union bank -audited financial report 31-12-2010

8/6/2019 Union Bank -Audited Financial Report 31-12-2010

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Union Bank of Colombo Limited

INCOME STATEMENTYear ended 31 December 2010

2010 2009

Note Rs. Rs.

INCOME 3 2,078,120,074 2,052,704,053

Interest Income 4 1,771,976,557 1,855,783,799

Less: Interest Expenses 5 997,841,287 1,392,872,704

NET INTEREST INCOME 774,135,270 462,911,095

Other Income 6 306,143,517 196,920,254

1,080,278,787 659,831,349

LESS : NON INTEREST EXPENSES

Operating Expenses 7 247,798,769 134,844,474

Personnel Costs 252,531,371 199,986,538

Premises, Equipment and Establishment Expenses 130,253,941 108,885,465

Loan Loss Provision 30,191,221 31,754,174

Provision for fall in value of Dealing Securities - (757,794)

Expenses on Defined Benefit Plan 23 6,661,756 4,666,709

667,437,058 479,379,566

PROFIT BEFORE TAXATION 412,841,729 180,451,783

Less : Value Added Tax on Financial Services 104,850,021 46,468,715

Provision for Taxation 8 158,194,702 71,842,056

PROFIT AFTER TAXATION 149,797,006 62,141,012

Earnings Per Share 9 0.64 0.44

The Accounting Policies and notes on pages 6 through 28 form an integral part of the Financial Statements.

-2-




BALANCE SHEETAs at 31 December 2010

2010 2009

ASSETS Note Rs. Rs.

Cash & Short Term Funds 10 1,285,529,573 630,505,193

Balances with Central Bank of Sri Lanka 11 749,885,174 763,844,165

Treasury Bills and Other Bills Eligible for

Re discounting with Central Bank 12 4,253,338,543 2,741,134,344Commercial Papers 22,901,759

Dealing Securities 13 161,205,900 -

Investment Securities 14 2,220,464,027 2,031,784,626

Bills of Exchange 15 354,488,715 330,734,648

Loans and Advances 16 8,939,389,295 6,807,179,358

Lease Receivables 17 268,551,461 382,410,177

Deferred Taxation 18 - 39,182,113

Other Assets 19 195,385,883 161,242,886

Property & Equipment 20 227,849,316 201,581,378

Total Assets 18,656,087,887 14,112,500,647

. .

LIABILITIES

Deposits 21 13,193,558,524 11,963,995,607

Borrowings 22 401,126,524 92,396,759

Deferred Taxation 18 13,789,728

Other Liabilities 23 507,420,714 457,334,003

Total Liabilities 14,115,895,490 12,513,726,369

SHAREHOLDERS' FUNDS

Stated Capital 24 4,573,820,996 1,813,170,000

Pending Allotement 30,970,117

Statutory Reserve Fund 25 22,231,977 14,742,127

Accumulated Losses (86,830,693) (229,137,849)

4,540,192,397 1,598,774,278

TOTAL LIABILITIES & SHAREHOLDERS' FUNDS 18,656,087,887 14,112,500,647

Commitments and Contingencies 26 7,643,167,479 6,905,792,133

Signd ....... Signd .. Signd. .

Ajita de Zoysa Anil Amarasuriya Nirosha Kannangara

Chairman Director/CEO Secretary


25 March 2011.

Colombo,

These Financial Statements are in compliance with the Companies Act No 07 of 2007.

Signd........................................................ Signd-----------------------------------

Kusal Perera Malinda Samaratunga

Assistant Vice President ( Finance) Chief Financial Officer

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.

Approved and signed for and on behalf of the Board.

-3-




STATEMENT OF CHANGES IN EQUITYYear ended 31 December 2010

Statutory Retained Profits

Stated Pending Reserve (Accumulated

Capital Allotment Fund Losses) Total

Rs. Rs. Rs. Rs.

Balance as at 1st January 2009 1,682,500,000 75,000,000 11,635,076 (288,171,810) 1,480,963,266

Shares issued for cash 55,670,000 - - - 55,670,000

Allotments during the Period 75,000,000 (75,000,000) - - -

Net Profit for the Period - - - 62,141,012 62,141,012

Transfers during the Period - - 3,107,051 (3,107,051) -

Balance as at 1st January 2010 1,813,170,000 - 14,742,127 (229,137,849) 1,598,774,278

Shares issued for cash 2,760,650,996 30,970,117 - - 2,791,621,113

Net Profit for the Period - - - 149,797,006 149,797,006

Transfers during the Period - - 7,489,850 (7,489,850) -

Balance as at 31st December 2010 4,573,820,996 30,970,117 22,231,977 (86,830,693) 4,540,192,397


-4-




CASH FLOW STATEMENTYear ended 31 December 2010

2010 2009

Rs. Rs.

