Resurgence and Rebuilding - LOLC · Financial Highlights 07 I Chairperson’s Statement 08 I Deputy Chairman’s Review 12 I Group Managing Director’s Review 16 I Board of Directors

Adam’s Peak… Sri Pada… Sivanolipatha Malai

one mountain peak… a footprint at its crest....

intrigues Buddhists who believe the foot print to be

that of Lord Buddha…

intrigues Hindus who think the footprint may be

that of Lord Shiva…

intrigues Christians and Muslims alike,

who surmise the foot print could be that of Adam

as he first set foot on earth…

and in being a focal point for the great religions

that most Sri Lankans are adherents of...

it intrigues us all...

as a telling symbol of Unity in Diversity…

to a Nation on the threshold of

Resurgence and Rebuilding

With a history dating back over 2500 years, Sri Lanka was truly the Pearl of the Indian Ocean. We were an important stop along the Silk Route… our spices drew traders from afar to our shores…after the traders, came the colonisers, the Portuguese, the Dutch and the British.

Our lush and verdant paddy lands gave way to tea, rubber and coffee… and to other infrastructural development such as roads and railways.

This is but a ‘thimbleful’ of the colourful history of the jewel shaped island, Sri Lanka, we call home.

As in all affairs of men, we embraced the good and the not so good! External influences brought diversity of races, religions, cultures, food and flora, to name a few. With such change came enrichment as well as enmity… the latter aspect brought into modern focus by an internecine terrorist conflict that had ravaged the country for almost 30 years.

And so, the one time ‘Pearl of the Indian Ocean’, ‘Taprobane’, ‘Serendip’ became a ‘Third World’, ‘developing’ and as some would have it, an ‘underdeveloped’ country.

Is this truly the real picture? Let’s take stock.

Sri Lanka consists of 65,610 square kilometers of unparalleled beauty, bounty and diversity… yes even after all the ravages of history, recent and long past! From the relative aridity of the North, from whence came ample produce and enterprise, to the green and fertile paddy and tea gardens and the urban industrial hubs, there is a nascent prosperity that needs a helping hand to reach full flower.

‘Green’ Sri Lanka existed long before the world woke up to environmental issues… and by and large we enjoy a way of life that supports our eco systems.

From Point Pedro to Dondra, ours is a land richly grounded in faith and morals providing a rich religious base for the community.

Ours is a highly literate community and one must not lose sight of the fact that we are descendants of a proud land that gave the world some of history’s most stupendous achievements, particularly in irrigation, water management and construction.

But time has paled the edge of accomplishment… and today, Sri Lanka stands in need of development to catalyse the resurgence of enterprise lying fallow and to rebuild previously war afflicted areas in the immediate aftermath of the war.

But we must realise… that through such development activity must flow true enrichment and safeguarding of national strengths and qualities.

It is within this context that one finds LOLC, a Company fully focused on extending the scope of its products and services into the vital areas of Resurgence and Rebuilding of Sri Lanka. We have an excellent pedigree in sustainable business; we espouse good governance practices of the highest standards and have built ourselves into a truly stable entity.

More importantly, we realise how vital these qualities are in the context of the renewal and development that must gather momentum.

This is an epic undertaking…. one in which YOU can Join us! Play an important role!

Photo Catching by LOLC

The photographs in

these pages,

of Sri Lanka in all its

diverse beauty, were captured not by

a professional photographic unit…

but by our own staff.They serve as a reminder of

the vast potential that

reposes in the country as

seen through the eyes of LOLC.

It is plainly evident that our task of

resurgence and rebuildingis in good hands… in the hands

of people who love and cherish

their country.

Contents

Financial Highlights 07 I Chairperson’s Statement 08 I Deputy Chairman’s Review 12 I Group Managing Director’s Review 16 I Board of Directors 22

Corporate Management Team 26 I Operational Management Team 30 I Business Impact Report 32 I Business Synergies 44

Sustainability Review 46 I Human Resources 54 I Expanding Our Reach 58 I Enterprise Governance 60

Enterprise Risk Management Report 72 I Financial Review 78

Financial Report 87 I Audit Committee Report 88 I Remuneration Committee Report 89 I Nominations Committee Report 89

Corporate Governance Committee Report 90 I Annual Report of the Directors on the Affairs of the Company 91 I Directors’ Responsibility for Financial Reporting 97

Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement 98 I Independent Auditor’s Report 99 I Income Statements 100 I Balance Sheets 101

Statements of Changes in Equity 102 I Cash Flow Statements 103 I Notes to the Financial Statements 105 I Milestones 140 I Ten Year Summary 142

Summarised Quarterly Statistics 143 I Value Addition 144 I Group Companies 146 I Investor Information 149 I Economic and Financial Indicators 151

Glossary 152 I Notice of Meeting 155 I Form of Proxy Enclosed I Corporate Information Inner Back Cover

6 | LOLC | Annual Report 2008/09

ORIX Corporation was established in 1964 in Osaka, Japan as Orient Leasing Company Ltd. by three trading companies and five banks, as a pioneer of leasing. Since its inception, ORIX has been on the leading edge of financial innovation and attributes its success to the ability to respond rapidly to changes in the market place. ORIX’s growth strategy has involved expansion strategically and geographically, with a boldness and scope that puts the Company in a class by itself among major Japanese financial services firms. ORIX has a diverse range of revenue streams, from operating and financing leases, low-margin business focused on auto and equipment leasing, insurance, corporate rehabilitation, loan servicing, real-estate related and other specialised finance, investments and retail banking and value-added services. The Company’s name was changed to ORIX Corporation in 1989 to reflect its increasingly international profile into financial services other than leasing and is listed in the Tokyo and New York Stock Exchanges.

Today, ORIX Corporation is the single largest leasing company in the world and the second largest financial solutions provider in Japan and has a global network of 231 consolidated subsidiaries and 100 affiliates throughout 27 countries worldwide. It has 1,208 offices in Japan, with 298 locations throughout the United States, Asia, Oceania, Europe, the Middle East and Northern Africa.

The financial year completed was challenging for ORIX, with the global business environment changing dramatically affecting most international businesses. The impact on ORIX’s dominant client base in Small and Medium - sized Enterprises (SMEs) in Japan, required the Company to adopt a strict approach towards credit. While many global financial giants faced financial crisis, ORIX has maintained a healthy level of profits and steered the Group towards long term economic sustainability in a turbulent environment.

Lanka ORIX Leasing Company PLC (LOLC) being the third Joint Venture of ORIX with the International Finance Corporation (IFC), has relentlessly

The ORIX Connection

added value to ORIX with its long track record of successful business innovation and diversification. LOLC’s dynamic diversification strategy is based on the driving principle that ‘expansion into new areas will increase our specialisation and competitiveness, which will then create new value for our customers. This strategy draws inspiration from the ‘ORIX-way’ and enables it to sustain Group synergy, professionalism, expertise, technology, innovative products and services and a dynamic corporate culture.

In addition to the parental guidance LOLC constantly receives from ORIX, it also benefits from the global ORIX network by way of knowledge transfer, technical expertise and compliance standards through its regular reviews and participation in ORIX conferences.

While LOLC gained pioneering status as a leasing entity in Sri Lanka 29 years ago, the Group has now morphed into a Total Financial Solutions Provider with an array of services beyond leasing such as insurance, factoring, savings and fixed deposits, pawning, micro finance, mortgage loans, islamic finance, working capital and stock brokering. The Group has also invested into other business streams in line with its long-term business goals.

With the end of the terrorist conflict in the Northern part of the country, LOLC look forward to playing a prominent role in the country’s economy to rebuild the nation, having a business model developed to suit financial needs of the most deserving SME and the Micro sectors. LOLC is also focusing on regional expansion opportunities with a view to facilitating cross-border knowledge and technology transfer, which will enable it to become a financial services leviathan.

LOLC will continue to follow in the footsteps of ORIX while pursuing its management strategy to contribute to the betterment of society and provide greater long-term benefits to its stakeholders by keeping abreast of market trends to continue to create new value.

01. Australia02. China03. China (Hong Kong)04. Egypt05. England06. France07. Germany 08. India09. Indonesia10. Ireland11. Japan12. Kazakhstan13. Malaysia

14. New Zealand15. Oman16. Pakistan17. Philippines18. Poland19. Saudi Arabia20. Singapore21. South Korea22. Sri Lanka23. Taiwan24. Thailand25. UAE26. USA

LOLC I Annual Report 2008/09 | 7

For the year ended 31 March 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Restated

Company

PERFORMANCE INDICATORS(Rs. Mn)

Net Profit after Tax 118 181 213 256 418 562 664 987 1,059 504New Executions 2,152 2,437 2,242 3,189 4,427 4,972 8,858 12,068 12,127 12,170

Gross Portfolio (Rentals Receivables) 5,432 6,018 6,052 6,757 8,082 9,144 12,858 19,851 25,056 25,185Net Portfolio (Net Investment) 4,215 4,550 4,570 5,129 6,193 7,088 9,653 13,547 16,727 16,985Outstanding Borrowings 3,939 3,915 3,751 4,113 5,396 6,025 9,824 16,250 22,273 24,850Non-Performing Portfolio 378 556 715 815 883 865 113 137 443 538Interest in Suspense 45 68 87 101 107 149 18 14 47 148Provision 107 338 389 485 608 645 61 45 116 237

KEY INDICATORS(Rs. Per Share)Dividends per Share 2.25 3.00 3.25 3.25 1.95 2.32 3.00 1.50 2.25 2.80Market Price per Share 22.50 21.50 51.00 73.50 60.00 85.00 101.00 107.50 150.00 69.25Book Value per Share 29.84 28.00 30.81 35.31 38.81 48.57 59.98 77.74 100.21 107.35

(Times)Debt to Equity Ratio 2.78 2.97 2.56 2.45 2.93 2.61 3.45 4.40 4.68 4.87Interest Cover 1.22 1.32 1.38 1.52 1.85 2.56 1.96 1.63 1.28 1.14Dividend Cover 4.42 2.54 2.75 3.30 4.50 5.09 4.64 13.86 9.53 3.79

FinancialHighlights


Dear Reader,

I have pleasure in presenting to you, the

Annual Report and Audited Accounts of

LOLC for the financial year 2008/09. This has

been a year of great challenge during which

the Group has performed commendably.

To perform well in a climate of challenge

requires resilience and a business model

that responds well to the need for change,

in the face of adversity. I believe that

LOLC’s strategic realignment and planning

process instituted two years ago, has given

us the ideal business platform to cope with

challenge and conduct our business affairs

with great success.

Partnerships of Strength

An unique aspect of LOLC’s operations and

one which we honour and cherish, is the

strong relationship we enjoy with a substantial

portfolio of global funding agencies.

In addition to our main shareholder, ORIX

Corporation of Japan, many of the world’s

top funding agencies not only channel

valuable resources through LOLC to meet

the country’s development requirements,

but also play an invaluable role in helping us

streamline our own processes and systems.

Such assistance flows from independent

transfer of expertise as well as through

compliance requirements of donor agencies

that LOLC needs to comply with.

Chairperson’s Statement

LOLC employs an optimum balance between collections and supportive credit that strives to deliver a win-win solution, safeguarding our own business interests whilst providing maximum leeway for the businesses of our customers to survive and grow


This has helped LOLC to strengthen its

corporate culture founded on transparency,

good governance and sustainability.

The Global and Domestic Economic Environment

The collapse of the sub-prime mortgage

markets in the US has triggered unprecedented

constraints on the performance of almost every

global economy. This is a ‘crisis of confidence’.

The global Banking and Financial Services

sector has been affected by greed, over

leveraging, poor risk management, lack of

integrity at the highest levels, failure to enforce

regulations and failure to respond with new

regulations to cope with new products and the

changing economic environment.

Consequently, by the end of 2008, we were

faced with an imminent worldwide economic

recession.

The Sri Lankan economy, which is heavily

dependent on imports, had to contend with

high oil and commodity prices that prevailed

in early 2008. Rapidly escalating prices, high

interest rates, high inflation and restrictions

on lending, all made 2008 a very difficult

year for Sri Lankan businesses.

By year end 2008, although inflation rates

were dropping towards a single digit regime,

interest rates remained high.

The Sri Lankan economy grew by 6% and

although the country has thus far been

relatively unaffected by the global crisis

largely due to Sri Lanka being insular and

less open to the global economy, the signs

are beginning to emerge, of hard times

ahead, particularly for the commodities

market such as tea, rubber and garments.

Some Implications for LOLC

The global economic crisis has had an

impact on LOLC due to the escalating cost

of financing and delays in repayment, where

businesses constrained by the crisis find it

difficult to keep to schedule in meeting their

obligations to LOLC.

In such a scenario, LOLC employs an

optimum balance between collections and

supportive credit that strives to deliver a

win-win solution - safeguarding our own

business interests whilst providing maximum

leeway for the businesses of our customers

to survive and grow.

The high interest rate regime is reflected in

high borrowing costs. Therefore, with the

rate of inflation coming down, we believe that

interest rates will follow suit, thus enabling us

to lend at reasonable rates and pass on the

benefits to our valued clientele.

Chairperson’s Statement I

VIBRANCEBlue Pansy -This uncommon and fast flying butterfly

is one of the 244 species found in the country

Highlights of 2008/09

Before I detail specific highlights, I believe it is important to emphasise that LOLC concentrates on serving the SME and Micro Finance sectors. A good 90% of our clientele are to be found within these categories.

Apart from business potential, we see that these are the categories that will require valuable input in the country’s drive towards resurgence of enterprise and as peace returns to the Northern and Eastern Provinces, towards rebuilding of communities and businesses.

Today, an analysis of contribution to GDP by Province reveals that the Western Province contributes 50.8% whilst all other Provinces together account for the balance 49.2%. This reveals quite clearly, the need to focus on development, in areas outside of the Western Province.

Despite the turbulent environment in which the Company had to operate during the financial year, carefully planned and proactively executed strategies enabled the Group to deliver resilient profits to the

shareholders. The Group recorded PBT of Rs. 1,247 Mn, a growth of 5.4% over last year. However, the Company profits saw a dip mainly seeing a shift in profits to its subsidiaries. Most companies made positive contributions to the bottom line of the Group and will continue to make a significant contribution in the coming years.

The company declared an interim dividend of Rs. 2.80 per share. The EPS for the Group was Rs. 22.18 The market capitalisation was Rs. 3.3 Bn and LOLC’s share price was stable at Rs. 69.25 per share at the year end.

Two Key Events Distinguished the Year for LOLC

The first was our acquisition of Commercial Leasing Company PLC (CLC). Being a profitable company, CLC with its strong leasing operation offered many areas of synergy to LOLC. Jointly, LOLC Group achieves an expanded outreach, a combined strength of formidable proportions in the sphere of leasing products to market and an added strength to the Group’s portfolio and Balance Sheet.

The other event of note came through our decision to spin off our Micro Credit business as a separate Company. LOLC Micro Credit Ltd. (LOMC) was constituted through a partnership with one of our funding agencies, The Netherlands Development Finance Company (FMO) which took a 20% stake in the new company, whilst also providing a credit line.

I believe this is the first Sri Lankan private sector Micro Credit Company incorporated with foreign partnership.

The business plan of the new Company envisages taking micro credit facilities to the provinces. Our goal is to develop rural entrepreneurship by combining credit lines with relevant training in areas such as Finance, Bookkeeping, Marketing and other

BLESSINGS OF CO-EXISTENCEDevalaya, Kirinda Temple - An ancient Hindu Kovil, alongside the historic Buddhist Temple signifies the religious harmony that goes back centuries

10 | Chairperson’s Statement I LOLC | Annual Report 2008/09


disciplines. Through such development, we expect to fulfil the hopes and aspirations and improve the quality of life of our clientele, whilst meeting Company objectives.

It has always been my belief that access to credit alone will not help our micro sector clientele and their enterprises to survive and be viable in a sustainable manner. We must look beyond credit lines to the provision of total financial solutions that are especially tailored for the sector.

LOLC Micro Credit Ltd. endeavours to achieve this and more, networking with other external agencies to provide its fullest support where necessary.

Through our microfinancing activities we also plan to empower women and help them emerge as entrepreneurs in their own right. This is an aspect we know is very close to the hearts of our donor agencies, not only in terms of gender issues, but in the way women bring intrinsic qualities to business - frugality, meeting commitments - among others.

We are honoured to report that LOLC was affirmed its rating this year at A(lka) by Fitch Ratings, whilst our finance company, Lanka ORIX Finance Company Ltd. (LOFIN) received an upgrade from BBB+(lka) to A - (lka). This is a significant achievement in the context of the domestic and global environments that prevailed during the year under review.

I would also like to note the recent developments and turmoil that have beset the informal finance markets of the country in recent times, which have resulted not only in the erosion of investor confidence but in many personal concerns and difficulties.

In this context, LOLC has maintained a responsible and stable profile, due to its continuous emphasis on good governance, transparency and a sustainable business model. Under the circumstances, the

positive performance of this year can also be attributed to a loyal customer base as well as to the high standards of integrity and professionalism of our Board of Directors and the Management Team.

I am happy to state that one of our key strengths is our young and professional team of employees, who are highly specialised in their respective disciplines and extremely focused. This is exemplified in their flexibility and swift response to change, both of which are highly desirable attributes, given the current volatile business environment.

LOLC ensures that a high level of skill and motivation prevails through its training and development structure as well as its reward and recognition schemes.

I am confident that the strategic direction of LOLC as a total financial solutions provider, will facilitate our contribution to the resurgence and rebuilding of the Nation.

On a personal note, mine has been a journey of 50 years through the banking and financial sector. Through these years, there have been many challenges to be met and surmounted; there have been good and bad times. I am happy that the present finds me with the LOLC Group, where I feel my skills and expertise are a source of strength and are put to good use in service to our stakeholders.

In conclusion, I would like to thank all employees, the Corporate Management and the Board of Directors of the Group for another year of yeoman endeavour, support and guidance, which has yielded good results.

The years ahead are full of promise and I believe that we have what is necessary to progress from promise to fulfilment.

Rohini NanayakkaraChairperson

29 May 2009

Chairperson’s Statement I

CHARM UNFADEDFrangipani flowers floating on water - Beauty and fragrance of

these flowers remain for sometime

CELEBRATION OF LIFEPurple Coot - Engaged in courtship display,

at Nawadankulama Tank, one of the 439 species of birds found in the country


DeputyChairman’sReview

Renewed purpose

At the backdrop of the global economic

crisis of the past two years and our own

debilitating civil war for the past 27 years,

there is no better time than now for a

resurgence of the nation and her peoples.

With the recent conclusion of the civil war,

we are honoured and proud to be one nation

once again! And with new life renewed

energy, we will endeavour, persevere to

make up for the lost time and embark on

that momentous, meaningful growth that this

country deserves. Once again, we at LOLC

are ready and focused to drive this initiative

of resurgence and rebuilding.

LOLC’s involvement in economic

development has a long story. Twenty-

nine years ago the country embarked on

an ambitious programme of accelerating

infrastructure development planned for

30 years to a 5 - year period. The financial

services sector of the day did not provide

viable asset financing and management

options which were prerequisites for

accelerated development. In order to bridge

this gap, LOLC was launched on a solid

foundation provided by the IFC, which is

the private sector arm of the World Bank,

At the dawn of the long awaited peace, enterprise must start up and communities must aspire to a sustainable prosperity. Steeped as we are in the SME sector, we at LOLC began to see an evolution of our operations towards fulfilling yet another National need - uplifting the much needed Microfinancing sector


ORIX Corporation of Japan together with

the Government of Sri Lanka and pioneered

Leasing in Sri Lanka.

With the incorporation of LOLC and

introduction of leasing, new worlds of

opportunity opened up for the SME sector...

they were able to access that essential

capital which had previously been restricted

to a segment with acceptable collateral and

realise the dreams of their entrepreneurial

spirit. And from this stems our mission,

assist those driven by the spirit of enterprise

to reach greater heights, through our

innovative, personalised and wide-ranging

financial solutions.

In effect, we added a new segment, a new

base to the national economy.

Leasing has not only revolutionised the SME

sector but also the financial sector of the

country. Today there are over 100 institutions

engaged in leasing in one form or another

and LOLC remains the market leader.

But our story is different. As pioneers, we

identified the needs, the potential and the

opportunities of the market. Having gained in

depth insight into the businesses, lifestyles,

needs and aspirations of our clientele, we

were able to look beyond and link them with

more expansive solutions that go beyond

immediate needs to other areas of the value

chain. As a result, LOLC has strategically

diversified into group of business entities

that offer a varied portfolio of solutions such

as factoring, insurance, stock brokering,

working capital, savings and deposits, SME

and microfinancing, fleet management,

information technology, Islamic financing,

foreign currency deposits, covering the

entire value chain. This related diversification

was also supported with our sustainable

business model, proactive reinforcement

of our internal processes and corporate

governance, the solid partnerships we enjoy

with our funding partners and regulators,

and our ability to keep sustainable business

processes operating for our prime customer

segments without compromise even in the

face of current trends.

Today, with more than 8 subsidiaries and

many associate companies, coupled with

a reach and a brand that goes to every

household and a loyal customer base,

LOLC is in a stronger position to fulfil both

timely roles that the nation is longing for-

Resurgence and Rebuilding !

Strategy in Action

At the dawn of the long awaited peace,

enterprise must start up and communities

must aspire to a sustainable prosperity.

Steeped as we are in the SME sector,

Deputy Chairman’s Review I

ENERGIZING DAWNBandarawela - All forms of life living in these cold areas

depend on the warmth and the light of the Sun. Have we truly harnessed its constant energy?

we at LOLC began to see an evolution of

our operations towards fulfilling yet another

national need - uplifting the much needed

Microfinancing sector. According to the

study done by GTZ, a leading technical

assistance provider for Microfinancing

in Germany & the Ministry of Finance &

Planning Sri Lanka, in 2008, it is estimated

that 50% of Sri Lankan households totalling

to 4.5 Mn do not have access to credit and

this unmet demand for micro finance in

Sri Lanka is estimated at Rs. 125 Bn.

Back in 2003, LOLC ventured into the Micro

Finance sector through RERED (Renewable

Energy for Rural Economic Development) a

solar power financing project initiated by the

World Bank to promote rural electrification

and we became the largest private sector

financier of solar panels in the country.

Today we have Sundaya Lanka (Pvt) Ltd.

(SLPL) one of the largest solar assembling

companies in Sri Lanka under our wing.

Through SLPL system we have a continued

vendor presence to ensure consistent

service in the deployed areas.

Serving closely to this grass root level

customer over the past seven years made

us realise the absence of access to capital,

the lack of required knowledge and technical

know-how as well as the infrastructure for

this segment. LOLC’s experience in the SME

sector coupled with the in house expertise

enabled us to foresee not only the great need

of the hour but also the unlimited potential of

this untapped market across the country in

particular in the North and East areas.

We realised that the only way we can make

a meaningful contribution towards the

sustainable development and progress of a

micro client is by offering a comprehensive

products and services range that covers this

entire value chain. Thus, we do not just offer

credit - together with our external partners

with whom we share this developmental

goal, LOLC offers technical know-how, help

in finding market linkages, conduct training

and community development programmes

and above all, have become an important

platform to uplift their quality of living.

Our unprecedented growth in microfinancing

was also reinforced by the fact that we

acquired a substantial stake in PRASAC,

Cambodia. PRASAC is one of the leading

Micro Finance institutions in Asia, and LOLC

has benefited immensely from their expertise

and of the other bi-lateral agencies all

engaged in Microfinancing.

At the time of renaissance in the

country, we made another vital initiative

in Microfinancing. Together with The

Netherlands Development Finance

Company FMO, we converted our rapidly

growing Microfinancing business unit

into a standalone business entity - LOLC

Micro Credit Ltd. This is the first and the

only regulated Micro Finance Company

with foreign equity in the country. It’s yet

another addition to our track record of

‘firsts’. With this solid partnership, our focus

in microfinancing will extend well beyond

the core, in to the periphery, to create and

address the entire value chain. This is

illustrated in detail in the sustainability review

in pages 46 and 53.

Going further on the Company’s business

model on sustainable development, LOLC’s

investment in Touchwood Investments

Ltd. (TIL) has been promising. TIL has

established more than 20 greenfield sites

across Sri Lanka and LOLC’s involvement

is aimed at catalysing an expansion of size

and scope of the project whilst stimulating

large scale reforestation activity. Through

this initiative we are safeguarding and

A GLORIOUS BEGINNINGWarakapola - Sunrise is as magnificent as can be in the very early hours of the morning.

WATCHFULYala National Park - These Whistling Teal like many birds look for a safe place such as this dead tree in the water to avoid the ground dwelling predators at night.

14 | Deputy Chairman’s Review I LOLC | Annual Report 2008/09


replenishing rain forests. The project, whilst

generating considerable commercial benefit

is also a major earner of carbon credits.

Thus in Touchwood we have a two pronged

strategy - long-term reforestation and

propagation of valuable timber resources as

well as short-term intermediate cash crops.

Another ongoing project of note is the

revitalisation of the Gal Oya Plantations,

formerly known as Hingurana Sugar

Industries. This is a successful Public/Private

sector initiative where the Government has

a shareholding of 51%, whilst LOLC and

Brown & Company hold the balance 49%

along with the management rights. This was

a project that had been neglected for over

a decade before it was resuscitated. This is

yet another facet of our sustainable business

model as in the process of sugar production,

alternative energy sources such as ethanol

and e-diesel can be produced. This will also

facilitate our micro initiatives of the ‘farmer

out-grower system’.

Funding Partners and LOLC… A mutually honoured trust

We count it a great honour that LOLC has

been able to establish and maintain an

excellent track record with a most illustrious

portfolio of funding partners, over many

years.

A listing of these entities appears on pages

42 and 43 of this report.

Fundamentally, funding agencies have

two main goals for channelling resources-

commercial progress and developmental

progress of recipients.

LOLC has an exemplary record in the

effective deployment of these funds

and delivering desired results. Over

the years, they have come to know and

trust LOLC as a perfect conduit for the

successful implementation of their resource

programmes. Our processes have been

perfected throughout to report to these

agencies on the impact they have created.

Therefore it comes as no surprise, while it

is always an honour for us to realise that we

are the first non-banking financial institution

to be recognised by these funding entities,

to be included in their developmental and

commercial road maps.

I am truly excited by the times that lie ahead

of LOLC. Resurgence and Rebuilding that

must spread through our country, now lies in

our path.

There is room for and a role for everyone…

all of us at LOLC, our funding partners,

regulators, customers… all stakeholders.

Lets journey together!

Ishara Nanayakkara

Deputy Chairman

29 May 2009

Deputy Chairman’s Review I

BEAUTY AND PURPOSEMahakanadarawe Tank - In all Sri Lankan villages both life and

livelihood revolves around the Sun and water from a nearby Tank.


Highlights

Looking back at the year under review, we

have performed well in these exceptional

circumstances in the market, we have fine

tuned our internal processes to optimise

resources and efficiencies, we have

continued to grow true to the spirit of the

business model in acquiring and diversifying

our portfolio and reach when necessary, we

have worked closely with all stakeholders in

achieving developmental and commercial

Group ManagingDirector’s Review

goals, and that’s not all. We have been

recognised by the regulators and rating

agencies which we consider a great honour.

Lanka ORIX Finance Company Ltd. (LOFIN)

was upgraded to A- from BBB+, by Fitch

Ratings and this was the only upgrade of

an institution of this magnitude among the

non-bank financial institutions in the year

under review.

The consistency and strength of LOLC’s

performance, the good governance

We have continued to grow true to the spirit of the business model in acquiring and diversifying our portfolio and reach when necessary, we have worked closely with all stakeholders in achieving developmental and commercial goals, and that’s not all. We have been recognised by the regulators and rating agencies which we consider a great honour


processes and the credibility have always

been recognised by the regulators and

was reaffirmed when the Central Bank of

Sri Lanka in a landmark decision granted

approval for LOFIN to engage in foreign

currency business. We are the only

non-bank financial institution in Sri Lanka to

enjoy this privilege of opening NRFC and

RFC accounts for clients. This is a significant

achievement in light of the recent adverse

developments in the financial sector.

In further recognition of our stability and

financial strength, the Central Bank also

granted approval for LOLC to enter into

SWAP agreements effectively reducing the

borrowing costs of the Group and allowing

the Company to compete in the banking

sector, for funding.

In line with our acquisition strategy, we have

invested in Commercial Leasing Company

PLC (CLC), one of the largest leasing

institutions in the country. This has been one

of the biggest transactions to take place on

the Colombo Stock Exchange during the year

and has made LOLC the market leader in

both leasing and factoring. Notwithstanding

the obvious synergies that emerged from

this move, this merger has inarguably

strengthened the Group’s Balance Sheet. It has

also created new opportunities by reaching a

diversified customer base accessed through

varied distribution channels.

Always aspiring for opportunities to thrive in

our core business lines, LOLC converted its

steadfast microfinancing arm to a stand-

alone business entity together with The

Netherlands Development Finance Company

(FMO) and we are proud to state that this is

the first micro finance company in Sri Lanka

with foreign equity.

The current perception of LOLC links us with

microfinancing and the SME and Agricultural

sectors. It is a compelling association of

thought that is totally evocative of the manner

in which our business has developed over

the years - from a basic leasing operation, to

becoming a total financial solutions provider

in the most important sectors of endeavour

in this country - the SMEs and the Micro

Finance seekers.

It is this evolution in business that places

our theme in context - the Resurgence and

Rebuilding of a Nation.

Group Managing Director’s Review I

BLESSEDDalada Maligawa, Kandy - The Temple of the Tooth Relic

overlooking the lake enshrines the sacred tooth relic of Lord Buddha. The rulers of the land, then and now,

sought its blessings and protection

Strategic initiatives

From the commencement of the financial

year 2008/09, LOLC recognised that the

local and global economies were going to

face a rough year. Long before the global

economic crisis made its impact, LOLC had

effected strategic change and repositioned

its business model to meet future challenge.

That this was a timely measure is clearly

evident in the resilience and flexibility with

which the Group has responded in the year

under review. I believe this to be a unique

strength of LOLC.

From a strategic perspective, we reaffirmed

our long-term focus to become a total

financial solutions provider with short-term

strategies and implemented a Quarterly

Roadmap, which has been invaluable,

particularly in addressing the increasingly

turbulent and volatile economic scenario

unfolding at present.

With weekly Management reviews to closely

follow up its progress, we made conscious

decisions to streamline business processes

and enhance operations.

One such endeavour has been on stringent

credit measures alongside focus on the

collections and recoveries regime.

Within the prevailing environment, we have

seen that many institutions in our line of

business are struggling with collections -

striving to achieve a balance between

timely recoveries whilst being supportive

of their clients. In this respect, LOLC is

on a better footing than most. We have

proactively revamped our collection and

recovery initiatives, minimising the impact to

our customers from the recurrent negative

economic conditions.

Another key initiative we took in coping with

this era of challenge was to parallel our

other initiatives with an inward look at better

cost management. Everyone at LOLC took

genuine efforts to minimise waste, recycle

and other initiatives to curtail expenses

which made a significant difference to the

cost base in a very short time span. From a

30% reduction in mobile telephony costs and

a 10% reduction in electricity consumption,

to so many more achievements of this kind,

we have been making progress over the year

in reducing costs and achieving a healthier

balance between costs and revenue.

Although there were internal cost

management measures, LOLC’s spirit

of enterprise and ‘service first’ mindset

remained strong. In keeping with our

strategy of enhancing reach for our

customers, we formed a strategic tie-up with

Sri Lanka post where LOLC has a presence

in many Post Offices around the country.

This is a particularly useful initiative, given

that the markets we are targeting are often

situated in the peripheries of the country.

LEADERSHIPElephants, Udawalawe - This family of elephants though concealed in the grass, were able to find their way towards a small water hole guided by their matriarch

18 | Group Managing Director’s Review | LOLC | Annual Report 2008/09

In this manner, the Group increased its

presence around the country with the opening

of 5 new LOLC centres within the LIOC fuel

station network, 15 centres within Post Offices

and 2 fully fledged branches in Horana and

Wellawatta and a mini branch in Ampara.

In the area of fleet management, we

streamlined processes and introduced

several new enhancements such as the

integration of all vehicle yards into one

location, and a new loyalty card programme

to reward our loyal customers with many

benefits such as breakdown assistance,

rent-a-car facilities and more. We are also

completing the construction of a state-of-the

art work shop, a much needed addition to

service our fleet management clients more

efficiently and effectively.

Capitalising on the opportunities that

lie in diversification and enhancing our

portfolio towards becoming a total financial

solutions provider, we transformed our

Islamic finance division into a fully fledged,

Shar’iah approved Islamic business unit

under our Finance Company. It is the first

finance company to receive Central Bank

approval to launch an Islamic finance unit.

We offer a full range of Islamic financing

products and are now ours is one of the

largest Islamic financial service providers in

the country. For further convenience of our

customers, the Group also launched its own

ATM programme linked with the Commercial

Bank of Ceylon’s ATM network, with over 300

outlets across the country.

Realising that markets were becoming

increasingly volatile and that funding would

also be more difficult to source, especially

with the increasing borrowing cost in the

local market we focussed heavily on liquidity

management. In the year under review, we

engaged in many successful dialogues

for attractive fund procurement with our

external funding agencies on account of our

longstanding relationship and integrity we

earned throughout. Thus, LOLC possesses

a very strong funding pipeline into the future,

which is amazing when one considers the

magnitude of the global economic crisis, which

has made funding very difficult to source.

During the year, LOLC was successful in

mobilising international funding of Rs. 3.8 Bn

and US $ 30 Mn, from multilateral agencies,

which in these times of hardship, is a

commendable achievement.

The Year 2008/09 and LOLC

Whilst gearing for the year, we also worked

towards maintaining that consistency of

performance which our stakeholders deserve

and which we have steadfastly striven to

deliver, year after year. If one looks at LOLC’s

performance over the past 10 years, it is clear

that LOLC has recorded superior performance

with consistent growth throughout.

During the early part of the year, the

Company continued on its strategy of top line

growth and during the latter part of the year,

consolidated the position achieved during

the last few years. Stringent credit evaluation

criteria coupled with the renewed focus on

collections and recoveries saw the Company

managing the NPLs effectively maintaining

same at healthy levels compared with the

industry and other financial institutions.

The total executions for the year was

Rs. 12.2 Bn maintained at the same level as

the previous year.

Group Managing Director’s Review I

SAFEGUARDKirinda Beach - An enclave on the kirinda beach

protected from the turbulent waves

PRECISION EXTENDEDGardens of King Kashyapa Sigiriya - Lush green in an arid zone, a

result of the hydro engineering expertise thousands of years ago


The working capital business completed the

year with funds in use of Rs. 3 Bn, a marginal

increase over last year.

The deposit base of the finance company,

saw significant growth, which is considered

remarkable given the turbulent times during

the year, recording a growth from Rs. 3.3 Bn

to Rs. 5.3 Bn, a 59% increase compared with

the previous year.

The total interest costs of the Group grew

from Rs. 3.4 Bn to Rs. 6.4 Bn, an 89% growth

over last year.

Provisions on account of bad and doubtful

debt too saw an increase over the year, but

far less than that of the industry in the current

environment. The total provisions for the

Group was Rs. 370 Mn.

The profit before tax recorded by the Group

was Rs. 1,247 Mn, an increase of 5.4% over

last year.

CONTEMPLATIONPelican, Kandy Lake - Enjoying the beauty of the sun’s ripples on the water and its warmth

EAGLE EYE VIEWKnuckles range - A natural pool in the rocky mountains, carved out by the water fall

We made significant inroads with the

Sri Lankan diaspora abroad in its first year

of operations in foreign currency business,

achieving a deposit base of US$ 1.5 Mn by

the year end.

The insurance business grew along with

the lending operations of the group and

achieved the milestone of collecting

Rs. 1 Bn as Gross Written Premium with a

resultant commission income contribution

to the Group of Rs. 144 Mn.

The significant increase in interest costs, had

a negative impact on the profit before tax.

A major contribution to the profits came from

the newly acquired CLC, giving the group

immediate returns on the investment made.

The rest of the businesses too made positive

contribution to the bottom line of the Group.

In terms of Human Resources, LOLC has

proven its status as a desired employer. We

have been constantly growing our employee

retention ratio - it stands at 86% for the year

under review, up from 83% the previous year

and 78% in 2006.

20 | Group Managing Director’s Review | LOLC | Annual Report 2008/09

Looking Ahead

Our focus is on resurgence and rebuilding

and our strategy to give effect to this focus is

through addressing the needs of SMEs and

Micro Finance seekers all over the country

and when enterprise returns, to the North

and East of the country.

It is our ultimate goal to improve access

to financial solutions for people in these

sectors. As war recedes and peace and

enterprise gradually begin to return to the

Northern and Eastern Provinces, we see vast

potential for what we have to offer in terms of

products and services.

These are the areas of focus that we have

begun to plan for. These and other areas

of relative impoverishment and lack of

opportunity will form the basis of our drive

to boost the resurgence and rebuilding that

must happen, to return Sri Lanka to stability

and prosperity.

The future will also see a continued

emphasis on the strengthening of LOLC’s

infrastructure, our access to funding and

our constant pursuit of sustainability of our

business through exemplary governance

and implementation of best practice across

all disciplines, among other factors.

I truly believe that there is a role of great

significance reserved for LOLC, in the

progress of Sri Lanka in the years ahead.

Our track record so far has been remarkable

with direction and guidance from the

Board led by Mrs. Rohini Nanayakkara who

completed 50 years of service in the banking

and financial sector.

REACHING FOR THE SUNTortoise, Kandy Lake - A common sight during the day

I am confident that we can discharge this

role with benefit to all. It is a journey in which

all stakeholders have partnership - our

funding agencies, regulators, customers,

depositors, and all of us at LOLC.

There is a role for us all, in the years ahead.

Kapila Jayawardena

Group Managing Director/Chief Executive Officer

29 May 2009

Group Managing Director’s Review I LOLC I Annual Report 2008/09 | 21


Board ofDirectors

Mrs. R.L. Nanayakkara

Rohini Nanayakkara obtained her BA Second Class

Honours Degree from the University of Peradeniya,

Sri Lanka and a Diploma in French from the

Chamber of Commerce, Brussels. She is a Fellow

of the Institute of Management and the Institute

Manager of the Bank of Ceylon, CEO of the Private

Sector Infrastructure Development Fund, a World

Bank funded project, Director/CEO of Seylan Bank

and Chairman/Director of several other financial

institutions and business organisations.

In January 2005, H.E. the President of Sri Lanka

appointed her as a Member of the Task Force to

Rebuild the Nation (TAFREN).

Mr. I.C. Nanayakkara

Mr. Nanayakkara is instrumental in all investment

strategies adopted by the LOLC Group, leading the

group towards diversification and risk mitigation.

He holds a Diploma in Business Accounting from

Australia and started his career as the Managing

Director of the Ishara Traders Group. Mr. Nanayakkara

also worked in Japan for two years with the largest

exporter of reconditioned motor vehicles - Yamagin

Corporation. He serves as the Deputy Chairman

of the Board of LOLC and all its subsidiaries and

associate companies, including Commercial Leasing

Company PLC. He is also a Director of Colombo

Mr. W.D.K. Jayawardena

Kapila Jayawardena holds an MBA in Financial

Management from the American University of

Asia. He is also a Fellow Member of the Institute of

Bankers and an Associate of the Institute of Cost

and Executive Accountants, London. He served

as the Country Head and CEO (Sri Lanka and

Maldives) of Citibank N.A. from 1999 to 2007.

He has varied experience in the fields of Banking

Operations, Audit, Relationship Management,

Corporate Finance, Corporate Banking and

Treasury Management with Citibank of which

8 years were as CEO.

Mr. Jayawardena was appointed as the Chairman

the Sri Lanka Banks’ Association (SLBA) in

2003/04. He has also served as the President of

the American Chamber of Commerce in Sri Lanka

and was appointed to the Financial Sector Reforms

Committee (FSRC) by the Prime Minister and is a

Land Exchange and Taprobane Fund Management

Ltd., focusing on primary markets.

Mr. Nanayakkara is a Director of Associated Battery

Manufacturers (Cey) Ltd and Browns Group of

Companies, a conglomerate with exposure in trade,

leisure and manufacturing.

With the exposure in the SME sector and going

further into the Micro sector, he is a Director of the

companies he spearheads - LOLC Micro Credit Ltd.

and Sundaya Lanka (Pvt) Ltd., and PRASAC, the

largest micro finance Company in Cambodia.

