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GREEN BANKINGFor sustainable economy

CL is proud to be a part ofsustainable development in

Bangladesh. We invest in the economic,social and environmental sustainability ofthe community we serve. As supporters ofecological sustainability, we understandthat each individual and business must dotheir part to maintain our quality of life.We believe that our success is directlylinked to the sustainability of ourcommunity and the natural environment.We also believe that actions speak louderthan words by establishing greeninitiatives within our organization. Wehope to do our part to create an evenbrighter future for our organization andthe community we serve.

GREEN BANKING IS MORE THANMONEY. OUR COMMITMENT TOGREEN GOES BEYOND MONEY.WE’RE COMMITTED TO HELPING

THE ENVIRONMENT. WEENCOURAGE TAKING STEPS TOREDUCE ENERGY & EMISSION,

REUSE AND RECYCLE THE WASTESAND HELP IMPROVE OUR

ENVIRONMENT

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SAVE NATURELIVE LONG

“Our task must be to free ourselves... by widening ourcircle of compassion to embrace all living creatures

and the whole of nature and its beauty.” Albert Einstein

Group Profile 4Corporate Framework 5Our Vision 6Our Mission 7Our Goals 8Core Values 9Overall Strategic Objectives 10Business Principles 12Ethical Principles 15Products & Services 16

Statement from the Chairman 18Statement from the Managing Director & CEO 20Management Review & Financial Analysis 22Five-years Financial Summary 40Graphical Data of Business Performance 412013 Social Indicators 452014 Key Priorities 46

Board of Directors 48Board Structure and its Operation 53Charter of the Board and its Committees 55Directors’ Report 57Audit Committee Report 79Report on Internal Control 81Directors' Responsibility in respect of the financial statements 84Responsibility of CEO and CFO in respect of Financial Reporting 85Report on Internal Control over Financial Reporting 86Chairman’s Statement on Corporate Governance 87Corporate Governance 88Ethical & Compliance Statement 103Professional Certificate on Compliance of Conditions on Corporate Governance 107Compliance Report on BSEC’s Notification on Corporate Governance 108Compliance Report on Bangladesh Bank’sGuidelines on Corporate Governance 113Report on Going Concern 115Report on Risk Management 117Senior Management 133Management Committees 136Organization Chart 138

CONTENTS What’s inside

An overview of the groupand a description of

vision, mission, values,strategic objectives,

ethical principles and ourbusiness activities

An introduction to theBoard and its committees

along with the Charters,group’s approach to

corporate governance andrisk management,

compliance status on thecode of corporate

governance, Directors andManagement

responsibilities in respectof financial reporting,

management committeesand their roles

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Union Capital Limited 2013 Annual Report 3

Our approach tosustainable development

and human resource,environment initiatives,

human resourceaccounting and report on

value added and itsdistribution SU

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Audited financialstatements of theGroup and Union

Capital Limited, keyaccounting policies and

applicable BFRS

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Audited financialstatements, and

accounting policies ofUCL’s subsidiaries

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Invitations from theChairman, notice of AGM,

financial calender andother useful informations

and contact details forshareholders SH

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Framework for Responsible Business 140Corporate Social Responsibility 142Environment Initiative 148Corporate Culture 149Contribution to National Economy 151Human Resource Report 154Human Resource Accounting 157Value Added Statement 160Market Value Added Statement 161Economic Value Added 162

Auditors' Report to the Shareholders 164Consolidated Balance Sheet 166Consolidated Profit and Loss Account 168Consolidated Cash Flow Statement 170Consolidated Statement of Changes in Equity 171Balance Sheet of UCL 172Profit and Loss Account of UCL 174Profit and Loss Account (Merchant Banking Operation) 176Cash Flow Statement of UCL 177Statement of Changes in Equity of UCL 178Statement of Liquidity Analysis of UCL 179Notes to the Financial Statements 180

UniCap Securities LimitedAuditors' Report to the Shareholders 224Statement of Financial Position 225Statement of Comprehensive Income 226Statement of Cash Flows 227Statement of Changes in Equity 228Notes to the Financial Statements 229

UniCap Investments LimitedAuditors' Report to the Shareholders 231Statement of Financial Position 232Statement of Comprehensive Income 233Statement of Cash Flows 234Statement of Changes in Equity 235Notes to the Financial Statements 236

Letter of invitation from the Chairman 238Questions form Annual General Meeting 239Notice of 16th Annual General Meeting 241Form of Proxy 243Financial Calender 2013 245Company Milestones 246Redressal of Investors complaint 247Other useful Information for Shareholders 248Definitions 250General Index 254CG Index 256

UCL is a financialservices groupoperating inBangladesh. UCLGroup has two principalsubsidiaries: UniCapSecurities Limited andUniCap InvestmentsLimited. Both thesubsidiaries areproviding capital marketservices while UCL is anon-banking financialinstitution provides acomprehensive financialservices. UCL’s ordinaryshares are traded onboth the Dhaka andChittagong StockExchange since 2007.

GROUP PROFILE

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CL and its subsidiaries constitute one of the largest financialgroups, which began its activities more than 15 years ago.

UCL’s predecessor, Peregrine Capital Limited was established in1988 based in Hong Kong. UCL is involved in a variety of financial and non-bankingactivities, in Bangladesh. The Group operates through UCL andits subsidiaries having 5 branch officess located in Dhaka,Chittagong, and Sylhet.UCL’s policy is to provide its customers with comprehensivefinancial solutions, high-level professional services, and a widevariety of products adapted to each customer's needs. To implement its strategy, UCL operates through differentbusiness lines, with each business line providing financialservices to a particular customer segment: Corporate FinancialServices including leasing and term finance to SMEs and largeenterprises of different sectors, Capital Market Services includeissue management, share trading and portfolio managementthrough its subsidiaries and Retail Customer Services includedeposit schemes and personal lending.

THE GROUP PROVIDES� Different deposit mobilization schemes� Corporate and SME finance� Investors portfolio management� IPO and rights issue management� Corporate advisory services� Margin loan for investment in securities� Share trading for retail and corporate investors

BUSINESS CLUSTERS� Union Capital Limited (NBFI)� UniCap Securities Limited

(a member of DSE and CSE)� UniCap Investments Limited (Full fledged merchant bank)

FOCUS� Local Market� Access to major areas of investment services� Building strong investment portfolio� Deliver legendary customer experiences� Be an extraordinary place to work� Operate with excellence� Take only risks that we understand and can manage� Enhance our brand image� Increase shareholder value

LOCATION� Registered office in Dhaka� Major operating centres in Dhaka� Branch network in Dhaka, Chittagong and Sylhet

Sketch UCL’soperational sphere

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Union Capital Limited 2013 Annual Report

Our

Vision

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CORPORATE FRAMEWORK

Our vision is to be asustainable financialinstitution with a specialfocus on enhancing valuefor all stakeholdersthrough excellence inperformance and goodgovernance.

We follow our guiding principles to :�� Deliver legendary customer experience;� Be an extraordinary place of work;� Operate with excellence;� Understand our business;� Take only the risks we understand and can

manage;� Enhance our brand image;� Increase shareholders’ value.

Our leaders :� Make an impact;� Build for the future;� Inspire the Will to win;� Work effectively in teams;� Live transparency;� Show excellent judgement;� Demonstrate unwavering integrity.

We are committed toreturning superior value toour stakeholders throughleadership in innovation,an absolute focus oncustomers and operationalexcellence, while costsneed to be at least in linewith our competitors.

Based on our vision, wehave chosen to givepriority to our overallstrategic objectives thatcreates the foundation forstrong growth and focuseson continuous valueenhancement.


UCL Group’sframework outlinesour Vision, Missionand Strategy alongwith our GuidingPrinciples andexpectations ofleaders. It outlines ina simple way whowe are, what westand for and howwe get things done.It’s easy foremployees tounderstand andincorporate in theirday-to-day work.Most importantly, itapplies to everyoneat UCL Group.

CORPORATE FRAMEWORK Outlines Vision, Mission, Strategyand Guiding Principles


Vision possesses realpower in settingdirections, motivatingaction, and guidingdecisions. It helpsdelivering quality serviceswith measurable resultsand achievements;evolving quickly;communicating clearly;collaborating withpartners; makingdecisions that are timelyand focused; andinnovating and lookingforward

OUR VISION The overall aspiration of the businessthat sets out what we want to be

ur vision is to become a leading and sustainable financialinstitution providing integrated financial services that reflects

its principles and values by aligning with our mission giving specialfocus on enhancing value through excellence in performance andgood governance for our stakeholders.

Our Shareholders Maximizing shareholders’ wealth achievingsuperior performance;

Our Customers Developing strong and mutual beneficialrelationships working closely with our customers;

Our Emplyees Providing a safe and supportive workingenvironment for our employees;

Our Community Be good citizens supporting communityinitiatives in health, education, arts and socio-economicdevelopment;

Our Environment Protecting our environment and benefit thecommunity where we work.

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CL Group is a fast growing financial institutions in the communitywhere we work. Our mission is to be the best run, customer-

focused, integrated financial institution with a unique and inclusiveemployee culture. We are committed to returning superior value to ourstakeholders. We will achieve this through leadership in innovation, anabsolute focus on customers and operational excellence.

Shareholders Our responsibility to our shareholders is to effectivelymanage our physical, financial and human resources to increaseshareholders’ value through employee commitment to excellence.

Customers We are dedicated to serve our customers and we believe ourfirst responsibility is to our customers. We will strive to meet our customers’need by providing high quality product and services of superior value. Webelieve our customers’ success determines our future.

Employees We provide responsible leadership and a clear vision of thefuture to all of our employees. We expect our people to maximize theirpotential, to consistently achieve a high level of performance. We willprovide a safe, productive work environment in which each employee willbe treated as an individual with fairness, dignity and respect. We willrecognize and reward creativity, individual initiative and superiorachievement.

Community We provide quality products and services to meet the needsof the society. We will maintain high ethical standards, obey all laws, andrespect local customs.

Environment We work together with all stakeholders to reduce ourenvironmental impact by embedding the environment into our businessand by involving our employees, our customer and our community.

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OUR MISSION The overall purpose of the business that setsout how we are going to achieve our vision

Our mission issupported by twofundamental principlesthat provide thefoundation for all of ouractivities: Ethicalprinciples and CoreValues. Attaining ourmission requiressuperior and continuallyimproving performancein every area and atevery level of theGroup. Ourperformance will beguided by clear andconcise strategicobjectives for eachbusiness unit.

We will leverage thestrengths of UCL Groupe.g. talented people,outstanding innovationcapabilities, a strongbrand, leading marketpositions and a solidbalance sheet – todeliver long-termshareholders’ value.

Union Capital Limited 2013 Annual ReportUnion Capital Limited 2013 Annual Report08

OUR GOALS General statements of whatbusiness intends to achieve

ur goals is to enhance shareholders’ value throughdeep understanding of our businesses and markets

and by building sustainable competitive advantage ineach business. In doing so, we will leverage thestrengths of UCL e.g. talented people, outstandinginnovation capabilities, a strong brand, leading marketpositions and a solid balance sheet - to deliver long-termshareholders’ value through:

� Managing risk prudently;� Building quality investment portfolio;� Developing reliable and long-term relationship

with our customers;� Maintaining strong relationship with the

development partners;� Diversifying earnings stream through innovation;� Striving for continuous improvement developing

performance excellence in all we do.

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e believe our strength is rooted in our core values: putting integrityfirst, building trust, working together, pursuing excellence, ensuring

transparency, embracing challenge and serving our community. Thesevalues are our legacy and our future. We never lose sight of ourfounding principles and our proud heritage. Our business is alwaysevolving but we’ll always stay true to who we are. They always havebeen. They always will be. Since its inception, UCL Group has beengoverned by its core values. They shape the culture and define thecharacter of our company. They guide how we behave and makedecisions. This is just one of the many ways that we continuallyreinforce the values on which this company was built.

Integrity We are honest in everything we do. We work hard to makesure that the integrity remains a priority for everyone at UCL - every day,at every level of our Company.

Trust We work deligently to build a deeper level of trust with our clientsand fund providers through appropriate investment ideas and valueadded services.

Teamwork We believe that highly qualified, motivated professionalsworking together in an entrepreneurial environment results in achievingUCL’s vision, mission and goal.

Openness We are open, honest and fair in what we say and do andaccountable to all including the community for our actions and inactions.

Transparency We are focused on the highest level of transparencyproviding timely and accurate information about company's performanceand financial results to meet the stakeholders’ expectation.

Excellence We aspire to achieve excellence in all that we do. Wedeliver what we promise and add value that goes beyond what isexpected. We pursue continued growth and strive to achieve the highestlevels of performance in all endeavors.

Resilience We welcome a challenge; we show strength of character,remain positive, even when things are tough; we see difficulty as anopportunity to demonstrate our ability.


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CORE VALUES The basis of our success that setsout what we collectively believe inand guide our behaviours

Seven core valuesdrive UCLemployees andmanagement indelivering results toour shareholders,clients and thecommunity weoperate in. Pursuingand living up tothese values is aresponsibility wetake great pride in.


As an integratedfinancial serviceprovider, UCL Groupoperates in a dynamicmarket environmentcharacterized by highpressure in terms ofcompetition, innovationand costs. We counterthis pressureforesightedly with ourcorporate strategy.

OVERALL

STRATEGIC OBJECTIVES More precise and detailedstatements of the goals

ur strategic objectives are a medium term step in the journeytowards the vision what we are doing over the next few years. We

will build on our core regulated business based on financial discipline todeliver sustainable growth and superior financial performance. Based onour vision and target image, we have chosen to give priority to thefollowing overall strategic objectives that creates the foundation forstrong growth and focuses on continuous value enhancement.

INTENDING TO RANK AMONG THE TOP IN MARKETS WHERE WEDO BUSINESSWe offer leading services in the fields of financing and capital market.Our products facilitate solving both short term and long-term financialfunding requirements. We deliver innovative solutions to cater customers’diverse needs for our services. Our services lead the field in terms ofquality and sophistication. In the area of capital market operations, weoffer a broad, modular range of products – with well-engineeredcomponents like corporate reengineering, capital restructuring, exploringdiverse funding sources, etc. The constant, ongoing development of ourproducts in our selected markets, leasing, term finance, SME finance,real estate finance and issue management, underwriting, portfoliomanagement, share trading and corporate advisory services throughsubsidiaries helps us to rank among the leading financial institutions.

GROWING STRONGLY COMPAREDTO OUR MARKETSOur strength in innovation, our marketexpertise, our focus on the constantlyrising level of quality portfolio and ourgearing towards SME markets shallallow us to achieve targeted revenue inthe coming years. Assuming no furthercrashes in capital market, we anticipateconsiderable growth in revenue incoming years, even with a relativelysmall rise in macro economic indicators.Our growth course will be buoyed by therising demand among the customers forproducts and services.

ENHANCING OUR EFFICIENCY ANDPRODUCTIVITY In recent times, we have made ourpresence even more efficient andproductive providing services more inthe areas that give better return. We will continue to pursue this policysystematically. The interaction of our growth, efficiency and productivityorientation allows us to offer competitive price always expected by ourcustomers. Our cost discipline throughout the group extends across allstages of operations more particularly in the areas of fund mobilizationand where possible, we utilize multi-sourcing and secure our volumes inthe long term.

STRIVING FOR A BALANCED GROWTH OF REVENUES In our two pillars – the financing operations and the capital marketoperations – we have a stable footing that should protect us from thecyclical fluctuations of the financial markets. This is why we are aiming togenerate major revenue directly from financing activities and adequateamount from capital market operations in the medium term. Today, theshare of revenue from financing activities is still higher than capital

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We deliver innovativesolutions to catercustomers’ diverseneeds for our services.Our services lead thefield in terms of qualityand sophistication. Inthe area of capitalmarket operations, weoffer a broad, modularrange of products – withwell-engineeredcomponents likecorporate reengineering,fund restructuring,exploring diverse fundingsources, etc.


market. We are pursuing three strategic directions inthis regard: Firstly, we are investing specifically in theSME sector and large industries having goodrepayment track record and strong cash flowmanagement; secondly, we are actively increasingour endeavors in managing our investment portfoliowith the objective of minimizing the NPL at athreshold level; thirdly, we are boosting our businesswith customer-specific solutions. More importance willbe attached to the growth of SME financing in thisregard.

GROWING INTERNALLY AND EXTERNALLY UCL has been growing organically and has alsosuccessfully integrated with its subsidiaries namelyUniCap Securities Limited and UniCap InvestmentsLimited. UCL operates as one family and pursuescommon goals with the help of a strong identitybased on the values given on page 9 of this report,that creates the requirements for a competitive, high-performance culture. Our proven ability to achieveinternal and external growth will aid our developmentin the future as well.

SAFEGUARDING OUR GROWTH IN THE LONGTERM WITH A SOLID FINANCING PROFILE Our goal is to ensure that ongoing investmentrequirements are financed from the operating cash

flow. Otherinvestment projectsshould be financedfrom new andadditional debt toachieve a constantstabilization orimprovement in theUCL's costs ofcapital. Owing inparticular to ourcurrent investmentclimate and theeffects of thelingering liquidity

problem on the financial markets as well, we arepursuing the target of maintaining the gearing ratio ata realistic level. If justified by special financingreasons or special market circumstances, we can riseabove this level for an appropriate period.

REGARD OUR EMPLOYEES AS THE KEYFACTOR IN OUR SUCCESS As an innovative company that plays a leading role inquality, the expertise of our employees is ofenormous importance as it would not be possible toimplement this strategy successfully without them.Utilizing comprehensive promotion and trainingactivities, we strive to be seen as an employer ofchoice at all levels on the job market.

BUILDING REVENUE MOMENTUM, GOODMARGIN IMPROVEMENT, HIGH CASHGENERATION, EARNINGS PER SHARE GROWTHAND GROWING RETURNS ON CAPITALWe are well positioned in markets with attractivelong-term growth prospects sustained by thecontinuing demand for financial services. We have aclear investment led growth strategy focused onbuilding revenue momentum across all ourbusinesses. This, together with improvements in costefficiency and organizational effectiveness, will flowthrough to operating profitability and cash flow.

Business strategy isconcerned with decidingwhich markets and activitiesUCL should be involved in;where it wants to be; andhow it is going to get there.Strategy is about makinghigh-level decisions andforms the managementgame plan for ...

� Satisfying customers(meeting customer needs)

� Running the business(organizing resources inthe most efficient andeffective way)

� Beating the competition(strategies and tactics togain competitiveadvantage)

� Achieving corporateobjectives(building on our corporateframework)

We are well positioned inmarkets with attractivelong-term growthprospects sustained bythe continuing demandfor financial services. Wehave a clear investmentled growth strategyfocused on buildingrevenue momentumacross all our businesses.


Our Business Principlesdefine how we operateand express our corevalues and behaviours.We believe thatoperating in accordancewith our BusinessPrinciples is essentialfor sustainableperformance and long-term value creation.

BUSINESSPRINCIPLES The roadmap on how UCL operates

and why we make our decision

ertain principles are so fundamental to our success that we would liketo follow in every business we operate. If we can adhere to these

principles – and they are not in order of importance – we will reach ourgoal of becoming the best financial services provider in Bangladesh. Wealso hope those give us a roadmap on how and why we make ourdecisions.We would like to create a financial group that all can be proud of, and weare confident that, working together, we will build one of the best financialservices companies in Bangladesh.

ASPIRE TO BE THE BEST

Grow organically providing superior services in every business weoperateTo be a great Company must have the ability to deliver good returns andsolid growth over time. To achieve these results, we must provide ourcustomers with a broad, complete and quality products and services. Wemust also demonstrate our ability to grow organically (e.g., new products,gaining market-share).

Consistently delivering the best products in a cost-effective wayWe must offer outstanding products and services and being helpful,courteous, quick and consistent follow up in the customer’s best interest.We need to be keenly aware of the competitive landscape and quick to act.We must exceed customers’ expectations and constantly make it easier forthem to do business with us.

Innovate in all actions we takeWe need to build forward-looking ideas into every conversation, everyanalysis and every new product we look at for that we will take somecalculated risks, knowing that some may fail.

Create strong brands that carry a commitment of quality and integrityUCL Group is not only a promise to customers, but also a commitment wemake to ourselves about who we are andjust how good we want to be. Thiscommitment goes well beyond creating aname. To be powerful and trusted, ourbrands must be brought to life by thepeople who represent them for which weneed to deliver on the promise every day.We want to be one of the best financialservices providers in Bangladesh.Because of our excellent platform, webelieve this is within our reach. We cannotpromise specific outcomes or risk-freeresults. What we can and will promise is toshare the truth, and offer honestassessments of our businesses and our prospects; act with integrity andhonor; do the right thing so that our shareholders, employees, customersand community can be proud.

EXECUTE MAGNIFICENTLY

Demand and maintain strong financial disciplineFinancial discipline is foundation of great companies, particularly financialcompanies. Financial discipline – including sound accounting standards,

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Business principles areso fundamental to thesuccess that we wouldlike to follow in everybusiness we operate. Ifwe can adhere to thoseprinciples we will reachour goal of becomingone of the best financialservices provider inBangladesh.


transparent public reporting and great managementinformation systems – leads to high-quality earnings thatare recurring and predictable in nature; yields highreturns on capital; produces good margins; and providesreasonable risk relative to the capital deployed.Financial discipline must be matched with superior–riskmanagement. If we properly manage risk, we should geta good return through the cycle, not just during the goodtimes. It is a trade-off we will always be prepared tomake.

Create and maintain a strong financial conditionA strong balance sheet is critical to managing successfulbusiness. Having appropriate reserves, strong capitalratios and strong credit ratings allows us to withstanddifficult events while giving us the flexibility to deploy ourcapital as we see fit – such as increasing our dividends,taking sectoral exposure, investing in subsidiaries,investing in our businesses, or simply doing nothing. Wewill deploy our capital wisely and in the shareholders’best interest. This is one of our most important goals.To build a strong balance sheet, we must thoroughlyunderstand all our assets and liabilities; make sure thatwe use sound, and appropriate accounting; and havestrong controls in place.

Maintain the best systems and operations Financially stong companies consistently build anddevelop the best infrastructure. The best systems andoperations give them the ability to meet the needs ofcustomers and exceed their expectations for service.Superior performance requires spending more andgetting more from every amount we spend. We mustrelentlessly focus on integrating and upgradingtechnology, and on aggressively consolidating,streamlining and standardizing our operations, all ofwhich help to push decision-making and authority to thefield. We believe that efficient operations will be critical inthe financial services business, and therefore we need toembrace and integrate them into everything we do. Weneed to continually strive to give our customers more,better and faster.

Eliminate bureaucracyWhile appropriate rules and procedures are critical to thecontrol and discipline of an entity, unnecessary rulestranslate into bureaucracy, which destroys initiative,neutralizes passion, stifles creativity, eliminatesaccountability, and makes it hard for people to do a goodjob and for managers to manage well.

Maintain good governance practices and internalcontrols Good governance is vital for effective management. Itties together all our businesses we do with a common setof rules, expectations and oversight activities. These helpsafeguard our reputation, which we believe is one of ourmost important assets, and align the company’sperformance with the best interests of our shareholders.

Measure performance through a balanced scorecardA mark of a winning company is its ability to outperformits competitors, regardless of economic conditions. A

company may improve profitability in the short run bytaking on additional risk and cutting back oninvestments but it may be the kind of growth onecomes to regret. Our commitment is to build UCLGroup that can thrive in any environment.To reach that level of performance requires using abalanced scorecard that goes beyond earnings toaddress many questions, such as:� Are we recruiting and developing talented people? � Are we innovating better products? � Are we relentlessly improving our core processes? � Are we making good returns on capital?As important as strategy is, we have got to execute towin. Execution involves every employee and everycontact we have with customers. We must act quicklyon problems; drive for results, not just activities; andensure detailed follow-up so that we meet ourcommitments.

BUILD A GREAT AND WINNING CULTURE

Operate with the highest standards of integrityEthical behavior does not just happen rather it needsto be cultivated and repeatedly affirmed throughout theorganization. Maintaining the highest standards ofintegrity involves being honest and doing the rightthing for our customers, employees, shareholders andall other partners.

Train and retain great peopleWe need to continually hire and train talents. Theyalways drive for superior performance, buildingteamwork within and across our group business. Theyact quickly on tough issues, relentlessly strive toimprove performance, demonstrate a passion to winand develop their colleagues.

Be open and honest with ourselves, ourcolleagues, our shareholders and our communityWe must build a culture based on truth, knowledge,constructive debate, a passion to win, and the courageto face and fixmistakes. Ourresponsibility is tocreate a company thatpromotes this kind ofconstructive exchange.We believe this is thehardest part ofleadership – we musthave the fortitude andcourage to take actionand do the right thing.Leadership is an honorand a privilege, andcarries theresponsibility to set theright example.All our employeesmust be engaged infacing the challenges and solving problems. The key isto never stop learning, to share ideas and always

We cannot promisespecific outcomes orrisk-free results. Whatwe can and will promiseis to share the truth, andoffer honestassessments of ourbusinesses and ourprospects; act withintegrity and honor; dothe right thing so thatour shareholders,employees, customersand the community canbe proud.

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acknowledge mistakes. Our commitment is to create aself-sustaining culture that strives for continualimprovement, which will ensure the health of thiscompany in the coming years.

Fair share of performanceWe want employees to think and act like owners andpartners. We want to offer them an appropriate shareof financial performance. A successful Company always provides people withcompetitive compensation, the opportunity to benefitas the company grows and a rewarding career path.

Foster an environment of respect andinclusivenessWe need to constantly remind ourselves that the mostimportant thing we can do for employees is to build a

healthy and vibrant companythat treats people with respectand creates opportunity. Wehave to remember that we allsupport one another. Above all,it means doing what is right forthe company and thecustomers.We strive to create a moreinclusive work environment thatdevelops the best talent.Building a diverse and inclusivework environment requires effortand perseverance, which is whywe will make inclusiveness anddiversity an integral part of howwe manage the Group.

Give back to our societyWe believe that building a strong and vibrant company,will eventually benefit not only our shareholders, buteveryone we touch. It is what enables us to give backto our community. In one sense, we view ourselves asa small business. But we are striving to be assupportive as we can. We are committed to addingvalue by focusing on issues that are universallyimportant, including education and communitydevelopment.Our greatest source of pride, however, is ouremployees, who contribute a good amount of time andtalent to worthwhile causes of the society. Ouremployees continue to volunteer their participation incommunity work.

Eventually, it all comes down to people. Creating awinning team and a self-sustaining culture takeshard work, and there is no substitute for it. Teamswin because they are disciplined, they work welltogether, they execute consistently and they have apassion to win.We follow our guiding principles to:� Deliver legendary customer experiences;� Be an extraordinary place of work;� Operate with excellence;� Understand our business;� Take only risk we understand and can manage;� Enhance our brand;� Increase shareholders’ value

As important asstrategy is, we havegot to execute to win.Execution involvesevery employee andevery contact we havewith customers. Wemust act quickly onproblems; drive forresults, not justactivities; and ensuredetailed follow-up sothat we meet ourcommitments.

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he Company is committed to conducting business on the basis ofmorality and to create added value to its shareholders and also to

put unwavering efforts to ensure that all stakeholders are fairly treated. Itis the duty and responsibility of all Directors, Executives and staffspresence to faithfully follow the Business Ethics and comply with thepolicies and practices stated in this Code of Conduct. The Company’sultimate goal is to achieve its business objectives for the benefit of allstakeholders.

ETHICAL RESPONSIBILITIES TO THE CUSTOMERS� We always think from the customers’ point of view.� We treat our customers with care and courtesy, and accommodate

customer complaints and suggestions with humility.� We safeguard customer assets.� Management of customer assets is, in principle, done only with

customer consent.� Customer assets must not be used for the benefit of the Company,

directors or employees.� We handle personal and financial customer information as required

by law.� We avoid unfair dealing with customers.� We do not accept gifts or entertainment from customers.� Illicit monetary dealing with customers is not tolerated for whatever

reason.

ETHICAL RESPONSIBILITIES TO THE SHAREHOLDERS� We provide long-term, stable return to shareholders through sensible

investment and prudent management.� We prepare and retain financial records in accordance with BFRS and

applicable rules, and provide company information to shareholdersaccurately and fairly.

ETHICAL RESPONSIBILITIES TO THE SOCIETY� We comply with all applicable laws, rules, and regulations, and uphold

the highest standard of business ethics and business principles.� We compete fairly, relying on the merits of our products and services.� We refrain from unreasonable business practices and create new

standards for competition, to promote healthy growth of the industry.

ETHICAL RESPONSIBILITIES TO THE COMPANY� We respect the dignity and rights of each other.� We are a family committed to common values.� Supervisors, subordinates, and co-workers all must work to build

mutual trust and respect.� Supervisors must not take advantage of their position to give unjust

orders or demand gifts from subordinates. Any kind of harassment inthe workplace is not tolerated.

� We safeguard corporate profits and property.� We safeguard tangible and intangible company assets.� Company assets must not be used for personal gain, and all reasonable

measures must be taken to keep business information secure.

ETHICAL RESPONSIBILITIES TO THE PROFESSION� We maintain professional competence and keep abreast of cutting

edge information and knowledge, continually developing professionaland financial expertise.

� We fulfill our fiduciary duty to customers, and faithfully do our part asmembers of UCL Group.

ETHICAL PRINCIPLES The qualities of virtue, truth and justicethat guides our decision making

Behaving in an ethicalmanner can createpositive businessresults. A businessenvironment thatpromotes and upholdsstrong values is usuallya happier and moreproductive workplace,and customers receivegood service so theykeep coming back.

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Across ourbusiness group, weoffer a completerange of financialservices to helpclients achieve theirgoals. We providestrategic advice,lend money, raisecapital, helpmanage funds andextend supports,and hold leadershippositions in all ofour major businessareas.

PRODUCTS & SERVICES The strength of diversity

s a full service financial institution, UCL�Group offers tailoredproduct and services to meet appropriate and diverse needs of

our customers, which include:

FINANCING AND INVESTMENT PRODUCTSLease Finance l Term Finance l Project Finance l CorporateFinance l Syndication Finance l SME Finance l ApartmentFinance l Real Estate Finance l Bridge Finance l Construction &Renovation Finance l Unsecure Personal Loan l Car Finance lStudent Finance l Professionals Loan l Venture Capital

CAPITAL MARKET SERVICESIPO Management l Rights Issue Management l Underwriting lPortfolio Management l Margin Loan l Pre-IPO Placement lShare Trading l Investment Management l CorporateRestructuring l Corporate Advisory Services l Equity Investment lFund Raising

DEPOSIT PRODUCTSFixed Term Deposit l Monthly Income Deposit l Periodic IncomeDeposit l Cumulative Income Deposit l Double Money Deposit lTriple Money Deposit l Millionaire Plus (MPlus) l Monthly SavingScheme (MSS) l Profit First Deposit l Home Planning Deposit lMarriage Deposit l Education Deposit

A

BUSINESS REVIEWIN THIS SECTION

Statement from the Chairman 18

Statement from the Managing Director & CEO 20

Management Review & Financial Analysis 22

Five-years Financial Summary 40

Graphical Data of Business Performance 41

2013 Social Indicators 45

2014 Key Priorities 46



n a year that posted negative credit growth and increase in non-performing loans in the overall financial sector of Bangladesh, Union

Capital Limited has succeeded in i) increasing its investment portfolio by 45percent; ii) reducing the percentage of its non-performing loans by almosthalf; and iii) increasing its net profit by a staggering 150 percent.The year 2013 for Bangladesh was unfortunately marked by significantpolitical unrest, which included about more than 85 days of strikes andblockades. This political turmoil left an adverse impact on the overalleconomy of Bangladesh, and the financial sector was no exception. Therehas been an overall decline in the credit growth of the financial industrycoupled with an alarming increase in non-performing loans. However, I am pleased to announce that Union Capital Limited prevailedagainst all odds and succeeded in delivering remarkable growth to itsinvestment and profitability. Some of the highlights of the performance are asfollows:� Net profit before tax for 2013 was Tk. 208.59 million, almost 92 percent

higher than the previous year. The operating profit also reflected a strongincrease of 139.44 percent year on year, following strong operatingrevenue. The net profit after tax was Tk. 141.76 million registering agrowth of 150 percent over last year.

� The overall investment portfolio of the Company increased by 45percent, which was made possible by the relentless efforts of themanagement. I would like to assure you in the strongest possible termsthat investment growth has not come at the cost of compromise on theasset quality. The Board and Management exercised highest level ofdiligence and scrutiny prior to approving any investment.

� The percentage of Non-performing Loan stood at 16.25 percent at theend of 2012. Owing to management’s effort in boosting recovery ofclassified loans, a significant amount of bad loans were successfullyrecovered. In addition, due to the increase in the investment portfolio andwriting-off selective NPL, the aggregate percentage of Non-performingloan for the year ended 2013 stands at 8.85 percent.

The achievements for the year have been possible due to the hard work ofall employees led by our Managing Director, Md. Akter H. Sannamat FCA, FCS.Our employees are at the heart of our growth. They are passionate aboutwhat they do and are dedicated to the Company’s sustainable growth. Tobuild a sustainable financial institution, we are fostering the necessaryculture and comprehensive approach in all of our operational areas. My

STATEMENT FROM

THE CHAIRMAN

We have passedanother year ofprogress for UCL inwhich we havedelivered solidinvestment portfolioand improved profit.We have achievedthis against a tougheconomic backdropand politicaluncertainty.

Good governance plays acritical role in ensuring thatUCL remains a successful andsustainable company. A keyelement of this is ensuring thatthe Board has the right mix ofindividual non-executivedirectors with the experienceand expertise, and who areprovided with the rightinformation and support, toconstructively challenge andsupport the executive team. Iam therefore pleased to reportthat the Board’s balance ofskills, expertise and attributes,including its diversity ofperspective, are enhanced bythe addition of two newDirectors in the Board.

I

appreciation goes to all employees in the UCL Groupwho in their own way, are shaping the UCL of thefuture.In this age of immense competition, both balancedand sustainable growth are the key for financialinstitutions like Union Capital Limited. Keeping that inmind, UCL has recently started satisfactorily financingto SMEs. In fact, SMEs own the major chunk of pie inthe graph of overall financing in Bangladesh. Webelieve it is not too late to give more focus on SMEfinancing since it is more rewarding as well associally viable than corporate lending. We recognizethat we have many things to explore in this area. Wehave a good customer base. Our procedures aresimple. We have an outstanding method forevaluation of a customer. Moreover, UCL has anautomated work flow system for providing superiorservice to our SME clients. We are thus leveragingour strength to capitalize the opportunity for our longterm and sustainable growth. I am proud to announce that UCL was conferredrecently a number of awards and recognitions inhome and abroad. The Company has received the

First Prize in theFinancial ServicesSector category inSAFA countries.Your company hasalso beenadjudged “OverallWinner” among allcategories of SAFAcountries inrecognition ofUCL’s BestPresented AnnualReport. SAFA - anapex body of theinstitutes ofProfessionalAccountants inSAARC countries,

evaluates every year very few selected listedcompanies for its excellence in corporate reporting. In2013, UCL has also been awarded Second Prize inICAB Best Published Annual Reports 2012.Winning such awards underscores UCL'scommitment to excellence in financial and corporatedisclosure and to the enhancement of best practicesin all areas of corporate reporting. UCL's corporatereporting practices have continued to evolve to keeppace with the ever-increasing expectations ofinvestors for greater transparency and betterinformation on which to base their investmentdecisions.I would like to thank my fellow Directors for theirprudent guidance to, and supervision of, themanagement. Good governance plays a significantrole in ensuring that UCL remains a successful andsustainable company. A key element of this is

ensuring that the Board has the right mix of individualnon-executive Directors with the experience andexpertise, and who are provided with the rightinformation and support, to constructively challengeand support the executive team. I would like towelcome Mr. Mohammad Nurun Nabi FCA theIndependent Director and Capt. Minhazur RezaChowdhury the Non-executive Director who joined on9 February last. Effective engagement with the shareholders is animportant part of my role as Chairman. In thisrespect, I was pleased to meet a number ofshareholders at last year’s Annual General Meeting(AGM), and look forward to once again meetingmany of you at this year’s AGM. I am also, of course,available throughout the year to meet our largershareholders on an individual basis.Whilst UCL faced significant challenges in 2013, wecontinued to make strong progress towards achievingour long-term goals and in delivering diverseproducts and services to our customers. Whilsteconomic uncertainties remain and some of ourmarkets will take time to recover, I believe that thekey enablers of our strategy, together with ourongoing investment and restructuring of functionalareas will support the continued growth of UCL in theyears ahead.In closing, let me express appreciation to my BoardMembers for their continued wise stewardship andstrategic guidance. I would also like to thank them fortheir commitment and for giving their time generouslyover and beyond scheduled Board discussions. I alsoexpress my appreciation to our team of talentedemployees for their passion, loyalty and dedication,and to our customers and partners for their continuedsupport.I take this opportunity to thank our regulatorsBangladesh Bank and Bangladesh Securities andExchange Commission and Stock Exchanges fortheir continued guidance and support extended to us. I conclude by reiterating my appreciation to all theshareholders of the Company who have taken thetime and effort to attend the Annual General Meetingin person. The suggestions, advice and constructivecriticism offered by our shareholders at the generalmeetings have always proved to be immenselyhelpful. I eagerly look forward to receiving yourthoughtful inputs at this 16th Annual General Meetingwhich will help us to drive the Company towardsexcellence.

sd/-Chowdhury Tanzim KarimChairman


The Statement from the Chairman

The success of anyorganization requires morethan just a sound businessstrategy. I am personallycommitted to ensuring thatethical leadership continues tobe embedded in our cultureacross our organization. UCL’sculture is a key ingredient toour success. It has roots inthe fundamental values we’veheld since our founding –things like putting customersfirst and always acting withrespect and integrity.

STATEMENT FROMTHE MANAGING DIRECTOR & CEO

We have acteddecisively in the lastyear to realign ourbusiness andstrengthen ourcompetitive positionsin the market wherewe do business. UCLis now betterstreamlined, furtherdiversified and solidlypositioned to revealthe corporate imagethat we have createdas a part of our long-term strategy.

013 was a difficult year for the financial sector and for the UCLGroup as well. While the first two quarters were not impressive, we

ended the year with an earnings of Taka 1.29 per share. There were manychallenges, and some of them were substantial. They included a sluggisheconomy, a decline in the quality of our assets, and the resultantprovisions and charge-offs. We acknowledge all of these challenges, andthose were the focus of our undivided attention and relentless effortsduring the year 2013. In the face of these challenges we had to restructure the operations andrebuilt the management team that had a significant outcome on theoperational results of UCL. Consequently, UCL has emerged from 2013 withits unique resilient. We have enough capital that exceeds all regulatoryrequirements. We have the ability to rely almost entirely on core fundingsources to fund our operations. Further, we have the opportunities that stillremain with a footprint that encompasses all of diverse businesses thatcould well flourish as the economy is expected to grow in the coming years.I joined UCL in the middle of 2012. While I saw a great many challengesahead for UCL, from first-hand observation, I appreciated the greatpotential this company still has, and I wanted to be a part of it. I amhonored and proud to be offered the opportunity to lead UCL into thenext episode of its long and respected history.

FOCUSED ON CORE BUSINESS OBJECTIVESThe financial results demonstrate the value of the solid foundation wehave built that has defined our company over these past years: adistinctive business model that generates multiple growth opportunitiesand the focused execution of a clearly defined operating strategy. Wehave established core business objectives to position ourselves forsuccess and continue to deliver growing value for our shareholders:� Maintain high quality of our portfolio and expand into new strategies;� Attract and retain top talent to support our business; � Capture greater market share; and� Optimize our capital structure to position the company for further

growth.We accomplished each of these objectives and generated solid financialand operating results in 2013 with a focus on continuing to producesustainable long-term value for our shareholders.


2

In today's emerging economy, building asustainable financial institution is harderthan ever especially for NBFIs. Leaders ofNBFIs are facing critical and manifoldchallenges in finding new and better ways toincrease top-line revenues, maintainnecessary capital ratios, improve margins,strengthen balance sheet and enhanceefficiency. Changes in regulatory policies,compliance, market volatility and issuesinvolving distressed lending and infectedassets added more concern.Moreover, an unhealthy environment hasemerged in the financing arena, wherebanks and NBFIs are competing acrossindustries for the same pool of customers.This competition has intensified further withthe entrance of new banks and FIs in thissmall economy. Thus, the financial serviceslandscape is undergoing a fundamentalchange. Timely insight and clear focus hasnever been more critical. Focus is now adays being given more on regulatorychallenges, innovation to meet thechanging needs of customers, restructuringfor growth, building trust and brand imageto seize the revenue growth where there isan opportunity.

SUSTAINABLE BUSINESS MODELEvery successful institution always looks to its corebusinesses for strength, balance and stayingtransparent, and these things are in place at UCL.

We are intensely focused onexecution and raising ourperformance to new levels. Astrong executive managementteam has put in place variousstrategies to steer thecompany back towards itsrobust growth curve, focusingon operational excellence,disciplined expense

management, and superior performance in our corebusinesses. We believe, our business model issustainable over the long term.

COMMITTED TO MEET CUSTOMERS’ NEEDSWe constantly strive to meet our customers’ presentand future needs, and are determined to furtherdevelop our relationship with them. With the objectiveof delivering even more personalized solutions toeach customer in a flexible, sensible manner, wehave embarked on a process of simplification.The objective is to reduce complexity in our operationand innovate in new solutions. We will simplify ourbusiness in terms of processes and products,focusing on the solutions that create the most valuefor our customers. This process of simplification willbe a journey of constant improvement to the benefitof our customers and UCL.Our strong customer focus and the relationshipstrategy will remain our guiding principle in our service

towards becoming thefuture leader in financialservice provider. Incontinued challengingtimes for our economies,we will contribute tostability and growth ininvestment and earningsby maintaining strongrelationship withcustomers. Also, bypursuing high operationalefficiency and better agility

in our products and services, we will ensure greatcustomer experiences and achieve our aim of makingit possible.

OUTLOOK We don’t expect to see any dramatic improvementsin our economy for 2014; therefore the conditions wehave to contend with to grow our business will stillpresent challenges and opportunities for us. We willbe re-doubling our efforts to expand our business,which, among other things, will include new financialservices and products and improved marketingtechniques.

We realize that the future still contains many challengesthat will require strong management oversight, and weare confident that we will meet these challenges; and indoing so UCL will have much to offer to our customersand shareholders. Their continued loyalty and support iswhat provides us the drive and determination for ourcontinued success. We look forward to having theopportunity to serve our stakeholders and especially toearn their on-going trust andconfidence.Assuming that the economic andpolitical landscape for the yearahead seems to be good, wehave hardcoded values andexperience and we believe thatour business is now betterstreamlined, further diversified and solidly positioned tounmask the franchise value that we have created inpursuit of our long-term strategy.The past year has shown us that we can managethrough the most significant of challenges and emergestronger than ever. We believe this is a testament to theenduring strength of the franchise we have built, andbodes well for our ability to create additional value forour shareholders in the future.

ACKNOWLEDGEMENTS We have many people to thank for helping us to deliverour better results in 2013. A special thanks to all ourcustomers for choosing UCL and allowing us to helpthem achieve their financial goals. We would like tothank our employees for embracing our commitment tohard work, integrity and placing the needs of ourcustomers above all else. I extend my utmost gratitude tothem for their united efforts, dedication and hard work inthe face of difficult conditions – as well as for theirwillingness to embrace change. And we would like tothank our shareholders for their continued support. Wealso thank the Board and the regulators for their supportand guidance during the past year.And finally, I would also like to express my sinceregratitude to our lenders and depositors for theircontinued support and confidence in these challengingtimes that underpin our future success.

Thank you.

sd/-Md. Akter Hossain Sannamat FCA, FCSManaging Director & CEO

I am personallycommitted toensuring that ethicalleadership continuesto be embedded inour culture acrossour organization.

We’re sharpening ourunderstanding of whatcustomers are lookingfor, how they want to dobusiness with us andmost importantly, whythey need our help.There are big changesgoing on in our industry.

The Statement from the Managing Director & CEO


The past year has shown usthat we can manage ourbusiness through the mostsignificant of challenges andemerge stronger than ever.We believe this is a testamentto the enduring strength of thefranchise we have built, andbodes well for our ability tocreate additional value for ourshareholders in the future.

he Managing Director & CEO and the Chief FinancialOfficer have signed a statement which can be found on

page 85 outlining management’s responsibility for financialinformation in the annual consolidated financial statements.This report describes UCL’s operations and financial conditionfor the year ended 31 December 2013. This should be read inconjunction with our consolidated financial statements for theyear ended 31 December 2013. Unless otherwise indicated, allamounts are stated in Bangladesh taka and have been derivedfrom financial statements prepared in accordance with BFRSand other applicable regulatory requirements.Certain prior year data has been reclassified to conform to thecurrent year’s presentation, including restatements arising fromtransaction of certain businesses between subsidiaries.

Index23 Who we are provides an overview of UCL Financial Group.23 Our strategy and Priorities outline our strategy and the

context in which it is developed, as well as our priorities.23 Caution regarding forward-looking statements advises

readers about the limitations and inherent risks anduncertainties of forward looking statements.

24 Factors that may affect future results outline certainindustry and company-specific factors that investors shouldconsider when assessing UCL’s earnings prospects.Accounting matters and disclosure and internal controlreview critical accounting estimates and changes inaccounting policies in 2013 and for future periods. It alsooutlines our evaluation of disclosure controls andprocedures and internal control over financial reporting.

25 Changes in Accounting Policies and BFRS26 Disclosure Controls and Procedures and Internal Control

over Financial Reporting27 Auditors Services and Fees

2013 financial performance and financial conditionreview provides a detailed review of UCL’s financialperformance by major income statement category andsegmental analysis and on our assets and liabilities bymajor balance sheet category.

27 Challenges in 201327 Major financial Indicators of 201327 Operating performance review27 Financial condition review32 Capital management33 Cash flow analysis33 Risk management outlines the specific risks that

management perceives its impact on our business and theapproach to managing those risk.Other disclosures provide information which managementdeems useful for investors.

36 Regulations37 Recent legislations38 Competition38 Communication with shareholders38 Human Resources39 Market for UCL’s ordinary shares


MANAGEMENT REVIEW& FINANCIAL ANALYSIS

The Managing Director& CEO and the ChiefFinancial Officer havesigned a statementwhich can be found onpage 85 outliningmanagement’sresponsibility forfinancial information inthe annual consolidatedfinancial statements.

Outlines UCL’s operationsand financial condition

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WHO WE AREEstablished in 1998, Union Capital Limited FinancialGroup is a diversified financial service provider basedin Dhaka. UCL has operations in both the principalsegments of financial market: capital market andfinancing & investment activities. Together with itsprincipal subsidiaries, UniCap Securities Limited andUniCap Investments Limited, UCL Group offers a widerange of complementary investment products liketerm/lease finance, SME finance, real estate finance,equity finance, etc. brokerage services, issuemanagement, underwriting, portfolio management andcorporate advisory services. UCL has 5 offices locatedin Dhaka, Chittagong and Sylhet. UCL is a publiclytraded Company listed in both the Dhaka andChittagong Stock Exchange.UCL’s business planning process is rigorous andconsiders the prevailing economic conditions, customers’growing needs and the opportunities available across ourlines of businesses. It includes clear and directaccountability for annual performance that is measuredagainst internal and external benchmarks and progresstowards our strategic priorities.

OUR STRATEGYChanges in the economic environment and their effectson our customers are ongoing. UCL focuses on helpingits customers and giving them confidence that they aremaking the right financial choices. It also drives theemployees to deliver their best in all endeavors.Recognizing that a company’s first responsibility is tobe well managed, we believe that the strength of ourbusiness model, balance sheet, risk managementframework and leadership team will continue togenerate sustainable growth. We remain steadfastlycommitted to our strategy, our customers, ourshareholders, regulators, lenders and the society as awhole which we operate in.

OUR PRIORITIES IN 2014� Drive quality earnings growth across all of our

businesses by focusing on industry leading customerexperience and enhancing operating efficiency;

� Accelerate the growth of our businesses by helpingour broad range of customers’ needs, particularly inSME segment addressing environmental risk whilemaking new business relationships;

� Build deeper customers’ relationships to delivergrowth in net income and strong ROE, whilemaintaining an appropriate risk/return profile;

� Develop our business in selected markets to growwith our customers;

� Expand our capabilities and reach new customers;� Sustain a culture that focuses on customers, high

performance and our people;� Become the employer of choice.

CAUTION REGARDING FORWARD-LOOKINGSTATEMENTSOur communications often include written or oralforward-looking statements. Statements of this type areincluded in this Annual Report, or in othercommunications are regarded as forward-looking

statements. Forward-looking statements may involve,but not limited to, comments with respect to ourobjectives and priorities for 2014 and beyond.Such forward looking statements may include,without limitation, statements relating to the following:� our strategies, objectives, goals or business plans;� our future economic performance or prospects; � the probable effect on our future performance of

certain contingencies; and � assumptions underlying any such statements.By their nature, forward-looking statements requireus to make assumptions and are subject to inherentrisks and uncertainties. There is significant risk thatpredictions, forecasts, conclusions or projections willnot prove to be accurate, that our assumptions maynot be correct and that actual results may differmaterially from such predictions, forecasts,conclusions or projections. We caution readers of thisAnnual Report not to place undue reliance on ourforward-looking statements as a number of factorscould cause actual future results, conditions, actionsor events to differ materially from the targets,expectations, estimates or intentions expressed inthe forward looking statements. These factors include the followings but not limited to:� general economic and market conditions of

Bangladesh;� strength of the regional and global economy;� degree of competition in the business areas in

which we operate;� changes in laws or in supervisory regulations,

guidelines including additional capitalrequirements, strict monitoring about interest rateand liquidity requirements and guidance;

� accuracy and completeness of the information weobtain with respect to our customers;

� changes to our credit ratings;� general political environment;� performance of our capital market;� ability to maintain sufficient liquidity;� market and interest rate fluctuations and interest

rate levels; � the ability of customers to meet their obligations

to us; � the effects of, and changes in fiscal, monetary

and tax policies;� operational factors such as systems failure,

human error, or the failure to implementprocedures properly;

� the effects of changes in accounting policies orpractices;

� the ability to retain and recruit qualified personnel; � the ability to maintain our reputation and promote

our brand image; � the ability to increase market share and control

expenses; � technological changes;� compliance with legal and regulatory

requirements and


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risks associated with all of the foregoing factors.We caution that the foregoing list is not exhaustive ofall possible factors. Other factors could adverselyaffect our actual performance.For more information, please see the discussionbelow, which outlines in detail certain key factors thatmay affect our future results. When relying on forward-looking statements to make decisions with respect toUCL, investors and others should carefully considerthese factors, as well as other uncertainties andpotential events, and the inherent uncertainty offorward-looking statements. UCL does not undertaketo update any forward-looking statements, whetherwritten or oral, that may be made from time to time bythe Company or on its behalf, except as required bylaw. The forward-looking information contained in thisdocument is presented for the purpose of assisting ourshareholders in understanding our financial position asat and for the period ended on the dates presented, aswell as our strategic priorities and objectives, and maynot be appropriate for other purposes.

FACTORS THAT MAY AFFECT FUTURE RESULTSAs noted in the preceding caution regarding forward-looking statements, all forward-looking statements andinformation, by their nature, are subject to inherentrisks and uncertainties, both general and specific,which may cause actual results to differ materially fromthe expectations expressed in any forward-lookingstatement. The report on risk management starting onpage 117 describes a number of risks, including credit,market, liquidity and funding, operational, legal andregulatory, business, strategic, reputation andenvironmental. Should our risk management frameworkprove ineffective, there could be a material adverseimpact on our financial position. The followings outlinesome additional risks and uncertainties:

Company's business and earnings are affectedby general business and political conditionsThe performance of UCL is influenced by economicconditions prevailing in the country as well as globaleconomy. Downturn in economies could result in ageneral reduction in business activity and aconsequent fall in income of our Company. It couldalso cause a slow recovery of investments. Politicalinstability also affects our earnings.

The financial performance of the Company isaffected by customers’ credibilityRisks arising from changes in portfolio quality and therecoverability of loans/leases are inherent in a widerange of our business. Adverse change in portfolioquality of our customers or deterioration ineconomies of Bangladesh and even global economicconditions, or events arising from systematic riskscould affect the recoverability and value ofCompany's investments. This would deteriorate theasset quality and require an increase in the provisionfor doubtful losses resulting in lower profitability.

Changes in interest rates and other marketfactors may affect our businessChanges in interest rate levels, yield curves andspreads may affect our interest income. The

performance of financial markets, monetary and fiscalpolicy may cause changes in the value of Company'sinvestments and portfolios. UCL has implementedrisk management methods to mitigate and controlthese factors and other market risks to which theCompany is exposed. However, it is difficult to predictwith accuracy the likely changes in economic andmarket conditions and to anticipate the effects thatsuch changes could have on the company's financialperformance and business operations.

Operational risks are inherent in Company'sbusinessOur businesses are dependent on the ability toprocess a very large number of transactionsefficiently and accurately. Operational losses canresults from fraud, errors by employees, failure todocument transaction properly, failure to comply withregulatory requirements and code of businessconduct and inadequacy in design of policies,procedures. Although, UCL has implemented riskcontrols and loss mitigation actions and substantialresources are devoted to developing efficientprocedures and to staff training. It is only possible tobe reasonably, but not absolutely, certain that suchprocedures will be effective in controlling each of theoperational risks faced by our Company.

Each of the Company's business is subject tostringent regulations and regulatory overseeingThe Company is subject to laws, regulations andadministrative actions of Bangladesh Bank,Bangladesh Securities and Exchange Commission,the Companies Act 1994, the Financial Institution Act1993, the Income Tax Ordinance 1984, otherapplicable laws and regulations. Our capital marketactivities are also monitored by Stock Exchanges.This supervision and regulation, if changed couldmaterially affect Company's business, the productsand services offered or the value of assets.

Future growth of Company's earnings andshareholders' value depend on strategic decisionsThe Company devotes substantial management andplanning resources to the development of strategicplans for organic growth. If these strategic plans donot meet with success, the Company's earningscould grow more slowly or decline.

The risk of litigation is inherent in Company'soperationIn the ordinary course of the Company's business,legal actions, claims by and against the Company mayarise. The outcome of such legal proceedings couldaffect the financial performance of the Company.

The Company is exposed to the risk of changesin tax legislation and its interpretation The Company's activities are subject to tax at variousrates. Actions by the government to withdraw any taxbenefit or impose additional taxes would affect theprofitability of the Company. Revisions to taxlegislation or its interpretation might also affect theCompany's results in future.A description on specific risks that UCL may likely toface is given in the last part of this section.


Pronouncement Nature of change Effective date Impact

Amendment toIAS 16, PPE andIAS 38, Intangibleassets

Both standards are amended to clarify how thegross carrying amount and the accumulateddepreciation are treated when an entity uses therevaluation model.

Financial periodsbeginning on orafter 1 January2014

The Group isassessing theimpact ofadopting theamended IAS 16and IAS 38

Amendment toIAS 19: Employeebenefits

The amendment clarifies the requirements thatrelate to how contributions from employees that arelinked to service should be attributed to periods ofservice.


The Group isassessing theimpact ofadopting theamended IAS 19

Amendment toIAS 24: Relatedparty disclosures

The standard is amended to include as a relatedparty, an entity that provides key managementpersonnel services to the reporting entity or to theparent of the reporting entity .



Amendment toIAS 32: FinancialInstruments:Presentation

The amendment in IAS 32: Financial Instruments:Presentation requires to provide clarifications on theapplication of the offsetting rules.



Amendment toIAS 36:Impairment

The standard is amended to introduce an explicitrequirement to disclose the discount rate used indetermining impairment (or reversals) whererecoverable amount (based on fair value less costsof disposal) is determined using a present valuetechnique.



Amendments toIAS 39

Under the amendments there would be no need todiscontinue hedge accounting if a hedgingderivative was novated, provided certain criteria aremet.



Amendment toIAS 40:Investmentproperty

The amendment clarifies that IAS 40 and IFRS 3are not mutually exclusive. IAS 40 assists preparersto distinguish between investment property andowner-occupied property. IFRS 3 determineswhether the acquisition of an investment property isa business combination.

