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We are in the business of financing happiness.

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Letter of Transmittal Notice of the 27th Annual General Meeting IDLCs Vision, Mission and Strategic Objectives IDLCs Core Values IDLCs Code of Conduct and Ethics IDLC at a Glance IDLCs Products and Services Shareholding Composition of IDLC Finance Limited Company Information History - Key Milestones

Our Management
Board of Directors Brief Profile of the Directors Committees of the Board & Management Management and Executives

Our Governance
Statement of Risk Management Our Treasury Operations Statement on Corporate Governance Corporate Social Responsibility (CSR) at IDLC Event Highlights Our Human Capital Report of the Audit Committee

How we are assessed


Assessment Report on the Going Concern Status of IDLC Business Environment and Its Likely Impact on the Financial Performance of IDLC

Our performance summary


Performance Indicators-Group Key Operating and Financial Highlights-Group Value Added Statement Market Value Added Statement Economic Value Added Statement Financial Highlights as Required by the Bangladesh Bank

What we state
Statement of Directors' Responsibility for Internal Control and Financial Reporting CEO & Managing Directors Review of Economic Environment and Business Performance Directors' Report to the Shareholders

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Auditors' Report

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Our Financial performance IDLC Group


Financial Statements - IDLC Group Consolidated Balance Sheet Consolidated Profit and Loss Account Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Financial Statements - IDLC Finance Limited Balance Sheet Profit and Loss Account Profit and Loss Account of Merchant Banking Operation Cash Flow Statement Statement of Changes in Equity Liquidity Statement Notes to the Consolidated and Separate Financial Statements

Groups Subsidiaries IDLC Securities Limited


Directors Report to the Shareholders Auditors' Report Financial Statements Statement of Financial Position Statement of Comprehensive Income

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IDLC Investments Limited


Directors Report to the Shareholders Auditors' Report Financial Statements Statement of Financial Position Statement of Comprehensive Income

Stakeholders Corner
Disclosure under Pillar III- Market Discipline Information for the Stakeholders Glossary
IDLCs Presence Shareholders Note Proxy Form & Attendance Slip

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I Letter of Transmittal

Letter of Transmittal
All Shareholders, Bangladesh Bank, Registrar of Joint Stock Companies & Firms, Securities and Exchange Commission, Dhaka Stock Exchange Limited, and Chittagong Stock Exchange Limited.

Dear Sir (s):

ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 2011


Enclosed please find a copy of the Annual Report together with the audited financial statements including consolidated and separate balance sheet as at December 31, 2011 and income statements, cash flow statements and changes in equity statements for the year ended December 31, 2011 along with notes thereon of IDLC Finance Limited and its subsidiaries (IDLC Securities Limited & IDLC Investments Limited) for your kind information and record.

Thank you. Yours sincerely,

H. M. Ziaul Hoque Khan Company Secretary

IDLC annual report 2011

I Notice of the 27th Annual General Meeting

Notice of the 27th Annual General Meeting


Notice is hereby given to all the Members of IDLC Finance Limited (IDLC) that the 27th Annual General Meeting of the Company will be held on Thursday, March 29, 2012 at 11.00 a.m. at Utshab, Radisson BLU Water Garden Hotel, Airport Road, Dhaka Cantonment, Dhaka 1206, for transacting the following business:
A01227-01 To consider and adopt the audited Profit & Loss Account of the Company for the year ended 31 December, 2011 and the Balance Sheet as at that date together with the Reports of the Auditors and the Directors thereon; Declaration of stock dividend for the year ended December 31, 2011, as recommended by the Board of Directors; Election of Directors in place of those who shall retire by rotation in accordance with the provision of Articles of Association of the Company; Appointment of Auditors of the Company for the term until the completion of next Annual General Meeting and fixation of their remuneration, as per Companies Act 1994.

A01227-02 A01227-03 A01227-04

By order of the Board Company Secretary Dated: February 22, 2012

Notes 1. The Record Date in lieu of Book Closure for the AGM shall be Tuesday, March 06, 2012. The Shareholders whose names would appear in the Register of Members of the Company and/or in the Depository on the Record Date will be eligible to attend the 27th AGM and entitled to Stock Dividend as mentioned above; 2. The Board of Directors recommended stock dividend @25% (one share for every four shares held) for the year 2011; 3. A Member may appoint a proxy to attend and vote in his place by filling proxy form as per Article 103 of the Articles of Association of the Company. The proxy form, duly completed and stamped, must be deposited at the oce not later than 48 hours before the time scheduled for holding the meeting;

4. Pursuant to Article 81 of the Articles of Association, a corporate member of the Company, by resolution of the Board of Directors or other Governing Body of such body corporate, may authorize such person as it thinks fit, to act as representative at any meeting of the members of the Company; 5. Annual Report, Attendance Slip and Proxy Form along with the Notice will be sent to all the Members by Courier Service/Post. The Members may also collect the Proxy Form from the Registered Oce of the Company.

IDLC annual report 2011

I IDLCs Vision, Mission and Strategic Objectives

IDLCs Vision, Mission and Strategic Objectives


Our Vision
We will be the best financial brand in the country

Our Mission
We will focus on quality growth, superior customer experience and sustainable business practices

Strategic Objectives 2012/2013


Grow and develop our talent pool; Fully leverage new core banking platform; Optimize distribution points; Grow and diversify funding sources; Grow sales and service capabilities in Consumer Division; Aggressively grow SME portfolio; Focus on top-tier clients in Corporate; Consolidate capital market operations and enhance capabilities; Embrace internationally accepted corporate governance and sustainable business practices.

IDLC annual report 2011

Who we are I

I IDLCs Core Values

IDLCs Core Values


Customer Focus Trust & Respect

Integrity

Equal Opportunity

Eco-Friendly

Passion

Simplicity

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IDLC annual report 2011

I IDLCs Code of Conduct and Ethics

IDLCs Code of Conduct and Ethics


In accordance with approved and agreed Code of Conduct, IDLC employees shall:

act with integrity, competence, dignity and in an ethical manner when dealing with customers, prospects, colleagues, agencies and public; act and encourage others to behave in a professional and ethical manner that will reflect positively on IDLC employees, their profession and on IDLC, at large; strive to maintain and improve the competence of all in the business; use reasonable care and exercise independent professional judgment; not restrain others from performing their professional obligations; maintain knowledge of and comply with all applicable laws, rules and regulations; disclose all conflicts of interest; deliver professional services in accordance with IDLC policies and relevant technical and professional standards; respect the confidentiality and privacy of customers, people and others with whom they do business; not engage in any professional conduct involving dishonesty, fraud, deceit or misrepresentation or commit any act that reflects adversely on their honesty, trustworthiness or professional competence.

IDLC employees have an obligation to know and understand not only the guidance contained in the Code of Conduct, but also the spirit on which it is based.

IDLC annual report 2011

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I IDLC at a Glance

IDLC at a Glance
IDLC Finance Limited was established in Bangladesh in 1985, as the first-ever leasing company of the country, through the collaboration of IFC, German Investment and Development Company (DEG), Kookmin Bank and Korean Development Finance Corporation, the Aga Khan Fund for Economic Development, the City Bank Limited, IPDC of Bangladesh Limited, and Sadharan Bima Corporation. As the company evolved over the years, the foreign shareholding gradually moved out and the last foreign shareholding was bought out by local sponsors in 2009. IDLCs strong focus on revenue diversification has led to the establishment of dierent client segments in the Corporate, Retail, SME and Capital Markets of Bangladesh. The current product portfolio consists of Corporate and Structured Finance solutions for local and multinational corporate houses; Personal financing products such as deposits, home loans, car loans, personal loans etc.; financing facilities for Small and Medium Enterprises; Merchant Banking solutions such as Portfolio Management and Investment Banking (IPO, RPO, Bond Issuance, Rights Shares Oering etc.); and Brokerage services. With this diversified array of products, IDLC Finance Limited is at present the largest multiproduct Non-Bank Financial Institution in Bangladesh, having two wholly-owned subsidiaries, IDLC Investments Limited and IDLC Securities Limited for carrying out its capital market operations. The Group is represented by over 559 employees working in 28 branches in the major cities of the country. IDLC is highly respected by its clients, peers, employees and regulators for its professional pool of resources, its progressive and enabling work environment, and its strong ethical practices. With significant growth in its business and profit over the last few years, the company has consistently demonstrated exemplary corporate governance and strict statutory compliance, and is a standard bearer in this regard in the financial sector of Bangladesh. Moreover, starting from 2010, its silver jubilee year, IDLC has decided to step up its commitment to sustainable business practices, with particular focus on environmental and social development. It has subscribed to a number of leading local and international sustainability initiatives including the Bangladesh CSR Centre, the UN Global Compact (UNGC) and the UN Environment Programme Finance Initiative (UNEP FI), and IDLC is the first company to become a member of UNEP FI from Bangladesh. As part of this commitment, IDLC is now active in promoting responsible practices among its stakeholder groups, mostly its employees and clients, while it is streamlining its own policies and practices to emerge as a truly responsible brand.

Subsidiaries
IDLC Securities Limited (IDLCSL) IDLC Securities Limited, a fully owned subsidiary of IDLC, oers full-fledged international standard brokerage service for retail and institutional clients. It has seats on both Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. It is also a Depository Participant (DP) of Central Depository Bangladesh Limited (CDBL). IDLC Investments Limited (IDLCIL) As required by the Securities & Exchange Commission (SEC), the Company formed a separate subsidiary on May 19, 2010 in the name and style IDLC Investments Limited to transfer its existing merchant banking activities. The Company obtained license from SEC on August 02, 2011 in the name of IDLC Investments Limited for operating existing merchant banking operation of IDLC Finance Limited and commenced its business on August 16, 2011. The main businesses of the company are portfolio management, issue management, underwriting of securities and advisory services.

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IDLC annual report 2011

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IDLC annual report 2011

2011 ep ort r annual IDLC

We are in the business of financing happiness.

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I IDLCs Products and Services

IDLCs Products and Services

IDLC annual report 2011

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I IDLCs Products and Services

Who we are I

IDLC annual report 2011

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I Shareholding Composition of IDLC Finance Limited

Shareholding Composition of IDLC Finance Limited


As on December 31, 2011
SL. NO. 1 NAME OF SHAREHOLDERS SPONSORS/DIRECTORS The City Bank Limited Transcom Group Eskayef Bangladesh Limited Trans Craft Limited Bangladesh Lamps Limited Sadharan Bima Corporation Mercantile Bank Limited Reliance Insurance Company Limited Sub-total 2 GENERAL Institutions Bangladesh Fund Eastern Bank Limited Investment Corporation of Bangladesh Marina Apparels Limited Other Institutions Sub-total Individuals General Public(Individuals) Sub-total Total Holdings 21,329,110 21,329,110 99,000,000 21.54 21.54 100.00 3,150,310 2,163,400 1,278,380 990,000 6,908,230 14,490,320 3.18 2.19 1.29 1.00 6.98 14.64 28,082,830 13,199,930 7,920,000 3,973,130 1,306,800 7,542,810 7,425,000 6,930,000 63,180,570 28.37 13.33 8.00 4.01 1.32 7.62 7.50 7.00 63.82 NO. OF SHARES %

IDLC annual report 2011

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I Company Information

Company Information
Registered Name of the Company IDLC Finance Limited Legal Form A public limited company incorporated in Bangladesh on May 23, 1985 under the Companies Act 1913 and listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited on March 20, 1993 and November 25, 1996, respectively. The Company licensed as Financial Institution under Financial Institutions Act, 1993 on February 7, 1995. Company Registration No. C 14218/1992 of 1984-1985 Bangladesh Bank License No. BCD (Non-banking)/Dhaka/2/1995 Registered Oce Bays Galleria (1st Floor) 57 Gulshan Avenue, Gulshan 1, Dhaka 1212, Bangladesh Tel: +880 2 883 4990 (Auto Hunting) Facsimile: +880 2 883 4377, 883 5887 E-mail: mailbox@idlc.com Corporate Website www.idlc.com Auditors M/s Huda Vasi Chowdhury & Co. Chartered Accountants BTMC Bhaban (Level 8) 7-9 Kazi Nazrul Islam Avenue Kakarwan Bazar C/A, Dhaka 1217 Chambers of Commerce & Industry International Chamber of Commerce - Bangladesh Metropolitan Chamber of Commerce & Industry Dhaka Chamber of Commerce & Industry Bangladesh German Chamber of Commerce & Industry Sustainability initiatives/ partners for sustainability UN Global Compact (UNGC) UN Environmental Programme Finance Initiative (UNEP FI) CSR Centre Institute The Institute of Bankers, Bangladesh Major Stock Brokers IDLC Securities Limited LankaBangla Securities Limited Multi Securities Limited Memberships Associations Bangladesh Leasing & Finance Companies Association Asian Financial Services Association Bangladesh Merchant Bankers Association Bangladesh Association of Publicly Listed Companies Principal Bankers Standard Chartered Bank Citibank N.A.

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IDLC annual report 2011

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I History - Key Milestones

HistoryKey Milestones
May 23, 1985 February 22, 1986 October 1, 1990 March 20, 1993 February 7, 1995 November 25, 1996 May 27, 1997 January 22, 1998 January 15, 1999 January 29, 2004 June 29, 2004 November 22, 2004 January 2, 2006 April 6, 2006 July 1, 2006 September 18, 2006 March 14, 2007 August 5, 2007 January 6, 2009 August 26, 2009 February 3, 2010 February 24, 2010 August 8, 2010 October 27, 2010 December 23, 2010 December 27, 2010 June 15, 2011 August 9, 2011
IDLC annual report 2011

Incorporation of the Company Commencement of leasing business Establishment of branch in Chittagong, the main port city Listed with the Dhaka Stock Exchange Limited Licensed as Non-Banking Financial Institution under the Financial Institutions Act, 1993 Listed with the Chittagong Stock Exchange Limited Commencement of Home Finance and Short Term Finance operations Licensed as a Merchant Banker by the Securities and Exchange Commission Commencement of Corporate Finance and Merchant Banking operations Opening of the first retail focused branch at Dhanmondi Opening of Gulshan Branch Launching of Investment Management Services "Cap Invest" Opening of first SME focused branch at Bogra Opening of Branch at Uttara Relocation of Company's Registered and Corporate Head Oce at own premises at 57 Gulshan Avenue Commencement of operation of IDLC Securities Ltd., a wholly owned subsidiary of IDLC Launching of Discretionary Portfolio Management Services "Managed Cap Invest" Company name changed to IDLC Finance Limited from Industrial Development Leasing Company of Bangladesh Limited Opening of Sylhet branch Opening of Gazipur SME Booth IDLC started its operation at Narayanganj Inauguration of Savar Branch IDLC opened its 2nd branch in Chittagong at Nandankanon IDLC stepped in Comilla IDLC inaugurated its Narsingdi Branch Opening of Keranigonj Branch IDLC started its operation at Mirpur Inauguration of Tongi Branch Commencement of operation of IDLC Investments Ltd., a wholly owned subsidiary of IDLC Opening of Jessore Branch

August 16, 2011 January 18, 2012

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I Board of Directors

Board of Directors
Chairman Anwarul Huq Chairman & CEO, Tyser Risk Management (Bangladesh) Limited - Nominated by Reliance Insurance Limited Directors Rubel Aziz, Chairman, The City Bank Limited - Nominated by The City Bank Limited Md. Habibur Rahman Mollah, FCA COO, Bangladesh Lamps Limited and Bangladesh Electrical Industries Limited - Nominated by Transcom Group Aziz Al Kaiser Director, The City Bank Limited - Nominated by The City Bank Limited Hossain Mehmood Director, The City Bank Limited - Nominated by The City Bank Limited Meherun Haque Vice Chairperson, The City Bank Limited - Nominated by The City Bank Limited K. Mahmood Sattar Managing Director & CEO, The City Bank Limited - Nominated by The City Bank Limited Md. Rezaul Karim Managing Director, Sadharan Bima Corporation - Nominated by Sadharan Bima Corporation A.K.M. Shahidul Haque Managing Director & CEO, Mercantile Bank Limited - Nominated by Mercantile Bank Limited Farooq Sobhan President & CEO, Bangladesh Enterprise Institute - Independent Director CEO & Managing Director Selim R. F. Hussain Company Secretary H. M. Ziaul Hoque Khan
IDLC annual report 2011 Our Management I

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I Brief Profile of the Directors

Brief Profile of the Directors


Anwarul Huq Chairman nominated by Reliance Insurance Limited Mr. Anwarul Huq was the founder Director and a member of the Audit Committee of Reliance Insurance Limited. Mr. Huq is the Chairman and Chief Executive Ocer of Tyser Risk Management (Bangladesh) Limited. He carries vast experience in the field of insurance business and is widely known in the insurance industry and business circles. He is also the Honorary Consul General of Greece and Senior Vice-President of Bangladesh Squash Rackets Federation.

Rubel Aziz Director nominated by The City Bank Limited An industrial entrepreneur, Mr. Rubel Aziz has been in the business for a long period and has set up and successfully executed a good number of industrial undertakings. He is the Chairman of The City Bank Limited, and Janata Insurance Co. Limited. He is the Managing Director of Partex Beverage Limited, a franchise of Royal Crown Cola International (RC Cola), Partex Plastics Limited, Partex Jute Mills Limited and Partex Properties Limited. He is also a Director of a number of companies of Partex Group and IBAIS University. He is also the elected former President of Gulshan Club.

Md. Habibur Rahman Mollah, FCA Director nominated by Transcom Group Mr. Md. Habibur Rahman Mollah is a Chartered Accountant with thirty years of experience in key positions of Finance and Accounts with multi-disciplinary business organizations. He started his career in 1983 and at present, is working in Transcom Group, one of the largest business conglomerates in the country, as Chief Operating Ocer of Bangladesh Lamps Limited, Bangladesh Electrical Industries Limited and Transcom Cables Limited.

IDLC annual report 2011

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I Brief Profile of the Directors

Aziz Al Kaiser Director nominated by The City Bank Limited Mr. Kaiser graduated from U.S. International University, London, UK. An industrial entrepreneur, Mr. Kaiser, has a track record of establishing and running a good number of industrial projects successfully. Mr Kaiser is the Vice Chairman of Partex Star Group. He is also the Managing Director of Star Particle Board Mills Limited, Partex Limited, Partex Real Estate Limited, Partex Builders Limited, Fairhope Housing Limited, Corvee Maritime Company Limited, Partex Furniture Industries Limited, Partex Laminates Limited and Partex Pvc Industries Limited. Mr Kaiser also holds Directorship in The City Bank Limited, Janata Insurance Company Limited, Danish Condensed Milk (BD) Limited, Danish Milk (BD) Limited, Danish Food Limited, Rubel Steel Mills Limited, etc. He is also a Director of Bangladesh Cricket Board and Chairman Marketing & Commercial Committee, Bangladesh Cricket Board. Hossain Mehmood Director nominated by The City Bank Limited Mr. Hossain Mehmood is an industrial entrepreneur and has been in the business for a long period and successfully set up and executed a good number of industrial undertakings. He is Director of a number of companies of Anwar Group of Industries and also the Director of The City Bank Limited. Mr. Mehmood is the Managing Director of Hossain Dyeing & Printing Mills Limited, Mehmood Industries (Pvt.) Limited and Anwar Silk Mills Limited.

Meherun Haque Director nominated by The City Bank Limited Mrs. Meherun Haque is the daughter of Mr. Deen Mohammad, a leading industrialist and Chairman of Phoenix Group. Mrs. Haque is the Vice-Chairperson of The City Bank Limited. She also holds Directorship in Phoenix Insurance Company Limited.
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I Brief Profile of the Directors

Kazi Mahmood Sattar Director nominated by The City Bank Limited Mr. K. Mahmood Sattar started his career with the former ANZ Grindlays Bank in 1981. During his career with the bank he worked in Mumbai, India as Corporate Dealer in treasury, for more than two years in Melbourne, Australia, as Manager corporate banking and after returning from abroad Mr. Sattar was Regional Head in Chittagong. Thereafter, for more than five years he was Head of Corporate & Investment Banking in Dhaka. Mr. Sattar joined Eastern Bank Limited as Managing Director & CEO in January, 2001 and successfully transformed the bank to a modern bank. Mr. Sattar joined The City Bank Limited in July, 2007 as Managing Director & CEO. He is the ExChairman of the Association of Bankers, Bangladesh (ABB) and Chairperson of SWIFT user group in Bangladesh and he is one of the Directors of Unique Hotel & Resort Nominated by The City Bank Limited.

Md. Rezaul Karim Director nominated by Sadharan Bima Corporation (SBC) Mr. Md. Rezaul Karim is Managing Director of Sadharan Bima Corporation (SBC). He started his career at SBC in 1981 as a Trainee ocer. During his career with SBC he attended a number of training and workshops on insurance related matters both at home and abroad. Mr. Karim is also a nominated Director of Investment Corporation of Bangladesh (ICB), National Housing Finance and Investments Limited (NHFIL), Central Depository Bangladesh Limited (CDBL), National Tea Company Limited (NTC) and Bangladesh Insurance Academy. He is also a Director of Asian Re-insurance Corporation, Bangkok, Thailand.

A.K.M. Shahidul Haque Director nominated by Mercantile Bank Limited Mr. A.K.M. Shahidul Haque is the Managing Director & CEO of Mercantile Bank Limited. He completed his B.A. (Hons) and M.A. from the University of Dhaka and started his banking career as a Probationary Ocer with Rupali Bank Limited in 1977. During his banking career, he held important positions with challenging assignments. Prior to joining Marcantile Bank in 1999, Mr. Haque served Prime Bank Limited and National Bank Limited in dierent capacities. He attended a number of training programs and workshops, both at home and abroad. He actively participated in the Liberation War of Bangladesh in 1971.

IDLC annual report 2011

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I Brief Profile of the Directors

Farooq Sobhan Independent Director Mr. Farooq Sobhan is the President and Chief Executive of Bangladesh Enterprise Institute (BEI). Mr. Sobhan was Executive Chairman, Board of Investment and Special Envoy to the Prime Minister 1997-1999, Foreign Secretary 1995-1997, High Commissioner to India 1992-1995, Ambassador to China 1987-1991, HighCommissioner to Malaysia 1984-1987, Ambassador and Deputy Permanent Representative to the United Nations 1981-1984. He served as Chairman of the Group of 77 at the UN 1982-1983 and was Chairman, UN Commission on TNCs between 1991-1992. Mr. Sobhan is a Member of the International Research Committee of the Centre for Security Studies, Colombo. He is a member of the Board of Governors of the South Asia Centre for Policy Studies (SACEPS), based in Kathmandu and was CoChairman of the Coalition for South Asian Co-operation (CASAC) from 1994-2001. He has written extensively on the subject of regional co-operation in South Asia and is currently involved in a number of initiatives in the region. Selim R. F. Hussain Ex Ocio Mr. Selim R. F. Hussain is a career banker, with an Honours degree in Accounting from Dhaka University and an MBA (Major in Finance) from the Institute of Business Administration, also from Dhaka University. Mr. Hussain worked in various roles with the two largest multi-national banks in Bangladesh, ANZ Grindlays Bank and Standard Chartered Bank, for twenty four years, before moving to the IDLC Group in 2010. He has resided in and worked in India and Australia for significant periods of his career and prior to taking over the helm at IDLC Finance Limited, was the Head of Finance & Strategy for Standard Chartered Banks Consumer Banking Division in Mumbai, India. Mr. Hussain was also CFO for Standard Chartered Bank, Bangladesh, from 2002 to 2007.

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IDLC annual report 2011

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I Committees of the Board & Management

Committees of the Board & Management


As per DFIM Circular Letter No. 18, dated October 26, 2011 of Bangladesh Bank on the policy regarding the responsibility and accountability of the Board of Directors, Chairman and Chief Executive Ocer/Managing Director of the Financial Institutions, the Board of Directors of IDLC formed two subcommittees of the Board: Executive Committee and Audit Committee. Audit Committee (AC) The Committee is empowered, among other things, to examine any matter relating to the financial aairs of the Company and to review all audit and inspection reports, internal control systems and procedures, accounting policies and adherence to compliance requirements, etc. Composition of Audit Committee The AC consists of five members. The members are as follows: Composition of ManCom Selim R. F. Hussain, CEO & Managing Director H. M. Ziaul Hoque Khan, FCA Deputy Managing Director & CFO M. Jamal Uddin, Head of Corporate Division Mir Tariquzzaman, Chief Technology Ocer (CTO) Bilquis Jahan, Head of Human Resources Asif Saad Bin Shams, Head of Credit & Collection Zahid Ibne Hai, Head of SME Division Irteza A. Khan, Head of Consumer Division M. Ataur Rahman Chowdhury, Head of Operations Mustaq Ahammed, FCA Head of ICC Md. Saifuddin, Managing Director, IDLC Securities Limited Md. Moniruzzaman, CFA Managing Director, IDLC Investments Limited Credit Evaluation Committee (CEC) CEC evaluates all projects/proposals of financing activities of the Company from risk point of view. Composition of CEC Selim R. F. Hussain, CEO & Managing Director H. M. Ziaul Hoque Khan, FCA Deputy Managing Director & CFO M. Jamal Uddin, Head of Corporate Division Asif Saad Bin Shams, Head of Credit & Collection Zahid Ibne Hai, Head of SME Division Irteza A. Khan, Head of Consumer Division

All other committees of IDLC are formed under the jurisdiction of the management.

Executive Committee (EC) The matter related to ordinary business operations of the Company and the matters that the Board of Directors authorizes from time to time are vested on this Committee. Composition of Executive committee Incompliance with the referred circular, the EC consists of five members. The members are as follows: Rubel Aziz, Chairman K. Mahmood Sattar, Member Md. Rezaul Karim, Member A.K.M. Shahidul Haque, Member Selim R. F. Hussain, Member

Md. Habibur Rahman Mollah, FCA Chairman Anwarul Huq, Member Rubel Aziz, Member Md. Rezaul Karim, Member Farooq Sobhan, Member Management Committee (ManCom) The Management Committee is tasked with making key decisions for the Companys management and operations, under the ocial delegation of authority from the Board. The Committee is comprised of senior executives who are from various key functions and operations of the Company.

IDLC annual report 2011

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I Committees of the Board & Management

Asset Liability Management Committee (ALCO) The Asset Liability Management Committee (ALCO) of the Company assesses the changes in interest rate, market conditions, carries out asset liability maturity gap analysis, re-pricing of products and thereby takes eective measures to monitor and control interest rate risk. Composition of ALCO Selim R. F. Hussain, CEO & Managing Director, Chairman H. M. Ziaul Hoque Khan, FCA Deputy Managing Director & CFO, Member M. Jamal Uddin, Head of Corporate Division, Member Zahid Ibne Hai, Head of SME Division, Member Irteza A. Khan, Head of Consumer Division, Member Asif Saad Bin Shams, Head of Credit & Collection, Member Md. Moniruzzaman, CFA Managing Director, IDLC Investments Limited, Member Md. Saifuddin, Managing Director, IDLC Securities Limited, Member Mohammad Abdul Ohab Miah, FCA CFO of Capital Market operations, Member H S Tareq Ahmed, Head of Treasury, Member & Organizer Internal Control Committee (ICC) Internal Control Committee addresses operational risk and frames and implements policies to encounter such risks. The Committee assesses operational risk across the Company, as a whole, and ensures that an appropriate framework exists to identify, assess and manage operational risk. Composition of ICC Selim R. F. Hussain, CEO & Managing Director

H. M. Ziaul Hoque Khan, FCA Deputy Managing Director & CFO Mustaq Ahammed, FCA Head of ICC Head of business units HR & Compensation Committee The principal purpose of the Committee is to assist the management in fulfilling its corporate governance and oversight responsibilities in relation to establishing people management and remuneration policies. Composition of HR & Compensation Committee Selim R. F. Hussain, CEO & Managing Director H. M. Ziaul Hoque Khan, FCA Deputy Managing Director & CFO Bilquis Jahan, Head of HR Head of business units Corporate Governance Committee The committee ensures the corporate governance practice within the Company as required by the SEC and Bangladesh Bank. The committee also recommends and advises course of actions in the areas where there is a scope of improvement. Composition of Corporate Governance Committee Selim R. F. Hussain, CEO & Managing Director H. M. Ziaul Hoque Khan, FCA Deputy Managing Director & CFO Asif Saad Bin Shams, Head of Credit & Collection Mustaq Ahammed, FCA Head of ICC BASEL implementation Committee The Basel Implementation Committee is responsible for the implementation of Basel Accord for Financial Institution (BAFI) in IDLC. Managing risk based capital adequacy is the most important responsibility of the committee.

The Basel Implementation Desk (BID) of the Risk Management Department manages the Basel activities. The results of risk based capital analysis along with recommendation are placed in the committee meeting by the BID where important decisions are made to maintain Minimum/ Regulatory Capital and manage related risk. Composition of BASEL implementation Committee Selim R. F. Hussain, CEO & Managing Director H. M. Ziaul Hoque Khan, FCA Deputy Managing Director & CFO Asif Saad Bin Shams, Head of Credit & Collection Mustaq Ahammed, FCA Head of ICC Ethics and Compliance Committee The committee supervises the ethical business practices of the dierent units of the company. It also ensures the compliance with the stated conduct and code of ethics of the company. Composition of Ethics and Compliance Committee Selim R. F. Hussain, CEO & Managing Director H. M. Ziaul Hoque Khan, FCA Deputy Managing Director & CFO Bilquis Jahan, Head of HR

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IDLC annual report 2011

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I Management & Executives

Management & Executives


Management Committee
Zahid Ibne Hai Head of SME Division Asif Saad Bin Shams Head of Credit & Collection Md. Moniruzzaman, CFA Managing Director, IDLCIL M. Ataur Rahman Chowdhury Head of Operations

IDLC annual report 2011

M. Jamal Uddin Head of Corporate Division

Bilquis Jahan Head of Human Resources

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I Management & Executives

Md. Saifuddin Managing Director, IDLCSL

Mir Tariquzzaman Chief Technology Ocer

Irteza A. Khan Head of Consumer Division

Mustaq Ahammed, FCA Head of ICC

Selim R. F. Hussain CEO & Managing Director

H. M. Ziaul Hoque Khan, FCA Deputy Managing Director & CFO

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I Management & Executives

Senior Executives

1 I Indrajit Mallick 2 I M. Maksudul Hoque 3 I Bidyut Kanti Das 4 I Iam Siddiqui 5 I Mesbah Uddin Ahmed 6 I Shafayet Hossain 7 I Kazi Mahmood Hossain 8 I Md. Mohidur Rahman 9 I Md. Masud Karim Majumder, ACA 10 I Laila Nasrin 11 I Mohammad Abdul Ohab Miah, FCA 12 I Rubayet-E-Ferdous 13 I Md. Al-Amin 14 I Rajib Kumer Dey

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I Our Vision, Mission and Corporate Philosophy

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I Risk Management

Statement of Risk Management


management and appropriate internal control measures are also in place to mitigate risk. Major Risks at IDLC Major Risks that IDLC identifies detrimental to its return and market reputation is as follows: Risk is the element of uncertainty or possibility of loss that prevail in any business transaction in any place, in any mode and at any time. Risk is an integral part of financing business. Risk management entails the adoption of several measures to strengthen the ability of an organization to cope with the vagaries of the complex business environment in which it operates. As a financial institution, IDLC is committed to ensuring that eective risk management policies and practices are incorporated as fundamental aspects of all its business operations. The Credit Risk Management Department (CRM) of the Company has a comprehensive risk management policy in place, addressing areas such as market risk, credit risk and operational risk. This policy seeks to minimize the risks generated by the activities of the Company. CRM continuously develops and enhances its risk management and control procedures in order to better identify and monitor risks and to proactively take appropriate actions to mitigate the same. Risk grading is assigned at the inception of lending considering the industry, business, financial and management risk associated with the financing. The Company has dierent committees for risk Credit Risk Credit risk is the possibility that a borrower or counter party will fail to meet agreed obligations. Thus managing credit risk for ecient management of a financial institution (FI) has become the most crucial task. Given the fast changing, dynamic global economy and the increasing pressure of globalization, liberalization, and consolidation it is essential that FIs have robust credit risk management policies and procedures those are sensitive and responsive to these changes. At IDLC, credit risk may arise in the following forms:

Liquidity Risk Liquidity risk arises when a company is unable to meet the short term obligation to its lenders and stakeholders. This arises from the adverse mismatch of maturities of assets and liabilities. Operational Risk Operational risk is the potential loss arising from a breakdown in companys systems and procedures, internal control, compliance requirements or corporate governance practices that results in human error, fraud, failure, damage of reputations, delay to perform or compromise of the companys interests by employees. Operational risk may also arise from the following:

Default risk Exposure risk Recovery risk Counter party risk Related party risk Legal risk Political risk

Turnover of trained sta; Risk of insider dealings; Leakage of sensitive information; Shortcomings of organizational structure; Risk of falling in credit ratings; Money laundering; Changes in statutory requirements; Technological obsolescence;

Business volume risks At IDLC, business volume risk may arise in the form of risk of falling business volumes and market share, risk of being overtaken and losing leadership position and risk of over trading which may aect profitability due to volatile revenues and reduced spread earnings, credit rating and

Market Risk Market risk refers to the risk of fluctuation in a variety of markets such as interest rates, prices of securities where the values of assets and liabilities can change and there exists the risk of incurring losses.

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reputation. Risk of over trading may lead to insucient capital. Counterparty risk It comes from non-performance of a trading partner. The nonperformance may arise from a counterpartys refusal to perform due to an adverse price movement caused by systematic factors, or from some other political or legal constraint that was not anticipated by the principals. Diversification is the major tool for controlling nonsystematic counterparty risk. Counterparty risk is like credit risk, but it is generally considered a transient financial risk associated with trading, rather than a standard creditor default risk associated with an investment portfolio. A counterpartys failure to settle a trade can arise from many factors other than a credit problem. Enterprise Risk Risks faced by the enterprises in accomplishing its goal fall in this category. If goal of the company is not compatible with the reality, then the company might be entangled by a bad patch. And because of this companys mission may become questionable. Project Risk This is about particular risks associated with the undertaking of a project. If projects undertaken by the company is not compatible with it and not feasible because of existing market scenario, the company may run the risk of encumbered by loss projects. Integrated Risk Integrated risk management refers to integrating risk data into the strategic decision making of the company and taking decisions, which take into account the set risk tolerance degrees of a department. In other words, it is

the supervision of market, credit and liquidity risk at the same time or on a simultaneous basis. Technology Risk It is the process of managing the risks associated with implementation of new technology. If a new technology is not compatible with business function of the company, the company may suer in the long run. A non-compatible technology not only brings diculty in all sorts of operations of the company but also run the risk of wasting money choosing the wrong one. Requirements for Active Risk Management Techniques If management is going to control risk, it must establish a set of procedures to obtain this goal. In IDLC this is referred to as a firmlevel risk management system. Its goal is to measure and manage firm level exposure to various types of risks which management has identified as central to their franchise. For each risk category, the firm employs a four-step procedure to measure and manage firm level exposure. These steps include: (i) standards and reports (ii) position limits or rules (iii) investment guidelines or strategies (iv) incentive contracts and compensation

In general, these tools are established to accurately define the risk, limit exposure to acceptable levels, and encourage decision makers to manage risk in a manner that is consistent with managements goals and objectives. To see how each of these four steps of a risk management system achieve these ends, we elaborate the process below. Steps to manage risk Risk Management Steps at IDLC Here is an overview of some of the crucial steps carried out by IDLC to ensure successful risk management program:

Integrating risk management policies into the companys top priority; Maintaining those values via actions; Performing risk analysis; Implementation of various strategies to minimize it; Building of screening systems to encourage early warnings related to prospective risk; Periodic analysis of the management program;

The process of managing risk in IDLC is explained below in a flow chart:

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Integrating risk management policies into the companys top priority IDLC always believes that continuous diversification is the only way to grow and deliver high value to its stakeholders. With this principle IDLC has become one of the best performing and most innovative financial solution provider in the country. IDLC believes in sustainable growth which is ensured through appropriate trade o between risk and return. IDLC regularly prepares policies regarding its Credit, ICT and Asset liability management. IDLC subsequently makes amendments to these policies. All the policies are robust and dynamic and reflect the core value of the Company. In addition to the industry best practices for assessing, identifying and measuring risks, IDLC also considers Guidelines for Managing Core Risks of financial institutions issued by the Countrys Central Bank, Bangladesh Bank; vide FID Circular No. 10 dated September 18, 2005 for management of risks. Maintaining those values via actions To ensure both speedy service and mitigation of credit risk, the approval process is maintained through a multilayer system. Depending on the size of the loan, a multilayer approval system is designed. As smaller loans are very frequent and comparatively less risky, lower sanctioning authority is set to improve the turn around time and associated risk. Bigger loans require more scrutiny as the associated risk is higher. So sanctioning authority is higher as well. IDLC also believes in diversification in terms of products as well as sectors. Threshold limit is set for

any sector so that any adverse impact on any industry has minimum eect on IDLCs total return. One of the major reasons behind the recent global economic downturn was the credit bubble and over-financing of the retail clients. IDLC mitigates this risk through keeping a threshold limit of customers maximum asset exposure limit. To match risk with return, a risk based pricing method is under consideration. This method automatically provides asking price for a particular customer depending on the clients market position, repayment behavior and risk grading. Implementation Principles for Company-Wide Risk Management Implementing Company-wide risk management practice entails a significant commitment of management time and institutional resources. It requires a focus on the central businesses of the organization, bottom-to-top review of lending or origination, trading or market making, and intermediation with a risk management perspective. It leads to the construction of data bases and reporting systems quite dierent from standard accounting systems. In this process, several guiding principals are maintained in IDLC for successful implementation of Company-level risk management practices. First, risk management is integral part of the IDLCs business plan. Decisions to enter leave, or concentrate on an existing business activity is done after careful assessment of both risks and potential returns. Risk management practices are defined for each business activity that is pursued.

Second, the specific risks of each business activity of the institution are defined and the means to measure the risks are developed. Similarly, data bases have been developed to obtain proper and consistent risk measurement across the entire organization. Third, procedures are established so that risk management begins at the point nearest to the assumption of risk. This means that trade entry procedures, customer documentation, client engagement methods, trading limits, maximum loan sizes, hedging strategies, and a myriad of other normal business activities are adapted to maintain management control, generate data in a consistent fashion, and eliminate needless exposure to risk. Fourth, data bases and measurement systems have been developed in accordance with the way business is conducted. Finally, the procedures or databases mentioned here become eective or meaningful because an overall risk management system is put in place and used by senior management. Performing risk analysis The Credit Evaluation Committee (CEC) regularly meets to review the market and credit risk related to lending and recommend and implement appropriate measures to counter associated risks. The CEC critically reviews projects considering the current global financial crisis and its probable impact on the project. An independent Credit Risk Management (CRM) Department is in place, at IDLC, to scrutinize projects from a risk-weighted point of view and assist the management in creating a high quality credit portfolio and maximize returns from risk assets. Research team

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of CRM regularly reviews market situation and exposure of IDLC in various industrial sub-sectors. Risk Grading Model (RGM) helps a Financial Institution to understand the various dimensions of risks involved in transactions related to small business clients who are plying their businesses in various geographical locations across the country. IDLC has been developing and managing RGM to promote the safety and soundness of the Company by facilitating informed decision-making. This model measures credit risk and dierentiate individual credits and groups of credits by the risk they pose. This allows management and examiners to monitor changes and trends in risk levels. The process also allows the management to manage risk to optimize returns. To mitigate credit risk, IDLC search for credit report from the Credit Information Bureau (CIB) of Bangladesh Bank. The report is scrutinized by CRM and CEC to understand the liability condition and repayment behavior of the client. Depending on the report, bankers opinions are taken from clients banks. Suppliers and buyers opinion are taken to understand the market position and reputation of our proposed customers. Appropriate internal control measures are in place, at IDLC, to address operational risks. IDLC has also established Internal Control and Compliances Department (ICC) to address operational risk and to frame and implement policies to encounter such risks. ICC assesses operational risk across the Company as a whole and ensures that an appropriate framework exists to identify, assess and mange operational risk.
IDLC annual report 2011

Committee (ALCO) of the Company regularly meets to assess the prevailing market risk. ALCO members analyze the changes in interest rate, market conditions, carry out asset liability maturity gap analysis, re-pricing of products and thereby takes eective measures to monitor and control interest rate risk. To encounter liquidity risk, the ALCO also oversees the asset liability maturity position, recommends and implements appropriate measures. Implementation of various strategies to minimize risk IDLC encounters four (4) major risks in following ways:

The senior management of the Company is responsible to implement the credit risk strategy approved by the top management. This includes developing written procedures that reflect the overall strategy and ensuring its implementation. The procedures include policies to identify, measure, monitor, and control credit risk. Care is given to diversification of portfolio by setting exposure limits on single counterparty, groups of connected counterparties, industries, economic sectors, geographical regions, and individual products. IDLC uses stress testing in setting limits and monitoring by considering business cycles, interest rate and other market movements.

Chart: Credit Risk Management A proper credit administration of IDLC includes ecient and eective operations related to monitoring, documentation, contractual requirements, legal covenants, collateral, etc., accurate and timely reporting to management, and compliance with management policies and procedures and applicable rules and regulations. IDLC operates under sound, welldefined credit-granting criteria to enable a comprehensive assessment of the true risk of the borrower or counterparty to minimize the adverse selection

Credit Risk Management process at IDLC in a nut-shell The top management outlines the overall credit risk strategies by indicating the institutions willingness to grant credit to dierent sectors, geographical location, maturity, and profitability. In doing so it recognizes the goals of credit quality, earnings, growth, and the risk-reward tradeo for its activities. The credit risk strategy is then communicated throughout the institution.

The Asset Liability Management

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problem. IDLC seeks information on many factors regarding the counterparty to whom it wants to grant credit. These include, among others, the purpose of the credit and the source of repayment, the risk profile of the borrower and its sensitivity to economic and market developments, borrowers repayment history and current capacity to repay, enforceability of the collateral or guarantees, etc. IDLC has a clear and formal evaluation and approval process for new credits and extension of existing credits. Each credit proposal is subject to careful analysis by a credit analyst so that information can be generated for internal evaluation and rating. This is used for appropriate judgments about the acceptability of the credit. Granting credit involves accepting risks as well as producing profits. Credit is priced such a way so that it appropriately reflects the inherent risks of the counterparty and the embedded costs. In considering the potential credit, IDLC establishes provisions for expected loss and hold adequate capital to absorb the unexpected losses. IDLC uses collateral and guarantees to help mitigate risks inherent in individual transactions. Note, however, that collateral cannot be a substitute for comprehensive assessment of a borrower and strength of the repayment capacity of the borrower is given prime importance. IDLC identifies and manages credit risk inherent in all of its assets and activities by carefully reviewing the risk characteristics of the asset or activity. Special care is given particularly when the institution embarks on new activities and assets. In this regard, adequate procedures and controls are taken to identify the risks in new asset or activity.

Interest Rate Risk Management ALCO approves the overall objectives, strategies and policies that govern the interest rate risk of IDLC. Other than approving the overall policies of IDLC regarding interest rate risk the top management ensures that the management takes the necessary actions to identify, measure, monitor, and control these risks. ALCO ensures that the company follows policies and procedures that enable the management of interest rate risk. These include maintaining an interest rate risk management review process, appropriate limits on risk taking, adequate systems of risk measurement, a comprehensive interest rate risk reporting system, and eective internal controls. IDLC is able to identify the individuals and/or committees responsible for interest rate risk management and define the line of authority and responsibility. IDLC clearly defines policies and procedures for limiting and controlling interest rate risk by delineating responsibility and accountability over interest rate risk management decisions and defining authorized instruments, hedging strategies and position taking opportunities. Interest rate risk in new products is identified by

carefully scrutinizing the maturity, re-pricing or repayment terms of an instrument. IDLC has an ecient and eective management information system for measuring, monitoring, controlling and reporting interest rate exposures. IDLC has interest rate risk management systems that assess the eects of rate changes on both the earnings and economic value. IDLC considers the worse case scenarios and ensures that appropriate contingency plans are available to tackle these situations. Interest rate reports for the top management includes summaries of the Companys aggregate exposures, compliance with policies and limits, summaries of reviews of interest rate risk policies and procedures, and findings of internal and external auditors. IDLC has adequate system of internal controls to ensure the integrity of its interest rate risk management process and to promote eective and ecient operations, reliable financial and regulatory reporting, and compliance with relevant laws, regulations, and institutional policies.

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Liquidity Risk Management As IDLC deal with other peoples money that can be withdrawn, managing liquidity is one of the most important functions of it. The top management makes sure that the companys priorities and objectives for liquidity management are clear. The essence of liquidity management problem arises from the fact that there is a trade-o between liquidity and profitability and mismatch between demand and supply of liquid assets. While IDLC has no control over the sources of funds (deposits), it can control the use of funds. As such, IDLCs liquidity position is given priority in allocating funds. IDLC now keeps protective reserves on top of planned reserves. While the planned reserves are derived from regulatory requirements and forecasts, the amount of the protective reserve depends on the managements attitude towards liquidity risk. IDLC establishes a process of measuring and monitoring net funding requirements by assessing its cash inflows and outflows. It is also important for IDLC to assess the future funding needs. IDLC has adequate internal controls over its liquidity risk management process that is a part of the overall system of internal control. An eective system has created a strong control environment and has an adequate process of identifying and evaluating liquidity risk. It has adequate information system that produces regular independent reports and evaluations to review adherence to established policies and procedures.
IDLC annual report 2011

Chart: Operational Risk Management

the overall policies and strategies for managing operational risk. As operational risk can arise due to failures in people, processes, and technology, management of this risk is more complex. Senior management has established the desired standards of risk management and clear guidelines for practices that would reduce operational risks. In doing so, care is taken to include people, process, and technology risks that can arise in the institution. Given the dierent sources in which operational risk can arise, a common standard for identification and management of these has been developed. Care is always given to tackle operational risk arising in dierent departments/ organizational unit due to people, process, and technology. As such a wide variety of guidelines and rules have been spelled out. To do so, the management has developed an operational risk catalogue in which business process maps for each business/ department of the institution are outlined. Given the complexity of operational risk, it is dicult to quantify it. Most of the operational risk measurement techniques are simple and experimental. IDLC, however, gathers information of dierent risks from reports and plans that are published within the institution (like audit reports,

regulatory reports, management reports, business plans, operations plans, etc.). A careful review of these documents reveals gaps that can represent potential risks. The data from the reports are then be categorized into internal and external factors and converted into likelihood of potential loss to the institution. To encounter and mitigate credit risk the following control measures are also taken place at IDLC:

Looking into payment performance of customer before financing; Annual review of clients; Adequate insurance coverage for funded assets; Vigorous monitoring and follow up by Special Assets Management and collection Team; Strong follow up of compliance of credit policies by Credit Admin Department; Taking collateral and performing valuation and legal vetting on the proposed collateral; Seeking legal opinion from internal and external lawyer for any legal issues; Maintaining neutrality in politics and following arms

Operational Risk Management The top management develops

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length approach in related party transactions;

investments and maintaining prudent provisioning policies. A summary of sector wise diversification of loan portfolio in IDLC for the year 2011 is shown at the end of the report. However, to mitigate any adverse eect that results from fluctuating interest rate in future, we are planning to issue bonds, commercial papers and fixed rate long term loans to raise funds. Liquidity requirements are managed on a day-to-day basis by the Treasury Division which is responsible for ensuring that sucient funds are available to meet short term obligations, even in a crisis scenario, and for maintaining a diversity of funding sources. Treasury Division maintains liquidity based on historical requirements, anticipated funding requirements from operation, current liquidity position, collections from financing, available sources of funds and risks and returns. A summary of Lease/Loan classification and provision for two consecutive years 2011 & 2010 is presented below to forecast future requirement of fund and understand present collections from financing: (Amount in millon BDT) 2011 Standard 24,610 36 76 57 461 25,540 2010 20,285 358 135 54 413 21,246

Regular review of market situation and industry exposure; Sector-wise portfolio is maintained within specific limits to ensure diversification of loan assets; Ensuring compatible technology for each operation

To encounter and mitigate business volume risk the following risk mitigation measures are in place, at IDLC:

Appropriate internal control measures are in place, at IDLC, to address operational risks. IDLC has also established Internal Control and Compliance Department (ICC) to address operational risk and to frame and implement policies to encounter such risks. ICC assesses operational risk across the Company as a whole and ensures that an appropriate framework exists to identify, assess and mange operational risk. The function of ICC is to constant vigilance against leakage of Shareholders value by identify, assess, measure, manage and transfer operational risk resulting from inadequate or failed internal processes, people and system or from external events. To encounter market risk we are negotiating for facilities that match the maturity structure with ideal interest rate, maintaining a balanced diversification in

Regular review of impact of global economic meltdown and taking appropriate measure; Innovative and convenient financial products and services; Taking prompt action on customer complaints; Frequent assessment of clients satisfaction; Regular review of performance against budget and targets; Review and analysis of competitors performance;

Building of screening systems to encourage early warnings related to prospective risks Prevention of risk by forecasting future market condition gives IDLC competitive edge over other competitors in the local market. In order to mitigate prospective risks of the market, the equity and research team regularly assesses the market information. This assessment updates the management about the current market situation, growth of certain industries, current global phenomena, price index of raw materials, refinance scheme taken by central bank and regulatory steps taken by various regulatory bodies. This also helps to make future prediction on any industry and the market as a whole. Periodic analysis of the management program All policies of IDLC are periodically modified. This modification is made within two years of each approval. Product Program Guidelines (PPG) for dierent products is analyzed every year.

Unclassified (UC) * SMA * SS Classified * DF * B/L Total Balance Outstanding of Loan and Lease amount

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IDLC annual report 2011

* SMA= Special Mention Account; *SS= Sub-standard; *DF= Doubtful; * B/L= Bad or Loss.

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This measure helps IDLC to cope with current market situation and changes in the industry. Monthly meeting is held between CRM, SAM and Collection team highlighting the learning from Type of Risk Credit Risk Market Risk Liquidity risk Operational risk Business volume risk

the special clients. This helps IDLC in making better policies to improve its assets. It also works as screening system and gives early warning to IDLC about a client/ industry.

