Annual Report of the Board of Directors

GRI 2-27

The Board of Directors is pleased to present to the shareholders the tenth integrated Annual Report of the Company.

The Report has been structured in a manner that provides a balanced and comprehensive evaluation of our financial, social, and environmental impacts resulting from our value creation activities and processes. It includes the Audited Financial Statements for the Company’s financial year ended on 31 March 2023, along with the Independent Auditor’s Report meeting all statutory requirements. The Financial Statements are certified by the Chief Financial Officer, 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. Please refer the Audited Financial Statements.

The Directors assume responsibility for preparing the Company’s Financial Statements and ensuring compliance with Sri Lanka Accounting Standards, Companies Act No. 07 of 2007, and Finance Business Act No. 42 of 2011. They are of the view that the Financial Statements 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 (d) and recommended best practices. The Statement of Directors’ Responsibility for Financial Reporting is an integral part of this Report.

Names of the persons holding office as Directors of the Company at the reporting dates 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 BOD Profiles 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.

The Report, where applicable, has been prepared in accordance with the Guiding Principles and Content Elements outlined in the International <IR> Framework issued by the International Financial Reporting Standards (IFRS) Foundation. We present 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. We emphasise the significant connections between stakeholders, strategy, and the value-creation process, which shape the content of the report. Sustainability reporting principles such as stakeholder inclusiveness, sustainability context, materiality, and completeness have been duly considered.

Having reviewed the Company’s business plan; the Board of Directors is of the view that the Company’s resources are sufficient to sustain its operations in the foreseeable future. The Report explains our value creation efforts during the reviewed year, offering a comprehensive assessment of the operational status. This fosters stakeholders’ confidence in the Company’s potential for future growth and sustainability.

Reporting period and boundary

GRI 2-2, 2-3, 2-4

The Report covers the operations of Citizens Development Business Finance PLC (CDB), identified as “the Company”.

The Report covers the timeframe from 01 April 2022, to 31 March 2023, 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. Our latest report for the period ended on 31 March 2023, can be accessed on our website: http://www.cdb.lk. During the year under review, 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.

Key frameworks and compliance

GRI 2-14

The Company’s social and environmental impacts are presented in accordance with the Global Reporting Initiative Sustainability Reporting Standards (GRI Standards). The following laws, regulatory frameworks, standards, guidelines and protocols have been followed in the preparation of this Report.

• The <IR> Framework (https://www.integratedreporting.org/resource/international-ir-framework)
• Sri Lanka Accounting Standards issued by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka)
• “A Preparers Guide to Integrated Corporate Reporting”, and “Guidelines for Presentation of Annual Reports 2023” published by The Institute of Chartered Accountants of Sri Lanka
• Sustainable Development Goals (SDGs) - The UN initiative with 17 aspirational “Global Goals”
• Smart Media Methodology for Integrated Reporting^TM
• Central Bank of Sri Lanka Corporate Governance Direction No. 05 of 2021, Colombo Stock Exchange (CSE) listing rules and the CA Sri Lanka Code of Best Practice on Corporate Governance 2017.

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 Annual Report of the Board of Directors of the Annual Report.

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 2023, including comparative figures for 2022, have been duly approved and authorised for release by the Board of Directors, in accordance with the resolution passed on 28 June 2023. 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.

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.

Improvements in reporting

This Report has been organised in a manner that effectively conveys our endeavours to generate value for all stakeholders in the short-, medium-, and long-term, as outlined in our business model. In line with this, we have recognised emerging developments and trends that are expected to influence our business model and the process of value creation. These trends have been categorised into risks and opportunities based on their relative significance to the Company and the stakeholders that are likely to be affected most. The Report includes an in-depth explanation of the Value Creation Story, which offers a comprehensive overview of the strategic imperatives and the strategies implemented to address risks and leverage opportunities. The governance structure and the risk management framework underlying these efforts are thoroughly outlined.

Supporting sustainable development

CDB believes that businesses have an important role to play in the achievement of the United Nations Sustainable Development Goals (UN SDGs). The Company remains committed to supporting this global initiative, recognising that the long-term sustainability of CDB is closely intertwined with the value created for its stakeholders.

Based on the Company’s business model and context, sustainability goals and targets have been aligned with 7 of the 17 SDGs. The following icons are used throughout the section “CDB in Action” to show connectivity between initiatives during the year under review and SDGs where relevant.

External auditors and assurance

GRI 2-5, 2-22

The Financial Statements and sustainability indicators presented in this Report have been audited by Messrs KPMG, who have provided their professional opinion on the accuracy and fairness of the Annual Financial Statements and have also provided assurance on the sustainability indicators as disclosed in this Annual Report. 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.

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 45 of this Annual Report. Additionally, a summary of these transactions conducted during the fiscal year was presented to the Board on 28 June 2023.

Queries

GRI 2-3

We welcome your comments and suggestions on our Report. Please direct your feedback to:

Vajeesha Edirisinghe
Assistant Manager – Sustainability

Citizens Development Business Finance PLC.
No. 123, Orabipasha Mawatha, Colombo 10.
vajeesha.edirisinghe@cdb.lk

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.