IDLC Annual Report 2007 (1)

committed to you

www.idlc.com

annualreport2007

Notice of the 23rd Annual General Meeting 04

Vision, Mission and Corporate Philosophy 05

Strategic Objectives 06

IDLC Core Values 07

IDLC Code of Conduct and Ethical Principles 08

History - Key Milestones 09

Corporate Structure 10

Brief Profile of the Directors 11

Committees 14

Company Information 15

Management and Executives 16

Head Office, Branches and Centre 18

Shareholding Structure 20

IDLC at a Glance 21

Risk Management 23

Statement on Corporate Governance 27

Report of the Audit Committee 32

Awards and Recognitions 33

Corporate Social Responsibility (CSR) 34

Event Highlights 36

Consolidated Performance of IDLC at a Glance 38

Value Added Statement 39

Performance Indicators 40

Chairman's Review 42

Directors' Report 44

Auditors' Report and Audited Financial Statements 70

Auditors' Report and Audited Financial Statements of IDLC Securities Ltd. 113

Auditors' Report and Audited Financial Statements of I.Cons Ltd. 126

conte

nts

04

Notice is hereby given that the 23rd Annual General Meeting of the shareholders of the Company

will be held on March 30, 2007 (Sunday) at 10:30 a.m. at the Bangladesh China Friendship

Conference Centre, Agargaon, Dhaka, to transact the following business:

A0823-01 Adoption of Directors' Report, Auditors' Report and Audited Financial Statements for the

year ended December 31, 2007

A0823-02 Declaration of cash dividend @ Tk. 15 per share (15%) and stock dividend @ 1:4 (one

share for every four shares held) for the year ended December 31, 2007

A0823-03 Election of Directors in place of those who shall retire by rotation in accordance with the

provision of Articles of Association of the Company.

A0823-04 Appointment of Auditors of the Company and fixation of their remuneration.

By order of the Board

H. M. Ziaul Hoque KhanDated: February 19, 2008 Company Secretary

NOTES:1. March 6, 2008 is the Record Date.

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. 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.

IDLC Finance LimitedBay's Galleria (1st Floor), 57 Gulshan Avenue, Gulshan-1, Dhaka-1212Tel: 8834990, Fax: 8834377, E-mail: [email protected]

Noti

ce o

f th

e

23rd

Annual G

enera

l M

eeti

ng

05

Our VisionBecome the best performing and most innovative financial solutions provider in the country

Our MissionCreate maximum possible value for all our stakeholders by adhering to the highest ethical standards

For our Customers

Relentless pursuit of customer satisfaction through delivery of top quality services

For our Shareholders

Maximize shareholders' wealth through a sustained return on their investments

For our Employees

Provide job satisfaction by making IDLC a centre of excellence with opportunity for career

development

For the Society

Contribute to the well being of the society, in general, by acting as a responsible corporate citizen

Our Goal Long term maximisation of Stakeholders' value

Our Corporate PhilosophyDischarge our functions with proper accountability for all our actions and results and bind ourselves

to the highest ethical standards

Vis

ion, M

issi

on a

nd

Corp

ora

te P

hiloso

phy

06

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

Str

ate

gic

Obje

cti

ves

07

IDLC

Core

Valu

es

IDLC always places highest priority to the national interest. Utmost importance is always

attached to country's growth and prosperity.

IDLC employees are trained with the object of developing good leaders rather than good

managers

IDLC places emphasis on creativity and innovation to achieve organisational excellence

IDLC believes in adherence to the highest ethical standards.

08

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

- act with integrity, competence, dignity and in an ethical manner when dealing with

customers, prospects, colleagues, agencies and public

- act and encourage others to behave in a professional and ethical manner that will

reflect positively on IDLC employees, their profession and on IDLC, at large.

- strive to maintain and improve the competence of all in the business

- use reasonable care and exercise independent professional judgement

- not restrain others from performing their professional obligations

- maintain knowledge of and comply with all applicable laws, rules and regulations

- disclose all conflicts of interest

- deliver professional services in accordance with IDLC policies and relevant

technical and professional standards

- respect the confidentiality and privacy of customers, people and others with

whom they do business

- not engage in any professional conduct involving dishonesty, fraud, deceit or

misrepresentation or commit any act that reflects adversely on their honesty,

trustworthiness or professional competence

IDLC employees have an obligation to know and understand not only the guidance

contained in the Code of Conduct, but also the spirit on which it is based.

IDLC

Code o

f C

onduct

and

Eth

ical P

rincip

les

09

May 23, 1985 Incorporation of the Company

February 22, 1986 Commencement of Leasing business

May 18, 1986 Signing of first lease agreement

October 01, 1990 Establishment of branch in Chittagong, the main port city

March 20, 1993 Listed on the Dhaka Stock Exchange

September 10, 1994 Licensed by Bangladesh Bank for deposit taking

February 07, 1995 Licensed as a Non-Banking Financial Institution under the Financial Institutions

Act, 1993

July 02, 1995 Licensed by Bangladesh Bank as an off-shore financier in the Export

Processing Zones

November 25, 1996 Listed on the Chittagong Stock Exchange

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 Financing and Merchant Banking operations

January 29, 2004 Opening of the first retail focused branch at Dhanmondi

June 29, 2004 Opening of Gulshan Branch

November 22, 2004 Launching of Investment Management Services "Cap Invest"

February 7, 2005 Issuance of First Securitised Zero Coupon Bonds by IDLC Securitisation Trust 2005

February 27, 2005 Signing of a MoU for strategic alliance between IDLC and SBI Capital Markets

Limited, India

September 18, 2005 Launching of Local Enterprise Investment Centre (LEIC), a centre established

for the development of SMEs with the contribution of the Canadian

International Development Agency (CIDA) of the Government of Canada

January 2, 2006 Opening of SME focused branch at Bogra

April6, 2006 Opening of Branch at Uttara

May 18, 2006 Opening Merchant Banking branch in the port city 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 3, 2007 IDLC Securities Limited Chittagong Branch commenced operation

December 18, 2007 IDLC Securities Limited DOHS Dhaka Branch opened

His

tory

- K

ey

Milest

ones

10

Board of Directors

Corp

ora

te S

tructu

re

ChairmanAnwarul Huq, Deputy Chairman, Reliance Insurance Limited.

- Nominated by Reliance Insurance Limited

DirectorsAhmed Rajeeb Samdani, Director, The City Bank Limited

- Nominated by the City Bank Limited

Rubel Aziz, Director, The City Bank Limited.

- Nominated by the City Bank Limited

Md. Habibur Rahman Mollah, FCA, General Manager, Transcom Electronics Limited.

- Nominated by Transcom Group

Md. Shafiqul Azam, Managing Director, Sadharan Bima Corporation (SBC)

- Nominated by SBC

A. K. M. Shahidul Haque, Additional Managing Director, Mercantile Bank Limited

- Nominated by Mercantile Bank Limited

Lee Dong Jue, Deputy CEO, Korea Development Financing Corporation

- Nominated by Korea Development Financing Corporation

Yongbok Jo, Deputy Managing Director, IDLC Finance Limited

- Nominated by Korea Development Financing Corporation

Choong-Sun Park, General Manager, Investment Banking Division, Kookmin Bank

- Nominated by Kookmin Bank

Monoweruddin Ahmed, Lead Consultant, Monower Associates

-Independent Director

CEO & Managing DirectorAnis A. Khan

11

Mr. Anwarul HuqChairman of the Board, nominated by Reliance Insurance Limited

Mr. Anwarul Huq is the Deputy Chairman and Board Member 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 insurance business, and is widely known in the insurance industry and business circles. He is also the Honorary Consul General of Greece and Vice-President of Bangladesh Squash Rackets Federation.

Mr. Ahmed Rajeeb SamdaniDirector nominated by The City Bank Limited

Mr. Ahmed Rajeeb Samdani is the Managing Director of Golden Harvest Sea Food and Fish Processing Limited, Golden Harvest Agro Industries Limited, Golden harvest Info Tech Limited, Golden Harvest Commodities Limited, Golden Harvest Organic Aquaculture Holdings Limited, Golden Harvest Scankort GIS Limited and Golden Harvest Logistics Limited. He is also a Director of The City Bank Limited. Mr. Samdani is the founder of TAC Charitable Hospital and TACM Trust.

Mr. Rubel AzizDirector nominated by The City Bank Limited

An industrial entrepreneur, Mr. Rubel Aziz has been in the business for more than a decade and has set up and successfully executed a good number of industrial undertakings. He is a 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 a Director of The City Bank Ltd. and also Director of a number of companies of Partex Holdings, Janata Insurance Company Ltd. and IBAIS University.

Mr Habibur Rahman Mollah, FCADirector nominated by Transcom Group

Mr. Md. Habibur Rahman Mollah is a Chartered Accountant with twenty four 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 a General Manager.

Brief Profile of the Directors

12

Mr. A. K. M. Shahidul HaqueDirector nominated by Mercantile Bank Limited

Mr. A. K. M. Shahidul Haque is the Additional Managing Director of Mercantile Bank Limited. He completed his B. A (Hons) and M. A. from the University of Dhaka and started his banking career as a Probationary Officer with Rupali Bank Limited in 1977. During his banking career, he held important positions with challenging assignments. Prior to joining Mercantile Bank in 1999, Mr. Haque served Prime Bank Limited and National Bank Limited in different capacities. He attended a number of t ra in ing programs and workshops, both at home and abroad. He act ively participated in the Liberation War of Bangladesh in 1971.

Mr. Md. Shafiqul AzamDirector nominated by Sadharan Bima Corporation (SBC)

Mr. Md. Shafiqul Azam is an Additional Secretary of the Govt. of the People's Republic of Bangladesh on deputation as Managing Director of Sadharan Bima Corporation (SBC). He joined Bangladesh Civil Service Audit and Accounts Cadre in 1981 as an Assistant Controller of Military Accounts. He is an MSS in Public Administration with Honours from University of Dhaka. Mr. Azam is also a nominated Director of Investment Corporation of Bangladesh (ICB), National Housing Finance and Investments Limited (NHFIL), Central Depository Bangladesh Limited (CDBL), Bangladesh Commerce Bank Limited and Dhaka Electric Supply Company Limited (DESCO).

Mr. Yongbok JoDirector nominated by Korea Development Financing Corporation (KDFC)

An MBA from Gorge Washington University, USA, Mr. Yongbok Jo joined KDFC in

1985. 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. Lee Dong JueDirector nominated by Korea Development Financing Corporation

Mr. Lee Dong Jue completed his MBA from Aju University, Seoul. He is the Chief

Executive Officer of Fine Capital Corporation, Seoul and Deputy Chief Executive

Officer of Korea Development Financing Corporation (KDFC)

13

Mr. Choong-Sun ParkDirector nominated by Kookmin Bank, South Korea

Mr. Choong-Sun Park is the General Manager of Investment Banking Department of

Kookmin Bank of South Korea. He is an MBA from Seoul National University and

completed International Career Associates Program (IRPS) from University of

California.

Mr. Monoweruddin AhmedIndependent Director

Mr. Monoweruddin Ahmed, having finished his university education, joined the Central Government in 50's as Assistant Central Labour Commissioner, for a stint. Thereafter, he moved to Carew and Company, as Head of Labour Relations, on to GlaxoSmithKline as Head of Personnel. Before retiring from British American Tobacco Company (BAT), he was serving as Member of the Company's Board. Mr. Ahmed, on ret i rement f rom BAT, set up Monower Associates, an HR and Management Consulting house, which he currently manages as Lead Consultant. He represented the Bangladesh employers in quite a few ILO conferences in Europe, North Africa, Southeast and South Asian countries.

Mr. Anis A. KhanEx Officio

Mr. Anis A. Khan joined the former Grindlays Bank p.l.c. in 1982 and went on to

acquire extensive experience in the financial services industry. Prior to joining IDLC in

April 2003, he was serving with Standard Chartered Bank (SCB) in a regional role

based in Dubai, United Arab Emirates. He qualified for joining the Bangladesh Civil

Service (BCS) after passing the BCS Examination in 1982. Mr. Khan is the Chairman

of the Bangladesh Leasing & Finance Companies Association. He serves on the

Board of the Credit Rating Agency of Bangladesh Limited as a Director nominated

by IDLC and on the Board of Chittagong Exchange as a Director nominated by the

Government of Bangladesh. He is also a member of the Advisory Committee of the

Securities and Exchange Commission, Bangladesh.

14

Com

mit

tees

Audit CommitteeMd. Habibur Rahman Mollah, FCA

Chairman

Anwarul HuqMember

Ahmed Rajeeb SamdaniMember

Md. Shafiqul AzamMember

Monoweruddin AhmedMember

Credit Evaluation CommitteeAnis A. KhanCEO & Managing Director

Yongbok JoDeputy Managing Director

Arif KhanGeneral Manager

H M Ziaul Hoque KhanChief Financial Officer

M. Zamal UddinHead of Corporate Division

Ariful Alam ChowdhuryHead of Credit Risk Management Department

HR and Compensation CommitteeAnis A. Khan

CEO & Managing DirectorYongbok Jo

Deputy Managing DirectorArif Khan

General ManagerH M Ziaul Hoque KhanChief Financial Officer

M. Jamal UddinHead of Corporate Division

Bilquis JahanHead of Human Resources

Asset Liability ManagementCommittee (ALCO)

Anis A. KhanCEO & Managing Director


Arif KhanGeneral Manager

H M Ziaul Hoque KhanChief Financial OfficerHead of business units

Management CommitteeAnwarul HuqChairman

Anis A. KhanMember

Yongbok JoMember

Operation Risk Management Committee (ORMC)Anis A. KhanCEO & Managing DirectorYongbok JoDeputy Managing DirectorArif KhanGeneral ManagerH M Ziaul Hoque KhanChief Financial OfficerHead of business unitsHead of Treasury

Core Management Committee (MANCOM)Anis A. KhanCEO & Managing DirectorYongbok JoDeputy Managing DirectorArif KhanGeneral ManagerH M Ziaul Hoque KhanChief Financial OfficerDeputy General Managers

15

Com

pany

Info

rmati

on Registered Name of the Company

IDLC Finance Limited

Legal FormA 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.

Company Registration No. C 14218/1992 of 1984-1985

Bangladesh Bank License No.BCD(Non-banking)/Dhaka/2/1995

AuditorsM/s A. Qasem & Co.Chartered Accountants, AQC Tower, 57, Dilkusha Commercial Area, Dhaka 1000

Registered OfficeBay's Galleria (1st Floor), 57 Gulshan Avenue, GPO Box No. 3160, Dhaka 1212Tel: +880 (2) 883 4990 (Auto Hunting), Facsimile: +880 (2) 883 4377, E-mail: [email protected]

Corporate Web Sitewww.idlc.com

Legal AdvisorLee Khan and Partners, City Heart, Suite No. 5/8, 67, Naya Paltan, Dhaka 1000

Principal BankersThe City Bank Limited, Standard Chartered Bank, Citibank NA

Stock BrokersLanka Bangla Securities Limited, SES Securities Limited, IDLC Securities Limited

MembershipsAssociationsBangladesh Leasing & Finance Companies AssociationAsian Leasing and Finance Companies AssociationBangladesh Merchant Bankers AssociationBangladesh Association of Publicly Listed Companies

InstituteThe Institute of Bankers, Bangladesh

Chambers of Commerce & IndustryInternational Chamber of Commerce - BangladeshForeign Investors Chamber of Commerce & IndustryMetropolitan Chamber of Commerce & IndustryDhaka Chamber of Commerce & IndustryBangladesh German Chamber of Commerce & Industry

16

Managem

ent

and

Exe

cuti

ves


Arifur RahmanDeputy General Manager

Indrajit MallickAssistant General Manager

Anis A. KhanCEO & Managing Director

Bilquis JahanDeputy General Manager

Meer Sajed-ul-Baser, ACAAssistant General Manager

Mohammad Monir UddinSenior Manager

Mir TariquzzamanDGM & Chief Technology Officer

Irteza A. KhanAssistant General Manager

Md. SaifuddinSenior Manager

Ifham SiddiquiSenior Manager

17

Shafayet HossainSenior Manager

Shaikh KamruzzamanDeputy General Manager

Iqbal MahmudAGM & Chief Risk & Compliance Officer

A H M Monjur MorshedSenior Manager

M. Jamal UddinDeputy General Manager

Kh. Asadul IslamDeputy General Manager

Shamim RezaSenior Manager

H M Ziaul Hoque Khan, FCAGeneral Manager & CFO

Mahmudul BariDeputy General Manager

Maksudul HoqueSenior Manager

Ziaul HuqSenior Manager

Arif Khan, CFA, FCMAGeneral Manager

Bidyut Kumar SahaDeputy General Manager

Ariful Alam Chowdhury, CFAAssistant General Manager

Kazi Mahmood HossainSenior Manager

18

Head O

ffic

eB

ranches

and C

entr

e Corporate Head Office Bay's Galleria (1st Floor), 57 Gulshan Avenue, GPO Box No. 3160, Dhaka 1212

Telephone: +880 (2) 883 4990 (Auto Hunting), Facsimile: +880 (2) 883 4377

E-mail: [email protected]

Dilkusha BranchHadi Mansion (7th Floor), 2 Dilkusha Commercial Area, Dhaka 1000

Telephone: +880 (2) 956 0111 (Auto Hunting), Facsimile: +880 (2) 956 3620


Merchant Banking Divison36 Dilkusha C/A (13th Floor), Dhaka 1000, Telephone: +880 (2) 957 1842 (Auto Hunting)

Facsimile: +880 (2) 957 1243, E-mail: [email protected]

Dhanmondi BranchSEL Centre (5th Floor), 29 West Panthapath, Dhanmondi, Dhaka 1205

Telephone: +880 (2) 815 7632, Facsimile: +880 (2) 811 2146, E-mail: [email protected]

Gulshan BranchTaj Marriot (1st Floor), 25 Gulshan Avenue, Dhaka 1212, Telephone: +880 (2) 988 7196,

986 3252, 883 4152, Facsimile: +880 (2) 988 6837, E-mail: [email protected]

Uttara BranchMonsur Complex (3rd Floor), Plot No. 59/A, Road No. 7, Sector # 4,

Uttara Model Town, Dhaka 1230, Telephone: +880 (2) 893 2487, 893 2683, 893 2340

Facsimile: +880 (2) 893 2487, E-mail: [email protected]

Chittagong BranchJahan Building 4 (Ground Floor), 76/77 Agrabad Commercial Area, Chittagong 4100

Telephone: +880 (31) 711 034, 713 742, 251 0117-8, Facsimile: +880 (31) 715 895


19

Bogra BranchSairul Complex (2nd Floor), Sherpur Road, Sutrapur, Bogra 5800

Telephone: +880 (51) 699 17, 69 838, Facsimile: +880 (51) 698 39, E-mail: [email protected]

Local Enterprise Investment Centre (LEIC) - for Small & Medium Enterprises (SMEs)Managed by IDLC with the contribution of the Canadian International Development Agency (CIDA)Taj Casilina (1st Floor), 25 Gulshan Avenue, Dhaka 1212, Telephone: +880 (2) 883 5369-70Facsimile: +880 (2) 883 4148, E-mail: [email protected]

IDLC Subsidiaries

IDLC Securities Limited: (A wholly owned subsidiary)36 Dilkusha C/A (13th Floor), Dhaka 1000, Telephone: +880 (2) 957 1842 (Auto Hunting)Facsimile: +880 (2) 9571243, E-mail: [email protected]

I.Cons Limited: (A wholly owned subsidiary)SEL Centre (5th Floor), 29 West Panthapath, Dhanmondi, Dhaka 1205Telephone: +880 (2) 815 7632, Facsimile: +880 (2) 811 2146, E-mail: [email protected]

Dhaka

IDLC Corporate Head Office

IDLC Branch offices

IDLC Subsidiaries

Dilkusha

DhanmondiGulshan

CHO

UttaraI.Cons Ltd.

IDLC Securities Ltd.

20

52.7%

30%

17.3%

Share

hold

ing S

tructu

reat

the y

ear

end 2

007 Foreign Sponsors - 30%

Korea Development Financing Corporation (KDFC), South Korea - 20%

Kookmin Bank, South Korea - 10%

Domestic Sponsors - 17.3%

The City Bank Limited - 9.7%

Sadharan Bima Corporation - 7.6%

General - 52.7%

Mercantile Bank Limited - 7.5%

Eskayef Bangladesh Limited - 8.0%

Reliance Insurance Limited - 7.0%

Other Institutions - 13.5%

Individuals - 16.7%

CAPITAL

Authorised : Tk. 1,000,000,000 (10,000,000 ordinary shares of Tk.100 each)

Paid-up : Tk. 200,000,000 (2,000,000 ordinary shares of Tk.100 each)

Foreign Sponsors - 30%

Domestic Sponsors - 17.3%

General - 52.7%

21

IDLC

at

a G

lance IDLC Finance Limited started its journey in 1985, as the first ever leasing company of the country.

In 1995, IDLC was licensed as a Financial Institution by the country's central bank, Bangladesh Bank, following the enactment of the Financial Institution Act 1993. Over the last two decades, IDLC has grown in tandem with the country's transition into a developing country and has emerged as Bangladesh's leading multiproduct financial institution. To encapsulate the evolving nature of the company, IDLC has changed its name to IDLC Finance Limited from earlier Industrial Development Leasing Company of Bangladesh Limited in August 2007.

Since 1985, when IDLC was formed as the pioneering leasing company in Bangladesh, the company continues to evolve as an innovative financial solutions provider. We are now able to offer our customers, integrated and customized financial solutions - all under one roof. Our wide array of products and services range from retail products, such as home and car loans, corporate and SME products including lease and term loans, structured finance services ranging from syndications to capital restructuring and a complete suite of merchant banking and capital market services.

IDLC's product and service offerings include:

Debt Products:· Lease Finance· Term Finance· Domestic Factoring of Accounts Receivable· Bill/Invoice Discounting· Work Order Finance· Corporate Real Estate Finance · Real Estate Developer Finance· Home Loans with Home Loan Shield· Home Equity Loans· Car Loans for Individuals· Business Loan· Machinery Loan· Double Loan· Festival Loan

Investment Products: · Common Equity investments· Preferred Equity Investments· Bonds

22

Liability Products:· Term Deposit Schemes· Debentures · Securitised Bonds

Corporate Services:· Project Finance Appraisal· Project Loan Syndication· Working Capital Arrangement· Syndication Agency services· Refinancing arrangements· Corporate Financial Advisory· Securitisation of Receivables· Trusteeship Management · Professional supports to the SMEs

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.

International Partnerships/ AffiliationsAs Manager of the Local Enterprise Investment Center (LEIC), with contribution of the Canadian International Development Agency (CIDA) of the Government of Canada, IDLC plays an active role in the development of the country's private sector by providing financial and professional support to the Small and Medium Enterprises (SMEs), who wish to expand and improve their products and services. This is the first direct partnership by CIDA with a local private sector entity in a developing country.

IDLC has made strategic alliance with the State Bank of India Capital Markets Ltd. (SBICAP) which allows the Company to provide project advisory, infrastructure advisory, privatization advisory, merger and acquisition valuations, deal structuring etc.

SubsidiariesIDLC 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).