Assessment of the risk of the operation We estimate our risk exposure based on our own assessment of the operations as well as the market perception to be as follows: Rating Moderate Moderate Moderate Low Low

Sector wise exposure - December 31, 2011

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I Our Treasury Operation

Our Treasury Operations


Overview of the Department The treasury function in any Financial Institution has always been vital in making sure that the business has sucient liquidity to meet its obligations, whilst managing payments, receipts and financial risks eectively. With the ever increasing pace of change to regulation, compliance and technology in the financial sector, in IDLC, Treasurys priorities are to ensure liquidity at optimum cost, explore & diversify funding avenues ranging from conventional bank borrowing to issuance of debt instruments & channel funds from oshore entities. Treasury also holds the responsibility of tracking and managing balance-sheet risks and maintains compliance of the associated regulatory thresholds. With the course of time Treasury has increasingly become a strategic business partner with both internal & external stake-holders across all areas of the business, adding value to the company. Being the Treasury of a non bank financial institution (NBFI), our core competencies are:

volatile. Started in last quarter of 2010, liquidity crisis in banking channel worsened further and prevailed throughout the year. Soaring fuel and food grain prices in international market, stagnant growth of remittance, widening gap between import payments & export earnings, dwindling foreign aids, rising subsidy bill and low levels of non-bank borrowing compelled the Government to borrow heavily from the banking sector, including from Bangladesh Bank. By the mid of November Govt. siphoned o its entire 2011 12 FYs borrowing target from the banking sector (BDT 18.99 bln). Yields on treasury securities inclined sharply and in the face of liquidly dryness, banks were compelled to revise deposit rates upward and booked deposit at exorbitant rates to meet-up their liquidity requirements. The weighted average rates of inter-bank call money hovered within the range of 10% to 20%. In this backdrop, in 2011 our key challenges were:

liability maturities and deposit withdrawals, funded asset growth and business operations. The main objective of liquidity management is to ensure sucient funds to meet all of ones financial commitments in a timely and cost eective manner. In IDLC, liquidity management involves forecasting funding requirements, maintaining sucient capacity to meet the financial needs and accommodating fluctuations in asset and liability levels. Contrary to the prevailing market scenario, IDLC performed excellent in meeting its funding objectives in 2011 and further enhanced its liquidity position. To ensure ample liquidity in an adverse market scenario, our ALCO constantly monitored the maturity of its payment and settlement obligations, asset growth demand and accordingly strategized well poised plans to meet the liquidity requirements from dependable funding avenues in desired time buckets, which is supported mainly by a robust and steady growth of customer deposit base. We also maintained strong rapports with our desired funding stakeholders to promote eective diversification of funding sources. Deposit has been our prime funding source for the last couple of years. Increasing visibility in retail market and growing market awareness about IDLC and its products opened up the opportunity to strike a major boost in our deposit basket growth in 2011. As of December 31, 2011, IDLCs total term deposit was BDT 16.82 billion - one of the highest deposit bases among all the NBFIs.

Agility; capacity to act fast Strong rapport with various stakeholders Senior managements experience Well trained and cohesive treasury team Robust Asset-Liability Management process Customized treasury software application Reputation as the best NBFI in the Country

Ensure sucient liquidity for IDLC Contain Cost of Funds in tolerable limits Maintain minimum dependency on volatile call money market, and Maintain ALM/ Regulatory indicators within the threshold limits

Liquidity Management Liquidity management is the constant ability to accommodate

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IDLC annual report 2011

Money Market Scenario and our priorities in 2011 In the year 2011, the overall money market scenario was

Underneath is furnished a brief description of our performance against the tough money market scenario in 2011.

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Shift in Funding mix


As of December 2010

Shift in Funding mix


As of December 2011

many other things - liquidity and interest rate in the banking channel. During the year most of the Banks and FIs operating profit slumped compared to the same of previous year partly due to rising cost of funds. Being a NBFI, despite assuming inherent shortcomings of not oering current and savings accounts to clients and not having the mandate of taking term deposits for less than six months, IDLC performed well in managing its Cost of Fund (CoF). There are a number of policy measures that ALCO adopted to manage the soaring Cost of Fund in tolerable limits. As the first step of the underlying key policy measures, we put our focus on mobilizing funds directly from the savers to cut intermediary costs. We fortified our deposit base with a year-on year deposit growth of 37% and flourished it with BDT 4.5 bln incremental deposit at relatively lower price, compared to the cost of term loans from banks.

During the year our deposit basket grew by BDT 4.5 billion and posted 37% year-on-year deposit growth. 57% of the deposits are sourced from retail depositors who are considered to be more stable and less rate sensitive than the institutional deposits. While managing liquidity, treasury continued its focus on reducing reliance on costlier intermediarys funds like credit lines from commercial banks and fortifying the deposit base. In 2011, IDLC has witnessed a major stride in both frontiers. Deposits contributed to 79% of IDLCs funding portfolio which was 69% in earlier year. Contribution of term loans from banks stood only 5% of total funding basket over 7% in previous year.

Aside deposit mobilization & bank credit lines, we are actively utilizing Bangladesh Banks (BB) refinancing windows, the lowest cost long term funding avenue for IDLC. We are currently participating in Small and Medium Enterprise (SME) refinancing schemes and Agro refinancing scheme of BB. During 2011 we received BDT 50.6 crore long term refinance from BB and total received amount stood at BDT 272 crore at the end of year 2011 that significantly contributed to lessen asset-liability mismatch and diversify our funding basket. Cost of Fund (CoF) Throughout 2011 the Countrys economy witnessed declension of its macro fundamentals that severely aggravated, among

Secondly, we reduced the contribution of term loan from commercial banks by 19.5% (y-on-y) to subdue the impact of the costliest fund in our funding basket. In the rising interest rate regime, we also focused on taking the interest rate heat more on shorter term funds rather than the longer terms and maintained long term borrowing costs as steady as possible to ensure interest rate adversity aects us for possibly shorter tenor. And finally, we maximized our eorts to draw funds from the cheapest available funding source for IDLC - windows of Bangladesh Banks refinance schemes.

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Fund received from BB refinance window at Bangladesh bank rate: (Amount in Cr.) Schemes IDA (EGBMP) Fund ADB Fund Women Entrepreneur Fund Agro Based Fund Total Yr. 2011 6.55 21.58 16.15 6.30 50.58

call money market in the year. Asset Liability Management From the very inception of a bank/ financial institution, its balance sheet movements entail various risks. Among them, liquidity risks and interest rate risks are major two risks, which require a system in place to detect them beforehand and consequently ensure sustainability of the organization in the long run. IDLC has an approved Asset Liability Management (ALM) Policy, key responsibility of which lies on the Asset Liability Management Committee (ALCO) comprised of senior management

Review and set depositpricing and asset-pricing strategy of IDLC. Determine deposits and assets growth in the right bucket for better Asset Liability Management (ALM) of IDLC.

Dependence on volatile Call money market Liquidity glut in Money Market kept the market calm up to September, 2010. Then sudden recoil of liquidity scenario due to increase of policy rates by Bangladesh Bank, aggressive public borrowings and other ailing macro-economic indicators ignited liquidity crisis in countrys financial sector that continued throughout 2011. Variance in macroeconomic as well as in money market scenario in two consecutive years produced an ideal scope to examine the resilience of the treasury of a financial institution; how it manages its performance in money market in two extreme ends- from liquidity abundance to sheer liquidity crunch. Through accurate assessment of the market trend, strong tie with lenders that are less prone to liquidity dryness, enhanced drive for deposit mobilization and through eciently tuned fund management, IDLCs Treasury capitalized this precariousness. Our Treasury performed as a borrower during low call rate period in 2010. Later on when the market became subject to head-winds we completely reversed our position in money market exposure and appeared as a lender. In 2011 our daily average (net) call lending was BDT 26 crore, a demonstration of our zero dependence on volatile

IDLC possesses a robust ALM software and dedicated ALM desk to generate necessary MIS for ALCO. Led by the Head of Treasury, ALM support desk tracks, analyzes and reports Balance Sheet movements of IDLC. In addition, it also monitors the economic outlook and market movements in which the bank/FI operates. The desk provides input to the ALCO

Net Call Loan Exposure: Yr. 2011 +ve bar re pre se nts lending & -ve bar repre se nts borrowing
BDT (Cror e )
125

Call Rate (%)


25.0%

100

20.0%

75

15.0%

50

10.0%

25

5.0%

0.0%

(25)

-5.0%

(50) (75)

Net Call Exposure


May-11 Mar-11 Feb-11 Apr-11

Call Rate
Aug-11 Nov-11 Oct-11 Sep-11 Dec-11 Jun-11 Jul-11

-10.0%

-15.0%

Jan-11

of the organization. ALCO holds responsibilities of:

who hold the final responsibility for managing the assets and liabilities. Treasury arranges ALCO meeting in every month and sometimes sit for special ALCO meetings on need basis. Head of Treasury, the organizer of ALCO meeting, prepares the ALCO paper with the help of ALM support desk and present it to the ALCO members. After each ALCO meeting, minutes are prepared based on the decisions taken in the meeting. Minutes, approved by the ALCO Chairman, is circulated to all ALCO members immediately. In the minutes, the responsibilities for implementing the decisions taken in the ALCO meeting are assigned specifically. In every ALCO meeting

Ensuring a systematic management process for tracking the Balance Sheet risks in a timely manner. Proactively review and manage potential liquidity risks and interest rate risks which may arise from market movements, regulatory changes and/or changes in economic/political environment. Ensuring compliance with the regulations of Bangladesh Bank in respect of statutory obligations involved within the parameters of Balance Sheet risks.

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implementation status of last ALCO meeting minutes is also reviewed. Against the backdrop of market unsteadiness and few financial institutions diculties in maintaining key ALM indicators (namely CRR, SLR, AdvanceDeposit or Loan to Fund ratio and time-bucket mismatch) within the threshold limit, IDLC not only assured perfect compliance of all key ALM indicators but also improved its Loan to Fund ratio. In 2011 eorts were also made to enhance competency and operational eciency in treasury dealings. Operational initiatives

which concluded during the year covered developing Fund Transfer Pricing (FTP) system as a business management tool and streamlining the Standard Operating Procedure (SOP) of treasury. Treasury also entered in to Bangladesh Electronic Funds Transfer Network (BEFTN) platform to deliver accurate and faster banking transactions services to all its stake-holders. In 2012, we are expecting continued liquidity tightness in banking channel & further rise in interest rate due to Governments sizable public borrowing target as well as Bangladesh Banks

restraining stance regarding monetary policies to curb the stoking inflation. Under these predicted constraints, we are planning to greatly impel our deposit drive, channel funds from o-shore lenders and enhance our participation in BB refinancing schemes to keep our liquidity position comfortable at an optimum cost throughout the year.

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20 11 ep ort r annual

I Corporate Governance

Statement on Corporate Governance


Corporate governance is the system by which companies are directed and controlled by the management in the best interest of all the stakeholders, thereby ensuring greater transparency and better and timely financial reporting. The Board of Directors is responsible for proper governance which includes setting out Companys strategic aims, providing the necessary leadership to implement such aims, supervising the management of the business and reporting to the shareholders on their stewardships. IDLC is committed to continually reviewing all corporate governance policies and practices to ensure the ongoing transparency of the companys practices and the delivery of high standards and quality information to stakeholders. The maintenance of eective corporate governance remains a key priority of the Board of IDLC Finance Limited. To exercise clarity about directors responsibilities towards the shareholders, corporate governance must be dynamic and remain focused on the business objectives of the Company and create a culture of openness and accountability. Keeping this in mind, clear structure and accountabilities supported by well understood policies and procedures to guide the activities of the Companys management have been instituted. IDLC considers that its corporate governance practices comply with all the aspects of the SEC Notification No. SEC/ CMMRRCD/2006-158/Admin/02-08 dated February 20, 2006 and all aspects of Bangladesh Banks DFIM Circular No. 7 dated September 25, 2007. In addition, to establishing high standards of corporate governance, IDLC also considers best governance practices in its activities. The independent role of Board of Directors, separate and independent role of Chairman and Chief Executive Ocer, distinct role of the Company Secretary & Chief Financial Ocer and Chief Compliance Ocer and dierent Board committees allows IDLC to achieve excellence in best corporate governance practices. As a listed Company, IDLC Finance Limited must comply with the SEC Listing Rules, which require the Company to provide a statement in the Annual Report disclosing the extent to which the Company has complied with the SEC Corporate Governance circulars. Tables summarizing the IDLCs compliances are provided at Annexure III & IV of the Directors Report. Date of this Corporate Governance Statement This Corporate Governance Statement reflects the corporate governance and other related policies and practices in place for the IDLC Finance Limited as at December 31, 2011. Board of Directors Composition The Board of IDLC considers that its membership should comprise of directors with an appropriate mix of skills, experience and personal attributes that allow the directors, individually and the Board, collectively, to discharge their responsibilities and duties, under the law, eciently and eectively, understand the business of the Company and assess the performance of the management.
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The composition of the Board embraces diversity. The Directors have a range of local and international experience and expertise, and specialized skills to assist with decision making and leading the company for the benefit of shareholders.

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The Board of IDLC comprises of ten directors who possess a wide range of skills and experience over a range of professions, businesses and services. All of them are nominated by their respective institutions except for the independent director. Each of IDLCs directors brings in independent judgment and considerable knowledge to perform their roles eectively. The Board of Directors ensures that the activities of the Company are always conducted with adherence to strict and highest possible ethical standards and in the best interests of the stakeholders. Selection and Appointment of New Directors In relation to the selection and appointment of new directors, the existing Board of Directors has the following duties and responsibilities:

Regularly review the size and composition of the Board and the mix of expertise, skills, experience and perspectives that may be desirable to permit the Board to execute its functions; Identify any competencies not adequately represented and agree the process necessary to be assured that a candidate nominated by the shareholders with those competencies is selected;

The directors are appointed by the shareholders in the Annual General Meeting (AGM). Casual vacancies, if any, are filled up by the Board in accordance with the stipulations of the Companies Act, 1994 and Articles of the Company. Retirement and Re-election of Directors As per the Article of Association of the company, one-third of the directors to retire in every year shall be those who have been longest in oce since their last election, but as between persons who became directors on the same day, those to retire shall (unless they otherwise agree themselves) be determined by lot, but remains eligible for re-election. Independent Director As per the SEC Circular No. SEC/CMRRCD/2006-158/Admin/02-08, dated February 20, 2006, the elected directors of the Board of IDLC nominates an independent director (1/10th of total number of Directors) on the Board of Directors so that the Board, as a group, includes core competencies considered relevant in the context of the company. Role and Responsibilities of the Board The Board is committed to the Company seeking to achieve superior financial performance and long term prosperity, while meeting stakeholders expectations of sound corporate governance practices. The Board determines the corporate governance arrangements for the Company. As with all its business activities, the Board is proactive in respect of corporate governance and puts in place those arrangements which it considers are in the best interest of the Company and its shareholders, and consistent with its responsibilities to other stakeholders. The Board duly complies with the guidelines issued by Bangladesh Bank regarding the responsibility and accountability of the Board, its Chairman and Chief Executive/Managing Director, vide DFIM Circular No. 7 dated September 25, 2007. The Board of Directors is in full control of the Companys aairs and is also fully accountable to the shareholders.

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They firmly believe that the success of the Company largely depends on the credible corporate governance practices adopted by the Company. Taking this into consideration, the Board of Directors of IDLC set out its strategic focus and oversees the business and related aairs of the Company. The Board also formulates the strategic objectives and policy framework for the Company. In discharging the above responsibilities, the Board caries out, inter alia, the following functions as per the charter of the Board and Bangladesh Banks DFIM Circular No. 7, dated September 25, 2007: Stakeholders Responsibilities Reserved to the Board Approval of business strategy and vision in line with eorts to drive shareholder value creation; Approval of business plans, assuring that sucient resources are available to implement strategy and monitoring of the implementation of strategy; Approval and monitoring of major investments or divestitures and strategic commitments; Determination of capital structure and dividend policy; Approval and monitoring of financial reporting; Shareholders Oversight of risk management, internal control and compliance systems as per Bangladesh Banks Core Risk Guideline; Recommendation for appointment or removal of external auditors and determination of the remuneration and terms of appointment of the auditors; Oversight of shareholder reporting and communications; Approval of annual budgets including major capital expenditure proposals; Regular review of financial performance and overdue situation; Monitoring the adequacy , appropriateness and operation of internal control; Ensure that technology and information systems used in the organization are sucient to operate the organization eectively and maintain competitiveness; Customers Benchmarking the delivery of value to customers, clients and partners; Reinforcement of culture, core values and employer of choice; Review and approval of CEO and Executive Management Teams contractual arrangements, remuneration and benefits; Oversight of succession planning for the CEO, Executive Management Team and such other executives as the Board may determine; Oversight of the management of social, economic and environmental concerns consistent with the delivery of sustainable outcomes for stakeholders and achievement of the Companys Incident & Injury Free vision; Reinforcement of reputation, brand and community relations; Review of the size and composition of the Board; Directors Directors nomination, selection, removal, succession planning and remuneration; and Review of Board performance.

Employees

Community

Chairman of the Board The Chairman of the Board is elected to the oce of Chairman by the directors. The Board considers that the Chairman is independent. Role of the Chairman
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The Chairman runs the Board. The Chairman serves as the primary link between the Board and management, and works with the CEO and Company Secretary to set the agenda for Board meetings. It is the Chairmans responsibility to provide leadership to the Board and ensure that the Board works eectively and discharges its responsibilities as directors of the Company.

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Chairman of the Board & CEO of the company are dierent person The Chairman of the Board is not the Chief Executive of the Company. The role of Chairman and the CEO & Managing Director are independent and separate. Role of the CEO & Managing Director The CEO & managing Director performs three fundamental roles in IDLC:

First, CEO as a leader establishes and directs the vision and mission of the team. In this capacity, the CEO is the source of visionary strength of the Company and keeps it on a consistent track to achieving the vision; Second, CEO is a project manager. In this role, the CEO is responsible for directing the operational activities of the Company by scheduling the utilization of the Companys resources, including people and capital equipment. In this way, the CEO gets things done through the eorts of the people in the Company. The CEO is responsible for establishing and executing the Companys operating plan that is necessary to achieve the Companys objectives; Third, CEO is a coach, and as such picks the people for the management team and improves the performance of people through ongoing counseling. As a coach, the CEO works with people to help them become greater contributors by helping them improve their eciency and eectiveness.

Conduct for the Board Members The Board of Directors of IDLC is committed to the highest standards of conduct in their relationships with its employees, customers, members, shareholders, regulators and the public. A Director of IDLC always:

Seeks to use due care in the performance of his/her duties, be loyal to the Company, act in good faith and in a manner such director reasonably believes to be not opposed to the best interests of the Company; Avoids: i) appropriating corporate business opportunities for themselves that are discovered through the use of Company property or information or their position as Board Member; using Company property or information, or their position as Board Member, for personal gain; and competing with the Company;

ii) iii)

Endeavors to avoid having his or her private interests interfere with the interests of the Company; Ensures that management is causing the Companys assets, proprietary information and resources to be used by the Company and its employees only for legitimate business purposes of the Company; Maintains the confidentiality of information entrusted to them in carrying out their duties and responsibilities, except where disclosure is approved by the Company or legally mandated or if such information is in the public domain; Endeavors to deal fairly, and should promote fair dealing by the Company, its employees and agents, with customers, suppliers and employees; Complies and endeavors to ensure that the management is causing the Company to comply with applicable laws, rules and regulations;
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Avoids insider trading with respect to the purchase and sale of the Companys securities and buy or sell securities while in possession of material non-public information about the issuer of that security, whether the issuer is IDLC or another company; Endeavors to ensure that management is causing the Company to promote ethical behavior and to encourage employees to report evidence of illegal or unethical behavior to the CEO & Managing Director of the Company.

Board Meeting Holding of the Board meeting The meetings of the Board of Directors of IDLC are normally held at the Registered Corporate Head Oce of the Company. The meetings are held frequently, at least once in a quarter, to discharge its responsibilities and functions as mentioned above. Meeting is scheduled well in advance and the notice of each Board meeting is given, in writing, to each director by the Company Secretary. Process of holding Board meeting The Company Secretary prepares the detailed agenda for the meeting. The Board papers comprising the agenda, explanatory notes and proposed resolutions are circulated to the directors in advance for their review. The members of the Board have complete access to all information of the Company enabling them to work eciently. The members of the Board are also free to recommend inclusion of any matter in the agenda for discussions. The Company Secretary and Chief Financial Ocer always attends the Board meeting and other senior management is invited to attend Board meeting to provide additional inputs to the items being discussed by the Board and make necessary presentations. There are procedures, at IDLC, for keeping the Board up-to-date with the Companys activities and relevant external developments. These includes senior management presenting significant matters to the Board and it being able to seek further information on any issue relating to performance, strategy, outlook, etc. Number of Board meeting held in 2011 The number of meetings of the Board and the Committees of the Board held during the accounting year, and the attendance of directors at those meetings and their respective remuneration, is disclosed in the Annexure-II of the Directors Report on page No. 108. The number of directors required to constitute a quorum is six (6), out of the ten directors. During 2011, total eleven (11) Board meetings were held. Independent Decision Making Any director may seek external, independent, professional advice at the Companys expense. The policy of the Board is that external advice will be made available to all directors, unless the Chairman of the Board determines otherwise. It is expected that a director will consult with the Chairman of the Board, Managing Director or Company Secretary before obtaining external advice. Role of the Company Secretary Appointed by the Board, the Company Secretary works with the Chairman of the Board to monitor and enhance corporate governance processes and to ensure that Board policies and procedures are followed. Senior Management
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Structure The Companys management structure comprises the CEO & Managing Director and the Management Team (ManCom). The ManCom is responsible for developing organizational and business strategy and sponsoring

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innovation and development of best practices across the company. The ManCom is also responsible for organizational eectiveness and the development of IDLCs values and culture. The ManCom is responsible for managing IDLCs performance and key business issues in line with the companys long term strategy and for talent and performance management. The ManCom is chaired by the CEO & Managing Director and the team meets face to face on a regular basis. Performance Review The CEO is responsible for setting financial targets as well as operational and management goals for the members of the ManCom. Both short term and long term goals form part of the performance management of all senior executives. Long term goals are directly linked to the vision of the company. Short term goals are generally directly linked to objectives of the company. The CEO and Evaluation Committee conduct a detailed review of the performance of senior executives against these goals on an annual basis at the end of each year. Remuneration of the senior executives Remuneration of all senior executives, are based on performance measured against financial and individual targets. Directors Remuneration Directors are not entitled to any remuneration other than attending meeting of the Board and its Committee. As per DFIM Circular No. 03, dated February 24, 2010, directors are entitled to the remuneration BDT 5,000 for attending each meeting. Board Committees Membership The Board has established two permanent Board Committees to assist, advice and make recommendations to the Board on matters falling within their respective responsibilities as per SEC and Bangladesh Bank guideline. Each Committee is governed by a formal charter approved by the Board setting out its objectives, responsibilities, structure and operation. The membership of the Board Committees as at the date of authorization of this Annual Report is set out in the table below: Member of Executive Committee Chairman Member Member Member Member Audit Committee Member Member Chairman Member Member IDLC annual report 2011

Name of Director Anwarul Huq Rubel Aziz Md. Habibur Rahman Mollah Aziz Al Kaiser Hossain Mehmood Meherun Haque K. Mahmood Sattar Rezaul Karim A.K.M Shahidul Haque Farooq Sobhan Selim R. F. Hussain

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Executive Committee A five member Executive Committee headed by a director is responsible for strategic and operational plans of the business. The matter related to ordinary business operations of the Company and the matters that the Board of Directors, from time to time authorize, are vested in this Committee in accordance with the Statement of General and Operational Policies established and made by the Board of Directors. This Committee assists IDLC in taking prompt decisions and reacts swiftly to changes in the market-place as they occur. The Rules of the Executive Committee is framed by the Board. During the year under review, twelve (12) Executive Committee meetings were held. Audit Committee The IDLC Audit Committee is a sub-committee of the Board of Directors (Board) of IDLC Finance Limited formed in compliance with requirements of DFIM Circular No. 13, dated October 26, 2011 of Bangladesh Bank and relevant SEC notification(s) and international best practices on Corporate Governance. Objectives of the Audit Committee The principal functions of the Audit Committee is to exercise oversight over the companys risk management, financial reporting and regulatory compliance functions. Composition of Audit Committee including independent Director Until recently, the Audit Committee consisted of six members including one independent director appointed by the Board. However, following the issuance of DFIM Circular No.13 dated October 26, 2011 by Bangladesh Bank, the committee has been recast and the number of members brought down to five, including one independent director. The Company Secretary acts as the secretary of the Audit Committee. Audit Committee Terms of Reference This role is further expounded on and clarified in the Terms of Reference (ToR) of the Audit Committee which was revised in light of recent directives contained in DFIM Circular No.13 dated October 26, 2011 issued by Bangladesh Bank. According to the revised ToR of the Audit Committee, its principal duties and responsibilities are as follows:

In respect of internal control Evaluating whether the management: a. Has an appropriate internal control and compliance culture with regard to risk management of the company; Has clearly defined the duties and responsibilities of ocials; Has full control over the operations of the company.

1.

b. c. 2.

Reviewing the appropriateness of Management Information System (MIS) including information technology system and its use. Reviewing whether management is complying with recommendations made by the internal and external auditors. Reviewing existing risk management procedures to ensure that the processes are eectively run in the company.

3.

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4.

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5.

Reviewing all fraud, forgery and internal control weakness discovered by internal, external or regulatory auditors and thereafter keeping the board of directors informed of all those discoveries and subsequent corrective measures. In respect of financial statements 1. Reviewing whether the financial statements were prepared in compliance with all directives and guidelines prescribed by the Bangladesh Bank and other applicable standards. Engaging in discussions with external auditors and management prior to the finalization of financial statement. Attending and answering questions related to the accounts and audit at the AGM.

2.

3.

In respect of internal audit 1. Reviewing the activities and organizational structure of internal audit and ensuring that there is no barrier or limitation to the performance of an independent internal audit. Assessing the eciency and eectiveness of internal audit. Assessing whether management is appropriately considering compliance of recommendations made by the internal auditors with regard to the observations identified by them. Placing recommendations before the board of directors in case of change of accounting polices.

2. 3.

4.

In respect of external audit 1. Appraising the audit procedures and reviewing the management letter submitted by external auditors. Assessing whether management has appropriately considered the observations and recommendations made by the external auditors. Placing recommendations to the board of directors regarding appointment of external auditors.

2.

3.

In respect of compliance to existing regulations Reviewing whether the rules and regulations set by regulatory authorities (central bank and others regulatory bodies) as well as internal policies and guidelines approved by the board of directors are being complied with.

Miscellaneous 1. Placing quarterly reports before the board of directors on rectification/correction status of errors, fraud, forgery and other irregularities identified by internal auditors, external auditors and Bangladesh Bank inspection team. Performing all other supervisory activities as assigned by the board as well as evaluating its own eciency on a regular basis.

2.

Chairman of the Audit Committee and his qualifications The Committee is headed by Mr. Md. Habibur Rahman Mollah, FCA with thirty years knowledge and experience in the fields of accounting, finance and audit. Mr. Mollah is a fellow member of the Institute of Chartered Accountants of Bangladesh (ICAB) and is currently working as Chief Operating Ocer of Bangladesh Lamps Limited, Bangladesh Electrical Industries Limited and Transcom Cables Limited.

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The Audit Committee and Internal Control & Compliance Internal Control & Compliance (ICC) is the department within IDLC that is tasked with reviewing the companys system of internal controls, including the conduct of regular audits of all operational units. ICC is operationally independent in that its members are not involved in the companys operational activities and in that the Head of ICC (HoICC), in addition to his direct reporting line to the CEO & MD, also has access to the Audit Committee. The Audit Committee is responsible for approving the annual audit plan of ICC and reviewing the plans subsequent implementation. Internal audit reports or summaries thereof prepared by ICC are reviewed on a regular basis by the committee. Head of ICCs access to the Audit Committee The Head of Internal Control & Compliance has direct access to the Audit Committee which in turn is directly accountable to the Board. Meetings of the Audit Committee As per its Terms of Reference, the Audit Committee is required to hold at least 4 meetings in a year. During the year ended 31 December 2011, the committee met this stipulation. Key issues discussed and/or resolved at the meetings of the Audit Committee included the following:

Review and acceptance of the audited financial statements of the company for the year 2010. Review of management letter issued by the external auditors. Recommendation regarding appointment of external auditors. Review and approval of annual internal audit plan 2011 and related risk based audit checklists. Review and approval of the IDLC Internal Control and Compliance Manual. Review of summary of internal audit reports. Review and approval of annual internal audit plan 2012. Review and approval of revised Terms of Reference of the Audit Committee.

Starting from 26 October 2011, all audit committee meeting minutes are required to be submitted to Bangladesh Bank in accordance with the directives of DFIM Circular No. 13. Accordingly, minutes of all audit committee meetings held subsequent to that date have been submitted to Bangladesh Bank. Reporting of Audit Committee The Audit Committee reports directly to the Board of Directors and under certain circumstances can also report to the SEC. Immediate reporting to the Board of Directors Audit Committee shall immediately report to the Board of Directors in the following cases:

On conflict of interest; Suspected and presumed fraud or irregularity or material defect in the internal control system; Suspected infringement of laws, including securities related laws, rules and regulations; and Any other matter which should be disclosed to the Board of Directors immediately.

No such issues arose at IDLC during the year ended 31 December 2011.
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Immediate reporting to the Securities & Exchange Commission If the Audit Committee has reported to the Board of Directors about anything which has material impact on the financial condition and results of operation of and where the Audit Committee finds that such rectification has

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been unreasonably ignored, the Audit Committee shall report such finding to the SEC, upon reporting of such matters to the Board of Directors for three times or completion of a period of 9 (nine) months from the date of first reporting to the Board of Directors, whichever is earlier. No such circumstances arose during the year ended 31 December 2011. Internal Control Internal control is a process designed to provide reasonable assurance regarding the achievement of objectives relating to eectiveness and eciency of operations, reliability of both external and internal financial and nonfinancial reporting, and compliance with applicable laws and regulations in IDLC. The control system applies to all divisions and departments of IDLCs operations. The internal control system of the Company consists of five interrelated components:

Control Environment

Monitoring

Risk Assessment

Internal Control System


Information and Communication

Control Activities

The control environment: The control environment refers to the attitudes, awareness, and actions of those in governance and management roles with regard to the companys internal control and its importance in the entity. Elements in IDLCs control environment include: active participation by those charged with governance as evidenced through regular meetings of its Board of Directors and Audit Committee; the communication and fostering of an environment that consistently requires integrity and ethical behaviour, as evidenced by regular communication of its Code of Conduct and zero tolerance for illegal or unethical behaviour; a formal well-defined organizational structure, setting out key areas of authority and responsibility and appropriate reporting lines, which is relevant to the nature and size of the Companys business; human resource policies that demonstrate the Companys commitment towards recruiting employees who meet established standards of competence and ethical behaviour

Risk assessment: Risk assessment refers to the process(es) by which the company identifies and assesses risks to the achievement of objectives.
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Control activities: Control activities are the policies and procedures that help ensure that management directives are carried out. Control activities have various objectives and are applied throughout the company at all levels and in all functions. These include activities such as authorization, reviews, reconciliations and verifications.

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Information and communication: The information and communication component facilitates the functioning of the other components by providing information that is necessary for the attainment of Company objectives and by establishing a continuous process for collecting, sharing and disseminating necessary information both within and outside the Company. Monitoring: Monitoring involves ensuring that controls are operating as intended and that they are appropriately modified in response to changing conditions. At IDLC, this is achieved through a variety of measures including regular management reviews and periodic internal audits of various departments and business functions.

Although the Board of IDLC is primarily responsible for ensuring that the Company has an adequate and eective control system in place ultimately all employees are accountable for managing internal controls. Business and operational units, particularly, department heads are in charge for ensuring that internal controls are established, properly documented, and maintained in his/her department. The process of standardizing documentation relating to the implementation and operation of controls through the use of Departmental Control Function Checklists (DCFCL) was initiated in 2011 and will continue in coming years. The Internal Control & Compliance (ICC) department conducts tests on the eciency and eectiveness of the control system through audit. Properly designed management structure, clearly defined responsibilities, delegation of authorities, risk awareness, establishment of accountability at each level and system of periodic reporting and monitoring performance are the key elements of the internal control framework employed in IDLC. Management Committees ManCom The Management Committee is a group elected among the management stas to take responsibility for the governance and strategic direction of IDLC. The role of the Management Committee is to oversee IDLC in accordance with its Constitution under the Financial Institution Act 1993. The Committee is responsible for all aspects of the ongoing operation of IDLC. It delegates day-to-day operations to the Executive Ocer. An important feature of good governance is a clear segregation of the responsibilities and accountability of the Committee from those of the Executive Ocer. ManCom is always aware of IDLCs operations, keeps an eye on the big picture, monitor the strategic plan and that goals are being met. It needs to be satisfied that what is happening is in accordance with IDLC policies and objectives, within the overall budget. Credit Evaluation Committee (CEC) The CEC evaluates all projects/proposals of financing activities of the Company from the risk point of view. The Committee is headed by the CEO & Managing Director and consists of six members. HR & Compensation Committee The Chairman of the Committee liaises with the Board to ensure that the Committee is appropriately briefed on matters relating to employees. The HR & Compensation Committee Charter states that the Committee has the following responsibilities: Monitor succession planning for members of the Executive Management Team; Review and approve strategy and principles for people management, including: Career, skills and leadership development and continuing education programs; Employee remuneration and benefit programs to be adopted across the Group; Employee share ownership, superannuation and pension plans; Review and approve any individual employee remuneration arrangement materially diverging from Group policy or practice; Review and make recommendations to the Board on remuneration; and

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Perform other functions referred to the Committee by the Board.

BASEL II implementation Committee As per the Capital Adequacy and Market Discipline guideline of the Bangladesh Bank IDLCs Basel Implementation Committee consists of four members. The Basel Implementation Committee Charter states that the committee has the following responsibilities:

Apply the action plan of Basel II and review there-of; Communicate issues related to Basel II implementation to their management; Help carry out Quantitative Impact Study (QIS) (if necessary); Capacity building program and training according to Training Need Assessment (TNA) for the concerned ocials; Establish planning and supervisory review as required by Pillar-II of Basel II Framework.

The committee reviews strategies on Basel Implementation, including:


Review of actions taken in previous BIU meeting; Economic and market status and outlook; Credit, market and operational risk related to the capital adequacy; Review of the Basel implementation status; and Action taken.

Communications and Relationship with Shareholders It is the Companys policy that all external communications by the Company will:

be factual and subject to internal vetting and authorization before issue; not omit material information; and be timely and expressed in a clear and objective manner.

IDLC strongly believes that all stakeholders should have access to complete information on its activities, performance and product initiatives. The Companys web site www.idlc.com displays, inter alia, the annual report, half yearly report, quarterly report, monthly business review, product oerings, recent announcements, presentations and events update. The Company reports to the shareholders, four times a year, through quarterly, half yearly report and detailed annual report. Every shareholder has the right to attend the annual general meeting, where they can meet and communicate with the directors and express their views regarding the Companys business, its future prospects and other matters of interest. The shareholders are always encouraged to attend the meeting or, if unable to attend, may appoint proxies. All disclosures required by the Securities and Exchange Commission, Listing Regulations of Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited and Bangladesh Bank are made adequately and promptly. In addition to ensuring timely compliance, this also enables dissemination of information to all stakeholders and the public. Preparation and Presentation of Financial Statements and Directors Responsibility The Companies Act 1994 requires the directors to prepare financial statements for each accounting year. The Board of Directors accepts the responsibility for preparation of the financial statements, maintaining adequate records for safeguarding the assets of the Company, preventing and detecting fraud and/or other irregularities, selecting suitable accounting policies and apply those policies, consistently, and making reasonable and prudent judgments and estimates where necessary. A separate statement of Directors responsibility for financial reporting is given at page No. 81.

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Corporate Social Responsibility (CSR) at IDLC


Corporate Social Responsibility (CSR) and Corporate Philanthropy are two concepts that are often interchanged. The basic dierence between CSR and Philanthropy is the nature and scope of their activities. Whereas Philanthropy is limited to one-time contribution from companys after-tax profits, with no long-term objective, CSR is thoroughly integrated in an organizations decision making and operational process, making the organization liable to achieve the desired outcome. As such, CSR can be more suitably defined as a self-regulating mechanism that helps organizations assume responsibility for their own actions and decisions, with minimum, if no negative impact on the economy, environment and surrounding community. In one word, CSR helps a company become responsible and sustainable in the long-run.

Philanthropy is what we do with our money, whereas CSR is how we make that money. CSR integrates the three Ps of People, Plant and Profit to meet the present needs without compromising the needs of the future generation.

CSR AND IDLC At IDLC, commitment to environmental and social welfare has been part of its corporate culture, and IDLC is much reputed for its contributions towards environmental and community development. However, starting from 2010, IDLC renewed this commitment to work for the betterment of its stakeholder groups, environment and the broader community in the long-run. Driven by this desire, IDLC became members of some local and multinational initiatives in the field of sustainable business.

Structural and policy changes were also introduced for a more structured and focused approach to CSR. In 2011, IDLC formed a dedicated CSR Department for coordinating and integrating these activities across the organization, and a CSR guideline was developed, defining its scope and mode of activities in future. FOCUS AREAS IN CSR GUIDELINE ETHICAL BUSINESS PRACTICE Non-discrimination in human resource management | Employee health and safety | Transparency in all spheres of operation | Product responsibility COMMUNITY ENGAGEMENT Education, Healthcare and Sustainable Livelihood for underprivileged people | Disaster management | Intervention in social issues

IDLC became members of: CSR Centre, a concern of Bangladesh Enterprise Institute (BEI), UN Global Compact (UNGC), and UN Environment Programme Finance Initiative (UNEP FI)

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ENVIRONMENTAL STEWARDSHIP Environmental Risk Management | Environment-friendly technologies | Preservation of resources | Waste management |Renewable energy *Although IDLC is gradually moving away from philanthropic activities, the impact of charities and donations in the lives of people in a developing country like Bangladesh cannot be denied. As such, a certain portion of IDLCs CSR budget every year will be dedicated to philanthropic deeds. CSR ORIENTATION IDLC believes that responsible behavior can only be expected after a person has been educated and made aware of better practices. As such, awareness creation, especially among its employees and clients, will be the primary focus of IDLC. With this objective in mind, IDLCs CSR Department is conducting employee orientation sessions across all branches of IDLC Group, focusing on the following key aspects:

Dierence between Corporate Philanthropy and Corporate Social Responsibility Definition of a sustainable business Relevance and benefits of environmentally and socially responsible practices Completed Sessions in the context of a financial institution Local and global sustainability initiatives CSR commitment, strategy and focus of IDLC CSR initiatives undertaken till now, and Role of each employee in gaining this objective Trainer Hours Trainee Hours Remaining Sessions 11 22 231 7

The remaining sessions are scheduled to be completed by the second quarter of 2012.

IDLCS HUMAN RESOURCES


EMPLOYEE MANAGEMENT IDLC aims to ensure equal opportunities for all its employees in terms of both their personal and professional development. Non-discrimination at all spheres of human resource management is embedded in IDLCs core values and forms a part of its employee Code of Conduct. IDLC also oers various training programs throughout the year, aimed at skill development of its employees to help them reach their full potential. Training requirements are mostly identified through a Performance Appraisal process, while Training Need Assessments are conducted occasionally through IDLCs local training partner. EMPLOYEE HEALTH AND SAFETY IDLC provides adequate life and hospitalization insurance coverage to all its employees. Moreover, various initiatives are undertaken throughout the year to provide better health and safety facilities to the employees and their family members. IDLC arranged a vaccination program at its premises, where its employees and their family members availed vaccines against Hepatitis B and Cervical Cancer. Follow-up sessions for the remaining dosages are also being arranged at IDLC. An awareness session had been arranged earlier at IDLCs corporate head oce to inform employees of the causes, prevention and treatment measures against these diseases.
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ENVIRONMENTAL STEWARDSHIP
RESPONSIBLE LENDING PRACTICES To control direct or indirect environmental impacts by IDLC-financed projects, IDLC has incorporated Environmental Risk Management (ERM) Guidelines of Bangladesh Bank in its credit appraisal process. The Guidelines oer one General and 10 sector-specific checklists to identify and assess environmental risks associated with projects, rating them as High, Moderate or Low based on Environmental Factors external to the projects and Environmental Management System of the Borrower. Based on the risk rating and assessment, business units are required to develop strategies to control or minimize the risk, implement those in cooperation with the borrowers, and monitor the outcomes on a regular basis. PRESERVATION OF RESOURCES Bangladesh has a population well over 160 million. Rapid population growth, urbanization and industrialization are increasingly creating pressure on resources like electricity, water, natural gas etc. Moreover, lack of awareness among the mass population regarding responsible utilization of these resources is also responsible for the growing gap between demand and supply. To play its part in awareness creation regarding better practices, IDLC undertook a campaign to promote responsible practices among its employees for more ecient utilization of electricity, water and paper. The idea was not only to educate the employees, but also to spread the message through them among their families, relatives and close circles. Mode of Operation Relevant stickers and posters were placed across all branches of IDLC Group, in places like washrooms, meeting rooms, switchboards, printers, PCs etc.

The images are also being used as screensavers and wallpapers for frequent viewing by the employees. CSR Orientation program across the Group contains a section, promoting responsible resource utilization practices among the employees New technologies were adopted by IDLCs IT department for reduction in paper use, such as introducing double-side printing machines, reducing total number of printers etc.

The charts show utilization pattern of paper and electricity over a period of four months, with July 2011 considered as the baseline.

ENVIRONMENT-FRIENDLY TECHNOLOGIES
Server Virtualization IDLC has taken the initiative to gradually transfer to a virtual environment for the servers, with the objective of capacity optimization and cost reduction, reduction in power consumption and CO2 emission, and in the process, creation of a greener IT infrastructure in the organization. The following table summarizes the results achieved till now in this regard: Particulars No of physical servers
IDLC annual report 2011

2010 28 2 14,000 8

2011 27 11 77,000 44

No of virtual servers Reduction in power consumption (kWh) Reduction CO2 emission (tons)

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Video Conferencing To save travel time for employees, the major branches of IDLC Group are connected with the Corporate Head Oce via video conferencing facility. The following table summarizes the benefits achieved due to this technology: Branches connected with head oce Meetings hosted per annum (average) Traveling participants saved per annum (approx.) Traveling km saved per annum Reduction in CO2 emission per annum (tons) 5 200 800 45,800 8.71

COMMITMENT TO A GREENER ENVIRONMENT


Carbon Footprint Analysis As part of its commitment to environmental sustainability, IDLC signed an agreement with Waste Concern Consultants (WCC) on January 22, 2012, to conduct Carbon Footprint Analysis of three of its branches. Carbon footprint is a measure of the Green House Gases (GHG) emitted through day-to-day human and organizational activities. Considering IDLCs nature of operations as a financial institution, seven major sources have been identified that are responsible for GHG emission by IDLC: electricity, diesel, octane, CNG, paper, organic waste and air travel. Based on the emission data, calculated in tons per year, per capita GHG emission for IDLC employees will be determined. Accordingly a carbon neutral program will be developed, detailing measures aimed at direct reduction within the organization, supplemented by green projects or initiatives outside the organization that can further neutralize IDLCs carbon footprint. The three-month long project started from February 2012. Tree Plantation Maintaining the ecological balance of any country requires forestland occupying at least 25% of the total area of the country. However, the percentage in Bangladesh is nowhere near the minimum requirement, owing mainly to rapid population growth, industrialization and urbanization, causing indiscriminate destruction of trees and forestlands to develop agricultural lands and residential areas. To take a stance against this, everyone should come forward to save trees, while planting more. To play its part, IDLC sponsored a tree plantation event in the University of Dhaka in August, 2011. The program formally inaugurated the country-wide 160 million tree plantation campaign of Mr. Musa Ibrahim, the first Bangladeshi to conquer Mount Everest. IDLC employees also took part in planting 1,000 saplings in the University premises.

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I Corporate Social Responsibility

PHILANTHROPIC ACTIVITIES FOR COMMUNITY DEVELOPMENT


IDLC used a mouth-painting by Ibrahim of CRP (Centre for Rehabilitation of the Paralyzed), as the theme of its Eid greeting card in 2011. This was an eort to generate livelihood for Ibrahim, who lost both his upper limbs in an accident while at work (July 2011).

IDLC arranged two blood donation programs at its premises, where its employees and also some of its clients donated blood to help the patients of Bangladesh Thalassaemia Hospital (July 2011).

IDLC partnered with Livelihood Education and Development Services (LEADS) to provide education and livelihood skills to underprivileged women and children. An interactive session with LEADS was held at IDLCs corporate head oce, followed by IDLCs contribution to provide better education and healthcare facilities to the children and their families (September 2011)

IDLC annual report 2011

IDLC contributed to SEID Trust a voluntary organization working for underprivileged children with intellectual and multiple disabilities (October 2011)
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IDLC distributed blankets and warm clothes in 22 locations at Bogra, Jessore, Sirajganj, Natore and Gaibandha to help the ultra-poor people aected by winter (January 2012)

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I Corporate Social Responsibility

IDLC donated computers to three schools in Jessore to facilitate computer education among school children (January 2012)

STAKEHOLDER ENGAGEMENT
COMMUNICATING WITH STAKEHOLDERS IDLC has developed a frequent communication channel with both its internal and external stakeholder groups to inform them and receive their feedback or suggestions regarding IDLCs CSR activities. IDLC now has a separate Sustainability section in its newly launched website, and regular updates are given via website and IDLCs monthly publication, Monthly Business Review. Press releases are given in leading dailies highlighting IDLCs CSR activities, and employees are regularly updated via internal mails. Moreover, starting from 2012, IDLC will publish a dedicated Annual Sustainability Report, highlighting responsible and sustainable practices of IDLC. First Annual Sustainability Report will be published in April 2012 STAKEHOLDERS ENGAGED IN 2011 CSR Initiatives in 2011 CSR Orientation sessions Awareness regarding responsible resource utilization practices Tree plantation at the University of Dhaka Blood donation for Thallasaemia patients Donation of blankets and warm clothes Financial assistance by IDLC employees, on top of IDLCs contribution to LEADS Stakeholders Engaged Employees Employees Employees Employees (volunteering) Employees (volunteering) Employees (volunteering) Stakeholders Benefited Employees Employees and Community (via employees) Community Community Community Community

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I Event Highlights

Event Highlights
1 2 3 4 5 6 1 I I I I I I Holding of 26th Annual General Meeting (AGM) of IDLC Holding of 7th Extraordinary General Meeting (EGM) of IDLC IDLC awarded the 1st prize for the best published Annual Accounts and Reports for the year 2010 at 11th National Award given by Institute of Chartered Accountants of Bangladesh (ICAB). Achievement of the prestigious SAFA Best Presented Accounts Award 2010. Institution of Cost and Management Accounts of Bangladesh (ICMAB) awarded IDLC the 1st position as the Best Corporate in the Banking Sector (Non Bank Financial Institution). ECPV Chittagong Limited (ECPVCL) signed an agreement with IDLC for arranging syndication finance. 2

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10

11

12

13

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7 8 9 10 11 12 13

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Clewiston Foods & Accommodation Limited mandated IDLC for arranging syndication finance. Energypac Power Generation Limited signed an agreement with IDLC to raise capital through IPO. IDLC singed agreement with MetLife Alico Bangladesh for Insurance Coverage to Home Loan Customers. IDLC Finance Limited opened the IDLC Groups 26th branch at Mirpur 10, Dhaka. IDLC Group opened its 27th branch in Tongi. IDLC Group opened its 28th branch in Jessore with a wide range of products. IDLC conducted a strategy session to critically review the strategic direction of the company.

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Our Human Capital


Our employees IDLC Human Resources values are based upon a number of important principles and capture qualities that each employee is encouraged to embody as an essential part of our success: Expertise

Assure quality and drive innovation; Listen to learn from each other champion continuous improvement; Be accountable keep commitments; Client Focus; Share our vision; share our passion; Strive for our clients profitability and satisfaction; Be a trusted partner;

Respect

Think and act as a team; Optimize the value of our global community; Deliver results and celebrate success;

Strength of IDLC- Its Human Resources IDLC believes that its human resources are its greatest assets and recognizes them as building blocks on which Companys performance and development are based. IDLC continues to implement human resources management policies and practices which are aimed at growing and developing employees and ensuring their contribution towards the achievement of corporate goals. As IDLC s human resources give the organization a significant competitive edge, the company is focused on recruiting the best resources and implementing programs to develop and retain high quality human resources. We are empowered by:

26 years of experience and expertise; Dynamic and capable workforce; Strong team of management; Highest standards in Corporate Governance ; and Excellent reputation among regulators, peers and clients.

IDLC has provided challenging career opportunities for young professionals over the last 26 years. The Companys Human Resources Departments goal is to attract, retain, develop and motivate the most competent people. The sta strength of the Company as on December 31, 2011 and for the previous two years is summarized below:

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Our Human Resources Mission IDLC provides services and support to its entire employee in ways that embrace the Organizational mission of innovation and tradition of excellence. Committed to cultivating a superior service-oriented culture, the employees seek to provide benefits to them that promote health, wellness, and a sound work-life balance. Through employee orientation and professional development, we foster the values of inclusiveness, solidarity, long-term employee engagement, and enduring learning. In all areas of work, the IDLC firmly upholds the tenets of confidentiality, accountability, and trust. IDLC as a WORKPLACE

Equal Opportunity Employer & Free From any Discrimination

The Company is an equal employment opportunity/armative action employer and is committed to the fair treatment of all employees and to the respect of their dignity as individuals at all times. Any discrimination against employees because of race, religion, sex, pregnancy, ancestry, age, marital status, physical disability, mental disability, medical condition, is scrupulously avoided in applying and implementing in all Company policies, procedures, and practices aecting employment, promotion, compensation, performance evaluation, and other conditions of employment.