Financial periodsbeginning on orafter 1 July 2014


Amendment toIFRS 1: First-timeadoption of IFRS

The amendment clarifies that, when a new versionof a standard is not yet mandatory but is availablefor early adoption, a first-time adopter may useeither the old or the new version provided that thesame standard is applied in all periods presented.

Financial periodsbeginning on orafter 1 July 2014

The Group isassessing theimpact ofadopting theamended IFRS 1

Amendment toIFRS 2: Share-based payment

The amendment clarifies the definition of a vestingcondition and separately defines performance andservice conditions.



Amendment toIFRS 3: Businesscombinations

As amended an obligation to pay contingentconsideration that meets the definition of a financialinstrument is classified as a financial liability or asequity on the basis of the definitions in IAS 32. Non-equity consideration is measured at fair value at eachreporting date, with changes recognized in theincome statement.



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CHANGES IN ACCOUNTING POLICIES,ESTIMATES AND BAS/BFRS

We did not adopt any new significant accountingpolicies during the year 2013. The following standards,interpretations and amendments thereto will be

relevant to UCL Group and all the amendments exceptIFRS 9: Financial Instruments have been adopted byICAB. The Group’s initial view of the impact of theseaccounting changes is outlined below:

DISCLOSURE CONTROLS AND PROCEDURESAND INTERNAL CONTROL OVER FINANCIALREPORTINGDisclosure Controls and ProceduresDisclosure controls and procedures are designed toprovide reasonable assurance that all relevantinformation is gathered and reported to seniormanagement, including the Managing Director &CEO and the Chief Financial Officer (CFO), on atimely basis so that appropriate decisions can bemade regarding public disclosure.An evaluation of the effectiveness of the design andoperation of our disclosure controls and procedureswas conducted as at 31 December 2013 by UCLManagement under the supervision of the CEO andthe CFO. Based on this evaluation, the CEO and theCFO have concluded that as at 31 December 2013,our disclosure controls and procedures are adequate,appropriate and effective both in terms of design,implementation and monitoring.

Internal Control over Financial ReportingInternal control over financial reporting is designedto provide reasonable assurance regarding thereliability of financial reporting and the preparationof financial statements in accordance withBAS/BFRS and the requirements of BangladeshBank and Bangladesh Securities and ExchangeCommission and other applicable laws andregulations.Management is responsible for designing,establishing and maintaining adequate internalcontrol systems over financial reporting for UCLFinancial Group. UCL’s internal control over financialreporting includes policies and procedures that:

� pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflectthe transactions and dispositions of the assetsof UCL;

� provide reasonable assurance that transactionsare recorded as necessary to permit preparationof the financial statements in accordance withBAS/BFRS and the requirements of BangladeshBank, Bangladesh Securities and ExchangeCommission, as applicable, and that receipts andexpenditures of UCL are being made only inaccordance with authorizations by managementand directors of UCL; and

� provide reasonable assurance regardingprevention or timely detection of the unauthorizedacquisition, use or disposition of UCL’s assetsthat could have a material effect on the financialstatements.

Because of its inherent limitations, internal controlover financial reporting can provide only reasonableassurance and may not prevent or detectmisstatements.The Management, under the supervision of the CEO,the CFO and Head of ICC has evaluated theeffectiveness of our internal control over financialreporting using the framework and criteriaestablished in internal control. Based on thisevaluation, management has concluded that internalcontrol over financial reporting was appropriate andeffective as at 31 December 2013.

Changes in Internal Control over FinancialReportingThere were no changes in our internal control overfinancial reporting in 2013 that have materially

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Amendment toIFRS 3: Businesscombinations

The amendment clarifies that IFRS 3 does not apply tothe formation of any joint arrangement and that thescope exemption only applies in the financialstatements of the joint arrangement itself.

Financialperiodsbeginning on orafter 1 July2014


Amendment toIFRS 8:Operatingsegments

IFRS 13’s consequencial amendment to IFRS 9 andIAS 39 led to a concern that entities could no longermeasure short term receivables and payables atinvoice amount where discounting is immaterials.



Amendment toIFRS 13: Fairvaluemeasurement

The amendment clarifies that the Board did not intendto remove the ability to measure short-term receivablesand payables at invoice amounts in such cases.

Financialperiodsbeginning on orafter 1 January2014

The Group isassessing theimpact ofadopting theamended IFRS13

Amendment toIFRS 13: Fairvaluemeasurement

The amendment clarifies that the portfolio exception inIFRS 13, which allows fair value measurement of agroup of financial assets and liabilities on a net basis,applies to all contracts within the scope of IAS 39 orIFRS 9.


The Group isassessing theimpact ofadopting theamended IFRS13


affected, or are reasonably or likely to materiallyaffect, our internal control over financial reporting.The ongoing preparation of financial statements inaccordance with the amendment in BAS/BFRS didnot change company’s internal control over financialreporting.

AUDITORS SERVICES AND FEESThe external auditors of UCL, M/S Hoda VasiChowdhury & Co., Chartered Accountants were notengaged to perform any of the following servicesother than annual statutory audit of the Company andthe audit of one of its subsidiary namely, UniCapSecurities Limited:� Appraisal or valuation services or fairness

opinions;� Financial information systems design and

implementation;� Book-keeping or other services related to the

accounting records or financial statements;� Broker-dealer services;� Actuarial services;� Internal audit services.� Audit/certification services on complience of

corporate governance.� Any other service that the

Audit Committeedetermines.

The auditors are paid anamount of Tk. 130,000 net ofVAT for their audit of UnionCapital Limited.One of the subsidiaries of UCLGroup, UniCap InvestmentsLimited is audited by M/S S. F.Ahmed & Co., CharteredAccountants who were notengaged in the abovementioned services other thancertification on the complianceby Union Capital Limited of theconditions on corporategovernance as stipulated in andrequired by BSEC’s notificationno. SEC/CMRRCD/ 2006-158/134/ Admin/44 dated 7August 2012. The auditors arepaid Tk. 50,000 net of VAT forthe certification services.

2013 FINANCIALPERFORMANCE ANDFINANCIAL CONDITIONREVIEW

Challenges in 2013� Economic slowdown;� Political instability;� Increased competition;� Volatile capital market;

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OPERATING PERFORMANCE REVIEWSummary of Profit and Loss Account(Figures in million Taka) % of increase/2013 2012 (decrease) For the year ended 31 December 1,428.77 897.15 59.26 Revenue from loans, advances & leases192.75 155.22 24.18 Revenue from capital market activities42.28 95.64 (55.79) Other operating income1,663.80 1,148.00 44.93 Total revenue1,057.47 836.13 26.47 Financial expenses 142.12 118.00 20.44 Management expenses255.62 85.19 200.06 Provision for doubtful losses1,455.21 1,039.32 40.02 Total expenses208.59 108.69 91.91 Profit before tax66.83 51.96 28.62 Provision for taxation141.76 56.72 149.93 Net profit after tax

Revenue from loans, advances and leasesThe following table shows the income generated from loans, advances andleases:

2013 2012Amount % Amount % (Figures in million Taka)198.71 13.91 153.21 14.60 Income from lease finance446.53 31.25 27.57 2.63 Income from term finance66.71 4.67 21.12 2.01 Income from SME finance592.39 41.46 599.46 57.13 Income from margin loan124.43 8.71 0.86 0.08 Other operating income1,428.77 100.00 1,049.22 100.00 Total

� Low demand for industrial credit;� Lack of confidence of investors;� Maintenance of asset quality;� Higher corporate tax rate;

Major Financial indicators of 2013Major performance indicators in 2013 were as under:� Investment increased to Tk. 12,376.35 million

from Tk. 9,170.70 million registering amomentous growth of 34.96 percent;

� Consolidated net profit for the year was Tk. 141.76 million as against Tk. 56.72 million of 2012 with noteworthy growth of 149.91 percent;

� Customers deposit increased by 70.43 percent toTk. 7,836.86 million from Tk. 4,598.30 million of2012;

� Shareholders’ equity increased to Tk. 2,010.67million from Tk. 1,868.91 million of 2012 withgrowth of 7.59 percent;

� Operating revenue increased to Tk. 1,663.80million from Tk. 1,148.00 million representinggrowth of 44.93 percent over last year;

� Earnings per share increased to Tk. 1.29 asagainst Tk. 0.52 of 2012.



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from financing activities like lease finance, termfinance, SME finance and margin loan. Earnings fromloans, advances and leases represent 85.87percent of total revenue earned by theCompany during 2013 (2012: 78.14percent). Income from loans, advances andleases increased by 36.17 percent i.e. Tk.379.55 million in 2013 compared with 2012due to 60.69 percent growth in performingbook as well as significant recovery fromclassified portfolio.

Operating Expenses(Figures in million Taka) % of 2013 2012 increase1,057.47 836.13 26.47 Financial expenses 142.12 118.00 20.44 Management expenses255.62 85.19 200.06 Provision for doubtful losses1,455.21 1,039.32 40.02 Total expenses

Income from margin loan was 1.18 percent lowerthan last year because of sluggish capital marketthroughout the year 2013.

Financial expenses In 2013 financial expenses has increased by 26.47percent due to increase in volume of customerdeposits by 70.43 percent and high money marketenvironment. Interest on term loan at one stagesoared up to 16 percent plus and sustained for quitelong time.UCL pays interest on funds mobilized from differentsources like deposits from individuals and institutions,loan from banks, call loan and security deposit fromcustomers. Interest rates vary depending on the natureof sources of funds. Interest expenses consist of 72.67percent of total expenses (2012: 80.45 percent). In2013 financial expenses were 63.57 percent of totaloperating revenue (2012: 72.83 percent).

Management expensesManagement expenses include salaries andallowances, office rent, promotional expenses, officemaintenance expenses, depreciation on fixed assets,legal and professional fee etc. Details of theexpenses are given in the Notes to the FinancialStatements of this Annual Report. Managementexpenses increased by 20.44 percent to Tk. 142.12million in 2013 (2012: Tk. 118.00 million) mainly dueto increase in salary and allowances. During 2013,management expense was 8.58 percent of totalrevenue (2012: 10.28 percent).

Provision for doubtful lossesProvision for doubtful losses has been made as perguidelines of Bangladesh Bank. During the year totalprovision of Tk. 255.62 million has been providedwhich was Tk. 85.19 million in 2012.

FINANCIAL CONDITION REVIEW(Figures in million Taka) % of increase/2013 2012 (decrease) Assets and Investments10,748.60 7,728.56 39.08 Loans, advances and leases1,627.75 1,442.14 12.87 Investment in securities18.24 22.71 (19.68) Fixed assets1,511.00 1,301.93 16.06 Cash & cash equivalent and other assets13,905.59 10,495.35 32.49 Total assets and investments

Shareholders’ equity and liabilities2,010.67 1,868.91 7.59 Shareholders’ equity 7,836.86 4,598.30 70.43 Deposits1,988.79 1,989.44 (0.03) Borrowings from banks and NBFIs2,069.27 2,038.70 1.50 Provisions and others liabilities13,905.59 10,495.35 32.49 Total shareholders’ equity & liabilities

Loans, advances and leasesTotal outstanding balance of loans, advances andleases at 31 December 2013 were Tk. 10,748.60million which is 39.08 percent higher than last year

(2012: Tk. 7,728.56 million). Outstanding balance of loans, advances and leasesas on 31 December 2013 and 2012 was as under:

2013 2012 (Figures in million Taka)Amount % Amount %1,951.48 18.16 1,875.50 24.27 Lease finance4,135.15 38.47 2,109.16 27.29 Term finance4,507.67 41.94 3,570.53 46.20 Margin loan154.30 1.44 173.37 2.24 Other finance

10,748.60 100.00 7,728.56 100.00 Total


Loans, advances and leasesUp to 1 1-3 3-12 1-5 Above 5

(Figures in million Taka) month months months years years Total Lease finance 136.90 312.24 409.81 936.41 156.12 1,951.48Term finance 358.81 717.62 2,252.73 472.87 683.11 4,485.14Margin loan 553.61 831.53 2,164.45 608.06 - 4,157.65Loan against deposits 15.91 46.39 55.67 14.58 - 132.55Staff loan 1.09 2.18 4.35 11.97 2.18 21.77 Total 1066.32 1909.96 4,887.01 2043.89 841.41 10,748.59

Maturity Table of borrowings and other liabilities are given below:Up to 1 1-3 3-12 1-5 Above 5

(Figures in million Taka) month months months years years Total Bank loan 24.03 75.34 292.04 583.25 - 974.66SMESPD Fund 0.63 1.25 3.13 7.50 - 12.51Fund from Bangladesh Bank 4.09 8.19 20.47 49.14 - 81.89Short term loan 883.70 10.34 21.99 3.70 - 919.73Total 912.45 95.12 337.63 643.59 - 1,988.79

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increased by 39.08 percent compared to 2012 mainlydue to increase in term loan by 96.06 percent andmargin loan by 26.25 percent. In 2013 we gavepriority more in loans to SME sector keeping thequality of portfolio in corporate segment with anspecial focus on recovery of slow moving and stuckup lone/leases. Management has always been tryingto concentrate on adding quality investments in itsportfolio rather than achieving high target of businessvolume, keeping in mind our previous experiences inour financing activities.

Liquidity StatementMaturity of assets and liabilities has been determinedas per agreements with our customers and fundproviders. Management always maintains long-termand short-term strategy to address the probableliquidity gap properly.The Company meets its funding requirements throughprudent liability management. Liability structuring ismade in such a way so that it matches with the tenureof asset structure. Liquidity is monitored continuously

to ensure the company's ability to support investmentgrowth, deposit encashment, meet contractualobligations, maintain reserve requirements andotherwise sustain operations. Union Capital maintainsits liquidity in the form of readily encashable depositswith banks, collection of rentals/installments andinvestment in listed securities. On the other hand, in order to meet company’s urgentrequirement UCL can, on the basis of its net assets,borrow significant amount in the form of call money,which is another point of liquidity support as far asfund management is concerned. Based on the netassets as of 31 December 2013, UCL can borrowfrom call money market to the tune of Tk.1,252.13million. A statement of liquidity profile is sent toBangladesh Bank on monthly basis. Management,however, believes that the Company's present positionis adequate to meet its current and future liquidityrequirements. Maturity analysis indicates that theCompany maintains reasonable maturity gap betweenassets & liabilities in case of one year maturity bucketsand above one year maturity buckets. Given below isthe maturity table of investment activities:

Investment in sharesUnion Capital Limited invested in diversified listedsecurities with highest investment in manufacturingcompanies represents 33.70 percent of totalinvestment followed by investment companies (23.05percent), insurance companies (19.80 percent) non-banking financial institutions sector (16.29 percent)and banking companies (7.15 percent). UCL isexposed to market risk since it has a significant

amount of investment in capital market and thefluctuation in the share price is a regular phenomenonof this market. We minimize this risk throughdiversification investing mostly in fundamentallystrong securities. The market value of the securitiesat 31 December 2013 was Tk. 228.49 million (2012:Tk. 341.17 million). The following table shows theconcentration of investment in major sectors of listedsecurities as at 31 December 2013 and 2012:

2013 2012 (Figures in million Taka)Amount % Amount %24.66 7.15 54.75 10.48 Bank companies56.16 16.29 96.69 18.51 Non Banking Financial Institution68.25 19.80 41.70 7.98 Insurance companies79.47 23.05 86.43 16.55 Investment companies- - 65.78 12.59 Fuel and power116.18 33.70 177.04 33.89 Manufacturing companies and others344.72 100.00 522.39 100.00 Total


Performance of Capital MarketWe could not perform well in 2013 in our capitalmarket activities as we expected at the beginning ofthe year. In all areas of this segment was effectedmostly due to sluggish market throughout the yearresulted from many factors including political instability,lack of investors’ confidence, liquidity problem, lack ofco-ordinations among the regulators etc.In 2013, DSEX index gained only 4.30 percent. Over2013, the DSEX gain only 176 points, closing at4,266.55. Since there, it reversed and subsequentlyreached at 4,439.59 on 20 November 2013, whichwas the highest. In 2013 the turnover velocity ratio inDSE went down to 38.14 percent. In comparison toother developed capital markets, our velocity ratio islower, showing that the DSE has room to grow andhas leveraged on the opportunities available asreflected by the improvements achieved in the lastfew years.

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which resulted in a gain of 4.30 percent only. TheDSE 30 Index (DS30) which comprises of the BLUE-Chip stocks clocked at its highest point at 1,654 on16 July, 2013 while the lowest level of DS30 wasrecorded at 1,282 on 29 April, 2013 and the year endclosing was 1,466.25.NBFI sector also followed the overall market asevidenced by its around 2.79 percent growth in totalcapitalization. In line with the overall market andNBFI sector, market price of Union Capital Limitedwas quite volatile. UCL started its journey of 2013 on01 January with the price of Tk. 27.40 in DSE andclosed at Tk. 34.60 on 30 December 2013. Thehighest price was recorded at Tk. 36.90 on 18 July2013 and the lowest was Tk. 19.70 on 24 April 2013.Following table shows the capital market picture ofDSE for the last three years:

Change %2011 2012 2013 (2012 Vs 2013)235 238 238 - Total Trading Days1,561 1,001 952.74 (4.82) Total Turnover value (BDT in Billion)6,642 4,206 4,003.12 (4.82) Daily Average Turnover value (BDT million)72 91 96.59 6.14 Average Volume (BDT million)2,617 2,404 2,648 10.15 Market Capitalization (BDT in Billion)501 515 529 2.72 Total Number of Listed Securities14 14 17 21.43 Total Newly Listed Securities33.23 26.27 25.51 (2.89) Market Capitalization to GDP (Ratio)

Non-performing loans, advances & leases (NPL)Loans, advances & leases are classified as non-performing when it is marked as substandardcategory or worse even if there exist no reasonabledoubts as to collectivity. Bangladesh Bank guidelinesare strictly followed for determining the classificationof loans, advances and leases. Interest accruedagainst overdue rental/installments of classified loans,advances and leases are not taken into profit andloss account rather kept in interest suspense account.

Moreover, interest accrued against overdue rentals ofloans, advances and leases falling under the categoryof ‘Special Mention Account (SMA)’ accounts are alsocredited to interest suspense account instead ofcrediting to profit and loss account as per BangladeshBank’s guidelines.Non-performing assets as of 31 December 2013 and2012 were as follows:

(Figures in million Taka)2013 2012

Outstanding NPL Outstanding NPLamount NPL (%) amount NPL (%)9,710.76 920.01 9.47 7,438.39 1,205.59 16.20 Loan/Lease finance883.54 16.50 1.87 116.80 19.61 16.79 SME finance154.30 - - 173.37 - - Other finance10,748.60 936.51 8.71 7,728.56 1,225.20 15.85 Total

against the classified loan accounts as perBangladesh Bank guidelines.

Coverage/reserve against non-performing loans,advances and leasesThe following table summarizes the allocation of theprovision and interest suspense against loans,advances and leases as of 31 December 2013 and2012:

Non-performing loans, advances and leases wasrecorded at Tk. 936.51 million in 2013 as againstTk.1,225.20 million of 2012, a significant downturnof 23.56 percent. The amount of classified loans,advances and leases decreased significantly due towrite off of stuck up accounts to the tune of Tk.284.36 million and a noteworthy recovery fromlegacy accounts followed by rigorous monitoringand follow up. Adequate provision has been made


2013 2012Provision Interest % of Provision Interest % of

(BDT in million) for NPL suspense Total NPL Coverage for NPL suspense Total NPL CoverageLease finance 165.99 135.84 301.83 683.40 44.17 347.17 223.23 570.04 937.32 60.85Term finance 48.31 38.86 87.17 253.11 34.44 41.90 39.65 81.55 287.88 28.33Real estate finance - - - - - - - - - -Margin loan - - - - - - - - - -Loan against term deposit - - - - - - - - - - Total 214.30 174.70 389.00 936.51 41.54 389.07 262.88 651.69 1,225.20 53.21

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Union Capital has maintained total provision of Tk.428.46 million against loans, advances and leases asof 31 December 2013 compared to Tk 468.25 millionof last year. Provision against classified loan hasdecreased by 8.50 percent compared to 2012. Theprovision for doubtful losses decreased due to writeoff of legacy classified loans, advances and leasesas well as oversize recovery from stuck up accounts.Management's periodic evaluation of the adequacy ofthe allowances is based on the companies past lossexperience, known and inherent risk in the portfolio,adverse situations that may affect the clients' abilityto repay and current economic conditions.Management has also taken the qualitative aspectswhile classifying an account.

We always adhere to the principle of classification asguided by Bangladesh Bank for making interestsuspense and provisioning against loans, advancesand leases. Interest amount is transferred to interestsuspense account rather than showing as income inthe profit & loss account when installments falloverdue for 2 months or more. Base for provision ismade after deducting interest suspense and value ofeligible security (considered 50 percent of marketvalue of the security in case of mortgage of land,building and shares and100 percent against cashsecurity) from outstanding amount of a particularloan, advance and lease. Rate of provision for loans,advances and leases classified as Sub-standard,Doubtful and Bad & Loss is 20 percent, 50 percentand 100 percent respectively.

Coverage ratio of loans, advances and leasesdecreased. As at 31 December 2013 coverage was41.54 percent compared to 53.21 percent of 2012.We believe coverage is satisfactory as the companymaintain adequate provision as per guidelines ofBangladesh Bank.

Management has taken adequate measures toreduce the rate of classified loans, advances andleases by regular monitoring, examining, appraising,evaluating the position/status of the classifiedclients/customers. Appropriate legal action has beentaken where necessary against the classified loanaccounts where prospect of recovery from thecustomer through negotiation and amicablesettlement is uncertain. Moreover, engagement ofexternal recovery agents and formation of internalmonitoring and recovery committee for effectivemonitoring and follow-up of problem accounts are theinitiatives for improving recovery situation.

CREDIT MONITORING FUNCTIONA continuous monitoring of loan/leases is one of themost important tools for ensuring the quality ofadvances assets for any lending institution. UCL toohas a well-established system of monthly monitoringof its loans, advances and leases accounts atvarious levels to prevent asset quality slippages andto take timely corrective steps to improve the qualityof its overall portfolio. At UCL, a separatedepartment, Special Asset Management (SAM), formonitoring function at the corporate level, has beenfunctional. UCL has placed special focus onsharpening of the credit monitoring process forimproving the asset quality, identifying the areas ofconcern and the branches requiring specialattention. It has also worked out strategies toensure implementation in a time-bound manner. Theprimary objectives of UCL’s Special AssetManagement Department at the corporate level arefixed as under:� Identification of weakness/potential default/

incipient sickness in the account at an early stage;� Initiation of suitable and timely corrective actions

for preventing impairment in credit quality,whenever signals are noticed in any account,e.g. decline in credit rating, delay in servicing ofrentals/installments etc;

� Prevention of slippage in the asset classificationthrough a vigorous follow up;

� Identification of suitable cases for restructuring/rescheduling/ rephasement;

� Taking necessary steps/regular follow up, forreview of accounts and compliance of terms andconditions, thereby improving the quality ofUCL’s portfolio;

� Regular monitoring progress of classifiedaccounts.

SHAREHOLDERS’ EQUITY AND CAPITAL

Capital ManagementObjectiveUCL is committed to a disciplined approach to capitalmanagement that balances the interests andrequirements of shareholders, regulators, depositorsand rating agencies. Our objective is to maintain astrong capital position in a cost-effective structure that:� is appropriate given our target regulatory capital

ratios and internal assessment of required capital;


� is consistent with our targeted credit ratings;� underpins our business strategies; � is in line with our growth potentials; and� builds depositors’ confidence and long-term

shareholder value.

Capital Management FrameworkThe principal and key elements of UCL’s capitalmanagement framework are outlined in our capitalmanagement policy which includes the results of theinternal capital adequacy assessment process.This process evaluates capital adequacy, and isused to establish capital targets and capitalstrategies that take into consideration the strategicdirection of the Company. The internal capitaladequacy assessment process and capital plan aredeveloped in conjunction with UCL’s annual businessplan, promoting alignment between our business andrisk strategies, regulatory capital requirements.Stress testing framework and scenario analysis arealso used to assess the impact of various stressconditions on UCL’s risk profile and capitalrequirements. The framework seeks to ensure thatwe are adequately capitalized given the risks wetake, and supports the determination of limits, goalsand performance measures that are used to managebalance sheet positions, risk levels and capitalrequirements. Assessments of actual and forecastcapital adequacy are compared to the capital planthroughout the year.UCL uses regulatory capital to evaluate businessperformance and as the basis for strategic andtransactional decision-making. This approach aims toprotect our stakeholders from the risks inherent in ourvarious businesses, while still allowing the flexibility todeploy resources to the high-return, strategic growthactivities of our operational areas.

GovernanceThe Board of Directors and the Risk ManagementCommittee provide ultimate oversight and approval ofcapital management, including our capitalmanagement policy and capital plan. We regularlyreview our capital position, capital adequacy and keycapital management activities. The Risk ManagementCommittee provides senior management oversight,and also reviews and discusses capital policies,issues and action items that arise in the execution ofour strategy.

2013 Regulatory Capital ReviewRegulatory capital requirements for UCL are currentlydetermined on a the basis of guidelines of ‘CapitalAdequacy and Market Disciplines (CAMD), commonlyknown as Basel II accord issued by BangladeshBank. UCL’s capital adequacy is determined basedon risk weighted assets (RWA) in our portfolio. UCL’stotal consolidated RWA were Tk. 12,013.87 million at31 December 2013, up from Tk. 11,645.29 million in2012. The table below provides a breakdown of ourRWA by risk type.

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BDT in millions2013 2012 As at 31 December10,923.25 9,089.98 Credit risk456.97 1,484.84 Market risk633.65 1,070.47 Operational risk12,013.87 11,645.29 Total RWA

Basel II Regulatory Capital (in million Taka)1,505.17 1,363.41 Tier 1 Capital377.45 398.32 Tier 2 Capital1,882.62 1,761.73 Total capitalThe above table details the components of regulatorycapital. Tier 1 capital is primarily comprised of paid upshare capital, and reserves and surplus. Ourshareholders’ equity and Tier 1 capital were Tk.1,505.17 million as at 31 December 2013 comparedto that of last year with a steady growth of 10.40percent.Total capital includes Tier 1 and Tier 2 capital, net ofcertain deductions. Tier 2 capital is primarilycomprised of subordinated debt and a portion of thegeneral allowance for credit losses. Deductions fromTier 2 capital primarily relate to our investments insubsidiaries. UCL does not have any subordinateddebt. Total capital as of 31 December 2013 was Tk.1,882.62 million.Our objective is to maintain strong capital ratios thatexceed regulatory requirements. The Equity Ratio,Tier 1 Capital Ratio and Total Capital Ratio are keymeasures of capital adequacy, and all remainedadequate in 2013.The Equity Ratio and the Basel II Tier 1 Capital Ratio,Tier 2 Capital Ratio, Total Capital Ratio and Capital toAssets multiple are the primary capitalmeasurements. The ratios are as under:2013 2012 As at 31 December12.53 11.71 The Equity Ratio/Tier 1 Capital Ratio3.14 3.42 Tier 2 Capital Ratio15.67 15.13 Total Capital Ratio1.57 1.51 Capital to Assets multipleThe Equity Ratio reflects shareholders’ equity dividedby RWA. The Tier 1 Capital Ratio reflects Tier 1capital divided by RWA. The Total Capital Ratioreflects total capital divided by RWA. Total CapitalRatio of Union Capital Limited was 15.67 percentagainst the minimum capital adequacy ratio of 10percent as per Bangladesh Bank guidelines.Therefore, the Company has surplus capital of 5.67percent over the minimum rate of regulatory capitalas per Basel II accord.

Borrowings from other banks and financialinstitutionsTotal outstanding loan from banks and other financialinstitutions as at 31 December 2013 was Tk.1,988.79million compared to Tk. 1,989.44 million in 2012.Interest on bank loans is paid on monthly/quarterlybasis as per terms of loan arrangements. During the


securities. During the year, a total amount of Tk.1,547.62 million (2012: Tk. 921.33 million) has beeninvested for purchase of listed securities while totalsale of securities was Tk. 1,304.31 million (2012: Tk.732.56 million).

Cash flow from financing activitiesNet cash flow from financing activities shows a netcash outflow that means the repayment of loan washigher than the money borrowed from banks andother sources. During the year a total amount Tk.590.56 million was paid to banks and financialinstitutions as repayment of short/long term loanwhile an amount of Tk. 589.91 million was taken asfresh loan.

SPECIFIC RISK AND ITS MANAGEMENTCOMPLIANCE RISKRegulatory riskThis is the risk whereby the procedures implementedby UCL to ensure compliance to relevant statutory,regulatory and supervisory requirements are notadhered to and/or are inefficient and ineffective.

Impact on businessCould result in significant financial loss, impairment ofshareholders’ funds and/ or outright closure ofbusiness occasioned by sanction/fine on UCL, orloss/ suspension of banking license.

Mitigation measuresProactive implementation of UCL’s sound complianceprogramme that ensures compliance by allstakeholders to relevant laws and regulations. Thisincludes continuous updates of UCL’s policyguidelines as well as training of employees tounderstand regulatory obligations and theconsequence of non-compliance.

Reputational riskThis is the risk whereby UCL might be exposed tonegative publicity due to the contravention ofapplicable statutory, regulatory and supervisoryrequirements and/ or providing a service that doesnot comply with fit and proper industry standards.

Impact on businessCould result in loss of correspondent bankingrelationship, loss of investor community confidencesignificant financial loss; occasioned by damage toUCL’s image as a result of negative publicity andeventual loss of business.

Mitigation measuresUCL has put in place adequate measures to knowour customers and implement processes forcombating money laundering and terrorist financing.In this regard, UCL continuously reviews its AntiMoney Laundering and Terrorist Financing policy,incorporating any new regulatory guidelines for KnowYour Customer (KYC)/ Know Your Customer’sBusiness (KYB).

year 2013, a total loan of Tk. 573.17 million wasrepaid. In addition, an amount of TK. 181.12 millionwas paid as interest.Union Capital has been enjoying credit facility fromBangladesh Bank for SME financing, womenentrepreneur finance and received JICA fund underthe refinancing scheme.

Treasury OperationIn order to minimize the asset-liability mismatch,UCL always strives for mobilizing funds for longerterm. In the current money market scenario it isdifficult to mobilized deposit for a period of morethan 12 months. For that reason, we need to borrowa large portion of our fund from banking sourceswhich is of course a costlier source of fund. Duringthe year 2013, an amount of Tk. 3,053.67 million hasbeen received as term deposits from various sourceswhich was Tk. 611.67 million in 2012. As at 31December 2013, total outstanding amount of termdeposit was Tk. 7,374.99 million compared to Tk.4,321.42 million in 2012. Interest amounting to TK.817.66 million was paid on term deposits during2013 as against Tk. 535.88 million in 2012. TheCompany offers different deposit products which isavailable on page 16.

CASH FLOWS ANALYSISUnion capital prepares its cash flow statement in linewith the format prescribed by Bangladesh Bank. Wemanage our cash flow preparing statement for differentmaturity period i.e. within 7 days, 2 weeks, 1-12months, between 1-3 years, 3-5 years, 5-10 years, 10-15 years, 15-20 years as per the situation demands.A considerable portion of our total assetsrepresenting 14.48 percent is liquid in nature andconsists mainly of cash and balance with variousbanks and financial institutions and investment inlisted securities. The highly liquid nature of ourassets provides us with flexibility in financing andmanaging our anticipated operating needs.The company's asset and liability management policyis intended to manage Balance Sheet Risk, especiallyfor managing of liquidity risk and interest rate risk. Wemanage the risk re-pricing the interest earning assetsand interest-bearing liabilities though in some cases itis difficult to re-price the loans, advances and leases.The Company is maintaining the CRR and SLR asprescribed by the Bangladesh Bank.

Cash flow from operating activitiesUnion Capital maintained a positive net cash flowfrom its operating activities during the year 2013.Positive net cash flows from operating activitiessignifies that UCL�Group generates sufficient cashflow from its operating activities to meet its operatingexpenses. Net cash inflows from operating activitieswas Tk. 344.26 million due to a significant amount ofdeposit collected from banks and financialinstitutions.

Cash flow from investing activitiesNet cash outflows from investing activities were Tk.248.38 million mainly due to investment in listed

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ResponsibilityThe primary responsibility for complying withregulatory requirements lies with all employeesconducting particular transactions, or activity to whichregulation applies. However, the Board of Directors isultimately accountable for compliance through theChief Compliance Officer.

CREDIT RISKCreditDefault risk, performance risk, payment risk,diversion risk, managerial risk.

Impact on business� Poor asset quality arising from high level of non-

performing loan/leases and ultimately low yield onrisk assets;

� Financial loss due to increased provisions andcharges on impaired assets;

� Could lead to impairment of shareholders’ funds.

Mitigation measures� Strong credit analysis to identify the risk; � Clear loan covenants and transaction dynamics; � Effective credit control and monitoring processes; � Prompt identification of early sign of deterioration; � Adequacy and realizability of collateral; � Adoption of risk-based pricing for risk assets;� Risk management systems and processes have

been strengthened to optimize portfolio qualityand to ensure appropriate pricing of risk assets.

Portfolio Concentration riskImpact on businessBreaches of portfolio limits and regulatory provisionscould lead to sanctions and increased financial loss.

Mitigation measuresAdherence to portfolio limits and regulatoryrequirements.

ResponsibilityBusiness Units, Chief Risk Officer and RiskManagement Committee.

MARKET AND LIQUIDITY RISKInterest rate riskImpact on businessCould result in significant financial loss, impairment ofinterest rate related instruments including fixed-rateinstruments.

Mitigation measures� Experienced Asset-liability Management

Committee that meets regularly;� Daily reporting to executive management;� Strict adherence to UCL’s internal policies such as

the use of limits and management action triggers.


Investment riskImpact on businessCould lead to diminution in the value of investments.

Mitigation measures� Significant investments are approved by the

Board and all others by the Board ExecutiveCommittee and the Management Committee;

� Experienced executives in the respectivebusiness units;

� Supervision by the parent company board onsubsidiaries;

� Portfolio selection and diversification strategies.

Liquidity riskImpact on businessCould lead to insolvency and eventual reputationalrisk.

Mitigation measures� Efficient Asset and Liability Committee that

oversees liquidity management;� Diversified sources of funding;� Contingent funding plan;� Effective cash flow planning.

ResponsibilityThe primary responsibility for mitigating the aboverisks lies with the treasury department. However, therisk identification, measurement, monitoring, controland reporting lies with the ALCO and the Chief RiskOfficer.

OPERATIONAL RISKPeople riskThe risk of loss – financial, reputational or otherwise– arising from a failure to properly manage UCL’shuman capital. This could manifest in the form of stafffraud, high staff attrition, knowledge gaps and ademotivated and disgruntled workforce.

Impact on businessThis would impact UCL by way of negative serviceexperiences for our customers and the attendantloss in market share, financial loss and reputationaldamage and the cumulative effect of being unable todeliver strong business performance that meets orexceeds stakeholders’ expectations.

Mitigation measures� UCL has put in place comprehensive service

rules to achieve a strong workplace;� Effective background checks on new hires;� Competitive remuneration package to attract and

retain the best talent;� Enforcement of strong supervisory control;� Zero tolerance to staff integrity issues and fraud;

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� A fully fledged HR Department to cater for thetraining and development needs of staff;

� A HR and Compensation Committee that dealwith and resolve employee issues.

Operations riskThe risk for UCL to incur financial loss as a result ofinadequacies or failures in operations processes,systems or staff. Operations risk additionallyincorporates the risk arising from disruption ofoperations activities caused by external events.Examples are: failures in the customer intake anddocumentation process; failed mandatory reportingobligations; limit breach due to inadequate internalprocesses; inadequate reconciliation processes andmanual intensive processes.

Impact on businessImpact on business ranges from negative customerimpact and the attendant loss in market share,financial loss and reputational damage, and thecumulative effect of being unable to deliver strongbusiness performance that meets or exceedsstakeholders’ expectations.

Mitigation measures� We have a operational guidelines that guide

operational activities;� There is a functional reporting structure for

effective supervisory control on the operations ofUCL;

� Automation of functional processes;� Putting in place sound business continuity plan

and disaster recovery programmes;� Stepping up operational risk awareness training;� Monitoring and managing key risk indicators

(KRIs) in products/activities.

Environmental riskEnvironmental risk is the risk of loss to financial,operational or reputational value resulting from theimpact of environmental issues. It arises from ourbusiness activities and our operations. For example,the environmental issues associated with our clients’purchase and sale of contaminated property ordevelopment of large-scale projects may give rise tocredit and reputation risk. Operational and legal risksmay arise from environmental issues at our differentoffices or data processing centers. Failure toadequately manage environmental risk couldadversely impact our results and/or significantlyimpact our reputation.

Impact on businessThis could result in financial loss to the UCL in theform of non-repyament of loans by the borrowers dueto discontinuation of business operations involvingenvironmentally hazardous activities.

Mitigation measuresWe have a robust risk assessment procedure atappraisal stage in case of any credit facility to any

borrower involving any activities that is detrimental tothe environment. UCL never extend any credit facilityto environmentally hazardous operations. We havealso adopted green banking policy that we follow inall of our business activities.

System or technology riskThe risk of failing to develop, implement or operateUCL’s technology platforms and solutions to meetstakeholders requirements.

Impact on businessThis could manifest in the form of: system downtimeresulting in irate customers and tarnished reputation;software failures; systems change processmanagement failures; seizure of technical support;hardware failures; obsolete hardware; and no supportfrom the system providers.

Mitigation measures� UCL has a Disaster Recovery Plan;� UCL execute Service Agreement with IT service

providers;� Regular IT supervision and control;� Hardware management covering hardware

purchase, use, replacement and disposal;� Extensive software selection process is in place

covering purchase or design, use, enhancementand replacement;

� Building resilience into UCL’s network platformthrough the installation of a back-up link.

Regulatory and compliance riskThis could lead to financial and reputational losses toUCL as a result of failure to comply with the laws,regulations or codes applicable to the financialservices industry.

Impact on businessThe impact of this risk category on UCL ranges fromfinancial loss arising from fines and penalties; loss ofrevenue due to temporary suspension or ban fromcertain market activities; possible loss in share priceand negative investors perception and suspension ofoperations.

Mitigation measures� UCL has compliance team to drive and

implement UCL’s compliance framework;� Effective monitoring of compliance with laws and

regulations, its code of conduct, and corporategovernance practices;

� UCL has a process for ensuring new andchanged legal and regulatory requirements;

� Ensuring that regulatory requirements areincorporated in the operation where appropriate;

� Prompt submission of regulatory reports;� Sound corporate governance practices and the

setting of the right tone from the top with respectto regulatory issues.


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ResponsibilityThe primary responsibility for mitigating the aboveoperational risks lies with the risk-taking units of UCL,which include all the business units and supportfunctions.

Information security riskConfidentiality, integrity and availability of UCLoperations and information assets.

Impact on businessInformation assets are critical to UCL’s operation andthe confidentiality, integrity and availability of theseassets are crucial to the effective and efficientdelivery of service by UCL to its customers.Disruption or interruptions to these assets wouldhave dire consequences on UCL operations.

Mitigation measures� Documenting and standardizing the processes

within UCL while building appropriate controlsinto these processes;

� Classifying all information assets with appropriatepriorities and assigning ownership for thoseassets;

� Developing awareness programme and makinginformation security the responsibility of all UCLstaff.

ResponsibilityThe primary responsibility for security of UCLinformation assets and applicable legislations lieswith all employees, while the Executive Managementhas the overall responsibility to ensure that allinformation assets within UCL are protected and thusadequately secure.

Legal riskImpact on businessIncreased costs, loss of revenue, abuse and/or lossof intellectual property, distraction, negative brandequity, strained relationships with customers,depositors, employees, service providers, investors,regulators and other stakeholders, and possibledisruption of business activities.

Mitigation measuresConsistent application of professional standards,transparency and fairness while transacting to reduceareas of possible conflicts, availability of adependable record retention system, engagement ofexternal counsel with proven competence in theprosecution of UCL’s claims against third parties andin the conduct of UCL’s defense, and exploringalternative dispute resolution mechanisms, amongothers.

Asset security cover riskImpact on businessLoss of revenues, weak legal position in recoveryefforts, increase in litigations and the attendantnegative impact.

Mitigation measuresThorough and experienced credit proposal reviews,use of independent experts for asset valuations,conduct of due diligence on assets subject matter ofthe security arrangements, legally defensibledocumentation protective of UCL’s security interestand effective and proactive monitoring of credits.

ResponsibilityThe Legal Services Department, Credit AppraisalUnit, Credit Risk Management and all RelationshipManagers.

REGULATIONSUCL has been operating under the license fromBangladesh Bank. Our operations are subject toregulation, inspection, and supervision. Thissupervision and regulation is intended primarily tobring financial discipline in the functioning of NBFIsand for the protection of the depositors. We arerequired to provide reports on our activities oncertain intervals some are regularly; some areweekly, monthly, quarterly, half-yearly, yearly and soon. Regulations applicable to UCL generally relate tolending and investment activities, maintenance ofappropriate level of capital, maintenance of cash andliquidity reserve, appointment of Directors, ManagingDirector and auditors, loan to Directors andassociates etc. Failure to comply with theseregulations may be considered an unsafe andunsound practice and may result in the imposition ofpenalties by Bangladesh Bank. The company isrequired to submit periodic reports/statements toBangladesh Bank describing its activities andfinancial conditions. Our capital market operationsare also monitored and supervised by BSEC andStock Exchanges. The periodic reports are requiredto submit to Bangladesh Bank, BSEC and StockExchanges are given below:

Reporting Type Frequency

Schedule of Bangladesh Bank ReportingStatement of Shareholding information QuarterlyStatement of Re-Schedulement of Lease/Loan A/C MonthlyStatement of Write Off of Lease/Loan A/C MonthlyCIB return MonthlyStatement of Business Activities QuarterlyStatement of Industrial Loan QuarterlyStatement on Money Laundering QuarterlyStatement of Loans/Leases of Bank/FIs Directors QuarterlyStatement of Top 10 Defaulters QuarterlyStatement of Litigation cases Half-YearlyStatement of Large Loan/Lease QuarterlyRisk Management Report MonthlyReport on National Integrity Strategy QuarterlyCall Money Transactions DailyReport on Product and Services Yearly


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Reporting Type FrequencyReport on Green Banking QuarterlyStatement of NBDC Return MonthlyUnaudited Balance Sheet Half-YearlyStatement of Net Assets Half-YearlySchedule of collection of fees/charges/commission Half-YearlyInter Bank Transaction Matrix MonthlyStatement of Corporate Social Responsibility Half-YearlyClassification of Leases & Loans (CL) QuarterlySector wise Investment QuarterlyBASEL II reporting QuarterlyStress Testing Report Half-YearlyMinutes of Board/Committee Meetings OccasionallyStatement of Cash Reserve Requirement MonthlyStatement of Statutory Liquidity Reserve MonthlyStatement of Lending/Deposit Rate QuarterlyLiquidity Profile MonthlyBranch wise information MonthlyAudited Financial Statements & Management Report AnnuallyStatement of SME Loan/Lease disbursement QuarterlyStatement of SME Loan/Lease disbursement for Women Entrepreneur QuarterlyStatement of SME Loan/Lease outstanding QuarterlyStatement of SME Loan/Lease recovery/collection status QuarterlyStatement of SME Loan/Lease cluster wise disbursement QuarterlyStatement of SME Loan/Lease cluster wise outstanding QuarterlySegmentation Data QuarterlyStatement of SME monitoring refinance scheme for Women Entrepreneur QuarterlyStatement of SME target report Yearly

Reporting to BSECQuarterly Financial Statements (Q1) QuarterlyQuarterly Financial Statements (Q3) QuarterlyShareholding position MonthlyHalf-Yearly report Half-yearlyDaily Trade Report DailyMerchant Bank activities MonthlyMerchant Bank activities Quarterly

Dhaka & Chittagong Stock ExchangeQuarterly Financial Statements (Q1) QuarterlyQuarterly Financial Statements (Q3) QuarterlyHalf-Yearly report Half-yearlyShareholding position MonthlyStatement of free float shareholding MonthlyAnnual Report Annually

RECENT LEGISLATIONSDuring the year 2013, Bangladesh Bank has issued

certain guidelines which inter alia include asunder:

� All NBFIs can mobilize customer deposits withminimum maturity period of 3 moths;

� Bangladesh Bank has issued a regulationallowing all NBFIs to maintain general [email protected] percent on SME finance falling under theclassification of standard.

� A new reporting is required to be submitted toBangladesh Bank by NBFIs on Inter BankTransaction Matrix.

� Bangladesh Bank issued a guideline on GreenBanking and required all NBFIs to submit a reporton Green Banking on quarterly basis.

� A yearly report on product and services has to besubmitted by Bangladesh Bank by NBFIs as perthe revised guidelines on Product and Services.

� Bangladesh Bank issued a guideline on NationalIntegrity Strategy to submit a report on quarterlybasis.

� Financial Institutions are required to submit aRisk Management Paper to Bangladesh Bankcovering all risk areas on monthly basis.

� Bangladesh Bank has instructed Non BankingFinancial Institutions to submit a report on BaseRate System on monthly basis and introducedCost of Fund Index (CoFI) of NBFIs.

The Securities and Exchange Commission has alsoissued guidelines for listed companies, which interalia include as under:� The Exchange Demutualization Act 2013 was

passed 2 May 2013 which have separated theownership and management of the StockExchanges that would ensure development &control of capital market, good governance ofstock exchanges and safeguarding investors’interest.

� BSEC has issued a Notification dated 18 August2013 imposing condition that no listed companywill be able to issue right share if the issuingcompany fails to comply with the conditionscontained in the notification no.SEC/CMRRCD/2006-158/Admin/44 dated 7August 2012 regarding Corporate GovernanceGuidelines;

� BSEC has issued a Notification on 21 July 2013amending condition no. 4 of the previousnotification no. SEC/CMRRCD/2006-158/Admin/44 dated 7 August 2012 regardingCorporate Governance Guidelines, where theCompany should not engage its external/statutoryauditors to perform audit/certification services oncompliance of corporate governance as requiredunder clause (i) of condition no 7 of thenotification;

� BSEC has issued a Notification no.SEC/CMRRCD/2009-193/150/Admin dated 18July 2013 regarding procedure, recognitions,presentation and disclosure of revaluation ofassets of listed companies.


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COMPETITIONUnion Capital faces intense competition in all themarkets where it operates. Its principal competitorsare the non-banking financial institutions. Because ofinvolvement of banks in our core product i.e. leasingbusiness, competitiveness in leasing has beenintensified further. Some banks are also offeringcapital market related products like brokerageservices, portfolio management etc.

COMMUNICATION WITH THE SHAREHOLDERSThe investor relation activities of the Company aredesigned to provide a balanced level ofcommunication between the Company and itsstakeholders. Established procedures are in place toensure the timely release of price sensitiveinformation. The Company also publishes itsquarterly, half-yearly and annual results well withinthe time periods prescribed by the regulators.The Company promotes the use of Company'swebsite in all Company announcements. Thewebsite also contains corporate information which isupdated on a regular basis and includes a corporategovernance information which contains details of theCompany's adherence to the guidelines and the fullterms of reference of the Board and its Committees.All the Directors normally attend the Annual GeneralMeeting and shareholders are invited to askquestions during the meeting and to meet withDirectors after the formal proceedings have beenconcluded. The Sixteenth Annual General Meetingwill be held on 31 March 2014. All shareholders ofthe Company are invited to attend the Company’sAnnual General Meeting. An invitation latter hasbeen given to the shareholders available on page238 of this Annual Report.The Directors appreciate the importance of generalshareholders of the Company and use theCompany’s Annual General Meeting as furtheropportunities to communicate with them. UCLprovides copies of its annual report in order thatthese are made available to them well in advance fordetail and constructive discussion. It is the company’s policy to give the shareholdersthe opportunity at Annual General Meeting to askquestions about its activities and prospects. TheBoard also structures these meetings so that

shareholders can vote separately on each matter, byproposing separate resolutions for each item to beconsidered.In accordance with the provisions of the CompaniesAct, 1994, the notice of the Sixteenth AnnualGeneral Meeting was sent to shareholders morethan 14 clear days before the meeting. Notice ofAGM is also published in two widely circulated dailynewspaper, one in English and the other in Bangla.Shareholders had the opportunity to vote separatelyon each proposal at the Annual General Meeting,either in person or by proxy. The proxy form isattached to the annual report to represent theoriginal shareholder in the meeting and vote on hisbehalf in case of preoccupation or otherwise. As in previous years, the Chairman of the Companywill be available to answer questions fromshareholders at the Annual General Meeting.The Company maintains a corporate websitewww.unicap-bd.com containing a wide range ofinformation of the Company.

HUMAN RESOURCESOur human capital strategy focuses on attractingand retaining the key skills needed to achieveorganizational objectives, improving individualcapabilities, placing the right people in developmentprogrammes, increasing the focus on achievingorganizational goals through performancemanagement, identifying a pipeline of leadersneeded by the organization now and in the future,improving change capability, fostering soundemployee relations, and organizationaltransformation, improving employee engagement,promoting the wellbeing of our employees, andensuring competitive rewards for employees.In line with our objective of increasing ownershipconcept among employees, we introduced amongothers employee provident fund, gratuity,performance bonus, home loan facility, transportfacility and so on. The total human resource strengthof UCL Group as on 31 December 2013 was 127including 19 support staff. Management considersrelation amongst its employees is satisfactory. Thelist of senior executives of UCL is given below:

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Age on Name 31 Dec 2013 (years) Executive since Present PositionMd. Akter H. Sannamat FCA, FCS 47 July 2012 Managing Director & CEOAbul Munim Khan 58 October 2009 EVP & Head of BusinessTauhidul Ashraf 35 August 2013 SVP & Company SecretaryAbdul Bareque 60 November 2013 SVP & Chief Risk OfficerA.N.M. Golam Shabbir 43 December 1998 VP & Head of HR & ICTFazle Karim Murad 40 June 2000 VP (Corporate Finance)Mohammad Shafi Uddin 41 October 2010 AVP (In-charge Chittagong Br.)Md. Israil Hossain 39 October 2012 AVP (Capital Market Operation)Raihan Uddin Ahammad ACA 30 September 2013 AVP & Head of ICCMd. Forhad Hossain ACA 34 September 2013 AVP & CFO (CC)Md. Shohidul Islam 49 November 2010 AVP & Head of SMEMd. Abu Zubayer Bhuiyan 35 February 2007 Senior ManagerShah Md. Julker Nine 30 April 2010 Senior ManagerMd. Rakibul Islam 51 August 2010 Senior ManagerSalamul Latif Choudhury 33 March 2005 Senior ManagerMd. Ali Faisal 34 July 2007 ManagerMohammad Belayet Hossain 32 May 2010 ManagerMd. Kohinoor Hossain 36 August 2013 ManagerAshraful Alam Mondol 35 July 2007 ManagerShahidul Islam Tuhin 36 July 2013 ManagerMd. Moinul Islam Bhuiyan 33 November 2006 ManagerDeenesh Kumar Raha 31 December 2013 ManagerJumaratul Banna 27 December 2013 Manager

OPERATIONAL HUBThe corporate head office of UCL is located at 73Sonargaon Road, Dhaka. We provide financialservices from our 5 offices including 4 branch offices,three of which are in Dhaka (Karwan Bazar, Motijheeland Gulshan), one is in Chittagong and Sylhet each.We conduct our merchant banking operations andsecurities trading activities through our subsidiarycompanies.

ANNUAL REPORT AND OTHER IMPORTANTDOCUMENTS AVAILABLE IN WEBSITEThis Annual Report, prepared and presented on thebasis of disclosure requirements by the regulatoryauthorities is made available on our website atwww.unicap-bd.com as soon as reasonablypracticable after furnishing the same to theBangladesh Bank, Bangladesh Securities &Exchange Commission (BSEC), Stock Exchangeswhere the shares of the Company are traded.

