Home Management Report Stewardship Supplementary Information The Bank in a Nutshell Sustainability Supplement Investor Relations Supplement Download PDF Version Chairman’s Message Risk Management Financial Statements
	Statement of Directors' Responsibility   Managing Director's and Chief Financial Officer's Responsiblity Statement   Auditors Report   Income Statement   Balance Sheet   Statement of Changes in Equity   Cash Flow Statement   Significant Accounting Policies   Notes to the Financial Statements         Financial Calendar   1. INTEREST INCOME Group Bank 2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Customer advances 29,134,243 24,134,687 29,156,825 24,151,524 Loans at Call 221,352 279,877 221,352 279,877 Treasury Bills, Treasury Bonds and other Money Market instruments 7,041,289 5,188,530 6,993,557 5,154,203 Interest Rate Swaps 184,244 197,575 184,244 197,575 Placements with Banks 632,246 719,893 632,246 719,893 Total 37,213,374 30,520,562 37,188,224 30,503,072 Since April 1, 2002, net interest income from Government Treasury Bills and Treasury Bonds has been grossed up by adding the notional tax credit, consequent to the interest income on Treasury Bills and Treasury Bonds being subjected to withholding tax as detailed in Note 9.3. 2. INTEREST EXPENSES   Customer deposits 17,326,062 13,558,135 17,326,920 13,562,628 Deposits at Call 394,813 197,511 394,813 197,511 Repurchase agreements and other Money Market instruments 4,639,546 2,848,736 4,656,621 2,861,646 Interest Rate Swaps 200,463 215,094 200,463 215,094 Due to Banks 348,293 662,899 348,293 662,899 Debentures 977,881 1,104,753 977,881 1,104,753 Refinance borrowings 430,713 346,587 430,713 346,587 Total 24,317,771 18,933,715 24,335,704 18,951,118     3. FEES AND COMMISION INCOME   Trade and other related activities 1,245,267 1,029,549 1,245,267 1,029,549 Personal banking 213,492 202,200 213,573 202,836 Foreign remittances 131,848 89,872 131,848 89,872 Electronic banking 510,075 439,368 510,075 439,368 Professional services 65,250 81,713 65,250 81,713 Other 549,048 539,200 549,048 539,200 Total 2,714,980 2,381,902 2,715,061 2,382,538 4. OTHER INCOME Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Income from investment securities (quoted) 5,406 5,965 5,406 5,965 Income from investment securities (unquoted) 295,761 228,899 295,761 228,899 Income from investments in associates (unquoted) 676 2,772 – 2,055 Income from investments in subsidiaries (quoted) – – 34,037 40,845 Income from investments in subsidiaries (unquoted) – – 9,500 – Income from investments held for sale 10,587 26,905 10,587 26,905 Income from investments in Dealing Securities 3,987 5,772 3,987 5,772 Bad debts recovered (including recovery of debts written-off) 699,798 352,256 699,798 352,256 Profit on sale of Property, Plant & Equipment 20,052 9,509 10,704 7,583 Rental and other income 114,087 103,167 86,040 86,392 Gain/(Loss) on Mark to Market Valuation on shares (30,326) (48,938) (30,326) (48,938) Capital Gain/(Loss) on sale of shares 221,289 42,953 395,443 51,666 Gain/(Loss) on Mark to Market Valuation on Treasury Bills and Bonds 9,222 7,722 9,222 7,722 Capital Gain/(Loss) on Treasury Bills and Bonds 48,484 25,354 48,484 25,354 1,399,023 762,336 1,578,643 792,476 Less: Dividends received from Associates transferred           to the Investments in Associates [Refer Note 20] 676 2,772 – – Total 1,398,347 759,564 1,578,643 792,476   5. OPERATING EXPENSES Operating expenses include the following: Directors’ Remuneration 45,465 57,666 44,815 57,295 Auditors’ Remuneration 7,682 5,573 7,017 5,202 Non-Audit fees 2,161 1,523 2,031 1,440 Pensions provided to past employees and past Directors 127,408 20,004 127,408 20,004 Depreciation of Property, Plant & Equipment 478,841 391,447 419,676 358,754 Amortisation of Leasehold Property 1,452 1,523 942 1,013 Amortisation of Intangible Assets 62,993 51,993 62,993 51,629 Professional and legal expenses 87,849 97,594 87,849 97,317 Advertising and marketing expenses 189,526 142,109 189,454 142,061 Donation to Corporate Social Responsibility (CSR) Trust 20,000 22,000 20,000 22,000 Donations 3,220 7,741 3,220 7,741 Employer’s contribution to Employees’ Provident Fund 198,631 164,351 196,721 162,998 Employer’s contribution to Employees’ Trust Fund 47,470 39,721 46,992 39,383 Gratuity provision 51,122 22,433 45,953 21,463 Financial Value Added Tax (VAT) on profits 2,091,468 1,551,762 2,091,468 1,551,762 Oil Hedging expenses 692,162 – 692,162 – 6. PROVISION FOR STAFF RETIREMENT BENEFITS A sum of Rs. 292.659 Mn (Rs. 269.128 Mn in 2007) has been charged against profits being the total contributions for the year to the Defined Contribution Plan and Defined Benefit Plan. 7. LOAN LOSSES AND PROVISIONS Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Provision for bad and doubtful debts: Specific provision on Bills of Exchange – 3,134 – 3,134 Specific provision on loans & advances 1,209,644 978,906 1,209,644 978,906 Specific provision on credit card receivable 105,740 50,348 105,740 50,348 Specific provision on lease receivable 285,661 114,301 285,661 114,301 Total [Refer Note 19.4 (a)] 1,601,045 1,146,689 1,601,045 1,146,689           General provision on Bills of Exchange 10,956 15,069 10,956 15,069 General provision on loans & advances 626,422 592,229 626,422 592,229 General provision on credit card receivable 4,446 13,653 4,446 13,653 General provision on lease receivable 30,202 8,000 30,202 8,000 Total [Refer Note 19.4 (b)] 672,026 628,951 672,026 628,951           Total provisions made during the year 2,273,071 1,775,640 2,273,071 1,775,640 Direct write-offs 5,141 1,836 5,141 1,836 Total 2,278,212 1,777,476 2,278,212 1,777,476 8. SHARE OF PROFIT OF ASSOCIATES Equity Investments Lanka Ltd. 4,605 2,807 – – Commercial Insurance Brokers (Pvt) Ltd. 4,480 22,204 – – Total 9,085 25,011 – – 9. INCOME TAX EXPENSE 9.1 Entity-wise Breakup of the Income Tax Expense is as follows: Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Bank Income tax expense of Domestic Banking Unit 2,465,926 2,160,222 2,465,926 2,160,222 Income tax expense of Off-shore Banking Centre 219,343 162,181 219,343 162,181 Income tax expense of Bangladesh operation 492,865 445,822 492,865 445,822 (Over)/under provision for taxes in    respect of prior years 82,661 (139,048) 82,661 (139,048) Deferred tax (reversal)/charge (9,025) (28,013) (9,025) (28,013) 3,251,770 2,601,164 3,251,770 2,601,164 Subsidiaries Income tax expense of Commercial Development Company PLC 23,004 23,286 – – Income tax expense of Commercial Bank Primary Dealer Ltd. 14,460 11,878 – – Income tax expense of ONEzero Company Ltd. 6,570 733 – – Income tax expense of X-pertise Ltd. (104) 750 – – Associates Share of Income Tax expense of Equity Investments Lanka Ltd. 142 43 – – Share of Income Tax expense of Commercial Insurance Brokers (Pvt) Ltd. – 542 – – Total     3,295,842 2,638,396 Effective tax rate (excluding deferred tax) 43.36% 39.21% Income tax has been provided on the taxable income at the following rates:   2008 % 2007 % Domestic operations of the Bank 35 35 On-shore banking operations of the Off-Shore Banking Centre of the Bank 35 35 Off-shore banking operations of the Off-Shore Banking Centre of the Bank 20 20 Bangladesh Operation 45 45 Commercial Development Company PLC 35 35 Commercial Bank Primary Dealer Ltd. 35 35 ONEzero Company Ltd. 35 35 X-pertise Ltd. 35 35 9.2 A reconciliation between income tax expense and the accounting profit multiplied by the statutory tax rate is as follows: Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Accounting profit before tax from operations 7,407,163 6,765,838 7,520,142 6,704,729           Tax effect at the statutory income tax rates 2,754,338 2,458,922 2,710,595 2,419,292 Tax effect of exempt income (596,539) (548,292) (596,539) (543,772) Tax effect of non-deductible expenses 3,366,767 2,876,466 3,334,557 2,857,511 Tax effect of deductible expenses (2,343,348) (2,048,374) (2,312,469) (2,030,858) Remittance tax of Bangladesh operation – 42,184 – 42,137 Share of Income tax expense of Associates 142 585 – – Social Responsibility Levy at 1.5% of     Income Tax (2007 - 1.0%) 42,422 24,280 41,990 23,915 (Over)/under provision of taxes in respect of prior years 82,702 (139,070) 82,661 (139,048) Deferred tax (reversal)/charge (10,642) (28,305) (9,025) (28,013) Income tax expense reported in the income statement at the effective income tax rate 3,295,842 2,638,396 3,251,770 2,601,164 9.3 Notional Tax Credit for withholding tax on Government Securities on Secondary Market Transactions The Inland Revenue Act No. 10 of 2006 and the amendments thereto, provide that a company which derives interest income from the secondary market transactions in Government Securities (on or after April 1, 2002) would be entitled to a notional tax credit (being one-ninth of the net interest income) provided such interest income forms part of statutory income of the Company for that year of assessment. Accordingly, the net interest income earned by the Group and the Bank from the secondary market transactions in Government Securities for the year, has been grossed up in the Financial Statements and the resulting notional tax credit amounted to Rs. 91.910 Mn and Rs. 87.741 Mn respectively (Rs. 67.868 Mn and Rs. 64.486 Mn respectively in 2007). 10. EARNINGS PER SHARE Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the parent (after deducting dividend on preference shares) by the weighted average number of ordinary shares in issue (both voting and non-voting) during the year, as required by the Sri Lanka Accounting Standard No. 34 (Revised 2005) on Earnings Per Share. The weighted average number of ordinary shares outstanding during the year and the previous year were adjusted for the events that have changed number of ordinary shares outstanding, without a corresponding change in the resources such as bonus issues. Diluted Earnings per Share is calculated by dividing the net profit attributable to equity holders of the parent (after deducting dividend on preference shares) by the weighted average number of ordinary shares outstanding during the year (both voting and non-voting) adjusted for the effects of all dilutive potential weighted average number of ordinary shares that would be issued on the conversion of all the dilutive ESOPs into ordinary shares. The following table shows the earnings and number of shares used in the basic and dilutive earnings per share calculation. Group   2008 Rs. ’000 2007 Rs. ’000 Amounts Used as the Numerator: Net profit attributable to equity holders of the parent 4,118,884 4,149,021 Less : Dividend on cumulative redeemable preference shares 40,684 112,500 Net profit attributable to equity holders of the parent for basic and diluted earnings per share 4,078,200 4,036,521   Number of Ordinary Shares Used as the Denominator: Weighted average number of ordinary shares 249,312,791 174,716,365 Issue of Bonus shares during the year – 62,234,467 Weighted average number of ordinary shares used for basic earnings per share 249,312,791 236,950,832   Effect of dilution: Number of outstanding options as at year end (Refer Note 31) 2,034,306 1,711,452 Weighted average number of ordinary shares adjusted for the effect of dilution 251,347,097 238,662,284 Basic earnings per share (Rs.) 16.36 17.04 Diluted earnings per share (Rs.) 16.23 16.91 11. DIVIDENDS Group Bank 2008 2007 2008 2007 Interim Rs. 3.00 (paid during 2008) Interim Rs. 4.50 (paid during 2007) Interim Rs. 3.00 (paid during 2008) Interim Rs. 4.50 (paid during 2007)   Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 On Ordinary Shares Net dividend paid to the ordinary shareholders 684,043 1,027,493 684,043 1,027,493 Withholding tax deducted at source 64,163 92,997 64,163 92,997 Gross ordinary dividend 748,206 1,120,490 748,206 1,120,490 On Preference Shares Dividend paid/payable on Cumulative Redeemable     Preference Shares of