bank of ceylon annual report 2010

The Plurality of the Singular as implied when we consider One Nation… One People is clear. The Bank of Ceylon is Sri Lanka’s No. 1 Bank… we are 1 with the Nation…1 with the People…in fact 1 figures largely in our enterprise as we work to support the Government’s vision of uniting and prospering Sri Lanka as 1 Nation…1 People.

THE POWER OF1…

BANK OF CEYLON ANNUAL REPORT 2010 1

VisionBankers to the nation

MissionCustomers - Foster mutually rewarding customer relationships with all our customers exceeding their expectations.

Staff - Give all our staff the recognition and rewards to be the best team of achievers in service excellence.

Owners - Be a profitable catalyst for equitable development covering urban and rural areas.

Society - Provide world-class banking services across the nation as a beacon for progress and growth.

1 customer base…millions of people of every persuasion,every occupation, every race…1 Product Portfolio…

1 Customer Service regime…1 Bank…BoC

1 Customer base…9 million

customers…1 Bank…Bank of Ceylon

Contents5 Business Highlights

6 Historical Review

7 Financial Highlights

8 Chairman’s Message

11 General Manager’s Review

14 Board of Directors

17 Corporate Management Team

26 Executive Management Team

30 Management Discussion and Analysis

56 Corporate Governance

80 Board & Board Subcommittees

81 Report of Board Subcommittees

87 Risk Management & Compliance

95 Sustainability Report

126 G3 Standard Disclosures Index

132 Products & Services

135 Financial Reports

137 Annual Report of the Board of Directors on the State of Affairs of the Bank of Ceylon

141 Directors’ Interests in Contracts

145 Directors’ Responsibility for Financial Reporting

146 Independent Assurance Report

147 Directors’ Statement on Internal Control

149 Report of the Auditor General

150 Income Statement

151 Balance Sheet

152 Statement of Changes in Equity

153 Cash Flow Statement

156 Significant Accounting Policies

167 Notes to the Financial Statements

237 Capital Adequacy

241 Investor Information

255 Group Structure

256 Subsidiaries & Associates

260 Corporate Offices & Overseas Branches

262 BoC Service Points

276 Correspondent Banks by Country

282 Exchange Companies by Country

283 Glossary of Financial/Banking Terms

Inner Back Cover Corporate Information

BUSINESS HIGHLIGHTS

Highest ranked Sri Lankan bank in the Bankers Almanac.

Wider customer base over 9 million accounts.

Leader in treasury operations with over 50% of local foreign exchange market.

Worldwide network reaching over 800 foreign correspondents.

Leader in inward foreign remittances with over 43% market share.

Nation’s first locally-owned bank, expanded its operations with an island-wide network of 875 service points; 854 connected on-line.

Representing largest off-shore banking operations with the highest market share of assets.

Bank of Ceylon‘s outlook has been revised by Fitch Ratings Lanka Limited to positive from stable, and affirmed its National Long-Term Rating at ‘AA (lka)’.

Bank achieved a remarkable breakthrough in trade finance by centralising its activities for customer convenience and recognised as the best Sri Lankan Trade Bank for 2010 for the second consecutive year with over 50% market share.

The first State Bank to commence 24 hour service point.

The London branch of the Bank was converted as an independent fully-owned Subsidiary, operating in United Kingdom.

Single borrower exposure capacity in excess of Rs. 10 billion.

BoC‘s new corporate plan branded ‘one 10 TWELVE’ (ie, Rs. 1 trillion assets, Rs. 10 billion profit before tax by year 2012) reached to Rs. 715 billion assets, Rs. 10 billion profit before tax in the year 2010.

Bank’s deposit mobilisation campaigns throughout the country achieved a remarkable deposit base of Rs. 524 billion.

Lending to private sector increased by Rs. 62 billion, 34% up.

Increased penetration in branchless banking by introduction of internet banking and mobile banking.

Bank successfully raised Rs. 5 billion for the second time by issuing subordinated 5 year debentures listed on the Colombo Stock Exchange.

Bank of Ceylon introduced new business lines by adding an investment arm and Islamic banking into its banking stream.

BANK OF CEYLON ANNUAL REPORT 20106

HISTORICAL REVIEW

Bank of Ceylon has evolved continuously over the years, undergoing changes in its business operations, branch network, ownership, people, products and services to emerge as the largest financial service provider in Sri Lanka. Such progress is summarised below:

1939Bank of Ceylon established as the nation’s first modern, locally-owned bank. Ceremonially opened on 1 August by Governor, Sir Andrew Caldecott, at the present-day premises of the City Office.

1941Operations commence in Kandy with opening of a branch office. Other branches opened subsequently in other large outstation towns: Galle, Jaffna and Trincomalee.

1946Foreign Department established. Operates from offices at the Grand Oriental Hotel (GOH) Building, Colombo Fort.

1949First overseas branch opens in London shortly after Independence; it is the thirteenth bank branch to be opened.

1953C Loganathan becomes first Sri Lankan General Manager.

1954Central Office moves from City Office to premises at GOH Building.

1959Authorised capital enhanced to Rs. 50 million by Act of Parliament.

1961Nationalisation. The Government of Ceylon becomes sole owner of Bank of Ceylon.

Kachcheri branch network set up in alignment with the Government’s District Administration System.

1973Agriculture Service Centre concept implemented. Operations commence at over 350 Agricultural Service Centre Branches. Comprehensive Rural Credit Scheme implemented.

1978Non-Residents Foreign Currency (NRFC) deposit scheme introduced.

1979Off-shore banking operations commenced with the establishment of the Foreign Currency Banking Unit.

1980Computer Division established; automation of business operations commences.

1981Branch opened in Malé, Republic of Maldives.

1985Head Office moves to 32-storey BOC Tower in Colombo.

1988Installation of the first BOC ATMs ushers in the electronic banking era.

1989Ceybank Visa credit card introduced in collaboration with Visa International.

1995Overseas branch network augmented with offices in Madras and Karachi.

1996Joint venture with Nepal Bank establishes Nepal Bank of Ceylon Limited.

1998MoU with Government results in greater management autonomy and target-based performance.

2000Authorised capital further enhanced to Rs. 50 billion by Act of Parliament.

2004Real estate subsidiary Mireka Capital Land (Private) Limited formed to invest in Havelock City, the largest single condominium development in Sri Lanka.

2005Balance Sheet footings top Rs. 300 billion, the largest asset base of any Sri Lankan bank.

Wide range of relief, rehabilitation and reconstruction activities undertaken and financed in the aftermath of the December 2004 tsunami.

2006Wins IBM/FISERV prize for the fastest deployment of an online core banking system in Asia Pacific region.

2007Raises US$ 210 million, the largest internationally syndicated debt by any Sri Lankan issuer; appointed Co-Manager of historic US$ 500 million debut bond issued by the Government of Sri Lanka; commences Village Development Programme focused on engaging rural communities.

2008Raises Rs. 4.2 billion via a listed subordinated rupee debenture of 5 years; raises US$ 21.6 million via a private placement of a 5-year subordinated dollar debenture.

2009BoC completed online branch network by bringing in Kilinochchi, Mankulam and Mullaitivu branches into the network, the operations of which were disrupted at the time of ending the war. BoC celebrated its70th Anniversary.

Bank launched an Islamic Banking Unit, which operates through Island-wide network.

2010BoC diversified its operations in the United Kingdom by upgrading its London branch to a Subsidiary of BoC that will be used as a platform for global banking and to attract more foreign investment to the country.

Bank has set up a specialised investment banking unit aiming to diversify its portfolio in non-core banking.

Bank successfully raised Rs. 5 billion in the second public issue of unsecured, subordinated redeemable five-year debentures.

BoC acted as the Bankers to the issue, Managers, sponsors and registrars for the Urban Development Authority‘s Rs. 10 billion debenture issue.


Bank Group

Key Financial Data2010

Rs. million2009

Rs. million Change

%2010

Rs. million2009

Rs. million Change

%

Results for the YearTotal revenue 63,363 63,461 (0.2) 66,867 66,128 1.1

Net interest income 19,648 14,810 32.7 21,043 15,789 33.3

Profit before financial VAT and taxation 14,054 7,202 95.1 14,990 7,666 95.5

Profit before taxation 10,053 4,208 138.9 11,075 4,720 134.6

Provision for taxation 3,687 1,124 228.0 4,162 1,403 196.7

Profit after taxation 6,365 3,084 106.4 6,913 3,317 108.4

Value to the Government 10,784 5,465 97.3 11,385 5,826 95.4

Position at the Year EndTotal assets 714,954 538,241 32.8 730,065 547,421 33.4

Shareholders’ funds (Capital & Reserves) 28,132 24,899 13.0 31,261 27,534 13.5

Deposits from customers 524,233 408,607 28.3 529,319 411,460 28.6

Gross loans and advances 382,310 275,022 39.0 392,708 283,298 38.6

Non-performing assets 12,639 15,542 (18.7) 13,701 16,281 (15.8)

Net non-performing assets 5,247 7,317 (28.3) 5,751 7,466 (23.0)

Per Share Data (Rs.)Earnings per share 1,273 617 106.3 1,352 660 104.8

Net assets per share 5,626 4,980 13.0 6,039 5,317 13.6

Profitability Ratios (%)Return on average equity 24.0 12.9 11.1 23.8 12.8 11.0

Return on average assets 1.6 0.8 0.8 1.7 0.9 0.8

Interest margin 3.1 2.9 0.2 3.3 3.0 0.3

Cost to income 53.7 68.3 (14.6) 53.9 68.0 (14.1)

Loans to deposits ratio 72.9 67.3 5.6 74.2 68.9 5.3

Year on Year Growth in Earnings (%) 106.4 (13.4) 119.8 108.4 (16.0) 124.4

Assets Quality Ratios (%)NPA ratio 3.3 5.7 (2.4) 3.5 5.8 (2.3)

Net NPAs/Shareholders’ equity 18.7 29.4 (10.5) 19.0 28.1 (9.0)

Statutory Ratios (%)Capital adequacy ratio: Tier I Capital (minimum required 5%) 10.3 11.2 (0.9) 11.4 12.0 (0.6)

Tier I & II Capital (minimum required 10%) 13.7 14.2 (0.5) 15.2 15.1 0.1

Liquid assets ratio (Domestic) (minimum required 20%) 28.7 21.1 7.6 N/A N/A N/A

FINANCIAL HIGHLIGHTS


CHAIRMAN’S MESSAGE

It is my pleasure to present to you the Annual Report and Financial Statements of the Bank of Ceylon (BoC) for the year 2010. The Bank celebrated 71 years as the Bankers to the Nation and was engaged in many initiatives to become an integrated financial services provider. The Bank has positioned itself to benefit from considerable earnings growth over the next few years, in tandem with the positive economic outlook of Sri Lanka.

ECONOMIC ENVIRONMENT

Having weathered a severe recession, the global economy is now showing signs of recovery. Although financial markets have recovered from their lows in 2009, they are still characterised by tight economic conditions. International capital flows to developing nations are projected to gather momentum. Modest demand growth has been tempered by factors including continued weakness in European Economy and slow adjustment of fiscal policies in developing economies. Medium-term prospects and development are heavily dependent on recovery and fiscal consolidation of developing economies.

Sri Lanka’s economy was relatively unharmed by the global crisis and it is satisfying to note that the optimism placed on economic growth due to the cessation of war was not merely an expectation but a reality.

We are encouraged by signs of economic recovery and solid performance in key sectors consequent to stoppage of war. I believe it is

the consensus opinion that our economy will grow at the above trend levels over the next few years with the expectation of doubling of GDP in the medium-term. Certain challenges are posed in this framework where local economy is likely to maintain a growth rate unparalleled to global counterparts. Policy makers are tested in this environment to support the growth momentum in the country whilst maintaining attractive interest rates, addressing supply side anomalies and maintaining inflation at a subdued level. In this context, BoC continues to be the leader in several core banking sectors. At a time when Sri Lanka is on the threshold of rapid economic growth with foreign investor confidence at unprecedented levels, BoC is engaged in prudent and strategic banking operations as encompassed in its corporate plan. Its position of strength, stability and potential is affirmed by the national long-term rating of AA (lka) and an upgrade to positive outlook by Fitch Ratings.

FINANCIAL PERFORMANCE

The Bank consolidated its position as the premier public sector bank by posting a staggering Group profit before tax of Rs. 11.1 billion in 2010, the highest ever in the Bank’s history. This is mainly attributed to the Bank’s fee-based income and investment banking activities which rose by 58% Year on Year (YoY). The Group Balance Sheet reached Rs. 730 billion with loans and advances reaching Rs. 393 billion. Deposits increased to Rs. 529 billion while the quality of the assets improved as reflected in the reduced NPA of 3.5%.

In 2009, we set ourselves a challenging target as set out in our Corporate Plan, “one 10 TWELVE” to reach Rs. 1 trillion in assets and attain Rs. 10 billion in profits by the end of year 2012. It is with pleasure that I mention that we have achieved the profit target through dedication and by adopting a well-focused approach, thus paving the way to set new milestones.

LOCAL FRANCHISE

Through our network of over 300 branches, 218 extension offices and 352 ATMs island-wide, we strive to expand banking facilities across the country in an equitable manner.

The Bank commenced night and day banking and extending allied services to assist the Government in its efforts of transforming the City of Colombo. A multi-purpose branch was established in the Head Office to play a greater role in stimulating economic activities. It was the first time a State commercial bank embarked on such a venture in Sri Lanka.

The Bank initiated target savings schemes to foster the savings habit among citizens in the rural areas. The primary objective of the Gam Udana programme is to promote all Sri Lankans to open and maintain bank accounts.

The Bank consolidated its position as the premier public sector bank by posting a staggering Group profit before tax of Rs. 11.1 billion in 2010, the highest ever in the Bank’s history.



GLOBAL BANKING

Whilst being in the forefront of national development, the Bank also made its presence felt in the global arena during the year. The London Branch of the Bank, re-named as Bank of Ceylon (UK) Limited, operates as an independent wholly- owned subsidiary, regulated by the Financial Services Authority of the United Kingdom. This Bank is the springboard to other destinations of the world, especially to the European Union, United States, Canada, Australia and Japan. The subsidiary is currently engaged in lending services and strategies to expand its reach and product-base over the coming years.

The Bank secured Rs. 200 billion worth of inward remittances during the year while 50,997 new Non-Resident Foreign Currency accounts were opened increasing the total accounts to 353,863. The Bank also expanded correspondent relationships with 60 new global banks and 6 exchange houses.

Through several bilateral agreements and loan syndications amounting to approximately US$ 300 million, BoC was able to establish long-term relationships to achieve growth targets, trade finance and infrastructure development of Sri Lanka.

THE ROLE OF THE BANK AS A CATALYST FOR DEVELOPMENT

At a time when Sri Lanka is entering a new era in its history with rapid changes in the socio economic and business sectors, the Bank of Ceylon is in the forefront of the nation’s active development programmes as the premier in the Business and Finance industry.

As the resurgence of the North and the East has been prioritised in the nation’s development agenda, BoC entered the development process by aligning its strategies with national development goals. The Bank successfully brought the community in the North and the East to the formal commercial banking stream, through providing access to funding, safekeeping of valuables and facilitating entry for entrepreneurship activities in the SME sector. Further, the Bank dedicated itself to improve and empower the Internally Displaced Persons (IDP) of the North and the

East through the expansion of the Bank’s branch network in the two Provinces by more than 100 service points and committing to extend advances in excess of Rs. 17 billion to the Northern and the Eastern Provinces. Our involvement encompassed distribution of donor funding. The Bank’s timely activities in this regard were commended by bilateral donor agencies.

The 24-hour call centre that was set up to provide a multi-lingual service to displaced customers in the North and the East. It was the first time a State Bank extended such a service.

The Bank of Ceylon was instrumental in bringing together the entrepreneurs of the North and the South through a joint programme with the private sector, creating markets for the produce of farmers in Jaffna through programmes such as ‘Yal Uthpaththi’ to assist the Poverty Alleviation Scheme of the Central Bank of Sri Lanka.

The Bank further aims to involve the Sri Lankan diaspora to actively contribute to the North and the East socioeconomic revival and thereby facilitate benefits to permeate to the whole economy.

The Bank, in partnership with the private sector, extended financial services to the corporate sector and institutions. The strategic transactions being the assistance given to the Urban Development Authority to issue a debenture worth Rs. 10 billion to address the housing demand in Colombo. The newly set up Investment Banking Unit of the Bank, managed the debenture of Rs. 5 billion to raise funds for the Bank in 2010.

During the year, the Bank of Ceylon became fully geared in implementing the Shariah-compliant Islamic Banking operations, exemplifying the Bank’s corporate adage, ‘Bankers to the Nation’.

The Bank will continue to play a crucial role by aligning its corporate strategy to partner the national development goals aimed at transforming Sri Lanka into a dynamic global hub for Naval, Aviation, Commercial, Energy and Knowledge.


The Bank of Ceylon in keeping with its traditional role as a socially responsible bank, introduced several innovative products and services to uplift the quality of life of diverse customers across the entire social strata, targeting economic, rural and social development which would benefit the country and its people. Products and services were introduced to complement consumer needs and aspirations and also address economic and infrastructure development. The Bank recognised the need for a retirement benefit scheme in the light of demographic changes and an ageing population. The Bank assisted the agrarian sector in order to propel the nation to be self-sufficient and ensure food security. The Bank continued to be a leader in providing assistance to small and medium enterprises through financing of debt and equity.

ACKNOWLEDGEMENTS

I wish to extend my sincere gratitude and appreciation to my Board Colleagues namely, Dr. R H S Samaratunga, Mr. G K A C K Kularatne, Mr. G Gallage and Dr. B Kaluarachchi who resigned from the Board in 2010. I really appreciate the significant contribution made by them to the Bank‘s affairs, during the period they served on the Board.

I also welcome Mr. S R Attygalle, Ms. Nalini Abeywardene, Mr. Chandrasiri de Silva and Mr. K L Hewage to the Board, who will bring a wealth of experience in diverse business sectors to our midst.

I wish to thank my fellow Board members for their invaluable contribution in steering the Bank’s strategic direction and providing concentrated focus in achieving our challenging goals. Their contribution in driving the current corporate plan and their unwavering support and commitment during the year is invaluable.

I also extend my appreciation to the General Manager for his contribution as helmsman of this institution in achieving commendable results in the operations of the Bank. The unstinting support and dedication to work ethic by the Corporate, Executive Management and the staff of the Bank of Ceylon is much appreciated.

We are grateful for the sustained support and patronage of our customers and we recognise and continue to commit ourselves to deliver exemplary banking services.

The contribution made by the auditors, legal advisors, consultants, correspondents and external advisors is thankfully acknowledged. The positive role played by the trade unions in the Bank’s operations is also appreciated.

I thank His Excellency Mahinda Rajapaksa, the President who is also the Minister of Finance and Planning, Honourable Deputy Minister of Finance and Planning, the Secretary to the Ministry of Finance and Planning, the Governor of the Central Bank of Sri Lanka, the Auditor General and the Attorney General and respective officials for their guidance and support.


CONCLUSION

I strongly believe the economic sentiment of Sri Lanka remains optimistic. In order to grasp the opportunities, we will continue to formulate strategies on innovations, skills development, customer centricity and diversification whilst paying due attention to managing risks and good governance. Having taken the initial steps to re-invent ourselves as a financial powerhouse, the Bank of Ceylon will continue to reach greater heights in the banking industry with the support and patronage of the Government of Sri Lanka, its stakeholders and well wishers.

Targeting to become a truly integrated financial services provider, the Bank of Ceylon will inspire and continue to deliver value to the Government of Sri Lanka, its customers and other stakeholders. In this regard, we have declared 2011 to be the “Year of IT enabled Customer Service Excellence”, with the intention of taking advantage of the rapidly evolving technology to provide the highest quality service to our customer base in a competitive manner.

Dr. Gamini WickramasingheChairman

Colombo24 March 2011


GENERAL MANAGER’S REVIEW

By any measure, 2010 was a year of spectacular results. After three years of consistently high profits in 2007, 2008 and 2009 the Bank was able to achieve a record profit, the highest in its history. The profit before tax of Rs. 10.0 billion it achieved is more than double (139%), that of last year’s and 92% above the previous highest of Rs. 5.2 billion in 2008.

Not only did the Bank achieve this record profit but it also performed well across a range of performance measures. This also follows three years of consistently good performance.

At the end of 2010, its asset base stands at Rs. 715 billion - a 33 % growth over the previous year. For three years in succession, from 2007 to 2009, it had achieved a growth of over 48%. Our asset base is by far the largest for any bank operating locally.

In 2010, our deposits rose by 28% to reach Rs. 524 billion. This is a very creditable achievement by the teams involved as this is a fiercely competitive area in local banking.

At the end of 2010, our capital adequacy stood strong at 13.7%. Our Non-performing advances stood at 3.3%.

In 2010, as in 2009, the Bank played a clearly visible role in national economic development. What makes the current performance levels spectacular is that this performance was achieved without sacrificing our commitment to being a catalyst to national economic growth and our obligations to society at large as a good corporate citizen. The range of activities and operations aimed at this was quite broad. More product and service lines supported micro level start-ups and businesses and also small and medium-sized enterprises (SMEs). Increased facilities were made available to support fisheries, animal husbandry and agriculture-related activities. Bank of Ceylon acted as a facilitator to the United Nations High Commissioner for Refugees (UNHCR) to help distribute approximately Rs. 1.5 billion as assistance to nearly 75,000 families rated as Internally Displaced Persons (IDPs). The Bank also supported many activities at a cost of Rs. 29 million under its Corporate Social Responsibility initiatives.

The Bank continued to offer a complete range of services over the largest geographical area covered by any bank operating locally. We continued to provide services in areas under served by other banks including areas undergoing post-conflict rehabilitation. In 2010 we continued to build and broaden our range of professional expertise and to maintain and raise, skills and capability levels, amongst staff.

Comprehensive coverage of all geographical areas in our services and maintaining high levels of expertise and high professional standards in all areas of activity are long-term commitments that are an integral part of our mission. The spread of the branch network and our human resources development activities reflect this commitment.

In 1948, nine years after our Bank commenced business, we opened our branch in London. In 2010 it was converted into a fully-owned subsidiary Bank of Ceylon (UK)Limited - a milestone in our presence overseas and a first-step in our plans to expand operations in Europe.

In 2010, the Bank added a fully-fledged investment arm to its operations - another milestone. The plans were laid in 2009 and in 2010, it became fully operational.

RETAIL BANKING

2010 was quite an innovative year for our retail operations. Our retail sector portfolio recorded over 47% growth.

Our online branch network - the largest on the island - is being used to increasingly better effect in our retail operations and to maintain full geographic coverage as per our strategic objectives. It is mostly through our retail operations that we addressed the needs of national economic development, providing services to support micro, small and medium enterprises and also the distribution of assistance in partnership with UNHCR. Our service excellence initiatives continued with the number of branches implementing quality circles, 5S and other such initiatives rising from 178 to 278.

Products to the retail market are frequently reviewed to take into account changes in market behaviour. A great many products were introduced to cater to changing customer needs backed by focused marketing for maximum impact. Among them were Smart Saver, BoC Infinity and Islamic Banking products. Many steps were taken to improve customer service quality, accessibility and convenience like relocating service points and packaging these new products with new features.

CORPORATE BANKING AND OFF-SHORE BANKING

In 2010, as in 2009 and before, our Bank continued to dominate the corporate banking segment. The second part of this year produced an increase in demand for credit and this division was able to make a significant contribution to the Bank’s profits. We recorded a growth exceeding 36% in our portfolio. Our close relationships and deep understanding of the customers’ requirements give us the edge over our competitors. The IT facilities that we provide are now well-utilised by our customers. Our vigilance on facilities to businesses vulnerable to the downturn in overseas markets was continued.

INTERNATIONAL

2010 was a successful year for the International Division. The most notable achievement was the completion of converting the London branch into a fully-owned subsidiary of the Bank called Bank of Ceylon (UK) Limited. This subsidiary is intended to be the gateway to enter Europe. Chennai and Male Branches reported improved performances in 2010.

The Bank continued to lead in the inward remittances market. This year remittances grew by around 20% on average.

To support its international activities the Bank continued to expand its network of foreign correspondents in many countries. At the end of 2010, this network stands at more than 800 correspondents. We continued to work at maintaining and developing relationships with other banks and financial institutions worldwide.



TREASURY

2010 was an exceptionally successful year for the treasury. Its contribution to the Bank’s profits was quite significant. In 2009 it operated successfully managing liquidity though that year began amidst volatility in financial markets. In 2010 it used the market conditions to its advantage.

Our treasury plays a vital role in helping key institutions with their funding and this year too our treasury succeeded in mobilising the required funding. The Bank acted as a co-arranger with HSBC to the issue of Sovereign Bonds of the Government of Sri Lanka and also played the role of Paying Agent for Sri Lanka Development Bond issues. In 2010 the Bank was able to raise US$ 285 million from foreign sources demonstrating the trust placed by foreign sources in Bank of Ceylon.

INVESTMENT BANKING

In 2010 as mentioned earlier the Bank added a fully-fledged investment arm to its operations. This newly-formed arm successfully handled the debenture issue of a state institution - the largest issue made so far by such an entity.

With this arm the Bank now has the capacity to offer, under one roof, a complete range of investment banking services such assisting in raising capital, underwriting issues, mergers and acquisitions and other investment related services.

HUMAN RESOURCES

As mentioned earlier a part of the Bank’s mission is to maintain high levels of

professional skills in Banking and to expand its range of expertise through human resource development.

To expand its range of expertise the Bank continued to deploy experts recruited from outside in the areas of finance, auditing, risk management, research, marketing, investment banking, information technology and human resources management.

To maintain, improve and expand professional skills many training opportunities were made available to staff to train both locally and overseas. More than 500 training programmes, both internal and external, were made available to the staff. More than 400 staff trained overseas. In 2010, the Bank recruited 1,274 personnel to its workforce.

The Human Resources Division implemented many improvements. Many processes underwent automation in various degrees.

INFORMATION TECHNOLOGY

In 2010 too, the Bank continued to enhance its IT capabilities. It has now become routine to report the position of our expanding online network. At the end of 2010 it stands at 309 Branches and 218 extension offices. This makes a total of 527 fully- automated service points backed by 352 ATMs in 329 locations. Services were extended to cover relatively underserved parts of the country in the North and the East.

During 2010, with the main systems now completely operational and running, we focused on the supporting systems that would add value and provide backup.

Among those focused on were the further strengthening of our disaster recovery capabilities, enhancing security features and other features that increase accessibility and convenience. The IT unit itself was strengthened by recruiting extra personnel.

In 2010 too, as in 2009, we continued to upgrade facilities and continued our training of personnel in more efficient and effective use of the IT resources now available.

THE WAY FORWARD

Primarily our target is to consolidate the present performance level so as to set this as the springboard to reach more ambitious performance levels in the future.

In our planning we have always stayed close to our core values and our plans have been built around them. Results we have obtained have further strengthened our belief that we are correct in adopting this approach. As in the past few years we shall continue to strengthen our ability to compete and expand our scope of operations. Continuing in the manner we did in 2009, we shall continue to develop human resources, develop expertise in several areas, continue investments in IT and take necessary steps to enter into new areas.

Human resources development is set to continue. This development covers the strengthening of the Human Resources Division through development of Human Resources Development (HRD) related skills and expertise, recruitment of personnel and the improvements to policies and practices. Our reviews of our policies and practices have

In 2010 we continued to build and broaden our range of professional expertise and to maintain and raise, skills and capability levels, amongst staff.



revealed areas that could be improved. One such decision is that we intend to establish a performance-based rewards culture in stages. Training and skill development activities will be continued with areas such as treasury, risk management, investments and customer service improvement receiving extra attention.

As in 2009 and 2010, the development of new areas of expertise and obtaining expertise will continue. Specialists deployed in the areas of research, internal audit, marketing, finance, information technology, investment banking, human resources development and risk management are expected to continue their work.

IT will continue as a main area of investment. We will continue to enhance our disaster recovery capability, continue to strengthen the Risk Management Division and also we intend to enhance the Asset and Liability Management Systems. The Human Resource Division will also be strengthened with IT based processes. Other investments in IT will be focused on adding value to existing products and services. IT Division is to be expanded with extra personnel.

With regard to our international operations, the Chennai and Male Branches, and Bank of Ceylon (UK) Limited are expected to expand operations.

The Bank intends to widen its scope of operations with substantial activity in the area of investment banking. With the development activity planned by the Government along with the special focus on the North and the East this investment division is expected to play a very significant role. As mentioned last year this is expected to be a new chapter in the Bank’s history.

ACKNOWLEDGEMENT

2010 was a hugely successful year for the Bank of Ceylon. The Bank kept up its work through the challenges of 2008 and 2009 staying close to the strategies and plans worked out in the last few years to achieve a strong competitive edge. This year we were able to give an indication of how this underlying strength would affect results.

This was a year where we were able to demonstrate the practical effectiveness of the strategies we are pursuing and the soundness of the core principles and values around which we built our strategies.

These results are even more satisfying when we consider that all this was achieved whilst fulfilling our obligations to national economic development.

I gratefully acknowledge the support provided by the Secretary to the Treasury, the Governor of the Central Bank of Sri Lanka, the Auditor General, the Attorney General, the Chairman of the Strategic Enterprises Management Agency and the other officials of these institutions.

Our staff, as in the years past, demonstrated their loyalty to the Bank, their dedication to maintaining high professional standards and their commitment to duty. I wish to thank them for their continuing dedication, loyalty and commitment and to thank their representatives - our trade unions - for their co-operation.

I, very gratefully acknowledge the guidance and support of the Chairman and other members of the Board of Directors. In this regard, I also gratefully acknowledge the contribution of the four subcommittees of the Board covering the areas of audit, risk management, human resources and corporate governance.

The years of investment to develop increased capability is now beginning to show its effectiveness. Through the challenges of 2008 and 2009, we maintained steady results consistently. Now with a wide range of opportunities opening up, I close this review of a spectacular 2010 looking forward, with great enthusiasm, to a very exciting and rewarding 2011.

B A C FernandoGeneral Manager



BOARD OF DIRECTORS


Appointed as the Chairman of the Board of

Bank of Ceylon in May 2007 and reappointed in

May 2010. Serves as an Independent

Non-Executive Director.

Dr. Wickramasinghe brings to the Board

business experience in both domestic and

international markets with his extensive senior

level experience obtained in the United Kingdom

and Belgium. He was the Chairman of the

Securities and Exchange Commission of

Sri Lanka from 2006 to 2009 and the Insurance

Board of Sri Lanka from 2006 to 2008.

He is the Managing Director of Informatics

Group of Companies, one of the largest

software development houses in the country.

He is also the Chairman of Bank of Ceylon (UK)

Limited, Property Development PLC, Ceybank

Holiday Homes (Private) Limited and Koladeniya

Hydropower (Private) Limited and a Director of

Mireka Capital Land (Private) Limited and The

Lanka Hospitals Corporation PLC.

Dr. Wickramasinghe holds a Master’s Degree

in Systems Analysis from the University of

Aston, Birmingham, United Kingdom (UK)

and a Doctorate in Business Administration

(DBA) from the Manchester Metropolitan

University, UK. He is a Fellow of the Chartered

Management Institute (FCMI), UK and also of

the British Computer Society (FBCS).

S R AttygalleEx officio Director

Appointed as a Director to the Board of Bank of

Ceylon in June 2010 and serves as the

Non-Executive Ex officio Director.

Mr. Attygalle brings to the Board the

knowledge that bridges the Bank’s goals with

Government’s objectives and the experience in

financial services sector.

He was a Senior Economist of the Central Bank

of Sri Lanka for a number of years and has also

served as a Director and Acting Chairman of

National Savings Bank and a Director of Shell

Gas Lanka Limited.

He presently serves as the Director General of

the Department of Public Enterprises of the

Ministry of Finance & Planning. He is also a

Director of the Sri Lanka Ports Authority and the

Board of Investment of Sri Lanka.

Mr. Attygalle holds a Bachelor of Science (B.Sc)

Degree in Mathematics from the University of

Colombo, Sri Lanka and a Master’s Degree in

Economics from Warwick University,

United Kingdom.

Raju SivaramanDirector

Appointed as a Director to the Board of

Bank of Ceylon in January 2006 and

reappointed in June 2007 and May 2010.

Serves as an Independent Non-Executive

Director.

Counting over 30 years of experience in

architecture and management, Mr. Sivaraman

brings to the Board business experience in both

public and private sectors. He is the Associate

Consultant of Plan 3 Architects in India and the

Managing Director of Arch-Triad Consultants

(Private) Limited, an architectural consultancy

firm since 1980.

Mr. Sivaraman is the Chairman of Ceylease

Financial Services Limited and also serves as a

Director of Merchant Credit of Sri Lanka Limited

and Milco (Private) Limited. He is the Managing

Director of Ram Developers (Private) Limited.

He served as a Director of Merchant Bank of Sri

Lanka PLC, Mireka Capital Land (Private) Limited

and Property Development PLC. He served as

a Member of the National Police Commission

from 2006 to 2009 and as a Council Member

and Treasurer of the Sri Lanka Institute of

Architects over a period of six years.

Mr. Sivaraman is a Chartered Architect holding

a Master’s Degree in Architecture [M.Sc.(Arch)]

and a Fellow Member of the Sri Lanka Institute

of Architects (F.I.A.).


BOARD OF DIRECTORS

Ms. Nalini Abeywardene Director


Ceylon in May 2010. Serves as a Non-Executive

Director.

Ms. Abeywardene brings to the Board her

experience in the field of commercial law and

25 years of management experience in the

private sector tea industry. She was formerly

attached to a leading legal firm in the country.

She was a Commissioner of the Human Rights

Commission of Sri Lanka from 2006 to 2009.

She is a Member of the Board of Management

of the Galle Heritage Foundation of the Ministry

of National Heritage and Cultural Affairs and a

Director of Hotels Colombo (1963) Limited and

Mussendapotta Estates (Private) Limited.

Ms. Abeywardene is an Attorney-at-Law.

Chandrasiri de Silva Director


Ceylon in May 2010. Serves as a Non-Executive

Director.

Being a practicing lawyer Mr. de Silva brings

to the Board his specialised experience in law,

as well as business, insurance, etc. He was

a former Director of People’s Bank, People’s

Merchant Bank PLC and People’s Insurance

Company Limited and also a former Chairman

of People’s Travels Limited.

He is the Chairman of BOC Travels (Private)

Limited and a Director of Hotels Colombo

(1963) Limited.

Mr. de Silva is an Attorney-at-Law and holds a

Master’s Degree in International Trade Law from

the University of Wales, United Kingdom.


V. Kanagasabapathy Alternate Director

Appointed as Alternate Director to

Mr. S R Attygalle, the Ex officio Director from

July 2010. Serves as a Non-Executive Alternate

Director to the Ex officio Director on the Board.

He was serving as the Alternate Director to

former Ex officio Directors too since March 2006.

Mr. Kanagasabapathy brings to the Board his

wide experience in the public sector of over

30 years in several senior capacities such as

Director/Additional Director General of Public

Finance, Director General of Public Enterprises

and Financial Management Reform,

Co-ordinator of the Ministry of Finance &

Planning. He also served as a Director of

People’s Bank, State Mortgage & Investment

Bank and Merchant Credit of Sri Lanka Limited.

He is presently the Financial Consultant of

the Academy for Financial Studies, which is

the training arm of the Ministry of Finance &

Planning. He is a Director on the Boards of

Merchant Bank of Sri Lanka PLC, Lanka Hydraulic

Institute Limited, Hotel Developers Lanka PLC

and De La Rue Lanka Currency and Security Print

(Private) Limited. He is also the Chairman of the

Distance Learning Centre, Council Member of

The Institute of Chartered Accountants of

Sri Lanka, Member on the Board of

Management of the Postgraduate Institute of

Management and Member of the National

Salaries and Cadres Commission.

Mr. Kanagasabapathy is a Chartered Accountant

and holds a Master’s Degree in Public

Administration from Harvard University, U.S.A.

He is a Fellow Member of The Institute of

Chartered Accountants of Sri Lanka, The Institute

of Public Finance and Development Accountancy,

The Institute of Certified Management

Accountants of Sri Lanka and The Association of

Accounting Technicians of Sri Lanka.

Ms. Janaki Senanayake SiriwardaneSecretary Bank of Ceylon/Secretary to the Board

Attorney-at-Law, LLB, MBA.

K L HewageDirector


Ceylon in June 2010. Serves as an Independent

Non-Executive Director.

Mr. Hewage brings to the Board his experience

of over 40 years in the spheres of consultancy,

management, training, project finance,

marketing, agriculture development and

extension, planting, etc.

Mr. Hewage served as the Chairman of People’s

Merchant Bank PLC, the Chairman/Chief

Executive Officer of Janatha Fertilizer Enterprises

Limited, State Plantations Corporation, State

Printing Corporation and Provincial Road

Development Authority (Western Province).

He also served as a Member of the Board of

Directors of People’s Bank, Janatha Estates

Development Board and as the General

Manager of Sri Lanka Institute of Co-operative

Management.

He is the Chairman of Ceybank Asset

Management (Private) Limited. He also serves

as a Member of the Governing Council of the

University of Visual and Performing Arts.

He holds a Bachelor of Science (B.Sc) Degree in

Bio Science from the University of Kelaniya,

Sri Lanka and a Master's Degree in Science

(M.Sc) in Agricultural Extension from the

University of Reading, United Kingdom.

BOARD OF DIRECTORS


CORPORATE MANAGEMENT TEAM

B A C Fernando General Manager

Appointed General Manager in February 2007,

Mr. Fernando is a career banker with over

40 years of diversified banking experience.

He joined the Bank in early 1970. Prior to

his appointment as General Manager, from

December 2002 to February 2007, he was

Deputy General Manager in charge of the

Bank’s retail operations. He has also served

as the Assistant General Manager in charge

of Corporate Banking Operations and as the

Assistant General Manager in charge of the

Southern Province.

Mr. Fernando specialises in retail banking and

credit-including both corporate and rural,

and credit administration. His experience

ranges from operational level to managerial

level. He has contributed immensely to the

improvement of credit knowledge and credit

skills among staff through training and has

provided leadership in restructuring initiatives.

He is a Director of the Institute of Bankers

of Sri Lanka and a Trustee of Bank of Ceylon

Pension Trust Fund. He is also a Director of the

Credit Information Bureau and many of the

subsidiary companies of Bank of Ceylon.

Mr. Fernando holds a Bachelor’s Degree in Arts

from the University of Sri Lanka, Vidyodaya

Campus and a Master’s Degree in Business

Administration from the University of Colombo,

Sri Lanka. He is also a Fellow of the Institute of

Bankers of Sri Lanka.

Ms. W A Nalani Senior Deputy General Manager (Corporate & Offshore Banking)

Ms. Nalani has been a Deputy General Manager

for over 6 years and appointed as Senior

Deputy General Manager (Corporate & Offshore

Banking) in December 2008. She joined the

Bank in April 1975.

Ms. Nalani is a career banker with over 35 years’

diversified banking experience. She has been

the Head of Corporate and Offshore Banking

operations for nearly 5 years, contributing

significantly for expansion of corporate banking

activities including trade finance in the Bank.

Presently, she is steering the Project formed

for ‘5 S System’ implementation, which is

integrated with the branch reorganisation under

model branch concept.

Prior to the present position, Ms. Nalani headed

the dedicated Recovery Unit for over 3½ years

until 2006 and played a dynamic role in

reducing the bank’s non-performing assets.

As an Assistant General Manager, she headed

important provincial business units including

the Metropolitan Branch for 5 years, the largest

middle market business unit and Sabaragamuwa

Province for 3 years covering economically

important Districts of Kegalle and Ratnapura.

Specialised in credit and recovery management

she has contributed significantly for human

resources development in those areas. She was

also actively involved in the implementation of

IT solutions for trade finance activities in the

Bank. She was a co-winner of the ‘Zonta Award

for Excellence’ in banking category for the

year 2009.

She is a Non-Executive nominee Director on

the Boards of Regional Development Bank

and Merchant Bank of Sri Lanka PLC. She also

serves as an Alternate Director on the Boards of

Credit Information Bureau, Institute of Bankers

of Sri Lanka and BoC Travels (Private) Limited.

She represents Bank of Ceylon on the Board

of SriLankan Airlines. She is the Senior Vice-

President of the Association of Professional

Bankers of Sri Lanka and Committee Member

of the Alumni Organisation, University of

Colombo. She also serves as a Director on the

Committee of Rotary Club of Colombo Central.

Ms. Nalani holds a Bachelor of Arts Degree

in Economics and Bachelor of Philosophy in

Economics from the University of Colombo,

Sri Lanka. She is also a Fellow Member of the

Institute of Bankers of Sri Lanka.


K Dharmasiri Deputy General Manager (Recovery)

Mr. Dharmasiri brings a rich and diversified

banking experience both locally and abroad,

since joining the bank in 1975. He bears a First

Class Honours Degree in Commerce in 1974 and

holds a Bachelor of Philosophy in Economics in

1976 from the University of Colombo, Sri Lanka.

Since his appointment to the grade of Deputy

General Manager in 2002, he brings to bear

his extensive knowledge and expertise in

monitoring and restructuring non-performing

assets, strategic planning, corporate financial

reporting and reorganisation of branches.

Mr. Dharmasiri has made an immense

contribution in maintaining the Bank’s NPA level

below the industry average. He has also held key

positions in audit and Corporate and Offshore

Banking. He held overseas assignments as the

Country Manager at BoC branch in Male from

1997 to 2000 and Managing Director of Nepal

Bank of Ceylon Limited in Nepal, in 2002.

A Non-Executive nominee Director on the Board

of Lanka Securities (Private) Limited and BOC

Management and Support Services (Private)

Limited. He also served as a Non-Executive

nominee Director on the Boards of Janashakthi

Insurance Company Limited, Ceybank Holiday

Homes (Private) Limited, Hotels Colombo (1963)

Limited, BOC Property Development (Private)

Limited, BOC Travels (Private) Limited, Mireka

Capital Land (Private) Limited, BOC Property

Development & Management (Private) Limited

and Sabaragamuwa Development Bank.

He is also an Associate Member of the Institute

of Bankers of Sri Lanka.

Ms. Kumudiniy Kulathunga Deputy General Manager (Retail Banking)

Joining the Bank in 1975, Ms. Kulathunga took

on the new role of Deputy General Manager

(Retail Banking) in April 2010.

Counting over 36 years’ experience in

banking and since her appointment to the

grade of Deputy General Manager in 2004,

Ms. Kulathunga has played a dynamic role

in various positions in the Bank including

branch operations, retail lending, supplies &

procurement and construction of new branches

in addition to training and Human Resources.

She has wide knowledge and expertise in

leading the teams in the Eastern, North Western

and Western Provinces as Assistant General

Manager in charge prior to her appointment as

Head of Human Resources. She played a major

role in implementing the present Performance

Potential Appraisal System, formulating the

transfer policy and promotion policies in the

Bank, and initiating procedures for productivity

improvements and cost reduction.


the Boards of Institute of Bankers of Sri Lanka

since 2002 and BOC Travels (Private) Limited

since 2010. She was a Non-Executive nominee

Director on the Boards of Hotels Colombo

(1963) Limited from 2006 to 2009, BOC

Property Development & Management Limited

from 2004 to 2006 and also Alternate Director

on the Boards of Property Development Limited

from 2006 to 2008 and Mireka Capital Land

(Private) Limited in 2007.

Having graduated from the University of

Colombo, Sri Lanka Ms. Kulathunga holds

a Special Bachelor’s Degree in Arts in 1972

and Bachelor of Philosophy Honours Degree

in 1973. A Fellow Member of the Institute of

Bankers of Sri Lanka, she obtained a Diploma in

Bank Management from the Institute of Bankers

of Sri Lanka in 1989, in addition to being a

Diploma Holder in Personnel Management from

the Institute of Personnel Management in 1997.



C Samarasinghe Deputy General Manager (Product & Development Banking)

Joining the Bank in 1975, Mr. Samarasinghe

was appointed to the post of Deputy General

Manager (Product & Development Banking) in

May 2006. He holds a Bachelor's Degree in Arts

(Special) with a 2nd Class from the University

of Colombo, Sri Lanka in 1975 and also holds a

Bachelor of Philosophy in Economics from the

University of Colombo, Sri Lanka in 1976.

In his current position he leads the Development

Banking activity, spearheading the card

business, electronic delivery channels,

Microfinance, Project Finance, SME lending, BoC

Assurance and Islamic Banking arm. Prior to

the assignment to the grade of Deputy General

Manager, Mr. Samarasinghe was instrumental in

establishing a large financial house based in the

Middle East and played a key role in introducing

organisational and structural changes in the

face of the changing business environment. He

has also served in Support Services, Recovery,

Sales & Channel Management and Credit Cards.

He is the Non-Executive Chairman on the

Board of Transnational Lanka Record Solutions

(Private) Limited since 2006 and serves as a

Non-Executive Director on the Board of Ceybank

Holiday Homes (Private) Limited since 2010.

A member of the Bankers Technical Assistance

Committee since 2007, he also served as a

Director on the Board of Merchant Credit of

Sri Lanka from 2006 to 2008.

H M A B Weerasekara Deputy General Manager (International & Treasury)

Appointed Deputy General Manager

(International & Treasury) in July 2006,

Mr. Weerasekara joined the Bank in May

1975, having graduated from the University

of Colombo, Sri Lanka in Economics in 1972.

Additionally, he holds a Bachelor of Philosophy

in Industrial Management in 1974 from the

same University.

His exposure to both the domestic and

international arena has contributed significantly

to sustain BoCs leadership position in treasury

and international operations. He has extensive

experience in trade finance, treasury operations,

offshore banking, international, retail banking

and investment banking. Mr. Weerasekara led

the Recovery Division of the Bank in 2006.

Prior to the assignment to the grade of Deputy

General Manager in 2006, he served in the

London Branch and was successful in enhancing

inward remittances and treasury activities of the

Bank. He played a pivotal role in subsidiarisation

of the BoC Branch in London and expansion of

the correspondent banking network.

He is a Non-Executive nominee Director on the

Board of Merchant Credit of Sri Lanka (Private)

Limited (MCSL) since 2006 and serves as the

Chairman of both the Audit & Risk Management

Committees of MCSL.


Ms. Deepa WanniaratchiDeputy General Manager (Finance & Planning)

Ms. Deepa Wanniaratchi joined the Bank in

May 1975. She holds a Bachelor’s Degree in

Commerce from the University of Peradeniya,

Sri Lanka obtained in 1974. In 2004, she

obtained a Postgraduate Diploma in Business

& Financial Administration from The Institute

of Chartered Accountants of Sri Lanka in

association with the Cranfield University School

of Management, UK. Appointed Deputy General

Manager (Finance & Planning) in April 2008.

She has wide experience in diverse fields such

as managing large technology projects, bank

restructuring under financial sector reforms and

Corporate & Retail Banking activities. Prior to

the present assignment, she provided leadership

in the restructuring project, designed to

implement the core banking system island-wide.

She has imparted her knowledge by conducting

extensive training courses in corporate and sales

related areas.


the Board of BOC Travels (Private) Limited since

December 2008 and served as a Non-Executive

nominee Director on the Board of Property

Development & Management Limited from

2006 to 2008. She is also a Trustee of the

Pension Trust Fund and the Humanitarian Trust

Fund of the Bank.

She is an Associate Member of the Institute of



M K Nandasiri Deputy General Manager (Support Services)

Having obtained a First Class Honours in

Economics from the University of Colombo,

Sri Lanka in 1974 together with a Bachelor of

Philosophy in Economics in 1975, Mr. Nandasiri

entered the Bank in 1975. He holds the position

of Deputy General Manager (Support Services)

since May 2009.

His experience in both domestic and

international banking operations has taken

through management and leadership roles in

the branch network. He has served in Corporate

Branch in various positions of which the period

he served in Corporate Imports was more

important. He played a leading role to improve

the department and was the team leader in

implementation of new Computer Package.

Specialised in Trade Finance and Credit fields,

he has contributed a lot in training staff in that

area. He served as Country Manager of the BoC

branch in Chennai from 2005 to 2008. He was

the Assistant General Manager (Pettah) prior to

taking up the appointment of Deputy General

Manager (Support Services).

A Non-Executive nominee Director on the Board

of Grand Oriental Hotel since September 2009,

Mr. Nandasiri is also the President of the Trade

Finance Association of Bankers of Sri Lanka since

April 2010.

He is an Associate Member of the Institute of


H M MudiyanseDeputy General Manager (Human Resource)

Mr. Mudiyanse joined the Bank in August 1973

and was appointed as Deputy General Manager

(Human Resource) in October 2010.

His extensive experience in retail banking is held in

good stead for managing and developing human

resources in his present position. Demonstrating

a remarkable leadership role due to his expertise

in microfinance, retail banking and agriculture

sectors, he was able to propel BoC to a higher

plane in the North Western Province.

He has been a Non-Executive Director on the

Board of Ceybank Holiday Homes (Private)

Limited and an Alternate Director of The Institute

of Bankers of Sri Lanka since October 2010.

Mr. Mudiyanse also served as a Non-Executive

Director on the Boards of Wayamba Chamber

of Commerce, Industrial Service Bureau and the

Wayamba Development Bank from 2007 to 2010.

Mr. Mudiyanse, an Associate Member of the

Institute of Bankers of Sri Lanka and obtained

a Postgraduate Diploma in Executive Bank

Management from the same institute in 2001.

P A Lionel Deputy General Manager (Investment Banking)

Appointed as Deputy General Manager

(Investment Banking) in October 2010. Mr. Lionel

joined the Bank in December 1983.

Counting over 27 years’ experience in banking

and financial services, Mr. Lionel has specialised

in the areas of treasury, international operations

and investments. He has been involved in

managing liquidity, assets and liabilities, fund-

raising activities, risk management in relation to

treasury and cross border funding. Additionally,

he has a flair for developing and marketing

treasury products. He held the position of CEO of

the Primary Dealer Unit of the Bank and headed

the Treasury and Investment Unit. He received

broad exposure and extensive training in Treasury

Management and Dealing Activities in London

from 1988 to 1989. He served as Head of

Treasury at the BoC Branch in Karachi.

He is a Non-Executive Director on the Board of

Lanka Hospitals (Private) Limited since 2010,

Property Development (Private) Limited since

2009 and Primary Dealer Association since 2007.

He is also an Alternate Director of Ceybank

Unit Trust since 2006 and the Vice-President of

Sri Lanka Forex Association since 2008.

Mr. Lionel obtained his Bachelor of Arts Degree

from the University of Colombo, Sri Lanka in 1980.



D M Gunasekara Deputy General Manager (Sales & Channel Management)

Appointed as Deputy General Manager

(Sales & Channel Management) in October

2010. Mr. Gunasekara joined the Bank having

graduated from the University of Colombo,

Sri Lanka with a Special Degree in Public Finance

& Taxation in 1981.

Commencing his career with retail banking,

Mr. Gunasekara has amassed a wealth of

knowledge and experience in all aspects of credit

management and administration. His recent

stint in Corporate and Offshore Banking has

seen the growth and expansion of this segment

significantly. Serving at the BoC London Branch

from 1997 to 2000, he obtained comprehensive

experience in international banking operations.

As an Associate Faculty Member of the Banks'

Training Institute, Mr. Gunasekara has readily

responded to uplifting the knowledge of our staff.

He is a Non-Executive nominee Director on the

Board of Ceybank Asset Management (Private)

Limited since August 2010 and Ceybank Holiday

Homes (Private) Limited since June 2009. He

served as a Non-Executive nominee Director on

the Board of Merchant Credit of Sri Lanka from

2008 to 2009.

He is an Associate Member of the Institute of



M K Muthukumar Chief Legal Officer

Attorney-at-Law, Mr. Muthukumar, a lawyer since

July 1975, was appointed as Chief Legal Officer

in September 2010. He joined Bank of Ceylon in

1992.

Counting over 19 years of experience in legal

affairs at the Bank, Mr. Muthukumar, served as

a Senior Legal Officer (Recovery) from January

1998 to October 2003 and as a Deputy Chief

Legal Officer (Recovery) from November 2003

to August 2010. He is a visiting lecturer on

Commercial and Banking Law at the Central

Bank Training Institute, Chartered Institute of

Management Accountants and Institute of

Bankers of Sri Lanka since 1996. He is also the

Chief Examiner for Laws relating to Financial

Services at the Institute of Bankers of Sri Lanka

since 2000.

He is also a Non-Executive nominee Director on

the Board of BOC Travels (Private) Limited since

2005 and serves as a Trustee of the Bank of

Ceylon Provident Fund since September 2010.

Ms. Janaki Senanayake Siriwardane Secretary to the Board/Secretary, Bank of Ceylon

Ms. Siriwardane, joined the Bank in January

1996 as its Assistant Secretary to the Board

and was appointed as Secretary to the Board/

Secretary, Bank of Ceylon in December

2005. She also serves as Secretary to all the

subcommittees of the Board.

She is an Attorney-at-Law by profession and was

a practicing lawyer. She also holds a Bachelor’s

Degree in Law and a MBA from the University of

Colombo, Sri Lanka.

Prior to joining the Bank, Ms. Siriwardane

was employed in the private sector handling

company secretarial work. She was also a visiting

lecturer, examiner and moderator on Commercial

and Industrial Law at the Industrial Management

Department of the University of Kelaniya,

Sri Lanka. She was a Non-Executive nominee

Director on the Board of Ceybank Holiday Homes

(Private) Limited up to September 2010.

She is also the Company Secretary for some of

the Subsidiaries of the Bank.


W A Asoka Rupasinghe Chief Financial Officer

Appointed as Chief Financial Officer in October

2009. Graduating from the University of

Sri Jayawardenapura, Sri Lanka, Mr. Rupasinghe

holds a Special Degree in Business

Administration in 1991 and a MBA in Finance

from the University of Southern Queensland,

Australia in 2007.

With over 24 years of experience in finance,

14 of which is in the financial services industry,

Mr. Rupasinghe has exposure in mergers and

acquisitions, cross border listing, cross border

fund raising through Euro Medium Term Notes

(EMTN) & Global Depository Receipts (GDRs)

programmes, in addition to specialisation in

group performance management. He had

been a resource person in several educational

institutions including The Institute of Chartered

Accountants of Sri Lanka and the University of

Sri Jayawardenapura.

Prior to joining Bank of Ceylon, he worked

as Head of Corporate Financial Affairs at

Commercial Bank of Qatar and Head of Finance

and Administration at Securities & Exchange

Commission of Sri Lanka.

A Non-Executive nominee Director of Ceylease

Financial Services Limited since March 2010,

Mr. Rupasinghe is also a Fellow Member of The

Institute of Chartered Accountants of Sri Lanka.

Trevine Fernandopulle Chief Risk Officer

Graduated from Imperial College, London with

a Bachelor of Science in 1977 in addition to a

Master’s degree in Statistics from the London

School of Economics in 1978, Mr. Fernandopulle

joined the Bank as the Chief Risk Officer in May

2009 after retirement from the services of HSBC

as Deputy CEO Sri Lanka.

In a Banking career spanning 30 years, he

has specialised in Corporate Banking and Risk

Management whilst acquiring wide experience

in all aspects of commercial banking including

treasury, corporate, retail and international

trade. He was seconded to the Saudi British

Bank an associate of HSBC Holdings PLC,

UK, as Manager Corporate Banking Eastern

Province Saudi Arabia and was responsible for

restructuring the Credit Control and Credit Risk

Departments.

He played a pivotal role in the successful issue of

the debut sovereign bond for US$ 500 million

for the Government of Sri Lanka in 2007.

Mr. Fernandopulle is a Trustee of Joseph Fraser

Memorial Hospital since 2010, President of

Sri Lanka Branch of the Chartered Institute of

Bankers, London since 2009 and a Fellow of the

Chartered Institute of Bankers, London.



Dr. W G KarunadasaChief Internal Auditor

Appointed as the Chief Internal Auditor of the

Bank of Ceylon in March 2009.

With over 30 years of experience in the

fields of accounting, auditing and financial

management, Dr. Karunadasa oversees the

internal audit function of the Bank.

Prior to enlisting at BoC, he headed the Internal

Audit Department of HDFC Bank and Veytex

(Private) Limited. He served on the Board

of Directors/Corporate Management of The

Finance Company PLC from 1988 to 2001.

Dr. Karunadasa holds a Master’s Degree in

Business Administration from the University of

Sri Jayawardenapura, Sri Lanka in 1996 and

obtained a Doctorate in Business Administration

from the Irish International University (EU)

in 2005.

He is also a Fellow Member of The Institute of

Chartered Accountants of Sri Lanka and also a

Fellow Member of the Certified Management

Accountants of Sri Lanka.

Rohan PeirisHead of Information Technology

Joined the Bank of Ceylon in February 2009, as

the Head of Information Technology, from his

previous position at DFCC Vardhana Bank.

Mr. Peiris holds a Master’s Degree in

Information Technology from Keele University,

UK in 2002.

Counting over 28 years’ experience in the

fields of Data Processing and Information and

Communication Technology, he is specialised in

software development and project management

and pioneering in facilities management.

He also served at Pan Asia Bank and Merchant

Bank of Sri Lanka. He was appointed as the

National Consultant on IT Projects funded

by United Nations Industrial Development

Organisation (UNIDO) in 1990 and served in

many committees of national interest. He is also

Information Technology Infrastructure Library

(ITIL) certified.

Additionally, he holds a Diploma in Systems

Analysis/Design. Mr. Peiris has membership

in the Computer Society of Sri Lanka, British

Computer Society, Institute of Electrical &

Electronic Engineers and Project Management

Institute and is also a Chartered Information

Technology Professional.



Dr. Lionel SiriwardenaHead of Research & Development

Appointed as Head of Research and Development

of the Bank of Ceylon in August 2009.

Dr. Siriwardena has over 21 years’ experience

in the banking sector handling macroeconomic

research, financial performance analysis

and forecasting. He has special exposure on

business process re-engineering, productivity

management, organisational restructuring and

customer care.

Prior to his appointment as Head of Research

and Development in Bank of Ceylon, he

served at the United Nations Development

Programme (UNDP) Regional Centre for Asia

Pacific Region as a Senior Researcher from

2005 to 2009 and Research Director at the

People’s Bank from 1991 to 2004. He was

also a Research Consultant for UNDP Maldives,

Lao PDR and Sri Lanka from 2008 to 2009,

Regional Researcher for microfinance and rural

development at the Asia Pacific Rural Agricultural

Credit Association (APRACA) from 2001 to

2004, the editor of Economic Review from

1991 to 2004, visiting lecturer at the University

of Colombo from 1995 to 1997 and Visiting

Research Fellow at the University of Burgen,

Norway and the University of Wageningen, the

Netherlands from 1979 to 1980.

Dr. Siriwardena holds a Master of Arts Degree

in Economics from the University of Kelaniya,

Sri Lanka in 1980 and obtained a Doctorate

in Social Sciences from the University of

Wageningen, the Netherlands in 1989.

M F GhaffoorHead of Marketing

Appointed as the Head of Marketing of the

Bank of Ceylon in January 2010.

In his current role he has responsibility for the

Banks’ CSR programmes.

Mr. Ghaffoor joined the Bank of Ceylon having

previously been with British American Tobacco

in East Africa, Pakistan and Iran from 2001

to 2008, as Marketing Director in each of

the Group’s subsidiaries. Prior to his overseas

secondments, he served in many roles at

Ceylon Tobacco Company before heading up its

Marketing Division in 1997.

During his tenure at British American Tobacco,

he acquired a thorough knowledge of Strategic

Planning, Product Development, Brand Planning

& Development, Supply Chain & Logistics and

Consumer Touch Point Management. His flair

for brand rejuvenation helped to secure market

leadership for British American Tobacco in

Pakistan.

Additionally, Mr. Ghaffoor served as General

Manager of Whittals Insurance and Country

Manager of DHL Sri Lanka from 1993 to 1996

during his tenure with John Keells Holdings.


1 Country…9 Provinces…

307 Branches… 1 Bank…Bank of Ceylon

1 Bank…on the ground in hundreds of towns, villages andhamlets across the country…1 Bank…BOC


EXECUTIVE MANAGEMENT TEAM

01 Ms. B D C WijekulasuriyaAGM - Product & Development Banking

02 Ms. Y A M M P KarunadharmaAGM - Metropolitan Branch

03 Ms. S W S FernandoAGM - Province Sales Management

04 Ms. K M AmarasuriyaAGM - Recovery (Provinces)

09 Ms. Sriyani AnandagodaAGM - Trade Finance

10 D L C AtapattuAGM - Central Province

11 H K W GunasingheAGM - Sabaragamuwa Province

12 Ms. K A D A PemadasaAGM - Administrative Services

17 W P R P H FonsekaAGM - Budget & Strategic Planning

18 I G C MadadeniyaAGM - Country Manager - London

19 T MutugalaAGM - Information System Audit

20 M WickramasingheAGM - Human Resource Operations

01 02 03 04

09 10 11 12

17 18 19 20



05 Ms. R G V S GunatilakeAGM - Credit Audit

06 Ms. W K I KularatneAGM - Western Province North

07 Ms. K A D FernandoAGM - Offshore Banking

08 P J JayasingheAGM - Corporate Credit

13 Ms. P R UnawatunaAGM - Branch Credit

14 Ms. L W WijesundaraRecovery Corporate

15 K B S BandaraAGM - Corporate Relations

16 D N J CostaAGM - North Central Province

21 Ms. L S L de S WijeyeratneAGM - Pettah Branch

22 D N L FernandoAGM - Western Province South

23 K T KarunaratneAGM - Support Services

24 D M L C KumaraAGM - Country Manager - Male

05 06 07 08

13 14 15 16

21 22 23 24



25 T M SafaAGM - Country Manager – Chennai

26 S S S SenanayakeAGM - Province & Branch Audit/Investigations

27 W G AriyaratneAGM - International

28 G H ChandrasiriAGM - Business Process Re-Engineering Project

33 C W WelagederaAGM - Eastern Province

34 D P K GunasekeraAGM - Overseas Branches

35 K E D SumanasiriAGM - Northern Province

36 W M S WanasingheAGM - BoC Card Centre

41 Ms. H M RatnayakeAGM - Accounting & MIS

42 Ms. C K JayarathneAGM - Customer Relations

43 T P G RanaweeraAGM - Consumer Product Management

44 K G JinadasaDeputy Chief Legal Officer (Operations)

25 26 27 28

33 34 35 36

41 42 43 44



29 M L J FernandoAGM - Risk Management & Compliance

30 G L P JinasomaAGM - Uva Province

31 S M S C JayasuriyaAGM - Treasury

32 G D SilvaAGM - Training & Development

37 D K N PiyasomaAGM - Southern Province

38 E M U BandaraAGM - North Western Province

39 H G NihalAGM - Superannuation Schemes

40 Ms. S S EkanayakeAGM - Marketing

45 Ms. S H RanawakaDeputy Chief Legal Officer (Recovery)

46 H R F FonsekaAssistant Director IT (Operations/Tech. Support)

47 Jagath KurundukumburaAssistant Director IT (Operations/Tech. Support)

29 30 31 32

37 38 39 40

45 46 47


MANAGEMENT DISCUSSION AND ANALYSIS

ABOUT THE BANK

The Bank of Ceylon (BoC) is the premier State owned commercial bank in Sri Lanka.

It provides diversified fully-fledged banking services including Retail, Corporate, International, Treasury, Development/Investment Banking Services, Credit Cards, Islamic Banking, Safe Deposit, Custodian and Pawn Broking Services through a network of 307 local and 2 overseas branches (Male and Chennai).

The Bank is subject to examination and regulation of the Central Bank of Sri Lanka and subject to listing rules of the Colombo Stock Exchange by virtue of its listed debenture. The overseas branches are subject to Banking Regulations prevalent in the respective countries.

The stability and strength of the Bank is affirmed by the AA (lka) rating with a positive outlook bestowed by Fitch Ratings Lanka Limited.

The financial performance of 2010 is yet another testimony of the Bank’s ability to remain profitable in lower interest regime and Rupee appreciating environment. By capitalising on the strengths in core businesses and seizing opportunities arising from the recovering economy, the Bank successfully captured the growth in the banking industry. In order to achieve the performance, the Bank expanded its service scope in various business areas including Investment Banking and Islamic Banking while the delivery channels, branch network and internet and mobile banking solutions gained ground. The Bank also continued to strengthen its financial position and risk management.

BoC has a staff strength of 9,352 consisting of 8,204 full time, and 1,148 of outsourced and contracted employees.

BoC’s customer base spans over 9 million customers island-wide. During the year the Bank’s asset base reached Rs. 715 billion while customers’ deposits increased to Rs. 524 billion while the quality of the assets improved reducing the NPA to 3.3%.

BoC has number of subsidiaries and associates under its Group umbrella operating in varied industries including financial services, property development, travel and leisure, unit trust, insurance, stock broking and renewable energy.

THE ECONOMIC ENVIRONMENT

THE GLOBAL ECONOMY

The global economy recovered during the year from one of the deepest economic recessions and is projected to grow by 4.8% in 2010 and by approximately 4.2% in 2011. Advanced economies are expected to expand by 2.7% and 2.2% in 2010 and 2011, respectively. Emerging economies continue to be the engine of world economic growth, and are expected to grow by about 7.1% and 6.4% in 2010 and 2011, respectively. Inflation in advanced economies is expected to move up to 1.4% in 2010 from and 1.3% in 2011. Inflation in emerging economies is expected to remain relatively high, accelerating from 5.2% in 2009 to around 6.2% in 2010, and decelerating back to 5.2% in 2011.

SRI LANKAN ECONOMY

Sri Lankan economy turned around in 2010 with macroeconomic variables indicating favourable developments. The economy grew by an estimated higher rate of 8.0% during the year compared to the growth of 3.5% recorded in 2009. The restoration of peace, strong macroeconomic environment, improved business confidence and the recovery of the global economy buttressed this growth.

All sectors of the economy performed well during the first three quarters of the year, with the agriculture sector recording a growth of 6.3%, industry sector 8.7% and services sector 7.9%. Total gross investment of the country was projected to increase to 27.8% of GDP in 2010 from 23.9% in 2009 largely due to private sector investment during the year. Domestic savings in 2010 were projected to remain unchanged at the 2009 level of 18% of GDP mainly due to the unexpected increase in import demand.

Demand management policies and improved domestic supply conditions enabled to maintain annual average inflation at subdued levels, which stood at 5.9% in 2010. The low and the benign level of inflation enabled Central Bank of Sri Lanka to ease its monetary policy by reducing the reverse repurchase rate and repurchase rate to 9.0% and 7.3%, respectively by end of 2010.

Supported by the recovery of exports and imports, increased remittances, higher foreign financial inflows, the external sector remained buoyant during the year. Balance of Payments (BOP) recorded a surplus, with the higher foreign financial inflows, including disbursements under the IMF-Stand-By Arrangement (SBA) facility and proceeds from the third international sovereign bond issue in October 2010 which raised the external reserves to the highest-ever level recorded. The exchange rate also remained at manageable level during the year consequent to the recovery of the external trade and increase in export earnings which rose by 17.3% to US$ 8.3 billion in 2010, while expenditure on imports increased by 32.4% to US$ 13.5 billion during this period. Sri Lanka was able to present itself strongly in international financial markets and international rating agencies, namely, Moody’s Rating Services, Standard and Poor’s, and Fitch Ratings.



The deficit in the trade account widened by 66.7% to US$ 5.2 billion during 2010. Worker remittances that grew by 23.6% Year-on-Year to US$ 4.1 billion ably compensated the expanding trade deficit. With foreign financial inflows to the Government, the overall BOP recorded a surplus of US$ 0.9 billion during the year. Gross official reserves without Asian Clearing Union (ACU) stood at US$ 6.6 billion as of end 2010.

The exchange rate policy continued to focus on maintaining stability in the domestic foreign exchange market in the face of significant inflows. The rupee appreciated against the US Dollar (3.0%), the Euro (10.0%) and Pound Sterling (7.3%), while depreciating against the Japanese Yen (10.7%) by end 2010. The Central Bank intervened in the foreign exchange market and mitigated the excessive volatility in the domestic foreign exchange market ensuring that the export sector is insulated from a sharp appreciation of the rupee.

The fiscal policy in 2010 was to maintain the budget deficit within the annual target of 8.0% of GDP. A significant improvement in the overall fiscal situation is envisaged through the considerable recovery in Government revenue with the higher level of economic activities, savings in Government expenditure, recovery of international trade, while maintaining public investment at the targeted level. Revenue deficit to GDP is expected to improve to 2.0% of GDP from 3.7% of GDP recorded in 2009.

Market interest rates continued to adjust downwards in tandem with the policy rate changes by the Central Bank. Monthly Average Weighted Prime Lending Rate (AWPR), which serves as a benchmark for selected lending rates, declined to below 9.5% and the monthly Average Weighted Deposit Rate (AWDR), which reflects the movement of interest rates of all interest-bearing deposits held by commercial banks,

declined to below 6.5% by end 2010. The Average Weighted Lending Rate (AWLR), which reflects the movement of interest rates pertaining to all lending by commercial banks to the private sector, also declined further.

The overall soundness of financial institutions improved during the year 2010 as reflected by capital, liquidity, asset quality and profitability, consequent to the increase in capital inflows, domestic financial markets became more liquid in 2010. Credit flows to the private sector picked up along with the improvement in credit conditions, reversing the negative growth recorded in the previous year.

The Sri Lankan economy is projected to grow by around 8.0% in 2011 and with positive contributions from all the major sectors of the economy. Domestic inflation in 2011 is expected to remain subdued within single digits. Money supply would be maintained at a level compatible with the expected growth in the nominal GDP in 2011. Sri Lanka’sexternal sector is expected to improve further in 2011 recording a surplus in the BOP, thereby increasing the country’s external reserves further. Exports are projected to rise in 2011 with higher value addition, diversification of products and markets, and the gradual recovery of the world economy. Imports are projected to grow in 2011, mainly due to the higher import demand from economic activities including those expected in the North and the East, better performance in the tourism sector, and the development of major roads, ports and power-generating projects.


NET INTEREST INCOME MARGINS AND SPREADS

Despite the loan growth of 40.2% YoY, the interest income reduced by 4.0% YoY to Rs. 50,853 million in 2010, consequent to the Bank’s commitment to create low interest rate regime to induce economic revival of the country.

The Bank’s net interest income increase of Rs. 14,810 million YoY to Rs. 19,648 million in 2010 is mainly attributed to the Bank’s ability to source funds at competitive prices. The favourable market conditions enabled the Bank to attract funds at lower rates, thereby reducing the average cost on interest-bearing liabilities by 2.7% YoY to 5.4% from 8.1% in 2009, while the average yield on interest-bearing assets declined by 2.5% to 9.2% from 11.7% in 2009. This broadened the interest spread of the Bank making a significant contribution towards the current year’s profit.


FINANCIAL REVIEW

In the backdrop of the macro and micro economic conditions stated above, the Bank achieved commendable results.

The Bank recorded a Profit Before Tax (PBT) of Rs. 10,053 million in 2010 an Year on Year (YoY) increase of 138.9% compared to Rs. 4,208 million the previous year. The increase in profits was mainly driven by the rise in net interest income and non-interest income which rose YoY by 32.7% and 28.0%, respectively.

Total operating income continued to rise in the year supported by the non-interest income.

Net interest margin increased by 0.27 % to 3.54% while the net interest spread increased by 0.21%%. Average interest-bearing assets grew by Rs. 103 billion, 22.7% YoY, to Rs. 555.7 billion in 2010.

The table below highlights the Net Interest Income & Margin.

Except percentage terms 2010 2,009 Rs. million Rs. million

Interest income 50,853 53,077

Interest expense (31,205) (38,267)

Net interest income 19,648 14,810

Net interest spread 3.78% 3.57%

Net interest margin 3.54% 3.27%

The table below highlights the average balances and average interest rates of individual categories of assets and liabilities.

Year ended 31 December 2010 Year ended 31 December 2009

AssetsAverage balance

AverageYield

Averagebalance

AverageYield

Rs. million % Rs. million %

Loans & advances to customers 318,893 11.1 268,085 13.9

Investment securities 74,132 4.0 70,594 5.1

Other interest earning assets 162,709 7.8 114,083 10.8

Total Interest earning assets 555,734 9.2 452,762 11.7

Non-interest earning assets 70,864 – 58,545 –

Year ended 31 December 2010 Year ended 31 December 2009

LiabilitiesAverage balance

AverageRate

Averagebalance

AverageRate


Deposits from customers 466,420 4.7 362,339 7.3

Borrowed funds 42,772 4.4 47,198 3.6

Debentures 28,375 10.4 18,017 17.3

Repo borrowing 43,863 9.8 42,003 16.8

Total Interest bearing liabilities* 581,430 5.4 469,556 8.1

Non-interest bearing liabilities 45,167 – 41,753 –

* This Includes Demand Deposits


In addition to the improved net interest income, the Bank’s revenue diversification strategy which aims to reduce the Bank’s dependence on net interest income reaped commendable results. The table below indicates the key areas in fee income.

FEE INCOME

2010 2009 VarianceRs. million Rs. million %

Trade services 3,690 2,270 62.6

Personal banking & account services 1,201 1129 6.4

Credit cards 473 380 24.5

Travel & remittances 412 313 31.6

Brokering services 117 66 77.3

Credit facilities 43 40 7.5

Custodial services 17 18 (5.6)

Others 61 41 48.8

Total 6,014 4,255 41.3

The increase in net fees and commission income by Rs. 1,759 million, 41.3% YoY, to Rs. 6,014 million during the year is attributable to the strong growth in trade services income which rose by 62.6% YoY to Rs. 3,690 million, followed by brokering services and credit cards which registered a decent growth. The increase in trade services commission is mainly due to expansion in external trade activities during the year in which the Bank enjoys a dominant market share.

As a result of our continued commitment to service to our overseas working population and the diaspora, the fee income earned from foreign remittances grew by 31.6% YoY to Rs. 412 million. The Bank will continue to service this market segment with innovative financial solutions and technology-based delivery channels by offering an efficient service to these customers. Cards operation of the Bank comprising of debit and credit cards was revitalised during the year which resulted in 24.5% YoY increase in the card fee income which rose to Rs. 473 million from Rs. 380 million last year. The Bank will continue to enhance this segment with technology-based customer delivery solutions.


TRADING INCOME

The boom in the Colombo Stock Exchange enabled BoC to register substantial capital gains from securities. The table below highlights the performance of the Bank’s trading both in equity and in other fixed rate instruments.

2010 2009 VarianceRs. million Rs. million %

Equity instruments

Mark to market valuation 80 164 (51.2)

Sale of securities 1,857 652 184.8

Fixed rate instruments

Mark to market valuation 132 364 (63.7)

Sale of securities 1,037 782 32.6

Trading income 3,106 1,962 58.3

BoC therefore recorded Rs. 1,857 million in realised gains, an increase of Rs. 1,205 million (184.8% YoY). The Bank achieved these results from an average trading portfolio of Rs. 2.5 billion.

On the other hand, capital gains from sale of fixed rate instruments recorded a growth of 32.6% YoY to Rs. 1,037 million in 2010 due to reducing interest rates, while mark-to-market gains reduced by Rs. 231.6 million to Rs. 132 million.

FOREIGN EXCHANGE INCOME

During the year, the Bank concentrated on mitigating exchange losses arising from the appreciation of Sri Lankan Rupee against the US Dollar. The chart below indicates the exchange rate trend for the year 2010.

The Sri Lankan Rupee appreciated against the US Dollar on a monthly basis and dropped from Rs. 114.55 in December 2009 to Rs. 111.25 in December 2010. Other major currencies (Euro & GBP) also remained low against the Sri Lankan Rupee compared to the previous year.


Consequent to the appreciation of the Rupee, the Bank’s exchange income was limited to trading gains. The mark-to-market revaluation recorded only marginal gain. The trading gains for the year amounted to Rs. 131 million recording a decline of Rs. 34 million. This amount is related to fund transfers for imports and exports and both inward and outward overseas remittances. The overall exchange income reduced by 73.9% YoY to Rs. 409 million in 2010. Further, the Bank having the largest foreign exchange operations successfully managed the exchange risk posed by appreciating Sri Lanka Rupee against US Dollars. As shown in the graph above, the long open position of US Dollars was reduced substantially thereby avoiding volatilities of the income statement arising from mark-to-market revaluation.

OPERATING EXPENSES

2010 2,009 Rs. million Rs. million

Staff costs 10,310 10,517

Premises and equipment expenses (excluding depreciation) 2,073 1,992

Depreciation on owned fixed assets 785 686

Other operating expenses 2,909 2,451

Total operating expenses 16,077 15,646

Cost-to-income ratio (%) 53.73 68.33


The Bank’s total operating expenses rose by 2.8% YoY to Rs. 16,077 million in 2010 mainly due to the increase in other operating expenses and depreciation of assets. The increase in other operating expenses and depreciation is attributable to expansion of the branch network and ATM coverage mainly in the North and the East. Additionally, the Bank wrote-off Rs. 134 million against lost articles and records in few branches in the Northern Province in order to expedite the restoration of normal banking functions in the peninsula which is also included in the other operating expenses. Marketing and advertising expenses increased marginally by Rs. 53 million, 8.5% YoY due to the expenses incurred to promote new products and services launched during the year.

The increase in revenue while containing the cost, coupled with the increase in Bank’s improved productivity resulted in the improvement of the Cost-to-Income ratio as shown in the graph which improved by 68.33% to 53.73%.

PROVISIONS

2010 2,009 Rs. million Rs. million

Specific provisions

Charge for the year (1,072) (1,803)

Reversed/recovered during the year 1,297 1,398

General provisions

Charge for the year (488) –

Reversed/recovered during the year – 1

Recovery of written-off 71 102

Net charge to income statement (192) (302)

The charge for credit losses for the year 2010 reduced by Rs. 110 million to Rs. 192 million, consequent to the credit recovery management and remedial process adopted by the Bank which mitigated the increase in non-performing loans during the year. Additionally, the Bank also adopted customer reinstatement programmes and innovative management of distressed loans portfolios to reduce the bad loan content.


FINANCIAL POSITION

As at 31 December 2010 2,009 Rs. million Rs. million

Cash and balances with banks and other financial institutions 39,998 29,772

Placements with banks and other financial institutions 42,680 45,867

Investments 195,222 165,903

Securities purchased under re-sale agreements 40,840 6,615

Loans & advances 372,722 265,065

Fixed assets and investment properties 5,786 5,835

Other assets 17,706 19,184

Total assets 714,954 538,241

Deposits from customers 524,233 408,607

Borrowed funds 52,445 33,098

Securities sold under re-purchase agreements 53,522 34,204

Tax payable & differed tax liability 2,657 599

Debentures 38,706 18,045

Other liabilities 15,259 18,790

Total liabilities 686,822 513,343

Capital and reserves attributable to the equity holders of the Bank 28,132 24,899

Total liabilities and equity 714,954 538,241

Loan-to-deposit ratio (%) 72.93 67.31

Total assets of the Bank stood at Rs. 714,954 million as at 31 December 2010, up by Rs. 176,713 million or 32.8% YoY. The overall assets structure of the Bank improved during the year with the growth in higher-yielding assets such as advances to customers as well as investment in securities. Cash and balances with banks and other financial institutions increased by 34.3% YoY to Rs. 39,998 million. Placements with banks and other financial institutions decreased by Rs. 3,187 million, 6.9% YoY, due to redeployment of Bank’s funds to advances to customers and debt securities.

The Bank’s loan portfolio exceeded the Rs. 300 billion mark during the year to reach Rs. 372,722 million, recording a YoY growth of 40.6%. Consumption loans increased by Rs. 16,853 million, pawning (mostly agricultural based) increased by


Rs. 21,920 million, while external trade-related loans rose by Rs. 2,758 million and loans to Hotels, Travels and Services Sector were up by Rs. 2,274 million to Rs. 19,089 million. Loans to the housing and property development sector rose by Rs. 7,554 million. The lending to the State-owned enterprises increased by Rs. 44,925 million during the year inclusive of the Rs. 3,555 million granted to stabilise the paddy prices after the harvest of Maha Kanna in 2010.

The Bank’s credit exposure to the Government of Sri Lanka increased during 2010 due to lending to State-Owned Enterprises (SOEs).

The graph indicates the industry exposure during 2009 and 2010.


The chart highlights the composition of assets. It is evident that the loans component has taken ground compared to 49.2% of last year to 52.1%.

FUNDING

Significant portion of the Bank’s funding 73.3% came from customer deposits in 2010. Consequent to the Bank’s continued efforts on deposit mobilisation, a substantial portion of the deposits was raised during the year while additional funds were sourced from issue of debentures to diversify the funding base. Apart from Rs. 5,000 million raised through a debenture listed on the Colombo Stock Exchange in June, additional Rs. 16,679 million was raised through privately placed debentures to bridge the funding gap and liquidity mismatch of the Bank.

DEPOSITS FROM CUSTOMERS

Deposits from customers increased YoY by Rs. 115,625 million, 28.3%, to Rs. 524,233 million. The deposit mix of the Bank improved in 2010 with the increase in low-cost funds. This composition of demand deposits increased to 17.1% while time deposits reduced to 46.1% from 46.4% in 2009 thus exerting a reduction in the Bank’s average cost of funds.



The analysis of the deposit interest cost is given in the table below:

Average balances 2010 2009

Volume Interest Cost Volume Interest Cost

Rs. million Rs. million Rs. million Rs. million

Current deposits 72,277 – 51,468 –

Savings deposits 176,145 7,559 145,752 8,359

Time deposits 215,600 14,514 162,102 17,963

Other deposits 2,398 15 3,016 85

Total 466,420 22,088 362,338 26,407


INDUSTRY-WISE NON-PERFORMING EXPOSURE

Net exposure of the non-performing loans was brought down resulting in the improvement of the NPA coverage to 75.9% including general provision which is above the industry standard. The balance 24.1% is substantially covered with high quality collaterals decimating further provision requirements.

CREDIT QUALITY

A well-coordinated effort of credit risk management and recovery initiatives during the year including innovative management of bad loans, early warning signals and proactive follow up of likely distressed credits reduced non-performing loans (NPLs) to Rs. 12,639 million from Rs. 15,542 million in 2009.

Non-performing loan (NPL) ratio improved from 5.6% in 2009 to 3.3% in 2010. The NPL excluding lending to the Government and State-Owned Enterprises was 5.2% which is still within the comparable industry level.

The lowering interest rates in the market supported by policy rates reduction, the Bank was able to source funding at competitive prices, thereby lowering total interest cost compared to last year.

The Bank’s loan-to-deposit ratio was up by 5.6% to 72.9% at the end of 2010 as total loan growth outpaced deposit growth.


CAPITAL & LIQUIDITY RATIOS

As at 31 December 2010 2009 Rs. million Rs. million

Core capital 28,007 24,773

Deductions (2,673) (1,581)

Core capital after Deductions 25,333 23,192

Supplementary capital 10,952 7,561

Deductions (2,509) (1,471)

Supplementary capital after deductions 8,443 6,090

Total capital base after deductions 33,776 29,282

Risk-weighted assets

Credit risk 198,284 168,378

Market risk 12,779 8,228

Operational risk 34,900 30,174

Total risk-weighted assets 245,963 206,780

Capital adequacy ratios

Core capital ratio (%) 10.3 11.2

Capital adequacy ratio (%) 13.7 14.2


OUR ACHIEVEMENT AGAINST FORECAST

The following table highlights the achievement of target key performance indicators which were set out in the Bank’s Annual Report in 2009.

2010 target 2010 actual Rs. million Rs. million

Total assets 625,376 714,954

Net Loans & Advances 354,044 372,722

Customer deposits 499,545 524,233

Shareholders’ Equity 28,315 28,132

Net Interest Income 18,736 19,648

Non-interest income* 11,815 12,042

Operating Expense** 19,906 17,637

Profit before tax 7,140 10,053

Profit after tax 4,641 6,365

ROAE (%) 17.60 24.01

ROAA (%) 1.20 1.60

Book Value (Rs.) 5,663 5,626

EPS (Rs.) 928.2 1,273.0

Cost to income ratio (%) 62.0 53.7

* Including recovery of NPA** Including provision for loan losses

REGULATORY DEVELOPMENTS

CENTRAL BANK DIRECTIONS

General provision on performing loans and advances

As per the regulations of Central Bank of Sri Lanka (CBSL) the general provision on non-performing loans, advances and credit facilities is to be reduced from the current 1% to 0.5% by December 2011 allowing a phased out reduction in provision at a rate of 0.1% per quarter, over five quarters commencing with the quarter ending 31 December 2010. The reduction in the general provision due to this change during the year was Rs. 266.2 million and accordingly the current year's profit would have been reduced by the same amount if not for this change.

Capital adequacy ratio decreased marginally by 0.5% to 13.7% as a result of the increase in risk-weighted assets primarily due to the enhancement of loan book during the year 2010. The sound liquidity position of the Bank was highlighted by the liquid asset ratio which was up by 7.5% to 28.6% from 21.1% in 2009.

DIVIDEND AND VALUE TO THE GOVERNMENT

2010 2009 2010/09Rs. million RS. million %

Value Added Tax 4,001.2 2,994.8 33.6

Income Tax 3,687.3 1,123.6 228.2

Dividends 3,096.4 1,346.4 130.0

Total 10,784.9 5,464.8 97.3

Profit Before VAT & Tax 14,053.8 7,202.5 95.1

Total Value to Government (%) 76.7 75.9 –


Sri Lanka Deposit Insurance Scheme (SLDIS)

A provision of Rs. 96.0 million was made in respect of the Sri Lanka Deposit Insurance Scheme (SLDIS) introduced by the CBSL. The Bank was committed to pay a quarterly premium at 0.1% per annum on the eligible deposit balance with effect from 1 October 2010.

Reduction of Interest RatesIn view of the reduced policy rates since early this year, the CBSL has requested all banks to take appropriate measures to reduce lending rates. In support of this, the Bank proactively reduced interest rates on all lending.

IFRS READINESS

The two new Sri Lanka Accounting Standards namely SLAS 44 & SLAS 45 will be effective for the Financial Statements commencing from January 2012. These two standards will substantially alter the manner in which revenue is recognised from financial instruments and disclosures. The initial impact assessment was completed and substantial training was given to staff across business units. The Bank is optimistic towards conversion to the new accounting standards in the year 2012.

COMPLIANCE WITH THE LISTING RULES ISSUED BY COLOMBO STOCK EXCHANGE (CSE)

The Unsecured, Subordinated, Redeemable Debentures of November 2008/November 2013 series and June 2010/June 2015 series, both fixed and floating interest rates are listed on the Colombo Stock Exchange. The total amount is Rs. 9,367 million. The above debt instruments listed in the CSE, require regular uploading of the quarterly and yearly Financial Statements in the website of the CSE and submission of same to the CSE as per the listing rules. During the year 2010, the Bank has complied with the requirements of the listing rules and submitted the Financial Statements on quarterly basis duly certified by the Chairman, Director, General Manager and Chief Financial Officer. Further, the Bank submitted the listing undertaking signed by the Chairman and General Manager of the Bank under the common seal to CSE on 11.03.2010.


BUSINESS PERFORMANCE

CORPORATE BANKING

Our Corporate Banking Division caters to corporate clients whose annual turnover of above Rs. 250 million and has continued to finance all sectors of the economy. The restoration of peace and the recovery of the global economy stimulated development activities which were favourable to the Corporate Banking business. The Corporate Banking activities were accelerated during the year to harness the economic development initiatives which emerged in the economy. Integration of the North and the East with the rest of the county, spurred business mobility, infrastructure development and transportation in the country and opened up many business opportunities. The Bank concentrated on improving service quality, reviewing business processes, identifying business drivers which trigger growth and expanding lending operations to the private sector through the implementation of market- based strategies in the low interest rate regime whilst maintaining a healthy advances portfolio. It is pertinent to mention that the Bank won the award the “Best Sri Lankan Trade Bank” in 2010 by The Trade Finance Global Magazine for Export and Commodity Finance.

The key highlights of the Corporate Banking Unit during 2010 are given below:

The Bank acted as financial facilitator of major development projects of the country such as rural electrification, construction/reconstruction of 5 bridges in the Eastern Province and major water supply projects in Colombo city, funded by international agencies.

Undertook project financing of over Rs. 38.0 billion in the areas of:

a. Port development and expansion

b. Telecommunicationc. Renewable energy with special

reference to wind power projects

d. Road development projects

Financed the infrastructure development projects undertaken for ‘IFFA’ International event in Sri Lanka and was the official banker to the event.

Supported the infrastructure development projects, related to ICC Cricket World Cup.

Introduced the “5S” concept and Quality Circle to the corporate environment, through trade services, with the assistance from the National Productivity Centre. All the actions have been initiated to obtain the ISO 9001 : 2008 certification, for Trade Services Unit in 2011.

Provided financial support to expand the wholesale market in Pettah to Dambulla and Northern parts of the island.

Revamped one of our main branches in Pettah to create a customer-friendly ambience.

Off-shore Banking

The Off-shore Banking unit recorded a commendable achievement amidst the slow global recovery. The unit continued to support the apparel sector by providing capital investment and working capital funding despite the recent withdrawal of GSP+ concessions by the European Union. Revolving working capital granted to the sector exceeded US$ 350 million during the year. The Unit also continued to fund the domestic and overseas leisure sector which continued to perform well.

RETAIL BANKING

As a part of the cost effective expansion strategy, the Bank established 26 extension offices island- wide and increased the number of branches linked online to 307, thus making Bank of Ceylon the largest online banking operator in Sri Lanka with 879 service points. To enhance the service delivering capabilities of the Bank, 23 ATMs were linked, increasing the ATM network to 352 during the year.

The following initiatives were taken to expand our provincial reach:

Central Province

Opened extension offices in Wilgamuwa and Hataraliyadde to provide extended banking facilities.

Relocation of the Dambulla Branch to increase banking convenience.


A workshop with the assistance of SEEDS (Sarvodaya Movement) was conducted on Remittance Literacy/Opening of NRFC/RFC accounts for relatives of migrant workers.

Establishment of a fully-computerised mobile banking unit at the Deyata Kirula Exhibition held in February 2010.

Sabaragamuwa Province

Establishment of an extension office in Weligepola to extend banking facilities to villages.

Relocation of branches in Ratnapura and Eheliyagoda and the extension offices in Godakawela and Kotiyakumbura to customer- convenient locations.

Opened 182 School Savings Units in the province.

Uva Province

Opened an extension office named ‘Badulla City Branch’.

A seminar on leadership skills was organised in school banking units of Bandarawela, Mahiyangana, Moneragala and Badulla Districts.

Branch modernisation was extended to Meegahakivula, Koslanda, Passara and Ballaketuwa branches.

Plans are under way to fund water bottling plants, large scale vegetable cultivation and hotel projects in Hambantota.

Eastern Province

Opened offices in Morawewa, Mamanagam, Kallar, Uppuveli, Polwatte and Karaitivu

Relocated Akkaraipattu Branch to a customer convenient location.

Shifted the Eastern provincial office which was stationed in Colombo to Trincomalee.


Northern Province

Reopened the Kilinochchi branch in March 2010 with online banking connectivity.

Initiated a rapid lending and financing programme to fast track the development of the economic activities in the area.

Credit facilities were extended to re-construct dwellings and recommence income-generating activities of the resettled population.

Wrote off Rs. 134 million in respect of lost articles and records to assist the affected business community.

Assisted the distribution of funds from UNHCR, World Vision, SLRC financial assistance, ENRep funds (emergency Northern Recovery Project) etc.

The credit facilities extended by our branches in the Northern Province amounted to Rs. 2,303 million reflecting an increase of 46.5%. In recognition of this achievement, our branches were awarded appreciations by the Central Bank of Sri Lanka as appearing in Sustainability Report.

BoC opened extension offices in Anandakulam and Mallavi and mobile service centres in Urumpirai, Kudathanai, Mulankavil and Atchuvely during 2010.

CREDIT CARD OPERATIONS

Despite intense competition, the Bank continued to perform well in the credit card market. The credit card total outstanding increased by Rs. 319 million to Rs. 1,223million, while merchant turnover rose by Rs. 2.4 billion to Rs. 11.6 billion. The number of cards also rose by 36,061 to 98,000 while the number of merchants increased by 900 to 3,900 in the year under review. As a consolidation strategy the Card Centre was shifted to the World Trade Centre while a 24-hour credit card issuing service point was established in the same location, a first in Sri Lanka in its kind. A new product named ‘Master Debit Card’ was introduced and the call centre was revamped during the year.

PRODUCTS AND SERVICES

A structured approach was adopted to develop innovative products to cater to all sectors and communities. Some of the products launched during the year are:

BoC Infinity and BoC Vishrama - These were introduced to contribute towards Government’s long-term objective of ‘pension for all citizens’.

Smart Saver saving schemeThis product was also introduced to create a long-term fund base to meet the growing funding needs of the country.

Islamic banking arm launched Mudarabah (savings), Atfal (children savings), Al Noor (current account), Diminishing Musharakah (housing) and Wakala (advances) products.

DEPOSIT MOBILISATION

Several deposit promotional campaigns were conducted island-wide to improve financial literacy and to popularise banking habits among the rural community. The launch of ‘Gam Udana’ and ‘Door to Door‘ campaigns were a resounding success as the Bank achieved the target of one million savings accounts which has now reached Rs. 8.5 million. The deposit promotion campaign launched with the participation of the Bank staff enabled to raise Rs. 2.2 billion deposits. In order to inculcate banking habits among children the Bank established 210 units of ‘School Sansadaya’ in schools island-wide.

SME AND DEVELOPMENT BANKING

In order to uplift the quality of life of the SME sector which forms the backbone of our economy, BoC extended several financial assistance schemes. Our development banking activities are detailed in the Sustainability Report.


INTERNATIONAL AND TREASURY OPERATIONS

With the network of 718 correspondents around the globe, the Bank is well-poised to meet the ever-increasing demand for International Banking Services from our clients. The International Division concentrates on canvassing inward remittances and foreign currency deposits from overseas working population. During the year, Rs. 187 billion worth of inward remittances were channelled through the Bank recording an YoY increase of 12% compared to Rs. 167 billion the previous year. This was achieved by increasing our presence in markets we source higher remittances and joining new remittances schemes such as Shift Financial Jordan and Merchant Trading Malaysia. The number of overseas representatives was increased to 25 from 21 the previous year.