MARKET FOR UCL’S ORDINARY SHARESThe ordinary shares of UCL are traded on the DhakaStock Exchange Ltd. and Chittagong Stock ExchangeLtd. under the symbol of ‘UNIONCAP’. The followinggraph indicates the high and low prices for the sharesof Union Capital, as reported by DSE during eachquarter end of 2013 (in Taka):

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Q1

Q2

Q3

Q4

32.9

0

32.2

0

36.9

0

35.3

0

24.4

0

19.7

0

27.2

0

27.0

0

(BDT in million except ratios and per share data)

2013 2012 2011 2010 2009 OPERATING PERFORMANCE1,663.80 1,148.00 1,208.52 1,720.38 891.53 Operating revenue606.33 311.88 596.51 1,232.55 467.82 Operating profit208.59 108.69 388.97 938.78 279.46 Profit before tax141.76 56.72 178.28 570.85 163.16 Net profit after tax1.29 0.54 1.70 10.50 3.90 Earnings per share (EPS)

STATEMENT OF FINANCIAL POSITION9,276.15 7,367.60 6,478.45 5,475.16 3,284.97 Current assets13,905.59 10,495.34 9,892.53 8,373.22 6,090.26 Total assets18.24 22.71 28.03 24.11 16.96 Property, plant and equipment812.56 409.74 526.95 837.92 439.87 Net current assets3,751.19 1,668.58 2,033.69 2,006.91 2,592.44 Long term liabilities8,463.59 6,957.86 5,951.50 4,637.24 2,845.10 Current liabilities11,894.92 8,626.44 7,985.19 6,644.15 5,437.54 Total liabilities2,010.67 1,868.91 1,907.34 1,729.06 652.72 Shareholders' fund5,441.99 3,537.48 3,941.03 3,735.98 3,245.16 Capital employed

PROFITABILITY AND OTHER FINANCIAL RATIOS36.44 27.17 49.36 71.64 52.47 Gross operating margin ratio (%)1,275.48 954.62 1,011.19 1,433.16 708.04 Earning before interest, depreciation and tax26.82 51.48 32.35 23.50 32.36 Price earnings ratio (Times)1.10 1.06 1.09 1.18 1.15 Current ratio (Times)7.31 3.07 9.87 25.13 8.61 Return on capital employed (%)0.55 0.89 1.07 1.16 3.97 Debt/Equity (Times)1.54 1.01 1.06 1.19 1.07 Financial expense coverage (Times)8.52 4.94 14.75 33.18 18.30 Net profit margin (%)10.00 5.00 20.00 75.00 30.00 Rate of dividend (%)7.54 10.28 8.88 9.88 12.43 Operating expense to operating revenue (%)

BUSINESS RATIOS5.00 5.00 5.00 5.00 5.00 Statutory liquidity reserve ratio (%)2.50 2.50 2.50 2.50 2.50 Cash reserve ratio (%)3.47 0.58 2.98 2.84 2.02 Net interest income as a % of working funds23.31 37.84 18.00 13.79 23.68 Cost/Income ratio (%)1.01 0.56 1.95 7.89 3.21 Return on average assets (%)18.29 17.85 20.04 31.80 15.60 Net asset value per share1.87 1.14 3.97 11.31 4.74 Profit per employee15.67 13.55 14.88 20.51 13.50 Capital adequacy ratio (%)5.65 2.97 6.03 14.72 7.68 Operating profit as a percentage of working funds1.29 1.08 0.94 1.40 1.30 Dividend cover ratio (Times)8.85 15.55 9.25 9.25 9.34 Non-Performing Loans to Total Loans (%)

EQUITY STATISTICS2,000.00 2,000.00 2,000.00 2,000.00 500.00 Authorized capital1,099.09 1,046.76 951.60 543.77 418.28 Paid up share capital109.91 104.68 95.16 54.38 41.83 Number of shares2,010.67 1,868.91 1,907.34 1,729.06 652.72 Shareholders' equity34.60 27.80 60.50 246.80 126.20 Year end market price3,802.86 2,909.98 5,757.16 13,420.22 5,278.74 Market capitalization1,792.19 1,041.07 3,849.82 11,691.16 4,626.02 Market value addition

FIVE-YEARS FINANCIAL SUMMARYAs of and for the year ended 31 December


GRAPHICAL DATA OF BUSINESS PERFORMANCE

2013

2012

2011

2010

2009

2,010.67

1,868.91

1,907.34

1,729.06

652.72

Shareholders’ fund(BDT in mn)

2013

2012

2011

2010

2009

1,099.09

1,046.76

951.60

543.77

418.28

Paid up share capital(BDT in mn)

2013

2012

2011

2010

2009

7,836.86

4,598.30

3,986.63

3,433.52

2,901.38

Deposits Growth(BDT in mn)

2013

2012

2011

2010

2009

13,905.59

10,495.34

9,892.53

8,373.22

6,090.26

Total assets(BDT in mn)

2013

2012

2011

2010

2009

2,010.67

1,868.91

1,907.34

1,729.06

652.72

Net asset growth(BDT in mn)

2013

2012

2011

2010

2009

9,812.09

6,129.02

6,220.17

5,564.88

4,299.30

936.51

1,189.20

650.93

298.08

311.76

1

Performing (■) VS non-performing loan (■)(BDT in mn)

2013

2012

2011

2010

2009

1,663.80

1,148.00

1,208.52

1,720.38

891.53

Operating revenue(BDT in mn)

2013

2012

2011

2010

2009

606.33

311.88

596.51

1,232.55

467.82

Operating profit(BDT in mn)


2013

2012

2011

2010

2009

1,428.77

897.15

907.13

725.74

547.01

Interest Income(BDT in mn)

2013

2012

2011

2010

2009

235.03

250.86

236.95

994.64

344.51

Non interest income(BDT in mn)

2013

2012

2011

2010

2009

15.67

13.55

14.92

17.26

13.50

Capital adequacy ratio(in percentage)

2013

2012

2011

2010

2009

13.41

15.50

15.20

11.99

11.96

Cost of Fund(in percentage)

2013

2012

2011

2010

2009

25.99

6.80

37.01

32.78

22.54

Net interest margin(in percentage)

2013

2012

2011

2010

2009

936.51

1,189.20

298.55

298.08

311.76

Gross non-performing assets(BDT in million)

2013

2012

2011

2010

2009

141.76

56.72

178.28

570.85

163.16

Net profit(BDT in mn)

2013

2012

2011

2010

2009

371.31

61.02

359.63

237.92

123.31

Net interest income(BDT in million)G

raph

ical

Dat

a of

Bus

ines

s P

erfo

rman

ce


(BDT in mn) (%)

1,074.76 210.69 945.64

24.91 441.92 185.51 664.75 352.48 110.72

3.72 283.64 320.06

12.72 548.78 294.41 181.67

3,996.00 934.56

10.151.998.930.244.171.756.283.331.050.042.683.020.125.182.781.7237.748.83

Trade & Commerce Garments & KnitwearTextileJute & Jute ProductsFood Products & Processing Industry Plastic IndustryIron, Still & Engineering Pharmaceuticals & ChemicalsCement & Allied IndustryTelecommunication & Information TechnologyPaper, Printing & Packaging Ship Manufacturing IndustryElectronics & Electrical ProductsPower, Gas, Water & Sanitary ServiceTransport & AviationHousingPortfolio Investors’ loanOthers

Sector-wise investment

2013

2012

2011

2010

2009

7.31

3.04

9.35

32.01

25.00

Return on shareholders’ fund(in percentage)

2013

2012

2011

2010

2009

1.29

0.54

1.70

10.50

3.90

Earnings per share(BDT in mn)

2013

2012

2011

2010

2009

23.44

37.84

18.01

13.79

23.68

Cost/Income Ratio(in percentage)

(BDT in mn) (%)

1,628 348 946

4,691 933

3,996 22

12.9602.7707.5337.3407.4331.8100.17

Investment in securitiesInvestment in subsidiaryLease financeTerm financeSME financeMargin loanStaff loan

Investment mix

Gra

phic

al D

ata

of B

usin

ess

Per

form

ance


2,500

2,000

3,000

3,500

4,000

0

50,000

100,000

150,000

200,000

Capitalization of NBFI Sector Capitalization of UCL (Taka in mn)

Price of UCLDSEX (Rebased)

1 Jan 1 Feb 1 Mar 1 Apr 1 May 1 Jun 1 Jul 1 Aug 1 Sep 1 Oct 1 Nov 1 Dec

JanDec’12 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

0

8

16

24

32

40

Turnover of UCL (MN) Close Price of UCL

0

5,000

10,000

15,000

20,000

25,000

1 Jan 1 Feb 1 Mar 1 Apr 1 May 1 Jun 1 Jul 1 Aug 1 Sep 1 Oct 1 Nov 1 Dec

STOCK PERFORMANCE

Movement in UCL’s share priceDhaka Stock Exchange introduces newIndex DSEX in 2013. DSEX started itsjourney with 4,055.91 from 27 January 2013while UCL’s share price was Tk. 29.10.DSEX reached to its peak value of 4,439.59on 20 November 2013 when UCL’s shareprice was Tk. 29.80. At the end of 2013, theDSEX increased to 4,266.55 when theUCL’s share price was Tk. 34.60.

UCL’s share turnoverThere was a direct relationship between theUCL’s share price and its trade volume.UCL’s share price has increased with theincrease in the demand for its shares. In2013, the highest turnover of UCL’s sharewas Tk. 22.56 million on 21 July while thelowest turnover was Tk. 0.09 million on 23October. As on that dates the share price ofUCL was Tk. 35.30 and Tk. 28.20respectively.

UCL’s market capitalizationThere was a direct relation betweenthe share price of UCL and that of theNBFI sector for the year 2013 thoughthere was an inverse relationship atthe month of August 2013. In themonth of August 2013, the marketcapitalization of UCL decreased whereas the market capitalization of NBFIincreased. It was because of the factthat the movement in share price wasdriven mostly by the market forces.The highest market capitalization ofUCL was Tk. 3,802.86 million at theend of December 2013 while it was Tk.171,152 million for the NBFI sector atthe end of August 2013.


STAFFING LEVEL 2013 2012Management Cadre 32 18Non Management Cadre 44 16Support Staff 13 17Total Work force 89 51Male 79 44Female 10 10

AVERAGE AGE OF EMPLOYEES Management Cadre 32.16 37.18Non-management Cadre 29.56 29.17Support Staff 31.11 32.07

SALARY & ALLOWANCE (IN MILLION TAKA)Total Salary 58.46 46.81MD's Salary 7.08 3.96Total Benefits 6.51 6.23

CHANGE IN STAFFING LEVEL Total employee at beginning 51 54Recruitment during year 48 5Departures

Retirement 2 -Resignation 8 8

Changes during the year 89 51

TRAININGAverage number of days in training per employee 0.33 1.2% of employees who participated in at least one 31.46 39.22%No. of employees who participated in at least one training program during the year 28 20No. of training programs participated by employees during the year 21 33

2013 SOCIAL INDICATORSOF UNION CAPITAL LIMITED

Driving qualityearnings across allof our business byfocusing onindustry leadingcustomerexperience andenhancingoperatingefficiency we shallstrive for achievingour strategicgoals.

2014 KEY PRIORITIESt the beginning of year 2013, the Management of the Companydeliberated and agreed on certain key priorities for UCL Group.

These priorities will serve as the platform for driving the overallperformance for the year 2014. They are:

STRENGTHENING OUR VALUE PROPOSITIONStrengthening our value proposition to our target customer segmentsincluding corporate, SME and retail customers with the objective ofimproving our share of businesses of financing operations and becomingan institution amongst the top performers in key areas.

CONSOLIDATING UCL AND ITS SUBSIDIARIESReinforcing our business in each of our operating segments in order todeepen our penetration, achieve positive contribution to the Group’sprofitability and deliver commensurate returns on working fund.

DRIVING FOR LOW COST TERM DEPOSITAugmenting our market share of low cost deposits by leveraging oursuperior reach and personalized to drive growth building a strong anddedicated team for deposit mobilization.

AGGRESSIVE INVESTMENT GROWTHImproving our investment by creating quality investment portfolio with thecustomers having good repayment track record in key sectors of theeconomy as well as leveraging the opportunities linked to SME financing.

COMMITMENT TO LEAN GROWTHFocusing on achieving aggressive revenue growth with minimal costgrowth by leveraging our existing operational platform to improve ourcost-to-income ratio.

PROCESS IMPROVEMENTRemoval of process, organizational and policy bottlenecks affectingefficiency improvements within the Group.

Stemming from the progress made on these key areas of priority in thelast part of the year 2012, it is our belief that the Company has delivereda solid and steady performance in 2013 and laid a strong foundation forachieving better performance in 2014 and beyond.

Outlines important actions forachieving strategic goals

A

GOVERNANCE ANDRISK MANAGEMENT

IN THIS SECTION

Board of Directors 48

Board Structure and its Operation 53

Charter of the Board and its Committees 55

Directors’ Report 57

Audit Committee Report 79

Report on Internal Control 81

Directors' Responsibility in respect of the financial statements 84

Responsibility of CEO and CFO in respect of Financial Reporting 85

Report on Internal Control over Financial Reporting 86

Chairman’s Statement on Corporate Governance 87

Corporate Governance 88

Ethical & Compliance Statement 103

Professional Certificate on Compliance of Conditions on Corporate Governance 107

Compliance Report on BSEC’s Notification on Corporate Governance 108

Compliance Report on Bangladesh Bank’sGuidelines on Corporate Governance 113

Report on Going Concern 115

Report on Risk Management 117

Senior Management 133

Management Committees 136

Organization Chart 138



THE BOARDOF DIRECTORS

CHOWDHURY TANZIM KARIMChairman(Nominated by EC Securities Ltd.)First appointment to the Board25 April 2011Born in May 1985Nationality BangladeshiCommittee Membership Executive CommitteeExternal AppointmentChairmanUniCap Securities Limited;UniCap Investments Limited.

Qualification & ExperienceMr. Chowdhury is a full time practicing lawyerspecialized in company, commercial, bankingand securities law. He is the Head of Chamberat C. T. Karim & Partners, a Dhaka based lawfirm primarily engaged in dealing with civilmatters. He has been providing legal servicesto a number of leading banks, financialinstitutions, merchant banks and assetmanagement companies in Bangladesh. Mr.Karim was called to the Bar of England andWales from the Honorable Society of Lincoln’sInn upon successful completion of BarVocational Course at Inns of Court, School ofLaw. He obtained his L.L.B degree from CardiffUniversity, UK and Diploma-in Law fromUniversity of London. Mr. Karim is enrolled asan Advocate of Supreme Court of Bangladeshand also a member of Dhaka Bar Associationand Supreme Court Bar Association.

M. FAIZUR RAHMANDirectorFirst appointment to the Board28 May 2002Born in May 1939Nationality BangladeshiCommittee MembershipAudit CommitteeExecutive CommitteeExternal AppointmentChairman & Managing DirectorAsian Surveyors Ltd.DirectorPubali Bank Limited;Credit Rating Agency ofBangladesh Ltd. (CRAB);Tiger Tours Limited.

Qualification & ExperienceMr. Rahman comes of a nationally known &respectable family of Moulvibazar, Sylhet. Hegraduated from Dhaka University and thenwent to London for higher studies and training.In London, he was trained by the CommercialUnion Assurance Co. Ltd. in 1962. He alsostudied in the Institute of Chartered Secretariesand Chartered Insurance Institution, London.He was one of the senior most executives ofInsurance Company in the then East Pakistan.After the creation of Bangladesh, he started hisown business and formed Asian SurveyorsLtd., one of the largest and globally renownedfirms of surveyors, valuers and loss adjusters.He was the Director of National Tea CompanyLtd. and Infrastructure Investment FacilitationCentre for many years. Mr. Rahman is alsoassociated with many social and welfareoriented organizations.


NASIR A. CHOUDHURYDirectorFirst appointment to the Board22 April 2002Born in December 1946Nationality BangladeshiCommittee MembershipExecutive Committee, ChairmanExternal AppointmentDirectorDBH Finance Corporation Limited;Progressive Life Insurance Co. Limited;United Hospital Limited;NASCOM (PVT) Limited;ChairmanGreen Delta Securities Limited;Green Delta Capital Limited.AdvisorGreen Delta Insurance Company Limited;

Qualification & ExperienceMr. Choudhury has been in the insurance profession foraround 55 years. For his outstanding contribution towardsthe development of the insurance industry, Mr. Choudhuryreceived the DHL and the Daily Star life time achievementaward 2009. After obtaining his Masters from the Universityof Dhaka, he started his career in Karachi in the executivecadre of the then Pakistan Insurance Corporation in 1958.Mr. Choudhury received advanced training for over 14months in insurance and reinsurance from UK andGermany during 1961 and 1962. He was the HonorableInsurance Advisor of Bangladesh Biman and BangladeshShipping Corporation for decades. He was also theChairman of Bangladesh Insurance Association from 2001to 2005. Mr. Choudhury is an Executive Committeemember of Federation of Afro-Asian Insurers & Reinsurers(FAIR). He is the President of Bangladesh MalaysianChamber of Commerce & Industry (BMCCI), CommitteeMember, Metropolitan Chamber of Commerce & Industry ofBangladesh (MCCI), Executive Committee Member ofBangladesh Insurance Association and Member of theGoverning Body of Bangladesh Insurance Academy.

NADEEM A. CHAUDHURYDirector(Nominated by Enrilco Limited)

First appointment to the Board22 November 2001

Born in May 1965

Nationality Bangladeshi

Committee MembershipAudit Committeee

External AppointmentDirectorEnrilco LimitedGreen Delta Securities Ltd.Green Delta Capital Ltd.

Qualification & ExperienceMr. Nadeem A. Chaudhury is representingEnrilco Limited in the Board of Union CapitalLimited. Mr. Chaudhury holds a Bachelor ofProfessional Science degree in ConstructionManagement and Civil Engineering from PrattInstitute, New York, USA. He is also an MBA.He has been involved in the InfrastructureDevelopment business internationally for over20 years. He is also highly skilled contractnegotiator with international concerns.Presently, he is the Chief Executive Officer ofBengal Development Corporation Ltd.

He was a Director of Green Delta InsuranceCompany Limited. He was also the ManagingDirector of Navana Pharmaceuticals Ltd,concern of Islam Group.

TAJRINA SIKDERDirector(Nominated by Palmal GarmentsHosiery Ltd.)

First appointment to the Board9 August 1998

Born in January 1974


Committee MembershipAudit Committee

External AppointmentDirectorPalmal Garments Hosiery Ltd.;Palmal Garments Washing Ltd.;Amazon Garments Ltd.;NKK Knitwear Ltd.;

Max Speed Plastic Ltd.;Designer Line (Pvt.) Ltd.;The Dacca Dyeing Garments Ltd.;MNK Apparels Ltd.;South Bridge Real Estate Ltd.;UniCap Investments Limited.

Qualification & ExperienceMrs. Tajrina Sikder obtained BBA degree fromABAC University of Thailand. Subsequently,she involved herself with Palmal Group as aDirector. As a businesswoman, Mrs. Sikder isassociated with business activities in the areaof apparels, fashion, accessories andpackaging. She has traveled various countriesfor business purpose. She is also involved withmany social work and welfare organization.

Board of Directors - continued


KAZI GOLAM SAMIUR RAHMANDirectorFirst appointment to the Board9 August 1998Born in March 1974Nationality BangladeshiCommittee MembershipExecutive CommitteeExternal AppointmentManaging DirectorTotalgaz BangladeshGroup Representative &Country ManagerTotal GroupQualification & ExperienceMr. Rahman has over 14 years ofexperience as an oil industryprofessional serving in various

senior management positions in the TotalGroup including as Head of Finance &Corporate Affairs of Premier LP Gas Ltd., ChiefFinancial Officer of Total Oil Pakistan Ltd. andManaging Director of Total Vietnam Limited. Hewas a Senior Manager of Strategy andDevelopment in Total’s Asia Pacific RegionalOffice in Singapore. Mr. Rahman is the Vice-President of France-Bangladesh Chamber ofCommerce and Industries, and member of thePower & Energy Sub-Committee as well as theStrategy & Planning Sub Committee of ForeignInvestors' Chamber of Commerce & Industry(FICCI). Mr. Rahman obtained his MBA degreefrom Massachussetts, USA after graduating asan Electrical Engineer from India. He isinvolved in various social and educationaldevelopment activities, including as Trustee ofan orphanage set up by his family for underprivileged children in his hometown.

M. A. SALAMDirector

First appointment to the Board9 August 1998

Born in November 1959


Committee Membership Nil

External Appointment

Chairman & CEOEkushey Television Ltd., South Asia Energy Ltd.,Sand Bangla Ltd.

ChairmanSemisam International Ltd.SAS Fashion Wear Ltd.

Managing DirectorSAS Holdings Ltd.

DirectorAmerican Super SpeciallityHospital Ltd.Bangladesh Mine & Energy Ltd.News Corp. Publications Ltd.Barisal Power Company Ltd.

Qualification & ExperienceMr. Salam is a well-known businessperson anda foremost entrepreneur of the Country startedbusiness in the year 1992. He has beeninvolved himself in different line of businessesin the sector of finance, local & internationaltrade, media & service and buying house &garments at home and abroad. He was also asponsor Director of One Bank Ltd.

CAPT. MINHAZUR REZACHOWDHURYDirector(Nominated by EC Securities Ltd.)

First appointment to the Board9 February 2014

Born in December 1975


Committee Membership Executive Committee

External AppointmentGeneral ManagerEast Coast Shipping Lines Ltd.

Qualification & ExperienceBachelor of Nautical Science, Master Mariner(Nautical), Associate Fellow of Nautical Institute(AFNI), UK

Master Mariner with over 14 years’ experiencein safe operations and commanding of oceangoing vessels particularly container,multipurpose general cargo/bulk carrier andtanker. Currently, working as General Managerfor three years at EC Bulk Carriers Limited andEast Coast Shipping Lines Limited.

Directors Profile - continued


MEHERUNNESA HAQUEDirectorFirst appointment to the Board26 June 2004Born in December 1954Nationality BangladeshiCommittee Membership NilExternal AppointmentDirectorPalmal Garments Hosiery Ltd.;Palmal Garments Ltd.;Palmal Knitwear Factory Ltd.;Palmal Garments Washing Ltd.;Palmal Styles Ltd.;Palmal Packaging Ltd.;Palmal Dresses Ltd.;N.K.K. Knitwear Ltd.;N.K.K. Sweaters Ltd.;

Pragati Fashionwear Ltd.;Pragati Metalex (Pvt) Ltd.;Al-Hamra Garments Ltd.;Amazan Garments Ltd.;The Dacca Dyeing Garments Ltd.;UniCap Investments Ltd.

Qualification & ExperienceMrs. Meherunnesa Haque was born in 1954.As a businesswoman she is involved withbusiness activities since 1984. Mrs. Haqueholds position of Director in good number ofbusiness entities in the area of garments andgarments accessories and finance. She was aDirectors of Prime Bank Ltd. Mrs. Haque hastraveled various countries including U.S.A, UK,Canada, Germany, Singapore, and Thailand forbusiness purposes. She enthusiastically takespart and contributes to various social activities.

KAZI RUSSEL MAHBUBDirector(Nominated by Palmal GarmentsHosiery Ltd.)

First appointment to the Board21 May 2012

Born in October 1971



External AppointmentChairmanFlora Accessories Ltd.

Qualification & ExperienceDr. Kazi Russel Mahbub graduatedfrom Dhaka Dental College in 1996.After finishing his training in Dhaka,

Dr. Mahbub went on to pursue further training in Australia,where he also obtained his Masters Degree from theprestigious University of Wollongogng, New South Wales(NSW) in 2002. Since then he has attended numerousscientific sessions and CME conferences in variouscountries. Dr. Mahbub setup his private practice inGulshan called BIODENT Dental Clinic in 2003. He is oneof the few private practitioners in Dhaka well known athome and abroad for his skills and high quality work.Skilled in Oral Surgical Procedures, Dr. Mahbub was oneof the first few Bangladeshi Dentists to train and qualifyfor the placement of Dental implants from the BICONInstitute of Boston, USA in 2009. Dr. Mahbub is also thefounder and Chairman of Floral Accessories Limited, areputed packaging industry setup in 2010. Dr. Mahbub isan avid golfer, and is a member of both The Army GolfClub and Kurmitola Golf Club. He is also a long standingmember of Dhaka Club. In his personal life, Dr. Mahbubis married and a loving father of one son and twodaughters. He is the son of Engr K A S Md. Abdur Rahim,retired Chairman of Dhaka Electric Supply Authority.

N.H. KHANIndependent Director

First appointment to the Board10 November 2008

Born in May 1935


Committee MembershipAudit Committee, Chairman

External AppointmentDirectorUniCap Securities Limited

Independent DirectorGreen Delta Insurance CompanyLtd.

Qualification & ExperienceMr. Khan obtained his M.A. degree from Dhaka Universityin 1956. He started his career in Pakistan Taxation Servicein 1957. He was Deputy Secretary, Ministry of Commerce,Pakistan Central Government in Islamabad at the time ofliberation of Bangladesh. On return from Pakistan he heldmany important positions under Government ofBangladesh, both home and abroad. He worked asSecretary, Ministries of Post and Telecommunication, Food& Internal Resources Division. He was also Chairman ofNational Board of Revenue. He worked abroad asEconomic Minister of Bangladesh Embassy, Jeddah andBangladesh Consul General in Karachi. He retired fromgovernment service in 1992. He was the founder chairmanof Eastern Bank Limited from 1992 to 2000. He has beenassociated with various educational and socialorganizations, including North South University, Dhakaand Shahjalal University, Sylhet. Since the year 2002, heis holding the position of Chairman of the governing bodyof Sapporo Dental College and Hospital, Dhaka.



ZIAUL HASAN SIDDIQUIIndependent Director

First appointment to the Board23 October 2012

Born in February 1953


Committee MembershipAudit Committee

External AppointmentDirectorUniCap Investments Limited, SummitPower Ltd., Summit Uttaranchal PowerCo. Ltd., Summit Purbanchal Power Co.Ltd., Summit Narayangonj Power Co. Ltd.

Qualification & ExperienceAn Advisor of Prime Bank Limited, Mr.Siddiqui started his career in 1976 atBangladesh Bank as direct Class-1

Officer and accomplished professional excellence in differentareas of Central Banking operations. He holds more than 35years of extensive and versatile experience under differentcapacities including Deputy Governor for more than 5 yearswith specialization in monetary policy, foreign exchangepolicy and reserve management. He also worked as Head ofFinancial Intelligence Unit to upgrade Anti Money Launderingand Combating Financing of Terrorism. During this longcareer, Mr. Siddiqui also held various important positions likeChairman, Bangladesh Commerce Bank Ltd., ManagingDirector, Security Printing Press Corporation Bangladesh Ltd,Board Member, Karma Sangsthan Bank Ltd. and WageEarners’ Welfare Fund of the GoB and also Member, APGSteering Committee representing South Asian countries. Heis also associated with different prestigious academies anduniversities as visiting guest speaker and part-time facultymember. He is now an adjunct professor at BRAC University.Mr. Siddiqui obtained his Masters in Economics with rating inthe top 5 percentile from University of Dhaka in 1974 andMasters in Public Administration from Harvard University,USA in 1989. He participated in many international trainingprograms, conferences and seminars at home and abroad.

MOHAMMAD NURUN NABI FCAIndependent Director

First appointment to the Board9 February 2014

Born in April 1948



External AppointmentChairmanSkeftech Ltd.Krishi Biplob Ltd.Shikarpur Horticulture Ltd.Debonair Ltd.Orbitex Ltd.AZWA Developments Ltd.

DirectorACNABIN Associates Ltd.Dinajpur Super Meat Products Ltd.Intercontinental Business Ltd.Shine Embroidery Ltd.WIN WIN Setabgonj Auto Bricks Industries Ltd.AMTRAS Ltd.SAARC Business Associate of Home BasedWorkers (SABAH) BangladeshHealth & Education for less Privileged People(HELP)

Qualification & ExperienceHe is a Bachelor of Science from KarachiUniversity and a fellow Member of the Instituteof Chartered Accountants of Bangladesh(ICAB). He has more than forty years ofexperience in his exchequer in local and foreignorganizations at different responsible capacity.

MD. AKTER H. SANNAMAT FCA, FCSManaging Director & CEOEx-officio Director

First appointment to the Board4 July 2012



Committee Membership ChairmanManagement Committee, CreditCommittee, Asset-LiabilityManagement Committee, MoneyLaundering Prevention Committee,Corporate Governance Committee,Ethics & Compliance Committee,BASELII Implementation Committee,HR & Compensation Committee andDisclosure Committee.

External AppointmentDirector, UniCap Investments Limited;Council Member, Institute of Bankers, Bangladesh;Member, Standing Committee, DCCI (Financial Institution &Financial Services and FDI, Industrial Policy & Privatizationof SOEs);Member, Panel of Experts, DSE;Member, Executive Committee, BLFCA;Vice President, Bangladesh Merchant Bankers Association.

Qualification & ExperienceA dynamic and versatile management executive Mr.Sannamat in his outstanding 20 years of service life showedoutstanding performance in diverse areas under differentcapacities. Prior to this, Mr. Sannamat was the ManagingDirector of Prime Finance and Investment Limited where heworked for more than 13 years.A Chartered Accountant Mr. Sannamat obtained his Honorsand Master in Accounting from Dhaka University securingfirst class in all through his academic career.


BOARD STRUCTURE& ITS OPERATIONBOARD STRUCTURE OF UCLChaired by Chowdhury Tanzim Karim, the Board of Directorsdetermines Company’s objectives and supervises their implementation.The operating procedure of the Board is governed by the internal rulesand regulations of the Board of Directors. The internal rules andregulations of Board of Directors also define the composition, dutiesand operating procedures of the Committees established by the Board,which have their own charter of functioning. The Board is assisted bythree committees as under:� Board Audit Committee� Executive Committee� Green Banking Committee

SIZE OF THE BOARDThe Board of UCL comprises of thirteen members including the threeIndependent Directors. As per FID Circular no. 9 dated 11 September,2002 of the Bangladesh Bank, the size of the Board of a Non-bankingFinancial Institution shall be minimum of nine and maximum elevenexcluding Independent Directors. As per BSEC’s Notification, a listedcompany should have Independent Director of at least one-fifth of theDirectors. As per Articles of Association of the Company theManaging Director is an Ex-officio Director.

COMPOSITIONThe Board of UCL comprises of the following:Non-executive DirectorsTen out of whom five are Nominated DirectorsIndependent DirectorsThreeExecutive DirectorOne (The Managing Director)

NON-EXECUTIVE DIRECTORThere are ten Non-executive Directors in the Board. None of theDirectors takes part in the day to day affairs of the Company. Theyattend only in the Board/Committee meetings to discuss the agendareserved for the Board/Committees.

INDEPENDENT DIRECTORIn order for a Director to qualify as an Independent Director, theBoard affirmatively determines that the Director has no materialrelationship with UCL either as a partner, shareholder or officer ofan organization that has a relationship with UCL that wouldpreclude that nominee from being an Independent Director. Forthe purpose of such determination, the Directors consider that the

The Primaryresponsibility ofthe Board ofDirectors is toprotect theshareholders’interest. TheBoard, elected bythe shareholders,is the highestgoverningauthority within themanagementstructure.

Board of Directors

Board Audit Committee

Green BankingCommittee

Executive Committee

The governingauthority of UCL

Independent Director does not hold any share orholds less than one percent shares of the totalpaid up capital of the Company, who is notconnected with the Company's Promoters orDirectors or Shareholders who holds one percentor more than one percent shares of the total paidup shares of the Company, on the basis of familyrelationship; who does not have any otherrelationship, whether pecuniary or otherwise, withthe company or its subsidiary/ associatecompanies, who is not a member, Director orOfficer of any Stock Exchange and who is not ashareholder, director or officer of any stockexchange or an intermediary of the capital market.The Independent Director is appointed for a period ofthree years which may be extended by one termonly. A person can not be appointed as IndependentDirector who has already been appointed asIndependent Director of three listed company.

TENURE AND RETIREMENTAs per Companies Act, the office of Non-executiveDirectors is subject to retirement. At least one-third of the non-executive Directors shall retire byrotation in every Annual General Meeting. TheManaging Director is appointed for a minimumperiod of three years subject to approval of theCentral Bank. The office of the Managing Directorbeing an Ex-officio Director is not subject toretirement. The tenure of an Independent Director isthree years and may be extended by another threeyears.

DIRECTORS’ COMPENSATIONExcept the Managing Director & CEO, none of theDirectors holds any position of profit and receivesany remuneration other than the fees forattending the Board/Committee meetings. Anamount of Tk. 5,000 is paid to each Director forattending each Board/Committee meeting.

MEMBERSHIP OF BOARD COMMITTEEAll the Board Committees are comprised entirely ofNon-executive Directors. Membership of Directors inthe Board Committees is given in their biographieson pages --------- of this Annual Report.

SUB-COMMITTEEThe Board has three sub-committees namely BoardAudit Committee, Executive Committee and GreenBanking Committeed. The Board Audit Committee iscomprised of five non-executive Directors. TheExecutive Committee is also consisted of five non-executive Directors. All the Board Committees havea written Charter that describes the Committees'purposes, duties and responsibilities. The CommitteeCharters are available on page ------- of this AnnualReport

BOARD MEETINGThe Board holds at least four regularly scheduledmeetings in each year. In the year 2013, the Boardmet twelve times to discuss scheduled businesses.

DIRECTORS’ RESPONSIBILITYEach Director uses his or her best efforts to attend in allthe meetings of the Board and the Board Committeesto which such Director is appointed. The Directors areresponsible for developing and upgrading UCL’sGovernance Principles, Code of Business Conductand the Charter of each Committee on which suchDirector serves. For review, working papers relating tobusiness to be transacted in the meeting areprovided well in advance to the members ofBoard/Committees.

COMMUNICATION TO DIRECTORInterested parties may communicate with anyDirector by sending letter to the attention of theDirectors in care of the Company Secretary, UnionCapital Limited, 73 Noor Tower, Sonargoan Road,Dhaka-1205.


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The role of theBoard has twofundamentalelements:decision-makingand oversight. Thedecision-makingfunction isexercised withrespect to theformulation withmanagement offundamentalpolicies andstrategic goalsand through theapproval of certainsignificant actions;the oversightfunction concernsthe review ofmanagementdecisions, theadequacy ofsystems andcontrols and theimplementation ofpolicies.

BOARD OF DIRECTORS he Board of Directors isresponsible for supervising the

management of the business andaffairs of the Company in a way whichensures that the interests ofshareholders and stakeholders arepromoted and protected. In dischargingthis duty, the Board has the followingoverall responsibilities:

Strategic planning process� Supervising the formulation of the

strategic direction, plans andpriorities of the Company andapproving the strategic plan.

� Reviewing and approving theorganizational structure of theCompany.

� Monitoring implementation andeffectiveness of the approvedstrategic and operating plans.

� Reviewing and approving thecorporate financial objectives andoperating plans and actions of theCompany.

� Approving major business decisions.

Identification and management ofrisks� Ensuring that processes are in

place to identify the principal risksof Company’s business.

� Reviewing the systems that areimplemented by management tomanage those risks.

� Reviewing the processes thatensure compliance with applicableregulatory, corporate, securities andother legal requirements.

Succession planning and evaluationof management performance� Supervising the succession

planning processes of theCompany, including the selection,appointment and development ofthe Chief Executive Officer and thesenior management team;

� Evaluating and approvingcompensation of the ChiefExecutive Officer and the seniormanagement team in a manner thatis consistent with regulatoryguidelines;

� Overseeing Company’s controlfunctions, having regard to theirindependence and effectiveness.

Oversight of communications andpublic disclosure� Assessing the effectiveness of

Company’s communications,including measures for receivingfeedback from stakeholders.

� Overseeing establishment ofprocesses for accurate, timely andfull public disclosure.

� Reviewing due diligence processesand controls in connection withcertification of the Company’sfinancial statements.

Internal controls� Reviewing the effectiveness of

Company’s internal controls andmanagement information systems.

� Reviewing and approving theCompany’s annual and quarterlyfinancial statements and otherpublic disclosure documents thatrequire Board approval.

� Overseeing compliance withapplicable audit, accounting andreporting requirements.

� Approving dividends, as well ascapital expenditures andtransactions which exceed thresholdamounts set by the Board.

Culture of Integrity� Establishing Company’s values� To the extent feasible, satisfying

itself as to the integrity of the ChiefExecutive Officer and other seniorofficers and that the ChiefExecutive Officer and other seniorofficers create a culture of integritythroughout the organization.

Governance� Developing a set of corporate

governance principles and guidelines. � Appointing from its members a

Chairman of the Board. � Establishing appropriate structures

and procedures to allow the Boardto function independently ofmanagement.

� Establishing Board committees anddefining their mandates to assistthe Board in carrying out its rolesand responsibilities.

� Setting expectations andresponsibilities of directors,including attendance at, preparationfor, and participation in meetings.


CHARTER OF THEBOARD AND ITS COMMITTEES Sets out the roles & responsibilities

of the Board and its Committees

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� Review the composition of the Board with a viewto the effectiveness and independence of theBoard and its members.

AUDIT COMMITTEEThe Audit Committee, within the delegated authorityand in fulfilling the regulatory requirements will:�

Internal Control� review the implementation of key accounting

policies and financial reporting;� evaluate the implementation of the internal control

systems and the risk management process.

Internal Audit� review the adequacy of internal audit function;� consider the scope of work and review and

approve the annual audit plan and ensure nounjustified restrictions or limitations are made;

� review and approve the annual audit report;� review the activities, resources and

organizational structure of Internal Audit;� contribute to the selection process for the

appointment of the Head of Internal Audit; and� ensure that findings and recommendations

communicated by Internal Audit andManagement’s proposed responses are received,discussed and appropriately acted on.

Compliance� review the effectiveness of the company’s system

for monitoring compliance with relevant laws andregulations (including internal rules) and themeasures taken by Management as a result of itsinvestigation of material incidents of non-compliance.

Relationship with the external auditor� review the scope of work and audit plan;� review Management Letters issued by external

Auditors;� review the Report on the annual audit of the

company;� consider the independence of the external auditor

and any potential conflicts of interest;� review the “Terms of Engagement” of the external

auditor;� discuss with the external auditor any audit

problems encountered in the course of auditwork, including any restriction on audit scope oraccess to information;

� discuss with the external auditor theappropriateness of the accounting policiesapplied in the company’s financial reports;

� ensure that significant findings andrecommendations communicated by the externalauditor and Management’s proposed responsesare received, discussed and appropriately actedon; and

� review the performance of the external auditor andmake recommendations to the Board of Directorsfor the appointment, reappointment or terminationof appointment of the external auditor.

Reporting to the Board� report on the conflict of interests;� suspected or presumed fraud or irregularity or

material defect in the internal control system;� suspected infringement of laws, rules and

regulations;� any other matters that requires immediate reporting.

Others� oversee the financial reporting process;� monitor choice of accounting policies and principles;� review the annual financial statements before

submission to the Board for approval;� review the quaterly and half yearly financial

statements;� review the statement of significant related party

transactions submitted by the management.

EXECUTIVE COMMITTEEThe Executive Committee, in fulfilling its purpose, will:� Guide the Management in achieving the

organization’s vision/mission;� Review implementation of the business policy;� Approve credit proposals upto Tk. 50 million for

each customer;� review credit proposals prepared by the

management and recommend to the Board wherethe amount exceeds Tk. 50 million;

� review the proposals relating to write offloan/leases and recommend to the Board forconsideration.

GREEN BANKING COMMITTEE� Formulate a Green Banking policy;� Guide and advise the green banking unit/cell to

prepare an in-house green banking guide;� Ensure regular training on in-house green banking

activities for creating green banking awarenesswithin the company;

� Ensure incorporation of environmental risk in corerisks management;

� Ensure environmental due diligence applied as partof environment risk management before makinginvestment decision;

� Ensure allocation of fund in the annual budget forgreen banking investment and proper utilization ofclimate risk fund; and

� Find avenues for innovation of new green bankingproducts and green marketing.

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DIRECTORS’ REPORTDEAR SHAREHOLDERS,

he Board of Directors of Union Capital Limited (UCL) takes thepleasure to present the Annual Report and the Audited

Financial Statements of the Company for the year ended 31December 2013 together with the Auditors’ Report thereon, forconsideration and approval of our respected Shareholders. TheBoard of Directors of the Company approved these on 4 March 2014. This Directors’ Report has been prepared in compliance with theSection 184 of the Companies Act 1994, BSEC’s Notification of 2012,the Listing Regulations of DSE & CSE, Bangladesh Bank guidelinesand other applicable rules and regulations. Relevant disclosures andexplanations relating to certain issues have been given by theDirectors, which they consider relevant and important to ensurecompliance, transparency and good governance practices. Webelieve the report will provide the insights of the Company’sperformance during the year under reporting.

GLOBAL ECONOMY 2013The global economy grew by 2.1 percent in 2013, its slowest ratesince 2009. While most developed economies continued to grapplewith the challenge of taking appropriate fiscal and monetary policyactions in the aftermath of the financial crisis, a number of emergingeconomies, which had already experienced a notable slowdown inthe past two years, encountered new domestic and internationalheadwinds during 2013.The euro area has finally come out of aprotracted recession, with gross domestic product (GDP) for theregion as a whole starting to grow again; the economy of the UnitedStates of America continues to recover; and a few large emergingeconomies, including China, seem to have at least stopped a furtherslowdown.

In 2013 the world’s big stock markets soared upwards - America’sS&P 500 index rose by 30 percent last year, and Japan’s Nikkei by57 percent - buoyed by monetary stimulus and growing optimismabout global growth.

USAThe US economy expanded at an annual rate of 3.2 percent in the lastthree months of 2013. The pace of growth slowed from 4.1 percent inthe previous quarter but still means that US gross domestic product(GDP) the broadest measure of goods and services produced acrossthe economy grew at an annual rate of 3.7 percent in the last half of2013, a pace unseen since 2003. In the United States, fiscal tighteningand a series of political gridlocks over budgetary issues weighedheavily on growth; however, quantitative monetary easing boostedequity prices. The US labor market and housing sector continued to

Growth of world GDP2007-2013

2013

2012

2011

2010

2009

2008

2007

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2.80

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recover. The economy’s strong year-end performancefollows on the heels of a 4.1 percent growth rate in thethird quarter. The most promising sign in the finalmonths of 2013 was a surge in consumer spending. InDecember, growth in payrolls decelerated, althoughthe unemployment rate did drop to 6.7 percent.Housing prices continued to rise on an annual basis, but the overall pace is slowing significantly.

CANADAThe Canadian economy accelerated in 2013 butunderlying growth remains modest. Quarterly growthaveraged 2.2 percent over the first three quarters of2013. But to a large extent this reflects the unwindingof disruptions in the energy sector that haddepressed production, investment, and exports in thesecond half of 2012, when GDP grew at a mere 0.8percent. The composition of growth does not yet pointto the much needed rebalancing from householdconsumption and residential construction towardsexports and business investment. Canada’s bankingsector remains well capitalized and has low levels ofnonperforming loans. IMF expects growth toaccelerate above potential in 2014, following astronger recovery in the United States, but thebalance of risks remains on the downside.

BRAZILGrowth in Brazil has been hampered by weak externaldemand, volatility in international capital flows andtightening monetary policy, but growth is expected torebound to 3 percent in 2014. Recent indicators haveconfirmed the Brazilian economies generally passedweak state in the year 2013. In December 2013,economic activity contracted and industrial productionfell over the previous month. Retail sales increased0.7 percent in November, but consumer confidenceretreated 1.2 percent in December. On a positive note,business confidence returned to optimistic territory inDecember for the first time since July of 2013.

JAPANGrowth in Japan has been boosted by a set ofexpansionary policy packages, but the effects offorthcoming structural reforms remain uncertain. Coremachinery orders expanded at the fastest pace in lastsix months in 2013. The trade balance recorded arecord deficit in 2013, mainly due to soaring fuelpurchases. Nearly a quarter-century after the Japanesestock market bubble burst at the end of 1989, the stockmarket leapt by more than 50 percent in 2013, as theera of deflation appeared to be finally ending.

CHINAA slowdown in China has been stabilized and growthis expected to maintain at a pace of about 7.5 percent in the next few years. The Chinese economygrew 7.7 per cent in 2013, the weakest since 1999,matching the revised figure for 2012. China'seconomy narrowly missed expectations for growth tohit 14-year lows in 2013. Government investment inrail and subway construction coupled with tax andother business incentives helped boost growth in theJuly-September period. For the whole of 2013,China's fixed-asset investment climbed 19.6 percent,

the smallest increase in last 10 years and a tick belowforecasts for a 19.8 percent rise. Chinese inflation fellto its lowest level in seven months in December at 2.5percent, driven by a decline in food prices.

RUSSIAIn the Russian Federation, growth weakened furtherin 2013, as industrial output and investment faltered.The final GDP result for 2013 confirmed theweakness of the Russian economy. GDP expanded1.3 percent, which was less than half of the 3.4percent expansion recorded in 2012 and marked theweakest performance since 2009. Meanwhile, theRussian ruble (RUB) is experiencing headwindsstemming from the recent turmoil in the financialmarkets. At the beginning of February, the currencytraded at a five-year low against the U.S. dollar. Itsubsequently recovered as a result of interventionfrom the Central Bank.

INDIAIndia experienced its lowest growth in two decades,along with large current account and governmentbudget deficits plus high inflation. For the Indianeconomy, 2013 has been a very turbulent year. The$1.8-trillion Indian economy suffered its worstslowdown over a decade with GDP growth below 4.8per cent for four straight quarters, amid threats of aratings down grade. It was because of domestic aswell as external factors the slowest since 2002.

UNITED KINGDOMThe UK's economy grew at the strongest rate in sixyears in 2013, having ended the year on a strongnote as the recovery became more entrenched. TheUK's services and manufacturing sectors were thedrivers of the annual growth rate to 1.9 percent, thestrongest since 2007 before the financial crisis tookhold. Low interest rates, easier credit conditions, pent-up demand and a resurgent housing sector are allstimulating purchases of vehicles and other consumerdurables, while solid employment growth is offsettingsome of the drag from weak wages. If the businesssentiment indicators are to be believed, 2014 isshaping up to be even stronger and overall economicgrowth could reach 2-3 percent per annum.

FRANCEThe French economy was unable to maintaineconomic growth. The slowdown was seen across-the-board, with both domestic and external demanddeteriorating. After eight quarters of economicstagnation, GDP rebounded at the end of 2013,although partly driven by temporary factors. Over theyear, GDP rose by 0.3 percent after a stagnation in2012. Household consumption expenditureaccelerated by the end of the year. Furthermore, totalgross fixed capital formation (GFCF) rose for the firsttime since the end of 2011. The final domesticdemand accelerated significantly and contributed for+0.5 points to GDP after a neutral contribution in Q3.In Q4 2013, exports bounced back while importsdecelerated slightly. Therefore, the foreign tradebalance contributed positively to activity anew: +0.2points after –0.7 points. All in all, after 0.3 percent in


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investment spending in the region exacerbated currentaccount deficits, which widened further in 2013.

MIDDLE EAST AND NORTH AFRICAThree years after the Arab Spring, the economies ofthe Middle East and North Africa region remaindepressed. Political turmoil in Egypt, stalemate inTunisia and an escalation of the civil war in Syria withspillovers to neighboring Lebanon and Jordan haveweakened activity in the developing oil-importingcountries. Egypt’s GDP contracted by 3.2 percent inQ2 of 2013, and growth for the fiscal year (ending inthe same quarter) amounted to 2.0 percent, down froma modest 2.3 percent in 2012. Industrial production inthe oil-importing countries contracted by 36 percent inthree months through October, led mainly by sharpdeclines of 44 percent in Egypt. Oil production indeveloping oil-exporting countries - accounting fornearly a third of the region’s oil output-has fallen overthe past year by nearly 8.5 percent (year to date) in2013, reflecting security setbacks, strikes, andinfrastructure problems in Algeria, Iraq, and Libya, andinternational sanctions in the case of the IslamicRepublic of Iran. External imbalances have worsenedacross the developing countries of the region.

GLOBAL ECONOMIC OUTLOOK IN 2014The global growth prospects look a lot brighter withmost large developed economies; especially Japan,the United Kingdom and the United States expected togrow strongly in 2014. Business confidence in China,Brazil, India and South Africa all fell to record low in2013, and in Russia and Turkey to record low sincethe financial crisis began. Following a contraction of0.4 percent in 2013, the currency bloc is expected toreturn to growth in 2014, but while Germany isexpected to expand robustly, the next two largesteconomies in the currency bloc, France and Italy, lookset to struggle and their business communities areamongst the least optimistic in the world.The fears over the ‘fiscal cliff’ in the United States,the recession in Europe and the rebalancing ofChina’s economy were dampening growth prospectsacross the world, and globally, business confidencewas at its lowest since the financial crisis. A recoveryin these economies is likely to boost global growth to3.6 percent in 2014, accelerating to 4.0 percent in2015. Key trading partners, the US and the EU, areprojected to grow faster in 2014 but private demandstill remains very sluggish in the Euro Area. On theother hand, Emerging Market and DevelopingEconomies are experiencing a multispeed recoveryprocess with growth projected at 5.1 percent in 2014.While China is projected to grow at around 7.3percent in 2014 the Indian economy is projected togrow by 5.1 percent.The economies of developing Asia, led by China,India and Indonesia, are expected to grow by 6.5percent in 2014. Strong growth is also forecast inSub-Saharan Africa and the Middle East, and NorthAfrica is expected to rebound after a tough 2013complicated by the fallout from the Arab Spring.Central and Eastern European economies havesuffered as major regional export markets have driedup but growth prospects are improving despite a lackof necessary reforms in Russia.

2013, real GDP growth is forecast to accelerategradually to 1.0 percent in 2014.

SWITZERLANDAfter showing remarkable growth in the third quarter,recent economic indicators suggest that the Swisseconomy maintained strong footing in the finalquarter of 2013. In addition, leading indicatorssuggest that the economy will shift up a gear at theoutset of 2014.

GERMANYWestern Europe emerged from recession in 2013, butgrowth prospects remain weak, as fiscal austerity willcontinue and the unemployment rates remainelevated. Despite the adverse economic environmentin the Eurozone, the German economy performedwell in 2013. Following the 0.7percent increase thatwas recorded in 2012, the economy grew 0.4 percentin 2013 according to preliminary estimates. Theexpansion was the result of solid domestic demand,particularly private consumption, which increased 0.9percent. Conversely, the external sector deteriorateddue to slower growth in exports. Leading indicatorspoint to an acceleration in GDP growth going forward.

ITALYAfter a severe recession, the economy returned togrowth at the end of 2013. The contraction in outputrecorded since mid-2011 came to a halt witheconomic activity posting a moderate increase in thelast quarter of 2013. Over the year, real GDPdeclined by 1.9 percent. The strong fall in domesticdemand acted as a drag on the economy due topersistently tight financing conditions and highuncertainty holding back consumption andinvestments. With still difficult labor marketconditions, private consumption is expected to riseonly marginally and by less than disposable incomeas households restore their savings.

SUB-SAHARAN AFRICAEconomic growth picked up in Sub-Saharan Africa in2013, supported by strong domestic demand, notablyresource-based investments. Real GDP for the regiongrew an estimated 4.7 percent; excluding South Africa,its largest economy, growth was higher at 6 percent.Foreign direct investments continued to flow in theregion, not only in the oil, gas and mining sectors butalso in non-extractive industries. Net FDI flows werean estimated $43 billion in 2013, up from $37 billion in2012. Gross fixed capital formation grew an estimated7.3 percent in 2013. Inflation decelerated in manycountries, owing to lower food prices and prudentmonetary policy; and the low inflation, combined withan estimated 6.2 percent increase in remittances,helped boost private consumption. Nevertheless,poverty and unemployment remain high in manycountries in the region. Fiscal balances deterioratedfurther in 2013, especially among oil exporters whofaced falling output and lower oil prices. Partly as aresult, public debt has risen from 29 percent of GDP in2008 to an estimated 34 percent of GDP in 2013. Debtratios in some countries have risen sharply, raising thespecter of debt sustainability going forward. The strong


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t rising remittances should stimulate householdconsumption and permit a continued rapid expansionof domestic demand. A modest fiscal consolidation isprojected to start in 2014; but fiscal deficits willremain elevated as governments maintain theirinvestment programs while revenue stays low.Slower growth in emerging markets and a weakerrecovery in developed economies could affect theregion’s growth prospects through a protracteddecline in commodity prices and lower FDI flows.Countries that depend on mineral exports would,however, see real GDP growth and current accountbalances deteriorate significantly.

Other emerging markets will also perform a littlebetterThe global environment facing emerging markets willbe more growth friendly than it has been in the lastthree years. US and Chinese growth will be a littlestronger and the Eurozone will no longer be a dragon the world economy. This means that emerging-market exports will again become a source ofgrowth. It is also expected that the real GDP growthfor these economies will strengthen from 4.7 percentin 2013 to 5.4 percent in 2014.

Prospects for the least developed countriesThe economies of the least developed countries willcontinue to expand at a solid rate, with growthforecast at 5.7 per cent in 2014. However, per capitaGDP is expected to increase at only 3.2 per cent in2014. Major obstacles for stronger economic andsocial development include institutional deficits, alack of infrastructure, and political instability. Innumerous African LDCs, such as Angola, Liberia,Sierra Leone, the United Republic of Tanzania, andZambia, investment in the natural resource sectorwill drive growth in 2014. However, the challenge liesin achieving a more comprehensive and lastingimpact on development.

Middle East and North Africa will struggle furtherGrowth in the developing countries of the region isexpected to remain weak in 2014. Under thebaseline scenario, marked improvement in thepolitical uncertainty that has plagued the region isnot expected. In developing oil importing countries,consumption will be underpinned by large publicoutlays on wages and subsidies, while publicinvestment will likely be constrained by large fiscaldeficits, while growth in developing oil exporters willstrengthen as the oil prices remain relatively highand infrastructure problems and security setbacksare resolved and mitigated. The region’s outlook issubject to significant downside risks that are mostlyinternal to the region. A further escalation of violencein Syria and spillovers to other countries canadversely affect the region.

OVERVIEW OF BANGLADESH ECONOMY IN 2013The GDP in Bangladesh expanded 6 percent in thefiscal year 2013 from 6.2 percent of the previousyear. 2013 was a mixed year with the stock indicesgearing up slightly better than the last couple ofyears. The economy went fine with good amount of

US growth will speed up slowlyA modest pace of growth is expected, with alreadyincreasingly strong cyclical forces gaining strengthsupported by easy financial conditions, even thoughFed policy has begun to shift towards ending assetpurchases in late 2014. GDP growth for 2014 isforecast at 2.75 percent, while the jobless rate isexpected to fall to 6 percent by late 2015. The USrecovery lost steam in 2013 because of massive fiscaltightening. The drag from fiscal policy will probably befar less over the coming year - especially in light ofthe mid-December budget deal made by the USCongress. This will allow the underlying strengths ofthe economy to become more visible. These includecontinued strength in housing and the ripple effects ofthe unconventional oil and gas boom. It is alsoexpected that the pace of capital spending will gathermomentum, making it one of the engines of growth in2014, although this growth will remain subduedrelative to cyclical recoveries in the past few decades.

The European recovery will proceed at a verysluggish paceDespite some signs of weakness, the nascentEurozone recovery will have staying power. Amultitude of factors will support growth (0.8 percent in2014), including: very accommodative monetarypolicy, stabilizing labor markets, less emphasis onausterity by EU officials, improved spending powerbecause of ultra-low inflation, better competitivenessin the peripheral countries, and more confidence inthe ability of Eurozone politicians to manage thesovereign-debt crisis. The jobless rate is expected toslide to 7 percent towards the end of 2014, and couldlead to a modest tightening of monetary policy in2015-16. Even with these positive trends, somecountries like Greece, Italy, and Spain will struggle toachieve positive growth. On the other hand, bothGermany and the United Kingdom will grow faster in2014 than they did in 2013.

China’s growth rate will be sustainedAfter hitting a low point in early 2013, China’srecovery re-accelerated thanks to the government’s“mini-stimulus.” It is also expected that the pace ofChinese growth to quicken a little from 7.8 percent in2013 to 8.0 percent in 2014. Further moderatestimulus will be applied if growth falls below 7.5percent. Much stronger stimulus will be forthcoming ifgrowth falls below 7.0 percent. The bigger growthchallenge for China will be over the medium term, asthe country deals with the daunting problems of anaging population and the consequences of rapidcredit growth, including a new housing bubble andrising debt levels.

Sub-Saharan Africa will maintain growthRobust domestic demand is expected to continue tosupport growth, despite tighter global financialconditions to which countries in the region arerelatively insensitive. Regional GDP is projected tostrengthen to 5.3 percent in 2014. Net FDI inflows areexpected to remain resilient and inflation is expectedto continue its downward trend as food and energyprices remain low, which combined with steadily


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tBangladesh economy achieved a respectable growthof 6 percent during FY13 in a very challengingdomestic and global economic environment. Theexpansion of the economy during FY13 was broadbased, registering positive growth by all sectors andsub-sectors of the economy. GDP growth during theyear was based on 9.0 percent growth in theindustry sector, 5.7 percent growth in the servicessector and 2.2 percent moderate growth in theagriculture sector. In the overall GDP growth of 6.0percent in FY13, the services and industry sectorscontributed equally 2.8 percentage points whileagriculture contributed 0.4% point.

Agriculture SectorThe agriculture sector contributed 18.7 percent of totalGDP in FY13 compared to 19.4 percent of total GDPin FY12. The output growth of agriculture sectormoderated to 2.2 percent in FY13 from 3.1 percent ofFY12. Within the agriculture sector, the highest growthwas achieved in the fishing sub-sector followed by theforest and related services sub-sector. Fishing sub-sector grew at a rate of 5.5 percent in FY13 against5.4 percent recorded in FY12.

Industry SectorThe country's industry sector grew substantially by ahealthy 9.0 percent in FY13. The sustained increase inmining and quarrying and construction spurred the

growth in the industry sector. The large and mediumscale manufacturing which accounted for 73 percent ofthe manufacturing sub-sector grew by 10.3 percent inFY13 compared to 10.5 percent in FY12. On the otherhand, small scale manufacturing sub-sector whichcontributed about 27.0 percent of the total output ofthe manufacturing sector grew by 6.8 percent in FY13,slightly higher than 6.5 percent in FY12. The export ofwoven garments and knitwear, the country's two keyexport industries showed a growth of 15.0 percent and10.4 percent respectively in FY13.However, exports ofraw jute, tea, frozen food and chemical productsshowed a downward growth during the year. Growth ofthe construction sub-sector increased to 8.1 percentduring FY13 from 7.6 percent in FY12.

Net Foreign Investment(in crores Taka)

December

November

October

September

August

July

June

May

April

March

February

January

64.95

276.83

228.35

84.65

155.41

188.54

336.6

231.58

82.96

90.55

103.56

98.92

remittances inflowing and foreign reserves rising tothe historical height.

However, the second half of the year was filled withvagaries in the political zone. The continuousnationwide strikes sparked the food prices drasticallyas movement of goods inside the country wasseriously obstructed by the political turmoil. Aftermany years, the country did not go through anynatural calamity in 2013 which is quite unnatural for anatural disaster-prone country like Bangladesh.The garments industry has been hit badly by thebreakdown of the surface transport network in thelast half of 2013. As a result, the garments exportershave been forced to resort to air shipment whichincreased the costs and reduced the profit margins.Due to the strong position of Bangladesh RMGexporters in the international market and the longtime gap between a purchase order and the actualsupply, any adverse impact on our exports is still notvisible. For the first time since 2001, annualremittances have decreased in 2013. This wasnegatively impacted by a sharp fall in our manpowerexport in 2013.

Economic Growth

GDP Growth Year Wise(in percentage)

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

6.00

6.20

6.70

6.10

5.70

6.20

6.40

6.60

6.00

6.30

Domestic Investment (�) Savings (�) of GDP(in percentage)

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

24.00

24.50

24.70

24.50

24.20

24.40

24.40

25.20

26.50

26.80

19.50

20.00

20.30

20.40

20.30

20.10

20.10

19.30

19.30

19.30



wheat, crude petroleum, chemicals, textile & articlesthereof etc. recorded increases of imports duringFY13. Except iron, steel & other base metal, capitalmachinery and others under the category of capitalgoods and others showed negative import growth.Therefore, imports of capital goods and othersdecreased by 9.0 percent to USD 1,1031.0 millionin FY13.

