SEYLAN MERCHANT BANK PLC385 Landmark Building Galle Road Colombo 03 Sri Lanka
www.smblk.com
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Seylan
Merch
ant B
ank PLC
SEYLAN MERCHANT BANK PLC
Annual Report
2008
Over the past year, Seylan Merchant Bank has operated in a very difficult environment. We have had to face a range of challenges - from intense competition and reduced market share to an unstable economic environment and general investor caution.
2008
Statutory StatusA Public Limited Liability Company incorporated in Sri Lanka on 3/9/1992 under the Companies Act No. 07 of 2007 and quoted on the Colombo Stock Exchange in 1993.
Registered as a Finance Leasing Establishment under the provisions of the Finance Leasing Act No. 56 of 2000
Company Re-registration No. PQ 91 Place of Incorporation – Colombo
Registered Office69, Janadhipathi MawathaColombo-1
Board of DirectorsDeputy ChairmanMr. R S W Senanayake ACMA (UK), FSCMA (SL)
Mr. M.S.I.PeirisAICM (SL)
R. Renganathan FCA
Mr. P. A. JayawardenaFCA, FSCMA (SL), FMAAT
Mr. E T L Ranasinghe MBA (Sri J’pura), Dip in MKT (UK), MCIM (UK), Chartered Marketer (UK)
Deshamanya Dr P.R. AnthonisD.Sc., FRCS (Eng), FICS, FSCS
SecretariesInternational Consultancy & Corporate Services (Pvt) Ltd.,29/23 , Vishaka Lane , Colombo 04.
AuditorsM/s. KPMG Ford, Rhodes, Thornton & Co.(Chartered Accountants)
Lawyers M/s. De Livera AssociatesAttorneys-at-Law & Notary PublicColombo
Ceylinco Consultancy & Allied Services (Pvt) Ltd., Colombo
M/s Julius & Creasy Attorneys-at-Law & Notaries PublicColombo
BankersSeylan Bank PLCSampath Bank LtdPeople’s Bank
Head OfficeLandmark Building, 385, Galle Road, Colombo-3
Telephone +94-11-2573363Fax +94-11-2573366
Parent CompanySeylan Bank PLC
Subsidiary CompaniesSMB Money Brokers (Pvt) Ltd
Associate CompaniesSMB Real Estate LtdSMB Securities (Pvt.) Ltd.SMB Kenenga Investment Corporation Ltd
Corporate Information
Produced by: Copyline (Pvt) Ltd.
Financial Highlights 2 Deputy Chairman’s Review 4 Directors Profile 6 Subsidiaries and Equity Accounted Investees 8 Human Resources 9 Risk Management 10 Corporate Governance 11 Financial Statements 15 Annual Report of the Board of Directors on the Affairs of the Company 16 Directors’ Responsibility Statement 19 Audit Committee Report 19 Independent Auditor’s Report 20 Income Statement 22 Balance Sheet 23 Statements of Changes in Equity 24 Cashflow Statement 25 Notes to the Financial Statements 26 Segment Reporting - Group 63 Decade at a Glance - Bank 64 Five Year Summary - Group 65 Value Added Statement 66 Shareholders’ & Investors’ Information 67 Information on Debenture 72 Notice of Meeting 73 Note 74 Form of Proxy 75 Corporate Information Inner Back Cover
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Corporate Philosophy
OUR MISSION
“Our mission is to be an excellent
provider of innovative financial products
and services aimed at creating and
enhancing the wealth of our society”
OUR CORPORATE OBJECTIVES
“To provide an excellent service to our
customers. To enhance shareholder’s
wealth by means of stable and attractive
returns. To develop highly satisfied
and motivated employees at all levels
who will make an effective and efficient
contribution towards our mission.
To contribute towards the economic
development of Sri Lanka.”
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Financial Highlights
GROUP BANK 2008 Change 2007 2008 Change 2007
% %
Performance During the Year
Income 949,473,173 0.57 944,078,997 334,660,987 (33.20) 500,997,793
Profit before Tax & VAT (652,565,669) (18332.12) 3,579,209 (581,932,694) (21662.22) 2,698,853
Taxation & VAT (44,513,298) 45116.41 (98,445) (36,742,835) 1410.84 (2,431,949)
Profit after Tax (697,078,966) (19054.45) 3,677,654 (618,675,530) (231896.75) 266,904
At the Year End
Lease / Loans portfolio 2,943,511,352 (16.81) 3,538,378,252 1,197,255,990 (38.59) 1,949,602,339
Other Assets 1,281,045,505 0.41 1,275,820,243 828,503,576 (15.76) 983,515,473
Total Assets 4,224,556,857 (12.25) 4,814,198,494 2,025,759,566 (30.93) 2,933,117,812
Shareholders’ Funds (152,279,542) (128.42) 535,821,023 (211,939,082) (152.11) 406,736,447
Minority Interest 74,326,806 0.96 73,620,541 - - -
Deposits & Borrowings 3,317,799,674 5.96 3,131,188,744 1,661,522,591 (4.93) 1,747,761,950
Debentures & Other Liabilities 984,709,919 (8.28) 1,073,568,186 576,176,058 (26.00) 778,619,415
Total Liabilities &
Shareholders’ Funds 4,224,556,857 (12.25) 4,814,198,494 2,025,759,566 (30.93) 2,933,117,812
Ratios
Earning / (Loss) per Share
- Voting (Rs.) (15.45) 25149.95 (0.05) (13.88) (113611.95) 0.01
Earning / (Loss) per Share
– Non Voting (Rs.) (6.87) 12524.98 (0.01) (6.18) (231897.95) 0.00
Interest Cover 0.14 (85.66) 1.01 (0.42) (141.83) 1.00
Net Assets per Ratio (2.79) (128.42) 9.83 (3.89) (152.13) 7.46
Cost / Income Ratio 36.72% 20.20 30.55% (21.23%) (223.95) 17.15%
Net Profit to Income Ratio (73.42%) (18946.76) 0.39% (184.87%) (369,832.69) 0.05%
Interest Income - Group2007
129%
7%
5%
31%
13%
64%
64%
0%
Customer AdvancesT. Bills & Placements with Other banks & Finance Co’sLease Interest IncomeOther Interest Income
2008
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Interest Expenses2007
5%
14%
2%7%
14%
7%
74%
78%
Borrowings & RefinanceTreasury Bills RepurchasedInterest expenses on DebenturesOther Interest expenses
2008
Other Income - Group2007
Dividend Income from Dealing Securities - QuotedDividend Income from Investment Securities - UnquotedFee & Commission IncomeProfit on Sale of Property , Plant & EquipmentProfit on Sale of Investment PropertiesProfit on Sale of Investment SecuritiesCapital Gain on Government SecuritiesOthers
20081%
66%
28%
3%2%
2%
49%3%
42%
1%3%
Total Assets2007
Cash & Short Term FundsInvestmentsLoans & advancesLease Rentals ReceivablesInvestment in Associate Co.Interest ReceivableInvestment PropertyProperty, Plant & EquipmentOther AssetsIntangible Assets
20081%
66%
28%
3%2%
0%12%
23%
47%
1%7%1%8%
1%0%
Total Borrowings2007
11%
11%
2%
8%
9%
2%
5%9%
3%
65%
77%
Shareholders’ FundsMinority InterestBorrowingsGroup Balances PayableOther LiabilitiesDebentures
2008
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Deputy Chairman’s Review
The year 2008 was a tumultuous one for Seylan Merchant Bank PLC (SMB) as it began to phase out its operations and transform into a holding Company.
Several changes took place on the global front, with an economic recession that began in the United States and gradually spread to Europe and Asia. Sri Lanka’s export industries were affected by the global downturn due to a slump in demand from its main consumer markets. Many Sri Lankan workers overseas were also laid off with many returning home although the job market locally was also restricted. On the domestic front, tourism was also in decline as the local separatist conflict also escalated and some countries issued travel advisories, while increased defence expenditure also slowed down economic growth.
With the collapse of some finance Companies during the year, there was also a loss of public confidence in the financial services industry and a high rate of withdrawals. This affected the industry as a whole as well as the private banking sector. Collection ratios dipped, while interest rates and inflation went up. Interest rates rose to as much as 22% while inflation was between 24-27% during the year. The
worst affected were fixed-price product Companies such as ours. Interest costs exceeded interest income and there was very little we could do as a Company. Mobilisation of debt instruments became difficult and we faced difficulties in recovery of facilities extended.
During the year, we continued with plans to transform SMB into a holding company and phase out our fund-based activities, handing it over to subsidiary Seylan Merchant Leasing PLC.
Company PerformanceGiven plans to phase out its business operations and convert into a holding company, SMB did not launch any new products or engage in new business. In terms of operational costs, SMB has adopted a strategy of downsizing and cost-reduction, which has been effective in a very challenging market. Turnover declined by Rs. 166.32 Million to Rs. 334.67 Million, while incurring a loss of Rs. 618.68 Million for the year.
The biggest factor, apart from the economic downturn, that affected performance was the problems with the Ceylinco Group. The association with the Ceylinco Group eroded public confidence and impacted on SMB’s mobilisation of debt instruments as well as other business interests such as real estate. I anticipate a difficult year ahead as well and it is unlikely that SMB will revert from the negative gross profit situation currently, to one of positive earnings in 2009/10.
No significant amount of leases were disbursed during the year, with recoveries deteriorating, although Non-Performing Ratios have declined in rupee terms. We began aggressively working on improving collections and reducing exposure to bad debts.
An Extra Ordinary General Meeting was held on 31st March 2009 complying with Section 220 of the Companies Act No. 07 of 2007 which addresses the serious loss of capital of a Company.
Performance of SubsidiariesSubsidiary SMB Real Estate Ltd posted a loss of Rs. 29.21 Million for the first time since its incorporation. This was due to a drop in property sales, caused in part by the liquidity crisis in the market and the phenomenally high interest rates which made housing loans from Banks unaffordable to the public. There was also declining interest from the segment of the market that buys land as an investment, due to other attractive investment options such as Treasury Bills, with interest rates as high as 22%.
Seylan Merchant Bank PLC sold 51% shares of SMB Real Estate Ltd. out of the 100% shares held by the Company in March 2009 to Ceylinco Capital Market Ltd. A valuation report was obtained from NDB Investment Bank Ltd. in July 2009. The total purchase consideration of this transaction was Rs. 31,519,065.08
Performance of subsidiary Seylan Merchant Leasing PLC (SML) was affected by high rates of taxation on vehicles which saw the costs of vehicle leases increasing, making it unaffordable to the public. Sale of leases on dual purpose vehicles for the plantation sector was also affected by the collapse of tea prices in the first half of the year, which prompted a default on payments by vehicle owners as a result of reduced earnings. The Company posted a turnover of Rs. 493.48 Million in 2008 over Rs. 428.05 Million in 2007, while making a loss of Rs. 20.80 Million from a profit of Rs. 35.16 Million in 2007.
The poor performance of the Colombo Stock Exchange in the period under review due to the economic recession and negative investor sentiment as a result of the escalation in the local conflict, impacted on the equities market. SMB Securities posted a loss of Rs. 9.08 Million for this financial year, but I am happy to report that it has reverted to profitability in the first three months of the new financial year. We
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trimmed costs and rationalised the branch network, which helped the company perform reasonably well given the circumstances. The forecast for this Company is positive with an end to the three decade war in the country and the anticipated increase in investment inflows.
SMB Money Brokers (Pvt) Ltd, was the best performing subsidiary, reporting a 240% growth in turnover to record 27.87 Million, while reporting a loss of Rs. 10.06 Million.
Human ResourcesThere was a change in our employee cadre during the year, with several employees transferred to sister Companies. This was done for two reasons: to keep our overheads at a minimum, and in line with plans to transform SMB into a holding Company by phasing out its operations. As at the end of the financial year, SMB employed 28 people.
Future Strategy and OutlookSeylan Merchant Leasing PLC (SML) has been divested to Peoples Leasing Company PLC, a change which took effect in the new financial year. The net sales proceeds generated through this transaction was Rs. 437,100,039.70
This move was deemed prudent as the association with the Ceylinco brand name has become a brand liability, given the reduced confidence and negative perceptions of the public. Divesting SML has reduced the outstanding liability position of SMB which also assisted them to honour the matured liabilities which was their prime concern. The Company will continue to move out of fund-based activities and phase out these operations in the coming year.
We expect the global recession to continue into the next year, although Sri Lanka’s economy may see resurgence with the end of the war and a renewed interest by foreign investors and tourists.
This will have a positive impact on subsidiaries such as SMB Securities and even the company’s real estate arm. The improved performance of the leasing and finance business will depend however on a turnaround in the local financial services industry.
We do not expect there to be any legal implications for SMB as a result of its association with the Ceylinco Group, as the Company and its subsidiaries are duly registered with the Central Bank of Sri Lanka and the Securities and Exchange Commission (SEC). We continue to maintain high levels of disclosure and transparency.
We, in the best interest of our shareholders and our creditors has implemented a plan to recover our dues and the Directors are in the opinion that Seylan Merchant Bank PLC could be restructure with the assistance of Seylan Bank PLC.
The Central Bank of Sri Lanka by their letter dated 17th August 2009, has imposed restrictions in Seylan Merchant Bank PLC raising fresh public borrowings as it has triggered the Finance Leasing (Gearing Ratio) Direction No 04 of 2006. Therefore SMB needs to rectify the core capital requirement by way of a right issue
ResignationsThe Chairman Deshamanya Dr. J L B Kotelawala resigned on 06th February 2009, Lady Dr. S P C Kotelawala on 30th October 2008, Mr. A D Jegasothy on 02nd January 2009 and Ms. L Seneviratne on 05th January 2009. The Company is in the process of complying with mandatory corporate governance rules by appointing new Independent Directors to the Boards of all subsidiaries on a best effort basis.
AcknowledgementsI would like to express my appreciation and thanks to the founder and former Chairman Deshamanya Dr. J L B Kotelawala, to the Board of Directors
and the Central Bank of Sri Lanka for all the advice and guidance, to all our staff members for their commitment, to our customers for their loyal support and finally to all our shareholders for their continued trust in the company.
R.S.W. SenanayakeDeputy Chairman
30th Octorber 2009Colombo
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Directors Profile
Deshamanya Dr. J.L.B. KotelawalaAMExA (UK), FBIM, FICM FCIC, MICM (UK), RIM, HFIB (SL)
Chairman
(70 Years)
No 28, Elibank RoadColombo 05
Dr. Kotelawala, was the Chairman since the inception of the Bank in 1992. He was also the Chairman of over 200 Companies under Ceylinco Consolidated. He introduced and set up the Grameen Banking concept (banking to the poor), which has over 90,000 customers.
Dr. Kotelawala resigned from the Board of Directors of the Bank w.e.f 06th February 2009.
Mr. R.S.W. SenanayakeACMA (UK), FSCMA (SL)
(42 Years)
Deputy Chairman
18/244 A, Evergreen ParkOff Muhandiram E. D. Dabare MawathaColombo 05
Mr. R S W Senanyake, is an Associate member of the Chartered Institute of Management Accountants of the United Kingdom. He presently functions as the Deputy Chairman of Seylan Merchant Bank Group and Ceylinco Capital Market Limited. Mr. Senanayake gained experience in accounting and auditing through a stint with M/S Coopers & Lybrand.
He has been involved in the Securities Industry for many years. He worked at Somerville Stock Brokers (Pvt) Ltd, a tenure during which he gained comprehensive exposure to the stock broking business. Mr. Senanayake has specialised in the profession of investment management, and was associated with Central Finance Company PLC as its Investment Manager, managing the equity portfolios of Central Finance Company PLC, Central Securities PLC, and some other subsidiaries of Central Finance Company PLC. He, then joined Ceylinco Insurance Company PLC as its Senior Investment Manger, assuming responsibility for management of the Life, General and Pension Funds of the Company. He presently holds the responsibility of the Deputy General Manger –Investments.
Lady (Dr.) S.P.C. Kotelawala
(66 Years)
Director
No 28, Elibank RoadColombo 05
Lady (Dr) Sicille Kotalawala joined Ceylinco Group as a Director of Middleway Ltd in 1964. She resigned from the Board of Directors of the Bank w.e.f. 31st October 2008.
Mr. M.S.I. PeirisAICM (SL)
(40 Years)
Director/General Manger
73,”Sunny Dale”KatukurundaMoratuwa
Mr. M S I Peiris , is an Associate member of the Institute of Credit Management of Sri Lanka. He joined Seylan Merchant Bank PLC in 1994 and presently functions as the Executive Director of Seylan Merchant Bank PLC. Mr. Peiris has extensive experience in leasing, counting over 20 years in the industry.
Mr. R. RenganathanFCA
(54 Years)
Director
33/7, De Fonseka PlaceColombo 05
Chief Executive Director ( Life) of Ceylinco Insurance Co PLC which achieved market leadership in the insurance industry in 2005. Under his leadership this Company has diversified into the healthcare sector by setting up a Cancer Detection Centre affiliated to the Washington Hospital Centre. He is the Chairman of Seylan Asset Management PLC and also the Deputy Chairman of Ceylinco Healthcare Services Ltd. and the Ceylinco Development Bank Ltd.
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Mr. A.D. JegasothyAttorney-at-Law & Notary Public, FICM, FCIC, MICM (UK)
(63 Years)
Director
“Treville”, WelisaraRagama
Mr. Jegasothy was attached to M/s De Silva and Mendis, Solicitors and Notaries Public before joining Ceylinco Group as a Legal Officer in 1974, He was also associated with M/s Coward Chance Firm of Solicitors, UK and counts over 30 years of experience. Mr. Jagasothy resigned from the Board of Directors of SMB w.e.f 02nd January 2009.
Mr. P.A. JayawardenaFCA, FSCMA (SL), FMAAT
(48 Years)
Director
145/1, Fife RoadColombo 05
Mr. P A Jayawardena, a Chartered Accountant by profession, counts over 23 years of experience in the field of accountancy and finance. He presently functions as the General Manger-Finance, of the Life Division of Ceylinco Insurance Company Limited and has completed a stint of 16 years with the Ceylinco Group.
Mr. E.T.L. RanasingheMBA (Sri J’pura), Dip in MKT (UK), MCIM (UK), Chartered Marketer (UK)
(48 Years)
Director
11/1, Wijayamangala RoadKohuwala
Mr. E.T.L. Ranasinghe has over 27 years of experience in the mercantile sector in the areas of sales, marketing, strategic planning and brand management. Mr. Ranasinghe is one of the pioneer members of the team that set up Ceylinco Insurance Co PLC in 1988. He also serves on the Board of Ceylinco Development Bank.
Deshamanya Dr. P.R. AnthonisD.Sc., FRCS (Eng), FICS, FSCS
(98 Years)
Director
161, Darmapala MawathaColombo 07
Deshamanya Dr. P.R. Anthonis, an eminent Surgeon the country has produced, has held many distinguished posts in the past viz. former Chancellor – University of Colombo, Former Senior Surgeon – General Hospital Colombo, Founder President – Ceylon College of Surgeons, President Sri Lanka Medical Council, to name a few.
Ms. L. Seneviratne
(54 Years)
Director
48/8, Epitamulla RoadPita Kotte
Mrs. Leonie Seneviratne was appointed to the Board of Seylan Merchant Bank w.e.f. 2007. She commenced her career at DFCC Bank and counts over 35 years of experience. She has resigned from the Board w.e.f 05th January 2009
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Name of The Company Principal Activity % Holding By Smb
Directors Resigned Date of Directors
Licence obtained
Investments in Subsidiaries - Quoted
Seylan Merchant Leasing PLC
Deposit mobilisation, Leasing of properties both movable & immovable, disbursing personal loans & providing other financial services
80.88 Deshamanya Dr. J.L.B. Kotelawala Mr. R.S.W. Senanayake Lady (Dr.) S.P.C. Kotelawala Mr. M.S.I. Peiris Mr. R. Renganathan Mr. A.D. Jegasothy Ms. M. Sabharatnam Mr. E.T.L. Ranasinghe Mr. P.A. Jayawardena Dr. D. Senthilverl
6th February 2009 6th June 2009 31st October 2008 5th June 2009 8th June 2009 2nd January 2009 8th June 2009 8th June 2009 8th June 2009 8th June 2009
Registered as a Finance Company and as a Finance Leasing Establishment
Indirect Holdings - SMBMBL 0.96
- SMBREL 0.35
Investments in Subsidiaries - Unquoted
SMB Real Estate Ltd. Property Development Activities
100.00 Deshamanya Dr. J.L.B. Kotelawala Mr. R.S.W. Senanayake Lady (Dr.) S.P.C. Kotelawala Mr. R. Renganathan Mr. A.D. Jegasothy Mr. M.S.I. Peiris
6th February 2009
31st October 2008
2nd January 2009
SMB Money Brokers(Pvt) Ltd.
Money Market Activities 51.00 Deshamanya Dr. J.L.B. Kotelawala Mr. R.S.W. Senanayake Lady (Dr.) S.P.C. Kotelawala Mr. R. Renganathan Mr. A.D. Jegasothy Mr. N.N. Jayathilake Mr. M.S.I. Peiris
6th February 2009
31st October 2008
2nd January 2009
ISO 9001-2000 Certifiacte
SMB Securities (Pvt) Ltd. Stock Brokering Activities 49.50 Deshamanya Dr. J.L.B. Kotelawala Mr. R.S.W. Senanayake Lady (Dr.) S.P.C. Kotelawala Mr. N.N. Jayathilake Mr. M.S.I. Peiris
6th February 2009
31st October 2008
Stock Broker Stock Dealers
Indirect Holdings - SMBREL 47.52
Equity Accouned Investee
SMB Kenenga Investment Corporation Ltd.
Investment Banking 49.00 Deshamanya Dr. J.L.B. Kotelawala Mr. R.S.W. Senanayake Lady (Dr.) S.P.C. Kotelawala Mr. R. Renganathan Mr. M.S.I. Peiris Mr. S.R. Wijesinghe Mr. H.Y.S.K. Dayaratne Mr. Tengku Noor Zakiah Mr. Dato Ramli Ismail Mr. Lee Kok Khee Mr. Seow Choong Laing Dr. Nasir Razak
6th February 2009 31st October 2008
15th July 2008
Subsidiaries and Equity Accounted Investees
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Human Resources
Human Resource Management (HRM) is the strategic and coherent approach to the management of an organisation’s most valued asset - the people working in the organisation, who individually and collectively contribute to the achievement of the objectives of the business. In an intensely competitive enviornment SMB focuses on employing the best people, developing their resources, utilising, maintaining and compensating their services in tune with the job and organisational requirement.
SMB recognises the importance of an effective and efficient team and continues to motivate and inspire its work force. Professional development is
an on going process in the Company. On the job training, participating in seminars and conferences and encouragement to excel in related examinations are regular opportunities available to the SMB team.
The management also recognises the importance of a balanced life and the need to take time off from the regular schedule of work. Therefore, SMB organised several activities that took place for the benefit of all group members.
1. Annual Award Ceremony - Contribution of the staff members towards the Company was recognised.
2. Other sports activities Chess Tournament - 4th October
2008 Swimming Tournament - 2nd
November 2008 Badminton Tournament - 16th
November 2008 Cricket Tournament - 30th
November 2008
SMB team has strived and worked hard to achieve its goals with dedication and commitment. SMB recognises this contribution with appreciation and will work towards being more proactive, achieving better performance and good corporate responsibility in the future.
