Sampath Bank | Annual Report 2013

Your point of viewSampath Bank | Annual Report 2013

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Financial reports are often little more than an advertisingtool for the companies that produce them; promotionalproductions that showcase the company yet reveal little ofthe back office operations that really make things go. Thisreport is a little different. In this report, we’re looking atour operations from your point of view. We’ve focused onpresenting the numbers, facts and figures that you need toknow, giving you a crystal clear picture of where we were in2013 and where we’re going in 2014.We will describe our strategic plans and vision of how weshall widen our reach and diversify our business portfolioeven further. And since we’re the third largest private bankin Sri Lanka, there’s a lot going on. From increased depositsand improved asset mobilisation to an even broaderfootprint across the island… your Bank is moving fastforward into a very promising year ahead.Read this report carefully. It’s all about Sampath Bank - fromyour point of view.Sampath Bank was originally incorporated as the Investment and Credit Bank Limited in 1986 withMr N U Jayawardena as the Chairman of the Board. In 1988, Sampath Bank launched the first multi-point network of automated teller machines in Sri Lanka. The Bank also introduced the first debitcard in South Asia in 1997. Many times awarded, Sampath Bank has won the World Finance Award2012, the National Best Quality ICT Awards 2011, the Bank of the Year award from The Banker ofFinancial Times Limited London for two consecutive years and the National Business ExcellenceAward of Sri Lanka in 2010.Sampath Bank is still one of the most technologically advanced banks in Sri Lanka since ourlandmark achievement of becoming the first bank in Sri Lanka to operate with a fully computerizeddatabase and related technologies in 1987. Sampath Bank has been the third largest private sectorbank in Sri Lanka in terms of total assets, since 2009. The Bank now operates 212 branches and 274ATMs including 10 off-site ATMs.Sampath Bank is a multiple award winning retail bank holding an overall credit rating of AA-lka(Stable) from Fitch Rating Lanka.

Contents 3 Directors Statement on Internal Control 4Our Vision and Our Values 6 Over Financial Reporting 211Financial Highlights 8Milestones 1986 -2013 12 Independent Assurance Report to the BoardChairman’s Statement 22Managing Director’s Review 29 of Directors of Sampath Bank PLC 213Board of Directors 33Corporate Management 35 Managing Director’s and Group ChiefChief Managers 40Senior Managers 90 Financial Officer’s Responsibility Statement 214Management Discussion & Analysis 95Branch Network 98 Statement of Directors’ Responsibility forNostro Accounts 102Correspondent Banks and Exchange Companies 142 Financial Reporting 215Corporate GovernanceBoard Audit Committee Report 146 Independent Auditors’ Report to theBoard Human Resources and 148 150 Shareholders of Sampath Bank PLC 217 Remuneration Committee Report 153Board Nomination Committee Report 155 Income Statement 218Board Risk Management Committee Report 156Board Credit Committee Report 158 Statement of Comprehensive Income 219Board Strategic Planning Committee Report 159Board Shareholder Relations Committee Report 160 Statement of Financial Position 220Board Treasury Committee Report 188Board Marketing Committee Report 198 Cash Flow Statement 221Risk Management ReportSustainability Highlights 200 Statement of Changes In Equity 223Financial CalendarAnnual Report of the Board of Directors Notes to the Financial Statements 224 on the Affairs of the Company Income Statement In US$ 322 Statement of Comprehensive Income in US$ 323 Statement of Financial Position in US$ 324 Ten Years at a Glance 325 Value Addition 326 Sources & Distribution of Income 327 Investor Relations 328 Capital Adequacy 336 Glossary of Financial and Banking Terms 342 Notice of Annual General Meeting 350 Form of Proxy 351 Corporate Information Inner Back Cover2

Our Vision Annual Report 2013 Sampath Bank PLCTHE GROWING FORCE INSRI LANKAN FINANCIAL SERVICESOur Values Create a learning culture that promotes individual and organisational development as well as promoting innovation and value for customers. Treat all internal and external customers the way we would like to be treated. Encourage and promote teamwork in all aspects of behaviour. Open to feedback and demonstrate an eagerness for personal development. Monitor and demonstrate an impressive commitment to results. Uncompromising ethical and professional standards of behaviour. 3

FINANCIALHIGHLIGHTS Bank Group 2013 2012 Change 2013 2012 Change Rs Mn Rs Mn Rs Mn % Rs Mn %Profitability 46,526 38,796 19.9 48,066 39,728 21.0 19,511 17,872 9.2 20,360 18,380 10.8Gross Income Total operating income 15,019 10,471 43.4 15,571 10,727 45.2Operating expenses, impairment 4,491 7,401 (39.3) 4,789 7,653 (37.4)  losses and VAT on Financial services 1,061 2,170 (51.1) 1,151 2,213 (48.0)Profit before tax 3,430 5,230 (34.4) 3,638 5,440 (33.1)Provision for taxation Profit for the year Assets & Liabilities 302,429 243,575 24.2 302,261 243,332 24.2Due to banks & other customers  (Deposits only) 261,748 210,404 24.4 268,256 214,700 24.9Loans and receivables to banks & 28,418 25,645 10.8 31,760 27,819 14.2  other customers after provision for  impairment losses (before staff 382,042 309,410 23.5 391,304 315,055 24.2  loan fairvalue adjustment) Total equity Total assets Investor Information 169.37 152.96 10.7 188.75 165.57 14.0 171.90 200.50 (14.3) 171.90 200.50 (14.3)Net asset value per share (Rs) Market value per share at year end (Rs) 20.45 31.34 (34.7) 21.67 32.57 (33.5)Earnings per share - Basic (Rs) 20.44 31.30 (34.7) 21.66 32.54 (33.4)Earnings per share - Diluted (Rs) Dividend yield ( %) 4.65 5.99 (22.4)Dividend per share (Rs) 8.00 12.00 (33.3)Dividend cover (Times) 2.56 Gross dividend (Rs Mn) 1,342 2.61 (1.9) Market capitalisation (Rs Mn) 28,843 1,953 (31.3) 32,629 (11.6)Key Indicators 3.70 3.25 13.8 3.67 3.24 13.3Loan impairment allowance to loans &  receivables to other customers (%) 1.30 2.66 (51.1) 1.36 2.70 (49.6)Return on average assets (%) 0.99 1.88 (47.3) 1.03 1.92 (46.4)  - before tax 12.69 22.26 (43.0) 12.23 21.32 (42.6) - after tax 59.1 58.2 1.5 58.9 57.9 1.7Return on equity (after tax) (%) 27.62 22.40 23.3 Cost to income ratio ( %) Liquid assets Ratio (%) Capital adequacy ratios (%) 10.08 11.80 (14.6) 10.08 11.87 (15.1) 14.14 13.75 2.8  - Tier I 14.22 13.61 4.5   - Tier I & II RAM Rating AA (Stable) AA (Stable)Fitch Rating AA-(lka) (Stable) AA-(lka) (Stable)4

SAMPATH BANK IS A GROWTH-ORIENTED, TECHNOLOGICALLYADVANCED BANKING INSTITUTION.THE BANK HAS CONTRIBUTEDTO NATIONAL DEVELOPMENTAND ALSO HELPS ITS INDIVIDUALCUSTOMERS TO GROW. SAMPATHBANK OFFERS SECURITY, SPEEDAND TECHNOLOGY AS WELL ASTHE PERSONALISED CARE THATHAS ENABLED ORGANISATIONSSUCH AS OURS TO GROW ANDOUR NATION TO PROGRESS.M G KULARATNECHAIRMAN & MANAGING DIRECTOR(MAGA ENGINEERING PVT LIMITED)17TH FEBRUARY 2014

Milestones 1986-2013 20011986 1997 1998 Quality Approved Status for the BankSampath Bank was incorporated The Bank The Bank was - Sampath Bankas Investment & Credit Bank Ltd, introduced the honoured with became the first Sriit received the certificates to DEBIT CARD, the award BEST Lankan organisationcommence business another first in COMMERCIAL to achieve the South Asia, in BANK OF THE “Quality Approved 1988 association with YEAR 1998 by Status” of best CIRRUS and “Asiamoney” for practice, which The ATM (SET) facility MAESTRO. the third year is presented by the was introduced in succession. Chartered Institute and Sampath Bank of Management became the first Accountants. bank in Sri Lanka to operate a multi-point 1997 network of Automated Teller Machines. 1986 1987 1988 19891989Uni-Bankingsystem wasintroduced to thecountry for thefirst time.1987 1996 1999 2000The Bank ceremonially “asiamoney” The Bank successfully 2000opened for business on the prestigious migrated to a more15th May 1987. Mr N U financial versatile banking Sampath BankJayawardhana became magazine in Asia package, Bancs2000 launched an Internetthe Chairman of the Bank, voted Sampath which provided a banking facilityMr Janaka de Silva was Bank as the ‘Best competitive edge “Sampathnet” inappointed as the General Commercial Bank considering the July.Manager. of the year’ in variety of services Sri Lanka. and products it offers.1987 It also invested in a new state-of-the-artThe Bank introduced a ATM switch, whichcheque guarantee card, also assisted thea saving account with continued efforts ofchecking facilities and improving productsextended banking hours till and services offered3.00 pm for the first time by the Bank.in the country.

