Vision “To be the leading financial solutions provider sustainably developing individuals and businesses”and businesses” Mission “To provide innovative and responsible solutions true to our Values with the expertise of our multidisciplinary team of professionals and synergies of our financial services group” Our Values Innovative Customer Centric Professional Ethical Accountable Team Oriented Socially Responsible “The stylised ‘ V ’ in our new logo represents Vardhana, but it also stands for many other things. It stands for our values, our vision, our past and the future victories and in a slight marketing twist, a small ‘tick’ to remind people that DFCC Bank is always their right choice.” About this Reporting Period Consequent to the change of the financial year-end to 31 December Report from 31 March following the amalgamation with DFCC Vardhana Bank PLC and obtaining the commercial banking license, this DFCC Bank Annual Report 2015 covers the nine month period from This is our fourth consecutive Integrated 1 April 2015 to 31 December 2015 (period under review) and is Annual Report, one which also builds further different from our usual annual reporting cycle for financial and on the triple bottom line reporting we had adopted sustainability reporting adopted up to 31 March 2015. The previous a few years earlier. As an integrated report, it is a concise Annual Report covered the period 1 April 2014 to 31 March 2015 communication about how our strategy, governance, performance (previous year), and is available on our website (www.dfcc.lk) and prospects, in the context of the external environment, lead to along with quarterly filings and older Annual Reports. Some of the the creation of value over time. consolidated entities have a 31 March financial year-end and they Value Creation and Capital Formation are consolidated with DFCC Bank’s reporting period with a three month time lag. A summary of the accounting periods covered by The ability of an organisation to create sustainable value for itself the Statement of Profit or Loss and Other Comprehensive Income in depends on the value it creates for its stakeholders, making value the Bank and the Group columns is given in the Financial Report creation essentially a two-way process. In fact, the more value an (page 123). organisation creates, the more value it is able to create for itself. Therefore firms spend substantial resources on creating and Report Boundary maintaining relationships with their stakeholders. Value creation Consequent to the amalgamation, our reporting covers DFCC Bank leads to capital formation. As a store of value, capital takes on PLC (‘DFCC Bank’ or ‘Bank’) and the DFCC Bank Group (‘Group’) a broader meaning in integrated reporting and constitutes the comprising the Bank and its subsidiaries, a joint venture company resources and relationships used and affected by an organisation. and an associate company. The respective entities are duly identified We classify capital that is owned by the organisation as being where applicable. ‘internal’ capital, while capital that is not owned as ‘external’ capital. Ownership is irrelevant here as long as the organisation has access Compliance to and uses all forms of its capital to create sustainable value for itself and its stakeholders. As declared on page 119 the Board of Directors of DFCC Bank, in the spirit of good governance, accepts responsibility for the entirety of Our Management Discussion and Analysis is thus structured this Annual Report 2015. likewise, based on value creation and capital formation. The information contained herein, as in the past, is in compliance Comprehensive and Yet Concise with all applicable laws, regulations and standards. Additional details are given in the Corporate Governance Report (page 89), Financial Taking forward the approach to reporting adopted last year, this Statements and the Notes thereon (page 122) and the Independent report balances the need to communicate effectively through concise, Auditors’ Report (page 121). relevant information (to a large and diverse stakeholder group), while at the same time providing comprehensive compliance-related In addition, we have drawn on concepts, principles and guidance from disclosures (that would interest only a few). We are thus presenting the Global Reporting Initiative (GRI) Sustainability Guidelines G4, our Annual Report 2015 in three primary formats: the International Integrated Reporting Framework and the Smart Integrated Reporting Methodology™ in producing this Report. a concise report (what you are now reading) in print and CD formats which meets compliance requirements while Precautionary Principle communicating with an audience looking for the essentials in a nutshell; We take due cognisance of the social and environmental consequences of our actions, both direct and indirect. The latter are more significant a comprehensive report for a universal audience in online html and they arise from our lending operations, which are addressed format [http://dfcc2015.annualreports.lk]; and through credit policies, the Social & Environment