Rs. 10.00 each for the period/year Net dividend paid 36,616 101,250 36,616 101,250 Withholding tax to be deducted/deducted at source 4,068 11,250 4,068 11,250 Gross preference dividend 40,684 112,500 40,684 112,500 Total dividends 788,890 1,232,990 788,890 1,232,990 Two interim dividends of Rs. 1.50 per share each, totalling to Rs. 3.00 per share was paid in 2008 to both the voting and non-voting ordinary shareholders of the Bank. (The interim dividends paid for the year 2007 was Rs. 4.50 per share.). Directors have recommended the payment of a final dividend of Rs. 4.00 per share to both the voting and non-voting ordinary shareholders of the Bank for the year ended December 31, 2008 (Rs. 2.50 in 2007) which will be declared at the forthcoming Annual General Meeting to be held on March 30, 2009. In accordance with the provisions of the Sri Lanka Accounting Standard No. 12 (Revised 2005) on Events After the Balance Sheet date, this proposed final dividend has not been recognised as a liability as at the year end. 12. UNAPPROPRIATED PROFIT/(LOSS) CARRIED FORWARD Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Commercial Bank of Ceylon PLC 929,269 552,106 1,003,480 626,317 Subsidiaries: Commercial Development Company PLC (4,450) (11,201) – – Commercial Bank Primary Dealer Ltd. 99,337 78,481 – – ONEzero Company Ltd. 38,109 31,468 – – X-Pertise Ltd. 1,609 1,276 – – Associates: Commercial Leasing Company PLC (Disposed on April 30 and May 22, 2008) – 174,154 – – Equity Investments Lanka Ltd. 1,807 (2,657) – – Commercial Insurance Brokers (Pvt) Ltd. 24,750 20,946 – – Total 1,090,431 844,573 1,003,480 626,317 13. CASH AND SHORT-TERM FUNDS Group Bank 2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Coins and notes held in local currency 4,382,795 3,337,926 4,382,590 3,337,887 Coins and notes held in foreign currency 737,746 883,396 737,746 883,396 Due from Banks 15,996,793 11,781,746 15,996,793 11,781,746 Loans at call and at short notice 2,997,577 205,179 2,997,577 205,179 Total 24,114,911 16,208,247 24,114,706 16,208,208 14. BALANCES WITH CENTRAL BANKS Bank’s Current Account with the Central Bank of Sri Lanka 7,494,269 9,959,910 7,494,269 9,959,910 Bank’s Current Account with the Bangladesh Bank 2,828,142 1,615,669 2,828,142 1,615,669 Total 10,322,411 11,575,579 10,322,411 11,575,579 As required by the provisions of Section 93 of the Monetary Law Act, a cash balance is maintained with the Central Bank of Sri Lanka. As at December 31, 2008 the minimum cash reserve requirement was 7.75% of the rupee deposit liabilities. There is no reserve requirement for foreign currency deposit liabilities of the Domestic Banking Unit and the deposit liabilities of the Off-shore Banking Centre in Sri Lanka. As per the Bangladesh Bank regulations, the Statutory Liquidity Requirement is 18% on time and demand liabilities, which includes a 5% cash reserve requirement and the balance 13% is permitted to be maintained in foreign currency and/or also in unencumbered securities held with the Bangladesh Bank. 15. GOVERNMENT TREASURY BILLS AND BONDS Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Government Treasury Bills and Bonds held for trading (Gross) 3,819,377 6,179,641 3,819,377 6,179,641 Gain/(loss) on Mark to Market Valuation 9,222 (8,844) 9,222 (8,844) Government Treasury Bills and Bonds held for trading (Net) 3,828,599 6,170,797 3,828,599 6,170,797 Government Treasury Bills and Bonds held to maturity 31,769,819 35,095,513 31,534,726 34,897,437 Total 35,598,418 41,266,310 35,363,325 41,068,234   15.1 Assets Pledged     Nature of Assets Nature of Liability Government Treasury Bills and Bonds Secured against the Repo instruments 28,750,209 26,813,364 28,750,209 26,813,364     28,750,209 26,813,364 28,750,209 26,813,364   16. DEALING SECURITIES Group Bank   As at 31.12.08 As at 31.12.07 As at 31.12.08 As at 31.12.07 Cost Market Value Cost Market Value Cost Market Value Cost Market Value   Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Quoted Shares Merchant Bank of Sri Lanka PLC 4,627 1,114 4,627 2,151 4,627 1,114 4,627 2,151 (153,614 Ordinary Shares) (@ Rs. 7.25) (@ Rs. 14.00) (@ Rs. 7.25) (@ Rs. 14.00) (153,614 Ordinary Shares as at December 31, 2007)                                    HDFC Bank of Sri Lanka 8,493 2,128 8,493 4,836 8,493 2,128 8,493 4,836 (38,000 Ordinary Shares)   (@ Rs. 56.00)   (@ Rs. 127.25)   (@ Rs. 56.00)   (@ Rs. 127.25)                   John Keells Holdings PLC 28,912 8,878 29,458 23,018 28,912 8,878 29,458 23,018 (177,553 Ordinary Shares)   (@ Rs. 50.00)   (@ Rs. 127.25)   (@ Rs. 50.00)   (@ Rs. 127.25)                   Hemas Holdings PLC 2,199 1,011 2,199 1,739 2,199 1,011 2,199 1,739 (18,300 Ordinary Shares)   (@ Rs. 55.25)   (@ Rs. 95.00)   (@ Rs. 55.25)   (@ Rs. 95.00)                   Richard Pieris & Company PLC 7,121 1,963 9,936 5,784 7,121 1,963 9,936 5,784 (87,266 Ordinary Shares)   (@ Rs. 22.50)   (@ Rs. 47.50)   (@ Rs. 22.50)   (@ Rs. 47.50)                   Asian Hotels Properties PLC 8,376 4,705 8,376 7,604 8,376 4,705 8,376 7,604 (190,100 Ordinary Shares)   (@ Rs. 24.75)   (@ Rs. 40.00)   (@ Rs. 24.75)   (@ Rs. 40.00)                   Amaya Leisure PLC 14,924 7,295 14,924 9,761 14,924 7,295 14,924 9,761 (411,000 Ordinary Shares)   (@ Rs. 17.75)   (@ Rs. 23.75)   (@ Rs. 17.75)   (@ Rs. 23.75)                   The Fortress Resorts PLC 2,609 752 2,609 1,181 2,609 752 2,609 1,181 (174,893 Ordinary Shares) (@ Rs. 4.30) (@ Rs. 6.75) (@ Rs. 4.30) (@ Rs. 6.75) (174,893 Ordinary Shares as at December 31, 2007)                                    Eden Hotel Lanka PLC 1,705 525 1,705 1,219 1,705 525 1,705 1,219 (75,000 Ordinary Shares)   (@ Rs. 7.00)   (@ Rs. 16.25)   (@ Rs. 7.00)   (@ Rs. 16.25) (75,000 Ordinary Shares as at December 31, 2007)                                    Taj Lanka Hotels PLC 2,753 1,018 4,740 2,003 2,753 1,018 4,740 2,003 (145,400 Ordinary Shares) (@ Rs. 7.00) (@ Rs. 8.00) (@ Rs. 7.00) (@ Rs. 8.00) (250,400 Ordinary Shares as at December 31, 2007)                                   Colombo Land & Development Company PLC 2,643 1,440 2,643 1,560 2,643 1,440 2,643 1,560 (400,000 Ordinary Shares) (@ Rs. 3.60) (@ Rs. 3.90) (@ Rs. 3.60) (@ Rs. 3.90) (400,000 Ordinary Shares as at December 31, 2007)                                   Tokyo Cement Company (Lanka) PLC 1,032 444 1,032 1,117 1,032 444 1,032 1,117 (61,200 Non-Voting Ordinary Shares) (@ Rs. 7.25) (@ Rs. 18.25) (@ Rs. 7.25) (@ Rs. 18.25) (61,200 Non-Voting Ordinary Shares as at December 31, 2007)                   Dankotuwa Porcelain PLC 1,348 219 1,348 625 1,348 219 1,348 625 (41,667 Ordinary Shares) (@ Rs. 5.25) (@ Rs. 15.00) (@ Rs. 5.25) (@ Rs. 15.00) (41,667 Ordinary Shares as at December 31, 2007)                                   Dipped Products PLC 8,734 4,943 8,734 7,077 8,734 4,943 8,734 7,077 (87,100 Ordinary Shares) (@ Rs. 56.75) (@ Rs. 81.25) (@ Rs. 56.75) (@ Rs. 81.25) (87,100 Ordinary Shares as at December 31, 2007)                                   Lanka IOC PLC 12,167 3,813 13,456 6,530 12,167 3,813 13,456 6,530 (250,000 Ordinary Shares) (@ Rs. 15.25) (@ Rs. 21.50) (@ Rs. 15.25) (@ Rs. 21.50) (303,700 Ordinary Shares as at December 31, 2007)                                   Vidulanka PLC – 107 1,619 1,100 – 107 1,619 1,100 (5,500 Ordinary Shares Bonus Issue 2008)   (@ Rs. 19.50)   (@ Rs. 20.00)   (@ Rs. 19.50)   (@ Rs. 20.00) (55,000 Ordinary Shares as at December 31, 2007)                                   John Keells PLC 3,006 1,818 3,006 2,909 3,006 1,818 3,006 2,909 (30,300 Ordinary Shares) (@ Rs. 60.00) (@ Rs. 96.00) (@ Rs. 60.00) (@ Rs. 96.00) (30,300 Ordinary Shares as at December 31, 2007)                                   Dialog Telekom PLC 8,842 1,980 48,245 36,382 8,842 1,980 48,245 36,382 (330,000 Ordinary Shares) (@ Rs. 6.00) (@ Rs. 20.00) (@ Rs. 6.00) (@ Rs. 20.00) (1,819,370 Ordinary Shares as at December 31, 2007)                                   John Keells Hotels PLC 5,318 3,000 5,318 4,200 5,318 3,000 5,318 4,200 (600,000 Ordinary Shares) (@ Rs. 5.00) (@ Rs. 7.00) (@ Rs. 5.00) (@ Rs. 7.00) (600,000 Ordinary Shares as at December 31, 2007)                                   ACL Cables PLC 589 324 589 510 589 324 589 510 (10,800 Ordinary Shares) (@ Rs. 30.00) (@ Rs. 94.50) (@ Rs. 30.00) (@ Rs. 94.50) (5,400 Ordinary Shares as at December 31, 2007)                                   Pelwatte Sugar Industries PLC 443 132 443 323 443 132 443 323 (12,300 Ordinary Shares) (@ Rs. 10.75) (@ Rs. 26.25) (@ Rs. 10.75) (@ Rs. 26.25) (12,300 Ordinary Shares as at December 31, 2007)                                   Ceylon Guardian Investment Trust PLC 270 164 270 330 270 164 270 330 (2,000 Ordinary Shares) (@ Rs. 82.00) (@ Rs. 165.00) (@ Rs. 82.00) (@ Rs. 165.00) (2,000 Ordinary Shares as at December 31, 2007)                                   Chemical Industries Colombo PLC 777 378 777 509 777 378 777 509 (13,140 Ordinary Shares) (@ Rs. 28.75) (@ Rs. 38.75) (@ Rs. 28.75) (@ Rs. 38.75) (13,140 Ordinary Shares as at December 31, 2007)                                   Overseas Reality Ceylon PLC 1,424 670 1,424 1,108 1,424 670 1,424 1,108 (103,100 Ordinary Shares) (@ Rs. 6.50) (@ Rs. 10.75) (@ Rs. 6.50) (@ Rs. 10.75) (103,100 Ordinary Shares as at December 31, 2007)                                   DFCC Bank PLC 2,851 999 2,851 2,393 2,851 999 2,851 2,393 (18,840 Ordinary Shares) (@ Rs. 53.00) (@ Rs. 127.00) (@ Rs. 53.00) (@ Rs. 127.00) (18,840 Ordinary Shares as at December 31, 2007)                   Nawaloka Hospitals PLC 39 23 39 30 39 23 39 30 (12,900 Ordinary Shares) (@ Rs. 1.80) (@ Rs. 2.30) (@ Rs. 1.80) (@ Rs. 2.30) (12,900 Ordinary Shares as at December 31, 2007)                                 eChanneling PLC 11,046 3,150 11,046 7,200 3,150 11,046 7,200 (450,000 Ordinary Shares) (@ Rs. 7.00) (@ Rs. 16.00) (@ Rs. 7.00) (@ Rs. 16.00) (450,000 Ordinary Shares as at December 31, 2007)                                   Hayleys PLC 1,600 860 3,395 2,543 1,600 860 3,395 2,543 (10,000 Ordinary Shares) (@ Rs. 86.00) (@ Rs. 107.75) (@ Rs. 86.00) (@ Rs. 107.75) (23,600 Ordinary Shares as at December 31, 2007)                                   Distilleries Company of Sri Lanka PLC 7,781 3,283 12,820 12,100 7,781 3,283 12,820 12,100 (65,000 Ordinary Shares) (@ Rs. 50.50) (@ Rs. 100.50) (@ Rs. 50.50) (@ Rs. 100.50) (120,400 Ordinary Shares as at December 31, 2007)                                   Colombo Dockyard PLC 12 16 3,995 4,304 12 16 3,995 4,304 (310 Ordinary Shares) (@ Rs. 50.00) (@ Rs. 53.00) (@ Rs. 50.00) (@ Rs. 53.00) (81,200 Ordinary Shares as at December 31, 2007)                                   Asiri Medical Services PLC 350 253 350 451 350 253 350 451 (44,000 Ordinary Shares) (@ Rs. 5.75) (@ Rs. 10.25) (@ Rs. 5.75) (@ Rs. 10.25) (44,000 Ordinary Shares as at December 31, 2007)                                   Kelani Cables PLC 2,807 885 2,807 1,478 2,807 885 2,807 1,478 (15,000 Ordinary Shares ) (@ Rs. 59.00) (@ Rs. 98.50) (@ Rs. 59.00) (@ Rs. 98.50) (15,000 Ordinary Shares as at December 31, 2007)                                   Nations Trust Bank PLC – – 695 678 – – 695 678 (2008 - Nil) (@ Rs. 29.75) (@ Rs. 29.75) (22,800 Ordinary Shares as at December 31, 2007)                                   Sampath Bank PLC – – 1,375 1,500 – – 1,375 1,500 (2008 - Nil) (@ Rs. 120.00) (@ Rs. 120.00) (12,500 Ordinary Shares as at December 31, 2007)                                   Haycarb PLC – – 2,328 2,138 – – 2,328 2,138 (2008 - Nil) (@ Rs. 42.75) (@ Rs. 42.75) (50,000 Ordinary Shares as at December 31, 2007)                                   Aitken Spence Hotel Holdings PLC – – 9,275 6,369 – – 9,275 6,369 (2008 - Nil) (@ Rs. 67.75) (@ Rs. 67.75) (94,000 Ordinary Shares as at December 31, 2007)                                   Piramal Glass Ceylon PLC – – 5,149 2,743 – – 5,149 2,743 (2008 - Nil) (@ Rs. 2.00) (@ Rs. 2.00) (1,371,428 Ordinary Shares as at December 31, 2007)                                   