The foreign currency deposit base also rose by 30.2% YoY to Rs. 166.4 billion from Rs. 127.7 billion in 2009. Several strategies were adopted to grow the NRFC deposit base including introduction of raffle draws and conducting educational programmes in association with Sri Lanka Bureau of Foreign Employment on the importance of inward remittances and savings habits to prospective Sri Lankan migrant employees. A pre-departure loan scheme was introduced to prospective migrant employees apart from the several awareness programmes conducted during the year.

The number of correspondents increased from 658 in 2009 to 718 in 2010, while the number of Relationship Management Arrangements (RMA) increased to 2,242 from 2,100 in 2009.


Overseas Branches

Chennai Branch

Rs. millionCCY 2010 2009 Increase (%)

Total assets INR 1,040 940 10.6

Gross loans INR 743 498 49.2

Deposits INR 935 751 24.5

Profit before tax INR 94 104 (9.6)

Profit after tax INR 59 62 (4.8)

INR - Indian Rupees

Chennai branch has recorded a goodperformance with a significant rise in asset deposits and loans. Total assets increased by 10.6% YoY, from INR 940 million to INR 1,040 million in 2010. The loans and advances increased by INR 245 million to INR 743 million while deposits base rose by INR 184 million to INR 935 million recording a growth 24.5% YoY. The profit for the year is slightly decreased to INR 94 million from INR 104 million last year, since profit reported in 2009 included a special recovery of INR 20 million.

An advanced Core Banking System integrated with treasury operations was implemented during the year. The branch is moving towards electronic banking with the proposed installation of Automated Teller Machines (ATMs) linked to the common ATM network of commercial banks in India. Plans are under way to introduce internet and SMS banking to improve delivery channels. BOC Chennai is the only Sri Lankan bank on Indian soil.

Male Branch

Rs. millionCCY 2010 2009 Increase (%)

Total assets MRF 1,351 838 61.2

Gross loans MRF 661 435 51.9

Deposits MRF 894 601 48.7

Profit before tax MRF 54 32 68.8

Profit after tax MRF 42 22 90.9

MRF - Male Rufiyaa

Male Branch

Despite the adverse economic conditions in Male and the stringent regulatory framework introduced by the Maldives Monetary Authority (MMA), total assets rose to MRF 1,351 million from MRF 838 million last year, while total advances increased by 52% YoY to MRF 661 million. Customer deposits also grew by 48.7% to MRF 894 million. Profit for the year amounted to MRF 54 million;the highest profit recorded in the history of the branch.

NPA ratio was brought down to the lowest level of 3.18% during the year. Non-interest income contributed to 38% of the gross income of the branch.

UK OPERATION

The Bank of Ceylon London branch was converted to a fully-owned subsidiary of BoC, namely Bank of Ceylon (UK) Limited creating immense international business opportunities for BoC in Europe.


Treasury Operation

Treasury Division consists of four sub-sections namely the Front Office (Dealing Room), Treasury Back Office, Primary Dealer Unit and the Asset & Liability Management Unit (ALM).

Treasury Division performed exceptionally well during the year, making a significant contribution to the overall profitability of the Bank. Income from treasury operations includes capital gains of Rs. 1.2 billion during the year.

The Bank acted as co-arranger with the HSBC to the issue of sovereign bonds of the Government of Sri Lanka and continued to maintain the leadership position in the security market of the Government, managing customer and Bank portfolios exceeding Rs. 150 billion and 85 billion respectively. The Bank is in the process of procuring the new Treasury Asset and Liability Software which would enhance the functional capabilities of the ALM Unit. Plans are also under way to obtain an advanced treasury management system to strengthen the back office functions of the Bank.

On the human resources front a substantial local and overseas training was offered to staff on latest treasury management techniques, products and services to staff across the branches, especially in the Jaffna District.

Some of the key achievements of the Treasury Division during the year are given below:

Raised a syndicated loan of US$ 165 million in July arranged by HSBC.

Obtained US$ 50 million, five-year loan from China Development Bank in December.

Raised a short-term syndicated loan of US$ 70 million arranged by HSBC in December.

Facilitated a US$ 152 million loan to the Government of Sri Lanka from China Development Bank through ESCROW accounting arrangement.

INVESTMENT BANKING

BoC being the premier banking institution in the nation catering to diverse segments and sectors of the economy, set up the Investment Banking Unit to harvest the opportunities emerged after the restoration of peace.


In this context the Bank undertook the management of the debenture issue of the Urban Development Authority which raised Rs. 10 billion to aid development activities of the Colombo city. This was the largest debenture issue undertaken by a State institution and first of its kind. As the financial advisor to the Government, BoC assisted the Government in the processes of taking over the balance 51% stake of the Shell Gas company from foreign ownership. The Unit also acquired a strategic stake of SriLankan Airlines during the year. Going forward BoC intends to develop capital market instruments in support of the capital market development.

ISLAMIC BANKING

The Islamic Banking Unit (IBU) set up in 2009 has very well progressed with a professional team of bankers to steer the strategically important business segment. As at end 2010, the total assets of IBU stood at over Rs. 700 million while a rate of return of 4.33% was granted to investors in the last quarter of 2010.

The main strength of IBU is its team of dedicated staff members who have been comprehensively trained on Islamic banking by Islamic Bank Bangladesh (IBBL). The Shari’ah Board is headed by the honourable members of the All Ceylon Jamiathul Ulema - the highest Muslim religious body of Sri Lanka. Shari’ah compatible products are offered throughout the network of 307 branches, while Islamic Banking operations are handled by the head office under the supervision by a Shari’ah Board. AN-NOOR current accounts, ordinary savings, children's savings (Athfal), leasing (‘Ijara’) finance for vehicles, and machinery, trade finance and term loan (‘Murabaha’), working capital, fund management (Wakala) are the products offered by the IBU. The Bank intends to introduce AN-NOOR's NRFC and Rupee Mudaraba fixed deposits, agri business finance, manufacturing finance and bonds in the near future. The Bank strategises to expand Islamic Banking operations to overseas branches by introducing Shari’ah compliant operations in Male and in the other overseas branches. Sri Lanka is one of the few countries with legislation for Islamic banking following amendments to the Banking Act No. 30 of 1988 in March

2005, thus providing adequate flexibility for conventional banks to establish Islamic banking windows and launch Islamic financial products.

SUBSIDIARY PERFORMANCE

There are 12 subsidiaries and 6 associate companies in BoC’s Group structure with a total investment of Rs. 6,123.8 million. A Subsidiary Management Charter was formulated setting out the rules, guidelines, risk management practices and code of conduct to be adhered to by the Directors appointed by the Bank to these subsidiaries. A separate unit within the Bank under the purview of the Chief Financial Officer was established to continuously monitor and review the progress of these entities. The Bank’s major subsidiary Merchant Bank of Sri Lanka (MBSL) initiated a merger of MBSL, Merchant Credit of Sri Lanka (MCSL) and Ceylease Financial Services Limited (CFSL) which process is expected to conclude early second quarter of 2011 upon receipt of regulatory approval.

INFORMATION TECHNOLOGY

BoC is the pioneer in introducing information technology to the banking sector in Sri Lanka and has continued to remain in the forefront serving a customer base of over 9 million with 99.9% speed and reliability. A total cost of Rs. 140 million was invested during the year to upgrade the core network infrastructure, strengthen the network security, enhance availability and introduce new redundancy features.

The off-site data centre was redesigned to accommodate proper equipment settings and secure data mirrors of live systems to ensure business continuity. The IT systems used in Trade Finance operations namely, Bank Trade, Client Trade and BoC Trade Info Wizard were upgraded to enhance customer service. Further, a Call Centre was set up at the head office with ICT Solutions to support the global customer base of the Bank.

In order to support the Government initiatives, the credit worthiness of customers is assessed via the Credit Information Bureau web site while functionalities were implemented to provide Trade Finance data in foreign currency to Sri Lanka Customs and the CBSL. The Bank is also involved


in submitting data to Maldives Monetary Authorisation (MMA).

BoC is the pioneer in introducing Automated Teller Machine (ATM) and the ATM technology to Sri Lanka. Since then, the Bank has installed more than 350 ATMs island-wide and has the widest ATM network in the country, with an additional 200 ATMs made available through the linkage with Sampath Bank. The Bank upgraded the hardware and the software of the ATM server at an investment of Rs. 230 million during the year and decentralised the issuing of credit/debit cards while extending the ATM card usage facilities to the branch in Maldives.

Being the pioneer in credit card operations in Sri Lanka, the Bank upgraded its Mastercard Global Clearing Management Software at an investment of Rs. 1 million to be in par with international practices while the software used for information exchange on non-BoC credit cards was also upgraded. Further, a ‘Visa Platinum- Black Card’ was introduced to serve the high net worth clients.

In order to enable acceptance of chip cards from any Point of Sale, initial step of Network Interface Validation (NIV) for MChip acquisition was taken at a cost of Rs. 1 million. This would enable foreigners to transact via chip cards in a secure manner. The Bank has also facilitated the use of Master Cards on the Bank’s ATMs and tripled the capacity of 40 high usage ATMs of the Bank.

The Bank’s web site was upgraded and was the only banking institution to receive an award at a contest carried out by the LK domain registry of the University of Moratuwa.

The intranet system of the Bank ’BoCiNET’ was extended to all local and overseas branches and extension offices while internet banking was enhanced to accommodate cross currency transactions. Customers are able to transact in any designated currency through the web and B2B and B2C transactions have also been enabled. ‘Kiosk’ type personal computers were made available at branches for customer use.

The mobile banking solution ‘PayMate’ was also upgraded to handle micro payments.PayMate was fully- integrated to the core-banking solution and enhanced to provide a

comprehensive service to customers day and night. Payment of bills, fund transfers and balance inquiries can be facilitated via the mobile phone of the customer.

Being the pioneers in practicing Electronic Fund Transfers since 1980 using the Telebox software, BoC has diversified the instant electronic fund transfer in multiple ways using high tech software. BoC e-cash solution has enabled Sri Lankan diaspora to transfer funds electronically through BoC’s network of exchange houses in many countries.

As mentioned above, BoC embarked on several IT initiatives during the year which will be implemented during 2010 and 2011. Some of the initiates include Asset Liability Management, Anti-Money Laundering, RISK, Leasing, Islamic Banking, IT Service Management, Call Centre, Credit Card Loyalty Programme to name a few. The Bank has also envisaged to expand the ATM and the POS network. Further, the Bank plans to enhance the trade application and enhance customer convenience by incorporating imaging and workflow modules which would enable customers to provide scanned documents without visiting the Bank.

CENTRALISATION OF NETWORK AFTER INTRODUCING THE NEW COMPUTER SYSTEM IN THE YEAR 2006

Most of the monotonous functions of the branches have now been centralised to the Central Back Office located in the BoC Head Office, easing the work of the branches. In the process of centralising mundane functions, the Bank introduced a Cheque Image Clearing System to clear cheques credited to customer accounts the following day in 2010. Developments are under way to improve the clearing the same day.

The issue of cheque books was centralised through the network system. This service is being enhanced to enable customers to obtain cheque books printed with their names or the Company name.

HUMAN RESOURCES

The Bank’s staff strength consists of 8,204 full-time permanent cadre, 1,058 outsourced and 86 contracted employees. 76% of the staff is in the branch network while 50 Management Trainees recruited for the North and the East, while another 1,200 Trainee

Staff Assistants joined the BoC family to serve in the provinces.

BoC is an equal opportunity employer andour HR processes are governed by a comprehensive regulatory framework including Recruitment and Promotion Policy/Code of Conduct of Employees and Disciplinary Code. The Bank set up a Performance-Based Rewards System Committee with the intention of introducing a Performance-Based Reward Scheme (PBRS).

The Bank offers a wide range of benefits and welfare activities to the employees and also facilitated social, cultural and extracurricular activities.

Further details on employee relations are provided in the Sustainability Report on page 114.

BUSINESS PROCESS RE-ENGINEERING (BPR)

This is a continuous process which is being carried out from year 2008 by the BPR Division. All branches of the Bank are being reorganised and repositioned to comply with the present day market requirement. The Bank has developed a few modelling concepts suitable for the urban/suburban and grass-root level banking after studying the customer behaviour as well as their requirements.

The liberalisation of the North and the East had a significant impact on the domestic market with the opening of new marketing areas and trading of more goods and services within the North, South, East and West of the country. These also led to the progress of the Bank’s branch network with the Bank expaning its services in the new markets and serving the clients by connecting them to a single network.

BoC has 309 branches opened so far excluding 218 extension offices so far established. Out of the above branch network, the Bank has modernised 225 branches to improve our customer convenience.

DISASTER RECOVERY SITE (DR)

A fully-equipped DR site has been set up in the Maharagama branch with facilities for Core-Banking, Bank Trade, Inward & Outward Remittances and Swift Operations. The DR site was further developed incorporating the suggestions of the Bank Supervision team of the Central Bank. The latest testing was



effected on 08 October 2010. The Bank is now fully-equipped with a comprehensive DR Site and geared to face any man made or natural disaster which may arise.

NEW BUILDINGS ADDED TO OUR ASSETS PORTFOLIO DURING THE YEAR:

Construction of buildings completed 4

Value Rs. 106 million

Buildings under construction 2

Value Rs. 70 million

KEY ACTIVITIES PERFORMED DURING THE YEARS WHICH HAVE MADE A SIGNIFICANT CONTRIBUTION TO THE OVERALL ECONOMIC DEVELOPMENT DURING THE YEAR 2010

The Bank of Ceylon being the Number One State Bank and the pioneer institution in contributing to the economic development in Sri Lanka, extended financial support and advisory services to uplift the Small and Medium Enterprises (SMEs) of the economy.

In the field of agriculture, the Bank extended funds to the tune of Rs. 292 million for crop production recording a YoY growth of 87% in credit disbursements during the year. The Bank also partnered with the National Chamber of Commerce and made available credit for working capital requirements to a wide area of SME businesses.

In tandem with the Government policy initiatives to encourage the entrepreneurs, the rates of interest of all existing and new facilities were reduced with effect from October 2009 and on several occasions during the year 2010 to pull down the market rates.

BoC also financed the working capital requirements of ‘Sri Lankan Airlines’ and acted as guarantor to the acquisition/lease of an aircraft. To facilitate the tourism industry finance was extended to budget airline ‘Mihin Lanka’. BoC assisted the CBSL in its initiatives to revive Seylan Bank and also supported import export trading. In recognition of the Bank’s contribution to the nation BoC was awarded ‘Best Sri Lankan Trade Bank - Asia Award for Excellence 2010.’


BOC’S CONTRIBUTION TO THE ‘EMERGING WONDER OF ASIA’ FOR THE NEXT 3 YEARS

Going forward, BoC intends to support the Government in the national food security programmes by providing financial assistance for safety foods storage projects and achieve self-sufficiency by boosting locally-produced food items including dairy production. BoC plans to assist the Government to save Rs. 30 billion currently incurred to import dairy products and support development of family entrepreneurships through microfinancing and supporting deep-sea fishing and long-line fish production projects and thereby enable the fish export market to achieve the target of US$ 100 million.

BoC would assist the Government in developing the coal mining and port sectors, e-Government projects and support infrastructure development in the tourist sector by being a partner in the construction of 2,500 tourist rooms across the country.

Further, BoC intends to facilitate private sector hospitals outside Colombo, finance higher education promotion projects for the development of knowledge economy, develop and upgrade investment banking to promote the capital market, facilitate distribution of United Nations High Commissioner for Refugees (UNHCR) resettlement grant to 140,000 families, expand credit to rural sector with a view to creating self-employment and self sufficiency and expanding microfinancing facilities to SME sector to foster GDP growth.

2011 BUSINESS FOCUSES

The Bank will continue to safeguard its financial strength and upgrade its core competences in key business segments. In the Retail Banking segment, the bank will continue to capitalise the on line services network across the country and provide a wider range of retail products to solidify its market leadership through innovative technology-based customer service excellence. In line with increase of per capita income and positive change of individual tax saving, attractive consumer loan facilities and retail lease facilities will be introduced with fast services methodologies.

In the area of Corporate Banking, the Bank will strengthen its relationship with corporate customers to create more cross-selling opportunities while fortifying its leadership position in the local corporate loans market. The Bank will strive to grow its corporate lending in the local and off-shore sector. The Bank will further strengthen the ‘Trade Finance’ platform and maintain its market leadership in the export and import business by consolidating its strategic position as the premier trade finance bank in the country. Simultaneously, the Bank will develop a customer-oriented model in developing products to cater to specific customer needs and thereby extend its business island-wide. With respect to the insurance business, the Bank intends to capitalise on the Bancassurance model and improve the product mix to meet the needs of customers.

The Bank will also continue to expand its corporate banking business by acquiring deposits and advances and continue to accelerate its retail banking business by focusing on cross-border and local customers. It will actively promote wealth management business and reinforce its marketing efforts in major cities. BoC will make extensive use of IT to offer improved customer service unparalleled to any other bank. Initial steps have already been taken to create a strong IT platform to facilitate 24-hour banking service, 365 days of the year. BoC hopes to shift from a paper base banking to virtual banking environment with the technological reforms.

Loan Portfolio… Rs. 382 billion

disbursed… 1 Bank…Bank of Ceylon

1 Source…assisting millions of farmers, fishermen, traders, entrepreneurs, corporates, families…in 1 country…1 Bank…BoC

Aviation HubFrom a regional perspective, Sri Lanka’s only international airport at Katunayake, through its sustained development over a period of years, has gained recognition and acceptance as one of the better and more well-appointed airports in South Asia. However, given the development goals of Sri Lanka into the future, it would not suffice to cater to propelling economic activities. Supporting and enhancing the tourism industry and as well as the demands of achieving hub status in other economic activities will

require increased capacity from the aviation sector. In addition, the aviation sector and our airport infrastructure will have to factor in the further development of domestic air travel as a highly desirable alternative means of travel to the country’s already-congested road and rail systems. In this regard, the country will require more airports, more terminals, more aircraft assets and related infrastructure involving colossal investments. Bank of Ceylon will be more than happy to provide assistance for ventures in this vital sector.

Commercial Hub The commercial hub that Sri Lanka aspires to be, goes far beyond a mere financial centre. State-of-the-art commercial districts; modern cosmopolitan city centres; enhanced quality of life for its people, through improved shopping, recreation, health and education facilities are the components envisioned in the commercial hub. It is expected to attract substantial foreign participation in addition to domestic resources to provide cross-border commercial services. In this endeavour, we will face tough competition from already established financial centres particularly in South East Asia. We will need to make sure

that the country builds the necessary skills and aptitudes within its people, possesses a robust regulatory and business infrastructure, provides access to international financial markets and enhances the quality of life of its citizens. In this endeavour, Bank of Ceylon will facilitate commercial development initiatives across all sectors. Our role will not just be confined to financing; we will strive to offer an all inclusive financial services proposition entailing debt, equity, corporate advisory and investment management at all stages of the project life cycle.

Energy HubSimply stated, becoming an energy hub would inevitably involve our energy production and resources achieving and even exceeding self-sufficiency levels. We would ideally need to be an energy-surplus country. At present, Sri Lanka is a net importer of energy. Thus, our economic progress is vulnerable to fluctuations in world energy production and consumption as well as to disruptions to supply from energy producing countries due to any number of reasons, both natural and man made. In making the country an energy

hub, we need to explore various pools of resource, specialise in the most feasible ones, meet energy requirement and possibly export the excess production. In this regard, Bank of Ceylon will proactively involve itself in the energy sector, financing various power projects in the spheres of hydro, wind, thermal, gas and fuel.

Knowledge HubGoing forward, it is knowledge that will drive development and knowledge that will be the key to generating employment, increasing exports and boosting the national economy. The country’s knowledge hub has progressed very well so far. Becoming a fully-fledged knowledge hub requires the country to tap into and harness the vast resources of global knowledge and apply such knowledge in the development of the country. Production of knowledge requires creative people. They must be attracted from all over the world and local experts should be encouraged and facilitated to become creative knowledge workers.

Bank of Ceylon will take every endeavour to bridge the ‘digital divide’ in Sri Lanka with focus on upgrading linguistic skills and technical know-how. We will seek opportunities to assist entrepreneurs to build world class knowledge facilities ranging from universities to Business Process Outsourcing (BPO) operations.

Maritime HubBecause of its location along the path of major sea routes, Sri Lanka is known as a strategic naval link between West Asia and South-East Asia. Proximity to the major shipping routes to and from the Far East has already made the country an important transshipment hub for the region. To make the maritime hub a reality, the country needs to develop and uplift its sea port assets to global standards. Sri Lanka at the moment is

moving in the right direction with a number of port facilities being built/expanded. In our bid to support the maritime hub, Bank of Ceylon has been offering strong financial support to the sector which includes facilities for purchasing of vessels, and boat building activities.


CORPORATE GOVERNANCE

Bank of Ceylon pursues a strategy of being in line with best practices in respect of Corporate Governance and it is a vital element in enhancing the Bank’s financial growth, competitiveness and implementing its sustainability framework. The Bank believes that complying with laws, regulations, policies, processes and procedures affecting the way that Bank of Ceylon is controlled and managed is the critical success factor of sound control environment, which will improve operational efficiency and enhance the brand image.

A sound system of governance is also fundamental in attracting and maintaining public confidence in the Bank.

Pivotal and dominant role the Bank plays in the Sri Lanka economy carrying substantial influence and leadership over many matters of policy and practice are the many reasons for the importance of good governance and for it to be a guiding framework for the future.

Conscious of the many roles of the Government in the life of the Bank as owner, customer, regulator and auditor, the Nomination and Corporate Governance Committee, which is a subcommittee of the Board primarily focuses on the implementation of the applicable governance rules and best practices and continuously monitors the progress.

The Bank is bound by the Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka. The Bank has taken steps to the best of its ability to comply with the said Direction to the extent that they are not inconsistent with the Bank of Ceylon Ordinance No. 53 of 1938 and its amendments, the statute governing the Bank, as provided for in the said Direction.

The Bank also follows the Code of Best Practice on Corporate Governance issued jointly by The Securities and Exchange Commission of Sri Lanka and The Institute of Chartered Accountants of Sri Lanka, which is not mandatory. Since the Bank is complying with the Directions laid down in the aforesaid

Banking Act Direction No. 11 of 2007,the Colombo Stock Exchange exempted the Bank from complying with its requirements stipulated in Section 7.10 under the Continuing Listing Requirements on Corporate Governance.

The governance in the Bank covers many stakeholders, the relationships between them and the strategic vision of the Bank. The stakeholders comprise the single shareholder, depositors, customers, the Board of Directors, management, employees, international banks, suppliers, regulators, investors (in debentures issued by the Bank) and society at large. All parties mentioned have either a direct or an indirect interest in Corporate Governance as it helps in the effective performance of the Bank. The Bank has adopted a Communication Policy covering all its stakeholders.

The Board is responsible to stakeholders for creating and delivering sustainable value through the management of the Bank’s businesses. The Board is the policy-making body for all matters of such importance as to be of significance to the Bank as a whole because of their strategic, financial or reputation implications or consequences. The governance by the Board also includes continuous review of internal structures to ensure that there are clear lines of accountability for management throughout the Bank. The Board also oversees the risk management and remuneration system of the Bank.

In conformance with the principles of Corporate Governance and the above said Banking Act Direction, the positions of the Chairman and the Chief Executive Officer/General Manager have been segregated with a clear division of duties and responsibilities of the latter, incorporated in the Board Charter adopted.

The overall governance of the Board is the responsibility of the Chairman, while the General Manager is primarily responsible for achievement of Board approved objectives, directions, corporate values and leading the executive team in the day-to-day management of the Bank and its business.

The Board approves the organisation’s strategic aims, and ensures that the necessary financial, technical and human resources are in place for the Bank to achieve its objectives. It reviews management performance against set goals and targets on a continuous basis.

The Board is committed to following very high ethical standards. This enables the Board to set values and standards for the Bank and its staff on par with best practices, while creating trust and transparency and ensuring that its obligations to all its stakeholders are understood and met.

In its search for continuous improvement in good governance, the Bank embraces best practices in Corporate Governance on its own. It follows an incremental approach in embedding governance into its value addition process and is making conscious efforts to continually improve the governance framework and the processes beyond the applicable rules and regulations.

As one such measure, in the year 2010, Bank of Ceylon formulated a Subsidiaries Management Charter, which was introduced to all the Subsidiaries and Associates of the Bank as a guideline for the Bank’s representatives on those Boards. This Charter, through the guidelines incorporated in it, strengthens the Bank of Ceylon’s oversight over its Subsidiaries through the Directors appointed to them while facilitating the Subsidiaries to fall in line with the Bank of Ceylon’s governance structure.

The disclosures below demonstrate the Bank’s adherence to disclosure requirements of the aforesaid Banking Act Direction No. 11 of 2007, and subsequent amendments thereto and the level of conformance to the Code of Best Practice on Corporate Governance, issued jointly by The Securities and Exchange Commission of Sri Lanka and The Institute of Chartered Accountants of Sri Lanka in 2008.

Aforesaid Direction No. 11 of 2007 consists of Direction 2 and 3. Direction 2 consists of principles explaining the rationale for mandatory rules set out in Direction 3. The table starting from page 57 gives the degree of compliance with Direction 3. Table starting from page 77 gives the status of compliance with the aforesaid joint code.



PRINCIPLES LEVEL OF COMPLIANCE

3 (1) The Responsibilities of the Board

3 (1) (i) The Board shall strengthen the safety and soundness of the Bank by

ensuring the implementation of the following:

(a) Approve and oversee the Bank’s strategic objectives and corporate

values and ensure that these are communicated throughout the Bank;

Complied with.

The Bank’s objectives and values are incorporated in the

rolling Corporate Plan and they are communicated with

the launch of the Corporate Plan and by way of meetings

held with provincial teams.

(b) Approve the overall business strategy of the bank, including the

overall risk policy and risk management procedures and mechanisms with

measurable goals, for at least the next three years;

Complied with.

Overall business strategy of the Bank was incorporated

into the rolling Corporate Plan prepared for the years 2010

to 2012 which was adopted by the Board. Action Plan

based on the said Corporate Plan which was also approved

by the Board indicated the measurable goals. This is an

annual process. In addition, the Bank has adopted a risk

policy which includes risk management procedures and

mechanisms.

(c) Identify the principal risks and ensure implementation of appropriate

systems to manage the risks prudently;

Complied with.

Identification of the principal risks relating to credit,

market, operation and strategic and the availability of

the appropriate systems to manage the risks are ensured

through the Integrated Risk Management Committee which

reports to the Board.

(d) Approve implementation of a policy of communication with all

stakeholders, including depositors, creditors, shareholders and borrowers;

Complied with.

Adopted a new Communication Policy in the year 2010

and reviewed it at the end of the year. The Bank adhered

to the policy guidelines.

(e) Review the adequacy and the integrity of the Bank’s internal control

systems and management information systems;

Complied with.

Reviewed the adequacy and the integrity of the Bank’s

internal control systems and management information

systems through the Audit Committee.

(f) Identify and designate Key Management Personnel, as defined in the

International Accounting Standards, who are in a position to:

(i) significantly influence policy;

(ii) direct activities; and

(iii) exercise control over business activities, operations and risk

management;

Complied with.

Organisation Structure of the Bank identifies the

designations of the Deputy General Managers and

Assistant General Managers. They are considered as the

Key Management Personnel of the Bank.

(g) Define the areas of authority and key responsibilities for the Board

Directors themselves and for the Key Management Personnel;

Complied with.

A Board Charter is in place which is reviewed periodically

whereby the authority and responsibilities of the Board

are clearly identified. The tasks of the Key Management

Personnel are identified in their job profiles and job

descriptions.

Level of Compliance with Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka.



(h) Ensure that there is appropriate oversight of the affairs of the Bank by

Key Management Personnel, that is consistent with Board policy;

Complied with.

The Board carries out this task by reviewing the progress

towards the achievement of the Corporate Plan objectives

based on the Action Plan made available to all Key

Management Personnel. Key Management Personnel are

called to the Board meetings as and when needed to

obtain clarifications relating to their respective areas of

operation.

(i) Periodically assess the effectiveness of the Board Directors’ own

governance practices, including:

Complied with.

Implementation of governance practices is reviewed

periodically by the Nomination and Corporate Governance

Committee and reported to the Board through its minutes.

i. The selection, nomination and election of Directors and

Key Management Personnel;

Bank of Ceylon being wholly-owned by the Government of

Sri Lanka, the Directors are appointed by the Minister in

charge of the subject of Finance in terms of the Bank of

Ceylon Ordinance No. 53 of 1938 and its amendments

which is the enactment by which the Bank of Ceylon was

established. All Key Management Personnel are appointed

by the Board and they are selected on a Board approved

scheme and established practices.

ii. The management of conflicts of interests; and Complied with.

Any conflicts of interests are reported to the Board.

(iii) The determination of weaknesses and implementation of changes

where necessary;

Complied with.

Any weakness in the governance practices is monitored

by the above mentioned Nomination and Corporate

Governance Committee in its overall evaluation of the

compliance with the applicable governance practices and

reported to the Board.

(j) Ensure that the Bank has an appropriate succession plan for

Key Management Personnel;

Complied with.

A succession plan is in place in the Bank for Key

Management Personnel.

(k) Meet regularly, on a needs basis, with the Key Management Personnel

to review policies, establish communication lines and monitor progress

towards corporate objectives;

Complied with.

The Board meets the Key Management Personnel on a

needs basis in reviewing policies etc. This is in addition

to the weekly review meeting the Chairman has with the

Corporate Management of the Bank. In the year 2010, half

yearly review meetings were held in an off-site location

with the participation of all the senior staff of the Bank to

review the progress towards the corporate objectives and

financial targets. This is an ongoing process.

(l) Understand the regulatory environment and ensure that the Bank

maintains an effective relationship with regulators;

Complied with.

On appointment as Directors they are exposed to all the

regulatory requirements. Any fresh directions, circulars

issued are made available to the Directors.

(m) Exercise due diligence in the hiring and oversight of External Auditors. The Auditor General is the External Auditor of the Bank as

provided for in the Constitution of the country.




3 (1) (ii) The Board shall appoint the Chairman and the Chief Executive Officer and

define and approve the functions and responsibilities of the Chairman and

the Chief Executive Officer in line with Direction 3 (5) of these Directions.

The Board appoints the Chief Executive Officer referred to

as the General Manager in the Bank of Ceylon with the

prior approval of the Minister in charge of the subject of

Finance.

However, the Chairman is appointed by the Minister in

charge of the subject of Finance in terms of the Bank of

Ceylon Ordinance and he is a Non-Executive Director.

A Board Charter is in place defining the responsibilities of

the Chief Executive Officer and the Board. Steps are being

taken to improve the Charter by specifically including the

Chairman’s responsibilities.

3 (1) (iii) The Board shall meet regularly and Board meetings shall be held at least

twelve times a year at approximately monthly intervals. Such regular Board

meetings shall normally involve active participation in person of a majority

of Directors entitled to be present. Obtaining the Board’s consent through

the circulation of written resolutions/papers shall be avoided as far as

possible.

Complied with.

Number of meetings held and the attendance of Directors

during the year 2010 are given on page 86 of this Annual

Report. Passing circular resolutions have been minimal.

During the year under review, only one circular resolution

was passed.

3 (1) (iv) The Board shall ensure that arrangements are in place to enable all

Directors to include matters and proposals in the agenda for regular Board

meetings where such matters and proposals relate to the promotion of

business and the management of risks of the Bank.

Complied with.

Directors are allowed to include any item to the agenda

where such matters and proposals relate to the promotion

of business and the management of risks of the Bank. This

practice would be documented for reference.

3 (1) (v) The Board procedures shall ensure that notice of at least 7 days is given of

a regular Board meeting to provide all Directors an opportunity to attend.

For all other Board meetings, reasonable notice may be given.

Complied with.

Annual calendar of Board meetings is made and circulated

to the Board of Directors before the beginning of the year.

Reasonable notice is given before any special meeting.

3 (1) (vi) The Board procedures shall ensure that a Director, who has not attended

at least two-thirds of the meetings in the period of 12 months immediately

preceding or has not attended the immediately preceding three consecutive

meetings held, shall cease to be a Director. Participation at the Directors’

meetings through an alternate Director shall, however, be acceptable as

attendance.

This situation has not arisen in the year under review.

The Secretary to the Board monitors the attendance and

ensures compliance with this direction.

3 (1) (vii) The Board shall appoint a Company Secretary who satisfies the provisions

of Section 43 of the Banking Act No. 30 of 1988, whose primary

responsibilities shall be to handle the Secretariat Services to the Board and

shareholder meetings and to carry out other functions specified in the

statutes and other regulations.

Complied with.

An Attorney-at-Law is the Secretary to the Board. She

satisfies the provisions of Section 43 of the Banking Act

No. 30 of 1988.

3 (1) (viii) All Directors shall have access to advice and services of the Company

Secretary with a view to ensuring that Board procedures and all applicable

rules and regulations are followed.

Complied with.




3 (1) (ix) The Company Secretary shall maintain the minutes of Board meetings

and such minutes shall be open for inspection at any reasonable time, on

reasonable notice by any Director.

Complied with.

3 (1) (x) Minutes of Board meetings shall be recorded in sufficient detail so that it

is possible to gather from the minutes, as to whether the Board acted with

due care and prudence in performing its duties. The minutes shall also

serve as a reference for regulatory and supervisory authorities to assess the

depth of deliberations at the Board meetings. Therefore, the minutes of a

Board meeting shall clearly contain or refer to the following:

(a) a summary of data and information used by the Board in its deliberations;

(b)the matters considered by the Board;

(c) the fact-finding discussions and the issues of contention or dissent

which may illustrate whether the Board was carrying out its duties with due

care and prudence;

(d) the testimonies and confirmations of relevant executives which indicate

compliance with the Board’s strategies and policies and adherence to

relevant laws and regulations;

(e) the Board’s knowledge and understanding of the risks to which the

Bank is exposed and an overview of the risk management measures

adopted; and

(f) the decisions and Board resolutions.

Complied with.

Detailed minutes are kept covering the given criteria.

3 (1) (xi) There shall be a procedure agreed by the Board to enable Directors, upon

reasonable request, to seek independent professional advice in appropriate

circumstances, at the Bank’s expense. The Board shall resolve to provide

separate independent professional advice to Directors to assist the relevant

Director or Directors to discharge his/her/their duties to the Bank.

Complied with.

Bank has adopted a Policy for Directors’ Access to

Independent Professional Advice and the Board resorts to

such advice when deemed necessary.

3 (1) (xii) Directors shall avoid conflicts of interests, or the appearance of conflicts of

interests, in their activities with, and commitments to, other organisations

or related parties. If a director has a conflict of interest in a matter to be

considered by the Board, which the Board has determined to be material,

the matter should be dealt with at a Board meeting, where Independent

Non-Executive Directors [refer to Direction 3 (2) (iv) of these Directions]

who have no material interest in the transaction, are present. Further,

a Director shall abstain from voting on any Board resolution in relation

to which he/she or any of his/her close relation or a concern, in which

a Director has substantial interest, is interested and he/she shall not be

counted in the quorum for the relevant agenda item at the Board meeting.

Complied with.

Any interests are disclosed to the Board and the interested

Directors do not participate in the decision making on

matters in which they have an interest. Such Director is not

counted in the quorum. Additionally, on the appointment

of a Director a statement informing the companies, etc.

in which he/she is a Director/partner/shareholder, etc.,

is tabled before the Board. This statement is taken on a

yearly basis and tabled before the Board.

3 (1) (xiii) The Board shall have a formal schedule of matters specifically reserved to

it for decision to ensure that the direction and control of the Bank is firmly

under its authority.

Complied with.

The Board Charter in place addresses this direction under

the Powers Reserved to the Board. This section of the

Charter addresses the schedule of matters specifically

reserved to the Board for decision ensuring that direction

and control of the Bank is firmly under its authority.

3 (1) (xiv) The Board shall, if it considers that the Bank is, or is likely to be, unable to

meet its obligations or is about to become insolvent or is about to suspend

payments due to depositors and other creditors, forthwith inform the

Director of Bank Supervision of the situation of the Bank prior to taking any

decision or action.

The situation has not arisen.




3 (1) (xv) The Board shall ensure that the Bank is capitalised at levels as required by

the Monetary Board in terms of the capital adequacy ratio and other

prudential grounds.

The Bank is fully compliant with capital adequacy

requirements of the Monetary Board. The Board ensures

this through the monthly financial information submitted

to the Board.

Please refer page 240 for the Capital Adequacy Ratios.

3 (1) (xvi) The Board shall publish in the Bank’s Annual Report, an annual corporate

governance report setting out the compliance with Direction 3 of these

Directions.

Complied with by including this report in the Annual

Report of the Bank.

3 (1) (xvii) The Board shall adopt a scheme of self-assessment to be undertaken by

each Director annually, and maintain records of such assessments.

Complied with.

The self-assessment of the Board is carried out annually

and the evaluation records are maintained. The evaluation

exercise is facilitated by the Nomination and Corporate

Governance Committee of the Board.

3 (2) The Board’s Composition

3 (2) (i) The number of Directors on the Board shall not be less than 7 and not more

than 13.

According to the Bank of Ceylon Ordinance No. 53 of

1938, the number of Directors permitted on the Board of

Bank of Ceylon is 6 and the present Board consists of 6

Directors.

3 (2) (ii) (a) The total period of service of a Director other than a Director who holds

the position of Chief Executive Officer shall not exceed nine years, and such

period in office shall be inclusive of the total period of service served by

such Director up to 01 January 2008.

Presently no Director of Bank of Ceylon has been in

office for a period exceeding 9 years. Year and month of

appointment of the present Directors are given on pages

14 to 16 of this Annual Report under the profiles of the

Directors.

(b) In this context, the following general exemption shall apply:

A Director who has completed nine years as at 01 January 2008, or who

completes such term at any time prior to 31 December 2008, may continue

for a further maximum period of 3 years commencing 01 January 2009.

Not applicable

3 (2) (iii) An employee of a bank may be appointed, elected or nominated as a

Director of the Bank (hereinafter referred to as an ‘Executive Director’)

provided that the number of Executive Directors shall not exceed one-third

of the number of Directors of the Board. In such an event, one of the

Executive Directors shall be the Chief Executive Officer of the Bank.

No employee of Bank of Ceylon has been appointed as a

Director of it and therefore there are no Executive Directors

on the Board of Bank of Ceylon.




3 (2) (iv) The Board shall have at least three Independent Non-Executive Directors or

one- third of the total number of Directors, whichever is higher. This sub-

direction shall be applicable from 01 January 2010 onwards.

A Non-Executive Director shall not be considered independent if he/she -

(a) has direct and indirect shareholdings of more than 1% of the Bank;

(b) currently has or had during the period of two years immediately preceding

his/her appointment as Director, any business transactions with the Bank as

described in Direction 3 (7) hereof, exceeding 10% of the regulatory capital

of the Bank;

(c) has been employed by the Bank during the two year period immediately

preceding the appointment as Director;

(d) has a close relation who is a Director or Chief Executive Officer or a

member of Key Management Personnel or a material shareholder of the

Bank or another bank. For this purpose, a ‘close relation’ shall mean the

spouse or a financially dependant child;

(e) represents a specific stakeholder of the Bank;

(f) is an employee or a Director or a material shareholder in a Company or

business organisation -

I. which currently has a transaction with the Bank as defined in Direction

3 (7) of these Directions, exceeding 10% of the regulatory capital of the

Bank; or

II. in which any of the other Directors of the Bank are employed or are

Directors or are material shareholders; or

III. in which any of the other Directors of the Bank have a transaction as

defined in Direction 3 (7) of these Directions, exceeding 10% of regulatory

capital in the Bank.

Complied with.

The entire Board of the Bank of Ceylon consists of

Non-Executive Directors. Out of them three Directors are

identified as Independent Directors based on the criteria

specified in this Direction. They are identified on pages

14 to 16 with the Profiles of the Directors and also under

Direction No. 3 (2) (viii) below.

3 (2) (v) In the event an alternate Director is appointed to represent an Independent

Director, the person so appointed shall also meet the criteria that applies to

the Independent Director.

No Alternate Directors were appointed for Independent

Directors.

3 (2) (vi) Non-Executive Directors shall be persons with credible track records and/or

have necessary skills and experience to bring an independent judgment to

bear on issues of strategy, performance and resources.

Complied with.

3 (2) (vii) A meeting of the Board shall not be duly constituted, although the number

of Directors required to constitute the quorum at such meeting is present,

unless more than one-half of the number of Directors present at such

meeting are Non-Executive Directors. This Sub-Direction shall be applicable

from 01 January 2010 onwards.

Complied with.

All the Board members of Bank of Ceylon are

Non-Executive.




3 (2) (viii) The Independent Non-Executive Directors shall be expressly identified as

such in all corporate communications that disclose the names of Directors of

the Bank. The Bank shall disclose the composition of the Board, by category

of Directors, including the names of the Chairman, Executive Directors, Non-

Executive Directors and Independent Non-Executive Directors in the annual

Corporate Governance Report.

Complied with.

The composition of the present Board of Directors is as

given below:

Dr. Gamini Wickramasinghe - Independent Non-Executive DirectorMr. S R Attygalle - Non-Executive Ex officio Director or in his absence Mr. V. Kanagasabapathy (Alternate Director)

Mr. R Sivaraman - Independent Non-Executive Director

Ms. Nalini Abeywardene - Non-Executive Director

Mr. Chandrasiri de Silva - Non-Executive Director

Mr. K L Hewage - Independent Non-Executive Director

Directors during the year are given on page 80 of this Report.

3 (2) (ix) There shall be a formal, considered and transparent procedure for the

appointment of new Directors to the Board. There shall also be procedures

in place for the orderly succession of appointments to the Board.

Not applicable since the appointments are made by the

Minister-in-charge of the subject of finance in terms of the

enabling enactment.

3 (2) (x) All Directors appointed to fill a casual vacancy shall be subject to election

by shareholders at the first general meeting after their appointment.

Not applicable.

3 (2) (xi) If a Director resigns or is removed from office, the Board shall:

(a) announce the Director’s resignation or removal and the reasons for such

removal or resignation including but not limited to information relating to

the relevant Director’s disagreement with the Bank, if any; and

(b) issue a statement confirming whether or not there are any matters that

need to be brought to the attention of shareholders.

Minister-in-charge of the subject of finance does the

appointments as well as the removals on behalf of the

Government of Sri Lanka, the sole shareholder of the Bank.

Any resignation is also referred to the same Minister.

3 (2) (xii) A Director or an employee of a bank shall not be appointed, elected or

nominated as a Director of another bank except where such bank is a

Subsidiary Company or an Associate Company of the first mentioned bank.

Neither Directors nor employees of the Bank of Ceylon

are Directors of another bank which is not a Subsidiary,

other than for the appointment of the Senior Deputy

General Manager (Corporate and Off-shore Banking) to

the Pradeshiya Sanwardana Bank under the Pradeshiya

Sanwardana Bank Act No. 41 of 2008, which requires that

a Deputy General Manager of Bank of Ceylon nominated

by the Board of Directors of the Bank of Ceylon shall hold

office as an Ex officio Director.

3 (3) Criteria to assess the fitness and propriety of Directors

3 (3) (i) The age of a person who serves as Director shall not exceed 70 years.

In this context, the following general exemption shall apply:

A Director who has reached the age of 70 years as at 01 January 2008

or who would reach the age of 70 years prior to 31 December 2008 may

continue in office for a further maximum period of 3 years commencing 01

January 2009.

Complied with.

All the present Board members of the Bank of Ceylon

are below 70 years of age and accordingly the Bank is in

compliance with this rule.

3 (3) (ii) A person shall not hold office as a Director of more than 20 companies/

entities/institutions inclusive of subsidiaries or Associate Companies of

the Bank. Of such 20 companies/entities/institutions, not more than 10

companies shall be those classified as Specified Business Entities in terms of

the Sri Lanka Accounting and Auditing Standards Act, No. 15 of 1995.

Complied with.

Directors of the Bank of Ceylon are in compliance

with this rule.




3 (3) (ii) (a) In this context, the following general exemption shall apply:

If any person holds posts in excess of the limitation as above, such person

shall within a maximum period of three years from 01 January 2009

comply with the above mentioned limitation and notify the Monetary

Board accordingly.

Not applicable.

3 (4) Management functions delegated by the Board

3 (4) (i) The Directors shall carefully study and clearly understand the delegation

arrangements in place.

Complied with.

Bank of Ceylon Ordinance No. 53 of 1938 and its

amendments provides for delegation of functions of the

Board. The Board may delegate any of its powers other

than the power to appoint the General Manager and

such delegation is subject to conforming to all regulations

prescribed by the Board. The Board has the power to

revoke such delegation. Delegation is done by the Board in

a way that it does not hinder the ability of the Board.

3 (4) (ii) The Board shall not delegate any matters to a Board Committee, Chief

Executive Officer, Executive Directors or Key Management Personnel, to an

extent that such delegation would significantly hinder or reduce the ability

of the Board as a whole to discharge its functions.

3 (4) (iii) The Board shall review the delegation processes in place on a periodic basis

to ensure that they remain relevant to the needs of the Bank.

Complied with.

Delegated powers are reviewed periodically to ensure that

they remain relevant to the needs of the Bank.

3 (5) The Chairman and Chief Executive Officer

3 (5) (i) The Roles of Chairman and Chief Executive Officer shall be separate and

shall not be performed by the same individual.

Complied with.

Positions of the Chairman and the Chief Executive Officer

referred to as the General Manager in the Bank of Ceylon

are held by two different individuals.

3 (5) (ii) The Chairman shall be a Non-Executive Director and preferably an

independent Director as well. In the case where the Chairman is not an

Independent Director, the Board shall designate an Independent Director as

the Senior Director with suitably documented terms of reference to ensure a

greater independent element. The designation of the Senior Director shall be

disclosed in the Bank’s Annual Report.

Complied with.

Chairman of Bank of Ceylon is an Independent Non-

Executive Director.

3 (5) (iii) The Board shall disclose in its Corporate Governance Report, which shall

be an integral part of its Annual Report, the identity of the Chairman and

the Chief Executive Officer and the nature of any relationship [including

financial, business, family or other material/relevant relationship(s)], if any,

between the Chairman and the Chief Executive Officer and the relationships

among members of the Board.

Complied with.

Chairman - Dr. Gamini Wickramasinghe

Chief Executive Officer (referred to as General Manager in

Bank of Ceylon) - Mr. B A C Fernando.

Declarations have been obtained from the Chairman and

General Manager stating that they have no relationship

as described in this Direction. Directors also have

submitted declarations stating that they also have no such

relationships amongst them.




3 (5) (iv) The Chairman shall - (a) provide leadership to the Board; (b) ensure that the

Board works effectively and discharges its responsibilities; and (c) ensure

that all key and appropriate issues are discussed by the Board in a timely

manner.

Complied with.

The Chairman provides leadership to the Board and

ensures that the Board functions effectively in discharging

its responsibilities. The Board in a timely manner

deliberates all key issues.

3 (5) (v) The Chairman shall be primarily responsible for drawing up and

approving the agenda for each Board meeting, taking into account where

appropriate, any matters proposed by the other Directors for inclusion in

the agenda. The Chairman may delegate the drawing up of the agenda to

the Company Secretary.

Complied with.

The Secretary to the Board draws up the agenda under

the authority delegated by the Chairman. The agenda is

drawn up based on the memoranda submitted through

the General Manager and any other relevant items wished

to be included by any Board member.

3 (5) (vi) The Chairman shall ensure that all Directors are properly briefed on issues

arising at Board meetings and also ensure that Directors receive adequate

information in a timely manner.

Complied with.

Adequate information is provided in a timely manner

through the Board memoranda submitted to the Board.

Generally, Board memoranda are circulated 6 to 7 days

before the Board meeting. Any late memoranda are also

submitted as soon as possible prior to the date of the

Board meeting. However, in the event of any urgent issues

in addition to the memoranda, detailed explanations are

provided to the Board on the contents of the memoranda

giving them adequate information to take decisions.

Chairman ensures the implementation of this process.

3 (5) (vii) The Chairman shall encourage all Directors to make a full and active

contribution to the Board’s affairs and take the lead to ensure that the

Board acts in the best interests of the Bank.

Complied with.

3 (5) (viii) The Chairman shall facilitate the effective contribution of Non-Executive

Directors in particular and ensure constructive relations between Executive

and Non-Executive Directors.

Complied with.

The full Board consists of Non-Executive Directors.

3 (5) (ix) The Chairman shall not engage in activities involving direct supervision of

Key Management Personnel or any other executive duties whatsoever.

Complied with.

3 (5) (x) The Chairman shall ensure that appropriate steps are taken to maintain

effective communication with shareholders and that the views of

shareholders are communicated to the Board.

Effective communication is maintained with the

Government of Sri Lanka who is the sole shareholder.

A representative of the Ministry-in-charge of the subject of

finance is always appointed as the Ex officio Director and

views of the shareholder are thus communicated.

3 (5) (xi) Chief Executive Officer shall function as the apex executive-in-charge of the

day-to-day management of the Bank’s operations and business.

Complied with.




3 (6) Board appointed Committees

3 (6) (i) Each bank shall have at least four Board Committees as set out in Directions

3 (6) (ii), 3 (6) (iii), 3 (6) (iv) and 3 (6) (v) of these Directions. Each

committee shall report directly to the Board. All committees shall appoint

a Secretary to arrange the meetings and maintain minutes, records, etc.,

under the supervision of the Chairman of the Committee. The Board shall

present a report of the performance on each committee, on their duties

and roles at the Annual General Meeting.

Complied with.

Four subcommittees of the Board (viz. Audit, Human

Resources & Remuneration, Nomination & Corporate

Governance and Integrated Risk Management) have

been established as required under this Direction which

are reporting directly to the Board by submitting the

minutes together with the recommendations. Secretary

to the Board has been appointed as the Secretary to all

the Committees and maintains minutes, etc., under the

supervision of the Chairmen of the Committees. Reports

on the performance of each committee are included in this

Annual Report on pages 81 to 86.

3 (6) (ii) The following rules shall apply in relation to the Audit Committee:

(a) The Chairman of the Committee shall be an Independent Non-Executive

Director who possesses qualifications and experience in accountancy

and/or audit.

Alternate Director to the Ex officio Director, who is a

Non-Executive Director and who possesses qualifications

and experience in accountancy and audit, functions as the

Chairman of Audit Committee with the permission of the

Central Bank of Sri Lanka.

(b) All members of the committee shall be Non-Executive Directors. Complied with.

(c) The Committee shall make recommendations on matters in

connection with:

i. The appointment of the External Auditor for audit services to be provided

in compliance with the relevant statutes;

Not applicable since the Bank’s External Auditor is the

Auditor General in terms of the Constitution of Sri Lanka.

ii. The implementation of the Central Bank guidelines issued to auditors

from time to time;

Complied with.

iii. The application of the relevant accounting standards; and The significant accounting policies that have been

developed based on the Sri Lanka Accounting Standards

are reviewed by the Committee with the Annual Financial

Statements and the Committee makes the necessary

recommendations on the application of such policies.

iv. The service period, audit fee and any resignation or dismissal of the

Auditor; provided that the engagement of the audit partner shall not

exceed five years, and that the particular audit partner is not re-engaged for

the audit before the expiry of three years from the date of the completion

of the previous term.

Not applicable in view of Auditor General being the

External Auditor of the Bank.

(d) The Committee shall review and monitor the external auditor’s

independence and objectivity and the effectiveness of the audit processes

in accordance with applicable standards and best practices.

Independence of the Auditor General is guaranteed under

the Constitution of Sri Lanka.




(e) The Committee shall develop and implement a policy on the engagement

of an External Auditor to provide non-audit services that are permitted

under the relevant statutes, regulations, requirements and guidelines. In

doing so, the committee shall ensure that the provision by an External

Auditor of non-audit services does not impair the External Auditor’s

independence or objectivity. When assessing the External Auditor’s

independence or objectivity in relation to the provision of non-audit services,

the Committee shall consider -

I. whether the skills and experience of the audit firm make it a suitable

provider of the non-audit services;

Not applicable since the Auditor General is the External

Auditor of the Bank.

II. whether there are safeguards in place to ensure that there is no threat

to the objectivity and/or independence in the conduct of the audit resulting

from the provision of such services by the External Auditor; and

III. Whether the nature of the non-audit services, the related fee levels and

the fee levels individually and in aggregate relative to the audit firm, pose

any threat to the objectivity and/or independence of the External Auditor.

(f) The Committee shall, before the audit commences, discuss and finalise

with the External Auditors the nature and scope of the audit, including:

i. An assessment of the Bank’s compliance with the relevant Directions in

relation to corporate governance and the management’s internal controls

over financial reporting; The Auditor General is the External Auditor of the Bank.

ii. The preparation of Financial Statements for external purposes in accordance

with relevant accounting principles and reporting obligations; and

iii. The co-ordination between firms where more than one audit

firm is involved.

(g) The Committee shall review the financial information of the Bank, in

order to monitor the integrity of the Financial Statements of the Bank, its

Annual Report, accounts and quarterly reports prepared for disclosure,

and the significant financial reporting judgments contained therein. In

reviewing the Bank’s Annual Report and accounts and quarterly reports

before submission to the Board, the Committee shall focus particularly on:

i. Major judgmental areas;

ii. Any changes in accounting policies and practices;

iii. Significant adjustments arising from the audit;

iv. The going concern assumption; and

v. The Compliance with relevant Accounting Standards and other legal

requirements.

Complied with.

This is a continuing process carried out in reviewing

monthly, quarterly and annual financials.

(h) The Committee shall discuss issues, problems and reservations arising

from the interim and final audits, and any matters the Auditor may wish

to discuss including those matters that may need to be discussed in the

absence of key management personnel, if necessary.

The Committee discusses issues, problems and reservations

arising from the interim and final audits. The Auditor

General is the External Auditor of the Bank and his

representative is present at all Audit Committee Meetings

and no request was made in the year under review to

discuss any matter in the absence of the management.




(i) The Committee shall review the External Auditor’s management letter

and the management’s response thereto.

Complied with.

Follow up action is taken accordingly.

(j) The Committee shall take the following steps with regard to the internal

audit function of the Bank:

I. Review the adequacy of the scope, functions and resources of the

internal audit department, and satisfy itself that the department has the

necessary authority to carry out its work;

Complied with.

II. Review the internal audit programme and results of the internal audit

process and, where necessary, ensure that appropriate actions are taken on

the recommendations of the internal audit department;

Complied with.

III. Review any appraisal or assessment of the performance of the head and

senior staff members of the internal audit department;

Complied with.

Appraisal of the Chief Internal Auditor is carried out by the

Audit Committee. Performance evaluation of senior staff

is carried out according to the Board approved evaluation

process by the Chief Internal Auditor and is tabled before

the Audit Committee.

IV. Recommend any appointment or termination of the head, senior staff

members and outsourced service providers to the internal audit function;

Complied with.

Appointment/termination of Chief Internal Auditor is

recommended by the Audit Committee to the Board.

Other senior positions are filled as per the Board approved

promotion scheme of the Bank. Bank did not outsource

any internal audit function in year 2010.

V. Ensure that the Committee is appraised of resignations of senior

staff members of the internal audit department including the chief

internal auditor and any outsourced service providers, and to provide an

opportunity to the resigning senior staff members and outsourced service

providers to submit reasons for resigning;

Complied with.

VI. Ensure that the internal audit function is independent of the activities

it audits and that it is performed with impartiality, proficiency and due

professional care;

Complied with.

(k) The Committee shall consider the major findings of internal

investigations and management’s responses thereto.

Complied with.

(l) The Chief Finance Officer, the Chief Internal Auditor and a representative

of the External Auditors may normally attend meetings. Other Board

Members and the Chief Executive Officer may also attend meetings

upon the invitation of the Committee. However, at least twice a year, the

Committee shall meet with the External Auditors without the Executive

Directors being present.

Complied with.

Chief Financial Officer, Chief Internal Auditor, General

Manager and the representatives of the Auditor General

participate at all Committee meetings.

There are no Executive Directors on the Board of

Bank of Ceylon.

(m) The Committee shall have -

i. Explicit authority to investigate into any matter within its terms of

reference;

ii. The resources which it needs to do so;

iii. Full access to information; and

iv. Authority to obtain external professional advice and to invite outsiders

with relevant experience to attend, if necessary.

Complied with.




(n) The Committee shall meet regularly, with due notice of issues to be

discussed and shall record its conclusions in discharging its duties and

responsibilities.

Complied with.

The Committee meets regularly and gives due notice of

the issues to be discussed. The minutes are made and

maintained of these Committee meetings.

(o) The Board shall disclose in an informative way,

i. Details of the activities of the Audit Committee;

ii. The number of Audit Committee Meetings held in the year; and

iii. Details of attendance of each individual Director at such meetings.

Complied with.

Activities of the Committee are reported in Audit

Committee Report on pages 81 and 82.

The Committee met seven times during the year 2010 and

details of attendance are given on page 86.

(p) The Secretary of the Committee (who may be the Company Secretary

or the head of the internal audit function) shall record and keep detailed

minutes of the Committee Meetings.

Complied with.

(q) The Committee shall review arrangements by which employees of

the Bank may, in confidence, raise concerns about possible improprieties

in financial reporting, internal control or other matters. Accordingly, the

Committee shall ensure that proper arrangements are in place for the fair

and independent investigation of such matters and for appropriate follow-

up action and to act as the key representative body for overseeing the

Bank’s relations with the external auditor.

Complied with.

Bank has adopted a Whistle-Blower Policy and significant

findings are reported to the Committee.

3 (6) (iii) The following rules shall apply in relation to the Human Resources andRemuneration Committee:

(a) The Committee shall determine the remuneration policy (salaries,

allowances and other financial payments) relating to Directors, Chief

Executive Officer (CEO) and Key Management Personnel of the Bank.

Directors’ remuneration is based on the circulars issued

by the Ministry in charge of the subject of finance.

A Remuneration Policy is in place encompassing the

applicable laws and regulations. Remunerations of Bank

Officials are reviewed once in three years with the approval

of the Minster in charge of the subject of finance. The

Committee makes recommendations on the remuneration

of CEO (General Manager in the case of Bank of Ceylon)

and Key Management Personnel.

(b) The Committee shall set goals and targets for the Directors, CEO and

the Key Management Personnel.

(c) The Committee shall evaluate the performance of the CEO and Key

Management Personnel against the set targets and goals periodically and

determine the basis for revising remuneration, benefits and other payments

of performance-based incentives.

No targets for the Directors are set since all of them are

Non-Executive Directors. Goals and targets for the Key

Management Personnel are documented and detailed in

the Action Plan prepared based on the Corporate Plan of

the Bank. CEO is responsible for the implementation of the

Corporate Plan through the Key Management Personnel.

Performance on same is reviewed by the full Board on a

periodic basis. A separate evaluation of the performance

of the CEO is also carried out on an annual basis by the full

Board. Please refer the Human Resources and Remuneration

Committee Report on pages 82 and 83 for further details.

(d) The CEO shall be present at all meetings of the Committee, except

when matters relating to the CEO are being discussed.

Complied with.

Matters relating to CEO were not discussed during the year.




3 (6) (iv) The following rules shall apply in relation to the Nomination Committee: Bank of Ceylon has established a Nomination and

Corporate Governance Committee. In addition to the

duties of the Nomination Committee given under this

Direction, certain other duties pertaining to upholding the

applicable Corporate Governance principles are included

under the Terms of Reference of this Committee.

(a) The Committee shall implement a procedure to select/appoint new

Directors, CEO and Key Management Personnel.

Directors are appointed by the Minister-in-charge of the

subject of finance and hence the Committee plays no

role in that regard. There is a Board approved procedure/

scheme for the selection/appointment of the staff of

Bank of Ceylon. Changes to such approved schemes are

recommended by this Committee. Please refer the Report

of the Committee given on pages 83 and 84 of this

Annual Report in this regard.

(b) The Committee shall consider and recommend (or not recommend) the

re-election of current Directors, taking into account the performance and

contribution made by the Director concerned towards the overall discharge

of the Board’s responsibilities.

Not applicable in view of the reasons given above.

(c) The Committee shall set the criteria such as qualifications, experience

and key attributes required for eligibility to be considered for appointment

or promotion to the post of CEO and the Key Management Positions.

The General Manager is appointed based on the Bank’s

accepted procedure with the approval of the Board of

Directors and the approval of the Minister in charge of

the subject of finance as specified in the Bank of Ceylon

Ordinance No. 53 of 1938. Board approved promotion

schemes stipulate the attributes required to be eligible to

be selected or promoted to the Key Management Positions.

(d) The Committee shall ensure that Directors, CEO and Key Management

Personnel are fit and proper persons to hold office as specified in the

criteria given in Direction 3(3) and as set out in the Statutes.

The Bank has complied with the request made by the

Central Bank of Sri Lanka to submit declarations and

affidavits complying with this requirement.

(e) The Committee shall consider and recommend from time to time, the

requirements of additional/new expertise and the succession arrangements

for retiring Directors and Key Management Personnel.

Directors are appointed by the Minister in charge of

the subject of finance and as such this Committee plays

no role in that regard. Please refer the Report of the

Committee given on pages 83 and 84 of this Annual

Report for other information.

(f) The Committee shall be chaired by an Independent Director and

preferably be constituted with a majority of Independent Directors. The

CEO may be present at meetings by invitation.

Complied with.

Please refer the Report of the Committee given on pages

83 and 84 of this Annual Report for details in this regard.

3 (6) (v) The following rules shall apply in relation to the Integrated Risk Management Committee:

(a) The Committee shall consist of at least three Non-Executive Directors,

Chief Executive Officer and Key Management Personnel supervising broad

risk categories, i.e., credit, market, liquidity, operational and strategic risks.

The Committee shall work with Key Management Personnel very closely

and make decisions on behalf of the Board within the framework of the

authority and responsibility assigned to the Committee.

Complied with.

This Committee being a Board’s subcommittee, consists of

three Non-Executive Directors. The Chief Executive Officer

and the Chief Risk Officer participates mandatorily at the

meetings to assist the Committee.




(b) The Committee shall assess all risks, i.e., credit, market, liquidity,

operational and strategic risks to the Bank on a monthly basis through

appropriate risk indicators and management information. In the case of

Subsidiary Companies and Associate Companies, risk management shall be

done, both on a bank basis and group basis.

Independent Integrated Risk management Division of the

Bank assesses the risks of the Bank. They are reported to

the Committee on a quarterly basis.

In the case of subsidiaries and associates, the Bank

conducts workshops on risk management and impact

studies are done as and when the need arises. In addition,

the Bank has introduced a Subsidiaries Management

Charter to be implemented by all the nominee Directors

of the Bank on the Boards of its Subsidiaries (as well

as Associates to the extent possible) which indicates

among other things how risks should be managed in the

Subsidiaries.

(c) The Committee shall review the adequacy and effectiveness of all

management level committees such as the credit committee and the

asset-liability committee to address specific risks and to manage those risks

within quantitative and qualitative risk limits as specified by the committee.

The Chief Risk Officer who reports to the Integrated

Risk Management Committee is a member of the

committees such as Credit Committee and the Asset and

Liability Committee etc., and reviews their adequacy and

effectiveness and reports to the Committee.

(d) The Committee shall take prompt corrective action to mitigate the

effects of specific risks in the case such risks are at levels beyond the

prudent levels decided by the Committee on the basis of the Bank’s policies

and regulatory and supervisory requirements.

The Committee recommends such corrective action

to the Board.

(e) The Committee shall meet at least quarterly to assess all aspects of risk

management including updated business continuity plans.

Number of Committee meetings held is disclosed on

page 86 of this Annual Report. In view of the change of

Directors during the year, only 3 meetings were held.

(f) The Committee shall take appropriate actions against the officers

responsible for failure to identify specific risks and take prompt corrective

actions as recommended by the Committee, and/or as directed by the

Director of Bank Supervision.

Complied with, when such situations arise. Appropriate

action would be taken by following the Board approved

Disciplinary Code of the Bank.

(g) The Committee shall submit a risk assessment report within a week of

each meeting to the Board seeking the Board’s views, concurrence and/or

specific directions.

Minutes of the Committee meetings are submitted to the

next immediate Board meeting. Risk assessment reports

are also now being submitted to the Board in addition to

the minutes.

(h) The Committee shall establish a compliance function to assess the Bank’s

compliance with laws, regulations, regulatory guidelines, internal controls

and approved policies on all areas of business operations. A dedicated

compliance officer selected from Key Management Personnel shall carry out

the compliance function and report to the Committee periodically.

Complied with.

Please see details under Risk and Compliance Report on

page 87 Monthly compliance reports are submitted to the

Board directly.




3 (7) Related Party Transactions

3 (7) (i) The Board shall take the necessary steps to avoid any conflicts of interest

that may arise from any transaction of the Bank with any person, and

particularly with the following categories of persons who shall be

considered as ‘related parties’ for the purposes of this Direction:

(a) Any of the Bank’s Subsidiary Companies;

(b) Any of the Bank’s Associate Companies;

(c) Any of the Directors of the Bank;

(d) Any of the Bank’s Key Management Personnel;

(e) A close relation of any of the Bank’s Directors or Key Management

Personnel;

(f) A shareholder owning a material interest in the Bank;

(g) A concern in which any of the Bank’s Directors or a close relation of

any of the Bank’s Directors or any of its material shareholders has a

substantial interest.

Complied with.

The Bank is considering an automated process to

strengthen the procedure in existence.

Transactions carried out with related parties in the normal

course of business are disclosed in Note 47 on ‘Related

Party Disclosures’ on page 226 of this Annual Report.

3 (7) (ii) The type of transactions with related parties that shall be covered by this

Direction shall include the following:

(a) The grant of any type of accommodation, as defined in the Monetary

Board’s Directions on maximum amount of accommodation;

(b) The creation of any liabilities of the Bank in the form of deposits,

borrowings and investments;

(c) The provision of any services of a financial or non-financial nature

provided to the Bank or received from the Bank;

(d) The creation or maintenance of reporting lines and information flows

between the Bank and any related parties which may lead to the sharing of

potentially proprietary, confidential or otherwise sensitive information that

may give benefits to such related parties.




3 (7) (iii) The Board shall ensure that the Bank does not engage in transactions with

related parties as defined in Direction 3 (7) (i) above, in a manner that

would grant such parties ‘more favourable treatment’ than that accorded

to other constituents of the Bank carrying on the same business. In this

context, ‘more favourable treatment’ shall mean and include treatment,

including the:

(a) Granting of ‘total net accommodation’ to related parties, exceeding a

prudent percentage of the Bank’s regulatory capital, as determined by the

Board. For purposes of this Sub-Direction:

I. ‘Accommodation’ shall mean accommodation as defined in the Banking

Act Directions, No. 07 of 2007 on Maximum Amount of Accommodation.

II. The ‘total net accommodation’ shall be computed by deducting from

the total accommodation, the cash collateral and investments made by

such related parties in the Bank’s share capital and debt instruments with a

maturity of 5 years or more.

(b) Charging of a lower rate of interest than the Bank’s best lending rate

or paying more than the Bank’s deposit rate for a comparable transaction

with an unrelated comparable counterparty;

(c) Providing of preferential treatment, such as favourable terms, covering

trade losses and/or waiving fees/commissions, that extend beyond the

terms granted in the normal course of business undertaken with unrelated

parties;

(d) Providing services to or receiving services from a related-party without

an evaluation procedure;

(e) Maintaining reporting lines and information flows that may lead

to sharing potentially proprietary, confidential or otherwise sensitive

information with related parties, except as required for the performance of

legitimate duties and functions.

Complied with.

The Board takes necessary steps to avoid any conflicts of

interest that may arise from any transaction of the Bank

with its related parties. Procedure in practice in this regard

would be documented.

3 (7) (iv) A bank shall not grant any accommodation to any of its Directors or to a

close relation of such Director unless such accommodation is sanctioned

at a meeting of its Board of Directors, with not less than two-thirds of the

number of Directors other than the Director concerned, voting in favour of

such accommodation. This accommodation shall be secured by such security

as may from time to time be determined by the Monetary Board as well.

Complied with.




3 (7) (v) (a) Where any accommodation has been granted by a bank to a person

or a close relation of a person or to any concern in which the person has a

substantial interest, and such person is subsequently appointed as a Director

of the Bank, steps shall be taken by the Bank to obtain the necessary security

as may be approved for that purpose by the Monetary Board, within one

year from the date of appointment of the person as a Director.

(b) Where such security is not provided by the period as provided in

Direction 3 (7) (v) (a) above, the Bank shall take steps to recover any

amount due on account of any accommodation, together with interest, if

any, within the period specified at the time of the grant of accommodation

or at the expiry of a period of eighteen months from the date of

appointment of such Director, whichever is earlier.

(c) Any Director who fails to comply with the above Sub-Directions shall be

deemed to have vacated the office of Director and the Bank shall disclose

such fact to the public.

(d) This Sub-Direction, however, shall not apply to a Director who at the

time of the grant of the accommodation was an employee of the Bank

and the accommodation was granted under a scheme applicable to all

employees of such bank.

No such situation has arisen during the year

under review.

3 (7) (vi) A bank shall not grant any accommodation or ‘more favourable treatment’

relating to the waiver of fees and/or commissions to any employee or a

close relation of such employee or to any concern in which the employee or

close relation has a substantial interest other than on the basis of a scheme

applicable to the employees of such bank or when secured by security as may

be approved by the Monetary Board in respect of accommodation granted as

per Direction 3 (7) (v) above.

Complied with.

No accommodation has been granted to any employee of

the Bank on more favourable terms unless under general

staff loan schemes applicable to all employees of the Bank.

Procedure in practice in this regard would be documented.

3 (7) (vii) No accommodation granted by a bank under Direction 3 (7) (v) and 3 (7) (vi)

above, nor any part of such accommodation, nor any interest due thereon

shall be remitted without the prior approval of the Monetary Board and any

remission without such approval shall be void and of no effect.

Complied with.

No such event took place during the year under review.




3 (8) Disclosures

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 that,

(b) Such statements are published in the newspapers in an abridged form,

in Sinhala, Tamil and English.

Complied with.

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 with.

(b) A report by the Board on the Bank’s 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 with.

Refer page 147.

(c) The External Auditor’s 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 31 December 2008.

Complied with.

Refer page 146.

(d) Details of Directors, including names, fitness and propriety, transactions

with the Bank and the total of fees/remuneration paid by the Bank.

Complied with.

Refer pages 14 to 16 for details of Directors, pages 226

and 227 on Related Party Disclosures for transactions and

fees and page 172 for specific amount on Directors’ fees.

(e) Total net accommodation as defined in 3 (7) (iii) is 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

Bank’s regulatory capital.

Complied with.

Please refer Note 47 on pages 226 to 230.

(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 the Broad categories

such as remuneration paid, accommodation granted and deposits or

investments made in the Bank.

Complied with.

Please refer pages 226 and 227 under ‘Related Party

Disclosures’.

(g) The External Auditor’s certification of the compliance with these

Directions in the annual Corporate Governance reports published after

01 January 2010.

The Auditor General has given a report on the status

of compliance/factual findings on the compliance

requirements under Direction No. 11 of 2007, based

on the auditing framework issued by ICASL for this

engagement. The recommendations made by the Auditor

General will be dealt within 2011. Also refer page 79 in

this regard.




(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.

Complied with.

Please refer page 93 of this Annual Report under the

report on Risk Management and Compliance.

(i) A statement of the regulatory and supervisory concerns on lapses in

the Bank’s 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.

No such situation has arisen.

3 (9) Transitional and Other General Provisions

3 (9) (i) Compliance with this Direction shall commence from 01 January 2008

onwards and all licensed commercial banks shall fully comply with the

provisions of this Direction by or before 01 January 2009 except where

extended compliance dates have been specifically provided for in this

Direction.

Complied with.

3 (9) (ii) In respect of the banks that have been incorporated by specific statutes in

Sri Lanka, the boards as specified in such statutes shall continue to

function in terms of the provisions of the respective statutes, provided

they take steps to comply with all provisions of this Direction that are not

inconsistent with the provisions of the respective statutes.

Bank of Ceylon has taken all possible measures to comply

with all applicable provisions of this Direction that are not

inconsistent with the provisions of the statute governing it,

viz. Bank of Ceylon Ordinance No. 53 of 1938.

Any non-compliances and where Bank of Ceylon has

continued to function in terms of the provisions of the

statutes applicable to it have been specifically mentioned

above against the relevant directions.

3 (9) (iii) This Direction shall apply to the branches of the foreign banks operating in

Sri Lanka to the extent that it is not inconsistent with the regulations and

laws applicable in such bank’s country of incorporation. The branch

of a foreign bank shall also publish its Parent Bank’s annual Corporate

Governance report together with its Annual Report and Accounts of the

branch operations in Sri Lanka.

Not applicable.

3 (9) (iv) In the event of a conflict between any of the provisions of this Direction

and the Articles of Association (or Internal Rules) pertaining to any bank,

the provisions of this Direction shall prevail. However, if the Articles of

Association of an individual bank set a more stringent standard than that

specified in this Direction, such provisions in the Articles of Association may

be followed.

Not applicable.

3 (9) (v) If for any reason such as ill health or any incapacity as provided in the

Banking Act, the Monetary Board considers that exemptions referred to in

Directions 3 (2) (ii) B, 3 (3) (i) A and 3 (3) (ii) A should not be availed of,

such ground may be notified to the person by the Monetary Board, and

after a hearing, the Monetary Board may limit the period of exemption.

Not applicable.



Level of Compliance with the Code of Best Practice on Corporate Governance issued jointly by The Securities and Exchange Commission of Sri Lanka and The Institute of Chartered Accountants of Sri Lanka.

SUBJECT DISCLOSURE RESPONSE

Chairman and CEO 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.

The posts of Chairman and CEO are held by two individuals.

Board Balance Should identify the Independent Non-Executive Directors.

If a Non-Executive Director is identified as ‘Independent’, notwithstanding the existence of any of the following factors, the reason for such determination should be disclosed.

Independent Directors are identified as per the Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks in Sri Lanka issued by the Central Bank of Sri Lanka.

Appointment of New Directors

When new Directors are appointed, the following details should be disclosed:

A brief resume of each such Director;

The nature of his expertise in relevant functional areas;

The names of companies in which the Director holds directorships or memberships in board committees; and

whether such Director can be considered independent.

The sole shareholder, the Government of Sri Lanka appoints the Directors.

Nomination Committee The Chairman and members of the Nomination Committee should be identified.

Complied with.Please refer page 83 of this Annual Report for details of the Nomination & Corporate Governance Committee.

Appraisal of Board performance

Should disclose how performance evaluations have been conducted.

Formats with identified criteria were used for this purpose, which were completed by each Director. A final report was prepared and tabled before the Board through the Nomination and Corporate Governance Committee comparing with the previous year’s performance.

Board Related Disclosures The following details pertaining to each Director should be disclosed:

Complied with. Please refer following pages of this Annual Report -

Name, qualification and brief profile; Pages 14 to 16.

The nature of his/her expertise in relevant functional areas; Pages 14 to 16.

Immediate family and/or material business relationships with other Directors of the Company;

Directors have confirmed that they have no such relationships.

Names of other listed companies in Sri Lanka in which the Director concerned serves as a Director;

Pages 14 to 16.

Names of companies in which the Director concerned serves as a Director and/or the fact that he/she holds other Directorships in the Group Companies;

Pages 14 to 16.

Number/percentage of Board meetings of the Company attended during the year;

Page 86.

Names of the committees in which the Director serves as the Chairman or a member; and

Pages 86.

Number/percentage of committee meetings attended during the year.

Pages 86.




Disclosure of Remuneration A statement of Remuneration Policy and details of remuneration of the Board as a whole.

Please refer page 172 for Remuneration of the Board for the year 2010. Please refer page 82 for information on Remuneration Policy.

Major Transactions All major transactions entered into by the Company should be disclosed.

Complied with.

Audit Committee Names of the members of the Audit Committee should be disclosed.

Names of members of the Audit Committee are given in the Audit Committee Report on page 81.

Basis for determining the independence of auditors. The External Auditor of the Bank is the Auditor General as enshrined in the Constitution of Sri Lanka. The independence of the Auditor General is ensured by the Constitution.

Code of Business Conduct and Ethics

Should disclose whether the Company has a Code of Business Conduct & Ethics for Directors and members of the senior management team.

Bank has a Code of Ethics for Directors. There is a separate Code of Ethics for employees.

Should also disclose an affirmative declaration that they have abided by such Code.

Compliance certificates are obtained annually.

The Chairman must certify that he/she is not aware of any violation of any of the provisions of this Code.

Complied with.

Going Concern Should report that the Company is a going concern, with supporting assumptions and qualifications as necessary .

Complied with.

Members of Remuneration Committee

The names of members of the Remuneration Committee should be disclosed in the Remuneration Committee Report

Complied with.Names of the members of Remuneration Committee are given in the Human Resources and Remuneration Committee Report on page 82 of this Annual Report

Directors’ Report Should contain the following declarations made by the Directors:

Complied with.Bank has only one shareholder, the Government of Sri Lanka.The Company has not engaged in any activities, which

contravenes laws and regulations;

The Directors have declared all material interests in contracts involving the Company and refrained from voting on matters in which they were materially interested;

The Company has made all endeavours to ensure the equitable treatment of shareholders;

The business is a going concern with supporting assumptions or qualifications as necessary; and

They have conducted a review of internal controls covering financial, operational and compliance controls and risk management and have obtained reasonable assurance of their effectiveness and successful adherence herewith.




Financial Statements The Board of Directors should include a Statement of Responsibility for the preparation and presentation of Financial Statements.

Complied with.Please refer pages 145 and 149.

Auditors should also have a statement about their reporting responsibility.

Management Report Should include a ‘Management Discussion and Analysis Report’ discussing at least the following issues:

Industry structure and developments;Opportunities and threats;Risks and concerns;Internal control systems and their adequacy;

Complied with.Please refer pages 30 to 44.

social and environmental protection activities carried out by the Company;

financial performance;

material developments in human resources/industrial relations; and

prospects for the future.

Corporate Governance Report

Should disclose the manner and extent to which the Company has complied with the principles and provisions of the Code.

Complied with by this exercise

Audit Committee Report Should set out the work carried out by the Committee. Complied with.Please refer pages 81 and 82.


REPORT FROM THE AUDITOR GENERAL ON THE COMPLIANCE REQUIREMENT OF THE CORPORATE GOVERNANCE DIRECTION NO. 11 OF 2007

The Auditor General has performed procedures in accordance with the principles set out in Sri Lanka Standards on Related Services 4400 applicable to agreed-upon procedures engagements issued by The Institute of Chartered Accountants of Sri Lanka, to meet the compliance requirement of the Direction No. 11 of 2007 on Corporate Governance issued by the Central Bank of Sri Lanka. His findings given in his report, were not materially different to the matters disclosed above and did not identify any significant inconsistencies to those reported above by the Board.

Ms. Janaki Senanayake Siriwardane Dr. Gamini WickramasingheSecretary, Bank of Ceylon/ ChairmanSecretary to the Board



BOARD & BOARD SUBCOMMITTEES

Mr. S R Attygalle was appointed to the Board in June 2010 in place of Dr. R H S Samaratunga, both Ex officio Directors.

Audit Committee Human Resources & Remuneration Committee

Integrated Risk Management Committee

Nomination & Corporate Governance Committee

ChairmanMr. V Kanagasabapathy(Altrenate Director to Dr. R H S Samaratunga and then to Mr. S R Attygalle, both Ex officio Directors)

MembersMr. G K A Chaminda K Kularatne (Resigned w.e.f. May 2010 )

Mr. R Sivaraman

Mr. G Gallage (Resigned w.e.f. May 2010 )

Dr. B Kaluarchchi (Resigned w.e.f. May 2010 )

Mr. K L Hewage (Appointed w.e.f. June 2010 )

ChairmanDr. B Kaluarchchi

(Resigned w.e.f. May 2010)

Chairperson Ms Nalini Abeywardene

(Appointed w.e.f. June 2010)

Members Mr. R Sivaraman Mr. G K A Chaminda K Kularatne (Resigned w.e.f. May 2010)

Mr. G Gallage (Resigned w.e.f. May 2010)

Mr. Chandrasiri de Silva (Appointed w.e.f. June 2010)

Mr. K L Hewage(Appointed w.e.f. June 2010)

Board of Directors

ChairmanMr. V KanagasabapathyAs Altrenate Director to Dr. R H S Samaratunga and then to Mr. S R Attygalle, both Ex officio Directors

Members Mr. R Sivaraman Mr. G K A Chaminda K Kularatne (Resigned w.e.f. May 2010)

Mr. G Gallage (Resigned w.e.f. May 2010 )

Dr. B Kaluarchchi (Resigned w.e.f. May 2010 )

Mr. K L Hewage(Appointed w.e.f. June 2010 )

ChairmanMr. R Sivaraman

MembersDr. R H S Samaratunga or his

alternate Mr. V Kanagasabapathy (Resigned w.e.f. May 2010)

Mr. G K A Chaminda K Kularatne (Resigned w.e.f. May 2010)

Mr. S R Attygalle (Appointed w.e.f. June 2010) or his alternate Mr. V Kanagasabapathy

Mr. K L Hewage(Appointed w.e.f. June 2010)

Dr. Gamini Wickramasinghe (Chairman)Independent Non-Executive Director

Dr. R H S Samaratunga Non-Executive Ex officio Director

Mr. Raju Sivaraman Independent Non-Executive Director

Mr. G K A Chaminda K KularatneNon-Executive Director

Mr. G Gallage Independent Non-Executive Director

Dr. B Kaluarachchi Non-Executive Director

Mr. V Kanagasabapathy Non-Executive Alternate Director to Dr. R H S Samaratunga


Mr. S R AttygalleNon-Executive Ex officio Director

Mr. Raju SivaramanIndependent Non-Executive Director

Ms. Nalini AbeywardeneNon-Executive Director

Mr. Chandrasiri de SilvaNon-Executive Director

Mr. K L HewageIndependent Non-Executive Director

Mr. V KanagasabapathyNon-Executive Alternate Director toMr. S R Attygalle

From January to May 2010 From May/June 2010


REPORT OF BOARD SUBCOMMITTEES

AUDIT COMMITTEE REPORT

ROLE OF THE COMMITTEE

The main role and responsibilities, which are clearly identified in the Charter of the Audit Committee, include inter alia; the following:

Reviewing the financial information of the Bank in order to monitor the integrity of the Bank’s Financial Statements, its Annual Report, accounts etc.

Monitoring, reviewing and evaluating the adequacy and effectiveness of the Bank’s internal audit function.

Reviewing the internal audit reports, external audit management letters and subsequent follow up audits together with management’s responses to them.

Evaluating the adequacy and effectiveness of internal controls.

Ensuring that the Board is made aware of matters which may significantly impact the financial condition or affairs of the business, in a timely manner.

Regularly update the Board about Committee activities and make appropriate recommendations.

COMPOSITION AND QUORUM

The Audit Committee comprises three Non-Executive Directors of the Board. The following Directors served as the members of the Committee during the year under review:

Mr. V Kanagasabapathy - Chairman(Alternate Director to Dr. R H S Samaratunga and then to Mr. S R Attygalle, both Ex officio Directors)

Mr. R Sivaraman - Member

Mr. G K A Chaminda K Kularatne - Member(From January to May 2010)

Mr. G Gallage - Member(From January to May 2010)

Dr. B Kaluarachchi - Member(From January to May 2010)

Mr. K L Hewage - Member(From June 2010)

Some members of the Board of Directors of the Bank were changed from May/June 2010. Accordingly, the Committee members were also changed with effect from 17 June 2010.

According to Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by the

Central Bank of Sri Lanka, the Chairman of the Audit Committee should be independent and hold qualifications and experience in accountancy and/or audit. Bank of Ceylon is using the services of the undersigned, a Chartered Accountant with experience in the fields required, who is the Alternate Director to Mr. S R Attygalle, Ex officio Director, to chair the meetings of the Audit Committee, even though he cannot be considered independent in terms of the definition given for an Independent Director in the said Direction No. 11 of 2007 as he represents the Government of Sri Lanka, the sole shareholder of the Bank. The Central Bank of Sri Lanka was informed and its concurrence obtained for such arrangement.

The wide range of experience brought to the Committee from positions held by the members can be seen from the Directors’ biographical details appearing on pages 14 to 16.

The quorum of the Committee is two members.

A representative of the Auditor General (External Auditor of the Bank), the Chief Internal Auditor and the Chief Financial Officer of the Bank are present at the meetings in addition to the opportunity given to the External Auditor to meet the Committee without the Management’s presence where necessary.

There are no members of the management on the Committee. The General Manager attends the meetings by invitation. The other members of the management and other staff members of the Bank are invited to attend the meetings when the Committee requires their presence. The Secretary, Bank of Ceylon/Secretary to the Board functions as the Secretary to the Committee.

MEETINGS AND ACTIVITIES

The Committee met 7 times during the year under review. The attendance of Committee members at meetings is given in the table on page 86. For all these meetings due notice together with details/memoranda for discussion were given.

The Committee carried out the following activities during the year under review:

Internal Audit

Effectiveness of the implementation of the Internal Audit Plan for year 2010 was monitored by way of regular reports. Appropriate follow up action were taken where necessary.

Reviewed significant internal audit findings/and management’s responses thereto with a view to taking timely corrective action to avoid recurrence in future. The correction certificates obtained in this process were reviewed and revised.

Reviewed the cadre position and the succession plan of the Internal Audit Division.

Audit Committee Charter was revisited and revised.

Approved the Internal Audit Plan for year 2011.

Reviewed the application controls and security review carried out of the existing IT system of the Bank and made the necessary recommendations for corrective measures.

Recommended to formulate a system to monitor and control the functional responsibilities of Internal Control Officers (ICOs) and performance of ICOs.

External Audit

Reviewed the report of the Auditor General to the Parliament of Sri Lanka on the accounts of the Bank for the year ended 31 December 2009, Management Letter, management’s responses thereto and followed up on the corrective measures taken by the Bank to avoid recurrence of the issues highlighted.

Reviewed the Reports on the Statutory Examinations carried out by the Central Bank of Sri Lanka with a view to taking corrective action and the recommendations were followed up.



Financial Reporting

Assisted the Board in ensuring that annual audited Financial Statements and quarterly Financial Statements are prepared and published in accordance with the requirements prescribed by the supervisory and regulatory authorities and applicable accounting standards.

Reviewed the monthly Financial Statements.

Reviewed the arrangements made for the implementation of International Accounting Standards 32, 39 and International Financial Reporting Standard 07.

Awareness Programmes

Arranged and held a discussion with Mr. M Jayasinghe, Technical Partner, Messrs Ernst and Young, Chartered Accountants, mainly in relation to the role of the Audit Committee in financial reporting, role of the Directors in financial reporting and the integrity of Financial Statements and Banking Act requirements with regard to audit and financial reporting, which was attended by the members of the Board and the Senior Management of the Bank. Roles of the Internal Audit Division, Risk Management Committee were also discussed.

Awareness programmes for Branch Managers and Internal Control Officers on effective internal control function and managing risks through proper audit function were conducted by the Internal Audit Division.

Supervision and Audit of Subsidiaries and Associates of Bank of Ceylon

Initiated the formulation of a Subsidiaries Management Charter and on approval received from the Board for same on the recommendation of the Committee, organised a workshop to introduce it to the subsidiaries and associate companies. Dr. Harsha Cabral, President’s Counsel, was invited and he made a presentation on the salient features of the Companies Act No. 07 of 2007 in order to enhancetheir knowledge on duties and responsibilities under the new Companies Act under which the Subsidiaries and Associates are governed.

Minutes/Reporting to the Board

Adequate minutes of the Committee proceedings are maintained at the Board Secretariat. All minutes of the Committee meetings are tabled and ratified at meetings of the Board and approval of the Board thus is obtained for implementation of the recommendations made by the Committee. Follow up action is taken on outstanding matters on a regular basis.

PROCEDURE FOR COMPLAINTS

The procedure for the receipt, retention and treatment of complaints received by the Bank regarding accounting, internal control and audit matters etc., referred to as the Whistle -Blower Policy, was in operation during the year under review. During the period, 167 complaints were received, out of which 151 were investigated and resolved.

CONCLUSION

A self-evaluation of the performance of the Committee was carried out. It also evaluated the internal audit function for the year 2010 and the performance of the Chief Internal Auditor. The Committee is confident that the internal audit function of the Bank is independent of the activities it audits and that it is performed with impartiality, proficiency and due professional care. The Audit Committee regularly reviews the adequacy of the internal controls in the Bank. Statement on Internal Control by the Directors and the Auditor General’s Report on it, is given elsewhere in this Annual Report. Accordingly, the Committee is of the view that necessary ‘checks and balances’ are in place to provide reasonable assurance that the Bank’s assets are safeguarded and that the financial position and the results disclosed in the audited accounts are free from any material misstatements.

V KanagasabapathyChairman,Audit Committee


HUMAN RESOURCES AND REMUNERATION COMMITTEE REPORT


The main responsibilities of the Committee, which are mainly based on the Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka are as follows:

Determining the remuneration policy (salaries, allowances and other financial payments) relating to the General Manager and Key Management Personnel (KMPs) of the Bank.

Setting goals and targets for the General Manager and KMPs.

Evaluating the performance of the General Manager and KMPs against the set targets and goals periodically and determining the basis for revising remuneration, benefits and other payments of performance-based incentives.

Reviewing staff matters referred to it by the Board.

Determining the Human Resource Policy and Organisational Structure of the Bank.


The Committee comprises four members of the Board. The Chairman/Chairperson of the Committee is a Non-Executive Director.

The following Directors served as members of the Committee during the year under review:

Dr. B Kaluarachchi - Chairman(From January to May 2010)

Ms. Nalini Abeywardene - Chairperson(From June 2010)




Mr. Chandrasiri de Silva - Member(From June 2010)

Mr. K L Hewage - Member (From June 2010)




The General Manager presents himself at all meetings except when matters relating to him are discussed. The other members of the staff are invited to attend the meetings when the Committee requires their presence. The Secretary, Bank of Ceylon/Secretary to the Board functions as Secretary to the Committee.


The Committee has met 4 times during the year under review. The attendance of members at meetings is given on page 86. The proceedings of the meetings are reported to the Board with the recommendations for ratification and approval.

According to the aforesaid Banking Act Direction No. 11 of 2007, this Committee has to determine the Remuneration Policy relating to Directors. However, in the case of Bank of Ceylon, the remuneration of Directors is determined in accordance with the circulars and instructions issued by the Ministry of Finance & Planning on behalf of the Government of Sri Lanka, the sole shareholder. The provisions in the Bank of Ceylon Ordinance No. 53 of 1938 and its amendments, the Act of Parliament which established Bank of Ceylon are also taken into consideration with regard to the Directors’ remuneration and benefits given to them. A Remuneration Policy for Directors has been adopted by the Board in keeping with the above rules and instructions. The details of the remuneration given to Directors are fully disclosed in the Annual Report on a yearly basis.

The remuneration of employees including the General Manager and KMPs is revised once in 3 years with the approval of the Minister in charge of the subject of finance in accordance with the provisions of Bank of Ceylon Ordinance. Prior to finalising the salary revision, the Committee

deliberates on the proposals and makes its recommendation. There was no salary revision in year 2010. The next salary revision is due in 2012.

Goals and targets for General Manager and KMPs are embodied in the rolling Corporate Plan and the related Action Plan. They were reviewed by the full Board as decided by it.

Further, the General Manager evaluates the performance of the Deputy General Managers and reports directly to the Board. Targets for Directors are not given since all the Directors are non-executive.

In this year, the Committee deliberated on a Performance Based Reward System (PBRS) for the employees and recommended a system in principle, to the Board. This system is to be implemented in year 2011. The Committee also recommended the revised cadre position of the Bank based on the cadre requirement for 2010/11. HR Strategic Plan of the Bank for 2010 - 2012 was considered. It also ensured that fresh position descriptions are available for KMPs.

The Board refers to the Committee any staff matter that it is of the opinion needs the Committee’s attention. Accordingly, the Committee deliberated and recommended the proposed Medical Assistance Scheme for Bank’s Pensioners and Widows’/Widowers’ & Orphans’ Pensioners’.

A self - evaluation of the performance of the Committee during the year under review was carried out.

CONCLUSION

The Committee would continue to assist the Board in its oversight responsibilities in regard to human resource and remuneration matters.

Ms. Nalini AbeywardeneChairperson,Human Resources and Remuneration Committee


NOMINATION AND CORPORATE GOVERNANCE COMMITTEE REPORT


The Committee is mainly responsible for the following:

Implementing procedures to select/appoint the General Manager (GM) and Key Management Personnel (KMPs).

Setting the criteria such as qualifications, experience and key attributes for eligibility to be considered for appointment or promotion to the post of GM and the key management positions.

Ensuring that GM and KMPs are fit and proper persons to hold office as specified in the criteria given in Direction No. 3 (3) of the Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka and as set out in the statutes.

Considering and recommending from time to time, the requirements of additional/new expertise and succession arrangements for KMPs.

Determining the methods and execution of the annual evaluations of the Board’s and each Board subcommittees' effectiveness and supporting the annual performance evaluation process.

Reviewing periodically the Bank’s Code of Ethics.

THE COMPOSITION OF THE COMMITTEE

The Committee comprises three members of the Board. The Chairman of the Committee is a Non-Executive Independent Director.

The following Directors served as members of the Committee during the year under review:

Mr. R Sivaraman - Chairman

Dr. R H S Samaratunga - Member(from January to May 2010)

Mr. G K A Chaminda K Kularatne - Member(from January to May 2010)

Mr. S R Attygalle - Member(from June 2010)

Mr. K L Hewage - Member(from June 2010)

Mr. V Kanagasabapathy - Member as anAlternate to Dr. R H S Samaratunga and then to Mr. S R Attygalle both Ex officio Directors




The General Manager presents himself at the meetings by invitation. Other members of staff are invited to attend the meetings when the Committee requires their presence. The Secretary, Bank of the Ceylon/Secretary to the Board functions as the Secretary to the Committee.


The Committee met 4 times during the year under review. The attendance of Committee Members at meetings is given on page 86. The proceedings of the meetings are reported to the Board with the recommendations for ratification and approval.

