Supplementary Information

Annex 1: Investor Relations

Dear Stakeholder,

We wish to convey our sincere gratitude to you for electing to invest in the Bank’s capital, both equity and debt, and wish to assure you that we are determined to optimise returns for your investments through sustained and prudent growth.
As a Domestic systemically important Bank, it is our responsibility to present you with timely, relevant, and balanced view of the Bank’s fundamentals in terms of operational results, financial position, and cash flows. We trust that this Report helps investors to comprehend the Bank’s underlying strengths and it also bolsters confidence and loyalty, bringing together a loyal group of investors with a long-term view of their investment.

The Bank always strives to encourage effective two-way communication with our investors promoting mutual trust and confidence besides ensuring the rights conferred on the investors by various statutes. We take every effort to ensure that all our investors are sufficiently informed of relevant information so that they are able to make informed decisions. This has enabled the Bank to actively engage with its investors in a consistent, comprehensive and accurate manner, often going beyond the minimum regulations promoting its reputation.

The Bank follows a multi-faceted approach to engage with its stakeholders, including the Annual Report, which is the Bank’s main investor communications tool, and the Annual General Meeting which is an opportunity available for the investor community to engage with the Bank. These engagements will certainly help our investors to gain insight into the Bank’s performance, strategic direction, and approach to governance and risk management strategies adopted.

The Bank took several initiatives to produce a concise integrated Annual Report which can be seen throughout each section of this Report, with due consideration being given to the valuable feedback given by our shareholders in response to the results of the survey conducted on the future direction of the Bank in 2018. Continuing this journey, this year too we have made arrangements to enclose a stakeholder feedback form in this Annual Report in order to seek your valuable suggestions and opinion for further improvements. Your comments and opinions are of great value to us. Many are taken on board and incorporated into our strategies for long-term value creation. The investor relations section of our website is another popular channel available for stakeholders and the Bank continues to ensure that its pages are updated in a timely manner along with the rest of the site.

We firmly believe that the Bank’s efforts to have an effective communication and active engagement with important stakeholder groups have made the Bank’s shares a creditable investment proposition. As a result of a very challenging economic environment witnessed throughout the year, the stock market too witnessed mixed results, with the ASPI increasing marginally by 1.27% and both S&P SL20 and BFI dropping by 6.32% and 1.04%, respectively. These results contributed to the decline in the Bank’s share price which traded at a discount at 0.73 times to book value at the end of December 2019 (0.98 times in 2018). However, it continued to remain the highest among the peers in the Bank, Finance and Insurance sector, and is a testament to our policy of sharing relevant information about our future prospects in addition to our current performance.

The Bank’s public holding (free float) as at December 31, 2019 was 99.76% in voting shares and 86.62% in non-voting shares while float-adjusted market capitalisation [compliant under option-1 of the Rules on minimum public holding requirement of the Colombo Stock Exchange (CSE)] amounted to Rs. 96 Bn. With its shares actively traded in the CSE, investors are provided with a convenient “entry and exit” mechanism.

Compliance report on the contents of Annual Report in terms of the Listing Rules of the CSE

We are happy to inform you that the Bank has fully complied with all applicable requirements of Section 7.6 of the Listing Rules of the CSE on the contents of the Annual Report and Accounts of a listed entity.

Please refer Table 29 for a complete list of disclosure requirements and references to the relevant sections of this Annual Report where Bank’s compliance is disclosed together with the relevant page numbers.

The pages that follow contain information on the performance of the Bank’s listed securities.