I.Cons Limited, a fully owned subsidiary of IDLC provides world class IT solutions starting from financial applications to IT infrastructure development and consultancy services.

23

Ris

k M

anagem

ent Risk is the element of uncertainty or possibility of loss that prevail in any business transaction in any

place, in any mode and at any t ime. Risk is an integral part of f inancing business. Risk management entails the adoption of several measures to strengthen the ability of an organization to cope with the vagaries of the complex business environment in which it operates.

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 grading is assigned at the inception of lending considering the industry, business, financial and management risk associated with the financing. The Company has different committees for risk management and appropriate internal control measures are also in place to mitigate risk.

In addition to the industry best practices for assessing, identifying and measuring risks, IDLC also considers guidelines for managing core risks of financial institutions issued by the Country's Central Bank, Bangladesh Bank, vide FID Circular No. 10 dated September 18, 2005 for management of risks.

Credit Risk

Credit risk is the possibility that a borrower or counter party will fail to meet agreed obligations. Thus managing credit risk for efficient management of a financial institution (FI) has become the most crucial task. Given the fast changing, dynamic global economy and the increasing pressure of globalization, liberalization, and consolidation it is essential that FIs have robust credit risk management policies and procedures that are sensitive and responsive to these changes. At IDLC, credit risk may arise in the following forms:

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

24

To encounter and mitigate credit risk the following control measures are in place at IDLC:

· Multilayer approval process

· Policy for maximum sector and group exposure limit

· Policy for customers maximum asset exposure limit

· Mandatory search for credit report from Credit Information Bureau

· Looking into payment performance of customer before financing

· Annual review of clients

· Adequate insurance coverage for funded assets

· Vigorous monitoring and follow up by Special Assets Management Team

· Strong follow up of compliance of credit policies by Operational Risk Management Department

· Taking collateral

· Seeking external legal opinion

· Maintaining neutrality in politics and following arm's length approach in related party transactions

· Regular review of market situation and industry exposure

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.

An independent Credit Risk Management Department is in place, at IDLC, to scrutinize projects from a risk-weighted point of view and assist the management in creating a high quality credit portfolio and maximize returns from risk assets.

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

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. To encounter market risk we are negotiating for facilities that matches the maturity structure with ideal interest rate, maintaining a balanced diversification in investments and prudent provisioning policies. IDLC has also strong access to money market and credit lines at a competitive rate through good reputation, strong earnings, financial strength and credit rating.

However, in order to mitigate any adverse effect that results from fluctuating interest rate in future, we are planning to carry out some securitizations of receivables and fixed rate long term loans to raise funds.

Credit Evaluation Commitee (CEC) meeting in Progress A view of Asset Liability Management Committee (ALCO) meeting

Risk Management

25

Liquidity RiskLiquidity risk arises when a company is unable to meet the short term obligation to its lenders and stakeholders. This arises from the adverse mismatch of maturities of assets and liabilities.

Liquidity requirements are managed on a day-to-day basis by the Treasury Division which is responsible for ensuring that sufficient funds are available to meet short term obligations, even in a crisis scenario, and for maintaining a diversity of funding sources. The Asset Liability Committee also oversee the asset liability maturity position and recommend and implement appropriate measures to encounter liquidity risk.

Operational Risk Operational risk is the potential loss arising from a breakdown in company's systems and procedures, internal control, compliance requirements or corporate governance practices, that results in human error, fraud, failure, damage of reputations, delay to perform or compromise of the company's interests by employees. Operational risk may also arise from the following:

· Turnover of trained staff

· Risk of insider dealings

· Leakage of sensitive information

· Shortcomings of organizational structure

· Risk of falling in credit ratings

· Money laundering

· Changes in statutory requirements

· Technological obsolescence

Appropriate internal control measures are in place, at IDLC, to address operational risks. IDLC has also established an Operational Risk Management Department (ORMD) to address operational risk and to frame and implement policies to encounter such risks. ORMD assesses operational risk across the Company as a whole and ensures that an appropriate framework exists to identify, assess and mange operational risk. The function of ORMD is to constant vigilance against leakage of Shareholders value by identifying, assessing, measuring, managing and transfer operational risk resulting from inadequate or failed internal processes, people and system or from external events.

ORMD also develops policies, processes and procedures for managing operational risk in all of the company products, activities, processes and systems by identifying and assessing the operational risk inherent in all our products, activities, processes and systems.

Operation Risk Management Committee (ORM) meeting

Risk Management

26

In particular, the following risk management measures are present at IDLC to address operational risk:

· Effective internal audit function throughout the organisation with direct access of Chief Internal Auditor to the Audit Committee and Board

· Suitable delegated authority level· Awareness throughout the organisation on "Know Your Customer" policy· Maintenance of assets through maintenance agreement with vendor· Proper risk transfer measure by taking insurance coverage for all assets of the Company· Infusing organisational values and ethics in employees· Strict compliance of Employees Code of Conducts · Regular compliance audit in relation to reporting requirements to regulatory bodies and other stakeholders· Creating conducive working environment for the staff· Implementation of computer based MIS system· Implementation of proper back up system· Regular upgrading of hardware and software to keep it up to state of the art level

Business volume risksAt IDLC, business volume risk may arise in the form of risk of falling business volumes and market share, risk of being overtaken and losing leadership position and risk of over trading which may affect profitability due to volatile revenues and reduced spread earnings, credit rating and reputation. Risk of over trading may lead to insufficient capital. To encounter and mitigate business volume risk the follwing risk mitigation measures are in place, at IDLC:

· Innovative and convenient financial products and services

· Taking prompt action on customer complaints

· Frequent assessment of clients satisfaction

· Regular review of performance against budget and targets

· Review and analysis of competitors performance

Assessment of the riskiness of the operationWe estimate our risk exposure based on our own assessment of the operations as well as the market perception

to be as follows:

Type of Risk Rating

Credit Risk Moderate

Market Risk Moderate

Liquidity risk Moderate

Operational risk Low

Business volume risk Low

Risk Management

Current Ratio

27

Sta

tem

ent

on

Corp

ora

te G

ove

rnance Corporate governance is the system by which companies are directed and controlled by the

management in the best interest of all the stakeholders, thereby ensuring greater transparency and better and timely financial reporting.

The platform on which corporate governance principles are structured is that the Board of Directors is responsible for the proper governance which includes setting out of the Company's strategic aims, providing the necessary leadership to implement such aims, supervising the management of the business and reporting to the shareholders on their stewardship.

The maintenance of effective corporate governance remains a key priority of the Board of IDLC of Bangladesh Limited. To exercise clarity about directors' responsibilities towards the shareholders, corporate governance must be dynamic and remain focused on the business objectives of the Company and create a culture of openness and accountability. Keeping this in mind, clear structure and accountabilities supported by well understood policies and procedures to guide the activities of the Company's management have been instituted.

IDLC considers that its corporate governance practices comply with all aspects of the SEC Notification No. SEC/CMMRRCD/2006-158/Admin/02-08 date February 20, 2006 and almost all aspects of Bangladesh Bank's DFIM Circular No. 7 dated September 25, 2007. In addition, to establish high standards of corporate governance, IDLC also considers best governance practices in its activities. The independent role of Board of Directors, separate and independent roles of Chairman and Chief Executive Officer, distinct role of Company Secretary, Chief Financial Officer and Chief Compliance Officer, different Board committees helps IDLC achieve excellence in best corporate governance practices.

This statement outlines the Company's main corporate governance practices as on December 31, 2007.

Board of Directors

CompositionThe Board of IDLC considers that its membership should comprise directors with an appropriate mix of skills, experience and personal attributes, that allow the directors, individually, and the Board, collectively, to discharge their responsibilities and duties under the law efficiently and effectively, understand the business of the Company and assess the performance of the management.

Statement on Corporate Governance

28

The Board of IDLC comprises of ten directors including one independent director with voting power, who possess a wide range of skills and experience over a range of professions, businesses and services. All the directors are nominated directors. Each of our Directors brings in independent judgement and considerable knowledge to perform their roles effectively. 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.

The Directors are appointed by the shareholders in Annual General Meeting (AGM). Casual vacancy in the Board, if any, is filled up by the Board as per Companies Act, 1994 and Articles of the Company. In addition, one third of the Directors retire from the Board every year in AGM, who are then eligible for re election.

Role and Responsibilities of the Board

The Board is committed to the Company seeking to achieve superior financial performance and long term prosperity, while meeting stakeholders' expectations of sound corporate governance practices. The Board determines the corporate governance arrangements for the Company. As with all its business activities, the Board is proactive in respect of corporate governances and puts in place those arrangements which it considers are in the best interest of the Company and its shareholders, and consistent with its responsibilit ies to other stakeholders.

The Board duly complies with the guidelines issued by Bangladesh Bank regarding the responsibility and accountability of the Board, its Chairman and Chief Executive/Managing Director, vide DFIM Circular No. 7 dated September 25, 2007.

The Board of Directors is in full control of the Company's affairs and is also fully accountable to the shareholders. They firmly believe that the success of the Company largely depends on the credible corporate governance practices adopted by the Company. Taking this into consideration, the Board of Directors of IDLC sets out its strategic focus and oversees the business and related affairs of the Company. The Board also formulates the strategic objectives and policy framework for the Company. In discharging the above responsibilities the Board caries out, inter alia, the following functions as per the charter of the Board and Bangladesh Bank's DFIM Circular No. 7, dated September 25, 2007:

· Determine, monitor and evaluate strategies, policies, management performance criteria and business plan

· Periodic and timely reporting to the shareholders on the affairs, progress and performance of the Company

· Ensuring proper decision-making and accountability structure throughout the Company so that the staff down

the line is fully accountable to the corporate management

· Monitoring of significant business risks and reviewing how they are managed as per Bangladesh Bank's "Core

Risk Guidelines"

· Delegation to Board Committees and management and approval of transactions in excess of delegated level

· Approval of annual budgets including major capital expenditure proposals

· Critical evaluation of all proposals which require Board's approval and/or directives

· Regular review of financial performance and overdue situation

· Appointment and evaluation of the performance of CEO & Managing Director and Deputy Managing Director

and senior executives

· Ensuring that the senior management team has the necessary skills and experience to perform their functions

effectively in the best interests of the Company

· Monitoring the adequacy and appropriateness and operation of internal controls

· Ensure that technology and information systems used in the organisation are sufficient to operate the

organisation effectively and maintain competitiveness


29

Role of the ChairmanThe Chairman of the Board is not the Chief Executive of the Company. 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.

Board Meetings

The Company Secretary, after approval by the Board's Management Committee, prepares the detailed agenda for the meeting. The Board papers comprising the agenda, explanatory notes and proposed resolutions are circulated to the directors, in advance, for their review. The members of the Board have complete access to all information of the Company, enabling them to work efficiently. The members of the Board are also free to recommend inclusion of any matter in the agenda for discussions. The Company Secretary and Chief Financial Officer always attend the Board Meeting and other senior management are invited to attend Board Meetings to provide additional inputs to the items being discussed by the Board and make business presentations.

There are procedures, at IDLC, for keeping the Board up-to-date with the Company's activities and relevant external developments. These includes senior management presenting significant matters to the Board and Board being able to seek further information, on any issue, relating to performance, strategy, outlook etc,.

During the year ended on December 31, 2007, a total six (6) Board Meetings were held and attendance by the Directors are shown in the Annexure I of the Directors' Report to the Shareholders.

Internal ControlThe Board is responsible for ensuring that the Company has an adequate and effective control system in place. Although, no system of internal financial control can provide absolute assurance against material mis-statement or loss, the Company's internal control systems have been designed to provide the directors with reasonable assurance, that assets are safeguarded against unauthorised use by the employees and/or management and/or third parties, transactions are authorised and properly recorded and material error and irregularities are either prevented, or detected, within a reasonable period of time.

Properly designed management structure, clearly defined responsibilities, delegation of authority, establishment of accountability at each level and system of periodic reporting and monitoring performance are the key elements of the internal control framework employed in IDLC.

Audit CommitteeThe Audit Committee comprises of five Directors. The Company Secretary is the Secretary of the Committee. The Committee is headed by a director who has professional background in accounting and finance. The rules of the Audit Committee clearly lay down its authority, responsibility and specific duties.

The Committee is empowered, among other things, to examine any matter relating to the financial affairs of the Company and to review all audit and inspection programs, internal control systems and procedures, accounting policies and adherence to compliance requirements, etc. This ensures that a sound financial reporting system is in place, which is well managed, providing accurate, appropriate and timely information to the Board of Directors and stakeholders.

The Chief Risk & Compliance Officer has direct access to the Committee and the Committee is directly reportable to the Board.

During the year under review, four Audit Committee meetings were held.

Functions and responsibilities of the Committee

· To assist the Board in fulfilling its oversight responsibilities including implementation of the objectives, strategies and overall business plans set by the Board for effective functioning of the Company


30

· To review the financial reporting process, the system of internal control and management of financial risks and the Company's processes for monitoring compliance with laws and regulations and its own code of business conduct

· To ensure that Company has adequate process in place, to safeguard the assets of the Company against unauthorized use by the employees/third parties, and to ensure that expenses incurred by the Company are for the purposes of the Company

· To evaluate whether management is setting the appropriate compliance culture by communicating the importance of internal control, the management of risk and ensure that all employees have understanding of their roles and responsibilities

· To review the arrangements made by the management for building a suitable Management Information System (MIS) including information technology system and its applications

· To review the corrective measures taken by the management, as regard the reports relating to fraud and forgery, deficiency in internal control or other similar issues detected by internal and external auditors and inspectors of the regulatory authorities

· To review the activities and organizational structure of internal audit functions and ensure that no unjustified restrictions or limitations are made

· To do any other functions as the Board may require from time to time

Management CommitteeA four member Management Committee headed by a Director is responsible for strategic and operational plans of the business. The matter related to ordinary business operations of the Company and the matters that the Board of Directors from time to time authorise are vested to this Committee in accordance with the Statement of General and Operational Policies established and made by the Board of Directors. This Committee assists IDLC in taking prompt decisions and react swiftly to changes in the market-place as they occur. The Rules of the Management Committee is framed by the Board.

During the year under review thirteen Management Committee meetings were held.

Credit Evaluation Committee (CEC)CEC evaluates all projects/proposals of financing activities of the Company from risk point of view. The Committee is headed by CEO & Managing Director and consists of six members. The members of the Committee are CEO & Managing Director, Deputy Managing Director, Head of Credit Risk Management Department, CFO and Business Heads.

Human Resources (HR) and Compensation CommitteeA six member HR & Compensation Committee headed by CEO & Managing Director is in place, at IDLC, to ensure the companywide equal opportunity in terms of recruitment, compensation, training, promotion and other issues. The role of the Committee is detailed below:

· Reviewing existing HR policies and formulating new policies· Review the training need assessments of senior management and staff members of the Company· To review the overall compensation package of the company and make adjustments, if required, based on the

market analysis

Communications and Relationship with ShareholdersIt is the Company's policy that all external communications by the Company will :

- be factual and subject to internal vetting and authorisation before issue,


31

- not omit material information and - be timely and expressed in a clear and objective manner ,

IDLC strongly believes that all stakeholders should have access to complete information on its activities, performance and product initiatives. The Company's web site www.idlc.com displays, interalia, company's annual report, half yearly report, product offerings, recent announcements, presentations and event updates.

The Company reports to shareholders twice a year through half yearly report and detailed annual report. Every shareholder has the right to attend the annual general meeting, where they can meet and communicate with the directors and express their views regarding the Company's business, its future prospects and other matters of interest. Shareholders are always encouraged to attend the meeting or, if unable to attend, then may appoint proxies.

All disclosures required by the Securities and Exchange Commission, Listing Regulations of Dhaka and Chittagong Stock Exchanges and Bangladesh Bank are made adequately and promptly. In addition to ensuring timely compliance, this also enables dissemination of information to all stakeholders and the public.

Preparation and Presentation of the Financial Statements and Directors' Responsibility

The Companies Act 1994 requires the directors to prepare financial statements for each accounting year. The Board of Directors accepts the responsibility for preparation of financial statement, maintaining adequate records for safeguarding the assets of the Company, preventing and detecting fraud and/or other irregularities, selecting suitable accounting policies and apply those policies, consistently, and making reasonable and prudent judgements and estimates where necessary.

The Board of Directors accepts responsibility for the integrity and objectivity of the financial statements. The estimates and judgements relating to the financial statements were made on a prudent and reasonable basis, in order that the financial statements reflect in a true and fair manner, the form and substance of transactions and reasonably present the Company's state of affairs. To ensure this, the Company has taken proper and sufficient care in installing a system of internal control, which is reviewed, evaluated and updated on an ongoing basis. The Operational Risk and Internal Audit Department of the Company conducts periodic audits to provide reasonable assurance, that the established policies and procedures of the Company were consistently followed.

The Board of Directors confirms that the International Accounting Standards, as adopted in Bangladesh by the Institute of Chartered Accountants of Bangladesh, have been adhered to, subject to any material departure being disclosed and explained in the notes to the accounts. The Board also confirms that the Company keeps accounting records, which disclose with reasonable accuracy the financial position of the Company and enables them to ensure that the financial statements comply with the requirements of the Companies Act, 1994, Securities and Exchange Rules 1987, Financial Institution Act 1993 and Listing Regulations of Dhaka and Chittagong Stock Exchanges and amendments thereto.


The Board welcomes Independent Director, Mr. Monoweruddin Ahmed Audit Committee Meeting in progress

32

Report

of

the

Audit

Com

mit

tee IDLC Audit Committee, formed in 2004, comprises of five Directors, nominated by the Board of

Directors. The Committee, headed by a director with professional background in Accounting and Finance, operates according to the charter of the Committee approved by the Board. The CEO & Managing Director attends the meeting by invitation. The Chief Risk & Compliance Officer has direct access to the Committee and the Committee is directly reportable to the Board.

The objectives of the Committee are to ensure that proper and adequate internal controls are in place, to facilitate the smooth functioning of the company's operations, and assist the Board in discharging its responsibilities toward the stakeholders of the Company.

The Committee ensures that a sound financial reporting system is in place, which is well managed, providing accurate, appropriate and timely information to the Board of Directors, management, regulatory bodies and shareholders. The Committee is empowered to examine any matter relating to the financials and other affairs of the Company, review all internal and external audit and inspection programs, internal control system, procedures and adherence to compliance requirements.

The Committee meets once in every quarter of the calendar. During 2007, four audit committee meetings were held to carry out the following tasks:

1. Reviewed and discussed the Report of the Statutory Auditors and actions taken by the management on various observations and queries made and raised by the External Statutory Auditors.

2. Reports and the recommendations of the Bangladesh Bank's Inspection team were reviewed and responses of the management on various observations are discussed, in detail, for taking corrective measures.

3. Reviewed various reports of Operational Risk Management Department on operational, financial procedures and branch activities.

4. The Audit Plan for 2007 and its progress report was reviewed by the Committee.

5. Reviewed the report on Operational Risk Diagnosis of IDLC prepared by Ernst & Young covering major business functions of the company as part of our drive to achieve operational excellence.

The Audit Committee is of the view that internal controls and procedures are adequate to present a true and fair view of the activities and financial status of the Company and that its assets are safeguarded.

Md Habibur Rahman Mollah, FCAChairman,Audit CommitteeDhaka, February 04, 2008

33

Aw

ard

s and R

ecognit

ions

IDLC bagged SAFA Best Presented Accounts Award for 2006

IDLC is awarded for Best Published Accounts andAnnual Report for 2006 by ICAB

IDLC receives First ICMAB National Best Corporate Award 2007

Credit RatingIDLC has been assigned "AA2" (Double A Two)) rating in the long term and ST- 3 rating in the short term by Credit Rating Agency of Bangladesh Limited (CRAB). This has been done in consideration of IDLC's strong ownership structure and corporate governance practices, experienced management team, improving income mix and strong retail deposit base.

Financial Institutions rated in this category are considered strong, characterized by very good financials, healthy and sustainable franchise and a first rate operating environment.

ICAB National Award and SAFA Merit Award IDLC Finance Limited was awarded the second prize of the Institute of Chartered Accountants of Bangladesh (ICAB) National Award and South Asian Federation of Accountants (SAFA) Merit Award for the Best Published Annual Accounts and Reports for 2006 awarded by ICAB and SAFA, respectively.

These awards ref lect pract ic ing good corporate governance, compliance with the rules and regulations, preparation and presentation of financial statements and disclosure of information following International Accounting Standards and best practice set by the Institute of Chartered Accountants of Bangladesh and the South Asian Federation of Accountants (SAFA).

ICMAB Best Corporate Award for 2006IDLC Finance Limited received the first ICMAB National Best Corporate Award 2007 given by the Institute of Cost and Management Accountants of Bangladesh (ICMAB).

IDLC got the second prize in the financial institution category of the Best National Corporate Award 2007. The assessment c r i te r ia fo r the award inc lude corporate governance practices, capital adequacy, liquidity, asset quality and profitability.

34

Corp

ora

te S

ocia

lR

esp

onsi

bilty

(C

SR

) An institution is only as good as community it grows up in. IDLC's policy is to constantly harness our social capital and provide opportunities for this to grow. IDLC believes that CSR does not mean just doling out largesse. Rather it means the strategic use of money and other resources to empower communities and to help people help themselves. We have made it a point to inculcate a deeper sense of responsibility and a stronger awareness among our staff on this issue. We have created a strong culture of corporate social responsibility at all levels and laboured the point that IDLC has a significant role to play as a leading corporate citizen.

Our branch network and increased SME focused operation, enabled us not only to reach remote areas and many more lives, but also provide the small entrepreneurs with new lease of life which will also help in sustainable economic and social development.

With a view to contributing to poverty reduction and 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 Local Enterprise Investment Centre (LEIC) in 2005. The LEIC is managed by IDLC and funded by Canadian International Development Agency (CIDA).

During the year, LEIC made initial contacts with four hundred local SMEs across a range of sectors and worked closely with fifty one new SMEs, as prospective clients, for the Centre's support. During 2007, LEIC undertook a process improvement initiative (implementation of CMMI - an international process standard) in some local software companies. LEIC also took a delegation of leading furniture companies of Bangladesh to Canada to explore long-term partnership opportunities with Canadian furniture companies. A good number of seminars, workshops and focus group discussions were also organized on different topics jointly with trade bodies and Board of Investment. We are expecting that through LEIC contribution, SMEs will be developed, new long-term business-to-business partnerships will be formed and a good number of jobs will be created, which will help in community development, as a whole.

Half of our total population are female and we believe that they have the potential to contribute to the society and economy. Keeping this in mind, we have started Women Entrepreneur Loan Scheme at a very low rate, in 2007, to support women to develop which will help them to be self dependent.

Environmental IssuesIDLC believes in development that meets the needs of our present generation, without compromising the possibi l i t ies of future generations to meet their needs. IDLC's products and services are not environmentally harmful. However as the Company is committed to the society, environmental issues related with projects are dealt with regularly in the process of project appraisal. Our relationship managers investigate all related environmental issues at the appraisal stage of projects. Extra efforts are given in analyzing the implications of environmental issues for projects, which may have critical environment implications. We, generally, avoid investments where environmental risks are considered high. In all the investment projects, our appraisal team always checks whether the client is complying with the Environmental Conservation Act 1995 and Environmental Conservation Rules 1997.

