Citizens Development Business Finance : Annual Report 2023/24

COVER RATIONALE

The concept of Yin and Yang,

rooted in ancient Chinese

philosophy, represents dualities and balance, where seemingly opposite forces are interconnected and interdependent. The cover of the Annual Report depicts CDB PLC's dual strategy of tech-disruption and sustainabilty which converges to create sustainable value.

Our journey towards new frontiers has been guided by the convergence of tech disruption and sustainability agenda-dual strategies which have enabled us to deliver resilient progress. This dynamic equilibrium has enabled us to harness the power of contrasting forces to create a harmonious and sustainable organisation.

The integration and convergence of opposing but complementary elements has enabled us to create a holistic approach to build an adaptable, resilient, customer-focused financial ecosystem enabling us to leverage opportunities in an ever-evolving dynamic business environment.

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FINANCE PLC	3 / 2 4
BUSINESS	T 2 0 2
DEVELOPMENT	A L R E P O R
CITIZENS	A N N U

INSIDE

ANNUAL REPORT OF THE BOARD OF DIRECTORS	4
ABOUT THE REPORT	6
WHO WE ARE
ABOUT THE COMPANY	9
OUR VALUE CREATION JOURNEY	10
FINANCIAL HIGHLIGHTS	12
VALUE ADDED STATEMENT	14
CONVERGING TOWARDS POSITIVE STRIDES	15
MESSAGE FROM THE CHAIRMAN	16
MANAGING DIRECTOR/ CHIEF EXECUTIVE
OFFICER'S REVIEW	20
OUR STRATEGY	25
OUR APPROACH AND KEY
ENABLERS TO VALUE CREATION
ECONOMIC AND SECTOR OVERVIEW	29
MACRO TRENDS IMPACTING OUR BUSINESS	33
AN INTEGRATED APPROACH TO VALUE CREATION	36
OUR VALUE CREATING BUSINESS MODEL	38
SUSTAINABILITY COMMITMENT	40
HOW WE ENGAGE AND CREATE VALUE FOR OUR
STAKEHOLDERS	45
IDENTIFYING MATERIAL MATTERS	49
HUMAN RESOURCE STRENGTH	5 1
DIGITAL CAPABILITIES	6 1

VALUE CREATION THROUGH OUR PERFORMANCE

FINANCIAL PERFORMANCE	67
A RESILIENT PERFORMANCE	72
INNOVATIVE AND EXCELLENT CUSTOMER SERVICE	82
PROGRESSIVE PARTNERSHIPS	91
STRONGER COMMUNITIES	95
ENVIRONMENTAL STEWARDSHIP	99

RESPONSIVE LEADERSHIP AND RISK MANAGEMENT

PRINCIPLE RISKS	108
BOARD OF DIRECTORS	1 1 8
EXECUTIVE COMMITTEE	124
CORPORATE MANAGEMENT TEAM	125
MANAGEMENT TEAM	129
CORPORATE GOVERNANCE	132
REPORT OF THE BOARD AUDIT COMMITTEE	156
REPORT OF THE BOARD INTEGRATED RISK
MANAGEMENT COMMITTEE	159
REPORT OF THE BOARD NOMINATION AND
GOVERNANCE COMMITTEE	1 6 1
REPORT OF THE BOARD HUMAN RESOURCES AND
REMUNERATION COMMITTEE	163
REPORT OF THE BOARD RELATED PARTY
TRANSACTIONS REVIEW COMMITTEE	165
REPORT OF THE BOARD CREDIT COMMITTEE	167
STATEMENT OF DIRECTORS' RESPONSIBILITY	168
DIRECTORS' STATEMENT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING	169
MANAGING DIRECTOR'S AND CHIEF FINANCIAL
OFFICER'S RESPONSIBILITY STATEMENT	171
AUDITORS' ASSURANCE REPORT ON THE
DIRECTORS' STATEMENT ON INTERNAL CONTROL	173

FINANCIAL REPORTS

FINANCIAL CALENDAR	1 76
FINANCIAL STATEMENTS TABLE OF CONTENTS	1 7 7
INDEPENDENT AUDITORS' REPORT	178
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME	1 8 1
STATEMENT OF FINANCIAL POSITION	182
STATEMENT OF CHANGES IN EQUITY STATEMENT
OF CASH FLOWS	184
NOTES TO THE FINANCIAL STATEMENTS	186