2005 The Bank was 2010 adjudged the Creating history in the banking industry Best Corporate of Sri Lanka, the Bank opened 40 Citizen for the branches and 39 ATMs during the year 2005 in year, bringing the total number of the Top Ten branches to 171 and total number of ATMs category. 2009 to 222 by end of 2010.2004 Sampath Bank 2011The first ever reached a greaterCheque Imaging Introduced the& Truncating (CIT) height by Supersite in Sri Lanka was Branch conceptlaunched by us on clinching the of 365-day25th of October. banking at global accolade Dharmapala Mawatha and “Bank of the Year Kiribathgoda. 2009” by the highly acclaimed international magazine ”The Banker” of the Financial Times London.2009 2011 2010 2012 2012 2013 We 2013 celebrated2003 Sampath Bank pioneer our Silver in introducing manyThe Bank became the Jubilee innovations to thefirst in Sri Lanka to Sri Lankan bankingintroduce “one day marking 25 industry proudly launchedclearing” for all cheques great years of its latest state-of-the-artdrawn on any Sampath banking facility “CardlessBank branch, collected service to Cash ATM” for the firstby any Commercial the nation. time in Sri Lanka. WithBank in the island and this new facility thepresented through 2007 2008 customer would be ableSri Lanka Automated to withdraw cash fromClearing House (SLACH). Telecommunication Honoured at the ATMs without using an technology National Science and ATM- debit card. The soft was infused Technology Awards launch of “Cardless Cash into banking 2008 in the category ATM” was held on 17th technology with of Locally Developed December at Sampath the introduction of New Technologies. Bank headquarters. ‘Sampath Mobile This has resulted in Cash’, a money successfully marketed transfer process products / services for using mobile our innovative product phones. “Sampath eRemittance System”.



CHAIRMAN’S STATEMENTWE FIRMLY BELIEVE, THAT MEETING OURSTAKEHOLDER INTERESTS AND VIEWINGOUR PRIORITIES IN THE LIGHT OF YOURPRIORITIES IS KEY TO REALIZING OURCOLLECTIVE VISION FOR SAMPATH BANK,AS WE FAST FORWARD INTO THE FUTURE. OUR SRI LANKAN IDENTITY REMAINS ONE OF OUR KEY STRENGTHS AND IS THE FOUNDATION ON WHICH OUR VALUE SYSTEM IS BUILT UPON. Dhammika Perera Chairman

CHAIRMAN’S banking industry to revisit their strategies for incomeSTATEMENT generation and to become more efficient through tighter cost to income ratios. This remains a priorityYour point of view is our point of consideration focus on our strategic agenda.As another financial year comes to an end, it givesme great pleasure to address and welcome all of you, As all of you are well aware, Sampath Bank pridesour valued shareholders, to the 28th Annual General itself in being a wholly Sri Lankan, home grown bankMeeting of Sampath Bank PLC and to present to you that is steeped in the local culture. Our Sri Lankanthe audited Financial Statements and Annual Report identity remains one of our key strengths and is thefor the financial year 2013. foundation on which our value system is built upon. As a result, we engage in a form of inclusive banking,As a stalwart in the financial services industry and which I believe is uniquely our own style. By pursuingindeed as an industry innovator , your Bank has led excellence in customer care through customerthe way towards sustained growth even in a year relevance, by innovating consistently to deliver firstswhere challenges have defined the dynamics of the in technology driven solutions to the banking industryindustry. This is inherently the result of our pursuit and through continuous product innovations, we haveto perceive our operations, our performance and carved a veritable niche for ourselves in the eyes ofabove all our strategic intent from your point of view. our customers. And it is thus that your point of viewWe firmly believe, that meeting our stakeholder remains our point of consideration.interests and viewing our priorities in the light of yourpriorities is key to realizing our collective vision for 3.4Rs BillionSampath Bank, as we fast forward into the future. BANKThe financial year under review was without doubt PATone of the more challenging years for the financialservices industry as a whole, and it was no differentfor Sampath Bank. An operational scenario defined bycontracting net interest margins has become a norm,a trend that we believe will continue to pressure theBY PURSUING EXCELLENCE IN CUSTOMERCARE THROUGH CUSTOMER RELEVANCE,BY INNOVATING CONSISTENTLY TODELIVER FIRSTS IN TECHNOLOGY DRIVENSOLUTIONS TO THE BANKING INDUSTRYAND THROUGH CONTINUOUS PRODUCTINNOVATIONS, WE HAVE CARVED AVERITABLE NICHE FOR OURSELVES IN THEEYES OF OUR CUSTOMERS.10

AS WE MOVE FORWARD INTO THE FUTURE }WITH CONFIDENCE, OUR INTENT REMAINSFOCUSED ON WEALTH CREATION FOR ALLSTAKEHOLDERS.As we move forward into the future with confidence,our intent remains focused on wealth creation forall stakeholders. With a corporate strategy that isfully aligned with the national strategy for wealthcreation, we are committed to contributing towardsSri Lanka’s economic and developmental targets.Specifically, our concerted drive towards propellingthe nation towards a USD 4K era and beyond, hasbeen supported by initiatives to drive Sri Lanka’slong-term growth, through the offer of a diverserange of products, services and financing solutionsthat cater to the financial needs of a broaderspectrum of households and businesses includingsmall and medium scale enterprises. We remainconfident that this strategy is a win-win in creatingwealth for our stakeholders as well as the nation atlarge.Sampath Bank in 2013 converted the operationsof Siyapath Finance Ltd to a fully-fledged FinanceCompany with the intention to be listed on theColombo Stock Exchange. In the upcoming year,we expect to formulate further strategies aimed atrealizing the our targets.My sincere appreciations to the Board of Directors,the Managing Director, the Management Teamand the Sampath Bank team for making 2013 yetanother year of commendable performance despitethe veritable challenges. My appreciations to ourshareholders for being pillars of support at timesof both success and challenges. We look to thenext financial year with confidence and resolutededication.Dhammika Perera Annual Report 2013 Sampath Bank PLCChairmanColombo, Sri Lanka18th February 2014 11



MANAGING DIRECTOR’S REVIEWWE CONTINUE TO FOCUS ON BOTHTRADITIONAL BRANCH BANKING ANDTECHNOLOGY DRIVEN CONVENIENCE FORCUSTOMERS AS WE ADAPT OUR STRATEGYTO THE CHANGING DEMOGRAPHICS OFOUR COUNTRY AND THEIR PERSONALPREFERENCES IN HOW THEY CARRY OUTTHEIR BANKING TRANSACTIONS. OUR CONSISTENT FOCUS ON CUSTOMER CONVENIENCE HAS BEEN THE KEY COMPETITIVE ADVANTAGE Aravinda Perera Managing Director

MANAGINGDREIRVEICEWTOR’S2013 has been a year in which we have faced concept were key factors that enabled growth inmany challenges and relied on our abilities honed deposits. We continue to focus on both traditionalover a quarter century to overcome them in line branch banking and technology driven conveniencewith our values. Our consistent focus on customer for customers as we adapt our strategy to theconvenience has been the key competitive changing demographics of our country and theiradvantage that fuelled our credit growth rate of personal preferences in how they carry out their24.9% above the industry growth rate of 8.8% during banking transactions.2013. The Loans and Advances portfolio increasedfrom Rs 217.4 Bn to Rs 271.7 Bn during 2013 reflecting Our growth was financed by both foreign and localthe growth in both Personal Banking and Corporate borrowings reflecting investor confidence in ourBanking which grew by 16.9% and 38.2% respectively. ability to grow and deliver performance. SampathWe have been able to safeguard the asset quality Bank reached a key milestone when we becameof our lending portfolios and improved performance the first private bank listed on the Colombo Stockin this key area on all portfolios except on pawning Exchange to raise US$ 100 Mn in a single transaction.where the sharp decline in gold prices weighed The syndication arranged was through HSBC whichon our overall performance. Our centralised credit took the deal to the market for US$ 45 Mn which wassanctioning and monitoring processes together with increased to US$ 100 Mn in view of the keen interestcontinued investment in creating a risk culture have demonstrated by investors. A further US$ 20 Mn wasbeen key strengths that contributed to our success raised from Proparco, the private investment armin this vital area. Accordingly total assets increased of the French Development Agency (AFD) in whichfrom Rs 309.4 Bn in 2012 to Rs 382.0 Bn during theyear, an increase of 23.5% reflecting growth in loansand advances and investments. Rs 382 Bn Rs Business Growth - Bank Rs Bn 309 Bn 382 Rs Bn 309 191 248 217 272 302 2012 2013 2012 133 179 Total Assets Total Assets 244 2010 2011Deposits grew by 24.1% to Rs 302.4 Bn largely driven 2013by increased business volumes from Personal Banking 153 196as branches increased their business volumes. Ourcountrywide presence through our network of 212 Loans & Advances Deposits Assetsbranches and initiatives implemented during theyear such as extended hours and the super branch14

the French government has a ma jority stake for 14.4Rs Billionrenewable energy projects which is an identifiedgrowth area for the country. The Bank issued Net InterestRs 5 Bn in debentures during the year to strengthen Incomethe Bank’s regulatory Tier II Capital base and reduceasset and liability maturity mismatches. This was tobe an initial subscription of Rs 2.5 Bn with the optionto increase up to Rs 5 Bn in case of oversubscriptionand the issue was oversubscribed with keen interestshown by investors.Net Interest Income (NII) reflected the strong growthof credit portfolios and enhanced operationalefficiency increasing by 23.7% to Rs 14.4 Bn overthe previous years’ NII of Rs 11.6 Bn. The Net InterestMargin (NIM) however is declining in line with theindustry due to both intense competition whichresulted in lower spreads as well as the slowergrowth proportion of current and savings accounts(CASA) in customer deposits. The Bank was able tomaintain the Net Interest Margin at 4.2% above theindustry average of 3.5% due to its ability to optimisere-pricing in line with market movements. Net Feeand Commission Income growth was 18.3% fromRs 2.1 Bn in 2012 to Rs 2.5 Bn in 2013 reflecting growthin trade volumes and streamlining of arrangementswith correspondent banks which enabled a passWE WERE GREATLY ENCOURAGED BY THE Annual Report 2013 Sampath Bank PLCAWARDS WON FOR OUR PERFORMANCEWHICH INCLUDED THE PRESTIGIOUS“EUROMONEY BEST BANK OF SRILANKA 2013” AND OTHER AWARDS INSUSTAINABILITY AND HUMAN RESOURCEAREAS AS WE CONTINUE TO STRIVE FOREXCELLENCE IN ALL KEY AREAS.through of the benefits to our customers in an 19.5 Bn in 2013 mainly due to strong growth in Netintensely competitive market. Other Operating Interest Income and Fee Based Income and reflectsIncome however declined from Rs 4.1 Bn in 2012 the moderation of earnings from volatile sources.to Rs 2.7 Bn by 34.9% due to LKR depreciating The impairment charge for loans and other lossesrelatively slower during the year, coupled with the was Rs 3.5 Bn as all adjustments required to presentmeasures taken to reduce volatility in earnings from the impact of the losses on the pawning portfolioforeign exchange gains and losses early this year. in a true and fair manner have been made, as ourForeign exchange revaluation income contributed intention has been to recognise all losses relatingsignificantly to earnings in 2012. Total Operating to pawning this year. Consequently Net Operatingincome grew by 9.1% from Rs 17.9 Bn in 2012 to Rs Income declined by 10% from Rs 17.8 Bn in 2012 to 15

