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Our Vision

To be the most technologically advanced, innovative and customer-friendly financial services organisation in Sri Lanka,

poised for further expansion in South Asia.

Our Mission

Providing reliable, innovative, customer-friendly financial services, utilising cutting-edge technology and focusing

continuously on productivity improvement whilst developing our staff and acquiring necessary expertise to

expand locally and regionally.

A century of experience. A year of reinvention.

Commercial Bank of Ceylon PLC Annual Report 2020

Contents

Annual Report of the Board of Directors 3 Introducing our 52nd Annual Report 4

Integrated Report 05-134

Organisational Overview 6 About the Bank 6

A Snapshot of the Bank's Profile 7 Financial Highlights 8 Strategic Highlights 9

Our Centennial Journey 10 Performance Review 13 Joint Message from the Chairman and his Predecessor 13 Managing Director/Chief Executive Officer's Review 15

Financial Review 20 Operating Environment 27 Connecting with Stakeholders 27

Material Matters 29 Operating Context and Outlook 32 Business Model for Sustainable Value Creation 35 Management Discussion and Analysis 41

Strategic Imperatives 41 Prudent Growth 42

Customer Centricity 48 Leading through Innovation 53

Operational Excellence 57 Governance and Risk Management 64

Board of Directors and Profiles 64 Corporate Management and Profiles 70

Senior Management 72 Annual Corporate Governance Report 75

Board Committee Reports 86 Statement of Compliance 101 Statement of Directors' Responsibility

for Financial Reporting 107 Directors' Statement on Internal Control

over Financial Reporting 109 Independent Assurance Report 111 Managing Director's and Chief Financial Officer's

Statement of Responsibility 112 Directors' Interest in Contracts with the Bank 113

Risk Governance and Management 114

This Annual Report is published within three months of the date of the Statement of Financial Position. The comprehensive end-to-end online HTML version is also published online on the same date as the date of issue of this Annual Report at Scan to view the online version 2

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In the COVID-19 pandemic recovery process, the Bank has played a significant

role leading the private sector banks in supporting affected sectors.

Justice K Sripavan Chairman

K G D D Dheerasinghe Former Chairman

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The question constantly on our minds, animating every decision taken, was: when the pandemic

finally subsides, how will our stakeholders judge the conduct

of the Bank during this most challenging of periods?

S Renganathan Managing Director/Chief Executive Officer

Financial Statements 135-290

137 Financial Calendar ? 2020 and 2021 138 Independent Auditors' Report 141 Financial Statements Highlights ? Bank 142 Financial Statements ? Table of Content 143 Income Statement

Statement of Profit or Loss and Other 144 Comprehensive Income 145 Statement of Financial Position 146 Statement of Changes in Equity ? Group 150 Statement of Changes in Equity ? Bank 154 Statement of Cash Flows 155 Notes to the Financial Statements

Supplementary Information 291-371

Notice of Meeting ? Annual General Meeting Circular to the Shareholders on the First and Final Dividend for 2020 Form of Proxy (Voting Shareholders) Form of Proxy (Non-Voting Shareholders) Stakeholder Feedback Form Corporate Information ? Inner Back Cover

All references to the banking industry figures in this Annual Report are based on CBSL publications which is based on regulatory reporting requirements and may differ from the figures published as per the Sri Lanka Accounting Standards.

Annual Report of the Board of Directors

Commercial Bank of Ceylon PLC Annual Report 2020

The Board of Directors is pleased to present medium and long term through its business Signed in accordance with a resolution of

to the shareholders the 52nd Annual Report model (pages 36 and 37). Accordingly, the

the Directors.

of the Bank comprising an integrated report, Bank identified the emerging developments

the Audited Financial Statements of the

and trends that are likely to impact its

Group and the Bank for the year ended

business model and value creation process.

