Sampath Bank Annual Report 2013

(d) Group - as at 31st December 2012 Neither past due nor impaired High Standard Sub- Un Exposures Past due Individually Total grade grade standard Rated not subject but not impaired grade to ratings impaired Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial AssetsCash & cash equivalents 10,398,351 43,908 - - - - - 10,442,259Balances with Central Bank of Sri Lanka 17,200,792 - - - - - - 17,200,792Placements with banks 7,624,376 1,163,751 - - - - - 8,788,127Reverse repurchase agreements 3,300,373 - - - - - - 3,300,373Derivative financial instruments 279,022 - - - - - - 279,022Financial assets held for trading 34,786,299 287,108 - 107,677 - - - 35,181,084Financial assets held for trading pledged as collaterals 2,856,321 - - - - - - 2,856,321Loans & receivables to banks - 826,674 - - - 1,943 - 828,617Loans & receivables to other customers 29,257,416 36,007,948 7,666,734 14,117,376 55,052,825 73,281,865 4,206,565 219,590,729Other loans & receivables 8,715,351 - - 1,509,123 - - - 10,224,474Financial investments available for sale  Quoted - Government debt securities 179,175 - - - - - - 179,175 Quoted - Other equity securities - - - 1,686,021 - - - 1,686,021 Unquoted - Equity securities - - - 58,484 - - - 58,484Financial investments held to maturity  Quoted - Government debt securities 9,765 - - - - - - 9,765Other assets - - - - 1,558,102 - 300,174 1,858,276Total 114,607,241 38,329,389 7,666,734 17,478,681 56,610,927 73,283,808 4,506,739 312,483,519Age Analysis of past due(i.e. facilities in arrears of 1 day and above) but not impaired loans by Class of Financial Assets Past due but not impaired Less than 31 to 60 61 to 90 More than 30 days days days 90 days TotalLoans & receivables to banks 1,943 - - - 1,943Loans & receivables to other customers 48,543,126 8,450,802 12,705,415 3,582,522 73,281,865Total 48,545,069 8,450,802 12,705,415 3,582,522 73,283,808 Annual Report 2013 Sampath Bank PLC 299

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.2.5 Credit Risk Exposure For Each Internal Credit Risk RatingIt is the Bank’s policy to maintain accurate and consistent risk ratings across the credit portfolio. This facilitates focused management of theapplicable risks and the comparison of credit exposures across all lines of business, geographic regions and products. The rating system issupported by a variety of qualitative as well as quantitative variables for the measurement of counterparty risk. All internal risk ratings aretailored to various categories and are derived in accordance with the Bank’s Rating Policy. The risk ratings of the business borrowers areupdated at least annually or earlier if required. The table below shows the Bank’s internal credit rating of the loans & advances to banks andloans & advances to other customers.Bank’s Internal Credit Rating Bank Fitch Historical Total Historical Total rating rating default 2013 default 2012 rate 2013 rate 2012 % Rs 000 % Rs 000 High grade A+ AAA to AA+ 0.54 12,274,726 0.31 5,729,576Risk rating class 1 A AA to AA- 0.52 20,512,627 0.46 8,158,629Risk rating class 2 A- A+ to A 0.56 30,304,098 0.59 20,107,485Risk rating class 3 B+ A- to BBB+ 1.84 26,238,481 1.95 13,549,461Risk rating class 4 Standard Grade B BBB to BBB- 1.46 46,682,504 0.84 33,538,712Risk rating class 5 B- BB+ to BB 2.22 22,039,465 1.95 15,609,176Risk rating class 6 C+ BB- to B+ 2.20 20,985,233 1.60 25,162,285Risk rating class 7 Sub standard grade C B to B- 3.39 9,416,453 1.71 12,096,134Risk rating class 8 C- CCC to CC 3.25 2,968,738 1.73 3,646,729Risk rating class 9 Unrated 1.65 18,896,263 1.08 19,448,164Impaired D C to D 1.40 6,089,161 1.37 3,912,763Risk rating class 10 Exposures not subject for ratingPawning 53,469,185 54,946,225Others 142,965 106,600Grand Total 270,019,899 216,011,939300

47.2.6 Analysis of Risk ConcentrationRisk concentrations: maximum exposure to credit risk without taking into account of any collateral and other credit enhancements.The Concentration risk is monitored/managed through borrower/group, Sector, product etc. Maximum exposure of both funded and nonfunded facilities to a company and a group as at the reporting date was Rs 3,106 Mn (Limit: Rs 4,425 Mn) and Rs 5,767 Mn (Limit: Rs 6,192Mn) respectively. The following tables show the maximum exposure to credit risk for the components of the Statement of Financial Position,including geography of counterparty, and sector.47.2.6.1 Country Risk - Geographical Analysis(a) Bank - as at 31st December 2013 Sri Lanka Europe America South Asia Asia Pacific Middle East Total & Africa Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial Assets 7,102,023 361,929 489,052 123,819 214,610 11,143 8,302,576Cash & cash equivalents Balances with Central Bank of Sri Lanka 15,766,967 - - - - - 15,766,967Placements with banks Reverse repurchase agreements - - 459,868 - 1,331,461 - 1,791,329Derivative financial instruments Financial assets held for trading 18,043,918 - - - - - 18,043,918Financial assets held for trading pledged as collaterals Loans & receivables to banks 227,019 3,047 - - 451 - 230,517Loans & receivables to other customers ** Other loans & receivables 46,974,516 - - - - - 46,974,516Financial investments available for sale Financial investments held to maturity 3,496,141 - - - - - 3,496,141Other assets Total 638,244 - - - - - 638,244 257,247,648 156,679 11,279 1,196,656 515,589 273,727 259,401,578 12,150,588 - - - - - 12,150,588 139,088 - - 2,254,030 - - 2,393,118 1,845,903 - - - - - 1,845,903 1,742,099 - - 9,275 - - 1,751,374 365,374,154 521,655 960,199 3,583,780 2,062,111 284,870 372,786,769** Provincial breakdown for loans & receivables to other customers within Sri LankaProvince Rs 000Central 12,726,298 Annual Report 2013 Sampath Bank PLCEastern 6,296,590North Central 7,824,376North Western 12,449,626Northern 7,423,214Sabaragamuwa 6,412,026Southern 13,901,359Uva 4,442,236Western 185,771,923Total 257,247,648 301

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.2.6.1 Country Risk - Geographical Analysis(b) Bank - as at 31st December 2012 Sri Lanka Europe America South Asia Asia Pacific Middle East Total & Africa Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial Assets 8,157,220 1,187,296 178,341 556,175 347,020 6,083 10,432,135Cash & cash equivalents Balances with Central Bank of Sri Lanka 17,200,792 - - - - - 17,200,792Placements with banks Reverse repurchase agreements 25 924,034 2,142,763 1,163,751 4,557,554 - 8,788,127Derivative financial instruments Financial assets held for trading 3,300,817 - - - - - 3,300,817Financial assets held for trading pledged as collaterals Loans & receivables to banks 200,732 253 77,511 - 526 - 279,022Loans & receivables to other customers ** Other loans & receivables 35,181,084 - - - - - 35,181,084Financial investments available for sale Financial investments held to maturity 2,856,321 - - - - - 2,856,321Other assets Total 816,119 - - - - - 816,119 205,650,774 77,722 12,744 697,368 497,498 1,248,263 208,184,369 10,515,756 - - - - - 10,515,756 202,285 - - 1,721,339 - - 1,923,624 - - - - - - - 1,399,091 - - - - - 1,399,091 285,481,016 2,189,305 2,411,359 4,138,633 5,402,598 1,254,346 300,877,257** Provincial breakdown for loans & receivables to other customers within Sri LankaProvince Rs 000Central 9,719,171Eastern 5,775,007North Central 5,777,983North Western 9,677,606Northern 6,473,367Sabaragamuwa 5,380,717Southern 11,262,684Uva 3,273,863Western 148,310,376Total 205,650,774302

(c) Group - as at 31st December 2013 Sri Lanka Europe America South Asia Asia Pacific Middle East Total & Africa Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial Assets 7,140,285 361,929 489,052 123,819 214,610 11,143 8,340,838Cash & cash equivalents Balances with Central Bank of Sri Lanka 15,766,967 - - - - - 15,766,967Placements with banks Reverse repurchase agreements - - 459,868 - 1,331,461 - 1,791,329Derivative financial instruments Financial assets held for trading 18,043,918 - - - - - 18,043,918Financial assets held for trading pledged as collaterals Loans & receivables to banks 227,019 3,047 - - 451 - 230,517Loans & receivables to other customers ** Other loans & receivables 46,974,516 - - - - - 46,974,516Financial investments available for sale Financial investments held to maturity 3,496,141 - - - - - 3,496,141Other assets Total 638,244 - - - - - 638,244 263,755,663 156,679 11,279 1,196,656 515,589 273,727 265,909,593 12,150,588 - - - - - 12,150,588 139,144 - - 2,254,030 - - 2,393,174 1,845,903 - - - - - 1,845,903 2,212,741 - - 9,275 - - 2,222,016 372,391,129 521,655 960,199 3,583,780 2,062,111 284,870 379,803,744** Provincial breakdown for loans & receivables to other customers within Sri LankaProvince Rs 000Central 14,173,255Eastern 7,093,562North Central 8,096,752North Western 13,290,704Northern 7,439,369Sabaragamuwa 6,581,796Southern 14,369,503Uva 4,442,236Western 188,268,486Total 263,755,663 Annual Report 2013 Sampath Bank PLC 303

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.2.6.1 Country Risk - Geographical Analysis(d) Group - as at 31st December 2012 Sri Lanka Europe America South Asia Asia Pacific Middle East Total & Africa Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial Assets 8,167,344 1,187,296 178,341 556,175 347,020 6,083 10,442,259Cash & cash equivalents Balances with Central Bank of Sri Lanka 17,200,792 - - - - - 17,200,792Placements with banks Reverse repurchase agreements 25 924,034 2,142,763 1,163,751 4,557,554 - 8,788,127Derivative financial instruments Financial assets held for trading 3,300,373 - - - - - 3,300,373Financial assets held for trading pledged as collaterals Loans & receivables to banks 200,732 253 77,511 - 526 - 279,022Loans & receivables to other customers ** Other loans & receivables 35,181,084 - - - - - 35,181,084Financial investments available for sale Financial investments held to maturity 2,856,321 - - - - - 2,856,321Other assets Total 816,119 - - - - - 816,119 209,946,446 77,722 12,744 697,368 497,498 1,248,263 212,480,041 10,224,474 - - - - - 10,224,474 202,341 - - 1,721,339 - - 1,923,680 9,765 - - - - - 9,765 1,858,276 - - - - - 1,858,276 289,964,092 2,189,305 2,411,359 4,138,633 5,402,598 1,254,346 305,360,333** Provincial breakdown for loans & receivables to other customers within Sri LankaProvince Rs 000Central 11,159,908Eastern 7,116,714North Central 5,987,912North Western 10,723,463Northern 6,526,017Sabaragamuwa 5,583,497Southern 11,827,562Uva 3,273,863Western 147,747,510Total 209,946,446304

47.2.6.2 Industry AnalysisThe following tables show the risk concentration by industry for the components of the Statement of Financial Position(a) Bank - as at 31st December 2013 Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Rs 000 & Fishing Financial & Services Business Services Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Financial Assets - - - - - - 8,302,576 - - - - 8,302,576Cash & cash equivalents - - - - - - - 15,766,967 - - - 15,766,967Balances with Central  Bank of Sri Lanka - - - - - - 1,791,329 - - - - 1,791,329Placements with banks Reverse repurchase agreements - - - - - - 10,035,819 8,008,099 - - - 18,043,918Derivative financial instruments Financial assets held for trading - - - - - 13,194 217,323 - - - - 230,517  Government debt securities  Quoted equities - - - - - - - 45,962,143 - - - 45,962,143Financial assets held for trading  pledged as collaterals - 40,879 - - - 221,159 750,335 - - - - 1,012,373Loans & receivables to banks Loans & receivables to other - - - - - - - 3,496,141 - - - 3,496,141 customers Other loans & receivables - - - - - - 12,377 625,867 - - - 638,244Financial investments available  for sale 34,447,250 35,648,616 13,476,931 3,924,506 26,401,964 59,381,313 17,851,608 201,229 8,291,865 7,343,645 52,432,651 259,401,578  Government debt securities   Other equity securities - - - - - - 3,095,878 9,054,710 - - - 12,150,588Financial investments held to maturity - - - - - - - 100,462 - - - 100,462Other assets Total - - - - - - 2,254,030 - - 38,626 - 2,292,656 - - - - - - - 1,845,903 - - - 1,845,903 - - - - - - - - - 1,751,374 - 1,751,374 34,447,250 35,689,495 13,476,931 3,924,506 26,401,964 59,615,666 44,311,275 85,061,521 8,291,865 9,133,645 52,432,651 372,786,769(b) Bank - as at 31st December 2012 Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Rs 000 & Fishing Financial & Services Business Services Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Financial Assets - - - - - - 10,432,135 - - - - 10,432,135Cash & cash equivalents - - - - - - - 17,200,792 - - - 17,200,792Balances with Central  Bank of Sri Lanka - - - - - - 8,788,127 - - - - 8,788,127Placements with banks Reverse repurchase agreements - - - - - - 3,300,817 - - - - 3,300,817Derivative financial instruments Financial assets held for trading - - - - - - 279,022 - - - - 279,022  Government debt securities  Quoted equities - - - - - - - 34,182,709 - - - 34,182,709Financial assets held for  trading pledged as collaterals - 10,236 14,291 - 4,853 282,474 686,521 - - - - 998,375Loans & receivables to banks Loans & receivables to - - - - - - 2,856,321 - - - - 2,856,321 Annual Report 2013 Sampath Bank PLC other customers Other loans & receivables - - - - - - 1,943 814,176 - - - 816,119Financial investments  available for sale 23,211,855 28,146,897 7,132,717 2,617,179 20,710,856 40,352,210 11,271,223 47,061 6,613,877 6,474,852 61,605,642 208,184,369  Government debt securities   Other equity securities 458,159 - - - - 726,016 2,173,931 7,157,650 - - - 10,515,756Financial investments held to maturity - - - - - - - 179,175 - - - 179,175Other assets Total - - - - - - 1,721,339 - - 23,110 - 1,744,449 - - - - - - - - - - - - - - - - - - - - - 1,399,091 - 1,399,091 23,670,014 28,157,133 7,147,008 2,617,179 20,715,709 41,360,700 41,511,379 59,581,563 6,613,877 7,897,053 61,605,642 300,877,257 305