MANAGINGDIRECTOR’SREVIEWRs 16.0 Bn in 2013 moderating an otherwise strong weather conditions. The industry sector growthperformance for 2013. The Cost to Income ratio was encouraging estimated at 9.2% for 2013 due tomarginally increased during the year from 58.2% favourable macroeconomic conditions, increasedin 2012 to 59.1% in 2013. Other operating expenses infrastructure development and gradual economicgrowth of 18.6% were mainly due to the upgrading recovery of ma jor trading partners. All subsectors ofof our branch network to reflect the brand and the industry sector performed well during 2013 andensure that all customers are able to conduct it is noteworthy that it recorded the highest sectorbusiness in a pleasant environment at all branches. growth for the 5th consecutive year with double digitThe impairment charge on the pawning portfolio growth in the mining & quarrying, electricity, gas &impacted Operating Profit before Income Tax and water and construction sectors in the 3rd quarter.Profit for the year which declined by 39.3% and 34.4% The services sector growth is estimated to be 6.7%respectively. Total Capital adequacy also improved mainly due to strong growth witnessed in the Hotelsduring the year from 13.6% to 14.2%. However Tier and Restaurants and Transport and CommunicationsI Ratio slightly declined from 11.8% in 2012 to 10.1% subsectors which grew in double digits during thein 2013. The team at Sampath Bank which I am year. It was encouraging to note that the country’sprivileged to lead has demonstrated its ability to growth was more broad based and inclusive withrespond to challenges arising from the operating the other provinces contributing 56.6% of the GDP inenvironment while staying true to our values and 2013. Increased employment was observed across alldemonstrating that we are indeed the growing force sectors with unemployment rising marginally fromin Sri Lankan Financial Services. We were greatly 4% in 2012 to 4.5% in 2013 mainly due to the entryencouraged by the awards won for our performance of new job seekers into the labour force. Labourwhich included the prestigious Euromoney Best Bank productivity also increased during the year across allof Sri Lanka 2013 and other awards in sustainability key sectors of the economy.and human resource areas and we continue tostrive for excellence in all key areas. The Board Exports, which declined in the first quarter, graduallyhas provided invaluable guidance in a year where increased from June due to a gradual recoverystrategy was reviewed and revised in response to in key export destinations and high agriculturala changing landscape and I am appreciative of its volume exports. Earnings from exports grew by 5.6%commitment and insightful guidance this year. during the period January to November 2013 to US$ 9,400 Mn led by increased agricultural exportsOur operating environment and industrial exports which grew by 10.6% and 4.1%The global economy improved during the year with respectively during the same period. ExpenditureWorld Output growth forecast at 3.5% for 2013. Agradual tapering of the quantitative easing wasannounced following moderate economic growth inthe US and the risk of the Euro zone break up wassuccessfully averted by policymakers. Emergingmarket economies continue to account for the bulkof the growth although significant slowdowns werewitnessed in Brazil, Russia, India and China. While oldrisks remain, new ones are also coming into play andit is expected that there will be a gradual recovery ofthe global economy in 2014. It is observed that globalfinancial stability has improved as stated in theGlobal Financial Stability Report in April 2013 whichprovides a platform for a growth agenda.Sri Lanka’s economic growth rebounded in 2013 andis estimated to be 7.2% in comparison to 6.4% in2012. The agriculture sector showed strong growthdue to the increased harvest in paddy and increasedoutput in the fisheries sector. Disappointingly, tea,rubber and coconut were impacted by adverse16

on imports declined by 2.5% to US$ 17,231 Mn due to policy measures implemented in 2012 and lower international commodity prices. It is estimated that the overall decline in imports for 2013 will be 0.7% totalling to US$ 19,046 Mn. Consequently the trade balance declined by 10.7% to US$ 7,831 Mn during the first 11 months of 2013 and is estimated to be US$ 8,594 Mn by end of 2013 equivalent to 12.8% of GDP. Growth in the tourism sector was strong with an increase of 15% and 24% in arrivals and earnings respectively for the period January to November 2013. The migrant worker remittances maintained their growth momentum and are estimated to reach Rs 6.7 Bn for 2013, an increase of 11.6% due to increased migration in the professional and skilledTHE BANK WAS ABLE TO MAINTAIN THENET INTEREST MARGIN AT 4.2% ABOVE THEINDUSTRY AVERAGE OF 3.5% DUE TO ITSABILITY TO OPTIMISE RE-PRICING IN LINE WITHMARKET MOVEMENTS. 14.2% category, increased use of formal channels for remittances and introduction of web based systems Total Capital for inward remittances. The current account deficit Adequacy for 2013 is expected to contract to US$ 2.6 Bn Ratio equivalent to 3.9% of GDP, a decrease from 6.6% in 2012 mainly due to the positive developments 274 observed during the year. ATMs Substantial foreign inflows to the capital and finance account were observed during the year3,688 Sampath which included US$ 1.5 Bn in project loans to the Bank government, US$ 1.5 Bn foreign borrowings by banksEmployees and US$ 650 Mn in Corporate Sector Borrowings 212 among other inflows. The balance of payments improved accordingly from a surplus of US$ 151 Annual Report 2013 Sampath Bank PLC Branches Mn in 2012 to a surplus of US$ 700 Mn in 2013. The Rupee depreciated 2.4% during the year against the US Dollar having appreciated 2.25% during the first four months of the year. It stabilised again by the last quarter and appreciated 1.6% with minimal intervention. Gross Official Reserves are estimated to be US$ 7.1 Bn, equivalent to 4.5 month’s imports and are deemed a healthy level above the 3 month benchmark. Headline inflation as measured by the Consumers Price Index declined to 4.7% during the year due to the moderation of global commodity prices and the effectiveness of monetary policy and fiscal discipline. 17

MANAGINGDIRECTOR’SREVIEWTHE OVERALL PERFORMANCE OFTHE SECTOR DEMONSTRATES THERESILIENCE AND STABILITY OF THEBANKING SECTOR AS IT CONTINUED ITSGROWTH TRAJECTORY AND MAINTAINEDPROFITABILITY IN 2013Monetary policy eased during the year with the at end November 2013. The overall performance ofrepurchase rate and the reverse repurchase rates the sector demonstrates the resilience and stabilitywere revised downward in May and October by of the banking sector as it continued its growth50 bps. Market interest rates declined accordingly tra jectory and maintained profitability in 2013 and iswith both deposit and short term lending rates expected to perform at a higher level in 2014 with theadjusting swiftly reflecting the downward trend. improvement in global economic outlook.Long term loan rates have also now adjusted toreflect monetary policy. A selective growth strategy We adopted a selective growth strategy duringBanking sector asset growth was 16.6% for the year, 2013 in response to the economic conditions thatmoderating from the 19.9% for 2012. Private sector prevailed during 2013. A key area of focus wascredit growth was 7.3% a decline from 17.6% in increasing branch business volumes and improving2012 due to a number of factors including a sharp the profitability of branches which yielded results andreduction in pawning activity, high base effects, now more than 95% of our branches are profitable.increased foreign borrowings by corporates and Centralising specialist skills structures played aconvenient access to debt markets. Branch networks key role in the growth of business volumes as weand ATM networks grew during the year with a were able to streamline operations and optimisenumber of branches opened outside the Western access to these specialists to reach a higher level ofProvince providing a platform for inclusive growth. performance during the year. Our branch networkDeposit growth moderated from 18% in 2012 to grew from 209 branches to 212 branches during15% in 2013. Total borrowing by the Banking sector the year with new branches opened in Thalahena,increased from Rs 804 Bn in 2012 to Rs 1,006 Bn by Karagampitiya and Gampaha (Super). We alsoDecember 2013 reflecting a structural change in upgraded the interiors and exteriors of our branchesthe funding structure of banks. Foreign currency to reflect the brand and ensure that our customersborrowings grew by 45% from Rs 441 Bn in 2012 to have a pleasant environment in which to conductRs 641 Bn as at end November 2013 as banks raised their banking transactions. Some of the branchesUS$ 1,548 Mn in foreign borrowings during the year. are now accommodated in premises that are ownedRupee borrowings of the banking sector showed by the Bank and purpose built for the business oflittle movement growing from Rs 363 Bn to Rs 365 Bn banking. These locations are in key towns in theduring the period January to November 2013. Gross country where we expect growth. We have alsoNon Performing Loans ratio increased from 3.7% in continued to develop electronic channels for the2012 to 5.6% mainly due to the decline of gold prices convenience of our customers which include theimpacting the pawning portfolio. Liquidity of banks ATM network, mobile banking and internet bankingimproved during the year as Liquid Assets to total which we believe will be the way forward as youngerassets ratio improved from 26% in 2012 to 32% as tech savvy generations avail themselves of banking18