Royal Ceramics Lanka PLC – – 810 640 – – 810 640 (2008 - Nil) (@ Rs. 32.00) (@ Rs. 32.00) (20,000 Ordinary Shares as at December 31, 2007)                   Hayleys Mgt Knitting Mills PLC – – 2,834 2,850 – – 2,834 2,850 (2008 - Nil) (@ Rs. 57.00) (@ Rs. 57.00) (50,000 Ordinary Shares as at December 31, 2007)                                   Ceylinco Insurance Company PLC – – 8,340 7,141 – – 8,340 7,141 (2008 - Nil) (@ Rs. 185.00) (@ Rs. 185.00) (38,600 Ordinary Shares as at December 31, 2007)                                   Hatton National Bank PLC – – 2,710 4,190 – – 2,710 4,190 (2008 - Nil) (@ Rs. 122.50) (@ Rs. 122.50) (34,200 Ordinary Shares as at December 31, 2007)                                   Ceylon Hospitals PLC – – 2,934 2,675 – – 2,934 2,675 (2008 - Nil) (@ Rs. 53.50) (@ Rs. 53.50) (50,000 Ordinary Shares as at December 31, 2007)                                   Tea Smallholder Factories PLC – – 1,638 1,910 – – 1,638 1,910 (2008 - Nil) (@ Rs. 77.00) (@ Rs. 77.00) (24,800 Ordinary Shares as at December 31, 2007)                                   United Motors Lanka PLC – – 4,235 2,713 – – 4,235 2,713 (2008 - Nil) (@ Rs. 54.25) (@ Rs. 54.25) (50,000 Ordinary Shares as at December 31, 2007)                                   Associated Motorways PLC – – 4,277 3,200 – – 4,277 3,200 (2008 - Nil) (@ Rs. 128.00) (@ Rs. 128.00) (25,000 Ordinary Shares as at December 31, 2007)                                   Sri Lanka Telecom PLC – – 12,587 13,435 – – 12,587 13,435 (2008 - Nil) (@ Rs. 31.50) (@ Rs. 31.50) (426,500 Ordinary Shares as at December 31, 2007)                                   Chevron Lubricants Lanka PLC – – 930 929 – – 930 929 (2008 - Nil) (@ Rs. 85.25) (@ Rs. 85.25) (10,900 Ordinary Shares as at December 31, 2007)                                    Kegalle Plantations PLC – – 58 81 – – 58 81 (2008 - Nil) (@ Rs. 54.00) (@ Rs. 54.00) (1,500 Ordinary Shares as at December 31, 2007)                   154,798 58,290 273,449 207,267   58,290 273,449 207,267 Provision for diminution in value (96,508)   (66,182)       (66,182)   Total 58,290   207,267   58,290   207,267   17. INVESTMENTS HELD FOR SALE Group Bank As at 31.12.08 As at 31.12.07 As at 31.12.08 As at 31.12.07 Balance Market Value/ Directors' Valuation Balance Market Value/ Directors' Valuation Balance Market Value/ Directors' Valuation Balance Market Value/ Directors' Valuation   Holding (%) Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Quoted: Commercial Leasing Company PLC (Incorporated in Sri Lanka) (*) 30 – – 260,704 547,903 – – 86,550 547,903 (2008 - Nil) (@ Rs. 103.50) (@ Rs. 103.50) (5,293,749 Ordinary Shares as at December 31, 2007)                     Units Comtrust Equity Fund (**) – – – 118,927 123,781 – – 118,927 123,781 (2008 - Nil) (@ Rs. 10.88) (@ Rs. 10.88) (11,376,899 Units as at December 31, 2007)                   Total – – – 379,631 671,684 – – 205,477 671,684 (*) The Bank disposed part of its investment in shares of Commercial Leasing Company PLC on April 30, 2008 and balance shares on May 22, 2008. (**) The Bank disposed these units of Comtrust Equity Fund on February 27, 2008. 18. INVESTMENT SECURITIES Group Bank As at 31.12.08 As at 31.12.07 As at 31.12.08 As at 31.12.07 Cost Managers’ Buying Market Value/ Price Cost Managers’ Buying Market Value/ Price Cost Managers’ Buying Market Value/ Price Cost Managers’ Buying Market Value/ Price   Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 QUOTED: SHARES Hatton National Bank PLC 315 537 315 943 315 537 315 948 (7,700 Ordinary Shares) (@ Rs. 69.75) (@ Rs. 122.50) (@ Rs. 69.75) (@ Rs. 122.50) (7,700 Ordinary Shares as at December 31, 2007)                   Sampath Bank PLC 72 106 72 186 72 106 105 186 (1,554 Ordinary Shares) (@ Rs. 68.00) (@ Rs. 68.00) (@ Rs. 68.00) (@ Rs. 68.00) (1,554 Ordinary Shares as at December 31, 2007)                   Seylan Bank PLC 24 29 24 32 24 29 29 32 (1,000 Ordinary Shares) (@ Rs. 28.50) (@ Rs. 32.00) (@ Rs. 28.50) (@ Rs. 32.00) (1,000 Ordinary Shares as at December 31, 2007)                   DFCC Bank PLC 155 93 155 222 155 93 155 222 (1,748 Ordinary Shares ) (@ Rs. 53.00 (@ Rs. 127.00 (@ Rs. 53.00 (@ Rs. 127.00 (1,748 Ordinary Shares as at December 31, 2007)                   Nations Trust Bank PLC 22 30 14 30 22 30 14 30 (1,333 Ordinary Shares) (@ Rs. 22.25) (@ Rs. 29.75) (@ Rs. 22.25) (@ Rs. 29.75) (1,000 Ordinary Shares as at December 31, 2007)                   NDB Bank PLC 215 233 215 458 215 233 215 458 (2,712 Ordinary Shares) (@ Rs. 86.00) (@ Rs. 168.75) (@ Rs. 86.00) (@ Rs. 168.75) (2,712 Ordinary Shares as at December 31, 2007)                   DEBENTURES Sampath Bank PLC (Floating Rate - 2009) 7,000 6,563 7,000 6,563 7,000 6,563 7,000 6,563 (70,000 Debentures) (@ Rs. 93.75) (@ Rs. 93.75) (@ Rs. 93.75) (@ Rs. 93.75) (70,000 Debentures as at December 31, 2007)                                   Senkadagala Finance PLC (14% - 2009) 4,000 4,000 10,000 10,000 4,000 4,000 10,000 10,000 (40,000 Debentures) (@ Rs. 100.00) (@ Rs. 100.00) (@ Rs. 100.00) (@ Rs. 100.00) (100,000 Debentures as at December 31,2007)                                   DFCC Bank PLC (Floating Rate - 2011) 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 (10,000 Debentures) (@ Rs. 1,000.00) (@ Rs. 1,000.00) (@ Rs. 1,000.00) (@ Rs. 1,000.00) (10,000 Debentures as at December 31,2007)                                   Hatton National Bank PLC (10% - 2008) – – 10,000 10,000 – – 10,000 10,000 (2008 - Nil) (@ Rs. 100.00) (@ Rs. 100.00) (100,000 Debentures as at December 31, 2007)                 Sub Total 21,803 21,591 37,795 38,434 21,803 21,591 37,795 38,434   UNQUOTED: SHARES Credit Information Bureau of Sri Lanka 440 440 440 440 440 440 440 440 (4,400 Ordinary Shares) (@ Rs. 100.00) (@ Rs. 100.00) (@ Rs. 100.00) (@ Rs. 100.00) (4,400 Ordinary Shares as at December 31, 2007)                                   Fitch Ratings Lanka Ltd. 625 625 625 625 625 625 625 625 (62,500 Ordinary Shares) (@ Rs. 10.00) (@ Rs. 10.00) (@ Rs. 10.00) (@ Rs. 10.00) (62,500 Ordinary Shares as at December 31, 2007)                                   Lanka Clear (Pvt.) Ltd. 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 (1,000,000 Ordinary Shares) (@ Rs. 10.00) (@ Rs. 10.00) (@ Rs. 10.00) (@ Rs. 10.00) (1,000,000 Ordinary Shares as at December 31, 2007)                                   Lanka Financial Service Bureau Ltd. 2,250 2,250 5,000 5,000 2,250 2,250 5,000 5,000 (225,000 Ordinary Shares) (@ Rs. 10.00) (@ Rs. 10.00) (@ Rs. 10.00) (@ Rs. 10.00) (500,000 Ordinary Shares as at December 31, 2007)                                   Dialog Telekom PLC 1,053,000 1,053,000 1,170,000 1,170,000 1,053,000 1,053,000 1,170,000 1,170,000 (1,053,000,000 Preference Shares) (@ Rs. 1.00) (@ Rs. 1.00) (@ Rs. 1.00) (@ Rs. 1.00) (1,170,000,000 Preference Shares as at December 31, 2007)                     Central Depository of Bangladesh Ltd. 9,809 9,809 9,470 9,470 9,809 9,809 9,470 9,470 (6 Shares of Bangladesh Taka 1.000 Mn each. Converted @ Rs.1.63490 per Taka) (6 Shares of Bangladesh Taka 1.000 Mn each. Converted @ Rs.1.57830 per Taka as at December 31, 2007)                   Group Bank As at 31.12.08 As at 31.12.07 As at 31.12.08 As at 31.12.07 Cost Managers’ Buying Market Value/ Price Cost Managers’ Buying Market Value/ Price Cost Managers’ Buying Market Value/ Price Cost Managers’ Buying Market Value/ Price   Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 LEASE BACKED SECURITIES Senkadagala Finance PLC 51,853 51,853 120,198 120,198 51,853 51,853 120,198 120,198 Commercial Leasing Company PLC 11,641 11,641 96,269 96,269 11,641 11,641 96,269 96,269 Specialist Gasses (Pvt) Ltd. – – 43,150 43,150 – – 43,150 43,150   TRUST CERTIFICATES/BONDS People’s Leasing Company PLC 15,500 15,500 177,292 177,292 15,500 15,500 177,292 177,292 Senkadagala Finance PLC 18,050 18,050 41,100 41,100 18,050 18,050 41,100 41,100 Government of Bangladesh Bonds 2,168 2,168 14,600 14,600 2,168 2,168 14,600 14,600                   Commercial Leasing Company PLC – – 30,150 30,150 – – 30,150 30,150 Sub Total 1,175,336 1,175,336 1,718,294 1,718,294 1,175,336 1,175,336 1,718,294 1,718,294 Total 1,197,139 1,196,927 1,756,089 1,756,728 1,197,139 1,196,927 1,756,089 1,756,728 19. BILLS OF EXCHANGE, LOANS & ADVANCES AND LEASE RECEIVABLE Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 19.1 Bills of Exchange           Export bills 2,266,071 2,613,315 2,266,071 2,613,315 Import bills 895,263 663,576 895,263 663,576 3,161,334 3,276,891 3,161,334 3,276,891 Less: Loan loss provision [Refer Note 19.1 (a)] 52,426 41,470 52,426 41,470           Interest in suspense [Refer Note 19.1 (b)] 50,033 40,370 50,033 40,370 Total 3,058,875 3,195,051 3,058,875 3,195,051   19.1 (a) Movement in the Provision for Bad & Doubtful Bills of Exchange:   Specific Provision Opening balance 26,401 47,541 26,401 47,541 Amount provided during the year – 3,134 – 3,134 Amount reversed during the year – (24,274) – (24,274) Closing balance 26,401 26,401 26,401 26,401 General Provision Opening balance 15,069 – 15,069 – Amount provided during the year 10,956 15,069 10,956 15,069 Closing balance 26,025 15,069 26,025 15,069 Total provision 52,426 41,470 52,426 41,470   19.1 (b) Movement in the Interest in Suspense of Bills of Exchange:           Opening balance 40,370 84,404 40,370 84,404 Interest suspended during the year 9,663 – 9,663 – Amount recovered during the year – (44,034) – (44,034) Closing balance 50,033 40,370 50,033 40,370   19.2 Loans & Advances     Sri Lankan rupee and foreign currency loans & advances [Refer Note 19.2 (a)] 176,657,832 166,730,414 176,721,610 166,737,219 Less: Loan loss provision [Refer Note 19.2 (b)] 4,462,812 3,303,395 4,462,812 3,303,395           Interest in suspense [Refer Note 19.2 (c)] 4,400,341 3,249,805 4,400,341 3,249,805 Total 167,794,679 160,177,214 167,858,457 160,184,019   19.2 (a) Sri Lankan Rupee and Foreign Currency Loans & Advances Sri Lankan Rupee Loans & Advances:           Overdrafts 34,536,493 34,730,095 34,595,566 34,730,095 Loans 93,525,269 88,591,745 93,529,974 88,598,550 Preshipment loans 347,786 723,190 347,786 723,190 Staff loans 3,008,960 2,649,695 3,008,960 2,649,695 Foreclosed properties [Refer Note 19.5] – 81,613 – 81,613 Interest receivable and others 2,864,532 2,272,868 2,864,532 2,272,868 Sub Total 134,283,040 129,049,206 134,346,818 129,056,011   Foreign Currency Loans & Advances: Overdrafts 8,524,324 7,797,227 8,524,324 7,797,227 Loans 27,463,440 23,689,903 27,463,440 23,689,903 Preshipment loans 6,196,608 5,987,254 6,196,608 5,987,254 Interest receivable and others 190,420 206,824 190,420 206,824 Sub Total 42,374,792 37,681,208 42,374,792 37,681,208 Total 176,657,832 166,730,414 176,721,610 166,737,219   19.2 (b) Movement in the Provision for Bad & Doubtful Loans & Advances:   Specific Provision Opening balance 2,507,225 2,168,080 2,507,225 2,168,080 Amount provided during the year 1,315,384 1,029,254 1,315,384 1,029,254 Exchange rate variance on foreign currency provision (3,506) 9,581 (3,506) 9,581 Amount reversed during the year (790,051) (699,690) (790,051) (699,690) Closing balance 3,029,052 2,507,225 3,029,052 2,507,225 General Provision Opening balance 796,170 190,658 796,170 190,658 Amount provided during the year 630,868 605,882 630,868 605,882 Exchange rate variance on    foreign currency provision 6,722 (370) 6,722 (370) Closing balance 1,433,760 796,170 1,433,760 796,170 Total provision 4,462,812 3,303,395 4,462,812 3,303,395           19.2 (c) Movement in the Interest in Suspense of Loans & Advances:             Opening balance 3,249,805 3,314,593 3,249,805 3,314,593 Interest suspended during the year 2,260,345 633,684 2,260,345 633,684 Amount recovered during the year (1,109,809) (698,472) (1,109,809) (698,472) Closing balance 4,400,341 3,249,805 4,400,341 3,249,805   19.3 Lease Receivable 19.3 (a) Lease Receivable within one year Total lease rentals receivable within one