Remittance shrinks 2.5 percent in 2013 A total amount of USD 13.83 billion remittance wasreceived in 2013, which was USD 14.17 billion in theprevious year, registering a 2.5 percent decrease.On the other hand, the amount was sufficient tocontribute to the highest foreign exchange reserveof the country which exceeded USD 18 bn. Sincethen, a declining trend of inflow was observed. Theprime reason for such declining trend in theremittance inflow was led by sluggish businessenvironment due to unrest in the political arenawhich in turn made the expatriates unwilling to sendmoney home for investment purposes. The Refugeeand Migratory Movements Research Unit (RMMRU)stated that the manpower export fell by more than200,000 in 2013.

External Trade and the Balance of PaymentsThe Current Account Balance (CAB) continued to bein surplus reflecting the increasing inflows ofremittances bolstered by continued export expansionand declining imports. Import growth was sluggish inFY13, partly reflecting the significant fall in foodimport demand, lower petroleum imports as well asslower demand for imports related to manufacturingoutput.The trade deficit declined significantly by 24.8percent in FY13 owing to the relatively largerexpansion in export earnings compared to theincrease in import expenditure. The deficit on theservices account, however, widened by USD 158.0million (5.3 percent) to USD 3159.0 million in FY13from USD 3001.0million in the previous year. Thedeficit on the primary income account also widenedsignificantly (49.5 percent) to USD 2315.0million inFY13 from USD 1549.0 million inFY12. Secondary

Foreign reserve(In USD)

December

November

October

September

August

July

June

May

April

March

February

January

18,094.60

17,105.90

17,345.40

16,154.80

16,252.30

15,533.70

15,315.20

14,531.40

14,829.10

13,971.10

13,848.30

13,076.50

Services SectorThe services sector growth moderated to 5.7 percentin FY13 compared to 6.0 percent in FY12. Themoderation in this sector growth was led mainly by aslowdown in wholesale and retail trade and financialintermediation. Wholesale and retail trade, whichaccounted about 28.5 percent of the sector, grew by4.7 percent in FY13 against 5.6 percent in FY12.Financial intermediation achieved a lower growth of9.0 percent in FY13 compared to 11.0 percent inFY12 largely due to lower profitability in the bankingsector. The education sub-sector exhibited animpressive growth of 9.7 percent in FY13,significantly higher than the 7.2 percent of FY12,possibly due to the growth of new institutions ofhigher education.

ExportTotal exports in FY13 had a strong growth over FY12.Aggregate exports increased by 11.2 percent in FY13to USD 27027.4 million from USD 24301.9 million inFY12. Apparels (woven garments and knitwearproducts) continued to occupy an overwhelming(above three fourth) share of the export basket inFY13.Due to the continuous turbulences in socio-political issues 40 percent of the total orders havebeen cancelled where some of them shifted to Indiaand Vietnam. Shipment costs have been increasedby an extra Tk.4,000 crore due to the politicalprograms. There are also some policy level issues inRMG sector.

ImportsImport payments in FY13 were USD 33576.0 millionregistering a positive growth of 0.8 percent comparedto USD 33309.0 million in FY12. Food grains importdecreased substantially by 19.4 percent to USD726.0 million in FY13 from USD 901.0 million in FY12mainly due to adequate

domestic supply of rice during the period. On theother hand wheat import increased by 13.5 percentto USD 696.0 million in FY13. Pulses, oil seeds,

Export(In USD Million)

2012-13

2011-12

2010-11

2009-10

2008-09

27,027

24,310

22,924

16,205

15,565

Import(In USD Million)

2012-13

2011-12

2010-11

2009-10

2008-09

33576

35442

29807

21140

19939

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October 2012 at 11.28 percent and has declinedsteadily to 4.88 percent in December 2013. However,the rise in food inflation is pushing up averageinflation which bottomed out at 6.06 percent inJanuary 2013, rose to 6.78 percent in June 2013 andis 7.53 percent in December 2013.

NBFI’s PERFORMANCE IN 2013The country experienced manifolds challenges in2013 which include political unrests, volatility incapital market, the widening gap between depositand lending rates, labour unrest in garments &textile sector, record high NPL ratio, operation ofsome more banks in the financial market, increasein interest rate of government securities etc. In theyear 2013, the Central Bank made a transitionfrom a cautiously restrained monetary stanceaimed at curbing credit growth and preservingexternal stability to a more balanced policy toensure sufficient credit envelop to attain targetedreal GDP growth while a careful consideration tocombating inflation.

Performance of major indicators of this sectorreflecting a movement of the risk weighted capitalasset ratio, the gross NPL ratio and the net NPLratio, ROE for all banks mostly remained at acomparable level relative to the closing figures of theprevious financial year. The gross NPL ratio and thenet NPL ratio of overall banking sector significantlyincreased and the risk weighted capital asset ratiodeclined to some extent during this year. Anotheraspect was that due to low investments, the creditgrowth was very slow. In addition, most NBFIs wentfor deposit mobilization in 2013. The big institutionsas well as the small ones have opted for thismethodology. Bangladesh Bank has allowed NBFIsto keep fixed deposits for three months. Theminimum period for term deposits was six monthspreviously.

ADR Ratio(in percentage)

December

November

October

September

August

July

June

May

April

March

February

January

70.80

71.91

71.85

71.65

73.34

73.35

74.10

74.90

75.26

75.28

76.28

76.95

income increased substantially (11.8 percent) fromUSD13423.0 million in FY12 to USD 15009.0millionin FY13. Workers' remittances recorded an increaseof 12.6 percent in FY13.

Workers' RemittancesRemittance contributes to our national economy in alarge scale by increasing foreign exchange reserve,per capita income and employment opportunities. It iscontributing more than 13 percent to our GDP.Bangladesh has been ranked seventh on the list often countries expected to receive highest officiallyrecorded remittance this year.

Despite continued global economics lowdown, theflow of inward remittances from Bangladeshinationals working abroad remained strong in FY13and continued to play an important role instrengthening the current account balance.Remittance inflow increased by 12.6 percent to USD14338 million in FY13from USD 12734 million inFY12. However, as discussed above the rate ofremittance growth sharply slowed down in the secondhalf of FY13 compared with the first half.

InflationFood inflation has risen steadily 9.00 percent inDecember 2013. The reasons relate to higherdistribution costs due to the frequent nationwide

strikes. On the other hand, point to point non-foodinflation is steadily declining, having peaked in

Annual Remittance(In USD)

2012-13

2011-12

2010-11

2009-10

2008-09

2007-08

13.84

14.18

12.17

11.01

10.72

8.98

CPI inflation Year Wise(in percentage)

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

7.70

10.60

8.80

7.30

6.70

9.90

7.20

7.20

6.50

5.80

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Due to flat capital market scenario fund raised fromthe primary market in 2013 of Bangladesh was thelowest in last five years. A total of 12 companiesoffered IPOs worth amount of BDT 8,305 mn in 2013to the public while the number of IPOs were 17 in2012 with an amount of BDT 12,081.09 mn. In 2013,Engineering sector was the top sector to raise fundfrom the primary market, followed byPharmaceuticals & Chemicals and Textile sector.IPO shares gave lower return in 2013 compared tothat of 2012. The weighted average return declinedto 69 percent in 2013 which was 104 percent in2012. The public interest was found significantly forthe shares which were offered at face value. AFCAgro Biotech Limited and Bangladesh BuildingSystems Limited were oversubscribed by 59.92 and45.95 times respectively while Orion Pharma Limitedand Appollo Ispat Complex Limited wereoversubscribed by 1.05 and 2.27 times. The highestoffer price in 2013 was BDT 60.00 including apremium of BDT 50.00 per share for Orion PharmaLimited.

Turnover(in billion)

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

952.74

1001.00

1561.00

4009.90

1475.30

667.96

322.82

65.08

64.86

53.18

IPO in last five years(BDT in crore )

2013

2012

2011

2010

2009

830.50

1208.11

1991.42

1186.08

891.73

CAPITAL MARKET IN 2013In 2013, Bangladesh Securities and ExchangeCommission (BSEC) has been upgraded to A-category from existing B-category. With intent tomaintain communication with other securitiesregulators and stock exchanges over the world,BSEC has opened up a new department in the nameof International Affairs Department (IAD). Thedepartment would provide required information andwould support to the International Organization ofSecurities Commissions (IOSCO) and the securitiesregulator and stock exchanges of other countrieswhile they visit Bangladesh. The great achievement for the capital market ofBangladesh in 2013 is the Demutualization of StockExchanges. “Exchanges Demutualization Act 2013”was passed and published in Bangladesh Gazette.Demutualization would lessen the conflicts visible in ametalized set-up. It leads to improvement in thecorporate governance structure and separation oftrading rights and ownership rights. It would alsoassist in attracting international strategic partners andgood quality issuers. As such, institutional investorsprefer to invest in markets where the exchangedemonstrates strong corporate governance, marketsurveillance and enforcement in the belief that suchmarkets are less likely to experience endemic marketspeculation and manipulation or be threatened bysystemic failure.

The year 2013 passed as another depressive year forinvestors, though DSE Broad Index (DSEX) gained4.30 percent over the year. Over 2013, the DSEXgain only 176 points, closed at 4,266.55. DSEXreached its highest at 4,439.59 on 20 November2013. In 2013 the turnover velocity ratio in DSE wentdown to 38.14 percent. In comparison to otherdeveloped capital markets, our velocity ratio is lower,showing that the DSE has room to grow and hasleveraged on the opportunities available as reflectedby the improvements achieved in the last few years.

Market capitalization(in billion)

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2058.16

1823.65

2054.37

2992.41

1475.41

852.21

624.65

275.60

215.40

224.16

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OPERATIONAL PERFORMANCE OF UCL GROUPThe financial sector including Union Capital passedanother year of challenge in 2013. National economyfaced a dificult time because of hartal, blockade andpolitical instability. The total economy was adverselyaffected as a result of hartal and blockade. Exportersincurred a huge losses as they could not makeshipment of goods due to shutdown and roadblockade. Global economic recession did havespillover impact on the Bangladesh economy.Political instability restricted growth of loans andadvances during 2013. The capital market remainedunstable throughout the year. UCL met thechallenges through focused marketing plan,diversified products and services, initiative towards afully automated and modern system, improving theassets quality by strengthening the recovery of non-performing assets, emphasis on human resourcesdevelopment programs to upgrade the skill andknowledge of our personnel.

FINANCING AND INVESTMENT OPERATIONUnion Capital always tried to be innovative whilemaking any investment decision with a focus toidentify and select emerging sectors for financing andmaintaining quality portfolio. As a reflection of itscorporate vision, the company always prefers thesegmented business proposition which includescorporate, institutional clients and SMEs. SMEfinancing is making a significant contribution to thecountry's economy but still there is an enormous gapbetween the sectors need and admittance to fundswithin reasonable cost. Keeping this in mind, UCL isoffering tailored financial products for the growth ofSME sectors. Overall investment was slow due topolitical uncertainly and lack of confidence ofentrepreneur throughout the year. On the top ofeverything, highest priority was given and relentlesseffort was made to recover loans/lease at utmostlevel and in which the company performed well.

BANGLADESH ECONOMY OUTLOOKThe macroeconomic developments during the earlymonths of the ongoing FY2014 reflect a set of mixedsignals. While some of the strong areas of FY2013including export earnings, FDI and BoP maintainedresilience, some of the correlates including importpayments which showed diminished performancedemonstrated signs of recovery. The World Bank hasprojected a slower economic growth of 5.7 percent inBangladesh for the year 2014 down by 1.5 percentpoints from the government’s target due to politicaluncertainty. Coupled with the safety problem,continued social unrest could affect Bangladesh’smanufacturing and export performance. Thereadymade garment sector the mainstay of theeconomy that makes up almost 80 percent thecountry’s total foreign exchange earnings is set tosuffer badly, as buyers continue to cancel orders fromBangladesh. Although exports have surged by 21percent in the July-November period, the garmentsector is threatened by the risks of cancellation oforders, GSP cancellation and Pakistan’s recentacquisition of GSP-plus facilities from the EuropeanUnion. The manpower export sector is alsodeteriorating, with remittance flow falling by 8 percentin November 2013. The poultry industry thatcontributes to 19 percent of the GDP has incurredlosses worth more than Tk. 4,000 crore due topolitical unrest in the last three months. All sub-sectors of the poultry industry, such as breeders,feed vendors, meat and egg producers and medicinesellers are incurring losses due to blockades andshutdowns. The economic growth prospect remainscircumscribed because of depressed privateinvestment demand.

HIGHLIGHTS ON FINANCIAL PERFORMANCEKey operating and financial data of last preceding 5(five) years is shown under the heading ofOperational Highlights and Financial Highlights in thepage no. 40 of this annual report.

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Size in mn OverSl Offer (including SubscriptionNo Name of the Issues Sector Price premium) (Times)1 Orion Pharma Limited Pharmaceuticals & Chemicals 60 2,400 1.05 2 Bengal Windsor Thermoplastics Limited Engineering 25 400 13.07 3 Familytex (BD) Limited Textile 10 340 18.05 4 ICB AMCL Sonali Bank 1st Mutual Fund Mutual Fund 10 500 - 5 Exim Bank 1st Mutual Fund Mutual Fund 10 500 - 6 Central Pharmaceuticals Limited Pharmaceuticals & Chemicals 10 140 44.33 7 Fareast Finance & Investment Limited Financial Institutions 10 450 17.56 8 Bangladesh Building Systems Limited Engineering 10 140 45.95 9 Paramount Textile Limited Textile 28 840 10.35 10 Appollo Ispat Complex Limited Engineering 22 2,200 2.27 11 Mozaffar Hossain Spinning Mills Textile 10 275 25.49 12 AFC Agro Biotech Pharmaceuticals & Chemicals 10 120 59.92


CAPITAL MARKET OPERATIONFirst quarter of 2013 was pretty volatile. Marketcontinued to decline upto May. DSEX’s lowest pointwas 3,438 and highest point was 4,439 which meansthere was fluctuation of almost 1,000 points. Theoverall turnover was low in 2013 which makes theyear a very significant one. However, we hadsignificant events like restructuring the benchmarkindex to DSEX and introducing the DSE 30 index.The average market turnover was BDT 4,003.12 mnin 2013. This year DSEX posted 5.19 percent from itsfirst available point in January 27, 2013. This is betterthan negative return of 19.74 percent in 2012. In line with the overall market and NBFI sector,market price of Union Capital Limited was quitevolatile. UCL started its journey of 2013 on 01January with the price of Tk. 27.40 in DSE andclosed at Tk. 34.60 on 31 December 2013. Thehighest price was recorded at Tk. 36.90 on 18 July2013 and lowest one was Tk. 19.70 which was closeprice of 24 April 2013.In spite of this unfavorable situation, Union Capitalworked hard to cope up and manage the riskprudently as it holds decades of experience in capitalmarket operations. The Company provides a broadrange of services to the corporate clients supportingthem in raising long term funds from capital market.UCL’s offering includes services in the area ofmerchant banking, portfolio management and stockbrokerage.

IPO ManagementUCL performs public issue management along withfinancial engineering and designing of capitalstructuring services for customers desiring to raisefunds from capital market for BMRE and repaymentof debts. During the year 2013, the Company did notsign any issue management contracts. There are twoprospectus submitted to BSEC for its approval.

UnderwritingIt is one of the core activities of merchant bankingoperation. As one of the major underwriter, during theyear 2013, the Company entered into a good numberof deals for underwriting shares for total amount ofTk. 664.80 million.

Private PlacementUCL arranges private placement of debt and equitysecurities for companies seeking a wide range ofcorporate finance alternatives. During the periodunder reporting, the Company worked for a numberof projects either in the capacity of an arranger or asubscriber of pre-IPO placements.

Corporate Financial and Advisory ServicesUCL offers professional corporate financial servicesincluding customized, value added solutions forbetter corporate performance in terms of prolongedexistence and steady growth. Project advisoryservices include systemic development of an ideainto a plan, development of financial structure andpreparing feasibility report.

Diversified portfolio Major financing activities of the company includeTerm Finance that represents 32.72 percent of totalinvestment portfolio followed by lease finance (17.22percent) and SME finance (8.22 percent).

Lease FinanceLease financing is one of the major fund basedactivity of Union Capital. The Company offers fullpayout financial lease for financing capital machinery,equipment and vehicles. UCL provide services tocustomers of different segments include growingcompanies, blue-chip companies and SMEs. Thoughas prudent business model the company hasdiversified its business in other business segments inthe year 2013. In 2013, total lease finance added wasTk. 647.65 million. The investment under leasefinance of the Company stands at Tk. 1,951.48million at the end of 2013.

Term FinanceTerm finance continued to be a core product of UCL.It is both long term and short term in nature. Long-term finance is available for commercial, industrial,SME sectors for a period ranging from 12 to 60months depending on the business nature and need.To provide liquidity comfort to corporate houses inemergency situation, the short-term finance is madeunder the different categories i.e. direct finance forworking capital, work order finance, finance againstterm deposits etc. As pointed out by the Central Bankterm finance by NBFIs are the alternate source ofcapital financing for the industrial growth in thisCountry. The Company’s investment under termfinance stands at Tk. 4,617 million at the end of 2013.

Bridge/Equity FinanceUnion Capital expanded its service range of bridgefinance beyond the concept of investment banking.The Company provides bridge finance in anticipationof all types of immediate financing requirementranging from term loan to IPO or equity investment.

SME FinanceUCL provides a wide range of SME products to thepotential clients under Bangladesh Bank Re-financescheme. SME based financial products include,Women entrepreneur loan, Supplier loan, Medicalloan, Education loan, Business expansion loan,Secured loan etc.

House Building FinanceThe Company operating its House Building loan tocorporate customer as well as Individuals for a periodof 5-20 years. It is against purchase of Flat,Construction and Renovation of House Building.

Fund Arrangement/SyndicationSometimes financial requirement of customerbecome so huge that cannot be arranged frominternal sources and also due to regulatoryrestrictions. In such situation required funds are beingraised through syndication arrangements with otherfinancial institutions and banks.

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Banking ArrangementsThe Company maintains sufficient facilities to meetits normal funding requirements. These facilities areprimarily in the form of bank facilities arranged on abilateral basis with a number of commercial banks. In2013 the Company obtained Tk. 450.00 million frombanks against different form of borrowings to financeits operations and repaid Tk. 573.00 million as perterms and conditions of contracts. During the yeardue to liquidity crisis the cost of borrowing increasedsignificantly. UCL also obtained Tk. 99.91 million fromBangladesh Bank under the SME RefinancingSchemes.

Deposit MobilizationUCL mobilizes term deposits from corporate andindividuals through its wide range of deposit schemeswith different maturity options, monthly/quarterly/half-yearly/yearly income options, double/triple moneyoptions, monthly saving options etc. The depositsbase of the Company continued to register a steadygrowth and stood at Tk. 7,836.86 million as on 31 December 2013 compared to Tk. 4,598.30 millionof the previous year, registering growth of 70.43percent. The growth was made due to high standardproducts and services along with competitive interestrate offered to customers.

Call Money TransactionsAs a financial Institution UCL actively participates inmoney market on a regular basis and has beendealing both borrowing and lending activities withdifferent banks/financial institutions to manage itsliquidity position in an effective way. UCL alsomaintains very high standard in money marketoperation and build up a strong reputation for itself.

OPERATIONAL HUBUCL provides services through its five officesgeographically diversified in the areas namely Dhaka,Chittagong and Sylhet.

OPERATING RESULTS (CONSOLIDATED) During 2013, the Company generated revenue Tk. 1,663.80 million, which concluded Profit from

Annual call money interest rate(in percentage)

2013

2012

2011

2010

2009

2008

2007

2006

2005

7.00

12.80

11.20

8.10

4.40

10.20

7.40

11.10

9.60

Portfolio ManagementUCL�provides portfolio management services with amargin loan facility to its clients. The transaction ofportfolio accounts was made both at the discretion ofthe customers and the Company.

Margin LoanUCL provides margin loan facilities to its portfoliocustomers for purchase of shares and securities.The amount of portfolio loan outstanding as onDecember 2013 was Tk. 3,996.00 million. Theabove amount represents the aggregate investors'portfolio loan extended to different portfoliocustomers for purchasing shares listed in the stockexchanges against their deposit. Loans are fullysecured by way of lien on shares purchased undermargin loan account. UCL always maintained itsloan ratio in a very just and reasonable wayadjusting with the market situation without takingany excessive risk for both the company and itscustomers.customers.

Stock BrokerageUCL also offers stock brokerage services to local andforeign investors through its wholly owned subsidiaryUnicap Securities Ltd. - which has corporatememberships at the Dhaka & Chittagong stockexchanges and full service depository participant ofCDBL. The market instability, lack of investors’confidence, non-participation of institutional investorsand liquidity crunch resulted significant decrease inmarket turnover during 2013.

Investment in Share and SecuritiesUCL maintains its own portfolio for investment inlisted companies shares and securities. These arefully diversified with different sectors of securities.The investment risk is being minimized throughdiversification and investing mostly in fundamentallystrong securities. In 2013, the Company earned Tk.27.39 million in the form of capital gain and dividend.

MONEY MARKET OPERATIONIn the year 2013, the Central Bank made atransition from a cautiously restrained monetarystance aimed at curbing credit growth andpreserving external stability to a more balancedpolicy to ensure sufficient credit envelop to attaintargeted real GDP growth while a carefulconsideration to combating inflation. The liquidity position of all banks (except SPBs asthey are exempted from the compliance of SLR byGovernment rule) improved at the end of June 2013and stood at 716.61 billion compared to 456.76 billionin June 2012 showing an easing of the moneymarket. At the retail level deposit rates havedecreased gradually in FY 2012-13 reflecting aliquidity surplus in the market however lending rateshave behaved downward stickier with slightdownward shift. Central Bank continued its reformactivities this year with a core focus on ensuringfinancial stability of the Banks, Non-bank FinancialInstitutions (NBFIs) and Micro Finance Institution(MFIs) operating in the market.

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fledged merchant bank. UniCap Investments Limitedwas incorporated on 24 May 2011. We have appliedto BSEC for transfer of license currently held in thename of Union Capital Limited. We have receivedthe approval from BSEC on 30 December 2013 ontransfer of the said transfer. During the year 2013,UCL has received Tk. 34.50 million from UniCapInvestments Limited as interim dividend. Separateaudited financial statements of the subsidiarycompanies are given on pages 224 to 236 of thisAnnual Report.

IPO OF THE COMPANYUCL floated its ordinary shares through IPO in theyear 2007 and raised Tk. 75,000,000 at par. The netproceeds of IPO used for Company’s operationalactivities i.e for investment in lease finance and termfinance.

EVENTS OCCURRING AFTER THE REPORTINGDATEAs at the date of this report, the Directors are notaware of any matter or circumstance that has arisensince the end of the year 2013 that has significantlyaffected or may significantly affect the operations ofthe Company, the results of its operations or its stateof affairs, which is not already reflected in this reportother than the following: On 4 March 2014, UnionCapital announced 10 percent stock dividend.Details of the announced dividend declared duringthe financial year are disclosed in Note 3.22 of theNotes to the Financial Statements on page 287 ofthis report.

APPROPRIATIONS OF PROFIT (Based onseparate F/S)Taking into account the profit available for distributionafter complying with the regulatory requirements, theBoard recommended 10 percent stock dividend (10bonus shares for every 100 shares held) for the yearended 31 December, 2013 for approval ofShareholders in the Sixteenth Annual GeneralMeeting. The Board proposed the followingappropriations:

Taka in million Profit after tax 138.74Retained Earnings brought forward 0.14Total Profit available for appropriation 138.88Proposed appropriation:Transfer to Statutory Reserve 27.75Proposed Dividend 109.91Retained Earnings carried forward 1.22

DIVIDENDThe Board of Directors in its meeting held on 4March 2014 recommended 10 percent stockdividend i.e. 10 bonus shares for every 100 sharesheld for the year 2013 to its shareholders forapproval in this AGM.

operation Tk. 464.21 million. Net profit has increasedby 149.91 percent to Tk. 141.76 million. An amount ofTk. 66.83 million has been provided as provision fortaxation in 2013. Earnings per share was Tk. 1.29 asagainst Tk.0.52 last year. The weighted averagenumber of ordinary shares outstanding during theyear was 109.91 million (2012: 104.68 million). Thefinancial results of the Company for the year 2013with a comparison of 2012 are summarized below:

(Taka in million except per share data)Particular 2013 2012Operating revenue 606.33 311.88Operating expenses 142.12 118.00Profit before tax 208.59 108.69Provision for tax 66.83 51.96Profit after tax 141.76 56.72Earnings Per Share (EPS) 1.29 0.52

SEPARATION OF MERCHANT BANKINGOPERATIONThe Bangladesh Securities and ExchangeCommission (BSEC) on 2 February 2010 directed allthe Banks and NBFIs including Union Capital Limitedto separate the Merchant Banking operation from themainstream business. Accordingly the Board ofDirectors in the Meeting held on 28 March 2010decided to form a separate Company for operation ofMerchant Baking activities. Subsequently, a PublicLimited Company with an authorized share Capital ofTk. 1,000 million as the fully owned subsidiary in thename of UniCap Investments Limited was formed on24 May 2011. Then, we applied to BSEC for transferof Merchant Banking license in favor of UniCapInvestments Limited from Union Capital Limited.Finally, BSEC has given its accord for transfer ofMerchant Banking License in favor of UniCapInvestments Limited on 30 December 2013. Finally,UniCap Investment Limited started its operation as afull- fledged Merchant Bank from 1 January 2014.

SIGNIFICANT DEVIATION IN OPERATINGRESULTSOperating profit during 2013 has increased by 91.92percent to Tk. 208.59 million (2012: Tk. 108.69million). The underlying main reasons for suchincrease are: � Significant improvement in recovery from stuck up

loans/leases;� Efficient investment in the volatile capital market

throughout the year;� Decrease of cost of fund;� Focus on SME finance;� Stable money market scenario compared to the

previous year;

SUBSIDIARY COMPANIESUCL has two fully owned subsidiary companies,namely, UniCap Securities Limited – a corporatemember of both Dhaka and Chittagong StockExchange; and UniCap Investments Limited – a full

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fluctuations in assets, liabilities, incomes andoutflows & inflows of cash etc. While the types anddegree of risks an organization may be exposed to,depend upon a number of factors, it is assumed thatgenerally FIs face Credit, Market, Liquidity,Operational, Compliance, Legal, Regulatory andReputation risks as summarized below:

Credit riskCredit risk is the risk of loss associated with anobligor’s potential inability or unwillingness to fulfilltheir contractual obligations. Credit risk may arisefrom the risk of default of our customers.Mitigation Measures� Ensuring credit quality; � Diversifying credit risks in transactions and

portfolios; � Using our credit risk rating and scoring systems; � Pricing appropriately for the credit risk taken;� Applying consistent credit risk exposure

measurements;� Mitigating credit risk through preventive controls; � Ongoing credit risk monitoring and administration;� Strong credit analysis to identify the risk; � Clear loan/lease covenants; � Effective credit control and monitoring processes; � Prompt identification of early sign of deterioration;� adequacy and realizability of collateral.

Market riskMarket risk is defined as the potential loss in value ofthe firm due to changes in market prices and ratesincluding interest rates, credit spreads and shareprices. Market risk has a direct impact on earningsand impacts the economic value of the company.

Mitigation measures� A Risk Management Committee that meets on a

regular interval;� Daily reporting of valuation results to executive

management;� Strict adherence to UCL’s internal policies such

as the use of limits and management actiontriggers.

Liquidity riskLiquidity risk is the risk that we may be unable togenerate or obtain sufficient cash or its equivalent ina timely and cost-effective manner to meet ourcommitments as they come due. The nature offinancing services inherently exposes us to varioustypes of liquidity risk. The most common sources ofliquidity risk arise from mismatches in the timing andvalue of cash inflows and outflows.

Mitigation measures� Efficient Asset and Liability Committee that

oversees liquidity management;� Diversified sources of funding;� Contingent funding plan;� Effective cash flow planning.

ANNUAL GENERAL MEETINGThe notice of the Sixteenth Annual General Meetingis given on page 241 of this Annual Report. Asummary of the agenda is given below:Ordinary Business� Receive and adopt the Directors' Report, Auditors

Report and Audited Financial Statements for theyear 2013;

� Declaration of dividend for the year 2013;� Re-appointment of the Directors;� Appointment of the Auditors;� Appointment of the Independent Directors;Special Business� Issuance of Non-convertible Preference Share

OBSERVANCE OF BAS, BFRS & APPLICABLE LAWSThe Directors have the responsibility for ensuring thatthe Company keeps accounting records whichdisclose with reasonable accuracy the financialposition of the Company and which enable us toensure that the financial statements comply with theCompanies Act, 1994, the Financial Institutions Act,1993, and the Bangladesh Securities and ExchangeRules, 1987. The Directors also confirm that thefinancial statements have been prepared inaccordance with the Bangladesh AccountingStandards and other applicable rules and regulations.A separate report on Directors’ Responsibilities as tothe preparation of financial statement is set out onpage no. 84 in this Annual Report.

ACCOUNTING POLICIES AND MAINTENANCE OFBOOKS OF ACCOUNTSThe Directors consider that in preparing the FinancialStatements, the Company has used appropriateaccounting policies, consistently applied andsupported by reasonable and prudent judgments andestimates and that all International AccountingStandards as adopted by the Institute of CharteredAccountants of Bangladesh (ICAB) have beenfollowed. In preparing financial statements,information has been obtained from the books ofaccounts, which have been maintained properly asrequired by the applicable rules and regulations.

FAIRNESS OF THE ACCOUNTSAs per Companies Act, 1994, it is the responsibility ofthe Directors to prepare financial statements for eachyear to be presented before the shareholders in theAnnual General Meeting. The financial statementsand other financial information included in this reportfairly present in all material respects, the financialconditions, results of operations, cash flows andchanges in equity of the Company as of, and for, theyear ended 31 December, 2013.

RISK MANAGEMENTRisk is an exposure to a transaction that may resultin a loss with some probability. In financialinstitutions, risk results from variations and

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OVERVIEW OF OTHER RISKSIn addition to the risks described in the RiskManagement section, there are other risk factors,described below, which may adversely affect ourbusinesses and financial results. The followingdiscussion is not exhaustive as other factors couldalso adversely affect our results.

Government fiscal, monetary and other policiesOur businesses and earnings are affected by thefiscal, monetary or other policies that are adopted bythe Government and Bangladesh Bank and variousregulatory authorities. As well, such policies canadversely affect our clients which may increase therisk of default by such clients.

Level of competitionThe competition for clients among financial servicescompanies in the markets in which we operate isintense. Client loyalty and retention can beinfluenced by a number of factors, including servicesoffered by our competitors, relative service levels, theprices and attributes of our products or services, ourreputation and actions taken by our competitors.Banks are also offering similar services like leasing,capital market operations etc. Such competitioncould also reduce net interest income, fee revenueand adversely affect our earnings.

Ability to attract and to retain employeesCompetition for qualified employees is intense withinthe financial services industry and from non-financialindustries looking to recruit. Although our goal is toretain and attract qualified employees, there is noassurance that we will be able to do so.

Accuracy and completeness of information onclients and counterpartiesWhen deciding to extend credit or enter into othertransactions with clients, we may rely on informationprovided by or on behalf of clients including auditedfinancial statements and other financial information.Our financial results could be adversely impacted ifthe financial statements and other financialinformation relating to clients on whom we rely arematerially misleading.

Environmental riskEnvironmental risk is the risk of loss to financial,operational or reputational value resulting from theimpact of environmental issues. It arises from ourbusiness activities and our operations. For example,the environmental issues associated with our clients’purchase and sale of contaminated property ordevelopment of large-scale projects may give rise tocredit and reputation risk. Operational and legal risksmay arise from environmental issues at our differentoffices or data processing centers.Failure to adequately manage environmental riskcould adversely impact our results and/orsignificantly impact our reputation.

Other factorsOther factors that may affect actual results includechanges in government trade policy, changes in

Operational riskOperational risk is the risk of loss or harm resultingfrom inadequate or failed internal processes, peopleand systems or from external events. Operational riskis embedded in all our activities, including thepractices and controls used to manage other risks.Failure to manage operational risk can result in director indirect financial loss, reputational impact,regulatory censure, or failure in the management ofother risks such as credit or market risk.

Mitigation measures� Effective background checks and thorough

confirmation process on new hires;� Competitive remuneration package and other

hygiene factors to attract and retain the besttalent;

� Enforcement of strong supervisory control;� Zero tolerance to staff integrity issues and fraud;� A fully fledged HR Department to cater for the

training and development needs of staff;� The introduction of a functional reporting structure

to the operations job families to allow for effectivesupervisory control of the operations of UCL;

� Automation of our processes;� Putting in place sound business continuity

planning and disaster recovery programmes;� Stepping up operational risk awareness training

and programmes;� Monitor and manage key risk indicators in

processes/products/activities.

Regulatory riskThis is the risk whereby the procedures implementedby UCL to ensure compliance to relevant statutory,regulatory and supervisory requirements are notadhered to and/or are inefficient and ineffective.

Mitigation measuresProactive implementation of UCL’s sound complianceprogramme that ensures compliance by allstakeholders to relevant laws and regulations. Thisincludes continuous updates of UCL’s rule books aswell as training of all concerned to understandregulatory obligations and the consequence of non-compliance.

Reputation riskReputation risk can arise from a number of eventsand primarily occurs in connection with credit risk,regulatory, legal and operational risks. Operationalfailures and non-compliance with laws andregulations can have a significant reputational impacton us.

Mitigation measures� We operate with integrity at all times in order to

sustain a strong and positive reputation;� Protecting our reputation is the responsibility of all

our employees, including senior management andextends to all members of the Board.

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INFORMATION TECHNOLOGYThe emergence of a global economy, transformationof industrial economies, transformation of thebusiness enterprise, and the emergence of digitalfirm make information systems essential in businesstoday. In many businesses, survival and the ability toachieve strategic business goals is difficult withoutextensive use of information technology. Keepingpace with the developed world, the financial sector ofBangladesh is becoming increasingly inclinedtowards digitization. Now a day, Information &Communication Technology (ICT) has becomeessential for financial institutions in ensuring smoothoperation and providing efficient services. UCL hasrecognized this fact and adopted a comprehensiveICT Policy for its various aspects of operations. TheCompany’s operation has grown significantly in termsof business volume, number of customers as well asdiversified its client and product range. In line withthis business growth, the challenges and risks ofdoing business have also grown manifold.Information Technology (IT) being one of the keyfacilitators of sound business growth and riskmanagement, is very important to have a robust,scalable and flexible IT platform. UCL holds a fullyautomated IT structure to support its operation whichalso produces better MIS for decision making,improve risk management and most importantly,delight its customers at every opportunity. RecentlyUCL automated its loan appraisal process through aworkflow driven system to ensure optimum controland paperless operation in line with BangladeshBank’s green banking initiatives. Additionally, UCLinstalled a robust online Human ResourceManagement Software for efficient management ofpayroll, PF, gratuity, leave and other relevantinformation of the employees of the Company.

DIRECTORS' MEETING, ATTENDANCE &REMUNERATIONDuring the year ended 31 December 2013 a totaltwelve meetings were held. All of the Directorsserving on the Board attended more than 76 percentof the aggregate of the total number of meetings ofthe Board of Directors. The attendance in the Boardmeetings by each Director is given in Annexure-I onpage 77 of this Annual Report.The Directors including the Independent Directors arenot entitled to any remuneration other than fees forattending in the Board/Committee meetings. Anamount of Tk. 5,000 is paid to each director forattending each Board/Committee meeting. Thedetails on remuneration paid to Directors in 2013 ispresented on page 98 of this Annual Report.

DIRECTORS’ STATEMENT PURSUANT TO THEDISCLOSURE AND TRANSPARENCYThe Directors confirm that to the best of eachDirector’s knowledge and belief the financialstatements, prepared in accordance with BFRS, give atrue and fair view of the assets, liabilities, financialposition and results of the Company, and themanagement report contained in the operational andfinancial review includes a fair review of the

accounting standards, including their effect on ouraccounting policies, estimates and judgments, thetimely and successful development of new productsand services, technological changes and our relianceon third parties to provide components of ourbusiness infrastructure, the failure of third parties tocomply with their obligations to us, fraud by internalor external parties, the possible impact on ourbusiness from national or global economies,disruptions to public infrastructure, includingtransportation, communication, gas and power,conflicts and political instability and our success inanticipating and managing the associated risks.A detailed report on risk management is given onpage 117 of this Annual Report.

CREDIT RATINGA credit rating is an assessment of the solvency orcredit-worthiness of a company according toestablished credit review procedures. These ratingshelp investors analyze the risks associated with thecompany by providing detailed information of theability of a company to meet their obligations. A ratingis being continuously monitored. It enables investors tomeasure their investment risk. The company is ratedby one of the leading independent rating agencies.UCL has been rated by National Credit Ratings Ltd.and adjudged AA minus (Double A-) in the long termand ST 2 in the Short term. The validity of the ratingwill expire on 2 June 2014. AA- rating in the long termsignifies UCL’s strong capacity for timely servicing offinancial obligations offering adequate safety.Institutions rated under this scale carry low credit risk.

INTERNAL CONTROLThe Board acknowledges its responsibilities forUCL’s system of internal control and for reviewing itsadequacy and effectiveness. The system of internalcontrol covers, inter alia, financial, operational,management information systems, organizational andcompliance controls. All internal control systems, nomatter how well designed, have inherent limitations,including the possibility of human error and thecircumvention or overriding of controls. Therefore,even those systems determined to be effective canprovide only reasonable assurance with respect tothe reliability of financial reporting and financialstatement preparation and presentation.Further, because of changes in conditions, theeffectiveness may vary over time. Our management,with the participation of the Chief Executive Officer,Chief Financial Officer and Chief of Internal Control &Compliance evaluated the effectiveness of ourInternal Control. Detailed implementation of thesystem of internal control throughout the companyhas been delegated by the Board to the ExecutiveManagement and the department of ICC. Thesecontrols include financial controls that assist theBoard in meeting its responsibilities for the integrityand accuracy of the company’s accounting records.The Company’s financial statements, prepared fromthese records, comply with the required laws andstandards. A separate report on Internal Control isgiven on page 81 of this Annual Report

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enhance the reliability and credibility of financialstatements of listed companies the BangladeshSecurities and Exchange Commission (BSEC)requires the Audit Committee along with theManagement of the Company to review the quarterlyand half-yearly financial statements prior to placingthe same before the Board for approval. The AuditCommittee of UCL reviews the interim financialstatements along with the Management beforeplacing the same to the Board. The Charter of theAudit Committee clearly includes among others thefunction of reviewing the quarterly and half-yearlyfinancial statements of the Company.

REPORT ON THE COMPLIANCE OF THECONDITIONS OF BSEC’S NOTIFICATION OF 2012As per BSEC Notification dated 07 August 2012, theDirectors are required to report on the compliance oncertain conditions in the Notification of August 2012.The Notification was issued for the purpose ofestablishing a framework for ensuring goodgovernance practices in the listed companies for theinterest of the investors and the capital market. TheDirectors confirm that we have complied with all theconditions stipulated in the Notification. A statementon the compliance with the conditions is given onpage 108 of this Annual Report.

REPORT ON THE COMPLIANCE ON THEGUIDELINES OF BANGLADESH BANKBangladesh Bank has issued guidelines on certainissues for the NBFIs to be complied with. The Boardof UCL confirms that we have complied with all theconditions of the guidelines. A statement on thecompliance with the conditions is given on page 113of this Annual Report.

CERTIFICATE FROM THE PRACTICINGPROFESSIONAL ON THE COMPLIANCE OFCONDITIONS ON CORPORATE GOVERNANCEAs a measure of good corporate governancepractice, and as required by BSEC, the Companyhas appointed S. F. Ahmed & Co., CharteredAccountants to conduct Audit on the compliancestatus of Union Capital Limited as to the conditionson the corporate governance as stipulated in BSECNotification dated 7 August 2012. The professionalfirm is required to give a certificate after review onthe practices by Union Capital Limited. S. F. Ahmed& Co., Chartered Accountants has given acompliance certificate for the year ended December31, 2013 which is available on page 107 in theAnnual Report. The Report confirms that theCompany has complied with all the conditionsstipulated in the BSEC Notification on CorporateGovernance.

GOING CONCERNCompanies and other entities are experiencing theimpact of difficult or uncertain economic conditions invarying degrees. The effects of such economicconditions may be significant in the area of financialreporting, in particular, the Directors’ assessment ofthe Company’s ability to continue as a going concern.

development and performance of the business and theposition of the company, together with a description ofprincipal risks and uncertainties that may face.

DIRECTORS' RESPONSIBILITIES OFPREPARATION OF FINANCIAL STATEMENTSAs per Companies Act 1994, the Directors areresponsible for preparing the Annual Report andCompany's financial statements in accordance withapplicable laws and regulations. The Board confirmsthat the Financial Statements have been preparedaccording to BFRS and other applicable laws andregulations. A statement of the Directors' responsibilityin relation to financial statements has been given onpage 84 of this Annual Report.

CORPORATE AND FINANCIAL REPORTINGFRAMEWORKThe Directors in accordance with BSEC Notificationdated 07 August 2012 confirm that:� The financial statements prepared by the

management of UCL present fairly its state ofaffairs, the result of its operations, cash flows andchanges in equity; Proper books of accounts ofthe Company have been maintained; Appropriateaccounting policies have been consistentlyapplied except for the changes disclosed in thefinancial statements in preparation of the financialstatements and accounting estimates are basedon reasonable and prudent judgment;

� Bangladesh Accounting Standards (BAS)/Bangladesh Financial Reporting Standards(BFRS), as applicable in Bangladesh have beenfollowed in preparation of the financial statementsand any departure there from has beenadequately disclosed;

� The system of internal control is sound in designand has been effectively implemented andmonitored; and

� There are no significant doubts upon theCompany's ability to continue as a going concern.

KEY OPERATING AND FINANCIAL DATAKey operating and financial data of last five years asrequired by BSEC is presented on page 40 of thisAnnual Report.

REGULARITY COMPLIANCEUCL is well known for its regulatory compliance andhas always followed applicable regulations rigorously.UCL has a dedicated compliance team for ensuringregulatory compliance across all the businesses andoperations. They are responsible for identificationand assessment and compliance related mattersfrom a regulatory compliance perspective andmonitoring and reporting. We ensure that these areperiodically reviewed in line with the changingscenario and taking into account modifications if anyin the regulatory guidelines.

EVALUATION OF QUARTERLY REPORTSIn order to improve disclosure related to thefunctioning of Board Audit Committee and to

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The Companies Act, 1994 requires that any Directorappointed by the Board since last Annual GeneralMeeting shall retire in the next Annual GeneralMeeting. Accordingly, Mr. Mohammad Nurun Nabi,Independent Director and Capt. Minhazur RezaChowdhury shall retire in the Sixteenth AnnualGeneral Meeting and eligible for re-appointment. Full biographical details of the Company’s Directorsat the date of this report are given on pages 48 to 52of this report.

COMMUNICATION, PUBLIC DISCLOSUREOBLIGATIONS AND STAKEHOLDER RELATIONSThe board recognises that effective communication isintegral in building stakeholder value and iscommitted to providing meaningful, transparent,timely and accurate financial and non-financialinformation to primary stakeholders, as definedbelow. The purpose is to help these stakeholdersmake meaningful assessments and informedinvestment decisions about the groupWe endeavor to present a balanced andunderstandable assessment of our position byaddressing material matters of significant interest andconcern. We seek to highlight the key risks to whichwe consider ourselves exposed and our responses tominimize the impact of these risks. Another objectiveis to show a balance between the positive andnegative aspects of our activities in order to achieve acomprehensive and fair account of our performance.Our primary stakeholders include employees,shareholders, government, regulatory bodies, clients,depositors, suppliers, rating agencies, the media, andthe community. The Board appreciates theimportance of ensuring an appropriate balance inmeeting the diverse needs and expectations of all ourstakeholders and building lasting relationships withthem. As a requirement of our Corporate structure,we comply with the disclosure obligations containedin the applicable listing rules of exchanges on whichour shares are listed and with any public disclosureobligations as required by BFRS, BSEC and BB. Wealso recognize that from time to time we are requiredto adhere to public disclosure requirements by SAFA.The Investor Relations division has day-to-dayresponsibility for ensuring appropriate communicationwith stakeholders and, together with the CompanySecretarial and ICC Department, ensures that wemeet our public disclosure obligations.The processes we have adopted to ensure that wecomply with all public disclosure obligations are setout below:� Significant announcements are released directly

to BSEC. Announcements are released almostsimultaneously to stock exchanges, where ourshares are listed thereby ensuring fair treatmentof all stakeholders. Copies of theseannouncements are placed on our websitewww.unicap-bd.com as soon as possiblefollowing confirmation of release on the relevantauthorities.

� We maintain a comprehensive investor relationswebsite, which ensures that all stakeholders readilyhave access to historical and current information

Going concern is a fundamental principle underlyingthe preparation of the financial statements of a listedcompany. Bangladesh Accounting Standards requireDirectors to consider whether there are materialuncertainties that would lead to significant doubtabout a company’s ability to continue for foreseeableperiod. BSEC requires the listed companies to makeadequate disclosures in the financial report about thegoing concern of a listed company. The financialstatements of the Group and UCL have beenprepared on a going concern basis. In making thisassessment, the Directors have considered a widerange of information relating to present and futureconditions covering principal activities, strategicdirections and challenges and uncertainties togetherwith a review of the income statement, financialposition and risk profile. In addition the Directors haveconsidered the future projections of profitability, cashflows, asset quality, the outcome of various stresstests and capital resources in making theirassessment. After assessment, the Directors aresatisfied that the Company has adequate resources tocontinue its operation for the foreseeable future andtherefore continue to adopt the going concern basis inpreparing the financial statements. A separate reporton going concern has been set out on page 115 ofthis Annual Report.

SUBSTANTIAL SHAREHOLDINGSBSEC’s Notification dated 7 August 2012 requires alisted company to disclose in the Directors’ Report,the list of shareholders holding ten percent or morevoting interest in the Company. None of theshareholders hold ten percent or above shares inUCL. The shareholding status of all sponsorshareholders as on 31 December 2013 is given inAnnexure-II, page 77 of this Report.

THE PATTERN OF SHAREHOLDINGSThe Authorized Capital of Union Capital Ltd. is Tk.2,000,000,000 divided into 200,000,000 ordinaryshares of Tk.10 each. The paid-up Capital of theCompany is Tk. 1,099,093,260 divided into109,909,326 ordinary shares of Tk.10 each. Theshareholding pattern of the Company as atDecember 31, 2013 is shown in Annexure-III, onpage 78 of this report as per BSEC Notification ofdated 7 August 2012. As per requirement of listingregulations, the distribution schedule ofshareholdings of the Company as on 31 December2013 is given under Annexure-IV on page 78 of thisAnnual Report.

DIRECTORS TO RETIRE AND RE-APPOINTMENTAs per Article 93 of the Articles of Association of theCompany, the following Directors will retire in theSixteenth Annual General Meeting and being eligibleoffered themselves for re-appointment:� Chowdhury Tanzim Karim

(Nominated by EC Securities Limited)� Mr. Nadeem A. Chaudhury

(Nominated by ENRILCO Limited)� Mrs. Meherunnesa Haque� Mr. Nasir A. Chowdhury

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Our CSR report demonstrates how our businesspractices and operations impact our localcommunities. We're working with our stakeholders tostrengthen Bangladesh’s sustainable future bysupporting economic growth, giving back to ourcommunities and being responsible to ourenvironment. UCL Group supports a number ofcharities in the community where our employees andcustomers live and work. A separate report on CSRactivities is given in the page 142 of this report.

CORPORATE GOVERNANCEThe Board of Directors and management of theCompany are committed to strong corporategovernance and believe it is a vital component forthe effective and efficient operation and futuresuccess of the Company. Good corporategovernance demonstrates the Board’s ability toindependently direct and evaluate the performanceof the Company’s management, as well as that ofthe Board members themselves. This is achievedthrough a well-qualified Board, a strong relationshipbetween the Board and senior management, andstrong governance practices and procedures.Strong corporate governance is about companieshaving clear and systematic decision-makingprocesses, thus providing clarity about responsibilities,avoiding conflicts of interest and ensuring satisfactorytransparency. Commitment to UCL’s mission andvision requires the integration of sound corporategovernance practices into regular business activities inorder to, attain – as far as possible – a company thatis well governed and well managed.The main emphasis is on the Board of Directors inits role as the main decision-making body in UCL’scorporate governance structure, and the interactionwith the other bodies to ensure sound corporategovernance. The Corporate Governance section inthis Annual Report provides detailed informationrelating to the UCL’s Corporate Governancepractices.

HUMAN RESOURCEIn today’s businesses, the right approach andmanagement of the company’s employees cangreatly affect the company’s overall performance.Starting from right staffing to maintaining performingemployees, HR management is key in developingnot only the employees, but the whole organizationitself. Developing not only management but also itsemployees is significant. To keep up withcompetition, employees are given with a number ofreasons to stay with the company, and do their jobsexemplary well. Their continuous growth, the rightcompensation and benefits, and work-life balanceare ensured that motivate employees to performbetter, producing better results for the customersand ultimately, the company.Union Capital persistently reviews the existinghuman resource policies and implements effectivemanagement policies and practices to enrich itsemployees. We believe that our human resourcesare our competitive advantage in terms of theirsincerity, experience and professional expertise.Considering this, we uncompromisingly take

� All shareholders are encouraged to attend theannual general meeting and to raise issues andparticipate in discussions on items included in thenotice of the meeting. The meeting enables theBoard to communicate with shareholders and forshareholders to ask questions in person. Thechairmen of the Board, Directors and theManaging Director attend the meeting to respondto relevant questions. All valid proxy appointmentsare recorded and counted and, at generalmeetings, a schedule of the proxy votes cast isavailable to all shareholders. We propose aseparate resolution on each substantially separateissue and do not bundle resolutions togetherinappropriately. All resolutions are determined ona voting. Shareholders are requested to approveour report and accounts and our business.

STAKEHOLDERS ENGAGEMENTStakeholders trust is of particular importance in thefinancial services industry. To cultivate trustingrelationships with our broad spectrum ofstakeholders, we are committed to engaging them ina variety of ways.We believe engagement is fundamental to creatingvalue for all our stakeholders: it assists in identifyingissues that are material and may otherwise have animpact (negative or positive) on their wellbeing. Wealso believe that engaging with our stakeholderspromotes the principles of balance, comparability,reliability, accuracy and transparency of our reporting,both internally and externally. UCL has a wide rangeof stakeholders that include any person ororganisation that may interact with, or have aninterest in, UCL and include customers, employees,lenders, suppliers, shareholders, communities,governments, etc. We aim to provide meaningful and transparentcommunications to meet the needs of all stakeholdergroups and present information to them in the mostappropriate format. These formats include annualreport. Following the launch of our corporate website,we have continued to develop and update thecontents and make those available to ourstakeholders. We communicate with our stakeholders throughoutthe year and engagement is integrated into ourbusiness decision-making processes. This 360-degree dialogue is essential in providing all partieswith a rounded view of all material issues and helpsall to shape their actions and strategies to moveforward on these matters.

CORPORATE SOCIAL RESPONSIBILITYUCL’s Corporate Social Responsibility effortscontinue to grow along with our business, creatingpositive change in our communities and deepeningthose connections among our employees, customers,neighbors, and other partners.Being a responsible business is integral to oursuccess and that of the customers, clients,shareholders and communities we serve around thecountry. Corporate social responsibility is embeddedin our values and informs how we conduct business,develop products and services and deliver on ourgoals and commitments.

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CODE OF CONDUCT AND BUSINESS ETHICSUCL’s code of conduct applies to everyone who isemployed by our company. Each of us isaccountable for upholding the highest ethicalstandards as we execute our responsibilities.Managers and leaders are also responsible forestablishing and nurturing a culture in whichemployees feel fully empowered, supported andobligated to do the right thing.The Code is based on our company’s Core Values.The Code of Ethics provides the guidance we needto translate our values into action as we compete inthe marketplace and engage with customers, clients,shareholders, and each other.As we work together to achieve our goals, it isequally important that we commit to one another thatwe will always do business and grow the right way -with the honesty, integrity and fair dealing that ourCode of Ethics and our Core Values require.

CONTRIBUTION TO NATIONAL ECONOMYWe recognize that Union Capital Limited has thecorporate responsibilities to the development of thecommunity and the country as a whole. We aspire tobe known as an institution that builds enduringrelationship with and delivers value for ourcustomers, shareholders, employees and thecommunity where we do business.As a financial service provider, UCL contributes to theeconomic prosperity by providing financial productsand services to the industrial undertakings includingSMEs. UCL contributes to the economy paying outfair share of taxes to Government. Union Capitaldeposits taxes regularly to the National Exchequer byway of collection of income taxes and VAT at sourcesfrom payments and also deposits of corporateincome taxes. During the reporting period, thedeposited amount was Tk. 64.42 million. We make an economic impact by creatingemployment and a well-trained workforce. Sustainableeconomic growth and a healthy environment are interlinked. In this backdrop, we take supportive role interms of providing financial services by restricting anddiscouraging those projects that cause pollution forenvironment and health hazard. UCL invests insustainable economic development, and we arecommitted to contributing to the success of peopleand businesses in the community in which weoperate. We support stimulate economic growth byinvesting in programs that enable economicdevelopment with a social purpose.We also encourage our employees to participate insocial and charitable programs. A detailed report onthe contribution to national economy has been givenon page 151 of the Annual Report.

AUDIT INFORMATIONThe Directors who held office at the date of thisDirector’s Report confirm that:� So far as the Directors are aware, there is no

relevant audit information of which the company’sauditors are unaware; and

appropriate policy to recruit the best-suited personsfor the right places, provide them adequate trainingfacilities and implement programs to develop andretain high quality human resources. UCL carefullylook into the motivational aspects, health and safetyof its employees. A separate report on HR is given inpage No. 154 of this report.

BUSINESS CONDUCT POLICYWe have built a strong company that is well regardedaround the country. Everyday, our actions, promises,ethics and attitudes reflect on UCL as a whole andeach of the other employees with whom we work. Atall times, we will strive to operate in a manner thatprotects employee safety and health. We offer sustainable solutions to environmentalproblems in the fields of energy and wastemanagement, and our businesses are heavilyregulated and scrutinized. We are committed tofostering an ethos of environmental responsibility thatgoes beyond compliance, and our environmentalpolicies rest on the core principles i.e. compliance,conservation, qualification and commitment.We are an equal opportunity employer. We have andwill continue to recruit, select, train, promote,compensate, transfer, discipline and take all otherpersonnel actions without regard to race, color,religion, gender, age, marital status, or any othercharacteristic protected by applicable law. As a publicly traded company, we disclose a greatdeal of information publicly and are responsible toensure that this information is accurate and complete.It is essential that our books, records and accountsaccurately, fairly and in reasonable detail reflect thetransactions related to our business so that ourfinancial statements are fairly presented in all materialrespects, and all other information we publiclydisclose, and the reports we file with the BangladeshSecurities and Exchange Commission, do not containany material misstatement or omission.

ENVIRONMENTAL INITIATIVESAs financial service provider, our impact on theenvironment is relatively less and indirect. We'reworking to reduce our environmental impact byembedding the environment into our business – andby involving our employees, our customers, and ourcommunities. UCL has a commitment to long-termenvironmental sustainability. We are also committedto taking environmental issues into account whenconducting its business activities. This includesoperational measures to reduce our consumption ofresources, as well as our contribution to climateprotection. We also develop products and servicesthat address our clients' financial needs, as well asenvironmental and social themes. It considers theclearance certificate from the regulators in time ofproviding financing facilities. We're concentrating our efforts on issues where wecan be most effective. Based on input from ourcustomers, employees, and community we haveselected 3 areas of focus for operations: responsiblepaper use, energy and emissions, engaging ouremployees and communities. Our environmentalinitiatives have been reported on page 148 of thisAnnual Report.