Summing Tournament Batmintant Tournament
Annual Cricket Tournament
Genderwise2007
72%68%
28%32%
MaleFemale
2008
Age wise2007
57%68%
31%
18%
8%4%
14%
20-3031-4041-50Over 50
2008
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Seylan Merchant Bank as a financial
service provider recognises risk
management as a vital component of
management. Risk management act a
major role in the context of the global
financial crisis, present liquidity crisis
faced by lending institutions, unstable
volatile rates of interest, contraction of
the economy, fall in value of securities
and also the present reputation
problems faced by companies within
the Ceylinco Group.
The following are the key risk factors
that may impact SMB.
l Credit Risk
l Market Risk
l Liquidity Risk
l Operational Risk
l Reputational Risk
Credit RiskThis is a significant risk in respect of a
financial institute. Credit risk may arise
when a borrower defaults on payment
of capital or interest within the specified
period, causing a loss to the Bank.
SMB manages this risk diligently with
a well-defined policy which includes
effective credit evaluation procedure
approved by the Credit Committee. This
Committee is responsible to monitor
the credit approval limits, evaluate
the facilities with large exposure and
creditworthiness of the borrower. They
will also review portfolio performance
on a regular basis and ensure loan
classification based on collection
performance.
Market RiskMarket risk, also known as systematic
risk, is the risk that results from the
characteristic behaviour of an entire
market or asset class. It is the risk of loss
arising from market volatilities, such
as changes in interest rates, exchange
rates, equity prices, credit spreads etc.
Interest Rate RiskInterest rate risk arise from interest
rate volatilities reducing the market
value of an investment. To reduce the
volatility in earnings, any mismatch of
rates of assets and liabilities should be
minimised.
An effective pricing policy is in place
to monitor and fix the lending rates to
maintain a minimum spread.
Liquidity RiskLiquidity risk arises when the company
is unable to meet its financial obligations
due to insufficient cash flow situations.
This results from a mismatch of rates
and maturities between the assets and
liabilities of the Company. The GAP
report reflects the mismatch between
borrowing and lending.
Liquidity risk is monitored by the Asset
and Liability Committee (ALCO) of
the Company. The committee has
introduced sound policies to minimise
the risk.
Operational RiskOperational risk arises from failure of
internal systems and controls, technical
faults, human errors, external events,
natural disasters etc.
Procedures are in place to reduce
day to day operational risks. Internal
audit department of the Bank, under
the guidance of the audit committee,
performs systematic checks to ascertain
whether the established systems and
procedures are being followed. Off-site
back ups and a carefully documented
Disaster Recovery Plan is in place
to mitigate this risk. In addition the
Company has an efficient Information
Technology Department that ensures
this risk is minimised.
Reputational RiskReputational risk is the loss of business
reputation, established over a period
by earning the confidence and trust
of the stakeholders in the business:
customers, suppliers and employees, as
well as shareholders. Reputation may be
an intangible but a highly prized asset,
often equated with the goodwill of the
business.
The recent domestic financial issues
had a direct impact on the reputational
risk of SMB. To overcome this risk SMB,
as has been in the past, will continue
to meet all statutory, regulatory and
compliance requirements as stipulated.
Risk Review and ControlThe Board has the overall responsibility
to assess risks associated with the
Bank. The Bank identifies developing
an organization wide “Risk Awareness”
programme as an effective way to
manage the risks.
Risk Management
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Corporate Governance
Corporate Governance Principles Compliance
The Board of Directors
Composition of the Board The Board comprises of six Directors out of which five are non Executive
Directors. Deputy Chairman also acts as a non Executive Director.
All Directors possess a wide range of skills, talents and experience required to
add value to enhance the business.
The following Directors resigned
Dr. J.L.B. Kotelawala
Lady Dr. S.P.C. Kotelawala
Mr. A.D. Jegosothy
Mrs. L. Senevirathna
The profiles of the Directors are set out in page 6 and 7.
Meetings Meetings are held every other month to review and evaluate the performance
of the company. Special meetings are convened when necessary.
Responsibilities of the Board The ultimate responsibility of all operations of the Bank and being accountable
to the stakeholders lies with Board of Directors. Matters reserved for the Board
and the sub committees and those delegated to the management are clearly
defined.
The Audit Committee is a sub committee of the Board.
The Board ensures:
l Formulating corporate strategic initiative & strategic direction of the Bank
l Monitoring the effectiveness of the Bank's risk management strategy
l Compliance with ethical and legal standards
l Reviewing the integrity of the Bank's Accounting and Financial Statements
l Approval of Financial Statements for publication
l Approval of Budget and Corporate Plans
l The interests of Shareholders and other stakeholders are safeguarded
l Making recommendations to shareholders on the changes of the Board
Independent professional advice The Board seeks independent professional advice whenever it is necessary.
Dedication of adequate time & effort for the matters of the Board and the Company
The Board dedicates adequate time and effort necessary to carry out its
responsibilities.
Training of the Directors Presentations are made to the Board from time to time regarding changes in
industry related matters.
Company Secretary Secretary of the Board is International Consultancy & Corporate Services (Pvt)
Ltd.
All Directors have access to the secretary, who is responsible to the Board to
ensure that Board procedures and the applicable rules and regulations are
complied with. The Articles of the Bank provides that the Board may appoint
or remove the secretary.
Independent judgment Each Director brings independent and objective judgment on the matters of
the Board. The composition of the Board also ensures the balance between
executive expediency and independent judgment.
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Corporate Governance Principles Compliance
Financial AcumenFinancial acumen of the Board The Board includes three Chartered or Management Accountants. These
members have the acumen and knowledge to provide the Board with
necessary guidance in conducting its business.
Supply of InformationTimely and accurate management information
All Directors are provided with timely, accurate and clear information on a
regular basis. Requests are made for further information if necessary.
Appointments to the BoardAvailability of a formal and transparent procedure for new appointments
The Company does not have a recommendation committee or procedure for
making recommendations on new appointments to the Board. New directors,
including the Deputy Chairman are appointed by the Board and ratified by the
shareholders at the AGM.
Disclosure of details of new Directors Details of new appointments are disclosed to the shareholders on their
appointment. Regulatory authorities are also informed as required.
Re-election Re-election of Directors The Articles of Association provides for 1/4th of the directors to retire by rotation
each year, with the exception of Chairman and Deputy Chairman.
Appraisal of Board PerformanceAppraisal of Board Performance There is no formal procedure to evaluate the Board performance.
Appraisal of the CEO The Board sets financial and non financial goals and objectives for the CEO
and delegates the required level of authority to the management to achieve
the strategic objectives.
Directors’ Remuneration
Remuneration Procedure The remuneration committee determines the remuneration package of
the Executive Directors based on the performance of the Company. The
Remuneration committee consisted of Deshamanya Dr. J.L.B. Kotelawala
(Chairman), Mr. R.S.W. Senanayake (Deputy Chairman), Mr. M.S.I. Peiris
(Director) and two other Directors.
Disclosure of Remuneration The total remuneration of the Directors’ is disclosed on page 32 of the Annual
Report.
Relations with Shareholders
Constructive use of the Annual General Meeting
The primary mode of communication between the Company and the
shareholders are the Annual Report and the Annual General Meeting.
Shareholders have an opportunity to participate in Company deliberations at
the Annual General Meeting of the Company.
Circulation of Notice of the AGM The Annual Report, Financial Statements and the notice of the meeting are
sent to shareholders with a notice period of at least 15 days.
Corporate Governance Contd.
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Corporate Governance Principles Compliance
Major transactions There were no major transactions materially affecting the balance sheet in
2008.
Accountability and Audit
Financial ReportingStatutory and regulatory reporting The Bank places great emphasis on complete disclosure of both financial
and non financial information and has presented a balanced assessment of
Company’s position for the year ended 31st December 2008 and at each
quarter. In preparing the quarterly and annual financial statements the
Bank has complied with Companies Act No 7 of 2007, Finance Leasing
(Amendment) Act No. 24 of 2005 and subsequent amendments and Finance
Companies Act No. 78 of 1988 and is presented in conformity with Sri Lanka
Accounting Standards. The Bank has also complied with the requirements of
the regulatory authorities such as the Central Bank of Sri Lanka, Securities and
Exchange Commission and Colombo Stock Exchange.
Directors’ Report in the Annual Report Directors’ report is given on pages 16 to 18 of the Annual Report.
Directors’ responsibility statement The statement of Directors’ responsibility for financial reporting is given on
page 19 of the Annual Report.
Statement of the External Auditors’ on their reporting responsibilities
The Auditors’ report is given on pages 20 and 21 of the Annual Report and
includes their scope for the audit and the opinion on the financial statements.
Declaration of the Board that the business is a going concern
This declaration is given on page 18 of the Annual Report.
Summoning an EGM to notify the shareholders if net assets fall below one half of the shareholders’ fund
There has not been such situation in the year under review. However, an EGM
was held on 31st March 2009.
Internal ControlsMaintaining a sound system of internal control and risk management
The ultimate responsibility of internal controls and mitigating risks rests with
the Board of Directors. Company’s internal control systems and procedures are
designed to eliminate possible risks and minimize any unforeseen risks while an
effective disaster recovery plan is in place. A detail risk management report is
given on page 10 of the Annual Report.
Reviewing the effectiveness of the Internal Control System
Regular reviews are carried out and a quarterly internal audit report is
submitted to the board. The Audit Committee reviews and evaluates the
effectiveness of the Company’s internal audit and control system.
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Corporate Governance Principles Compliance
Audit Committee and AuditorsAvailability of an Audit Committee Audit Committee consists of three Non-Executive Directors. The committee
meets regularly and with external auditors annually. The Chief Financial
Officer, Internal & External Auditors, Secretaries may attend meetings by
invitation.
The committee makes recommendations on appointment/dismissal of external
auditors, implementation of Central Bank guidelines to auditors, application
of accounting standards, audit fee etc. Committee is also responsible to report
to the Board, reviews on financial statements and internal control procedures,
accounting policies, compliance with regulatory requirements.
The detail report of the Audit Committee is given on page 19 of the Annual
Report.
Employee/Other StakeholderRights of other Employees/Other stakeholders The Bank is conscious of its responsibility towards its stakeholders and is
focused in value addition. Stakeholders have access to relevant, sufficient and
reliable information on a timely and regular basis.
Corporate Governance The Board ensures that the Bank complies with the Code of Best Practices on
Corporate Governance issued by the Institute of Chartered Accountants of Sri
Lanka.
ComplianceRegulatory Compliance The Bank complies with regulations of regulatory bodies such as the Central
Bank of Sri Lanka, Securities and Exchange Commission and The Colombo
Stock Exchange.
Corporate Governance Contd.
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Financial Statements
Annual Report of the Board of
Directors on the Affairs of the
Company 16
Directors’ Responsibility Statement 19
Audit Committee Report 19
Independent Auditor’s Report 20
Income Statement 22
Balance Sheet 23
Statements of Changes in Equity 24
Cashflow Statement 25
Notes to the Financial Statements 26
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Annual Report of the Board of Directors on the Affairs of the Company
The Directors of Seylan Merchant
Bank PLC have pleasure in presenting
herewith their report together with
the Audited Consolidated Financial
Statements for the year ended 31st
December 2008 which were approved
by the Directors on 05th November
2009
Principal ActivitiesThe principal activities of the Bank are
merchant banking and related activities
such as fund mobilisation, personal
banking, debt trading, lease financing,
dealing in Government Securities &
Investment Securities.
Principal Activities of SubsidiariesThe principal activities of the Company’s
Subsidiaries, namely,
Seylan Merchant Leasing PLC is
providing finance leasing, deposit
mobilisation, disbursing personal loans
and providing other financial services.
SMB Money Brokers (Pvt) Ltd, whose
principal activity is money market
activities.
SMB Real Estate Ltd, handling property
development activities.
SMB Securities (Pvt) Ltd, trading in Equity
and Debt Securities, Equity and Debt
Security Brokering, placement of Equity
and Debt Securities.
Principal Activities of Associates,
SMB Kenanga Investment Corporation Ltd, is investment banking.
Review of OperationsThe Deputy Chairman’s Statement
contains a detailed description of the
operations of the Company during the
year ended 31st December 2008 and
contain a fair view of the Company’s
affairs.
Financial StatementsThe Financial Statements of the Group
and the Company are given on pages
22 to 62 of the Annual Report.
Auditor’ ReportThe Auditors’ Report on the Financial
Statements is given on the pages 20
and 21 of the Annual Report.
Significant Accounting PoliciesThe Significant Accounting Policies
adopted in the preparation of Financial
Statements are given on pages 26 to 30
of the Annual Report.
Directors’ RemunerationDirectors’ Remuneration of the Bank for
the financial year ended 31st December
2008 are given in Note 8 to the
Financial Statements on page 32.
DonationsDuring the year charitable donations
amounting to Rs. 3.9Mn were made by
the Group. (2007 – Rs 3.4Mn).
TaxationA detailed description of the income
tax rate applicable to the Company
and a reconciliation of the accounting
profits with the taxable profits are given
in Note 8 to the Financial Statements.
It is the policy of the group to provide
for deferred taxation on all known
temporary differences at the Balance
Sheet date on the liability method. The
deferred tax detail of the Company
is given in Note 10.b to the Financial
Statements.
Group RevenueThe revenue of the group was Rs.
949.3Mn (2007 – Rs 944.1Mn). An
analysis of revenue based on segments
is disclosed in the segmental analysis on
page 63 in this report.
Property, Plant & EquipmentDetails relating to Property, Plant &
Equipment are disclosed in Note 22 to
the Financial Statements.
Capital ExpenditureThe total capital expenditure of the
group incurred by the acquisition of
Property, Plant & Equipment during the
year which is given in the Note 22 to
the Financial Statements amounts to Rs.
38.2Mn.
Financial Results of the Bank for the Year 31.12.08 31.12.07
Rs.’000 Rs.’000
Profit/(Loss) before Taxation (583,074) 266Taxation (35,602) -Profit/(Loss) after Taxation Unappropriated Profit/(Loss) (618,676) 266Brought forward (160,289) (160,543)Dividend PaidStatutory Reserve Fund - - - (13)Retained Profit/(Loss) (778,965) (160,289)
Market Value of PropertiesThe carrying value of investment
properties owned by the Bank is
stated in the Note 21 to the Financial
Statements.
InvestmentsDetailed descriptions of the Investments
made by the Bank in subsidiaries are
given in the Note 20.a to the Financial
Statements.
ReservesThe reserves of the group are disclosed
in the Statement of Changes in Equity.
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Stated CapitalThe stated capital as at 31st December
2008 was Rs. 565.8Mn (2007 - Rs
565.8Mn) consisting of 44,503,120
(44,503,120 – 2007) ordinary voting
shares and 100,000,000 (100,000,000
– 2007) ordinary non-voting shares.
Page 47 of this report describes
the details of the distribution and
composition of Shareholders.
Share InformationInformation relating to Earnings,
Dividends, Net Assets, and Market value
per share and share trading is given on
pages 72.
Major ShareholdersDetails of the twenty largest
Shareholders of the Company and the
percentages held by each of them are
disclosed in the pages 67 and 68 to this
report.
EmploymentIt is the group policy to practice equality
of opportunity for all employees. The
group continuously invests in training
and development of staff in order
to maintain a dedicated and highly
motivated team to achieve service
excellence.
DirectorsThe following were Directors of the
Company as at 31st December 2008.
1. Mr. R S W Senanayake
2. Mr. M S I Peiris
3. Mr. R Renganathan
4. Mr. E T L Ranasinghe
5. Mr. P A Jayawardena
6. Deshamanya Dr. P R Anthonis
Retirement of DirectorsIn terms of Articles 92 (a) of the Articles
of the Company, Mr. E.T.L. Ranasinghe,
retire by rotation and being eligible
offers himself for re-election.
Directors’ ShareholdingsThe shareholdings of the Directors of
the Company are shown on page 71
under Shareholders’ Information.
Directors’ Interest in Shares and DebenturesDirectors interest in Shares and
Debentures of the Company as at 31st
December 2008 are as disclosed on
page 71 of the Annual Report.
Directors’ Interest in ContractsThe Directors of the company have no
direct or indirect interest in any contract
or proposed contract of the company,
except those specified in Note 36 to the
Accounts, which have been disclosed
and declared at meetings of the
Directors.
Interest RegisterThe Directors’ Interest register is
maintained by the Company and
relevant disclosures are made in this
report.
Board Sub CommitteesAudit Committee
The following Directors serve on the
Board Audit Committee.
Mr. A D Jegasothy
Mr. P A Jayawardena
Mr. E T L Ranasinghe
Chief Accountant, the Internal
Auditor and External Auditors and the
Secretaries of the Company attend
meetings by invitation.
The Report of the Audit Committee is
given on page 19 of the Annual Report.
Remuneration Committee
The following Directors served on the
Board Remuneration Committee
Deshamanya Dr. S.L.B. Kotelawala
Mr. R.S.W. Senanayake
Mr. M.S.I. Peiris and two other Directors.
The Committee determines the
remuneration package of Executive
Directors based on the performance of
the Company.
Statutory PaymentsThe directors confirm that to the best
of their knowledge, all taxes, duties
and levies payable by the bank and
its subsidiaries, all contributions, levies
and taxes payable on behalf of and
in respect of the employees and all
known statutory dues as at the balance
sheet date have been paid or where
relevant, provided for by the bank and
its subsidiaries.
Environmental ProtectionThe Board of Directors to the best
of their ability takes every attempt to
comply with relevant environmental
laws, regulations and best practices
applicable in the country.
Directors’ Responsibility for Financial ReportingThe directors are responsible for
the preparation of the Financial
Statements of the Company reflecting
a true and fair view of the state of
its affairs. The directors are of the
view that these Financial Statements
have been prepared in conformity
with the requirements of Sri Lanka
Accounting Standards and Companies
Act No. 07 of 2007, thereafter, Finance
Leasing (Amendment) No. 24 of 2005
and Listing rules of Colombo Stock
Exchange.
Corporate GovernanceThe Board of Directors is of the view
that it has focused on the necessary
resources and processes to ensure that
the Company is compliant with the
code of best practices of Corporate
Governance issued by the Institute
of Chartered Accountants of Sri
Lanka throughout the year ended
31st December 2008. The Corporate
Governance report is given on pages 11
to 14 of the Annual Report.
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Annual Report of the Board of Directors on the Affairs of the Company Contd.
Risk ManagementThe steps taken by the Company in
respect of both financial and operational
risks have been set out in the page 10
to this report.
Going ConcernThe directors are of the view that the
restructuring plan will meet the liquidity
requirements of the Company. The
Financial Statements are prepared based
on a going concern concept.
Loan CapitalThe Company has from time to time
issued quoted/unquoted,unsecured,
subordinated, redeemable debentures
for use in leasing and loan activities.
Summarised details of the issues are
stated in Note 30.a to the Financial
Statements.
Post Balance Sheet EventsThe events that have occurred after the
Balance Sheet date disclosed in Note 35
to the Financial Statements.
AuditorsThe retiring auditors M/s. KPMG
Ford Rhodes Thornton & Company,
Chartered Accountants have signified
their willingness to continue in office.
A resolution to re-appoint them as
Auditors and authorizing the Directors
to fix their remuneration will be
proposed at the Annual General
Meeting. Audit fee is disclosed in Note
8 of the Financial Statements on page
32 The Auditors have confirmed that
they do not have any relationship with,
or interests in the company other than
those disclosed above.
This report is signed for and on behalf
of the Board of Directors by
R.S.W. Senanayake M.S.I. Peiris
Deputy Chairman Executive Director
(Sgd.)
International Consultancy and Corporate Services (Pvt) Ltd
Company Secretaries
Colombo
05th November 2009
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Directors’ Responsibility Statement
The Bank’s Financial Statements for the
year ended 31st December 2008 are
prepared and presented in compliance
with the Sri Lanka Accounting Standards
Act No. 15 of 1995 issued by the
Institute of Chartered Accountants
of Sri Lanka and requirements of the
Companies Act No. 07 of 2007.
The Financial Statements reflect a true
and fair view of the Loss of the Bank
and the Balance Sheet presents a true
and fair view of the Bank at the end of
the Financial Year. The estimates and
judgments relating to the Financial
Statements were made on a prudent
and reasonable basis, in order that the
Financial Statements reflect in a true and
fair manner, the form and subsistence
over transactions.
The Directors are also of the view that,
in preparing these Financial Statements
appropriate accounting policies
and practices have been adopted
consistently together with relevant
Accounting Standards and Directions
issued by the external regularity
authorities.
The Board of Directors is responsible
for taking reasonable assurance of
appropriate internal control systems
and accounting records which ensures
that the Bank’s business is carried on
in an acceptable and efficient manner
so as to safeguard the Bank’s assets,
and preventing and detecting frauds
as well as other irregularities, which is
reviewed, evaluated and updated on a
going concern basis.
By Order of the Board,
(Sgd.)
International Consultancy and
Corporate Services (Pvt) Ltd
Secretaries
05th November 2009
Audit Committee Report
The Audit Committee which is in
existence for the forth year met on three
occasions during the year under review.
The Audit Committee was successful in
reviewing the progress of the audit, the
internal control procedures, accounting
policies and compliance with the
Sri Lanka Accounting and Auditing
Standards. Further the Committee
ensured that the Company complies
with the directions issued by the
Department of Supervision of Non Bank
Financial Institutions of the Central Bank
of Sri Lanka.
The Audit Committee consists of
three non-executive directors. Chief
Accountant, the Internal Auditor, and
the Secretaries of the Company and
External Auditors may attend meetings
by invitation.
It is proposed to meet quarterly in the
current year in order to ensure that
there is a smooth functioning of the
Accounting Policies of the Company.
A. D. Jegasothy
Chairman - Audit Committee
05th November 2009
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Independent Auditor’s Report
TO THE SHAREHOLDERS OF SEYLAN MERCHANT BANK PLC
Report on the Financial StatementsWe have audited the accompanying
financial statements of Seylan Merchant
Bank PLC, the consolidated financial
statements of the Company and its
subsidiaries as at December 31, 2008
which comprise the balance sheet as at
December 31, 2008, and the income
statement, statement of changes in
equity and cash flow statement for the
year then ended, and other explanatory
notes as set out on pages 26 to 30.
Management’s Responsibility for the Financial StatementsManagement is responsible for the
preparation and fair presentation of
these financial statements in accordance
with Sri Lanka Accounting Standards.
This responsibility includes: designing,
implementing and maintaining internal
controls relevant to the preparation and
fair presentation of financial statements
that are free from material misstatement,
whether due to fraud or error; selecting
and applying appropriate accounting
policies; and making accounting
estimates that are reasonable in the
circumstances.
Scope of Audit and Basis of OpinionOur responsibility is to express an
opinion on these financial statements
based on our audit. We conducted
our audit in accordance with Sri Lanka
Auditing Standards. Those standards
require that we plan and perform the
audit to obtain reasonable assurance
whether the financial statements are
free from material misstatement.
An audit includes examining, on a
test basis, evidence supporting the
amounts and disclosures in the financial
statements. An audit also includes
assessing the accounting principles
used and significant estimates made by
management, as well as evaluating the
overall financial statement presentation.
Except as described in the following
paragraph we have obtained all the
information and explanations which to
the best of our knowledge and belief
were necessary for the purposes of our
audit except for the matters mentioned
in our opinion paragraph. We therefore
believe that our audit provides a
reasonable basis for our opinion.
