Annual Report 2023/2024

ABOUT US

Vision, Mission & Values 5

Our Sustainability Policy 6

Our Reporting Philosophy 7

Financial Highlights 8

Chairman's Statement 9

Chief Executive Officer's Statement 11

Board of Directors' Profiles 13

Corporate Management Profiles 14

OUR APPROACH TO VALUE CREATION

Stakeholder Identification & Engagement 16 Economic Review 19

Industry Review 24

Our Value Creation Model (Business Model) 30 Corporate Strategy behind Value Creation 32

MANAGEMENT DISCUSSION & ANALYSIS

Financial Capital 36

Customer Capital 43

Business Partner Capital 45

Human Capital 48

Infrastructure Capital 56

Intellectual Capital 59

Creating Sustainable Value 60

Economic Contribution 61

Social Contribution 61

Environmental Contribution 62

Risk Management 63

ACCOUNTABILITY & TRANSPARENCY

Corporate Governance Philosophy 70

Corporate Governance Disclosures 72 Directors' Statement On Internal Controls 135 Independent Assurance Report 137

Report of the Audit Committee 139

Report of the Remuneration Committee 141 Related Party Transactions Review

Committee Report 142

Report of the Integrated Risk Management Committee 144

Nomination and Governance Committee Report 146 Statement Of Directors' Responsibilities 147

Annual Report Of The Board Of Directors On The Affairs Of The Company 148

Report of Senior Independent Director 154

FINANCIAL STATEMENTS

Financial Calendar 156 Independent Auditors' Report 157 Income Statement 161

Statement of Comprehensive Income 162 Statement of Financial Position 163 Statement of Changes in Equity 164 Statement of Cash Flows 165 Significant Accounting Policies 166 Notes to the Financial Statements 186

SUPPLEMENTARY INFORMATION

Ten Year Summary 238

Investor Information 240

Branch Network 243

Corporate Information 244

Notice of Meeting 245

Notes 246

Form of Proxy 247

As a distinguished entity within the expansive Softlogic Group, operating seamlessly across the nation and boasting a rich history spanning over 25 years, we have consistently navigated through the currents of macroeconomic uncertainties. These experiences, ingrained in our journey, have cultivated our preparedness to both discern and navigate potential impacts that might reverberate across our enterprise and extend

to our valued clientele. The intricate tapestry of Sri Lanka's external debt sustainability, the current political stability and the prevailing uncertainty surrounding the upcoming elections, and the regulatory measures imposed by the central bank shall remain integral facets of the external landscape. Although these dynamics persist, we acknowledge the likelihood of significant alteration remains limited in the near term.

Our stance as a corporate citizen deeply committed to Sri Lanka remains resolute. Armed with

a proactive approach, we stand well-equipped to navigate an array of potential scenarios. Our commitment remains steadfast in catering to the diverse needs of our clientele, spanning both the Northern and Southern regions, as well as the myriad points that intertwine between them. Despite the challenges posed by a period of economic contraction and the regulatory measures implemented by the central bank, we have demonstrated resilience and successfully navigated these obstacles, resulting in a remarkable turnaround in our financial performance

Fueling our aspirations to stand as a premier financial partner for the emerging new economy, we are steadfast in our dedication to realign our business strategies in a manner

that fosters enduring success for both our clients and the future trajectory of our enterprise. Our core values, etched deeply within us, underscore the essence of unity, adaptability, commitment to fruition, and the unwavering resilience demonstrated by

our colleagues. These bedrock principles are instrumental in our pursuit of triumph within the competitive marketplace.

Nurturing our culture of excellence, which radiates a client-centric ethos and thrives on diversity and inclusivity, is pivotal to the realization of our aspiration to attain a truly high performance standing. As we chart a course forward, we remain vigilant in adapting, innovating, and nurturing an ecosystem that propels us to new pinnacles of achievement.

VALUES

PERFORMANCE

We are committed to a result-oriented culture. We place customers at the centre of our activities and we hold ourselves

VISIONresponsible to deliver what we promise in keeping with customer needs.

