What Defines Us LANKA ORIX LEASING COMPANY PLC | Annual Report 2017/18 What Defines Us As a broadly diversified company operating in several industry sectors from financial services, agriculture, renewable energy and leisure to construction, manufacturing and trading, at LOLC, we are responsible to a diversity of people and institutions, both here and overseas. There are a number of characteristics that have made us who we are today: a trailblazing corporate that is bold and aggressive in spirit, guided by a long-term vision and prudent strategy, maximising wealth creation for the many stakeholders we serve. That’s why the outstanding results recorded in these pages are so significant; reflecting the enduring qualities that have brought us thus far, and the strength and vision that inspire us to keep our promise of excellence both now and into the future. The LOLC Group has rapidly evolved into being the biggest non-banking financial institution and one of the biggest and most diversified conglomerates in the country. Besides a range of financial products and services, our portfolio includes leisure, plantations, agri-inputs, renewable energy, construction, manufacturing and trading and other strategic investments. Our footprint in Sri Lanka spans every district, from the rural hinterlands to major cities and we have enduring business partnerships with a host of financial and developmental organisations across the world. We have significantly successful investments in Cambodia, Myanmar, Pakistan and Indonesia and we continue to expand our international presence by actively seeking new opportunities in the region. As a leading player in Sri Lanka’s SME and microfinance sectors, the LOLC Group has been a catalyst in facilitating financial inclusion. Our role in microfinance has enabled us to benefit many people and communities, whilst striving to maximise environmental benefits through green operations and processes in line with our triple bottom line focus in all we do. The Group’s business interests are in key growth areas of the economy and we are confident that LOLC will grow further both in potential and in value creation for the many stakeholders we partner and serve. Contents Group Overview 4 .........Our Business Sectors 6 .........Why invest with LOLC 8 .........Group Structure 10 .......Awards and Certifications 12 .......Our Presence 14 .......Funding Partners 18 .......Financial Highlights Executive Reviews 20 ......Deputy Chairman’s Message 24 ......Group Managing Director/CEO’s Review Operational Review 29 ........... Financial Review 34 ........... Financial Services 42 ........... Agriculture & Plantation 46 ........... Leisure 52 ........... Renewable Energy 54 ........... Construction 56 ........... Manufacturing & Trading 61 ............ Overseas Expansion 66 ........... Other Strategic Investments Sustainability at LOLC 72 ......Sustainability Report Governance 85 ......The Board of Directors 89 ......Corporate Management Team 96 ......Operational Management Team 104 ....Report of the Board of Directors 107 ....Corporate Governance Report 111 ......Report of the Talent Development and Remuneration Committee 112 ......Report of the Integrated Risk Management Committee 113 ......Report of the Corporate Governance Committee 114 .....Report of the Audit Committee 115......Report of the Related Party Transaction Review Committee Scan the QR Code with your smart 116 .....Enterprise Risk Management device to view this report online. 2 Lanka ORIX Leasing Company PLC Annual Report 2017/18 Financial Statements 120 ....Financial Calendar 121 ......Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement 122 .....Directors’ Responsibility for Financial Reporting 123 .....Independent Auditors’ Report 126 ....Statement of Financial Position 128 .....Statement of Profit or Loss 129 ....Statement of Comprehensive Income 130 ....Statement of Changes in Equity 136 ....Statement of Cash Flow 138 .....Notes to the Financial Statements Supplementary Information 298 ...Property Details of the Company 300 ...Decade at a Glance 304 ...Summarised Quarterly Statistics 306 ...Value Addition 307 ...Indicative US Dollar Financial Statements 310 ....Milestones 317 .....List of Directors 322 ....Share Distribution 324 ....Corporate Information 325 ....Glossary 330 ...Notice of Meeting 331 .....Form of Proxy 3 Our Business Sectors Experience, expertise and visionary strategies for growth Financial Leisure Services As Sri Lanka’s largest NBFI, The sector offers a total the LOLC Group offers a solutions package, with comprehensive portfolio a leisure, travel and of financial solutions, to a entertainment proposition, diverse customer profile with resorts in operation and ranging from individuals under construction in some to micro and large scale iconic locations in Sri Lanka enterprises, across the and the Maldives. length and breadth of the country. 