DFCC Bank was incorporated in 1955 under the DFCC Bank Act No. 35 of 1955 as a limited liability public company and the ordinary shares of the Bank were listed on the Colombo Stock Exchange.
Consequent to the enactment of the DFCC Bank (Repeal and Consequential Provisions) Act No. 39 of 2014, the DFCC Bank Act No. 35 of 1955 was repealed and with effect from 6 January 2015 the Bank was incorporated under the Companies Act No. 07 of 2007 as a Public Limited Company listed on the Colombo Stock Exchange with the name ‘DFCC Bank PLC’.
The shareholders at the Extraordinary General Meeting held on 28 August 2015 approved the amalgamation of DFCC Vardhana Bank PLC (DVB) with DFCC Bank PLC (Bank). The Registrar General of Companies on 1 October 2015 issued the Certificate of Amalgamation in terms of Section 244 (1) (a) of the Companies Act No. 07 of 2007 that DVB has been amalgamated with DFCC Bank PLC in accordance with the provisions of Part VIII of the Companies Act, with DFCC Bank PLC surviving as the amalgamated entity.
DFCC Bank PLC also obtained a commercial banking license from the Monetary Board of the Central Bank of Sri Lanka in terms of the Banking Act No. 30 of 1988, as amended, and accordingly upon the amalgamation now operates as a Licensed Commercial Bank with effect from 1 October 2015.
The Directors are satisfied that the Bank has adequate resources to continue its operations in the future and as such, the financial statements are prepared on the basis of a going concern. The Auditors have declared the Bank solvent even after the payment of dividend.
The financial statements of the Bank and the Group are given under Financial Reports section of the Annual Report.
The financial statements of the Bank and the Group have been prepared in accordance with Sri Lanka Accounting Standards prefixed SLFRS and LKAS, the Banking Act No. 30 of 1988 and amendments thereto, the Companies Act No. 07 of 2007 and other applicable statutory and regulatory requirements.
The Chairman’s Statement, Chief Executive’s Report and the Management Discussion and Analysis give details of the operations of the Bank and the Group, and the key strategies that were adopted during the year under review.
| Year-ended 31 December 2016 | LKR 000 |
|
Profit for the period |
3,288,723 |
|
Appropriations |
|
|
Transfer to: |
|
|
Reserve Fund (statutory requirement) |
170,000 |
|
First and final dividend approved for |
1,192,940 |
|
Unappropriated profit for the period |
1,925,783 |
The accounting policies adopted in the preparation of the financial statements of the Bank and the Group are stated on Notes to the Financial Statements section of the Annual Report.
There were no changes to the accounting policies of the Group in the year under review.
The Auditors’ Report on the financial statements, which is unqualified, is given under Finacial Reports section.
The present Auditors, Messrs KPMG have expressed their willingness to continue as Auditors of the Bank for the next financial year-ending 31 December 2017. The Audit Committee has reviewed the effectiveness and the relationship with the Bank including the fees paid to the Auditors and has concluded that they are suitable to continue in office. The Directors are satisfied that based on the written representation made by the Auditor’s, they have no relationship or interest with the Bank or with any of its subsidiaries which would impair the Auditor’s independence. A Resolution pertaining to their reappointment and authorising the Directors to determine their remuneration will be proposed at the Annual General Meeting for adoption.
The Board of Directors of the Bank presently consist of 11 Directors with wide knowledge and experience in the fields of banking and finance, trade, law, commerce, manufacturing or services. Profiles of the Directors are given in Board of Directors page. The following were the Directors of the Bank as at 31 December 2016 categorised in accordance with criteria specified in the Direction No. 11 of 2007 issued by the Central Bank of Sri Lanka:
C R Jansz – Chairman
K D N R Asoka*
Ms V J Senaratne
H A Ariyaratne
K P Cooray
T Dharmarajah
P M B Fernando
Ms S R Thambiayah
L N de S Wijeyeratne
A R Fernando – Chief Executive Officer
L H A L Silva – Deputy Chief Executive Officer
*Appointment in terms of Article 46 (ii) of the Articles of Association
K D N R Asoka represents a specific stakeholder and as such does not qualify to be designated as an Independent Director. C R Jansz and Ms V J Senaratne also do not meet the criteria set out in the Direction to be designated as Independent Directors by virtue of the fact that Mr Jansz and Ms Senaratne are common Directors of two companies outside the Group.
P M B Fernando has been designated as the Senior Director in terms of Central Bank of Sri Lanka Direction on Corporate Governance.
A N Fonseka and A W Atukorala resigned from the Board with effect from 9 July 2016 and 25 August 2016 respectively.
The Directors’ record their appreciation for the contributions made by them during their tenure as Directors.