year 5,406,677 5,378,924 5,467,607 5,439,863 Less: Unearned income 2,137,140 1,700,404 2,162,599 1,720,843           Loan loss provision 173,342 70,717 173,248 70,571           Interest in Suspense [Refer Note 19.3 (e)] 87,171 46,219 87,171 46,219 Total 3,009,024 3,561,584 3,044,589 3,602,230   19.3 (b) Lease Receivable from one to five years           Total lease rentals receivable from one to five years 7,632,625 9,158,582 7,776,716 9,284,042 Less: Unearned income 1,048,995 1,789,458 1,088,288 1,810,726           Loans loss provision 265,765 141,665 265,859 141,811 Total 6,317,865 7,227,459 6,422,569 7,331,505   19.3 (c) Lease Receivable over five years           Total lease rentals receivable over five years 17,886 11,837 17,886 11,837 Less: Unearned income 792 953 792 953 Loan loss provision 429 54 429 54 Total 16,665 10,830 16,665 10,830   19.3 (d) Movement in the Provision for Bad and Doubtful Lease Receivable:   Specific Provision Opening balance 156,472 82,223 156,472 82,223 Amount provided during the year 285,661 114,301 285,661 114,301 Amount reversed during the year (88,763) (40,052) (88,763) (40,052) Closing balance 353,370 156,472 353,370 156,472 General Provision Opening balance 55,964 47,964 55,964 47,964 Amount provided during the year 30,202 8,000 30,202 8,000 Closing balance 86,166 55,964 86,166 55,964 Total provision 439,536 212,436 439,536 212,436           19.3 (e) Movement in the Interest in Suspense of Lease Receivable               Opening balance 46,219 36,227 46,219 36,227 Interest suspended during the year 82,672 51,712 82,672 51,712 Amount recovered during the year (41,720) (41,720) (41,720) (41,720) Closing balance 87,171 46,219 87,171 46,219 The maturity analysis of Bills of Exchange, loans & advances and lease receivable is given in Note 35. 19.4 Non-Performing Bills of Exchange, Loans & Advances and Lease Receivable Net exposure on non-performing Bills of Exchange, loans & advances and lease receivable as at December 31, before discounting the value of the securities obtained is given below: Group Bank   2008 Rs. ’000 % 2007 Rs. ’000 % 2008 Rs. ’000 % 2007 Rs. ’000 % Bills of Exchange 71,001 52,486 71,001 52,486 Loans & advances 10,408,909 5,925,963 10,408,909 5,925,963 Lease receivable 662,312   285,896   662,312   285,896   Sub Total (*) 11,142,222 5.97 6,264,345 3.50 11,142,222 5.96 6,264,345 3.50 Add: Interest receivable on non-performing loans & advances 3,007,946   2,339,098   3,007,946   2,339,098   Gross non-performing loans & advances 14,150,168 8,603,443 14,150,168 8,603,443 Less: Interest in suspense [Refer Note 19.4 (c)] 4,537,545   3,336,394   4,537,545   3,336,394   Net non-performing loans & advances 9,612,623 5.19 5,267,049 2.96 9,612,623 5.19 5,267,049 2.96 Less: Specific Provisions for bad & doubtful debts [Refer Note 19.4 (a)] 3,408,823   2,690,098   3,408,823   2,690,098   Net exposure 6,203,800 3.33 2,576,951 1.44 6,203,800 3.33 2,576,951 1.44 (*) This includes foreclosed properties, the details of which are given in Note 19.5. 19.4 (a) Specific Provision for Bad & Doubtful Debts - Summary Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Specific Provision Opening balance 2,690,098 2,297,844 2,690,098 2,297,844 Amount provided (Refer Note 7) 1,601,045 1,146,689 1,601,045 1,146,689 Exchange rate variance on foreign currency provisions (3,506) 9,581 (3,506) 9,581 Amount reversed during the year (878,814) (764,016) (878,814) (764,016) Closing balance 3,408,823 2,690,098 3,408,823 2,690,098   19.4 (b) General Provision for Bad & Doubtful Debts - Summary   General Provision Opening balance 867,203 238,622 867,203 238,622 Amount provided (Refer Note 7) 672,026 628,951 672,026 628,951 Exchange rate variance on     foreign currency provisions 6,722 (370) 6,722 (370) Closing balance 1,545,951 867,203 1,545,951 867,203           Total Provision 4,954,774 3,557,301 4,954,774 3,557,301   19.4 (c) Interest in Suspense - Summary           Opening balance 3,336,394 3,435,224 3,336,394 3,435,224 Interest suspended during the year 2,352,680 685,396 2,352,680 685,396 Amount recovered during the year (1,151,529) (784,226) (1,151,529) (784,226) Closing balance 4,537,545 3,336,394 4,537,545 3,336,394 19.5 Foreclosed Properties The foreclosed properties included under loans and advances as at December 31, include the following: Bank   Extent 2008 2007   A R P Cost/W.D.V. Rs. ’000 Forced Sale Value Rs. ’000 Cost/W.D.V. Rs. ’000 Forced Sale Value Rs. ’000 Land and Building at Kochchikade, Negombo (*) 2 2 36.91 – – 81,613 100,000 Less : Fall in Value       – – (15,000) – Total       – – 66,613 100,000 A = Acres, R = Roods, P = Perches (*) Bank acquired this hotel property in 1999 in settlement of a debt due to the Bank. With the approval of the Central Bank of Sri Lanka, the Bank entered into a management agreement with Serendib Leisure Management (Pvt) Ltd. which expired in December 2002. This was disposed on March 28, 2008. 19.6 Bills of Exchange, Loans & Advances and Lease Receivable - Summary Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Bills of Exchange 3,161,334 3,276,891 3,161,334 3,276,891 Loans & advances 176,657,832 166,730,414 176,721,610 166,737,219 Lease receivable 9,870,261 11,058,528 10,010,530 11,203,220 Gross Bills of Exchange, loans & advances and lease receivable 189,689,427 181,065,833 189,893,474 181,217,330 Less: Provision for bad & doubtful           debts [Refer Note 19.4 (a) & (b)] (4,954,774) (3,557,301) (4,954,774) (3,557,301)           Interest in suspense [Refer Note 19.4 (c)] (4,537,545) (3,336,394) (4,537,545) (3,336,394) Net Bills of Exchange, Loans & Advances and Lease Receivable 180,197,108 174,172,138 180,401,155 174,323,635 19.7 Concentration of Credit Risk Sector-wise analysis of Bank's loans & advances portfolio reflecting the exposure to credit risk in the various sectors is given below: Group Bank   2008 Rs. ’000 % 2007 Rs. ’000 % 2008 Rs. ’000 % 2007 Rs. ’000 % Exports 20,738,284 11.11 21,879,306 12.24 20,738,284 11.10 21,879,306 12.23 Tourism & allied 6,136,145 3.29 4,841,672 2.71 6,136,145 3.28 4,841,672 2.71 Industrial 29,702,579 15.91 27,861,656 15.59 29,702,579 15.89 27,861,656 15.58 Agriculture & fishing 8,166,631 4.37 7,688,429 4.30 8,166,631 4.37 7,688,429 4.30 Commercial trading 18,315,548 9.81 16,863,077 9.44 18,315,548 9.80 16,863,077 9.43 Imports 23,644,173 12.66 21,325,779 11.93 23,644,173 12.65 21,325,779 11.92 Consumption 9,751,498 5.22 11,570,708 6.47 9,751,498 5.22 11,570,708 6.47 Services 22,345,635 11.97 24,549,566 13.74 22,485,905 12.03 24,694,257 13.81 Housing & construction 17,843,086 9.56 18,126,246 10.14 17,843,086 9.55 18,126,246 10.13 Others 30,037,902 16.09 24,020,298 13.44 30,101,680 16.11 24,027,103 13.42 Total loans & advances 186,681,482 100.00 178,726,737 100.00 186,885,529 100.00 178,878,233 100.00 20. INVESTMENTS IN ASSOCIATES Group Bank As at 31.12.08 As at 31.12.07 As at 31.12.08 As at 31.12.07 Balance Market Value/ Directors' Valuation Balance Market Value/ Directors' Valuation Balance Market Value/ Directors' Valuation Balance Market Value/ Directors' Valuation   Holding (%) Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Unquoted: Equity Investments Lanka Ltd. (Incorporated in Sri Lanka) 22.92 44,331 46,138 44,331 41,674 44,331 46,138 44,331 41,674 (4,110,938 Ordinary Shares) (4,110,938 Ordinary Shares as at December 31, 2007) Add: Share of profit applicable to the Bank: Balance at the beginning of the year (2,657) (3,366) Current year’s share of profit after tax 4,464 2,764 Less: Dividend received during the year – (2,055) Current year’s retained profit   4,464   709               1,807   (2,657)           Balance at the end of the year   46,138 46,138 41,674 41,674 44,331 46,138 44,331 41,674                     Commercial Insurance Brokers (Pvt) Ltd. 18.91 100 24,850 100 21,046 – – – – (Incorporated in Sri Lanka) (120,000 Ordinary Shares) (120,000 Ordinary Shares as at December 31, 2007) Add: Share of profit applicable to the Bank: Balance at the beginning of the year 20,946 – Current year's share of profit after tax 4,480 21,662 Less: Dividend received during the year (676) (716) Current year's retained profit   3,804   20,946               24,750   20,946           Balance at the end of the year   24,850 24,850 21,046 21,046         Total Value of Investments in Unquoted Associates at carrying value   70,988   62,720   44,331   44,331   Total Market Value/Directors’ Valuation of Investments in Associates     70,988   62,720   46,138   41,674 21. INVESTMENTS IN SUBSIDIARIES Group Bank As at 31.12.08 As at 31.12.07 As at 31.12.08 As at 31.12.07 Balance Market Value/ Directors' Valuation Balance Market Value/ Directors' Valuation Balance Market Value/ Directors' Valuation Balance Market Value/ Directors' Valuation   Holding (%) Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Quoted: Commercial Development Company PLC (Incorporated in Sri Lanka) 94.55 – – – – 274,393 340,371 274,393 624,014 (11,345,705 Ordinary Shares) (11,345,705 Ordinary Shares of as at December 31, 2007)             (@ Rs. 30.00)   (@ Rs. 55.00)   Unquoted: Commercial Bank Primary Dealer Ltd. (Incorporated in Sri Lanka) 100.00 – – – – 150,000 150,000 150,000 150,000 (15,000,000 Ordinary Shares) (@ Rs. 10.00) (@ Rs. 10.00) (15,000,000 Ordinary Shares as at December 31, 2007)                                       ONEzero Company Ltd. (Incorporated in Sri Lanka) 100.00 – – – – 5,000 5,000 5,000 5,000 (500,000 Ordinary Shares) (@ Rs. 10.00) (@ Rs. 10.00) (500,000 Ordinary Sharesas at December 31, 2007)                   X-pertise Ltd. (Incorporated in Sri Lanka) 100.00 – – – – 4,288 4,288 4,288 4,288 (428,797 Ordinary Shares) (428,797 Ordinary Shares as at December 31, 2007)             (@ Rs. 10.00)   (@ Rs. 10.00) Total   – – – – 433,681 499,659 433,681 783,302 22. OTHER ASSETS Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Deposits & prepayments 380,133 229,983 369,431 226,252 Clearing account balance 2,245,221 2,753,608 2,245,221 2,753,608 Other accounts 614,055 670,311 554,343 650,457 Total 3,239,409 3,653,902 3,168,995 3,630,317 23. PROPERTY, PLANT & EQUIPMENT 23.1 Group Freehold Freehold Leasehold Computer Motor Office Capital 31.12.08 31.12.07 Land Buildings Buildings Equipment Vehicles Equipment & Furniture Work-in- Progress Total Total   Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs.’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Cost/Valuation 1,136,540 901,493 561,947 1,895,581 235,081 1,641,461 59,522 6,431,625 5,558,251 As at beginning of the year Additions during the year 802 50,011 5,923 404,670 70,347 290,174 58,775 880,702 633,062 Revaluation adjustment on accumulated depreciation – – – – – – – – (56,587) Surplus on revaluation of property – – 41,568 – – – – 41,568 329,950 Disposals during the year – (106) – (46,154) (29,054) (10,115) – (85,429) (19,264) Exchange rate variance – – – 2,164 610 4,865 – 7,639 (4,315) Transfers/Adjustments – – – 211 – – (88,807) (88,596) (9,472) As at end of the year 1,137,342 951,398 609,438 2,256,472 276,984 1,926,385 29,490 7,187,509 6,431,625 Accumulated depreciation As at beginning of the year – 110,450 9,492 1,223,593 113,934 977,103 – 2,434,572 2,120,774 Charge for the year – 36,608 22,891 210,419 45,089 163,834 – 478,841 391,447 Revaluation adjustment on accumulated depreciation – – – – – – – – (56,587) Disposals during the year – (10) – (42,868) (23,159) (6,945) – (72,982) (15,099) Exchange rate variance – – – 1,265 75 2,882 – 4,222 (6,018) Transfers/Adjustments – – – 211 – – – 211 55 As at end of the year – 147,048 32,383 1,392,620 135,939 1,136,874 – 2,844,864 2,434,572 Net Book Value as at 31.12.08 1,137,342 804,350 577,055 863,852 141,045 789,511 29,490 4,342,645   Net Book Value as at 31.12.07 1,136,540 791,043 552,455 671,988 121,147 664,358 59,522   3,997,053 The carrying amount of Group's revalued assets that would have been included in the Financial Statements had the value of these assets been carried at cost less depreciation is as follows: 2008 2007 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Class of Asset Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Land 376,722 – 376,722 375,919 – 375,919 Freehold Buildings 637,569 174,814 462,755 587,664 157,680 429,984 Leasehold Buildings 102,808 25,863 76,945 96,885 23,204 73,681 Total 1,117,099 200,677 916,422 1,060,468 180,884 879,584 23.2 Bank Freehold Freehold Leasehold Computer Motor Office Capital 31.12.08 31.12.07 Land Buildings Buildings Equipment Vehicles Equipment & Furniture Work-in- Progress Total Total Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs.’