Reasonable Working Hours

We acknowledge and support the need of employees to balance work and personal interests and encourage flexibility where possible.

Health and Safety

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IDLC annual report 2011

IDLC always have, and comply with, internal health and safety policies and procedures and national regulations to ensure a safe working environment. We are committed to working with our employees to ensure that health and safety standards are maintained and improved. This process involves the eective application of an environmental, health and safety management and monitoring system. We always ensure that our standards and policies are understood to the employees. The Company provides hospitalization insurance coverage to ensure medical security of its sta. In addition, the Company has group life insurance scheme for its permanent sta to cover the unforeseen risk of death. All accidents and incidents are reviewed at HR & Compensation committee meeting, along with lost time incidents, accident forms, health and safety trends etc.

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Fair, Transparent and Competitive Remuneration and Benefits

IDLC recognizes the need for our remuneration policies to be competitive and these have been designed to ensure a real dierentiation amongst individuals and teams within the company, using criteria such as: qualifications, skills, performance, contribution and responsibility. IDLC uses objective instruments in determining the level and seniority of roles within the business by means of a well-defined method of job evaluation, which defines roles, scope and subsequent salary positions and ranges. These are then compared against this industry means to ensure competitiveness. We use remuneration and reward as an active tool to build and maintain a high performance, highly motivated culture. Our approach is based on a mix of financial and non-financial, long and short term incentives.

Place of Talent Nurturing

Where possible we fill vacancies internally, although we seek out external talent as this provides the opportunity for fresh thinking, new ideas and experiences. Our recruitment strategy is based on retaining and attracting the most suitable people at all levels of the business and this is reflected in our objective approach to recruitment and selection. The approach is based on the requirements of the job (both now and in the near future), matching the ability and potential of the individual.

Qualification, skills and competency form our basis for nurturing talent. We are proud to state that favorable job responsibilities are increasingly attracting greater participation from dierent level of employees in the IDLC family. We aim to foster a sense of pride in working for IDLC and to be the employer of choice.

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Sociable & Trusted Working Environment

We strive to maintain a friendly and respectful environment at all times that motivates our employees to give their best and contribute to their full potential. We have created an environment of trust and support within the organization to enable everyone to work together as a team, while at the same time encourage individuals to be innovative and creative within their own roles. Our Senior Management is accessible at all times to provide guidance when required, and encourage ideas that contribute to business performance and continuous improvement.

Reward & Recognition

IDLC never fails to recognize the eorts of people who want to make a dierence. Our employees receive Performance Bonus annually in acknowledgement of their hard work and dedication. On top of that, we also give Spot Awards to appreciate those of our colleagues who had the spirit to take on new challenges and who have contributed significantly in areas outside their regular responsibilities. Our investments for employee development We develop and deliver high quality learning and development initiatives appropriate to the needs of the individual employee. Whilst we put great emphasis on human resources in training and opportunities for development, employees are encouraged to take responsibility for their own development. Since, we consider our employees as our most valuable assets; we invest considerable time and eort for their personal and professional development. We encourage our employees to give their best and assist them in doing just that through relevant training programs & work shop both at home & aboard. Like as previous years, a large number of employees were sent to dierent training programs, which included both managerial development and technical modules. During 2011, 1,265 employees were trained locally in 136 training courses while 31 employees were sent on overseas training programs spread over 14 dierent modules. Among the local training programs, 707 employees participated in 39 in-house training programs and 10 customized training courses were arranged where 331 employees participated. In addition, 227 employees were sent to 87 other public training programs. The total cost for all training programs was BDT 9.31 million in the year 2011.

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I Human Capital

A summary of the training status of the year 2011 of IDLC group is given below. No. of Training 14 In-House Customized Others Total 39 10 87 150 No. of Participants 31 707 328 227 1293 Total Cost BDT million 6.47 0.05 1.40 2.74 10.68

Type of Program

Foreign Local

Life at IDLC IDLC is that it not only cares for its employees, but is committed to environment and community as well. We have numerous events throughout the year, including picnic, family days, employees birthday celebration, celebration for new born baby , iftar party and sports events that bring us all together as a big family. To help us act more responsibly towards our community and the country, IDLC also regularly arranges various environmental and community service events in participation of us all. By recognizing our priorities and aspirations, our company helps us maintain the balance between our work and personal life, while giving us the chance to be more responsible citizens. Ethical Standards IDLC adheres to the highest ethical standards and believes. This is a key to business success. The company prioritizes statutory compliance and has a set of Code of Ethics for employees, who are required to read and sign these documents every year, as a sign of reiteration and commitment to the principles enshrined in it. Compensation & Reward It is a cornerstone of our ethos that IDLC is a meritocracy, where all employees are recognized and rewarded on the basis of their performance, eort, contribution and achievements. The companys performance management and personal development processes are being rolled out through the extended group. They are based on the following principles:
IDLC annual report 2011

that employees have a clear understanding of how they contribute to the business and have clear personal objectives, aligned to the business strategy and objectives; career pathways that identify key capabilities and behaviors at dierent competency levels across core career paths;

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personal development, training and succession planning to support personal growth; an annual review of performance that drives decisions about pay and career progression.

IDLC provides its employees with a competitive compensation package. The Company has implemented a strict performance based reward system and evaluates sta performance evaluation twice a year. IDLC is a performance driven organization and career development opportunities are based on merit and performance. A detailed compensation survey was carried out by an independent consultant in the year 2010, to assess and evaluate the current pay level of IDLC vis a vis the market. The survey results helped us make necessary adjustments to ensure that IDLC employees are fairly paid and which is also competitive in the market. Communication & employee satisfaction IDLC recognizes that, as a rapidly changing, knowledge-based business, communication is a critical ingredient for success. We place emphasis on both formal and informal communication. The managers have a key role to play in communication. Managers are accessible, encourage collaboration and the development of ideas that contribute to business performance and continuous improvement. In addition to face-to-face meetings, we encourage the use of Live Internet Meetings which allow business management to talk frequently to employees, without the need to bring them together in one place. We have an active program to ensure communication from Executive Team through a variety of media and encourage employee feedback and comment though methods including group discussions, employee surveys and email dialogue.

Employees Birth Day Celebration

IDLC annual report 2011

IDLCs Family Day

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I Report of the Audit Committee

Report of the Audit Committee


Scope of work of Audit Committee The Committee is authorized to investigate any matter within its terms of reference, access all documents and information of the company, seek information from any director or employee of the Group and co-opt any resources (including external professional assistance) it sees fit in order to fulfill its duties. However, the Committee has no executive function and its primary objective is to review and challenge, rather than assume responsibility for any matters within its remit. The Committee presents a summary of its activities to shareholders and other interested parties by means of this report, and the committee Chairman attends all general meetings of the Companys shareholders to answer any questions on the committees activities. Review of financial statements by the Audit Committee Audit Committee reviewed the annual financial statements for the year 2011 and placed its recommendations to the Board of Directors. Advancements during the year The following advancements have taken place at IDLC in relation to the internal control process in 2011:

Internal audits for all departments and branches were completed using risk based audit checklists developed in 2010. This represents a logical progression from previous years with the introduction of the risk assessment process in 2009 and the development of detailed risk based audit checklists in 2010. All audited departments and branches were assigned audit ratings derived through the use of pre-established mathematical formulae in order to arrive at a more objective assessment of risk; Field visits of clients were introduced on a limited scale for the first time in 2011, in order to add a new dimension to audit activities; Coverage of capital market operations was extended to include all branches of the two subsidiary companies IDLC Securities Limited (IDLCSL) and IDLC Investments Limited (IDLCIL); Internal Control and Compliance Manual was formally approved and adopted; Standardized Departmental Control Function Checklists (DCFCL) and Branch Control Function Checklists (BCFCL) templates were introduced and circulated across all departments of the company, the first step of an organization-wide drive to standardize the manner in which departmental and branch control functions are documented; As part of eorts to streamline the process for responding to non-routine queries from various regulatory and other government authorities, the responsibility for coordinating such responses was assumed by the Internal Control and Compliance (ICC) department; In order to better serve customers, a complaints cell was established in accordance with central bank directives with a senior manager of the ICC department being put in charge of the cell. In addition, a feedback line was also established on the companys website; In a continuation of overall awareness building eorts with regard to Anti-Money Laundering activities, branch level self assessment process was further consolidated and a workshop was organized by ICC department on Anti-Money Laundering, Anti-terrorism regulations and importance of internal controls and compliance; Delegation of authority matrix was formally reviewed, revised and circulated across all departments;

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I Report of the Audit Committee

All this enables the Committee to evaluate major business risk areas, so as to ensure proper controls are in place, which is well managed, providing accurate, appropriate and timely information to the Board of Directors, management, regulatory bodies and shareholders. External audit Hoda Vasi Chowdhury & Co, Chartered Accountants, a partnership firm registered in Bangladesh and Independent Correspondent Firm to Deloitte Touche Tohmatsu, acted as the external auditors to the company throughout the year. The external auditors are not engaged by the company on any material non-audit work such as:

Appraisal or valuation services or fairness opinions; Financial information systems design and implementation; Book-keeping or other services related to the accounting records or financial statements; Broker-dealer services; Actuarial services; and Internal audit services;

Independence of External Auditor As a policy, the Committee prohibits the external auditors from performing any work that they may subsequently need to audit, or which might otherwise create a conflict of interest. The Committee also monitors the balance between audit and non-audit related functions to ensure that auditor independence can be shown to be maintained. The Chief Financial Ocer is permitted to engage the external auditors on matters that do not create such conflicts. The Audit Committee appraised the expertise, resources, independence and objectivity of the external auditors and also reviewed their eectiveness as external auditors before reaching the recommendation to the Board that their re-election should be proposed to shareholders. Resolutions of the Audit Committee meeting: The Committee met four times during 2011 to carry out the following tasks:

The Audit Committee reviewed the financial statements for the year ended December 31, 2010; Reviewed and discussed the Management Letter, by the outgoing external auditors Rahman Rahman Huq, for the year ended December 31, 2010 on the annual audit on financial statements of IDLC Finance Limited; Reviewed expressions of interest sent by various audit firms and recommended appointment of Hoda Vasi Chowdhury & Co, Chartered Accountants, as auditors of the Company for the year 2011; Reviewed and approved annual internal audit plan for the year 2012 Reviewed and approved Internal Control and Compliance Manual; Reviewed and discussed the Bangladesh Bank Inspection Report 2010 and, managements responses to the report; Reviewed various reports of Internal Control & Compliance Department on operational, financial procedures and branch activities;

Based on the review and above discussions, the Audit Committee is of the view that the internal control and compliance procedures are adequate to present a true and fair view of the activities and financial status of the company and to ensure that its assets are safeguarded properly.
IDLC annual report 2011 Our Governance I

Md. Habibur Rahman Mollah, FCA Chairman, Audit Committee

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I Going Concern Report

Assessment Report on the Going Concern Status of IDLC


Going Concern is a fundamental accounting concept that underlies the preparation of financial statements of companies. Under the Going Concern concept it is assumed that a company will continue in operation and that there is neither the intention nor the need either to liquidate it or to cease trading. The purpose of this Going Concern Statement is to bring together the requirements of company law, accounting standards and the Listing Rules on going concern. The management of IDLC has made this assessment based on accounting period ended on or after 31 December 2011. The managements assessment of whether the company is a going concern involves making appropriate inquiries including review of budget and future outcome of inherent risk involved in the business. Considering the following major indicators, the managements of IDLC have reached to a conclusion that the financial statement for the year 2011 is prepared based on going concern assumption: Financial indications A steady trend of current ratio: IDLC has a optimum current ratio over the last few years which we can observe from our financial highlights in page No. 76. It means that the Company has the ability to meet its short-term obligations out of short-term assets. Fixed term debt with realistic renewal or repayment: At the close of financial year 2011, total borrowing from other bank and financial institutions of the Company was BDT 4,565 million. Based on our past experience we can say that there is every possibility that major part of the debt would be renewed further or can be repaid from its existing cash flow. Less reliance on short term borrowing: At the end of 2011, total short term borrowings of the Company were BDT 1,210 million, representing only 26.50% of total borrowings that indicates the Company has least reliance on short term borrowings. Continuous financial support by lenders/depositors: The Company has a very good track record and reputation in settlement of its obligation with its lenders/ depositors. The company is able to increase the level of confidence of depositors which results a significant increase (35.67%) of our deposits in 2011. Positive operating cash flows: Cash flow statement of the Company for the year 2011 shows positive operating cash flows of BDT 2,266 million. Statement of liquidity also shows overall positive liquidity gap representing strong ability to meet current and future obligations. Positive key financial ratios: The Companys financial ratios indicate a sound financial strength and prospects of the company as evident from financial highlights given on page No. 76 of this Annual Report.
IDLC annual report 2011

Consistent payment of dividends: IDLC has been paying dividend consistently to its shareholders over the years. We refer to financial highlights page No. 76 of this Annual Report to show our steady Dividend payment records.

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I Going Concern Report

Moreover, the company has paid stock dividend @ 25% in 2011 and stock dividend @ 65% in 2010 that reflects Companys long-term viability in operational existence. Credibility in payment of obligations: IDLC has strong credibility in terms of payment of its obligations to the lenders. The Company is very particular in fulfilling the terms of loan agreement and never been defaulter, even in terms of convenient. Increasing trend of investment portfolio and performance growth: IDLC has excellent growth in its operating performance. Companys investment in long-term finance, real estate finance, car loan and short-term finance have increased by 84.75%, 24.52%,13.62% and 75.61%, respectively in 2011 in compared to 2010. Operating indications No key management turnover: During the year 2011, the company has not experienced of any event of turnover in key management position. Employees have long term commitment and loyalty to the Company. Average length of services of an employee at IDLC is 3.2 years (2.95 years in 2010). A report on human Resource has been given on page No. 62 of this Annual Report. Expansion of business: IDLC is continuously expanding its segment geographically by opening new branches (three new branches) in dierent places considering the economic significance. Company has also strengthened its product/service line by increased marketing eorts and extensive investment. Corporate environment and employee satisfaction: There exists a very good corporate environment in the Company. This is being reflected at our Statement of Corporate Governance and Report about our Human Capital. Other indications Maintenance of Capital Adequacy Ratio (CAR): As per DFIM Circular No. 14 , dated December 28, 2011 of Bangladesh Bank on Prudential Guidelines on Capital Adequacy and Market Discipline for Financial Institutions has come into force from January 01,2012. As per the guideline Financial Institutions (FIs) are required to maintain CAR @10%. Before its implementation, FIs have been reporting CAR to Bangladesh Bank based on draft BASEL Accord for Financial Institutions . During trail run period ( from January 01, 2011 to December 31, 2011), IDLC has been reporting CAR to Bangladesh Bank on quarterly basis. In each quarter of 2011, IDLC Finance Limited as well as Group had CAR above the minimum requirement of 10%. Strong equity base: As on 31 December 2011, total equity of IDLC stands at BDT 3,982 (BDT 3,690 million in December 31, 2010) representing an increase of 7.87% over last year that reflects companys long-term viability. Strong CAMEL rating: CAMEL rating is used by Bangladesh Bank as a tool for evaluating the strength and performance of a non-banking financial institution. The composite rating adjudged by Bangladesh Bank signifies satisfactory performance of IDLC. The report contained no adverse material observation of Bangladesh Bank on the activities of the company. Changes in Government policy: Management anticipates no significant change in legislation or government policy, which may materially aect the business of the Company.

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IDLC annual report 2011

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I Impact of Business Environment

Business Environment and Its Likely Impact on the Financial Performance of IDLC
Some statements in this annual report such as IDLCs plans, anticipation, beliefs, expectations etc., are forward looking. These statements involve uncertainties and actual achievement may differ from plan and expectation due to changes in the business environment. Following are some major factors that may affect the business environment:

Change in countrys general economic condition; Natural calamities and political disturbances; Change in commodities price level; Further volatility in interest rate in the market; Further volatility in capital market; Changes in Government policies, viz,

Implementation of BASEL Accord; Changes in corporate income tax rate and VAT; Changes in Monetary policy of the Bangladesh Bank; Increase in provisioning requirements; Increase in statutory liquidity reserves & cash reserve requirements by Bangladesh Bank; Change in Bangladesh Banks re-financing Scheme

IDLC annual report 2011

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I Our Vision, Mission and Corporate Philosophy

20 11 ep ort r annual

I Performance Indicators -Group

Performance Indicators - Group

IDLC annual report 2011

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I Performance Indicators -Group

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I Key Operating and Financial Highlights - Group

Key Operating and Financial Highlights - Group


Particulars Financial Performance Lease and Term loans disbursed Housing finance disbursement Short term finance portfolio Lease Finance Real estate finance assets Total assets Long term liabilities Term deposit balance Net current assets Operational Performance Operational income Operational expenses Financial expenses Profit before tax Net profit after tax Average eective tax rate Financial Ratios Debt equity ratio (Times) Financial expenses coverage ratio (Times) Current ratio (Times) Return on total assets (%) Non performing loan ratio (%) Return on shareholders equity (%) Earnings per share* (BDT) Dividend per share Price earnings ratio (Times) Dividend yield (%) Dividend payout ratio (%) Equity Statistics Number of shares (No.) Year end market price per share (BDT) Net asset value per share (BDT) Market capitalization Market value addition Shareholders equity
IDLC annual report 2011

2007 2,977 1,255 213 4,571 3,065 15,056 11,103 8,257 1,401 883 272 1,246 475 303 36.08 9.54 1.38 1.20:1 2.37 5.96 27.59 3.06 4.00 49.63 2.63 26.40 2,000,000 1,519.00 12.60 3,038 139.30 1,247

2008 3,412 1,612 336 4,734 3,915 17,342 12,115 8,249 1,559 1,179 352 1,553 708 406 42.57 8.32 1.46 1.21:1 2.50 3.97 28.43 4.10 3.50 55.76 1.53 21.55 2,500,000 2,289.00 16.28 5,723 212.62 1,611

2009 3,750 1,839 317 4,383 4,789 22,681 18,792 9,780 3,645 1,913 490 1,687 1,273 822 35.46 8.48 1.75 1.04:1 4.11 3.43 41.05 8.30 11.00 44.60 2.97 40.14 3,000,000 3,703.00 24.17 11,109 346.13 2,393

2010 4,345 2,121 468 4,107 5,605 26,930 21,745 12,373 4,172 3,047 966 1,822 1,956 1,327 32.16 6.30 2.07 1.39:1 5.35 2.84 43.64 13.41 10.00 34.67 2.15 45.21

2011 8,517 2,586 821 4,547 6,979 31,165 25,299 16,828 3,676 2,160 913 2,364 1,217 500 58.88 6.83 1.51 1.31:1 1.72 2.32 13.04 5.05 2.50 27.41 1.81 49.47

Growth (%) 96.03% 21.90% 75.61% 10.72% 24.52% 15.72% 16.34% 36.01% -11.88% -29.11% -5.43% 29.76% -37.81% -62.30% 83.08% 8.44% -26.96% -0.08% -3.63% -0.52% -30.60% -62.30% -75.00% -20.96% -0.34% 4.26% 1550.00% -97.02% 7.87% -50.83% -77.01% 7.87%

6,000,000 99,000,000** 4,648.00 37.27 27,888 427.53 3,690 138.50*** 40.21 13,712 98.29 3,980

* Prior years number of shares have been adjusted to reflect bonus share issued in 2010. **As per Securities and Exchange Commissions Order No. SEC/CMRRCD/2009-193/109, dated September 15, 2011, denomination of face value of shares of IDLC has been converted to BDT 10 from BDT 100 per share. ***Market value of share having face value of BDT 10 per share. Reasons for major deviations from earlier years have been explained in the CEO & Managing Directors Report of businees environment & performance analysis.

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I Value Added Statement

Value Added Statement


for the year ended December 31, 2011
Value added is the wealth created by IDLC through extending Corporate Financing, Consumer Financing, SME Financing, Supplier Financing (factoring of accounts receivable and work order financing) and Marchent Banking Services. The Value Added Statement shows the total worth created and how it was distributed to meet certain obligation and the portion retained for the continued operation and expansion of the Company. Particulars Value added Operating revenue Cost of borrowing Other income Provisions Operating expenses excluding sta costs and depreciation. Value added Distribution of value addition To Employees as remuneration To Government as taxes To Shareholders Retained in the business as capital and revenue reserve as depreciation 343,579,079 572,153,206 247,500,000 622,290,931 556,728,979 65,561,952 1,785,523,216 Number of employees Value added per employee 409 4,365,582 19 32 14 35 31 4 100 355,316,786 588,087,495 600,000,000 256,423,410 205,571,981 50,851,429 1,799,827,691 353 5,098,662 20 33 33 14 11 3 100 4,191,897,873 (2,359,226,854) 1,832,671,019 210,016,857 2,042,687,876 5,912,781 (263,077,441) 1,785,523,216 100 3,859,617,258 (1,817,840,968) 2,041,776,290 144,147,910 2,185,924,200 (119,323,814) (266,772,695) 1,799,827,691 100 Dec. 31, 2011 Taka % Dec. 31, 2010 Taka %

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I Market Value Added Statement

Market Value Added (MVA) Statement


Market value added statement reflects the Companys performance evaluated by the market through the share price of the company. This statement shows the dierence between the market value of a company and the capital contributed by investors. In other words, it is the sum of all capital claims held against the company plus the market value of debt and equity. The higher MVA is the better indication. A high MVA indicates the company has created substantial wealth for the shareholders. A negative MVA means that the value of managements actions and investments are less than the value of the capital contributed to the company by the capital market (or that wealth and value have been destroyed). The following statement shows how the MVA has been calculated for the year ended 31 December 2011 and 2010: BDT in million 2011 13,712 3,980 9,732 2010 27,888 3,690 24,198

Particulars Market value of shares outstanding Book value of shares outstanding Market value added

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I Economic Value Added Statement

Economic Value Added (EVA) Statement


Economic Value-Added is the surplus generated by an entity after meeting an equitable charge towards providers of capital. It is the post-tax return on capital employed (adjusted for the tax shield on debt) less the cost of capital employed. Companies which earn higher returns than cost of capital create value, and companies which earn lower returns than cost of capital are deemed harmful for shareholder value. The aim of EVA is to provide management with a measure of their success in increasing shareholders wealth: a better measure than profit of how much the company had made for shareholders. EVA has been calculated by the following formula: EVA = Net Operating Profit Taxes Cost of Capital Amount in BDT 2011 1,370,469,404 (572,153,206) 798,316,198 2010 1,393,659,476 (588,087,495) 805,571,981

Particulars

Net operating profit Provision for taxes Net operating profit after tax (NOPAT) Charges for capital Capital employed Cost of equity (%) Capital charge Economic Value added Capital employed as on December 31 Shareholders' equity Accumulated provision for doubtful accounts and future losses Average shareholders' equity

3,845,264,733 12.33% 474,121,142 324,195,056

3,413,651,510 10.07% 343,754,707 461,817,274

3,220,515,574 918,907,258 3,845,264,733

2,626,286,595 924,820,039 3,413,651,510

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I Financial Highlights as required by Bangladesh Bank

Financial Highlights as Required by Bangladesh Bank


(BDT in million) Sl no. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Paid-up capital Total capital Surplus/(shortage) capital Total assets Total deposits Total loans, advances and leases Total contingent liabilities and commitments Loans to deposit ratio (total loans/total deposits) % of classified loans against total loans Profit after tax and provision Classified loans, advances and leases during the year Provisions kept against classified loans, advances and leases Provision surplus / (deficit) against classified loans, advances and leases Cost of fund Interest earning assets Non-interest earning assets Return on investment (ROI) Return on assets (ROA) Income from investment Operating profit per share Earnings per share Price earning ratio Particulars Taka Taka Taka Taka Taka Taka Taka % % Taka Taka Taka Taka % Taka Taka % % Taka Taka Taka Times 2011 990 2,575 (10)* 31,165 17,639 26,357 1,410 1.49 2.32 500 594 (98) 125 12.33 30,127 1,037 2.05 1.72 (108) 12.59 5.05 27.41 2010 600 2,024 100 26,930 13,001 21,254 835 1.63 2.84 1,327 603 104 275 10.07 25,553 1,377 6.32 5.35 526 21.02 13.41 34.67

*As per DFIM Circular No. 05, dated July 24, 2011 of Bangladesh Bank, Financial Institutions (FIs) are required to maintain minimum paid up capital of BDT 100 crore. Shortfall in the paid up capital shall be covered within June 30, 2012, if any. As on December 31, 2011, the paid up capital of IDLC Finance Limited was BDT 99 crore. However, the Board of IDLC has recommended stock dividend @25% i.e. BDT 24.75 crore. If the impact of the Bonus share is given the paid up capital will stand at BDT 123.75 crore and there will be a surplus in paid up capital of Tk. 23.75 crore.

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I Directors Responsibility Statement

Statement of Directors Responsibility for Internal Control & Financial Reporting


Responsibility to Financial statements The Directors are responsible for ensuring that the Company keeps proper books of accounts of all the transactions and prepares financial statements, which give a true and fair view of the state of aairs and profit/loss for the year. The Board of Directors accepts responsibility for the integrity and objectivity of the financial statements. It ensures that the estimates and judgments relating to the financial statements were made on a prudent and reasonable basis, so that they reflect in a true and fair manner, the form and substance of transactions, and reasonably present the Companys true state of aairs. The Board of Directors confirms that the International Financial Reporting Standard (IFRS) and International Accounting Standards, as adopted in Bangladesh by the Institute of Chartered Accountants of Bangladesh, have been adhered to, subject to any material departure being disclosed and explained in the notes to the accounts. The Board also confirms that the Company keeps accounting records, which disclose with reasonable accuracy, the financial position of the Company, and which enables it to ensure that the financial statements comply with the requirements of the Companies Act, 1994, Securities and Exchange Rules 1987, Financial Institution Act 1993 and Listing Regulations of Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited and amendments thereto. Responsibility to internal control systems To ensure this, the Company has taken proper and sucient care in installing a system of internal control, which is reviewed, evaluated and updated on an ongoing basis. The Operational Risk and Internal Audit Department of the Company conducts periodic audits to provide reasonable assurance that the established policies and procedures of the Company were consistently followed. Opinion of the external auditors The auditor of the Company, Huda Vasi Chowdhury & Co., Chartered Accountants, have carried out annual audits to review on the system of internal controls, as they consider appropriate and necessary, for expressing their opinion on the financial statements. They have also examined the financial statements made available by the management together with all the financial records, related data, minutes of shareholders and Board meetings, relevant policies and expressed their opinion.

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I CEO & Managing Directors Review

CEO & Managing Directors Review of Economic Environment and Business Performance

IDLC annual report 2011

Salim R.F. Hussain CEO & Managing Director


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GLOBAL ECONOMY Following two years of anemic and uneven recovery from the global financial crisis, the world economy is teetering on the brink of another major downturn. Against a backdrop of unresolved structural fragilities, a barrage of shocks hit the international economy this year. Japan was struck by the devastating Great East Japan earthquake and tsunami, and political and social unrest swelled in certain oil-producing countries. At the same time, the handover from public to private demand in the U.S. economy stalled, the euro area encountered major financial turbulence, global markets suered a major sell-o of risky assets, and there are growing signs of spillovers to the real economy. Growth, which had been strong in 2010, decreased in 2011. According to World Bank statistics, the global economy grew at an estimated 2.7% rate in 2011 and is now expected to expand 2.5% and 3.1% in 2012 and 2013 respectively. The economic woes in many developed economies are a major factor behind the slowdown in developing countries. Economic growth in developed countries has already slowed to 1.3% in 2011, down from 2.7% in 2010. Developing countries and economies in transition are expected to continue to stoke the engine of the world economy, growing on average by 5.6% in 2012 and 5.9% in 2013, as per the World Economic Situation and Prospects 2012 by United Nations. This is well below the pace of 7.5% achieved in 2010, when output growth among the larger emerging economies in Asia and Latin America, such as Brazil, China and India, had been particularly robust. From the second quarter of 2011, economic growth in most developing countries and economies in transition started to slow notably to a pace of 5.9% for the year. Emerging Asia is forecast to continue to post strong growth of about 8%. Among the major developing countries, Chinas and Indias GDP growth is expected to remain robust, but to decelerate. In China, growth slowed from 10.4% in 2010 to 9.3% in 2011 and is projected to slow further to below 9% in 2012-2013. Indias economy is expected to expand by 7.7% - 7.9% in 2012-2013, down from 9% in 2010. Reflecting the growth slowdown, world trade, which expanded by an estimated 6.6% in 2011, will grow only 4.7% in 2012, before strengthening to 6.8% in 2013, as per the World Bank statistics. Overall, global economic conditions are fragile, and there remains great uncertainty as to how markets will evolve over the medium term. The developed economies are on the brink of a downward spiral enacted by four weaknesses that mutually reinforce each other: sovereign debt distress, fragile banking sectors, weak aggregate demand and policy paralysis caused by political gridlock and institutional deficiencies. Developing economies and the economies in transition would likely take a significant blow. The impact would vary as their economic and financial linkages to major developed economies dier across countries.

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BANGLADESH ECONOMY Potential shocks to the global economy could aect Bangladesh through several channels. Trade, remittances and aid inflows are the three most important channels through which growth and external balances in Bangladesh can be aected if global growth weakens. The economy is under pressure due to soaring imports of fuel and fertilizer, skyrocketing inflation levels, rise in budget deficit and government borrowing, increase in subsidies, falling foreign aid and currency reserve, sharp rise in import bills, declining export earnings and devaluation of the currency. GDP Growth The Bangladesh economy performed well in the fiscal year 2010-11 (FY11), after exports recovered and domestic consumption increased through a surge in credit. Real GDP grew at 6.7% in FY11 which was higher than 6.1% in FY10, continuing the upward trend in growth after declining during FY06-FY09. GDP growth in FY12 is projected at 7%, with continued healthy growth in exports, improvements in the power supply situation, boost in domestic demand, and pickup in remittance growth. Strong performance by all sectors contributed to the better growth performance. Agriculture, industry, and the services sectors each played an important role in contributing to gross domestic product (GDP) growth. Agriculture grew by 5.0% in FY11, slightly lower than 5.2% in FY10. The industry sector recorded robust growth because of a strong rebound in export-oriented manufacturing and better performance by domestic market-based industries. Industry sector growth during FY11 was 8.2%, up from 6.5% in FY10 and is expected to edge up to 8.8% in FY12. Services sector growth in FY11 is estimated at 6.6%, slightly better than 6.5% in FY10. Inflation Managing inflation is emerging as a major challenge. Increase in prices of both food and non-food items contributed to the rising inflation in 2011. Bangladesh Bureau of Statistics (BBS) inflation data for December 2011 shows that the average inflation increased to 10.71% in December 2011 from that of 8.13% in December 2010. Non-food inflation reached to 11.38% in December 2011, as diesel and electricity prices went up while food inflation stood at 10.40%. Export-Import Both exports and imports rose in FY11 while remittance growth slowed down considerably. Exports recovered strongly in FY11 from the depressed base of FY10. In dollar terms, exports rose by 41.7% in FY11, compared to just 4.1% in the year before, based on an impressive performance by the dominant garments sector. In FY11, import payments grew rapidly by 41.8%, well above the 5.5% growth recorded in FY10, due to higher prices of food grains, fertilizer, fuel, raw cotton, and yarn in the international market. Remittance Bureau of Manpower Employment and Training (BMET) statistics reveals that more than seven million Bangladeshi overseas workers remitted USD 12.17 bn in calendar year 2011, a record in the countrys history, marking a 10.55% growth over 2010. The current account balance entered a negative terrain for the first time in the current fiscal year as exports receipts and remittances could not fill in the gap in trade deficit. The shortfall in the current account balance was recorded at USD 14 mn in the July-November period of FY12 against a surplus of USD 762 mn in the same period of FY11. Foreign Exchange Reserves
IDLC annual report 2011

The foreign exchange reserves are under pressure because of growing import payments, particularly for fuel oils, food grains, and power plant equipment. The reserve has declined by 16.53% and reached to USD 9,327 million in December 2011 from USD 11,174 million of December 2010. The taka depreciated by 6.6% in FY11 versus the US dollar despite the central banks USD 925 million sales.

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Future Challenges The near-term economic prospects for Bangladesh depend on global economic conditions as well as domestic policies and management. Slowdown in developed countries can aect Bangladeshs balance of payments through its impact on exports and remittances, put pressure on the exchange rate, increase economic uncertainty, and, in turn, weaken investment and growth. Domestic policies will also aect Bangladeshs economic prospects. A slow pace of reforms in the investment climate can aect domestic and foreign investments. The reversal of trade reforms as well as weakening of the financial sector can also aect export growth and investments. Expansionary macroeconomic policies could increase risks on the current account and make inflation management more dicult. FINANCIAL SECTOR SCENARIO In the year 2011, the overall money market scenario was volatile. Started in last quarter of 2010, liquidity crisis in banking channel worsened further and prevailed throughout the year. Soaring fuel and food grain prices in international market, stagnant growth of remittance, widening gap between import payments & export earnings, dwindling foreign aids, rising subsidy bill and low levels of non-bank borrowing compelled the Govt. to borrow heavily from the banking sector, including from Bangladesh Bank. By the mid of November, Govt. siphoned o its borrowing target for FY12 from the banking sector (BDT 18.99 bln). Yields on treasury securities inclined sharply and in the face of liquidly dryness, banks were compelled to revise deposit rates upward and booked deposit at exorbitant rates to meet-up their liquidity requirements. While pursuing FY11 monetary programme objectives with 50 basis point CRR enhancement once and repo, reverse repo interest hikes totaling 225 basis points in four steps; BB had also to inject Taka repo funds virtually on a daily basis, particularly in H2 FY11, so that liquidity crunch does not bring markets to grinding halt. Repo rate and reverse repo rate was increased by 50 basis point at 7.75% and 5.75% from 8 January, 2012 as compared to 7.25% and 5.25% respectively in 5 January, 2012. In order to curb inflationary and external sector pressures and to ensure adequate private sector credit to productive pursuits, Bangladesh Bank (BB) has decided to continue its monetary policies in a restraining stance. Bangladesh Bank (BB) statistics reveals that the rate of private sector credit growth (on a year-on-year basis) came down to 19.33% in November 2011 and stood at BDT 3,618 billion compared to the year-on-year credit growth of 27.77% of November 2010. Under the new monetary programme, credit growth rate to the private sector will be limited to 18% by the end of fiscal year 2011-12 (FY12) from an estimated level of 25.50% in June 2011. Disbursement of industrial term loans by banks and financial institutions increased to BDT 322 billion in FY11 which was 24.3% higher than the previous fiscal. Loans for agriculture and SMEs were being prioritized in 2011, in line with the central banks policy directives. Total SME loans increased by 29.05% and stood at BDT 784 billion at the end of September, 2011 as compared to BDT 607 billion at the end of September, 2010. However, disbursement of agricultural credit during July-December, 2011 stood lower at BDT 57 billion as compared to BDT 62 billion during July-December, 2010. In order to ensure prompt collection of credit information from the database of the Credit Information Bureau of Bangladesh Bank (BB) as well as instantaneous delivery of credit report to the users by applying latest computer technology, the central bank has recently opened CIB Online Services on 19 July 2011. This online service will enable the banks/FIs to share credit information for taking proper decision avoiding defaulted borrowers thus reducing default rates, while allowing borrowers to obtain credit promptly thus facilitating timely implementation of projects and reducing time to market their products. Banking sector in Bangladesh demonstrated a moderate level of resilience in FY11, attributable to improvement in key financial indicators of the banking industry. With a view to maintaining soundness, solvency, eciency and stability in the financial system, Bangladesh Bank (BB) initiated a number of policy measures including greater emphasis on risk managements in the banks; periodic review of stability of the banks and the banking industry through stress testing; strengthening financial inclusion of under-served/un-served productive economic sectors and population segments; and encouraging enhanced CSR activities and Green Banking initiatives. In 2011, Bangladesh Bank (BB) decided to allow some new banks, considering the countrys overall economic activities, along with its population growth. The ratio of NPL to total loans of all the banks shows an encouraging trend

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since its decline from the peak (34.9%) in 2000, although the aggregate ratio was still as high as 7.1% at end FY11. Advances increased by 23.64% in FY11, against an increase of 23.32% during FY10. Bank deposits (excluding interbank items) increased by 21.85% during FY11 compared to 20.90% increase in FY10. The credit/deposit ratio of the scheduled banks, excluding the specialized banks was 0.85 at the end of June 2011 whereas it was 0.83 at the end of June 2010. During 2011, Bangladesh Bank (BB) issued two more licenses in non-banking financial institutions sector to Bangladesh Infrastructure Finance Fund Limited (BIFFL) to facilitate the countrys infrastructural development activities and to Agrani SME Financing Company Limited to facilitate the countrys small and medium enterprises (SME) sector. In total, 31 FIs are now operating in Bangladesh. The branch network of the FIs increased to 158 as on June 30, 2011. Total asset of the FIs was BDT 273 billion at the end of June 2011. Total liabilities and equity were BDT 222 billion and BDT 52 billion respectively at the end of June 2011 whereas total deposit stood at BDT 106 billion (48% of total liabilities). To cope up with the international best practices and to make the capital more risks sensitive as well as more shock resilient, guidelines on Basel Accord for Financial Institutions (BAFI) have been introduced from January 01, 2011 on test basis. At the end of test run period, the prudential guidelines on Capital Adequacy and Market Discipline for Financial Institutions have come fully into force from January 01, 2012. FIs are now required to maintain Capital Adequacy Ratio (CAR) of not less than 10% with at least 5% in core capital. Standard & Poors, a leading rating agency in the world, has recently armed Bangladeshs sovereign credit rating with a stable outlook, which would give a much-needed boost to the countrys under-pressure economy. The US-based financial services company gave Bangladesh a BB- rating, just a few days after another international rating agency, Moodys Investors Service, reassessed Bangladesh and left its rating unchanged at Ba3, which the central bank believes would help the country float its first ever sovereign bonds. The stable outlook reflects Bangladeshs strong growth prospects and ongoing donor support, which ensures low-cost and long maturity external debt that minimizes refinancing risk. CAPITAL MARKET SCENARIO Bangladesh experienced consistent economic growth around the 6% mark over the last few years. This growth, allied with a relatively liberal monetary policy and relaxed regulatory framework, fuelled a long bull run, which started from early 2007 when the DSE General Index (DGEN) was around 1,400 and ended when the DGEN reached to all time high at 8,918 on December 5, 2010. The rise was also fuelled by an overvaluation of scrips in the primary market and increased money flow, stemmed mainly from aggressive credit expansion by banks/FIs. Globally, over 80% of equity markets were in the negative in 2011 and were aected by a number of events, of which significant ones included U.S. credit rating downgrade, Middle East instability, Eurozone debt crisis and an economic slowdown in major economies like China and India. As a result, 2011 experienced high volatility in all economies as well as investment arenas including Equities, Fixed Income, Derivatives and major commodities like Gold and Oil. Statistics of Emerging Markets of Asia Country Name Indonesia Malaysia Thailand Pakistan Srilanka Hong-kong Taiwan
IDLC annual report 2011

Index Name Jakarta Comp FTSE Bursa KLCI Bangkok SET KSE 100 CSE All Share Hang Seng Weighted Pr BSE Sens DSE General

Market PE (30.12.2011) 15.8 15.6 12.0 8.5 21.7 8.4 13.0 15.1 13.7

Annual Return 2.37% -2.55% -5.41% -10.14% -11.99% -19.91% -23.73% -36.52% -36.58%

India Bangladesh Data Source: Bloomberg, DSE and Financial Times

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The equity returns of emerging markets also reflected the global trend. While the Indonesian market provided just over 2% return, most of the emerging markets of Asia fell significantly. Against a 83% positive return in 2010, the DSE General Index (DGEN) lost 36.6% in 2011. It is true that the steep rise of the DGEN was never justified by underlying fundamentals of the market. However, many analysts felt that the central banks new restrictive monetary policy, aimed at curbing inflation and arresting the depreciation of the Bangladesh Taka, and the sudden enforcement of various capital and money market regulations also contributed to the DGEN crash of December, 2010. Fading confidence only accelerated the fall. The DGEN fell by 37% and closed at 5,258 while the DSI Index ended at 4,384 and the DSE-20 closed at 3,910 by end 2011. Total market capitalization stood at USD 30.77 billion at end 2011, having fallen by 25% from USD 41.25 billion, a year earlier. Daily average turnover also fell to BDT 6,642 million from BDT 16,434 million in 2010; decreased by 60%. Market Capitalization to GDP ratio declined to 33.32% from 50.67%. Market cap of equity also suered; by 33%. During the year, the total number of listed securities increased from 445 to 501 - which included six (6) new mutual funds and one (1) corporate bond. During the year, the number of total public oerings (IPOs and RPOs) was 15 with a value of around BDT 17,824.0 million while previous year, it was 23 with a value of BDT 35,000.0 million. Throughout the year, various measures, ranging from short term to long term, were taken by Government and its regulators to restore stability in the market. Though the market occasionally rallied following these steps, the momentum did not last long. Lack of consistency in policy measures and a deteriorating economic outlook accentuated the fall. The continued restrictive monetary policy, rising interest rates and liquidity pressures, currency devaluation and rising inflation look likely to prolong the bearish trend.

Capital Market at a Glance during 2011

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IDLCs BUSINESS ACTIVITIES Throughout 2011, the Bangladesh economy suered from liquidity pressures, a volatile money market and a turbulent capital market. Not surprisingly, new and viable investment opportunities were relatively scarce. With viable few investment opportunities and clients becoming scarcer, the small Non-Banking-Financial-Institution sector faced even more competition from the much larger Commercial Banking sector than in previous years. The investment climate was further impacted newer challenges e.g. shortages of gas & electricity locally, increases in global food prices, shortages of important raw materials such as oil and cotton, slow-down of overseas remittances, etc. Despite all these significant challenges, IDLCs core loans & deposit business operations performed very well as outlined in the next section - Performance by Business Segments. During 2011, IDLCs SME focused branches/booths have strengthened its financing activities to generate business volumes from SME markets which are mostly untapped by us, establish our permanent presence in dierent areas, give faster service delivery and cross selling opportunities of all our other financial products and services and also broaden our deposit mobilization eort. All these factors and increased visibility by opening two new branches helped the SME segment to grow customer assets significantly. Traditional term-lending and leasing businesses, particularly in the corporate clients segment, also showed a reasonable growth in 2011 while retail home-loans also grew very well for most of 2011. IDLCs Treasury performed excellent in meeting its funding objectives in 2011 and further enhanced its liquidity position contrary to the prevailing market scenario. While managing liquidity, treasury continued its focus on reducing reliance on costlier intermediarys funds like credit lines from commercial banks and fortifying the deposit base. Aside deposit mobilization & bank credit lines, we are actively utilizing Bangladesh Banks (BB) refinancing windows, the lowest cost long term funding avenue for IDLC. In 2011, when the market became subject to head-winds, we completely reversed our position in money market exposure and appeared as a net lender, a demonstration of our zero dependence on volatile call money market in the year. IDLCs consolidated assets, at 2011 year-end, stood at BDT 31.16 billion - a 16% growth over 2010 and customer deposits had reached the BDT 16.83 billion mark - 36% higher than the previous year. The Companys equity had increased by 8% to BDT 3.98 billion over the previous year. IDLC earned a consolidated net profit of BDT 500 million in 2011 - a 62% decline over the previous year mainly due to historic downfall in the capital market as we discussed earlier. The decline is also attributed by bleak economic outlook under restrictive monetary policy with tightened credit growth, rising interest rate, acute liquidity crisis, currency devaluation and growing inflation. At IDLC, we believe that superior service delivery, diversification of client segments and businesses, definitive sales and performance focus, strong risk-management and growth, development and empowerment of sta are keys to ensuring sustained financial performance. In 2011, the Company continued to invest in each of these areas. IDLC Finance Limited opened two new branches at Tongi, and Mirpur in 2011 and in January 2012, one more branch was launched at Jessore. 121 stas were recruited in 2011 and 1,296 employees participated in 150 training programs which is 114% higher than previous year. Among the total 1,296 training participants, 1,265 employees were trained locally in 136 training courses while 31 employees were sent on overseas training programs spread over 14 dierent modules. The ratio of Non-performing Loans has further reduced from 3.43% in 2009 and 2.84% in 2010 to 2.32% in 2011 mainly because of the strengthening of the credit & collections teams and relevant processes. IDLC has continued with its prudential policy of building adequate provisions for doubtful accounts and future losses. It must be mentioned that this provisioning policy is significantly more conservative than the minimum required by regulators and followed by almost all competitors. The Companys tax policies are also extremely conservative with full provisions having been made for all conceivable contingencies.
IDLC annual report 2011

Over the years IDLC has built a merit-based working environment which is free of discrimination and is focused on maintaining the highest standard of corporate governance and ethics. IDLC has always sought to dierentiate

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itself through its human resources and in 2011, the Company continued to invest heavily in the development and growth of sta. The Company has always tried to implement international best-practice employee compensation policies - aiming at attracting, retaining and rewarding best talent. In 2011, under the mandate of the Board of Directors, the Companys employee compensation policies were made even more performance oriented than in earlier years. FINANCIAL PERFORMANCE OF IDLC DURING 2011 The IDLC Groups 2011 financial performance was significantly impacted by the stock market crash. Consolidated operating results during 2011 are summarized below: (BDT in million) Particulars Operating income Operating expenses Total operating profit Profit before income tax Net profit after income tax Earnings per share 2011 2,160 913 1,246 1,217 500 5.05 2010 3,047 966 2,081 1,956 1,327 13.41 Growth % (29) (5) (40) (38) (62) (62)

A business-wise breakdown of the above performance is given below: Particulars Operating Profit from core (loans & deposits) financing business Operating Profit from Merchant Banking activities Income from investment in shares Operating Profit of IDLC Securities Ltd. Net profit after income tax of IDLC Securities Ltd. 2011 951 412 186 (21) (164) 2010 686 613 290 568 522 Growth % 39 (33) (36) (104) (131)

The Bangladesh capital markets had experienced an extraordinary bull run in 2010 with the IDLC Group earning equally exceptional levels of income from very high trading volumes and capital gains. In 2011, DGEN market capitalization and turnover both dropped dramatically and this crash impacted our brokerage commission, fees and investment revenue streams. In line with the Boards policy to remain conservative and comply with statutory limitations, IDLC also halved its margin loan portfolio in 2011 from mid-2010 levels in order to mitigate longer term default risks. PERFORMANCE BY BUSINESS SEGMENTS CORPORATE DIVISION The Corporate Division comprises the Corporate Finance and Structured Finance Units. Over the years, this division has achieved a reputation for expertise, extensive knowledge and experience to oer a range of financial solutions in response to the needs of local and multinational corporate houses in Bangladesh. Corporate Finance Unit In 2011, the Corporate Division upgraded its risk appetite and shifted focus to higher quality clients and assets. The Division achieved strong asset growth over the previous year - despite the sluggish growth in the industrial sector caused by lack of adequate power and infrastructure.

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The contribution of Corporate Finance Unit is summarized below: Figures in BDT million Particulars Disbursement Outstanding balance as at Dec 31 2011 3,960 6,309 2010 1,820 4,749 Achievement (2011 over 2010) 118% 33%

Structured Finance Unit IDLCs Structured Finance business had lost focus over the last few years and was rebuilt in 2011 with new sta and a more aggressive mandate. Figures in BDT million Particulars Portfolio Size Fund Raised Revenue Syndication Deals in 2011 Structured Finance Unit signed one IPO deal and a number of syndication deals such as: 1. Acting as a joint arranger for raising USD 45.00 million Term Loan facility for ECPV Chittagong Limited (ECPVCL) to set up a 108 MW HFO based power plant at Chittagong. Raising USD 38.50 million for Clewiston Foods & Accommodation Limited to set up a 278 keys 5 star Hotel in the name of Radisson BLU Hotel Coxs Bazar under a Development & Management contract with Carlson Hotels worldwide USA Acting as a lead-arrange for raising USD 115 mn for Summit Bibiyana-1 Power Company Limited and Summit Bibiyana-2 Power Company Limited through the Investment Promotion and Financing Facility (IPFF) Acting as Issue Manager for raising capital through Initial Public Oering (IPO) for Energypac Power Generation Limited 2011 19,569 8,625 2.64 2010 10,944 3.19 Achievement (2011 over 2010) 79% (17%)

2.

3.

4.
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Future Outlook - Corporate Division Now with a larger team and enhanced capabilities and expertise, the Corporate Division looks forward to the future with confidence. Our near term objectives include formulation of a strong marketing team, introduction of Liability & Research Unit for Corporate Division, identification of thrust sectors and undertaking sector-wise marketing plan, finding out the new emerging corporate clients, and focusing more on financing large tickets for credit worthy clients. We are forecasting that prospects for power sector investment, Infrastructure & Green Financing will continue to rise in 2012 and working with multilateral agencies for project financing may become more prominent. As we are expecting that heavy borrowing by the government may increase private sector crowding out and hence liquidity crisis may continue further, we will focus on exploring foreign financing opportunity and enhancing working relationship with international financiers as co-financiers during 2012. SME DIVISION Small and Medium Enterprises - SMEs contribute significantly towards industrial output, exports and employment generation for the economic growth of any country. SMEs account for about 45% of manufacturing value addition, 80% of industrial employment and about 25% of the total labor force. The SMEs make up 75% of the domestic economy. However, there is large gap between their needs and access to reasonably priced funds. Under this backdrop, we have taken a strategy to aggressively increase investment in this segment. IDLC started operating in SME financing segment since 2006. It is now by far one of the largest recipients of fund under Bangladesh Banks SME refinancing scheme. Almost 26% of customer lending of IDLC group is in SME sector. During 2011, IDLCs SME focused branches/booths have strengthened its financing activities to generate business volumes from SME markets, which werepreviously untapped by us. Establishing our permanent presence in SME hubs has not only allowed us to, deliver faster service and manage customer relationships but also and opened up cross selling opportunities for other products including Deposits. Small Enterprise Finance (SEF) and Medium Enterprise Finance (MEF) To help SMEs meet their short/medium term cash flow needs, to procure fixed assests and to bridge the fundflow gaps, IDLC oers a range of SME products. Lease financing, Term Loan financing, Working Capital financing, and Project financing are some of the products oered to credit hungry SME sector. IDLC also provides financing for Suppliers, Distributors against their invoices. IDLC also puts significant emphasis in promoting women entrepreneurs of the country. The company extends Women Entrepreneur Loan at favorable terms in line with Central Banks guideline. During 2011, we launched two new products - SME Commercial Vehicle Loan and SME Seasonal Loan. The products brief are as follows SME Commercial Vehicle Loan is a financing facility for Small and Medium Enterprises (SME) for procuring commercial vehicles for business use at simple and convenient terms. SME Seasonal Loan is a financing facility for Small and Medium sized trading and manufacturing businesses with flexible repayment terms. The loan repayment schedule is structured in a way to match the cash flow of the business and to cater to the seasonal demand of the business.