Opinion-CompanyWe have not received confirmations
for certain related party balances as at
31 December 2008 and for any of the
related party transactions for the year
then ended. Owing to the nature of the
Company’s records, alternative audit
procedures were not practicable to
obtain comfort in that regard. We were
therefore unable to satisfy ourselves as
to the completeness of the related party
disclosures reflected in note 36 to the
financial statements.
In our opinion, except for the effects
of such adjustments, if any, as might
have been determined to be necessary
due to the matters stated above, the
financial statements give a true and fair
view of the Company’s state of affairs as
at December 31, 2008 and the loss and
cash flows for the year then ended in
accordance with Sri Lanka Accounting
Standards.
Without further qualifying our opinion
we draw attention to note 37 (a) which
more fully describes the existence of
material uncertainty of the Company’s
ability to continue as a going concern
due to adverse liquidity constraints
faced by the Company and that is more
so because we are unable to assess
with certainty the extent of successful
realisation of the restructuring plans for
turning around the Company.
Opinion-GroupWe have not received confirmations
for certain related party balances of
Seylan Merchant Bank PLC as at 31
December 2008 and for any of the
related party transactions for the year
then ended. Owing to the nature of the
Company’s records, alternative audit
procedures were not practicable to
obtain comfort in that regard. We were
therefore unable to satisfy ourselves as
to the completeness of the related party
disclosures reflected in note 36 to the
financial statements.
In our opinion, except for the effects
of such adjustments, if any, as might
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have been determined to be necessary
due to the matters stated above, the
consolidated financial statements give a
true and fair view of the state of affairs
as at December 31, 2008 and the
loss and cash flows for the year then
ended, in accordance with Sri Lanka
Accounting Standards, of the Company
and its subsidiaries dealt with thereby,
so far as concerns the members of the
Company.
Without further qualifying our opinion
we draw attention to
Note 37 (b) which more fully describes
the existence of material uncertainty of
the Company’s ability to continue as a
going concern due to adverse liquidity
constraints faced by the Company and
that is more so because we are unable
to assess with certainty the extent of
successful realisation of the restructuring
plans for turning around the Company.
Note No. 19 (e) to the financial
statements where reference is made
to the fact that a capital amount of
Rs 37,578,474 was outstanding on
account of a lease facility granted by
Seylan Merchant Leasing PLC to Golden
Key Eye Hospital Ltd., which was a
subsidiary of Golden Key Credit Card
Company Ltd. We are unable to assess
with certainty, the recoverability of the
said sum due to various legal cases
pending against Golden Key Credit Card
Company Ltd., which has implications
on how the proceeds from the sale of
the assets of the Company’s subsidiaries
and associates will be applied.
Note No. 18 (f) to the financial
statements referring to the execution of
the mortgage bonds subsequent to the
balance sheet date for a loan granted
to Finance and Guarantee Property
Developers Ltd by Seylan Merchant
Leasing PLC. The legal implications of
the mortgages so executed appears
uncertain under the circumstances
prevailing and consequently the
adequacy of the security cover for
the loan of Rs 7.750 mn cannot be
assessed.
Note 37 (c) to the financial statements,
where reference is made to the
inventories still remaining unsold. We
are unable to assess the net realizable
value of the inventories and the extent
of their saleability within a reasonable
period of time under the prevailing
circumstances more fully described in
Note 37 (c) to the financial statements.
These facts along with the net loss of
Rs 29,209,665 during the year ended
31 December 2008 raise doubt that the
Company will be able to continue as a
going concern.
Report on Other Legal and Regulatory RequirementsThe Company’s net assets are less than
half of the stated capital and face a
serious loss of capital situation in terms
of Section 220 of the Companies Act,
No 07 of 2007.
The Company’s core capital as at 31
December 2008 is below the required
level as stipulated in the relevant
directions issued by the Central Bank of
Sri Lanka.
Except as mentioned above;
• TheCompany’sFinancialStatements
also comply with the requirements
of Sections 151(2) to Section 153
(7) of the Companies Act No. 07 of
2007.
Chartered Accountants
Colombo.
05th November 2009
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Income Statement
GROUP BANKFor the Year Ended 31 December 2008 2007 2008 2007
Note Rs. Rs. Rs. Rs.
Gross Income 4 949,473,173 944,078,977 334,660,987 500,997,793
Interest Income 5 859,359,216 804,894,054 295,665,931 424,776,309Interest Expenses 6 (763,043,988) (619,226,698) (410,292,936) (400,239,118)
Net Interest Income/(Expense) 96,315,228 185,667,356 (114,627,005) 24,537,191
Other Income 7 90,113,957 139,184,923 38,995,056 76,221,484
Operating Income 186,429,185 324,852,279 (75,631,949) 100,758,675
Less: Operating Expenses 8Personnel Costs (115,056,655) (98,164,380) (17,348,263) (25,421,277)Premises, Equipment & Establishment Expenses (106,905,832) (61,632,671) (22,044,928) (22,249,776)Other Overhead Expenses (126,722,476) (128,630,724) (31,636,417) (38,265,959)
Loan Loss Provision 9 (378,264,751) (33,795,145) (333,860,905) (12,122,810)
Provision for fall in value of Investment (116,410,232) - (101,410,232) -
Operating Expenses (843,359,946) (322,222,920) (506,300,745) (98,059,822)
Operating Profit/(Loss) before VAT on Financial Services (656,930,761) 2,629,359 (581,932,694) 2,698,853
Value Added Tax on Financial Services (2,566,746) (3,531,516) (1,141,324) (2,431,949)
Operating Profit/(Loss) before Asso. Co. Profit (659,497,507) (902,157) (583,074,018) 266,904
Share of Associate Company Profit 4,365,092 949,850 - -
Profit/(Loss) before Taxation (655,132,415) 47,693 (583,074,018) 266,904
Taxation 10 (41,946,552) 3,629,961 (35,601,511) -
Profit/(Loss) for the Period (697,078,967) 3,677,654 (618,675,529) 266,904
Attributable to :
Equity holders of the Parent Company (688,100,565) (2,731,510) (618,675,529) 266,904
Minority Interest (8,978,402) 6,409,164 - - (697,078,967) 3,677,654 (618,675,529) 266,904
Basic Earnings/(Loss) per - Voting Share 11 (15.447) (0.050) (13.880) 0.005Basic Earnings/(Loss) per - Non Voting Share 11 (6.874) (0.005) (6.180) 0.000
Notes form an integral part of these financial statements.
Figures in brackets indicate deductions
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Balance Sheet
GROUP BANKAs at 31 December 2008 2007 2008 2007 Note Rs. Rs. Rs. Rs.
ASSETSCash and Short Term Funds 12 17,636,423 73,999,228 10,068,966 60,261,731Treasury Bills and Bonds Eligible for Rediscounting with Central Bank 13 225,916,744 251,013,343 47,896,922 48,723,918Government and other Securities held for dealing Purpose 14 - 132,481 - 132,481Placements with and loans to other Banks & Finance Companies 15 198,887,623 117,661,810 - -Placements with and loans to Non Financial Institutions 16 59,003,102 98,338,842 59,003,102 98,338,842Investment Securities 17 9,893,704 120,823,155 17,571,914 107,404,475Securities purchased under Resale Agreements - 33,550,000 - 33,550,000Loans and Advances 18 956,320,172 972,960,968 651,871,775 886,534,416Lease Rentals Receivable within 1 year 19.a 875,325,694 631,246,940 280,826,281 173,995,545Lease Rentals Receivable from 1 to 5 years 19.b 1,105,751,098 1,737,678,659 264,557,933 704,077,198Lease Rentals Receivable After 5 years 19.c 6,114,387 11,496,503 - -Interest & Fees Receivable 325,592,358 347,671,022 253,036,887 288,631,580Investments in Subsidiary Companies 20.a - - 324,196,825 319,540,267Investments in Associate Companies 20.d 54,314,942 49,949,850 49,000,000 49,000,000Investment Properties 21 16,316,000 27,505,400 16,316,000 27,505,400Property Plant & Equipment 22 50,096,568 47,576,278 8,054,878 11,947,225Intangible Assets 23 25,409,694 26,847,978 - -Other Assets 24 294,303,352 258,376,784 43,358,083 123,474,735Deferred Tax Assets 25 3,674,996 7,369,253 - -Total Assets 4,224,556,857 4,814,198,494 2,025,759,566 2,933,117,812
EQUITY AND LIABILITIESLiabilitiesDeposits 26 1,568,863,611 1,137,248,009 - -Borrowings 27 1,748,936,063 1,993,940,735 1,661,522,591 1,747,761,950Group balances payable 28 197,848,000 153,000,000 197,848,000 153,000,000Other Liabilities 29 386,807,818 413,799,601 63,408,061 229,892,830Debentures 30 340,308,507 506,768,585 255,174,402 395,726,585Bank Over Draft 12 59,745,594 - 59,745,594 -Total Liabilities 4,302,509,593 4,204,756,930 2,237,698,648 2,526,381,365
EquityStated Capital 31 565,786,045 565,786,045 565,786,045 565,786,045Statutory Reserves 32 4,420,527 4,420,527 1,239,777 1,239,777Reserves 33 (722,486,114) (34,385,549) (778,964,904) (160,289,375)
Total equity attributable to the equity holders of the Bank (152,279,542) 535,821,023 (211,939,082) 406,736,447Minority Interest 74,326,806 73,620,541 - -Total Equity (77,952,736) 609,441,564 (211,939,082) 406,736,447
Total Liabilities & Equity 4,224,556,857 4,814,198,494 2,025,759,566 2,933,117,812
Net Assets per Ordinary Share (Rs.) (2.79) 9.83 (3.89) 7.46
Commitments & Contingencies 34 - 8,865,000 - 8,865,000
It is certified that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 7 of 2007.
Manjula JayasuriyaChief Financial Officer
The Board of Directors is responsible for the preparation and presentation of these Financial statements.Approved and signed on behalf of the Board
R.S.W.Senanayake M S I PeirisDeputy Chairman Director
05th November 2009Colombo
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Statements of Changes in Equity
Attributable to equity holders of the Bank Reserve on Statutory
Stated Scrip Reserve Retained Total Minority Total
Capital Issue Fund Loss Interest Equity
For the Year Ended 31 December 2008 Rs. Rs. Rs. Rs. Rs. Rs. Rs.
GROUP
As at 01.01.2007 566,016,045 8,316,030 2,910,658 (38,460,200) 538,782,533 73,799,372 612,581,905
Adjustment on Change in Minority Interest - - - - - (6,587,995) (6,587,995)
Share Issue Expenses (230,000) - - - (230,000) - (230,000)
Net Profit/(Loss) attributable to Shareholders - - - (2,731,510) (2,731,510) 6,409,164 3,677,654
Transfer to Statutory Reserve Fund - - 1,509,869 (1,509,869) - - -
As at 31.12.2007 565,786,045 8,316,030 4,420,527 (42,701,579) 535,821,023 73,620,541 609,441,564
As at 01.01.2008 565,786,045 8,316,030 4,420,527 (42,701,579) 535,821,023 73,620,541 609,441,564
Adjustment on Change in Minority Interest - - - - - 12,972,098 12,972,098
Dividend Paid - - - - - (3,287,431) (3,287,431)
Net Loss attributable to Shareholders - - - (688,100,565) (688,100,565) (8,978,402) (697,078,966)
As at 31.12.2008 565,786,045 8,316,030 4,420,527 (730,802,144) (152,279,542) 74,326,806 (77,952,736)
Statutory
Stated Reserve Retained Total
Capital Fund Loss Equity
Rs. Rs. Rs. Rs.
BANK
As at 01.01.2007 566,016,045 1,226,432 (160,542,933) 406,699,544
Share Issue Expenses (230,000) - - (230,000)
Net Profit attributable to Shareholders - - 266,903 266,903
Transfer to Statutory Reserve Fund - 13,345 (13,345) -
As at 31.12.2007 565,786,045 1,239,777 (160,289,375) 406,736,447
As at 01.01.2008 565,786,045 1,239,777 (160,289,375) 406,736,447
Share Issue Expenses - - - -
Net Loss attributable to Shareholders - - (618,675,530) (618,675,530)
Transfer to Statutory Reserve Fund - - - -
As at 31.12.2008 565,786,045 1,239,777 (778,964,904) (211,939,082)
Notes form an integral part of these financial statements.
Figures in brackets indicate deductions.
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Cashflow Statement
Group Bank 2008 2007 2008 2007 For the year ended 31 December Rs. Rs. Rs. Rs.
Cash Flow from Operating ActivitiesInterest Received 822,157,046 840,989,484 255,392,291 487,179,217Interest Payments (763,043,988) (638,323,354) (410,292,935) (441,496,111)Fees and Commission Receipts 112,192,622 35,971,899 74,589,746 5,378,557Profits from Other Operating Activities - 112,707,526 - 20,347,128Cash Payments to Employees and Suppliers (347,944,337) (283,628,246) (70,371,788) (91,097,866)
Net Profit before Changes in Operating Assets (176,638,658) 67,717,309 (150,682,685) (19,689,075)
Funds Advanced to Customers 31,606,968 549,294,158 233,573,069 478,140,036Other Assets (10,153,645) (206,538,638) 115,711,342 (169,009,333)
Cash Generated from Operations (155,185,335) 410,472,829 198,601,726 289,441,628
Tax Paid (41,946,552) (7,270,808) (35,601,511) (2,431,949)Gratuity Paid - (2,027,124) - (2,027,124)Net Cash used in Operating Activities (197,131,887) 401,174,897 163,000,215 284,982,555
Cash Flow from Investing ActivitiesDividend Received - 1,054,927 - 40,225,584Investment in Subsidiary Companies - - - (4,993,135)Investment in Associate Companies (4,365,092) (49,000,000) - (49,000,000)Sale of shares in Subsidiary Companies - - 18,760,000 -Sale of Shares in Associate Company - - - -Proceeds from Sale of Dealing Securities 132,481 11,629 132,481 11,629Net (Increase)/Decrease of Treasury Bills & Bonds 25,096,599 213,491,799 826,995 344,578,419Purchase of Investment Securities. 144,479,451 (23,894,964) 123,382,561 (6,300,000)Proceeds from Sale of Investment Securities (81,225,813) 2,148,305 - 2,148,305Net (Increase)/Decrease in Other Non Dealing Investments 39,335,740 22,684,225 39,335,740 78,457,992Purchase of Property, Plant & Equipment 23,751,728 (17,437,833) 2,055,372 (1,626,442)Proceeds from Disposal of Property, Plant & Equipment 4,121,720 9,256,195 39,000 8,519,160Purchase of Investment Properties 11,189,400 (15,000,000) 11,189,400 (15,000,000)Intangible Assets 1,438,284 - - -Sales Proceeds of Investment Properties - 13,672,796 - 13,672,796Net Cash from/(Used in) Investing Activities 163,954,498 156,987,078 195,721,550 410,694,309
Cash Flow from Financing ActivitiesIncrease/(Decrease) in Debentures (166,460,078) (272,343,832) (140,552,183) (202,220,932)Debentures issued 100,000,000 - 100,000,000Increase/(Decrease) in Liabilities (27,732,409) (329,162,685) (167,225,394) (2,437,925)Increase/(Decrease) in Other Borrowings 171,713,336 22,873,204 (101,136,953) (527,373,117)Increase/(Decrease) in Minority Interest (706,265) (6,587,995) - -Issue of Shares - - - -Share issue expenses - (230,000) - (230,000)
Net Cash from / ( used in) Financing Activities. (23,185,416) (485,451,308) (408,914,530) (632,261,974)
Net Increase or (Decrease) in Cash and Cash Equivalents (56,362,805) 72,710,667 (50,192,766) 63,403,260Cash and Cash Equivalents at the beginning of the year 73,999,228 34,838,561 60,261,731 30,408,471Cash and Cash Equivalents at the end of the year 17,636,423 107,549,228 10,068,966 93,811,731
Reconciliation of Cash and Cash EquivalentsCash and Short Term Funds 17,636,423 73,999,228 10,068,966 60,261,731Government Securities - Under Re-purchase Agreement - 33,550,000 - 33,550,000 17,636,423 107,549,228 10,068,966 93,811,731
The Accounting Policies and the Notes form an integral part of these financial statements.
Figures in brackets indicate deduction
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For the year ended 31 December 2008
1 Reporting EntitySeylan Mercahnt Bank PLC is a quoted
Public Company incorporated &
operating in Sri Lanka. The consolidated
Financial Statements of the group for
the year ended 31 December 2008
comprises the Bank and its Subsidiaries
and group interest in associate
Company.
The principal activities of the Bank are
merchant banking and related activities
such as fund mobilisation, personal
banking, debt trading, lease financing,
dealing in Government Securities &
Investment Securities etc.
The principal activities of the Bank’s
subsidiaries namely, Seylan Mercahnt
Leasing PLC, SMB Real Estate Ltd, SMB
Mony Brokers (Pvt) Ltd, SMB Securities
(Pvt) Ltd are Leasing of Properties
both movable & immovable, Property
Development, Money Market and Stock
Brokering respectively.
2 Basis of Preparation2.1 Statement of ComplianceThe Financial Statements are prepared
in Sri Lanka Rupees, rounded to nearest
rupee. The Balance Sheet, Income
Statement and Cash Flow Statement
of the Bank and the group unless
otherwise stated herein are prepared
on the historical cost convention in
conformity with generally accepted
accounting principles applied
consistently and in compliance with
Sri Lanka Accounting Standards
prescribed by the Institute of Chartered
Accountants of Sri Lanka. Exceptions
to the historic cost convention of
accounting relate to dealing securities
and investment securities as described in
accounting policy 3.5.3.
No adjustments are made for
inflationary factors affecting these
Financial Statements.
3 Significant Accounting PoliciesThe Bank and the Group has
consistently applied the Accounting
Policies and previous year’s figures
and phrases have been rearranged
wherever necessary to confirm to the
current year’s presentation.
3.1 Basis of ConsolidationThe group Financial Statements includes
the consolidated results, assets and
liabilities of the Bank and its subsidiaries
made up to the financial year end. The
results of subsidiaries are included from
the date on which the Bank effectively
acquired control of each subsidiary. The
interest of outside shareholders of the
subsidiaries in the net assets and their
proportion of results grouped separately
in the Consolidated Balance Sheet and
Income Statement under the heading of
“Minority Interest”.
3.1.1 Subsidiaries
Subsidiaries are those enterprises
controlled by the Bank. Control exists
when the Company has the power,
directly or indirectly, to govern the
financial and operating policies of an
enterprise so as to obtain benefits from
its activities. The Financial statements
of subsidiaries are included in the
Consolidated Financial Statements
from the date that control effectively
commence until the date that control
ceases. The total Subsidiary Companies’
profits for the year are included in the
Consolidated Income Statement. The
assets and liabilities of the Subsidiary
Companies as at the Balance Sheet
date are included in the group Balance
Sheet.
3.1.2 Equity Accounted Investees
Equity Accounted Investees is an
enterprise in which the Bank has
significant influence but not control over
the financial and operating policies.
The Consolidated Financial Statements
include the group’s share of the total
recognised gain and losses of the Equity
Accounted Investees, SMB Kenenga
Investment Corporation Ltd, under
the equity method of accounting. The
carrying value of investment in the
Consolidated Balance Sheet is hereby
increases or decreases to recognise the
group share of retained profit and losses
of the Equity Accounted Investees since
the date of acquisition.
In the Bank’s Financial Statements,
investments in Subsidiary Companies
and Equity Accounted Investees are
accounted for at cost. Income is
recognised to the extent that dividend is
declared from the accumulated profit.
3.1.3 Transactions Eliminated on
Consolidated
Inter group balances and transactions,
and any unrealised gains arising from
inter group transactions, are eliminated
on preparing the consolidated Financial
Statements. Unrealised gains from
transactions with subsidiaries and
Associate Company are eliminated
to the extent of group interest in the
enterprise.
3.2 Taxation3.2.1 Income Taxation
Provision for taxation is based on the
elements of income and expenditure as
reported in the Financial Statements and
computed in terms of the provision of
Inland Revenue Act No. 10 of 2006 and
amendments thereto.
3.2.2 Deferred Taxation
Deferred tax assets and liabilities are
recognised for all temporary differences.
Deferred tax assets are recognised for
all deductible temporary differences,
carrying forward of unused tax credit
and tax losses, to the extent that it is
probable that taxable profit will be
available against which the deductible
temporary differences, and the carrying
forward of unused tax credits and
unused tax losses can be utilized.
The carrying amount of deferred tax
assets is reviewed at each Balance
Sheets date and reduced to the extent
that it is no longer probable that
Notes to the Financial Statements
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sufficient taxable profit will be available
to allow all or part of the deferred tax
assets to be utilised. Unrecognised
deferred tax assets are reassessed
at each Balance Sheet date and are
recognized to the extent that it has
become probable that future taxable
profit will allow the deferred tax assets
to be recovered.
Deferred tax assets and liabilities are
measured at tax rates that are expected
to apply to the year when the assets
are realised or liability is settled, based
on the tax rates and tax laws that have
been enacted or substantively enacted
as at the Balance Sheet date.
Income tax relating to items recognized
directly in equity is recognised in equity.
Deferred tax assets and deferred
tax liabilities are offset, if a legally
enforceable right exists to set off current
tax assets against current liabilities and
deferred taxes relate to the same taxable
entity and the same taxation authority.
3.3 Comparative FiguresThe figures and phrases of the previous
year have been rearranged wherever
necessary to conform to the current
years’ presentation.
3.4 Events after the Balance Sheet DateAll the material events after the Balance
Sheet date have been considered and
appropriate adjustment to /disclosures
have been made in the notes to the
financial statements.
3.5 Assets and Bases of Their Valuation
3.5.1 Loans and Advances to
Customers
Loans and advances are stated in the
Balance Sheet net of provisions for
possible bad and doubtful loans and
net of interest in suspense, which is not
accrued to revenue.
3.5.1.1 Provision for Loan LossesSpecific Provisions for possible loan
losses are based on a continuous review
of the loans and advances portfolio.
These provisions relate to identified
bad and doubtful advances. These
provisions are required under the
Finance Leasing (Amendment) Act No.
24 of 2005 and apply according to the
Central Bank Direction No. 2 of 2005.
In addition, as a matter of prudence,
general provisions are made wherever
necessary based on recognition criteria
as per Sri Lanka Accounting Standard
No. 36. Provisions are applied to write
off advances, in part or in whole, when
loans are considered partly or wholly
irrecoverable.
Specific provision for loan receivables is
arrived at using the following basis.
are made wherever necessary based
on recognition criteria as per Sri Lanka
Accounting Standard No. 36.
Provisions are used to write off
advances, in parts or in whole, when
leases are considered partly or wholly
irrecoverable.
Specific provision for lease receivables is
arrived at using the following basis.
Period Outstanding Classification Minimum Provision made net
of realisable value of security
6 to 12 months Sub-standard 20%
12 to 18 months Doubtful 50%
18 months and above Loss 100%
3.5.2 Finance Leases
Assets leased to customers under
agreements that transfer substantially
all the risks and rewards associated
with ownership other than legal title
are classified as finance leases. Lease
rentals receivable in the Balance Sheet
include total lease payments due net
of unearned lease interest income not
accrued to revenue, interest in suspense
and provision for bad and doubtful
recoveries.
3.5.2.1 Provisions for Lease ReceivableSpecific provision has been made
in relation to identifying possible
bad and doubtful losses based on a
continuous review of lease portfolio.
