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04 Notice of the 25th Annual General Meeting
05 Our Vision, Mission and Corporate Philosophy
06 Strategic Objectives and IDLC Core Values
07 IDLC Code of Conduct and Ethics
08 IDLC at a Glance
10 Shareholding Structure at the year end 2009
11 Company Information
12 History - Key Milestones
13 Board of Directors
14 Brief Profile of the Directors
18 Committees of the Board and Management Committees
19 Management and Executives
20 Management Committee
21 Head Office and Branches
23 Risk management
26 Statement on Corporate Governance
31 Statement of Directors' Responsibility for Financial Reporting
32 Corporate Social Responsibilty (CSR)
33 Report of the Audit Committee
34 Event highlights
36 Consolidated Performance at a glance during 2009
37 Key Operating and Financial Information -Consolidated
38 Value Added Statement
39 Performance Indicators
42 Highlights as Required by Bangladesh Bank
43 Business Environment and Its Likely Impact on the Financial Performance of IDLC
44 Chairman's Review
46 CEO & Managing Director's Review of Business Environment
51 Directors' Report to the Shareholders
63 Auditors’ Report and Financial Statements of IDLC Finance Limited
133 Auditors’ Report and Financial Statements of IDLC Securities Limited
Notice of the 25th
Annual General Meeting
Notice is hereby given that the 25th Annual General Meeting of the shareholders of the Company will be held on Monday,
April 19, 2010 at 11.00 a.m. at the Celebrity Hall of Bangabandhu International Conferance Centre, Agargaon, Dhaka 1207,
to transact the following business:
Notes
2. A shareholder 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 office
not later than 48 hours before the time scheduled for holding the meeting
3. 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 authorise such person as it thinks fit, to act as
representative at any meeting of the members of the Company.
04
Vision, Mission and
Corporate Our Vision
Philosophy Become the best performing and most innovative
financial solutions provider in the country
Our Mission
Create maximum possible value for all our stakeholders
by adhering to the highest ethical standards
Our Goal
Long term maximisation of stakeholders' value in a
socially responsible manner
05
Strategic Objectives and IDLC Core Values
Strategic Objectives
> Create synergy by combining high quality and strategically balanced portfolios
> Provide a range of financial products and services to our customers under one roof
> Strengthening our position in capital market operation
> Balanced diversification of funding sources
> Maximize corporate value through sustained high quality growth
> Strengthening corporate governance practices
Developing Leaders
Commitment
IDLC employees are trained with thee object of to national
developing good leaders rather thann good interest
Highest
managers Developing
ethical
Leaders
Creativity and innovations standards
IDLC places emphasis on creativity and
innovation to achieve organisational
al
excellence
Accountability
IDLC complies with the highest standard
dard of
accountability in the conduct of its operations
and in making investment decisionss Credibility
innovations
Credibility
IDLC acts with responsibility by keeping
ping
IDLC
promises given to its business partners
ners and Core Values
regularly disclosing reliable and unbiased
biased
information to stakeholders
06
IDLC Code of In accordance with approved and agreed Code of
Conduct, IDLC employees shall:
Conduct and > act with integrity, competence, dignity and in an
ethical manner when dealing with customers,
Ethics prospects, colleagues, agencies and public
07
IDLC at a Glance
IDLC Finance Limited commenced its journey in 1985, Since 1985, when IDLC was formed as the pioneering
as the first ever leasing company of the country. In leasing company in Bangladesh, the company
1995, IDLC was licensed as a Financial Institution by the continues to evolve as an innovative financial solutions
country's central bank, Bangladesh Bank, following the provider. IDLC is now able to offer its customers,
enactment of the Financial Institution Act 1993. During integrated and customized financial solutions - all
the last two and a half decades, IDLC has grown in under one roof. The Company’s wide array of products
tandem with the country's transition into a developing and services range from retail products, such as home
country and has emerged as Bangladesh's leading and car loans, corporate and SME products including
multiproduct financial institution. To encapsulate the lease and term loans, structured finance services
evolving nature of the company, IDLC has changed its ranging from syndications to capital restructuring and
name to IDLC Finance Limited from earlier Industrial a complete suite of merchant banking and capital
Development Leasing Company of Bangladesh Limited market services.
in August 2007.
Investment Products:
Common Equity investments
Preferred Equity Investments
Bonds
08
Merchant Banking and Portfolio Management Services:
Investor Discretionary/Non-discretionary Portfolio Management Services "Cap Invest" and "Managed Cap Invest"
IPO Advisory
Issue Management
Underwriting
Investment Advisory
Placement of Equity, Debentures and Bonds
Custodial Services
IDLC's unique institutional shareholding structure, comprising mostly of financial institutions, helps the company to
constantly develop through sharing of experience and professional approach at the highest policy making level.
Subsidiary
IDLC Securities Limited, a fully owned subsidiary of IDLC, offers full-fledged international standard brokerage service
for retail and institutional clients. It has seats on both the Dhaka and Chittagong Stock Exchanges. It is also a Depository
Participant (DP) of Central Depository Bangladesh Limited (CDBL).
09
Shareholding Structure at
the year end 2009
Sponsors 36.01%
The City Bank Limited 28.39%
Sadharan Bima Corporation 7.62%
General 63.99%
Eskayef Bangladesh Limited 8.00%
Mercantile Bank Limited 7.50%
Reliance Insurance Limited 7.00%
Eastern Bank Limited 6.00%
Transcraft Limited 4.01%
Investment Corporation of Bangladesh 1.87%
M.M. Capital Investment Company 1.82%
Bangladesh Lamps Limited 1.32%
Marina Apparels Limited 1.00%
Other Institutions 7.73%
Individuals 17.74%
C A P I T A L
Authorised : Tk. 1,000,000,000 (10,000,000 ordinary shares of Tk.100 each)
Paid-up : Tk. 300,000,000 (3,000,000 ordinary shares of Tk.100 each)
10
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 and Chittagong Stock Exchanges on March 20, 1993 and November 25, 1996, respectively.
Licensed as Financial Institution under Financial Institutions Act, 1993 on February 7, 1995.
Principal Bankers
Standard Chartered Bank
Citibank N.A.
11
History - Key Milestones
May 23, 1985 Incorporation of the Company
February 7, 1995 Licensed as a Non-Banking Financial Institution under the Financial Institutions Act, 1993
May 27, 1997 Commencement of Home Finance and Short Term Finance operations
January 22, 1998 Licensed as a Merchant Banker by the Securities and Exchange Commission
January 15, 1999 Commencement of Corporate Finance and Merchant Banking operations
January 29, 2004 Opening of the first retail focused branch at Dhanmondi
February 7, 2005 Issuance of Securitised Zero Coupon Bonds by IDLC Securitisation Trust 2005
May 18, 2006 Opening Merchant Banking branch in the port city of Chittagong
July 1, 2006 Relocation of Company's Registered and Corporate Head Office at own premises at 57,
Gulshan Avenue
September 18, 2006 Commencement of operation of IDLC Securities Limited, a wholly owned subsidiary of IDLC
March 14, 2007 Launching of Discretionary Portfolio Management Services "Managed Cap Invest"
August 5, 2007 Company name changed to IDLC Finance Limited from Industrial Development Leasing
Company of Bangladesh Limited
December 18, 2007 IDLC Securities Limited DOHS Dhaka Branch opened
January 6, 2009 IDLC Finance Limited and IDLC Securities Limited open Sylhet branches
12
Board of Directors
(As on March 16, 2010)
Chairman
Anwarul Huq, Director, Reliance Insurance Limited
- Nominated by Reliance Insurance Limited
Directors
Rubel Aziz, Director, 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
K. Mahmood Sattar, Managing Director & CEO, The City Bank Limited
- Nominated by the City Bank Limited
Company Secretary
H. M. Ziaul Hoque Khan
13
Brief Profile of the Directors
Mr. Anwarul Huq
Chairman, nominated by Reliance Insurance Limited
Mr. Anwarul Huq is the founder Director and a member of the Audit Committee of
Reliance Insurance Limited. Mr. Huq is also the Chairman and Chief Executive Officer 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 Janata Insurance Co. Ltd. and Vice Chairman of IT Consultant Ltd.
(ITCL). He is the Managing Director of Partex Beverage Ltd., a franchise of Royal Crown
Cola International (RC Cola), Partex Plastics Ltd., Plastic Accessories Ltd., a licensee of
BRAIFORM, incorporating Plasti-form and Braitrim and Partex Properties Ltd. He is one
of the Directors of The City Bank Ltd. He is also a Director of a number of companies of
Partex Group, and IBAIS University. He is also the elected President of Gulshan Club.
Mr. Md. Habibur Rahman Mollah is a Chartered Accountant with twenty nine years of
experience in key positions of Finance and Accounts with multi-disciplinary business
organisations. 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
Officer of Bangladesh Lamps Limited , Bangladesh Electrical Industries Limited and
Transcom Cables Limited.
14
Aziz Al Kaiser
Director nominated by The City Bank Limited
Meherun Haque
Director nominated by The City Bank Limited
K. 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 Melborne, 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 jointed The City Bank
Limited in July, 2007 as Managing Director & CEO. He is the Chairman of the Association
of Bankers, Bangladesh (ABB) and Chairperson of SWIFT user group in Bangladesh.
15
Yongbok Jo
Director nominated by The City Bank Limited
An MBA from Gorge Washington University, USA, Mr. Yongbok Jo joined Korea Develop-
ment Financing Corporation (KDFC), which was one of the sponsor shareholders of IDLC,
in 1985. Mr. Jo also worked as Deputy Managing Director of IDLC since July 2000 until
September 2009. Mr. Jo completed his B. A. from Seoul National University. During his
career in KDFC, Mr. Jo held important positions in fund management, lease marketing,
marketing planning, business strategy, credit analysis and asset management team.
Mr. Md. Rezaul Karim is the Managing Director of Sadharan Bima Corporation (SBC). He
started his career at SBC in 1981 as a Trainee officer. During his career with SBC he
attended a number of training and workshops on insurance related matters both at
home and abroad. Mr. Rezaul Karim is also a nominated Director of Investment
Corporation of Bangladesh (ICB), National Housing Finance and Investments Ltd. (NHFIL)
and Central Depository Bangladesh Ltd. (CDBL). He is also a Director of Asian
Re-insurance Corporation, Bangkok, Thailand.
A. K. M. Shaheed Reza
Director Nominated by Mercantile Bank Limited
Mr. A. K. M. Shaheed Reza is a Director of Mercantile Bank Ltd. and Global Insurance
limited. He is also Chairman of number of companies established by him. Mr. Reza is also
a Co-Chairman of Standing Committee on Utilization Expert (woven) in BGMEA and a
member of a Standing Committee of FBCCI. He is also actively involved in social activities
and is the Chairman of Dholia High School Management Committee, Feni, Bagherhat
High School Managment Committee, Feni and Thakurhat Govt. Primary School Manage-
ment Committee,Feni.
16
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 Commis-
sioner to India 1992-1995, Ambassador to China 1987-1991, High- Commissioner 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 Co-Chairman
of the Coalition for South Asian Co- operation (CASAC) during 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 Officio
Mr. Selim R.F. Hussain is career banker, with an Honours degree in Accounting from
Dhaka University and an MBA (Finance major) from the Institute of Business
Administration, also from Dhaka University.
Mr. Hussain has worked in various roles with the two largest multi-national banks in
Bangladesh, ANZ Grindlays Bank and Standard Chartered Bank, for the past twenty
four years. He has resided in and worked in India and Australia for significant periods
of his career and prior to moving to IDLC Finance Limited in January 2010, was the
Chief Financial Officer for Standard Chartered Bank’s Consumer Banking Division in
India. Mr. Hussain has also been CFO for Standard Chartered Bank, Bangladesh, from
2002 to 2007.
17
Committees of the Board and
Management Committees
Committee and Mandate Composition
Executive Committee
The matter related to ordinary business operations of the Rubel Aziz, Chairman
Company and the matters that the Board of Directors from K. Mahmud Sattar, Member
Md. Rezaul Karim, Member
time to time, authorises are vested on this Committee.
A. K. M. Shaheed Reza, Member
Selim R. F. Hussain, Member
Audit Committee
The Committee is empowered, among other things, to
Md. Habibur Rahman Mollah, FCA, Chairman
examine any matter relating to the financial affairs of the
Anwarul Huq, Member
Company and to review all audit and inspection programs,
Rubel Aziz, Member
internal control systems and procedures, accounting
Md. Rezaul Karim, Member
policies and adherence to compliance requirements, etc.
Farooq Sobhan, Member
Management Committee (ManCom)
To provide a forum for discussions on various strategic Selim R. F. Hussain, CEO & Managing Director
issues. Arif Khan, Deputy Managing Director
H. M. Ziaul Hoque Khan, General Manager & CFO
Deputy General Managers
Head of Merchant Banking Division
Head of IDLC Securities Limited
Head of Internal Control & Compliance
Credit Evaluation Committee (CEC)
CEC evaluates all projects/proposals of financing activities Selim R. F. Hussain, CEO & Managing Director
of the Company from risk point of view. Arif Khan, Deputy Managing Director
H. M. Ziaul Hoque Khan, General Manager & CFO
M. Jamal Uddin, Head of Corportae Division
Asif Saad Bin Shams, Head of Credit Risk Management
Asset Liability Management Committee (ALCO)
The Asset Liability Committee (ALCO) of the Company Selim R. F. Hussain, CEO & Managing Director
assesses the changes in interest rate, market conditions, Arif Khan, Deputy Managing Director
carry out asset liability maturity gap analysis, re-pricing of H. M. Ziaul Hoque Khan, General Manager & CFO
products and thereby takes effective measures to monitor Head of business units
and control interest rate risk. Head of Treasury
18
Management and
Executives
CEO & Managing Director
Selim R. F. Hussain
19
Management Committee
a] Selim R. F. Hussain
CEO & Managing Director
d] M. Jamal Uddin
Deputy General Manager
e] Shaikh Kamruzzaman
Deputy General Manager
f] Mir Tariquzzaman
c d e DGM & Chief Technology Officer
g] Bilquis Jahan
Deputy General Manager
h] Arifur Rahman
Deputy General Manager
k] Md. Saifuddin
Assistant General Manager
i j k l] Md. Moniruzzaman
Assistant General Manager
m] Iqbal Mahmud
AGM & Chief Risk &
Compliance Officer
l m
IDLC FINANCE LIMITED ANNUAL REPORT 2009
20
Head Office and Branches
CORPORATE HEAD OFFICE CHITTAGONG BRANCH
Bay’s Galleria (1st Floor) Jahan Building 4 (Ground Floor)
57 Gulshan Avenue, Dhaka 1212 76/77 Agrabad C/A, Chittagong 4100
Telephone: +880 (2) 883 4990 Telephone: + 880 (31) 711 034, 713 742, 251 0117-8
Facsimile: +880 (2) 883 4377 Facsimile: +880 (31) 715 895
E-mail: mailbox@idlc.com E-mail: idlcctg@idlc.com
21
Dhaka
Uttara
Dhanmondi
GAZIPUR SME BOOTH Gulshan
CHO
Joydebpur
Gazipur 1700
Telephone: +880 (2) 926 2496, 926 2498
E-mail: mailbox@idlc.com
HEAD OFFICE
36 Dilkusha C/A (13th floor)
Dhaka 1000
Telephone: +880 (2) 957 1842
Facsimile: +880 (2) 716 1544
E-mail: securities@idlc.com
22
Risk Management
IDLC always concentrates on delivering high value to its stakeholders
through appropriate trade off 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.