During 2011, we pioneered in introducing Online SME Loan Eligibility Tool - a web based tool, which will allow SME entrepreneurs to assess their primary eligibility for accessing a SME loan from IDLC. The interactive tool is expected to facilitate entrepreneurs, who are keen to avail SME financing, by allowing them to gauge their preliminary loan eligibility through logging-in to www.idlc.com and filling out a simple web form.
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The business performance of the SME division is depicted below: Figures in BDT million Particulars Disbursement till Dec 31 Women Entrepreneur Loan Outstanding as at Dec 31 Medium Enterprise Finance (MEF) Small Enterprise Finance (SEF) Supplier Finance (SFD) 2011 5,360 2,81 6,850 2,812 3,192 821 2010 3,018 1,50 4,132 1,873 1,791 468 Achievement (2011 over 2010) 78% 85% 66% 50% 78% 75%

Supplier Finance Factoring is a suitable instrument, in particular forsuppliers in SME sector, to develop their business through securing quick cash flow. It is a short term revolving facility that bases on the outstanding receivable of a supplier/ service provider. Suppliers/service providers who sell on credit can get up to90% of its bill value immediately upon submission of properly accepted bills by its buyer(s). Hence, it eliminates the working capital crisis of the suppliers and helps them increase their sales in a very short time. It is a collateral free financing. Hence in the context of Bangladesh, it provides many entrepreneurs with access to finance, which is hardly available from the conventional banking system. With the help of this facility, in last 12 years, since the inception of Factoring facility in Bangladesh by IDLC, many entrepreneurs have successfully grown and became big and self reliant. Many who started with a limit of BDT 0.5 million, now have access to bank facility of BDT 50 million or more. Success stories are a lot. A good number of women entrepreneurs have also been benefited from our Supplier Finance products. In 2011, we have successfully launched a unique product named Reverse factoring facility. IDLC oers this customized solution for financing Accounts Payable, where borrowers nominated suppliers will be paid by IDLC on behalf of the borrower, immediately after goods or services have been delivered to it. This is a short-term revolving facility where terms and conditions can be designed as per borrowers requirement. Currently, we are

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maintaining a portfolio of BDT 130.00 million under this product. The response to the newly introduced product from the corporate houses is very encouraging. Like 2010, we have been able to keep sustainable growth in all sectors. Our portfolio growth during the period was 78%. To maintain a quality portfolio, we have strengthen our buyer management unit that continuously monitors both the buyers and Clients performances and maintains strong relationship with them. Quarterly, in some cases monthly, reconciliation of the records of submitted bills in IDLC Vs Buyers help us find and streamline the deviations, if any. The performance figures of our Supplier Finance Unit are given below: Figures in BDT million Particulars Disbursement Collection Portfolio 2011 4,445 4,333 821 2010 3,510 3,329 468 Achievement (2011 over 2010) 27% 30% 75%

The major challenges faced by our SME division in this year are:

Customers have become more rate sensitive in this segment. Attracting good customers with sizable fund requirements was challenging in the face of high cost of fund Our cost of fund has increased, thereby threatening to squeeze our spread The capital market slump invited other Banks/FIs into this business segment Power shortage severely hampered the small and medium enterprises, especially manufacturers

Despite the above mentioned challenges, IDLC Finance, with speedy turn-around times, customer-friendly service and tailored solutions has established itself as one of the leading and most successful SME finance-providers in Bangladesh. Future Outlook SME Division SME Division looks forward to set up more distribution points throughout the year 2012, introduce business intelligence and research team, set up a new Women Entrepreneur Cell comprising of woman employees and launch new products & services using new technology platform to increase sales by tapping into new customer segments. In spite of high cost of fund, lack of information about the SME borrowers creditworthiness and overall economic uncertainities, in 2012, we are targeting to boost the existing portfolio by 50%. CONSUMER DIVISION (FORMERLY KNOWN AS PERSONAL FINANCE DIVISION) The Consumer Division was formally set up in 1997 to focus on the retail sector. The Division began gaining momentum in 2004, opening up Dhanmondi and Gulshan branches way. In the same year it has opened its Gulshan branch and in the consecutive year (2005) it opened its Uttara branch. With these 4 branches in Dhaka and 1 branch in Chittagong, RD has contributed and experienced its growth from 2006 till date. Now RD has 4 flag ship branches at Dilkhusha, Dhanmondi Gulshan and Uttara working as cluster for the other 3 branches situated at Mirpur, Comilla and Chittagong. Moreover RD stas are also present in most of the SME focused branches of IDLC. Now RD has a sizable portfolio of BDT 25 billion (Asset BDT 8 billion & Liability BDT 17 billion) maintaining the need of more than 10,000 retail customers in this industry. The wheel of our Retail Division is run by 147 employees
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among which 78 employees are permanent and 69 employees are contractual. The core competencies of this team is its reputation, diversified customer base, faster service delivery, flexibility and advanced technology. The expertise and continuous eorts of the team members contribute towards the growth of this division and thus contribute towards the growth of the company. Consumer Finance (Home Loan, Car Loan, Personal Loan) Individual clients now have access to their financial requirements and enjoy higher living standard with dierent consumer products oered by IDLC namely Home Loan, Car Loan and Personal Loan Continuing with the sustainable growth for consumer credit in 2010, we maintained progress in 2011. The total outstanding in 2011 reached BDT 7,577 million comparing to BDT 6,156 million in 2010 exhibiting a growth by 23%. Strong profit performance was attributable to its sustained growth with maintaining asset quality. The performance statistics of consumer finance are depicted below: Figures in BDT million 2011 Number of Customers Total Disbursement Home Loan Car Loan Personal Loan Total Portfolio as at Dec 31 Home Loan Car Loan Personal Loan Deposit Mobilization Deposit has been our prime funding source for the last couple of years. Increasing visibility in retail market and growing market awareness about IDLC and its products opened up the opportunity to strike a major boost in our deposit basket growth in 2011. Competitive deposit rates also helped us to retain existing depositors over the course of the year. As of December 31, 2011, the deposit base of the company grew by 36% or BDT 4,455 million to record BDT 16,828 million. 69% of the deposits are sourced from retail depositors who are considered to be more stable and less rate sensitive than the institutional depositors. 4,537 2,868 2,586 199 83 7,577 6,979 386 212 2010 5,544 2,439 2,121 150 168 6,156 5,605 339 212 Achievement (2011 over 2010) -18% 18% 22% 33% -51% 23% 25% 14% 0%

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Figures in BDT million 2011 Total Deposit Number of Customers 16,828 2,665 2010 12,373 1,563 Achievement (2011 over 2010) 36% 71%

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Retail Division faced some major challenges in 2011. Liquidity glut in money market kept the market calm up to September, 2010. Then sudden recoil of liquidity scenario due to increase of policy rates by Bangladesh Bank, aggressive public borrowings and other ailing macro-economic indicators ignited liquidity crisis in countrys financial sector that continued throughout 2011. Inflation took its flight and landed to around 11%. Capital market downtrend continued throughout the year. The central bank curtailed repo support. Moreover, banks went on all out eort to get fresh deposits to maintain asset-deposit ratio. On the other hand, discontinuation of fresh utility connections slowed down apartment sales. New duty structure slowed down reconditioned car sales. On the face of all these challenges, we strengthened our sales Campaign during the year to boost up business. We have launched Mirpur Branch and opened RD operations in most of the SME Branch Oces. We introduced new fees and charges for both asset and liability products and revised interest rates for Loan against Deposits (LAD) and premature encashment. We were able to maintain the Deposit Retention Rate to 80% level. We also tied up with MetLife Alico for our Home Loan Shield facility to provide complete protection to our Home Loan borrowers through life insurance coverage equivalent to the outstanding home loan amount. We also introduced special Home Loan Oer for customers of Asset Development. Future Outlook Retail Division Macro economic variables suggest that increasing deposit rates are likely to remain unchanged for a major part of 2012. We are forecasting that banks will run aggressively for deposit booking to maintain asset-deposit ratio. On the other hand, credit flow is expected to be restricted by the central bank to curtail inflation. Bangladesh Bank (BB) recently brought about some changes in the margin ratios of various loans to discourage commercial banks lending to unproductive sectors including consumer financing. From now on, banks will have to maintain a 70:30 loan margin ratio, instead of the existing 80:20, in the housing finance. The ratio for the car loans and all other consumer financing will be 30:70 instead of the existing 50:50. Thus we forecast that central bank may also impose the same restriction on the non-banking financial institutions (FIs) and the consumer financing sector may continue to suer. Moreover reconditioned car market may also suer due to heavy duty structure over luxurious car and increasing trend of fuel price. CAPITAL MARKET OPERATIONS IDLC has a significant presence in the Capital Markets through its two wholly-owned subsidiaries - IDLC Investments Limited (IDLCIL), and IDLC Securities Limited (IDLCSL). Both the subsidiaries provide a high standard of professional and personalized services to its local and international clients and have proven track record of quality client services and strict compliance with local rules and regulations with high standard of both corporate and employees ethics. Some other distinguished core competencies can be mentioned as follows:

IDLCs Strong brand value Better Risk Management for both Company and its clients Quality Human Resource (Experienced Fund managers, Investment Banking team etc.) Trend Setter executed first book-building case Ecient trade execution Trade service through multiple channels like Call center, Web, SMS, Mobile Application etc. Online Customer Order management through web, e-mail, SMS and call centre

IDLC Securities Limited (IDLCSL) Our stock brokerage arm, IDLC Securities Limited (IDLCSL), is also amongst the top five brokers in the country. The company oers full-fledged international standard brokerage services for both local and foreign individuals, and retail and institutional clients as well as foreign institutional investors. It has seats on both Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. As a Depository Participant (DP) of Central Depository Bangladesh Limited (CDBL) it provides some other services like BO (Beneficial Owner) accounts opening and maintenance, dematerialization and re-materialization of shares, transfer and transmission of securities, pledging, un-pledging and confiscation of securities, corporate events announcement Enquiry and BO ISIN balances enquiry. At the end

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of 2011, the company has a network spanning 9 branches, with 109 employees and a client base of more than 7,900 institutions and individuals. During 2011, IDLC Securities Limited started the full functional operation of order management system (OMU) which enables investors to manage and execute trades, access their portfolio and meet dierent queries through their mobile phones, internet, our call center, and SMS based service. More than 1,600 investors registered and availed the above services from IDLC Securities Limited till December 31, 2011. In 2011, IDLCSL secured the 4th position in terms of turnover in the Dhaka Stock Exchange with a negative turnover growth of 67.83% compared to last year which was slightly higher than overall market turnover growth. The Company registered operating revenue of BDT 190.64 million in 2011 compared to BDT 865.21 million in 2010 making a negative growth of 77.96%. The net loss after tax as of December 31, 2011 stood at BDT 164.06 million compared to previous years net profit of BDT 521.53 million. The tremendous pressure on the companys profitability growth was mainly due to keeping mark-to-market provision for diminution in the value of proprietary investment made by the company. The detail report on IDLC Securities Limited is enclosed in page no. 194. IDLC Investments Limited (IDLCIL) Our merchant banking arm, IDLC Investments Limited (IDLCIL), received Merchant Banking License from SEC on August 02, 2011 and commenced its operation on August 16, 2011. The existing assets and liabilities of the Merchant Banking unit of IDLC had been transferred to IDLCIL. IDLCIL has a strong client base 4,659 clients among which 89% are individual clients, 2% are corporate clients and the rest 9% are joint accounts who are served by 41 permanent employees. IDLCIL also has a strong research team that has extensive research coverage on listed companies and industries, economic coverage on National Budget Review, Monetary Policy Statement Review, Economic Review etc. and that also regularly publishes Capital Market Review, IDLCIL Investment Insight, Daily Market Commentary, Weekly Mutual Fund Update, Monthly Market Commentary, Flash note on price sensitive information and Synopsis on newly listed companies. The detail report on IDLC Investments Limited is enclosed in page no. 204. Future Outlook Capital Market Operations Whereas 2011 has been very volatile with sharp fall, 2012 may be ushered with further fall in price and volume amid less volatility and flat tail. For 2012, we are expecting that IPO market will remain attractive despite volatility in the secondary market may hamper the primary market. Flow of margin loan in capital market tends to be limited in coming years due to conservative approach of market participants. However, we project that Advisory Service for investors can open up new avenue of product oerings for us as SEC is currently preparing the guideline for the service. Considering the market scenario, we will concentrate on Cash client having low market risk and developing sale side research, advisory and stock rating services. We are targeting aggressive selling through our sales & marketing team as we forecast that entrance of new issues to meet up the demand of quality stocks in the capital market will create good investment opportunity for the investors. TREASURY OPERATIONS With the course of time, our Treasury has increasingly become a strategic business partner with both internal & external stake-holders across all areas of the business, adding value to the company. In the year 2011, the overall money market scenario was volatile. Started in last quarter of 2010, liquidity crisis in banking channel worsened further and prevailed throughout the year. In this backdrop, our key challenges for 2011 were ensuring sucient liquidity for IDLC, containing cost of funds in tolerable limits, maintaining minimum dependence on volatile call money market, and maintaining ALM/ Regulatory indicators within the threshold limit. Through accurate assessment of the market trend, strong tie with lenders that are less prone to liquidity dryness, enhanced drive for deposit mobilization and above all - through eciently tuned fund management, IDLCs Treasury capitalized this precariousness.

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While managing liquidity, treasury continued its focus on reducing reliance on costlier intermediarys funds like credit lines from commercial banks and fortifying the deposit base. In 2011, IDLC has witnessed a major stride in both frontiers. Deposits contributed to 79% of IDLCs funding portfolio which was 69% in previous year. Contribution of term loans from banks stood only 5% of total funding basket over 7% in previous year. Aside deposit mobilization & bank credit lines, we are actively utilizing Bangladesh Banks (BB) refinancing windows, the lowest cost long term funding avenue for IDLC. We are currently participating in Small and Medium Enterprise (SME) Refinancing schemes and Agro refinancing scheme of BB. During 2011 we received BDT 506 million long term refinance from BB and total received amount stood at BDT 2,720 million at the end of year 2011 that significantly contributed to lessen asset-liability mismatch and diversify our funding basket. Our Treasury performed as a borrower during low call rate period in 2010. Later on when the market became subject to head-winds we completely reversed our position in money market exposure and appeared as a net lender. In 2011 our daily average (net) call lending was BDT 260 million, a demonstration of our zero dependence on volatile call money market in the year. Future Outlook Treasury Operations In 2012, we are expecting continued liquidity tightness in banking channel & further rise in interest rate due to Governments sizable public borrowing target as well as Bangladesh Banks restraining stance regarding monetary policies to curb the stoking inflation. Under these predicted constraints, we are planning to greatly impel our deposit drive, channel funds from o-shore lenders and enhance our participation in BB refinancing Schemes to keep our liquidity position comfortable at an optimum cost. The details of our Treasury activities in 2011, challenges faced in this year and future plan are described in page no. 37 of this report. SUPPORT SERVICES HUMAN CAPITAL IDLC considers its human resources as its greatest asset and believes that the employee skill, knowledge, expertise and professionalism greatly contribute to move the companys goals and objectives forward. To establish the perfect strategic HR, IDLC links its human resources to strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation, flexibility and competitive advantage. At IDLC, our aim is to employ the right people, develop their capacities, manage their life cycle and reward their performance based on each individuals qualification, skills, performance, contribution and responsibility. As one of the leading financial institutions in the country, IDLC has focused on establishing a dynamic HR process for meeting its human resource needs. Based on the current and future need of human resources, IDLC has planned to fill the required position(s) either by using internal candidates from the own talent pool or by hiring/recruiting competent and skilled people regardless of race, gender, religion age, marital status, medical condition etc from external sources through a transparent recruitment process. We took all out eorts to encourage growth and career development of the employees by training, workshop, seminar, coaching etc. An extensive training need analysis has been conducted through task analysis of new entrants and performance analysis of the existing employees. IDLC provides its employees necessary in-house, local and overseas training opportunities to continuously upgrade their skills, expertise and knowledge, and to better equip them to meet organizational needs and face future challenges in the ever changing financial sector of the country. IDLC adheres to the highest ethical standards. The company prioritizes statutory compliance and has a set of Code of Ethics for its employees. At IDLC, we appreciate eective internal communications and free flow of ideas, creativity and innovation, fairness, commitment, teamwork and highest standards of professional excellence and integrity.

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IDLCs Human Resource Division envisages implementation of appropriate human resource policies and practices to develop its employees with a view to introducing superior level of job satisfaction and to ensure their optimum contribution towards the achievement of corporate goals. A detail report on our policies and strategies with regard to human resource management is given in page No. 62 of this report. INFORMATION TECHNOLOGY Information & Communication technology (ICT) has become indispensable for financial institutions in ensuring smooth operation and providing ecient services. IDLC has recognized this fact and the Board of Directors have adopted a comprehensive ICT Policy for the Company. IDLC is one of the very few organizations that have embraced ICT as the key to achieving excellence in its various aspects of operations. Over the past few years, IDLC has grown significantly in terms of business volume, number of customers and the company has also diversified its client and product range. In line with this business growth, the challenges and risks of doing business have also grown manifold. Information Technology (IT) being one of the key enablers of sound business growth and risk management, it is very important to have a robust, scalable and flexible IT platform. Accordingly, during 2011 we have provided tremendous eort to implement a robust core banking system, Oracle Flexcube Universal Banking Solution (OFSS), a banking transaction processing engine from Oracle, a world leader in IT services. The new core banking system has recently been launched in January 2012. Flexcube, our new core banking system will enable us to streamline our business processes, develop new products, produce better MIS for decision making, improve risk management, and, most important of all, delight our customers at every opportunity. We have started out on a wonderful journey a journey to grow our business exponentially and take our beloved company to the next level. RISK MANAGEMENT IDLC has recognized the maintenance of a strong risk management framework as a strategically important priority area in managing the company eectively in todays volatile financial market. The ability of the company to take strategic initiatives within pre-defined and consistent risk framework can be considered as a specialty that can make a distinction for the FI and ensure Safety for all shareholders in todays competitive market scenario. IDLC is committed to maintain and continuously improve its risk management framework through a number of initiatives including substantial investments in IT infrastructure, training and development of human resources, maintaining adequate capital etc. A well structured and proactive risk management system is in place within the Company to address risks relating to credit, market, liquidity and operations. The Company has dierent committees for risk management. The Credit Evaluation Committee (CEC) and Asset and Liability Committee (ALCO) regularly meet to review the market, credit and liquidity related factors and recommend and implement appropriate measures to counter associated risks. IDLC has an approved Asset Liability Management (ALM) Policy key responsibility of which lies on the Asset liability Committee (ALCO) comprised of senior management of the organization. IDLC possesses a robust ALM software and dedicated ALM desk to generate necessary MIS to ALCO. An independent Credit Risk Management (CRM) Department scrutinizes projects from a risk-weighted point of view and assists the relevant divisions to set business development priorities within the risk appetite of the company, while optimizing the risk return trade o derived from the relevant risk exposure. CRM team clearly defines the sectors which are perceived to be exceptionally high risk and the prohibited type of lending which the company under no circumstances will entertain due either to the very high risks involved in such proposals and/or to negative social/ethical consideration. At individual exposure level, a Risk Grading Model (RGM) has been used to promote the safety and soundness of the Company by facilitating informed decision-making. At portfolio level, the company tracks the quality of the loan book by analyzing risk migration and trends in the non-performing ratios of dierent lending portfolios on a regular basis. Such indicators prompt the relevant risk management committees to take timely decisions in preserving the quality of loans and advances.

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IDLC has established Credit Administration Department (CAD) and Internal Control and Compliances Department (ICC) to assesses operational risk across the Company as a whole and ensures that an appropriate framework exists to identify, assess and mange operational risk. IDLC has also established a Basel Implementation Unit (BIU) which is responsible for implementing Capital Adequacy and Market Discipline (CAMD) instructions of Bangladesh Bank in the company and managing risk based capital adequacy of the FI. Specifically, the Basel Implementation Desk (BID) of CRM Department carries out the risk based capital analysis and places it to the BIU along with recommendations where important decisions are made to maintain Minimum/Regulatory Capital and manage related risks. A summary of business risks that the company is now facing and the steps taken to eectively manage and mitigate such risks is stated in a separate statement on risk management in page no. 29 of this report. MARKETING COMMUNICATIONS We have progressively started focused marketing strategy. We are now investing our resources in building brand equity of the company and targeting right market segments for our product oering. We continued to focus Transparency, Corporate Governance and Statutory Compliance in our corporate communications. This has been critical and core to our continued ownership of the critical attributes that a top financial institution requires. Media played an important role in our marketing strategy for the year 2011. We undertook a fresh look at our media processes and rationalized them. This helped us drive down media costs. We were able to undertake many media innovations that added to the overall media benefits that we got. Several promotional campaigns were carried out targeting deposits and lending in the country. A combination of advertising and on ground promotions in our branches enabled us to garner the required deposit base. IDLC is very focused on promoting the alternate channels of delivery. A professional business website is one of the most eective branding tools for a company. It not only communicates information to existing and potential customers, regulatory bodies and other stakeholders but also upholds a good image of the company to its clients and markets the company to the whole world. Keeping this in consideration, during 2011, we revamped and relaunched our website which quickly became a favorite online destination in financial services. Future Outlook In 2012, we plan to rebrand ourselves with the intention of developing a dierentiated position in the mind of stakeholders and competitors that fits with our business strategy and brand strategy. With this vision, we have recently launched our new Logo. We believe that this will move our brand up market, communicate a new message for the company and dierentiate ourselves from competitors which will attract more customers and draw in more desirable employees. IDLC continues to be recognized as the leading multi-product NBFI in Bangladesh and is both a benchmark and a role-model for all competitors. We believe that the companys diversified business strategies; strong compliance culture and the energy and commitment of its sta will generate exceptional results in coming years. COMMITMENT TOWARD CORPORATE SOCIAL RESPONSIBILITY (CSR) IDLC is committed to being the most preferred financial institution in the country. But starting from 2010, its silver jubilee year, IDLC has renewed this commitment to come across as a responsible organization an organization that works for the welfare of its stakeholders, environment and the larger community. We are now moving away from the traditional practice of terming charities and donations as our CSR or Corporate Social Responsibility, since these are better termed as Corporate Philanthropy. Rather our focus in now on initiatives that can leave a long-term impact, and where IDLC itself will be accountable for achieving the desired outcome; in one word, initiatives that are sustainable.

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With this view, IDLC underwent a number of structural and policy reforms to integrate CSR in our core values and everyday operations. We became members of some local and international sustainability initiatives that can guide our activities as per globally acceptable standards, and we now have a dedicated CSR department to move forward in a focused manner. A detail report on our Corporate Social Responsibility (CSR) activities is stated in page no. 54 of this report. FUTURE PROSPECTS In 2011, IDLC conducted a strategy session to critically review the strategic direction of the company for preparing and approving the 2012 Budget and Plans. In keeping with the vision and mission statement of the company, the strategic direction has been clearly identified and laid down in the Corporate Plan. It detailed out the SWOT analysis of the main business segments and supporting units of the company. Respective divisional and product strategies have been discussed above under the caption Future Outlook. The 2012 Budget and Plans have also enumerated the following major operational initiatives to be undertaken by IDLC:

Increase the diversity of the revenue streams beyond traditional sources of income Make strategic alliances by partnering with other organizations to cater to identified market segments Educate customers on the advantages of the products and product attributes to be carried out under IDLCs marketing communication plan Improve the operational eciency by identifying processes that can be automated, improved, eliminated and combined with other processes

Despite constantly increasing competition in the market with entering into leasing, housing finance, merchant banking and brokerage businesses by commercial banks, we will put in strenuous eorts to achieve the business volumes targeted by all the departments as well as realize our corporate objectives. Innovative and relentless marketing drive will continue to attain quality asset growth, while maintaining and improving existing portfolio quality. Whatever we have achieved so far is the reflection of exceptional eorts by IDLC sta members, the IDLC Team. I thank this Team for their energy, creativity and team-work. My sincere note of gratitude also goes out to our distinguished Chairman and honorable members of the Board of Directors for their insistence that operations of the IDLC Group be based on the highest standards of corporate governance and ethics and for their guidance, encouragement and empowerment to the Management Team.

Selim R. F. Hussain CEO & Managing Director

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Directors Report to the Shareholders

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Anwarul Huq Chairman

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DEAR SHAREHOLDERS, The Board of Directors of IDLC Finance Limited is pleased to present the audited financial statements of the Company for the year ended December 31, 2011, Auditors Report thereon along with Companys performance, and other matters in terms of Companies Act, 1994, Guidelines issued by Securities and Exchange Commission and Bangladesh Bank and Bangladesh Accounting and Financial Reporting Standards: OPERATIONAL PERFORMANCE OF IDLC DURING 2011 During the year 2011, the core business operations of IDLC performed reasonably well despite the company has passed through a year with full of challenges such as volatile money market, significant turbulence in capital market, serious liquidity crisis, slow growth in manufacturing sector(s) and fewer industrial expansion/ new projects due to lack of adequate infrastructure. Although the general market conditions aected the companys overall performance, however the loans and advances and customer deposits showed increasing trends over the last 4 years while the companys non-performing loan (NPL) ratio showed a declining trend over this period. Loans and advances marked 24% growth and customer deposits recorded 36% growth in 2011 whereas NPL ratio decreased by 0.52 percentage points to 2.32% at the end of 2011. As a part of business expansion, during 2011, IDLC opened two new branches at Tongi and Mirpur and in January 2012, one more branch was launched at Jessore. We believe that the new branches will contribute significantly to the managements eort for increasing SME business and deposit mobilization in those regions to increase our business and provide better services to our SME clients at those regions. We have also planned to set up more branches in dierent locations of the country during the year 2012. During 2011, IDLCs SME focused branches/booths have strengthened its financing activities to generate business volumes from SME markets. During 2011, IDLC launched three new products- SME Commercial Vehicle Loan, SME Seasonal Loan and Reverse factoring facility; and pioneered a web based tool - Online SME Loan Eligibility - which will allow SME entrepreneurs to assess
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their primary eligibility for accessing a SME loan from IDLC. During 2011 SME Division has disbursed BDT 5,360 million against BDT 3,018 million in 2010 showing a robust growth of 78%. As on December 31, 2011 the SME asset size of the Company stands at BDT 6,850 million compared to BDT 4,132 million as on December 31, 2010. During 2011, Corporate Division achieves satisfactory results despite intense and increasing competition from commercial banks as regard to the pricing, increasing trend for cost of borrowing and aggressive financing by other NBFIs. The Retail Division of the Company oers dierent consumer products, namely, Home Loan, Car Loan and Personal Loan; as well as various deposit schemes to individual clients to meet their financial requirements enabling them to enjoy higher living standard. A detail review of the operations and performance of each division has been made in the CEO & Managing Directors review of economic environment and business performance. It is worthy to mention that the core competencies of IDLC such as expertise in corporate lending; diversified clientbusiness portfolio; cost-eective operations; superior service delivery; strong risk-management and lower NPL Ratio; state-of-the-art technology; and target-oriented work culture has enabled the company to be recognized as the best non-banking financial institution (FI) in the country. The companys near term objectives include formulation of a strong marketing team, introduction of Liability & Research Unit, identification of thrust sectors and undertaking sector-wise marketing plan, finding out the new emerging clients, providing quick services to large corporate houses and focusing more on financing large tickets for credit worthy clients.
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IDLCs consolidated operating result during 2011 along with budget for 2011 is summarized below: Figures in BDT million Particulars Actual in 2011 2,160 913 1,247 1,217 500 5.05 Budget for 2011 3,949 1,345 2,604 2,445 1,752 17.69 Achievement as a % of Budget 55% 68% 48% 50% 29% 29%

Operating income Operating expenses Total operating profit Profit before income tax Net profit after income tax Earnings per share

In 2010, the contribution of capital market was more than 60% of the consolidated profit of the company. While preparing budget for 2011, we considered that the bull run in the stock market that continued for 2010 would also continue in 2011 and revenue target from capital market was set at a much higher level than 2010. However, the prevailing capital market shock aected our capital market operation seriously in 2011, thus aecting our consolidated operating results. Due to the historic downfall in the capital market in 2011, IDLC Securities Limited (IDLCSL), our stock brokerage arm, registered Net Loss after Tax & provision of BDT 164.06 million in 2011 compared to the net profit after tax of BDT 521.53 million in 2010. And our merchant banking unit registered profit before tax of BDT 415 million in 2011 compared to that of BDT 616 million in 2010 and also kept growth of margin loan basket restrained in order to minimize the downfall risks. The reasons of the weak performance, mainly in the capital market operation has been explained further in the CEO & Managing Directors review of economic environment and business performance. CONTRIBUTION TO NATIONAL ECONOMY IDLC Finance Limited commenced its journey in 1985 as the first leasing company in the country. With its pioneering role, IDLC has made the lease financing popular in the country. Over the 26 years operation in Bangladesh, IDLC has diversified its business operation and become the largest multi-product Non-Bank Financial Institution of Bangladesh, with almost equal focus in Corporate, Retail and SME sectors. IDLC is continuously increasing its focus on financing to Small and Medium Enterprises (SMEs), the engine for growth of any developing economy. During the year under report, the Company has deposited BDT 513 million to the Government Exchequer as corporate income tax of the Company. Moreover, the Company also collected and deposited to the government exchequer BDT 153 million as withholding tax and VAT. CORPORATE AND FINANCIAL REPORTING FRAMEWORK The Directors, in accordance with SEC Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006; confirm compliance with the financial reporting framework for the following:

The financial statements prepared by the management of IDLC, present fairly its state of aairs, the results of its operations, cash flows and changes in equity; Proper books and accounts of the Company have been maintained; Appropriate accounting policies have been consistently applied except for the changes disclosed in the financial statements in preparation of financial statements and accounting estimates are based on reasonable and prudent judgment International Accounting Standards, as applicable in Bangladesh, have been followed in preparation of financial statements and any departure there from has been adequately disclosed. The system of internal control is sound in design and has been eectively implemented and monitored; There are no significant doubts upon the Companys ability to continue as a going concern;

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KEY OPERATING AND FINANCIAL DATA Key operating and financial information of last five years and reasons of significant deviations as per requirement of SEC Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006, are presented in the page No. 76 as Key Operating and Financial information. Highlights of overall operation of the Company as per DFIM circular No. 11 dated December 23, 2009 are also shown in page No. 80. SHAREHOLDING PATTERN Shareholding patterns of the Company as at the end of the year 2011 is shown in Annexure I of this report. BOARD MEETINGS AND ATTENDANCE BY THE DIRTECTORS During the year ended on December 31, 2011 at total of eleven (11) Board Meetings were held and attendance by the Directors are summarized in Annexure II of this report. PROPOSED DIVIDEND The Board proposed stock dividend @ 25% (one share for every four shares held) for the year 2011. DIRECTORS As per Article- 116 of the Articles of Association of the Company, the following three Directors will retire from the oce of the Company in the 27th Annual General Meeting: Mr. Anwarul Huq, nominated by Reliance Insurance Limited; Mrs. Meherun Haque, nominated by The City Bank Limited; and Mr. Md. Rezaul Karim, nominated by Shadharan Bima Corporation. Please note that they are also eligible for re-election. AUDITORS In 26th Annual General Meeting, shareholders appointed M/s Huda Vasi Chowdhury & Co., Chartered Accountants, as the auditors of the Company for the year 2011 until the conclusion of 27th Annual General Meeting at a remuneration of Tk. 400,000. Being eligible for re-appointment, the existing auditors, M/s Huda Vasi Chowdhury & Co., Chartered Accountants, oered themselves for re-appointment. As proposed by the Audit Committee ,the Board recommends M/s Huda Vasi Chowdhury & Co., Chartered Accountants , for further appointment as the auditor of the company until completion of the next annual General Meeting. STATUS OF COMPLIANCE Status of compliance with the conditions imposed by the Securities and Exchange Commissions Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006 is enclosed as Annexure III. On behalf of the Board of Directors,

IDLC annual report 2011

Anwarul Huq Chairman

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Annexure-I
Pattern of Shareholdings as on December 31, 2011 No. of Share holding Particulars Shares Held by : Subsidiaries and other related parties Directors, their spouses and minor children* Chief Executive Ocer (CEO) and his spouse and minor children Chief Financial Ocer (CFO) and his spouse and minor children Company Secretary (CS) and his spouse and minor children Head of Internal control and Compliance (HICC) and his spouse and minor children Executives (Top five person other than CEO, CFO, CS, HICC): 1. M. Jamal Uddin 2. Asif Saad Bin Shams 3. Mir Tariquzzaman 4. Bilquis Jahan 5. Zahid Ibne Hai 6. Irteza A. Khan Shareholders holding 10% or more voting right: The City Bank Limited Total 28,082,830 28,084,560 28.3665% 28.3682% Nil Nil Nil 1,400 Nil Nil 0.0014% Nil Nil Nil Nil Nil 330 0.00033% % Remarks

*All the Directors except Independent Director, are directors nominated by institutions and they do not hold any share in their personal name.

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Annexure-II
Meeting attended by the directors during 2011

Board of Directors Meeting Total BOD meeting Held during Director's tenure Total EC meeting Held during Director's tenure

Executive Committee Meeting Total AC meeting Held during Director's tenure

Audit Committee Meeting Attendence as % of total meeting held Total Remuneration paid for the year 2011 (Taka)

Name of Director

Meeting Attended

Attendence as % of total meeting held

Remuneration paid for attending the meeting

Meeting Attended

Attendence as % of total meeting held

Remuneration paid for attending the meeting

Meeting Attended

Remuneration paid for attending the meeting

(Taka) Mr. Anwarul Huq Mr. Rubel Aziz Mr. Md.Habibur Rahman Mollah Mr. Aziz Al Kaiser Mr. Hossain Mehmood** Ms. Meherun Haque Mr. K. Mahmood Sattar Mr. Yongbok Jo* Mr. Md. Rezaul Karim Mr. Golam Faruk Ahmed Mr. Farooq Sobhan Total Remuneration paid 11 11 11 11 9 11 11 2 11 11 11 11 4 9 6 6 8 8 2 7 3 6 100 36.36 81.82 54.55 66.67 72.73 72.73 100 63.64 27.27 54.55 55,000 20,000 45,000 30,000 30,000 40,000 40,000 10,000 35,000 15,000 30,000 350,000 12 12 12 12 9 5 10 7 75 41.67 83.33 58.33 -

(Taka) 45,000 25,000 50,000 35,000 155,000 4 4 4 4 4 4 4 4 1 1 100 100 25 25

(Taka) 20,000 20,000 5,000 5,000 50,000 75,000 65,000 65,000 30,000 30,000 40,000 65,000 10,000 90,000 50,000 35,000 555,000

Leave of absence was granted to the Directors those who could not attend at the meeting. * Mr. Yongbok Jo resigned on March 31, 2011. ** Mr. Hossain Mehmood has been appointed in place of Mr. Yongbok Jo on March 31, 2011.
I Directors Report

I Directors Report

Annexure-III
Status of compliance with the conditions imposed by the Securities and Exchange Commissions Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006 issued under section 2CC of the Securities and Exchange Commission Ordinance 1969: Explanation for noncompliance with the condition

Condition No. 1.1 1.2(i) 1.3 1.4 1.4(a) 1.4(b) 1.4(c) 1.4(d) 1.4(e) 1.4(f) 1.4(g) 1.4(h) 1.4(i) 1.4(j) 1.4(k) 2.1

Title Boards Size: Board members should not be less than 5(Five) and more than 20 (Twenty) Appointment of Independent Director: At least 1/10th Chairman and Chief Executive be dierent person Directors report to shareholders to include declarations on: Fairness of financial Statements Maintenance of proper books of accounts Adaptation and consistent application of appropriate accounting policies and estimates Compliance with Bangladesh Accounting Standards (BAS) Soundness and eciency of Internal Control System Ability of the Company to continue as Going Concern Significant deviation in operating results from last year Presentation of key operating and financial data for at least last three years Declaration of dividend Details of Board Meeting and attendance by directors Shareholding Pattern Appointment of CFO, Head of Internal Audit and Company Secretary and defining of their respective roles, responsibilities and duties

Compliance Status Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied Complied

As appointing a Company Secretary is not cost eective considering the activity of Company Secretary, CFO also acts as Company Secretary Complied

2.2 3.00 3.1(i) 3.1(ii) 3.1(iii) 3.2(i) 3.2(ii) 3.3.1(i)

Attendance of CFO and the Company Secretary at Board of Directors meeting Audit Committee: Formation of Committee Constitution of Committee with Board members including one Independent Director Filling of casual vacancy in the Audit Committee Selection of the Chairman of the Audit Committee Professional qualification and experience of the Chairman of the Audit Committee Reporting on the activities of the Audit Committee to the Board

Complied Complied Complied Complied Complied Complied


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Condition No. 3.3.1(ii) (a)

Title Reporting of Conflict of Interest to the Board of Directors

Compliance Status Not occurred Not occurred Not found Not found Not occurred Complied

Explanation for noncompliance with the condition

3.3.1(ii)(b) Reporting of any fraud or irregularity or material defect in the internal control system to the Board of Directors 3.3.1(ii) (c) Reporting of non-compliance of laws to the Board of Directors 3.3.1(ii)(d) Reporting of any other matter to the Board of Directors 3.3.2 3.4 4.00 4.00(i) 4.00(ii) 4.00(iii) 4.00(iv) 4.00(v) 4.00(vi) Reporting to the SEC by the Committee Reporting of activities to the shareholders and general investors External/Statutory Auditors: Non-engagement in appraisal or valuation Non-engagement in designing of Financial Information System Non-engagement in Book-Keeping Non-engagement in Broker-dealer service Non-engagement in Actuarial Services Non-engagement in Internal Audit

Complied Complied Complied Complied Complied Complied Complied

4.00(vii) Non-engagement in any other services

IDLC annual report 2011

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Annexure-IV
Statement of compliance on the good governance guideline issued by the Bangladesh Bank By the DFIM Circular No. 7 dated 25 September 2007, Bangladesh Bank issued a policy on responsibility & accountability of Board of Directors, Chairman & Chief Executive of the financial institution. The Board of Directors of the Company has taken appropriate steps to comply with the guidelines and implemented the same. Status report on compliance with those guidelines is given below: Sl. No. 1. Particulars Responsibilities and authorities of the Board of Directors: (a) Work-planning and strategic management: (i) The Board shall determine the objectives and goals and to this end shall chalk out strategies and work-plans on annual basis. It shall specially engage itself in the aairs of making strategies consistent with the determined objectives and goal and in the issues relating to structural change and reorganization for enhancement of institutional eciency and other relevant policy matters. It shall analyze/monitor at quarterly rests the development of implementation of the work-plans. (ii) The Board shall have its analytical review incorporated in the Annual report as regard the success/failure in achieving the business and other targets as set out in its annual work-plan and shall apprise the shareholders of its opinions/recommendations on future plans and strategies. (iii) The Board will set the Key Performance Indicator (KPI)s for the CEO and other senior executives and will evaluate half yearly / yearly basis. (b) Formation of sub-committee: Executive Committee may be formed in combination with directors (excluding any alternate Director) and management of the Company only for rapid settlement of the emergency matters (approval of loan/lease application, write-o, rescheduling etc.) arisen from the regular business activities. (c) Financial management: (i) Annual budget and statutory financial statements shall be adopted finally with the approval of the Board. (ii) Board shall review and examine in quarterly basis various statutory financial statements such as statement of income-expenses, statement of loan/lease, statement of liquidity, adequacy of capital, maintenance of provision, legal aairs including actions taken to recovery of overdue loan/ lease. (iii) Board shall approve the Companys policy on proqurement and collection and shall also approve the expenditures according to policy. The Board shall deligate the authority on the Managing Director and among other top executives for approval of expenditure within budget to the maximum extend. (iv) The Board shall adopt the operation of bank accounts. Groups may be formed among the management to operate bank accounts under joint signatures. Complied Complied Complied Complied Compliance Status

Complied

Complied

Complied

Complied
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Sl. No.

Particulars (d) Management of loan/lease/investments: (i) Policy on evaluation of loan/lease/investment proposal, sanction and disbursement and its regular collection and monitoring shall be adopted and reviewed by the Board regularly based on prevailing laws and regulations. Board shall delegate the authority of loan/lease/investment specifically to management preferably on Managing Director and other top executives. (ii) No director shall interfere on the approval of loan proposal associated with him. The director concerned shall not give any opinion on that loan proposal. (iii) Any syndicated loan/lease/investment proposal must be approved by the Board. (e) Risk management: Risk Management Guideline framed in the light of Core Risk Management Guideline shall be approved by the Board and reviewed by the Board regularly.

Compliance Status

Complied

Complied

Complied

Complied

(f) Internal control and compliance management: A regular Audit Committee as approved by the Board shall be formed. Board shall evaluate the reports presented by the Audit Committee on compliance with the recommendation of internal auditor, external auditors and Bangladesh Bank Inspection team. (g) Human resource management: Board shall approve the policy on Human Resources Management and Service Rule. Chairman and director of the Board shall not interfere on the administrative job in line with the approved Service Rule. Only the authority for the appointment and promotion of the Managing Director/Deputy Managing Director/ General Manager and other equivalent position shall lie with the Board incompliance with the policy and Service Rule. No director shall be included in any Executive Committee formed for the purpose of appointment and promotion of others. Complied Complied

Complied

(h) Appointment of CEO: The Board shall appoint a competent CEO for the Company with the approval of the Bangladesh Bank and shall approve any increment of his salary and allowances. (I) Benefits oer to the Chairman: Chairman may be oered an oce room, a personal secretary, a telephone at the oce, a vehicle in the business-interest of the Company subject to the approval of the Board.
IDLC annual report 2011

Complied

Complied

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Sl. No. 2

Particulars Responsibilities of the Chairman of the Board of Directors: (a) Chairman shall not participate in or interfere into the administrative or operational and routine aairs of the Company as he has no jurisdiction to apply executive power; (b) The minutes of the Board meetings shall be signed by the Chairman; (c) Chairman shall sign-o the proposal for appointment of Managing Director and increment of his salaries & allowances;

Compliance Status

Complied

Complied Complied

Responsibilities of Managing Director: (a) Managing Director shall discharge his responsibilities on matters relating to financial, business and administration vested by the Board upon him. He is also accountable for achievement of financial and other business targets by means of business plan, ecient implementation of administration and financial management; (b) Managing Director shall ensure compliance of Financial Institutions Act 1993 and other relevant circulars of Bangladesh Bank and other regulatory authorities; (c) All recruitment/promotion/training, except recruitment/promotion/ training of DMD, shall be vested upon the Managing Director. He shall act such in accordance the approved HR Policy of the Company; (d) Managing Director may re-schedule job responsibilities of employees; (e) Managing Director may take disciplinary actions against the employees except DMD; (f) Managing Director shall sign all the letters/statements relating to compliance of polices and guidelines. However, Departmental/Unit heads may sign daily letters/statements as set out in DFIM circular no. 2 dated 06 January 2009 if so authorized by MD. Complied

Complied

Complied

Complied Complied Complied

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114
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IDLC annual report 2011

Auditors Report to the shareholders of


IDLC Finance Limited and its subsidiaries
We have audited the accompanying consolidated financial statements of IDLC Finance Limited and its subsidiaries (the Group) as well as the financial statements of IDLC Finance Limited (the Company) which comprise the consolidated and the separate balance sheet as at 31 December 2011, profit and loss account, statement of changes in equity, cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Managements responsibility for the financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements of the Group and the financial statements of the Company in accordance with Bangladesh Accounting Standards (BASs) and Bangladesh Financial Reporting Standards (BFRSs), the Financial Institutions Act 1993, the rules and regulations issued by the Bangldesh Bank, the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations and for such internal control as management determines is necessary to enable the preparation of these consolidated financial statements of the Group and the financial statements of the Company 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. Auditors responsibility Our responsibility is to express an opinion on the consolidated financial statements of the Group and the financial statements of the Company based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements of the Group and the financial statements of the Company are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements of the Group and the financial statements of the Company. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements of the Group and the financial statements of the Company, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements of the Group and the financial statements of the Company in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements of the Group and the financial statements of the Company. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and the financial statements of the Company prepared in accordance with the Bangladesh Accounting Standards (BASs) and Bangladesh Financial Reporting Standards (BFRSs), give a true and fair view of the balance sheet of the Group and the Company as at 31 December 2011 and the results of their profit and loss account and their cash flows for the year then ended and comply with the applicable sections of the Financial Institutions Act 1993, the rules and regulations issued by Bangladesh Bank, the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations.

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We also report that i) 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 and made due verification thereof;

ii) in our opinion, proper books of account as required by law have been kept by the Group and the Company so far as it appeared from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us; iii) the consolidated balance sheet and consolidated profit and loss account of the Group and those of the Company together with annexed note 1 to 43 dealt with by the report are in agreement with the books of account and returns; iv) the expenditure incurred was for the purposes of the Group and the Companys business; v) the consolidated financial position of the Group and those of the Company as at 31 December 2011 and their profit for the year then ended have been properly reflected in the consolidated financial statements of the Group and those of the Company, and these financial statements have been prepared in accordance with the generally accepted accounting principles;

vi) the consolidated financial statements of the Group and those of the Company have been drawn up in conformity with the Financial Institutions Act 1993 and in accordance with the accounting rules and regulations issued by the Bangladesh Bank to the extent applicable to the Company; vii) adequate provisions have been made for leases and advances and other assets which are, in our opinion, doubtful of recovery; viii) the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements; ix) the information and explanations required by us have been received and found satisfactory; x) the Company has complied with relevant laws pertaining to reserves and found satisfactory; xi) the consolidated financial statements of the Group and those of the Company conform to the prescribed standards set in the accounting regulations issued by Bangladesh Bank after consultation with the professional accounting bodies of Bangladesh; xii) although the risk weighted assets calculations determined by Bangladesh Bank for Non Banking Financial Institutions (NBFI) are mandetory from 1 January 2012, for our audit purposes we have used this calculation to ensure we have reviewed 80% of the risk weighted assets of the Group and the Company during the course of our audit and we have spent over 1,800 person hours.

Dhaka, 22 February 2012

Hoda Vasi Chowdhury & Co Chartered Accountants

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I Consolidated Balance Sheet

IDLC FINANCE LIMITED


Consolidated Balance Sheet
as at December 31, 2011 2011 Taka 2010 Taka

Particulars

Note

PROPERTY AND ASSETS Cash In hand Balance with Bangladesh Bank Balance with other banks and financial institutions in Bangladesh Money at call and short notice Investments Loans, advances and leases Fixed assets including land, building, furniture and fixtures Other assets Total Assets LIABILITIES AND CAPITAL Liabilities Borrowings from other banks and financial institutions Deposits and other accounts Term deposits Other deposits

3(a)i 3.2 4(a) 5 6(a) 7(a) 8(a) 9(a)

246,000 417,207,356 417,453,356 2,133,007,415 670,000,000 549,596,742 26,357,104,245 355,694,293 681,684,403 31,164,540,454

206,000 323,943,694 324,149,694 3,028,738,202 370,000,000 575,465,138 21,254,201,366 325,671,174 1,051,764,655 26,929,990,229

10 11

4,565,821,153 16,828,267,206 810,581,392 17,638,848,598 4,979,398,082 27,184,067,833 990,000,000 3,750,000 723,210,192 811,250,000 46,500,000 1,405,760,814 3,980,471,006 1,615 31,164,540,454

4,656,967,523 12,373,161,861 628,184,694 13,001,346,555 5,581,486,184 23,239,800,262 600,000,000 3,750,000 562,364,396 811,250,000 46,500,000 1,666,323,343 3,690,187,739 2,228 26,929,990,229

12(a) Other liabilities Total liabilities Capital / Shareholders' equity Paid-up capital 13 Share premium 14 Statutory reserves 15 General reserves 16 Dividend equalisation reserves Retained earnings Total equity attributable to equity holders of the company Non-controlling interest Total liabilities and Shareholders' equity

IDLC annual report 2011

Our Financial Performance -IDLC Group I

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I Consolidated Balance Sheet

Particulars

Note

2011 Taka

2010 Taka

OFF - BALANCE SHEET ITEMS Contingent liabilities Letters of guarantee Irrevocable letters of credit Indemnity Bond Other commitments Undisbursed contracted loans and leases Total O-Balance Sheet items Net assets value per share

17.1 126,958,540 8,811,279 135,769,819 17.2 1,274,012,995 1,409,782,814 40.21 823,917,425 834,698,967 37.27 270,263 1,700,000 8,811,279 10,781,542

The annexed notes 1 to 43 form an integral part of these financial statements.