These provisions are required under
the Finance Leasing (Amendment) Act
No. 24 of 2005 and apply according
to the Central Bank Direction No. 2 of
2005. In addition, general provisions
3.5.3 Investments
3.5.3.1 Dealing SecuritiesInvestments in Companies, of which
shares are quoted, are valued at the
lower of cost or market value on the
Aggregated Portfolio basis. Adjustment
for fall in market value below cost if
relevant is accounted for by charging
the difference to the Income Statement.
3.5.3.2 Investment SecuritiesThese are acquired and held for yield
or capital growth in the medium/long
term. Such securities are recorded
at cost. Changes in Market values of
these Securities are not taken into
account unless, these are considered
to be permanent diminution in value.
Where the group interests in equity
is less than 20% and or in companies
where the Bank does not exercise
significant influence and/or control over
Period Outstanding Minimum Provision
made net of realisable
value of security
6 to 12 months 20%
12 to 18 months 50%
18 months and above 100%
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the financial and operating policies,
investments are valued at cost.
Unquoted Investments are stated at
cost.
3.5.3.3 Investments in Treasury Bills and BondsInvestments in Treasury Bills and Bonds
are reflected at the value of the Bills/
Bonds purchased and the discount/
premium accrued thereon. Discount
received/premium paid is taken on the
Income Statement based on a pattern
reflecting a constant periodic rate of
return.
3.5.3.4 Investment PropertiesInvestments in Land & Building that
are not occupied substantially for use
by or in the operations of the Bank
are classified as Investment Properties.
Investment Properties of the company
are stated at cost as stated in Note 21.
3.5.3.5 Investment in Real EstateLand purchase cost, development cost
and borrowing cost incurred during
the development period of real estate
projects have been capitalised to the
inventories.
3.5.4 Property, Plant & Equipment
3.5.4.1 Recognition and MeasurementsThe property, plant & equipment are
recorded at cost less accumulated
depreciation and impairment losses as
set out below.
Items of property, plant & equipment
are recognised upon disposal or when
no future economic benefits expected
from its use. Any gain or loss arising on
derecognition of the assets is included
in the Income Statement in the year the
asset is derecognised.
The cost of property, plant & equipment
is the cost of purchase or construction
together with any expenses incurred
in bringing the assets to its working
condition for its intended use.
Expenditure incurred for the purpose
of acquiring, extending or improving
assets of permanent nature by means
of which to carry on the business or
to increase the earning capacity of the
business has been treated as capital
expenditure.
The cost of the property, plant &
equipment is the cash price equivalent
at the recognition date. If payment is
deferred beyond normal credit terms,
the difference between the cash price
equivalent and the total payment
as interest over the period of credit
unless such interest is recognized in
the carrying amount of the item in
accordance with the allowed alternative
treatment in SLAS 20.
The carrying amount of the property,
plant & equipment are reviewed
for impairment when events or
changes in circumstances indicated
that the carrying amount may not be
recoverable.
3.5.4.2 Subsequent Costs/ Replacement of partsThe cost of replacing part of items
of property, plant & equipments is
recognised in the carrying amount of
the item if it is probable that the future
economic benefits embodied within
the part will flow to the Company and
its cost can be measured reliably. The
cost of day to day servicing of property,
plant & equipment are recognized in
Income Statement as it incurred.
When replacement costs are recognised
in the carrying amount of an item
of property, plant & equipment, the
remaining carrying amount of replaced
part is derecognised.
3.5.4.3 DepreciationDepreciation is provided on the assets
purchased and used during the year at
the following rates on the straight-line
basis.
Motor Vehicles 20% per annum
Computers 20% per annum
Office Equipment
& Machines 20% per annum
Furniture & Fittings 20% per annum
Leased Assets 20% per annum
Depreciation of an asset begins when it
is available for use and ceases at earlier
of the date that the asset is classified as
held for sale and the date that the asset
is recognised.
Leased assets are depreciated over the
shorter of the leased term and their
useful lives.
Depreciation is not provided for
freehold land.
3.5.5 Impairment of Assets
The carrying amount of Company’s
non-financial assets, other than
inventories and deferred tax assets,
are reviewed at each reporting date
to determine whether there is any
indication of impairments. If any such
indication exists, then asset’s recoverable
amount is eliminated. For goodwill and
intangible assets that have indefinite
lives or that are not yet available for use,
recoverable amount is estimated at each
reporting date.
An impairment loss is recognised if
the carrying amount of assets or its
cash-generating units exceeds its
recoverable amount. A cash-generating
unit is the smallest identifiable assets
group that generates cash flows that
largely are independent from other
assets and groups. Impairment losses
are recognised in Income Statement.
Impairment losses are recognised in
respect of cash-generating units and
are allocated to the units and then to
reduce the carrying amount of other
assets in the unit on prorate basis.
Notes to the Financial Statements Contd.
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The recoverable amount of an asset
or cash-generating unit is the greater
of its value in use and its fair value less
costs to sell. In assessing value in use,
the estimated future cash flows are
discounted to their present value using
pre tax discount rate that reflects current
market assessment of the time value of
money and the risks specific to the asset.
An impairment loss in respect of
goodwill is not reversed. In respect
of other assets, impairment losses
recognised in prior periods are
assessed at each reporting date for any
indications that the loss has decreased
or no longer exists. Any impairment
loss is reversed only to the extent that
asset’s carrying amount does not exceed
the carrying amount that would have
been determined, net of depreciation or
amortisation, if no impairment loss been
recognised.
3.5.6 Intangible Assets
Intangible assets comprise of the initial
acquisition cost of the license fee
at the inception for stock brokering
license. The cost is amortised using the
straight line basis at the rate of 20% per
annum commencing from the date of
acquisition. The amortised amount is
based on the best estimate of its useful
life, such that the cost is amortized
fully at the end of the useful life. The
amortisation cost is recognised as an
expense in the Income Statement.
3.5.7 Cash and Short Term Funds
Cash and cash equivalents are defined
as cash in hand, demand deposits and
short term highly liquid investments
which are readily convertible to know
the amount of cash and subject to
insignificant risk of change in the value.
Cash and short-term funds stated in the
Balance Sheet comprise cash balances in
hand and at banks and call investments.
For the purpose of cash flow statement,
cash and cash equivalents consist of
cash in hand at Bank, demand deposits
and securities purchase under resale
agreement.
3.6 Liabilities & Provisions3.6.1 Interest-Bearing Borrowings
Interest-bearing borrowings are
recognised initially at cost, net of any
transaction costs incurred. Subsequently
to initial recognition, interest bearing
borrowings are stated at amortised cost
with any difference between cost and
redemption value being recognised in
the income Statement over the period
of the borrowing. When borrowings
are repurchased or settled before
maturity, any difference between the
amount repaid and carrying amount is
recognised immediately in the Income
Statement.
3.6.2 Retirement Benefits
Sri Lanka Accounting Standard 16
(Revised 2006) – Employee Benefits,
which applies to financial statements
covering annual periods beginning on
or after 1 July 2007 was adopted by the
group with effect from 1 January 2008.
Company
The Company measures its retirement
benefit obligation based on the Gratuity
Formula Method as recommended by
the standard.
Key assumptions used are as follows;
Interest rate - 10%
Salary increment rate - 8.5%
Subsidiary Companies
Subsidiary Companies other than
Seylan Merchant Leasing PLC measure
their present value of defined benefit
obligation based on Gratuity Formula
Method as recommended by the
Standard. Seylan Merchant Leasing
measures their present value of defined
benefit obligation using the Projected
Unit Credit Method defined by the
Actuary.
The key assumptions used by the
Actuary are as follows;
Interest rate - 10%
Salary increment rate - 8.5%
As per the payment of Gratuity Act No.
12 of 1983 the liability to an employee
arises only on completion of 5 years of
continued service.
3.6.3 Employees’ Provident Fund and
Employees’ Trust Fund
Employees are eligible for Employees’
Provident Fund and Employees’ Trust
Fund contributions in accordance
with the respective statutes and
legislations. The Bank contributes 12%
and 3% of gross salary of employees
to the Employees’ Provident Fund and
Employees’ Trust Fund respectively.
3.6.4 Commitments and Contingent
Liabilities
All material capital commitments and
contingent liabilities of the bank and
group are disclosed in respective Notes
to the Accounts and all discernible risks
are accounted for in determining the
amount of other liabilities.
3.7 Events Occurring after the Balance Sheet DateAll material events occurred after the
Balance Sheet date has been considered
and appropriate adjustments/
disclosures have been made in the
Financial Statement where necessary.
3.8 Income Statements3.8.1 Interest Income from Loans and
Advances
Interest income is recognised on an
accrual basis. However, no accrued
interest income is recognised where any
portion of capital or interest is in arrears
for six months or more. In such cases
interest income is accounted for on a
cash basis.
3.8.2 Lease Income
The excess of aggregate lease rental
receivable over the cost of the leased
assets constitutes the total unearned
lease income at the commencement of
the lease. The unearned lease income
is taken into income over the term of
the lease on proportion to the declining
receivable balance. However, no
accrued interest income is recognised
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where any portion of capital or interest
is in arrears for six months or more. In
such cases interest income is accounted
for on a cash basis.
3.8.3 Operating Leases – Rental
Income
Rental income is recognised as revenue
on a straight line basis over the term
of lease. However, no accrued rental
income is recognised where any portion
of capital or interest is in arrears for six
months or more. In such cases rental
income is accounted for on a cash basis.
3.8.4 Interest Income from Other
Sources
Interest income from Government
Securities is recognised on time
proportion basis as discount on
purchase, over the period to maturity
or the date of sale. Income from other
interest baring investments is recognised
as revenue on an accrual basis.
3.8.5 Income from Fee Base
Activities Fee and Commission Income is
recognised on a cash basis.
3.8.6 Dividend Income
Dividend income is recognised on an
accrual basis in the period in which
dividend is declared.
3.8.7 Profit or Loss on Sale of
Marketable Securities
Profit or loss arising on sale of equity
shares, commercial papers and other
marketable securities is accounted for
on a cash basis.
3.8.9 Real Estate Income
Income is recognised when the
properties are sold and buyer has taken
the possession of such properties. For
this purpose properties are deemed to
be sold once 25% of the outright sales
price has been received.
3.8.10 Profit or Loss on Sale of
Property, Plant and Equipments
Profits or losses of a revenue nature
on the disposal of Property, Plant and
Equipments are accounted for in the
Income Statement.
3.8.11 Interest Expenses
3.8.11.1 Borrowing CostBorrowing costs are recognized as
an expense in the year in which they
are incurred except to the extent they
are capitalized in accordance with Sri
Lanka Accounting Standards No. 20 -
“Capitalisation of Borrowing Cost”
3.9 Segment ReportingA segment is a distinguishable
component of the Group that is
engaged in providing products or
services within a particular economic
environment, which is subject to risk
and rewards that are different from
those of other segments.
3.10 Cash Flow StatementsThe Cash Flow has been prepared by
using the “Direct Method” of preparing
Cash Flows. Cash and short-term funds
are comprised of cash in hand and cash
in Bank, demand deposits and securities
purchase under resale agreement.
Notes to the Financial Statements Contd.
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GROUP BANK 2008 2007 2008 2007
For the Year ended 31 December Rs. Rs. Rs. Rs.
4 Gross IncomeInterest Income (Note 5) 859,359,216 804,894,054 295,665,931 424,776,309
Other Income (Note 7) 90,113,957 139,184,923 38,995,056 76,221,484
949,473,173 944,078,977 334,660,987 500,997,793
5 Interest IncomeCustomer Advances 150,676,737 129,816,470 104,745,047 124,870,332
Treasury Bills & Placements with Other banks
& Financial Institutes 69,301,752 58,702,935 9,557,873 27,162,900
Lease Interest Income 413,550,568 515,317,823 140,583,848 203,055,085
Other Interest Income 225,830,159 101,056,826 40,779,163 69,687,992
859,359,216 804,894,054 295,665,931 424,776,309
6 Interest ExpensesCustomer Deposits 275,632,965 96,369,143 - -
Borrowings & Refinance 379,683,906 389,521,477 362,367,591 296,098,922
Treasury Bills Repurchased 8,493,044 34,871,555 8,493,044 34,871,555
Debentures 32,685,036 72,396,356 39,416,071 64,847,926
Other Interest expenses 66,549,037 26,068,167 16,230 4,420,715
763,043,988 619,226,698 410,292,936 400,239,118
7 Other IncomeDividend Income from Dealing Securities - Quoted 1,998,257 1,045,820 1,780,409 647,837
Dividend Income from Investment Securities - Unquoted 28,141 9,107 28,141 4,608
Dividend Received from Subsidiaries - - 9,436,467 39,573,140
Fee & Commission Income 41,975,801 38,434,680 13,936,939 7,841,338
Profit on Sale of Property , Plant & Equipment 2,207,207 4,716,816 - 4,656,816
Profit on Sale of Investment Properties 2,710,600 2,991,547 2,710,600 2,991,547
Profit/(Loss) on Sale of Investment Securities (697,496) 146,372 - 159,069
Profit on Disposal of Subsidiary 5,787,902 - 6,630,036 -
Capital Gain on Government Securities 751,407 197,740 717,146 -
Amortisation on premium of T Bond (21,184) - - -
Others 35,373,322 91,642,841 3,755,318 20,347,129
90,113,957 139,184,923 38,995,056 76,221,484
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GROUP BANK 2008 2007 2008 2007
For the Year ended 31 December Rs. Rs. Rs. Rs.
8 Operating ExpensesOperating Expenses include the following :-
Directors’ Emoluments 7,088,970 6,960,077 - -
Auditors’ Emoluments
Audit Fees 2,278,321 1,140,000 900,456 385,000
Other Audit Fee - 45,250 - 12,150
Non Audit Fee 372,200 485,888 - 112,023
Depreciation 18,853,531 17,524,483 5,908,719 6,849,013
Donations 3,900,261 3,377,681 38,000 1,047,681
Expenses on Litigation 3,765,254 3,029,716 2,366,770 2,272,363
Employees Providend Fund 8,447,584 6,723,721 917,548 1,808,660Employees Trust Fund 2,111,604 1,681,557 228,887 452,165
Provision for Employee Retirement Benefits is shown
separately in Note No 29.a
9 Loan Losses and ProvisionsProvision for Bad & Doubtful Debts during the period 337,826,433 11,485,573 305,648,742 4,769,524
Direct Write Off 40,355,513 22,309,572 28,212,163 7,353,286
378,264,751 33,795,145 333,860,905 12,122,810
10 TaxationIncome Tax on profits (Note 10.a) 2,356,770 1,731,070 - -
Tax attributable to the Share of profit of Associates - - - -
Under provision in Previous Years (934,449) - - -
Transfer to / (from) Deferred Taxation (Note No. 10.b) 3,694,258 (7,369,253) - -
Deductible Tax Credits - (882,430) - -
With Holding Tax on Dividend 1,228,462 2,890,652 - -
ESC irrecoverable 35,601,511 - 35,601,511 -
41,946,552 (3,629,961) 35,601,511 -
10.a Reconciliation of Accounting Profit & the Income Tax ExpenseProfit Before Taxation (655,132,415) 47,693 (583,074,018) 266,903
Aggregate Disallowed Expenses 1,056,631,384 735,280,721 214,614,032 (29,007,774)
Aggregate Allowable expenses (1,181,198,617) (1,140,793,607) (364,442,098) (307,517,992)
Aggregate Allowable Income 412,193,666 581,164,875 412,193,666 587,757,706
Aggregate Disallowed Income (127,152,896) (168,116,953) (119,998,195) (252,001,029)
Profit From the Business (494,658,878) 7,582,729 (440,706,613) (502,186)
Loss From the Business 500,118,985 - - -
Total Statutory Income 5,460,107 7,582,729 (440,706,613) (502,186)
Other Income 4,683,021 - - -
Tax Loss Claimed during the Year (3,509,010) (2,636,815) - -
Taxable Profit/( Loss) 6,634,118 4,945,914 (440,706,613) (502,186)
Taxation Thereon 2,321,941 1,731,070 - -
SRL @ 1.5% (2007 - 1%) 34,829 -
Total Tax Liability 2,356,770 1,731,070 - -
Notes to the Financial Statements Contd.
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Group tax expense is based on the taxable profits of the individual Companies within the group .
Income Tax provision of Seylan Merchant Bank PLC being a quoted Public Company, has been calculated on its adjusted profit at
35% in terms of Inland Revenue Act No. 10 of 2006, and amendments thereto.
Taxation details of the other companies in the Group are as follows.
Income Tax provision of Seylan Merchant Leasing PLC being a quoted Public Company has been calculated on its adjusted profit at
35% in terms of Inland Revenue Act No. 10 of 2006, and amendments thereto. No provision has been made during the year for
income tax due to tax losses.
Profits of SMB Real Estate Limited are liable to income tax at 35%.
Profits of SMB Money Brokers (Pvt) Ltd. are liable to income tax at 35%.
Profits of SMB Securities (Pvt) Ltd. are liable to income tax at 35%.
10.b Deferred tax on Seylan Merchant Bank PLC
GroupSeylan Merchant Bank PLC and Seylan Merchant Leasing PLC have not recognised deferred tax asset since the temporary differences
are not likely to reverse in the foreseeable future. The deferred tax asset on each temporary difference which were not recognised
in the financial statements are disclosed below.
Details of the Group unaccounted deferred taxation as at the end of year 2008 are given below.
Temporary Temporary
difference Tax Effect difference Tax Effect
31.12.2008 31.12.2008 31.12.2007 31.12.2007
Taxable Temporary Differences
Balance as at 1 January (203,948,705) (71,382,047) 276,247 96,686
Amount originating/(reversing) (165,925,260) (58,073,841) (204,224,952) (71,478,733)
Balance as at 31 December (369,873,965) (129,455,888) (203,948,705) (71,382,047)
Deductible Temporary Differences
Balance as at 1 January 6,989,337 2,446,268 7,648,219 2,676,877
Amount originating/(reversing) (422,405) (147,842) (658,882) (230,609)
Balance as at 31 December 6,566,932 2,298,426 6,989,337 2,446,268
Tax Losses
Balance as at 1 January 458,809,536 160,583,338 407,848,855 142,747,099
Amount originating/(reversing) 218,445,647 76,455,976 50,960,681 17,836,238
Balance as at 31 December 677,255,183 237,039,314 458,809,536 160,583,338
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Details of the deferred taxation provided during period for the other subsidiaries in the group are given below.
31.12.2008 31.12.2007
Balance as at the beginning of the year (7,369,253) 483,005
SMB Real Estate Limited 5,071,035 (6,941,811)
SMB Securities (Pvt.) Ltd. (1,500,254) -
SMB Money Brokers (Pvt) Ltd 123,476 (427,442)
Reverse to P&L - (483,005)
Balance as at the end of the year (3,674,996) (7,369,253)
The details of unaccounted deferred taxation is as follows.
Temporary Tax Effect Temporary Tax Effect
difference difference
31.12.2008 31.12.2008 31.12.2007 31.12.2007
Taxable Temporary Differences
Balance as at 1 January (4,055,716) (1,419,501) (8,209,455) (2,873,309)
Amount originating/(reversing) (262,925,708) (92,023,998) 4,153,739 1,453,808
Balance as at 31 December (266,981,424) (93,443,499) (4,055,716) (1,419,501)
Deductible Temporary Differences
Balance as at 1 January 2,955,473 1,034,416 5,265,783 1,843,024
Amount originating/(reversing) (1,777,972) (622,290) (2,310,310) (808,609)
Balance as at 31 December 1,177,501 412,126 2,955,473 1,034,416
Tax Losses 173,884,449 60,859,557 183,181,911 64,113,669
Amount originating/(reversing) 203,387,361 71,185,576 (9,297,462) (3,254,112)
Balance as at 31 December 377,271,810 132,045,133 173,884,449 60,859,557
Deferred Tax Asset as at 31 December 39,013,760 60,859,557
11 Earnings/(Loss) per Share GROUP BANK 2008 2007 2008 2007
Net Profit/(Loss) attributable to Ordinary Share holders (Rs.) (688,100,565) (2,731,510) (618,675,530) 266,904
No. of Shares - Voting 44,503,120 44,503,120 44,503,120 44,503,120
No. of Shares - Non Voting 100,000,000 100,000,000 100,000,000 100,000,000
Basic Earnings/(Loss) per Share - Voting (15.447) (0.050) (13.880) 0.005
Basic Earnings/(Loss) per Share - Non Voting (6.874) (0.005) (6.180) 0.000
The calculation of Earnings Per Share is based on the Net Profit/(Loss) attributable to Ordinary shareholders divided by the no of
shares. (Ordinery shares outstanding during the period).
Notes to the Financial Statements Contd.
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GROUP BANK 2008 2007 2008 2007
As at 31 December Rs. Rs. Rs. Rs.
12 Cash and Short term FundsCash in hand and Balances with Banks 17,636,423 73,999,228 10,068,966 60,261,731
Bank Over Draft (59,745,594) - (59,745,594) -
(42,109,171) 73,999,228 (49,676,628) 60,261,731
13 Treasury Bills and Bonds Eligible For Rediscounting with the Central BankTreasury Bills (Note 13.a) 126,448,039 133,852,678 - -
Treasury Bonds (Note 13.a) 99,468,705 117,160,665 47,896,922 48,723,918
225,916,744 251,013,343 47,896,922 48,723,918
13.a Treasury Bills and Bonds Eligible For Rediscounting with the Central BankTreasury Bills maturing within one year 126,448,039 133,852,678 - -
Treasury Bills maturing after one year - - - -
Treasury Bonds maturing within one year 51,571,783 68,436,747 - -
Treasury Bonds maturing after one year 47,896,922 48,723,918 47,896,922 48,723,918
Total Treasury Bills and Bonds 225,916,744 251,013,343 47,896,922 48,723,918
14 Government and other securities held for dealing purposes
Investments in -Quoted Equity Securities (note 14.d) - 132,481 - 132,481
Total - 132,481 - 132,481
14.a Investments in Quoted Equity Securities Held by Seylan Merchant Bank PLC.
31.12.2008 31.12.2007 No. of Shares Cost Market Value No. of Shares Cost Market Value
Manufacturing
Magpek Exports PLC. 125,000 5,000,000 - 125,000 5,000,000 -
5,000,000 - 5,000,000 -
Footwear & Textiles
Pugoda Textile Mills PLC. 7,500 252,525 - 7,500 252,525 -
252,525 - 252,525 -
Hospital
Nawaloka Hospital PLC - - 100,000 532,481 230,000
- - 532,481 230,000
Total Dealing Securities 5,252,525 - 5,785,006 230,000
Less : Provision for Diminution in Value (5,252,525) - (5,652,525)
- - 132,481 230,000
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15 Placements with and Loans to Other Banks and Financial Institutions
GROUP BANKAs at 31 December 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Seylan Bank PLC. 75,185,993 87,237,826 -
Other Bank and Financial Institutions 123,701,630 30,423,984 - -
198,887,623 117,661,810 - -
16 Placements with and Loans to Non Financial InstitutionsNon Financial Institutions 59,003,102 98,338,842 59,003,102 98,338,842
59,003,102 98,338,842 59,003,102 98,338,842
17 Investment Securities GROUP BANKAs at 31 December 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Quoted Equity Investments (Note 17.a)
Held by Seylan Merchant Bank PLC. 8,574,711 30,792,675 8,574,711 30,792,675
Held by SMB Money Brokers (Pvt) Ltd. 271,790 857,193 - -
Held by SMB Real Estate (Pvt) Ltd. - 14,831,487 - -
8,846,501 46,481,355 8,574,711 30,792,675
Non-Quoted Equity Investments (Note 17.b)
Held by Seylan Merchant Bank PLC. - 68,661,800 - 68,661,800
Held by SMB Real Estate (Pvt) Ltd. - 5,680,000 -
- 74,341,800 - 68,661,800
Quoted Debenture Investments
- Non Current (Note 17.c.1)
Held by Seylan Merchant Bank PLC. 1,047,203 - 8,997,203 7,950,000
1,047,203 - 8,997,203 7,950,000
Non - Quoted Debenture Investments
- Non Current (Note 17.c.2)
Held by Seylan Merchant Bank PLC. - - - -
- - - -
Total 9,893,704 120,823,155 17,571,914 107,404,475
Notes to the Financial Statements Contd.