SUPPLEMENTARY REPORTS

QUARTERLY STATISTICS		272
TEN YEAR STATISTICAL SUMMARY		273
USD ACCOUNTS		274
GRI INDEX		276
BRANCH NETWORK		284
GLOSSARY		286
ABBREVIATIONS		289
BASIS OF RATIOS		290
NOTICE OF MEETING		291
NOTES		292
FORM OF PROXY (VOTING SHAREHOLDERS)	295
FORM OF PROXY (NON-VOTING SHAREHOLDERS)	297
CIRCULAR TO SHAREHOLDERS		299
CORPORATE INFORMATION	Inner Back Cover

CONVERGING A dynamic equilibrium of Yin and Yang

Sustainable

Impact

People

YIN - Rural Lending

YANG - Urban Funding

The concept of Yin and Yang is derived from the ancient Asian philosophies of Zen and Daoism. A circle bisected by a wavy, reverse S-line is used to illustrate two opposing but complementary forces or domains, called yin and yang.

This symbol is known as the 'taijitu'.

The two halves of the circle show a color contrast, generally white and black. Each half gives the swirly appearance of a "head" joined to a "tail" that curves inward. Each head half of the taijitu also contains a small circular "seed" of the opposing color. This circle and seed pattern portrays the balancing and interacting nature of yin-yang paired opposites.

A dynamic equilibrium between contrasting forces creates a harmonious and effective organisation. This convergence can lead to a more resilient, innovative, and customer-focused financial ecosystem.

CDB has over its corporate journey balanced these elements to be adaptable, resilient, and successful in a complex and ever-changing environment to create sustainable impact, reach out with responsibility and create sustainable growth.

Dynamic

Responsibility

Planet

YIN - Green Financing

YANG - Biodiversity and

Conservation

Sustainable

Growth

Profit

YIN - Sustainable returns to shareholders YANG - Equitable economic value addition

4 ANNUAL REPORT OF THE BOARD OF DIRECTORS

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FINANCE PLC	3 / 2 4
BUSINESS	T 2 0 2
DEVELOPMENT	A L R E P O R
CITIZENS	A N N U

PREAMBLE

The Board of Directors of Citizens Development Business Finance PLC is pleased to present to the shareholders its Annual Report themed "Converging" comprising the Audited Financial Statements and Integrated Report for the financial year ended 31 March 2024. The Report conforms to the requirements of the Companies Act No. 07 of 2007 (as amended), the Listing Rules of the Colombo Stock Exchange (CSE) (as amended), other applicable laws and regulations

and recommended good governance disclosures. A softcopy of this Annual Report will be hosted/published on the website of the Company, www.cdb.lk and also on the website of the Colombo Stock Exchange (CSE), www.cse.lk.

The Financial Statements are certified by the Chief Financial Officer and recommended by the Audit Committee and approved by the Board of Directors, and signed by the Chairman and the Managing Director, in conformance with the Companies Act No. 07 of 2007. The Board is of the view that the Financial Statements on pages 181 to 270 adhere to Sri Lanka Accounting Standards (LKASs and SLFRSs) under the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, Companies Act No. 07 of 2007, Finance Business Act No. 42 of 2011, and related amendments, as well as the Listing Rules of the Colombo Stock Exchange (CSE) which include requirements for Related Party Transactions in Section 9.3.2 (c) and

1. and recommended best practices. The Statement of Directors' Responsibility for Financial Reporting on page 168 is an integral part of this Report.

Names of the persons holding office as Directors of the Company at the reporting date and the names of persons who ceased to hold office as Directors of the Company during the year, as required by the Section 168 (1) (h) of the Companies Act No. 07 of 2007, are given on pages 135 to 136 of this Annual Report. As required under Section 223 (1) of the Companies Act, the Company maintains a Register of Directors and Secretaries which contains information of each Director and the Secretary.

INTEGRATED REPORTING

This Annual Report marks the eleventh year of our continually enhancing integrated reporting journey. CDB has made every effort to adhere to the principles of the Framework, and present clear, concise and relevant information, while providing simplified presentations for ease of use

of the diverse stakeholders who refer the Report. The Report presents the financial and non-financial performance for the reviewed year, including risk management, corporate governance practices, and forward-looking information on our short, medium, and long-term strategic outlook. This year's report focuses on how the CDB has converged technological advancements with sustainability principles, to create

a more resilient and environmentally conscious society.

COMPLIANCE

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All required payments to the Government, other regulatory bodies, and employees have been made on time, according to the Directors' understanding and belief. The Board of Directors has analysed the Company's business plans and concluded

that sufficient resources are in place to sustain operations in the foreseeable future. Therefore, the Financial Statements of the Company are formulated on the assumption of the Company's continued operation.