services. Our customers have access to a network 1st Annual Report 2013 Sampath Bank PLCof 1,842 ATMs connected to the ATM Switch whichcombines the ATM networks of 10 banks including to Introduce274 ATMs of Sampath Bank. We also launched the CardlessSampath Mobile App available from the Apple Store ATMsand Google Play Store which has had over 10,000downloads which demonstrates the need for further enabled the growth of business volumes creating ainvestment and development in this area. Mobile and base for the cross-selling of our other products.Telebanking volumes also increased during the yearby 20% and 23% respectively as utilisation of these We have significantly grown our advances portfolioproducts increased due to customer familiarity. by 24.9% during a challenging year for the industrySimilarly internet banking volumes and value also as private sector credit growth rate declined duringgrew 31% and 53% respectively reflecting our 2013. Growth was facilitated through excellentresponse to customer needs. customer service which also enabled growth of our trade volumes during a year in which volumesWe also focussed on the growth of our remittances contracted in the country. Our selective growththrough expansion programmes which included strategy was the bedrock of our corporate bankinggrowth of our overseas business partner network growth strategy which enabled us to grow infrom 53 to 82. Technological enhancements enabled identified growth sectors in alignment with therecipients to access their remittances 24 hours country’s growth strategy.through their mobile and our ATM network as wecombined Mobile Banking with our e-Remittance Our heritage of technological innovation hassystem to provide greater convenience. provided us with scalable solutions for the banking needs of our customers and is inextricablyCredit and Debit cards are a key growth area for intertwined with our brand promise to ourthe Bank and we continue to be the only bank in customers. We continue to shape the bankingthe country that has the three leading global card industry through technological innovations, some offranchises, Visa, MasterCard and American Express®. which are discussed above. In addition to these, weThe number of active cards and business volume have launched the first cardless ATM in the countrygrowth has been encouraging and enabled us to and expanded the foreign currency ATM network toincrease our market share. We have promoted cover key tourist markets in the country. Many of oure-commerce through aggregators which link a electronic channels have been improved for greaternumber of smaller players enabling us to offer convenience of our customers and re-launchedcustomers a wider choice of merchants and products including ‘Sampath Vishwa’ for our corporatethan previously available. Technological innovation banking customers.has enabled us to reach smaller merchants throughmPOS which converts any android mobile phone to Sampath Leasing & Factoring Ltd, obtained thea POS terminal. We are committed to growing this license to operate as a finance company and was re-segment of merchants into our payment networks branded as Siyapatha Finance Ltd, during the year. Itenabling their growth as strategic partners. is expected to obtain a listing in the Colombo Stock Exchange in 2014.It is noteworthy that retail banking has grown despitethe focus on reducing the pawning portfolio which Talent Managementwas a key concern during the year. The pawning Our team continues to be the driving force forportfolio (which includes interest receivables) was our sustained growth and provides us with ourreduced from Rs 54.9 Bn to Rs 53.5 Bn during the greatest competitive edge. The talent pool has beenyear which now accounts for 19.7% of the Bank’s loan developed through a learning and mentoring cultureportfolio compared to 25.3% at the beginning of the that has embedded our values into the day-to-year. We have recognised the impairment charges day business of the Bank. We continue to focus onin full during the year, together with the resulting recruiting the best talent for our identified businessinterest reversals as our intention has been to needs and developing them to facilitate achievementrecognise all losses this year. of their personal career goals in alignment with the Bank’s business goals. Accordingly we promoted 243Sampath Bank has been able to raise deposits withrelative ease with increase in our footprint, brandrecognition as a responsible bank and the relentlessfocus on customer convenience. This has playeda key role in the profitability of our branches as it 19

MANAGING DIRECTOR’S REVIEW} Our focus on talent of Directors on a regular basis. The Compliance development has been Unit, Risk Management Unit and Internal Audit rewarded with a continue to provide the Board and its Committees continuous increase in with assurance on compliance with the statutory employee productivity framework which includes regulations issued by which has been the the SEC and the Central Bank of Sri Lanka. The Risk foundation for our Management Department which forms the 2nd line performance this year. of defense and the Compliance and Internal Audit Departments which form a vital part of the 3rd line officers at various levels during the year and grew of defense have been strengthened during the year our talent pool with the recruitment of 372 team with increased staff and investment in software to members. Our focus on talent development has been assist in fulfilling not just the regulatory requirements rewarded with a continuous increase in employee but the more prudential guidance of the Board and its productivity which has been the foundation for our Sub Committees which are charged with oversight of performance this year. We have widened the scope these functions. of the Sampath Leadership Academy and enhanced leadership capability at all levels of the Bank which Our strategy for 2014 has energised and empowered managers at all levels We will continue our strategy of selective growth to bring forward valuable suggestions for innovation into 2014 in line with the Government’s strategy. and streamlining of business processes enhancing Our ambition for 2014 is to grow our operations our profitability and productivity. Our talent retention beyond the country’s borders and establish a regional rate continues to be high at 97% which is testimony presence in identified growth markets. The initial to the commitment and dedication of our team and visits and studies have been completed and we strong alignment with the corporate vision to be the expect to establish our presence in the selected growing force in Sri Lankan Financial Services. markets in 2014. Care has been taken to understand the challenges and changes in the risks for the Bank Compliance and Regulatory framework and we are confident that these areas have been The Central Bank continued to strengthen the sufficiently addressed. Our focus will be on private banking sectors with a focus on risk-based sector credit growth in 2014 with an emphasis on supervision, calibrating business models and the power, leisure, infrastructure development and processes of banks and aligning the country’s needs trade which are key sectors for growth. We will look and strategy with the banking sector. Accordingly to technological innovations to increase financial a number of Directions were issued during the year inclusion in the country as a core part of our retail to strengthen risk management, financial reporting, banking strategy. Debit and Credit cards, remittances regulate stock market activity and cap interest rates and deposit growth remain key areas of focus on credit cards and penal interest rates. The ceiling following our success in 2013 in these business lines. rates for credit cards, pawning and penal interest Our strategy to reduce the pawning portfolio will limit the tools for management of recoveries which is continue into 2014 and we will continue to monitor a greater concern than the limitation on profitability developments in this area proactively to ensure that of these business segments. strategy is in line with market and risk appetite. We will intensify our operations with SMEs as we expect Compliance with regulations is a key priority at a high rate of growth and we are well positioned to the Bank and is monitored at the highest levels serve this sector’s need as we now have the footprint by the Board Audit Committee and the Board Risk and technology which enable a speedy response to Management Committee which report to the Board the entrepreneurs who drive the growth of this sector. The Investment Fund Account is utilised in full for the development of this sector with the loan size being below Rs 30 Mn in line with the Government’s vision in setting up the fund. We will continue to invest in developing our talent pools through provision of technical, soft skills and leadership training to enable them to compete effectively in an increasingly competitive market with declining margins.20

The Road Map for 2014 presented by CBSL outlines Annual Report 2013 Sampath Bank PLCproposals for consolidation of the banking industryand we are in the process of determining our ownstrategy in this regard at the time of writing. We areabove the threshold for forced consolidation andwill evaluate the growth opportunities presented toensure alignment with the Bank’s long term strategyif we do deem it a desirable growth strategy.Concerns outlined in the previous year still remainas emerging markets growth rates have declinedalthough they remain above the advanced economygrowth rates. However, the positive outlook for theUS and the Eurozone is encouraging for exportersalthough downside risks remain. Private sector creditgrowth rates in the country are of particular concernas it is a key driver of growth for the bankingsector and the growing trend of corporate interestin debenture issues and foreign direct borrowingsdecrease the growth opportunities for banks inthis sector. We will continue our aggressive lendingstrategy in selected business lines and industrysectors and focus on improving our NPA ratio in2014. We expect 2014 to be a challenging year withopportunities for growth both within the country andbeyond its shores.An experienced and dynamic team provides us withthe ability to grasp new opportunities for growth. Ilook to the Board to provide leadership, vision andstrategic direction as in the past, to lead us to a newera of growth and an enlarged vision. I wish to thankthe Team Sampath for its continued commitment toachieving our vision and the Board for its guidanceand continued support. Our customers who havetrusted us to be their partner in growth have beenthe foundation for our success and we renew ourpromise to be responsive to their needs as we growtogether.Aravinda PereraManaging DirectorColombo, Sri Lanka18th February 2014 21

01 Mr Dhammika Perera Chairman (Non Executive) 02 Mr Aravinda Perera Managing Director (Executive) BOARDOF DIRECTORS22

03 Mr Channa Palansuriya 04 Mr Sanjiva Senanayake Deputy Chairman Senior Director (Non Executive) (Non Executive / Independent)05Mr Deepal Sooriyaarachchi Director (Non Executive / Independent)06 Prof Malik Ranasinghe 07Mrs Dhara Wijayatilake Director (Non Executive / Independent) Director (Non Executive / Independent) 23

BOARD OFDIRECTORS 09 Mr Deshal De Mel Director (Non Executive)08 Miss Annika Senanayake Director (Non Executive / Independent) 10 Mr Ranil Pathirana Director (Non Executive)11 Mrs Saumya Amarasekera 12 Mr Ranjith Samaranayake Director (Non Executive) Group Chief Financial Officer 24 Director (Executive)