Risk is the element of uncertainty or possibility of loss liberalization, and consolidation it is essential that FIs
that prevail in any business transaction in any place, in have robust credit risk management policies and
any mode and at any time. Risk is an integral part of procedures that are sensitive and responsive to these
financing business. Risk management entails the changes. At IDLC, credit risk may arise in the following
adoption of several measures to strengthen the ability forms:
of an organization to cope with the vagaries of the
complex business environment in which it operates. > Default risk
> Exposure risk
IDLC always concentrates on delivering high value to > Recovery risk
its stakeholders through appropriate trade off between > Counter party risk
risk and return. A well structured and proactive risk > Related party risk
management system is in place within the Company to > Legal risk
address risks relating to credit, market, liquidity and
> Political risk
operations. Risk grading is assigned at the inception of
lending considering the industry, business, financial
To encounter and mitigate credit risk the following
and management risk associated with the financing.
control measures are in place at IDLC:
The Company has different committees for risk
management and appropriate internal control " Multilayer approval process
measures are also in place to mitigate risk. " Policy for maximum sector and group exposure limit
" Policy for customers maximum asset exposure limit
In addition to the industry best practices for assessing,
identifying and measuring risks, IDLC also considers " Mandatory search for credit report from Credit
guidelines for managing core risks of financial Information Bureau
institutions issued by the Country's Central Bank, " Looking into payment performance of customer
Bangladesh Bank, vide FID Circular No. 10 dated before financing
September 18, 2005 for management of risks. " Annual review of clients
" Adequate insurance coverage for funded assets
Credit Risk " Vigorous monitoring and follow up by Special Assets
Management Team
Credit risk is the possibility that a borrower or counter
" Strong follow up of compliance of credit policies by
party will fail to meet agreed obligations. Thus
Operational Risk Management Department
managing credit risk for efficient management of a
financial institution (FI) has become the most crucial " Taking collateral
task. Given the fast changing, dynamic global " Seeking external legal opinion
economy and the increasing pressure of globalization, " Maintaining neutrality in politics and following arm's
23
Risk Management
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
length approach in related party transactions stakeholders. This arises from the adverse mismatch of
" Regular review of market situation and industry maturities of assets and liabilities.
exposure
Liquidity requirements are managed on a day-to-day
The Credit Evaluation Committee (CEC) regularly meets basis by the Treasury Division which is responsible for
to review the market and credit risk related to lending ensuring that sufficient funds are available to meet
and recommend and implement appropriate measures short term obligations, even in a crisis scenario, and for
to counter associated risks. The CEC critically reviews maintaining a diversity of funding sources. Treasury
projects from risk point of view. Division maintains liquidity based on historical
requirements, anticipated funding requirements from
An independent Credit Risk Management Department operation, current liquidity position, collections from
is in place, at IDLC, to scrutinize projects from a financing, available sources of funds and risks and
risk-weighted point of view and assist the manage- returns.
ment in creating a high quality credit portfolio and
maximize returns from risk assets. The Asset Liability Committee also oversee the asset
liability maturity position and recommend and
Market Risk
implement appropriate measure to encounter
Market risk refers to the risk of fluctuation in a variety liquidity risk.
of markets such as interest rates, prices of securities
where the values of assets and liabilities can change Operational Risk
and there exists the risk of incurring losses.
Operational risk is the potential loss arising from a
The Asset Liability Committee (ALCO) of the Company breakdown in company's systems and procedures,
regularly meets to assess the changes in interest rate, internal control, compliance requirements or corporate
market conditions, carry out asset liability maturity gap governance practices, that results in human error,
analysis, re-pricing of products and thereby takes fraud, failure, damage of reputations, delay to perform
effective measures to monitor and control interest rate or compromise of the company's interests by employ-
risk. To encounter market risk we are negotiating for ees. Operational risk may also arise from the following:
facilities that matches the maturity structure with ideal
interest rate, maintaining a balanced diversification in > Turnover of trained staff
investments and maintaining prudent provisioning > Risk of insider dealings
policies. IDLC has also strong access to money market > Leakage of sensitive information
and credit lines at a competitive rate through good > Shortcomings of organizational structure
reputation, strong earnings, financial strength and > Risk of falling in credit ratings
credit rating. > Money laundering
> Changes in statutory requirements
However, in order to mitigate any adverse effect that > Technological obsolescence
results from fluctuating interest rate in future, we are
planning to issue bonds and fixed rate long term loans Appropriate internal control measures are in place, at
to raise funds. IDLC, to address operational risks. IDLC has also
established an internal control & compliance depart-
Liquidity Risk ment (ICCD) to address operational risk and to frame
and implement policies to encounter such risks. This
Liquidity risk arises when a company is unable to meet department assesses operational risk across the
the short term obligation to its lenders and Company as a whole and ensures that an appropriate
24
Risk Management
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 effective measures to
monitor and control interest rate risk
framework exists to identify, assess and mange Business volume risks
operational risk. The function of ICCD is to constant
vigilance against leakage of Shareholders value by At IDLC, business volume risk may arise in the form of
identify, assess, measure, manage and transfer risk of falling business volumes and market share, risk
operational risk resulting from inadequate or failed of being overtaken and losing leadership position and
internal processes, people and system or from external risk of over trading which may affect profitability due
events. to volatile revenues and reduced spread earnings,
credit rating and reputation. Risk of over trading may
ICCD also develops policies, processes and procedures lead to insufficient capital. To encounter and mitigate
for managing operational risk in all of the company business volume risk the following risk mitigation
products, activities, processes and systems by identify- measures are in place, at IDLC:
ing and assessing the operational risk inherent in all
our products, activities, processes and systems. > Regular review of global economic situation and
taking appropriate measure
In particular, the following risk management measures > Innovative and convenient financial products and
are present at IDLC to address operational risk: services
> Taking prompt action on customer complaints
> Effective internal audit function throughout the > Frequent assessment of clients satisfaction
organisation with direct access of Chief Internal
> Regular review of performance against budget and
Auditor to the Audit Committee and Board
targets
> Suitable delegated authority level
> Review and analysis of competitors performance
> Awareness throughout the organisation on "Know
Your Customer" policy Assessment of the riskiness of the operation
> Maintenance of assets through maintenance
We estimate our risk exposure based on our own
agreement with vendor
assessment of the operations as well as the market
> Proper risk transfer measure by taking insurance perception to be as follows:
coverage for all assets of the Company
Type of Risk Rating
> Infusing organisational values and ethics in employees
Credit Risk Moderate
> Strict compliance of Employees Code of Conducts
Market Risk Moderate
> Regular compliance audit in relation to reporting
requirements to regulatory bodies and other Liquidity risk Low
stakeholders Operational risk Low
> Creating conducive working environment for the staff Business volume risk Moderate
25
Statement on Corporate Governance
Corporate governance is the system by which compa- Board of Directors
nies are directed and controlled by the management in
the best interest of all the stakeholders, thereby Composition
ensuring greater transparency and better and timely
financial reporting. The Board of IDLC considers that its membership
should comprise of directors with an appropriate mix
The platform on which corporate governance of skills, experience and personal attributes that allow
principles are structured is that the Board of Directors is the directors, individually and the Board, collectively, to
responsible for proper governance, which includes discharge their responsibilities and duties, under the
setting out Company's strategic aims, providing the law, efficiently and effectively, understand the business
necessary leadership to implement such aims,
of the Company and assess the performance of the
supervising the management of the business and
management.
reporting to the shareholders on their stewardship.
IDLC considers that its corporate governance practices The Directors are appointed by the shareholders in the
comply with almost all the aspects of the SEC Notifica- Annual General Meeting (AGM). Casual vacancies, if
tion No. SEC/CMMRRCD/2006-158/Admin/02-08 dated any, are filled up by the Board in accordance with the
February 20, 2006 and almost all aspects of Bangladesh
stipulations of the Companies Act, 1994 and Articles of
Bank's DFIM Circular No. 7 dated September 25, 2007.
the Company. In addition, one third of the Directors
In addition, to establishing high standards of corporate
retire from the Board every year in the AGM, but remain
governance, IDLC also considers best governance
eligible for re-election.
practices in its activities. The independent role of Board
of Directors, separate and independent role of
Chairman and Chief Executive Officer, distinct role of
Role and Responsibilities of the Board
Company Secretary, Chief Financial Officer and Chief
The Board is committed to the Company seeking to
Compliance Officer, different Board committees allows
achieve superior financial performance and long term
IDLC to achieve excellence in best corporate gover-
prosperity, while meeting stakeholders' expectations of
nance practices.
26
Statement on Corporate Governance
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.
sound corporate governance practices. The Board > Delegation to Board Committees and management
determines the corporate governance arrangements and approval of transactions in excess of delegated
for the Company. As with all its business activities, the level
Board is proactive in respect of corporate governance > Approval of annual budgets including major
and puts in place those arrangements which it capital expenditure proposals
considers are in the best interest of the Company and > Critical evaluation of all proposals which require
Board's approval and/or directives
its shareholders, and consistent with its responsibilities
to other stakeholders. > Regular review of financial performance and
overdue situation
The Board duly complies with the guidelines issued by > Appointment and evaluation of the performance of
Bangladesh Bank regarding the responsibility and the top management position.
accountability of the Board, its Chairman and Chief > Ensuring that the senior management team has
Executive/Managing Director, vide DFIM Circular No. 7 the necessary skills and experience to perform
dated September 25, 2007. their functions, effectively, in the best interests of
the Company
The Board of Directors is in full control of the Company's > Monitoring the adequacy, appropriateness and
affairs and is also fully accountable to the shareholders. operation of internal controls
They firmly believe that the success of the Company > Ensure that technology and information systems
largely depends on the credible corporate governance used in the organisation are sufficient to operate
practices adopted by the Company. Taking this into the organisation effectively and maintain competi-
consideration, the Board of Directors of IDLC sets out its tiveness
strategic focus and oversees the business and related
affairs of the Company. The Board also formulates the Role of the Chairman
strategic objectives and policy framework for the
The Chairman of the Board is not the Chief Executive of
Company. In discharging the above responsibilities, the
the Company. The role of Chairman and CEO &
Board caries out, inter alia, the following functions as Managing Director are independent and separate. The
per the charter of the Board and Bangladesh Bank's Chairman runs the Board while the CEO & Managing
DFIM Circular No. 7, dated September 25, 2007: Director takes all executive decisions as delegated and
empowered by the Board.
> Determine, monitor and evaluate strategies,
policies, management performance criteria and
Conduct for the Board Members
business plans
> Periodic and timely reporting to the shareholders
The Board of Directors of IDLC Finance Limited is
on the affairs, progress and performance of the
committed to the highest standards of conduct in their
Company
relationships with its employees, customers, members,
> Ensuring proper decision-making and accountabil- shareholders, regulators and the public.
ity structure throughout the Company so that the
A Director of IDLC always
staff down the line is fully accountable to the
corporate management > Seeks to use due care in the performance of his/her
duties, be loyal to the Company, act in good faith
> Monitoring of significant business risks and
and in a manner such Director reasonably believes
reviewing how they are managed as per Bangla-
to be not opposed to the best interests of the
desh Bank's "Core Risk Guidelines"
Company
27
Statement on Corporate Governance
The role of Chairman and CEO & Managing Director are independent and separate.
The Chairman runs the Board while the CEO & Managing Director takes all executive
decisions as delegated and empowered by the Board
> Avoids i) appropriating corporate business normally held at the Registered and Corporate Head
opportunities for themselves that are discovered Office of the Company. The meeting are held
through the use of Company property or frequently, at least once in a quarter, to discharge its
information or their position as Board Member; ii) responsibilities and functions as mentioned above.
using Company property or information, or their Meetings are scheduled well in advance and the notice
position as Board Member, for personal gain; and of each Board Meeting is given, in writing, to each
iii) competing with the Company Director by the Company Secretary.
> Endeavours to avoid having his or her private
interests interfere with the interests of the The Company Secretary prepares the detailed agenda
Company for the meeting. The Board papers comprising the
agenda, explanatory notes and proposed resolutions
> Ensures that management is causing the are circulated to the directors in advance for their
Company's assets, proprietary information and review. The members of the Board have complete
resources to be used by the Company and its access to all information of the Company enabling
employees only for legitimate business purposes of them to work efficiently. The members of the Board are
the Company also free to recommend inclusion of any matter in the
> Maintains the confidentiality of information agenda for discussions. The Company Secretary and
entrusted to them in carrying out their duties and Chief Financial Officer always attends the Board
responsibilities, except where disclosure is Meeting and other senior management is invited to
approved by the Company or legally mandated or attend Board Meeting to provide additional inputs to
if such information is in the public domain the items being discussed by the Board and make
necessary presentations.
> Endeavours to deal fairly, and should promote fair
dealing by the Company, its employees and agents, There are procedures, at IDLC, for keeping the Board
with customers, suppliers and employees up-to-date with the Company's activities and relevant
> Complies and endeavours to ensure that the external developments. These includes senior manage-
management is causing the Company to comply ment presenting significant matters to the Board and it
with applicable laws, rules and regulations being able to seek further information on any issue
relating to performance, strategy, outlook, etc,.
> Avoids insider trading with respect to the purchase
and sale of the Company's securities and buy or sell During the year ended on December 31, 2009 a total of
securities while in possession of material ten (10) Board Meetings were held and attendance by
non-public information about the issuer of that the Directors are shown in the Annexure-II of the
security, whether the issuer is IDLC or another Directors' Report to the Shareholders.
company
> Endeavours to ensure that management is causing Internal Control
the Company to promote ethical behaviour and to
The Board is responsible for ensuring that the
encourage employees to report evidence of illegal
Company has an adequate and effective control system
or unethical behaviour to the CEO & Managing
in place. Although no system of internal financial
Director of the Company
control can provide absolute assurance against
material mis-statement or loss, the Company's internal
Board Meetings control systems have been designed to provide the
directors with reasonable assurance that assets are
The meetings of the Board of Directors of IDLC are safeguarded against unauthorised use by the employ
28
Statement on Corporate Governance
The Committee is empowered, among other things, to > To review the corrective measures taken by the
examine any matter relating to the financial affairs of management as regard the reports relating to
the Company and to review all audit and inspection fraud and forgery, deficiency in internal control or
programs, internal control systems and procedures, other similar issues detected by internal and
accounting policies and adherence to compliance external auditors and inspectors of the regulatory
requirements, etc. This ensures that a sound financial authorities
reporting system is in place, which is well managed, > To review the activities and organizational
providing accurate, appropriate and timely information structure of internal audit functions and ensure
to the Board of Directors and stakeholders. that no unjustified restrictions or limitations are
made
The Chief Risk & Compliance Officer has direct access to
the Committee and it is directly reportable to the Board. > To do any other functions as the Board may
require from time to time
During the year under review, four (4) meeting of the
Audit Committee were held. Executive Committee
Functions and responsibilities of the Committee A five member Executive Committee is responsible for
strategic and operational plans of the business. The
> To assist the Board in fulfilling its oversight matter related to ordinary business operations of the
responsibilities including implementation of the Company and the matters that the Board of Directors,
objectives, strategies and overall business plans from time to time authorise, are vested in this Commit-
set by the Board for effective functioning of the tee in accordance with the Statement of General and
Company Operational Policies established and made by the
29
Statement on Corporate Governance
All disclosures required by the SEC, Listing Regulations of DSE & CSE 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.
Board of Directors. This Committee assists IDLC in All disclosures required by the Securities and Exchange
taking prompt decisions and reacts swiftly to changes Commission, Listing Regulations of Dhaka and
in the market-place as they occur. The Rules of the Chittagong Stock Exchanges and Bangladesh Bank are
Executive Committee is framed by the Board. made adequately and promptly. In addition to
ensuring timely compliance, this also enables dissemi-
During the year under review, eight Executive Commit- nation of information to all stakeholders and the
tee meetings were held. public.
> be factual and subject to internal vetting and A separate statement of Directors' responsibility for
authorisation before issue financial reporting is given in page No. 31
> not omit material information
> be timely and expressed in a clear and objective
manner
30
Statement of Directors' Responsibility for
Financial Reporting
The Directors are responsible for ensuring that the Company, and which enables it to ensure that the
Company keeps proper books of accounts of all the financial statements comply with the requirements of
transactions and prepares financial statements, that the Companies Act, 1994, Securities and Exchange
give a true and fair view of the state of affairs and Rules 1987, Financial Institution Act 1993 and Listing
profit/loss for the year. Regulations of Dhaka and Chittagong Stock Exchanges
and amendments thereto.
The Board of Directors accepts responsibility for the
integrity and objectivity of the financial statements. It The auditor of the Company, Rahman Rahman Huq,
ensures that the estimates and judgements relating to Chartered Accountants, have carried out annual audits
the financial statements were made on a prudent and to review on the system of internal controls, as they
reasonable basis, so that they reflect in a true and fair consider appropriate and necessary, for expressing
manner, the form and substance of transactions, and their opinion on the financial statements. They have
reasonably present the Company's true state of affairs. also examined the financial statements made available
To ensure this, the Company has taken proper and by the management together with all the financial
sufficient care in installing a system of internal control, records, related data, minutes of shareholders and
which is reviewed, evaluated and updated on an Board meetings, relevant policies and expressed their
ongoing basis. The Operational Risk and Internal Audit opinion.