Cash Flow from Operating Activities

Interest Received 1,623,590,272 1,812,413,616

Fees and Commission Receipts 133,942,154 88,590,483

Interest Paid (1,079,607,435) (1,402,526,488)

Net Foreign Exchange gain 48,204,897 39,728,046

Receipts from Other Operating Activities 107,518,745 67,448,521

Payments on Other Operating Activities (685,820,753) (454,370,073)

Operating Profit before changes in Operating Assets & Liabilities 147,827,880 151,284,105

(Increase)/Decrease in Operating Assets:

Funds Advanced to Customers (2,022,616,302) 68,023,093

Bills of Exchange (23,754,067) (209,460,273)

Others (33,441,546) (8,027,365)

(2,079,811,915) (149,464,545)

Increase /(Decrease) in Operating Liabilities:

Deposits from Customers 1,252,117,559 1,048,056,872

Negotiable Certificates of Deposit (22,554,642) 423,861,877

Securities Sold Under Repo Agreement 62,218,432 16,141,009

Others 86,592,621 27,762,706

1,378,373,970 1,515,822,464

Net Cash from Operating Activities before Income Tax (553,610,065) 1,517,642,024

Retiring Gratuity paid (1,501,213) (2,268,495)

Income Tax (Paid) / Refunds (24,443,886) (26,331,379)

Net Cash from Operating Activities (579,555,164) 1,489,042,150

Cash Flow from Investing Activities

Dividends Received 1,960,116 305,200

Purchase of Non Dealing Securities 262,052,884 (442,729,079)

Purchase of Property & Equipment (76,114,725) (74,726,241)

Purchase of Dealing Securities (123,786,537) 2,297,790

Proceeds from Sale of Property & Equipment 102,668 1,209,320

Net Cash from Investing Activities 64,214,406 (513,643,010)

Cash Flow from Financing Activities

Proceeds from shares 2,791,621,113 55,670,000

Increase / (Decrease) in Other Borrowings 29,167,352 48,861,458

2,820,788,465 104,531,458

Net Increase/(Decrease) in Cash and Cash Equivalents 2,305,447,707 1,079,930,598

Cash and Cash Equivalents at Beginning of the year 3,298,677,897 2,218,747,299

Cash and Cash Equivalents at end of the year 5,604,125,604 3,298,677,897

Reconciliation of Cash and Cash Equivalents

Cash and Short Term Funds 1,285,529,573 630,505,193

Balances with Central Bank 749,885,174 763,844,165

Government of Sri Lanka Treasury Bills & Reverse Repurchase 3,806,388,166 1,924,661,867

Borrowings from Banks (237,677,309) (20,333,328)

5,604,125,604 3,298,677,897


-5-




NOTES TO THE FINANCIAL STATEMENTSYear ended 31 December 2010

3. INCOME 2010 2009

Rs. Rs.

Interest Income (Note No 4) 1,771,976,557 1,855,783,799

Other Income (Note No 6) 306,143,517 196,920,254

2,078,120,074 2,052,704,053

4. INTEREST INCOME

Loans and Advances 1,329,224,020 1,474,821,795

Treasury Bills & Placement with Other Banks 346,435,910 287,179,561

Deep Discounted Bond 90,898,924 88,976,974

Other Interest Income 5,417,703 4,805,469

1,771,976,557 1,855,783,799

Notional Tax Credit on Secondary Market Transactions

5. INTEREST EXPENSE

Deposits 987,398,106 1,374,390,659

Short term borrowings and refinance 4,312,999 8,955,995

Treasury bills repurchased 5,231,643 7,073,023

Other interest expenses 898,539 2,453,027

997,841,287 1,392,872,704

6. OTHER INCOME

Net Foreign Exchange Gain 48,204,897 39,728,046

Dividend Income from Securities 1,960,116 305,200

Fee and Commission Income 133,942,154 88,590,483

Gain from Investment Securities 18,652,476 25,843,504

Gains from Dealing Securities 51,924,232 -

Other 51,459,642 42,453,021

306,143,517 196,920,254

7. OPERATING EXPENSES

Operating Expenses includes the following :

