Annual Report Of The Directors On The State Of Affairs Of Bank Of Ceylon

1. General

The Board of Directors of Bank of Ceylon takes pleasure in presenting their report on the affairs of the Bank together with the Audited Consolidated Financial Statements for the year ended 31 December 2024 of the Bank and the Group and the Auditor General's Report on those Financial Statements, conforming to the requirements of the Bank of Ceylon Ordinance No. 53 of 1938 and Banking Act No. 30 of 1988 and amendments thereto. The Report also includes certain disclosures laid down by the Colombo Stock Exchange Listing Rules and certain disclosures required to be made under the Banking Act Direction No. 11 of 2007 on Corporate Governance for licensed commercial banks issued by the Central Bank of Sri Lanka and subsequent amendments thereto. The Directors reviewed and approved the Financial Statements on 24 February 2025.

Bank of Ceylon is a licensed commercial bank under the Banking Act No. 30 of 1988 and amendments thereto and was duly incorporated on 1 August 1939 under Bank of Ceylon Ordinance No. 53 of 1938. The Bank is wholly owned by the Government of Sri Lanka. The unsecured subordinated redeemable debentures issued by the Bank are listed on the Colombo Stock Exchange.

2. Review of the business

2.1. Principal activities of the Bank

The principal activities of the Bank during the year were personal banking, corporate banking, development banking, off-shore banking, trade financing, lease financing, primary dealing, investment banking and treasury operations, correspondence banking and money remittances, islamic banking, bancassurance, pawning, credit card facilities, foreign currency operations and other financial services.

2.2. Subsidiaries and associates

The principal activities of subsidiaries and associates are given under Notes to the Financial Statements on page 194. There were no significant changes in the nature of the principal activities of the Bank and the Group during the year under review, other than changes mentioned under accounting policies.

2.3. Changes to the Group Structure

During the year, the structure of the Group has not undergone any change and, notes to the Financial Statements No. 31 and 32 on pages from 256 to 263 of this Annual Report give details about the Group.

2.4. Vision, Mission and Corporate Conduct

The Bank's Vision, Mission and Value Statement are given on page 8 of this Annual Report. The Bank maintains high ethical standards in its activities whilst pursuing the objectives stated under "Vision", "Mission" and "Value Statements".

2.5. Review of the year's performance

The Chairman's Message on pages 16 to 19 deals with the year's performance of the Bank/ Group and on the Sri Lankan economy. The General Manager's Review on pages 20 to 23 provides a detailed description of the operations of the Bank during the year under review. The section titled "Financial Review" on pages 66 to 72 provides a detailed analysis of business operations of the Bank. These reports that provide a fair review of the Bank's affairs form an integral part of the Annual Report.

2.6. Customer Contact Points expansion

Enhancing the digital adoption, the Bank expanded its network by 113 CRMs during the year across the island, bringing out the total direct customer contact points to 2,294. This number

does not include peer banks' ATMs through which customers of Bank of Ceylon can transact, School "Sansada" and Mobile saving units.

During the year 2024 two branches have been added to the brick and mortar network of the Bank.

2.7. Corporate donations

The Bank has donated LKR 215.2 million on Community Development Activities carried out during the year (2023 – LKR 130.0 million).

2.8. Directors' responsibility for financial reporting

The Directors are responsible for the preparation of Financial Statements that will reflect a true and fair view of the state of affairs. The Directors are of the view that these Financial Statements have been prepared in conformity with the requirements of the Sri Lanka Accounting Standards, Banking Act No. 30 of 1988 and its amendments, Bank of Ceylon Ordinance No. 53 of 1938 and its amendments and the Listing Rules of the Colombo Stock Exchange. In the case of subsidiaries, the Financial Statements are also prepared in accordance with the provisions of the Companies Act No. 07 of 2007. The Statement of "Directors' Responsibility for Financial Reporting" is given on page 177 of this Annual Report and forms an integral part of this Report of the Directors.

2.9. Auditor's report

The Auditor General is the Auditor of Bank of Ceylon in terms of the provisions of Article 154 of the Constitution of the Democratic Socialist Republic of Sri Lanka.

Report of the Auditor General on the Financial Statements of the Bank and the Consolidated Financial Statements of the Bank and its subsidiaries (Group) as at 31 December 2024 is given on pages 178 to 182 of this Annual Report.