Focusing on sustainable forestry and plantations,

Mr. Nanayakkara is also the Deputy Chairman of

Touchwood Investments Ltd. He is a Director of

Maturata and Pussallawa Plantations and the Sugar

manufacturing Company - Gal Oya Plantations, which

is a Public - Private Partnership with the Government

of Sri Lanka.

LOLC I Annual Report 2008/09 | 23Board of Directors I

Mrs. K.U. Amarasinghe

Kalsha Amarasinghe holds an Honours Degree

in Economics. She serves on the Boards of all the

LOLC Group Companies, on the Boards of Ishara

Traders (Pvt) Ltd. and its Group Companies and

also on the Board of Touchwood Investments Ltd.

Mr. R.M. Nanayakkara

Rajah Nanayakkara is the founder and

Executive Chairman of Ishara Traders (Pvt) Ltd., a

business which pioneered the import and sale of

new and reconditioned motor vehicles. Thirty years

later, this organisation remains an industry leader.

He was also the founder Chairman of the Motor

Vehicle Importers’ Association of Sri Lanka and

continues to play a significant role.

Mr. Nanayakkara is also the Chairman of Ishara

Plantations - an award winning Estate of Tea

and Spices and Chairman of Ishara Property

Development, a company which has been involved

in construction for the past 18 years.

Member of the Finance Sector and Capital Markets

Cluster of the National Council of Economic

Development (NCED).

He joined LOLC in the year 2007 as Group Managing

Director and CEO. He is also on the Boards of Lanka

ORIX Factors Ltd., Lanka ORIX Insurance Brokers

Ltd., Lanka ORIX Finance Company Ltd., LOLC

Micro Credit Ltd., Lanka ORIX Information Technology

Ltd. and LOIB Financial Services Ltd. which are

subsidiaries of the LOLC Group.

Mr. Jayawardena is also a Director of Touchwood

Investments Ltd., Sundaya Lanka (Pvt) Ltd. and

People’s Merchant Bank.

A BIRD’S EYE VIEWNuwara Eliya -The cold mountains of ‘Little England’

Deshamanya M.D.D. Pieris

Deshamanya Dharmasiri Pieris is a Fellow of the

Chartered Management Institute, U.K. and has

been conferred the Degree of Doctor of Letters

(Honoris Causa) by the University of Colombo.

He is an illustrious retired Civil Servant, who in the

course of his distinguished career in the public

service has held several important posts, including

Secretary to the Prime Minister; Secretary, Ministry

of Public Administration, Provincial Councils and

Home Affairs; Secretary, Ministry of Agriculture,

Food and Co-operatives; Secretary, Ministry of

Education and Higher Education and Chairman

and Director General of Broadcasting.

He also serves as Director in Lanka ORIX Factors

Ltd., Lanka ORIX Insurance Brokers Ltd., Lanka ORIX

Mr. M.T.L. Fernando

Lal Fernando is a Fellow of the Institute of

Chartered Accountants, England & Wales and Sri

Lanka. He was the Precedent Partner of Ernst &

Young, Sri Lanka for over 30 years.

He has served on the Board of The Colombo Stock

Exchange and was a Member of the Council of the

Institute of Chartered Accountants of Sri Lanka, Past

Chairman - Taxation Committee and a Committee

Member of the Ceylon Chamber of Commerce.

Mr. R.A. Fernando

Ravi Fernando holds an MBA from the University

of Colombo and is a Fellow of the Chartered

Institute of Marketing (UK). He holds a Diploma in

International Management (1999) and completed

the Advanced Management Programme (2001) at

the INSEAD Business School in France. He is an

Alumni of the University of Cambridge University

Programme for Industry having done the Climate

Leadership Programme in 2007.

Ravi started his career at Unilever (Sri Lanka) as

a Management Trainee (Marketing) and left as

Senior Brand Manager (DT Foods) in 1987. He

commenced his International Career with Sterling

Winthrop as Regional Marketing Director, East

Africa moved to General Manager Gulf Region and

Regional Marketing Director, Middle East to Chief

Resident Representative/Operations Director of

Smithkline Beecham International, Vietnam during

the period of 1988 to 1999. Between 2000-02, he

was Managing Director/CEO of Reckitt Benckiser

(Lanka) Ltd., and is currently Director, Corporate

Branding & Strategic CSR at MAS Holdings Ltd.,

and on the Board of MAS Fabric Park. He is

the United Nations Global Compact Focal point

for Sri Lanka and on its Barcelona Centre and

Asian Faculty on ‘Progress and Values’. He is on

the Boards of LOLC, World Vision, Habitat for

Humanity, Environmental Foundation of Lanka

and the Duncan White Sports Foundation. He is a

Guest Lecturer on Strategic CSR at the Advanced

Management Programmes at INSEAD (France)

since 2005 and leads the course Advanced Brand

Management at the University of Colombo MBA

programme. He functions as Marketing Advisor to

the Hayleys Group affiliate Mabroc/Kelani Valley

Plantations. In September 2007, he won a ‘Global

Strategy Leadership Award’ at the World Strategy

Summit for his work on Ethical Branding for the Sri

Lankan Apparel and Tea Sectors.

PANORAMIC VISIONView of the hills from Nuwara Eliya -The diversity of terrain just three hours from the shores

BEAUTY IN DIVERSITYKudawella beach - Indigo sea against charcoal rocks, bordered by verdant shores

24 | Board of Directors | LOLC | Annual Report 2008/09

Board of Directors I

Mr. T.H.M. Wickramasinghe

Tushan Wickramasinghe has over 16 years of

extensive experience in a wide range of financial

services. He has over 11 years experience in the area

of education and is the Founder Chairman of Shakthi

Institute (Pvt) Ltd., a leader in the field of Education.

He currently serves as the Managing Director of

Lanka ORIX Securities (Pvt) Ltd.

Finance Company Ltd., Lanka ORIX Information

Technology Ltd., and LOIB Financial Services Ltd.

which are subsidiaries of the LOLC Group.

Mr. Hideo Ichida

Hideo Ichida joined ORIX Corporation in 1982. Since

then, he has served in ORIX Group of Companies in

Japan and the United States of America. This year, he

was appointed Executive Vice-President of the ORIX

Corporation.

Mr. Makoto Inoue

Makoto Inoue joined ORIX Corporation in1975. Since

then, he has served in ORIX Group of Companies in

Japan. He has now been appointed the Corporate

Senior Vice-President of Global Business and

Alternative Investment Headquarters.

Miss C. S. Emmanuel

Chrishanthi Emmanuel is a Fellow of the Institute of

Chartered Secretaries and Administrators - UK. She

is the Company Secretary of all companies within the

LOLC Group, including Touchwood Investments Ltd.

and Sundaya Lanka (Pvt) Ltd. She is also Secretary of

the Leasing Association of Sri Lanka.

A GOOD BEGINNINGMorning, Dickwella beach - A fisherman pulling ashore

his boat after a long night at sea



CorporateManagementTeam

Brindley de Zylva Managing Director/Chief Executive Officer Lanka ORIX Finance Co. Ltd.

Joined LOLC in 2003. Counts over 25 years of

experience in both Registered Finance Companies

and Finance Leasing Establishments. Member of

the Council of Management of the Finance Houses

Association since 2005.

Conrad DiasManaging Director/Chief Executive Officer Lanka ORIX Information Technology Ltd.

Chief Information Officer - LOLC Group

Joined the LOLC Group in 2006. Counts over

18 years of experience in both Finance and

IT Management in Trading, Banking & Finance and

Manufacturing sectors.

Gunendra JayasenaGeneral Manager - LOLC Ventures

Joined LOLC in 2007. Counts over 16 years

of experience in Manufacturing, Human

Resource Management, General Trading

& Plantation Management.

AN EARLY STARTSeaside dawn at Tangalle beach - Fishermen drawing in a net cast in the shallow waters of the bay

LOLC I Annual Report 2008/09 | 27Corporate Management Team I

Jayantha Kelegama Chief Credit Officer

Joined LOLC in 2005. Has over 15 years experience in Leasing & Asset Financing, Credit Risk Management and commercial Banking. Director of the Leasing Association of Sri Lanka.

Anura L. DharmapremaCorporate Executive Officer - Recoveries

Joined LOLC in 1998. He has over 20 years of experience in recoveries in the Financial Services Industry. Was previously Senior Collections Manager of a leading Finance Company.

Kithsiri GunawardeneChief Operating Officer & Chief Legal Officer

Joined LOLC in 2004. Counts over 19 years of experience with the State as well as the Private Bar.

Sanjiv KeerthiratneChief Executive Officer Lanka ORIX Insurance Brokers Ltd.

Joined LOLC in 1999 and played a key role

in setting up Lanka ORIX Insurance Brokers

Ltd. Counts over 21 years of experience in the

Insurance Industry. Council Member of the Sri

Lanka Insurance Brokers Association and the Sri

Lanka Insurance Institute.

Sunjeevani KotakadeniyaChief Financial Officer - LOLC Group

Joined in 2005. Counts over 21 years of experience

in Financial Management in Insurance, Asset

Management and Financial Services. Many years

of experience in Strategic and Business Planning,

Treasury Management, Project Management, IT,

Administration and ERP Solutions Implementation.

Held a number of important positions in the State including the Office of State Counsel attached to the Attorney General’s Department, the Office of Director, Legal of the Securities and Exchange Commission and the Insurance Board of Sri Lanka and was involved in setting up the Consumer

Affairs Authority as its first Director General.

OCEAN OF OPPORTUNITYTangalle Beach - Southern dawn brings a bountiful harvest

GLOWING FINALEPolhena beach - A sunset of calm warmth

Jacqueline LordChief HR Officer - LOLC Group

Joined in 2006. Counts over 18 years of

experience in Human Resource Management and

Development, including HR Strategy, Restructuring

Automation of HR Processes, etc. Gained exposure

in Intrastructure Management Encompassing

Building and Office Services.

Rohan PereraGroup Treasurer

Joined LOLC in 2007. Counts over 21 years

of experience in Treasury Management, Banking

& Corporate sector, including Strategic Risk

Management & Cash Management. Pioneer in

introducing the concept of Corporate Treasury in

Sri Lanka. President of the Association of Corporate

Treasurers in Sri Lanka and involved in setting up of

the Association as its first President.

Ravi TisseraDirector/Chief Executive OfficerLOLC Micro Credit Ltd.

Joined LOLC in 1993 and has experience in Branch Management, Strategic Partnerships,Commercial Banking and Credit Policy Formulation. Conceptualised and introduced Micro Finance to LOLC in 2003. Member of the Steering Committee on Promotion of the Micro Finance Sector PROMIS.

Sharmini WickremasekeraChief Risk Officer

Counts 25 years of experience covering Finance, Accounting, Credit, Auditing, Risk Management and Business Process Re-engineering. Introduced the concept of Enterprise Risk Management (ERM), Insurance Broking and IT Auditing to LOLC. President of the ISACA (USA) - Sri Lanka Chapter, and she is the first female to head a professional IT Association in Sri Lanka. She also sits on the Boards of SLCERT and Infotel and was appointed to the SPTAC on ICT Industry Sector by the TVE Commission.

HIGH WIREThe tappers, Galle - Traditional craft of tapping the coconut palm for its sap which has a multitude of uses

REJUVENATINGKukule Ganga Falls - One of many spectacular water falls in the wet zone of the country

28 | Corporate Management Team | LOLC | Annual Report 2008/09

Nimal MendisChief Executive OfficerLanka ORIX Project Development Ltd.

DirectorAgrisel Holdings Ltd.

Joined LOLC in 2005. Possess 39 years experience in General Management, Engineering, Project - Contracts - Construction & Maintenance Management. 23 years at overseas locations and balance in Sri Lanka. A professional Civil, Building & Building Services Engineer.

Krishan ThilakaratneChief Executive Officer Auto Finance

Deputy Chief Executive Officer Commercial Leasing Company PLC

Joined LOLC in 1995. He counts over 17 years experience in Banking, Credit, Leasing andBranch Management. Conceptualised and introduced Islamic Finance to LOLC.

Tushan WickramasingheManaging Director Lanka ORIX Securities (Pvt) Ltd.

Joined the LOLC Group in 2002. Chairman of Shakthi Institute (Pvt) Ltd. and Director ofseveral other companies. Counts 18 years of experience in Financial Services. Accounts for many strategic transactions in the Colombo Stock Exchange.

Dr. H.S.D. SoysaGeneral Manager/CEOCommercial Leasing Company PLC

He joined the Commercial Leasing Company PLC in 2002. Counts over 25 years experience in the financial sector. He is a committee member of Ceylon Chamber of Commerce and is the former Chairman of the Leasing Association of Sri Lanka.

Corporate Management Team I

A BRILLIANT DISPLAYPainted Stork - Of the 5 species of storks in the country, these photographed

at Bundala National Park is the most colourful



OperationalManagementTeam

Sujeewa Vidanapathirana

AGM - Insurance

Jithendra Gunatilake

DGM - Finance Operations

Soloman Jesudason

Head of Marketing Operations

Graham Lawrence

CEO Working CapitalHead of Metropolitan Branch Network

Gayani de Silva

Head of Corporate MARCOM & CRM

Mehra Mendis

AGM - Fleet Management

LIGHT AT THE END ...Kadugannawa Railway Tunnel - One can only imagine the courage and hard work that resulted in the completion of this railway tunnel, built more than a century ago

NOURISHING SURROUNDINGSYoung elephant, Udawalawe - The lush vegetation provides ample nutrition for the young and growing!


Chrishanthi Emmanuel

Company Secretary

Operational Management Team I

Chandana Jayanath

AGM - Recoveries

Dilum Mahawatte

DGM - Finance Corporate

Ashan Nissanka

Head of Regional Branch Network

Rohana Kumara

AGM - Micro Finance

VERSATILITYFarm land, Knuckles range - The ground preparation is referred to as ‘Hel Malu’ in Sinhala,

meaning steps along the slope, the only way to take full advantage of the fertile soil


The Contours of sustainability

Two words in our theme this year have

special significance - Resurgence and

Rebuilding.

At its inception, LOLC was instrumental

in giving effect to resurgence in Sri Lanka

through the introduction of leasing, which

provided economic support and placed

financial solutions in the hands of a needy

sector of our population who had no

access to formal financing options from the

conventional financial sources of the day.

The resultant resurgence of viable and

sustainable enterprise from such financially

impoverished sectors led to a rebuilding of

livelihoods and put them on the road to a

better future. These customers have graduated

to the SME sector and many businesses have

evolved to the corporate level.

BusinessImpactReport

With our strategy aimed at revolutionising the

microfinance sector through an innovative

and comprehensive offering of products,

services and know-how, we will strive to

drive the resurgence and rebuilding of our

country’s economy.

The creation of Business Units consequent

to the restructure of the business model

of the LOLC Group has resulted in the

development of products and services to

cater to the financial needs of our customers.

Some Highlights of the Year

A new Company, LOLC Micro Credit Limited

(LOMC) was incorporated during the year

under review, with a 20% foreign investment

from one of our long-standing funding

partners, FMO, a reputed AAA rated (by

Standard & Poor’s Rating) development

financial institution in Europe. The unique

aspect of the new Company is that, it is the

first microfinancing establishment to be set

up with foreign investment in Sri Lanka.

One of the biggest transactions to take

place through the Colombo Stock Exchange,

LOLC acquired Commercial Leasing

Company PLC (CLC), one of the largest and

successful leasing companies in Sri Lanka.

During the year, the Company acquired over

98% of CLC. The investment made in CLC

has brought significant benefits to the Group

not only in terms of leadership in the leasing

industry, but also, through the integration

of the distribution channels, increasing the

customer base and room for future synergies

in middle and back office operations.

Lanka ORIX Factors Ltd., was merged

with the Parent Company creating new

opportunities and scope for the working

capital business.

With our strategy aimed at revolutionising the microfinance sector through an innovative and comprehensive offering of products, services and know-how, we will strive to drive the resurgence and rebuilding of our country’s economy


Performance Highlights of Business Units

Auto

The Auto Business Unit is the single largest

Business Unit within the Group offering a

varied portfolio of more than twenty products

and service options rooted in auto financing

and other instruments that use motor vehicles

and equipment as collateral.

This Business Unit remains as the biggest

income generator for the Group and the key

contributor to LOLC’s bottom line during the

year under review. The portfolio of the Group

saw a drastic increase due to the acquisition

of CLC, which essentially revolves around

auto finance business.

Due to the negative economic sentiments

in the market, the rate of growth was

consciously curtailed in this sector. The

finance lease industry remained stagnant

due to the fiscal policies prevalent. This

was a time for consolidation and acquiring

a debt conscious customer base. Auto BU

has been able to cater to the demands of the

customer with innovative financial solutions

and continued to lead the industry.

To manage the negative impacts from the

economic crisis, strict credit evaluation

policies were introduced and the focus was

shifted from executions to collections and

much effort was put in for active recoveries

which enabled the Company to manage the

NPLs within acceptable levels.

During the year, we strived to achieve a

balance between business growth and

quality of portfolio. We also capitalised on

the branch and broker distribution network of

CLC to offer customer solutions considering

their needs of the day. Many initiatives were

taken to streamline operations and improve

customer services and one such initiative

was the introduction of the Internal Valuation

Unit. Customers are now able to benefit

from this service and the Company is able

to assess the true value of the assets that

are taken as collateral. LOLC is a registered

valuer with the Leasing Association of Sri

Lanka. We are the only Valuer-cum-Leasing

Company in the Association. The Valuation

Unit is expanding its reach to cover key

regions in the country.

In terms of new product offers, we extended

a special loan scheme targeting holders

of Government permits to import motor

vehicles. The new product solutions offered

to the customers of the Islamic Finance

Business Unit saw significant growth

considering that this business commenced

only recently.

Strategic business promotion campaigns

carried out with our business partners,

DIMO, Toyota Lanka and Micro Cars Ltd.

Business Impact Report I

NEW DISCOVERIESBlue Whale - The adult whale, is the largest mammal to

have ever lived on earth, photographed off Mirissa in the South, a surprising find in Sri Lanka

in packaged offers drew customer interest in

the total solutions we provide.

Development Finance

LOLC has been actively seeking business

opportunities that help develop various

sectors of the economy and the Development

Finance Unit of LOLC has been engaged in

this business since the late 90’s formed with

the participation in the SMAP loan scheme

funded by JBJ Nippon Fund. Since then, the

Company has participated in several such

credit lines and is the largest financier of

refinance loan schemes among the non-

banking financial institutions.

The development finance portfolio under

LOLC is as follows:

Tea Development Project - LOLC was

the first non-banking financial institution

to be recognised as a PFI (Participating

Financial Institution) under this project

funded by ADB, which is aimed at

supporting the tea smallholder sector.

The Company so far has funded over 60

projects.

Plantation Development Project – LOLC

is also a PFI for the ADB funding

scheme for long-term sustainability and

development of the plantations sector

and improving the living and working

conditions of the estate workforce.

Second Perennial Crop Development

Project (SPCDP) – LOLC is a PFI for the

disbursement of the revolving fund set

up for the support and development of

the perennial crops sector.

Environmentally Friendly Solutions

Fund Project II (E-Friends II) - A special

fund set up to support environmental

protection projects. LOLC is a PFI for

this funding line and provides facilities

to enterprises that engage in pollution

control and waste management in

industries, resource saving initiatives,

recycling of waste and energy saving

projects. LOLC has disbursed funds

for projects involved in waste water

treatment plants and converting

industries from fossil fuel to biomass

energy saving projects.

EIB Post-Tsunami Credit Line - LOLC

is a PFI for the disbursement of funding

made available by the European

Investment Bank at the request of the

Government of Sri Lanka for tsunami -

affected small-to medium-sized industries.

Construction Sector Development

Project (CSDP) - LOLC is also a PFI

for the fund set up by AFD (French

Development Agency) which facilitates

financial and technical capacity building

of local private businesses in post-

tsunami reconstruction.

Micro

LOLC Micro Credit Ltd. (LOMC) is the new

Company set up for our microfinancing activity.

Our business consists mainly of extending

loans to individuals and communities

of less affluent circumstances who are

predominantly located in rural areas of the

country. Our focus is mainly on assisting

those engaged in agriculture, skill-enabled

small businesses, dairy and other small

business activities who have little or no

access to mainstream financial services.

Our foray into microfinancing began many

years ago, through projects that provided

rural communities with solar power, where

access to electricity from the national grid

was unavailable.

CONSERVING FOR TOMMORROWThe Thalangama tank - A tank in protected wetlands in the suburbs of Colombo

THE SILVER LININGBlue Mist - This is an endemic species found commonly in the dry zone. These flowers blooming together add striking colours to the otherwise dry forest

34 | Business Impact Report | LOLC | Annual Report 2008/09

Today, LOLC provides financial instruments

that help rural communities to start

enterprises through access to agricultural

machinery and equipment such as two-

wheel and four-wheel tractors, water pumps,

motor vehicles such as three-wheelers and

motor bikes. Solar home systems as well as

group loans offered to women’s groups are

becoming very popular.

During the year under review, our three-

wheeler business saw a growth of 26%

over the last year and we have granted

skill-enabled facilities and agriculture-

related facilities which are distributed in

the rural areas through a dedicated Micro

Finance sales team. With the strengthened

distribution channels and dedicated efforts,

collections are maintained at competitive

levels despite the negative economic climate

that prevailed during the year.

We are committed to uplift and provide

access to credit to the Micro sector. Having

identified reach as a key element of its

strategy, the Company leveraged on the

strategic alliances entered into with the

Lanka Indian Oil Company (LIOC) which

has over 150 fuel stations island-wide and

opened 14 service centres during the year.

In another strategic move we partnered

Sri Lanka Post (SLP), which has 641 Post

Offices and over 3,000 Sub-Post Offices

Island-wide. During the year, 10 Post Office

centres were opened.

The BU also continues to benefit from the

tie-up with Sundaya Lanka Ltd., a solar

component assembly and marketing facility.

The BU leads the market in Solar Financing,

to uplift the living conditions of the rural

poor and facilitates this through the

RERED fund (Refinancing loan scheme

of the World Bank).

The Micro Business Unit exceeded budgeted

growth by 13.2%, which is commendable

given the turbulent business environment

that prevailed during the year. The Company

hopes to continue to grow with the additional

strength of the new alliance formed with FMO

and other multinational funding partners who

have pledged their support and commitment

to provide Micro Finance opportunities

to a much needy sector in the Sri Lankan

economy. Each of these funding agencies

have different developmental goals and LOMC

is becoming the conduit in achieving these

goals for them. Several initiatives have already

taken shape benefiting the rural sector.

the BU established 20 rural internet

centres under the aegis of the Last

Mile Initiative of USAID. GTZ provides

technical assistance to scale up micro

loans for Self-Help Groups and to extend

microfinancing to post-conflict areas in

Sri Lanka including the North and the

East. They also provide assistance in

staff training and help LOMC staff to get

exposure in overseas environments for

better service for its clients.


SPIRITEDLong-snouted Spinner Dolphin - Large pods of these playful

mammals, sometimes comprising of thousands of animals can be seen off the sea in Kalpitiya


Through our involvement in the South

Asia Micro Finance Network, ACTED

provides technical assistance to the

BU to help improve the standards and

technical soundness of the staff.

Success was driven through a mix of

innovative products and services tailored

for the sector, the strong performance of

the country’s agricultural sector, the strong

and visible presence of the Company on

the ground where it matters, well trained and

knowledgeable staff coupled with

stringent monitoring and supervision

of processes.

For the future, in a macro sense, we see the

fast returning normalcy to the Eastern and

Northern Provinces of the country as areas

of huge potential, where the core purposes

and benefits of microfinancing will need to

be deployed to the fullest, as we stimulate

resurgence and rebuilding of the livelihoods of

individuals and communities in those regions.

We will continue to increase the range of

products and services. One such product

is the Bio-Digester, which converts cattle

dung to eco-friendly, clean fuel. The slurry

that is left from this process makes excellent

compost, which the farmer can employ in

his cultivation, completing the cycle. The

product cycle will begin in reality, with the

Company facilitating the farmer to purchase

the cow - then help him produce and market

the dairy products. The cycle is completed

with the Bio-Digester.

We have already commissioned a feasibility

study in Sri Lanka with the assistance of the

University of Colombo and a consultant from

Holland and hope to begin pilot projects shortly.

Outreach, sustainability of operations, and

achieving greater operational efficiencies

that will benchmark the BU as the best in

South Asia are a few of the future objectives

of the BU.

Savings


is Sri Lanka’s only finance company with

a direct association with a reputed global

financial entity.

LOFIN is registered and licensed with

the Monetary Board of the Central Bank

of Sri Lanka (CBSL) and in a significant

development during the year under review,

the CBSL has extended this licence, allowing

LOFIN to engage in foreign currency

business, the only finance company to

receive such approval.

Thus in July 2008, LOFIN commenced

deposit mobilisation of foreign currencies.

Almost 85% of the foreign currency deposits

are remittances from overseas.

In the financial year 2008/09, the Company’s

deposit base exceeded Rs. 5 Bn, a growth

of 55% compared with the last year and

OPPORTUNITYMannar - With the arrival of peace, the true potential of the wide open spaces of the North and East can now be realised



almost a 50% growth in market share. This

is considered remarkable given the negative

market sentiments that prevailed during the

2nd half of the year due to the collapse of

several registered and unregistered financial

institutions in the country.

In terms of products, LOFIN launched an

ATM operation for all its SLR account holders,

in collaboration with Commercial Bank. Our

first LOLC branded ATM was commissioned

at our Head Office at Rajagiriya. Now, all

savings account holders can access their

account from over 300 ATMs island-wide.

LOFIN continues to offer a wide range of

products - from savings schemes for minors,

through corporate entities to senior citizens.

We also offer tailored savings instruments to

the rural community.

During the year, LOFIN offered an

unconventional deposit product, ‘unfixed

deposits’ with greater flexibility to the investor

considering the current market conditions.

This is the first time a Finance Company has

offered such a product in the country.

We widened reach through the opening of

two new branches at Horana and Wellawatte

and nine new Savings Centres located within

LIOC fuel stations around the country.

LOFIN was also honoured this year when

Fitch upgraded its rating from BBB+(lka)

to A-(lka), thus reinforcing the strength and

stability of the Company. This is another

milestone which depicts the success of the

finance company given the current market

trend on downgrading ratings in the banking

and finance industry.

Islamic Finance Business Unit

We are honoured to report the formation of

the Islamic Finance Business Unit which

functions under LOFIN.

The concept of Islamic Finance is firmly

based on Shar’iah Law and an in-house

Shar’iah Supervisory Board oversees the

functioning of the Unit. This Unit operates

under the guidance of the All Ceylon

Jamiyyathul Ulama (ACJU), the official

proponent of the Shar’iah Law Supervisory

in Sri Lanka.

Products offered include Mudharabah

(Profit Sharing Investments), Ijarah (Leasing),

Murabaha (Trade Finance) and Diminishing

Musharakah (Property Development Finance).

During the year under review, the portfolio

of the unit grew from Rs. 50 Mn to Rs. 450

Mn. It also paid the highest quantum of

profit share to its investors, of all the Islamic

Finance Institutions in the country.

The IBU identifying the need of the

community for these products, is expecting

to broadbase its operations to the regions

with the wealth of knowledge and expertise

gained in the field during the past year.

LOFIN is the only entity to have received

approval and is registered with the Central

Bank to conduct Islamic Finance Business.

Insurance

Lanka ORIX Insurance Brokers Ltd. (LOIB)

chalked up several milestones this year.

The Company completed 10 years of

enterprise in the field of Insurance Brokering.

During the year under review, LOIB surpassed

the Rs. 1 Bn mark by achieving a total Gross

Written Premium of Rs. 1.26 Bn, a growth of

38% over the last year. This can be regarded

as a singular achievement in the face of the

inhospitable financial climate within which the

Company operated.


APPRECIATING MICROBrazil Clover - Even though only a little larger than a pin head,

there is great beauty hidden in these flowers, which can be enjoyed by only those who would take the time to look

FINDING MIRACLESKap ruka, Thundola - Rice is the staple food of Sri Lankans. Coconut too plays an integral role, and the palm is referred

to as the ‘miracle tree’ since all parts of it is used by the peoples of this land

The Company carried out new business

promotions and capitalised on Group

synergies by offering a wide range of

products to the customers, especially to

leasing and factoring customers.

The Company operates through all branches

of LOLC and has expanded the reach with

the establishment of LIOC branches and

offers its services through the post offices

having LOLC centres. These strategies

enable the Company to broadbase its

customer segments with access to the SME

and now the Micro sector. The growth in the

corporate sector too paid dividends during

the year recording a threefold increase.

The innovative ‘Guardian’ product range

caters to the SME and Micro sectors and the

personal Guardian product was the latest

addition to the range.

Fleet Management

Over the past few years, the Fleet

Management unit of LOLC has become

popular with large corporates and even

with the state sector as the choice for

total solutions in fleet management. The

popularity of the products and services

offered by this unit is an indicator of the

potential that lies within this field of asset

management business.

Fleet management solutions lie beyond

the leasing of individual vehicles to single

parties with LOLC offering a complete

transport solution to large corporates/

institutions. We take care of their transport

solutions by freeing the customers from

the infrastructural ‘headaches’ of running

a vehicle pool of their own. The short-term

hire market essentially targets the individual

customer who needs a vehicle for short-term

hires. The demand for short-term hires have

shown an increase due to the high cost of

owning and maintaining vehicles.

This year, the Company strove to consolidate

its position in fleet management services whilst

investing in infrastructure needed to pursue

opportunities in the short-term hire market.

We also introduced many enhancements

to products and services offered. The

introduction of the ‘Royalty’ privilege card

rewards loyal customers with value added

services such as breakdown assistance,

rent-a-car facilities and discounts on

selected items for vehicles.

With the expansion of the fleet of vehicles

managed by this Business Unit, the

Company identified the immediate

requirement to have its own workshop which

will bring immense service-related benefits

to the customers as well as cost effective

maintenance for the Company. The state-

of-the-art workshop is being constructed

in Gothatuwa with significant additional

capacity to accept outside business

as well. The workshop is expected to

generate future revenues for the Group, once

commissioned.

Working Capital

Through the solutions it offers, the Working

Capital Business Unit of LOLC enables SME

sector entrepreneurs to generate steady cash

inflows required for their ongoing cashflow

needs, growth and expansion.

The year in review brought with it a

restructuring of the unit, which saw

Lanka ORIX Factors (LOFAC), a Group

Company since its incorporation in 1992,

fully amalgamating with LOLC in February

2009. The working capital business of CLC

operates independently and is popularly

MAMMOTH POTENTIALAsian Elephant - This lone bull elephant, one of the 91 species of wild mammals found in the country caused a ‘road block’ at Udawalawe National Park.

HERALDING PROPERITYDrummers, Lankathilaka Viharaya, Kandy - The ‘Kohomba Kankariya’ performed here, is a ritual to ensure freedom from diseases and invoke blessings



known as ‘ComFactors’. This strengthens

the leadership position LOLC has in the

factoring market.

With these two independent operations

the Working Capital Business Units target

different market segments and also reach

customers using independent distribution

channels, thus, creating an effective

diversification in the distribution strategy with

a wide ranging customer base.

The amalgamation of LOFAC with LOLC was

a strategic move to strengthen the Business

Unit with much needed additional capacity to

grow. Now the business expansion strategies

will focus on regional expansion using the

branch network.

We persisted with new market penetration

strategies, introducing factoring products

and solutions to suburban and rural sectors,

where research indicates that significant

potential exits.

Despite intense competition, the Business

Unit continued to achieve operational

efficiencies through internal reorganisation of

functions and cost management measures.

However, high costs of borrowing and

adverse impacts experienced in the finance

industry pushed lending rates up and also

reduced demand for working capital facilities.

The Business Unit will in the short-to

medium-term, concentrate on leveraging on

the leadership position within the industry.

We are confident that economic conditions

and interest rates will both improve during

the forthcoming financial year.

Returning peace to the country also

promises new market opportunities which

will greatly benefit the industry.

Stockbroking

The latter half of 2008 was an extremely

challenging period for the stockbroking

industry. Many international institutional

investors took flight from emerging markets

such as Sri Lanka, which in turn depressed

activity levels.

During 2008, the price indices, the ASPI

and MPI, decreased by 41% and 50%

respectively. Market capitalisation decreased

by 40% to close at Rs. 489 Bn. The total

turnover at the Colombo Stock Exchange

was Rs. 110 Mn.

The gloom lifted somewhat in early 2009,

emboldened by military victory in the

conflict areas.

Lanka ORIX Securities (LOSEC) maintained

steady momentum in this mercurial

environment, serving the client base

with undiminished vigour and maintaining

the outreach intact, at a time when many

others in the industry were cutting back

on resources.

Performance Highlights of Other Subsidiaries

Information Technology

The financial year 2008/09 presented an

unprecedented challenge for LOLC Group IT

as well as new entity, Lanka ORIX Information

Technology Ltd. (LOIT), the latter just stepping

into business, where turbulence in the

A PILGRIMAGE OF REMEMBARANCEA buddhist monk climbing up the Kirinda rock - Kirinda has a

special significance in the history of Sri Lanka as the place where the ship carrying benevalant queen

Vihara Maha Devi came ashore


local arena was exacerbated by the global

economic crisis.

Though the market for direct business looked

bleak, a decision was made to remain

proactive and the Company went ahead

with strategic investments, which reaped

good results for the Group during the year

under review, with LOIT supporting many IT

initiatives undertaken by the Group.

The Company strengthened the Information

Security domain by investing in a data centre

grade firewall solution. Network connectivity

to the Head Office was strengthened by

investing in a dark fibre metro ethernet

solution, which is efficient and cost effective.

Following the principles of ‘Green IT’

practices an investment was made in

a server virtualisation environment that

will enable LOIT team to reduce server

administration load, cut costs and boost

efficiency by moving from physical servers to

virtual servers.

To support the all round growth of the Group,

investments were made in bandwidth

optimisation hardware and software solutions

that enables the Group and its branches

to increase the speed and efficiency of

customer service.

LOIT also designed and implemented a new

application for the new Micro Credit Company.

The all new Group website was launched

and in its second phase of development,

online access will be incorporated for clients

as an added feature.

LOIT in its short journey was able to achieve

the Gold Certified Partner Level from

Microsoft Corporation, USA, the highest

level of partnership that an IT company can

achieve with Microsoft.

Project Development

Lanka ORIX Project Development

Company Ltd. (LOPD) was constituted

to pursue two objectives - to partner with

reputed, experienced foreign organisations

and to participate in infrastructure and

related projects in Sri Lanka and other

regional countries.

During the year under review, LOPD

prepares to commence a project in offshore

sand mining to supply to the construction

and other related industries.

The project will be a collaboration with

Dredging International N.V. of Belgium

with financial assistance from the

Government of Belgium.

Another project involves Precipitated Silica

manufacture from rice husk ash, for which

a project company, Agrisil Holdings Limited

was incorporated this year. This Company

is a partnership between LOPD and Agritec

Incorporated - USA. BOI approval has been

obtained for the project and arrangements are

under way for implementing our first plant in

Thailand with Thai partners, ING Fund.

PURITYStream, Knucles range - A pristine stream of unpolluted water flowing through the rainforests



Global Alliances and Funding Partners

Over its twenty-eight years, LOLC has

evolved as a total financial solutions provider

and is recognised today as a significant

player in the industry. The Company’s

long-term vision of sustainable growth and

development of the SME and Micro sectors

is a vision that is aligned very clearly with

the goals of many multilateral and bilateral

agencies. LOLC would not have been able to

realise its dreams and successes if not for the

backing of these funding institutions which,

having understood the vision of the Company,

have supported us with long-term funding

solutions at attractive terms and conditions.

In 1994, LOLC for the first time secured

a long term funding line from FMO - the

Development Finance Company of the

Netherlands, marking the beginning of

its success at securing many more such

funding lines for SME and microfinancing

activities. Today, LOLC is one of a handful

of Sri Lankan private sector entities that

partners many of these funding institutions

around the world in providing long-term

funding. The full list of LOLC’s partner

funding institutions is given below.

LOLC’s vision for sustainable development,

its drive to develop the SME and the Micro

sectors and its superior performance have

convinced many funding institutions to

consider LOLC, as their preferred local

partner to fulfil their developmental goals,

that cover attractive long-term funding and on

capacity building and technical assistance.

In addition to providing funding for lending

to the customer, these agencies have driven

LOLC to reach the highest standards of

ethics, transparency and accountability;

they ensure that LOLC follows internationally

accepted guidelines such as Anti-Money

Laundering (AML) policies, Know Your

Client (KYC) policies, and environmental

protection procedures and also ensures

that the Company manages risks involved

in its business effectively. They have been

instrumental in providing expertise and

know-how for the implementation of the

environmental and AML policies at LOLC

which have enabled us to enhance our

knowledge and in turn, support our clients

better. The agencies’ expertise has been

transferred to LOLC, with support to train

our staff, knowledge transfer and even IT

systems support for the development of risk

management tools.

While the foreign bilateral and multilateral

agencies support the business with attractive

funding options, the local commercial banks

too play an equal important role in having

confidence in LOLC and extending support

with further funding lines for business

expansion, over the years.

These long-term mutually beneficial

partnerships between LOLC and our funding

institutions not only provide long-term

funding solutions to us, but also provide

LOLC with a total solution that helps us

ingrain best practices into our operations.

ALERT AND RESPONSIVESpotted Deer - In Yala National Park the

difference between life and death for these deer can be their vigilance

MELODY OF NATURESpot-winged Thrush - At Sinharaja forest, this is one of the main contributors to the sweet dawn course of bird calls. It is one of the 33 endemic

birds found in the country


Institution Type of Facility Purpose of Funding Value Addition

Organisation of the Petroleum Exporting Countries Fund for International Development(OPEC)

Long-term US$ Loan

SME sector financing and development

The Netherlands DevelopmentFinance Company (FMO) - Netherland

Long-term Rupee Loan/Equity Tier I & II and debt capital for the micro finance company

SME and Micro Finance sector financing and development

Environmental policy; Anti Money Laundering policy

French DevelopmentAgency Group (PROPARCO) - France

Long-term US$ loan Tsunami-affected SME sector financing


DeutscheInvestitions-und Entwicklungs-gesellschaft mbH (DEG) - Germany

Long-term US$ loan SME sector financing and development

Environmental policy; Anti Money Laundering Policy, Liquidity Risk Managementtechnology

Belgium Investment Organisation (BIO) - Belgium



Overseas Private InvestmentCorporation (OPIC)

Risk sharing facility with Citi Bank, Colombo

SME sector financing and development


United States Agency for International Development(USAID) - USA

Portable guarantee scheme

Micro Finance Sector development in Eastern and Uva province


Finish Development Finance Company (FINNFUND) - Finland



European Investment Bank (EIB)

Long-term Rupee/Euro refinancing scheme

Tsunami-affected SME sector development and support in tourism sector


World Bank Long-term refinancing Rupee loan

Refinancing of rural sector renewable energy development


Global Funding Partners

WELCOMING DIVERSITYIndian Pea-fowl - Commonly seen at Yala National Park, one of the most popular game reserves in the country



Institution Type of Facility Purpose of Funding Value Addition

Japan Bank for International Corporation (JBIC) - Japan

Long-term Rupee loan/ Refinancing scheme

Environmental Protection/ Mitigate & eliminate industrial pollution and waste / Energy saving, Recycling & resource recovery in industries


Asian Development Bank (ADB)

Long-term Rupee loan/ refinancing scheme

SME sector financing and development / Tea smallholders income improvement and development. Development of the plantation sector in enhancing profitability. Improve the living and working conditions of the workforce


DeutscheGesellschaftfür Technische Zusammenarbeit(GTZ) - Germany

Technical assistance for Micro Finance

Development of Micro finance sectors

Promotion of Micro Finance Sector

Export DevelopmentCorporation (EDC) - Canada

Long-term US$ loan SME Sector financing & development with Canadian Imports

Nippon Export and InvestmentInsurance (NEXI) - Japan

Long-term US$ loan Citi Bank and ING Bank Tokyo being the lenders and Nexi as the guarantor

ING Bank - Japan

Citi - Japan

Triple Jump - Netherlands

Long-term EURO loan

Micro finance sector development

Triodos Bank - Netherlands

Long-term US$ loan Micro finance sector development

Sybiotics -Switzerland

Long-term US$ loan Micro finance sector development proposal

PERSEVERANCE AND SUCCESSCarpenter Bee on Vogel’s Tepharosia - This industrious insect

photographed at Haldummulla, visits hundreds of flowers to find enough nectar to sustain it



BusinessSynergies

LOLC I Annual Report 2008/09 | 45Business Synergies I

DIVING INMuthurajawela, Negambo - Two birds diving in

for delicious lake fish

TAKING FLIGHTA Purple Heron – Mirroring the air craft at the international

airport minutes away from this site


A Closely-Woven Fabric of Responsible Development and Upliftment

From the inception LOLC has been ‘in the

ground’ of sustainability. From the moment

we pioneered leasing, we were placing a

unique portfolio of products, services and

solutions at the service of a sector of the

population who had no such support from

traditional financial sources.