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Cost/Valuation As at beginning of the year 1,136,540 901,493 98,515 1,895,074 60,699 1,583,861 59,522 5,735,704 5,190,782 Additions during the year 802 50,011 5,923 404,084 6,174 290,044 58,775 815,813 563,407 Disposals during the year – (106) – (46,154) (3,676) (10,115) – (60,051) (10,324) Exchange rate variance – – – 2,164 610 4,865 – 7,639 (4,315) Transfers/Adjustments – – – 211 – – (88,807) (88,596) (3,846) As at end of the year 1,137,342 951,398 104,438 2,255,379 63,807 1,868,655 29,490 6,410,509 5,735,704 Accumulated depreciation As at beginning of the year – 110,450 9,492 1,223,130 34,064 940,974 – 2,318,110 1,973,520 Charge for the year – 36,608 3,468 210,283 8,646 160,671 – 419,676 358,754 Disposals during the year – (10) – (42,868) (3,662) (6,945) – (53,485) (8,205) Exchange rate variance – – – 1,265 75 2,882 – 4,222 (6,018) Transfers/Adjustments – – – 211 – – – 211 59 As at end of the year – 147,048 12,960 1,392,021 39,123 1,097,582 – 2,688,734 2,318,110 Net Book Value as at 31.12.08 1,137,342 804,350 91,478 863,358 24,684 771,073 29,490 3,721,775   Net Book Value as at 31.12.07 1,136,540 791,043 89,023 671,944 26,635 642,887 59,522   3,417,594 With the permission of the Monetory Board of the Central Bank of Sri Lanka, freehold and leasehold land & buildings of the Bank were revalued by professionally qualified independent valuers as at December 31, 2004. The surplus on the revaluation amounting to Rs. 1,131.147 Mn was credited to the Revaluation Reserve. The carrying amount of Bank's revalued assets that would have been included in the Financial Statements had the value of these assets been carried at cost less depreciation is as follows: 2008 2007 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Class of Asset Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Rs.’000 Land 376,722 – 376,722 375,919 – 375,919 Freehold Buildings 637,569 174,814 462,755 587,664 157,680 429,984 Leasehold Buildings 102,808 25,863 76,945 96,885 23,204 73,681 Total 1,117,099 200,677 916,422 1,060,468 180,884 879,584 24. LEASEHOLD PROPERTY Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Cost/Valuation         As at beginning of the year 128,700 128,700 84,840 84,840 Additions during the year – – – – As at end of the year 128,700 128,700 84,840 84,840           Accumulated Amortisation         As at beginning of the year 9,735 8,212 2,897 1,884 Transfers during the year (71) – (71) – Amortisation for the year 1,452 1,523 942 1,013 As at end of the year 11,116 9,735 3,768 2,897 Net Book Value 117,584 118,965 81,072 81,943 The leasehold rights to land is disclosed under Leasehold Property as per a ruling issued by the Urgent Issues Task Force (UITF) of the Institute of Chartered Accounts of Sri Lanka, which does not permit further revaluation of Leasehold Property. An amount of Rs. 64.662 Mn is remaining in the equity under Revaluation Surplus relating to previous revaluation of leasehold rights to land. 25. INTANGIBLE ASSETS Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 25.1 Computer Software and Copyrights Cost/Valuation         As at beginning of the year 610,549 527,412 610,503 525,887 Additions during the year 74,758 85,683 74,758 84,616 Disposals during the year – (2,546) – – As at end of the year 685,307 610,549 685,261 610,503   Accumulated Amortisation As at beginning of the year 415,988 364,599 415,987 364,358 Amortisation for the year 62,993 51,993 62,993 51,629 Disposals during the year – (604) – – As at end of the year 478,981 415,988 478,980 415,987 Net book value 206,326 194,561 206,281 194,516   25.2 Software under Development Cost/Valuation       As at beginning of the year 73,971 15,101 73,971 15,101 Additions during the year 73,220 58,870 71,933 58,870 Transfers during the year (56,794) – (56,794) – As at end of the year 90,397 73,971 89,110 73,971 Total Net book value 296,723 268,532 295,391 268,487 26. DEPOSITS FROM CUSTOMERS   Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Local Currency Deposits Current account deposits 13,600,878 14,597,770 13,616,409 14,619,729 Savings deposits 49,212,943 45,719,566 49,213,195 45,719,862 Time deposits 71,777,977 62,742,264 71,777,977 62,742,264 Certificates of deposit 3,538,205 3,307,118 3,538,205 3,307,118 Sub Total 138,130,003 126,366,718 138,145,786 126,388,973 Foreign Currency Deposits Current account deposits 4,589,679 5,231,856 4,589,679 5,231,856 Savings deposits 23,022,759 25,636,200 23,022,759 25,636,200 Time deposits 34,122,762 25,853,106 34,122,762 25,853,106 Sub Total 61,735,200 56,721,162 61,735,200 56,721,162 Total Deposits 199,865,203 183,087,880 199,880,986 183,110,135   26.1 Analysis of Deposits Deposits from Banks 3,567,307 1,008,570 3,567,307 1,008,570 Deposits from Finance Companies 2,508,618 2,394,836 2,508,618 2,394,836 Deposits from other Customers 193,789,278 179,684,474 193,805,061 179,706,729 Total 199,865,203 183,087,880 199,880,986 183,110,135 The maturity analysis of deposits is given in Note 35. 27. BORROWINGS                   Call money borrowings 1,150,000 1,800,000 1,150,000 1,800,000 Borrowings from banks 4,160,895 8,994,620 4,160,895 8,994,620 Refinance borrowings 7,180,705 6,872,791 7,180,705 6,872,791 Long-term borrowings 1,128,000 1,085,000 1,128,000 1,085,000 Total 13,619,600 18,752,411 13,619,600 18,752,411   28. OTHER LIABILITIES           Accrued expenditure and interest 5,867,548 5,035,313 5,863,227 5,033,658 Cheques sent on clearing 2,113,904 2,348,480 2,113,904 2,348,480 Provision for Gratuity 70,140 35,821 61,541 29,846 Other accounts 2,042,328 2,321,477 2,064,610 2,343,576 Total 10,093,920 9,741,091 10,103,282 9,755,560 29. DEFERRED TAX Group Bank Balance Sheet Income Statement Balance Sheet Income Statement 2008 2007 2008 2007 2008 2007 2008 2007   Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Deferred Tax Liabilities Accelerated depreciation for tax purposes - own assets 308,859 262,602 (46,257) (11,891) 278,970 233,391 (45,579) (11,534) Accelerated depreciation for tax purposes - leased assets 407,335 408,199 864 30,266 407,335 408,199 864 30,266 Revaluation surplus on property 129,457 134,714 – – – – – – Deferred Tax on reclassification of revaluation surplus to retained earnings (19,231) – – – – – – –   826,420 805,515 (45,393) 18,375 686,305 641,590 (44,715) 18,732 Deferred Tax Assets Finance leases 3,883 2,396 1,487 423 – – – – Defined benefit plans 76,176 21,851 54,325 7,558 73,436 19,917 53,518 7,333 Provision for bad & doubtful loans and advances 14,420 13,724 696 2,423 14,420 13,724 696 2,423 Effect of brought forward reversal of Deferred Tax Assets on General Provision 55,737 55,737   55,737 55,737   150,216 93,708 143,593 89,378                   Effect of Exchange rate variance 192 110 (474) (475) 192 110 (474) (475) Deferred Income Tax on income/(expenses) 10,641 28,304 9,025 28,013 Net Deferred Tax 676,396 711,917 542,904 552,322 30. DEBENTURES Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 As at beginning of the year 6,680,440 6,680,440 6,680,440 6,680,440 Redemptions during the year (2,244,410) – (2,244,410) – As at end of the year 4,436,030 6,680,440 4,436,030 6,680,440 .------------------------------------------------------------------------------------------------------------------------------------ As at December 31, 2008, debentures consisted of 4,436,030 Unsecured Subordinated Redeemable Debentures of Rs. 1,000.00 each issued by the Bank in 2003, 2004, 2005 and 2006.               Bank Value as at Debenture Categories Colombo Stock Interest Allotment Maturity Effective Annual Yield December 31 Exchange Payable Date Date 2008 2007 2008 2007   Listing Frequency         Rs. ’000 Rs. ’000 Fixed Rate Debentures 2003/2008 - 10.00% p.a.                 (Redeemed on May 12, 2008) Listed Quarterly 12.05.2003 12.05.2008 – 10.38% – 115,890 2005/2010 - 12.00% p.a. Not listed Annually 10.10.2005 10.10.2010 12.00% 12.00% 284,000 284,000 2006/2011 - 12.00% p.a. Not listed Annually 16.05.2006 16.05.2011 12.00% 12.00% 15,000 15,000 2006/2016 - 13.25% p.a. Not listed Annually 16.05.2006 16.05.2016 13.25% 13.25% 505,000 505,000 2006/2011 - 13.50% p.a. Listed Annually 18.12.2006 18.12.2011 13.50% 13.50% 527,800 527,800 2006/2013 - 13.75% p.a. Listed Annually 18.12.2006 18.12.2013 13.75% 13.75% 250 250 2006/2016 - 14.00% p.a. Listed Annually 18.12.2006 18.12.2016 14.00% 14.00% 467,260 467,260               1,799,310 1,915,200 Floating Rate Debentures 2003/2008 - 3 months TB rate (Net) + 2% p.a.                 (Redeemed on May 12, 2008) Listed Quarterly 12.05.2003 12.05.2008 – 18.97% – 2,128,520 2004/2009 - 3 months TB rate (Net) + 2% p.a. Not listed Quarterly 01.10.2004 01.10.2009 19.33% 18.97% 1,000,000 1,000,000 2005/2010 - 3 months TB rate (Net) + 2% p.a. Not listed Quarterly 10.10.2005 10.10.2010 19.33% 18.97% 120,000 120,000 2005/2010 - 3 months TB rate (Gross) + 1% p.a. Not listed Quarterly 10.10.2005 10.10.2010 20.25% 19.81% 905,000 905,000 2006/2011 - 3 months TB rate (Net) + 2% p.a. Not listed Quarterly 16.05.2006 16.05.2011 19.33% 18.97% 15,000 15,000 2006/2011 - 3 months TB rate (Gross) + 1% p.a. Not listed Quarterly 16.05.2006 16.05.2011 20.25% 19.81% 465,000 465,000 2006/2011 - 12 months TB rate (Gross) + 1% p.a. Listed Annually 18.12.2006 18.12.2011 22.24% 15.42% 131,020 131,020 2006/2013 - 12 months TB rate (Gross) + 1% p.a. Listed Annually 18.12.2006 18.12.2013 22.24% 15.42% 300 300 2006/2016 - 12 months TB rate (Gross) + 1% p.a. Listed Annually 18.12.2006 18.12.2016 22.24% 15.42% 400 400               2,636,720 4,765,240 Total debentures             4,436,030 6,680,440 Notes 3 Months TB rate (Gross) - three months Government Treasury Bill rate before 10% Withholding Tax Rate as published by the Central Bank of Sri Lanka immediately prior to the commencement of each interest period. 3 Months TB rate (Net) - three months Government Treasury Bill rate after 10% Withholding Tax Rate as published by the Central Bank of Sri Lanka immediately prior to the commencement of each interest period. 12 Months TB rate (Gross) - twelve months Government Treasury Bill rate before 10% Withholding Tax Rate as published by the Central Bank of Sri Lanka immediately prior to the commencement of each interest period. 