Chairman

Director

CEO & Managing Director

Company Secretary

Auditors report to the shareholders see annexed report of date

Dhaka, February 22, 2012

Hoda Vasi Chowdhury & Co Chartered Accountants

Our Financial Performance -IDLC Group I

IDLC annual report 2011

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I Consolidated Profit and Loss Account

IDLC FINANCE LIMITED


Consolidated Profit and Loss Account
for the year ended December 31, 2011
Particulars

Note Interest income Interest expenses Net interest income Investment income Commission and brokerage Other operating income Total operating income Salaries and allowances Rent, taxes, insurance, electricity, etc. Legal expenses Postage, stamp, telecommunication, etc. Stationery, printing, advertisements, etc. Managing Director's salary and benefits Directors' fees Auditors' fees Charges on loan losses Depreciation and repair of Company's assets Other expenses Total operating expenses Profit before provision Provision for loans/ investments General provision Specific provision Provision for diminution in value of investments Total provision Total profit before taxes Provision for taxation Current tax Deferred tax
IDLC annual report 2011

2011 Taka 19a 20a 21a 22a 23a 3,942,101,471 (2,364,389,738) 1,577,711,733 (107,841,926) 462,752,097 227,252,920 2,159,874,824 24a 25a 26a 27a 28a 29 30a 31a 32a 33a 431,010,582 107,370,342 17,585,871 31,193,643 45,356,398 10,527,400 753,250 1,023,450 95,682,436 172,957,358 913,460,730 1,246,414,094

2010 Taka 3,084,689,228 (1,822,057,780) 1,262,631,448 525,703,900 1,111,176,449 147,408,290 3,046,920,087 420,570,925 73,570,485 8,047,774 16,723,604 50,426,985 10,527,400 590,150 804,400 72,922,916 311,735,348 965,919,987 2,081,000,100

12.7(ii)a 12.7(ii)a 12.7(ii)a

39,600,062 (98,489,199) 88,700,713 29,811,576 1,216,602,518

20,644,866 104,124,427 124,769,293 1,956,230,807

12.2a 9.5a

730,035,667 (13,716,103) 716,319,564 500,282,954

633,244,495 (4,111,804) 629,132,691 1,327,098,116

Net profit after taxation

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I Consolidated Profit and Loss Account

Particulars

Note Attributable to: Shareholders of the Company Non-controlling interest Appropriations Statutory reserve
General reserve

2011 Taka

2010 Taka

500,283,267 (313) 500,282,954

1,327,097,073 1,043 1,327,098,116

160,845,796 160,845,796 339,437,471 36 (a) 5.05

161,114,396 161,114,396 1,165,982,677 13.41

Retained surplus Earnings per share (EPS)

The annexed notes 1 to 43 form an integral part of these financial statements.

Chairman

Director

CEO & Managing Director

Company Secretary

Auditors report to the shareholders see annexed report of date

Dhaka, February 22, 2012

Hoda Vasi Chowdhury & Co Chartered Accountants

Our Financial Performance -IDLC Group I

IDLC annual report 2011

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I Consolidated Cash Flow Statement

IDLC FINANCE LIMITED


Consolidated Cash Flow Statement
for the year ended December 31, 2011 2011 Taka 2010 Taka

Particulars

A) Cash flows from operating activities Interest received Interest paid Dividend received Fees and commission received Paid to employees and suppliers Payment of income tax Received from other operating activities Cash generated from operating activities before changes in operating assets and liabilities Increase / (decrease) in operating assets and liabilities Lease receivable Long-term finance Real estate finance Car loans Personal loan Margin loan to portfolio investors Short term finance Net proceeds of investment in marketable securities Other assets Term and other deposits Net drawdown of short term loan Payable and accrued expenses Deferred liability-employee gratuity Portfolio investors' fund Deferred tax liability Interest suspense account Net cash from operating activities B) Cash flows from investing activities Purchase of property and equipment Disposal of property and equipment Net proceeds of investment in non marketable securities
IDLC annual report 2011

3,942,101,471 (808,673,230) 35,321,280 462,752,097 (822,419,115) (618,989,790) 75,607,237

3,084,689,228 (865,108,762) 24,428,811 1,111,176,449 (901,877,868) (421,068,453) 648,320,149

2,265,699,950

2,680,559,554

(440,112,207) (3,565,405,481) (1,374,426,696) (46,214,881) 126,415 914,736,743 (353,521,833) (51,829,620) 365,286,434 4,418,664,690 180,840,397 (1,447,251,667) 9,286,840 (884,637,698) 5,513,603 18,667,866 (2,250,277,095) 15,422,855

276,128,239 (769,865,103) (816,027,095) 5,304,571 (111,863,087) 242,795,875 (150,590,092) 35,265,720 (661,174,748) 2,294,609,109 (1,130,540,466) (775,778,235) 12,158,404 1,220,174,071 11,167,665 (318,235,172) 2,362,324,382

(155,981,199) 43,398,941 77,698,016 (34,884,242)

(169,514,541) 4,674,073 27,215,716 (137,624,752)

Net cash used in investing activities

Our Financial Performance -IDLC Group I

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I Consolidated Cash Flow Statement

Particulars

2011 Taka

2010 Taka

C)

Cash flows from financing activities Drawdown of term loans Repayment of term loans Payment against lease obligation Dividend paid Net Cash from financing activities

1,248,068,525 (1,520,055,293) (2,697,263) (208,281,707) (482,965,738) (502,427,125) 3,722,887,896 3,220,460,771

1,242,492,103 (1,484,164,502) (2,355,612) (29,371,305) (273,399,316) 1,951,300,314 1,771,587,582 3,722,887,896

D) E) F) G)

Net increase / (decrease) in cash and cash equivalents (A+ B + C) Eects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year (D+E+F) Cash and cash equivalents at end of the year Cash in hand (including foreign currencies) Money at call and short notice Balance with Bangladesh Bank and its agent bank (s) Balance with other banks and financial institutions (note- 4 (a))

246,000 670,000,000 417,207,356 2,133,007,415 3,220,460,771

206,000 370,000,000 323,943,694 3,028,738,202 3,722,887,896

Our Financial Performance -IDLC Group I

IDLC annual report 2011

123

124
Our Financial Performance -IDLC Group I

IDLC annual report 2011

IDLC FINANCE LIMITED


Consolidated Statement of Changes in Equity
for the year ended December 31, 2011

Attributable to equity holders of the company Dividend equalisation reserve Taka Non controlling interest Taka

Share capital Taka Balance at January 1, 2011 Dividend for 2010: 35% cash dividend 65% stock dividend 100% cash dividend of IDLC Securities Limited Changes in accounting policy Surplus/(deficit) on account of revaluation of properties Surplus/(deficit) on account of revaluation of investments Currency translation dierences Net gain and losses not recognised in the profit and loss accounts Net profit for the year 2011 Non controlling share capital of IDL C Investment Limited Appropriation to reserves Balance at December 31, 2011 390,000,000 990,000,000 990,000,000 600,000,000

Share premium Taka 3,750,000 -

Statutory reserve Taka 562,364,396 -

General reserve Taka 811,250,000 -

Retained earnings Taka

Total Taka

Total equity Taka

46,500,000 1,666,323,343 3,690,187,739 - (210,000,000) (210,000,000) - (390,000,000) -

2,228 3,690,189,967 - (210,000,000) (400) (400) -

3,750,000 562,364,396 811,250,000 160,845,796 -

46,500,000 1,066,323,343 3,480,187,739 500,283,267 500,283,267 -

1,828 3,480,189,567 I Consolidated Statement of Changes in Equity

(313) 500,282,954 100 100 -

- (160,845,796)

3,750,000 723,210,192 811,250,000

46,500,000 1,405,760,814 3,980,471,006

1,615 3,980,472,621

IDLC FINANCE LIMITED


Consolidated Statement of Changes in Equity
for the year ended December 31, 2010
Attributable to equity holders of the company Dividend equalisation reserve Taka Non controlling interest Taka

Share capital Taka

Share premium Taka

Statutory reserve Taka

General reserve Taka

Retained earnings Taka

Total Taka

Total equity Taka

Balance at January 1, 2010 Dividend for 2009: 10% cash dividend 100% stock dividend Changes in accounting policy Restated balance Surplus/(deficit) on account of revaluation of properties Surplus/(deficit) on account of revaluation of investments Currency translation dierences Net gain and losses not recognised in the profit and loss accounts
Our Financial Performance -IDLC Group I

300,000,000 300,000,000 600,000,000 -

3,750,000 401,250,000 811,250,000 -

46,500,000 830,340,665 2,393,090,665 (30,000,000) (30,000,000) -

1,185 2,393,091,850 (30,000,000) -

- (300,000,000)

3,750,000 401,250,000 811,250,000 -

46,500,000 500,340,665 2,363,090,665 -

1,185 2,363,091,850 -

Net profit for the year 2010 Appropriation to reserves Balance at December 31, 2010

600,000,000

161,114,396

- 1,327,097,073 1,327,097,073 - (161,114,396) 46,500,000 1,666,323,343 3,690,187,738

1,043 1,327,098,116 2,228 3,690,189,966

I Consolidated Statement of Changes in Equity

3,750,000 562,364,396 811,250,000

IDLC annual report 2011

125

I Balance Sheet

IDLC FINANCE LIMITED


Balance Sheet
as at December 31, 2011 2011 Taka 2010 Taka

Particulars

Note

PROPERTY AND ASSETS Cash In hand Balance with Bangladesh Bank

3 3.1 3.2

136,000 417,207,356 417,343,356 1,404,989,474 670,000,000 397,108,875 397,108,875 25,540,199,582 259,707,167 829,466,848 29,518,815,302

96,000 323,943,694 324,039,694 2,106,738,063 370,000,000 457,419,364 457,419,364 21,245,794,636 236,733,130 612,284,404 25,353,009,291

Balance with other banks and financial institutions in Bangladesh Money at call and short notice Investments Government Others Loans, advances and leases Fixed assets including land, building, furniture and fixtures Other assets Total Assets LIABILITIES AND CAPITAL Liabilities Borrowings from other banks and financial institutions Deposits and other accounts Term deposits Other deposits Other liabilities Total liabilities Capital / Shareholders' equity Paid-up capital Share premium Statutory reserves General reserves Dividend equalisation reserves Retained earnings Total equity Total liabilities and Shareholders' equity
IDLC annual report 2011

4 5 6

7 8 9

10 11

4,565,821,153 16,828,267,206 810,581,392 17,638,848,598 4,093,629,977 26,298,299,728

4,656,967,523 12,373,161,861 628,184,694 13,001,346,555 5,068,408,618 22,726,722,696 600,000,000 3,750,000 562,364,396 811,250,000 46,500,000 602,422,199 2,626,286,595 25,353,009,291

12

13 14 15 16

990,000,000 3,750,000 723,210,192 811,250,000 46,500,000 645,805,382 3,220,515,574 29,518,815,302

Our Financial Performance -IDLC Group I

126

I Balance Sheet

Particulars

Note

2011 Taka

2010 Taka

OFF - BALANCE SHEET ITEMS Contingent liabilities Letters of guarantee Irrevocable letters of credit Indemnity Bond Other commitments Undisbursed contracted loans and leases Total O-Balance Sheet items
Net assets value per share The annexed notes 1 to 43 form an integral part of these financial statements. 17.2

17.1 126,958,540 8,811,279 135,769,819 1,274,012,995 1,409,782,814 32.53 270,263 1,700,000 8,811,279 10,781,542 823,917,425 834,698,967 26.53

Chairman

Director

CEO & Managing Director

Company Secretary

Auditors report to the shareholders see annexed report of date

Dhaka, February 22, 2012

Hoda Vasi Chowdhury & Co Chartered Accountants

Our Financial Performance -IDLC Group I

IDLC annual report 2011

127

I Profit and Loss Account

IDLC FINANCE LIMITED


Profit and Loss Account
for the year ended December 31, 2011

Particulars

Note

2011 Taka

2010 Taka

Interest income Interest expenses Net interest income Investment income Commission and brokerage Other operating income Total operating income Salaries and allowances Rent, taxes, insurance, electricity, etc. Legal expenses Postage, stamp, telecommunication, etc. Stationery, printing, advertisements, etc. Managing Director's salary and benefits Directors' fees Auditors' fees Charges on loan losses Depreciation and repair of Company's assets Other expenses Total operating expenses Profit before provisions Provision for loans / investments General provision Specific provision Provision for diminution in value of investments Total provision
Total profit before taxes Provision for taxation Current tax Deferred tax

19 20 21 22 23

3,826,541,599 (2,359,226,854) 1,467,314,745 185,918,988 179,437,286 210,016,857 2,042,687,876 333,051,679 53,015,020 11,473,555 18,458,870 41,050,954 10,527,400 638,250 839,500 70,202,179 132,961,065 672,218,472 1,370,469,404

3,047,391,848 (1,817,840,968) 1,229,550,880 289,734,360 522,491,050 144,147,910 2,185,924,200 344,789,386 48,837,695 7,027,563 15,265,322 43,491,345 10,527,400 530,150 631,400 59,616,931 142,223,718 672,940,910 1,512,983,290

24 25 26 27 28 29 30 31 32 33

12.7(ii) 12.7(ii) 12.7(ii)

39,600,062 (98,489,199) 52,976,356 (5,912,781) 1,376,382,185

20,644,866 98,678,948 119,323,814 1,393,659,476 592,199,299 (4,111,804) 588,087,495 805,571,981

12.2 9.5

575,129,014 (2,975,808) 572,153,206 804,228,979

IDLC annual report 2011

Net profit after taxation

Our Financial Performance -IDLC Group I

128

I Profit and Loss Account

Particulars

Note

2011 Taka

2010 Taka

Appropriations Statutory reserve General reserve Retained surplus Earnings per share (EPS) 36 160,845,796 160,845,796 643,383,183 8.12 161,114,396 161,114,396 644,457,585 8.14

The annexed notes 1 to 43 form an integral part of these financial statements.

Chairman

Director

CEO & Managing Director

Company Secretary

Auditors report to the shareholders see annexed report of date

Dhaka, February 22, 2012

Hoda Vasi Chowdhury & Co Chartered Accountants

Our Financial Performance -IDLC Group I

IDLC annual report 2011

129

I Profit and Loss Account of Merchant Banking Operation

IDLC FINANCE LIMITED


(Merchant Banking Operation) Profit and Loss Account
for the period ended August 15, 2011*
Particulars

Note

2011 Taka

2010 Taka

Interest income Interest expenses Net interest income Custodial Fees Advisory Fee Issue Management Fee Documentation Fees Portfolio Management Fee Settlement charges Underwriting Commission Total fees & commission income Total operating income Administrative expenses Depreciation on property and equipment Other expenses Total operating expenses Profit before provision Provision for future losses Profit before tax (PBT)

18.3

549,625,294 (353,952,752) 195,672,542 133,678 3,350,000 4,800,000 169,000 100,324,985 67,174,109 846,289 176,798,061 372,470,603

794,182,177 (593,332,470) 200,849,707 494,353 13,686,104 934,500 201,232,558 302,107,202 928,950 519,383,667 720,233,374 42,655,975 2,189,907 62,047,573 106,893,455 613,339,919 (2,282,821) 615,622,740

18.4 8.1 18.5

12.7(i)

40,227,592 3,129,577 14,069,353 57,426,522 315,044,081 1,489,931 313,554,150

*With eect from August 16, 2011, the activities of Merchant Banking Operation have been transferred to the new subsidiary of the company IDLC Investments Limited.
The annexed notes 1 to 43 form an integral part of these financial statements.

Chairman

Director

CEO & Managing Director

Company Secretary

Auditors report to the shareholders see annexed report of date

Dhaka, February 22, 2012


IDLC annual report 2011

Hoda Vasi Chowdhury & Co Chartered Accountants

Our Financial Performance -IDLC Group I

130

I Cash Flow Statement

IDLC FINANCE LIMITED


Cash Flow Statement
for the year ended December 31, 2011
2011 Taka 2010 Taka Particulars

A)

Cash flows from operating activities Interest received Interest paid Dividend received Fees and commission received Paid to employees and suppliers Payment of income tax Received from other operating activities Cash generated from operating activities before changes in operating assets and liabilities Increase / (decrease) in operating assets and liabilities Lease receivable Long-term finance Real estate finance Car loans Personal loan Margin loan to portfolio investors Loan to IDLC Investments Limited Short term finance Net proceeds of investment in marketable securities Other assets Term and other deposits Net drawdown of short term loan Payable and accrued expenses Inter-company payables Deferred liability-employee gratuity Portfolio investors' fund Deferred tax liability Interest suspense account Net cash from operating activities

3,394,898,874 (803,510,346) 227,497,685 179,437,286 (606,656,520) (512,884,375) 159,897,739 2,038,680,343 (440,112,207) (3,565,405,481) (1,374,426,696) (46,214,881) 126,415 5,633,191,635 (3,669,276,020) (353,521,833) (17,387,527) (42,492,434) 4,418,664,690 180,840,397 (1,237,299,337) (1,127,136) 4,355,197 (1,375,958,530) 5,513,603 18,667,866 (1,861,862,279) 176,818,064 (119,467,489) 39,471,920 77,698,016 (2,297,553) 1,248,068,525 (1,520,055,293) (2,697,263) (208,281,407) (482,965,438) (308,444,927) 2,800,777,757 2,492,332,830 136,000 670,000,000 417,207,356 1,404,989,474 2,492,332,830

2,724,417,811 (860,891,950) 19,962,886 522,491,050 (622,089,481) (421,068,453) 412,798,969 1,775,620,832 276,128,239 (769,865,103) (816,027,095) 5,304,571 (111,863,087) 228,768,662 (150,590,092) 48,196,899 (211,571,766) 2,294,609,109 (1,130,540,466) (676,069,866) 1,909,218 12,158,404 1,220,174,071 11,167,665 231,889,363 2,007,510,195 (101,823,991) 3,901,079 27,215,716 (70,707,196) 1,242,492,103 (1,484,164,502) (2,355,612) (29,371,305) (273,399,316) 1,663,403,683 1,137,374,074 2,800,777,757
IDLC annual report 2011

B)

Cash flows from investing activities Purchase of property and equipment Disposal of property and equipment Net proceeds of investment in non marketable securities Net cash used in investing activities Cash flows from financing activities Drawdown of term loans Repayment of term loans Payment against lease obligation Dividend paid Net Cash from financing activities Net increase / (decrease) in cash and cash equivalents (A+ B + C) Eects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year (D+E+F) Cash and cash equivalents at end of the year Cash in hand (including foreign currencies) Money at call and short notice Balance with Bangladesh Bank and its agent bank (s) Balance with other banks and financial institutions (note- 4 )

C)

D) E) F) G)

96,000 370,000,000 323,943,694 2,106,738,063 2,800,777,757

Our Financial Performance -IDLC Group I

131

132
Our Financial Performance -IDLC Group I

IDLC annual report 2011

IDLC FINANCE LIMITED


Statement of Changes in Equity
for the year ended December 31, 2011
Dividend equalisation reserve Taka

Share capital Taka

Share premium Taka

Statutory reserve Taka

General reserve Taka

Retained earnings Taka

Total Taka

Balance at January 1, 2011 Changes in accounting policy

600,000,000 600,000,000

3,750,000 3,750,000

562,364,396 562,364,396

811,250,000 811,250,000

46,500,000 46,500,000

602,422,199 602,422,199

2,626,286,595 2,626,286,595

Dividend for 2010: 35% cash dividend 65% stock dividend Restated balance Surplus/(deficit) on account of revaluation of properties Surplus/(deficit) on account of revaluation of investments Currency translation dierences Net gain and losses not recognised in the profit and loss accounts Net profit for the year 2011 Appropriation to reserves Balance at December 31, 2011 390,000,000 990,000,000 990,000,000 3,750,000 3,750,000 562,364,396 160,845,796 723,210,192 811,250,000 811,250,000 46,500,000 46,500,000 (210,000,000) (390,000,000) 2,422,199 804,228,979 (160,845,796) 645,805,382 (210,000,000) 2,416,286,595 804,228,979 3,220,515,574
I Statement of Changes in Equity

IDLC FINANCE LIMITED


for the year ended December 31, 2010

Statement of Changes in Equity


Share premium Taka 3,750,000 3,750,000 3,750,000 3,750,000 Statutory reserve Taka 401,250,000 401,250,000 401,250,000 161,114,396 562,364,396 Dividend equalisation reserve Taka 46,500,000 46,500,000 46,500,000 46,500,000 Retained earnings Taka 337,964,514 49,999,900 287,964,614 (30,000,000) (300,000,000) (42,035,386) 805,571,981 (161,114,396) 602,422,199

Share capital Taka Balance at January 1, 2010 Changes in accounting policy Dividend for 2009: 10% cash dividend 100% stock dividend Restated balance Surplus/(deficit) on account of revaluation of properties Surplus/(deficit) on account of revaluation of investments Currency translation dierences Net gain and losses not recognised in the profit and loss accounts Net profit for the year 2010 Appropriation to reserves Balance at December 31, 2010
Our Financial Performance -IDLC Group I IDLC annual report 2011

General reserve Taka 811,250,000 811,250,000 811,250,000 811,250,000

Total Taka 1,900,714,514 49,999,900 1,850,714,614 (30,000,000) 1,820,714,614 805,571,981 2,626,286,595

300,000,000 300,000,000 300,000,000 600,000,000 600,000,000

I Statement of Changes in Equity

133

134
Our Financial Performance -IDLC Group I

IDLC annual report 2011

IDLC FINANCE LIMITED


Liquidity statement
as at December 31, 2011
Not more than 1 month term 3-12 months term Above 5 years term

Particulars Assets Cash in hand ( including balance with Bangladesh Bank) Balance with other banks and financial institutions Money at call and short notice Investments Loans, advances and leases Fixed assets Other assets Total assets Liabilities Borrowing from other banks and financial institutions Deposits and other accounts Provision and other liabilities Total liabilities Net Liquidity Gap

1-3 months term

1-5 years term

Total

417,343,356 704,989,474 670,000,000 320,102,207 4,902,357 99,667,992 2,217,005,386

450,000,000 25,000,000 2,198,907,620 10,267,274 234,034,419

250,000,000 11,047,300 9,824,984,843 43,510,446 17,541,473

35,073,668 9,777,455,139 128,238,151 9,940,766,958

5,885,700 72,788,939 478,222,964

417,343,356 1,404,989,474 670,000,000 397,108,875 259,707,167 829,466,848

3,738,851,980 25,540,199,582

2,918,209,313 10,147,084,062

4,295,749,583 29,518,815,302

713,300,000 537,101,969 168,490,284 1,418,892,253 798,113,133

385,980,000 2,414,790,243 337,073,905

1,413,720,397 9,351,343,917 1,599,250,770

1,302,200,000 4,651,217,410 1,014,251,633 6,967,669,043 2,973,097,915

750,620,756 974,563,386 1,886,170,383

4,565,821,153 4,093,629,978 3,220,515,574

684,395,058 17,638,848,597 2,409,579,200 26,298,299,728

3,137,844,148 12,364,315,084 (219,634,835) (2,217,231,022)

I Liquidity statement

I Notes to the financial statements of the IDLC Group

IDLC FINANCE LIMITED


Notes to the consolidated and separate financial statements
as at and for the year ended December 31, 2011

1.
1.1

Company and its activities


Legal status and nature of the Company IDLC Finance Limited IDLC was incorporated in Bangladesh as a public limited company on May 23, 1985 under the Companies Act 1913 in its original name of Industrial Development Leasing Company of Bangladesh Limited with its registered oce at Hadi Mansion, 2 Dilkusha C/A. The Company changed its name in August 2007. The registered oce of the company was changed to Bays Galleria (1st Floor), 57 Gulshan Avenue, Gulshan 1, Dhaka on July 1, 2006. The Company was registered as a Financial Institution under the Financial Institutions Act 1993 and as a Merchant Bank in 1998 with the Securities and Exchange Commission. The Company went for public issue of its shares in 1993. Its shares are listed in the Stock Exchanges in Bangladesh.

1.2

Principal activities and nature of operation The Company extends lease and term financing, as its core businesses. It expanded its activities into Short-Term Finance (factoring of accounts receivable and work order financing) and Real Estate Finance operations in 1997 and merchant banking and corporate finance in 1999. It also started portfolio management, car loan and personal loan services to individuals in 2004 and 2007 respectively.

1.3 1.3.1

Subsidiary companies IDLC Securities Limited IDLC Securities Limited, a wholly owned subsidiary company of IDLC Finance Limited, was incorporated on 19 April, 2006 as a private limited company under Companies Act 1994 with authorised share capital of Tk 25 crore. The Company had started its operation from September 2006. The main objective of the Company is to act as a member of stock exchanges, operate the central depository system (CDS) and to carry on the business of brokers, jobbers or dealers in stocks, shares, securities, commodities, commercial papers, bonds, obligations, debentures etc.

1.3.2

IDLC Investments Limited As required by the Securities & Exchange Commission (SEC), the Company formed a separate subsidiary on May 19, 2010 in the name and style IDLC Investments Limited to transfer its existing merchant banking activities. The Company obtained license from the SEC on August 02, 2011 in the name of IDLC Investments Limited for opreating existing merchant banking opreation of IDLC Finance Limited and commenced its business on August 16, 2011. The authorised and paid up capital of the Company are Tk. 300 crore and Tk. 40 crore, respectively, and out of the total 4,000,000 paid up shares, the holding of IDLC is 3,999,999 Shares. The paid up capital of this new company was raised, in kind, in exchange of a part of the balance of margin loan provided to the investors.

2.
2.1

Basis of preparation and significant accounting policies


IDLC annual report 2011

Statement of compliance The financial statements have been prepared on a going concern basis following accrual basis of accounting except for cash flow statement and investment in marketable securities which are stated at

Our Financial Performance -IDLC Group I

135

I Notes to the financial statements of the IDLC Group

market value in accordance with the Companies Act 1994, the Financial Institutions Act 1993, Securities and Exchange Rules 1987, the Listing Rules of Dhaka and Chittagong Stock Exchanges and International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted in Bangladesh by the Institute of Chartered Accountants of Bangladesh as Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), except the circumstances where local regulations dier, and other applicable laws and regulations. The presentation of the financial statements has been made as per the requirements of DFIM Circular No: 11, dated December 23, 2009 issued by the Department of Financial Institutions and Markets of Bangladesh Bank. The activities and accounting heads mentioned in the prescribed form, which are not applicable for the financial institutions, have been excluded in preparing the financial statements.

2.2

Basis of measurement This financial statements have been prepared based on Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS) and no adjustment has been made for inflationary factors aecting the financial statements. The accounting policies, unless otherwise stated, have been consistently applied by the Company and are consistent with those of the previous year.

2.3

Disclosure of deviations from few requirements of BAS/BFRS due to mandatory compliance of Bangladesh Banks requirements Bangladesh Bank (the local Central Bank) is the prime regulatory body for Non-Banking Financial Institutions (NBFI) in Bangladesh. Some requirements of Bangladesh Banks rules and regulations contradict with those of financial instruments and general provision standards of BAS and BFRS. As such the Company has departed from those contradictory requirements of BAS/BFRS in order to comply with the rules and regulations of Bangladesh Bank which are disclosed below along with financial impact where applicable:

2.3.1

As per FID circular No. 08 dated 03 August 2002 investments in quoted shares and unquoted shares are revalued at the year end at market price and as per book value of last audited balance sheet respectively. Provision should be made for any loss arising from diminution in value of investment. As such the company measures and recognises investment in quoted and unquoted shares at cost if the year-end market value (for quoted shares) and book value (for unquoted shares) are higher than the cost. At the year-end the Companys market value and book value of quoted and unquoted shares was lower than the cost price by Tk. 52.98 million in case of the separate financial statements and in case of the consolidated financial statements the same is higher than cost by Tk. 88.70 million. In order to comply with the requirement specified in DFIM Circular No. 11, the company has charged the entire amount of dierence in market value and cost price of marketable securities to the profit and loss account. However as per requirements of BAS 39 investment in shares falls either under at fair value through profit and loss account or under available for sale where any change in the fair value at the year-end is taken to profit and loss account or revaluation reserve respectively. As per FID circular No. 08 dated 03 August 2002 and FID circular No. 03, dated 03 May 2006 a general provision at 1% to 5% under dierent categories of unclassified loans (good/standard loans) has to be maintained. However such general provision cannot satisfy the conditions of provision as per BAS 39. At the year end the Company has recognised an accumulated provision of Tk. 918.9 million in the balance sheet under liabilities.

2.3.2

IDLC annual report 2011

Our Financial Performance -IDLC Group I

136

I Notes to the financial statements of the IDLC Group

2.3.3

Bangladesh Bank has issued templates for financial statements which will strictly be followed by all banks and NBFIs. The templates of financial statements issued by Bangladesh Bank do not include Other Comprehensive Income (OCI) nor are the elements of Other Comprehensive Income allowed to be included in the Single Comprehensive Income (OCI) Statement. As such the company does not prepare the other comprehensive income statement. However the company does not have any elements of OCI to be presented.

2.3.4

As per Bangladesh Bank guidelines financial instruments are categorized, recognized and measured dierently from those prescribed in BAS 39. As such some disclosures and presentation requirements of BFRS 7 and BAS 32 have not been made in the accounts.

2.4

Date of authorisation The Board of director has authorised this financial statement for public issue on February 22 , 2012.

2.5

Presentation and functional currency and level of precision The financial statements are presented in Bangladesh Taka (BDT) currency, which is the Companys functional currency. All financial information presented in BDT has been rounded o to the nearest BDT.

2.6

Use of estimates and judgments The preparation of financial statements in conformity with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS) requires management to make estimates and assumptions that aect the reported amounts of assets, liabilities, revenue and expenses. It also requires disclosures of contingent assets and liabilities at the date of the financial statements. The most critical estimates and judgements are applied to the following: - Provision for impairment of loans, leases and investments - Gratuity The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result 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 dier from these estimates. However, the estimates and underlying assumptions are reviewed on an ongoing basis and the revision is recognised in the period in which the estimates are revised.

2.7

Directors responsibility statement The Board of Directors takes the responsibility for the preparation and presentation of these financial statements.

2.8

Basis of consolidation of operations of subsidiaries The financial statements of the Company and its subsidiaries, as mentioned in note No. 1.3.1 and 1.3.2 have been consolidated in accordance with Bangladesh Accounting Standard 27 Consolidated and Separate Financial Statements. The consolidation of the financial statement has been made after eliminating all material inter company balances, income and expenses arising from inter company transactions.

Our Financial Performance -IDLC Group I

IDLC annual report 2011

137

I Notes to the financial statements of the IDLC Group

The total profits of the Company and its subsidiaries are shown in the consolidated profit and loss account with the proportion of profit after taxation pertaining to non-controlling shareholders being deducted as Non-controlling Interest.

All assets and liabilities of the Company and of its subsidiaries are shown in the consolidated balance sheet. The interest of non-controlling shareholders of the subsidiary are shown separately in the consolidated balance sheet under the heading Non-controlling Interest.

2.9

Branch accounting The Company has fifteen branches and two SME booths, with no overseas branch as on December 31, 2011. Accounts of the branches are maintained at the head oce from which these accounts are drawn up.

2.10

Accounting for leases As per Bangladesh Accounting Standard (BAS) 17 Leases, all leases are treated as finance lease since assets leased under agreements are transferred substantially to customers with all the risks and rewards associated with ownership, other than legal title and all leases are full payout leases. In accordance with the said standard, the aggregate lease receivables including un-guaranteed residual value throughout the primary lease term are recorded as gross lease receivables while the excess of gross lease receivables over the total acquisition cost including interest during the period of acquiring the lease assets constitutes the unearned lease income. At the execution of each lease, a portion of the unearned lease is recognised as revenue income representing initial direct cost. The balance of the unearned lease income is amortised to revenue on a monthly basis over the primary lease term yielding a constant rate of return over the period.

2.11

Accounting for direct finance Books of accounts for direct finance operation are maintained based on the accrual method of accounting. Outstanding loans, along with the accrued interest thereon, for short-term finance, and unrealised principal for long-term finance, real estate finance, car loans and other finances are accounted for as direct finance assets of the Company. Interest earnings are recognised as operational revenue periodically.

2.12

Merchant banking operation As per Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules 1996, the services of issue management, portfolio management, underwriting of shares and securities advisory services fall under the purview of merchant banking operation. Accordingly, profit and loss account of merchant banking operation includes revenue from issue management, underwriting and portfolio management services and the Company maintains separate books of accounts for the merchant banking operation as required under the regulations of the Securities and Exchange Commission (SEC).

IDLC annual report 2011

As required by the SEC, Merchant Banking activities of financial institutions are to be carried out by forming a separate subsidiary. Accordingly, the Company has formed a fully owned separate subsidiary, IDLC Investments Limited (IDLCIL) and commenced its operation on August 16, 2011. Therefore, up to August 15, 2011, the Merchant Banking activities of the Company was accounted for by the Company and thereafter, the entire Merchant Banking activities was transferred to and accounted for by IDLCIL.

Our Financial Performance -IDLC Group I

138

I Notes to the financial statements of the IDLC Group

2.13

Property and equipment i) Recognition and measurement Owned assets Items of own property and equipments are measured at cost less accumulated depreciation and any accumulated impairment losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the assets to its working condition for its intended use as per Bangladesh Accounting Standard (BAS) 16 Property, Plant and Equipments.

Leasehold assets Leasehold assets of which the company assumes substantially all the risks and rewards of ownership are accounted for as finance leases and capitalised at the inception of the lease at fair value of the leased property or at the present value of the minimum lease payments, whichever is lower as per Bangladesh Accounting Standard (BAS) 17 Leases. The corresponding obligation under the lease is accounted for as liability.

ii) Subsequent expenditure on property and equipment Subsequent expenditure is capitalised only when it increases the future economic benefit from the assets and that cost can be measured reliably. All other expenditures are recognised as an expense as and when they are incurred.

iii) Depreciation Depreciation is charged to amortise the cost of assets, over their estimated useful lives, using the straight-line method in accordance with BAS-16 Property, Plant and Equipment. Full depreciation is charged on additions irrespective of date when the related assets are put into use and no depreciation is charged from the month of disposal. Asset category wise depreciation rates are as follows: Rates Furniture and fixtures Building Electrical equipment Curtain and carpets Oce equipment Oce decoration Telephone and telex Motor vehicles Leasehold motor vehicles Computers 12.50% 2.50% 20.00% 33.33% 20.00% 20.00% 33.33% 25.00% 25.00% 20.00%

The gain or loss arising on the disposal or retirement of an asset is determined as the dierence between the sale proceeds and the carrying amount of the asset and is recognised in the profit and loss account. Depreciation methods, useful lives and residual values, if any are reviewed at the balance sheet date.
IDLC annual report 2011

Our Financial Performance -IDLC Group I

139

I Notes to the financial statements of the IDLC Group

2.14

Intangible assets and amortisation of intangible assets Intangible assets comprise the value of computer software. Intangible assets acquired separately are measured on initial recognition at cost and are carried at cost less accumulated amortisation and accumulated impairment losses if any. Amortisation is calculated using the straight line method to write down the cost of intangible assets to their residual values over their estimated useful lives based on the management best estimates (3 years). Subsequent expenditure on software assets is capitalised only when it increases the future economic benefits in the specifications to which it relates. All other expenditure is expensed as incurred.

2.15

Revenue recognition Interest income from loans and other sources is recognised on an accrual basis of accounting. Lease income: The excess of aggregate rentals receivable over the cost of the leased asset constitutes the total unearned lease income. The unearned lease income is recognised on installment date as revenue on an accrual basis over the terms of the lease. However, lease income is not recognised if capital or interest receivable is in arrears for more than three months.

Interest on real estate finance: Interest on real estate finance is recognised as revenue on an accrual basis and no interest on real estate finance is accounted for as revenue where any portion of capital or interest is in arrear for more than six months. Interest on term loans and short term finance: Interest on term loan and short term finance are recognised as revenue on an accrual basis and interest income on term loan is not recognised where any portion of interest is in arrear for more than three months.

Dividend income and profit or loss on sale of securities: Dividend is recognised as income when the right to receive income is established whereas profit or loss arising from the sale of securities is accounted for only when the securities are sold/ooaded.

Fee based revenues: Fee on services rendered by the company are recognised as and when services are rendered.

2.16

Interest suspense account Lease income earned, interest on term finance and on car loans overdue beyond three months period and interest on real estate finance overdue beyond six months period are not recognised as revenue and credited to interest suspense account.

2.17

Accounts receivable Accounts receivable at the balance sheet date is stated at amounts which are considered realisable. Specific allowance is made for receivable considered to be doubtful for recovery.

IDLC annual report 2011

Our Financial Performance -IDLC Group I

140

I Notes to the financial statements of the IDLC Group

2.18

Securitization Securitization of various leases/loans result in sale of these assets to Special Purpose Vehicles (SPVs), which, in turn issue securities to investors. Financial assets are partially or wholly derecognized when the control of the contractual rights in the securitized assets is lost.

2.19

Borrowing cost Borrowing costs are recognised as expense in the year in which they are incurred unless capitalisation is permitted under Bangladesh Accounting Standard (BAS) 23 Borrowing Costs.

2.20

Cash flow statements The cash flow statement is prepared using the direct method as stipulated in Bangladesh Accounting Standard (BAS) 7 Cash Flow Statements.

2.21

Conversion of foreign currency transactions Foreign currency transactions are translated into Taka at rates prevailing at the respective dates of transactions, while foreign currency monetary assets at the end of the year are reported at the rates prevailing on the balance sheet date. Exchange gains or losses arising out of the said conversions are recognised as income or expense for the year after netting o. However, Company did not have any foreign currency transaction during the year.

2.22

Investment in securities Investment in marketable ordinary shares has been shown at cost or market price, whichever is lower, on an aggregate portfolio basis. Investment in non-marketable shares has been valued at cost. Full provision for diminution in value of shares as on closing of the year on an agreegate portfolio basis is made in the financial statemenets as required by Bangladesh Bank DFIM circular No. 02 dated January 31, 2012.

2.23

Provision for doubtful accounts and future losses Provision has been made at estimated rates on outstanding exposures, based on aging and continuous review of the receivables, as per the Company policy. In addition, a general provision has also been made by the company to cover unforeseen losses on all leases, loans and investments excluding those for which a specific provision has been made. The provision is considered adequate to meet any probable future losses.

2.24

Write o: Write-o describes a reduction in recognised value. It refers to recognition of the reduced or zero value of an asset. Generally, it refers to an investment for which a return on the investment is now impossible or unlikely. The items potential return is thus canceled and removed from (written o) the Companys balance sheet. Recovery against debts written o/provided for is credited to revenue. Income is recognized where amounts are either recovered and/or adjusted against securities/properties or advances there-against or are considered recoverable.
IDLC annual report 2011 Our Financial Performance -IDLC Group I

141

I Notes to the financial statements of the IDLC Group

2.25

Employees benefit obligation

2.25.1

Defined contribution plan The Company operates a contributory provident fund scheme for its permanent employees. Provident fund is administered by a Board of Trustees and is funded by equal contributions both by the employees and the Company at a predetermined rate. The contributions are invested separately from the Companys asset.

2.25.2

Defined benefit plan The Company also operates an unfunded gratuity scheme (which is a defined benifit scheme as specified in BAS 19). Employees are entitled to gratuity benefit after completion of minimum five years of service with the Company. The gratuity is calculated on the last basic pay and is payable at the rate of one months basic pay for every completed year of service up to ten years of service, one and half months basic pay for every completed year of service up to fifteen years of service and two months basic pay for more than fifteen years of service. Full provision for gratuity has been made in the accounts for the existing employees based on their years of services with the Company.

2.25.3

Other employees benefit obligation The Company operates a group life insurance scheme for its permanent employees. The Company also has real estate loan for its permanent employees. Employees are entitled to real estate loan after completion of minimum five years of services with the Company.

2.26

Taxation Tax expense comprises current and deferred tax.

2.26.1

Deferred tax The Company accounts for deferred tax as per Bangladesh Accounting Standard (BAS) 12 Income Taxes. Deferred tax is provided using the balance sheet method for all temporary timing dierences arising between the tax base of assets and liabilities and their carrying value for financial reporting purposes. Tax rate prevailing at the balance sheet date is used to determine deferred tax.

2.26.2

Current tax Provision for current tax is made on the basis of the profit for the year as adjusted for taxation purpose in accordance with the provision of Income Tax Ordinance, 1984 and amendments made thereto from time to time.

2.27

Impairment of long-lived assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the book value of the assets may not be recovered. Accordingly, the Company estimates the recoverable amount of the assets. Impairment losses, if any, is recognised in the profit and loss account when the estimated recoverable amount of an asset is less than its carrying amount.

2.28
IDLC annual report 2011

Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cash at bank, term deposits and investments in call loan that are readily convertible to a known amount of cash and that are subject to an insignificant risk of change in value.

Our Financial Performance -IDLC Group I

142

I Notes to the financial statements of the IDLC Group

2.29

Earning per share (EPS) The Company calculates earning per share in accordance with Bangladesh Accounting Standards (BAS) 33 Earnings Per Share which has been shown in the face of the Profit and Loss Account and the computation is stated in note 36 and note 36(a).

2.30

Related party disclosure As per Bangladesh Accounting Standards (BAS) 24 Related Party Disclosures, parties are considered to be related if one of the party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. The Company carried out transactions in the ordinary course of business on an arms length basis at commercial rates with its related parties. Related party disclosures have been given in note 37.

2.31

Determination and presentation of operating segment As more fully disclosed in note 2.12, the license of the Merchant Banking Operation was transferred to IDLC Investment Limited (IDLCIL) from the Company on August 16, 2011. Hence, in compliance with the requirement of statutory regulations of the Securities and Exchange Commission (the SEC) , the Company prepared separate profit and loss account for its separate segment, Merchant Banking Operation. Profit and loss account of merchant banking operation includes revenue from issue management, underwriting and portfolio management services and the Company maintains separate books of accounts for the merchant banking operation as required under the regulations of the SEC. Profit and loss account of merchant banking operation and other operation have been prepared in accordance with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), and results of its operation has been combined, item by item, with the financial results of the Company. Compliance with Bangladesh Financial Reporting Standard As of 1 January 2010, the Company determines and presents operating segments based on information that is internally provided to the Companys Management Committee (MC), which is the Companys Chief Operating Decision Maker (CODM). This is due to the adoption of the Bangladesh Financial Reporting Standard (BFRS) 8 Operating Segments. Since the adoption of this BFRS only aects presentation and disclosure aspects, there is no impact on the earning per share. An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses, including revenues and expenses that relate to transactions with the Companys other components, whose operating results are regularly reviewed by the Companys MC to make decisions about resources allocated to the segments and assess its performance and for which discrete financial information is available. Up to August 15, 2011, for the separate financial statements, the Company has determined two reportable segments such as merchant banking and core business and for the consolidated financial statements, the subsidiaries of the Company have been determined to be a separate reportable segment in addition to the other two segments. Thereafter, for the seperate financial statements, the Company has one reportable segment which is core business and for the consolidated financial statements, the subsidiaries of the Company ( IDLC Securities Limited and IDLC Investments Limited) have been determined to be two separate reportable segments in addition to the core business. Information about operating segment has been presented in note 34 and 34(a).

2.32

Proposed dividend Proposed dividend has not been recognised as a liability in the balance sheet in accordance with Bangladesh Accounting Standards (BAS) 10 Events After the Balance Sheet Date.
IDLC annual report 2011

Our Financial Performance -IDLC Group I

143

I Notes to the financial statements of the IDLC Group

2.33

Events after the balance sheet date All material events occurring after the balance sheet date has been considered and where necessary, adjusted for or disclosed in note 42.

2.34

Contingent liabilities and contingent assets The Company does not recognize contingent liability and contingent asset but discloses the existence of contingent liability in the financial statements. A contingent liability is a probable obligation that arises from past events whose existence will be confirmed by occurrence or non-occurrence of uncertain future events not within the control of the Company or a present obligation that is not recognized because outflow of resources is not likely or obligation cannot be measured reliably.

2.35

Liquidity statement The liquidity statement has been prepared in accordance with remaining maturity grouping of Assets and Liabilities as of the close of the year as per following bases: a) Balance with other bank and financial institutions are on the basis of their maturity term. b) Investments are on the basis of their residual maturity term. c) Loans, advances and leases are on the basis of their repayment/maturity schedule d) Fixed assets are on the basis of their useful lives. e) Other assets are on the basis of their adjustment terms. f) Borrowings from other banks and financial institutions as per their maturity/repayment terms. g) Deposits and other accounts are on the basis of their maturity term and behavioral past trends. h) Other long term liabilities on the basis of their maturity terms. i) Other liabilities are on the basis of their settlement terms.

2.36

Allocation to Merchant Banking operation Indirect expenses have been allocated based on number of employees working in Merchant Banking Division.

2.37

Status of compliance of Bangladesh Accounting Standards and Bangladesh Financial Reporting Standards. In preparing the Consolidated Financial Statements and Separate Financial Statements, IDLC applied following BAS and BFRS:

IDLC annual report 2011

Our Financial Performance -IDLC Group I

144

I Notes to the financial statements of the IDLC Group

Name of the BAS Presentation of Financial Statements Inventories Cash Flow Statements Accounting Policies, Changes in Accounting Estimates and Errors Events after the Balance Sheet Date Construction Contracts Income Taxes Property, Plant and Equipment Leases Revenue Employee Benefits Accounting for Government Grants and Disclosure of Government Assistance The Eects of Changes in Foreign Exchange Rates Borrowing Costs Related Party Disclosures Accounting and Reporting by Retirement Benefit Plans Consolidated and Separate Financial Statements Investment in Associates Interests in Joint Ventures Financial Instruments: Disclosure and Presentation Earnings per share Interim Financial Reporting Impairment of Assets Provisions, Contingent Liabilities and Contingent Assets Intangible Assets Financial Instruments: Recognition and Measurement Investment Property Agriculture Name of the BFRS Share Base payment Business combination Insurance Contracts Non-current assets held for sale and discontinued operation Exploration for and Evaluation of Mineral Resources Financial Instruments: Disclosures Operating Segments

BAS no. 1 2 7 8 10 11 12 16 17 18 19 20 21 23 24 26 27 28 31 32 33 34 36 37 38 39 40 41 BFRS no. 2 3 4 5 6 7 8

Status * N/A Applied Applied Applied N/A Applied Applied Applied Applied Applied N/A Applied Applied Applied N/A Applied N/A N/A * Applied Applied Applied Applied Applied * N/A N/A Status N/A N/A N/A N/A N/A * Applied

N/A=Not applicable.

Our Financial Performance -IDLC Group I

IDLC annual report 2011

*As the regulatory requirements dier with the standards, relevant disclosures are made in accordance with Bangladesh Banks requirements (please see note 2.3).

145

I Notes to the financial statements of the IDLC Group

2.38

BASEL II & its implementation To cope with the international best practices and to make the capital more risks sensitive as well as more shock resilient, guidelines on Basel Accord for Financial Institutions (BAFI) have been introduced from January 01, 2011 on test basis by the Bangladesh Bank. At the end of test run period, Basel Accord regime has started and the guidelines namely Prudential Guidelines on Capital Adequecy and Market Discipline for Financial Institutions (CDMD) have come fully into force from January 01, 2012 with its subsequent supplements/revisions. Instructions regarding Minimum Capital Requirement (MCR), Adequate Capital, and Disclosure requirement as stated in these guidelines have to be followed by all FIs for the purpose of statutory compliance. As per CDMD guidelines, Financial Institutions should maintain a Capital Adequecy Ratio (CAR) of minimum 10%. In line with CDMD guidelines requirement, IDLC has already formed BASEL Implementation Unit (BIU) to ensure timely implementation of BASEL II accord.

2.39

Financial risk management IDLC always concentrates on delivering high value to its stakeholders through appropriate trade o between risk and return. A well structured and proactive risk management system is in place within the Company to address risks relating to credit, market, liquidity and operations. In addition to the industry best practices for assessing, identifying and measuring risks, IDLC also considers guidelines for managing core risks of financial instructions issued by the Countrys Central Bank, Bangladesh Bank, vide FID Circular No. 10 dated September 18, 2005 for management of risks. Credit risk To encounter and mitigate credit risk the company employed multilayer approval process, policy for maximum sector and group exposure limit, policy for customers maximum asset exposure limit, mandatory search for credit report from Credit Information Bureau, looking into payment performance of customer before financing, annual review of clients, adequate insurance coverage for funded assets, vigorous monitoring and follow up by Special Assets Management Team, strong follow up of compliance of credit policies by Operational Risk Management Department, taking collateral, seeking external legal opinion, maintaining neutrality in politics and following arms length approach in related party transactions, regular review of market situation and industry exposure etc. The Credit Evaluation Committee (CEC) regularly meets to review the market and credit risk related to lending and recommend and implement appropriate measures to counter associated risks. The CEC critically reviews projects from risk point of view. An independent Credit Risk Management Department is in place, at IDLC, to scrutinize projects from a risk-weighted point of view and assist the management in creating a high quality credit portfolio and maximize returns from risk assets. Market risk The Asset Liability Committee (ALCO) of the Company regularly meets to assess the changes in interest rate, market conditions, carry out asset liability maturity gap analysis, re-pricing of products and thereby takes eective measures to monitor and control interest rate risk. IDLC has also strong access to money market and credit lines at a competitive rate through good reputation, strong earnings, financial strength and credit rating.

IDLC annual report 2011

Our Financial Performance -IDLC Group I

146

I Notes to the financial statements of the IDLC Group

Liquidity Risk Liquidity requirements are managed on a day-to-day basis by the Treasury Division which is responsible for ensuring that sucient funds are available to meet short term obligations, even in a crisis scenario, and for maintaining a diversity of funding sources. Treasury Division maintains liquidity based on historical requirements, anticipated funding requirements from operation, current liquidity position, collections from financing, available sources of funds and risks and returns. Operational Risk Appropriate internal control measures are in place, at IDLC, to address operational risks. IDLC has also established an internal control & compliance department (ICCD) to address operational risk and to frame and implement policies to encounter such risks. This department assesses operational risk across the Company as a whole and ensures that an appropriate framework exists to identify, assess and mange operational risk. The function of ICCD is to constant vigilance against leakage of Shareholders value by identify, assess, measure, manage and transfer operational risk resulting from inadequate or failed internal processes, people and system or from external events.