We remain ever conscious of our social responsibilities, as an integral element of our corporate culture.

35

CSR Activities

a b

c d

e f

g h

a. IDLC donates Tk 1.00 Million to Chief Adviser's Relief And Welfare Fund for the victims of Cyclone SIDRb. IDLC donates Tk 1.00 Million to Chief Adviser's Relief And Welfare Fund for the flood victimsc. IDLC donates employees one day's salary to BRAC for the flood victimsd. IDLC makes contribution to Bangladesh Thalassaemia Hospitale. IDLC provides support to SEID Trust for underprivileged children with intellectual and multiples disabilitiesf. IDLC donates to Centre for the Rehabilitation of the Paralysed (CRP) for providing services to the poor disabled patients for

treatment and rehabilitation to spinal injuryg. Distribution of blankets to Centre for the Rehabilitation of the Paralysedh. Distribution of blankets by IDLC's Bogra Branch

36

d e

cb

a

a. Contribution Agreement between Modern Erection Limited (MEL) and IDLC, on behalf of LEIC, to facilitate the

pre-investment feasibility of an industrial water and effluent treatment plant.

b. IDLC Launches Discretionary Portfolio

Management Service

c. A view of the IDLC 5th Extra-Ordinary General

Meeting

d. A partial view of the 22nd Annual General

Meeting

e. Directors at 22nd Annual General Meeting

Eve

nt

Hig

hlig

hts

37

i. IDLC participates in BRAC Bank Five A side soccer tournament

j. 1st IDLC Victory Day Cup Cricket Tournament

K. IDLC Picnic 2008

f. LEIC signs agreement with five leading Bangladeshi furniture companies for arranging and funding a match-making mission to

Canada

g. IDLC Securities Limited Inaugurates it's first branch in Chittagong

h. IDLC Securities Limited opens DOHS Mohakhali, Dhaka Branch

f g

h i

j k

38

Conso

lidete

d P

erf

orm

ance o

f ID

LC

at

a G

lance 2003 2004 2005 2006 2007 Growth (%)

Financial Performance Lease and term loans executed 1,882 2,030 2,564 2,875 2,977 3.5 Housing finance disbursement 300 519 898 1,205 1,255 4.1 Short term finance portfolio 500 420 355 326 213 -34.6 Lease finance portfolio 4,160 4,174 4,711 5,001 4,571 -8.6 Housing finance assets 727 1,064 1,643 2,441 3,065 25.5 Total assets 5,920 6,788 8,800 11,170 14,424 29.1 Long term liabilities 4,283 4,274 6,605 8,099 11,076 36.7 Term deposit balance 1,737 2,760 4,487 5,610 8,092 44.2 Net current assets 391 365 (238) (192) 1,401 830.7 Operational Performance Operational revenue 702 859 1,008 1,291 2,000 54.9 Operational expenses 489 612 747 1,059 1,535 44.8 Financial expenses 388 418 536 816 1,126 37.9 General and administrative expenses 79 95 135 170 225 32.3 Profit before tax 213 247 265 236 475 100.9 Net profit after tax 113 134 153 157 303 92.9 Average effective tax rate 46.95 45.75 42.31 33.41 36.08 7.9 Financial Ratios Debt equity ratio 7.50 7.60 8.00 9.28 9.04 -2.6 Financial expenses coverage ratio 1.50 1.60 1.50 1.29 1.42 10.2 Current ratio (Times) 1.2:1 1.1:1 1.6:1 0.96:1 1.2:1 27.6 Return on total assets (%) 2.08 2.11 1.96 1.57 2.37 27.6 Non performing loan ratio 6.44 5.93 5.00 4.74 4.62 -2.5 Return on shareholders’ equity 17.80 18.80 19.00 17.45 27.59 58.1 Earnings per share* 56.50 67.00 76.30 78.63 151.66 92.9 Dividend per share (%) 30.00 35.00 37.50 38.33 40.00 4.4 Price earnings ratio (Times) 8.30 13.90 9.90 7.60 10.02 31.8 Dividend yield (%) 4.80 2.81 3.72 4.89 2.63 -46.1 Dividend payout ratio (%) 53.10 52.24 49.15 48.75 26.37 -45.9 Equity Statistics Number of shares 1,500,000 1,500,000 1,500,000 1,500,000 2,000,000 33.3 Year end market price per share (Tk) 625 1,245 1,007 784 1,519 93.7 Net asset value per share (Tk)* 334 378 426 476 624 31.1 Market capitalization (million) 937 1,867 1,510 1,176 3,038 158.3 Market value addition per share (Tk) 180 741 440 150 896 497.3 Shareholders’ equity (million) 667 756 851 952 1,247 30.1

*Prior years' number of shares has been adjusted to reflect bonus share issued in 2006

(Tk. in Million)

39

Value added Operating revenue Cost of borrowing Other income Provisions Operating expenses excluding staff costs and depreciation. Value added

Distribution of value addition

To Employees as remuneration

To Government as taxes To Shareholders as dividend (both cash and stock) Retained in the business for reinvestment : - as capital and revenue reserve - as depreciation

Value Added Statementfor the year ended December 31, 2007

The Value Added Statement shows the total worth created and how it was distributed to meet certain obligations and the portion retained for the continued operation and expansion of the Company.

%

100%

30%

21%

16%

33%27%6%

100%

2006Taka

1,238,104,292 (777,928,067) 460,176,225

3,336,210 463,512,435 (45,834,038) (52,711,167)

364,967,230

2006Taka

108,933,040

78,458,854

57,500,000

120,075,336 97,655,834 22,419,502

364,967,230

1542,369,917

2007Taka

1,922,061,541 (1,112,894,874

809,166,667 3,430,014

812,596,681 (136,418,203) (90,379,941) 585,798,537

2007Taka

134,756,910

168,132,848

80,000,000

202,908,779 172,437,371 30,471,408

585,798,537

1683,486,896

%

100%

%

23%

29%

14%

34%29%5%

100%

Employees Government Shareholders Retained in the business

2007 2006

Number of employees Value added per employee

40

Perf

orm

ance Indic

ato

rs

Taka

in m

illio

n

Taka

in m

illio

n

Taka

in m

illio

n303

157

Tak

a in

millio

n

% Taka

in m

illio

n

2.372.37

1.571.57

41

Taka

in m

illion

1,247

952

Tak

a

27.59

17.45

%Taka

in m

illio

n

Tim

es

10.02

%

9.049.28

Market price per share Asset value per share

Taka

624

334378 426 476

42

Chair

man's

Revi

ew

Anwarul HuqChairman

Dear Valued Shareholders,

I am delighted to welcome you all to the 23rd Annual General Meeting (AGM) of your Company, IDLC Finance Limited. This is the first AGM after the change of name from Industrial Development Leasing Company of Bangladesh Limited to IDLC Finance Limited. The new name now reflects the changed nature of your financial institution. IDLC has successfully completed 22 years of uninterrupted operations and I thank you for reposing so much trust and confidence in the Board and Management Team within this highly competitive financial services industry.

43

You are well aware that the leasing industry is facing tremendous competition, challenges and regulatory changes are affecting adversely on the business, Thus, we believe that continued diversification is the only way to survive, grow, be sustainable and become the best performing and most innovative financial solutions provider in the country while maintaining high quality growth of shareholders wealth. Taking this into consideration, IDLC, in 2007, has concentrated more on diversified investments. Accordingly, the financial institution's diversified business, real estate finance, term finance, car loans and merchant banking operation posted a substantial growth during the year under review. IDLC's fully owned subsidiary, IDLC Securities Limited witnessed its first full year of operations in 2007 and opened branches in the port city of Chittagong and at DOHS, Mohakhali, Dhaka. We plan to open at least two more branches in 2008. Formation of another fully owned subsidiary - asset management company, is in process.

The capital market in Bangladesh, is in no way mature, and has a lot of potential to develop and grow. In order to embody and realize such potential, we shall coordinate our forces, and hope that our merchant banking and securities brokerage operation will continue to contribute, substantially, to our profitability and growth in the forthcoming years.

I believe that success could be mapped out, if we venture into niche areas, pursuing untapped opportunities that are available, which would in effect give us a strategic advantage over our major competitors.

Steady growth and development of business has placed your Company in a strong position. The asset size of the Company at the year-end stands at Taka 14.4 billion, marking a healthy growth of 29.1% over the previous year. We continue to recieve encouraging response to our deposit mobilization efforts, and, at year-end, the balance of term deposits held by the Company was Taka 8.1 billion which is 44.2% higher over the previous year's balance. With a view to reduce funding cost and improve asset liability mismatch, issuance of Zero Coupon Bonds and Mortgage Backed Securities are well in progress.

During 2007, IDLC earned a consolidated net profit of Taka 303.3 million compared to previous year's Taka 157.3 million showing a tremendous growth of 92.9%. Earnings per share during the year under review were Taka 151.66 compared to previous year's Taka 78.63.

Your Company continues its prudential policy of building adequate provisions for doubtful accounts and future losses. We believe that this conservative provisioning policy will result in lower provisioning expectations for the future.

I would like to thank all our valued shareholders for the confidence and trust reposed in the Company. On behalf of the Board of Directors, I wish to pledge that through prudent and carefully planned strategies, we will continue to add value to shareholders' wealth and achieve our vision and mission and reinforce the values.

My thanks to our loyal customers, who continued to be with us despite strong pressure from our competitors.

Finally, I would like to convey my appreciation to the fellow directors for their generous cooperation and support during the year. I appreciate the hard work, dedication, sincerity and commitment the Company's human resources have shown for its development by launching innovative ideas, products and services.

Thank you, dear valued shareholders for your support and encouragement.

Anwarul HuqChairman

44

Dir

ecto

rs' R

eport

Anwarul HuqChairman

Anis A KhanCEO & Managing Director

Dear Shareholders,

The Board of Directors of IDLC Finance Limited is pleased to present the audited financial statements of the Company for the year ended December 31, 2007, Auditors' Report thereon along with economic overview, market status, Company's performance, and other matters in terms of Companies Act, 1994, Guidelines issued by Securities and Exchange Commission and Bangladesh Bank and Bangladesh Accounting Standards:

45Directors' Report

GLOBAL ECONOMY

Global economic growth slowed modestly in 2007, coming in at 5.2% after a strong 5.4% in 2006. Most of the slowdown was attributable to weaker growth in high-income countries. Growth in developing economies was a robust 7.8%, broadly unchanged from 2006. This strong performance in the developing countries has offset somewhat, the slowdown in U.S domestic demand, which started with the unwinding of the housing bubble early in 2006. During 2007, developing countries accounted for more than half the growth in world imports, contributing along with the depreciation of the dollar to strong net export for the United States and furthering the reduction in global imbalances.

In Asia, growth remains buoyant. Emerging countries including China, India, Brazil, Turkey and Russia played an important role in contributing to world growth in 2007. Developing Asia foresees an annual growth of 9.6 % in 2007, with particular contribution from China and India, which are expected to grow at 11.4% and 8.4%, respectively.

Global growth is projected at 4.8% in 2008, down from 5.2% in 2007. The growth projection of 2008 is subject to a number of potential destabilizing factors including the likelihood of oil prices continuing high, heightened volatility of international financial markets and exchange rate of major economies, high global food inflation, downturn in the housing market in major economies, especially in the US, and depressed growth outlook for Japan and the Euro area.

The projection for advanced economies has been reduced significantly. Projected growth in the United States in 2008 has been lowered to 1.5%, on a year to year basis, down from 2.2% in 2007. Growth in emerging market and developing economies is also expected to ease, moderating from 7.8% in 2007 to 6.9% in 2008. In China, growth is projected to decelerate from 11.4% to 10%.

STATE OF BANGLADESH ECONOMY

Bangladesh economy grew on an average at above 6.0%, in the last four years, up to fiscal 2006-2007. According to the estimate of the Bangladesh Bureau of Statistics, real GDP recorded a strong growth of 6.5% in 2006-2007, which is marginally lower than 6.6% recorded in 2005-2006. The growth is underpinned mainly by robust growth in services, strong remittance inflows, reasonable growth in exports and notable expansion in manufacturing activities, despite a challenging environment marked by high and volatile oil prices, phasing out of the MFA quota, labour unrest in the garments industry and confrontational political situation of the country in the first half of 2006-2007.

The industrial sector, which contributed about 29.8% of GDP, attained robust growth of 9.5% in 2006-2007 slightly lower than 9.7% in 2005-2006. The growth was mainly due to a continued improved performance in manufacturing sub sector, facilitated by strong and sustained growth in export oriented manufacturing activity and expansion in domestic demand. Overall services sector saw a growth of 6.7% in 2006-2007, higher than 6.4% recorded in 2005-2006, largely propelled by growth in the telecommunication sector, emergence of new TV channels and networks, increase in industrial output and trade related activities.

46 Directors' Report

The agricultural sector achieved a moderate growth of 3.2% in 2006-2007 following the post flood high growth of

4.9% in 2005-2006. The decline in growth is attributable to the set back in agricultural production due to shortage

of electricity, higher diesel prices, short supply of fertilizer and inefficient distribution system of agricultural inputs.

The rate of CPI inflation has been on the rise, and, on a point to point basis, hit a record 11.2% and for the first

time since independence. Inflation was on an uptrend during 2007, primarily due to rising import prices of metal,

food grains and some other essentials in the international market. This was accentuated by problems in the

domestic supply chain, political turmoil in the first half of 2006-2007, dislocation of market structure created by

anti-hoarding drive, crackdown on corrupt business houses and lower growth of crop production. Moreover,

increased domestic demand induced by high monetary and credit growth added to the uptrend in consumer

prices.

The country's foreign exchange reserves as at the end of 2007, shot up to US$ 5.5 billion, for the first time in the

nation's history, compared to US$ 3.9 billion, in the previous year, mainly due to robust growth of remittances

from Non Resident Bangladeshis (NRBs). The remittances surpassed all previous records with US$ 6.5 billion

coming in during 2007 compared to US$ 5.4 billion in 2006, showing an impressive growth of 20.4%.

In the National Budget 2007, the target GDP growth rate for 2007-2008 was set at 7.0%, sustaining at or above

7.0% through 2010. This is to be aided by improved macro economic stability and intrinsic resilience, buoyancy in

the overall agricultural sector growth, steady growth in the manufacturing sector, competitive business

environment, sustained improvements in the investment climate and ongoing implementation of economic reform

programs. However, the Central Bank revised the projection downwards to 6.0% to 6.2% in 2007-2008

considering recent global and domestic developments including natural calamities, temporary disruption in

domestic production and adverse price developments in the international market, which have negatively affected

the growth performance of the economy.

Despite the adverse impact of the floods, Cyclone "Sidr" and the risk of rising inflation currently existing in the

economy, the near term economic outlook of Bangladesh remains favourable mainly because of the potential of

strong recovery by all economic sectors.

However, rising inflationary pressure, sustained high global oil and commodity prices, underpricing of energy

products, infrastructural constraints such as power, port and transportation, probable adverse effect in the ready-

made garments sector from 2008, onwards, due to the expiry of restrictions on China, are major concerns for the

country. , Restoring business confidence for strengthening private sector investment activities, political

developments and outcome of the next general election and possible slow progress in the structural reforms are

other concerns and pose downside risk for the coming years.

FINANCIAL SECTOR SCENARIO

Bangladesh Bank announced the new monetary policy for the January-June period of the current fiscal year

2007-2008, aiming to achieve maximum growth through expansion of credit to real sectors and by keeping

inflationary pressure under control. The new policy aims at bringing about a quantitative change and a perceptible

strategic shift in monetary policy formulation, and conduct to allow a greater scope for supporting growth-

enhancing policies in line with the emerging developments and requirements of the economy.

Despite a number of measures taken by the Government to reduce classified loans, the default loans in the

banking sector showed an upward trend as classified loans stood higher at the end of June 2007, compared to

December 2006. Classified loans as at the end of June, 2007 stood at Tk. 223.02 billion, which is 10.96% of the

total outstanding loans. Classified loans as at the end of December were Tk. 200.98 billion.

47Directors' Report

However, bad debts of around Tk. 120.31 billion in the country's banking sector have been written off from regular books of accounts of the banks, up to June 2007, with NCBs taking the lead by writing off Tk. 42.8 billion.

Outstanding bank credit during 2006-2007 rose by 14.7% to Tk. 1,651 billion as against an increase of 20.2% in 2005-2006. However, bank deposits during the same period increased by 16.5% to Tk. 1,970 billion against 18.5% increase in 2005-2006.

With a view to strengthening the capital base of banks and prepare them for the implementation of Basel II Accord, it has been decided by the Central Bank that banks shall maintain capital to risk weighted assets ration at 10% at the minimum with core capital not less than 5%. Moreover, Bangladesh Bank has instructed the commercial banks to raise minimum core capital to TK 2.0 billion from the existing minimum of Tk. 1.0 billion by June 2009. The banks will have to make up for 50% of any capital shortfall by June 2008 and the rest by June 2009.

In the budget for fiscal year 2007-2008, amendment has been made to the Third Schedule of Income Tax Ordinance, 1984 withdrawing depreciation allowance for the leasing industry, which it has been enjoying for the last twenty two years ever since its inception. This withdrawal of depreciation allowance is going to affect the cash flow as well as profitability of the financial institutions, which has so far been growing at a steady clip of 30% over the past few years.

CAPITAL MARKET SCENARIO

After a slow market, mixed with both bullish and bearish trend in 2006, the capital market experienced upward trend in 2007. The year 2007 was most hectic for the country's stock market since the 'stock market bubble' in 1996. All the indicators such as, general index, market capitalization and turnover significantly improved in 2007.

The DSE General Index rose to record levels, propelled by regained investors' confidence after the Caretaker Government assumed power in January 2007. Calm political atmosphere and promising corporate performance contributed to the restoration of investor confidence. Starting from 1583 in January 2007, DSE General Index reached ten year's high of 3,093 by November 07. 15 companies including 14 new one floated IPO worth Tk. 4.96 billion in 2007. Marketcapitalization increased from Tk 311 billion to Tk. 742 billion, a 138% growth, which makes it 16% of GDP from that of 6% in 2006. Average daily turnover increased from Tk. 0.45 billion in 2006 to Tk. 1.4 billion in 2007. However, market has gone through short and medium term recession quite a few times, largely due to withdrawal of netting facility and restriction on loan disbursement of merchant banks by the Securities and Exchange Commission.

Though this market surge seems undue, overall market Price Earning ratio (P/E) should be much lower in December 31, 2007 if equity return of 2007 is considered. Identification of Bangladesh as next investment frontier by world-renowned investment banks and prospects of higher equity return both in South Asia and Bangladesh, keeps the hope for sustainable growth in coming years.


BUSINESS ACTIVITY

We believe that proper and balanced diversification of products and services among different sectors is the only way to achieve our vision and ensure sustained and balanced growth. Keeping this in view, we have, in 2007, concentrated our investment in diversified products and services.

Your Company's total investment portfolio as on December 31, 2007 stood at Tk. 12,144 million, which is 18% higher than previous year. Out of the total portfolio, lease, term loan, real estate finance and margin loan respectively represent 34%, 18%, 25%, and 11.4% of the total portfolio.

IDLC also maintains a well diversified investment portfolio in the major sectors with highest allocation to services sector at 10.29%, followed by food and beverages sector at 9.75%, textiles at 8.59%, financial services at 8.43%, transport at 7.18%, apparel and accessories at 6.88%, building and construction at 5.41%, packaging 5.25%, agro based industry 5.17%, and so on. Our balanced diversification of investment portfolio helps us mitigate economic and sectoral risks.

OPERATIONAL PERFORMANCE OF IDLC DURING 2007

Your financial institution has completed its most successful year in 2007, despite an initial setback due to political uncertainty and overall economic slowdown. There was a marked increase in business confidence among customers during the year.

As a part of business expansion, during 2007, IDLC's fully owned subsidiary, IDLC Securities Ltd. has opened branches in Chittagong and DOHS Mohakhali, in Dhaka, and we plan to open at least two more branches in 2008. The Company's diversified operations and subsidiaries saw a hefty growth during the year.

SMEs in Bangladesh have been making a significant contribution to the country's economy. However, there is large gap between their needs and access to reasonably priced funds. Under this backdrop, we have taken an initiative to increase investment in this segment, in a structured manner, and created a focused and separate SME Division to cater to the financing needs to small and medium sized business enterprises. IDLC's SME focused branch at Bogra has strengthened its financing activities in this growing sector in the northern region of the country.

Sectoral Exposure 2007

49Directors' Report

IDLC's consolidated operating result during 2007 is summarized below:(Tk. in million)

2006 2007 Growth %

Operating revenue 1,238 1,764 42.5

Operating expenses 1,013 1,351 33.4

Operating profit from merchant banking operation 6.7 51.4 667.2

Total operating profit 231.6 464.9 100.7

Profit before income tax 236.1 474.5 101.0

Net profit after income tax 157.3 303.3 92.8

Earnings per share 78.63 151.66 92.9

During the year under report, the Company has deposited Tk. 232 million to the Government Exchequer as corporate income tax, withholding tax and VAT.

Lease and Term Loan

Amid intense and increasing competition amongst the financial institutions as well as the commercial banks, IDLC maintained its leadership position in the market. During 2007, your Company executed Tk. 2,977 million in leases and term loans, compared to previous year's Tk. 2,875 million. The lease and term loans portfolio at the end of the year saw a marginal growth of 4.08% over previous year. This year we have concentrated more on quality portfolio rather than volume achievement. With the creation of a separate SME Division, the financial institution expects to continue its drive to diversify its client base, maintain portfolio quality and improve service quality, which, we believe, will enable us to maintain a sustainable growth in this operation.

Real Estate Finance

Although the real estate and housing industry experienced a setback in 2007, with drastic fall in sales, IDLC's housing finance operation witnessed a marginal growth of 4.0% in disbursements. However, revenue saw a hefty growth of 42.7%. The housing finance assets as at the close of the year stood at Tk. 3,065 million, 25.5% higher than the previous year. We believe that this operation will continue to grow with increasing retail customer base in the years ahead.

Taka in million Taka in million


Car Loans

During the year under report, your Company disbursed Tk. 177 million, a marginal 3.5% higher than the previous year's disbursement of Tk. 171 million. This operation has, however, earned revenue of Tk. 44.3 million during the period, which is 79.3% higher than previous year. This operation is facing enormous competitions, with commercial banks offering lower rates and showing aggressive operation, in this market with strong marketing team and branch network. However, we have mounted a strong campaign and are optimistic that this operation will disburse expected volumes and earn reasonable revenue in the future.

Capital Market Operation

During 2007, IDLC's Merchant Banking Operation earned Tk 235 million revenue which is a robust 342% higher than the previous year. The operation has earned an operating profit of Tk. 51.4 million, compared to last year's

Tk. 6.7 mil l ion. We hope that this operation wil l earn increasing revenue in the years ahead and will take a stronger position in the market. At the end of December 2007, total portfolio value at cost was Tk. 3,320 million and balance of margin loan was Tk. 1,387 million.

Moreover, Merchant banking Operation earned BDT 134 mill ion in capital gains during 2007 through trading of securities in the secondary market.