31. STATED CAPITAL The details of the Stated Capital are given below: Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Opening Balance 10,514,807 – 10,514,807 – Ordinary Share Capital-Voting – 2,329,312 – 2,329,312 Ordinary Share Capital-Non-Voting – 161,206 – 161,206 11.25% Cumulative Redeemable Preference Share Capital – 1,000,000 – 1,000,000 Share Premium – 7,024,289 – 7,024,289 Issue of Ordinary Shares under Employee Share Option Plan 33,316 – 33,316 – Redemption of 11.25% Cumulative Redeemable Preference Share Capital (1,000,000) – (1,000,000) – Closing Balance 9,548,123 10,514,807 9,548,123 10,514,807 The above amount includes 232,281,226 Ordinary Voting Shares and 16,120,797 Ordinary Non-Voting Shares as at December 31, 2008. These Shares are quoted in the Colombo Stock Exchange. The 11.25% Cumulative Redeemable Preference Shares allotted on May 13, 2003, were redeemed on May 12, 2008. In accordance with Section 58 of Companies Act No. 7 of 2007, which became effective from May 3, 2007, Share Capital and Share Premium have been reclassified as Stated Capital. Employee Share Option Plan The Bank obtained the approval of the shareholders at an Extra-Ordinary General Meeting held in September, 2002 to introduce an Employee Share Option Plan for the benefit of all the executive officers in Grade III and above by creating new ordinary voting shares up to 5% of the ordinary voting shares, in equal tranches over a period of four years, upon the Bank achieving specified performance targets. The details relating to the four tranches of the Employee Share Option Plan are given below:   Tranche I Tranche II Tranche III Tranche IV Total Date granted March 31, 2003 March 31, 2004 March 31, 2005 March 31, 2006 Price (Rs.) - (*) 36.00 57.85 56.13 111.38 Exercisable between April 01, 2004 April 01, 2005 April 01, 2006 April 01, 2007 to March 31, 2008 to March 31, 2009 to March 31, 2010 to March 31, 2011             Original number of options - (**) 650,000 812,500 1,637,947 1,659,756 4,760,203 Additions consequent to scrip issues – 17,922 96,231 730,293 844,446 Options cancelled due to non-acceptance or resignations (25,057) (10,149) (14,697) (121,640) (171,543) Number of options exercised up to December 31, 2008 (624,943) (802,129) (1,655,897) (315,831) (3,398,800) Number of options outstanding as at December 31, 2008 – 18,144 63,584 1,952,578 2,034,306 (*) Determined on the basis of the weighted average price of the voting shares of the Bank between October 01 and December 31 of each year. (**) Giving options under each tranche is based on the overall performance of the Bank for each year and the individual performance of the eligible employees. In the event of a bonus or/and rights issue of shares during the vesting period the number of shares offered and the offer prices are suitably amended in line with the accepted market practices. The number of options given to the Managing Director under tranches I, II, III & IV are 25,623, 30,753, 63,349 and 84,907 respectively. 32. STATUTORY RESERVE FUND Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Opening balance 1,634,497 1,429,319 1,633,678 1,428,500 Add: Transfers during the year 213,419 205,178 213,419 205,178 Closing balance 1,847,916 1,634,497 1,847,097 1,633,678 Five percentum of profits after tax is transferred to the Reserve Fund as required by Section 20 (i) of the Banking Act No. 30 of 1988. This balance in the Statutory Reserve Fund will be used only for the purposes specified in the Section 20 (2) of the Banking Act No. 30 of 1988. 33. RESERVES Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Capital Reserves Revaluation Reserve [Refer Note 33.2] 1,533,746 1,489,474 1,286,695 1,286,695 Sub Total 1,533,746 1,489,474 1,286,695 1,286,695   Revenue Reserves General Reserve [Refer Note 33.3] 12,518,821 10,278,367 12,518,821 10,278,367 Foreign Currency Translation Reserve [Refer Note 33.5] (361,796) (427,485) (361,796) (427,485) Primary Dealer Special Risk Reserve [Refer Note 33.6] 48,809 23,658 48,809 23,658 Unappropriated profit/(loss) carried forward (Refer Note 12) 1,090,431 844,573 1,003,480 626,317 Sub Total 13,296,265 10,719,113 13,209,314 10,500,857 Total 14,830,011 12,208,587 14,496,009 11,787,552 33.1 Share Premium Opening balance – 1,728,793 – 1,728,793 Proceeds from issue of shares under Employee Share Option Plan – 67,368 – 67,368 Proceeds from Rights issue of shares – 5,310,449 – 5,310,449 Writing-off of Share/Debenture issue expenses – (82,321) – (82,321) – 7,024,289 – 7,024,289 Transferred to Stated Capital – (7,024,289) – (7,024,289) Closing balance – – – – Share Premium was used for bonus issue of ordinary shares and writing-off of share and debenture issue expenses. 33.2 Revaluation Reserve Opening balance 1,489,474 1,288,177 1,286,695 1,288,177 Realised revaluation surplus on disposal of property – (1,482) – (1,482) Surplus on revaluation of property 39,302 311,968 – – Deferred tax effect on revaluation surplus on property 4,970 (109,189) – – Closing balance 1,533,746 1,489,474 1,286,695 1,286,695 The Revaluation Reserve relates to revaluation of Land & Buildings and represents the increase in the fair value of the Land & Buildings at the date of revaluation. The Licensed Commercial Banks are allowed to carry out revaluation of their Land & Buildings every seven years and are allowed to treat 50% of the surplus as supplementary capital in the Tier II of their Capital Base in the computation of Risk-Weighted Capital Adequacy Ratio. Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 33.3 General Reserve Opening balance 10,278,367 7,971,914 10,278,367 7,971,914 Transfer from the Income Statement 2,240,454 2,022,243 2,240,454 2,022,243 Transfer from Capital Redemption Reserve Fund – 284,210 – 284,210 Closing balance 12,518,821 10,278,367 12,518,821 10,278,367   33.4 Capital Redemption Reserve Fund Opening balance – 906,555 – 906,555 Utilised for the bonus issue of shares – (622,345) – (622,345) – 284,210 – 284,210 Transferred to General Reserve – (284,210) – (284,210) Closing balance – – – – The above reserve represented the nominal value of preference shares redeemed out of profits.   33.5 Foreign Currency Translation Reserve Opening balance (427,485) (416,049) (427,485) (416,049) Net unrealised gains/(losses) for the year from the translation of Financial Statements of the Bangladesh operation 65,689 (11,436) 65,689 (11,436) Closing balance (361,796) (427,485) (361,796) (427,485)   33.6 Primary Dealer Special Risk Reserve Opening balance 23,658 6,244 23,658 6,244 Transfer from the Income Statement 25,151 17,414 25,151 17,414 Closing balance 48,809 23,658 48,809 23,658 As per the Directive issued by the Public Debt Department of the Central Bank of Sri Lanka on April 18, 2005, with effect from July 01, 2005, Primary Dealers that maintain a capital above Rs. 300 Mn are required to allocate 25% of profits after tax to a special risk reserve annually. 34. COMMITMENTS AND CONTINGENCIES 34.1 In the normal course of business the Bank makes various irrevocable commitments and incurs certain contingent liabilities with legal recourse to its customers. Even though these obligations may not be recognised on the Balance Sheet, they do contain credit risk and are therefore part of the overall risk of the Bank. Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 Commitments: Commitments for unutilised facilities      (Direct Advances) 16,647,191 16,301,393 16,647,191 16,301,393 Sub Total 16,647,191 16,301,393 16,647,191 16,301,393   Contingent Liabilities: Acceptances 6,823,002 5,006,384 6,823,002 5,006,384 Documentary Credits 9,096,333 12,992,718 9,096,333 12,992,718 Guarantees 17,706,284 18,066,653 17,706,284 18,066,653 Bills for Collection 9,835,411 4,847,574 9,835,411 4,847,574 Stock of Travelers' Cheques 867,450 1,054,141 867,450 1,054,141 Bullion on Consignment 96,484 739,235 96,484 739,235 Sub Total 44,424,964 42,706,705 44,424,964 42,706,705   Forward Exchange Contracts: Forward Exchange Sales 32,023,385 29,036,865 32,023,385 29,036,865 Forward Exchange Purchases 19,148,522 28,090,471 19,148,522 28,090,471 Sub Total 51,171,907 57,127,336 51,171,907 57,127,336   Interest Rate Swap Agreements/Currency Options: Interest Rate Swaps 141,278 14,508 141,278 14,508 Currency Options 26,194 62,500 26,194 62,500 Sub Total 167,472 77,008 167,472 77,008   Exposure on Oil Hedging Transactions: Exposure on Oil Hedging Transactions 3,397,044 – 3,397,044 – Sub Total     3,397,044 – Total Commitments and Contingent Liabilities   115,808,578 116,212,442   34.2 Litigation against the Bank Litigation is a common occurrence in the banking industry due to the nature of the business. The Bank has an established protocol for dealing with such legal claims. Once professional advice has been obtained on the certainty of the outcome and the amount of damages reasonably estimated, the Bank makes adjustments to account for any adverse effects which the claims may have on its financial standing. Set out below are unresolved legal claims against the Bank as at the year end for which adjustments to the Financial Statements have not been made due to the uncertainty of their outcome. (i) Court action has been initiated by a customer in proceedings number 36/96 (1) to claim a sum of Rs. 183.050 Mn on account of a forward exchange contract. Judgement was delivered in favour of the Bank dismissing the plaintiff’s action but the plaintiff has appealed against the judgement. The case is pending to be listed in the Supreme Court. (ii) Judgement was delivered on September 21, 1995 on the court action initiated by a customer in proceedings number 93650/M to claim a sum of approximately Rs. 6.000 Mn relating to a dispute over the payment by the Bank of several cheques alleged to have been forged. The Bank has lodged an appeal against the judgement delivered favouring the plaintiff. Case is listed for argument. (iii) A Labour Tribunal case filed by an ex-employee on termination of employment is pending against the Bank, where the employee demands two months salary for each year of service amounting to Rs. 0.279 Mn. An appeal is pending in the Supreme Court lodged by an ex-employee against the judgement entered in the High Court for reinstatement or substantial compensation. (iv) Court action has been initiated by a customer in proceedings number 25831/MR to claim a sum of Rs. 2.880 Mn together with interest on account of an interest refund claimed on a current account. Judgement was delivered against the Bank for a sum of Rs. 1.874 Mn. Bank lodged an appeal against the said judgement. Judgement in the appeal case is due to be delivered on March 16, 2009. (v) Court action has been initiated by a customer in proceedings number 282/2002 (1) restraining the Bank from paying a sum of Rs. 13.350 Mn on a bank guarantee. The case has been transferred to Commercial High Court and is yet to be taken up. The Bank has obtained a counter guarantee from an insurance company. (vi) Court action has been initiated by a customer in proceedings number 25085/MR to recover a sum of US$ 27,500 alleged to have been paid by the Bank in pursuance of a guarantee issued, by debiting the customer’s account without the authority of the customer. Judgement was delivered dismissing the plaintiff’s action. Plaintiff has lodged an appeal against the judgement. Argument is fixed for June 15, 2009. (vii) Court action for Rs. 1.500 Mn has been initiated by a customer in proceedings number 36542/MR to recover a sum of Rs. 0.400 Mn with interest at 24% from June 20, 2002 and a further sum of Rs. 1.000 Mn from the Bank on an alleged breach of contract. The Bank is defending the action. Further trial is fixed for April 27, 2009. (viii) Court action has been initiated by a customer in proceedings number 1336/M to claim a sum of Rs. 0.200 Mn and interest thereon relating to a dispute over the alleged non-payment by the Bank of two cheques when instructions were given to honour them and alleged payment by the Bank of another cheque when instruction was given not to do so. The Bank is defending the action. Further trial is fixed for May 7, 2009. (ix) Court action has been initiated by a customer in proceedings number 57970/MR to claim a sum of Rs. 35.000 Mn in respect of an alleged transfer made by the Bank to a partnership account amounting to Rs. 7.555 Mn belonging to the Plaintiff, which has been withdrawn by the other partner. The Bank is defending the action. The case will be called up on March 13, 2009. (x) Court action has been initiated in proceedings number 31/2008/MR against the Bank to claim Rs. 7.500 Mn together with accrued interest on fixed deposits in the name of plaintiff held as security for an overdraft facility. Since the overdraft facility was transferred to non-performing category, Bank has recovered the amount outstanding by uplifting the fixed deposits. Plaintiff claims that he has signed the letter of set