Depreciation 48,488,741 35,815,119

Donations 127,100 40,805

Expenses on litigation 7,646,099 3,494,895

EPF & ETF 23,776,973 19,071,797

Audit fees & Expenses 2,010,000 1,479,615

Net Interest Income of the Bank from Treasury Bills & Treasury Bonds ( Interest Income accrued or received on an outright or

reverse purchase transaction on such security, Bill or Bond, less interest expenses on repurchase transaction with Securities,

Treasury Bills or Treasury Bonds for which such interest income was earned) for the period 1st January 2010 to 31st December

2010 has been grossed up by Rs. 31.74 Mn (2009 Rs. 26 Mn) for Notional Tax Credit , Consequent to the incomeon the above

instrument being subjected to withholding tax.

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8. TAX ON PROFITS ON ORDINARY ACTIVITIES 2010 2009

Rs. Rs.

Income Tax on Current Year Profit 103,560,806 44,593,620

(Over)/ under provision in respect of previous year 108,643 (825)

Deferred Tax charge/(credit)( Note No 18) 52,971,841 26,580,357Social Responsibility Levy 1,553,412 668,904

158,194,702 71,842,056

8.1 Reconciliation of the Accounting Profit to Income Tax Expense

Profit Before Tax 307,991,708 133,983,068

Add: Disallowable Expenses 235,723,337 261,959,120

Less: Tax Deductible Expenses (100,746,255) (190,049,011)

Statutory Income 442,968,790 205,893,177

: Tax profit on leases 12,243,546 (6,420,221)

: Tax Losses claimed (159,324,318) (72,062,612)

Taxable Income 295,888,018 127,410,344

Income Tax on Current Year Profit @35% 103,560,806 44,593,620

Social Responsibility Levy 1,553,412 668,904

(Over)/ under provision in respect of previous year 108,643 (825)

Deferred Tax charge/(credit) 52,971,841 26,580,357

Income Tax Expense 158,194,702 71,842,056

Effective Tax Rate (%) 51% 54%

9. EARNINGS PER SHARE

2010 2009

Rs. Rs.

Net Profit attributable to Ordinary Shareholders (Rs.) 149,797,006 62,141,012

Weighted average Ordinary Shares in issue applicable to Basic Earnings

per Share computation. 232,279,642 141,703,368

As at As at

10 CASH AND SHORT TERM FUNDS 31/12/2010 31/12/2009

Rs. Rs.

Cash and Deposits with Banks 421,298,375 486,226,838

Money at Call and Short Notice 864,231,198 144,278,355

1,285,529,573 630,505,193

11 BALANCES WITH CENTRAL BANK

Income Tax on Profit has been computed at the rate of 35% on the Taxable Income arising from the Domestic Banking Unit

(DBU) and Foreign Currency Banking Unit (FCBU).

Basic Earnings Per Share (EPS) is calculated by dividing the Net Profit for the year /period attributable to Ordinary

Shareholders by the weighted average number of Ordinary Shares in issue during the period. The following reflects the

Income and Share data used in the Basic Earnings Per Share computation.

This represents the minimum cash reserve requirement of 7% of the deposit liabilities as required by the provision of Section

93 of the Monetary Law Act.Further there is no reserve requirement for deposit liabilities of the Foreign Currency Banking

Unit.-18-





12. TREASURY BILLS AND OTHER BILLS ELIGIBLE FOR 2010 2009

REDISCOUNTING WITH CENTRAL BANK Rs. Rs.