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.2.6.2 Industry Analysis(c) Group - as at 31st December 2013 Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Rs 000 & Fishing Financial & Services Business Services Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Financial Assets - - - - - - 8,340,838 - - - - 8,340,838Cash & cash equivalents - - - - - - - 15,766,967 - - - 15,766,967Balances with Central  Bank of Sri Lanka - - - - - - 1,791,329 - - - - 1,791,329Placements with banks Reverse repurchase agreements - - - - - - 10,035,819 8,008,099 - - - 18,043,918Derivative financial instruments Financial assets held for trading - - - - - 13,194 217,323 - - - - 230,517  Government debt securities   Quoted equities - - - - - - 45,962,143 - - - 45,962,143Financial assets held for - 40,879 - - - 221,159 750,335 - - - 1,012,373  trading pledged as collaterals Loans & receivables to banks - - - - - - - 3,496,141 - - - 3,496,141Loans & receivables to other customers - - - - - - 12,377 625,867 - - - 638,244Other loans & receivables Financial investments 35,042,331 35,648,616 13,476,931 4,140,536 26,608,580 62,158,426 16,175,023 201,229 8,291,865 11,288,506 52,877,550 265,909,593  available for sale   Government debt securities - - - - - - 3,095,878 9,054,710 - - - 12,150,588  Other equity securities Financial investments held - to maturity Other assets - - - - - - - 100,462 - - - 100,462Total - - - - - - 2,254,030 - - 38,682 - 2,292,712 - - - - - - - 1,845,903 - - - 1,845,903 - - - - - - - - - 2,222,016 - 2,222,016 35,042,331 35,689,495 13,476,931 4,140,536 26,608,580 62,392,779 42,672,952 85,061,521 8,291,865 13,549,204 52,877,550 379,803,744(d) Group - as at 31st December 2012 Agriculture Manufacturing Tourism Transport Construction Traders Banks, Government Infrastructure Other Consumers Total Rs 000 & Fishing Financial & Services Business Services Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Financial Assets - - - - - - 10,442,259 - - - - 10,442,259Cash & cash equivalents - - - - - - - 17,200,792 - - - 17,200,792Balances with Central  Bank of Sri Lanka - - - - - - 8,788,127 - - - - 8,788,127Placements with banks Reverse repurchase agreements - - - - - - 3,300,373 - - - - 3,300,373Derivative financial instruments Financial assets held for trading - - - - - - 279,022 - - - - 279,022  Government debt securities  Quoted equities - - - - - - - 34,182,709 - - - 34,182,709Financial assets held for trading  pledged as collaterals - 10,236 14,291 - 4,853 282,474 686,521 - - - - 998,375Loans & receivables to banks Loans & receivables to - - - - - - 2,856,321 - - - - 2,856,321 other customers Other loans & receivables - - - - - - 1,943 814,176 - - - 816,119Financial investments  available for sale 23,756,525 28,146,897 7,132,717 2,752,208 20,888,013 42,325,045 11,271,223 47,061 6,613,877 9,045,289 60,501,186 212,480,041  Government debt securities   Other equity securities 458,159 - - - - 726,016 1,882,649 7,157,650 - - - 10,224,474Financial investments held to maturity - - - - - - - 179,175 - - - 179,175Other assets Total - - - - - - 1,721,339 - - 23,166 - 1,744,505 - - - - - - 9,765 - - - - 9,765 - - - - - - - - - 1,858,276 - 1,858,276 24,214,684 28,157,133 7,147,008 2,752,208 20,892,866 43,333,535 41,239,542 59,581,563 6,613,877 10,926,731 60,501,186 305,360,333306

47 RISK MANAGEMENT CONTD.47.2.7 Commitments and ContingenciesTo meet the financial needs of customers, the Bank enters into various commitments and contingent liabilities. Even though these obligationsmay not be recognised on the Statement of Financial Position, they do contain credit risk and are, therefore, part of the overall risk of the Bank.The table below shows the Bank’s maximum credit risk exposure for commitments and contingencies. The maximum exposure to credit riskrelating to a financial guarantee is the maximum amount the Bank should have to pay if the guarantee is called upon. The maximum exposureto credit risk relating to a loan commitment is the full amount of the commitment. In both cases, the maximum risk exposure is significantlygreater than the amount recognised as a liability in the Statement of Financial Position. Bank Group 2013 2012 2013 2012 Rs 000 Rs 000 Rs 000 Rs 000Commitments 37,346,053 27,340,066 37,464,520 27,543,720Commitment for unutilised facilities (direct advances) Contingent Liabilities 7,871,824 6,308,188 7,871,824 6,308,188Acceptances Documentary credit 12,014,404 11,310,366 12,014,404 11,310,366Guarantees Bills sent for collection 28,333,570 21,993,951 28,333,570 21,993,951Others Sub Total 164,448 129,388 164,448 129,388 14,791 352,396 14,791 352,396 48,399,037 40,094,289 48,399,037 40,094,289Forward exchange contracts 37,093,136 28,684,448 37,093,136 28,684,448Currency SWAPs 22,728,550 19,806,940 22,728,550 19,806,940Sub Total 59,821,686 48,491,388 59,821,686 48,491,388Total Commitments & Contingencies 145,566,776 115,925,743 145,685,243 116,129,39747.3 Liquidity Risk and Funding Management Annual Report 2013 Sampath Bank PLCLiquidity risk is the risk that the Bank will encounter difficulties in meeting its financial commitments that are settled by delivering cash oranother financial asset. Hence the Bank may be unable to meet its payment obligations when they fall due under both normal and stresscircumstances. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, and adopted apolicy of continuously managing assets with liquidity in mind and of monitoring future cash flows and liquidity on a daily basis. The Bank hasdeveloped internal control processes and contingency plans for managing liquidity risk. This incorporates an assessment of expected cashflows and the availability of high grade collateral which could be used to secure additional funding if required.The Bank maintains a portfolio of highly marketable and diverse assets assumed to be easily liquidated in the event of an unforeseeninterruption of expected cash flow. The Bank also has committed lines of credit that could be utilized to meet liquidity needs. Further, the Bankmaintains a statutory deposit with the Central Bank of Sri Lanka equal to 6% (2012: 8%) of rupee deposits. In accordance with the Bank’spolicy, the liquidity position is assessed and managed under a variety of scenarios, giving due consideration to stress factors relating to both themarket in general and specific to the Bank. The most important of these is to maintain the required ratio of liquid assets to liabilities, to meetthe regulatory requirement. Liquid assets consist of cash, short–term bank deposits and liquid debt securities available for immediate sale.Further the Statutory Liquid Assets Ratio of the Bank for the month of December 2013 is as follows.47.3.1 Statutory Liquid Assets RatioFor the month of December 2013: 27.62% ( 2012: 22.40%) 307

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.3.2 Due to Banks and Due to Other Customers (Deposits) to Loans and Receivables to Banks and Other Customers (Advances) RatioThe Bank is aware of the importance of due to banks and other customers as a source of funds for its lending operations.This is monitored using the following ratio, which compares loans and receivables to customers as a percentage of due to banks and due toother customers (Deposits).Due to banks and due to other customers to loans and receivables to banks and other customers RatioAs at 31 December 2013 : 89.28% (2012 : 88.68%)47.3.3 Analysis of Financial Assets and Liabilities by Remaining Contractual MaturitiesThe tables below summarise the maturity profile of the undiscounted cash flows of the Bank’s financial assets and financial liabilities as at31st December 2013. Repayments which are subject to notice are treated as if notice were to be given immediately. However, the Bankexpects that many customers will not request repayment on the earliest date it could be required to pay and the table does not reflect theexpected cash flows indicated by its deposit retention history.Contractual Maturities of Undiscounted Cash Flows of Financial Assets and Financial Liabilities(a) Bank - as at 31st December 2013 Up to 3 3 - 12 1 - 3 3 - 5 Over 5 Months Months Years Years Years Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial AssetsCash & cash equivalents 8,302,576 - - - - 8,302,576Balances with Central Bank of Sri Lanka 10,794,345 4,747,900 89,843 134,134 745 15,766,967Placements with banks 1,792,729 - - - - 1,792,729Reverse repurchase agreements 18,068,169 - - - - 18,068,169Derivative financial instruments 116,411 114,106 - - - 230,517Financial assets held for trading 22,838,980 25,698,608 - - - 48,537,588Financial assets held for trading pledged as collaterals 2,123,708 1,455,247 - - - 3,578,955Loans & receivables to banks 69,450 184,447 438,535 91,448 - 783,880Loans & receivables to other customers 160,989,565 39,856,325 54,699,890 25,492,354 20,050,799 301,088,933Other loans & receivables 526,313 1,091,020 10,511,802 1,799,277 - 13,928,412Financial investments available for sale 2,356,194 - - - 38,625 2,394,819Financial investments held to maturity - 1,975,000 - - - 1,975,000Other assets 68,570 16,688 31,218 28,547 1,606,351 1,751,374Total Financial Assets 228,047,010 75,139,341 65,771,288 27,545,760 21,696,520 418,199,919Financial LiabilitiesDue to banks 2,220,536 - - - - 2,220,536Derivative financial instruments 594,231 44,493 - - - 638,724Securities sold under re-purchase agreements 2,515,772 915,347 - - - 3,431,119Due to other customers 206,346,742 96,812,366 1,969,163 3,859,509 40,826 309,028,606Debt issued & other borrowed funds 18,022,769 1,897,396 5,587,306 14,689,848 6,457,849 46,655,168Unclaimed dividend 54,981 - - - - 54,981Other liabilities 37,205 3,335 6,239 5,705 12,217 64,701Total Financial Liabilities 229,792,236 99,672,937 7,562,708 18,555,062 6,510,892 362,093,835Total Net Financial Assets / (Liabilities) (1,745,226) (24,533,596) 58,208,580 8,990,698 15,185,628 56,106,084308

(b) Bank - as at 31st December 2012 Up to 3 3 - 12 1 - 3 3 - 5 Over 5 Months Months Years Years Years Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial AssetsCash & cash equivalents 10,504,835 - - - - 10,504,835Balances with Central Bank of Sri Lanka 12,805,701 4,205,300 121,924 67,030 837 17,200,792Placements with banks 7,624,456 1,177,646 - - - 8,802,102Reverse repurchase agreements 3,300,817 - - - - 3,300,817Derivative financial instruments 154,690 124,332 - - - 279,022Financial assets held for trading 35,181,084 - - - - 35,181,084Financial assets held for trading pledged as collaterals 2,858,321 - - - - 2,858,321Loans & receivables to banks 73,872 235,811 540,622 253,211 - 1,103,516Loans & receivables to other customers 126,100,984 54,887,118 40,384,278 17,043,168 16,041,516 254,457,064Other loans & receivables 2,329,352 3,598,266 5,598,952 - - 11,526,570Financial investments available for sale 1,900,514 - - - 23,110 1,923,624Financial investments held to maturity - - - - - -Other assets - - - - 1,399,091 1,399,091Total Financial Assets 202,834,626 64,228,473 46,645,776 17,363,409 17,464,554 348,536,838Financial Liabilities 625,051 - - - - 625,051Due to banks 360,835 21,003 - - - 381,838Derivative financial instruments Securities sold under 2,164,530 642,856 - - - 2,807,386 re-purchase agreements Due to other customers 184,844,334 66,808,610 2,586,230 1,490,651 310,693 256,040,518Debt issued & other borrowed funds Unclaimed dividend 9,336,177 7,406,830 1,621,902 9,754,206 5,695,072 33,814,187Other liabilities Total Financial Liabilities 49,185 - - - - 49,185 41,084 3,683 6,889 6,300 13,492 71,448 197,421,196 74,882,982 4,215,021 11,251,157 6,019,257 293,789,613Total Net Financial Assets / (Liabilities) 5,413,430 (10,654,509) 42,430,755 6,112,252 11,445,297 54,747,225 Annual Report 2013 Sampath Bank PLC 309

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.3.3 Analysis of Financial Assets and Liabilities by Remaining Contractual Maturities(c) Group - as at 31st December 2013 Up to 3 3 - 12 1 - 3 3 - 5 Over 5 Months Months Years Years Years Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial AssetsCash & cash equivalents 8,340,838 - - - - 8,340,838Balances with Central Bank of Sri Lanka 10,794,345 4,747,900 89,843 134,134 745 15,766,967Placements with banks 1,792,729 - - - - 1,792,729Reverse repurchase agreements 18,068,169 - - - - 18,068,169Derivative financial instruments 116,411 114,106 - - - 230,517Financial assets held for trading 22,838,980 25,698,608 - - - 48,537,588Financial assets held for trading pledged as collaterals 2,123,708 1,455,247 - - - 3,578,955Loans & receivables to banks 69,450 184,447 438,535 91,448 - 783,880Loans & receivables to other customers 162,456,165 42,319,707 58,690,249 26,446,860 20,064,406 309,977,387Other loans & receivables 526,313 1,091,020 10,511,802 1,799,277 - 13,928,412Financial investments available for sale 2,356,194 - - - 38,625 2,394,819Financial investments held to maturity - 1,975,000 - - - 1,975,000Other assets 326,634 185,829 113,141 32,693 1,563,719 2,222,016Total Financial Assets 229,809,936 77,771,864 69,843,570 28,504,412 21,667,495 427,597,277Financial LiabilitiesDue to banks 2,243,757 15,600 - - 65,754 2,325,111Derivative financial instruments 594,231 44,493 - - - 638,724Securities sold under re-purchase agreements 2,189,620 907,069 - - - 3,096,689Due to other customers 206,346,742 96,812,366 1,969,163 3,859,509 40,826 309,028,606Debt issued & other borrowed funds 19,828,748 3,106,340 7,592,396 15,528,955 6,489,356 52,545,795Unclaimed dividend 54,981 - - - - 54,981Other liabilities 37,205 3,335 6,239 5,705 12,217 64,701Total Financial Liabilities 231,295,284 100,889,203 9,567,798 19,394,169 6,608,153 367,754,607Total Net Financial Assets / (Liabilities) (1,485,348) (23,117,339) 60,275,772 9,110,243 15,059,342 59,842,670310

(d) Group - as at 31st December 2012 Up to 3 3 - 12 1 - 3 3 - 5 Over 5 Months Months Years Years Years Total Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial AssetsCash & cash equivalents 10,514,958 - - - - 10,514,958Balances with Central Bank of Sri Lanka 12,805,701 4,205,300 121,924 67,030 837 17,200,792Placements with banks 7,624,456 1,177,646 - - - 8,802,102Reverse repurchase agreements 3,300,373 - - - - 3,300,373Derivative financial instruments 154,690 124,332 - - - 279,022Financial assets held for trading 35,181,084 - - - - 35,181,084Financial assets held for trading pledged as collaterals 2,858,321 - - - - 2,858,321Loans & receivables to banks 73,872 235,811 540,622 253,211 - 1,103,516Loans & receivables to other customers 127,288,537 55,024,254 42,834,308 17,878,723 16,050,410 259,076,232Other loans & receivables 2,038,069 3,598,266 5,598,952 - - 11,235,287Financial investments available for sale 1,900,514 - - - 23,166 1,923,680Financial investments held to maturity 2,400 7,365 - - - 9,765Other assets - - - - 1,858,276 1,858,276Total Financial Assets 203,742,975 64,372,974 49,095,806 18,198,964 17,932,689 353,343,408Financial LiabilitiesDue to banks 668,466 - - - - 668,466Derivative financial instruments 360,835 21,003 - - - 381,838Securities sold under re-purchase agreements 2,158,745 642,856 - - - 2,801,601Due to other customers 184,601,578 66,808,610 2,586,230 1,490,651 310,693 255,797,762Debt issued & other borrowed funds 10,409,607 8,299,300 2,897,110 9,906,081 5,695,072 37,207,170Unclaimed dividend 49,185 - - - - 49,185Other liabilities 41,084 3,683 6,889 6,300 13,492 71,448Total Financial liabilities 198,289,500 75,775,452 5,490,229 11,403,032 6,019,257 296,977,470Total Net Financial Assets / (Liabilities) 5,453,475 (11,402,478) 43,605,577 6,795,932 11,913,432 56,365,938 Annual Report 2013 Sampath Bank PLC 311