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t Another big challenge for NBFIs is payment of tax oninterest suspense account. Section 28 (3) of IncomeTax Ordinance (ITO) 1984 allows all commercialbanks and some other specialized banks to pay taxon ‘interest on bad or doubtful loans’ in the incomeyear in which the interest is credited to its profit andloss account or in the year in which it is actuallyreceived, whichever is earlier. Because of non-inclusion of NBFIs in Section 28(3), we are to pay taxon interest suspense account despite such item isnot a revenue item rather a balance sheet item.NBFIs are crediting interest on classified loans/leaseson cash basis as permitted by Section 35 of ITO1984. Unfortunately, tax authority is charging tax onour interest suspense account ignoring theapplication of Section 35. We are pursuing forinclusion of NBFIs in the Section 28(3) in the nextbudget proposal through trade bodies and otherauthorities.High corporate tax on NBFIs is anotherchallenge for us. NBFIs are taxed at the rate of 42.5percent. It is likely that the rate may be reduced tosome extent as announced by the Finance Minister. While financial products and capital market expectedto remain dominant in the long run, we expect to seecontinued growth in demand for our products andservices in the short-run as well, which will requirefurther strengthening our existing services, speciallyas our clients move into more comfortable operatingenvironment.We have adequate capital. We are quite large interms of providing a full range of financial services.Our presence in the market is growing steadily andwe have improved our presence in all areas ofoperations. We have professionals with profoundmanagerial talents and perhaps most importantly, wehave a hard earned reputation as one of the topservice providers in our industry. We are confidentthat we have the right team and the strategy in placeto achieve our goal. While there has certainly been achallenging few years for UCL, we feel good aboutwhere we are going.

ACKNOWLEDGEMENTThe Directors wish to place on record theirappreciation for the co-operation and support receivedfrom Bangladesh Bank, Bangladesh Securities andExchange Commission and Stock Exchanges. We would like to express our sincere gratitude to allthe cherished shareholders for their confidence in theCompany. The Board also places on record itsappreciation for continued support provided by theesteemed customers, bankers, financial institutionsand depositors. The Directors also acknowledge thehard work, dedication and commitment of theemployees. Their enthusiasm and unstinting effortshave enabled the Company to grow better thanbefore. We hope similar support from all of you thatwill underpin our continuous growth.On behalf of the Board of Directors,

sd/-Chowdhury Tanzim KarimChairman

� The Directors have taken all the steps that theythemselves ought to have taken as Directors inorder to make themselves aware of any relevantinformation and to establish that the company’sAuditors are aware of that information.

RELATED PARTY TRANSACTIONIn the ordinary course of business a number oftransactions with other entities that fall within thedefinition of related party contained in BangladeshAccounting Standard 24: Related Party Disclosures.The Company extends loans/leases and takes depositsto/from related parties including its Directors andrelated companies. A statement on related partytransactions along-with their basis has been disclosedon page 215 of this Annual Report.

APPOINTMENT OF AUDITORSThe Company’s Auditors M/S. Hoda Vasi Chowdhury &Co., Chartered Accountants will retire in the SixteenthAnnual General Meeting. Being eligible under Section212 of the Company’s Act, 1994 and the FinancialInstitutions Act, 1993, the Auditors have expressedtheir willingness to continue their office for the financialyear 2014. The Auditors have completed their secondyear of audit and hence eligible for re-appointment. TheBoard of Directors recommended for approval of theappointment of M/S. Hoda Vasi Chowdhury& Co.,Chartered Accountants as Auditors of the Company forthe year 2014 with the fee of Tk. 140,000 plus VAT.

FUTURE OUTLOOK2014 is expected to be another challenging year for oureconomy and UCL group as well. Bangladesh has totackle a number of challenges mainly maintenance oftargeted GDP growth of 6.5 percent. Meantime,Finance Minister has given an indication for downwardrevision of targeted growth of GDP. There are anumber of dynamics, both political and economic,which could significantly affect both the investment andcapital markets. We are carefully monitoring economicconditions in Bangladesh where we are getting mixedsignals from the various economic indicators. On anunderlying basis, the business is still growing of courseat a slower rate. While the business of capital market isuncertain and volatile in nature, at this stage we arehopping to make progress in 2014.In addition, we recognize a number of morechallenges, which includes increased competition, andslow recovery due to negative change in political andinvestment climate. The year 2014 may be again affected by politicalturmoil followed by Upazila election and we have takenthose factors into consideration while fixing thebusiness target. Boosting up of investment is anotherchallenge to sustaining private sector led economicgrowth. We are hopeful that private investment willincrease in 2014.Because of involvement of banks in leasing business,competitiveness in leasing has been intensified further.Some banks are also offering capital market relatedproducts like brokerage services, portfolio managementetc. Moreover, banks are charging higher interest forNBFIs comparing to their other corporate clients.

Annexure - IDIRECTORS' MEETING & ATTENDANCE

Total Meeting % of ChangeName of the Directors Nominated by Meetings Attended Attendence During 2013Chowdhury Tanzim Karim EC Securities Ltd. 12 12 100 ContinuingMr. M. Faizur Rahman Self 12 12 100 ContinuingKazi Golam Samiur Rahman Self 12 12 100 ContinuingMr. Nasir A. Choudhury Self 12 12 100 ContinuingMrs. Rumana Sharif EC Securities Ltd. 12 12 100 ContinuingMr. Nadeem A. Chaudhury Enrilco Limited 12 9 75 ContinuingMrs. Tajrina Sikder Palmal Garments Hosiery Ltd. 12 6 50 ContinuingMrs. Meherunnesa Haque Self 12 8 67 ContinuingMr. N.H. Khan Self 12 11 92 ContinuingMr. M.A. Salam Self 12 3 25 ContinuingMr. Kazi Russel Mahbub Palmal Garments Hosiery Ltd. 12 2 17 ContinuingMr. Ziaul Hasan Siddiqui Self 12 11 92 Continuing

Annexure - IISHAREHOLDINGS OF SPONSOR SHAREHOLDERSName of Sponsor Shareholders % of ShareholdingPalmal Garments Hosiery Ltd. 9.73EC Securities Ltd. 7.22Mr. M. A. Salam 6.26Mr. M. Faizur Rahman 4.94Enrilco Limited 4.58Mr. Nasir A. Choudhury 4.45Kazi Golam Samiur Rahman 3.58Engr. M. A. Rashid 2.87Mrs. Khurshida Choudhury 2.77Mrs. Meherunnesa Haque 2.02Progati Shipping (Bangladesh) Ltd 1.44Engr. M Abu Taher 1.39Mr. SMAM Reza 0.96Mrs. Tajrina Sikder 0.80Mrs. Sabita Rezwana Rahman 0.83Ms. Runa N. Alam 0.81Fortuna Agro Fisheries 0.71Ms. Rumana Sharif 0.21Mrs. Asiya Rahman 0.03Total 55.43


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Annexure - IIIPATTERN OF SHAREHOLDINGS

No. ofSponsor Shareholders/Directors shares held PercentagePalmal Garments Hosiery Ltd. 10,695,156 9.73 EC Securities Ltd. 7,935,120 7.22 Mr. M. A. Salam 6,884,070 6.26 Mr. M. Faizur Rahman 5,224,643 4.94 Enrilco Limited 5,032,834 4.58 Mr. Nasir A. Choudhury 4,890,672 4.45 Kazi Golam Samiur Rahman 3,937,201 3.58 Engr. M. A. Rashid 3,150,000 3.01 Mrs. Khurshida Choudhury 3,044,439 2.77 Mrs. Meherunnesa Haque 2,225,292 2.02 Progati Shipping (Bangladesh) Ltd 1,587,023 1.44 Engr. M Abu Taher 1,531,851 1.43 Mr. SMAM Reza 1,049,894 1.05 Mrs. Tajrina Sikder 883,260 0.89 Mrs. Sabita Rezwana Rahman 908,107 0.83 Ms. Runa N. Alam 889,996 0.81 Fortuna Agro Fisheries 784,876 0.71 Ms. Rumana Sharif 226,722 0.21 Mrs. Asiya Rahman 37,837 0.03

Senior ExecutivesManaging Director & CEO Nil Company Secretary Nil Head of Finance Nil Head of Internal Audit Nil

Other top five ExecutivesMr. Abul Munim Khan NilMr. Abdul Bareque Nil Mr. Fazle Karim Murad Nil Mr. A. N. M. Golam Shabbir Nil Mr. Md. Israil Hossain Nil

Shareholders Holding 10% or more voting rightShareholders holding ten percent (10%) or more voting interest in the company Nil

Annexure - IVRANGE OF SHAREHOLDINGSThe distribution schedule of shareholdings as on 31 December 2013 was as under:

Shareholding range No. of shareholders No. of shares % of total

Less than 500 3937 634,235 0.58 501 to 5,000 5266 8,439,920 7.68 5,001 to 10,000 501 3,437,775 3.13 10,001 to 20,000 236 3,171,119 2.89 20,001 to 30,000 83 1,942,267 1.77 30,001 to 40,000 28 978,729 0.89 40,001 to 50,000 20 907,468 0.83 50,001 to 100,000 34 2,410,569 2.19 100,001 to 1,000,000 46 18,552,471 16.88 Over 1,000,000 19 69,434,773 63.17 Total 10,170 109,909,326 100.00


he Board Audit Committee wasformed in compliance with

Bangladesh Bank guidelines andBangladesh Securities and ExchangeCommission (BSEC) notification onCorporate Governance with a view toprovide independent oversight of theCompany’s financial reporting, non-financial corporate disclosure,effectiveness of internal control systemetc. as set out in the CommitteeCharter.

COMPOSITION OF THE BOARDAUDIT COMMITTEEThe Audit Committee consists of fivenon-executive Directors of the Companywith the exception of the Chairman ofthe Board appointed by the Board ofDirectors. In order to fulfill a quorum, atleast three members of the committeemust be present in the meeting. Theappointment of an Independent Directoris ratified by the shareholders in theAGM. An Independent Director is in theChair of the Audit Committee. In compliance with Section 3.2 (i) of thelatest Corporate GovernanceNotification issued by the BSEC on 07August 2012, the Board AuditCommittee was reformed on 31December 2012. The Committeecomprises the following members as ofthe date of this report:� Mr. N.H. Khan

(appointed on 31 December 2012)� Mr. M. Faizur Rahman

(appointed on 31 December 2012)� Mr. Nadeem A. Chaudhury

(appointed on 31 December 2012)� Mrs. Tajrina Sikder

(appointed on 31 December 2012)� Mr. Ziaul Hasan Siddiqui

(appointed on 31 December 2012)Biographical details of the currentmembers of the Committee are set outon page 48 to 52, Members’ fees areincluded in the table of remuneration ofthe audit committee members on page99 of the report.The Chief Executive Officer (CEO),Chief Financial Officer (CFO), Head ofInternal Control and Compliance (ICC)and the representatives of the externalauditors are invited to attend theCommittee Meetings.

OBJECTIVE OF THE COMMITTEEThe objective of the committee is toassist the Board in fulfilling its corporategovernance responsibilities, particularly:

� the reliability and integrity ofinformation for inclusion inCompany’s financial statements;

� compliance with legal andregulatory obligations, includingaudit, accounting, tax and financialreporting obligations;

� the integrity of company’s internalcontrol framework; and

� safeguarding the independence ofthe external and internal auditors.

� ensuring that the management hasselected accounting policies thatare in line with applicableaccounting standards.

� Review interim financial releasesi.e., quarterly and half yearlyunaudited financial statements andrecommend the same to the Boardof Directors for approval.

The engagement partner of the externalaudit firm is invited to attend eachAnnual General Meeting and to beavailable to answer shareholdersquestions about the conduct of theaudit and the preparation and contentof the auditor’s report.

CHAIRMAN OF THE AUDIT COMMITTEEThe committee is chaired by a non-executive Independent Director Mr.N.H. Khan who is considered to bebest qualified to serve in this role andhas knowledge of finance. Mr. N.H.Khan obtained his M.A. degree fromDhaka University in 1956 and startedhis career in Pakistan Taxation Servicein 1957. He was the Deputy Secretary,Ministry of Commerce, PakistanCentral Government in Islamabad atthe time of liberation of Bangladesh.He held many important positionsunder Government of Bangladesh,both home and abroad. He worked asSecretary, Ministries of Post andTelecommunication, Food & InternalResources Division. He was alsoChairman of National Board ofRevenue (NBR). He worked abroad asEconomic Minister of BangladeshEmbassy. The biography of Mr. N. H.khan is given on page 51 of thisAnnual Report.

AUDIT COMMITTEE CHARTERPurposeTo assist the Board of Directors infulfilling its oversight responsibilitiesfor (1) the integrity of the UCL’sfinancial statements, (2) UCL’s

AUDIT COMMITTEE REPORT

The Board AuditCommittee was formedin compliance withBangladesh Bankguidelines andBangladesh Securitiesand ExchangeCommission (BSEC)notification onCorporate Governancewith a view to provideindependent oversightof the Company’sfinancial reporting, non-financial corporatedisclosure,effectiveness of internalcontrol system etc. asset out in theCommittee Charter.

Outlines how theCommittee works

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compliance with legal and regulatory requirements, (3)the External Auditor’s qualifications and independence,and (4) the performance of UCL’s internal auditfunction and independent auditors. The auditcommittee will also conduct the functions thatregulatory rules require to be done.

AuthorityThe audit committee has authority to conduct orauthorize investigations into any matters within itsscope of responsibility. It is empowered to:� Recommend to the Board regarding appointment,

compensation and oversee the work of the externalauditors appointed by UCL to conduct the annualaudit. The Auditors will report to the audit committee.

� Resolve any disagreements between managementand the auditor regarding financial reporting.

� Pre-approve all auditing and permitted non- auditservices performed by the company’s external auditfirm.

� Retain independent counsel, accountants or othersto advise the committee or assist in the conduct ofan investigation.

� Seek any information it requires from employees –all of whom are directed to cooperate with thecommittee’s requests – or external parties.

� Meet with company officers, external auditors, oroutside counsel, as necessary.

� Delegate authority to subcommittees, including theauthority to pre-approve all auditing and permittednon-audit services, providing that such decisionsare presented to the full committee at its nextCommittee meeting.

Internal Control� review the implementation of key accounting


systems and the risk management process.

Internal Audit� review the adequacy of internal audit function;� consider the scope of work and review and approve

the annual audit plan and ensure no unjustifiedrestrictions or limitations are made;

� review and approve the annual audit report;� review the activities, resources and organizational

structure of Internal audit;� contribute to the selection process for the

appointment of the Head of Internal audit; and� ensure that findings and recommendations

communicated by Internal audit and Management’sproposed responses are received, discussed andappropriately acted on.

ComplianceReview the effectiveness of the company’s system formonitoring compliance with relevant laws andregulations (including internal rules) and the measurestaken by Management as a result of its investigation ofmaterial incidents of non- compliance.

Relationship with External Auditor � discuss with the external auditor any audit

problems encountered in the course of audit work,including any restriction on audit scope or accessto information;

� discuss with the external auditor theappropriateness of the accounting policies appliedin the company’s financial reports;

� ensure that significant findings andrecommendations communicated by the externalauditor and Management’s proposed responsesare received, discussed and appropriately actedon;

� review the performance of the external auditor andmake recommendations to the Board of Directorsfor the appointment, reappointment or terminationof the external auditor.

ACTIVITIES OF THE COMMITTEE CARRIED OUT INTHE YEAR 2013:The audit Committee carried out among others thefollowing activities in the year 2013:� reviewed both the consolidated and separate

audited financial statements for the year ended 31December 2013 along with the auditors’ reportthereon;

� reviewed the proposal of auditors for re-appointment and recommended the same to theBoard;

� reviewed the inspection reports of BangladeshBank on head office of UCL and its branch officesand management responses thereon;

� reviewed the departmental activities of thecompany;

� reviewed and discussed on the managementstructure of the company and its subsidiaries alongwith the weaknesses of the company;

� reviewed the report on the non-performing/defaultclients;

� reviewed the report on business operations;� reviewed the revised and annual budget of the

company;� reviewed the quarterly financial statement of the

group;� reviewed the overdue status of company’s portfolio;� reviewed the affairs of subsidiary companies.The Committee concurs with and accepts the auditreport on the financial statements and hasrecommended for approval thereof to the Board. TheBoard has subsequently approved the financialstatements, which will be open for discussion at theforthcoming Annual General Meeting.

sd/-N.H. KhanChairmanAudit Committee28 February 2013


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Whilst the Boardacknowledges thattotal elimination ofrisks is notpossible, thesystem of internalcontrols that is inplace is designedto manage risks inmeeting theGroup’s businessobjectives. Thesystem can onlyprovidereasonable andnot absoluteassurance againstmaterialmisstatement, lossor fraud.

INTRODUCTIONsound internal control system has always been one of the mostimportant matters for any organization. The better the internal

control system better the performance of the Company. The Board ofDirectors recognizes the importance of a sound internal control systemwith a view to ensuring good corporate governance practice therebysafeguard the shareholders’ investments and the Company’s assets. The system of internal control that we have in place enables us to driveour business operations in a more efficient and effective mannerensures sound financial reporting and control procedures, as well ascompliance with the relevant laws and regulations.As a listed issuer, we have an obligation, to ensure that a statement onthe state of the company’s internal control is included in this annualreport. The following statement on internal control has been prepared inaccordance with the regulatory requirements not only to comply with theregulatory requirements but also to articulate the practical internalcontrol effectiveness to the existing and potential stakeholders.

RESPONSIBILITYThe Board of Directors acknowledges the importance of maintaining asound system of internal control to safeguard shareholders’ investmentsand the Company’s assets. Guidance for Directors of Public ListedCompanies, the Board is pleased to present the Statement on InternalControl of the Group. The Board affirms its overall responsibility for the Group’s system ofinternal control and risk management, and for reviewing the adequacyand integrity of these systems. However, in view of the inherentlimitations in any system, such system of internal control is designed tomanage rather than to eliminate risks that may impede the achievementof the Company’s objectives. The system can therefore only providereasonable and not absolute assurance against material misstatements,frauds or losses. The system of internal control covers riskmanagement and financial, organisational, operational and compliancecontrols. The Board confirms that there is an on-going process ofidentifying, evaluating and managing significant risks by themanagement. This process has been put in place for the year and isreviewed periodically by the Board through its Audit Committee which issupported by the Internal Auditors. While the ‘tone at the top’ is set by the Board, it is the role ofmanagement to implement the policies adopted by the Board. Infulfilling its responsibilities, management identify and evaluate the risksfaced by the Company – for consideration by the Board - and design,implement and monitor an appropriate system of internal control.

DESCRIPTION ON THE INTERNAL CONTROL SYSTEMControl Environment:The control environment sets the tone of an organisation, influencingthe control consciousness of its people. It is the foundation for all othercomponents of internal control, providing discipline and structure.Control environment factors include the integrity, ethical values andcompetence of the Company’s people; management’s philosophy andoperating style; the way management assigns authority andresponsibility, and organises and develops its people; and the attentionand direction provided by the Board of directors.Identification and Evaluation of Risks and Control Objectives:Naturally the Company faces a variety of risks from various sourcesthat are assessed. A precondition to risk assessment is establishment

Report on

INTERNAL CONTROL Describes the effectivenessof Internal Control system


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of objectives, linked at different levels and internallyconsistent. Risk assessment is the identification andanalysis of relevant risks to achievement ofobjectives, forming a basis for determining how therisks should be managed. Because economic,industry, regulatory and operating conditions willcontinue to change. Mechanisms are needed toidentify and deal with the special risks associatedwith change.Control ActivitiesControl activities are the policies and procedures thathelp ensure that management directives are carriedout. They help ensure that necessary actions havebeen taken to address risks to achievement of theentity’s objectives. Control activities occur throughoutthe organisation, at all levels and in all functions.They include a range of activities as diverse asapprovals, authorisations, verifications,reconciliations, reviews of operating performance,security of assets and segregation of duties.Information and Communication ProcessesPertinent information must be identified, capturedand communicated in a form and timeframe thatenables people to carry out their responsibilities.Information systems produce reports, containingoperational, financial and compliance-relatedinformation, that make it possible to run and controlthe business. They deal not only with internallygenerated data, but also information about externalevents, activities and conditions necessary toinformed business decision-making and externalreporting Effective communication must also occur ina broader sense, flowing down, across and up theorganisation. All personnel must receive a clearmessage from top management that controlresponsibilities must be taken seriously. They mustunderstand their own role in the internal controlsystem, as well as how individual activities relate tothe work of others. They must have a means ofcommunicating significant information upstream.There also needs to be effective communication withexternal parties, such as customers, suppliers,regulators and shareholders.Processes for Monitoring the Effectiveness ofInternal Control SystemInternal control systems need to be monitored - aprocess that assesses the quality of the system’sperformance over time. This is accomplished throughongoing monitoring activities, separate evaluations ora combination of the two. Ongoing monitoring occursin the course of operations. It includes regularmanagement and supervisory activities, and otheractions personnel take in performing their duties. Thescope and frequency of separate evaluations willdepend primarily on an assessment of risks and theeffectiveness of ongoing monitoring procedures.Internal control deficiencies should be reportedupstream, with serious matters reported to topmanagement and the Board.

KEY INTERNAL CONTROL PROCESSESThe key processes that the Board has established inreviewing the adequacy and integrity of the Group’ssystem of internal controls include the following:

Risk Management FrameworkThe risk management process seeks to identify,measure, monitor and control risk. It also seeks toensure that risk exposures are adequately managedand that the expected returns compensate the riskstaken.This is all the more important given that the riskswithin the industry we operate in continually changeand evolve. This process is regularly reviewedthrough its Risk Management Committee (RMC)which ensures the proper management of risks andtakes the appropriate measures to mitigate anyidentified weaknesses in the control environment.The RMC provides oversight of the Group’s overallrisk management. In discharging its overall dutiesand responsibilities, the RMC is supported by the riskmanagement function which monitors and evaluatesthe effectiveness of the risk management system andoperations on an ongoing basis.Amongst the other committees set up in the Group tomanage specific areas of risk are the Assets &Liabilities Management Committee (ALCO),Management Credit Committee and Basel IIImplementation Committee.In line with regulatory requirements and industry bestpractices, the Group has instilled the principle thatrisk management is a core responsibility of therespective business and operating units. This isenriched in the risk management framework of theGroup.

Internal Audit FunctionThe internal audit performs regular review of theCompany’s operational processes and system ofinternal controls. Internal audit adopts a risk-basedapproach in determining the auditable units andfrequency of audits. Audit plans are reviewedregularly.The results of the audits conducted by internalauditor are reported to the Board Audit Committee.The follow-up actions and the review of the status ofactions taken as per the auditors’ recommendationsare carried out by the management via variousmanagement committees.The Audit Committee holds regular meetings todeliberate on the findings and recommendations forimprovement highlighted by both the internal andexternal auditors as well as the regulatory authorities.The minutes of the meetings of the Audit Committeeare subsequently tabled to the respective Boards fornotation. The copy of the minutes of the meetings ofthe Audit Committee is also sent to Bangladesh Bankregularly within the stipulated time.Further details of the activities undertaken by theaudit Committee of the Company are set out in theaudit Committee report.

Group Compliance FrameworkCompliance risk in UCL is defined as the risk ofimpairment to the Group’s reputation and financialcondition from failure to meet laws and regulations,internal policies and expectations of stakeholders.


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The Group’s state of compliance with laws,regulations and internal policies and procedures arereported to RMC. In addition the Group has in placea reporting process wherein any incident affecting thereputation of the Group is escalated to the seniormanagement immediate after the occurrence of theincident. The escalation process ensures theadequate oversight and guidance is provided by theBoard in managing reputational risk.Compliance in collaboration with the businessoperating units continuously assesses andrecommends improvements to control by carrying outroot cause analysis on common incidences of non-compliance, negligence and fraud.To mitigate compliance risk, briefings as well asvarious awareness and learning initiatives areconducted to ensure continuous compliance withexisting controls and to embed a compliance culturewithin the Group.

Board CommitteesSpecific responsibilities have been delegated to therelevant Board Committees, all of which have writtenterms of references. These committees have theauthority to examine and/or consider all matterswithin their scope of responsibilities and makerecommendations to the Board for approval, if such isrequired. The Board Committees are as follows:� Audit Committee; � Executive Committee; and� Green Banking Committee.

Management Committee (MC)The Management Committee, comprising keymanagement personnel of UCL and chaired by theManaging Director, manages the strategic directionand provides strategic guidance to the functionalunits. Being a forum where all strategic andoperational matters are discussed, the MC meetsregularly and special meetings are convened todiscuss urgent issues.

Authority LimitsDelegation of authority including authorization limitsat various levels of Management in the Group aredocumented and designed to ensure accountabilityand responsibility.

Internal Policies and ProceduresPolicies, procedures and processes governing theGroup’s businesses and operations are documentedand are made available to employees across theGroup. These policies, procedures and processesare reviewed and updated to cater to changes inlaws and regulations as well as changes to thebusiness and operational environment. Furthermore,a review of the policies, procedures and processesare also carried out to ensure that appropriatecontrols are in place to manage operational risks.

There is clear procedure for investment appraisalsincluding equity investment and capital expenditure.

Budgeting ProcessA detailed budgeting process is established requiringall key operating companies in the Group to preparebudgets and business plans annually for approval bythe Boards. The budget and business plans as wellas strategic initiatives are discussed by the seniormanagement and the Board at an annual businessplanning and budgetary session.A reporting system on actual performance againstapproved budgets is in place and significantvariances are followed up by the Management andreported to the Board.

Performance ReviewRegular and comprehensive information is shared bythe Management for monitoring of their performanceagainst the strategic business plan approved by theBoard, covering all key financial and operationalindicators as well as key strategic initiativesundertaken by the Group during the year.The Management Committee and the Board receiveand review the monthly accounts and financialinformation reports at their monthly or regularmeetings.

Human Capital ManagementThe Group acknowledges that one of the keyconstituents of any internal control system is itspeople and that our system of internal controls isdependent on the responsibility, integrity andjudgment that people apply to their work.Hence, the Group has in place policies andprocedures that govern recruitment and appointment,performance management, talent management,succession planning, compensation and reward,learning Statement on Internal Control and humancapital development as well as policies andprocedures that govern discipline, termination anddismissal.

Code of Ethics and ConductThe Code of ethics and Conduct sets out thestandards of good and ethical business practices,and aims to maintain confidence in the security andintegrity of the business practices. It is a requirementthat all employees of the Group understand andobserve the Code.


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he Directors are responsible for preparing theDirector’ Report and the Financial Statements

in accordance with BFRS and applicable laws andregulations.The Companies Act, 1994, requires the Directors toprepare financial statements for each financial year.The Directors have prepared the financial statementsin accordance with International Financial ReportingStandards (IFRSs) as adopted by the ICAB,Bangladesh Securities and Exchange Rules 1987and the Listing Regulations of the Stock Exchanges.The financial statements are required by law to givea true and fair view of the state of affairs of the groupand of the profit or loss of the group for that year.In preparing those financial statements, the Directorsare required to:� select suitable accounting policies and then apply

them consistently;� make judgements and estimates that are

reasonable and prudent; � state that the financial statements comply with

IFRSs as adopted by the ICAB; and � prepare the consolidated financial statements on

the going concern basis, unless it is inappropriateto presume that the group will continue inbusiness, in which case there should besupporting assumptions or qualifications asnecessary.

The Directors confirm that they have complied withthe above requirements in preparing the financialstatements.The Directors are responsible for keeping adequateaccounting records that disclose with reasonableaccuracy at any time the financial position of thegroup. They are also responsible for safeguardingthe assets of the group and hence for takingreasonable steps for the prevention and detection offraud and other irregularities. In addition, the Companies Act, 1994 requiresdirectors to provide the auditors with everyopportunity to take whatever steps and undertakewhatever inspections the auditors consider to beappropriate for the purpose of enabling them to givetheir audit report. The Directors, having madeappropriate enquiries, confirm that:� so far as the Directors are aware, there is no

relevant audit information of which the auditorsare unaware; and

� The Directors have taken all the steps that theyought to have taken as a Director in order tomake themselves aware of any relevant auditinformation and to establish that the auditors areaware of that information.

The Directors have reviewed the budget and cashflow forecasts. On the basis of this review, and in the

light of the current financial position and existingborrowing facilities, the directors are satisfied thatUCL is a going concern and have continued to adoptthe going concern basis in preparing the financialstatements.In compliance with the requirements of the BSEC'sNotification dated 7 August 2012, the Directors arealso required to disclose certain matters in theirreport. The Directors confirm that:� Financial Statements present fairly its state of

affairs, result of its operations, cash flows andchanges in equity;

� proper books of account have been maintained; � appropriate accounting policies have been

consistently applied in preparation of financialstatements and accounting estimates are basedon reasonable and prudent judgment;

� BFRSs have followed in preparing FinancialStatements and any departure has beenadequately disclosed;

� the system of internal control is sound in designand effectively implemented and monitored;

� statement on company’s ability to continue as agoing concern has been disclosed;

� significant deviations from last year in operatingresults have been highlighted along with thereasons thereon has been disclosed;

� key operating and financial data of preceding fiveyears have been summarized;

� the number of Board meetings held during theyear and attendance by each Director has beendisclosed;

� the pattern of shareholdings etc. has beendisclosed;

� Industry outlook and possible futuredevelopments has been disclosed;

� segment-wise performance has been disclosed;� risks and concerns has been disclosed;� continuity of any extra-ordinary gain or loss has

been disclosed;� a statement of all related party transactions has

been disclosed;� significant variance occurs between quarterly

financial performance and annual financialstatements has been disclosed;

� remuneration to Directors including independentDirectors has been disclosed;

� a brief resume, nature of Directors’ expertise inspecific areas, other directorship and themembership of committees of the Board of othercompanies given on pages 50 to 53 of thisAnnual Report.

DIRECTORS' RESPONSIBILITYin respect of the financial statements

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e the following signatories certify that we have reviewed the accompanying consolidatedfinancial statements of Union Capital Limited and to the best of our knowledge and belief:

� the financial statements do not contain any materially untrue statement or omit any materialfact or contain statements that might be misleading; and

� the financial statements together present a true and fair view of the Company’s affairs andwere prepared in accordance with the Financial Institutions Act, 1993 and BangladeshFinancial Reporting Standards (BFRS) and other applicable laws and regulations.

We further certify that to the best of our knowledge and belief there were no transactionsentered into by the Company during the year, which are fraudulent, illegal, or violation of theCompany’s code of conduct.

sd/- sd/-Md. Akter Hossain Sannamat FCA, FCS Md. Forhad Hossain ACAManaging Director and CEO AVP & CFO (CC)

Dhaka, 10 March 2014

Responsibility of the CEO and CFO in respect of

FINANCIAL REPORTING

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anagement of UCL is responsible forestablishing and maintaining adequate internal

control over financial reporting. Internal control overfinancial reporting is a process designed by or underthe supervision of, the Managing Director & CEO andthe Chief Financial Officer and effected by the Boardof Directors, the Management and other personnel toprovide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financialstatements for external purposes in accordance withBFRS and other applicable rules and regulations. Itincludes those policies and procedures that:� Pertain to the maintenance of records that, in

reasonable detail, accurately and fairly reflect thetransactions related to operations;

� Provide reasonable assurance that transactionsare recorded as necessary to permit preparationof financial statements in accordance with BFRSand our receipts and expenditures are made onlyin accordance with authorizations of ourmanagement and directors; and

� Provide reasonable assurance regardingprevention or timely detection of unauthorizedacquisition, use, or disposition of our assets thatcould have a material effect on our financialstatements.

Due to its inherent limitations, internal control overfinancial reporting may not prevent or detectmisstatements on a timely basis. Also, projections ofany evaluation of the effectiveness of internal control

over financial reporting to future periods are subjectto the risk that the controls may become inadequatebecause of changes in conditions, or that the degreeof compliance with the policies or procedures maydeteriorate.

Management evaluated, under the supervision of andwith the participation of the Managing Director &CEO, the Chief Financial Officer and the Head ofInternal Control & Compliance, the effectiveness ofour internal control over financial reporting as of 31December 2013.

Based on that evaluation, management concludedthat, as of December 31, 2013, internal control overfinancial reporting was effective. Also, based on theresults of our evaluation, management concludedthat there were no material weaknesses that havebeen identified in internal control over financialreporting as of 31 December 2013.

Our internal control over financial reporting as of 31December 2013 has been audited by Hoda VasiChwdhury & Co., Chartered Accountants, who alsoaudited our Consolidated Financial Statements forthe year ended 31 December 2013. The Auditor alsoassess the effectiveness of our internal control anddetermines the degree and extent of reliance oninternal control system.


Report onINTERNAL CONTROL OVER FINANCIAL REPORTING

sd/- sd/-Md. Akter Hossain Sannamat FCA, FCS Md. Forhad Hossain ACAManaging Director and CEO AVP & Chief Financial Officer (CC)

Dhaka, 4 March 2014

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he Board is accountable to the Company’sshareholders for the good conduct of the

Group’s affairs. This report explains how the Groupapplies the Corporate Governance issued by theBSEC and Bangladesh Bank.The Directors are committed to maintaining thehighest standards of corporate governance, whichthey believe are fundamental in discharging theirstewardship responsibilities.

The Board confirms that the Company has,throughout the period under review, complied with allprovisions set out in corporate governance guidlines.

As part of its commitment to sustainable operationsat every level, UCL Group operates within a clearlydefined governance framework that defines allgovernance and compliance aspects of the

Company. Thisframework includesgovernance structuresthat are strategicallylinked to performancemanagement, therebyencouraging andenabling our businessunits to focus on keyrequirements.

The Board of Directorsstrongly believes in theimportance of goodCorporate Governance inmaintaining Company’sreputation and solid

foundation. The Board will continue to ensure goodCorporate Governance to provide the requisiteleadership, policy, strategy and internal controls inorder to continue to deliver and sustain company’svalue propositions. This benefits our stakeholderswhile at the same time ensuring continuingmomentum towards reaching UCL’s aspirations to bea leading financial institution.

UCL is committed to the principles of excellence incorporate governance and ethics. This commitment isevidenced by the following practices that are in placeat UCL Group :� A Board with all non-executive members being

independent of Management;� Clear separation of the role of the Chairman of

the Board and the Managing Director & CEO;� The Audit Committee and Executive Committee

comprises solely of Non-executive Directors;

� Inclusion of all the independent Directors in theBoard Audit Committee;

� An Independent Director is in the Chair of theAudit Committee;

� A code of ethics and business conduct ;� Maintaining the basic principles of Corporate

Governance;� Published Charter for the Board and all of its

Committees;� Certification from an independent professional on

the compliance of the conditions of BSEC’sNotification of 7 August 2012.

� A set of corporate values – integrity, trust,teamwork, openness, transparency, excellenceand resilience – communicated to all employees;

� The members of the Board Audit Committeepossesses knowledge on internal control,financial and administrative matters;

� The Audit Committee meets regularly with/withoutthe presence of the Executive Management;

� An established system of internal control withappropriate check and balance;

� Ensure transparency in financial reporting andadequate disclosures;

� A firm commitment for creation of long-termshareholders’ value.

For UCL, Corporate Governance is not a merestatement of compliance. We aim to achieve andmaintain the highest standards of business integrity,ethics and professionalism across the Group.We believe that good governance, in its broadestsense, is a competitive advantage. To maximizeshareholders’ value on a sustainable basis, principlesof good governance must extend beyond the Boardof Directors into every segment of business activities.Indeed, a foundation of ethics, integrity and goodgovernance guides all of our activities across ourdiverse operations.

Thank you,

Chowdhury Tanzim KarimChairman

Chairman’s Statement on

CORPORATE GOVERNANCE

In today’s marketplace ofcontinually evolvingregulatory and investorexpectations, your Boardhas focused on corporateobjectives and performancein the context of doing whatis right and ethical. Myfellow Directors havedemonstrated a strongsense of integrity, corporateresponsibility and awillingness to work hard onall issues.

How we govern ourselves as a group is as important as anything else we do. Being anethical company is about much more than simply adhering to the letter of the law. Butit’s an important step. We aim to achieve and maintain the highest standards ofbusiness integrity, ethics and professionalism across all of our activities.


Describes UCL’s approach togood governance practices

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CORPORATE GOVERNANCEorporate governance deals with the relationship between theshareholders and the company’s Board and Executive

Management, as well as the company’s goals. This CorporateGovernance Report is based on a shareholder perspective as it isprepared in accordance with the requirements of BSEC’s Code ofCorporate Governance. The main emphasis is on the Board of Directorsin its role as the main decision-making body in UCL’s corporategovernance structure, and the interaction with the other bodies to ensuresound corporate governance. UCL’s system for internal control and riskmanagement regarding financial reporting is also covered.

OVERVIEW� Our core values guide the Board’s oversight, its relationship with

management and its accountability to shareholders;� Our governance responsibilities are integral to our performance and

long-term sustainability;� Our corporate governance standards reflect emerging best practices

and meet or exceed legal and regulatory requirements; and� Proper governance is important to our shareholders, our customers,

our employees, our communities – to UCL.

FOUNDATION FOR CORPORATE GOVERNANCEUCL sees good corporate governance, risk management and internalcontrol as key elements in a successful business and to maintainconfidence among customers, shareholders, authorities and otherstakeholders.UCL defines corporate governance as the relationship betweenshareholders, executive management, employees, the variouscompanies within the Group and other stakeholders. In a broader sense,it also means:� how the vision, purpose and strategy are designed and

communicated� how the values are followed� how goals are set and followed up� how risks are managed� how a corporate culture that supports company’s commitment to

customers and builds shareholders value is created.Good corporate governance benefits both our customers and ourshareholders, and is essential to our long-term business success. For thisreason, we devote considerable time and resources to making sure that:� our policies reflect our values and business goals;� we have an effective corporate governance structure; and� we are operating in a way that is open, honest and transparent.As part of our long-standing commitment to ethics and good corporatecitizenship, our first step is always to comply with the laws andregulations that govern the way we market our products and services.We have a sound compliance practices that:� are consistent with recommendations set forth by the BSEC;� seek to prevent, detect and resolve potential violations of law or

company policy; and� undergo regular assessment to make sure we are being responsive

to our evolving business and associated compliance risks.Our compliance practices are just one part of our overall commitment tooperating ethically, openly and transparently. But we believe it’s the rightplace to start.CORPORATE GOVERNANCE FRAMEWORK

Describes Directors’ approach togovernance and how it works

Strong corporategovernance is aboutcompanies having clearand systematicdecision-makingprocesses, thusproviding clarity aboutresponsibilities,avoiding conflicts ofinterest and ensuringsatisfactorytransparency.Commitment to UCL’smission and visionrequires the integrationof sound corporategovernance practicesinto regular businessactivities in order to,attain – as far aspossible – a companythat is well governedand well managed.

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that defines all governance and compliance aspectsof the organization.This governance framework entails far more thancompliance with legislation, and has been developedwith the aim of enabling UCL Group to attain a numberof very clear objectives and goals, which include:� Maximizing efficiency and profitability within

acceptable risk parameters.� Implementing group’s strategy within defined

compliance requirement.� Adhering to correct and proper corporate behaviors.� Balancing, within a framework of effective

accountability, the interests of shareholders andother stakeholders who may be affected by theconduct of Directors or executives of the Group.

� Minimizing or avoiding conflicts of interestbetween the business interests of the Group andpersonal interests of Directors or executives.

� Disclosing matters that are material to thebusiness of the Group or the interests ofstakeholders timely and accurately.

� Ensuring efficient and effective functioning of theRisk Management Framework.

� Complying in substance, not just in form, with theprovisions of the Code of Corporate Governanceand regulations affecting the financial servicesindustry.

Our corporate governance policies and procedures formthe basis of a sound corporate governance frameworkand refer to other documents that regulate certainaspects of corporate governance in greater detail.Articles of Association (AoA): Define the purpose ofthe business, the powers and duties of the Directorsand the basic organizational framework.Code of Conduct: Defines the UCL’s ethical valuesand professional standards that the Board and allemployees are required to follow, including anemphasis that employees must adhere to all relevantlaws, regulations, and policies in order to maintain andstrengthen our reputation for integrity, fair dealing andmeasured risk taking.Organizational Guidelines and Regulations: Definethe responsibilities and sphere of authority of thevarious bodies within the company, as well as therelevant reporting procedures.Corporate Governance Guidelines: Summarizecertain principles promoting the function of the Boardand its committees and the effective governance ofthe company.Board of Directors Charter: Outlines theorganization and responsibilities of the Board.Board Committee Charters: Define the organizationand responsibilities of the Committees. As part of itscommitment to sustainable operations at every level,UCL group operates within a governance framework

OUR GOVERNANCE STRUCTUREThe Board and its Committees are independent of Management. The following chart gives the picture of ourcorporate governance structure:


External Auditors

External Auditors

Audit Committee

Company Secretary

Asset-LiabilityManagementCommittee

RiskManagement Forum

Money LaunderingPrevention Committee

GovernanceCommittee

Ethics &Compliance Committee

Basel II ImplementationCommittee

HR & CompensationCommittee

Green BankingUnit

Risk Analysis Unit

Internal Control &Complience

Credit Committee

Green BankingCommittee Executive Committee

SHAREHOLDERS

Board of Directors

MD & CEO

Management Committee

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strategic direction of the Group and monitoring theimplementation of that strategy by the Management,including:� executive management development and

succession planning;� input into, and approval of the annual operating

budget;� approving and monitoring the progress of major

capital expenditure and capital management;� monitoring compliance with all legal, tax and

regulatory obligations;� reviewing the effectiveness of the implementation of

its risk management system;� monitoring the performance of the Senior Executives

and implementation of strategy and policies,ensuring appropriate resources are available;

� appointment, reappointment or replacement of theexternal auditor.

Details of the charter of the Board of Directors aregiven on page 55 of this Annual Report.

POLICY ON APPOINTMENT OF DIRECTORSThe Directors are appointed as per the rules andregulations set forth in the Companies Act, 1994, theFinancial Institutions Act, 1993 and BangladeshSecurities and Exchange Commission’s (BSEC)guidelines on Corporate Governance. To be a member of the Board of a listed company, aDirector other than nominated and alternate Directormust hold at least 2 percent of the outstanding sharesof the company. The Independent Directors areexempted from such requirement.As per the Companies Act, 1994, the office of non-executive Directors is subject to retirement. At leastone-third of the non-executive Directors shall retire byrotation in every Annual General Meeting. As per theCentral Bank’s guidline, a Director may be appointedfor a period of three years and the term may beextended by another term of three years. TheManaging Director is appointed for a minimum period ofthree years subject to approval of the Central Bank.The office of the Managing Director being an ex-officioDirector is not subject to retirement. The tenure of anIndependent Director is three years and may beextended by another three years.

SIZE OF THE BOARDThe Board of UCL comprises of ten members excludingthe three Independent Directors and the ManagingDirector. As per FID Circular no. 9 dated 11 September,2002 of the Central Bank, the size of the Board of anon-banking Financial Institution shall be minimum ofnine and maximum eleven. As per BSEC’s notification,a listed company should have Independent Director ofat least one-fifth of the Directors. As per articles ofassociation of the Company the Managing Director isan ex-officio Director.

COMPOSITION OF THE BOARDThe Directors determine the composition and size ofthe Board in accordance with Central Bank and BSEC’sregulations. The regulators set upper and lower limits

CORPORATE GOVERNANCE STATEMENTThe Board of UCL governs the business on behalf ofshareholders as a whole with the prime objective ofprotecting and enhancing shareholders’ value. The Boardis committed to, and ensures that, the Managementperforms in accordance with the highest level of ethicsand integrity. This statement outlines the main corporategovernance practices employed by the Board of UCL inapplying the Corporate Governance guidelines.Corporate governance is the framework of rules,relationships, systems and processes within which andby which the operations of the group is exercised andcontrolled. It influences the setting and achievement ofobjectives of the Company, the monitoring andassessment of risk and the optimization ofperformance. There is no single model of goodcorporate governance. For UCL, best practicecorporate governance has been adapted to thechanging circumstances and will continue to evolve asthose circumstances change.

GOVERNANCE MODELUCL’s Governance Model conforms to the relevantregulatory requirements as well as the best marketpractices. The Governance Model is in place to ensure itremains relevant and is able to meet future challenges.

BASIC PRINCIPLES FORMING A GOOD BOARDThe Board is collectively responsible to the Company’sshareholders for the long-term success of theCompany and for its overall strategic direction, itsvalues and its governance. It provides the leadershipnecessary for the Company to meet its businessobjectives whilst ensuring that a sound system ofinternal control and risk management is in place.The Board is responsible for governing the businessand affairs of the Company and for exercising all suchpowers pursuant to the articles of association of theCompany. While carrying out their duties andresponsibilities, the Board is committed to ensuring thatthe highest corporate governance standards areadhered to. The overall principal responsibilities of theBoard are as follows:� providing strategic leadership to the Company;� reviewing, approving and monitoring the

implementation of the strategic business plans andpolicies of the company;

� ensuring the Company and Group maintain aneffective system of internal contorts and are able toidentify and manage principal risks resulting inefficiency in operations and a stable financialenvironment;

� monitoring as well as evaluating the performance ofthe Management to ensure that the performancecriteria remains dynamic; and

� ensuring the formulation of a succession plan forlong-term business continuity.

THE BOARD AND ITS CHARTERLays solid foundations for management andoversightThe Board has a Charter which sets out the roles ofthe Board. The Board is responsible for setting the


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CEO, pursuant to the provisions of the externalframework, regulatory authorities, the Articles ofAssociation and the internal instructions set forth bythe Board of Directors.

THE CHAIRMANResponsible for leading the BoardThere is a clear and effective division of accountabilityand responsibility between the roles of the Chairmanand the Managing Director & CEO.

RESPONSIBILITY OF THE CHAIRMANThe Chairman is responsible for leading the Boardand ensuring it performs in an effective manner.The Chairman presides over Board and GeneralMeetings of the Company. He ensures that the Boardis well informed and effective; that Members,individually and as a group, have the opportunity to airdifferences, explore ideas and generate the collectiveviews and wisdom necessary for the proper decisionmaking of the Board and the Company. Additionally,the Chairman has to ensure that General Meetingsare conducted efficiently and in accordance with therequirement of the Companies Act 1994, and thatshareholders have adequate opportunity to air theirviews and obtain answers to their queries.The Chairman also has following responsibilities:� to provide effective leadership in the determination

of Company’s strategy and in the achievement ofthe Company's objectives;

� to work with the Company Secretary to scheduleBoard and Committee meetings and ensure thatDirectors receive accurate, timely and clearinformation, in particular on the Company's andGroup's performance and issues arising, to enablethe Board to make sound decisions, conducteffective monitoring and provide sound advice inachieving the Company's objectives;

� to ensure that Board Committees are properlyestablished and composed, with appropriate termsof reference;

� to ensure that all important agenda areappropriately discussed by the Board;

� to ensure the independence of the Board indischarging its duties;

� to ensure that the Board and individual Directorsfully exercise their responsibilities and adhere toapplicable laws, regulations, rules, directives,policies and guidelines;

� to promote effective relationships and opencommunication between the Board and the SeniorManagement in relation to corporate governanceand corporate performance;

� to ensure effective relationships are maintainedwith all major stakeholders.

SCHEME FOR ANNUAL APPRAISAL OF THEBOARD’S PERFORMANCE Being the representative of the shareholders, theBoard is responsible to the shareholders for theoverall performance of the company. However, thereis no such annual appraisal scheme for the appraisal

with the number of Directors not permitted to be lessthan five and more than twenty as per BSECcorporate governance guidelines while the minimumnumber is nine with a maximum limit of eleven as perCentral Bank regulations. The Board has determinedthat there shall be eleven Directors excluding theIndependent Directors and the Managing Director.The skills and experience of each Director and theirperiod of office at the date of this report are set outon pages 48 of the Annual Report.The Board of UCL comprises of the following:Non-executive Directors Ten out of whom five are nominated DirectorsIndependent DirectorsThree Executive DirectorOne (The Managing Director & CEO)Chairman of the Company is a non-executiveDirector and independent of CEO

NON EXECUTIVE DIRECTORAll the Directors except the CEO are the non-executiveDirectors in the Board. None of the Directors takes partin the day to day affairs of the Company. They attendonly in the Board/Committee meetings to discuss theagenda reserved for the Board/Committees.

INDEPENDENT DIRECTOR AND BOARD’SCONSENT THEREOFThere are three Independent Directors in the Boardrepresenting one-fifth of the total Directors. As per theBSEC guideline on Corporate Governance at leastone fifth of the total Directors should be IndependentDirectors. In order for a Director to qualify as anIndependent Director, the Board affirmativelydetermines that the Director has no materialrelationship with UCL either as a partner, shareholderor officer of an organization that has a relationship withUCL that would preclude that nominee from being anIndependent Director. For the purpose of suchdetermination, the Directors consider that theIndependent Director does not hold any share or holdsless than one percent shares of the total paid upcapital of the Company, who is not connected with theCompany's Promoters or Directors or Shareholderswho holds one percent or more than one percentshares of the total paid up shares of the Company, onthe basis of family relationship; who does not have anyother relationship, whether pecuniary or otherwise,with the company or its subsidiary/associatecompanies, who is not a member, Director or officer ofany Stock exchange and who is not a shareholder,Director or officer of any stock exchange or anintermediary of the capital market. The IndependentDirector is appointed for a period of three years whichmay be extended by one term only. A person cannotbe appointed as Independent Director who havealready been appointed as Independent Director ofthree listed companies.

DIVISION OF POWERS AND RESPONSIBILITIESThe management and control of UCL is dividedamong the shareholders (at the General Meeting),the Board of Directors and the Managing Director &

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believes that the interests of the shareholders arebest served by:� the current composition of the Board which is

regarded as balanced with a complementaryrange of skills and experience detailed in theDirectors’ profile on pages 48 of this report; and

� the Independent Directors providing an element ofbalance as well as making a considerablecontribution in their respective fields of expertise.

The following measures are in place to ensure thedecision making process of the Board is subject toindependent judgments:� a standard item on each Board Meeting agenda

requires Directors to focus on and declare anyconflicts of interest in addition to those alreadydeclared;

� Directors may seek the advice of independentexperts, subject to the approval of the Board;

� all Directors must act at all times in the interests ofthe Company; and

� Directors meet as required independently ofexecutive management.

Adoption of these measures ensures that the interestsof shareholders, as a whole, are pursued and notjeopardized by a lack of independence.

DIRECTORS’ RETIREMENT ANDREAPPOINTMENTAs per The Companies Act 1994, the office of non-executive Directors is subject to retirement. At leastone-third of the non-executive Directors shall retire byrotation in every Annual General Meeting. TheManaging Director is appointed for a minimum periodof three years subject to approval of the Central Bank.The office of the Managing Director being an ex-officioDirector is not subject to retirement. The tenure of anIndependent Director is three years and may beextended by another three years.

NUMBER OF MEETINGS OF THE BOARD ANDTHE PARTICIPATION OF EACH DIRECTORIn 2013, the Board held 12 meetings in person. TheBoard may also take certain decisions via circularresolution, unless a member asks that the matter bediscussed in a meeting and not decided upon by wayof written consent. The details of the attendance ofthe Directors is given on page no. 98 of this AnnualReport.All members of the Board are expected to spend thenecessary time outside these meetings needed todischarge their responsibilities appropriately. TheChairman calls the meeting with sufficient notice andprepares an agenda for each meeting.However, any other Board member has the right to callan extraordinary meeting, if deemed necessary. TheChairman has the discretion to invite members ofmanagement or others to attend the meetings.Generally, the members of the Management Committeeattend the meetings to ensure effective interaction withthe Board. Minutes are kept of the proceedings andresolutions of the Board are sent to the Central Bankincluding the minutes of Board Committees.

of the performance of the non-executive members ofthe Board. The non-executive Directors of the Boardget fees for attending Board and CommitteeMeetings as prescribed by the Central Bank.

POLICY ON TRAINING OF DIRECTORS The Board of Directors of UCL is well-balancedhaving professional and industry knowledge to putforward the Company to the desired level of success.During the year under review no such trainingprogram has been organized for the Directors. Weare aware that IFC is conducting such training for theDirectors of different listed companies. We recognizethe importance of the program of such training for theoverall development of the Company to ensure bestcorporate governance practices.

REPORT ON COMPLIANCE WITH THE BESTPRACTICES ON CORPORATE GOVERNANCEThe Chairman of the Company on behalf of theBoard of Directors issues a report on compliance withthe best practices on Corporate Governance. Thereport is reviewed by the External Auditors. Thecertificate of the External Auditors is given on page107 of this Annual Report. The report of theChairman is also given on page 87 of this report.

MEMBERSHIP AND QUALIFICATION OF THEDIRECTORSThe Board currently consists of thirteen memberswhich is within the regulatory limit. We believe thatthe size of the Board must be such that thecommittees can be staffed with qualified members. Atthe same time, the Board must be adequate enoughto ensure an effective decision-making process.

DIRECTORS KNOWLEDGE AND EXPERIENCEAs a major financial services provider, the Boardrecognizes that its Members must have theappropriate mix of skills as well as the necessaryknowledge, experience and commitment to effectivelycontribute towards the growth and expansion of thecompany as a whole. Furthermore, being on theBoard of a parent company, the Board Members arerequired to be responsive to the constantly changingfinancial landscape.Our Directors bring on Board a wealth of knowledgeand experience in business development, finance,legal, accounting, general management skills and theregulatory environment. A brief profile of eachMember of the Board outlining their quantifications,experience and skills is presented on pages 48 to 52of this Annual Report.

DIRECTORS INDEPENDENCEAll the Directors except the Managing Director arenon-executive Directors and independent of themanagement. All Directors bring independentjudgments to bear on their decisions.The materiality thresholds used to assess Directorsindependence are set out in the BSEC notification onCorporate Governance dated 7 August 2012. TheManaging Director & CEO is an ex-officio member ofthe Board having no voting rights. The Board

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BOARD MEETINGS PROCEDURE� The Board convene according to an agreed

schedule to discuss business and other issueswhenever considered necessary;

� The Chairman decides on the agenda based onproposals by the other members of the Board, theManaging Director & CEO, and the secretary tothe Board;

� The Chairman convene a meeting to deal with aspecific item, if requested by a member of theBoard or the Managing Director & CEO;

� The Board deals with the reports of the Boardcommittees, Credit committees and the ManagingDirector & CEO;

� Working papers are delivered to the membersseven days before meetings.

BUSINESS OF THE BOARD MEETINGSThe Board’s agenda is managed to ensure thatshareholder value and governance. All play anappropriate part in its deliberations and judgments.The Board delegates to management the day-to-dayoperation of the business, in accordance withappropriate risk parameters. The Board monitorscompliance with policy and achievement againstobjectives, by holding management accountable forits activities through regular updates.During the year ended 31 December 2013, the Boardconsidered a wide range of issues, including:� receiving proposal on financing business;� receiving regular reports on the financial position

of the company and the various businesses;� receiving reports on the outstanding issues arises

from earlier board meetings;� receiving reports on financing proposals

approved by the management credit committee;� approving the budget and long-term plan;� approving interim and full-year results;� discussing and approving corporate strategy;

receiving reports from the Audit Committee,Executive Committee and Green BankingCommittee; and

� receiving reports on governance issues affectingthe company;

ACCESS TO INFORMATIONDirectors may access all relevant informationrequired to discharge their duties in addition toinformation provided in Board papers and regularpresentations delivered by executive Management onbusiness performance and issues.

THE MANAGING DIRECTOR & CEOResponsible for day to day operationsWhile the Chairman leads the Board, the CEO hasexecutive responsibility for the day to day operationsand performance of the company.The Managing Director & CEO who has extensivefinancial experience and knowledge (includingcorporate finance and business development), drives

the Group's overall strategic growth towards achievingUCL's strategic vision and direction. He leads theManagement in the execution of strategic initiatives.The distinct and separate duties and responsibilitiesof the Managing Director and the Chairman ensurethe balance of power and authority in relation to theestablishment of a fully effective Board.The Managing Director's integral role is to implementthe policies and decisions of the Board, oversee theentity's operations as well as coordinate thedevelopment and execution of the corporatestrategies. In addition thereto, he is also responsiblefor the following tasks: to put in place initiatives thatwill shape the corporate direction and values of thecompany towards the achievement of a "customer-centric" corporate culture and underpinned by thecompany's values;

POLICY ON ANNUAL EVALUATION OF THE CEOBY THE BOARDSince the CEO is responsible for daily operation ofthe Company, the annual performance of the CEO ismeasured through following key performanceindicators:� Meet the annual budgetary targets of the

Company as approved by the Board;� Maximize the shareholders value through

achieving desired Return on Asset (ROA), Returnon Investments (ROI) and Return on Equity(ROE) as set by the Board;

� Enhance the Earnings Per Share (EPS) to acompetitive level in the industry;

� Sustainable growth of investment and revenue forthe Company as set by the Board;

� Gradual reduction of cost to income ratio of theCompany;

� Gradual reduction of the non-performing asset(NPA);

� Improvement of the overall CAMELS Rating.