Dealing Securities

Treasury Bills and Bonds 3,806,388,166 1,924,661

Investment Securities

Treasury Bills and Bonds ( Note No 12.1) 446,950,377 816,472

4,253,338,543 2,741,134

12.1 Treasury Bills and Bonds

Cost Market Value Cost Market Va

As at As at As at As at

31/12/2010 31/12/2010 31/12/2009 31/12/200

Treasury Bills 396,073,274 396,479,545 222,479,270 222,309

Treasury Bonds 50,877,103 49,261,475 593,993,207 593,429

446,950,377 445,741,020 816,472,477 815,739

13. DEALING SECURITIES No. of Cost Market Value Cost Market Va

Shares As at As at No. of. As at As at

31/12/2010 31/12/2010 Shares 31/12/2009 31/12/200Quoted

Vanik Incorporation Limited 51,375 1,755,277 - 51,375 1,755,277

Central Finance PLC 16,700 9,553,461 13,036,020

Asian Hotels & Properties PLC 36,400 4,999,996 6,916,000

Dialog Axiata PLC 1,177,000 12,891,472 13,888,600

HNB Assurance PLC 76,500 5,633,394 5,913,450

Hatton National Bank PLC (NV) 51,200 10,224,537 10,880,000

John Keels Hotel PLC 445,600 9,491,312 8,778,320

Royal Ceramics PLC 55,500 10,674,176 16,650,000

Hotel Services (Ceylon) PLC 1,000,000 27,117,874 25,600,000

Seylan Bank PLC - (NV) 440,100 19,935,834 21,388,860

Richard Pieris & Company PLC 126,200 1,001,197 1,325,100

National Development Bank PLC 26,300 9,725,013 9,165,550

Singer Finance (Lanka) Ltd 77,600 1,164,000 1,164,000

Sampath Bank PLC 36,000 9,764,138 9,684,000Tokyo Cement Company ( Lanka ) PLC(NV) 420,400 11,001,336 16,816,000

144,933,017 161,205,900 1,755,277

(Provision)/Appreciation on Mark to market 16,272,883 - (1,755,277)

161,205,900 161,205,900

14. INVESTMENT SECURITIES 2010 2009

Rs. Rs.

Unquoted (Note No 14.1) 2,112,994,811 2,031,784

Leased Backed Trust Certificates 107,469,216

2,220,464,027 2,031,784

14.1 Unquoted

Deep Discounted Bond Issued By Serendib Capital (Private) Limited 2,111,464,811 2,030,254

Lanka Financial Service Bureau Limited 1,000,000 1,000

Lanka Clear (Private) Limited 500,000 500

Vanik Debentures 500,000 500

Credit Information Bureau 30,000 30

2,113,494,811 2,032,284

Less : Provision for fall in value other than temporary (500,000) (500

2,112,994,811 2,031,784

The unquoted Investments are carried at Directors Valuation. The Directors valuation is at cost which is consistent with that of the preceding year.

The Bank purchased a Deep Discounted Bond from Serendib Capital (Pvt) Ltd on 1st August 2003 guaranteed by a Commercial Bank. The purchase cos

1,578 mn was settled by transferringpart of the Bank 's portfolio at its book value of Rs 978 Mn and balance in cash. The face value of the Bond amount

3,458 Mnand will mature on1 st August 2023. The Bankintends to hold thisbond till its maturity and is recorded at cost plusa porpotion of the discount ov

period to maturity based on its implicit rate of return of 4%.

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15. BILLS OF EXCHANGE 2010 2009

Rs. Rs.

Export Bills 286,715,711 263,441,184

Import Bills 46,743,806 56,271,276

Cheques Purchased 21,029,198 11,022,188

354,488,715 330,734,648

16. LOANS AND ADVANCES

Overdrafts 3,656,993,651 2,623,524,088

Import and Export Loans 1,879,793,727 1,438,740,997

Staff Loans 156,765,330 117,273,014

Term Loans 2,726,226,315 2,221,901,600

Pawning 682,217,078 455,899,330

Other Advances 120,935,129 180,897,213

Interest Receivable 176,881,251 150,955,112

9,399,812,481 7,189,191,354

Less: Loan Loss Provision (Specific)( Note No 16.1) (181,196,029) (173,827,936)

Loan Loss Provision (General) (68,167,578) (57,264,656)

Interest in Suspense ( Note No 16.1) (211,059,579) (150,919,404)

8,939,389,295 6,807,179,358

16.1 Movement in the Provisions for Loan Loss and Interest in Suspense. Provision

Against specific Suspended

Advances Interest

Rs. Rs.

As at 01.01.2010 173,827,936 150,919,404

Provision for the year 16,249,397 87,548,295

Provision Reversal (3,066,480) (23,405,659)

Write-offs (1,825,770) (3,187,470)

Translation Difference on FCBU Conversion (3,989,054) (814,991)

As at 31.12.2010 181,196,029 211,059,579

16.2

2010 2009

Rs. Rs.

Loans and Advances 1,012,247,390 959,171,158

Less: Loan Loss Provision (181,196,029) (173,827,936)

Interest in Suspense (211,059,579) (150,919,404)

Net Exposure 619,991,782 634,423,818

16.3 Concentration of Credit Risk

2010 2009Rs. Rs.