off and the letter of authority out of ignorance. An order was given by the Commercial High Court rejecting the admissions and issues against the Bank. This case will be called on March 4, 2009. An appeal has been lodged in the Supreme Court against the order rejecting the admissions and issues which case will be mentioned on March 25, 2009. (xi) Court action has been initiated in proceedings number 91/2008/MR against the Bank to claim Rs. 7.500 Mn together with accrued interest on fixed deposits in the name of plaintiff’s spouse held as security for an overdraft facility. Since the overdraft facility was transferred to non-performing category, Bank has recovered the amount outstanding by uplifting the fixed deposits. The plaintiff is claiming ownership of the said Fixed Deposits. The case will be called on March 4, 2009. (xii) Court action has been initiated by two customers in proceedings number 174/2008/MR to claim Rs. 34.000 Mn as damages for alleged unauthorised transactions which had not been sanctioned by the plaintiff. One of the plaintiffs has taken up the position that he did not receive the proceeds of the housing loan which had been obtained from the Bank. Admissions and issues of both parties are due on March 16, 2009. (xiii) Court action has been initiated by a third party in proceedings number 2116/L to claim the title of a property, which has been mortgaged to the Bank for a loan granted. Loan is in the performing category. The case will be called on March 30, 2009. (xiv) Court action has been initiated for BDT 9.153 Mn (approximately Rs. 14.964 Mn) in proceedings number 149 against the Credit Agricole Indosuez and the Bank for the breach of contract due to improper termination of a contract between Credit Agricole Indosuez and the plaintiff on network facility provided for Electronic Fund Transfer (EFT). As the Bank was not a party to the contract, the Bank has filed a statement to the court requesting for a dismissal. The case will be called up on February 26, 2009. (xv) Court action has been initiated in proceedings number 571/08/MR against the Bank to prevent the Bank from exercising the right of lien and set-off against a deposit of the plaintiff amounting to US$ 15.000 Mn and to claim interest at 1.5% per annum from December 19, 2008. The plaintiff had defaulted payment of US$ 21.024 Mn on a back hedge contract with the Bank. Statement of objections is due on April 22, 2009. 35. MATURITY ANALYSIS 35.1 Group 35.1.1 An analysis of the total assets employed of the Group as at December 31, based on the remaining period at the Balance Sheet date to the respective contractual maturity dates is given below: Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at months months years years 5 years 31.12.2008 31.12.2007   Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Interest Earning Assets Cash and short-term funds 13,400,539 2,347,373 – – – 15,747,912 10,320,206 Balances with Central Banks 1,586,097 65,006 – – – 1,651,103 792,810 Government Treasury Bills and Bonds 18,341,382 17,257,036 – – – 35,598,418 41,266,310 Securities purchased under resale agreements 3,309,821 90,634 – – – 3,400,455 3,804,120 Investment Securities 44,763 221,433 613,577 292,500 – 1,172,273 1,729,020 Treasury bonds maturing after one year – – 14,779,578 890,066 600,282 16,269,926 8,794,841 Biils of exchange, loans & advances and lease receivable 84,730,754 26,091,343 37,156,480 16,495,981 15,722,550 180,197,108 174,172,138 As at 31.12.2008 121,413,356 46,072,825 52,549,635 17,678,547 16,322,832 254,037,195   As at 31.12.2007 104,033,673 59,004,237 44,862,415 17,018,849 15,960,271   240,879,445   Non-Interest Earning Assets Cash and short-term funds 8,366,999 – – – – 8,366,999 5,888,041 Balances with Central Banks 6,090,542 1,912,306 277,155 186,103 205,202 8,671,308 10,782,769 Dealing Securities 58,290 – – – – 58,290 207,267 Investments held for sale – – – – – – 379,631 Investment Securities 10,747 – – – 14,119 24,866 27,069 Investments in Associates – – – – 70,988 70,988 62,720 Interest and fees receivable 2,341,033 – – – – 2,341,033 2,119,836 Other assets 3,029,580 199,445 – – 10,384 3,239,409 3,653,902 Property, Plant & Equipment – – – – 4,342,645 4,342,645 3,997,053 Leasehold Property – – – – 296,723 296,723 268,532 Intangible assets – – – – 117,584 117,584 118,965 As at 31.12.2008 19,897,191 2,111,751 277,155 186,103 5,057,645 27,529,845   As at 31.12.2007 17,759,142 1,021,410 3,735,007 75,533 4,914,693   27,505,785 Total Assets - As at 31.12.2008 141,310,547 48,184,576 52,826,790 17,864,650 21,380,477 281,567,040   Total Assets - As at 31.12.2007 121,792,815 60,025,647 48,597,422 17,094,382 20,874,964   268,385,230 Percentage - As at 31.12.2008 50.20 17.11 18.76 6.34 7.59 100.00   Percentage - As at 31.12.07 45.37 22.37 18.11 6.37 7.78   100.00 35.1.2 An analysis of the total liabilities and shareholders' funds of the Bank as at December 31, based on the remaining period at the Balance Sheet date to the respective contractual maturity dates is given below: Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at months months years years 5 years 31.12.2008 31.12.2007   Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Interest Bearing Liabilities Deposits from customers 127,826,015 41,691,822 4,401,650 3,406,745 4,498,248 181,824,480 163,354,574 Borrowings 4,778,354 1,652,623 3,343,502 1,799,373 2,045,748 13,619,600 18,752,411 Securities sold under     repurchase agreements 17,322,849 7,629,623 7,172 – – 24,959,644 23,238,005 Debentures – 1,000,000 2,462,820 550 972,660 4,436,030 6,680,440 As at 31.12.2008 149,927,218 51,974,068 10,215,144 5,206,668 7,516,656 224,839,754 As at 31.12.2007 155,403,966 35,976,813 5,734,988 5,158,311 9,751,352   212,025,430   Non-Interest Bearing Liabilities Deposits from customers 18,040,723 – – – – 18,040,723 19,733,306 Preference dividend payable – – – – – – 112,500 Other liabilities 9,926,030 167,890 – – – 10,093,920 9,741,091 Tax liabilities 84,291 1,578,958 – – – 1,663,249 1,679,306 Deferred tax – – 676,396 – – 676,396 711,917 Stated Capital – – – – 9,548,123 9,548,123 10,514,807 Statutory Reserve Fund – – – – 1,847,916 1,847,916 1,634,497 Reserves – – – – 14,830,011 14,830,011 12,208,587 Minority Interest – – – – 26,948 26,948 23,789 As at 31.12.2008 28,051,044 1,746,848 676,396 – 26,252,998 56,727,286 As at 31.12.2007 29,884,766 2,381,437 711,917 – 23,381,680 56,359,800 Total Liabilities and Equity - As at 31.12.2008 177,978,262 53,720,916 10,891,540 5,206,668 33,769,654 281,567,040   Total Liabilities and Equity - As at 31.12.2007 185,288,732 38,358,250 6,446,905 5,158,311 33,133,032   268,385,230 Percentage - As at 31.12.2008 63.21 19.08 3.87 1.85 11.99 100.00   Percentage - As at 31.12.2007 69.04 14.29 2.40 1.92 12.35   100.00 35.2 Bank 35.2.1 An analysis of the total assets of the Bank as at December 31, based on the remaining period at the Balance Sheet date to the respective contractual maturity dates is given below: Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at months months years years 5 years 31.12.2008 31.12.2007   Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Interest Earning Assets Cash and short-term funds 13,400,539 2,347,373 – – – 15,747,912 10,320,205 Balances with Central Banks 1,586,097 65,006 – – – 1,651,103 792,810 Government Treasury Bills and Bonds 18,106,289 17,257,036 – – – 35,363,325 41,068,234 Securities purchased under resale agreements 3,309,821 90,634 – – – 3,400,455 3,804,120 Investment Securities 44,763 221,433 613,577 292,500 – 1,172,273 1,729,021 Treasury Bonds maturing after one year – – 14,779,578 890,066 600,282 16,269,926 8,794,841 Biils of exchange, loans & advances and lease receivable 84,934,801 26,091,343 37,156,480 16,495,981 15,722,550 180,401,155 174,323,635 As at 31.12.2008 121,382,310 46,072,825 52,549,635 17,678,547 16,322,832 254,006,149   As at 31.12.2007 103,987,094 59,004,237 44,862,415 17,018,849 15,960,271   240,832,866   Non-Interest Earning Assets Cash and short-term funds 8,366,794 – – – – 8,366,794 5,888,003 Balances with Central Banks 6,090,542 1,912,306 277,155 186,103 205,202 8,671,308 10,782,769 Dealing Securities 58,290 – – – – 58,290 207,267 Investments held for sale – – – – – – 205,477 Investment Securities 10,747 – – – 14,119 24,866 27,068 Investments in associates – – – – 44,331 44,331 44,331 Investments in subsidiaries – – – – 433,681 433,681 433,681 Interest and fees receivable 2,341,033 – – – – 2,341,033 2,119,836 Other assets 2,959,166 199,445 – – 10,384 3,168,995 3,630,317 Property, Plant & Equipment – – – – 3,721,775 3,721,775 3,417,594 Leasehold property – – – – 81,072 81,072 81,943 Intangible assets – – – – 295,391 295,391 268,487 As at 31.12.2008 19,826,572 2,111,751 277,155 186,103 4,805,955 27,207,536   As at 31.12.2007 17,735,518 847,256 3,735,007 75,533 4,713,459   27,106,773 Total Assets - As at 31.12.2008 141,208,882 48,184,576 52,826,790 17,864,650 21,128,787 281,213,685   Total Assets - As at 31.12.2007 121,722,612 59,851,493 48,597,422 17,094,382 20,673,730   267,939,639 Percentage - As at 31.12.2008 50.22 17.13 18.79 6.35 7.51 100.00   Percentage - As at 31.12.2007 45.42 22.34 18.14 6.38 7.72   100.00 35.2.2 An analysis of the total liabilities and shareholders' funds of the Bank as at December 31, based on the remaining period at the Balance Sheet date to the respective contractual maturity dates is given below: Up to 3 3 to 12 1 to 3 3 to 5 More than Total as at Total as at months months years years 5 years 31.12.2008 31.12.2007   Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Interest Bearing Liabilities Deposits from customers 127,826,015 41,691,822 4,401,650 3,406,745 4,498,248 181,824,480 163,367,664 Borrowings 4,778,354 1,652,623 3,343,502 1,799,373 2,045,748 13,619,600 18,752,411 Securities sold under re-purchase agreements 17,438,296 7,629,623 7,172 – – 25,075,091 23,342,102 Debentures – 1,000,000 2,462,820 550 972,660 4,436,030 6,680,440 As at 31.12.2008 150,042,665 51,974,068 10,215,144 5,206,668 7,516,656 224,955,201   As at 31.12.2007 155,521,153 35,976,813 5,734,988 5,158,311 9,751,352   212,142,617   Non-Interest Bearing Liabilities Deposits from customers 18,056,506 – – – – 18,056,506 19,742,471 Preference dividend payable – – – – – – 112,500 Other liabilities 9,935,392 167,890 – – – 10,103,282 9,755,560 Tax liabilities 84,632 1,579,931 – – – 1,664,563 1,698,132 Deferred tax – – 542,904 – – 542,904 552,322 Stated capital – – – – 9,548,123 9,548,123 10,514,807 Statutory Reserve Fund – – – – 1,847,097 1,847,097 1,633,678 Reserves – – – – 14,496,009 14,496,009 11,787,552 Minority Interest – – – – 26,948 26,948 23,789 As at 31.12.2008 28,076,530 1,747,821 542,904 – 25,891,229 56,258,484 As at 31.12.2007 29,931,585 2,377,078 552,322 – 22,936,037   55,797,022 Total Liabilities and Equity - As at 31.12.2008 178,119,195 53,721,889 10,758,048 5,206,668 33,407,885 281,213,685   Total Liabilities and Equity - As at 31.12.2007 185,452,738 38,353,891 6,287,310 5,158,311 32,687,389   267,939,639 Percentage - As at 31.12.2008 63.34 19.10 3.83 1.85 11.88 100.00   Percentage - As at 31.12.2007 69.21 14.31 2.35 1.93 12.20   100.00 Notes (i) Loans and advances are shown net of interest in suspense and provision for bad & doubtful debts. (ii) Balances with Central Banks have been apportioned into the maturity groups based on the maturity pattern of the deposits liable for Statutory Reserve Requirements. (iii) Demand and savings deposits have been classified into the up to 3 months’ category. However, the major part of these deposits represents core retail deposits with longer term maturity. (iv) Shareholders’ funds is classified into the more than 5 years category since no contractual date of maturity can be identified. However, these funds are available and have in fact been used for financing assets with lesser maturity periods. 