THE COMPANY SECRETARY Serves the Board on company mattersThe Company Secretary serves the Board on mattersrelating to the affairs of the Board and ensures thatBoard meetings are properly convened and anaccurate and proper record of the proceedings andminutes of the meetings are kept. The CompanySecretary assists the Chairman and Directors in theconduct of meetings and their governance obligationsand responsibilities as Directors of the Company. TheCompany Secretary also facilitates thecommunication of key decisions and policies betweenthe Board, Board Committees, the SeniorManagement and the regulators.Apart from performing the duties and responsibilitiesof a Secretary to the Board, the Company Secretaryalso undertakes the following roles:� ensures that the Board is kept well informed/

updated on legal/regulatory requirements thataffects the duties and responsibilities of Directors;

� ensures that the relevant companies within theGroup comply with its statutory obligations underrelevant laws and regulations;

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� provides guidance to Directors and SeniorManagement on various corporate affairs matters;

� assists in managing shareholder relations andresolving their enquires;

� manages relationship with the office of RJSC;Submit all statutory return to RJSC withinstipulated time period; and

� acts as a custodian of the Group's statutoryrecords.

THE AUDIT COMMITTEEObjective of the Audit Committee The objective of the committee is to assist theBoard in fulfilling its corporate governanceresponsibilities, particularly:� the reliability and integrity of information for

inclusion in Company’s financial statements;� compliance with legal and regulatory obligations,

including audit, accounting, tax and financialreporting obligations;

� the integrity of company’s internal controlframework;

� safeguarding the independence of the externaland internal auditors;

� ensuring that the management has selectedaccounting policies that are in line will applicableaccounting standards; and

� Review interim financial releases i.e., quarterlyand half yearly unaudited financial statementsand recommend the same to the Board ofDirectors for approval.

The engagement partner of the external audit firm isinvited to attend each Annual General Meeting and tobe available to answer shareholders questions aboutthe conduct of the audit and the preparation andcontent of the auditor’s report.

APPOINTMENT AND COMPOSITIONThe Audit Committee is a sub-committee of theBoard of Directors. The committee assists the Boardof Directors in ensuring that the financial statementsreflect true and fair view of the state of affairs of thecompany as well as ensures that the operatingeffectiveness of the internal control system isadequate. The committee is directly responsible tothe Board of Directors.The Audit Committee comprises of five non-executiveDirectors out of whom Mr. N. H. Khan and Mr. ZiaulHasan Siddiqui are Independent Directors.

CHAIRMAN OF THE AUDIT COMMITTEEThe committee is chaired by a non-executiveIndependent Director Mr. N.H. Khan who isconsidered to be best qualified to serve in this roleand has knowledge of finance. The biography of Mr.N. H. khan is given on page 51 of this Annual Report.

QUALIFICATION AND EXPERTISE OF THEMEMBERS OF THE AUDIT COMMITTEEThe Committee is chaired by an Independent DirectorMr. N. H. Khan who is considered best qualified to

serve in this role and has expert knowledge offinance and accounts. Mr. N.H. Khan obtained hisM.A. degree from Dhaka University in 1956 andstarted his career in Pakistan Taxation Service in1957. He was the Deputy Secretary, Ministry ofCommerce, Pakistan Central Government inIslamabad at the time of liberation of Bangladesh. Heheld many important positions under Government ofBangladesh, both home and abroad. He worked asSecretary, Ministries of Post and Telecommunication,Food & Internal resources Division. He was alsoChairman of National Board of Revenue (NBR). Heworked abroad as Economic Minister of BangladeshEmbassy. On the other hand Mr. Ziaul HassanSiddiqui holds more than 35 years of extensive andversatile experience under different capacitiesincluding Deputy Governor for more than 5 years withspecialization in monetary policy, foreign exchangepolicy and reserve management. He also worked asHead of Financial Intelligence Unit to upgrade AntiMoney Laundering and Combating Financing ofTerrorism. Overall all the members of the AuditCommittee are diversified and knowledgeable indifferent areas of business and administration.Biography of the audit committee members is givenon page 48 to 52 of this Annual Report.

CHARTER OF THE COMMITTEE The audit Committee, within the delegated authorityand in fulfilling the regulatory requirements will:Internal Control� review the implementation of key accounting


systems and the risk management process.Internal Audit� review the adequacy of internal audit function;� consider the scope of work and review and

approve the annual audit plan and ensure nounjustified restrictions or limitations are made;

� review and approve the annual audit report;� review the activities, resources and organizational

structure of internal audit;� contribute to the selection process for the

appointment of the Head of Internal audit; and� ensure that findings and recommendations

communicated by internal audit andManagement’s proposed responses are received,discussed and appropriately acted on.

Compliancereview the effectiveness of the company’s system formonitoring compliance with relevant laws andregulations (including internal rules) and themeasures taken by Management as a result of itsinvestigation of material incidents of non- compliance.

Relationship with the External Auditor� review the scope of work and audit plan;� review Management Letters issued by external

auditors;� review the report on the annual audit of UCL;


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� consider the independence of the external auditorand any potential conflicts of interest;

� review the “Terms of engagement” of the externalauditor;

� discuss with the external auditor any auditproblems encountered in the course of auditwork, including any restriction on audit scope oraccess to information;

� discuss with the external auditor theappropriateness of the accounting policiesapplied in the company’s financial reports;

� ensure that significant findings andrecommendations communicated by the externalauditor and Management’s proposed responsesare received, discussed and appropriately actedon;

� review the performance of the external auditorand make recommendations to the Board ofDirectors for the appointment, reappointment ortermination of the external auditor.

AUDIT COMMITTEE INVOLVEMENT IN SELECTIONOF APPROPRIATE ACCOUNTING POLICIESAs per the BSEC guideline on CorporateGovernance, The Audit Committee shall assist theBoard of Directors in ensuring that the financialstatements reflect true and fair view of the state ofaffairs of the company and in ensuring a goodmonitoring system within the business. The Board delegates the responsibility to the AuditCommittee to select the appropriate accountingpolicies that are in line with applicable accountingstandards as applicable and adopted by the ICAB,Bangladesh Securities and Exchange rules 1987 andthe Listing Regulations of the Stock exchanges. Afterselecting the appropriate accounting policies, theAudit Committee recommends the Board regardingadoption of the selected accounting policies. TheBoard thereafter approves the selected accountingpolicies for adoption to ensure the true and fair viewof the state of the affairs of the company.

AUDIT COMMITTEE INVOLVEMENT IN REVIEWOF EXTERNAL AUDIT FUNCTIONThe audit committee reviews the following auditfunctions of the external audit:� scope of work and audit plan;� Management Letters issued by external auditors;� report on the annual audit of the company;� independence of the external auditor and any

potential conflicts of interest;� “Terms of Engagement” of the external auditor;

AUDIT COMMITTEE INVOLVEMENT IN THEREVIEW OF ANNUAL AND INTERIM FINANCIALRELEASESAs per the Corporate Governance guideline of theBSEC, the Audit Committee is required to reviewalong with the management, the quarterly and halfyearly and annual financial statements beforesubmission to the Board for approval. In compliance

with the BSEC’s guideline on Corporate Governance,the Audit Committee reviews the interim and annualfinancial releases whether audited and/or unauditedand places the same before the Board for approval.

AUDIT COMMITTEE INVOLVEMENT INCOMPLIANCE WITH LAWS AND REGULATIONSUCL being a part of the financial industry inBangladesh required to comply with applicable lawsand regulations. There are several regulatoryauthorities including the Central Bank who are therelated parties of the company’s operation andperformance. The Audit Committee monitors andensures the Board that the company complies with allthe applicable laws, rules and regulations of variousregulatory authorities.

ACCESS OF THE HEAD OF INTERNAL AUDIT TOTHE COMMITTEEThen head of internal control and compliance havedirect access to the Audit Committee.

INTERNAL CONTROL AND RISK MANAGEMENTInternal ControlThe guidelines on internal control & compliance givenby Bangladesh Bank recommend internal controlpractices for NBFIs to assist them in assessing theapplication of the principles and compliance with theprovisions with regard to internal control.The systems of internal control of the company aredesigned and operated to support the identification,evaluation and management of risks affecting thecompany. These include controls in relation to thefinancial reporting process and the preparation ofconsolidated accounts, but extend across all areas ofoperations. They are subject to continuous review ascircumstances change and new risks emerge.Key features of the systems of internal control are:� the risk management system described in the

section of risk management report;� written policies and procedures within our

businesses, which are detailed in policy manuals;� clearly defined lines of accountability and

delegation of authority;� minimization of operating risk by using

appropriate infrastructure, controls, systems andpeople throughout the businesses;

� business continuity planning, including preventiveand contingency measures, back-up capabilities;

� key policies employed in managing operating riskinvolve segregation of duties, transactionauthorization, monitoring, financial andmanagerial review and comprehensive reportingand analysis against approved standards andbudgets; and

� a treasury operating framework which establishespolicies and manages liquidity and financial risks.ALCO that monitor these activities andcompliance with the policies. Treasury policies,risk limits and monitoring procedures arereviewed regularly by the ManagementCommittee;


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Assurance on compliance with systems of internalcontrol and on their effectiveness is obtained throughregular management reviews, reviews of key financialcontrols, internal audit reviews and quality assurance,testing of certain aspects of the internal financialcontrol systems by the external auditors during thecourse of their statutory examinations and reports tothe Audit Committee by the external auditors.

INTERNAL AND EXTERNAL AUDITORSAuditing forms an integral part of corporategovernance at the Group. Both internal and externalauditors have a key role to play by providing anindependent assessment of our operations andinternal controls.

INTERNAL AUDITOur internal audit department comprises of a team ofindependent professionals headed by a CharteredAccountant Mr. Raihan Uddin Ahammad ACA reportsdirectly to the Audit Committee.Internal audit performs an independent and objectiveassurance and consulting function that is designed toadd value to our operations. Using a systematic anddisciplined approach, the Internal Audit teamevaluates and enhances the effectiveness of our riskmanagement, control and governance processes.Internal audit is responsible for carrying out periodicaudits. Its function also include independentassessment risk exposure of our various businessactivities, taking into account industry trends,strategic and organizational decisions, best practiceand regulatory matters. Based on the results of itsassessment, Internal Audit develops detailed annualaudit objectives, defining areas of audit concentrationand specifying resource requirements for approval bythe Audit Committee.Internal audit coordinates its operations with theactivities of the external auditor for maximum effect.

EXTERNAL AUDITOur statutory auditor is M/S Hoda Vasi Chowdhury &Co., Chartered Accountants.They are also the auditorof one of our subsidiary UniCap Securities Limited.Another subsidiary UniCap Investment Limited isaudited by S. F. Ahmed & Co., Chartered Accountants.

DIRECTORS RESPONSIBILITY TO ESTABLISHAPPROPRIATE SYSTEM OF INTERNAL CONTROLThe Board of Directors acknowledges the importanceof maintaining a sound system of internal control tosafeguard shareholders’ investments and theCompany’s assets. Guidance for Directors of PublicListed Companies, the Board is pleased to presentthe Statement on Internal Control of the Group. The Board affirms its overall responsibility for theGroup’s system of internal control and riskmanagement, and for reviewing the adequacy andintegrity of these systems. However, in view of theinherent limitations in any system, such system ofinternal control is designed to manage rather than toeliminate risks that may impede the achievement ofthe Company’s objectives. The system can therefore

only provide reasonable and not absolute assuranceagainst material misstatements, frauds or losses.

REVIEW THE ADEQUACY OF THE SYSTEM OFINTERNAL CONTROLThe system of internal control covers riskmanagement and financial, organizational,operational and compliance controls. The Boardconfirms that there is an on-going process ofidentifying, evaluating and managing significant risksby the management. This process has been put inplace for the year and is reviewed periodically by theBoard through its Audit Committee which issupported by the Internal Auditors.

MANAGEMENT AND MITIGATION OF THE RISKSDisclosure on risk management is covered in detailsin the risk management section of this report frompage 117 to 132. This risk management disclosurehas been made in line with best practices andpremised on the commitment of the Board ofDirectors to adhere to sound corporate governancestandards within the UCL Group. The report is aimedto provide relevant information to all stakeholders inan orderly and timely manner and thereby continue toboost the confidence of the market in UCL and itssubsidiaries. Year on year, we have continued tostrive at improving on the quality and scope of our riskmanagement practice and transparent disclosures.

ETHICS AND COMPLIANCEWe believe that a Code of Conduct and Businessethics provides a foundation for the stability andsustainable growth of UCL, and supports theCompany’s efforts in achieving its goals. UCL,therefore, encourages all Directors, Managementteam and all employees to conduct business andperform their duties in accordance with the Code ofConduct and ethical principles. UCL has its own codeof conduct and ethical principles. This annual reportcontains the ethical principles that we follow whiledischarging our duties.As governance and regulatory requirements in thefinancial industry continues unabated, financialinstitutions are coming under intense pressure toimplement good governance practices and managecompliance risk while pushing for improvements to thebottom-line. Compliance risk within the UCL FinancialGroup is defined as the risk of impairment to theorganization’s business model, reputation and financialcondition from failure to meet laws and regulations,internal policies and the expectations of stakeholders.The Group upholds the adoption and infusion of goodcorporate governance principles and best practicesas a basic tenet of running and growing its business.The compliance principles remain an important guidefor the Group as it continuously evolves to meet thegrowing demands of compliance best practices.

IntegrityThe UCL Financial Group along with its Directors andemployees: � act in good faith in order to win the trust of

customers.


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� value the maintenance of long-term relationshipsof trust with customers, local communities, andshareholders.

� fair in dealings and with competition.

Conflict of InterestUCL does not condone any form of conflict of interestbe it personal, financial or family interest that could inany way keep the individual from acting in the bestinterests of the company and which may compromisethe interest of company, its shareholders and clients.To this end, all employees are required to refrain fromany activity which may result in any conflict orpotential conflict of interest. Any actual or potentialconflict of interest must be reported to theManagement as soon as it is recognized.The Company has comprehensive procedures inplace to deal with any situation where a Director hasan actual or potential conflict of interest. Under theseprocedures members of the Board are required to:� consider each conflict situation separately on its

particular facts;� consider the conflict situation in conjunction with

the rest of their duties under the applicable rulesand regulations; and

� keep appropriate records and Board minutesdemonstrating any authorization granted by theBoard for such conflict and the scope of anyapprovals given.

DISCLOSURE OF STATEMENT OF ETHICALPRINCIPLES AND VALUESThe Code of ethics enhances the standard ofcorporate governance and promotes ethical conductwith a view to achieving the following objectives:� to establish a uniform ethical standard emphasizing

conduct free from conflicts of interest; and� to uphold the spirit of corporate responsibility and

accountability in Iine with the governing laws,regulations and guidelines.

The code of ethics and business conduct deal withamong others the following issues:� Compliance with laws and regulations� unacceptable payments giving or receiving gifts

protection of UCL assets proper accountingdealing with auditors

� unauthorized public statements conflict of Interest� use of inside information� UCL employee share trading policy

COMMUNICATION OF ETHICS AND BUSINESSPRACTICE TO THE EMPLOYEESUCL has in place a Code of Ethics and BusinessConduct applicable for all employees. The code ofethics and business conduct is communicated toevery employee in the induction training after joiningUCL. The Board and the Management confirms thatthe ethics and business principles are communicatedto employees to ensure the best ethical practicewithin the company.

BOARDS COMMITMENT TO ESTABLISHING HIGHLEVEL OF ETHICS AND COMPLIANCEThe Board believes that a Code of Conduct andBusiness Ethics provides a foundation for thestability and sustainable growth of UCL, andsupports the Company’s efforts in achieving itsgoals. Therefore, UCL’s Board is committed toestablish high level of ethics and compliance in theorganization to ensure safe and ethical businesspractice in the financial industry.

COMPLIANCE WITH RULES, REGULATIONS ANDLAWS The financial industry of Bangladesh is verycompetitive and highly regulated by severalregulatory authorities such as the central bank ofBangladesh, BSEC, RJSC, Stock Exchanges andthe National Board of Revenue etc. UCL FinancialGroup is in complaint to all the rules and regulationsas promulgated by the appropriate regulatoryauthorities from time to time. Detailed disclosure onEthics and Compliance has been covered in page103 of this report.

REMUNERATION COMMITTEEAs per the guideline of the Central Bank the Boardcan have only the following committees:� Audit Committee;� Executive Committee; and � Green Banking Committee.Therefore UCL have no remuneration committeecomprises of the Board Members. However, there isa HR and Compensation Committee for employees ofthe Company.

POLICY WITH REGARD TO REMUNERATION OFDIRECTORSExcept the Managing Director & CEO, none of theDirector holds any position of profit and does notreceive any remuneration other than the fees forattending the Board/Committee meetings. As per thecentral bank’s guideline, maximum amount of Tk.5,000 can be paid to each Director for attending eachBoard/Committee meeting.

POLICY WITH REGARD TO REMUNERATION OFTHE MANAGING DIRECTOR AND CEOThe Board appoints the CEO of the Companyapproved by the shereholders in the General Meeting.Concent to the appointment and other terms includingremuneration is required from the Central Bank.

REMUNERATION POLICY OF THE SENIORMANAGEMENTThe Board reserves the right to recruit and decidethe remuneration and other benefit of the seniormanagement in the positions of General Managerand above. The CEO has been given with theauthority to recruit and decide remuneration of themid and lower level management in line with theindustry best practice.


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Remuneration of the DirectorsSl Status with Status with Meeting no. Name the Company the Committee Attendance Fee1 Chowdhury Tanzim Karim Chairman Chairman 12/12 60,0002 Mr. M. Faizur Rahman Director Member 12/12 60,0003 Mr. Nasir A. Choudhury Director Member 12/12 60,0004 Mr. Nadeem A. Chaudhury Director Member 9/12 45,0005 Mrs. Tajrina Sikder Director Member 6/12 30,0006 Kazi Golam Samiur Rahman Director Member 12/12 60,0007 Mr. M. A. Salam Director Member 3/12 15,0008 Mrs. Rumana Sharif Director Member 12/12 60,0009 Mrs. Meherunnesa Haque Director Member 8/12 40,00010 Kazi Russel Mahbub Director Member 2/12 10,00011 Mr. N. H. Khan Independent Director Member 11/12 55,00012 Mr. Ziaul Hasan Siddiqui Independent Director Member 11/12 55,000

Remuneration of the Audit Committee1 Mr. N.H. Khan Independent Director Chairman 9/9 45,0002 Mr. M. Faizur Rahman Director Member 9/9 45,0003 Mr. Nadeem A. Chaudhury Director Member 7/9 35,0004 Mrs. Tajrina Sikder Director Member 7/9 35,0005 Mr. Ziaul Hasan Siddiqui Independent Director Member 8/9 40,000

Remuneration of the Executive Committee1 Mr. Nasir A. Choudhury Director Chairman 9/10 45,0002 Chowdhury Tanzim Karim Chairman Member 10/10 50,0003 Mr. M. Faizur Rahman Director Member 9/10 45,0004 Kazi Golam Samiur Rahman Director Member 9/10 45,0005 Mrs. Rumana Sharif Director Member 10/10 50,000

COMPOSITION OF THE HR & COMPENSATIONCOMMITTEE AND MEETINGS HELDThe compensation committee comprises of 4members headed by the CEO. Other members of thecommittee are Mr. Abul Munim Khan, Executive VicePresident and Head of Business, Mr. Tauhidul AshrafFCS, Senior Vice President and Company Secretaryand Mr. A.N.M. Golam Shabbir, Vice President andHead of Admin and HR. The committee sits once inevery three months. In 2013, the committee held 4meetings in person.

CHARTER OF THE MANAGEMENTCOMPENSATION COMMITTEE � recommend the requirements of management

personnel for different sections of the company; � interview for selection; � recruitment of management cadre;� take disciplinary action against employees, if

situation demands;� evaluate the performance of employees annually;

� evaluate effectiveness of the HR Policy,� assess the workload, strength and weakness of

the officers and executives; and� recommend the Board any change in the HR &

Compensation policy for approval.

ACTIVITIES OF THE MANAGEMENTCOMPENSATION COMMITTEEThe management compensation committee activitiesduring the year under review as under:� reviewed the existing pay scale to compare

UCL’s pay scale with industry benchmark;� proposed and recommended the Board for

revision of old pay scale;� introduced a new pay scale in line with industry

benchmark;� significant changes made in the company’s

service rules for employees; and� conducted induction training for the newly

recruited employees of the company.


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in the industry and in the society where it operates. Inorder to sustain this element of leadership, strongemphasis is placed on developing employees through in-house training programmes as well as by supporting andorganizing educational opportunities outside UCL.As a forward-looking enterprise, UCL strives to continuallystimulate its employees to uphold the state of the art intheir respective fields. In order to inspire trust and createadded customer value, great emphasis is placed onmaintaining employees’ knowledge and skills throughtraining, development and informative feedback. As inprevious years, UCL placed great emphasis on training itsmanagers and developing their leadership qualities.Moreover, the annual meeting with employees, play acentral role in making sure that the strategy and objectivesfor each year are clearly communicated and executed. it isvitally important that those who drive company’s successare fully informed of its vision, strategy, and focus for theyear and know what kind of contribution is expected ofthem as individuals in order to achieve these.

SALARIES AND BENEFITSIn addition to a monthly salary, bonuses are paid tothose key employees and management who directlyaffect company’s performance. Bonus payments aresubject to the individual’s performance as well ascompany’s profits.

COMMUNICATIONUCL places great emphasis on keeping employeesinformed about UCL’s vision, strategy and focus.Moreover, the company provides regular communicationto its employees with information regarding currentnews, events and achievements.The open flow of information within UCL is important inorder to maintain efficient operations. Employeeengagement is facilitated through corporate intranet.Furthermore, the CEO and senior executives visitsdifferent offices of UCL which opens face-to-face dialoguebetween employees and senior management. Throughthese channels UCL supports a flat organizationalstructure and encourages collaboration throughout UCL.

ESTABLISHING AN EFFECTIVE ANTI FRAUD PROGRAMAnti-fraud ProgramOur anti-fraud program outlines UCL’s attitude to, andposition on, fraud and sets out responsibilities for itsdetection and prevention. It establishes guidelines forpreventing, detecting and dealing with fraud. It gives aclear message to employees and stakeholders aboutconduct that will not be tolerated by UCL.

FUNDAMENTAL ELEMENTS OF AN EFFECTIVEANTI-FRAUD PROGRAM� Creating and maintaining a culture of honesty;� Evaluating the risk of fraud and implementing the

processes, procedures and controls necessary tomitigate those risks; and

� Developing and appropriate oversight process.

COMMON EXAMPLE OF FRAUD AND FRAUDULENTBEHAVIOR� Rank personal gain over corporate interests;� Misappropriation of assets, embezzlement and theft;

REMUNERATION OF THE MANAGING DIRECTORAND CEOThe total remuneration of the CEO was BDT 7,080,000 forthe year under review that includes all benefits asapproved by the central bank of Bangladesh.

REMUNERATION OF THE SENIOR MANAGEMENTEmployees in the rank of Assistant Vice President andabove are considered as the senior management. In2013, total senior management employees were 11 innumber with a total remuneration of BDT 14,997,369.

HUMAN CAPITALThe talented and highly motivated people who make upour workforce are key to our blueprint for building asustainable and successful future. UCL strives tostrengthen our reputation as a quality employer in themarkets we do business.

RECRUITMENTA great part of success in the financial services industrydepends more than anything else, on the know-how,experience, talent, and commitment of human capital.For UCL to continue to succeed, the company must beable to attract, develop and retain qualified people.UCL’s employees should be able to benefit from itsstrong business principles, its fast-moving andentrepreneurial spirit, and the broad opportunity forindividual and team success.

COMPETITIVE COMPENSATION AND TOTALREWARDSAt the heart of an engaged workforce is a flexible,competitive and meaningful rewards program. Ourprogram is based on an understanding of whatemployees’ value. It recognizes that flexibility and choiceare the best response to meet our employees’ diverseneeds. Our comprehensive approach rewardsemployees for their skills and contributions by offeringemployees competitive compensation, benefits and apositive work environment.

GROWTH THROUGH TRAINING AND DEVELOPMENTWe aim to create a learning culture and provideopportunities for our employees to fully apply theirknowledge and skills in the service of the company. Wewill help our employees to continue their development inthe interests of the company and its objectives.Employees expect ongoing career and learningopportunities to be a part of their total rewards programand our commitment to continuous employee growth anddevelopment helps ensure we meet the current and futureneeds of both our people and our clients. Employees alsohave access to the training resources they need to learnand grow through our in house learning opportunities.

CAREERS AND DEVELOPMENTSThe people of UCL are part of a culture of integrity andleadership, which they have an active role in creating.They form a community in which people’s potential andtalents are cultivated with the aim of establishing lifelongcareers. High-quality employees are trained andfostered, with the goal of developing tomorrow’s leaders.Leadership is certainly among the strongest elementsfostered by UCL seeking to demonstrate leadership both


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� Payment or receipt of bribes, kickbacks or otherinappropriate payments;

� Participation in fraudulent transactions;� Deceptive, misleading or false statements about

corporate transactions;� Forgery or alteration of accounting record or vouchers;� Failing to keep confidential trade secrets of the

Company;� Non-disclosure of material information needed for

an informed investment decision; and� Other fraud behaviors causing loss to the Company

interests.

UCL’S FOCUS ON ANTI FRAUD PROGRAMUCL is committed to creating a culture of honesty andhigh ethics inside out of the company to clearlycommunicate acceptable behavior and expectations ofeach employee. Such a culture is rooted in a strong setof core values that provides the foundation foremployees as to how UCL conducts itsbusiness. It also allows the company todevelop an ethical framework that covers1. Fraudulent financialreporting, 2.Misappropriation ofassets, and 3.corruption as well asother issues.Directors andofficers set the “toneat the top” for ethicalbehavior within thecompany. Managementshows its employeesthrough words andactions thatdishonest orunethical behaviorwill not be tolerated,even if the result ofthe action benefits thecompany. All employeesare treated equally,regardless of their position.Anti-fraud program aim to outline UCL’scommitment to:� Take appropriate measures to prevent and

deter fraud;� Introduce and maintain necessary procedures to

detect fraud;� Encourage employees to report any suspicions

action;� Investigate all instances of suspected fraud;� Take appropriate disciplinary, civil or criminal

proceedings;� Report all suspected fraud to the appropriate

authorities.

EMPLOYEES CODE OF CONDUCTAll the employees of ULC have been given with the codeof conduct during his induction to the company. The

employees are instructed to follow the ethical principlesto add value to the ethical practice of the company.

PREVENTION AND CONTROL OF FRAUDAll Head of the Departments of UCL advocates to thesubordinates of the respective department to developa corporate culture of honesty and integrity. Besides itis the duty of each departmental head to assess therisk of fraud arising in the normal course of operationsof his department and establishes controls andprocedures designed to eliminate the likelihood offraud. The senior management of UCL receives,investigates, reports and recommends a remedialcourse of action in respect to suspected or voicedconcerns of fraud or fraudulent behavior.UCL promotes a regular corporate culture of honestyand integrity through the following actions andactivities:� Top Management lead by example in complying

with this Anti-Fraud Program;� Regularly communicate the Company’s

message of honesty and integrity withemployees of the Company through theEmployees Code of Conduct and other

written and verbalpresentations of the

principles underlying thisAnti-Fraud Program;� Conductperiodic meetings toensure employeesattend trainings

regarding businessethics and the related laws

and regulations;� Notify all director indirect interestparties, includingexternal parties(customers, suppliers,supervision authorities

and shareholders)regarding this Anti-Fraud

Program and the obligation ofthe employees to comply

therewith;�Notify employees and external parties of the

opportunity and procedures for reporting wrongdoings and dishonest behavior;

� In connection with the Company’s risk managementassessment process, UCL Management identifyand assess the importance and possibility of fraudrisk at entity level, in each business operationallevel and at all significant accounts levels. Theassessment should include a report disclosing anyirregularities in the Company’s financial reports,incidents involving misappropriation of companyassets, improper income or expenditures and afraud risk assessment in respect of seniormanagement of the Company;

� Periodic reports issued by the Head of eachDepartment to the ICC Department. ICCDepartment then issue to the Audit Committeeregarding the operations of this Anti-FraudProgram within each Department;


Service and Fairness

Promoting environmental sustainability

Setting an example in corporate social responsibility

Providing ethical leadership

Communication and Transparency

Determining information flows

Communicating with all stakeholders Reporting to

shareholders and others

Accomplishment and Measurement

Overseeing Management

Selecting corporate performance measures

Evaluating the Board, individual Directors and Senior Management

Empowerment and Accountability

Delegating authority

Allocating responsibilities

Establishing effective accountability mechanisms

Continuous Learning and Growth

Promoting a culture of innovation and change

Developing executives and employees

Leadership and Stewardship

Ensuring strategic direction and planning

Planning for Succession Overseeing risk management and internal Control

Principle-BasedGovernance

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� Management establishes control procedures toreduce the potential occurrence of fraud throughprotective approval, authorization and auditchecks, segregation of duties, periodiccompliance reviews; and

� Management performs customary backgroundchecks (education, work experience and criminalrecords) for individuals being considered foremployment or for promotion to positions of trust.Formal written documents for background checksshall be retained and filed in employee’s record.

CREATING POSITIVE WORK ENVIRONMENTImportance of positive work environment is beyondexplanation. In absence of a positive workenvironment, there are ample opportunities foremployee morale, which can affect an employee’sattitude about committing fraudulent activities againstthe company’s interest. UCL recognizes theimportance of a positive work environment. TheBoard delegated the authority to the top managementof the company to ensuring a positive workenvironment with a view to minimizing the risk ofprobable fraud. The CEO conducts a regular monthlymeeting with all the employees where the floor isopen for all to speak out and report any irregularitiesdirectly to the CEO. The management also discusson different issues regarding company’s workingenvironment in the meeting.

OVERSIGHT AND RESPONSIBILITIES OFESTABLISHING ANTI FRAUD MEASURESThe Internal Control and Compliance (ICC)Department is primary responsible for preventing,monitoring and rectifying fraud and potentiallyfraudulent behavior. The Head of ICC is independentof the management with direct reporting to the AuditCommittee. The Internal Audit Department graduallyestablishing and regularly monitoring procedures andcontrols designed to assess, prevent and remediatefraud and fraudulent behavior. If necessary, all thedepartmental heads will report regarding theimplementation of this Anti-Fraud Policy to the ICCDepartment, which will then be reviewed andsummary of findings will be reported to the AuditCommittee depending the nature of the fraud.

MITIGATING FRAUD RISKSOnce risk areas are identified by management, UCLManagement evaluates the adequacy of existinginternal control activities and determines if furthercontrols or changes to existing controls are requiredto reduce or eliminate the risk. Although there maybe high risk fraud indicators in certain instances,other compensating measures may exist to mitigatethe weakness in controls. It may be possible toreduce or eliminate certain fraud risks by makingchanges to the entity’s activities and processes.

HOT LINE REPORTING OF FRAUDULENTBEHAVIOR AND/OR SUSPICIOUS ACTIVITIESThe Internal Control and Compliance (ICC)Department is the focal point to report any type offraudulent behavior or suspicious activity within theorganization. The ICC Department maintains reliablecommunications channels (Direct telephone and e-mail) allowing for the anonymous reporting of actual

or suspected instances of fraud or fraudulentbehavior committed by any employees. Complaintsand concerns relating to instances of actual orsuspected instances of fraud or fraudulent behavioror questionable accounting, internal control orauditing matters shall be reportable through theestablished channels of communications and may bereported on an anonymous basis.For the people external to the company has also beengiven with the opportunity to report any type offraudulent/suspicious activities through the company’swebsite. In this case the focal contact person is theCompany Secretary. Email address of the CompanySecretary along with direct telephone number hasbeen published in the company’s website.

WHISTLEBLOWER SYSTEMEmployees are usually the first to notice if Company’sprocedures are not followed. All our employees havean obligation to report any suspicion or knowledge ofbreaches of the Company’s policies to the head ofInternal Control & Compliance. The reports are thenpassed on to the Audit Committee and the Board ofDirectors. UCL values a free flow of information. Toensure that critical information is not withheld, allreports and questions received through thewhistleblower system are treated confidentially.UCL�recognizes that the decision to report a concernabout suspected fraud or fraudulent behavior couldbe a difficult. Employees are often the first to realizethat there is something seriously wrong within theCompany. However, they may not express theirconcerns because they feel that speaking up wouldbe disloyal to their colleagues or to the Company.They may also fear revenges, harassment orvictimization. In these circumstances, it may beeasier to ignore the concern rather than report whatmay just be a suspicion. UCL encourages andenables employees, staff and external parties to raiseserious concerns within the Company rather thanoverlooking a problem or blowing the whistle to theauthorities including the Central Bank.UCL will protect employees and ensure that they aretreated with respect, and we do not accept reprisalsagainst such employees. Individuals are encouragedto put their names to allegations. Concerns expressedanonymously are much less powerful, but they will beconsidered and investigated at the discretion of UCL.

COMMUNICATION TO SHAREHOLDERS ANDSTAKEHOLDERSThe Company reports including quarterly, half-yearlyand annual reports and accounts were sent toshareholders in a timely and accurate manner, andmeet with shareholders in the AGM where they areencouraged to ask questions about the performance,strategy and future prospect of the Company. TheStakeholders have access to company informationthrough the company’s website and postalcorrespondence. UCL complied with the requirementsfor reporting and disclosure of information to theShareholders and Stakeholders during the year underreview. The Board reports included the nature andextent of its social, ethical, safety, health andenvironmental policies and practices. The outcome ofevery general meeting is announced to Shareholdersand adopted by the Board of Directors.


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ANNUAL GENERAL MEETINGUnder Companies act law, the AGM must be heldwithin nine months from the end of the financial year.Notice of an AGM, including agenda items andproposals submitted by the Board must be published atleast 14 days prior to the meeting.Shareholders only qualify for voting at an AGM if they areentered into the depository register with voting rights onrecord date fixed no later than 14 days prior to the AGM.

Convocation of Shareholder MeetingsAn AGM is convened by the Board with 14 days’ clearnotice for ordinary/extra-ordinary resolutions. Twenty onedays notice is required for passing special resolution.

Request to Convene a Meeting by the shareholdersShareholders holding shares not less than one-tenth ofthe issued share capital of the company have the rightto call an extra-ordinary general meeting and requestfor a specific item be placed on the agenda and votedupon at the meeting. The Director shall, within 21 daysfrom the date of deposit of the requisition for meetingby the shareholders, proceed duly to call ashareholders’ meeting.

Statutory QuorumsThe AGM may, in principle, pass resolutions withoutregard to the number of shareholders present at themeeting or represented by proxy. Resolutions andelections generally require the approval of a majority ofthe votes represented at the meeting, except as otherwiseprovided by mandatory provisions of law or by the AoA.Shareholders’ resolutions that require a vote by amajority of the votes represented include:� transaction of ordinary business carried out in an

AGM;� increase of paid up capital; consolidation or

subdivision of shares; cancellation of unissuedshares;

� a consensus of at least two thirds of the votesrepresented is required for resolutions include:

� change provisions of the object clause;� change the name of the company or alter its AoA;� reduce share capital;� make reserved capital;� make Director’s liability unlimited; remove auditor

before expiry of term; on court winding up;� on voluntary winding up;

Notices of Shareholders MeetingNotices to shareholders are made by publication in thedaily newspapers. The Board may designate furthermeans of communication for publishing notices toshareholders. Notices required under the listing rules ispublished in two widely circulated newspapers in Englishand Bangla and sent to the stock exchanges and BSEC.

Timely and Balanced DisclosureThe Board has an established process to ensureaccountability at a senior executive level for compliancewith the continuous disclosure obligations of BangladeshBank, BSEC and listing rules. Executive management isrequired to communicate all matters of a material nature

and which may require disclosure to regulators, to theChairman, CEO or the Company Secretary.

The Rights of ShareholdersUCL promotes effective communication with theCompany’s shareholders and encouragesshareholder participation at Annual GeneralMeetings. UCL communicants with the shareholdersthrough AGM, EGM, the Annual Report andCompany’s website. All of the Company’sannouncements to the market may be accessedthrough the Company’s website.Shareholders are provided with the opportunity toquestion the Board concerning the operation of theCompany at the Annual General Meeting. They arealso afforded the opportunity to question the Company’sauditors concerning matters related to the audit of theCompany’s financial statements at that meeting.

CONTRIBUTION TO ENVIRONMENT ANDSOCIETYA natural and clean environment, economical use ofresources and respect for people’s health and safetyall these are getting increasing importance. Inaccordance with this, UCL is continuously workingtowards reducing consumption of energy, eliminationof use of hazardous substances from its processesand minimizing waste generation. The emphasis is onminimizing paper transactions to the extent possible.One of the key targets for financing manufacturingcompanies is to reduce their carbon footprint.The focus is on developing environmental portfolio.UCL is financing as demonstrated its responsibility asa socially responsible corporate.The central bank has taken rigorous steps toencourage green banking in Bangladesh through theissuance of guidelines on green banking andEnvironmental Risk Management (ERM). It isencouraging banks and financial institutions inminimizing paper transactions and installing solarpower system, opening up refinance line for solarenergy, bio-gas and effluent treatment plant (ETP) atreduced interest rates. The central bank introducedrefinancing scheme for financing solar energy, biogasand effluent treatment plant (ETP) at only 5 percentinterest rate.UCL is committed to doing better for our clients, ourinvestors, our employees and our communitiesthrough a focused approach to corporateresponsibility.

THE DISCLOSURE COMMITTEEThe disclosure committee consists of the ChiefExecutive officer, the CFO and Company Secretaryand the Head of ICC. The function of the disclosurecommittee is to meet as and when required in orderto assure compliance with the Disclosure andTransparency requirements and the Listing Rules,and to ensure that the routes of communicationbetween UCL members, the disclosure committee,the company secretarial office and investor relationsare clear so that the company is able to comply fullywith its continuing obligations under the Disclosurerequirements.


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OVERVIEWs governance and regulatory requirements inthe financial industry continues unabated,

financial institutions are coming under intensepressure to implement good governance practicesand manage compliance risk while pushing forimprovements to the bottom-line. Compliance riskwithin the UCL Financial Group is defined as the riskof impairment to the organization’s business model,reputation and financial condition from failure to meetlaws and regulations, internal policies and theexpectations of stakeholders.The Group upholds the adoption and infusion of goodcorporate governance principles and best practicesas a basic tenet of running and growing its business.The compliance principles remain an important guidefor the Group as it continuously evolves to meet thegrowing demands of compliance best practices.

COMPLIANCE RISK MANAGEMENTThe main aim of compliance risk management is topreserve the Group’s reputation so that ourcompetitive standing, reputation, brand and sharevalue are not only maintained, but also enhanced.With a vision to be a financial group with industryleading compliance culture, the following are theGroup’s compliance objectives:� to be the most compliant financial group;� to enable business growth and compliance;� to ensure zero-tolerance for regulatory breaches;

and� to minimise operational losses.To achieve these objectives, the Group’s underlyingmission is to effectively measure and manage thecompliance risk of the Group to meet theexpectations of all stakeholders. Providing thefoundation for this aspiration is the GroupCompliance Framework, from which the buildingblocks of the compliance functions are shaped.

ETHICAL & COMPLIANCE STATEMENTCommitment to meet the growing demand of compliance

COMPLIANCE GOVERNANCEAt the apex of Compliance is the Board, whichoversees and provides strategic direction forcompliance in the Group. The Risk ManagementCommittee (“RMC”) is the management committeewherein the Group’s state of compliance with laws,regulations, internal policies and procedures isreported.

The Compliance Division is responsible fordeveloping and maintaining the Group ComplianceFramework. This forms the foundation from whichpolicies and procedures are designed to managecompliance risk.

VISION

Be an integrated

financial group with industry

leadingcompliance culture.

MISSION

Effectively measure and manage the

compliance risk of the UCL

Financial Group to meet the

expectations of all stakehold-

ers.

VALUE ADD

InfusingBest

Practices

ComplianceRisk

Mitigation

ComplianceAssurance

EnablingCompliance-Education &Awareness

KEY FUNCTIONS

Enabling and ensuring compliance with the relevant laws and regulations;

Enabling and ensuring compliance with internal policies, procedures and controls;

Ensuring reputational risk is being managed effectively through adequate escalation and

update process;

Working with business and functional units to identify, address and resolve regulatory and

internal control failures;

Collaborating with business and functional units to enhance compliance awareness and

competencies;

Working with business and functional units to embed a compliance culture within the Group;

Anticipating and planning for changes in regulations.


A


SCOPE OF COMPLIANCEThe scope of compliance covers the areas of credit,operations, anti-money laundering and terroristfinancing (AML/TF), treasury, insurance, financingoperations and investment management, includingsubsidiaries. The Internal Control team was set-up toassist in managing internal control compliance and riskissues. The team also assists in the identification ofissues at ground level that may affect compliance andthe escalation of the same. This also creates expertiseat operational level for compliance processes.Division and Department Heads are continuouslyengaged to ensure they continue to inculcatecompliance awareness and discharge their dutieseffectively to ensure their respective units complywith regulatory and internal requirements.

COMPLIANCE LIFE CYCLECompliance activities are closely intertwined withcompliance developments on the global front,existing legal & regulatory requirements as well asthe Group’s policies and procedures. The followingdiagram illustrates the compliance lifestyle andgeneral approach taken by the Group in managingcompliance risk.The approach is derived from various compliancesources such as new regulations, sound practices,reports from relevant stakeholders as well as internalreviews conducted by the Compliance Division itself.

Board

Risk ManagementCommittee

ComplianceDivision

COMPLIANCE CHALLENGESAgainst the backdrop of increasing regulatoryrequirements and pervasive threat of financial crimeand fraud, traditional approaches to oversight are nolonger adequate. Compliance initiatives are thusanchored upon providing a value proposition to ourstakeholders.

KEY INITIATIVESThe year 2012 saw the Group introducing innovativeservices and new business models to meet the evergrowing demands of customers and pressure to growbusiness. The strategies adopted to provide a valueproposition to our stakeholders are as below:

COMPLIANCE SOURCES

� Laws and regulations� Group’s policies and procedures

� Sound industry practices� Internal compliance review

� Internal audit reports� Group risk assessment

� Regulators’ reports or dialogues

CHALLENGES

□ Recalibrate functions to focus on compliance;□ Focus resources on value-adding initiatives;

□ Re-validate best practices periodically;□ Use expertise to enhance knowledge and

awareness in the Group;□ Continue to build good and valuable controls

to avoid operational losses;□ Provide meaningful compliance assurance;□ Continuous surveillance on key risk areas;

□ Strive to improve processes to enable compliance.

COMPLIANCE VALUE

□ Infusing Best Pratices□ Education and Awareness□ Compliance Risk Mitigation

□ Compliance Assurance□ Enabling Compliance

Rigorous monitoring to ensure effective implementation

Prevent noncompliance

incident

Improve policies, procedures and internal controls

Formulate compliance tools

Gap analysis to determine statusof compliance

Monitoring of rectification measures

Recommendations to address

compliance issues

Identification ofcompliance scope

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Infusing Best PracticesA comprehensive set of policies and procedures thatinstitutionalize right from wrong is integral inpromoting a sound compliance culture. It isimperative that the Group develop overarchingcompliance policies along with procedures on how tocomply with specific regulations. Among the keyCompliance Policies emplaced are:� Compliance Framework� AML & TF Programme� Incident Reporting, Management and

Escalation Process� Core Values� Code of Ethics and Conduct� Whistleblower Policy� Insider Trading PolicyContinuous revisions are made to the CompliancePolicies to ensure the Group keeps abreast ofregulations, industry best practices and the changesevolving within the Group.

Compliance AssuranceThe Group’s state of compliance is provided for,through surveillance programmes. The respectiveBoards and Senior Management are apprised of thestate of compliance through the submission of theCompliance Report. The Compliance Reportencompasses compliance with statutory orregulatory requirements, compliance with internalpolicies and procedures, operational lossesincurred, AML/TF measures, as well as root causeand trend analyses.In addition, any incident affecting the reputation ofthe Group is escalated to the respective authority.This escalation process ensures adequate oversightand guidance is provided by the Board in managingreputational risk.

Compliance Risk MitigationCompliance risk mitigation is a key process in theentire Incident Reporting and ManagementProcess. Incidence reports are duly reviewed todetect trends or commonalities so that losses andincidences of non-compliance, negligence or fraudcan be managed proactively and minimizedaccordingly. Where applicable, preventive orcorrective actions to be taken by staff aredisseminated.The Compliance Division continues to play an activerole in integrating sound compliance riskmanagement into the overall risk managementstrategy. Particular attention is paid to new businessmodels or new processes that are introduced for thefirst time, either to the Group or to industry, to ensurethat good internal controls and processes are inbuiltto avoid operational losses.

Enabling ComplianceApart from working with respective business andoperating units to ensure compliance with relevant

laws and regulations, enabling compliance isanother key function of Compliance. This is done bycarrying out root cause analyses as well aspreventive and corrective action recommendations.The analyses and recommendations includeprocess or procedural changes that not only supportcompliance objectives but also enhance productivityand efficiency.The Compliance Division embarked on issuingregulatory alerts on an as-and-when basis to enableand assist business and operating units to respond toregulatory requirements in a speedy manner. Whereissues are related to regulatory compliancereminders are issued to relevant business oroperating units to ensure that the Group providesnecessary data and accurate information to them.

Education and AwarenessEffective knowledge management is a key challengein ensuring that staff of the Group are aware of therisk issues surrounding their activities and are able tomanage them accordingly in the course of carryingout their duties. To this end, Compliance Division hasa plan to organize fraud awareness programs with anaim to increase awareness amongst staff on thevarious modus operandi of frauds and scams. Seniorrepresentatives from Bangladesh Bank will be invitedto speak at our program and expected that they willshare interesting anecdotes and provided insightfulperspectives on fraud.With the ultimate aim of embedding a complianceculture throughout the Group, the ComplianceDivision works with Internal Audit and RiskManagement Department to carry out overallbriefings. These briefings involve sharing commonfindings and experiences as well as advising on howto improve compliance and contain operational riskwithin the branches.Continuous improvements would be made throughtraining to ensure compliance policies are understoodand practised by all staff.Mindful that regulatory requirements and soundpractices continue to increase and grow incomplexity, education and creation of awarenessremain a primary focus for the Group.

VALUE OF COMPLIANCEThe five-pronged strategy as detailed in the previouspages ultimately aims to protect the UCL brandvalue by achieving compliance excellence.Fundamental to achieving compliance excellence isthe process of “making compliance smart” that isattained as follows:As business models change, new technologiesemerge and regulatory requirements increaseamidst the intense focus on operational efficienciesand the consolidation of the financial sector, theGroup has never been more exposed to such amyriad of risks, not to mention larger sets of rulesand regulations. Thus, “making compliance smart”becomes a critical determining factor in our journeytowards compliance excellence.


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In this regard, the Board and senior managementwithin each respective entity have extended theirfullest support and cooperation in moving complianceto the front-line. They have done this by establishingthe tone from the top, which is quite simply, tocomply with all laws and regulations and employethical behavior. All staff are aware that the Boardand Management takes an uncompromising stance ifsuch trust is breached.The Group’s focus on root cause analysis andpreventive & corrective action to generate apositive presence has yielded greatercompliance understanding. Growing intandem with the understanding is thecooperation between the business andoperating units and the ComplianceDivision with regard to managingcompliance risk. The Compliancedepartment is increasinglybecoming a point-of referenceand advisor for key strategicinitiatives that the Groupembarks on.The effective penetration of a proper complianceculture into all business and operating units hasenhanced our public domain presence andfacilitated early detection of compliance risk. Thishas resulted in quicker compliance risk mitigationactions being undertaken which in turn translate intoa reduction of operational losses and a higher levelof operational efficiency.The Group recognizes that the strengthening of acompliance culture is the foundation for goodcompliance practices and it is imperative that thisbecomes an intrinsic trait of the Group. Not only it

preserve the Group’s integrity and reputation, it willalso enhance our corporate image as a respectableorganization and ultimately, increase brand andshareholder value.

ANTI-MONEY LAUNDERING AND TERRORISTFINANCING (AML/TF)As one of the forerunners of the Government andBangladesh Bank initiatives to prevent the financialsystem from being used for illicit and launderingactivities, the Group has established the following

processes and infrastructure:� accountability of each level of employee for

anti-money laundering detection andprevention;

� education and training inpreventing and detecting money

laundering; and� extensive procedures covering

customer identification, accountopening, record keeping and

recognition and reporting ofsuspicious transactions.

The AML/TF measures continue to focus on ensuringthe effectiveness of reporting by all business andoperating units to Compliance Division.AML/TF self-compliance assessments continue toprovide an avenue for the Compliance Division togauge the understanding of business and operatingunits on AML/TF and act as tools to enhance futuremeasures. In addition, various learning initiatives areoffing to raise awareness among employees on theimportant role that they play in ensuring the Groupdoes not become a conduit for money laundering.


Enhance Publicdomain Presence

Moving Compliance to theFront-Line

Focus on root cause analysesand preventive & corrective action

Generating Positive Presence

MakingCompliance Smart

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Professional Certificate onCOMPLIANCE OF CONDITIONS ON CORPORATE GOVERNANCE

Established : 1958

S. F. AHMED & COChartered Accountants

House 25, Road 13ABlock D, BananiDhaka 1213, Bangladesh

Phones: (880-2) 989-4258 & 989-4346Fax: 882-5153E-mails: (i) [email protected] (ii) [email protected]

House 25, Road 13A, Block DBanani, Dhaka 1213, BangladeshDated, 10 March 2014

Certificate on the Compliance with Corporate Governance of Union Capital Limited


We have examined the compliance with Corporate Governance of Union Capital Limited for the year ended 31 December 2013 as stipulated in notification no. SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012, as amended vide notification dated 21 July 2013 and 18 August 2013 of Bangladesh Securities and Exchange Commission.

The compliance with Corporate Governance is the responsibility of the management of the Company. Our examination was limited to the procedures and implementation thereof as adopted by the Company for ensuring the compliance with Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above-mentioned notification.

We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of Company.



n order to enhance corporate governance in the interest of investors and the capital market, BangladeshSecurities and Exchange Commission (BSEC) has issued a Notification No. SEC/CMRRCD/2006-158/

134/ Admin/44 dated 07 August 2012 (as amended) containing certain conditions to be complied with by thelisted companies. Given below is the compliance status on the BSEC’s conditions by Union Capital Limited:

Report on Compliance of

BSEC’s Notification on Corporate Governance

Compliance statusNot

No. Conditions Complied complied Remarks

1 BOARD OF DIRECTORS1.1 Board size

The members of the Board shall not be less than 5 (five) & morethan 20 (twenty) �

1.2 Independent Directors1.2 (i) At least one fifth (1/5) of the Board Members shall be

Independent Directors �1.2 (ii) Independent Directors who:

a. do not hold any share or hold less than one percent (1%) shares of the total paid-up shares of the company �

b. are not a sponsor and do not have family relationship with any sponsor/Director/Shareholder who holds 1% or more shares of total paid-up shares of the company, and his/her family members should not hold mentioned shares of the company �

c. do not have any other relationship, whether pecuniary or otherwise, with the company or its subsidiary/associated companies �

d. are not a member, Director or officer of any stock exchange �e. are not a shareholder, Director or officer of any member of stock

exchange or an intermediary of the capital market �f. were not be a partner/executive during preceding 3 years of any

statutory audit firm �g. were not be an Independent Director in more than 3 listed companies �h. have not been convicted by a court of competent jurisdiction as a

defaulter in payment of any loan to a bank or a NBFI � i. have not been convicted for a criminal offense involving moral turpitude �

1.2 (iii) Independent Directors shall be appointed by the Board of Directors and approved by the shareholders in the Annual General Meeting �

1.2 (iv) The post of Independent Directors can not remain vacant for more than 90 days �

1.2 (v) The Board shall lay down a code of conduct of all Board members and annual compliance of the code to be recorded �

1.2 (vi) The tenure of office of an Independent Director shall be appointed for a period of 3 years and can be extended for 1 more term only �

1.3 (i) Independent Director shall be a knowledgeable individual with integrity who is able to ensure compliance and can make meaningful contribution to business �

1.3 (ii) He/she can be a business leader/corporate leader/bureaucrat/university teacher with economics or business studies or law background/professionals like CA, CMA or CS, must have at least 12 years of corporate management/professional experiences �

1.3 (iii) In special cases the above qualifications may be relaxed subject to prior approval �

1.4 Chairman and CEO will be different individuals, The BOD shouldclearly define the role and responsibilities of the Chairman and CEO �

I




1.5 The Directors' Report to Shareholders shall include:1.5 (i) Industry outlook and possible future development in the industry �1.5 (ii) Segment-wise or product-wise performance �1.5 (iii) Risk & Concerns �1.5 (iv) A discussion on cost of goods sold, gross profit margin and net

profit margin �1.5 (v) Discussion on continuity of any Extra-ordinary gains or loss �1.5 (vi) Basis of related party transactions- a statement of all related party

transactions should be disclosed in annual report �1.5 (vii) Utilization of proceeds from public issues, rights issues and/or

through any others instruments �1.5 (viii) An explantation if financial results deteriorate after the company

goes for Initial Public Offering (IPO), Rights Offer, Direct Listing etc. Not applicable1.5 (ix) If significant variance occurs between quarterly financial

performance and annual financial statements the management shall explain about the variances on their annual report �

1.5 (x) Remuneration to directors including independent directors �1.5 (xi) The financial statements prepared by the management of the

company present fairly its state of affairs, the result of its operations, cash flows and changes in equity �

1.5 (xii) Proper books of account of the company have been maintained. �1.5 (xiii) Appropriate accounting policies have been consistently applied in

preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgement �

1.5 (xiv) International Accounting Standards (IAS)/ Bangladesh Accounting Standards (BAS)/ International Financial Reporting Standards (IFRS) Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements �

1.5 (xv) The system of internal control is sound in design and has been effectively implemented and monitored �

1.5 (xvi) There are no significant doubts upon the company's ability to continue as a going concern. If the company is not considered to be a going concern, the fact along with reason thereof should be disclosed. �

1.5 (xvii) Significant deviations from the last years operating results of the issuer company shall be highlighted and the reasons thereof should be explained �

1.5 (xviii) Key operating and financial data of at least preceding 5 (five) years shall be summerized �

1.5 (xix) If the company has not declared dividend (Cash or Stock) for the year, the reasons should be given Not applicable

1.5 (xx) The number of Board meetings held during the year and attendance by each director shall be disclosed �

1.5 (xxi) The pattern of the shareholding shall be reported to disclose the aggregate number of shares held by:a. Parent/Subsidiary/Associated Companies and other related

parties (name wise details); �b. Directors, Chief Executive Officer, Company Secretary, Chief

Financial Officer, Head of Internal Audit and their spouses and minor children (name wise details) �

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c. Executives (top 5 salaried employees, other than Director, CEO, CFO, CS, Head of Internal Audit) �

d. Shareholders holding ten percent (10%) or more voting interest in the company (name wise details) �

1.5 (xxii) Company shall disclose the following information in case of appointment/re-appointment of a director:a. A brief resume of the Director �b. Nature of his/her expertise in specific functional ares �c. Directorship in other companies and membership

at Board Committees �

2 CHIEF FINANCIAL OFFICER (CFO), HEAD OF INTERNAL AUDITAND COMPANY SECRETARY (CS)

2.1 The company shall appoint a CFO, a Head of Internal Audit and a Company Secretary. Board of Directors should clearly define their respective roles, responsibilities and duties. �

2.2 The CFO and CS shall attend the Board meetings, they should not attend such part of Board meeting, which involves consideration of an agenda item relating to their personal matters �

3 AUDIT COMMITTEE3 (i) Company shall have an Audit Committee as a sub-committee

of the Board of Directors �3 (ii) The Audit Committee shall assist the Board of Directors in

ensuring that the Financial Statements reflect true and fair view of the state of affairs of the company and in ensuring a good monitoring system within the business �

3 (iii) The Committee shall be responsible to the Board of Directors. The duties of the Committee shall be clearly set forth in writing �

3.1 Constitution of the Audit Committee3.1 (i) The Committee Shall be composed of at least 3 members of the Board �3.1 (ii) Board of Directors shall appoint members of the Audit Committee

who shall be directors of the company and shall include at least one Independent Director �

3.1 (iii) All members of the Committee should be ‘financially literate’ and at least one member shall have accounting or related financial management experiences �

3.1 (iv) In any circumstances, where the Committee members become less than three, the Company will get 1 month time to fill up new Committee �

3.1 (v) The Company secretary shall be the Secretary of the Committee �3.1 (vi) Quorum of the Audit Committee meeting shall not constitute without

at least one independent director �

3.2 Chairman of the Audit Committee3.2 (i) Board of Directors shall select one member of the Audit Committee to be

Chairman of the Audit Committee, who shall be an independent director �3.2 (ii) The Chairman of the Committee shall remain present in the AGM �

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3.3 Role of Audit Committee shall include:3.3 (i) Oversee the financial reporting process �3.3 (ii) Monitor choice of accounting policies and principles �3.3 (iii) Monitor internal control risk management process �3.3 (iv) Oversee hiring and performance of external auditors �3.3 (v) Review along with the management the annual financial statements

before submission to the Board for approval �3.3 (vi) Review along with the management the quarterly and half yearly FS

before submission to the Board for approval �3.3 (vii)Review the adequacy of internal audit function �3.3 (viii) Review statement of significant related party transactions submitted

by the management �3.3 (ix) Review Management Letters/Letter of Internal Control Weakness

issued by statutory auditors �3.3 (x) When money is raised through IPO/RPO/Rights Issue the company

shall disclose to the Audit Committee about the uses/applications of funds by major category (capital expenditure, sales and marketing expenses, working capital, etc), on a quarterly basis, as a part of their quarterly declaration of financial results. Further, on an annual basis, the company shall prepare a statement of funds utilized for the purposes other than those stated in the offer document/prospectus. Not applicable

3.4 Reporting of the Audit Committee3.4.1 (i) The committee shall report on its activities to the Board of Directors �3.4.1 (ii) a. Shall report to the Board of Directors on conflicts of interests �

b. Shall report to the Board of Directors on suspected or presumed fraud or irregularity or material defect in internal control system �

c. Shall report to the Board of Directors on suspected infringement of laws, including securities related laws, rules and regulations �

d. Shall report to the Board of Directors on any other matters �3.4.2 If the Committee has reported to the Board of Directors about

anything which has material impact on the financial condition and results of operation and has discussed with the Board of Directors and the management that any rectification is necessary and if the Audit Committee finds that such rectification has been unreasonably ignored, the Committee should report such finding to the Commission, upon reporting of such matters to the Board of Directors for three times or completion of a period of 6 months from the date of first There was noreporting to the Board of Directors, whichever is earlier such matters

3.5 A Report on the activities of the Audit committee, including any report made to the Board of Directors, should be disclosed in annual report under the signature of the Chairman of the Committee �

4 EXTERNAL/STATUTORY AUDITORSThe External auditors should not be engaged for the following services:4 (i) appraisal or valuation service or fairness opinion �4 (ii) financial information systems design and implementation �4 (iii) book keeping or other services related to

accounting records or Financial Statements �

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4 (iv) broker-dealer services �4 (v) actuarial services �4 (vi) internal audit services �4 (vii) any other service that the Audit Committee determines �4 (viii) No partner or employees of the external audit firms shall possess any

share of its client during the tenure of their audit assignment. �4 (ix) Audit/certification services on compliance of corporate governance

as required under clause (i) of condition No. 7. �

5 SUBSIDIARY COMPANY5 (i) Composition: Same as Holding Company �5 (ii) Independent Director: At least one Independent Director of holding

company shall be in the Board of subsidiary company �5 (iii) Minutes of the Board meeting: The minutes of Board meeting of the

subsidiary company shall be placed for review at the following Board meeting of holding company �

5 (iv) The minutes of the respective Board meeting of the holding company shall state that they have reviewed the affairs of the subsidiary company also. �

5 (v) The Audit Committee of the holding company shall review the financial statements particularly the investments made bythe subsidiary company �

6 DUTIES OF CHIEF EXECUTIVE OFFICER (CEO) ANDCHIEF FINANCIAL OFFICER (CFO)6 Both the CEO and CFO shall certify to the Board that:6 (i) they have reviewed annual Financial Statements and that to the

best of their knowledge and belief:a. those statements do not contain any materially untrue

statement or omit any material fact or contain statements that might be misleading �

b. these statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards and applicable laws �

6 (ii) There are, to the best of knowledge and belief, no transactionsentered into by the company during the year, which are fraudulent, illegal, or violation of company’s code of conduct �

7 REPORTING AND COMPLIANCE OF CORPORATE GOVERNANCE7 (i) The directors of the company shall state, in prescribed format,

in the directors’ report whether the company has complied with these conditions �

7 (ii) The company shall obtain a certificate from Chartered Accountant/Cost & Management Accountant/Chartered Secretary) regarding compliance of conditions of CG Guidelines that will be a part the annual report �

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RESPONSIBILITIES AND AUTHORITIES OF BOARD OF DIRECTORS Compliance status

A. Work-planning and strategic managementi. The Board shall determine the vision/mission of the Company.

Board shall also determine the strategy and work-planning forenhancement of institutional efficiency and other policy matters onannual basis. Board shall make necessary amendment in thestrategy on quarterly basis.

ii. The Board shall have its analytical review to be incorporated in theannual report as regard to the success or failure in achieving thetarget as set out in the annual work plan and inform the same tothe shareholders in the annual general meeting.

iii. The Board will set the Key Performance indicators (KPI) for theManaging Director/CEO and other senior executives and willevaluate on half-yearly/yearly basis.