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.3.4 Contractual Maturities of Commitments and ContingenciesThe table below shows the contractual expiry by maturity of the Bank’s contingent liabilities and commitments. Each undrawn loan commitmentis included in the time band containing the earliest date it can be drawn down. For issued financial guarantee contracts, the maximum amountof the guarantee is allocated to the earliest period in which the guarantee could be called.(a) Bank - as at 31st December 2013 On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Contingencies 2,355,104 8,094,295 10,640,169 4,907,427 2,336,575 28,333,570Financial guarantees Acceptance 3,586 4,742,739 3,085,529 39,970 - 7,871,824Bills sent for collection Forward contracts 164,448 - - - - 164,448Documentary credit Others - 44,570,612 15,251,074 - - 59,821,686Total Contingencies 1,413,586 6,567,127 4,033,691 - - 12,014,404 14,791 - - - - 14,791 3,951,515 63,974,773 33,010,463 4,947,397 2,336,575 108,220,723Commitments 23,162,860 - - - - 23,162,860Undrawn OD 3,035,935 - - - - 3,035,935Undrawn loans 1,801 - - - - 1,801Undisbursed cash loans Undrawn credit card limits 11,145,457 - - - - 11,145,457Total Commitments 37,346,053 - - - - 37,346,053Total Commitments & Contingencies 41,297,568 63,974,773 33,010,463 4,947,397 2,336,575 145,566,776(b) Bank - as at 31st December 2012 On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Contingencies 1,070,979 6,651,724 7,627,451 4,360,012 2,283,785 21,993,951Financial guarantees Acceptance 4,802,347 1,160,280 345,561 - - 6,308,188Bills sent for collection Forward contracts 129,388 - - - - 129,388Documentary credit Others - 44,553,202 3,938,186 - - 48,491,388Total Contingencies 1,147,619 6,940,144 3,222,603 - - 11,310,366CommitmentsUndrawn OD 352,396 - - - - 352,396Undrawn loans Undisbursed cash loans 7,502,729 59,305,350 15,133,801 4,360,012 2,283,785 88,585,677Undrawn credit card limits Total Commitments 18,034,987 - - - - 18,034,987Total Commitments & Contingencies 1,489,301 - - - - 1,489,301 3,981 - - - - 3,981 7,811,797 - - - - 7,811,797 27,340,066 - - - - 27,340,066 34,842,795 59,305,350 15,133,801 4,360,012 2,283,785 115,925,743312

(c) Group - as at 31st December 2013 On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Contingencies 2,355,104 8,094,295 10,640,169 4,907,427 2,336,575 28,333,570Financial guarantees 3,586 4,742,739 3,085,529 39,970 - 7,871,824Acceptance Bills sent for collection 164,448 - - - - 164,448Forward contracts Documentary credit - 44,570,612 15,251,074 - - 59,821,686Others Total Contingencies 1,413,586 6,567,127 4,033,691 - - 12,014,404 14,791 - - - - 14,791 3,951,515 63,974,773 33,010,463 4,947,397 2,336,575 108,220,723Commitments 23,162,860 - - - - 23,162,860 3,035,935 - - - - 3,035,935Undrawn OD 1,801 - - - - 1,801Undrawn loans Undisbursed cash loans 11,145,457 - - - - 11,145,457Undrawn credit card limits 118,467 - - - - 118,467Undrawn commitments factoring Total Commitments 37,464,520 - - - - 37,464,520Total Commitments & Contingencies 41,416,035 63,974,773 33,010,463 4,947,397 2,336,575 145,685,243(d) Group - as at 31st December 2012 On Less than 3 to 12 1 to 5 Over 5 Total Demand 3 Months Months Years Years Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Contingencies 1,070,979 6,651,724 7,627,451 4,360,012 2,283,785 21,993,951Financial guarantees 4,802,347 1,160,280 345,561 - - 6,308,188Acceptance Bills sent for collection 129,388 - - - - 129,388Forward contracts Documentary credit - 44,553,202 3,938,186 - - 48,491,388Others Total Contingencies 1,147,619 6,940,144 3,222,603 - - 11,310,366 352,396 - - - - 352,396 7,502,729 59,305,350 15,133,801 4,360,012 2,283,785 88,585,677Commitments 18,034,987 - - - - 18,034,987 Annual Report 2013 Sampath Bank PLC 1,489,301 - - - - 1,489,301Undrawn OD 3,981 - - - - 3,981Undrawn loans 7,811,797 - - - - 7,811,797Undisbursed cash loans 203,654 - - - - 203,654Undrawn credit card limits Undrawn commitments factoring 27,543,720 - - - - 27,543,720Total Commitments 35,046,449 59,305,350 15,133,801 4,360,012 2,283,785 116,129,397Total Commitments & Contingencies 313

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.4 Market RiskMarket risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such asinterest rates, foreign exchange rates, commodity prices and equity prices. The Bank classifies exposures to market risk into either trading ornon trading portfolios and manages each of those portfolios separately.47.4.1 Interest Rate RiskInterest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments.The Bank’s policy is to continuously monitor positions on a daily basis and hedging strategies are used to ensure positions are maintainedwithin prudential levels.The following tables demonstrate the sensitivity of the Bank’s Income Statement as at 31st December 2013 and 31st December 2012 to areasonable possible change in interest rates, with all other variables held constant.Rate Sensitive Assets (RSA) & Rate Sensitive Liabilities (RSL) as at 31st December 2013 2012 Rs 000 Rs 000Rate Sensitive Assets (RSA)* 319,727,891 262,645,830Rate Sensitive Liabilities (RSL)* 318,306,901 253,343,129GAP (RSA - RSL) 1,420,990 9,302,701* Only the capital amountsImpact on Income Statement due to Interest Rate Shocks as at 31st December 2013 2012 Rs 000 Rs 000Interest Rate Shock 0.50% 401,629 310,267 1.00% 803,257 620,534 (0.50%) (401,629) (310,267) (1.00%) (803,257) (620,534)314

Interest Rate Sensitivity AnalysisThe tables below analyse the Bank’s interest rate risk exposure on financial assets and financial liabilities. The Bank’s assets and liabilities areincluded at carrying amount and categorised by the earlier of contractual re–pricing or maturity dates.(a) Bank - as at 31st December 2013 Up to 3 3 - 12 1 - 3 3 - 5 over 5 Non Total Months Months Years Years Years Interest Bearing Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial Assets - - - - - 8,302,576 8,302,576Cash & cash equivalents Balances with Central Bank of Sri Lanka - - - - - 15,766,967 15,766,967Placements with banks Reverse repurchase agreements 1,791,329 - - - - - 1,791,329Derivative financial instruments Financial assets held for trading 18,043,918 - - - - - 18,043,918Financial assets held for trading pledged as collaterals Loans & receivables to banks - - - - - 230,517 230,517Loans & receivables to other customers Other loans & receivables 45,962,143 - - - - 1,012,373 46,974,516Financial investments available for sale Financial investments held to maturity 2,105,489 1,390,652 - - - - 3,496,141Other assets Total Financial Assets 48,862 136,745 366,850 85,787 - - 638,244 152,759,327 31,288,470 41,068,421 19,531,035 14,754,325 - 259,401,578 1,890,417 8,555,405 903,271 801,495 - - 12,150,588 100,462 - - - - 2,292,656 2,393,118 - 1,845,903 - - - - 1,845,903 - - - - - 1,751,374 1,751,374 222,701,947 43,217,175 42,338,542 20,418,317 14,754,325 29,356,463 372,786,769Financial Liabilities 1,879,072 - - - - 332,209 2,211,281Due to banks Derivative financial instruments - - - - - 638,724 638,724Securities sold under re-purchase agreements Due to other customers 2,509,543 880,141 - - - - 3,389,684Debt issued & other borrowed funds Unclaimed dividend 185,853,118 91,487,819 1,664,420 2,477,906 21,711 19,044,376 300,549,350Other liabilities Total Financial Liabilities 24,463,569 1,991,184 1,721,366 7,762,764 2,923,448 - 38,862,331 - - - - - 54,981 54,981 - - - - - 64,701 64,701 214,705,302 94,359,144 3,385,786 10,240,670 2,945,159 20,134,991 345,771,052Interest Rate Sensitivity Gap 7,996,645 (51,141,969) 38,952,756 10,177,647 11,809,166 9,221,472 27,015,717 Annual Report 2013 Sampath Bank PLC 315

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.4.1 Interest Rate Risk(b) Bank - as at 31st December 2012 Up to 3 3 - 12 1 - 3 3 - 5 over 5 Non Total Months Months Years Years Years Interest Bearing Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial AssetsCash & cash equivalents 3,012,734 7,419,401 10,432,135Balances with Central Bank of Sri Lanka 17,200,792 17,200,792Placements with banks 7,624,376 1,163,751 - - - 8,788,127Reverse repurchase agreements 3,300,817 3,300,817Derivative financial instruments - - - - - 279,022 279,022Financial assets held for trading 34,182,709 - - - - 998,375 35,181,084Financial assets held for trading pledged as collaterals 2,856,321 2,856,321Loans & receivables to banks 41,299 150,120 400,320 224,380 - 816,119Loans & receivables to other customers 133,645,410 38,282,470 19,193,251 8,294,387 8,768,851 - 208,184,369Other loans & receivables 2,225,878 7,657,631 632,247 - - 10,515,756Financial investments available for sale 179,175 1,744,449 1,923,624Financial investments held to maturity -Other assets 1,399,091 1,399,091Total Financial Assets 187,068,719 47,253,972 20,225,818 8,518,767 8,768,851 29,041,130 300,877,257Financial LiabilitiesDue to banks 244,038 - 380,746 624,784Derivative financial instruments - - - - - 381,838 381,838Securities sold under re-purchase agreements 2,146,527 610,590 - - - - 2,757,117Due to other customers 165,203,292 59,582,186 1,905,895 880,847 149,847 15,608,923 243,330,990Debt issued & other borrowed funds 9,223,958 6,925,955 1,138,035 7,931,551 3,605,530 - 28,825,029Unclaimed dividend 49,185 49,185Other liabilities - - - - - 71,448 71,448Total Financial Liabilities 176,817,815 67,118,731 3,043,930 8,812,398 3,755,377 16,492,140 276,040,391Interest Rate Sensitivity Gap 10,250,904 (19,864,759) 17,181,888 (293,631) 5,013,474 12,548,990 24,836,866316

(c) Group - as at 31st December 2013 Up to 3 3 - 12 1 - 3 3 - 5 over 5 Non Total Months Months Years Years Years Interest Bearing Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial Assets - - - - - 8,340,838 8,340,838Cash & cash equivalents Balances with Central Bank of Sri Lanka - - - - - 15,766,967 15,766,967Placements with banks Reverse repurchase agreements 1,791,329 - - - - - 1,791,329Derivative financial instruments Financial assets held for trading 18,043,918 - - - - - 18,043,918Financial assets held for trading pledged as collaterals Loans & receivables to banks - - - - - 230,517 230,517Loans & receivables to other customers Other loans & receivables 45,962,143 - - - - 1,012,373 46,974,516Financial investments available for sale Financial investments held to maturity 2,105,489 1,390,652 - - - - 3,496,141Other assets Total Financial Assets 48,862 136,745 366,850 85,787 - - 638,244 153,892,732 32,933,853 43,975,252 20,336,465 14,771,291 - 265,909,593 1,890,417 8,555,405 903,271 801,495 - - 12,150,588 100,462 - - - - 2,292,712 2,393,174 - 1,845,903 - - - - 1,845,903 - - - - - 2,222,016 2,222,016 223,835,352 44,862,558 45,245,373 21,223,747 14,771,291 29,865,423 379,803,744Financial Liabilities 1,902,563 15,600 - - - 332,209 2,250,372Due to banks Derivative financial instruments - - - - - 638,724 638,724Securities sold under re-purchase agreements Due to other customers 2,183,391 871,866 - - - - 3,055,257Debt issued & other borrowed funds Unclaimed dividend 185,713,304 91,487,819 1,664,420 2,477,906 21,711 19,016,626 300,381,786Other liabilities Total Financial Liabilities 30,436,043 2,161,772 1,707,726 7,519,541 2,923,448 - 44,748,530 - - - - - 54,981 54,981 - - - - - 64,701 64,701 220,235,301 94,537,057 3,372,146 9,997,447 2,945,159 20,107,241 351,194,351Interest Rate Sensitivity Gap 3,600,051 (49,674,499) 41,873,227 11,226,300 11,826,132 9,758,182 28,609,393 Annual Report 2013 Sampath Bank PLC 317

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.4.1 Interest Rate Risk(d) Group - as at 31st December 2012 Up to 3 3 - 12 1 - 3 3 - 5 over 5 Non Total Months Months Years Years Years Interest Bearing Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Financial Assets 3,045,165 - - - - 7,397,094 10,442,259Cash & cash equivalents Balances with Central Bank of Sri Lanka - - - - - 17,200,792 17,200,792Placements with banks Reverse repurchase agreements 7,624,376 1,163,751 - - - - 8,788,127Derivative financial instruments Financial assets held for trading 3,300,373 - - - - - 3,300,373Financial assets held for trading pledged as collaterals Loans & receivables to banks - - - - - 279,022 279,022Loans & receivables to other customers Other loans & receivables 34,182,709 - - - - 998,375 35,181,084Financial investments available for sale Financial investments held to maturity 2,856,321 - - - - - 2,856,321Other assets Total Financial Assets 41,299 150,120 400,320 224,380 - - 816,119 134,278,463 39,284,010 21,500,688 8,753,830 8,663,050 - 212,480,041 1,934,596 7,657,631 632,247 - - - 10,224,474 179,175 - - - - 1,744,505 1,923,680 - 2,400 7,365 - - - 9,765 - - - - - 1,858,276 1,858,276 187,442,477 48,257,912 22,540,620 8,978,210 8,663,050 29,478,064 305,360,333Financial Liabilities 287,451 - - - - 380,747 668,198Due to banks Derivative financial instruments - - - - - 381,838 381,838Securities sold under re-purchase agreements Due to other customers 2,140,742 610,590 - - - - 2,751,332Debt issued & other borrowed funds Unclaimed dividend 165,116,048 59,582,186 1,905,895 880,847 149,847 15,453,413 243,088,236Other liabilities Total Financial Liabilities 11,395,368 7,469,415 2,040,387 7,707,314 3,605,530 - 32,218,014 - - - - - 49,185 49,185 - - - - - 71,448 71,448 178,939,609 67,662,191 3,946,282 8,588,161 3,755,377 16,336,631 279,228,251Interest Rate Sensitivity Gap 8,502,868 (19,404,279) 18,594,338 390,049 4,907,673 13,141,433 26,132,082318