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

The detailed disclosure regarding the Company's compliance with the requirements stated in Section 168 of the Companies Act No. 07 of 2007, along with its amendments and other relevant statutes, can be found on pages 132 to 155 of the Annual Report. The Board of Directors carries out several of its duties and responsibilities through its Board subcommittees to ensure compliance with applicable laws, rules and regulations and the activities carried out during the year can be found on pages 132 to 155.

The Board affirms that the Annual Report has been prepared in a timely manner as mandated by Sections 166 (1) and 167

1. of the Companies Act. The Financial
   Statements of the Company, covering the period ended on 31 March 2024, including comparative figures for 2023, have been duly approved and authorised for release by the Board of Directors, in accordance with the resolution passed on 26 June 2024. The necessary copies of the Annual Report will be submitted to the CSE within the legal deadlines, and electronic versions will be made available on the Company's website at www.cdb.lk

DISCLOSURE ON THE AFFAIRS OF THE COMPANY'S RELATED PARTY TRANSACTIONS

No related party transactions have been identified that exceed either 10% of the equity or 5% of the total assets, whichever is lower. The Company has ensured compliance with the relevant provisions of the Listing Rules of the CSE pertaining to Related Party Transactions. However, the Directors have disclosed transactions that could be categorised as related party transactions, as per the Financial Statements' presentation requirements. These transactions are detailed in Note 43 on pages 239 to 240 of this Annual Report. Additionally, a summary of these transactions conducted during the fiscal year was presented to the Board on 25 June 2024.

The Board of Directors does hereby acknowledge the contents of this Annual Report as per the requirement of Section 168 (1) (k) of the Companies Act No. 07 of 2007. Signed in accordance with the resolution adopted by the Directors.

Alastair Corera

Chairman/

Non-Executive Independent Director

Damith Tennakoon

Deputy CEO/

Executive Director

Dave De Silva

Executive Director

Samitha Hemachandra

Non-Executive Director

Jayomi Lokuliyana

Non-Executive Independent Director

Mahesh Nanayakkara

Managing Director/

Chief Executive Officer

Roshan Abeygoonewardena

Executive Director

Jagath Abhayaratne

Non-Executive Director

Sujeewa Kumarapperuma

Non-Executive Independent Director

Senior Prof Sampath Amaratunge

Non-Executive Independent Director

Sasindra Munasinghe

Executive Director

Rajitha Perera

Non-Executive Independent Director

Senior Prof Prasadini Gamage

Non-Executive Independent Director

26 June 2024

Colombo

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A N	CITIZENS
N U A L R E	DEVELOPMENT
P O R T	BUSINESS
2 0 2 3 /	FINANCE
2 4	PLC

6

ABOUT THE REPORT

CITIZENS DEVELOPMENT BUSINESS FINANCE PLC

A N N U A L R E P O R T 2 0 2 3 / 2 4

PLC

OUR INTEGRATED REPORTING JOURNEYSince the adoption of in FY2013/14, our 11th Integrated Annual Report has evolved over the years and now;

 Has more impactful and quality

disclosures with greater

connectivity demonstrating our

OUR REPORTING SCOPE AND BOUNDARY

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This integrated annual report covers the principal activities and operations of Citizens Development Business Finance PLC (CDB), identified as "the Company". The period covered in this report is from 01 April 2023 to 31 March 2024, aligning with our customary annual reporting cycle. It evaluates the significant financial and non-financial aspects within the framework of the Company unless specified otherwise. There were no significant changes in the organisation type, structure, ownership, supply chain or topic boundaries, nor there were significant changes in reporting or restatements that were made of previously reported financial, social or environmental information.

MATERIALITY

We assess what information should be reported in our integrated annual report based on the principle of materiality. This report discloses our risks, opportunities, macro-trends and other considerations that impact materiality on our six capitals and our ability to create, preserve and minimise erosion of value for our stakeholders. We conduct a materiality assessment (refer pages 49 to 50) on key topics deemed pertinent to both internal and external stakeholders and this assessment helps shape our long-term strategy and execution of our business model to create value- added outcomes for all stakeholders.

FINANCE 3 / 2 4
BUSINESS	T 2 0 2
DEVELOPMENT	A L R E P O R
CITIZENS	A N N U

integrated thinking.

 Focuses on material and value

enhancing disclosures, that also

meet regulatory requirements, for

informed decision making by our

stakeholders.