Department of the Company conducts periodic audits
to provide reasonable assurance that the established
policies and procedures of the Company were
consistently followed.
31
Corporate Social
Responsibilty (CSR)
An institution is only as good as the community it society and economy. Keeping this in mind, we have
grows up in. IDLC's policy is to constantly harness our started Women Entrepreneur Loan Scheme at a low
social capital and provide opportunities for this to rate, in 2007, to support women and which will help
grow. IDLC believes that CSR does not mean just them to be self dependent.
doling out largesse. Rather it means the strategic use
of money and other resources, to empower communi- Environmental issues
ties, and to help people help themselves.
IDLC believes in development that meets the needs of
We have made it a point to inculcate a deeper sense of our present generation, without compromising the
responsibility and a stronger awareness among our possibilities of future generations to meet their needs.
staff on this issue. We have created a strong culture of IDLC's products and services are not environmentally
corporate social responsibility, at all levels, and harmful. However as the Company is committed to the
laboured the point that IDLC has a significant role to society, environmental issues related with projects are
play as a leading corporate citizen. dealt with regularly in the process of project appraisal.
Our relationship managers investigate all related
Our branch network and increased SME focused environmental issues at the appraisal stage of projects.
operation enabled us not only to reach remote areas Extra efforts are given in analyzing the implications of
and many more lives, but also provide the small environmental issues for projects, which may have
entrepreneurs with new leases of life, which will help critical environment implications. We, generally, avoid
in sustainable economic and social development. We investments where environmental risks are considered
remain ever conscious of our social responsibilities as high. In all the investment projects, our appraisal team
an integral element of our corporate culture. always checks whether the client is complying with
the Environmental Conservation Act 1995 and
With a view to contributing to poverty reduction and Environmental Conservation Rules 1997.
sustainable development in Bangladesh by supporting
the development of SMEs that are close to being ready
to invest and/or export, that will benefit the poor,
through the creation of more better jobs, and
ultimately sustainable livelihood, IDLC established the
Local Enterprise Investment Centre (LEIC) in 2005. The
LEIC, a pilot project, managed by IDLC and funded by
the Canadian International Development Agency
(CIDA) was designed for a life span of forty months,
which ended on March, 2009.
32
Report of the
Audit Committee
The Audit Committee of IDLC was formed with the iii. To review the internal control system and
following major objectives: procedures
iv. Adherence to compliance requirements
1. To ensure proper and adequate internal controls
are in place The Committee normally meets every quarter. During
2009, four Audit Committee meetings were held to
2. To provide the Board with a clear understanding carry out the following tasks:
of where enterprise risks lie
1. Reviewed and discussed the Management Letter,
3. Assist the Board in discharging its responsibilities by external auditor Rahman Rahman Huq, for the
toward the stakeholders of the Company year ended December 31, 2008 on the annual
audit on Financial Statements of IDLC Finance Ltd.
In line with the above, IDLC introduced risk based
auditing in 2008. To further strengthen the audit, in 2. Reviewed and discussed the Bangladesh Bank
2009, we started risk assessment process of our major Inspection Report 2008 and, management’s
business operations. This enables the Committee to response on the report.
evaluate major business risk areas, so to ensure
proper controls are in place, which is well managed, 3. Reviewed various reports of Internal Control &
providing accurate, appropriate and timely informa- Compliance Department on operational, financial
tion to the Board of Directors, management, regula- procedures and branch activities.
tory bodies and shareholders.
4. The Committee reviewed the status report of
The Committee comprises of five Directors, Audit Plan 2008.
nominated by the Board of Directors, and, is headed
by a director with professional background in 5. The Audit Plan for 2009 was also reviewed by the
Accounting and Finance. It operates according to the Committee.
charter of the Committee approved by the Board. The
CEO & Managing Director attends the meeting by The Audit Committee is of the view that the internal
invitation. The Chief Risk & Compliance Officer has control and procedures are adequate to present a
direct access to the Committee and the Committee is true and fair view of the activities and financial status
directly reportable to the Board. of the Company and that its assets are safeguarded
against all unauthorised disposal.
The Committee is empowered to examine
33
Event Highlights
01. Directors at 24th Annual General Meeting
02. A partial view of the 24th Annual General Meeting
03. IDLC Launches Investors’ Awareness Program in Sylhet
04. IDLC receives Commward Excellence in Communication 2009 organized by Bangladesh Brand Forum
05. IDLC opens SME booth at Gazipur
06. IDLC Securities Limited Inaugurates Its Gulshan Branch
01 02
03 04
05 06
34
07. IDLC inaugurates SME booth at Imamganj
08. IDLC gets ICMAB Best Corporate Performance Award 2008
09. IDLC organizes training program on anti money laundering and anti terrorism regulations
10. IDLC provides support to SEID Trust for under privileged children with intellectual and multiple disability
11. IDLC Distributes Blankets to the cold-hit poor in Bogra
12. IDLC in REHAB Fair
07 08
09 10
11 12
35
Consolidated Performance at
a glance during 2009
Total Assets grew Shareholders equity rose
by 30.79% by 48.52%
to reach Tk. 22,681 million to reach Tk. 2,393 million
Net Profit After Tax grew Net Asset Value per share
by 102.25% Tk. 797.70
to reach Tk. 822 million 2008 : Tk. 537.10
36
Key Operating and Financial Information
-Consolidated
(Tk. in Million)
2005 2006 2007 2008 2009 Growth (%)
Financial Performance
Lease and Term loans executed 2,564 2,875 2,977 3,411 3,750 9.90%
Housing finance disbursement 898 1,205 1,255 1,612 1,839 14.08%
Short term finance portfolio 355 326 213 336 317 -5.65%
Lease Finance 4,711 5,001 4,571 4,734 4,383 -7.41%
Housing finance assets 1,643 2,441 3,065 3,915 4,789 22.32%
Total assets 9,291 11,680 15,056 17,342 22,681 30.79%
Long term liabilities 6,989 8,115 11,103 12,115 18,792 55.11%
Term deposit balance 4,487 5,610 8,257 8,249 9,780 18.56%
Net current assets (238) (192) 1,401 1,559 1,003 -35.66%
Operational Performance
Operating Income 476 479 883 1,179 1,913 62.25%
Operating expenses 152 197 272 352 489 38.92%
Financial expenses 536 816 1,246 1,553 1,687 8.63%
General and administrative expenses 135 170 225 352 490 39.21%
Profit before tax 265 236 475 708 1,273 79.80%
Net profit after tax 153 157 303 406 822 102.25%
Average effective tax rate 42.31 33.41 36.08 42.57 35.46 -16.71%
Financial Ratios
Debt equity ratio (Times) 8.00 9.28 9.54 8.32 8.48 1.92%
Financial expenses coverage ratio (Times) 1.50 1.29 1.38 1.46 1.75 20.53%
Current ratio (Times) 1.6:1 0.96:1 1.2:1 1.21:1 1.04:1 -14.05%
Return on total assets (%) 1.96 1.57 2.37 2.50 4.11 64.40%
Non performing loan ratio (Times) 5.00 4.74 4.62 4.50 3.62 -19.56%
Return on shareholders’ equity (%) 19.00 17.45 27.59 28.43 41.05 44.39%
Earnings per share* (Tk.) 50.86 52.33 101.00 135.46 273.96 102.25%
Dividend per share (%) 37.50 38.33 40.00 35.00 110.00 214.29%
Price earnings ratio (Times) 9.90 7.60 10.02 16.89 13.52 -20.00%
Dividend yield (%) 3.72 4.89 2.63 1.53 2.97 94.11%
Dividend payout ratio (%) 73.73 73.24 39.60 25.83 40.15 55.40%
Equity Statistics
Number of share 1,500,000 1,500,000 2,000,000 2,500,000 3,000,000 20.00%
Year end market price per share (Tk) 1,007.00 784.00 1,519.00 2,289.00 3,703.00 61.77%
Net asset value per share (Tk.) 283.67 317.33 415.81 537.10 797.70 48.52%
Market capitalization 1,510.50 1,176.00 3,038.00 5,722.50 11,109.00 94.13%
Market value addition per share 723.33 466.67 1,103.19 1,751.90 2,905.30 65.84%
Shareholders’ equity 851.00 952.00 1,247.44 1,611.31 2,393.09 48.52%
* Prior years' number of shares have been adjusted to reflect bonus share issued in 2008
37
IDLC Finance Limited
Value Added Statement
for the year ended December 31, 2009
Value added is the wealth created by IDLC through extending lease financing, short-term finance (factoring of accounts
receivable and work order financing), housing finance, merchant banking and corporate finance.
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.
18 Employees 22
2008 27 Provider of capital 12
36 Government 40
19 Growth and expansion 27
38
Performance Indicators
Operating Income Profitability
Taka in million Taka in million
Profit before tax Profit after tax
1,913 1,273
1,179
822
708
883 62%
475 406
34%
479 265 303
476 236
84%
153 157
1%
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
17,342
1,611
15,056 31%
49%
1,247
11,680
15%
9,291 952 29%
851
29%
31%
26%
12%
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
39
Return on total assets Return on Shareholders equity
Percentage Percentage
4.11
41.05
1.96
1.57 19.00
5% 17.45 44%
3%
51%
58%
-20%
-8%
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
9.28 9.54
8.32 8.48
8.00
2%
135.46
-13%
102%
101.00
3% 34%
50.86 52.33
16% 93%
2.89%
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
40.00
37.50 38.33
35.00
5,723
214%
94%
-13%
3,038
88%
4%
1,511 1,176 158%
2%
-22%
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
40
Book value Vs Market price of share Taka Price Earning ratio
Year end market price per share (Tk), Net asset value per share (Tk.) Times
16.89
3,703
13.52
10.02
9.90
-20%
2,289
7.60
1,519 68%
1,007
784 798 32%
537
416
284 317 -23%
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Information Technology
4%
Iron & Steel Paper & Paper Products
4% 2%
Education
4% Pharmaceuticals
6%
Building & Construction Financial Services
4% 5%
41
Highlight as required by
Bangladesh Bank
Sl no. Particulars 2009 2008
2008
42
Business Environment and Its Likely
Impact on the Financial
Performance of IDLC
Some statements in this annual report such as IDLC's 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 environ-
ment:
Increase in statutory liquidity reserves and cash reserve requirements by Bangladesh Bank
43
Chairman's Review
Dear Valued Shareholders,
IDLC
IIDL
DLC FINANCE
DL FINA
NANNCE
NC
C
CEE LIMIT
LLIMITED
LIIMITTED
ED ANNUAL
ANN
A
ANNNU
NN UA
UAL
AL RE
AL RREPORT
EPPO
POR
OR
OR T 22009
009
4444
During 2009, IDLC earned a consolidated net profit of Taka 822 million compared to
previous year’s Taka 406 million showing a robust growth of 102.3%. Consolidated
earnings per share during the year under review were Taka 273.96 compared to
previous year’s Taka 135.46.
I believe that increased success could come IDLC’s way I would like to thank all our valued shareholders for the
if we venture into niche areas, pursuing untapped confidence and trust reposed in the Company. On
opportunities that are available and which would in behalf of the Board of Directors, I wish to pledge that
effect give us a strategic advantage over our major through prudent and carefully planned strategies, we
competitors. will continue to add value to shareholders’ wealth and
achieve IDLC’s vision and mission and reinforce its
The steady growth and development of business has values.
placed your financial institution in a strong position.
The asset size of the Company, at the year-end, stands My thanks to our loyal customers, who continued to be
at Taka 22.7 billion, marking a growth of 30.8% over the with us despite strong pressure from our competitors.
previous year. We continue to receive strong response
to our deposit mobilization efforts, and, at year-end, Finally, I would like to convey my appreciation to the
the balance of term deposits received by the Company fellow directors for their generous cooperation and
was Taka 9.8 billion which is 18.56% higher than support during the year. I also appreciate the hard
previous year. We have also plans for issuance of Zero work, dedication, sincerity and commitment the
Coupon bonds in 2009 which will help us reduce Company’s human resources have shown for its
funding costs and improve asset liability mismatch. development by launching innovative ideas, products
and services. I am proud to have this unique group of
During 2009, IDLC earned a consolidated net profit of highly qualified, competent and dedicated individuals
Taka 822 million compared to previous year’s Taka 406 to advance IDLC’s objectives and protect its interest.
million showing a robust growth of 102.3%. Consoli-
dated earnings per share during the year under review
were Taka 273.96 compared to previous year’s Taka
135.46.
45
CEO & Managing Director’s
Review of Business
Environment
GLOBAL ECONOMY
IDLC
IDLLC FFINANCE
IN
INA
NANCE
N LLI
LIMITED
M ED
MIT D ANNUAL
AN
ANN UA
UA
ALL RE
RREPORT
EPPOR
OR T 22009
009
000
0
4466
CEO & Managing Director’s Review
The Bangladesh economy managed to avoid the first round shocks of the global
financial meltdown due to limited, regulated openness of its economy. The economy
was affected relatively lightly by the global economic slowdown with 5.9% real GDP
growth in 2008-2009, not far below the 6.2% growth achieved in 2007-2008
Moreover, high unemployment rates and public debt, as demand supported by growing workers’ remittance
well as not fully healed financial systems, and in some inflows and budgetary stimulus packages and higher
countries, weak household balance sheets are present- social safety net spending also contributed to the high
ing further challenges to the recovery in these econo- growth expectation of the industrial sector in response
mies. Growth in emerging and developing economies is to growing domestic demand. The growth performance
expected to rise to about 6 percent in 2010. Stronger of service sector, which accounts for about half of GDP,
economic frameworks and swift policy responses have is continued to be buoyant due to the recovery in
helped many emerging economies to cushion the private consumption, export and import growth.
impact of the unprecedented external shock and Booming trend in construction sector activities
quickly re-attract capital flows. China and India, the including residential and commercial housing activities
main contributor to the growth of the developing Asia will also create momentum in service sector growth.
are expected to grow by 10.0% and 7.7% in 2010
Growth of Real GDP
compared to 8.7% and 5.6%, respectively, in 2009.
7
STATE OF THE BANGLADESH ECONOMY 6
5
Percent
47
CEO & Managing Director’s Review
The inflow of workers’ remittances maintained its uptrend during fiscal year 2008-2009
compared with the previous fiscal. Total remittances in FY 2008-2009 increased by
22.32% (from USD 7.91 billion to USD 9.68 billion)
48
CEO & Managing Director’s Review
to 25.4% as on December 2008 which contributed anticipation of amendment in the insurance act pushed
significantly in decreasing the overall gross NPL ratio. the sector performance positive while NBFIs were in
The net NPL ratio of all banks also declined to 2.34% at safe territory due to the expectation of bonus and right
the end of September 2009 compared to 2.8% in shares as most of them require enhancement of capital
December 2008. base.
In an attempt to strengthen and consolidate the Trend in Market Capitalisation and DSE Index
financial base of non banking financial institutions 1600 4700
1400 4200
(NBFIs), Bangladesh Bank (BB) plans to implement Basel
1200 3700
II capital framework by the end of 2010 for all the NBFIs Billion Taka 3200
1000
now operating in the country. Under the framework, BB 2700
Index
800
2200
will determine the minimum capital requirement and 600
1700
the risk weighted assets for the NBFIs based on the 400 1200
overall sectoral performance. The BB has already 200 700
instructed NBFIs to increase their paid up capital to Tk. 0 200
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Mar-05
Mar-06
Mar-08
Mar-09
Dec-05
Mar-07
Dec-06
Dec-07
Dec-08
Dec-09
500 million within December 2010. The earlier require-
ment for the minimum paid up capital along with
Market Capitalisation Index
reserves was Tk. 250 million.
Source: Bangladesh Bank (BB) quarterly report
CAPITAL MARKET SCENARIO Dhaka Stock Exchange (DSE) has launched the
over-the-counter (OTC) market -a separate trading floor
During 2008, the world went through its worst
to facilitate trading of the junk shares suspended by the
economic crisis since 1930, triggered by the financial
regulatory body in recent period. This will enable
tremors that jolted Wall Street giants and almost froze
investors, whose funds remained stuck-up with the
up the global credit system, the lifeblood of modern
suspension of the trading of the junk shares of listed
capitalism. In this context, it must be said the Bangla-
companies, to take part in daily trading.
desh capital market did exhibit marked resilience.