Agriculture, Agro Business and Fisheries 1,158,693,420 860,464,412

Manufacturing 2,114,289,294 1,106,383,302

Tourism 55,666,950 23,122,691

Transport 138,337,778 98,878,119

Construction 890,112,028 552,302,485

Traders 1,823,907,558 2,477,829,638

New Economy 328,597,011 204,380,251

Financial & Business Services 337,085,113 272,462,283

Infrastructure 365,169,900 157,642,440

Other Services 732,757,065 441,833,109

Other Customers Including Pawning 1,915,850,243 1,564,734,247

9,860,466,360 7,760,032,979

Non Performing Assets included in the Loans and Advances on which interest is not recognised are as follows :

Sector wise analysis of bank's credit portfolio given below reflects the bank's exposure to credit r isk in the various sectors

-20-





17. LEASE RECEIVABLES 2010 2009

Rs. Rs.

Total Lease Rentals Receivable 343,002,726 487,589,033

Less: Rentals Received in advance 7,893,914 8,492,269

Lease Rentals Receivable after one year but before five years

from balance sheet date ( Note No 17.2) 142,995,645 236,078,401

17.1 Lease Rentals Receivable within one year

from balance sheet date 192,113,167 243,018,363

Unearned Lease Income (33,677,956) (56,997,118)

Interest in Suspense (4,675,210) (4,789,184)

Loan Loss Provision (Specific) (7,579,521) -

General Provision (1,211,747) (1,812,320)

144,968,733 179,419,741

17.2 Lease Rentals Receivable after one year but before five years

from balance sheet date 142,995,645 236,078,401

Unearned lease income (18,384,442) (31,037,557)

General provision (1,028,475) (2,050,408)

123,582,728 202,990,436

Total Receivable on leases 268,551,461 382,410,177

There are no Lease Rentals receivable after 5 years

from balance sheet date

18. DEFERRED TAXATION 2010 2009

Rs. Rs.

Balance as at beginning of the year 39,182,113 65,762,470

(Charge) /Reversal made during the Year ( Note No 8) (52,971,841) (26,580,357)

Balance as at the year end (13,789,728) 39,182,113

Deferred Tax Assets

Carry Forward Losses 13,179,645 72,295,702

Defined Benefit Plan Liability 6,450,280 6,256,659

19,629,925 78,552,361

Deferred Tax liability

Accelerated Depreciation allowance for tax purposes ( Property and Equipment) (19,067,265) (21,235,197)

Accelerated Depreciation allowance for tax purposes ( Lease Rental Receivable) (14,352,388) (18,135,051)

(33,419,653) (39,370,248)

(13,789,728) 39,182,113

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19. OTHER ASSETS 2010 2009

Rs. Rs.

Deposits & Prepayments 85,570,913 63,217,812

Interest Receivable 35,270,871 26,729,537

Tax Receivable - 8,938,200

Others 164,157,898 151,971,136 Less: Provision for Bad & Doubtful Debts (89,613,799) (89,613,799)

195,385,883 161,242,886

20. PROPERTY & EQUIPMENT As at Additions Disposals / As at

31/12/2009 During the year Written off 31/12/2010

Rs. Rs. Rs. Rs.

Cost

Leasehold Properties & Improvements 59,419,052 16,505,084 - 75,924,136

Computers & Equipments 339,793,390 38,853,427 (20,168,144) 358,478,673

Furniture & Fittings 86,031,680 11,476,141 (200,000) 97,307,821

Motor Vehicles 20,738,903 6,055,357 - 26,794,260

Total 505,983,025 72,890,009 (20,368,144) 558,504,890

Accumulated Depreciation As at Charge Disposals / As at

31/12/2009 For the Year Written off 31/12/2010

Leasehold Properties & Improvements 30,535,048 10,792,554 - 41,327,602

Computers & Equipments 207,285,070 27,123,562 (18,810,098) 215,598,534

Furniture & Fittings 56,237,672 5,996,150 (200,000) 62,033,822

Motor Vehicles 10,343,857 4,576,475 - 14,920,332

Total 304,401,647 48,488,741 (19,010,098) 333,880,290

Net Book Value 201,581,378 224,624,600

20.1 Capital work in progress Balance Incurred During Reclassified/ Balanceas at the Year Transferred as at

01.01.2010 31.12.2010

Rs. Rs.

Capital work in progress - 3,224,716 3,224,716

227,849,316

21. DEPOSITS 2010 2009

Rs. Rs.