Today, LOLC’s business model finds us

drilling downwards, as we increasingly

enhance our services to the grass root level

of the society, micro credit. Almost 80%

of our business targets the micro credit

sector. In the simplest of terms, our aim is to

progress and develop the recipients of micro

credit to advance to the status of an SME

and even beyond, to the Corporate.

We believe that, unlike many other

enterprises, LOLC is uniquely placed in

direct contact with the ‘sustainability tripod’

of economic, social and environmental

factors where they are most apparent and

have the most impact. Our business scope

spans to all segments of the society.

Our business begins often in the rural

heartlands of the country, with start up

enterprises, with farmers, with people who

have a small dream and no money to make

it come true. We go to them. We take in the

location, the project, the environment, the

economic implications, the social aspects…

this is as ‘hands on’ as you can get.

As our own business evolved in service

to this sector, we structured products,

services and a business model that placed

uncompromising responsibility towards

safeguarding the sustainabiity tripod.

We have developed a visual interpretation of

the ‘value chain’ that exemplifies the manner

in which we progress our business and the

development of the recipients of our products

and services, through which the latter uplift

their economic and social well being. All

processes are environmentally friendly.

The examples we have used are those of an

agri-farmer and a dairy - farmer - however,

the model works across every business/

entrepreneurial segment in the microfinancing

sector. In that respect, the chain also

encompasses LOLC’s products and services

to the SME and Corporate sectors as well.

Our business begins often in the rural heartlands of the country, with start up enterprises, with farmers, with people who have a small dream and no money to make it come true. We go to them. We take in the location, the project, the environment, the economic implications, the social aspects… this is as ‘hands on’ as you can get

SustainabilityReview


Across the Chain

Typically, a recipient of LOLC support at the

start of the ‘value chain’ would begin with

Cycle 1 of our Group Loan facility, as

a member of a Group in the community.

The Group Loan scheme spans three cycles

and loans progress from the starting point

of Rs. 20,000/- up to Rs. 65,000/-, as at

end of Cycle 3.

At the initial point on our ‘value chain’ the

facilities offered by LOLC to the farmer are

loans for acquisition of tractors, loan, leasing

and hire purchase facilities for acquisition

of cattle and/or farming equipment, crop

insurance (loss of income) plus loans for skill

development and a savings facility.

Let’s look at this, in operation.

Sustainability Review I

OVERFLOW OF ABUNDANCEThudugala Falls - Water, so precious, in gushing abundance

Farmer X is identified for assistance with

LOLC’s Group Loan facilities under Cycle 1

of the scheme. He takes a loan to purchase

equipment he needs for his farm. His monthly

premium for payback includes a contribution

to the savings account. At the end of one

year, he would have repaid part of his loan

and have also saved for his future, gradually

he will qualify for Cycle 2 of the Company’s

Group Loan scheme.

Along the way LOLC will provide Farmer X

with a Crop Insurance, which not only covers

his repayments to LOLC in any eventuality, but

also provides a quantum financial assistance

for personal use, to ride over the crisis.

To dairy farmers we offer a facility to purchase

cattle and to develop his infrastructure.

The Company also offers a Skill

Development Loan facility which we regard

as a support service to the main products.

This facility provides for knowledge

enhancement across enterprises enabling

subjects such as bookkeeping, marketing

and general business skills.

Since LOLC operates across the entire

spectrum - i.e. the Micro, SME and Corporate

- we also offer support to our customers to

establish the relevant market linkages they

need, to carry their business forward and to

obtain fair and lucrative returns for their efforts.

Lets look at some examples where LOLC

catalysed the market linkage process for

our customers.

In Embilipitiya, we work with a group of spice

growers who are recipients of our Group

Loan facility. We also have a customer who

is a wholesaler in the area in the spice trade.

We made the connection between the two

and today the growers have their market at

fair price whilst the wholesaler gets a reliable

supply of quality produce from the area.

LOLC has facilitated similar linkages

between top corporates and Corn growers,

Gherkin farmers, Big Onion growers etc.

Self-help is also a quality the Company

that fully supports. We quote an example

of a group of LOLC customers who have

been successful at bargaining for and

clinching a lucrative supply arrangement

for their produce, with one of the country’s

top supermarket chains. Individually none

of them would have had the required ‘clout’

CATCHING THE ELUSIVECeylon Trogon - Photographed at Sinharaja World Heritage Site, this is one of the most beautiful but extremely elusive birds of this ancient forest.

AT GRASS ROOT LEVELGrass Flower - These tiny flowers, photographed at Tangalle, are extremely common in most grass fields. One has to be at ground level to appreciate their beauty

48 | Sustainability Review | LOLC | Annual Report 2008/09


but together, aided by their own growing

knowledge of market dynamics and business

skills, they have had the strength and acumen

to establish their own market linkages.

Another example of self-help in seeking

markets comes from the tea smallholder

sector. In the areas of Matugama and

Badureliya, there are around 1,200 families

engaged in growing tea. Typically, they

each may own a half or quarter acre plot

producing anywhere between 10 kg and 20

kg of tea. Around 100 of these families are

LOLC customers.

These smallholders have had great difficulty

in getting their produce to market, since

collectors do not find it a viable proposition

to travel around the area, to collect such

small quantities from each farmer. The

farmers banded themselves together, hired

their own transport, collected their produce

and delivered it directly to a tea factory,

thus getting over the hurdle of dealing with

a collector and establishing a vital direct

connection with a tea manufacturer.

Today, these farmers have worked out a

lucrative price for their produce and have

developed their relationship with the tea

factory to a point where they enjoy a barter

facility - taking a portion of remuneration in

processed tea.

It’s a great win-win example of empowered

business at the most basic level.

At the end of the third cycle in the Group

Loan facility, the customer is ready to

progress towards an Individual Loan facility.

The range of support in this category

provides for loans above Rs. 65,000/- and up

to a maximum of Rs. 200,000/-.

Our target is to migrate at least 50% of

our Group Loan customers to the individual

loan category.

Looking at our value chain depiction,

our farmer would now be eligible for an

equipment lease and or loan to purchase

harvesting equipment or, in the case of a

dairy farmer, a means of transport to get his

produce to a milk collection point, such as a

motor cycle.

The Company’s Individual Loan facility also

has a Savings scheme in built, as for the

Group Loan structure. Thus we continue

to encourage the recipient to build and

maintain financial stability.

The dairy farmer is at this point, also eligible

to participate in an exciting new project

which we have launched this year - the

Bio-digester. This is a project which has

been extensively researched by LOLC

along with a Dutch consultancy firm, where

our feasibility studies show a significant

degree of success and benefit across the

sustainability tripod.

The Bio-digester is a processing plant

whereby, cattle waste (dung) or any other

biodegradable waste is the input. Once


A PERFECT BLENDJezebel - One of the few species of butterflies which is commonly seen in the city, this one at

‘Meemure’ in the Knukles mountain range.

processed, it yields a ‘clean’, bio-efficient

gas ideal for cooking purposes. The slurry

that emerges as waste from the Bio-digester

constitutes excellent organic compost and

can even be used as fish food.

The final three points in the ‘chain’ find us

now in SME and Corporate territory where

our products and services cater not only

to the customer rising through the ranks,

but to many of our customers who join the

change at different points or are already

entrepreneurs at these points.

At the Distribution point, LOLC provides

facilities such as Factoring, Leasing,

Insurance and Fleet Management.

At the Marketing point, we offer Factoring

and Insurance.

Now, let us examine the benefits of LOLC’s

enterprise against our ‘sustainability tripod’.

Economic Impact

The Company’s financial input at the

commencement of the value chain

empowers, start up, nascent or struggling

ventures to develop profitably. Incorporating

a savings facility helps establish and grow

the financial stability of the customer.

The crop insurance facility provides real

protection in a sector where crop failure can

have immediate and drastic economic effects

LOLC’s products at the Collection/

Processing point of the chain include Debt

Factoring, Invoice Discounting, Insurance,

Intermediary facilities to set up Milling

Machines, Freezer facilities, Processing and

Packaging, Rice Milling Machines, Paddy

Stocking, Transport facilities and Provision

for Working Capital.

for the farmer. Providing market linkages

opens up lucrative and fair returns to the

customer, increasing wealth and well-being.

The markets targeted by our customers with

their enterprise are often ‘peopled’ by other

customers of LOLC. They benefit from a direct

supply of goods and services that are of good

A FRAGRANT CUPPussellawa plantations - Perfectly manicured tea plantations, spanning acres across the hill country. Ceylon tea is renowned for its unmatched flavor and remains a top export earner, sustaining the economy



quality, often at their doorstep, which saves

on transport costs and helps them progress

with their own businesses leading to their own

economic development and well-being.

LOLC’s support across the value chain, to

customers in the SME and Corporate sectors

empowers a range of business enterprises

placing financial support where it’s needed

most and ultimately ensuring that businesses

thrive and prosper sustainably.

The Company maintains its assets and

liabilities portfolios in a manner that optimises

overall profitability, proactively explores

investment opportunities and identifies and

works with funding partners who share similar

values and development goals.

In a landmark achievement, LOLC became

the only non-banking financial institution to

become a Participating Financial Institution

(PFI) for the ADB-funded Tea Development

Project in 2001, which seeks to develop

the tea smallholder sector in Sri Lanka.

To date the Company has disbursed over

Rs. 225 Mn across more than 60 projects.

In 2005, LOLC became a PFI for the

ADB-funded Plantation Development

Project aimed at improving the long-term

sustainability of the plantations sector.

The aims of the project are twofold - to

enhance the profitability of the sector

through transformation of Regional Plantation

Companies from primary producers to

agri-business entities and to improve

the living and working conditions of

the estate sector workforce to achieve

parity with other sectors.

The ravages of the tsunami of 2004 are

still being repaired today in our land. The

Government with the assistance of the

European Investment Bank (EIB) established

a Post-Tsunami Project as a dedicated credit

line of finance for small and medium-scale

enterprises in industry, tourism and other

service sectors which had been directly/

indirectly affected.

The Construction Sector Development

Project is funded by AFD (the French

Development Agency) and aims to

strengthen the financial and technical

capacities of private local businesses

to participate effectively in construction

and public work in the post-tsunami

reconstruction effort.

In 2006, LOLC became a PFI for the

Revolving Fund of the Second Perennial

Crop Development Project, which seeks to

provide support for the perennial crop sector,

increasing enterprise profitability and farmer

income and broadening the agricultural export

base whilst encouraging a greater private

sector participation in commercial agriculture.

Social Impact

It’s all about empowering entrepreneurship…

from the humblest to the most sophisticated.

From the initial inputs LOLC offers

throughout a well structured portfolio of

financial solutions and services that span

the gamut of Micro, SME and Corporate

sectors in this country, we are providing and

enhancing wealth creation and sustainable

prosperity of the people. In the process we

are also closely involved with knowledge

enhancement in critical areas

A CHOICE PICKFishing, Negombo - The bountiful sea fare

in the shallow waters of the lagoon

PROTECTING THEIR FUTURESloth Bear, Yala National Park -These two playful bear cubs,

a brother and sister, will need our intervention to protect their shrinking jungle habitat


of entrepreneurship that builds social worth

as well as business acumen, in service

to the community.

LOLC catalysed initiatives such as solar

power in rural electrification across the

country, the new bio-digester that will place

clean, renewable and affordable energy at

the disposal of rural communities across the

land, a significant contribution to nutritional

well being in the country through supporting

agro-farming and dairy farming among many

other Company initiatives.

LOLC has facilitated community centres at

LOLC Ridhee Gama in Seenigama and at

Medhabadda. This is the centre of village

community life where everything from business

to welfare can be discussed or enjoyed.

In another measure of social upliftment, we

have recruited 60 field officers to promote

micro finance - they are all from these villages

and we are expecting to increase cadre.

Our outreach is closely linked with all

Post Offices and Sub Post Offices of

Sri Lanka Post.

Returning peace in the Country has allowed

us to go in and serve the people of the

country. We are planning to set up three

fully-fledged branch offices in Trincomalee,

Batticaloa and Ampara. Each branch will be

in close proximity to about five or six Post

Offices, to expand reach and provide more

customer convenience.

In addition to our own micro finance Group

Loan facilities, under the Government’s

Poverty Alleviation Micro Finance

programme, we have been qualified as a

PFI where we’ll be granting the facility at a

subsidised interest rate, with the support of

the State, which will be promoted especially

in the post-conflict areas of the country.

Environmental Impact

The ethos that LOLC has, of looking well

beyond the financial solution to impact that

spread across the entire supply chain has

enabled the Company to fully embrace a

sustainability mindset. This mindset influences

our core business model and radiates

outwards to every product, service and

interaction we have with our stakeholders.

There are innumerable examples of projects

we have chosen to fund because they have

impeccable ‘credentials of sustainability’,

whilst enhancing the enterprises of our

business audiences.

From solar power and other clean

and renewable energy generation,

environmentally responsible agricultural

and dairy farming to our own environmental

best practices within the Group itself, we are

committed fully to preserving and enhancing

natural resources wherever possible.

In 2007, LOLC became a PFI in the

Environmentally-Friendly Solutions Fund

Project II (E-Friends II) which has as its main

objectives the control of industrial pollution,

minimising industrial waste, protection and

saving of resources, recycling waste and

energy saving. E-Friends II assists industries

to comply with the regulations and standards

of the National Environmental Act.

ON A HIGH PERCHLittle Cormorant, Thalangama - A resourceful water bird

REFRESHEDA domesticated elephant - A welcome dip in the Menik Ganga, Kataragama, to beat the daytime heat



The project is ongoing and to date, LOLC

has disbursed funding facilities for projects

such as waste water treatment plants, energy

saving and converting industries from using

fossil fuel to bio-mass produced energy.

LOLC continues to be a PFI in the

Renewable Energy for Rural Economic

Development (RERED), under which we

provide additional financing to promote

Grid Connected Renewable Energy. We

concentrate mainly on financing Grid

connected mini-hydro power projects.

Internally within the scope of LOLC’s own

operation, we have a plethora of initiatives

that we apply across the Group, with

the wholehearted support of our staff, in

heightened environmental consciousness, to

enact our business affairs with responsibility.

These measures range from maximising

natural lighting sources within our office

complexes, to the proliferation of energy

saving lighting (CFL bulbs), a way of

life that sees LOLC people switching off

unnecessary power draw offs, such as lights,

air-conditioners, computers, a responsible

approach to IT which is not only power

saving but also working towards a paperless

office environment amongst others.

Our responsibility and commitment as well as

our stewardship of Business Sustainability is

only as strong as each strand of the ‘closely

woven fabric’ that is our business operations.

It is where the strength of LOLC is to be

clearly seen.

NEW HORIZONSOrange Migrant - This butterfly found in Wariyapola made history in being a new species to the country and

carried the message of the possibility more new discoveries for those who strive



The LOLC Group is firmly on course to

attain its goal of becoming a total financial

solutions provider. That journey is going

to encompass crucial national goals of

resurgence and rebuilding of North and East

as peace gradually returns, to which effort

the Group expects to contribute immensely.

Developing the ideal business model to

deliver the desired results began with our

recent restructuring and is now

firmly established.

Whatever the business plan, whatever the

corporate goals it must be driven by people

who are competent, passionate, innovative

and ethically sound. Today, we have built

the LOLC Team into a committed, service

oriented, energised and multi-skilled work

force robustly led and much admired by the

financial industry.

HumanResources

The HR processes begin as we seek the

‘right’ employee to drive our business

goals. The Company employs a multitude of

means to reach the right employee: on-line

recruitment, job fairs, recruitment camps,

direct recruitment (through a referral scheme),

head hunting, walk-in interviews and more. At

the conclusion of the financial year, LOLC has

been able to deploy diverse employee cadres

in addition to its core cadre, in pursuit of

realising its corporate goals while being able

to attract a pool of talented individuals within

and outside the industry, ensuring diversity

of the workforce. The graphs below highlight

the segmentation of the staff within the

management, executives and non-executive

cadres of the Company:

The LOLC Team has made immense progress in growing the success of the Group as well as their own personal development - we can truly subscribe to this motto ‘as we grow, so would you’

The Company continually invests in the

skill and competency development of

the employees, guided by our corporate

goals. During the year in review 82% of

our workforce was exposed to continuous

learning initiatives. An investment of

Rs. 6.6 Mn was made for training with 152

interventions being provided to the staff. The

introduction of new products and services


has provided our employees with many

opportunities to acquire new skills thereby

enhancing their own personal capacities.

Bespoke training programmes were

conducted throughout the year, which

fostered team bonding, development of

leadership skills and more. We received

great support from our donor agencies

such as FMO, ACTED and International

Development Ireland Limited, whereby we

were able to offer our Team overseas as well

as local training opportunities.

Statistically, the LOLC Team has grown as a

consequence of our targeted approach to

acquiring the skills and aptitudes that will drive

our business objectives into the future. At the

end of the financial year in review, we had a

total employee strength of 664 (Company) and

1,164 (Group). The diversity of the LOLC Team

is outlined in the ensuing charts:

Human Resources I

HARMONY IN NATUREAsian Elephant and Spotted Deer - Elephants are messy feeders.

At Yala National park, Deer will seek the company of Elephants to feed on the leaves of branches broken by them, creating for

themselves, an otherwise unavailable opportunity

RESILIENCEWaves, Kirinda - Momentum of the transitional wave is no match for the stability of the rock

techniques that are fully inclusive and

transparent to constantly improving

assessment standards we offer a very

comprehensive rewards and recognition

regime that is in itself a great motivator.

Awards were presented once again to our

employees whose service exceeded 10

years which included three of our employees

who successfully completed 25 years with

the Company.

We also recognise the vital importance of

balancing these initiatives with adequate

recreational opportunities to truly enhance

the quality of our employees’ working life.

This latter aspect is the province of SPIRIT,

the Group’s Recreation Club. During the

year under review, the Club organised a full

calendar of recreational opportunities for

the employees - the Annual Staff and Family

Trip, a Group Dinner Dance, Kiddies Party,

a Sinhala New Year Sports Festival and the

Annual Pirith Ceremony, among others.

Employees are encouraged to identify with

LOLC in its core pursuit of true sustainability

and care for society. Within the many CSR

initiatives enthusiastically supported by staff,

the donation of medical supplies to the

Sri Lanka Army Medical Unit, Anuradhapura

was a good example of our response in the

hour of need.

LOLC CARE a new CSR initiative organised

by the Group, engages the LOLC Team in

contributing to the society through diverse

charitable events both financially and

through active participation. The success

of this initiative will ultimately draw all

stakeholders of LOLC to contribute to

Employee retention rates are sound and we

have been able to augment them year on

year through the application of simple and

practical initiatives aimed at obtaining a

better return on human capital investment.

The spread of employees based on the

years of service with the Company is

graphically represented below:

A significant acquisition by the Group was

that of Commercial Leasing Company PLC

(CLC). The staff strength of CLC stands at

268, with an employee growth rate of 18.06%.

We introduced our HR policies and

processes into CLC and Lanka ORIX

Securities (Pvt) Ltd. with a view to

streamlining it’s HR systems and operations

and aligning them with the Group Company.

This has been successfully completed and

the benefits of the HR architecture operating

as a shared services entity have been

derived by the Group.

Performance management has been

significantly enhanced over the year.

From emancipated performance appraisal

DROP AT A TIMENelum leaf - These tiny droplets on the impermeable lotus leaf provides nourishment for many even tinier insects

56 | Human Resources | LOLC | Annual Report 2008/09


this initiative and thereby become worthy

corporate citizens who act with responsibility

to the continued enrichment of society.

Our multi-talented employees have

represented the Company in the knowledge

base and sports arena and have received

high commendation, thus strengthening the

image and reputation of the Company:

· 1st Prize in this year’s final of FMO Asset

and Liability Management Competition

held in Netherlands.

· Champions in the Inter-Firm Badminton

Team Championship - 2008 organised

by the Mercantile Badminton Association

· Our Insurance Brokering arm won the

Hayleys AIG Inter Broker Six-a-Side

Cricket Tournament and became the

Joint Champions of HNB Assurance

Beach Rugby Challenge Cup 2009

· Winner of the Mercantile Open

Badminton Men’s Single Plate

Championship

· Representation in Ari-Lanka Mercantile

Badminton Team sponsored by the

Mercantile Badminton Association in India.

Overall, the capability, competence

and capacity of the organisation and its

workforce have appreciated significantly,

over this financial year. We are confident that

we are geared to meet and overcome the

challenges of the future.

The LOLC Team has made immense

progress in growing the success of the

Group as well as their own personal

development - we can truly subscribe to this

motto ‘as we grow, so would you’.

An extension to the social sphere of the Sustainability Policy of LOLC, lies ‘LOLC Care’ the Company’s Strategic CSR initiative, focused on contributing to the society at large with the total commitment and support from the internal society, i.e. LOLC Team. LOLC Care an integral component of the Sustainability Policy of LOLC, will enable LOLC to leap into the paradigm of a Socially Responsible Business (SRB), which would be the ultimate that a commercial entity would desire to be in.

CSR is not alien to the LOLC team who has risen to many occasions in the past to support the needy, whether, for internal staff or for the community. LOLC Care brings the formal entity into life within which the staff will look forward to serve the community at large. LOLC care would be a ‘not for profit entity’ within the umbrella of the LOLC Group and would be run by the staff who would zealously engage in all its endeavours, considering it to be an obligation that they need to fulfil for society it belongs to.

All channel offices of the LOLC Group would have a specially designed till placed in a conspicuous position, that would prompt staff as well as customers to contribute regularly for a worthy cause. The cause would be proposed and decided by the staff from time to time. The ultimate ownership of the concept and the obligation to fulfil the objectives would also rest with staff and it is envisaged that this would facilitate not only the efficient operation of the LOLC care concept, but total commitment of the team.

During the year under review, the staff of LOLC rose to the needs of the Army Hospital in Anuradhapura and collected funds to donate a large stock of material needed by the injured soldiers.

In the coming months, the LOLC team will utilise contributions made to LOLC Care for Internally Displaced People and work is already underway to identify the requirements.

LOLC Care not only focuses on raising funds for worthy causes but also will prompt the LOLC Team to habitually take part in contributing to the society at large.

LOLC Care

Human Resources I

CONSERVATIONAnagi Mala Ella, Kanneliya - A feeder forest for the State Plywood Corporation, later converted to a forest reserve

striking a balance between development and conservation.


Expandingour Reach


LOLC Branches

1. Rajagiriya

2. Kandy

3. Kegalle

4. Matara

5. Badulla

6. Ratnapura

7. Embilipitiya

8. Polonnaruwa

9. Anuradhapura

10. Kochchikade

11. Colombo 7

12. Kurunegala

13. Kalutara

14. Galle

15. Nuwara Eliya

16. Gampaha

17. Kiribathgoda

18. Wattala

19. Chilaw

20. Mahiyangana

21. Mount Lavinia

22. Union Place

23. Ampara

24. Dambulla

25. Horana

26. Wellawatte

LOLC Service Centres

at LIOC Filling Stations

27. Morawaka

28. Trincomalee

29. Pilimathalawa

30. Seeduwa

31. Aluthgama

32. Kadawatha

33. Ambalangoda

34. Debarawewa

35. Beliatta

36. Talawakelle

37. Panadura

38. Batticaloa

39. Padukka

40. Deraniyagala

At Post Offices

41. Melsiripura

42. Kuliyapitiya

43. Godakawela

44. Balangoda

45. Elpitiya

46. Bulathsinhala

47. Thambuththegama

48. Padaviya

49. Eheliyagoda

50. Divulapitiya

51. Nikaweratiya

Expanding our Reach I

A SEA OF ATTRACTIONSanderling -These migrant birds running down the beach in

unison to feed on what the receding waves at Chilaw offers - the value of working in harmony


The Directors believe that good governance

benefits all stakeholders. Following the

implementation of a strategic plan that

focused on optimising group strengths and

synergizing expertise and functions, the

Group is now working within a business

unit structure. Procedures are constantly

being reviewed to ensure speed and

efficiency, while eliminating duplication of

work or under-utilisation of resources. By

establishing clear lines of accountability and

a regular reporting process, the Board is

able to monitor productivity, profitability and

compliance with required standards.

The Board now takes a holistic view of the

Group. Reports of the subsidiary CEOs,

relating not only to performance but also

to compliance and risk management are

reviewed by the Company’s Board of

Directors regularly. Believing that a chain is

only as strong as its weakest link the Board

seeks to ensure that every group company

is in sound financial health and alive to its

compliance requirements.

The Company acknowledges with gratitude

the favourable position it holds in the eyes

of shareholders, financiers and regulators.

In a turbulent and uncertain environment,

the Company and the Group which it heads

can still avail itself of borrowing, be sure

of steady demand for its products and

be able to immediately honour all

commitments to stakeholders.

The Company, which was a pioneer in

leasing, remains a leader in a field which

now numbers over 70 players. Recognising

the need to carry the pioneering spirit further,

the Company has, over the past several

years, gradually expanded into a group by

the judicious incorporation of subsidiaries,

within the financial services sector. Thus

Group companies now offer leasing, hire

purchase, fleet management, factoring,

insurance broking, shariah compliant

financial products, fixed and savings

deposits, pawning and micro finance.

Acquisitions too have been synergistic

with the Group’s core products. Associate

companies focus on cultivation and

reforestation, tying in with the Group’s

concept of sustainable development and a

sharper focus on micro finance.

Group procedures, practices and policies

are adopted by each new company

within the Group, thereby ensuring the

maintenance of tried and tested checks

and balances. The Board seeks to establish

a corporate culture which stresses the

importance of team work, ethical behaviour,

risk appraisal and mitigation and compliance

with regulatory and statutory requirements.

EnterpriseGovernance

The Board seeks to establish a corporate culture which stresses the importance of team work, ethical behaviour, risk appraisal and mitigation and compliance with regulatory and statutory requirements


This has ensured sustainable growth and

development for the LOLC Group, thereby

enabling it to play a significant role in helping

to rebuild the nation and to restore hope and

opportunities for all areas of Sri Lanka.

Governance Principle Conformance

Board of Directors and Board Committees

Composition of the Board The Board is made up of 11 Directors, including the Non-executive Chairman and the Executive Managing Director.

Of the 11 Directors, 8 are Non-Executive. In this way, LOLC observes the recommended best practice of having the majority of its Directors Non-Executive. Further, LOLC is in compliance with the Corporate Governance requirements of the Colombo Stock Exchange relating to the number of Independent Directors.

The names of the Directors and their profiles are given on pages 22 to 25.

Procedure for appointment of new Directors

As part of the review of Corporate Governance practices and procedures begun last year, a Nomination Committee was set up. As there were no vacancies in the Board, the Committee did not face the necessity of making a recommendation to the Board for appointment of a new director.

While no appointments have been made, the Board is always aware of the need for the Company to have Directors who are conscious of their duties and responsibilities and who bring to the Company the benefit of their experience and expertise.

Disclosure of details of new Directors to shareholders

The appointment of a new Director is disclosed to the Colombo Stock Exchange for dissemination to the public, together with a brief resume of the said Director. This resume will provide details of the Director’s qualifications and experience. The Central Bank of Sri Lanka is also notified of the appointment and full disclosure is made of other directorates and significant shareholdings.

Detailed below are the corporate

governance principles advocated by the

Institute of Chartered Accountants of

Sri Lanka and LOLC’s compliance thereto.

Enterprise Governance I

AWAITING REVIVALUdawalawe tank - As sure as the setting sun will rise tomorrow,

the seemingly ‘dead’ tree will spring in to life when the water level in the tank recedes


Holding of regular Board meetings

Board meetings are held every month. As recommended by the Corporate Governance Committee, the Board papers were reviewed and additional papers requested. The Managing Director/CEO provides the Board with a brief review of the macro environment and current market conditions. Comprehensive board papers are provided, covering not only the performance of the Company but also confirmations of compliance with relevant statute and regulation and risk reviews. Minutes of Meetings of Board Sub committees are also included, so that the whole Board is kept well informed of the affairs of the Company.

Availability of formal schedule of matters specifically reserved for the decision making of the board

The Board is conscious that it is responsible to all stakeholders, including the regulators, for ensuring that the operations of the Company and of the Group are carried out ethically and in accordance with regulations.

Authority for routine operations has been delegated to board subcommittees or subcommittees comprising Executive Directors and Senior Management.

The Board remains responsible for:

· Formulating the strategy, vision, values and ethics of the Company

· Appointing the CEO and key senior officers

· Approving budgets and targets

· Monitoring performance against the budgets and targets

· Ensuring that controls are implemented, including an adequate risk management system and monitoring these controls

· Ensuring compliance with statutory and regulatory requirements

· Obtaining periodic reports on issues in the micro and macro environment which could impact the Company

· Approving investments, acquisitions and diversifications

· Approving policies and procedures

· Approving shareholder communication including interim and annual financial statements

Obtaining of independent professional advice

Whenever felt necessary, the Board seeks the independent professional advice of third parties. These include the Company’s lawyers, auditors or tax consultants and such advice is sought at the Company’s expense.

Company Secretary The Company Secretary is a qualified Chartered Secretary, with over ten years experience with the Company, apart from many years experience prior to her joining the Company. The Company Secretary is present at all Board and Board subcommittee meetings. Her advice and support can be sought by any Director, and she is the contact point for any shareholder. She advices the Board on good Corporate Governance practices and requirements, together with relevant statutory and regulatory requirements. The removal of the Company Secretary is a matter for the whole Board.

BEAUTY OF THE ORDINARYMushroom - A ray of light which pierced the canopy very briefly at Sinharaja forest brought out the beauty of this otherwise common mushroom.

62 | Enterprise Governance | LOLC | Annual Report 2008/09



Independent judgment The Directors take into consideration the information provided by the Management in Board papers and their recommendation. However, in full awareness of the fact that it is the Directors who are answerable for such decisions, the Board critically reviews all such information and recommendations and draw on their expertise and experience to help take decisions.

If any Director should have any interest in a transaction being discussed, he/she discloses it and such disclosure is recorded in the Minutes.

Dedication of adequate time and effort

At the monthly Board meetings adequate time is devoted to discussion to enable all Directors to be apprised of the Company’s performance in comparison to agreed targets and conformance with all regulations. Following the Corporate Governance review and the expansion of the Board papers requested, the Board has redesigned certain Board meetings to ensure that there is in-depth discussion of strategy and risk management apart from careful monitoring of performance and compliance. If is felt that an issue needs to be studied in even greater detail, it is referred to a Board Subcommittee or a Management Subcommittee with a report to be submitted subsequently.

Training for Directors While formal training has not been considered necessary, the Board ensures that it stays abreast of market and competitor information, new trends and requirements and potential risks by information provided both by senior management and also from other sources.

Chairman and CEO

Clear division of responsibilities

The roles of Chairman and Chief Executive Officer are separate and distinct. This ensures a balance of power between the Non-Executive Chairperson and the Executive Managing Director .

Role of the CEO The Managing Director, who also functions as Group CEO, oversees the operational functions of the Company and reports to the Board on Company and Group performance, adherence to agreed policies and procedures, risk mitigation measures and governance and compliance issues.

Role of the Chairman The Non-Executive Chairperson ensures that Directors are provided with the information necessary to assist in decision making and critical analysis of Company performance. She encourages all Directors to contribute at meetings.

Financial acumen There is a sufficient amount of financial acumen and knowledge available among the Directors. The advice of the auditors and tax consultants is called for when required.

Balance of the Board/ independence of Directors

The majority of the Directors are Non-Executive. Reports from the senior management and the Executive Managing Director help to maintain a good flow of information and a system of checks and balances.

All Board subcommittees include at least one of the independent directors and where required by the Corporate Governance requirements of the Listing Rules of the Colombo Stock Exchange, the relevant Committee comprises only Independent Directors.


PURITY WITHINRed Water lily - Even though the inception is in mud and murky

water this flower which reflects the impermanence of life is fit enough to be picked and offered to the holiest of beings


Balance of the Board/ independence of Directors (Contd.)

The composition of the Audit Committee, the Corporate Governance Committee, the Remuneration Committee and the Nomination Committee are given on pages 89 and the reports of the Committees appear on pages 91 to 96 respectively.

Mr. M.T.L. Fernando has served as a Director for over nine years. Over the course of his illustrious career, Mr. Fernando has served on the Boards of several private and quoted companies, and also with state enterprises. The Board values his expertise and integrity and is satisfied that Mr. Fernando remains independent, despite his years of service.

Mr. R.A. Fernando has just completed nine years on the Board. Mr. Ravi Fernando holds a Postgraduate Certificate in Sustainable Business from Cambridge University and is currently reading for his Ph.D. at PIM on ‘Strategic Corporate Responsibility and Sustainable Business’. His expertise is especially valuable to the LOLC Group as it focuses on sustainable development and environmental responsibility. The Board is satisfied that Mr. Ravi Fernando’s ability to function as an independent Director is not affected by his years of service.

Supply of quality information

The Board has reviewed the information it receives and has further refined and enlarged its scope. Reports submitted regularly by Senior Management, including CEOs of subsidiary companies, provide information on performance, compliance and risk. The Board seeks to ensure that focus shifts from micro to macro, so that facts can be viewed in context and areas for concern are highlighted

Availability of management information

Any additional information which the Board seeks is provided by the Management. In the event that it cannot be provided immediately, it will be made available by circulation subsequently.

Re-election of Directors With the exception of the Executive Managing Director, all Directors retire by rotation and offer themselves for re-election. The Board considers each Directors’ performance and if thought appropriate, recommends to the shareholders the re-election of a retiring Director.

Appraisal of Board performance

It is the opinion of the Board that the Company’s performance, and the satisfaction of the stakeholders and regulators is a measure of the effectiveness of the Board.

The Group’s finance company, Lanka ORIX Finance Co Ltd (LOFIN) is the only non-bank to have obtained the approval of the Central Bank of Sri Lanka (CBSL) to operate foreign exchange savings products. LOFIN is also approved by the CBSL to offer shariah compliant Islamic finance products. The Company continues to enjoy funding from both local and foreign banks. The Group’s clientele continue to seek our products and services. The Board feels that all this reflects the standing the Company and the Board has in the eyes of all stakeholders.

The Nomination Committee did not make recommendations on new appointments as there are no vacancies on the Board at present. However, Board performance is being reviewed.

ESSENCE OF LIFESunset, Kalpitiya - Just before dying, for a few minutes, the sun will appear as a ball of fire form the beach at Kalpitiya. This primary source of all life on earth will present you with this splendid view if you are there at the right time during these few minutes




Appraisal of CEO/MD The MD also serves as the Group CEO, and reports to the Board on all operational, financial, risk mitigation and compliance issues of the Company and the Group. It follows therefore that his performance is measured against the standards laid down for each of those areas. The profile of the MD is found on page 22.

Directors’ Remuneration

Directors’ remuneration policy

The Remunerations Committee increased its scope and widened its area of review. Remuneration of Directors and of senior management is being reviewed, in the light of respective skill set, experience and contribution.

All recommendations of this Committee are reviewed by the Board as a whole, to ensure balance and control.

The Remuneration Committee comprises independent Directors. The Non-Executive Chairperson is invited to attend meetings.

The Remuneration Committee Report is on page 89

Disclosure of remuneration

The Directors remuneration is disclosed on page 89

Relationship with Shareholders

Constructive use of shareholder meetings

All shareholders receive the prescribed period of notice of any shareholder meeting. Shareholder meetings have always been cordial and conflict free. The Board ensures that any shareholder query is responded to. As the senior management is always present at all shareholder meetings, shareholders are free to seek additional clarification.

Should a shareholder be unable to attend, such shareholder has the opportunity to convey his/her views through a proxy. As the Company provides two way proxy forms, all shareholders are able to communicate their wish on any decision which has been submitted for their approval.

Each decision voted on separately

Each item on the agenda is taken up separately for discussion and voting. Re-election of Directors are always voted on separately for each such Director.

Procedures for voting For each agenda item, the Chairperson calls for a show of hands on assent and on dissent. The outcome of each decision is then declared by the Chairperson based on the show of hands.

Should a poll be called for, the Auditors will be available to oversee the counting of the poll votes, after which the Chairman will declare the result.

The Board encourages shareholders to actively participate at all shareholder meetings.

Availability of subcommittee Chairmen

At shareholder meetings the entire Board is present. Therefore, those Directors who serve as Subcommittee Chairmen are available at such meetings.

MASTERING THE ELEMENTS‘Gini Keli’, Dalada Perahera, Kandy - The traditional art of

illuminating the path of the pageant



Disclosure of major transactions

There have been no such transactions, but should there be any, they will be disclosed in accordance with the regulations.

Enhancing shareholder value

The Board is deeply committed to enhancing shareholder value and retaining stakeholder confidence. The Board has always been conservative in lending, prudent in investing and conscious of the need for synergies when diversifying or acquiring new businesses. This has resulted in the Company being one of the few which are not in need of Government support during this time of crisis being faced both locally and internationally. The Group’s finance company has liquidity ratios which are better than satisfactory and more than legally required.

As at 31 March 2009, the Company’s market capitalisation was Rs. 3.3 Bn The share price as at end of trading on 31 March 2008 was Rs. 69.25.

An interim Dividend of Rs. 2.80 per share was paid on 26 June 2008.

Financial Reporting

The Company provides shareholders with interim Financial Statements. These Financial Statements are issued within the stipulated timelines. The Annual Report contains comprehensive financial reports. All these Financial Statements are prepared in accordance with the Company’s Act No. 7 of 2007, the Listing Rules of the Colombo Stock Exchange and Sri Lanka Accounting Standards and comprise both Company figures and Group consolidated figures.

All reports required by the Central Bank of Sri Lanka or of the Colombo Stock Exchange are submitted in the manner required and within the prescribed timelines. At its monthly meetings the Board monitors compliance with statutory and regulatory requirements.

All price sensitive information is disclosed promptly.

The Annual Report contains detailed reviews of the operation of the Group.

Declaration by the Directors

The Directors’ annual report on the affairs of the Company is found on page 91 to 96

All Directors’ are requested to make regular disclosures of any interests in contracts with companies of which they (or their spouses) are Directors and/or significant shareholders.

Such disclosures are tabled at Board Meetings and recorded in the Minutes.

Directors’ responsibility for financial reporting

The statement by Directors’ on their responsibility for preparation and presentation of Financial Statements is on page 97.

Management report Business Impact Report on pages 32 to 43.

Going concern The Board is confident that the business is a going concern. This statement is also included in the Annual Report of the Board of Directors on the Affairs of the Company on pages 91 to 96.

SHROUDED IN BLESSINGMaskeliya - The areas surrounding the foothills of the Adams peak, where Lord Buddha is believed to have tread, is often covered with white carpets of pure mist symbolizing philosophy the advocated




Summoning an EGM if assets fall below half shareholders funds

Asset management is carefully monitored and stringently controlled. Therefore, such a situation has not arisen. However, should such a situation arise, the statutory procedure will be complied with.

Internal Controls

Periodic review of controls Following the Corporate Governance review, risk reports are now being requested regularly from all senior managers and subsidiary CEOs. It is expected that these will enhance the effectiveness of existing controls and highlight any controls which need to be introduced or further refined.

The Enterprise Risk Management Division reviews controls as a part of its regular audit reviews and these are discussed by the Audit Committee. The Committee will then forward its recommendation to the Board or the Executive Committee for approval and implementation.

In the current financial environment, the Executive Directors have been tasked with asset management and maintenance of liquidity.

Reporting to the shareholders on risks

The Risk Management review is on page 72.

Audit & Auditors

Audit Committee The Audit Committee comprises three Independent Directors. The Committee is chaired by a person with accounting qualifications and experience. The Chairperson, CEO and CFO are invited to attend Meetings of the Committee. The Audit Committee Charter details the role of the Committee.

The Audit Committee meets quarterly to review the financials and also study reports of the Enterprise Risk Management Division and make recommendations to the Board for implementation by the Executive Managing Director. Should the need arise, additional meetings are held. Minutes of the Audit Committee Meetings are copied to all Directors and tabled at Board Meetings.

Relationship with external auditors

The Audit Committee also meets with the External Auditors to review the audits and the objectivity and independence of the Auditors.