December 31, 2020, and the Independent

These trends were then categorised into

Justice K Sripavan

Auditors' Report on the Financial Statements risks and opportunities based on their

Chairman

conforming to all applicable statutory

importance to the Bank and its stakeholders,

requirements.

together with the stakeholders that are likely

This Report, where applicable is presented in accordance with the Guiding Principles and Content Elements as stipulated by the International Framework issued by the International

to be affected most. The Bank identified its strategic imperatives through its annual strategic planning exercise and continued to execute the required strategies to mitigate risks and exploit opportunities.

Prof A K W Jayawardane Deputy Chairman

Integrated Reporting Council (IIRC).

Sections 150 (1), 151, 152 and 153 (1) & (2) of the Companies Act No. 07 of 2007 and amendments thereto make it a responsibility of the Board of Directors of the Bank to prepare the Financial Statements of the Group and the Bank, which reflect a true and fair view of the financial position and

The Management Discussion and Analysis (pages 41 to 62) contained in this Report provides a detailed account of such imperatives and strategies. The underlying governance structure and the risk management framework are detailed on pages 77 and 120.

The Bank's External Auditors, Messrs Ernst

S Renganathan Managing Director/Chief Executive Officer

K Dharmasiri Director

performance of the Group and the Bank. In & Young, who were appointed in accordance

this regard, the Board of Directors wishes

with a resolution passed at the 51st Annual

to confirm that the Income Statement, Statement of Comprehensive Income, Statement of Financial Position, Statement

General Meeting held on June 25, 2020 (which was postponed to the above date from its originally planned date of March 30,

L D Niyangoda Director

of Changes in Equity, Statement of Cash

2020, due to curfew and lockdowns in many

Flows, and Significant Accounting Policies

parts of the country following the outbreak

and Notes thereto appearing on pages 143 to 290 have been prepared and presented in conformity with the requirements of

of COVID-19), have expressed their opinion, given on pages 138 to 140 of this Annual Report. The details on the remuneration of

Ms N T M S Cooray Director

the Sri Lanka Accounting Standards as

External Auditors are given in Note 21 on

mandated by the Sri Lanka Accounting

page 186 to the Financial Statements. As

and Auditing Standards Act No. 15 of 1995

far as the Directors are aware, the Auditors

and the Companies Act No. 07 of 2007 and amendments thereto.

This Report also provides the information and disclosures as required by the Companies Act No. 07 of 2007 and

do not have any other relationship with the Bank, or any of its subsidiaries and its associate. The External Auditors do not have any interest in contracts with the Bank, or any of its subsidiaries and its associate.

T L B Hurulle Director

amendments thereto, Banking Act No.

The Directors, to the best of their

30 of 1988 and amendments thereto, the Directions issued thereunder including the Banking Act Direction No. 11 of 2007

knowledge and belief are satisfied that all statutory payments to the Government, other regulatory institutions, and to

S C U Manatunge Director/Chief Operating Officer

and subsequent amendments thereto, the

employees have been made in time.

Listing Rules of the Colombo Stock Exchange (CSE) including the Rules pertaining to Related Party Transactions as required by Section 9.3.2 (c) and (d) thereof and the recommended best practice.

The Board of Directors reviewed the business plans of the Bank and its subsidiaries and is satisfied that the Bank and its subsidiaries have adequate resources to continue their operations in the foreseeable

Ms J Lee Director

The Financial Statements of the Group

future. Accordingly, the Financial Statements

and the Bank for the year ended December 31, 2020, including comparatives for 2019, were approved and authorised for issue by the Board of Directors in accordance with the Resolution of the Directors on February 24, 2021. The appropriate number of copies of the Annual Report will be submitted to the CSE and to the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) within the statutory deadlines and soft copies of same will be hosted in the website of the Bank, . This Report has been structured to effectively communicate the Bank's efforts to create value to all its stakeholders across the short,

of the Group and the Bank are prepared based on a going concern basis.

The Board has carefully considered matters material to the Bank and its stakeholders in preparing this Report and acknowledges that reasonable care has been exercised in the preparation and presentation of this Integrated Annual Report while preserving its integrity.

