EXPLANATORY NOTES
     
Note   1. Accounting policies
      The accounting policies and methods of computation are consistent with those policies and methods followed during the previous financial year.
     
Note   2. Accounting for investments in associate companies and subsidiary companies
      Accounted under cost method in Bank’s financial statements. Amounts are based on audited financial statements of the associate and subsidiary companies
       
Note   3.

Accounting for investment in Joint Venture Company.
      Accounted under partial consolidation method in group’s financial statements. Amounts are based on audited financial statements of the joint venture company.
Note   4. 31 December financial year companies.
      These are Commercial Bank of Ceylon PLC (associate) DFCC Vardhana Bank Ltd and Synapsys Ltd (subsidiaries) Acuity Partners (Pvt) Limited (joint venture).

Results of these companies are consolidated with DFCC Bank with a three months gap. Thus the consolidated results for the year ended 31.03.2010 includes profits of these companies for the period 01.01.2009 to 31.12.2009.
Note   5. Foreign Exchange Income
      The Bank swaped US dollars raised from a medium term foreign borrowing and the foreign exchange risk was covered by entering into forward purchase contracts. The cost of the premium paid on the forward contracts is charged to foreign exchange income. All forward exchange contracts of the bank are in respect of funding swaps.
       
Note   6. Non-Interest Income
       
     
  Bank Group
  31.03.2010
Rs. 000		 31.03.2009
Rs. 000		 31.03.2010
Rs. 000		 31.03.2009
Rs. 000
         
Dividend income 665,814

715,709

 264,037 318,355
Gain on sale of subsidiary to Joint Venture Company 284,393 84,981 168,506 42,491
Net gain on sale of
investment securities		 145,274 121,386 150,241 135,418
Other income 184,048 319,021 561,999 803,053
Non-interest income 1,279,529 1,241,097 1,144,783 1,299,317
       
Note   7. Taxation
       
     
  Bank Group
  31.03.2010
Rs. 000		 31.03.2009
Rs. 000		 31.03.2010
Rs. 000		 31.03.2009
Rs. 000
         
Current Income Tax 703,491 611,479 1,039,223 933,307
Deferred tax (14,050) 34,571 28,009 121,537
  689,441 646,050 1,067,232 1,054,844
       
Note   8.
Post balance sheet events
    8.1 Options exercised by employee

The employees have exercised options during the post-balance sheet period. Increase in ordinary share capital corresponding to the options exercised was Rs58,330 and the increase in the share premium was Rs626,814.18.
    8.2 Proposed Dividend

The Directors have recommended the payment of final dividend of Rs6 per share for the year ended 31 March 2010 which requires the approval of the shareholders at the Annual General Meeting to be held on 30 June 2010. The Board of Directors confirms that the Bank has satisfied the solvency test in accordance with Section 57 of the Companies Act No 7 of 2007 and have obtained the Certificate from the Auditors.
The proposed final dividend exceeds the minimum distribution mandated by the Inland Revenue Act No 10 of 2006 and therefore, the 15% deemed dividend tax will not be imposed on the Bank
    8.3 Commercial Bank of Ceylon PLC (CBC)
    (a) The market value of the investment in CBC on 26 May 2010 based on the closing share price of Rs249.25 per share (voting) and Rs210.00 per share (non-voting) was Rs16,724 million.
    (b) Board of Directors of CBC have recommended;
(ii) Subdividing two (2) existing issued and fully paid ordinary (voting) shares into three (3) ordinary (voting) shares; and (ii) Subdividing two (2) existing issued and fully paid ordinary (non-voting) shares into three (3) ordinary (non-voting) shares.

This recommendation requires the approval of the shareholders at an Extraordinary General Meeting convened on 8 June 2010.
    8.4 Investment in joint venture company - Acuity Partners (Pvt) Limited

The Bank has agreed to invest up to Rs500 million in the ordinary shares of the Company; of this amount Rs350 million was advanced in the form of a loan as at the balance sheet date.
    8.5 Additional Investment in Synapsys Limited

The Bank has approved an additional Rs50 million in the ordinary shares of Synapsys Limited. The investment will be made in stages.
    8.6 No other circumstances have arisen which would require disclosure or adjustment to the accounts.
       