The Audit Committee Report is on page 88.

Corporate Governance Practices

The Company ensures compliance with the Corporate Governance Rules of the Colombo Stock Exchange. It also benchmarks its governance practices against the code of Corporate Governance for banks and other finance institutions issued by the Central Bank of Sri Lanka, the Code of Corporate Governance issued by the Institute of Chartered Accountants and OECD principles.

ADAPTATIONSNew cultivation, Knuckles range - Non traditional crop

cultivation. Tomatoes replacing paddy, the traditional crop, as it provides a higher income to the farmers



Compliance The Company complies with all requirements of the Central Bank of Sri Lanka applicable to companies registered under the Finance Leasing Act No. 56 of 2000, the Listing Rules of the Colombo Stock Exchange, the Companies Act No. 7of 2007, the Financial Transactions Reporting Act, the Anti Money Laundering Act and all other applicable laws and regulations.

In keeping with world trends, the Company is moving towards enterprise governance, which covers both conformance and performance.

Self-governance initiatives by the Company

Codes of Ethics have been formulated for Directors and for employees. The standards and values expected from the practice of these ethics are captured in the bi annual performance appraisals, which means that adherence is rewarded and deviation noted for corrective action.

The Company is a member of The Financial Ombudsman Sri Lanka (Guarantee) Ltd. A Compliance Officer has been appointed for the head office and every branch location. This Officer is available to meet with any client who is dissatisfied with the Company’s service.

The Company has adopted the Voluntary Code on dealings by Directors, CEOs and connected parties issued by the Colombo Stock Exchange. For several years now, such transactions, when they occur, have been disclosed to the CSE for publicising.

The funding decisions of the Company are also influenced by the impact the applicant’s operations have on the environment. As a further development to this, the Company is currently formulating an environmental policy.

The Company complied with the directive of the Central Bank of Sri Lanka to establish a reserve fund.

A Group IT Steering Committee, comprising the Chairperson, Executive Director, Chief Information Officer and Chief Risk Officer meet periodically to review IT developments within the Group and connected controls. This Committee also discusses available technology and makes recommendations to the Board on Improving systems.

The Company was proactive in taking cautionary measures with funding and was one of the first to issue an Anti Money Laundering Policy. This policy, recently reviewed, includes procedures to be followed. Provisions of this policy are built into credit appraisals.

A policy on Corporate Social Sustainability was recently reviewed. With the Group’s increasing focus on sustainability it is envisaged that there will be more initiatives next year.

REBUILDINGWaves - The beauty of these waves breaking on the shores off Tangalle hides the havoc they created with the Tsunami and the efforts that went in to rebuilding of the nation




Relationship with stakeholders

The Board is aware of the environment within which it operates and seeks to interact with all its stakeholders for mutual benefit.

With the intensifying of the Group’s focus on micro finance, a subsidiary, LOLC Micro Credit Ltd. will be reaching out to support the rural entrepreneur. It is expected that this will lead to development of the rural areas as well as the upliftment of the lifestyle of the individual entrepreneur.

LOFIN has established a Shariah Council, which reviews and endorses all Shariah compliant products offered by the Group. The Group seeks in this way to provide facilities to a section of society which previously did not have access to financial products. These products offered, while economically benefiting them are also religiously acceptable.

LOFIN is looking at providing migrant workers with reliable and secure ways to remit home their hard earned wages for the care of their families here in Sri Lanka. The workers are also offered a measure of control over the money being remitted.

The Group is conscious of the value added by its employees. Long service awards have been set up and the Company is gratified by the number of employees who look on the Company as their employer of choice and have put in years of service ranging from 30% to 75% of the Company’s own lifetime. While keeping in mind the need for liquidity and the conservation of resources (which will be crucial to face turbulent financial times ahead) the Directors are ensuring that remuneration packages remain attractive and that jobs stay secure.

The Group is frequently reminded of the desire of its employees to provide assistance to the wider community, from orphaned children to those caught in both sides of the current armed conflict. To help channel these efforts, the Company is in the process of setting up a dedicated project which will serve as the focal point for all donations and other offers of support.

Board Committees

Audit Committee The Audit Committee comprises the following:

M.T.L. Fernando - Independent Director (Committee Chairman)

M.D.D. Pieris - Independent Director

R.A. Fernando - Independent Director

The Chairperson, Chief Executive Officer, Chief Financial Officer and Chief Risk Officer are invited to attend meetings.

The Audit Committee meets quarterly to review the interim Financial Statements prior to dispatch. The Committee also meets periodically with the External Auditors, to discuss any issues of concern. Reports submitted by the Chief Risk Officer are discussed, and on occasion the head of the relevant front office or support function Division is also called in, to ensure that an issue is properly understood and that appropriate and timely remedial action can be taken.

ENJOY THE JOURNEYThe Hamilton Canal - built by the Dutch to transport spices and other tradeware from Chillaw to Colombo, along Muthurajawela

is bordered by lush mangroves



Corporate Governance Committee

The Corporate Governance Committee meets every quarter. The new initiatives introduced, which include monthly or quarterly risk and macro reviews at Board level, are being evaluated for effectiveness and possible expansion.

The Committee comprises the following :

M.D.D. Pieris - Independent Director (Committee Chairman)

M.T.L. Fernando - Independent Director

Mr. R.A. Fernando - Independent Director

Mrs. R.L. Nananyakkara (Non-Executive Chairperson)

The Executive Director and the CEO are invited to attend meetings.

The Corporate Governance Committee, which has a documented charter, reviews the Company’s compliance with all applicable legislation and regulations and ensures that periodic reports are submitted to the Board confirming compliance. The Committee meets quarterly. The Corporate Governance Committee Report is on page 90.

Executive Committee The Executive Committee comprises the following :

Mrs. R.L. Nanayakkara - Non-Executive Chairperson (Committee Chairperson )

I.C. Nanayakkara - Executive Deputy Chairman


K.U. Amarasinghe - Executive Director

W.D.K. Jayawardena - Managing Director and Group CEO

This Committee, which meets monthly, reviews the performance of all business units. Issues relating to support functions are also taken up for discussion and decision. All Divisional Heads are invited to attend Executive Committee Meetings. The Divisional Heads and their profiles are provided on pages 26 to 31.

The presence of the Heads of all Divisions, both front line and back office functions, ensure that decisions taken have the support of all and have been taken after considering all facets of the issue. The Minutes of these Meetings are tabled at Board Meetings, ensuring that the entire Board is kept informed of the decisions taken.

The Managing Director also chairs weekly management meetings at which performance against goals, set every quarter, are monitored.

DARE TO VENTUREMoon - Early humans who worshiped the moon never imagined that one of them will walk on it some day. There are those who still worship the moon in the deep jungles of the Amazon but the future will belong to those who dream and dare to venture, breaking convention




Remuneration Committee The Remuneration Committee comprises Independent Directors. The Non-Executive Chairperson and the Cheif Executive Officer are invited to attend meetings.

The Remuneration Committee meets annually.

The Committee comprises

R.A. Fernando - Independent Director (Committee Chairman)



The Remuneration Committee at it’s meeting this year expanded it’s scope and made further recommendations to the Board on the remuneration of Executive and Non-Executive Directors and Senior Management.

The Remuneration Committee Report is on page 89.

Nominations Committee The Nomination Committee comprises the following three Independent Directors and one Executive Director:

M.D.D. Pieris - Independent Director (Committee Chairman)


R.A. Fernando - Independent Director

I.C. Nanayakkara - Executive Deputy Chairman

This Committee meets annually to make recommendations to the Board on potential candidates who may be suitable for Board seats. As there have been no vacancies on the Board, no candidates have been identified/recommended .

The Nominations Committee report is on page 89.

CONTINUITYStilt Fishermen, Southern Coast - Most of these fishermen lost everything they owned in the Tsunami, but they have resumed

their livelihoods. Some still engage in ‘stilt fishing’ there are others who own deep sea trawlers now



Enterprise Risk Management

Having defined risk as ‘anything which

hinders the achievement of our corporate

objectives’ and conscious of the myriad

of risks and their inter-related nature,

LOLC focuses on an Enterprise Level Risk

Management Strategy. We strongly believe

that with the evolution and expansion of

business, the risk management initiatives

should be adopted to effectively provide the

management with reasonable assurance

over strategy delivery, implementation

of plans and the control environment.

Further we believe that as each business

entity is unique, the risk management

initiatives should be tailor-made to suit the

organisational dynamics to be effective.

As such, at LOLC we strive to inculcate a

culture where conscious appraisement of

risk pervades across the organisation, at

Enterprise Risk Management

all levels. Thereby decisions at all levels

are taken with a consciousness of potential

risks and rewards, which gives a reasonable

assurance that adequate and effective risk

mitigation controls are in place to manage

the risks within levels.

The Enterprise Risk Management (ERM)

division synergises the resources and the

expertise of the Internal Audit, Information

Systems Audit and Risk Management

functions and Risk Management & Audit

Committee (part of the Governance

framework) in providing the Board with a

reasonable assurance that LOLC’s risk

control framework is both effective and

consistent in defense against the identified

profile of risks.

Risk Management Framework & Strategy

The Risk Management Framework of LOLC

is formulated encompassing the Business

Units, Sales and Channels and Corporate

Solutions whilst keeping the risk ownership

We at LOLC strongly believe that the ultimate risk mitigation strategy, is building an organisation culture where all levels of employees have the required skills and knowledge to appraise and manage the risk on operations under their purview which will enhance the value-creation ability of LOLC


Defence in Depth/Layered Defence

Risk Environment

with them. We adopt a defense in-depth

strategy and our risk mitigation controls are

layered to provide preventive, detective as

well as compensating controls addressing

both macro and micro-level-risks.

Risk Mitigation Model

Identified risks are categorised at three

levels as depicted above. The ultimate

objective of the above strategy is to lower

every risk identified to compliance level

which in practice means that there are

laid down policies, procedures and best

practices in order to manage the risk at

acceptable level within the risk appetite of

the organisation. We practice total quality

management concepts at ERM where we

constantly try to improve on our approach,

reporting mechanism and mitigation

Enterprise Risk Management I

RAYS OF LIFESunrise, Randenigala - The first rays of the morning sun beaming through the clouds and mist over these mountains will be greeted by an army of birds with their pleasing calls that would announce

the dawn of a new day

strategies in line with the dynamic business

environment, ensuring that embedded risk

controls are both current and are constantly

reviewed for effectiveness.

Self risk assessment by the process owners

is an integral part of the management

supervision function as the risk ownership

remains with the process owner. The control

mechanisms formulated are reviewed by

ERM for adequacy and consistency thus

ensuring that minimum controls are built in

to each and every process/activity of the

organisation. The second level denotes

the formal function of risk assessment

undertaken by the Internal Audit/ERM. The

perceived risk assessment is an initiative

formulated by ERM in order to function as

an indicator of perceived risk levels among

stakeholders of a process excluding the

process owner and formal mechanisms are

in place to communicate concerns which

includes monthly reporting to ERM; ERM

conducts interviews and fraud management

initiatives which in turn facilitate execution of

a comprehensive risk assessment.

Risk Categorisation & Prioritization

LOLC adopts a two dimensional risk

categorisation matrix which is customised to

profile risks both on qualitative and quantitative

aspects. The categorisation and ratings

allow us to prioritize risk responses and has

a secondary usage as a risk scoring model

which ERM uses to decide on allocation of

ERM resources and on the audit frequency.

The Risk Management Process at LOLC

Risk Assessment

The ERM division adopts a 3600 approach to risk assessment.

PR

OB

AB

ILIT

Y (

P)

(5) Very High p>80% 5 10 15 20 25

(4) High 60%<p>80% 4 8 12 16 20

(3) Medium 40%<p<60% 3 6 9 12 15

(2) Low 20%<p<40% 2 4 6 8 10

(1) Very Low P<20% 1 2 3 4 5

(1) Isolated (2) SBU (3) Process (4) Regional (5) Enterprise

Level Level /Channel Level Level

IMPACT

RISK MATRIX

FOCUS ON DETAILLindernia -This tiny wild flower found at Hettipola is one of the 3771 flowering plants found in the country

74 | Enterprise Risk Management | LOLC | Annual Report 2008/09


Risk Score Qualitative Measure Rank Priority for Action

1-3 Negligible/Low Acceptable Risk

4-5 Low/Medium Risk 5

6-8 Medium Risk 4

9-12 High Risk 3

13-20 Critical 2

20> Catastrophic 1

Risk Control and Monitoring

The annual risk review plan of LOLC and

its subsidiaries is formulated by ERM and

is subjected to a review quarterly in order

to retain a high degree of flexibility which

enhances the ability of ERM to address high

risk areas on a priority basis.

Risk Reporting

ERM conducts its Risk Audits and Reports

to the Audit Committee/Integrated Risk

Management Committee. Reporting

mechanism constitutes a three tier approach

Pre-planned reviews as for the yearly

Plan of ERM

Monthly reviews initiated by ERM

based on emerging risks and changing

business and operational practices

Investigative and forensics oriented

reviews and reviews requested by the

management.

Risk Profile of LOLC

We maintain a risk registry and the process

maps of LOLC including embedded controls

in order to clearly identify the risks involved.

The following is a broad level risk profile of

LOLC and the perceived confidence level

of the mitigation strategies adopted by the

risk owners.

Identified control weaknesses require risk

owners to formulate mitigation strategies

based on recommendations made. The

effectiveness of the controls are subsequently

reviewed by ERM for consistency.


ADAPTING, SURVIVINGRose-ringed Parakeets - These birds commonly found in Colombo feed on raw rice kept for them by bird friendly

home owners. Their adaptability has resulted in their success as a species

A NATURAL BOUNTYRubber with a multitude of users, is a main export crop of

Sri Lanka, growing in abundance with little attention

Risk Category Risk Primary Impact Secondary Impact

Control ConfidenceLevel

Financial Liquidity Solvency Sustainability Maintenance of the appropriate asset & liability mix & maturity structure and constant monitoring by ALCO

High

Interest Rate Profitability Cost of Funds

Maintenance of matching interest rate maturity structure

Negotiating long-term funding lines

Maintenance of an appropriate volume of floating rate assets

Medium

High

High

Balance Sheet Structure

FinancialLeverage

Sustainability Maintenance of appropriate asset & liability mix

Asset securitising

Constant monitoring by ALCO

High

High

High

Foreign Exchange

Profitability Liquidity Maintenance of matching FOREX reserves at banks

High

Income and Profitability Structure Risk

Profitability Sustainability Strategic steering of the business

Maintenance of a diverse product portfolio

Diversification of income generating activities

High

High

Medium

CapitalAdequacy

Borrowing Sustainability Constant monitoring & maintenance of a healthy gearing ratio

Asset securitisation

High

High

Credit Asset Quality Profitability Credit policy

Delegated lending limits

Monitoring of credit concentration

Constant credit monitoring

Aggressive recovery mechanisms

Collateral based lending

High

V. High

High

V. High

V. High

V. High

Investment Asset Value Return on Assets

Diversified investments

Mark to market & prudent provisioning policies

Medium

V. High

THE FIST OF DETERMINATIONKnuckles Range - The forest reserve that is nestled in this mountain range is home to many endemic plants and animals

76 | Enterprise Risk Management | LOLC | Annual Report 2008/09


Risk Category Risk Primary Impact Secondary Impact

Control ConfidenceLevel

Operational Failure of Internal controls

Operationaleffectiveness

Reputation & Image

Internal control framework

Internal control reviews Review by external

auditors

High

V. High

High

Technology Operationaleffectiveness

Availability Implementation of a proper ICT security infrastructure

Recovery strategies IT audit reviews

High

High

High

Mismanagement& fraud

Financial Reputation & Image

Fraud management policy & guidelines

Zero tolerance on fraud & abuse

Corporate whistle blowing hot line & witness protection programme

Management insight

V. High

V. High

High

High

Business BusinessStrategy

Market Share Profitability Regular review of the strategic plan

Aggressive marketing strategy

Market research & intelligence

High

V. High

High

Statutory Legal Regulatory Reputation & Image

Anti money laundering policies

100% regulatory compliance

Constant monitoring of the legal environment & regulatory requirements

Staff awareness & non- disclosure agreements

High

V. High

V. High

High

Image & reputation

Publicconfidence

Reputation Corporate governance policy

Code of ethics Strategic CSR

V. High

V. High

Medium

Event Disasterrecovery

Availability Sustainability Disaster recovery & business continuity planning framework & periodic testing

Reduction of inter-dependability of branch network & head office

Medium

High

We at LOLC strongly believe that the ultimate risk mitigation strategy, is building an organisation culture where all levels of employees have the required skills and knowledge to appraise

and manage the risk on operations under their purview which will enhance the value-creation ability of LOLC.

PERSEVERANCECotton Teal - This male is enjoying a well earned rest after

having to fight for hours with two other males to win over his female. In the animal kingdom it’s only the

strongest that is able to pass on his genes



LOLC Group

The financial year saw the Group steer through a period where the global as well as local financial industries witnessed an extremely challenging period. The global recession and tightening of liquidity had a negative impact on the local economy with a reduction in foreign investments as well as a slowdown in exports.

With the recent military victory as the country returns to normalcy after three decades, LOLC looks forward to play a vital role in the positive economic change, being part of the resurgence and rebuilding of the nation. LOLC sees great opportunities and potential to partner the best bilateral and multilateral funding institutions in the world who will add this initiative to their development goals and LOLC is geared with its strategies and processes to be the catalyst in taking same to the neediest through the SME and Micro Sector business model. The Group looks forward to this in the coming year and the years to come.

The Group acquired Commercial Leasing Company PLC (CLC) during the first quarter of the year, a move which saw the Group becoming the market leader in the leasing industry. During the fourth quarter, the Group spun-off its Micro Credit Business Unit as a separate company, LOLC Micro Credit Ltd. (LOMC). Lanka ORIX Factors Ltd. (LOFAC) the pioneer debt factoring company in the country was merged with the Parent Company, LOLC.

FinancialReview

With the recent military victory as the country returns to normalcy after three decades, LOLC looks forward to play a vital role in the positive economic change, being part of the resurgence and rebuilding of the nation

During the year under review, the Group’s income increased by 66% to Rs. 9.8 Bn from Rs. 5.9 Bn recorded during the previous year. In addition, the Group reported sales revenue from instalment sales of Rs. 3.5 Bn during the year.


However, the high interest rate and high inflationary environment that the Group operated within had a negative impact on profitability during the year under review. The Group’s net interest expense increased by 89% to Rs. 6.4 Bn when compared with the previous year due to the increase in the quantum of borrowings as well as the increase in cost of funds.

Provisioning for doubtful debt during the year was Rs. 370 Mn increasing from the previous year’s provision of Rs. 172 Mn.

Financial Review I

POWER OF NATURESt. Claire’s Falls - The upper Kotmale Hydro Power Project may

compromise the beauty of this water fall, but will provide much needed energy to develop the country

The Group’s Profit Before Tax increased by 5.4% from the previous year to Rs. 1.25 Bn. However, due to the taxation charge, profit after tax reduced to Rs. l.l Bn.

The lease and loan portfolio of the Group increased by 51% from Rs. 20.2 Bn to Rs. 30.5 Bn, contributed to by organic growth as well as acquisition of CLC. The total borrowings of the Group increased by 39% from the previous year to Rs. 31.8 Bn. The deposits canvassed by the Finance Company increased the deposit base by 59% to Rs. 5.3 Bn.

Lanka ORIX Leasing Co. PLC (LOLC)

LOFAC was merged with LOLC during the 4th quarter and the financials have been restated to reflect the impact of the merger. During the year under review, the Company’s strategic investments in subsidiaries, associates and joint ventures, increased to Rs. 3.3 Bn from Rs. 1.3 Bn during the previous year, fuelling the growth of the Group. The increase in strategic investments had a negative impact on the financial performance of the Company as the benefits of the investments are reflected in the consolidated financials.

The Company’s net interest expense increased by 42% to Rs. 4.2 Bn when compared with previous year due to the increase in the quantum of borrowings as well as the increase in cost of funds.

GETTING A HEAD STARTFishing Wadduwa - Fishermen heading out to sea on a locally crafted fishing vessel,

PRECIOUS WATERBopath Ella, Ratnapura - The water fall gets its name from its shape, which resembles the Bo- Leaf, the leaf of the Bo-Tree

80 | Financial Review | LOLC | Annual Report 2008/09

The executions of the Company were maintained at the same level as the previous year with new executions of Rs. 12.2 Bn. The aggressive growth seen in the previous year was not seen in the current year, with the change in strategic direction by the Company to concentrate on credit quality of the new portfolio given the possible impact from the economic crisis.

The income of the Company increased by 23% to Rs. 6.1 Bn during the year under review and reported sales revenue from instalment sales of Rs. 3.5 Bn. The Company was able to report a gross profit of Rs. 503 Mn from instalment sales.

The Company’s provisioning for doubtful debt during the year increased to Rs. 200 Mn from Rs. 115 Mn during the previous year, reflecting the negative economic conditions prevailing in the country and the resultant dip in collections. The Company’s other income declined to Rs. 71 Mn from Rs. 261 Mn,


primarily due to marked to market losses of the Company’s share portfolio, main contributor being the drop in share price of Peoples Merchant Bank. The resultant Profit Before Tax for the year was Rs. 580 Mn and the Profit After Tax for the year was Rs. 504 Mn. The increase in operating expenses and increase in the borrowing cost affected the cost to income ratio.

The Company’s lease and loan portfolio remained at the same level as the previous year. The transfer of the Company’s Micro Credit Portfolio to LOLC Micro Credit Ltd. (LOMC) as well as the change in focus during the second half of the year towards maintaining a high asset quality within the turbulent economic environment contributed towards the lack of growth in the Company’s loan book. In addition, the Company has a factoring portfolio of Rs. 1.2 Bn following the merger of LOFAC.

Financial Review I

BLESSINGS FROM AFARSigiriya & Pidurangala - the historically renowned fortress

kingdom and the naturally fortified mountain temple, an uncommon site only seen from the bund of the Thalkote Tank

The increase in interest cost had a negative impact on the Company’s interest cover with the interest cover coming down to 1.14 times from 1.28 times at the end of the year.

GREEN ABUNDANCEValley, Nuwara Eliya - Lush green beauty, co-existing with civilization, a true representation of green Sri Lanka



The financial year completed was a challenging year which saw major changes within the Company. The approval to mobilise foreign currency deposits, setting up of a dedicated Islamic Business Unit (IBU) and launching of the island-wide ATM network were highlights for the year changing the landscape for the financial results of the Finance Company. The upgrading of the Company’s credit rating to A-(lka) by Fitch Ratings, during the turbulent year which saw the collapse of a number of financial institutions as well as the down grading of credit ratings of many financial institutions, was another significant achievement by the Company.

The deposit base increased by 59% from Rs. 3.3 Bn to Rs. 5.3 Bn which can be considered the greatest achievement given the challenges faced in the light of the collapse of several finance companies in the country. Savings deposits too saw significant growth, with the savings deposit base growing by 56% when compared with the previous year.

Although the financial markets contracted during the year and many financial institutions were faced with liquidity problems, the Company was able to source additional financing locally as well as from international funding partners. The Company’s total borrowings increased by 12% from the previous year to Rs. 24.8 Bn. The Company’s debt to equity ratio increased to 4.87 times from 4.68 times by end of the year.


The income of the Company increased from Rs. 725 Mn to Rs. 1.1 Bn, a 53% growth over last year. The interest costs including deposits increased 85% to reach Rs. 872 Mn, clearly reflecting the impact of the growth in the deposit base and in the high interest rates.

UNIQUECeylon Blue Magpie - This endemic species found in the

Sinharaja World Heritage Site has drawn many from all over the world to the country

ON TOP OF THE WORLDAdam’s-Peak - Those who have the will to make the climb

to the peak and endure the extreme cold in the night will be rewarded with the breathtaking beauty that surrounds the

peak during sun rise

Financial Review I

The product profile of the Company saw significant changes with the introduction of foreign currency deposits as well as specialised products designed for the IBU. The lending portfolio saw a shift towards an increased loan portfolio accounting for 64% of the total portfolio. The reduction came from leases and hire purchases.

The Company made provisions against bad and doubtful debt of Rs. 72 Mn and this was 46% higher than last year.

With the expansion of the branch network the operating expenses saw an increase and reached Rs. 245 Mn by the year end. The resultant Profit Before Tax was Rs. 103 Mn, marginally higher than last year’s Rs. 100 Mn.

Commercial Leasing Company PLC (CLC)

The newest addition to the LOLC Group, completed a very successful year with very positive contributions made to the Group. The Company’s financial year end was changed from December to March in line with the LOLC Group’s financial year end. Further, the Company was de-listed on the 24th of March 2009, with LOLC acquiring further shares, increasing LOLC’s stake to 99.6%.

The Company performed well within the turbulent market conditions and continued to expand its portfolio in Leasing, Hire Purchase

and Factoring business. The executions for the 15 months were Rs. 4.4 Bn. The corresponding executions for the period since the acquisition by LOLC were Rs. 3.3 Bn.

The funds in use for the factoring business at the year end were Rs. 772 Mn, a growth of 51% over the previous financial year.

The product mix of the Company at the year end was primarily leases and hire purchases; 31% leases, 59% hire purchases and 9% factoring receivables.

The Company’s operating expenses were Rs. 628 Mn. The Company made a Rs. 80 Mn provision against bad and doubtful debt which includes provisions made under the Direction No. 2 of Central Bank and a general provision.

The borrowing costs increased significantly and ended the year at Rs. 1.6 Bn.

The resultant Profit After Tax for the Company was Rs. 415 Mn, an increase of Rs. 87 Mn recorded for the financial year end December 2007. A provision of Rs. 99 Mn is set aside as taxes.

The net assets grew to Rs. 1.7 Bn and the debt to equity ratio was of the Company was 3.85 times.

LOLC Micro Credit Ltd. (LOMC)

The Micro Credit Company of LOLC started its independent operations in February, with the transfer of the Micro Credit Portfolio from the Parent Company, totaling a book of Rs. 2.3 Bn. During the two months up to the year end, the Company executed facilities up to Rs. 389 Mn. The resultant top line was Rs. 149 Mn.

A FIGHTING CHANCEThe Sri Lankan Leopard - an animal threatened with extinction from the jungles of Sri Lanka due to loss of habitat and poaching in Yala

REWARDBlue Wanderer - Photographing butterflies is a test of patience, but offers a worthy reward


The Micro Credit Portfolio of LOMC consists of agriculture related financing, self-employment and skill enabled facilitates and many related products.

The Company recorded a Profit After Tax of Rs. 28 Mn for the two months in operation.

Lanka ORIX Insurance Brokers Ltd (LOIB)

During the year the Company achieved a significant milestone surpassing the Rs. 1 Bn mark in gross written premiums. Gross written premium recorded for the last year was Rs. 867 Mn. The Company derived Rs. 144 Mn as commission from this business, an increase of Rs. 36 Mn over the last year.

The Company is pursuing strategies to broad base the corporate business having less dependency on the Group business.


During the year, the Company operating expenses increased by 24% to reach Rs.130 Mn which is being carefully managed within the Group expense management initiatives.

The Company recorded a Profit After Tax of Rs.15 Mn. The Company contributed Rs. 22 Mn as royalty fees to the Parent Company and this was a twofold increase from the last year.

Lanka ORIX Information Technology Ltd. (LOIT)

LOIT completed yet another successful year with growth in top line to Rs. 92 Mn from Rs. 74 Mn recorded in the previous financial year. The Company concentrated in Group business and also has made significant investments in infrastructure and human resources in preparation for future expansion of external business. The resultant Profit After Tax was Rs. 41 Mn.

Lanka ORIX Project Development Ltd. (LOPD)

The Company is yet to realise income and profits and was focusing on reaching finalisation of many projects undertaken. However, in the interim, the Company made further losses of Rs. 4 Mn, relatively less than the last year’s loss of Rs. 14 Mn.

FUNDAMENTALSAsian Elephant - Fresh water holes at Yala attract many animals particularly during periods of drought. Knowledge of its location

would be a life saving factor

Financial Review I

Lanka ORIX Securities Ltd. (LOSEC)

LOSEC was directly impacted from the global economic meltdown with many large international institutional investors and local investors choosing a ‘cut losses and exit’ strategy rather than an investing or ‘stay and watch’ strategy. The activities in the Colombo Stock Exchange were minimal, further affected by the long-drawn military offensive in the North, not seeing revival during the financial year. With the recent military victory, the Company can look forward to a positive year ahead with new investments and renewed activity in the market.

The Commission income saw a dip during the year and deteriorated by 51% compared with the previous year. The resultant bottom line was a loss of Rs. 2 Mn.

Touchwood Investments PLC (TIL)

Touchwood Investments began the year on a very positive note with growth strategies put in place for plantation expansion and rapid top line growth. However, the turbulent economic conditions towards the latter half of the year prevented the Company from taking the full benefits from execution of these strategies.

The Company’s top line grew by 22% compared with the previous year to Rs. 727 Mn. This includes the fair value of the plantations amounting to Rs. 502 Mn, an

increase of 10% over the last year. Plantation expansion and other related direct expenses saw a significant increase compared with the previous year in line with the expansion strategy. The Company made a Rs. 244 Mn provision for purchase back guarantees in line with the commitments to the customers on account of the tree sales, an increase of 79% over the previous year.

The Company recorded a 10% decline in profits compared with the previous year’s Rs. 284 Mn and ended the year at Rs. 255 Mn. LOLC’s share of this profit is Rs. 74 Mn, an increase of 29% compared with last year.

Gal Oya Holdings Ltd.

The 50:50 joint venture between LOLC and Browns PLC, for the investment in Gal Oya Holdings Ltd., the Management Company of Gal Oya Plantations Ltd., formally known as Hingurana Sugar, the Public Private

THE BRAVE, RETURNDawn at Dickwella - Fishermen coming home in with the tide after having been at sea throughout the night


Partnership with the Government, required the two investor companies to make initial investments into resurrecting the plantations and the factory. Towards this LOLC has extended project financing of Rs. 208 Mn which will form the equity investment required in Gal Oya Plantations Ltd.

The Company made a loss of Rs. 26 Mn for the year, due to operating expenses. It is expected that the commencement of full operations at Gal Oya Plantations will see positive cash flows coming in to Gal Oya Holdings Ltd., soon after the renovations of the factory is completed.

Sundaya Lanka (Pvt) Ltd.

Sundaya reported a turnover of Rs. 9 Mn for the year. However, the net loss for the year was Rs. 3.4 Mn due to operational expenses.

PRASAC Micro Finance Company - Cambodia

LOLC’s investment in PRASAC, two years ago is giving very positive returns with the excellent performance of the Company with steady growth of top line and bottom line. The share of profits recorded in LOLC books was Rs. 60 Mn, for the 12 months to December 2008. The previous year’s share of profits was Rs. 30 Mn, for the 9 months to December 2007.

FinancialReport

Audit Committee Report 88 I Remuneration Committee Report 89 I Nomination Committee Report 89

Corporate Governance Committee Report 90 I Annual Report of the Directors on the Affairs of the Company 91 I Directors’ Responsibility for Financial Reporting 97

Chief Executive Officer’s and Chief Financial Officer’s Responsibility Statement 98 I Independent Auditor’s Report 99 I Income Statements 100 I Balance Sheets 101

Statements of Changes in Equity 102 I Cash Flow Statements 103 I Notes to the Financial Statements 105 I Milestones 140 I Ten Year Summary 142

Summarised Quarterly Statistics 143 I Value Addition 144 I Group Companies 146 I Investor Information 149 I Economic and Financial Indicators 151

Glossary 152 I Notice of Meeting 155 I Form of Proxy Enclosed I Corporate Information Inner Back Cover


AuditCommitteeReport

The Audit Committee comprises the

following:

M.T.L. Fernando

Independent Director (Committee Chairman)


Independent Director

R.A. Fernando


The composition of this Committee fulfils

the requirements of the Listing Rules of

the Colombo Stock Exchange. Further, the

recommendations of the Code of Corporate

Governance for banks and financial

institutions issued by the Central Bank of

Sri Lanka, which recommends that the

Chairman of the Committee should possess

accountancy qualifications as well as

knowledge and experience in accounting

and auditing is also fulfilled.

The Chairman, Executive Deputy Chairman

and the Executive Managing Director are

invited to attend meetings along with the

Chief Financial Officer. The Committee met

on eight occasions.

The Audit Committee, which has written

terms of reference, reviews matters relating

to the Company’s financials and the financial

accounting systems, the accounting policies

and compliance with Accounting Standards.

The Audit Committee also reviews internal

controls. Internal Audit Reviews are

periodically submitted by the Chief Risk

Officer (CRO) and discussed at meetings to

which the CRO is invited.

If an issue needs to be discussed in depth,

the relevant Divisional Head is also invited

to attend.

The Committee, having thus assessed the

business and control risks prevalent in the

Company, has advised the Board on action to

be taken where weaknesses were observed.

The Audit Committee meets with the External

Auditors to discuss audit issues, as well as

issues highlighted in the Management Letter,

including the Management response and

corrective action taken.

The Committee recommends the payment of

fees to the External Auditors and has given

consideration to the independence of the

External Auditors.

The Audit Committee has recommended

to the Board of Directors that Messrs Ernst

and Young be reappointed as Auditors for

the financial year ending 31st March, 2010.

The reappointment of the Audit Firm and

acceptance of its fee will be subject to the

approval of the shareholders at the Annual

General Meeting to be held on 30th June, 2009.

M.T.L. Fernando

ChairmanAudit Committee

29 May 2009


RemunerationCommitteeReport

Following the introduction of the new

Corporate Governance Rules of the

Colombo Stock Exchange, the Remuneration

Committee was reconstituted. The

Remuneration Committee now comprises

three Independent Directors -

Mr. R.A. Fernando (Chairman of the

Committee), Mr. M.T.L. Fernando and

Deshamanya M.D.D. Pieris.

The Committee initially defined its scope and

purpose as being ‘To ensure the attraction,

retention and motivation of LOLC Talent

through a competitive remuneration and

reward system’. In order to do so, they have

initiated a comprehensive salary survey in

2009. The committee reviewed and redrafted

the remuneration policy based on currently

available information until the comprehensive

survey information is available to impact the

2010 policies. Based on the recommendation

of the Committee, the Board approved

adoption of the policy.

The policy covers remuneration to Executive

and Non-Executive Directors, including the

Non-Executive Chairperson and the Executive

Managing Director/Group CEO, all General

and Deputy General Managers in the holding

company and all its subsidiaries. Under the

terms of this policy, remuneration will be

related to performance and contribution.

The aggregate remuneration paid to the

Executive & Non - Executive Directors

is Rs. 58 Mn.

Ravi A. Fernando

ChairmanRemuneration Committee

29 May 2009

NominationsCommitteeReport

The Nomination Committee comprises the following:

Deshamanya M.D.D. PierisIndependent Director (Committee Chairman)

Mr. R.A. FernandoIndependent Director

Mr. M.T. L. FernandoIndependent Director

Mr. I.C. NanayakkaraExecutive Deputy Chairman

The Board is of the view that the appointing of a Director is a matter that should be deliberated and decided upon by the Board as a whole. However, it was agreed that, in line with recommended governance practices, a Nominations Committee be set

up to assist the Board with Board evaluation and a succession plan.

The Committee has written terms of reference and at its meeting has deliberated methods of Board evaluation.

As there is no vacancy on the Board at present, the Nomination Committee has not been called upon to assess and recommend potential candidates for appointment as Directors.

M.D.D. Pieris

ChairmanNomination Committee

29 May 2009


CorporateGovernanceCommitteeReport

The Corporate Governance Committee

comprises the following:


Independent Director (Committee Chairman)

Mr. R.A. Fernando


Mr. M.T.L. Fernando



Non-Executive Chairman

Having pioneered leasing and factoring,

the Company has strategically increased its

range of operations. The Group now offers

a wide portfolio of products and services,

all of which are financial in nature. This

has two implications. Firstly, the financial

services sector is strictly regulated. Secondly,

stakeholder and regulator confidence is of

vital importance, especially given certain

spectacular collapses of companies in both

the local and global market.

With this in mind, the Corporate Governance

Committee has reviewed the reports submitted

to the Board. Their purpose is to ascertain

whether the information contained therein is

comprehensive, timely, accurate and focused

enough to enable the Board to assess key

areas such as liquidity, extent of liabilities, risk

mitigation, levels of compliance and reporting

to regulators.

Accordingly, several changes have been

instituted. The Group CEO is now required to

regularly and formally brief the Board on the

macro environment and the proposed route

the Group will pursue over the short term and

the long term. In today’s volatile environment, it

is prudent to remain agile enough to meet the

challenges of the changing circumstances,

while not losing sight of the main focus. It is

also necessary to ensure that measures taken

to cope with short-term emergencies do not

undermine long-term progress or go against

agreed controls.

Newly designed risk review reports now

cover all operational areas and also all

support functions, including such key areas

as Information Technology. These reports

identify risks and detail the measures taken

to mitigate them, or make recommendations

for corrective action. The reports also confirm

compliance with regulator and statutory

requirements. In this way, the Board not

only monitors governance, it also reinforces

the message to the management that good

governance is required and expected.

As these reports cover all areas, all Group

companies are also reviewed by the Holding

Company. This ensures that there is no

possibility of distress in one subsidiary going

undetected until it adversely impacts the

whole group.

This cohesive approach also enables

standards to be upheld across the group.

Use of resources is optimised, whether it

be human resources, funding or information

technology. This also contributes towards

reducing waste, managing cost and

increasing productivity.

While the Company’s key ratios are noted and

discussed each month, the Board also looks

at the Group position, to ensure that there is

growth and development overall, even if it is

not indicated in the Company’s figures.

The Committee has also reviewed the

improvements made, to further enhance them

and increase their effectiveness.

M.D.D. Pieris

ChairmanCorporate Governance Committee

29 May 2009


Annual Report of the Board of Directors on the Affairs of the Company

The Directors take pleasure in presenting

their report together with the audited

financial statements for the year ended

31st March, 2009.

PRINCIPAL ACTIVITIES

The principal activities of the Company are

the provision of financial services, including

finance and operating leasing, factoring,

mortgage finance, loans and hire purchase.

In order to better meet client needs, the

LOLC Group constantly expands its product

range. Group companies now provide

Shar-iah compliant financing, micro finance

facilities, fixed and savings deposits, pawning,

margin trading financing, insurance broking

and trading in equity and debt securities.

In keeping with the Group’s movement to

sustainable development with a greater focus

on environmental responsibility, the Group

has sought to improve the productivity and

efficiency of the operations of companies in

which it has made strategic investments and

which are engaged in reforestation, cultivation

and provision of solar power.

Directorate

The Directors of the Company during the year

under review are as follows:


Non-Executive Chairperson

Mr. I.C. Nanayakkara

Executive Deputy Chairman



Mr. M.T.L. Fernando


Mr. R.A. Fernando



Executive Director

Mr. T.H.M. Wickremasinghe

Non-Executive Director

Mr. R.M. Nanayakkara

Non-Executive Director


Managing Director - Group CEO

Mr. M. Inoue (appointed w.e.f. 06.02.09)

Mr. H. Ichida (appointed w.e.f. 06.02.09)

Alternate to Mr. M. InoueMr. M. Sekimoto (appointed w.e.f. 06.02.09)

Alternate to Mr. H. IchidaMr. Y. Matsuoka (appointed w.e.f. 06.02.09)

Mr. Y. Oshima

Non-Executive Director (resigned w.e.f. 06.02.09)

Mr. K. Fushitani

Non-Executive Director(resigned w.e.f. 06.02.09)

Alternates to Mr. OshimaMr. T. Mori (appointed w.e.f. 23.04.08 and

resigned w.e.f. 31.07.08)

Mr. K. Katayama (appointed w.e.f. 31.07.08

and resigned w.e.f. 31.10.2008)

Mr. Y. Matsuoka (appointed w.e.f. 31.10.08

and ceased w.e.f. 06.02.09)

Alternate to Mr. Fushitani Mr. M. Sekimoto (ceased to be alternate

w.e.f. 06.02.09)

The profiles of the Directors are given on

pages 22 to 25.

INDEPENDENT DIRECTORS

The Independent Directors are

Mr. M.T.L. Fernando, Deshamanya

M.D.D. Pieris and Mr. R.A. Fernando.

Mr. M.T.L. Fernando has served as a Director

for over nine years. Over the course of his

illustrious career, Mr. Lal Fernando has

served on the Boards of several private

and quoted companies and also with state

enterprises. The Board values his expertise

and integrity and is satisfied that Mr. Lal

Fernando remains independent, despite his

years of service.