2011 Taka

2010 Taka

3
3.1

Cash
Cash in hand: In local currency In foreign currency Balance with Bangladesh Bank in local currency

136,000 136,000 417,207,356 417,343,356

96,000 96,000 323,943,694 324,039,694

3.2

3.3

Cash Reserve Requirement (CRR) and Statutory Liquidity Reserve (SLR) Cash Reserve Requirement and Statutory Liquidity Reserve have been calculated and maintained in accordance with Financial Institution Act, 1993 & Financial Institution Regulations 1994 and FID Circular No. 06 dated November 06, 2003 and FID Circular No. 02 dated November 10, 2004. Cash Reserve Requirement (CRR) has been calculated at the rate of 2.5% on Total Term Deposits which is preserved in current account maintained with Bangladesh Bank. Total Term Deposit means Term or Fixed Deposit, Security Deposit against Lease/Loan and other Term Deposits, received from individuals and institutions (except Banks & Financial Institutions) Statutory Liquidity Reserve (SLR) has been calculated at the rate of 5.0% on total liabilities, including CRR of 2.5% on Total Term Deposit. SLR is maintained in liquid assets in the form of cash in hand (notes & coin in BDT), balance with Bangladesh Bank and other banks and Financial Institutions, investment at call, unencumbered treasury bill, prize bond, savings certificate & any other assets approved by Bangladesh Bank.

Our Financial Performance -IDLC Group I

IDLC annual report 2011

147

I Notes to the financial statements of the IDLC Group

2011 Taka a) Cash Reserve Requirement Required reserve Actual reserve maintained Surplus / (deficit) 415,471,000 419,894,000 4,423,000

2010 Taka

308,567,000 314,548,000 5,981,000

b) Statutory Liquidity Reserves Required reserve (including CRR) Actual reserve maintained (including CRR) (note 3.3.1) Surplus / (deficit) 1,192,461,000 1,391,670,530 199,209,530 799,408,000 1,401,938,000 602,530,000 799,408,000 1,401,938,000 602,530,000

Total required reserves Actual reserve held Total surplus

1,192,461,000 1,391,670,530 199,209,530

3.3.1

Actual reserve maintained (including CRR) The City Bank Limited Standard Chartered Bank Citibank N.A. Commercial Bank of Ceylon PLC Southeast Bank Limited Pubali Bank Limited AB Bank Limited Bank Asia Limited Prime Bank Limited Eastern Bank Limited The Hong Kong and Shanghai Banking Corporation State Bank of India Dutch Bangla Bank Limited Bangladesh Bank International Leasing and Financial Service Limited LankaBangla Finance Limited National Bank Limited Mercantile Bank Limited Union Capital Limited Agrani Bank Limited (Call Placement) Bank Asia Limited EXIM Bank Limited Jamuna Bank Limited (Call Placement) Standard Bank Ltd. Investment in Bonds 11,134,076 12,593,482 52,526,334 55,240,128 4,762 52,184 359,001 762,845 2,995,254 418,625,926 200,000,000 100,000,000 2,148,858 50,000,000 160,000,000 227,680 100,000,000 50,000,000 150,000,000 25,000,000 1,391,670,530 6,696,321 148,570,591 70,426,398 1,914,453 8,882,529 5,231 370,000,000 31,946,928 97,922 12,215 1,819,819 380,031 2,893,806 324,065,343 150,000,000 100,000,000 9,226,413 50,000,000 100,000,000 25,000,000 1,401,938,000

IDLC annual report 2011

Our Financial Performance -IDLC Group I

148

I Notes to the financial statements of the IDLC Group

2011 Taka 3(a) Consolidated cash

2010 Taka

3(a)i

Cash in hand: IDLC Finance Limited IDLC Securities Limited IDLC Investments Limited 136,000 110,000 246,000 96,000 110,000 206,000

Balance with other banks and financial institutions in Bangladesh


Current deposits in local currency: Woori Bank limited Uttara Bank Limited Bank Al- Falah Limited Basic Bank Limited The City Bank Limited National Bank Limited Eastern Bank Limited Bank Asia Limited State Bank of India Commercial Bank of Ceylon PLC The Hong Kong and Shanghai Banking Corporation Citibank N.A Standard Chartered Bank Mutual Trust Bank Limited Social Islami Bank Limited Trust Bank Limited Dutch Bangla Bank Limited BRAC Bank Limited Dhaka Bank Limited United Commercial Bank Limited IDLC Investment Limited 12,300 41,815 2,953 1,719,520 62,500 3,029,589 2,315,624 1,575,107 888,753 (391,607) (133,846,442) 11,435 3,140 5,521,397 3,180,482 322,536 21,575 179,961,283 64,431,960 3,161 1,903 359 750 12,221,413 12,215 32,743,173 380,031 529,390 1,818,584 57,150,005 71,400,151 1,520 10,426 5,185 2,887,151 2,458,203 65,430 181,689,050

Our Financial Performance -IDLC Group I

IDLC annual report 2011

Short-term deposit accounts: Pubali Bank Limited Prime Bank Limited The City Bank Limited BRAC Bank Limited Southeast Bank Limited Citibank N.A Standard Chartered Bank Commercial Bank of Cylon

4,285 30,356 2,161,240 27,247 11,857,166 39,907,181 36,780,614 (210,575) 90,557,514

5,231 92,922 6,705,262 3,607,532 11,788,348 657,104 16,196,300 33,813,814 72,866,513

149

I Notes to the financial statements of the IDLC Group

2011 Taka Fixed Deposits: International Leasing & Financial Services Limited LankaBangla Finance Limited Phoenix Finance & Investments Limited Social Islami Bank Limited Mercantile Bank Limited Southeast Bank Limited BRAC Bank Limited Shahjalal Islami Bank Limited Standard Bank Limited Union Capital Limited National Bank Limited Export Import Bank of Bangladesh Limited 300,000,000 200,000,000 100,000,000 150,000,000 150,000,000 50,000,000 200,000,000 100,000,000 1,250,000,000 1,404,989,474

2010 Taka

250,000,000 200,000,000 100,000,000 100,000,000 50,000,000 100,000,000 300,000,000 250,000,000 302,182,500 200,000,000 1,852,182,500 2,106,738,063

4.1

Maturity grouping of balance with other banks and financial institutions: Payable on demand Up to 1 month Over 1 month but not more than 3 months Over 3 months but not more than 6 months Over 6 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years

64,431,960 640,557,514 450,000,000 250,000,000 1,404,989,474

181,689,050 1,075,049,013 300,000,000 550,000,000 2,106,738,063

4(a)

Consolidated balance with other banks and financial institutions: In Bangladesh: IDLC Finance Limited IDLC Securities Limited (Note 4(a)i) IDLC Investments Limited (Note 4(a)ii) 1,404,989,474 642,789,539 85,228,402 2,133,007,415 2,106,738,063 922,000,139 3,028,738,202

IDLC annual report 2011

Our Financial Performance -IDLC Group I

150

I Notes to the financial statements of the IDLC Group

2011 Taka 4(a)i Bank balance of IDLC Securities Limited Standard Chartered Bank Ltd. Eastern Bank Ltd. Commercial Bank of Ceylon Plc BRAC Bank Limited One Bank Limited Trust Bank Limited IDLC Finance Limited 59,598,437 667,677 3,417,806 2,189,626 154,404,545 6,312,597 416,200,000 642,790,688 4(a)ii

2010 Taka

478,835,943 314,462,058 10,082,548 9,554,292 103,200,368 5,864,930 922,000,139

Bank balance of IDLC Investments Limited Standard Chartered Bank Ltd. Commercial Bank of Ceylon Plc BRAC Bank Limited 84,562,650 301,782 363,970 85,228,402 -

Money at call and short notice


AB Bank Limited Jamuna Bank Limited 410,000,000 260,000,000 670,000,000 370,000,000 370,000,000

Investments
Government securities: Other investments: Investment in non marketable ordinary shares (Note 6.1) Investment in preference shares (Note 6.2) Investment in bonds (Note 6.3) Investment in marketable securities (Note 6.4) 5,885,700 66,120,968 25,000,000 300,102,207 397,108,875 397,108,875 5,885,700 143,818,984 25,000,000 282,714,680 457,419,364 457,419,364 -

6.1

Investment in non marketable ordinary shares No. of Shares Credit Rating Agency of Bangladesh Limited Dan & Bradstreet Rating Agency Bangladesh Limited
20,498 41,659

1,719,800 4,165,900 5,885,700

1,719,800 4,165,900 5,885,700


IDLC annual report 2011

Our Financial Performance -IDLC Group I

151

I Notes to the financial statements of the IDLC Group

2011 Taka 6.2 Investment in preference shares


17.5% cumulative redeemable preference shares of Basic Dredging Company Limited * 9% cumulative redeemable preference shares of BRAC Bank Ltd 10% cumulative redeemable preference shares of PHP Power Company Ltd 12.75% cumulative redeemable preference shares of STS Holdings Ltd 12.75% cumulative redeemable preference shares of ECPV Ltd 14.0625% cumulative redeemable preference shares of Fiber @ Home Ltd

2010 Taka

20,000,000 11,047,300 5,073,668 30,000,000 66,120,968

20,000,000 50,000,000 4,335,000 33,141,900 6,342,084 30,000,000 143,818,984

Adequate provisions for future losses have been made as per Bangladesh Bank Guidelines. *Redemption of the 17.5% cumulative redeemable preference shares of Basic Dredging Company Limited is under process. Full amount against the shares has been collected and redemption of the shares will be eected after completion of some legal formalities. 6.3 Investment in bonds As per Trust Deed signed between IDLC Finance Limited (IDLC) and Investment Corporation of Bangladesh (ICB), a Trust named IDLC Securitization Trust 2007-A was formed and IDLC sold lease receivables of Tk. 364,154,897 to the Trust to issue asset backed securitized zero coupon bonds in December 31, 2007. The Trust issued 50 class A bonds and 5 class B bonds of Tk. 5,000,000 each of which IDLC purchased all class B bonds bearing coupon rate of 7.75% per year. All class B bonds are subordinated to class A bonds. Any loss due to non-collection of lease receivables will be adjusted upto the amount of class B bonds held by IDLC. 6.4 Investment in marketable securities Details of marketable securities are given below:
Name of company No. of shares Cost price Taka Market price at the end of the year Taka

Apex Adelchi Footwear Ltd. BEXIMCO Ltd. BRAC Bank Ltd. BSRM Steels Ltd. Golden Son Ltd. Grameen Phone Ltd. Green Delta Mutual Fund Islami Bank Bangladesh Ltd. LankaBangla Finance Ltd. LR Global Mutual Fund 1
IDLC annual report 2011

21,000 150,000 192,500 104,500 186,500 13,000 1,000,000 60,000 5,000 5,000,000 69,100 900 5,000,000

7,346,226 28,954,105 10,177,957 15,410,409 15,886,123 2,162,181 10,000,000 3,216,554 1,105,778 50,000,000 37,788,287 133,704 50,000,000

6,207,600 16,950,000 8,797,250 12,404,150 11,395,150 2,125,500 6,800,000 3,270,000 851,000 53,000,000 26,914,450 75,240 34,000,000

Marico Bangladesh Ltd. Navana CNG Ltd. PHP 1st Mutual Fund

Our Financial Performance -IDLC Group I

152

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka
Market price at the end of the year Taka

Name of company

No. of shares

Cost price Taka

Popular life First Mutual Fund Reliance Insurance Mutual Fund S. Alam Cold Rolled Steels Ltd. Summit Power Ltd. Titas Gas Transmission and Dist. Co. Ltd. Aamra Technologies Ltd.* Bangladesh Welding Electrodes Ltd. GBB Power Ltd.* Lanka Bangla Securities Ltd.* Saiham Cotton Mills Ltd.*

500,000 500,000 53,000 30,000 142,500 200,000 26,031 285,800 40,000 100,000

5,000,000 5,000,000 3,899,028 2,309,054 10,996,491 7,500,000 210,310 20,006,000 10,000,000 3,000,000 300,102,207

3,450,000 5,050,000 3,254,200 2,232,000 9,633,000 7,500,000 210,310 20,006,000 10,000,000 3,000,000 247,125,850

* Not listed as on December 31, 2011 and accordingly trading was not started. All investments in marketable securities are valued on an aggregate portfolio basis, at the lower of cost and market value, at the balance sheet date. Market price for securities not listed as on reporting date, has been shown at cost for calculation purpose. As on December 31, 2011 there was Tk 52,976,357 gross unrealised loss on investment in marketable listed securities full provision for which has been kept in profit and loss account. 6.5 Maturity grouping of investments: On demand Up to 1 month Over 1 month but not more than 3 months Over 3 months but not more than 6 months Over 6 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years 320,102,207 25,000,000 11,047,300 35,073,668 5,885,700 397,108,875 6(a) Consolidated investments IDLC Finance Limited IDLC Securities Limited (Note - 6(a)i) IDLC Investments Limited 302,714,680 54,335,000 11,681,508 11,681,508 71,120,968 5,885,700 457,419,364

397,108,875 152,487,867 549,596,742

457,419,364 118,045,774 575,465,138


IDLC annual report 2011

As on December 31, 2011 there was Tk. 99,551,479 gross unrealised loss on investment in marketable listed securities full provision for which has been kept in profit and loss account.

Our Financial Performance -IDLC Group I

153

I Notes to the financial statements of the IDLC Group

2011 Taka 6(a)i Details of marketable securities are given below:


Cost price Taka

2010 Taka

Name of company

No. of shares

Market price at the end of the year Taka

Berger Paints Beximco Ltd. BSRM Steels Glaxosmithkline Golden Son Ltd. Grameenphone Ltd. Heidelberg Cement Marico Bangladesh National Bank Ltd. Prime Bank Ltd. Republic Insurance South East Bank Square Pharmaceuticals Summit Power Titas Gas Applied for IPO of GBB Power

2,600 198,100 90,000 18,750 158,500 15,000 44,300 17,900 145,000 111,000 5,000 10,000 2,000 19,000 117,500 50,000

2,000,489 41,481,536 13,598,652 22,799,238 13,393,454 2,853,460 15,299,172 10,200,552 10,178,150 5,368,296 368,535 301,752 477,766 1,485,433 9,181,382 148,987,867 3,500,000 152,487,867

1,430,000 22,385,300 10,683,000 12,459,375 9,684,350 2,452,500 11,336,370 6,972,050 9,686,000 4,939,500 252,500 301,000 474,200 1,413,600 7,943,000 102,412,745 102,412,745

Loans, advances and lease


Inside Bangladesh: Lease receivable Gross lease rentals receivable (Note 7.1) Unearned lease income (Note 7.2) Advance for leases (Note 7.3) Long-term finance (Note 7.4) Real estate finance (Note 7.5) Car loans (Note 7.6) Personal loan (Note 7.7) Margin loan to portfolio investors (Note 12.5) Short term finance (Note 7.8) Loan to IDLC Investments Limited (Note 7.9) Loan against deposits (LAD)

5,608,107,193 (1,078,402,519) 17,231,878 4,546,936,552 7,772,386,735 6,978,998,771 385,502,415 212,148,367 821,088,462 3,669,276,020 771,536,479 382,325,781 25,540,199,582 25,540,199,582

4,954,296,875 (858,723,030) 11,250,500 4,106,824,345 4,206,981,254 5,604,572,075 339,287,534 212,274,782 5,633,191,635 467,566,629 552,699,126 122,397,256 21,245,794,636 21,245,794,636

IDLC annual report 2011

Interest Receivable (Note-7.10) Outside Bangladesh

Our Financial Performance -IDLC Group I

154

I Notes to the financial statements of the IDLC Group

2011 Taka 7.1 Gross lease rentals receivable Balance at January 1 Add: Addition during the year Less: Realisation during the year Add: Net receivable/(payable) on terminated leases Balance at December 31 7.1.1
Aging analysis of gross lease receivable 2011 Amount in Tk. % of total

2010 Taka

4,954,296,875 3,255,935,974 8,210,232,849 2,596,734,459 5,613,498,390 (5,391,197) 5,608,107,193

5,061,010,814 2,181,964,376 7,242,975,190 2,192,213,342 5,050,761,848 (96,464,973) 4,954,296,875

2010 Amount in Tk. 2,268,008,291 2,170,803,901 515,484,683 4,954,296,875 % of total 45.78 43.82 10.40 100.00

Up to one year Above one year to t ree years Above three years to five years More than five years

2,305,586,322 3,159,873,631 142,647,240 5,608,107,193

41.11 56.34 2.54 100.00

7.2

Unearned lease income The excess of aggregate rentals receivable over the cost of the leased asset constitutes the total unearned lease income. The unearned lease income is recognised as revenue on an accrual basis over the terms of the lease. Balance at January 1 Add: Addition during the year Less: Lease income earned during the year Balance at December 31 858,723,030 896,268,567 1,754,991,597 676,589,078 1,078,402,519 873,405,403 479,450,478 1,352,855,881 494,132,851 858,723,030

7.3

Advance for leases This represents disbursements for procurement of leased assets and capitalised cost of funds for the period from the dates of respective disbursements to the date of execution of lease. On execution of lease, advances will be transferred to gross lease receivables. Long-term finance Balance at January 1 Add: Disbursement made during the year Less: Realisation during the year Balance at December 31 4,206,981,254 7,736,004,331 11,942,985,585 4,170,598,850 7,772,386,735 3,437,116,151 6,031,541,894 1,824,560,640 4,206,981,254
IDLC annual report 2011

7.4

2,594,425,743

Our Financial Performance -IDLC Group I

155

I Notes to the financial statements of the IDLC Group

2011 Taka 7.5 Real estate finance This represents loans to individuals, employees under the Companys real estate loan scheme and corporate bodies for purchase and construction of apartments and homes in urban areas for periods ranging from 5 to 20 years. Balance at January 1 Add: Disbursement during the year Less: Realisation during the year Balance at December 31 7.5.1 Aging analysis of real estate finance 2011 Amount in Tk. Up to one year Above one year to three years Above three years to five years More than five years 674,877,107 1,834,536,068 1,339,243,917 3,130,341,679 6,978,998,771 7.6 Car loans Balance at January 1 Add : Disbursement during the year Less : Realisation during the year Balance at December 31 7.7 Personal loan Balance at January 1 Add : Disbursement during the year Less : Realisation during the year Balance at December 31
IDLC annual report 2011

2010 Taka

5,604,572,075 2,662,610,960 8,267,183,035 1,288,184,264 6,978,998,771

4,788,544,980 2,042,323,770 6,830,868,750 1,226,296,675 5,604,572,075

2010 % of total 9.67 26.29 19.19 44.85 100.00 Amount in Tk. 637,702,897 1,056,002,773 912,310,718 2,998,555,687 5,604,572,075 % of total 11.38 18.84 16.28 53.50 100.00

339,287,534 211,510,053 550,797,587 165,295,172 385,502,415

344,592,105 129,308,747 473,900,852 134,613,318 339,287,534

212,274,782 166,911,638 379,186,420 167,038,053 212,148,367

100,411,695 154,557,018 254,968,713 42,693,931 212,274,782

Our Financial Performance -IDLC Group I

156

I Notes to the financial statements of the IDLC Group

2011 Taka 7.8 Short term finance Factoring of account receivable Work order financing Inter Corporate Deposits (ICD) 803,809,577 17,278,885 821,088,462 7.9 Loan to IDLC Investments Limited Balance at January 1 Add : Disbursement during the year Less : Realisation during the year Balance at December 31 7.10 Interest Receivables Lease receivable Long-term finance Real estate finance Car loan Personal loan Loan to IDLC Investments Limited Loan against deposits (LAD) 22,854,110 38,736,511 46,166,511 2,379,214 1,144,087 240,680,939 30,364,409 382,325,781 7.11 Net loans, advances and leases Gross performing loans, advances and leases (Note-7) Less: Non-performing loans, advances and leases (Note-7.16(x)(a)) Interest suspense (Note-12.6) Provision for loans and advances / investments (Note-12.7) 25,540,199,582 593,804,072 74,969,334 918,907,258 1,587,680,664 23,952,518,918 7.12 Residual maturity grouping of loans, advances and leases Repayable on demand Over 1 month but not more than 3 months Over 3 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years 2,198,907,620 9,824,984,843 9,777,455,139 3,738,851,980 25,540,199,582 9,771,968,921 9,771,968,921 6,102,692,901 3,669,276,020

2010 Taka

453,917,637 1,009,220 12,639,772 467,566,629

28,696,172 25,833,036 40,592,289 3,386,789 511,969 23,377,001 122,397,256

21,245,794,636 603,050,023 56,301,468 924,820,039 1,584,171,530 19,661,623,106

2,143,741,457 9,149,841,850 3,081,200,867 21,245,794,636


IDLC annual report 2011

6,871,010,462

Our Financial Performance -IDLC Group I

157

I Notes to the financial statements of the IDLC Group

2011 Taka 7.13 Loans, advances and lease on the basis of significant concentration a) Loans, advances and lease to the institutions in which Directors have interest b) Loans, advances and lease to Chief Executive and other senior executives c) Loans, advances and lease to customer groups: i) Real estate finance ii) Car Loan iii) Personal loan iv) Loan against deposits (LAD) v) Small and medium enterprises vi) Special program loan (BB refinancing scheme) vii) Sta loan viii) Industrial Loans, advances and leases (Note- 7.13 (d)) ix) Other loans and advances

2010 Taka

24,590,039 25,244,256 6,570,349,922 387,881,629 211,481,052 801,900,888 6,390,461,921 406,292,507 101,797,464 6,710,242,945 3,909,956,959 25,490,365,287 25,540,199,582

63,510,554 34,455,399 4,919,668,960 342,674,323 209,878,126 576,076,127 4,248,952,356 640,399,789 68,438,382 4,508,548,985 5,633,191,635 21,147,828,683 21,245,794,636

d) Details of Industrial loans, advances and leases i) Agricultural industries ii) Textiles, Apparels & Accessories iii) Food and Beverage iv) Pharmaceuticals v) Leather & Leather Products, Chemicals vi) Power, Energy & Engineering vii) Real Estate & Home Appliances, Cement, Ceramics viii) IT & Services ix) Transportation x) Other industries 36,812,899 1,279,123,607 1,132,320,473 738,082,753 148,064,097 887,829,530 567,340,768 1,239,126,251 327,579,331 353,963,236 6,710,242,945 7.14 Loans, advances and leases -geographical location-wise Inside Bangladesh: Urban Dhaka Chittagong Bogra Sylhet Savar
IDLC annual report 2011

179,320,392 844,453,911 389,323,435 488,753,830 21,558,513 591,887,566 493,257,546 960,073,749 263,063,147 276,856,897 4,508,548,985

21,711,461,571 2,516,618,829 392,964,181 348,907,645 179,239,035 160,870,094 230,138,226 25,540,199,581 25,540,199,581

13,857,853,402 6,895,102,582 207,047,030 285,791,622 21,245,794,636 21,245,794,636

Comilla Narsandi Outside Bangladesh:

Our Financial Performance -IDLC Group I

158

I Notes to the financial statements of the IDLC Group

2011 Taka 7.15 Details of large loan / investments

2010 Taka

There were no clients with outstanding amount and classified loans / investments exceeding 15% of total capital of the financial institution. Total capital of the financial institution was Taka 3,220.51 million as at 31 December 2011 (Tk 2,626.29 million in 2010) 7.16 Particulars of loans, advances and leases i) Loans, advances and leases considered good in respect of which the financial institution is fully secured ii) Loans, advances and leases considered good against which the financial institution holds no security other than the debtors personal guarantee iii) Loans, advances and leases considered good secured by the personal undertaking of one or more parties in addition to the personal guarantee of the debtors

15,372,648,655

14,280,022,926

7,775,030,408

5,219,610,209

2,392,520,518 25,540,199,581

1,746,161,501 21,245,794,636

iv) Loans, advances and leases adversely classified; provision not maintained there against v) Loans, advances and leases due by directors or ocers of the financial institution or any of them either separately or jointly with any other persons [Note-7.13 (b) & c (vii)] vi) Loans, advances and leases due from companies or firms in which the directors of the financial institution have interest as directors, partners or managing agents or in case of private companies, as members

127,041,720

102,893,781

24,590,039

63,510,554

vii) Maximum total amount of advances including temporary advances made at any time during the year to directors or managers or ocers of the financial institution or any of them either separately or jointly with any other person. viii) Maximum total amount of advances including temporary advances granted during the year to the companies or firms in which the directors of the financial institution have interest as directors, partners or managing agents or in the case of private companies, as member ix) Due from bank and financial institutions

127,041,720

102,893,781

24,590,039 593,808,393

63,510,554
IDLC annual report 2011

357,108,306

Our Financial Performance -IDLC Group I

159

I Notes to the financial statements of the IDLC Group

2011 Taka x) Classified loans, advances and leases a) Classified loans, advances and leases on which interest has not been charged (Note-7.17) b) Provision on doubtful loans, advances and leases Provision on bad loans, advances and leases Total specific provisions (Note 12.7ii) c) Amount of written o loans, advances and leases Total amount realised against loans and leases previously written o d) Provision kept against loans and advances classified as bad debts e) Interest credited to Interest Suspense Account (Note-12.6) xi) Cu ulative amount of written o loans, advances and leases Opening Balance Amount written o during the year The amount of written o loans, advances and leases for which law suits have been filed 7.17 Classification of loans, advances and leases Unclassified: Standard including sta loan Special mention account (SMA) Classified: Sub-standard Doubtful Bad / Loss 24,610,441,716 335,953,793 24,946,395,509 75,884,803 56,819,392 461,099,877 593,804,072 25,540,199,581

2010 Taka

593,804,072 140,775,026 (146,687,806) (5,912,780) 40,735,413 (146,687,806) 74,969,334 125,703,322 125,703,322 195,378,391

603,050,023 (80,079,775) 199,403,589 119,323,814 72,204,207 4,860,000 199,403,589 56,301,468 53,499,115 72,204,207 125,703,322 104,801,931

20,284,964,794 357,779,819 20,642,744,613 135,397,887 54,293,591 413,358,545 603,050,023 21,245,794,636

IDLC annual report 2011

Our Financial Performance -IDLC Group I

160

I Notes to the financial statements of the IDLC Group

2011 Taka 7.18 Particulars of required provision for loans, advances and leases Status General Provision Loans and leases (Excluding SMA) 24,610,441,716 Special mention account (SMA) 313,763,316 1% 5% 246,104,417 15,688,166 261,792,583 Status
Specific provision Sub-standard Doubtful 50,587,729 48,507,006 20% 50%

2010 Taka

Base for provision

Rate (%) 202,849,648 17,102,120 219,951,768

Base
for provision

Rate (%)

10,117,546
24,253,503 444,829,692

21,168,436 22,468,996 386,180,791

Bad / Loss

444,829,692

100%

479,200,741 Required provision for loans, advances and leases Required provision for diminution in value of investments Total provision required Total provision maintained (Note - 12.7) Excess / (short) provision at 31 December 7(a) Consolidated loans, advances and leases IDLC Finance Limited IDLC Securities Limited IDLC Investments Limited 21,630,242,623 327,307 4,726,534,315 26,357,104,245 740,993,324 52,976,356 793,969,680 918,907,258 124,937,578

429,818,223 649,769,991 649,769,991 924,820,039 275,050,048

21,245,794,636 8,406,730 21,254,201,366

Our Financial Performance -IDLC Group I

IDLC annual report 2011

161

162
Our Financial Performance -IDLC Group I

IDLC annual report 2011

Property and equipment - for 2011


Cost Balance at January 1, 2011 Taka Addition during the year Taka Disposal/ adjustment during the year Taka Balance at December 31, 2011 Taka Balance at January 1, 2011 Taka Depreciation Charged for the year Taka Adjustment during the year Taka Balance at December 31, 2011 Taka Written down value at December 31, 2011 Taka

Asset category

Rate

Free hold assets: Land Building Furniture and Fixtures Electrical equipment Curtain and carpets Oce equipment Oce decoration Computers Software Telephone and telex Motor vehicles 26,958,470 56,530,000 30,423,212 35,788,941 1,584,538 49,474,563 43,830,056 45,488,291 10,038,510 6,053,163 82,215,884 388,385,628 Lease hold assets: Motor vehicles Total 2011 24,872,037 413,257,665 119,467,489 (21,134,624) (76,940,510) 3,737,413 455,784,644 25.00 23,312,887 176,524,535 768,600 65,561,952 (20,821,268) (46,009,010) 3,260,219 196,077,477 477,194 259,707,167 8,442,258 9,746,240 577,626 11,353,307 14,859,634 14,865,560 435,048 2,127,549 57,060,267 119,467,489 (3,884,033) (4,302,086) (346,046) (6,189,859) (8,089,296) (9,727,822) (400,000) (1,644,307) (21,222,437) (55,805,886) 26,958,470 56,530,000 34,981,437 41,233,095 1,816,118 54,638,011 50,600,394 50,626,029 10,073,558 6,536,405 118,053,714 452,047,231 2.50 12.50 20.00 33.33 20.00 20.00 20.00 33.33 33.33 25.00 6,359,625 9,813,453 17,403,102 939,670 23,642,755 20,032,755 26,246,867 9,610,633 3,568,694 35,594,094 153,211,648 1,413,250 4,078,988 6,445,439 518,582 13,719,366 7,879,492 1,736,821 439,805 1,222,182 27,339,427 64,793,352 (1,027,508) (1,450,956) (192,021) (1,875,024) (1,332,026) (5,666,581) (399,995) (847,613) (12,396,018) (25,187,742) 7,772,875 12,864,933 22,397,585 1,266,231 35,487,097 26,580,221 22,317,107 9,650,443 3,943,263 50,537,503 192,817,258 26,958,470 48,757,125 22,116,504 18,835,510 549,887 19,150,914 24,020,173 28,308,922 423,115 2,593,142 67,516,211 259,229,973
I Notes to the financial statements of the IDLC Group

Property and equipment - for 2010


Cost Asset category Balance at Addition during January 1, 2010 the year Taka Taka Balance at Disposal/ adjustment December 31, during the year 2010 Taka Taka Balance at January 1, 2010 Taka Depreciation Charged for the year Taka Adjustment during the year Taka Balance at December 31, 2010 Taka Written down value at December 31, 2010 Taka

Rate

Free hold assets: Land Building Furniture and Fixtures Electrical equipment Curtain and carpets Oce equipment Oce decoration Computers Software Telephone and telex Motor vehicles
Our Financial Performance -IDLC Group I

26,958,470 56,530,000 27,195,200 30,263,681 1,277,731 31,060,706 31,416,142 34,719,408 10,018,510 5,020,034 48,163,384 302,623,266

7,493,057 8,707,654 321,807 19,212,640 15,486,361 10,921,683 20,000 1,808,289 37,852,500 101,823,991

(4,265,045) (3,182,394) (15,000) (798,783) (3,072,447) (152,800) (775,160) (3,800,000) (16,061,629)

26,958,470 56,530,000 30,423,212 35,788,941 1,584,538 49,474,563 43,830,056 45,488,291 10,038,510 6,053,163 82,215,884 388,385,628

2.50 12.50 20.00 33.33 20.00 20.00 20.00 33.33 33.33 25.00

4,946,375 8,984,846 14,799,331 550,536 17,211,691 16,269,231 20,695,976 8,409,346 3,314,738 22,518,467 117,700,537

1,413,250 3,604,153 5,714,143 404,129 6,920,437 6,815,573 5,650,266 1,201,287 1,009,887 16,058,951 48,792,076

(2,775,546) (3,110,372) (14,995) (489,373) (3,052,049) (99,375) (755,931) (2,983,324) (13,280,965)

6,359,625 9,813,453 17,403,102 939,670 23,642,755 20,032,755 26,246,867 9,610,633 3,568,694 35,594,094 153,211,648

26,958,470 50,170,375 20,609,759 18,385,839 644,868 25,831,808 23,797,301 19,241,424 427,877 2,484,469 46,621,790 235,173,980
I Notes to the financial statements of the IDLC Group

Lease hold assets: Motor vehicles Total 2010 24,872,037 327,495,303 101,823,991 (16,061,629) 24,872,037 413,257,665 25.00 21,253,534 138,954,071 2,059,353 50,851,429 (13,280,965) 23,312,887 176,524,535 1,559,150 236,733,130

IDLC annual report 2011

163

164
Our Financial Performance -IDLC Group I

IDLC annual report 2011

8.1

Allocation of depreciation charged (note 2.36) 2011 Taka 2010 Taka

Depreciation charged during the year has been allocated as follows: Main Operation Merchant Bank Operation 62,432,375 3,129,577 65,561,952 8.2 Details of disposals/adjustments : 48,661,522 2,189,907 50,851,429

Asset category

Cost Taka

Accumulated depreciation Taka

Book value Taka

Sale price/ adjustment Taka

Profit/(loss) on disposal Taka

Mode of disposal

Buyer

Free hold assets : Furniture and Fixtures Electrical equipment Curtain and carpets Oce decoration Oce equipment Computers Software Telephone and telex Motor vehicles Lease hold assets: Motor vehicles
Total 2011

3,884,033 4,302,086 346,046 8,089,296 6,189,859 9,727,822 400,000 1,644,307 21,222,437 55,805,886 21,134,624
76,940,510

(1,027,508) (1,450,956) (192,021) (1,332,026) (1,875,024) (5,666,581) (399,995) (847,613) (12,396,018) (25,187,742) (20,821,268)
(46,009,010)

2,856,525 2,851,130 154,025 6,757,270 4,314,834 4,061,241 5 796,694 8,826,419 30,618,143 313,356
30,931,499

2,823,405 2,838,201 165,261 6,757,270 4,314,834 4,103,576 822,232 14,408,141 36,232,920 3,239,000
39,471,920

(33,120) (12,929) 11,236 42,335 (5) 25,538 5,581,722 5,614,777 2,925,644


8,540,421

As per policy of the Company As per policy of the Company As per policy of the Company As per policy of the Company As per policy of the Company As per policy of the Company As per policy of the Company As per policy of the Company As per policy of the Company

Employees/Outsider Employees/Outsider Employees Employees/Outsider Employees/Outsider


I Notes to the financial statements of the IDLC Group

Employees/Outsider Adjusted Employees/Outsider Outsiders

As per policy of the Company

Outsiders

8(a)

Consolidated property and equipment - for 2011


Cost Balance at January 1, 2011 Taka Addition during the year Taka Disposal/ adjustment during the year Taka Balance at December 31, 2011 Taka Balance at January 1, 2011 Taka Depreciation Charged for the year Taka Adjustment during the year Taka Written down value at Balance at December 31, December 31, 2011 2011 Taka Taka

Asset category

Rate

Free hold assets: Land Building Furniture and Fixtures Electrical equipment Curtain and carpets Oce equipment Oce decoration Computers Software Telephone and telex Motor vehicles 26,958,470 56,530,000 42,784,172 56,937,380 1,662,038 81,805,874 65,202,318 59,684,511 11,602,248 7,650,054 88,834,884 499,651,949 Lease hold assets: Motor vehicles Total 2011 24,872,037 524,523,986 155,981,199 (21,134,624) (81,732,780) 3,737,413 598,772,405 25.00 23,312,887 198,852,812 768,600 91,041,615 (20,821,268) (46,816,315) 3,260,219 243,078,112 477,194 355,694,293
Our Financial Performance -IDLC Group I

11,950,935 15,865,748 684,373 20,859,009 24,863,198 15,229,910 1,595,261 3,242,005 61,690,760 155,981,199

(4,932,915) (6,175,763) (346,046) (6,297,242) (9,817,759) (9,727,822) (400,000) (1,678,172) (21,222,437) (60,598,156)

26,958,470 56,530,000 49,802,192 66,627,365 2,000,365 96,367,641 80,247,757 65,186,599 12,797,509 9,213,887 129,303,207 595,034,992 2.50 12.50 20.00 33.33 20.00 20.00 20.00 33.33 33.33 25.00

6,359,625 11,535,082 21,031,537 982,721 29,515,512 22,937,719 30,662,434 10,425,100 4,045,143 38,045,052 175,539,925

1,413,250 6,139,946 12,063,824 562,015 20,360,677 12,923,077 4,593,434 969,886 1,906,260 29,340,646 90,273,015

(1,184,238) (1,797,663) (192,021) (1,896,351) (1,607,863) (5,666,581) (399,995) (854,317) (12,396,018) (25,995,047)

7,772,875 16,490,790 31,297,698 1,352,715 47,979,838 34,252,933 29,589,287 10,994,991 5,097,086 54,989,680 239,817,893

26,958,470 48,757,125 33,311,402 35,329,667 647,650 48,387,803 45,994,824 35,597,312 1,802,518 4,116,801 74,313,527 355,217,099
I Notes to the financial statements of the IDLC Group

IDLC annual report 2011

165

166
Our Financial Performance -IDLC Group I

IDLC annual report 2011

Consolidated property and equipment - for 2010


Cost Balance at January 1, 2010 Taka Free hold assets: Land Building Furniture and Fixtures Electrical equipment Curtain and carpets Oce equipment Oce decoration Computers Software Telephone and telex Motor vehicles 26,958,470 56,530,000 32,688,645 36,914,691 1,355,231 43,958,080 39,221,073 42,574,228 11,038,510 5,687,914 52,582,384 349,509,226 Lease hold assets: Motor vehicles Total 2010 24,872,037 374,381,263 169,514,541 (19,371,818) 24,872,037 524,523,986 25.00 21,253,534 149,871,667 2,059,353 64,042,119 (15,060,974) 23,312,887 198,852,812 1,559,150 325,671,174 14,856,013 24,618,113 321,807 38,646,577 30,425,900 17,263,083 563,738 2,766,810 40,052,500 169,514,541 (4,760,486) (4,595,424) (15,000) (798,783) (4,444,655) (152,800) (804,670) (3,800,000) (19,371,818) 26,958,470 56,530,000 42,784,172 56,937,380 1,662,038 81,805,874 65,202,318 59,684,511 11,602,248 7,650,054 88,834,884 499,651,949 2.50 12.50 20.00 33.33 20.00 20.00 20.00 33.33 33.33 25.00 4,946,375 9,809,148 16,483,496 567,756 20,077,013 17,648,299 23,240,294 8,958,042 3,481,368 23,406,342 128,618,133 1,413,250 4,663,511 8,481,882 429,960 9,927,872 9,115,825 7,521,515 1,467,058 1,339,859 17,622,034 61,982,766 (2,937,577) (3,933,841) (14,995) (489,373) (3,826,405) (99,375) (776,084) (2,983,324) (15,060,974) 6,359,625 11,535,082 21,031,537 982,721 29,515,512 22,937,719 30,662,434 10,425,100 4,045,143 38,045,052 175,539,925 26,958,470 50,170,375 31,249,090 35,905,843 679,317 52,290,362 42,264,599 29,022,077 1,177,148 3,604,911
I Notes to the financial statements of the IDLC Group

Depreciation Disposal/ adjustment during the year Taka Balance at December 31, 2010 Taka Balance at January 1, 2010 Taka Charged for the year Taka Adjustment during the year Taka Written down value at Balance at December 31, December 31, 2010 2010 Taka Taka

Asset category

Addition during the year Taka

Rate

50,789,832 324,112,024

I Notes to the financial statements of the IDLC Group

2011 Taka 8.1(a) Allocation of depreciation charged (note 2.36) Depreciation charged during the year has been allocated as follows:

2010 Taka

Main Operation Merchant Bank Operation

87,912,038 3,129,577 91,041,615

61,852,212 2,189,907 64,042,119

Other assets
Investment in subsidiary companies (Note - 9.1) Accounts receivable (Note - 9.2) Advances, deposits and prepayments (Note - 9.3) Inter - company receivables (Note - 9.4) Deferred tax asset (Note - 9.5) 449,999,800 190,085,849 143,616,562 17,541,473 28,223,164 829,466,848 49,999,900 290,564,602 55,697,564 196,288,585 19,733,753 612,284,404

9.1

Investment in subsidiary companies IDLC Securities Limited (Note- 9.1.1) IDLC Investments Limited (Note- 9.1.2) 49,999,900 399,999,900 449,999,800 49,999,900 49,999,900

9.1.1

Out of the total of 4,000,000 ordinary shares issued and paid up, IDLC Finance Limited holds 3,999,992 (including bonus shares issued in 2008, 2009 and 2010) ordinary shares of Tk 100 each. Out of the total of 4,000,000 ordinary shares issued and paid up, IDLC Finance Limited holds 3,999,999 ordinary shares of Tk 100 each. Accounts receivable Interest receivable - treasury Other receivables 49,316,944 140,768,905 190,085,849 37,944,073 252,620,529 290,564,602

9.1.2

9.2

9.3

Advances, deposits and prepayments Deposits and prepayments Advance against expenses 101,191,204 42,425,358 143,616,562 Advances, deposits and prepayments are considered good but not secured by collateral. 1,213,506 54,484,058 55,697,564
IDLC annual report 2011

Our Financial Performance -IDLC Group I

167

I Notes to the financial statements of the IDLC Group

2011 Taka 9.4 Inter - company receivables This represents receivables from subsidiary companies. IDLC Securities Limited IDLC Investments Limited 647,932 16,893,541 17,541,473 9.5 Deferred tax

2010 Taka

196,288,585 196,288,585

Deferred tax has been calculated based on deductible/taxable temporary dierence arising due to dierence in the carrying amount of the assets and its tax base in accordance with the provision of Bangladesh Accounting Standard (BAS) 12 Income Taxes. Deferred tax liability is arrived at as follows: Carrying amount at balance sheet Taka Assets: Fixed assets net of depreciation as on December 31, 2011 Total Assets: Fixed assets net of depreciation as on December 31, 2010 Total 232,748,697 232,748,697 219,775,513 219,775,513 (12,973,184) (12,973,184) (Taxable)/ deductible temporary dierence Taka

Tax base

Taka

209,774,660 209,774,660

204,906,089 204,906,089

(4,868,571) (4,868,571)

Applicable tax rate Deferred tax liability as on December 31, 2011 Deferred tax liability as on December 31, 2010 Deferred tax expenses accounted for during the year

42.50% (5,513,603) (2,069,143) (3,444,461)

IDLC annual report 2011

Our Financial Performance -IDLC Group I

168

I Notes to the financial statements of the IDLC Group

2011 Taka Deferred tax asset is arrived at as follows: Carrying amount at balance sheet Taka Liabilities: Employee gratuity as on December 31, 2011 Total Loss on sale of secondary shares Total Liabilities: Employee gratuity as on December 31, 2010 Total 55,656,128 55,656,128 45,693,093 45,693,093 Tax base Taka
-

2010 Taka (Taxable)/ deductible temporary dierence Taka


55,656,128 55,656,128

45,693,093 45,693,093

51,300,931 51,300,931

51,300,931 51,300,931 42.50% 10.00%

Applicable tax rate for employees' gratuity Applicable tax rate for loss on sale of secondary shares Deferred tax asset as on December 31, 2011
Deferred tax asset as on December 31, 2010 Deferred tax income accounted for during the year

28,223,164
21,802,896 6,420,268 2,975,808

Net deferred tax income 9.5(a) Consolidated deferred tax Balance at January 1 IDLC Finance Limited IDLC Securities Limited IDLC Investments Limited 19,733,753 19,733,753 Addition during the year IDLC Finance Limited IDLC Securities Limited IDLC Investments Limited Balance at December 31 9(a) Consolidated other assets IDLC Finance Limited IDLC Securities Limited IDLC Investments Limited

15,621,949 15,621,949

2,975,808 10,635,302 104,993 13,716,103 33,449,856

4,111,804 4,111,804 19,733,753

361,925,575 227,430,501 92,328,327 681,684,403

365,995,919 685,768,736 1,051,764,655


IDLC annual report 2011

Our Financial Performance -IDLC Group I

169

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka

10

Borrowings from other banks, financial institutions


Inside Bangladesh (Note- 10.1) Outside Bangladesh 4,565,821,153 4,565,821,153 4,656,967,523 4,656,967,523

10.1

Inside Bangladesh Secured long term loans: Bond and Debenture: Mutual Trust Bank Ltd. Dhaka Bank Ltd. Prime Bank Limited Mercantile Bank Ltd. 37,500,000 18,750,000 37,500,000 37,500,000 131,250,000 Long-term loans: United Commercial Bank Ltd. Prime Bank Ltd. Pubali Bank Ltd. Commercial Bank of Ceylon PLC Bank Al-Falah Ltd. BRAC Bank Ltd. Uttara Bank Ltd. Dhaka Bank Ltd. Mutual Trust Bank Ltd. Trust Bank Ltd. Woori Bank Total secured long-term loans Unsecured long-term loans Bond and Debenture: Sadharan Bima Corporation Long-term loans: Kreditanstalt fr Wiederaufbau (KfW) The Hong Kong & Shanghai Banking Corporation Ltd. Standard Chartered Bank Bangladesh Bank (Small Enterprise Refinancing Program) Bangladesh Bank (Home Loan Refinancing Program) Bangladesh Bank (Agro Loan Refinancing Program) Bank Asia Ltd. IPFF Total unsecured long-term loan 135,250,277 12,019,936 749,289,350 927,637,302 63,000,000 32,795,606 85,384,952 2,205,377,423 151,634,009 18,429,184 5,178,351 602,970,366 971,060,015 78,099,973 85,384,952 2,212,756,850 62,500,000 31,250,000 62,500,000 62,500,000 218,750,000

100,000,000 393,750,000 10,000,000 24,000,000 20,000,000 83,333,333 165,000,000 222,270,000 1,018,353,333 1,149,603,333

172,500,000 40,000,000 41,000,000 42,000,000 233,000,000 69,440,641 152,500,000 130,020,032 215,000,000 100,000,000 1,195,460,673 1,414,210,673

200,000,000

300,000,000

IDLC annual report 2011

Our Financial Performance -IDLC Group I

170

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka

Short-term and Call loans: Short-term loans Citi Bank N.A. Commercial Bank of Ceylon PLC Mutual Trust Bank Ltd. Export Import Bank of Bangladesh Ltd. Standard Bank Ltd. Shahjalal Islami Bank Limited Standard Chartered Bank

600,000,000 115,840,397 50,000,000 95,000,000 350,000,000 1,210,840,397

400,000,000 50,000,000 280,000,000 200,000,000 100,000,000 1,030,000,000

Call Loans Agrani Bank Limited The Premier Bank Ltd. Dutch Bangla Bank Ltd Jamuna Bank Limited Basic Bank Limited Total short-term and call loans Total Borrowings 10.2 1,210,840,397 4,565,821,153 1,030,000,000 4,656,967,523

Security against borrowings from other banks and financial institutions Secured Unsecured 2,360,443,730 2,205,377,423 4,565,821,153 1,814,210,673 2,842,756,850 4,656,967,523

Secured loans are covered by first equitable mortgage of all present and future immovable properties and by floating charges on movable assets of the Company ranking pari-passu among the lenders. The Company has a Pari Passu Security Sharing Agreement (PPSSA) among the secured lenders stipulating the procedure in the sharing of the security provided by the Company. Loans repayable within one year have been placed under current liabilities. Details of loans are as under: 10.3 Maturity grouping of borrowings from other banks and financial institutions Payable on demand Up to 1 month Over 1 month but within 3 months Over 3 months but within 1 year Over 1 year but within 5 years Over 5 years 713,300,000 385,980,000 1,413,720,397 1,302,200,000 750,620,756 4,565,821,153 736,310,000 441,940,000 1,350,530,000 1,489,877,523 638,310,000 4,656,967,523
IDLC annual report 2011

Our Financial Performance -IDLC Group I

171

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka

11

Deposits and other accounts


Term deposits (Note- 11.1) Refundable deposits (Note- 11.2) 16,828,267,206 810,581,392 17,638,848,598 12,373,161,861 628,184,694 13,001,346,555

11.1

Term deposits This represents deposits received from institutions and individuals for a period not less than six months period. Balance at January 1 Add: Deposits received during the year Less: Matured/encashed during the year Balance at December 31 12,373,161,861 10,339,808,968 22,712,970,829 5,884,703,623 16,828,267,206 9,779,933,274 9,584,892,502 19,364,825,776 6,991,663,915 12,373,161,861

11.1.1 Rate of interest Rate of interest on term deposit receipts ranges from 7.75% to 14.5% (2010: 7% to 13.5%). 11.2 Refundable deposits The Company takes deposits from the clients of lease and loan on signing of agreement, refundable at the end of the contract period. Balance at December 31 stands as under: Deposits against loan and lease rental Deposits against financing as per term of agreements (Security deposits) 318,035,187 492,546,205 810,581,392 271,374,447 356,810,247 628,184,694

Security deposits are interest bearing while deposits against loan and lease are non interest bearing. 11.3 Group-wise break-up of deposits and other accounts Government Bank Other institutions Individuals 507,659,988 5,321,804,389 10,998,802,829 16,828,267,206 11.4 Maturity analysis of deposits Maturity analysis of Term deposits Payable on demand Up to 1 month Over 1 month but within 6 months Over 6 months but within 1 year
IDLC annual report 2011

131,055,000 3,925,763,131 8,316,343,730 12,373,161,861

491,921,506 6,675,532,296 4,937,484,219 4,041,570,897 680,978,536 779,752 16,828,267,206

578,642,111 4,101,777,107 3,418,678,182 3,810,428,542 454,476,552 9,159,367 12,373,161,861

Over 1 year but within 5 years Over 5 years but within 10 years Above 10 years

Our Financial Performance -IDLC Group I

172

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka

Maturity analysis of Refundable deposit Payable on demand Up to 1 month Over 1 month but within 6 months Over 6 months but within 1 year Over 1 year but within 5 years Over 5 years but within 10 years

41,254,367 3,926,096 57,686,684 95,430,961 609,646,513 2,636,770 810,581,391

33,271,019 84,918,592 91,234,468 415,525,345 3,235,270 628,184,694

12

Other liabilities
Payable and accrued expenses (Note- 12.1) Provision for income tax (Note- 12.2) Inter-company payables (Note- 12.3) Liabilities under finance lease (Note- 12.4) Deferred liability-employee gratuity Portfolio investors' fund (Note- 12.5) Interest suspense account (Note- 12.6) Provision for doubtful accounts and future losses (Note- 12.7) Unpaid dividend Deferred tax liability (Note - 9.5) 2,021,883,410 1,008,738,029 3,204,327 93,337 55,656,128 74,969,334 918,907,258 4,664,551 5,513,603 4,093,629,977 1,703,466,239 946,493,390 4,331,463 2,790,600 51,300,931 1,375,958,530 56,301,468 924,820,039 2,945,958 5,068,408,618