B. Formulation of sub-committeeExecutive Committee may be formed in combination with Directors(excluding any alternate Director) and management of theCompany only for rapid settlement of the emergency matters(approval of loan/lease application, write-off, rescheduling etc.)arisen from the regular business activities

C. Financial Managementi. Annual budget and statutory financial statements shall be adopted

finally with the approval of the Board.ii. The Board shall review and examine in quarterly basis various

statutory financial statements such as statement of income-expenses, statement of loan/lease, statement of liquidity, adequacyof capital, maintenance of provision, legal affairs including actionstaken to recovery of overdue loan/lease.

iii. The Board shall approve the Company’s policy on procurementand collection and shall also approve the expenditures accordingto policy. The Board shall delegate the authority on the ManagingDirector and among other top executives for approval ofexpenditure within budget to the maximum extend.

iv. The Board shall adopt the operation of bank accounts. Groups maybe formed among the management to operate bank accounts underjoint signatures.

D. Loan/Lease/Investmenti. Policy on evaluation of loan/lease/investment proposal, sanction

and disbursement and its regular collection and monitoring shall beadopted and reviewed by the Board regularly based on prevailinglaws and regulations. Board shall delegate the authority ofloan/lease/investment specifically to management preferably onmanaging director and other top executives.

ii. No Director shall interfere on the approval of loan proposalassociated with him. The Director concerned shall not give anyopinion on that loan proposal.

Compliance Report on

Bangladesh Bank’s Guidelineson Corporate Governance

angladesh Bank issued a guideline on Corporate Governance vide DFIM Circularno. 7 dated 25 September 2007. The Board of Directors of Union Capital Limited

has taken appropriate steps to comply with the guidelines and implementation of thesame. Status report on compliance with those guidelines is given below:

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

B


Compliance status

F. Internal Control & ComplianceAn Audit Committee approved by the Board shall be formed. Board shall evaluate thereports presented by the Audit Committee on compliance with the recommendation ofinternal auditor, external auditors and Bangladesh Bank inspection team.

G. Human Resources ManagementThe Board shall approve the policy on Human Resources Management and service rule.Chairman and Director of the Board shall not interfere on the administrative job in linewith the approved service rule.Only the authority for the appointment and promotion of the managing Director/DeputyManaging Director/General Manager and other equivalent position shall lie with theBoard in compliance with the policy and service rule. No Director shall be included inany executive Committee formed for the purpose of appointment and promotion ofothers.

H. Appointment of Managing Director and Increase of Salaries & AllowancesThe Board shall appoint a competent managing director for the Company with theapproval of the Bangladesh Bank and shall approve any increment of his salary andallowances.

I. Benefit to ChairmanThe Chairman may be offered an office room, a personal secretary, a telephone at theoffice, a vehicle in the business-interest of the Company subject to the approval of theBoard.

RESPONSIBILITIES AND DUTIES OF CHAIRMAN i. The Chairman shall not participate in or interfere into the administrative or operational

and routine affairs of the Company as he has no jurisdiction to apply executive power.ii. The minutes of the Board meetings shall be signed by the Chairman.iii. The Chairman shall sign-off the proposal for appointment of the managing director and

increment of his salary & allowances.

RESPONSIBILITIES AND DUTIES OF MANAGING DIRECTRi. The managing director shall discharge his responsibilities on matters relating to financial,

business and administration vested by the Board upon him. He is also accountable forachievement of financial and other business targets by means of business plan, efficientimplementation of administration and financial management.

ii. The managing director shall ensure compliance of financial institutions act 1993 andother relevant circulars of Bangladesh Bank and other regulatory authorities.

iii. All recruitment/promotion/training, except recruitment/promotion/training of DMD & GMequivalent position, shall be vested upon the managing director. He shall act such inaccordance with the approved HR Policy of the Company.

iv. The managing director may re-schedule job responsibilities of employees.v. The Managing Director may take disciplinary actions against the employees except the

DMD and GM or equivalent position.vi. The managing director shall sign all the letters/statements relating to compliance of

polices and guidelines. However, departmental/Unit heads may sign dailyletters/statements as set out in DFIM circular no. 2 dated 06 January 2009 if soauthorized by managing director.

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

Complied

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OVERVIEWangladesh Accounting Standard(BAS) 1: Presentation of Financial

Statements requires management to makean assessment of an entity’s ability tocontinue as a going concern. In otherFinancial Reporting Frameworks, there maybe no explicit requirement for managementto make a specific assessment of anentity’s ability to continue as a goingconcern. Nevertheless, since the goingconcern assumption is a fundamentalprinciple in the preparation of financialstatements as per BAS 1, the preparationof the financial statements requiresmanagement to assess UCL’s ability tocontinue as a going concern even if thefinancial reporting framework does notinclude an explicit requirement to do so.Bangladesh Securities and ExchangeCommission’s Notification dated 7 August2012 requires the Directors of all the listedcompanies to report on its ability tocontinue as going concern. The Board ofDirectors of UCL makes annualassessment as to whether there exists anymaterial uncertainty that may castsignificant doubt about UCL’s ability tocontinue as a going concern.The time period that the Directors haveconsidered in assessing theappropriateness of the going concern basisin preparing the financial statements forthe year ended 31 December 2013 is aperiod of twelve months from the date ofapproval of these financial statements (theperiod of assessment).Our assessment regarding UCL’s ability tocontinue as a going concern involvesmaking a judgment, about inherentlyuncertain future outcomes of events orconditions. In judgment, Management hasconsidered following factors that appearedto be relevant:The degree of uncertaintyManagement confirms that during theperiod of assessment there was no suchevent or condition the outcome of whichmay increase any uncertainty about thecontinuance of UCL’s business;Nature and size of businessUCL is engaged in financing and capitalmarket operations. Considering the nature,size and extent of business, Management isof the opinion that there was no suchexternal factors that might affectmanagement assessment while makingjudgment as to the continuance of UCL’sbusiness;

Subsequent eventsSubsequent events that were readilyavailable at the time of judgment have beentaken into account while makingassessment as to the continuance UCL as agoing concern.Moreover, in making this assessment, theDirectors considered the Group’s business,profitability forecasts, cash flows, terms andconditions of borrowing facilities,governance and risk managementpractices, funding and capital plansincluding stress scenarios, together with arange of factors such as the outlook for theBangladesh economy taking account of theimpact of fiscal realignment measures,monetary policy and in particular theDirectors have focused on the matters setout below:

FINANCIAL MATTERSNet current assetsAs on 31 December 2013, UCL has positivenet current assets of Tk. 812.56 million(2012 : Tk. 409.74 million) that signifiesCompany’s ability to meet its short-termobligations from its short-term assets. Debts with excellent repayment recordsAt the close of 2013, the total fixed termborrowings of the Company were Tk. 974.66million (2012 : Tk. 1,084.66 million). Duringthe year we availed new credit facilities ofTk. 450.00 million and repaid Tk. 560.00million to the lenders on due dates therebyenhanced lenders’ confidence on UCL.Dependency on short term borrowingsAt the end of 2013, total short termborrowings of the Company were Tk.882.74 million, representing only 7.42percent of total liabilities that indicatesUCL’s less dependency on short termborrowings. UCL uses short termborrowings to meet only short termcontingency requirements.Consistent support by lendersUCL has been enjoying unparallel supportsfrom banks and other lenders. We have avery good track record in repayment of ourloan that gives a comfort to our lenders. Wealso enjoy a very good and competitiveterms of borrowings from our lenders. Positive operating cash flowsCash flow statement of the Company for theyear ended 31 December 2013 shows apositive operating cash flows of Tk. 344.26million that signifies UCL’s ability togenerate adequate cash flow from operatingactivities to meet its operating expenses.

Report on

GOING CONCERN Reflects UCL’s continuancefor the foreseeable future

Going concernassumption is afundamentalprinciple in thepreparation offinancialstatements andhence it is theresponsibility ofthe Directors toassesscompany’s abilityto continue asgoing concernthat involvesmakingappropriateinquiries ofcertain financialand operatingmatters.

Going concernassumption is afundamentalprinciple in thepreparation offinancialstatements andhence it is theresponsibility ofthe Directors toassesscompany’s abilityto continue asgoing concernthat involvesmakingappropriateinquiries ofcertain financialand operatingmatters.

B


Positive key financial ratiosThe Company has positive financial ratios as evidentfrom financial summary given on page 40 of thisAnnual Report. Such positive financial ratios indicateCompany’s sound financial health and growthprospects.Consistent payment of dividendsThe Company has been paying dividend consistentlyto its shareholders over many years. For the last fiveyears the company has paid an average dividend ofTk. 28.00 per share of Tk. 10 each that reflectscompany’s commitment to its shareholders forsustainable growth. Credibility in payment of obligationsThe Company has an excellent track record in re-payment of its loan liabilities. There was no suchinstances that UCL had requested to its lenders forrescheduling or extension of term of loan. Operating performance growthUCL has a satisfactory growth in its operatingperformance. The Company’s total investment hasincreased from Tk. 9,170.70 million to Tk. 12,376.35million registering a remarkable growth of 34.96percent over last year. In 2013, total consolidatedoperating revenue was Tk. 606.33 million and totalprofit after tax was Tk. 141.76 million showing agrowth of 94.41 percent and 149.91 percentrespectively. All those indicators confirm Company’scontinuance in foreseeable periods. Timely disclosure of financial resultsUCL is committed to timely and transparentdisclosure of financial results to its shareholders. Wehave taken a policy to disclose annual key financialresults to the stakeholders within two months fromthe date of the closer of financial year.

OPERATING MATTERSExpansion of businessUCL has been continually expanding its operationsthrough diversification to cater the many fold needsof its customers as well as for enhancing its earningsstream.Corporate culture and employee satisfactionA good working environment is paramount to anycompany’s success and the wellbeing of itsemployees. At UCL we strive to create a flexible andchallenging framework that always attracts qualifiedaspirant and encourages existing employees tocontinuously hone their skills and excel in their fields.There exists a very good corporate environment inthe Company. UCL is an excellent work place withfriendly environment.Communication among the employees is veryexcellent. The company endeavors to be honestand practices fair treatment to all employees whichensures good corporate environment. The Companypays a very competitive compensation package andthere exists a good number of employee benefitslike home loan benefit, car loan benefit,performance related bonus, gratuity, provident fundetc., which considered to be instrumental foremployee satisfaction.

OTHER MATTERSMaintenance of sufficient capitalAs on 31 December 2013, the Company’s totalconsolidated equity stands at Tk. 2,010.67 million.While the minimum paid-up capital as required byBangladesh Bank is Tk. 1,000.00 million, Company’spaid-up as on 31 December 2013 was Tk. 1,099.09million. UCL would like to enhance its equity graduallyfollowing prudent dividend policy and issuance ofpreference shares based on its profitability growth forlong term sustainability of the company.CAMEL RatingCAMELS rating is used by Bangladesh Bank as atool for evaluating the strength and performance of anon-banking financial institution. The composite ratingadjudged by Bangladesh Bank signifies satisfactoryperformance of UCL. In that report, there was noadverse material observation of Bangladesh Bank onthe activities of UCL. Stress TestBangladesh Bank has introduced a stress testingframework for financial institutions to proactivelymanage risks, which focuses on sensitivity andscenario analysis. UCL has rigorously implementedthe stress testing framework of Bangladesh Bank andas at 31 December 2013, the Company does notrequire to enhance its capital requirement other thanto make a three year capital maintenance plan. TheDirectors believe this satisfactorily addresses thecapital risk of the Company.Credit RatingUCL has been rated as AA- in the long run and ST-2for short term by National Credit Rating Company Ltd.that reflects very strong capacity for timely serving offinancial obligations offering high level of financialsafety. As such UCL is exposed to very lower risk. ST-2 reflects strong capacity for timely payment offinancial commitments and carry lowest credit risk.Changes in Government policyManagement anticipates no significant change inlegislation or government policy, which may materiallyaffect the business of the Company.

CONCLUSIONThe above matters may individually or collectively castsignificant doubt about the going concern assumptionfor an entity. This listing is not all-inclusive nor doesthe existence of one or more of the items alwayssignify that a material uncertainty exists.The Directors’ assessment of whether the company isa going concern entity involves making appropriateinquiries of all the above matters including review ofbudget and future outcome of inherent uncertaintiesin existence. The Directors are convinced from theabove indications, which give reasonable assuranceas to company’s continuance as a going concern forthe foreseeable future.In this backdrop, the Directors consider it appropriateto prepare the financial statements on a going concernbasis having concluded that there are no materialuncertainties related to events or conditions that maycast significant doubt on the Group’s ability to continueas a going concern over the period of assessment.

his risk management disclosure is made in line with the bestpractices and premise on the commitment of the Board of

Directors to adhere to sound corporate governance standards withinthe UCL Group. The report is aimed to provide relevant informationto all stakeholders in an orderly and timely manner and therebycontinue to boost confidence of the market in UCL and itssubsidiaries. Year on year, we have continued to strive at improvingon the quality and scope of our risk management practice andtransparent disclosures.

RISK MANAGEMENT FRAMEWORKRISK MANAGEMENT PHILOSOPHYThe key elements of UCL’s risk management philosophy are thefollowing:� UCL recognizes sound risk management to be the foundation of a

long-lasting financial institution;� UCL continues to adopt an integrated approach to risk

management and, therefore, brings all risks together under one ora limited number of oversight functions;

� risk officers are empowered to perform their duties professionallyand independently without undue interference;

� risk management is governed by a set of policies that are clearlycommunicated;

� risk management is a shared responsibility. Therefore, UCL aimsto build a shared perspective on risks that is grounded inconsensus;

� there is a clear segregation of duties between operations and riskmanagement functions;

� risk-related issues are taken into consideration in all businessdecisions. UCL shall continue to strive to maintain a conservativebalance between risk and revenue considerations;

RISK CULTURE� The Board and Management consciously promote a responsible

approach to risk and ensure that the long-term survival andreputation of UCL are not jeopardised while expanding UCL’smarket share.

� The responsibility of risk management in UCL is vested in theBoard of Directors, which is implemented through the ExecutiveManagement.

� UCL pays attention to both quantifiable and unquantifiable risks.� UCL management promotes awareness of risk and risk

management across UCL.� UCL avoids products, markets and businesses where it cannot

objectively assess and manage the associated risks.

RISK APPETITEUCL’s risk appetite is set at a level that minimizes erosion ofearnings or capital due to avoidable losses and trading books, orfrom frauds or operational inefficiencies. UCL’s appetite for risk isgoverned by the following:� high-quality risk assets measured by three Key Performance

Indicators:i. ratio of non-performing loans to total loans;

Report on

RISK MANAGEMENT

The importance ofrisk managementcannot beoverstated. This isa fundamental partof doing businessthat must beaddressedappropriately forthe company to besuccessful. Riskmanagementprovides a clearand structuredapproach toidentifying risks.Having a clearunderstanding of allrisks allows anorganization tomeasure andprioritize them andtake theappropriate actionsto reduce losses.

Describe how wemanage our risks

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The Risk Management Department coordinates themonitoring and reporting of all risks across UCL and itssubsidiaries. The department is headed by a skilledand competent Executive.The Internal Control & Complience department isresponsible for continuous independent verification ofcontrol measures to manage all risks across the Group.Internal audit has the responsibility of auditing the riskmanagement function to ensure that all units chargedwith risk management perform their roles effectively ona continuous basis. Internal audit also tests theadequacy of internal controls and makes appropriaterecommendations where weaknesses are identifiedwith the view of strengthening the Group’s riskmanagement framework. Its functions are as under: � Sets policies and defines limits for other units in

UCL.� Performs risk monitoring and reporting, and

provides framework for management of risk.� Coordinates activities with internal audit to provide

a holistic view of risks.� Collaborates with information technology department

to provide relevant automated credit information

RELATIONSHIP OF RISK MANAGEMENT WITHOTHER UNITSThe relationships between the Risk ManagementDepartment (RMD) and other sections of the Group arehighlighted below:

Riskmanagement

Credit riskmanagement

Recoverymanagement

Marketing andOperations

Credit analysis andprocessing

Special assetmanagement

Legal risk

Operational risk Information security

ComplianceMarket andliquidity risk

Financial andmanagement control

Financial control

Internal control

Strategy

Strategic risk

Reputational risk

Businessunits RMD Regulators

Reportingand analysis

EnquiriesBusinessinformationand analysis

Internalaudit

Operations

Clients

Auditors

Ratingagencies

Riskreport

Riskadvisory

Audit report

Risk reportsand practices

Reportinganalysis

Enquiries

Risk summary

Technologysupport

Positionsand otherinformation

Risk reportsand practices

Riskmanagement

ii. ratio of loan loss expenses to interest revenue;andiii. ratio of loan loss provision to gross non-performing loans.

� Diversification targets are set for the credit portfolioand limits are also set for aggregate large exposures.

� Financial and prudential ratio targets are pegged ata level more conservative than regulatoryrequirements and better than the industry average.

� UCL aims at minimising the following independentindicators of excessive appetite for risk:i. exception reporting by ICC officers, auditors,regulators and external rating agencies;ii. adverse publicity in press;iii. frequent litigations;iv. payment of fines and other regulatory penalties;andv. above average level of staff and customer attrition.

UCL will not compromise its reputation throughunethical, illegal and unprofessional conduct. UCLalso maintains zero appetite for association withdisreputable individuals and entities.

RISK MANAGEMENT PRINCIPLESThe following principles guide our management of risk:� Effective balancing of risk and reward by aligning

risk appetite with business strategy, diversifyingrisk, pricing appropriately for risk, mitigating riskthrough preventive controls and transferring risk tothird parties.

� Shared responsibility in risk management asbusiness segments are responsible for activemanagement of their risks, with direction andoversight provided by risk managementdepartment and other business units.

� Business decisions are based on an understandingof risk as we perform rigorous assessment of risksin relationships, products, transactions and otherbusiness activities.

� Avoid activities that are not consistent with ourValues, Code of Conduct or Policies, whichcontributes to the protection of our reputation.

� Proper focus on clients reduces our risks byknowing our clients and ensuring that all productsand transactions are suitable for, and understoodby our clients.

� Use of clear communication line for risk reporting withmaximum cooperation from the Chief Risk Officer andeffective monitoring of every department helpsmanage risks throughout the organization.

RISK MANAGEMENT OVERSIGHTUCL’s Risk Management Department provides centraloversight of risk management across UCL and itssubsidiaries to ensure that the full spectrum of risksfacing UCL and the Group are properly identified,measured, monitored and controlled to minimise adverseoutcomes. The department is, however, complementedby other departments in the management of certainimportant risks as illustrated below.


Risk Management Fourm (RMF)For all categories of risk, the Risk ManagementForum is responsible for formulating policies,monitoring, implementation and reviewing risk reportsfor presentation to the Board/Board committees aswell as implementing Board decisions across UCL.The Forum comprises of Heads of Business, SME,HR & ICT, ICC and Treasury and is headed by theChief Risk Officer. To be more specific, the Forum isresponsible for the following:� Designing overall risk management strategy of

UCL.� Communicating views of the Board and

management regarding risk management cultureand risk appetite all over UCL.

� Developing policies and procedures foridentifying, measuring and controlling risk;

� Reviewing market conditions, identifying externalthreats and providing recommendations oncourse of actions

� Allocating appropriate resources to evaluate andcontrol risk;

� Implementation of risk strategy approved by theBoard of Directors;

� Appointing credit officers and delegate approvalauthorities to individuals and committees.

� Reviewing risk reports on a regular and timelybasis;

� Monitoring the prescribed threshold limits of riskappetite set by the regulators and UCL itself andreport on compliance.

� Developing, testing, and observing the use ofmodels to measure and monitor risk as well asMIS to support risk management function of UCL.

� Highlighting the key portfolios and deficiencies ontimely manner and reporting these analysis to theManaging Director as well as the Board ofDirectors with specific recommendations andsuggestions.

� Providing all reports required by the Board and itscommittees for the effective performance of riskmanagement oversight functions.

� Holding monthly meetings of the Forum todiscuss findings on Risk Management Paper(RMP) submitted by RAU and plan necessaryprecaution measures to mitigate risks.

Risk Analysis Unit (RAU)The Risk Analysis Unit acts as secretariat of the RiskManagement Forum (RMF). The Unit is independentof rating transactions, or setting/working to achieveany target imposed by UCL. In more details theresponsibilities of this Unit includes:� Identifying and analysing all sorts of risks

appropriately, timely and quantifying those risksand their exposure to material loss

� Maintaining and monitoring an effective riskmanagement environment in the Group andcollecting all relevant data of risk indicators fromdifferent models and MIS and assessing the quality,completeness, and correctness of those data

GOVERNANCERisk management governance frameworkUCL’s risk management governance framework isoutlined in the diagram below:

1 Managing Director/Risk Management Forum2 Management Committee.3 Chief Risk Officer.

Roles and responsibilitiesBoard of Directors� Approve risk strategy and policies.� Ensure executive management takes steps

necessary to monitor and control risks.� Ensure that management maintains an

appropriate system of internal control andreviews its effectiveness.

� Ensure risk strategy reflects the Group’stolerance for risk.

� Ensure the Group’s overall credit risk exposure ismaintained at prudent levels and consistent withthe available capital.

� Review and approve changes/amendments to therisk management framework.

� Review and approve risk management proceduresand control for new products and activities.

� Ensure that the Management as well asindividuals responsible for credit riskmanagement possesses the requisite expertiseand knowledge to accomplish the riskmanagement function.

� Ensure that the Group implements a soundmethodology that facilitates the identification,measurement, monitoring and control of risk.

� Ensure that detailed policies and procedures forrisk exposure creation, management andrecovery are in place.

Board committeesThe above responsibilities of the Board of Directorsare discharged primarily by its two Committeesnamely:� The Board Audit Committee: and� The Board Executive Committee.Without prejudice to the roles of these committees,the Board retains ultimate responsibility for riskmanagement and ensures through RMF.

Board of Directors

ExecutiveCommittee

Board AuditCommittee

MD/RMF¹

Internal Audit

CRO³

MANCOM²

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ent � management and administration of users/access

control on UCL’s various application software toensure proper user access rights are attached toeach job role and to ensure reliability of accesscontrol mechanisms on the applications;

� monitoring and reviewing UCL’s processes,practices and procedures through a systematicand automated approach, crossing alldepartmental and functional boundaries,guaranteeing validity, completeness, accuracyand timeliness of financial data relating to UCLrevenue. This includes interest income, interestexpense, commissions, fees and managementfees etc.;

� monitoring IT operations, databases, serverhardware and server operating systems, networkinfrastructure and applications systemsmonitoring;

� reviewing all new systems end-to-end andcoming up with technology-related risk andvulnerabilities in the product, process or systembeing developed and advising mitigating controls.

Fraud management objectives� Prevention of fraud occurrence or losses. Where

prevention is not possible they should bepromptly detected and mitigated.

� Prevent repetition of operational lapses andsystem defects that facilitate occurrence of fraud.

� Minimise other operational losses associatedwith fraud.

� Automation of fraud preventive measures.

Fraud management strategies� Building fraud prevention and detection controls

in processes and systems.� Strict compliance with internal policy, regulatory

and statutory requirements.� Implementation of anti-fraud operational,

supervisory and independent controls.� Proactive management of financial and non

financial risks.� Holding operators and supervisors personally

responsible for fraud occurrence.� Conducting root cause analysis of fraud

occurrence.� Automation of reconciliation activities.� Risk-based departmental and independent

control checklist for supervisors.� Continuous awareness campaign on fraud

learning points.� Continuous control improvement measures.� Improve anti-fraud operational control capacities

among operations staff.� Effective fraud escalation mechanism to all levels

of management.� Implementation of whistle-blowing policy.

� Reviewing proposals in respect of credit policiesand standards and endorsing them to the RiskManagement Forum for approval by the Board

� Monitoring on an ongoing basis the Group’s riskquality and performance by reviewing periodiccredit portfolio reports and assessing portfolioperformance

� Defining credit approval framework and assigningcredit approval limits in line with UCL policy

� Reporting to RMF on compliance of UCL’s creditpolicies with statutory requirements prescribed bythe regulatory/supervisory authorities;

� Conducting periodic Stress Testing� Preparing Risk Management Paper (RMP) on a

monthly basis for submission to the BangladeshBank where the risks associated in conductingbusiness are highlighted analysed, andrecommendations put forward for discussion andapproval by the RMF.

INTERNAL CONTROLOverviewInternal control in UCL refers to the overall operatingframework of practices, systems, organizationalstructures, management philosophy, code of conduct,policies, procedures and actions, which exists in theGroup and is designed to ensure:� that essential business objectives are met,

including the effectiveness and efficiency ofoperations and the safeguarding of assetsagainst losses;

� the reliability of financial reporting andcompliance;

� compliance with applicable laws and regulationsincluding internal policies;

� systematic and orderly recording of transactions;and

� provision of reasonable assurance that undesiredevents will be prevented or detected andcorrected.

UCL is committed to creating and maintaining aunique internal control environment that is capable ofsustaining its current leadership position in thefinancial services industry.

Strategy and policyUCL operates in an environment that is continuouslyexposed to uncertainties and change. Such risks mayprevent the institution from achieving its strategicbusiness objectives. To effectively manage theserisks, UCL Group has put in place internal controlmeasures that cover the company and itssubsidiaries.

Effective IT control and revenue assuranceUCL has developed a framework for effectiveinformation technology (IT) controls. This essentiallyrevolves around ensuring the integrity, security,efficiency and reliability, and compliance of UCLinformation systems and resources, including:


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approach with regards to risk management as adefense mechanism to ensure that UCL’s growingportfolio is strengthened from the core andcompliment its values to create a sustainable futurefor all the stakeholders.

RISK MANAGEMENT DISCLOSURE

CREDIT RISKOverviewCredit risk management verifies and manages thecredit process from origination to collection. Indesigning credit policies, due consideration is givento our commitment to:� create, monitor and manage credit risk in a

manner that complies with all applicable laws andregulations;

� identify credit risk in each investment, loan orother activity of UCL;

� utilise appropriate tools to measure credit risk;� adopt a risk-based approach for determining

appropriate pricing for lending products andservices;

� set acceptable risk parameters;� maintain acceptable levels of credit risk for

existing individual credit exposures;� maintain acceptable levels of overall credit risk for

our portfolio;� coordinate credit risk management and other

risks inherent in UCL business activities; and� set remedial and recovery actions.

PhilosophyThe following principles guide credit risk managementacross UCL. UCL shall:� manage its risk asset portfolio to ensure that the

risk of excessive concentration to any industry,sector or individual customer is minimised, as wellas ensure portfolio flexibility and liquidity;

� ensure that exposures to any industry orcustomer are within the regulatory guidelines andinternal policies;

� extend credit to only suitable and provencustomers and never where there is any doubt asto their ethical standards and record;

� never extend credit where the source ofrepayment is unknown or speculative nor wherethe purpose of funds is undisclosed;

� never take a credit risk where ability of thecustomer to meet obligations is based on themost optimistic forecast of events;

� ensure that the primary source of repayment foreach credit is from an identifiable cash flow ofcustomers’ normal business operations or otherfinancial arrangements; the realisation of securityremains a fall-back option;

� adopt a pricing model to ensure that higher risksare compensated by higher returns;

Priorities for 2014� Full implementation of the Bangladesh Bank

Guidlines on ICC.� Strengthening of internal controls consciousness

in UCL through effective support and training tooperators in their role as the first line of defencein risk management.

� Strengthening IT control and monitoring to ensureadequate controls built UCL software.

RISK MANAGEMENT REPORTING In compliance with the issue of Bangladesh BankCircular No DFIM 1 April 2013, UCL have startedsubmitting its Risk Management Paper (RMP) everymonth from the month of April 2013 to theDepartment of Financial Institutions & Markets(DFIM) of Bangladesh Bank. According to the circularUCL have formed the Risk Analysis Unit (RAU) whichis responsible for constructing the Risk ManagementPaper of every month and submission to the RiskManagement Forum (RMF). The Forum which isformed by the Departmental Heads of Business,SME, HR & ICT, ICC, Treasury and headed by theChief Risk Officer meets every month to discuss onthe Risk Management Paper in hand and formulatepolicies to mitigate the risks affecting theorganisation. The meeting minutes and resolution areattached with the RMP of the month and submitted toDFIM of Bangladesh Bank.The Risk Management Paper emphasize on thefollowing risks affecting UCL:

� Credit Risk� Market Risk� Liquidity Risk� Reputational Risk� Operational Risk� Capital Adequacy Management� Stress Testing

The report identifies, analyses, and measures howeach of the 7 categories of risks affect UCL andquantifies the risk of material loss as a result. ThePaper also goes on to provide recommendations onhow UCL can draw precautionary measures andmitigate the risks facing the business.The Risk Analysis Unit (RAU) responsible forformulating the report draws on operationalinformation from all departments of UCL based onwhich risks affecting the organisation are identified,analysed and measured. The RAU uses variousanalytical tools and mathematical models to measurerisks and incorporate them into the Risk ManagementPaper (RMP). The recommendations are drawn fromdiscussions with the relevant departments andanalysis of the market, economy and financial andoperational strength of the company. The Risk Management Forum (RMF) headed by theChief Risk Officer of UCL meets by the 20th of everymonth with the Risk Management Paper of the pastmonth in hand and discusses and develops policieson risk management for the times ahead. The Forumbelieves that it is imperative to address all thematters of risks that face the organization and the



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Description Rating bucket Range of scores

Extremely low risk 1%Very low risk 80–89% 1%Low risk 70–79% 1.5%Low risk 60–69% 2%Acceptable – moderately high risk 50–59% 4%High risk 40–49% 6%Very high risk 30–39% 9%Extremely high risk 10–29% 13%High likelihood of default 0–9% 15%Default risk D

D Sub-standardSMA

D 20%5%

Doubtful D 50% Bad loss D 100%

Investment

Non-investment

Defau

lt

AAAAAA

BBBBBB

CCCCCC

1.00 – 1.992.00 – 2.993.00 – 3.994.00 – 4.995.00 – 5.996.00 – 6.997.00 – 7.998.00 – 8.999.00 – 9.99

12345678910

90–100%

Prob.of default Grade

� ensure that the quantum of exposure and qualityand value of collateral required are determinedbased on the risk profile of the customers;

� avoid all conflict of interest situations and reportall insider-related credits to appropriate bodies;and

� ensure that there are consequences fornoncompliance with UCL credit policies.

Responsibilities and functions of keystakeholders in the credit processIn line with company’s philosophy to entrench soundcorporate governance in its operations, the functionsof the Credit Group are handled at different levels byfive departments, namely:� Operations and Marketing Department;� Credit Analysis & Processing (CAP);� Credit Risk Management (CRM);� Recovery & Monitoring Department; and� Special Assets Management (SAM).

Operations and Marketing Department isresponsible for procurement of business and acts asa relationship manager.

Credit Analysis & Processing (CAP) is responsiblefor the appraisal of credit requests and processing toobtain requisite approvals in line with UCL’s policy.

Credit Risk Management (CRM) is responsible forthe planning, monitoring and reporting of the creditportfolio. The monitoring of loans and portfolio as wellas the reporting of these to Management and theBoard remains the core responsibility of CRM. Thedepartment serves as the credit secretariat and

manages the documentation and other credit processinitiatives for the Company.

Recovery and Monitoring Department (RMD) isresponsible independently following up on customerswith delinquent assets before the level of delinquencyfalls in the category of special assets that is tillinstallments past due for less than 6 months.

Speical Assets Management (SAM) is responsible forthe recovery of loans that are past due for 6 months ormore and accounts written off from on-balance sheet.SAM will continue to liaise with recovery agents, legaldepartment and outsourcing legal services to ensureeffective recovery of bad loans.

Internal ratings scaleIn measuring credit risk of loan and advances tocustomers, UCL reflects the following components: � Character and capacity of the client; � Current exposures to the counterparty and its

likely future development; and� Credit history of the counterparty and likely

recovery ratio in case of default obligations –value of collateral and other ways out.

Customers Risk Rating systemIn order to manage our credit risk, the managementhas developed a risk rating grade system. The riskrating grades have nine risk buckets to provide apreset, objective basis for making credit decisions,with one additional bucket specifically included tocategorise customers in default. Each risk bucketmay be denoted alphabetically and by range ofscores as follows:

Collateral Risk Rating (CRR)UCL shall not lend to non-investment gradecustomers without any form of collateral. Collateralsare rated from best to worst in order of liquidity,controllability and realisable value. The more liquid acollateral is, the lower the estimated portion of theexposure that may not be covered in the event ofdefault. Therefore, for highly illiquid collaterals, ahigher loss given default is assumed.

Risk limit control and mitigation policiesThe industry and portfolio limits are set by the Boardof Directors on the recommendation of theManagement. Credit Risk Management monitorscompliance with approved limits.

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The process of setting the limits is as follows:� UCL engages in a detailed portfolio plan. In

drawing up the plan, UCL reviews themacroeconomic factors, identifies the growthsectors of the economy and conducts a risk ratingof the sectors to determine its acceptable targetmarket industries and exception. UCL target loanportfolio is then distributed across acceptabletarget market industries.

� Aggregate large exposure limit of not more than15 percent of company’s equity. It may go beyondthe limit with the permission of Bangladesh Bank.

� Sector exposure limit of not more than 20% ofUCL loan portfolio.

Geographic limits� Presently, UCL does not have any exposure to

counterparties domiciled outside Bangladesh.

Single party limits� Limits are imposed on loans to individual

borrowers. UCL as a matter of policy does notlend above its regulatory lending limit, which is 30percent of its shareholders’ funds. The internalguidance limit is, however, set at 25 percent tocreate a prudent buffer.

UCL also sets internal credit approval limits forvarious levels in the credit process and these areshown in the table below (amount in Taka):Approval levels Investment gradeBoard of Directors Over 50,000,000Executive Committee Upto 50,000,000Credit Committee Upto 10,000,000

Approval limits are set by the Board of Directors andreviewed from time to time as the circumstances ofthe UCL demand. Exposure to credit risk is alsomanaged through regular analysis of borrowers andpotential borrowers to meet interest and capitalrepayment obligations and by changing these lendinglimits where appropriate.

Classification and provisioning policyProvision is made in accordance with the PrudentialGuidelines issued by Bangladesh Bank for eachaccount that is not performing in accordance with theterms of the related facility as follows:Classification Past due obligation Provision (%)Performing 2 months 1SMA >2-5 months 5Sub-standard >5-11 months 10Doubtful >11-17 months 50Bad & Loss >17 months 100

Write-off and recoveriesAfter full evaluation of a non-performing exposure, inthe event that either one or all of the followingconditions apply, such exposure shall berecommended for write-off:

� continued contact with customer is impossible;� recovery cost is expected to be higher than the

outstanding debt;� amount obtained from realisation of collateral

security leaves a balance of the debt; or� it is apparent that no further recovery on the

facility is possible.� legal actions have been taken against customers

for recovery.All credit facility write-offs shall require endorsementat the Board level. Credit write-off approval shall bedocumented in writing.Whenever amounts are recovered on previouslywritten-off credit exposures, such amount recoveredis recognised as income on a cash basis only.

Portfolio ratiosAsset quality ratiosNon-performing accounts have been recognised,classified and provisions made as appropriate in linewith the Bangladesh Bank Guidelines. Nonperformingloans/total loans ratio for the period was mainly dueto the recognition and classification of weak andimpaired assets in the portfolio.Non-performing exposures are defined as exposureswith past due obligations >2 months. Loans movefrom performing status to SMA, sub-standard,doubtful and bad & loss, depending on objectivecriteria based on the number of months past due asshown in the previous table.

Credit Risk Management outlookThe Group will continue to pursue a moderate andsustainable loan growth strategy by optimallyexploiting the economic development goals of thegovernment vis-a-vis achieving its own strategicimperatives. It is expected that there would beincreased demand for credit, while loan selectioncriteria will remain rigorous with pricing reflecting therisks being taken on such exposures for assetcreation to make business sense. In spite of the growth projections in 2014, assetquality will not be compromised and this would beensured through the constant review of UCL’s riskacceptance criteria. Therefore, credits will only beextended to suitable and proven customers. UCL willalso continue to focus on the growth sectors of theeconomy through strategic portfolio planning,supported by sound risk identification, measurement,control, monitoring and reporting. There will also bean aggressive focus on recovery of delinquent assets. The credit process will be enhanced to addressprevailing challenges, while credit models will besubjected to periodic validation for the purpose ofobtaining necessary assurances. Portfolio stresstests will be adopted as appropriate, to considerimplications of scenarios that may seem relativelyunlikely but could pose serious risks to the companyif they crystallise.We will continue to strengthen SME lending, creditanalysis and credit monitoring through both internaland external trainings.


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The Board of Directors provides oversight for themarket risk management function through itsManagement Committee.Management oversight is provided by the Assets &Liabilities Management Committee (ALCO).The Board of Directors is responsible for:� approval of market risk management framework,

policies, strategies, guidelines and philosophy; � approval of market risk-related limits for UCL.

The ALCO, made up of relevant department heads, isresponsible for:� reviewing policies relating to market risk

management;� recommending market risk policies to the Board;� providing management oversight for the

implementation of policies relating to interestrates and share prices’ risks;

� reviewing market risk strategy;� developing policies, procedures and systems for

identifying, measuring, controlling and reportingmarket risks;

� evaluating market risk inherent in new products;� ensuring compliance with statutory and regulatory

requirements relating to market risks; � recommending policies and guidelines for market

risk measurement, management and reporting;� ensuring that market risk management processes

(including people, systems, operations, limits andcontrols) are in line with market risk framework;

� recommending policies for identifying, measuring,monitoring, controlling and reporting market risk;and

� recommending steps to protect UCL capital ratiosfrom the effects of changes in market risk factors;

UCL also provides oversight for its subsidiaries thatengage in trading in quoted equities. UCL does nottrade in commodity and therefore is not exposed tocommodity risk.

Policy and strategyUCL has put in place a market risk managementframework that provides the Board and Managementwith guidance on market risk managementprocesses.

Stress testingIn recognition of the volatile market environment andthe regulations that have had significant effect onmarket rates and prices, UCL augments other riskmeasures with stress testing to evaluate the potentialimpact of possible extreme movements in financialvariables on portfolio values.Stress testing is an integral part of the market riskmanagement framework and considers both historicalmarket events and forward-looking scenarios. Stressscenarios are regularly updated to reflect changes inrisk profile and economic events.

MARKET RISKOverviewMarket risk is the risk that the value of investmentportfolio will decrease due to changes in market riskfactors such as share prices, interest rates, etc.It represents the potential for a negative impact onthe balance sheet and income statement resultingfrom adverse changes in the value of investmentsand interest rates as a result of movements in marketvariables.During the financial year, UCL was exposed tomarket risk in its trading and investing activitiesmainly as a result of:� interest rate movements in response to market

forces or as directly indicated by monetary policypronouncements;

� share price movements in response to marketforces.

PhilosophyThe market risk management process in the UCLGroup allows disciplined risk taking within aframework of risk appetite that enables UCL toenhance shareholder value while maintainingcompetitive advantage through effective utilisation ofrisk capital.Our objective is to manage market risk exposures foroptimal returns while maintaining a market profileconsistent with our status in the financial servicesindustry. Thus, UCL’s market risk management policyensures: � management is responsible for the establishment

of appropriate procedures and processes inimplementing market risk policy and strategy;

� a group-wide market risk management process towhich all risk-taking units are subjected;

� alignment of market risk management standardswith best practices. Risk measurements areprogressively based on modern techniques suchas sensitivity, stress testing and scenarioanalysis;

� risk officers are empowered to perform theirduties professionally without undue interference;

� UCL does not undertake any risk that cannot bemanaged, or risks that are not fully understood;and

� where UCL takes on any risk, full consideration isgiven to pronouncement, guidelines or policies.

Structure and frameworkUCL ensures that all the market risk exposures areconsistent with its business strategy and within thedefined risk tolerance. UCL therefore managesmarket risk within:� an overall market risk exposure maintained at

levels consistent with the available capital; and� a reliable methodology for identifying, measuring,

controlling, monitoring and reporting market risk.


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ent� a sound process for identifying, measuring,

monitoring and controlling liquidity risk, includinga sound framework for projecting cash flowsarising from assets and liabilities;

� a clear funding strategy that provides effectivediversification in the sources and tenor of funding;

� ranking and prioritisation of funding sources bystability;

� a comprehensive contingency funding plan thatclearly sets out the strategies for addressingliquidity shortfalls in emergency situations.

GovernanceThe Board is primarily responsible for approval ofliquidity risk management framework, policies,strategies, guidelines and philosophy;The Assets & Liabilities Management Committee(ALCO), made up of the Managing Director & CEO,the Chief Financial Officer and other relevantdivisional heads, is responsible for the following:� review policies relating to liquidity risk management;� recommendation of liquidity risk policies to the

MANCOM;� review liquidity risk strategy and recommendation

of the same for Board approval;� provision of management oversight on the

implementation of policies relating to liquidity risk;� monitor liquidity risk inherent in the maturities

mismatch of the assets and liabilities;� development of policies, procedures and systems

for identifying, measuring, controlling andreporting liquidity risks;

� ensure compliance with statutory and regulatoryrequirements relating to liquidity risks;

� review and recommendations on liquidity riskrelated limits for approvals; and

� approval of stress scenarios and contingencyfunding plan assumption.

Implementation of UCL market and liquidity riskmanagement policies, procedures and systems isdelegated to the Head of Treasury who reports to theALCO/Chief Risk Officer. UCL maintains a liquidity risk policy, which drives thelevel of liquidity risk exposures and determinesbusiness size and maturities.

Policies and proceduresThe principal mechanism for implementing UCL’sliquidity policy is the maintenance of the liquid assetsover and above the defined regulatory minimum. The liquidity ratio is interpreted in conjunction withcash flow projection and liability concentration ratiosto measure UCL’s exposure to liquidity risk. The cashflow technique used is the maturity ladder, whichassesses all UCL’s cash inflows against its outflowsto identify the potential for net shortfalls or netfunding requirements.UCL use of concentration ratios helps preventing itfrom relying on a limited number of depositors orfunding sources.

The ALCO is responsible for reviewing stressexposures and where necessary, enforcingreductions in overall market risk exposure. Thestress-testing methodology assumes that scope formanagement action would be limited during a stressevent, reflecting the decrease in market liquidity thatoften occurs. Regular stress-test scenarios areapplied to interest rates and share prices.

OutlookThe year 2013 was characterised by contractingmonetary policy to keep a lid on inflationary pressure.We may see more of Bangladesh Bank’s actions incombating liquidity in 2014 especially with thebalanced monetary stance but the apex Bank is morelikely to explore other indirect monetary policy tools inmanaging system liquidity.We anticipate that fighting inflation will be a greatchallenge in 2014, taking into account the removal offuel subsidies as well as the monetary policy. Thecapital market moved into further decline in 2013.Small investors are showing preference for risk-freeinvestment avenues over the highly volatile and riskyshares due to the incessant rising of interest rate andpartly as a result of the uncertainty in the economicenvironment engendered by the political confrontationwhich negatively affected the capital market. We arepositive that the gains from the ongoing reforms in ourcapital market will be visible and lead to the growthand development of the market. Bangladesh financial system is now relatively stableand well positioned to stimulate growth anddevelopment of the economy. The year 2014 isexpected to be better as we are witnessing somepositive signs since the beginning of the year.

LIQUIDITY RISKOverviewLiquidity risk is the risk that the Group does not havesufficient financial resources to meet its obligationsas they fall due, or will have to meet the obligationsat excessive cost. This risk arises from mismatchesin the timing of cash flows.Funding risk (a form of liquidity risk) arises when theliquidity needed to fund illiquid asset positions cannotbe obtained at the expected terms and whenrequired.The objective of the Group’s liquidity riskmanagement is to ensure that all anticipated fundingcommitments can be met when due and that accessto funding sources is coordinated and cost effective.

PhilosophyUCL Group maintains an optimal level of liquiditythrough the active management of both assets andliabilities while complying with regulatoryrequirements and optimizing returns.The following principles guide liquidity riskmanagement across UCL Group:� a sound liquidity risk management framework that

ensures maintenance of sufficient liquidity towithstand a range of stress events;


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ent there have been several press releases by the

committee aimed at increasing capital requirementsand improving measurement of capital. Though therehas been a regulatory requirement for NBFIs tocomply Basel II requirements, UCL has madesubstantial progress in its Basel II complianceproject. The successful conclusion will allow UCL’scapital measurement to reflect credit, market andoperational risk exposures on the assets of UCL.

OutlookWe have strengthened the Group’s funding andliquidity risk management framework to boost ourability to closely watch liquidity requirements,enhance timely responses to liquidity events(changes in the mix of business we operate and themarket environment), make best use of fundingsources and minimise borrowing costs.UCL expects to continue building on the goodwill inthe coming years by maintaining a strong liquidityposition that ensures financial obligations are met asand when due at minimal cost. Penetration of allcustomer segments will continue as a means ofproviding a stable, low-cost deposit base for UCLfrom well-diversified funding sources.

OPERATIONAL RISKOverviewOperational risk is the risk of loss resulting frominadequate or failed internal processes, people,systems and external events. This definition includeslegal risk but excludes reputational risk. Therefore, inline with the Basel II risk management frameworkand best practices, operational risk in UCL iscomposed of the following risk types: operations risk,legal risk, regulatory compliance risk, technologicalrisk, financial and environmental risk.UCL recognises the significance of operational risk,which is inherent in all areas of our business.Operational risk is managed within acceptable levelsthrough an appropriate level of management focusand resources.

ObjectivesUCL is committed to the management of operationalrisks. UCL’s operational risk management frameworkaims to:� reduce losses arising from operational risk – a

key role of operational risk management in UCLis to reduce losses from operational failure;

� improve performance measurement – improvedunderstanding of its operational risk profile shallenable appropriate allocation of risk which wouldallow improved performance measurement andevaluation of activities;

� ensure better control of operations – UCL expectsthat increased understanding of risk activitieswithin various business units will lead toimprovements in the control of operations and theemergence of a more proactive operational riskmanagement culture;

� provide early warning signals of deterioration inUCL internal control system; and

Capital managementUCL’s capital management approach is driven by itsstrategy and organisational requirements, taking intoaccount the regulatory and business environment inwhich it operates. It is company policy to maintain astrong capital base to support the development of itsbusiness and to meet regulatory capital requirementsat all times.Through its corporate governance processes, UCLmaintains discipline over its investment decisions andwhere it allocates its capital, seeking to ensure thatreturns on investment are appropriate after takingaccount of capital costs.UCL’s capital is divided into two Tiers:Tier 1 capital comprises core equity includingordinary shares, statutory reserves and generalreserves. Under provisions are deducted in arriving atTier 1 capital.Tier 2 capital comprises general provisions, minorityand other interests in Tier 2 capital and unrealisedgains arising from the fair valuation of equityinstruments held as available-for-sale. Tier 2 capitalalso includes reserves arising from the revaluation ofproperties, if any.Bangladesh Bank prescribed a minimum limit of 10percent of total risk weighted assets as a measureof capital adequacy for NBFIs. The total riskweighted assets reflects only credit, market andoperational risk.UCL achieved a capital adequacy ratio of 15.67percent at the end of the year 2013. Current positionis closely monitored by the Assets and LiabilitiesManagement Committee.(Figure in million)Dec 2013 Dec 201215.67 15.13 Capital adequacy ratio (%)

Capital composition:Tier 11099.09 1,046.76 Paid-up capital281.82 254.07 Statutory reserves- 7.00 Dividend equalization reserves- - Non-contorolling interest (insignificant)124.25 55.58 Retained earnings1,505.17 1,363.41 Total

Tier 2124.70 145.57 General provision252.75 252.75 Asset revaluation reserves377.45 398.32 Total

Capital utilisation:12,013.87 11,645.29 Qualifying risk weighted assets

In June 2006, the Basel Committee on BankingSupervision published International convergence ofCapital Measurement and Capital Standards, knownas Basel II. Basel II is structured around three‘Pillars’: minimum capital requirements, supervisoryreview process and market discipline. Thereafter


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entshareholders’ value. In more specific terms, our

strategy is to:� reduce the likelihood of occurrence of

unexpected events and related cost bymanaging the risk factors and implementing lossprevention or reduction techniques to reducevariation in earnings;

� minimise the impact of unexpected eventsincluding related costs that support UCL’s longterm growth, cash flow management and balancesheet protection; and

� make all managers responsible for themanagement of operational risk and thus minimiseactual or potential losses. UCL recognises thatsome losses, such as operational errors, areinevitable and are normal business costs; but willensure these costs are kept within acceptablelevels and potential losses are minimised.

GovernanceWhile the overall responsibility for operational riskmanagement in UCL resides with the Board, theManagement is responsible for the day-to-daymanagement of such risks.To ensure consistency and prudent management ofoperational risks, the responsibility for managingoperational risk has been split as follows: � the overall governance owned by the Board

through MANCOM;� the approval of operational risk policies and

standards for risk identification, measurement,assessment, monitoring and reporting is theresponsibility of the Board and the MANCOM;

The Board and Management CommitteesThe Board of Directors and the ManagementCommittee have overall oversight function foroperational risk management. It shall be theirresponsibility to ensure effective management ofoperational risk and adherence to the approvedoperational risk policies.

Board of DirectorsThe Board of Directors:� sets operational risk strategy and direction in line

with UCL’s corporate strategy;� gives approval for operational risk management

framework, policies and procedures; and� ensures that senior management is performing its

risk management responsibilities.

Management Committee (MANCOM)UCL’s MANCOM:� ensures policies and procedures are developed

for managing operational risk in products,activities, systems and processes;

� ensures that all level of staffs understand theirresponsibilities with respect to operational riskmanagement;

� reviews risk profile and assesses potential

� raise awareness of operational risk in UCL fromtop to bottom through the implementation of anoperational risk approach.

Philosophy and principlesThe following philosophy and principles govern themanagement of operational risk in UCL:� The Board of Directors has the responsibility for

setting the operational risk strategy for UCL andits implementation.

� Operational risk in UCL is coordinated through acentralised operational risk management function.

� Ownership, management and accountability foroperational risk is decentralised with businessand functional units.

� UCL’s operational risk management practices arein line with Basel II.

� UCL’s operational risk management practices aresubject to independent review by internalauditors.

� Operational risk management is governed bypolicies and procedures.

� Operational risk-related issues are taken intoconsideration in business decisions.

� Operational risk and loss events are reported tothe appropriate levels once they are identified.

� Adequate processes and systems for identifying,measuring, monitoring, reporting and controllingoperational risks are being implemented by UCL.

MethodologiesIn order to meet its operational risk managementobjectives, each business function within UCL isrequired to identify, assess, measure and control itsoperational risk in line with the policy.