2.10. Accounting policies

The Group and the Bank prepared their Financial Statements in accordance with Sri Lanka Accounting Standards (LKASs) and Sri Lanka Financial Reporting Standards (SLFRSs).

The accounting policies adopted in the preparation of Financial Statements are given on pages 194 to 209.

3. Planned developments

An overview of the developments planned by the Bank for the future is presented in the Chairman's Message on pages 16 to 19 and General Manager's Review on pages 20 to 23 of this Annual Report.

4. Total income

The total income of the Group for the year 2024 was LKR 494,921.9 million as against LKR 551,866.8 million in the previous year. The Bank's total income accounted for 98% (2023 – 98%) of the total income of the Group. The main income of the Group is interest income, which comprises 95% (2023 –96%) of the total income.

5. Dividends and reserves

5.1. Profit and appropriations

The Bank has recorded a profit before income tax of LKR 106,904.3 million in 2024 reflecting a notable increase of 165%, compared to LKR 40,342.4 million recorded for the previous year.

After a charge of LKR 42,517.3 million for income tax (2023 – LKR 13,648.9 million), the Bank has recorded Profit After Tax (PAT) for the year 2024 amounting to LKR 64,386.9 million, which is a 141.2% increase compared to LKR 26,693.5 million PAT reported in 2023.

After charge of LKR 43,159.9 million of income tax (2023 – LKR 14,155.4 million), the profit after tax for the year of the Group is LKR 65,061.5 million in 2024 (2023– LKR 27,617.6 million).

5.2. Dividends

The Bank pays dividends to its sole shareholder; the Government of Sri Lanka, as per the Dividend Policy of the Bank in consultation with the Government, prudently based on profits after of tax, provisioning for loan losses and any such portion for reserves. However, no any dividend has been paid, during the year 2024 and a sum of LKR 173.2 million was paid for the year 2023.

5.3. Reserves

The total reserves of the Group stood at LKR 295,566.3 million as at 31 December 2024 (2023 – LKR 245,727.9 million). The Group reserves consist of the following:

Group
As at 31 December	2024 LKR million	2023 LKR million
Permanent reserve fund	16,953.0	15,665.0
Cash flow hedge reserve	1,521.4	5,251.5
Revaluation reserve	33,584.7	33,687.4
Free reserve	366.7	366.7
Exchange translation reserve	9,994.3	12,335.3
FVOCI reserve	7,328.6	4,599.8
Statutory reserve	358.9	358.9
Special reserve	39,922.1	-
Retained earnings	185,536.6	173,063.3
Total	295,566.3	245,727.9

6. Property, plant and equipment

The total capital expenditure incurred by the Group on the addition of Property, Plant and Equipment and intangible assets during the year amounted to LKR 5,870.2 million (2023 – LKR 4,056.2 million) the details of which are given in Notes 34 and 36 of Financial Statements on pages 265 to 278 and 281 to 282 of this Annual Report.

7. Value of freehold properties

The value of freehold properties owned by the Group as at 31 December 2024 is included in Note 34 of the Financial Statements at LKR 39,562.3 million (2023 – LKR 38,748.4 million).

8. Stated capital and shareholding

8.1. Stated capital

The total issued and fully paid-up capital of the Bank as at 31 December 2024 was LKR 25,000 million (2023 – LKR

25,000 million). During the year 2022 Government Treasury infused LKR 730.0 million as capital contribution to the Bank and as at 31 December 2024 this amount has been recorded under capital pending for the allotment.

8.2. Shareholding

The Government of Sri Lanka is the sole shareholder of the Bank.

9. Issue of subordinated debentures/ bond

During the year, the Bank successfully raised LKR 15,000.0 million (2023 – LKR 10,000.0 million) through the issuance of Basel III compliant, listed, rated, unsecured, subordinated, debentures to support Tier 2 capital base.

The details of debentures outstanding as at the date of Statement of Financial Position are given in Note 49 of the Financial Statements on pages 300 to 302.

10. Share information

The basic earnings per share of the Group was LKR 2,600.31 (2023 - LKR 1,102.31) and net Asset value per share as at 31 December 2024 was LKR 12,851.85 (2023 - LKR 10,858.32), for the year under review.