01 Mr Dhammika Perera Risk Management Committee, Board HR & Skills & Experience: Extensive governance Remuneration Committee, Board Strategic experience gained through membership of Planning Committee and Board Treasury the Boards of Sampath Bank, NDB Bank, Pan Committee Asia Bank and other financial institutions; a quintessential business leader with interests Current Appointments: Managing Director, in a variety of key industries including hydro Sampath Bank PLC; Director of Siyapatha power generation, manufacturing, hospitality, Finance Ltd. Director Institute of Bankers of entertainment, banking and finance. He Sri Lanka, Director Lanka Financial Services enriches the Board with over 25 years of Bureau Limited, Director Lanka Bangla Finance experience in managing companies to deliver Limited and President of the Association of high performance. Professional Bankers of Sri LankaAppointed to the Board: 1st August 2007. Former Appointments: Deputy ManagingAppointed as Non Executive Chairman on 1st Director, Chief Operating Officer, DeputyJanuary 2012. General Manager, Corporate Banking and other roles spanning a career of 26 years at SampathMembership of Board Sub Committees: Bank. Senior Project Officer, DFCC andChairman of Board Strategic Planning Departmental Manager and Service EngineerCommittee; Member of Board Nomination at Ceylon Tobacco Company, Engineer atCommittee National Milk Board.Current appointments: Secretary, Ministry 03 Mr Channa Palansuriyaof Transport, Sri Lanka. Director, Strategic Skills & Experience: Thirty years of extensiveEnterprise Management Agency of Sri Lanka. experience in the Apparel sector by headingChairman Vallibel One PLC, Vallibel Finance the Orit Group of companies and throughPLC, Vallibel Power Erathna PLC, The Fortress continuous leadership given to otherResorts PLC, The Queensbury Leisure Ltd and companies in the Apparel Industry. Further,Delmege Limited. He is the Deputy Chairman being a Board member of the BOI since 2005,of Hayleys PLC, Royal Ceramics Lanka PLC, he gained wide experience in GovernmentHorana Plantations PLC, Lanka Administration. He has won awards such asCeramic PLC and LB Finance PLC. He also Asia Pacific Outstanding Entrepreneurshipserves on the Boards of Amaya Leisure PLC, Award in 2013, Sri Lankan Entrepreneur ofHaycarb PLC, Hayleys MGT Knitting Mills PLC, the Year in 2002 and the Silver Award of theThe Kingsbury PLC, Dipped Products PLC, National Chamber of Exporters of Sri Lanka forLanka Floortiles PLC and Orit Apparels Lanka the Garment Extra Large category in 2004.(Pvt) Limited. Appointed to the Board: 1st January 2012 asFormer appointments: Chairman and Director a Non Executive Director. Appointed DeputyGeneral, Board of Investment, Sri Lanka. Chairman on 26th January 2012.02 Mr Aravinda Perera Membership of Board Sub Committees: Skills & Experience: Counts over 29 years Chairman of Board Shareholder Relations in the Banking sector. Fellow Member of Committee, Member of Board Risk Management Institute of Bankers, Sri Lanka; Fellow Member Committee, Board HR and Remuneration of the Chartered Institute of Management Committee, Board Strategic Planning Accountants, UK; Chartered Engineer Committee, Board Nomination Committee and and member of the Institute of Engineers, Board Credit Committee. Sri Lanka; MBA from the University of Sri Jayewardenepura; Bachelor of Science Current Appointments: Chairman/Managing degree in Engineering from the University of Director of Orit Group comprising Orit Apparels Moratuwa. Lanka (Pvt) Ltd, Orit Trading Lanka (Pvt) Ltd, Chairman Style-Kraft Sportswear (Pvt) Ltd Appointed to the Board: 25th November (Canada) and Orit Inspired Creations (Pvt) Ltd, 2008 as an Executive Director and appointed Deputy Chairman of Joint Apparel Association Managing Director with effect from 1st January Forum (JAAF), Executive Committee Member 2012. of Apparel Exporters Association 200gfp, Executive Committee Member of Sri Lanka Membership of Board Sub Committees: Apparel Sourcing Association (SLASA), Member of Board Credit Committee, Board Executive Committee Member of Old Boys’ 25

BOARD OF 05 Mr Deepal SooriyaarachchiDIRECTORS Skills & Experience: Counts over 30 years experience in Sales, Advertising, Marketing, Association of Ananda College & Patron of Old Human Resources Development & Strategy with Ananda Buddhist Association and Basnayake extensive experience in the field of insurance. Nilame of Hendala Temple. Fellow member of the Chartered Institute of Marketing UK and a Chartered Marketer. Past Former Appointments: Board Member of Sri President of Sri Lanka Institute of Marketing. Lanka Institute of Textile & Apparel, Chairman Holds an MBA from the University of Sri of Apparel Exporters’ Association 200gfp Jayawardenapura. Pioneer in disseminating during 2006 to 2008, Chairman of GC Lanka management knowledge in Sinhala Language. Clothing (Pvt) Ltd. A leading management development consultant and Author.04 Mr Sanjiva Senanayake Skills & Experience: Extensive local and Appointed to the Board: 5th August 2010 as an overseas experience in the financial Independent Non Executive Director services sector having served in the senior management capacities at premier financial Membership of Board Sub Committees: institutions and as an independent consultant. Chairman of Board HR & Remuneration Committee and Board Marketing Committee. Member of Board Audit Committee Appointed to the Board: 1st January 2012 06 Current Appointments: Independent as Independent Non Executive Director and Non Executive Director at AIA Insurance appointed as Senior Director with effect from Lanka PLC; Pan Asian Power PLC, Hemas 26th January 2012. Manufacturing PVT Ltd (Chairman, Non Executive Independent) Commissioner of Sri Membership of Board Sub Committees: Lanka Inventors Commission. Member National Chairman of Board Treasury Committee, Administrative Reforms committee (NARC). Member of the Board Audit Committee, Board Certified Partner RBL Group USA Credit Committee, Board Risk Management Committee and Board Strategic Planning Former Appointments: Managing Director Committee, Aviva NDB Insurance PLC. Current Appointments: Non Executive Director Prof Malik Ranasinghe of Asian Hotel & Properties PLC, Hemas Power Skills & Experience: Extensive governance PLC, Hemas Pharmaceuticals (Pvt) Ltd experience as a Vice-Chancellor and Non- Executive Director on corporate boards. A Former Appointments: Senior Investment Fellow Member and International Professional Officer, Global Financial Markets Department, Engineer of the Institution of Engineers, Sri International Finance Corporation (Private Lanka; Fellow of the National Academy of sector investment arm of World Bank); Sciences, Sri Lanka; PhD from University of International Finance Corporation Resident British Columbia, Vancouver, Canada in Civil Representative for Sri Lanka & Maldives; Engineering as a Canadian Commonwealth Assistant General Manager (Treasury & Scholar; published extensively on Engineering Investment Banking) at National Development and Environmental Economics with Project Bank of Sri Lanka; Consultant (Treasury & Management, Recipient of accolades and Business Development) Commercial Bank of awards including the General Research Ceylon Ltd, Citi Bank Brunei, Citibank Colombo Committee Award for outstanding Contribution Citibank Sydney; Co-ordinating Engineer, to Sri Lankan Science from the Sri Lanka Greater Colombo Economic Commission; Association for Advancement of Science, the Development Planning Assistant, United Committee of Vice-Chancellors and Directors Nations Development Program. (CVCD) Excellence Award for 2012 for the Most Outstanding Senior Researcher in Technology and related Sciences, the Award for Outstanding Contribution to Education 2012 at World Education Congress and the Education Leadership Award 2013 at the 4th Asia’s Best B-School Awards, Singapore.26

Appointed to the Board: 30th August 2011 as an Member of Board HR & Remuneration Independent Non Executive Director Committee, Board Credit Committee and Board Marketing Committee Membership of Board Sub Committees: Chairman of Board Credit Committee, Member Current Appointments: Chief Executive Officer of Board Audit Committee, Board Strategic of ART Television Broadcasting Company Planning Committee and Board Treasury (Pvt) Ltd, and IWS Geographical Information Committee Systems Ltd. Director of IWS Holdings (Pvt) Ltd. Current Appointments: Senior Professor in Civil Engineering, University of Moratuwa and 09 Mr Deshal De Mel Independent Director Textured Jersey Lanka Skills & Experience: Master of Science degree in PLC and Access Engineering PLC International Political Economics from the London School of Economics, Bachelor of Arts degree Former Appointments: Vice-Chancellor of with Honours in Philosophy, Political Science and the University of Moratuwa, Chairman of the Economics from University of Oxford. Committee of Vice Chancellors and Directors of Sri Lanka, Council Member of the Association Appointed to the Board: 1st January 2012 as a of Commonwealth Universities, Fellow of Non Executive Director the National University of Singapore, Non Executive Director of the Colombo Stock Membership of Board Sub Committees: Exchange and Lanka IOC PLC, Independent Member of Board Credit Committee, Board HR Director Hemas Power PLC & Remuneration Committee, Board Strategic Planning Committee, Board Shareholder07 Mrs Dhara Wijayatilake Relations Committee, Board Treasury Skills & Experience: Attorney-at-Law, LLB (Cey), Committee and Board Marketing Committee Senior Public Officer counting over 39 years experience in the Public Service. The first Current Appointments: Senior Economist, woman to hold the post of a Secretary to a Hayleys PLC, Member, Economic Fiscal Cabinet Ministry. and Policy Planning Committee and Export Committee of the Ceylon Chamber of Appointed to the Board: 30th August 2011 as Commerce. Independent Non-Executive Director Former Appointments: Economist, Institute Membership of Board Sub Committees: of Policy Studies, Sri Lanka focussing on Chairperson of Board Risk Management international trade, trade in services, foreign Committee, Member of Board Audit Committee aid and post-conflict economics. Current Appointments: Secretary to Ministry of 10 Mr Ranil Pathirana Technology & Research, member of Sri Lanka Skills & Experience: Extensive experience Law Commission in finance and management in financial, apparel and energy sectors. Fellow member Former Appointments: Secretary to the Ministry of the Chartered Institute of Management of Justice, Secretary to the Ministry of Plan Accountants, UK(FCMA) and holds a Bachelor Implementation of Commerce degree from the University of Sri08 Miss Annika Senanayake Jayawardenapura. Skills & Experience: Graduate of the University Appointed to the Board: 1st January 2012 as an of Nottingham Heads Corporate Planning for Non Executive Director IWS Holdings (Pvt) Ltd., in diversified business interests in telecommunications, broadcasting, Membership of Board Sub Committees: aviation, automobiles, shipping, warehousing Chairman of Board Audit Committee, Member and logistic support services, packaging and of Board Strategic Planning Committee food processing. Current Appointments: Group Finance Director, Appointed to the Board: 1st January 2012 Hirdramani Group of Companies, Non- appointed to the Board as an Independent Non Executive Director of Hayleys PLC. Executive Director. Former Appointments: Chief Executive Officer, Membership of Board Sub Committees: Vanik Bangladesh Securities; AVP of Vanik Chairperson of Board Nomination Committee, Incorporation. 27