Mr. R.A. Fernando has just completed nine

years on the Board. Mr. Ravi Fernando holds

a Postgraduate Certificate in Sustainable

Business from Cambridge University and

is currently reading for his Ph.D. at PIM on

‘Strategic Corporate Responsibility and

Sustainable Business’. His expertise is

especially valuable to the LOLC Group as

it focuses on sustainable development and

environmental responsibility. The Board is

satisfied that Mr. Ravi Fernando’s ability to

function as an Independent Director is not

affected by his years of service.

Accordingly, the Board is of the opinion

that both Mr. Lal Fernando and Mr. Ravi

Fernando should be considered Independent

Directors. Both Directors meet all other

qualifying criteria necessary to be viewed as

Independent Directors.

DIRECTORS’ MEETINGS

Board Meetings are held monthly. If a Board

decision is required before a Meeting, it is

obtained by a Circular Resolution. Copies

of these resolutions, together with copies of

Minutes of Board subcommittee Meetings are

tabled at Board Meetings, ensuring that all

Directors are kept well informed .

RE-ELECTION OF DIRECTORS

In terms of Article 84 of the Articles

of Association of the Company, Messrs

I.C. Nanayakkara and T.H.M.

Wickremasinghe retire by rotation.

Mr. Wickremasinghe has communicated

to the Board that he will not be seeking re-

election as a Director. The Board thanks

Mr. Wickremasinghe for the services he

rendered over his years as a Director.

Mr. Nanayakkara will be seeking re-election.

The Board of Directors recommends his

re-election.

In terms of Article 91 of the Articles of

Association of the Company, Mr. H. Ichida

and Mr. M. Inoue retire by rotation and

seek re-election. The Board of Directors

recommends their re-election.

The Company has received notices from

shareholders of their intention in terms of

Section 210 of the Companies Act No. 7

of 2007 to propose the re-elections of

Mrs. R.L. Nanayakkara, Mr. M.T.L. Fernando

and Deshamanya M.D.D. Pieris, all of whom

are over 70 years of age. The Board of

Directors recommends their re-election .

The Directors’ interests in shares as at 31 March 2009 were as follows: As at As at

31.03.2009 31.03.2008

Mrs. R.L. Nanayakkara – –

Mr. I.C. Nanayakkara 5,989,550 5,989,550

Deshamanya M.D.D. Pieris – –

Mr. M.T.L. Fernando 81,844 76,844

Mr. R.A. Fernando 1,500 1,500

Mrs. K.U. Amarasinghe 5,243,200 5,243,200

Mr. T.H.M. Wickremasinghe – –

Mr. R.M. Nanayakkara 14,660,724 14,598,122

Mr. W.D.K. Jayawardena – –

Mr. M. Inoue (appointed w.e.f. 06.02.09) – –

Mr. H. Ichida (Appointed w.e.f. 06.02.09) – –

Mr. K. Fushitani (Resigned w.e.f. 06.02.09) – –

Mr. Y. Oshima (resigned w.e.f. 06.02.09) – –

Mr. M. Sekimoto (Alternate) – –

Mr. Y. Matsuoka (Alternate) – –

92 | Annual Report of the Board of Directors on the Affairs of the Company I LOLC | Annual Report 2008/09

DIRECTORS’ INTERESTS IN CONTRACTS

The Directors have made the declarations

required by the Companies Act No. 7 of 2007.

These have been noted by the Board, recorded

in the Minutes and entered into the Interest

Register which is maintained by the Company.

DIRECTORS’ REMUNERATION

The Directors’ remuneration is disclosed

on page 89.

BOARD SUBCOMMITTEES

In compliance with regulatory guidelines

and also with best practices, the Board has

formed the following subcommittees :

the Executive Committee

the Audit Committee

the Remuneration Committee

the Nomination Committee

the Corporate Governance Committee

The Reports of these Committees (except for

the Executive Committee) can be found on

pages 88, 89 and 90.

In order to ensure speedy response to volatile

economic conditions, the Board has tasked

the Managing Director/Group CEO with

assets and liability management and liquidity

management. The MD meets with the key

senior management to ensure that resources

are optimised, liquidity is maintained and risk

is recognised and provided for.

Following focused efforts, the Group IT

Steering Committee (comprising the

Chairperson, one of the Executive Directors,

the Chief Information Officer, the Chief

Finance Officer and the Chief Risk Officer)

has been able to streamline IT development

within the Group and increase automation.

This has further increased the accuracy

and comprehensiveness of management

information. The Chief Information Officer is

tasked with reviewing licensing and IT security.

REVIEW OF BUSINESS

Following its purchase of 67% of the stated

capital of Commercial Leasing Company

PLC (CLC), the Company, in accordance

with the provisions of the Take Over and

Mergers Code of the Securities and Exchange

Commission, made an offer to all the

remaining shareholders for the purchase of

the remaining shares and acquired a further

30% of the stated capital.

The Board of Directors of CLC then

recommended to the shareholders that

CLC be de-listed. In order to provide the

remaining shareholders with an exit option,

the Company then made a further offer to the

few remaining shareholders.

Currently the Company holds 99.6% of the

stated capital.

The Company has sharpened its focus on

micro finance by incorporating a subsidiary

company, LOLC Micro Credit Ltd. (LOMC)

to pursue this area of operations. The

Company is delighted that its vision in

this area is shared by several foreign

development financiers. LOMC has invited

the Nederlandse Financierings -

Maatschappij voor Ontwikkelingslanden

N.V. (FMO) to invest in 20% of the stated

capital of the Company and also provide

significant loans. Other foreign financing is

also being successfully pursued.

DIRECTORS’ RESPONSIBILITY FORFINANCIAL REPORTING

The Directors are responsible for the

preparation of Financial Statements of the

Company to reflect a true and fair view of the

state of its affairs. The Directors are of the

view that the Financial Statements (appearing

on pages 100 to 139) have been prepared in

accordance with the requirements of the Sri

Lanka Accounting Standards, the Companies

Act No. 7 of 2007, the Finance Leasing Act

No. 56 of 2000 and all relevant directions of

the Central Bank of Sri Lanka.

Annual Report of the Board of Directors on the Affairs of the Company I LOLC I Annual Report 2008/09 | 93

In accordance with the Listing Rules of the

Colombo Stock Exchange, interim Financial

Statements are dispatched to all shareholders

following each of the first three quarters of

the financial year. The Company sends out

its Annual Report (with a review of the entire

financial year) within three months of the

financial year end thus making dispatch of last

quarter accounts unnecessary.

RESPONSIBILITY STATEMENTS

The Chief Executive Officer’s and Chief

Financial Officer’s Responsibility for Financial

Reporting Statement appears on pages 98.

The Directors Responsibility for Financial

Reporting Statement appears on page 97.

GOING CONCERN

The Directors believe that the Company is

in a position to continue its operations in the

foreseeable future. Accordingly, the Financial

Statements are prepared on the basis that

the Company is a going concern.

FINANCIAL STATEMENTS

The Financial Statements are given on

pages 100 to 139.

INCOME

The income of the Company was

Rs. 6,120,691,922 /- (2008 -

Rs. 4,960,979,140/-). The income of the

Group was Rs. 9,843,453,815/-

(2008 - Rs. 5,934,772,221/-)

PROFIT

Despite difficulties faced due to increasing

cost of funds, the Company made a profit of

Rs. 503,952,740 /- (2008 - Rs. 1,059,236,649/-).

The profit of the Group was

Rs. 1,055,176,529 /- (2008 - Rs. 1,343,495,401/-)

PROFIT AND APPROPRIATIONS2008/09 2007/08

(Restated)Rs. Rs.

Net profit of the Group for the year after providing for all expenses,

known liabilities and depreciation of property, plant & equipment 824,180,680 650,107,421

to which income earned on other activities is added 282,660,615 313,375,519

Goodwill on consolidation is added – 131,292,503

share of profit of Associate companies 140,457,638 88,276,885

and income tax and deferred tax on Group Profit has

to be added/(deducted) (192,122,404) 160,443,073

leaving the Group with a Profit after taxation of 1,055,176,529 1,343,495,401

from which the amount attributable to minority interest is adjusted (1,022,907) (2,616,118)

and transfer to Reserve Fund (48,206,669) (71,692,027)

transfer from retained earnings (32,185,234) –

and deduct the payment of the interim Dividend of Rs. 2.80 per share

for 2008/09 on a Stated Capital of Rs. 475,200,000/-

(2007/08 Rs. 2.25 per share on a Stated Capital of Rs. 475,200,000/-) (134,718,375) (106,920,000)

leaving a sum of 839,043,344 1,162,267,256

to be carried forward out of the year’s profit which when added

to the profit brought forward from previous years of 4,142,813,661 2,980,546,405

leaves an unappropriated profit of 4,981,857,005 4,142,813,661

after these appropriations, the total reserves of the Group stand at 5,536,269,470 4,649,019,458


SIGNIFICANT ACCOUNTING POLICIES

The Significant Accounting Polices adopted

when preparing these Financial Statements

and any changes thereof if applicable are

given on pages 105 to 114.

STATUTORY PAYMENTS

For the year under review, all known statutory

payments have been made and all retirement

gratuities have been provided for. Further, all

management fees and payments to related

parties for the year under review have been

reflected in the accounts. Details are given in

Note 12 of page 117.

DONATIONS

During the year under review, the Company

made donations amounting to Rs. 546,125/-

(2008 - Rs 118,000/-)

AUDITORS

The Auditors, Messrs Ernst and Young retire

and offer themselves for reappointment. The

Board recommends their reappointment for

the year 2009/10, at a fee to be decided

upon by the Board.

During the year under review, the

Auditors were paid Rs. 1,975,000/- as

audit fees. They were paid a further

amount of Rs 373,690/- for provision

of professional services.

As far as the Directors are aware, the

Auditors do not have any other relationship

with the Company or any of its subsidiaries

nor do they have any interest in contracts

with the Company or any of its subsidiaries.

AUDITOR’S REPORT

The Auditor’s Report appears on page 99.

INTERNAL CONTROLS

Internal controls are periodically reviewed.

The Enterprise Risk Management Division

periodically submits reports to the Audit

Committee, analysing risk in operational

areas, procedures or practices, and

recommending corrective measures.

Following the recommendation of the

Corporate Governance Committee, risk

reports are called for from all Group

companies and analysed by the Board

of the holding Company.

The Risk Management Report on pages 72 to

77 and the Enterprise Governance Report on

pages 60 to 71 give further details.

COMPLIANCE WITH LAWS ANDREGULATIONS

The Company has not engaged in any

activity that contravenes any applicable

law or regulation.

CORPORATE GOVERNANCE

The Corporate Governance committee

meets quarterly and regularly recommends

improvements to existing controls, policies

and procedures. All aspects of risk are being

reviewed, together with mitigating measures

being taken.

Details of steps taken in this connection are

given in the Enterprise Governance Report

found on pages 60 to 71.

ADOPTION OF APPLICABLE REGULATORYAND STATUTORY REQUIREMENTS

Following the revision of the Listing Rules

of the Colombo Stock Exchange (CSE), the

Company has submitted to the CSE the

required listing undertaking.

All group companies have been re-registered

under the Companies Act No. 7 of 2007.

The Board is constantly reviewing risk

assessment and management and compliance

with regulatory and statutory requirements. The

introduction of new procedures and additional

reports enhance Board control and serve to

remind senior management of the need for

strict compliance. It also serves to highlight

non-compliance early.

Annual Report of the Board of Directors on the Affairs of the Company I LOLC I Annual Report 2008/09 | 95

The Company complies with all Directions

and Regulations of the Central Bank of

Sri Lanka on management of companies

engaged in leasing. The Group complies

with any such direction or regulation on

leasing and also those applicable to finance

companies. Monthly compliance reports are

submitted to the Board.

SHAREHOLDINGS

The stated capital of the Company is

Rs. 475,200,000/-, divided into 47,520,000

shares. The shareholding structure is given

on pages 149 to 150, together with the 20

largest shareholders. During the year, the

share price ranged from Rs. 58/- to Rs. 136/-.

As at the end of trading on 31st March, 2009,

the share price was Rs. 69.25.

EQUITABLE TREATMENT OFSHAREHOLDERS

The Directors have made every endeavour

to ensure the equitable treatment of

all shareholders and are committed to

maximising shareholder wealth.

Notice of shareholders’ Meetings are sent

out as required by the Companies Act

No. 7 of 2007, and by the Company’s Articles

of Association. Two way proxies enable all

shareholders to indicate their consent or

dissent on any decision, even if they are

unable to be present at the meeting.

DIVIDENDS

An interim Dividend of Rs. 2.80 per share

(2008 - Rs. 2.25 ) was paid on 26th June,

2008. Taking into account the general decline

in businesses both locally and globally, and

believing that the LOLC Group needs to be

able to immediately honour all commitments,

the Directors are of the view that maintaining

liquidity is crucial.

EVENTS OCCURRING AFTER THEBALANCE SHEET DATE

The Company responded to an invitation

by the Central Bank of Sri Lanka (CBSL) to

invest in a percentage of the stated capital

of Seylan Bank PLC. Working within very

strict time frames and always conscious of

the need to maintain confidentiality of price

sensitive information, the Company followed

up its initial response with a bid. The CBSL

is currently reviewing the bids.

NOTICE OF MEETING

The Notice of Meeting is found on page

155 If you are unable to be present, please

complete and return the Form of Proxy.

HUMAN RESOURCES

During the year under review, the

implementation of the BU structure was

strengthened by the physical relocating of

staff. This has not only enhanced teamwork

but also facilitated training, as group

employees are exposed to the whole range

of the Company’s products and services.

Uniformity of practices and procedures

can be better ensured, while controls are

strengthened.

The refurbishment of the Head Office

building is nearing completion. The improved

environment is having a positive impact on

the workforce and also lends itself to better

security, in terms of physical resources,

human capital and IT safety needs.

Remuneration continues to be linked to

performance. Performance appraisals were

once more reviewed, to ensure that they enable

an employee’s performance to be assessed

as accurately as possible, with regard to both

qualitative and the quantitative aspects.

Kapila JayawardenaGroup Managing Director/Chief Executive Officer

27 May 2009


Directors’ Responsibilityfor Financial Reporting

The Directors confirm that the Company’s

Financial Statements for the year to

31st March, 2009 are prepared and

presented in conformity with the requirements

of the Sri Lanka Accounting Standards, the

Regulations and Directions of the Central

Bank of Sri Lanka, the Listing Rules of the

Colombo Stock Exchange, the Finance

Leasing Act No. 56 of 2000 and the

Companies Act No. 7 of 2007. They believe

that the Financial Statements present a true

and fair view of the state of the affairs of the

Company and of the Group as at the end of

the financial year.

The Directors also accept responsibility for

the integrity and accuracy of the Financial

Statements presented and confirm that

appropriate accounting policies have been

selected and applied consistently and

reasonable and prudent judgment has

been exercised so as to accurately report

transactions.

The Directors have taken reasonable steps

to safeguard the assets of the Company, to

prevent, deter and detect fraud, and to ensure

the integrity, accuracy and safeguarding of

operational and financial records.

The Directors confirm that to the best of their

knowledge, all statutory payments due in

respect of the Company and its subsidiaries

as at the balance sheet date have been paid

for, or where relevant, provided for.

The external Auditors, Messrs Ernst and

Young, were provided with the opportunity

to make appropriate inspections of financial

records, minutes and other documents

to enable them to form an opinion of the

Financial Statements. The Report of the

Auditors is set out on page 99.

Kapila Jayawardena


27 May 2009



Chief Executive Officer’s and Chief FinancialOfficer’s ResponsibilityStatement

The Financial Statements are prepared in

compliance with the Sri Lanka Accounting

Standards issued by the Institute of

Chartered Accountants of Sri Lanka and the

requirements of the Companies Act No. 7

of 2007 and any other applicable statutes

to the extent applicable to the Company.

There are no departures from the prescribed

accounting standards in their adoption. The

accounting policies used in the preparation

of the Financial Statements are appropriate

and are consistently applied.

The Board of Directors and the management

of your Company accept responsibility for

the integrity and objectivity of these Financial

Statements. The estimates and judgments

relating to the Financial Statements were

made on a prudent and reasonable basis,

in order that the Financial Statements reflect

in a true and fair manner, the form and

substance of transactions and reasonably

present the Company’s state of affairs. To

ensure this, the Company has taken proper

and sufficient care in installing a system of

internal controls and accounting records,

for safeguarding assets and for preventing

and detecting frauds as well as other

irregularities, which is reviewed, evaluated

and updated on an ongoing basis. Our

Internal Auditors have conducted periodic

audits to provide reasonable assurance that

the established policies and procedures of

the Company were consistently followed.

However, there are inherent limitations

that should be recognised in weighing the

assurances provided by any system of

internal controls and accounting.

The Financial Statements were audited by

M/s. Ernst & Young, Chartered Accountants,

the Company’s External Auditors. The Audit

Committee of your Company meets periodically

with the Internal Auditors and the External

Auditors to review the manner in which these

auditors are performing their responsibilities

and to discuss auditing, internal control and

financial reporting issues. To ensure complete

independence, the External Auditors and the

Internal Auditors have full and free access to

the members of the Audit Committee to discuss

any matter of substance.

It is also declared and confirmed that the

Company has complied with and ensured

compliance by the Auditor with the guidelines

for the audit of listed companies where

mandatory compliance is required. It is further

confirmed that all the other guidelines have

been complied with.

Kapila Jayawardena


Sunjeevani Kotakadeniya

Chief Financial OfficerLOLC Group

27 May 2009


IndependentAuditor’s Report

HMAJ/TWC/JJ

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF LANKA ORIX LEASING COMPANY PLC

Report on the Financial StatementsWe have audited the accompanying financial statements of Lanka Orix Leasing Company PLC (“the Company”) and the consolidated financial statements of the Company and its subsidiaries, (‘the Group’) which comprise the balance sheets as at 31 March 2009, and the income statements, statements of changes in equity and cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Scope of Audit and Basis of OpinionOur responsibility is to express an opinion onthese financial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures

in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.

OpinionIn our opinion, so far as appears from our examination, the Company maintained proper accounting records for the year ended 31 March 2009 and the financial statements give a true and fair view of the Company’s state of affairs as at 31 March 2009 and its profit and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs as at 31 March 2009 and the profit and cash flows for the year then ended, in accordance with Sri Lanka Accounting Standards, of the Company and its subsidiaries dealt with thereby, so far as concerns the shareholders of the Company.

Report on Other Legal and Regulatory RequirementsIn our opinion, these financial statements also comply with the requirements of Sections 151(2) and 153(2) to 153(7) of the Companies Act No. 07 of 2007.

27 May 2009Colombo.


IncomeStatements

Group Company

For the year ended 31 March 2009 2008 2009 2008 Restated Note Rs. Rs. Rs. Rs.

GROSS REVENUE 3 13,621,721,231 6,248,147,740 9,687,377,538 5,222,232,312

REVENUE

Revenue from instalment sales 3,495,606,802 – 3,495,606,802 –

Less: cost of sales (2,993,076,288) – (2,993,076,288) –

Gross profit 502,530,514 – 502,530,514 –

INCOME 4 9,843,453,815 5,934,772,221 6,120,691,922 4,960,979,139

OPERATING EXPENSES 5

Direct expenses excluding interest costs 6 (497,742,300) (218,144,472) (314,921,094) (174,335,683)

Provision for bad and doubtful debts (369,767,923) (171,592,067) (200,446,301) (114,887,215)

Staff costs 7 (727,552,967) (521,628,481) (358,807,279) (360,542,736)

Depreciation (498,266,606) (319,886,314) (409,933,410) (298,137,043)

Other operating expenses 8 (987,292,400) (649,448,292) (624,799,364) (460,937,228)

OPERATING PROFIT BEFORE NET INTEREST COST 7,265,362,133 4,054,072,595 4,714,314,988 3,552,139,234

Net interest costs 9 (6,441,181,453) (3,403,965,174) (4,205,473,730) (2,972,056,968)

RESULTS FROM OPERATING ACTIVITIES 824,180,680 650,107,421 508,841,258 580,082,266

Other income/(expenses) 10 282,660,615 313,375,519 71,078,814 261,253,173

Negative Goodwill 11 – 131,292,503 – –

Share of profit of associate companies 140,457,638 88,276,885 – –

PROFIT BEFORE TAXATION 1,247,298,933 1,183,052,328 579,920,072 841,335,439

Taxation 12 (192,122,404) 160,443,073 (75,967,332) 217,901,210

PROFIT FOR THE YEAR 1,055,176,529 1,343,495,401 503,952,740 1,059,236,649

Attributable to:

Equity holders of the Company 1,054,153,622 1,340,879,283 503,952,740 1,059,236,649

Minority interest 1,022,907 2,616,118 – –

PROFIT FOR THE YEAR 1,055,176,529 1,343,495,401 503,952,740 1,059,236,649

BASIC/DILUTED EARNINGS PER SHARE 13 22.18 28.22

Figures in brackets indicate deductions.

The above Income Statements should be read in conjunction with the Notes, which form an integral part of these Financial Statements,

disclosed on pages 105 to 139.


BalanceSheets

Group Company

As at 31 March 2009 2008 2009 2008 Restated Note Rs. Rs. Rs. Rs.

ASSETSCash and cash equivalents 14 1,832,565,294 1,072,750,722 552,835,056 606,030,326Short-term investments 920,295,148 863,356,920 13,351,058 178,838,916Rentals receivable on lease assets/hire purchase/others 15 17,193,230,490 11,602,159,331 6,497,919,685 9,984,330,771Advances and other loans 16 10,297,960,442 8,562,905,852 7,532,245,716 6,742,226,553Instalment sales 17 2,954,951,809 – 2,954,951,809 – Factoring receivable 1,897,170,734 1,109,135,185 1,138,142,223 1,109,135,185Inventories 19,572,061 20,884,442 – – Real estate stocks 124,121,566 160,757,548 3,135,535 39,290,372Advances for margin trading 51,070,162 79,880,328 – – Other current assets 18 2,423,498,281 1,587,243,130 3,636,303,826 1,771,252,175Investment Securities 19 292,711,686 365,660,795 289,966,285 365,482,970Investment in term deposits 3,864,491,419 4,362,623,372 2,281,454,487 4,239,553,926Deferred tax asset 20 548,735,133 563,105,368 539,311,406 562,231,103Investments in joint venture 21 – – 10,000,000 100,000,000Investments in associate companies 22 676,420,661 492,585,403 278,190,903 278,190,903Investments in subsidiary companies 23 20 20 2,997,494,547 911,245,620Goodwill 151,415,234 – – – Intangible assets 24 144,206,594 – – – Property, plant and equipment 25 2,969,649,409 2,151,209,445 2,603,966,056 2,108,258,683Total assets 46,362,066,143 32,994,257,861 31,329,268,592 28,996,067,503 LIABILITIES AND EQUITYLiabilitiesBank Overdraft 2,750,579,613 1,090,023,468 1,909,632,293 786,837,530Deposits from customers 26 5,303,920,975 3,339,664,870 – – Short-term borrowings 27 9,792,087,865 7,865,273,046 7,525,259,970 7,555,533,046Finance lease liabilities 28 612,754,819 961,803,300 612,754,819 961,151,033Provision for taxation 165,528,410 21,301,187 113,855,355 8,739,146Long-term borrowings - current 29 6,676,896,050 3,867,594,352 4,442,165,898 3,867,594,352Trade and other payables 30 2,611,688,796 1,500,815,506 1,212,462,796 1,909,078,611Long-term borrowings - non-current 29 11,931,366,227 9,102,258,984 10,359,946,685 9,102,258,984Deferred taxation 351,416,535 15,881,811 – – Retirement benefit obligations 31 74,349,053 51,772,347 51,819,459 42,737,849Total liabilities 40,270,588,343 27,816,388,871 26,227,897,275 24,233,930,551 Equity Stated capital 32 475,200,000 475,200,000 475,200,000 475,200,000Reserves 33 554,412,465 506,205,796 529,406,289 494,396,232Retained earnings 34 4,981,857,006 4,142,813,662 4,096,765,029 3,792,540,720Equity attributable to equity holders of the Company 6,011,469,471 5,124,219,458 5,101,371,317 4,762,136,952Minority interest 35 80,008,329 53,649,532 – – Total equity 6,091,477,800 5,177,868,990 5,101,371,317 4,762,136,952Total liabilities & equity 46,362,066,143 32,994,257,861 31,329,268,592 28,996,067,503

The above Balance Sheets should be read in conjunction with the Notes, which form an integral part of these Financial Statements, disclosed on pages 105 to 139.

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.

The Chief Financial Officer - LOLC Group certifies that the Financial Statements have been prepared in compliance with the requirements of the Companies Act No. 07 of 2007.

Mrs. S.S. KotakadeniyaChief Financial Officer - LOLC Group

Signed on behalf of the Board

Mrs. R.L. Nanayakkara Mr. W.D.K. Jayawardena Chairperson Group Managing Director/CEO 27 May 2009Rajagiriya (Greater Colombo)


Statement of Changes in EquityGROUP Attributable to Equity Holders of the Company Stated Subsidiary Revaluation Future Statutory Retained Minority Total Capital Share Reserve Taxation Reserve Earnings Interest Premium ReserveFor the year ended 31 March 2009 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 31.03.2007 475,200,000 536,504 – 205,000,000 123,574,424 2,980,546,405 40,061,662 3,824,918,995

Profit for the year – – – – – 1,340,879,283 2,616,118 1,343,495,401

Dividends – – – – – (106,920,000) – (106,920,000)

Addition to minority through

acquisition of subsidiary – – – – – – 10,971,752 10,971,752

Transfers during the year – – – – 71,692,027 (71,692,027) – –

Revaluations during the year – – 105,402,842 – – – – 105,402,842

Balance as at 31.03.2008 475,200,000 536,504 105,402,842 205,000,000 195,266,451 4,142,813,661 53,649,532 5,177,868,990

Profit for the year – – – – – 1,054,153,622 1,022,907 1,055,176,529

Dividends – – – – – (134,718,375) – (134,718,375)

Addition to minority through

acquisition of subsidiary – – – – – – 25,335,890 25,335,890

Transferred back to retained earnings – – – – – (32,185,234) – (32,185,234)


Balance as at 31.03.2009 475,200,000 536,504 105,402,842 205,000,000 243,473,120 4,981,857,005 80,008,329 6,091,477,800

COMPANY Attributable to Equity Holders of the Company Stated Subsidiary Revaluation Future Statutory Retained Minority Total Capital Share Reserve Taxation Reserve Earnings Interest Premium ReserveFor the year ended 31 March 2009 Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 31.03.2007 475,200,000 – – 205,000,000 115,542,388 2,898,544,546 – 3,694,286,934

Transferred to retained

earnings through merger – – – – – 14,284,169 – 14,284,169

Profit for the year – – – – – 1,059,236,649 – 1,059,236,649

Dividends – – – – – (111,073,642) – (111,073,642)


Transferred to retained earnings – – – – – – – –

Revaluations during the year – – 105,402,842 – – – – 105,402,842

Balance as at 31.03.2008 475,200,000 – 105,402,842 205,000,000 183,993,390 3,792,540,720 – 4,762,136,952

Profit for the year – – – – – 503,952,740 – 503,952,740

Transferred to retained earnings

to factoring receivables – – – – – (30,000,000) – (30,000,000)

Dividends – – – – – (134,718,375) – (134,718,375)


Revaluation during the year – – – – – – – –

Balance as at 31.03.2009 475,200,000 – -105,402,842 205,000,000 219,003,446 4,096,765,029 – 5,101,371,317


Cash Flow Statement

Group Company


CASH FLOW FROM OPERATING ACTIVITIES

Net profit before taxation 1,247,298,933 1,183,052,328 579,920,072 841,335,439

Adjustment for:

(Profit)/Loss on sale of property, plant and equipment (16,173,288) (6,158,934) (9,468,008) (3,176,819)

Depreciation 498,266,606 319,886,314 409,933,410 298,137,043

Provision for gratuity 8,146,452 18,448,564 9,235,879 15,797,824

Allowances for doubtful debts 274,320,990 119,014,628 121,115,756 76,585,720

Provision for fall/(increase) in value of investments 180,997,507 (138,353,860) 178,573,279 (136,427,230)

Capital gain on treasury bond trading (25,196,300) – (25,196,300) –

Investment income (3,175,105) (1,789,404) (28,159,560) (8,659,278)

Interest cost 6,612,437,228 3,633,596,534 4,376,729,505 3,290,826,740

Interest income (171,255,775) (229,631,360) (171,255,775) (229,631,360)

(Profit)/Loss on sale of investments – (47,744,537) – (47,744,537)

Negative Goodwill – (131,235,677) – –

Share of profit of equity accounted investees (140,457,638) (88,276,885) – –

7,217,910,677 3,447,755,383 4,861,508,186 3,255,708,103

Operating profit before working capital change 8,465,209,610 4,630,807,711 5,441,428,258 4,097,043,542

(Increase)/Decrease in accounts receivables & others (4,550,833,939) (580,419,322) 1,260,954,321 (1,291,710,514)

Change in inventories 1,312,381 (3,447,493) – –

Increase/(Decrease) in accounts payables 1,411,882,380 (108,579,785) (846,619,083) 976,122,896

(Increase)/Decrease in real estate stocks 36,635,982 (10,772,430) 36,154,837 7,475,345

(Increase)/Decrease Investment in leases 6,151,356,956 (1,463,786,152) 2,177,476,125 (1,217,757,622)

(Increase)/Decrease in factoring account receivable (798,386,414) (615,752,485) (39,357,903) (621,445,221)

(Increase)/Decrease Investment in advances and other loans (8,603,212,043) (2,811,783,189) (5,675,538,397) (1,523,839,200)

2,113,964,913 (963,733,145) 2,354,498,158 425,889,226

Interest paid (6,128,877,313) (3,022,107,835) (4,526,732,775) (3,107,052,885)

Income tax paid (51,739,684) (156,744,952) (6,186,532) (114,240,753)

Gratuity paid (3,278,593) (1,507,264) (1,111,361) (750,800)

Net cash used in operating activities (4,069,930,677) (4,144,093,196) (2,179,532,510) (2,796,155,212)

Group Company


CASH FLOW FROM INVESTING ACTIVITIES

Investment in subsidiary companies – – (2,086,248,927) (36,244,900)

Net cash & cash equivalents on acquisition of subsidiary (1,313,539,634) 10,404,153 – –

Investment in equity accounted investees (183,835,258) (216,359,359) – (216,359,359)

Investment in joint venture – – 90,000,000 (100,000,000)

Purchase of property, plant and equipment (1,106,008,424) (805,358,312) (1,003,347,160) (794,014,472)

Net proceeds from short term investments (56,938,228) (458,808,018) 165,487,860 (144,060,251)

Net additions to investments 259,010,614 (101,087,928) 654,089,963 (105,278,385)

Increase in investment in term deposits 498,131,954 (1,349,244,407) 1,958,099,439 (1,226,174,961)

Proceed from the sale of property, plant and equipment 120,057,274 67,542,412 107,174,385 65,869,586

Interest received 171,255,775 229,631,360 171,255,775 229,631,360

Dividend received 2,545,905 1,789,404 28,159,560 8,659,278

Rent received 629,200 – – –

Net cash flow from investing activities (1,608,690,820) (2,621,490,695) (84,670,895) (2,317,972,104)

CASH FLOW FROM FINANCING ACTIVITIES

Net proceed from short term borrowings (334,616,265) 2,463,914,708 (430,273,076) 2,369,020,304

Net Increase/(Decrease) in lease liability (349,048,481) (69,904,082) (348,396,214) (69,455,109)

Net Proceeds from customer deposits 1,964,256,104 1,593,500,130 – –

Proceeds from long term loans 8,314,957,324 6,935,999,832 6,515,209,629 6,935,999,833

Repayments of long term loans (4,682,950,382) (4,274,501,532) (4,682,950,382) (4,274,501,532)

Dividend paid (134,718,375) (106,920,000) (134,718,375) (106,920,000)

Net cash generated from financing activities 4,777,879,925 6,542,089,056 918,871,582 4,854,143,496

Net Increase/(Decrease) in cash & cash equivalents during the year (900,741,573) (223,496,835) (1,175,990,033) (259,983,820)

Cash & cash equivalents at the beginning of the year (17,272,746) 206,224,089 (180,807,204) 79,176,616

Cash & cash equivalents at the end of the year (918,014,319) (17,272,746) (1,356,797,237) (180,807,204)

Analysis of Cash & Cash Equivalents at the end of the year

Cash at bank and in hand (Note 14.1) 1,832,565,294 1,072,750,722 552,835,056 606,030,326

Bank overdraft (Note 14.2) (2,750,579,613) (1,090,023,468) (1,909,632,293) (786,837,530)

(918,014,319) (17,272,746) (1,356,797,237) (180,807,204)

104 | Cash Flow Statement I LOLC | Annual Report 2008/09

Notes to the Financial Statements

1. CORPORATE INFORMATION

1.1 General

Lanka ORIX Leasing Company PLC is

a public quoted company incorporated

on 14 March 1980 and domiciled in

Sri Lanka. The Consolidated Financial

Statements of the Company for the year

ended 31 March 2009 comprise of the

Company and its subsidiaries (together

referred to as the ‘Group’).

The Financial Statements were authorised

for issue by the Directors on 29 May 2009.

1.2 Principal Activities and Nature of Operations

During the year, the principal activities

of the Group comprised of leasing,

hire purchase, loans, operating leases,

instalment sales, factoring, insurance

broking, accepting deposits, pawn

broking, Islamic Financing and assembly

and distribution of solar light systems.

1.3 Directors’ Responsibility Statement

The Board of Directors takes the

responsibility for the preparation and

presentation of these Financial

Statements.

2. ACCOUNTING POLICIES

2.1 Statement of Compliance

The Financial Statements of the

Company and those consolidated with

such are prepared in accordance with

the Sri Lanka Accounting Standards

laid down by the Institute of Chartered

Accountants of Sri Lanka and therefore

present fairly the financial position,

financial performance and cash flow of

the Company.

The preparation of Financial Statements

in conformity with SLASs require

management to make judgments,

estimates and assumptions that affect

the application of policies and reported

amounts of assets and liabilities, income

and expenses. The estimates and

associated assumptions are based

on historical experience and various

other factors that are believed to be

reasonable under the circumstances, the

results of which form the basis of making

the judgments about carrying values of

assets and liabilities that are not readily

apparent from other sources. Actual

results may differ from these estimates.

2.2 Basis of Preparation

The Financial Statements are presented

in Sri Lanka Rupees which is also the

Company’s functional currency where

appropriate the significant Accounting

Policies have been disclosed in the

succeeding Notes. The Financial

Statements are prepared on the

historical cost basis and no adjustment

has been made for inflationary factors

affecting the Financial Statements

except for revaluation of land. Assets

and liabilities are grouped by nature and

listed in an order that reflect their relative

liquidity. These Financial Statements

are in compliance with the Companies

Act No. 07 of 2007.

Previous period figures and Notes have

been restated and reclassified wherever

necessary to conform to the current

presentation Note 44.

The specific policies used are

explained below and relate to both the

Consolidated Financial Statements and

that of the Company, except as stated

otherwise.

The Accounting Policies have been

consistently applied by the Company

and are consistent with those used in

the previous year except where the

Company has during the year adopted

SLAS 16 (Revised 2006) - Employee

Benefits Note 31.


Key assumptions concerning the future

and other key sources of estimation of

uncertainty at Balance Sheet date that

may have a significant risk of causing

material adjustments to the carrying

amounts of assets and liabilities within

the next financial year, considered in the

financials include:

· Provision for cost of defined

benefit plan (gratuity) using

an actuarial valuation.

· Deferred tax assets recognised for all

unused tax losses to the extent that it

is probable that taxable profit will be

available against which, the losses

can be utilised.

2.3 Basis of Consolidation

(i) Subsidiaries

The Financial Statements of the

Group represent the consolidation

of the Financial Statements of Lanka

ORIX Leasing Company PLC, and its

subsidiaries as disclosed in Note 23.

Subsidiaries are entities controlled by

the Company. Control exists when the

Company has the power, directly or

indirectly, to govern the financial and

operation policies of an entity so as

to obtain benefits from its activities.

In assessing control, potential voting

rights that presently are exercisable or

convertible are taken into account.

Subsidiaries are consolidated from

the date the Parent Company obtains

control until such time as control

ceases. Acquisition of subsidiaries

are accounted for using the purchase

method of accounting.

The Group Financial Statements are

prepared in accordance with the

Sri Lanka Accounting Standards No. 26

on Consolidated Financial Statements.

The interest of the outside shareholders

of the Group is disclosed separately

under the heading ‘Minority Interest’.

(ii) Associates and Jointly Controlled Entities

Associates are those entities in which

the Group has significant influence,

but not control, over the financial and

operating policies. Joint ventures are

those entities over whose activities the

Group has joint control, established by

contractual agreement and requiring

unanimous consent for strategic

financial and operating decisions.

Significant influence is presumed to exist

when the Group holds between 20% and

50% of the voting power of another entity.

Associates are accounted for using

the equity method (equity accounted

investees) and are initially recognised at

cost. The Group’s investment includes

goodwill identified on acquisition, net

of any accumulated impairment losses.

The Consolidated Financial Statements

include the Group’s share of the income

and expenses and equity movements

of equity accounted investees, after

adjustments to align the accounting

policies with those of the Group, from

the date that significant influence

commences until the date that significant

influence ceases. When the Group’s

share of losses exceeds its interest in an

equity accounted investee, the carrying

amount of that interest (including any

long-term investments) is reduced to nil

and the recognition of further losses is

discontinued except to the extent that

the Group has an obligation or has made

payments on behalf of the investee.

Jointly controlled entities are accounted

for using proportionate consolidation

method, from the date that significant

influence or joint control commences

until the date that significant influence or

joint control ceases.

106 | Notes to the Financial Statements I LOLC | Annual Report 2008/09

(iii) Business Combinations

All business combinations have been

accounted for by applying the purchase

method in accordance with the Sri Lanka

Accounting Standards No. 25 (Revised

2004) - Business Combinations.

Applying this method involves the entity

that obtains control of the other entity

to recognise the fair value of assets

acquired and liabilities and contingent

liabilities assumed, including those not

previously recognised.

(iv) Transactions Eliminated on Consolidation

Intra-group balances and any unrealised

gains and losses or income and

expenses arising from intra-group

transactions are eliminated in preparing

the Consolidated Financial Statements.

(v) Goodwill

Goodwill represents the excess of the

cost of any acquisition of a subsidiary

or an associate over the Group’s interest

in the net fair value of the identifiable

assets, liabilities and contingent

liabilities acquired.

Goodwill is initially recognised at cost.

The Company will test the goodwill for

impairment annually and asses for any

indication of impairment to ensure that

its carrying amount does not exceed the

recoverable amount. If an impairment

loss is identified, it is recognised

immediately to the Income Statement.

Carrying amount of the goodwill arising

on acquisition of subsidiaries and joint

ventures is presented as an intangible

and the goodwill on an acquisition of

and equity accounted investment is

included in the carrying value of the

investment.

In the Group’s interest in the net fair

value of the identifiable assets, liabilities

and contingent liabilities exceeds the

cost of the acquisition of the entity, the

Group will reassess the measurement

of the acquiree’s identifiable assets

and liabilities and the measurement

of the acquiree’s identifiable assets

and liabilities and the measurement of

the cost and recognise the difference

immediately to the Consolidated

Income Statement.

(vi) Intagibale Assets

Intangible assets acquired separately

are measured as initial recognition

at cost. Following initial recognition

intangible assets are carried at cost

less any accumulated amortisation and

any accumulated impairment losses.

The useful life of intangible assets are

assessed to be either finite or indefinite.

Intangible assets with finite areas are

amortised over the useful economic life

and assessed for impairment when ever

there is an indication that the intangible

asset may be impaired. The amortisation

period and the method for an intangible

assets with a finite useful life is reviewed

at least at each financial year end.

2.4 Assets and Bases of their Valuation(i) Cash and Cash Equivalents

Cash and cash equivalents comprise

of cash in hand and cash at banks.

Bank overdrafts that are repayable

on demand and form an integral part

of the Group cash management are

included as a component of Cash and

Cash Equivalents for the purpose of the

statement of cash flows.

(ii) Rentals Receivable on Leased Assets, Mortgage Loans, Hire Purchases

Rentals receivable on leased assets are

accounted for as finance leases and

reflected in the Balance Sheet at balance

cost recoverable after eliminating

unearned income and deducting

pre-paid rentals, rental collections and

provision for doubtful debts.