47.4.2 Currency RiskCurrency risk arises as a result of fluctuations in the value of a financial instrument due to changes in foreign exchange rates. The Board hasset limits on positions by currency. In accordance with the Bank’s policy, positions are monitored on a daily basis and hedging strategies areused to ensure positions are maintained within established limits.The tables below indicate the currencies to which the Bank had significant exposures as at 31st December 2013 and 31st December 2012and the effect to the Gains/Losses in case of a market exchange rates up/drop by 5 % and 10%. The analysis calculates the effect of areasonably possible movement of the currency rate against the LKR, with all other variables held constant, on the Income Statement (due tothe fair value of currency sensitive non trading monetary assets and liabilities) and equity (due to the change in fair value of currency swaps andforward foreign exchange contracts used as cash flow hedges). A negative amount in the “Impact on Income Statement “ Column of the tablereflects a potential net reduction in Income Statement or Equity, while a positive amount reflects a net potential increase.Foreign Exchange Position as at 31st December 2013 2012 Net Overall Net Overall Net Overall Net Overall Long Short Long Short Rs 000 Rs 000 Rs 000 Rs 000Currency 317,016 - - (184,320)USD GBP 19,296 - 28,004 -EUR JPY 129,358 - 173,023 -AUD CAD 14,585 - 7,539 -CHF SGD 47,094 - 47,334 -HKD Sub Total 9,168 - 7,850 -Other Currencies Grand Total 11,160 - 27,827 -Higher of Long or Short 12,697 - 5,851 - 5,675 - 5,293 - 566,049 - 302,721 (184,320) 151,990 (6,956) 127,761 - 718,039 (6,956) 430,482 (184,320) 718,039 430,482Impact on Income Statement due to 2013 2012Exchange Rate Shocks Net Open Impact on Net Open Impact on Position Income Position Income (After Rate Statement (After Rate Statement Shocks) as at 31st Shocks) as at 31st December 2013 December 2012Exchange Rate Shock Rs 000 Rs 000 Rs 000 Rs 0005% 753,941 35,902 452,007 21,524 Annual Report 2013 Sampath Bank PLC10% 789,843 71,804 473,531 43,048-5% 682,137 (35,902) 408,959 (21,524)-10% 646,235 (71,804) 387,435 (43,048)47.4.3  Equity Price RiskEquity price risk is the risk that the fair value of equities decreasing as a result of changes in the level of equity indices and individual stocks.Investment Committee reviews and approves all equity investment decisions. The market value of the Bank’s equity portfolio as of31st December 2013 is Rs 1,012,373,000/- (2012: Rs 998,375,000/-). 319

NOTES TO THE FINANCIAL STATEMENTS47 RISK MANAGEMENT CONTD.47.5 Operational RiskOperational risk is the risk of losses arising from failed internal processes, systems failure, human error, fraud or external events. When controlsfail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. Strategic andReputational Risks are not covered in Operational Risk.Operational Risks of the Bank are mitigated and managed through a Board approved Operational Risk Management Policy control frameworkwhich consists of monitoring and responding to potential risks such as segregation of duties, access, authorisation and reconciliation procedures,staff education and assessment processes, Business Continuity Planning etc. Operational Risk Management Unit reports to Group Chief RiskOfficer and the Board Risk Management Committee maintains a high level overall supervision of managing Operational Risks of the Bank.48 MATURITY ANALYSIS(a) Maturity Gap Analysis as at 31st December 2013 Bank Group Within 12 After 12 Total as at Within 12 After 12 Total as at Months Months 31.12.2013 Months Months 31.12.2013 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Assets 8,302,576 - 8,302,576 8,340,838 - 8,340,838Cash & cash equivalents 15,542,245 224,722 15,766,967 15,542,244 224,723 15,766,967Balances with Central Bank of Sri Lanka Placements with banks 1,791,329 - 1,791,329 1,791,329 - 1,791,329Reverse repurchase agreements Derivative financial instruments 18,043,918 - 18,043,918 18,043,918 - 18,043,918Financial investments held for trading Financial assets held for trading 230,517 - 230,517 230,517 - 230,517 pledged as collaterals Loans & receivables to banks 46,974,516 - 46,974,516 46,974,516 - 46,974,516Loans & receivables to other customers Other loans & receivables 3,496,141 - 3,496,141 3,496,141 - 3,496,141Financial investments available for sale Financial investments held to maturity 185,607 452,637 638,244 185,607 452,637 638,244Investment in subsidiaries Property, plant & equipment 184,047,797 75,353,781 259,401,578 186,897,882 79,011,711 265,909,593Intangible assets Deferred tax assets 1,079,510 11,071,078 12,150,588 1,079,510 11,071,078 12,150,588Other assets Total Assets 2,354,493 38,625 2,393,118 2,354,493 38,681 2,393,174 1,845,903 - 1,845,903 1,845,903 - 1,845,903 - 1,059,921 1,059,921 - - - - 5,134,731 5,134,731 - 8,327,019 8,327,019 - 297,359 297,359 - 313,305 313,305 - 308,816 308,816 9,457 323,492 332,949 449,012 3,756,430 4,205,442 949,039 3,799,874 4,748,913 284,343,564 97,698,100 382,041,664 287,741,394 103,562,520 391,303,914LiabilitiesDue to banks 2,211,281 - 2,211,281 2,250,372 - 2,250,372Derivative financial instruments 638,724 - 638,724 638,724 - 638,724Securities sold under re-purchase agreements 3,389,684 - 3,389,684 3,055,257 - 3,055,257Due to other customers 296,414,788 4,134,562 300,549,350 296,247,224 4,134,562 300,381,786Debt issued & other borrowed funds 18,586,853 20,275,478 38,862,331 21,601,775 23,146,755 44,748,530Unclaimed dividend 54,981 - 54,981 54,981 - 54,981Current tax liabilities 575,398 2,116,467 2,691,865 636,871 2,116,467 2,753,338Deferred tax liabilities - - - - 59,034 59,034Other provisions - 441,209 441,209 - 457,100 457,100Other liabilities 2,780,725 2,003,262 4,783,987 3,133,501 2,011,718 5,145,219Total Liabilities 324,652,434 28,970,978 353,623,412 327,618,705 31,925,636 359,544,341Maturity Gap (40,308,870) 68,727,122 28,418,252 (39,877,311) 71,636,884 31,759,573Cumulative Gap (40,308,870) 28,418,252 - (39,877,311) 31,759,573 -320

(b) Maturity Gap Analysis as at 31st December 2012 Bank Group Within 12 After 12 Total as at Within 12 After 12 Total as at Months Months 31.12.2012 Months Months 31.12.2012 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000 Rs 000Assets 10,432,135 - 10,432,135 10,442,259 - 10,442,259Cash & cash equivalents Balances with Central Bank of Sri Lanka 17,011,002 189,790 17,200,792 17,011,002 189,790 17,200,792Placements with banks Reverse repurchase agreements 8,788,127 - 8,788,127 8,788,127 - 8,788,127Derivative financial instruments Financial investments held for trading 3,300,817 - 3,300,817 3,300,373 - 3,300,373Financial assets held for trading pledged as collaterals 279,022 - 279,022 279,022 - 279,022Loans & receivables to banks Loans & receivables to other customers 35,181,084 - 35,181,084 35,181,084 - 35,181,084Other loans & receivables Financial investments available for sale 2,856,321 - 2,856,321 2,856,321 - 2,856,321Financial investments held to maturity Investment in subsidiaries 191,419 624,700 816,119 191,419 624,700 816,119Property, plant & equipment Intangible assets 154,179,332 54,005,037 208,184,369 155,643,797 56,836,244 212,480,041Deferred tax assets Other assets 5,415,759 5,099,997 10,515,756 5,124,476 5,099,998 10,224,474Total Assets 1,900,513 23,111 1,923,624 1,900,513 23,167 1,923,680 - - - 9,765 - 9,765 - 1,059,921 1,059,921 - - - - 4,559,806 4,559,806 3,551 6,760,821 6,764,372 - 311,758 311,758 - 316,412 316,412 - - - 3,778 8,550 12,328 2,066,629 1,934,045 4,000,674 2,532,210 1,927,649 4,459,859 241,602,160 67,808,165 309,410,325 243,267,697 71,787,331 315,055,028LiabilitiesDue to banks 624,784 - 624,784 668,198 - 668,198Derivative financial instruments 381,838 - 381,838 381,838 - 381,838Securities sold under re-purchase agreements 2,757,117 - 2,757,117 2,751,332 - 2,751,332Due to other customers 240,394,402 2,936,588 243,330,990 240,151,645 2,936,591 243,088,236Debt issued & other borrowed funds 16,149,912 12,675,117 28,825,029 18,115,813 14,102,201 32,218,014Unclaimed dividend 49,185 - 49,185 49,185 - 49,185Current tax liabilities 936,000 2,105,259 3,041,259 967,984 2,105,259 3,073,243Deferred tax liabilities - 357,474 357,474 - 388,201 388,201Other provisions - 342,636 342,636 - 355,358 355,358Other liabilities 273,756 3,781,732 4,055,488 487,247 3,775,072 4,262,319Total Liabilities 261,566,994 22,198,806 283,765,800 263,573,242 23,662,682 287,235,924Maturity Gap (19,964,834) 45,609,359 25,644,525 (20,305,545) 48,124,649 27,819,104 Annual Report 2013 Sampath Bank PLCCumulative Gap (19,964,834) 25,644,525 - (20,305,545) 27,819,104 321

INCOME STATEMENT INUS$ Bank GroupFor the year ended 31st December 2013 2012 2013 2012 Restated* Restated* (US$ 000) (US$ 000) (US$ 000) (US$ 000)Gross Income 355,836 303,926 367,619 311,224Interest income 312,975 249,761 323,673 256,263Less : Interest expense Net interest income 203,102 158,789 208,226 161,950 109,873 90,972 115,447 94,313Fee & commission income 22,965 21,964 23,703 22,536Less : Fee & commission expense Net fee & commission income 3,513 5,129 3,675 5,289 19,452 16,835 20,029 17,247Net trading income (533) 49 (533) 49Other operating income Total operating income 20,430 32,152 20,776 32,376 149,221 140,008 155,719 143,985Impairment charge / (reversal) for loans & other losses 26,693 508 27,335 628Net operating income 122,528 139,500 128,384 143,357Less: Operating expenses 33,783 31,409 35,734 32,753Personnel expenses 47,546 41,043 48,901 41,436Other operating expenses 81,328 72,451 84,635 74,189Total operating expenses Operating profit before Value Added Tax (VAT) 41,199 67,049 43,748 69,168Less : Value Added Tax on Financial Services 6,848 9,073 7,121 9,214Operating profit after Value Added Tax (VAT) 34,351 57,976 36,627 59,954Less : Income tax expense 8,114 17,001 8,805 17,337Profit for the year 26,237 40,975 27,822 42,617Attributable to: 26,237 40,975 27,801 42,591Equity holders of the Bank Non controlling interest - - 21 26 26,237 40,975 27,822 42,617Earnings per share: Basic (US$) 0.17 0.26 0.17 0.25Earnings per share: Diluted (US$) Dividend per share: Gross (US$) 0.06 0.09Dividend per share: Net (US$) 0.06 0.09Exchange rate of US$ was Rs 130.75 as at 31st December 2013 (Rs 127.65 as at 31st December 2012 and Rs 113.90 as at 31stDecember 2011).* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4322

STATEMENT OFCOMPREHENSIVEINCOME INUS$ Bank GroupFor the year ended 31st December 2013 2012 2013 2012 Restated* Restated* (US$ 000) (US$ 000) (US$ 000) (US$ 000)Profit for the year 26,237 40,975 27,822 42,617Other comprehensive income / (expenses) net of tax 3,782 (2,733) 3,782 (2,733)Gains & Losses arising on re-measuring available  for sale financial assets 51 126 51 126Exchange difference in translation 3,833 (2,607) 3,833 (2,607)Actuarial gains & losses on defined benefit plans (3,523) 96 (3,535) 96Deferred tax effect on above 986 (27) 986 (27) (2,536) 69 (2,549) 69Surplus from revaluation of Property, plant & equipment 3,177 (21) 10,548 (21)Deferred tax effect on above (195) - (195) - 2,982 (21) 10,353 (21)Gains & losses arising from cash flow hedges (1,285) - (1,285) -Other comprehensive income net of tax 2,995 (2,558) 10,352 (2,558)Total comprehensive income for the year net of tax 29,231 38,417 38,174 40,058Attributable to: 29,231 38,417 37,943 40,032Equity holders of the Bank Non controlling interest - - 231 26 29,231 38,417 38,174 40,058Exchange rate of US$ was Rs 130.75 as at 31st December 2013 (Rs 127.65 as at 31st December 2012 and Rs 113.90 as at 31stDecember 2011).* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4 Annual Report 2013 Sampath Bank PLC 323

STATEMENT OFFINANCIALPOSITIONINUS$ Bank GroupAs at 31st December 31st December 1st January 31st December 31st December 1st January 2013 2012 2012 2013 2012 2012 Restated* Restated* Restated* Restated* (US$ 000) (US$ 000) (US$ 000) (US$ 000) (US$ 000) (US$ 000)ASSETS 63,500 81,725 94,262 63,792 81,804 94,352Cash & cash equivalents 120,589 134,750 116,173 120,589 134,750 116,173Balances with Central Bank of Sri Lanka Placements with banks 13,700 68,845 46,858 13,700 68,845 46,858Reverse repurchase agreements 138,003 25,858 40,404 138,003 25,855 40,439Derivative financial instruments Financial assets held for trading 1,763 2,186 1,789 1,763 2,186 1,789Financial assets held for trading 359,270 275,606 202,397 359,270 275,606 202,397  pledged as collaterals Loans & receivables to banks 26,739 22,376 35,143 26,739 22,376 35,143Loans & receivables to other customers 4,881 4,881 Other loans &receivables 6,393 3,880 6,393 3,880Financial investments available for sale 1,983,951 2,033,725 Financial investments held to maturity 92,930 1,630,900 1,489,740 92,930 1,664,552 1,509,894Investment in Subsidiaries 18,303 18,303 Property, plant & equipment 14,118 82,380 50,362 14,118 80,098 50,362Intangible assets 8,106 - Deferred tax asset 39,271 15,070 17,781 63,687 15,070 17,781Other assets 2,274 2,396 Total assets 2,362 - 90 2,546 76 170 32,164 36,321 8,303 9,262 - - 2,921,925 2,992,764 35,721 39,752 52,992 58,746 2,442 591 2,479 644 - - 97 21 31,341 25,862 34,938 30,018 2,423,896 2,174,345 2,468,116 2,208,668LIABILITIES 16,912 4,895 10,322 17,211 5,235 10,322Due to banks 4,885 4,885 Derivative financial instruments 2,991 2,730 2,991 2,730Securities sold under re-purchase agreements 25,925 23,367 Due to other customers 2,298,657 21,599 36,004 2,297,375 21,554 36,004Debt issued and other borrowed funds 297,226 1,906,236 1,713,741 342,245 1,904,334 1,712,857Unclaimed dividend 421 421 Current tax liabilities 225,813 173,435 252,393 188,678Deferred tax liabilities 20,588 21,058 Other provisions - 385 326 452 385 326Other liabilities Total Liabilities 3,374 23,825 16,258 3,496 24,076 16,516 36,589 39,352 2,704,577 2,800 2,899 2,749,861 3,041 3,037 2,684 2,667 2,784 2,782 31,770 28,574 33,391 30,758 2,222,999 1,986,956 2,250,184 2,004,010EQUITYStated capital 34,113 27,921 24,089 34,113 27,921 24,089Reserves   Statutory Reserves 28,097 21,174 12,575 28,833 21,618 12,835  Other Reserves 136,014 131,748 131,637 154,030 142,868 144,099  Retained Profit 19,124 20,054 19,087 25,246 25,045 23,109Total equity attributable to equity holders  of the Bank 217,348 200,897 187,388 242,222 217,453 204,132Non controlling interest - - - 681 480 526Total Equity 217,348 200,897 187,388 242,903 217,933 204,658Total liabilities and equity 2,921,925 2,423,896 2,174,345 2,992,764 2,468,116 2,208,668Net asset value per share ( US $) 1.30 1.20 1.17 1.44 1.30 1.27Commitments and contingencies 1,113,321 908,153 1,061,868 1,114,227 909,749 1,061,868Exchange rate of US$ was Rs 130.75 as at 31st December 2013 (Rs 127.65 as at 31st December 2012 and Rs 113.90 as at 31st December 2011).* Certain amounts shown here do not correspond to the Financial Statements - 2012 and reflect adjustments made based on the newly adopted Sri Lanka Accounting Standards: refer Note 6.4324