Note   9. Intra group transactions
      These transactions are eliminated on consolidation where the financial year of subsidiary Company coincides with the financial year of the Bank. Due to the consolidation of the results of DFCC Vardhana Bank Limited with the Bank takes place with a time lag of three months. As a result short term lending to DFCC Vardhana Bank Ltd Rs 813 mn and short-term deposits of USD1 mn and EUR 0.25 mn were not eliminated on consolidation as at 31 March 2010.
       
Note   10

Disclosures under Appendix 7B to the Listing Rules
    10.1

Bank has not incurred management fees or any other similar expenditure
       
    10.2

Share Capital
Number of shares issued as at 31 March 2010 is 132,375,305 (as at 31 March 2009 -130,732,470)
The Financial Statements of the Bank has retained the concept of par value, authorized capital and share premium account instead of the Stated Capital introduced by the Companies Act No. 7 of 2007 in accordance with section 7 of the DFCC Bank Act No. 35 of 1955 as amended
       
    10.3

Twenty Major Shareholders as at 31.03.2010
     
Name of Shareholder/Company  Shareholding   % 
       
1 Bank of Ceylon No.2 A/c  19,191,197 14.498
2 Sri Lanka Insurance Corporation Ltd-Life Fund 17,211,766 13.002
3 Hatton National Bank Limited A/c No.1  16,054,570 12.128
4 Mr M A Yaseen  11,262,250 8.508
5 Distilleries Company of Sri Lanka Ltd  8,521,428 6.437
6 Seafeld International Ltd  7,643,397 5.774
7 HSBC Intl NomLtd-BPSS Lux-Aberdeen Global Asia Pacific Equity Fund  6,108,073 4.614
8 HSBC Intl Nom Ltd-BPSS LDN-Aberdeen Asia Pacific Fund 3,375,000 2.550
9 Renuka City Hotels Ltd 3,352,035 2.532
10 Employees Provident Fund 2,420,600 1.829
11 HSBC Intl Nominees Ltd/DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbH 2,250,162 1.700
12 Renuka Hotels Limited 2,024,180 1.529
13 RBC Dexia Investor Services Trust S/A Edinburgh Dragon Trust Plc  2,000,000 1.511
14 National Savings Bank 1,608,000 1.215
15 Northern Trust Co S/A Murray Johnstone International Delaware Business Trust 1,271,250 0.960
16 Cargo Boat Development Company Limited 1,024,000 0.774
17 HSBC Intl Nominees Ltd-SSBTL-Aberdeen Asia Smaller Companies Investment Trust XCB9  900,000 0.680
18 HSBC Intl Nominees Ltd-SSB TL-Aberdeen New Dawn Investment Trust XCC6 900,000 0.680
19 Employees Trust Fund Board 768,333 0.580
20 Mellon Bank N.A. - Florida Retirement Scheme 750,000 0.567
       
       
     10.4

Public holding as at 31.03.2010 is 60.29%
       
     10.5 Directors’ Interests in Shares
     
  No of Shares*
As at   
31.03.2010    		No of Shares*
As at  
31.03.2009 
Brito, J M S 9,380  9,380
Caglayan T Nil Nil
Cooray,Mrs S Nil Nil
Dalchow R Nil Nil
Fonseka, A N

66,499

     57,332
Jayaratne, A M de S

750

 750
Palihena,S N P 5,000 5,000
Perera, C P R 13,000 4,500

Weerakkody, D S

 12,844  1,244

Dr.Damitha De Zoysa

 Nil Nil

Mr.A.S.Abeywardena

 1,190 Nil

Mr. T.K Bandaranayake

 739 Nil

Mr. G.K Dayasri

 518 Nil
       
      *Directors’ shareholding includes shares held by the spouse, and children under 18 years of age.
       
   

Certification
    We, the undersigned, being the Chairman, the Chief Executive Officer and the Chief Financial Officer of DFCC Bank certify that:
   
(a) tthe above statements have been prepared in compliance with the format and definitions prescribed by the Central Bank of Sri Lanka.
(b) the information in respect of the full year contained in these statements have been extracted from the audited financial statements of the Bank
   
(Sgd.)
J M S Brito
Chairman

26/05/2010

(Sgd.)
A.N Fonseka
Ex-officio Director & Chief Executive

(Sgd.)
S. Nagarajaha
Chief Financial Officer
     
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