Notes to the Financial Statements I LOLC | Annual Report 2008/09 | 107

Advances and Other Loans to Customers

Advances and other loans to customers

comprised of revolving loans and loans

with fixed instalments.

Revolving loans to customers are

reflected in the Balance Sheet at

amounts disbursed less repayments

and provision for doubtful debts. Loans

to customers with fixed instalments

are stated in the Balance Sheet net of

possible loan losses and net of interest,

which is not accrued to revenue.

(iii) Provision for Doubtful Debts

The Company computes its provisioning

for bad and doubtful debts according to

the Central Bank Direction No. 2 of 2006.

The specific provisions for doubtful debts

are arrived at using the following bases:

Lease, hire purchase and loan receivables

of Lanka ORIX Leasing Company PLC

and LOLC Micro Credit Ltd.

Twenty percent (20%) of all lease,

hire purchase and loan receivables

(net of unearned income) which are in

arrears for a period of 6 to 12 months.

Fifty percent (50%) of all lease, hire

purchases and loan receivables (net of

unearned income) which are in arrears

for a period of 12 to 18 months.

One hundred percent (100%) of

all lease, hire purchases and loan

receivables (net of unearned income)

which are in arrears for a period of

18 months and more, with additional

specific provisions on a case-by-

case basis.

High risk Micro products of Lanka ORIX Leasing

Company PLC, LOLC Micro Credit Ltd. and

lease, hire purchase and loan receivables

of Lanka ORIX Finance Company Ltd. and

Commercial Leasing Company PLC.

Computation is based on the Direction

No. 1 of 1991 of Section 2 of the Finance

Companies Act No. 78 of 1988.

Fifty percent (50%) on all receivables

(net of unearned income) which are

in arrears for a period of 6 to

12 months.

One hundred percent (100%) on all

receivables (net of unearned income)

which are in arrears for a period of

12 months and more with additional

specific provisions.

Additional specific provisions are

made upon management review

on the performance of the lease,

hire purchase and loan portfolios.

Facilities that are overdue for 18

months or more and fully provided

have been written off against the

provisions made:

The values of the following items held

as collateral for a particular advance

have been deducted in arriving at the

above provisions:

With regard to vehicles that have

been repossessed by the Company,

eighty percent (80%) of the valuation

obtained during the preceding 6

months from a professional valuer

with regard to land and buildings,

the full value, in case of a primary

mortgage, such value shall not

exceed the value decided by a

qualified professional valuer at the

time of providing the accommodation

(iv) Factoring Debtors - (Subsidiary)

Factoring receivables of the Group have

been stated net of specific provisions

based on company provisioning policy.

Any amount uncollectable is written off

against profits.

Further Commercial Leasing Company

PLC makes a general provision of 0.75%

of factoring receivables to absorb any

losses arising from unforeseen events.


(v) Inventories

Inventories are stated at the lower of

cost and net realisable value. Inventories

has been valued based on the weighted

average cost method and includes

expenditure incurred in acquiring the

inventories and bringing them to their

existing condition and location.

(vi) Real Estate Stocks

Real Estate Stocks of the Company

represent the purchase value of

properties acquired for resale with

buy-back agreements, less repayments.

Real Estate Stocks of Lanka ORIX

Finance Company represent the

purchase value of properties acquired

and any subsequent expenditure

incurred on such for development.

(vii) Short-Term Investments

Short-term investment comprises

of call deposits, interest earning

demand deposits with banks and

securities purchased under repurchase

agreements (Repos). Call deposits and

deposits with banks are stated at the

amounts to be realised and Repos are

stated at purchase value plus interest

accrued on a time proportionate basis.

(viii) Investments in Term Deposits

Term deposits are stated at principal

amount plus interest accrued on a time

proportionate basis.

(ix) Investments in Subsidiary Companies

In the Parent Company’s Financial

Statements, the investments in the

Subsidiary Companies are reflected at

cost of acquisition, net of any provision

for diminution in value other than

temporary.

Provision made for fall in value of such

investments is charged against profits.

(x) Investment Securities

Investments in quoted shares are stated

at their respective market values on an

aggregate portfolio basis. Provision for

fall in market value is also made on an

aggregate portfolio basis for each class

of investment.

Investment in Treasury Bills and

commercial papers are shown at initial

cost plus accumulated interest.

Investment in non-quoted shares

are stated at cost of acquisition and

adjusted for any fall in value, which are

other than temporary.

(xi) Receivable from Clients on Share Purchases

Amounts receivable from clients for

shares purchased on behalf of them are

stated at net of specific provisioning.

(xii) Other Receivables

Other receivable balances are stated

at estimated amounts receivable after

providing for doubtful receivables.

(xiii) Property, Plant and Equipment (Other than Operating Lease Assets and Leasehold Vehicles and Machinery)

(a) Recognition and Measurement

Items of property, plant and equipment

are measured at cost/revaluation

less accumulated depreciation/

impairment losses.

Cost includes expenditure that is directly

attributable to the acquisition of the

asset. The cost of self-constructed

assets includes the cost of materials and

direct labour, any other costs directly

attributable to bringing the asset to

a working condition for its intended

use, and the costs of dismantling and

removing the items and restoring the site

on which they are located.


When parts of an item of property, plant

and equipment have different useful

lives, they are accounted for as separate

items of property, plant and equipment.

Gains and losses on disposal of an item

of property, plant and equipment are

determined by comparing the proceeds

from disposal with the carrying amount

of property, plant and equipment

and are recognised net within ‘other

income’ in profit or loss. When revalued

assets are sold, the amounts included

in the revaluation surplus reserve are

transferred to retained earnings.

(b) Subsequent Costs

The cost of replacing part of an item

of property, plant and equipment is

recognised in the carrying amount of

the item if it is probable that the future

economic benefits embodied within the

part will flow to the Group and its cost

can be measured reliably. The carrying

amount of the replaced part

is derecognised. The costs of the

day-to-day servicing of property, plant

and equipment are recognised in profit

or loss as incurred.

(c) Depreciation

Property, plant and equipment are stated

in the Balance Sheet, at cost/revaluation

less accumulated depreciation together

with any incidental expenses thereon.

The cost includes expenditure that is

directly attributable to the acquisition of

the asset and any other costs incurred

in bringing the asset to the working

condition.

Depreciation is provided from the date

the asset is available for use up to the

date it derecognises. The Company and

its subsidiaries provide depreciation for

the following assets on the straight line

method over the estimated useful life

stated below. Land is not depreciated.

Building 40 years

Motor Vehicles 4 years

Furniture & Fittings 5 years

Office Equipment 5 years

Commercial Leasing Company PLC,

a subsidiary company, depreciates

fixtures and office furniture over 10 years

and computer equipment over 4 years.

Lanka ORIX Securities (Pvt) Ltd., a

subsidiary Company, depreciates

computers categorised under office

equipment over 3 years and furniture

and fittings over 4 years.

Gal Oya Holdings (Pvt) Ltd., a Joint

Venture Company, depreciates

computers over 4 years and office

equipment over 8 years.

Sundaya Lanka (Pvt) Ltd., a subsidiary

Company, depreciates motor vehicles

over 5 years. Equipments & tools,

furniture & fittings and computers are

depreciated over 4 years.

(xiv) Operating Lease Assets

Operating lease assets are motor

vehicles and equipments shown under

property, plant and equipment in the

Balance Sheet at cost less accumulated

depreciation.

Motor vehicles are depreciated net of

cost and the estimated residual value

over the effective useful life. Residual

value is the estimated net amount the

Company would currently obtain from

disposal of the assets at the end of

useful life.

(xv) Leasehold Vehicles

Leasehold vehicles are assets obtained

on finance leases facilities by the

Company for the business of hiring and

shown under the property, plant and

equipment in the Balance Sheet at cost

less accumulated depreciation.


These assets are depreciated net of cost

and the estimated residual value over

the effective useful life.

(xvi) Leasehold Machinery

Leasehold machinery are machinery and

equipments shown under property, plant

and equipment in the Balance Sheet

at cost less accumulated depreciation.

Depreciation on leasehold machinery is

computed over the lease period.

(xvii) Capital Work-in-Progress

Capital work-in-progress is stated

at cost. These are expenses of a

capital nature directly incurred in the

construction of building.

2.5 Foreign Currency Transactions

Transactions denominated in foreign

currencies are converted into Rupees

at the monthly average exchange rate

applicable for the transactions. Assets

and liabilities denominated in foreign

currencies are converted into Rupees

at the rate of exchange prevailing at

the date of the Balance Sheet. Profit or

loss arising on conversion is credited or

debited to the Income Statement.

2.6 Liabilities and Provisions

Liabilities are recognised in the

Balance Sheet when there is a present

obligation as a result of a past event, the

settlement of which is expected to result

in an outflow of resources embodying

economic benefits. Obligations payable

at the demand of the creditor or within

one year of the Balance Sheet date

are treated as current liabilities in the

Balance Sheet. Liabilities payable after

one year from the Balance Sheet date

are treated as non-current liabilities in

the Balance Sheet.

(i) Finance Leases

Property and Equipment on finance

leases, which effectively transfer to

the Group substantially all of the risk

and benefits incidental to ownership

of the leased items, are disclosed as

finance leases at their cash price and

depreciated over the period the Group is

expected to benefit from the use of the

leased assets.

The corresponding principal amount

payable to the lessor is shown

as a liability. Lease payments are

apportioned between the finance

charges and reduction of the lease

liability so as to achieve a constant rate

of interest on the outstanding balance

of the liability. The interest payable over

the period of the lease is transferred to

an interest in suspense account. The

interest element of the rental obligations

pertaining to each financial year is

charged to the Income Statement over

the period of lease.

(ii) Income Tax

The tax rates and tax laws used to

compute the amount are those that are

enacted or substantively enacted as at

the Balance Sheet date. Accordingly,

provision for taxation is made on the

basis of the profit for the year as adjusted

for the taxation purposes in accordance

with provision of the Inland Revenue Act

No.10 of 2006 and amendments thereto.

The rates used are specified in Note 12

to Financial Statements.

(iii) Deferred Taxation

Deferred taxation is provided on the

liability method for temporary differences

between the carrying amount of assets

and liabilities for financial reporting

purposes and the amounts used for

taxation purposes. The amount of

deferred tax provided is based on

the expected manner of realisation or

settlement of the carrying amount of

assets and liabilities.


A deferred tax asset is recognised for

carried forward unused tax losses to

the extent that it is probable that future

taxable profit will be available against

which the asset can be utilised.

The carrying amount of deferred tax

asset is reviewed at each Balance Sheet

date and reduce to the extent that is

no longer probable that the related tax

benefit will be realised. Unrecognised

deferred tax asset in relation to

deductible differences, unused tax

credits and unused tax losses carried

forward are reassessed at each Balance

Sheet date and recognised to the extent

that has become probable that future

taxable profits will allow the deferred tax

asset to be recovered.

Deferred tax liabilities and assets are

measured at the applicable tax rate

prevailing in the year. Deferred tax asset

and the liabilities in the same entity are

set off in line with provision of prevailing

tax laws.

(iv) Retirement BenefitsDefined Benefit Plan- Gratuity

The Company changed the policy to

value its gratuity plan on an actuarial

basis and to recognise the gratuity

liability in terms of the statute for the

Company and the Group. Towards this

liability, the Company carries a provision

in the Balance sheet.

The actuarial valuation is done on an

ongoing basis and uses a Projected

Unit Credit Method. When complying

with the new SLAS, the Company has

created a transitional liability/(asset).

The difference between the actuarial

gratuity liability attributed to the past

service at the beginning of the year and

the provision made in the Balance Sheet

prior to adoption of SLAS has created an

asset, which is recognised in the current

year’s financials.

The gratuity liability is not funded.

Defined Contribution Plan - EPF & ETF

All employees of the Company are

members of the Employees’ Provident

Fund (EPF) and Employees’ Trust Fund

(ETF), to which the Company

contributes 12% and 3% of employee

salaries respectively and charged

against the profits.

2.7 Income Statement

(i) Gross income represents the gross

income receivable for the year on

all performing contracts, rentals on

operating leases, income on factoring

of client debtors, commission earned

on insurance premiums, brokerage

on share transactions and fees for IT

services provided. It includes all income

related to operations such as interest

on overdue rentals, profit/loss on leases

and loans terminated and collections on

contracts written-off.

(ii) Revenue Recognition(a) Earned Income on Leases

The Group follows the financing method

of accounting for lease income.

The excess of aggregated contract

receivable over the cost of the leased

assets constitutes the total unearned

income at the commencement of

a contract.

The unearned income is recognised

as income over the term of the lease

commencing with the month that the

lease is executed in proportion to the

declining receivable balance, so as

to produce a constant periodic rate of

return on the Lessor’s net investment

outstanding on the lease.


Non-performing leases are those

leases where the rentals are overdue

for 6 months and over. Lease income

accrued is suspended from the date a

lease is classified as non-performing

and credited to the ‘Earned Income in

Suspense’. Thereafter, such income is

recognised on cash basis.

Profit or loss on leases terminated,

collections on contracts written off,

interest on overdue rentals, interest

on revolving loans, interest earned on

property sale and buy back agreements,

interest income on pawn broking are

accounted for on cash basis.

b) Factoring

Revenue is derived from two sources,

Funding and providing Sales Ledger

related services.

Funding - Discount income relating to

factoring transactions is recognised at

the end of a given accounting month.

In computing this discount, a fixed rate

agreed upon at the commencement of

the factoring agreement is applied on

the daily balance in the Client’s

Current Account.

Sales Ledger related services - A

service charge is levied as stipulated in

the Factoring Agreement.

Income is accounted for on an

accrual basis and deemed earned on

disbursement of advances for invoices

factored, except where the account is

classified as non-performing.

(c) Securitisation of Lease Receivables (Subsidiary)

LOLC Funding One Ltd. was established

to securitise lease receivables of LOLC

and to provide a cost-effective method

of long-term finance to LOLC. Currently

LOLC Funding One Ltd. is dormant.

(d) Insurance Broking

Lanka ORIX Insurance Brokers Ltd. and

LOIB Financial Services Ltd., derive their

income from commission on insurance

premiums. Income is accounted for on

premium collection basis.

(e) Brokerage on Share Transaction

Lanka ORIX Securities (Pvt) Ltd., earns

brokerage income on the value of share

transactions carried out on behalf of its

clients. This income is accounted for on

an accrual basis.

(f) IT Service Fee

Lanka ORIX Information Technology Ltd.,

earns fee for IT services provided for

Group Companies and is accounted for

on an accrual basis.

(g) Turnover from Sale of Solar Systems

Sundaya Lanka (Pvt) Ltd., earns revenue

from sale of solar systems and its

accounted on an accrual basis.

(h) Royalty Income

Royalty Income is charged from the

Group Companies for the usage of

‘LOLC’ logo and ORIX brand, usage of

infrastructure support and is accounted

for on accrual basis.

(i) Treasury Management Fees & Management Fees

Treasury management fee and

management Fee collected from

subsidiaries is accounted for on

accrual basis.

(j) Other Income

Rent income, non-operational interest

income and foreign exchange gains are

accounted for on accrual basis.

Dividend income is recognised when the

right to receive payment is established.

Profit on sales of property, plant and

equipment are accounted for on

accrual basis.


(iIi) The Group Profits are stated after:

(a) Providing for all bad and doubtful debts

and depreciation of property, plant and

equipment.

(b) Charging all expenses incurred in the

day-to-day operations of the business

and in maintaining the property, plant

and equipment in a state of efficiency.

(iv) Borrowing Costs

Borrowing costs are recognised as

expenditure in the period in which

they are incurred. However, borrowing

costs that are directly attributable to the

acquisition, construction or production of

qualifying assets that take a substantial

period of time to get ready for its

intended use or sale, are capitalised as

part of the assets. During the year no

borrowing cost has been capitalised.

2.8 Movement of Reserves

Movement of reserves is disclosed in the

Statements of Changes in Equity.

2.9. Cash Flow Statements

The cash flow statements are prepared

using the indirect method as stipulated

in SLAS 9 - Cash Flow Statements,

Cash and Cash Equivalents for Cash

Flow Statements comprise mainly of

cash in hand, balances at banks and

bank overdraft.

2.10 Related Party Transactions

Transactions with related parties are

conducted on normal business terms.

The relevant disclosures are given in

Note 45 to the Financial Statements.

2.11 Segmental Reporting

Segment is a distinguishable component

of the Group that is engaged either in

providing products or services (business

segment), or in providing products or

services within a particular economic

environment (geographical segment),

which is subject to risks and rewards that

are different from those of other segments.

In accordance with the Sri Lanka

Accounting Standards No. 28 on

Segment Reporting, segmental

information is presented in respect of

the Group. The segment comprises

of leasing, hire purchase and other

advances factoring, insurance broking,

IT services and stock brokering and

others are described in Note 38.

Segment results, assets and liabilities

include items directly attributable to a

segment as well as those that can be

allocated on a reasonable basis.

Segment capital expenditure is the

total cost incurred during the period

to acquire segment assets that are

expected to be used for more than

one period.


Group Company

For the year ended 31 March 2009 2008 2009 2008 Restated Rs. Rs. Rs. Rs.

3. GROSS REVENUE

Revenue 3,495,606,802 – 3,495,606,802 –

Income 9,843,453,815 5,934,772,221 6,120,691,922 4,960,979,139

Other income 282,660,615 313,375,519 71,078,814 261,253,173

Gross revenue 13,621,721,231 6,248,147,740 9,687,377,538 5,222,232,312

Revenue from instalment sales 3,495,606,802 – 3,495,606,802 –

Less:cost of sales (2,993,076,288) – (2,993,076,288) –

Gross profit 502,530,514 – 502,530,514 –

4. INCOME

Leasing interest income 2,271,869,419 1,586,383,566 1,389,300,901 1,381,745,650

Hire purchases interest income 2,345,112,502 948,165,721 941,003,160 809,056,422

Advances and other loans interest income 2,715,191,638 1,875,691,500 2,119,074,193 1,563,222,581

Deferred instalment income 175,777,795 – 175,777,795 –

Operating lease and hire rental income 653,255,496 531,295,664 611,411,113 530,496,056

Overdue interest income 488,791,526 226,819,876 252,073,633 189,345,477

Other operational incomes 276,627,872 248,814,658 242,906,888 234,463,391

Debt factoring 604,072,617 252,649,562 389,144,239 252,649,562

Insurance broking 147,116,705 110,961,106 – –

Securities trading/others 161,275,475 162,450,757 – –

IT consultancy fee 92,024,245 73,500,000 – –

9,931,115,290 6,016,732,410 6,120,691,922 4,960,979,139

Inter-company income (87,661,475) (81,960,189) – –

9,843,453,815 5,934,772,221 6,120,691,922 4,960,979,139

5. EXPENSES

Expenses are stated after including the following;

Auditors remuneration and expenses:

Audit related 3,785,498 1,730,000 1,975,000 1,175,000

Non - Audit related 393,690 236,758 373,690 216,758

Legal expenses 25,341,687 8,982,510 12,912,490 7,866,217

Donations 784,858 164,800 546,125 118,000

6. DIRECT EXPENSES EXCLUDING INTEREST COSTS

VAT on leases/general expenses /VAT on financial services 240,622,790 162,423,892 110,610,221 131,555,945

BTT,debits tax and others 257,119,510 55,720,580 204,310,873 42,779,738

497,742,300 218,144,472 314,921,094 174,335,683


Group Company


7. STAFF COSTS

Salaries and other benefits 662,852,370 464,664,567 316,266,175 317,564,867

Defined contribution to EPF 45,243,316 30,812,280 26,644,180 21,470,220

Defined contribution to ETF 11,310,829 7,703,070 6,661,045 5,367,555

Provision for retiring gratuity 8,146,452 18,448,564 9,235,879 16,140,094

727,552,967 521,628,481 358,807,279 360,542,736

8. OTHER OPERATING EXPENSES

Administration cost 577,781,940 393,761,364 304,387,314 214,205,835

Operating and marketing cost 385,642,762 235,890,976 304,779,009 240,874,136

Specific provisions (95,446,932) (92,902,939) (79,330,545) (37,330,961)

Specific bad debts written-off 119,314,630 112,698,891 94,963,586 43,188,218

987,292,400 649,448,292 624,799,364 460,937,228

9. NET INTEREST COSTS

Overdraft and other short term borrowings 2,813,750,028 1,206,071,606 2,246,161,541 1,231,676,183

Long term borrowings 2,811,988,605 1,833,148,638 1,988,537,258 1,812,573,093

Finance lease interest 142,192,716 157,606,052 142,030,706 157,439,052

Interest on customer deposits 844,505,878 436,770,238

6,612,437,228 3,633,596,534 4,376,729,505 3,201,688,328

Less: Interest income on US$ and EURO deposits (171,255,775) (229,631,360) (171,255,775) (229,631,360)

6,441,181,453 3,403,965,174 4,205,473,730 2,972,056,968

10. OTHER INCOME/(EXPENSES)

10.1 Other Income

Rent income 629,200 – – – Profit on sale of property, plant and equipment 16,115,261 6,158,934 9,468,008 3,176,819Sales proceeds received in excess on refinances 2,534,608 2,745,826 2,534,609 2,745,827Profit on sale of vehicles 58,027 963,249 – 963,249Dividends received 1,962,757 1,789,404 28,159,560 12,812,920Interest received from US$ current accounts, treasury bills, call deposits 228,163,308 78,547,232 7,357,305 6,521,875Debenture interest income 583,148 – 583,148 – Royalty Income – – 31,631,927 20,862,973Foreign exchange gain 54,376,893 434,538 54,376,893 – Restructuring fee – – 50,000,000 – Capital gain on bond trading 25,196,300 – 25,196,300 – Reversal of provision for fall in value of investments and others 721,656 19,588,857 – 17,578,002Appreciation in market value - People’s Merchant Bank shares – 136,929,540 – 136,929,540Profit on sale of quoted and non quoted shares – 47,744,537 – 47,744,537Sundry income 132,756,448 17,145,237 40,344,343 10,446,296Supplier payments unclaimed – (193,203) – (193,203)Due diligence fee – 25,652,174 – 25,652,174

463,097,606 337,506,325 249,652,093 285,241,009


Group Company


10.2 Other Expenses

Fall in market price 143,260,527 – 143,260,527 – Loss on sale of quoted and non-quoted shares 8,210,702 58,745 6,630,021 – Provision for fall in value for investment 28,804,621 18,164,536 28,682,731 18,080,311Foreign exchange loss 161,141 5,907,525 – 5,907,525

180,436,991 24,130,806 178,573,279 23,987,836 282,660,615 313,375,519 71,078,814 261,253,173

The foreign exchange gain was mainly derived from profits earned on foreign currency denominated leases and foreign currency deposits converted in to the reporting currency.

11. NEGATIVE GOODWILL Group Company


Touchwood Investment Ltd. – 126,117,616 – – Sundaya Lanka (Pvt) Ltd. – 5,174,887 – –

– 131,292,503 – –

12. PROVISION FOR INCOME TAX

All Group Company operations were taxed at the rate of 35% during the year

12.1 Major component of income tax expense for the years ended 31st March are as follows: Group Company

For the year ended 31 March 2009 2008 2009 2008 Restated Restated Rs. Rs. Rs. Rs.

Current income taxCurrent income tax charge 172,939,233 148,931,233 48,234,700 92,968,699Under provision of current taxes in respect of prior years 4,812,935 5,446,950 4,812,935 2,093,469Deferred income taxDeferred Taxation Charge/(Reversal) (Note 20) 14,370,236 (314,821,256) 22,919,697 (312,963,378)Income tax expense reported in the income statement 192,122,404 (160,443,073) 75,967,332 (217,901,210)

12.2 A reconciliation between tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows:

Group Company

For the year ended 31 March 2009 2008 2009 2008 Restated Restated Rs. Rs. Rs. Rs.

Accounting profit before income tax 1,247,298,933 1,183,052,327 579,920,072 841,335,439

Income tax expense at the statutory income tax rate of 35% 436,554,626 414,068,315 202,972,025 294,467,404Tax effect of other allowable credits (2,709,080,995) (2,282,267,159) (1,690,746,010) (2,005,406,859)Tax effect on losses claimed (24,376,511) (67,005,812) (24,376,511) (45,823,756)Non deductible expenses 2,486,200,990 1,774,761,583 1,587,369,417 1,538,010,988Social Responsibility Levy 1.5% of tax 2,824,294 – 748,411 851,013Income tax expense 192,122,404 (160,443,073) 75,967,332 (217,901,210)

Effective income tax rate of the Company for the year 13% (2008 - 26%) Income tax rate of the Group for the year 15% (2008 - 14%)Social Responsibility Levy 1.5% of tax.


13. BASIC/DILUTED EARNINGS PER SHARE

The calculation of basic earnings per share as at 31 March 2009 is based on the profits attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the year ended 31 March 2009 of 47,520,000 (2008: 47,520,000); calculated as follows:

Group

31.03.2009 31.03.2008

Pofit for the year (Rs.) 1,054,153,622 1,340,879,283Weighted average number of ordinary shares 47,520,000 47,520,000Earnings per share (Rs.) 22.18 28.22

14. CASH AND CASH EQUIVALENTS

14.1 Cash in hand and favourable bank balances Group Company

31.03.2009 31.03.2008 31.03.2009 31.03.2008 Restated Rs. Rs. Rs. Rs.

Cash in hand 3,275,045 2,438,531 1,116,991 886,635

Balances at banks 1,829,290,249 1,070,312,191 551,718,065 605,143,691

1,832,565,294 1,072,750,722 552,835,056 606,030,326

14.2 Bank overdraft balanceBank overdrafts (2,750,579,613) (1,090,023,468) (1,909,632,293) (786,837,530)

(2,750,579,613) (1,090,023,465) 1,909,632,293) (786,837,530)New cash and cash equivalents (918,014,319) (17,272,746) (1,356,797,237) (180,807,204)

15. RENTALS RECEIVABLE ON LEASED ASSETS, HIRE PURCHASE AND OTHERS

15.1 Rental receivable on leased assets

Receivable from one to five yearsRentals receivable 7,033,321,755 6,265,563,761 3,040,309,142 5,478,902,085Unearned income (1,782,112,960) (1,416,557,269) (818,983,990) (1,251,672,758)Provision for doubtful debts (45,455,158) – (17,508,882) – Deposits received from lessees (836,136,584) (165,216,186) (101,416,490) (152,546,101)

4,369,617,053 4,683,790,306 2,102,399,780 4,074,683,226

Receivables within one yearRentals receivable 5,257,788,219 3,759,838,736 2,375,360,418 3,215,973,267Unearned income (1,271,096,051) (1,314,765,873) (558,648,799) (1,139,085,697)Provision for doubtful debts (108,142,914) – (9,427,859) –

3,878,549,254 2,445,072,863 1,807,283,760 2,076,887,570

Overdue rental receivableRentals receivable 233,828,953 159,605,717 157,158,888 109,262,268Earned income in suspense (20,274,246) (15,450,985) (17,584,716) (7,162,486)Provision for doubtful debts (103,833,220) (95,339,612) (58,240,063) (55,390,007)

109,721,487 48,815,120 81,334,109 46,709,775

TotalRentals receivable 12,524,938,927 10,185,008,214 5,572,828,448 8,804,137,620Unearned income (3,053,209,011) (2,731,323,142) (1,377,632,789) (2,390,758,455)Earned income in suspense (28,371,897) (15,450,985) (17,584,716) (7,162,486)Provision for doubtful debts (257,431,292) (95,339,612) (85,176,804) (55,390,007)Deposits received from lessees (836,136,584) (165,216,186) (101,416,490) (152,546,101)Balance as at 31 March 8,349,790,143 7,177,678,289 3,991,017,649 6,198,280,571

Rentals receivable on leased assets to the value of Rs. 19,624,802,733/- (31 March 2008 - Rs. 10,709,542,366/-) have been assigned against bank loans.


Group Company


15.2 Rentals Receivable on Hire - Purchase

Receivable from one to five years

Rentals receivable 7,376,974,912 3,940,389,407 1,674,846,119 3,358,629,276

Unearned income (2,226,598,560) (967,475,056) (531,292,607) (827,529,548)

Provision for doubtful debts (69,537,727) – 15,064,663 –

5,080,838,625 2,972,914,351 1,128,488,849 2,531,099,728

Receivables within one year


Unearned income (1,546,708,708) (978,273,849) (335,681,264) (835,532,426)

Provision for doubtful debts 50,348,180 – 8,111,742 –

3,675,604,797 1,405,235,643 1,297,429,098 1,213,300,068

Overdue rental receivable

Rentals receivable 125,155,720 79,376,985 101,099,828 68,756,902

Earned income in suspense (27,081,822) (8,347,557) (22,946,010) (7,455,814)

Provision for doubtful debts (44,357,041) (31,495,388) (30,449,798) (26,447,692)

53,716,857 39,534,040 47,704,020 34,853,396

Total


Unearned income (3,773,307,268) (1,945,748,905) (866,973,871) (1,663,061,974)



Balance as at 31 March 8,810,160,279 4,417,684,034 2,473,621,966 3,779,253,192

15.3 Rentals Receivable on Operating Leases and Hire

Total


Unearned income (2,731,879,510) (2,106,204,221) (2,731,879,510) (2,106,204,221)

Earned income in suspense (43,697,025) (745,195) (43,697,025) (745,195)

Provision for doubtful debts – (872,926) – (872,926)

Balance as at 31 March 33,280,069 6,797,008 33,280,069 6,797,008

15.4 Total Receivable on Leased Assets, Hire Purchase and Others


Unearned income (9,558,395,789) (6,783,276,268) (4,976,486,170) (6,160,024,650)



Deposits received from lessees (836,136,585) (165,216,186) (101,416,490) (152,546,101)



Group Company


15.5 Provision for Doubtful Debts

Balance as at 01 April 127,707,926 84,486,139 82,710,625 25,814,224Provisions made during the year– Charged against profits 304,280,005 119,014,628 66,406,073 78,790,852– Written off during the year (10,313,691) (75,792,841) (10,313,691) (21,894,451)Balance as at 31 March 421,674,240 127,707,926 138,803,007 82,710,625

16. ADVANCES AND OTHER LOANS

Rentals receivable on loans to customers 10,046,681,545 8,715,324,134 6,899,560,019 6,818,267,517Capital outstanding of revolving loans 2,146,110,751 1,584,410,829 2,034,132,649 1,584,410,828Receivables under Textile Debt Recovery Fund scheme 7,202,445 7,202,445 7,202,445 7,202,445Overdue loan instalments 408,200,785 271,735,744 357,285,466 251,425,436Earned income in suspense (101,879,843) (48,624,999) (62,937,947) (31,936,976)Unearned loan income (2,048,555,764) (1,920,884,425) (1,604,527,480) (1,853,637,697)Provision for doubtful debts (159,799,477) (46,257,876) (98,469,436) (33,505,000)

10,297,960,442 8,562,905,852 7,532,245,716 6,742,226,553

Less: Provision for Doubtful DebtsBalance as at 01 April 46,257,876 26,012,263 33,505,000 19,460,195Provisions made during the year– Charged against profits 182,558,455 37,355,711 133,981,290 29,481,315– Written-off during the year (69,016,854) (17,110,098) (69,016,854) (15,436,510)Balance as at 31 March 159,799,477 46,257,876 98,464,436 33,505,000

17. INSTALMENT SALES

Rentals receivable on loans to customers 4,088,071,115 – 4,088,071,115 – Overdue instalments 18,849,222 – 18,849,222 – Instalment in suspense (945,822) – (945,822) – Deferred income on instalment sales (1,150,471,368) – (1,150,471,368) – Provision for doubtful debts (551,338) – (551,338) –

2,954,951,809 – 2,954,951,809 –

18. OTHER CURRENT ASSETS

Insurance commission receivable 83,246,009 63,838,659 – – Securities clients/ brokers receivable 195,038,400 392,569,640 – – Amount due from subsidiaries – – 2,458,257,133 981,366,965Finance charges suspended 216,032,318 56,804,225 216,032,318 56,804,225Other accounts receivable 1,844,303,623 1,030,540,582 902,014,375 714,195,824VAT refunds due from IRD 24,502,930 43,336,272 – 18,885,161ACT recoverable – – – – ESC recoverable 60,375,001 153,751 60,000,000 –

2,423,498,281 1,587,243,130 3,636,303,826 1,771,252,175

Above receivables are shown after deducting provisions for doubtful debts.

Finance charges suspended include expenses incidental to obtaining long-term loans such as guarantee fees, structuring fees, placement fees and front end fees. These charges are written-off over the period of corresponding loans as the Directors are of the opinion that these are part of the financing cost of the long-term borrowings.


19. INVESTMENT SECURITIESGroup Company


Investment in Bank of Ceylon debentures 29,609,408 – 29,609,408 –

Investment - Mudarabah deposit 75,000,000 – 75,000,000 –

Investment in REPO investment 3,100,000 – 3,100,000 –

Quoted ordinary shares (Note 19.1) 180,889,296 357,120,657 178,326,395 356,942,832

Non-quoted ordinary shares (Note 19.2) 182,500 – – –

Acquired properties 3,930,482 8,540,138 3,930,482 8,540,138

Total 292,711,686 365,660,795 289,966,285 365,482,970

19.1 Quoted Ordinary Shares-Company No.of 31.03.2009 31.03.2009 No.of 31.03.2008 31.03.2008 Shares Cost Market Value Shares Cost Market Value Rs. Rs. Rs. Rs.

Brown & Company Ltd. 1,676,600 61,274,065 30,178,800 36,700 34,363,357 33,947,500

Central Finance Co. Ltd. – – – 3,900 937,471 780,000

Chemical Industries (Colombo) Ltd. – – – 137,440 5,767,985 4,638,600

Chemical Industries (Colombo) Ltd. 40 1,679 820 27,500 715,792 653,122

Dialog Telekom Ltd. – – – 831,600 21,432,993 13,929,300

HDFC Bank (par value Rs. 100/-) 47,200 7,749,236 2,395,400 47,200 7,749,236 7,749,236

Housing Development Finance Co. – – – 34,400 1,909,885 4,196,800

Peoples’ Merchant Bank 4,982,953 152,081,734 145,751,375 4,987,953 152,081,734 289,011,274

Property Development Ltd. – – – 67,900 2,823,104 2,037,000

Veyangoda Textiles Mills Ltd. 10,300 262,060 – 10,300 262,060 –

Total cost of quoted ordinary shares 221,368,774 178,326,395 228,043,617 356,942,832

Less:

Provision for fall in market value

Balance as at 01 April (128,899,215) – 7,528,015 –

Provision/(Reversal) made during the year 171,941,594 – (136,427,230) –

Balance as at 31 March 43,042,379 – (128,899,215) –

178,326,395 178,326,395 356,942,832 356,942,832


No. of 31.03.2009 31.03.2009 No. of 31.03.2008 31.03.2008 Shares Cost Market Value Shares Cost Market Value Rs. Rs. Rs. Rs.

Quoted Ordinary Shares - Subsidiaries

Ahot Properties Ltd. 300 9,150 7,425 300 9,150 12,000

Dialog Telekom Ltd. 9,000 274,491 54,216 9,000 274,491 165,825

Royal Ceramics (Lanka) Ltd. 11,000 300,000 302,500 – – –

Asian Hotels Corporation Ltd. 5,000 139,425 123,750 – – –

Colombo Drydocks Ltd. 8,400 184,548 480,900 – – –

Lanka Ventures Ltd. 10,000 96,168 57,500 – – –

DFCC Bank 66 20,028 4,488 – – –

Central Finance Ltd. 166 22,472 26,062 – – –

Overseas Realty Ceylon Ltd. 113,680 1,664,891 881,020 – – –

Lanka IOC Ltd. 10,000 270,000 160,000 – – –

HDFC 1,200 264,000 60,900 – – –

Seylan Bank Ltd. 72,400 1,104,210 398,200 – – –

Sierra Cables Ltd. 5,400 16,200 5,940 – – –

Total Cost of Quoted Ordinary Shares 4,365,583 2,562,901 – 283,641 177,825

Less:

Provision for fall in Market Value

Balance as at 01 April – (105,816) – – 117,609 –

Provision/(Reversal) made during the year – (121,890) – – (223,425) –

Balance as at 31 March – (227,706) – – (105,816) –

2,562,901 2,562,901 – 177,825 177,825

Quoted Ordinary Shares - Group – 180,889,296 180,889,296 – 357,120,657 357,120,657

19.2 Non-Quoted Ordinary Shares- Company No. of 31.03.2009 No. of 31.03.2008 Shares Cost Shares Cost Rs. Rs.

Indo Lanka Steel Ltd. 200,000 6,000,000 200,000 6,000,000

Lanka Glass Manufacturing Ltd. 3,000,000 3,000,000 3,000,000 3,000,000

Magpek Exports Ltd. 25,000 1,000,000 25,000 1,000,000

Total cost of non-quoted ordinary shares 10,000,000 10,000,000

Less: Provision for fall in value

Balance as at 01 April 10,000,000 10,000,000

Provision/(Reversal) made during the year – –

Balance as at 31 March 10,000,000 10,000,000

– –

Non-Quoted Ordinary Shares - Subsidiaries

Equity Investments Lanka Ltd. 17,250 172,500 – –

Credit Information Bureau 100 10,000 – –

182,500 – –


20. DEFERRED TAX

Deferred Tax assets, liabilities and income tax relate to the followings:Company Balance Sheet Income Statement

2009 22008 2009 2008 Restated Restated Rs. Rs. Rs. Rs.

Deferred Tax Liability

Capital allowances for tax purposes on

property, plant and equipment (234,611) 12,015,495 (12,250,106) 12,456,798

Operating Lease Assets 52,848,531 35,927,725 16,920,806 11,664,021

Unamortised VAT (28,770,168) – (28,770,168) –

23,843,752 47,943,220 (24,099,468) 24,120,819

Deferred Tax Assets

Defined benefit plans (40,681,839) 14,014,917 (54,696,755) 5,397,908

Capital allowances for tax purposes on Lease Receivables (6,900,532) (41,724,447) 34,823,915 35,979,727

Brought forward Tax losses 610,737,529 637,883,853 (27,146,325) 295,706,562

563,155,158 610,174,323 (47,019,165) 337,084,197

Deferred tax expense (22,919,697) 312,963,378

Net Deferred tax Liability/Asset 539,311,406 562,231,103

Group Balance Sheet Income Statement

2009 2008 2009 2008 Restated Restated Rs. Rs. Rs. Rs.

Deferred Tax Liability

Capital allowances for tax purposes on

property, plant and equipment (7,311,214) 12,084,561 (19,395,775) 11,542,250

Operating Lease Assets 52,848,531 35,927,725 16,920,806 11,664,021

Unamortised VAT (28,770,168) – (28,770,168) –

16,767,149 48,012,286 (31,245,137) 23,206,271

Deferred Tax Assets

Defined benefit plans (38,948,385) 14,958,248 (53,906,633) 6,341,238

Capital allowances for tax purposes on Lease Receivables (7,645,736) (41,724,447) 34,078,711 35,979,727

Brought forward Tax losses 612,096,403 637,883,853 (25,787,451) 295,706,562

565,502,282 611,117,654 (45,615,373) 338,027,527

Deferred tax expense – – (14,370,236) 314,821,256

Net Deferred tax Liability/Asset 548,735,133 563,105,368


21. INVESTMENT IN JOINT VENTURE Group Company 31.03.2009 31.03.2008 31.03.2009 31.03.2008 Rs. Rs. Rs. Rs.

Gal Oya Holdings (Pvt) Ltd. (GHL)

Cost of Investment as at 31 March 08 – – 10,000,000 100,000,000

Percentage of ownership – – 50% 50%

Principal activity Plantation Management

The investment in the GHL has been recognised in the Financial Statements on the basis of proportionate consolidation stated capital of GHL

was reduced to Rs. 20 Mn (2,000,000 shares of Rs. 10/- each) during the financial year. Accordingly, LOLC investment is Rs. 10 Mn, being 50%

of the stated capital, with the balance converted to a loan. As at As at 31 March 2009 31 March 2008

Current Assets 486,279,338 102,669,333Long-Term Assets 16,609,082 116,463Current Liabilities 6,861,832 7,810,594Long-Term Liabilities 512,265,629 – Income 658,326 984,774Expenses 26,846,771 5,953,246

22. INVESTMENTS IN EQUITY ACCOUNTED INVESTEES Commercial Touchwood PRASAC Micro Insurance Brokers Investments PLC Finance Institution

Insurance Forestry Micro Finance Broking Management Services

Principal Activity

Carrying Amount 49,113,139 474,654,664 152,652,858Holding 39.25% 29.20% 19.00%Cost 785,040 216,359,359 61,831,544Profit share recognised 5,735,520 74,347,843 60,374,275Last published financial statements 31 Dec 2008 31 Mar 2009 31 Dec 2008 Assets 253,715,080 3,148,158,296 6,836,946,750Liabilities 130,332,233 1,523,539,876 4,627,466,550Revenue 101,806,381 727,010,387 1,584,228,040

Profit/(Loss) 21,217,154 254,620,476 317,759,345

The reporting date of the financial statements of PRASAC MFI is 31 December, profit share relating to 12 months ended December 2008 is

reflected in LOLC financials for 2008/09.

