FORESIGH LOLC HOLDINGS PLC | ANNUAL REPORT 2018/19 Scan the QR Code with your smart device to view this report online. FORESIGH LOLC has performed remarkably well in 2018, once again demonstrating our powerful impact on the diverse industry sectors in which we operate, many of which we now dominate. We believe that this achievement is the result of our farsighted vision, constant vigilance, well-timed strategies and prudent planning. Our increasing regional presence and partnerships across Cambodia, Myanmar, Pakistan, Indonesia and the Philippines have also given us resilience, financial stability and a well-spread risk profile, ensuring a steady performance during times of uncertainty in the local economy. That is why the past few years have seen your Company on a trajectory of robust growth and progress, delivering year-on-year results that have far exceeded expectations and placed us firmly among the nation’s biggest diversified conglomerates. We believe we have only just begun to show what we can do and we will continue to develop our well-balanced and diversified investment portfolio; relying on our unerring foresight to deliver sustainable expansion, profitability and value. CONTENTS 01 GROUP OVERVIEW 04 SUSTAINABILITY AT LOLC 06 FINANCIAL STATEMENTS About Us 03 Sustainability Report 67 Financial Calendar 106 Unlocking Hope 04 Chief Executive Officer’s and Chief Financial LOLC at a Glance 08 Officer’s Responsibility Statement 107 Group Structure 10 Directors’ Responsibility for Financial Awards and Certifications 12 Reporting 108 Funding Partners 14 Independent Auditors’ Report 109 Our Presence 16 Statement of Financial Position 114 Financial Highlights 17 Statement of Profit or Loss 116 Statement of Comprehensive Income 117 Statement of Changes in Equity 118 Statement of Cash Flow 128 Notes to the Financial Statements 130 02 EXECUTIVE REVIEWS 05 GOVERNANCE Deputy Chairman’s Message 18 The Board of Directors 79 Group Managing Director/CEO’s Review 22 Corporate Management Team 83 Report of the Board of Directors 90 Report of the Audit Committee 93 Report of the Talent Development and Remuneration Committee 94 07 SUPPLEMENTARY INFORMATION Report of the Related Party Transaction Review Committee 95 Property Details of the Company 310 Report of the Integrated Risk Management Decade at a Glance 312 Committee 96 Summarised Quarterly Statistics 316 Report of the Corporate Governance Value Addition 318 Committee 97 OPERATIONAL REVIEW Indicative US Dollar Financial Statements 319 03 Corporate Governance Report 98 Milestones 322 Enterprise Risk Management 102 MANAGEMENT DISCUSSION & ANALYSIS List of Group Companies 328 Financial Review 25 Share Distribution 332 Financial Services 31 Corporate Information 334 Agriculture & Plantation 40 Glossary 335 Leisure 44 Notice of Meeting 338 Renewable Energy 48 Form of Proxy 339 Construction 50 Manufacturing & Trading 53 Overseas Expansion 57 Other Strategic Investments 63 About Us 03 GROUP OVERVIEW Unlocking Hope 04 LOLC at a Glance 08 Group Structure 10 Awards and Certifications 12 Funding Partners 14 Our Presence 16 Financial Highlights 17 partnerships with a host of financial and environmental benefits through green ABOUT US developmental organisations across the operations and processes in line with world. We have significantly successful our triple bottom line focus in all we do. The LOLC Group has rapidly evolved into investments in Cambodia, Myanmar, The Group’s business interests are in key being the biggest Non-Banking Financial Pakistan, Indonesia and the Philippines and growth areas of the economy and we are Institution and one of the biggest and most we continue to expand our international confident that LOLC will grow further both diversified conglomerates in the country. presence by actively seeking new in potential and in value creation for the Besides a range of financial products and opportunities in the region. many stakeholders we partner and serve. services, our portfolio includes leisure, plantations, agri-inputs, renewable energy, As a leading player in Sri Lanka’s SME and construction, manufacturing and trading and microfinance sectors, the LOLC Group other strategic investments. has been a catalyst in facilitating financial inclusion. Our role in microfinance has Our footprint in Sri Lanka spans every enabled us to benefit many people and district, from the rural hinterlands to major communities, whilst striving to maximise cities and we have enduring business ANNUAL REPORT 2018/19 3 UNLOCKING HOPE Building Entrepreneurs in frontier and emerging economies. Driven by an unwavering focus on our customers’ success, LOLC is rapidly expanding its footprint in Asia and Africa, building a secure future for underserved communities through pro-poor market-based solutions. Sri