Operation of Local Enterprise Investment Centre (LEIC)

The Local Enterprise Investment Centre (LEIC) is a pilot project of the Canadian Government, which is managed by IDLC Finance Ltd and funded by Canadian International Development Agency (CIDA). The Centre is working for the development of local enterprises, particularly the small and medium enterprises (SME), through creating joint ventures or other form of long-term partnerships, which would allow the SMEs to have access to capital, new technology, new products or processes and international market.

In 2007, LEIC made initial contacts with four hundred local SMEs across a range of sectors and worked closely with fifty-one new SMEs as prospective clients for the Centre's support. Eleven seminars, workshops, and focus group discussions were organised on different topics, jointly, with trade bodies and the Board of Investment. Four foreign companies and two large local companies signed Memoranda of Understanding (for developing long-term alliance) with their local SME counterparts - where LEIC is helping the SMEs to conduct feasibility studies and would intervene in the implementation phase. Through LEIC contribution, it is expected that at least fourteen SMEs will be developed, six new long-term business-to-business partnerships will be formed and about fifteen hundred jobs will be created.

TREASURY OPERATIONS

Our drive to reduce funding costs, diversify funding sources and diminish reliance on conventional sources continued to witness significant progress in 2007. IDLC's deposit base saw significant growth, both in the institutional and retail segments with the products proving to be very popular and attractive to the customers.

Taka in million

Taka in million

51Directors' Report

In 2007, IDLC's deposit base has achieved substantial growth. As on December 31, 2007, IDLC's aggregate term deposit amount was Tk. 8,092 million which is 44% higher than that of the previous year. These deposits have contributed to 73% of IDLC's funding portfolio and 44% of the deposits are from retail sources. This growth in deposits has helped us to achieve further disintermediation.

The substantial growth in deposits has contributed to reduction in cost of funds, while asset-liability mismatch has increased. To address this mismatch, your Company has intensified its efforts for raising sizable amount of funds through issuance of privately placed bonds of longer tenor. We have already floated Asset-backed Securitized Zero Coupon Bonds of BDT 275.0 million. Further issuances are in the pipeline, which we believe, will boost our efforts to lessen asset-liability mismatch, diversify our funding basket and reduce overall funding cost. We have also negotiated fresh credit lines with a number of major banks.

IDLC is actively participating in the Small Enterprise Refinancing Schemes and Women Entrepreneurs Schemes of Bangladesh Bank, funded by IDA and ADB. We are regularly submitting projects against these schemes and receiving reimbursements. IDLC has also become eligible to participate in 'Refinance Scheme in Housing Sector' of Bangladesh Bank. The Scheme caters to the housing finance needs of the middle-income group of our country.

SUBSIDIARY OPERATIONS

I.Cons Limited

I.Cons Limited, a wholly owned subsidiary Company of IDLC, has been providing IT services to its sister concerns and affiliates as well as other financial institutions in the industry. The IT services provided by the company includes: Software Application Development, Web Solutions, and, Advisory Services. The company earned a profit of Tk. 1.6 million during the year ended on December 31, 2007

IDLC Securities Limited

IDLC Securities Limited (IDLCSL), another wholly owned subsidiary of IDLC, started its operation in September 2006. The main object of the company is to act as member of stock exchanges, the central depository system (CDS) and carry out the business of broker, jobbers or dealers in stocks, shares, securities, etc,.

IDLCSL is a corporate member of both the Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited and a full service Depository Participant of Central Depository of Bangladesh.

This is the second year of operation of the Company and during 2007; the company earned a net profit of Tk. 49.32 million. We expect that these companies will take strong position in the market, in the future, and continue to contribute significantly to the profitability of your company.

HUMAN RESOURCES MANAGEMENT

IDLC continued to implement appropriate human resource management policies and practices to develop its employees, and to ensure their optimum contribution towards the achievement of corporate goals. At IDLC, we believe that our Human Resources (HR) give the organization a significant competitive edge, in terms of knowledge and experience. Keeping this in mind, we continued our policy of recruiting best people and implementing programs to develop and retain high quality human resources.

Funding mix


Ethical Standards

At IDLC, we believe in the importance of adherence to the highest standards of ethical conduct as a key to business success and make every effort to maintain full compliance with laws, rules and regulations that governs our business. We have a set of Code of Ethics and Business Conduct for our employees, who are required to read and sign it every year.

Training

While maintaining high recruitment standards, IDLC also provides need based internal and external training to its staff, with a view to encouraging human resources development, as well as meet organizational needs to face future challenges. As part of IDLC's Human Resource development program, a large number of employees were sent to different training programs, which included both managerial development and technical modules. During the year 2007, one hundred fifty (150) employees were trained locally while thirty four (34) employees were sent to overseas programs.

Employee Health & Safety

Employee health and safety are our main priorities. Keeping this in mind, IDLC regularly arranges routine health check-up for employees. The Company provides hospitalization insurance coverage to ensure medical security of its staff. In addition, the Company has group life insurance scheme for its permanent staff to cover the unforeseen risk of death.

Staff Strength

The staff strength of the Company as on December 31, 2007 and for the previous two years is summarized below:

2007 2006 2005

Core management staff 10 4 5

Management staff 32 31 30

Executive officers 48 43 22

Support staff 78 76 70

Total 168 154 127

53Directors' Report

Non-Discriminatory Policy And Equal Opportunities Employer

IDLC always respects employee's right and dignity. We always practice equal treatment to all existing and potential employees irrespective of their race, religion, age and gender. It is your Company's policy to ensure equal opportunity in recruitment, selection, promotion, development, training and rewards.

INFORMATION TECHNOLOGY

IDLC has highly experienced and trained professionals working on maintaining and developing the Company's IT infrastructure. The software professionals are constantly innovating and writing in-house programs to meet the needs of the company's ever increasing and diversified product and services industry. The Company's branch and office network now embraces eleven locations, and the IT Division has successfully implemented a Wide Area Network (WAN) to connect all of the premises on real-time basis, thereby, providing seamless connectivity and prompt customer services.

Information & Communication technology (ICT) has become indispensable for financial institutions in ensuring smooth operation and providing efficient service. Your Company has recognized this fact and the Board of Directors have adopted a comprehensive ICT Policy for your Company. IDLC is one of the very few organizations that have embraced ICT as the key to achieving excellence in its various aspects of operations.

RISK MANAGEMENT

Risk is an integral part of financing business. 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. The Company has different committees for risk management. The Credit Evaluation Committee (CEC) and Asset and Liability Committee (ALCO) regularly meet to review the market, credit and liquidity related factors and recommend and implement appropriate measures to counter associated risks. Appropriate internal control measures are also in place to address operational risks.

An independent Credit Risk Department is in place, at IDLC, to scrutinize projects from a risk-weighted point of view and assist the management in creating a high quality credit portfolio and maximize returns from risk assets. IDLC has also established an Operational Risk Management Department to address operational risk and to frame and implement policies to encounter such risks.

A summary of business risks facing the Company and steps taken to effectively manage and mitigate such risks are stated in a separate statement on risk management in page no. 23.

FUTURE PROSPECTS

Despite constantly increasing competition in the market with opening of leasing divisions by commercial banks, we will put in strenuous efforts to achieve the business volumes targeted by all the departments, as well as realise our corporate objectives. Innovative and relentless marketing drive will continue to attain quality asset growth, while maintaining and improving existing portfolio quality.

IDLC has succeeded immensely in its diversification efforts resulting in growth in income steams from an array of business segments. Our focus in 2008, and in the near future, will be in further growing our SME business through expansion of branch network across the country and opening dedicated SME desk in all existing branches. We shall also take extra efforts to offer loans to women entrepreneurs.

The Corporate Division has been affected somewhat by the change in depreciation policy by the Government. The Division is now concentrating in offering term loans to its customers. Plans are afoot to introduce operating lease as a new product to counter the loss of business in the financial lease segment, our mainstay since inception of the company.

The Personal Finance Division will build on its successes, until date, which have been in mortgages, auto loans and deposit mobilization. Consumer loans have just been launched to offer IDLC customers one-stop services under one roof. We have plans to open a branch each in Old Dhaka and Sylhet in 2008 to cater to the ever increasing needs of our personal segment customers.


IDLC's Merchant Banking Division has performed very well in 2007. We shall continue our efforts to increase the customer base, both in the individual and institutional segments. We shall endeavour to encourage our customers to get themselves listed on the bourses, thereby bringing in quality scrips into our burgeoning capital market. As the financial institutions are facing immense competition, the Company will try to concentrate more on capital market operation and fee generating activity and diversify its mode of investment.

With all these expansion and diversification efforts, IDLC aims to be a truly specialized financial institution focusing on SME financing and investment banking operation, while maintaining its business share in corporate financing.

CREDIT RATING

Your Company has been assigned "AA2" (Double A Two)) rating in the long term and ST- 3 rating in the short term by Credit Rating Agency of Bangladesh Limited (CRAB). This has been done in consideration of IDLC's strong ownership structure and corporate governance practice, experienced management team, improving income mix and strong retail deposit base.

Financial Institutions rated in this category are considered to be very strong, characterized by very good financials, healthy and sustainable franchise and a first rate operating environment. The level, growth and quality of earnings, over the medium term, are of very high grade and changes in business/economic circumstances, as may be envisaged, may very slightly impair the underlying fundamentals.

CORPORATE AND FINANCIAL REPORTING FRAMEWORK

The Directors, in accordance with SEC Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006; confirm compliance with the financial reporting framework for the following:

a) The financial statements prepared by the management of IDLC, present fairly its state of affairs, the results of

its operations, cash flows and changes in equity;

b) Proper books and accounts of the Company have been maintained;

c) Appropriate accounting policies have been consistently applied, except for the changes disclosed in the

financial statements in preparation of financial statements and accounting estimates are based on reasonable

and prudent judgement

d) International Accounting Standards, as applicable in Bangladesh, have been followed in preparation of financial

statements and any departure therefrom has been adequately disclosed

e) The system of internal control is sound in design and has been effectively implemented and monitored;

f) There are no significant doubts upon the Company's ability to continue as a going concern;

KEY OPERATING AND FINANCIAL DATA

Key operating and financial information of last five years and reasons of significant deviations, if any, as per requirement of SEC Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006, are presented in the page no. 38 as Key Operating and Financial highlights.

Taka in million

Taka

in m

illion

55Directors' Report

SHAREHOLDING PATTERN

Shareholding patterns of the Company as at the end of the year 2007 is shown in Annexure I of this report.

BOARD MEETINGS AND ATTENDANCE BY THE DIRTECTORS

During the year ended on December 31, 2007 at total of six (6) Board Meetings were held and attendance by the Directors are summarized in Annexure II of this report.

PROPOSED DIVIDEND AND APPROPRIATION OF PROFIT

The financial results of and recommended appropriations for the year 2007 are summarized below:

2007 Taka in million

Profit after tax 252.44 Retained earnings brought forward 19.52

Profit available for appropriation 271.96

Directors' recommendation for appropriation: Cash Dividend @ 15% (Tk. 15 per share) 30.00 Stock dividend @25% (one share for every four shares held) 50.00 Transfer to General Reserve 175.00

Balance profit carried forward 16.96

DIRECTORS

As per Article 116 of the Articles of Association of the Company, the following three Directors will retire from the office of the Company in the 23rd Annual General Meeting:

- Mr. Yongbok Jo, nominated by Korea Development Financing Company- Mr. Habibur Rahman Mollah, nominated by Transcom Group- Mr. A.K.M. Shahidul Haque, nominated by Mercantile Bank Limited

They are also eligible for re-election.

AUDITORS

The Auditors of the Company, M/S A. Qasem & Co., Chartered Accountants, will retire in the 23rd Annual General Meeting and is not eligible for reappointment as they are the Auditors of the Company for last consecutive three years, as per stipulation under the Financial Institutions Act, 1993. On the basis of the proposal of the Board's Audit Committee, the Board recommends to appoint Rahman Rahman Huq, Chartered Accountants, a member firm of KPMG, as the Auditor of the Company for the year 2008 at a remuneration of Tk. 200,000.

STATUS OF COMPLIANCE

Status of compliance with the conditions imposed by the Securities and Exchange Commission's Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006 is enclosed as Annexure III.

On behalf of the Board of Directors,

Anwarul Huq Anis A Khan

Chairman CEO & Managing Director

56

Annexure-I

Pattern of Shareholdings as on December 31, 2007

Particulars

Shares Held By :

Subsidiaries and other related parties

Directors, their spouses and minor children

Chief Executive Officer (CEO) and his spouse and minor children

Chief Financial Officer (CFO) and his spouse and minor children

Company Secretary (CS) and his spouse and minor children

Head of Internal Audit (HIA) and his spouse and minor children

Executives (Top five person other than CEO, CFO, CS, HIA):

1. Arif Khan2. M. Jamal Uddin3. Shaikh Kamruzzaman4. Mir Tariquzzaman5. Bilquis Jahan

Shareholders Holding 10% or more voting right:

Korea Development Financing Corporation (KDFC)

Kookmin Bank of South Korea

Total

No. Share holding

Nil

Nil

133

Nil

Nil

Nil

Nil

NilNilNil53

400,000

200,000

600,186

Percentage

0.0067%

0.0027%

20.0%

10.0%

30.01%

Remark

Directors' Report

Name of Director

Mr. Anwarul Huq

Mr. Habibur Rahman Mollah

Mr. Rubel Aziz

Mr. Ahmed Rajeeb Samdani

Mr. Elias Ahmed

Mr. Shah Md. Nurul Alam

Mr. A.K.M. Shahidul Haque

Mr. Yongbok Jo

Mr. Lee Dong Jue

(Ms. Jeong Won Byun acts as

Alternate Director)

Mr. Choong-Sun Park

(Ms. Jeong Won Byun acts as

Alternate Director)

Mr. Monoweruddin Ahmed

Nominated by

Reliance Insurance Ltd.

Transcom Group

The City Bank Ltd.

The City Bank Ltd.Sadharan Bima Corporation (SBC)

Mercantile Bank Ltd.

Mercantile Bank Ltd.Korea Development FinancingCorporation (KDFC)

Korea Development

Financing Corporation

(KDFC)

Kookmin Bank, South

Korea

Independent Director

Total Meetings

06

06

06

06

06

04*

02**

06

06

06

06

Attended

06

06

01

04

06

03

02

06

05

05

05

%

100

100

17

67

100

75

100

100

83

83

83

Annexure-ll

Attendance by the Directors at theBoard Meetings during the year 2007

* Mr. Shah Md. Nurul Alam resigned on November 13, 2007

** Mr. A.K.M. Shahidul Haque was appointed as Director in place of Mr. Shah Md. Nurul Alam on November 13, 2007

Leave of absence was granted to directors who could not attend some of the Board Meetings, due to business preoccupations both at home and abroad.

Ms. Jeong Won Byun acts as Alternate Director for Mr. Lee Dong Jue and Mr. Choong-Sun Park as per Articles of Association of the Company

57Directors' Report


Condition No.

1.1

1.2(i)

1.3

1.4

1.4(a)

1.4(b)

1.4(c)

1.4(d)

1.4(e)

1.4(f)

1.4(g)

1.4(h)

1.4(i)

1.4(j)

1.4(k)

2.1

Title

Board's Size: Board members should not

be less than 5 (Five) and more than 20

(Twenty)

Appointment of Independent Director: At least 1/10th

Chairman and Chief Executive be different persons

Directors report to Shareholders to include declarations on:

Fairness of financial Statements

Maintenance of proper books of accounts

Adaptation and consistent application of appropriate accounting policies and estimates

Compliance with Bangladesh Accounting Standards (BAS)

Soundness and efficiency of Internal Control System

Ability of the company to continue as Going Concern

Significant deviation in operating results from last year

Presentation of key operating and financial data for at least last three years

Declaration of Dividend

Details of Board Meeting and attendance by Directors

Shareholding Pattern

Appointment of CFO, Head of Internal Audit and Company Secretary and defining of their respective roles, responsibilities and duties

Compliance Status

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Explanation for non compliance with the condition

Annexure-lll

Status of compliance with the conditions imposed by the Securities and Exchange Commission's Notification No. SEC/CMRRCD/2006-158/Admin/02-08 dated February 20, 2006

59Directors' Report

Condition No.

2.2

3.00

3.1(i)

3.1(ii)

3.1(iii)

3.2(i)

3.2(ii)

3.3.1(i)

3.3.1(ii)(a)

3.3.1(ii)(b)

3.3.1(ii)(c)

3.3.1(ii)(d)

3.3.2

3.4

4.00

4.00(i)

4.00(ii)

4.00(iii)

4.00(iv)

4.00(v)

4.00(vi)

4.00(vii)

Title

Attendance of CFO and the company Secretary at Board of Directors meeting

Audit Committee:

Formation of Committee

Constitution of Committee with Board members including one Independent Director

Filling of Casual Vacancy in the Audit Committee

Selection of the Chairman of the Audit Committee

Professional Qualification and experience of the Chairman of the Audit Committee

Reporting on the activities of the Audit Committee to the Board

Reporting of Conflict of Interest to the Board of Directors

Reporting of any fraud or irregularity or material defect in the internal control system to the Board of Directors

Reporting of non-compliance of laws to the Board of Directors

Reporting of any other matter to the Board of Directors

Reporting to the SEC by the Committee

Reporting of activities to the Shareholders and General Investors

External/Statutory Auditors:

Non-engagement in appraisal or valuation

Non-engagement in designing of Financial Information System

Non-engagement in Book-Keeping

Non-engagement in Broker-dealer service

Non-engagement in Actuarial Services

Non-engagement in Internal Audit

Non-engagement in any other services

Compliance Status

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Not applicable

Complied

Not applicable

Not applicable

Not applicable

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Explanation for non compliance with the condition

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AvBwWGjwm-i A_©vq‡b cÖwZwôZ GKwU c¨v‡KwRs cÖwZôvb AvBwWGjwm-i A_©vq‡b Avg`vwbK…Z †gwkbvwi


2007 mv‡ji Rb¨ †Kv¤•vbx Ges Gi mn‡hvMx‡ì Kbmwj‡W‡UW Acv‡iwUs †iRvë-Gi GKwU mvims‡¶c wb‡P †`qv nj:

wgwjqb UvKv 2006 2007 cÖe„w× %

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2007 mv‡j †Kv¤•vbx AvqKi, Dr‡m KZ©bK…Z Ki Ges f¨vU eve` †gvU 232 wgwjqb UvKv miKvwi †KvlvMv‡i Rgv w`‡q‡Q|

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cwiPvjK‡ì cÖwZ‡e`b 65

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66 cwiPvjK‡ì cÖwZ‡e`b

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L) †Kv¤•vbxi wnmve-wbKvk h_vh_fv‡e msi¶Y Kiv

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cwiPvjK‡ì cÖwZ‡e`b 69

cÖ¯vweZ jf¨vsk Ges djvdj eÈb wgwjqb UvKv 2007

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eÈb‡hvM¨ gybvdv 271.96

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70

Audit

ors

' R

eport

and

Audit

ed F

inancia

l Sta

tem

ents Auditors’ Report to the Shareholders of


We have audited the accompanying consolidated Balance Sheet of IDLC Finance Limited and its subsidiaries as of December 31, 2007 and the related consolidated Profit and Loss Account,

consolidated Cash Flow Statement, consolidated Statement of Changes in Shareholders' Equity

and notes to the consolidated Financial Statements for the year then ended. The preparation of

these consolidated financial statements is the responsibility of the Company’s management. Our

responsibility is to express an independent opinion on these consolidated financial statements

based on our audit. The financial statements of its subsidiaries have been audited by another

auditors. In addition, we have performed audit procedure for consolidation purpose, based on the

financial statements of the subsidiaries.

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 consolidated financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated

financial statements. An audit also includes assessing the accounting principles used and

significant estimates made by management, as well as evaluating the overall consolidated financial

statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion:

In our opinion, the consolidated financial statements along with notes thereon prepared in

accordance with Bangladesh Accounting Standards (BAS), give a true and fair view of the state of

the company’s affairs as at December 31, 2007 and of the results of its operations and its 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.

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;

71

b) in our opinion, proper books of accounts as required by law have been kept by the Company so far as it appeared from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us ;

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 purpose of Company's operation;

e) the financial position of the Company at December 31, 2007 and the profit for the year then ended have been properly reflected in the consolidated financial statements and the consolidated financial statements have been prepared in accordance with generally accepted accounting principles;

f) the consolidated financial statements have been drawn up in conformity with the 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 classification, provisioning and suspension of interest;

i) the records and statements submitted by 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; and

k) the Company has complied with the relevant laws pertaining to reserves and maintenance of liquid assets.

(A. Qasem & Co.)

Dated: February 19, 2008 Chartered Accountants

72

IDLC Finance Limited and its SubsidiariesConsolidated Balance SheetAs at December 31, 2007

SOURCES OF FUNDS Shareholders' fund

Share capital Share premium

Reserves and surplus General reserves Dividend equalisation reserves Proposed dividend: Stock dividend Cash dividend

Retained earnings Shareholders' equity Minority interest Long term loans - net of current maturity

Secured long term loans Unsecured long term loans

Long term liability-net of current maturity

Refundable deposits Term deposits Liabilities under finance lease

Deferred liability-employee gratuity Deferred tax liability/(asset) Portfolio investors' fund Fund from CIDA for LEIC project Interest suspense account APPLICATION OF FUNDS Property, plant and equipment (at cost less depreciation) Intangible assets (at cost less amortisation) Investment in non marketable shares Membership of stock exchanges

Notes

34

5

6

789

10111213

14 (a)

15(a)

1718

2007

200,000,000 3,750,000

1,043,689,454 847,500,000 46,500,000

50,000,00042,499,975

57,189,479

1,247,439,454

550

1,585,071,264 737,261,320 847,809,944

5,171,502,569 309,874,627

4,855,272,911 6,355,031

27,522,973 (17,867,152) 39,230,069 54,971,540 44,635,963

8,152,507,230

176,531,034

2,543,680

143,076,500 18,676,000

2006

150,000,000 3,750,000

797,864,318 672,500,000 46,500,000

50,000,000 7,500,000

21,364,318

951,614,318

291

1,412,978,180 821,051,175 591,927,005

3,624,574,978 255,275,228

3,366,054,353 3,245,397

16,253,399 -

7,721,764 18,933,213 55,268,720

6,087,344,863

169,486,777

3,214,166

92,175,000 18,676,000

Amounts in Taka

73

Lease receivables Gross lease rentals receivable - net of current maturity Unearned lease income - net of current maturity Advance for leases

Direct finance-net of current maturity

Long term finance Real estate finance Car loans

Provision for doubtful accounts and future losses Current assets

Accounts receivable Advances, deposits and prepayments Investment in marketable securities

Margin loan to portfolio investors Short term finance Current maturity of gross lease receivables Current maturity of unearned lease income Current maturity of direct finance Cash and cash equivalents Less: Current liabilities and provisions

Current maturity of long term loans, deposits and advances Short term loans

Payable and accrued expenses Provision for current taxation Unpaid dividend Net surplus/(deficit) in current assets

Notes

192021

222324

25

26(a)27(a)28113019

3132(a)

3334

35(a)36

2007

2,743,920,183 3,378,961,115 (657,187,697)

22,146,765

4,279,971,531 1,356,014,263 2,674,309,427

249,647,841

(613,457,344)

7,673,003,574 689,910,165 272,095,307 242,966,768

1,387,355,680 213,114,268

2,384,106,173 (556,703,525)

1,356,297,410 1,683,861,328

6,271,757,928 4,224,858,577

292,846,083 1,017,735,377

734,902,820 1,415,071

1,401,245,646

8,152,507,230

2006

3,115,454,290 3,878,428,938 (820,957,606)

57,982,958

3,390,123,848 1,091,177,101 2,114,873,194

184,073,553

(510,031,098)

4,890,771,762 422,785,222 126,417,183 132,035,741 568,761,889 325,550,498

2,437,781,418 (551,823,032) 830,397,992 598,864,851

5,082,525,882 3,034,922,695

758,361,920 743,563,901 544,293,215

1,384,151

(191,754,120)

6,087,344,863

Amounts in Taka

Chairman CEO & Managing Director Company Secretary

Signed in terms of our separate report of even date annexed

(A. Qasem & Co.)