The extent of compliance with the requirements of Section 168 of the Companies Act No. 7 of 2007 and amendments thereto and other relevant statutes is disclosed in detail on pages 101 to 106.

R Senanayake Director

S Muhseen Director

R A P Rajapaksha Company Secretary February 24, 2021

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Introducing our 52nd Annual Report

Commercial Bank of Ceylon PLC Annual Report 2020

The 52nd Annual Report of Commercial Bank of Ceylon PLC covers the 12-month period from January 1 to December 31, 2020. Having commenced reporting in line with the International Framework in 2013, this integrated report is consistent with our usual annual reporting cycle for financial and sustainability reporting and follows our most recent Report for the year ended December 31, 2019, for which comparatives are given, where applicable, within this Report.

Transcending the medium To cater to the communications needs of the Bank's diverse stakeholder groups, this Report is available in multiple mediums and formats. This approach also aims to balance the disparate imperatives of conciseness, comprehensiveness, and accessibility in our disclosure practices.

Strategic orientation In addition to a focus on performance over the year, this Annual Report also provides stakeholders with insights into the Bank's current and future strategies to drive growth.

Non-financial information Recent trends make it clear that in addition to traditional forms of financial reporting, stakeholders in general, and providers of financial capital in particular, want access to non-financial information when assessing future potential of corporates. Accordingly, this Annual Report seeks to provide a holistic, integrated discussion of the Bank's performance, operations, and strategic imperatives.

Basis of preparation This Report has been prepared in line with the International framework; and the Bank's social and environmental impacts are presented in accordance with the GRI Standards: Core option. It also comments on the Bank's contribution towards the UNDP Sustainable Development Goals.

The concepts, principles, and guidelines used in the preparation of this Report are drawn from the following sources:

z The International Integrated Reporting Framework ()

z The Global Reporting Initiative Sustainability Reporting Guidelines ? GRI Standards ()

z "A Preparer's Guide to Integrated Corporate Reporting", published by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka)

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z "Handbook on Integrated Corporate Reporting", published by CA Sri Lanka in collaboration with The Integrated Reporting Council of Sri Lanka

Report boundary

The financial performance of the Group includes the Bank along with seven subsidiaries ? Commercial Development Company PLC, CBC Tech Solutions Limited, CBC Finance Limited (formally Serendib Finance Ltd.), Commercial Insurance Brokers (Pvt) Ltd., Commex Sri Lanka S.R.L. Italy, Commercial Bank of Maldives Private Limited and CBC Myanmar Microfinance Company Limited ? and an associate ? Equity Investments Lanka Ltd. (depicted in the Consolidated Financial Statements on pages 143 and 290).

The Bank's social and environmental impact, as discussed within the Management Discussion and Analysis, focuses on both Sri Lankan and Bangladesh operations of Commercial Bank of Ceylon PLC., the Parent entity of the Group, which accounts for more than 98% of revenue, assets, and borrowings unless stated otherwise.

During the year under review, no significant changes in the organisation type, structure, ownership, supply chain or topic boundaries took place. No significant changes in reporting or restatements were made of previously reported financial, social or environmental information, other than the inclusion of GRI disclosures GRI 207: Tax (2019) and GRI 403: Occupational health and safety (2018).

Responsibility for sustainability practices and external assurance

The Bank's Managing Director/Chief Executive Officer, Chief Operating Officer and other members of the Corporate Management are responsible for the sustainability practices and disclosures made in this Report. They have actively engaged with the external assurance providers on the Report content.

The Bank's External Auditors, Messrs Ernst & Young, have assured the Group's Financial Statements and non-financial information, while Messrs DNV GL Business Assurance Lanka (Pvt) Ltd., who represent DNV GL, have assured the Bank's social and environmental processes.