ABOUT US OUR APPROACH TO VALUE CREATION

To be the preferred non-Banking financial institution in Sri Lanka.

MISSION

To strive to delight our customers through accessible tailor-made financial solutions, served through our well versatile accomplished and highly motivated team, committed to excellence.

To create shareholder value through stability and above- average returns.

To sustain our continued commitment to being a good corporate citizen and make a positive contribution to the community and the environment.

INNOVATION

We constantly challenge conventional wisdom and develop new solutions and bring simplicity and accessibility for customers.

INTEGRITY

We act fairly and honestly. We believe in ethics and transparency in all our dealings.

HUMAN CAPITAL

We benefit from the diversity of our business and our people by working together to achieve success. We treat all our staff with respect and dignity, provide opportunities for their career enhancement and reward them for good performance.

SUCCESS

We always strive to be the best in our business and possess a will to win.

CORPORATE RESPONSIBILITY

We care for the community and the environment, taking responsibility to protect them. We are a good corporate citizen and support worthy causes and CSR projects.

MANAGEMENT DISCUSSION & ANALYSIS ACCOUNTABILITY & TRANSPARENCY FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION

Investors - Our decision making process and our short term and long term financial objectives have always been aligned with the aspirations of our investors so that they receive sustainable returns for their investments. We are committed to providing them with all relevant information in a timely manner so that they are well informed when making investment decisions.

Employees - Our actions have undoubtedly proven that we regard our employees as the lifeblood of our company. We focus on professionally developing them so that they would continue to add strategic value to our business. Further, as a part of our employee value proposition, we offer our employees a rewarding, safe and challenging work environment for them to professionally and personally excel in.

Customers - The expectations of our customers always take the forefront in our business operations. Our financial solutions have been designed with the demands of our customer segments in mind and we are not afraid to aggressively restructure existing products or introduce new solutions to cater to the evolving aspirations

of our clientele. We are committed to continuously reengineering our processes and introducing new platforms to conduct business in order to ensure that the customer service levels we offer are never compromised. In short, the entirety of our business operations is committed to fostering a service culture.

Business Partners & Suppliers - Our commitment to fostering and maintaining long term, mutually beneficial relationships with our

suppliers and business partners has been instrumental in developing the overall value proposition that we offer our clientele. Our engagement mechanism with them is collaborative and we have committed ourselves to ethical and transparent business practices.

The Environment - All our business decisions and operational activities have been designed to ensure that we operate in an environmentally sustainable manner and invest in environmental conservation initiatives.

The Community - We actively foster long term partnerships and engagements with the communities that we serve and actively immerse ourselves in community development initiatives so that we have an intimate and resilient bond with the communities around us.

Reporting Context

Welcome to our eighth Integrated Annual Report! As a company dedicated to providing responsible and transparent financial solutions, our goal is to present actionable and relevant information to empower all our stakeholders to make informed decisions about our business.

We have adopted the Integrated Reporting framework advocated by the Integrated Reporting Council to effectively convey our value creation story in a cohesive and multidimensional way. Our focus is on delivering sustainable value that can endure the challenges of our industry. This requires a deep understanding of our value creation process, our responsibilities to stakeholders, and the economic, social, and environmental impacts of our operations.

In this report, we highlight the key inputs to our value creation process, identified as our value drivers. These are presented as input capitals: Financial, Customer, Business Partner, Human, Intellectual, and Infrastructure Capital. We also outline our value-generating activities and their immediate outputs, emphasizing the economic, social, and environmental impacts of our business, as we believe that true value creation should positively influence all three areas.

Annual Report 2023/24

Additionally, we acknowledge our responsibility to our diverse stakeholders throughout the value creation process. To this end, we have provided a comprehensive discussion of our corporate governance and integrated risk management practices, which ensure adequate checks, balances, and safeguards for the myriad interests of our stakeholders.

Reporting Scope

Driven by our commitment to our stakeholders and the necessity to address their needs, we have adopted the Integrated Reporting methodology to emphasize the long-term sustainability of our value creation process.