The annexed notes 1 to 53 form an integral part of these financial statements.

74

IDLC Finance LimitedBalance SheetAs at December 31, 2007

SOURCES OF FUNDS Shareholders' fund

Share capital Share premium

Reserves and surplus General reserves Dividend equalisation reserves Proposed dividend:

Stock dividend Cash dividend

Retained earnings Shareholders' equity

Long term loans - net of current maturity Secured long term loans Unsecured long term loans

Long term liability-net of current maturity

Refundable deposits Term deposits

Liabilities under finance lease Deferred liability-employee gratuity Deferred tax liability/(asset) Portfolio investors' fund Fund from CIDA for LEIC project Interest suspense account APPLICATION OF FUNDS Property, plant and equipment (at cost less depreciation) Intangible assets (at cost less amortisation) Investment in subsidiary companies Investment in non marketable shares Lease receivables

Gross lease rentals receivable - net of current maturity Unearned lease income - net of current maturity Advance for leases

Notes

34

5

6

789

10111213

14

15

1617

192021

2007

200,000,000 3,750,000

990,957,226

847,500,000 46,500,000

50,000,00030,000,000

16,957,226

1,194,707,226

1,585,071,264 737,261,320 847,809,944

5,171,502,569 309,874,627

4,855,272,911 6,355,031

27,522,973 (17,867,152) 39,230,069 54,971,540 44,635,963

8,099,774,452

163,996,885

2,325,334

50,999,800 143,076,500

2,743,920,183 3,378,961,115

(657,187,697) 22,146,765

2006

150,000,000 3,750,000

796,019,855

672,500,000 46,500,000

50,000,000 7,500,000

19,519,855

949,769,855

1,412,978,180 821,051,175 591,927,005

3,624,574,978 255,275,228

3,366,054,353 3,245,397

16,253,399 -

7,721,764 18,933,213 55,268,720

6,085,500,109

166,428,103

2,947,496

50,999,800 92,175,000

3,115,454,290 3,878,428,938

(820,957,606) 57,982,958

Amounts in Taka

75

Direct Finance-net of current maturity

Long term finance Real estate finance Car loans

Provision for doubtful accounts and future losses Current assets

Accounts receivable Advances, deposits and prepayments Investment in marketable securities Inter-company receivables Margin loan to portfolio investors Short term finance Current maturity of gross lease receivables Current maturity of unearned lease income Current maturity of direct finance Cash and cash equivalents

Less: Current liabilities and provisions

Current maturity of long term loans, deposits and advances

Short term loans

Payable and accrued expenses

Provision for current taxation

Inter-company payables

Unpaid dividend Net surplus/(deficit) in current assets

Notes

222324

25

26272829113019203132

3334353637

2007

4,279,971,531 1,356,014,263 2,674,309,427

249,647,841

(613,457,344)

7,360,051,247 550,139,592 268,861,018 242,966,768

4,440,676 1,387,355,680

213,114,268 2,384,106,173 (556,703,525)

1,356,297,410 1,509,473,187

6,031,109,684 4,224,858,577

292,846,083 776,519,153 734,902,820

567,980 1,415,071

1,328,941,563 8,099,774,452

2006

3,390,123,848 1,091,177,101 2,114,873,194

184,073,553

(510,031,098)

4,824,168,848 421,166,193 126,233,552 132,035,741

2,201,064 568,761,889 325,550,498

2,437,781,418 (551,823,032) 830,397,992 531,863,533

5,046,766,178 3,034,922,695

758,361,920 707,804,197 544,293,215

- 1,384,151

(222,597,330) 6,085,500,109

Amounts in Taka



(A. Qasem & Co.)



76

IDLC Finance Limited and its SubsidiariesConsolidated Profit and Loss AccountFor the year ended December 31, 2007

Operational revenue

Income from lease financeIncome from real estate finance

Income from term finance Income from short term finance

Income from car loansIncome from investment in securities

Income form structured finance Income from IT operations Income from securities brokerage operation Fees for management of LEIC Less : Operational expenses

Financial expenses General and administrative expenses Depreciation on property, plant and equipments Amortisation of intangible assets Allowances for doubtful accounts and future losses Other operational expenses Profit on merchant banking operation

as per separate profit and loss account enclosed

Operating profit Non-operational income Profit before taxation Less: Tax expenses

Current taxDeferred tax

Profit after taxation Minority interest Net profit for the yearEarning Per Share (EPS)

Notes

3839404142

43(a)444647

48(a)49.1(a)14.1(a)15(a)25

50(a)

10

2007

1,764,258,849 698,728,072 434,080,675 312,455,425 36,778,958 44,350,635

154,599,911 13,451,786 8,793,000

56,715,677 4,304,710

1,350,793,830 977,522,983 217,840,553 28,412,475 1,920,736

122,544,646 2,552,437

51,394,659

464,859,678

9,642,525 474,502,203 171,176,807 189,043,959 (17,867,152)

303,325,396 260

303,325,136 151.66

2006

1,237,916,373 622,292,160 304,232,278 165,735,704 32,006,390 24,732,112 70,385,123 8,250,962 1,893,635 4,583,372 3,804,637

1,012,888,016 778,785,744 164,796,624 20,987,754 1,641,155

45,834,038 842,701

6,664,926

231,693,283

4,452,187 236,145,470 78,895,299 78,895,299

- 157,250,171

116 157,250,055

78.63

Amounts in Taka



(A. Qasem & Co.)Dated: February 19, 2008 Chartered Accountants


77

IDLC Finance LimitedProfit and Loss Accountfor the year ended December 31, 2007

Operational revenue

Income from lease finance Income from real estate finance Income from term finance Income from short term finance Income from car loans

Income from investment in securities Income form structured finance Fees for management of LEIC Less : Operational expenses Financial expenses General and administrative expenses Depreciation on property, plant and equipments Amortisation of intangible assets Allowances for doubtful accounts and future losses Other operational expenses Profit on merchant banking operation

as per separate profit and loss account enclosedOperating profit Non-operational income Profit before taxation Less: Tax expenses

Current taxDeferred tax

Profit after taxation Earning Per Share (EPS)

Notes

38394041424344

4849.114.11525

50

3610

2007

1,686,754,576 698,728,072 434,080,675 312,455,425 36,778,958 44,350,635

142,604,315 13,451,786 4,304,710

1,321,009,030 964,175,436 202,592,282 27,331,817 1,812,412

122,544,646 2,552,437

51,394,659 417,140,205

3,430,014 420,570,219 168,132,848 186,000,000 (17,867,152) 252,437,371

126.22

2006

1,231,439,366 622,292,160 304,232,278 165,735,704 32,006,390 24,732,112 70,385,123 8,250,962 3,804,637

1,007,825,814 777,928,067 160,801,506 20,811,677 1,607,825

45,834,038 842,701

6,664,926 230,278,478

3,336,210 233,614,688 78,458,854 78,458,854

- 155,155,834

77.58

Amounts in Taka



(A. Qasem & Co.)



78

IDLC Finance LimitedProfit and Loss Account(for Merchant Banking Operation)For the year ended December 31, 2007

Operational revenue Underwriting commission Advisory fees Issue management fee Income from portfolio management services Less : Operational expenses Financial expenses General and administrative expenses Depreciation on property, plant and equipments Provision for margin loan

Other operational expensesProfit from operations transferred to profit and loss account

Notes

45

48.149.114.125.1

2007

235,306,965 615,750

- -

234,691,215

183,912,306 148,719,438

7,544,516 1,327,179

13,873,557 12,447,616

51,394,659

2006

53,212,508 323,497 806,675 434,783

51,647,553

46,547,582 37,570,060

5,496,350 888,478

- 2,592,694

6,664,926

Amounts in Taka



(A. Qasem & Co.)



79

IDLC Finance Limited and its SubsidiariesConsolidated Cash Flow Statementfor the year ended December 31, 2007

Cash flows from operating activities: Receipts from operational revenue Interest payments Cash payments to employees and suppliers Operating profit before change in operating assets/liabilities

(Increase)/decrease in operating assets: Lease receivables Long term finance Real estate finance Car loans Investment in non marketable shares Investment in marketable securities Margin loan to portfolio investors Accounts receivable and advances Fund from CIDA for LEIC project

Increase/(decrease) in operating liabilities: Accounts payable Increase in lease advance & term deposits Net cash from operating activities before income tax Non-operational income Income tax paid Net cash from operating activities Cash flows from investing activities: Purchase of property, plant and equipments Disposal of property, plant and equipments Membership cost Acquisition of intangible assets Net cash from investing activities Cash flows from financing activities: Drawdown of long term loans Repayment of long term loans Term deposits Net drawdown of short term loans Dividend paid Net cash from financing activities Effects of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

2007 628,633,561

1,995,261,104 (1,126,242,421)

(240,385,122)

(2,117,009,299) 397,097,888

(697,177,898) (623,276,909) (95,292,294) (50,901,500)

(110,931,027) (818,593,791) (153,972,095)

36,038,327

390,320,689 307,882,241 82,438,448

(1,098,055,049) 12,179,337

(146,394,742) (1,232,270,454)

(38,532,311) 3,516,298

- (1,250,250)

(36,266,263)

1,124,229,128 (779,741,947)

2,482,030,930 (465,515,837)

(7,469,080) 2,353,533,194

-

1,084,996,477

598,864,851 1,683,861,328

2006 301,044,708

1,291,128,881 (816,355,804) (173,728,369)

(2,194,448,583) (317,305,439) (585,181,132) (798,558,109) (136,193,860) (41,675,000) (59,270,144)

(333,582,425) 58,384,313 18,933,213

83,278,905 127,207,383 (43,928,478)

(1,810,124,970) 2,643,555

(43,958,806) (1,851,440,221)

(55,227,102) 3,620,989

(18,676,000) (1,100,000)

(71,382,113)

930,941,629 (543,300,315)

1,123,471,508 577,844,034 (56,019,009)

2,032,937,847

839,961

110,955,474

487,909,377 598,864,851

Amounts in Taka





80

IDLC Finance LimitedCash Flow Statementfor the year ended December 31, 2007

Cash flows from operating activities:

Receipts from operational revenue Interest payments Cash payments to employees and suppliers Operating profit before change in operating assets/liabilities (Increase)/decrease in operating assets:

Lease receivables Long term finance Real estate finance Car loans Investment in non marketable shares Investment in marketable securities Margin loan to portfolio investors Investment in subsidiary companies Accounts receivable and advances Fund from CIDA for LEIC project Increase/(decrease) in operating liabilities: Accounts payable Increase in lease advance & term deposits Net cash from operating activities before income tax Non-operational income Income tax paid Net cash from operating activities Cash flows from investing activities: Purchase of property, plant and equipments Disposal of property, plant and equipments Acquisition of intangible assets Net cash from investing activities Cash flows from financing activities: Drawdown of long term loans Repayment of long term loans Term deposits Net drawdown of short term loans Dividend paid Net cash from financing activities Effects of exchange rate changes on cash and cash equivalents Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

2007 579,725,106

1,917,756,831 (1,112,894,874)

(225,136,851)

(1,978,046,709) 397,097,888

(697,177,898) (623,276,909) (95,292,294) (50,901,500)

(110,931,027) (818,593,791)

- (15,009,505) 36,038,327

188,476,109 106,037,661 82,438,448

(1,209,845,494) 5,966,826

(146,394,742) (1,350,273,410)

(27,976,178) 3,516,298

(1,190,250) (25,650,130)

1,124,229,128 (779,741,947)

2,482,030,930 (465,515,837)

(7,469,080) 2,353,533,194

-

977,609,654

531,863,533 1,509,473,187

2006 299,420,496

1,284,651,874 (815,498,127) (169,733,251)

(2,244,782,505) (317,305,439) (585,181,132) (798,558,109) (136,193,860) (41,675,000) (59,270,144)

(333,582,425) (49,999,900) 58,050,291 18,933,213

48,097,546 92,081,024

(43,983,478)

(1,897,264,463) 1,527,578

(43,958,806) (1,939,695,691)

(52,844,621) 3,620,989 (800,000)

(50,023,632)

930,941,629 (543,300,315)

1,123,471,508 577,844,034 (56,019,009)

2,032,937,847

839,961

44,058,485

487,805,048 531,863,533

Amounts in Taka





81

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83

IDLC Finance Limited and its SubsidiariesNotes to the consolidated accountsfor the year ended December 31, 2007

1. Company and its activities 1.1 Legal status and nature of the Company IDLC Finance Limited (IDLC) was incorporated in Bangladesh as a public limited Company on 23 May 1985 under Companies Act 1913 having its registered office at Bay's Galleria (1st floor), 57 Gulshan Avenue, Gulshan 1, Dhaka. The Company changed its name to IDLC Finance Limited from the earlier Industrial Development Leasing Company of Bangladesh Limited in August, 2007. The Company registered itself as a financial institution under the Financial Institutions Act. 1993. The Company also registered itself as a merchant bank in 1998 with the Securities and Exchange Commission. The Company went for public issue of shares in 1993, which are listed in the stock exchanges of Bangladesh. 1.2 Principal activities and nature of operation The Company extends lease financing, as its core business, for all types of machinery and equipment 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 services and car loan for individuals in 2004.

1.3 Local Enterprise Investment Centre (LEIC)

The Company established a Local Enterprise Investment Centre (LEIC) with the contribution of Canadian International Development Agency (CIDA) and signed an agreement in this regard on August 31, 2005. The objective of the LEIC is to develop the local private sector by helping small and medium enterprises (SME's) have access to capital, innovative knowledge, technologies and practices that will allow them to produce more and better goods and services. LEIC assists local enterprises in Bangladesh to identify potential investment partners interested in joint ventures, or other long term partnership agreements offering good investments and technology transfer opportunities.

Set up costs, salaries, operating expenses and all expenses directly related to the implementation of and carry out the project are reimbursed by CIDA. Fees received by the Company for the management of the centre are accounted for as income while balance of contribution fund received from CIDA as at the end of the year is shown as “Funds received from CIDA for LEIC Project”. The Centre maintains separate books of accounts for recording its transactions.

1.4 Subsidiary companies 1.4.1 I.Cons Limited I.Cons Limited, a wholly owned subsidiary company of IDLC Finance Limited was incorporated on March 9, 2004 as a private limited company under Companies Act 1994 with authorised share capital of Tk. 100,000,000. The main object of the Company is to carry on business of information and communication technology services related to system integration, process engineering, reengineering as well as to develop, design, create computer programs and software and to sell, trade, import and export of such programs and software. The Company went into operation from July 01, 2006.

84 Notes to the Accounts

1.4.2 IDLC Securities Limited IDLC Securities Limited, another wholly owned subsidiary company of IDLC Finance Limited was incorporated on April 19, 2006 as a private limited company under Companies Act 1994 with authorised share capital of Tk. 25 crore. The Company has started its operation from September 2006. The main object of the Company is to act as 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, commodities, commercial paper, bonds, obligations, debentures etc. The Company is also authorised to buy, sell, hold or otherwise acquire or invest the capital of the company in shares, stocks and fixed income securities.

2. Significant accounting policies 2.1 Basis of preparation 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. 2.2 Statement of Compliance The financial statements have been prepared on a going concern basis following accrual basis of accounting except for cash flow statement and in accordance with the Companies Act, 1994, the Financial Institutions Act 1993, Securities and Exchange Rules 1987, the Listing Rules of Dhaka and Chittagong Stock Exchanges and International Accounting Standards adopted in Bangladesh by the Institute of Chartered Accountants of Bangladesh (Bangladesh Accounting Standards) and other applicable laws and regulations.

2.3 Consolidation of operations of subsidiaries The financial statements of the Company and its subsidiaries, as mentioned in Note No. 1.4, have been consolidated in accordance with Bangladesh Accounting Standard No. 27 "Consolidated and Separate Financial Statements" The consolidation of the financial statement has been made after eliminating all material intra group transactions.

The total profits of the Company and its subsidiaries are shown in the consolidated profit and loss account, with the proportion of profit after taxation pertaining to minority shareholders being deducted as 'Minority Interest'.

All assets and liabilities of the Company and of its subsidiaries are shown in the consolidated balance sheet. The interest of minority shareholders of the subsidiaries are shown separately in the consolidated balance sheet under the heading 'Minority Interest'.

2.4 Directors' Responsibility Statement The Board of Directors takes the responsibility for the preparation and presentation of these financial statements. 2.5 Branch accounting The Company has six branches, with no overseas branch as on December 31, 2007. Accounts of the branches are maintained at the head office from which these accounts are drawn up.

2.6 Accounting for leases As per Bangladesh Accounting Standard (BAS) No. 17 “Leases”, all leases are treated as finance lease since assets leased to customers under agreements transfer substantially all the risks and rewards associated with ownership, other than legal title, to the customers and all leases are full payout leases.

85

In accordance with the said standard, the aggregate lease receivables including un-guaranteed residual value throughout the primary lease term are recorded as gross lease receivables while the excess of gross lease receivables over the total acquisition cost including interest during the period of acquiring the lease equipment constitutes the unearned lease income.

At the execution of each lease, a portion of the unearned lease is recognised as revenue income representing initial direct cost. The balance of the unearned lease income is amortised to revenue on a monthly basis over the primary lease term yielding a constant rate of return over the period.

2.7 Accounting for direct finance Books of accounts for direct finance operation are maintained based on the accrual method of accounting. Outstanding loans, along with the accrued interest thereon, for short-term finance, and unrealised principal for long-term finance, real estate finance, car loans and other finances are accounted for as direct finance assets of the Company. Interest earnings are recognised as operational revenue periodically. 2.8 Merchant banking operation As per Securities and Exchange Commission (Merchant Banker and Portfolio Manager) Rules 1996, the services of issue management, portfolio management, underwriting of shares and securities advisory services fall under the purview of merchant banking operation. Accordingly, profit and loss account of merchant banking operation includes revenue from issue management, underwriting and portfolio management services and the Company maintains separate books of accounts for the merchant banking operation as required under the regulations of Securities and Exchange Commission. 2.9 Property, plant and equipment Owned assets Own property, plant and equipment are stated 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) No. 16 ''Property, Plant and Equipment''.

Leasehold assets Leasehold assets 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) no. 17 "Leases". The corresponding obligation under the lease is accounted for as liability. Subsequent expenditure on property, plant and equipment Subsequent expenditure is capitalised only when it increases the future economic benefit from the assets. All other expenditures are recognised as an expense as and when they are incurred. Depreciation Depreciation is charged to amortise the cost of assets, over their estimated useful lives, using the straight-line method in accordance with BAS-16. Full month's depreciation is charged on additions irrespective of date when the related assets are put into use and no depreciation is charged for the month of disposal. The depreciation rates used to write off the amount of assets are as follows:

Notes to the AccountsNotes to the Accounts

86

Rates Furniture and fixtures 12.50%

Building 2.00%

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% 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. 2.10 Intangible assets and amortisation of intangible assets Intangible assets include the value of computer software. Intangible assets acquired separately are measured on initial recognition at cost and are carried at cost less amortisation and impairment losses. Amortisation is calculated using the straight line method to write down the cost of intangible assets to their residual values over their estimated useful lives based on the management's best estimates.

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

Interest on real estate finance: Interest on real estate finance is recognised as revenue on an accrual basis and no interest on real estate finance is accounted for as revenue where any portion of capital or interest is in arrear for more than six months.

Dividend income and profit or loss on sale of securities: Dividend income is recognised on an accrual basis in the period in which the dividend is declared whereas profit or loss arising from the sale of securities is accounted for only when the securities are sold in the market.

Interest on term loans and short term finance: Interest on term loan and short term finance are recognised as revenue on an accrual basis and interest income on term loan is not recognised where any portion of interest is in arrear more than three months.

Fee based revenues: Fee based revenues are recognised as income on a cash basis.

2.12 Interest suspense account Lease income earned, interest on term finance and car loan 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.

Notes to the Accounts

87

2.13 Borrowing cost Borrowing cost is capitalised for the period from the dates of respective disbursements to the date of execution of lease. On execution of lease, advance including capitalised borrowing cost is transferred to the gross lease receivables.

All other borrowing costs are recognised as expenses in the year in which they are incurred unless capitalisation is permitted under Bangladesh Accounting Standard (BAS) 23 "Borrowing Costs".

2.14 Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 Bangladesh Accounting Standard (BAS) No. 37 "Provisions, Contingent Liabilities and Contingent Assets" when - The Company has a legal or constructive obligation as a result of past event. - It is probable that an outflow of economic benefit will be required to settle the obligation. - A reliable estimate can be made of the amount of the obligation. 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 estimates and underlying assumptions are reviewed on an ongoing basis and the revision is recognised in the period in which the estimates are revised.

2.15 Cash flow Statements

The cash flow statement is prepared using the direct method as stipulated in Bangladesh Accounting Standard (BAS) No. 7 "Cash Flow Statements".

2.16 Conversion of foreign currency transactions

Foreign currency transactions are translated into Taka at rates prevailing at the respective dates of transactions, while foreign currency monetary assets at the end of the year are reported at the rates prevailing on the balance sheet date. Exchange gains or losses arising out of the said conversions are recognised as income or expense for the year.

2.17 Investment in securities

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) No. 25 "Accounting 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, if required, has been taken into account.

2.18 Provision for doubtful accounts and future losses 2.18.1 Provision has been made at estimated rates on outstanding exposures, based on aging and continuous review of the receivables, as per guideline of the Company. In addition, a general provision is also made by the Company to cover unforeseen losses on all leases, loans and investments excluding those for which a specific provision has been made. The provision is considered adequate to meet probable future losses.


88

2.19 Employees benefit obligation

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

2.19.2 Defined benefit plan

The Company also operates an unfunded gratuity scheme. Employees are entitled to gratuity benefit after completion of minimum five years of service in the Company. The gratuity is calculated on the last basic pay and is payable at the rate of one month's basic pay for every completed year of service. Actuarial valuation of the gratuity scheme was made in 2004 to assess the adequacy of the liability provided for the scheme as per Bangladesh Accounting Standard No. 19: "Employee Benefit".

2.19.3 Other employees benefit obligation The Company operates a group insurance scheme for its permanent employees. The Company has also a real estate loan scheme for its permanent employees. Employees are entitled to take real estate loan and car loan under this scheme after completion of minimum five years and three years of service in the Company respectively.