12.1

Payable and accrued expenses Receipt against leases Liabilities for expenses Liabilities for other finance

27,235,243 1,658,857,817 335,790,350 2,021,883,410

142,074,228 1,164,290,337 397,101,674 1,703,466,239

12.2

Provision for income tax Provision Balance at January 1 Add: Provision made during the year Settlement of previous year's tax liability Balance at December 31

2,067,054,976 575,129,014 2,642,183,990 2,642,183,990

1,474,855,677 592,199,299 2,067,054,976 2,067,054,976

Our Financial Performance -IDLC Group I

IDLC annual report 2011

173

I Notes to the financial statements of the IDLC Group

2011 Taka Advance tax Balance at January 1 Add: Payment made during the year: Under sections 64 and 74 of ITO 1984 Deduction at source Others 1,120,561,586 435,707,141 76,502,432 674,802 512,884,375 Less: Adjustment during the year Net balance at 31 December 12.2a Consolidated provision for income tax IDLC Finance Limited IDLC Securities Limited IDLC Investments Limited 1,633,445,961 1,633,445,961 1,008,738,029

2010 Taka

699,493,133 404,505,048 16,477,677 85,728 421,068,453 1,120,561,586 1,120,561,586 946,493,390

575,129,014 117,934,285 36,972,368 730,035,667

592,199,299 41,045,196 633,244,495

12.3

Inter-company payables IDLC Securities Limited (Note- 12.3.1) IDLC Investments Limited (Note- 12.3.2)

438,741 2,765,586 3,204,327

4,331,463 4,331,463

12.3.1 The amount has been paid by IDLC Securities Limited on account of administrative expenses, fixed assets purchase and CDBL charges on behalf of IDLC Finance Limited. 12.3.2 The amount has been paid by IDLC Investments Limited on account of administrative expenses and CDBL charges on behalf of IDLC Finance Limited. 12.4 Liabilities under finance lease Liabilities under finance lease represent liabilities against certain motor vehicles taken under finance lease. Details of which are given below: Balance at January 1 Add: Addition during the year Less: Repayment during the year Balance at December 31 12.4.1 Aging analysis of liabilities under finance lease Up to one year
IDLC annual report 2011

2,790,600 2,790,600 2,697,263 93,337

5,146,212 5,146,212 2,355,612 2,790,600

93,337 93,337

2,082,099 708,501 2,790,600

Above one year to three years Above three years to five years

Our Financial Performance -IDLC Group I

174

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka

The average lease term of the vehicles taken under finance lease is 60 months and all leases are on fixed repayment basis. The Companys obligations under finance lease are secured by the lessors charge over the lease assets. 12.5 Portfolio investors' fund This represents the balance of deposits made with the Company by the portfolio investors to take margin loan and buy marketable securities. The balance of fund has been arrived at as follows: Deposit made by the portfolio investors for purchase of securities Margin loan extended for purchase of securities Less: Investment in securities Interest and other charges Balance of fund 12,696,616,297 5,633,191,635 18,329,807,932 15,802,916,266 1,150,933,136 16,953,849,402 1,375,958,530

As the Company has transferred its entire margin lending portfolio during the year to its subsidiary IDLC Investments Limited the balance of fund is now included in consolidated position. 12.6 Interest suspense accounts Lease income earned and interest on term finance, car loan and personal loan overdue beyond three months period and interest on real estate finance beyond six months period and interest on short term finance overdue beyond permitted credit term plus sixty days period are not recognised as revenue and credited to interest suspense account. Product wise details are given below: On lease finance On real-estate finance On term finance On car loans On personal loans On short term finance 14,503,956 16,024,525 13,695,023 1,310,414 477,900 28,957,516 74,969,334 12.7 Provision for loans and advances / investments Balance at January 1 Provision required for the year Provision released during the year Provision charged for the year Write o during the year Balance at December 31 12.7(i) Allocation: Main operation Merchant Bank operation (7,402,712) 1,489,931 (5,912,781) 121,606,635 (2,282,821) 119,323,814
IDLC annual report 2011

17,411,701 17,539,722 16,805,568 2,628,006 1,916,471 56,301,468

924,820,039 323,879,776 (329,792,557) (5,912,781) 918,907,258

877,700,432 122,688,745 (3,364,931) 119,323,814 72,204,207 924,820,039

Our Financial Performance -IDLC Group I

175

I Notes to the financial statements of the IDLC Group

2011 Taka 12.7(ii) Provision charged for the year General provision Specific provision Provisions for diminutions in value of investments

2010 Taka

39,600,062 (98,489,199) 52,976,356 (5,912,781)

20,644,866 98,678,948 119,323,814

12.7(ii)a Consolidated provision charged for the year General provision Specific provision Provisions for diminutions in value of investments

39,600,062 (98,489,199) 88,700,713 29,811,576

20,644,866 104,124,427 124,769,293

12.7(iii) Product wise break up of provision: Lease Long- term finance Real estate finance Car loan Investment in shares Personal Loan Short term finance Margin loan Loan to IDLC Investments Limited

406,523,478 250,409,895 97,825,724 9,891,424 54,304,773 5,417,730 57,841,474 36,692,760 918,907,258

445,736,886 277,853,360 90,438,370 14,287,583 4,370,844 5,106,939 30,694,141 56,331,916 924,820,039

12(a)

Consolidated other liabilities IDLC Finance Limited (Note -12) IDLC Securities Limited IDLC Investments Limited

4,090,425,650 345,773,509 543,198,923 4,979,398,082

5,064,077,155 517,409,029 5,581,486,184

13

Share capital
Authorised 400,000,000 ordinary shares of Taka 10 each Issued, subscribed and paid-up 99,000,000 ordinary shares of Taka 10 each ( including bonus shares) (2010: 6,000,000 ordinary shares of Taka 100 each) 4,000,000,000 1,000,000,000

IDLC annual report 2011

990,000,000

600,000,000

Our Financial Performance -IDLC Group I

176

I Notes to the financial statements of the IDLC Group

2011 Taka Paid-up share capital as on December 31, 2011 comprises the following: Composition of shareholding: Sponsor shareholders: % of holding Domestic The City Bank Limited (CBL) Sadharan Bima Corporation (SBC) 2011 Number of shares Taka

2010 Taka

2010 Taka

28.37 7.62 35.99

28,082,830 7,542,810 35,625,640

280,828,300 75,428,100 356,256,400

170,199,000 45,714,000 215,913,000

General shareholders: Eskayef Bangladesh Limited Mercantile Bank Limited Reliance Insurance Co. Ltd. Transcraft Limited Bangladesh Fund Eastern Bank Limited Bangladesh Lamps Limited Other Institution/Corporate Individuals Total Distribution of shareholders:

8.00 7.50 7.00 4.01 3.18 2.19 1.32 9.27 21.54 64.01 100.00

7,920,000 7,425,000 6,930,000 3,973,130 3,150,310 2,163,400 1,306,800 9,176,610 21,329,110 63,374,360 99,000,000

79,200,000 74,250,000 69,300,000 39,731,300 31,503,100 21,634,000 13,068,000 91,766,100 213,291,100 633,743,600 990,000,000

48,000,000 45,000,000 42,000,000 24,079,600 20,000,000 125,112,900 79,894,500 384,087,000 600,000,000

Classification of shareholdings as required by Regulation 37 of the Listing Regulations of Dhaka Stock Exchange Ltd. are as follows: Number of shareholders 4,971 3,809 254 126 43 23 22 38 30 24 9,340 Number of shares Percentage of holdings

Number of share

Less than 500 501 to 5,000 5,001 to 10,000 10,001 to 20,000 20,001 to 30,000 30,001 to 40,000 40,001 to 50,000 50,001 to 100,000 100,001 to 300,000 300,001 to Above

1,184,820 5,602,250 1,848,250 1,782,890 1,028,590 815,160 961,900 2,633,840 4,931,360 78,210,940 99,000,000

1.20% 5.66% 1.87% 1.80% 1.04% 0.82% 0.97% 2.66% 79.00% 100.00%
IDLC annual report 2011

4.98%

Our Financial Performance -IDLC Group I

177

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka

The shares were listed with Dhaka Stock Exchange Ltd. on March 20, 1993, and with Chittagong Stock Exchange Ltd. on November 25, 1996, and quoted at Taka 138.5 and Taka 139.1 at Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. respectively at December 29, 2011.

14

Share premium
This represents premium amount over par value of shares received against issue of 75,000 shares in 1993 @Taka 50 per share.

15

Statutory reserves
Balance at January 1 Add: Transferred from General Reserve Add: Transferred on appropriation of profit Balance at December 31 562,364,396 160,845,796 723,210,192 401,250,000 161,114,396 562,364,396

16

General reserve
Balance at January 1 Add: Transferred on appropriation of profit Less: Transferred to Statutory Reserve Balance at December 31 811,250,000 811,250,000 811,250,000 811,250,000

17

Business commitments and contingencies


In the normal course of business, the Company makes various commitments and incurs certain contingent liabilities. No material losses are anticipated as a result of these transactions. These contingent liabilities and business commitments are quantified below:

17.1

Contingent liabilities Letters of guarantee Irrevocable letters of credit Indemnity Bond 126,958,540 8,811,279 135,769,819 270,263 1,700,000 8,811,279 10,781,542

17.2

Business commitments Lease and term finance commitments outstanding at December 31 Real estate finance commitments outstanding at December 31 Car loan commitments outstanding at December 31 Personal loan commitments outstanding at December 31 913,264,298 337,289,584 21,766,112 1,693,001 1,274,012,995 463,972,116 351,287,809 200,000 8,457,500 823,917,425

17.3

Money for which the FI is contingently liable in respect of guarantee given in favour of: Directors or ocers 270,263 270,263 Government Banks and other financial institutions Others

IDLC annual report 2011

Our Financial Performance -IDLC Group I

178

I Notes to the financial statements of the IDLC Group

2011 Taka 17.4 Capital expenditure commitments

2010 Taka

There was no capital expenditure contracted but not incurred or provided for at December 31, 2011 (2010: nil). There was no material capital expenditure authorised by the Board but not contracted for at December 31, 2011 (2010: nil). 17.5 Unacknowledged debt The Company had no claim, legal or other, against it which has not been acknowledged as debt at the balance sheet date. 17.6 Disbursements During the year the Company contracted and disbursed the following amounts : 2011 Contracts/ sanctions Tk. Lease and term finance Real estate finance Car loans Personal loans 9,430,635,690 2,922,826,558 220,334,000 84,787,801 12,658,584,049 Disbursements Tk. 8,517,371,392 2,585,536,974 198,567,888 83,094,800 11,384,571,054 Contracts/ sanctions Tk. 4,808,909,816 2,472,306,259 150,482,312 176,071,228 7,607,769,615 2010 Disbursements Tk. 4,344,937,700 2,121,018,450 150,282,312 167,613,728 6,783,852,190

18

Income statement
Income: Interest, discount and similar income (Note-18.1) Dividend income (Note-21) Fees, commission and brokerage (Note-22) Other operating income (Note-23) 3,784,962,902 227,497,685 179,437,286 210,016,857 4,401,914,730 Expenses: Interest paid on deposits and borrowings (Note-20) Administrative expenses (Note-18.2) Other operating expenses (Note-33) Depreciation on assets (Note-32) 3,317,163,322 19,962,886 522,491,050 144,147,910 4,003,765,168

2,359,226,854 473,695,455 132,961,065 65,561,952 3,031,445,326 1,370,469,404

1,817,840,968 479,865,763 142,223,718 50,851,429 2,490,781,878 1,512,983,290

18.1

Interest, discount and similar income Interest income (Note -19) Gain on sale of marketable securities (Note - 21) Income from investment in bonds (Note - 21)

3,826,541,599 (45,693,093) 4,114,396 3,784,962,902

3,047,391,848 264,561,351 5,210,123 3,317,163,322


IDLC annual report 2011

Our Financial Performance -IDLC Group I

179

I Notes to the financial statements of the IDLC Group

2011 Taka 18.2 Administrative expenses Salary and allowances (Note-24) Rent, taxes, insurance, electricity, etc. (Note-25) Legal expenses (Note-26) Postage, stamp, telecommunication, etc. (Note-27) Stationery, printing, advertisement, etc. (Note-28) Managing Director's salary and fees (Note-29) Directors' fees (Note-30) Auditors' fees (Note-31) Repair of Company's assets (Note-32)

2010 Taka

333,051,679 53,015,020 11,473,555 18,458,870 41,050,954 10,527,400 638,250 839,500 4,640,227 473,695,455

344,789,386 48,837,695 7,027,563 15,265,322 43,491,345 10,527,400 530,150 631,400 8,765,502 479,865,763

18.3

Allocation of interest expenses Merchant Bank Operation Main Operation

(353,952,752) 2,713,179,606 2,359,226,854

(593,332,470) 2,411,173,438 1,817,840,968

18.4

Allocation of administrative expenses Merchant Bank Operation Main Operation

40,227,592 433,467,863 473,695,455

42,655,975 437,209,788 479,865,763

18.5

Allocation of other operating expenses Merchant Bank Operation Main Operation

14,069,353 118,891,712 132,961,065

62,047,573 80,176,145 142,223,718

18.6

Allocation to Merchant Banking operation Indirect expenses have been allocated based on number of employees working in Merchant Banking Division.

19

Interest income
This represents interest income for the following products: Lease finance Real estate finance Term finance Short term finance Car loans Personal loans Margin loan to portfolio investors Loan to IDLC Investments Limited Interest income on balance with other banks and financial institutions Call loans Loan against deposits 610,874,668 874,935,844 936,135,543 75,090,303 58,109,671 33,719,869 549,625,294 240,680,939 3,379,172,131 325,684,301 41,448,764 80,236,403 3,826,541,599 541,222,163 750,919,776 590,887,886 48,877,791 56,085,030 23,924,964 794,182,177 2,806,099,787 154,956,703 46,260,278 40,075,080 3,047,391,848

IDLC annual report 2011

Our Financial Performance -IDLC Group I

180

I Notes to the financial statements of the IDLC Group

2011 Taka 19a Consolidated interest income IDLC Finance Limited (Note-19) IDLC Securities Limited IDLC Investments Limited 3,585,860,660 72,807,069 283,433,742 3,942,101,471

2010 Taka 3,047,391,848 37,297,380 3,084,689,228

20

Interest expenses
Interest on term deposits Interest on borrowings Interest on Secured Zero Coupon Bonds Interest on Security Deposit Interest on Call Loan Others 1,920,086,035 340,072,705 22,486,562 55,876,368 6,234,458 14,470,726 2,359,226,854 1,270,409,528 415,045,514 19,587,637 53,291,449 58,068,771 1,438,069 1,817,840,968

20a

Consolidated interest expenses IDLC Finance Limited (Note-20)


IDLC Securities Limited IDLC Investments Limited

2,359,226,854
5,162,884 2,364,389,738

1,817,840,968 4,216,812 1,822,057,780

21

Investment income
Gain/(loss) on sale of marketable securities Dividend income Income from investment in bonds (45,693,093) 227,497,685 4,114,396 185,918,988 264,561,351 19,962,886 5,210,123 289,734,360

21a

Consolidated investment income IDLC Finance Limited IDLC Securities Limited IDLC Investments Limited

(14,080,612) (93,761,314) (107,841,926)

289,734,360 235,969,540 525,703,900

22

Commission and brokerage


Agency fees Arrangement fees Advisory fees Syndication Commission Underwriting Commission Documentation fees Custodial fees Issue management fees Portfolio management fees Settlement charges 970,000 1,669,225 3,350,000 846,289 169,000 133,678 4,800,000 100,324,985 67,174,109 179,437,286 1,188,633 2,000,000 (81,250) 928,950 934,500 494,353 13,686,104 201,232,558 302,107,202 522,491,050

Our Financial Performance -IDLC Group I

IDLC annual report 2011

181

I Notes to the financial statements of the IDLC Group

2011 Taka 22a Consolidated commission and brokerage IDLC Finance Limited (Note-22) IDLC Securities Limited IDLC Investments Limited

2010 Taka

179,437,286 206,986,294 76,328,517 462,752,097

522,491,050 588,685,399 1,111,176,449

23

Other operating income


Realisation of late payment interest & others Transfer price/ gain at the time of expiry of lease Application, processing and documentation fees Service charges Gain/(Loss) on disposal of fixed assets Miscellaneous income 55,845,957 13,069,743 31,950,825 51,502,643 8,540,421 49,107,268 210,016,857 70,848,955 14,761,303 24,881,437 26,563,205 1,120,415 5,972,595 144,147,910

23a

Consolidated other operating income IDLC Finance Limited (Note-23) IDLC Securities Limited IDLC Investments Limited

210,016,857 4,610,246 12,625,817 227,252,920

144,147,910 3,260,380 147,408,290 344,789,386

24
24.1

Salaries and allowances


Salary and allowances

333,051,679

Salary and allowances include annual contribution of Tk. 12,333,643 to Provident Fund and provision of Tk. 9,644,946 for Gratuity Fund. 24a Consolidated salaries and allowances IDLC Finance Limited (Note-24) IDLC Securities Limited IDLC Investments Limited 333,051,679 74,830,093 23,128,810 431,010,582 344,789,386 75,781,539 420,570,925

25

Rent, taxes, insurance, electricity, etc.


Rent, rate and taxes Insurance Power and electricity 38,361,802 2,122,225 12,530,993 53,015,020 34,032,196 3,791,293 11,014,206 48,837,695

25a
IDLC annual report 2011

Consolidated rent, tax, insurance, electricity etc. IDLC Finance Limited (Note-25) IDLC Securities Limited IDLC Investments Limited

53,015,020 50,171,838 4,183,484 107,370,342

48,837,695 24,732,790 73,570,485

Our Financial Performance -IDLC Group I

182

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka

26

Legal expenses
Renewal and registration Other professional charges 10,963,615 509,940 11,473,555 6,748,684 278,879 7,027,563

26a

Consolidated legal expenses IDLC Finance Limited (Note-26) IDLC Securities Limited IDLC Investments Limited

11,473,555 5,863,168 249,148 17,585,871

7,027,563 1,020,211 8,047,774

27

Postage, stamp, telecommunication, etc.


Postage Telecommunication and internet etc. 807,014 17,651,856 18,458,870 591,757 14,673,565 15,265,322

27a

Consolidated postage, stamps, telecommunication etc. IDLC Finance Limited (Note-27) IDLC Securities Limited IDLC Investments Limited

18,458,870 12,510,427 224,346 31,193,643

15,265,322 1,458,282 16,723,604

28

Stationery, printing, advertisements, etc.


Stationery and printing etc. Printed stationery Computer consumable stationery Advertisement and publicity 16,455,921 1,272,904 17,728,825 23,322,129 41,050,954 10,135,029 272,884 10,407,913 33,083,432 43,491,345

28a

Consolidated stationery, printing, advertisements, etc. IDLC Finance Limited (Note-28) IDLC Securities Limited IDLC Investments Limited

41,050,954 4,126,608 178,836 45,356,398

43,491,345 6,935,640 50,426,985

29

Managing Director's salary and benefits


Basic pay Allowances Bonus Company's contribution to provident fund 4,524,000 3,420,000 2,131,000 452,400 10,527,400 4,524,000 3,420,000 452,400 10,527,400
IDLC annual report 2011

2,131,000

Our Financial Performance -IDLC Group I

183

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka

30

Directors' fees
Honorium for attending meeting Incidental expenses for attending meeting 638,250 638,250 530,150 530,150

30a

Consolidated directors' fees IDLC Finance Limited (Note-30) IDLC Securities Limited IDLC Investments Limited 638,250 115,000 753,250 530,150 60,000 590,150

30.1

Directors' fees Directors remuneration for attending each board meeting during the year was Tk. 5,000 per meeting/ Director. No Director has been paid any remuneration for rendering any special services during the year.

31

Auditors' fees
Statutory annual audit fees (including VAT) Other audit fees 548,500 291,000 839,500 488,500 142,900 631,400

31a

Consolidated fees for auditors IDLC Finance Limited (Note-31) IDLC Securities Limited IDLC Investments Limited

839,500 183,950 1,023,450

631,400 173,000 804,400

32

Depreciation and repair of company's assets


Freehold assets (Note-8) Leasehold assets (Note-8) Repair and maintenance For premises For vehicles For computers and computers accessories 64,793,352 768,600 65,561,952 252,727 3,687,681 699,819 4,640,227 70,202,179 48,792,076 2,059,353 50,851,429 149,046 3,224,373 5,392,083 8,765,502 59,616,931

32a

Consolidated depreciation and repair of company's assets IDLC Finance Limited (Note-32) IDLC Securities Limited IDLC Investments Limited 70,202,179 23,637,780 1,842,477 95,682,436 59,616,931 13,305,985 72,922,916

IDLC annual report 2011

Our Financial Performance -IDLC Group I

184

I Notes to the financial statements of the IDLC Group

2011 Taka

2010 Taka

33

Other expenses
Bank charges Books and periodicals Car expenses Donations and subscriptions Medical expenses Welfare expenses Entertainment Consultancy fees Oce service expenses Training expenses Travel and conveyances Brokerage Charges CDBL charges Loss on disposal of lease assets Repossession Fees and others 1,815,009 202,846 11,144,722 2,806,769 50,817 4,608,913 5,143,097 1,375,120 20,274,479 10,680,339 6,639,101 6,650,104 15,677,443 12,021,388 33,870,918 132,961,065 1,436,535 224,138 7,782,665 3,529,955 171,374 1,795,628 9,710,049 3,328,577 16,629,318 4,606,621 5,545,723 8,978,399 54,899,953 723,213 22,861,570 142,223,718

33a

Consolidated other expenses IDLC Finance Limited (Note-33) IDLC Securities Limited IDLC Investments Limited

132,961,065 35,081,400 4,914,893 172,957,358

142,223,718 169,511,630 311,735,348

34

Operating Segment Report


For the year 2011 Merchant banking Core business (Up to August 15th) Revenue and profit External revenue Net interest income Investment income Commission and brokerage Other Operating income Inter-segment revenue Total segment revenue Other operating expenses Major non-cash expenses: Depreciation Provision for future losses Total

1,271,642,203 185,918,988 2,639,225 210,016,857 1,670,217,273 552,359,575 62,432,375 (7,402,712) 607,389,238 1,062,828,035

195,672,542 176,798,061 372,470,603 54,296,945 3,129,577 1,489,931 58,916,453 313,554,150

1,467,314,745 185,918,988 179,437,286 210,016,857 2,042,687,876 606,656,520 65,561,952 (5,912,781) 666,305,691 1,376,382,185

Reportable segment profit before tax

Our Financial Performance -IDLC Group I

IDLC annual report 2011

185

I Notes to the financial statements of the IDLC Group

2011 Taka For the year 2010 Merchant Core business banking External revenue Net interest income Investment income Commission and brokerage Other Operating income Inter-segment revenue Total segment revenue Other operating expenses Major non-cash expenses: Depreciation Provision for future losses 1,028,701,173 390,064,160 3,107,383 144,147,910 1,566,020,626 517,385,933 200,849,707 519,383,667 720,233,374 104,703,548

2010 Taka

Total

1,229,550,880 390,064,160 522,491,050 144,147,910 2,286,254,000 622,089,481 50,851,429 119,323,814 104,610,634 615,622,740

48,661,522 2,189,907 121,606,635 (2,282,821) 687,654,090 878,366,536

792,264,724 Reportable segment profit before tax 1,493,989,276

Segment assets and liabilities The necessary information regarding assets and liabilities of operating segments in not separable and individually identifiable for this purpose. For this reason the assets and liabilities of the respective segments is has not been presented here.

34a

Consolidated operating Segment Report Revenue and profit For the year 2011
Merchant banking Core business (Up to August 15th) Subsidiaries Total

External revenue Net interest income Investment income Commission and brokerage Other Operating income Inter-segment revenue Total segment revenue Other operating expenses Major non-cash expenses: Depreciation Provision for future losses

1,030,961,264 185,918,988 2,639,225 210,016,857 240,680,939 1,670,217,273 552,359,575 62,432,375 (7,402,712) 607,389,238

195,672,542 351,077,927 - (293,760,914) 176,798,061 283,314,811 17,236,063 - (240,680,939) 372,470,603 117,186,948 54,296,945 3,129,577 1,489,931 58,916,453 215,762,595 25,479,663 35,724,357 276,966,615

1,577,711,733 (107,841,926) 462,752,097 227,252,920 2,159,874,824 822,419,115 91,041,615 29,811,576 943,272,306

Reportable segment profit before tax

1,062,828,035

313,554,150 (159,779,667)

1,216,602,518

IDLC annual report 2011

I Notes to the financial statements of the IDLC Group

Our Financial Performance -IDLC Group I

186

I Notes to the financial statements of the IDLC Group

Core business External revenue Net interest income Investment income Commission and brokerage Other Operating income Inter-segment revenue Total segment revenue Other operating expenses Major non-cash expenses: Depreciation Provision for future losses 860,524,340 238,646,900 11,881,085 90,629,521 1,201,681,846 317,294,804 44,843,458 116,447,491 478,585,753 723,096,093

For the year 2010 Merchant Subsidiary banking 81,819,272 213,461,437 295,280,709 70,967,736 6,814,543 27,960,044 105,742,323 189,538,386 (49,372,064) 85,458,995 378,207,275 1,474,342 415,768,548 40,069,069 9,514,829 5,405,288 54,989,186 360,779,362

Total 892,971,548 324,105,895 603,549,797 92,103,863 1,912,731,103 428,331,609 61,172,83 0 149,812,823 639,317,262 1,273,413,841

Reportable segment profit before tax

Segment assets and liabilities The necessary information regarding assets and liabilities of operating segments are not separable and individually identifiable for this purpose. For this reason the assets and liabilities of the respective segments have not been presented here.

35
35.1

Tax expenses
Current tax Provisions for current tax has been made on the basis of the profit for the year as adjusted for taxation purposes in accordance with the provisions of Income Tax Ordinance, 1984 and amendments made thereto. The current tax rate for the Company is 42.5% on taxable income. Full provision has been made for disputed tax against which appeal has been made and decision is pending. Deferred tax Deferred tax is provided using the balance sheet method for all temporary dierences arising between the tax base of assets and liabilities and their carrying values for financial reporting purposes as per Bangladesh Accounting Standard 12 Income Taxes. 2011 Taka 2010 Taka

35.2

35.3

Average eective tax rate The average eective tax rate is calculated below as per Bangladesh Accounting Standard 12 Income Taxes: Tax expenses Accounting profit before tax Average eective tax rate 572,153,206 1,376,382,185 41.57% 588,087,495 1,393,659,476 42.20%
IDLC annual report 2011

Our Financial Performance -IDLC Group I

187

I Notes to the financial statements of the IDLC Group

2011 Taka 35.3(a) Consolidated average eective tax rate

2010 Taka

The average eective tax rate is calculated below as per Bangladesh Accounting Standard 12: Tax expenses Accounting profit before tax Average eective tax rate 716,319,564 1,216,602,518 58.88% 629,132,691 1,956,230,807 32.16%

36

Earnings per share (EPS)


Earnings per share as shown in the face of the Profit and Loss Account is calculated in accordance with Bangladesh Accounting Standard 33: Earnings Per Share. Basic earnings per share has been calculated as follows: Earnings attributable to ordinary shareholders (Net profit after tax) Weighted average number of ordinary shares outstanding during the year Basic earnings per share 804,228,979 99,000,000 8.12 805,571,981 99,000,000 8.14

No diluted earning per share is required to be calculated for the year as there was no convertible securities for dilution during the year. 36(a) Consolidated earnings per share (EPS) Earnings per share as shown in the face of the consolidated Profit and Loss Account is calculated in accordance with Bangladesh Accounting Standard 33: Earnings Per Share. Basic earnings per share has been calculated as follows: Earnings attributable to ordinary shareholders (Profit after tax and minority interest) Weighted average number of ordinary shares outstanding during the year Basic earnings per share

500,283,267 99,000,000 5.05

1,327,097,073 99,000,000 13.41

IDLC annual report 2011

Our Financial Performance -IDLC Group I

188

I Notes to the financial statements of the IDLC Group

37

Related party disclosure


a. Particulars of Directors and their interest in dierent entities Name of the firms/companies in which interested as proprietor, partner, director, managing agent, guarantor, employee etc. Status in interested entities Chairman & CEO Chairman Chairman MD MD MD MD MD MD MD MD MD Director Director Director Director Director Director Director Director Director Director Director Vice Chairman MD MD MD MD MD MD MD MD MD Director Director Director Director Director Director Director Director Director (%) of Holding/ Interest in the concern as on 31.12.2011 3.10% 2.50% 1.33% 37.50% 10.00% 35.00% 40.00% 50.00% 50.00% 0.20% 37.50% 75.00% 2.08% 15.00% 35.00% 15.00% 15.00% 37.50% 37.50% 15.00% 25.00% 25.00% 4.58% 75.00% 75.00% 75.00% 75.00% 15.00% 10.00% 75.00% 75.00% 80.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 2.00% 50.00% 10.00%
IDLC annual report 2011 Our Financial Performance -IDLC Group I

SL no.

Name of Directors

Status in IDLC

1. 2.

Mr. Anwarul Huq Mr. Rubel Aziz

Chairman Finaccord Trading Limited Director The City Bank Limited Janata Insurance Co. Limited Partex Plastics Furniture Limited Fotoroma Limited Partex Properties Limited Partex Foundry Limited New Horizon Farms Limited New Era Milk Processing Limited Partex Beverage Limited Partex Plastics Limited Partex Jute Mills Limited Amber Cotton Mills Limited Partex Real Estate Limited Partex Rotor Limited Partex Sugar Mills Limited Partex Denim Limited Partex Rotor Spinning Mills Limited Partex Energy Limited Dhakacom Limited Partex Spinning Mills Limited Partex Ceremic Limited The City Bank Limited Partex Star Group Partex PVC Industries Limited Star Particle Board Mills Limited Partex Furniture Industries Limited Partex Laminates Limited Partex Real Estate Limited Partex Limited Corvee Maritime Co. Limited Partex Builders Limited Fairhope Housing Limited Rubel Steel Mills Limited Danish Condensed Milk (BD) Limited Danish Foods Limited Danish Milk Bangladesh Limited Danish Distribution Network Limited Danish Dairy Firm Limited Janata Insurance Co. Limited Partex Housing Limited GSP Finance Company (BD) Limited

3.

Mr. Aziz Al Kaiser

Director

189

I Notes to the financial statements of the IDLC Group

SL no.

Name of Directors

Status in IDLC

Name of the firms/companies in which interested as proprietor, partner, director, managing agent, guarantor, employee etc. The City Bank Limited The City General Insurance Company Ltd. Hossain Dyeing & Printing Mills Ltd. Mehmood Industries (Pvt) Limited Anwar Silk Mills Limited Anwar Cement Mills Limited Khaled Iron & Steel Mills Limited Anwar Ispat Limited A-1 Polymer Anwar Jute & Spinning Mills Limited Anwar Galvanizing Limited

Status in interested entities

(%) of Holding/ Interest in the concern as on 31.12.2011 0.02% 3.03% 20.33% 30.00% 19.67% 8.06% 6.76% 33.33% 29.97% 20.81% 5.68% 0.29% 1.68% -

4.

Mr. Hossain Mehmood

Director

Director Director MD MD MD Director Director Director Director Director Director Vice Chairman Director Managing Director & CEO Nominated Director of CBL Chief Operating Ocer

5.

Ms. Meherun Haque

Director

The City Bank Limited Phoenix Insurance Company Ltd

6.

Mr. Kazi Mahmood Sattar

Director

The City Bank Limited Unique Hotel & Resorts Limited

7.

Mr. Md. Habibur Rahman Mollah Mr. Md. Rezaul Karim

Director

Transcom Group

Director

MD DirectorInvestment Corporation of Bangladesh Nominated by SBC DirectorCentral Depository Bangladesh Ltd Nominated by SBC DirectorNational Housing Finance & Nominated by SBC Investments Ltd DirectorNational Tea Company Limited Nominated by SBC DirectorBangladesh Insurance Academy. Nominated by SBC Sadharan Bima Corporation Mercantile Bank Limited Chittagong Stock Exchange Limited Centre for Corporate Social Responsibility (CSR) Managing Director & CEO Director Chairman of the Board of Trustees

9.

Mr. A.K.M Shahidul Haque Mr. Farooq Sobhan

Director Director

10

IDLC annual report 2011

Our Financial Performance -IDLC Group I

190

b. c.

Significant contract where FI is party and wherein Directors have interest - Nil Related party transactions

Parties are considered to be related if one party has the ability to control the other party or exercises significant influence over the other party in making financial and operational decision and include associated companies with or without common Directors and key management positions. The Company has entered into transaction with other related entities in normal course of business that fall within the definition of related party as per Bangladesh Accounting Standard 24: Related Party Disclosures. Transactions with related parties are executed on the same terms, including interest rate and collateral, as those prevailing at the time for comparable transactions with other customers of similar credentials and do not involve more than a normal risk. Details of transactions with related parties and balances with them as at December 31, 2011 were as follows: Name of the related party Transaction nature Relationship Balance as at January 1, 2011 Taka Sadharan Bima Corp Mercantile Bank Ltd Transcom group Debenture Zero coupon bond Lease/Loan Sponsor shareholder General shareholder Shareholder (300,000,000) (62,500,000) 63,510,555 (298,989,445)
d. e.
Our Financial Performance -IDLC Group I

Addition Taka (20,000,000) (20,000,000)

Adjustment Taka 120,000,000 25,000,000 (38,928,725) 106,071,275

Balance at year end receivable/ (payable) Taka (200,000,000) (37,500,000) 24,581,830 (212,918,170)

Share issued to Directors and executives without consideration or exercisable at a discount - Nil Lending policy to related parties Related parties are allowed Loans and Advances as per General Loan Policy of the Company.
I Notes to the financial statements of the IDLC Group

f.

Loans, advances and leases to Directors and their related concern

Name of the related party

Transaction nature

Classification status

Provision kept

Security amount

Transcom group

Lease/Loan

Standard

245,900

2,665,680

g.

Investment in the Securities of Directors and their related concern - Nil

IDLC annual report 2011

191

38

Receivable from Directors


The Company does not have any receivable from any of the Directors of the Company as at December 31, 2011.

39

Disclosure on Audit committee


a. Particulars of audit committee The audit committee of the Board was duly constituted by the Board of Directors of the Company in accordance with the Securities and Exchange Commission notification ref no. SEC/CMMRRCD/2006158/Admin/02-08 dated February 20, 2006 and Bangladesh Banks DFIM circular no.13 dated October 26, 2011. The Audit Committee of the Board of Directors consisted of the following 5 (five) members of the Board:

Name Mr. Md. Habibur Rahman Mollah, FCA Mr. Anwarul Huq Mr. Rubel Aziz Mr. Md. Rezaul Karim Mr. Farooq Sobhan

Status at the Company Director Chairman Director Director Independent Director

Status at committee Chairman Member Member Member Member

The company secretary is to act as Secretary of the Audit Committee . b. Meetings held by the committee during the year by date: Meeting No 21st 22nd 23rd 24th Held on 24-Feb-2011 25-Jul-2011 26-Oct-2011 22-Dec-2011

c. The audit committee meeting held four (4) times during the year 2011 to carry out the following tasks: i) Reviewed the Financial Statements for the year ended December 31, 2010. ii) Reviewed Management Letter received from statutory auditor Rahman Rahman Huq, Chartered Accountants, for the year ended December 31, 2010 on the annual audit on Financial Statements of IDLC Finance Limited. iii) The expression of interest sent by the Audit Firms were reviewed by the Audit Committee and recommended for appointing Hoda Vasi Chowdhury & Co., Chartered Accountants, as auditor of the Company for the year 2011.
IDLC annual report 2011

Our Financial Performance -IDLC Group I

192

iv) Reviewed and approved IDLCs internal control and compliance manual. v) Reviewed the Bangladesh Bank Inspection Report as of June 30, 2010 and managements response to the report. vi) Reviewed internal audit reports on operational, financial procedures, branch activities and audit rating thereof . vii) Discussed and agreed to strictly comply with revised terms of reference of audit committee circulated by Bangladesh Bank. viii) Reviewed and approved risk-based annual audit plan and checklist for 2011.

40

Foreign remittance
There were no foreign remittance during the year 2011.

41

Number of employees
The Company paid an aggregate amount more than Taka 36,000 per annum to 250 employees and more than Tk. 3,000 per month to 179 employees who were in employment for full year or part of the year.

42
42.1

Subsequent events
Dividend for the year 2011 The Board of Directors at the 191st Board Meeting held on February 22, 2012, recommended to the shareholders a stock dividend @ 25% i.e. one share for every four fully paid shares of Tk 10 each held (amounting to Tk. 247,500,000). This will be considered for approval by the shareholders at the 27th Annual General Meeting (AGM) to be held on March 29, 2012.

43
43.1

General
The Company publishes its quarterly accounts as per the Securities and Exchange Commission (SEC) Notification No. SEC/CMRRCD/2008-183/Admin/03-34, dated September 27, 2009. The Company does not have any restriction on distribution and payment of dividends. During the year under report, no matters were submitted to a vote of shareholders of the Company. Previous year have been rearranged where necessary to conform current year presantation.

43.2 43.3 43.4

Our Financial Performance -IDLC Group I

IDLC annual report 2011

193

I Directors Report -IDLCSL

IDLC Securities Limited


(A Fully Owned Subsidiary of IDLC Finance Limited)

Directors Report to the Shareholders


It is the immense pleasure of the Board in presenting the Directors Report, the audited Balance Sheet and Income statements of the company for the year ended December 31, 2011 and auditors report thereon along with capital market overview, Companys performance and other matters in compliance of the Companies Act 1994. IDLC Securities Limited (IDLCSL) was incorporated in Bangladesh as a private limited Company on April 19, 2006 under the Companies Act 1994. The Company commenced its operation on September 18, 2006. IDLC Securities Limited was set up to cater the needs of the institutional and individual investors in the capital market. The company oers full-fledged international standard brokerage services for both local & foreign individual and retail &institutional clients as well as foreign institutional investors. IDLC Securities Limited provides a high standard of professional and personalized services to its local and international clients. It has proven track record of quality client services and strict compliance with local rules and regulations with high standard of both corporate and employees ethics. Core competencies:

Trusted Clients Service Strong Corporate Branding Online Customer Order management through web, e-mail, SMS and call centre Quality Human Resource A network spanning 9 branches, with 109 employees, servicing more than 7,900 institutional and individual clients Superior Clients Service Ecient trade execution

Major Functions: Brokerage Services:


Trade execution through Dhaka and Chittagong Stock Exchange for both local and foreign individual and institutional investors Safe keeping of physical shares Trade execution of portfolios of Merchant Bankers portfolio account holders

CDBL Services:
IDLC annual report 2011

BO (Beneficial Owner) accounts opening and maintenance Dematerialization and Re-materialization of shares Transfers and transmission of securities Pledging, un-pledging and confiscation of securities Corporate events announcement Enquiry BO ISIN balances enquiry

Groups Subsidiary-IDLCSL I

194

I Directors Report -IDLCSL

Customer Focus:

Retail Individual Investors High Net worth Individual Clients Non Resident Bangladeshi Investors Corporate Investors- Merchant banks and Mutual Fund and others Foreign Investors

Operational Highlights 2011: A. Client base: FY 2006 Individual & Joint Account opened during the year Institution & Foreign NRB Total Number of Account Account opened during the year Growth (year to year) Account closed during the year Total account closed till date Number of accounts after closure 126 14 4 126 108 FY 2007 1,452 1,344 37 23 40 36 1,529 1,403 100% 24 24 1,505 FY 2008 2,638 1,186 67 30 93 53 2,798 1,269 83% 15 39 2,759 FY 2009 4,405 1,767 85 18 141 48 4,631 1,833 66% 36 75 4,556 FY 2010 6,882 2,477 108 23 166 25 7,156 2,525 55% 57 132 7,024 FY 2011 9,018 2,136 129 21 187 21 9,334 2,178 30% 1,214 1,346 7,988

Groups Subsidiary-IDLCSL I

IDLC annual report 2011

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IDLC SL is concentrating it business to cash based clients from margin account clients over the year.

IDLC annual report 2011

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D. Order Management System (OMU):


IDLC Securities Limited established the order management system (OMU) in 2010 and it was fully functional in 2011. The main objective of OMU is to facilitate those investors who are not able to come physically at our oces premises to execute trade. Under OMU, IDLCSL provides the following services to its local, NRB & foreign investorsCall Center Through the call center our professional associates assist the investors executing their trades eciently. They also meet dierent queries of the investors regarding their portfolios or any trading rules and regulations. i-trade Under this facility investors could access their portfolio or portfolios they manage and also execute trades through internet from anywhere of the world. m-trade Under this service, investor could access portfolio on their mobile phone by using a Java based application. The investors could also place buy or sell order from that application. After execution of the trade, they will get a confirmation SMS. SMS Based Service Under this service, investors could place order or query their portfolio by sending SMS in a predefined format. To avail the service investors have to register their mobile number with IDLCSL. As of December 31, 2011 there were 1,674 registered investors who are availing the above services from IDLC Securities Limited. Services Number of registered investors Financial Highlights: In 2011, IDLCSL has averagely secured the 4th position in terms of turnover in the Dhaka Stock Exchange. IDLCSLs operating result during the year 2011 is summarized below: (Amount in BDT million) 2011 Turnover in DSE & CSE Total assets Operating revenue Operating expenses Net profit/(loss) before tax Net profit/(loss) after tax & provision Total Shareholders Equity Return on total assets (%) Return on shareholders equity (%) * Cash dividend paid Tk 20 crore 74,952 1,096.26 208.77 206.52 (56.76) (164.06) 749.84 -11.22 -17.61 2010 232,969 1,827.60 591.07 203.06 652.49 521.53 1,113.90 34.65 61.13
IDLC annual report 2011 Groups Subsidiary-IDLCSL I

Call Center 1,674

Internet 1,619

Mobile 936

SMS 849

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I Directors Report -IDLCSL

In 2011, IDLCSL secured a negative turnover growth of 67.83% compared to last year which was slightly higher than overall market turnover growth. The Company registered an operating profit of BDT 191.19 million in 2011 compared to Tk 536.38 million in 2010 making a negative growth of 64.36%. The net loss after tax of the Company as of 31st December 2011 stood at BDT 164.06 million compared to previous years net profit of BDT 521.53 million making a negative growth of 130.65%. General and administrative expense increased by 27.45% from BDT 148.36 million in 2010 to BDT 189.08 million in 2011. Human Resource Development IDLCSL strongly believes that its quality human resources are its best assets and recognizes them as building blocks for Companys performance and development. IDLCSL continues to develop and implement proper Human resources policies to motivate its employees and ensure their optimum contribution towards the achievement of the company goals and ethical standard. As IDLCSL believes that human resources give a significant competitive edge in the market, we continue our policy of recruiting the best professionals and implement dierent training and motivational program to develop and retain high quality human resources. At the end of 2011 the number of employee in IDLCSL was 109 and in 2010 it was 127.

IDLC annual report 2011

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IDLCSL strongly emphasized on training as a joint investment by employees and employer. In 2011, IDLCSL HR arranged dierent in-house training programs as well as many local and customized training for employees development in 2011. Our HR division aims at providing all out eorts towards converting the human resources into human capital.

Training provided during 2011 Number of training In house Local Total 37 9 46 Number of participants 645 20 665

Future Outlook

Demutualization of Stock Exchanges will be done in FY 2012 which will increase the transparency and accountability of stock exchange Entrance of new issues in the market will create good investment opportunity for the investors. More foreign investment is expected to enter in Bangladesh Capital Market due to under valuation of securities and regulatory liberalization of sell side research. Regulator might release more IPO in the FY 2012, 2013 & 2014 to meet up the demand of quality stocks in the capital market. Flow of margin loan in capital market tend to be limited in coming years due to conservative approach of market participants. Downward attitudes of capital market resulting switching of quality resources to other industries 2012 might give good opportunity for accumulation for strategic investment

Action Planned:

Concentration on Cash client (low market risk). Developing multi-tasking capacity in all levels of people that directly or indirectly enable sales and business. Develop and setting up institutional and foreign business target, KPI for identifying potentials in all respects, we must coin the brand nationally and internationally. Developing sale side research, advisory and stock rating services.

Distribution of profit for 2011: The Company made a loss of BDT 164,064,193 in the year 2011. As the Company made a loss in 2011, the Board proposed not to pay any dividend to the shareholders for the year 2011.

Groups Subsidiary-IDLCSL I

IDLC annual report 2011

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Appointment of Auditors: In terms of Article 102 of the Articles of Association of the Company, the Company shall at each annual general meeting, appoint an auditor or auditors to hold oce until the next annual general meeting. The Auditors of the Company M/s Hoda Vasi Chowdhury & Co. Chartered Accountants has completed 1st year as Auditor of the Company and they are eligible for re-appointment as Auditors of the Company for the year 2012. For and on behalf of the Board of Directors,

Selim R.F. Hussain Chairman

IDLC annual report 2011

Groups Subsidiary-IDLCSL I

200

AUDITORS REPORT TO THE SHAREHOLDERS OF IDLC SECURITIES LIMITED


We have audited the accompanying financial statements of IDLC SECURITIES LIMITED, which comprises the statement of financial position as at 31 December, 2011 and the related statement of comprehensive income, statement of cash flows and Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Accounting Standards (BAS) & Bangladesh Financial Reporting Standards (BFRS), the Companies Act 1994 and other applicable laws and regulations. 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. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion: In our opinion, the Financial Statements prepared in accordance with Bangladesh Accounting Standards (BAS) & Bangladesh Financial Reporting Standards (BFRS), give a true and fair view of the state of the companys affairs as at 31 December, 2011 and of the results of its operations and its cash flows for the year then ended and comply with the Companies Act 1994 and other applicable laws and regulations. Further to our opinion in the above paragraph, we state that: (i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof;

(ii) in our opinion, proper books of account as required by law have been kept by IDLC SECURITIES LIMITED, so far as it appeared from our examination of those books; (iii) the companys Statement of Financial Position, Statement of Comprehensive Income, Statement of Cash Flow and Statement of Changes in Equity dealt with by the report are in agreement with the books of account and returns. (iv) the expenditure incurred was for the purpose of the companys business.
IDLC annual report 2011

Dhaka 15 February 2012

Chartered Accountants

201

I Statement of Financial Position

IDLC SECURITIES LIMITED


Statement of Financial Position
As at December 31, 2011

Particulars

2011

2010

SOURCES OF FUNDS Share capital Retained earnings Shareholder's Equity APPLICATION OF FUNDS Non-current assets Fixed assets (at cost less accumulated depreciation) Intangible assets Membership at cost DSE CSE Current Assets Advances, Deposits and Prepayments Investment in securities Accounts receivable Deferred tax assets Margin loan to clients Cash & cash equivalents Current Liabilities Accounts payable Provision for expenses Provision for current tax Provision for diminution in value of investments Net Current Assets Net Assets
71,821,958 854,607 18,676,000 15,225,000 88,188,773 749,271 18,676,000 15,225,000

400,000,000 349,839,079 749,839,079

200,000,000 913,903,272 1,113,903,272

3,451,000 1,004,907,956 47,788,336 152,487,867 150,769,605 10,635,302 327,307 642,899,539 346,421,445 243,759,445 3,862,308 52,224,568 46,575,123 658,486,511 749,839,079

3,451,000 1,719,986,843 45,200,087 118,045,774 626,224,113 8,406,730 922,110,139 713,697,614 662,607,091 581,723 39,658,034 10,850,767 1,006,289,228 1,113,903,272

IDLC annual report 2011

Managing Director

Director

Chairman

Chartered Accountants

Groups Subsidiary-IDLCSL I

202

I Statement of Comprehensive Income

IDLC SECURITIES LIMITED


Statement of Comprehensive Income
For the year ended December 31, 2011

Particulars

2011

2010

Operating revenue Brokerage commission Other operating revenue Direct expenses Net revenue from operation Other revenue Capital gain/ (loss) from sale of securities Net interest income Other non-operating revenue Total revenue General & administrative expenses Salaries & allowances Rent, taxes, insurance, electricity, etc Legal expenses Postage, stamp, telecommunication, etc Stationery, printing, advertisements, etc Directors' Fees Auditors' Fees Depreciation and repair of company's assets Other expenses Profit/ (loss) before provision Provision for diminution in value of investments Net profit/ (loss) before income tax Provision for Income tax Current tax Deferred tax Net profit/(loss) after tax

208,770,194 206,986,294 1,783,900 17,583,477 191,186,717 (23,290,783) (101,584,509) 67,644,186 10,649,541 167,895,934 188,936,788 74,830,093 50,171,838 5,863,168 12,510,427 4,126,608 115,000 183,950 23,637,780 17,497,924 (21,040,853) 35,724,357 (56,765,210) 107,298,983 117,934,285 (10,635,302) (164,064,193)

591,067,099 588,685,399 2,381,700 54,691,546 536,375,552 269,928,787 231,503,615 33,080,567 5,344,605 806,304,339 148,364,567 75,781,539 24,363,191 4,488,995 8,308,835 7,585,695 69,000 173,000 13,190,690 14,403,622 657,939,773 5,445,479 652,494,294 130,968,158 130,968,158 521,526,136

Chartered Accountants

Groups Subsidiary-IDLCSL I

IDLC annual report 2011

Managing Director

Director

Chairman

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I Directors Report -IDLCIL

IDLC Investments Limited


(A Fully Owned Subsidiary of IDLC Finance Limited)
Directors Report to the Shareholders The Directors have the pleasure in presenting the audited financial statements of the company for the year ended December 31, 2011 and auditors report thereon Companys performance and other matters in compliance with Companies Act 1994. IDLC Investments Limited (IDLCIL) was incorporated in Bangladesh as a private limited Company on May 19, 2010, under the Companies Act 1994. It is a wholly owned subsidiary of IDLC Finance Limited since inception. However the Company received Merchant Banking License from SEC on August 02, 2011 and commenced it operation on August 16, 2011. This new company took over all the business, operations and services of the Merchant Banking Division of IDLC Finance Limited on the commencement date. The Companys principal activities are Investment Banking (Issue management, Underwriting, and Corporate Advisory), Discretionary Portfolio Management, Margin Lending and Custodial Services. The company also produces top grade equity research and publishes it in the Bloomberg. IDLC Investments Limited provides a high standard of professional and personalized services to its local and NRB clients. It has proven track record of serving clients satisfying their needs and wants while maintaining strict compliance with countrys laws and highest ethical standards. IDLC has been treated as one of the top ranking merchant bankers in the country for its quality investment banking and portfolio management services. Core competencies:

Trusted Clients Service Better Risk Management for both Company and its clients Due to strict compliance of rules and regulations - respected in the eyes of regulators Experienced fund managers Experienced investment banking team Trend setter executed first book-building case Launched Order Management System through multiple channels like internet trading, call center, SMS and mobile application.