Lanka “My first business was a failure and I lost all my savings. I had no money to start another. As I had failed once, no bank was willing to give me a loan. LOLC helped me with a small loan so that I could start this horticulture business. I probably would have ended up working as a menial laborer, if not for LOLC.” Chandra Rajapakse Siriketha, Polonnaruwa, Sri Lanka Horticulturist With business success comes confidence, risk management, and the application of LOLC spurs emerging and frontier which impels further achievements. Through digital technology. economies by igniting industrialisation this virtuous cycle, LOLC empowers and modernisation, increasing workforce the next generation of success-oriented Our commitment to our customers’ participation especially among women, entrepreneurs to build high-growth micro, success goes well beyond providing credit. improving productivity, and alleviating small and medium businesses. Leveraging our vast pool of organisational poverty. capabilities, we offer bespoke financial By building the economic strength of LOLC is making a difference in the MSME solutions, inculcate business discipline and individuals, LOLC seeks to impel the GDP landscape by deploying best practices in ethics, and impart technical and managerial growth of its host countries – a mission that customer protection, customer experience, skills. ensures our MSME platform stands out in the global financial services industry. 4 LOLC HOLDINGS PLC Preserving Dreams that their guarantors, family members and Our customers are the lifeline of their business partners will not be burdened by families. They are significant players in and debt in an unfortunate event. the economic backbone of their respective nations. Ensuring their success, welfare and As a testament to LOLC’s commitment 17,000++ $4.25b protection form an integral part of our human to customer protection, LOLC has been Financial Professionals Loan Book Value – centric approach to financial inclusion. awarded the prestigious certification for “Client Protection Principles”. Part of the underserved communities, our customers possess limited business experience and low financial literacy. Our role as a socially conscious and responsible 1.6m $2.8b lender requires keen understanding of their Customers Customer Deposits challenges to ensure they borrow wisely and invest prudently. We provide every LOLC customer with insurance coverage against disability and death. In doing so, we offer peace of mind 0.12% 100++ Net NPL Funding Partners Myanmar “Making Pagoda crowns is a creative job. Knowing that what you make will be mounted on a pagoda and worshipped by thousands makes you feel happy. To become a successful crown maker, you need years of training, but to build a successful crown-making business you need to get a loan. I struggled for five years until I took my first loan from LOLC. I am happy with what I have achieved.” Daw Ei Ei Tun Bago, Myanmar Pagoda crown maker ANNUAL REPORT 2018/19 5 UNLOCKING HOPE Indonesia “My mother used to crochet clothes and various items for the family and to give as gifts. I grew up watching her produce intricate pieces, and naturally, I learned the techniques from her. Although my mother never wanted to build a business out of it, I asked myself, ‘why not?’ Masdiana Deli serdang regency, Indonesia Crochet artist Strengthening Society Uplifting the Masses LOLC’s mission is to move people from the bottom of the pyramid to become middle-income earners. 6 LOLC HOLDINGS PLC “IN DEVELOPING The inequality between the rich and the underserved compromises universal social NATION’S, PEOPLE AT justice and impedes economic growth. Uplifting the latter is, thus, both a social THE BOTTOM OF THE necessity and an economic imperative. PYRAMID ARE DEPRIVED Building the capacity of lower income families underscores the mission of LOLC OF OPPORTUNITIES and its partners. FOR ECONOMIC By providing them with the means to ADVANCEMENT. THEIR become entrepreneurs and economically productive citizens, LOLC enables them to CIRCUMSTANCES move up the pyramid and enjoy a better quality of life, while gaining greater wealth IMPEDE THEIR ABILITY and social acceptance. Eventually, they will TO BREAK FREE FROM integrate with the formal economy, join the ranks of the middle class, and contribute to POVERTY AND IMPROVE fiscal revenue. THEIR LIVES.” Cambodia “Thanks to the loans I have received from LOLC, our income from basket making and rice farming has increased. Our family’s living conditions have also improved. My two daughters now attend school regularly, as I have enough money to buy their school supplies. They want to do well in their studies and get good jobs.” Kaov Sary Kampot Province, Cambodia Rice farmer and basket weaver ANNUAL REPORT 2018/19 7 LOLC AT