According to the aforesaid Banking Act Direction No. 11 of 2007, the Nomination Committee has to implement a procedure to select/appoint new Directors. However, in the case of Bank of Ceylon, which is wholly owned by the Government of Sri Lanka, the appointment of Directors is carried out by the Minister in charge of the subject of finance, as provided for in the Bank of Ceylon Ordinance No. 53 of 1938 and its amendments. As such the Nomination and Corporate Governance Committee does not have any role to play in connection with the appointment of Directors.

During the year under review the Committee carried out the following activities:

Reviewed the Succession Plan of the Bank.

Recommended a new performance evaluation method for KMPs (viz. Assistant General Managers and Deputy General Managers).

Ensured that approved promotion schemes, procedures and practices are available to select KMPs and the General Manager of the Bank. Review of the existing promotion schemes was also recommended.

Recommended the preparation of a talent inventory with a view to identifying future leaders of the Bank.

Mooted preparation of an objective oriented training policy for the staff.

Recommended re-looking at the Organisation Structure of the Bank with special attention to the top layer.

Ensured that there is a system for evaluation of employees on compliance with the Code of Ethics and Guidelines for Employees.

Recommended identifying relevant exposure programmes to Directors.

With a view to ensuring that there is an oversight of affairs of the Bank by KMPs, that is consistent with Board policy and to monitor progress towards corporate objectives, recommended reviewing the progress of the Bank on the Corporate Plan on a quarterly basis.

Additionally, arranged for the compilation of a document indicating the work carried out by all the management committees of the Bank.

Facilitated the Board in carrying out its self evaluation exercise including that of the performance of subcommittees by recommending the evaluation process to be carried out and also by preparing the report on the self-assessment of the Board. Also recommended the format for evaluation of the General Manager. and prepared the final report relating to his evaluation.

Gauged the level of compliance with the aforesaid Banking Act Direction No. 11 of 2007, and the level of compliance with the Committee Charter.

Took the initiative to invite from the Corporate Management, action to improve the best practices in Corporate Governance of the Bank.

Reviewed and recommended the Board Charter that has been adopted, whereby the duties of the Board and the General Manager have been separated.

Recommended a new Communication Policy for the Bank and required circulation of same among staff. Reviewed it at the end of the year.

Reviewed the Charter of the Committee.

Affidavits and declarations obtained from the GM and KMPs in compliance with Direction No. 3 (3) of the aforesaid Banking Act Direction on their fitness and propriety to hold their offices were submitted directly to the Central Bank of Sri Lanka.

CONCLUSION

An evaluation was carried out to determine the effectiveness of the Committee and it will endeavour to enhance the Corporate Governance practices of the Bank.

R SivaramanChairman

Nomination and Corporate Governance Committee




INTEGRATED RISK MANAGEMENT COMMITTEE REPORT


The main role and responsibilities of the Committee are to assist the Board in fulfilling its oversight responsibilities for all aspects of risk management. In this connection the Committee focuses on and reviews risks such as credit, market, liquidity, operational and strategic risks through appropriate risk indicators and management information.

In addition to the above, the Committee is responsible for reviewing and/or recommending the following which are identified in the Charter of the Integrated Risk Management Committee:

Policies, programmes and management committee charters relating to risk management and compliance.

Risk limits and policies that establish appetite for credit, market, liquidity and operational risks, as recommended by the Chief Risk Officer.

Adequacy and effectiveness of all management level committees such as the Credit Committee and Assets & Liability Management Committee to address specific risks and to manage those risks within quantitative and qualitative risk limits as specified by the Committee.

Risk management reports on the risk profile of the Bank, as well as emerging market and regulatory risks and actions undertaken to identify, measure, monitor and control such risks.

Corrective action to mitigate the effects of specific risks in case such risks are beyond the prudent levels decided by the Committee on the basis of the Bank’s policies and regulatory and supervisory requirements.

Appropriate actions against the officers responsible for failure to identify specific risks and prompt corrective action as directed by the Director of Bank Supervision or otherwise.

Adequacy and effectiveness of risk identification, measurement, monitoring and mitigation relating to credit, market, liquidity, operational and compliance risks.


The following Directors served as the members of the Committee during the year under review:

Mr. V Kanagasabapathy - ChairmanAs Alternate Director to Dr. R H S Samaratunga and then to Mr. S R Attygalle, both Ex officio Directors




Dr. B Kaluarachchi - Member(From January to May 2010)

Mr. K L Hewage - Member(From June 2010)

The General Manager and Chief Risk Officer participate at all meetings and their participation is mandatory.



The Secretary, Bank of Ceylon/Secretary to the Board functions as the Secretary to the Committee. The other members of the staff are invited to attend the meetings when the Committee requires their presence.



The Committee met 3 times during the year under review. The attendance of Committee members at meetings is given in the table on page 86.

The Committee is conscious, when carrying out its responsibilities, that banks are in the business of taking risk. The aim of the Bank and the Committee is therefore not to minimise risks but to optimise it by ensuring that risks being taken are; properly identified and understood; appropriate; relative to the scale and type of business; affordable; properly controlled and managed; and earning an appropriate return.

Activities carried out by the Committee during the year under review are summarised below:

Reviewed the following reports and assessed the risk profile of the Bank:

- Credit Risk Management

- Operational Risk Management

- Market Risk Management

- Compliance Risk Management

Arrangements are at an advanced stage to purchase a state-of-the-art risk management system for managing credit, operational and market risks.

Steps were taken to raise awareness and implement the Business Contingency Plan across all departments as part of Operational Risk Management. Test runs are carried out in this regard.

Reviewed the Terms of Reference of Investment Committee.

Adopted a Compliance Policy for the Bank.

Introduced a Risk Management Policy for the Subsidiaries and Associates of the Bank through the Subsidiaries Management Charter introduced to the Subsidiaries and Associates of the Bank.


Awareness programmes on policies on Anti-Money Laundering (AML), Combating Terrorist Financing and Know Your Customer (KYC) were conducted across all sections of the staff and to the Board of Directors through workshops and presentations by the Independent Integrated Risk Management Unit.

Adopted a Fraud Risk Management Policy and the Terms of Reference for the Fraud Risk Management Committee.

Reviewed the Write off Policy for Credit Cards.

Reviewed and revised the Charter of Integrated Risk Management Committee.

The Committee works closely with the Audit Committee and reviewed the Whistle-Blower Policy of the Bank and also initiated an impact study on compliance with Sri Lanka Accounting Standards 44 and 45.

The Committee reported to the Board by way of minutes giving the recommendations. All minutes of the Committee meetings are tabled and ratified at meetings of the Board and follow up action is taken on outstanding matters.

CONCLUSION

A self-evaluation of the performance of the Committee was carried out. The Committee is of the view that the Bank has made good progress towards meeting the challenges of risk management and compliance, complying


ATTENDANCE OF DIRECTORS AT BOARD & SUBCOMMITTEE MEETINGS

Main Board Audit Committee Human Resources and Remuneration

Committee

Nomination and Corporate Governance

Committee

IntegratedRisk Management

Committee

Total No. of Meetings held during the year 2010 19 7 4 4 3

From Jan.to May

2010

From June to Dec.

2010

From Jan. to May

2010

From June to Dec.

2010

From Jan. to May

2010

From June to Dec.

2010

From Jan. to May

2010

From June to Dec.

2010

From Jan. to May

2010

From June to Dec.

2010

No. of Meetings held during the period 5 14 2 5 0 4 2 2 1 2

Names of Directors No. Attended No. Attended No. Attended No. Attended No. Attended

Dr. Gamini Wickramasinghe 5 14

Dr. R H S Samaratunga (Resigned w.e.f. June 2010) 5 x x x 2 x x

Mr. G K A Chaminda K Kularatne (Resigned w.e.f. June 2010) 3 x 2 x x 1 x 1 x

Mr. G Gallage (Resigned w.e.f. June 2010) 5 x 2 x x x 1 x

Mr. R Sivaraman 4 12 2 4 4 2 2 1 2

Dr. B Kaluarachchi (Resigned w.e.f. June 2010) 4 x 2 x x x 1 x

Mr. S R Attygalle x 11 x x x 1 x

Ms. Nalini Abeywardene x 10 x x 4 x x

Mr. Chandrasiri de Silva x 11 x x 3 x x

Mr. K L Hewage x 13 x 5 x 4 x 2 x 2

Mr. V Kanagasabapathy (Alternate Director to Dr. Samaratunga & then to Mr. Attygalle) 2 5 1 2

Not a member of the Committee.

Mr. V Kanagasabapathy, Alternate Director, attended the Audit & Integrated Risk Management Committee meetings on behalf of Dr. Samaratunga & Mr. Attygalle. He did not attend any Board meeting as the Alternate Director for the Ex officio Directors during the year under review.

No meetings were held during the period.x Was not a Director during this period.

with international standards. In view of accomplishing this task the abovementioned Risk Management Unit assesses the credit, market, liquidity, operational and strategic risks on monthly basis through appropriate risk indicators and management information. The relevant Risk Assessment Reports are submitted to the Board on the recommendation of the Integrated Risk Management Committee.

V KanagasabapathyAs Alternate Director to Mr. S R AttygalleChairmanIntegrated Risk Management Committee



RISK MANAGEMENT & COMPLIANCE

RISK MANAGEMENT

Bank of Ceylon Risk Strategy

Risk to varying degrees is present in all aspects of business activities; therefore effective risk management is fundamental to the success of the Bank. The primary goal is to ensure that there is an appropriate balance between risk and reward in order to maximise shareholder returns both in monetary and non-monetary terms bearing in mind the socioeconomic role the Bank plays in Sri Lanka’s development. Given the ever changing and challenging risk landscape both internationally and locally the Bank established an Independent Integrated Risk Management Division over two years ago to evaluate the varied impacts and manage the complex risk interactions across all units and divisions to meet these challenges. Risk Management in the Bank is continuously evolving and the awareness is being developed enterprise-wide so that it forms part of the corporate DNA.

Risk Governance

Risk Management Governance Structure of the Bank begins with oversight by the Board of Directors, through the Integrated Risk Management Committee (IRMC) to which reports the Independent Integrated Risk Management Division (IIRMD).

Board Of Directors

IIRMD

Credit Risk

ALCO

Market Risk Operational Risk Compliance

IRMC

ORMEC Credit Committee

IRMC - Integrated Risk Management CommitteeALCO - Asset & Liability CommitteeORMEC - Operational Risk Management Executive CommitteeIIRMD - Independent Integrated Risk Management Division

Integrated Risk Management Committee (IRMC)

Primary purpose of the IRMC is to assist the Board in fulfilling its oversight responsibilities with respect to the operation and effectiveness of risk management and compliance function of the Bank. Members to this committee are appointed by the Board of Directors and include Board members with the participation of the General Manager and the Chief Risk Officer (CRO).

Independent Integrated Risk Management Division (IIRMD)

As an oversight of the risk management function of the Bank, IIRMD functions as a separate division, independent from the revenue generating Strategic Business Units (SBUs). Considering the strong interdependent nature of Credit, Operational, Market and Liquidity risks, they are managed in an integrated manner through the IIRMD. The Division is headed by the CRO who reports to the IRMC and ultimately to the Board of Directors. New standards for financial institutions introduced by Basel II are integrated into the risk management strategy and framework and it is implemented through IIRMD.

Management Committees

There are several executive committees such as Credit Committee, Asset & Liability Committee (ALCO), Operational Risk Management Executive Committee (ORMEC), IT Steering Committee, Business Continuity Planning Committee, Investment Committee, Forged Cheques and Frauds Committee, Foreclosed Property and the Non-Performing Advances (NPA) Recovery Committee are involved in managing the various risks that the Bank is exposed to.


Risk Management Framework

In order to effectively and efficiently deliver its core purposes the Bank has a comprehensive risk management framework to identify, measure, monitor and control the principal risks assumed in conducting its activities. These risk exposures include: Strategic, Credit, Market, Operational, Compliance and Liquidity.

Staff Awareness

To ensure that all staff are aware of the inherent risks in their areas of responsibility and their role in managing and mitigating risk, the Bank facilitates ongoing training at all levels and maintains effective dialogue across functional units. In addition, the IIRMD issues a quarterly newsletter to the staff on Risk Management and Compliance.

As per the Basel II regulations the Bank has to allocate capital charge for credit, market and operational risk. In quantitative terms, credit risk is the most significant risk in the banking book.

CREDIT RISK

Credit risk is the possibility of losses associated with changes in the credit profile of borrowers or counterparties. These losses, associated with changes in portfolio value, could arise due to default or deterioration in credit quality.

The major drivers of credit risk are default risk (obligor fails to service debt obligations), concentration risk (over exposure to an individual obligor, group or industry) and correlation risk (concentration based on common risk factors between different borrowers, industries or sectors which may lead to simultaneous default).

In order to strengthen the asset quality and optimise the capital charge, Bank undertakes comprehensive credit risk management practices. Effective credit risk management is a critical component of risk management and essential to the long-term success of the Bank.


Line of Defence

Three Lines of Defence interplay for Risk Management Function in BoC

Board & Executive Oversight

Line of Defence

Internal Audit

Business/ Operational Units

IIRMD

Provide assurance that risk management process is functioning as designed.Independent testing and verification of efficacy of corporate standard and business line compliance.

’Owner‘ of the risk management process.Identifies, manages, mitigates and reports on risks.

Risk ManagementDesign, interpret and develop overall risk management framework and monitor business/operational units adherence to framework.Overview & reporting of key risks.

Compliance - Monitor and report onRegulatory issues. Anti-money laundering/combating terrorist financing issues.

3rd

2nd

1st

Enab

ling

Risk

Cul

ture

Risk

man

agem

ent F

ram

ewor

k an

d Pr

oces

s A

lignm

ent

Line of Defence

Credit Risk Management

The Board approved credit risk management policy and manual governing all credit risk related activities of the Bank. These policies and procedures are communicated through awareness programmes and workshops both at top level and at operational levels.

The highest authority in credit approval is vested with the Board of Directors, which has been delegated to the Credit Committee to exercise within its delegated limit or make appropriate recommendations to the Board. The Committee regularly reviews the exposure limits with a view to maintain the credit quality.

The Bank has a structured and standardised credit approval process, and a borrower evaluation model developed by a world-renowned external consultancy firm and it is being used to assess risk associated with credit proposals. In addition, for corporate credit proposals an internal rating model is in use for assessing the credit risk.


IIRMD developed an internal credit rating model adding more parameters to the existing model to be in line with industry best practices and Basel II guidelines. The rating parameters are both quantitative as well as qualitative with credit enhancement features specific to the transaction. The rating serves as a key input in the approval as well as post-approval credit processes. The rating for every borrower is reviewed at least annually. A risk based asset review framework is in place wherein the frequency of asset review would be higher for cases with higher exposure and/or lower credit rating. Industry knowledge is constantly updated through field visits and interactions with clients, regulatory bodies and industry experts.

A risk based pricing approach was introduced to achieve an appropriate balance between risk and reward while continuing to enhance the risk management capabilities to assist in achieving corporate objectives.

Portfolio Management

The need for credit portfolio management arises from the potentially adverse impact of concentration of exposures and necessity to optimise the benefits associated with diversification. The Bank has developed systems for identification of credit weaknesses well in advance. Bank’s credit portfolio is effectively managed through periodic monitoring, evaluating the portfolio quality by tracking the migration of borrowers from one rating scale to another and keeping close track of deteriorating credit-quality. Further, portfolio reviews, stress tests and scenario analysis are undertaken at least annually or when there are changes to the external environment.

Segmentation

Loan portfolio of the Bank consists of credit originating from Corporate and Off-shore Banking Division, Branches Division, Product and Development Banking Division and International Division (overseas branches). The Bank is in the process of refining the segmentation of the loan book, which would facilitate and improve the assessment of the portfolio credit risk in a more proactive manner and help develop strategies for mitigating risk more effectively.


Asset Quality

(I) Loans and Advances

2010 2009

%Amount

Rs. million %Amount

Rs. million

Performing Loans 96.69 369,671 94.35 259,480

Non-performing Loans 3.31 12,639 5.65 15,542

Total Exposure 100.00 382,310 100.00 275,022

Less:

Specific provision for loans and advances (7,192) (8,043)

General provision for loans and advances (2,396) (1,914)

Net loans and advances 372,722 265,065

Provision cover (Excluding general provision) 57% 52%

The Bank continuously emphasises on good asset quality. Effectiveness of the Bank’s systems and controls for identifying, monitoring and addressing asset quality in a timely manner is evident from the improvement in NPA position over the year 2010.

Provisioning Policies

Provision for non-performing loans and advances is made on the basis of a continuous review of all loans and advances in accordance with the applicable Accounting Standards and the regulations imposed by the Central Bank of Sri Lanka. The provisioning policy of the Bank is given under the Accounting Policies on page 159.

Concentration Risk

Concentration of exposures in credit portfolios is an important aspect of credit risk. It may arise from two types of imperfect diversification. The first type, name concentration, relates to imperfect diversification of idiosyncratic risk in the portfolio because of large exposures to specific individual obligors. The second type, sector concentration, relates to imperfect diversification across sectors.

Name Concentration

Name concentration is monitored and managed by stipulating prudential risk limits on various risk parameters such as single/related party borrower limits.

MARKET RISK

Market risk is the risk that arises due to adverse changes in market variables such as interest rates, foreign exchange rates, equity and commodity prices. Mismatches carried in interest rates, currency and equity products, which are exposed to general and specific market movements and changes in the level of volatility of interest rates, foreign exchange rates and equity prices generate market risk to the Bank.


Market risk arises from both trading and non-trading activities of the Bank. Bank engages in trading activities to support client sales business, as well as to profit in the short-term from volatalities in market prices.

Market Risk Management

The IIRMD manages market risk with the broad objectives of:

Managing interest rate risk, currency risk and equity risk arising from the day-to-day commercial baking operations and in its investment portfolios with proper classification, valuation, accounting and reporting of the same.

Effective control over the operation and execution of market related transactions while facilitating business growth in a transparent risk management framework.

Ensure that overall market risk exposure is maintained at prudent levels and consistent with the available capital.

Compliance with regulatory requirements.

Interest Rate Risk

Interest rate risk is the risk where changes in market interest rates may adversely affect a bank’s financial condition. The impact of changes in interest rates affects the Bank’s earnings in the near term. The long-term impact would be on the Bank’s net worth as the economic value of its assets, liabilities and off-Balance Sheet items linked to different benchmark rates get affected by the movements in market interest rates.

ALCO involves in planning, directing and controlling the flow, level, mix of rates on the Bank’s assets and liabilities and therefore ALCO responsibilities are fully aligned to the overall objectives of the Bank.

Assets and Liability Management Unit (ALM Unit) of the Bank prepares various reports to monitor the adherence to the prudential limits as per the ALM Policy. Based on the information provided by the ALM Unit, ALCO periodically gives direction for management of interest rate risk on the basis of its expectations of future trends. ALCO may suggest necessary corrective actions in order to realign the exposure with the current assessment of the markets.

Bank’s Net Interest Margin (NIM) is monitored for variances and appropriate remedial action is taken. This initiative resulted in maintaining NIM at an acceptable level, which ensured that the projected earnings of the Bank were well within the expected levels. Bank uses gap analysis to measure the repricing risk of Bank’s assets and liabilities in order to assess the impact from interest rate changes and thereby on the profitability of the Bank. Based on the outcome, the Bank takes measures to mitigate any possible adverse impact.

Liquidity Risk

Liquidity risk is the risk that the Bank will encounter difficulty in meeting obligations associated with financial liabilities as and when they fall due. Liquidity risk arises from the possibility that market conditions prevailing at some point in the future will require the Bank to sell positions at a value which is below their underlying worth, or may result in the inability to exit from the positions.

The Bank manages liquidity risk in accordance with its ALM Policy. This policy is framed as per the extant regulatory guidelines and is approved by the Board of Directors. The ALM Policy is reviewed periodically to incorporate changes as required by regulatory stipulations or to realign with changes in the economic landscape. The ALCO of the Bank formulates and reviews strategies and provides guidance for management of liquidity risk.


Accordingly, the Bank manages liquidity risk through positive cash flow management, maintaining a highly liquid asset portfolio in accordance with prudential regulations and with a prudent funding strategy. Treasury ensures maintenance of a portfolio of highly marketable assets that can easily be liquidated as protection against any unforeseen interruption to cash flow. Liquidity ratios are continuously monitored to adhere to internal and external regulatory requirements.

The Bank has diverse sources of liquidity to allow for flexibility in meeting funding requirements. For the domestic operations, current accounts and savings deposits form a significant part of the Bank’s funding and the Bank continues to work on its concerted strategy to sustain and grow this segment of deposits along with term deposits. These deposits are augmented by wholesale deposits, inter-bank borrowings and through issuance of bonds and subordinated debt from time to time. Loan maturities and sale of investments also provide liquidity. The Bank holds unencumbered, high quality liquid assets to protect against stress conditions. For domestic operations, the Bank also has the option of managing liquidity by borrowing in the inter-bank market on a short-term basis through committed lines.


Overall, the Bank follows a conservative approach in its management of liquidity and has in place a healthy governance structure, policy framework and review mechanism to ensure availability of adequate liquidity even under stressed market conditions.

Foreign Exchange Risk

Foreign exchange risk is the risk that a bank may suffer losses as a result of adverse exchange rate movements during a period in which it carries mismatches, either spot or forward, or a combination of the two, in foreign currencies. Even in cases where spot and forward positions in individual currencies are balanced, the maturity pattern of forward transactions may produce mismatches, which would result in Bank incurring losses due to changes in premiums/discounts of the concerned currencies.

Bank uses many tools to monitor and manage foreign exchange risk through position limits, stop loss limits and dealer limits. Foreign exchange risk is mainly mitigated through fixing of appropriate limits on open positions and gaps (individual and aggregate gaps). IIRMD monitors both diversified and undiversified VaR in foreign exchange exposures. BoC traditionally maintains its open positions well below Central Bank stipulated limits.

Equity Risk

Equity risk represents exposures to securities that represent an ownership interest for the Bank in the form of common stock or other equity linked securities. The Bank has established an Investment Committee (IC) comprising members from departments who are independent to investment activities. IC governs the decision to buy and sell common stock in the investment portfolio. Trading portfolio, is closely monitored using VaR methodologies complemented by sensitivity


Stress Testing

In order to ascertain the impact and the Bank’s ability to withstand extreme volatilities in market variables, we use stress testing and scenario analysis. This acts as an early-warning indicator in monitoring the Bank’s regulatory capital ratios. Stress tests are applied for foreign exchange, equity and treasury bond portfolios of the Bank. Periodic reports with results of stress tests are submitted to management to enable pre-emptive decision making.

measures and portfolio nominal limits. This is supplemented with stress testing which takes account of more extreme scenarios.

Sector wise exposure of the equity-trading portfolio:

OPERATIONAL RISK

Operational risk is the risk of direct or indirect loss resulting from inadequate or failed internal processes, people, systems and external events. The Bank recognises the significance of operational risk, which is inherent in all areas of business. IT security, internal and external frauds, outsourcing of operations, customer service quality, operational process reliability, recruitment and training related issues, social and environmental impacts and regulatory compliance have been identified as the major sources of Bank’s operational risk.

The Bank seeks to minimise exposure to operational risk, through implementing improved management and measurement approaches.

Operational Risk Management Framework

The Board approved Operational Risk Management (ORM) policy and manual governs the enterprise wide management of operational risk. This policy aims at not only ensuring consistent application of risk policies, procedures and systems for identifying, measuring, monitoring, reporting and controlling operational risk but also ensures that any new or changed activity, such as new products or system conversions, will be evaluated for operational risk prior to implementation.

The Board of Directors has established tolerance levels and set strategic direction in relation to operational risk.

The Bank has established an organisational culture that places a high priority on effective ORM and adherence to sound operational controls. Ownership, management and accountability of operational risk lies with business and functional units, while it is co-ordinated centrally through IIRMD.

Operational Risk Management Executive Committee (ORMEC)

ORMEC has the authority of addressing cross-functional risk issues with a view to implementing and maintaining the highest operational standards for the Bank. The Committee also provides the means to ensure that the risk management programme is truly enterprise-wide. Operational risk issues


are brought to the notice of ORMEC by the business units and the Committee reviews the matters and develops controls to mitigate/prevent the operational risks in the future.

Chief Risk Officer and the Deputy General Manager (Support Services) are the ex-officio Co-Chairmen of the Committee. The Committee submits quarterly reports covering its findings and recommendations to the IRMC.

Managing Operational Risk

Consistent techniques are used Bank wide to systematically identify the operational risk profiles, to prioritise and to define risk-mitigating measures.

Operational Risk Management (ORM) Culture

General awareness programmes were conducted within the Head Office and Provinces, by IIRMD to enhance staff awareness on ORM practices to ensure that each staff member understands the inherent risks in their area of responsibility and their role in managing and mitigating operational risk. Further, liaison officers were appointed from the business units and departments to establish formal mechanism to maintain relationship with the IIRMD in the process of introducing sound risk management practices on an enterprise wide basis.

Operational Risk Management Tools

Risk and Control Self-Assessment (RCSA)

The Bank’s RCSA programme assesses and reviews its operations and activities against a menu of potential operational risk vulnerabilities and control gaps. This process is driven internally and often incorporates checklists and/or workshops to identify the strengths and weaknesses of the operational environment.

‘RCSA matrix’ provides a means of translating qualitative assessments into quantitative form giving a relative ranking for different types of operational risk exposures. Scores address inherent risks, as well as the controls to arrive at the residual risk. In the process of RCSA the control assessment is performed to identify the control gaps and consequently to implement appropriate corrective

actions within a specified timeframe IIRMD implemented RCSA successfully at selected operational units of strategic importance.

The RCSA exercise will be conducted on a periodic basis in all business units and departments with the intention of strengthening the control environment of the Bank and to use in Basel II Advance Measurement Approach (AMA).

Loss Data Management

The Bank has identified the importance of establishing a complete ‘Operational Loss Event Database’. With this in mind the IIRMD has implemented a mechanism for ‘Tracking of Operational Loss Event Data’ and a process to collate information on ‘Events Disrupting Business Continuity in the Bank’. Operational loss event database, which captures information on operational losses, is centrally managed and maintained by the IIRMD.

The Bank’s internal loss event data management process captures all operational risk loss events above a set threshold. This process is used to enhance the adequacy and effectiveness of controls, identify opportunities to prevent or reduce the impact of reoccurrence, identify emerging trends and enable formal loss event reporting. The scope of the Bank’s operational loss event data capturing process continues to be enhanced within the centralised database.

Key Risk Indicators (KRIs)

Business units and departments monitor KRIs against their material risks. These indicators are used to monitor the operational risk profile and exposure to losses against thresholds, which trigger risk management actions. KRIs are being developed for each business unit based on the results of RCSA and reviewed at monthly managers’ meetings.

Implementation of 5S and ISO 9001:2008

Having recognised the importance of bringing productivity improvement techniques to the Bank’s business processes, IIRMD initiated a programme to implement 5S concepts and obtain ISO 9001:2008


Certification. The pilot project was launched at Trade Services Department and presently, both 5S implementation and ISO Certification Programmes are at their last stages. Parallel to the above, 5S concepts are being implemented at fifty selected branches in collaboration with the National Productivity Secretariat of Sri Lanka.

Information System Security

A well defined IT Security Policy is in place which ensures that all critical systems are validated and tested before implementation. Information System Security Policies and Procedures (ISSPP) Unit continues to implement policies and procedures to enhance and maintain information security controls and systems.

The Bank’s IT Steering Committee provides a consultative forum that can effectively address the strategic needs of the Bank in relation to Information Technology. The forum is a mechanism to track the progress of IT initiatives, identify risks and strategies to mitigate the same.

Business Continuity Plan

A key function of risk management is to manage crisis situations and to ensure the continuity of business across the Bank.

The Bank’s Business Continuity Plan (BCP) is a comprehensive plan of actions that spell out the processes, procedures and systems, which are essential to continue or restore the operations of the Bank in the event of various categories of disasters based on several levels of severity.

Business Continuity Coordinating Unit is responsible for governance and oversight of the Bank’s business continuity, which monitors and ensures compliance with documented policies. It ensures that unit business continuity plans are developed for their respective functions, which are tested from time to time.



As a key requirement of the Bank’s BCP, a comprehensive disaster recovery centre is in place outside city limits with alternate arrangements to facilitate continuing key operations in the event of various pre-defined scenarios. IIRMD oversees the functioning of BCP reporting to the ORMEC.

Insurance

The Bank’s risk mitigation programmes use insurance policies to transfer the risk of high severity losses arising from frauds and external events that are beyond the control of the Bank such as natural disasters, thefts, burglaries where feasible and appropriate.

COMPLIANCE

Compliance describes the way we do business, the way we make decisions and the way we act in order to uphold integrity throughout the Bank.

Adherence to the law and internal regulations is the foundation of all our business activities. Compliance risk is the risk that the Bank fails to comply with the letter and spirit of all statutes, regulations, supervisory requirements and industry codes of conduct, which apply to the Bank’s business. The Bank seeks to bring the highest standard of compliance best practices to all jurisdictions in which we operate. In keeping with our core values, the Bank endeavours to comply with the highest professional standards of integrity and behaviour, which builds trust. The Bank is subject to extensive supervisory and regulatory governance in the countries in which we operate. The CBSL is the lead Regulator and significant business developments in any of the operations must be approved by the CBSL as well as the Overseas Regulatory Authority where applicable.

BoC’s Compliance Department is headed by the Chief Risk Officer, who reports to the Board of Directors through the IRMC, operates independently from the strategic business units and operational departments. The Compliance Officer who is a Key Management Personnel, is responsible for ensuring management of compliance risk within the Bank. Compliance functions

are decentralised across all business units and coordinated through the Compliance Department and operates under the IIRMD.

Compliance risk is managed through internal policies and procedures, which include legal, regulatory and other technical requirements relevant to the business. The Compliance Department provides regular training and advice to ensure that all employees are familiar with regulatory obligations. The Compliance Department independently monitors adherence to policies, procedures and other technical requirements of all business units.

New Products

The Compliance Department ensures that new products and services offered to customers are aligned with the necessary compliance requirements.

Regulatory Compliance

The Bank considers compliance with the regulatory requirements and guidelines as core to its business and good governance. The Compliance Department is responsible for regulatory compliance and also dissemination of regulatory instructions across the Bank. As per the Corporate Governance Directives, the Board ensures compliance with all prudential requirements, regulations, laws and internal controls affecting the Bank.

During the period under review, there were no material non-compliance with prudential requirements, regulations, laws and internal controls pertaining to the Bank.

Anti-Money Laundering (AML)/Combating Terrorist Financing (CTF)

There has been considerable focus on implementing the new directives and legislative requirements related to anti-money laundering and financial crime across the globe. In response to international best practices and global standards of AML and CTF, the Government of Sri Lanka has enacted laws during 2005-2006. Accordingly, CBSL issued Know Your Customer (KYC)/Customer Due Diligence (CDD) Rules in 2007 and thereafter the Bank implemented policies which include obligations such as customer identification and verification, record-

keeping, monitoring and the establishment and maintenance of an AML/CTF programme. In this regard regular training and awareness programmes are conducted for the relevant employees of the Bank. During this year, the Bank's policies and procedures were reviewed and updated in line with the International Standards and best practices.

CAPITAL ADEQUACY RATIO (CAR)

This gives a sense of the financial stability of the Bank. The Bank of Ceylon complies with the Basel II regulatory requirements for calculation of CAR as required by the Central Bank and apply the standardised approach for Credit Risk, standardised measurement method for Market Risk and basic indicator approach for Operational Risk. On the above basis our CAR is at a strong position, which is above the minimum required by the Regulator providing a healthy ‘cushion’ against any potential losses.

The detailed Capital Adequacy Computation as at 31 December 2010 is given on page 237 of this Annual Report.

1 Nation… 20 million people…Rs. 29 million CSR spend…1 Bank…Bank of Ceylon1 Country…hundreds of projects advancing sustainable living…affecting millions of people…1 Bank…BoC


SUSTAINABILITY REPORT


The concepts of sustainability and sustainable development are increasingly gaining popularity globally as it is well understood that focusing solely on short term economic gains, impacts negatively in the socio-economic order. But I am happy to state that the Bank of Ceylon has always created products and services aligned with the evolving needs of society during its 71 years of history, thereby contributing to a sustainable socio-economic environment.

In keeping with this trend, the Bank in 2010 worked with a clear vision and emphasis on sustainable development that continued to earn the trust and loyalty of its stakeholders. In such an endeavour the Bank supported many economic and social development programmes of the country including nurturing youth talents, sports, environmental and cultural initiatives. Not only financial support was provided but also the integration of corporate social responsibility projects into the core activities saw the involvement of our own human resources voluntarily serving the needs of the Sri Lankan communities ensuring the right balance between business growth and the impact on the society.

The business of banking was carried out to touch and improve the lives of people across the whole social strata by making financial services accessible to all. I would like to reiterate facts presented in the Chairman’s Message that the Bank recognised and catered to the needs of a diverse society with the sole consideration of uplifting and improving all sections of the society of Sri Lanka.

As I am certain that these facts illustrate our commitment to empower the community and improve the socio-economic environment at large, I take pleasure in presenting the Sustainability Report for 2010 of the Bank of Ceylon to you.

We believe that working towards a sustainable future for Sri Lanka is a continuing process, especially at a time when the financial sector has a greater responsibility to stimulate wider economic and social development activity in the country. Hence, we will continue to align our corporate goals focused on sustainable growth and to create a value to the society to build a sustainable future.


24 March 2011

STRATEGY AND ANALYSIS

As Sri Lanka’s largest financial institution, the Bank is conscious of the fact that our actions should have a meaningful impact on wealth creation to the nation, to our environment in which we operate and the communities to whom we are responsible for. The Bank accordingly was involved in numerous projects on education, culture and social causes in addition to providing comprehensive banking services to the nation.

Business with comprehensive responsibility towards sustainability is presented in this Report.

ORGANISATIONAL PROFILE

LEGAL FORM AND STRUCTURE

Bank of Ceylon is a State-owned licenced commercial bank domiciled in Sri Lanka. Details appear under Corporate Information on the inner back cover and Information on the Bank’s Subsidiaries and Associates appears on page 255.

The Location

Location of the Bank’s Headquarters is at No. 4, Bank of Ceylon Mawatha, Colombo 1, Sri Lanka. A detailed description about the Bank is given in the Management Discussion & Analysis on page 30.

The chart given on page 96 provides a summary of the Bank’s core businesses and related functions.



OPERATIONAL STRUCTURE OF THE BANK

Senior DGM Corporate & Offshore Banking

Corporate Banking Offshore Banking

Development Banking Islamic Banking/Card Centre Product Development

Investment Banking

NPA Monitoring & Recovery

Strategic Planning & Financial Strategy, Supervision of Subsidiaries

Financial Controls and Reporting,Performance Management

Risk Management & Compliance

Treasury Operations International Banking Overseas Branch Operations

Retail Banking Personal Banking Leasing Operations

DGM International & Treasury

DGM Retail Banking

DGM Sales & Channel Management

DGM Product & Development

DGM Investment Banking

DGM Recovery

Chief Finance Officer

DGM Finance & Planning

Chief Risk Officer

Chief Internal Auditor Internal Audit

Head of Information Technology

Information Technology

Through the Audit Committee

DGM Human Resources HR OperationsTraining

Chief Legal Officer Legal

DGM Support ServicesProcurement, Premises, Core Banking System Operations, Security & Transport

Head of Marketing

Head of Research Research & Development

Support Services

Control & Compliance

Major Areas of Business

Board of Directors

GeneralManager

Marketing


MARKETS SERVED - A GEOGRAPHIC PERSPECTIVE

Our Local Footprint

The Bank expanded its network within Sri Lanka by increasing the number of service points from 831 to 879 as at 31 December 2010. Further details of the BoC Network, which covers all districts and provinces of the country, appear on page 262.

Our Global Footprint

The Bank operates in Sri Lanka and two overseas locations, namely, Maldives and India. In addition, the Bank has appointed representatives at exchange houses in the Middle East, namely, Qatar, the United Arab Emirates, Kuwait, Bahrain, Oman, the Kingdom of Saudi Arabia, Israel and Jordan; while Business Promotion Assistants function in Italy and Japan, South Korea and France.The Bank’s branch in London was converted to a subsidiary in May 2010.

MARKETS SERVED - SECTOR-WISE

The Bank’s sectoral exposure is given on page 191.


The products and services provided by the Bank in its capacity as Sri Lanka’s pioneer State-owned commercial bank appear on pages 132 - 134.

BEYOND BANKING

In addition to direct financial services, the Bank expands its services to a wide range beyond banking to meet the needs of its diverse customers as follows.

OUTSOURCING OF ACTIVITIES

The Bank sources a number of non-core activities and staff from external service providers. These include;

Printing and despatching of account statements/balance confirmations/ renewal notices/letters and other print matter

Couriering functions

Sourcing of support staff such as secretarial assistants, messengers, data entry operators, drivers and security personnel.

IT support services, tax consultancy services, janitorial services, etc.

Maintenance of the Bank’s Debenture Holders’ Register

Bank’s promotional activities

The Bank employs a total of 8,204 as permanent employees

Capitalisationconsists of debt of Rs. 45 billion and equity of Rs. 28 billion

Total revenue Rs. 63 billion

The Bank’s total assets

Rs. 715 billion

SCALE OF OPERATIONS

Scale of the Bank of Ceylon

The scale of the Bank is best highlighted by the following factors reported as at the end of 2010.

LCBs - Other Licenced Commercial Banks.


Beyond Banking...

Primary dealingForex & Fund ManagementCash/Working Capital Management ServicesFund Transfer ServicesTravel ServicesGold SalesSafe Custody Vault ServicesInsurance ServicesInvestment Banking Activities

Equity Portfolio ManagementIPOsEquity ParticipationDebt IssuanceMergers, acquisitions and related services

E-channelling


Significant Changes in Terms of Size, Structure and/or Ownership

The table below shows the significant changes during the year brought about by the Bank’s continuing growth and expansion of services.

Year No. of BranchesNo. of

Extension Offices No. of ATMs Total Service Points

2009 310 192 329 831

2010 309 218 352 879

Additions (01)* 26 23 48

* BoC London Branch was converted to a Subsidiary with effect from 01 May 2010.

There were no changes in share capital structure and other capital formation of the Bank during the year under review.

AWARDS

The Bank was felicitated for several achievements during the year 2010, as noted below:


Award for Excellence in Trade Finance

Best Sri Lankan Trade Bank for 2010 in a competition organised by Trade Finance, the Global Magazine for exports and commodity finance.

ARC Awards for the Annual Report 2009

International ARC Awards 2010, organised by Mercomm, Inc. USA

Interior Design in the Banks: National Commercial category - GoldIllustrations: National Commercialcategory - Silver

Financial Data - Honours

Photography - Honours

Vision Awards 2009

Organised by League of American Communications Professionals (LACP).Overall Silver Award for Annual Report (Commercial Banks, Annual Revenue up to US$ 10 billion).

Best Presented Accounts Awards Competition 2009

Organised by South Asian Federation of Accountants (SAFA)Award: GoldPublic Sector Entities - Co-Winner

Annual Report Awards Competition 2010

Organised by The Institute of Chartered Accountants of Sri LankaAward: Certificate of Compliance


REPORT PARAMETERS

REPORT PROFILE AND FREQUENCY

Continuing with our initial effort to comply with the Global Reporting Initiative (G3) guidelines in the previous year, we have prepared this Sustainability Report against the GRI (G3) guidelines. Unless otherwise stated, the period covered by this Report for the information provided is from 01 January to 31 December 2010, which coincides with our financial year. The previous Sustainability Report of the Bank, dated 18 March 2010, covered year 2009 and was included in our Annual Report of that year. The Bank produces Sustainability Report annually.

For any information or clarification on this Sustainability Report may be directed to Finance and Planning Division of the Bank on telephone number +94 112471615 or fax number +94 112445798 or email address [email protected]

REPORT SCOPE AND BOUNDARY

This Sustainability Report provides an overview of how the Bank contributes to the improvement of the nation’s wealth, environment in which we operate and social conditions of its key stakeholders and how it manages such impacts.

All financial information stated in the Report has been extracted from Audited Financial Statements of the Bank. Other financial data that are not available in the Audited Financial Statements, have been extracted from the source documents of the departments/units and information processed through formal Management Information System for the use of internal management purposes.

Estimates have been used to report consumption volumes of materials/units based on the data available at major consumer units/divisions of the Bank, whose consumption covers approximately 70% of the reported amount. These estimates have been consistently applied during the years 2009/10. There were no significant changes for previous reporting period in the scope, boundary or measurement method applied in the report except for a few restatement of figures where applicable.

Further, we declare that this Report is limited to the local operations of Bank of Ceylon, and does not include any of its Subsidiaries/Associate companies or Overseas operations.

GRI CONTENT INDEX

GRI Index is given on pages 126.

GOVERNANCE, COMMITMENTS AND ENGAGEMENT

GOVERNANCE

Corporate governance is discussed in detail in a separate Corporate Governance Report beginning on page 56, which is an integral part of the Bank’s Annual Report.

STAKEHOLDER ENGAGEMENT

This Report covers activities and performance indicators that reflect the Bank’s most significant economic, environmental and social impacts and/or those which would substantively influence the assessment and decisions of our stakeholders. Given the large scale of operations of the Bank, it is therefore necessary to first identify the principal stakeholder groups, determine materiality, and then target its engagement and reporting accordingly. This is an ongoing process. The Bank has identified its principal stakeholders as customers, employees and their trade unions, the Government as sole shareholder, regulators, suppliers, the community, fund providers such as multilateral lending agencies, correspondent banks and rating agencies.



The table that follows provides information on how such activities were carried out during the year under review.

STAKEHOLDER GROUP OBJECTIVE/ENGAGEMENT/RESPONSE

Customers Objective Providing excellent services to all strata of society across the country exceeding their expectations to build a

loyal client base whilst maintaining the highest level of trust and confidentiality

Engagement/

ResponseDelighting customers through value added services

Enhancing customer service points and channels , with emphasis on less-developed areas

Constantly plan and introduce innovative new products and services

Recognising special needs of senior citizens and present products and services accordingly

Listening to customer suggestions

Making day-to-day banking convenient and enjoyable by continuous enhancement of our electronic banking propositions

Streamlining procedures, upgrading branch facilities and internal layouts including provision of special facilities to differently abled customers

Employees and

Trade Unions

Objective Creating job satisfaction through career development and job rotation, performance based reward schemes

whilst maintaining excellent industrial harmony

Engagement/

ResponseTraining and development programmes for all levels of staff both local and international

Regular assessment and feedback on performance against agreed goals

Opportunities to continuously engage in team work through extra-curricular activities/sports, leisure, multi-cultural and religious and other social activities

Cordial and effective negotiations with Trade Unions to provide win- win solutions to all stakeholders

Constantly reviewing and upgrading staff health and safety policies

Government Objective Actively participate and facilitate the socio-economic development programmes of the country

Engagement/Response

Align the Bank’s strategic plan in line with national priorities, whilst being competitive

Actively participate in national development activities, including making strategic investments.

Regulators Objective To be a model financial institution that complies with all statutory regulations and other requirements without exception both in spirit and to the letter

Engagement/Response

Compliance with all the regulations imposed by the Central Bank of Sri Lanka, Ministry of Finance and Planning, Basel II guidelines, Colombo Stock Exchange, and other regulatory bodies

Compliance with all the relevant accounting standards issued by the Institute of Chartered Accountants, Sri Lanka

Constant improvement in the good governance practices to meet international standards

Board and Management commitment through participation in periodic review sessions conducted by regulatory bodies




Suppliers Objective To build and maintain a strong mutual relationship with the Bank’s supply chain

Engagement/Response

Maintenance of transparency in all procurement processes

Registration of suppliers and review of their capacity and strengths

Conduct of on-site visits

Seek expert opinion on matters of high-tech nature

Regular meetings with the suppliers to make sure that the required high quality of products and services are offered

Community Objective To be a concerned corporate citizen that relates closely with the community it serves

Engagement/Response

Assisting youth through training, scholarships, etc to come up in their life

Bringing the unbanked into the banking sector through effective engagement programmes

Provide sponsorships to various social, cultural, religious, sports, educational, environmental and social events

Volunteer participation of staff of the Bank in health and social events organised and conducted at provincial level

Provide training opportunities on banking activities for school leavers and undergraduates

Fund providers & multilateral lending agencies

Objective Ensuring safe custody and commensurate return on invested funds

Engagement/Response

Disclosure of relevant information as well as terms and conditions that apply in a transparent manner

Disclose financial position of the Bank by publishing Interim and Annual results

Submitting compliance certificates to fulfil contractual obligations

Periodic review meetings conducted with lending agencies in order to ensure the compliance covenants that are associated with the agreements

Customer education on choice of investment products available to suit individual needs through several channels such as brochures, posters, website, etc.

Rating agencies Objective To have an independent assurance on our stability and the strength

Engagement/Response

Proactive disclosure of rating sensitive information to rating agencies

Periodic review meetings

Submission of quarterly financial and non-financial information that are relevant

Annual review




CorrespondentBanks

Objective Maintain close and cordial relationship with Overseas Correspondent Banks, Exchange Companies and Financial Institutions to facilitate Trade Service Activities, Bank Guarantees, Fund Transfers and Foreign Remittances.

Engagement/Response

Establish Relationship Management Authorisation (RMA) and correspondent relationships with overseas banks

Evaluate performance and capabilities of all correspondent banks annually to comply with Anti- Money Laundering (AML) and other international companies

Set up credit limits for correspondent banks and respective country limits for trade service activities, guarantees and Treasury operations to facilitate their business activities

Assist all business units of our Bank to handle their business activities on trade services, guarantees, money market operations and forex transactions through the correspondent banks.

Initiate the opening of Nostro and Vostro accounts and deploying Bank of Ceylon representatives to exchange companies overseas.

Make aware of the branches and business units of the Bank with the latest developments in the worldwide countries and financial markets and sanctions/embargoes imposed etc.


CorrespondentBanks

Customers

Employees & Trade Unions

Government

Regulators

Community

Suppliers

Fund Providers & Multilateral

Lending Agencies

Rating Agencies

Working hard to keep our stakeholdersdelighted...


ECONOMIC PERFORMANCE

MANAGEMENT APPROACH

The economic policy of the Bank is to drive its strategies to enhance sustainable performance and growth of the Bank while creating wealth to the nation.

The Bank’s growth is a continuous process of planned approach to management of its day- to-day activities which are laid down within a broad framework of well-set corporate vision, mission and strategy. The Bank has laid down a process whereby a 3-year corporate plan is developed on a rolling basis which sets out the entity wide strategies of the Bank in short and medium term.

Plan comprehensively covers detailed identified economic activities and tasks setting out clear responsibilities to the respective business/process owners.

The performance against the plan is reviewed on a quarterly basis and the Board of Directors is enlightened on the achievement as well as suitability of current strategy adopted.

The execution of the plan is done through number of committees which will review in different responsibility areas such as Risk, Asset and Liability Management, Marketing, Human Resource and Procurement, etc.

In addition to the quarterly review, the Corporate Management discusses summary achievement on weekly basis against the set plan. The Bank also has laid down procedures where the Bank is always benchmarked against the peers in order to challenge its own plans and achievements.

Eventually, the Bank ensures that the Balance Sheet is managed with economic asset allocation.

The asset allocations are done in order to achieve set corporate objectives within a broad economic and social responsibility framework.

In 2010, economic value addition has increased 200% over the last year reflecting the Bank’s capacity of contributing to the growth of wealth of the nation.

The Bank’s social responsibility does not only confine to the benefits, that are provided through direct value generation and distribution to the community it serves, but also going beyond adopting many strategies continuing with the well-being of the people to whom we serve. Moreover, it is a broad- term of community investment.

The Bank’s strategies include substantial allocation of funds to the most needed sectors whilst giving priority to the less developed areas, enhancing accessibility of banking facilities across the society, empowering the lower layer of the community through education, consultancy and financial assistance, suitably designed financial solutions to cater to the need of different segments of the community, are among them.


CONTINUING WITH OUR INITIATIVES ON CONVERTING THE ‘UNBANKABLES’ TO THRIFT-CONSCIOUS ‘BANKABLES’

A considerable portion of rural population, including some urban, yet have no access to the banking sector.

The Bank of Ceylon has taken strides to reach out to this group, by socially mobilising them into Self-help Groups and empowering them to be a bankable segment that can negotiate with finance providers on an equal footing. Over 13,000 such groups have been formed, comprising about 75,500 Self-help Group members, a majority of them being women. Initially, the Bank focused on the North, the East

CREATING WEALTH TO THE NATION

2010 2009


Economic Value Addition

Average invested capital 26,515 24,000

Revaluation reserves (125) (126)

Bonus shares issued in 2006 (1,400) (1,400)

24,990 100.0 22,474 100.0

Return on Invested Capital

Profit after taxation 6,365 3,084

Depreciation attributable to the revaluation surplus 18 18

Impact on reduction of lending rates 1,303

Total return on invested capital 6,383 25.5 4,405 19.6

Opportunity cost of invested Capital (2,232) 8.9 (3,023) 13.4

Economic Value Added 4,151 16.6 1,382 6.1

Weighted average 12 months TB rate 8.93% 13.45%

In 2010, economic value addition has increased 200% over the last year reflecting the Bank’s capacity of contributing to the growth of wealth of the nation.


now expanded to Galenbindunuwewa to Kavatikudah (Trincomalee), Sammanthurai to Mahaulpotha (Bandarawela), Pansalgodella (Hingurakgoda) to Bulathsinghala and Devinuwara to Horowpotana. They represent the geographical and demographical diversity in this challenging task undertaken by the Bank.

The Bank’s caring attitude towards the needy and under-developed sectors in society is amply evident by the low-interest funding with thin margins extended to micro enterprises, cottage industries, craftsmen and small-time farmers and

fishermen. The range of products the Bank has offered includes loans for housing, educational assistance, poverty alleviation, employment generation, transportation and sustainable livelihood development.

A substantial number of Micro and SME enterprises identified and nurtured by the Bank have now come of age and firmly established in their chosen fields. Some have today become household names, steadily reaching the top. We take pride in their achievements. As a testament to their grit and determination, the Bank produced a video documentary on 14 success stories and that was telecasted over the National Rupavahini channel.


VALUE ADDITION

The following table illustrates that the value generated during the period was allocated among the key stakeholders of the Bank.

2010 2009


VALUE ADDED

Income earned by providing banking services 59,788 61,152

Cost of services (27,466) (31,207)

Value added by banking services 32,322 29,945

Non-banking income 3,575 2,309

Provision for bad debts (1,560) (1,802)

Value addition 34,337 30,452

VALUE ALLOCATION

To employees

Salaries, wages & other benefits 10,310 30.0 10,516 34.5

To Government

Income tax 3,639 1,221

Value added tax 4,001 2,995

7,640 22.3 4,216 13..8

Dividends declared to the Government of Sri Lanka 3,096 9.0 1,346 4.4

10,736 31.3 5,562 18.2

To providers of external funds

Interest on refinance & borrowings 6,178 8,747

Interest on debentures 2,954 3,113

9,132 26.6 11,860 39.0

To expansion & growth

Retained profit 3,269 1,738

Depreciation 842 873

Deferred taxation 48 (97)

4,159 12.1 2,514 8.3

34,337 100.0 30,452 100.0

The above statement shows that the value addition during the year 2010 was enhanced by Rs. 3.8 billion, an increase of 13% compared to 2009.

In comparison to 2009, there has been a substantial increase in value absorbed by the Government. This was mainly due to high pay out of dividends & taxes which has been increased to 31% from 18% in 2009.



SOURCES AND DISTRIBUTION OF INCOME

For the year ended 31 December 2010 2009 2008 2007 2006

Rs. million Rs. million Rs. million Rs. million Rs. million

Sources of Income

Interest income 50,853 53,077 49,684 42,286 26,823

Foreign exchange profit 409 1,567 2,886 1,179 2,261

Fee & commission income 6,014 4,255 4,084 3,099 2,196

Investment income 3,575 2,309 981 1,624 1,370

Other income 1,144 753 946 687 755

61, 995 61,961 58,581 48,875 33,405

Distribution of Income

To Depositors & other lenders 31,205 38,267 35,989 29,453 15,743

To Suppliers and service providers 5,393 4,799 4,487 3,578 2,881

To Employees 10,310 10,517 9,273 8,769 8,599

To Government

- As dividends 3,096 1,346 846 846 1,173

- As taxation (Including income tax, VAT on financial services) 7,640 4,216 3,612 3,370 2,810

Retained by the Bank

- Reserves 3,269 1,738 2,715 1,997 1,454

- Depreciation/amortisation 842 873 754 760 694

- Provision for loan loss (Net) 192 302 775 (75) (416)

- Deferred tax 48 (97) 130 177 467

61,995 61,961 58,581 48,875 33,405


CLIMATE CHANGE

Risk and opportunities

Climate changes have not significantly affected the Bank’s operational activities or operational results during the year, except minor or insignificant losses due to floods and damages to Bank property by lightning. The total value of the loss has been estimated at Rs. 1.6 million.

DEVELOPMENT OF EMERGING PROVINCES

The five IDP mini Banking units which were operated during the year 2009 continued to function until June 2010. Two units i.e., Zone 4 and Ananda Coomaraswamy, still continue to function. People in these resettled areas have been granted more credit facilities to reconstruct their dwellings and re-commence their income-generating activities. Credit facilities amounting to about Rs. 2,303 million were granted for agriculture, fishery, animal husbandry and dairy farming aiming to revitalise business activities which had been affected due to the war. Credit facilities granted by branches in the Northern Province increased by 46.5%, and in recognition of this achievement, five Bank of Ceylon branches listed below were recognised by the Central Bank of Sri Lanka for their good work in granting development loans.

1. Thirunelvely Branch - 1st Place for highest loan granted under ‘Vadakin Sasanatham’ Development Loan Scheme

2. Chunnakam Branch - 2nd Place for the highest loans granted under ‘Vadakin Sasanatham’ Development Scheme

3. Atchuvely Branch - 1st Place for the highest loans granted under New Comprehensive Rural Credit Scheme (NCRCS)

4. Chavakachcheri Branch - 1st Place for the highest loans granted under Agro Livestock Development Loans Scheme (ALDLS)

5. Nelliaddy Branch - 1st Place for highest loans granted under Krushi Navodaya Credit Scheme


Atchuvely Branch opened ‘Kalaioli BoC Village’, which is a milestone in the Bank’s Corporate Responsibility Project. It aims to increase household incomes of the people in the area and to eradicate poverty. Considering the importance of developing the rural economy and to reduce regional disparities in the country, credit facilities have been granted to the people of Kalaiolii Village who are engaged in several economic activities.

Progress under the Poverty Alleviation Microfinance Project (PAMP) is given below:

Northern Province

No. of groups formed 2,500

No. of members 13,000

No. of facilities granted 4,230

Amount granted Rs. 220 million

The Bank of Ceylon also demonstrated its strongest commitment by way of implementing a variety of strategies to bringing in lives of communities with the objective of contributing towards economic development and prosperity of the Northern Province. The following are some examples:

Writing off all advances amounting to approximately Rs. 85 million granted by Kilinochchi, Mankulam and Mullaitivu branches for housing, agricultural, industry and SME sectors to customers who fell into distressed condition.

Waiving off total interest receivable amounting to approximate Rs. 49 million from advances outstanding at Kilinochchi, Mankulam and Mullaitivu branches.

Defaulters of credit facilities at Kilinochchi, Mankulam and Mullaitivu branches will be treated as fresh applicants, for any new credit facilities, irrespective of whether they figure as defaulters or not.

Disbursing of Rs. 2 billion of advances for fisheries, agriculture, small and medium industries, self-employment projects, etc., at very low interest rates to create employment and self-sufficiency in the Northern Province.

Establishment of 15 new extension offices in Mannar, Kilinochchi, Mullaitivu Districts to cater to the immediate banking requirements of re-settled communities at their villages.

Reconstruction of lost transactions of Kilinochchi, Mankulam and Mullaitivu branches absorbing the entire losses incurred due to loss of records and assets. The customers of the three branches are now able to continue transactions through their accounts maintained with the above branches without incurring any losses due to misplacement of their records or documents.

Resettlement and Reconstruction of Lives in Affected Areas

To expedite the resettlement of Internally Displaced Persons, the Bank continued its facilities in the Wanni area. Mankulam Branch was the first branch which commenced its banking activities, followed by another mobile service at Mallavi. Thereafter, the Kilinochchi Branch was re-opened in March at its earlier building with online facilities.

The Bank played a major role in disbursing relief funds to the resettled families, particularly those from UNHCR, World Vision, SLRC and ENRep (Emergency Northern Recovery Project). Due to the poor transport facilities in the area, Mullaitivu Branch conducted special mobile services in Oddusuddan area. After re-opening Mullaitivu branch, the Mullaitivu Kachcheri


Branch commenced banking business in September 2010. For the benefit of the resettled people in the areas of Mulankavil, Jayapuram and Poonary, mobile banking service was commenced at Mulangavil in October 2010.

In the Eastern Province, the Bank opened extension offices in Morawewa, Mamanagam, Kallar, Uppuveli, Polwatte, and Karaitivu areas and relocated the Akkaraipattu Branch to a more convenient location for customers. The Eastern Province Office, so far operated from Colombo, too was shifted to Trincomalee in the latter part of the year with the same objective.

Facilities amounting to Rs. 64.5 million and Rs. 38 million were granted to dairy farm project at Chenkalady and Rice Mill at Trincomalee, respectively.

Progress so far against set-targets in Group formation and credit delivery is indicated in the following chart:

Eastern Province

No. of groups formed 3,700

No. of members 20,000


Amount granted Rs. 296 million


The table below details the credit facilities extended to the people of the Northern and the Eastern Provinces as at 31 December 2010.

Northern Province Eastern Province

Scheme No. of Loans Amount No. of Loans Amount

Rs. million Rs. million

New Comprehensive Rural Credit Scheme (NCRCS) 8,927 614 2,475 143

Agro Livestock Development Loan Scheme (ALDL) 377 40 180 83

Poverty Alleviation Microfinance Project (PAMP)

* Agriculture 2,060 80 2,050 76

* Animal husbandry 730 30 1,960 85

* Fisheries & related activities 145 65 1,510 56

* Industry 510 20 740 35

* Other 785 25 900 44

Pibidena Uthura/Eastern Development

* Agriculture 1,400 175 1,000 122

* Livestock Development 1,500 170 90 09

* Fisheries 475 50 15 02

* Micro & Small Entrepreneurs 300 47 – –

* Trade & other self-employment 1,900 300 640 75


This strategy has enabled the Bank of Ceylon to extend timely and adequate finance to the farmers with comprehensive package consisting of production, processing, packaging, transportation, storage, marketing and insurance. The market linkage introduced under the Forward Sales Contract Agreement has so far benefited tens of thousands of farmers and buyers. Credit facilities amounting to Rs. 4,900 million were granted during the year 2010 for crop production to farmers and purchase of Paddy, Maize, Sugar cane, Gherkin, Potatoes, Big onions. Ginger, etc., to Paddy Millers, Companies and Individual buyers.

Storage Facilities for Agricultural Produce

Normally, the commodity price falls down during the peak and reaching a high during the lean season. Short-term storage credit offers a workable solution in this context.

The Government of Sri Lanka (GOSL) has intervened time and again to have in place a reasonable price mutually beneficial to the farmers and the buyer, particularly in regard to paddy and maize which together constitute 83% of crop production loans disbursed by the Bank at any given time. These facilities have been granted in the form of pledge loans and local trust receipt facilities, while the quantum of advance is determined by the value of stock available at the stores.

LENDING A HAND TO RURAL COMMUNITIES

Agriculture and Agro-Based Industries

Increasing agriculture productivity and promoting agro-processing enterprises are critical for rural upliftment and eradication of poverty. The common criteria for credit are the economic viability of the loan proposal and the repayment capacity of the farmer. Such criteria would leave out most of the small farmers who constitute the bulk of the farming community in the country. Hence, small farmer credit has been re-oriented in such a way that potentially viable loan proposals by small farmers are also included in it. It means that a farmer whose credit proposal is not economically viable at present but has a possibility to become viable as a consequence of credit assistance has been given priority by the Bank.

Short-term crop production loans (Maximum 270 days) under NCRCS adequately supported cultivation cost of paddy and 35 other subsidiary crops under both rain-fed and irrigated cultivation practices. These crops include chillies, onions, pulses, oil seeds, roots and fibres including potatoes, 15 categories of low-country and up-county vegetables and 4 other crops (sugar cane, ginger, betel and pineapple).

The crop production loan programme has been extended to cover seed production and planting materials benefiting seed farmers and planting material production.

The Bank lending portfolios on borrower group have been expanding over the years as shown below by comparative data for the past 5 cultivation seasons:

Season No. of Borrowers Loan Volume Acreage in Hectares

Rs. million

2007/08 Maha 14,525 508 33,581

2008 Yala 8,014 310 20,600

2008/09 Maha 15,867 767 51,100

2009 Yala 6,540 380 25,400

2009/10 Maha 18,400 940 62,600


The following table illustrates the volume of credit extended over the past 5 cultivation seasons towards storage facilities for agricultural produce:

Seasons No. of farmersDisbursed Loan Volume

Rs. million

2007/08 Maha 9,700 1,640

2008 Yala 7,600 1,173

2008/09 Maha 11,700 1,900

2009 Yala 8,900 1,430

2009/10 Maha 21,400 2,680


As a special programme, the Bank has financed Rs. 2,500 million to Paddy Marketing Board to purchase Paddy from the farmers during the Yala 2010. Further, the Bank introduced a new credit scheme for small-scale paddy collection at the village level to purchase paddy up to Rs. 50,000/- per person.

POVERTY ALLEVIATION MICRO FINANCE CREDIT SCHEME

The Bank of Ceylon is participating in this Credit Scheme implemented by the Central Bank of Sri Lanka to strengthening the economic conditions and social empowerment of low income families living in most vulnerable poverty-stricken areas identified by the Department of Census and Statistics, linking this low income communities with formal financial system for establishment of efficient and sustainable financial delivery system for them. Self- help groups are formed in these villages to improve the habit of savings and thrift, professional and entrepreneurial skills, financial capabilities, self-confidence and making them free from dependent mentality. Village groups are generally formed and with a regime of strong discipline. Village group lending offer group responsibility in the repayment of credit while enhancing their group savings.

The Programme is a group-based one. Where the Bank’s animation mobilise the low income segment in the target area into small solidarity groups of 5-8 members, who meet and save an agreed amount on weekly basis and has an elected leadership. The focus will be on poverty-ridden villages in the periphery as well as urban slums and tenements.

PROVINCIAL DEVELOPMENT CREDIT SCHEME

The Bank of Ceylon is participating in this Credit Scheme implemented by the Central Bank of Sri Lanka with the objective of providing capital to Small & Medium Projects in all provinces to improve and originate income-generating activities. BoC has allocated Rs. 1.4 billion for 640 projects identified by branches. So far 300 loans amounting to Rs. 475 million have been financed under the scheme.

Once the groups perform continuously for 3 months, group members become eligible for Micro Credit to set up/expand income- generating activities.

The bank has initially selected 3000 villages throughout the island to form Self-Help Groups, and there will be a minimum of 150,000 small groups with more than 750,000 members. A typical Self-Help Group will comprise like-minded individuals who volunteer to save a minimum of Rs. 100/- per week in a common pool. The group members should preferably have a homogeneous background and with more than 50% women participation.

Progress so far in Group formation and Credit delivery is indicated in the chart below:

No. of Groups formed 14,000

Members involved 74,600


Amount Granted Rs. 763 million

AGRO-LIVESTOCK DEVELOPMENT LOAN SCHEME

This programme is one of the major goals in 2009 Government Budget and it is expected to set up scientifically managed Dairy units across the country. BoC has been allocated a target of financing 5,000 such units. As of 31 December 2010, the Bank has financed 1,610 units with a loan volume of over rupees half a billion.

This programme also envisages the setting up of milk processing plants that are linked with dairy farmers. BoC has funded one such project at Pelwatte, Buttala, linking around 2500 dairy farmers with the processing plant.


FARM MECHANISATION

Funding for Agriculture can be classified under several levels. Starting with the base, at crop production it branches out to (a) storage (b) post-harvest technology (c) market linkage (d) processing and (e) farm mechanisation. In the present context, where agriculture is gradually transforming into a technology-driven activity, farm mechanisation plays a vital role in process modernisation and crop production.

Farm mechanisation has gained popularity over the years across the country; particularly in the dry zone. Demand for farming implements (Power sprayers, Water Pumps) land vehicles (Two-wheel and Four-wheel tractors, Weeders, Seeders). Process machinery (Harvesters, Harvester combines) Irrigation equipment (Sprinkler system/Drip irrigation) has steadily grown.

The Bank has financed this demand through specially-designed Credit Schemes, namely Govi Shakthi Programme, Krushi Navodaya and Refinance SME Credit Lines. Funding running into Rs. 900 million has centred around major agricultural areas such as North-Central Province, Hambantota and Ampara Districts and Uda Walawe area in the Ratnapura District.

ASSISTANCE TOWARDS COCONUT CULTIVATION - KAPRUKA

Coconut Cultivation loan programme (Kapruka Ayojana) which came into operation in 1998 with the operational assistance of Coconut Cultivation Board was concerned to give an impetus to coconut sector production which had seen a declining trend. The programme has an exposure of Rs. 126 million for 610 ventures.

FISHERIES SECTOR

Deep Sea Fishing

Deep sea fishing is entirely carried out by multi-day boats. The Bank has funded a series of multi-day boats under a special loan programme designed for this purpose and other available credit programmes such as SMI, SMAP, SMILE, DASUNA where fisheries is an eligible sector. Total funding by the Bank reached Rs. 410 million by the end of the year under review.

Mechanised Day-Boats and Traditional Crafts

Facilities were considered under SMI, SMAP, SMILE and DASUNA programmes as well as the Dheewara Shakthi Credit and Savings Scheme. A unique feature under Dheewara Shakthi Scheme is the combination of credit with savings. The focus is to inculcate the savings habit among the fishing community, where this practice is almost non-existent. Funding was provided for fishing craft, out-board motors, fishing gear and repairs.


Self-Employment Programme for Fishermen

Fisheries self-employment loan scheme commenced in 1989, and has funded traditional fishing crafts as well as day-boats and fishing gear. The Bank had funded 3,000 projects for a total loan volume of Rs. 650 million. Dheewara Shakthi Loan Programme, with emphasis on fish processing and fisher-folk women engaged in land-based activities (self-employment ventures outside fishery) has funded 600 projects amounting to Rs. 220 million.

Fish Processing and Transportation

The Bank, using its own funds, implemented a credit scheme for purchasing insulated trucks for transportation of fish. The total loan exposure was Rs. 96 million as at end-2010.

Mid Level Fishery Projects

Another Credit Programme styled Fisheries Loan Scheme without subsidy, targets mid-level fishermen for purchase of crafts (traditional and mechanised), fishing gear, communication and navigation equipment. 410 projects with a loan volume of Rs. 250 million have been financed.

COMMODITY PURCHASE

Market linkages are arranged between crop producers and processors. They would be brought together under Forward Sales Contracts (FSCs) with the Bank playing the role of facilitator funding at both ends. This product, now successfully practiced in the North-Central Province in particular, will be promoted in the North-East primarily focusing on Paddy and Maize. The Bank targets a total disbursement of Rs. 1 billion per annum covering both provinces.


ENVIRONMENTAL PERFORMANCE

MANAGEMENT APPROACH

Being a service organisation, the Bank's activities have minimum impact on the environment we operate. However, the Bank, being a large organisation, consumes substantial resources of the living planet. We are all elevated, working towards achieving our objectives utilising minimum level of resources specially in the areas of paper, fuel, electricity and water.

Apart from internal attempts and arrangements, the Bank pays more emphasis on working with its customers to manage the environmental risks and opportunities through environmental finance solutions like e-friend loan schemes and also through sponsorships for the programmes that encourage the protection of the environment.


We are all elevated, working towards achieving our objectives utilising minimum level of resources specially in the areas of paper, fuel, electricity and water.

SOWING…AND HARVESTING TEAM SPIRIT

The marsh net to the Bank’s Wellawaya

Branch was an eyesore and an environmental

hazard. A spark of initiative gave way to a

joint action by the Branch staff in an attempt

at converting this waste land into a paddy

(rice) field…in the heart of Wellawaya town.

The required approvals were obtained, and

an intrepid in-house team set forth on a

spirit of adventure, but with a purpose.

Many drawbacks were perceived and,

in fact, encountered - time constraints

while meeting the customer requirements,

protecting the crop, maintaining the

paddy field and so on. But it also had its

lighter moments.

The monetary value of the yield was

marginal. Nevertheless, the project

stimulated team spirit right across all levels

of the Branch, and generated a sense of

dedication and hard work sprinkled with

fun and excitement. Above all, it caught

the eye of the community…on how a

bunch of literally ‘barefoot’ bankers could

do something positive to transform the

environment for the better. Leading by

example, the Bank of Ceylon way…


MATERIALS AND RESOURCE UTILISATION

The chart below compares the Bank’s consumption of resources during the years 2009 and 2010:

Resource Consumption in volume

Consumption in value Rs. '000

Consumption in volume per average assets

2010 2009 2010 2009 2010 2009

Electricity 16,208 MWh 13,823 MWh 320,576 278,267 2.6% 2.7%

Paper – – 244,816 165,121 – –

Water 271,430 m3 253,818 m3 18,960 17,343 43.3% 49.6%

Fuel 799,837 Ltr 721,288 Ltr 67,633 60,991 127.6% 141.1%


Solid waste management

Gardens containing medicinal plant varieties are being developed in schools

ENCOURAGING ENVIRONMENTAL CLEAN UP

Loans for Environmental Clean-up

The Bank reviews the potential indirect impact on the environment when approving financial services to customers. Diligence is applied during project appraisal through a review of the customer’s own environmental policies, processes and licencing requirements. The Bank granted several credit facilities via the e-friends II scheme, which is a loan fund set up by the Government to assist industrial enterprises to control pollution, conserve energy, minimise waste, etc. The Bank granted credit facilities amounting to Rs. 137 million under this scheme during the year.

The increased volume for year 2010 compensates with the business volume of the Bank. However, efficiency of the resource utilisation is reflected in the ratios.

BIODIVERSITY

The Bank is the main sponsor of ‘Rividina Arunella’, which is an environmentally friendly programme to promote organic farming. The Bank also works with the Green Forest Association and entered into a sponsorship agreement to select the 'Wasere Adarshawath Parisarika Pasala in the years of 2009 & 2010' at a national level. The Green Forest Association, a joint-venture between the Government and NGOs, was established in 1999 to promote environmental conservation. Under this programme, participation of school children was encouraged to:

Modelling classrooms according to the ‘5 S’ system

Landscaping of school gardens and the growing of ornamental and medicinal plants


Funds provided under e-friends 11 scheme is very much lower to commercial lending rates at 6.5%.

No. Nature of the project Benefits to the society Loan value

Rs. ’000

01. Funding for manufacture of plastic resins & monofilament yarn by using industrial waste

Project reduces industrial pollution 45,000

02. Constructions of waste water treatment unit

Project reduces water pollution 32,860

03. Funding for replacement of conventional paddy processing system with modernised system

To modernise high pressure steam generator with smoke elimination system and steam distribution system

21,500

04. To establish a Bio-gas production unit

The project helps to reduce environmental pollution

18,750

05. Installation of machinery for eco-friendly polythene products

The project helps to reduce environmental pollution

7,000

06. To establish an integrated system of fruit & milk processing with waste management

Fruit waste converted to compost reduce environment pollution

5,327

07. To modernise the rice processing using parboiled systems, which are heated by paddy husk without using electricity

The project reduces environmental pollution which can be caused due to waste of rice mills

4,000

08. To improve plant productivity 2,750


Great Bequest for the Consumption Sphere from the ‘Bankers to the Nation’

Rividina Arunella

Rividina Arunella which was inaugurated three years ago, as a national commitment, telecasts weekly over the National TV plays a vital role in boosting productivity among home gardeners. It helps to make the public aware of how they can use land, space, sunlight, rain water and other freely available resources to maximise their gardens’ productivity in an economically viable and environmentally friendly manner. The use of chemical fertilisers is a cause for concern for the safety of food and sustainable production. It is believed that organic farming by reverting to the use of manures, green manures, urban waste, rural wastes, etc., can bring

eco-friendliness and sustainability to agriculture. It facilitates to develop a sustainable agriculture system for guaranteed adequate food production in the foreseeable future, to develop a self-sufficient agriculture system which would rely as much as possible upon resources from within its own resources and to develop an alternative strategy over chemical farming, which would be a guideline for the working of biological processes in natural eco-systems.

It also offers information on cultivation methods which maximise urban garden productivity such as potted cultivation, hanging gardens, and growing leafy vegetable ‘towers’. Other topics include affordable nursery techniques, identifying

CONCERNED WITH ENVIRONMENT IMPACT

Some schemes of recruitments are done on provincial basis in order to minimise the transport/movement of employees. During the year, 1,200 new recruits that were recruited were from 10 provinces and they were assigned to the branches in the same provinces.

Selected training programmes were conducted at branch and provincial level, for which the resource persons travelled to the location concerned. This was done concerning the amount of resources that could be saved by avoiding the large number of staff attending Colombo Head Office. During the year, 101 such programmes were conducted by Risk Management Division, Internal Audit Division, Business Process Re-Engineering Division and also by Training Department of the Bank. Total staff participants of these programmes were around 10,055 employees.

compatible crop mixtures, eco-friendly pest management techniques, and rehabilitation of fruit trees through proper pruning.

Considering the unique and eco-friendly features and the contribution towards the upliftment of home-based agriculture of this programme, three prizes have been awarded by the Department of Agriculture, Peradeniya, Ministry of Mass Communication and the State Award from the Government.

It envisages our active participation for the well-being of our country perceiving and developing our home-based agriculture in an environmentally-friendly manner.


As a responsible institution to the society at large, the BoC has aligned its HR practices to discharge its responsibilities to establishing decent labour practices setting out clear HR policies, monitoring and follow up.

SOCIAL PERFORMANCE

LABOUR PRACTICES AND DECENT WORK

MANAGEMENT APPROACH

As a responsible institution to the society at large, the BoC has aligned its HR practices to discharge its responsibilities to establishing decent labour practices setting out clear HR policies, monitoring and follow up. Our commitment includes training and awareness of our staff members establishing transparent labour practices and disciplinary procedures, cordial atmosphere for employee trade union affairs, empowering them for collective bargaining. The Bank also has constructed over the years a HR culture that promotes multi-ethnic diversity, cultural and religious rights and employee security.

True to our Mission statement, the Bank of Ceylon always strive to ‘give all our staff to reach their full potential and give the recognition and rewards to be the best team of achievers in service excellence’. Stemming down from our Mission statement we have formulated our strategies and


policies to develop and nurture the innate skills of individual members of the BoC family. Our mission is further segregated into HR objectives, the attainments of which are measured through applicable KPIs in respective areas of engagement.

HR OBJECTIVES

Objective Selected KPI

Develop business leaders and functional specialists who could face business challenges in competitive environment

No. of successors developedBackup ratio

Establish performance-based and accountable work culture

Achieve agreed business goals

To be a partner in knowledge transformation process through creating and fostering a learning culture

Skill GapsTraining EvaluationsCustomer Satisfaction Surveys

To create automated/manual HR process in order to speedy and accurate decision-making

Service Level Agreement (SLA)

To develop self-motivated workforce to drive the business

Employee Satisfaction Index (ESI)

Make healthy work environment and infrastructure for sustainable work life balance

Employee Turnover Percentage



HR STRATEGIES

Strategic Option HR Strategy

Strategic Partner Ensure availability of the required talents at the right place and at the right time

Strategic Partner Revisit PDs (Position Descriptions) and align them with business realities

Study the current performance management system and make amendments if required in line with modern business requirements/techniques

Introduce PBRS (Performance Based Rewards System)

Learning Culture Develop and enhance the knowledge, skills and attitudes of employees for continuous improvement

Establish entrepreneur skills for functional heads

Admin Expert Enhance operational efficiency and effectiveness of key HR deliverables

Change Agent Enhance organisational flexibility and develop proactive workforce

Employee Championship Create a friendly environment which fulfills mental and physical needs of the employees

High Potential Culture

Staff benefits

Recruitment

Turnover

Motivation

OccupationalHealth & Safety

Balance Gender Distribution

IndustryHarmony

Training & Development

LABOURPRACTICES &

DECENT WORK


Careful attention is paid to the well-being of the employees, and systems and procedures that are in place to ensure adoption of sound labour practices when achieving our HR objectives.

Workforce by Nature of Employment

No. of Employees

YearFull-time,

permanent Part-time Outsourced On contract Total

2010 8,204 None 1,058 86 9,348

2009 7,538 None 1,198 88 8,824

Net increase of the full time, employees is the difference between the recruitment and retirement.

Workforce by employment category and age group

No. of Employees

Category/YearsCorp.

MgmtExec.

MgmtChiefMgr.

Senior Mgr.

Br. Mgr.& Other Officers

Bkg./ Mgmt.

TraineesStaff

Asst.

Office Assts &

AlliedTotal for

2010Total for

2009

55 to 60 15 33 49 78 1,408 – 366 98 2,047 1,344

45 to 54 3 14 44 61 1,475 – 670 228 2,495 3,650

35 to 44 1 – 2 3 387 2 152 110 657 730

25 to 34 – – – – 224 263 1,297 47 1,831 1,264

18 to 24 – – – – – – 1,180 – 1,180 550

Total 19 47 95 142 3,494 265 3,665 483 8,210 7,538


Total Corporate Management members includes 6 contracted employees filled through local recruitment.

In 2010, Corporate Management and Executive Management comprise less than 1% of the total staff. Executive Officers including Chief Managers, Senior Managers and other officer grades are 3,731 in number, 45% of total workforce. Management Trainees plus clerical and allied grades consist of 54% in total.

Distribution by province (Permanent Employees)

As shown in the table below, more than 80% of the total staff population is employed in the branch network.

No. of Employees

Year H/OCorp Bkg. CP EP NP NCP NWP Sab. P SP UP WP Total

2010 1,436 625 759 392 418 490 672 454 734 373 1,851 8,204

2009 1,385 604 710 348 335 432 598 399 661 338 1,728 7,538



The number of employees in all provinces increased due to recruitments made on provincial basis.

New Recruitments

No. of Employees

Grade 2010 2009

Management Trainees 50 200

Trainee Staff Assistants 1,200 8

Legal Assistant /Officer 1 8

Multi-duty Assistants – 22

Trainee Secretarial Assistants – 44

System Analyst/ Programmer 20 –

Investment Banking Specialist 1 –

Senior Executive in capital market 1 –

Specialist in corporate advisory 1 –

Total 1,274 282

The Bank continues to be a catalyst for the development of young talent, providing opportunities for educated youth from all parts of the country. To cater to the surge in business opportunities in the North and the East, a total of 50 Management Trainees was recruited during the year. Further, a total of 1,200 Trainee Staff Assistants joined the Bank, who have been deployed in all regions.

Recruitments are made in a transparent manner in accordance with Government regulations, with due consideration to safeguard social equity and fairness. The general recruitments therefore are based on open examination, independently conducted by the Department of Examinations.

Gender Distribution

No. of Employees

Category Male Female Total

Corporate Management 15 4 19

Executive Management 31 16 47

Chief Manager 70 25 95

Senior Manager 102 40 142

Br. Mgr. & Other Officer grades 1,982 1,641 3,623

Banking/Management Trainees 107 156 263

Staff Assistants & allied grades 1,465 2,073 3,538

Office Assistants & Allied Grades 467 16 483

Total 4,239 3,971 8,210

The Bank has maintained and balanced the gender distribution.

Entry Level Wage Structure

The Bank’s entry level monthly remuneration, applicable to all job positions, is as follows:

Management Trainee - Rs. 25,000.00

Trainee Staff Assistant - Rs. 12,500.00

Trainee Secretarial Assistant - Rs. 10,000.00


Recognition in Service

In order to recognise their immense contribution, the Bank offered five hundred and thirty seven awards in the 21st long service award ceremony for the employees who had successfully completed 25 years of service.

Medical Assistance Scheme

The Bank maintains a medical assistance scheme for its employees. It provides reimbursement/payment of bills on account of medical expenses incurred routinely as well as for special cases such as surgical treatment.

Staff Loans

The Bank operates its own staff loan schemes at concessionary rates for employees.

Type of LoanInterest Rate,

p.a. (%)

Housing Loan 2.25 to 5.0

Distress One Month Salary Loan 0

Distress Three months salary Loan 6.0

Computer Loan 6.5

Unified General Loan 5.5

PF Loan 5.0

Investment Loan 5.0

Car Loan 6.5

Labour/Management Relations

The Bank respects the right of its employees to join unions. 98.4 % of the total work-force was covered by Collective Agreement signed during the year with the Trade Unions representing the staff.

Compensation

Salaries

The Bank has established harmonious relationships with the Trade Unions. Accordingly, it has been the practice for several decades to negotiate salary structures and increases every three years culminating with a Collective Agreement between the two parties. Thus, the Bank entered into a Collective Agreement with the Ceylon Bank Employees’ Union (CBEU) with a pay hike of 10-17% for the employees in the grade of Senior Manager and below and 20% for Chief Manager and above effective from year 2009 to 2011.

Staff Turnover

No. of Employees

Age group Number on Payroll Number Leaving During 2010

Male Female Total Male Female Total

55 and over 1,433 610 2,043 – – –

45 to 54 1,470 1,023 2,493 – – –

35 to 44 302 355 657 – 2 2

25 to 34 599 1,232 1,831 – 7 7

18 to 24 429 751 1,180 – 1 1


Staff Benefits2010 2009

Employees' Benefit Plan Rs. million Rs. million

Bank’s Contribution to Pension Fund 1,730 1,883

Bank’s Contribution to W & OP Fund 456 456

Bank’s Contribution to EPF 526 513

Bank’s Contribution to ETF 130 128

Gratuity 79 70

Staff Welfare 57 55

Medical Assistance Scheme (on-line branches) 369 312

Terminal Benefits

The Bank maintains an Employees’ Provident Fund and an Employees’ Pension Fund for its employees. The Bank regards its pensioners as its brethren and revises their pensions from time to time taking into account increases in the cost of living.

Health Fitness & Sports Activities of Staff

The members of the staff in all branches have formed sports/welfare Clubs. The Bank grants financial assistance to all these clubs in proportion to the membership. The aim of the promotion of sports activities is, interalia, maintaining health, relationships among staff and enhancing productivity.

Gymnasiums

The Bank maintains well-equipped gymnasiums for employees at the Head Office. Further, it has arranged gymnasiums in its Metropolitan, Pettah and Bambalapitiya Branches.

Resorts for Holidaying

The Bank also renovated and upgraded the service of the Resorts/Bungalows located in various parts of the country during the year. A total of 3,367 employees availed themselves of these facilities with their families, with 1,142 being assisted with transport facilities.

Catering Services

The Bank provides meals at the Head Office and York Street Buildings in Colombo at subsidised prices.



Incentive Payments

The Bank made an incentive payment from the profit earned during the year 2009, considering the group contribution towards overall profits of the Bank. The Bank is moving towards Performance-Based Reward System (PBRS).

Industrial Harmony

During the year, no man hours were lost due to trade union activities.

Minimum Notice of Employee Regarding Operational Changes

Operational changes, if any, are discussed at corporate and executive management levels, and the outcome is communicated to the relevant parties through established lines of authority by way of meetings, circulars and through other established corporate communication tools.

Occupational Health and Safety

Formal Health & Safety Committees that help to monitor and advise on occupational safety programmes jointly with management and labour are in existence. The Bank has assigned a specially trained officer to overlook matters pertaining to fire-related risks. In the Head Office building two wardens have been appointed to each floor to co-ordinate the staff in the event of a fire under the guidance of Fire and Safety Security Personnel. The wardens have been instructed to organise and convene meetings of the inmates periodically and give necessary instructions to them. Personnel were trained on firefighting practices through the Fire Brigade of the Municipal Council of Colombo. Evacuation drills are also carried out on both spontaneous and pre-informed basis. All required alarm and firefighting systems are in place at all high rise buildings of the Bank.

Number of Work-Related Fatalities by Region

No work-related fatalities have been reported within the year 2010.

Programmes to Assist Workforce Members - Serious Diseases

A medical practitioner is employed at Head Office to assist employees with health problems. Awareness programmes were conducted with the participation of Specialist Medical Practitioners to make employees aware of the serious diseases like Dengue and Swine Flue.

Training & Development

Cultivating talented professionals is one of our top priorities. We offer our employees continuous training and development opportunities to enhance their technical and management skills in order to meet the needs of business. Programmes are targeted, based on regular assessments of needs.

Year

Training Expenses

Rs. million

No. of Training Programmes

In-house Overseas Local

2010 146 276 137 170

2009 152 361 117 317

2008 65 283 94 213

No. of participants:

In-house training 15,502

Local training 666

Overseas training 405


Technological Advancement in HR

The payments of salaries, bonuses, incentives, arrears, medical reimbursements, etc. have been automated. Further, the Bank was able to implement the new attendance recording system at the Head Office. The process of advancement in IT is being rolled out to outstation branches with the aim of completing the whole automation in the near future.

Cultural Activities

The 71st Anniversary celebration of the Bank was held in a grand manner, with three mega programmes:

Quiz competition was held with the participation of all provinces & divisions

Cultural Show - ‘Wasanthaya Awith’ also for the celebration of Sinhala and Tamil New Year festival.

Launching of the Second Volume of ‘Expanding Horizons’, the chronicle of the Bank

Training Hours

No. of training hours No. of employeesAverage hours of training

per year per employee

Employee category 2010 2009 2010 2009 2010 2009

Corporate Management 2,496 328 72 17 35 19

Senior Management 4,368 6,525 156 261 28 25

Executive Officers 122,409 79,534 4,221 3,059 29 26

Executive Assistants 114,282 51,727 5,442 2,249 21 23

Banking Trainees 220,096 18,200 6,878 700 32 26

Building-up of High Potential Culture

In order to increase employee loyalty and boost staff morale, the Bank organises various team building activities. The provincial Area Managers and Assistant General Manager frequently conduct meetings and visit branches to show that the management cares.

All promotions, gradings, confirmations, extension of services, overseas training and annual increments are based on Performance and Potential Appraisal (PPA) System. The appraisal of an employee is based on three factors, viz. an achievement of goals, behaviour and knowledge. The goals which are challenging, measurable and realistic are set collectively by the appraiser and appraisee before the beginning of the year. The results connected to the goals are measured and rated against the measurement devices and reviewed quarterly. Fifty percent of the final appraisal score is based on the results achieved by the employee (Appraisee) during the relevant year.

At the time of the final appraisal, the appraiser evaluates the areas where the employee’s skill and/or behaviour/knowledge have to be improved by proper training or development. Thus, the existing PPA has paved the way to build-up a high potential culture through identification of the areas where the employee needs training and development. Energising others to Perform

The Bank has the tradition of recognising staff for their achievements, usually through established communication channels as well as the quarterly journal, ‘Cey-bank News’. The journal is also a forum for staff to present their ideas and messages.



HUMAN RIGHTS

INCIDENTS OF DISCRIMINATION AND ACTION TAKEN

The Bank advocates equal opportunity and adopts the principle of justice and fairness in our human resource management. The Bank is committed to maintaining a harmonious workplace which is free from physical or verbal harassment or discrimination on gender, race, religion, age, nationality, and view their different backgrounds as a success factor.

CHILD LABOUR

The Bank does not recruit children for employment. The process relating to the recruitment and selection is done by verifying the age with reference to the birth certificate. The Bank does not also promote businesses or entrepreneurship of its customers that engage in employment of child labour. At the same time, all our outsourced and service providing parties are not accepted if they indicate to have employed child labour.

CORRUPTION

Our Policy

It is the policy of BoC to observe high standards of integrity and fair dealing in the conduct of its business and to act with due skill, care and diligence.

To comply with both the letter and spirit of all relevant laws, codes, rules and regulations and standards of good market practice in each area we conduct business.

Accordingly, the Bank maintained maximum transparency and corruption-free practices in all its activities. This has been ensured through

Delegation of authority level for approval of credit and procurements

Credit/Procurements approvals by Committees

Well-defined procurements policy which entails transparent tender procedures

System and procedure manuals


Internal Operational Instruction Circulars

Personnel Policy Committee

Disciplinary Code

Regular training of staff involved in operations, contracts and compliance

Further, Internal Audit Department carries out regular checks, controls and monitoring, with a view to ensure that operational activities are carried out in accordance with established rules, regulations, policies and procedures.


During the year 2010, Internal Audit Division has carried out such evaluations, covering substantial areas as appearing in the table.

Internal Audit Carried Out

No. of branch audits

carried out

No. of credit audits

carried out

No. of information system audits

carried out

No. of training conducted and number of staff (approx.) covered in the training

No. of investigations

carried out

236 53 110 35 training programmes

and 2,500 staff members

covered in the training

114

Likewise, we continued with special schemes like providing discount vouchers in collaboration with D. Samson Industries for Ran Kekulu account holders. Students with RKG accounts who obtained top grades in the Year 5 Scholarship Examination were granted cash awards to help them move forward with their studies.

Students who had excelled in G.C.E. (Advanced Level) Examination were awarded with 20 scholarships, based on their merits. Further, 71 scholarships of Rs. 30,000/- each to students from all over the country on the basis of lucky draw were given in commemoration of the 71st Anniversary of the Bank.

Seminars for school children covering all School Banking Units of Bandarawela, Mahiyangana, Moneragala and Badulla branches were conducted with a view to enhancing the leadership qualities of students.

Emotional Serving for School Children

History reveals that screening BoC in the heart of Colombo was an attractive mind- end by many school children up to date. In the year 2010, many local schools (specially schools in the Northern & Eastern Provinces) have organised their educational excursions to Colombo. Amid those visits to Colombo, Bank of Ceylon Head Office premises was their main aspire and it was, on the other hand, an education visit since they are allowed to access and to gain knowledge on places including Cheque Clearing Centre, the Giant Mural in the lobby, only one of such a kind in Sri Lanka and Cash Museum of the Bank where antique currency coins and notes are kept, and the picturesque City of Colombo from the topmost floor of the Bank.


The Risk Management Division of the Bank too, continuously contributing to achieve the objective of elimination of corruption. The division has conducted several awareness programmes to the staff involved in operational activities. 20 such programmes were conducted during the year, with a participation of around 900 staff members.

AS BANKERS TO THE NATION, WE TOOK SOCIAL RESPONSIBILITY IN OUR STRIDE THROUGH

NURTURING YOUTH TALENTS

The Bank places great attention on the younger generation of Sri Lanka as we strongly believe that the seeds of thrift sown in the minds of children will be the foundation on which nations are built. Accordingly, we embarked on an aggressive campaign throughout the year and established 210 units of ‘School Sansadaya’ in schools countrywide.

These visits have tremendously increased, and during the period concerned, there were around 160 schools that have visited with nearly 14,000 participants including children, teachers and parents.

ON-THE-JOB TRAINING FOR UNDERGRADUATES AND SCHOOL LEAVERS

The Bank provides on-the job training and business exposure to school leavers and undergraduates by employing them in branches and departments at an appropriate allowance. The school leavers are given minimum of six months training focusing on general banking. The undergraduates are given six months‘ training in selected areas like Accounting System, Management Information System, Treasury activities and Human Resources, etc. The total number of school leavers trained for the period under review was 3,146 with a total investment of Rs. 75 million. A total of 458 undergraduates was trained during 2010 at an investment of Rs. 25 million. The Bank considers this effort as an investment in the community, since it is the future generations that are being moulded to be a better class of business leaders.

SPORTS

Cricket

The Inter-Provincial Cricket Tournament, the premier in our domestic cricket calendar, under the aegis of Sri Lanka Cricket was sponsored by BoC. Targeted at selecting the crème de la crème for the National squad, this 3-month fiesta saw individuals and teams displaying a great deal of prowess in the 3 aspects of the tourney, viz. T20 games, the 50-Over matches and latterly, the 4-day encounters for the Bank of Ceylon Trophy in



each category. Cricket fans got more than a glimpse of the stars in Pallekelle, Kurunegala, Galle, Moratuwa and a host of venues in Colombo.

Motor Sports & Super Cross

For the second successive year, the Carlton Super event at Hambantota proved to be an exciting sports extravaganza where Bicycle Races, Water Sports, Motor racing, Motor Cross and off-road 4x4 events drew participation from outside the district much to the satisfaction of this rural constituency in their rapidly changing environment. The carnival closed with musical shows, every evening, in which young artistes had an opportunity to display their talents. The Bank associated itself as the principal sponsor.

The Bank lent a generous hand to the Sri Lanka Army in support of their efforts to create awareness and raise funds for the welfare of the disabled soldiers and their families through a host of events. The larger of these events, conducted in association with SLADAR was the Annual Fox Hill Super Cross at Diyatalawa, Motor Cross events at Boyagane, Minneriya.

The Katukurunda Motor races organised by the Sri Lanka Air Force under the supervision of SLARDAR were sponsored by BoC for the 5th year.

Maritime Adventure

The 60th jubilee of the Sri Lanka Navy which enveloped a host of events centred on maritime adventure, exhibits, music, entertainment and a ceremonial flotilla received our sponsorship support in December.

Swimming

The Open Age Group National Swimming Championship Meet organised by the Old Anandians Sports Club and conducted by the Aquatic Association of Sri Lanka in August had wide participation from schools and individuals.

Tennis

Soccer

At the request of the Football Team of the University of Colombo in collaboration with their Department of Physical Education, we readily responded through sponsorship of the inaugural Inter-University Football Tournament. The Tournament was conducted under the watchful eyes of the Football Federation of Sri Lanka. Teams from the Universities in Jaffna, Moratuwa, Jayawardenapura, Kotelawala Defence Academy, SLIIT, APIIT and, of course, Colombo University, participated.

The Central Province Sports festival was successfully held at the Bernard Aluvihare Stadium in Matale, with the participation of a special team of fellow staff members from the Northern Province.

RELIGIOUS, CULTURAL & LITERARY SPONSORSHIPS

BoCs ties with the venerated Sri Dalada Maligawa and its activities have continued to strengthen for a number of years. We gave generous financial grants for the conduct of the annual Esala Pageant, the regular monthly bulletins on TV and print, in addition to the support for computer education.