IDLC’s BUSINESS ACTIVITY- A SUCCESS STORY BASED
The Bangladesh capital market experienced strong
ON DIVERSIFICATION
performance during 2009 with healthy growth in most
relevant indicators. The rising trend of the DSE General At IDLC, we have always believed that diversification of
Index (DGEN) has continued since July 2009 and hit an products and services and revenue streams is the best
all time high of 5,828 on February 17, 2010. The index way of ensuring sustained financial performance.
increased by 765 point in a single day and crossed the Accordingly, we have continued to focus on multiple
psychological 4,000 points mark on November 16, 2009 business areas in 2009 and have taken measures to
when the largest company in Bangladesh Grameen encounter the uncertainty that may arise in business
Phone debuted on the bourses. The stock market activities from the aftermath of the global economic
capitalization reached a record high level at Tk. 2.366 crisis.
trillion on February 17, 2010, a 123% higher than end of
December 2008. Although DGEN started moving IDLC’s total investment portfolio as on December 31,
upward from July 2009 but record breaking rally began 2009 stood at Tk. 20,099 million which is 26.33% higher
in November 2009 mainly due to renewed interest in than the previous year. Out of the total portfolio, lease,
high cap banking sector riding on higher third quarter term loan, real estate finance and margin loans,
earnings compared to previous quarter and the respectively, represent 22.06%, 17.30%, 24.10%, and
anticipation of year end dividend declaration. The 29.50% of the total portfolio.
49
CEO & Managing Director’s Review
I would like to thank this Team for their sincerity, diligence and team-work in
2009 – all of which have, together, ensured the achievement of the company’s
annual goals and objectives
IDLC also maintains a well diversified investment The NBFI-sector experienced significant competition in
portfolio in the major sectors with highest allocation 2009 from the Banking industry with Banks using low
to services and apparel & accessories at 9.97% and cost of funds and the high liquidity prevailing in the
9.96%, respectively, followed by food and beverages market to enter the already crowded term loan market.
sector at 8.82%, transport at 7.72%, textiles at 7.02%, It is expected that interest rate competition will
housing & real Estate at 6.81%, pharmaceuticals at continue for the foreseeable future, particularly for
5.72%, financial services at 4.76%, iron & steel at 4.45%, traditional businesses such as leasing and term loans.
agro based industry at 4.38% and so on. This diversifi-
cation of investment portfolio helps us mitigate IDLC continues to be recognised as the leading
economic and sectoral risks. multi-product NBFI in the Bangladesh and is a
Portfolio Composition
continuous role-model for all competitors. The
Personal loan Margin loan company’s vision, diversified business strategy and
1% 29% strong compliance culture has helped overcome
competition and achieve exceptional results in 2009.
Investment in Lease finance
shares 22%
3% The strong results achieved in 2009 are mainly the
Car loan result of exceptional efforts put in by IDLC staff
2% members – the IDLC-Team. I would like to thank this
Short term Team for their sincerity, diligence and team-work in
finance 2009 – all of which have, together, ensured the
2% Real estate
finance achievement of the company’s annual goals and
Term finance 24% objectives.
17 %
50
Directors’ Report to the Shareholders
DEAR SHAREHOLDERS, locations of the country during the rest of 2010.
We believe that setting up of these branches will help
The Board of Directors of IDLC Finance Limited is us to generate business volumes from SME markets
pleased to present the audited financial statements of which are mostly untapped by us, establish our
the Company for the year ended December 31, 2009, permanent presence in different areas, give faster
Auditors’ Report thereon along with economic service delivery and cross selling opportunities of all
overview, market status, Company’s performance, and our other financial products and services. Setting up of
other matters in terms of Companies Act, 1994, these branches, we believe, will also broaden our
Guidelines issued by Securities and Exchange Commis- deposit mobilization effort.
sion and Bangladesh Bank and Bangladesh Accounting
Standards: IDLC’s fully owned subsidiary, IDLC Securities Limited
(IDLCSL) has also opened a branch at Gulshan and
OPERATIONAL PERFORMANCE OF IDLC Sylhet and plans are afoot to open five more branches
DURING 2009 in 2010.
The Company’s diversified operations and subsidiary IDLC’s consolidated operating result during 2009 along
saw a hefty growth during the year 2009. SMEs in with budget for 2009 is summarized below:
Bangladesh have been making a significant contribu-
tion to the country’s economy. However, there is large (Tk. in millions)
gap between their needs and access to reasonably Actual in Budget for Achievement
priced funds. Under this backdrop, we have taken an 2009 2009 as a %
initiative to further increase investment in this of Budget
segment, in a structured manner to cater to the Operating income 1,913 1,248 153.29%
financing needs to small and medium sized business Operating expenses 489 427 114.52%
enterprises. IDLC’s SME focused branches at Bogra has
Total operating profit 1,424 858 166.0%
strengthened its financing activities in this growing
sector in the northern region of the country. Profit before income tax 1,273 720 176.8%
Net profit after income tax 822 461 178.3%
As a part of business expansion, during 2009, we Earnings per share 274 154 177.9%
opened branch at Sylhet which, we believe, will
contribute significantly to the management’s effort for
increasing SME business and deposit mobilization in BUSINESS REVIEW
that region. We have also opened two SME Booths at
Imamganz in old Dhaka and Gazipur during 2009 to Lease and Term Loan
increase our business and provide better services to
our SME clients at that region. Moreover, considering Amid intense and increasing competition amongst the
the business potential for SME financing, we have also financial institutions as well as the commercial banks,
opened two SME focused branches at Savar and IDLC maintained its leadership position in the market.
Narayanganj in February, 2010 and have also plan to During 2009, your Company executed Tk. 3,750 million
set up five more SME Focused Branches in different in lease and term loans compared to previous year’s
51
Directors’ Report
Tk. 3,411 million, showing a growth of 10%. The lease slowly see its own growth with the passage of time.
and term loans portfolio at the end of the year saw a
marginal growth of 4.0% over the previous year. This Capital Market Operation
year we have concentrated more on acquiring better
quality financial assets rather than volume achieve- During 2009, IDLC’s Merchant Banking Operation
ment for its own sake. The Company expects to earned Tk 814.5 million in revenues, which is a hefty
continue its drive to diversify its client base, maintain 87.2% higher than the previous year. The operation
portfolio quality and improve service quality, which, has earned an operating profit of Tk. 189.54 million,
we believe, will enable us to maintain a sustainable compared to previous year’s Tk. 91.67 million, marking
growth in this operation. a robust growth of 106.8%. We hope that this opera-
tion will earn increasing revenue in the years ahead
Housing Finance and will take much stronger position in the market. At
the end of December 2009, total portfolio value at cost
Although the real estate and housing industry was Tk. 11,455 million (Tk. 12,637 million at the
experienced a setback during early 2009 with fall in market price) and balance of margin loan was Tk. 5,862
sales due to the uncertainty in the business and trade million. During the year this operation has also
circles, IDLC’s housing finance operation witnessed a successfully managed the issue management of
reasonable growth of 14% in disbursements. Revenue Marico Bangladesh Limited.
of the operation also witnessed growth of 22.46%. The
housing finance assets as at the close of the year stood Moreover, Merchant banking Operation earned Tk. 201
at Tk. 4,789 million, 22.32% higher than the previous million in capital gains during 2009 through trading of
year. We believe that this operation will continue to securities in the secondary market.
grow with increasing retail customer base in the years
ahead. Treasury Operations
52
Directors’ Report
Sluggish credit growth, increase in foreign remittance IDLC Securities Limited (IDLCSL), a wholly owned
and decrease in commodity price globally, caused subsidiary of IDLC, started its operation in September
mounting excess liquidity in the financial sector, which 2006. The main object of the company is to act as
resulted in substantial decline in overall interest rates member of stock exchanges, the central depository
during the year 2009. system (CDS) and carry out the business of broker,
jobbers or dealers in stocks, shares, securities, etc,.
Considering the prevailing excess liquidity in the
financial sector, we shifted our focus to avail fund from IDLCSL is a corporate member of both the Dhaka Stock
short-term sources. Under the declining interest rate Exchange Limited and Chittagong Stock Exchange
scenario, we were very active to use cheaper short- Limited and a full service Depository Participant of the
term funding sources, which helped us to reduce our Central Depository of Bangladesh Limited. It has
financial expenses substantially. As a result, our cost of already become one of the top four brokerage
fund decreased by more than 2.0% during the year. companies in the country with IDLC’s unique branding,
market image and reputation contributing signifi-
In year 2010, as we expect rise in interest rate, we are cantly to both institutional and personal customer
planning to issue longer terms bonds and avail other accretion.
long term funding sources, which we believe, will
boost our efforts to lessen asset-liability mismatch, During 2009, IDLCSL earned a net profit of Tk. 353.35
diversify our funding basket and reduce overall million. We expect that this enterprise will take strong
funding cost. position in the market in future and continue to
contribute significantly to the profitability of your
We are actively participating in Small and Medium company.
Enterprise Refinancing Schemes of Bangladesh Bank,
funded by IDA and ADB. We have regularly submitted I.Cons Limited
projects against these schemes and received refinanc-
ing of BDT 1,010.93 million till December 2009. We are I.Cons Limited, a wholly owned subsidiary Company of
also receiving funds against our submitted projects IDLC, was incorporated on March 9, 2004 as a private
under Bangladesh Bank’s Home Loan Refinancing limited company under Companies Act, 1994 with paid
Scheme. Till December 2009, we received refinancing up share capital of Tk. 1,000,000 which had been
of BDT 525.83 million under the scheme. providing IT services to its sister concerns and affiliates
as well as to some other financial institutions in the
We have also submitted eligible project under industry.
Investment Promotion and Financing Facility (IPFF)
jointly initiated by IDA of World Bank Group and As the company’s performance was not up to mark
Government of Bangladesh and received fund for BDT and considering the performance of IT sector in the
80.0 million. country, the company was wound up voluntarily with
53
Directors’ Report
4.35%
3%
4.74%
26.09%
2%
5.14%
6. 7
23%
2.37%
49% 0.40%
45.45%
Core management staff Management staff Less than 2years 2- 5 years 6-10 years 23 - 30 years 31 - 35 years 36 - 40 years
Executive officer Support stuff 11-15 years Over 15 41 - 45 years 46 - 50 years Over 51 years
effect from November 18, 2009. The assets and resources development as well as meet organizational
liabilities of the Company were distributed to its needs to face future challenges. As part of IDLC’s
shareholders in proportion to the shareholding as per Human Resource Development Program, a large
the liquidator's winding up accounts. On liquidation, number of employees were sent to different training
all the assets of I.Cons Limited were taken over by IDLC programs, which included both managerial develop-
at book value and the proportionate residual balance ment and technical modules.
amounting to Tk. 795,908 was received by IDLC as a
holder of 9,999 shares, out of total 10,000 shares of During the year 2009, 50 employees were trained
I.Cons Limited. locally in 20 training courses while 26 employees were
sent on overseas training programs spread over 13
HUMAN CAPITAL different modules. In addition, a significant number of
in-house training courses were arranged on money
IDLC continued to implement appropriate human laundering and other managerial development
resource management policies and practices to aspects.
develop its employees, and to ensure their optimum
contribution towards the achievement of corporate Compensation and Reward
goals. At IDLC, we believe that our Human Resources
(HR) give the organization a significant competitive IDLC provides its employees with a competitive
edge in terms of knowledge and experience. Keeping compensation package. The Company also ensures
this in mind, we continued our policy of recruiting the performance based reward system and makes
best people and implementing programs to develop performance evaluation, once in July to reflect annual
and retain high quality human resources. increments, and, another in December to award
performance based bonus. A detailed compensation
Ethical Standards survey is carried out by independent consultant to
assess and evaluate the current pay level of IDLC vis a
At IDLC, we believe in the importance of adherence to vis the market.
the highest standards of ethical conduct as a key to
business success and make every effort to maintain full Employee Health & Safety
compliance with laws, rules and regulations that
govern our business. We have a set of Code of Ethics Employee health and safety are our main priorities. The
and business conduct for our employees, who are Company provides hospitalization insurance coverage
required to read and sign it every year, as a sign of to ensure medical security of its staff. In addition, the
reiteration and commitment to the principles Company has group life insurance scheme for its
enshrined in it. permanent staff to cover the unforeseen risk of death.
Training
2008 Staff Strength
While maintaining high recruitment standards, IDLC The staff strength of the Company as on December 31,
also provides need based internal and external 2009 and for the previous two years is summarized
training to its staff, with a view to encourage human below:
54
Directors’ Report
Executive officers 48 43 49
RISK MANAGEMENT
Support staff 78 99 135
Total 168 207 253 Risk is an integral part of financing business. IDLC
always concentrates on delivering high value to its
Non-Discriminatory Policy and Equal Opportunities stakeholders through appropriate trade off between
Employer risk and return. A well structured and proactive risk
management system is in place within the Company to
IDLC always respects employee’s right and dignity. We address risks relating to credit, market, liquidity and
always practice equal treatment to all existing and operations. The Company has different committees for
potential employees irrespective of their race, religion, risk management. The Credit Evaluation Committee
age and gender. It is your Company’s policy to ensure (CEC) and Asset and Liability Committee (ALCO)
equal opportunity in recruitment, selection, promo- regularly meet to review the market, credit and
tion, development, training and rewards. liquidity related factors and recommend and imple-
ment appropriate measures to counter associated
INFORMATION TECHNOLOGY risks. Appropriate internal control measures are also in
place to address operational risks.
IDLC has highly experienced and trained professionals
working on maintaining and developing the An independent Credit Risk Department is in place, at
Company’s IT infrastructure. The software professionals IDLC, to scrutinize projects from a risk-weighted point
are constantly innovating and writing in-house of view and assist the management in creating a high
programs to meet the needs of the company’s ever quality credit portfolio and maximize returns from risk
increasing and diversified product and services assets. IDLC has also an Operational Risk Management
industry. Department in place to address operational risk and to
frame and implement policies to encounter such risks.
The Company’s branch and office network now
embraces sixteen locations, and the IT Division has A summary of business risks facing the Company and
successfully implemented a Wide Area Network (WAN) steps taken to effectively manage and mitigate such
to connect all of the premises on real-time basis, risks are stated in a separate statement on risk
thereby, providing seamless connectivity and prompt management in page number 23.
customer services.
FUTURE PROSPECTS
Information & Communication technology (ICT) has
become indispensable for financial institutions in Despite constantly increasing competition in the
ensuring smooth operation and providing efficient market with entering into leasing, housing finance,
service. Your Company has recognized this fact and the merchant banking and brokerage business by
Board of Directors have adopted a comprehensive ICT commercial banks, we will put in strenuous efforts to
55
Directors’ Report
- 0
2005 2006 2007 2008 2009
2005 2006 2007 2008 2009
achieve the business volumes targeted by all the five new branches during 2010.
departments as well as realise our corporate objec-
tives. Innovative and relentless marketing drive will With all these expansion and diversification, IDLC aims
continue to attain quality asset growth, while to be a truly specialized financial institution focusing
maintaining and improving existing portfolio quality. on SME financing and investment banking operation
while maintaining its business share of corporate
IDLC has succeeded immensely in its diversification financing.
efforts resulting in growth in income steams from an
array of business segments. Our focus in 2009 and in CONTRIBUTION TO NATIONAL ECONOMY
the near future will be in further growing of our SME
business through expansion of branch network across IDLC Finance Limited commenced its journey in 1985
the country and focusing more SME businesses in all as the first leasing company in the country. With its
existing branches. We shall also take extra efforts to pioneering role, IDLC has made the lease financing
offer more loans to women entrepreneurs. popular in the country and developed the leasing
industry, which has a total investment more than Tk.
The Corporate Division has been affected somewhat 127 billion now, as a vibrant financial intermediary in
by the change in depreciation policy by the Govern- the medium term financing segment in the country.
ment and also by the reduction of the lending rate by IDLC is continuously increasing its focus on financing
the commercial banks for corporate lending. Plans are to Small and Medium Enterprises (SMEs), the engine
afoot to explore the possibility of extending operating for growth for any developing economy.
lease as a new product to counter the loss of business
in the financial lease segment, our mainstay since During the year under report, the Company has
inception of the company. deposited Tk. 360 million to the Government Exche-
quer as corporate income tax, withholding tax and VAT.