Demand Deposits 1,709,819,982 1,179,436,049

Savings Deposits 3,012,140,830 1,683,488,040

Time Deposits 6,596,084,718 7,203,003,883

Certificate of Deposits 1,875,512,994 1,898,067,635

13,193,558,524 11,963,995,607

21.1 Analysis of Deposits

Deposits from Non Bank Customers 13,190,905,411 11,731,529,101

Deposits from Banks - 135,104,511

Deposits from Finance Companies 2,653,113 97,361,995

13,193,558,524 11,963,995,607

During the year the Bank acquired Property, Plant & Equipment to the aggregate value of Rs.76.1 Mn (2009 Rs. 74.7 Mn).

Cash payments amounting to Rs 76.1 Mn (2009 Rs. 74.7Mn) was made during the year for the purchase of Property, Plant

& Equipment.

Property, Plant and Equipment includes fully depreciated assets having a gross carrying amounts of Rs 211.5 Mn.

(2009 Rs 218 Mn)

-22-





22. BORROWINGS 2010 2009

Rs. Rs.

Borrowings under Repurchase Agreement 81,759,441 19,541,009

Borrowing from Central Bank under Refinance Schemes 28,488,095 32,011,905

Borrowings from Banks 237,677,309 20,333,328Other Borrowings 53,201,679 20,510,517

401,126,524 92,396,759

23. OTHER LIABILITIES

Provision for Gratuity (Note No 23.1) 23,036,713 17,876,170

Accrued Interest & other expenses 444,761,998 439,457,833

Tax payable 39,622,003 -

507,420,714 457,334,003

23.1 Provision for Gratuity

Balance at the beginning of the Year 17,876,170 15,477,956

Expenses on Defined Benefit Plan For the Year (23.2) 6,661,756 4,666,709

Payments made during the Year (1,501,213) (2,268,495)

Balance at the end of the Year 23,036,713 17,876,170

23.2 Expenses on Defined Benefit Plan

Current Service Cost 4,162,683 2,843,847

Interest Cost 2,499,073 1,822,862

6,661,756 4,666,709

24 STATED CAPITALNumber Rs. Number Rs.

Fully Paid Ordinary Shares (Note No 24.2) 333,345,763 4,573,820,996 148,703,600 1,813,170,000

Fully Paid Ordinary Shares (Class 'A')( Note No 24.1) - - - -

Fully Paid Ordinary Shares 333,345,763 4,573,820,996 148,703,600 1,813,170,000

24.1 Fully Paid Ordinary Shares (Class 'A') Number Rs. Number Rs.

Balance at the beginning of the year - - 118,750,000 1,322,500,000

Issue of Class 'A' Shares for cash - - 7,500,000 75,000,000

Conversion of Shares (1 Class 'A' Share issued for 2

Ordinary Shares) - - 18,000,000 360,000,000

Less - Reclassified to Ordinary Shares (144,250,000) (1,757,500,000)

Balance at the end of the year - - - -

24.2 Fully Paid Ordinary Shares

Number Rs. Number Rs.

Balance at the beginning of the year 148,703,600 1,813,170,000 36,000,000 360,000,000

Conversion of Shares to Class 'A' Shares (2 Ordinary

Shares converted to 1 Class 'A' Share) - - (36,000,000) (360,000,000)

Add - Reclassified from Class 'A' Shares - - 144,250,000 1,757,500,000

Issue of Shares for cash 184,642,163 2,760,650,996 4,453,600 55,670,000

Balance at the end of the year 333,345,763 4,573,820,996 148,703,600 1,813,170,000

2010 2009

2010 2009

2010 2009

-23-





25. RESERVE FUND 2010 2009

Rs. Rs.

Balance at the beginning of the year 14,742,127 11,635,07

Add: Transfers during the year 7,489,850 3,107,05

Balance as at end of the year 22,231,977 14,742,12

26. COMMITMENTS AND CONTINGENCIES

26.1

2010 2009

Commitments Rs. Rs.

Commitments for Building Contract 8,862,819 -

Commitments for Unutilised Facilities 2,008,639,349 1,279,871,99

Sub Total 2,017,502,168 1,279,871,99

Contingent LiabilitiesAcceptances 603,885,721 481,021,55

Guarantees 2,540,197,217 3,552,649,73

Documentary Credit 1,155,874,452 458,399,21

Bills for Collection 19,384,813 57,712,96

Others 252,495,780 267,722,68

Sub Total 4,571,837,983 4,817,506,15

Currency SWAP Agreements

Spot Purchase 220,989,239 35,440,07

Spot Sold - 12,574,99

Sub Total 220,989,239 48,015,07

Forward Exchange Contracts

Forward Contracts Bought 417,229,788 369,040,72Forward Contracts Sold 415,608,301 391,358,18

Sub Total 832,838,089 760,398,91

Total Commitments and Contingent Liability 7,643,167,479 6,905,792,13

26.2 Litigation Against the Bank

a) One LT application is submitted before the labour Tribunal aginst the ceased of the Employment.