36. CAPITAL COMMITMENTS The Group has commitments for acquisition of Property, Plant & Equipment and intangible assets incidental to the ordinary course of business as at December 31, as follows:   Group Bank   2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 36.1 Capital expenditure commitments in relation to Property, Plant & Equipment     Approved and contracted for 444,450 208,898 444,450 208,898 Approved but not contracted for 388,750 61,950 388,750 61,950 Sub Total 833,200 270,848 833,200 270,848           36.2 Capital expenditure commitments in relation to Intangible Assets     Approved and contracted for 177,053 108,389 177,053 108,389 Sub Total 177,053 108,389 177,053 108,389 Total 1,010,253 379,237 1,010,253 379,237 37. FINANCIAL REPORTING BY SEGMENT AS PER THE PROVISIONS OF SRILANKA ACCOUNTING STANDARD NO. 28 - GROUP The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. 37.1 Primary Segment Information - Business Segments (Group) The following table presents the income, profit and certain asset and liability information regarding the Group’s business segment for the year ended December 31, 2008 and December 31, 2007. Banking Leasing Dealing/Treasury Investments Total/Consolidated For the year ended December 31, 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007   Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 External Operating Income: Net interest income 9,823,243 8,966,388 – – 1,272,210 1,055,372 – – 11,095,453 10,021,760 Foreign exchange profit 949,066 627,847 – – 1,684,255 916,985 – – 2,633,321 1,544,832 Lease income – – 1,800,150 1,565,087 – – – – 1,800,150 1,565,087 Fees and commissions income 2,575,711 2,374,030 – – 139,269 7,872 – – 2,714,980 2,381,902 Other income 732,940 382,323 – – 57,706 33,076 434,466 196,064 1,225,112 611,463 Eliminations/unallocated – – – – – – – – 173,235 148,101 Total Operating Income 14,080,960 12,350,588 1,800,150 1,565,087 3,153,440 2,013,305 434,466 196,064 19,642,251 16,273,145 Credit loss expenses (1,962,349) (1,655,175) (315,863) (122,301) – - – - (2,278,212) (1,777,476) Net operating income 12,118,611 10,695,413 1,484,287 1,442,786 3,153,440 2,013,305 434,466 196,064 17,364,039 14,495,669 Segment result 4,484,452 4,354,112 1,267,480 1,369,754 2,248,532 2,251,034 373,824 186,139 8,374,288 8,161,039 Unallocated operating expenses (967,125) (1,395,201) Profit from operations 7,407,163 6,765,838 Share of profit of Associates 9,085 25,011 Income tax expense (3,295,842) (2,638,396) Minority interest                 (1,522) (3,432) Net profit for the year, attributable to equity holders of the parent           4,118,884 4,149,021 Banking Leasing Dealing/Treasury Investments Total/Consolidated As at December 31, 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007   Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Rs. ’000 Other Information Segment assets 180,246,324 177,270,196 9,343,554 10,799,873 85,893,793 73,524,904 1,255,429 2,342,987 276,739,100 263,937,960 Investment in Associates – – – – – – 70,988 62,720 70,988 62,720 Unallocated assets – – – – – – – – 4,756,952 4,384,550 Total assets                 281,567,040 268,385,230                       Segment liabilities 156,410,633 154,881,843 9,343,554 10,799,873 85,893,793 73,524,904 1,326,417 2,405,707 252,974,397 241,612,327 Unallocated liabilities – – – – – – – – 2,339,645 2,391,223 Total liabilities                 255,314,042 244,003,550                       For the year ended December 31, 2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000 2008 Rs. ’000 2007 Rs. ’000   Information on Cash Flows Cash flows from operating activities 11,646,376 4,481,624 2,723,799 1,371,878 2,248,532 2,251,034 – – 16,618,707 8,104,536 Cash flows from investing activities (excluding capital expenditure) 117,889 23,440 – – 375,817 (7,648,717) 1,594,938 (138,625) 2,088,644 (7,763,902) Cash flows from financing activities (1,200,154) 6,738,279 – – (4,833,725) (1,978,507) – – (6,033,879) 4,759,772 Capital expenditure Property, Plant & Equipment (880,702) (633,062) Intangibles (91,184) (144,553) Eliminations/unallocated                 (3,794,922) (1,845,983) Net Cash Flow generated during the year             7,906,664 2,476,808 37.2 Secondary Segment Information - Geographical Segments The following table presents the distribution of the Group/Bank income, total assets, profit before tax, profit after tax by geographical segment, allocated based on the location in which the transactions, assets and liabilities are recorded for the year ended December 31, 2008 and December 31, 2007. Group Bank   2008 Rs. ’000 % 2007 Rs. ’000 % 2008 Rs. ’000 % 2007 Rs. ’000 % Assets Sri Lanka operations 258,124,447 91.67 249,141,437 92.83 257,771,092 91.66 248,695,846 92.82 Overseas operations 23,442,593 8.33 19,243,793 7.17 23,442,593 8.34 19,243,793 7.18 Total 281,567,040 100.00 268,385,230 100.00 281,213,685 100.00 267,939,639 100.00 Income Sri Lanka operations 41,085,946 93.46 32,826,895 93.24 41,241,173 93.49 32,842,953 93.24 Overseas operations 2,874,076 6.54 2,379,965 6.76 2,874,076 6.51 2,379,965 6.76 Total 43,960,022 100.00 35,206,860 100.00 44,115,249 100.00 35,222,918 100.00 Profit before Tax Sri Lanka operations 6,397,146 86.26 5,880,809 86.60 6,501,040 86.45 5,794,689 86.43 Overseas operations 1,019,102 13.74 910,040 13.40 1,019,102 13.55 910,040 13.57 Total 7,416,248 100.00 6,790,849 100.00 7,520,142 100.00 6,704,729 100.00 Profit after Tax Sri Lanka operations 3,581,235 86.91 3,671,781 88.42 3,729,201 87.37 3,622,893 88.29 Overseas operations 539,171 13.09 480,672 11.58 539,171 12.63 480,672 11.71 Total 4,120,406 100.00 4,152,453 100.00 4,268,372 100.00 4,103,565 100.00 38. RELATED PARTY DISCLOSURES The Bank carries out transactions in the ordinary course of business on an arm’s length basis at commercial rates with Related Parties. Except for the transactions that Key Management Personnel (KMPs) have availed under schemes uniformly applicable to all the staff at concessionary rates, transactions with related parties listed below have been at commercial rates. 38.1 Transactions with Directors and other KMPs Related parties include KMPs defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Bank and its subsidiaries. Such KMPs include the Board of Directors of the Bank, key employees who are holding directorships in subsidiary companies of the Bank and other key executives who meet the criteria described above. 38.1.1 Compensation of KMPs   2008 Rs. ’000 2007 Rs. ’000 Short-term employment benefits 175,296 125,406 Post employment benefits 15,101 12,464 Post employment benefits paid to past Directors 920 980 Total 191,317 138,850       38.1.2 Transactions, arrangements and agreements involving KMPs, their Close Family Members (CFMs) and entities which are controlled, and/or significantly influenced by the KMPs or their CFMs. 38.1.2.1 Balance Sheet KMPs and their CFMs Entities in which KMPs and their CFMs have control, joint control or significant influence Year End Balance Average Balance Year End Balance Average Balance   2008 Rs. '000 2007 Rs. '000 2008 Rs. '000 2007 Rs. '000 2008 Rs. '000 2007 Rs. '000 2008 Rs. '000 2007 Rs. '000 Assets Loans and advances 62,703 105,483 62,607 97,251 242 341 350 357 Credit cards 441 518 551 503 – – – – Total 63,144 106,001 63,158 97,754 242 341 350 357   Liabilities Deposits 96,697 77,257 86,876 79,174 227 333 229 63 Securities sold under repurchase agreements 232,999 168,615 207,422 154,695 – – – – Debentures 1,100 1,000 1,100 1,000 – – – – Total 330,796 246,872 295,398 234,869 227 333 229 63           Number of Ordinary Shares held 2,844,381 3,299,406 – – Dividends paid (Rs. ’000) 15,052 22,234 – –   38.1.2.2 Off-Balance Sheet Items Commitments and Contingencies Undrawn facilities 20,861 13,323 21,379 14,378 233 90 128 58 Total 20,861 13,323 21,379 14,378 233 90 128 58 38.1.2.3 Income Statement During the Year During the Year 2008 2007   2008 2007   Rs. '000 Rs. '000   Rs. '000 Rs. '000 Interest income 3,106 6,669   80 86 Interest expenses 41,599 27,530   20 – Other income 49 –   – – Payments to KMPs as shown in 38.1.1 above 191,317 138,850   – – 38.1.2.4 Share Options for the KMPs   As at the Year End   2008 2007 Cumulative number of options allotted under the Employee Share Option Plan (ESOP) 2002     Tranche 1 117,293 138,641 Tranche 1 137,160 166,068 Tranche 3 274,173 325,866 Tranche 4 356,490 422,820       38.2 Group The Group related parties include subsidiaries, associates, significant investors (either entities or individuals) that have control, joint control or significant influence and post employment benefit plans for the Bank’s employees. . 38.2.1 Transactions with Subsidiaries and Associates of the Group/Bank 38.2.1.1 Balance Sheet Subsidiaries Associates Year End Balance Average Balance Year End Balance Average Balance 2008 2007 2008 2007 2008 2007 2008 2007   Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Assets Loans and advances 63,778 6,806 9,177 7,638 47,409 15,441 53,498 12,385 Lease receivable 140,269 120,378 120,677 100,921 3,401 – 2,290 – Other 31,452 16,135 31,452 16,135 – – – – Total 235,499 143,319 161,306 124,694 50,810 15,441 55,788 12,385   Liabilities Deposits 15,783 22,255 20,522 54,155 37,009 10,151 14,962 13,981 Securities sold under repurchase agreements 115,446 104,097 107,569 98,434 12,564 24,325 21,902 13,791 Debentures – – – – 5,000 5,000 5,000 5,000 Other 43,330 37,866 43,330 57,862 – 563 – 563 Total 174,559 164,218 171,421 210,451 54,573 40,039 41,864 33,335           Number of Preference Shares held – – – 500,000 Dividends paid (Rs. ’000) – – 183 563 38.2.1.2 Off-Balance Sheet Items Commitments and Contingencies Letter of Credit – – – 4,910 – – – – Guarantees – 200 – 674 – – – – Undrawn facilities 6,080 – 63,694 – – – – – Total 6,080 200 63,694 5,584 – – – – 38.2.1.3 Income Statement During the Year During the Year   2008 Rs. '000 2007 Rs. '000   2008 Rs. '000 2007 Rs. '000 Interest income 22,583 13,508   11,763 1,878 Interest expenses 17,933 17,403   4,655 3,856 Other income 43,705 41,541   12,753 22,594 Other expenses 139,507 135,635   – – 38.2.2 Transactions with entities which have a significant influence over the affairs of the Bank and the post employment benefit plans for the employees of the Bank 38.2.2.1 Balance Sheet Entities which have a significant influence over the affairs of the Bank Post employment benefit plans Year End Balance Average Balance Year End Balance Average Balance   2008 Rs. '000 2007 Rs. '000 2008 Rs. '000 2007 Rs. '000 2008 Rs. '000 2007 Rs. '000 2008 Rs. '000 2007 Rs. '000 Assets Loans and advances – – 25 – – – – – Total – – 25 – – – – –   Liabilities Deposits 68,557 15,200 11,236 14,796 2,088,003 3,692,054 2,614,934 2,666,261 Securities sold under   repurchase agreements – – – – 1,046,902 1,060,511 793,646 387,451 Total 68,557 15,200 11,236 14,796 3,134,905 4,752,565 3,408,580 3,053,712           Number of Ordinary Shares held 67,099,881 72,099,881 – – Dividends paid (Rs. ’000) 370,880 443,065 – – 38.2.2.2 Off-Balance Sheet Items Commitments and Contingencies Undrawn facilities 450,000 450,000 449,975 450,000 Total 450,000 450,000 449,975 450,000 38.2.2.3 Income Statement During the Year   During the Year 2008 2007   2008 2007   Rs. '000 Rs. '000   Rs. '000 Rs. '000 Interest income 5 –   – – Interest expenses – –   800,305 534,976 Other income 115 –   – – Contribution made/taxes paid by the Bank – –   483,474 429,058 39. EVENTS AFTER THE BALANCE SHEET DATE No circumstances have arisen since the Balance Sheet date which would require adjustments to or disclosure in the Financial Statements, except for the following: Directors have recommended the payment of a final dividend of Rs. 4.00 per share to both the Voting and Non-Voting ordinary shareholders of the Bank for the year ended December 31, 2008. This will be declared at the forthcoming Annual General Meeting to be held on March 30, 2009 for shareholders’ approval.
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