‘Dalada Waruna’ monthly publication and ‘Dalada Sevana’ TV programme was sponsored by the Bank throughout the year.

The annual Perahera at Kataragama Devalaya, Poson activities at Tissamaharama and the Mirisavetiya in Anuradhapura were some of the major involvements with the Bank through sponsorships.

For the second successive year, the Poson illumination at the Somawathi Chaithiya in Seruwila received the Bank’s sponsorship.

Colombo’s Navam Perahera and Vesak activity in the city conducted by the Gangaramaya and the All Ceylon Buddhist Congress saw active participation through financial support and involvement by the Bank’s Buddhist Society.

A first of its kind, the Bank considered it our bounden duty to sponsor the International Wheel Chair Tennis Championship for the disabled conducted by the SLTA and organised by the SSC which was held in Colombo in August. Sri Lanka took the Championship at this skill.

Track & Field

At the Annual Schools Track & Field Championship organised by the Ministry of Education, generous denominations of Savings Certificates were presented to the 6 categories in recognition of their prowess and also to inculcate the savings mindset in the young achievers.


Under CSR projects, the Sabaragamuwa Province has conducted blood donation campaigns at Ratnapura SG, Mawanella, Yatiyantota and Ruwanwella branches.

Seminars for school children covering all School Banking Units of Bandarawela, Mahiyangana, Moneragala and Badulla branches were conducted with a view to enhancing the leadership qualities of the students.

An Awareness Programme for the Matara District self-employed persons was held with 800 participants.

8. G3 STANDARD DISCLOSURES AND REPORT APPLICATION LEVEL

REPORT APPLICATION LEVEL

This Sustainability Report is prepared in accordance with the Global Reporting Initiative (G3) indicator protocols. The Bank of Ceylon self-declares a ‘C+’ level rating against the G3 Application Levels, and sought external assurance for its Sustainability Report which is appearing on page 125.

The Annual Athletic Meet of the Southern Province conducted by the Department of Education and held at Matara was sponsored by the Bank.

The student who obtained Island‘s 1st place in Year 5 Scholarship examination was a RKG account holder of BoC Maharagama Branch. In addition to the ‘Nenapahana’, a special scholarship awarded until his graduation, a special cash award of Rs. 100,000/- was also granted to the student.

Also, out of the three students who obtained 2nd places in the above examination, one student who was a RKG account holder at Matugama Branch, and the student who ranked island‘s 3rd was given a special cash award too. He holds a RKG account at our Kottawa Branch.

Under the Bank’s CSR project, the province has taken action to clean and paint the Female Ward No. 1B of the Kalutara-Nagoda Hospital. Also cleaned and painted the Ward No. 1B of Nagoda Base Hospital renovating all toilets and fully repaired the ward at a cost of Rs. 750,000/-.

Under the Bank’s CSR Project, Uva Province has renovated the Mahiyangana Government Hospital, re-wired two wards in Bibile Hospital.

Already arrangements are under way to complete construction of a Waiting Room for patients in Dambagalla Hospital at a cost of Rs. 0.4 million. Has undertaken to complete construction of an Emergency Treatment Unit in Wellawaya Hospital at a cost of Rs. 2.0 million.

The epic construction of the tallest sculpture of Lord Buddha in Rambodagalla continues to receive generous support of the Bank and our employees.

The Bank also sponsored the construction of three dwellings in the greater Madhu Development Zone.

IFTHAR programmes were conducted at all branches in predominantly Muslim areas with the view to cultivating religious harmony.

‘Ruhune Aluth Sahal Mangalya Ceremony’ organised by the Tissamaharama branch for the 15th time was held at Tissa Raja Maha Viharaya.

The Bank continued to sponsor and support the activities of National Business Chambers in Industry and Commerce, too numerous to mention herein, at their annual awards in particular and welfare activities in general.

At the Deyata Kirula exhibition, we featured a well-designed stall which caught the eye of many visitors.

The Bank lent a hand in sponsoring a coffee table photo extravaganza authored by Vajira Wijegunawardena on the Majesty of the Sri Lanka Elephant as part of our focus on biodiversity.



BDO Partners, a Sri Lankan Partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international

INDEPENDENT ASSURANCE REPORT TO THE STAKEHOLDERS OF BANK OF CEYLON ON THE SUSTAINABILITY REPORT - 2010

INTRODUCTION AND SCOPE OF THE ENGAGEMENT

The management of Bank of Ceylon (‘Bank‘) engaged us to provide an independent assurance on the following elements of the Sustainability Report 2010 (‘the Report‘).

Reasonable assurance on the information on financial performance as specified on pages 104, 105 and 106 of the Report.

Limited assurance on key performance indicators and other information presented in the Report.

RESPONSIBILITY OF THE MANAGEMENT ON THE REPORT

The management of the Bank is responsible for the preparation and presentation of the Report in accordance with the Bank's sustainability practices and policies which are derived from Global Reporting Initiatives (GRI-G3) Sustainability Reporting Guidelines. These responsibilities include among other things, identification of stakeholders and material issues, determining the sustainable performance criteria for reporting and establishing appropriate processes and internal control systems to measure and report the sustainability performance criteria.

OUR RESPONSIBILITY

Our responsibility is to perform a reasonable and limited assurance engagement and express conclusions based on the work performed in accordance with Sri Lanka Standard on Assurance Engagements (SLSAE 3000): ‘Assurance Engagements other than Audits or Reviews of Historical Financial Information‘, issued by The Institute of Chartered Accountants of Sri Lanka (‘ICASL’).

Reasonable assurance is a high level of assurance. However, reasonable assurance is not an absolute level of assurance because there are inherent limitations of assurance engagement.

A limited assurance engagement is substantially less in scope than a reasonable assurance engagement and consequently does not enable to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement.

This Report is made solely to the Bank in accordance with our engagement letter dated March 07, 2011. We disclaim any assumption of responsibility for any reliance on this Report to any person other than the Bank or for any purpose other than that for which it was prepared. In conducting our engagement, we have complied with the independence requirements of the Code of Ethics for professional Accountants issued by the ICASL.

ASSURANCE PROCEDURES CARRIED OUT

Financial Information

We reconciled the information on financial performance as reported on pages 104, 105, and 106 of the Report with the Audited Financial Statements of the Bank for the years ended December 31, 2009 and 2010.

Key Performance Indicators

We reviewed the reliability of the data/information on Key Performance Indicators for the year ended December 31, 2010 based on reviews of:

the systems used to generate, aggregate and report these information;

the information reported by the relevant business units to corporate level;

the information validation processes at corporate and business level;

the information trends in discussions with management; and

the calculation performed by the Bank on a sample basis through recalculation.

Other Information

We planned and performed following assurance procedures on other information presented in the Report:

Inquiring relevant Bank‘s personnel to understand the process for collection, analysis, aggregation and presentation of information in the Report.

Reviewing the system used to generate, aggregate and report the information in the Report

Interviewing the senior management and relevant staff at corporate level and selected business unit level and obtained the evidence concerning sustainability strategy and policies for material issues and implementation of those across operation of the Bank.

Reviewing and validating the information contained in the Report.

Reading the information presented in the Report to determine whether that information is in line with our overall knowledge of, and experience with, sustainbalility performance of the Bank.

CONCLUSION

Based on the procedures performed, as described above, we conclude that:

The information on financial performance as specified on pages 104, 105 and 106 of the Report is properly derived from the Audited Financial Statements of the Bank for the years ended December 31, 2009 and 2010.

Nothing has come to our attention that causes us to believe that key performance indicators and other information presented in the Report are not presented, in all material respects, in accordance with the Bank's sustainability practices and policies which are derived from GRI (G3) Sustainability Reporting Guidelines.

CHARTERED ACCOUNTANTS

March 21, 2011Colombo

Sri Lanka


No. Description Location/Reference Page No.

1 Strategy and Analysis

1.1 Statement from the most senior decision maker of the organisation (e.g., CEO, chair or equivalent senior position) about the relevance of sustainability to the organisation and its strategy

Sustainability Report (SR) 95

1.2 Description of key impacts, risks and opportunities Risk Management Report 87

2 Organisational Profile

2.1 Name of the organisation Bank of Ceylon

2.2 Primary brands, products, and/or services Product & ServicesSR

13297

2.3 Operational structure of the organisation, including main divisions, operating companies, subsidiaries and joint ventures

SR 96

2.4 Location of organisation’s headquarters 4, Bank of Ceylon Mawatha, Colombo 1

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

SR covers the domestic operations of the Bank

97

2.6 Nature of ownership and legal form SRCorporate information

95Inner Back Cover

2.7 Markets served (including geographic breakdown, sectors served and types of customers/beneficiaries)

SRNotes to the Financial StatementsBoC service points

97191262

2.8 Scale of the reporting organisation SR 97

2.9 Significant changes during the reporting period regarding size, structure or ownership SR 98

2.10 Awards received in the reporting period SR 98

3 Report Parameters

3.1 Reporting period (e.g., fiscal/calendar year) for information provided 1 January 2010 to 31 December 2010

3.2 Date of most recent previous Report December 2009

3.3 Reporting cycle (annual, biennial, etc.) Annual

3.4 Contact point for questions regarding the Report or its contents SR 99

3.5 Defining Report content SR 99

3.6 Boundary of the Report SR 99

3.7 State any specific limitations on the scope or boundary of the Report Relating to local operations of the Bank

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

N/A

3.9 Data measurement techniques and the bases of calculations, including assumptions and techniques underlying estimations applied to the compilation of the indicators and other information in the Report

SR 99

3.10 Explanation of the effect of any restatement of information provided in earlier Report, and the reasons for such restatement

NA

3.11 Significant changes from previous reporting periods in the scope, boundary or measurement methods applied in the Report

SR 99

3.12 Table identifying the location of the standard disclosures in the Report SR 126

3.13 Policy and current practice with regard to seeking external assurance for the Report SR 124

The table given below provides a cross reference to the G3 standard disclosures to the key sections of the Annual Report (which includes a Management Report, Risk Management Report, Corporate Governance Report, Sustainability Report (SR), Financial Report and Report of the Board of Directors) where applicable. The rest are indicated in the table itself, or are reported as Not Applicable (NA), Not Material (NM), or Not required as per ‘C’ level of reporting (NR) as the case may be.

G3 STANDARD DISCLOSURES INDEX



4 Governance, Commitments and Engagement

4.1 Governance structure of the organisation, including committees under the highest governance body responsible for specific tasks, such as setting strategy or organisational oversight

Corporate Governance Report (CGR)

56

4.2 Indicate whether the chair of the highest governance body is also an executive officer CGR 56

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

CGR and Report of the Board of Directors on the State of affairs of the Bank

63 & 139

4.4 Mechanisms for shareholders and employees to provide recommendations or directions to the highest governance body

CGR 56 - 86

4.5 Linkage between compensation for members of the highest governance body, senior managers and executives, and the organisation’s performance

CGR 56 - 86

4.6 Processes in place for the highest governance body to ensure conflicts of interest are avoided

CGR 56 - 86

4.7 Process for determining the qualifications and expertise of the members of the highest governance body for guiding the organisation’s strategy on economic, environmental and social topics

CGR 56 - 86

4.8 Internally-developed statements of mission or values, codes of conduct and principles relevant to economic, environmental and social performance and the status of their implementation

CGR 56 - 86

4.9 Procedures of the highest governance body for overseeing the organisation’s identification and management of economic, environmental and social performance, including relevant risks and opportunities and adherence or compliance with internationally agreed standards, codes of conduct and principles

CGR 56 - 86

4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental and social performance

CGR 56 - 86

4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organisation

CGR 56 - 86

4.12 Externally developed economic, environmental and social charters, principles or other initiatives to which the organisation subscribes or endorses

NA

4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organisations in which the organisation

Ceylon Chamber of CommerceSri Lanka Bank’s Association (Guarantee) Limited

4.14 List of stakeholder groups engaged by the organisation SR 100 - 102

4.15 Basis for identification and selection of stakeholders with whom to engage SR 100 - 102

4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group

SR 100 - 102

4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to those key topics and concerns, including through its reporting

SR 100 - 102




5 Management Approach and Performance Indicators

Economic

5.1 Disclosure on management approach to economic aspects Management Discussion and Analysis

30

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

SR 104

EC2 Financial implications and other risks and opportunities for the organisation’s activities due to climate change

SR 106

EC3 Coverage of the organisation’s defined benefit plan obligations SR 118

EC4 Significant financial assistance received from Government The Bank does not receive significant financial assistance from the Government

EC5 Range of ratios of standards entry level wage compared to local minimum wage at significant locations of operation

SR 117

EC6 Policy, practices and promotions of spending on-locally-based suppliers at significant locations of operation

Supply procedure is governed by the procurement policy manual

EC7 Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation

SR 117

EC8 Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in-kind or pro bono engagement

NR

EC9 Understanding and describing significant indirect economic impact, including the extent of impacts

Management Discussion and Analysis

30

Environmental

5.2 Disclosure on management approach to environmental aspects SR 111

Materials

EN1 Materials used by weight or volume SR 112

EN2 Percentage of materials used that are recycled input materials NA

Energy

EN3 Direct energy consumption by primary energy source None

EN4 Indirect energy consumption by primary source None

EN5 Energy saved due to conservation and efficiency improvements NR

EN6 Initiatives to provide energy-efficient or renewable energy-based products and services and reductions in energy requirements as a result of these initiatives

NR

EN7 Initiatives to reduce indirect energy consumption and reductions achieved NR

Water

EN8 Total water withdrawal by source Insignificant

EN9 Water sources significantly affected by withdrawal of water Insignificant

EN10 Percentage and total volume of water recycled and reused NR




Biodiversity

EN11 Locations of size of land owned, leased, managed in or adjacent to, protected areas and areas of high biodiversity value outside protected area

Bank’s operational units are located within the protected areas or high biodiversity valued areas

EN12 Description of significant impacts of activities, products and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas

Bank activities product or services do not affect on the biodiversity

EN13 Habitats protected or restored NA

EN14 Strategies, current actions and future plans for managing impacts on biodiversity NA

EN15 Number of IUCN Red list species and national conservation list species with habitats in areas affected by operations, by level of extinction risk

Bank‘s operations do not affect the Red list species

Emissions, Effluents and Waste NR

EN16 Total direct and indirect greenhouse gas emissions by weight NR

EN17 Other relevant indirect greenhouse gas emissions by weight NR

EN18 Initiatives to reduce greenhouse gas emissions and reduction achieved NR

EN19 Emissions of ozone-depleting substances by weight NA

EN20 No, SO, and other significant air emissions by weight NA

EN21 Total water discharged by quality and destination NR

EN22 Total weight of waste by type and disposal method NR

EN23 Total number of volumes of significant spills NR

EN24 Weight of transported, imported, exported or treated waste deemed hazardous under the terms of Basel Convention Annex I, II, III and VIII and percentage of transported waste shipped internationally

NR

EN25 Identify size, protected status and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and run-off

NR

Products and Services

EN26 Initiative to mitigate environmental impacts of products and services, and extent of impact mitigation

Bank‘s products being service nature, do not have an impact on environment

EN27 Percentage of products sold and their packaging materials that are reclaimed by category NR

Compliance

EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

No fines have been imposed for non-compliance with environmental laws

Transport

EN29 Significant environmental impacts of transporting products and other goods and materials used for the organisation’s operations and transporting member of the workforce

SR 113

Overall

EN30 Total environmental protection expenditure and investments by type SR 111 - 113


N/A - not applicableNR - Not required as per C level of reporting



Social

5.3 Disclosure on management approach to social aspects SR 114

Labour Practices and Decent Work

LA1 Total workforce by employment type, employment contract and region SR 116 - 117

LA2 Total number and rate of employee turnover by age group, gender region SR 118

LA3 Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations

SR 117 - 118

LA4 Percentage of employees covered by collective bargaining agreements SR 118

LA5 Minimum notice period(s) regarding operational changes, including whether it is specified in collective agreements

SR 118

LA6 Percentage of total workforce represented in formal joint management-worker health and safety committees that help monitor and advice on occupational health and safety programmes

SR 119

LA7 Rates of injury, occupational diseases, lost days and absenteeism and of work-related fatalities by region

SR 119

LA8 Education, training, counselling, prevention and risk-control programmes in place to assist workforce members, their families or community members regarding serious diseases

121

LA9 Health and safety topics covered in formal agreements with trade unions 121

LA10 Average hours of training per year per employee by employee category SR 120

LA11 Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings

SR 120

LA12 Percentage of employees receiving regular performance and career development reviews SR 120

LA13 Composition of governance bodies and breakdown of employees per category according to gender, age, group, minority group membership and other indicators of diversity

SR 116 - 117

LA14 Ratio of basic salary of men to women by employee category Maintains equal ratio

Human RightsHR1 Percentage and total number of significant investment agreements that include human

rights clauses or that have undergone human rights screeningNR

HR2 Percentage of significant suppliers and contractors that have undergone screening on human rights and actions taken

NR

HR3 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained

NR

HR4 Total number of incidents of discrimination actions taken SR 121HR5 Operations identified in which the right to exercise freedom of association and collective

bargaining may be at significant risk, and actions taken to support these rightsSR 118

HR6 Operations identified as having significant risk or incidents of child labour, and measures taken to contribute to the elimination of child labour

SR 121

HR7 Operations identified as having significant risk for incidents of forced or compulsory labour, and measures taken to contribute to the elimination of forced or compulsory labour

SR 121

HR8 Percentage of security personnel trained in the organisation’s policies or procedures concerning aspects of human rights that are relevant to operations

NR

HR9 Total number of incidents of violations involving rights of indigenous people and actions taken

No incidents of violation of rights of indigenous people




Society

SO1 Nature, scope and effectiveness of any programmes and practices that asses and manage the impacts of operations on communities, including entering, operating and exiting

SR 114

SO2 Percentage and total number of business units analysed for risks related to corruption SR 87, 122SO3 Percentage of employees trained in organisation’s anti-corruption policies and procedures SR 122SO4 Actions taken in response to incidents of corruption NoneSO5 Public policy positions and participation in public policy development and lobbying NoneSO6 Total value of financial and in-kind contributions to political parties, politicians and

related institutions by countryNone

SO7 Total number of legal actions taken for anti-competitive behaviour, anti-trust and monopoly practices and their outcomes

None

SO8 Monitory value of significant fines and total number of non-monetary sanctions for non-compliance with laws and regulations

None

Product ResponsibilityPR1 Life cycle stages in which health and safety impacts of products and services are assessed

for improvement, and percentage of significant products and services categories subject to such procedures

PR2 Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycle, by type of outcomes

None

PR3 Type of product and service information required by procedures, and percentage of significant products and services subject to such information requirements

PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes.

None

PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction

SR 100

PR6 Programmes for adherence to laws, standards and voluntary codes related to marketing communications, including advertising, promotion and sponsorship

NR

PR7 Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing communications, including advertising, promotion and sponsorship by type of outcomes

None

PR8 Total number of substantiated complaints regarding breaches of customer privacy and losses of customer data

None

PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services

NR




DEPOSITS

LOCAL CURRENCY DEPOSIT ACCOUNTS

Normal Savings - General purpose savings account for anyone above 18 years of age.

Ran Kekulu - Higher interest, scholarships for grade 5 scholarship winners, free insurance policies for both, the child and account holder and many more benefits.

14+ Teen Savings - Unique savings scheme ideal for teenagers which could be operated by themselves, free VISA Electron Card.

18+ Youth Savings - Life insurance cover to a maximum of Rs. 500,000 and special insurance cover for partial disability and illness, a gold coin for the wedding and Ran Kekulu for first born, scholarships for higher education, special facilities and many more benefits.

Sisu Saviya Savings - To encourage savings among school children.

Kantha Ran Ginum - Higher interest, Free insurance policy cover up to Rs. 500,000 (Life & Accident cover), loan facilities at special interest rate, Apsara Visa Credit Card.

Senior Citizens Savings - Assured monthly payments during the retirement as per agreed plan.

Senior Citizens Fixed Deposits - Monthly interest payment at a higher rate.

Special Purpose Accounts

Ran Govi Thenpathu - To promote savings habit among farmer community.

Ranaviru Ran Ginum - Specially designed savings account for staff in the armed forces.

Samurdhi Savings - To encourage savings among lower income groups. Specially designed with higher interest rate.

Dheevara Thenpathu - Specially designed for the fishing community.

Prestige+Current Account - Personalised cheque book, free Visa Electron debit card with a withdrawal limit of Rs. 100,000, free BoC credit card, Internet banking, SMS banking facilities.

BoC Infinity - Ability to choose the retirement benefits in multiplies of Rs. 10,000.

BoC Vishrama - Flexible investment opportunity for cash in hand.

Maturity Deposits

7-day Call Deposits

Savings Certificates - Ideal short-term investment, instant loans and overdrafts, interest paid upfront, no stamp duty/ withholding tax, encashment at any branch.

Fixed Deposits - General purpose fixed deposits for anyone over 18 years of age.

Moving Rate Fixed Deposits - Ability to receive different interest rates depending on the period.

Senior Citizens Fixed Deposits - Deposit with special interest rates for senior citizens.

BoC Smart Saver - Protection against interest rate fluctuations.

Securities Investment Account (SIA) - To invest in treasury bills/treasury bonds issued by Government of Sri Lanka/equity capital of companies incorporated in Sri Lanka/units of unit trusts in Sri Lanka.

FOREIGN CURRENCY DEPOSIT ACCOUNTSNRFC Accounts

NRFC Savings and Fixed Deposits

Transactions in 9 currencies, free life insurance cover, 'BoC Sarani' housing loan and other loan facilities, no commission charges for foreign currency inward remittances, e-banking facilities, international and local Visa debit/credit cards, tax exemptions for interest earnings.

Foreign Currency Savings Account for Professional Service Providers

Foreign Currency Fixed Deposit for Professional Service Providers

Foreign Currency Current Account for Professional Service Providers

RFC Accounts

RFC Savings and Fixed Deposits

Transactions in 9 currencies, attractive interest rates, loan facilities, credit card and VISA Electron debit card. Tax exemptions for interest earnings.

Children’s Savings

Ran Kekulu Foreign Currency - Transactions in 9 currencies, bonus interest.

Other Accounts

Ethera Thilina Savings

Resident Non-National Foreign Currency Savings (RNNFC)

Export Foreign Currency Accounts (EFC)

Special Foreign Investment Deposit Accounts (SFIDA)* - Deposit account for Non-Sri Lankans/Non-resident investors with high interest rates, tax exemptions.

Senior Foreign Investment Deposit Account (SENIOR FIDA)* - Facilitate investment with a view to obtaining Sri Lankan Permanent Resident Visa for Senior Foreign Nationals under 'Sri Lanka My Dream Home' Programme.

* These accounts can be opened with any

designated foreign currencies or Sri Lankan

rupees.



TREASURY

Primary Dealer Unit

Treasury Bills

Treasury Bonds

REPOs

Reverse REPOs

Forex & Fund Management

Forwards

SWAPS

Import/Export Financing

Custodian Services

Money Market Lending & Borrowing

Interest Rate Swap

ADVANCES

Personal Lending

Overdraft Facilities:

Permanent OverdraftsExport Packing Credit OverdraftsRan Surekum OverdraftsTemporary Overdrafts

Home Loans:

RannivasaHousing Loan for NRFC customers

Other Loan Schemes

Development Lending

Microfinance

New Comprehensive Rural Credit Scheme (NCRCS)Govishakthi Credit Scheme

Micro Enterprises

Estate Sector Self-EmploymentKantha Ran DiriyaSmall Enterprise Development SookshamaPoverty Alleviation Microfinance Project

Fisheries

Deewara Shakthi Credit SchemeFisheries Credit Scheme without subsidyAquatic Resources Development Quality Improvement Project Credit Scheme (ARDQIP)

Agribusiness

KaprukaImprovement of locally produced riceKrushi Navodaya Credit Scheme

Housing

Government Employees Housing LoanBoC housing loan scheme

Transportation

Three wheel auto rickshawsMotor cycles for employees of GovernmentPurchase of bicycleMotor vehicle loan schemeImportation of motor vehicles under permitsMotor vehicles for provincial council membersBus purchase loan for private bus owners

Small & Medium Enterprises

Technical Transfer Assistance Scheme (TTAS) under SMILE IIITTAS under E-Friends IIGamata Naya

Consumption

BoC personal loan

Education

BoC comprehensive educational loan schemeBoC personal computer loan scheme

Other Credit Facilities

Pledge LoansHypothecation LoansTrust Receipt LoansSeries of LoansForeign Currency LoansBridging LoansExport Packing Credit Loans

Letters of Guarantee

Credit Purchase GuaranteeTender GuaranteeBid Guarantee (Bid Bond)Performance Guarantee (Performance Bond)Advance Payment Guarantee (Advance Bond)Retention Guarantee (Retention Money Bond)Customs Duty Guarantee for Imports (Custom Duty Bond)Shipping Guarantee

Lease Financing

BoC Leasing Scheme - Flexible services, ability to obtain leasing facilities even without a guarantor. Special Leasing Scheme with DIMO

Other Services

Letters of CreditNegotiation of Bills (DP/DA Terms, deferred payment terms)Purchase of Export Bills (DA/DP)Purchasing of ChequesEncashment Facilities



Credit Cards

Visa Credit Card - LocalRange of cards to suit different needs

Lowest interest rates

Additional limit for emergency hospitalisation

Free life insurance cover, permanent totaldisability cover and lost baggage cover

‘Spend more-have more’ loyalty scheme

Interest free easy payment scheme

Visa Credit Card - International

Visa Platinum Smart Card (BoC Black Card)

Master Credit Card

Apsara Ladies Credit Card

Visa/Master Card Acquiring Services

Visa Electron Debit Card

SPECIAL SERVICES

Cash Services

ATM Services

Cheque Encashment

SLT Direct Debit

Foreign Currency

RTGS Fund Transfer

Funds Transfer

Inter-Branch Money Transfers

SWIFT

SLIPS

Telegraphic Transfers

Mail Transfers

e-Cash Inward Remittance Service (Moneygram, Ez remit, Coin Star,

Telemoney)

Xpress Inward Remittance Service

Issuing and Encashing Foreign Drafts

Travel Services

Bureau de Exchange

Traveller’s Cheques

Value-Added Services

Gold Shop

Safe Custody Vault

Insurance Desk

Left Handers’ Cheque Book

Ran Kekulu Gift Vouchers

Money & Banking Museum

Small Entrepreneur Consultancy

Trade Information and Help Desk

e-Channelling

Ran Kekulu Sansada (School Savings Units)

SMS Banking

BoC Paymate - paying utility bills and other services via SMS

Phone Banking

BoC Internet Banking

ISLAMIC BANKING PRODUCTS

Deposits

BoC An-noor Current Account

BoC products for Muslim community - Shari’ah compliant banking

An-noor Ordinary Savings

An-noor Children’s Savings (‘Afthal’)

Loans

An-noor Leasing (‘Ijarah’)

An-noor Trade Finance and Term Loan (‘Murabaha’)

An-noor ‘Wakala’

FINANCIAL REPORTSAnnual Report of the Board of Directors on the State of Affairs of the Bank of Ceylon 137Directors’ Interests in Contracts 141Directors’ Responsibility for Financial Reporting 145Independent Assurance Report 146Directors’ Statement on Internal Control 147Report of the Auditor General 149Income Statement 150Balance Sheet 151Statement of Changes in Equity 152Cash Flow Statement 153Significant Accounting Policies 156Notes to the Financial Statements 167


The Board of Directors of the Bank of Ceylon has pleasure in presenting their report on the affairs of the Bank together with the Audited Consolidated Financial Statements for the year ended 31 December 2010, of the Bank and the Group and the Auditors’ Report on those Financial Statements, conforming to the requirements of the Bank of Ceylon Ordinance No. 53 of 1938, Banking Act No. 30 of 1988 and amendments thereto. The report also includes certain disclosures laid down by the Colombo Stock Exchange Listing Rules and certain disclosures required to be made under the Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka. The Directors approved the Financial Statements on 16 March 2011.

The Bank of Ceylon is a licensed commercial bank established under the Banking Act No. 30 of 1988 and was duly incorporated on 01 August 1939 under the Bank of Ceylon Ordinance No. 53 of 1938. Bank is wholly owned by the Government of Sri Lanka. The unsecured subordinated redeemable debentures issued by the Bank are listed on the Colombo Stock Exchange.

PRINCIPAL ACTIVITIES

BANK

The principal activities of the Bank during the year were commercial banking, personal banking, development financing, mortgage financing, lease financing, investment banking, Islamic banking, corporate financing, dealing in Government Securities, pawn broking, credit card facilities, internet and e-banking, off-shore banking, foreign currency operations and other financial services.

SUBSIDIARIES AND ASSOCIATES

The principal activities of Subsidiaries and Associates are given in Significant Accounting Policies to the Financial Statements on page 156.

There were no significant changes in the nature of the principal activities of the Bank and the Group during the year under review other than for engaging in hydropower generating business through acquisition of a hydropower project to the Group.

During the year, Bank introduced a Subsidiaries Management Charter to its Group companies with a view to rationalising the management of Subsidiaries.

ANNUAL REPORT OF THE BOARD OF DIRECTORS ON THE STATE OF AFFAIRS OF THE BANK OF CEYLON

CHANGES TO THE GROUP STRUCTURE

During the year, Property Development PLC, a Subsidiary of the Bank of Ceylon, has acquired 94.59% of the stake in Koladeniya Hydropower (Private) Limited (hydropower generating project) by investing Rs. 23,625,000/-, making it an indirect Subsidiary of the Bank.

The Financial Services Authority (FSA), the regulator of the financial service industry in the United Kingdom, required that the London branch of the Bank be converted into a Subsidiary of Bank of Ceylon with its own capital base, management and Board of Directors. As it is in the corporate agenda of the Bank to gradually enter the Global Financial Service Industry and enhance the aggregate value of the Bank of Ceylon brand, the opportunity offered was ideally used. As a result, Bank of Ceylon (UK) Limited was established in May 2010 as a fully-owned Subsidiary of Bank of Ceylon with an investment amounting to GBP 12 million (Rs. 2,087 million).

VISION, MISSION AND CORPORATE CONDUCT

The Bank’s Vision and Mission are given on page 2 of this Annual Report. The Bank maintains high ethical standards in its activities whilst pursuing the objectives stated under ‘Vision’ and ‘Mission’.

REVIEW OF THE YEAR’S PERFORMANCE

The Chairman’s Message on pages 8 to 10 deals with the year’s performance of the Bank/Group and on the Sri Lanka economy. The General Manager’s Review on pages 11 to 13 provides a detailed description of the operations of the Bank during the year under review.

Management Discussion and Analysis on pages 30 to 44 provide a detailed analysis of business operations of the Bank. These reports that provide a fair review of Bank’s affairs form an integral part of this Report.

BRANCH EXPANSION OF THE YEAR

The Bank extended its services through the addition of 26 new extension offices during the period under review. The number of branches that existed was reduced by one with the closure of London branch that has been converted into a Subsidiary of the Bank. The ATM network was further expanded enhancing customer convenience. The Bank installed 23 ATMs during the year across the island bringing out the total

ATMs to 352. This number does not include peer bank’s ATMs through which customers of Bank of Ceylon can transact.

FUTURE DEVELOPMENTS

An overview of the future plans and development of the Bank is presented in the Chairman’s Message on pages 8 to 10 and Management Discussion and Analysis on pages 30 to 44 of this Annual Report.

RISK MANAGEMENT

The Board of Directors assumes overall responsibility for managing risks. The specific measures taken by the Bank in mitigating with the risks are detailed on pages 87 to 93 of this Annual Report.

INTERNAL CONTROL

The Board of Directors has ensured the implementation of an effective and comprehensive system of internal controls in the Bank through the Audit Committee.

The Audit Committee helps the Board of Directors to discharge their fiduciary responsibilities. The report of the Chairman of the Audit Committee is contained on pages 81 and 82 of this Annual Report. The Directors are satisfied with the effectiveness of the system of internal control during the year under review and up to the date of the Annual Report and the Financial Statements. The Board has issued a statement on the internal control mechanism of the Bank as per Direction No. 3 (8) (ii) (b) of Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks. The above report is given on pages 147 and 148 of this Annual Report. The Board has confirmed that 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.

The Board has obtained an Assurance Report from the Auditor General on Directors’ Statement on Internal Control and it is given on page 146 of this Annual Report.


The Board of Directors is committed towards maintaining an effective Corporate Governance structure and process. The financial, operational and compliance functions of the Bank are


directed and controlled effectively within Corporate Governance practices. These procedures and practices that are in conformity with Corporate Governance directions issued by the Central Bank of Sri Lanka, the regulator for commercial banks, under Banking Act Direction No. 11 of 2007 and the Code of Best Practices on Corporate Governance issued jointly by The Securities and Exchange Commission of Sri Lanka and The Institute of Chartered Accountants of Sri Lanka are described in the Corporate Governance Report appearing on pages 56 to 86 of this Annual Report.

The Board has obtained a report from the Auditor General on the compliance with the provisions of the above mentioned Direction No. 11 of 2007.

HUMAN RESOURCES

One of the most valuable assets of the Bank is its employees and it is important for the Bank to develop them. Several measures were taken to strengthen the much-valued human capital in order to optimise their contribution towards the achievement of corporate objectives. The Bank’s Human Resource Management policies and practices are detailed in the Sustainability Report on pages 114 to 122 of this Report.

ACCOUNTING POLICIES

The accounting policies adopted in the preparation of Financial Statements are given on pages 156 to 166 There have been no changes in the accounting policies adopted by the Bank during the year under review.

GROSS INCOME

The main income of the Group is interest income, which comprises 80% of the total income. The gross income of the Group for the year 2010 was Rs. 66,867 million as against Rs. 66,128 million in comparison to the previous year. The Bank’s total income accounted for 95% (2009 - 96%) of total income of the Group.

PROFIT

The Bank recorded a pre-tax profit of Rs. 10,053 million in 2010 reflecting an increase of 139%, compared to Rs. 4,208 million recorded for the previous year. After deducting Rs. 3,687 million (Rs. 1,124 million in 2009) for income tax, the profit after tax for the year 2010 amounted to Rs. 6,365 million, a 106% increase compared to Rs. 3,084 million profit after tax reported in 2009.

The pre-tax profit of the Group also increased from Rs. 4,720 million to Rs. 11,075 million, an increase of 135% in comparison to the previous year. After deducting Rs. 4,162 million for income tax (Rs. 1,403 million in 2009), the profit after tax for the year of the Group increased to Rs. 6,913 million in 2010 from the profit after tax of Rs. 3,317 million reported in 2009.

STATED CAPITAL

The total issued and fully-paid up capital of the Bank as at 31 December 2010 was Rs. 5,000 million consisting of 5,000,000 ordinary shares.

SHAREHOLDING

The Government of Sri Lanka is the sole shareholder of the Bank.

SHARE INFORMATION

The earnings per share and net assets per share of the Group were Rs. 1,352.06 and Rs. 6,039.22 respectively, for the period under review.

DIVIDENDS

All profits after deduction of tax, loan loss provision and any such portion for reserves, if any, as the Government shall determine in consultation with the Board, will be declared as dividends to the Government. Accordingly, a sum of Rs. 3,096 million has been declared by the Bank as dividends for the year (2009 - Rs. 1,346 million).

RESERVES

The total reserves of the Group stood at Rs. 25,196 million as at 31 December 2010 (2009 - Rs. 21,583 million). The Group reserves consist of the following:

2010 2009Rs. ’000 Rs. ’000

Permanent reserve fund 2,777,500 2,650,000

Revaluation reserve 178,692 178,692

Special risk reserve of primary dealer unit 776,683 528,470

Foreign currency

translation 565,745 606,163

Other reserves 504,437 504,437

Retained profits 20,393,029 17,115,523

Total 25,196,086 20,583,285

ISSUE OF DEBENTURES

The Group had issued debentures (both listed and unlisted), amounting to Rs. 39,435 million as at 31 December 2010 (2009 - Rs. 19,113 million). The proceeds of these debentures were utilised to bridge the maturity gaps and to strengthen the supplementary capital base of the Bank. The details of debentures outstanding as at the date of Balance Sheet are given in Note 38 to the Financial Statements on page 215.


Details of profit relating to the Bank and the Group are given in table 1:

Table 1 Bank Group2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Profit for the year after payment of all expenses and providing for depreciation, possible loan losses and contingencies before VAT and Tax 14,053,822 7,202,472 14,989,548 7,665,619

VAT on financial services (4,001,253) (2,994,825) (4,126,961) (3,076,362)

Share of profit of Associate Companies before tax – – 212,898 130,653

Profit before income tax 10,052,569 4,207,647 11,075,485 4,719,910

Provision for taxation (3,687,257) (1,123,641) (4,162,289) (1,402,987)

Net profit after taxation 6,365,312 3,084,006 6,913,196 3,316,923

Appropriations

Transfers to permanent reserve fund 127,500 65,000 127,500 65,000

Transfers to primary dealer special risk reserve 248,213 187,571 248,213 187,571

Dividends 3,096,410 1,346,410 3,096,410 1,346,410

Unappropriated profit carried forward 2,893,189 1,485,025 3,441,073 1,717,942


CORPORATE DONATIONS

The donations granted during the year amounted to Rs. 1,355,000/-. In addition the Bank has incurred Rs. 28,893,000/- on Corporate Sustainability & Responsibility activities.

CORPORATE SUSTAINABILITY AND RESPONSIBILITY

The programmes carried out under the Corporate Sustainability and Responsibility (CS & R) are detailed on pages 95 to 125 under the Sustainability Report.

PROPERTY, PLANT & EQUIPMENT

The total capital expenditure incurred by the Group on the acquisition of property, plant & equipment during the year amounted to Rs. 1,232 million (2009 - Rs. 1,488 million), the details of which are given in Note 29 to Financial Statements on pages 202 to 210 of this Annual Report.

MARKET VALUE OF FREEHOLD PROPERTIES

The value of freehold properties owned by the Group as at 31 December 2010 is included in Note 29 to Financial Statements at Rs. 4,242 million (2009 - Rs. 4,177 million).

DIRECTORS

The Board of Directors of the Bank of Ceylon as at 31 December 2010, consists of six members including Chairman and they do not hold any executive positions in the Bank. They bring a wide range of skills and experience to the Board. The qualifications and experience of the present Directors are given on pages 14 to 16 of this Annual Report.

The Directors of the Bank who held office from January to May 2010 during the year under review were:


Dr. R H S SamaratungaNon-Executive Ex officio Director


Mr. G K A Chaminda K KularatneNon-Executive Director

Mr. G GallageIndependent Non-Executive Director


Dr. B KaluarachchiNon-Executive Director

Mr. V KanagasabapathyNon-Executive Alternate Director to Dr. R H S Samaratunga

The Board was reconstituted and the Directors who held office from May/June 2010 were:


Mr. S R AttygalleNon-Executive Ex officio Director


Ms. Nalini AbeywardeneNon-Executive Director

Mr. Chandrasiri de SilvaNon-Executive Director

Mr. K L HewageIndependent Non-Executive Director

Mr. V KanagasabapathyNon-Executive Alternate Director to

Mr. S R Attygalle

The Directors are classified as Independent Directors on the basis given in Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks issued by the Central Bank of Sri Lanka.

BOARD SUBCOMMITTEES

The Board has formed four subcommittees complying with the aforesaid Banking Act Direction No. 11 of 2007 to ensure oversight control over affairs of the Bank. The subcommittee composition is given on page 80 of this Annual Report.

DIRECTORS’ MEETINGS

Attendance of Directors at Board and subcommittee meetings are given on page 86 of this Annual Report.

DIRECTORS’ RESPONSIBILITIES FORFINANCIAL REPORTING

The Directors are responsible for the preparation of the Financial Statements that will reflect a true and fair view of the 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, Banking Act No. 30 of 1988 and its amendments, Bank of Ceylon Ordinance No. 53 of 1938 and its amendments and the Listing rules of the Colombo Stock Exchange. In the case of Subsidiaries, the Financial statements are prepared also in accordance with the provisions of the Companies Act No. 7 of 2007.

The Statement of Directors’ Responsibility for Financial Reporting is given on page 145 of this Annual Report and forms an integral part of this Report of the Directors.

DIRECTORS’ INTERESTS IN CONTRACTS

Directors’ interests in contracts with the Bank, both direct and indirect are given on pages 141 to 144. These interests have been declared at meetings of the Board of Directors. Except for the contracts given therein, the Directors have no any direct or indirect interest in other contracts or proposed contracts with the Bank.

DIRECTORS’ INTERESTS IN DEBENTURESISSUED BY THE BANK/GROUP

Dr. Gamini Wickramasinghe (Chairman) has invested US$ 349,000 in debentures issued by the Bank during the year 2008 and appears in the Debenture Register as at 31 December 2010. There were no debentures registered in the name of any other Director as at the beginning and at the end of the year.

DIRECTORS’ ALLOWANCES/FEES

The allowances/fees payable to Board of Directors are made in terms of the provisions/contents in the Public Enterprises Circular Nos. PED 35 dated 17 January 2006, PF/PE/23 dated 19 July 2002, letter dated 24 March 2008 all issued by the Department of Public Enterprises of the Ministry of Finance and Planning and the Bank of Ceylon Ordinance No. 53 of 1938 and its amendments.

The Directors’ remuneration in respect of the Group and the Bank for the financial year ended 31 December 2010 are given on page 172.

COMPLIANCE WITH LAWS AND REGULATIONS

The Directors, to the best of their knowledge and belief confirm that the Group has not engaged in any activities contravening the laws and regulations. Details of the Bank’s compliance with laws and regulations are given on page 93 under Report on Risk and Compliance which forms an integral part of this Report.


OUTSTANDING LITIGATION

The Directors are of the opinion that the litigation currently pending against the Bank will not have a material impact on the reported financial results or future operations of the Bank.

STATUTORY PAYMENTS

The Board confirms that all statutory payments due to the Government and in relation to employees have been made on time.

ENVIRONMENTAL PROTECTION

The Bank has not engaged in any activity, which has caused detriment to the environment. Further, precautions taken to protect the environment have been given in Sustainability Report on pages 111 to 113.

POST BALANCE SHEET EVENTS

The Directors are of the view that no material events have arisen in the interval between the end of the financial year and the date of this Report, that would require adjustments or disclosure.

GOING CONCERN

The Directors are confident that the resources of the Bank are adequate to continue its operations. Therefore, it has applied the going concern basis in preparing the Financial Statements.


AUDIT REPORT

The Auditor General is the Auditor of Bank of Ceylon in terms of the provisions of Article 154 of the Constitution of the Democratic Socialist Republic of Sri Lanka. Report of the Auditor General on the Financial Statements of the Bank and the Consolidated Financial Statements of the Bank and its Subsidiaries as at 31 December 2010 is given on page 149 of this Annual Report.

By Order of the Board,

Janaki Senanayake SiriwardaneSecretary, Bank of Ceylon/Secretary to the Board




Related party disclosures as required by the Sri Lanka Accounting Standard No. 30 on ‘Related Party Disclosures’ (Revised 2005) are detailed in Note 47 to the Financial Statements on pages 226 to 233 In addition, the transactions that have been carried out in the ordinary course of business in an arm’s length basis with entities where the Chairman or a Director of the Bank is the Chairman or a Director of such entities, are detailed below:

Company Relationship Nature of Transactions Limit Balance/Amountoutstanding

as at 31.12.10

Balance/Amountoutstanding

as at 31.12.09

Security

’000* ’000* ’000*

DR. GAMINI WICKRAMASINGHEBank of Ceylon (UK) Limited

Chairman Current account(Nostro account)

Placements

Other payable

US$ 138(Rs. 15,576)

EURO 17,801(Rs. 2,639,955)

GBP 427(Rs. 73,619)

EURO 40,000(Rs. 5,932,068)

GBP 48,749(Rs. 8,395,450)

181,675

Ceybank Holiday Homes (Private) Limited

Chairman Current accountTime depositOther payable

– 3,7117822

2,58575

138

Other receivable 700 580

Property Development PLC

Chairman Current accountTime deposit

4,502 755,400

1,965 112,000

Repo balance 454,200 989,140

Rent paid in advance 235,179 209,328

Deposit for fuel 907 907

Other payableLetter of creditLetter of guarantee

5,00038,15086,8153,000

110,547 Related shipping document

Mireka Capital Land (Private) Limited

Director Current accountCurrent account

Term loan

Other receivable

US$ 24,000(Rs. 2,676,120)

1,533US$ 2

(Rs. 174)US$ 22,700

(Rs. 2,531,163)

12,673US$ 0.3(Rs. 34)

US$ 24,000(Rs. 2,749,320)

12,809

Clean basis and time deposits placed by Shing Kwan Investment (Singapore) Pte. Limited

The Lanka Hospital Corporation PLC

Director Current accountCurrent account

68US$ 2

(Rs. 172)

68US$ 2

(Rs. 176)

Informatics Group ofCompanies**

ManagingDirector

Savings accountSavings account

8 US$ 3

(Rs. 327)

14US$ 16

Rs. 1,854)

Current account 927 9,555

Time deposit US$ 474(Rs. 52,905)

US$ 454(Rs. 52,008)

Overdraft 45,600 46,663 46,369 Time depositsTerm loan 17,300 2,883 6,343 Mortgage over commercial

propertyLetter of guarantee 9,600 4,531 2,314 Residential propertyLetter of guarantee US$ 1,778

(Rs. 203,679)

Procurement -transaction value

Payable (excluding taxes)

55,084 46,556

* Currencies in thousands** The Board of Directors of Bank of Ceylon has approved the following:

(1) In terms of minute No. 1.2.07 of 05.05.2009 appointing Visual Computing Systems (Private) Limited (A company belonging to Informatics Group) to provide maintenance support in Tandem server.

(2) In terms of minute No. 5.2 of 14.08.2009 to procure 12 numbers of Automated Teller Machines from Informatics (Private) Limited.



Company Relationship Nature of Transaction Limit Balance/AmountOutstanding as at

31.12.10

Balance/AmountOutstanding as at

31.12.09

Security

’000* ’000* ’000*

MR. S R ATTYGALLE

Sri Lanka Ports Authority Director Savings accountSavings account

188,166 US$ 381

(Rs. 42,557)

Current account 591,113

Time deposit 24,636

Time deposit US$ 23,107

(Rs. 2,576,560)

Term loan US$ 62,512 US$ 31,256 Negative pledge over the

(Rs. 3,485,215) assets imported

Letter of credit 750,000 255,417 Clean

Board of Investment Director Current account 280,438

MR. RAJU SIVARAMAN

Ceylease FinancialServices Limited

Chairman Current accountRepo balance

27,11127,000

6,38117,000

Overdraft 50,000 Clean

Series of loan 450,000 26,689 58,880 Lease receivable/ hire purchase

Bridging finance 100,000 receivable backed by Power of

Attorney

Money market loan 350,000 210,000 86,000 Clean

Letter of credit 50,000 Bills of exchange and shipping documents

Other receivable 615

Other payable 1,577

Arch-Triad Consultants (Private) Limited**

ManagingDirector

Consultancy services value

980 10,997

Milco (Private) Limited Director Current accountTime depositLease 17,900

25,498315,431

1,465 Machinery

Merchant Credit of Sri Lanka Limited

Director Savings accountCurrent account

8650,875 36,964

Time deposit 15 15

Series of loan 250,000 –

Lease receivables backed by Power of Attorney

Overdraft 50,000

Money market loan 50,000 50,000 30,000

Bridging finance 100,000

Letter of credit 10,000

Letter of guarantee 4,000

Repo balance – 14,000

Reverse Repo balance

– 127,000

* Currencies in thousands

** The Board of Directors of Bank of Ceylon has approved the following:

(1) In terms of minute No. 4.1 of 14.08.2009 appointing Arch-Triad Consultants (Private) Limited as the interior design consultants for interior/exterior refurbishment of Super Grade Branch, Nugegoda.

(2) In terms of minute No. 9.2.10 of 27.04.2010 appointing Arch-Triad Consultants (Private) Limited as the consultants for project of constructing a new building for Bank of Ceylon at Nelliady.




31.12.10


31.12.09

Security

’000* ’000* ’000*

MS. NALINI ABEYWARDENE

Hotels Colombo (1963)Limited

Director Current accountTime deposit

2,58979,610

5,69531,085

Other receivable 19,566 110,195

MR. CHANDRASIRI DE SILVA

Hotels Colombo (1963)Limited

Director Current accountTime deposit

2,58979,610

5,69531,085

Other receivable 19,566 110,195

BoC Travels (Private) Limited


27,55840,000

17,20220,000

Debenture 10,000 5,000

Overdraft 9.600 Book debts

Letter of guarantee 50,000 50,000 50,000 Debentures and time deposits

Other payable 794

MR. K L HEWAGE

Ceybank Asset Management (Private) Limited

Chairman Current accountRepo balanceInvestment in Units

13,486 8,200

1,309,174

MR. V KANAGASABAPATHY

Merchant Bank of Sri Lanka PLC

Director Current accountDebenture

35,725 1,083

39,361370

Overdraft 50,000 25,916 11,615

Series of loan 600,000 81,647 26,250 Lease receivable backed by Power of AttorneyMoney market loan 100,000

Repo balance 10,000 35,000

Grant on immediate

Credit on cheque limit

1,000

Intra day overdraft 5,000

Guarantee 2,500

Hotel DevelopersLanka PLC

Director Savings account US$ 3(Rs. 349)

US$ 3(Rs. 357)

Savings account JPY 5(Rs. 7)

JPY 1(Rs. 1)

Current account 1,912 4,531

Term loan(Granted under SRCC & T)

350,000 78,750 113,750 Treasury guarantee





31.12.10


31.12.09

Security

’000* ’000* ’000*

De La Rue Lanka Currency & Securities Print (Private) Limited

Director Savings account GBP 22 GBP 217

Current accountCurrent account

(Rs. 3,754)842

GBP 46

(Rs. 39,463)7,091

GBP 170(Rs. 7,849) (Rs. 30,915)

Time deposit 15,962 13,803

Overdraft 30,000 281 14,256 Mortgage over commercial property

Letter of credit 38,631 Related shipping documents

Letter of credit US$ 34(Rs. 3,749) Time deposits

Letter of guarantee 16,262 7,690

Distance LearningCentre Limited


2,5868,243

3,3827,680

Overdraft 2,000 Time deposits

Lanka HydraulicInstitute

Director Savings accountCurrent account

47 18

31169



DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING

The responsibility of Directors in relation to financial reporting of the Bank of Ceylon and the Group is set out in the following statement.

FINANCIAL STATEMENTS

In terms of the provisions of the Bank of Ceylon Ordinance No. 53 of 1938 and its amendments read with the Banking Act No. 30 of 1988 and its amendments, Directions issued under it, the Listing Rules of the Colombo Stock Exchange, and the Sri Lanka Accounting Standards, the Directors of the Bank are responsible for:

(a) the state of affairs of the Bank and the Group as at 31 December 2010, and

(b) the profit of the Bank and the Group for the financial year ended 31 December 2010.

Accordingly, the Directors confirm that the Financial Statements presented reflect a true and fair view of the state of affairs of the Bank of Ceylon and the Group as at 31 December 2010. The Directors acknowledge that in preparing the Financial Statements for the year 2010, presented in this Annual Report, the most appropriate accounting policies have been used and applied consistently supported by judgments and estimates that are reasonable and prudent. Material departures, if any, have been disclosed and explained.

GOING CONCERN

The Directors are of the view that the Bank and the Group have adequate resources to continue in business for the foreseeable future. Accordingly, they have continued to adopt the going concern basis in preparing the Financial Statements.

INTERNAL CONTROLS, RISK MANAGEMENTAND COMPLIANCE

The Directors are also responsible for the system of internal financial controls and risk management and place considerable importance on maintaining a strong control environment to protect and safeguard the Bank’s assets and prevent fraud and mismanagement. Whilst inherent and residual risks cannot be completely eliminated, the Bank endeavours to minimise them by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and practiced within predetermined procedures and constraints.

A statement by the Directors on the Bank’s internal control mechanism confirming that the financial reporting system has been designed to provide reasonable assurance regarding the reliability of financial reporting is given on pages 147 and 148 of this Annual Report. The Board obtained an Assurance Report from the Auditor General on Directors’ Statement on Internal Control and it is given on page 146.

The Directors and Management have put in place risk management policies and guidelines. Management committees are established to monitor and manage material risks. Arrangements are made to submit reports on risk to the Integrated Risk Management Committee on a quarterly basis for discussion. Compliance with applicable laws, regulations, rules, directives and guidelines are monitored by the Risk Division and reported to the Board.

The Audit Committee and Integrated Risk Management Committee, on an ongoing basis, strengthens the effectiveness of internal control and risk management procedures. The reports of the Audit Committee and Integrated Risk Management Committee are included on pages 81 & 82 and 85 & 86 respectively of this Annual Report.

AUDIT REPORT

Pursuant to provisions of Article 154 of the Constitution of the Democratic Socialist Republic of Sri Lanka, the Auditor General is the Auditor of the Bank and issues the final opinion on the Financial Statements of the Bank. The responsibilities of the Auditor in relation to the Financial Statements are set out in the Report of the Auditor General on page 149 of this Annual Report.

By Order of the Board,

Janaki Senanayake SiriwardaneSecretary, Bank of Ceylon/Secretary to the Board



REPORT ON THE DIRECTORS’ STATEMENT ON INTERNAL CONTROLS OF BANK OF CEYLON

Introduction

This report is to provide assurance on the Directors’ Statement on Internal Control of Bank of Ceylon included in the annual report for the year ended 31 December 2010.

Management’s responsibility

Management is responsible for the preparation and presentation of the Statement in accordance with the “Guidance for Directors of Banks on the Directors’ Statement on Internal Control” issued in compliance with the section 3(8)(ii)(b) of the Banking Act Direction No. 11 of 2007, by the Institute of Chartered Accountants of Sri Lanka.

INDEPENDENT ASSURANCE REPORT

My responsibilities and compliance with SLSAE 3050

My responsibility is to issue a report on the Statement based on the work performed. I conducted my engagement in accordance with Sri Lanka Standard on Assurance Engagements SLSAE 3050 - Assurance Report for Banks on Directors’ Statement on Internal Control issued by the Institute of Chartered Accountants of Sri Lanka.

Summary of work performed

This engagement has been conducted to assess whether the Statement is both supported by the documentation prepared by or for directors and appropriately reflects the process the directors have adopted in reviewing the system of internal control for the Bank.

The procedures performed are limited primarily to inquiries of bank personnel and the existence of documentation on a sample basis that supports the process adopted by the Board of Directors.

SLSAE 3050 does not require me to consider whether the Statement covers all risks andcontrols, or to form an opinion on the effectiveness of the Bank’s risk and control procedures. SLSAE 3050 also does not require me to consider whether the processes described to deal with material internal control aspects of any significant problems disclosed in the annual report will, in fact, remedy the problems.

Conclusion

Based on the procedures performed, nothing has come to my attention that causes me to believe that the Statement included in the annual report is inconsistent with my understanding of the process the Board of Directors has adopted in the review of the design and effectiveness of internal control of the Bank.

H A S SamaraweeraActing Auditor General

24 March 2011


DIRECTORS’ STATEMENT ON INTERNAL CONTROL

INTRODUCTION

The Board is pleased to provide the Directors’ Statement on Internal Control (‘Statement’), that was prepared in line with Section 3 (8) (ii) of the Banking Act Direction No. 11 of 2007, on Corporate Governance for Licensed Commercial Banks in Sri Lanka which outlines the processes and procedures that the Board has adopted in reviewing the adequacy and integrity of the system of internal controls of the Bank.

RESPONSIBILITY

The Board acknowledges its overall responsibility for maintaining a sound internal control system to safeguard the stakeholders’ interests and the Bank’s assets. The Board is of the view that the internal control framework is designed to manage the Bank’s risks within an acceptable risk profile, rather than to eliminate the risk of failure, to achieve the policies, goals and objectives of the Bank. It can therefore only provide reasonable, rather than absolute assurance of effectiveness against material misstatement of management and financial information or against financial losses and frauds.

The Board has in place an on-going process for identifying, evaluating, monitoring and managing significant risks that may affect the achievement of business objectives. The process which has been instituted throughout the Bank is updated and reviewed from time to time to suit the changes in the business environment and this on-going process has been in place for the whole financial year under review.

The process is regularly reviewed by the Board through the Audit Committee and accords with the guidance for Directors of Banks on the Directors’ Statement of Internal Control issued by the Institute of Chartered Accountants of Sri Lanka. As per the said guidance, significant processes affecting significant accounts of the Bank were assessed along with the key risk areas of the Bank.

The Management assists the Board in the implementation of the Board’s policies and procedures on risk and control by;

identifying and evaluating the risks faced;

formulating related policies and procedures to manage these risks;

designing, operating and monitoring a suitable system of internal controls; and

implementing the policies approved by the Board.

KEY INTERNAL CONTROL PROCESSES

The key processes that the Directors have established in reviewing the adequacy and integrity of the system of internal controls include the following:

RISK MANAGEMENT FRAMEWORK

The Board has established an organisation structure with clearly defined lines of responsibility, authority limits and accountability aligned to business and operational requirements, which support the maintenance of a strong control environment. It has extended the responsibilities of the Audit Committee to include the assessment of internal controls, through the internal audit function.

The Board has also delegated the responsibility of reviewing the effectiveness of risk management to the Integrated Risk Management Committee. The effectiveness of the risk management system is monitored and evaluated by the Bank’s risk management function, on an on-going basis.

Risk management principles, policies, procedures and practices are updated regularly to ensure relevance and compliance with current/applicable laws and regulations, and are made available to all employees. The Bank also adopted a Whistle-Blower Policy, providing an avenue for employees to report actual or suspected malpractice, misconduct or violations of the Bank’s policies and regulations in a safe and confidential manner.

Establishment of the three (3) lines of Defence Concept - risk taking units, risk control unit (Independent Integrated Risk Management Unit) and internal audit. The risk taking units are responsible for the day-to-day management of risks inherent in their business activities while the risk control unit is responsible for setting the risk management framework and developing tools and methodologies. The internal audit provides independent assurance of the effectiveness of the risk management approach.

INTERNAL AUDIT FUNCTION

The internal audit checks for compliance with policies and procedures and the effectiveness of the internal control system on an on-going basis using samples and rotational procedures, and highlights significant findings in respect of any non-compliance. Audits are carried out on all units and branches, the frequency of which is determined by the level of risk assessed, to provide an independent and objective report. The annual audit plan is reviewed and approved by the Audit Committee. Findings of the internal audit are submitted to the Audit Committee for review at their regular meetings.

The Audit Committee of the Bank reviews internal control issues identified by the internal audit, regulatory authorities and management, and evaluates the adequacy and effectiveness of the risk management and internal control system. They also review the internal audit function with particular emphasis on the scope of audits and quality of internal audits. The Audit Committee submits its recommendations to the Board along with the minutes of the meetings and follows up on the action to be taken. Further details of the activities undertaken by the Audit Committee of the Bank during the year under review are set out in the Audit Committee Report appearing on pages 81 and 82.

OTHER KEY ELEMENTS OF INTERNAL CONTROL

The other key elements of the procedures established by the Board that provide effective internal controls include the following:

Submission of annual business plan and budget is submitted to the Board for approval. Actual performances are reviewed against the targeted results on a monthly basis allowing timely responses and corrective actions to be taken to mitigate risks. The Board reviews regular reports from the management on the key operating statistics, as well as legal and regulatory matters. The Board also approves any changes or amendments to the Bank’s policies.

Several subcommittees of the Board are set up to assist the Board to perform its oversight functions. Specific responsibilities have been delegated to these subcommittees, all of which have formalised terms of reference. These Committees have the authority to examine all matters within their scope and report to the Board with their recommendations.


DIRECTORS’ STATEMENT ON INTERNAL CONTROL

Asset & Liability Management Committee, Credit Policy Committee, Investment Committee, Marketing Committee, Human Resource Policy Committee etc are also established as part of its stewardship function to ensure effective management and supervision of the areas under the respective Committees’ purview.

A clearly defined framework with appropriate empowerment and authority limits has been approved by the Board for granting of credits, acquisitions and disposals of assets, awarding tenders as well as writing off operational and credit items.

There are policies and procedures in place to ensure compliance with internal control and the prescribed laws and regulations. These policies and procedures are set out in the Bank’s Operating Instruction Circulars and are updated from time to time in tandem with changes to the business environment or regulatory guidelines.

In assessing the internal control system on financial reporting , the Bank reviews all procedures and controls that are connected with significant accounts and disclosures of the Financial Statements of the Bank. These in turn were observed and checked by the internal audit for suitability of design and effectiveness on an on-going basis. Documentation of all processes is a dynamic activity that happens on an on-going basis. Areas with respect to related party transactions, risk disclosures, commitments and contingences are identified to be completed in the future. The assessment did not include Subsidiaries of the Bank.

CONFIRMATION

Based on the above processes and procedures, the Board confirms that the financial reporting system of the Bank has been designed to provide reasonable assurance on the reliability of financial reporting and the preparation of Financial Statements for external purposes that has been done in accordance with Sri Lanka Accounting Standards and regulatory requirements of the Central Bank of Sri Lanka. The Board also confirms that the Bank complies with section 3 (8) (ii) (b) of the Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks in Sri Lanka in relation to the Directors’ Statement on Internal Control.

REVIEW OF THE STATEMENT BY AUDITORGENERAL

The Auditor General, the External Auditor of the Bank has reviewed this Directors’ Statement on Internal Control in accordance with Sri Lanka Standard on Assurance Engagements (SLSAE) 3050 - Assurance Report for Banks on Directors’ Statement on Internal Control issued by The Institute of Chartered Accountants of Sri Lanka.

Based on the procedures performed, the Auditor General has reported to the Board that nothing has come to his attention that causes him to believe that this Statement is inconsistent with his understanding of the process Board has adopted in the review of the design and effectiveness of the internal control system over financial reporting of the Bank. The Independent Assurance Report of the Auditor General confirming the above is given on page 146 of this Annual Report.

For and on behalf of the Board,


Mr. R. SivaramanDirector

Mr. V. KanagasabapthyChairmanAudit Committee



REPORT OF THE AUDITOR GENERAL

The audit of the accompanying financial statements of Bank of Ceylon (“Bank”) and the consolidated financial statements of the Bank and its Subsidiaries as at 31 December 2010 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 (Nos. 1 to 48) to the financial statements was carried out under my direction in pursuance of provisions in Article 154 (1) of the Constitution of the Democratic Socialist Republic of Sri Lanka. The financial statements of the Subsidiaries were audited by firms of Chartered Accountants in public practice appointed by the members of the respective Subsidiaries.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatements, 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

My responsibility is to express an opinion on these financial statements based on my audit. The audit was carried out in accordance with Sri Lanka Auditing Standards which require that the audit shall be planned and performed to obtain reasonable assurance as to whether the financial statements are free from material misstatements. The audit includes examining on a test basis, evidence supporting the amounts and disclosures in the said financial statements. The audit also includes assessing the accounting policies used and significant estimates made by the management as well as evaluating the overall presentation of financial statements. I have obtained all the information and explanations which to the best of my knowledge and belief were necessary for the purpose of my audit. I therefore believe that my audit provides a reasonable basis for my opinion.

OPINION

So far as appears from my examination, I am of opinion that the Bank of Ceylon had maintained proper accounting records for the year ended 31 December 2010 and the financial statements give a true and fair view of the state of affairs of the Bank of Ceylon as at 31 December 2010 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

I am of opinion that the consolidated financial statements give a true and fair view of the state of affairs as at 31 December 2010 and the profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards, of the Bank, and its Subsidiaries dealt with thereby, so far as concerns the shareholders of the Bank.

REPORT ON OTHER LEGAL AND REGULATORYREQUIREMENTS

These financial statements present the information required by the Banking Act, No. 30 of 1988 and subsequent amendments thereto.

EXEMPTION

The Bank has been exempted from the provisions of Part II of the Finance Act, No. 38 of 1971 by an Order of the then Minister of Finance published in the Government Gazette No. 715 of 14 May 1992 by virtue of powers vested in him by Section 5 (1) of the said Finance Act.

REPORT TO PARLIAMENT

My report to Parliament in pursuance of provisions in Article 154 (6) of the Constitution will be tabled in due course.

H A S SamaraweeraActing Auditor General


INCOME STATEMENT

Bank GroupFor the year ended 31 December Note Page 2010 2009 Change 2010 2009 Change

No. Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 %

Income 1 167 63,362,866 63,461,366 (0.2) 66,866,792 66,128,194 1.1

Interest income 2 167 50,853,347 53,076,779 (4.2) 53,062,286 55,279,046 (4.0)

Interest expense 3 167 (31,205,160) (38,266,874) (18.5) (32,019,161) (39,489,821) (18.9)

Net interest income 19,648,187 14,809,905 32.7 21,043,125 15,789,225 33.3

Fee and commission income 4 167 6,014,178 4,255,204 41.3 6,487,663 4,353,702 49.0

Fee and commission expenses 5 168 (467,298) (544,395) (14.2) (556,008) (550,477) 1.0

Net fee and commission income 5,546,880 3,710,809 49.5 5,931,655 3,803,225 56.0

Foreign exchange profit 408,686 1,566,916 (73.9) 418,461 1,566,916 (73.3)

Dividend income 6 168 468,998 347,878 34.8 257,910 150,456 71.4

Net gains from investment in securities 7 168 3,105,791 1,961,210 58.4 3,508,297 2,012,436 74.3

Other operating income 8 168 1,143,913 753,247 51.9 1,524,738 1,128,780 35.1

5,127,388 4,629,251 10.8 5,709,406 4,858,588 17.5

Operating income 30,322,455 23,149,965 31.0 32,684,186 24,451,038 33.7

Operating expenses

Personnel costs 9 168 (8,044,072) (8,107,775) (0.8) (8,731,783) (8,572,330) 1.9

Staff retirement benefits 10 169 (2,266,119) (2,409,631) (6.0) (2,299,079) (2,427,467) (5.3)

Premises, equipment and establishment expenses 11 172 (2,858,245) (2,677,921) 6.7 (2,751,960) (2,491,248) 10.5

Other operating expenses 11 172 (2,908,256) (2,450,593) 18.7 (3,573,401) (2,954,607) 20.9

(16,076,692) (15,645,920) 2.8 (17,356,223) (16,445,652) 5.5

Operating profit before provisions 14,245,763 7,504,045 89.8 15,327,963 8,005,386 91.5

Provision for loan losses 12 172 (1,559,894) (1,801,705) (13.4) (1,725,997) (1,894,977) (8.9)

Recovery of non-performing advances 13 173 1,367,953 1,500,132 (8.8) 1,394,539 1,506,205 (7.4)

Provision for fall in value of investments and dealing securities – – – (6,957) 49,005 (114.2)

Operating profit before VAT 14,053,822 7,202,472 95.1 14,989,548 7,665,619 95.5

Value added tax on financial services (4,001,253) (2,994,825) 33.6 (4,126,961) (3,076,362) 34.2

Operating profit 10,052,569 4,207,647 138.9 10,862,587 4,589,257 136.7

Share of profit of Associate Companies before tax 14 173 – – – 212,898 130,653 62.9

Profit before taxation 10,052,569 4,207,647 138.9 11,075,485 4,719,910 134.7

Provision for taxation 15 173 (3,687,257) (1,123,641) 228.2 (4,162,289) (1,402,987) 196.7

Profit after taxation 6,365,312 3,084,006 106.4 6,913,196 3,316,923 108.4

Attributable to:

Equity holder of the parent 6,365,312 3,084,006 106.4 6,760,310 3,299,873 104.9

Minority interest – – – 152,886 17,050 796.7

Profit for the year 6,365,312 3,084,006 106.4 6,913,196 3,316,923 108.4

Per Share:

Basic earnings per share (Rs.) 16 175 1,273.06 616.80 1,352.06 659.97

Dividend per share (Rs.) 16 175 619.28 269.28 619.28 269.28

The Significant Accounting Policies on pages 156 to 166 and notes on pages 167 to 236 form an integral part of these Financial Statements.


Bank GroupAs at 31 December Note Page 2010 2009 Change 2010 2009 Change

No. Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000 %

ASSETSCash and short-term funds 17 176 14,103,803 13,508,852 4.4 13,754,857 13,517,254 1.8 Balances with Central Banks 18 176 25,894,466 16,263,468 59.2 25,894,466 16,263,468 59.2 Treasury bills, bonds and other eligible bills 19 176 45,379,013 28,735,396 57.9 46,348,696 29,688,285 56.1 Securities purchased under re-sale agreements 40,840,091 6,615,045 517.4 40,840,091 6,667,925 512.5 Dealing securities 20 177 3,232,348 1,827,869 76.8 3,805,443 2,137,383 78.0 Placements with and loans to other banks 21 185 42,679,798 45,867,067 (6.9) 47,773,386 45,887,067 4.1 Treasury bonds maturing after one year 51,296,744 46,910,486 9.4 51,749,203 46,910,486 10.3 Loans and advances to customers- Bills of exchange 22.1 185 15,395,903 15,254,316 0.9 16,015,528 15,700,891 2.0 - Loans & advances 22.2 186 353,097,916 245,602,284 43.8 355,265,395 247,201,769 43.7 - Lease rentals receivable - within one year 22.3 187 1,837,935 1,920,713 (4.3) 4,560,906 4,790,308 (4.8)- Lease rentals receivable - one to five years 22.4 187 2,387,835 2,287,871 4.4 6,743,744 5,106,358 32.1 - Lease rentals receivable - after five years 22.5 188 1,995 207 863.8 2,224 300 641.3

372,721,584 265,065,391 40.6 382,587,797 272,799,626 40.2 Government of Sri Lanka Restructuring Bonds 23 192 8,547,000 8,547,000 – 8,547,000 8,547,000 –Investment securities 24 192 80,643,496 75,844,742 6.3 81,118,367 76,453,242 6.1 Investment properties 25 198 – – – 386,867 391,730 (1.2)Investments in Associate Companies 26 199 844,658 844,658 – 1,284,563 1,084,065 18.5 Investments in Subsidiary Companies 27 200 5,279,094 3,191,859 65.4 – – –Other assets 28 202 17,706,268 19,184,449 (7.7) 18,313,650 19,774,648 (7.4)Property, plant & equipment 29 202 5,544,589 5,660,753 (2.1) 7,370,308 7,072,057 4.2 Leasehold land 30 210 77,515 63,290 22.5 119,978 107,110 12.0 Intangible assets 31 211 163,826 110,812 47.8 170,404 119,205 43.0 Total assets 714,954,293 538,241,137 32.8 730,065,076 547,420,551 33.4

FINANCED BY:LIABILITIESDeposits from customers 32 211 524,232,697 408,607,442 28.3 529,318,700 411,459,582 28.6 Borrowed funds 33 212 52,445,153 33,098,377 58.5 57,432,015 35,767,123 60.6 Securities sold under re-purchase agreements 34 212 53,522,487 34,203,701 56.5 52,968,787 32,968,041 60.7 Insurance provision - life 35.1 212 – – – 66,937 41,336 61.9 Insurance provision - non life 35.2 213 – – – 252,774 181,569 39.2 Tax payable 2,199,758 189,824 1,058.8 2,422,527 287,650 742.2 Deferred tax liability 36 214 457,587 409,453 11.8 489,525 440,132 11.2 Other liabilities 37 215 15,258,392 18,789,140 (18.8) 16,417,749 19,627,591 (16.4)Debentures 38 215 38,706,348 18,044,613 114.5 39,434,565 19,113,386 106.3 Total liabilities 686,822,422 513,342,550 33.8 698,803,579 519,886,410 34.4

SHAREHOLDERS’ EQUITYStated capital 39 220 5,000,000 5,000,000 – 5,000,000 5,000,000 –Permanent reserve fund 40 220 2,777,500 2,650,000 4.8 2,777,500 2,650,000 4.8 Retained profits 18,712,777 15,819,588 18.3 20,393,029 17,115,523 19.1 Reserves 41 220 1,641,594 1,428,999 14.9 2,025,557 1,817,762 11.4 Total equity attributable to the parent 28,131,871 24,898,587 13.0 30,196,086 26,583,285 13.6 Minority interest – – – 1,065,411 950,856 12.0

Total equity 28,131,871 24,898,587 13.0 31,261,497 27,534,141 13.5 Total shareholders’ equity and liabilities 714,954,293 538,241,137 32.8 730,065,076 547,420,551 33.4

Commitments and contingencies 42 221 223,164,930 246,244,648 (9.4) 224,942,115 246,316,116 (8.7)


These Financial Statements give a true and fair view of the state of affairs of Bank of Ceylon and the Group as at 31 December 2010 and its profit for the year then ended.

W A Asoka Rupasinghe

Chief Financial Officer

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.

Approved and signed for and on behalf of the Board by,

Dr. Gamini Wickramasinghe R Sivaraman B A C Fernando

Chairman Director General Manager

Colombo

16 March 2011

BALANCE SHEET


Stated Permanent Reserves Retained Total Note Page capital reserve fund Other Revaluation profits equity

No. reserves reservesRs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Bank

Balance as at 01 January 2009 5,000,000 2,585,000 1,055,732 126,961 14,334,563 23,102,256

Net profit for the year 2009 – – – – 3,084,006 3,084,006

Dividends for 2009 16.1 176 – – – – (1,346,410) (1,346,410)

Transfers to permanent reserve 40 220 – 65,000 – – (65,000) –

Revaluation adjustment 41.1 220 – – – (1,662) – (1,662)

Net exchange translation adjustment 41.3 221 – – 60,397 – – 60,397

Transfers to primary dealer special risk reserve 41.4 221 – – 187,571 – (187,571) –

Balance as at 31 December 2009 5,000,000 2,650,000 1,303,700 125,299 15,819,588 24,898,587

Balance as at 01 January 2010 5,000,000 2,650,000 1,303,700 125,299 15,819,588 24,898,587

Net profit for the year 2010 – – – – 6,365,312 6,365,312

Dividends for 2010 16.1 176 – – – – (3,096,410) (3,096,410)

Transfers to permanent reserve 40 220 – 127,500 – – (127,500) –

Transfers to exchange gain on conversion of London branch into a Subsidiary 41.3 221 – – (39,566) – – (39,566)

Net exchange translation adjustment 41.3 221 – – 3,948 – – 3,948

Transfers to primary dealer special risk reserve 41.4 221 – – 248,213 – (248,213) –

Balance as at 31 December 2010 5,000,000 2,777,500 1,516,295 125,299 18,712,777 28,131,871

Attributable to the parentStated Permanent Reserves Retained Minority Total

Note Page capital reserve fund Other Revaluation profits interest equityNo. reserves reserves

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Group

Balance as at 01 January 2009 5,000,000 2,585,000 1,299,807 180,354 15,826,941 655,342 25,547,444

Net profit for the year 2009 – – – – 3,299,873 17,050 3,316,923

Dividends for 2009 16.1 176 – – – – (1,346,410) (30,629) (1,377,039)

Transfers to permanent reserve 40 220 – 65,000 – – (65,000) – –

Transfers to other reserves – – 91,295 – (91,295) – –

Share issue of Subsidiaries – – – – – 237,094 237,094

Revaluation adjustment 41.1 220 – – – (1,662) – – (1,662)

Adjustments – – – – (321,015) – (321,015)

Net increase due to change in shareholding – – – – – 71,999 71,999

Net exchange translation adjustment 41.3 221 – – 60,397 – – – 60,397

Transfers to primary dealer special risk reserve 41.4 221 – – 187,571 – (187,571) – –

Balance as at 31 December 2009 5,000,000 2,650,000 1,639,070 178,692 17,115,523 950,856 27,534,141

Balance as at 01 January 2010 5,000,000 2,650,000 1,639,070 178,692 17,115,523 950,856 27,534,141

Net profit for the year 2010 – – – – 6,760,310 152,886 6,913,196

Dividends for 2010 16.1 176 – – – – (3,096,410) (38,143) (3,134,553)

Transfers to permanent reserve 40 220 – 127,500 – – (127,500) – –

Adjustments – – – – – (188) (188)

Net increase due to change in shareholding – – – – (10,681) – (10,681)

Transfers to exchange gain on conversion of London branch into a Subsidiary 41.3 221 – – (39,566) – – – (39,566)

Net exchange translation adjustment 41.3 221 – – (852) – – – (852)

Transfers to primary dealer special risk reserve 41.4 221 – – 248,213 – (248,213) – –

Balance as at 31 December 2010 5,000,000 2,777,500 1,846,865 178,692 20,393,029 1,065,411 31,261,497


STATEMENT OF CHANGES IN EQUITY


Bank GroupFor the year ended 31 December Note 2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Cash flows from operating activitiesInterest receipts 48,958,295 52,699,040 51,048,298 54,790,121

Interest payments (32,236,920) (36,221,614) (33,076,221) (37,191,635)

Commissions, fees and receipts from other operating activities 9,121,713 4,917,426 10,154,963 5,335,677

Premium received from policyholders – – 558,840 264,405

Claims and benefits paid – – (210,662) (126,668)

Reinsurance premium paid – – (80,676) (47,696)

Reinsurance receipts in respect of claims – – 4,897 8,557

Cash paid to and on behalf of employees (9,544,644) (9,868,539) (10,265,315) (10,350,930)

Cash payments to suppliers (5,813,787) (4,165,318) (6,433,716) (4,262,472)

Recovery of loans written-off in previous years 70,866 102,013 97,452 108,086

Value added tax on financial services paid (3,667,377) (2,933,948) (3,793,085) (3,015,485)

Cash flows from operating activities before changes in operating assets and liabilities I 6,888,146 4,529,060 8,004,775 5,511,960

(Increase)/decrease in operating assetsDeposits held for regulatory purposes (9,630,998) (634,388) (9,630,998) (634,388)

Funds advanced to customers (107,937,795) 5,520,355 (110,018,536) 4,388,370

Net increase in credit card receivable (259,654) 60,376 (259,654) 60,376

Short-term marketable securities (1,324,765) (704,119) (1,581,389) (793,699)

Other operating assets 900,628 (961,357) 2,376,806 (713,922)

(118,252,584) 3,280,867 (119,113,771) 2,306,737

Increase/(decrease) in operating liabilitiesDeposits from other banks 179,675 420,101 418,628 420,101

Deposits from customers 117,571,827 92,117,775 117,440,490 92,861,829

Other operating liabilities (1,611,323) 1,378,267 (1,481,636) 1,171,716

Net cash from/(used in) operating activities before income tax 4,775,741 101,726,070 5,268,486 102,272,343

Income tax paid (1,692,034) (1,611,027) (1,927,120) (1,858,874)

Net cash from/(used in) operating activities 3,083,707 100,115,043 3,341,366 100,413,469

Cash flows from investing activitiesNet increase in Treasury bills and other eligible bills (16,668,014) (2,748,295) (16,684,808) (3,221,280)

Proceeds from sale of investment securities 23,571,307 777,133 23,735,457 777,133

Dividends received 468,998 347,878 257,910 150,456

Purchase of investment securities (31,567,092) (13,917,685) (32,050,072) (14,262,931)

Net cash effect on investment in Subsidiaries and AssociatesNet cash effect on investment in Bank of Ceylon (UK) Limited II (a) (1,893,873) – – –

Net cash effect on acquisition of Subsidiaries II (b) – – (23,625) (134,800)

Net cash effect on investment in other Subsidiaries and Associates II (c) – (433,954) (187,186) (126,048)

Purchase of property, plant & equipment (1,043,502) (1,390,830) (1,106,282) (1,430,799)

Purchase of intangible assets (107,887) (55,548) (109,473) (56,707)

Purchase of leasehold lands (16,521) – (16,521) –

Purchase of investment properties – – (2,659) (110,398)

Purchase of securities purchased under re-sale agreements (34,225,046) (4,855,545) (34,172,166) (4,908,425)

Proceeds from sale of property, plant & equipment 89,179 110,617 98,738 120,878

Net cash from/(used in) investing activities (61,392,451) (22,166,229) (60,260,687) (23,202,921)

Cash flows from financing activitiesProceeds from issue of shares – – – 237,094

Proceeds from issue of securities sold under re-purchase agreements 19,318,786 (15,597,955) 20,000,746 (15,751,965)

Proceeds from issue/(redemption) of debentures 20,678,813 – 20,338,953 (88,750)

Net increase/(decrease) in other borrowings 18,642,032 (28,199,518) 21,664,892 (27,453,459)

Dividends paid to Government of Sri Lanka (2,923,205) (1,346,410) (2,923,205) (1,346,410)

Dividends to minority shareholders – – (38,143) (30,629)

Net cash from financing activities 55,716,426 (45,143,883) 59,043,243 (44,434,119)

Net increase/(decrease) in cash and cash equivalents (2,592,318) 32,804,931 2,123,922 32,776,429

Cash and cash equivalents at the beginning of the year 59,375,919 26,570,988 59,404,321 26,627,892

Cash and cash equivalents at the end of year III 56,783,601 59,375,919 61,528,243 59,404,321

CASH FLOW STATEMENT


Bank GroupFor the year ended 31 December Note Page 2010 2009 2010 2009

No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000

Note I

Reconciliation of operating profit before taxation with cash flow from operating activities

Profit before taxation 10,052,569 4,207,647 11,075,485 4,719,910

Add/(Less):

Net gain from dealing securities (64,339) (835,429) (73,573) (836,290)

Net gain from investment securities (1,214,701) (906,066) (1,174,383) (902,061)

Reversal of provision for non-performing advances (1,297,087) (1,398,119) (1,297,087) (1,398,119)

Net (gain)/loss on marked to market valuation on Government securities (132,069) (361,490) (132,069) (361,490)

Net (gain)/loss on marked to market valuation (79,714) (164,076) (79,714) (164,076)

Profit on sale of property, plant & equipment 8 168 (26,775) (98,371) (32,494) (111,975)

Provision for diminution in value of investment and dealing securities – – (6,957) 49,006

Provision made for staff payments 765,546 648,867 765,547 648,867

Provision made for value added tax 333,876 60,877 333,876 60,877

Exchange revaluation (279,536) (1,402,125) (277,475) (1,402,125)

Share of profit of Associate Companies 14 173 – – (212,898) (130,653)

Notional tax credit on interest on Government securities 15.5 175 (659,630) (351,925) (685,027) (380,873)

Depreciation of investment properties 25 198 – – 3,074 3,060

Depreciation of property, plant & equipment 29 202 784,993 686,428 889,616 790,745

Amortisation of leasehold land 30 210 2,296 8,648 3,653 20,857

Amortisation of intangible assets 31 211 54,873 185,473 59,076 189,860

Loan loss provision 12 172 1,559,894 1,801,705 1,725,997 1,894,977

Accrued interest on loans and advances (1,235,422) (25,813) (1,328,958) (108,049)

Accrued interest on deposits and borrowings (1,031,760) 2,045,260 (1,057,060) 2,298,184

Accruals for expenses (422,149) 627,043 (422,149) 627,043

Equity adjustment of Associate Companies – – (5,336) 3,222

Goodwill on acquisition – – 24,676 1,063

Dividends received from Subsidiaries and Associates (222,719) (199,474) – –

Profit from sale of Associate Companies – – (91,045) –

Cash flows from operating activities before changes in operating assets and liabilities 6,888,146 4,529,060 8,004,775 5,511,960

Note IINet cash effect on investment in Subsidiaries and Associates

2010Rs. ’000

(a) Net cash effect on investment in Bank of Ceylon (UK) Limited

[On 30 April 2010 Bank of Ceylon branch in London was converted into a Subsidiary named Bank of Ceylon (UK) Limited]

Net identifiable assets and liabilities in:

Securities held on own account (912,426)

Loans and Advances to customers (217,340)

Property, plant and equipment (450,090)

Other assets (283,068)

Deposits from banks (704,745)

Customer deposit accounts 2,126,247

Other payables 250,121

Net identifiable assets and liabilities transferred to Bank of Ceylon (UK) Limited (191,301)

Cash outflow on the additional investment made in Bank of Ceylon (UK) Limited (1,893,873)

Exchange translation adjustment (2,061)

Total investment in Bank of Ceylon (UK) Limited since classified as investment in Subsidiaries (2,087,235)

CASH FLOW STATEMENT


NOTES TO THE CASH FLOW STATEMENT

2010Rs. ’000

(b) Net cash effect on acquisition of Subsidiaries:

Koladeniya Hydropower (Private) Limited

(On 3 December 2010 Koladeniya Hydropower (Private) Limited was acquired by Property Development PLC as a Subsidiary)


Property, plant & equipment (3,604)

Trade and other payables 4,655

Net identifiable assets and liabilities 1,051

Goodwill on acquisition (24,676)

Cash outflow on acquisition (23,625)

2009Rs. ’000

MBSL Insurance Company Limited

(On 7 April 2009 MBSL Insurance Company Limited was acquired by Merchant Bank of Sri Lanka PLC as a Subsidiary)


Cash and cash equivalents (3,806)

Investments (258,210)

Amounts recceivable (165,274)

Property, plant & equipment (22,075)

Trade payables 305,105

Borrowings 6,717

Goodwill on acquisition (1,063)

Total purchase price (138,606)

Add: Cash of Subsidiaries 3,806

Cash outflow on acquisition of net of cash acquired (134,800)

Bank Group2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000

(c) Net cash effect on investment in other Subsidiaries and Associates

Merchant Bank of Sri Lanka PLC – (347,906) – –

Ceylease Financial Services Limited – (60,000) – –

Ceybank Asset Management (Private) Limited – (26,048) – (26,048)

MBSL Savings Bank Limited – – (137,186) (100,000)

MBSL Insurance Company Limited – – (50,000) –

– (433,954) (187,186) (126,048)

Bank GroupFor the year ended 31 December Note Page 2010 2009 2010 2009

No. Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000

Note III

Analysis of cash and cash equivalents

Cash and short-term funds 17 176 14,103,803 13,508,852 13,754,857 13,517,254

Placements with and loans to other banks 21 185 42,679,798 45,867,067 47,773,386 45,887,067

56,783,601 59,375,919 61,528,243 59,404,321


CASH FLOW STATEMENT


1. CORPORATE INFORMATION

Bank of Ceylon is a Government Corporation domiciled in Sri Lanka, duly incorporated on 01 August 1939 under the Bank of Ceylon Ordinance No. 53 of 1938. It is a licensed commercial bank established under the Banking Act No. 30 of 1988 and amendments thereto. The registered office of the Bank is situated at No. 4, Bank of Ceylon Mawatha, Colombo 01, Sri Lanka. The debentures issued by the Bank are listed on the Colombo Stock Exchange.

The staff strength of the Bank as at 31 December 2010 was 8,204 (2009 - 7,538).

The Consolidated Financial Statements of the Bank prepared for the year ended 31 December 2010 comprise the Bank (‘Parent’), its Subsidiaries (together referred to as the ‘Group’) and the Group’s interests in its Associate Companies.

The Bank does not have an identifiable parent of its own.

The Financial Statements for the year ended 31 December 2010 were authorised for issue on 16 March 2011 in accordance with a resolution of the Board of Directors passed on 16 March 2011.

1.1 PRINCIPAL ACTIVITIES

Bank

The principal activities of the Bank during the year were commercial banking, personal banking, development financing, mortgage financing, lease financing, investment banking, Islamic banking, corporate financing, dealing in Government Securities, pawn broking, credit card facilities, off-shore banking, foreign currency operations and other financial services.

There have been no significant changes in the nature of these activities during the year.

Subsidiaries

The principal activities of Bank’s Subsidiaries are as follows:

Name of Company Principal Activity

Property Development PLC Maintain, manage, develop and sustain the utility and value of Bank of Ceylon Head Office Building

Merchant Bank of Sri Lanka PLC Leasing and hire purchase, trade finance, corporate advisory services, fund management, capital market activities, corporate secretarial and legal services

BoC Management and Support Services (Private) Limited

Provides management services

BoC Property Development and Management (Private) Limited

Renting of office space of BoC Merchant Tower in Colombo 03 and Ceybank House in Kandy

BoC Travels (Private) Limited Engages in travel related services

Hotels Colombo (1963) Limited Provides hotel services

Merchant Credit of Sri Lanka Limited Acceptance of deposits, granting lease facilities, hire purchase, loans and other credit facilities, pawning and real estate developments and related services

Ceylease Financial Services Limited Granting finance lease, hire purchase, commercial loan facilities and real estate developments and sales


Managing, operating, maintaining and conducting Pilgrims, Rests, Hotels and Guest Houses in Sri Lanka

MBSL Insurance Company Limited Offers Life and General Insurance Products


Hydropower generation

Bank of Ceylon (UK) Limited Provides financial services including accepting deposits and dealing in investments

There have been no significant changes in the nature of principal activities of Subsidiaries during the year under review other than for engaging in hydropower generation through acquisition of Koladeniya Hydropower (Private) Limited to the Group.

Associates

The principal activities of Bank’s Associates are as follows:

Name of Company Principal Activity

Ceybank Asset Management (Private) Limited Management of Unit Trust Funds and other private

portfolios

Southern Development Financial Company Limited Granting loan facilities

Lanka Securities (Private) Limited Equity trading, debt trading and placements

Mireka Capital Land (Private) Limited Purchasing, hiring and acquiring real estate properties, real estate developments and providing infrastructure facilities to real estate development projects

Transnational Lanka Records Solutions (Private) Limited Real estate - renting out properties

MBSL Savings Bank Limited Provides financial services including accepting deposits, leasing, hire purchase and pawning.

SIGNIFICANT ACCOUNTING POLICIES

There have been no significant changes in the nature of principal activities of Associates during the year.

2. DIRECTORS’ RESPONSIBILITY FOR FINANCIALSTATEMENTS

The Board of Directors is responsible for the preparation and presentation of the Financial Statements of the Bank in terms of the provisions of the Bank of Ceylon Ordinance and its amendments read with the Banking Act No. 30 of 1988 and its amendments thereto and Sri Lanka Accounting Standards.

3. SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

3.1 BASIS OF PREPARATION

The Financial Statements of the Bank and the Group encompassing the Balance Sheet, Income Statement, Cash Flow Statement, Statement of Changes in Equity, Accounting Policies and the Notes thereto are prepared in conformity with Accounting Standards issued by The Institute of Chartered Accountants of Sri Lanka and on the basis of historical cost convention except otherwise stated as required by the above Standards, which have been applied consistently


The judgments by the management are required in the estimation of these amounts and such estimations are based on the number of factors such as any deterioration of countries, industry and technological obsolescence, borrowers’ financial situation.

Impairment of Other Assets

The Group assesses on each Balance Sheet date or more frequently to determine whether there is objective evidence that an asset is impaired. This requires the management to make an estimate of expected future cash flows, suitable discount rates in order to arrive at the present value of future cash flows, which can be derived from a particular asset.

3.3 MATERIALITY AND AGGREGATIONS

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 as permitted by the Sri Lanka Accounting Standard No. 03 (Revised 2005) on ‘Presentation of Financial Statements’.

3.4 STATEMENT OF COMPLIANCE

The Financial Statements of the Bank and its Subsidiaries are prepared in accordance with the Sri Lanka Accounting Standards (SLASs) laid down by The Institute of Chartered Accountants of Sri Lanka and comply with the requirements of Bank of Ceylon Ordinance and Banking Act No. 30 of 1988 and amendments thereto. In the case of Financial Statements of Subsidiaries in addition to the above, they comply with Companies Act No. 07 of 2007, Finance Leasing Act No. 56 of 2000, Finance Companies Act No. 78 of 1988, Insurance Industry Act No. 43 of 2000 and provisions of International Financial Reporting Standards (IFRSs). The Financial Statements of the Bank and its Subsidiaries present fairly the financial position, financial performance and cash flows.

3.5 FOREIGN CURRENCY TRANSLATION

Functional and Presentation Currency

Items in the Financial Statements of the Bank and each of its Subsidiaries are translated using their functional currency, being the currency of the primary economic environment in which the entity operates. The Consolidated Financial Statements are presented in Sri Lankan Rupees, which is the functional and presentation currency of the Bank and except for Bank of Ceylon (UK) Limited whose functional currency is Sterling Pounds.


with that of the previous year. Except as indicated, the Financial Statements presented in Sri Lankan Rupees have been rounded to the nearest thousand. No adjustment has been made for inflationary factors affecting the Financial Statements except on certain land and buildings, investment properties and dealing securities.

3.2 ESTIMATES AND MANAGEMENTJUDGMENTS

The preparation of Financial Statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amount of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances.

The estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and/or in future periods if the revision affects future periods too.

Key items which involve these judgments, estimates and assumptions are discussed below:

Defined Benefit Plans

The cost of defined benefit plans, gratuity and pension obligation is determined by using actuarial valuations. It involves making assumptions about discount rates, expected rates of return on planned assets, attrition rate, future salary increases, future cost of living allowances and future pension increases. All assumptions are reviewed at each reporting date due to uncertainty.

Impairment on Loans and Advances

In addition to the provisions made for possible losses on loans and advances based on the parameters given in the Sri Lanka Accounting Standard No. 23 on ‘Revenue Recognition and Disclosures in the Financial Statements of Banks’ and Directives issued by the Central Bank of Sri Lanka, the Group reviews its loans and advances portfolio at each reporting date or more frequently, if events or changes are in existence, which require to asses whether a further provision for impairment is required against exposures.

3.5.1 Foreign Currency Transactions

Transactions in foreign currencies are measured at the exchange rate ruling at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated into Sri Lankan Rupees at the exchange rate ruling at the Balance Sheet date. The resulting gains and losses from foreign exchange differences are accounted for in the Income Statement.

Non-monetary assets and liabilities measured at cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities measured at fair value in foreign currencies are translated into Sri Lankan Rupees at the exchange rate ruling at the date the fair value was determined.

3.5.2 Foreign Operations

The results and financial position of the branches in India, Maldives and Bank of Ceylon (UK) Limited whose functional currency is not Sri Lankan Rupees are translated into Sri Lankan rupees as follows:

Assets and liabilities are translated at the exchange rate ruling at the Balance Sheet date.

Income and expenses in the Income Statement are translated at an average exchange rate approximating the exchange rates at the dates of the transactions, and in the case of income and expenses of overseas branches, the monthly average exchange rates are applied for translation.

Resulting exchange differences are recognised in the foreign currency translation reserve, which is a separate component of equity.

When a foreign operation is disposed, the deferred cumulative translation gain or loss recognised in Equity relating to that particular foreign operation is recognised in the Income Statement as part of the gain or loss on disposal.

Forward exchange contracts are valued at the forward market rates ruling on the date of the Balance Sheet. Resulting net unrealised gains and losses are dealt with through the Income Statement.