2.20 Taxation 2.20.1 Deferred tax

The Company accounts for deferred tax as per Bangladesh Accounting Standard (BAS) No. 12 "Income Taxes". Deferred tax is provided using the liability method for all temporary timing differences 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.

2.20.2 Current tax

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

2.21 Impairment of long-lived assets

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

2.22 Cash and cash equivalent

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

2.23 Earning Per Share (EPS)

The Company calculates Earning per share in accordance with “Bangladesh Accounting Standards (BAS) No. 33 "Earnings Per Share" which has been shown in the face of the Profit and Loss Account and the computation is stated in Note 52.


89

2.24 Related party disclosure

As per Bangladesh Accounting Standards (BAS) No. 24 "Related Party Disclosures", parties are considered to be related if one of the party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. The Company carried out transactions in the ordinary course of business on an arm’s length basis at commercial rates with related parties. Related party disclosures have been given in Note 53.1. 2.25 Events after the balance sheet date All material events occurring after the balance sheet date are considered and where necessary, adjusted for or disclosed in Note- 53.9.

2.26 Segment reporting

In compliance with the statutory (SEC regulations) requirements, the Company has prepared separate profit and loss account for its separate segment, 'Merchant Banking Operations'. 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 with the financial results of the Company. The performance of the segment is evaluated primarily on profit before tax.

2.27 Off balance sheet items

Off balance sheet items have been disclosed under "Business Commitment and Contingencies" under Note- 53.3. 2.28 Proposed dividend

Proposed dividend has not been recognised as a liability in the balance sheet in accordance with Bangladesh Accounting Standards (BAS) No. 10 "Event After the Balance Sheet Date".

2.29 Reporting currency The financial statements are expressed in Taka currency.


90

3 Share capital Authorised

10,000,000 ordinary shares of Taka 100 each Issued, subscribed and paid-up

2,000,000 ordinary shares of Taka 100 each (2006: 1,500,000 ordinary shares of Taka 100 each)

Paid-up share capital as on December 31, 2007 comprises the following : Composition of shareholdings: Sponsors shareholders Foreign : Korea Development Financing Corporation (KDFC) Kookmin Bank, South Korea Aga Khan Fund for Economic Dev. (AKFED) Domestic : The City Bank Limited (CBL) Sadharan Bima Corporation (SBC) Industrial Promotion and Development Company ofBangladesh Ltd. (IPDC) General shareholders : Mercantile Bank Limited Eskayef Bangladesh LimitedReliance Insurance co. Ltd. Other Institution/Corporate Individual Total:

Distribution of shareholders: Classification of shareholders by holding as required by Regulation 37 of the listing Regulations of Dhaka Stock Exchange Limited are as follows:

20.00%10.00%

- 30.00%

9.70%7.62%0.13%

17.45%47.45%

7.50%8.00%7.00%

13.33%16.71%52.55%

100%

500 5,000

10,000 20,000 30,000 40,000 50,000

100,000 300,000

Less than 501 to

5,001 to 10,001 to 20,001 to 30,001 to 40,001 to 50,001 to

100,001 to

2007

1,000,000,000

200,000,000

40,000,00020,000,000

- 60,000,000

19,405,30015,238,000

266,600

34,909,90094,909,900

15,000,000 16,000,000 14,000,000 26,661,400 33,428,700

105,090,100 200,000,000

Number of Shareholders

2,088 107

4 4 2

- - 2 7

2,214

2006

1,000,000,000

150,000,000

30,000,00015,000,0003,606,000

48,606,000

14,556,00011,430,000

200,000

26,186,000 74,792,000

15,000,000 12,000,000 10,500,000 22,734,000 14,974,000 75,208,000

150,000,000

Percentage of Holdings

6.89%7.80%1.40%3.80%2.69%

- -

7.60%69.82%

100.00%

Amounts in Taka


Number of Share

91

The shares were listed in Dhaka Stock Exchange Ltd. on March 20, 1993, and in Chittagong Stock Exchange Ltd. on November 25, 1996, and traded at Taka 1,519 and Taka 1,530 at Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. respectively at the end of the year under reporting.

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

5 General reserve Balance at 01 January 672,500,000 572,500,000 Add : Transferred from appropriation of profit 175,000,000 100,000,000 Balance at 31 December 847,500,000 672,500,000 6 Long-term loans

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 these loans are as under :

Secured long term loan : Debenture BRAC 10,000,000 100,000,000

Delta Life Insurance Company Ltd. - 25,000,000

ICB AMCL First Mutual Fund 10,000,000 10,000,000

ICB AMCL Unit Fund 5,000,000 5,000,000

ICB Asset Management Co. Ltd. 5,000,000 5,000,000

The City Bank Ltd. 100,000,000 100,000,000

Sadharan Bima Corporation 20,000,000 80,000,000

Long-term loans

Islami Bank Bangladesh Ltd. 187,150,896 246,464,601

Mercantile Bank Ltd. 34,999,999 58,333,333

Prime Bank Ltd. 125,833,336 66,666,668

Standard Chartered Bank - 277,093

United Commercial Bank Ltd. 60,000,000 120,000,000

Pubali Bank Ltd. 160,000,000 90,000,000

Commercial Bank of Ceylon Limited 65,000,000 85,000,000

Bank Alfalah Ltd. 69,999,998 41,666,666

BRAC Bank Ltd. 232,500,000 114,000,000

Uttara Bank Ltd. 191,447,739 208,481,099

Dhaka Bank Ltd. 47,500,000 -

One Bank Ltd. 50,000,000 -

1,374,431,968 1,355,889,460

Less : Transfer to current liabilities being current maturity(Note-33) 637,170,648 534,838,285

737,261,320 821,051,175

2007 2006

Amounts in Taka

2007 2006

Amounts in Taka


Amounts in Taka

92

Unsecured long-term loan : Arab Bangladesh Bank Ltd. 11,505,927 21,658,592

Commercial Bank of Ceylon Ltd. 8,721,758 16,431,150

International Development Association (IDA) 34,718,380 88,135,471

Kreditanstalt fÜr Wiederaufbau (KfW) 194,106,401 206,296,369

The Hong Kong & Shanghai Banking Corporation Ltd. 8,381,595 1,199,319

Standard Chartered Bank 47,421,486 65,565,271

Prime Bank Limited 214,299 2,453,959

Eastern Bank Ltd. 22,135,264 42,172,378

Bangladesh Bank (Small Enterprise Refinancing Program) 309,438,000 62,438,000

Sadharan Bima Corporation 200,000,000 80,000,000

Mercantile Bank Ltd. 66,666,667 100,000,000

Bank Asia Ltd. 207,456,748 98,471,345

1,110,766,525 784,821,854

Less : Transfer to current liabilities being current maturity (Note-33) 262,956,581 192,894,849

847,809,944 591,927,005

Balance of long-term portion at 31 December 1,585,071,264 1,412,978,180 Long-term loans outstanding at 31 December are repayable as follows :

Years

2007 - 727,733,134

2008 900,127,229 663,987,070

2009 627,962,139 371,714,367

2010 510,116,932 161,944,569

2011 211,696,760 215,332,174

2012 and above 235,295,433 -

2,485,198,493 2,140,711,314 7 Refundable deposits The Company takes deposits from the clients of lease and loan on signing of agreement, refundable at the end of the contract period. Balance at 31 December stands as under: Deposits against loan and lease rental 259,011,570 239,297,500

Deposits against financing as per term of agreements (Security deposits) 135,928,699 76,665,358

394,940,269 315,962,858

Less : Transfer to current liabilities being current maturity (Note-33) 85,065,642 60,687,630

309,874,627 255,275,228 Security deposits are interest bearing while deposits against loan and lease are non interest bearing.

2007 2006


93

8 Term deposits This represents deposits received from institutions and individuals for a period not less than six months and one year respectively. Considering the past trend of renewals of deposits, management is in the opinion that around 60% of the deposits will be renewed for futher period. Moreover, all deposits taken by the Company are renewable. Based on this assumption, 40%, of the total deposits have been considered as current liability. Balance at 1 January 5,801,626,675 4,547,317,746

Add: Deposits received during the year 5,263,191,264 3,430,422,678

11,064,817,939 7,977,740,424

Less: Matured/ Encashed during the year 2,807,957,871 2,176,113,749

8,256,860,068 5,801,626,675

Less: Adjustment of loans against deposits 164,738,550 191,536,087

Balance at 31 December 8,092,121,518 5,610,090,588

Less: Transfer to current liability being current maturity (Note-33) 3,236,848,607 2,244,036,235

4,855,272,911 3,366,054,353 Deposits under term borrowing scheme include Tk. 3,532.60 million (Tk. 3,435.70 million in 2006) received as deposits from individuals. Rate of interest

Rate of interest on term deposit receipts ranges from 12% to 14% 9 Liabilities under finance lease

Liabilities under finance lease represents liability against certain motor vehicles taken under finance lease, details of which are given below :

Balance at 1 January 5,711,093 9,248,075 Add: Addition during the year 6,500,000 - 12,211,093 9,248,075 Less: Repayment during the year 3,038,963 3,536,982

9,172,130 5,711,093 Transferred to current liabilities being current maturity(Note-33) 2,817,099 2,465,696 Balance at 31 December 6,355,031 3,245,397

9.1 Aging analysis of liabilities under finance lease Up to one year 2,817,099 2,465,696 Above one year to three years 4,033,451 3,245,397 Above three years to five years 2,321,580 -

9,172,130 5,711,093 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.

2007 2006

Amounts in Taka


94

10 Deferred tax liability/(asset)

Deferred tax has been calculated based on taxable temporary differences arising due to difference in the carrying amount of the assets and its tax base in accordance with the provision of Bangladesh Accounting Standards (BAS) No. 12 "Income Taxes". 10.1 Deferred tax liability

Restated

Balance at 1 January - 368,000,000 Provision during the year - 48,458,854 Balance at 31 December - 416,458,854

Transfer to current tax liability - (416,458,854)

Restated balance at 31 December - -

In accordance with the Finance Ordinance 2007, leasing companies will not be allowed to claim depreciation on machineries, plant, vehicles and furniture given to any lessee on finance lease. Accordingly, the Company has submitted income tax return for the accounting year 2006, without claiming initial and normal depreciation, and no deferred tax liability arises, as there is no timing difference in the book value of lease assets between tax base and accounting base. Accordingly, the balance of deferred tax liability has been transferred to current tax liability and balance as at December 31, 2006 has been restated.

10.2 Deferred tax asset: Deferred tax asset was arrived at as follows:

Carrying amount at Tax base Taxable/(deductible)balance sheet temporary difference

Taka Taka Taka Assets: Fixed assets net of depreciation 163,996,885 176,178,694 (12,181,809)Liabilities: Employee gratuity 27,522,973 - (27,522,973)Total 191,519,858 176,178,694 (39,704,782)Applicable tax rate 45%Deferred tax asset as on December 31, 2007 (17,867,152)Deferred tax asset as on December 31, 2006 - Deferred tax accounted for during the year (17,867,152)

11 Portfolio investors' fund This represents the balance of deposits made 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 1,263,805,134 579,209,198

Margin loan extended for purchase of securities 1,387,355,680 568,761,889

2,651,160,814 1,147,971,087

Less: Investment in securities 2,182,676,478 1,029,309,168

Interest and other charges 429,254,267 110,940,155

2,611,930,745 1,140,249,323 Balance of fund 39,230,069 7,721,764

2007 2006

Amounts in Taka


95

12 Fund from CIDA for LEIC Project

The Company has launched the Local Enterprise Investment Centre (LEIC) in 2005 with the contribution of the

Canadian International Development Agency (CIDA). The balance of fund as at the end of the year has been

arrived at as follows:

Client deposit 1,297,609 -

Fund received from CIDA 98,082,652 33,132,638

Interest from short term deposits 1,724,941 185,149

Payable to IDLC Finance Limited 2,088,432 -

103,193,634 33,317,787

Expenses made from the fund

Acquisition of fixed assets 5,369,303 5,431,161

Salary and allowance 8,624,591 2,065,390

Administrative expenses 7,113,539 2,501,937

Management fees 8,109,336 1,840,788

Medical and welfare 29,782 29,782

Members' honorarium 111,000 33,000

Motor vehicle expenses 1,391,130 717,668

Office maintenance 3,194,022 1,713,813

Professional fees 15,285 51,035

Bank charges 12,596 -

Project cost 14,251,510 -

48,222,094 14,384,574

Balance at 31 December 54,971,540 18,933,213

Fund as at December 31, 2007 represent cash at bank Tk. 54,826,753 and advance and deposits Tk. 144,787

13 Interest suspense accounts

Lease income earned and interest on term finance, and 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. Product wise details are given below:

On lease finance 35,406,763 45,238,147

On real-estate finance 4,613,186 2,236,387

On term finance 2,777,737 7,449,046

On Car loan 1,838,277 345,140

44,635,963 55,268,720

2007 2006

Amounts in Taka



Ass

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the

year

has

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as fo

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tion

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old

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ts :

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and

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and

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14

Pro

per

ty,

pla

nt

and e

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Bal

ance

at

Jan

1, 2

007

Tak

a

26,

958,

470

56,

530,

000

15,

729,

506

19,

625,

485

629

,350

4

2,22

2,07

7 1

9,76

0,48

4 3

,782

,259

1

7,92

4,56

1 20

3,16

2,19

2

16,6

34,6

24

219,

796,

816

90,7

71,8

79

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t

344

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1

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,805

2

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2

16,4

10

4,5

00,0

00

8,4

92,7

78

Acc

umul

ated

d

epre

ciat

ion

(170

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) (1

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) (2

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) (1

31,8

93)

(3,1

37,4

85)

(6,7

44,3

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B

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Valu

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173

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1

18,7

29

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95

84,

517

1,3

62,5

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48,4

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a

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159

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3

80,2

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503

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4

3,05

7 2

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3

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(13,

902)

261,

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494

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(4

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67,8

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Buy

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Add

ition

dur

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the

year

Taka

-

-

967

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1

,442

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4

6,01

2 4

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,681

1

24,4

69

393

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1

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1,47

6,17

8

6,5

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27,

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at

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200

7 T

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26,

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56,

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52,7

21

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88

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362

44,7

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9 27

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21

6,14

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2 23

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9,28

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6

219,

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Bal

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at

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Tak

a

-

706

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2

,765

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7

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3

37,2

63

17,

825,

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3,5

14,2

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1,6

96,5

83

8,4

88,5

57

42,9

94,3

31

10,3

74,3

82

53,3

68,7

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01,7

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Bal

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at

Dec

31,

2007

T

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-

2,1

19,8

75

4,56

8,24

2 10

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47

6,05

6 23

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7,

466,

758

2,31

7,32

5 10

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60

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14,7

61,7

98

75,2

83,3

31

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54,

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11,7

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9 19

9,30

6 21

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12

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1,

642,

454

17,1

75,6

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155

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8,37

2,82

6 16

3,99

6,88

5

166,

428,

103

Adjus

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t dur

ing

the

year

T

aka

-

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(170

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) -

(2

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(1

31,8

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(3,1

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(6,7

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-

(6,7

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(2,3

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This represents cost of IT software and its development, the details of which are given below: Cost: Opening balance at 1 January 5,908,385 5,108,385 Addition during the year 1,190,250 800,000

7,098,635 5,908,385 Amortisation: Opening balance at 1 January 2,960,889 1,353,064 Addition during the year 1,812,412 1,607,825 4,773,301 2,960,889 Balance at 31 December 2,325,334 2,947,496 15(a) Consolidated intangible assets This represents cost of IT software and its development, the details of which are given below: Cost: Opening balance at 1 January 6,208,385 5,108,385 Addition during the year 1,250,250 1,100,000

7,458,635 6,208,385 Amortisation: Opening balance at 1 January 2,994,219 1,353,064 Addition during the year 1,920,736 1,641,155

4,914,955 2,994,219 Balance at 31 December 2,543,680 3,214,166 16 Investment in subsidiary companies IDLC Securities Limited (Note 16.1) 49,999,900 49,999,900 I.Cons Limited (Note 16.2) 999,900 999,900 50,999,800 50,999,800 16.1 Out of total 500,000 issued and paid up share capital, IDLC subscribed 499,999 ordinary shares of Tk. 100 each.

16.2 Out of total 10,000 issued and paid up share capital, IDLC subscribed 9,999 ordinary shares of Tk. 100 each. 17 Investment in non marketable shares Investment in non marketable ordinary shares (Note 17.1) 500,000 500,000 Investment in preference shares (Note 17.2) 142,576,500 91,675,000

143,076,500 92,175,000 17.1 Non-marketable shares

No. of Shares Cost price Cost price Credit Rating Agency of Bangladesh Ltd. 5,000 500,000 500,000 17.2 Investment in preference shares This consists of following: 17.5% cumulative redeemable preference shares of Basic Dredging Company Ltd. 20,000,000 20,000,000 9% cumulative redeemable preference shares of BRAC Bank Ltd. 50,000,000 50,000,000 10% cumulative redeemable preference shares of PHP Power Company 17,340,000 21,675,000 12% cumulative redeemable preference shares of STS Holdings Ltd. 55,236,500 -

142,576,500 91,675,000 Adequate provisions for future losses have been made as per Bangladesh Bank Guidelines.

2007 2006

Amounts in Taka15 Intangible assets

99

18 Membership of stock exchanges This represents the amount paid for purchasing membership of Dhaka Stock Exchange Ltd. (DSE) and Chittagong Stock Exchange Ltd. (CSE) including stamp duty for transferring shares in the name of IDLC Securities Ltd. 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

19 Gross lease rentals receivable- net of current maturity

Balance at 1 January 6,316,210,356 5,657,871,208

Add : Addition during the year 1,867,487,433 2,926,448,089

8,183,697,789 8,584,319,297

Less: Realisation during the year 2,513,255,388 2,360,889,873

5,670,442,401 6,223,429,424

Add: Net receivable on terminated leases 92,624,887 92,780,932

5,763,067,288 6,316,210,356 Less: Transferred to current assets being current maturity 2,384,106,173 2,437,781,418

Balance at 31 December 3,378,961,115 3,878,428,938 19.1 Aging analysis of gross lease receivable

Amount in Tk. % of total Up to one year 2,384,106,173 41.37

Above one year to three years 2,554,989,345 44.33

Above three years to five years 569,242,157 9.88

More than five years 254,729,613 4.42

5,763,067,288 100 20 Unearned lease income The excess of aggregate rentals receivable over the cost of the leased asset constitutes the total unearned lease income. The unearned lease income is recognised as revenue on an accrual basis over the terms of the lease.

Balance at 1 January 1,372,780,638 1,140,931,069 Add: Addition during the year 516,191,836 826,871,090

1,888,972,474 1,967,802,159 Less: lease income earned during the year 675,081,252 595,021,521 1,213,891,222 1,372,780,638 Less: Transferred to current liabilities being current maturity 556,703,525 551,823,032 657,187,697 820,957,606

2007 2006

Amounts in Taka


100

2007 2006

Amounts in Taka

21 Advance for leases This represents disbursements for procurement of leased assets and capitalised cost of funds for the period from the dates of respective disbursements to the balance sheet date. On execution of lease, advance will be transferred to gross lease receivables.

22 Long-term finance - net of current maturity Balance at 1 January 1,542,068,226 956,887,094 Add: Disbursement made during the year 1,266,254,832 985,126,889

2,808,323,058 1,942,013,983 Less: Received during the year 569,076,934 399,945,757 Balance at 31 December 2,239,246,124 1,542,068,226 Less: Transfer to current liability being current maturity (Note-31) 883,231,861 450,891,125 1,356,014,263 1,091,177,101 23 Real estate finance- net of current maturity This represents loans to individuals, employees under company's real estate loan scheme and corporate bodies for purchase and construction of apartments in urban areas for periods ranging from 5 to 20 years. Loans receivable within one year have been placed under current assets, details are as under : Balance at 1 January 2,441,324,043 1,642,765,934 Add : Disbursement during the year 1,254,220,576 1,234,493,956

3,695,544,619 2,877,259,890 Less : Realisation during the year 630,943,667 435,935,847 Balance at 31 December 3,064,600,952 2,441,324,043 Less: Transfer to current liability being current maturity (Note-31) 390,291,525 326,450,849

2,674,309,427 2,114,873,194

23.1 Aging analysis of real estate finance Amount in Tk. % of total

Up to one year 382,912,953 12.49 Above one year to three years 716,197,610 23.37 Above three years to five years 686,719,605 22.41 More than five years 1,278,770,784 41.73

3,064,600,952 100 24 Car loan- net of current maturity Balance at 1 January 237,129,571 100,935,712 Add : Disbursement during the year 166,489,552 173,533,752

403,619,123 274,469,464 Less : Realisation during the year 71,197,258 37,339,893 Balance at 31 December 332,421,865 237,129,571 Less: Transfer to current liability being current maturity (Note-31) 82,774,024 53,056,018 249,647,841 184,073,553


101

25 Provision for doubtful accounts and future losses Balance at 1 January 510,031,098 490,629,970 Provision required for the year 265,362,694 197,419,782Provision released during the year (128,944,491) (151,585,744)Provision charged for the year 136,418,203 45,834,038Write off during the year (Note 25.3) (32,991,957) (26,432,910)Balance at 31 December 613,457,344 510,031,098

25.1 Allocation: Merchant bank 13,873,557 -Other than merchant bank 122,544,646 45,834,038

136,418,203 45,834,03825.2 Product wise break up of provision: Lease 438,098,959 351,002,992 Long term finance 58,256,372 47,784,941 Real estate finance 37,513,819 27,662,128 Car loan 10,293,003 5,057,658 Investment in shares 36,304,103 21,520,357 Short term finance 32,991,088 57,003,022

613,457,344 510,031,098 25.3 During the year 2007, the Company had written off it's receivables of eight contracts as per write off policy of the Bangladesh Bank. 26 Accounts receivable Lease 133,681,274 279,747,608 Real estate finance 30,849,272 35,274,462 Car loan 4,867,618 3,672,029 Long term finance 37,166,438 34,296,048 Other receivables 343,574,990 68,176,046

550,139,592 421,166,193 26(a) Consolidated accounts receivable Lease 133,681,274 279,747,608 Real estate finance 30,849,272 35,274,462 Car loan 4,867,618 3,672,029 Long term finance 37,166,438 34,296,048 Receivable from CSE & DSE 86,089,697 979,029 Receivable from sale of shares 52,762,876 - Interest receivable - 640,000 Other receivables 344,492,990 68,176,046

689,910,165 422,785,222 27 Advances, deposits and prepayments Deposits and prepayments 784,159 726,579 Advance against expenses 6,626,540 7,437,764 Suspense payment 2,934,367 5,947,998 Advance corporate tax 258,515,952 112,121,211 268,861,018 126,233,552

Advances, deposits and prepayments are considered good but not secured by collateral.