IDLC’s Merchant Banking Division has performed
exceedingly well in 2009. We shall continue our efforts CORPORATE AND FINANCIAL REPORTING
to increase the customer base, both in the individual FRAMEWORK
and institutional segments. We shall endeavor to
encourage our customers to get them listed on the The Directors, in accordance with SEC Notification No.
bourses, thereby bringing in quality scrips into our SEC/CMRRCD/2006-158/Admin/02-08 dated February
burgeoning capital market. As the financial institutions 20, 2006; confirm compliance with the financial
are facing immense competition, the Company will try reporting framework for the following:
to concentrate more on capital market operation and
fee generating activity and diversify its mode of a) The financial statements prepared by the
investment. management of IDLC, present fairly its state of
2008 affairs, the results of its operations, cash flows and
IDLC Securities limited (IDLCSL), a fully owned changes in equity;
subsidiary engaged in securities brokerage business, is
expecting to increase its client base and revenue with b) Proper books and accounts of the Company have
superior quality services to its customers by opening been maintained;
56
Directors’ Report
c) Appropriate accounting policies have been by the Directors are summarized in Annexure II of this
consistently applied except for the changes report.
disclosed in the financial statements in prepara-
tion of financial statements and accounting PROPOSED DIVIDEND AND APPROPRIATION OF PROFIT
estimates are based on reasonable and prudent
judgement The financial results of and recommended appropria-
tions for the year 2009 are summarized below:
d) International Accounting Standards, as applicable
in Bangladesh, have been followed in preparation (Tk in million)
of financial statements and any departure there Profit after tax 518.53
from has been adequately disclosed Retained earnings brought forward
after payment of dividend for 2008 14.43
e) The system of internal control is sound in design
and has been effectively implemented and Profit available for appropriation 532.96
monitored;
Directors’ recommendation for appropriation
Stock Dividend @ 100% 300.00
f) There are no significant doubts upon the
(one share for every one share held)
Company’s ability to continue as a going concern ;
Cash Dividend @ 10% 30.00
KEY OPERATING AND FINANCIAL DATA (per share on 3,000,000 ordinary shares)
Transfer to Statutory Reserve 105.00
Key operating and financial information of last five
years and reasons of significant deviations as per Transfer to General Reserve 90.00
requirement of SEC Notification No. Balance profit carried forward 7.96
SEC/CMRRCD/2006-158/Admin/02-08 dated February
20, 2006, are presented in the page number 37 as Key DIRECTORS
Operating and Financial information.
As per Article- 116 of the Articles of Association of the
Highlights of overall operation of the Company as per Company, the following three Directors will retire from
DFIM cirlular No. 11 dated December 23, 2009 are also the office of the Company in the 25th Annual General
shown in page number 42. Meeting:
57
Directors’ Report
APPOINTMENT OF CEO & MANAGING DIRECTOR 3.0 billion, in phases, subject to the approval of the
shareholders at the Annual General Meeting.
The Employment Contract with Mr. Anis A. Khan, ex
CEO and Managing Director of the Company expired STATUS OF COMPLIANCE
on March 31, 2009, which was not renewed as desired
by Mr. Khan. Subsequently, the Board at its 168th Status of compliance with the conditions imposed by
meeting held on November 10, 2009 decided to the Securities and Exchange Commission’s Notification
appoint Mr. Selim Reza Farhad Hussain who was No. SEC/CMRRCD/2006-158/Admin/02-08 dated
working as Head of Finance, Consumer Banking, February 20, 2006 is enclosed as Annexure III.
Standard Chartered Bank, India, as the CEO and
Managing Director of the Company with effect from
January 1, 2010 for a period of three years. The On behalf of the Board of Directors,
appointment was subsequently approved by Bangla-
desh Bank. As per requirement of Section 109 of the
Companies Act, 1994, consent of the shareholders in
General Meeting is required for appointment of
Managing Director. Anwarul Huq
Chairman
AUDITORS
ISSUANCE OF BOND
2008
58
Directors’ Report
ANNEXURE-I
Pattern of Shareholdings as on December 31, 2009
Shares Held by :
Subsidiary and other related parties Nil
Directors, their spouses and minor children:
Chief Executive Officer (CEO) and his spouse and minor children Nil
Chief Financial Officer (CFO) and his spouse and minor children Nil
Company Secretary (CS) and his
spouse and minor children Nil
Head of Internal Audit (HIA) and his spouse and minor children Nil
59
Directors’ Report
ANNEXURE-II
Attendance by the Directors at the Board Meeting during the year 2009
Total
meetings
Meeting % of
Name of Director held during Remarks
attended attendance
individual’s
tenure
Mr. Anwarul Huq 10 10 100
Mr. Habibur Rahman Mollah 10 09 90
Mr. Rubel Aziz 10 06 60
Mr. Yongbok Jo 10 10 100
Mr. Md. Shafiqul Azam 03 03 100 Resigned on February 25, 2009
Mr. Md. Rezaul Karim 07 06 85.7 Appointed in place of Mr. Md. Shafiqul Azam
Mr. Lee Dong Jue 02 01 50 Resigned at on February 25, 2009
Mr. Aziz Al Kaiser 08 08 100 Appointed in place of Mr. Lee Dong Jue
Mr. Choong-Sun Park 02 01 50 Resigned on February 25, 2009
Mr. K. Mahmood Sattar 08 07 87.5 Appointed in place of Mr. Choong Sun Park
Mr. Ahmed Rajeeb Samdani 03 01 33.33 Resigned on March 30, 2009
Ms. Meherun Haque 07 05 71.5 Appointed in place of Mr. Ahmed Rajeeb Samdani
Mr. A.K.M. Shahidul Haque 03 02 66.67 Resigned on May 27, 2009
Mr. A.K.M. Shaheed Reza 07 07 100 Appointed in place of Mr. A.K.M. Shahidul Haque
Mr. Monoweruddin Ahmed 09 07 77.78 Resigned on December 27, 2009
Leave of absence was granted to Directors who could not attend some of the Board Meetings.
Ms. Jeong Won Byun acted as Alternate Director for Mr. Lee Dong Jue and Mr. Choong-Sun Park as per Articles of
Association of the Company.
2008
60
Directors’ Report
ANNEXURE-III
Status of compliance with the conditions imposed by the Securities and Exchange Commission’s Notifica-
tion No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006
61
Directors’ Report
62
Auditors’ Report and
Financial Statements of
IDLC Finance Limited
Directors’ Report
Scope
We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
The financial statements of the Company's subsidiary IDLC Securities Limited, reflect total assets of Tk.
1,184,971,898 as at 31 December 2009 and total revenue of Tk. 483,441,639 for the year then ended. These
financial statements have been audited by other auditors whose reports have been furnished to us and our
opinion, in so far as it relates to the amounts included in respect of the Company's subsidiary, is based solely on
the reports of the other auditors.
Opinion
In our opinion, the financial statements of the Company along with the notes thereon and the consolidated
financial statements, drawn up on the consideration of the separate audit reports of the subsidiary as at 31 Decem-
ber 2009, prepared in accordance with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Report-
ing Standards (BFRS), give a true and fair view of the state of the Company’s affairs and of its subsidiary, and of the
results of their operations and cash flows for the year then ended and comply with the Companies Act 1994, the
Financial Institutions Act 1993, the Securities and Exchange Rules 1987, the rules and regulations issued by the
Bangladesh Bank and other applicable laws and regulations.
64
We also report that
a) 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;
b) in our opinion, proper books of account as required by law have been kept by the Company so far as it appeared
from our examination of these books and proper returns adequate for the purposes of our audit have been
received from branches not visited by us;
c) the Company's balance sheet and profit and loss account dealt with by the report are in agreement with the
books of account and returns;
d) the expenditure incurred was for the purposes of the Company's operation;
e) the financial position of the Company at 31 December 2009 and the profit for the year then ended have been
properly reflected in the financial statements, and the financial statements have been prepared in accordance
with generally accepted accounting principles;
f ) the financial statements have been drawn up in conformity with the Financial Institutions Act 1993 and in
accordance with the accounting rules and regulations issued by Bangladesh Bank to the extent applicable to
the Company;
g) adequate provisions have been made for leases and advances which are, in our opinion, doubtful of recovery;
h) the Company has followed the instructions issued by Bangladesh Bank in matters of lease/advance classifica-
tion, provisioning and suspension of interest;
i) the records and statements submitted by the branches have been properly maintained and consolidated in the
financial statements;
j) the information and explanations required by us have been received and found satisfactory;
k) the Company has complied with relevant laws pertaining to reserves and maintenance of liquid assets.
65
IDLC Finance Limited
Balance Sheet
as at December 31, 2009
2009 2008
Note
Taka Taka
Cash 3
In hand 3.1 66,000 51,000
Balance with Bangladesh Bank 3.2 225,155,458 213,666,706
225,221,458 213,717,706
Balance with other banks and financial institutions in Bangladesh 4 912,152,616 201,278,108
Fixed assets including land, building, furniture and fixtures 7 188,541,232 167,778,916
Other assets 8 318,228,163 421,436,571
Total Assets 21,615,259,934 16,912,673,151
Liabilities
Borrowings from other banks and financial institutions 9 6,029,180,391 4,145,174,744
Deposits and other accounts 10
Term deposits 9,779,933,274 8,248,679,428
Other deposits 579,835,183 530,686,903
10,359,768,457 8,779,366,331
Other liabilities 11 3,325,596,572 2,568,447,887
Total liabilities 19,714,545,420 15,492,988,962
Capital / Shareholders' equity
Paid-up capital 12 300,000,000 250,000,000
Share premium 13 3,750,000 3,750,000
Statutory reserves 14 401,250,000 -
General reserves 15 811,250,000 1,017,500,000
Dividend equalisation reserves 46,500,000 46,500,000
Retained earnings 337,964,514 101,934,189
Total equity 1,900,714,514 1,419,684,189
Total liabilities and Shareholders' equity 21,615,259,934 16,912,673,151
66
2009 2008
Note
Taka Taka
67
IDLC Finance Limited
Profit and Loss Account
for the year ended December 31, 2009
2009 2008
Note
Taka Taka
68
2009 2008
Note
Taka Taka
Appropriations
69
IDLC Finance Limited
(Merchant Banking Operation)
Profit and Loss Account
for the year ended December 31, 2009
2009 2008
Note
Taka Taka
Operational revenue
Underwriting commission 2,606,862 -
Custodial fees 12,500 12,500
Issue management fees 3,300,000 397,700
Income from portfolio management services 808,578,337 434,651,664
814,497,699 435,061,864
Less: Operational expenses
Interest expenses 17.3 519,216,990 293,027,900
Administrative expenses 17.4 23,834,499 16,068,765
Depreciation on property and equipment 7.1 6,814,543 1,718,998
Provision for margin loan 11.7(i) 27,960,044 16,786,002
Other operational expenses 17.5 47,133,237 15,784,973
624,959,313 343,386,638
Profit from merchant banking operations 189,538,386 91,675,226
70
IDLC Finance Limited
Cash Flow Statement
for the year ended December 31, 2009
2009 2008
Particulars
Taka Taka
71
72
IDLC FINANCE LIMITED
IDLC Finance Limited
Statement of Changes in Equity
for the year ended December 31, 2009
Figures in Taka
Particulars Not more than 1 3-12 months Above 5 years
1-3 months term 1-5 years term Total
month term term term
Assets
Cash in hand ( including balance with Bangladesh Bank) 225,221,458 - - - - 225,221,458
Balance with other banks and financial institutions 232,152,616 - 680,000,000 - - 912,152,616
Money at call and short notice - - - - - -
Investments 350,911,579 - 32,033,017 144,483,983 5,403,400 532,831,979
Loans, advances and leases 1,017,843,032 1,841,374,329 8,124,117,767 6,180,707,970 2,274,241,388 19,438,284,486
Fixed assets 3,413,014 6,802,398 29,299,320 74,033,382 74,993,118 188,541,232
Other assets 18,185,697 36,371,394 163,671,272 - 99,999,800 318,228,163
Total assets 1,847,727,396 1,884,548,121 9,029,121,376 6,399,225,335 2,454,637,706 21,615,259,934
Liabilities
Borrowing from other banks and financial institutions 1,287,915,400 971,102,751 1,081,021,113 2,140,849,101 548,292,026 6,029,180,391
Deposits and other accounts 333,074,091 807,723,783 6,184,578,486 2,638,448,517 395,943,581 10,359,768,457
Provision and other liabilities 135,946,836 271,868,483 1,222,785,152 868,464,613 826,531,488 3,325,596,572
Total liabilities 1,756,936,327 2,050,695,017 8,488,384,750 5,647,762,231 1,770,767,095 19,714,545,420
Net Liquidity Gap 90,791,069 (166,146,896) 540,736,625 751,463,105 683,870,611 1,900,714,514
73
IDLC Finance Limited
Consolidated Balance Sheet
as at December 31, 2009
Cash
In hand 3(a)i 116,000 71,000
Balance with Bangladesh Bank 3.2 225,155,458 213,666,706
225,271,458 213,737,706
Balance with other banks and financial institutions in Bangladesh 4(a) 1,546,316,124 534,199,265
Money at call and short notice - -
Investments 5(a) 637,946,574 350,565,498
Loans, advances and leases 6(a) 19,460,718,429 15,557,896,352
Fixed assets including land, building, furniture and fixtures 7(a) 224,509,596 187,955,026
Other assets 8(a) 586,525,045 497,175,774
Total Assets 22,681,287,226 17,341,529,621
Liabilities
Borrowings from other banks and financial institutions 9 6,029,180,391 4,145,174,744
Deposits and other accounts 10
Term deposits 9,779,933,274 8,248,679,428
Other deposits 579,835,183 530,686,903
10,359,768,457 8,779,366,331
Other liabilities 11(a) 3,899,246,528 2,805,676,347
Total liabilities 20,288,195,376 15,730,217,422
Capital / Shareholders' equity
Paid-up capital 12 300,000,000 250,000,000
Share premium 13 3,750,000 3,750,000
Statutory reserves 14 401,250,000 -
General reserves 15 811,250,000 1,017,500,000
Dividend equalisation reserves 46,500,000 46,500,000
Retained earnings 830,340,665 293,561,361
Total equity attributable to equity holders of the company 2,393,090,665 1,611,311,361
Minority interest 1,185 838
Total liabilities and Shareholders' equity 22,681,287,226 17,341,529,621
74
Note 2009 2008
Taka Taka
75
IDLC Finance Limited
Consolidated Profit and Loss Account
for the year ended December 31, 2009
2009 2008
Note
Taka Taka
76
2009 2008
Note
Taka Taka
Attributable to:
Shareholders of the Company 821,878,658 406,371,882
Minority interest 707 313
821,879,365 406,372,195
Appropriations
77
IDLC Finance Limited
Consolidated Cash Flow Statement
for the year ended December 31, 2009
2009 2008
Taka Taka
78
2009 2008
Taka Taka
79
80
IDLC FINANCE LIMITED
IDLC Finance Limited
Consolidated Statement of Changes in Equity
for the year ended December 31, 2009
Balance at 1 January 2009 250,000,000 3,750,000 - 1,017,500,000 46,500,000 293,561,361 1,611,311,361 838 1,611,312,199
Changes in accounting policy - - - - - - - - -
250,000,000 3,750,000 - 1,017,500,000 46,500,000 293,561,361 1,611,311,361 838 1,611,312,199
Surplus/(deficit) on account of revaluation - - - - - - - -
of properties
Surplus/(deficit) on account of revaluation - - - - - - - -
of investments
Currency translation differences - - - - - - - - -
Net gain and losses not recognised in the - - - - - - - - -
profit and loss accounts
Net profit for the year 2009 - - - - - 821,878,658 821,878,658 707 821,879,365
Issue of bonus share 50,000,000 - - - - (50,000,000) - - -
Transfer to statutory reserve from general reserve - - 296,250,000 (296,250,000) - - - - -
Appropriation to reserves - - 105,000,000 90,000,000 - (195,000,000) - - -
Adjustment for winding up of I.Cons Ltd. - - - - - (2,599,354) (2,599,354) (360) (2,599,714)
Payment of dividend - - - - - (37,500,000) (37,500,000) - (37,500,000)
Balance at December 31, 2009 300,000,000 3,750,000 401,250,000 811,250,000 46,500,000 830,340,665 2,393,090,665 1,185 2,393,091,850
Balance at December 31, 2008 250,000,000 3,750,000 - 1,017,500,000 46,500,000 293,561,361 1,611,311,361 838 1,611,312,199
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 office at Hadi Mansion, 2 Dilkusha C/A. The
Company changed its name in August 2007. The registered office of the company was changed to
Bay’s 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.