3.5.3 Consolidation Adjustments

On consolidation, foreign exchange differences arising from the translation of net investments in foreign entities, as well as any borrowings and instruments designated as foreign currency hedges of such investments are taken to capital reserves.

3.6 BASIS OF CONSOLIDATION

The Bank’s Financial Statements comprise the consolidation of the Financial Statements of the Domestic Banking Unit, the Off-shore Banking Unit and the foreign operations that are integral to the Bank. The Group Financial Statements comprise consolidation of the Financial Statements of the Bank, its Subsidiaries in terms of the Sri Lanka Accounting Standard No. 26 (Revised 2005) on ‘Consolidated and Separate Financial Statements’ and in terms of the Sri Lanka Accounting Standard No. 27 (Revised 2005) on ‘Investments in Associates’.

3.6.1 Subsidiaries

Subsidiaries are those companies in which the Bank, directly or indirectly, has an interest of more than one-half of the voting rights or has control over the financial and operating policies.

Subsidiaries are consolidated from the date on which effective control is transferred to the Bank and are no longer consolidated from the date of disposal.

The Consolidated Financial Statements are prepared to common financial year end of 31 December. The accounting policies of the Subsidiaries have been changed wherever necessary to comply with the Bank’s accounting policies. There are no significant restrictions on the ability of Subsidiaries to transfer funds to Parent in the form of cash dividends or to repay loans and advances. All Subsidiaries of the Bank have been incorporated in Sri Lanka except for Bank of Ceylon (UK) Limited, which is incorporated in the United Kingdom.

A listing of the Bank’s Subsidiaries is given in Note 27 to the Financial Statements. Separate disclosure is made in respect of minority interest.

3.6.2 Associates

Associates are entities in which the Group has significant influence, but not control, and generally holds a shareholding of between and including 20% and 50% of the voting rights.

The Group’s investments in Associates are accounted for using Equity Method and initially carried at cost. The carrying amount is increased or decreased to recognise the Group’s share of net assets of the Associate, less any impairment in value after the date of acquisition. Where the Group’s share of losses in an Associate equals or exceeds its interest in the Associate, including any unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the Associate. The Group discontinues the use of Equity Method from the day that it ceases to have significant influence over an Associate and accounts for the investment in accordance with the Sri Lanka Accounting Standard No. 22 on ‘Accounting for Investments’.

The reporting dates of the Group and the Associates are identical and there are no significant restrictions on the ability of Associates to transfer funds to Parent in the form of cash dividends or to repay loans and advances. The results of the Associates are taken from the latest audited accounts or unaudited management accounts of the Associates prepared at dates not more than three months prior to the end of the financial year of the Group.

A listing of the Bank’s Principal Associates is shown in Note 26 to the Financial Statements.

3.6.3 Business Combinations and Goodwill

Business combinations are accounted for using the Purchase Method of Accounting as per the requirements of the Sri Lanka Accounting Standard No. 25 (Revised 2004) on ‘Business Combinations’. This involves recognising identifiable assets and liabilities of the acquired business at fair value. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired, is recognised as goodwill. If the cost of acquisition is less than the fair values of the identifiable net assets acquired, the difference is identified as discount on acquisition and is recognised directly in the Income Statement in the year of acquisition.

Goodwill acquired in a Business Combination is initially measured at cost, being the excess of the cost of the Business Combination over the Bank’s interests in the net fair value of the identifiable assets, liabilities including contingent liabilities acquired. Sri Lanka Accounting Standard No. 25 (Revised 2004) on ‘Business Combinations’ requires that following the initial recognition, goodwill is to be measured at


cost, less any accumulated impairment losses and goodwill to be reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The acquired goodwill is written-off in full in the year of acquisition.

When Subsidiaries/Associates/other business units are sold, the difference between the selling price and the net assets plus cumulative translation differences and unimpaired goodwill, if any, is recognised in the Income Statement in the year of disposal.

3.6.4 Transactions Eliminated on Consolidation

All intra-group transactions, balances, income and expenses are eliminated on consolidation. Unrealised gains and losses resulting from transactions between the Group and its Associates are also eliminated on consolidation to the extent of the Group’s interests in the Associates. Where necessary, adjustments are made to the Financial Statements of Subsidiaries to bring the Accounting Policies used in line with those used by the Group.

3.7 TAXATION

Provision for taxation comprises current and deferred tax and Social Responsibility Levy. Provision for taxation 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. Provision for taxation on the overseas operations is made on the basis of the profit for the year as suggest for taxation purposes in accordance with the provisions of the relevant regulations in the respective country.

3.7.1 Current Taxation

Provision for taxation on Sri Lankan operations is made on the basis of the net profit for the year as adjusted for taxation purposes in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and the amendments thereto. Provision for taxation on the overseas branches is made on the basis of the net profit for the year as adjusted for taxation purposes in accordance with the provisions of the relevant statutes in those countries.

3.7.2 Deferred Taxation

Deferred tax is provided in full, using the Liability Method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the


Financial Statements. Deferred tax liabilities are recognised for all taxable temporary differences, except:

Liabilities arising from goodwill for which amortisation is not deductible for tax purposes.

Liabilities arising from the initial recognition of an asset/liability other than in business combinations which, at the time of transaction, does not affect either the accounting or taxable profit.

Deferred tax assets are recognised for all deductible temporary differences, unused tax losses to the extent that it is probable that taxable profit will be available against, which the deductible temporary differences can be utilised, except:

Negative goodwill, which was treated as deferred income under business combinations.

The initial recognition of an asset/liability other than in a business combination which, at the time of transaction, does not affect the accounting or taxable profit.

The carrying amount of deferred tax asset is reviewed at each Balance Sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax assets to be utilised. Any such reduction should be subsequently reversed to the extent that it becomes probable that sufficient taxable profit would be available.

Deferred tax assets and liabilities are measured at the tax rate that are expected to apply in the year when the assets are realised or the liabilities are settled, based on tax rates and tax laws that have been enacted or substantially enacted at the Balance Sheet date.

Current tax and deferred tax relating to items recognised directly in equity are also recognised in equity. Deferred tax assets and liabilities are set off if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.


3.7.3 Value Added Tax (VAT) on Financial Services

During the year, the Bank’s total value addition was subjected to a 20% Value Added Tax as per Section 25 (a) of the Value Added Tax Act No. 14 of 2002 and amendments thereto.

3.7.4 Economic Service Charge (ESC)

In terms of the provisions of the Economic Service Charge Act No. 13 of 2006, ESC is payable on the liable turnover at specified rates. ESC paid is deductible from the income tax liability. Any unclaimed liability can be carried forward and set off against the income tax payable for a further four years.

3.7.5 Social Responsibility Levy (SRL)

In terms of the provisions of the Finance Act No. 05 of 2005, as amended by the Finance Act No. 11 of 2006, SRL is payable at the rate of 1.5% on all taxes and levies chargeable as specified in the First Schedule of the Act.

3.7.6 Withholding Tax on Dividends

Dividend distributed out of taxable profit of the Subsidiaries and Associate Companies 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 expense in preparing the Consolidated Financial Statements as a consolidation adjustment.

4. ASSETS AND BASIS OF THEIR VALUATION

4.1 LOANS AND ADVANCES, FINANCELEASES AND CREDIT CARD RECEIVABLE

4.1.1 Loans and Advances

All loans and advances are recognised when cash is advanced to borrowers. Loans and advances are stated in the Balance Sheet net of provisions for loan losses and net of interest, which is not accrued to revenue.

4.1.2 Finance Leases

Assets leased to customers, which transfer substantially all the risks and rewards associated with ownership other than legal title for a specific period are accounted for as finance leases.

Lease receivables are stated in the Balance Sheet net of initial rentals received, unearned lease income and provision for rentals doubtful of recovery.

4.1.3 Credit Card Receivable

Amounts receivable on credit cards are included in advances to customers at the amounts expected to be recovered.

4.2 NON-PERFORMING LOANS AND PROVISION FOR LOAN LOSSES

4.2.1 (a) Non-Performing Loans

Loans and advances, which are in arrears of due capital and/or interest are classified as non-performing as per the Direction No. 03 of 2008 on ‘Classification of Loans and Advances, Income Recognition and Provisioning’, as amended by the Direction No. 09 of 2008 on ‘Amendments to Directions on Classification of Loans and Advances, Income Recognition and Provisioning for Licensed Commercial Banks in Sri Lanka’ issued by the Central Bank of Sri Lanka.

4.2.1 (b) Foreclosed Properties

Foreclosed properties represent properties that are acquired in full or partial settlement of debts. These properties are classified as non-performing advances and accounted for at the lower of cost or market value on an individual property basis. The shortfall between the market value of the foreclosed properties and the related loan outstanding is recognised as a provision for loan losses in the Income Statement. Foreclosed properties are not subject to depreciation.

Subsequent gains and losses on the disposal of the foreclosed properties are taken into account in determining operating profits.

4.2.2 Provision for Loans, Advances and Finance Leases

4.2.2 (a) Provision for Non-Performing Loans and Advances

Provisions for non-performing loans and advances are made on the basis of a continuous review of all loans and advances in accordance with Sri Lanka Accounting Standard No. 23 on ‘Revenue Recognition and Disclosures in the Financial Statements of Banks’ and the regulations imposed by the Central Bank of Sri Lanka.

Accordingly, specific provisions have been made as follows:

Period outstanding Classification

Provisionmade net

of realisable value of the

security

3 to 6 months Special mention –

6 to 12 months Substandard 20%

12 to 18 months Doubtful 50%

18 months and over Loss 100%


Additional provisions have also been made over and above the minimum percentages specified above, on a case-by-case basis depending on the risk associated with such loans.

When a loan is deemed uncollectible, it is written-off against the related provision for impairments. Subsequent recoveries are credited to the Income Statement.

In addition, the value of the security is determined on the ‘Hair Cut Rule’ imposed by the Central Bank of Sri Lanka, i.e., the extent up to which the Forced Sale Value (FSV) of immovable property can be counted as the value of security (which is given below) in calculating the provisioning for non-performing advances.

% of FSV of immovable property that can be considered

as the net value of security

ItemFreehold property

Leaseholdproperty

For the advances in the substandard and doubtful category 75 60

For the Advances in the Loss Category

Less than 12 months 75 60

More than 12 months but less than 24 months 60 50



More than 48 months 40 Nil

4.2.2 (b) Provision for Lease Rentals Receivable in Arrears

When the rental is in arrears over a consecutive period of 90 days, the specific provision is made as follows:

Period of outstanding Classification Provision

90 - 180 days Special mention –

Over 180 days Loss 100%

Category Provision

A 100% of capital outstanding of lease assets minus 50% of the invoice value/condition and valuation report whichever is lower, net of upfront rentals and cash security obtained, if any.

B 100% of capital outstanding net of upfront rentals and cash security obtained, if any.

Category A- Identified at the time of termination

of lease contract.

Category B - Identified at the time of loss

of the assets.


4.2.2 (c) Provision for Credit Card Receivable

When the required minimum payment is in arrears on credit card receivable, specific provision is made as follows:

Period of outstanding Classification Provision

3 - 4 months Special mention –

4 - 6 months Substandard 25%

6 - 8 months Doubtful 50%

Over 8 months Loss 100%

4.2.2 (d) Provision for Pawning

A 100% specific provision is made for the total amount advanced for unsold articles at every auction.

4.2.2 (e) Provision for Regular Advances

Apart from specific provisions, the Bank also carried general provision of 1% on total performing and overdue loans and advances for credit losses to absorb all losses inherent in its loan portfolio including credit card receivable, lease rentals receivable, and pawning upto 30 September 2010.

According to the Banking Act Direction No. 03 of 2010, ‘Amendments to Direction on Classification of Loans and Advances, Income Recognition and Provisioning for Licensed Commercial Banks in Sri Lanka’, banks shall maintain general provision of 0.5% of total outstanding of on Balance Sheet performing loans and advances and total outstanding of special mention on-Balance Sheet credit facilities net of interest in suspense commencing from 01 January 2012. In order to fulfil the above requirement, the banks shall reduce 0.1% per quarter during the five quarters commencing 01 October 2010 to arrive at the statutory requirement.

Accordingly, the Bank has reduced the general provision to 0.9% on total performing and overdue loans and advances as at 31 December 2010 (1% as at 31 December 2009).

4.2.3 Write-off Policy of the Bank

The Bank writes off a loan net of related loan loss provisions when it determines that the loan is uncollectible. This decision is made when the borrower can no longer pay or the proceeds from collateral is not sufficient to pay back the entire obligation.

4.3 INVESTMENTS

4.3.1 Investments in Subsidiaries

Investments in Subsidiaries are accounted for under the Cost Method of accounting in the Bank’s Financial Statements in accordance with the Sri Lanka Accounting Standard No. 26 (Revised 2005) on ‘Consolidated and Separate Financial Statements’. Accordingly, investments in Subsidiaries are stated in the Bank’s Balance Sheet at cost, less impairment losses, if any.

4.3.2 Investments in Associates

Investments in Associates are accounted for under the Cost Method in the Bank’s Financial Statements and under the Equity Method in the Group’s Financial Statements in accordance with the Sri Lanka Accounting Standard No. 27 (Revised 2005) ‘Investment in Associates’.

In the Bank’s Balance Sheet, investments in Associates are stated at cost, less impairment losses, if any. Under the Equity Method, the investments in Associates are initially accounted for at cost and the carrying amount is adjusted for post-acquisition changes in the Bank’s share of net assets of the Associates, less any impairment.

4.3.3 Dealing Securities

These are marketable securities acquired and held with the intention of resale over a short period of time. Such securities are initially measured at cost and subsequently marked to market and carried at market value in the Balance Sheet. Any gains/losses on marked to market valuation are dealt with through the Income Statement.


4.3.4 Investment Securities

These are acquired and held for yield or capital growth in the medium or long term with the positive intent and ability to hold until maturity. Such securities are recorded at cost in accordance with Sri Lanka Accounting Standard No. 22 on ‘Accounting for Investments’. Changes in market values of these securities are not taken into account, unless there is considered to be diminution in value, which is other than temporary.

4.3.5 Non-Current Assets Held for Sale

These are investments classified as held for sale as at the Balance Sheet date. The Bank intends to recover the value of these assets, principally through a sales transaction rather than continuing to hold. These are assets which are available for immediate sale in their present condition, subject to only the terms that are usual and customary for sale of such assets and where sale is highly probable. These assets are measured at the lower of the carrying amount and fair value less costs to sell, as per the Sri Lanka Accounting Standard No. 38 (Revised 2006) on ‘Non-current Assets Held for Sale and Discontinued Operations’.

4.4 PROPERTY, PLANT & EQUIPMENT

The Group applies the requirements of the Sri Lanka Accounting Standard No. 18 (Revised 2005) on ‘Property, Plant & Equipment’ in accounting for its own assets which are held for and used in the provision of services, for rental to others or for administrative purposes and are expected to be used more than one year.

4.4.1 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 the cost of the asset can be reliably measured.

4.4.2 Measurement

An item of property, plant & equipment that qualifies for recognition as an asset is initially measured at its cost of purchase directly attributable to the acquisition of the asset or construction or valuation together with any incidental expenses thereon.

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 the computer equipment.

4.4.3 Cost Model

The Group applies Cost Model to plant & equipment and records at cost of purchase or construction together with any incidental expenses thereon, less accumulated depreciation and any accumulated impairment losses.

4.4.4 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 seven 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 capital 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 written-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 capital reserve in respect of that asset. When a revalued asset is disposed off, any revaluation surplus will be transferred directly to retained earnings.

4.4.5 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.

4.4.6 Restoration Costs

The cost incurred on repairs or maintenance of property, plant & equipment in order to restore or maintain future economic benefits is charged to Income Statement as incurred.


4.4.7 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 the 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.

4.4.8 Depreciation

The Group provides depreciation on straight-line basis over the periods appropriate to the estimated useful lives of the different types of assets.

Provisioning for depreciation of property, plant & equipment is made on pro-rata basis.

The depreciation on domestic assets is determined using the following estimated useful lives:

Freehold Building Over 40 years

Office Equipment Over 08 years

Furniture & Fittings Over 08 years

Computer Equipment Over 05 years

Motor Vehicles Over 04 years

The future economic benefits embodied in the assets that are used by overseas business operations are different from those used domestically in terms of the asset’s expected utility.

Accordingly, the depreciation on assets belonging to overseas operations are determined using the following estimated useful lives:

Freehold Building Over 50 years

Freehold/Leasehold Refurbishment Over 10 years

Office Equipment & Computers Over 05 years

Furniture & Fittings Over 10 years

The asset’s residual value, useful life and method of depreciation are reviewed at each Balance Sheet date to change estimates.


4.4.9 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.

4.4.10 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 the Sri Lanka Accounting Standard No. 20 on ‘Borrowing Costs’. Capitalisation of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are completed.

4.5 LEASEHOLD PROPERTY

Leasehold properties are recorded at carrying value in terms of the Sri Lanka Accounting Standard No. 19 (Revised 2005) on ‘Leases’.

The carrying value of leasehold properties is amortised over the remaining lease term or useful life of leasehold property, whichever is lower. Subsequent revaluations are not carried out for leasehold properties.

4.6 INTANGIBLE ASSETS

The Group applies the requirements of the Sri Lanka Accounting Standard No. 37 on ‘Intangible Assets’ in accounting for intangible assets.


An intangible asset is recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the entity and the cost of the assets can be measured reliably.

4.6.2 Measurement

4.6.2 (a) Software

Software represents the value of computer application software licensed for use of the Group, other than software applied to the operation software system of computers. Intangible assets are carried at its cost, less accumulated amortisation and any impairment losses.

The initial costs comprise licence fees paid at the time of purchase, duties/levies and also other directly attributable expenditure that are

incurred in customising the software for its intended use.

4.6.2 (b) Goodwill

Goodwill arising on the acquisition represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities at the date of acquisition. According to the Sri Lanka Accounting Standard No. 25 (Revised 2004) on ‘Business Combinations’, goodwill is no longer amortised. Instead, goodwill is tested for impairment annually and assessed for any indication of impairment at each reporting date to ensure that its carrying amount does not exceed its recoverable amount. If an impairment loss is identified, it will be recognised immediately in the Income Statement.

The negative goodwill is recognised immediately in the Income Statement.

4.6.3 Subsequent Expenditure

Expenditure incurred on software is capitalised only when it enhances and extends the economic benefits of computer software beyond their original specifications and lives and such cost is recognised as capital improvement and added to the original cost of software.

4.6.4 Amortisation

Intangible assets except for goodwill are amortised using the straight-line method over the estimated useful life of five years commencing from the date the application software is available for use over the best estimate of its useful economic life.

The unamortised balances of software with finite lives are reviewed for impairment whenever there is an indication for impairment and recognised as expenses in the Income Statement to the extent that they are no longer probable of being recovered from the expected future benefits.

4.6.5 Derecognition

Intangible assets are derecognised when it reveals that they will not generate economic benefits or circumstances indicate that the carrying value is impaired.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds


and the carrying amount of the assets and are recognised in the Income Statement.

4.7 INVESTMENT PROPERTIES

The Group applies the requirements of the Sri Lanka Accounting Standard No. 40 (Revised 2005) on ‘Investment Property’, in accounting for investment properties.


Investment property is property that is held to earn rentals or for capital appreciation or both and the future economic benefits that are associated with the investment property but not for sale in the ordinary course of business.

4.7.2 Measurement

Investment property is accounted for under Cost Model in the Financial Statements. Accordingly, after recognition as an asset, the property is carried at its cost, less accumulated depreciation and impairment losses.

4.7.3 Depreciation

Depreciation is provided on a straight-line basis over the estimated life of the class of asset from the date of purchase up to the date of disposal.

4.7.4 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.

The gain/loss on disposal is calculated as the difference between the net disposal proceeds and the carrying amount of the asset and is recognised as income or expense in the Income Statement.

4.8 IMPAIRMENT OF ASSETS

The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such evidence exists, the carrying amount of a particular asset or portfolio of assets is reduced to the estimated recoverable amount by means of a charge to the Income Statement, in those expense categories consistent with the function of the impaired asset or portfolio of assets, except for property previously revalued where the revaluation was taken to equity. In this case, the impairment is also recognised in equity up to the amount of any previous revaluation.


The recoverable amount of an asset is the higher of its net selling price and value in use. The net selling price is the fair value of an asset or cash-generating unit, less costs to sell. In determining the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value of money and the risks specific to the assets. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then, to reduce the carrying amount of the other assets in the unit.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group makes an estimate of the recoverable amount. Previously recognised impairment losses other than in respect of goodwill are reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment losses were recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. Such reversal is recognised in the Income Statement unless the asset is carried at the revalued amount, in which case, the reversal is treated as a revaluation increase.

4.9 SECURITIES PURCHASED UNDER RE-SALE AGREEMENTS (REVERSE REPOS)

Securities purchased under re-sale agreements are treated as collateralised lending and recorded at the consideration paid and interest accrued thereon. The amount lent is shown as an asset either as loans and advances to customers or loans to other banks.

The difference between purchase price and re-sale price is treated as interest received and accrued evenly over the life of Repo agreement.

4.10 GOVERNMENT OF SRI LANKA TREASURYBILLS, BONDS AND OTHER SECURITIES

4.10.1 Investments that are held for trading

Investments in Treasury Bills and Treasury Bonds that are acquired for the purpose of short-term selling (held for trading) are marked to market and carried at that value in the Balance Sheet. Gains and losses on marked to market valuation are dealt with through the Income Statement.

4.10.2 Investments that are held to Maturity

Investments in Treasury Bills and Treasury Bonds that the Bank intends and is able to hold to maturity are reflected at the value of the Bonds/Bills purchased and the discount/premium accrued thereon. Discounts received/premia paid are taken to the Income Statement based on a pattern reflecting a constant periodic rate of return.

5. LIABILITIES AND PROVISIONS

5.1 DEPOSITS FROM CUSTOMERS

Deposits from customers include non-interest bearing deposits, savings deposits, term deposits, 7 days’ call deposits and certificate of deposits. They are stated in the Balance Sheet at amounts payable. Interest paid/payable on these deposits is charged to the Income Statement.

5.2 BORROWED FUNDS

Borrowed funds include call money borrowings, refinance borrowings and other term borrowings from banks. They too are stated in the Balance Sheet at amounts payable. Interest paid/payable on these borrowings is charged to the Income Statement.

5.3 SECURITIES SOLD UNDER RE-PURCHASEAGREEMENTS (REPOS)

Securities sold under re-purchase agreements (‘Repos’) are treated as collateralised borrowings and stated at the consideration received and interest accrued thereon. These are retained in the Financial Statements and the counter-party liability is accounted for as a liability and classified under debt securities in issue.

The difference between sale and re-purchase price is treated as interest paid and accrued evenly over the life of the Repo period.

5.4 DEBENTURES

These represent the funds borrowed by the Group for long-term funding requirements, from the public issues and through private placements. These are recorded in the Balance Sheet at amounts expected to be payable at the Balance Sheet date.

5.5 OTHER LIABILITIES

Other liabilities comprise of interest, fees, expenses payable and other provisions. These liabilities are recorded at the cash value to be paid.


5.6 DEFINED BENEFIT PLANS

5.6.1 Bank of Ceylon Pension Trust Fund

The ‘Bank of Ceylon Pension Trust Fund’ is a funded, non-contributory, defined retirement benefit plan, operated for the payment of pensions until death to the permanent employees who have completed a minimum of ten years of continuous service with the Bank, at their retirement on reaching the retirement age on or after 55 years or on medical grounds, before reaching retirement age. The pension is computed as a percentage of the last drawn salary excluding certain allowances.

Contributions to the Pension Trust Fund are made monthly, based on the advice of a qualified actuary, currently at 56.76% of gross salary for employees who joined the Bank prior to 01 January 1996. Employees who joined the Bank on and after 01 January 1996 may contribute 20% of their gross salary to a Pension Fund in which event the Bank contributes 5%. This arrangement is tentatively pending until the formulation of a contributory pension scheme is finalised.

The fund is actuarially valued by a qualified actuary once in three years.

The Subsidiaries do not operate Pension Funds.

5.6.2 Bank of Ceylon Widows’/Widowers’ and Orphans’ Pension Fund

The Bank is liable for and guarantees the payments to the beneficiaries of the ‘Bank of Ceylon Widows’/Widowers’ and Orphans’ Pension Fund’ to which the Bank’s employees monthly contribute 8% of their gross salary. The Bank’s liability towards the beneficiaries of the employees arises when an employee who has contributed to the fund for five continuous years dies while in service or on the death of a pensioner where the Bank will be liable to pay a monthly Widows’/Widowers’ and Orphans’ Pension to his/her beneficiaries. The pension to beneficiaries of an employee who dies while in service is based on the last drawn salary excluding certain allowances.

The fund is actuarially valued by a qualified actuary once in three years. Funding would be done in consultation with the Actuary, Trustees and Beneficiaries. Currently, the Bank contributes a sum of Rs. 456 million per annum to meet the deficit as recommended by the Actuary.


Both the Pension Fund and the Widows’/Widowers’ and Orphans’ Pension Fund are approved by the Government and are independently administered.

5.6.3 Provision for Gratuity

Provision has not been made in the Financial Statements for retirement gratuity payable under the Payment of Gratuity Act No. 12 of 1983, to employees who joined the Bank prior to 01 January 1996 as the Bank has its own non-contributory retirement benefit scheme in force. However, employees whose services are terminated other than by retirement are eligible to receive a terminal gratuity under the Payment of Gratuity Act No. 12 of 1983, at the rate of one-half of the basic or consolidated wage or salary, cost of living and all other allowances applicable to the last month of the financial year, for each year of continuous service. A provision is being made in these Financial Statements for retirement gratuities from the first year of service for all employees who joined the Bank on or after 01 January 1996, as they are not covered by the pension scheme of the Bank.

In terms of the Sri Lanka Accounting Standard No. 16 (Revised 2006) on ‘Employee Benefits’, the Bank and its Subsidiaries have calculated the post-employment benefit obligations, based on the actuarial valuation method recommended in SLAS 16 and recognised that provision in the Income Statement.

The Gratuity Liabilities are not externally funded.

5.7 DEFINED CONTRIBUTION PLANS

Contributions to defined contribution plans are recognised as an expense in the Income Statement as incurred.

5.7.1 Bank of Ceylon Provident Fund

All employees of the Bank are members of the ‘Bank of Ceylon Provident Fund’ to which the Bank contributes 12% of employees’ monthly gross salary excluding overtime, while employees contribute 8%. The Bank’s Provident Fund is an approved Fund, which is independently administered.

5.7.2 Employees’ Provident Fund

The Subsidiaries and their employees (other than Bank of Ceylon and its employees) contribute 12% (15% by Property Development PLC) and 8% respectively on salary of each employee

to Employees’ Provident Fund, in terms of the Employees’ Provident Fund Act No. 15 of 1958 as amended.

5.7.3 Employees’ Trust Fund

All employees of the Bank and its Subsidiaries are members of the Employees’ Trust Fund to which Bank/Group contributes 3% of employees’ monthly gross salary excluding overtime, in terms of the Employees’ Trust Fund Act No. 46 of 1980.

5.8 PROVISIONS FOR LIABILITIES

A provision is recognised in the Balance Sheet when the Bank has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligations, in accordance with the Sri Lanka Accounting Standard No. 36 on ‘Provisions, Contingent Liabilities and Contingent Assets’.

6. INCOME STATEMENT

6.1 REVENUE RECOGNITION - BANK AND NON-INSURANCE BUSINESS

6.1.1 Interest Income from Loans and Advances

Interest on loans and advances is accounted for in terms of the provisions of the Sri Lanka Accounting Standard No. 23 on ‘Revenue Recognition and Disclosures in the Financial Statements of Banks’. Accordingly, interest income from loans and advances is recognised on an accrual basis. Interest ceases to be accrued when the recovery of principal or interest is in arrears for more than 90 days. Interest income from non-performing loans and advances is accounted for on cash basis. Interest falling due on non-performing loans and advances is credited to interest in suspense account on memorandum basis. In addition, interest accrued upto three months on such non-performing loans and advances is also eliminated from the interest income and transferred to interest in suspense.

6.1.2 Lease Income

Lease income is accounted for in terms of the provisions of the Sri Lanka Accounting Standard No. 19 (Revised 2005) on ‘Leases’. Accordingly, lease income is the interest component of the lease rentals of all finance leases receivable during the year. The excess to the aggregate rental receivable over the cost of the leased assets constitutes unearned income, which is taken into revenue over the term of the lease,


from the month in which the lease is executed, in proportion to the remaining receivable balance of the lease. Interests on finance leases cease to be accrued when they are in arrears for more than 90 days. Thereafter, such income is recognised on cash basis.

6.1.3 Interest Income from Other Sources

Interest income from securities issued by Government or Central Bank of Sri Lanka is recognised on a time proportionate basis as premia/discounts on purchase and amortised to income on a straight-line basis over the period to maturity. Income from all other interest-bearing securities is recognised on an accrual basis.

6.1.4 Commission and Fee Income

Commission and fee income mainly comprise fees receivable from customers for guarantees and other services provided by the Group, and fees for foreign and domestic payment tariff. Such income is recognised as revenue at the time the services are provided.

6.1.5 Income on Discounting of Bills of Exchange

Income on the endorsement of Bills of Exchange is recognised only when the bill is received and either issued or endorsed, and the payment under the particular instrument has been effected.

6.1.6 Dividend Income

Dividend income is recognised when the right to receive payment is established.

6.1.7 Profit/Loss from Sale of Property, Plant & Equipment

Profit/Loss arising from sale of property, plant & equipment is recognised in the period in which the sale occurs and is classified as other income.

6.1.8 Gains or Losses arising from Investment Securities

Gains or losses arising from the sale of equity shares, units, and financial instruments, including Treasury Bills sold prior to maturity, are accounted for on the date on which the transaction takes place.

6.1.9 Rental Income

Rental income is recognised on an accrual basis.

6.1.10 Interest Expenses

Interest expenses are recognised on an accrual basis.


6.1.11 Operating Expenses

All the expenses payable are recognised on an accrual basis in the Income Statement to the period to which they relate.

6.2 GENERAL INSURANCE BUSINESS

6.2.1 Gross Written Premiums

Premium is generally recognised as written upon inception of the policy. Upon inception of the contract, premium is recorded as written and is earned primarily on a pro-rata basis over the term of the related policy coverage. However, for those contracts for which the period of risk differs significantly from the contract period, premium is earned over the period of risk in proportion to the amount of insurance protection provided.

6.2.2 Reinsurance Premium

Reinsurance premium expense is accounted for in the same accounting period as the Gross Written Premium to which it relates or in accordance with the pattern of reinsurance services received.

6.2.3 Unearned Premium

Unearned premium is the portion of the gross premium and reinsurance premium written in the current year in respect of risks related to subsequent periods. Unearned premium is calculated on the 24th basis in accordance with the Rules made by the Insurance Board of Sri Lanka under the Regulation of Insurance Industry Act No. 43 of 2000.

6.2.4 Unexpired Risk

Provision is made where appropriate for the estimated amount required over and above unearned premiums to meet future claims and related expenses on the business in force as at the reporting date.

6.2.5 Deferred Acquisition Expenses

Acquisition expenses, represent commissions and other underwriting expenses, which vary with and are directly related to the production of business, are deferred and amortised over the period in which the related written premium is earned. Reinsurance Commission is also treated in the same manner with deferred acquisition costs and it is calculated on the 24th basis in accordance with the Rules made by the Insurance Board of Sri Lanka under the Regulation of Insurance Industry Act No. 43 of 2000.


6.2.6 Premiums Receivable

According to the Premium Payment Warranty (PPW) ruling by the Insurance Board of Sri Lanka (IBSL), all policies issued and not recovered over 60 days are cancelled.

6.2.7 Reinsurance Receivable

Reinsurance assets include the balances due from both insurance and reinsurance companies for paid and unpaid losses and loss adjustment expenses. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured policy. Reinsurance is recorded gross in the Balance Sheet, unless a right to offset exists.

If a reinsurance asset is impaired, the Company reduces the carrying amount accordingly and recognises a loss in the Statement of Income. A reinsurance asset is impaired if there is objective evidence, as a result of an event that occurred after the initial recognition of the reinsurance asset, that the Company may not receive amounts due to it under the terms of their contract, and the event has a reliably measurable impact on the amount that the Company will receive from the reinsurer.

6.2.8 Claims

Claims expense and a liability for outstanding claims are recognised in respect of direct and inwards reinsurance business. The liability covers claims Incurred But Not Reported claims (IBNR) and the anticipated direct and indirect costs of settling those claims. Claims outstanding are assessed by review of individual claim files and estimating changes in the ultimate cost of settling claims, IBNRs and settlement costs using statistics, based on past experience and trends.

Actuarial valuations are performed on an annual basis. While the Directors consider that the provision for claims is fairly stated on the basis of information currently available, the ultimate liability will vary as a result of subsequent information and events. This may result in adjustments to the amounts provided. Such amounts are reflected in the Financial Statements for that period. The methods used and the estimates made are reviewed regularly.

In addition to the normal insurance policies, the Company has issued the advance, bid and performance bonds during the financial period

and claims expenses on those bonds have been specifically mentioned in the bond agreements with the policyholders.

6.3 LIFE INSURANCE BUSINESS

6.3.1 Gross Written Premium

Premium from traditional life insurance contracts, including participating contracts and annuity policies with life contingencies, is recognised as revenue when cash is received from the policyholder. Benefits and expenses are provided against such revenue to recognised profits over the estimated life of the policies. Moreover, for single premium contracts, premium is recorded as income when received with any excess profit deferred and recognise in income in a constant relationship to the insurance in-force or, for annuities, the amount of expected benefit payments.

6.3.2 Reinsurance Premium

Outward reinsurance premium is recognised when payable. Reinsurance recoveries are credited to match the relevant gross claims.

6.3.3 Benefits, Losses and Expenses

Death claims are recorded on the basis of notifications received. Surrenders, maturities and annuity payments are recorded when due. Claims payable include direct costs of settlement. Interim payments and surrenders are accounted for only at the time of settlement.

6.3.4 Actuarial Valuation for Long-TermInsurance Provision

The Directors agree to the long-term insurance provision for the Company at the year end on the recommendations of the Consultant Actuary following his annual investigation of the life insurance business. The actuarial valuation takes into account all liabilities and is based on assumptions recommended by the Consultant Actuary.

7. ISLAMIC BANKING POLICIES

Islamic Banking operations in the Bank are conducted in line with Shari’ah principles while complying with the Bank of Ceylon Ordinance and the Banking Act No. 30 of 1988 and amendments thereto. A separate unit has been formed in line with the Standards set out by the Banking Advisory Committee of All Ceylon Jamiyathul Ulama (ACJU) - the apex body of Muslim theologians. Accordingly,


an independent Shari’ah Supervisory Board consisting of renowned Shari’ah Scholars of the country has been formed to advise and ensure the compliance of Islamic principles. This expert advice is a part of Governance requirement to ensure the harmonised operations under the existing regulatory, audit and accounting environment.

Profit sharing deposits are mobilised under the principle of Mudaraba, which is in line with the Shari’ah Standards of Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Similarly, demand deposits are accepted under the concept of ‘Qard’ (loan), which enables the depositor to withdraw his funds on demand.

Asset side of the Islamic Banking Balance Sheet is at present, represented by the following instruments that are also modified in line with Standards:

Murabaha to the purchase order (cost plus sale)

Ijarah (leasing)

Wakala Isthismar (agency arrangement in fund management)

8. COMMITMENTS AND CONTINGENCIES

Contingent liabilities are the 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.

9. SEGMENTAL REPORTING

Segmental information is presented in accordance with Sri Lanka Accounting Standard No. 28 (Revised 2000) on ‘Segment Reporting’, in respect of the Group’s business.

Business segments provide products and services whose risks and returns are different from those of other business segments. These segments comprise banking, leasing, treasury and investment, property and insurance.

Geographical segments provide products or services within a particular economic environment where risks and returns are different from those of other economic environments. These segments comprise domestic, off-shore banking units (branches) and off-shore banking division and foreign subsidiary.

Measurement of segment results, assets and liabilities include items which are directly attributable or can be reasonably allocated to a segment. Other items are reported as unallocated.

10. CASH FLOW STATEMENT

The Cash Flow Statement has been prepared by using the ‘Direct Method’ in accordance with the Sri Lanka Accounting Standard No. 09 on ‘Cash Flow Statements’. Cash and cash equivalents comprise cash, amounts due from other banks and other short-term highly-liquid investments with less then 90 days, maturity from date of acquisition.

11. COMPARATIVE FIGURES

Where necessary, amounts shown for the previous year have been reclassified to facilitate comparison.

12. EVENTS AFTER THE BALANCE SHEETDATE

Where necessary, all the material events after the Balance Sheet date have been considered and appropriate adjustments/disclosures have been made in the Financial Statements as per the Sri Lanka Accounting Standard No. 12 (Revised 2005) on ‘Events After the Balance Sheet Date’.

13. NEW ACCOUNTING STANDARDS ISSUEDBUT NOT EFFECTIVE AS AT THE BALANCE SHEET DATE

Following the convergence of Sri Lanka Accounting Standards with International Financial Reporting Standards, the Council of The Institute of Chartered Accountants of Sri Lanka has adopted a new set of Financial Reporting Standards that would apply for financial periods beginning on or after 01 January 2012. The application of these Financial Reporting Standards is substantially different to the previous Standards.


Accordingly, Sri Lanka Accounting Standards are based on International Financial Reporting Standards (IFRs) and International Accounting Standards (IASs) formulated by International Accounting Standards Board and they will be prefixed as SLFRS or LKAS, respectively.

These Standards have not been applied in preparing the Financial Statements as they were not effective for the year ended 31 December 2010. However, the Bank is in the process of evaluating the impact of adopting to new SLFRSs and LKASs from 01 January 2012 with greater consideration on the following Standards:

LKAS 32 on ‘Financial Instruments: Presentation’. (SLAS 44)

LKAS 39 on ‘Financial Instruments: Recognition and Measurement’. (SLAS 45)

SLFRS 7 on ‘Financial Instruments: Disclosure’. (SLAS 46)

Due to the complex nature of the effects of these Standards, the impact of adoption cannot be estimated as at the date of publication of these Financial Statements.


Bank GroupFor the year ended 31 December 2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

1. INCOME

Interest income (Note 2) 50,853,347 53,076,779 53,062,286 55,279,046

Dividend income (Note 6) 468,998 347,878 257,910 150,456

Net gains from investment in securities (Note 7) 3,105,791 1,961,210 3,508,297 2,012,436

Fee and commission income (Note 4) 6,014,178 4,255,204 6,487,663 4,353,702

Foreign exchange profit 408,686 1,566,916 418,461 1,566,916

Other operating income (Note 8) 1,143,913 753,247 1,524,738 1,128,780

Recovery of non-performing advances (Note 13) 1,367,953 1,500,132 1,394,539 1,506,205

Share of profit of Associate Companies before tax (Note 14) – – 212,898 130,653

63,362,866 63,461,366 66,866,792 66,128,194

2. INTEREST INCOME

Customer advances

Bills of exchange 1,825,130 1,763,957 1,893,923 1,835,221

Loans and advances 24,029,532 25,608,860 24,599,475 25,983,944

Leasing 728,841 936,415 2,086,052 2,335,035

Trade finance 1,510,508 1,876,456 1,536,935 1,898,749

Pawning 7,144,581 6,953,328 7,151,380 6,954,826

Treasury bills, bonds and other eligible bills 13,143,034 13,566,316 13,288,145 13,843,703

Securities purchased under re-sale agreements 990,515 682,904 1,001,487 691,481

Short-term funds 282,908 531,376 306,591 578,920

Government of Sri Lanka Restructuring Bonds 1,025,640 1,025,640 1,025,640 1,025,640

Government securities 172,658 131,527 172,658 131,527

50,853,347 53,076,779 53,062,286 55,279,046

Net interest income earned from the secondary market transactions in Treasury bills and Treasury bonds has been grossed up by adding the notional tax credit to the interest income. More details are given in Note 15.5.


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

3. INTEREST EXPENSE

Customer deposits 22,073,580 26,406,994 22,452,332 27,061,880

Securities sold under re-purchase agreements 4,285,640 7,060,149 4,193,817 7,059,146

Debentures 2,953,869 3,112,970 3,071,549 3,358,567

Refinance borrowings 280,914 235,300 280,914 235,300

Other borrowed funds 1,611,157 1,451,461 2,020,549 1,774,928

31,205,160 38,266,874 32,019,161 39,489,821

4. FEE AND COMMISSION INCOME

Trade and other related activities 3,733,185 2,310,069 3,983,843 2,312,962

Travel and remittances 412,169 313,032 418,291 313,032

Personal banking 1,674,153 1,507,838 1,678,646 1,507,838

Custodial services 16,987 17,756 16,987 17,756

Brokering services 117,067 65,527 118,684 65,718

Others 60,617 40,982 271,212 136,396

6,014,178 4,255,204 6,487,663 4,353,702

NOTES TO THE FINANCIAL STATEMENTS




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

5. FEE AND COMMISSION EXPENSES

Brokering services 125,697 153,012 202,042 153,012

Credit cards 238,066 180,592 238,066 180,592

Fees 69,454 178,039 70,166 182,749

Others 34,081 32,752 45,734 34,124

467,298 544,395 556,008 550,477

6. DIVIDEND INCOME

Subsidiaries - Quoted 189,377 172,657 _ _

- Unquoted 12,666 22,140 _ _

Associates - Unquoted 20,676 4,675 _ _

Investment securities - Quoted 73,985 55,252 73,985 55,252

- Unquoted 8,652 24,457 11,048 25,649

Dealing securities held for trading - Quoted 64,339 19,473 73,574 20,333

Income from Unit Trust 98,448 49,224 98,448 49,222

Preference shares 855 – 855 –

468,998 347,878 257,910 150,456

7. NET GAINS FROM INVESTMENT IN SECURITIES

Gains/(losses) on mark to market valuation on securities held for trading

- Shares 79,714 164,076 216,078 181,019

- Treasury bills and bonds 132,068 363,630 143,923 397,913

Capital gains/(losses) on sale of securities held for trading

- Shares 1,856,780 651,881 2,088,752 651,881

- Treasury bills and bonds 1,037,229 781,623 1,059,544 781,623

3,105,791 1,961,210 3,508,297 2,012,436

8. OTHER OPERATING INCOME

Profit/(loss) on sale of property, plant & equipment including foreclosed properties 26,775 98,371 32,494 111,975

Other income 1,117,138 654,876 1,492,244 1,016,805

1,143,913 753,247 1,524,738 1,128,780

9. PERSONNEL COSTS

Staff emoluments 6,861,601 6,992,726 7,341,451 7,313,945

Employers’ contribution to defined contribution plans

- Employees’ Provident Fund 526,179 513,648 582,875 547,729

- Employees’ Trust Fund 130,486 128,002 143,469 136,002

Other personnel cost 525,806 473,399 663,988 574,654

8,044,072 8,107,775 8,731,783 8,572,330

The number of persons employed by the Bank as at 31 December 2010 was 8,204 (7,538 as at 31 December 2009).



Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

10. STAFF RETIREMENT BENEFITS

Employers’ contribution to defined benefit plans

Bank of Ceylon Pension Trust Fund 1,730,096 1,883,403 1,730,096 1,883,403

Bank of Ceylon Widows’/Widowers’ and Orphans’ Pension Fund 456,000 456,000 456,000 456,000

Provision for terminal gratuity 80,023 70,228 112,983 88,064

2,266,119 2,409,631 2,299,079 2,427,467

The Bank has a Pension Scheme established under an Industrial Award which is solely funded by the Bank. There is also a Widows’/Widowers’ and Orphans’ Pension Scheme established by the members. Both these funds have been closed to new entrants as from 01 January 1996.

The assets of these two plans are held independently of the Bank’s assets and administered by Boards of Trustees/Managers, representing the management and the employees, as provided in the Trust Deed/Rules of the respective Funds.

Both Funds are subject to annual audits independent of the audit of the Bank, by a firm/s of Chartered Accountants appointed by the members and actuarial valuations are carried out at least once in three years, as per the rules governing these Funds.

10.1 BANK OF CEYLON PENSION TRUST FUND

An actuarial valuation of the Pension Fund as at 31 December 2010 was carried out by Messrs K A Pandit - Consultants & Actuaries of Mumbai, India, a firm of professional actuaries.

The valuation has been done using the ‘Projected Unit Credit Method’, which is recommended in the Sri Lanka Accounting Standard No. 16 (Revised 2006) on ‘Employee Benefits’.

(a) The results of the actuarial valuation of the Pension Fund is summarised as follows:

31 December 31 December2010 2009

Rs. ’000 Rs. ’000

Present value of funded obligations 41,981,000 38,377,130

Fair value of plan assets (43,907,940) (39,843,170)

Present value of net obligations (1,926,940) (1,466,040)

2010 2009Rs. ’000 Rs. ’000

(b) Movement in the present value of defined benefit obligations

Liability for defined benefit obligation at the beginning of the year 38,377,130 33,111,760

Interest cost 3,837,710 3,973,410

Current service cost 570,330 622,180

Benefit paid by the plan (3,439,000) (2,333,330)

Actuarial (gain)/loss on obligation 2,634,830 3,003,110

Liability at the end of the year 41,981,000 38,377,130

(c) Plan assets

Bonds and securities issued by the Government of Sri Lanka 13,588,916 13,099,040

Debentures issued by Corporates 14,395,460 5,500,000

Investment in equity shares 4,708,274 3,182,390

Fixed deposits 8,450,000 14,620,000

Other investments 478,598 732,585

Other receivable 2,286,692 2,709,155

43,907,940 39,843,170



2010 2009Rs. ’000 Rs. ’000

(d) Movement in plan assets

Fair value of plan assets at the beginning of the year 39,843,170 33,111,760

Expected return on plan assets 3,984,320 3,969,257

Contribution paid into plan 1,729,642 1,883,403

Benefits paid by the plan (3,439,000) (2,333,330)

Actuarial gain/(loss) on plan assets 1,789,808 3,212,080

Fair value of plan assets at the end of the year 43,907,940 39,843,170

(e) Actuarial assumptions

Future salary increase 6.5% p.a. 6.5% p.a.

Increase in future Cost of Living Allowance (COLA) 6.0% p.a. 6.0% p.a.

Increase in pension in payment (Basic) Nil Nil

Rate of discounting 10.0% p.a. 10.0% p.a.

Rate of return on plan assets 10.0% p.a. 10.0% p.a.

Attrition rate 0.4% p.a. 0.4% p.a.

10.2 BANK OF CEYLON WIDOWS’/WIDOWERS’ AND ORPHANS’ PENSION FUND

(a) An actuarial valuation of the Pension Fund as at 31 December 2010 was carried out by Messrs K A Pandit - Consultants & Actuaries of Mumbai, India, a firm of professional actuaries.


The results of the actuarial valuation of the W/W & O Pension Fund is summarised as follows:

31 December 31 December2010 2009

Rs. ’000 Rs. ’000

Present value of funded obligations 10,138,000 9,515,950

Fair value of plan assets (10,346,890) (9,035,020)

Present value of net obligations (208,890) 480,930

2010 2009Rs. ’000 Rs. ’000

(b) Movement in the present value of defined benefit obligations

Liability for defined benefit obligation at the beginning of the year 9,515,950 7,394,320

Interest cost 951,600 887,320

Benefit paid by the plan (363,140) (313,950)

Actuarial (gain)/loss on obligation 33,590 1,548,260

Liability at the end of the year 10,138,000 9,515,950



2010 2009Rs. ’000 Rs. ’000

(c) Plan assets

Bonds and securities issued by the Government of Sri Lanka 1,739,921 1,304,550

Debentures 4,037,160 2,050,000

Other receivable 4,569,809 5,680,470

10,346,890 9,035,020

(d) Movement in plan assets

Fair value of plan assets at the beginning of the year 9,035,020 7,394,320

Expected return on plan assets 903,500 887,320

Contribution paid by members 225,830 244,450

Special contribution paid by the Bank 456,000 456,000

Benefits paid by the plan (363,140) (313,950)

Actuarial gain/(loss) on plan assets 89,680 366,880

Fair value of plan assets at the end of the year 10,346,890 9,035,020

(e) Actuarial assumptions



Increase in Widows‘/Widowers‘ and Orphans‘ Pension in payment (Basic) Nil Nil



Attrition rate 1.0% & 0.4% p.a. 1.0% & 0.4% p.a.

10.3 GRATUITY FUND

Provision is made to meet the Bank’s obligation to pay gratuity in terms of the Payment of Gratuity Act No. 12 of 1983, to all those employees who have joined after 01 January 1996. Provision also includes those who have joined the Bank prior to 01 January 1996 and leave the Bank without being entitled to a pension. The probability of early withdrawal has been considered as 1% in the case of those joined after 01 January 1996 and 0.4% in the case of others by the actuaries based on the historical data.

An actuarial valuation of the Gratuity Fund as at 31 December 2010 was carried out by Messrs K A Pandit - Consultants & Actuaries of Mumbai, India, a firm of professional actuaries.


The results of the actuarial valuation of the Gratuity Fund indicate that the present value of the obligation is Rs. 197.93 million as at 31 December 2010 (2009 - Rs. 167.95 million). The provision made by the Bank is adequate to meet its gratuity obligations in full.

The principal actuarial assumptions used in the valuation were as follows:

2010 2009Rs. ’000 Rs. ’000

Actuarial assumptions



Increase in gratuity in payment (Basic) Nil Nil



Attrition rate 1.0% & 0.4% p.a. 1.0% & 0.4% p.a.




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

11. PREMISES, EQUIPMENT & ESTABLISHMENT AND OTHER OPERATING EXPENSES

Premises, equipment & establishment and other operating expenses include the following:

Directors’ emoluments 1,570 1,707 12,604 12,031

Auditors’ remuneration 20,467 21,194 35,835 24,023

Depreciation on property, plant & equipment (Note 29) 784,993 686,428 889,616 790,745

Depreciation on investment properties (Note 25) – – 3,074 3,060

Amortisation of leasehold land (Note 30) 2,296 1,095 3,653 2,452

Amortisation of intangible assets (Note 31) 54,873 185,473 59,076 189,860

Professional expenses 78,554 52,386 104,439 74,924

Legal expenses 34,380 24,636 49,355 32,528

Donations 47 21 1,355 370

As per the Banking Act Direction No. 5 of 2010, the Bank is required to provide a premium of 0.1% or 0.125% of the eligible deposit liabilities depending on the Capital Adequacy Ratio (CAR) of the immediate proceeding audited Financial Statements, payable quarterly on ‘Deposit Insurance Scheme’ with effect from 01 October 2010. Accordingly, the Bank has provided a sum of Rs. 95,952,038/- on account of Deposit Insurance Scheme during the last quarter of year 2010.


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

12. PROVISION FOR LOAN LOSSES

Specific provision for loans and advances 1,066,497 1,340,832 1,082,639 1,245,527

Specific provision for pawning advances 18,806 47,725 18,806 47,725

Specific provision for credit card receivable (38,193) 24,080 (38,193) 24,080

1,047,110 1,412,637 1,063,252 1,317,332

Specific provision for bills of exchange (13,628) 197,954 (15,538) 198,864

Specific provision for leasing facilities 32,684 192,126 148,712 376,613

Specific provision for foreclosed properties 5,712 – 5,712 –

Total specific provision for loans and advances 1,071,878 1,802,717 1,202,138 1,892,809

General provision made for regular advances 490,924 (556) 497,944 8,878

General provision for bills of exchange (1,470) (122) 3,121 1,972

General provision for leasing facilities (1,438) (334) 22,794 (8,682)

Total general provision for loans and advances 488,016 (1,012) 523,859 2,168

Total provision for loan losses 1,559,894 1,801,705 1,725,997 1,894,977




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

13. RECOVERY OF NON-PERFORMING ADVANCES

Recovery of loans written-off in previous years 70,866 102,013 97,452 108,086

Reversal of provisions for non-performing advances 1,297,087 1,398,119 1,297,087 1,398,119

1,367,953 1,500,132 1,394,539 1,506,205

14. SHARE OF PROFIT OF ASSOCIATE COMPANIES BEFORE TAX

Ceybank Asset Management (Private) Limited – – 26,331 6,215

Southern Development Financial Company Limited – – (495) (722)

Lanka Securities (Private) Limited – – 116,606 41,773

Mireka Capital Land (Private) Limited – – 75,773 42,626

Transnational Lanka Records Solutions (Private) Limited – – 5,123 4,885

MBSL Savings Bank Limited – – (10,440) 35,876

– – 212,898 130,653

15. INCOME TAX EXPENSE

The break-up of income tax expense is as follows:

15.1 BANK

Domestic branch operations

Income tax on profit of domestic operations of the Bank 2,465,896 146,718 2,465,896 146,718

Off-shore Banking Division (OBD)

Income tax on profits of on-shore operations of OBD 946,236 984,383 946,236 984,383

Income tax on profits of off-shore operations of OBD 74,252 54,719 74,252 54,719

Overseas branch operations

Income tax on profits of the branch in Maldives 103,373 97,572 103,373 97,572

Income tax on profits of the branch in Chennai 86,779 102,526 86,779 102,526

(Over)/Under provision for taxation in respect of prior years (37,413) (165,199) 40,043 (155,464)

3,639,123 1,220,719 3,716,579 1,230,454

15.2 SUBSIDIARY COMPANIES

Income tax on profit of:

Property Development PLC – – 167,361 178,696

Merchant Bank of Sri Lanka PLC – – 105,640 63,770

BoC Management & Support Services (Private) Limited – – 64 193

BoC Property Development & Management (Private) Limited – – 13,006 11,870

BoC Travels (Private) Limited – – 4,711 4,543

Hotels Colombo (1963) Limited – – 8,382 206

Merchant Credit of Sri Lanka Limited – – 27,648 15,722

Ceylease Financial Services Limited – – 5,431 1,152

Ceybank Holiday Homes (Private) Limited – – 877 837

MBSL Insurance Company Limited – – 5,516 –

– – 338,636 276,989




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

15.3 ASSOCIATE COMPANIES

Share of income tax on profit of:

Ceybank Asset Management (Private) Limited – – 12,297 4,144

Southern Development Financial Company Limited – – – 175

Lanka Securities (Private) Limited – – 42,353 15,914

Mireka Capital Land (Private) Limited – – 2,236 11

Transnational Lanka Records Solutions (Private) Limited – – 795 865

– – 57,681 21,109

Deferred tax (released)/charged (Note 36) 48,134 (97,078) 49,393 (125,565)

3,687,257 1,123,641 4,162,289 1,402,987

15.4 RECONCILIATION OF ACCOUNTING PROFIT AND INCOME TAX EXPENSE IS AS FOLLOWS:


Tax Rate Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Accounting profit before tax 10,052,569 4,207,647 11,075,485 4,719,910

Tax effect at the statutory income tax rates

Domestic operations of the Bank 35.0% 2,497,910 433,574 2,497,910 433,574

On-shore banking operations of the off-shore banking division of the Bank 35.0% 946,236 984,383 946,236 984,383

Off-shore banking operations of the off-shore banking division of the Bank 20.0% 74,252 54,719 74,252 54,719

Foreign branch operations

Male 25.0% 103,373 97,572 103,373 97,572

Chennai 40.0% 86,779 102,526 86,779 102,526

Subsidiaries [Note 15.4 (a)] – – 300,341 158,175

3,708,550 1,672,774 4,008,891 1,830,949

Tax effect of deductible expenses (3,544,769) (3,166,183) (4,398,874) (3,889,160)

Tax effect of non-deductible expenses 3,461,232 2,861,803 4,349,499 3,700,175

Share of income tax expenses of Associates – – 57,681 21,109

Social responsibility levy at 1.5% of income tax 51,523 17,524 55,656 20,943

(Over)/Under provision of taxes in respect of prior years (37,413) (165,199) 40,043 (155,464)

Deferred tax (reversal)/charge 48,134 (97,078) 49,393 (125,565)

Income tax expense reported in the income statement 3,687,257 1,123,641 4,162,289 1,402,987



15.4 (a) Income tax rates which were applicable for Subsidiaries in 2009 and 2010 are as follows:

Subsidiaries 2010 2009

1. Property Development PLC 35% 35%

2. Merchant Bank of Sri Lanka PLC 35% 35%

3. BoC Management & Support Services (Private) Limited 15% 15%

4. BoC Property Development & Management (Private) Limited 35% 35%

5. BoC Travels (Private) Limited 15% 15%

6. Hotels Colombo (1963) Limited 15% 15%

7. Merchant Credit of Sri Lanka Limited 35% 35%

8. Ceylease Financial Services Limited 35% 35%

9. Ceybank Holiday Homes (Private) Limited

- Hotel business 15% 15%

- Other activities 35% 35%

10. MBSL Insurance Company Limited 35% 35%

11. Koladeniya Hydropower (Private) Limited* – –

12. Bank of Ceylon (UK) Limited 28% –

*As per the agreement with Board of Investment (BOI), Koladeniya Hydropower (Private) Limited is exempted from taxation for the year 2010.

15.5 NOTIONAL CREDIT FOR WITHHOLDING TAX ON GOVERNMENT SECURITIES ON SECONDARY MARKET TRANSACTIONS

In terms of the Section 137 of the Inland Revenue Act No. 10 of 2006 and the amendments thereto, a company which derives interest income from the secondary market transactions in Government securities would be entitled to a notional tax credit [being one-ninths (1/9) of the net interest income], provided such interest income form a part of statutory income of the Company for that year of assessment.

Accordingly, the net income earned by the Bank and the Group on the secondary market transactions in Government securities for the year has been grossed up in the Financial Statements and the resulting notional tax credit amounted to a sum of Rs. 659,630,077/- (2009 - Rs. 351,925,417/-) for the Bank and Rs. 685,026,871/- (2009 - Rs. 380,872,682/-) for the Group.

16. EARNINGS PER SHARE AND DIVIDENDS PER SHARE

EARNINGS PER SHARE

As per the Sri Lanka Accounting Standard No. 34 (Revised 2005) on ‘Earning Per Share’, basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the parent entity (the numerator) by the weighted average number of ordinary shares in issue (the denominator) during the year.

DIVIDENDS PER SHARE

Dividends per share is calculated by dividing the total profit distributed to shareholders (the numerator) by the weighted average number of ordinary shares in issue (the denominator) during the year.


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Profit/(loss) attributable to ordinary shareholders of the parent 6,365,312 3,084,006 6,760,310 3,299,873

Total dividends declared to shareholders during the year 3,096,410 1,346,410 3,096,410 1,346,410

Weighted average number of ordinary shares in issue 5,000,000 5,000,000 5,000,000 5,000,000

Basic earnings per share (Rs.) 1,273.06 616.80 1,352.06 659.97

Dividend per share (Rs.) 619.28 269.28 619.28 269.28



16.1 DIVIDENDS

Under the agreement between the Bank of Ceylon and the Government of Sri Lanka, on re-capitalising and granting of autonomy to the Bank, the Government reserves the option of the level of profit after tax that will be retained by the Bank.

All profits after deduction of provision for taxation, provision for loan losses and any such portion for reserves, if any, as the Government shall determine, will be issued as dividends to the Government at the end of each year.

Accordingly, a sum of Rs. 3,096 million has been declared by the Bank as dividends for the year 2010 (2009 - Rs. 1,346 million).

Bank GroupAs at 31 December 2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

17. CASH AND SHORT TERM FUNDS

Coins, notes held in local currency 8,044,372 7,241,555 8,079,260 7,261,393

Coins, notes held in foreign currency 715,208 763,214 715,208 763,214

Balances with other banks 5,344,223 5,504,083 4,960,389 5,492,647

14,103,803 13,508,852 13,754,857 13,517,254

18. BALANCES WITH CENTRAL BANKS

Central Bank of Sri Lanka (Note 18.1) 22,933,090 13,910,808 22,933,090 13,910,808

Reserve Bank of India (Note 18.2) 393,699 615,333 393,699 615,333

Maldives Monetary Authority (Note 18.3) 2,567,677 1,737,327 2,567,677 1,737,327

25,894,466 16,263,468 25,894,466 16,263,468

18.1 In terms of the provisions of Section 93 of the Monetary Law Act No. 58 of 1949, the Bank is required to maintain a cash reserve with the Central Bank of Sri Lanka. The minimum cash reserve required to be maintained at the Central Bank of Sri Lanka as at 31 December 2010 was 7.0% (2009: 7.0%) of Sri Lanka Rupee deposit liabilities. There is no reserve requirement for foreign currency deposit liabilities maintained by domestic branches and the deposit liability of the Off-shore Banking Division in Sri Lanka (2009: Nil).

18.2 Section 42 (1) of the Reserve Bank of India (RBI) Act of 1934, requires that the branch in Chennai maintains a cash reserve of 6.0% (31 December 2009: 5.5%) with the Reserve Bank of India, being the minimum cash reserve requirement, as at 31 December 2010 on its demand and term deposit liabilities.

18.3 Regulations issued by Maldives Monetary Authority (MMA), requires that 50% of minimum required capital of the branch in Maldives be maintained in a deposit with MMA (2009: 50%). In addition, a reserve of 25% on the deposit liability (2009 - 25%) should also be maintained with the MMA.

19. TREASURY BILLS, BONDS AND OTHER ELIGIBLE BILLS

Treasury bills, bonds and other eligible bills are debt securities issued by the Government of Sri Lanka and the respective Government authorities where the overseas branches are located.

Treasury bills, bonds and other eligible bills maturing within the period of less than twelve months have been classified as follows:


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Gross Treasury bills & bonds held for trading 27,685,647 14,576,408 28,655,330 15,529,297

Gain/(loss) on marked to market valuation 62,012 44,075 62,012 44,075

Net Treasury bills & bonds held for trading 27,747,659 14,620,483 28,717,342 15,573,372

Treasury bills, bonds and other eligible bills held to maturity 17,631,354 14,114,913 17,631,354 14,114,913

45,379,013 28,735,396 46,348,696 29,688,285

The details of the Treasury bills & bonds that have been pledged as security for liabilities at the year end are disclosed in Note 44.



BankAs at 31 December 2010 2009

No. of Market price Carrying No. of Market price Carryingordinary per share value ordinary per share value

shares Rs. Rs. ’000 shares Rs. Rs. ’000

20. DEALING SECURITIES

LISTED EQUITY SECURITIES

Bank, Finance and Insurance

Central Finance Company PLC – – – 66,500 317.50 21,114

Ceylon Investment PLC – – – 17,600 247.50 4,356

Commercial Bank of Ceylon PLC - Voting 16,100 259.90 4,184 2,208,945 189.50 418,595

Commercial Bank of Ceylon PLC - Non-Voting 199,300 162.00 32,287 – – –

DFCC Bank 800,000 200.20 160,160 315,900 167.00 52,755

Hatton National Bank PLC - Voting 1,031,600 399.90 412,537 2,665,200 170.25 453,750

Hatton National Bank PLC - Non-Voting 439,900 214.60 94,402 – – –

HDFC Bank of Sri Lanka – – – 90,900 147.75 13,431

Lanka ORIX Leasing Company PLC 346,800 127.80 44,321 76,400 137.00 10,467

LB Finance PLC 38,400 261.90 10,057 – – –

Nations Trust Bank PLC - Voting 953,500 83.40 79,522 – – –

Sampath Bank PLC 629,800 271.90 171,243 – – –

1,008,713 974,468

Diversified Holdings

Aitken Spence PLC 212,300 169.90 36,070 36,100 1,325.00 47,833

Carsons Cumberbatch PLC 43,200 513.20 22,170 – – –

C T Holdings PLC 310,000 182.70 56,637 100,000 54.00 5,400

Hayleys PLC 157,100 345.00 54,199 63,700 171.75 10,941

Hemas Holdings PLC 30,000 44.50 1,335 1,031,000 122.75 126,555

John Keells Holdings PLC 1,080,235 298.40 322,342 90,084 171.50 15,449

Richard Pieris & Company PLC 8,734,900 10.50 91,716 – – –

584,469 206,178

Manufacturing

ACL Cables PLC 379,900 85.10 32,329 94,400 76.25 7,245

Chevron Lubricants Lanka PLC 768,200 159.50 122,528 – – –

Dipped Products PLC 882,400 119.70 105,623 24,900 86.00 2,141

Kelani Tyres PLC 50,000 49.30 2,465 – – –

Lanka Cement PLC 9,583,809 28.00 268,347 9,583,809 23.25 222,824

Lanka Floortiles PLC 210,000 134.30 28,203 74,800 66.50 4,974

Lanka Walltiles PLC 38,900 138.90 5,403 273,400 57.25 15,652

Piramal Glass Ceylon PLC 1,000,000 7.80 7,800 4,021,200 2.20 8,847

Royal Ceramics Lanka PLC 403,000 304.90 122,875 348,200 66.50 23,155

Sierra Cables PLC 436,400 4.30 1,876 – – –

Tokyo Cement Company (Lanka) PLC - Voting 75 55.00 4 506,300 322.25 163,155

697,453 447,993






Hotels & Travels

Aitken Spence Hotel Holdings PLC 541,000 105.70 57,184 – – –

Asian Hotels & Properties PLC 502,700 194.00 97,524 363,400 94.50 34,341

Eden Hotel Lanka PLC 392,300 57.60 22,596 – – –

Hotel Services (Ceylon) PLC 575,800 26.00 14,971 600,000 19.00 11,400

John Keells Hotels PLC 800,600 20.00 16,012 369,200 22.50 8,307

Kandy Hotels Company (1938) PLC – – – 10,000 113.25 1,133

Taj Lanka Hotels PLC 550,000 71.70 39,435 – – –

The Lighthouse Hotel PLC 100,000 63.00 6,300 – – –

Trans Asia Hotels PLC – – – 100,000 174.25 17,425

254,022 72,606

Power & Energy

Hemas Power PLC 1,226,800 29.50 36,191 1,285,100 19.50 25,059

Lanka IOC PLC 233,300 18.90 4,409 283,300 17.25 4,887

Laugfs Gas Limited - Voting 1,232,700 25.90 31,927 – – –

Laugfs Gas Limited - Non-Voting 350,400 18.50 6,482 – – –

Panasian Power Limited 79,200 3.00* 238 – – –

79,247 29,946

Telecommunications

Dialog Axiata PLC 6,400 11.90 76 – – –

Sri Lanka Telecom PLC 214,000 49.00 10,486 214,000 46.00 9,844

10,562 9,844

Motors

Diesel & Motor Engineering PLC 10,000 973.50 9,735 – – –

United Motors Lanka PLC – – – 18,000 64.25 1,157

9,735 1,157

Plantations

Agalawatte Plantations PLC 13,600 63.00 857 – – –

Balangoda Plantations PLC 103,100 57.40 5,918 – – –

Horana Plantations PLC 390,000 36.40 14,196 – – –

Kahawatte Plantations PLC 200,000 28.00 5,600 – – –

Kegalle Plantations PLC 117,300 161.80 18,979 64,500 33.50 2,161

Kotagala Plantations PLC 9,400 116.90 1,099 – – –

Malwatte Plantations PLC – – – 8,000 33.00 264

Namunukula Plantations PLC 66,400 119.10 7,908 – – –

54,557 2,425

Health Care

Asiri Hospital Holdings PLC 100,000 8.80 880 100,000 10.25 1,025

Asiri Surgical Hospital PLC 179,200 8.70 1,559 179,200 11.00 1,971

Ceylon Hospitals PLC 6 102.00 1 10,472 80.25 840

Nawaloka Hospitals PLC 3,119,800 3.70 11,543 – – –

The Lanka Hospitals Corporation PLC – – – 67,000 19.00 1,273

13,983 5,109

* Represents the allotment price of the shares.






Beverage, Food & Tobacco

Cargills (Ceylon) PLC 400,000 195.40 78,160 30,000 65.25 1,958

Coco Lanka PLC 69,900 64.40 4,502 – – –

Distilleries Company of Sri Lanka PLC 405,700 177.90 72,174 – – –

The Lion Brewery Ceylon PLC 531,700 185.10 98,418 – – –

253,254 1,958

Chemical & Pharmaceuticals

Chemical Industries (Colombo) PLC - Voting 208,100 140.70 29,280 1,185,300 63.00 74,674

Chemical Industries (Colombo) PLC - Non-Voting 30,300 99.90 3,027 – – –

Haycarb PLC 164,400 168.50 27,701 – – –

60,008 74,674

Construction & Engineering

Colombo Dockyard PLC 100,000 275.00 27,500 75 244.75 18

27,500 18

Trading

Brown & Company PLC 716,000 246.90 176,780 – – –

176,780 –

Investment Trust

Renuka Holdings PLC – – – 11,000 135.75 1,493

– 1,493


PC House PLC 182,700 11.30 2,065 – – –

2,065 –

Total dealing securities 3,232,348 1,827,869



GroupAs at 31 December 2010 2009



LISTED EQUITY SECURITIES

Bank, Finance and Insurance

Amana Takaful PLC 195,800 3.00 587 – – –

Asia Capital PLC 12,200 47.00 573 – – –

Central Finance Company PLC – – – 68,500 317.50 21,733

Ceylinco Insurance PLC 14,300 381.00 5,448

Ceylon Investment PLC – – – 17,635 247.50 4,362

Commercial Bank of Ceylon PLC - Voting 30,400 259.90 7,901 2,219,945 189.50 420,449

Commercial Bank of Ceylon PLC - Non-Voting 199,300 162.00 32,287 – – –

DFCC Bank 861,800 200.20 172,532 415,900 167.00 68,120

First Capital Holdings PLC 760,000 19.00 14,440 – – –

Hatton National Bank PLC - Voting 1,037,100 399.90 414,736 2,699,100 170.25 458,791

Hatton National Bank PLC - Non-Voting 524,300 214.60 112,515 – – –

HDFC Bank of Sri Lanka – – – 90,900 147.75 13,431

Janashakthi Insurance Company PLC 805,100 16.00 12,882 205,000 9.50 2,460

Lanka ORIX Leasing Company PLC 356,800 127.80 45,599 101,800 137.00 13,406

Lanka Ventures PLC – – – 40,000 18.00 566

LB Finance PLC 38,400 261.90 10,057 – – –

Merchant Bank of Sri Lanka PLC 17,000 45.80 779 – – –

National Development Bank PLC 14,600 349.50 5,103 31,000 206.00 4,811

Nations Trust Bank PLC - Voting 1,026,000 83.40 85,568 160,000 36.50 4,275

Nations Trust Bank PLC - Non-Voting 20,000 57.60 1,152 – – –

Pan Asia Banking Corporation PLC 2,833 52.00 147 68,000 20.00 1,144

People's Merchant Bank PLC 6,200 29.40 182 – – –

Sampath Bank PLC 629,800 271.90 171,243 10,000 204.00 1,736

Seylan Bank PLC - Voting 118,500 97.80 11,589 – – –

Seylan Bank PLC - Non-Voting 41,700 49.00 2,043 – – –

Singer Finance (Lanka) Limited 2,600 15.00 39 – – –

SMB Leasing PLC - Voting 86,800 1.90 165 – – –

SMB Leasing PLC - Non-Voting 1,600,000 1.00 1,600 – – –

SMB Leasing PLC - Share Warrants (015) 2,000,000 0.80 1,600 – – –

SMB Leasing PLC - Share Warrants (016) 1,600,000 0.60 960

1,111,727 1,015,284






Diversified Holdings

Aitken Spence PLC 212,300 169.90 36,070 36,100 1,325.00 47,833

Carsons Cumberbatch PLC 43,200 513.20 22,170 – – –

C T Holdings PLC 342,200 182.70 62,520 100,000 54.00 5,400

Hayleys PLC 157,100 345.00 54,199 78,700 171.75 13,435

Hemas Holdings PLC 33,900 44.50 1,509 1,031,000 122.75 126,555

John Keells Holdings PLC 1,308,161 298.40 390,355 165,110 171.50 26,121

The Colombo Fort Land & Building Company PLC – – – 15,000 31.50 441

Richard Peiris & Company PLC 10,589,100 10.50 111,185 150,000 39.00 5,655

678,008 225,440

Manufacturing

ACL Cables PLC 384,800 85.10 32,746 120,900 76.25 9,116

ACL Plastics PLC – – – 5,000 74.00 329

Central Industries PLC 431,700 90.00 38,853 – – –

Ceylon Grain Elevators PLC – – – 40,000 14.25 563

Chevron Lubricants Lanka PLC 768,200 159.50 122,528 12,200 142.00 1,443

Dipped Products PLC 882,400 119.70 105,623 38,400 86.00 3,413

Hayleys Exports PLC 62,600 41.00 2,567 – – –

Kelani Tyres PLC 50,000 49.30 2,465 – – –

Lanka Cement PLC 9,644,209 28.00 270,038 9,638,809 23.25 224,802

Lanka Floortiles PLC 212,400 134.30 28,525 89,800 66.50 5,708

Lanka Walltiles PLC 40,900 138.90 5,681 294,600 57.25 16,625

Pelwatte Sugar Industries PLC 30,800 27.40 844 – – –

Piramal Glass Ceylon PLC 1,200,000 7.80 9,360 4,021,200 2.20 8,847

Richard Pieris Exports PLC – – – 5,000 28.00 129

Royal Ceramics Lanka PLC 403,000 304.90 122,875 388,200 66.50 25,006

Sierra Cables PLC 436,400 4.30 1,876 – – –

Tokyo Cement Company (Lanka) PLC - Voting 6,325 55.00 348 556,300 322.25 164,024

Tokyo Cement Company (Lanka) PLC - Non-Voting 7,500 40.30 302 – – –

744,631 460,005






Hotels & Travels

Aitken Spence Hotel Holdings PLC 541,000 105.70 57,184 – – –

Amaya Leisure PLC 4,214 91.00 383 – – –

Asian Hotels & Properties PLC 571,600 194.00 110,890 393,400 94.50 36,422

Ceylon Hotels Corporation PLC 55,100 36.50 2,011 25,100 23.75 665

Citrus Leisure PLC – – – 23,100 2.10 52

Dolphin Hotels PLC 22,800 61.20 1,395 – – –

Eden Hotel Lanka PLC 688,100 57.60 39,634 665,100 26.00 17,377

Galadari Hotels (Lanka) PLC 209,100 35.80 7,486 31,600 15.00 499

Hotel Developers (Lanka) PLC – – – 3,000 118.00 411

Hotel Services (Ceylon) PLC 3,602,950 26.00 93,677 7,080,750 19.00 118,504

John Keells Hotels PLC 2,087,233 20.00 41,745 429,000 22.50 9,101

Kandy Hotels Company (1938) PLC – – – 10,000 113.25 1,133

Marawila Resorts PLC 11,300 14.80 167 915,900 5.75 6,012

Mahaweli Reach Hotels PLC 8,100 35.00 284 – – –

Riverina Hotels PLC – – – 42,200 68.00 2,865

Serendib Hotels PLC – – – 94,700 39.25 4,015

Stafford Hotels PLC – – – 41,600 28.00 1,120

Taj Lanka Hotels PLC 550,000 71.70 39,435 4,600 23.50 107

Tangerine Beach Hotels PLC – – – 10,000 66.00 707

The Fortress Resorts PLC 123,700 20.60 2,548 70,000 12.25 891

The Lighthouse Hotel PLC 104,600 63.00 6,590 – – –

Trans Asia Hotels PLC – – – 100,000 174.25 17,425

403,429 217,306

Power & Energy

Hemas Power PLC 1,241,800 29.50 36,633 1,344,700 19.50 26,375

Lanka IOC PLC 341,600 18.90 6,456 295,800 17.25 5,115

Laugfs Gas Limited - Voting 1,405,700 25.90 36,408 – – –

Laugfs Gas Limited - Non-Voting 587,300 18.50 10,865 – – –

Panasian Power Limited 1,985,000 3.00* 5,955 – – –

96,317 31,490

Telecommunications

Dialog Axiata PLC 110,000 11.90 1,309 310,000 7.25 4,643

Sri Lanka Telecom PLC 238,900 49.00 11,706 238,900 46.00 10,980

13,015 15,623

Motors

Diesel & Motor Engineering PLC 10,000 973.50 9,735 – – –

United Motors Lanka PLC – – – 18,000 64.25 1,157

9,735 1,157

* Represents the allotment price of the shares.






Plantations

Agalawatte Plantations PLC 13,600 63.00 857 10,000 21.75 238

Balangoda Plantations PLC 124,600 57.40 7,152 – – –

Horana Plantations PLC 390,000 36.40 14,196 – – –

Kahawatte Plantations PLC 200,002 28.00 5,600 198,100 31.00 6,218

Kegalle Plantations PLC 117,900 161.80 19,076 69,500 33.50 2,332

Kotagala Plantations PLC 21,700 116.90 2,537 – – –

Malwatte Plantations PLC – – – 8,000 33.00 264

Maskeliya Plantations PLC 4,000 27.80 111 10,200 18.50 211

Namunukula Plantations PLC 66,400 119.10 7,908 – – –

57,437 9,263

Health Care

Asiri Hospital Holdings PLC 395,200 8.80 3,478 120,000 10.25 1,197

Asiri Surgical Hospital PLC 219,100 8.70 1,906 179,200 11.00 1,971

Ceylon Hospitals PLC 6 102.00 1 10,472 80.25 840

Nawaloka Hospitals PLC 5,589,800 3.70 20,682 200,000 3.10 623

The Lanka Hospitals Corporation PLC – – – 67,000 19.00 1,273

26,067 5,904

Beverage, Food & Tobacco

Cargills (Ceylon) PLC 400,000 195.40 78,160 35,000 65.25 2,269

Ceylon Tobacco Company PLC – – – 10,000 185.00 1,784

Coco Lanka PLC 75,005 64.40 4,830 10,000 48.50 397

Distilleries Company of Sri Lanka PLC 535,500 177.90 95,265 129,800 105.25 13,437

Kotmale Holdings PLC 228,200 43.20 9,858 50,000 16.00 837

Lanka Milk Foods (CWE) PLC 81,903 113.00 9,255 22,000 64.00 1,428

Nestle Lanka PLC – – – 1,000 415.00 329

Raigam Wayamba Salterns PLC 47,500 4.00 190 – – –

Renuka Agri Foods PLC – – – 1,350,200 3.30 3,038

The Lion Brewery Ceylon PLC 674,700 185.10 124,887 5,000 81.00 422

322,445 23,941

Chemical & Pharmaceuticals

Chemical Industries (Colombo) PLC - Voting 253,100 140.70 35,611 1,395,600 63.00 85,734

Chemical Industries (Colombo) PLC - Non-Voting 39,900 99.90 3,986 – – –

Chemanex PLC 1,000 122.30 122 – – –

Haycarb PLC 194,600 168.50 32,790 – – –

Lankem Ceylon PLC – – – 96,400 44.75 3,912

72,509 89,646






Construction & Engineering

Colombo Dockyard PLC 113,400 275.00 31,185 11,475 244.75 2,061

31,185 2,061

Trading

Brown & Company PLC 815,300 246.90 201,297 22,900 74.50 1,347

Ceylon Foreign Trades PLC 100,000 7.70 770 – – –

C W Mackie & Company PLC 300 85.10 26 25,000 36.00 834

Tess Agro PLC 139,900 2.70 378 175,000 1.60 327

202,471 2,508

Investment Trust

Environmental Resources Investment PLC 35,000 85.90 3,007 – – –

Renuka Holdings PLC – – – 11,000 135.75 1,493

3,007 1,493


PC House PLC 665,800 11.30 7,524 – – –

E-Channelling PLC 13,300 22.00 293 20,000 9.75 237

7,817 237

Land & Property

City Housing & Real Estate Company PLC – – – 10,000 21.25 346

Colombo Land & Development Company PLC 53,500 19.40 1,038 65,000 6.50 390

C T Land Development PLC – – – 51,100 21.50 1,174

Equity One PLC 40,600 56.00 2,274 – – –

Equity Two PLC 18,200 24.30 442 – – –

East West Properties PLC 1,200 12.90 15 – – –

Overseas Realty (Ceylon) PLC 403,500 15.30 6,174 40,000 15.50 543

Seylan Developments PLC 100,000 16.80 1,680 – – –

Touchwood Investment PLC 25,000 28.30 708 – – –

York Arcade Holdings PLC 45,800 24.10 1,104 – – –

13,435 2,453

Footwear & Textile

Hayleys MGT Knitting Mills PLC 65,600 32.00 2,099 834,100 35.00 29,994

Ceylon Leather Products PLC 184,300 92.60 17,066 – – –

19,165 29,994

Services

John Keells PLC – – – 23,700 153.00 3,578

3,578

3,812,400 2,137,383

Provision for fall in value (6,957) –

Total dealing securities 3,805,443 2,137,383




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

21. PLACEMENTS WITH AND LOANS TO OTHER BANKS

Placements with banks in Sri Lanka

- Sri Lanka rupee placements – 770,000 – 790,000

- Foreign currency placements 8,502,256 762,152 8,502,256 762,152

Placements with banks abroad

- Foreign currency placements 34,177,542 44,334,915 39,271,130 44,334,915

42,679,798 45,867,067 47,773,386 45,887,067

22. LOANS AND ADVANCES TO CUSTOMERS

22.1 BILLS OF EXCHANGE

Export bills 5,923,519 4,269,855 5,923,519 4,269,855

Import bills 9,852,601 11,828,675 9,852,601 11,828,675

Local bills – – 645,682 469,951

15,776,120 16,098,530 16,421,802 16,568,481

Specific provision for bills of exchange [Note 22.1 (b)] (156,452) (150,371) (168,534) (164,363)

General provision for bills of exchange [Note 22.1 (c)] (144,248) (145,718) (158,223) (155,102)

Interest in suspense [Note 22.1 (d)] (79,517) (548,125) (79,517) (548,125)

Net bills of exchange 15,395,903 15,254,316 16,015,528 15,700,891

22.1 (a) Analysis of net bills of exchange

Not later than 3 months 15,307,197 14,567,001 15,920,399 15,013,347

Later than 3 months and not later than 12 months 88,706 687,315 95,129 687,544

15,395,903 15,254,316 16,015,528 15,700,891

22.1 (b) Movement in specific provision for bills of exchange

Balance as at 01 January 150,371 281,682 164,363 294,764

Amount provided during the year (13,628) 197,954 (15,538) 198,864

Amount reversed during the year – (301,124) – (301,124)

Adjustments/transfers 19,709 (28,141) 19,709 (28,141)

Balance as at 31 December 156,452 150,371 168,534 164,363

22.1 (c) Movement in general provision for bills of exchange


Amount provided/(reversed) during the year (1,470) (122) 3,121 1,972


22.1 (d) Movement in interest in suspense of bills of exchange


Interest suspended during the year 12,448 101,627 12,448 101,627

Amount reversed during the year (481,056) (107,463) (481,056) (107,463)





Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.2 LOANS AND ADVANCES

Sri Lanka rupee loans and advances

Overdrafts 65,418,200 56,946,022 65,418,200 56,946,022

Term loans 164,341,648 96,685,864 166,113,749 98,281,626

Trust receipts 8,785,954 6,797,199 8,785,954 6,797,199

Staff loans 16,465,422 14,001,771 16,544,211 14,058,401

Loans under schemes 11,917,213 10,200,400 12,204,217 10,213,880

Foreclosed properties [Note 22.2 (e)] 814,154 445,876 814,154 445,876

267,742,591 185,077,132 269,880,485 186,743,004

Foreign currency loans and advances

Overdrafts 5,899,030 2,666,731 5,976,977 2,666,731

Term loans 87,250,968 66,576,024 87,283,723 66,576,024

Trust receipts 9,369,752 8,381,259 9,369,752 8,381,259

Staff loans 4,334 15,381 9,549 15,381

102,524,084 77,639,395 102,640,001 77,639,395

Total Sri Lanka rupee and foreign currency loans & advances 370,266,675 262,716,527 372,520,486 264,382,399

Specific provision for loans & advances [Note 22.2 (b)] (6,539,181) (7,595,463) (6,589,140) (7,629,954)

General provision for loans & advances [Note 22.2 (c)] (2,204,669) (1,719,846) (2,232,972) (1,741,129)

Interest in suspense [Note 22.2 (d)] (8,156,736) (7,766,138) (8,164,806) (7,776,751)

Provision for foreclosed properties [Note 22.2 (f)] (268,173) (32,796) (268,173) (32,796)

Net loans and advances 353,097,916 245,602,284 355,265,395 247,201,769

22.2 (a) Analysis of net loans and advances

Not later than 1 year 219,528,496 157,606,283 220,391,054 158,507,011

Later than 1 year and not later than 5 years 77,046,369 44,705,518 78,339,431 45,385,032

Later than 5 years 56,523,051 43,290,483 56,534,910 43,309,726

353,097,916 245,602,284 355,265,395 247,201,769

22.2 (b) Movement in specific provision for loans & advances

Balance as at 01 January 7,595,463 7,410,629 7,629,954 7,437,841

Adjustments for difference of currency conversion (64,329) 12,333 (64,329) 12,333

7,531,134 7,422,962 7,565,625 7,450,174

Amounts provided during the year (Note 12) 1,047,110 1,412,637 1,063,252 1,317,332

Amounts recovered/written back on account of provisions previously made (1,279,222) (1,059,849) (1,279,896) (1,064,883)

Amount reversed due to loans written off (502,599) (291,240) (502,599) (291,781)

Adjustments/transfers (257,242) 110,953 (257,242) 219,112

Balance as at 31 December 6,539,181 7,595,463 6,589,140 7,629,954

22.2 (c) Movement in general provision for loans & advances


Adjustments for difference of currency conversion (6,131) 1,164 (6,131) 1,164

1,713,715 1,743,052 1,734,998 1,754,901

Amounts provided/(reversed) during the year 490,924 (556) 497,944 8,878

Adjustments/transfers 30 (22,650) 30 (22,650)





Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.2 (d) Movement in interest in suspense of loans & advances


Interest suspended during the year 1,172,174 687,475 1,175,216 687,475



Adjustments/transfers 111,295 (24,159) 111,295 (13,903)


22.2 (e) Movement in foreclosed properties


Additions during the year 431,204 111,472 431,204 111,472

Disposals during the year (61,109) (6,428) (61,109) (6,428)

Adjustments/transfers (1,817) – (1,817) –


22.2 (f) Movement in provision for foreclosed properties


Amount provided during the year 5,712 – 5,712 –

Amount reversed during the year (2,345) (988) (2,345) (988)

Adjustments/transfers 232,010 5,283 232,010 5,283


22.3 LEASE RENTALS RECEIVABLE - NOT LATER THAN ONE YEAR

Gross lease rentals receivable 2,414,982 2,788,342 6,676,887 6,961,590

Prepaid rentals (16,480) (17,462) (68,454) (83,493)

2,398,502 2,770,880 6,608,433 6,878,097

Unearned income (366,977) (580,685) (1,463,102) (1,399,152)

Specific provision for lease rentals receivable (Note 22.6) (143,562) (159,165) (362,524) (449,992)

General provision for lease rentals receivable (Note 22.7) (21,019) (22,105) (63,320) (60,690)

Interest in suspense (Note 22.8) (29,009) (88,212) (158,581) (177,955)

Net lease rentals receivable 1,837,935 1,920,713 4,560,906 4,790,308

22.4 LEASE RENTALS RECEIVABLE - LATER THAN ONE YEAR AND NOT LATER THAN FIVE YEARS

Gross lease rentals receivable 3,152,224 3,101,035 8,849,640 7,077,698

Prepaid rentals (26,229) (29,239) (44,007) (35,659)

3,125,995 3,071,796 8,805,633 7,042,039

Unearned income (566,315) (546,058) (1,689,220) (1,510,798)

Specific provision for lease rentals receivable (Note 22.6) (84,589) (104,806) (203,729) (211,499)

General provision for lease rentals receivable (Note 22.7) (25,826) (26,639) (72,836) (53,133)

Interest in suspense (Note 22.8) (61,430) (106,422) (96,104) (160,251)

Net lease rentals receivable 2,387,835 2,287,871 6,743,744 5,106,358




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.5 LEASE RENTALS RECEIVABLE - LATER THAN FIVE YEARS

Gross lease rentals receivable 170,395 240 170,628 334

Prepaid rentals (63) – (63) –

170,332 240 170,565 334

Unearned income (167,868) (19) (167,872) (20)

Specific provision for lease rentals receivable (Note 22.6) – – – –

General provision for lease rentals receivable (Note 22.7) (469) (8) (469) (8)

Interest in suspense (Note 22.8) – (6) – (6)

Net lease rentals receivable 1,995 207 2,224 300

22.6 MOVEMENT IN SPECIFIC PROVISION FOR LEASE RENTALS RECEIVABLE


Amount recovered/written back on account provisions previously made (15,520) (36,039) (41,432) (36,239)

Adjustments/transfers (52,985) (8,522) (62,481) 6,938

Amount reversed due to facility written off – – (140,037) (162,106)

Amount provided during the year (Note 12) 32,684 192,126 148,712 376,613


22.7 MOVEMENT IN GENERAL PROVISION FOR LEASE RENTALS RECEIVABLE


Amount provided/(reversed) during the year (1,438) (334) 22,794 (8,682)

Adjustments/transfers – – – (17,811)


22.8 MOVEMENT IN INTEREST IN SUSPENSE FOR LEASE RENTALS RECEIVABLE


Adjustments/transfers – – (126,422) 94,339

Interest suspended during the year – 347,647 170,753 368,071



22.9 MOVEMENT IN SPECIFIC PROVISION FOR BILLS OF EXCHANGE, LOANS & ADVANCES, FORECLOSED PROPERTIES AND LEASE RENTALS RECEIVABLE - SUMMARY


Adjustments for difference due to currency conversion (64,329) 12,333 (64,329) 12,333

7,978,272 7,849,551 8,424,275 8,249,723

Amount recovered/written back on account of provisions previously made (1,297,087) (1,398,000) (1,323,673) (1,403,234)


Adjustments/transfers (58,508) 79,573 (68,004) 203,193

Amount provided during the year (Note 12) 1,071,878 1,802,717 1,202,138 1,892,809





Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.10 MOVEMENT IN GENERAL PROVISION FOR BILLS OF EXCHANGE, LOANS & ADVANCES AND LEASE RENTALS RECEIVABLE - SUMMARY


Adjustments for difference due to currency conversion (6,131) 1,164 (6,131) 1,164

1,908,185 1,937,978 2,003,931 2,048,355

Amounts provided during the year (Note 12) 488,016 (1,012) 523,859 2,168

Adjustments/transfers 30 (22,650) 30 (40,461)


22.11 MOVEMENT IN INTEREST IN SUSPENSE FOR BILLS OF EXCHANGE, LOANS & ADVANCES AND LEASE RENTALS RECEIVABLE - SUMMARY


Interest suspended during the year 1,184,622 1,136,749 1,358,417 1,157,173


Amount written off (809,899) (322,439) (811,727) (322,439)

Adjustments/transfers 111,295 (24,159) (15,127) 80,436


22.12 NON-PERFORMING LOANS & ADVANCES

The Bank’s net exposure on non-performing loans & advances as at Balance Sheet date, before adjusting for the value of securities are as follows:


Rs. ’000 % Rs. ’000 % Rs. ’000 % Rs. ’000 %

Non-performing loans and advances

Bills of exchange 284,071 792,563 423,826 910,110

Loans & advances 10,969,634 13,548,459 11,473,931 13,605,840

Foreclosed properties 814,155 445,877 814,155 445,877

Lease rentals receivable 570,673 755,421 989,169 1,319,123

Non-performing advances 12,638,533 3.31* 15,542,320 5.65* 13,701,081 3.49* 16,280,950 5.75*

Add: Interest receivable on non-performing advances 8,127,464 8,325,915 8,141,233 8,336,890

Gross non-performing advances 20,765,997 23,868,235 21,842,314 24,617,840

Less: Interest in suspense for


Loans & advances 8,156,736 7,766,138 8,164,806 7,776,751

Lease rentals receivable 90,439 194,640 254,685 338,212

Total interest in suspense 8,326,692 8,508,903 8,499,008 8,663,088

Net non-performing advances 12,439,305 15,359,332 13,343,306 15,954,752

Less: Specific provision for loan losses for


Loans & advances 6,539,181 7,595,463 6,589,140 7,629,954

Foreclosed properties 268,173 32,796 268,173 32,796

Lease rentals receivable 228,150 263,971 566,253 661,491

Total specific provision for loans & advances 7,191,956 1.88* 8,042,601 2.92* 7,592,100 1.93* 8,488,604 3.00*

Net exposure 5,247,349 1.37* 7,316,731 2.66* 5,751,206 1.46* 7,466,148 2.64*

* As a percentage of total gross loans & advances (Net of interest in suspense).



The Bank’s net exposure on non-performing advances of Rs. 5,247 million as at 31 December 2010 (2009: Rs. 7,317 million) is covered bysecurities valued at Rs. 6,860 million (2009: Rs. 8,459 million).

The reduction in the value of security corresponds with the reduction in the non-performing category.

22.12 (a)


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Provision cover - Gross

Specific provision 7,191,956 8,042,601 7,592,100 8,488,604

Non-performing loans & advances 12,638,533 15,542,320 13,701,081 16,280,950

Specific provision to non-performing loans & advances 56.90% 51.75% 55.41% 52.14%

Provision cover - Net

Specific provision 7,191,956 8,042,601 7,592,100 8,488,604

Net non-performing loans & advances 12,439,305 15,359,332 13,343,306 15,954,752

Specific provision to non-performing loans & advances 57.82% 52.36% 56.90% 53.20%

22.12 (b) Analysis of geographic sector non-performing advances

Bank

As at 31 December 2010NPA

% 2009NPA

%Rs. ’000 Rs. ’000

Sri Lanka 10,154,252 3.6 12,683,363 5.8

Off-shore banking division 2,244,907 2.4 1,929,640 3.8

Overseas branches 239,374 3.1 929,317 17.6

12,638,533 15,542,320

*NPA % of the particular geographic sector.