TEN YEARSAT A GLANCE Rs Mn Annual Report 2013 Sampath Bank PLC SLAS SLFRSYear 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Profit Performance 6,953 8,704 12,340 17,400 22,243 25,213 24,333 27,577 38,796 46,526Income 5,412 7,227 9,997 14,950 19,451 20,970 18,477 21,111 31,882 40,921Interest income 2,859 3,913 5,890 9,947 12,801 13,165 9,953 12,168 20,269 26,556Interest expenses 2,553 3,314 4,107 5,003 6,650 7,805 8,525 8,943 11,613 14,366Net interest income Exchange income 617 192 646 505 647 774 498 964 2,154 520Other income 924 1,284 1,697 1,944 2,144 3,469 5,357 4,351 4,104 2,671Total operating income 4,094 4,790 6,450 7,452 9,441 12,048 14,380 14,572 17,872 19,511Operating expenses & impairment losses 2,308 3,493 4,183 5,234 6,877 8,072 9,878 9,578 9,313 14,124Profit before tax 965 1,297 2,268 2,218 2,564 3,976 4,502 4,994 7,401 4,491Income tax expense 344 476 1,240 1,167 1,150 1,878 1,199 1,606 2,170 1,061Profit after tax 621 821 1,028 1,052 1,414 2,098 3,303 3,387 5,230 3,430 SLAS SLFRS 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Year 4,813 5,848 8,814 9,108 6,923 5,868 6,048 16,073 19,220 10,094Assets 2,424 2,748 2,572 2,947 2,827 2,985 - - - -Cash & cash equivalents including placements 43,548 54,043 67,061 83,695 87,380 92,189 - - - -Bills of exchange 1,972 3,304 6,337 6,788 5,448 3,511 - - - -Loans and advances Lease rentals receivable - - - - - - - 442 816 638Loans and receivables to banks - - - - - - 124,067 169,681 208,184 259,402Loans and receivables to other customers 452 862 1,096 970 970 992 992 1,055 1,060 1,060Investment in associates & subsidiaries 1,183 1,435 1,823 3,080 3,289 3,420 4,278 4,528 4,560 5,135Property, plant & equipment 67,483 84,811 109,550 133,196 138,539 156,162 191,314 247,658 309,410 382,042Total assets 53,305 65,900 81,432 99,419 107,380 126,091 153,310 195,900 243,575 302,429Liabilities 1,564 1,900 2,774 4,157 4,592 4,819 - - - -Due to banks & other customers (Deposits Only) 2,196 2,491 2,734 4,433 4,514 3,102 - - - -Refinance borrowings Other liabilities evidenced by paper - - - - - - 8,702 20,225 29,206 39,194Borrowings from banks & debt issued and 6,501 8,889 15,984 16,618 12,276 10,304 8,311 10,189 10,985 12,000 other borrowed funds 63,566 79,180 102,924 124,627 128,762 144,316 170,323 226,314 283,766 353,623Other liabilities including income & deffered tax liabilities Total liabilities 517 689 1,582 1,582 1,582 1,582 1,786 2,744 3,564 4,460 3,401 4,943 5,044 6,987 8,195 10,265 19,204 18,600 22,080 23,958Shareholders’ FundStated capital 88.6 137.8 172.2 206.7 275.6 473.6 1,235.8 1,427.0 1,954.1 1,342.3Reserves 7.0 6.0 6.0 5.1 5.1 4.4 2.7 2.4 2.6 2.6Investor Information 75.82 81.75 96.17 124.39 141.92 77.52 131.18* 129.00* 152.96* 169.37*Dividend paid/proposed 105.00 114.00 117.25 135.00 120.00 205.00 550.00 307.00 216.00 242.00Dividend cover (times) Net assets per share (Rs) 60.25 61.00 75.25 100.00 65.00 65.00 201.00 191.00 148.50 161.60Market price per share (Rs)-Max 62.75 90.00 109.75 120.00 68.00 204.25 271.90 195.00 200.50 171.90Market price per share (Rs)-Min Market price as at 31 December (Rs) 104.60 102.10 107.52 108.65 113.00 114.47 110.95 113.90 127.65 130.75 1,702 1,875 2,039 2,213 2,364 2,388 2,688 3,230 3,455 3,688Other Information 71 83 96 105 112 131 171 206 209 212Exchange rate (US $) Number of staff as at 31 December 15.0 25.2 41.8 41.0 27.8 13.4 (3.5) 9.9 40.7* 19.9*Number of branches as at 31 December 60.1 60.0 58.0 56.8 59.6 57.0 55.8 61.5* 58.2* 59.1* 25.9 23.6 23.5 22.4 8.1 17.5 19.4 27.8* 24.3* 24.2*Ratios 27.3 25.3 26.4 23.0 2.4 3.2 30.3 37.1* 22.9* 24.4*Growth of income (%) 2.00 2.00 2.50 3.00 4.00 6.25 8.09 9.00 12.00 8.00Cost to income ratio (%) 1.02 1.08 1.06 0.87 1.04 1.42 1.94 1.55* 1.88* 0.99*Growth of deposits (%) 17.02 17.20 16.78 13.84 15.41 19.41 24.59 16.17* 22.26* 12.69*Growth of advances (%) 30.2 25.5 28.9 35.9 33.6 28.9 20.4 21.2 17.8 18.1Dividend per share 17.2 15.1 17.4 15.5 14.2 13.2 9.1 11.6 12.1 13.4Return on assets (after tax) (%) Return on equity (after tax) (%) 23.6 25.3 31.3 29.0 29.5 30.5 26.3 25.0 22.4 27.6Fixed assets to shareholders’ fund (%) Total assets to shareholders’ fund (Times) 9.14 10.14 8.38 7.58 8.10 10.40 10.71 10.24 11.80* 10.08* 13.30 13.53 10.82 11.58 11.95 13.45 12.91 11.45 13.61* 14.22*(As specified in Banking Act No. 30 of 1988)Liquid Assets Ratio (%) Capital Adequacy Ratios (%)- TIER I - TIER I+II *Based on SLFRSs and LKASs 325

VALUE ADDITIONEconomic Value Addition 2013 2012 Rs Mn Rs MnShareholders’ funds 27,031 23,494Provision for Impairment Losses 9,980 7,012 37,011 30,506Profit attributable to shareholders 3,431 5,231Impairment charge / (reversal) 3,490 65Amounts written off (326) (105) 6,595 5,191Economic cost % (12 months average Treasury Bill rate plus 2% risk premium) 12.6 14Economic cost 4,675 4,277Economic value addition 1,920 914The economic value created by the Bank to its shareholders’ credit during the period is reflected in the above analysis.Financial Value Addition 2013 % 2012 % Rs Mn Rs Mn 46,325 38,649Value AddedIncome earned by providing 32,464 25,371Banking services Cost of services 13,861 13,278Value added by banking services Non-banking income 200 147Provision for Impairment Losses (3,490) (65)Value allocated 10,571 13,361To employees Salaries, wages and other benefits 4,417 41.8 4,009 30.0To providers of capital 4,417 41.8 4,009 30.0Dividend to shareholders Interest to Debenture holders 1,643 15.5 2,164 16.2 1,342 12.7 1,954 14.6To government Income Tax 301 2.8 210 1.6Value Added Tax 2,519 23.8 3,304 24.7To expansion and growth Retained income 1,624 15.4 2,146 16.1Depreciation Deferred taxation 895 8.5 1,158 8.6 1,992 18.8 3,883 29.1 2,088 19.8 3,276 24.5 570 5.4 579 4.3 (666) (6.3) 27 0.3 10,571 100.0 13,361 100.0326

SOURCES & DISTRIBUTION OF INCOMEFor the year ended 31st December 2013 2012 Rs Mn Rs MnSources of IncomeInterest Income 40,921 31,882Net Fee & Commission Income 3,003 2,804Net Trading Income (70) 6Other Operating Income 2,671 4,104 46,526 38,796Distribution of IncomeTo Depositors/ Borrowers/Debenture Holders 27,015 20,924Interest Paid 26,556 20,269Fee & Commission Paid 459 655To Employees 4,417 4,009Personnel Expenses 4,417 4,009To Suppliers / Depreciation set aside 9,707 5,304Depreciation & Amortisation 570 579Impairment Provision 3,490 65Other Expenses 5,647 4,660To Government 1,956 3,328Value Added Tax on Financial Services 895 1,158Income Tax Expense (including deferred tax) 1,061 2,170 To Shareholders 3,430 5,230Dividend 1,342 1,954Retained Profit 2,088 3,276 46,526 38,796 Annual Report 2013 Sampath Bank PLC 327

INVESTOR RELATIONSValue Creation for Shareholders 2013 2012 Change % 169.37 152.96 10.72   21.67 32.57 Net Assets per Share (Rs) 8.00 12.00 (33.46) Earnings per Share - Group (Rs) 171.90 200.50 (33.33) Dividend per Share (Rs) (14.26) Market Price per Share - Year End (Rs)Sampath Bank Market DDiPvSidend Per Share - Earnings and HighestCapitalisation Rank Market Price per Share Rs 12 Rs Rs 550 307 216 24215 8 8 22.3 16 13 9 23.0 16 32.6 21.72010 2010 2010 2011 2011 2011 2012 2012 2012 2013 2013 2013 Earnings Per Share (EPS) Group Highest Market Price Per Share (HMPS)Bank’s Market Capitalisation in Comparison to CSE - As at December 31   2013 2012 2011 2010 2009Sampath Bank Market Capitalisation (Rs Mn) 28,843 32,628 30,587 41,548 14,070Increase/ Decrease % in Market Capitalisation (12%) 7% (26%) 195% 200%CSE Market Capitalisation (Rs Mn) 2,213,873As a % of CSE Market Capitalisation 2,459,900 2,167,581 2,210,452 1,092,137Market Capitalisation Rank 1.17 % 1.50% 1.38% 1.88% 1.29% 16 13 16 15 19Shareholders' Fund Composition of Share Sampath Bank Return Ownership - 2013 on Equity & MarketRs Mn (No of shareholders) Interest Rates 20,990 55 50 %% 21,344 40 24.6 25,645 22.3 28,418 16.2 12.7 8.6 9.2 7.5 8.2 12.0 11.1 10.6 13.1 2010 Shares 500 & Less 2010 2011 Shares 501 - 5,000 2011 2012 Shares 5,001 - 10,000 2012 2013 More than 10,000 Shares 2013 Average 12 T.B. Rate AWFDR ROE328

Analysis of ShareholdersResident / Non-Resident 31st December 2013 31st December 2012   No of No of % No of No of % Shareholders SharesResident Shareholders Shareholders Shares 85.02 94.39Non-Resident Shareholders 14.98 5.61  17,595 142,649,505 100.00 17,216 153,613,404 305 25,138,100 302 9,123,261 100.00 17,900 167,787,605 17,518 162,736,665Individuals / Institutions 31st December 2013 31st December 2012   No of No of % No of No of % Shareholders Shares Individuals / Public Shareholders Shares 35.40 7.21 Institutions 64.60 92.79   17,331 59,392,666 100.00 9,081 11,728,136 100.00 569 108,394,939 8,437 151,008,529 17,900 167,787,605 17,518 162,736,665Composition of Share Ownership 31st December 2013 31st December 2012  No of % No of % No of % No of % Shareholders Shares Shareholders SharesShares 500 & Less 8,916 49.81 1,738,236 1.04 8,813 50.31 1,711,831 1.05Shares 501-5,000 7,113 39.74 10,986,610 6.55 7,359 42.01 11,020,135 6.77Shares 5,001-10,000 864 4.83 3.69 3.74 4,467,234 2.75More than 10,000 6,197,624 656Shares  1,007 5.62 148,865,135 88.72 690 3.94 145,537,465 89.43 17,900 100.00 167,787,605 100.00 17,518 100.00 162,736,665 100.00Sampath Bank Market Composition of Share Share Trading -Capitalisation Ownership - 2013 Sampath Bank PLC (No of shares)Rs Mn No of Shares 1 Traded Mn 441,548 68 30,587 6 48 32,628 89 192009 27 28,843 2010 29 20112010 Shares 500 & Less 2012 2011 Shares 501 - 5,000 2013 2012 Shares 5,001 - 10,000 Annual Report 2013 Sampath Bank PLC 2013 More than 10,000 Shares 329

INVESTORRELATIONSShare Trading 2013 2012 2011 2010 2009Market 1,421,303 1,857,384 4,579,352 3,355,126 1,266,299 24,543,700,782   9,054,193,822 9,691,236,634 18,489,195,424 4,928,999,666 No of Transactions No of Shares Traded 200,468 213,827 546,255 570,326 142,463 Value of Shares Traded (Rs Mn)Bank 2013 2012 2011 2010 2009 19,212 13,473 15,335 20,154 8,578   No of Transactions 47,891,453 28,871,254 26,951,903 67,672,164 19,077,355 Number of Shares Traded 28.54 17.74 17.18 44.20 27.69 As a % of Total Shares in Issue 39.75 22.55 90.78 10.41 Average Daily Turnover (Rs Mn) 30.23 Value of Shares Traded (Rs Mn) 9,620.18 5,457.94 7,225.70 20,427.00 2,457.52Sampath Share Price Fluctuation 2013 2012 2011 2010 2009 161.60 148.50 191.00 201.00 65.00   216.00 307.00 550.00 Minimum Market Price (Rs) 242.00 205.00 Maximum Price (Rs) 200.50 195.00 271.90 Price as at 31st December 171.90 204.25 (Closing Price) (Rs) Gross Dividend Shareholding of Individuals & Rs Mn Institutions as at 31st December 1,235.9 1,427.0 % 1,954.1 1,342.3 2010 88.3 2011 90.8 2012 92.8 2013 64.6 2010 35.4 2011 11.7 9.2 7.2 2012 2013 Individuals / Public Institutions330