The Company extends lease financing, as its core business, for all types of machinery and equip-
ment including vehicles for industrial and commercial purposes. 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 respec-
tively.
The Company established a Local Enterprise Investment Centre (LEIC) with the contribution of
Canadian International Development Agency (CIDA) on August 31, 2005. The object of the LEIC
was to develop the local private sector by helping Small and Medium Enterprises (SME’s) have ac-
cess to capital, innovative knowledge, technologies and practices that will allow them to increase
production of better goods and services.
The project expired on December 31, 2008. However, as agreed by IDLC and CIDA, the operating
activities relating to the project were completed within April 30, 2009 and accordingly, the unused
fund received from CIDA for the project was refunded.
IDLC Securities Limited, another wholly owned subsidiary company of IDLC Finance Limited was
incorporated on 19 April 2006 as a private limited company under Companies Act 1994 with au-
thorised 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 cen-
tral 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.
81
1.4.2 I. Cons Limited
I.Cons Limited, a wholly owned subsidiary company of IDLC Finance Limited was wound up vol-
untarily with effect from November 18, 2009. The assets and liabilities of the Company were dis-
tributed to its shareholders in proportion to the shareholding as per the liquidator’s winding up
accounts. The decision of the winding up of the Company was taken by its member at an Extra
Ordinary General Meeting held on September 29, 2009. On liquidation all the assets of I.Cons Lim-
ited were taken over by IDLC at book value and the proportionate residual balance amounting to
Tk. 795,908 was received by IDLC as a holder of 9,999 shares, out of total 10,000 shares of I.Cons
Limited.
I.Cons Limited was incorporated on March 9, 2004 as a private limited company under Companies
Act, 1994 with paid up share capital of Tk. 1,000,000. The main objective of the Company was to
carry on the business of information and communication technology services related to system
integration, process engineering, reengineering as well as to develop, design, create computer
programs and softwares and to sell, trade, import and export of such programs and softwares.
The financial statements have been prepared on a going concern basis following accrual basis of
accounting except for cash flow statement in accordance with the Companies Act 1994, the Finan-
cial Institutions Act 1993, Securities and Exchange Rules 1987, the Listing Rules of Dhaka and Chit-
tagong 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) 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.
This financial statement has been prepared based on historical cost basis on generally accepted
accounting principles (GAAP) in Bangladesh and no adjustment has been made for inflationary
factors affecting 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.
The Board of Directors have authorised this financial statements for public issue on 16 March 2010
The financial statements are presented in Bangladesh Taka (BDT) currency, which is the Compa-
ny’s functional currency. All financial information presented in BDT has been rounded off to the
nearest BDT.
The preparation of financial statements in conformity with generally accepted accounting prin-
82
ciples requires management to make estimates and assumptions that affect 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.
Provisions and accrued expenses are recognised in the financial statement in line with the Ban-
gladesh Accounting Standard (BAS) 37 “Provisions, Contingent Liabilities and Contingent Assets”
when
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 differ from these estimates. However, the esti-
mates and underlying assumptions are reviewed on an ongoing basis and the revision is recogn-
ised in the period in which the estimates are revised.
The Board of Directors takes the responsibility for the preparation and presentation of these
financial statements.
The financial statements of the Company and its subsidiary, as mentioned in note no. 1.4, 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.
The total profits of the Company and its subsidiary are shown in the consolidated profit and loss
account with the proportion of profit after taxation pertaining to minority shareholders being
deducted as ‘Minority Interest’.
All assets and liabilities of the Company and of its subsidiary are shown in the consolidated bal-
ance sheet. The interest of minority shareholder of the subsidiary are shown separately in the con-
solidated balance sheet under the heading ‘Minority Interest’.
The Company has seven branches, with no overseas branch as on December 31, 2009. Accounts
of the branches are maintained at the head office from which these accounts are drawn up.
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
83
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.
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 opera-
tional revenue periodically.
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, under-
writing and portfolio management services and the Company maintains separate books of ac-
counts for the merchant banking operation as required under the regulations of Securities and
Exchange Commission.
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 payment, which
ever is lower as per Bangladesh Accounting Standard (BAS) 17 “Leases”. The corresponding
obligation under the lease is accounted for as liability.
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, us-
ing 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
84
use and no depreciation is charged from the month of disposal. Asset category wise deprecia-
tion rates are as follows:
Rates
Furniture and fixtures 12.50%
Building 2.50%
Electrical equipment 20.00%
Curtain and carpets 33.33%
Office equipment 20.00%
Office decoration 20.00%
Telephone and telex 33.33%
Motor vehicles 25.00%
Leasehold motor vehicles 25.00%
Computer 20.00%
The gain or loss arising on the disposal or retirement of an asset is determined as the difference
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.
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 meth-
od to write down the cost of intangible assets to their residual values over their estimated useful
lives based on the management best estimates. 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.
Interest income from loans and other sources is recognised on an accrual basis of accounting.
Interest income is recognised on due date of each equal monthly installments (EMI) and due dates
of EMIs are on 5, 15, 20 and 25 day of each month based on the date of executions. Interest income
of EMIs is recognized on the due date of each month. Interest income from all loans and leases
other than factoring and margin loan to portfolio investors are not recognized at cut-off date (31
December) i.e., for the period from due dates of EMIs in December to 31 December of the year.
Accordingly, interest income of previous year (for the period from due date in December to 31
December of earlier year) is recognized in January of the current year.
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.
85
Dividend income and profit or loss on sale of securities:
Dividend income is recognised 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 of-
floaded.
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.
Fee on services rendered by the company are recognised as and when services are rendered.
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.
Borrowing costs are recognised as expense in the year in which they are incurred unless capitalisa-
tion is permitted under Bangladesh Accounting Standard (BAS) 23 “Borrowing Costs”.
The cash flow statement is prepared using the direct method as stipulated in Bangladesh Ac-
counting Standard (BAS) 7 “Cash Flow Statements”.
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 conver-
sions are recognised as income or expense for the year after netting off.
Investment in marketable ordinary shares has been shown at cost or market price, whichever is
lower, on an aggregate portfolio basis under Bangladesh Accounting Standard (BAS) 25 “Account-
ing for Investment”. 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 individual investment basis has
been made in the account.
Provision has been made at estimated rates on outstanding exposures, based on aging and con-
tinuous 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 ad-
equate to meet any probable future losses.
86
2.21.1 Defined contribution plan
The Company operates a contributory provident fund scheme for its permanent employees. Provi-
dent 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 Company’s asset.
2.21.2 Defined benefit plan
The Company also operates an unfunded gratuity scheme. Employees are entitled to gratuity ben-
efit after completion of minimum five years of service within the Company. The gratuity is calcu-
lated on the last basic pay and is payable at the rate of one month’s basic pay for every completed
year of service upto ten years of service, one and half months basic pay for every completed year
of service upto 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.
2.21.3 Other employees benefit obligation
The Company operates a group life insurance scheme for its permanent employees.
The Company also has real estate loan and car loan schemes for its permanent employees.
Employees are entitled to real estate loan and car loan under this scheme after completion of
minimum five years and three years of services with the Company, respectively.
2.22 Taxation
Tax expense comprises current and deferred tax.
2.22.1 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 differ-
ences 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.
2.22.2 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.
2.23 Impairment of long-lived assets
The Company reviews long-lived assets for impairment whenever events or changes in circum-
stances indicate that the book value of the assets may not be recovered. Accordingly, the Com-
pany 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.
2.24 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 insig-
nificant risk of change in value.
87
2.25 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 34.
2.26 Related party disclosure
As per Bangladesh Accounting Standards (BAS) 24 “Related Party Disclosures”, parties are consid-
ered 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 arm’s length basis at commercial rates
with related parties. Related party disclosures have been given in note 34(a).
2.27 Segment reporting
In compliance with the statutory (SEC regulations) requirements, the Company has prepared sep-
arate profit and loss account for its separate segment, ‘Merchant Banking Operation’. Profit and
loss accounts of merchant banking operation has been prepared in accordance with generally
accepted accounting principles and results of its operation has been combined, item by item, with
the financial results of the Company. The performance of the segment is evaluated primarily on its
profit before tax.
2.28 Proposed dividend
Proposed dividend has not been recognised as a liability in the balance sheet in accordance with
Bangladesh Accounting Standards (BAS) 10 “Event After the Balance Sheet Date”.
2.29 Reclassifications
To facilitate comparison, certain relevant balances pertaining to the previous year have been rear-
ranged/restated/reclassified whenever considered necessary to conform to current period’s pre-
sentation.
2.30 Events after the balance sheet date
All material events occurring after the balance sheet date has been considered and where neces-
sary, adjusted for or disclosed in note 40.
2.31 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 behavioural 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.
2.32 Allocation to Merchant Banking operation
Indirect expenses have been allocated based on number of employees working in Merchant
Banking Division.
88
2.33 Compliance of Bangladesh Accounting Standards and Bangladesh Financial Reporting Stan-
dards.
Name of the BAS BAS no Status
Presentation of Financial Statements 1 Applied
Inventories 2 Applied
Cash Flow Statements 7 Applied
Accounting Policies, Changes in Accounting Estimates and Errors 8 Applied
Events after the Balance Sheet Date 10 Applied
Construction Contracts 11 N/A
Income Taxes 12 Applied
Segment Reporting 14 Applied
Property, Plant and Equipment 16 Applied
Leases 17 Applied
Revenue 18 Applied
Employee Benefits 19 Applied
Accounting for Government Grants and Disclosure of Government Assistance 20 N/A
The Effects of Changes in Foreign Exchange Rates 21 Applied
Borrowing Costs 23 Applied
Related Party Disclosures 24 Applied
Accounting for Investments 25 Applied
Accounting and Reporting by Retirement Benefit Plans 26 Applied
Consolidated and Separate Financial Statements 27 Applied
Investment in Associates 28 N/A
Disclosures in the Financial Statements of Banks and similar Financial Institutions 30 Applied
Interests in Joint Ventures 31 N/A
Financial Instruments: Disclosure and Presentation 32 N/A
Earnings per share 33 Applied
Interim Financial Reporting 34 Applied
Impairment of Assets 36 Applied
Provisions, Contingent Liabilities and Contingent Assets 37 Applied
Intangible Assets 38 Applied
Financial Instruments: Recognition and Measurement 39 N/A
Investment Property 40 N/A
Agriculture 41 N/A
89
2009 2008
Taka Taka
3 Cash
3.1 Cash in hand:
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 Deposit
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, re-
ceived from individuals and institutions (except banks & Financial Institutions).“
Statutory Liquidity Reserve (SLR) has been calculated at the rate of 5.0% on Total Liabilities, includ-
ing 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.
90
2009 2008
Taka Taka
AB Bank Limited - 1,544,926
Bank Asia Limited 1,265,237 12,514
Uttara Bank Limited 5,006 1,120
Prime Bank Limited 1,633,347 100,054,269
Eastern Bank Limited 65,290 65,660
The Hong Kong and Shanghai Banking Corporation 844,675 1,283,067
State Bank of India 659,603 1,357,178
EXIM Bank Limited - 584,860
Bangladesh Bank 218,999,946 162,854,579
Southeast Bank Limited 30,000,000 -
International Leasing and Financial Service Limited 100,000,000 -
Bank Alfalah Limited 50,000,000 50,000,000
LankaBangla Finance Limited 100,000,000 -
United Leasing Co. Limited 50,000,000 50,000,000
Dhaka Bank Limited - 50,000,000
Mercantile Bank Limited - 100,000,000
Investment in Bonds 25,000,000 25,000,000
684,403,820 561,286,272
91
2009 2008
Taka Taka
Short-term deposit accounts:
Pubali Bank Limited 6,016 23,370
Prime Bank Limited 35,428 54,469
EXIM Bank Limited - 314,871
The City Bank Limited 7,932,480 1,824,313
BRAC Bank Limited 3,422,905 2,602,333
Southeast Bank Limited 11,201,014 11,042,310
Citibank N.A 25,356,497 33,549,210
Standard Chartered Bank 4,154,286 74,370,052
Fund received from CIDA for LEIC (Citibank N.A.) - 12,581,868
52,108,626 136,362,796
Fixed Deposits:
International Leasing & Financial Services Limited 150,000,000 -
LankaBangla Finance Limited 200,000,000 -
Phoenix Finance & Investments Limited 180,000,000 50,000,000
United Leasing Company Limited 50,000,000 50,000,000
Social Islami Bank Limited 100,000,000 -
ONE Bank Limited 100,000,000 -
Mercantile Bank Limited - 100,000,000
Bank Alfalah Limited - 100,000,000
Prime Bank Limited - 100,000,000
Southeast Bank Limited - 30,000,000
780,000,000 430,000,000
912,152,616 201,278,108
* The negative balance in current deposit account has arisen due to the issuance of cheques at the close of
the year (December 30 and 31) against payments relating to 2009. Required fund were transferred to the ac-
counts on January 1, 2010. However, as on December 30, 2009 (December 31 being bank holiday) there was
a positive balance.
4.1 Maturity grouping of balance with other banks and financial institutions
92
2009 2008
Taka Taka
In Bangladesh:
IDLC Finance Limited 912,152,616 201,278,108
IDLC Securities Limited (Note-4(a)i) 634,163,508 332,419,525
I.Cons Limited - 501,632
1,546,316,124 534,199,265
5 Investments
Government securities: - -
Other investments:
Investment in non marketable ordinary shares (Note-5.1) 5,403,400 500,000
Investment in preference shares (note 5.2) 171,517,000 150,187,000
Investment in bonds (Note-5.3) 25,000,000 25,000,000
Investment in marketable securities (Note-5.4) 330,911,579 174,878,498
532,831,979 350,565,498
532,831,979 350,565,498
No. of Shares
Credit Rating Agency of Bangladesh
Limited 12,375 1,237,500 500,000
Dan & Bradstreet Rating Agency
Bangladesh Limited 41,659 4,165,900 -
5,403,400 500,000
93
* “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 af-
fected after completion of some legal formalities.“
“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. 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.
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.
As on December 31, 2009 there was Tk 24,561,857 gross unrealised gain and Tk 315,453 gross unrealised loss
on investment in marketable listed securities. However, provisions have been made amounting to Tk 315,453
for diminution in value of shares as on the close of the year on an individual investment basis.
94
2009 2008
Taka Taka
On demand - -
Up to 1 month 350,911,579 194,878,498
Over 1 month but not more than 3 months - -
Over 3 months but not more than 6 months 11,681,508 -
Over 6 months but not more than 1 year 20,351,509 8,670,000
Over 1 year but not more than 5 years 144,483,983 146,517,000
Over 5 years 5,403,400 500,000
532,831,979 350,565,498
5(a) Consolidated investments
Inside Bangladesh:
Lease receivable
Gross lease rentals receivable (Note-6.1) 5,061,010,814 5,798,249,728
Unearned lease income (Note-6.2) (873,405,403) (1,118,798,134)
Advance for leases (Note-6.3) 195,347,173 54,071,249
4,382,952,584 4,733,522,843
Long-term finance (Note-6.4) 3,437,116,151 2,780,711,116
Real estate finance (Note-6.5) 4,788,544,980 3,915,040,859
Car loans (Note-6.6) 344,592,105 331,866,393
Personal loan (Note-6.7) 100,411,695 44,408,101
Margin loan to portfolio investors (Note-11.5) 5,861,960,297 3,065,955,890
Short term finance (Note-6.8) 316,976,537 335,958,808
95
2009 2008
Taka Taka
2009 2008
Amount in Tk. % of total Amount in Tk. % of total
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.