2007 2006

Amounts in Taka


102

27(a) Consolidated advances, deposits and prepayments Deposits and prepayments 2,815,833 862,613 Advance against expenses 7,071,807 7,437,764 Suspense payment 2,934,367 5,947,998 Advance corporate tax 259,273,300 112,168,808

272,095,307 126,417,183 28 Investment in marketable securities 242,966,768 132,035,741 Details of marketable securities are given below:

Market price at theName of Company No. of Shares Cost price Taka end of the year (Taka) Standard Bank Ltd. 151 15,900 51,000 One Bank Ltd. 40,746 12,696,898 23,327,085 Islami Bank Bangladesh Ltd. 4,179 17,515,496 27,715,128 United Leasing Co. Ltd. 20 9,574 12,705 Eastern Cables Ltd. 10 6,240 6,050 Eastland Insurance Ltd. 190 20,583 76,997 Berger Paints BD Ltd. 30,500 4,639,926 8,347,850 Mutual Trust Bank Ltd. 7 2,604 4,176 Square Pharmaceuticals Ltd. 9,527 17,279,657 35,078,414 Square Textiles Ltd. 35,815 2,152,934 4,562,831 BATBC 106,100 8,114,605 15,766,460 Power Grid Company Limited 20,250 11,819,043 13,820,625 Dhaka Electric Supply Company (DESCO) 71,000 69,434,138 75,916,750 Southeast Bank Limited 30,304 14,897,521 17,371,768 Prime Bank Ltd. 48,000 37,892,539 44,340,000 Shahjalal Bank Ltd. 74,750 20,429,038 27,358,500 Apex Adelchi Footwear Ltd. 1,280 911,437 2,778,880 Lanka Bangla Finance Limited 250,000 11,268,649 25,025,000 National Bank Ltd. 13,480 11,373,380 20,142,490 BOC Ltd. 15,050 2,486,606 4,831,050 242,966,768 346,533,759 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, 2007 there was Tk. 103,566,991 gross unrealised gain on investments in marketable listed securities. 29 Inter- company receivables This represents receivables from subsidiary companies. IDLC Securities Limited 3,776,587 1,476,261 I.Cons Limited 664,089 724,803 4,440,676 2,201,064

2007 2006

Amounts in Taka


103

30 Short term finance Factoring and account receivable 120,921,721 132,391,523 Work order financing 12,390,451 24,490,944 Inter Corporate Deposits (ICD) 79,802,096 168,668,031

213,114,268 325,550,498 31 Current maturity of direct finance Long term finance 883,231,861 450,891,125 Real estate finance 390,291,525 326,450,849 Car loan 82,774,024 53,056,018

1,356,297,410 830,397,992

32 Cash and cash equivalents Cash in hand 36,000 38,000 Cash at bank: Current deposit Arab Bangladesh Bank Ltd. 6,865,799 2,784,379

Bangladesh Bank 143,836,691 127,472,506

Bank Asia Ltd. (2,409,414) (1,225,235)

Citi Bank N.A 33,132,807 38,254,703

Commercial Bank of Ceylon 3,027,219 4,692,438

Eastern Bank Ltd. 69,090 (1,965,544)

Islami Bank Foreign Ex. Br. 302,962 309,211

Prime Bank Ltd. - 202,570

Standard Chartered Bank (76,345,444) 11,697,566

State Bank of India 285,914 41,407

The City Bank Ltd. 4,797 258,797

HSBC 3,569,503 (203,748)

Dhaka Bank Ltd. 9,318,944 -

Uttara Bank Limited 300 4,900 121,659,168 182,323,950

Short term deposit Pubali Bank Ltd. 23,344 33,175

Southeast Bank Ltd. 187,286 (31,156)

Citi Bank N.A 61,239,395 49,634,300

Commercial Bank of Ceylon - 38,727

Exim Bank Ltd. 835,002 41,284

Prime Bank Ltd. 208,528 206,291

Standard Chartered Bank 17,208,117 12,451,392

The City Bank Ltd. 2,262,807 3,194,357

BRAC Bank Limited 20,842,000 -

Investment on call loan - 85,000,000

Fixed deposits 1,230,000,000 180,000,000

Funds received from CIDA for LEIC 54,971,540 18,933,213

1,387,778,019 349,501,583 1,509,473,187 531,863,533

2007 2006

Amounts in Taka


104

32(a) Consolidated cash and cash equivalents Cash in hand 56,000 48,000 Cash at bank 1,683,805,328 598,816,851

1,683,861,328 598,864,851 33 Current maturity of long term loans, deposits and advances Long term loans Secured long term loan 637,170,648 534,838,285 Unsecured long term loan 262,956,581 192,894,849 Term deposits 3,236,848,607 2,244,036,235 Lease & loan advances 85,065,642 60,687,630 Liabilities under finance lease 2,817,099 2,465,696

4,224,858,577 3,034,922,695 34 Short term loans This consists of as follows: Bank overdraft (Note 34.1) 7,846,083 348,361,920 Short term loan (Note 34.2) 285,000,000 410,000,000

292,846,083 758,361,920 34.1 Bank overdraft Dhaka Bank Ltd. - 101,435,469 BRAC Bank Ltd. 4,855,788 48,176,715 One Bank Limited 2,990,295 198,749,736

7,846,083 348,361,920 Total limit of overdraft is Tk. 210,000,000 which is secured under pari pasu security sharing agreement with other lenders . 34.2 Short term loan Commercial Bank of Ceylon Limited 85,000,000 100,000,000 Mutual Trust Bank Ltd. 50,000,000 - Citi Bank N.A. 50,000,000 210,000,000 Standard Chartered Bank 100,000,000 100,000,000 285,000,000 410,000,000 35 Payable and accrued expenses Receipt against leases 155,543,081 181,105,881

Liabilities for expenses 541,350,756 447,559,292

Liabilities for other finance 79,625,316 79,139,024

776,519,153 707,804,197

2007 2006

Amounts in Taka


105

35(a) Consolidated payable and accrued expenses Receipt against leases 155,543,081 181,105,881 Liabilities for expenses 545,114,433 448,074,737 Liabilities for other finance 80,105,851 79,139,024 Payable to clients 236,917,012 33,515,645 Other liabilities 55,000 1,728,614

1,017,735,377 743,563,901 36 Provision for current taxation Opening balance 544,293,215 97,834,361 Add: Transferred from deferred tax - 368,000,000 Add: Provision made during the year 186,000,000 78,458,854

730,293,215 544,293,215 Less: Adjustments made during the year (4,609,605) -

734,902,820 544,293,215 37 Inter-company payable - Tk. 567,980 The above amount has been paid by IDLC Securities Limited to meet expenditure, such as fixed assets purchase, CDBL charges and training expenses on behalf of IDLC Finance Limited.

38 Income from lease finance Lease income earned 675,081,252 595,021,521 Realisation of interest accrued upto lease execution 1,677,108 7,629,120 Realisation of late payment interest & others 16,059,319 10,653,741 Transfer price/ gain at the time of expiry of lease 5,910,393 8,987,778

698,728,072 622,292,160

39 Income from real estate finance Interest income 412,366,206 288,917,934 Application and documentation fees 21,714,469 15,314,344

434,080,675 304,232,278 40 Income from term loan Interest on loan 304,497,775 162,072,179 Commitment fees, service charges and documentation fees 3,941,310 2,717,739 Realisation of late payment interest 4,016,340 945,786

312,455,425 165,735,704

2007 2006

Amounts in Taka


106

41 Income from short term finance Interest income 30,836,736 27,874,983 Service charges 5,942,222 4,131,407

36,778,958 32,006,390 42 Income from car loan Interest income 42,565,508 23,762,399 Application and processing fees 1,785,127 969,713

44,350,635 24,732,112 43 Income from investment in securities Gain on sale of marketable securities 133,793,376 58,092,276 Dividend income 8,810,939 12,292,847

142,604,315 70,385,123 43 (a) Consolidated Income from investment in securities Gain on sale of marketable securities 145,788,972 58,092,276 Dividend income 8,810,939 12,292,847

154,599,911 70,385,123 44 Income form structured finance Agency fees 109,739 1,093,793 Arrangement fees 12,365,121 6,113,673 Advisory fees 976,926 1,000,000 Syndication commission - 43,496

13,451,786 8,250,962 45 Income from portfolio management services Documentation fees 636,000 90,500

Portfolio management fees 32,033,271 6,936,462

Trading commission 37,599,493 5,003,889

Interest on margin loans to portfolio investors 164,422,451 39,616,702 234,691,215 51,647,553

46 Income form IT operations Web designing 540,000 295,635 Support service 3,343,000 7,200 Software development 4,910,000 1,590,800

8,793,000 1,893,635 47 Income from securities brokerage operation Brokerage commission 55,173,445 4,559,512 Service charges 397,900 12,800 Transaction fees 903,942 10,438 Custody fees 129,690 622 BO account maintenance fees 110,700 -

56,715,677 4,583,372

2007 2006

Amounts in Taka


107

48 Financial expenses Interest and charges on loans and debentures 1,241,930,971 909,659,266 Interest capitalisation (9,023,494) (40,390,246)Legal fee for Loans 71,510 59,500 Earnings from liquid funds (120,084,113) (53,830,393)Transferred to merchant bank operation (Note 48.1) (148,719,438) (37,570,060)

964,175,436 777,928,067

48.1 Transferred to merchant bank operation Allocation has been made on the basis of average investment portfolio.

48(a) Consolidated financial expenses Interest on loans and debentures 1,244,304,309 909,843,156 Interest capitalisation (9,023,494) (40,390,246)Legal fee for loans 71,510 59,500 Earnings from liquid funds (120,084,113) (53,830,393)Howla and laga charges 6,205,005 309,064 CDBL fees 1,181,642 138,165 Tax expenses 3,101,876 155,498 Connectivity charges 485,686 71,060 Transferred to merchant bank operation (Note 48.1) (148,719,438) (37,570,060)

977,522,983 778,785,744 49 General and administrative expenses Salary and allowances (Note 49.3) 128,501,158 103,688,317 Medical and welfare expenses 2,932,753 2,023,782 House expenses 3,322,999 3,220,941 Training expenses 1,254,591 1,251,274 Professional fees Audit fees 224,675 155,625 Other professional fees 2,081,464 1,610,076 Directors' remuneration (Note 49.4) 311,000 220,700 Travel and conveyance 2,955,661 2,240,146 Office maintenance 30,551,164 21,851,008 Motor vehicle expenses 6,748,884 5,729,707 Printing and stationery 6,160,822 6,039,474 Books and periodicals 154,772 118,065 Communication 7,185,770 6,420,778 Renewal and registration 1,393,955 344,937 Bank charges 738,930 679,262 Advertisement and publicity 6,758,322 7,131,025 Promotional expenses 1,050,174 216,537 Donations and subscriptions 4,136,377 543,009 Entertainment 2,480,085 2,352,504 Public relations 1,193,242 460,689

210,136,798 166,297,856

2007 2006

Amounts in Taka


108

49.1 Allocation:

Merchant bank (Note 49.5) 7,544,516 5,496,350 Other than merchant bank 202,592,282 160,801,506

210,136,798 166,297,856

49.2 Management emoluments Remuneration 25,082,167 15,535,695 Benefits 3,626,772 4,363,670

28,708,939 19,899,365 Management emoluments include an aggregate amount of Tk. 8,594,870 (Tk.8,200,785 in 2006) paid to the Managing Director of the Company as remuneration and benefits. 49.3 Salary and allowances Salary and allowances include annual contribution of Tk. 4,146,028 to provident fund and provision of Tk. 11,269,574 for gratuity fund.

49.4 Directors remuneration Directors remuneration for attending each board meeting during the year was Tk. 4,000. No director has been paid any remuneration for any special services rendered.

49.5 Allocation to merchant banking operation Indirect expenses have been allocated based on number of employees working in the Merchant Banking Unit. 49(a) Consolidated general and administrative expenses Salary and allowances 139,511,934 105,518,068 Medical and welfare expenses 2,932,753 2,023,782 House expenses 3,322,999 3,638,951 Training expenses 1,387,226 1,272,774 Professional fees Audit fees 287,375 195,625 Other professional fees 2,192,814 1,718,736 Directors' remuneration 311,000 220,700 Travel and conveyance 3,163,615 2,240,146 Office maintenance 32,826,148 21,975,252 Motor vehicle expenses 6,748,884 5,801,766 Printing and stationery 6,590,125 6,220,235 Books and periodicals 159,675 118,315 Communication 7,435,538 6,439,541 Renewal and registration 1,447,010 412,482 Bank charges 740,105 680,362 Advertisement and publicity 6,881,772 7,570,913 Promotional expenses 1,050,174 216,537 Donations and subscriptions 4,579,624 1,123,200 Entertainment 2,620,426 2,379,875 Government fees and stamp duty 2,630 65,025 Public relations 1,193,242 460,689

225,385,069 170,292,974

2007 2006

Amounts in Taka


109

49.1(a) Allocation:

Merchant bank 7,544,516 5,496,350 Other than merchant bank 217,840,553 164,796,624

225,385,069 170,292,974 50 Non operating income Foreign exchange gain - 839,961 Gain/(Loss) on disposal of fixed assets 1,767,898 968,671 Miscellaneous income 1,662,116 1,527,578

3,430,014 3,336,210 50(a) Consolidated non operating income

Foreign exchange gain - 839,961 Gain/(Loss) on disposal of fixed assets 1,767,898 968,671 Miscellaneous income 2,112,116 1,527,578 Bank interest 5,762,511 1,115,977 9,642,525 4,452,187

51 Tax expenses 51.1 Current tax Provisions for current tax has been made on the basis of the profit for the year as, adjusted for taxation purposes in accordance with the provisions of Income Tax Ordinance, 1984 and amendments thereto. The current tax rate for the Company is 45% on taxable income. 51.2 Deferred tax Deferred tax is provided using the liability method for all temporary differences arising between the tax base of assets and liabilities and their carrying values for financial reporting purposes as per Bangladesh Accounting Stansdard No. 12.

51.3 Average effective tax rate The average effective tax rate is calculated below as per Bangladesh Accounting Standards 12: Tax expenses 168,132,848 78,458,854 Accounting profit before tax 420,570,219 233,614,688 Average effective tax rate 39.98% 33.58% 51.3(a) Consolidated average effective tax rate The average effective tax rate is calculated below as per Bangladesh Accounting Standards 12 : Tax expenses 171,176,807 78,895,299 Accounting profit before tax 474,502,203 236,145,470 Average effective tax rate 36.08% 33.41%

2007 2006

Amounts in Taka


110

52 Earnings Per Share (EPS) Earnings per share as shown in the face of the profit and loss account is calculated in accordance with Bangladesh Accounting Standards No-33: "Earnings Per Share". Basic earnings per share has been calculated as follows: Earnings attributable to ordinary shareholders (Net profit after tax) 252,437,371 155,155,834 Weighted average number of ordinary shares outstanding during the year 2,000,000 2,000,000

Basic earnings per share 126.22 77.58 No diluted earnings per share is required to be calculated for the year, as there was no convertible securities for dilution during the year. 52(a) Consolidated Earnings Per Share (EPS) Earnings per share, as shown in the face of the consolidated profit and loss account, is calculated in accordance with Bangladesh Accounting Standards no.-33: "Earnings Per Share". Basic earnings per share has been calculated as follows: Earnings attributable to ordinary shareholders(Profit after tax and minority interest) 303,325,136 157,250,055 Weighted average number of ordinary shares outstanding during the year 2,000,000 2,000,000 Basic earnings per share 151.66 78.63

53 Others 53.1 Related party transactions Parties are considered to be related, if one party has the ability to control the other party, or exercises significant influence over the other party, in making financial and operational decisions and include associated companies with or without common directors and key management positions. The Company has entered into transactions with other entities in the normal course of business that fall within the definition of related party as per Bangladesh Accounting Standards No. - 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 normal risk.

Details of transactions with related parties and balances with them as at December 31, 2007 were as follows:

Balance at year endName of the related party Transaction nature Relationship receivable/ (payable)

TakaThe City Bank Ltd. Debenture placement Sponsor shareholder (100,000,000)

Sadharan Bima Corporation Debenture placement Sponsor shareholder (20,000,000)

Sadharan Bima Corporation Debenture placement Sponsor shareholder (200,000,000)

Mercantile Bank Ltd. Long-term loan General shareholder (101,666,666)

Partex Group Lease financing/Loan Common Directorship 73,629,056

Transcom Group Lease financing/Loan Shareholder 96,627,917

2007 2006

Amounts in Taka


111

53.2 Receivable from Directors The Company does not have any receivable from any of the Directors of the Company as at the end of the year.

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

Tk. in million Tk. in millionGuarantees 9.00 2.58 Commitments on account of letter of credit 63.20 25.66 Indemnity Bonds 14.59 21.75 Lease and term finance commitments outstanding at December 31, 2007 161.00 223.95 Real estate finance commitments outstanding at December 31, 2007 271.00 217.82 Car loan commitments outstanding at December 31, 2007 19.00 20.83 53.4 Capital expenditure commitments There was no capital expenditure contracted but not incurred or provided for, at December 31, 2007. There was no material capital expenditures, authorised by the Board but not contracted for at December 31, 2007. 53.5 Unacknowledged debt The Company had no claim, legal and other against it which has not been acknowledged as debt at the balance sheet date.

53.6 Disbursements During the year, the Company contracted and disbursed the following amounts :

2007 2006

Contracts / Sanction Execution / Contracts / Sanction Execution /Disbursement Disbursement

Tk. in million Tk. in million Tk. in million Tk. in millionLease and term finance 3,138 2,977 2,846 2,875Real estate finance 1,526 1,255 1,422 1,205Car loans 196 177 192 171

4,860 4,409 4,460 4,251 53.7 Foreign remittances The Company remitted the following amounts of foreign currencies during the year:

Currency AmountDividend to two foreign shareholders for the year 2006 US$ 29,208 53.8 Number of employees The Company paid an aggregate amount more than Taka 36,000 to 119 employees and more than Tk. 3,000 per month to 84 employees who were in employment, for full year, and part of the year respectively.


112

53.9 Subsequent events The Board of Directors, at is 154th metting held on February 19, 2008, has recommended stock dividend @ 1:4, i e. one share for every four shares held and 15% cash dividend for the year ended December 31, 2007, for placement before shareholders at 23rd Annual General Meeting of the Company scheduled to be held on March 30, 2008. 53.10 Reclassifications To facilitate comparisons, relevant balances pertaining to the pervious year have been rearranged/restated/reclassified, wherever considered necessary, to conform to current period's presentation. 53.11 General 53.11.1 The Company publishes half yearly accounts within the following month of half year ended at June 30 of

each year. 53.11.2 The Company does not have any restrictions on distribution and payment of dividends. 53.11.3 During the year under report, no matters were submitted to a vote of shareholders of the Company. 53.11.4 Figures in these notes and financial statements have been rounded off to the nearest taka.



113

Audit

ors

' R

eport

and

Audit

ed F

inancia

l Sta

tem

ents We have audited the accompanying Balance Sheet of IDLC Securities Ltd. for the year ended

December 31, 2007 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 disclosures 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 as of 31 December 2007 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.

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 purpose 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 those books;

c) The Company’s Balance Sheet and Income Statement dealt with by the report are in agreement with the books of accounts.

Dated: Dhaka (Masih Muhith Haque & Co.) February 18, 2008 Chartered Accountants.

Auditors' ReportTo the shareholders of IDLC Securities Ltd.

114

IDLC Securities LimitedBalance SheetAs at December 31, 2007 Amounts in Taka

Notes 2007 2006 SOURCES OF FUNDS Share capital 3 50,000,000 50,000,000 Proposed dividend 12,500,000 - Retained earnings 4 37,733,682 912,228

100,233,682 50,912,228 APPLICATION OF FUNDS

Fixed assets (at cost less accumulated depreciation) 5 11,913,662 2,282,308

Intangible assets 6 218,347 266,670

Membership at cost 7 18,676,000 18,676,000 DSE 15,225,000 15,225,000 CSE 3,451,000 3,451,000 Current assets 351,509,228 67,115,414 Security deposits 8 125,000 125,000 Advance Income Tax (AIT) 9 743,898 45,111 Advances and Prepayments 10 2,245,640 - Inter company receivable 11 567,980 - Receivable from DSE 12 93,283,487 1,061,058 Receivable from CSE 13 29,410,994 160,170 Receivable from Clients 14 355,960 - Receivable from sale of shares 15 52,762,876 - Interest receivable 16 - 640,000 Cash & cash equivalents 17 172,013,393 65,084,075 Current liabilities 282,083,555 37,428,164 Payable to clients 18 237,272,973 33,515,645 Payable to DSE 19 34,375,772 82,029 Payable to CSE 20 2,229,012 1,658,784 Inter company payable 21 3,951,587 1,476,261 Accounts payable 22 480,535 175,000 Security deposits 23 55,000 55,000 Provision for expenses 24 3,718,676 465,445 Net current assets 69,425,673 29,687,250

100,233,682 50,912,228

Attached notes form part of these accounts. As per our annexed report of even date. Chairman / Director CEO (Masih Muhith Haque & Co.) Chartered Accountants


115

IDLC Securities LimitedIncome Statementfor the year ended December 31, 2007 Amounts in Taka Particulars Notes 2007 2006

Operating income 25 68,711,273 4,583,372 Less : Operating expenses 26 11,586,570 753,889 Net income from operation 57,124,703 3,829,483 Add : Other income 27 6,102,867 1,091,112 Total income 63,227,570 4,920,595 Less : Office & administrative expenses 28 8,488,818 3,388,032 Profit before financial expenses 54,738,752 1,532,563 Less : Financial expenses 29 2,373,339 183,890 Net profit/ (loss) before income tax 52,365,413 1,348,673 Income tax 3,043,959 436,445

Net profit/(loss) after tax 49,321,454 912,228

Chairman / Director CEO (Masih Muhith Haque & Co.)

Chartered Accountants


116

IDLC Securities LimitedStatement of Changes in EquityFor the year ended December 31, 2007

Particulars Share Proposed Retained Total capital dividend earnings

Amount (Tk.) Amount (Tk.) Amount (Tk.) Amount (Tk.) Issue of share capital 50,000,000 - - 50,000,000 Net profit during the period (Sep 18, 2006 to Dec 31, 2006) - - 912,228 912,228 Balance as on December 31, 2006 50,000,000 - 912,228 50,912,228 Net profit during the year (Jan 01, 2007 to Dec 31, 2007) - - 49,321,454 49,321,454

Proposed dividend (25% cash) - 12,500,000 (12,500,000) - Balance as on December 31, 2007 50,000,000 12,500,000 37,733,682 100,233,682




117

IDLC Securities LimitedCash Flow StatementFor the year ended December 31, 2007 Amounts in Taka

Particulars 2007 2006

A. Cash flow from operating activities Net profit during the year/period 49,321,454 912,228 Add: Amount considered as non cash items: Depreciation & amortization charged 1,020,602 133,503 Provision for income tax 3,043,959 436,445 Provision for CDBL charges 75,829 9,000 Provision for audit fee 6,125 20,000 Sub total of non cash items 4,146,515 598,948

Change in current liabilities & assets Receivable from DSE (92,222,429) (1,061,059)Receivable from CSE (29,250,824) (160,170)Receivable from Clients (355,960) - Receivable from sale of shares (52,762,876) - Interest receivable 640,000 (640,000)Other Receivable (567,980) - Advances and Prepayments (2,245,640) - Advance Income Tax (AIT) (698,787) (45,111)Payable to clients 203,757,328 33,515,645 Payable to DSE 34,293,743 82,029 Payable to CSE 570,228 1,658,784 Accounts payable 305,535 175,000 Provision for expenses 127,318 - Net cash flows from operating activities 115,057,625 35,036,295

B. Cash flow from investing activities Acquisition of membership DSE - (15,225,000) CSE - (3,451,000)Security deposits - (125,000)Security deposits - 55,000 Fixed assets acquisition (10,603,633) (2,682,481)

Net cash flows from investing activities (10,603,633) (21,428,481)C. Cash flows from financing activities

Share capital - 50,000,000 Loan from IDLC Finance Limited 2,475,326 1,476,261 Net cash used in financing activities 2,475,326 51,476,261

D. Net cash increase/ (decrease) (A+B+C) 106,929,318 65,084,075 E. Cash and cash equivalents at the beginning of the year 65,084,075 -

F. Cash and cash equivalents at the end of the year 172,013,393 65,084,075

Closing balance represents Cash in hand 20,000 10,000 Cash at bank 171,993,393 40,074,075 Fixed deposits - 25,000,000

172,013,393 65,084,075




118

IDLC Securities LimitedNotes to the AccountsFor the year ended December 31, 2007

1.00 Company and its activities 1.01 Legal status of the Company IDLC Securities Limited was incorporated as a private limited company in Bangladesh under The Companies Act, 1994 on April 19, 2006 vide registration No. C-61319 (3328)/06. The Company started its operation from September 18, 2006.