The Board of Directors and the Management have no other relationship with Messrs Ernst & Young, DNV GL Business Assurance Lanka (Pvt) Ltd. or DNV GL aside from their engagement as independent Assurance Service providers of the Group.

Quality assurance

Six qualitative criteria were taken into account in the production of both text and visual elements (figures, graphs, tables):

z Completeness: This Annual Report includes material impacts within and under the direct control of the Bank, external impacts that are indirectly influenced through our engagement with stakeholders, and broader sustainability initiatives undertaken through the Bank's own CSR Trust.

z Comparability: This Report includes the performance of current and previous reporting periods together with industry benchmarks where relevant and available.

z Accuracy and Consistency: The content of this Report is supported by inbuilt internal controls to facilitate traceability and verifiability of information.

z Clarity: This report incorporates both text and visual elements to enhance readability, facilitate understanding, and maintain concision.

z Balance: This Report makes every possible effort to present a balanced review of relevant material information.

z Credibility and Reliability: This Report's financial and sustainability information has been vetted by reputed external assurance service providers.

Precautionary Principle

Being keenly aware of the direct and indirect social and environmental impact of our actions, and the indirect consequences resulting from the business activities of our customers to whom we lend in particular, the Bank avoids or reduces any such negative impacts through credit policies, SMES screening, post-disbursement supervision, dedicated green products and risk management processes.

Although the Bank's business model and operations do not directly create a significant negative impact on the environment, every effort is made to reduce its own carbon footprint through initiatives such as offering digital products/channels, solar energy usage, energy efficient air conditioning and the minimisation of paper usage in its processes.

Contact

Your comments or questions on this Report are welcome and we invite you to direct them to:

Chief Financial Officer Commercial Bank of Ceylon PLC "Commercial House" 21, Sir Razik Fareed Mawatha Colombo 1 Sri Lanka

Commercial Bank of Ceylon PLC Annual Report 2P0a20ges 0 I5N-T1E3G4RATED REPORT Introducing our 52nd Annual Report

INTEGRATED REPORT

This Integrated Report has been prepared in accordance with the Guiding Principles and Content

Elements outlined in the International Framework. It forms a discrete section within the Annual Report of the Bank,

and is given pride of place because it presents a multidimensional view of the Bank's performance over the year 2020. As stated in the Annual Report of the Board of Directors on page 3, the Board of Directors acknowledges that reasonable care has been exercised in the preparation and presentation of this Integrated Report while

preserving its integrity.

Organisational Overview ? 6 Performance Review ? 13

Operating Environment ? 27 Business Model for Sustainable Value Creation ? 35

Management Discussion and Analysis ? 41 Governance and Risk Management ? 64

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Organisational Overview About the Bank

Our regional presence and global connectivity Figure ? 01

Correspondent

Banks

16

Correspondent

Banks

Italy

11

Subsidiary

Business Promotion

Officers

14

The Maldives Subsidiary

Branches

268

Sri Lanka

Subsidiaries

4

Associate

1

Correspondent

Business Promotion Officer

Banks

25

1

Bangladesh Branches

Myanmar Subsidiary and

19

a Representative Office

Correspondent Banks

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Commercial Bank of Ceylon PLC Annual Report 2020 Organisational Overview

Largest and Systemically Important Bank Commercial Bank of Ceylon PLC is the largest private sector commercial bank ? and the third largest bank overall ? in Sri Lanka in terms of total assets, which stood at Rs. 1.736 Tn. (USD 9.285 Bn.) as at the end of 2020. It is the only private sector Bank that has been designated by the Central Bank of Sri Lanka as a higher-tier Domestic Systemically Important Bank (D-SIB). The Bank accounts for approximately 10.7%, 11.2% and 11.8% of sector loans and advances, deposits and assets, respectively.

Over Hundred Year Legacy The Bank's origins date back to 1920, and it marked just over a half-century of operations under its present name in 2020. The total staff cadre of the Bank stood at 5,057 as at end 2020 and they serve over 3.5 million plus customers through a wide local and international network of branches, subsidiaries, agency arrangements, Business Promotion Officers, and correspondent banking relationships.

