Scan the QR Code with your smart device to view this report online www.lolcfinance.com Vision We believe in an inclusive financial service that requires client advocacy and stewardship, a passion for leading-edge solutions and the delivery of services that exceed customer expectations. Mission Our mission is to help set the industry standard in Non-Bank Financial Services. We reach out to all Small and Medium Enterprises and provide them with affordable and convenient financial services tailored to their specific needs. Corporate Values We are committed to the highest standards of ethical conduct in all we do. We believe that honesty and integrity engenders trust, which is the cornerstone of our business. We abide by the laws of the land and strive to be good citizens and take responsibility for our actions. We recognise that our success as an enterprise depends on the talents, skills and expertise of our staff and our ability to function as a closely-integrated team. We appreciate our diversity and believe that respect – for our employees, customers, partners, regulators and all those with whom we interact – is an essential element of all positive and productive business relationships. We understand the importance of our mission and the trust our customers place in us. With this in mind, we strive to excel in every aspect of our business and approach, every challenge with a determination to succeed. CONTENTS PG 14 PG 16 Chairman’s Director/CEO Review Review About Us Directors’ Statement on Internal Supplementary Financial Information - Vision/Mission/Corporate Values ............... 01 Control Over Financial Reporting .............. 74 Al-Falaah, Alternate Financial Services Unit An Outstanding Profile ................................ 03 Independent Assurance Report ................. 75 Statement of Financial Position ............... 158 Key Highlights of the year ........................... 04 Report of the Audit Committee ................... 76 Statement of Profit or Loss and Other Comprehensive Income............................. 159 Operational Highlights ................................ 05 Report of the Integrated Risk Management Committee ........................... 77 Cash Flow Statement ................................ 160 Milestones ................................................... 06 Report of the Remuneration Notes to the Supplementary Finance Branch Network .......................................... 10 Committee ................................................... 78 Information ................................................ 161 Executive Reviews Report of the Related Party Transaction Review Committee ................. 79 Financial Information for Last Ten Years Board of Directors ....................................... 12 Report of the Nomination Statement of Financial Position ............... 172 Chairman’s Review ..................................... 14 Committee .................................................. 80 Statement of Profit or Loss ...................... 173 Director/CEO Review .................................. 16 Chief Executive Officer’s and Head of Quarterly Statement of Profit or Loss Finance’s Responsibility Statement .......... 81 and Other Comprehensive Income .......... 174 Management Discussion & Analysis Directors’ Responsibility for Quarterly Statement of Financial Review of Operations .................................. 20 Financial Reporting .................................... 82 Position ...................................................... 175 Financial Review ......................................... 25 Manufactured Capital ................................. 28 Financial Statements Investor Information ................................. 176 Intellectual Capital ..................................... 30 Financial Calendar ...................................... 84 Other Disclosures ..................................... 179 Human Capital ............................................ 31 Independent Auditor’s Report .................... 85 Branch Network ........................................ 185 Social and Relationship Capital ................. 34 Statement of Financial Position .................. 89 Notice of Meeting ...................................... 187 Natural Capital ........................................... 37 Statement of Profit or Loss and other Notes ......................................................... 188 Comprehensive Income .............................. 90 Form of Proxy ............................................ 191 Stewardship Statement of Changes in Equity ................ 92 Corporate Information ............................. IBC Corporate Governance ................................ 38 Statement of Cash Flows ........................... 