1.02 Nature of business activities The Company is a securities company and a member of Dhaka Stock Exchange Limited (DSE) (Membership No. 58) and Chittagong Stock Exchange Limited (CSE) (Membership No. 119) and is engaged in brokerage in the capital market.

2.00 Significant accounting policies

2.01 Basis of accounting The financial statements have been prepared under the historical cost convention on a going concern basis and in accordance with Companies Act,1994 and Bangladesh Accounting Standards (BAS).

2.02 Revenue recognition Operating income: Revenue is recognized based on share transactions amount which comprises of brokerage commissions, service charges, transaction fees and custody fees and capital gain.

Interest on bank accounts and fixed deposit:

Revenue is recognized as the interest accrues unless collectibility is in doubt. 2.03 Taxation Income tax charges for the year: Under the Income Tax Ordinance 1984, IDLC Securities Limited is subject to tax on income derived from share transaction amount of its trading activities.

2.04 Provision for taxation Provision for income tax has been calculated on the other income of the Company. The Company's trading income is subject to deduction of tax at source on brokerage commission as final settlement.

2.05 Provision for expenses Provisions for expenses are recognised 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 obligation and a reliable estimate of the amount can be made.


119

2.06 Fixed assets and depreciation

Fixed assets

Fixed assets are stated at cost less accumulated depreciation.

Depreciation

Depreciation is charged on fixed assets on a straight line method at the rates varying from 12.50% to 33.33% in

order to write them off over their useful economic life.

Amortization

ntangible assets are amortized over a period of three years.

Depreciation and amortization have been allocated to operating and office & administrative expenses as 60% &

40% proportionately.

2.07 Cash and cash equivalents:

Cash and cash equivalents includes cash in hand, cash at banks and fixed deposits which are held and available

for use by the Company without any restriction. There is insignificant risk of change in value of the same.

2.08 Currency

The amounts of these financial statements have been rounded off to the nearest figure in Bangladesh Taka.

Amounts in Taka

2007 2006

3 Share capital Authorised capital

2,500,000 shares of Tk. 100 each 250,000,000 250,000,000

Issued, subscribed & paid up capital :


499,999 shares of Tk. 100 each fully paid up in cash 49,999,900 49,999,900

Mr. Arif Khan

1 share of Tk. 100 each fully paid up in cash 100 100

50,000,000 50,000,000

4 Retained earnings

Opening balance 912,228 -

Add : Net profit during the year 49,321,454 912,228

Less : Proposed dividend 12,500,000 -

37,733,682 912,228


120

5.01 Allocation of depreciation charged Amounts in Taka

2007 2006

Depreciation charged during the year has been allocated as follows :

Operating expenses (60%) 547,367 60,104

Office & administrative expenses (40%) 364,912 40,069

912,279 100,173

6 Intangible assets

This represents cost of IT Software & development,

the details of which are given below :

360,000 300,000

Opening balance 300,000 -

Purchase during the year 60,000 300,000

Less : 141,653 33,330

Opening amortisation 33,330 -

Amortization during the year (Note: 6.01) 108,323 33,330

218,347 266,670

6.01 Allocation of amortization charged

Amortization charged during the year has been allocated as follows :

Operating expenses (60%) 64,994 19,998

Office & admin. expenses (40%) 43,329 13,332

108,323 33,330

5 Fixed assets (at cost less depreciation)

Particulars

Computer peripherals Office equipments Electrical equipment Office decoration Furniture & fixtures Telephone and telex Total Year 2006

Balanceas on

01.01.07

1,234,000

828,994

-

-

319,487

-

2,382,481

-

Purchaseduring the

year

2,238,420

1,862,418

2,703,117

2,222,766

1,433,652

83,260

10,543,633

2,382,481

Balanceas on

31.12.07

3,472,420

2,691,412

2,703,117

2,222,766

1,753,139

83,260

12,926,114

2,382,481

Balanceas on

01.01.07

56,367

37,150

-

-

6,656

-

100,173

-

Chargedduring the

year

372,585

241,012

140,761

74,355

75,830

7,736

912,279

100,173

Balanceas on

31.12.07

428,952

278,162

140,761

74,355

82,486

7,736

1,012,452

100,173

W.D.Vas on

31.12.07

3,043,468

2,413,250

2,562,356

2,148,411

1,670,653

75,524

11,913,662

2,282,308

Rateof

Dep.%

20.00

20.00

20.00

20.00

12.50

33.33

Cost Depreciation


121

7 Membership at cost

This represents the amount paid for purchasing membership of Dhaka Stock Exchange Ltd. (DSE) and Chittagong Stock Exchange Ltd. (CSE) Including stamp duty for transferring shares.

Amounts in Taka 2007 2006

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

8 Security deposits

Security deposit at CDBL 100,000 100,000 Security deposit at CSE 25,000 25,000

Total 125,000 125,000

9 Advance income tax

Opening balance 45,111 - Addition during the year 698,787 45,111

743,898 45,111

The amount has been deducted at source on Bank Interest, FDR Interest and Dividend Income.

10 Advances and Prepayments

Advance: 350,000 - Advance to Dhaka Stock Exchange Limited 350,000 -

Prepayments: 1,895,640 - Chittagong branch rent 1,655,640 - DOHS branch rent 240,000 -

2,245,640 - 11 Inter company receivable The amount represents receivable from IDLC Finance Ltd. for the following expenses bared by IDLC Securities Ltd.

Staff training 25,885 - Furniture and Fixtures 176,900 - Computer peripherals 241,500 - CDBL Charges 123,695 -

567,980 -


122

12 Receivable from DSE This balance has been resulted from sale of shares through Dhaka Stock Exchange Ltd. (DSE). Amounts in Taka

2007 2006 Total Sales 93,283,487 1,061,058

93,283,487 1,061,058

13 Receivable from CSE This balance has been resulted from sale of shares through Chittagong Stock Exchange Ltd. (CSE).

Total Sales 29,410,994 160,170 29,410,994 160,170

14 Receivable from Clients. Tk. 355,960

This balance represents the clients' purchase of shares on 30 December 2007 and CDBL charge incurred against trading during December 2007.

15 Receivable from sale of shares: Tk. 52,762,876

This balance has been resulted from the sale of marketable securities during the year.

16 Interest receivable

The interest has been accrued from FDR amount with IDLC and calculated on daily basis at the range of interest @ 13.00% to 13.50% .

Interest receivable - 640,000 - 640,000

17 Cash & cash equivalents

Cash in hand 17.1 20,000 10,000 Cash at bank 17.2 171,993,393 40,074,075 FDR - 25,000,000

172,013,393 65,084,075 17.1 Cash in hand : Tk. 20,000

The amount is lying with the accountant's custody as on December 31, 2007.

17.2 Cash at bank

Name of the Bank Branch A/c no. A/c type Amount (Tk.)

Standard Chartered Bank Ltd. Dhaka Main Br. 02-3066347-01 Call deposit 3,458,754

Standard Chartered Bank Ltd. Dhaka Main Br. 02-3066347-02 Call deposit 168,534,639

CitiBank N.A. Dhaka 010000200553004 Current A/C -

HSBC Dhaka Main 001-247642-011 Current A/C -

171,993,393

18 Payable to clients: Tk. 237,272,973 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.


123

19 Payable to DSE This balance has been resulted from purchase of shares through Dhaka Stock Exchange Ltd (DSE). Amounts in Taka

2007 2006 Total Purchase 34,375,772 82,029

34,375,772 82,029

20 Payable to CSE This balance has been resulted from purchase of shares through Chittagong Stock Exchange Ltd (CSE).

Total purchase 2,229,012 1,658,784 2,229,012 1,658,784

21 Inter company payables

This represents payable to IDLC Finance Limited for the following expenses incurred by IDLC Securities Limited and I.Cons Limited for getting IT services:

IDLC Finance Limited: Opening balance 1,476,261 - Addition during the year 2,300,326 1,476,261 Legal and professional fee - 87,860 Office equipment - 234,000 Salaries and remuneration 1,170,379 541,439 Telephone expenses 72,617 18,763 Office rent 691,000 351,000 Utilities 246,257 124,244 Postage and courier 5,668 - Company registration - 43,930 Government fees & stamp duty - 65,025 Internet connectivity charge 13,512 - Traveling and conveyance 97,060 - Donation 3,833 - Memorandum drafting fee - 10,000

3,776,587 1,476,261 I.cons Limited

For IT services 175,000 - Total 3,951,587 1,476,261

22 Accounts payable

Payable to MSOFT Technologies - 175,000 Payable to Grameen Bitek Limited 45,000 - Payable to M/S Selection 282,550 - Payable to IDLC Securities Employees' Provident Fund 151,766 - Other payable 1,219 -

480,535 175,000 23 Security deposits The amount deposited by clients as security money against their respective Beneficiary Owners A/c (BO) Foreign individual 1,000 1,000 Local individual 47,000 47,000 Local institution 7,000 7,000 55,000 55,000


124

24 Provision for expenses Amounts in Taka 2007 2006

Audit fee 26,125 20,000

Office rent 69,500 -

Utilities 57,818 -

Income tax 3,480,404 436,445

CDBL charges 84,829 9,000

3,718,676 465,445

25 Operating income Brokerage commission 55,173,446 4,559,512

Service charges 397,900 12,800

Transaction fees 903,941 10,438

Custody fees 129,690 622

BO account maintenance fees 110,700 -

Gain on sale of marketable securities 12,030,796 -

Loss on trading (35,200) -

68,711,273 4,583,372

Capital gain has generated from own portfolio of IDLC Securities Limited during the year 2007. 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.

26 Operating expenses Howla charges 1,035,213 49,899

DSE 926,913 42,573

CSE 108,300 7,326

Laga charges 5,169,793 259,165

DSE 4,724,944 139,950

CSE 444,849 119,215

CDBL transaction fees 1,011,858 136,370

CDBL custody fees 169,784 1,795

Tax Deducted at Source (TDS) (Note: 26.1) 3,101,876 155,498

Internet connectivity charges 485,685 71,060

Depreciation & amortization 612,361 80,102

11,586,570 753,889 26.1 Tax Deducted at Source (TDS) The amount has been deducted by Dhaka Stock Exchange Ltd. (DSE) & Chittagong Stock Exchange Ltd. (CSE) from the transaction amount as per section 53BBB of the Income Tax Ordinance 1984.

TDS deducted by: Dhaka Stock Exchange Ltd. 2,834,966 83,970 Chittagong Stock Exchange Ltd. 266,910 71,528

3,101,876 155,498


125

27 Other Income

Amounts in Taka 2007 2006

Interest on FDR 2,710,000 640,000 Bank interest 2,942,867 451,112 Dividend income 450,000 -

6,102,867 1,091,112

28 Office & administrative expenses Salaries & remuneration 4,190,899 1,270,989

Staff training 132,635 21,500

Legal charges & professional fee 111,350 108,660

Advertisement & promotion 123,450 439,888

Subscription & fee 329,414 580,191

Company registration - 43,930

Government fees & stamp duty 2,630 65,025

Memorandum drafting fee - 10,000

Renewal & registration 45,450 -

Office rent 1,413,540 351,000

Utilities 321,866 124,244

Repair & maintenance 269,910 72,059

Entertainment 140,341 27,371

Telephone expenses 137,520 18,763

Printing & stationeries 429,302 180,761

Newspaper & periodicals 4,903 250

Audit fee 42,700 20,000

Postage and courier 13,715 -

Traveling and conveyance 207,954 -

Donations 113,833

Other office expenses 49,165 -

Depreciation & amortization 408,241 53,401

Total 8,488,818 3,388,032 29 Financial expenses

Bank charges 26,311 6,112 Interest on short term loan 2,144,250 - Interest on overdraft facilities 202,778 177,778

2,373,339 183,890

30 Net worth

Share capital 50,000,000 50,000,000

Proposed dividend 12,500,000 -

Retained earnings 37,733,682 912,228

100,233,682 50,912,228 This represents 200.47% of the paid up capital of the Company.


126

Audit

ors

' R

eport

and

Audit

ed F

inancia

l S

tate

ments We have audited the accompanying Balance Sheet of I.Cons Limited as of 31 December 2007

and the related Profit & Loss Account and Cash Flow Statement for the year ended on that date. The preparation of the financial statements is the responsibility of the Company’s management. 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 that the financial statements are free of material misstatement. Our audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit also includes assessing the accounting pr inciples used and signif icant est imates made by management, as well as evaluating 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 as of 31 December 2007 and of the results of its operation for the year then ended and comply with the Company’s Act, 1994 and other applicable laws and regulations.

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 purpose 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 those books;

c) The Company’s Balance Sheet, Profit & Loss Account and Cash Flow Statement dealt with by the report are in agreement with the books of accounts.

Dated: 23 January 2008 Shahadat Hossain & Co.Place: Dhaka Chartered Accountants.

Auditors' Report to the ShareholdersI.Cons Limited

127

Amounts in TakaParticulars Notes 2007 2006 Property, plant & equipment 3 620,486 730,649 Current assets Advance, deposit & prepayments 4 119,751 13,520

Accounts receivable 5 918,000 -

Inter-company receivable 6 175,000 -

Cash and cash equivalents 7 2,374,748 1,917,243

3,587,499 1,930,763

Current liabilities Liabilities for expenses 8 45,000 50,000

Inter-company payable 9 664,089 724,803

709,089 774,803

Net current assets 2,878,410 1,155,960

Total 3,498,896 1,886,609

Financed by:

Authorised share capital: 1,000,000 Ordinary shares of Tk.100 each 100,000,000 100,000,000

Paid up share capital: 10,000 Ordinary shares of Tk.100 each 10 1,000,000 1,000,000

Retained earnings 11 2,498,896 886,609

Total 3,498,896 1,886,609


Chairman Managing Director

Signed in terms of our separate report of even date annexed.


I.Cons LimitedBalance SheetAs at December 31, 2007

I.Cons Limited

128

Amounts in TakaParticulars Notes 2007 2006

Operational revenue 12 8,793,000 1,893,635

Operational expenses: Staff salary 6,819,877 558,762

Office rent & maintenance 201,783 67,010

License fees 2,605 13,615

Bank charge & commission 1,175 1,100

Audit and professional fees 20,000 20,000

Communication expenses 98,533 -

Membership fees 5,000 -

Insurance expenses 8,221 -

Repair and maintenance 10,500 -

Depreciation 122,663 121,621

7,290,357 782,108

Operating profit 1,502,643 1,111,527

Non-operating income (Bank Interest) 109,644 24,865

Net profit for the year 1,612,287 1,136,392





I.Cons LimitedProfit and Loss AccountFor the year ended December 31, 2007

I.Cons Limited

129

I.Cons LimitedCash Flow StatementFor the year ended December 31, 2007

Amounts in Taka Particulars 2007 2006

A. Cash flows from operating activities:

Net profit as per profit and loss account 1,612,287 1,136,392 Less: Adjustments Depreciation 122,663 121,621

122,663 121,621

Advance, deposit & prepayments (106,231) (115,520) Increase of accounts receivable (918,000) - Increase of Inter company receivable (175,000) -

Decrease of liabilities for expenses (5,000) 10,000 Decrease of inter-company payable (60,714) 660,421 Total cash flows from operating activities: 470,005 1,812,914

B. Cash flow from investing activities:

Acquisition of fixed assets (12,500) - (12,500) -

C. Cash flow from financing activities:

- - Net cash flow (A+B+C) 457,505 1,812,914 Opening cash and cash equivalents 1,917,243 104,329 Closing cash and cash equivalents 2,374,748 1,917,243





I.Cons Limited

130

I.Cons LimitedStatement of Changes in EquityFor the year ended December 31, 2007

Particulars Share Capital Retained earnings Total Taka Taka Taka

Balance at January 1, 2006 1,000,000 (249,783) 750,217

Net profit for the year 2006 - 1,136,392 1,136,392

Balance at December 31, 2006 1,000,000 886,609 1,886,609

Net profit for the year 2007 - 1,612,287 1,612,287

Balance at December 31, 2007 1,000,000 2,498,896 3,498,896





I.Cons Limited

131

I.Cons LimitedNotes to the Financial Statements For the year ended December 31, 2007 Forming an integral part of the financial statements

1 Legal status and nature of the Company

I.Cons Limited was incorporated on 19 March 2004 as a Private Limited Company in Bangladesh under the Companies Act. 1994 having its registered office at SEL Centre (5th Floor) West Panthapath, Dhanmondi, Dhaka-1205. The company started operation from 1 July 2006.

Principal activities The principal activities of the Company are to carry out the business of IT products and services which includes among other things to develop, design and create computer programs and software and to sell, trade, import and export of such programs and software.

2 Significant accounting policies

2.a Basis of financial statements preparation

The financial statements are prepared on historical cost basis on generally accepted accounting principals in Bangladesh including Bangladesh Accounting Standard.

2.b Property, plant & equipment

Property, plant & equipments are stated at cost less accumulated depreciation. Details of fixed assets are shown in Note - 3

2.c Depreciation

Depreciation is calculated to write off the cost of property, plant & equipment by the straight line method over their estimated useful lives as follows:

Electrical equipment 20.00% Furniture and fixtures 12.50% Office decoration 10.00%

2.d Revenue recognition

Revenue is recognised when it is probable that the economic benefit of the product sold and services rendered will flow to the company and the revenue and costs associated with it can be measured reliably.

I.Cons Limited

132

4 Advance, deposit & prepayments Amounts in Taka

2007 2006

House rent 11,034 11,034 Advance income tax 13,450 2,486 Web hosting expenditure 95,267 -

119,751 13,520 5 Accounts receivable This represents amount receivable from the customer for providing software.

United Leasing Company Limited 870,000 - LankaBangla Finance Limited 48,000 -

918,000 - 6 Inter-company receivable This represents amount receivable from sister concern for providing IT maintenance service to the Company.

IDLC Securities Limited 175,000 - 175,000 -

7 Cash and bank balance

This represents bank balance at the end of the period with The City Bank Limited, Principal Office, Dhaka. 8 Liabilities for expenses

Audit & professional fees: Balance as on 1 January 50,000 40,000 Addition during the year 20,000 20,000

70,000 60,000 Less: Payment during the year 25,000 10,000 Balance as on 31 December 45,000 50,000

3. Property, plant & equipment

Sl

No.

1

2

3

Particulars

Electrical equipment

Furniture and fixture

Office decoration

Total

Total -2006

Balance

as on

01.01.2007

278,342

342,400

231,528

852,270

852,270

Addition

during the

year

12,500

-

-

12,500

-

Total

as on

31.12.2007

290,842

342,400

231,528

864,770

852,270

Rate

20%

12.5%

10%

Balance

as on

01.01.2007

55,668

42,800

23,153

121,621

-

Total

as on

31.12.2007

112,378

85,600

46,306

244,284

121,621

Written

down

value as on

31.12.2007

178,464

256,800

185,222

620,486

730,649

Charged

for

year

56,710

42,800

23,153

122,663

121,621

Cost Depreciation

I.Cons Limited

133

9 Inter-company payable Amounts in Taka

2007 2006

Various expenses paid by Holding Company 664,089 724,803 664,089 724,803

The above amount has been paid by IDLC Finance Limited to meet the various expenses such as office rent and maintenance, staff salary, licence fees and audit and professional fees. 10 Share capital

Authorised: 1,000,000 ordinary shares of Tk 100 each 100,000,000 100,000,000 Issued, subscribed and paid up: 10,000 Ordinary shares of Tk 100 each 1,000,000 1,000,000

Shareholding position at December 31, 2007 was as follows:

Sl No. Name of shareholder

1 IDLC Finance Limited 999,900 999,900 2 Mr. Anis A. Khan 100 100

1,000,000 1,000,000 11 Retained earnings

Previous balance 886,609 (249,783)Current year balance 1,612,287 1,136,392

2,498,896 886,609 12 Operational Revenue

Web designing 540,000 295,635 Service support 3,343,000 7,200 Softwear development 4,910,000 1,590,800

8,793,000 1,893,635 13 Income tax I. Cons Ltd. has been enjoying the tax exemption benefit up to 30 June 2008 as per SRO No. 216-AIN/IT/2005 dated July 17, 2005. 14 Related party transaction During the year under review, the Company does not have any transactions with related party, except as mentioned in Note No- 6 and 9.

15 Post balance sheet events

No material events had occurred after the balance sheet date to the date of issue of these financial statements, which could affect the values stated in the financial statements.

I.Cons Limited

134

16 Number of employee

The number of permanent employees engaged for the whole year who received a total annual remuneration ofTk. 36,000 and above was 8 and below Tk. 36,000 was nil.

17 Contingent liability

As at the end of the year there were no liabilities which were contingent or off Balance Sheet.

18 General (a) Previous year's figures have been re-arranged where necessary to conform to current period's presentation. (b) Figures have been rounded off to the nearest Taka.


I.Cons Limited

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 23rd Annual General Meeting

of the Company to be held on March 30, 2008 (Sunday) and at any adjournment thereof.

IDLC Finance LimitedBay's Galleria (1st Floor), 57 Gulshan Avenue, Gulshan-1, Dhaka-1212 Tel: 8834990, Fax: 8834377, E-mail: [email protected]

I hereby record my attendance at the 23rd Annual General Meeting of IDLC Finance Limited as a holder of

shares of the Company.

Signed this day of March 2008

Signature Signature

Name

Folio/BO ID No. Folio/BO ID No.

(Member)

Signature

Name

Folio/BO ID No.

(Member/Proxy)

(Proxy)Name

IDLC Finance LimitedBay's Galleria (1st Floor), 57 Gulshan Avenue, Gulshan-1, Dhaka-1212 Tel: 8834990, Fax: 8834377, E-mail: [email protected]

IDLC FINANCE LIMITED

IDLC Annual Report 2007 (1)

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