(b) Four customers have filed actions against the Bank in the Commercial High Court to prevent the bank from enforcing the

mortgages to recover it dues.

In the normal course of business, the Bank makes various commitments and incurs certain contingent liabilities with leg

recourse to its customers. No material losses are anticipated as a result of these transactions.

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(b) A customers have filed an action against the Bank in the District Court to prevent the Bank from enforcing

the mortgages to recover it dues.

27. RELATED PARTY TRANSACTIONS

27.1 Transactions with Key Management Personnel

27.1.1

27.1.2

27.1.3

27.1.4

27.1.5 Fees and amount reimbursed to Key Management Personnel during the period relating to share issue was Rs 10.7 Mn

27.2

Name of Related Relationship Nature of Outstanding Outstanding

Party Transaction As at As at

31/12/2010 31/12/2009

Rs. Rs.

Penguine Group Director Packing Credit Loans 27,014,951 -

LC / Acceptance - 27,362,265Current Account (93,254)

Platinum Reality Investments Director Term Loan 112,499,999 79,181,291

Current Account 9,901,689

27.3 During the year bank has paid to Just in time Holding (Pvt) Ltd of Rs 3,882,327 for purchase of Computers.(2009 Nil)

(c) Third party has filed these actions against the Bank claiming the title of the the property mortgaged to the Bank by

customer

Transactions with Entities controlled by Key Management Personnel and their close family members.

The Bank carries out transactions in the ordinary course of its business with related parties. These related parties, their

relationship and the nature of transactions entered into as at 31 st December are listed below :-

Key Management Personnel includes Board of Directors of the Bank and senior managerial staff directly reporting to the

CEO of the Bank.

Outstanding balance of Loans and Advances granted to Key Management Personnel and their close family members as

31/12/2010 amounts to Rs. 6.36 Mn (2009 1.08 Mn).

Short term employment benefits to Key Management Personnel amounts to Rs 22.597 Mn for the year ended 31/12/2010.

(2009 Rs 22.2 Mn).

Post employment benefits to Key Management Personnel amounts to Rs 3.66 Mn for the year ended 31/12/2010 (2009 Rs

2.4 Mn)

Deposits and Investments held by Key Management Personnel as at 31/12/2010 amounts to Rs 35 Mn (2009 Rs 82 Mn)

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28. MATURITY ANALYSIS

follows:

Maturity Period Up to 3 3 to 12 1 to 3 3 to 5 More than Total

Months Months Years Years 5 Years(Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

Interest Bearing Assets

Money at call & Short notice 943,618,957 - - - - 943,618,

Treasury Bills, Bonds and Reverse Repo's 3,691,804,560 94,189,581 467,344,402 - - 4,253,338,

Invesment Securities - 107,469,216 - - 2,111,464,811 2,218,934,

Loans & Advances 6,400,565,023 1,666,285,224 716,820,765 337,899,157 86,370,587 9,207,940,

Bills of Exchange 354,488,715 - - - - 354,488,

Sub Total 11,390,477,255 1,867,944,021 1,184,165,167 337,899,157 2,197,835,398 16,978,320,

Non Interest Bearing Assets

Cash and Deposits with banks 341,910,616 - - - - 341,910,

Balances with Central Bank 494,346,838 226,064,210 7,938,298 20,108,327 1,427,501 749,885,

Dealing Securities 71,654,008 89,551,892 - - - 161,205, Deferred Taxation - - - -

Invesment Securities 1,530,000 1,530,

Other Assets 85,142,959 68,061,496 15,749,418 25,557,910 874,100 195,385,

Fixed Assets - - - - 227,849,316 227,849,

Sub Total 993,054,421 383,677,598 23,687,716 45,666,237 231,680,917 1,677,766,

Total Assets 12,383,531,676 2,251,621,619 1,207,852,883 383,565,394 2,429,516,315 18,656,087,

Interest Bearing Liabilities

Deposits 7,088,572,323 3,918,557,675 129,554,489 324,049,597 23,004,513 11,483,738,

Borrowings 309,229,526 16,731,026 12,523,818 9,440,475 - 347,924,

Sub Total 7,397,801,849 3,935,288,701 142,078,307 333,490,072 23,004,513 11,831,663,