11. Community Development Activities

The programmes carried out under community development activities investments are detailed on page 110 to 116 under the section titled "Banking for a Sustainable Future".

12. Directors

Details of Directors who held the office during the year 2024 and holding the office as of the sign-off date of this Annual report is given in the table below. The Directors of the Bank do not hold any executive positions in the Bank. They bring wide range of skills and experience to the Bank. The qualifications and experience of the Directors are given on pages 26 to 29 of this Annual report. As of the Annual Report sign- off date, the number of Directors holding office is six (6). During the year 2024, the Board consisted of the following members;

12.1. List of directors

Mr Kavinda M L de Zoysa
Independent Non-Executive Director/ Chairman (Appointed w.e.f. 04 November 2024)

Mr R M P Rathnayake
Independent, Non-Executive Director(Appointed as in Ex-officio director w.e.f. 29 April 2023, ceased to be a Ex-officio director w.e.f. 06 November 2024 and re-appointed as a Independent director w.e.f. 20 December 2024)

Dr Kapila Senanayake
Non-Independent, Non-Executive Ex-officio Director (Appointed w.e.f. 14 November 2024)

Mr. Jayamin Pelpola
Independent Non-Executive Director (Appointed w.e.f. 22 February 2024)

Mr. Jehaan Ismail
Independent Non-Executive Director (Appointed w.e.f. 07 February 2024)

Dr. Amal Illesinghe
Independent Non-Executive Director (Appointed w.e.f. 06 December 2024)

Mr. Ronald C Perera PC
Independent Non – Executive Director/ Chairman
(Appointed w.e.f. 18 January 2023, resigned w.e.f. 13 March 2024)

Mr. Kavan Ratnayaka
Independent Non- Executive Director/ Chairman
(Appointed w.e.f. 14 March 2024, resigned w.e.f. 22 September 2024)

Major General (Rtd.) G A Chandrasiri VSV
Independent Non- Executive Director
(Appointed w.e.f. 08 January 2021, ceased to be a director w.e.f. 07 January 2024)

Prof. Kithsiri M Liyanage
Independent Non- Executive Director
(Appointed w.e.f. 31 March 2023, resigned w.e.f. 28 November 2024)

Mr. Naresh Abeyesekera
Independent Non- Executive Director
(Appointed w.e.f. 04 May 2023, resigned w.e.f. 13 November 2024)

Accordingly, the present Board is as follows,

Name of the Director	Executive / Non-Executive Status	Status of Independence
Mr. Kavinda M L de Zoysa	Non-Executive	Independent
Mr. R M P Rathnayake	Non-Executive	Independent
Dr. Kapila Senanayake	Non-Executive Ex officio	Non-Independent
Dr. Amal Illesinghe	Non-Executive	Independent
Mr. Jehaan Ismail	Non-Executive	Independent
Mr. Jayamin Pelpola	Non-Executive	Independent

The Directors are classified as Independent Directors on the basis given in Banking Act Direction No. 11 of 2007 on Corporate Governance for licensed commercial banks issued by the Central Bank of Sri Lanka.

12.2. Board subcommittees

The Board has formed six subcommittees complying with the aforesaid Banking Act Direction No. 11 of 2007 to ensure oversight control over affairs of the Bank. The subcommittee composition is given under the Governance on pages 131 to 142 of this Annual Report.

12.3. Directors' meetings

Attendance of Directors at Board and subcommittee meetings are given on page 120 of this Annual Report.

12.4. Directors' interests in contracts

Directors' interests in contracts with the Bank, both direct and indirect are given on page 173. These interests have

been declared at meetings of the Board of Directors. Except for the contracts given therein, the Directors do not have any direct or indirect interest in other contracts or proposed contracts with the Bank. Directors refrain from voting matters in which they are materially interested.

12.5. Directors' interests in debentures issued by the Bank/ Group

There were no debentures registered in the name of any Director.

12.6. Directors' allowances/ fees

The allowances/ fees payable to the Board of Directors are made in terms of the provisions/ contents in the Public Enterprises Circular No. PED 3/2015 dated 17 June 2015 and PED 01/2020 dated 27 January 2020 issued by the Department of Public Enterprises of the Ministry of Finance and Bank of Ceylon Ordinance No. 53 of 1938 and its amendments and Remuneration Policy for Chairman and Directors of the Bank of Ceylon. The Directors' remuneration in respect of the Bank and the Group for the financial year ended 31 December 2024 are given in Note 17 on page 218.