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17.a Quoted Equity Investments 31.12.2008 31.12.2007 No. of shares Cost Market Value No. of shares Cost Market Value
Held by Seylan Merchant Bank Ltd.
Banking, Finance & Insurance
The Finance Co. PLC 108,997 5,651,738 2,970,168 108,997 5,651,738 6,594,319
5,651,738 2,970,168 5,651,738 6,594,319
Manufacturing
Blue Diamond Jewellery Worldwide PLC. 3,180,280 47,817,531 4,452,392 3,180,280 47,817,531 8,904,784
Metal Recyclers Colombo PLC. 69 3,105 - 69 3,105 -
Royal ceramics Co PLC. - - - 41,000 2,012,845 1,312,000
Ceylon Glass Co PLC. - - - 265,000 1,012,222 530,000
Grain Elivators Co PLC. - - - 38,700 957,876 503,100
47,820,636 4,452,392 51,803,579 11,249,884
Beverage Food & Tobacco
Kotmale Holding PLC 1,000 15,724 9,500 15,000 235,814 165,000
15,724 9,500 235,814 165,000
Land & Property
Ceylinco Seylan Development PLC. 1,020,000 10,000,000 4,590,000 1,020,000 10,000,000 9,180,000
Ceylinco Seylan Development PLC. 223,343 3,284,719 1,005,044 223,343 3,284,719 2,010,087
13,284,719 5,595,044 13,284,719 11,190,087
Power & Energy
Lanka Indian Oil Co PLC. - - - 40,400 2,131,050 868,600
- - 2,131,050 868,600
Hotels & Travels
Galadari Hotel PLC. - - - 15,400 280,154 146,300
Reefcomber Hotel Co PLC. - - - 107,700 242,302 96,930
Ruhunu Hotels PLC - - - 10,000 212,993 67,500
- - 735,449 310,730
Total Quoted 66,772,817 13,027,104 73,842,349 30,378,620
Less - Provision for Diminution in value (58,198,106) - (43,049,674) -
Net Carrying Amount of
Investments (Bank) 8,574,711 13,027,104 30,792,675 30,378,620
Held by SMB Money Brokers (Pvt) Ltd.
Banking, Finance & Insurance
Commercial Bank PLC.
Preference shares of Rs. 10/- each - - - 50,000 585,403 450,000
Ordinary Shares of Rs.10/- each - - - - - -
- - 585,403 450,000
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17.a Quoted Equity Investments contd. 31.12.2008 31.12.2007 No of shares Cost Market Value No of shares Cost Market Value
Manufacturing
Sierra Cables PLC 5,400 16,200 7,020 5,400 16,200 9,180
16,200 7,020 16,200 9,180
Telecommunication
Dialoge Telecom PLC 9,000 255,590 43,200 9,000 255,590 180,000
255,590 43,200 255,590 180,000
Net Carrying Amount of Investments 271,790 50,220 857,193 639,180
Held by SMB Real Estate (Pvt) Ltd.
Banking, Finance & Insurance
Ceylinco Insurance PLC. - - 81,400 14,831,487 15,059,000
- - 14,831,487 15,059,000
Total Carrying Amount of
Quoted Investments (Group) 8,846,501 13,077,324 46,481,355 46,076,800
17.b Non Quoted Equity Investments 31.12.2008 31.12.2007 No of shares Cost No of shares Cost
Held by Seylan Merchant Bank Ltd.
Ceylinco Sports Complex Ltd. 300,000 3,000,000 300,000 3,000,000
Ceylinco Investment & Realty 100,000 1,000,000 100,000 1,000,000
Seraka Investment Ltd. (Note 17.b.1.) 5,655,900 48,645,300 5,655,900 48,645,300
South Asian Travels 30,000 300,000 30,000 300,000
Ceylinco Express Ltd. 37,050 370,500 37,050 370,500
Ceylinco Savings Bank Ltd 1,189,600 11,896,000 1,189,600 11,896,000
Ceylinco Coloured Stone (Pvt) Ltd. 500,000 5,000,000 500,000 5,000,000
Openarc Global Solutions (Pvt) Ltd. 45,000 450,000 45,000 450,000
70,661,800 70,661,800
Less- Provision for Diminution in Value - (70,661,800) (2,000,000)
- 68,661,800
17.b.1. The investment made in the Seraka Investment Limited is 10% Non cumulative Non Redeemable Preference Shares
17.c Investment in Debentures17.c.1 Quoted Debenture Investments
31.12.2008 31.12.2007 No of shares Cost No of shares Cost
Seylan Merchant Leasing PLC. 79,500 7,950,000 79,500 7,950,000
Seylan Bank PLC 10,000 1,047,203
8,997,203 7,950,000
Net Carrying Amount of Investments 8,997,203 7,950,000
Notes to the Financial Statements Contd.
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17.c.2 Unquoted Debenture Investments Contd.
31.12.2008 31.12.2007 No of shares Cost No of shares Cost
Ceylinco Automobiles Ltd 17,600,000 - -Less- Provision for Diminution in Value (17,600,000) - -
8,997,203 7,950,000
18 Loans and Advances GROUP BANK 2008 2007 2008 2007
As at 31 December Rs. Rs. Rs. Rs.
Staff Loans 973,303 689,225 973,303 689,225Other Loans 1,231,727,512 1,070,075,498 927,279,115 983,648,946 1,232,700,815 1,070,764,723 928,252,418 984,338,170
Less:Loan loss Provision (Note 18.c) (243,304,157) (24,559,527) (243,304,157) (24,559,527) Interest in suspense (Note 18.c) (33,076,486) (73,244,228) (33,076,486) (73,244,228) 956,320,172 972,960,968 651,871,775 886,534,416
18.a Movement in Loan Loss Provision 2008 2007 Specific General Specific General
GROUPBalance brought Forward 120,496,998 - 112,019,995 -Additional Provision made - Loans 218,744,630 - 2,431,876 -Additional Provision made - Leases 89,847,616 - 9,053,697 -Reversal of Provision for write off - - (3,008,570) -Transfer from /to General / Specific Reserve 429,089,244 - 120,496,998 -
Loan and Advances
BANK Specific General Specific General
Balance brought Forward 80,836,229 - 79,075,275 -Additional Provision made - Loans 218,744,630 - 2,431,876 -Additional Provision made - Leases 57,895,540 - 2,337,648 -Reversal of Provision for write off - - (3,008,570) -Transfer from/to General/Specific Reserve 357,476,399 - 80,836,229 -
18.b Movement in Interest in Suspense GROUP BANK 2008 2007 2008 2007
As at 31 December Rs. Rs. Rs. Rs.
Balance Brought forward 131,599,971 121,325,311 105,705,408 107,229,429Interest Suspended during the year 71,403,187 61,890,453 21,999,528 16,153,951Interest Recovered during the year (112,712,198) (51,615,793) (65,811,213) (17,677,972)Reversal of Interest for write off - - - - 90,290,960 131,599,971 61,893,723 105,705,408
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18.c Analysis for Provision for Loan Losses and Interest in Suspense
GROUP BANK As at 31 December As at 31 December
2008 2007
Loan Loss Interest in Loan Loss Interest in
Provision Suspense Provision Suspense
GROUPLoans and Advances 243,304,157 33,076,486 24,559,527 73,244,228
Lease Rental Receivable 185,785,087 57,214,475 95,937,471 58,355,743
429,089,244 90,290,960 120,496,998 131,599,971
BANKLoans and Advances 243,304,157 33,076,486 24,559,527 73,244,228
Lease Rental Receivable 114,172,242 28,817,238 56,276,702 32,461,180
357,476,399 61,893,724 80,836,229 105,705,408
18.d Non performing assets included in the Bills of Exchange ,Loans and advances, and lease rentals receivable on which
interest is not being accrued are as follows.
GROUP BANK As at 31 As at 31
December December December December
2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Loans and Advances 163,292,906 99,817,910 163,292,906 99,817,910
Lease Rentals Receivable 333,863,521 264,080,048 148,622,729 146,471,666
497,156,427 363,897,958 311,915,635 246,289,576
18.e Concentration of Credit RiskSector wise analysis of Bank’s credit portfolio given below reflects the Bank’s exposure to credit risk in the various sectors of the
economy.
GROUP BANK 2008 2007 2008 2007
As at 31 December Rs. Rs. Rs. Rs.
Foods, Beverages and Tobacco 43,046,986 49,394,339 10,526,968 18,226,057
Agriculture, Agro Business and Fisheries 255,382,378 293,787,809 62,452,738 108,404,999
Textiles and Wearing apparel 93,231,296 107,320,684 22,799,340 39,600,345
Wood and Paper products 69,811,951 80,411,036 17,072,233 29,670,933
Rubber and Leather products 91,670,006 105,427,565 22,417,533 38,901,802
Metals , Chemicals and Engineering 181,109,599 208,307,792 44,289,627 76,863,659
Hotels 40,593,531 46,798,729 9,926,985 17,268,301
Services 832,613,465 957,767,250 203,612,288 353,407,304
Others 622,731,528 716,202,079 152,286,501 264,271,980
2,230,190,740 2,565,417,283 545,384,213 946,615,380
Notes to the Financial Statements Contd.
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18.f Loans and Advances - F & G Property Developers (Pvt) LtdLoans and Advances of the Group includes Loans of Rs. 12Mn and 7.258Mn were granted by Seylan Merchant Leasing PLC
to Finance and Guarantee Property Developers Ltd, a related company on 04 June and 31 December 2008 respectively. The
borrower company has provided land and buildings as security and effected mortgage bonds for the loans subsequent to the
Balance sheet date, on 06 and 22 January 2009 respectively. The loans outstanding as at the balance sheet date were Rs.6.389Mn
and Rs. 7.258Mn respectively totalling Rs. 13.647Mn of which the net exposure to the Company of Rs. 5.897Mn, after allowing for
the value of the securities mortgaged, has been provided for. The Board of Directors is of the opinion that the mortgage bonds are
valid and the balance of the loans totalling Rs. 7.750Mn covered by the mortgage are recoverable.
19 Lease Rentals Receivable GROUP BANK 2008 2007 2008 2007
As at 31 December Rs. Rs. Rs. Rs.
19.a Lease Rentals Receivable after One YearFrom the Balance Sheet date 1,547,529,562 1,264,995,906 613,963,705 443,332,742
Less: Unearned Income (400,848,476) (403,271,919) (174,540,730) (126,122,809)
Less: Pre-paid Rentals (28,355,829) (76,183,833) (15,607,214) (54,476,507)
1,118,325,257 785,540,154 423,815,761 262,733,427
Less: Interest in Suspense (Note 18.c) (57,214,476) (58,355,743) (28,817,238) (32,461,180)
Less: Loan Loss provision (Note 18.c) (185,785,087) (95,937,471) (114,172,242) (56,276,702)
875,325,694 631,246,940 280,826,281 173,995,545
19.b Lease Rentals Receivable after One Year & within Five YearsFrom the Balance Sheet date (note 19.C) 1,330,188,123 2,133,570,139 264,557,933 826,544,531
Less: Unearned Income (224,437,025) (395,891,480) - (122,467,333)
1,105,751,098 1,737,678,659 264,557,933 704,077,198
19.c Lease Rentals Receivable after Five YearsFrom the Balance Sheet date 7,077,232 13,264,559 - -
Less: Unearned Income (962,845) (1,768,056) - -
6,114,387 11,496,503 - -
19.d Lease Rentals Receivables 1,358,543,952 2,188,046,645 280,165,147 859,313,711
Less : Deposit of Rentals (28,355,829) (54,476,506) (15,607,214) (32,769,180)
1,330,188,123 2,133,570,139 264,557,933 826,544,531
19.e The Group lease rental receivable includes a lease facility of Rs. 43,478,260.87 granted by Seylan Merchant Leasing PLC to
the Golden Key Eye Hospital Ltd, a related company which is a subsidiary of Golden Key Credit Card Company Ltd on 29th May
2007.The assets under lease are hospital equipments and were invoiced to Seylan Merchant Leasing PLC. The Directors are of the
opinion that the current value of these hospital equipments has not diminished significantly since then. The capital outstanding on
this lease facility as at 31 December 2008 was Rs. 37,578,474. Since 31st December 2008 Golden Key Eye Hospital Ltd. has paid
Rs. 1,580,232/- towards the repayment of this facility.
In addition to the leased assets Seylan Merchant Leasing PLC holds a secondary concurrent mortgage with Central Finance
Company PLC. for Rs. 50 Million over commercial property at Cotta Road, Rajagiriya worth over 700mn which houses the said
hospital.
Seylan Merchant Leasing PLC has made a claim to the Attorney General of Sri Lanka for the amount due from Golden Key Eye
Hospital Ltd consequent to an interim order of the Supreme Court dated 27.04.2009 on the Fundamental Rights application No.
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191/09 filed by deposit holders of Golden Key Credit Card Company Ltd. which extended to associate and subsidiary companies as
well.The Company has made a claim in compliance with the order calling upon the affected parties to submit evidence of proof to
grant relief. The Board of Directors is of the opinion that this lease is recoverable.
20 INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES.
2008 2007Name Of The Company Principal Cost As At Cost As At
Activity % Holding No Of Shares 31/12/2008 % Holding No Of Shares 31/12/2007
20.a Held by Seylan Merchant Bank PLC.
Investments in Subsidiaries - QuotedSeylan Merchant Leasing PLC Leasing of
properties both
movable &
immovable 80.88 18,370,791 199,645,425 83.95 19,069,057 208,290,267
Investments in Subsidiaries - UnquotedSMB Real Estate Ltd. Property
Development
Activities 100.00 1,260,007 61,801,400 100.00 1,050,000 48,500,000
SMB Money Brokers(Pvt) Ltd Money Market
Activities 51 1,275,000 12,750,000 51 1,275,000 12,750,000
SMB Securities (Pvt) Ltd. Stock Brokering
Activities 49.50 5,000,000 50,000,000 49.50 5,000,000 50,000,000
324,196,825 319,540,267
20.b Held by SMB Money Brokers (Pvt) Ltd - Quoted
Seylan Merchant Leasing PLC Leasing of
properties both
movable &
immovable 1.89 359,850 3,995,418 1.89 359,850 3,995,418
20.c Held by SMB Real Estate Limited - Quoted
Seylan Merchant Leasing PLC Leasing of
properties both
movable &
immovable 0.35 80,267 1,284,278 0.35 80,267 1,284,278
SMB Securities (Pvt) Ltd. Stock Brokering
Activities 47.52 4,800,000 48,000,000 47.52 4,800,000 48,000,000
20.d Investments in Associates
SMB Kenenga Investment Investment Banking 49.00 4,900,000 49,000,000 49.00 4,900,000 49,000,000
Corporation Ltd. -
Balance as at 31st December 4,900,000 49,000,000 4,900,000 49,000,000
Notes to the Financial Statements Contd.
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GROUP BANK As at 31 As at 31
December December December December
2008 2007 2008 2007
Rs. Rs. Rs. Rs.
20.d 1 GroupInvestment At Cost 49,949,850 49,000,000Share of Profit After Tax 4,365,092 949,850Balance as at 31 December 54,314,942 49,949,850
21 Investment PropertiesBalance as at 01 January 27,505,400 23,186,650 27,505,400 23,186,650Add : Additions during the year - 15,000,000 - 15,000,000Less : Disposals (11,189,400) (10,681,250) (11,189,400) (10,681,250)Balance as at 31 December 16,316,000 27,505,400 16,316,000 27,505,400
21.a Details of Investment Properties GROUP BANK
December December December December
2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Property Location Cost Market Value Cost Market Value Cost Market Value Cost Market Value
Maradana Road, Borella. - 18,250,000 11,189,400 18,250,000 - 18,250,000 11,189,400 18,250,000
Halpe Village, Katana 647,000 855,000 647,000 855,000 647,000 855,000 647,000 855,000
Dorakumbura, Kurunegala 669,000 669,000 669,000 669,000 669,000 669,000 669,000 669,000
Nugegoda,Kotte 15,000,000 15,030,000 15,000,000 15,030,000 15,000,000 15,030,000 15,000,000 15,030,000
16,316,000 34,804,000 27,505,400 34,804,000 16,316,000 34,804,000 27,505,400 34,804,000
22 Property, Plant and EquipmentBANK
Computer Office machine Furniture Motor 31.12.08 31.12.07
Equipment & equipment & Fittings Vehicles Total Total
Rs Rs Rs Rs Rs Rs
Cost / ValuationBalance as at 01 January 38,859,347 12,083,325 13,439,994 5,657,555 70,040,221 75,725,774Additions for the Year 1,051,038 93,068 796,483 114,783 2,055,372 1,626,442Surplus on revaluation - - - - - (7,311,995)Disposals - - (39,000) - (39,000) -As at 31 December 39,910,385 12,176,393 14,197,477 5,772,338 72,056,593 70,040,221
Accumulated DepreciationBalance as at 01 January 33,939,208 8,398,425 10,255,056 5,500,307 58,092,996 54,742,448Charge for the year 2,971,873 1,363,810 1,304,513 268,523 5,908,719 6,849,013Disposals - - - - - (3,498,465)As at 31 December 36,911,081 9,762,235 11,559,569 5,768,830 64,001,715 58,092,996
Capital Work in ProgressNet book value as at 31.12.08 2,999,304 2,414,158 2,637,908 3,508 8,054,878 11,947,225
Net book value as at 31.12.07 4,920,139 3,684,900 3,184,938 157,248 11,947,225
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GROUP Free Hold Computer Office machine Furniture Motor 31.12.08 31.12.07
Land Equipment & equipment & Fittings Vehicles Total Total
Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Cost / ValuationBalance as at 01 January 326,316 68,468,578 24,803,064 27,286,621 13,099,815 133,984,394 125,794,468
Additions for the Year - 15,873,264 1,731,634 4,745,048 1,401,783 23,751,729 18,477,833
Disposals - - (13,875) (158,745) (3,949,100) (4,121,720) (10,287,907)
Write Off (326,316) - - - (1,037,281) (1,363,597) -
As at 31 December - 84,341,842 26,520,823 31,872,924 9,515,218 152,250,806 133,984,394
Accumulated DepreciationBalance as at 01 January - 42,192,847 17,262,525 16,384,527 10,568,217 86,408,116 74,878,942
Charge for the year - 9,790,811 3,110,273 4,352,744 1,599,703 18,853,531 17,524,483
Disposals - - (10,637) (82,017) (3,014,755) (3,107,409) (5,995,309)
As at 31 December - 51,983,658 20,362,161 20,655,254 9,153,165 102,154,238 86,408,116
Net book value as at 31.12.08 - 32,358,184 6,158,662 11,217,670 362,053 50,096,568 -
Net book value as at 31.12.07 326,316 26,275,731 7,540,539 10,902,094 2,531,598 47,576,278
23 Intangible Assets GROUP BANKAs at 31 December 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Balance as at 01 January 26,847,978 28,286,262 - -
Payment made during the Year - - -
Amortised during the year (1,438,284) (1,438,284) - -
Balance as at 31 December 25,409,694 26,847,978 - -
The intangible assets of the Group comprised of the payment made for member license fee of Colombo Stock Exchange. This
amount has been amortised over 20 years on straight line basis to the income statement.
GROUP BANKAs at 31 December 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
24 Other AssetsDeposits & Prepayments 3,420,453 61,849,754 3,234,404 42,939,572
Sundry Debtors 27,616,250 60,997,382 - -
Land Stock -Real Estate (Note 37.C) 1,691,853 19,921,984 1,691,853 1,691,853
Easy Payment Debtors - SMB Real Estate Limited - 23,432,086 - -
Other Assets 261,574,796 92,175,578 38,431,826 78,843,310
294,303,352 258,376,784 43,358,083 123,474,735
Other assets of the Bank includes Rs. 13.3Mn and Seylan Merchant Leasing PLC includes Rs. 21.1Mn Economic Service Charge
receivables.
Notes to the Financial Statements Contd.
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25 Deferred Taxation GROUP BANKAs at 31 December 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Balance as at the beginning of the Period 7,369,253 - - -
Provisions made during the year for subsidiaries (5,194,511) 7,369,253 - -
Reversal made during the year 1,500,254 - - -
Balance as at the end of the Period - - - -
3,674,996 7,369,253 - -
BankSeylan Merchant Bank PLC has not recognised deferred tax asset, since it is not possible that future taxable profits will be available
against which Company can utilise the benefits there from. The details of unaccountinted differed taxtation has been disclosed in
note no 10.b to the Financial Statament
GROUP BANKAs at 31 December 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
26 DepositsSavings 85,060,834 40,198,180 - -
Fixed Deposits 1,483,802,777 1,097,049,828 - -
1,568,863,611 1,137,248,009 - -
27 BorrowingsPromissory Notes/FD 1,359,268,658 1,563,191,126 1,427,218,641 1,260,495,057
Borrowings under Repo’s 43,617,648 69,814,312 43,617,648 69,814,312
Refinance Borrowings 5,334,448 7,139,884 5,176,448 7,139,884
Other Borrowings 340,715,309 353,795,414 185,509,854 410,312,697
1,748,936,063 1,993,940,735 1,661,522,591 1,747,761,950
28 Group Balances PayableName of The Company
Seylan Bank Ltd. 197,848,000 153,000,000 197,848,000 153,000,000
197,848,000 153,000,000 197,848,000 153,000,000
28.a Rs.350 Mn Lease portfolio has been pleadged to Seylan Bank PLC as security to for the Treasury Loan and the Temporary
Overdraft of Rs.30Mn.
28.b Treasury Loan of Rs.153 Mn has been obtained from Seylan Bank PLC. under ordinary market terms and conditions.