H A Ariyaratne was appointed a Director with effect from 12 October 2016. H A Ariyaratne will retire in terms of Article 46 (ii) of the Articles of Association and is offering himself for re-election at the Annual General Meeting. The Nomination and Governance Committee has recommended his re-election and the Board having concluded that he is a fit and proper person to be a Director in terms of the provisions of the Banking Act, unanimously endorsed the recommendation of the Nomination and Governance Committee.
The Directors retiring by rotation in terms of Article 44 of the Articles of Association are K P Cooray and Ms S R Thambiayah, who offer themselves for re-election under the said Article with the unanimous support of the Directors.
The Directors’ remuneration in respect of the Bank and the Group for the financial year-ended 31 December 2016 is given below.
| Year-ended 31 December 2016 | Nine Months Ended 31 December 2015 | |
| Bank | 68,748 | 48,690 |
| Group | 90,223 | 95,107 |
The Bank held 13 Board meetings during the year. The attendance of Directors is shown in the Table on Corporate Governance section of the Annual Report.
|
No. of Shares
as at 31 December 2016 |
No. of Shares*
as at 31 December 2015 |
|
| H A Ariyaratne1 | 102,710 | – |
| K D N R Asoka | Nil | Nil |
| A W Atukorala2 | – | 14,500 |
| K P Cooray | Nil | Nil |
| T Dharmarajah | 500 | 500 |
| A R Fernando | 4,470 | 4,470 |
| P M B Fernando | 1,000 | 1,000 |
| A N Fonseka2 | – | 142,006 |
| C R Jansz | 1,000 | 1,000 |
| Ms V J Senaratne | 1,296 | 1,296 |
| L H A L Silva | 3,476 | 3,476 |
| Ms S R Thambiayah | Nil | Nil |
| L N de S Wijeyeratne | Nil | Nil |
1 Not a Director as at 31 December 2015
2 Not a Director as at 31 December 2016
* Includes shares held by the spouse.
| 31 December 2016 LKR 000 | 31 December 2015 LKR 000 | |
| A R Fernando | Nil | 5,000 |
| L H A L Silva | 2,000 | Nil |
No Director directly or indirectly holds options of the Bank.
An interest register is maintained by the Bank as required by the Companies Act No. 07 of 2007. Directors have made the general disclosure as provided for in Section 192 of the Companies Act No. 07 of 2007. The Directors have declared all material interests in contracts involving the Bank and have not participated in the decision-making related to such transactions. All related entries were made in the interest register during the year under review.
The Directors’ interests in transactions with entities/persons (other than subsidiaries, the joint venture and associate) is listed under each Director for the year-ended 31 December 2016 and are as follows:
| LKR ‘000 | |
| A R Fernando | |
| Aggregate amount of accommodation | 25,000 |
| A R Fernando | |
| LVL Energy Fund Limited Aggregate amount of accomodation | 300,000 |
| Credit Information Bureau of Sri Lanka Aggregate amount of payments made for services | 9,572 |
| P M B Fernando | |
| Asia Asset Finance PLC Aggregate amount of accommodation | 200,000 |
| C R Jansz | |
| Distilleries Company of Sri Lanka PLC Pericyl (Pvt) Limited Aggregate amount of accommodation | 3,300,000 |
| Lanka Bell Limited Aggregate amount of payments made for services | 2,425 |
| Ms V J Senaratne | |
| Distilleries Company of Sri Lanka PLC Aggregate amount of accommodation | 3,000,000 |
| L H A L Silva | |
| Aggregate amount of accommodation | 2,000 |
| Lanka Financial Services Bureau Limited Aggregate amount of payments made for services | 3,564 |
| L N de S Wijeyaratne | |
| Royal Ceramics PLC Rockland Distilleries (Pvt) Limited Talawakelle Tea Estates PLC Aggregate amount of accommodation | 842,000 |
| The Kingsbury PLC Aggregate amount of payments made for services | 383 |
A R Fernando and L H A L Silva are or have been Chairman/Director of one or more of the subsidiary, joint venture or associate companies. Details of transactions with subsidiary, joint venture and associate companies are disclosed in Notes 55.2-55.4 in the Notes to the financial statements.
During the year, the Bank made donations amounting to LKR 1.36 million.
The following are the present members of the permanent committees of the Board. Changes to the composition during the year are set out in the respective Committee Reports in the Annual Report:
P M B Fernando – Chairman
T Dharmarajah
L N de S Wijeyeratne
K D N R Asoka
C R Jansz – Chairman
T Dharmarajah
K P Cooray
C R Jansz – Chairman
Ms S R Thambiayah
T Dharmarajah
C R Jansz – Chairman
Ms V J Senaratne
Ms S R Thambiayah
P M B Fernando – Chairman
C R Jansz
K P Cooray
L N de S Wijeyeratne – Chairman
P M B Fernando
K D N R Asoka
H A Ariyaratne
A R Fernando – Chief Executive Officer
Chief Risk Officer of the Bank is also a member of the Committee.