96
2009 2008
Taka Taka
This represents loans to individuals, employees under the Company’s 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. Details are as under:
2009 2008
Amount in Tk. % of total Amount in Tk. % of total
97
2009 2008
Taka Taka
Repayable on demand - -
Over 1 month but not more than 3 months 2,859,217,361 2,624,526,929
Over 3 months but not more than 1 year 8,124,117,767 4,821,907,846
Over 1 year but not more than 5 years 6,180,707,970 7,418,627,910
Over 5 years 2,274,241,388 692,833,667
19,438,284,486 15,557,896,352
98
2009 2008
Taka Taka
99
2009 2008
Taka Taka
Inside Bangladesh:
Urban
Dhaka 14,662,511,453 12,183,838,495
Chittagong 4,454,391,527 3,215,832,795
Bogra 175,180,195 158,225,062
Sylhet 146,201,311 -
19,438,284,486 15,557,896,352
Outside Bangladesh: - -
19,438,284,486 15,557,896,352
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 1,900.71 million as at 31
December 2009 (Tk 1,419.68 million in 2008)
100
2009 2008
Taka Taka
Unclassified:
Standard including staff loan 18,614,392,409 14,805,934,131
Special mention account (SMA) 193,527,605 181,028,318
18,807,920,014 14,986,962,449
Classified:
Sub-standard 140,170,673 182,467,801
Doubtful 55,018,347 35,550,944
Bad / Loss 435,175,452 352,915,158
630,364,472 570,933,903
19,438,284,486 15,557,896,352
101
2009 2008
Taka Taka
Specific provision
Sub-standard 133,161,861 20% 26,632,372 36,994,060
Doubtful 45,215,654 50% 22,607,827 17,471,743
Bad / loss 415,197,388 100% 415,197,388 321,459,859
464,437,587 375,925,662
Required provision for loans, advances and leases 657,817,532 538,601,474
Total provision maintained (Note - 11.7) 877,700,432 733,292,897
Excess / (short) provision at 31 December 219,882,901 194,691,423
102
7 Property and equipment
Total 2008 246,378,851 38,080,431 (3,659,623) 280,799,659 80,056,632 34,865,952 (1,901,841) 113,020,743 167,778,916
103
104
IDLC FINANCE LIMITED
7.1 Allocation of depreciation charged (note 2.32)
Depreciation charged during the year has been allocated as follows: 2009 2008
Total 2008 260,529,735 48,788,539 (3,659,623) 305,658,651 81,455,021 38,150,445 (1,901,841) 117,703,625 187,955,026
105
2009 2008
Taka Taka
8 Other assets
Advances, deposits and prepayments are considered good but not secured by collateral.
106
2009 2008
Taka Taka
Deferred tax has been calculated based on deductible temporary difference arising due to difference in the
carrying amount of the assets and its tax base in accordance with the provision of Bangladesh Accounting
Standard (BAS) 12 “Income Taxes”.
Assets:
Fixed assets net of depreciation 161,582,762 159,197,761 (2,385,001)
Liabilities:
Employee gratuity 39,142,527 - 39,142,527
Total 200,725,289 159,197,761 36,757,526
Applicable tax rate 42.50%
Deferred tax asset as on December 31, 2009 15,621,949
Deferred tax asset as on December 31, 2008 17,751,467
Deferred tax expenses accounted for during the year 2,129,518
Tax collected under section 53BBB of Income Tax Ordinance 1984 is treated as final tax liability
under section 82C(2)(le) in case of income of IDLC Securities Limited. Accordingly, no additional
tax is imposed on the income of IDLC Securities Limited and no deferred tax has been accounted
for as no taxable/deductible temporary difference has been found to be applicable.
107
2009 2008
Taka Taka
108
2009 2008
Taka Taka
Long-term loans:
Commercial Bank of Ceylon PLC 1,149,894 4,375,697
International Development Association (IDA) - 6,918,149
Kreditanstalt fÜr Wiederaufbau (KfW) 166,849,946 180,981,576
The Hong Kong & Shanghai Banking Corporation Ltd. 16,118,276 18,641,836
Standard Chartered Bank 16,168,591 28,301,896
Eastern Bank Ltd. 1,929,959 1,929,959
Bangladesh Bank (Small Enterprise Refinancing Program) 672,878,740 558,866,192
Bangladesh Bank (Home Loan Refinancing Program) 523,306,483 168,963,887
Mercantile Bank Ltd. - 33,333,333
Bank Asia Ltd. 126,916,266 169,945,076
IPFF 82,763,007 -
1,608,081,162 1,172,257,601
Total unsecured long-term loan 1,928,081,162 1,492,257,601
Short-term and call loans:
Short-term loans
The City Bank Limited 500,000,000 150,000,000
Citi Bank N.A. 400,000,000 180,000,000
Commercial Bank of Ceylon PLC 60,000,000 35,000,000
Mutual Trust Bank Ltd. 50,000,000 -
BRAC Bank Limited 500,000,000 -
Dhaka Bank Ltd. 93,342,586 1,392,709
BRAC Bank Ltd. 47,197,880 48,139,345
National Bank Limited - 30,446,936
Standard Chartered Bank - 100,000,000
1,650,540,466 544,978,990
Call loans
Agrani Bank Limited 100,000,000 -
The Premier Bank Ltd. 150,000,000 -
Dutch Bangla Bank Ltd 90,000,000 -
Jamuna Bank Limited 70,000,000 -
Basic Bank Limited 100,000,000 -
510,000,000 -
Total short-term and call loans 2,160,540,466 544,978,990
Total borrowings 6,029,180,391 4,145,174,744
9.2 Security against borrowings from other banks and financial institutions
109
2009 2008
Taka Taka
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:
9.3 Maturity grouping of borrowings from other banks and financial institutions
This represents deposits received from institutions and individuals for a period not less than six months and
one year respectively.
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:
Security deposits are interest bearing while deposits against loan and lease are non interest bearing.
110
2009 2008
Taka Taka
Government - -
Bank 1,073,755,000 2,500,000,000
Other institutions 3,048,903,713 2,371,870,366
Individuals 5,657,274,561 3,376,809,062
9,779,933,274 8,248,679,428
11 Other liabilities
111
2009 2008
Taka Taka
Provision
Balance at January 1 1,032,881,141 734,902,820
Add: Provision made during the year 441,974,536 297,978,321
1,474,855,677 1,032,881,141
Settlement of previous year's tax liability - -
Balance at December 31 1,474,855,677 1,032,881,141
Advance tax
Balance at January 1 450,760,450 258,515,952
Add: Payment made during the year:
Under sections 64 and 74 of ITO 1984 219,846,703 178,520,253
Deduction at source 15,585,196 13,724,245
Others 13,300,784 -
248,732,683 192,244,498
699,493,133 450,760,450
Less: Adjustment during the year - -
699,493,133 450,760,450
Net balance at 31 December 775,362,544 582,120,691
112
2009 2008
Taka Taka
11.3.1 The amount had been paid by IDLC Securities Limited on account of office rent, fixed assets purchase, CDBL
charges and training expenses on behalf of IDLC Finance Limited.
Liabilities under finance lease represent liabilities against certain motor vehicles taken under finance lease.
Details of which are given below:
The average lease term of the vehicles taken under finance lease is 48 months and all leases are on fixed
repayment basis. The Company’s obligations under finance lease are secured by the lessor’s charge over the
lease assets.
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 6,774,299,430 1,579,860,102
Margin loan extended for purchase of securities 5,861,960,297 3,065,955,890
12,636,259,727 4,645,815,992
113
2009 2008
Taka Taka
Lease income earned and interest on term finance and car loan overdue beyond three months period and
interest on real estate finance beyond six months period are not recognised as revenue and credited to inter-
est suspense account. Product wise details are given below:
11.7(i) Allocation:
Provisions for bad and doubtful loans, advances and leases 109,247,477 100,621,549
Provisions for unclassified loans, advances and leases 34,844,605 11,536,807
Provisions for diminutions in value of investments 315,453 7,677,197
144,407,535 119,835,553
Provisions for bad and doubtful loans, advances and leases 114,503,207 100,621,549
Provisions for unclassified loans, advances and leases 34,844,605 11,536,807
Provisions for diminutions in value of investments 465,011 7,677,197
149,812,823 119,835,553
114
2009 2008
Taka Taka
12 Share capital
Authorised
10,000,000 ordinary shares of Taka 100 each 1,000,000,000 1,000,000,000
Composition of shareholding:
115
2009 2009 2008
% of Number of Taka Taka
holding shares
Sponsor shareholders:
Foreign
Korea Development Financing
Corporation (KDFC) - - - 50,000,000
Kookmin Bank, South Korea - - - 25,000,000
- - - 75,000,000
Domestic
The City Bank Limited (CBL) 28.39 851,735 85,173,500 24,254,600
Sadharan Bima Corporation (SBC) 7.62 228,710 22,871,000 19,047,500
36.01 1,080,445 108,044,500 43,302,100
36.01 1,080,445 108,044,500 118,302,100
General shareholders:
Mercantile Bank Limited 7.50 225,100 22,510,000 18,750,000
Eskayef Bangladesh Limited 8.00 240,000 24,000,000 20,000,000
Reliance Insurance Co. Ltd. 7.00 210,000 21,000,000 17,505,000
Eastern Bank Limited 6.00 180,000 18,000,000 -
Transcraft Limited 4.01 120,398 12,039,800 10,033,200
Other Institution/Corporate 13.74 412,270 41,227,000 25,368,000
Individuals 17.73 531,787 53,178,700 40,041,700
63.99 1,919,555 191,955,500 131,697,900
Total 100.00 3,000,000 300,000,000 250,000,000
Distribution of shareholders:
Classification of shareholdings as required by Regulation 37 of the Listing Regulations of Dhaka Stock Ex-
change Ltd. are as follows:
The shares were listed with Dhaka Stock Exchange Ltd. on March 20, 1993, and with Chittagong Stock Ex-
change Ltd. on November 25, 1996, and quoted at Taka 3,703 and Taka 3,680 at Dhaka Stock Exchange Ltd.
and Chittagong Stock Exchange Ltd. respectively at December 30, 2009.
116
2009 2008
Taka Taka
13 Share premium
This represents premium amount over par value of shares received against issue of 75,000 shares in 1993 @
Taka 50 per share.
14 Statutory reserves
Balance at January 1 - -
Add: Transferred from General Reserve 296,250,000 -
Add: Transferred on appropriation of profit 105,000,000 -
Balance at December 31 401,250,000 -
15 General reserve
117
2009 2008
Taka Taka
16.3 Money for which the FI is contingently liable in respect of guarantee given in favoring
Directors or officers - -
Government - -
Banks and other financial institutions - -
Others 6,698,663 8,478,773
6,698,663 8,478,773
There was no capital expenditure contracted but not incurred or provided for at December 31, 2009. There
was no material capital expenditure authorised by the Board but not contracted for at December 31, 2009.
The Company had no claim, legal or other, against it which has not been acknowledged as debt at the bal-
ance sheet date.
16.6 Disbursements
During the year the Company contracted and disbursed the following amounts :
2009 2008
Contracts/ Execution/ Contracts/ Execution/
sanction disbursement sanction disbursement
Tk. Tk. Tk. Tk.
118
2009 2008
Taka Taka
17 Income statement
Income:
Interest, discount and similar income (Note-17.1) 2,769,939,116 2,282,729,507
Dividend income (Note-20) 80,204,576 32,763,461
Fees, commission and brokerage (Note-21) 225,342,522 135,332,714
Other operating income (Note-22) 90,629,521 63,109,295
3,166,115,735 2,513,934,977
Expenses:
Interest expenses (Note-19) 1,619,153,280 1,523,299,164
Administrative expenses (Note-17.2) 293,941,984 231,820,872
Other operating expenses (Note-33) 105,368,194 51,042,467
Depreciation on assets (Note-32) 40,610,363 34,865,952
2,059,073,821 1,841,028,455
1,107,041,914 672,906,522
119
2009 2008
Taka Taka
18 Interest income
* Interest rate for real estate finance has been calculated on monthly amortization method since 22 February
2009. Prior to February 22, 2009, interest rate was calculated based on annual amortization method which
resulted in higher effective rate under monthly amortization method.
120
2009 2008
Taka Taka
19 Interest expenses
20 Investment income
121
2009 2008
Taka Taka
Salary and allowances include annual contribution of Tk. 6,257,159 to Provident Fund and provision of Tk.
4,948,349 for Gratuity Fund.
122
2009 2008
Taka Taka
25 Legal expenses
123
2009 2008
Taka Taka
29 Directors’ fees
Directors remuneration for attending each board meeting during the year was Tk. 4,000 per meeting/Direc-
tor. No Director has been paid any remuneration for rendering any special services during the year.
30 Auditors’ fees
124
2009 2008
Taka Taka
32 Other expenses
125
2009 2008
Taka Taka
33 Tax expenses
The average effective tax rate is calculated below as per Bangladesh Accounting Standard 12 “Income Tax”.
Earnings attributable to ordinary shareholders (Net profit after tax) 518,530,325 254,976,963
Weighted average number of ordinary shares outstanding during the year 3,000,000 3,000,000
Basic earnings per share 172.84 84.99
No diluted earning per share is required to be calculated for the year as there was no convertible securities for
dilution during the year.
126
2009 2008
Taka Taka
Earnings per share as shown in the face of the consolidated Profit and Loss Account is calculated in accor-
dance with Bangladesh Accounting Standard 33: “Earnings Per Share”.
Reported
Name of the firms/companies in
share of hold-
SL Status in which interested as proprietor, Status in interested
Name of Directors ing/ interest in
no. IDLC partner, director, managing agent, entities
the concern as
guarantor, employee etc.
on 31.12.09
1. Mr. Anwarul Huq Chairman Finaccord Trading Limited Chairman & CEO 3.10%
2. Mr. Aziz Al Kaiser Director The City Bank Limited Chairman 4.58%
Star Particle Board Mills Limited MD 75.00%
Star Vegetable Oils Mills Limited MD 75.00%
Danish Condensed Milk (BD) Ltd Director 15.00%
Rubel Steel Mills Limited Director 15.00%
Danish Foods Limited Director 15.00%
Partex Furniture Industries Ltd MD 75.00%
Partex Sugar Mills Limited Director 15.00%
Partex Laminates Limited MD 75.00%
Partex Real Estate Limited MD 15.00%
Partex Limited MD 10.00%
Corvee Maritime Co. Limited MD 75.00%
Partex Builders Limited MD 75.00%
Fairhope Housing Limited MD 80.00%
Ferrotechnic Limited Director 15.00%
Fotoroma Limited Director 15.00%
Danish Milk Bangladesh Limited Director 15.00%
Russel Steel Mills Limited Director 15.00%
127
Reported
Name of the firms/companies in
share of hold-
SL Status in which interested as proprietor, Status in interested
Name of Directors ing/ interest in
no. IDLC partner, director, managing agent, entities
the concern as
guarantor, employee etc.
on 31.12.09
Danish Distribution Network Ltd Director 15.00%
Danish Dairy Firm Limited Director 15.00%
Dhaka com Limited Director 15.00%
Janata Insurance Co. Limited Director 2.00%
Partex Housing Limited Director 50.00%
3. Mr. Rubel Aziz Director The City Bank Limited Director 4.63%
Amber Cotton Mills Limited Director 2.08%
Partex Beverage Limited MD 0.20%
Partex Plastics Limited MD 37.50%
Partex Sugar Mills Limited Director 15.00%
Partex Energy Limited Director 37.50%
Partex Rotor Spinning Mills Director 37.50%
Limited
Partex Denim Limited Director 15.00%
Plastic Accessories Limited MD 37.50%
Partex Plastics Furniture Limited MD 37.50%
Partex Properties Limited MD 35.00%
Partex Foundry Limited MD 40.00%
New Horizon Farms Limited MD 50.00%
New Era Milk Processing Limited MD 50.00%
Partex Real Estate Limited Director 15.00%
Partex Rotor Limited Director 35.00%
Dhaka COM Limited Director 15.00%
Janata Insurance Co. Limited Chairman 1.33%
Partex Spinning Mills Limited Director 25.00%
Partex Ceramic Limited Director 25.00%
4. Mr. Kazi
Director The City Bank Limited MD & CEO -
Mahmood Sattar
Nominated
Unique Hotel & Resorts Limited -
Director of CBL
5. Ms. Meherun Haque Director The City Bank Limited Director 0.29%
Phoenix Insurance Company Limited Director 1.68%
128
Reported
Name of the firms/companies in
share of hold-
SL Status in which interested as proprietor, Status in interested
Name of Directors ing/ interest in
no. IDLC partner, director, managing agent, entities
the concern as
guarantor, employee etc.
on 31.12.09
Investment Corporation of Director- -
Bangladesh Nominated by SBC
Central Depository Bangladesh Director- -
Limited Nominated by SBC
National Housing Finance & Director- -
Investments Limited Nominated by SBC
Aramit Limited Director- -
Nominated by SBC
Bangladesh Insurance Academy Director- -
Nominated by SBC
b. Significant contract where FI is party and wherein Directors have interest - Nil
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 as-
sociated 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, 2009 were as
follows:
129
130
IDLC FINANCE LIMITED
Balance at year end
Name of the related party Transaction nature Relationship Balance as at January 1, 09
Addition Adjustment receivable /(payable)
Taka Taka Taka Taka
d. Share issued to Directors and executives without consideration or exercisable at a discount - Nil
e. Lending policy to related parties Related parties are allowed Loans and Advances as per General Loan Policy of the Bank.
f. Loans, advances and leases to Directors and their related concern
Name of the related party Transaction nature Classification status Provision kept Security amount
Partex group Lease/Loan Standard 1,130,863 5,983,175
Transcom group Lease/Loan Standard 719,908 -
The audit committee of the Board was duly constituted by the Board of Directors of the Company in accor-
dance with the Securities and Exchange Commission notification ref no. SEC/CMMRRCD/2006-158/Admin/02-
08 dated February 20, 2006.