Compliance with requirements of the Section 7.6 of the Listing Rules of the CSE

  Table – 29

Rule No. Disclosure requirement Section/reference
7.6 (i) Names of persons who during the financial year were Directors of the Bank Corporate Governance Report
7.6 (ii) Principal activities of the Bank and its subsidiaries during the year and any changes therein Note 1.3 of the Accounting Policies Group Structure
7.6 (iii) The names and the number of shares held by the 20 largest holders of voting and non-voting shares and the percentage of such shares held Item 5.3 of the “Investor Relations”
7.6 (iv) The float adjusted market capitalisation, public holding percentage (%),
number of public shareholders and under which option the listed entity complies with the minimum public holding requirement
Item 5.3 of the "Investor Relations”
7.6 (v) A statement of each Directors’ holding and Chief Executive Officer’s holding in shares of the entity at the beginning and end of each financial year Item 5.4 of the “Investor Relations”
7.6 (vi) Information pertaining to material foreseeable risk factors of the Bank Item 7 of the “Investor Relations”
7.6 (vii) Details of material issues pertaining to employees and industrial relations of the Bank Item 8 of the “Investor Relations”
7.6 (viii) Extents, locations, valuations and the number of buildings of the entity’s land holdings and investment properties Note 39.5 (a) and (b) to the Financial Statements on “Property, Plant and Equipment”
7.6 (ix) Number of shares representing the Bank’s stated capital Note 53 to the Financial Statements on “Stated Capital”

Item 3 of the “Investor Relations”
7.6 (x) A distribution schedule of the number of holders in each class of equity securities, and the percentage of their total holdings as at the end of the year Item 5.2 of the “Investor Relations”
7.6 (xi) Ratios and market price information:
Equity – Dividend per share, dividend payout ratio, net asset value per share, market value per share

Debt – Interest rate of comparable Government Securities, debt/equity ratio, interest cover and quick asset ratio, market prices and yield during the year Any changes in credit rating
Items 2, 4 and 10.2 of the “Investor Relations” Items 10.1 and 10.2 of the “Investor Relations” Items 10.3 and 10.4 of the “Investor Relations”
7.6 (xii) Significant changes in the Bank’s or its subsidiaries’ fixed assets and the market value of land, if the value differs substantially from the book value Note 39.5 (b) to the Financial Statements on “Property, plant and equipment”
7.6 (xiii) Details of funds raised through Public Issues, Rights Issues, and Private Placements during the year Note 53 to the Financial Statements on “Stated Capital”

Not applicable since the Bank has not raised funds through share issue during the year
7.6 (xiv) a. Information in respect of Employee Share Option Schemes (ESOP) The number of options granted to each category of employees during the financial year.

Total number of options vested but not exercised by each category of employees during the financial year.

Total number of options exercised by each category of employees and the total number of shares arising therefrom during the financial year.

Options cancelled during the financial year and the reasons for such cancellation.

The exercise price.

A declaration by the directors of the entity confirming that the Entity or any of its subsidiaries has not, directly or indirectly, provided funds for the ESOS.
Note 53.2 and 54 to the Financial Statements on “Employee Share Option Plans”
b. Information in respect of Employee Share Purchase Schemes (ESPS)

The total number of shares issued under the ESPS during the financial year

The number of shares issued to each category of employees during the financial year
The price at which the shares were issued to the employees

A declaration by the Directors of the entity confirming that the entity or any of its subsidiaries has not, directly or indirectly, provided funds for the ESPS
Not applicable as the Bank does not have Employee Share Purchase Schemes
7.6 (xv) Disclosures pertaining to Corporate Governance practices in terms of Rules 7.10.3, 7.10.5 (c) and 7.10.6 (c) of Section 7 of the Rules. Not applicable since the Bank received an exemption in terms of Section 7.10 (c) of the Listing Rules
7.6 (xvi) Related party transactions exceeding 10% of the equity or 5% of the total assets of the entity as per Audited Financial Statements, whichever is lower The Bank did not have any related party transactions exceeding this threshold as at end 2019
Details of investments in a related party and/or amounts due from a related party to be set out separately
The details shall include, as a minimum:
  • The date of the transaction;
  • The name of the related party;
  • The relationship between the entity and the related party;
  • The amount of the transaction and terms of the transaction;
  • The rationale for entering into the transaction
Item 20.3 of Annual Report of Board of Directors