29 Other Liabilities GROUP BANKAs at 31 December 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Accrued Expenses 18,597,575 41,753,095 1,564,593 5,084,103
Provision for Gratuity (Note 29 a) 8,957,446 8,007,036 1,918,126 2,955,473
Others 359,252,797 364,039,470 59,925,342 221,853,254
386,807,818 413,799,601 63,408,061 229,892,830
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29.a Provision for Gratuity GROUP BANKAs at 31 December 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Balance as at the beginning of the period 8,007,036 8,573,932 2,955,473 5,265,783
Transitional Liability 966,500 - - -
Gratuity Charge 2,721,283 - 424,719 -
Interest Cost 845,472 - 252,302 -
Payments (2,366,520) (2,027,124) (2,400,912) (2,027,124)
(Gain)/Loss arising from changes in the
assumptions or due to (over)/under (1,216,325) - 686,545 -
Provision made during the year - 1,460,228 - -
Transfers - - - (283,186)
Balance as at end of the period 8,957,446 8,007,036 1,918,126 2,955,473
GROUP BANKAs at 31 December 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
30 Debentures 340,308,507 506,768,585 255,174,402 395,726,585
340,308,507 506,768,585 255,174,402 395,726,585
30.a Bank
Unquoted
August 1998 Unsecured Redeemable Debentures of each Rs 100/= 50,000,000
October 1998 Unsecured Redeemable Debentures of each Rs 100/= 130,090,000
May 1999 Unsecured Redeemable Debentures of each Rs 100/= 106,000,000
December 1999 Unsecured Redeemable Debentures of each Rs 100/= 61,670,000
July 2000 Unsecured Redeemable Debentures of each Rs 100/= 55,730,000
February 2001 Unsecured Redeemable Debentures of each Rs 100/= 3,200,000
July 2001 Unsecured Redeemable Debentures of each Rs 100/= 52,400,000
January 2002 Unsecured Redeemable Debentures of each Rs 100/= 47,740,000
February 2003 Unsecured Redeemable Debentures of each Rs 100/= 400,000,000
February 2004 Unsecured Redeemable Debentures of each Rs 100/= 200,000,000
September 2004 Unsecured Redeemable Debentures of each Rs 100/= 200,000,000
Quoted
November 2006 Unsecured Redeemable Debentures of each Rs 100/= 95,000,000
March 2007 Unsecured Redeemable Debentures of each Rs 100/= 100,000,000
Seylan Merchant Leasing PLC
Unquted
March 2002 Unsecured Redeemable Debentures of each Rs 100/= 50,000,000
January 2003 Unsecured Redeemable Debentures of each Rs 100/= 100,000,000
Quoted
June 2005 Unsecured Redeemable Debentures of each Rs 100/= 100,000,000
SMB Real Estate Limited
Unquoted
February 2005 Unsecured Redeemable Debentures of each Rs 100/= 50,000,000
February 2006 Unsecured Redeemable Debentures of each Rs 100/= 50,000,000
Notes to the Financial Statements Contd.
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GROUP BANK 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
30.b Movement In DebenturesBalance as at the beginning of the period 506,768,585 679,112,417 395,726,585 497,947,517
Add: issued during the period - 100,000,000 - 100,000,000
Less: redemption made during the period (166,460,078) (272,343,832) (140,552,183) (202,220,932)
Balance as at the end of the period 340,308,507 506,768,585 255,174,402 395,726,585
31 Stated Capital44,503,120 Voting Ordinary Shares 445,031,200 445,031,200 445,031,200 445,031,200
100,000,000 Non Voting Ordinary Shares 100,000,000 100,000,000 100,000,000 100,000,000
Share Premium 20,754,845 20,754,845 20,754,845 20,754,845
565,786,045 565,786,045 565,786,045 565,786,045
32 Statutory Reserves FundBalance as at the beginning 4,420,527 2,910,658 1,239,777 1,226,432
Provision made during the year - 1,509,869 - 13,345
Reversals made during the year - - - -
Balance as at the end 4,420,527 4,420,527 1,239,777 1,239,777
The statutory Reserve has been created during the year 2006 in accordance with the Finance Leasing (Amendment) Act No. 24 of
2005.
33 Reserves GROUP BANK 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Retained profits / (Loss) (730,802,144) (42,701,579) (778,964,904) (160,289,375)
Reserve on Script Issue 8,316,030 8,316,030 - -
(722,486,114) (34,385,549) (778,964,904) (160,289,375)
The reserve on script issue was created during the year 2004 by Seylan Merchant Leasing PLC., with an intention to issue bonus
shares to raise the Share Capital
34 Commitments and ContingenciesIn the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities with legal recourse
to its customers. No material losses are anticipated as a result of these transactions.
GROUP BANK 2008 2007 2008 2007
Rs. Rs. Rs. Rs.
Guarantees - 8,865,000 - 8,865,000
- 8,865,000 - 8,865,000
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35 Post Balance Sheet EventsDue to the net asset position of the Company being less than half of its stated capital, an Extra Ordinary General (EGM) meeting
was held on 31st March 2009.
Management of the Parent Company (Seylan Bank PLC) was changed by the Central Bank of Sri Lanka.
SMB Real Estate Limited which was a fully owned subsidiary of Seylan Merchant Bank PLC was disposed during February 2009.
Seylan Merchant Leasing PLC which was a 80.88% owned subsidiary of Seylan Merchant Bank PLC was disposed during June
2009.
The below mentioned Directors have resigned from the Company on the dates given below.
Deshamanya Dr.J.L.B.Kotelawala 06th February 2009
Mr. A.D.Jegasothy 02nd January 2009
Ms. Leonie Seneviratne 05th January 2009
36 Related Party DisclosureDirectors of Seylan Merchant Bank PLC,who are Directors of Companies with whom we have dealings, are listed below. Except for
the transactions in the normal course of business between the Seylan Merchant Bank PLC and those companies, the Directors have
no direct or indirect interest in contracts entered into or proposed with the Company.
Notes to the Financial Statements Contd.
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--
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--
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all I
nve
stm
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rman
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488,
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han
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246,
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s
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13,
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--
-13
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82,4
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1,59
2 33
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anat
han
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linco
Ind
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ham
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Dr.
J.L
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law
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h L
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-1,
079,
708
-1,
154,
272
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11,8
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linco
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Dr.
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Ch
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34,4
22
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252,
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linco
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tatio
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-
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linco
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tdD
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ce L
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5,76
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09
29,6
19
Lad
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linco
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tdD
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rman
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--
105
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linco
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Ltd
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Cas
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com
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5,00
0 -
--
Mr
A D
Jeg
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Mr.
R. R
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anat
han
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Seyl
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k PL
C
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Rep
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200
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Co
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3
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J.L
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Ch
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125,
496
-19
1,75
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-
426,
376
--
Mr
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Mr.
R. R
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anat
han
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cto
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Cey
lico
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lan
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pm
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PLC
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ham
anya
Dr.
J.L
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law
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Ch
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- -
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95,8
70
83,7
08
454,
212
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nan
ce L
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me
179,
055
--
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59,0
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-28
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ce L
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-
266,
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128,
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-9,
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ham
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Dr.
J.L
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Ch
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-7,
041,
953
--
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--
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Cey
linco
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ham
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Dr.
J.L
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law
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Ch
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an
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Lea
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-
2,5
08,7
11
312,
857
1,6
68,5
33
Mr.
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3,47
8,84
8 27
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5,32
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3 28
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R. R
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han
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4,50
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0
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M.S
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ts-
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Ser
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s (P
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r. J
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,878
)-
(1,4
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-
Mr.
A.D
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aso
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Dep
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C
hai
rman
La
dy
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. S.P
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ote
law
ala
Dire
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Notes to the Financial Statements Contd.
Seyl
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ant
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k P
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An
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Co
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on
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n(1
,495
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)-
(
894,
000)
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Lad
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wal
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Mr.
R. R
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han
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nd
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ham
anya
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J.L
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law
ala
Ch
airm
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162,
245
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Cey
linco
Ed
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Dr.
J.L
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law
ala
Ch
airm
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-11
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thy
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91,4
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linco
Fo
liag
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Dr.
J.L
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law
ala
Ch
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-2,
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416,
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s (P
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Dr.
J.L
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law
ala
Ch
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-1,
292,
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389,
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1,92
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ham
anya
Dr.
J.L
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law
ala
Ch
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89,8
18
109,
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687,
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200
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Mr.
R. R
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han
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cto
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Cey
lico
Mai
ni (
Pvt)
Ltd
Des
ham
anya
Dr.
J.L
.B.K
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law
ala
Ch
airm
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Fin
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tere
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com
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- 95
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- 1,
350,
043
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irect
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visi
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linco
Sto
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rs (P
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tdD
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8,78
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158,
244
Lad
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linco
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td.
Des
ham
anya
Dr.
J.L
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law
ala
Ch
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201,
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574,
912
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-(2
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Mr.
R. R
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han
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Cey
linco
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Des
ham
anya
Dr.
J.L
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law
ala
Ch
airm
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Cu
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har
ges
(127
,973
)-
(169
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)-
Lad
y (D
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.P.C
. Ko
tela
wal
aD
irect
or
Mr
A.D
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linco
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LCD
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sura
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3,90
8,31
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-
Cey
linco
CIS
CO
Sec
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ansp
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&
Alli
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Des
ham
anya
Dr.
J.L
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ote
law
ala
Ch
airm
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Cas
h T
ran
spo
rt
Mrs
. S.P
.C. K
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law
ala
Dire
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1,26
7,33
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Mr.
A.D
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Dire
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r Ba
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Do
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ts-
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linco
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-2,
432,
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522,
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Notes to the Financial Statements Contd.
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LC
An
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Co
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3
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Mr
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Cey
linco
CIS
CO
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olo
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on
sulta
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(Pvt
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Des
ham
anya
Dr.
J.L
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law
ala
Ch
airm
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Secu
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Co
nsu
ltan
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5,91
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)-
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y (D
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wal
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irect
or
Cey
linco
CIS
CO
Sec
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(Pvt
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Des
ham
anya
Dr.
J.L
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law
ala
Ch
airm
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Secu
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Ch
arg
es(1
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,663
)-
(1,6
41,3
53)
-
Lad
y (D
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.P.C
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tela
wal
aD
irect
or
Loan
-3,
687,
490
--
Mr.
A.D
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cto
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sio
n fo
r Ba
d &
Do
ubt
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Deb
ts-
(4,0
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10)
--
Cey
linco
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dD
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r. J
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tela
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rman
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vest
men
t in
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no
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-(2
07,4
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-(1
82,1
75)
Lad
y (D
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.P.C
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tela
wal
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or
Mr.
A.D
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aso
thi
Dire
cto
r
Mr.
R. R
eng
anat
han
Dire
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Cey
linco
Sav
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s Ba
nk
Ltd
Des
ham
anya
Dr.
J.L
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ote
law
ala
Ch
airm
an
Inve
stm
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in P
ron
ote
s
Mr.
R. R
eng
anat
han
Dire
cto
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nan
ce L
ease
-
4,08
8,58
8 87
,486
5,
054,
705
Lad
y (D
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tela
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Lea
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tere
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1,88
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--
Mr.
A.D
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aso
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Dire
cto
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on
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men
t-
--
(57,
000,
000)
Mr.
P.A
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den
aD
irect
or
Inte
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--
(3,9
16,5
62)
-
The
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& G
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ante
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tdD
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r. J
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--
Lad
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Mr.
A.D
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Dire
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The
Go
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Key
Cre
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Co
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any
Ltd
Des
ham
anya
Dr.
J.L
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law
ala
Ch
airm
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Fin
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Lea
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-20
3,94
6 -
-
Lad
y (D
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.P.C
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tere
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9,86
2 14
1,50
6 71
3,04
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men
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-
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sso
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linco
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r. J
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wal
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G
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p E
xpen
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(540
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(
603,
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Lad
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.P.C
. Ko
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Seyl
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200
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Co
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mo
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3
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7
Mr.
R.S.
W. S
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aD
irect
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Cey
linco
Inve
stm
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Co
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Des
ham
anya
Dr.
J.L
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law
ala
Ch
airm
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Gro
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00)
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Mr.
A.D
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Tsu
nam
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(140
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.P.C
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tela
wal
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Mr
R Re
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linco
Inte
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al T
rad
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C
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tdD
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r. J
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wal
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hai
rman
Fi
nan
ce L
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-
1,22
6,14
7 43
6,55
3 2,
229,
386
Mr.
A.D
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thi
Dire
cto
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nan
ce L
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Inte
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Inco
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505,
286
--
-
The
Fin
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un
d C
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tdD
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r. J
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2,20
5,92
4 73
1,63
8 3,
457,
303
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r. J
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tela
wal
aC
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rman
Fi
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ce L
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-
1,03
9,06
2 -
-
Mr.
R.S.
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Ch
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Fin
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Lea
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Cas
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1,
184,
337
2,42
6,14
0 35
7,20
3 7,
192,
993
Mr.
A.D
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Dire
cto
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sy P
aym
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Loan
-1,
523,
194
604,
728
3,90
0,48
2
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tere
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0,44
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Mo
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--
(531
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6,11
3,34
1 35
0,81
2 -
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1,03
9,06
2 -
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Pro
visi
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for
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btfu
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-(4
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,180
)-
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Cey
linco
Wo
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Co
Lt
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-51
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Pro
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-(5
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Cey
linco
Fin
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sulta
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C
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Pvt)
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ham
anya
Dr.
J.L
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law
ala
Ch
airm
an
Fin
ance
Lea
se
4,56
4,60
5 1,
361,
251
6,24
6,33
2
Lad
y (D
r). S
.P.C
. Ko
tela
wal
aD
irect
or
Fin
ance
Lea
se In
tere
st In
com
e1,
453,
010
--
-
Mr
A D
Jeg
aso
thi
Dire
cto
r
Cey
linco
Tax
& F
inan
cial
Des
ham
anya
Dr.
J.L
.B.K
ote
law
ala
Ch
airm
an
Fin
ance
Lea
se
-1,
869,
703
185,
181
2,34
6,48
6
Co
nsu
ltan
ts(P
vt)L
tdLa
dy
(Dr)
. S.P
.C. K
ote
law
ala
Dire
cto
r Fi
nan
ce L
ease
Inte
rest
Inco
me
519,
035
--
-
Mr.
A.D
.Jeg
aso
thi
Dire
cto
r
Cey
com
Glo
bal C
om
mu
nic
atio
nD
esh
aman
ya D
r. J
.L.B
.Ko
tela
wal
aC
hai
rman
Fi
nan
ce L
ease
- 35
6,27
5 -
356,
275
Lad
y (D
r). S
.P.C
. Ko
tela
wal
aD
irect
or
Cey
fco
Pro
per
ty C
o.(P
vt) L
tdD
esh
aman
ya D
r. J
.L.B
.Ko
tela
wal
aC
hai
rman
Fi
nan
ce L
ease
-
1,16
4,92
4 29
6,30
1 1,
686,
175
Lad
y (D
r). S
.P.C
. Ko
tela
wal
aD
irect
or
Fin
ance
Lea
se In
tere
st In
com
e45
2,57
3 -
--
F &
G R
eal E
stat
e C
o. L
td.
Des
ham
anya
Dr.
J.L
.B.K
ote
law
ala
Ch
airm
an
Fin
ance
Lea
se-
7,74
2,47
4 -
-
Lad
y (D
r). S
.P.C
. Ko
tela
wal
aD
irect
or
Fin
ance
Lea
se In
tere
st In
com
e1,
720,
450
--
-
Cey
linco
Tra
vels
& T
ou
rs (P
vt) L
tdD
esh
aman
ya D
r. J
.L.B
.Ko
tela
wal
aC
hai
rman
Te
rm L
oan
-1,
501,
759
--
Pro
visi
on
for
Bad
& D
ou
btfu
l D
ebts
-(1
,501
,759
)-
-
Op
enar
c G
loba
l So
lutio
n (P
vt) L
tdD
esh
aman
ya D
r. J
.L.B
.Ko
tela
wal
aC
hai
rman
Q
uic
k C
ash
Lo
an-
2,76
5 -
Mr.
R.S
.W. S
enan
ayak
e D
epu
ty
Ch
airm
anPr
ovi
sio
n fo
r Ba
d &
Do
ubt
ful
Deb
ts-
(2,7
65)
--
Mr.
M.S
.I. P
eiris
Dire
cto
r
CA
S Re
cove
ries
& C
ust
od
ial
Serv
ices
(Pvt
) Ltd
Des
ham
anya
Dr.
J.L
.B.K
ote
law
ala
Ch
airm
an
Term
Lo
an-
85,6
82,2
90
--
Inve
stm
ent
in P
rom
isso
ry N
ote
Pro
mis
sory
No
te-
328,
000
--
Pro
visi
on
for
Bad
& D
ou
btfu
l D
ebts
-(3
28,0
00)
--
Seyl
an M
erch
ant
Ban
k PL
C
A
nn
ual
Rep
ort
200
8
58
Notes to the Financial Statements Contd.
Co
mp
any
Nam
e o
f D
irec
tor
Posi
tion
D
etai
ls o
f Fi
nan
cial
Dea
ling
s2
00
82
00
7
Am
ou
nt
Cap
.Ou
tsta
nd
ing
A
mo
un
t C
ap.O
uts
tan
din
g
Rec
eive
d/
Rec
eiva
ble
(
Paya
ble
/Pai
d)
Am
ou
nt
as a
t
31
.12
.20
08
R
ecei
ved
/ R
ecei
vab
le
(Pa
yab
le/P
aid
)
A
mo
un
t as
at
3
1.1
2.2
00
7
Go
lden
Key
So
ftwar
e So
lutio
ns
Des
ham
anya
Dr.
J.L
.B.K
ote
law
ala
Ch
airm
an
Pro
visi
on
for
Bad
& D
ou
btfu
l D
ebts
-41
,355
-
-
Key
Man
agem
ent
Pers
on
nel
Co
mp
ensa
tion
Key
Man
agem
ent
per
son
nel
incl
ud
es, B
oar
d o
f Dire
cto
rs o
f th
e C
om
pan
y
Gro
up
Ba
nk
(a) s
ho
rt-te
rm e
mp
loye
e be
nef
its;
7,08
8,97
0-
(b) p
ost
-em
plo
ymen
t be
nef
its;
2,81
0,84
91,
161,
311
(c) o
ther
lon
g-te
rm b
enef
its;
- -
(d) t
erm
inat
ion
ben
efits
;-
-
(e) s
har
e-ba
sed
pay
men
ts.
- -
2,81
0,84
9 1.
161.
311
Seyl
an M
erch
ant
Ban
k P
LC
An
nu
al R
epo
rt 2
008
59
37 Going ConcernBank37.a A material call for repayment of borrowings has been observed from the month of December 2008, due to external market
conditions mainly arising from adverse circumstances encountered by certain related companies. The Bank is under pressure
to honor the matured debt instruments and as at 09 October 2009 the total debt instruments which had passed the maturity
dates but were awaiting refunds amounted to Rs.188,725,725/-.The Bank’s ability to disburse new lease/loan facilities have been
curtailed due to priority being given to allocate funds to honor matured debt instruments. Further, the restrictions imposed by the
Central Bank of Sri Lanka to raise funds by issue of new debt instruments and the restriction imposed by the Monetary Board of the
Central Bank for the disposal of the repossessed assets pursuant to the orders of the Supreme Court in connection with a related
company issue have also adversely affected the Bank’s liquidity.
The Bank incurred a net loss of Rs 618,675,530/- for the year ended 31 December 2008 and its total liabilities exceeded its total
assets by Rs 211,939,082/- as of that date. These indications along with those stated in the preceding paragraph raise substantial
doubt that the Bank will be able to continue as a going concern. However, the Directors are confident that the Bank would
continue as a going concern and have put forward a plan to improve the bank’s results and liquidity position in the near future.
Their plan is to implement the following strategic initiatives on the operations of the Company.
1. Reduce the non performing loans and leases by increasing the NPL collection by 5% and increase collections of performing
loans.
2. Dispose the investments in Subsidiary and Associate Companies within the next six months with the approval of the relevant
regulatory authorities.
3. Dispose the investment properties within the next six months with the approval of the relevant regulatory authorities.
4. Reduce the overhead costs by Rs 750,000/- per month
5. Launch a rights issue.
Group37.b A material call for repayment of borrowings of Seylan Merchant Bank PLC has been observed from the month of December
2008 due to external market conditions mainly arising from adverse circumstances encountered by certain related companies. The
Company is under pressure to honor the matured debt instruments and as at 09 October 2009 the total debt instruments which
had passed the maturity dates but were awaiting refunds amounted to Rs 188,725,725.30/- . The company’s ability to disburse
new lease/loan facilities have been curtailed due to priority being given to allocate funds to honor matured debt instruments.
Further, the restrictions imposed by the Central Bank of Sri Lanka to raise funds by issue of new debt instruments and the restriction
imposed by the Monetary Board of the Central Bank for the disposal of the repossessed assets pursuant to the orders of the
Supreme Court in connection with a related company issue have also adversely affected the company’s liquidity.
Seylan Merchant Bank PLC incurred a net loss of Rs 618,675,530/- for the year ended 31 December 2008 and its total liabilities
exceeded its total assets by Rs.211,939,082/- as of that date. These indications along with those stated in the preceding paragraph
raise substantial doubt that the Company will be able to continue as a going concern. However, the Directors are confident that
the company would continue as a going concern and have put forward a plan to improve the company’s results and liquidity
position in the near future. Their plan is to implement the following strategic initiatives on the operations of the company.
1. Reduce the non performing loans and leases by increasing the NPL collection by 5% and increase collections of performing
loans.
2. Dispose the investments in Subsidiary and Associate Companies within the next six months with the approval of the relevant
regulatory authorities.
3. Dispose the investment properties within the next six months with the approval of the relevant regulatory authorities.
4. Reduce the overhead costs by Rs 750,000/- per month.
5. Launch a rights issue.
Seyl
an M
erch
ant
Ban
k PL
C
A
nn
ual
Rep
ort
200
8
60
37.c Land Stock in Note No 24 represent cost of Seventy seven blocks of land ready for sale as at the balance sheet date of SMB
Real Estate Limited. Seven of the blocks have been sold subsequent to that date, six in January and one in May 2009, at the prices
above cost. The Directors are of the opinion that the balance blocks of land could also be sold at prices higher than the cost in the
near future.
Pursuant to the order of the supreme court in respect of the Fundamental Rights Applications filed by some customers of The
Golden Key Credit Card Co.Ltd (GKCL) and to the subsequent directions of the Monetary Board of the Central Bank of Sri Lanka
issued to the relevant authorities including Registar General, that any transaction that has the effect of transferring or transacting
assets of GKCL, its subsidiary and associate Companies, Directors and Key Management Personnel of GKCL and other related
entities, should not be given effect, the registration by the Registar General, of the deeds of transfer on account of the sale of blocks
of land would require clearance certificates from the Central Bank.
Above facts along with the net loss of Rs 29,209,665 during the year ended 31 December 2008 raise doubt that the Company will
be able to continue as a going concern. The Financial Statements of the Group do not include any adjustments in relation to the
recoverability and classification of recorded asset amounts or to amounts and classification of liabilities that may be necessary if the
entity is unable to continue as a going concern.
38 MATURITY ANALYSIS38.a BANKAn analysis of the total assets employed as at 31st December 2008 based on the remaining period at the Balance Sheet date
to the respective contractual maturity dates is given below.
Up to 3 to 12 1 to 3 3 to 5 Morethan TOTAL 3 Months Months Years Years 5
Interest Earning Assets
Bills of Exchange - - - - - -
Loans & Advances 109,998,582 92,240,358 296,183,010 67,615,052 128,570,638 694,607,640
Lease Receivable 88,503,904 328,933,629 321,957,851 16,289,854 - 755,685,238
Balances with banks - - - - - -
Short term Funds - - - - - -
Investments in Debentures - - - - - -
Treasury Bills / Bonds 47,896,922 - - - - 47,896,922
Group Balances Receivable - - - - - -
Securities purchased under REPO’ s - - - - - -
Non Interest Earning Assets
Cash in hand - - - - - -
Balances with CBSL - - - - - -
Investments - 373,196,825 - - - 373,196,825
Investment Property - 16,316,000 - - - 16,316,000
Property ,Plant & Equipment - - - - 8,054,876 8,054,876
Other Assets 6,381,967 104,230,201 19,389,897 - - 130,002,065
TOTAL ASSETS 252,781,376 914,917,013 637,530,758 83,904,906 136,625,515 2,025,759,566
Notes to the Financial Statements Contd.