The Audit Committee of the Board of Directors consisted of the following 4 (four) members of the Board:
Meeting No Held on
13th 3-Mar-2009
14th 25-Nov-2009
15th 6-Dec-2009
16th 9-Dec-2009
c. The audit committee has discussed the following issues during the year 2009:
i) The Audit Committee reviewed the report of the Audit Committee and approved its publication
in the Annual Report 2008.
ii) The committee reviewed and approved the audit plan for 2009.
iii) The Audit Committee also reviewed the Management Letter on Interim Audit 2008, annual audit
2008 and Bangladesh Bank Inspection report 2008.
38 Foreign remittance
39 Number of employees
The Company paid an aggregate amount more than Taka 36,000 p.a. to 174 employees and more than Tk.
3,000 per month to 116 employees who were in employment for full year or part of the year.
131
40 Subsequent events
40.1 Formation of separate subsidiary company for existing Merchant Banking activities
As per instruction letter no. SEC/Reg/MB/2009/446, dated December 21, 2009 of the Securities and Ex-
change Commission, the Company at its 170th Board meeting held on February 2, 2010 has approved to
form a separate subsidiary in the name and style “IDLC Investments Limited” within March 31, 2010, subject
to the approval of regulatory authorities to carry on its existing Merchant Banking activities. The authorised
and paid up capital of the proposed subsidiary would be Tk. 300 crore and Tk. 40 crore, respectively, and
the existing assets of the Merchant Banking operation will be transferred to the new subsidiary at book
value basis.
The Board of Directors at the 171st Board Meeting held on March 16, 2010, recommended to the sharehold-
ers a cash dividend of Tk. 10 per share of Tk 100 each (amounting to Tk. 30,000,000) and a stock dividend
(bonus shares) @ 100% i.e. one bonus share for every one fully paid shares (1:1) of Tk. 100 each (amounting
to Tk. 300,000,000). This will be considered for approval by the shareholders at the 25th Annual General
Meeting (AGM) to be held on April 19, 2010.
41 General
41.1 The Company publishes its quarterly accounts within the following months of quarter ended of each year
41.2 The Company does not have any restriction on distribution and payment of dividends
41.3 During the year under report, no matters were submitted to a vote of shareholders of the Company
132
Auditors’ Report and
Financial Statements of
IDLC Securities Limited
Auditors’ Report and
Audited Financial Statements of
IDLC Securities Limited
We have audited the accompanying Balance Sheet of IDLC Securities Ltd. for the year ended December 31, 2009 and
the related Income Statement, Statement of Changes in Equity and Cash Flow Statement for the year then ended.
The preparation of these financial statements are the responsibility of the management of IDLC Securities Ltd. Our
responsibility is to express an independent opinion on these financial statements based on our audit.
We conducted our audit in accordance with Bangladesh Standard on Auditing (BSA). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
materials misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclo-
sures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluation of the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements, prepared in accordance with Bangladesh Accounting Standards (BAS), give
a true and fair view of the state of the Company’s affairs for the year ended December 31, 2009 and of the results of
its operations and its cash flow for the year then ended and comply with the Company’s Act, 1994, the Securities and
Exchange rules 1987 and other applicable laws and regulations.
b) In our opinion, proper books of account as required by law have been kept by the Company so far as it ap-
peared from our examination of those books;
c) The Company’s Balance Sheet and Income Statement dealt with by the report are in agreement with the books
of accounts.
134
IDLC Securities Limited
Balance Sheet
As at December 31, 2009
2009 2008
Notes
Taka Taka
SOURCES OF FUNDS
Shareholder's Equity
Share capital 5 100,000,000 50,000,000
Retained earnings 6 492,377,135 189,028,195
Total s ources of funds 592,377,135 239,028,195
APPLICATION OF FUNDS
135
IDLC Securities Limited
Income Statement
For the year ended December 31, 2009
2009 2008
Particulars Notes
Taka Taka
Operating income
Brokerage commission 19 378,207,275 195,547,415
Capital gain from sale of securities 20 85,258,963 3,194,086
Other operating income 21 1,313,400 943,400
464,779,638 199,684,901
Less : Operating expenses 22 69,343,613 30,084,849
Net income from operation 395,436,025 169,600,052
Add : Other income 23 18,662,001 7,070,935
Total income 414,098,026 176,670,987
Less : Office & administrative expenses 24 45,379,139 21,139,442
Provision for future losses 18 5,405,288 -
Profit before financial expenses 363,313,599 155,531,545
Less : Financial expenses 25 2,534,237 1,177,349
Net profit/ (loss) before income tax 360,779,362 154,354,196
Provision for Income tax 7,430,422 3,059,683
Net profit/(loss) after tax 353,348,940 151,294,513
Dated: Dhaka
March 15, 2010
136
IDLC Securities Limited
Statement of Changes in Equity
For the year ended December 31, 2009
Share Retained
Total
Particulars capital earnings
Taka Taka Taka
Dated: Dhaka
March 15, 2010
137
IDLC Securities Limited
Cash Flow Statement
For the year ended December 31, 2009
2009 2008
Particulars
Taka Taka
138
IDLC Securities Limited
36, Dilkusha C/A (13th Floor)
Dhaka- 1000
IDLC Securities Limited (IDLCSL) was incorporated in Bangladesh as a private limited Company on April
19, 2006 vide registration no. C-61319 (3328)/06 under The Companies Act 1994. The Company has
started its operation from September 18, 2006.
The main object of IDLC Securities Limited is to act as a member of stock exchanges, the central
depository system (CDS) companies and to carry on the business of broker, jobbers or dealers in stocks,
shares, securities, bonds, debentures etc. The Company is also authorized to buy, sell, hold or otherwise
acquire or invest the capital of the Company in shares, stocks and fixed income securities.
The Financial Statements of IDLC Securities Limited includes the Balance Sheet, Income Statement,
Statement of Changes in Equity, Cash Flow Statement, and Notes to the accounts. These Financial
Statements have been prepared under the historical cost convention on a going concern basis on
Generally Accepted Accounting Principles (GAAP) and in accordance with International Accounting
Standards (IAS) as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB) so far, and
the Companies Act, 1994, Securities and Exchange Rules, 1987.
Cash Flow Statement is prepared in accordance with Bangladesh Accounting Standard (BAS) No.7: Cash
Flow Statement and the cash flows from operating activities have been presented under the indirect
method.
Depreciation is charged on the cost of fixed assets in order to write off such amounts over the estimated
useful lives, using the straight-line method in accordance with BAS 16. Depreciation for full month is
charged on additions irrespective of date when the related assets are put into use and no depreciation
139
is charged for the month of disposal. The rates of depreciation used to write off the amount of assets are
as follows:
Intangible assets are recognized if it is probable that future economic benefits that are attributable to
the asset will flow to the Company and the cost of the asset can be measured reliably in accordance
with BAS 38: Intangible Assets. Accordingly, these assets are stated in the Balance Sheet at cost less
accumulated amortisation.
Revenue, which comprises of brokerage commission, service charges and capital gain is recognized in
accordance with Bangladesh Accounting Standard (BAS) 18: Revenue recognition.
Provision for income tax has been calculated on the income other than brokerage commission. The
Company’s trading income is subject to deduction of tax at source which is treated as final discharge
from tax liability under Income Tax Ordinance 1984.
Provision for expenses is recognized when the company has a present obligation as a result of a past
event and it is probable that an outflow of resources embodying economic benefits will be required to
settle the obligations and reliable estimate of the amount can be measured.
Cash and cash equivalent includes cash in hand, cash at bank and fixed deposits which are held and are
available for use by the company without any restriction.
140
2.9 Currency
The amounts in the Financial Statements have been rounded off to the nearest integer in Bangladesh
Taka.
3 Subsequent events
The Board of Directors at the 26th Board Meeting held on 15 March 2010 recommended to the
shareholders a stock dividend (bonus shares) in the ratio of 1 Bonus share for every 1 fully paid share (1
: 1) of Tk. 100 each. This will be considered for approval by the shareholders at the 4th Annual General
Meeting (AGM).
4 General
Figures of previous year have been rearranged wherever considered necessary to conform presentation of
the current year.
2009 2008
Particulars
Taka Taka
5 Share capital
Authorised capital
99,99,998 shares of Tk. 100 each fully paid up in cash 99,999,800 49,999,900
100,000,000 50,000,000
6 Retained earnings
492,377,135 189,028,195
141
142
IDLC FINANCE LIMITED
7.00 Fixed assets (at cost less depreciation)
Particulars Cost Accumulated Book Value Sale price/ Profit / (loss) Mode of disposal Buyer
depreciation adjustment on disposal
Taka Taka Taka Taka Taka
Motor Vehicles 1,000,000 104,167 895,833 966,650 70,817 As per rules of the company Employees
Telephone and Telex 38,950 3,593 35,357 35,357 - As per rules of the company Employees
8 Intangible assets
9 Membership at cost
This represents the amount paid for purchasing membership of Dhaka Stock Exchange Limited (DSE) and
Chittagong Stock Exchange Limited (CSE) Including stamp duty for transferring shares.
DSE
Purchase of DSE membership from Mehnaz Mannan & Co. 15,000,000 15,000,000
Share transfer stamp duty 225,000 225,000
15,225,000 15,225,000
CSE
Purchase of CSE membership from Technohaven Securities Ltd. 3,400,000 3,400,000
Share transfer stamp duty 51,000 51,000
3,451,000 3,451,000
18,676,000 18,676,000
143
2009 2008
Taka Taka
Advances
Advance to Dhaka Stock Exchange Limited 600,000 350,000
Advance to Lead Soft Bangladesh Limited - 200,000
Advance to iCons Limited 217,000 -
Advance for Services / Suppliers 286,028 -
Advance to Employees for Expenses 1,270 -
1,104,298 550,000
Prepayments
Rent 11,691,506 5,078,280
Chittagong branch 1,024,920 1,340,280
DOHS branch - 120,000
Sylhet branch 2,970,000 3,618,000
Gulshan branch 4,294,586
Narayanganj branch 3,402,000 -
11,925,460 5,192,493
Insurance Premium
Group Life 127,569 78,000
DMX branch 13,309 -
Chittagong branch 6,099 -
DOHS branch 6,612 -
Sylhet branch 6,490 -
Gulshan branch 18,555 -
Motor Vehicles 55,320 36,213
233,954 114,213
13,029,758 5,742,493
10.2 Deposits
144
2009 2008
Taka Taka
The amount has been deducted at source on Bank Interest, FDR Interest and Dividend Income.
12 Investment in Securities
13 Accounts Receivable
The amount represents receivable from IDLC Finance Ltd. for the following expenses bared by IDLC Securities Ltd.
145
2009 2008
Taka Taka
This balance has been resulted from sale of shares through Dhaka Stock Exchange Limited (DSE).
93,402,573 56,808,031
This balance has been resulted from sale of shares through Chittagong Stock Exchange Limited (CSE).
This balance represents the clients’ purchase of shares as broker on 31 December, 2009 and CDBL charge
incurred against trading as on 31 December, 2009.
This balance has been resulted from the sale of marketable securities during the year.
The interest has been accrued from FDR amount with Trust Bank Limited calculated on daily basis interest @
8.00% p.a. respectively.
This balance represents the margin loan to clients’ provided by the Company on 31 December, 2009
634,213,508 332,439,525
The amount was lying with the accountant’s custody as on December 31, 2009.
146
15.2 Cash at bank
Name of the Bank Branch A/C No. A/C Type 2009 Taka
Standard Chartered Bank Ltd. Dhaka Main 02-3066347-01 Call deposit 38,044,504
Standard Chartered Bank Ltd. Dhaka Main 02-3066347-02 Call deposit 261,732,941
Standard Chartered Bank Ltd. Dhaka Main 02-3066347-03 Call deposit 126,129,361
CitiBank, N.A. Dhaka Main 010000200553004 Current A/C -
The HSBC Dhaka Main 001-247642-011 Current A/C -
Eastern Bank Ltd. Dhaka Main 101.130.21 STD A/C 202,422,721
Commercial Bank of Ceylon Dhaka Main 2802005291 STD A/C 362,031
628,691,558
15.3 FDR
This balance represents the clients’ sale proceeds of shares and deposits against share purchase which is
currently lying with the company’s bank A/C.
This balance has been resulted from purchase of shares as broker through Dhaka Stock Exchange Ltd.
This balance has been resulted from purchase of shares as broker through Chittagong Stock Exchange Ltd.
147
2009 2008
Taka Taka
148
2009 2008
Taka Taka
This represents the provision for future losses from investment in securities for the year ended 2009.
19 Brokerage commission
Capital gain has generated from own portfolio of IDLC Securities Limited during the Year 2009. As such the
Company has informed the Stock Exchanges regarding its own transactions through Form ‘D’ to comply with
rules 8(3) of Securities and Exchange Commission Rules 1987.
149
2009 2008
Taka Taka
22 Operating expenses
Howla charges
DSE as Broker 5,343,606 2,627,958
DSE as Dealer 25,485 -
5,369,091 2,627,958
CSE as Broker 361,332 299,568
5,730,423 2,927,526
Laga charges
DSE as Broker 28,182,154 13,488,642
DSE as Dealer 170,285 -
28,352,439 13,488,642
CSE as Broker 1,598,458 1,175,127
29,950,897 14,663,769
CDBL transaction fee 1,255,002 433,383
Tax Deducted at Source (Note 22.1) 24,553,993 8,798,262
Internet connectivity charges 3,795,623 1,396,834
Depreciation & amortization 4,057,676 1,865,075
69,343,613 30,084,849
The amount has been deducted by Dhaka Stock Exchange Ltd. (DSE) & Chittagong Stock Exchange Limited
(CSE) from the transaction amount as per section 53BBB of the Income Tax Ordinance 1984.
150
2009 2008
Taka Taka
23 Other Income
151
2009 2008
Taka Taka
25 Financial expenses
2,534,237 1,177,349
26 Net worth
Dated: Dhaka
March 15, 2010
152
IDLC Finance Limited
Bay’s Galleria (1st Floor), 57 Gulshan Avenue, Gulshan-1, Dhaka-1212, Tel: 8834990, Fax : 8834377, E-mail : mailbox@idlc.com
PROX Y FORM
I/We ........................................................................................................................................................................................................................ of
.................................................................................................................................................................................................... being a member
of IDLC Finance Limited and a holder of ............................... Shares hereby appoint Mr./ Ms. ..........................................................
of .............................................. as my/ our proxy to vote for me/us and on my/our behalf at the 25th Annual General
Meeting of the Company to be held on April 19, 2010 (Monday) and at any adjournment thereof.
Signature Signature
Name Name
(Member) Revenue (Member)
Stamp
Folio/BO ID No Folio/BO ID No
NOTE :
a) This form of proxy, duly completed, must be deposited at least 48 hours before the meeting at the Company’s
registered office. Proxy is invalid if not signed and stamped as explained above.
b) Signature of the Shareholders should agree with the Specimen Signature registered with the Company and
Depository Register.
Attendance Slip
IDLC Finance Limited
Bay’s Galleria (1st Floor), 57 Gulshan Avenue, Gulshan-1, Dhaka-1212 Tel : 8834990, Fax : 8834377, E-mail “ mailbox@idlc.com
I hereby record my attendance at the 25th 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.
153