Sampath Share Price Share Trading - %Fluctuation Sampath Bank PLCRs 30,000 25,000600 20,000 15,000500 10,000400 5,000 0300200100 0 Maximum Price Minimum Market Price Price as at 31st December2009 2010 2011 2012 2013 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Volume Traded (No' 000) Turnover (Rs' 000)Sampath Bank PLC - Ordinary Shares Frequency Distribution of Shareholders as at 31 December 2013 RESIDENT NON RESIDENT TOTALShare Range No of Shareholders % No of Shares % No of Shareholders % No of Shares % No of Shareholders % No of Shares % 1-250 4,518 25.24 352,137 0.2099 57 0.32 5,403 0.0032 4,575 25.56 357,540 0.2131 251-500 4,298 24.01 4,341 24.25 1,380,696 0.8229 501-1,000 2,999 16.75 1,365,843 0.8140 43 0.24 14,853 0.0089 3,049 17.03 2,071,813 1.2348 1,001-2,000 2,214 12.37 2,258 3,212,441 2,001-5,000 1,762 9.84 2,036,354 1.2136 50 0.28 35,459 0.0211 1,806 12.61 5,702,356 1.9146 5,001-10,000 4.72 10.09 6,197,624 3.3986 10,001-20,000 845 3,151,635 1.8783 44 0.25 60,806 0.0362 864 4.83 8,039,194 3.6937 20,001-30,000 563 3.15 580 4,155,834 4.7913 30,001-40,000 164 0.92 5,552,915 3.3095 44 0.25 149,441 0.0891 170 3.24 2,520,918 2.4768 40,001-50,000 0.37 0.95 1,330,038 1.5024 50,001-100,000 67 0.16 6,077,566 3.6222 19 0.11 120,058 0.0716 72 0.40 4,060,303 0.7927 100,001-1,000,000 29 0.32 30 0.17 22,841,637 2.4199 1,000,001-Over 57 0.38 7,811,941 4.6559 17 0.09 227,253 0.1354 59 0.33 105,917,211 13.6134Total 68 0.06 80 0.45 167,787,605 63.1258 98.30 4,008,342 2.3889 6 0.03 147,492 0.0879 16 0.09 100.0000 11 17,900 100.00 17,595 2,339,115 1.3941 5 0.03 181,803 0.1084 1,286,903 0.7670 1 0.01 43,135 0.0257 3,923,641 2.3385 2 0.01 136,662 0.0814 17,831,115 10.6272 12 0.07 5,010,522 2.9862 86,911,998 51.7988 5 0.03 19,005,213 11.3269 142,649,505 85.0179 305 1.70 25,138,100 14.9821 Annual Report 2013 Sampath Bank PLC 331

INVESTORRELATIONSSAMPATH BANK PLC (ORDINARY SHARES) Top 20 Shareholders as at 31st December 2013 No Shareholder Name Shareholding Ratio 25,107,454 14.961 VALLIBEL ONE PLC 16,745,012 9.98 16,738,207 9.982 EMPLOYEES PROVIDENT FUND 11,496,342 6.853 MR Y S H I SILVA 7,050,493 4.204 ROSEWOOD (PVT) LIMITED-ACCOUNT NO 3 4,706,155 2.80 4,468,022 2.665 HSBC INTL NOM LTD-BBH-MATTHEWS INTERNATIONAL FUNDS- MATTHEWS ASIA GROWTH FUND 4,375,557 2.616 NORTHERN TRUST CO S/A CARAVEL FUND ( INTERNATIONAL ) LTD. 4,067,943 2.42 2,735,145 1.637 EMPLOYEES TRUST FUND BOARD 1,663,598 0.998 HSBC INTL NOM LTD-STATE STREET LUXEMBOURG C/O SSBT -ABN 1,513,159 0.90 AMRO MULTI -MANAGER FUNDS 1,437,278 0.869 VARNERS INTERNATIONAL (PRIVATE) LIMITED 1,388,010 0.83 1,359,849 0.8110 SAMPATH BANK PLC ACCOUNT NO 04 (SAMPATH BANK PENSION FUND) 1,064,987 0.63 0.5811 MR B A MAHIPALA 979,243 0.57 950,000 0.4912 NORTHERN TRUST CO S/A-NORTHERN TRUST FIDUCIARY SERVICES 0.45 (IRELAND) LTD AS TRUSTEE TO BARING ASEAN FRONTIERS FUND 816,155 65.21 750,00013 AIA INSURANCE LANKA PLC A/C NO 07 109,412,609   100.0014 KEYSTONE (PRIVATE) LIMITED   167,787,605 -15 MELLON BANK N.A.-UPS GROUP TRUST 100.00 -16 CEYLON GUARDIAN INVESTMENT TRUST PLC A/C NO 01 167,787,605   0.0617 CEYLON INVESTMENT PLC A/C NO 01   64.60 99,568* 35.3418 BNY-CF RUFFER INVESTMENT FUNDS : CF RUFFER PACIFIC FUND 108,394,939 100.00 59,293,09819 HSBC INTL NOM LTD-BBH-MATTHEWS EMERGING ASIA FUND 167,787,605   84.98%20 THE CEYLON GUARDIAN INVESTMENT TRUST PLC A/C NO 02   15.02% -    -     Total No. of Shares Registered  Total No. of Shares Unregistered  Total No. of Shares Issued    Shares held by Directors  Shares held by Institutions  Balance held by Public  Total No. of Shares Issued    % Shares held by Public  % Shares held by Directors and Related Parties* Mr. Dhammika Perera is the Chairman of Vallibel One PLC as well as Sampath Bank PLC, total shares held by Vallibel One PLC iscategorised under institutions.332

Dividend Payment DetailsYear Total Dividend Paid Dividend per Share Net Profit after Tax Dividend Pay Out Ratio  Rs Mn Rs  Rs Mn  2000/2001 58.70 1.752001/2002 52.14 1.75 402 14.60%2002/2003 88.57 2.002003 (Interim) 59.78 322 16.19%2003 (Final) 21.99 2.002004 (Interim) 65.98 441 20.08%2004 (Final) 34.30 2.00 2005 (Interim) 87.14 561 14.58%2005 (Final) 32.21 2.002006/2007 155.47 621 16.15%2007/2008 206.66 2.502008/2009 256.65 3.00 821 14.54%2009/2010 436.19 4.002010/2011 1,235.86 6.25 1,028 15.12%2011/2012 1,426.98 8.09 1,052 19.64%2012/2013 1,954.10 9.00 1,414 18.15%2013/2014 12.00 2,098 20.79%(Proposed) 3,303 37.42% 3,819 37.37% 5,230 37.36% 1,342.30  8.00  3,430  39.13% Record of Scrip Issues Year Issue Basis New No of Stated Capital Reason for Issue Shares (Rs Mn)2010 Scrip Dividend 1 for 120.74 627,5962010 Scrip Dividend 1 for 43.39 1,786.25 Increase Stated Capital2011 Scrip Dividend 1 for 43.06 3,521,2942012 Scrip Dividend 1 for 33.12 2,701.79 Increase Stated Capital 3,682,039 3,523.87 Increase Stated Capital 4,916,007 4,457.89 Increase Stated CapitalRecord of SubdivisionsYear Issue Basis New No of Stated Capital Reason for Issue 11 for 10 Shares (Rs Mn) 1 for 1 6,888,7622010 Consolidation and 1,581.65 Increase in Liquidity Subdivision 76,403,9862010 Subdivision 1,786.25 Gift Benefit to Shareholders Annual Report 2013 Sampath Bank PLCEmployee Share Option Plan 2010 Year Issue Basis New No of Stated Capital Reason for Issue Shares (Rs Mn)20112012 ESOP 2% of Issued Shares 524,924 2,743.78 Benefit for Staff Members2013 ESOP 2% of Issued Shares ESOP 2% of Issued Shares 2,200,436 3,564.17 Benefit for Staff Members 134,933 4,460.34 Benefit for Staff Members 333

INVESTORRELATIONSDEBENTURE INFORMATION(a) Market ValuesDebentures - 2007/2012 *  Highest Lowest Period EndFixed - 17.5% 2013 2012 2013 2012 2013 2012Fixed - 15.5%Floating rate N/A N/T N/A N/T N/A N/T N/A N/T N/A N/T N/A N/T N/A N/T N/A N/T N/A N/TN/A - Not Applicable and N/T - Not Traded*Debentures were redeemed on 29th August 2012 Debentures - 2012/2017  Highest Lowest Period End Fixed - 16.5% 2013 2012 2013 2012 2013 2012 Fixed - 15.0% Floating rate 107.00 100.00 95.00 100.00 107.00 100.00N/T - Not Traded 103.00 100.00 90.00 100.00 100.00 100.00 N/T N/T N/T N/T N/T N/TDebentures - 2013/2018  Highest Lowest Period EndFixed - 13.4% 2013 2012 2013 2012 2013 2012Fixed - 13.0% 101.21 N/A 101.21 N/A 101.21 N/A N/T N/A N/T N/A N/T N/AN/A - Not Applicable and N/T - Not Traded(b) Interest Rates 2013 2012 Debentures - 2007/2012  Coupon Rate Effective Rate Coupon Rate Effective Rate Fixed - 17.5% N/A N/A 17.50% 17.50% Fixed - 15.5% Floating rate N/A N/A 15.50% 16.65%N/A - Not Applicable N/A N/A --Debentures - 2012/2017  2013 2012Fixed - 16.5% Coupon Rate Effective Rate Coupon Rate Effective RateFixed - 15.0%Floating rate      16.50% 16.50% 16.50% 16.50% 15.00% 16.08% 15.00% 16.08% ----334

Debentures - 2013/2018 2013 2012 Fixed - 13.4% Coupon Rate Effective Rate Coupon Rate Effective Rate Fixed - 13.0%N/A - Not Applicable 13.40% 13.40% N/A N/A 13.00% 13.42% N/A N/ADebentures - 2007/2012 Floating rate is equivalent to the 3 month Treasury Bill rate (Gross) plus 1.5% pa payable quarterly. Thesedebentures were redeemed on 29th August 2012. Debentures - 2012/2017 Floating rate is equivalent to the six month Treasury Bill rate (Gross) plus 2.0% pa payable half yearly. (c ) Interest Rate of Comparable Government Securities - Gross Rates  2013 20123 Month Treasury Bill 9.21% 11.11%6 Month Treasury Bill 9.59% 12.58%(d) Current Yield and Yield to maturity   Fixed Fixed Floating  Debentures - 2007/2012   ‘16.50% ‘15.00%   Current yield Yield to maturity of last trade 2013 2012 2013 2012 2013 2012N/A - Not Applicable and N/T - Not Traded N/A N/T N/A N/T N/A N/T N/A N/T N/A N/T N/A N/T  Fixed Fixed Floating Debentures - 2012/2017  ‘16.50% ‘15.00%  Current yield 2013 2012 2013 2012 2013 2012Yield to maturity of last trade 15.42% N/A 15.00% N/A N/A N/A 13.98% N/A 16.01% N/A N/T N/AN/A - Not Applicable and N/T - Not Traded Fixed Fixed  Debentures - 2013/2018 13.40% 13.00% Current yield 2013 2012 2013 2012 Annual Report 2013 Sampath Bank PLC Yield to maturity of last tradeN/A - Not Applicable and N/T - Not Traded 13.24% N/A N/A N/A(e) Ratios 13.04% N/A N/A N/A   Debt to Equity Ratio (%) 2013 2012 Interest Cover (Times) 28.1% 12.4% Quick Asset Ratio (%) 34.9 18.9 104.7% 95.6% 335

CAPITALADEQUACYCapital adequacy is the key financial indicator At present, the calculations with regard to capitalwhich illustrates the soundness and the stability of adequacy are prepared as per the “BASEL Accord”a bank by measuring the adequacy of its capital to which is an universally accepted frameworkmeet unexpected losses arising from various risks, put forward by the “Basel Committee on Bankassociated with the business of banking, such as Supervision” of the Bank for International Settlementscredit risk, market risk, operational risk etc. Hence (BIS).the capital of a bank acts as a “cushion” or “buffer”to the extent of its size, in absorbing potential losses The Basel Committee on Banking Supervisionarising from these risks, thereby safeguarding the (BCBS)depositors’ funds, at least to that extent. Hence, The Basel Committee on Banking Supervision is thecapital adequacy is an essential requisite for banks to International body for Central Bankers, set up bymaintain over and above the stipulated requirements the Central Banks of the Group of Ten (G10), the 10under the integrated risk management system. wealthiest nations of the world and located in the City of “Basel”, Switzerland.Capital Adequacy Ratios (CARs) are a measure of theamount of a bank’s capital expressed as a percentage The Basel Committee is the primary global standard-of its Risk-Weighted Assets. setter for the prudential regulation of banks and provides a forum for cooperation on bankingCAR is defined as: supervisory matters. Its mandate is to strengthen the regulation, supervision and practices of banksCAR = Tier I capital + Tier II capital worldwide with the purpose of enhancing financial Risk Weighted Assets stability.Tier 1 Capital Basel IThe Tier 1 Capital mainly consists of Stated Capital, In 1988, the Basel Committee on Banking Supervisionnon redeemable and non cumulative preference (BCBS) published a set of minimum capitalshares and other capital and revenue reserves requirements for banks. This is also known as theafter deducting the total value of intangible assets 1988 Basel Accord, and was enforced by law in theand 50% of the investments made in shares and Group of Ten (G-10) countries in 1992. The Baseldebentures of banks and financial companies and Accord well known as “Basel I“ was followed by Sriunconsolidated banking and financial subsidiary Lankan Banks to compute the Capital Adequacycompanies. ratios up to 31st December 2007.Tier 11 Capital A new set of rules known as Basel II was laterTier 11 Capital includes Revaluation Reserves developed to replace the Basel I accords by the Baselapproved by CBSL, General Loan Loss Provision and Committee.subordinated term debts approved by CBSL afterdeducting totals of intangible assets, 50% of the Basel IIinvestments made in shares and debentures of banks The Basel Committee on Banking Supervision (BCBS)and financial companies and unconsolidated banking published the International Convergence of Capitaland financial subsidiary companies. Measurement and Capital Standards: a Revised Framework (Basel II) in June 2004 and as amendedRisk Weighted Assets (RWA) in June 2006. This is the basis currently used byRisk weighted assets is a measure of the amount of Sri Lankan Banks for the computation of the Capitalthe bank’s assets, adjusted for risk. RWAs are Bank’s Adequacy Ratio effective from 1st January 2008.assets and off-balance sheet exposures, weightedaccording to the risk. Different classes of assets have Basel II comprises three mutually reinforcing pillars,different risk weights associated with them. Pillar 1 - Minimum capital requirements Pillar 2 - Supervisory review Pillar 3 - Market discipline336

Pillar 1 – Minimum Capital Requirement Pillar 1. (e.g.: Credit concentration risk, Liquidity risk,The pillar 1 deals with maintenance of regulatory business and strategic risk etc). It also covers thecapital calculated for three ma jor components of risk Stress Tests which are used to measure the impactthat a bank faces: credit risk, operational risk, and on possible adverse movements in different marketmarket risk. Other risks are not considered fully at scenarios.this stage. Sampath Bank has so far successfully met theThe credit risk component can be calculated in three time targets set by CBSL with regard to ICAAPdifferent ways of varying degrees of sophistication, implementation.namely standardized approach, Foundation IRB(Internal Rating-Based), Advanced IRB Approach. In Pillar 3 – Market Disciplineaccordance with the current regulatory framework in Pillar 3 presents a number of disclosurethe country, the Bank has adopted the Standardized requirements. The objective is to raise the level ofApproach for calculating credit and market risk market discipline by giving external stakeholdersas well as Basic Indicator Approach for calculating a better understanding of bank’s capital adequacyoperational risk. calculations and the procedures involved. This Pillar is seen as particularly important because underPlans are underway to migrate to Advanced IRB the advanced approaches of Basel 11, banks areApproach for credit risk and standarised Approach allowed to rely more heavily on internal methods forfor Operational Risk in 2014. determining risk, giving them greater discretion in determining their capital needs.Pillar 2 – Supervisory Review ProcessPillar 2 sets forth the framework for the Supervisory Basel IIIReview Process (SREP) and the framework for bank’s Basel III is the Third Basel Accord issued by BaselInternal Capital Adequacy Assessment Process Committee in 2010 which is a global, voluntary(ICAAP). Pillar II concerns bank’s risks in a wider regulatory standard on bank capital adequacy, stresssense, including risks not captured and accounted by testing and market liquidity risk. Basel III – Financial Stability Pillar 1 Pillar 2 Pillar 3 Minimum Capital and Supervisory Review Market DisciplineLiquidity Requirements Calculation of Regulatory Disclosure Annual Report 2013 Sampath Bank PLC Credit, Market framework for requirements and Operational banks (ICAAP of bank Risk through and Risk (transparency of standard and/or Management) risk position and internal approach comparability of Supervisory banks for market Liquidity framework participants) measurement (evaluation of internal systems and review of compliance) 337