Commercial Insurance Brokers is an investment by Commercial Leasing Company PLC and profit recognised relates to the post acquisition share.


23. INVESTMENTS IN SUBSIDIARIES Principal No. of Holding Cost No. of Holding Cost Activity Ordinary 31.03.2009 Ordinary 31.03.2008 Shares Shares % Rs. % Rs.

Group

Lanka Orient Investment Ltd. No operations 2 100 20 2 100 20

Company

LOLC Funding One Ltd. Securitisation of

(Par value Rs.100/-) lease receivables 7 100 700 7 100 700

Lanka ORIX Insurance Brokers Ltd. Insurance broking 1,000,000 100 10,000,000 1,000,000 100 10,000,000

LOIB Financial Services (Pvt) Ltd. Investment advice 500,000 100 – 500,000 100 –

Lanka ORIX Finance Finance business

Company (Pvt) Ltd. and pawn

broking 80,000,000 100 800,000,000 80,000,000 100 800,000,000

Lanka ORIX Information Technology Ltd. Software design,

development

and distribution 2,000,000 100 20,000,000 2,000,000 100 20,000,000

Lanka ORIX Securities (Pvt) Ltd. Stock broking 270,000 30 23,000,000 270,000 30 23,000,000

Lanka ORIX Project Development Ltd. Property and

infrastructure 5,200,000 100 52,000,000 5,200,000 100 52,000,000

Sundaya Lanka (Pvt) Ltd. Assembling and

distribution of

solar systems 624,490 51 6,244,900 624,490 51 6,244,900

Commercial Leasing Company PLC Leasing, hire

purchase and

factoring 17,315,310 98 1,626,123,927 – –

LOLC Micro Credit Ltd. Agro and Micro

financing 40,000,000 100 460,125,000 – –

2,997,494,527 911,245,620

Lanka ORIX Factors Ltd., a fully owned subsidiary of Lanka ORIX Leasing Company PLC merged with the Parent Company on 01 February 2009.

LOLC Micro Credit Ltd., a fully owned subsidiary of Lanka ORIX Leasing Company PLC commenced its business operations on 01 February 2009

On 09 May 2008 the Company acquired 66.55% of the shares in Commercial Leasing Company PLC for Rs. 1,102,793,101/-, further 31.26%

was acquired in July 2008. Percentage holding as at 31 March 2009 stands at 98.13.

The Company is in the business of leasing, hire purchasing and factoring. During the period the subsidiary contributed a post aquisition

profit of Rs. 320,218,884/-.


The acquisition had the following effect on the Group’s assets and liabilities on acquisition date:

Recognised values Recognised values Total on acquisition on acquisition as at 30.04.2008 as at 30.06.2008 Rs. Rs. Rs.

Property, Plant and Equipment 300,986,000 313,017,000 –

Lease receivables 7,226,410,000 7,256,012,000 –

Investments 49,081,618 49,081,618 –

Other current assets 728,556,000 768,869,703

Cash and cash equivalents 206,656,996 105,927,297 –

Tax payable (79,388,000) (110,741,000) –

Retirement benefit obligations (19,174,000) (19,831,000) –

Short-term loans (3,462,205,000) (3,287,781,000) –

Long-term loans (2,656,966,000) (2,796,177,000) –

Trade and other payable (939,096,996) (883,506,000) –

Net identifiable assets and liabilities 1,354,860,618 1,394,871,618 –

Percentage acquired 66.55% 31.58% –

Net assets applicable to Group 901,659,741 440,500,457 1,342,160,198

Intangible assets acquired 144,206,594 – 144,206,594

Positive goodwill on acquisition 56,926,766 94,488,468 151,415,234

Consideration paid, satisfied in cash 1,102,793,101 523,330,826 1,626,123,927

Cash acquired 206,656,996 105,927,297 312,584,293

Net cash inflow/(outflow) (896,136,105) (417,403,529) (1,313,539,634)

Pre-acquisition carrying amounts were determined based on applicable SLASs immediately before the acquisition

24. INTANGIBLE ASSETS

Arising from the acquisition of Commercial Leasing Company PLC the Group recognises intangible assets as follows:

Brand Value 94,784,945

Customer Base 49,421,649

144,206,594


25. PROPERTY, PLANT & EQUIPMENT Land & Motor Leasehold Furniture Office Computers Leasehold Assets for Capital Total Building Vehicles Motor & Fittings Equipment & Software Machinery Operating Work-in- Vehicles Lease progress Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Group Cost/ValuationBalance as at 01 April 2008 487,743,267 167,946,669 1,008,230,909 156,784,924 169,320,997 186,807,187 123,343,978 671,746,629 61,144,615 3,033,069,175Additions 127,460,848 164,240,522 17,887,659 53,954,204 37,143,106 76,438,504 – 602,699,836 26,183,745 1,106,008,424Disposals – (32,418,287) (63,250,481) – – (1,326,194) (123,343,978) (149,803,923) – (370,142,862)Acquisition of subsidiary 186,936,598 188,644,745 2,608,696 21,136,941 18,449,122 58,597,456 – – – 476,373,558Transferred from CWIP 37,486,276 – – – – – – – (37,486,276) –Balance as at 31 March 2009 839,626,989 488,413,649 965,476,784 231,876,069 224,913,225 320,516,953 – 1,124,642,542 49,842,084 4,245,308,295 Accumulated DepreciationBalance as at 01 April 2008 10,780,571 66,647,112 244,196,605 62,952,496 105,205,326 111,653,400 107,925,981 172,498,238 – 881,859,729Charge for the year 7,655,386 80,288,689 141,090,178 31,706,012 17,440,433 48,213,921 15,417,997 156,453,990 – 498,266,606Depreciation on disposals – (29,229,532) (24,241,063) – – (1,326,195) (123,343,978) (88,118,108) – (266,258,876)Acquisition of subsidiary 6,939,856 92,812,532 2,500,000 11,865,312 11,618,811 36,054,916 – – – 161,791,427Balance as at 31 March 2009 25,375,813 210,518,801 363,545,720 106,523,820 134,264,570 194,596,042 – 240,834,120 – 1,275,658,886

Written Down Valueas at 31 March 2009 814,251,176 277,894,848 601,931,064 125,352,249 90,648,655 125,920,911 – 883,808,422 49,842,084 2,969,649,409

as at 31 March 2008 476,962,696 101,299,557 764,034,304 93,832,428 64,115,671 75,153,786 15,417,997 499,248,391 61,144,615 2,151,209,445

Land & Motor Leasehold Furniture Office Computers Leasehold Assets for Capital Total Building Vehicles Motor & Fittings Equipment & Software Machinery Operating Work-in- Vehicles Lease progress Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

CompanyCost/ValuationBalance as at 01 April 2008 (Restated) 487,743,267 159,680,058 1,007,204,909 126,774,923 130,625,275 123,206,546 123,343,978 671,746,629 61,144,616 2,891,470,201Additions 127,460,848 115,583,564 15,639,584 47,333,042 16,454,781 51,991,760 – 602,699,836 26,183,745 1,003,347,160Disposals – – (57,006,650) – – (1,326,195) (123,343,978) (149,803,923) – (331,480,746)Transferred from CWIP 37,486,276 – – – – – – – (37,486,276) –Balance as at 31 March 2009 652,690,391 275,263,622 965,837,843 174,107,965 147,080,056 173,872,111 – 1,124,642,542 49,842,085 3,563,336,615

Accumulated DepreciationBalance as at 01 April 2008 (Restated) 10,780,571 62,244,784 244,196,606 42,092,816 80,077,098 63,395,424 107,925,981 172,498,238 – 783,211,518Charge for the year 4,754,337 31,288,304 140,509,733 24,835,603 7,825,065 28,848,381 15,417,997 156,453,990 – 409,933,410Depreciation on disposals – – (20,986,088) – – (1,326,195) (123,343,978) (88,118,108) – (233,774,369)Balance as at 31 March 2009 15,534,908 93,533,088 363,720,251 66,928,419 87,902,163 90,917,610 – 240,834,120 – 959,370,559

Written Down Valueas at 31 March 2009 637,155,483 181,730,534 602,117,592 107,179,546 59,177,893 82,954,501 – 883,808,422 49,842,085 2,603,966,056

as at 31 March 2008 (Restated) 476,962,696 97,435,274 763,008,303 84,682,107 50,548,177 59,811,122 15,417,997 499,248,391 61,144,616 2,108,258,683

Lands of LOLC were revalued in March 2008 by Mr. G.J. Sumanasena and Mr. S.N. Wijepala independent professional valuers.

The total market value of Lands as per the revaluation on the basis of existing use as at March 2008 was Rs. 365,780,000/-. If the Lands were

stated on the historical cost basis, the cost of the land would amount to Rs. 327,178,979/- (31 March 2008 - Rs. 260,377,158/-). Company

policy is to revalue the lands every 3-5 years.


Motor Vehicles include vehicles used for short-term hire and vehicles held for replacements of Operating Leases. Total net book value of such

vehicles as at 31 March 2009 is Rs. 128,068,943/- (31 March 2008 - Rs. 51,716,274 /-).

LOLC has not pledged any of its property, plant & equipment against any liability.

Property plant & equipment of the Group includes assets acquired with the business combination during the financial year. The net book value of such assets as at 31 March 2009 is made up as follows:

Subsidiary Cost Accumulated Net Book Depreciation Value

Commercial Leasing Company PLC 507,501,695 196,161,398 311,340,297

26. DEPOSITS FROM CUSTOMERSGroup Company

31.03.2009 31.03.2008 31.03.2009 31.03.2008 Rs. Rs. Rs. Rs.

Deposits maturing within one year 4,720,876,692 2,826,801,429 – –Deposits maturing after one year 583,044,283 512,863,441 – –

5,303,920,975 3,339,664,870 – –

27. SHORT-TERM BORROWINGS Group Company


Commercial papers 1,774,798,835 973,547,200 1,042,441,792 973,547,200Short-term loans and others 8,017,289,030 6,891,725,846 6,482,818,178 6,581,985,846

9,792,087,865 7,865,273,046 7,525,259,970 7,555,533,046 28. FINANCE LEASE LIABILITIES

Group Company

31.03.2009 31.03.2008 31.03.2009 31.03.2008 Rs. Rs. Rs. Rs.

Gross lease rentals payable as at 01 April 1,201,033,499 1,326,765,053 1,200,012,766 1,325,943,757Leases obtained during the year – 301,273,916 – 301,273,916Lease rentals paid during the year (474,143,095) (427,204,907) (473,122,362) (427,204,907)Gross lease rentals payable as at 31 March 726,890,404 1,200,834,062 726,890,404 1,200,012,766Less: Interest in suspense (114,135,585) (239,030,762) (114,135,585) (238,861,733)Net lease liability 612,754,819 961,803,300 612,754,819 961,151,033

Repayable within one year

Gross lease rentals payable 393,178,840 465,208,750 393,178,840 464,592,778Less: Interest in suspense (76,347,571) (127,097,449) (76,347,571) (126,942,252)Net lease liability 316,831,269 338,111,301 316,831,269 337,650,526

Repayable after one year

Gross lease rentals payable 333,711,564 735,625,312 333,711,564 735,419,988Less: Interest in suspense (37,788,013) (111,933,313) (37,788,013) (111,919,481)Net lease liability 295,923,551 623,691,999 295,923,551 623,500,507


29. LONG-TERM BORROWINGS Group Company


Balance as at 01 April 12,969,853,336 10,308,355,035 12,969,853,336 10,308,355,035

Received during the year 11,589,750,255 6,935,999,833 6,515,209,629 6,935,999,833

Repaid during the year (5,951,341,314) (4,274,501,532) (4,682,950,382) (4,274,501,532)


Long-term borrowings - current 6,676,896,050 3,867,594,352 4,442,165,898 3,867,594,352

Long-term borrowings - non-current 11,931,366,227 9,102,258,984 10,359,946,685 9,102,258,984

18,608,262,277 12,969,853,336 14,802,112,583 12,969,853,336

Analysis of non-current portion of long-term borrowings

Repayable within 3 years 7,843,847,939 6,865,527,023 6,272,428,396 6,865,527,023

Repayable after 3 years 4,087,518,288 2,236,731,961 4,087,518,289 2,236,731,961

11,931,366,227 9,102,258,984 10,359,946,685 9,102,258,984

30. TRADE AND OTHER PAYABLES Group Company


Accounts payable 2,084,706,234 973,843,976 978,745,731 812,136,892

Creditors for leased equipment 494,942,214 440,582,529 198,406,482 405,098,488

Amount due to subsidiaries – – 33,532,746 689,969,077

Clients payable 9,120,195 64,301,807 – –

Insurance premium payable 17,499,841 20,213,040 – –

Unclaimed dividends 5,420,312 1,874,154 1,777,837 1,874,154

2,611,688,796 1,500,815,506 1,212,462,796 1,909,078,611

31. RETIREMENT BENEFIT OBLIGATIONGroup Company

2009 .2008 2009 2008 Rs. Rs. Rs. Rs.

Net Benefit expense

Current service cost 9,829,566 18,448,564 6,184,653 15,797,824

Transitional asset recognized during the year (9,766,298) – (2,188,278) –

Interest cost on benefit liability 7,885,831 – 5,169,828 –

Net benefit expense 7,949,099 17,114,263 9,166,203 15,797,824

Benefit Liability

Defined benefit liability 74,349,053 51,772,347 51,819,459 42,737,849

74,349,053 51,772,347 51,819,459 42,737,849


Group Company

2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Change in the defined benefit obligation are as follows:

Defined benefit obligation as of 01 April 69,678,547 34,831,047 42,737,849 27,690,825

Interest cost on benefit liability 7,885,831 5,169,828 -

Current service cost 9,829,566 18,448,564 6,184,653 15,797,824

Benefits paid (3,278,593) (1,507,264) (84,593) (750,800)

Transitional difference (over provision) recognised during the year (9,766,298) (2,188,278) -

Defined benefit liability as of 31 March 74,349,053 51,772,347 51,819,459 42,737,849

Key assumptions used in the above valuation are as follows:

Discount Rate 12% 12%

Salary increment rate 13% 13%

The unrecognised loss of Rs. 3,978,495/- has not been recognised in the Company financials in line with Company policy.

The total number of employees of the Group as at 31 March, 2009 was, 1,164 and the number of qualifying employees in respect of the above

was 1,150 (as at March 2008 - 814 and 1,027 respectively).

32. STATED CAPITALGroup Company

31.03.2009 31.03.2008 31.03.2009 31.03.2008 Rs. Rs. Rs. Rs.

Issued and fully paid

At the beginning of the year 47,520,000 of Rs.10/- each 475,200,000 475,200,000 475,200,000 475,200,000

Issued and fully paid – – – –

At the end of the year 47,520,000 shares 475,200,000 475,200,000 475,200,000 475,200,000

33. RESERVES Group Company

31.03.2009 31.03.2008 31.03.2009 31.03.2008 Rs. Rs. Rs. Rs.

Share premium of subsidiary 536,504 536,504 – –

Future taxation reserve 205,000,000 205,000,000 205,000,000 205,000,000

Statutory reserve 243,473,119 195,266,451 219,003,447 183,993,390

Revaluation reserve 105,402,842 105,402,842 105,402,842 105,402,842

Total Reserves as at 31 March 554,412,465 506,205,796 529,406,289 494,396,232

Subsidiary Share Premium

The premium of Rs. 536,504/- has arisen on the date on which shares were issued to the Parent over the par value by subsidiaries. The use of this reserve is restricted to write off preliminary expenses, to charge discounts when debentures are issued at less than par value or to redeem any debentures or preference shares

Future Taxation Reserve

The reserve has been created over the years since year 1987 to year 2000 for any future tax liabilities.

Reserve Fund

The Company’s reserve fund was created according to the Direction No. 5 of 2006 issued by the Central Bank, under Section 34 of the Finance Leasing Act of No. 56 of 2000.


34. RETAINED EARNINGS Group Company

31.03.2009 31.03.2008 31.03.2009 31.03.2008 Rs. Rs. Rs. Rs.

Balance brought forward 4,142,813,662 2,980,546,405 3,792,540,720 2,912,828,715

Transferred back to retained earnings (32,185,234) – (30,000,000) –

Transfers to statutory reserves (48,206,669) (71,692,026) (35,010,056) (68,451,002)

Net profit for the year 1,054,153,622 1,340,879,283 503,952,740 1,059,236,649

Dividends (134,718,375) (106,920,000) (134,718,375) (111,073,642)

Balance carried forward 4,981,857,006 4,142,813,662 4,096,765,029 3,792,540,720

34.1 Dividends Group Company

31.03.2009 31.03.2008 31.03.2009 31.03.2008 Rs. Rs. Rs. Rs.

Interim of Rs. 2.80 per share (on a stated capital

of Rs. 475,200,000) paid on 30 June, 2008 for 2008/09 134,718,375 106,920,000 134,718,375 111,073,642

134,718,375 106,920,000 134,718,375 111,073,642

Dividend per share – – 2.80 2.25

In terms of the Inland Revenue (Amendment) Act No. 10 of 2006 a Withholding Tax of 10% has been imposed on dividends.

35. MINORITY INTEREST

The Minority Interest relates to the Net Assets of Lanka ORIX Securities (Pvt) Ltd., Sundaya Lanka (Pvt) Ltd. and Commercial Leasing Company

PLC which is not represented by the Parent Company’s investment.

36. BUSINESS COMBINATIONS THAT WERE EFFECTED DURING THE PERIOD Commercial Leasing Company PLC

Principal Activity Financial Services

Acquisition Date 9th May, 2008

Percentage holding as at 31 March, 2009 98.13%

No. of shares 17,315,310

Cost (Rs.) 1,626,123,927

Profit Share recognised (Rs.) 320,218,884

Assets as per last audited statements as at 31 March, 2009 (Rs.) 9,450,887,870

Liabilities as per last audited statements as at 31 March, 2009 (Rs.) 7,775,808,565


37. MATURITY ANALYSIS - COMPANY Assets/Liabilities 0-12 Months 12-36 Months 36-60 Months More than Total

60 Months Rs. Rs. Rs. Rs. Rs.

Assets(a) Interest Earning AssetsInvestments in Govt securities – – – – –Fixed deposits and savings deposits with banks/finance companies 481,909,164 1,009,714,439 665,493,607 124,337,277 2,281,454,487(b) Loans and Advances Net of ProvisionsLeasing - Finance and operating leases 1,840,563,829 1,626,535,719 557,198,170 – 4,024,297,718Hire Purchase and instalment sales 2,402,661,631 2,592,927,943 432,984,201 – 5,428,573,775Advances and other loans 4,781,693,294 1,857,525,675 893,026,747 – 7,532,245,716Loans to real estate/housing 3,135,535 – – – 3,135,535Factoring 1,138,142,223 – – – 1,138,142,223(c) Non-Interest Earning AssetsCash and bank balances 552,835,056 – – – 552,835,056(d) Investments inSubsidiary companies – – – 2,997,494,547 2,997,494,547Associate companies – – – 278,190,903 278,190,903Joint ventures – – – 10,000,000 10,000,000Dealing securities 260,356,877 – – – 260,356,877Debentures/Commercial papers 29,609,408 – – – 29,609,408Stocks (vehicles/real estates/machineries etc.) 45,698,979 – – – 45,698,979Short-term investments 13,351,058 – – – 13,351,058(e) Fixed AssetsProperty, plant and equipment – – – 2,603,966,056 2,603,966,056(f) Other Current AssetsOther current assets 1,132,347,714 – – – 1,132,347,714Amount due from subsidiaries 2,458,257,133 – – – 2,458,257,133Deferred tax asset – 539,311,406 – – 539,311,406Total assets 15,140,561,903 7,626,015,182 2,548,702,725 6,013,988,782 31,329,268,592

Liabilities & Equity(a) Interest Bearing LiabilitiesBank overdrafts 1,909,632,293 – – – 1,909,632,293Bank loans-short term loans 6,482,818,178 – – – 6,482,813,178Commercial papers 1,042,441,792 – – – 1,042,441,792Long-term borrowings 4,442,165,898 6,272,428,618 1,892,709,242 2,194,808,821 14,802,112,580Finance lease liabilities 316,831,269 295,923,550 – – 612,754,819(b) Non-Interest Bearing LiabilitiesAmount due to subsidiaries/associates – – – – – Leased equipment creditors 198,406,482 – – – 198,406,482Taxation 113,855,355 – – – 113,855,355Trade and other payables 1,014,056,318 – – – 1,014,056,318Retirement benefit obligation – – – 51,819,459 51,819,459(c) Shareholders FundsShareholders funds excluding redeembale preference shares – – – 5,101,371,318 5,101,371,318Total liabilities and equity 15,520,207,583 6,568,352,169 1,892,709,242 7,347,999,598 31,329,268,592


38. SEGMENTAL INFORMATION Leasing, Factoring Insurance IT Services Stock Broking Total Hire Purchase and Broking and Other Other Products Rs. Rs. Rs. Rs. Rs. Rs.

2008/09Operating profit before interest 6,853,043,041 440,649,663 39,856,082 (46,217,023) (21,969,629) 7,265,362,134Net Interest cost (6,073,783,915) (350,521,828) (10,776) (2,308) (16,862,626) (6,441,181,453)Other income/(expenses) 250,728,890 3,284,863 9,689,803 – 18,957,059 282,660,615Share of profit of associate companies – – – – – 140,457,638Profit before taxation 1,029,988,016 93,412,698 49,535,109 (46,219,331) (19,875,197) 1,247,298,933

2007/08Operating profit before interest 3,667,255,859 407,323,677 15,851,081 (40,765,389) 4,407,367 4,054,072,595Net Interest cost (3,196,091,132) (203,277,186) (110,089) (1,913) (4,484,854) (3,403,965,174)Other income/(expenses) 294,609,398 2,863,335 10,751,566 – 5,151,220 313,375,519Goodwill on consolidation – – – – – 131,292,503Share of profit of associate companies – – – – – 88,276,885Profit before taxation 765,774,125 206,909,826 26,492,558 (40,767,302) 5,073,733 1,183,052,328

2008/09Capital expenditure 1,076,470,080 2,098,010 685,766 11,370,370 15,384,198 1,106,008,424Depreciation of property, plant and equipment 480,535,822 1,225,041 3,953,899 2,287,041 10,264,803 498,266,606Provision/(reversal) for doubtful debts and bad debts written-off 256,765,306 104,536,089 – – 32,334,226 393,635,621Provision/(reversal) for fall in value of investments 27,961,075 – 121,890 – – 28,082,965Provision for gratuity 6,298,366 – 458,602 521,732 867,752 8,146,452

2007/08Capital expenditure 799,532,391 1,128,034 1,256,746 3,119,446 5,343,387 810,380,004Depreciation of property, plant and equipment 302,802,841 1,535,235 4,325,865 2,042,842 9,179,531 319,886,314Provision/(reversal) for doubtful debts and bad debts written off 163,494,922 8,697,932 16,036,054 – 3,159,111 191,388,019Provision/(reversal) for fall in value of investments (502,310) – 1,926,630 – – 1,424,320Provision for gratuity 16,999,159 – 454,460 698,795 296,150 18,448,564

As at 31 March, 2009Total assets 42,271,554,058 2,448,225,798 178,833,608 130,689,420 1,332,763,257 46,362,066,143Total liabilities 37,550,989,226 2,031,618,871 76,481,288 23,933,779 587,565,176 40,270,588,343

As at 31 March, 2008

Total assets 30,058,040,809 1,975,198,888 139,964,835 63,142,078 757,911,251 32,994,257,861Total liabilities 26,740,518,638 561,562,252 60,490,675 3,741,767 450,075,538 27,816,388,871


Portfolio Analysis by Customer Segment

The total rent receivable to the Group is attributable to: Group 2009 Rs. Mn

Corporate/Public 4,056 9%

SME 37,043 83%

Micro 3,725 8%

Total Receivable 44,824 100%

39. LOANS TO EMPLOYEES (Rs. 20,000/- and above) Group Company

2009 2008 2009 2008 Rs. Rs. Rs. Rs.

Balance as at 01st April 92,252,743 83,670,011 69,852,455 63,546,664Loans granted during the year 40,069,999 44,391,050 33,533,249 35,603,400Recoveries during the year (33,250,034) (35,808,318) (26,178,928) (29,297,609)Balance as at 31st March 99,072,708 92,252,743 77,206,776 69,852,455

40. CAPITAL COMMITMENTS

The Company as at 31st March, 2009 has a capital commitment of approximately Rs. 140 Mn for the construction of the fleet management

workshop.

41. CONTINGENT LIABILITIES

Contingent Liabilities exist as at 31st March, 2009 on guarantees given by the Company to Hatton National Bank, in relation to the banking

facilities obtained by the Company’s subsidiary Lanka ORIX Insurance Brokers Ltd. (LOIB). The balances outstanding on these facilities as at

31st March, 2009 amounted to Rs. 2,050,000/-.

Contingent Liabilities exist as at 31st March, 2009 on guarantees given by the Company to banks on Letter of Credit opened by the Company

for import of equipment and vehicles for execution of leases. The value of LC’s at the year end was Rs. 9,028,500/-.

The Company does not anticipate any material liability to arise out of any contingent event.

42. CONSOLIDATION OF ACCOUNTS WITH THOSE OF THE SUBSIDIARY COMPANY

The results of the Company’s subsidiary, Lanka Orient Investments (Pvt) Ltd., incorporated on 27th February, 1986 have not been consolidated

with that of the Company in accordance with Section 153 (6) (a) of the Companies Act No. 07 of 2007.

43. EVENTS AFTER THE BALANCE SHEET DATE

There have been no material events occurring after the Balance Sheet date that require adjustment to or disclosure in the Financial statements,

other than the following:

1. The Company submitted a bid for the purchase of 33 1/3% of Seylan Bank PLC and awaiting decision of the Central Bank of Sri Lanka.

2. The Company has offered to purchase all remaining shares of Commercial Leasing Company PLC at Rs. 90/- per share in line with the

de-listing of the Company.


44. COMPARATIVE INFORMATION IN THE FINANCIAL STATEMENTS HAS BEEN RESTATED AS FOLLOWS:

CompanyIncome statement for year ended 31 March 2008

As per last year Prior year Impact due to Restated in financial adjustment merger 2008/09 financial statements Note 44.1 Note 44.2 statements Rs. Rs. Rs. Rs.

Income 4,480,432,084 480,547,056 4,960,979,140Operating Profit before Net Interest 3,153,837,331 398,301,903 3,552,139,234Net Interest Cost 2,768,779,783 203,277,185 2,972,056,968Other Income/(Expenses) 440,602,192 (179,349,019) 261,253,173Profit before Taxation 825,659,740 15,675,699 841,335,439Profit after Taxation 977,871,455 72,705,920 8,659,274 1,059,236,649

Balance Sheet as at 31 March 2008Assets 27,653,040,450 42,705,920 1,300,321,133 28,996,067,503Liabilities 22,982,399,219 1,251,531,332 24,233,930,551Equity 4,670,641,231 42,705,920 48,789,801 4,762,136,952

44.1 Prior Year Adjustments

Decrease in Factoring receivables (30,000,000)Increase in deferred tax asset 72,705,920

42,705,920

44.2 The restatement of last year financials, is in view of the merger of the fully owned subsidiary Lanka ORIX Factors Ltd., in February 2009.

45. RELATED PARTY TRANSACTIONS

45.1 The Directors of the Company are also Directors of the following Companies in the Group through which they have control.

LOIB LFSL LOFIN LOSEC LOIT LOPD LFOL Sundaya CLC LOMC

Mrs. R.L. Nanayakkara -Mr. I.C. Nanayakkara -Mr. M.D.D. Pieris - - - - - -Mrs. K.U. Amarasinghe - - -Mr. M.T.L. Fernando - - - - - -Mr. T.H.M. Wickramasinghe - - - - - - - - -Mr. W.D.K. Jayawardena - - -Mr. R.M. Nanayakkara - - - - - - - - -


As at As at 31 March, 2009 31 March, 2008 Rs. Rs.

Amounts due from Subsidiary & Join Venture Companies to ParentLOIB 49,228,418 41,638,773LOFIN 191,764,934 225,637,470LOPD 6,772,336 6,448,654LOSEC 4,778,786 4,854,190LOIT – 1,866,056Sundaya 5,064,056 4,831,157Gal Oya 64,819,452 – LOMC 1,815,122,592 – CLC 320,706,558 –

2,458,257,132 285,276,300

Amount due to Subsidiary Companies from ParentLOIT 33,532,746 28,155,864

Inter-Company Transactions

1. The Company has received following income from subsidiaries: LOSEC LOIB LOIT LOPD Rs. Rs. Rs. Rs.

2007/08

Royalty 10,000,000 9,921,255 – –

Operating lease rental income 4,594,206 – – 665,604

14,594,206 9,921,255 – 665,604 LOSEC LOIB LOIT LOPD Rs. Rs. Rs. Rs.

2008/09

Royalty 10,000,000 21,631,927 – –

Operating lease rental income 5,403,018 – – 661,475 15,403,018 21,631,927 – 661,475


2. The Company has paid IT service fee of Rs. 45,000,000/- to LOIT (2007/08 - Rs. 36,000,000/-)

3. The subsidiary companies have the following transactions with other subsidiaries and the parent.

3.1 LOIB has earned Rs. 3,047,893/- (2007/08 - Rs. 1,560,452/-) as insurance commission from premium paid by the following:

2008/09 2007/08

Rs. Rs.

LOLC 2,843,118 1,384,438

LOSEC – –

LOFIN 204,775 176,014

3,047,893 1,560,452

3.2 LOIT has received IT service fee as follows:

LOIB 4,500,000 4,500,000

LOLC 52,500,000 45,000,000

LOFIN 30,000,000 24,000,000

87,000,000 73,500,000

3.3 Due from LOIB to LFSL Rs. 500,230/- (2007/08 - Due from LFSL to LOIB Rs. 1,727,789/-).

3.4 Due from LOFIN to LOIT - Nil (2007/08 - Rs. 16,000,000/-).

3.5 Due from LOFIN to LOFAC/LOLC Rs. 6,643,285/- (2007/08 - Rs. 6,121,588/-).

3.6 Due from LOIB to LOFIN - Rs. 6,381,863/- (2007/08 - Rs. 6,115,431/-).

3.7 Due from LOIB to LOSEC - Nil (2007/08 - Rs. 239,755/-).

3.8 Due from LOFIN to LOMC - Rs. 114,416/- (2007/08 - Nil).

3.9 Due from LOMC to LOIB - Rs. 23,452/- (2007/08 - Nil).

45.2 Transactions with Key Management Personnel

Key Management Personnel include all the members of the Board of Directors of the Group having authority and responsibility for planning, directing and controlling the activities of the Company as well as the subsidiaries, directly or indirectly.

Group has paid fees amounting to Rs. 20,656,598/- for the year 2008/09. (2007/08 - Rs. 12,468,103/-).

Emoluments paid to key management personnel during the year 2008/09 amounted to Rs. 36,901,514/- (2007/08 - Rs. 32,203,919/-).

In addition to the above company has provided the following benefits and facilities:

2008/09 2007/08

Short-term Long-term Total Short-term Long-term benefits benefits benefits benefits Total Rs. Rs. Rs. Rs. Rs. Rs.

Total benefits and facilities 30,401,616 – 30,401,616 11,586,928 7,055,833 18,642,760

Group has not incurred any amount as Termination benefits or post-employment benefits on account of the key managerial personnel

during the year.

Group has not provided leases, loans, advances or other credit facilities in the names of key managerial persons as at 31.03.2009.


45.3 Other Related Parties

The Company carries out transactions in the ordinary course of its business on arm’s length basis with related parties. Names of Directors, their relationship, accommodations granted and balance outstanding as at 31 March 2009 are listed below: Name of Related Party Name of Director Relationship

Ishara Traders Mr. R.M. Nanayakkara Proprietor

Mr. I.C. Nanayakkara Director Mrs. K.U. Amarasinghe Director

Brown & Co .Ltd. Mrs. R.L. Nanayakkara Chairperson Mr. M.T.L. Fernando Director Mr. I.C. Nanayakkara Director

Taprobane Fund Management (Pvt) Ltd. Mrs. R.L. Nanayakkara Director Mr. M.T.L. Fernando Director Mr. I.C. Nanayakkara Director

The Colombo Land Exchange Ltd. Mr. I.C. Nanayakkara Director

1. The Group and Company paid Rs. 79,172,762/- and Rs. 66,822,762/- (2007/08 - Rs. 36,772,500/- and Rs. 25,817,500/-) respectively for the

supply of lease vehicles to Ishara Traders (Pvt) Ltd.

2. The Company has obtained Rs. 3,148,681,375/- (2007/08 Rs. 700,000,000/- & fully settled on 24 December 2007) loan from Ishara Traders

during the year and Rs. 162,272,581/- (2007/08 - Rs. 14,738,356/-) paid as interest - Loan outstanding balance as at 31 March 2009 -

Rs. 1,226,102,079/-.

3. The Group and Company paid Rs. 8,168,450/- and Rs. 4,677,700/- for the supply of lease vehicles to Brown & Company Ltd.

(2007/08 - Rs. 411,130,700/- for Company).

4. LOLC/LOFAC has advanced Rs. 213,007,500/- to Standard Finance Ltd. and earned Rs. 43,986,679/- (2007/08 - Rs. 11,978,417/-) as

interest income and earned Rs. 26,612/- (2007/08 - Rs. 254,155/-) as discount charge income during the year from Mason’s Mixtures Ltd.

5. The Company has granted Rs. 204,690,823/- loan facility to Galoya Holdings (Pvt) Ltd. & earned Rs. 64,819,452/- as interest income during

the year 2008/09.

6. Amount due from related party transactions are as follows: Balance outstanding

As at As at 31 March, 2009 31 March, 2008

Name of the Company Nature of transactions Rs. Rs.

The Colombo Land Exchange Ltd. Loan Granted 100,250,897 –

Brown & Company Ltd. Finance Lease 635,970 1,362,736

Brown & Company Ltd. Loan Granted 290,327,796 –

Gal Oya Holdings (Pvt) Ltd. Loan Granted 7,241,886 10,164,210

Gal Oya Holdings (Pvt) Ltd. Finance Lease – 2,443,170

Touchwood Investments PLC Loan Granted 46,861,330 25,074,574

Touchwood Investments PLC Finance Lease 3,713,274 5,506,372

Touchwood Investments PLC Operating Leases 18,011,675 –


8. Interest Income earned from loans granted to related party transactions as follows: 2008/09 2007/08

Name of the Company Rs. Rs.

Brown & Company Ltd. 24,653,748 13,930,168

Gal Oya Holdings (Pvt) Ltd. 7,019,192 2,188,951

Gal Oya Holdings (Pvt) Ltd. 2,028,571 1,607,910

Touchwood Investments PLC 1,080,223 2,606,339

46. FOREIGN EXCHANGE RISK

The Company received approval from Central Bank of Sri Lanka to enter into SWAP agreements to hedge against foreign exchange exposure. Lanka ORIX Finance Company the fully owned subsidiary of LOLC received approval from Central Bank of Sri Lanka to mobilise Foreign Currency deposits and the Company currently accepts deposits in US Dollars, Great Britain Pounds, EURO and Australian Dollars.


1980

The first to introduce leasing to Sri Lanka

1992

Launched its first subsidiary LOFAC

1995

First branch office opened in Kandy

Negotiated the first long-term Rupee loan

from FMO

1996

The first to extend Dollar denominated

leases to BOI companies

1997

The first to introduce export factoring

through LOFAC

Branch office opened in Matara

1998

Branch offices opened in Badulla and

Rathnapura

1999

LOFAC enters into strategic alliance with

Dunn and Bradstreet

Branch office opened in Anuradhapura

Launched its insurance broking subsidiary,

LOIB

2000

Negotiated the second tranche of Long-

term Rupee loan from FMO

Branch office opened in Kochchikade

2001

Launched its finance subsidiary, LOFIN

Branch offices opened in Kurunegala and

Kaluthara

Milestones

2002

The first leasing company to be recognised

as a Participating Financial Institution for

the Indian Line of Credit

Branch office opened in Galle

2003

Received the first US Dollar Long-term

Loan from OPEC Fund

The first to win the leasing category ‘Award

for Excellence in Annual Reports and

Accounts’ conducted by the Institute of

Chartered Accountants of Sri Lanka

Negotiated the third tranche of Long-term

Rupee loan from FMO

Branch offices opened in Nuwara Eliya and

Kiribathgoda

2004

Entered into stock broking through LOSEC

Launched LOIT, the Information Technology

arm

The first to win the Non-Banking Sector

Award at the South Asian Federation of

Accountants (SAFA) for Best Presented

Accounts Competition

Branch office opened in Gampaha

2005

The first leasing company to be ranked

among the top 10 Brands by Sting

Consultants Brand Power Index

Launched LOPD, the project development

subsidiary

LOLC cricket team emerged Mercantile ‘C’

Division Champions

Negotiated the second tranche of Long-

term US Dollar loan from OPEC Fund

Negotiated the fourth tranche of Long-term

Rupee loan from FMO

Negotiated the long term US Dollar loan

from PROPARCO

Branch offices opened in Kegalle,

Embilipitiya and Polonnaruwa


2006

Negotiated the Long-term US Dollar loan

from DEG

Negotiated the Long-term US Dollar loan

from OPEC

Branch office opened in Wattala

The first Regional Expansion to Cambodia

through 17.91% holding of PRASAC

First to introduce a branded product

‘Guardian’ range from an insurance broker,

through LOIB

Won the leasing category ‘Award for

Excellence in Annual Reports and

Accounts’ conducted by the Institute of

Chartered Accountants of Sri Lanka for

2005/06

2007

Branch offices opened in Chilaw and

Mahiyangana

Ranked among the top 50 brands by

Super Brands

Launched the new Strategic Plan for the

Company and its Subsidiaries

Opened the first Hospital Savings Centre in

Oasis

Opened the first Student Savings Centre at

Royal College - Polonnaruwa

LOFIN operations expanded to Wattala,

Kegalle, Mahiyanganaya, Mount Lavinia

and Chilaw

LOPD received Cabinet sub-committee

approval for the project on offshore Sand

Mining, Washing, Sieving and Grading to

supply construction and related industries

Signed up with LIOC to establish LOLC

sub branches at LIOC filling stations.