Management a condensed ‘annual snapshot’ in print and pdf formats that System (SEMS), post-disbursement supervision and risk communicates across a broad spectrum of current and potential management processes. stakeholders. Comparability Going beyond mere ‘annual’ reporting we are also striving for a more ‘current’ format for reporting and are upgrading our corporate The basis for reporting on subsidiaries, joint ventures and other website with a focus on investor relations, duly supplemented by an entities, leased facilities, outsourced operations as well as any investor relations app for smart phones and other devices. restatements and significant changes from previous reporting periods in the scope, boundary or measurement methods are disclosed where appropriate. They are in compliance with the reporting standards disclosed in the Financial Reports. Queries We welcome your comments or questions on this Report. You may contact the Secretary to the Board at our Head Office via email or snail mail through the contact details given under Corporate Information. 04 06 Highlights Message from the Chairman 08 10 21 Chief Executive’s Profiles Business Model Review About DFCC Bank – 21 Board of Directors – 10 Group Structure – 22 Corporate Management – 14 Our Portfolio – 24 Management Team – 16 Operating Environment – 26 Strategic Direction – 28 Stakeholders – 30 Materiality – 32 33 72 73 Stewardship Management Discussion Recognition and Analysis Integrated Risk Awards and Accolades – 72 Management – 73 Value Creation and Internal Corporate Governance – 89 Capital Formation – 33 Annual Report of the Board of Financial Capital – 33 Directors on the Affairs of the Bank – 99 Institutional Capital – 40 Board Committees – 104 Value Creation and External Directors’ Statement on Capital Formation – 42 Internal Control – 110 Investor Capital – 42 Independent Assurance Report – 112 Customer Capital – 43 Employee Capital – 53 Business Partner Capital – 65 117 Social and 113 Financial Reports Environmental Capital – 68 Investor Relations Financial Calendar – 118 Statement of Directors’ Investor Engagement – 113 Responsibilities in Relation to Financial Statements – 119 Performance of the Share – 113 Chief Executive’s and Distribution of Shareholding – 115 Chief Financial Officer’s Statement of Responsibility – 120 Independent Auditors’ Report – 121 Financial Statements and Notes – 122 Other Disclosures – 210 213 Supplementary Information Value Added Statement – 213 Sources and Distribution of Income – 214 SCAN to view the online version Ten Year Summary – 215 http://dfcc2015.annualreports.lk Corporate Information – 216 Highlights Broadbased Launched The Utility The Tea Integrated Payment Solution Payment System More utility providers and corporates A groundbreaking supplier settlement joined the payment scheme system to serve Sri Lanka’s large community of private tea manufacturers and tea leaf suppliers Consolidated Developed The Two Core The Mobile Wallet Banking Solutions Solution The best of both systems were unified, A convenient electronic payment and fund thus achieving true synergy management solution that allows users to send and receive funds through their mobile devices instantly Amalgamated Established DFCC Bank and DFCC Bank's DFCC Vardhana First Ever Bank 'Automated Branch' DFCC Bank PLC is the surviving entity at the newly refurbished premises in Negombo Celebrated Upgraded DFCC Bank�s Sri Lanka 60th Anniversary Postal Units Events for customers and other to fully-fledged branches stakeholders held in all the Regions 4 DFCC Bank PLC Annual Report 2015 Financial Highlights Group Based on current SLFRS 9 months Year ended 31 March ended 31 December 2015 2014 2013 2012 LKR million 2015 Operating Results Total income 17,503 20,094 20,376 16,630 12,231 Profit before tax 2,553 5,416 4,117 4,431 3,674 Tax expense 912 977 902 870 628 Profit attributable to equity holders of the Bank 1,592 4,362 3,151 3,494 2,966 Statement of Financial Position Assets Cash and short-term funds 4,316 6,855 8,043 11,625 5,054 Loans to and receivables from banks and other customers 164,945 138,887 117,716 102,477 87,827 Financial investments 66,861 56,699 40,976 27,648 24,433 Investments in associate and joint venture 1,248 1,188 1,029 901 950 Other assets 9,739 6,981 7,231 6,628 4,992 Total assets 247,109 210,610 174,995 149,279 123,256 Liabilities Due to other customers 110,551 92,712 80,917 62,878 45,682 Other borrowing 87,381 65,874 50,075 46,012 42,492 Other liabilities 5,208 3,761 3,549 3,265 2,317 Equity Total equity attributable to equity holders of the Bank 43,716 47,909 40,121 36,814 32,472 Non-controlling interests 253 354 333 310 293 Total equity and liabilities 247,109 210,610 174,995 149,279 123,256 Return on equity, %* 5.6 14.0 10.9 13.1 10.7 Return on total assets, %* 0.8 2.5 2.1 2.8 3.0 Earnings per share, LKR 6.01 16.46 11.89 13.18 11.19 Net asset value per share, LKR 164.90 180.72 151.34 138.87 122.49 Capital adequacy Core capital ratio, % 15.39 17.71 18.71 20.84 21.05 Total capital ratio, % 15.32 16.62 17.19 19.37 19.88 *After eliminating fair value reserve.