CAPITALADEQUACYBasel III is supposed to strengthen bank capital Net Stable Funding Ratio (NSFR)requirements by increasing bank liquidity and The NSFR is defined as the amount of availabledecreasing bank leverage. It also demands banks stable funding relative to the amount of requiredto maintain much higher capital buffers compared stable funding. This ratio should be equal to at leastto traditional capital adequacy levels. The main 100% on an on-going basis. “Available stable funding”objective of BASEL III is to minimize the possibility is defined as the portion of capital and liabilitiesand severity of occurrence of financial crisis. expected to be reliable over the time horizon considered by the NSFR, which extends to one year.To achieve these objectives BASEL III has introducednew stringent rules covering key areas such as Global Systematically Important FinancialCapital, liquidity and risk weighted assets of the Bank. Institutions (G-SIFIs) One of the key elements of Basel III is theIncreasing the Quantity and the Quality of requirement for “Global Systematically Important“Capital” Financial Institutions” (G-SIFIs) to have a higher lossBasel III has tightened the definition of “capital”, absorbing capacity to prevent the risks that posethus increasing the quality of capital buffers held to the financial systems as a whole. The additionalby banks. In terms of “quantity”, Basel III greatly buffer for G-SIFIs would be met with a progressivefocuses on common equity and the minimum to be common equity Tier I capital requirement, rangingraised up to 4.5% of risk weighted assets (RWA) after from 1% to 2.5%, depending on the systemicdeductions. Capital Conversion Buffer comprising of importance of each bank.common equity of 2.5% of RWA expects to bring thetotal common equity to 7% from the present level of The Central Bank of Sri Lanka is expecting to issue2%. directions for Liquidity / Capital Standards under Basel 111 from 1st quarter 2014.Increase in Risk CoverageBasel III framework targets at capturing the types At present, the Core Capital Ratio as well as the Baseof risk that were not properly covered by Basel II. It Capital Ratio maintained by the Bank comfortablyextends the risk coverage to capture counterparty exceeds the regulatory requirements set by CBSL.exposures as well.Controlling the leverage of assets through“Leverage Ratio”The expectation is that the capital of the bank shouldat least be 3% of the total assets including on and offbalance sheet assets, before risk weighting. Improving Liquidity StandardsThe excessive Liquidity risk arising from tenormismatches between assets and liabilities mayultimately lead to a financial crisis unless it has beenproperly addressed. Basel III intends addressing thisarea by introducing two liquidity ratios.Liquidity Coverage Ratio (LCR)The Liquidity Coverage Ratio (LCR) requires theBank to have sufficient high quality liquid assets towithstand a 30 day stressed potential liquidity crisis.The banks may need to hold low yielding assets suchas government securities to meet the LCR.338

Computation of Capital Adequacy Ratios - Basel 11 Bank Group 2013 2012 2013 2012Risk Weighted Assets For Credit Risk Assets Risk Assets Risk Assets Risk Assets Risk Weighted Weighted Weighted Weighted Assets Assets Assets Assets Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs MnClaims on Central Government &  Central Bank of Sri Lanka 44,178.3 - 27,215.1 - 44,502.9 - 27,224.8 -Claims on Public Sector Entities 708.3 272.5 544.4 108.6 708.3 272.5 544.4 108.6Claims on Banks Exposures 3,847.3 1,620.1 14,456.7 3,948.6 3,847.4 1,620.1 14,457.0 3,948.7Claims on Financial Institutions 13,824.9 7,637.4 8,029.6 5,610.4 12,238.8 6,844.3 7,058.6 4,639.4Claims on Corporates 147,471.8 143,366.0 102,803.2 101,067.3 153,696.4 149,590.6 107,103.4 105,367.4Retail claims 37,155.7 27,866.8 39,227.8 29,420.8 37,155.7 27,866.8 39,227.8 29,420.8Claims Secured by Residential Property 14,074.2 9,051.5 9,354.1 6,572.4 14,074.2 9,051.5 9,354.1 6,572.4Past Due Loans 2,074.7 2,868.4 952.5 1,322.1 2,330.7 3,124.4 972.9 1,342.5Past Due Residential Mortgage Loans 269.3 254.5 222.1 206.7 269.3 254.5 222.1 206.7Cash / Gold Against Loans 81,625.9 50.5 80,184.2 33.8 81,626.1 50.5 80,184.4 33.8Other Assets 7,056.2 7,056.2 6,072.7 6,072.7 12,725.1 12,725.1 9,336.0 9,336.0 352,286.6 200,043.9 289,062.4 154,363.4 363,174.9 211,400.3 295,685.5 160,976.3 Bank Group 2013 2012 2013 2012Off-balance sheet Items Credit Principal Credit Principal Credit Principal Credit Principal Credit Conversion amount of equivalent amount equivalent amount equivalent amount equivalent Factor (%) Off-balance of Off- of Off- of Off- of Off- of Off- of Off- of Off- sheet items balance balance balance balance balance balance balance sheet items sheet items sheet items sheet items sheet items sheet items sheet items Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs Mn Rs MnDirect Credit Substitutes 14,655.2 14,655.2 11,818.1 11,818.1 14,655.2 14,655.2 11,818.1 11,818.1General Guarantees of Indebtedness 100.0 14,655.2 14,655.2 11,818.1 11,818.1 14,655.2 14,655.2 11,818.1 11,818.1Transaction-related Contingencies 8,349.2 4,758.6 7,169.0 4,089.9 8,349.2 4,758.6 7,169.0 4,089.9Performance Bonds, Bid Bonds & Warranties 50.0 6,013.0 3,006.5 4,922.7 2,461.3 6,013.0 3,006.5 4,922.7 2,461.3Others 75/72.5 2,336.2 1,752.1 2,246.3 1,628.6 2,336.2 1,752.1 2,246.3 1,628.6Short-Term Self-Liquidating Trade-Related Contingencies 21,662.8 4,332.6 18,620.9 3,724.2 21,662.8 4,332.6 18,620.9 3,724.2Shipping Guarantees 20.0 1,776.6 355.3 1,002.3 200.5 1,776.6 355.3 1,002.3 200.5Documentary Letters of Credit 20.0 12,014.4 2,402.9 11,310.4 2,262.1 12,014.4 2,402.9 11,310.4 2,262.1Trade Related Acceptances 20.0 7,871.8 1,574.4 6,308.2 1,261.6 7,871.8 1,574.4 6,308.2 1,261.6Other Commitments with an Original maturity of  up to one year or which can be unconditionally  cancelled at any time 34,787.8 - 25,846.8 - 34,787.8 - 25,846.8 -Undrawn Overdraft Facilities/Unused  Credit Card Lines 0.0 34,787.8 - 25,846.8 - 34,787.8 - 25,846.8 -Other Commitments with an Original  Maturity of over one year 3,033.3 1,516.6 1,493.3 746.6 3,033.3 1,516.6 1,696.9 848.5 Annual Report 2013 Sampath Bank PLCUndrawn Term Loans 50.0 3,033.3 1,516.6 1,493.3 746.6 3,033.3 1,516.6 1,696.9 848.5Foreign Exchange Contracts 61,211.6 1,224.2 47,786.0 955.7 61,211.6 1,224.2 47,786.0 955.7Original Maturity-less than one year 2.0 61,211.6 1,224.2 47,786.0 955.7 61,211.6 1,224.2 47,786.0 955.7 143,699.9 26,487.2 112,734.1 21,334.5 143,699.9 26,487.2 112,937.7 21,436.4 339

CAPITAL Bank GroupADEQUACY 2013 2012 2013 2012 Rs Mn Rs Mn Rs Mn Rs MnRisk-weighted amount for Market Risk 61.88 194.95 61.88 194.95 61.88 194.95 61.88 194.95Interest Rate Risk - - - -General Risk 43.06 56.42 43.06 56.42Specific Risk 26.20 32.53 26.20 32.53Equity Risk 16.86 23.89 16.86 23.89General Risk 71.88 43.05 71.88 43.05Specific Risk 176.82 294.42 176.82 294.42Foreign Exchange and Gold Risk Total Capital Charge for Market Risk 1,768.23 2,944.13 1,768.23 2,944.13Total Risk-weighted amount for Market Risk  (Total Capital Charge X 10) Bank GroupRisk-weighted Amount for Operational Risk 2013 2012 2013 2012 Rs Mn Rs Mn Rs Mn Rs MnAverage net Income for last three financial years 17,317.3 15,607.1 17,955.2 16,095.0Deductions: - - - -Realised profits from the sale of securities  (average of last three financial years) 286.8 937.3 926.8 926.8Extraordinary / irregular item of income  (average of last three financial years) 8.3 10.0 19.9 19.9Gross Income 17,022.2 14,659.8 17,008.5 15,148.3Total Capital Charge for Operational Risk  (Gross Income X 15%) 2,553.3 2,199.0 2,551.3 2,272.2Total Risk-weighted amount for Operational risk  (Total Capital Charge for Operational Risk X 10) 25,533.3 21,989.8 25,512.6 22,722.3Computation of Total Risk weighted amount 200,043.9 154,363.4 211,400.3 160,976.3Risk-weighted assets for credit risk 1,768.2 2,944.1 1,768.2 2,944.1Risk-weighted amounts for market risk Risk-weighted amounts for operational risk 25,533.3 21,989.8 25,512.6 22,722.3Total Risk-Weighted Amount 227,345.4 179,297.3 238,681.1 186,642.7340

Bank GroupComputation of Capital Base 2013 2012 2013 2012 Rs Mn Rs Mn Rs Mn Rs MnCore Capital (Tier 1) 4,460.3 3,564.2 4,460.3 3,564.2 3,673.6 2,702.9 3,769.9 2,759.6Stated Capital 2,184.8 2,016.2 2,937.5 2,653.4Statutory Reserve Fund 13,971.0 13,895.8 13,971.0 13,895.8Published Retained Profits General and Other Reserves - - 89.0 61.2Non controlling interest Deductions/Adjustments-Tier 1 - - - 5.3 308.8 - 332.9 -Goodwill 297.4 311.0 313.3 315.6Net Deferred Tax Assets Other Intangible Assets 262.5 262.5 - -50% of investments in unconsolidated banking and  financial subsidiary companies 511.2 454.7 511.2 454.750% investments in the capital of other banks and 22,909.8 21,150.9 24,070.3 22,158.6  financial institutions Total Core Capital Supplementary Capital (Tier II) 426.6 405.1 426.6 405.1Revaluation Reserves (as approved by CBSL) 2,064.0 694.0 2,064.0 694.0General Provisions 7,694.0 2,868.7 7,694.0 2,868.7Approved Subordinated Term Debt Deductions-Tier II 262.5 262.5 - -50% of investments in unconsolidated banking and  financial subsidiary companies 511.2 454.7 511.2 454.750% investments in the capital of other banks and 9,410.9 3,250.6 9,673.4 3,513.1financial institutions 32,320.7 24,401.5 33,743.7 25,671.7Eligible Tier II Capital Base Capital (Tier I + Tier II) LIMITS :(i) Approved subordinated Term Debt is limited to 50% of Total Tier 1 Capital.(ii) The total of Tier 11 Supplementary Elements should not exceed a maximum of 100% of Tier 1 Elements.(iii) General Provision should not exceed 1.25% of Risk Weighted Assets. Bank Group 2013 2012 2013 2012Core Capital Ratio (Minimum Ratio - 5%) 22,909.8 x 100 21,150.9 x 100 24,070.3 x 100 22,158.6 x 100 Core Capital (Tier 1) x 100 227,345.4 179,297.3 238,681.1 186,642.7 Total Risk-weighted Assets Total Capital Ratio (Minimum Ratio - 10%) 32,320.7 x 100 24,401.5 x 100 33,743.7 x 100 25,671.7 x 100 Annual Report 2013 Sampath Bank PLC Capital Base x 100 227,345.4 179,297.3 238,681.1 186,642.7 Total Risk-weighted Assets Core Capital (Tier 1) Ratio ( % ) 10.08 11.80 10.08 11.87Total Capital Ratio ( % ) 14.22 13.61 14.14 13.75 341

GLOSSARY OFBFAINNAKNINCGIALTEARNMDSA Available For Sale (AFS) Financial AssetsAcceptances Non derivative financial assets that are designatedThe signature on a Bill of Exchange indicates that the as available for sale or are not classified as (a) loansperson on whom it is drawn accepts the conditions and receivables, (b) held-to-maturity investments orof the bill. In other words a bill of exchange that has (c) financial assets at fair value through profit or loss.been accepted. BAccounting Policies Bills of CollectionThe specific principles, bases, conventions, rules A bill of exchange drawn by an exporter usually atand practices adopted by an entity in preparing and a term, on an importer overseas and brought by thepresenting Financial Statements. exporter to his Bank with a request to collect the proceeds.Accrual BasisRecognition of the effects of transactions and other BIS Surplusevents when they occur without waiting for receipt or The total Capital Adequacy in excess of the minimumpayment of cash or its equivalents. stipulated by Basel International Standards and as modified to suit local requirements by the CentralAmortisation Bank of Sri Lanka.The systematic allocation of the depreciable amountof an intangible asset over its useful life. C Capital Adequacy RatioAmortised Cost The percentage of risk-adjusted assets supportedThe amount at which the financial asset of financial by capital as defined under the framework of risk-liability is measured at initial recognition minus based capital standards developed by the Bank forprincipal repayments, plus or minus the cumulative International Settlement (BIS) and as modified to suitamortisation using the effective interest rate method local requirements by the Central Bank of Sri Lanka.of any difference between that initial amount and thematurity amount, and minus any reduction (directly Capital Gain (Capital Profit)or through the use of an allowance account) for The gain on the disposal of an asset calculated byimpairment or uncollectability. deducting the cost of the asset from the proceeds received on its disposal.Associate CompanyAn associate is an entity in which the investor has Capital Reservessignificant influence and which is neither a subsidiary Capital Reserves consist of revaluation reservesnor an interest in a joint venture. arising from revaluation of properties owned by the Bank and Reserve Fund set aside for specificAsset and Liability Committee (ALCO) purposes defined under the Banking Act, No 30 ofA risk-management committee in a bank that 1988 and shall not be reduced or impaired withoutgenerally comprises the senior-management levels the approval of the Monetary Board.of the institution. The ALCO’s primary goal is toevaluate, monitor and approve practices relating to Cash Equivalentsrisk due to imbalances in the capital structure. Among Short-term highly liquid investments that are readilythe factors considered are liquidity risk, interest rate convertible to known amounts of cash and whichrisk, operational risk and external events that may subject to an insignificant risk of changes in value.affect the bank’s forecast and strategic balance-sheetallocations.342