22.13 CREDIT CONCENTRATION - GEOGRAPHIC SECTOR RISK CONCENTRATION

Geographic sector risk concentration within the customer loan portfolio were as follows:


Rs. ’000 % Rs. ’000 % Rs. ’000 % Rs. ’000 %

Sri Lanka 280,739,408 73.4 218,413,729 79.4 291,021,434 74.1 226,689,714 80.0

Off-shore banking division 93,744,288 24.5 51,323,395 18.7 93,744,290 23.87 51,323,394 18.1

United Kingdom – 0.0 215,755 0.1 115,917 0.03 215,755 0.1

Republic of Maldives 5,979,414 1.6 3,842,615 1.4 5,979,414 1.5 3,842,615 1.4

India 1,846,662 0.5 1,226,814 0.4 1,846,662 0.5 1,226,814 0.4

382,309,772 100.0 275,022,308 100 392,707,717 100 283,298,292 100



22.14 CREDIT CONCENTRATION - ECONOMIC SECTOR RISK CONCENTRATION

Economic sector risk concentration within the customer loan portfolio were as follows:

Bank Group

As at 31 December 2010 2009 2010 2009

Rs. ’000 % Rs. ’000 % Rs. ’000 % Rs. ’000 %

Exports and imports 34,944,448 9.1 32,186,130 11.7 35,394,778 9.0 32,486,450 11.5

Wholesale and retail trade 23,367,576 6.1 21,058,927 7.7 27,680,809 7.0 22,107,979 7.8

Banking, finance and insurance 4,657,807 1.2 3,094,565 1.1 5,579,079 1.4 3,584,324 1.3

Agriculture and fisheries 11,305,962 3.0 7,751,422 2.8 11,628,857 3.0 8,359,859 3.0

Manufacturing 11,532,404 3.0 8,324,054 3.0 12,136,544 3.1 8,810,347 3.1

Hotels, travels and services 19,088,626 5.0 16,814,594 6.1 21,787,255 5.5 21,387,099 7.4

Housing, construction & property development 43,345,196 11.3 35,791,167 13.0 43,967,683 11.3 36,262,928 12.8

Consumption and others 95,420,599 25.0 56,647,624 20.6 95,885,557 24.4 56,945,481 20.1

Government & SOEs 137,833,000 36.1 92,907,949 33.8 137,833,000 35.1 92,907,949 32.8

Foreclosed properties 814,154 0.2 445,876 0.2 814,155 0.2 445,876 0.2

Gross loans & advances 382,309,772 100 275,022,308 100 392,707,717 100 283,298,292 100


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

22.15 GROSS BILLS OF EXCHANGE, LOANS AND ADVANCES AND LEASE RENTALS RECEIVABLE - SUMMARY

Bills of exchange [Note 22.1] 15,776,120 16,098,530 16,421,802 16,568,481

Loans and advances [Note 22.2] 370,266,675 262,716,527 372,520,486 264,382,399

Lease rentals receivable [Note 22.3, 22.4, 22.5] 4,593,669 4,716,154 12,264,437 11,010,500

390,636,464 283,531,211 401,206,725 291,961,380

Total provision for interest in suspense [Note 22.16] (8,326,692) (8,508,903) (8,499,008) (8,663,088)

Total gross bills of exchange, loans and advances and lease rentals receivable 382,309,772 275,022,308 392,707,717 283,298,292

Total provision for loan losses [Note 22.17] (9,588,187) (9,956,917) (10,119,920) (10,498,666)

Total net bills of exchange, loans and advances and lease rentals receivable 372,721,585 265,065,391 382,587,797 272,799,626

22.16 TOTAL PROVISION FOR INTEREST IN SUSPENSE - SUMMARY

Bills of exchange [Note 22.1 (d)] 79,517 548,125 79,517 548,125

Loans and advances [Note 22.2 (d)] 8,156,736 7,766,138 8,164,806 7,776,751

Lease rentals receivable [Note 22.8] 90,439 194,640 254,685 338,212

8,326,692 8,508,903 8,499,008 8,663,088

22.17 TOTAL PROVISION FOR LOAN LOSSES - SUMMARY

Bills of exchange [Note 22.1 (b), 22.1 (c)] 300,700 296,089 326,757 319,465

Loans and advances [Note 22.2 (b), 22.2 (c) and 22.2 (f)] 9,012,023 9,348,105 9,090,285 9,403,879

Lease rentals receivable [Note 22.6, 22.7] 275,464 312,723 702,878 775,322

9,588,187 9,956,917 10,119,920 10,498,666



As at 31 December 2010 2009 Rate Date of Rs. ‘000 Rs. ‘000 % maturity

23. GOVERNMENT OF SRI LANKA RESTRUCTURING BONDS

Date issued Description

24.03.1993 For re-capitalisation purposes 4,780,000 4,780,000 12 24.03.2023

24.03.1993 For settlement of loans 3,767,000 3,767,000 12 24.03.2023

Total 8,547,000 8,547,000


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. INVESTMENT SECURITIES

Equity shares

Listed equity shares [Note 24 (a)] 1,146,862 1,146,862 1,386,793 1,360,152

Unlisted equity shares [Note 24 (b)] 3,388,581 98,575 3,398,625 113,735

Unlisted preference shares [Note 24 (c )] – 25,000 – 25,000

Debt securities

Listed debentures [Note 24 (d)] 35,240 120,000 35,973 120,000

Asset securitisation bonds (unlisted) [Note 24 (e)] – 13,321 – 13,321

Trust certificates [Note 24 (f)] 197,784 – 197,784 –

Bonds

Sri Lanka Development Bonds [24 (g)] 72,820,570 71,948,559 72,820,570 71,948,559

Units in unit trusts [Note 24 (h)] 1,309,174 1,110,725 1,312,314 1,110,725

Government securities [Note 24 (i)] 1,745,285 1,381,700 1,745,285 1,381,700

Other investments [Note 24 (j)] – – 221,023 380,050

80,643,496 75,844,742 81,118,367 76,453,242

24. (a) Listed equity sharesBank

As at 31 December 2010 2009No. of Cost of Market No. of Cost of Market

ordinary investment value ordinary investment valueshares Rs. ‘000 Rs. ‘000 shares Rs. ‘000 Rs. ‘000

National Development Bank PLC 8,185,538 691,862 2,860,846 8,185,538 691,862 1,686,221

Seylan Bank PLC 13,000,000 455,000 1,271,400 13,000,000 455,000 481,000

1,146,862 4,132,246 1,146,862 2,167,221




No. of Cost of Directors' No. of Cost of Directors' ordinary investment valuation ordinary investment valuation

shares Rs. ‘000 Rs. '000 shares Rs. ‘000 Rs. '000

24. (b) Unlisted equity shares

Credit Information Bureau of Sri Lanka 47,400 42,256 42,256 27,000 2,700 2,700

Fitch Ratings Lanka Limited 62,500 625 625 62,500 625 625

Kandurata Development Bank* – – – 1,200,000 12,000 12,000

Kandy Textile Industries Limited 191,790 1,918 – 191,790 1,918 –

Lanka Clear (Private) Limited 2,100,000 21,000 21,000 2,100,000 21,000 21,000

Lanka Financial Services Bureau Limited 225,000 2,250 2,250 225,000 2,250 2,250

Megpek Exports Limited 300,000 4,355 – 300,000 4,355 –

Pradeshiya Sanwardhana Bank 7,418,448 72,000 72,000 – – –

Rajarata Development Bank* – – – 1,298,448 12,000 12,000

Ruhunu Development Bank* – – – 1,200,000 12,000 12,000

Sabaragamuwa Development Bank* – – – 1,200,000 12,000 12,000

Serendib Coconut Products Limited 37,500 375 – 37,500 375 –

Sri Lankan Airlines Limited 12,115,571 3,250,450 3,250,450 – – –

Uva Development Bank* – – – 1,200,000 12,000 12,000

Wayamba Development Bank* – – – 1,320,000 12,000 12,000

3,395,229 3,388,581 105,223 98,575

Provision for diminution in value (6,648) (6,648) –

3,388,581 3,388,581 98,575 98,575

* Development Banks were converted to Pradeshiya Sanwardhana Bank by a Gazette notification on 01 May 2010.

.


Cost of Directors' Cost of Directors' No. of investment valuation No. of investment valuationshares Rs. ‘000 Rs. '000 shares Rs. ‘000 Rs. '000

24. (c) Unlisted preference shares

Carson Cumberbatch Company PLC [Non-voting 14.0% redeemable, cumulative preference shares]

– – – 2,500,000 25,000 25,000

– – 25,000 25,000


No. of Cost of Market No. of Cost of Marketsecurities/ investment value securities/ investment value

debentures Rs. ‘000 Rs. '000 debentures Rs. ‘000 Rs. '000

24. (d) Listed debentures

HDFC Bank of Sri Lanka [6 months gross TB rate plus 185 basis points subject to cap of 15.0% Rs. 100/- each matured in June 2010]

– – – 750,000 75,000 75,000

Singer (Sri Lanka) PLC [6 months gross TB rate plus 150 basis points subject to cap of 15.5% Rs. 100/- each matured in September 2010]

– – – 450,000 45,000 45,000

Urban Development Authority [Fixed rate of 11.0% Rs. 100/- each maturing in October 2015]

352,400 35,240 35,240 – – –

35,240 35,240 120,000 120,000




Cost of Market Cost of Market investment value investment value

Rs. ‘000 Rs. '000 Rs. ‘000 Rs. '000

24. (e) Asset securitisation bonds

HDFC Bank of Sri Lanka[3 months gross TB rate plus 150 basis points matured in May 2010]

– – 13,321 13,321

– – 13,321 13,321

24. (f) Trust certificates

Commercial Leasing Company Limited 197,784 197,784 – –

197,784 197,784 – –


Date of Cost of Net realisable Cost of Net realisable maturity investment value investment value

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. (g) Sri Lanka Development Bonds (US$ Bonds)

Sri Lanka Development Bonds (6 months LIBOR plus 275 basis points, matured in July 2010) 15.07.2010 – – 22,338,225 22,338,225

Sri Lanka Development Bonds (6 months LIBOR plus 550 basis points) 16.03.2011 557,525 559,331 572,775 572,775

Sri Lanka Development Bonds (6 months LIBOR plus 540 basis points) 16.03.2011 1,672,575 1,677,992 1,718,325 1,718,325




Sri Lanka Development Bonds (6 months LIBOR plus 350 basis points) 23.09.2012 557,525 555,199 – –

Sri Lanka Development Bonds (6 months LIBOR plus 395 basis points) 26.03.2013 1,115,050 1,119,695 – –




72,820,570 72,895,543 71,948,559 71,948,559


No. of Cost of Manager’s No. of Cost of Manager’sunits investment valuation units investment valuation

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. (h) Units in Unit Trusts

Ceybank Unit Trust Investments 94,437,649 1,113,433 3,970,159 86,699,503 980,312 1,793,813

Ceybank Century Growth Fund 7,447,569 95,741 534,413 7,327,748 88,413 259,475

Ceybank Surekum Gilt Edged Fund 10,000,000 100,000 100,500 – – –

Ceybank Unit Trust - Seed Fund – – – 4,421,052 42,000 91,472

1,309,174 4,605,072 1,110,725 2,144,760



As at 31 December 2010 2009Cost of Manager’s Cost of Manager’s

investment valuation investment valuation Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. (i) Government securities

Investment in Government securities 1,745,285 1,745,285 1,381,700 1,381,700

1,745,285 1,745,285 1,381,700 1,381,700


No. of Cost of Market No. of Cost of Marketordinary investment value ordinary investment value


24. (a) Listed equity shares

National Development Bank PLC 8,220,538 704,909 2,873,078 8,185,538 691,862 1,686,221

Seylan Bank PLC 13,000,000 455,000 1,271,400 13,000,000 455,000 481,000

The Lanka Hospital Corporation PLC 21,329,000 213,290 676,129 21,329,000 213,290 506,564

DFCC Bank 60,000 13,594 12,012

1,386,793 4,832,619 1,360,152 2,673,785


No. of Cost of Directors’ No. of Cost of Director’sordinary investment valuation ordinary investment valuation


24. (b) Unlisted equity shares

Capital Reach Holdings Limited – – – 511,500 5,115 5,115

Ceylinco Investment Company Limited 5,000,000 5,000 5,000 5,000,000 5,000 5,000

Credit Information Bureau of Sri Lanka 47,600 42,300 42,300 37,100 2,745 2,745

Fitch Ratings Lanka Limited 62,500 625 625 62,500 625 625

Kandurata Development Bank* – – – 1,200,000 12,000 12,000

Kandy Textile Industries Limited 191,790 1,918 – 191,790 1,918 –

Lanka Clear (Private) Limited 2,100,000 21,000 21,000 2,100,000 21,000 21,000

Lanka Financial Services Bureau Limited 225,000 2,250 2,250 225,000 2,250 2,250

MEGA Containers Limited 1,000,000 10,000 5,000 1,000,000 10,000 5,000

Megpek Export Limited 300,000 4,355 – 300,000 4,355 –

Pradeshiya Sanwardhana Bank 7,418,448 72,000 72,000 – – –

Rajarata Development Bank* – – – 1,298,448 12,000 12,000

Ruhunu Development Bank* – – – 1,200,000 12,000 12,000

Sabaragamuwa Development Bank* – – – 1,200,000 12,000 12,000

Serendib Coconut Products Limited 37,500 375 – 37,500 375 –

Sri Lankan Airlines Limited 12,115,571 3,250,450 3,250,450 – – –

Uva Development Bank* – – – 1,200,000 12,000 12,000

Wayamba Development Bank* – – – 1,320,000 12,000 12,000

3,410,273 3,398,625 125,383 113,735

Provision for diminution in value (11,648) – (11,648) –

3,398,625 3,398,625 113,735 113,735

* Development Banks were converted to Pradeshiya Sanwardhana Bank by a Gazette notification on 01 May 2010.




No. of Cost of Directors’ No. of Cost of Director’spreference investment valuation preference investment valuation


24. (c) Unlisted preference shares

Carson Cumberbatch Company PLC [Non-voting 14.00% redeemable, cumulative preference shares]

– – – 2,500,000 25,000 25,000

– – 25,000 25,000


No. of Cost of Market No. of Cost of Marketsecurities/ investment value securities/ investment value

debentures Rs. ‘000 Rs. '000 debentures Rs. ‘000 Rs. '000

24. (d) Listed debentures

HDFC Bank PLC[6 months gross TB rate plus 185 basis points subject to cap of 15.00% Rs. 100/- each, matured in June 2010]

– – – 750,000 75,000 75,000

Singer (Sri Lanka) PLC[6 months gross TB rate plus 150 basis points subject to cap of 15.50% Rs. 100/- each, matured in September 2010]

– – – 450,000 45,000 45,000

Urban Development Authority[Fixed rate of 11.00% Rs. 100/- each maturing in October 2015]

352,400 35,240 35,240 – – –

Seylan Bank PLC

[Fixed rate of 16.20% Rs. 100/- each, maturing in December 2012] 2,000 215 200 – – –

[Fixed rate of 16.75% Rs. 100/- each, maturing in May 2012] 3,400 364 340 – – –

[Fixed rate of 13.50% Rs. 100/- each, maturing in July 2011] 1,500 154 150 – – –

35,973 35,930 120,000 120,000

24. (e) Asset securitisation bond

HDFC Bank PLC[3 months gross TB rate plus 150 basis points matured in May 2010]

– – – – 13,321 13,321

– 13,321 13,321

24. (f) Trust certificates

Commercial Leasing Company Limited – 197,784 197,784 – – –

– 197,784 197,784




Date of Cost of Net realisable Cost of Net realisable maturity investment value investment value

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

24. (g) Sri Lanka Development Bonds (US$ Bonds)

Sri Lanka Development Bonds (6 months LIBOR plus 275 basis points, matured in July 2010) 15.07.2010 – – 22,338,225 22,338,225






Sri Lanka Development Bonds (6 months LIBOR plus 350 basis points) 23.09.2012 557,525 555,199 – –





72,820,570 72,895,543 71,948,559 71,948,559


No. of Cost of Manager’s No. of Cost of Manager’sunits investment valuation units investment valuation

Rs. ‘000 Rs. '000 Rs. ‘000 Rs. '000

24. (h) Units in Unit Trusts

Ceybank Unit Trust Investments 94,437,649 1,113,433 3,970,159 86,699,503 980,312 1,793,813

Ceybank Unit Trust - Seed Fund – – – 4,421,052 42,000 91,472

Ceybank Century Growth Fund 7,477,569 95,741 545,339 7,327,748 88,413 259,475

Ceybank Surekum Gilt Edged Fund 10,000,000 100,000 100,500 – – –

Namal Acuity Value Fund 32,800 3,140 2,952 – – –

1,312,314 4,618,950 1,110,725 2,144,760


Cost of Manager’s Cost of Manager’s investment valuation investment valuation

Rs. ‘000 Rs. '000 Rs. ‘000 Rs. '000

24. (i) Government securities

Investment in Government securities 1,745,285 1,745,285 1,381,700 1,381,700

1,745,285 1,745,285 1,381,700 1,381,700


Cost of Director’s Cost of Director’s investment valuation investment valuation

Rs. ‘000 Rs. '000 Rs. ‘000 Rs. '000

24. (j) Other Investments

Investment in commercial papers 220,965 220,965 380,000 380,000

Investment in other banks 58 58 50 50

221,023 221,023 380,050 380,050



Bank Group2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

25. INVESTMENT PROPERTIES

Cost

Balance as at 01 January – – 396,914 431,181

Additions during the year – – 2,659 110,398

Transfers/adjustments – – – (144,215)

Disposals during the year – – (4,798) (450)

Balance as at 31 December – – 394,775 396,914

Less: Accumulated depreciation

Balance as at 01 January – – 5,184 2,431

Charge for the year – – 3,074 3,060

Transfers/adjustments – – – (307)

Released on disposal – – (350) –

Balance as at 31 December – – 7,908 5,184

Net investment properties – – 386,867 391,730

No investment properties held by the Bank both for the current year as well as for the previous year.

As at 31 December 2010 2009Cost Fair value Cost Fair value

Building Extent Land Building Total Total Total Total(sq.ft) Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000

25.1 INVESTMENT PROPERTIES HELD BY THE GROUP

No. 64 & 66, Nonagama Road, Pallegama, Embilipitiya. * 16.61p 1,750 – 1,750 13,000 1,750 3,000

Lot No. 2 & 3 of Muttuweowita. (Acquired by RDA) * 20.40p 714 – 714 1,000 714 1,000

No. 300/8, Thalawathugoda Road, Madiwela, Kotte. * 2,478 16.15p 2,465 2,635 5,100 5,012 5,100 5,012

No. 385/1, Kotte Road, Pittakotte. 2,896 19.01p 2,958 1,730 4,688 5,298 4,688 5,298

No. 19, Galle Road, Angoda, Bentota. 961 2R-00.00p – – – – 2,989 5,816

No. 116, 116/1, 118, 120, 1st Cross Street, Colombo 11. (Sold 90%) * 12.35p 1,249 – 1,249 1,249 1,249 22,500

No. 43, 45, 49, 51 & 53, New Olcott Mawatha, Colombo 11. * – 9.76p 9,950 – 9,950 35,000 9,950 35,000

No. 102 & 104, Dam Street, Colombo 12. * 7,925 1R-10.70p 17,970 4,989 22,959 56,029 22,109 56,029

Kumbuththukuliya Watta, Bangadeniya Road, Puttalam. * – 2.00A 600 – 600 3,400 600 2,000

Mirissawelawatta Hena, Thekka Watta, Dambadeniya. * – 1A-0R-28.00p 162 – 162 600 162 2,560

Rukgahakottunuwa, Gehenuwala, Meepe. – 38.33p 2,418 – 2,418 890 2,418 890

No. 299, Union Place, Colombo 02. * 10,456 50.00p 225,085 10,100 235,185 225,344 235,185 225,344

No. 50/21, Old Kesbewa Road, Raththanapitiya, Boralesgamuwa. ** 44,877 2A-1R-4.35p 65,604 44,396 110,000 229,075 110,000 229,075

Total 330,925 63,850 394,775 575,897 396,914 593,524

Note* The fair value of the investment properties as at 31 December 2010 was based on market valuations carried out by Mr. D N Dhammika Baranage [RICS (UK), DIV AIS (SL)] and Mr. H A W Perera [BSc Estate

Management and Valuation (Special)], who are independent valuers not connected with the Group. The Directors have reviewed values of other investment properties as at 31 December 2010 and concluded that there were no impairment.

** Professional valuation has been carried out by Mr. A G Gunarathna [BSc Estate Management and Valuation, FIV (Sri Lanka)], incorporated valuer on basis of Market Approach (Direct Comparison Method) on 24 July 2009.




Group’s CostMarketvalue/ Group’s Cost

Marketvalue/ Equity

Marketvalue/ Equity

Marketvalue/

interest in Directors’ interest in Directors’ value Directors’ value Directors’statedcapital

valuation statedcapital

valuation valuation valuation

% Rs. ’000 Rs. ‘000 % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ‘000 Rs. ’000 Rs. ‘000

26. INVESTMENTS IN ASSOCIATE COMPANIES

26.1 UNQUOTED

Lanka Securities (Private) Limited

(3,495,000 Ordinary shares)

(Incorporated in Sri Lanka)

40.92 41,940 41,940 40.92 41,940 41,940 171,607 171,607 134,081 134,081




40.00 750,000 750,000 40.00 750,000 750,000 905,937 905,937 832,400 832,400

Southern Development Financial Company

Limited (2,500,001 Ordinary shares)


41.67 25,000 1,670 41.67 25,000 1,670 53 53 692 692

Transnational Lanka Records Solutions

(Private) Limited (2,000,000 Ordinary shares)


24.69 20,000 20,000 24.69 20,000 20,000 33,605 33,605 29,177 29,177




43.36 31,048 31,048 49.60 31,048 31,048 61,558 61,558 54,560 54,560

MBSL Savings Bank Limited



49.08 – – 49.88 – – 111,803 111,803 33,155 33,155

Total investment in Associate Companies 867,988 844,658 867,988 844,658 1,284,563 1,284,563 1,084,065 1,084,065

Provision for diminution in value (23,330) (23,330)

Net investment in Associate Companies 844,658 844,658 844,658 844,658 1,284,563 1,284,563 1,084,065 1,084,065

Bank GroupCost Equity value

2010 2009 2010 2009Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

26.2 MOVEMENT IN INVESTMENTS IN ASSOCIATE COMPANIES

Value as at 01 January 867,988 841,940 1,084,065 956,370

Increase/(decrease) in investment – 26,048 80,364 26,048

Share of profit/(loss) before tax – – 212,898 130,653

Share of tax – – (55,384) (21,109)

Dividends – – (42,713) (4,675)

Other adjustments – – 5,334 (3,222)

Value as at 31 December 867,988 867,988 1,284,564 1,084,065

Bank Group2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

26.3 MOVEMENT IN PROVISION FOR DIMINUTION IN VALUE

Balance as at 01 January 23,330 23,330 – –

Amount provided during the year – – – –

Balance as at 31 December 23,330 23,330 – –



As at 31 December 2010 2009Rs. ’000 Rs. ’000

26.4 THE GROUP'S INTEREST IN THE SUMMARISED FINANCIAL INFORMATION OF THE ASSOCIATES ARE AS FOLLOWS:

Total assets 3,914,506 2,673,026

Total liabilities 2,619,263 2,602,178

For the year ended 31 December

Total operating income 740,817 682,975

Total operating expenses (527,919) (552,322)

Profit before taxation 212,898 130,653

Provision for taxation (55,384) (21,109)

Profit after taxation 157,514 109,544


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

27. INVESTMENT IN SUBSIDIARY COMPANIES

Investment in quoted companies (Note 27.2) 2,862,705 2,862,705 – –

Investment in unquoted companies (Note 27.3) 3,233,519 1,146,284 – –

Total investment in subsidiary companies 6,096,224 4,008,989 – –

Provision for diminution in value (Note 27.5) (817,130) (817,130) – –

Net investment in Subsidiary Companies 5,279,094 3,191,859 – –

27.1 MOVEMENT IN INVESTMENT IN SUBSIDIARIES

Balance as at 01 January 4,008,989 3,601,084 – –

Increase/(decrease) in investment 2,087,235 407,905 – –

Balance as at 31 December 6,096,224 4,008,989 – –


Group’s interestin stated capital

Cost Market value/Directors’ value



% Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000

27.2 QUOTED

Property Development PLC 93.16 740,070 2,766,827 93.16 740,070 1,767,695

(61,485,050 Ordinary shares )(Incorporated in Sri Lanka)

Merchant Bank of Sri Lanka PLC 72.14 2,122,635 4,460,560 72.14 2,122,635 1,899,147

(97,392,136 Ordinary shares )(Incorporated in Sri Lanka)

Investment in quoted Subsidiary Companies 2,862,705 7,227,387 2,862,705 3,666,842








% Rs. ’000 Rs. ’000 % Rs. ’000 Rs. ’000

27.3 UNQUOTED

BoC Management & Support Services (Private) Limited(100,000 Ordinary shares) (Incorporated in Sri Lanka)

100.00 1,000 1,000 100.00 1,000 1,000

BoC Property Development & Management (Private) Limited(100,999,998 Ordinary shares) (Incorporated in Sri Lanka)

100.00 1,010,000 1,010,000 100.00 1,010,000 1,010,000

BoC Travels (Private) Limited (250,006 Ordinary shares) (Incorporated in Sri Lanka)

100.00 2,500 2,500 100.00 2,500 2,500

Hotels Colombo (1963) Limited(73,669 Ordinary shares) (Incorporated in Sri Lanka)

99.99 737 737 98.23 737 737

Merchant Credit of Sri Lanka Limited(4,900,018 Ordinary shares) (Incorporated in Sri Lanka)

85.79 22,047 22,047 85.79 22,047 22,047

Ceylease Financial Services Limited(110,000,000 Ordinary shares) (Incorporated in Sri Lanka)

55.00 110,000 110,000 55.00 110,000 110,000

Bank of Ceylon (UK) Limited(12,119,611 Ordinary shares) (Incorporated in United Kingdom)

100.00 2,087,235 2,087,235 – – –

Investment in unquoted Subsidiary Companies 3,233,519 3,233,519 1,146,284 1,146,284

In addition to the above Subsidiaries, Ceybank Holiday Homes (Private) Limited, MBSL Insurance Company Limited and Koladeniya Hydropower (Private) Limited are indirect Subsidiaries of the Bank.

27.4 INVESTMENTS IN SUBSIDIARIES DURING THE YEAR

1. Bank of Ceylon (UK) Limited

The Financial Services Authority (FSA), the regulator of the Financial Services Industry in the United Kingdom, required that the London branch of the Bank be converted to a Subsidiary of Bank of Ceylon that will be operated with its own capital base, management and Board of Directors. As a result, Bank of Ceylon branch in London was converted to a fully-owned Subsidiary during the year 2010 and named ‘Bank of Ceylon (UK) Limited’. Total investment is GBP 12,119,612/-.

2. Koladeniya Hydropower (Private) Limited

Koladeniya Hydropower (Private) Limited was acquired by Property Development PLC, Subsidiary of Bank of Ceylon during the year 2010 and became a Subsidiary of Bank of Ceylon through indirect holding of its stated capital.

Group’s interest in the voting shares : 88.12%

Amount invested (Rs.) : 23,625,000/-

Post-acquisition (loss)/profit to Group account for the financial year 2010 (Rs.) : (1,090,783/-)

Bank Group2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

27.5 MOVEMENT IN PROVISION FOR DIMINUTION IN VALUE

Balance as at 01 January 817,130 817,130 – –

Amount provided during the year – – – –

Balance as at 31 December 817,130 817,130 – –




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

28. OTHER ASSETS

Accrued interest and other receivables 10,238,043 9,002,621 10,620,946 9,266,588

Consumable stock in hand 338,357 284,242 410,819 349,381

Foreign cheques purchased 102,994 84,721 102,994 84,721

Local cheques purchased 1,236,611 1,414,411 1,236,611 1,414,411

Other assets 5,790,263 8,398,454 5,942,280 8,659,547

17,706,268 19,184,449 18,313,650 19,774,648

Freeholdland

Freeholdbuilding

Leaseholdbuilding

Equipment Motorvehicles

Leaseholdmotor

vehicles

Capitalwork-in-progress

Total Total

As at 31 December 2010 2009Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000

29. PROPERTY, PLANT & EQUIPMENTBANK

29.1 COST OR VALUATION

As at 01 January 1,566,606 1,767,530 615,472 6,419,846 468,661 33,595 214,431 11,086,141 9,836,873

Additions during the year 26,319 8,581 112,336 645,393 132,263 16,793 229,095 1,170,780 1,390,829

Disposals during the year – – (75) (120,461) (25,878) – – (146,414) (116,599)

Exchange rate adjustments – – – (984) 76 – – (908) 51,227

Transfer to Bank of Ceylon (UK) Limited – (432,817) – (76,097) – – – (508,914) –

Work-in-progress capitalised – 10,613 75,954 – – – (213,845) (127,278) –

Transfers/adjustments – – – (1,683) – – – (1,683) (76,189)

As at 31 December 1,592,925 1,353,907 803,687 6,866,014 575,122 50,388 229,681 11,471,724 11,086,141

Accumulated Depreciation

As at 01 January – 388,917 332,166 4,426,318 267,430 10,557 – 5,425,388 4,826,427

Charge for the year – 40,452 31,505 631,771 71,858 9,407 – 784,993 686,428



Transfer to Bank of Ceylon (UK) Limited – (63,421) – (74,575) – – – (137,996) –

Transfers/adjustments – – – – – – – – (7,553)

As at 31 December – 365,948 363,646 4,863,566 314,011 19,964 – 5,927,135 5,425,388

Net book value as at 31 December 2010 1,592,925 987,959 440,041 2,002,448 261,111 30,424 229,681 5,544,589 –

Net book value as at 31 December 2009 1,566,606 1,378,613 283,306 1,993,528 201,231 23,038 214,431 – 5,660,753

5,544,589 5,660,753



29.1.1 Details of freehold lands & buildings held by the Bank as at 31 December 2010

Name of Premises Extent(Perches)

Building(Square Feet)

Cost/ Revaluation

of Land Rs. ’000

Cost/Revaluationof Building

Rs. ’000

TotalValue

Rs. ’000

AccumulatedDepreciation

Rs. ’000

Net BookValue

Rs. ’000

Central Province

Galaha BranchNo. 59/37, Deltota Road, Galaha

15.00 6,340 1,500 5,543 7,043 1,028 6,015

Gampola BranchNo. 44, Kadugannawa Road, Gampola

175.00 9,270 875 10,287 11,162 4,815 6,347

Hatton BranchNo. 46, Circular Road, Hatton

85.65 8,784 5,000 8,406 13,406 1,522 11,884

Hatton Staff QuartersHatton

40.00 5,560 4,000 7,300 11,300 1,417 9,883

Kandy 2nd City BranchNo. 22, Dalada Veediya, Kandy

42.81 9,017 34,500 34,335 68,835 16,883 51,952

Maskeliya BranchNo. 66, Upcot Road, Maskeliya

42.05 6,402 2,000 3,333 5,333 614 4,719

Nawalapitiya BranchNo. 6, Gampola Road, Nawalapitiya

15.00 6,317 3,066 13,127 16,193 1,936 14,257

Nuwara Eliya BranchNo. 43, Lawson Street, Nuwara Eliya

133.50 13,645 85,000 14,889 99,889 3,009 96,880

Nuwara Eliya Staff QuartersNo. 14, 19, Hill Street, Nuwara Eliya

53.69 5,086 8,000 2,500 10,500 485 10,015

Nuwara Eliya PropertyNo. 12, Hill Street, Nuwara Eliya

27.54 3,070 7,015 12,291 19,306 4,020 15,286

Talawakelle BranchNo. 23, 25, 29, Hatton Road, Talawakelle

25.30 5,045 2,500 8,854 11,354 1,353 10,001

Talawakelle Staff QuartersTalawakelle Estate Plantation

160.00 4,898 2,000 7,000 9,000 1,359 7,641

155,456 127,865 283,321 38,441 244,880

Eastern Province

Batticaloa BranchCovington Road, Batticaloa

65.00 8,137 16 5,464 5,480 3,976 1,504

Mutur BranchNo. 38, Batticaloa Road, Mutur

40.27 2,226 1,260 819 2,079 614 1,465

Pottuvil BranchMain Street, Pottuvil

10.70 4,976 1,000 1,307 2,307 230 2,077

Trincomalee BranchNo. 24, Inner Harbour Road, Trincomalee

90.00 9,432 15 5,114 5,129 2,177 2,952

Valachchenai BranchMain Street, Valachchenai

47.34 6,391 285 7,103 7,388 2,555 4,833

2,576 19,807 22,383 9,552 12,831





Cost/ Revaluation

of Land Rs. ’000


Rs. ’000

TotalValue

Rs. ’000


Rs. ’000

Net BookValue

Rs. ’000

Northern Province

Jaffna Area OfficeNo. 476, 476A, Hospital Road, Jaffna

– 7,300 – 3,027 3,027 2,203 824

Jaffna BranchNo. 56, Stanley Road, Jaffna

164.27 9,775 115 4,388 4,503 2,450 2,053

Mannar BranchNo. 52, Pallimunai Road, Grand Bazaar, Mannar

– 5,720 – 2,318 2,318 1,865 453

Nelliady BranchThikkam Road, Karaveddy, Nelliady

42.74 – 15,686 – 15,686 – 15,686

15,801 9,733 25,534 6,518 19,016

North-Western Province

Alawwa BranchNo. 64, Giriulla Road, Alawwa

31.80 7,305 4,000 5,070 9,070 977 8,093

Chilaw BranchRadaguru Edmund Peiris Mawatha, Chilaw

43.50 3,640 14,000 8,981 22,981 1,698 21,283

Dummalasuriya BranchNo. 227, Kuliyapitiya-Madampe Road, Dummalasuriya

41.80 5,353 3,500 5,000 8,500 971 7,529

Kurunegala Province Office, AGM’s Quarters & Chief Manager’s QuatersNo. 18, Mihindu Mawatha, Kurunegala

225.00 17,210 45,000 18,871 63,871 3,442 60,429

Kurunegala Branch Commercial Complex, Kurunegala

– 15,100 – 15,604 15,604 6,825 8,779

Kurunegala Bazaar BranchNo. 34, Colombo Road, Kurunegala

53.00 8,915 55,000 19,569 74,569 3,764 70,805

Madampe BranchNo. 10, Station Road, Madampe

61.10 6,565 4,053 6,292 10,345 1,172 9,173

Madurankuliya BranchNo. 66 , Colombo Road, Madurankuliya

279.00 – 445 – 445 – 445

Narammala BranchNo. 139, Negombo Road, Narammala

117.50 5,970 5,500 3,319 8,819 507 8,312

Puttalam Area OfficeNo. 53, Kurunegala Road, Puttalam

72.26 2,000 18 281 299 281 18

131,516 82,987 214,503 19,637 194,866





Cost/ Revaluation

of Land Rs. ’000


Rs. ’000

TotalValue

Rs. ’000


Rs. ’000

Net BookValue

Rs. ’000

Sabaragamuwa Province

Balangoda BranchNo. 137, Main Street, Balangoda

14.50 3,556 8,500 941 9,441 174 9,267

Dehiowita BranchNo. 62, Main Street, Dehiowita

38.60 2,088 1,500 3,073 4,573 540 4,033

Kegalle BranchNo. 110, Colombo Road, Kegalle

131.38 18,023 17,000 21,307 38,307 4,030 34,277

Rambukkana BranchNo. 8A, Diyasunnatha Mawatha, Rambukkana

27.25 4,500 2,600 10,674 13,274 1,989 11,285

Ratnapura BranchNo. 6, Dharmapala Mawatha, Ratnapura

100.00 9,013 20,000 8,491 28,491 1,572 26,919

Ratnapura Branch - (BMC.1/L)No. 58, Main Street, Ratnapura

31.69 – 10,439 – 10,439 – 10,439

60,039 44,486 104,525 8,305 96,220

Southern Province

Ambalangoda BranchNo. 274, Main Street, Ambalangoda

58.00 – 12,166 – 12,166 – 12,166

Ambalantota BranchNo. 11, Wanduruppa Road, Ambalantota

38.00 6,041 2,250 929 3,179 113 3,066

Galle Province OfficeNo. 2, Light House Street, Fort, Galle

32.63 13,060 4,000 9,611 13,611 1,829 11,782

Galle BranchNo. 2, Gamini Road, Galle

31.50 12,570 6,300 10,388 16,688 3,179 13,509

Hakmana BranchBeliatta Road, Hakmana

36.70 3,250 263 3,823 4,086 1,602 2,484

Imaduwa BranchAhangama Road, Imaduwa

83.50 2,300 3,000 3,194 6,194 589 5,605

Matara BranchNo. 11, Kumaratunga Mawatha, Matara

104.50 13,514 21,000 13,102 34,102 2,738 31,364

Matara Bazaar BranchGunawardena Mawatha, Matara

49.25 – 14,038 – 14,038 – 14,038

Tangalle BranchNo. 145/147, Sea Street, Tangalle

21.05 – 13,134 – 13,134 – 13,134

Weligama BranchNo. 239, Main Street, Weligama

97.50 8,500 831 6,165 6,996 2,478 4,518

76,982 47,212 124,194 12,528 111,666

Uva Province

Badulla Uva Province OfficeBank Road, Badulla

118.75 9,048 7,000 6,104 13,104 1,139 11,965

Bandarawela BranchNo. 198 B, Badulla Road, Bandarawela

9.52 7,731 7,500 8,500 16,000 1,661 14,339

Haputale Branch No. 20, Station Road, Haputale

– 4,775 – 7,364 7,364 2,778 4,586

Monaragala Branch & Manager’s QuartersNo. 401, Wellawaya Road, Moneragala

90.10 9,033 45 16,474 16,519 7,259 9,260

Moneragala Staff QuartersNo. 401, Wellawaya Road, Moneragala

230.00 3,042 18 440 458 349 109

14,563 38,882 53,445 13,186 40,259





Cost/ Revaluation

of Land Rs. ’000


Rs. ’000

TotalValue

Rs. ’000


Rs. ’000

Net BookValue

Rs. ’000

Western Province North

Borella BranchNo. 71, Danister de Silva Mawatha, Borella

42.62 19,195 30,000 44,940 74,940 8,423 66,517

Colombo 1 - City OfficeNo. 41, Bristol Street, Colombo 1

39.50 24,952 100,000 50,863 150,863 11,349 139,514

Colombo 1 - Grand Oriental HotelYork Sreet, Colombo 1

181.85 232,801 467,225 349,095 816,320 81,642 734,678

Grandpass BranchNo. 703, Sirimavo Bandaranaike Mawatha, Grandpass

20.12 6,295 12,000 10,576 22,576 1,655 20,921

Ja-Ela BranchNo. 19, Negombo Road, Ja-Ela

40.64 8,090 14,158 10,989 25,147 1,859 23,288

Kadawatha BranchNo. 469, Ragama Road, Kadawatha

28.86 6,181 10,000 11,561 21,561 2,221 19,340

Negombo BranchNo. 118, Rajapakse Broadway, Negombo

97.25 16,754 55,000 15,259 70,259 3,384 66,875

Pettah BranchNo. 212/63, Gas Work Street, Colombo 11

28.29 24,530 28,440 44,238 72,678 20,538 52,140

716,823 537,521 1,254,344 131,071 1,123,273

Western Province South

Aluthgama BranchNo. 267, Galle Road, Aluthgama

36.60 – 3,435 – 3,435 – 3,435

Bambalapitiya BranchNo. 10, Unity Plaza Building, Galle Road, Colombo 4

– 7,776 – 36,348 36,348 17,063 19,285

Beruwala BranchNo. 165 A, Galle Road, Beruwala

21.50 5,418 26,319 10,613 36,932 44 36,888

Dehiwala BranchNo. 207, Galle Road, Dehiwala

22.00 12,715 2,225 25,360 27,585 8,938 18,647

Horana BranchNo. 87, Anguruwathota Road, Horana

70.00 8,078 6,000 12,819 18,819 3,824 14,995

Idama BranchNo. 707, Galle Road, Moratuwa

61.12 7,550 8,000 23,305 31,305 4,590 26,715

Kalutara Area OfficeNo. 108, Old Road, Kalutara

22.50 3,060 4,500 2,500 7,000 596 6,404

Kalutara BranchNo. 218, Galle Road, Kalutara South, Kalutara

40.86 9,885 17,000 7,773 24,773 1,904 22,869

Maharagama BranchNo. 88, High Level Road, Maharagama

80.00 45,245 11,438 16,267 27,705 7,001 20,704

Matugama BranchNo. 72, Agalawatte Road, Matugama

9.50 2,883 4,500 3,959 8,459 730 7,729

Nugegoda BranchNo. 174, High Level Road, Nugegoda,

30.50 38,108 95,000 41,564 136,564 11,631 124,933

Panadura BranchNo. 4, Super Grade Branch, Susantha Mawatha, Panadura

80.00 6,490 4,000 7,910 11,910 3,410 8,500

Wadduwa BranchNo. 557 A, Galle Road, Wadduwa

29.00 – 3,179 – 3,179 – 3,179

Wellawatte BranchNo. 149, Galle Road, Colombo 6

51.25 15,798 20,510 32,669 53,179 11,436 41,743

206,106 221,087 427,193 71,167 356,026





Cost/ Revaluation

of Land Rs. ’000


Rs. ’000

TotalValue

Rs. ’000


Rs. ’000

Net BookValue

Rs. ’000

Holiday Homes and Rests

Badulla Fernham Bungalow & PropertyNo. 153, Spring Valley Road, Badulla

222.25 4,580 1,071 7,093 8,164 1,958 6,206

Bandarawela Holiday HomeBandarawela

115.00 3,028 45 2,226 2,271 1,214 1,057

Dickoya Upper/Lower Glencarn BungalowDickoya

– 7,807 – 10,138 10,138 3,502 6,636

Haputale Woodland BungalowHaputale

– 3,005 – 5,559 5,559 1,862 3,697

Lindula Ridge Holiday HomeLindula

– 3,412 – 5,130 5,130 1,451 3,679

Nuwara Eliya Holiday HomeNo. 16, Hill Street, Nuwara Eliya

185.06 3,388 200 2,669 2,869 1,106 1,763

1,316 32,815 34,131 11,093 23,038

Others

General Manager's BungalowNo. 75, Ananda Kumaraswamy Mawatha, Colombo 7

79.80 7,450 80,000 8,421 88,421 1,588 86,833

Colombo Darley Road, Stores, Browns Building,No. 497, T B Jayah Mawatha, Colombo 10

151.00 22,337 96,999 7,473 104,472 3,055 101,417

World Trade CentreNo. 8, Bank of Ceylon Mawatha,Colombo 1

– 6,935 – 129,389 129,389 19,946 109,443

Kollupitiya - Walkers Sons Ltd.No. 28, St. Michael’s Road, Cololmbo 3

57.00 – 23,311 – 23,311 – 23,311

Maharagama - Central Training InstituteNo. 88, High Level Road, Maharagama

105.10 36,775 11,437 46,229 57,666 19,861 37,805

211,747 191,512 403,259 44,450 358,809

Total freehold land and building 1,592,925 1,353,907 2,946,832 365,948 2,580,884



Freeholdland

Freeholdbuilding

Leaseholdbuilding

Equipment Motorvehicles

Leaseholdmotor

vehicles

Capitalwork-in-progress

Total Total

As at 31 December 2010 2009Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000

GROUP

29.2 COST OR VALUATION

As at 01 January 1,566,606 3,801,613 615,475 7,204,244 531,162 33,595 265,911 14,018,606 12,701,259

Additions during the year 26,319 20,090 112,336 683,067 145,859 16,793 229,095 1,233,559 1,452,873



Transfer from equipment to freehold building – 386,190 – (386,190) – – – – –

Work-in-progress capitalised – 41,808 75,954 20,285 – – (265,324) (127,277) –

Transfers/adjustments – 9,019 – (66,725) – – 4,090 (53,616) (62,300)

As at 31 December 1,592,925 4,258,720 803,690 7,333,195 638,917 50,388 233,772 14,911,607 14,018,606

Accumulated depreciation

As at 01 January – 1,190,915 332,167 5,118,808 294,102 10,557 – 6,946,549 6,273,023

Charge for the year – 100,792 31,503 665,175 82,739 9,407 – 889,616 790,745



Transfer from equipment to freehold building – 380,955 – (380,955) – – – – –

Transfers/adjustments – (63,420) – (75,344) (1,574) – – (140,338) (25,886)

As at 31 December – 1,609,242 363,645 5,207,698 340,750 19,964 – 7,541,299 6,946,549

Net book value as at 31 December 2010 1,592,925 2,649,478 440,045 2,125,497 298,167 30,424 233,772 7,370,308 –

Net book value as at 31 December 2009 1,566,606 2,610,698 283,308 2,085,436 237,060 23,038 265,911 – 7,072,057

7,370,308 7,072,057

29.2 (a)

1. Revaluation

A revaluation of freehold properties was carried out in 2010 by professionally qualified independent valuers based on open market value of existing use and no losses in value have been identified. However, the revaluation gains were not transferred to the revaluation reserve as at December 2010. It will subsequently be included in the Financial Statements with the permission of the Monetary Board of Central Bank of Sri Lanka.

The surplus realised by the revaluation carried out in 2003, a sum of Rs. 2,057 million has been transferred to the revaluation reserve of the Bank. Further, as there is no reduction in the value of assets a provision for impairment was not required to be made in the Financial Statements of 2010.

2. The detailed classification of the ‘equipment’ is given in Note No. 29.10 (a) & (b).

3. Capital work-in-progress which is accounted for on the basis of value of work certified includes mobilisation of advances and other construction expenses.

4. The amount of commitments for the acquisition of property, plant & equipment is given in the Note No. 43.1 (a).

29.3 TITLE RESTRICTION ON PROPERTY, PLANT & EQUIPMENTThere were no restrictions that existed in the title of the property, plant & equipment of the Bank and the Group as at the Balance Sheet date.

29.4 PROPERTY, PLANT & EQUIPMENT PLEDGED AS SECURITY FOR LIABILITIESNo freehold property, plant & equipment have been pledged as security for any liability.

29.5 COMPENSATION FROM THIRD PARTIES FOR ITEMS OF PROPERTY, PLANT & EQUIPMENTThere were no compensation received/receivable from third parties for items of property, plant & equipment which were impaired, lost or given up.



29.6 FULLY DEPRECIATED PROPERTY, PLANT & EQUIPMENT

The initial cost of fully-depreciated property, plant & equipment at the end of year 2010, which are still in use are as follows:Bank Group

As at 31 December 2010 2009 2010 2009Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Motor vehicles 96,250 44,786 103,055 51,403

Computer equipment 1,458,630 1,008,575 1,465,876 1,014,899

Computer software (Intangible) 1,177,284 1,023,906 1,177,650 1,023,906

Equipment, furniture & fittings 357,531 333,205 461,800 488,900

Leasehold building 56,764 46,471 56,764 46,471

Machines, plant & machinery 427,588 398,513 429,420 703,098

3,574,047 2,855,456 3,694,565 3,328,677

29.7 TEMPORARILY IDLE PROPERTY, PLANT & EQUIPMENT

There were no temporarily idle property, plant & equipment as at the Balance Sheet date.

29.8 PROPERTY, PLANT & EQUIPMENT RETIRED FROM ACTIVE USE

The Bank held no property, plant & equipment retired from active use and which were not classified as held for sale in accordance with Sri Lanka Accounting Standard No. 38 - ‘Non-Current Assets Held for Sale and Discontinued Operations’ (Revised 2006).

29.9 FREEHOLD PROPERTIESThe carrying value of the properties, if they were carried at cost less accumulated depreciation is as follows:


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Land 43,221 43,221 43,221 43,371

Building 702,359 702,359 702,359 713,255

Accumulated depreciation on building (361,167) (343,608) (361,167) (349,453)

384,413 401,972 384,413 407,173

As at 31 December 2010 2009Computer Furniture Office Total Total

equipment & fittings equipment Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

29.10 EQUIPMENTS29.10 (a) Bank

Cost

Balance as at 01 January 3,552,665 1,521,864 1,345,317 6,419,846 5,572,465

Additions during the year 270,895 251,998 122,500 645,393 962,332

Disposals during the year (77,306) (21,288) (21,867) (120,461) (112,048)

Exchange rate adjustments (976) (30) 22 (984) 9,387

Transfer to Bank of Ceylon (UK) Limited (49,208) (10,132) (16,757) (76,097) –

Adjustments/transfers (1,035) (279) (369) (1,683) (12,290)

Balance as at 31 December 3,695,035 1,742,133 1,428,846 6,866,014 6,419,846


Balance as at 01 January 2,713,075 884,640 828,603 4,426,318 3,929,548

Charge for the year 380,264 144,225 107,282 631,771 580,088


Exchange rate adjustments (903) 36 (101) (968) 9,364

Transfer to Bank of Ceylon (UK) Limited (48,472) (9,392) (16,711) (74,575) –

Balance as at 31 December 2,966,813 993,763 902,990 4,863,566 4,426,318

Net book value as at 31 December 2010 728,222 748,370 525,856 2,002,448 –

Net book value as at 31 December 2009 839,590 637,224 516,714 – 1,993,528



As at 31 December 2010 2009Computer Furniture Office Total Total

equipment & fittings equipment Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

29.10 (b) Group

Cost

Balance as at 01 January 3,687,646 2,136,620 1,379,978 7,204,244 6,415,017

Additions during the year 286,871 268,745 127,451 683,067 989,808


Exchange rate adjustments (977) (30) 23 (984) 9,387

Transfer from equipments to freehold building – (386,190) – (386,190) –

Work-in-progress capitalised – 20,285 – 20,285 –

Adjustments/transfers (45,616) (3,983) (17,126) (66,725) (94,508)

Balance as at 31 December 3,850,618 2,014,124 1,468,453 7,333,195 7,204,244


Balance as at 01 January 2,820,849 1,446,394 851,565 5,118,808 4,715,832

Charge for the year 394,644 159,408 111,123 665,175 621,940


Exchange rate adjustments (902) 36 (101) (967) 9,364

Transfer from equipment to freehold building – (380,955) – (380,955) –

Adjustments/transfers (49,311) (9,388) (16,645) (75,344) (132,103)

Balance as at 31 December 3,088,129 1,189,714 929,855 5,207,698 5,118,808

Net book value as at 31 December 2010 762,489 824,410 538,598 2,125,497 –

Net book value as at 31 December 2009 866,797 690,226 528,413 – 2,085,436

Bank Group2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

30. LEASEHOLD LAND

Cost


Additions during the year 16,521 – 16,521 –

Disposals during the year – – – –

Adjustments/transfers – 63,499 – 74,350


Accumulated amortisation


Amortisation during the year 2,296 1,095 3,653 2,452

Disposals during the year – – – –

Adjustments/transfers – 7,553 – 18,405


Net book value 77,515 63,290 119,978 107,110

Leasehold land represents the leasehold interest in the lands held for own use. The value of buildings situated in the leasehold land is shown separately under property, plant & equipment. The interest on leasehold land is stated at cost less accumulated amortisation.



Bank Group2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

31. INTANGIBLE ASSETS

Cost


Additions during the year 107,887 55,548 109,473 56,707

Disposals during the year (1,104) – (1,104) –

Adjustments/transfers – 8,173 1,668 17,428


Accumulated amortisation


Amortisation during the year 54,873 185,473 59,076 189,860

Disposals during the year (1,104) – (1,104) –

Adjustments/transfers – – 866 6,911

Balance at as 31 December 1,354,788 1,301,019 1,390,303 1,331,465

Net book value 163,826 110,812 170,404 119,205

Intangible assets represent the value of computer application software systems and subsequent modifications including costs directly attributable in customising for its intended use, and are carried at cost less accumulated amortisation and any impairment losses.


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

32. DEPOSITS

Local currency deposits

Current account deposits 65,438,920 48,612,023 65,270,554 48,495,108

Savings deposits 135,234,980 110,371,042 135,234,894 110,371,042

Time deposits 155,226,772 120,893,683 157,867,930 123,862,640

Certificates of deposits 28,539 29,499 28,539 29,499

Other deposits 1,886,224 968,732 1,886,367 968,831

357,815,435 280,874,979 360,288,284 283,727,120

Foreign currency deposits

Current account deposits 24,086,714 6,416,004 25,200,786 6,416,004

Savings deposits 54,866,267 51,816,724 55,141,632 51,816,724

Time deposits 86,281,233 68,798,888 87,504,950 68,798,888

Other deposits 1,183,048 700,847 1,183,048 700,846

166,417,262 127,732,463 169,030,416 127,732,462

524,232,697 408,607,442 529,318,700 411,459,582

32. (a) CUSTOMER-WISE ANALYSIS OF DEPOSITS

Deposits from banks 1,065,756 886,081 1,304,709 886,081

Deposits from finance companies 2,538,817 2,220,754 2,538,817 2,220,754

Deposits from other customers 520,628,124 405,500,607 525,475,174 408,352,747

524,232,697 408,607,442 529,318,700 411,459,582

Note:The maturity analysis of deposits is given in Note 46.



Bank Group2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

33. BORROWED FUNDS

Call money borrowings – 11,984,026 947,581 12,070,026

Term borrowings from banks abroad 43,743,353 2,952,643 43,743,914 2,952,643

Term borrowings from banks & other institutions in Sri Lanka 2,787,625 13,269,914 6,826,345 15,852,660

Refinance borrowings 5,914,175 4,891,794 5,914,175 4,891,794

52,445,153 33,098,377 57,432,015 35,767,123

33. (a) MATURITY OF BORROWINGS

Not later than 1 year 41,852,436 28,738,695 45,880,019 31,227,321

Later than 1 year and not later than 5 years 10,189,076 1,924,890 11,148,355 2,105,009

Later than 5 years 403,641 2,434,792 403,641 2,434,793

52,445,153 33,098,377 57,432,015 35,767,123

34. SECURITIES SOLD UNDER RE-PURCHASE AGREEMENTS

Securities sold under re-purchase agreements 53,522,487 34,203,701 52,968,787 32,968,041

53,522,487 34,203,701 52,968,787 32,968,041

The securities sold under repurchase agreements are debt securities issued by the Bank for short term funding purposes and mature within a period of less than twelve months. The interest rate for such securities varied from 6.0% to 11.0% during the year. (2009 - 6.0% to 20.0%).

35. INSURANCE PROVISION

35.1 INSURANCE PROVISION - LIFE

The insurance provision - life balance represents the life fund of MBSL Insurance Company Limited which carries out life and non life insurance business.

This balance indicates the liability on account of policyholders which has been actuarially valued and claims/benefits due to life policyholders, which remain unclaimed to the Balance Sheet date.


Rs. ’000 Rs. ’000

Insurance provision - life 66,365 41,336

Unclaimed benefits 572 –

Total 66,937 41,336

Long term insurance contract liabilities included in the Life Insurance Fund, result primarily from traditional non participating life insurance products. Short duration contract liabilities are primarily accident and health insurance products.

The insurance provision has been established based upon the following:

(a) Interest rates that vary by product and as required by regulations issued by the Insurance Board of Sri Lanka;

(b) Mortality rates based on published mortality tables adjusted for actual experience as required by regulations issued by the Insurance Board of Sri Lanka; and

(c) Surrender rates based upon actual experience by geographic area and modified to allow for variations in policy form.

The valuation of the insurance provision - life insurance business as at 31 December 2010 was made by Mr. R Kahakachchi of Actuarial & Management Consultants (Private) Limited for and on behalf of MBSL Insurance Company Limited. In accordance with the consultant actuary’s report, the reserve for the year amounts to of Rs. 66,364,916/- (2009 - Rs. 41,336,000/-) in the opinion of consultant actuary the reserve is adequate to cover the liabilities pertaining to the life insurance businesses.



Further the actuary has estimated that the solvency margin required under the regulation of Insurance Industry Act No. 43 of 2000 as Rs. 3,200,000/- (2009 - Rs. 2,032,000/-). This solvency margin is maintained in the long term insurance fund.

2010 2009Rs. ’000 Rs. ’000

35.1 (a) Movement in Insurance Provision Fund

Balance as at 01 January 41,336 28,842

Increase in life fund 25,601 12,494

Balance as at 31 December 66,937 41,336

35.2 INSURANCE PROVISION - GENERAL INSURANCE

The general insurance provision represents non life insurance carried out by MBSL Insurance Company Limited.

The reserve for net unearned premium indicates the amount of premium (net of reinsurance) which is attributable to policies written as at 31 December 2010, but covering period after 31 December 2010.

The reserve for net deferred acquisition cost refers to the commission adjustment (net of reinsurance) linked to the above reserve.

The reserve for gross outstanding claims refers to amount of claims which remain unclaimed as at 31 December 2010.This reserve includes a reserve for claims incurred but not reported (IBNR).

2010 2009Rs. ’000 Rs. ’000

Reserve for net unearned premiums [Note 35.2 (a)] 188,504 157,059

Reserve for net deferred acquisition cost [Note 35.2 (b)] (11,717) (11,080)

Reserve for gross outstanding claims [Note 35.2 (c )] 75,987 35,590


35.2 (a) Movement in the reserve for net unearned premiums


Increase/(decrease) during the year 31,445 74,153


35.2 (b) Movement in the reserve for net deferred acquisition cost

Balance as at 01 January (11,080) (1,258)

Increase/(decrease) during the year (637) (9,822)

Balance as at 31 December (11,717) (11,080)



2010 2009Rs. ’000 Rs. ’000

35.2 (c) Movement in the reserve for gross outstanding claims


Increase/(decrease) during the year 34,464 13,247


IBNR and IBNER claims reserve


Increase/(decrease) during the year 5,933 (4,609)


Total gross outstanding claims 75,987 35,590

Directors are of the opinion that the total of future claims and related expenses will not exceed the unearned premium and premium related to unexpired risks. IBNR/IBNER claims reserve is determined based on information currently available. However, it is inherent to the nature of the business that the ultimate liability may vary as a result of subsequent developments.

The incurred but not reported claim reserve and Incurred But Not Enough Reported (IBNER) claim reserve have been actuarially computed by Mr. N K Parikh of Messrs K A Pandith, Consultants & Actuaries. The valuation is based on internationally accepted actuarial methods, and is performed on an annual basis.

36. DEFERRED TAX

Bank GroupAs at 31st December 2010 2009 2010 2009

Temporary Tax Temporary Tax Temporary Tax Temporary Tax difference effect difference effect difference effect difference effect

Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000

36 (a) SUMMARY OF NET DEFERRED TAX LIABILITY

Balance as at 01 January 1,169,866 409,453 1,447,232 506,531 1,257,519 440,132 1,616,278 565,697

Deferred tax originated/(reversed) during the year 137,525 48,134 (277,366) (97,078) 141,117 49,393 (358,759) (125,565)

Balance as at 31 December 1,307,391 457,587 1,169,866 409,453 1,398,636 489,525 1,257,519 440,132

Bank GroupAs at 31st December Balance Sheet Income Statement Balance Sheet Income Statement

2010 2009 2010 2009 2010 2009 2010 2009Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000 Rs’ 000

36 (b) RECONCILIATION OF NET DEFERRED TAX LIABILITY

Deferred tax liabilities on:

Accelerated depreciation for tax purposes:

Own assets 329,075 328,278 (797) 6,174 421,582 412,070 (9,512) 915

Leased assets 247,384 175,280 (72,103) 64,531 397,830 355,904 (41,926) 38,878

576,459 503,558 (72,900) 70,705 819,412 767,974 (51,438) 39,793

Deferred tax assets on:

Defined benefit plans 118,872 94,105 24,766 26,373 150,171 123,567 26,604 27,633

Unused tax losses – – – – 179,716 204,275 (24,557) 58,339

118,872 94,105 24,766 26,373 329,887 327,842 2,047 85,972

Deferred income tax on income/expense (48,134) 97,078 (49,391) 125,765

Net deferred tax liability 457,587 409,453 489,525 440,132




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

37. OTHER LIABILITIES

Accrued interest payable 10,630,898 11,662,658 11,037,435 12,094,495

Payable to employees and suppliers 1,558,308 2,052,534 1,558,308 2,052,534

Cheques sent on clearing 769,471 1,000,299 769,471 1,000,299

Lease creditors

- Within 12 months 16,805 12,432 16,805 12,432

- Later than 12 months 25,857 21,387 25,857 21,387

Provision for gratuity (Note 37.1) 346,886 272,620 484,730 379,910

Other Payable 1,910,167 3,767,210 2,525,143 4,066,534

15,258,392 18,789,140 16,417,749 19,627,591

37.1 PROVISION FOR GRATUITY


Provision made during the year 80,023 70,228 112,983 88,868

Payment made during the year (5,757) – (8,163) (4,110)

Adjustment/transfers – – – –



Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

38. DEBENTURES

Listed debentures

Unsecured, subordinated, redeemable debentures of Rs. 100/- each (public issue) 9,367,355 4,318,507 9,356,272 4,313,120

Unlisted debentures

Unsecured, redeemable debentures of Rs. 100/- each (private placement) 25,378,813 8,700,000 25,918,113 9,330,000

Unsecured, redeemable debentures of Rs. 100/- each (public issue) – – – 14,160

Unsecured, subordinated redeemable debentures of Rs. 100/- each (private placement) 1,550,000 2,550,000 1,550,000 2,550,000

Secured, redeemable debentures of Rs. 100/- each (private placement) – – 200,000 430,000

Unsecured, subordinated, redeemable debentures of US$ 1,000 each (private placement) 2,410,180 2,476,106 2,410,180 2,476,106

38,706,348 18,044,613 39,434,565 19,113,386

38.1 THE MOVEMENT IN DEBENTURES ISSUED WAS AS FOLLOWS:

Movement in debentures


Issued during the year 21,678,813 – 22,083,113 330,000

Redemptions (1,000,000) – (1,744,160) (418,750)

Interest capitalised* 48,848 41,419 48,848 41,419

Inter-company adjustment – – (696) (387)

Exchange rate adjustment (65,926) 14,590 (65,926) 14,590


* Interest payable on zero coupon debentures has been capitalised to the value of debentures.




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

38.2 CUSTOMER-WISE ANALYSIS OF DEBENTURES

Debentures issued to third parties

Fixed interest rate

Unsecured, subordinated, redeemable debentures 1,758,313 641,240 1,758,313 641,223

Unsecured, redeemable debentures – – 180,000 –

Floating interest rate

Unsecured, subordinated, redeemable debentures 11,558,139 8,698,003 11,558,139 8,698,003

Unsecured, redeemable debentures – – 336,800 344,160

Secured, redeemable debentures – – 200,000 430,000

13,316,452 9,339,243 14,033,252 10,113,386

Debentures issued to related entities of the Bank/Group

Fixed interest rate

Unsecured, subordinated, redeemable debentures 11,083 5,370 – –

Unsecured, redeemable debentures 4,428,813 – 4,451,313 –


Unsecured, redeemable debentures 20,950,000 8,700,000 20,950,000 9,000,000

25,389,896 8,705,370 25,401,313 9,000,000

Total debentures issued 38,706,348 18,044,613 39,434,565 19,113,386

38.3 DEBENTURES - SUMMARY

Subordinated debentures 13,327,535 9,344,613 13,316,452 9,339,226

Other debentures 25,378,813 8,700,000 26,118,113 9,774,160

Total debentures 38,706,348 18,044,613 39,434,565 19,113,386



Note Interest payablefrequency

Issue date Maturitydate

Coupon rate Effectiveannual rate

Amount as at 31 December

Bank Group2010 2009 2010 2009 2010 2009 2010 2009

% % % % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

38.4 TYPE OF DEBENTURES

A - Sri Lanka rupee debentures

Fixed interest rate

Unsecured, subordinated, redeemable debentures (a) Annually 24.11.2008 24.11.2013 19.00 19.00 19.00 19.00 345,190 345,190 339,107 339,803

Unsecured, subordinated, redeemable debentures (a) At maturity 24.11.2008 24.11.2013 – – 17.61 17.61 322,775 273,927 322,775 273,927

Unsecured, subordinated, redeemable debentures (b) Annually 28.06.2010 28.06.2015 11.50 – 11.50 – 1,074,670 – 1,069,670 –

Unsecured, redeemable debentures Annually 01.07.2010 01.07.2015 13.20 – 13.20 – 1,000,000 – 1,000,000 –



Unsecured, redeemable debentures Semi-annually 31.07.2010 31.07.2013 13.00 – 13.85 – – – 80,000 –

Unsecured, redeemable debentures Semi-annually 31.08.2010 31.08.2013 13.00 – 13.85 – – – 100,000 –

Unsecured, redeemable debentures At maturity 05.05.2010 05.06.2013 15.25 – 15.25 – – – 22,500 –

6,171,448 619,117 6,362,865 613,730


Unsecured, subordinated, redeemable debentures (a)/(c) Semi-annually 24.11.2008 24.11.2013 8.95 10.00 10.46 17.04 3,699,390 3,699,390 3,699,390 3,699,390

[6 months TB rate (Gross) plus 75 basis points]

Unsecured, subordinated, redeemable debentures (c) Semi-annually 31.12.2003 31.12.2011 10.43 10.15 10.56 16.69 250,000 250,000 250,000 250,000


Unsecured, subordinated, redeemable debentures (b)/(c) Semi-annually 28.06.2010 28.06.2015 8.95 – 11.54 – 3,925,330 – 3,925,330 –


Unsecured, subordinated, redeemable debentures (d) Semi-annually 03.11.2005 03.11.2010 – 11.68 – 20.24 – 1,000,000 – 1,000,000


Unsecured, subordinated, redeemable debentures (d) Semi-annually 27.10.2006 27.10.2011 8.94 12.11 11.88 20.16 1,000,000 1,000,000 1,000,000 1,000,000


Unsecured, subordinated, redeemable debentures (d) Annually 15.08.2008 15.08.2013 10.49 14.31 12.87 18.14 300,000 300,000 300,000 300,000


Unsecured, redeemable debentures (d) Annually 17.11.2006 17.11.2011 8.19 11.36 10.98 19.41 1,200,000 1,200,000 1,200,000 1,200,000

[12 months TB rate (Gross)]













Bank Group2010 2009 2010 2009 2010 2009 2010 2009

% % % % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000



Unsecured, redeemable debentures (d) Annually 01.11.2007 01.11.2012 8.69 11.48 11.01 19.99 500,000 500,000 500,000 500,000


Unsecured, redeemable debentures (d) Annually 01.04.2008 01.04.2013 11.02 18.80 12.94 19.54 500,000 500,000 500,000 500,000




Unsecured, redeemable debentures (d) Annually 03.08.2010 03.08.2015 11.50 – 11.50 – 5,200,000 – 5,200,000 –






Unsecured, redeemable debentures (c) Semi-annually 05.12.2009 05.12.2011 10.39 12.29 12.53 21.55 – – 330,000 330,000


Unsecured, redeemable debentures (d) Semi-annually 31.03.2007 31.03.2010 – 17.00 – 16.31 – – – 14,160


Unsecured, redeemable debentures Semi-annually 05.10.2007 05.10.2010 – 17.85 – 17.36 – – – 300,000

[36 months T Bond rate plus 110 basis points]

Unsecured, redeemable debentures (d) Semi-annually 31.03.2010 31.03.2013 11.64 – 12.32 – – – 6,800 –


Secured, redeemable debentures (d) Annually 10.01.2008 10.01.2010 – 22.22 – 22.23 – – – 430,000








Bank Group2010 2009 2010 2009 2010 2009 2010 2009

% % % % Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Secured, redeemable debentures (d) Annually 10.01.2010 10.01.2011 11.20 – 11.20 – – – 50,000 –


Secured, redeemable debentures (d) Semi-annually 10.01.2010 10.07.2011 11.20 – 11.83 – – – 25,000 –












30,124,720 14,949,390 30,661,520 16,023,550

B - United States dollar debentures

Fixed interest rate

Unsecured, subordinated,

redeemable debentures Semi-annually 10.10.2008 10.10.2013 5.50 5.50 5.50 5.50 26,761 27,493 26,761 27,493


Unsecured, subordinated,

redeemable debentures (e) Semi-annually 10.10.2008 10.10.2013 3.46 4.69 3.49 4.74 2,383,419 2,448,613 2,383,419 2,448,613

(6 months LIBOR Plus 300

basis points)

2,410,180 2,476,106 2,410,180 2,476,106

Total value of debentures 38,706,348 18,044,613 39,434,565 19,113,386

Notes

(a) Debentures that are listed in the Colombo Stock Exchange which were issued on 24 November 2008. Some of them have been traded in the Colombo Stock Exchange during the year ended 31 December 2010.

(b) Debentures that are listed in the Colombo Stock Exchange which were issued on 28 June 2010.

(c) Weighted average 6 months Treasury Bill interest rate before deducting 10% withholding tax at the primary quotations as announced by the Central Bank of Sri Lanka, at the preceding week of the interest resetting date.

(d) Weighted average 12 months Treasury Bill interest rate before deducting 10% withholding tax at the primary quotations as announced by the Central Bank of Sri Lanka, at the preceding week of the interest resetting date.

(e) 6 months London Inter Bank Offered Rate (LIBOR) for US Dollars plus 3% per annum.




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

39. STATED CAPITAL

Authorised

50,000,000 ordinary shares 50,000,000 50,000,000 50,000,000 50,000,000

Issued and fully paid

Balance as at 01 January 5,000,000 ordinary shares 5,000,000 5,000,000 5,000,000 5,000,000

Balance as at 31 December 5,000,000 ordinary shares 5,000,000 5,000,000 5,000,000 5,000,000

40. PERMANENT RESERVE FUND


Transfer during the year 127,500 65,000 127,500 65,000


The permanent reserve fund is maintained as required by the Bank of Ceylon Ordinance No. 53 of 1938 (Chapter 397), whereby the Bank must, out of net profit after taxation but before any dividend is declared, transfer to a reserve, a sum equivalent to not less than 20% of such profit until the reserve is equivalent to 50% of the issued and paid up capital and thereafter, an appropriate amount determined at 2% per annum under the Banking Act No. 30 of 1988 and amendments thereto until the reserve is equal to the paid up capital.

In order to meet the requirement, an amount of Rs. 127 million was transferred to the reserve during the year (2009 - Rs. 65 million).

The balance in the permanent reserve fund will be used only for the purposes specified in Section 20 (2) of the Banking Act No. 30 of 1988 and amendments thereto.


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

41. RESERVES

Capital reserves

Revaluation reserve (Note 41.1) 125,299 125,299 178,692 178,692

125,299 125,299 178,692 178,692

Revenue reserves

Free reserve (Note 41.2) 169,067 169,067 366,644 366,644

Net exchange translation adjustment (Note 41.3) 570,545 606,163 565,745 606,163

Primary dealer special risk reserve (Note 41.4) 776,683 528,470 776,683 528,470

Other reserves – – 137,793 137,793

1,516,295 1,303,700 1,846,865 1,639,070

1,641,594 1,428,999 2,025,557 1,817,762

41.1 REVALUATION RESERVE


Realised surpluses on disposal of property – (1,662) – (1,662)


The revaluation reserve represents the surpluses arising on the revaluation of freehold properties which are still in use for banking operations. According to the regulatory directives, Bank can account for the revaluation surplus every seven years. Revaluation reserve is generally used for the issue of bonus shares or for capital reduction programme.




Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

41.2 FREE RESERVE



Free reserve has been created for unforeseeable risk and future losses.

41.3 NET EXCHANGE TRANSLATION ADJUSTMENT


Currency translation difference during the year 3,948 60,397 (852) 60,397

Transfer to Income Statement due to conversion of London branch into a Subsidiary during the year (39,566) – (39,566) –


This represents the exchange difference arising from translating investments made in the capital of foreign branches, and also exchange differences arising from translation of the results of overseas branches for this year from the average rate to the exchange rate ruling at the year end. If and when the investments in foreign branches are disposed, the exchange gain or loss will be recognised in the Income Statement.


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

41.4 PRIMARY DEALER SPECIAL RISK RESERVE


Amount transferred during the year 248,213 187,571 248,213 187,571


According to a direction issued by the Central Bank of Sri Lanka, primary dealers are required to transfer 25% of their profit after tax annually to a special risk reserve in order to strengthen capital base for further development of the Government securities market.

42. COMMITMENTS AND CONTINGENCIES

42.1 CONTINGENCIES

In the normal course of business, the Bank undertakes commitments and incurs contingent liabilities with legal recourse to its customers to accommodate the financial and investment needs of clients, to conduct trading activities, and to manage its own exposure to risk. These financing instruments generate interest or fees and carries elements of credit risk in excess of those amounts recognised as assets and liabilities in the Balance Sheet. However, no material losses are anticipated as a result of these transactions.

These commitments are quantified below:


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Acceptances and documentary credits 124,677,407 174,571,889 126,048,237 174,571,889

Bills for collection 3,988,739 3,114,649 4,048,990 3,114,649

Forward exchange contracts 46,722,050 27,928,577 46,722,050 27,928,577

Guarantees 47,666,313 40,427,298 47,876,977 40,498,766

Other commitments 110,421 202,235 245,861 202,235

223,164,930 246,244,648 224,942,115 246,316,116

42.2 The unutilised value of irrevocable commitments which cannot be withdrawn at the discretion of the Bank, without risk of incurring significant penalties or expenses approximates to Rs. 23,305 million as at the Balance Sheet date (2009 - Rs. 15,674 million).



43. CONTINGENT LIABILITIES AND COMMITMENTS

43.1 (a) CAPITAL COMMITMENTS

Capital expenditure approved by the Directors for which no provision has been made in the Financial Statements, amounts to:


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Approved and contracted for 1,052,586 920,972 1,173,586 920,972

Approved and not contracted for 286,433 332,740 286,433 332,740

1,339,019 1,253,712 1,460,019 1,253,712

43.1 (b) OPERATING LEASE COMMITMENTS

Future minimum lease payments under non-cancellable operating leases where the Bank is the lessee are as follows:


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Not later than 1 year 637,889 351,600 637,889 351,600

Later than 1 year and not later than 5 years 842,246 130,597 842,246 130,597

Later than 5 years 10,834 32,500 10,834 32,500

1,490,969 514,697 1,490,969 514,697

43.1 (c) FINANCING LEASE COMMITMENTS

Future minimum lease payments under non-cancellable financing leases where the Bank is the lessee are as follows:


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Not later than 1 year 16,805 13,930 16,805 13,930

Later than 1 year and not later than 5 years 25,857 22,635 25,857 22,635

42,662 36,565 42,662 36,565

43.1 (d) LITIGATION

Usually, money transactions, specially lending and employing persons as a workforce encounter disputes. It is natural that some of the said disputes end in judicial process for determination. Bank of Ceylon, being a major player in banking transactions, thus in lending and being an employer of a large number of staff, attracts the judicial process - litigation as a mode to sort out the issues and disputes.

Bank of Ceylon, due to its efficient and effective dispute resolution, does not carry a bountiful of litigation in its bag. For its enormity of money transaction, which reaches more than 100 trillion a year and for a workforce of over 8,000, the cases by and against the Bank are less in number comparatively in the industry.

Out of these cases, most are in regard to recovery of debts from the defaulting customers, averagely 1,000 cases a year involving a sum of Rs. 500 - 750 million in debt.

The debt recovery cases filed by delinquent customers against the Bank to prevent it from recovering the debts by ’short process‘ known as ’parate proceedings‘. These cases are known as ’injunction cases‘ against the Bank and are eventually held in favour of the Bank as they are filed as dilatic tactics - just to delay the process. Of course, a few are held against the Bank which are financially, just a whisper in the huge economy of the Bank.

All the outstanding cases, disputes and lawsuits have been perused by us and we are of the opinion that they will not cause any material impact on the financial stability of the Bank and therefore no related provisions are made.



44. ASSETS PLEDGED AS SECURITY

The securities sold under repurchase agreements and debentures are debt securities issued by the Bank and the Group and details of assets pledged by the Bank and the Group, to secure those liabilities are given below:


Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Securities sold under repurchase agreements 53,522,487 34,203,701 52,968,787 32,968,041

Debentures – – 30,772 16,782

Trust certificates – – 237,135 339,079

Refinance purposes – – 383,329 –

53,522,487 34,203,701 53,620,023 33,323,902

Secured by:

Treasury bills held by the Bank 7,055,313 3,510,263 7,055,313 3,510,263

Treasury bonds held by the Bank 51,302,618 30,693,438 51,302,618 30,693,438

Index linked bonds – 4,298,045 – 4,298,045

Lease/hire purchase rentals receivable – – 651,236 355,861

58,357,931 38,501,746 59,009,167 38,857,607

45. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

No material events have occurred since the Balance Sheet date which would require adjustments to, or disclosure in the Financial Statements.

46. MATURITIES OF ASSETS AND LIABILITIES

46.1 BANK

The analysis of total assets and liabilities of the Bank into relevant maturity groupings based on the remaining period as at 31 December into the contractual maturity date is given in the table below:

Up to 3 3-12 1-3 3-5 Over 5 Totalmonths months years years yearsRs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

Interest earning assets

Treasury bills and other short term bills 22,742,419 22,636,594 – – – 45,379,013

Securities purchased under re-sale agreement 40,840,091 – – – – 40,840,091

Placements with and loans to other banks 39,346,316 3,333,482 – – – 42,679,798

Treasury bonds maturing after one year – – 28,349,481 18,953,025 3,994,238 51,296,744

Investment securities 3,611,800 1,115,050 69,839,005 233,024 – 74,798,879

Bills of exchange 15,307,197 88,706 – – – 15,395,903

Loans and advances 86,397,669 133,130,827 41,153,096 35,893,273 56,523,051 353,097,916

Lease rentals receivable 767,581 1,070,798 1,373,207 1,013,741 2,438 4,227,765

GOSL - restructuring bonds – – – – 8,547,000 8,547,000

209,013,073 161,375,457 140,714,789 56,093,063 69,066,727 636,263,109




Non interest earning assets

Cash and balances with other banks 14,103,803 – – – – 14,103,803

Balances with Central Banks 17,587,263 7,629,341 474,967 171,972 30,923 25,894,466

Dealing securities 3,232,348 – – – – 3,232,348

Accrued interest and others 10,238,043 – – – – 10,238,043

Investment securities – – – – 5,844,617 5,844,617

Investments in related companies – – – – 6,123,752 6,123,752

Property, plant & equipment – – – – 5,544,589 5,544,589

Leasehold land – – – – 77,515 77,515

Intangible assets – – – – 163,826 163,826

Other assets 6,986,759 397,172 – – 84,294 7,468,225

52,148,216 8,026,513 474,967 171,972 17,869,516 78,691,184

Total assets 261,161,289 169,401,970 141,189,756 56,265,035 86,936,243 714,954,293

Interest bearing liabilities

Deposits 270,034,109 150,814,505 9,710,389 3,515,853 632,207 434,707,063

Borrowings 15,046,545 26,805,891 3,521,207 6,667,869 403,641 52,445,153

Securities sold under re-purchase agreements 41,846,407 11,676,080 – – – 53,522,487

Debentures – 2,450,000 14,577,535 21,678,813 – 38,706,348

326,927,061 191,746,476 27,809,131 31,862,535 1,035,848 579,381,051

Non interest bearing liabilities

Deposits 89,525,634 – – – – 89,525,634

Accrued interest payable 12,189,206 – – – – 12,189,206

Deferred tax liabilities – 160,156 208,202 89,229 – 457,587

Tax payable – 2,199,758 – – – 2,199,758

Other liabilities 2,683,111 10,420 28,769 – 346,886 3,069,186

Shareholders’ funds – – – – 28,131,871 28,131,871

104,397,951 2,370,334 236,971 89,229 28,478,757 135,573,242

Total liabilities 431,325,012 194,116,810 28,046,102 31,951,764 29,514,605 714,954,293

Net liquidity gap - 2010 (170,163,723) (24,714,840) 113,143,654 24,313,271 57,421,638 –




46. MATURITIES OF ASSETS AND LIABILITIES (CONTD.)

46.2 GROUP

The analysis of total assets and liabilities of the Group into relevant maturity groupings based on the remaining period as at 31 December into the contractual maturity date is given in the table below:


Interest earning assets

Treasury bills and other short-term bills 22,450,692 23,898,004 – – – 46,348,696

Securities purchased under re-sale agreements 40,840,091 – – – – 40,840,091

Placements with and loans to other banks 44,439,904 3,333,482 – – – 47,773,386

Treasury bonds maturing after one year – – 28,801,941 18,953,025 3,994,237 51,749,203

Investment securities 3,671,800 1,115,030 69,839,083 243,024 151,638 75,020,575

Bills of exchange 15,920,399 95,129 – – – 16,015,528

Loans and advances 87,012,686 133,378,368 41,377,498 36,961,933 56,534,910 355,265,395

Lease rentals receivable 1,426,198 3,020,338 3,551,429 3,190,726 118,183 11,306,874

GOSL - restructuring bonds – – – – 8,547,000 8,547,000

215,761,770 164,840,351 143,569,951 59,348,708 69,345,968 652,866,748

Non interest earning assets

Cash and balances with other banks 13,754,857 – – – – 13,754,857

Balances with Central Banks 17,587,263 7,629,341 474,967 171,972 30,923 25,894,466

Dealing securities 3,794,537 10,906 – – – 3,805,443

Accrued interest and others 10,578,148 42,798 – – – 10,620,946

Investment securities – 160,965 – 12,739 5,924,088 6,097,792

Investment properties – 105,745 – 281,122 – 386,867

Investment in related companies 1,284,563 – – – – 1,284,563

Property, plant & equipment – – – 44,047 7,326,261 7,370,308

Leasehold land – – – – 119,978 119,978

Intangible assets – – – 1,360 169,044 170,404

Other assets 6,891,244 668,444 33,957 23,722 75,337 7,692,704

53,890,612 8,618,199 508,924 534,962 13,645,631 77,198,328

Total assets 269,652,382 173,458,550 144,078,875 59,883,670 82,991,599 730,065,076

Interest bearing liabilities

Deposits 270,254,128 153,101,977 11,138,650 3,720,398 632,207 438,847,360

Borrowings 17,121,881 28,758,138 3,871,777 7,276,578 403,641 57,432,015

Securities sold under re-purchase agreements 41,292,707 11,676,080 – – – 52,968,787

Debentures 50,000 2,805,000 14,744,852 21,834,713 – 39,434,565

328,718,716 196,341,195 29,755,279 32,831,689 1,035,848 588,682,727

Non interest bearing liabilities

Deposits 90,471,340 – – – – 90,471,340

Insurance provision - life – – – – 66,937 66,937

Insurance provision - non life – – 252,774 – – 252,774

Accrued interest and expenditure 12,590,505 – – – 5,238 12,595,743

Deferred tax liability – 160,155 208,202 89,229 31,939 489,525

Tax payable – 2,422,527 – – – 2,422,527

Other liabilities 2,684,352 564,738 95,462 – 477,454 3,822,006

Shareholders’ funds – – – – 31,261,497 31,261,497

105,746,197 3,147,420 556,438 89,229 31,843,065 141,382,349






46. MATURITIES OF ASSETS AND LIABILITIES (CONTD.)

Notes(1) Demand and savings deposits have been categorised as up to 3 months maturity group. However, a major part of these deposits

represent a core retail deposit base with longer term maturity.

(2) Bills of exchange, loans and advances and lease rentals receivables are shown net of interest in suspense and provision for bad and doubtful debts.

(3) The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Bank. It is unusual for banks ever to be completely matched since business transacted is often of uncertain terms and of different types. An unmatched position potentially enhances profitability, but also increases the risk of losses.

(4) The maturities of assets and liabilities and the ability to replace, at an acceptable cost, interest bearing liabilities as they mature, are important factors in assessing the liquidity of the Bank and its exposure to changes in interest rates and exchange rates.

(5) Liquidity requirements to support calls under guarantees and standby letters of credit are considerably less than the amount of the commitment because the Bank does not generally expect the third party to draw funds under the agreement. The total outstanding contractual amount of commitments to extend credit does not necessarily represent future cash requirements, since many of these commitments will expire or terminate without being funded.

47. RELATED PARTY DISCLOSURES

In 2010, the Group entered into transactions with its significant investor, Subsidiaries and Associate companies and post-employment benefit plans for the Bank’s employees, Key Management Personnel (KMP), Close Family Members (CFMs) of KMP in which such parties have control, joint control, significant influence or for which significant voting power is held by such parties. The transactions that have been carried out during the year 2010 include lending activities, acceptance and placements, Off-Balance Sheet transactions and provision of other banking and financial services. The interests, commissions and other fees on their transactions are determined on an arm’s length basis as per Sri Lanka Accounting Standard No. 30 (Revised 2005) on ‘Related Party Disclosures’.

47.1 PARENT AND THE ULTIMATE CONTROLLING PARTY

The Bank does not have an identifiable parent of its own.

47.2 TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL (KMP)

According to Sri Lanka Accounting Standard No. 30 (Revised 2005) on ‘Related Party Disclosures’, the Key Management Personnel includes those who are having authority and responsibility for planning, directing and controlling the activities of the Bank and its Subsidiaries and Associates. The Board of Directors, members of the Corporate Management of the Bank, Executive Management and other key employees who are holding directorships in Subsidiaries and Associate companies and their Close Family Members (CFMs) have been classified as Key Management Personnel of the Bank.

Close Family Members are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.




(Restated) (Restated)Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000

47.2.1 Compensation to Key Management Personnel

Short-term employment benefits 203,824 154,636 206,657 156,472

Post-employment benefits 62,539 51,618 62,539 51,618

Post-employment benefits paid to past Directors – – – –

Total 266,363 206,254 269,196 208,090

47.2.2 Transactions, arrangements and agreements involving Key Management Personnel (KMP), their Close Family Members (CFMs) and entities that are controlled, significantly influenced by the KMP or their CFMs.



47.2.2 (a) Income Statement

Interest earned 12,969 17,339 12,969 17,339

Interest paid 4,219 5,266 4,219 5,266

Payments made as shown in Note 47.2.1 266,363 206,254 269,196 208,090



47.2.2 (b) Balance Sheet

Assets

Loans and advances 258,974 202,973 258,974 202,973

Credit cards 5,341 3,851 5,341 3,851

264,315 206,824 264,315 206,824

Liabilities

Deposits 123,068 72,855 123,068 72,855

Debentures 40,650 41,030 40,650 41,030

163,718 113,885 163,718 113,885

47.2.2 (c) Off-Balance Sheet items

Commitments and contingencies

Undrawn facilities 164,237 139,527 164,237 139,527

164,237 139,527 164,237 139,527

Net accommodation 387,902 305,321

Net accommodation as a % of the Bank’s regulatory capital 1.1% 1.0%



47.3 TRANSACTIONS WITH SUBSIDIARIES AND ASSOCIATE COMPANIES

47.3.1 Transactions with Subsidiaries and Associate Companies of the Bank

The Property Development PLC is a Subsidiary of the Bank which owns, maintains and manages the Bank of Ceylon, Head Office building at No. 4, Bank of Ceylon Mawatha, Colombo 01.

The BoC Property Development & Management (Private) Limited, a fully-owned Subsidiary of the Bank, maintains and manages two buildings in Colombo 03 and Kandy, where a branch of the Bank and also a principal place of business of another Subsidiary are located.

Merchant Bank of Sri Lanka PLC, a Subsidiary of the Bank provides certain management services.

The Ceybank Holiday Homes (Private) Limited, an indirect fully-owned Subsidiary of the Bank, manages the holiday bungalows for the welfare of the Bank staff.

A Subsidiary of the Bank, Property Development PLC has acquired Koladeniya Hydropower (Private) Limited in 2010 which is engaged in hydropower generation.

Bank of Ceylon London branch was converted into a fully-owned Subsidiary of the Bank in 2010 namely, Bank of Ceylon (UK) Limited which is engaged in Financial Services including accepting deposits and dealing in investments.

The aggregate amount of income and expenses arising from their transactions during the year and amount due to and due from the relevant related parties, and total contract sum of Off-Balance Sheet transactions at the year end are as follows:

Subsidiary Companies Associate CompaniesFor the year ended 31 December 2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000


Interest earned 119,218 194,343 122,977 88,926

Interest paid 109,791 4,366 9,489 2

Other income 22,394 9,210 1,871 1,936

Expenses incurred 525,335 470,578 – 10,801

Subsidiary Companies Associate CompaniesAs at 31 December 2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000


Assets

Loans and advances 395,167 212,745 2,535,663 2,750,885

Placements 14,327,518 – – –

Other receivable 256,447 448,731 – 12,844

14,979,132 661,476 2,535,663 2,763,729

Liabilities

Deposits 4,027,486 328,140 44,470 42,968

Securities sold under re-purchase agreements 553,700 1,235,660 375,200 89,200

Debentures 11,083 5,370 – –

Other liabilities 248,225 133,620 – 9

4,840,494 1,702,790 419,670 132,177

47.3.1 (c) Off-Balance Sheet itemsCommitments and contingencies

Letters of credit 86,815 60,000 – –

Guarantees 53,000 56,500 – –


Others – – – 50,000

273,499 264,485 25,500 78,435

Net accommodation 894,030 900,591 1,042,465 1,192,572

Net accommodation as a % of the Bank’s regulatory capital 2.6% 3.1% 3.1% 4.1%




47.3.2 Transactions with Subsidiaries and Associate Companies of the Group

Subsidiary Companies Associate CompaniesFor the year ended 31 December 2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000


Interest earned 119,218 194,343 122,977 91,462

Interest paid 109,791 6,903 9,489 2

Other income 106,362 171,302 13,306 6,451

Expenses incurred 593,092 619,396 27,646 28,589

Subsidiary Companies Associate CompaniesAs at 31 December 2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000


Assets

Loans and advances 395,167 212,745 2,535,663 2,750,885

Placements 14,327,518 – – –

Other receivables 317,197 465,119 – 108,714

15,039,882 677,864 2,535,663 2,859,599

Liabilities

Deposits 4,027,486 328,140 44,470 42,968

Securities sold under re-purchase agreements 553,700 1,235,660 375,200 89,200

Debentures 11,083 5,370 – –

Other liabilities 256,088 231,612 52,887 14,275

4,848,357 1,800,782 472,557 146,443


Commitments and contingencies

Letters of credit 86,815 60,000 – –

Guarantees 53,000 56,500 – –


Others – – – 50,000

273,499 264,485 25,500 78,435

Net accommodation 954,780 916,979 1,042,465 1,288,442

Net accommodation as a % of the Bank’s regulatory capital 2.8% 3.1% 3.1% 4.4%


47.4 TRANSACTIONS WITH THE SIGNIFICANT INVESTORS HAVING SIGNIFICANT INFLUENCE OVER BANK AND THE POST-EMPLOYMENT BENEFIT PLANS FOR BANK’S EMPLOYEES

Significant Investor Post-Employment Benefit PlansFor the year ended 31 December 2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000


Interest earned 7,212,750 11,514,172 – –

Interest paid 177,441 102,729 5,087,479 6,642,868

Contributions made – – 2,712,272 2,853,088

Significant Investor Post-Employment Benefit PlansAs at 31 December 2010 2009 2010 2009

Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000


Assets

Loans and advances 52,324,373 64,557,521 – –

Investment in bonds 85,297,670 81,050,009 – –

137,622,043 145,607,530 – –

Liabilities

Deposits 24,429,780 8,900,089 20,954,183 27,557,867

Debentures – – 28,461,433 9,900,000

24,429,780 8,900,089 49,415,616 37,457,867


Letters of credit 12,982,848 53,886,192 – –

Bills and acceptance 5,378,459 36,862,417 – –

Guarantees 8,560,881 8,802,506 – –

26,922,188 99,551,115 – –

Net accommodation 159,544,231 240,158,645 – –

Net accommodation as a % of the Bank’s regulatory capital 472.4% 820.2% – –

47.4.1 (d) Other Transactions

No. of Ordinary shares held at the year end 5,000,000 5,000,000

Dividends for the year (Rs. ’000) 3,096,410 1,346,410



47.5 RELATED PARTY TRANSACTIONS

The Bank entered into transactions with its related parties in the ordinary course of business activities including deposits, lending and other banking services. The interest rates, commission and other fees on these transactions are determined on an arm’s length basis. Details thereon are summarised below:

Name of related company Name and relationship Nature of transaction LimitRs. ’000

Balance/Amount outstanding

as at 31.12.2010 Rs. ’000

Security

47.5.1 Subsidiaries

Property Development PLC Dr. Gamini Wickramasinghe - Chairman Current account 4,502

Mr. P A Lionel - Director Time deposit 755,400

Mr. B M Amarasekara - Director REPO balance 454,200

Mr. L N de Silva Wijeyeratne - Director Letter of credit 5,000 86,815 Related shipping documentLetter of guarantee 3,000

Rent paid in advance 235,179

Deposit for fuel 907

Other payable 38,150

Merchant Bank of Sri Lanka PLC Mr. M R Shah - Chairman Current account 35,725

Mr. V Kanagasabapathy - Director Overdraft 50,000 25,916

Ms. W A Nalani - Director REPO balance 10,000

Debentures 1,083

Series of loan 600,000 81,647 Lease receivable backed by PowerMoney market loan 100,000 – of AttorneyGrant on immediate –

Credit on cheque limit 1,000 –

Intra day overdraft 5,000 –

BoC Management & Mr. B A C Fernando - Chairman Current account 2,467

Support Services Mr. K Dharmasiri - Director Time deposit 1,200

(Private) Limited Ms. L S L de S Wijeyeratne - Director Other payable 322

Other receivable 95

BoC Property Development & Mr. B A C Fernando - Chairman Current account 7,182

Management (Private) Limited Ms. W A Nalani - Alternate Director Time deposit 253,074

Ms. S W S Fernando - Director REPO balance 62,500

Mr. P J Jayasinghe - Director Other payable 9,462

Ms. S H Ranawaka - Director

BoC Travels (Private) Limited Mr. Chandrasiri de Silva - Chairman Current account 27,558

Mr. B A C Fernando - Director Time deposit 40,000

Ms W A Nalani - Alternate Director Debenture 10,000

Ms. Kumudiniy Kulatunga - Director Overdraft 9,600 – Book Debts

Ms. Deepa Wanniaratchi - Director Other payable 794

Mr. M K Muthukumar - Director Letter of guarantee 50,000 50,000 Indemnity of Directors, Debenturesand Rs. 20 million secured by time deposits

Hotels Colombo (1963) Limited Mr. Rohan Jayasinghe - Chairman Current account 2,589

Ms. Nalini Abeywardene - Director Time deposit 79,610

Mr. Chandrasiri de Silva - Director Other receivable 19,566

Mr. B A C Fernando - DirectorMr. M K Nandasiri - DirectorMs. W K I Kularatne - DirectorMr. M P R Kumara - DirectorMr. C D K Walisundara - Director





as at 31.12.2010 Rs. ’000

Security

Merchant Credit of Mr. A B L A de Silva - Chairman Current account 50,875

Sri Lanka Limited Mr. Raju Sivaraman - Director Savings account 86

Mr. H M A B Weerasekara - Director Time deposit 15

Ms. Sriyani Anandagoda - Director Overdraft 50,000 – Lease receivables backed by Power of AttorneySeries of loan 250,000 –

Money market loan 50,000 50,000

Bridging finance 100,000 –

Letter of credit 10,000 –

Letter of guarantee 4,000 –

Ceylease Financial Mr. Raju Sivaraman - Chairman Current account 27,111

Services Limited Mr. W A Asoka Rupasinghe - Director REPO balance 27,000

Ms. K A D Fernando - Director Overdraft 50,000 – CleanSeries of loan 450,000 26,689 Lease receivable/hire purchaseBridging finance 100,000 – receivable backed by Power of

AttorneyMoney Market Loan 350,000 210,000 CleanLetter of credit 50,000 – Bills of exchange & shipping

documents

Other payable 1,577

Ceybank Holiday Homes Dr. Gamini Wickramasinghe - Chairman Current account 3,711

(Private) Limited Mr. B A C Fernando - Director Time deposit 78

Mr. K Dharmasiri - Alternate Director Other payable 22

Mr. C Samarasinghe - Director Other receivable 700

Mr. H M Mudiyanse - DirectorMr. D M Gunasekera - DirectorMs. K A D A Pemadasa - DirectorMr. W G Ariyaratne - DirectorMr. A Kuruppu - General Manager

MBSL Insurance Company Limited Mr. M R Shah - Chairman Current account 7,353

Overdraft 915

Koladeniya Hydropower Dr. Gamini Wickramasinghe - Chairman (Private) Limited

Bank of Ceylon (UK) Limited Dr. Gamini Wickramasinghe - Chairman Current account US$ 138

Mr. B A C Fernando - Director (Nostro accounts) (Rs. 15,576)

Mr. I G C Madadeniya - EURO 17,801

Chief Executive Officer (Rs. 2,639,955)

Ms. Sandya Jayasinghe - GBP 427

Chief Operating Officer (Rs. 73,619)

Placements EURO 40,000

(Rs. 5,932,068)

GBP 48,749

(Rs. 8,395,450)

Other payable 181,675





as at 31.12.2010 Rs. ’000

Security

47.5.2 Associates

Ceybank Asset Management Mr. K L Hewage - Chairman Current account 13,486

(Private) Limited Mr. B A C Fernando - Director REPO balance 8,200

Mr. P A Lionel - Alternate Director

Mr. D M Gunasekara - Director

Southern Development Mr. D K N Piyasoma - Director Current account 44

Financial Company Limited Savings account 38

Lanka Securities (Private) Limited Mr. K Dharmasiri - Director Current account 19,755

REPO balance 367,000

Overdraft 25,000 – Treasury bills

Mireka Capital Land Dr. Gamini Wickramasinghe - Director Current account US$ 2

(Private) Limited Ms. B C D Wijayakulasuriya - (Rs. 174)

Alternate Director Current account Rs. 1,533

Mr. K B S Bandara - Director Term loan US$ 24,000 US$ 22,700 Clean basis and US$ 14.4 million secured by Time Deposit placed by Shing Kwan Investment (Singapore) Private Limited

Mr. W P R P H Fonseka - Director (Rs. 2,676,120) (Rs. 2,531,163)

Mr. T Mutugala - Alternate Director

Transnational Lanka Records Mr. C Samarasinghe - Chairman Overdraft 5,000 4,500 Mortgage over commercial property

Solutions (Private) Limited Ms. C K Jayaratne - Director Current account 3

MBSL Savings Bank Limited Mr. M R Shah - Chairman Current account 977

Savings account 8,461

47.5.3 Other Entities

Credit Information Bureau of Sri Lanka

Mr. B A C Fernando - Director Bank has contributed towards the capital

42,256 Company shares

Pradeshiya Sanwardhana Bank Ms. W A Nalani - Director Bank has contributed towards the capital


Lanka Clear (Private) Limited Mr. B A C Fernando - Director Bank has contributed towards the capital


Lanka Financial Services Bureau Limited

Mr. B A C Fernando - Director Bank has contributed towards the capital


Ceybank Century Growth Fund Bank has invested in units/mutual funds

95,741

Ceybank Unit Trust Investments Bank has invested in units/mutual funds

1,113,433

Ceybank Surekum Gilt Edged Fund Bank has invested in units/mutual funds

100,000

Transactions with other entities where the Board of Directors of the Bank hold directorships, are disclosed under Directors’ Interest in Contracts on pages 141 to 144 in this Annual Report.