BOARD OFDIRECTORS11 Mrs Saumya Amarasekera Skills & Experience: Counts over 26 years in active legal Trusts and Practice in Civil Law practicing in the Original, Apellate & Supreme Court as an Attorney-At-Law. Holds a Masters in Law from the University of Pennsylvania with particular emphasis on Insurance Law, Privacy and Defamation Law. She has experience in areas relating to Money Recovery, Property, Testamentary, Condominium Disputes, Family Law and litigates on behalf of financial services sector clients and has specialised in local and international arbitrations. Appointed to the Board: 1st June 2012 as an Independent Non Executive Director Membership of Board Sub Committees: Chairperson of Board Nomination Committee (from November 2012 until 11th December 2013). Member of Board Nomination Committee and Board Marketing Committee. Current Appointments: Legal practitioner Member of the Bar Association of Sri Lanka, Member of the Supreme Court Complex Board of Management.12 Mr Ranjith Samaranayake Skills & Experience: Extensive experience as Head of Finance & Planning at National Savings Bank, Commercial Bank PLC and Sampath Bank. Counts over 38 years experience of managing finance in the financial services sector. Holds a Bachelor of Commerce (Accountancy Special) Degree from the University of Peradeniya. Appointed to the Board: 1st January 2009 as an Executive Director. Membership of Board Sub Committees: Member of Board Credit Committee, Board Risk Management Committee, Board Strategic Planning Committee and Board Treasury Committee Current Appointments: Group Chief Financial Officer, Sampath Bank PLC, Director Siyapatha Finance Ltd. Former Appointments: Senior Deputy General Manager, Finance & Planning at Commercial Bank PLC.28

CORPORATE 02MANAGEMENT 0103 04 05 06 29

CORPORATE 08MANAGEMENT 10 07 12 09 1130

13 1416 15 18 17 19 31

CORPORATEMANAGEMENT1 Mr Aravinda Perera 15 Mr Amanda Abeyweera Managing Director Assistant General Manager - Administration2 Mr Ranjith Samaranayake 16 Mr Upali Dharmasiri Executive Director / Assistant General Manager - Recoveries Group Chief Financial Officer 17 Mrs Nimali Abeyratne3 Mr Nanda Fernando Assistant General Manager - Branch Credit II Senior Deputy General Manager 18 Mrs Shashi Jassim4 Mr Lalith Jayakody Assistant General Manager - Senior Deputy General Manager - Corporate Finance & FCBU Finance & Planning 19 Mr Pradeep Perera5 Mr Saman Herath Head of Internal Audit Senior Deputy General Manager - Operations & Branch Credit6 Mr Wije Dambawinne Deputy General Manager - Treasury7 Mr Tharaka Ranwala Deputy General Manager - Marketing & Business Development8 Mr Aruna Jayasekera Deputy General Manager – Human Resources9 Mrs Anoja Karunaratne Group Chief Risk Officer10 Mr Ajantha De Vas Gunasekara Deputy General Manager - Finance11 Mrs Hiranthi De Silva Deputy General Manager - Corporate Credit12 Mr Dinusha Ihalalanda Assistant General Manager - Operations13 Mr S Sudarshan Group Company Secretary14 Mr Deepal Samarasekera Assistant General Manager - Branch Credit I32

CHIEF 03MANAGERS 06 02 09 01 33 04 0507 08

CHIEFMANAGERS 10 11 12 14 13 8 Mr Maheel Kuragama1 Mrs Anuja Goonetilleke Chief Manager - Operations Chief Compliance Officer 9 Mr H B Keerthiratne2 Mrs Nirosha De Silva Chief Manager - Finance & Forex Back Office Chief Manager - Card Centre 10 Mr Amal Kirihena3 Mr Ra jendra Ranasinghe Chief Manager - Branch Credit Chief Manager - Systems & Procedures 11 Mr Sanjaya Gunawardena4 Mr Pununuwan Wickremasekera Chief Manager - Branch Credit Chief Legal Officer 12 Mr Thusitha Nakandala5 Mr Sanath Abhayaratna Chief Manager - Branch Credit Head of Trade Services 13 Mr Prasantha De Silva6 Mr Manoj Akmeemana Chief Dealer Chief Manager - Branch Credit 14 Mrs Ayodya Iddawela Perera7 Mr Ajith Salgado Chief Manager - Corporate Credit Head of Information Technology 34

SENIOR 03MANAGERS 06 02 01 04 05 08 0907 35

SENIOR 12MANAGERS 11 10 1513 14 1716 1836

20 19 21 23 2422 25 26 27 28 37

SENIORMANAGERS1 Mr Sujith Abeyratne 16 Mr Hemantha Marasinghe Senior Manager - Branch Supervision Senior Manager - Engineering Services 17 Mr Nalaka Gunawardena2 Mr Dushyantha Dassanayake Senior Manager - System Audit Senior Manager - Systems Development & Electronic Delivery Channels 18 Mr Prasanna Mullegama3 Mr Asoka Manikgoda Senior Regional Manager Senior Manager - Recoveries 19 Mr Janaka Jayasuriya4 Mr Ananda Wijitha Senior Manager - City & Commercial Credit Senior Manager - IT/ Communication & 20 Mr Lasantha Senaratne Networks Assistant Company Secretary 5 Mr Jawana Atukorale 21 Mrs Kumari Jayasuriya Senior Manager - Compliance Senior Regional Manager6 Mr Thilak Abeysinghe 22 Mr Pasan Manukith Head of Deposits Senior Manager - Systems Development7 Mr Sisira Dabare 23 Mr Deepal De Silva Senior Regional Manager Senior Regional Manager8 Mr Saman De Silva 24 Mr Halin Hettigoda Senior Regional Manager Senior Manager - Network Service Centre 9 Mr Vijith Peiris 25 Mr Gayan Ranaweera Senior Manager - Computer Operations (IT-EDP) Senior Manager - Credit Risk10 Mr Priam Kasturiratne 26 Ms Dulsiri Jayasinghe Senior Manager - Operational Risk & Senior Manager - Corporate Finance Market Risk 27 Mrs Aloka Ekanayake11 Mrs Achala Wickremaratne Senior Manager - FCBU Senior Regional Manager 28 Mr Lalith Weragoda12 Mr Prasada Gooneratne Senior Manager - Human Resources Senior Manager - Database Administration (IT-EDP)13 Mr Nayana Peiris Senior Regional Manager14 Mrs Chamila Bandara Senior Regional Manager15 Mr Chatura Rudesh Senior Manager - Trade Services38

THANKS TO THE LOAN WERECEIVED FROM SAMPATHBANK, WE WERE ABLE TOCONSTRUCT A FIVE STOREYBUILDING FOR THE LINGAMCOOL BAR IN JAFFNA. WE ALSOAPPRECIATE THE BANK’S ADVICEAND SUPPORT TO EXPAND OURBUSINESS.THE SERVICE AND HELP WERECEIVED AT THE BANK WASEXCEPTIONAL.A GEETHASHAGILANPROPRIETOR(LINGAM COOL BAR, JAFFNA)17TH FEBRUARY 2014

MANAGEMENTDANISACLUYSSISSION &WE HAVE PROVED RESILIENT TOEXTERNAL SHOCKS THROUGH EFFECTIVERISK MANAGEMENT PROCESSES AND OURABILITY TO RESPOND TO CHANGES INOUR OPERATING ENVIRONMENT.Sampath Bank Group services to all customers throughout the country as well as overseas customers.Sampath Bank PLC is Sri Lanka’s third largest non-government Bank with an asset base of Rs 382 Bn and GROUP STRUCTURE3,688 employees serving over 1,865,012 corporate The Group comprises of Sampath Bank andand retail customers through a network of 212 Subsidiaries engaged in providing specialisedbranches throughout the country. We have a proud financial services to clients and Subsidiariesheritage of customer focussed innovations which engaged in providing services to the Bank. The Bankhave shaped the banking industry in the country and contributes 94% to the Group’s pre-tax profit and iswe have gained recognition as an innovative bank, the most significant entity within the Group.successfully combining technology and financialservices to provide superior access to financial Sampath Bank PLC Siyapatha Finance SC Securities Sampath Sampath Co Ltd (formerly: (Pvt) Ltd Information Centre Ltd Sampath Leasing 100% Technology and Factoring Ltd) Solutions Ltd 97% 100% 100% Renting of Commercial Leasing, Factoring Stock Broking Provides IT and Accepting Fixed related services Property & Savings Deposits to the parent and to financial sector clients40