4 Lanka ORIX Leasing Company PLC Annual Report 2017/18 Renewable Construction Manufacturing Energy & Trading In keeping with the Group’s The LOLC Group is active The sector includes the Triple Bottom Line focus, in the Construction sector Group’s own manufacturing the Group ventured into through its investments plant which produces solar power with the in Sierra Construction, RADCO branded radiators; commissioning of its first one of Sri Lanka’s leading and the authorised solar power plant and construction companies, dealership for other leading actively seeks opportunities with wide expertise global brands in Vehicle for investing in renewable and experience in civil batteries, Power Generators, energy generation. and telecommunication Machinery, Power tools, engineering, piling and Office Solutions and irrigation. Veterinary Care products. Agriculture & Overseas Other Strategic Plantations Expansion Investments LOLC Group’s investments in Today, the LOLC Group’s The Group’s other Strategic this sector ranges from large footprint extends overseas Investments include scale Tea, Rubber and Sugar as the Group has established Information Technology, Cane plantations to being itself as a leader in the Healthcare and Banking. Sri Lanka’s leading supplier Microfinance industry in of agricultural machinery, several countries in the fertiliser and crop care. region including Cambodia, Myanmar, Pakistan and Indonesia. 5 Group Overview Why invest with LOLC An enterprise born out of a pioneering spirit as Sri Lanka’s first Leasing Company in 1980, LOLC Group has since then been on a meteoric rise to become one of Sri Lanka’s most profitable conglomerates with a diversified portfolio across growth sectors in the region. Leadership in Governance and Sustainability (Economic Value Added by the Group) To Employees Rs. 18.68 Bn To Government Rs. 8.73 Bn To Providers of Capital Rs. 9.46 Bn To Expansion and Growth Rs. 12.05 Bn 6 Lanka ORIX Leasing Company PLC Annual Report 2017/18 Leadership in local and international markets Becoming one of the nation’s largest enterprises has not been at the expense of agility and nimbleness, the Group continues Pakistan to value innovation and dynamism, seeking Myanmar new opportunities to create value in Sri Lanka Cambodia and across the region; with a business model which harnesses a multitude of synergies of being a Group, whilst letting expertise in each Indonesia Sri Lanka area of business spearhead the growth of each sector. A vibrant Sri Lankan economy GDP US$ 87.2 Bn GDP per capita US$ 4,065 Exports US$ 11.36 Bn Financial Tourism Manufacturing ICT Agriculture Services 11.6% 3.9% 10.2% & Forestry Foreign direct 7% -0.8% investment US$ 1.91 Bn Source: CBSL Net assets value per share (Rs.) Broadly diversified in key industry sectors 150 148.28 Financial Services Pg 34 123.84 120 Agriculture & Plantations Pg 42 Leisure Pg 46 90 Pg 52 79.33 Renewable Energy Pg 54 59.41 Construction 60 47.64 43.96 Manufacturing & Trading Pg 56 Pg 61 30 Overseas Expansion Other Strategic Pg 66 Investments 0 2013 2014 2015 2016 2017 2018 7 Group Overview Group Structure 8 Lanka ORIX Leasing Company PLC Annual Report 2017/18 9 Group Overview Awards and Certifications LOLC was ranked 5th LOLC was placed at amongst the 100 Most number 4 in the Business For the second Respected Entities in Today TOP 30 consecutive year, LOLC Sri Lanka won the Financial Service Provider of the Year award at the SLIM-Nielsen People’s Awards 2018 LOLC Finance won 3 top Awards at LankaPay Technnovation Awards 2017 For the third consecutive Year, the Eden Resort Financial Best Mobile Most Popular & Spa won Gold at the Institution of the Payment Electronic 2017 National Business Year for Customer Application of Payment Product Excellence Awards in the Convenience the Year of the Year Hospitality and Tourism Sector 10 Lanka ORIX Leasing Company PLC Annual Report 2017/18 LOLC Al-Falaah was LOLC Al-Falaah bagged two Bronze awards for iPay was recognised at the awarded as the Winner The Best Leasing Company of the Year and Social Open Group Conference of the Best Islamic Upliftment Award at the Sri Lanka Banking and and Awards for Innovation Bank category for Financial Institution (SLIBFI) Awards 2018 and Excellence in Bangalore Sri Lanka in the IFN in February 2018 Best Banks Poll 2017 LOLC Al-Falaah won the Silver award for The Islamic Business The Islamic Business Division of CLC was the Entity of the Year, Gold for Window/ Division of CLC was awarded the Gold Award for the Best Unit of the Year and Silver for CSR Project awarded the Gold Award Leasing Company of the Year and the of the