Major Functions: Investment Banking IDLC Investments Limited has been treated as one of the top Investment bankers in the country for its quality services. Over a decade of its journey, it has become the first preference of potential issuer companies. With a long experience in investment banking, we assist our clients throughout the entire Initial Public Oer (IPO) process starting from capital structuring and pre-issue preparations till successful listing and post IPO processes. Our core strength lies in correctly positioning the company in the financial market to procure the right valuation of the enterprise, showcasing of the enterprise to the right investors, suggesting the best financial structure, and completing the entire process smoothly with our strong co ordination with regulatory authorities. We aim to provide the maximum return to the investors on the one hand and on the other hand try to ensure growth and continuous value creation of the company intending to go for public oer. Therefore, our post-listing support to the companies nurtures them to face the new regulatory environment where they enter after listing.

IDLC annual report 2011

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What we look for IPO Clients:


Companies with good brand value Strong presence in the market Good corporate governance Transparency & accountability Qualified management

Our Investment Banking Operation focuses on:


Initial Public Oering (IPO) of both equity and debt issuance Repeat Public Oering (RPO) of both equity and debt issuance Rights issue management Underwriting of IPO, RPO & Rights Issue Corporate Advisory on pre-IPO Capital Raising Arranging pre-IPO private placement/capital raising and Substantial share acquisition and take over.

Portfolio Management IDLC Investments Limited oers the following Portfolio Management Services:

MaxCap - Discretionary Portfolio Management: IDLC Investments experienced team of fund managers manages portfolios on behalf of the clients, both individuals and institutions, following a disciplined investment process and structured approach to build the portfolio which is tailored to specific client needs and constraints. CapInvest - Non-discretionary Portfolio Management / Margin Lending: IDLC Investments oers margin loan to portfolio investors following internal policies. Besides facilitating trading (executed at clients discretion), we collect dividends, subscribe to rights oers and help ensure that clients entitlements are ensure arising out of dierent corporate actions. IDLCs professional research team prepares list of marginable securities and updates it regularly.

Equity Research

Groups Subsidiary-IDLCIL I

IDLC annual report 2011

Company Coverage- Research coverage on listed companies; Industry Coverage- Research coverage on industries; Economic Coverage National Budget Review Monetary Policy Statement Review Economic Review etc. Publications Capital Market Review IDLCIL Investment Insight (company research published in Financial Expresss on every weekend). Daily Market Commentary Weekly Mutual Fund Update Monthly Market Commentary Flash note on price sensitive information Synopsis on newly listed companies; Price Discovery under Book-Building Method; Research dissemination through Bloomberg Terminal.

205

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Performance Highlights Considering that 2010 was a year of exceptional Bull Run, the performance of 2010 cannot be expected to sustain in the year after. Despite all the market vulnerabilities, the Company registered profits before tax of BDT 98.59 million during August 16, 2011 to December 31, 2011.During the year, market capitalization as well as turnover witnessed significant drop impacting our management fees, transaction and settlement fees. We also kept growth of margin loan basket restrained in order to minimize the downfall risks. Financial Highlights Despite all vulnerabilities, the merchant banking function earned taka 98.59 million during August 16, 2011 to December 31, 2011 as profit before tax for 4.5 months operation. The following table shows further breakdown of revenue streams. A1: Portfolio Operations (16 Aug. 2011 to Dec. 2011) Operational Revenue Net Interest Income Management Fees Transaction Commission Documentation Fees Total Operational Revenue Cap Invest 42,457,175 44,733,604 11,181,891 21,500 98,394,170 MaxCap 295,628 6,710,896 1,729,624 1,000 8,737,148

A2: Investment Banking (16 Aug 2011 to Dec, 2011) Revenue From Investment Banking Issue Management Fees Corporate Advisory Fees Underwriting Commission Total Revenue From Investment Banking Fig. in BDT 2,000,000 9,950,000 11,950,000

IDLC annual report 2011

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Revenue from Investment Banking was BDT 11.95 million, where significant contribution was mainly from Corporate Advisory Fees followed by Issue Management Fees. Due to market turmoil, the book building process was kept at abeyance by the regulator. Also some of the pipeline deals could not be closed due to bearish mood of the market. Operational Expenses CDBL Expense Salary and Allowances General & administrative expenses Total Operational Expenses Fig. in BDT 1,976,541 23,128,810 8,008,806 33,114,157

For 4.5 months of FY 2011, total BDT 33.11 million expenses were incurred for merchant banking operations. One major component is salary and allowance followed by general and administrative expenses; however CDBL expenses are variable in nature and proportionate to the turnover of the company. The company implemented various cost cutting measures during the year. Human Resource Development IDLCIL strongly believes that its human resources are its finest assets and recognize them as building blocks on which the Companys performance and development are based upon. IDLCIL continues to develop and implement proper human resource policies to motivate its employees and ensure their optimum contribution towards the achievement of the company goals. As the human resources of IDLCIL give the Company a significant competitive edge in the market, the Company continues its policy of recruiting the best professionals and implement dierent training and motivational program to develop and retain high quality employees. Number of Permanent Employees: IDLC Investments Limited No. of Employees Total Female 8 41 Male 33

Groups Subsidiary-IDLCIL I

207

IDLC annual report 2011

I Directors Report -IDLCIL

Training provided during 2011

No. of Training Local Foreign Group Training Total 2 1 7 10

No. of Participants 20 1 25 46

Total Cost 105,550 199,150 133,892 438,591

During the year, two local trainings took place; Employees were put mainly in group training for the enhancement of competencies of our sta. However 20 employees took local training where as one took foreign. Besides, there were several trainings organized by IDLC Group Oce. Future Outlook

Volatility of the secondary market may hamper the primary market. IPO market is still attractive. Volatility of the secondary market may hamper the primary market. IPO market is still attractive. Capital rising has emerged as a new revenue source of the Issue Management Company. Whereas 2011 has been very volatile with sharp fall, 2012 may be ushered with further fall in price and volume amid less volatility and flat tail 2012 will give good opportunity for accumulation for strategic investment Advisory Service for investors can open up new avenue of product oerings for us. Currently SEC is preparing the guideline for the service. Maintain leadership position in Investment Banking. Positioning our Research works as No. 1 in the market. Managing the downside risk of Margin Loan. Aggressive selling through sales & marketing team.

IDLC annual report 2011

Groups Subsidiary-IDLCIL I

208

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Distribution of Profit for 2011: The Company made a profit of BDT 61,725,607 in the year 2011. As the company commenced it operation on August 16, 2011 and it was the first year of the operation of the Company, the Board proposed not to pay any dividend to the shareholders for year 2011. Appointment of Auditors: In terms of Article 18.2 of the Articles of Association of the Company, the Company shall at each annual general meeting, appoint an auditor or auditors to hold oce until the next annual general meeting. The Auditors of the Company M/s Hoda Vasi Chowdhury & Co. Chartered Accountants has completed 1st year as Auditor of the Company and they are eligible for re-appointment as Auditors of the Company for the year 2012. For and on behalf of the Board of Directors,

Selim R.F. Hussain Chairman

Groups Subsidiary-IDLCIL I

IDLC annual report 2011

209

AUDITORS REPORT TO THE SHAREHOLDERS OF IDLC INVESTMENTS LIMITED


We have audited the accompanying financial statements of IDLC INVESTMENTS LIMITED, which comprises the statement of financial position as at 31 December, 2011, related statement of comprehensive income, statement of cash flow and statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. Managements Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Accounting Standards (BAS) & Bangladesh Financial Reporting Standards (BFRS), the Companies Act 1994 and other applicable laws and regulations. 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. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion: In our opinion, the Financial Statements prepared in accordance with Bangladesh Accounting Standards (BAS) & Bangladesh Financial Reporting Standards (BFRS), give a true and fair view of the state of the companys affairs as at 31 December, 2011 and of the results of its operations for the year then ended and comply with the Companies Act 1994 and other applicable laws and regulations. Further to our opinion in the above paragraph, we state that: (i) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof;

(ii) in our opinion, proper books of account as required by law have been kept by IDLC Investments Limited, so far as it appeared from our examination of those books; (iii) the companys Statement of Financial Position, Statement of Comprehensive Income, Statement of Cash Flow and Statement of Changes in Equity dealt with by the report are in agreement with the books of account and returns.
IDLC annual report 2011

(iv) the expenditure incurred was for the purpose of the companys business.

Date: Dhaka 15 February 2012

Chartered Accountants

210

I Statement of Financial Position

IDLC INVESTMENTS LIMITED


Statement of Financial Position
As at 31 December 2011

PARTICULARS

BDT 2011

ASSETS Non-Current Assets Property, Plant and Equipment - Net o Accumulated Depreciation Intangible Assets Deferred tax - assets Current Assets Margin loan to portfolio clients Accounts Receivable Advance, Prepayments & Deposits Advance Income Tax (AIT) Cash & Cash Equivalents TOTAL ASSETS EQUITY AND LIABILITIES Shareholders' Equity Share capital Accumulated profit Deferred Liabilities - Gratuity payable Current Liablities Borrowing from Banks and Fianancial Institutions Deposit from portfolio clients Accounts Payables Accruals and Provisions Other Payables Inter-company account TOTAL EQUITY AND LIABILITIES

23,310,561 22,785,767 524,794 104,993 4,906,751,637 4,726,534,315 94,196,255 55,000 737,665 85,228,402 4,930,167,192

460,117,768 400,000,000 60,117,768 2,579,472 4,467,469,953 3,669,276,020 491,320,832 250,456,907 35,925,510 3,880,235 16,610,449 4,930,167,192

Managing Director

Director

Chairman

Groups Subsidiary-IDLCIL I

IDLC annual report 2011

Chartered Accountants

211

I Statement of Comprehensive Income

IDLC INVESTMENTS LIMITED


Statement of Comprehensive Income
For the year ended 31 December 2011

PARTICULARS

BDT 2011 283,433,742 (240,680,939) 42,752,803 51,444,501 12,911,516 22,500 11,950,000 12,625,817 88,954,334 131,707,137

Interest Income Interest Expenses Net Interest Income Income from Portfolio Mangerment sevices Settlement and Transaction Fees Documentation Charges Income from Investment Banking Other income Total Revenue Cost to the revenue CDBL Expenses Operating Income Administrative expenses Profit before tax Income Tax (expense)/income: Current @ 37.5% Deferred Profit after tax for the year

(1,976,541) 129,730,597 (31,137,615) 98,592,982

(36,972,368) 104,993 (36,867,375) 61,725,607

Managing Director

Director

Chairman

IDLC annual report 2011

Chartered Accountants

Groups Subsidiary-IDLCIL I

212

I Disclosure under Pillar III-Market Discipline

Disclosure under Pillar III-Market Discipline


A) Scope of application Qualitative Disclosures: (a) The name of the top corporate entity in the group to which this guidelines applies.

IDLC Finance Limited

(b) An outline of dierences in the basis of consolidation for accounting and regulatory purposes, with a brief description of the entities within the group (a) that are fully consolidated; (b) that are given a deduction treatment; and (c) that are neither consolidated nor deducted (e.g. where the investment is risk-weighted). IDLC has two wholly owned subsidiaries: IDLC Securities Limited and IDLC Investments Limited, which are fully consolidated.

(c) Any restrictions, or other major impediments, on transfer of funds or regulatory capital within the group.

Not applicable.

Quantitative Disclosures: (d) The aggregate amount of capital deficiencies in all subsidiaries not included in the consolidation that are deducted and the name(s) of such subsidiaries.

Capital deficiency of IDLC Investments limited is included in consolidation.

B) Capital structure Qualitative Disclosures (a) Summary information on the terms and conditions of the main features of all capital instruments, especially in the case of capital instruments eligible for inclusion in Tier 1 or in Tier 2.

Tier 2 capital includes: i) General provision up to a limit of 1.25% of Risk Weighted Asset (RWA) for Credit Risk; ii) Revaluation reserves: 50% Revaluation reserve for fixed assets; 45% Revaluation reserve for securities; iii) All other preference shares.

Conditions for maintaining regulatory capital: The calculation of Tier 1 capital, and Tier 2 capital, shall be subject to the following conditions: i) The amount of Tier 2 capital will be limited to 100% of the amount of Tier 1 capital.
IDLC annual report 2011

Stakeholders Corner I

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I Disclosure under Pillar III-Market Discipline

ii) 50% of revaluation reserves for fixed assets and 45% of revaluation reserves for securities are eligible for Tier 2 capital. Quantitative Disclosures: (b) The amount of Tier 1 capital, with separate disclosure of: Particulars Paid up capital Non-repayable share premium account Statutory reserve General reserve Retained earnings Minority interest in subsidiaries Non-cumulative irredeemable preference shares Dividend equalization account Total Tier 1 capital (c) The total amount of Tier 2 capital. (d) Other deductions from capital. (e) Total eligible capital. C) Capital Adequacy Qualitative Disclosures (a) A summary discussion of the FIs approach to assessing the adequacy of its capital to support current and future activities.

Amount in crore Taka 99 0.38 56.24 81.13 156.82 4.65 398.20 26.18 424.38

Risk Weighted Assets (RWA) and Capital Adequacy Ratio (CAR) IDLC has adopted Standardized Approach for computation of Capital Charge for Credit Risk and Market Risk while Basic Indicator Approach for Operational Risk. Total Risk Weighted Assets (RWA) of the Company is determined by multiplying the capital charge for market risk and operational risk by the reciprocal of the minimum capital adequacy ratio i.e. 10% as on December 2011 and adding the resulting figures to the sum of risk weighted assets for credit risk. Total RWA is then used as denominator while total Eligible Regulatory Capital as on numerator to derive Capital Adequacy Ratio.

Strategy to achieve the required Capital Adequacy:

Operational level: Immediate measures:


Asking unrated Corporate clients to have credit rating from External Credit Assessment Institutions (ECAIs) recognized by Bangladesh Bank; Rigorous monitoring of overdue contracts to bring those under 90 days overdue; Assessing incremental eect of capital charge over the expected net income from financing before sanctioning any appraisal, which could be one of the criteria for taking financing decision.

Continuous measures:
IDLC annual report 2011

Concentrating on SME clients having exposure up to BDT 1 crore as this will carry 75% fixed risk weight (for regular contracts only); Financing clients having good credit rating;

Stakeholders Corner I

214

I Disclosure under Pillar III-Market Discipline

Using benefit of credit risk mitigation by taking eligible financial collaterals against transactions; Focusing more on booking high spread earning assets and thus increasing retained earnings.

Strategic level:

Injecting fresh capital by issuing right shares, if required. Amount in crore Taka 2,679.30 69.91 368.36

Quantitative Disclosures (b) Capital requirement for Credit Risk (c) Capital requirement for Market Risk (d) Capital requirement for Operational Risk (e) Total and Tier 1 capital ratio:

For the consolidated group; and For stand alone Particular Consolidated 13.61 12.77 Solo 11.92 11.03

CAR on Total capital basis (%) CAR on Tier 1 capital basis (%) D) Credit Risk Qualitative Disclosures

(a) The general qualitative disclosure requirement with respect to credit risk, including:

Definitions of past due and impaired (for accounting purposes) As per the Bangladesh Banks Prudential Guideline on Capital Adequacy and Market Discipline for Financial Institutions, the unsecured portion of any claim or exposure (other than claims secured by residential property) that is past due for 90 days or more, net of specific provisions (including partial write-o) will be risk weighted as per risk weights of respective balance sheet exposures. For the purpose of defining the net exposure of the past due loan, eligible financial collateral (if any) may be considered for Credit Risk Mitigation.

Description of approaches followed for specific and general allowances and statistical methods; Specific and General provisions are maintained according to the relevant Bangladesh Bank guideline. For Example, 1% provision is maintained against good loans, 5% against SMA loans, 20% against substandard, 50% against doubtful and 100% against bad/loss loans after deducting the amount of interest expenses and value of eligible securities from the outstanding balance of classified accounts.

Discussion of the FIs credit risk management policy.

Implementation of various strategies to minimize risk: To encounter and mitigate credit risk the following control measures are taken place at IDLC: Looking into payment performance of customer before financing; Adequate insurance coverage for funded assets; Vigorous monitoring and follow up by Special Assets Management and collection Team;
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Annual review of clients;

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Strong follow up of compliance of credit policies by Credit Administration Department; Taking collateral and performing valuation and legal vetting on the proposed collateral; Seeking legal opinion from internal and external lawyer for any legal issues; Maintaining neutrality in politics and following arms length approach in related party transactions; Regular review of market situation and industry exposure; Sector-wise portfolio is maintained within specific limits to ensure diversification of loan assets.

In addition to the industry best practices for assessing, identifying and measuring risks, IDLC also considers Guidelines for Managing Core Risks of financial institutions issued by the Countrys Central Bank, Bangladesh Bank; vide FID Circular No. 10 dated September 18, 2005 for management of risks.

Approved Credit Policy by the Board of Directors The Board of Directors has approved the Credit Policy for the company where major policy guidelines, growth strategy, exposure limits (for particular sector, product, individual company and group) and risk management strategies have been described/stated in detail. Credit Policy is regularly updated to cope up with the changing global, environmental and domestic economic scenarios.

Separate Credit Risk Management (CRM) Department An independent Credit Risk Management (CRM) Department is in place, at IDLC, to scrutinize projects from a risk-weighted point of view and assist the management in creating a high quality credit portfolio and maximize returns from risk assets. Research team of CRM regularly reviews market situation and exposure of IDLC in various industrial sub-sectors. CRM has been segregated from Credit Administration Department in line with Central Banks Guidelines. CRM assess credit risks and suggest mitigations before recommendation of every credit proposal while Credit Administration confirms that adequate security documents are in place before disbursement.

Special Assets Management and Collection Team A strong Law and Recovery Team monitors the performance of the loans & advances, identify early signs of delinquencies in portfolio, and take corrective measures to mitigate risks, improve loan quality and to ensure recovery of loans in a timely manner including legal actions.

Independent Internal Control and Compliances Department (ICC) Appropriate internal control measures are in place at IDLC. IDLC has also established Internal Control and Compliances Department (ICC) to ensures, compliance with approved lending guidelines, Bangladesh Bank guidelines, operational procedures, adequacy of internal control and documentation procedures. ICC frames and implements policies to encounter such risks.

Credit Evaluation The Credit Evaluation Committee (CEC) regularly meets to review the market and credit risk related to lending and recommend and implement appropriate measures to counter associated risks. The CEC critically reviews projects considering the current global financial crisis and its probable impact on the project.

IDLC annual report 2011

Risk Grading Model (RGM) helps a Financial Institution to understand the various dimensions of risks involved in transactions related to small business clients who are plying their businesses in various geographical locations across the country. IDLC has been developing and managing RGM

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to promote the safety and soundness of the Company by facilitating informed decision-making. This model measures credit risk and dierentiate individual credits and groups of credits by the risk they pose. This allows management and examiners to monitor changes and trends in risk levels. The process also allows the management to manage risk to optimize returns. To mitigate credit risk, IDLC search for credit report from the Credit Information Bureau (CIB) of Bangladesh Bank. The report is scrutinized by CRM and CEC to understand the liability condition and repayment behavior of the client. Depending on the report, bankers opinions are taken from clients banks. Suppliers and buyers opinion are taken to understand the market position and reputation of our proposed customers.

Credit Approval Process To ensure both speedy service and mitigation of credit risk, the approval process is maintained through a multilayer system. Depending on the size of the loan, a multilayer approval system is designed. As smaller loans are very frequent and comparatively less risky, lower sanctioning authority is set to improve the turnaround time and associated risk. Bigger loans require more scrutiny as the associated risk is higher. So sanctioning authority is higher as well.

Credit Quality and Portfolio Diversification IDLC believes in diversification in terms of products as well as sectors. To mitigate the Credit Risk, the company diversifies its loan exposure to dierent sectors confirming the Central Banks requirements. Threshold limit is set for any sector so that any adverse impact on any industry has minimum eect on IDLCs total return. Central Banks instructions are strictly followed in determining Single Borrower/Large Loan limit. Significant concentration of credit in terms of groups or geographical location is carefully avoided to minimize risk.

Early Warning System Performance of loans is regularly monitored to trigger early warning system to address the loans and advances whose performance show any deteriorating trend. It enables the company to grow its credit portfolio with ultimate objective to protect the interest of stakeholders.

NPL Management IDLC measures its loan portfolio in terms of payment arrears. The impairment levels on the loans and advances are monitored regularly. As per FID Circular No.3 dated March 15, 2007: 1. 2. 3. Loan/Lease, classified as bad/loss and with 100% provision, can only be written-o. Approval from the Board of Directors has to be taken before write-o. The financial institutions should constantly try to recover the loan/lease written-o amount. If legal action has not been taken against the client, legal charges should be placed before the write o.

4. To expedite the legal settlement or collection of the due amount, third party agents can be appointed by the financial institutions. 5. A separate ledger should be maintained for the written o loans/leases and the accumulated written o value should be disclosed separately under the heading of notes to the account in the annual report/balance sheet of the financial institutions.
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6. Even if the loan/lease has been written o, the client should be classified as defaulter and reported to CIB accordingly.

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Detail records for all such write o accounts are meticulously maintained and followed up.

Counterparty Credit Rating IDLC is taking initiatives to rate the Corporate Clients of the company immediately by the External Credit Assessment Institutions (ECAIs)/Rating Agencies duly recognized by the Central Bank. Some corporate clients have already conducted their credit rating by ECAIs and we are optimistic of getting a significant number of counter party ratings by 2012.

Methods used to measure Credit Risk As per the directives of Bangladesh Bank, The Standardized approach is applied by the company to measure its Credit Risk.

Quantitative Disclosures (b) Total gross credit risk exposures broken down by major types of credit exposure. Particulars Leasing Long-term finance Real estate finance Car loan Personal loan Margin loan to portfolio investors Short term finance Loan against deposit Interest receivable Total Amount in crore Taka 454.69 777.24 697.90 38.55 21.21 472.69 82.10 77.15 14.16 2,635.71

(c) Geographical distribution of exposures, broken down in significant areas by major types of credit exposure. Area Dhaka Chittagong Bogra Sylhet Savar Comilla Narsingdi Total Amount in crore Taka 2,643.83 251.66 39.29 34.89 17.92 16.09 23.01 2,635.71

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(d) Industry or counterparty type distribution of exposures, broken down by major types of credit exposure. Sector Apparels & Accessories Agro Based Industry Building & Construction Education Food and Beverage Household Products & Home Appliances Housing & Real Estate Iron & Steel Information Technology Packaging Power & Energy Pharmaceuticals Paper & Paper Products Financial Services Service Transport Textiles Others Total Amount in crore Taka 130.69 23.46 83.92 8.63 171.63 77.95 86.20 60.27 35.43 24.58 60.44 84.47 47.07 35.51 109.82 105.03 85.71 121.23 1,352.05

Beside this, total consumer finance (which includes individual Home Loan, Car Loan and Personal Loan) amounts to BDT 810.97 crore and Margin Loan to Portfolio Investors amounts to BDT 472.69 crore. Therefore, the total Industry exposure amounts to BDT 2,635.71 crore. (e) Residual contractual maturity breakdown of the whole portfolio, broken down by major types of credit exposure. Particulars Repayable on demand Over 1 month but not more than 3 months Over 3 months but not more than 1 year Over 1 year but not more than 5 years Over 5 years Total Amount in crore Taka 692.57 982.50 977.75 373.86 2,635.71 Amount in crore Taka (f) Gross Non Performing Assets ( NPAs) Non Performing Assets ( NPAs) to Outstanding Loans & advances 103.24 3.91%
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Movement of Non Performing Assets (NPAs) Movement of Non Performing Assets ( NPAs) Opening balance Additions Reductions Closing balance Movement of specific provisions for NPAs Movement of specific provisions for NPAs Opening balance Provisions made during the period Write-o Write-back of excess provisions Closing balance E) Equities: banking book positions Qualitative Disclosures (a) The general qualitative disclosure requirement with respect to equity risk, including: Dierentiation between holdings on which capital gains are expected and those taken under other objectives including for relationship and strategic reasons; and

Amount in BDT crore Taka 0.31 20.92 21.84 59.38

Amount in BDT crore Taka 42.98 15.89 10.95 47.92

Total equity shares holdings are for capital gain purpose. Discussion of important policies covering the valuation and accounting of equity holdings in the banking book positions. This includes the accounting techniques and valuation methodologies used, including key assumptions and practices aecting valuation as well as significant changes in these practices.

Quoted shares are valued at cost prices and if the total cost of a particular share is lower than the market value of that particular share, then provision are maintained as per terms and condition of regulatory authority. On the other hand, unquoted share is valued at cost price or book value as per latest audited accounts.

Quantitative Disclosures (b) Value disclosed in the balance sheet of investments, as well as the fair value of those investments; for quoted securities, a comparison to publicly quoted share values where the share price is materially dierent from fair value. Amount in crore Taka Quoted shares Unquoted shares (c) The cumulative realized gains (losses) arising from sales and liquidations in the reporting period. Nil
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44.91 7.20

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(d) Particulars Total unrealized gains (losses) Total latent revaluation gains (losses) Any amounts of the above included in Tier 2 capital. Amount in crore Taka 8.70 0.87

(e) Capital requirements broken down by appropriate equity groupings, consistent with the FIs methodology, as well as the aggregate amounts and the type of equity investments subject to any supervisory provisions regarding regulatory capital requirements.

Specific Risk- Market value of investment in equities is BDT 34.95 crore. Capital Requirement is 10% of the said value which stand to BDT 3.50 crore. General Risk- Market value of investment in equities is BDT 34.95 crore. Capital Requirement is 9% of the said value which stand to BDT 3.50 crore.

F) Interest rate in the banking book Qualitative Disclosures (a) The general qualitative disclosure requirement including the nature of interest risk and key assumptions, including assumptions regarding loan prepayments and behavior of non-maturity deposits. Interest rate risk in the banking book arises from mismatches between the future yield of an assets and their funding cost. Assets Liability Committee (ALCO) monitors the interest rate movement on a regular basis. IDLC measure the Interest Rate Risk by calculation Duration Gap i.e. a positive Duration Gap aect companys profitability adversely with the increment of interest rate and a negative Duration Gap increase the companys profitability with the reduction of interest rate. Quantitative Disclosures (b) The increase (decline) in earnings or economic value (or relevant measure used by management) for upward and downward rate shocks according to managements method for measuring interest rate risk broken down by currency (as relevant). Interest Rate Risk-Increase in Interest Rate: (BDT in million) Where applicable) Interest Rate Risk - Increase in Interest Rate Scenario 1 Magnitude of Shock Weighted Average Yield on Asset (%) Total Assets Duration Gap Fall in MVE (on-balance sheet) Net fall in MVE (on-balance sheet & o-balance sheet) Tax adjusted Loss Revised Capital Revised RWA Revised CAR (%) 1% 15.49% 31,154 0.83 223 233 134 4,110 31,042 13.24 Scenario 2 2% 15.49% 31,154 0.83 445 466 268 3,976 30,908 12.86 Scenario 3 3% 15.49% 31,154 0.83 668 698 402 3,842 30,774 12.49
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G) Market risk Qualitative Disclosures (a) Views of BOD on trading/investment activities All the Market Risk related policies/guidelines are duly approved by BOD. The BOD sets limit and review and updates the compliance on regular basis aiming to mitigate the Market risk. Methods used to measure Market risk Market Risk is the probability of losing assets in balance sheet and o- balance sheet position arising out of volatility in market variables i.e. interest rate, exchange rate and prices of securities. In order to calculate the market risk for trading book purposes the company uses Standardized (rule based) Approach where capital charge for interest rate risk, price and foreign exchange risk is determined separately. Market Risk Management system Policies and processes for mitigating market risk A Policy for managing Market Risk has been set out by the Board of Directors of the company where clear instructions has been given on Loan Deposit Ratio, Whole Sale Borrowing Guidelines, Medium Term Funding, Maximum Cumulative Outflow, Liquidity Contingency Plan, Local Regulatory Compliance, Recommendation / Action Plan etc. Treasury manages the Market Risk with the help of Asset Liability Management Committee (ALCO) and Asset Liability Management (ALM) Desk in the following fashion: Interest Risk Management Treasury Division reviews the risks of changes in income of the Company as a result of movements in market interest rates. In the normal course of business, IDLC tries to minimize the mismatches between the duration of interest rate sensitive assets and liabilities. Eective Interest Rate Risk Management is done as under: Market analysis Market analysis over interest rate movements are reviewed by the Treasury of the company. The type and level of mismatch interest rate risk of the company is managed and monitored from two perspectives, being an economic value perspective and an earning perspective. GAP analysis ALCO has established guidelines in line with central Banks policy for the management of assets and liabilities, monitoring and minimizing interest rate risks at an acceptable level. ALCO in its regular monthly meeting analyzes Interest Rate Sensitivity by computing GAP i.e. the dierence between Rate Sensitive Assets and Rate Sensitive Liability and take decision of enhancing or reducing the GAP according to prevailing market situation aiming to mitigate interest rate risk. Continuous Monitoring Companys treasury manages and controls day-to-day trading activities under the supervision of ALCO that ensures continuous monitoring of the level of assumed risks.

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Equity Risk Management Equity Risk is the risk of loss due to adverse change in market price of equities held by the Company. Equity Risk is managed by the following fashion: IDLC minimizes the Equity Risks by Portfolio diversification as per investment policy of the company. The entire portfolio is managed by IDLC Investments Limited. Quantitative Disclosures (b) The capital requirements for Market Risk: Particular Interest rate risk Equity position risk Foreign Exchange Position and Commodity risk (if any). H) Operational Risk: Qualitative disclosure: a) Views of Board on system to reduce Operational Risk: All the policies and guidelines of internal control and compliances are duly approved by the Board. The Board delegates its authority to Executive Committee and to ManCom members as per company policy of delegation of authority. Audit Committee of the Board directly oversees the activities of internal control and compliance as per good governance guideline issued by Securities and Exchange Commission. Performance gap of executives and stas IDLCs recruitment strategy is based on retaining and attracting the most suitable people at all levels of the business and this is reflected in our objective approach to recruitment and selection. The approach is based on the requirements of the job (both now and in the near future), matching the ability and potential of the individual. Qualification, skills and competency form our basis for nurturing talent. We are proud to state that favorable job responsibilities are increasingly attracting greater participation from dierent level of employees in the IDLC family. We aim to foster a sense of pride in working for IDLC and to be the employer of choice. As such thee exists no performance gap in IDLC. Potential external events No such potential external event exist to rise operational risk of IDLC at the time of reporting. Polices and procedures for mitigating operational risk: IDLC has also established Internal Control and Compliances Department (ICC) to address operational risk and to frame and implement policies to encounter such risks. ICC assesses operational risk across the Company as a whole and ensures that an appropriate framework exists to identify, assess and mange operational risk. Amount in BDT crore 6.99 -

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Approach for calculating capital charge for operational risk: Opreational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and system or from external events. IDLC uses basic indicator approach for calculation capital charge against operational risk i.e. 15% of average positive annual gross income of the company over last three years. Quantitative Disclosures: b) capital requirement for operational risk: Particular Capital requirement for operational risk: Amount in crore Taka 36.84

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Information for the Stakeholders


IDLC is very much concern of the stakeholders interest on the company including the potential investors. IDLC with 26 years of financial expertise helps its clients to decide in taking right financial decisions. The following historical information will help our current and potential investors for their decision making: Financial calendar to the stakeholders Events for the year Publication of Financial Statements for the 1st Quarter Publication of Financial Statements for the Half-year Publication of Financial Statements for the 3rd Quarter Annual Financial statements approved by the Board Date of Record Dispatching notice for the Annual General meeting along with the Annual Report Holding of Annual General Meeting Transfer/ payment of Dividend Comparative Shareholding Structure of IDLC as on December 31 Types of Share Holders Sponsor/Director Institutions Individuals Total shares held 2011 No. of Shares 63,180,570 14,490,320 21,329,110 99,000,000 % of Shares 63.82 14.64 21.54 100 2010 No. of Shares 3,829,126 1,371,929 798,945 6,000,000 % of Shares 63.82 22.87 13.32 100 2011 May 12, 2011 July 27, 2011 October 27, 2011 February 22, 2012 March 6, 2012 March 11, 2012 March 29, 2012 April 30, 2012 2010 May 5, 2010 July 20, 2010 October 27, 2010 February 24, 2011 March 10, 2011 March 15, 2011 March 31, 2011 April 30, 2011

Top ten shareholders of IDLC as on December 31 2011 Sl. No. 1 2 3 4 5 6 7 8 9 10 Name of the shareholders The City Bank Limited Eskayef Bangladesh Limited Sadharan Bima Corporation Mercantile Bank Limited Reliance Insurance Co. Limited Transcraft Limited Bangladesh Fund Eastern Bank Limited Bangladesh Lamps Limited Investment Corporation of Bangladesh (ICB) No. of shares % of Issued held shares 28,082,830 7,920,000 7,542,810 7,425,000 6,930,000 3,973,130 3,150,310 2,163,400 1,306,800 1,278,380 28.37 8 7.62 7.5 7 4.01 3.18 2.19 1.32 1.29 2010 No. of shares held 1,701,990 480,000 457,140 450,000 420,000 240,796 200,000 79,200 69,472 % of Issued shares 28.37 8 7.62 7.5 7 4.01 1.32 1.16
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Equity statistics of IDLC important to the stakeholders: Particulars Number of shares in issue (No.) Net asset value per share (BDT) Market Capitalization (BDT in million) Market value addition per share (BDT) Shareholders equity (BDT in millon) IDLCS share price as on December 31 2011 Highest (BDT) Lowest (BDT) Closing (BDT) Shares traded (No.) Market Turnover (BDT in million) Economic and Financial indicators December Economic Growth GDP at Current Market Prices (BDT in Billion) GDP Growth Rate (%) Rate of Inflation (Consumer Price Index) General Food Share Market All Share Price Index - DSE Market Capitalization (BDT in million) 2,535.96 742,196 2,309.35 1,059,530 3,747.53 1,903,228 6,877.66 3,508,006 4,383.94 2,616,730 7.20 8.11 9.94 12.28 6.66 7.19 7.31 8.53 10.63 10.4 2,939 7.70 3,578 6.80 4,411 6.00 4,825 3.50 7,875 6.66 2007 2008 2009 2010 2011 140.10 137.30 138.50 79,200 11.037 2010 4,679 4,562 4,648 17,700 81,830 2009 3,738 3,695 3,703 18,820 69.778 2007 2,000,000 12.60 3,038.00 139.30 1,247.44 2008 2,500,000 16.28 5,722.50 212.62 1,611.31 2009 3,000,000 24.17 11,109.00 346.13 2,393.09 2010 6,000,000 37.27 27,888 427.53 3,690.19 2011 99,000,000 40.21 13,712 98.29 3,980.47

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I Glossary

Glossary
Terms Terms Accrual Basis Meaning Recognizing the eects of transactions and events when they occur, without waiting for receipt or payment of cash or cash equivalent. Amortization is the systematic allocation of the depreciable amount of an intangible asset over its useful life. Recognizing the eects of transactions and events when receipt or payment of cash or cash equivalent occurs. 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. Financial Statements of a Group presented as those of a single Company. Depreciation is the allocation of the depreciable amount of an asset over its estimated useful life. Depreciation for the accounting period is charged to net profit or loss for the period either directly or indirectly. Advances granted to clients under leasing, hire purchase, installment sales and loan facilities. Fair value is the amount for which an asset could be exchanged or a liability settled between knowledgeable, willing parties in an arms length transaction. 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. The proportion of profit distributed to shareholders inclusive of tax withheld. Total rental receivable of the advances granted to clients under leasing, hire purchase, installment sales and loan facilities. An intangible asset is an identifiable non-monetary asset without physical substance held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. The sum of monies accrued and payable to the sources of borrowed working capital. Interest income of non-performing portfolio; these interests are accrued but not considered as part of income.

Amortisation

Cash Basis

Cash Equivalents

Consolidated Financial Statements Depreciation

Executions

Fair Value

Finance Lease

Gross Dividend Gross Portfolio Intangible Asset

Interest Cost

Interest in Suspense

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Terms Investment Property

Meaning Investment property is property (land or a building - or part of a building or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for use in the production or supply of goods or services or for administrative purposes; or sale in the ordinary course of business. 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. 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. Total rental receivable excluding interest of the advances granted to clients under leasing, hire purchase, installment sales and loan facilities. Facilities granted to clients which are in default for more than the period recommended by Bangladesh Bank. 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. Amounts set aside against possible losses on net receivable of facilities granted to clients, as a result of them becoming partly or wholly uncollectible. 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. A transfer of resources or obligations between related parties, regardless of whether a price is charged. Analysis of information by segments of an enterprise, specifically the dierent industries and the dierent geographical areas in which it operates. Total of issued and fully paid ordinary share capital and reserves. 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. Value of wealth created by providing leasing and other related services considering the cost of providing such services.

Lease

Non-controlling interest (Minority Interest)

Net Portfolio

Non-Performing Portfolio

Paid up Capital

Provision

Related Parties

Related Party Transactions

Segmental Analysis

Shareholders Funds (Equity) Subsidiary Company

Value Addition

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I Glossary

Ratios Ratio Cost to Income Ratio Method of computation Operating expenses excluding provision for bad and doubtful debts as a percentage of total operating income, net of interest cost. Total debts divided by equity. Indication Eciency of cost management in generating income.

Debt to Equity (Gearing) Ratio

The extent to which debt contributes to fund total assets, compared to the contribution from equity. Number of times dividend is covered by current years distributable profits. Share of current years dividend distributable to an ordinary share in issue.

Dividend Cover

Profit attributable to ordinary shareholders divided by gross dividends of ordinary shares. Value of the dividend proposed and paid out to ordinary shareholders divided by the number of ordinary shares in issue.

Dividend Per Share (DPS)

Earnings Per Share (EPS)

Share of current years earnings Profit attributable to ordinary shareholders divided by the weighted attributable to an ordinary share in issue. average number of ordinary shares outstanding during the year. Earnings before interest and tax divided by interest charges. Ability to cover or service interest charges of the debt holders.

Interest Cover

Market Capitalization

Total market value of all ordinary No. of ordinary shares in issue multiplied by market value of a share. shares in issue. Book value of ordinary shares.

Net Asset Value per Ordinary Ordinary shareholders funds divided by the number of ordinary shares in Share issue. Non-Performing Facilities Ratio Total gross non-performing portfolio divided by total gross portfolio.

Percentage of total gross nonperforming portfolio against the total gross portfolio. Number of years that would be taken to recoup shareholders capital outlay in the form of earnings. Overall eectiveness in generating profits with available assets; earning power of invested total capital. Earning power on shareholders book value of investment (equity).
IDLC annual report 2011 Stakeholders Corner I

Price Earning Ratio (PER Ratio)

Market price of a share divided by Earnings Per Share (EPS).

Return on Assets (ROA)

Net profits expressed as a percentage of average total assets.

Return on Equity (ROE)

Net profit, less preference share dividends if any, expressed as a percentage of average ordinary shareholders funds.

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IDLCs Presence

CORPORATE HEAD OFFICE


Bays Galleria (1st Floor) 57 Gulshan Avenue, Dhaka 1212 Telephone : +880 (2) 883 4990 (Auto Hunting) Facsimile : +880 (2) 883 4377 E-mail : mailbox@idlc.com GULSHAN BRANCH Taj Marriot (1st Floor) 25 Gulshan Avenue, Dhaka 1212 Telephone : +880 (2) 988 6837, 989 2123 Facsimile : +880 (2) 883 4148 E-mail : idlcgln@idlc.com UTTARA BRANCH Monsur Complex (3rd Floor) Plot No. 59/A, Road No. 7, Sector No. 4 Uttara Model Town, Dhaka 1230 Telephone : +880 (2) 893 2340, 891 9036 Facsimile : +880 (2) 895 9190 E-mail : idlcuttara@idlc.com NARAYANGANJ BRANCH Sattar Tower (Ground Floor) 50 S. M. Maleh Road, Tanbazar Narayangonj 1400 Telephone : +880 (2) 764 8213-4 Facsimile : +880 (2) 764 8217 E-mail : idlcngonj@idlc.com SAVAR BRANCH Alam Plaza (2nd Floor) 122/B Jaleshwar, Savar, Dhaka 1340 Telephone : +880 (2) 774 4961-3 E-mail : idlcsavar@idlc.com
IDLC annual report 2011

DILKUSHA BRNCH Eunoos Trade Centre, Level 13 52-53 Dilkusha C/A, Dhaka 1000 Telephone : +880 (2) 956 0111 (Auto Hunting) Facsimile : +880 (2) 956 3620 E-mail : idlcdlk@idlc.com DHANMONDI BRANCH House No. 39A (3rd Floor) Road No. 14A, Dhanmondi, Dhaka 1209 Telephone : +880 (2) 815 7632 Facsimile : +880 (2) 811 2146 E-mail : idlcdhn@idlc.com MIRPUR BRANCH Khan Plaza (1st Floor) Plot No. 6, Main Road No. 1 Mirpur 10, Dhaka 1216 Telephone : +880 (2) 805 1845 +880 (2) 805 2492 E-mail : IDLCMirpur@idlc.com NARSHINGDI BRANCH T Hussain Tower, Holding No. 382 Kalibari Road, Narshingdi Bazar, Narshingdi Telephone : +880 (2) 945 2075-6 Facsimile : + 880 (2) 945 2078 E-mail : IDLCNrsd@idlc.com KERANIGONJ BRANCH A K Tower (1st Floor) Nagar Mahal Road, Nadidhara Ispahani East Aganagar, South Keranigonj, Dhaka 1310 Telephone : +880 (2) 776 3805-6 E-mail : idlckeranigonj@idlc.com

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TONGI BRANCH Banesa Complex (Ground Floor) 26, Anarkoli Road, Tongi, Gazipur 1710 Telephone : +880 981 7647, +880 981 7648 +880 981 7649 E-mail : IDLCTongi@idlc.com NANDANKANON BRANCH A. K. Mansion (1st Floor) 17 J.C. Guha Road Nandankanon, Chittagong 4100 Telephone : +880 (31) 612 732, 612 715 Facsimile : +880 (31) 612 2762 COMILLA BRANCH Artisan Nasir Center (3rd Floor) 437 Nazrul Avenue, Kandirpar Comilla 3500 Telephone : +880 (81) 64 907-8, 72881 Facsimile : +880 (81) 649078 (Ext-110) : +880 (81) 72881 (Ext-110) E-mail : idlccomilla@idlc.com JESSORE BRANCH Rashid Center (2nd Floor) 7/A, R. N. Road, Jessore 7400 Telephone : +880 (421) 60892, 60893 +880 (421) 60894, 60895 Facsimile : +880 (421) 60896 E-mail : IDLCJessore@idlc.com GAZIPUR SME BOOTH Rahmat Tower (2nd Floor) Holding No. 1034, Outpara, Joydebpur, Gazipur 1700 Telephone : +880 (2) 926 2496, 926 2498 Facsimile : +880 (2) 926 2496 E-mail : IDLCGaz@idlc.com

CHITTAGONG BRANCH Jahan Building 4 (Ground Floor) 76/77 Agrabad C/A, Chittagong 4100 Telephone : +880 (31) 711 034, 713 742, 251 0117-8 Facsimile : +880 (31) 715 895 E-mail : idlcctg@idlc.com SYLHET BRANCH Casablanca (2nd Floor) 982 Dargah Gate, Sylhet 3100 Telephone : +880 (821) 283 2461-3 Facsimile : +880 (821) 283 2464 E-mail : idlcsyl@idlc.com BOGRA BRANCH Sairul Complex (2nd Floor) Sherpur Road, Sutrapur, Bogra 5800 Telephone : +880 (51) 699 17, 698 38 Facsimile : +880 (51) 698 39 E-mail : idlcbog@idlc.com

IMAMGANJ SME BOOTH 75 Midfort Road (2nd Floor) Imamganj, Dhaka 1100 Telephone : +880 (2) 734 3766-7 E-mail : IDLCImg@idlc.com

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I IDLCs Presence

IDLC SECURITIES LIMITED


(A wholly owned subsidiary of IDLC) HEAD OFFICE 36 Dilkusha Commercial Area (13th Floor) Dhaka 1000, Bangladesh Telephone : +880 (2) 957 1842 (Auto Hunting) Facsimile : +880 (2) 716 1544 E-mail : securities@idlc.com

IDLC INVESTMENTS LIMITED


(A wholly owned subsidiary of IDLC) HEAD OFFICE Eunoos Trade Centre, Level 21 52-53 Dilkusha C/A, Dhaka 1000 Telephone : +880 (2) 957 1170 (Auto Hunting) Facsimile : +880 (2) 957 1171 E-mail : merchantbanking@idlc.com

BRANCHES OF

IDLC SECURITIES LIMITED AND IDLC INVESTMENTS LIMITED


GULSHAN BRANCH Capita South Avenue Tower (5th Floor) Unit No. 502, House No. 50, Road No. 3 7 Gulshan Avenue, Dhaka 1212 Telephone : +880 (2) 988 3898, 988 9861 Facsimile : +880 (2) 989 6142 E-mail : idlcslgulshan@idlc.com DOHS MOHAKHALI BRANCH House No. 109, Park Road Block A, New DOHS, Mohakhali, Dhaka 1206 Telephone : +880 (2) 871 5081, 871 5287 Facsimile : +880 (2) 871 4510 E-mail : idlcsldohs@idlc.com CHITTAGONG BRANCH Ayub Trade Centre (6th Floor) 1269/B Sk. Mujib Road Agrabad Commercial Area, Chittagong 4100 Telephone : +880 (031) 251 4051-52 Facsimile : +880 (031) 251 4059 E-mail : idlcslctg@idlc.com SYLHET BRANCH Casablanca (2nd Floor) 982 Dargah Gate, Sylhet 3100 Telephone : +880 (821) 710 292, 710 324, 710 352, 710 321, 710 400 Facsimile : +880 (821) 283 2464 E-mail : idlcslsylhet@idlc.com UTTARA BRANCH Monsur Complex (4TH Floor) Plot No. 59/A, Road No. 7, Sector No. 4 Uttara Model Town, Dhaka 1230 Telephone : +880 (2) 895 9392, 895 9046 Facsimile : +880 (2) 896 0982 E-mail : idlcsluttara@idlc.com GAZIPUR BRANCH Rahmat Tower (2nd Floor) Holding No. 1034, Outpara, Joydebpur, Gazipur 1700 Telephone : +880 (2) 926 3503, 926 3505 Facsimile : +880 (2) 926 3539 E-mail: idlcslgazipur@idlc.com NARAYANGANJ BRANCH Sattar Tower (Ground Floor) 50 S. M. Maleh Road, Tanbazar, Narayangonj 1400 Telephone : +880 (2) 763 2891, 763 2894 Facsimile : +880 (2) 763 2896 E-mail : idlcslng@idlc.com

KHATUNGANJ BRANCH M H No. 3/A (4th Floor) Ramjoy Mohajan Lane Khatunganj, P. S.: Kotwali, Chittagong 4100 Telephone : +880 (031) 286 6491-3 Facsimile : +880 (031) 2866 494 E-mail : idlcslkg@idlc.com

IDLC annual report 2011

Stakeholders Corner I

232

I IDLCs Presence

Address of the Corporate Head Office and branches of IDLC group

Dhaka City Map


Savar

Uttara Gulshan

Mirpur Dhanmondi Corporate Head office IDLCSL


Dilkusha

Dilkusha IDLCIL
Dilkusha

Imamganj SME Booth

Keranigonj

IDLCs Corporate Head oce IDLC Finances Branch oces IDLC Subsidiaries Head oce
IDLC annual report 2011 Stakeholders Corner I

233

234

IDLC annual report 2011

Shareholders Note

Bays Galleria (1st Floor), 57 Gulshan Avenue, Gulshan-1 Dhaka-1212, Tel: +88 02 8834990 Fax : 8834377, E-mail : mailbox@idlc.com

PROXY FORM
I/We .................................................................................................................................................................................................................................. of
...........................................................................................................................................................................................................

being a member as my/ our proxy to

of IDLC Finance Limited and a holder of Mr./ Ms.

..............................................................................................

shares hereby appoint

...............................................................................................

of

............................................................................

vote for me/us and on my/our behalf at the 27th Annual General Meeting of the Company to be held on March 29, 2012 (Thursday) and at any adjournment thereof. Signed this Signature Name : (Proxy) Folio/BO ID No. Revenue Stamp Folio/BO ID No day of March 2012 Signature Name : (Member)

NOTE : a) b) This form of proxy, duly completed, must be deposited at least 48 hours before the meeting at the Companys registered oce. Proxy is invalid if not signed and stamped as explained above. Signature of the shareholders should agree with the specimen signature registered with the Company and Depository Register.

Bays Galleria (1st Floor), 57 Gulshan Avenue, Gulshan-1 Dhaka-1212, Tel: +88 02 8834990 Fax : 8834377, E-mail : mailbox@idlc.com

ATTENDANCE SLIP
I hereby record my attendance at the 27th Annual General Meeting of IDLC Finance Limited as a holder of
.........................................................................................................................................................................

shares of the Company.

Signature Name : (Member/ Proxy) Folio/BO ID No.

NOTE : Shareholders attending the meeting in person or by proxy are requested to complete the Attendance Slip and hand it over at the entrance of the meeting hall.