Non Interest Bearing LiabilitiesDeposits 1,709,819,926 - - - - 1,709,819,

Deferred Taxation - - - 13,789,728 13,789,

Balances with Banks- Nostro 53,201,679 53,201,

Other Liabilities 194,689,604 159,295,913 85,347,643 50,955,927 17,131,627 507,420,

Sub Total 1,957,711,209 159,295,913 85,347,643 50,955,927 30,921,355 2,284,232,

Total Liabilities 9,355,513,058 4,094,584,614 227,425,950 384,445,999 53,925,868 14,115,895,

Shareholder's Funds - - - - 4,540,192,397 4,540,192,

Total Liabilities & Shareholder's Funds 9,355,513,058 4,094,584,614 227,425,950 384,445,999 4,594,118,265 18,656,087,

29 ASSETS PLEDGED AS SECURITY

The following assets have been pledged as securities for liabilities

29.1 Nature of assets Nature of 2010 2009

Liability Rs. Rs.

Government Treasury Bills and Bonds Secured against the

Repo instruments 81,759,441 19,541,

81,759,441 19,541

An analysis of the interest-bearing assets and liabilities based on the remaining period at the Balance sheet date to the respective contractual maturity dates is

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30. SEGMENTAL ANALYSIS

Business Segments Business Leasing Pawning Total

2010 2009 2010 2009 2010 2009 2010 2009

Revenue from external customers :

Interest 1,622,842,880 1,632,492,491 61,666,957 87,440,647 87,466,720 63,818,969 1,771,976,557 1,783,752,1Exchange 48,204,897 39,728,046 48,204,897 39,728,0

Commission 133,942,154 88,590,483 133,942,154 88,590,4

Other 121,742,881 67,816,973 216,964 119,390 61,849 665,362 122,021,694 68,601,7

Total Revenue from external customers 1,926,732,812 1,828,627,993 61,883,921 87,560,037 87,528,569 64,484,331 2,076,145,302 1,980,672,3

Segment Results

Unallocated Expenses 1,651,138,515 1,766,528,610 62,747,367 77,108,562 54,267,712 75,083,813 1,768,153,594 1,918,720,9

Profit from Operations 275,594,297 62,099,383 (863,446) 10,451,475 33,260,857 61,432,210 307,991,708 107,131,2

Income Tax expenses 143,551,596 42,976,257 2,827,187 7,042,006 11,815,919 21,823,793 158,194,702 71,842,0

Profit for the equity holders of the bank 132,042,701 19,123,126 (3,690,633) 3,409,469 21,444,938 39,608,417 149,797,006 62,141,0

Segment Assets 174,756,965,260 13,072,609,762 268,351,461 382,410,177 682,217,078 455,899,330 175,707,533,799 13,910,919,2

Unallocated Assets - - 224,796,670 201,581,3

Segment Liabilities 13,165,326,951 11,675,416,862 268,351,461 382,410,177 682,217,078 455,899,330 14,115,895,490 12,513,726,36

Unallocated Liabilities

Cash Flow from Operating activities (620,219,174) 931,926,463 175,942,637 222,788,393 (138,789,180) 334,327,294 (583,065,717) 1,489,042,15

Cash Flow from Investing activities 67,724,959 (513,643,010) 67,724,959 (513,643,01

Cash Flow from Financing activities 2,820,788,465 104,531,458 2,820,788,465 104,531,45

Capital Expenditure 72,890,009 74,726,241 72,890,009 74,726,24

Depreciation 48,488,741 35,815,119 48,488,741 35,815,11

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31. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

a)

b)

Category Number of Shares Percentage of

to be Issued Issue (%)

Category A-Employees of UBC 1,500,000 10%

Category B-Customers of UBC 2,250,000 15%(who have been maintaining accounts

with UBC for a minimum period of

six(06) months as at January 31, 2011)

Category C-Other Investors 11,250,000 75%

15,000,000 100%

The Bank acquired 51% of the ownership of the Namal Asset Management Limited (NAMAL) for Rs.331,500,00/- duringFebruary 2011. NAMAL is a public company incorporated in Sri Lanka in 1991 and licensed by the Securities and Exchange

Commission of Sri Lanka to manage Unit Trusts.

There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the

Financial Statements except for the followings.

An invitation made to the public to purchase Fifteen Million (15,000,000) new Ordinary Voting Shares of the Bank at the Share

Issue in the following manner:

The share issue was opened to the Public on the 24 th February 2011 and closed on the same day.

union bank -audited financial report 31-12-2010

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