LIOC centers opened in Morawaka and

Trincomalee

Set up the Islamic BU with an in-house

Shari’ah Supervisory Board

Dairy farmer loans, cultivation loans,

business set up loans and skills enable

loans were introduced

Partnered with GTZ for capacity building

of the micro finance staff, setting up low

cost branch network and development of a

micro banking system

2008

Launched a lottery for customers with a

house as the prize

Launched Western Union Money transfer

services at LOLC branches

Entered into a joint venture agreement with

Agri Tec for manufacture of precipitated silica

and allied products using rice husk ash

LIOC centers opened in Pilimathalawa,

Seeduwa, Aluthgama, Kadawatha,

Ambalangoda, Debarawewa, Beliatta and

Talawakele

LOLC Micro Credit Ltd. was appointed as

the only representative from the private

sector to the Micro Finance Steering

Committee appointed by Department of

Development Finance attached to Ministry

of Finance and Planning

Won Bronze Award at Effie Awards 2008, in

the Financial Services/Products category

Spin off of Micro Finance Business Unit as

LOLC Micro Credit Ltd. (LOMC) together

with FMO

Won the International Assets and Liability

Management competition held by FMO

and DEG

Joined with Sri Lanka Post to open up

Isuru Diriya centers at post offices and

sub post offices

Milestones I LOLC I Annual Report 2008/09 | 141


Ten Year Summary

For the year ended 31st March, (Rs. ‘000) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Restated

COMPANY

OPERATING RESULTS

Gross income/profit 860,738 938,381 1,062,137 1,130,880 1,401,776 1,566,952 1,908,291 3,034,110 4,960,979 6,623,222

Other operating expenses (239,310) (289,072) (352,377) (415,469) (588,339) (617,719) (621,628) (972,865) (1,408,840) (1,908,907)

Operating profit before interest 621,428 649,309 709,760 715,411 813,437 949,233 1,286,663 2,061,245 3,552,139 4,714,315

Interest costs (529,136) (562,269) (566,914) (492,557) (493,338) (532,298) (703,399) (1,442,881) (2,972,057) (4,205,474)

Other income/(expenses) 25,933 94,198 69,862 32,679 97,806 145,294 93,449 291,840 261,254 71,079

Income tax expense – – – – – – (12,701) 76,390 217,901 (75,967)

Net profit after tax 118,225 181,238 212,708 255,533 417,905 562,229 664,012 986,594 1,059,237 503,953

As at 31 March

ASSETS

Total assets 5,587,654 5,502,316 5,527,821 5,980,825 7,616,680 8,746,741 13,297,988 20,888,694 28,996,068 31,329,269

LIABILITIES

Current liabilities 2,486,632 3,077,791 2,222,274 3,044,815 3,713,713 2,999,461 5,003,038 7,840,922 13,279,129 15,552,646

Non-current liabilities 1,683,013 1,107,767 1,841,339 1,257,849 2,058,618 3,439,150 5,444,697 9,353,485 10,954,802 10,675,251

Total liabilities 4,169,645 4,185,558 4,063,613 4,302,664 5,772,331 6,438,611 10,447,735 17,194,407 24,233,931 26,227,897

SHAREHOLDERS’ FUNDS

Share capital & reserves

Share capital 118,800 237,600 237,600 237,600 475,200 475,200 475,200 475,200 475,200 475,200

Reserves 1,299,209 1,079,158 1,226,608 1,440,560 1,369,149 1,832,930 2,375,053 3,219,087 4,286,937 4,626,171

Share holders’ funds 1,418,009 1,316,758 1,464,208 1,678,160 1,844,349 2,308,130 2,850,253 3,694,287 4,762,137 5,101,371

INVESTOR RATIOS

Bonus issues 10:1 1:1 – – 1:1 – – – – –

Gross dividends 26,730 71,280 77,220 77,220 92,664 110,009 142,560 71,280 106,920 133,056

Total assets to shareholders’

funds (times) 4 4 4 4 4 4 5 6 6 6

Return on assets (%) 2 3 4 4 6 7 6 6 4 2

Return on equity (%) 8 14 15 16 24 27 26 30 23 10

OTHER INFORMATION

No. of employees 166 170 179 201 259 269 346 414 521 664

No. of branches 6 6 8 9 12 12 16 18 22 26

No. of LIOC branches 0 0 0 0 0 0 0 0 10 14

No. of Postal branches 0 0 0 0 0 0 0 0 0 11

No. of subsidiary companies 3 4 5 5 6 7 8 8 9 9

No. of associate companies 0 0 0 0 0 0 0 0 2 2

No. of joint ventures 0 0 0 0 0 0 0 0 1 1


Income Statements (Rs.’000)2008/09 2007/08

For the 3 months ended June 30 Sept 30 Dec 31 March 31 June 30 Sept 30 Dec 31 March 31

COMPANY

Operating Profit before Interest 879,980 1,112,725 1,127,030 1,594,580 688,794 673,582 901,725 1,288,038

Interest costs (853,047) (1,049,839) (1,021,025) (1,281,563) (543,425) (632,194) (683,299) (1,113,139)

Other income/(expenses) 16,384 71,216 (27,091) 10,570 52,912 67,709 296,689 (156,057)

Taxation (15,161) (19,652) – (41,154) (48,000) (36,000) (41,093) 270,288

Profit available to shareholders’

of the Company 28,156 114,450 78,914 282,433 150,281 73,097 474,022 289,131

Balance Sheets (Rs.’000)

As at June 30 Sept 30 Dec 31 March 31 June 30 Sept 30 Dec 31 March 31

Assets 29,673,348 31,250,667 31,461,465 31,329,269 22,958,188 24,149,170 26,514,031 29,323,361

Liabilities 25,107,607 26,570,474 26,702,358 26,227,897 19,220,540 20,338,425 22,229,265 24,633,930

Net assets 4,565,741 4,680,193 4,759,107 5,101,371 3,737,648 3,810,745 4,284,766 4,689,431

Share capital & reserves 4,565,741 4,680,193 4,759,107 5,101,371 3,737,648 3,810,745 4,284,766 4,689,431

Share capital 475,200 475,200 475,200 475,200 475,200 475,200 475,200 475,200

Reserves 4,090,541 4,204,993 4,283,907 4,626,171 3,262,448 3,335,545 3,809,566 4,214,231

GROUP

For the 3 months ended June 30 Sept 30 Dec 31 March 31 June 30 Sept 30 Dec 31 March 31

Operating profit before interest 1,312,673 1,954,086 2,065,321 1,933,282 852,784 896,332 1,161,680 1,143,277

Interest costs (1,178,277) (1,640,181) (1,710,390) (1,912,333) (645,811) (781,669) (863,445) (1,113,040)

Other income/(expenses) 35,070 13,341 (31,673) 292,244 29,298 36,263 264,799 (16,984)

Goodwill on consolidation – – – – – 5,175 – 126,118

Share of profit of associate

companies 24,303 29,906 28,389 57,860 – – (4,473) 92,750

Taxation (48,053) (77,934) (56,924) (9,211) (48,525) (68,828) (54,446) 332,242

Minority interest (22,002) (5,249) 482 27,791 (9,776) (1,395) (18,295) 32,082

Profit available to shareholders’

of the Company 123,714 273,969 295,205 361,266 177,970 85,878 485,820 591,211

Balance Sheets (Rs.’000)

As at June 30 Sept 30 Dec 31 March 31 June 30 Sept 30 Dec 31 March 31

Assets 46,138,261 48,654,109 48,843,150 46,359,550 26,915,804 28,620,658 32,058,118 32,921,552

Liabilities 40,575,227 43,234,136 43,128,453 40,270,588 22,990,310 24,616,746 27,550,092 27,816,389

Net assets 5,563,034 5,419,973 5,714,697 6,088,962 3,925,494 4,003,912 4,508,026 5,105,163

Share capital & reserves 5,563,034 5,419,973 5,714,697 6,088,962 3,925,494 4,003,912 4,508,026 5,105,163

Share capital 475,200 475,200 475,200 475,200 475,200 475,200 475,200 475,200

Reserves & minority interest 5,087,834 4,944,773 5,239,497 5,613,762 3,450,294 3,528,712 4,032,826 4,629,963

The above statements relating to the Company, are as per Published Financials and does not reflect any restatement effected in view of the merger

with Lanka ORIX Factors Ltd.

Summarised Quarterly Statistics

Value Addition

2008/09 % 2007/08 % (Restated) Rs. Rs.

Company

Value added

Income 6,623,222,436 4,960,979,140

Cost of borrowing and services (5,546,086,790) (3,837,104,310)

Provisions 200,446,301 114,887,215

Other income 71,078,814 261,253,173

Value added tax 599,707,761 659,754,698

1,948,368,522 2,159,769,915

Distribution of Value added

To Employees 358,807,279 18 360,542,736 17

Remuneration and other benefits 358,807,279 360,542,736

To Government 675,675,093 35 441,653,488 20

Indirect taxes 599,707,761 659,754,698

Direct taxes 75,967,332 (217,901,210)

To Providers of Capital 168,066,056 9 179,524,644 8

Dividends to shareholders 133,056,000 111,073,642

Reserves 35,010,056 68,451,002

To Expansion and Growth 745,820,094 38 1,177,849,648 55

Retained profits 335,886,684 879,712,005

Depreciation 409,933,410 298,137,043

1,948,368,522 100 2,159,769,915 100


Value Addition

2008/09 % 2007/08 % (Restated) Rs. Rs.

Group

Value added

Income 10,345,984,329 5,934,772,221

Cost of borrowing and services (8,665,751,999) (4,614,742,071)

Provisions 369,767,923 171,592,067

Other income 282,660,615 313,375,519

Goodwill on consolidation – 131,292,503

Share of profits of associate companies 140,457,638 88,276,885

Value added tax 701,576,919 746,258,089

3,174,695,425 2,770,825,213

Distribution of Value added

To Employees 727,552,966 23 521,628,482 19

Remuneration and other benefits 727,552,966 521,628,482

To Government 893,699,323 28 585,815,016 21

Indirect taxes 701,576,919 746,258,089

Direct taxes 192,122,404 (160,443,073)

To Providers of Capital 181,262,669 6 182,765,669 7

Dividends to shareholders 133,056,000 111,073,642

Reserves 48,206,669 71,692,027

To Expansion and Growth 1,372,180,467 43 1,480,616,046 53

Retained profits 873,913,861 1,160,729,732

Depreciation 498,266,606 319,886,314

3,174,695,425 100 2,770,825,213 100

Value Addition I LOLC I Annual Report 2008/09 | 145

Group Companies


Date of Incorporation

13 December 2001

Stated Capital

Rs. 800,000,000/- (80,000,000 shares)

Group Holding

100%

Status of the Company

Unquoted Public Company

Principal Activities

Finance Business and Pawn Broking,

Islamic Financing, Advances for Margin

Trading

Registered Office

No. 100/1,

Sri Jayewardenepura Mawatha,

Rajagiriya, Sri Lanka.

Directors

Mrs. R.L. Nanayakkara - ChairpersonMr. I.C. Nanayakkara - Deputy ChairmanDeshamanya M.D.D. Pieris

Mr. J.M. Swaminathan


Mr. B.C.G. de Zylva - Managing DirectorMr. W.D.K Jayawardena

Mr. R.N. Asirwathan (Appointed

w.e.f. 26.11.2008)

Lanka ORIX Insurance Brokers Ltd. (LOIB)


2 February 1999

Stated Capital

Rs. 10,000,000/- (1,000,000 shares)

Group Holding

100%



Principal Activity

Insurance Broking

Registered Office

No. 100/1, Sri Jayewardenepura Mawatha,


Directors

Mrs. R.L. Nanayakkara - ChairpersonMr. I.C. Nanayakkara - Deputy ChairmanDeshamanya M.D.D. Pieris


Mr. N.D.J. Silva (Retired w.e.f. 26.03.2009)

Mr. W.D.K.Jayawardena

Lanka ORIX Information Technology Ltd. (LOIT)


5 March 2004

Stated Capital

Rs. 20,000,000/- (2,000,000 shares)

Group Holding

100%




Software Design, Development and

Distribution

Registered Office


Rajagiriya, Sri Lanka

Directors

Mrs. R.L. Nanayakkara - ChairpersonMr. I.C. Nanayakkara - Deputy ChairmanMrs. K.U. Amarasinghe

Deshamanya M.D.D.Pieris

Mr. M.T.L. Fernando

Mr. F.K.C.P.N. Dias - Managing DirectorMr. W.D.K. Jayawardena


Lanka ORIX Project Development Ltd. (LOPD)


12 May 2005

Stated Capital

Rs. 52,000,000 - (5,200,000 shares)

Group Holding

100%




Property and Infrastructure Development

Registered Office



Directors

Mrs. R.L. Nanayakkara - Chairperson

Mr. I.C. Nanayakkara - Deputy Chairman


LOLC Micro Credit Ltd. (LOMC)


16 May 2008

Stated Capital

Rs. 460,125,000/- (40,000,000 shares)

Group Holding

100%




Leasing and Finance, Micro Credit Operations

Registered Office



Directors




Mr. R.D. Tissera


Commercial Leasing Company PLC (CLC)


30 April 1998

Stated Capital

176,458,400/- (17,645,840 shares)

Group Holding

98.13%


Quoted Public Company


Leasing, Hire Purchase and Factoring

Registered Office

No. 68, Bauddhaloka Mawatha,

Colombo 4, Sri Lanka.

Directors

Mrs. R. L. Nanayakkara - Chairperson




Lanka ORIX Securities (Pvt) Ltd. (LOSEC)


19 December 1990

Stated Capital

Rs. 9,000,000/- (900,000 shares)

Group Holding

30%


Private Limited Liability Company

Group Companies I LOLC I Annual Report 2008/09 | 147

Principal Activity

Stock Broking

Registered Office

No. 42, Sir Mohamed Macan Markar

Mawatha, Colombo 3, Sri Lanka.

Directors

Mrs. R. L. Nanayakkara - ChairpersonMr. I.C. Nanayakkara - Deputy ChairmanMr. T.H.M. Wickramasinghe - ManagingDirectorMrs. K.U. Amarasinghe

Mr. R.F. Senewiratne (Resigned w.e.f. 11.07.08)

Mr. V.S. Premawardhana

(Resigned w.e.f. 30.11.08)

Mr. K.A.K.P. Gunawardena

(Appointed w.e.f. 16.02.09)

Sundaya Lanka (Pvt) Ltd.


6 June 2005

Stated Capital

Rs. 12,244,900/- (1,224,490 shares)

Group Holding

51% acquired along with the assets of

LOFAC, when LOFAC was amalgamated

with LOLC


Manufacturing, assembly and sales of solar

power systems

Registered Office



Directors



Mr. M.C. Adema

Mr. R.D. Tissera

Mr. P.S.T. Loh

Mr. T.S.R. Visweswaran


Agrisil Holdings Limited


23 April 2008

Stated Capital

Rs. 54,000,000/- (1,000,000 shares)

Group Holding

(50% Joint Venture of Lanka ORIX Project

Development Limited)



Principal Activity

Management Services

Registered Office



Directors



Mr. G.R. Wellen (Appointed w.e.f. 16.06.2008)

Mr. C.W. Wellen


Mr. N.M.C. Mendis


Mr. D. Stephens

(Appointed w.e.f. 16.06.08, deceased

on 11.10.08)

148 | Group Companies I LOLC | Annual Report 2008/09

InvestorInformation1. SHAREHOLDING INFORMATION

1.1 Shareholding as at 31 March,2009 2008

No. of % of No. of % of Shares Shares Shares Shares

Residents 33,160,368 69.78 33,070,268 69.60ORIX Corporation 14,256,000 30.00 14,256,000 30.00Other foreign investors 103,632 0.22 193,732 0.40

47,520,000 100 47,520,000 100

1.2 Analysis of Ordinary Shares as at 31 March,2009 2008

Range No. of No. of % of No. of No. of % ofShareholders Shares Shares Shareholders Shares Shares

1 - 1,000 1,133 302,395 0.63 1,156 337,813 0.711,001 - 5,000 307 708,029 1.49 356 840,803 1.775,001 - 10,000 66 488,352 1.03 76 567,067 1.19

10,001 - 50,000 68 1,360,922 2.86 72 1,415,907 2.9850,001 - 100,000 8 546,220 1.15 10 733,228 1.55

100,001 - 500,000 9 1,915,692 4.03 10 1,952,394 4.11500,001 - 1,000,000 2 1,324,302 2.79 1 800,200 1.68

Over 1,000,000 Shares 6 40,874,088 86.02 6 40,872,588 86.01 1,599 47,520,000 100 1,687 47,520,000 100

1.3 Categories of Shareholders as at 31 March,2009

Resident Non-Resident


1 - 1,000 1,118 296,707 0.62 15 5,688 0.011,001 - 5,000 300 691,209 1.45 7 16,820 0.045,001 - 10,000 63 466,416 0.98 3 21,936 0.05

10,001 - 50,000 65 1,301,734 2.74 3 59,188 0.1250,001 - 100,000 8 546,220 1.15 – – –

100,001 - 500,000 9 1,915,692 4.03 – – – 500,001 - 1,000,000 2 1,324,302 2.79 – – –

Over 1,000,000 Shares 5 26,618,088 56.02 1 14,256,000 30.00 1,570 33,160,368 69.78 29 14,359,632 30.22

2008

Resident Non-Resident


1 - 1,000 1,140 331,525 0.70 16 6,288 0.011,001 - 5,000 350 824,483 1.74 6 16,320 0.035,001 - 10,000 72 534,431 1.12 4 32,636 0.07

10,001 - 50,000 69 1,361,719 2.87 3 54,188 0.1150,001 - 100,000 9 648,928 1.37 1 84,300 0.18

100,001 - 500,000 10 1,952,394 4.11 – – – 500,001 - 1,000,000 1 800,200 1.68 – – –

Over 1,000,000 Shares 5 26,616,588 56.01 1 14,256,000 30 1,656 33,070,268 69.60 31 14,449,732 30.4


1.4 Categories of Shareholders as at 31 March,2009 2008

No. of No. of % of No. of No. of % ofShareholders Shares Shares Shareholders Shares Shares

Individual 1,463 16,987,996 35.75 1,537 17,419,631 36.66Institutions 136 30,532,004 64.25 150 30,100,369 63.34Total 1,599 47,520,000 100 1,687 47,520,000 100

2009 2008

No. of % of Issused No. of % of Issused Shares Capital Shares Capital

1. ORIX Corporation 14,256,000 30.00 14,256,000 30.00

2. Mr. R.M. Nanayakkara

- Through a Margin Trading Account 12,019,708 25.29 12,019,708 25.29

- In his Own Name 2,123,614 4.47 2,122,114 4.47

3. Mr. I.C. Nanayakkara 5,989,550 12.60 5,989,550 12.60

4. Mrs. K.U. Amarasinghe 5,243,200 11.03 5,243,200 11.03

5. Sri Lanka Insurance Corporation - Life Fund 1,242,016 2.61 1,242,016 2.61

6. DPMC Financial Services (Pvt) Ltd. (A/C No. 01) 806,900 1.70 800,200 1.68

7. Mrs. I. Nanayakkara 517,402 1.09 456,402 0.96

8. DPMC Financial Services (Pvt) Ltd. (A/C No. 02) 321,400 0.68 128,700 0.44

9. Employees’ Trust Fund Board 237,700 0.50 107,900 0.23

10. Mr. G.G. Ponnambalam 208,992 0.44 208,992 0.44

11. HSBC - Mr. C.P. de Silva 200,000 0.42 200,000 0.42

12. HSBC - Mr. R.C. de Silva 200,000 0.42 200,000 0.42

13. HSBC - Mr. C.L. de Silva 200,000 0.42 200,000 0.42

14. Swastika Mills Ltd. 200,000 0.42 200,000 0.42

15. Capital Alliance Holdings Ltd. 197,600 0.42 – –

16. Mr. M. Radhakrishnan 150,000 0.32 150,000 0.32

17. Mr. D.J. Wilson 85,216 0.18 85,216 0.18

18. Mrs. S.N. Fernando 81,844 0.17 – –

19. Miss F.A.J.A. Cader 75,900 0.16 75,900 0.16

20. Hi-Line Tading (Pvt) Ltd. 70,500 0.15 – –

43,357,042 91.24

The Public Sharehoding as at 31 March, 2009 was 15.33%

150 | Investor Information I LOLC | Annual Report 2008/09

Economic and Financial IndicatorsDecember 2005 2006 2007 2008 2009

Economic Growth

GDP at Current Market Prices (Rs. Bn) 2,091 2,453 2,939 3,578 4,411

GDP Growth Rate % 5.4 6.2 7.7 6.8 6.0

External Finance

Trade Balance - US $ Mn (2,243) (2,516) (3,371) 3,657 (5,871)

Balance of Payment (Rs. Mn) (7.5) 48.1 33.5 60.0 (126.0)

Exchange Rates - Rs. US $

Annual Average 101.19 100.5 103.96 110.62 108.33

Year End 104.61 102.12 107.71 108.72 113.14

Rate of Inflation

CCPI* Annual Average Change % 9.0 11.0 10.0 15.8 22.6

Money Supply - Percentage change Dec. to Dec.

Narrow Money - M1 % 16.6 22.4 12.6 2.7 4.0

Broad Money - M2b % 19.6 19.1 17.8 16.6 8.5

Interest Rates - Per cent per annum at year end

Repurchase Rate - Overnight % 7.5 8.8 10.0 10.5 10.5

Reverse Repurchase Rate - Overnight % 9.0 10.3 11.5 12.0 12.0

Treasury Bill Rate

91 Days % 7.25 10.10 12.76 21.30 17.33

364 Days % 7.65 10.37 12.96 19.66 19.12

CB’s** Weighted Average Deposit Rate % 5.3 6.2 7.6 10.3 11.6

CB’s** Weighted Average Prime Lending Rate % 10.2 12.2 15.2 18.0 18.5

Share Market

All Share Price Index - ASPI 1,506.90 1,922.20 2,722.40 2,541.00 1,503.00

Market Capitalisation Rs. Bn 382.1 584.0 834.8 820.7 488.8

* CCPI - Colombo Consumers Price Index

** CB - Commercial Bank


Glossary

TERMS

Accrual Basis

Recognising the effects of transactions and

events when they occur, without waiting

for receipt or payment of cash or cash

equivalent.

Associate Company

A Company other than a subsidiary in

which the Holding Company has significant

influence over its financial and operating

policy decisions.

Cash Basis

Recognising the effects of transactions and

events when receipt or payment of cash or

cash equivalent occurs.

Cash Equivalents

Short-term highly liquid investments that are

readily convertible to known amounts of cash

and which are subject to an insignificant risk

in change in value.

Consolidated Financial Statements

Financial Statements of a Group presented

as those of a single Company.

Corporate Governance

The process by which corporate entities

are governed. It covers the way in which

power is exercised over the management

and direction of entity, the supervision of

Executive actions and accountability to

owners and others.

Executions

Advances granted to customers under

leasing, hire purchase, instalment sales

and loan facilities.

Finance Lease

A lease that transfers substantially all the

risk and rewards incident to ownership of

the asset to the lessee. Title may or may not

eventually be transferred.

Gross Dividend

The proportion of profit distributed to

shareholders inclusive of tax withheld.

Gross Portfolio

Total rental receivable of the advances

granted to customers under leasing, hire

purchase, instalment sales and loan facilities.

Hire Purchase

A Hire Purchase is a contract between hirer

and financier where the hirer takes on hire

a particular article from the financier, with

the option to purchase the article at the

conclusion of the agreed rental payments.

Interest Cost

The sum of monies accrued and payable to

the sources of borrowed working capital.

Interest in Suspense

Interest income of non-performing portfolio;

these interests are accrued but not

considered as part of income.

Lease

A lease is an agreement whereby the lessor

conveys to the lessee in return for a payment

or series of payments the right to use an

asset for an agreed period of time.

Minority Interest

Part of the net results of operations and of net

assets of a subsidiary attributable to interests

who are not owned, directly or indirectly

through subsidiaries, by the parent.

Net Portfolio

Total rental receivable excluding interest of

the advances granted to customers under

leasing, hire purchase, instalment sales and

loan facilities.

Non-Performing Portfolio

Facilities granted to customers which are in

default for more than six months.


Operating Lease

An operating lease is a lease other than a

finance lease.

Provision

Amounts set aside against possible losses

on net receivable of facilities granted to

customers, as a result of them becoming

partly or wholly uncollectible.

Related Parties

Parties are considered to be related if one

party has the ability to control the other

party or exercise significant influence

over the other party in making financial or

operating decisions.

Related Party Transactions

A transfer of resources or obligations

between related parties, regardless of

whether a price is charged.

Residual Value

The estimated amount that is currently

realisable from disposal of the asset, after

deducting estimated costs of disposal, if

the asset was already of the age and in the

condition expected at the end of its useful life.

Revenue Reserve

Reserves set aside for future distribution and

reinvestment.

Segmental Analysis

Analysis of information by segments of an

enterprise, specifically the different industries

and the different geographical areas in which

it operates.

Shareholders’ Funds (Equity)

Total of issued and fully paid ordinary share

capital and reserves.

Stated Capital

All amounts received by the Company or due

and payable to the Company (a) in respect

of the issue of shares (b) in respect of calls

on shares.

Subsidiary Company

Subsidiary is a Company that is controlled

(power to govern the financial and operating

policies of an enterprise so as to obtain

benefits from its activities) by another

Company known as the parent.

Substance Over Form

The consideration that the accounting

treatment and the presentation in Financial

Statements of transactions and the events

should be governed by their substance and

financial reality and not merely by legal form.

Value Addition

Value of wealth created by providing leasing

and other related services considering the

cost of providing such services.

RATIOS

Method of Computation and Indicates

Cost to Income Ratio

Operating expenses excluding provision for

bad and doubtful debts as a percentage of

total operating income, net of interest cost.

Efficiency of cost management in generating

income.

Debt to Equity (Gearing) Ratio

Total debts divided by equity. The extent to

which debt contributes to fund total assets,

compared to the contribution from equity.

Dividend Cover

Profit attributable to ordinary shareholders

divided by gross dividends of ordinary

shares. Number of times dividend is covered

by current year’s distributable profits.

Glossary I LOLC I Annual Report 2008/09 | 153

Dividend Per Share (DPS)

Value of the dividend proposed and paid out

to ordinary shareholders divided by the

number of ordinary shares in issue. Share

of current year’s dividend distributable to an

ordinary share in issue.

Earnings Per Share (EPS)

Profit attributable to ordinary shareholders

divided by the weighted average number of

ordinary shares outstanding during the year.

Share of current year’s earnings attributable

to an ordinary share in issue.

Interest Cover

Earnings before interest and tax divided by

interest charges. Ability to cover or service

interest charges of the debt holders.

Market Capitalisation

No. of ordinary shares in issue multiplied by

market value of a share. Total market value of

all ordinary shares in issue.

Net Asset Value per Ordinary Share

Ordinary shareholders’ funds divided by the

number of ordinary shares in issue. Book

value of an ordinary share.

Non-Performing Facilities Ratio

Total gross non-performing portfolio divided

by total gross portfolio. Percentage of total

gross non-performing portfolio against the

total gross portfolio.

Price Earning Ratio (PER Ratio)

Market price of a share divided by Earnings

Per Share (EPS). Number of years that would

be taken to recoup shareholders’ capital

outlay in the form of earnings.

Return on Assets (ROA)

Net profits expressed as a percentage of

average total assets. Overall effectiveness

in generating profits with available assets;

earning power of invested total capital.

Return on Equity (ROE)

Net profit, less preference share dividends if

any, expressed as a percentage of average

ordinary shareholders’ funds. Earning power on

shareholders’ book value of investment (equity).

154 | Glossary I LOLC | Annual Report 2008/09

Notice of Meeting

NOTICE IS HEREBY GIVEN THAT THE ANNUAL GENERAL MEETING of the Company will be

held on Tuesday, 30th June, 2009 at 10.00 a.m. at ‘LOLC Auditorium’,

No. 100/1, Sri Jayewardenepura Mawatha, Rajagiriya for the following purposes:

1. To receive and consider the Report of the Directors and Statement of Accounts for the year

ended 31st March, 2009 with the Report of the Auditors thereon.

2. To re-elect as a Director Mr. I.C. Nanayakkara, who retires by rotation in terms of Article 84

of the Articles of Association of the Company.

3. To re-elect as a Director Mr. H. Ichida, who retires by rotation in terms of Article 91 of the

Articles of Association of the Company.

4. To re-elect as a Director Mr. M. Inoue who retires by rotation in terms of Article 91 of the

Article of Association of the Company.

5. To re-elect as a Director Mrs. R.L. Nanayakkara, who retires in terms of Section 210 of the

Companies Act No. 7 of 2007. As Mrs. R.L. Nanayakkara is over 70 years, Special Notice

has been received from a shareholder of the intention to pass a resolution which is set out

below in relation to her re-election (see Note 4 below).

6. To re-elect as a Director Mr. M.T.L. Fernando, who retires in terms of Section 210 of the

Companies Act No. 7 of 2007. As Mr. M.T.L. Fernando is over 70 years, Special Notice has

been received from a shareholder of the intention to pass a resolution which is set out below

in relation to his re-election (see Note 5 below).

7. To re-elect as a Director Mr. M.D.D. Pieris, who retires in terms of Section 210 of the

Companies Act No. 7 of 2007. As Mr. Pieris is over 70 years, Special Notice has been

received from a shareholder of the intention to pass a resolution which is set out below in

relation to his re-election (see Note 6 below).

8. To reappoint Messrs Ernst & Young as Auditors for the year 2009/10, at a fee to be decided

upon by the Board.

9. To authorise the Directors to make donations.

BY ORDER OF THE BOARD,

Chrishanthi Emmanuel

Secretary

29th May, 2009

Rajagiriya (in the Greater Colombo)


NOTE:

1. A member entitled to attend and vote at the Meeting is entitled to appoint a Proxy to attend and

vote instead of him/her. A Proxy need not be a member of the Company.

2. The completed Form of Proxy should be deposited at the Registered Office of the Company,

No. 100/1, Sri Jayewardenepura Mawatha, Rajagiriya, not later than 10.00 a.m. on Sunday,

28th June, 2009.

3. A Form of Proxy accompanies this Notice.

4. Special Notice has been received by the Company from a shareholder of the Company

giving Notice of intention to move the following Resolution at the above Annual General

Meeting: ‘Resolved that Mrs. R.L. Nanayakkara (a Director retiring) of the Company who is 73 years be and is hereby re-elected a Director of the Company and it is further specifically declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director, Mrs. R.L. Nanayakkara.’



Meeting: ‘Resolved that Mr. M.T.L. Fernando (a Director retiring) of the Company who is 83 years be and is hereby re-elected a Director of the Company and it is further specifically declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director, Mr. M.T.L. Fernando.’



Meeting: ‘Resolved that Mr. M.D.D. Pieris (a Director retiring) of the Company who is 71 years be and is hereby re-elected a Director of the Company and it is further specifically declared that the age limit of 70 years referred to in Section 210 of the Companies Act No. 7 of 2007 shall not apply to the said Director, Mr. M.D.D. Pieris.’

156 | Notice of Meeting I LOLC | Annual Report 2008/09

Form of Proxy

I/We .......................................………...............................................................................................of

.............................................................................................................being a member/members of

Lanka ORIX Leasing Company PLC hereby appoint .....................................................................of

...................................................................................................................................... whom failing.

Mrs. Rohini Lettitia Nanayakkara of Colombo or failing herMr. Ishara Chinthaka Nanayakkara of Colombo or failing him Mr. Malawige Tissaka Lal Fernando of Colombo or failing him Mr. Ravindra Ajith Fernando of Colombo or failing him Mrs. Kalsha Upeka Amarasinghe of Colombo or failing herMr. Minuwanpitiyage Dharmasiri Dayananda Pieris of Colombo or failing himMr. Raja Mahinda Nanayakkara of Colombo or failing him Mr. Tushan Harsha Mendis Wickramasinghe of Colombo or failing him Mr. Waduthantri Dharshan Kapila Jayawardena of Colombo

as my/our proxy to represent me/us * ………… and vote on my/our behalf at the Annual General Meeting of the Company to be held on Tuesday, 30th June, 2009 and at any adjournment thereof and at every poll which may be taken in consequence of the aforesaid Meeting.

For Against1. To receive and consider the Report of the Directors and Statement of

Accounts for the year ended 31st March, 2009 with the Report of the Auditors thereon.

2. To re-elect as a Director Mr. I.C. Nanayakkara, who retires by rotation in terms of Article 84 of the Articles of Association of the Company.

3. To re-elect as a Director Mr. H. Ichida, who retires by rotation in terms of Article 91 of the Articles of Association of the Company.

4. To re-elect as a Director Mr. M Inoue who retires by rotation in terms of Article 91 of the Articles of Association of the Company.

5. To re-elect as a Director Mrs. R.L. Nanayakkra, who retires in terms of Section 210 of the Companies Act No. 7 of 2007.

6. To re-elect as a Director Mr. M.T.L. Fernando, who retires in termsof Section 210 of the Companies Act No. 7 of 2007.

7. To re-elect as a Director Mr. M.D.D. Pieris, who retires in termsof Section 210 of the Companies Act No. 7 of 2007.

8. To reappoint Messrs Ernst & Young, as Auditors at a remuneration to be fixed by the Directors.

9. To authorise the Directors to make donations.

Dated this ……….………………….. day of June, Two Thousand Nine.

.....................................................

Signature of ShareholderNOTE:

1. A Proxy need not be a member of the company.

2. If you wish your Proxy to speak at the Meeting you should insert the words ‘and to speak’ immediately

before the word ‘vote’ marked * and initial the alteration.

3. Instructions as to completion appear on the reverse hereof:

We hereby certify that the Stamp Duty payable, namely cents 50 in respect of this instrument has been

compounded in terms of Section 13 of the Stamp Duty Act No. 43 of 1982.

LOLC I Annual Report 2008/09

INSTRUCTIONS AS TO COMPLETION

1. Please return the completed Form of Proxy after filling in legibly your full name and address,

signing on the space provided and filling in the date of signature.

2. The completed Form of Proxy should be deposited at the registered office of the Company,

No. 100/1, Sri Jayewardenepura Mawatha, Rajagiriya not less than 48 hours before the time

appointed for the holding of the Meeting.

Form of Proxy I LOLC | Annual Report 2008/09

Corporate InformationName of the CompanyLanka ORIX Leasing Company PLC

Country of IncorporationSri Lanka

Legal FormA quoted public company with limited liability

Date of Incorporation14th March 1980

Company Registration No.PQ 70

Stock Exchange ListingThe ordinary shares of the Company are listed on the Colombo Stock Exchange of Sri Lanka

Principal ActivitiesFinance Leases, Hire Purchase,Consumer Finance, Operating Leases,Fleet Management, Loans, Factoring

Company SecretaryMs. Chrishanthi S. Emmanuel, FCIS

AuditorsErnst & Young, Chartered Accountants

LawyersJulius & CreasyNithya Partners

RegistrarsSSP Corporate Services (Pvt) Ltd.No. 101, Inner Flower Road, Colombo 3.

BankersBank of Ceylon, Standard Chartered Bank, Citi Bank N A , Hatton National Bank, Hongkong & Shanghai Banking Corporation, National Savings Bank, Deutsche Bank, Nations Trust Bank, Commercial Bank of Ceylon, NDB Bank, Public Bank of Berhad, Sampath Bank, Seylan Bank, Union Bank, ICICI Bank, MCB Bank, State Bank of India, Indian Overseas Bank, Indian Bank

Registered OfficeNo. 100/1, Sri Jayewardenepura Mawatha, Rajagiriya, Sri LankaTelephone: 011-5880880Fax: 011-2865606 (Gen.) 011-2865612 (Mkt.), 2865642 (Fin.)Website: www.lankaorix.com

Head OfficeNo. 100/1, Sri Jayewardenepura Mawatha, Rajagiriya, Sri LankaTel: 011-5880880Fax: 011-2865606 (Gen.)

Union PlaceNo. 323, Union Place, Colombo 2Tel: 011-5333801, 011-5358117Fax: 011-2303166

Colombo 7No. 79, C.W.W. Kannangara MawathaTel: 011-5039943-7, 5034141, 5034140, 5018229, 011-2665780-2Fax: 011-4723376

Colombo 3LOSEC (Head Office)No. 42, Sir Mohamed Macan Markar MawathaTel: 011-5335225Fax: 011-5365725

AnuradhapuraNo. 7/488, Maithripala Senanayake MawathaTel: 025-2224921-2, 025-5810810-4Fax:025-2224923

BadullaNo. 32, Udayaraja MawathaTel: 055-5760760-3Tel/Fax: 055-2230900, 055-2230899

ChilawNo. 89, Kurunegala RoadTel: 032-5676880-3, Fax: 032-2223267

EmbilipitiyaNo. 335, Ratnapura RoadTel: 047-5670880-3Fax: 047-2261825

GalleNo. 71/21, Sri Gnanobasha Mawatha, OroppuwattaTel: 091-5458860-3, 091-2232580/2Fax:091-2232583

GampahaNo. 58B, Queen Mary’s RoadTel: 011-5353582-3, 011-5353597-8Tel/Fax: 033-2234771Fax: 033-2234772

HoranaNo. 192 C, Ratnapura RoadTel: 034-5626880-3Fax: 034-2265514

Kalutara

No. 546, Galle Road, Kalutara SouthTel: 034-5588860-3Fax: 034-2224280-2

KandyNo. 202/3, Katugastota RoadTel: 081-2213315-9, 081-5741010-8Fax: 081-4472614

KiribathgodaNo. 101, Kandy RoadTel: 011-5510520-1, 011-5510523-4Fax: 011-2907950

KochchikadeNo. 60/1, Regal Building, Chilaw RoadTel: 031-2276121-3, 031-5318682, 031-5310240, 031-5310008Fax: 031-5319580

KurunegalaNo. 18, Mihindu MawathaTel: 037-5260330, 037-222191-2Fax: 037-2220372

KegalleNo. 108 A & 106, Main StreetTel: 035-5880880-3Fax: 035-2223972

MataraNo. 387A, Anagarika Dharmapala Mawatha,PamburanaTel: 041-2227300-2, 041-5419900-1, 041-5419985-6Fax: 041-2227303

Mount LaviniaNo. 459C, Galle RoadTel: 011-5552880-3, 011-2715749Fax: 011-2715741

MahiyanganaNo. 43, Kandy Road, MiyugunagamaTel: 055-5676880, 055-5676882, 055-2257301Fax: 055-2257300

Nuwara EliyaNo. 72, Tharanga Building, Park RoadTel: 052-5720720-2, 052-2224071-2Fax: 055-2224070

Polonnaruwa

No. 421, Main Street, KaduruwelaTel: 027-5870001, 027-5670880Fax: 027-2224999

RatnapuraNo. 240A, Colombo RoadTel: 045-5440100-2, 045-2230054Fax: 045-2230056

WattalaNo. 503, Negombo RoadTel: 011-5355880-3Fax: 011-2931360

WellawatteNo. 116A, Galle RoadTel: 011-5555880-4Fax: 034-5555885

Located at LIOC Filling StationsMorawaka, Trincomalee, Pilimatalawa, Seeduwa, Aluthgama, Kadawatha, Ambalangoda, Debarawewa, Beliatta, Thalawakelle, Panadura, Padukka, Batticaloa, Deraniyagala

Located at Post OfficesBulathsinhala, Elpitiya, Balangoda, Melsiripura, Kuliyapitiya, Godakawela, Eheliyagoda, Padaviya, Thambuththegama, Divulapitiya, Nikaweratiya

Board of DirectorsMrs. R.L. Nanayakkara - ChairpersonMr. I.C. Nanayakkara - Deputy ChairmanDesamanya M.D.D. PierisMr. M.T.L. FernandoMr. R.A. FernandoMrs. K.U. AmarasingheMr. T.H.M. WickramasingheMr. R.M. NanayakkaraMr. W.D.K. Jayawardena - Managing Director and Group CEOMr. M. Inoue (appointed w.e.f. 06.02.09)Mr. H. Ichida (appointed w.e.f. 06.02.09)Mr. K. Fushitani (resigned w.e.f. 06.02.09)Mr. Y. Oshima (resigned w.e.f. 06.02.09)Mr. M. Sekimoto (Alternate to Mr. Fushitani up to 06.02.09)(Alternate to Mr. M. Inoue from 06.02.09)Alternates to Mr. Y. Oshima Mr. Mori (from 23.04.08 to 31.07.08)Mr. K. Katayama (from 31.07.08 to 31.10.08)Mr. Y. Matsuoka (from 31.10.08 to 06.02.09)Mr. Y. Matsuoka (Alternate to Mr. H. Ichida w.e.f. 06.02.09)

Corporate ManagementKithsiri Gunawardena - Chief Operating Officer & Chief Legal OfficerSunjeevani Kotakadeniya - Chief Financial OfficerAnura Dharmaprema - Corporate Executive Officer - Recoveries Jacqueline Lord - Chief HR OfficerJayantha Kelegama - Chief Credit OfficerRohan Perera - Group TreasurerSharmini Wickremasekera - Chief Risk OfficerConrad Dias - Chief Information Officer/

Managing Director - LOITKrishan Thilakaratne - Chief Executive Officer - Auto FinanceRavi Tissera - Chief Executive Officer - Micro FinanceBrindley de Zylva - Managing Director/CEO - Lanka ORIX Finance Co. Ltd.Sanjiv Keerthiratne - Chief Executive Officer - Lanka ORIX Insurance Brokers Ltd. Tushan Wickramasinghe - Managing Director - Lanka ORIX Securities (Pvt) Ltd.Gunendra Jayasena - General Manager VenturesNimal Mendis - CEO- LOPDDr. H.S.D. Soysa - General Manager/CEO - Commercial Leasing Company PLC

Prod

uced

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Documents

Resurgence and Rebuilding - LOLC · Financial Highlights 07 I Chairperson’s Statement 08 I Deputy Chairman’s Review 12 I Group Managing Director’s Review 16 I Board of Directors