Seyl
an M
erch
ant
Ban
k P
LC
An
nu
al R
epo
rt 2
008
61
An analysis of the total Liabilities employed as at 31st December 2008 based on the remaining period at the Balance Sheet
date to the respective contractual maturity dates is given below.
Up to 3 to 12 1 to 3 3 to 5 Morethan TOTAL 3 Months Months Years Years 5
Interest bearing liabilities
Deposits - - - - - -
Borrowings 669,761,599 577,456,963 349,063,783 42,740,842 220,347,401 1,859,370,588
Debentures 23,888,000 20,324,402 1,530,000 111,962,000 97,470,000 255,174,402
Bank Overdraft 59,745,594 - - - - 59,745,593
Securities sold under REPO’ s - - - - - -
Non Interest bearing liabilities
Deposits - - - - - -
Other liabilities 9,343,865 28,031,596 26,032,600 - - 63,408,061
Deffered taxation - - - - - -
Tax payable - - - - - -
Dividend payable - - - - - -
Shareholders Funds - - - - (211,939,082) (211,939,082)
Minority Interest - - - - - -
TOTAL LIABILITIES 762,739,057 625,812,961 376,626,384 154,702,841 105,878,318 2,025,759,566
38.b GROUPAn analysis of the total assets employed as at 31st December 2008 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 Morethan TOTAL
Months Months Years Years 5
Interest Earning Assets
Bills of Exchange - - - - - -
Loans & Advances 136,546,502 108,946,358 316,537,010 67,615,052 128,570,638 758,215,560
Lease Recievable 518,781,858 588,801,891 980,494,931 410,232,674 23,790,921 2,522,102,275
Balances with Banks &
Finance Companies 150,595,667 42,402,040 58,893,018 6,000,000 - 257,890,725
Short term Funds - - - - - -
Investments in Debentures - - - - - -
Treasury Bills / Bonds 120,441,744 102,609,000 2,866,000 - - 225,916,744
Group Balances Receivable - - - - - -
Securities purchased under REPO’ s - - - - - -
Non Interest Earning Assets
Cash in hand - - - - - -
Balances with CBSL - - - - - -
Investments - 70,630,942 - - - 70,630,942
Investment Property - 16,316,000 - - - 16,316,000
Property ,Plant & Equipment - - - - 50,096,568 50,096,568
Other Assets 115,727,767 144,004,651 21,931,976 11,457,767 30,265,881 323,388,042
TOTAL ASSETS 1,042,093,538 1,073,710,882 1,380,722,935 495,305,493 232,724,009 4,224,556,857
Seyl
an M
erch
ant
Ban
k PL
C
A
nn
ual
Rep
ort
200
8
62
An analysis of the total Liabilities employed as at 31st December 2008 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 Morethan TOTAL
Months Months Years Years 5
Interest bearing liabilities
Deposits 690,143,628 488,762,125 400,572,003 53,149,735 17,236,120 1,568,863,611
Borrowings 716,761,599 607,476,962 359,477,258 42,740,842 230,347,401 1,946,804,062
Debentures 48,629,100 29,544,402 52,683,005 111,962,000 97,470,000 340,288,507
Bank Overdraft 59,745,594 - - - - 59,745,593
Securities sold under REPO’ s - - - - - -
Non Interest bearing liabilities
Deposits - - - - - -
Other liabilities 143,430,837 174,705,801 54,107,044 14,564,136 - 386,807,818
Deffered taxation - - - - - -
Tax payable - - - - - -
Dividend payable - - - - - -
Shareholders Funds - - - - (152,279,542) (152,279,541)
Minority Interest - - - - 74,326,806 74,326,806
TOTAL LIABILITIES 1,453,803,009 1,302,482,964 720,905,754 500,757,772 246,607,356 4,224,556,857
Notes to the Financial Statements Contd.
Seyl
an M
erch
ant
Ban
k P
LC
An
nu
al R
epo
rt 2
008
63
Segment Reporting - Group
B
anki
ng
Leas
ing
Trea
sury
Pr
oper
ty/I
nve
stm
ents
Elim
inat
ion
s/U
nal
loca
ted
Con
solid
ated
20
08
2007
20
08
2007
20
08
2007
20
08
2007
20
08
2007
20
08
2007
Reve
nue
Inte
rest
14
5,52
4,21
0 16
0,23
6,35
2 58
7,90
8,72
8 51
5,31
7,82
3 44
,371
,908
58
,702
,935
75
,844
,147
25
,773
,475
15
,204
,720
30
,419
,882
83
8,44
4,27
2 72
9,61
0,70
3Ex
chan
ge
- -
- -
- -
- -
- -
- -
Leas
e In
com
e/Br
oker
ing
- -
- -
- 11
,602
,168
-
14,6
61,7
76
- -
- 26
,263
,944
Com
miss
ions
& F
ee In
com
e 13
,936
,939
6,
360,
685
28,0
38,8
62
29,1
20,0
78
- -
- -
- -
41,9
75,8
01
35,4
80,7
63O
ther
34
,615
,990
60
,296
,995
18
,118
,477
67
,870
,873
17
,418
,905
29
,646
,859
9,
183,
328
67,4
98,2
65
10,2
83,6
01
- 69
,053
,099
22
5,31
2,99
2To
tal R
even
ue fr
om
194,
077,
138
226,
894,
032
634,
066,
067
612,
308,
774
61,7
90,8
13
99,9
51,9
62
85,0
27,4
75
107,
933,
516
25,4
88,3
21
30,4
19,8
82
949,
473,
173
1,01
6,66
8,40
2Ex
tern
al C
usto
mer
s To
tal R
even
ue
194,
077,
138
226,
894,
032
634,
066,
067
612,
308,
774
61,7
90,8
13
99,9
51,9
62
85,0
27,4
75
107,
933,
516
25,4
88,3
21
30,4
19,8
82
949,
473,
173
1,01
6,66
8,40
2Se
gmen
t res
ult
(118
,886
,037
) 3,
807,
723
(480
,292
,171
) 10
,275
,732
(1
4,04
3,41
3)
1,67
7,38
8 (2
3,05
7,26
2)
1,81
1,33
4
(6
36,2
78,8
84)
17,5
72,1
76U
nallo
cate
d
In
com
e/Ex
pens
es
- -
- -
- -
- -
- -
- -
Less
Dep
reci
atio
n
ch
arge
d fo
r the
yea
r 3,
214,
020
3,79
7,38
8 12
,984
,442
10
,247
,842
97
9,99
0 1,
672,
836
1,67
5,08
0 1,
806,
418
- -
18,8
53,5
31
17,5
24,4
84Pr
ofit
from
Ope
ratio
ns
(122
,100
,057
) 10
,335
(4
93,2
76,6
13)
27,8
90
(15,
023,
402)
4,
553
(24,
732,
342)
4,
916
- -
(655
,132
,415
) 47
,692
Inco
me
tax
expe
nse
35,6
01,5
11
(786
,578
) 49
0,97
3 (2
,122
,703
) (1
01,3
75)
(346
,505
) 5,
955,
443
(374
,175
) -
- 41
,946
,552
(3
,629
,961
)Pr
ofit
Afte
r Inc
ome
tax
(157
,701
,568
) 79
6,91
3 (4
93,7
67,5
86)
2,15
0,59
2 (1
4,92
2,02
7)
351,
058
(30,
687,
785)
37
9,09
1 -
- (6
97,0
78,9
66)
3,67
7,65
4M
inor
ity In
tere
st
- -
- -
- -
- -
- -
Net
Pro
fit fo
r the
yea
r (1
57,7
01,5
68)
796,
913
(493
,767
,586
) 2,
150,
592
(14,
922,
027)
35
1,05
8 (3
0,68
7,78
5)
379,
091
- -
(697
,078
,967
) 3,
677,
654
OTH
ER IN
FORM
ATIO
N
Segm
ent a
sset
s 83
3,21
1,49
5 1,
061,
914,
655
3,36
6,12
2,45
5 2,
865,
741,
572
254,
055,
211
467,
797,
466
434,
252,
248
505,
152,
918
560,
930,
314
- 4,
326,
711,
095
4,90
0,60
6,61
0Le
ss A
ccum
ulat
ed
D
epre
ciat
ion
17,4
14,5
52
18,7
23,8
14
70,3
53,7
03
50,5
29,1
18
5,30
9,88
6 8,
248,
264
9,07
6,09
7 8,
906,
920
- -
102,
154,
238
86,4
08,1
16In
vestm
ent i
n Su
bsid
iarie
s 32
4,19
6,82
5 31
9,54
0,26
7 -
- 3,
995,
418
3,99
5,41
8 48
,001
,072
28
4,27
8 37
6,19
3,31
5 32
3,81
9,96
3 -
(0)
Tota
l Ass
ets
1,13
9,99
3,76
8 1,
362,
731,
108
3,29
5,76
8,75
2 2,
815,
212,
454
252,
740,
744
463,
544,
619
473,
177,
223
496,
530,
276
937,
123,
629
323,
819,
963
4,22
4,55
6,85
7 4,
814,
198,
494
Segm
ent l
iabi
litie
s 76
5,86
0,99
5 1,
160,
502,
247
3,09
4,03
0,63
7 2,
269,
466,
474
233,
519,
314
374,
458,
224
399,
150,
588
400,
329,
985
190,
051,
941
4,
302,
509,
593
4,20
4,75
6,93
0Sh
areh
olde
rs F
unds
49
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,948
20
2,22
8,86
1 20
1,73
8,11
4 54
5,74
5,98
0 15
,226
,012
89
,086
,395
26
,025
,562
96
,200
,291
44
5,20
5,17
8 39
7,44
0,50
4 (1
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535,
821,
023
Min
ority
Inte
rest
74
,326
,806
(7
3,62
0,54
1)
74,3
26,8
06
73,6
20,5
41To
tal l
iabi
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s 81
5,79
6,94
3 1,
362,
731,
108
3,29
5,76
8,75
1 2,
815,
212,
454
248,
745,
326
463,
544,
619
425,
176,
151
496,
530,
276
709,
583,
925
323,
819,
963
4,22
4,55
6,85
7 4,
814,
198,
494
Cash
flow
s fro
m
Ope
ratin
g ac
tiviti
es
(33,
605,
688)
86
,280
,698
(1
35,7
64,8
84)
232,
841,
859
(10,
246,
738)
38
,008
,602
(1
7,51
4,57
6)
41,0
43,7
37
- -
(197
,131
,887
) 39
8,17
4,89
7Ca
sh fl
ows f
rom
In
vest
ing
activ
ities
27
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,835
34
,017
,601
11
2,91
5,59
1 91
,801
,778
8,
522,
208
14,9
85,5
24
14,5
66,8
64
16,1
82,1
76
- -
163,
954,
498
156,
987,
079
Cash
flow
s fro
m
Fina
ncin
g ac
tiviti
es
(3,9
52,4
90)
(104
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) (1
5,96
7,81
4)
(282
,124
,414
) (1
,205
,157
) (4
6,05
3,38
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(2,0
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(49,
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922)
-
- (2
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5,41
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(482
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pita
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ture
2,
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372
9,76
5,78
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,196
,713
7,
672,
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3,49
9,64
3
- -
- -
23,7
51,7
28
17,4
37,8
33
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For the year ended December 31 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
(Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000)
Operating Results
Revenue 239,172 321,879 326,838 472,481 565,768 557,668 589,173 515,425 500,998 334,661
Interest Income 210,523 263,176 288,358 377,445 424,171 506,640 541,836 436,047 424,776 295,666
Interest Expense 200,795 240,906 292,279 320,189 332,344 369,130 399,959 359,235 400,239 410,293
Operating Expenses & Provision 56,665 98,533 90,254 133,407 205,432 143,288 128,850 110,889 (85,937) (71,030)
Profit before Taxation & VAT (18,289) (17,559) (55,696) 2,280 10,790 22,203 30,690 31,859 2,699 (581,933)
VAT & Taxation - - - - 794 2,777 9,921 6,994 (2,432) (36,743)
Profit after Taxation & VAT (18,289) (17,559) (55,696) 2,280 9,996 19,426 20,769 24,865 267 (618,676)
As at December 31
Assets
Cash & Short Term Funds 7,437 12,859 2,344 3,157 (122,572) 22,016 122,247 30,408 60,262 10,069
Investments 407,887 8,478 326,289 1,226,838 316,816 428,024 814,500 673,337 288,150 124,472
Bills of Exchange 91,750 96,164 64,723 43,220 32,373 4,000 3,525 - - -
Loans & advances 562,528 549,394 611,674 571,910 658,254 974,280 1,063,481 1,184,387 1,002,987 651,872
Lease Rentals Receivables 606,531 597,164 798,089 1,288,168 1,554,555 1,889,881 1,490,044 1,255,478 946,615 545,384
Investment in Associate Co. - - - - - 1,200 1,200 - 49,000 49,000
Investment in Subsidiary Co. 9,000 51,500 51,500 76,225 97,100 112,100 154,068 314,547 319,540 324,197
Interest Receivable - - - - - 22,297 40,296 51,538 103,636 253,037
Investment Property - 330,122 - - 11,189 11,189 11,189 23,187 27,505 16,316
Property, Plant & Equipment 7,689 10,341 11,046 16,196 15,811 27,098 24,132 20,983 11,947 8,055
Other Assets 198,806 271,650 247,884 259,831 222,524 100,741 67,842 66,493 123,475 43,358
Intangible Assets 3,843 17,303 22,151 8,835 - - - - - -
1,895,471 1,944,975 2,135,701 3,494,380 2,786,051 3,592,826 3,792,524 3,620,358 2,933,118 2,025,760
Equity & Liabilities
Stated Capital
Ordinary Shares 333,773 333,773 333,773 333,773 333,773 333,773 445,031 545,031 545,031 545,031
Share Premium 13,244 13,244 13,244 13,244 13,244 13,244 23,257 20,985 20,755 20,755
Reserves (103,105) (163,711) (219,407) (217,129) (207,132) (187,707) (175,281) (159,317) (159,050) (777,725)
Borrowings 1,230,036 1,057,858 1,574,200 2,889,285 1,892,595 1,987,677 2,355,174 2,271,892 1,747,762 1,721,268
Group Balances Payable - 265,119 103,700 149,500 90,300 209,000 218,000 197,500 153,000 197,848
Other Liabilities 37,128 46,537 35,494 31,658 29,493 305,202 295,285 246,319 229,893 63,408
Debentures 384,395 392,155 294,697 294,049 633,778 931,637 631,058 497,948 395,727 255,174
1,895,471 1,944,975 2,135,701 3,494,380 2,786,051 3,592,826 3,792,524 3,620,358 2,933,118 2,025,760
Income Growth (%) 36.41% 34.58% 1.54% 44.56% 19.74% (1.43%) 5.65% (12.52%) (2.80%) (33.31%)
Property, Plant & Equipment
to Shareholders’ Funds (%) 3.15% 5.64% 8.66% 12.47% 11.30% 17.01% 8.24% 5.16% 2.94% (3.80%)
Total Assets to Shareholders’
Funds (times) 7.77 10.61 16.74 26.90 19.92 22.55 12.94 8.90 7.21 (9.56)
Net Assets per Share (Rs.) 7.31 5.49 3.82 3.89 4.19 4.77 6.58 7.46 7.46 (3.89)
Earning / (Loss) Per Share – voting (0.81) (0.55) (0.53) (1.67) 0.07 0.30 0.58 0.51 0.005 (13.88)
Decade at a Glance - Bank
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For the year ended 31st December 2004 2005 2006 2007 2008
(Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000) (Rs. ‘000)
Operating Results
Revenue 699,713 795,882 876,014 944,079 949,473
Interest Income 581,068 541,836 734,651 804,894 859,359
Interest Expense 393,187 399,959 519,816 (619,227) (763,044)
Operating Expenses & Provision 212,825 128,850 240,345 (288,428) (348,685)
Profit before taxation & VAT 63,806 69,800 72,205 3,579 (656,930)
Taxation & VAT 7,626 15,875 7,995 98 (44,513)
Profit After Taxation & VAT 56,179 53,925 64,210 3,678 (697,079)
Minority Interest 2,074 2,848 5,922 6,409 (8,978)
Profit Attributable to Shareholders 54,105 51,077 58,288 (2,732) (688,101)
Assets
Cash & Short Term Funds 24,173 122,836 33,503 73,999 17,636
Investments 477,606 825,029 803,520 621,520 493,701
Bills of Exchange 4,000 3,525 - - -
Loans & advances 918,633 888,293 1,126,237 972,961 956,320
Lease Rentals Receivables 2,299,831 2,750,393 2,995,231 2,565,417 1,987,191
Investment in Associate Co. 82 - - 49,950 54,315
Interest Receivable 24,786 43,667 75,326 162,676 325,592
Investment Property 11,189 11,189 23,186 27,505 16,316
Property, Plant & Equipment 53,993 73,180 51,956 47,576 50,097
Other Assets 305,226 255,842 190,549 265,746 297,978
Intangible Assets - - 28,286 26,848 25,410
4,119,519 4,973,954 5,327,794 4,814,198 4,224,557
Equity & Liabilities
Stated Capital
Ordinary Shares 333,773 445,031 545,031 545,031 545,031
Share Premium 13,244 23,257 20,985 20,755 20,755
Reserves (102,557) (63,599) (27,234) (29,965) (718,066)
Minority Interest 13,008 16,346 73,799 73,620 74,327
Borrowings 2,250,458 3,150,918 3,445,893 3,131,189 3,377,545
Group Balances Payable 209,000 218,000 197,500 153,000 197,848
Other Liabilities 408,379 375,896 392,706 413,800 386,808
Debentures 994,215 808,105 679,114 506,769 340,309
4,119,520 4,973,954 5,327,794 4,814,198 4,224,557
Cash Flow
Cash Flow from Operating Activities (775,968) (497,779) (388,035) 401,175 (197,132)
Cash Flow from Investing Activities (253,280) (408,417) (10,298) 156,987 163,954
Cash Flow from Financing Activities 1,034,835 953,800 309,335 (465,891) (23,185)
Net Increase or (Decrease) in Cash and
Cash Equvalents 5,587 47,604 (88,998) 92,271 (56,363)
Earning/ (Loss) Per Share - Voting 1.62 1.15 1.20 (0.05) (15.45)
Assets Growth (%) 35.98 20.74 7.11 (9.64) (12.25)
Net Assets Growth (%) 27.31 57.18 33.14 (0.55) (128.42)
Net Assets Per Share 7.71 9.46 9.89 9.83 (2.79)
Five Year Summary - Group
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Value Added Statement
GROUP BANKFor the Year Ended 31st December 2008 2007 2008 2007
Rs. “000” % Rs. “000” % Rs. “000” % Rs. “000” %
Value Added
Interest and similar income 859,359 804,894 295,666 424,776
Cost of Borrowings (730,359) (546,830) (370,877) (335,391)
Value added by financial services 129,000 258,064 (75,211) 89,385
Other Income 90,114 139,185 38,995 76,221
Associate Company Profit 4,365 950
Provision for Bad Debts (494,675) (33,795) (435,271) (12,123)
Total (271,196) -100.0% 364,403 100.0% (471,487) -100.0% 153,484 100.0%
Distribution of Value Added 398,198
To Service Providers
Overhead and Support Services 216,926 80.0% 171,786 47.1% 47,773 10.1% 53,667 35.0%
To the Government
Taxes 44,513 16.4% (98) 0.0% 36,743 7.8% 2,432 1.6%
To Employees
Salaries, Wages and Other Benefits 115,057 42.4% 98,164 26.9% 17,348 3.7% 25,421 16.6%
To Lenders of Capital
Dividends to Share holders - - - -
Minority Interest 6,409
Interest on Borrowings 32,685 72,396 39,416 64,848
32,685 12.1% 78,806 21.6% 39,416 8.4% 64,848 42.3%
To Expansion & Growth
Depreciation 16,702 18,478 5,909 6,849
Deferred taxation - - - -
Retained Profit (697,079) (2,732) (618,676) 267
(680,377) -250.9% 15,746 4.3% (612,767) -130.0% 7,116 4.6%
Total (271,196) -100.0% 364,403 100.0% (471,487) -100.0% 153,484 100.0%
Value Added Statement - Group2007
33%
51%7%
1%
27%1%
17%
38%
22%3%
To Services ProvidersTo the GovermmeentTo EmployeesTo Lenders of CapitalTo Expansion & Growth
2008
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Shareholders’ & Investors’ Information
1 Stock Exchange ListingThe Ordinary Shares, Voting and Non Voting, December 2006-2016 debentures, both fixed and floating interest rates of the Bank
are listed in the Colombo Stock Exchange.
The Stock exchange ticker symbol for Seylan Merchant Bank PLC is “SEMB”
2 Top Twenty Largest ShareholdersOrdinary Voting
31st December 2008 31st December 2007 Number % Number of %
Name of Shares Shares
Seylan Bank PLC. 23,071,066 51.84 23,071,066 51.84
Dr. T. Senthilverl 4,669,100 10.49 4,591,600 10.32
Ceylinco Insurance Co. PLC. & Ceylinco Insurance Co. PLC.
A/C No. 1 (Life Fund) 3,220,869 7.23 3,220,869 7.23
Pershing LLC S/A Aver Bach Grauson & Co. 1,000,000 2.25 1,000,000 2.25
S K M Lanka Holding (Pvt) Ltd. 743,000 1.67 - -
Dr. C.A. Twerenbond 613,000 1.38 613,000 1.38
The Finance Co. PLC 606,666 1.35 600,000 1.35
The Magnum Fund Ltd. 402,643 0.90 691,843 1.55
Ceylinco Finance PLC 323,433 0.73 323,433 0.73
Waldock Mackenzie Ltd/ Mr.Lalith Prabash Hapangama 276,100 0.62 276,100 0.62
First Capital Markets Ltd./ Mr. M.A.U. Gnanathi 259,766 0.58 255,666 0.57
Mrs. L.Y.G. Lakmali 223,500 0.50 - -
Lanka Orix Finance Co. Ltd./ R.E. Rambukwelle 160,300 0.36 160,300 0.36
Mr. D.R.S.F. Jayawardena 133,600 0.30
Asian Finance Ltd. 132,333 0.30 132,333 0.30
Mr. R.P.L. Eheliyagoda 120,000 0.27 100,000 0.22
Waldock Mackenzie Ltd.- Line Trading (Pvt) Ltd. 117,000 0.26 117,000 0.26
DFCC Vardhana Bank PLC./ Mr. R.E. Rambukwelle 101,700 0.23 101,700 0.23
Mr. D.F.S. Thambinayagam 100,000 0.22 100,000 0.22
Mr. S. Prabinath 80,000 0.18 - -
SUB TOTAL 36,354,076 81.66 35,354,910 79.43
Others 8,149,044 18.34 9,148,210 20.57
TOTAL ISSUED SHARE CAPITAL 44,503,120 100.00 44,503,120 100.00
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Ordinary Non Voting 31st December 2008 31st December 2007 Number % Number of %
Name of Shares Shares
Ceylinco Insurance Co. PLC. 6,981,600 6.98 6981600 6.98
Dr. T. Senthilverl 6,981,600 6.98 6981600 6.98
Mr. R.S.P. Hewage 3,314,100 3.31 3314100 3.31
Mr. K.K.S. Bose 1,549,600 1.55 - -
Waldock Mackenzie Ltd./ Mr. S.A. Gulamhusein 1,549,600 1.55 561600 0.56
Mr. L.V. Chinthaka Nishantha 1,500,000 1.50 - -
Mr. K.R.U. Gunawardhena 1,470,700 1.47 - -
Mr. M.H. Nassim Hussain 1,424,200 1.42 - -
Mr. C.T.G. Punchihewa 1,322,100 1.32 - -
Mr. H.G. Eksjrom 1,300,000 1.30 1300000 1.3
Mr. S. Siriwardena 1,104,300 1.10 - -
Vision Care Optical Services (Pvt) Ltd. 1,000,000 1.00 1000000 1
The Bishop Of Galle 1,000,000 1.00 1000000 1
Ceylinco Shriram Capital Management Services Co. (Pvt) Ltd. 1,000,000 1.00 1000000 1
Mr. W.A.S. Weerasinghe 958,400 0.96 - -
Mr. N.B. Razak 800,000 0.80 800000 0.8
Seylan Bank Asset Management Ltd. 699,400 0.70 3000000 3
Lanka Orix Finance Company Ltd. 689,500 0.69 - -
Mrs. S. Masood 668,000 0.67 - -
Favourite Investments (Pvt) Ltd. 650,000 0.65
SUB TOTAL 35,963,100 35.95 25,938,900 25.93
Others 64,036,900 64.05 74,061,100 74.07
TOTAL ISSUED SHARE CAPITAL 100,000,000 100.00 100,000,000 100.00
3 Shareholder BaseThe Total number of (Ordinary Voting) shareholders as at December 31, 2008 were 7,277 compared to 7,507 as at December 31,
2007. The Total number of (Ordinary Non Voting) shareholders as at December 31, 2008 were 1,528 compared to 1,349 as at
December 31, 2007.