To achieve this, we present both financial and non-financial information that enables a comprehensive assessment of our business's financial and operational performance. Additionally, we include key comparative performance indicators from the previous financial year, along with a future outlook for

all our value-creating activities. This ongoing commitment to transparency is further strengthened by identifying the factors impacting our key stakeholders and the sustainability initiatives we champion, informed by our stakeholder identification and engagement processes.

Reporting Boundaries

This Annual Report encompasses all activities of Softlogic Finance PLC across the island during the financial year 2023/24, ending on 31st March 2024. No restatements of financial or non- financial information have been made regarding the previous financial year, unless specifically stated otherwise.

The financial statements reported as of 31st March 2024 have been prepared in accordance with applicable Sri Lanka Accounting Standards. All relevant disclosures comply with the necessary laws and regulations. Our Corporate Governance disclosures adhere to the Code of Best Practice on Corporate Governance (Direction No. 03 of 2008) and its amendments issued by the Central Bank of Sri Lanka, as well as the Finance Companies (Corporate Governance) Direction No. 05 of 2021. Additionally, disclosures are aligned with the Listing Rules of the Colombo Stock Exchange and the Companies Act No. 07 of 2007 and its subsequent amendments.

External Assurance

External Assurance for the Financial Statements and its accompanying notes has been obtained from Messrs. Ernst and Young and their independent opinion is stated in the Independent Auditor's Report in Pages 157 to 160.

7

ABOUT US OUR APPROACH TO VALUE CREATION MANAGEMENT DISCUSSION & ANALYSIS ACCOUNTABILITY & TRANSPARENCY FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION

Financial Results for the Year Ended 31st March (Rs. Mn)

Total Gross Income

Interest Income

Interest Expenses

Net Interest Income

Other Income

Total Operating Income

Total Operating Expenses

Impairment Charges

Profit / (Loss) Before Tax (PBT)

Taxation (Income Tax & VAT on Financial Services)

Profit / (Loss) After Tax (PAT)

Financial Position as at 31st March (Rs. Mn)

Total Assets

Loans and receivables

Lease and hire purchase receivables

Customer Deposits

Total Borrowed Funds

Shareholders' Funds

Financial Ratios & Indicators

Cost to Income Ratio (%)

Return on Average Assets (ROA) - before tax (%)

Return on Average Equity (ROE) - after tax (%)

Earnings / (Loss) Per Share (EPS) (Rs.)

Earnings / (Loss) Yield (%)

Net Assets Value Per Share (Rs.)

Market Price Per Share (Closing) (Rs.)

Market Capitalization (Rs.) (Mn.)

Price to Earnings (Times)

Total Available Liquid Assets

Required Minimum Amount of Liquid Assets

Debt to Equity Ratio (Times)

Interest Cover (Times)

Core Capital Ratio (%) (Minimum Requirement - 8.5%)

Total Risk Weighted Capital Ratio (%) (Minimum Requirement - 12.5%)

2023/24

2,720

2,576

2,781

(205)

144

(61)

1,071

644

(1,777)

-

(1,777)

11,291

3,840

3,999

7,482

558

2,789

(1,749.19)

(10.62)

(70.72)

(2.90)

(50.84)

2.90

5.70

5,487

(1.97)

765.61

781.51

3.05

0.36

4.92

4.92

2022/23

4,199

3,925

3,891

34

274

308

1,493

1,810

(2,995)

-

(2,995)

22,182

8,843

7,816

12,431

6,916

2,236

485.09

(12.60)

(90.77)

(5.66)

(72.62)

3.67

7.80

4,752

(1.38)

2,384

1,804

8.92

0.23

(1.11)

0.60

% Change

-35%

-34%

-29%

-702%

-47%

-120%

-28%

-64%

-41%

-

-41%

-49%

-57%

-49%

-40%

-92%

25%

-461%

-16%

-22%

-49%

-30%

-21%

-27%

15%

43%

-68%

-57%

(5.87)

0.13

-543%

720%