CORE AREAS OF OPERATION individuals, corporates and other institutions. OurSampath Bank is a mass-bank focussing on core areas of operations are:delivering imaginative financial services toPersonal Banking Caters to a wide range of customers facilitating management of personal finances through a range of products that address their investment, transactional and financing needsCorporate Banking Delivers financial solutions tailored to meet corporate investment and operational needs through our sub-divisions Corporate Finance, Trade Services, Corporate Credit and the Foreign Currency Banking UnitTreasury Operations Responsible for carrying out local and foreign currency fund management activities and inter-bank operations, to manage the Bank’s exposure to exchange rate, interest rate and liquidity risk from normal business activities. Also investments and customer sales of Government Securities are carried out through the Primary Dealer Unit and Investment Department.Credit & Debit Cards Offers a range of cards to suit the diverse lifestyle needs of Sri Lankans with unmatched promotions and the highest security for all transactionsE-Banking Develops and maintains a range of products facilitating electronic transactions for the convenience of our customers. These range from mobile cash to the Sri Lanka e-gateway for tourist visas to Sri Lanka.Operating Environment Economic Annual Report 2013 Sampath Bank PLC GrowthGlobal economic growth continued to remain weakaveraging a mere 3.5% in 2013. Emerging economies 7.2%continue to account for the bulk of the growth butgrowth rates and asset quality declined in these contract to US$ 8,594 Mn which is 12.8% of the GDPmarkets. The advanced economies have increased in 2013. Encouragingly, earnings from tourism andtheir rate of growth but significant downside risks worker remittances increased by 24% and 11.7%remain. Key issues such as the fragmented financial respectively, bolstering the Balance of Payments.system in the Euro zone and high levels of public The gross official reserves increased by 4.4% todebt in all ma jor advanced economies remain USD 7,128 Mn as at end 2013 which is equivalent tounresolved and could result in new crises. 4.5 months of imports. Annual average inflation was 6.9% driven by both increasing food prices resultingThe Sri Lankan economy growth is estimated to from the drastic weather patterns and the increasingbe 7.2% for 2013, an improvement from 6.4% in costs of essential services such as electricity and2012. The stringent policy measures implemented transport. Overall, it has been a challenging yearin 2012 which included increasing of policy interest which reflected the moderated growth in corporaterates, imposition of a credit ceiling on bank lending, earnings and some deterioration in asset quality asgreater flexibility on exchange rates, higher border experienced in most emerging market economies.tariffs on imports of selected items including motorvehicles and greater pass through of fuel and energycosts corrected the overheating of the economy andcurtailed the growth of the trade deficit to a greatextent. Earnings from exports are estimated to beincreased by 6.9% in 2013 and imports expenditureis estimated to be reduced by 0.7% for the sameperiod. As a result the trade deficit is expected to 41

MANAGEMENTDISCUSSION &ANALYSISCOUNTRY PERFORMANCE Import & Export Exchange rate - USD - LKRGDP Growth USD Mn Rs %8.0 20,269 19,183 127.16 130.75 8.2 19,046 6.8 7.2 13,451 8,626 10,559 9,774 10,452 110.95 113.902010 2010 2010 2011 2011 2011 2012 2012 2012 2013 2013 2013GDP Growth % Import - USD Mn Exchange rate - USD - LKR Exports - USD Mn TBraaladnecBeaolaf nPcaeyments &CBSL Policy Rates Inflation USD Mn% % 921 151 700 9.0 9.5 7.6 (1,061) 8.5 7.5 8.5 6.2 6.7 6.9 (4,825)7.2 6.5 7.0 2011 2012 (8,594) (9,710) (9,409)2010 2010 2010 2013 2011 2011 2012 2012 2013 2013 Repo Annual Avg Balance of Payments - USD Mn Reverse Repo Trade Balance - USD Mn Worker RemittancesPer Capita Income Bank Interest Rates USD-Mn %USD-Mn 24.2 %2,400 24.4 7.5 2,836 4.1 9.3 2,923 5.1 3,282 6.0 6.2 6.7 9.3 17.7 10.8 11.7 7.2 11.7 14.4 10.1 8.3 10.9 9.42010 2010 2010 2011 2011 2011 2012 2012 2012 2013 2013 2013 Per Capita Income Worker Remittances USD Mn T-bills - One Year Growth rate %42 AWPLR AWDR

THE BANKING SECTOR of liquidity due to low credit demand and CentralThe Banking, Insurance and Real Estate sector Bank lowering the statutory reserve ratio in theaccounted for 8.6% of GDP in 2013, marginally second quarter by 200 basis points. This impactedlower than the contribution made in 2012 of 10.7% deposit growth in the sector as banks did not carryreflecting the lower growth rate of the sector in 2013. out aggressive campaigns for deposits as the excessThe Banking sector is a key player in the country’s liquidity obviated the need.financial system accounting for 70.6% of the totalfinancial sector’s assets. There was no change in Low demand for credit discussed above impactedthe number of players in the banking sector during the earnings of the banking sector which werethe year which comprised 12 domestic licensed further exacerbated by the volatility of the interestcommercial banks, 12 foreign commercial banks and exchange rates, excess liquidity and theand 9 licensed specialised banks. Collectively lacklustre performance of the Colombo Bourse. Netthe banking sector has a total of 3,426 branches, interest margins declined across the sector due3,031 extension offices and 2,496 ATMs as at end to excess liquidity and intensifying competition.September. Deterioration of the pawning portfolios impacted earnings of the sector as fewer pawned articles wereThe sector witnessed a moderated loan growth redeemed due to loss in value which was reflectedrate of 8.8% in 2013 despite the withdrawal of the both in higher impairment charges and reversalcredit ceiling in January 2013 compared to the of interest. Fee based income declined marginally21% growth recorded in 2012 in line with the credit due to lower trade volumes witnessed in bothceiling imposed by Central Bank in March 2012. exports and imports. The industry has been able toSeveral factors contributed to moderate the growth curtail the growth of operating expenses to a levelof the Banking sector including ease of access to marginally lower than the previous year reflectingdebt markets, a sluggish global economy, increased the measures taken by all industry players to moveborrowing of funds from abroad by corporates and to more cost efficient operating models. The Bankingthe high base effects. The dramatic decline of gold sector remains well capitalised as at 30th Septemberprices in April 2013 was a key factor that decelerated 2013 with Tier 1 Capital Adequacy Ratio at 13.6% andthe growth of personal banking portfolios which the Total Capital Adequacy Ratio at 15.8%, a marginalincluded pawning as a key product. Border tariffs increase from 13.1 % and 15.0% respectively in 2012.introduced on selected imports, particularly motorvehicles, remained in place with further restrictions The Central Bank issued a number of directivessuch as the imposition of documentary credit during the year covering a range of topics includingmargins for import of motor vehicles which was financial reporting, corporate governance, issuancethe main reason for declining imports impacting of foreign currency notes, lending rates and riskgrowth of both corporate and personal banking management etc. Policy rates were kept low andportfolios. As the slower growth rate follows two reduced further in 2013 in an effort to stimulateyears of high credit growth it could also be argued demand for private sector credit.that this is perhaps a natural adjustment given theexternal factors that prevailed during the period ofhigh growth. The industry experienced a high levelBanking sector soundness indicators of Licensed Commercial Banks Capital Adequacy Ratio – Tier 1 Capital % Statutory 2011 2012 2013 Annual Report 2013 Sampath Bank PLC Capital Adequacy Ratio – Total Capital % Requirement Return on Assets (%) Before Tax 14.3 13.1 *13.6 Return on Equity (%) 5.0 16.0 15.0 *15.8 Liquidity Ratio (%) - DBU 10.0 1.7 1.7 1.3* 2013 3rd quarter figures - 19.8 20.3 16.0 - 32.4 31.3 37.7 20.0 43

MANAGEMENTDISCUSSION &ANALYSISOVERALL, IT HAS BEEN A CHALLENGINGYEAR WHICH REFLECTED THE MODERATEDGROWTH IN CORPORATE EARNINGS ANDSOME DETERIORATION IN ASSET QUALITY ASEXPERIENCED IN MOST EMERGING MARKETECONOMIES.SECTOR PERFORMANCE Net Interest Margin SAstasetutstoRraytLioiquid Asset Growth % % % 4.6 37.7 19.9 4.1 4.2 36.6 17.9 19.7 3.5 32.4 31.3 16.62010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013 Asset Growth Net Interest Margin Statutory Liquid Assets Ratio (DBU)Cost to Income Ratio Return on Assets Return on Equity% % 79.3 % 1.8 1.7 75.2 1.7 22.0 74.1 20.3 72.0 1.3 19.8 Cost to Income Ratio 16.0 Return on Equity2010 2011 2012 2013 2010 2011 2012 2013 2010 2011 2012 2013 Return on Assets44