13. Risk management and system of internal controls

13.1. Risk management

The Board of Directors assumes overall responsibility for managing risks. The specific measures which were taken by the Bank in mitigating the risks are detailed on pages 143 to 166 of this Annual Report.

13.2. Internal control

The Board of Directors has ensured the implementation of an effective and comprehensive system of internal controls in the Bank through the Audit Committee.

The Audit Committee helps the Board of Directors to discharge their fiduciary responsibilities. The Report of the

Chairman of the Audit Committee is contained on pages 131 to 132 of this Annual Report. The Directors are satisfied with the effectiveness of the system of internal controls during the year under review and up to the date of the Annual Report and the Financial Statements.

The Board has issued a statement on the internal control mechanism of the Bank as per Direction No. 3 (8) (ii) (b) of Banking Act Direction No. 11 of 2007 on Corporate Governance for licensed commercial banks. The above report is given on pages 174 and 175 of this Annual Report. The Board has confirmed that the financial reporting system has been designed to provide reasonable assurance regarding the reliability of financial reporting and that the preparation of Financial Statements for external reporting purposes has been done in accordance with relevant accounting principles and regulatory requirements.

The Board has obtained an Assurance Report from the Auditor General on Directors' Statement on Internal Control and it is given on page 176 of this Annual Report.

14. Related Party Transactions

Directors have also disclosed transactions if any, that could be classified as Related Party Transactions in terms of Sri Lanka Accounting Standards - LKAS 24 (Related Party Disclosures) which is adopted in preparation of the Financial Statements.

The Related Party Transactions Review Committee considers all transactions Policy and in compliance with the relevant regulations of CSE and Central Bank of Sri Lanka, ensuring transactions are fair and in the best interests of the Bank.

Directors are in the view of the Bank has not granted favourable treatments to its related parties in the all transactions.

15. Corporate governance

The Board of Directors is committed towards maintaining an effective corporate governance structure and process. The financial, operational and compliance functions of the Bank are directed and controlled effectively within corporate governance practices. These procedures and practices that are in conformity with Corporate Governance Directions issued by the Central Bank of Sri Lanka under Banking Act Direction No. 11 of 2007 and the Code of Best Practice on Corporate Governance issued by the Institute of Chartered Accountants of Sri Lanka, are described in the section titled "Corporate Governance" appearing on pages 113 to 130 of this Annual Report.

The Board has obtained a report from the Auditor General on the compliance with the provisions of the above mentioned Direction No. 11 of 2007.

16. Human Resources

One of the most valuable assets of the Bank is its employees and it is important for the Bank to develop them. Several measures were taken to strengthen the much valued human capital in order to optimise their contribution towards the achievement of corporate objectives. The Bank's human resource management policies and practices are detailed in the section titled "A Talented, Inclusive and Sustainable Workforce" on pages 96 to 98 of this Report.

17. Compliance with laws and regulations

The Directors, to the best of their knowledge and belief confirm that the Group has not engaged in any activities contravening the laws and regulations.

Details of the Bank's compliance with laws and regulations are given on pages 351 to 394 under the section titled "Compliance Annexes" which forms an

integral part of this Report. They ensure that they are aware of applicable laws, rules and regulations.

18. Outstanding litigation

In the opinion of the Directors and as confirmed by the Bank's lawyers, the litigation currently pending against the Bank will not have a material impact on the reported financial results or future operations of the Bank.

19. Statutory payments

The Board confirms that all statutory payments due to the Government and in relation to employees have been made on time.

20. Environmental Protection

The Bank has not engaged in any activity, which has caused detriment to the environment. Further, precautions taken to protect the environment are given in the section titled "Banking for a Sustainable Future" on page 110 to 111.

21. Post-balance sheet events

The Directors are of the view that no material events have arisen in the interval between the end of the financial year and the date of this Report that would require adjustments or disclosures.

22. Going concern

The Directors are confident that the resources of the Bank are adequate to continue its operations. Therefore, it has applied the going concern basis in preparing the Financial Statements.

By order of the Board,

Janaki Senanayake Siriwardane
Secretary Bank of Ceylon/ Secretary to the Board

24 February 2025
Colombo