 Is more concise covering our

strategy, risk management,

governance, business activities,

performance and outlook as

well as sustainability endeavours

within the operating context

to create value over time for

identified stakeholders.

REPORTING FRAMEWORK

GRI 2-14

Financial reporting	Integrated reporting	Sustainability reporting	Corporate governance
 Sri Lanka Financial Reporting	 International Integrated Reporting		Global Reporting Initiative	 Code of Best Practices on
Standards (SLFRS) and Sri Lanka	Framework		(GRI) -2021	Corporate Governance 2023
Accounting Standards (LKAS) issued				issued by CA Sri Lanka
by CA Sri Lanka
 Companies Act No.7 of 2007 - Listing	 A Prepare's Guide to Integrated		Sustainable Development Goals	 Listing Rules of the Colombo
Rules of Colombo Stock Exchange	Reporting and Guidelines for		(SDGs) of United Nations	Stock Exchange
	presentation of Annual Reports
	2023 issued by CA Sri Lanka
 Finance Business			Guide on communicating	 Corporate Governance
Act No. 42 of 2011			sustainability issued by the	Direction No. 05 of 2021
			Colombo Stock Exchange	issued by the Central Bank of
				Sri Lanka

ASSURANCE

GRI 2-5

The Financial Statements presented in this Report have been audited by Messrs Ernst & Young, who have provided their professional opinion on the accuracy and fairness of the Annual Financial Statements (refer pages 178 to 180).

To the best of the knowledge of the Directors, the Auditors do not maintain any other relationship with the Company, nor do they have any vested interest in contracts with the Company.

PRECAUTIONARY PRINCIPLE

The Company has applied the precautionary principle in addressing its social and environmental sustainability. As a responsible corporate entity, we have implemented necessary measures to mitigate any potential risks posed to the society and the environment as a result of our activities.

Soft copy

To download a soft copy of this integrated report, refer to http://www.cdb.lk or scan the QR

FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements about CDB's future strategy, performance, operations and prospects. These statements and expectations carry risks and uncertainties given that they are dependent on circumstances that will take place in the future. As such, these factors may cause actual results or developments to deviate materially from CDB's forward- looking statements made at the time of release of our FY2023/24 results. CDB makes no representations or warranty, express or implied, that these forward- looking statements will be achieved. All forward-looking statements are presented without recourse or liability to the Board or other preparers of the Annual Report, given the considerable uncertainty associated with them.

We welcome your suggestions and comments on further improving the readability and relevance of our report

GRI 2-3

Laavanya Paheerathan Company Secretary [e-mail]

Vajeesha Edirisinghe

Manager - Sustainability [e-mail]

Citizens Development Business

Finance PLC.

No. 123, Orabipasha Mawatha,

Colombo 10.

ICONS USED IN THIS REPORT

Six capitals used to create value

Financial	Manufactured	Intellectual	Human	Social and	Natural
Capital	Capital	Capital	Capital	Relationship	Capital
				Capital

Key stakeholders

Investors Customers Employees Environment Community Business Regulators Partners

Principle risks

R1	R2	R3	R4	R5
Business and	Credit	Operational	Liquidity	Market
strategic	risk	risk	and funding	risk
execution risk			risk

		R6	R7	R8		R9
		Capital	IT and	Regulatory and	Environmental,
		risk	cyber risk	compliance		Social and
				risk	Governance (ESG)
						risk
Key strategic pillars		SUSTAINABILITY		TECH
		AGENDA			DISRUPTION

CDB's prioritised SDGs

Good Health	Quality	Clean Water	Affordable and	Responsible	Life on Land	Partnerships
and Well-Being	Education	and Sanitation	Clean Energy	Consumption		for the Goals
				and Production

Refer pages 40 to 44 for further details on CDB's sustainability commitment

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A N	CITIZENS
N U A L R E	DEVELOPMENT
P O R T	BUSINESS
2 0 2 3 /	FINANCE
2 4	PLC

8

WHO WE

ARE

I N S P I R I N G
PLCIMPACT4
FINANCE	3
Guided by our singular purpose: Empowering
	2
Aspirations, our 'Urban Funding - Rural Lending'
	/
positions us as a beacon of empowerment and
BUSINESS	2
	0
aspirations. Transcending beyond traditional financing
	2
we focus on uplifting individuals and communities to
	T

realise their fullest potential. This convergence enables
DEVELOPMENT	R
LA
	O
us to go beyond our role as a financial institution to be
	P
	E
a catalyst of empowerment and growth.
	R
CITIZENS	A N N U