48. FINANCIAL REPORTING BY SEGMENT

Segmental information is presented in respect of Group business distinguishing the component of the Group that is engaged in different business segments or operations within a particular economic environment which is subject to risk and returns that are different from those of other segments.

48.1 PRIMARY SEGMENT INFORMATION - BUSINESS SEGMENTS (GROUP)

Business segments provide products and services whose risk and returns are different from other segments which represents banking, leasing, treasury & investments, property, insurance and other non-banking activities.

Banking Leasing Treasury & investments2010 2009 2010 2009 2010 2009

(Restated) (Restated) (Restated)Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

Revenue from external customers:

Interest 33,159,051 34,527,041 62,345 52,494 17,713,343 18,324,885

Exchange (251,547) 133,794 – – 670,008 1,433,122

Lease income – – 2,086,052 2,335,035 – –

Commissions 6,278,055 4,169,828 109,559 76,941 – –

Other 1,915,729 1,799,925 130,829 106,092 3,835,916 2,193,672

Total revenue 41,101,288 40,630,588 2,388,785 2,570,562 22,219,267 21,951,679

Segment result 8,631,548 3,938,335 1,268,596 1,273,440 7,738,205 5,214,647

Unallocated expenses – – – – – –

Profit from operations – – – – – –

Income from Associates – – – – – –

Income tax expense – – – – – –

Minority interest – – – – – –

Profit attributable to equity holders/parent – – – – – –

Segment assets 377,756,035 266,873,616 11,460,688 10,235,883 312,496,190 240,543,400

Investment in Associates – – – – – –

Unallocated assets – – – – – –

Total assets 377,756,035 266,873,616 11,460,688 10,235,883 312,496,190 240,543,400

Segment liabilities 375,591,228 265,227,694 7,875,741 7,360,029 317,433,546 246,167,879

Unallocated liabilities – – – – – –


Cash flows from operating activities (38,963,122) 63,685,347 (212,237) (364,099) 47,068,667 39,789,797

Cash flows from investing activities* – – – – (58,820,977) (21,477,780)

Cash flows from financing activities 11,691,490 (14,338,027) – – 47,339,896 (30,165,163)

Capital expenditure (1,187,231) (1,440,020) (22,759) (21,013) – –

* Excluding capital expenditure.




Property Insurance Other non-banking/unallocated Total2010 2009 2010 2009 2010 2009 2010 2009

(Restated) (Restated) (Restated) (Restated)Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000 Rs. ‘000

4,313 6,308 29,427 19,870 7,755 13,413 50,976,234 52,944,011

– – – – – – 418,461 1,566,916

– – – – – – 2,086,052 2,335,035

10,711 10,735 89,055 89,187 283 7,011 6,487,663 4,353,702

606,009 605,146 8,665 3,076 401,234 220,619 6,898,382 4,928,530

621,033 622,189 127,147 112,133 409,272 241,043 66,866,792 66,128,194

953,450 880,149 60,656 36,350 107,462 19,468 18,759,917 11,362,389

– – – – – – (7,897,330) (6,773,132)

– – – – – – 10,862,587 4,589,257

– – – – – – 212,898 130,653

– – – – – – (4,162,289) (1,402,987)

– – – – – – (152,886) (17,050)

– – – – – – 6,760,310 3,299,873

1,711,562 1,689,642 226,116 187,349 1,181,262 1,032,704 704,831,853 520,562,592

– – – – – – 1,284,563 1,084,065

– – – – – – 23,948,660 25,773,894

1,711,562 1,689,642 226,116 187,349 1,181,262 1,032,704 730,065,076 547,420,551

394,781 340,752 433,235 264,884 913,606 897,004 702,642,137 520,258,242

– – – – – – (3,838,558) (371,832)

394,781 340,752 433,235 264,884 913,606 897,004 698,803,579 519,886,410

59,373 (47,676) 93,978 16,166 (4,705,293) (2,666,066) 3,341,366 100,413,469

(59,258) (118,740) (148,176) (118,895) – – (59,028,411) (21,715,415)

– – 50,000 99,700 (38,143) (30,629) 59,043,243 (44,434,119)

(3,806) (4,706) (5,459) (130) (13,021) (21,637) (1,232,276) (1,487,506)



48. FINANCIAL REPORTING BY SEGMENT (CONTD.)

48.2 SECONDARY SEGMENT INFORMATION - GEOGRAPHICAL SEGMENTS

Geographical segments provide products or services within a particular economic environment where risk and returns are different from those of other economic environment.

These segments comprise domestic operations, Off-Shore Banking Divisions and Off-Shore Banking Units (Branches).

Bank Group2010 2009 2010 2009

Rs. ’000 % Rs. ’000 % Rs. ’000 % Rs. ’000 %

Assets

Domestic operations 487,346,097 68.1 385,328,332 71.6 479,649,757 65.7 394,507,746 72.1


Off-shore banking units 16,236,664 2.3 24,703,620 4.6 39,043,787 5.3 24,703,620 4.5

714,954,293 100.0 538,241,137 100.0 730,065,076 100.0 547,420,551 100.0

Gross Income



Off-shore banking units 1,371,814 2.2 1,401,964 2.2 1,767,094 2.6 1,401,964 2.1

63,362,866 100.0 63,461,366 100.0 66,866,792 100.0 66,128,194 100.0

Profit Before Tax



Off-shore banking units 785,485 7.8 603,517 14.3 770,663 7.0 603,517 12.8

10,052,569 100.0 4,207,647 100.0 11,075,485 100.0 4,719,910 100.0

Profits After Tax



Off-shore banking units 595,333 9.4 403,419 13.1 580,511 8.4 403,419 12.2

6,365,312 100.0 3,084,006 100.0 6,913,196 100.0 3,316,923 100.0


CAPITAL ADEQUACY

In order to support the business growth and to meet regulatory capital requirement, the Bank maintains a strong capital base, well above the norm set by the Central Bank of Sri Lanka. This has ensured the Bank's ability to withstand the associated risks of its business. The Bank measures the Capital Adequacy Ratio (CAR), based on the relationship between risk-weighted assets of credit, market and operational aspects of the banking business as against the regulatory capital, as per the Basel II guidelines issued by the Central Bank of Sri Lanka.

The Basel Committee on Banking Supervision published a framework for the International Convergence of Capital Measurement and Capital Standards (commonly referred to as Basel II), which replaced the original Basel I Accord published in 1988. Basel II structured three pillars,

which are outlined below:

Pillar 1The minimum amount of regulatory capital that Bank must hold against the risk they assume.

Pillar 2Key principles for the supervisory review of a bank’s risk management framework and its capital adequacy. It sets out specific oversight responsibilities for the Board and Senior Management, reinforcing principles of internal control and other corporate governance practices.

Pillar 3Bolster market discipline through enhanced disclosure by banks.

There are two Tiers of Capital which required banks to maintain two CARs, named Tier I CAR (Core capital ratio) and Tier I plus Tier II CAR (Total capital ratio). All commercial banks are required to maintain minimum of 5% of Tier I CAR and minimum of 10% of Tier I plus Tier II CAR.

TIER I AND TIER II CAPITAL OF THE BANK

Capital is the core measure of a bank's financial strength from the regulators‘ point of view.

Tier I capital as at 31 December 2010 of the Bank was Rs. 25,334 million (2009 - Rs. 23,192 million) and for the Group was Rs. 30,172 million (2009 - Rs. 26,201 million). Tier II capital as at 31 December 2010 of the Bank was Rs. 8,444 million (2009 - Rs. 6,090 million) and for the Group was Rs. 10,206 million (2009 - Rs. 6,809 million).

This is the best means to preserve the integrity of capital in banks with subsidiaries by

eliminating double gearing.

CREDIT RISK - THE STANDARDISED APPROACH

As per the regulatory requirements, the credit risk is measured using the standardised approach. This method relies on credit ratings of borrowers assigned by ‘External Credit Assessment Institutions’ (ECAIs) to compute banks’ regulatory capital for credit risk. The

applicable risk weights vary from 0% to 150%.


CAPITAL ADEQUACY

CAPITAL ADEQUACY COMPUTATION

Bank Group2010 2009 2010 2009

Risk-weighted

factor

On-BalanceSheet assets

& credit equivalent

of Off-BalanceSheet assets

Risk-weighted

assets

On-Balance Sheet assets

& credit equivalent

of Off-Balance

Sheet assets

Risk-weighted

assets

On-BalanceSheet assets

& credit equivalent

of Off-BalanceSheet assets

Risk-weighted

assets

On-Balance Sheet assets

& credit equivalent

of Off-Balance

Sheet assets

Risk-weighted

assetsRs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Assets

Claims on Government of Sri Lanka and Central Bank of Sri Lanka 0 305,283 – 289,517 – 306,705 – 290,523 –

Claims on foreign sovereigns and their Central Banks 0 - 150 7,448 6,897 5,433 4,665 7,448 6,897 5,433 4,665

Claims on Public Sector Entities (PSEs) 20 - 150 101 101 1,562 1,562 101 101 1,562 1,562

Claims on banks 20 - 150 57,536 12,938 59,232 21,638 62,630 18,031 59,252 21,658

Claims on financial institutions 20 - 150 1,585 1,267 1,666 1,407 1,585 1,267 1,666 1,407

Claims on corporates 20 - 150 73,937 73,506 65,808 65,136 83,537 83,106 72,566 71,893

Retail claims 75 - 100 58,672 48,967 27,802 23,602 58,672 48,967 27,802 23,602

Claims secured by residential property 50 - 100 21,024 14,536 15,853 11,119 21,024 14,536 15,853 11,119

Non-Performing Assets (NPAs) 50 - 150 5,447 6,477 7,500 9,266 5,447 6,477 7,500 9,266

Cash items 0 - 20 13,045 857 13,423 1,084 12,696 857 13,432 1,084

Exposures collateralised by cash, gold & Government Securities 0 226,901 – 130,846 – 226,901 – 130,846 –

Property, plant & equipment 100 5,622 5,622 5,724 5,724 7,497 7,497 7,188 7,188

Other assets 100 27,116 27,116 23,175 23,175 28,131 28,131 24,545 24,545

Total exposure 803,717 198,284 647,541 168,378 822,374 215,867 658,168 177,989

Bank Group2010 2009 2010 2009

Credit conversion

factor Assets Credit

equivalent AssetsCredit



equivalent % Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Off Balance Sheet Exposures

Direct credit substitutes 100 23,438 23,438 14,449 14,449 23,438 23,438 14,449 14,449

Transaction-related contingencies 50 129,686 64,843 184,505 92,253 129,686 64,843 184,505 92,253

Short-term self-liquidating trade-related contingencies 20 11,669 2,334 9,053 1,811 11,669 2,334 9,053 1,811

Other Commitments with an Original maturity of up to one year or which can be unconditionally cancelled at any time 0 23,305 – 15,674 – 23,305 – 15,674 –

Foreign exchange contracts 0 - 5 46,722 934 27,929 559 46,722 934 27,929 559

Total off-Balance Sheet exposure 234,820 91,549 251,610 109,072 234,820 91,549 251,610 109,072

The risk-weighted assets in credit risk increased by Rs. 30 billion or 18% compared to 2009, largely driven by increase in exposures to corporate and retail

claims. During the year, lending to corporate increased by Rs. 8 billion to Rs. 74 billion whereas retail lending increased by Rs. 31 billion to Rs. 59 billion.


MARKET RISK - THE STANDARDISED MEASUREMENT APPROACH

Market risk is the risk of losses in on-Balance Sheet and off-Balance Sheet positions arising from undesirable

market movements. This risk arises from adverse movements in the market prices of interest rate instruments,

equities, currencies and gold position.

Bank Group2010 2009 2010 2009

Rs. '000 Rs. '000 Rs. '000 Rs. '000

CAPITAL CHARGE FOR MARKET RISK

Item

Capital charge for interest rate risk 692,669 511,243 692,669 511,243

Capital charge for equity 582,919 305,667 582,919 305,667

Capital charge for foreign exchange & gold 2,294 5,932 2,294 5,932

Total capital charge for market risk 1,277,882 822,842 1,277,882 822,842

Total risk-weighted assets for market risk 12,778,820 8,228,420 12,778,820 8,228,420

Market risk increased by Rs. 2.5 billion or 55% to Rs. 12.8 billion during the year 2010, in line with increased

trading activities, specially the equity investment. According to the capital charge for market risk increased by

Rs. 455 million.

OPERATIONAL RISK - THE BASIC INDICATOR APPROACH

Operational risk is defined as the losses resulting from inadequate or failed internal processes, people, systems

or any other internal or external events. Under basic indicator approach, the Bank maintains capital for

operational risk at 15% on the average positive income of the three immediately preceding years.

Bank Group2010 2009 2010 2009

Year Rs. '000 Rs. '000 Rs. '000 Rs. '000

Capital charge for operational risk

Gross income

2007 – 17,693,645 – 18,859,716

2008 21,383,027 21,383,027 22,526,924 22,526,924

2009 21,201,193 21,201,193 22,451,040 22,451,040

2010 27,216,664 – 29,175,890 –

Total income 69,800,884 60,277,865 74,153,854 63,837,680

Average gross income 23,266,961 20,092,622 24,717,951 21,279,227

Total capital charge for operational risk - (15%) 3,490,044 3,013,893 3,707,693 3,191,884

Total risk-weighted assets for operational risk 34,900,442 30,138,933 37,076,927 31,918,840

Operational risk increased by Rs. 4.8 billion or 16% to Rs. 34.9 billion during the year, due to the change in gross

income level over a rolling three years‘ time horizon, the growth reflects the strong performance over previous year.

CAPITAL ADEQUACY



Rs. million Rs. million Rs. million Rs. million

COMPUTATION OF CAPITAL

TIER I: Core Capital

Paid-up ordinary shares 5,000 5,000 5,000 5,000

Permanent reserve fund 2,778 2,650 2,778 2,650

Published retained profits 18,713 15,820 20,393 16,901

General and other reserves 1,516 1,304 1,847 1,563

Minority interest (consistent with the above capital constituents) – – 1,065 951

Less:

Other intangible assets (164) (111) (164) (111)

Advances granted to employees of the Bank for the purchase of shares of the Bank (ESOP) – – – –

50% of the investments in the capital of other banks and financial institutions (2,509) (1,471) (747) (753)

Total Eligible Core Capital (TIER I Capital) 25,334 23,192 30,172 26,201

TIER II: Supplementary Capital

Revaluation reserves (as approved by the Central Bank of Sri Lanka) 63 63 63 63

General provisions 2,396 1,914 2,396 1,914

Approved subordinated term debt 8,494 5,584 8,494 5,584

Less:

50% of the investments in the capital of other banks and financial institutions (2,509) (1,471) (747) (752)

Total Eligible Supplementary Capital (TIER II Capital) 8,444 6,090 10,206 6,809

Total Capital Base 33,778 29,282 40,378 33,010

COMPUTATION OF RATIOS

Total Risk-Weighted Assets

Total risk-weighted assets for credit risk 198,284 168,378 215,867 177,989

Total risk-weighted assets for market risk 12,779 8,228 12,779 8,228

Total risk-weighted assets for operational risk 34,900 30,139 37,077 31,920

Sub Total 245,963 206,745 265,723 218,137

Minimum Capital Charge

Minimum capital charge for credit risk 19,828 16,837 21,587 17,799

Minimum capital charge for market risk 1,278 823 1,278 823

Minimum capital charge for operational risk 3,490 3,014 3,708 3,192

Sub Total 24,596 20,674 26,573 21,814

Total eligible core capital (TIER 1 Capital) 25,334 23,192 30,172 26,201

Total eligible supplementary capital (TIER II Capital) 8,444 6,090 10,206 6,809

Total Capital Base 33,778 29,282 40,378 33,010

Core Capital Ratio (Minimum Requirement 5%)

Total eligible core capital (TIER I Capital) 25,334 23,192 30,172 26,201

Total risk-weighted assets 245,963 206,745 265,723 218,137

Core capital ratio 10.30% 11.22% 11.35% 12.01%

Total Capital Ratio (Minimum Requirement 10%)

Total capital base 33,778 29,282 40,378 33,010

Total risk-weighted assets 245,963 206,745 265,723 218,137

Capital Adequacy Ratio 13.73% 14.16% 15.20% 15.13%

CAPITAL ADEQUACY


The Bank has issued the following debt securities which are listed on the Colombo Stock Exchange (CSE).

Unsecured, subordinated, redeemable debentures with a tenure of 5 years (par value Rs. 100/-) Type Interest payable frequency Interest rate (per annum)

November 2008/2013 series A Annually 19%

B Semi annually 6 months TB rate (Gross) plus 75 basis points

C At maturity Zero coupon, redeemable at Rs. 225/- each

June 2010/2015 series A Annually 11.5%

B Semi annually 6 months TB rate(Gross) plus 75 basis points

COMPLIANCE TO THE LISTING RULES ON CONTENTS OF ANNUAL REPORT, WHICH WERE APPLICABLE TO THE BANK FOR THE YEARENDED 31 DECEMBER 2010 ENFORCED BY THE COLOMBO STOCK EXCHANGE, ARE SUMMARISED BELOW:

Rule No. Requirement Period Date submitted

7.4 a (i) The interim Financial Statements prepared on quarterly basis,

approved by the Board of Directors to be submitted to CSE within

45 days from respective quarter ends for the first three quarters

and within two months at the end of fourth quarter

Quarter 1 ended 31 March 2010 14/05/2010

Quarter 2 ended 30 June 2010 12/08/2010

Quarter 3 ended 30 September 2010 09/11/2010

Quarter 4 ended 31 December 2010 28/02/2011

The quarterly Financial Statements are published in Sinhala, Tamil and English newspapers for public information.

Rule No. Requirement Compliance

7.4 b (i) Comply with SLAS 35 and disclose Group and Bank separately

7.4 b (ii) Disclose the additional notes and ratios as per listing rules

7.4 b (iii) Be signed by two Directors

7.4 b (iv) State whether the Financial Statements are audited or not

7.5 a Annual Report to be submitted to CSE within five months from the closure of financial year

The audited Financial Statements for the year ended 31 December 2010 was submitted on 24 March 2011. Annual Report for the year 2010 will be submitted before the deadline

The Bank also complied with the above requirements in 2009.

INVESTOR INFORMATION



Rule No. Disclosure requirement Reference/comments Page No.

7.6 (i) Names of persons who during the financial year were Directors of the entity

Annual Report of the Board of Directors on the State of Affairs of the Bank of Ceylon 139

7.6 (ii) Principal activities of the entity and its Subsidiaries during the year and any changes therein

Annual Report of the Board of Directors on the State of Affairs of the Bank of Ceylon 137

Significant Accounting Policies 156

Subsidiaries & Associates 256

7.6 (iii) The names and the number of shares held by the 20 largest holders of voting and non-voting shares and the percentage of such shares held

The Government of Sri Lanka is the sole shareholder of the Bank of Ceylon

7.6 (iv) The public holding percentage Not applicable

7.6 (v) A statement of each Directors’ holding and Chief Executive Officer’s holding in shares of the entity at the beginning and end of each financial year

Not applicable

7.6 (vi) Information pertaining to material foreseeable risk factors of the entity

Risk Management & Compliance87

7.6 (vii) Details of material issues pertaining to employees and industrial relations of the entity

No material issues occurred during the year under review

–

7.6 (viii) Extents, locations, valuations and the number of buildings of the entity’s land holdings and investment properties

Note No. 29 to the Financial Statements on property, plant and equipment

203

7.6 (ix) Number of shares representing the entity’s stated capital Note No. 39 to the Financial Statements on stated capital

220

7.6 (x) A distribution schedule of the number of holders in each class of equity securities and percentage of their total holdings

Investor Information 249

7.6 (xi) Ratios and market price information: 1. Dividend per share, net asset value per share, interest rate

of comparable government securities, debt/equity ratio, interest cover and liquid asset ratio

Investor InformationNote No. 16 to the Financial Statements on earnings per share and dividends per share

247,253

175

2. Market information on listed debentures Investor InformationNote No. 38 to the Financial Statements on debentures

249

215

3. Any changes in credit rating Investor Information 251

7.6 (xii) Significant changes in the entity’s or its subsidiaries fixed assets and the market value of the land, if the value differs substantially from the book value

Note No. 29 to the Financial Statements on property, plant & equipment 202

7.6 (xiii) During the year the entity has raised funds either through a public issue, rights issue and private placement

Note No. 38 to the Financial Statements on debentures 215

7.6 (xiv) Information in respect of each employee share ownership or stock option scheme

Not applicable

7.6 (xv) Disclosures pertaining to Corporate Governance practices in terms of Rules 7.10.3, 7.10.5.c and 7.10.6.c of Section 7 of the Rules

Exempted under section 7.10 of listing rules, since the Bank complies with Directions laid down is the Banking Act Direction No. 11 of 2007 on Corporate Governance

7.6 (xvi) Related party transactions exceeding 10% of the equity or 5% of the total assets of the entity as per Audited Financial Statements, whichever is lower

Investor Information 254


INCOME STATEMENT IN US$


US$ ’000 US$ ’000 US$ ’000 US$ ’000

Income 568,250 553,981 599,676 577,262

Interest income 456,063 463,330 475,874 482,555

Interest expense (279,854) (334,048) (287,154) (344,724)

Net interest income 176,209 129,282 188,720 137,831

Fee and commission income 53,936 37,146 58,183 38,005

Fee and commission expenses (4,191) (4,752) (4,986) (4,805)

Net fee and commission income 49,745 32,394 53,197 33,200

Foreign exchange profit 3,665 13,678 3,753 13,678

Dividend income 4,206 3,037 2,313 1,313

Net gains from investment securities 27,853 17,120 31,463 17,567

Other operating income 10,259 6,575 13,674 9,854

45,983 40,410 51,203 42,412

Operating income 271,937 202,086 293,120 213,443

Operating expenses

Personnel costs (72,141) (70,776) (78,308) (74,832)

Staff retirement benefits (20,323) (21,035) (20,619) (21,190)

Premises, equipment and establishment expenses (25,633) (23,377) (24,680) (21,747)

Other operating expenses (26,082) (21,392) (32,047) (25,792)

(144,179) (136,580) (155,654) (143,561)

Operating profit before provisions 127,758 65,506 137,466 69,882

Provision for loan losses (13,989) (15,728) (15,481) (16,542)

Recovery of non-performing advances 12,268 13,095 12,507 13,148

Provision for fall in value of investments and dealing securities – – (62) 428

Operating profit before VAT 126,037 62,873 134,430 66,916

Value added tax on financial services (35,884) (26,143) (37,012) (26,855)

Operating profit 90,153 36,730 97,418 40,061

Share of profit of Associate Companies before tax – – 1,909 1,141

Profit before taxation 90,153 36,730 99,327 41,202

Provision for taxation (33,068) (9,809) (37,328) (12,247)

Profit after taxation 57,085 26,921 61,999 28,955

Attributable to:

Equity holder of the parent 57,085 26,921 60,628 28,806

Minority interest – – 1,371 149

Profit for the year 57,085 26,921 61,999 28,955

Basic earnings per share (US$) 11.42 5.38 12.13 5.76

Dividend per share (US$) 5.55 2.35 5.55 2.35

Exchange rate of 1 US$ was Rs. 111.5050 as at 31 December 2010. (Rs. 114.5550 as at 31 December 2009)

The Income Statement given on this page does not form part of the Audited Financial Statements and it is solely for the

convenience of the shareholders, investors, bankers and other interested parties of the Financial Statements of our Bank.



BALANCE SHEET IN US$


US$ ’000 US$ ’000 US$ ’000 US$ ’000

ASSETSCash and short term funds 126,486 117,925 123,356 117,998

Balances with Central Banks 232,227 141,971 232,227 141,971

Treasury bills, bonds and other eligible bills 406,968 250,844 415,665 259,162

Securities purchased under re-sale agreements 366,262 57,746 366,262 58,207

Dealing securities 28,988 15,956 34,128 18,658

Placement with and loans to other banks 382,761 400,393 428,442 400,568

Treasury bonds maturing after one year 460,040 409,502 464,098 409,502

Loans & advances to customers - Bills of exchange 138,074 133,162 143,631 137,060

- Loans and advances 3,166,655 2,143,968 3,186,094 2,157,931

- Lease rentals receivable - within one year 16,483 16,767 40,903 41,817

- Lease rentals receivable - one to five years 21,415 19,972 60,479 44,576

- Lease rentals receivable - after five years 18 2 20 3

3,342,645 2,313,871 3,431,127 2,381,387

Government of Sri Lanka Restructuring Bonds 76,651 74,610 76,651 74,610

Investment securities 723,228 662,081 727,486 667,393

Investment properties – – 3,470 3,420

Investments in Associate Companies 7,575 7,373 11,520 9,463

Investments in Subsidiary Companies 47,344 27,863 – –

Other assets 158,795 167,469 164,241 172,621

Property, plant & equipment 49,725 49,415 66,098 61,735

Leasehold land 695 552 1,076 935

Intangible assets 1,469 967 1,528 1,041

Total assets 6,411,859 4,698,538 6,547,375 4,778,671

FINANCED BY:LIABILITIESDeposits from customers 4,701,428 3,566,911 4,747,040 3,591,808

Borrowed fund 470,339 288,930 515,062 312,227

Securities sold under re-purchase agreements 480,001 298,579 475,035 287,792

Insurance provision - life – – 600 361

Insurance provision - non-life – – 2,267 1,585

Tax payable 19,728 1,657 21,726 2,511

Deferred tax liability 4,104 3,574 4,390 3,842

Other liabilities 136,840 164,018 147,238 171,339

Debentures 347,127 157,519 353,657 166,849

Total liabilities 6,159,566 4,481,188 6,267,015 4,538,314

SHAREHOLDERS' EQUITYStated capital 44,841 43,647 44,841 43,647

Permanent reserve fund 24,909 23,133 24,909 23,133

Retained profits 167,820 138,096 182,889 149,409

Reserves 14,722 12,474 18,166 15,868

Total equity attributable to the parent 252,292 217,350 270,805 232,057

Minority interest 9,555 8,300

Total equity 252,292 217,350 280,360 240,357

Total shareholders' equity and liabilities 6,411,859 4,698,538 6,547,375 4,778,671

Commitments and contingencies 2,001,389 2,149,576 2,017,328 2,150,200

Exchange rate of 1 US$ was Rs. 111.5050 as at 31 December 2010. (Rs. 114.5550 as at 31 December 2009)

The Income Statement given on this page does not form part of the Audited Financial Statements and it is solely for the

convenience of the shareholders, investors, bankers and other interested parties of the Financial Statements of our Bank.



SUMMARY OF THE INCOME STATEMENT

2010 20091st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total

For the quarter ended 31 Mar. 30 Jun. 30 Sep. 31 Dec. 31 Dec. 31 Mar. 30 Jun. 30 Sep. 31 Dec. 31 Dec. Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Bank

Net interest income 3,915 4,624 5,041 6,068 19,648 3,405 3,750 3,204 4,451 14,810

Non-interest income 2,356 3,632 3,184 3,336 12,508 2,811 2,877 2,291 2,405 10,384

Less: Non-interest expenses 3,905 4,211 4,064 4,364 16,544 3,539 3,919 4,099 4,634 16,191

Provision for bad & doubtful debts 553 606 441 (41) 1,559 666 717 378 40 1,801

Profit from operations before taxes 1,813 3,439 3,720 5,081 14,053 2,011 1,991 1,018 2,182 7,202

Less: Value added tax on financial services 599 1,062 1,086 1,254 4,001 581 714 707 992 2,994

Profit before taxation 1,214 2,377 2,634 3,827 10,052 1,430 1,277 311 1,190 4,208

Less: Income tax expenses 457 937 698 1,595 3,687 450 464 108 102 1,124

Profit after taxation 757 1,440 1,936 2,232 6,365 980 813 203 1,088 3,084

Quarterly profit as a % of the profit after tax 12 23 30 35 100 32 26 7 35 100

Cumulative profit as a % of the profit after tax 12 35 65 100 – 32 58 65 100 –

Group


Non-interest income 2,404 3,882 3,652 3,652 13,590 2,807 2,914 2,401 2,597 10,719

Less: Non-interest expenses 4,099 4,498 4,432 4,890 17,919 3,676 4,018 4,207 5,046 16,947

Provision for bad & doubtful debts 575 650 467 34 1,726 701 772 418 4 1,895

Profit from operations before taxes 1,953 3,674 4,161 5,200 14,988 2,047 2,081 1,219 2,319 7,666

Less: Value added tax on financial services 617 1,090 1,126 1,293 4,126 587 723 720 1,046 3,076

Profit from operations before corporate tax 1,336 2,584 3,035 3,907 10,862 1,460 1,358 499 1,273 4,590

Add: Share of profit of Associate Companies 74 69 (6) 76 213 17 36 (61) 139 131

Profit before taxation 1,410 2,653 3,029 3,983 11,075 1,477 1,394 438 1,412 4,721

Less: Income tax expense 555 1,053 828 1,726 4,162 518 523 179 184 1,404

Profit after taxation 855 1,600 2,201 2,257 6,913 95 871 259 1,228 3,317

Quarterly profit as a % of the profit after tax 12 23 32 33 100 29 26 8 37 100

Cumulative profit as a % of the profit after tax 12 35 67 100 – 29 55 63 100 –

INVESTOR INFORMATION - QUARTERLY FINANCIAL PERFORMANCE


INVESTOR INFORMATION - QUARTERLY FINANCIAL PERFORMANCE

SUMMARY OF THE BALANCE SHEET

2010 2009

As at As at As at As at As at As at As at As atAs at 31 Mar. 30 Jun. 30 Sep. 31 Dec. 31 Mar. 30 Jun. 30 Sep. 31 Dec.

Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

BankNet loans & advances 292,342 330,582 318,212 372,722 274,273 260,844 264,809 265,065Investments 185,417 171,508 208,719 236,063 149,124 155,920 164,987 172,517Property, plant & equipment 5,892 5,682 5,991 5,622 5,305 5,630 6,011 5,724Other assets 62,444 79,253 88,718 100,547 64,591 71,435 98,303 94,935

546,095 587,025 621,640 714,954 493,293 493,829 534,110 538,241

Deposits 406,515 430,690 452,587 524,233 332,313 359,023 399,245 408,607Borrowings 97,020 113,764 124,337 144,674 118,203 91,936 89,667 85,347Other liabilities 19,080 17,651 18,611 17,915 18,868 18,431 21,379 19,388Shareholders’ funds 23,480 24,920 26,105 28,132 23,909 24,439 23,819 24,899

546,095 587,025 621,640 714,954 493,293 493,829 534,110 538,241

GroupNet loans & advances 300,257 339,037 327,588 382,588 280,786 267,998 272,218 272,800Investments 182,660 168,842 205,887 233,693 147,489 154,333 163,673 171,488Property, plant & equipment 7,336 7,569 7,885 7,490 6,745 7,056 6,811 7,179Other assets 63,579 91,321 94,179 106,294 66,007 72,904 100,473 95,954

553,832 606,769 635,539 730,065 501,027 502,291 543,175 547,421

Deposits 407,727 434,889 456,020 529,319 334,638 361,621 402,154 411,460Borrowings 99,422 124,855 130,032 149,835 120,075 94,410 92,293 87,849Other liabilities 20,472 19,232 20,234 19,650 19,990 19,371 22,404 20,578Shareholders’ funds 26,211 27,793 29,253 31,261 26,324 26,889 26,324 27,534

553,832 606,769 635,539 730,065 501,027 502,291 543,175 547,421



SUMMARY OF FINANCIAL STATISTICS (QUARTERLY)

2010 2009

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

31 Mar. 30 Jun. 30 Sep. 31 Dec. 31 Mar. 30 Jun. 30 Sep. 31 Dec.

BankProfitability

Interest margin (%) 2.89 3.04 3.12 3.14 2.79 2.93 2.71 2.90

Return on assets (before tax) (%) 0.89 1.28 1.43 1.60 1.17 1.11 0.79 0.82

Return on equity (after tax) (%) 12.48 17.62 21.59 24.01 16.67 15.08 11.34 12.85

Investor Information

Debt equity (%) 100.37 114.07 175.37 158.61 95.40 92.52 94.28 92.12

Interest cover (times) 1.59 1.87 1.94 2.10 1.38 1.40 1.33 1.35

Earnings per share (Rs.) 603.94 878.03 1,101.38 1,273.06 783.59 717.10 532.17 616.80

Net assets per share (Rs.) 4,696.06 4,984.09 5,221.11 5,626.37 4,781.71 4,887.89 4,763.83 4,979.72

Capital Adequacy Ratios

Tier 1 (%) 10.95 10.20 9.59 10.30 10.75 10.78 10.66 11.22

Total (Tier 1+ Tier 2) (%) 13.83 14.92 14.27 13.73 15.31 15.30 14.97 14.16

Assets Quality

Net non-performing asset ratio (%) 2.78 2.79 2.39 1.42 3.00 3.40 3.46 2.79

(Net of interest in suspense & provision)

Gross non-performing asset ratio (%) 5.39 5.65 4.73 3.30 5.72 6.44 6.53 5.65

(Net of interest in suspense)

Regulatory Liquidity

Statutory liquid asset ratios

Domestic banking unit (%) 24.55 21.13 25.87 28.65 22.55 26.79 28.39 21.13

Off-shore banking unit (%) 41.40 55.46 44.52 74.17 52.10 57.84 69.28 55.46

Group

Profitability

Interest margin (%) 3.07 3.18 3.28 3.29 2.91 3.05 2.84 3.04

Return on assets (before tax) (%) 1.02 1.41 1.60 1.73 1.19 1.15 0.85 0.91

Return on equity (after tax) (%) 13.20 18.46 21.91 24.35 14.78 13.96 11.01 12.50

Investor Information

Earnings per share (Rs.) 664.69 964.18 1,215.09 1,352.06 766.12 732.93 557.09 659.97

Net assets per share (Rs.) 5,049.13 5,365.27 5,646.36 6,039.20 5,135.31 5,253.40 5,141.93 5,316.66

Capital Adequacy Ratios

Tier 1 (%) 11.88 10.93 10.58 11.35 12.11 11.69 11.30 12.01

Total (Tier 1+ Tier 2) (%) 13.83 15.83 15.57 15.20 16.86 16.26 15.67 15.13

Assets Quality

Net non-performing asset ratio (%) 2.97 2.61 2.56 1.55 3.12 2.77 2.86 2.75

(Net of interest in suspense & provision)

Gross non-performing asset ratio (%) 5.63 4.96 4.95 3.49 5.91 6.71 6.80 5.75

(Net of interest in suspense)



ANALYSIS OF DEPOSITS

As at 31 December 2006 2007 2008 2009 2010Rs. million Rs. million Rs. million Rs. million Rs. million

Local Currency Deposits

Demand 47,242 44,933 44,304 48,612 65,439

Savings 78,118 87,379 91,324 110,371 135,235

Time 44,690 69,475 83,085 120,894 155,227

Certificates of deposit 173 59 30 29 29

Other 2,160 740 662 969 1,886

172,383 202,586 219,405 280,875 357,816

Foreign Currency Deposits

Demand 3,615 4,387 3,604 6,416 24,087

Savings 36,887 39,277 37,993 51,817 54,866

Time 48,181 60,413 51,427 68,799 86,281

Other 1,610 2,193 3,641 700 1,183

90,293 106,270 96,665 127,732 166,417

Total Deposits 262,676 308,856 316,070 408,607 524,233

ANALYSIS OF LOANS AND ADVANCES

As at 31 December 2006 2007 2008 2009 2010Rs. million Rs. million Rs. million Rs. million Rs. million

Bills of exchange 4,528 11,430 16,908 16,099 15,776

Loans and advances 235,509 281,872 266,423 262,716 370,267

Lease rentals receivable 2,003 5,918 6,155 4,716 4,594

242,040 299,220 289,486 283,531 390,637

Less: Interest in suspense 8,422 7,859 8,607 8,509 8,327

Total gross loans and advances 233,618 291,361 280,879 275,022 382,310


SHARE INFORMATION

As at 31 December 2010 2009

Shareholder No. of Ordinary Shares Holding % No. of Ordinary Shares Holding %

Government of Sri Lanka 5,000,000 100 5,000,000 100

INFORMATION ON DEBENTURES ISSUED BY THE BANK

Coupon rateEffective

annual rateInterestrate of

comparableGovernment

security


Description NoteInterest payablefrequency Issue date

Maturitydate 2010 2009 2010 2009 2010 2009

% % % % % Rs. ’000 Rs. ’000

A - Sri Lanka Rupee debentures

Fixed interest rate

Unsecured, subordinated, redeemable debentures (a) Annually 24.11.2008 24.11.2013 19.00 19.00 19.00 19.00 8.15 345,190 345,190

Unsecured, subordinated, redeemable debentures (a) At maturity 24.11.2008 24.11.2013 – – 17.61 17.61 8.15 322,775 273,927

Unsecured, subordinated, redeemable debentures (b) Annually 28.06.2010 28.06.2015 11.50 – 11.50 – 9.15 1,074,670 –

Unsecured, redeemable debentures Annually 01.07.2010 01.07.2015 13.20 – 13.20 – 9.15 1,000,000 –



6,171,448 619,117


Unsecured, subordinated, redeemable debentures (b)/(c) Semi annually 28.06.2010 28.06.2015 8.95 – 11.54 – 9.15 3,925,330 –


Unsecured, subordinated, redeemable debentures (a)/(c) Semi annually 24.11.2008 24.11.2013 8.95 10.00 10.46 17.04 8.15 3,699,390 3,699,390


Unsecured, subordinated, redeemable debentures (c) Semi annually 31.12.2003 31.12.2011 10.43 10.15 10.56 16.69 7.55 250,000 250,000

[6 months TB (Gross) rate plus 150 basis points]

Unsecured, subordinated, redeemable debentures (d) Semi annually 03.11.2005 03.11.2010 – 11.68 – 20.24 – – 1,000,000


Unsecured, subordinated, redeemable debentures (d) Semi annually 27.10.2006 27.10.2011 8.94 12.11 11.88 20.16 7.45 1,000,000 1,000,000


Unsecured, subordinated, redeemable debentures (d) Annually 15.08.2008 15.08.2013 10.49 14.31 12.87 18.14 8.10 300,000 300,000


Unsecured, redeemable debentures (d) Annually 17.11.2006 17.11.2011 8.19 11.36 10.98 19.41 7.46 1,200,000 1,200,000

[12 months TB (Gross) rate]









Coupon rateEffective

annual rateInterestrate of

comparableGovernment

security


Description NoteInterest payablefrequency Issue date

Maturitydate 2010 2009 2010 2009 2010 2009

% % % % % Rs. ’000 Rs. ’000



Unsecured, redeemable debentures (d) Annually 01.11.2007 01.11.2012 8.69 11.48 11.01 19.99 7.65 500,000 500,000


Unsecured, redeemable debentures (d) Annually 01.04.2008 01.04.2013 11.02 18.80 12.94 19.54 8.00 500,000 500,000




Unsecured, redeemable debentures (d) Annually 03.08.2010 03.08.2015 11.50 – 11.50 – 9.20 5,200,000 –






30,124,720 14,949,390

B - United States Dollar debentures

Fixed interest rate

Unsecured, subordinated, redeemable debentures Semi annually 10.10.2008 10.10.2013 5.50 5.50 5.50 5.50 4.43 26,761 27,493


Unsecured, subordinated, redeemable debentures (e) Semi annually 10.10.2008 10.10.2013 3.46 4.69 3.49 4.74 4.43 2,383,419 2,448,613

[6 months LIBOR plus 300 basis points]

2,410,180 2,476,106

Total value of Debentures 38,706,348 18,044,613

Notes(a) Debentures that are listed in the Colombo Stock Exchange were issued on 24 November 2008. Some of these have been traded in the Colombo Stock Exchange

during the year ended 31 December 2010.

(b) Debentures that are listed in the Colombo Stock Exchange were issued on 28 June 2010.

(c) Weighted average 6 months Treasury Bill interest rate before deducting 10% withholding tax at the primary quotations as announced by the Central Bank of Sri Lanka, at the preceding week of the interest resetting date.

(d) Weighted average 12 months Treasury Bill interest rate before deducting 10% withholding tax at the primary quotations as announced by the Central Bank of Sri Lanka, at the preceding week of the interest resetting date.

(e) 6 months London Inter Bank Offered Rate (LIBOR) for US Dollars plus 3% per annum.




INFORMATION ON LISTED DEBENTURES

Market price Rs.Interest yield as at date of

last trade done %Yield to maturity of last trade done %

For the year ended 31 December 2010 2009 2010 2009 2010 2009

BoC Debenture 2008/2013,

Unsecured, subordinated, redeemable, 5 years, fixed rate (19.0%) 17.76 18.18 16.36 18.56

Highest (Rs.) 107.00 101.00

Lowest (Rs.) 107.00 100.00

Last transaction (Rs.) 107.00 101.00

Unsecured, subordinated, redeemable, 5 years, floating rate [06 months TB rate (gross) plus 75 basis points] Not Traded Not Traded Not Traded Not Traded

Highest (Rs.) Not Traded Not Traded

Lowest (Rs.) Not Traded Not Traded

Last transaction (Rs.) Not Traded Not Traded

Unsecured, subordinated, redeemable, 5 years, zero coupon 13.13 Not Traded 15.57 Not Traded

Highest (Rs.) 135.11 Not Traded

Lowest (Rs.) 134.15 Not Traded

Last transaction (Rs.) 134.15 Not Traded

BoC Debenture 2010/2015,

Unsecured, subordinated, redeemable, 5 years, fixed rate (11.5%) Not Traded N/A Not Traded N/A

Highest (Rs.) Not Traded N/A

Lowest (Rs.) Not Traded N/A

Last transaction (Rs.) Not Traded N/A

Unsecured, subordinated, redeemable, 5 years, floating rate [06 months TB rate (gross) plus 75 basis points] Not Traded N/A Not Traded N/A

Highest (Rs.) Not Traded N/A

Lowest (Rs.) Not Traded N/A

Last transaction (Rs.) Not Traded N/A

CREDIT RATINGS

Fitch Ratings Lanka Limited has revised the Bank’s outlook to ‘Positive’ from ‘Stable’ and affirmed its national long-term rating at ‘AA(lka)’.

Further, the debt instrument issued by the Bank in 2008 and 2010 were assigned an ‘AA-(lka)’ rating by the same rating agency.


Ten Year Statistical Summary - Bank

For the year ended 31 December 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Operating results

Income 28,410 24,578 22,805 23,957 27,324 35,192 50,159 60,182 63,461 63,363

Interest income 22,887 20,258 17,040 16,609 20,595 26,823 42,286 49,684 53,077 50,853

Interest expense (17,704) (12,794) (8,438) (8,256) (11,231) (15,744) (29,453) (35,989) (38,267) (31,205)


Foreign exchange profit 1,205 737 707 1,781 1,015 2,261 1,178 2,887 1,567 409

Other income 3,270 3,384 4,817 5,310 5,716 6,107 6,695 7,611 8,818 12,101

Other operating expenses (6,892) (7,406) (8,676) (9,127) (10,400) (12,174) (13,105) (14,514) (16,190) (16,544)

Provision for loan losses and fall in value of investments and dealing securities (1,875) (2,941) (3,012) (2,886) (1,659) (1,369) (1,210) (2,375) (1,802) (1,560)

Operating profit before VAT 891 1,238 2,438 3,431 4,036 5,904 6,391 7,304 7,203 14,054

Value added tax on financial services – – (638) (872) (916) (1,767) (1,873) (2,073) (2,995) (4,001)

Profit before taxation 891 1,238 1,800 2,559 3,120 4,137 4,518 5,231 4,208 10,053

Income tax expense (74) (219) (168) (590) (1,225) (1,510) (1,675) (1,670) (1,124) (3,687)

Profit after taxation 817 1,019 1,632 1,969 1,895 2,627 2,843 3,561 3,084 6,365

As at 31 December

Assets

Cash and short term funds 4,122 4,275 4,179 5,584 6,127 7,790 9,244 10,168 13,509 14,104

Balances with Central Banks 8,835 9,198 7,944 12,480 13,933 17,106 17,253 15,629 16,263 25,894

Treasury bills, bonds and other eligible bills 4,313 13,134 13,837 25,502 41,366 45,808 39,205 27,707 35,350 86,219

Dealing securities 797 503 1,411 507 54 1,180 3,184 144 1,828 3,232

Placements with and loans to other banks 10,642 13,494 26,412 27,362 36,851 23,735 19,722 16,403 45,867 42,680

Treasury bonds maturing after one year 3,217 10,955 16,554 15,334 9,882 24,263 27,337 38,834 46,910 51,297

Bills of exchange & loans and advances 143,288 115,255 114,287 131,096 165,668 222,971 278,619 265,256 260,857 368,494

Lease rentals receivable 266 276 406 579 936 1,991 5,877 5,849 4,209 4,228

Government of Sri Lanka Restructuring Bonds 17,883 17,883 17,883 17,883 17,883 8,547 8,547 8,547 8,547 8,547

Investment securities 23,418 16,593 10,227 6,493 2,787 2,380 2,362 69,681 75,845 80,643

Investment properties – 754 1,150 1,150 1,236 1,088 559 – – –

Investment in Subsidiaries and Associates 2,822 2,831 4,008 4,984 4,225 3,711 3,650 3,603 4,037 6,124

Other assets 14,619 19,532 17,746 12,498 12,833 11,928 16,901 17,304 19,184 17,706

Deferred tax assets – – – – 704 236 60 – – –

Property, plant & equipment 3,451 3,192 4,344 4,947 4,769 5,145 4,982 5,018 5,724 5,622

Intangible assets 467 420 399 233 111 164

Total assets 237,673 227,875 240,388 266,399 319,721 378,299 437,901 484,376 538,241 715,056



For the year ended 31 December 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million Rs. million

Liabilities

Deposits from customers 147,389 170,544 187,256 206,184 232,822 262,990 308,856 316,070 408,607 524,233

Borrowed funds 54,285 21,510 17,908 28,778 54,686 81,106 84,658 111,100 67,302 105,968

Tax payable 134 402 62 137 76 727 885 1,079 190 2,200

Deferred tax liability – – – – – – – 506 409 458

Other liabilities 12,070 12,356 11,242 9,152 8,436 11,714 13,302 14,531 18,789 15,258

Debentures 12,550 11,225 9,600 6,800 7,350 3,850 9,150 17,988 18,045 38,706

Total liabilities 226,428 216,036 226,068 251,051 303,370 360,387 416,851 461,274 513,342 686,822

Shareholders’ equity

Stated capital 2,600 2,600 2,600 2,600 4,000 4,000 5,000 5,000 5,000 5,000

Permanent reserve fund 1,225 1,430 1,465 1,505 1,915 2,455 2,515 2,585 2,650 2,778

Retained profits 7,033 7,173 8,097 9,034 9,475 10,298 12,161 14,335 15,820 18,712

Reserves 387 636 2,158 2,209 961 1,159 1,374 1,182 1,429 1,642

Total shareholders’ equity 11,245 11,839 14,320 15,348 16,351 17,912 21,050 23,102 24,899 28,132

Total equity and liabilities 237,673 227,875 240,388 266,399 319,721 378,299 437,901 484,376 538,241 714,954

Commitments and contingencies 73,316 62,996 50,087 58,841 80,187 105,502 134,713 164,813 246,245 223,165

Ratios

Return on average assets (%) 0.38 0.53 0.77 1.01 1.06 1.19 1.11 1.13 0.82 1.60

Return on average shareholders’ funds (%) - after tax 7.31 8.83 12.48 13.28 11.96 15.33 14.59 16.13 12.85 24.01

Income growth (%) 24.86 (13.49) (7.21) 5.05 14.05 28.80 42.53 19.98 5.45 (0.16)

Capital adequacy ratio (%)

- Tier I 12.40 11.64 12.11 12.33 12.67 11.90 11.38 11.29 11.22 10.30

- Tier I + Tier II 13.05 12.44 13.11 12.44 13.18 12.30 11.40 15.88 14.16 13.73

Capital funds to liabilities including contingent liabilities (%) 3.75 4.24 5.19 4.95 4.26 3.84 3.82 3.69 3.28 3.09

Liquidity ratio (%) 28.50 34.19 25.34 23.82 26.87 22.19 21.20 24.21 21.13 28.65

Cost to income ratio (%) 73.43 66.21 68.77 61.76 72.63 68.93 67.48 64.24 68.33 53.73

Other information

No. of employees 9,245 9,268 8,927 8,718 8,891 8,363 8,253 7,912 7,538 8,204

No. of branches 296 297 299 300 304 305 307 309 310 309

No. of ATMs 54 79 85 104 104 190 203 251 329 352

No. of advances (in ‘000) 718 796 1,061 1,218 1,285 1,541 1,867 1,839 2,011 2,261

No. of depositors (in ‘000) 4,896 5,089 5,274 5,491 5,782 6,248 6,993 7,494 8,440 9,321

Cash flow from operating activities 6,970 16,396 18,187 1,374 (8,961) (24,200) (13,713) 30,262 100,115 3,084

Cash flow from investing activities 1,946 197 1,238 5,575 (6,315) (8,998) 3,034 (67,091) (20,775) (60,349)

Cash flow from financing activities (8,104) (5,175) (5,901) 7,070 25,309 21,746 8,120 34,433 (45,144) 55,716

Capital expenditure on purchase of property, plant & equipment (377) (322) (519) (911) (927) (912) (514) (627) (1,391) (1,044)



DESCLOSURE IN TERMS OF SECTION 7.6 (XVI) OF THE LISTING RULES OF THE COLOMBO STOCK EXCHANGE ONRELATED PARTY TRANSACTIONS EXCEEDING 10% OF THE EQUITY OR 5% OF THE TOTAL ASSETS OF THE BANK

The Bank did not carry out any transactions exceeding 10% of the equity or 5% of the total assets of the Bank

whichever is lower, with the related parties given in Note No. 47 to the Financial Statements, except for the transactions

engaged with the Government of Sri Lanka.

The Government of Sri Lanka, who holds 100% shareholding in Bank of Ceylon, carries out transactions with the Bank,

in the ordinary course of business and the aggregate monetary value of these transactions exceeded the threshold given

in Section 7.6 (xvi) of the Listing Rules of Colombo Stock Exchange. These transactions include;

1. Overdraft facility granted to the Deputy Secretary to the Treasury.

2. Foreign currency loans granted to the Government of Sri Lanka.

3. Investment in Sri Lanka Development Bonds and Restructuring Bonds issued by the Government of Sri Lanka.

4. Extending of trade finance credit and other related services to facilitate import transactions of the Government of

Sri Lanka.

5. Deposits made by the Government Departments with the Bank.

Most of these transactions are considered as recurrent nature transactions and the outstanding balances as at Balance

Sheet date and the during the year transactions are given in the Note No. 47.4 to the Financial Statements.



GROUP STRUCTURE


43.36%

Bank of Ceylon (UK) Limited

100%


88.12%

Property Development PLC

93.16%

Hotels Colombo (1963) Limited

99.99%

Ceylease Financial Services Limited

55%


100%

BoC Management & Support Services (Private) Limited

100%

BoC Property Development & Management (Private) Limited

100%

BoC Travels (Private) Limited

100%

Merchant Credit of Sri Lanka Limited

85.79%

Merchant Bank of Sri Lanka PLC

72.14%

MBSL Insurance Company Limited

72.14%

Southern Development Financial Company Limited

41.67%

Transnational Lanka Records Solutions (Private) Limited

24.69%


40%

Lanka Securities (Private) Limited

40.92%

29%

42.86%

94.59%

42.86%

14.28%

68.03%

MBSL Savings Bank Limited

49.08%

Associates Subsidiaries

20%

49%

51%

100%

Bank of Ceylon


SUBSIDIARIES & ASSOCIATES

Principal Activities Bank’s Interest Directors Highlights 2010 2009% Rs. million Rs. million

SUBSIDIARY COMPANIESProperty Development PLC Maintain, manage, develop 93.16 Dr. Gamini Wickramasinghe Stated capital 660.0 660.019th Floor,BoC Head Office Building,No. 4, Bank of Ceylon Mawatha,Colombo 01Tel: 011 2544328

and sustain the utility and (Chairman) Total assets 2,256.3 2,122.3 value of Bank of CeylonHead Office Building

Mr. P A LionelMr. B M AmarasekeraDr. M S PereraMr. L N de Silva WijeyeratneMr. S E de Silva

SecretariesMerchant Bank of Sri Lanka PLC

Investment by the Bank 740.1 740.1 Profit before tax 404.0 453.7 Profit after tax 252.9 292.8 EPS (Rs.) 3.8 4.4

Merchant Bank of Sri Lanka PLCBoC Merchant Tower,No. 28, St. Michael’s Road,Colombo 03Tel: 011 4711711, 011 2565636

Leasing and hire purchase,trade finance, corporateadvisory services, fundmanagement, capitalmarket activities,corporate secretarial andlegal services

72.14 Mr. M R Shah(Chairman)Mr. V KanagasabapathyMs. W A NalaniDr. R W T M Ranjith BandaraMr. Lakshman PereraMr. A B L A de SilvaMr. P G RupasingheMr. M S S Paramananda

SecretaryMs. Marina Pillips

Stated capital 1,607.0 1,607.0

Total assets 7,182.6 5,578.9Investment by the Bank 2,122.6 2,122.6

Profit before tax 650.7 254.3

Profit after tax 449.7 201.0

EPS (Rs.) 3.3 2.2

BoC Management & Support Provides management 100Mr. B A C Fernando(Chairman)Mr. K DharmasiriMs. L S L de S Wijeyeratne


Stated capital 1.0 1.0Services (Private) Limited services Total assets 8.0 7.825th Floor,BoC Head Office Building,No. 4, Bank of Ceylon Mawatha,Colombo 01Tel: 011 2446790


BoC Property Development & Renting of office space of 100 Mr. B A C Fernando Stated capital 1,010.0 1,010.0Management (Private) Limited BoC Merchant Tower in (Chairman) Total assets 951.5 905.419th Floor,BoC Head Office Building,No. 4, Bank of Ceylon Mawatha,Colombo 01 Tel: 011 2388229

Colombo 03 and CeybankHouse in Kandy.

Ms. S W S FernandoMr. P J JayasingheMs. S H RanawakaMs. W A Nalani(Alternate Director to Mr. B A C Fernando)


Investment by the Bank 1,010.0 1,010.0 Profit before tax 58.6 54.8 Profit after tax 32.6 31.2 EPS (Rs.) – –

BoC Travels (Private) Limited Engages in travel related 100 Mr. Chandrasiri de Silva Stated capital 2.5 2.51st Floor, services (Chairman) Total assets 116.5 104.7BoC Super Grade Branch Building,Baseline Road,Colombo 08Tel: 011 2688154-8

Mr. B A C FernandoMs. Kumudiniy KulatungaMs. Deepa WanniaratchiMr. M K MuthukumarMr. C WijayatilakeMs. W A Nalani (Alternate Director to Mr. B A C Fernando)


Investment by the Bank 2.5 2.5 Profit before tax 22.1 20.6 Profit after tax 18.2 16.6EPS (Rs.) 72.9 66.2

Hotels Colombo (1963) Limited Provides hotel services 99.99 Mr. Rohan Jayasinghe Stated capital 100.8 0.8No. 2, York Street, (Chairman) Total assets 199.9 140.4Colombo 1Tel: 011 2320391-3

Ms. Nalini AbeywardeneMr. Chandrasiri de SilvaMr. B A C FernandoMr. M K NandasiriMs. W K I KularatneMr. M P R KumaraMr. C D K WalisundaraMr. J C Ratwatte


Investment by the Bank 0.7 0.7 Profit before tax 40.0 (14.6)Profit after tax 37.0 (14.7)EPS (Rs.) 40.7 –



Merchant Credit of Sri Lanka Limited Acceptance of deposits, 85.79 Mr. A B L A de Silva Stated capital 100.0 100.011th Floor, BoC Merchant Tower,No. 28, St. Michael’s Road,Colombo 03Tel: 011 2301500-3

granting lease facilities, (Chairman) Total assets 4,503.1 3,817.3hire purchase, loans andother credit facilities, pawning and real estate developments and related services

Mr. Raju SivaramanMr. H M A B WeerasekaraDr. R W T M Ranjith BandaraMs. Sriyani AnandagodaMr. M R ShahMr. V Kanagasabapathy(Director for a short period)



Ceylease Financial Services Limited Granting finance lease, 55.00 Mr. Raju Sivaraman (Chairman)Mr. W A Asoka RupasingheMs. K A D FernandoMr. S LiyanwalaMr. B PremalalMr. Kishan JayasekaraMr. Chaminda PrabhathMr. M Aslam Omar(Alternate Director toMr. Kishan Jayasekara)

SecretariesVarners International (Private) Limited

Stated capital 200.0 200.0No. 182, Platinum Tower, hire purchase, commercial Total assets 1,534.5 1,449.2Elvitigala Mawatha,Colombo 08Tel: 011 2681850, 011 2358000

loan facilities and real estatedevelopments and sales

Investment by the Bank 110.0 110.0 Profit before tax 18.3 (132.2)Profit after tax 15.7 (106.0)EPS (Rs.) 0.8 –

Ceybank Holiday Homes(Private) Limited

Managing, operatingmaintaining and conducting Pilgrims, Rests, Hotels andGuest Houses in Sri Lanka

100 Dr. Gamini Wickramasinghe (Chairman)Mr. B A C FernandoMr. C SamarasingheMr. D M GunasekaraMr. H M MudiyanseMs. K A D A PemadasaMr. W G AriyaratneMr. K Dharmasiri (AlternateDirector to Mr. B A C Fernando)

SecretaryMs. Janaki Senanayake Siriwardane

Stated capital – –

Total assets 14.6 10.0012th Floor,BoC Head Office Building,No. 4, Bank of Ceylon Mawatha,Colombo 01Tel: 011 2447845

Investment by the Bank – –Profit before tax 2.0 3.7 Profit after tax 1.1 2.8 EPS (Rs.) 16,169.7 40,182.2

MBSL Insurance Company Limited Offers Life and General 72.14 Mr. M R Shah Stated capital 528.5 478.5No. 388, Galle Road, Insurance products (Chairman) Total assets 632.4 449.4Colombo 03.Tel: 011 2574500

Mr. Lakshman PereraMr. P G RupasingheMr. A P G KarunathilakeDr. R W T M Ranjith BandaraMr. P S K L GajanayakeMr. S Senerath


Investment by the Bank – –Profit before tax 10.0 (119.9)Profit after tax 4.5 (119.9)EPS (Rs.) – –

Koladeniya Hydropowr (Private) Limited Hydropower generation 88.12 Dr. Gamini Wickramasinghe Stated capital – –No. 28/7A, Rathupalliya Road,Sarikkamulla,PanaduraTel: 011 2544328

(Chairman) Total assets 4.1 –Dr. M S Perera Mr. S E de SilvaMr. M W V SurangaMr. U J Jayatissa

SecretariesM/S Em En Es (Assignments)(Private) Limited

Investment by the Bank – –Profit before tax (1.2) –Profit after tax (1.2) –EPS (Rs.) – –

Bank of Ceylon (UK) Limited Provides financial services 100 Dr. Gamini Wickramasinghe Stated capital 2,087.2 –No. 1, Devonshire Square, including accepting deposits (Chairman)

Mr. B A C FernandoMr. I G C MadadeniyaMs. S K JayasingheMr. David SwanneyMr. Roy England

SecretaryMs. S K Jayasinghe

Total assets 22,807.1 –London Ec 2M 4WDUnited KingdomTel: 0044 207 3771888

and dealing in investments Investment by the Bank 2,087.2 –Profit before tax (14.8) –Profit after tax (14.8) –EPS (Rs.) – –




ASSOCIATE COMPANIES

Ceybank Asset Management (Private) Limited3rd Floor, BoC Building,York Street,Colombo 01Tel: 011 7602000-2

Management of Unit Trust Funds and other 43.36 Mr. K L Hewage Stated capital 37.6 25.0

private portfolios (Chairman)Mr. M SelvanathanMr. C SathkumaraMr. B A C FernandoMr. D M GunasekaraMr. B Babu RaoMr. M S P R PereraMr. P P J PereraMr. P A Lionel (Alternate Director to Mr. B A C Fernando)

SecretariesCarsons Management Services (Private) Limited

Total assets 246.3 224.2 Investment by the Bank 31.1 31.1 Profit before tax 53.1 19.0 Profit after tax 28.9 10.9 EPS (Rs.) 0.8 0.4

Southern Development FinancialCompany Limited

Granting loan facilities 41.67 Mr. R Gunasekara Stated capital 60.0 60.0

(Chairman) Total assets 37.9 43.1 No. 18, Bandarawatta,Pamburana,MataraTel: 041 2221618

Mr. A SiripalaMr. D K N Piyasoma

SecretariesMSL Galle (Private) Limited

Investment by the Bank 25.0 25.0 Profit before tax (1.1) (1.7)Profit after tax (1.1) (2.2)EPS (Rs.) – –

Lanka Securities (Private) Limited Equity trading,debt trading andplacements

40.92 Mr. Salmaan Taseer Stated capital 279.6 279.6No. 228/2,Galle Road,Colombo 04Tel: 011 4706757

(Chairman) Total assets 705.9 504.5 Mr. M Eshan ul-HaqMr. R SiriwardenaMr. K DharmasiriMr. Farooq Bin HabibMr. K U D Gamage Mr. M R ShahMr. S Muqeel Hasnain(Alternate Director to Mr. M Eshan ul-Haq)Mr. Shahbaz Ali Taseer (Alternate to Mr. Salmaan Taseer)







Purchasing, hiring andacquiring real estateproperties, realestate developments and providing infrastructure facilities to real estate development projects.

40 Mr. S P Tao Stated capital 1,875.0 1,875.0

(Chairman) Total assets 5,555.9 5,635.2 No. 324, Havelock City,Colombo 05Tel: 011 2596793, 011 2502247

Mr. H Z CassimDr. Gamini WickramasingheMr. K B S BandaraMr. W P R P H FonsekaMr. A M de S JayaratneMr. L R de LanerolleMs. M T OngMr. M B Pereira (AlternateDirector to Ms. M T Ong)Ms. B C D Wijayakulasuriya(Alternate Director to Dr. Gamini Wickramasinghe)Mr. T Muthugala(Alternate Director to Mr. W P R P H Fonseka)Mr. E P Ong (Alternate Director to Mr. S P Tao)

SecretaryMs. Jayanga Kumudu Kumari Wegodapola

Investment by the Bank 750.0 750.0 Profit before taxProfit after taxEPS (Rs.)

189.4176.8

0.94

106.6 106.5

0.57

Transnational LankaRecords Solutions (Private) Limited

Real estate - renting outproperties

24.69 Mr. C Samarasinghe Stated capital 81.0 81.0

(Chairman) Total assets 163.9 120.4 No. 160/16,Kirimandala Mawatha,Narahenpita,Colombo 05Tel: 011 2369007, 011 2369001-4

Mr. L R WatawalaMr. M H CassimMr. D K W LiewMs. C K JayaratneMr. S J JebarathnamMr. M S Saleem (AlternateDirector to Mr. D K W Liew)Mr. T H C E de Silva (AlternateDirector to Mr. S J Jebarathnam)

SecretariesPW Corporate Secretarial (Private) Limited


MBSL Savings Bank Limited Provides financial servicesincluding accepting deposits, leasing, hire purchaseand pawning

49.08 Mr. M R Shah(Chairman)Mr. A P G KarunathilakeDr. T SenthilverlMr. B R S T EdirisingheDr. R W T M Ranjith BandaraMr. P G RupasingheMr. M S S ParamanandaDr. S T S de Silva

SecretaryMr. A V C Fernando

Stated capital 728.7 546.2

No. 2, Deal Place,Colombo 03.Tel: 011 2374000

Total assets 2,463.7 2,138.8 Investment by the Bank – –Profit before tax (20.9) 40.3 Profit after tax (20.9) 40.3 EPS (Rs.) – 0.4



CORPORATE OFFICES & OVERSEAS BRANCHES

REGISTERED HEAD OFFICE

No. 4, Bank of Ceylon Mawatha,

Colombo 1, Sri Lanka.

Tel:+94 11 2446790-811 (22 lines)

+94 11 2338741-55 (15 lines)

+94 11 2544340-344 (5 lines)

Telegraphic Address: ’HEADBANK’

Telex: 21331 BOCST CE

SWIFT Code: BCEYLKLX

Website: www.boc.lk

Bank Code - 7010

INTERNATIONAL DIVISION

9th Floor, Head Office Building,



Tel/Fax: +94 11 2445794

Email: [email protected]

Branch Code - 087

CORRESPONDENT BANKING DIVISION




Tel: +94 11 2445791

Fax: +94 11 2445791

Email: [email protected], [email protected]

Branch Code - 087

INWARD REMITTANCES




Tel: +94 11 2445792, 2541933, 5742978

Fax: +94 11 2344845


Branch Code - 185

SWIFT/TELEX CENTRE




Tel: +94 11 2544309

Fax: +94 11 2447171


Branch Code - 087

TREASURY DIVISION




Tel: +94 11 2471905, 2203603

Fax: +94 11 2394583


Branch Code - 760

DEALING ROOM




Tel: +94 11 2445785-7, 2386862

Fax: +94 11 2445788


Branch Code - 760

PRIMARY DEALER UNIT




Tel: +94 11 2448830

Fax: +94 11 2448207


Branch Code - 099

CORPORATE BRANCH

1st, 2nd, 3rd Floors, Head Office Building,



Tel: +94 11 2446814, 2445803, 2345428,

2471613, 2446818-20

Fax: +94 11 2389128, 2446813, 2399562

Telex: 21331


SWIFT Code: BCEYLKLX

Branch Code - 660

PETTAH BRANCH

No. 21/63, Gas Work Street,


Tel: +94 11 2452368, 2393544,

2434478-9, 2431555

Fax: +94 11 2432629, 2435949


Branch Code - 004

METROPOLITAN BRANCH

Bank of Ceylon Building, York Street,


Tel: +94 11 2449063, 2329419,

2328521 (10 lines)

Fax: + 94 11 2325629, 2328691, 2320838,

2472646, 2328197


Branch Code - 618

TAPROBANE BRANCH

Bank of Ceylon Building, York Street,


Tel: +94 11 2422267, 2447173,

2328521 (10 lines)

Fax: + 94 11 2430267


Branch Code - 747

OFFSHORE BANKING DIVISION

2nd Floor, Head Office Building,



Tel: +94 11 2338765, 2389123, 2389122,

2346553, 2346598, 2346551

Fax: + 94 11 2448776, 2445784,

2346536, 2346596


SWIFT Code: BCEYLKLX 131

Branch Code - 726

TRADE SERVICES




Tel: +94 11 2394310, 2338763

Fax: +94 11 2542170


Branch Code - 660

CORPORATE RELATIONS




Tel: +94 11 2446817, 2389124, 2447802,

2446814, 2440080

Fax: +94 11 4713396, 2389128


Branch Code - 660


CREDIT SUPPORT

3rd Floor, Head Office Building,



Tel: +94 11 2541943

Fax: +94 11 2446820


Branch Code - 660

SECOND CORPORATE BRANCH




Tel: +94 11 2325742

Fax: +94 11 2446816


Branch Code - 822

RECOVERY - CORPORATE




Tel: +94 11 2386080, 2203410,

Fax: +94 11 2389130


Branch Code - 2220

RECOVERY - PROVINCE




Tel: +94 11 2394584, 2439540

Fax: +94 11 2452017


Branch Code - 2210

PRODUCT AND DEVELOPMENTBANKING DIVISION




Tel: +94 11 2395812, 2394592

Fax: +94 11 2439558


Branch Code - 1800

CARD CENTRE

World Trade Centre

Echelon Square, West Tower,

Level - 1, Bank of Ceylon Mawatha,


Tel: +94 11 2445799, 2325088, 2395806

Fax: +94 11 2325099, 2325092


Branch Code - 731

ELECTRONIC BANKING UNIT

21st Floor, Head Office Building,



Tel: +94 11 2542162, 2204650-54 (5 lines)

Fax: +94 11 2447569


Branch Code - 777

ISLAMIC BANKING UNIT




Tel: +94 11 2205036

Fax: +94 11 2445811


Branch Code - 776

INVESTMENT BANKING DIVISION




Tel: +94 11 2346845, 2448348

Fax: +94 11 2346842


Branch Code - 756

CONSUMER PRODUCT MANAGEMENT




Tel: +94 11 2435811, 2448606,

5764241, 5764247

Fax: +94 11 2338762, 2445812


Branch Code - 1630

CORPORATE OFFICES & OVERSEAS BRANCHES

OVERSEAS BRANCHES

MALE BRANCH

Bank of Ceylon,

‘Aage’ 12,

Boduthakurufaanu Magu,

Henveiru, Male 20094,

Republic of Maldives.

Tel: 00960 3323045, 00960 3323046

Fax: 00960 3320575

SWIFT Code: BCEYMVMV


Branch Code - 632

CHENNAI BRANCH

Bank of Ceylon

1090, Poonamallee High Road,

Chennai 600 084, India.

Tel: 009144-26423501, 26420972

Fax: 009144-25325590

SWIFT Code: BCEYIN5M


Branch Code - 758


BOC SERVICE POINTS

BANK OF CEYLON SERVICE POINTS AS AT 31 DECEMBER 2010

Province No. of Branches

No. of Extension Offices

No. of ATMs

TotalService Points

Central Province 33 28 34 95

Eastern Province 17 30 15 62

North Central Province 30 12 25 67

Northern Province 17 23 21 61

North Western Province 34 17 33 84

Sabaragamuwa Province 24 23 24 71

Southern Province 37 20 40 97

Uva Province 25 13 16 54

Western Province - North 41 18 62 121

Western Province - South 43 21 70 134

Corporate Branches 6 13 10 29

Overseas Branches 2 0 2 4

309 218 352 879

North Central Province

67

EasternProvince

62

UvaProvince

54Sabaragamuwa

Province

71

NorthernProvince

61

North WesternProvince

84

WesternProvince

284

SouthernProvince

97

CentralProvince

95


BOC SERVICE POINTS

95CENTRAL PROVINCE

BranchCode

Name of Branch Telephone E-Mail Address Address

768 Alawathugoda 066-2242327 [email protected] 1496, Matale Road, Alawathugoda

576 Dambulla 066-2285270 [email protected] 438 D, Anuradhapura Road, Dambulla

273 Digana 081-2376928 [email protected] 2, New Town, Digana, Rajawella

615 Galagedara 081-2461214 [email protected] 237, Rambukkana Road, Galagedara

101 Galaha 081-2467213 [email protected] 59/37, Deltota Road, Galaha

432 Galewala 066-2289262 [email protected] 168, Kurunegala- Dambulla Road, Galewala

575 Gampola 081-2350108 [email protected] 79, Kadugannawa Road, Gampola

524 Gelioya 081-2310214 [email protected] 430/B, Gampola Road, Karamada, Gelioya

040 Hatton 051-2225015 [email protected] 46, Circular Road, Hatton

633 Kandapola 052-2229636 [email protected] 30, 31, 32, Main Street, Kandapola

002 Kandy 081-2223697 [email protected] 88, Dalada Veediya, Kandy

649 Kandy City 081-2234292 [email protected] 22, Dalada Veediya, Kandy

666 Katugastota 081-2499398 [email protected] 161/A, Madawala Road, Katugastota

581 Madawala 081-2470484 [email protected] 35 A2, Wattegama Road, Madawala

506 Maskeliya 052-2277280 [email protected] 66, Upcot Road, Maskeliya

068 Matale 066-2222262 [email protected] 5/2, Trincomalee Street, Matale

092 Naula 066-2246280 [email protected] 85, Dambulla Road, Naula

598 Nawalapitiya 054-2222233 [email protected] 106, Gampola Road, Nawalapitiya

029 Nuwara Eliya 052-2224047 [email protected] 43, Lawson Street, Nuwara Eliya

492 Padiyapelella 052-3536628 [email protected] 35, 35 1/1 Ragala Road, Padiyapelella

640 Pallepola 066-2247272 [email protected] 19, 19/1 Akuramboda Road, Pallepola

588 Peradeniya 081-4475283 [email protected] 1157, Sirimavo Bandaranaike Mawatha, Peradeniya

587 Pilimatalawa 081-5674566 [email protected] 237, Colombo Road, Pilimatalawa

425 Pundaluoya 051-2233205 [email protected] 45, Upper Bazaar, Pundaluoya

337 Pussellawa 081-2478664 [email protected] 500, Nuwara Eliya Road, Pussellawa

639 Rattota 066-2255280 [email protected] 72, Main Street, Rattota

167 Rikillagaskada 081-2365314 [email protected] 3, Dimbulkumbura Road, Rikillagaskada

650 Talatuoya 081-2404334 [email protected] 2 B, Kandy Road, Talatuoya

BranchCode


531 Talawakelle 052-2258892 [email protected] 29, Hatton Road, Talawakelle

606 Udadumbara 081-2402317 [email protected] 44, 46, Mahiyangana Road, Udadumbara

743 Walapane 052-2279238 [email protected] Ratnayake Building, Walapana

340 Wattegama 081-2475838 [email protected] 4/110, Kandy Road, Wattegama

144 Yatawatta 066-2221084 [email protected] 35 A, Matalapitiya Road, Yelakkaraya, Yatawatta

Extension Office Telephone Address

1. Agarapatana 051-2230133 24, Main Street, Agarapatana

2. Akurana 081-2301477 197, Matale Road, Akurana

3. Bogawanthalawa 052-2267599 30, Bridwell Bazaar, Bogawanthalawa

4. BOI Pallekele 081-5672445 Kandy Industrial Park, Pallekelle

5. Bokkawala 081-2461056 33/1, Bokkawala Main Street, Bokkawala

6. Danture 081-2575228 572, Main Street, Danture

7. Daulagala 081-2315171 01/1, Imbuldeniya, Handessa

8. Dedicated Economic Centre - Dambulla

066-2285217 Dedicated Economic Centre, Dambulla

9. Digana Village 081-2375851 Digana Village, Digana

10. Gampola City 081-2354214 23, Nawalapitiya Road, Gampola

11. Ginigathhene 051-2242310 91/1, Hatton Road, Ginigathhene

12. Hatharaliyadda 081-2464187 21/5, Kandy Road, Hatharaliyadda

13. Kandy City Centre 081-2205110 Premises No. 19, Level 1, Dalada Veediya, Kandy

14. Kandy Kachcheri 081-2224214 Kachcheri Building, Kandy

15. Kandy Teaching Hospital 081-2233335 Kandy Teaching Hospital, Kandy

16. Kotagala 051-2223206 184-186 Wooten Bazaar, Kotagala

17. Matale Kachcheri 066-2222024 Kachcheri Building, Matale

18. Meepilimana 052-2234410 67/68 A, Meepilimana, Nuwara Eliya

19. Menikhinna 081-2376911 19, Teldeniya Road, Menikhinna

20. Nuwara Eliya Kachcheri 052-2222770 Kachcheri Building, Nuwara Eliya

21. Palapathwala 066-2225505 409, Matale Road, Palapathwala

22. Peradeniya Botanical Gardens 081-2386463 Peradeniya Botanical Gardens

23. Poojapitiya 081-2301718 15, Medawala Road, Poojapitiya

24. Ragala 052-2265660 1/19, Ragala, Halgranoya

25. Sigiriya 066-2286270 1, Air Port Road, Kimbissa

26. Teldeniya 081-2376820 19, Circular Road, New Town, Karaliyadda, Teldeniya

27. University of Peradeniya 081-2392422 University of Peradeniya, Peradeniya

28. Wilgamuwa 066-2250002 80/2/1, Hettipola New Town, Wilgamuwa

Holiday Banking Service

Saturday

Sunday

Saturday & Sunday

Night Banking


BOC SERVICE POINTS

ATMs No.

1. Alawathugoda Branch 1

2. Dambulla Branch 1

3. Dedicated Economic Centre, Dambulla 1

4. Digana Branch 1

5. Galagedara Branch 1

6. Galewala Branch 1

7. Gampola Branch 1

8. Gelioya Branch 1

9. Hatton Branch 1

10. Kandy Branch 3

11. Kandy City Centre - Extension Office 1

12. Kandy Teaching Hospital - Extension Office 1

13. Kandy Second City Branch 2

14. Katugastota Branch 1

15. Madawala City Branch 1

16. Maskeliya Branch 1

17. Matale Branch 2

18. Naula Branch 1

19. Nawalapitiya Branch 1

20. Nuwara Eliya Kachcheri - Extension Office 1

21. Nuwara Eliya Branch 1

22. Pallekelle Extension Office 1

23. Peradeniya Branch 1

24. Peradeniya Botanical Gardens - Extension Office 1

25. University of Peradeniya - Extension Office 1

26. Rikillagaskada Branch 1

27. Sigiriya Extension Office 1

28. Talawakelle Branch 1

29. Udadumbara Branch 1

30. Wattegama Branch 1

62EASTERN PROVINCE

BranchCode


590 Akkaraipattu 067-2277235 [email protected] 288, Main Street, Akkaraipattu

021 Ampara 063-2222137 [email protected] 115 A, D. S. Senanayaka Street, Ampara

012 Batticaloa 065-2227410 [email protected] Covington Road, Batticaloa

630 Chenkalady 065-2240492 [email protected] Trincomalee Road, Chenkalady

509 Hingurana 063-2240037 [email protected] Jeyalanka Building, Hingurana Junction, Hingurana

510 Kalmunai 067-2229774 [email protected] 78, Kitddanki Road, Kalmunai

611 Kalawanchikudy 065-2250012 [email protected] Main Street, Kalawanchikudy

623 Kantale 026-2234230 [email protected] 91, Agrabodhi Mawatha, Kantale

648 Kattankudy 065-2246613 [email protected] 40, 40b, 40c, Fowzy Mawatha, Kattankudy-1

735 Kinniya 026-2236270 [email protected] 27, 27/1, 27/2, 29, Lathef Vidhanayar Road, Kinniya

118 Mutur 026-2238327 [email protected] 38, Batticaloa Road, Mutur

591 Nintavur 067-3696117 [email protected] 75, Main Street, Nintavur

318 Pottuvil 063-2248021 [email protected] Main Street, Pottuvil

440 Sammanthurai 067-2260898 [email protected] 49/1 C , Ampara Road, Sammanthurai

006 Trincomalee 026-2223084 [email protected] 24, Inner Harbour Road, Trincomalee

624 Trincomalee City 026-2223880 [email protected] 9, Main Street, Trincomalee

626 Valachchenai 065-2257007 [email protected] Main Street, Valachchenai


1. Addalaichchenai 067-2279303 Main Street, Addalaichchenai

2. Ampara Kachcheri 063-2224150 Kachcheri Building, Ampara

3. Arayampathy 065-2247939 Co-operative Building, Kalmunai Road, Arayampathy

4. Batticaloa 065-2227032 5, Station Road, Batticaloa

5. Batticaloa Kachcheri 065-2257708 Kachcheri Building, Batticaloa

6. China Bay (4th Mile Post) 026-2242327 61, Kinniya Road, China Bay

7. Eastern University 065-2240490 Vantharumulai, Batticaloa

8. Eravur 065-2241012 Divisional Secretariat Building, Eravur

9. Gonagolla 063-3632943 Kandy Road, Gonagolla

10. Kallady 065-2227962 180 A, New Kalmunai Road, Kallady

11. Kallar 067-2225421 Main Street, Periyakallar-1

12. Karadiyanaru 065-2241330 1, Badulla Road, Karadiyanaru

13. Karitivu 067-2225484 20, Main Street, Karitivu

14. Kokkaddicholai 065-2227916 Main Street, Ward No. 10, Kokkaddicholai

15. Mamanagam 065-2227973 450, Bar Road, Mamanagam, Batticaloa

16. Maruthamunai 067-2220503 Main Street, Periyanilawanai, Maruthamunai

17. Morawewa 026-2225825 Provincial Council Building, Morawewa

18. Nilaveli 026-2232290 Ward No. 2, Main Street , Nilaveli

19. Oddamavadi 065-2258111 Main Street, Mawadichchenai, Oddamavadi

20. Polwatta 063-2242128 10, Polwaga Janapadaya, Polwatta, Ampara


Saturday

Sunday

Saturday & Sunday

Night Banking



21. Sainthamarathu 067-2220478 15, Main Street, Sainthamarathu - 11

22. Serunuwara 026-2251010 Agrarian Service Building, Serunuwara

23. Thambiluvil 067-2265309 Main Street, Thambiluvil - 2

24. Thampalagamam 026-2248043 Agrarian Service Building, Kandy Road, Thampalagamam

25. Thoppur 026-2240989 Main Road, Thoppur

26. Trincomalee Kachcheri 026-2222465 Kachcheri Building, Trincomalee

27. Uhana 063-2250001 Jayanthi Building, Kandy Road, Uhana

28. Uppuveli 026-2226227 Agrarian Service Centre, Love Lane, Uppuveli

29. Vakarai 065-2258181 Trincomalee Road, Kandalady, Vakarai

30. Vellavely 065-2251113 100 B, Main Street, Vellavely

ATMs No.

1. Akkaraipattu Branch 1

2. Ampara Branch 1

3. Batticaloa Branch 1

4. Chenkalady Branch 1

5. Eastern University Extension Office 1

6. Kalawanchikudy Branch 1

7. Kalmunai Branch 1

8. Kantale Branch 1

9. Mutur Branch 1

10. Sri Lanka Navy - Trincomalee 1

11. Pothuvil Branch 1

12. Sammanthurai Branch 1

13. Trincomalee Branch 1

14. Sri Lanka Air Force China Bay - Trincomalee 1

15. Valachchenai Branch 1

67NORTH CENTRAL PROVINCE

BranchCode


022 Anuradhapura 025-2222393 [email protected] Maithripala Senanayake Mawatha, Anuradhapura

551 Anuradhapura City

025-2225932 [email protected] Market Complex, Anuradhapura

098 Anuradhapura New Town

025-2223685 [email protected] New Town, Anuradhapura

599 Aralaganwila 027-3279257 [email protected] Aralaganwila

652 Bakamoona 066-2256680 [email protected] Lanka Banku Mawatha, Bakamoona

686 Dehiattakandiya 027-2250287 [email protected] New Town, Dehiattakandiya

692 Eppawala 025-2249180 [email protected] Talawa Road, Eppawala

122 Galenbindunu-wewa

025-2258280 [email protected] Denzil Kobbekaduwa Mawatha,Galenbindunuwewa

653 Galkiriyagama 025-3853065 [email protected] New Town, Galkiriyagama

514 Galnewa 025-3855484 [email protected] Thambuttegama Road, Galnewa

601 Hingurakgoda 027-2247642 [email protected] St. Micheal Building, Main Street, Hingurakgoda

217 Horowpatana 025-2278416 [email protected] Anuradhapura Road, Horowpatana

236 Ipalogama 025-2264279 [email protected] Kekirawa Road, Ipalogama

600 Jayanthipura 027-2222266 [email protected] 22nd Mile Post, Jayanthipura

502 Kaduruwela 027-2225025 [email protected] 612, 614, Batticaloa Road, Kaduruwela

622 Kahatagasdigiliya 025-2247480 [email protected] Trincomalee Road, Kahatagasdigiliya

621 Kebithigollawa 025-2298680 [email protected] Horowpatana Road, Kebithigollawa

676 Kekirawa 025-2264162 [email protected] 3, Habarana Road, Kekirawa

654 Madatugama 025-2264283 [email protected] Kekirawa-Dambulla Road, Madatugama

162 Medawachchiya 025-2245683 [email protected] 36, Jaffna Road, Medawachchiya

641 Medirigiriya 027-2248337 [email protected] School Junction, Medirigiriya

728 Meegalewa 025-3855054 [email protected] Meegallewa

335 Mihintale 025-2266503 [email protected] Trincomalee Road, Mihintale

656 Nochchiyagama 025-2257880 [email protected] Main Street, Nochchiyagama

127 Padavi Parakramapura

025-2254018 [email protected] Padavi Parakramapura

152 Pemaduwa 025-2223307 [email protected] Mannar Road, Pemaduwa

083 Polonnaruwa New Town

027-2223009 [email protected] 286, 286/1, New Town, Polonnaruwa New Town

183 Sewagama 027-2222585 [email protected] Nandana Building, Sewagama

655 Thambuttegama 025-2276280 [email protected] Rajanganaya Road, Thambuttegama

157 Tirappana 025-3853087 [email protected] Colombo-Anuradhapura Road, Tirappana

BOC SERVICE POINTS


Saturday

Sunday

Saturday & Sunday

Night Banking



1. Anuradhapura Kachcheri 025-2222142 Kachcheri Building,Anuradhapura

2. Galamuna 027-2226650 Galamuna, Pansalgodalla

3. General Hospital - Anuradhapura

025-3778400 General Hospital, Anuradhapura

4. Habarana 066-2270048 Trincomalee Road, Habarana

5. Minneriya 027-2245333 Habarana Road, Minneriya

6. Padaviya 025-2253011 Bandaranayake Mawatha, Padaviya

7. Rajanganaya 025-2276558 5th Mile Post, Rajanganaya

8. Rajina Junction 025-2276538 157, Rajina Junction,Thambuttegama

9. Rambewa 025-2266555 Jaffna Road, Rambewa

10. Ranajayapura 025-2262003 Ranajayapura, Ipalogama

11. Sevanapitiya 060-2277263 63, Sevanapitiya

12. Thalawa 025-2275090 Anuradhapura Road, Talawa

ATMs No.

1. Sri Lanka Air Force - Anuradhapura 1

2. Sri Lanka Air Force - Hingurakgoda 1

3. Anuradhapura Branch 2

4. Anuradhapura City Branch 1

5. Anuradhapura General Hospital Extention Office 1

6. Bakamoona Branch 1

7. Dehiattakandiya Branch 1

8. Galenbindunuwewa Branch 1

9. Galnewa Branch 1

10. Hingurakgoda Branch 1

11. Horowpatana Branch 1

12. Kaduruwela Branch 1

13. Kekirawa Branch 1

14. Maliban Textiles (Private) Limited - Dehiattakandiya 1

15. Medawachchiya Branch 1

16. Medirigiriya Branch 1

17. Mihintale Branch 1

18. New Town - Anuradhapura Branch 1

19. Padavi Parakramapura Branch 1

20. Polonnaruwa Hospital Branch 1

21. Rajarata University 1

22. Ranajayapura Extension Office 1

23. Tambuttegama Branch 1

24. Nochchiyagama Branch 1

BOC SERVICE POINTS

61NORTHERN PROVINCE

BranchCode


778 Atchuvely 021-3215237 [email protected] Central College View, Rosa Veethy, Atchuvely

501 Chavakachcheri 021-3214229 [email protected] V.M.K. Building, Kandy Road, Chavakachcheri

053 Chunnakam 021-3214228 [email protected] 146, KKS Road, Chunnakam

005 Jaffna 021-2224018 [email protected] 476, 476 A, Hospital Road, Jaffna

500 Jaffna City 021-2222598 [email protected] 56, Stanley Road, Jaffna

605 Kankesanthurai 021-3212716 [email protected] 51, K.K.S. Road, Kankesanthurai

749 Karainagar 021-3212381 [email protected] Post Office View, Karainagar

063 Kayts 021-3215215 [email protected] Vangalavadi Junction, Velanai

093 Kilinochchi 024-3248004 [email protected] Karadipokku Junction, A9 Road, Kilinochchi

281 Manipay 021-2255188 [email protected] 174, Jaffna Road, Manipay

574 Mankulam 024-3248037 [email protected] Main Road Mallavie, Mankulam

046 Mannar 023-2251001 [email protected] 52, Pallimunai Road, Grand Bazaar, Mannar

511 Mullaitivu 024-3245730 [email protected] Paranthan Road, Mullaitivu

638 Nelliady 021-2264815 [email protected] Thikkam Road, Karaveddy, Nelliady

028 Point Pedro 021-2263570 [email protected] 155/10, Main Street, Point Pedro

761 Thirunelveli 021-2223948 [email protected] 531, Palaly Road, Thirunelveli

044 Vavuniya 024-2222358 [email protected] 75, Station Road, Vavuniya


1. Anandakulam W/C* 023-3233751 Anandakulam, Adampan

2. Ananthakumarasamy W/C* 024-3248036 Zone 01, Menik Farm, Wanni

3. Chankanai 021-3214232 Main Street, Chankanai

4. Delft 021-3205614 Delft

5. Jaffna Bus Stand 021-2221010 400, Hospital Road, Jaffna

6. Jaffna Kachcheri 021-2228808 Kachcheri Building, Jaffna

7. Jaffna Main Street 021-2224564 St. Martin Bishops House, Main Street, Jaffna

8. Kaithady 021-3737100 Kandy Road, Jaffna

9. Kayts 021-3214227 Main Street, Kayts

10. Kodikamam 021-3737070 Kandy Road, Jaffna

11. Kokuvil 021-3737765 K.K.S. Road, Kokuvil

12. Kopay 021-2228484 Kopay

13. Mallavi 024-3248038 Main Street, Mallavi

14. Mannar Kachcheri 023-2232234 Kachcheri Building, Wanni

15. Murunkan 023-3238095 Chilawatura Road, Murunkan

16. Nanatan 023-3233515 Uyilankulam Road, Moddakkadai, Nantan

17. Pesalai 023-3233511 Church Road, Pesali

18. Poovarasakulam (Thalikkulam) 024-3248002 Mannar Road, Poovarasakulam, Vavuniya

19. Puthukulam 024-3248034 Sasthri Kolankulam, Vavuniya

20. Talaimannar Pier 023-2281085 Thalaimannar Pier, Thalaimannar

21. Valvettiturai 021-2264883 D, Yale Road, Valvettiturai

22. Vavuniya Kachcheri 024-2222626 Kachcheri Building, Vavuniya

23. Zone 4 W/C* 060-2248039 Zone 4, Menik Farm, Wanni

* W/C - Welfare Centre


Saturday

Sunday

Saturday & Sunday

Night Banking


ATMs No.