Growing International Footprint With the acquisition of the Bangladesh operations of Cr?dit Agricole Indosuez in 2003, the Bank began its expansion beyond Sri Lanka's shores and became the first private sector bank to establish a branch operation outside the country. Since then, it has established three subsidiaries in Italy, the Maldives and Myanmar.

Risk Profile Fitch Ratings Lanka Ltd., (Fitch) revised the National Long-term Rating of the Sri Lankan financial institutions following the recalibration of its Sri Lankan national rating scale. As a result, Fitch revised the National

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Long-term of the Bank to AA-(lka) from AA+(lka) and its outlook from negative to stable in January 2021 and it is on par with the highest rating for any local private sector bank. The Bank's Bangladesh Operations' credit rating was reaffirmed at AAA by Credit Rating Information Services Ltd in June 2020 for the 10th consecutive year. The Bank's risk profile reflects a restrained risk appetite, a robust funding base, a secure level of liquidity, a sound domestic franchise and stable, consistent performance.

Diversification

The Bank's business is well diversified across four main business segments: Personal Banking, Corporate Banking, Treasury, and International Operations. The International Operations of the Bank covers operations in Bangladesh, Maldives, Italy, and Myanmar, which now account for 11.79% of consolidated assets and 20.46% of consolidated profit before taxes. Besides geographical diversification, the Bank has successfully accomplished a high level of diversification in its operations across many other parameters such as customer profile, currency, products and services portfolio, funding profile, maturity profile, economic sectors and the sources of revenue.

Vibrant financial intermediation

Having being the first private sector Bank to cross Rs. 1 Tn. mark in assets and deposits in 2016 and 2019 respectively, during the first half of 2020, the Bank became the first private sector bank in Sri Lanka to cross the Rs. 1.5 Tn. mark in total assets which reached to Rs. 1.736 Tn. at the end of 2020. Customer deposits fund 72.92% of total assets, demonstrating the Bank's strong role as a financial intermediary. For the past five years, the Bank's loans to deposits ratio was over 80% on average, reflecting a growth in loans

commensurate with the growth in deposits. The Bank's asset quality is one of the best in the industry, while its Current Accounts and Savings Accounts (CASA) make up 42.72% of total deposits, the highest among the peer banks.

Strong capitalisation

The Bank's Tier 1 Capital ratio and Total Capital Ratio stood at 13.217% and 16.819%, respectively, as at December 31, 2020, compared to the regulatory minimum ratios of 9% and 13% applicable for the year. The Bank's growth was prudent with gearing in terms of on-balance sheet assets as well as risk-weighted assets remaining at 11.05 times and 5.94 times, respectively, as of the end of 2020. Demonstrating the strength of the franchise, the Bank's shares reported the highest price to Book Value of 0.60 times and the highest market capitalisation of Rs. 94 Bn. (USD 500 Mn.) among banking, finance and insurance institutions on the Colombo Stock Exchange at year's end (the Bank is the fifth largest institution listed on the CSE overall).

Ownership of the Bank

Of the 16,820 ordinary voting shareholders of the Bank at end of 2020, DFCC Bank PLC held 12.02% and entities related to the State, including Employees' Provident Fund, Employees' Trust Fund Board and Sri Lanka Insurance Corporation, collectively held 19.49% of Bank's shares. While Mr Y S H I Silva (8.87%), the International Finance Corporation (7.12%), Citibank New York S/A Norges Bank Account 2 (4.16%), Melstacorp PLC (4.14 %), CB NY S/A IFC Emerging Asia Fund LP (3.67%) and CB NY S/A IFC Financial Institutions Growth Fund LP (3.67%) are the other major shareholders, holding a combined ownership stake of 31.63%. Notably, the Bank has a substantial foreign shareholding, with foreign shareholders owning a combined 23.66% stake in the Bank.

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