4 Distribution of ShareholdersOrdinary Voting – Shareholding as at 31st December 2008
Resident Non-Resident Total No. of No. of % of No. of No. of % of No. of No. of % of
Range of Share Holding Holders Shares Holding Holders Shares Holding Holders Shares Holding
1 - 1,000 6,013 1,538,145 3.46% 14 4,932 0.01% 6,027 1,543,077 3.47%
1,001 - 5,000 893 2,224,286 5.00% 5 13,000 0.03% 898 2,237,286 5.03%
5,001 - 10,000 172 1,305,057 2.93% 4 37,500 0.08% 176 1,342,557 3.02%
10,001 - 50,000 139 2,923,423 6.57% 2 77,500 0.17% 141 3,000,923 6.74%
50,001 - 100,000 18 1,245,543 2.80% 1 52,300 0.12% 19 1,297,843 2.92%
100,001 - 500,000 9 1,859,499 4.18% 0 0 0.00% 9 1,859,499 4.18%
500,001 - 1,000,000 2 1,149,300 2.58% 2 1,613,000 3.62% 4 2,762,300 6.21%
1,000,001 - 50,000,000 3 30,459,635 68.44% 0 0 0.00% 3 30,459,635 68.44%
50,000,001 - 75,000,000 0 0 0.00% 0 0 0.00% 0 0 0.00%
75,000,001 - & Above 0 0 0.00% 0 0 0.00% 0 0 0.00%
Total 7,249 42,704,888 95.96% 28 1,798,232 4.04% 7,277 44,503,120 100.00%
Shareholder’s & Investors Information Contd.
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Ordinary Non Voting – Shareholding as at 31st December 2008
Resident Non-Resident Total No. of No. of % of No. of No. of % of No. of No. of % of
Range of Share Holding Holders Shares Holding Holders Shares Holding Holders Shares Holding
1 - 1,000 373 272,300 0.28% 0 0 0.00% 373 272,300 0.28% 1,001 - 5,000 383 1,323,300 1.35% 0 0 0.00% 383 1,323,300 1.35% 5,001 - 10,000 245 2,310,400 2.36% 0 0 0.00% 245 2,310,400 2.36% 10,001 - 50,000 339 9,387,600 9.39% 3 72,000 0.07% 342 9,459,600 7.61% 50,001 - 100,000 84 7,706,000 7.86% 0 0 0.00% 84 7,706,000 7.86% 100,001 - 500,000 70 16,719,500 17.06% 4 1,250,000 1.28% 74 17,969,500 18.34% 500,001 - 1,000,000 11 8,869,500 9.05% 2 1,468,000 1.50% 13 10,337,500 10.55% 1,000,001 - 50,000,000 12 47,966,400 48.95% 2 2,655,000 2.71% 14 50,621,400 51.65% 50,000,001 - 75,000,000 0 0 0.00% 0 0 0.00% 0 0 0.00% 75,000,001 - & Above 0 0 0.00% 0 0 0.00% 0 0 0.00%Total 1,517 92,555,000 94.56% 11 5,445,000 5.44% 1,528 100,000,000 100.00%
5 Categories of ShareholdersOrdinary Voting – Shareholding as at 31st December 2008
Individual Company Total No. of No. of % of No. of No. of % of No. of No. of % of
Range of Share Holding Holders Shares Holding Holders Shares Holding Holders Shares Holding
1 - 1,000 5,932 1,511,603 3.40% 95 31,474 0.07% 6,027 1,543,077 3.47% 1,001 - 5,000 874 2,173,306 4.88% 24 63,980 0.14% 898 2,237,286 5.03% 5,001 - 10,000 165 1,255,491 2.82% 11 87,066 0.20% 176 1,342,557 3.02% 10,001 - 50,000 125 2,600,516 5.84% 16 400,407 0.90% 141 3,000,923 6.74% 50,001 - 100,000 19 1,297,843 2.92% 0 0 0.00% 19 1,297,843 2.92% 100,001 - 500,000 2 278,000 0.62% 7 1,581,499 3.55% 9 1,859,499 4.18% 500,001 - 1,000,000 1 613,000 1.38% 3 2,149,300 4.83% 4 2,762,300 6.21% 1,000,001 - 50,000,000 1 4,669,100 10.49% 2 25,790,535 57.95% 3 30,459,635 68.44% 50,000,001 - 75,000,000 0 0 0.00% 0 0 0.00% 0 0 0.00% 75,000,001 - & Above 0 0 0.00% 0 0 0.00% 0 0 0.00%Total 7,119 14,398,859 32.35% 158 30,104,261 67.65% 7,277 44,503,120 100.00%
Ordinary Non Voting – Shareholding as at 31st December 2008
Individual Company Total No. of No. of % of No. of No. of % of No. of No. of % of
Range of Share Holding Holders Shares Holding Holders Shares Holding Holders Shares Holding
1 - 1,000 372 271,300 0.27% 1 1,000 0.00% 373 272,300 0.27% 1,001 - 5,000 383 1,323,300 1.32% 0 0 0.00% 383 1,323,300 1.32% 5,001 - 10,000 243 2,290,400 2.29% 2 20,000 0.02% 245 2,310,400 2.31% 10,001 - 50,000 339 9,405,400 9.41% 3 54,200 0.05% 342 9,459,600 9.46% 50,001 - 100,000 82 7,506,000 7.51% 2 200,000 0.20% 84 7,706,000 7.71% 100,001 - 500,000 69 16,577,500 16.58% 5 1,392,000 1.39% 74 17,969,500 17.97% 500,001 - 1,000,000 8 5,998,000 6.00% 5 4,339,500 4.34% 13 10,337,500 10.34% 1,000,001 - 50,000,000 11 39,265,200 39.27% 3 11,356,200 11.36% 14 50,621,400 50.62% 50,000,001 - 75,000,000 0 0 0.00% 0 0 0.00% 0 0 0.00% 75,000,001 - & Above 0 0 0.00% 0 0 0.00% 0 0 0.00%Total 1,507 82,637,100 82.64% 21 17,362,900 17.36% 1,528 100,000,000 100.00%
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6 Composition of Shareholders
December 31, 2008 December 31, 2007Ordinary Voting Shares No. of No. of % of No. of No. of % of
Holders Shares Holding Holders Shares Holding
Resident 7,249 42,704,888 95.96% 7,485 42,726,888 96.01%
Non-Resident 28 1,798,232 4.04% 22 1,776,232 3.99%
Total 7,277 44,503,120 100.00% 7,507 44,503,120 100.00%
Individual 7,119 14,398,859 32.35% 7,330 13,626,462 30.62%
Institution 158 30,104,261 67.65% 177 30,876,658 69.38%
Total 7,277 44,503,120 100.00% 7,507 44,503,120 100.00%
As per Rule No. 8.7 (h) of the Colombo Stock Exchange, percentage of public holding as at December 31, 2008 was 26.12
approximately.
December 31, 2008 December 31, 2007Ordinary Voting Shares No. of No. of % of No. of No. of % of
Holders Shares Holding Holders Shares Holding
Resident 1,517 94,555,000 94.56% 1,342 97,215,000 97.21%
Non-Resident 11 5,445,000 5.44% 7 2,785,000 2.79%
Total 1,528 100,000,000 100.00% 1,349 100,000,000 100.00%
Individual 1,507 82,637,100 82.64% 1,330 70,285,600 70.29%
Institution 21 17,362,900 17.36% 19 29,714,400 29.71%
Total 1,528 100,000,000 100.00% 1,349 100,000,000 100.00%
As per Rule No. 8.7 (h) of the Colombo Stock Exchange, percentage of public holding as at December 31, 2008 was 81.91
approximately.
GROUP BANKOther Ratios 2008 2007 2008 2007
Debt Equity Ratio (%) (50.23) 5.65 (10.26) 5.65
Interest Cover (Times) 0.14 1.01 (0.46) 1.01
Quick Asset Ratio (Times) 0.77 0.66 0.85 0.64
Shareholder’s & Investors Information Contd.
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2008 2007Directors’ Shareholding No. of Shares % of Holdings No. of Shares % of Holdings
Mr.R.S.W.Senanayake Voting 6,200 0.01% 6,200 0.01%
Non Voting 50,000 0.05% 50,000 0.05%
Mr.R.Renganathan 500 0.00% 500 0.00%
Mr.M.S.I.Peiris 1 0.00% 1 0.00%
Mr.P.A.Jayawardena 1,000 0.00% 1,000 0.00%
Mr.E.T.L.Ranasinghe 3,000 0.01% 3,000 0.01%
Dr.P.R.Anthonis 7,530 0.02% 7,530 0.02%
Share Information 2008 2007
Book Value
Net Assets per Share- Group (Rs.) (2.79) 9.83
Share Prices
Ordinary Shares- Voting
Highest (Rs.) 8.00 8.50
Lowest (Rs.) 2.50 5.50
Last Traded (Rs.) 3.00 7.00
Ordinary Shares- Non Voting
Highest (Rs.) 1.00 0.90
Lowest (Rs.) 0.20 0.50
Last Traded (Rs.) 0.40 0.70
Earnings
Ordinary Shares - Voting
Earnings/(Loss) per Share (Rs.) (12.62) (0.05)
Price Earning Ratio (Times)* - -
Ordinary Shares - Non Voting
Earnings/(Loss) per Share (Rs.) (1.26) (0.01)
Price Earning Ratio (Times)* - -
Frequency of Shares Traded
Number of Shares Traded 62,359,000 38,387,800
Number of Transaction 3,595 5,278
Value of Shares Traded
Value of Shares Traded (Rs.) 61,127,235 68,840,055
Market Capitalization
Seylan Merchant Bank PLC Value (Rs. Mn.) 134 312
*Since the Earnings Per Share was negative, Price Earning Ratio has not been calculated
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Information on Debenture
Debenture Categories CSE Listing Interest Payable Market Interest Other Ratios (Frequency) Values Rate As at Date of Highest Lowest Year Coupon Effective Interest Yield To End Rate Annual Yield Yield Maturity Rs. Rs. Rs. % % % %
FIXED RATESerylan Merchant Bank PLCAUG 1998/AUG 2002 - 14.25% p.a. Not listed Monthly - - - 14.25 15.22 15.50% p.a. Annually - - - 15.50 15.50 15.75% p.a. Maturity - - - 15.75 15.75
OCT 1998/OCT 2002 - 14.00% p.a. Not listed Monthly - - - 14.00 14.93 15.00% p.a. Annually - - - 15.00 15.00 15.25% p.a. Maturity - - - 15.25 15.25
MAY 1999/MAY 2003 - 13.50% p.a. Not listed Monthly - - - 13.50 14.37 14.50% p.a. Annually - - - 14.50 14.50 14.75% p.a. Maturity - - - 14.75 14.75
DEC 1999/DEC 2003 - 13.50% p.a. Not listed Monthly - - - 13.50 14.37 14.50% p.a. Annually - - - 14.50 14.50 15.50% p.a. Annually - - - 15.50 15.50 14.75% p.a. Maturity - - - 14.75 14.75
JULY 2000/JULY 2004 - 13.50% p.a. Not listed Monthly - - - 13.50 14.37 14.50% p.a. Annually - - - 14.50 14.50 15.50% p.a. Annually - - - 15.50 15.50 14.75% p.a. Maturity - - - 14.75 14.75
FEB 2001/FEB 2005 - 16.50% p.a. Not listed Annually - - - 16.50 16.50 16.75% p.a. Maturity - - - 16.75 16.75
JULY 2001/JULY 2005 - 18.00% p.a. Not listed Annually - - - 18.00 18.00
JAN 2002/JAN 2006 -14.25% p.a. Not listed Monthly - - - 14.25 15.22 13.00% p.a. Annually - - - 13.00 13.00 13.50% p.a. Annually - - - 13.50 13.50 14.50% p.a. Annually - - - 14.50 14.50
FEB 2003/FEB 2007 - 13.00% p.a. Not listed Monthly - - - 13.00 13.80 13.50% p.a. Annually - - - 13.50 13.50
FEB 2004/FEB 2008 - 11.50% p.a. Not listed Monthly - - - 11.50 12.13 11.75% p.a. Annually - - - 11.75 11.75
FEB 2004/FEB 2008 - 12.50% p.a. Not listed Monthly - - - 12.50 13.24 13.00% p.a. Annually - - - 13.00 13.00
JAN 2005/JAN 2009 -14.00% p.a. Not listed Annually - - - 14.00 14.00
JAN 2005/JAN 2009 -12.50% p.a. Not listed By-Annually - - - 12.50 13.89
NOV 2006/NOV 2016 - 16.00% p.a. Listed Monthly Not traded 16.00 17.23 17.00% p.a. Annually during the year 17.00 17.00 22.00% p.a. Maturity 22.00 22.00
MAR 2007/MAR 2012 - 16.00% p.a. Listed Monthly 16.00 16.00 16.25% p.a. Not traded 16.25 16.25 16.50% p.a. during the year 16.50 16.50 16.75% p.a. 16.75 16.75 17.00% p.a. 17.00 17.00
Seylan Merchant Leasing PLCDEC 2002/DEC 2006 - 14.00% p.a. Not listed Monthly - - - 14.00 14.93 14.50% p.a. Annually - - - 14.50 14.50
NOV 2003/NOV 2007 - 10.00% p.a. Not listed Monthly - - - 10.00 10.47 10.50% p.a. Annually - - - 10.50 10.50
JUN 2005/JUN 2009 - 11.75% p.a. Listed Monthly Not traded 11.75 12.40 12.50% p.a. Annually during the year 12.50 12.50
SMB Real Estate LimitedFEB 2005/FEB 2009 - 14.00% p.a. Not listed Monthly - - - 14.00 14.93 14.50% p.a. Annually - - - 14.50 14.50 FEB 2006/FEB 2010 - 13.25% p.a. Not listed Monthly - - - 13.25 14.09 14.25% p.a. Annually - - - 14.25 14.25
FLOATING RATE - Seylan Merchant Bank PLCNOV 2006/NOV 2016 - +5% p.a. Listed Annually
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Notice of Meeting
NOTICE IS HEREBY GIVEN THAT the Sixteenth Annual General Meeting of Seylan Merchant Bank PLC will be held on 30th December
2009 at 4.00 p.m. at “Raja Bojun” Restaurant, Ceylinco Seylan Towers, No. 90, Galle Road, Colombo 3 for the following purpose:
1. To receive and consider the Report of the Board of Directors and the Audited Accounts of the Company for the year ended 31st
December 2008 together with the Report of the Auditor’s thereon.
2 To re-elect Mr. E T L Ranasinghe , Director who retires by rotation in terms of Article 93 (a) of the Articles of Association of the
Company, as a Director.
3. To re-appoint Messrs KPMG Ford, Rhodes, Thornton & Company, Chartered Accountants, as Auditors of the Company for the
ensuing year and authorize the Board of Directors to determine their remuneration
4. To authorise the Board of Directors to determine contributions to charities and other donations for the year 2009.
5. To transact any other business of which due notice has been given.
BY ORDER OF THE BOARD
(Sgd.) Authorized Signatory
INTERNATIONAL CONSULTANCY & CORPORATE SERVICES (PVT) LTD.,
SECRETARIES
Colombo
05th November 2009
Note: Any member of the Company unable to attend the meeting may appoint another person (whether a member or not) as
a proxy to attend and vote for him/her. A proxy form is attached herewith for your use. The completed form of proxy should be
deposited with the Secretaries of the Company not later than 24 hours before the holding of the meeting.
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Note
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I/We,…………............…………………………………………………………….................................................................................…………..
of….............................................................................................……………………………………………………………………………………
being a member/s of Seylan Merchant Bank PLC hereby appoint
1. Mr. Rohan Senaka Wickramasinghe Senanayake of Colombo 5, whom failing2. Mr. Rajkumar Renganathan of Colombo 5, whom failing3. Mr. Muthuthantrige Surath Isira Peiris of Moratuwa, whom failing4. Deshamanya Dr. Polwattearachchige Romiel Anthonis of Colombo 7 whom failing5. Mr. Palitha Abeysekera Jayawardena of Colombo 05 whom failing
6. Mr. Elmo Thushara Lalindra Ranasinghe of Kohuwela whom failing
Mr/Mrs/Miss ………………………………………............................................................................................................................................
(holder of N.I.C.No …….................……………………) of …………....…….………………… ………………………………………………… as my/our Proxy to represent me/us and vote on my/our behalf at the Sixteenth Annual General Meeting of the Bank to be held on …………..2009 at …… at “Raja Bojun” Restaurant, Ceylinco Seylan Towers, No. 90, Galle Road, Colombo – 3 on and at any adjournment thereof and at every poll which may be taken in consequence thereof to vote.
Please indicate your preference by placing a ‘X’ against the Resolution No.
FOR AGAINST
1. To receive and consider the Report of the Board of Directors and the Audited Accounts of the Company for the year ended 31st December 2008 together with the Report of the Auditor’s thereon.
2. To re-elect Mr. E T L Ranasinghe , Director who retires in terms of Article 93 (a) of the Articles of Association of the Company, as a Director.
3. To re-appoint Messrs KPMG Ford, Rhodes, Thornton & Company, Chartered Accountants, as Auditors of the Company for the ensuing year and authorize the Board of Directors to determine their remuneration.
4. To authorise the Board of Directors to determine contributions to charities and other donations for
the year 2009
Signed this …………………….. day of ……...…….2009
……………………………………..Signature
……………………………………..Shareholder’s N.I.C/P.P./Co.Reg.No.
Form of Proxy
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INSTRUCTIONS FOR THE COMPLETION OF THE FORM OF PROXY
1. Please perfect the Form of Proxy overleaf, after filling in legibly your full
name and address, by signing in the space provided and filling the date of
signature and your National Identity Card Number.
2. The completed form of Proxy should be deposited at the Office of the
Company Secretaries, INTERNATIONAL CONSULTANCY AND CORPORATE
SERVICES (PVT) LTD of No. 29/23, Vishaka Lane, Colombo 04, 48 hours
before the time appointed for the holding of the meeting.
3. If an Attorney has signed the Form of Proxy, the relative Power of Attorney
should also accompany the completed Form of Proxy for registration, if such
Power of Attorney has not already been registered with the Company.
4. If the Shareholder is a company or a corporate body, the Proxy should
be executed under its Common Seal in accordance with its Articles of
Association or constitution.
5. If there is any doubt as to how the vote is to be exercised, by reason of the
manner in which the Form of Proxy has been completed, no vote will be
recorded by the Form of Proxy.
Form of Proxy Contd.
Over the past year, Seylan Merchant Bank has operated in a very difficult environment. We have had to face a range of challenges - from intense competition and reduced market share to an unstable economic environment and general investor caution.
2008
Statutory StatusA Public Limited Liability Company incorporated in Sri Lanka on 3/9/1992 under the Companies Act No. 07 of 2007 and quoted on the Colombo Stock Exchange in 1993.
Registered as a Finance Leasing Establishment under the provisions of the Finance Leasing Act No. 56 of 2000
Company Re-registration No. PQ 91 Place of Incorporation – Colombo
Registered Office69, Janadhipathi MawathaColombo-1
Board of DirectorsDeputy ChairmanMr. R S W Senanayake ACMA (UK), FSCMA (SL)
Mr. M.S.I.PeirisAICM (SL)
R. Renganathan FCA
Mr. P. A. JayawardenaFCA, FSCMA (SL), FMAAT
Mr. E T L Ranasinghe MBA (Sri J’pura), Dip in MKT (UK), MCIM (UK), Chartered Marketer (UK)
Deshamanya Dr P.R. AnthonisD.Sc., FRCS (Eng), FICS, FSCS
SecretariesInternational Consultancy & Corporate Services (Pvt) Ltd.,29/23 , Vishaka Lane , Colombo 04.
AuditorsM/s. KPMG Ford, Rhodes, Thornton & Co.(Chartered Accountants)
Lawyers M/s. De Livera AssociatesAttorneys-at-Law & Notary PublicColombo
Ceylinco Consultancy & Allied Services (Pvt) Ltd., Colombo
M/s Julius & Creasy Attorneys-at-Law & Notaries PublicColombo
BankersSeylan Bank PLCSampath Bank LtdPeople’s Bank
Head OfficeLandmark Building, 385, Galle Road, Colombo-3
Telephone +94-11-2573363Fax +94-11-2573366
Parent CompanySeylan Bank PLC
Subsidiary CompaniesSMB Money Brokers (Pvt) Ltd
Associate CompaniesSMB Real Estate LtdSMB Securities (Pvt.) Ltd.SMB Kenenga Investment Corporation Ltd
Corporate Information
Produced by: Copyline (Pvt) Ltd.
Financial Highlights 2 Deputy Chairman’s Review 4 Directors Profile 6 Subsidiaries and Equity Accounted Investees 8 Human Resources 9 Risk Management 10 Corporate Governance 11 Financial Statements 15 Annual Report of the Board of Directors on the Affairs of the Company 16 Directors’ Responsibility Statement 19 Audit Committee Report 19 Independent Auditor’s Report 20 Income Statement 22 Balance Sheet 23 Statements of Changes in Equity 24 Cashflow Statement 25 Notes to the Financial Statements 26 Segment Reporting - Group 63 Decade at a Glance - Bank 64 Five Year Summary - Group 65 Value Added Statement 66 Shareholders’ & Investors’ Information 67 Information on Debenture 72 Notice of Meeting 73 Note 74 Form of Proxy 75 Corporate Information Inner Back Cover
SEYLAN MERCHANT BANK PLC385 Landmark Building Galle Road Colombo 03 Sri Lanka
www.smblk.com
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Seylan
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SEYLAN MERCHANT BANK PLC
Annual Report
2008