Cash Flow Hedge Cost Method Annual Report 2013 Sampath Bank PLCA cash flow hedge is a hedge of the exposure to the A method of accounting whereby the investmentvariability in cash flows that (i) is attributable to a is recorded at cost. The Income Statement reflectsparticular risk associated with a recognised asset or income from the investment only to the extent thatliability (such as all or some future interest payments the investor receives distributions from accumulatedon variable rate debt) or a highly probable forecast net profits of the investee arising subsequent to thetransaction and (ii) could affect profit or loss. date of acquisition.Collectively Assessed Loan Impairment Provisions Cost-Push InflationAlso known as portfolio impairment provisions. A continuous increase in average price levels due toImpairment assessment on a collective basis an increase in production costs.for homogeneous groups of loans that are notconsidered individually significant and to cover Cost to Income Ratiolosses that has been incurred but has not yet been Operating expenses as a percentage of net income.identified at the reporting date. Typically assetswithin the Consumer Banking business (Housing, Country Riskpersonal, vehicle loans etc) are assessed on a The risk that a foreign government will not fulfill itsportfolio basis. obligations or obstructs the remittance of funds by debtors, either for financial reasons (transfer risk) orCollectively Assessed Impairment for other reasons (political risk).Impairment assessment on a collective basisfor homogeneous groups of loans that are not Credit Ratingconsidered individually significant and to cover An evaluation of a corporate ability to repay itslosses which have been incurred but have not obligations or likelihood of not defaulting carried outyet been identified on loans subject to individual by an independent rating agency.assessment. Credit RiskCommercial Paper (‘CP’) Credit risk is the risk of financial loss to the BankAn unsecured, short-term debt instrument issued by if a customer or counter party to a financiala corporation, typically for the financing of accounts instrument fails to meet its contractual obligations,receivable, inventories and meeting short-term and arises principally from the loans and advancesliabilities. The debt is usually issued at a discount, to customers and other banks and investment debtreflecting prevailing market interest rates. securities.Commitments Credit Risk MitigationCredit facilities approved but not yet utilized by the A technique to reduce the credit risk associated withclients as at the Reporting date. an exposure by application of credit risk mitigants such as collateral, guarantee and credit protection.ContingenciesA condition or situation, the ultimate outcome of Currency Riskwhich, gain or loss, will be confirmed only on the The risk that the fair value or future cash flowsoccurrence or non-occurrence of one or more of a financial instrument will fluctuate because ofuncertain future events. changes in foreign exchange rates.Corporate Governance Currency SWAPsThe process by which corporate entities are The simultaneous purchase of an amount of agoverned. It is concerned with the way in which currency for spot settlement and the sale of thepower is exercised over the management and same amount of the same currency for forwarddirection of entity, the supervision of executive settlement.actions and accountability to owners and others. Customer DepositsCorrespondent Bank Money deposited by account holders. Such funds areA bank in a foreign country that offers banking recorded as liabilities.facilities to the customers of a bank in anothercountry. 343

GLOSSARY OFFINANCIAL ANDBANKING TERMSD Documentary Letters of Credit (LCs)Dealing Securities Written undertakings by a bank on behalf of itsThese are marketable securities acquired and held customers, authorising a third party to draw on thewith the intention to resale over a short period of Bank up to a stipulated amount under specific termstime. and conditions. Such undertakings are established for the purpose of facilitating international trade.Deferred TaxSum set aside in the Financial Statements that may Ebecome payable/ receivable in a financial year other Earnings Per Share (EPS)than the current financial year. It arises because The profit attributable to each ordinary share in theof temporary differences between tax rules and Bank, based on the profit for the period after tax andaccounting conventions. after deducting minority interest and preference share Dividend.DelinquencyA debt or other financial obligation is considered Economic Value Added (EVA)to be in a state of delinquency when payments are A measure of productivity which takes intooverdue. Loans and advances are considered to be consideration cost of total invested equity.delinquent when consecutive payments are missed.Also known as ‘Arrears’. Effective Interest Rate (EIR) Rate that exactly discounts estimated future cashDepreciation payments or receipts through the expected life of theThe systematic allocation of the depreciable amount financial instruments or when appropriate a shorterof an asset over its useful life. period to the net carrying amount of the financial asset or financial liability.DerecognitionRemoval of a previously recognised financial asset Effective Tax Rate (ETR)or financial liability from an entity’s statement of Provision for taxation excluding deferred tax dividedfinancial position. by the profit before taxation.Derivatives ESOP (Employee Share Ownership Plan)A derivative is a financial instrument or other A method of giving employees shares in the businesscontract, the value of which changes in response to for which they work.some underlying variable (e.g., an interest rate), thathas an initial net investment smaller than would be Equity Instrumentrequired for other instruments that have a similar An equity instrument is any contract that evidencesresponse to the variable, and that will be settled at a a residual interest in the assets of an entity afterfuture date. deducting all of its liabilities.Discount Rate Equity MethodA rate used to place a current value on future cash The equity method is a method of accountingflows. It is needed to reflect the fact that money has whereby the investment is initially recognised ata time value. cost and adjusted thereafter for the post-acquisition changes in the investor’s share of net assets of theDividend Cover investee. The profit or loss of the investor includes theProfit after tax divided by gross Dividend. This ratio investor’s share of the profit or loss of the investee.measures the number of times dividend is covered bythe current year’s distributable profits. Equity Risk The risk arising from positions, either long or short,Dividend Yield in equities or equity-based instruments, which createDividend earned per share as a percentage of its exposure to a change in the market price of themarket value. equities or equity instruments.344

Events after the Reporting Period Financial Instrument Annual Report 2013 Sampath Bank PLCTransactions that are not recognised as assets or Financial Instrument is any contract that gives rise toliabilities in the Statements of Financial Position, but a financial asset of one entity and a financial liabilitywhich give rise to contingencies and commitments. or equity instrument of another entity.Expected Loss (EL) Financial LiabilityA regulatory calculation of the amount expected to A contractual obligation to deliver cash or anotherbe lost on an exposure using a 12 month time horizon financial asset to another entity.and downturn loss estimates. EL is calculated bymultiplying the Probability of Default (a percentage) Foreign Exchange Contractby the Exposure at Default (an amount) and Loss Agreement between two parties to exchange oneGiven Default (a percentage). currency for another at a future date at a rate agreed upon today.Exposure A claim, contingent claim or position which carries a Foreign Exchange Incomerisk of financial loss. The realised gain recorded when assets or liabilities denominated in foreign currencies are translatedF into Sri Lankan Rupees on the reporting date atFair Value prevailing rates which differ from those rates inFair Value is the amount for which an asset could be force at inception or on the previous reporting date.exchanged between a knowledgeable, willing buyer Foreign exchange income also arises from trading inand a knowledgeable, willing seller in an arm’s length foreign currencies.transaction. Firm CommitmentFair Value Adjustment A Firm Commitment is a binding agreement for theAn adjustment to the fair value of a financial exchange of a specified quantity of resources at ainstrument which is determined using a valuation specified price on a specified future date or dates.technique (level 2 and level 3) to include additionalfactors that would be considered by a market Gparticipant that are not incorporated within the General Provisionsvaluation model. General provisions are established for loans and advances for anticipated losses on aggregateFinance Lease exposures where credit losses cannot yet beA lease in which the lessee acquires all the financial determined on an individual facility basis.benefits and risks attaching to ownership ofwhatever in being leased. Gross Dividend The portion of profits distributed to the shareholdersFinancial Asset including the tax withheld.Any asset that is cash, an equity instrument ofanother entity or a contractual right to receive cash Groupor another financial asset from another entity. A group is a parent and all its subsidiaries.Financial Asset or Financial Liability at Fair Value Guaranteesthrough Profit or Loss A promise made by a third party (Guarantor), whoFinancial asset or financial liability that is held for is not a party to a contract between two others, thattrading or upon initial recognition designated by the the guarantor will be liable if the guarantee fails toentity as ‘at fair value through profit or loss’. fulfil the contractual obligations. Financial Guarantee Contract HA Financial Guarantee Contract is a contract that Hedgingrequires the issuer to make specified payments to A strategy under which transactions are effectedreimburse the holder for a loss it incurs because a with the aim of providing cover against the riskspecified debtor fails to make payment when due in of unfavourable price movements (Interest Rate,accordance with the original or modified terms of a Foreign exchange rate, commodity prices, etc)debt instrument. 345

GLOSSARY OFFINANCIAL ANDBANKING TERMSHeld To Maturity (HTM) Financial Assets Interest SpreadHeld-to-maturity investments are non-derivative This represents the difference between the averagefinancial assets with fixed or determinable payments interest rate earned and the average interest rateand a fixed maturity that an entity has the positive paid on funds.intention and ability to hold to maturity. Investment PropertiesI Investment property is property (land or a building -Impairment or part of a building – or both) held (by the owner orThis occurs when recoverable amount of an asset is by the lessee under a finance lease) to earn rentals orless than its carrying amount. for capital appreciation or both, rather than for use or sale.Impaired LoansLoans where the Group does not expect to collect all Investment Securitiesthe contractual cash flows or expects to collect them Securities acquired and held for yield or capitallater than they are contractually due. growth purposes and are usually held to maturity.Impairment Allowances JManagement’s best estimate of losses incurred in the Joint Controlloan portfolios at the reporting date. Joint control is the contractually agreed sharing of the control over an economic activity, and exists onlyIndividually Assessed Impairment when the strategic financial and operating decisionsExposure to loss is assessed on all individually relating to the activity require the unanimous consentsignificant accounts and all other accounts that do of the parties sharing control.not qualify for collective assessment. Joint VentureIntangible Asset A joint venture is a contractual arrangement wherebyAn identifiable non-monetary asset without physical two or more parties undertake an economic activitysubstance held for use in the production / supply that is subject to joint control.of goods / services or for rental to others or foradministrative purposes. K Key Management PersonnelInterest Cover Key Management Personnel are those persons havingA ratio showing the number of times interest charges authority and responsibility for planning, directingis covered by earnings before interest and tax. and controlling the activities of the entity, directly or indirectly, including any Director (whether ExecutiveInterest in Suspense or otherwise) of that entity.Interest suspended on non-performing loans andadvances. L Level 1 – Quoted Market PriceInterest Margin Financial instruments with quoted prices for identicalNet interest income expressed as a percentage of instruments in active markets.interest earning assets. Level 2 – Valuation Technique Using ObservableInterest Rate Risk InputsThe risk that the fair value or future cash flows of a Financial instruments with quoted prices for similarfinancial instrument will fluctuate because of changes instruments in active markets or quoted prices forin market interest rates. identical or similar instruments in inactive markets and financial instruments valued using models whereInterest Rate SWAP all significant inputs are observable.Arrangement whereby one party exchanges one setof interest payments for another.346

Level 3 –Valuation Technique With Significant N Annual Report 2013 Sampath Bank PLCUnobservable Inputs Net Asset Value Per ShareFinancial instruments valued using valuation Shareholders’ Funds divided by the number oftechniques where one or more significant inputs are ordinary shares in issue.unobservable. Net-Interest Income (NII)Liquid Assets The difference between what a bank earns on assetsAssets that are held in cash or in a form that can such as loans and securities and what it pays onbe converted to cash readily, such as deposits with liabilities such as deposits refinance funds and inter-other banks, Bills of Exchange and Treasury Bills and bank borrowings.Bonds. Non-Performing Advances (NPA)Liquidity Risk All loans are classified as nonperforming when aThe risk that an entity will encounter difficulty payment is 90 days in arrears.in meeting obligations associated with financialliabilities Non-Performing Advances Cover (NPA Cover) Cumulative loan loss provision as a percentage ofLoan Losses and Provisions total Non-Performing Advances (net of Interest inAmounts set aside against possible losses on Suspense).loans, advances and other credit facilities as aresult of such facilities becoming partly or wholly NPA Ratiouncollectible. Total non-performing advances (net of Interest in Suspense) divided by total advances portfolio (net ofLoans and Receivables Interest in Suspense).Non derivative financial assets with fixed ordeterminable payments that are not quoted in Non Controlling Interestan active market other than those intends to sell Non controlling interest is the equity in a subsidiaryimmediately or in the near term and designated as not attributable, directly or indirectly to a parent.fair value through profit or loss or available sale oninitial recognition. O Open Credit Exposure RatioLoans Payable Total net non-performing loans and advancesLoans payable are financial liabilities, other than expressed as a percentage of regulatory capitalshort term trade payables on normal credit terms. base.Loss Given Default (‘LGD’) Operational RiskThe estimated ratio (percentage) of the loss on an Operational risk refers to the losses arising fromexposure to the amount outstanding at default (EAD) fraud, negligence, oversight, human error, processupon default of counterparty. errors, system failures, external events, etc.M Other Price RiskMarket Capitalisation The risk that the fair value or future cash flowsThe value of a company obtained by multiplying the of a financial instrument will fluctuate because ofnumber of issued shares by its market value as at a changes in market prices (other than those arisingdate. from interest rate risk or currency risk), whether those changes are caused by factors specific to theMarket Risk individual financial instrument or its issuer, or factorsMarket risk is the risk that changes in market affecting all similar financial instruments traded inprices, such as interest rates, equity prices, foreign the market.exchange rates and credit spreads (not relating tochanges in the obligor’s/issuer’s credit standing) will Paffect the Bank’s income or the value of its holdings Parentof financial instruments. A parent is an entity that has one or more subsidiaries.MaterialityThe relative significance of a transaction or anevent, the omission or misstatement of whichcould influence the decisions of users of FinancialStatements. 347

GLOSSARY OFFINANCIAL ANDBANKING TERMSPast Due Return On Average Equity (ROE)A financial asset is past due when a counterparty has Net income, less preferred share Dividend if any,failed to make a payment when contractually due. expressed as a percentage of average ordinary shareholders’ equity.Price Earnings Ratio (P/E Ratio)The current market price of the share is divided by Revaluation Reservethe earnings per share of the Bank. Part of the shareholders’ equity that arises from changes in the current value of property, plant andProbability of Default (‘PD’) equipment.The probability that an obligor will default within aone-year time horizon. Revenue Reserves Reserves set aside for future distribution andProvision for Bad and Doubtful Debts investment.A charge to income statement which is added tothe allowance for loan losses. Specific provisions Reverse Repurchase Agreementare established to reduce the book value of specific Transaction involving the purchase of governmentassets (primarily loans) to estimated realisable securities by a bank or dealer and resale back to thevalues. seller at a given price on a specific future date.Provision Cover Rights IssueTotal provisions for loan losses expressed as a Issue of shares to the existing shareholders at anpercentage of net non-performing loans and agreed price, generally lower than market price.advances before discounting for provisions on non-performing loans and advances. Risk Weighted Assets Used in the calculation of risk-based capital ratios.Prudence The face amount of lower risk assets is discountedInclusion of a degree of caution in the exercise of using risk weighting factors in order to reflect ajudgment needed in making the estimates required comparable risk per rupee among all types of assets.under conditions of uncertainty, such that assets or The risk inherent in Committment & Contingenciesincome are not overstated and liabilities or expenses is also recognised, first by adjusting notionalare not understated. values to Statement of Financial Position (or credit) equivalents and then by applying appropriate riskR weighting factors.Related PartiesParties where one party has ability to control the Sother party or exercise significant influence over Segmental Analysisthe other party in making financial and operating Analysis of financial information by segments of andecisions, directly or indirectly. enterprise specifically, the different industries and the different geographical areas in which it operates.Repurchase AgreementThis is a contract to sell and subsequently repurchase Shareholders’ Fundsgovernment securities at a given price on a specified Total of issued and fully paid share capital and capitalfuture date. and revenue reserves.Return On Average Assets (ROA) Single Borrower LimitNet income expressed as a percentage of average 30% of Tier II Capital.total assets, used along with ROE, as a measureof profitability and as a basis of intra-industry Statutory Reserve Fundperformance comparison. A capital reserve created as per the provisions of the Banking Act No. 30 of 1988.348