94 Enterprise Risk Management .................... 67 Notes to the Financial Statements ............ 95 Report of the Board of Directors ................ 70 02 LOLC FINANCE PLC | ANNUAL REPORT 2019/20 AN OUTSTANDING PROFILE International Business Magazine Awards iPay was recognised as the Best Payment Platform, Sri Lanka for 2019 by the International Business Magazine Awards. LankaPay LankaPay Technnovation Awards Technnovation Awards LOLC Finance was awarded the Gold LOLC Finance secured the Overall Award for Non-Banking Financial Gold Award for Excellence in Institution of the year for Customer Inter-Bank Payments amongst Convenience. Non-Banking Financial Institutions. IFN Best Islamic Bank IFN Best Islamic Provider Sri Lanka Award Global Award LOLC FINANCE PLC | ANNUAL REPORT 2019/20 03 KEY HIGHLIGHTS OF THE YEAR 2020 2019 New Executions Rs. Million 72,985 87,172 Net Interest Income Rs. Million 18,910 21,772 Profit Before Tax Rs. Million 3,880 7,108 Profit After Tax Rs. Million 3,780 5,963 Net Assets Rs. Million 31,290 22,767 Total Value Added Rs. Million 7,945 11,827 Market Capitalisation Rs. Million 11,550 13,020 Value Added Per Employee Rs. Million 2.74 4.55 Financial Highlights Per Share Market Value Rs. 2.20 3.10 Net Assets Rs. 5.96 5.42 Earnings Rs. 0.77 1.42 Total Staff Number 2,715 2,461 Total Training Investment Rs. Million 19.6 17 Total Training Hours Hours 51,024 49,125 Number of Female Employees Number 499 421 Social Highlights New Recruits Number 504 615 NET INTEREST INCOME PROFIT BEFORE TAX NET ASSETS 18.9 Rs. Bn 3.9 Rs. Bn 31.3 Rs. Bn TRAINING INVESTMENT TOTAL STAFF TOTAL TRAINING HOURS 19.6 Rs. Mn 2,715 51,024 04 LOLC FINANCE PLC | ANNUAL REPORT 2019/20 OPERATIONAL HIGHLIGHTS TOTAL ASSETS CUSTOMER DEOPSITS PORTFOLIO Rs. Mn Rs. Mn Rs. Mn 250,000 120,000 160,000 140,000 100,000 200,000 120,000 80,000 150,000 100,000 60,000 80,000 100,000 60,000 40,000 40,000 50,000 20,000 20,000 0 0 0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2020 191.9 Rs. Bn 2020 99.3 Rs. Bn 2020 134.0 Rs. Bn NEW EXECUTIONS REVENUE PROFIT AFTER TAX Rs. Mn Rs. Mn Rs. Mn 100,000 50,000 7,000 6,000 80,000 40,000 5,000 60,000 30,000 4,000 3,000 40,000 20,000 2,000 20,000 10,000 1,000 0 0 0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2020 73.0 Rs. Bn 2020 43.0 Rs. Bn 2020 3.8 Rs. Bn PORTFOLIO COMPOSITION REGION-WISE PORTFOLIO FUNDING COMPOSITION 2% 8% 15% 35% 11% 33% 61% 16% 14% 65% 4% 17% 15% 4% Rentals receivable on leased assets Fixed Deposits Central Loans and advances Savings Deposits Eastern & Uva Factoring receivable Borrowings Metro North Western, Northen & North Central I II Others Southern & Sabaragamuwa Western & North Western II Western II & Southern II LOLC FINANCE PLC | ANNUAL REPORT 2019/20 05 MILESTONES 200120012001 200620012001 Fitch assigns rating of A-(lka) with Stable Outlook. Obtained approval to operate a Incorporated as LOLC Finance Opened a branch in Horana. Company Limited, a wholly-owned Mobile Deposit Mobilisation Unit. subsidiary of Lanka ORIX Leasing Co. PLC. 200920012001 200720012001 Relocated the branch at Colombo 07 Opened 13 branches in Kalutara, 200220012001 to Wellawatte. Nuwara Eliya, Matara, Embilipitiya, Licensed as a Registered Finance Polonnaruwa, Badulla, Galle, Opened six branches in Dambulla, Company. Wattala, Colombo 02, Kegalle, Ampara, Kattankudy, Jaffna, Vavuniya Mahiyanganaya, Mount Lavinia and and Batticaloa. Chilaw. Joined SWIFT and assigned Banker 200320012001 Al-Falaah, the Islamic Business Unit Identification Code LOFCLKLC. of Lanka ORIX Finance PLC, was Registered as a Finance Leasing Fitch Ratings Lanka affirms Rating of launched. Establishment on 05th June 2003. A-(lka) with Stable Outlook. Commenced commercial operations Fitch affirmed the BBB+(lka) from No. 79, C.W.W. Kannangara National Rating assigned for implied Mawatha, Colombo 07. long-term unsecured senior debt 201020012001 with a Stable Outlook. Changed name to Lanka ORIX Entered into a Worker Remittance Finance Company Limited. Obtained a unique Issuer Agreement with Xpress Money. Identification Number for Payment Opened nine branches in Opened two branches in Kandy and Cards issued by the Company. Anuradhapura. Trincomalee, Elpitiya, Avissawella, Opened a Students Savings Centre at Mathugama, Monaragala, Royal College, Polonnaruwa. Divulapitiya, Nawalapitiya, Kalmunai and Ambalangoda. 200420012001 Entered into an Agreement with Registered as a Market Intermediary Commercial Bank to issue ATM and Joined SEEDS in their project to function as a Margin Provider Debit Cards and the usage of the titled ‘Leveraging Remittances for by the Securities and Exchange Commercial Bank ATM network. Socioeconomic Development in Sri Commission. Lanka’ to develop special remittance