AMW Capital Leasing & Finance PLC Annual Report 2016 Contents Vision Mission and Corporate Values........................................................................................................... 1 Milestones of the Company......................................................................................................................... 2 Chairman’s Message..................................................................................................................................... 4 Director / CEO’s Message............................................................................................................................. 6 Board of Directors........................................................................................................................................ 8 Senior Management Team........................................................................................................................... 11 Operational Review...................................................................................................................................... 13 Human Resource Engagement..................................................................................................................... 15 Branch Network........................................................................................................................................... 17 Financial Highlights.......................................................................................................................................... 19 Risk Management......................................................................................................................................... 21 Corporate Governance................................................................................................................................. 30 Report of the Directors................................................................................................................................. 50 Directors’ Statement on Internal Controls over Financial Reporting............................................................ 51 Report of the Board Audit Committee......................................................................................................... 52 Report of the Integrated Risk Management Committee ............................................................................. 53 Report of the Remuneration Committee…………………………………………………………………………………………………. 54 Report of the Related Party Transactions Review Committee…………………………………………………………………. 55 Directors’ Responsibility for Financial Reporting......................................................................................... 56 Financial Reports........................................................................................................................................... 57 Share Information.......................................................................................................................................... 96 Vision Mission To be the most trusted admired and Consistently deliver best-in-class service experiences profitable financial institution in Sri Lanka. to our clients. Attract and develop best-in-class professionals who are motivated to achieve the highest levels of service and performance. Provide a superior return for our shareholders and invest in the communities we serve. Corporate Values • Best-in-class client experience • Adaptability We provide timely, personalized and We are willing to capitalize on the opportunities comprehensive solutions that create unique that arise, tailor our services to fit our customers service experiences and earn our clients’ loyalty. and anticipate future needs. • Our people • A high performance company We attract and develop a diverse workforce We are committed to excellence and are comprised of committed and driven individuals individually accountable for the achievement of that have a sense of urgency and an inherent measurable outcomes. motivation to succeed. • Teamwork We collaborate as one team to achieve our strategic objectives and goals. • Reliability We are committed to carrying out all tasks with accuracy, efficiency, honesty and integrity every day. The communities we serve, our customers, employees and shareholders can depend on us to remain a strong, locally-owned and operated and independent finance company. • Expertise Corporate We are committed to continuous improvement Values of and never stop learning and use our resources and expertise to encourage positive change in AMWCL our customers, ourselves and our community. • Embracing change We embrace change to find the best ideas, and to continuously improve and grow. E x s p e i e t r AMW Capital Leasing and Finance PLC | Annual Report 2016 1 MILESTONES OF THE COMPANY - Listed on the Diri Savi Board of the Colombo Stock Exchange - Opened three new branches in Badulla, Anuradhapura and Nugegoda - Migrated into a sophisticated state of the art Leasing Module - Introduced Operating Leases to the product portfolio 2011 - Opened two new branches in Negombo and Kandy 2007 2008 - Obtained Finance Company License - Obtained Leasing Company License 2006 - Opened principal place of business in Borella - Opened first branch in Kurunegala, second branch in Matara and third branch in Ratnapura 2 AMW Capital Leasing and Finance PLC | Annual Report 2016 - Total assets surpassed the Rs. 9 Bn mark - Opened two New Service Centers in Kaduwela and Mt. Lavinia - Recorded highest ever Executions and Profits - Fitch Ratings Lanka Ltd upgraded the Company rating from BB- to BBB+ (four notches up) - Total Fixed Deposits surpassed Rs. 2 Bn at the end of 2015 - Total assets surpassed Rs. 5 Bn mark - Opened a fully-fledged branch in Colombo 2015 - Opened Fixed Deposits Division - Two New Service Centers were opened in Kalutara and Kiribathgoda - A Micro Finance unit was setup 2016 - Islamic Finance to the product portfolio was introduced - Total assets topped the Rs. 11 Bn - Launched the company website mark - Opened a New Branch in Kegalle - Two New Service Centers were opened in Panadura and Wattala - Relocated Badulla Branch 2013 - Celebrated 10th year anniversary 2014 - Opened a New Branch in Galle - Relocated Ratnapura, Nugegoda, Avissawella and Dambulla Branches - Became a Tier “A” NBFI surpassing Rs. 8 Bn assets - Software module for Fixed Deposits 2012 was implemented - Opened two new branches in Kuliyapitiya and Gampaha - New Service Center was opened in Avissawella - Business model changed to include financing used vehicles - Integration with SAP ERP System AMW Capital Leasing and Finance PLC | Annual Report 2016 AMW Capital Leasing and Finance PLC | Annual Report 2016 3 CHAIRMAN’S MESSAGE Profit after tax increased by 49% to Rs. 343 million, while return on equity increased to over 20%. Despite aggressive asset growth of 17%, portfolio quality was maintained at a high level as measured by the non-performing loan ratio of 1.9% 4 AMW Capital Leasing and Finance PLC | Annual Report 2016 CHAIRMAN’S MESSAGE (CONTD.) It is with great pleasure that I present to you the Annual The CEO, Mr Brandon Morris and his management team are Report and Audited Financial Statement for the year ended to be commended for this excellent performance. 31st December 2016 of AMW Capital Leasing and Finance PLC. I am happy to report that our company recorded its Going forward, finance leasing companies are likely to face highest ever profit of Rs. 343 million, despite economic strategic challenges as market growth slows in an industry headwinds and competitive challenges in the environment with over capacity and as regulatory capital requirements in which we do business. This profit is the result of careful increase. Competitors are likely to take steps to diversify, planning, balancing risks and rewards appropriately, as well to control costs as margins diminish and to look again at as professional execution of strategic and operation plans. opportunities for consolidation. AMWCL is reviewing these changes and its own strategic responses. I am pleased to report that the company had another very successful year as described below, despite a more volatile I am confident that the board and management will be and difficult environment. successful in positioning the company appropriately in changing circumstances and that it will sustain its growth While the global economy continues its gradual recovery trajectory over the long term. from the recession of 2008, global politics was rocked by the Brexit vote in the UK and the election of President I would like to take this opportunity to thank my fellow Trump in the US. Both watershed events seem to signal a directors, the CEO, the management team and our parent turning point, as policy direction changes away from the company, Associated Motorways (Pvt) Ltd, for their globalization paradigm adopted since the fall of the Berlin invaluable contribution to the success of the company. Wall nearly three decades ago, to more inward looking and protectionist positions. Such trends if sustained, will be negative over the medium term for emerging economies including Sri Lanka. In Sri Lanka, expectations of a sustained post war boom Nihal Senanayake Welikala have not yet been realized, with GDP growth slipping below Chairman 5 % in 2016, with a similar outlook for 2017. Growth hit a speed bump in the form of a balance of payments challenge, 21 February 2017 as exports faltered while short term foreign