Our Performance through improved service quality effectively combining human resources and technological2013 has been another challenging year for the innovation. We have proved resilient to externalbanking sector with moderate growth due to low shocks through effective risk management processescredit demand and decreased trade volumes. and our ability to respond to changes in ourSampath Bank has demonstrated its ability to grow operating environment.by focussing on enhancing customer experiencesWe have achieved asset growth rates above the industry growth rate Sampath Bank Banking Industryby focussing on providing a superior service to all customer segments 2013 2013by enhancing both face-to-face interactions and technology userinterfaces. 23.5% 16.6%Our deposit growth remains well above industry growth rates over a 5 24.1% 15.0%year period. We continued to maintain this in 2013 as well despite thefact that no ma jor campaigns were done to increase the deposit base 4.2% 3.5%in 2013 due to the excess liquidity.Our Net Interest Margin has been consistently maintained aboveindustry levels reflecting our ability to manage the timely andefficient pricing of our assets and liabilities. This trend has beenmaintained even while increasing our market share which reflectsour ability to compete effectively and the skills and experience of ourmanagement team tasked with managing the assets and liabilities.The Bank maintains a strong capital base as our aim is to maintain a strong balance sheet that provides forsustainable levels of organic equity generation.Tier I Capital Adequacy Ratio 10.1% *13.6%Total Capital Adequacy Ratio 14.2% *15.8%* 2013 3rd quarter figuresInfrastructure growth From the inception of the Bank, technology has Annual Report 2013 Sampath Bank PLCWe commenced the year with 209 branches and been a core competitive strength and we haveadded 3 branches during the year in Karagampitiya, continued to invest in maintaining this advantage.Thalahena and Gampaha Super. Further we also Our ATM network increased with 12 new installationsopened a pay office at the Mattala Ra japakse taking the total ATM network to 274. Three ATMsInternational Airport. As there is adequate coverage are foreign currency ATMs enabling conversion ofof locations with potential in the country, a vital US Dollars and Euros to Sri Lankan rupees and areelement of our corporate strategy has been to conveniently located in the tourist hubs of Colombo,increase the business volumes of the existing Kandy and Negombo. The Sampath Interbankbranch network. This year we focussed attention ATM network is the largest in the country enablingon enhancing our service capabilities with a view customers to transact through 1,842 ATMs. Mobileto creating a positive customer experience. All banking re-launched in 2012 has continued to growbranches were upgraded to provide a pleasant in popularity due to the country’s mobile penetrationenvironment in which to carry out banking rate exceeding 100%. We launched an applicationtransactions and to better reflect the brand. compatible with Apple iPhones/iPads and AndroidAdditionally, 4 branches were upgraded to super devices during the year which provides a range ofbranches in 2013. They are open for business from services to Sampath Bank customers and even to8.00 am to 8.00 pm and are located in busy towns those who are not customers.taking the total of super branches to 8. Our branchescontinue to provide all the services to ensure thatthere is equal access to financial services to allSri Lankans. 45

MANAGEMENTDISCUSSION &ANALYSISProvince No of Branches No of ATMsCentral 19 25Eastern 17 17North Central 9 10North 13 13North Western 19 21Sabaragamuwa 12 15Uva 9 10Western 92 137Southern 22 26Total 212 274Assets Assets 259.4Total assets of the Bank grew by 23.5% above theindustry growth rate of 16.6% for 2013 according to Rs Bna client focussed strategy driven by a dedicatedteam of banking professionals. We continue to 169.7 208.1maintain credit growth rates above the industryaverage due to our unrelenting focus on providing 124.1 23.1 35.2 46.9a superior service to all segments of our clients. 54.9 66.0 75.7The Bank managed to grow its loan book by 24.9% 2010 26.7despite the Banking sector recording a disappointing 40.6 2011 2012 2013growth rate of 8.8% due to low demand for credit asunderlying economic growth decelerated and trade Loans & receivables to other customersvolumes declined. Policy interest rates were reducedtwice during the year. This positively impacted the Financial assets held for trading Other Assetsgrowth rate in the second half of the year. However,underlying factors such as economic growth and Rs 3,490 Mn in 2013 mainly due to the increasedtrade will need to improve to sustain the momentum provision for pawning which amounted to Rs 3,509in the long term. While growth was largely led by Mn. Collective impairment without pawning onthe corporate sector it was encouraging to see the the other hand decreased by Rs 572.0 Mn in 2013.increasing contribution made by the branch network Financial investments recorded a mark to marketto the growth of advances which amounted to 58.8% gain of Rs 276 Mn from the Treasury Bills and otherof the total advances. We will continue to focus both trading securities which were higher than theon increasing our market share in the corporate corresponding gain in 2012 of Rs 72 Mn. There wassector as well as the increasing business volumes a net impairment reversal of Rs 19 Mn without thethrough the branch network. pawning provision.Financial Assets held for trading which consist of The decline in gold prices impacted the pawningGovernment Treasury Bills and quoted equities held portfolio of the Bank and safeguards were introducedfor dealing purposes increased from Rs 35.1 Bn in 2012 to maintain the risk reward equilibrium in lineto Rs 46.9 Bn in 2013. The Bank invested more than Rs with the risk appetite of the Bank which includes a11.0 Bn in Treasury Bills during the year due to excess lower loan to value ratio and measures to manageliquidity in the market.The impairment provision on individually significantloans marginally increased from Rs 729 Mn in 2012to Rs 798 Mn in 2013. The total Impairment provisionincreased significantly from Rs 65 Mn in 2012 to46

the lending product mix, gradually reducing the }We have been ableexposure on pawning. A key strength of the Bank’s to avoid delays inNPL management mechanisms is pre-sanctioning processing facilities byof credit quality by a centralised credit approval successfully leveragingsystem where authority for credit approval is technology combineddelegated to Regional Managers and not the with robust creditBranch or Relationship Managers who initiate governance structure.business. This ensures that credit is granted bya highly specialised staff. We have been able toavoid delays in processing facilities by successfullyleveraging technology combined with a robust creditgovernance structure.LiabilitiesLiability growth has also been low in comparison to2012 due to excess liquidity in the market althoughthe Bank growth has remained above the industrygrowth rate. The deposit growth of the Bank duringthe year was 24.1% as against 24.3% growth achievedin 2012. No ma jor campaigns were carried out toattract deposits as there was excess liquidity. We areoptimistic that the growth can be accelerated whenthe need arises, albeit at a cost. The proportion ofcurrent and savings account balances (CASA) to totaldeposits declined marginally from 34.6% in 2012 to33.9% in 2013. Foreign USD 100 Mn Syndicated Term Loan Facility Borrowings - 2013: USD 120MnLiabilitiesRs Bn153.3 195.2 Annual Report 2013 Sampath Bank PLC 243.3 300.62010 8.6 2011 19.8 2012 28.8 38.9 8.5 11.4 11.6 14.2 2013 Priority privileges for Sampath Bank chequesDue to other customers Other LiabilitiesDebt issued & other borrowed funds 47

MANAGEMENT CreditDISCUSSION & GrowthANALYSIS 24.9% &FoLreoicganl BBoorrrroowwiinngg Rs Bn 22.3 18.1 16.5 10.7 8.6 6.3 13.5 2010 Interest Income was insufficient to offset the impact 2011 from the additional impairment charge against the 2012 pawning portfolio. Further the revaluation gain on 2013 the Foreign Currency Banking Unit’s (FCBU’s) foreign currency reserves fell below the previous year by Rs Foreign Borrowing 994 Mn mainly due to the slower depreciation of the Local Borrowing domestic currency during 2013, as compared to the last year and due to the conversion of a part of Bank’sSampath Bank engaged HSBC to raise a syndicated FCBU reserve into LKR in 2013. All these factors playedloan of USD 45 Mn which was increased to USD 100 a key role in the decreased profitability of the BankMn in view of the vibrant market appetite making it in 2013. However, we are of the view that all chargesthe first successfully concluded deal over the USD relevant to 2013 have been recognised and that we100 Mn mark by the Bank. This reflects the confidence commence a new year with the worst behind us andof the foreign investors in the Bank’s performance to improved systems to manage the risks arising out ofdate, a strong Balance Sheet and the ability to sustain our business lines. The Group companies contributedthe growth momentum. A further loan of USD 20 Mn 5.7% of the net profits as the Bank continues towas raised from Proparco, the ‘private sector’ arm dominate Group results.of the French Development Agency (AFD), to financerenewable energy projects which the Bank believes Key Challengeswill be a key growth sector in the country given the Whilst the operating environment presentedpolicy to allow greater pass through of the rising a number of challenges for the Banking sectorenergy costs. including Sampath Bank, we were able to successfully grow our lending portfolio by 24.9%. The creditDebt Issued and Other Borrowed Funds increased ceiling imposed in 2012 was withdrawn in Decemberduring the year by 34.8% from Rs 28.8 Bn as at end 2012 but it failed to stimulate credit demand as2012 to Rs 38.8 Bn as at the end of 2013. However, expected reflecting the deceleration in the economythe mix of foreign currency borrowings and rupee in line with most emerging markets. Despite exportsborrowings changed significantly from 62.7% in which grew only by 6.9% and a decline in import2012 to 57.4% in 2013 even with the syndicated loan volumes, the Bank was able to grow its export traderaised during the year. This is partially due to the volumes by 30% during the year by providing aBank raising Rs 5 Bn by issuing 50 Mn unsecured superior service to our corporate and SME customers.subordinated redeemable 5 year debentures of Rs.100/- each in the local market. The Bank entered into The most significant impact was the dramatica cash flow hedge to manage the exchange rate risk decline of gold prices which affected the pawningon the USD 100 Mn foreign currency borrowing. portfolio which had grown significantly in the previous year. Pawning is a popular product whichProfitability many personal banking customers are familiar withThe profit before tax of Rs 4.5 Bn was 39.3% lower than and is relatively easy to obtain due to a relativelythe Rs 7.4 Bn profit before tax recorded in the previous simple documentation and evaluation process. In theyear due to the impairment provision against the North and East where immovable collateral cannotpawning advances which amounted to 17.9% of Total be independently verified due to the destructionOperating Income in 2013. Despite the satisfactory of land registries, it is key to providing capital togrowth in advances, the corresponding increase in Net48