T Dharmarajah – Chairman
C R Jansz
K P Cooray
In addition, from time to time the Board appoints committees to deal with specific matters. The Board also invites external advisors and Key Management Personnel to serve on some of the committees as and when necessary.
Further details relating to the committees are given in the section on Corporate Governance and the Committee Reports.
The Directors have approved the payment of a first and final dividend of LKR 4.50 per share, (final dividend paid in the previous period, LKR 2.50 per share). The total dividend for the year will amount to approximately LKR 1,193 million (LKR 663 million in the previous period), which amounts to 38% of the Bank’s distributable profit.
The Directors unanimously declare that, DFCC Bank PLC will satisfy the solvency test stipulated in Section 57 of the Companies Act No. 07 of 2007 immediately after the dividend payment is made and a certificate of solvency from its Auditor is obtained.
The total expenditure of acquisition on property, plant and equipment during the year amounted to LKR 219 million of which intangible assets amounted to LKR 59 million. Details of these are given in the Note 38 and 39 to the financial statements.
Total reserves and retained profit amounted to LKR 41,134 million.
The information on market value of freehold properties are given in Note 38.1.3 to the financial statements.
The stated capital as at 31 December 2016 was LKR 4,716 million. The number of shares in issue as at 31 December 2016 was 265,097,688. Further information is given under Notes to the Financial Statements section.
Information relating to earnings, net asset and market value per share are given on Highlighs and Investor Relations sections of the Annual Report and also contains information pertaining to the share trading during the period.
As at 31 December 2016, there were 8,776 registered shareholders and the distribution is indicated on Distribution of Shareholding page.
The 20 largest shareholders as at 31 December 2016 are listed on Distribution of Shareholding page.
The policy of the Bank is to develop and maintain a dedicated and highly motivated group of employees who are committed to creating sustainable value through effective risk management and high quality service while supporting public and private sector in its development efforts within the ambit of the Articles of Association of the Bank. DFCC Bank PLC continuously invests in training and development of its staff to meet these objectives. The Bank is an equal opportunity employer. Remuneration of employees consists of fixed and variable payments. Annual increments and pay awards are based on the performance of the Bank and the individual. It is the Bank’s policy to fix remuneration at a level which will attract, motivate and retain high quality employees.
The Directors, to the best of their knowledge and belief are satisfied that all statutory payments due to the Government and in relation to the employees have been made on time.
The Related Party Transactions Review Committee is responsible for ensuring compliance with the code specified in Section 9 of the CSE Listing Rules. The Committee reviewed the related party transactions carried out during the year and noted that the transactions were in compliance with the said code.
DFCC Bank PLC has not engaged in any activities contravening the laws and regulations and has complied with prudential requirements. The Directors obtain quarterly, a confirmation report from the Management with regard to compliance with laws, regulations and prudential requirements.
Subsequent to the date of the statement of financial position, no circumstances have arisen which would require adjustments to the accounts. Significant events occurring after the reporting period which in the opinion of Directors require disclosure are described in Note 58 to the financial statements.
The Directors place great emphasis on following internationally accepted good corporate governance practices, and principles, systems and procedures are in place in order to satisfy good governance requirements.
The Directors have obtained External Auditors’ assurance on effectiveness of the internal control mechanism and compliance with the Direction 11 of 2007 of the Central Bank of Sri Lanka on Corporate Governance.
Details of governance practices and the required disclosures are given on Corporate Governance Section.
Rule 3 (8) of the Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks in
Sri Lanka prescribe disclosures in the Annual Report. These disclosures have been made in this Annual Report as shown in the following Table:
The Table below provides cross references to facilitate easy reference.
| Reference to Rule | Requirement | Reference to Annual Report |
| 3 (8) (i) | Financial statements on prescribed format | Financial statements |
| 3 (8) (ii) (a) | Affirmative assurance of compliance with accounting standards and requirements | Directors’ Responsibility Statement |
| 3 (8) (ii) (b) | Affirmative assurance of the integrity of financial reporting system | Directors’ Statement of Internal Control |
| 3 (8) (ii) (c) | Assurance report issued by the External Auditor | Independent Assurance Report |
| 3 (8) (ii) (d) | Information on Directors | Board of Directors |
| 3 (8) (ii) (d) | Remuneration of Directors | Annual Report of the Directors |
| 3 (8) (ii) (e) |
Net accommodation granted to each category of related party |
Corporate Governance Report |
| 3 (8) (ii) (f) | Compensation and other transactions with Key Management Personnel | Corporate Governance Report |
| 3 (8) (ii) (h) |
Compliance with prudential requirements and regulations |
This report. |
As required by Section 161 (1) (k) of the Companies Act No. 07 of 2007, the Board of Directors does hereby acknowledge the contents of this Report.
For and on behalf of the Board of Directors,
C R Jansz
A R Fernando
Ms A Withana20 February 2017