1. Adampan Extention Office 1

2. Ananthakumarasamy W/C* 1

3. Atchuveli Branch 1

4. Chavakachcheri Branch 1

5. Chunnakam Branch 1

6. Jaffna Branch 1

7. Jaffna Campus - Thirunelvely 1

8. Jaffna Hospital 1

9. Jaffna Main Street, Extention Office 1

10. Jaffna Second City Branch 1

11. Kilinochchi Branch 1

12. Mallawi Extention Office 1

13. Manipay Branch 1

14. Mankulam Branch 1

15. Mannar Branch 1

16. Nelliady Branch 1

17. Point Pedro Branch 1

18. Vavuniya Branch 2

19. Vavuniya Kachcheri Extension Office 1

20. Zone 4 W/C* 1

* W/C - Welfare Centre

84NORTH-WESTERN PROVINCE

BranchCode


498 Alawwa 037-2278032 [email protected] 64, Giriulla Road, Alawwa

548 Anamaduwa 032-2263280 [email protected] 27, 27/1, & 31, Kurunegala Road, Anamaduwa

554 Bingiriya 032-2246107 [email protected] 35 A, Chilaw Road, Bingiriya

020 Chilaw 032-2222335 [email protected] Radaguru Edmund Peiris Mawatha, Chilaw

497 Dankotuwa 031-2258180 [email protected] 46, 48, Kurunegala Road, Dankotuwa

580 Dummalasuriya 032-2240690 [email protected] 227, Kuliyapitiya-Madampe Road, Dummalasuriya

549 Galgamuwa 037-2253080 [email protected] 67, 69, Anuradhapura Road, Galgamuwa

553 Giriulla 037-2288080 [email protected] Market Complex, Giriulla

570 Hettipola 037-2291080 [email protected] 45, 47, Kurunegala Road, Hettipola

569 Hiripitiya 037-2264080 [email protected] Kumbukgete Road, Hiripitiya

770 Ibbagamuwa 037-2259970 [email protected] 110, Dambulla-Kurunegala Road, Ibbagamuwa

589 Kalpitiya 032-2260702 [email protected] 90, Main Street, Kalpitiya

172 Kobeigana 037-2293101 [email protected] Main Street, Kobeigana

BranchCode


052 Kuliyapitiya 037-2281280 [email protected] 70, Madampe Road, Kuliyapitiya

009 Kurunegala 037-2233880 [email protected] Commercial Complex, Kurunegala

513 Kurunegala City

037-2231472 [email protected] 34, Colombo Road, Kurunegala

544 Madampe 032-2247680 [email protected] 10, Station Road, Madampe

565 Madurankuliya 032-2268003 [email protected] 66, Colombo Road, Madurankuliya

564 Maho 037-2275280 [email protected] 145, Nikaweratiya Road, Maho

257 Mawathagama 037-2299259 [email protected] Kandy Road, Mawathagama

555 Melsiripura 037-2250088 [email protected] 254, Dambulla Road, Melsiripura

534 Narammala 037-2248771 [email protected] 139, Negombo Road, Narammala

050 Nattandiya 032-2254280 [email protected] Kuliyapitiya Road, Nattandiya

547 Nikaweratiya 037-2260922 [email protected] Puttalam Road, Nikaweratiya

779 Norochcholai 032-2268555 [email protected] Kalpitiya Road, Norochcholai

546 Pannala 037-2245071 [email protected] Public Ground Road, Pannala

526 Polgahawela 037-2243280 [email protected] 64, Kegalle Road, Polgahawela

664 Pothuhera 037-2237619 [email protected] 96, Colombo Road, Pothuhera

048 Puttalam 032-2265255 [email protected] 53, Kurunegala Road, Puttalam

532 Ridigama 037-2252080 [email protected] 84, Kurunegala Road, Ridigama

558 Waikkal 031-2277280 [email protected] Thopputhota, Waikkal

379 Wariyapola 037-2267348 [email protected] 1, Chilaw Road, Wariyapola

104 Welpalla 031-2299512 [email protected] Agriculture Service Centre, Welpalla

508 Wennappuwa 031-2255280 [email protected] 197, Chilaw Road, Wennappuwa


1. Ambanpola 037-2254099 Anuradhapura Road, Ambanpola

2. Anavilundawa 032-2259050 55, 57, Puttalam Road, Anavilundawa

3. Dambadeniya 037-2266144 70, Kurunegala Road, Dambadeniya

4. Katupotha 037-2247471 Rambawewa Road, Katupotha

5. Kirimatiyana 031-2249960 60, Negombo Road,Kirimatiyana, Lunuwila

6. Kochchikade 031-2277353 23, Chilaw Road, Kochchikade

7. Kurunegala Kachcheri 037-2229726 Kachcheri Building, Kurunegala

8. Makandura 031-2298303 Bandaranayaka Mawatha, Makandura

9. Marawila 032-2252675 27/1, Chilaw Road, Marawila

10. Palaviya 032-2269210 Deshani Motors Building, Colombo Road, Palaviya

11. Paragahadeniya 037-2296085 Kandy Road, Paragahadeniya

12. Polpithigama 037-2273103 Madagalla Road, Polpithigama

13. Puttalam Kachcheri 032-2265351 Kachcheri Building, Puttalam

14. Toduwawa 032-2256330 Church Road, Thoduwawa

15. Udappuwa 032-2258675 47, Main Street, Udappuwa

16. Wayamba University 037-2284480 Wayamba University, Kuliyapitiya

17. Wellawa 037-2235499 Sovis Building, Hiripitiya Road, Wellawa

BOC SERVICE POINTS


Saturday

Sunday

Saturday & Sunday

Night Banking


71SABARAGAMUWA PROVINCE

BranchCode


566 Aranayake 035-2258016 [email protected] 480, Dippitiya, Aranayake

530 Avissawella 036-2222099 [email protected] 47, Dharmapala Mawatha, Avissawella

401 Ayagama 045-2250080 [email protected] 38, Kalawana Road, Ayagama

688 Balangoda 045-2288390 [email protected] 137, Main Street, Balangoda

634 Dehiowita 036-2222580 [email protected] 62, Main Street, Dehiowita

642 Deraniyagala 036-2249280 [email protected] 4, Dehiowita Road, Deraniyagala

057 Eheliyagoda 036-2259571 [email protected] 46, Main Street, Eheliyagoda

535 Embilipitiya 047-2230980 [email protected] 545, New Town, Embilipitiya

772 Hemmathagama 035-2257280 [email protected] 86, Mawanella Road, Hemmathagama

507 Kahawatta 045-2270180 [email protected] 746, Main Street, Kahawatta

645 Kalawana 045-2255280 [email protected] 53C, 53C 1/1, 53C 1/2, Ratnapura Road, Manana, Kalawana

027 Kegalle 035-2230600 [email protected] 110, Colombo Road, Kegalle

536 Kegalle City 035-2222550 [email protected] 681/5, Main Street, Kegalle

325 Kuruwita 045-2262581 [email protected] 60, Ratnapura Road, Kuruwita

559 Mawanella 035-2246280 [email protected] 43, Main Street, Mawanella

597 Nivitigala 045-2279086 [email protected] 72, Kalawana Road, Nivitigala

683 Pelmadulla 045-2274380 [email protected] 57, Main Street, Pelmadulla

594 Rakwana 045-2246280 [email protected] 51, Main Street, Rakwana

582 Rambukkana 035-2265280 [email protected] 8 A, Diyasunnatha Mawatha, Rambukkana

031 Ratnapura 045-2222100 [email protected] 6, Dharmapala Mawatha, Ratnapura

684 Ratnapura City 045-2222710 [email protected] 58, Main Street, Ratnapura

585 Ruwanwella 036-2268005 [email protected] Public Trade Complex, Ruwanwella

562 Warakapola 035-2267258 [email protected] 89 A, Main Street, Warakapola

477 Yatiyantota 036-2271280 [email protected] 93, Ginigathhena Road, Yatiyantota


1. Bulathkohupitiya 036-2247356 76, Kegalle Road, Bulathkohupitiya

2. Embilipitiya 047-2261981 15, Moraketiya Road, Embilipitiya

3. Endana 060-2450661 New Town, Endana, Gabbela, Kahawatta

4. Galigamuwa 035-2282050 Avissawella Road, Galigamuwa Junction

5. General Hospital - Ratnapura 045-2223561 General Hospital, Ratnapura

6. Godakawela 045-2240080 170, Main Street, Godakawela

7. Gonagaldeniya 036-5677923 Basnagoda Road, Gonagaldeniya

8. Idangoda 045-2265080 7 A, Idangoda, Kiriella

9. Karawanella 036-2268780 133/7, Avissawella Road, Karawanella

10. Karawita 045-2222454 Palawela Road, Udakarawita

11. Kegalle Kachcheri 035-2231574 Kachcheri Building, Kegalle

12. Kegalle Hospital 035-2222765 Base Hospital Premises, Kegalle

ATMs No.

1. Alawwa Branch 1

2. Anamaduwa Branch 1

3. Bingiriya Branch 1

4. Chilaw Branch 1

5. Dankotuwa Branch 1

6. Dummalasuriya Branch 1

7. Galgamuwa Branch 1

8. Giriulla Branch 1

9. Hettipola Branch 1

10. Hiripitiya Branch 1

11. Kalpitiya Branch 1

12. Katupotha Extention Office 1

13. Kuliyapitiya Branch 2

14. Kurunegala Branch 1

15. Kurunegala Base Hospital 1

16. Kurunegala City Branch 2

17. Kurunegala Kachcheri 1

18. Madampe Branch 1

19. Madurankuliya Branch 1

20. Mawathagama Branch 1

21. Melsiripura Branch 1

22. Narammala Branch 1

23. Nattandiya Branch 1

24. Nikaweratiya Branch 1

25. Norochcholai Branch 1

26. Pannala Branch 1

27. Polgahawela Branch 1

28. Puttalam Branch 1

29. Wariyapola Branch 1

30. Wayamba University 1

31. Wennappuwa Branch 1

BOC SERVICE POINTS


Saturday

Sunday

Saturday & Sunday

Night Banking


97SOUTHERN PROVINCE

BranchCode


754 Ahungalla 091-2264107 [email protected] 60, Galle Road, Ahungalle

613 Akuressa 041-4922380 [email protected] 64, Matara Road, Akuressa

047 Ambalangoda 091-2256307 [email protected] 274, Main Street, Ambalangoda

537 Ambalantota 047-2223280 [email protected] 11, Wanduruppa Road, Ambalantota

774 Angunakolapelessa 047-2229120 [email protected] Hungama Road, Angunakolapelessa

525 Baddegama 091-2292280 [email protected] S. Abeywickrama Building, Baddegama

522 Batapola 091-2260405 [email protected] Aluthmawatha, Batapola

539 Beliatta 047-2243274 [email protected] New Shopping Complex, 1st Floor, No. 06, Beliatta

102 Bentota 034-2271796 [email protected] Tourist Village, Bentota

528 Deniyaya 041-2273870 [email protected] Main Street, Deniyaya

504 Devinuwara 041-2226280 [email protected] Tangalle Road, Devinuwara

592 Dickwella 041-2255280 [email protected] 28 & 28/1, Beliatta Road, Dickwella

619 Elpitiya 091-4387524 [email protected] Janadhipathi Mawatha, Elpitiya

003 Galle 091-2234214 [email protected] 2, Light House Street, Fort, Galle

089 Galle City 091-2234478 [email protected] 2, Gamini Road, Galle

691 Hakmana 041-2286280 [email protected] Beliatta Road, Hakmana

085 Hambantota 047-2220180 [email protected] 33, Tower Hill Road, Hambantota

609 Hikkaduwa 091-2277813 [email protected] 223, Galle Road, Hikkaduwa

135 Imaduwa 091-2286030 [email protected] Ahangama Road, Imaduwa

529 Kamburupitiya 041-2292213 [email protected] School Lane, Kamburupitiya

616 Kataragama 047-2235280 [email protected] 315, Tissamaharama Road, Kataragama

750 Koggala 091-2283380 [email protected] Galle Road, Koggala

024 Matara 041-2229280 [email protected] 11, Kumaratunga Mawatha, Matara

614 Matara City 041-2222218 [email protected] Gunawardena Mawatha, Matara

518 Middeniya 047-2247280 [email protected] Panamura Road, Middeniya

667 Neluwa 091-3783014 [email protected] Kadihingala Road, Neluwa

610 Pitigala 091-2291205 [email protected] 39, North Pitigala Road, Pitigala

693 Ruhunu Campus 041-2232880 [email protected] Ruhunu Campus Branch, Wellamadama, Matara

596 Talgaswela 091-3920100 [email protected] Elpitiya, Mapalagama Road, Talgaswela

056 Tangalle 047-2240280 [email protected] 145/147, Sea Street, Tangalle

250 Tawalama 091-3783030 [email protected] Tawalama

538 Tissamaharama 047-2237280 [email protected] 70, Main Street, Tissamaharama

298 Urubokka 041-2272280 [email protected] Main Street, Urubokka

517 Walasmulla 047-2245280 [email protected] 70, Beliatta Road, Walasmulla

139 Weeraketiya 047-2246280 [email protected] Main Street, Weeraketiya

520 Weligama 041-2250280 [email protected] 239, Main Street, Weligama

578 Yakkalamulla 091-2286080 [email protected] Yakkalamulla


13. Kitulgala 036-2287747 81, Hatton Road, Kithulgala

14. Kolonna 045-2260280 Hospital Junction, Kolonna

15. Kotiyakumbura 035-2289240 110, Kegalle Road, Kotiyakumbura

16. Sabaragamuwa University 045-2280093 Sabaragamuwa University, Pambahinna, Balangoda

17. Pinnawala Elephant Orphange

035-2264294 Elephant Orphange, Pinnawala

18. Sabaragamuwa Provincial Council

045-2226116 Provincial Council New Building, New Town, Ratnapura

19. Ratnapura Kachcheri 045-2222454 Kachcheri Building, Ratnapura

20. Seethawakapura BOI Complex 036-2232656 BOI Sri Lanka Office Complex, Avissawella

21. Udawalawa 047-2232180 24/4, Udawalawa Junction, Kolambageara

22. Weligepola 045-2227180 299/2, Weligepola

23. Welioya 045-3603304 Gunarathna Building, Welioya

ATMs No.

1. Avissawella Branch 2

2. Balangoda Branch 1

3. Eheliyagoda Branch 1

4. Embilipitiya Branch 1

5. Kahawatte Branch 1

6. Kalawana Branch 1

7. Kegalle Branch 1

8. Kegalle Hospital Extension Office 1

9. Kuruwita Branch 1

10. Mawanella Branch 1

11. Nivithigala Branch 1

12. Pelmadulla Branch 1

13. Rakwana Branch 1

14. Rambukkana Branch 1

15. Ratnapura Branch 1

16. Ratnapura City Branch 1

17. Ratnapura Hospital Office Extension 1

18. Ruwanwella Branch 1

19. Sabaragamuwa Provincial Council Extension Office 1

20. Sabaragamuwa University 1

21. Seethawakapura Extension Office 1

22. Warakapola Branch 1

23. Yatiyantota Branch 1

BOC SERVICE POINTS


Saturday

Sunday

Saturday & Sunday

Night Banking



1. Ahangama 091-2283977 71/1, Galle Road, Ahangama

2. Barawakumbuka 047-3621008 New Road, Barawakumbuka

3. Deiyandara 041-2268598 Hakmana Road, Deiyandara

4. Galle Kachcheri 091-2234514 Kachcheri Building, Galle

5. Karapitiya 091-2227090 161 A, Hirimbura Cross Road, Galle

6. Katuwana 047-3621005 Urubokka Road, Katuwana

7. Kekanadura 041-2265061 Sarath Building, Kekanadura Junction, Kekanadura

8. Kosmodara 041-2271070 Jayabima Building, Kosmodara, Kotapola

9. Kudawella 041-2257514 116 B, East Kudawella, Nakulugamuwa

10. Lunugamvehera 047-3621007 New Town, Lunugamvehera

11. Maha-Edanda 091-3932627 Sanasa Mandiraya, Maha-Edanda, Karandeniya

12. Makandura 041-2268785 Samarasinghe Building, Makandura

13. Matara Kachcheri 041-2222673 Kachcheri Building, Matara

14. Morawaka 041-2282700 Wijaya Building, Morawaka

15. Pitabeddara 041-2281081 Deniyaya Road, Pitabeddara

16. Ranna 047-2227280 165/1, Tissa Road, Ranna

17. Suriyawewa 047-2288280 27/1, Main Street, Suriyawewa

18. Udugama 091-2285015 H.A.L.A. Building, Watte Kade, Udugama

19. Uragasmanhandiya 091-2264865 125 1/1, Main Street, Uragasmanhandiya

20. Warapitiya 047-3623303 Sithamagalla Road, Rammala, Warapitiya

ATMs No.

1. Akuressa Branch 1

2. Ambalangoda Branch 1

3. Ambalantota Branch 1

4. Baddegama Branch 1

5. Beliatta Branch 1

6. Bentota Branch 1

7. Deniyaya Branch 1

8. Devinuwara Branch 1

9. Dikwella Branch 1

10. Elpitiya Branch 1

11. Galle Branch 1

12. Galle City Branch 2

13. Hakmana Branch 1

14. Hambantota Branch 1

15. Hikkaduwa Branch 1

16. Imaduwa Branch 1

17. Kamburupitiya Branch 1

18. Karapitiya Extension Office 1

19. Kataragama Branch 1

BOC SERVICE POINTS

ATMs No.

20. Koggala Branch 1

21. Kudawella Extension Office 1

22. Maha-Edanda Branch 1

23. Makandura Extension Office 1

24. Matara Branch 1

25. Matara City Branch 1

26. Matara General Hospital 1

27. Middeniya Branch 1

28. Neluwa Branch 1

29. Pitigala Branch 1

30. Ranna Extension Office 1

31. Ruhunu Campus Branch 1

32. Tangalle Branch 1

33. Thalgaswala Branch 1

34. Tissamaharama Branch 1

35. Urubokka Branch 1

36. Walasmulla Branch 1

37. Weeraketiya Branch 1

38. Weligama Branch 1

39. Yakkalamulla Branch 1

54UVA PROVINCE

BranchCode


540 Badalkumubura 055-2250279 [email protected] 191, 191 1/1, Main Street, Badalkumubura

011 Badulla 055-2222129 [email protected] Bank Road, Badulla

320 Balleketuwa 055-2285160 [email protected] 36, Passara Road, Balleketuwa

515 Bandarawela 057-2230014 [email protected] 198 B, Badulla Road, Bandarawela

579 Bibile 055-2265480 [email protected] 41, Mahiyangana Road, Bibile

560 Buttala 055-3562610 [email protected] 23, Moneragala Road, Buttala

260 Diyatalawa 057-3579407 [email protected] 28, Chandrasiri Building, Main Street, Diyatalawa

476 Ettampitiya 055-2294080 [email protected] 21, Nuwara Eliya Road, Ettampitiya

669 Girandurukotte 027-2254380 [email protected] New Town, Girandurukotte

463 Haldummulla 057-3576821 [email protected] 25, Main Street, Haldummulla

035 Haputale 057-2268080 [email protected] 20, Station Road, Haputale

629 Koslanda 057-2257780 [email protected] 15, Wellawaya Road, Koslanda

577 Lunugala 055-2263980 [email protected] 149, Main Street, Lunugala

647 Lunuwatta 057-2232742 [email protected] Padmasiri Building, Udapussellawa Road, Lunuwatta

542 Mahiyangana 055-2258195 [email protected] 7, New Town, Badulla Road, Mahiyangana

238 Medagama 055-2265580 [email protected] Moneragala Road, Medagama

384 Meegahakiwula 055-2245707 [email protected] Ratnayake Complex, Meegahakiwula

082 Moneragala 055-2276080 [email protected] 401, Wellawaya Road, Moneragala

348 Padiyatalawa 063-2246003 [email protected] Main Street, Padiyatalawa


Saturday

Sunday

Saturday & Sunday

Night Banking


BranchCode


503 Passara 055-2288865 [email protected] 382, Main Street, Passara

416 Siyambalanduwa 055-3555360 [email protected] Moneragala Road, Siyambalanduwa

322 Thanamalwila 047-2234080 [email protected] 6, Tissa Road, Thanamalwila

343 Uva-Paranagama 057-3577000 [email protected] Lunuatugama, Walahamulla, Uva-Paranagama

730 Welimada 057-2245984 [email protected] 12,12 A, Hemapala Munidasa Mawatha, Welimada

434 Wellawaya 055-2274628 [email protected] Tissamaharama Road, Wellawaya


1. Badulla City Office 055-2229580 1, Bandarawela Road, Badulla

2. Badulla Kachcheri 055-2225475 Kachcheri Building, Badulla

3. Bogahakumbura 057-2280088 Ambewela Road, Bogahakumbura

4. Dambagalla 055-2276079 Makulla Town, Dambagalla

5. Ella 057-2228899 Wellawaya Road, Ella

6. Ethiliwewa 055-3594115 Ethiliwewa Junction, Ethiliwewa

7. Hali-Ela 055-2295080 47, Bandarawela Road, Hali-Ela

8. Hasalaka 055-2257180 New Town, Hasalaka

9. Keppetipola 057-2280043 Timber Corporation Junction, Nuwara Eliya Road, Keppetipola

10. Moneragala Kachcheri 055-2277270 Kachcheri Building, Moneragala

11. Moneragala Town 055-2277270 94/2, Kumaradola Road, Moneragala

12. Okkampitiya 055-2273395 Weeragashandiya, Okkampitiya

13. Pelwatta Sugar Industries Complex

055-3559825 Pelawatta Sugar Industries Complex, Pelwatta

ATMs No.

1. Sri Lanka Air Force Camp - Diyatalawa 1

2. Badulla Branch 1

3. Badulla Hospital 1

4. Bandarawela Branch 1

5. Bibile Branch 1

6. Buttala Branch 1

7. Diyatalawa Branch 1

8. Haputale Branch 1

9. Mahiyangana Branch 1

10. Moneragala Branch 1

11. Padiyatalawa Branch 1

12. Passara Branch 1

13. Pelwatta Sugar Industries Complex Extension Office 1

14. Siyambalanduwa Branch 1

15. Welimada Branch 1

16. Wellawaya Branch 1

121WESTERN PROVINCE - NORTH

BranchCode


494 Andiambalama 011-2265565 [email protected] 113, Minuwangoda Road, Andiambalama

732 Biyagama 011-2488770 [email protected] IPZ Administrative Complex, Biyagama

038 Borella 011-4612617 [email protected] 71, Danister De Silva Mawatha, Borella

668 Borella City 011-2685140 [email protected] 845, Super Market Complex, Borella

573 Central Bus Stand

011-2326761 [email protected] Central Bus Stand, Colombo 11

672 Central Super Market

011-2357573 [email protected] 2nd Floor, Central Super Market, Colombo 11

001 City Office 011-2438455 [email protected] 41, Bristol Street, Colombo 1

561 Dematagoda 011-2698588 [email protected] 45, 37, Kolonnawa Road, Dematagoda

433 Divulapitiya 031-4921640 [email protected] 34, Negombo Road, Divulapitiya

060 Fifth City 011-2449646 [email protected] 85, York Street, Colombo 1

045 Gampaha 033-2234403 [email protected] 16, Rest House Road, Gampaha

628 Grandpass 011-2448202 [email protected] 703, Sirimavo Bandaranaike Mawatha, Grandpass

032 Hulftsdorp 011-2320374 [email protected] 30, St. Sebastian Hill, Hulftsdorp

039 Ja-Ela 011-5342311 [email protected] 19, Negombo Road, Ja-Ela

059 Kadawatha 011-2920687 [email protected] 469, Ragama Road, Kadawatha

771 Kandana 011-2232398 [email protected] 41/B-1/1 Negombo Road, Kandana

658 Katunayake IPZ 011-2259583 [email protected] 436, Baseline Road, Averiwatta, Katunayake IPZ

543 Kiribathgoda 011-2911304 [email protected] 201, Kandy Road, Kiribathgoda

571 Kirindiwela 033-2267280 [email protected] 21, Radawana Road, Kirindiwela

595 Kolonnawa 011-2572265 [email protected] 430 A, IDH Road, Kolonnawa

663 Kotahena 011-2448632 [email protected] 182, George R De Silva Mawatha, Kotahena

636 Lake House 011-5863723 [email protected] D.R. Wijewardena Mawatha, Colombo 1

612 Lake View 011-2314207 [email protected] 142, Sir James Peiris Mawatha, Colombo 2

026 Main Street 011-2329631 [email protected] 94, Main Street, Colombo 11

041 Maradana 011-2696550 [email protected] 94, S. Mahinda Himi Mawatha, Colombo 10

545 Minuwangoda 011-2295214 [email protected] 19, Divulapitiya Road, Minuwangoda

088 Mirigama 033-2276844 [email protected] 12, Amaratunga Mawatha, Mirigama

762 Narahenpita 011-2368514 [email protected] 540, Thimbirigasyaya Road, Narahenpita

018 Negombo 031-2224711 [email protected] 118, Rajapakse Broadway, Negombo

572 Negombo City 031-2222156 [email protected] 111, Main Street, Negombo

675 Nittambuwa 033-2287280 [email protected] Super Market Complex, Nittambuwa

BOC SERVICE POINTS


Saturday

Sunday

Saturday & Sunday

Night Banking


BranchCode


042 Peliyagoda 011-2930397 [email protected] 42, Negombo Road, Peliyagoda

681 Personal 011-2446821 [email protected] 4, Bank of Ceylon Mawatha, Colombo 1

765 Pugoda 011-2404821 [email protected] 40/1, 43, Kospitiyana, Pugoda

764 Ragama 011-2960291 [email protected] 35/26, 36/26, Kadawatha Road, Ragama

627 Regent Street 011-2690506 [email protected] National Hospital, Colombo 8

421 Seeduwa 011-2252019 [email protected] 429, 1/1, Negombo Road, Seeduwa

682 Veyangoda 033-2287279 [email protected] 203 A, Negombo Road, Veyangoda

505 Wattala 011-2932280 [email protected] 520, Negombo Road, Wattala

527 Welisara 011-2958485 [email protected] 540/2, Negombo Road, Welisara

769 Yakkala 033-2233591 [email protected] 46, Kandy Road, Yakkala


1. BOI Cash Collection Centre 011-2448875 BOI, No. 14, Baron Jayathilake Mawatha, Colombo 1

2. BOI Katunayake Cash Collection Centre

011-2252523 Export Processing Road, Katunayake

3. Bopitiya 011-2243172 2, Bopitiya Junction, Pamunugama

4. Cargo Office 011-2251943 IPZ Katunayake

5. Central Hospital 011-2690546 114, 4th Floor, Norris Canal Road, Colombo 10

6. Courtaulds Clothing Lanka (Private) Limited

011-2295214 487, Negombo Road, Katuwellegama

7. Delgoda 011-2402970 351/ H/5, New Kandy Road, Delgoda

8. Demanhandiya 031-2228730 370, Westerciten Farm, Divulapitiya Road, Demanhandiya

9. Enderamulla 011-2937240 117, Gongithota Road, Enderamulla, Wattala

10. Gampaha Kachcheri 033-2220868 Kachcheri Building Gampaha

11. Ganemulla 033-2264888 182/1, Kirindiwita Road, Ganemulla

12. Gothatuwa New Town 011-5344593 19, Welikada Road, Gothatuwa

13. Katana 031-2228353 305/J/1, Mirigama Road, Mahahunupitiya

14. Makola 011-2964401 177/1, Makola South, Makola

15. Naiwala 033-2297720 Divulapitiya Road, Naiwala

16. Narahenpita Economic Centre 011-2369622 Dedicated Economic Centre, Narahenpita

17. Raddolugama 011-2289977 275, National Housing Scheme, Raddolugama

18. Weliweriya 033-2255444 342, New Kandy Road, Weliveriya

ATMs No.

1. Agio Tobacco Company - BEPZ, Malwana 1

2. Sri Lanka Air Force Camp - Ekala 1

3. Sri Lanka Air Force - Katunayake 1

4. Andiambalama Branch 1

5. Biyagama Branch 1

6. Borella Branch 2

7. Castle Hospital, Borella 1

8. Courtaulds Clothing Garments Extension Office 1

9. City Office Branch 2

10. Divulapitiya Branch 1

11. Gampaha Branch 2

12. Ganemulla Branch 1

13. Gothatuwa Extension Office 1

14. Grandpass Branch 1

15. Hulftsdorp Branch 1

16. IPZ Katunayake Branch 1

17. Ja-Ela Branch 1

18. Kadawatha Branch 2

19. Kandana Branch 1

20. Katunayake Air Port 1

21. Kiribathgoda Branch 2

22. Kirindiwela Branch 1

23. Kolonnawa Branch 1

24. Kotahena Branch 1

25. Lady Ridgeway Hospital 1

26. Lake House Branch 1

27. Linea Aqua Garments - Kapugoda 2

28. Main Street Branch 1

29. Maradana Branch 1

30. Minuwangoda Branch 1

31. Mirigama Branch 1

32. Sri Lanka Navy Camp - Welisara 1

33. Narahenpita Economic Centre 1

34. Negombo Branch 2

35. Negombo City 1

36. Sri Lanka Ports Authority, New Nuge Road, Bagage Office - Peliyagoda

1

37. Nittambuwa Branch 2

38. Peliyagoda Branch 1

39. Personal Branch 3

40. Presidential Secretariat 1

41. Petrolium Corporation - Kolonnawa 1

42. Pugoda Branch 1

43. Regent Street Branch 1

44. Regent Street Doctors’ Quarters 1

45. Seeduwa Branch 1

46. Trelleborg Garments - Sapugaskanda 1

47. Veyangoda Branch 1

48. Wattala Branch 2

49. Welisara Branch 1

50. World Trade Centre - Colombo 1 1

51. Yakkala Branch 1

BOC SERVICE POINTS


Saturday

Sunday

Saturday & Sunday

Night Banking


134WESTERN PROVINCE - SOUTH

BranchCode


657 Agalawatta 034-2243980 [email protected] 5, Kalutara Road, Agalawatta

680 Aluthgama 034-2271413 [email protected] 267, Galle Road, Aluthgama

757 Athurugiriya 011-2560599 [email protected] 70/20, Malabe Road, Athurugiriya

037 Bambalapitiya 011-2598390 [email protected] 10, Unity Plaza Building, Galle Road, Colombo 4

665 Bandaragama 038-2290280 [email protected] Janadhipathi Mawatha, Bandaragama

679 Battaramulla 011-2862575 [email protected] 231, Main Street, Battaramulla,

058 Beruwala 034-2279899 [email protected] 165 A, Galle Road, Beruwala

673 Bulathsinhala 034-4912984 [email protected] 40, Horana Road, Athura, Bulathsinhala

051 Dehiwala 011-2738514 [email protected] 207, Galle Road, Dehiwala

563 Dharga Town 034-2275247 [email protected] 298, Main Street, Dharga Town

293 Dodangoda 034-2281628 [email protected] 16, Thudugala, Matugama Road, Dodangoda

741 Hanwella 036-2253520 [email protected] 133/8, Main Street, Hanwella,

568 Homagama 011-2855059 [email protected] 93, High Level Road, Homagama

054 Horana 034-2261280 [email protected] 87, Anguruwathota Road, Horana

521 Hyde Park 011-2687281 [email protected] 500, T. B. Jaya Mawatha, Colombo 10

453 Independent Square

011-2678073 [email protected] 30 A, Independence Avenue, Colombo 7

604 Ingiriya 034-2269580 [email protected] 20, Ratnapura Road, Ingiriya

608 Kaduwela 011-2571253 [email protected] Seevali Mahal, Avissawella Road, Kaduwela

016 Kalutara 034-2222214 [email protected] 218, Galle Road, Kalutara South, Kalutara

030 Katubedda 011-2625438 [email protected] 601, Galle Road, Moratuwa

034 Kollupitiya 011-4795035 [email protected] 28, St. Michael's Road, Colombo 3

670 Kollupitiya City 011-2565380 [email protected] 409, Galle Road, Colombo 3

773 Kottawa 011-2783313 [email protected] 264/5 A & B, High Level Road, Kottawa, Pannipitiya

055 Maharagama 011-2850339 [email protected] 88, High Level Road, Maharagama

763 Malabe 011-2760753 [email protected] 410/1, Athurugiriya Road, Malabe

556 Matugama 034-2243590 [email protected] 72, Agalawatta Road, Matugama

593 Milagiriya 011-2504627 [email protected] 248, Galle Road, Colombo 4

061 Moratuwa 011-2645127 [email protected] 707, Galle Road, Moratuwa

766 Mount Lavinia 011-2721059 [email protected] 286, Galle Road, Mount Lavinia

049 Nugegoda 011-2812091 [email protected] 174, High Level Road, Nugegoda

678 Padukka 060-2175401 [email protected] 45, Hanwella Road, Padukka

007 Panadura 038-2232214 [email protected] 4, Susantha Mawatha, Panadura

BranchCode


607 Panadura City 038-2243324 [email protected] 21, Jayathilake Mawatha, Panadura

644 Parliament 011-2777310 [email protected] Sri Lanka Parliament, Sri Jayawardenapura, Kotte

690 Pelawatta 011-2785550 [email protected] 18 A, New Parliament Road, Pelawatta, Battaramulla

736 Piliyandala 011-2614165 [email protected] 58, Moratuwa Road, Piliyandala

746 Rajagiriya 011-5368641 [email protected] 608, Nawala Road, Rajagiriya

689 Ratmalana 011-2738030 [email protected] 452, Galle Road, Ratmalana

512 Thimbirigasyaya 011-2587345 [email protected] 174, Havelock Road, Colombo 5

043 Union Place 011-2302470 [email protected] 278, Access Tower, Colombo 2.

775 Visakha Vidyalaya 011-2556215 [email protected] 133 C, Vajira Road, Colombo 4

584 Wadduwa 038-2284304 [email protected] 557 A, Galle Road, Wadduwa

023 Wellawatta 011-2584232 [email protected] 149, Galle Road, Colombo 6


1. Administrative Complex - Isurupaya

011-2785875 Ministry of Education, Isurupaya, Pelawatta, Battaramulla

2. BMICH Premises 011-2696820 BMICH Premises, Bauddhaloka Mawatha, Colombo 7

3 Baduraliya 034-2244952 36/1, Agalawatta Road, Baduraliya

4. Bodyline (Private) Limited 034-4285500 Bodyline (Private) Limited, Ratnapura Road, Gurugoda, Horana

5. Bombuwala 034-2289824 Temple Road, Mankada, Bombuwala

6. Boralesgamuwa 011-2518478 8, Colombo Road, Boralesgamuwa

7. Immigration & Emigration Office

011-3071267 45, Ananda Rajakaruna Mawatha, Colombo 10.

8. Kalutara Kachcheri 034-2222286 Kachcheri Branch, Divisional Secretariate, Kalutara

9. Katubedda Campus 011-2650301 Katubedda Campus Premises, Bandaranayake Mawatha, Moratuwa

10. Kesbewa 011-2602517 229/D/2, Bandaragama Road, Kesbewa

11. Keselwatte 038-2298330 29, Galle Road, Keselwatte, Panadura

12. Kirulapone 011-2513874 88, High Level Road, Kirulapone

13. Lotteries Board 011-2333546 356, Dr. Colvin R. De Silva Mawatha, Union Place, Colombo 2

14. Meegoda Economic Dev. Centre - Meegoda

011-2831589 35, Padukka Road, Library Building, Meegoda

15. Moratumulla 011-2652178 242, De Zoysa Road, Moratumulla, Moratuwa

BOC SERVICE POINTS


Saturday

Sunday

Saturday & Sunday

Night Banking



16. National Institute of Education

011-7601601 21, High Level Road, Maharagama

17. Pita Kotte 011-2820311 130 C, Pagoda Road, Nugegoda

18. Sethsiripaya 011-2863637 Sethsiripaya Complex, Battaramulla

19. Srawasthi Mandiraya 011-2681366 Srawasthi Mandiraya, Colombo 7

20. Sri Jayawardenapura Hospital

011-2779136 Sri Jayawardenapura Hospital, Thalapathpitiya, Nugegoda

21. Thalawathugoda 011-2775027 215/2, Pannipitiya Road, Thalawathugoda

ATMs No.

1. Agalawatta Branch 1

2. Aluthgama Branch 1

3. Athurugiriya Branch 1

4. Baduraliya Extention Office 1

5. Bally's Entertainment Centre, D.R. Wijewardena Mawatha, Colombo 10

1

6. Bambalapitiya Branch 2

7. Bandaragama Branch 1

8. Battaramulla Branch 1

9. Beruwala Branch 1

10. BMICH 1

11. Body Line Garments Extension Office 1

12. Boralesgamuwa Extension Office 1

13. Central Engineering Consultancy Bureau - Bauddhaloka Mawatha

1

14. Colombo Municipal Council - Town Hall 1

15. Dehiwala Branch 1

16. Dodangoda Branch 1

17. German Technical College, Ratmalana 1

18. Hanwella Branch 1

19. Hirdaramani Garments - Kahathuduwa 1

20. Homagama 2

21. Horana 2

22. Ingiriya 1

23. Independence Square Branch 1

24. Isurupaya Branch 1

25. Sri Jayawardenapura Hospital Extension Office 1

26. Kaduwela Branch 1

27. Kalubowila Hospital 1

ATMs No.

28. Kalutara Branch 1

29. Kalutara Kachcheri Extension Office 1

30. Katubedda Branch 1

31. Katubedda University Extension Office 1

32. Kesbewa Extension Office 1

33. Keselwatte Extension Office 1

34. Kirulapone Extension Office 1

35. Kollupitiya Branch 1

36. Kotalawela Defence Academy - Ratmalana 1

37. Kottawa Branch 1

38. Maharagama - Cancer Hospital 1

39. Maharagama Branch 2

40. Malabe Branch 1

41. Matugama Branch 1

42. Milagiriya Branch 1

43. Moratumulla Extension Office 1

44. Moratuwa Branch 1

45. Mount Lavinia Branch 1

46. Nugegoda Branch 3

47. Odel - Alexandra Place 1

48. Padukka Branch 1

49. Panadura Branch 1

50. Panadura City Branch 1

51. Parliament Branch 1

52. Piliyandala Branch 1

53. Rajagiriya Branch 1

54. Ratmalana Branch 1

55. Sintesi Garments - Ranala 1

56. Srawasthi Mandiraya Extension Office 1

57. Talawathugoda Extension Office 1

58. Thimbirigasyaya Branch 1

59. Union Place Branch 1

60. Visakha Vidyalaya Branch 1

61. Wadduwa Branch 1

62. Water Board - Ratmalana 1

63. Wellawatta Branch 2

BOC SERVICE POINTS


Saturday

Sunday

Saturday & Sunday

Night Banking


29CORPORATE BRANCHES

BranchCode


660 Corporate 011-2345428 [email protected] 4, Bank of Ceylon Mawatha, Colombo 1

822 Corporate 2nd 011-2394584 [email protected] 4, Bank of Ceylon Mawatha, Colombo 1

618 Metropolitan 011-2329419 [email protected] 10, York Street, Colombo 1

004 Pettah 011-2393544 [email protected] 212/63, Gas Work Street, Colombo 11

747 Taprobane 011-2422267 [email protected] 10, York Street, Colombo 2

726 Off-Shore Banking Unit

011-2338765 [email protected] 4, Bank of Ceylon Mawatha, Colombo 1


1. Board of Investment - SLPA 011-2448875 Sri Lanka Port Authority

2. Jawatta Inland Revenue 011-5657162 Inland Revenue Department No. 80, Jawatte Road, Colombo 5

3. Canal Yard - SLPA 011-2483526 Sri Lanka Port Authority

4. Permit Office - SLPA Hunters Sri Lanka Port Authority

5. Sri Lanka Bureau of Foreign Employment

011-2864147 234, Denzil Kobbakaduwa Mawatha, Koswatta, Battaramulla

6. Ware House Sri Lanka Port Authority

011-2942620 Sri Lanka Port Authority, Nawa Nuge Road, Peliyagoda

7. Pettah Kachcheri 011-2434478-50 Kachcheri Building, Pettah

8. Ceylon Shipping Lines Limited 011-2445268 450, D.R. Wijewardena Mawatha, Colombo 10

9. Customs Imports Unit 011-2436663 Sri Lanka Customs, Chaitya Road, Colombo 1

10. Inland Revenue Department 011-2337367 Inland Revenue Building, Sir Chittampalam A. Gardiner Mawatha, Colombo 2

11. Health Ministry Suvasiripaya 011-2681361 Ministry of Health, 385, Baddegama Wimalawansa Mawatha, Colombo 10

12. Laksiriseva (Private) Limited 011-2917729-ext 730

66, New Nuge Road, Peliyagoda

13. Trico Maritime (Private) Limited 011-4610977 50, K. Cyril C. Perera Mawatha, Colombo 13

ATMs No.

1. Sri Lanka Air Force Head Quarters - Colombo 2 1

2. Bellagio Club - Duplication Road, Colombo 3 1

3. Sri Lanka Bureau of Foreign Employment 1

4. Metropolitan Branch 1

5. MGM Club - Galle Road, Bambalapitiya 1

6. Mobile Banking Unit 1

7. Pettah Branch 2

8. Sri Lanka Ports Authority - Jaya Terminal 1

9. Health Ministry - Suvasiripaya 1

4OVERSEAS BRANCHES

BranchCode

Name of Branch

Telephone E-Mail Address Address

758 Chennai 009144-26423501 009144-26420972

[email protected]

No. 1090, Poonamalee High Road, Chennai 600 084, India.

632 Malé 00960-3323045 00960-3323046

[email protected]

'Aage', 12, Boduthakurufaanu, Magu, Henveiru, Male. 20094Republic of Maldives

ATMs No.

1. Malé 2

BOC SERVICE POINTS


Saturday

Sunday

Saturday & Sunday

Night Banking


CORRESPONDENT BANKS BY COUNTRY

AFGHANISTAN1. Afghanistan Bank DA

ALBANIA2. Raiffeisen Bank

ALGERIA3. Banque Exterieure D’Algerie

ARGENTINA4. Banco Macri Bansud SA5. Banco Finansur SA6. Banco Credicoop Cooperativo Limited

ARMENIA7. Ardshininvestment Bank

AUSTRALIA8. Australia & New Zealand Banking

Group Limited9. Commonwealth Bank of Australia10. HSBC Bank Australia Limited11. National Australia Bank Limited12. Westpec Banking Corporation

AUSTRIA13. Allgemeine Sparkasse Oberosterreich14. Bank Austria Creditanstalt AG15. Bawag Psk Bank16. Bks Bank AG17. Erste Bank Der Oesterreichischen Sparkassen AG18. Erste Group Bank AG19. Oberbank AG20. Osterreichische Volksbanken AG21. Raiffeisen Zentrale Bank Osterreich AG22. Raiffeisenlandesbank Oberosterreich

Aktiengesellschaft23. Salzburger Landes - Hypothekenbank AG

BAHRAIN24. Albaraka Islamic Bank25. Arab Banking Corporation26. Bahrain Islamic Bank27. BBK (Formerly Bank of Bahrain & Kuwait BSC)28. Bmi Bank BSC (C)29. Habib Bank Limited30. HSBC Bank Middle East31. National Bank of Bahrain 32. The Arab International Company

BANGLADESH33. Agrani Bank34. Bangladesh Krishi Bank35. Basic Bank Limited (Bangladesh Small

Industries & Commerce Bank Limited)36. Janata Bank37. Prime Bank Limited38. Pubali Bank Limited39. Sonali Bank40. The Premier Bank Limited41. Uttara Bank

BELARUS42. Belarus Bank (Formerly Minskcomplex Bank) 43. Belvnesheconombank

BELGIUM44. Antwerpse Diamant Bank NV45. Banca Monte Paschi, Belgio46. Byblos Bank Europe SA47. Deutsche Bank SA/NV48. Fortis Bank NV/SA49. Ing Belgium SA/NV

(Formerly Bank Brussels Lambert)50. Kbc Bank NV

BERMUDA51. Bank of Bermuda Limited

BOTSWANA52. Barclays Bank of Botswana Limited

BRAZIL53. Banco Abc Brasil SA54. Banco Fibra SA55. Banco Industrial E Commercial SA (Bicbanco)56. Banco Indusval SA

BULGARIA57. Central Cooperative Bank58. Investbank PLC59. Municipal Bank PLC60. Texim Bank61. Unicredit Bulbank AD (Formerly Bulbank AD)62. United Bulgarian Bank AD

CAMBODIA63. Acleda Bank PLC

CANADA64. Bank of Montreal65. Bank of Nova Scotia66. Canadian Imperial Bank of Commerce67. HSBC Bank Canada

(Formerly Credit Lyonnais Canada)68. Royal Bank of Canada69. Toronto Dominion Bank

CHILE70. Corpbanca

CHINA71. Bank of Changsha72. Bank of China73. Bank of Communications74. Bank of Hangzhou Company Limited75. Bank of Jiangsu76. Bank of Jiujiang Company Limited77. Bank of Nanjing78. Bank of Shaoxing Company Limited79. Changshu Rural Commercial Bank80. China Construction Bank 81. China Everbright Bank82. Evergrowing Bank83. Export Import Bank of China84. Xian City Commercial Bank Company Limited85. Zhejiang Nanxun Rural Cooperative Bank86. Zhejiang Xiaoshan Rural Cooperative Bank

COLOMBIA87. Banco Popular

COOK ISLANDS88. WSBC Bank (Wall Street Banking

Corporation Limited)

CROATIA89. Zagrebacka Banka DD

CUBA90. Banco National De Cuba (Vol. 6)

CYPRUS91. Alpha Bank Cyprus Limited92. Bank of Cyprus Public Company Limited93. Hellenic Bank Public Company Limited94. Marfin Popular Bank Public Company

Limited (Formerly Cyprus Popular Bank Public Company Limited) (Laiki Bank)

95. National Bank of Greece (Cyprus) Limited

CZECH REPUBLIC96. Ceska Sporitelna AS97. Ceskoslovenska Obchodni Banka AS98. Ge Money Bank AS99. Komercni Banka AS

DENMARK100. Als Skiern Bank101. Danmarks National Bank102. Danske Bank AS103. Jyske Bank AS104. Nordea Bank Denmark AS105. Nordjyske Bank AS106. Skjern Bank107. Spare Nord Bank108. Sparebank Vest109. Sydbank AS110. Vestjysk Bank

ECUADOR111. Banca International Produbanco

EGYPT112. ABC Egypt (Arab Banking Corporation)113. Arab International Bank114. Bank of Alexandria115. Banque Du Carie SAE116. Banque Misr SAE117. Central Bank of Egypt118. Commercial International Bank (Egypt) SAE119. Egyptian Saudi Finance Bank120. Faisal Islamic Bank of Egypt SAE121. Mohandes Bank122. National Bank of Egypt123. Suez Canal Bank SAE

ESTONIA124. Seb Pank

ETHIOPIA125. Commercial Bank of Ethiopia

FIJI126. National Bank of Fiji Limited

(Colonial National Bank)



FINLAND127. Aktia Bank PLC128. Nordea Bank Finland PLC129. Oko Osuuspankkien Keskuspankki Oyj130. Pohjola Bank PLC131. Sampo Bank PLC

FRANCE132. Bank of India (Paris Branch) 133. Banque De Neuflize, Schlumberger,

Mallet, Demachy134. Banque D'escompte 135. Banque Federative Du Credit Mutuel136. Banque Palatine137. Banque Sba138. Bnp Paribas139. Calyon140. Credit Agricole141. Credit Agricole Indosuez (Egypt) SAE

(Now Calyon Bank Egypt) SAE142. Credit Du Nord143. Credit Industrial Del' Quest144. Credit Industrial ET Commercial (CIC)145. Credit Lyonnais146. HSBC Private Bank France SA147. Natixis (Formerly Natexis Banque Populaires)148. Societe Generale149. Union De Banques A Paris150. VTB Bank (France) SA (Formerly Banque

Commerciale Pour L’Europe Du Nordeurobank)

GEORGIA151. Bank of Georgia

GERMANY152. Baden Wuttenbergische Bank AG153. Bankhaus Carlf Plump & Co.154. Bankhaus Neelmeyer AG155. Bayerische Hypo-Und Vereinsbank AG156. Bayerische Landesbank157. Berliner Volksbank EG158. BHF Bank Aktiengeselschaft159. Bremer Landesbank160. Commerzbank AG (Dusseldorf - Germany)161. Commerzbank AG (Frankfurt - Germany) 162. Deutsche Bank AG163. Deutsche Bundesbank164. Deutsche Postbank AG165. DVB Bank AG166. DZ Bank AG167. Frankfurter Volksbank EG168. HSBC Trinkaus & Burkhardt KGA169. Ing Bhf - Bank AG170. Kreissparkasse Goppingen171. Landesbank Baden-Wurttemberg172. Landesbank Berlin AG (Merger of Bankgesel-

Ischaft Berlin AG & Landesbank Berlin AG)173. Landesbank Hessen Thuringen Girozentrale174. LRP Landesbank Rheinland Pfalz175. Nassauische Sparkasse176. Nordeutsche Landesbank Girozentrale

177. NRW Bank178. Oldenburgische Landesbank AG179. Sparkasse Bielefeld180. Sparkasse Duren181. Sparkasse Herford182. Sparkasse Pforzheim CALW183. Standard Chartered Bank (Frankfurt - Germany)184. Stadtsparkasse Monchengladbach185. Stadtsparkasse Wuppertal186. Westlb AG

GHANA187. Ghana Commercial Bank Limited

GREECE188. Alpha Bank 189. Aspis Bank190. Efg Eurobank Ergasias SA191. Marfin Egnatia Bank SA

(Formerly Egnatia Bank SA) 192. National Bank of Greece193. Piraeus Bank

HONG KONG194. Bank of East Asia Limited195. CATHAY BANK196. Chiyu Banking Corporation Limited197. Chong Hing Bank Limited (Formerly Liu

Chong Hing Bank Limited)198. DAH Sing Bank Limited199. DBS Bank (Hong Kong) Limited200. Hang Seng Bank Limited201. Hongkong & Shanghai Banking Corporation202. Industrial & Commercial Bank of China

(Asia) Limited203. Nan Yang Commercial Bank Limited204. Oversea - Chinese Banking Corporation205. Shanghi Commercial Bank Limited206. Wing Hang Bank Limited

HUNGARY207. Budapest Credit Development Bank RT208. Central-European Int’l Bank Limited

(CIC Bank)209. Erst Bank Hungary NYRT210. Kereskedelmi Es Hitelbank

(K and H Bank NYRT)211. Magyar Nemzeti Bank212. Raiffeisen Bank ZRT213. Unicredit Bank Hungary ZRT

ICELAND214. Glitnir Banki HF (Formerly Islandsbanki -

FBA Limited)

INDIA215. Allahabad Bank216. Andhra Bank217. Axis Bank218. Bank of Baroda219. Bank of India (Mumbai)220. Bank of Maharashtra221. Canara Bank222. Central Bank of India

223. Development Credit Bank Limited224. HDFC Bank225. ICICI Bank Limited226. IDBI Bank Limited227. Indian Bank228. Indian Overseas Bank229. Indusind Bank Limited230. Jammu & Kashmir Bank Limited231. Karur Vysya Bank232. Punjab & Sind Bank Limited233. Punjab National Bank234. Saraswat - Cooperative Bank Limited235. State Bank of India236. State Bank of Hyderabad237. State Bank of Travancore238. Syndicate Bank239. Tamilnad Mercantile Bank Limited240. The Bank of Rajastan Limited241. UCO Bank242. Union Bank of India243. United Bank of India

INDONESIA244. PT Bank Pan Indonesia Tbk (Panin Bank)245. Bank Mega246. PT Bank Bukopin247. PT Bank Ekspor Indonesia248. PT Bank Mandiri (Persero)249. PT Bank Negara Indonesia Tbk250. PT Bank Rabobank International251. PT Bank Rakyat Indonesia

IRAN252. Bank Markazi Jomhouri Islami253. Bank Mellat254. Bank Melli Iran255. Bank Pasargad256. Bank Sederat257. Bank Sepah258. Bank Tejarat259. En Bank Pjsc (Bank Eghtesad Novin-Iran)260. Export Development Bank of Iran261. Karafarin Bank (Public Joint Stock Co.)262. Parsian Bank263. Post Bank of Iran264. Saman Bank

IRAQ265. Central Bank of Iraq266. Rafidain Bank 267. Rasheed Bank

IRELAND268. Allied Irish Bank PLC

ISRAEL269. Bank Hapoalim BM270. Bank Leumi Le Israel BM271. Bank of Palestine272. First International Bank of Israel Limited273. Israel Discount Bank274. Mercantile Discount Bank Limited275. Mizrahi Tefahot Bank Limited276. Union Bank of Israel Limited



ITALY277. Banca Agricola Mantovana SPA278. Banca Antonveneta SPA279. Banca Carige SPA280. Banca Delle Marche SPA281. Banca Di Credito Cooperativo Di Alba282. Banca Di Imola SPA283. Banca Di Roma284. Banca Etruria Soc Coop285. Banca Monte Dei Paschi Di Siena286. Banca Nazional Del Lavoro SPA

(Merged Into BNP Paribas)287. Banca Popolare - Volksbank

(Banca Popolare Dell Alto Adige)288. Banca Popolare Dell Emilia Romagna289. Banca Popolare Di Milano290. Banca Popolare Di Ravenna SPA291. Banca Popolare Di Sondrio292. Banco Popolare Di Verona E Novara Scrl

(Including Credito Bergamasco SPA, Banca Popolare Di Novara SPA) Verona

293. Banca Popolare Di Vicenza Scparl294. Banca Regionale Europea SPA295. Banca Toscana SPA296. Banca Ubae SPA297. Banca Valsabbina SCPA298. Banco Carim - Cassa Di Risparmio

Di Rimini SPA299. Banco Di Desio E Della Brianza SPA300. Banco Di Sardegna SpA301. Banco Di Sicilia 302. Bipop-Carires303. Cariparma SPA304. Cassa Di Risparmio Di Carrara SPA305. Cassa Di Risparmio Di Prato SPA (Cariprato)306. Deutsche Bank SPA307. Hipo Alpe-Adria-Bank SPA308. Intesa Sanpaolo SPA

(Formerly Banca Intesa SPA)309. Unicredito Italiano SPA310. Unipol Banca SPA

JAMAICA311. National Commercial Bank of Jamaica Limited

JAPAN312. 77 Bank Limited313. Aozora Bank Limited314. Australia & New Zealand

Banking Group Limited315. Awa Bank Limited316. Bank of Kochi Limited317. Bank of Kyoto318. Bank of Tokyo-Mitsubishi Ufj Limited319. Bank of Yokohama Limited320. Chiba Kogyo Bank Limited321. Chukyo Bank Limited322. Chuo Mitsui Trust and Banking

Company Limited

323. Gunma Bank Limited324. Higashi-Nippon Bank325. Horuriku Bank Limited326. Kinki Osaka Bank Limited327. Kiyo Bank Limited328. Kyoto Shinkin Bank329. Minato Bank Limited

(Formerly Midori Bank Limited)330. Mitsubishi Trust & Banking Company331. Mizuho Bank Limited332. Mizuho Corporate Bank Limited333. Nishi Nippon City Bank Limited334. Okazaki Shinkim Bank335. Resona Bank Limited336. Saitama Resona Bank Limited337. Seto Shinkin Bank338. Shiga Bank Limited339. Shinkin Central Banko340. Shinsei Bank Limited

(Formerly Long-Term Credit Bank of Japan)341. Standard Chartered Bank342. Sugamo Shinkin Bank343. Sumitomo Mitsui Banking Corporation344. The Asahi Shinkin Bank345. The Ashikaga Bank Limited346. The Hokkaido Bank Limited347. The Shikoku Bank Limited348. The Shizuoka Bank Limited349. The Yokohama Shinkin Bank350. Tokushima Bank Limited351. Tokyo Tomin Bank Limited352. Tomato Bank Limited353. Towa Bank Limited354. Yamagata Bank Limited355. Yamaguchi Bank Limited356. Yamanashi Chuo Bank Limited

JORDAN357. Arab Bank PLC358. Arab Jordan Investment Bank359. Bank of Jordan PLC360. Cairo Amman Bank361. Housing Bank for Trade & Finance362. Islamic International Bank Limited363. Jordan Ahli Bank PLC w.e.f. 12.11.2006

(Formerly Jordan National Bank)364. Jordan Commercial Bank

(Formerly Jordan Gulf Bank)365. Jordan Investment & Finance Bank (JIF Bank)366. Jordan Kuwait Bank367. Union Bank for Savings & Investment

KAZAKSTAN368. JSC Bank Centercredit

KENYA369. Barclays Bank of Kenya Limited370. Kenya Commercial Bank Limited

KOREA371. Citibank Korea Inc. (Formerly Koram Bank)372. Foreign Trade Bank of The Democratic

People’s Bank of Korea373. Hana Bank (Merger of Hana Bank &

Seoul Bank) 374. Kookmin Bank375. Korea Development Bank376. Korea Exchange Bank377. Kyongnam Bank378. Pusan Bank379. The Kwagju Bank Limited380. Woori Bank

KUWAIT381. Bank of Kuwait & The Middle East382. Burgan Bank SAK383. Commercial Bank of Kuwait SAK384. Gulf Bank385. National Bank of Kuwait SAK

KYRGYZSTAN386. Asia Universal Bank

LATVIA387. Parex Bank388. Rietumu Bank389. Seb Banka

LEBANON390. Al Ahli International Bank SAL391. Arab African International Bank392. Arab Bank PLC

(Lebanon Branches Centre) Beirut393. Audi Saradar Private Bank SAL394. BLC Bank SAL395. Bank Audi SAL - Audi Saradar Group396. Bank of Beirut SAL397. Bbac SAL (Formerly Bank of Beirut &

The Arab Countries SAL)398. BLC Bank SAL (Formerly Banque Libanaise

Pour Le Commerce SAL)399. BLOM Bank SAL400. Byblos Bank SAL401. Credit Libanais SAL402. Fransbank SAL403. IBL Bank404. Jamal Trust Bank SAL405. Lebanese Canadian Bank SAL406. Meab Bank407. Near East Commercial Bank SAL408. Societe Nouvelle De La Banque De

Syrie Et Du Liban SAL

LIBYA409. Gumhoria Bank410. National Commercial Bank SAL411. Umma Bank SAL412. Wahda Bank



LITHUANIA413. AB Bankas Hansa Bankas414. Seb Bank415. Ukio Bank AS

MADAGASCAR416. Bank of Africa - Madagascar 417. Banque Centrale De Madagascar

MALAWI418. National Bank of Malawi

MALAYSIA419. Alliance Bank Malaysia, Berhad420. Ambank Berhad

(Formerly Arab-Malaysian Bank - Berhad)421. Bank Islam Malaysia Berhad422. CIMB Bank Berhad (Formerly Bumiputra-

Commerce Bank Berhad)423. Eon Bank Berhad424. Malayan Banking Berhad (May Bank)425. OCBC (Malaysia) Berhad426. Overseas - Chinese Banking Corporation

Limited (Kuala Lumpur)427. Public Bank Berhad428. Royal Bank of Scotland429. United Overseas Bank (Malaysia) Berhad

MALDIVES430. Bank of Maldives PLC431. Habib Bank Limited

MALTA432. Bank of Valleta433. FIM Bank PLC Limited434. HSBC Bank Malta PLC

MAURITIUS435. State Bank of Mauritius Limited436. The Mauritius Commercial Bank Limited

MEXICO437. Banco Nacional De Mexico SA438. Banco Santander Mexicano SPA439. BBVA Bancomer SA440. HSBC Mexico SA

MOZAMBIQUE441. Banco International De Mocambique SARL

MONGOLIA442. Trade & Development Bank of Mongolia

MOROCCO443. Credit Du Marco SA

MYANMAR444. Myanmar Foreign Trade Bank445. Myawaddy Bank Limited

NAMIBIA446. Bank Windhoek Limited

NEPAL447. Himalayan Bank Limited448. Nepal Bank Limited449. Standard Chartered Bank Nepal Limited

THE NETHERLANDS450. Abn Ambro Bank451. F Van Lanschot Bankiers NV452. Hollandsche Bank - Unie NV453. ING Bank NV454. Lan Schot Bankiers NV F Van 455. Rabobank Nederland456. SNS Bank NV

NEW ZEALAND457. ANZ Bank National Bank Limited458. ASB International Bank459. Bank of New Zealand460. Westpec Banking Corporation

NIGERIA461. First Bank of Nigeria PLC462. Union Bank of Nigeria PLCNORWAY463. DNB Nor Bank ASA

(Formerly Den Norske Bank NA)464. Nordea Bank Norge AS465. Sparebanken Hedmark466. Sparebanken More467. Sparebanken Nord Norge

OMAN468. Bank Dhofar SAOG469. Bankmuscat SAOG470. National Bank of Oman SAOG471. Oman Arab Bank SAOC472. Oman International Bank

PAKISTAN473. Allied Bank of Pakistan474. AskariBank Limited (Formerly Askari

Commercial Bank Limited)475. Atlas Bank476. Bank Al Habib Limited477. Bank of Khyber478. Bank of Punjab479. Dawood Islamic Bank Limited480. Faysal Bank Limited481. Habib Bank Limited482. Habib Metropolitian Bank Limited483. KASB Bank484. MCB Bank Limited (Formerly Muslim

Commercial Bank)485. Meezan Bank Limited486. Mybank Limited487. National Bank of Pakistan488. Soneri Bank Limited489. Standard Chartered Bank (Pakistan) Limited490. United Bank Limited

PALESTINIAN AUTONOMOUS AREAS491. Arab Islamic Bank

PAPUA NEW GUINEA492. Westpac Bank Png Limited

PARAGUAY493. Banco Amambay SA

PERU494. Banco De Credito Del Peru

PHILIPPINES495. Metropolitan Bank & Trust Company496. Philippine National Bank

POLAND497. Bank BGZ498. Bank Gospodarstwa Krajowego499. Bank Handlowy Warszawa SA500. Bank Millennium SA501. Kredyt Bank SA502. Raiffeisen Bank Polska SA

PORTUGAL503. Banco BPI SA504. Banco Espirito Santo SA505. BNP - Banco Portugues De Negocios SA506. Finibanco SA507. Millennium BCP (Formerly Banco

Commercial Portugues SA)

QATAR508. Barwa Bank509. Doha Bank510. Qatar International Islamic Bank511. Qatar Islamic Bank SAQ

ROMANIA512. Banca Comerciala Carpatica513. Banca Commerciala Romana SA514. Banca Transilvania515. Brd - Groupe Societe Generale SA

RUSSIA516. Bank for Development & Foreign Economic

Affairs (Formerly Bank for Foreign Economic Affairs of the USSR)

517. Bank Jugra518. Bank of Moscow519. Bin Bank520. International Moscow Bank521. JSC VTB Bank [Formerly Bank for Foreign

Trade (Vneshtorgbank)] 522. M D M Bank523. Nomos-Bank (Novaya Moskva)524. ROS Bank 525. Sberbank526. Trans Credit Bank527. Vneshtconombank


SAUDI ARABIA528. Al Rajhi Bank (Formerly Al Rajhi Banking &

Investment Corporation)529. Arab National Bank530. Bank Al Bilad531. Bank Al Jazira532. Banque Saudi Fransi533. National Commercial Bank Limited534. Riyad Bank535. Samba Financial Group536. Saudi British Bank537. Saudi Hollandi Bank

SCOTLAND538. Royal Bank of Scotland

SERBIA539. Banca Intesa AD Beograd

SERBIA AND MONTENEGRO540. National Bank of Serbia

SEYCHELLES541. Seychelles International Mercantile Banking

(NOUVOBNQ)

SINGAPORE542. Bank of India (Singapore)543. DBS Bank Limited544. Dexia Banque Internationale A Luxembourge545. Far Eastern Bank Limited546. Indian Bank547. Oversea-Chinese Banking Corporation Limited548. Skandinaviska Enskilda Banken AB549. Standard Chartered Bank550. The Bank of East Asia Limited551. UCO Bank552. Union De Banques Arabes ET Francaises (UBAF)553. United Overseas Bank Limited554. VTB Bank Europe PLC (Formerly Moscow

Narodny Bank Limited)

SINGAPORE/MALAYSIA555. ABN Amro

SLOVAKIA556. Postova Bank AS557. Slovenska Sporitelna AS558. Tarta Bank AS559. Vseobecna Uverova Bank AS

SLOVENIA560. Abanka Vipa DD561. Nova Kreditna Banka Maribor DD562. Nova Ljubljanska Banka DD Ljubljana

SOLOMON ISLANDS563. National Bank of Solomon Islands

SOMALIA564. Commercial & Savings Bank of Somalia

SOUTH AFRICA565. ABSA Bank Limited566. Firstrand Bank Limited567. Nedcor Bank Limited (NED BANK)568. Standard Bank of South Africa Limited569. The Standard Chartered Bank of South Africa

SPAIN570. Banco Bilbao Vizcaya Argentaria571. Banco De Europa SA572. Banco De Sabadell573. Banco De Valencia574. Banco Guipuzcoano SA575. Banco Intercontinental Espanol (Bankinter)576. Banco Pastor SA577. Banco Santander Central Hispano578. Caixa’d Estalvis De Catalunya579. Caja De Ahorrosy Pensiones

De Barcelona La Caixa580. Caja Madrid

SUDAN581. Bank of Khartoum582. National Bank of Sudan

SWEDEN583. Nordbanken AB (Publ)584. Skandinaviska Enskilda Banken AB (Publ.)585. Svenska Handelsbanken AG (Publ.)586. Swed Bank

SWITZERLAND587. Banque Cantonale De Geneve588. Banque Cantonale Vandoise589. Banque De Commerce Et De Placements590. BNP Paribas (Suisse) SA591. BSI SA592. Credit Agricole (Suisse) SA593. Credit Suisse594. Habib Bank AG Zurich595. Luzerner Kantonal Bank596. UBS AG (Union Bank of Switzerland)597. Zurcher Kantonalbank

SYRIA598. Bank Audi Syria599. Commercial Bank of Syria

TAIWAN600. Bank of Taiwan601. China Trust Commercial Bank602. Chinfon Commercial Bank603. E-sun Commercial Bank Limited604. First Commercial Bank605. Hua Nan Commercial Bank606. Mega International Commercial Bank607. Shanghai Commercial & Savings Bank Limited608. Shin Kong Bank609. Taipei Fubon Commercial Bank610. Taiwan Cooperative Bank611. Union Bank of Taiwan


TANZANIA612. NCB Limited (National Bank of Commerce)

THAILAND613. Bangkok Bank Public Company Limited614. Bank of Ayudhya Public Company Limited615. Export Import Bank of Thailand616. Kasikornabank Public Company Limited

(Formerly Thai Farmers Bank)617. Krung Thai Bank Public Company Limited618. Siam City Bank Public Company Limited619. Siam Commercial Bank PCL620. Standard Chartered Bank (Thai) Public

Company Limited621. United Overseas Bank (Thai)

Public Company Limited

TUNISIA622. Attijari Bank623. Banque Nationale Agricole624. Societe Tunisienne De Banque

TURKEY625. AK Bank TAS626. Anadolu Bank627. Arab Turkish Bank628. Asya Katilim Bankasi AS

(Formerly Asya Finans Kurumu AS)629. Euro Tekfen AS630. Kocbank AS (Merged into Yapi

Ve Kredi Bankasi)631. Kuvoyt Turk Katilim Bankasi AS632. Oyak Bank AS (ING Bank AS) Name changed

on 07.07.2007633. Tekstil Bankasi AS634. Turk Economi Bankasi635. Turkiye Finance Katilinu Bankasi AS636. Turkiye Garanti Bankasi AS637. Turkiye Is Bankasi AS638. Turkiye Vakiflar Bankasi TAO639. Turkland Bank - T Bank640. Yapi Ve Kredi Bankasi AS

UNITED ARAB EMIRATES641. Abu Dhabi Commercial Bank642. Abu Dhabi Islamic Bank643. Arab Bank For Investment & Foreign Trade644. Commercial Bank International PLC645. Commercial Bank of Dubai PSC646. Dubai Islamic Bank PLC647. Emirates Bank International PJSC648. First Gulf Bank649. Mashreqbank PSC650. Middle East Bank PJSC651. National Bank of Abu Dhabi652. National Bank of Fujirah653. Noor Islamic Bank654. Union National Bank655. United Arab Bank



UGANDA656. Barclays Bank of Uganda Limited

UKRAINE657. Calyon Bank658. First Ukrainian International Bank-Pjsc 659. Otp Bank - Public Joint Stock Company660. Pjsc ‘Alfa - Bank’661. Ukreximbank (State Export-Import

Bank of Ukrain)

UNITED KINGDOM662. AIB Group (Formerly Allied Irish Bank)663. Barclays Bank PLC664. Clydesdale Bank PLC665. Gulf International Bank (UK) Limited666. Habib Bank Ag Zurich667. Habibsons Bank Limited 668. HSBC Bank PLC669. Investec Bank (UK) Limited670. Lloyd’s TSB Bank PLC671. National Westminster Bank PLC672. Royal Bank of Scotland PLC673. Standard Bank PLC674. Standard Chartered Bank

UNITED STATES OF AMERICA675. American Express Bank Limited676. Banco Del Pichincha CA677. Bank of America NA678. Bank of Tampa679. Branch Banking & Trust Company680. Brown Brothers Harriman & Company681. Citibank NA682. Cobank ACB683. Commerce Bank NA684. Deutsche Bank Trust Company Americas 685. First Hawaiian Bank686. French American Banking Corporation687. Habib American Bank 688. HSBC Bank USA689. Hibernia National Bank690. Huntington National Bank691. Israel Discount Bank of New York

692. JP Morgan Chase Bank 693. La Salle Bank Midwest694. M & T Bank (Formerly Allfirst Bank)695. National City Bank of Indiana696. Northern Trust Company697. PNC Bank NA698. San Diego National Bank699. Silicon Valley Bank700. Sovereign Bank701. Standard Chartered Bank702. State Street Bank & Trust Company703. Sun Trust Bank Limited704. The Bank of NewYork Mellon (Bank of New

York merged with Mellon Bank 21.07.08)705. UMB Bank NA706. Union Bank of California NA707. US Bank NA708. WELLS FARGO BANK NA (Wachovia Bank

NA merged with Wells Fargo)

URUGUAY709. The Banco De La Republic Oriental

Del Uruguay

VIETNAM710. Bank for Foreign Trade of Vietnam711. Bank for Investment & Development

of Vietnam

YEMEN712. International Bank of Yemen YSC713. National Bank of Yemen714. Yemen Bank for Reconstruction & Development715. Yemen Commercial Bank716. Yemen Kuwait Bank

ZAMBIA717. Barclays Bank of Zambia Limited

ZIMBABWE718. Barclays Bank of Zimbabwe Limited


EXCHANGE COMPANIES BY COUNTRY

AUSTRALIA1. Ceylon Exchange (Pty) Limited 2. Kapruka (Pty) Limited3. Serendib Financial Services4. Serendib (Pty) Limited Rs. A/C NZ

BAHRAIN5. Bahrain Financing Company6. Bex Money - Bahrain Express Exchange

(Formerly Bahrain Express Exchange)7. Dalil Exchange8. Ezremit Limited9. National Finance & Exchange Company WLL10. Zenj Exchange11. Zenj Exchange Company WLL (Turbo Cash)

CANADA12. Delma Exchange Canada

GREECE13. International Express Remittance International

Money Transfer Mediation Company

HONG KONG14. Lotus Forex Limited

ISRAEL15. Tifco Logistics & Trade Limited

ITALY16. Valutrans SPA

JORDAN17. Al Samhouri Exchange Company18. Alawaneh Exchange Company19. Shift Financial Services Limited

KUWAIT20. Al Mulla International Exchange Company WLL 21. Al Muzaini Exchange Company KSC (Closed)22. Bahrain Exchange Company WLL23. City International Exchange Company WLL24. Dollarco Exchange Company Limited25. Etemadco Exchange Company WLL26. International Financial Line Company27. Kuwait Asian International Exchange

Company WLL28. Kuwait Bahrain International Exchange Co.29. Kuwait India International Exchange Company30. National Exchange Company WLL31. National Money Exchange Company WLL32. Oman Exchange Company Limited33. Security Exchange Company WLL34. UAE Exchange Centre WLL

LEBANON35. Services Exchange Company (Imad Al Hariri

Trading Company & Partners - SECO)

MALAYSIA36. Merchantrade Asia SDN BHD

OMAN37. Asia Express Exchange 38. Gulf Overseas Exchange Company LLC39. Hamdan Exchange40. Majan Exchange LLC41. Modern Exchange Company LLC42. Musandam Exchange43. Mustafa Sultan Exchange Company LLC44. Oman & UAE Exchange Centre Company LLC45. Oman International Exchange LLC46. Oman United Exchange Company LLC47. Purshottam Kanji Exchange Company LLC

QATAR48. Al Dar For Exchange Works49. Al Fardan Exchange Company WLL50. Al Sadd Exchange51. Arabian Exchange Company WLL52. Eastern Exchange EST53. Gulf Exchange Company54. Habib Qatar International Exchange Limited55. Islamic Exchange 56. National Exchange Company WLL

(Formerly Al Shaibei Exchange Company)57. Trust Exchange Company Limited58. Union Exchange

SINGAPORE59. HBZ International Exchange Company

(Singapore) Pvt Limited60. Mustafa Foreign Exchange

SWITZERLAND61. Motherhouse GMBH

UNITED ARAB EMIRATES62. Al Ahalia Money Exchange Bureau63. Al Ansari Exchange EST64. Al Fardan Exchange65. Al Mona Exchange Company LLC66. Al Razouki International Exchange

Company LLC67. Al Rostamani International Exchange

(Formerly Thomas Cook Al Rostamani Exchange Company)

68. Alukkas Exchange69. Asia Exchange Centre70. Delma Exchange71. Dubai Exchange Centre LLC72. Emirates India International Exchange Company73. Habib Exchange Company LLC74. Hadi Express Exchange 75. Lari Exchange Establishment76. Lulu International Exchange LLC77. National Exchange Company78. Orient Exchange Company LLC79. Redha Al-Ansari Exchange EST80. UAE Exchange Centre81. Wall Street Exchange Centre82. Xpress Money Services Limited83. Zareen Exchange

UNITED KINGDOM84. 3R Telecom Limited85. An Express Limited86. Coinstar87. Currency Exchange Corporation (Fast Cash) 88. Global Exchange Limited89. Intl Global Currencies Limited90. Moneygram

UNITED STATES OF AMERICA91. Trans-Fast Remittance LLC


GLOSSARY OF FINANCIAL/BANKING TERMS

AACCOMMODATIONCredit exposure including on & Off-Balance Sheet Commitments and investment exposure including all financial investments except for investments in equity (only ordinary shares).

ACCOUNTING POLICIESThe specific principles, bases, conventions, rules and practices adopted by an entity in preparing and presenting Financial Statements.

ACCRUAL BASISTo recognise the effects of transactions and other events as they occur without waiting for the receipt or payment of related cash or its equivalent.

ACTUARIAL ASSUMPTIONSAn entity’s unbiased and mutually compatible best estimates of the demographic and financial variables that will determine the ultimate cost of providing post-employment benefits.

ACTUARIAL GAINS AND LOSSESActuarial gains and losses comprise the effects of differences between the previous actuarial assumptions and what has actually occurred and the effects of changes in actuarial assumptions.

ACTUARIAL PRESENT VALUE OF PROMISEDRETIREMENT BENEFITSThe present value of the expected payments by a retirement benefit plan to existing and past employees, attributable to the service already rendered.

ACTUARIAL VALUATIONFund value as determined by computing its normal cost, actuarial accrued liability, actuarial value of its assets and other relevant costs and values.

AMORTISATIONThe systematic allocation of the depreciable amount of an asset over its useful life. In the case of an intangible asset or goodwill, the term ‘amortisation’ is generally used instead of ‘depreciation’. Both terms have the same meaning.

ASSOCIATE COMPANYA company other than a Subsidiary in which a holding company has a participating interest and exercise a significant influence over its operating and financial policies.

ATTRITION RATEA measure of how many employees leave over a certain period of time.

BBILL OF EXCHANGEA signed written unconditional order addressed by one person (the drawer) directing another person (the drawee) to pay a specified sum of money to the order of a third person (the payee). The terms ‘bill of exchange and draft’ are often used interchangeably.

BORROWING COSTSInterest and other costs incurred by an entity in connection with the borrowing of funds.

BUSINESS SEGMENTA distinguishable component of an entity that is engaged in providing an individual product or service or a group of related products or services and that is subject to risks and returns that are different from those of other business segments.

CCAPITALISATIONRecognising a cost as part of the cost of an asset.

CAPITAL ADEQUACY RATIO (CAR)The percentage of the 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.

CAPITAL RESERVECapital reserve consists of revaluation reserves arising from revaluation of properties owned by the Bank and permanent Reserve Fund set aside for specific purposes defined under the Banking Act No. 30 of 1988 and shall not be reduced or impaired without the approval of the Monetary Board.

CASH EQUIVALENTSInvestments/assets that are readily convertible to cash, subject only to an insignificant risk of change in their value.

COMMITMENT TO EXTEND CREDITRefers to contractual arrangements between a bank and a customer to extend credit in the future. The agreement will stipulate conditions that must be satisfied by the customer for the facility to be utilised.

COMPOUND ANNUAL GROWTH RATE (CAGR)The year-over-year growth rate over a specified period of time.

CONSOLIDATED FINANCIAL STATEMENTSThe Financial Statements of a Group presented as those of a single entity.

CONTINGENT LIABILITIESLiabilities that at Balance Sheet date can either not be measured or can only be anticipated to arise if a particular event occurs.

CORRESPONDENT BANKA bank that acts as an agent for another bank. The correspondent bank will generally provide a wide variety of banking services on behalf of the other bank in the region in which the correspondent bank is located.

CORPORATE GOVERNANCEThe way in which corporate entities are managed and organised, ensuring in particular that the interests of stakeholders are given sufficient weight.

COSO FRAMEWORKInternal control framework developed by the Committee of Sponsoring Organisations of the US-based Trade Way Commission and now accepted globally as the standard.

COST/INCOME RATIOOperating expenses compared to net income.

COUNTRY RISKThe credit risk associated with lending to borrowers within a particular country, sometimes taken to include sovereign risk.

CREDIT RISKThe risk of loss due to non-payment of a loan or other line of credit (either the principal or interest or both), by the borrower or a counter party.

CREDIT RATINGSAn evaluation of a corporate’s ability to repay its obligations or the likelihood of not defaulting, carried out by an independent rating agency.

DDEALING SECURITIESSecurities acquired and held with the intention of reselling them in the short-term.

DEBT EQUITY RATIOLong-term borrowings (Refinance borrowings +Debentures) divided by Shareholders' equity.

DEFERRED INTERESTInterest not due at a particular date, but which will be due later.

DEFERRED TAXATIONSum set aside for tax in the Financial Statements that will become payable in a financial year other than the current financial year.

DEFINED BENEFIT PLANSRetirement benefit plans under which amounts to be paid as retirement benefits are determined by reference to a formula usually based on employees’ remuneration and/or years of service.

DEPRECIATIONThe systematic allocation of the depreciable amount of an asset over its useful life.

DERIVATIVESA financial instrument, the price of which has a strong relationship with an underlying commodity, currency variable or financial instrument.

DIVIDEND PER SHAREDividend per share is calculated by dividing the total profit distributed to shareholders by the weighted average number of shares in issue during the year.

DOCUMENTARY LETTERS OF CREDIT (L/C’s)Written undertakings by a bank on behalf of its customers (typically an importer), authorising a third party (e.g., an exporter) to draw drafts on the bank up to a stipulated amount under specific terms and conditions. Such undertakings are established for the purpose of facilitating international trade.

EEARNINGS PER SHARE (EPS)Net profits earned during a period attributable to ordinary shareholders of a company divided by number of shares in issue during that period.

EFFECTIVENESSDoing things that influences quality of output.

EFFECTIVE TAX RATEProvision for taxation divided by the profit before taxation.



EFFICIENCYDoing the things right. Refers to the ratio of output to input. Example: Cost to Income Ratio.

EQUITY METHODA method of accounting whereby the investment is initially recorded at cost and adjusted thereafter for the post-acquisition change in the investor’s share of net assets of the invested. The Income Statement reflects the investor’s share of the results of operations of the invested.

EVENTS AFTER THE BALANCE SHEET DATEEvents after the Balance Sheet date are those events, both favourable and unfavourable, that occur between the Balance Sheet date and the date when the Financial Statements are authorised for issue.

EFFECTIVE ANNUAL YIELDReturn as a percentage of market value of the investment.

FFAIR VALUEThe amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

FINANCE LEASELeases which transfer risks and rewards of ownership. Title may or may not eventually be transferred.

FINANCING ACTIVITIESActivities that result in changes in the size and composition of the equity capital and borrowings of the entity.

FORECLOSED PROPERTIESProperties acquired in full or partial settlement of debts, which will be held with the intention of re-sale at the earliest opportunity.

FOREIGN EXCHANGE INCOMEThe gain recorded when assets or liabilities denominated in foreign currencies are translated into Sri Lankan Rupees on the Balance Sheet date at prevailing rates which differ from those rates in force at inception or on the previous Balance Sheet date. Foreign exchange income also arises from trading in foreign currencies.

FORWARD EXCHANGE CONTRACTAgreement between two parties to exchange one currency for another at a future date at a rate agreed upon today.

GGENERAL PROVISIONSA provision made as a percentage on total performing advances and special mention loans and advances, for the potential credit risk.

GROSS DOMESTIC PRODUCTThe value of all goods and services produced domestically in an economy during a specified period, usually a year. Nominal GDP, adjusted for inflation, gives GDP in real terms.

GROUPA Parent and all its subsidiaries.

GUARANTEESPrimarily represent irrevocable assurances that a bank will make payments in the event that its customer is unable to perform its financial obligations to third parties. Certain other guarantees represent non-financial undertakings such as bid and performance bonds.

HHISTORICAL COST CONVENTIONRecording transactions at the actual value received or paid.

IIMPAIRMENTWhen recoverable amount declines below carrying amount.

INTANGIBLE ASSETAn identifiable non-monetary asset without physical substance held for use in the production or supply of goods or services, for rental to others, or for administrative purposes.

INTEREST IN SUSPENSEThe interest due on non-performing assets held in suspense until all the arrears of principal and interest are settled, or a specific reverse entry is made when they are determined as bad. Interest falling due from the date of classification as a non-performing asset is credited to interest in suspense.

INTEREST MARGINNet interest income expressed as a percentage of average interest earning assets.

INTEREST SPREADRepresents the difference between the average interest rate earned on interest earning assets and the average interest rate incurred on interest bearing liabilities.

INVESTING ACTIVITIESThe acquisition and disposal of long-term assets and other investments not included in cash equivalents.

INVESTMENT FLUCTUATION RESERVEReserve created to meet fluctuation in investments.

INVESTMENT PROPERTIESLand and buildings not occupied substantially for use by or in the operations of the Bank.

INVESTMENT SECURITIESSecurities acquired and held for yield or capital growth purposes and usually held to maturity.

KKEY MANAGEMENT PERSONNELThose persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any Director (whether Executive or otherwise) of that entity.

KEY PERFORMANCE INDICATORS (KPI)KPIs are quantifiable measurements, agreed before hand that reflect the critical success factors of a company.

LLEVERAGETotal liabilities as number of times of equity.

LIQUID ASSETSAssets that are held in cash or in a form that can be converted to cash readily, such as deposits with other banks, Bills of Exchange, Treasury Bills.

LIQUID ASSETS RATIOLiquid assets expressed as a percentage of total liabilities other than shareholders’ funds.

MMARKET CAPITALISATIONNumber of ordinary shares issued multiplied by the market value of each share.

MARKET RISKThe risk that the value of an investment will change due to moves in market factors.

MATERIALITYThe relative significance of a transaction or an event the omission or misstatement of which could influence the economic decisions of users of Financial Statements.

MINORITY INTERESTThat portion of the profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the Parent.

MORTALITY RATEA measure of the number of deaths in some population, scaled to the size of that population, per unit time.

NNET INTEREST INCOMEThe difference between what Bank earns on assets such as loans and securities and what it pays on liabilities such as deposits, refinance funds and interbank borrowings.

NET REALISABLE VALUEThe estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

NON-PERFORMING ADVANCES (NPA)A loan placed on cash basis (i.e., interest income is only recognised when cash is received) because, in the opinion of the management, there is reasonable doubt regarding the collectibility of principal or interest. Loans are automatically placed on cash basis when a payment is 90 days past due. All loans are classified as non-performing when a payment is 90 days in arrears.

NPA RATIOTotal Non-performing Advances (net of Interest in Suspense) divided by total advances portfolio (net of Interest in Suspense)

OOFF-BALANCE SHEET TRANSACTIONSTransactions not recognised as assets or liabilities in the Balance Sheet but which give rise to contingencies and commitments.



OPERATING ACTIVITIESThe principal revenue-producing activities of an entity and other activities that are not investing or financing activities.

OPERATIONAL RISKThe risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events.

PPARENT COMPANYA Parent Company is an entity that has one or more subsidiaries.

PLAN ASSETS (OF AN EMPLOYEE BENEFIT PLAN)Assets held by a long-term employee benefit fund.

PRICE EARNINGS RATIO (P/E RATIO)The current market price of a share divided by its earnings per share (EPS).

PROJECTED UNIT CREDIT METHODAn actuarial valuation method that sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation.

PRIMARY DEALER SPECIAL RISK RESERVEReserve maintained in order to strengthen capital base further with development of capital market.

PROPERTY, PLANT & EQUIPMENTTangible assets that:

(a) are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and

(b) are expected to be used during more than one period.

PROVISION FOR LOAN LOSSESA charge to income added to the allowance for loan losses. Specific provisions are established to reduce the book value of specific assets (primarily loans) to estimated realisable values.

PRUDENCEInclusion of a degree of caution in the exercise of judgment needed in making the estimates required under conditions of uncertainty, such that assets or income are not overstated and liabilities or expenses are not understated.

RREDEMPTIONRepayments of principal monies.

REINSURANCETransfer of all or part of the risk assumed by a primary insurer under one or more insurance to another insurer.

RELATED PARTIESTwo parties where one controls the other or exercise significant influence in financial and operating decisions.

REPOsRepurchase Agreements relating to 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)Net income expressed as a percentage of average total assets. Used along with ROE, as a measure of profitability and as a basis of intra-industry performance comparison.

RETURN ON AVERAGE EQUITY (ROAE)Net income, less preference share dividends, if any, expressed as a percentage of average ordinary shareholders’ equity.

REVENUE RESERVEReserves set aside for future distribution and investment.

REVERSE REPOThe purchase of securities under an agreement to re-sell at a given price on a specific future date.

RISK-ADJUSTED ASSETSUsed in the calculation of risk-based capital ratios. The face amount of lower risk assets is discounted using risk-weighting factors in order to reflect a comparable risk per Rupee among all types of assets. The risk inherent in Off-Balance Sheet instruments is also recognised, first by adjusting notional values to Balance Sheet (or credit) equivalents and then by applying appropriate risk weighting factors.

RISK-WEIGHTED ASSETSOn Balance Sheet assets and the credit equivalent of Off-Balance Sheet assets multiplied by the relevant risk- weighting factors.

SSEGMENT REPORTINGSegment reporting indicates the contribution to the revenue derived from business segments such as banking operations, leasing operations, treasury and investments, property and insurance.

SHAREHOLDERS’ FUNDSShareholders’ funds consist of issued and fully-paid ordinary share capital plus capital and revenue reserves.

SIGNIFICANT INFLUENCESignificant influence is the power to participate in the financial and operating-policy decisions of an investee but is not control or joint control over those policies.

SOLVENCYThe availability of cash over the longer term to meet financial commitments as they fall due.

SUBORDINATE DEBENTUREThe claims of debenture holders shall in the event of winding up, rank after all the claims of the secured and unsecured creditors and any preferential claims under any statutes, but in priority to and over claims and right of the shareholders.

SUBSIDIARY COMPANYA Company is a subsidiary of another company if the Parent Company holds more than 50% of the nominal value of its equity capital or holds some shares in it and controls the composition of its Board of Directors.

SUBSTANCE OVER FORMRefers to the consideration that the accounting treatment of transactions and the events should be governed by their financial reality and not by presentation form.

SURRENDER VALUEThe amount payable by an insurer to a policyholder on termination of an insurance policy before the expiry of its term (more common in Life Insurance).

SWAPS (CURRENCY)The purchase of currency for spot settlement and its simultaneous sale for settlement at a future date. Alternatively, the simultaneous spot sale and future purchase of a currency.

TTIER I CAPITALConsists 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 II CAPITALConsists of the sum total of revaluation reserves, general provisions, hybrid capital instruments and approved subordinated debentures.

TOTAL CAPITALIs the sum of Tier I capital and Tier II capital.

UUNIT TRUSTAn undertaking formed to invest in securities under the terms of a trust deed.

UNSECUREDRepayment of the principal and interest not being secured by any specific asset.

VVALUE ADDEDValue 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.


NOTES

CORPORATE INFORMATION

CLARIFICATIONS ON THE REPORT, PLEASE CONTACTDeputy General Manager (Finance & Planning)10th Floor, Bank of CeylonNo. 4, Bank of Ceylon Mawatha, Colombo 1, Sri LankaTel: +94 11 2432680, +94 11 2386854Facsimile: +94 11 2448203Email: [email protected]

NAME OF THE INSTITUTIONBank of Ceylon

LEGAL FORM* A banking corporation domiciled in Sri Lanka, duly incorporated on 01 August 1939 under the Bank of Ceylon Ordinance No. 53 of 1938.

* A licensed commercial bank established under the Banking Act No. 30 of 1988.

REGISTERED OFFICENo. 4, Bank of Ceylon Mawatha, Colombo 1, Sri LankaTel: +94 11 2446790-811 (22 lines)

+94 11 2338741-55 (15 lines)Facsimile: +94 11 2449401Bank Code: 7010Telex: 21331 BOCST CESWIFT Code: BCEYLKLXEmail: [email protected]: www.boc.lk

CALL CENTRETel: +94 11 2204444 (16 lines)Facsimile: +94 11 2320864

TAX PAYER IDENTIFICATION NUMBER (TIN)409000070

VAT REGISTRATION NUMBER409000070 - 7000

ACCOUNTING YEAR END31 December

STOCK EXCHANGE LISTINGThe Unsecured, Subordinated Redeemable Debentures of November 2008/November 2013 series with fixed, floating and zero coupon interest rates and June 2010/June 2015 series, with fixed and floating interest rates of the Bank are listed on the Colombo Stock Exchange.

CREDIT RATINGS‘AA (lka)/Positive Outlook’ by Fitch Ratings Lanka LimitedLevel 15-04, East Tower, World Trade Centre,Colombo 01, Sri LankaTel: +94 11 2541900Facsimile: +94 11 2541903Website: www.fitchratings.lk

www.fitchratings.com

LAWYERSMr. M K MuthukumarChief Legal Officer of Bank of Ceylon and his assistantsTel: + 94 11 2445813Facsimile: + 94 11 2321167Email: [email protected]

COMPLIANCE OFFICERMr. M L J Fernando (Assistant General Manager - Risk Management & Compliance)Tel: + 94 11 2321169Facsimile: + 94 11 2439546Email: [email protected]

AUDITORThe Auditor GeneralThe Auditor General’s DepartmentIndependence Square, Colombo 07, Sri LankaTel: + 94 11 2691151Facsimile: + 94 11 2697451Email: [email protected](Appointed in terms of the provisions of Article 154 of the Constitution of the Democratic Socialist Republic of Sri Lanka)

REGISTRARS TO THE DEBENTURE ISSUES2010/2015 SeriesBank of CeylonInvestment Banking Division23rd Floor, No. 04 Bank of Ceylon Mawatha, Colombo 1, Sri LankaTel: +94 11 2542167, +94 11 2448348

+94 11 2446790 - 811 (22 lines)Facsimile: + 94 11 2346842Email: [email protected]

2008/2013 SeriesMerchant Bank of Sri Lanka PLCLevel 18, Bank of Ceylon Merchant TowerNo. 28, St. Michael's Road, Colombo 3, Sri LankaTel: +94 11 4711766, +94 11 4711711Facsimile: +94 11 4711704Email: [email protected]

BOARD OF DIRECTORSDr. Gamini Wickramasinghe (Chairman)Mr. S R AttygalleMr. Raju SivaramanMs. Nalini AbeywardeneMr. Chandrasiri de SilvaMr. K L HewageMr. V Kanagasabapathy (Alternate Director to Mr. S R Attygalle)

SECRETARY TO THE BOARDMs. Janaki Senanayake Siriwardane

AUDIT COMMITTEEMr. V Kanagasabapathy (Chairman)

(Alternate Director to Mr. S R Attygalle)Mr. Raju SivaramanMr. K L Hewage

HUMAN RESOURCES AND REMUNERATIONCOMMITTEEMs. Nalini Abeywardene (Chairperson)Mr. Raju SivaramanMr. Chandrasiri de SilvaMr. K L Hewage

NOMINATION AND CORPORATEGOVERNANCE COMMITTEEMr. Raju Sivaraman (Chairman)Mr. S R AttygalleMr. K L HewageMr. V Kanagasabapathy

(Alternate Director to Mr. S R Attygalle)

INTEGRATED RISK MANAGEMENT COMMITTEEMr. V Kanagasabapathy (Chairman)

as Alternate Director to Mr. S R AttygalleMr. Raju SivaramanMr. K L Hewage

SUBSIDIARY COMPANIESProperty Development PLCMerchant Bank of Sri Lanka PLCBoC Management & Support Services (Private) LimitedBoC Property Development & Management (Private) LimitedBOC Travels (Private) LimitedHotels Colombo (1963) LimitedMerchant Credit of Sri Lanka LimitedCeylease Financial Services LimitedCeybank Holiday Homes (Private) LimitedMBSL Insurance Company LimitedKoladeniya Hydropower (Private) LimitedBank of Ceylon (UK) Limited

ASSOCIATE COMPANIESCeybank Asset Management (Private) Limited Southern Development Financial Company LimitedLanka Securities (Private) LimitedMireka Capital Land (Private) LimitedTransnational Lanka Records Solutions (Private) LimitedMBSL Savings Bank Limited

bank of ceylon annual report 2010

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