Key operational risksMajor operational risks faced by UCL are financialcrimes (internal fraud, external fraud and moneylaundering). Each incident is analysed and actedupon. Analysis revealed that the quality of people andtheir integrity is a critical panacea to mitigating thesekey operational risks. As a result, UCL has adopted acompetency-based recruitment policy in whichattitude, skills and knowledge are considered beforeengaging any employee. Other key countermeasuresput in place includes:� enhanced employee training; � enhanced Know Your Customer (KYC) drive; � job segregation; and� imposition of stiff disciplinary measures for

fraudulent staff.

StrategyFailure to manage operational risk effectively oftenresults in significant financial losses, regulatory fines,reputational damage, brand erosion or even the lossof licence, all of which directly impact shareholders’value. Accordingly, UCL’s operational risk strategyaims to minimise the impact of operational risk on its


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ent The Business Units and support functions

The Business Units and support functions are the firstline of defense in our operational risk managementprocess. They own, manage and are accountable forthe operational risks and controls in their respectiveareas. They have the following responsibilities:� Comply with Group operational risk-related

policies, procedures, processes and tools in theirareas.

� Assess risks and the effectiveness of controls inline with risk policies.

� Operate and monitor a suitable system of control.� Manage and review risk as part of day-to-day

business activity.� Identify, review and assess the inherent

operational risks in the context of the existingcontrol environment.

� Create awareness of operational risk. � Maintain the operational risk framework for the

division/control and support unit, ensuring thatthe data and analyses are timely, relevant andcomplete for reporting.

� Ensure potential operational risks in newbusinesses, products and services, andprocesses within their business units areidentified and mitigated.

OutlookUCL is on a journey to embed sound operational riskmanagement practices, culture and environmentbeyond complying with regulatory requirements, butas a value driver that enhances and contributes tostakeholders’ value, long-term existence and survivalof the institution. To this end, a number of initiativesare currently ongoing that will enhance the riskmanagement culture and practices within theorganisation and by extension, significantly reduceUCL’s operational risk exposures and incidences.Some of these key initiatives are as follows:� embed the culture of self assessment in all

activities and across all levels in the group; and� capacity building and increase employees’ risk

awareness level and competence in managingrisks.

INFORMATION SECURITY RISKOverviewUCL, as part of its risk management strategy, aims tocontinuously implement best practices that would inturn ensure strong risk governance.Business and security environments are constantlyevolving and hence new threats and vulnerabilitiesare emerging. Addressing these threats and ensuringno business disruption occurs becomes a challengethat organizations have to live with. It is now widelyestablished that the best way to address informationsecurity concerns is through a combination ofcontinuous monitoring, well defined riskmeasurement metrics/indices and an effectiveawareness programme.

impact on the activities of the company orbusiness units;

� ensures that staffs are adequately trained andhave access to the necessary resources; and

� ensures that UCL’s operational policies andprocedures promote the desired risk culture.

Risk Management Forum (RMF)UCL’s RMF:� carries out the first-level review of operational risk

policies and procedures;� manages significant operational risks where they

originate within the business/function;� ensures compliance with operational risk policies

and procedures;� ensures implementation of the real-time incident

reporting process;� continually promotes risk awareness throughout

the company so that complacency does not setin; and

� assists the Management Committee in managingongoing corporate governance issues.

Chief Risk Officer� Leads the development and implementation of

operational risk management.� Develops operational risk management strategy,

principles, framework and policy.� Implements appropriate operational

risk management processes and methodologies.� Advises management and business units on risk

management.� Exercises supervisory responsibilities over

operational risk management in addition toresponsibility over market risk, credit risk andother key risk types.

Risk Management FunctionThe core responsibility of the Operational RiskManagement function is the development andimplementation of operational risk managementacross the Group.This entails:� Drafting operational risk management policies,

standards, processes and procedures;� Developing and driving implementation and

maintenance of the operational riskmanagement framework;

� Developing tools, techniques, methodologies, riskframeworks, analysis, reports, communicationand training;

� Escalating high-priority issues to seniormanagement and the Board; and

� Liaising with external parties, e.g., regulators andexternal auditors, etc. on company’s operationalrisk management practices.


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ent� Assess the effectiveness of UCL’s information

security process.� Provide the resources (human capital, financial,

systems, etc.) required to implement securityinitiatives.

� Ensure risk assessments (procedural andtechnical) are performed and used to determinethe level of protection accorded to informationassets.

Chief Risk OfficerKey responsibilities of the Chief Risk Officer withrespect to information security are detailed below:� Promote the effectiveness of information security

within the organisation.� Ensure security initiatives and activities are

aligned with business objectives.� Provide appropriate resources to control

information-related risks.� Escalate information security incidents to the

MANCOM where necessary.

Internal AuditTo support the monitoring process without losingindependence, the Internal Audit function and ITdepartment’s key responsibilities are:� harmonise approaches used to evaluate

information risk from a security perspective;� harmonise checklists used to evaluate security

vulnerabilities and threats;� help shape the development of the monitoring

process to ensure that all key issues areaddressed;

� have access to the current situation of UCL asprepared by the IT Department; and

� audit the information security functions to ensureeffectiveness.

ComplianceThe Compliance function is to protect businessgrowth and sustainability by ensuring compliance toregulation.

Internal Control� helps shape the development of the monitoring

process to ensure all key issues are addressed;and

� monitors the transactions to ensure accuracy,integrity and completeness.

Information Technology DepartmentIT department is accountable for the secure storageand use of major information assets. Keyresponsibilities are as follows:� Ensure that information assets are properly

labeled.� Monitor the security condition of information

assets.

PhilosophyThe key elements of UCL’s information securitymanagement philosophy are the following:

The BoardThe Board and Management have the overallresponsibility to ensure that all information assetswithin UCL are protected and adequately secured.These responsibilities include preserving theconfidentiality, integrity and availability of all thephysical and electronic information to ensure allcustomer information receives adequate protection. Inaddition, it assures that UCL complies with all legal,regulatory, contractual and commercial requirementsof information security.

CultureUCL is committed to ensuring the confidentiality,integrity and availability of its customers’ informationthrough:� identification of the value of information through

appropriate risk assessments;� understanding vulnerabilities and threats that the

information assets may be exposed to; and� appropriate management of information security

risks for compliance with contractual and legalrequirements.

OversightThe Management Committee performs an oversightfunction spanning the entire information security basein UCL.Its function also includes ensuring that detailedpolicies, procedures and standards are created,updated regularly and effectively communicated tostakeholders.

GovernanceBoard of DirectorsThe Board as well as the Management Committeeand Chief Risk Officer are responsible forsafeguarding UCL’s information assets. Keyresponsibilities of the Board with respect toinformation security are:� approving UCL overall information security

framework and policy; and� ensuring that UCL information security posture is

maintained in line with its risk appetite andcommensurate with the risks associated withinformation assets.

Management Committee (MANCOM)Key responsibilities of the MANCOM with respect toinformation security are detailed below:� Ensure UCL implements an effective methodology

for managing information security.� Ensure detailed policies, standards and

procedures are created and effectivelycommunicated within the organization.


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ent with care and due diligence. The risk of

noncompliance with legal and regulatoryrequirements ranges from potential financial lossarising from regulatory sanctions, loss of business aswell as damage to the Group’s reputation.In ensuring compliance with laws and regulations,UCL has in place a compliance framework. Thecompliance function, under the leadership of theChief Compliance Officer, ensures that statutory andregulatory requirements are adhered to and ensuresthat breaches are promptly reported.While the primary responsibility for complying withregulatory requirements lies with all employeesconducting particular transactions or activities towhich regulation applies, the Management isaccountable for compliance performance.The current regulatory regime places muchpressure on financial institutions to know theircustomers and implement processes for combatingmoney laundering, as well as putting in placemeasures aimed at understanding regulations asthey affect the financial services industry and theimplication for non-compliance. In this regard, UCLhas reviewed its guidelines relating to anti moneylaundering and terrorist financing, incorporating newguidelines for KYC/KYB.

Governance structureThe management of regulatory risk encompassesensuring compliance with all the statutory andregulatory requirements.In line with best practice, the compliance function isresponsible for ensuring that UCL continuouslymanages its regulatory risk. Regulatory risk is the risk that occurs when financialinstitutions do not comply with the applicable lawsand regulations or supervisory requirements.Responsibility for managing compliance with internalrules created by UCL itself lies with the InternalControl and Compliance functions. These aremonitored as part of their normal duty of ensuringthat an effective system of internal controls ismaintained in UCL.Certain internal rules are of such importance that theManagement Committee (MANCOM) may require theinvolvement of the compliance function for effectiveimplementation. The compliance function is also, tothat extent, responsible for monitoring compliancewith internal rules, as determined by MANCOM fromtime to time.The compliance function operates independentlyfrom the Internal Control. However, the departmentleverages on the Internal Control & Complianceinfrastructure by administering compliancechecklists on business units and branches throughthe independent control and normal auditprocedures.

Roles and responsibilitiesRoles and responsibilities for compliance areassigned to various functions as follows:

� Review staff logical access rights to systems andapplication.

� Review the department/branch operatingprocedure.

� Ensure implementation of information securitycontrols.

� Ensure all staffs receive information securityawareness training before granting them accessto information assets,

All UCL employeesAll UCL employees are responsible for complyingwith the principles and policies of the informationsecurity policy where relevant to their jobs. They areresponsible for maintaining the security of allinformation entrusted to them. Any employee failingto comply with the policies could be subject todisciplinary action, potentially including terminationof employment.

COMPLIANCE RISKOverviewThe establishment of an independent compliancefunction in UCL is in line with best practices. Thecompliance function operates from head office toensure compliance with established rules andregulations. Highlights of the scope of coverage ofthe compliance function include:� regulatory compliance;� Anti Money Laundering and terrorist financing

compliance (including Know Your Customer(KYC), Know Your Customers’ Business (KYB)principles); and

� corporate governance compliance monitoring.The objectives of the compliance function, as a part ofan effective risk management, include the followings:� assist and support line management to ensure

that business is conducted in accordance withapplicable statutory, regulatory and supervisoryrequirements.

� enable UCL to demonstrate that it is proper toundertake its business.

� maintain fairness in all UCL dealings.� facilitate the management of compliance risks.� prevent disciplinary action by regulators.

PhilosophyThe Board approves the compliance framework andstrategies and delegated to the management forcompliance performance.UCL compliance risks are centrally managed by anindependent compliance function. The ComplianceRisk Management practices in UCL are subject toperiodic reviews by the internal audit.

Strategy and priorityUCL remains committed to complying fully withapplicable laws and regulations and to always act


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Board of Directors Assumes overall accountability for compliance performance.

Managing Director & CEO

RMF

MANCOM

Subsidiaries andtheir management teams

Department Heads and RMs

Branch Managers

All employees

Internal Control Assists the Compliance function in the conduct of independent monitoring.

Internal Audit Provides quality assurance for the Compliance function.

Chief Compliance Officer

External Audit

Responsible for day-to-day compliance with regulations applicable to area business.

Responsible for familiarising themselves with the regulatory requirements applicable to their business and ensuring that all transactions and activities in which they are involved are carried out in accordance with those regulations.

Responsible for the development, communication, leadership and implementation of the compliance strategy, policy, structure and process.

Reviews the compliance risk management process.

Assume overall accountability for compliance within their companies and their respective management is responsible for day-to-day compliance with regulations applicable to their business.

Designing overall risk management strategy of the Company and responsible for communicating views of the board and senior management regarding the risk management culture and risk appetite all over the Company.

Assume overall accountability for compliance within their Business Units.

Branch Managers assume overall responsibility for compliance in their branches and are responsible for conducting periodic compliance reviews.

Provides demonstrable support to the Compliance officer with the development of a compliance culture.

� Compiles and maintains a comprehensivecompliance manual for the Group.

OutlookThe regulatory environment has become even moredynamic in recent times. The policy on depositcollections comes with enormous challenges on thepart of NBFIs. The challenge is in putting in placeappropriate compliance risk management processesand procedures in knowing our customers andleveraging on our technology infrastructure tounderstand and manage the risk of transactions.Current measures aimed at understandingregulations as they affect the industry and theimplications for non-compliance are beingcontinuously improved through process rejuvenationand revalidation, which is then communicated to allemployees.

LEGAL RISKOverviewLegal risk management is an integral part of UCL’sRisk Management Framework. UCL recognises thatall aspects of its business activities are fraught withlegal risks, the growth of which may not only outstripits business growth. To this end, there is adedicated Legal Services Department withresponsibility for the effective management of thisportion of UCL’s overall risk profile.

ApproachAt UCL, our approach to legal risk management is to:� identify where and how things can and/or might

go wrong from the legal perspective;� determine the extent of any negative impact in

the event of its crystallisation;

Responsibilities of the Chief Compliance Officer(CCO)The CCO takes responsibility for compliance issuesincluding its Business Unit. The CCO works closelywith the Chief Risk Officer (CRO) in the performanceof the following specific responsibilities:� Assigns a sound compliance structure, process

and advisory service in order to ensure linemanagement’s compliance with current laws,regulations and supervisory requirements.

� Reports non-compliance with laws, regulationsand supervisory requirements to the ChiefExecutive Officer and the Board of Directors.

� Ensures, as far as possible, that no conflict ofinterest exists between the compliance functionand other internal control functions.

� Establishes a compliance culture in UCL Groupthat contributes to the overall objective of prudentrisk management.

� Establishes effective communication with linemanagement in order to continuously monitorcompliance with laws, regulations andsupervisory requirements.

� Ensures that regulatory requirements areincorporated into operational procedures andmanuals where appropriate.

� Makes recommendations whenever necessary toensure that laws, regulations and regulatoryrequirements are being complied with.

� Establishes effective mechanisms for reportingand resolving non-compliance with laws,regulations or regulatory requirements.

� Ensures required training of compliance staffs ontechnical knowledge of regulatory framework andassociated risks.



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ent � identify and grade the risks and impact of the

current controls;� establish controls to reduce or eliminate the legal

risks; and� monitor the controls to ensure effectiveness.In doing this, we continue to ensure that our policiesand operational guidelines do not only provide thestructure for the effective management and control ofidentifiable legal risks, but also bring UCL and itsemployees to a true appreciation of the legalconstraints impacting on UCL business activities.

GovernanceThe Legal Department oversees UCL’s legal riskfunction and reports directly to the Managing Directorand Chief Risk Officer. The department handles allthe legal issues of UCL’s claims against third partiesand/or UCL’s defence of claims against it. The unitmonitors and manages UCL’s litigation portfolio,including the evaluation, recommendation withexternal counsel interface.This department is also responsible for thedocumentation and perfection of the varioussecurities used to secure credit facilities extended toUCL customers.

OutlookDuring the year, we have deepened the skills of ourpeople in the areas of documentation, execution ofcourt decisions and the capacity of our branch officesand give it the needed impetus for its growing roles.Across all our operations, we will strive to optimiseour operational efficiencies through the effective useof technology for reliable data and performanceevaluation. We will seek to streamline our legalstructure for greater efficiency.

RISK

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Promote AwarenessSetting Risk AppetiteSetting ObjectiveRisk IdentificationRisk AssesmentRisk ResponseInternal ControlMonitoring


Md. Akter H. Sannamat FCA, FCS Mushfiq Ul Quayoom Abul Munim Khan

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TAUHIDUL ASHRAF FCSSVP & Company Secretary

With UCL since 22 August 2013

Born in September 1978


Committee MembershipMemberManagement Committee, CreditCommittee, Asset-LiabilityManagement Committee, CorporateGovernance Committee, Ethics &Compliance Committee, BASELIIImplementation Committee, HR &Compensation Committee andDisclosure Committee

External Appointment Nil

Qualification & ExperienceMr. Tauhidul Ashraf has 13 years ofextensive experience in Bank, NBFIs,Insurance & Group of Companies inSenior positions. Mr. Ashraf is aqualified Chartered Secretary. Hejoined Union Capital Limited on 22August, 2013 as SVP & CompanySecretary. Prior to his joining, heserved in H.R. Textile Mills Ltd.,Northern General Insurance Co. Ltd.,S. Alam Group of Industries, FirstSecurity Islami Bank Ltd., PrimeFinance & Investments Ltd. and AmanGroup under different capacities. Hepossesses versatile knowledge in theareas of Corporate Affairs,Administration, Share Management,Capital Market Operation etc.A Fellow Member of the Institute ofChartered Secretaries of Bangladesh.Mr. Ashraf was the MemberSecretary of Dhaka Regional Chapterof ICSB for two consecutive sessions.He attended a number of trainingcourses and seminars in home andabroad on Core Risk Management,Internal Audit & Control andCorporate Governance, the role ofCompany Secretary etc.

ABUL MUNIM KHANEVP & Head of Business

With UCL Since 18 October 2009

Born in February 1956


Committee MembershipMemberManagement Committee, CreditCommittee, Risk ManagementForum, Ethics & ComplianceCommittee, BASELIIImplementation Committee and HR& Compensation Committee

External AppointmentNil

Qualification & Experience Mr. Khan is a qualified professionalwith an MBA degree from IBA,Dhaka University and about 32years of extensive exposure inOperations, Credit Admin, CreditRisk Management and Marketingboth in Commercial (Conventional& Islamic) and InvestmentBanking. Mr. Khan is a selfmotivated individual who is marketdriven and result oriented havingCredit & Marketing exposure bothin UAE and Bangladesh. Attendedvarious workshops/seminars &training courses on credit,marketing & change managementissues at home & abroad.

MD. AKTER H. SANNAMAT FCA, FCSManaging Director & CEO

With UCL since 04 July 2012



Committee MembershipChairmanManagement Committee, Credit Committee, Asset-Liability Management Committee, Money LaunderingPrevention Committee, Corporate GovernanceCommittee, Ethics & Compliance Committee, BASELIIImplementation Committee, HR & CompensationCommittee and Disclosure Committee.

External AppointmentDirector, UniCap Investments LimitedCouncil Member, Institute of Bankers, BangladeshMember, Standing Committee, Financial Institution &Financial Services and FDI, Industrial Policy andPrivatization of SOEs of DCCIMember, Panel of Experts, DSEMember, Executive Committee, BLFCAVice President, Bangladesh Merchant Bankers Association

Qualification & ExperienceA dynamic and versatile management executive Mr.Sannamat in his outstanding 20 years of service lifeshowed outstanding performance in diverse areasunder different capacities. Prior to this, Mr. Sannamatwas the Chief Consultant of AHKC, CharteredAccountants – an Exclusive Correspondent Firm ofPKF International, UK and the Managing Director ofPrime Finance and Investment Ltd. where he workedfor more than 13 years.A Chartered Accountant, Mr. Sannamat obtained hisHonors and Master in Accounting from the University ofDhaka securing first class in all through his academiccareer. A Fellow Member of the Institute of CharteredAccountants of Bangladesh (ICAB) and the Institute ofChartered Secretaries of Bangladesh (ICSB), Mr.Sannamat took part in various training courses,seminars, and workshops in the areas of capitalmarket, risk management, good governance, auditing,credit, credit appraisal, secretarial practices etc. inhome and abroad.


Md. Morshed Alam Fazle Karim Murad Engr. A.N.M. Golam Shabbir FIEB Mohammad Redwanur Rahman FCA

MOHAMMAD SHAFI UDDINAVP & Branch In Charge,Chittagong

With UCL since 20 October 2010



Committee MembershipNil


Qualification & ExperienceMr. Shafi Uddin is an MSS(Economics) from ChittagongUniversity. He has 12 yearsexperience with Banks & NBFI.Before joining in UCL, he was withEastern Bank Limited, ONE BankLimited, Bank Asia Limited & TheCity Bank Limited and worked withCredit Administration Deptt &Credit Department.

FAZLE KARIM MURADVP, Corporate Finance

With UCL since 01 June 2000



Committee MembershipMemberAsset-Liability ManagementCommittee, Credit CommitteeMoney Laundering PreventionCommittee, Risk ManagementForum, BASELII ImplementationCommittee


Qualification & Experience Mr. Murad has completed M.Com(Marketing) from University ofDhaka and MBA major in financefrom American InternationalUniversity Bangladesh (AIUB). Hestarted his career with apromotional project namelyHORECA of British AmericanTobacco in December 1998 asProject Leader and worked therefor 6 months and then joined in aproduction house namely In-houseProduction in June 1999 andworked there for 9 months. InJune 2000 he joined UCL asJunior Associate and from thattime working in different segmentof lease and corporate financedepartment. In 2009 he waspromoted as Vice President ofLease and Corporate FinanceDepartment as responsible inMarketing to Corporate and SMEfinancing. Obtained varioustraining/ workshop/seminars atHome and abroad.

ENGR. A.N.M. GOLAM SHABBIRFIEBVP & Head of ICT, HR & Admin

With UCL since 17 December 1998



Committee MembershipMemberManagement Committee(MANCOM), CorporateGovernance Committee, Ethics &Compliance Committee, HR &Compensation Committee andDisclosure Committee


Qualification & ExperienceMr. Shabbir obtained his B. Sc.Engineering Degree in Electrical &Electronics Engineering from KhulnaUniversity of Engineering andTechnology. He has a wideexperience of over 14 years withNBFI in various capacities and 03years in different ICT vendors.Starting his career in Flora Limited,the then largest ICT vendor of thecountry, Mr. Shabbir also worked inUNICEF as LAN Consultant underemployment of Flora Limited. Prior tojoining at UCL Mr. Shabbir served asthe Manager of Hardware & NetworkDivision of Systematique ComputingLimited (SYSCOM). Besides ITexpertise, he is proficient in HRMand carrying full responsibilities ofHR & Administration Department forover 07 years and presently holdingthe position of Head of HR &Administration Department alongwith ICT Department. He attended anumber of seminars, workshops andtrainings, relating to the ICT and HR& Administration issues, at homeand abroad. Mr. Shabbir is a Fellowof Institute of Engineers Bangladesh.

ABDUL BAREQUESVP & Chief Risk Officer

With UCL since 11 Nov 2013



Committee MembershipMemberCredit Committee, Asset-LiabilityManagement Committee, MoneyLaundering Prevention Committee,Risk Management Forum, Ethics &Compliance Committee


Qualification & Experience Mr. Bareque obtainedMSS(Economics) degree underDhaka University, Post GraduateDiploma in Bank Management(PGDBM) from BIBM and BankingDiploma(both part) from Institute ofBankers of Bangladesh. He hasvast experience in banking arena.He served in Bangladesh Bank forabout 33 years in differentdepartments in different positionslastly as Deputy General Manager.Prior to joining here Mr. Barequeserved in Japan BangladeshGroup as Executive Director andlastly in ICB Islamic Bank Limitedas Special Project Adviser ofICCD. Mr. Bareque served as aFaculty Member of BangladeshBank Training Academy for about 5years. He conducted manysessions for the direct recruitedofficers of Bangladesh Bank andalso for others Banks and NBFIs.He attended many sessions ofdifferent Training Academy ofdifferent Banks and also indifferent NBFIs as Guest Speaker.When he was in Bangladesh Bankhe looked after the supervisionworks of NBFIs for about 5 years.Mr. Bareque attended a number oftrainings, workshops and seminarsat home and abroad.


Zafor Uddin Ahmed Mohammad Shafi Uddin Engr. Md. Israil Hossain FIEB

MD. SHOHIDUL ISLAMAVP & Head of SME

With UCL since 01 November2010

Born in March 1965


Committee MembershipMemberCredit Committee


Qualification & ExperienceMr.Shohidul has completed MSS(Political Science) from Universityof Rajshahi. He started his careerwith BRAC NGO on October 1991as a Programme Organizer(Education programmee, Creditand MELA Programme) andworked there up to May 2001.There after he joined BRAC BANKas Senior Officer in SMEDepartment and worked there fromJune 2001 to October 2010 invarious capacities and his lastposition was BusinessDevelopment Manager (FAVP). Mr.Shohidul joined in UCL on 1stNovember 2010 as Manager &Head of SME and presentlyholding the position of AssistantVice President. Mr. Shohidulreceived various training/workshop/seminars from home andabroad.

RAIHAN UDDIN AHAMMAD ACAAVP & Head of ICC

With UCL since 1 September 2013



Committee MembershipMemberCorporate Governance Committee,Risk Management Forum, MoneyLaundering Prevention Committee,and Disclosure Committee


Qualification & Experience Mr. Riahan Uddin Ahammad is anassociate member of the Instituteof Chartered Accountant ofBangladesh (ICAB). He obtainedhis business degree form theUniversity of Dhaka. After obtainingbusiness degree from University,Mr. Raihan joined in RahmanRahman Huq, CharteredAccountant (A member firm of theKPMG International). Aftersuccessful completion of articleshipfrom Rahman Rahman Huq, Mr.Raihan joined a renownedcorporate group namely STSGroup as the Finance Manager.Prior to his current assignment asthe Head of ICC at UCL, he servedSTS Group as Finance Managerfor more than 2 years. Mr. Raihanis also a faculty member of theICAB conducts class forprofessional students at ICAB.

MD. FORHAD HOSSAIN ACAAVP & CFO (CC)

With UCL Since 4 September 2013



Committee MembershipMemberManagement Committee(MANCOM), Asset-LiabilityManagement Committee,Corporate Governance Committee,BASELII ImplementationCommittee, Risk ManagementForum and Disclosure Committee


Qualification & ExperienceMr. Md. Forhad Hossain ACA is anAssociate Member of the Instituteof Chartered Accountants ofBangladesh (ICAB). Mr. Forhadhas completed his BBA and MBAfrom University of Dhaka major inAccounting and InformationSystems. He has completedarticleship from KPMG RahmanRahman Huq, CharteredAccountants, a member firm ofKPMG International in the processof being a member of ICAB. Mr.Hossain started his career withWarid Telecom InternationalBangladesh Limited as internalauditor. Prior to his currentassignment at Union CapitalLimited as AVP, Finance &Accounts, he served IPDC ofBangladesh Limited as SeniorManager, Finance & Accounts.

ENGR. MD. ISRAIL HOSSAIN FIEBAVP, Capital Market Operation

With UCL since October 2012



Committee MembershipNil


Qualification & ExperienceMr. Hossain is an M.Sc inComputer Science and obtainedhis B. Sc. Engineering Degree inMechanical Engineering fromBangladesh University ofEngineering and Technology(BUET). He has more than 11years of extensive experience inCapital Market both in Securitieshouse and Merchant Bankingoperation. Before joining in UCL,he worked in Sonar Bangla CapitalManagement Ltd. as Head ofOperations. He also served in BDFinance Securities Ltd. as AVP &Head of Operations and in PrimeFinance & Investment Ltd. asSenior Manager.


MANAGEMENT COMMITTEESCommittee Members Major ResponsibilitiesManagementCommittee(MANCOM)

Md. Akter H. Sannamat FCA, FCS, ChairmanAbul Munim Khan, MemberTauhidul Ashraf FCS, MemberEngr. A. N. M. Golam Shabbir, MemberForhad Hossain ACA, Member

The Management Committee is responsiblefor managing and conducting company’sbusiness as designated by the Board ofDirectors, or under specific resolution of theBoard of Directors. It has the authority tomanage the company’s business according toset policies and plans.

Asset-LiabilityManagementCommittee

Md. Akter H. Sannamat FCA, FCS, ChairmanAbdul Munim Khan, MemberTauhidul Ashraf FCS, MemberAbdul Bareque, MemberFazle Karim Murad, MemberForhad Hossain ACA, MemberMohammad Abu Zubayer Bhuiyan, Member

Responsible for managing various financialrisks of the company such as market, interestrate and liquidity. The ALCO reviews marketand credit portfolio risks, as well as interestrate risk inherent in the Company’s balancesheet. It meets regularly to ensure that thelevel of interest rate exposures are withinregulatory and internal limits, to maximize thecompany’s net interest income, to ensureadequate liquidity and to maximize the returnon the Company’s capital.

CreditCommittee

Md. Akter H. Sannamat FCA, FCS, ChairmanAbul Munim Khan, MemberTauhidul Ashraf FCS, MemberAbdul Bareque, MemberFazle Karim Murad, MemberShohidul Islam, Member

Oversee the credit and lending strategies andobjectives of the Company and approve thefinancial proposals within the limit delegatedby the Board. The Committee is alsoresponsible to review all financing proposalsbefore placing the same to the ExecutiveCommittee/Board.

RiskManagementForum

Abdul Bareque, Chief Risk OfficerAbul Munim Khan, MemberEngr. A. N. M. Golam Shabbir, MemberFazle Karim Murad, MemberForhad Hossain ACA, MemberRaihan Uddin Ahammad ACA, MemberEng. Md. Israil Hossain, MemberAbu Zubayer Bhuiyan, Member

Establish and maintain an effective riskmanagement environment in the company;review proposals in respect of credit policiesand endorse them to the Board of Directors forapproval; review periodic credit portfolioreports and assess portfolio performance;ensure compliance with UCL credit policiesand statutory requirements prescribed by theregulatory/supervisory authorities;

MoneyLaunderingPreventionCommittee

Md. Akter H.Sannamt FCA, FCS, ChairmanTauhidul Ashraf FCS, MemberAbdul Bareque, MemberFazle Karim Murad, MemberRaihan Uddin Ahammad ACA, MemberMohammad Abu Zubayer Bhuiyan, MemberShah Md. Julker Nine Sarker, Member

Responsible for prevention of the use ofcompany’s products and services from moneylaundering; preventing from the damage ofcompany’s reputation by association withmoney launderers; ensuring that the companyis complying with the relevant laws andregulations relating to anti-money laundering &Terrorist Financing.

GovernanceCommittee

Md. Akter H. Sannamat FCA, FCS, ChairmanTauhidul Ashraf FCS, MemberEngr. A. N. M. Golam Shabbir, MemberForhad Hossain ACA, MemberRaihan Uddin Ahammad ACA, Member

Review and discuss the issues relating togood governance practices and ensure thatthe conditions and guidelines on corporategovernance are complied with.

The Authority of Management Teamresponsiable for execution ofdelegated responsibilities


Committee Members Major ResponsibilitiesEthics &ComplianceCommittee

Engr. A. N. M. Golam Shabbir, Focul PointAbul Munim Khan, MemberTauhidul Ashraf FCS, MemberAbdul Bareque, MemberForhad Hossain ACA, MemberRaihan Uddin Ahammad ACA, Member

Implement ethical business practices;arranging meeting with stakeholders onintegrity, identification of areas ofimprovement and planning of training fordevelopment of ethical practices, analysis ofexisting laws, rules and regulations andidentification of problems and makingrecommendation for solving those problems,developing job evaluation guidelines andrewarding the performers with integrity,implementation of e-governance system,review whether the Company's business isconducted ethically and in sociallyresponsible manner; Ensure whether theemployees are complying with the ethicalprinciples and code of business conduct;Review and evaluate compliance of laws,rules and regulations.

Basel IIImplementationCommittee

Md. Akter H. Sannamat FCA, FCS, ChairmanAbul Munim Khan, MemberTauhidul Ashraf FCS, MemberFazle Karim Murad, MemberForhad Hossain ACA, Member

Responsible for the implementation of BaselAccord for NBFIs. Lay down the overallsolution framework for Basel II complianceand prepare a clear and comprehensiveimplementation roadmap covering the variousstage of implementation.

HR &CompensationCommittee

Md. Akter H. Sannamat FCA, FCS, ChairmanAbul Munim Khan, MemberTauhidul Ashraf FCS, MemberEngr. A. N. M. Golam Shabbir, Member

Recommend the requirements of Managementpersonnel for different sections of thecompany; Interview for selection, andrecruitment of management cadre and takedisciplinary action against them, if situationdemands; Evaluate the performance ofemployees annually; Evaluate effectiveness ofthe HR Policy, Assess the workload, strengthand weakness of the officers and executives.

DisclosureCommittee

Md. Akter H. Sannamat FCA, FCS, ChairmanTauhidul Ashraf FCS, MemberEngr. A. N. M. Golam Shabbir, MemberForhad Hossain ACA, MemberRaihan Uddin Ahammad ACA, Member

Assure compliance with the disclosure andtransparency requirements and the listingrules, and to ensure that the routes ofcommunication between UCL members, thedisclosure committee, the company secretarialoffice and investor relations are clear so thatthe company is able to comply fully with itscontinuing obligations under the disclosurerequirements.

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ORGANIZATION CHART

Board of Directors

Managing Director

Green Banking Committee

Deputy Managing Director

Operation & Marketing

Head of the Department

BranchOffice

Credit Administration

Special Assets Management

LegalUnit

SME

Corporate Finance

Real Estate Finance

Factoring & Others

Capital Market Operations

Internal Control& Compliance

Compliance

Risk Management

Board Audit Committee

Executive Committee

Audit & Inspection

Research & Development


Information & Technology


HRM & Administration


Finance & Accounts



Accounts &Taxation

Rental & Cheque Management

Compliance & Reporting

Treasury

BoardSecretariate

Company Secretary

CorporateAffairs

Investors relations

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

TeamMembers

The Framework around which UCL is organized. It tells how the organization is puttogether and how it works.

Illustrates the managementstructure of UCL


SUSTAINABILITYDEVELOPMENT REPORT

IN THIS SECTION

Framework for Responsible Business 140

Corporate Social Responsibility 142

Environment Initiative 148

Corporate Culture 149

Contribution to National Economy 151

Human Resource Report 154

Human Resource Accounting 157

Value Added Statement 160

Market Value Added Statement 161

Economic Value Added 162

ur Framework for Responsible Business defines the principles bywhich we manage the business, sets the context for corporate

governance, and helps us take account of economic, environmental andsocial factors in our decisions. Our Framework is based on three businessgoals, which comprise a number of underlying values:� Sustainable Growth. � Profits with Responsibility. � Investing in the Future.

SUSTAINABLE GROWTHWe are constantly looking to expand and grow our business bytransferring our skills to new markets. Growth needs to be sustainable ifwe are to bring long-term value both to our shareholders and to others. Sowe must: � Contribute to the economic growth of our country through the way in

which we manage and invest in our business. � Act with honesty and integrity as we undertake and develop our

business.� Protect the future of our business by proactively managing existing

and future non-financial and environmental risks. � Value our employees through inclusion. � Employ the right number of people with the right skills for the work we

have to do. � Treat our employees fairly. � Act in accordance with all laws and regulations. � Respect human rights.

PROFITS WITH RESPONSIBILITYFor our business to be sustainable, we must be profitable. However,increasing our profitability at any cost is neither sustainable noracceptable. We therefore have tobe responsible in the way in whichwe generate our profits. So wemust: � Improve our efficiency without

compromising the reliability andintegrity of our operations.

� Maintain a sound system ofinternal financial control.

� Be efficient in our use ofnatural resources.

� Keep our waste to a minimumand increase the economicvalue of any waste we produce.

� Help protect the environmentfor future generations, includingmaking our contribution tominimizing climate change.

� Safeguard each other andthose who work with us byoperating an healthy workplace and protect the safety of the publicthrough the integrity of our operations.

� Help our employees balance work with their other commitments.


We must actkeeping theenvironment inmind meaning tobe conscious of allthe things we doon a daily basis. Allof our actionsaffect others liveson the Earth,including otherhuman beings. It’simportant to thinkbefore we act.

We believe that our successis directly linked to thesustainability of ourcommunities and the naturalenvironment. We alsobelieve that actions speaklouder than words, byestablishing green initiativeswithin our organization wehope to do our part to createan even brighter future forour organization and thecommunities we serve.When we think about Green,we think about three R’s:Reduce, Reuse andRecycle. This is the first stepof living green.

FRAMEWORK FOR

RESPONSIBLE BUSINESSOutlines how UCL achievesvision managing its business ina responsible way

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Business Conduct, policies and public positionstatements support the framework.

� We intend to play a central role in tackling thechallenges of energy security, climate change,and making energy affordable.

� We want UCL to be a company where peoplewant to work and where they can develop to theirfull potential. We will support our employees withthe right training, knowledge and resources. Wewill trust them to use their skills and expertise todo their jobs well. We will always make sure thesafety and wellbeing of our employees, contractpartners and the public are at the centre ofeverything we do.

� We are a long-term business and these are long-term commitments. We have a duty to delivervalue to our shareholders and they too areessential to our long- term commercial success.This allows us to invest in the future to furtherbenefit our customers, shareholders, employees,the environment and society as a whole, ensuringwe have a successfuland sustainable future.

� We believe it is notacceptable to make aprofit regardless of theeffects this may haveon the environment,society, our customersor our employees. Ourreputation depends onour stakeholders beingable to trust us and beconfident in us. We willonly retain our right tooperate by working tothe highest standards,by trusting ouremployees to do theright thing and byrunning our companyresponsibly and sustainably.

� We continually look to improve our performanceand reputation as a responsible and sustainablecompany. To do this, we must make sure that weare open and honest with all our stakeholders.

� Respect our customers by conducting ourbusiness in a professional manner.

� Be open and constructive in the dialogue wehave with our stakeholders.

INVESTING IN THE FUTUREAs a responsible business, our commercial successenables us to invest in the future in a way thatbenefits our shareholders, our employees, theenvironment and society. This investment is areflection of our desire to be a long-term business.So we:� Seek to deliver progressively increasing returns

for our shareholders. � Enable others to contribute to economic growth

by providing high-quality dependable services. � Improve, where we can, the environmental status

of the land on which we operate. � Contribute to the development of new initiatives

aimed at improving the environment and thequality of life.

� Develop our employees so that they can addvalue to the company, to themselves and tosociety.

� Recognize and reward our employees for thecontribution they make.

� Encourage and support investment in thecommunity through both the activities of ouremployees and our financial contributions, withan emphasis on developing partnerships.

Our Framework for Responsible Business wasdeveloped in 2012 applies to all of our operationswith a view of achieving our aims as detailed below :� We, at UCL, will be the foremost financial

institution, delivering unparalleled safety, reliabilityand efficiency, vital to the wellbeing of ourcustomers and communities.

� We are committed to being an innovative leaderin financial sector and to safeguarding ourenvironment for future generations.

� Our Framework for Responsible Businessoutlines how we will achieve these aims bymanaging our business in a responsible way. Itexplains how we take account of environmental,economic and societal issues when we make ourbusiness decisions. Our Standards of Ethical


We have a duty todeliver value to ourshareholders and theytoo are essential to ourlong- term commercialsuccess. This allowsus to invest in thefuture to further benefitour customers,shareholders,employees, theenvironment andsociety as a whole,ensuring we have asuccessful andsustainable future.

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VISIONCL is committed to doing better for our clients, our investors, ouremployees and our communities through a focused approach to

corporate responsibility. Our goals are to demonstrate integrity in ourbusiness practices and provide leadership in the workplace and themarketplace. We are committed to be a strong supporter of thecommunities in which we do business and to transparency insustainability reporting practices.

STRUCTUREAt UCL, our whole company, every employee, is responsible forbehaving responsibly, as outlined in our Code of Conduct. It is our dutyas a corporate citizen to add value to the society while earning a profitfor our shareholders. UCL group takes responsibility for the effects oftheir actions, both social and economic.

REPORTINGUCL has adopted a multi-pronged approach to reporting our corporateresponsibility practices, sometimes called non-financial or sustainabilityreporting. We undertake a range of reporting activities geared tovarious stakeholder groups, with our website being our primaryreporting medium.

OUR APPROACHThe corporate responsibility priorities are relatively new, yet they reflectaspects of this company that have been around for many years. Ourjourney to build the priorities considered:� The Guiding Principles that provide a foundation for UCL’s

corporate values;� The Leadership Profile as a standard of behaviour expected from

our leaders;� The multitude of stakeholder interactions keeping us connected to

the needs and concerns of those we affect;� An understanding of materiality to help us navigate and assess

immediate and emerging social and environmental issues; and� Finally, UCL’s business strategy, which articulates the direction of

UCL.

PRIORITIESTaking all the above components, we crafted the following CorporateResponsibility priorities:

Be customer focused� Treat customers fairly, and provide support in tough times; � Be the financial institution of choice.

Build an extraordinary workplace� Build a fair, diverse and inclusive workplace that reflects the

communities we serve; � Attract and retain talents and create opportunities for continued

development.

Be an environmental leader� Continuously improve our environmental footprint;� Protect and enrich the natural environment;


CORPORATE

SOCIAL RESPONSIBILITY

We strive to take activeresponsibility for our dailychoices that UCL faces:How should we beststructure and govern ourCompany? How shouldwe best serve our clientsin terms of ethics, privacyand services? How shouldwe attract the best talentsand motivate ouremployees? How shouldwe contribute to ourcommunities in which weoperate our business?How can we minimize theimpact of our businessactivities on theenvironment? and Howcan we grow our companyin a sustainable way?

Serving as a responsiblecorporate citizen

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� Manage the social and environmental risks of ourlending and investment products.

Make an impact� Contribute to the economic and social

development of the community we serve;� Be transparent about the way we conduct our

business.

UCL AND ITS CUSTOMERSTaking responsibility – to be customer-drivenApproachWe want to deliver legendary experiences that willinspire our customers to trust us with more of theirbusiness and recommend us to their friends andfamily. Every part of our business, and everyemployee, are measured on the contribution theymake to our customers’ experience with us. Ourapproach is to treat customers fairly, support themwhen they go through difficult times and consistentlydeliver on our goal to be a leading financial institution.

2014 Challenge� Continuing economic uncertainty created financial

difficulties for many customers.� Maintaining our standard of customer service as

we diversify our business.� Balancing needs-based financing with targets for

revenue growth.

Customer ExperienceWe evaluate our performance based on our customersatisfaction. This helps us to set targets and driveimprovement. We exchange our views withcustomers to evaluate our performance in a numberof areas, such as:� showing we value our customers;� listening carefully to understand our customers’

concerns and questions;� providing prompt responses to requests; and� showing genuine interest in helping our

customers.

A safe and secure business experienceOur customers tell us that it makes a big difference intheir lives when they can have confidence in oursystem, the safety of their deposits. We arecommitted to managing our business in a way thatreinforces their confidence and protects their fundand information. We do this through compliance withexternal regulations, as well as through a range ofinternal policies, including those that cover:� our Code of Conduct and Ethics;� anti-money laundering and terrorist financing; and� information security and fraud protection.

Our Code of Conduct and EthicsThe Code provides a framework for how we interactwith one another, our shareholders, customers and

community. The Code addresses issues such as howto handle potential conflicts of interest and ensureconfidentiality of information. Employees understandclearly that any irregular business conduct, includingbribery, corruption or insider trading, will not betolerated. Any breach is considered a seriousoffence, and employees must report any possibleviolations they witness. As a responsible financial institution and corporatecitizen, UCL together with its subsidiaries iscommitted to conducting its affairs to the higheststandards of ethics, integrity, honesty, fairness andprofessionalism – in every respect, without exception,and at all times. While reaching our business goals iscritical to our success, equally important is the waywe achieve them.

Anti-money laundering and terrorist financingUCL is strongly committed to preventing the use ofour financial services for money laundering andterrorist financing purposes.Our Anti-Money Laundering Compliance developsand maintains policies, guidelines, training and riskassessment tools and other controls to help ouremployees protect UCL and our clients and to ensurewe are managing ever-evolving money launderingand terrorist financing risks.Our controls in this area incorporated Know YourCustomers rules required by Bangladesh Bank toensure we properly identify our customers andprotect against the illegal use of our products andservices.

Information Security and Fraud ProtectionUCL has a dedicated team of security and fraud-management professionals who oversee securitystandards to protect our systems and our customerinformation against unauthorized access and use.They continually assess our security programs toensure our customers can place complete confidencein our facilities.UCL has a sound technology risk-management andinformation security program in place to help keepconfidential and private information secure andprotected. This program helps protect UCL’s internalsystems from unauthorized access.

Transparent Product InformationWe want to help our customers understand thefinancial products and services they avail. Ouremployees are trained to take sufficient time toexplain issues and answer questions.We make product information readily available in ourdifferent offices, as well as on our websites.

Responsible MarketingUCL meets or exceeds the laws and regulationsrequiring us to disclose basic information about thefinancial products and services we offer. We ensurethat our products and services meet genuine needsand that customers do not feel any undue pressureto buy unwanted products or services.Promoting our products and services responsibly is


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2014 Challenges� We face a continuing challenge recruiting people

with requisite skill and knowledge.� Managers are looking for tools, training and

increased cultural awareness to prepare them forthe challenges of managing adverse workforce.

Employee FeedbackWe track employee engagement through internalsurvey and open to every employee.Entry and exit surveys are used to better understandhow employees rate their experience of joining UCLor choosing to leave. Newly hired employees areasked to rate UCL on the hiring and recruiting processand if they felt supported during the first few monthson the job. Questions that are in the list given below:

RecruitmentOur recruitment activities are designed to make surewe’re well positioned to meet our future businessneeds. Welcome to UCL is an orientation course fornew employees. It introduces them to UCL culturethrough interviews with employees and executivesabout who we are, what we stand for and whatmakes UCL an extraordinary place to work.We believe in open access to all internal careeropportunities. Although UCL has a strongcommitment to developing leaders from within, due torapid growth and the increasing complexity of ourbusiness, we have hired external executivecandidates with the specific skills we need.

RetentionUCL has a unique culture of working environmentthat would be reflected from the following table :Employee Turnover (%) 2013 2012 2011Voluntary 8.08 7.37 10.20Retirement 2.02 - -TOTAL 10.10 7.37 10.20

also a fundamental obligation. UCL has programsand processes in place, to ensure adherence to lawsand regulations related to marketing communications,which include advertising, promotion andsponsorship.

Inclusive investmentAs a financial services provider we have a role toplay in supporting access to financial services to helpour customers. We provide a variety of specialproducts for senior citizen, students/youth and low-income customers.We offer a number of deposit options:� For seniors, we offer monthly deposit scheme

which features special profit rate.� For student/young people, we offer monthly and

periodical deposit schemes that features specialand flexible rate of profit.

� We offer personal deposit scheme forunemployed and housewives that featuresdeposits of small amount.

Helping small businesses contribute to oureconomy In our economy, small businesses are the lifebloodfor sustainable economic development and that’s whyUCL consistently stands besides these vitalenterprises. Our support for small business includesaccess to financing, specialized services and adviceand education.Small business credit products are available at allUCL branches. To better assist small businesscustomers who have complex credit needs, UCLseek to understand the unique needs of eachbusiness, offer proactive and innovative solutions,provide expert advice and help customers obtain theright products and services.

UCL AND ITS EMPLOYEESTaking responsibility – to build an extraordinaryworkplaceApproachWe want our employees to feel engaged in what theydo, empowered to make a difference, excited byopportunities to develop and grow to their fullpotential, and recognized for their uniquecontributions.We aspire to be increasingly inclusive by identifyingand eliminating barriers or biases. We celebrate andwelcome difference and work to constantly improveour employees’ experience.The UCL culture has many elements: our drive todeliver exceptional customer service; our passion forthe environment and for giving back to thecommunities we serve; and our determination tocreate a unique, diverse, respectful and safeworkplace for our employees to grow and develop.It doesn’t happen overnight, and there are manysteps along the way to building the workplace wewant to see across UCL.


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■ I feel comfortable bringing work-related concerns to my manager.

■ My manager provides ongoing feedback that helps me to improve my performance.

■ In the last 12 months, I have had opportunities to develop my skills and abilities.

■ I am able to achieve the balance I need between my personal life and my work life at UCL.

■ UCL is genuinely committed to the well-being of its employees.

■ UCL treats employees fairly regardless of their age, family/ marital status, gender or religion.

■ UCL takes a genuine interest in the well-being of community in which it does business.

Yes No

Yes No

Yes No

Yes No

Yes No

Yes No

Yes No

TransitionsAs part of our commitment to be a best run company,we look for ways to streamline our operations andsimplify our processes so that we can improve thevalue and service we provide our customers.Sometimes these changes result in the consolidation orreassignment of work. To minimize the impact of thesedecisions on our employees, our practices are to:� keep employees informed;� offer employees the opportunity to apply for other

internal positions;� make every effort to minimize the overall impact

through natural attrition; and� provide appropriate support, including employee

training.

Compensation and BenefitsThe objective of our compensation strategy is toattract, retain and motivate high-performingemployees to produce long-term profitable growth. Toachieve this, UCL’s compensation includes basesalary and performance incentives that are alignedwith the company’s strategy and business objectivesand are competitive within our industry. We work toensure a consistent approach to compensationacross UCL that fosters a pay-for-performanceculture. In 2013, we spent Tk. 72.05 million inemployee compensation and benefits.Compensation is designed to be fair and withoutdiscrimination and we ensure that it is competitive inthe markets in which we compete.

Performance and DevelopmentAt the core of employee development at UCL is ourPersonal Performance & Development process. Weencourage employees to take ownership of theircareers and personal development and helpmanagers prepare for personal development andcareer planning discussions. All managers andemployees participate in year-end reviews.

Investment in Training and Development(Figure in million Taka except hour/days) 2013 2012UCL’s investment in training 0.10 0.27Average number of days of training 1.38 1.97Average hours of training per executive 6.19 4.40

Leadership DevelopmentBuilding talent at UCL for today and tomorrow iscritical to our future growth and is a keyaccountability for UCL executives and leaders at alllevels. Business leaders complete an annual reviewto identify future leaders who are capable of takingon executive responsibilities.Our CEO, the Senior Executive team and otherleaders participate in and help facilitate UCL’sleadership development programs.

Communication and RecognitionOpen and direct communication is an evolving part ofUCL’s employee experience. We’ve learned,

especially through organizational changes, thatemployees value getting the straight story from theirmanagers and being able to talk openly about issuesthat concern them.

RecognitionTo acknowledge and celebrate individual and teamsuccess we have a number of programs that includeinformal recognition and celebration events.We are going to launch this year to formally celebrateEmployee Appreciation Week to acknowledge theoutstanding contributions UCL employees makeevery day through events and activities.

Employment Equity PolicyOur Employment Equity Policy states: UCL Group iscommitted to maintaining a workplace where theterms and conditions of employment are fair and non-discriminatory. It is the right of every employee to betreated with dignity and respect, within a workenvironment conducive to productivity, self-development and career advancement, regardless ofrace, colour, religion, age, sex, marital status etc.

Inclusive WorkplaceWe are committed to fostering an inclusive,accessible environment where all employees andcustomers feel valued, respected and supported.This means building a workforce that reflects themany different human facets of the communities welive in and serve, including cultures, languages,genders, ages, abilities and disabilities. We strive tocreate an environment where every employee hasthe opportunity to reach his or her potential.While our key areas of focus continue to beimportant, over time employee feedback hasidentified four priorities that are common to allgroups. These priorities shaped our thinking ondiversity and inclusion in 2013. They are:� recruitment : focus on reaching the broadest

possible talent pools. We do this by buildingawareness and relationships amongst allemployees;

� mentoring and networking : support all employeesas they build knowledge, skills and capabilitiesthat will help them succeed;

� talent management : ensure diversity andinclusion that are integrated into all aspects ofresource planning, performance and developmentand personal career management; and

� training and development : embed diversity andinclusion principles into both formal and informallearning so that employees can understand anddiscuss key topics.

Whistleblower ProgramUCL has recently developed a whistleblowerprogram for employees. Employees cananonymously report any concerns regarding theintegrity of UCL accounting, internal accountingcontrols or auditing matters, as well as any concernsrelating to ethical or legal matters or any allegationsof retaliation.


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EducationEducation are important to UCL. To make an impactin these areas, we work in partnership withcommunity organizations to raise literacy levels witha focus on underserved community people.

Creating opportunities for young peopleUCL strives to create opportunities for youth so theycan develop educationally, socially and artistically inorder to fulfill their potential. These are difficulteconomic times for many young people in oursociety, as well as the organizations that run orsupport youth services. We believe that makes iteven more imperative for companies like UCL to playa role by creating opportunities for graduates throughinternships and employment.

Responding to DisastersIn the wake of devastating natural disasters in thepast, UCL provided corporate funding and ouremployees raised money to support recovery effortsas well as provide support and comfort for thoseforced out of their homes. We pulled together tomake a difference life for:� flood affected people;� victim of natural disasters like SIDOR, AILA etc.� those affected by cold waves/havoc;

VolunteerismUCL employees care and want to make a difference,so we look for programs in which our employees canalso engage. We connect community organizations –which often consider human support as valuable anasset as financial support – with interested UCLemployees. By volunteering, UCL employees aretaking responsibility to help enrich the well-being oflocal communities. Volunteering also givesemployees opportunities to build their skills, networkand learn more about their communities.

Civic ContributionsUCL is a member of different associations that trackand advocate on issues of interest to theirmembership, including the Dhaka Chamber ofCommerce and Industry, Bangladesh Association ofPublicly Listed Companies, The Institute of Bankers,Bangladesh.UCL is also a member of Bangladesh Leasing andFinance Companies Association an apex body offinancial institutions that serves common interest ofmember companies.

UCL & ITS ENVIRONMENTTaking responsibility – to be an environmentalleaderOur ApproachWe equate a healthy environment with a healthyeconomy. The combined pressures of populationgrowth and urbanization place growing demands onbasic resources – such as energy, water, and land.These resources are becoming increasinglyconstrained, and costs are rising.

UCL AND ITS COMMUNITYTaking responsibility – to make an impactApproachWe strive to make a positive impact where we dobusiness and where our customers and employeeslive and work. For us, that means contributing to thesocial and economic development of ourcommunities in meaningful, long-lasting andinnovative ways.

2014 Challenges� Responding to local needs while maintaining a

focus on our giving priorities.� Multiple demands involving issues: in the area of

education, for instance, UCL receives fundingrequests to support scholarships, contribution forhelping distressed people, assistance foreducation of underprivileged and disabledchildren.

Our Strategy:� Create opportunities for young people so they

can fulfill their potential� Work with communities in need, to

build a more prosperous and inclusivefuture

� Protect and enhance the environment� Engage our employees, customers

and partners to make a differencetogether in our communities.

Our PrioritiesOur community giving priorities are:� Education;� Creating opportunities for young

people;� Responding to Disasters; � Volunteerism; and� Civic Contributions.We invest in community programs thatsupport and promote each of these areas.In addition, we look for opportunities toinvest in initiatives that support diversity

across our giving priorities (e.g., financial assistancefor disabled and underprivileged children).


Volunteerism.Philanthropy. Soundbusiness practices andethics. And aconservation-mindedapproach to protectingthe environment. All areintegral to UCL’s cultureof caring and form thefoundation of ourcorporate socialresponsibility (CSR).Our commitment to aculture of caring meansthat by turning moneyinto good works, weextend a helping handto those who may beunable to care forthemselves.

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Just like our customers, employees, and communitywe are concerned about reducing our environmentalimpacts. How to manage the growth of a business,while reducing demands on scarce resources, is atthe heart of responsible development. Whetherthrough our financing activities, our products andservices, or how we operate our facilities, this is topof mind for UCL.

2014 Challenges� Achieving targets on paper reduction� Increase environmental awareness and build

employee engagement.� Continuing to manage the environmental and

social risks associated with financing activities.

Environmental PillarsOur goal is to be an environmental sensitive. Wehave been building an environmental strategy thatwill be embedded within UCL’s vision and mission.Our environmental strategy will reach across allaspects of our business and will be managedthrough:� Reducing the environmental footprint of our

business operations;� Responsible financing;� Engaging our environmental stakeholders in

dialogue to promote understanding and solutions. While there are many environmental issues thatneed attention, we concentrate our efforts onissues where we can be most effective. In responseto feedback from customers, employees and otherenvironmental stakeholders, we selected two areasto focus on: energy and paper.

Reducing UCL’s Operational FootprintWe’re committed to continuous improvement to lowerUCL’s operational footprint through:� reducing energy use across UCL’s business

operations and fleet;� reducing non-paper waste and e-waste; and� reducing paper usage;

Responsible FinancingOur financing activities include loans, lease, projectfinancing etc. Our goal is to make balanced, informedand transparent financing decisions. We work withour clients and stakeholders to proactively mitigateenvironmental and related social risks in ourfinancing activities.UCL is an investment bank and a nominalpercentage of total investment involves clientsoperating in environmentally and socially sensitiveindustries such as power generation, automotive andchemicals.UCL has developed the following policies thatsupport responsible financing:

Protecting BiodiversityUCL does not lend money for transactions that wouldresult in the degradation of protected critical naturalhabitats.

Illegal and restricted businessWe do not lend money fortransactions that are directlyrelated to the trade in ormanufacturing of material forchemical or biological weaponsor cluster bombs, tobacco etc.

Anti-CorruptionUCL applies anti-corruptionand anti-fraud controls toactivities that are known to besusceptible to criminal activityor have been designated asbeing at high risk for moneylaundering or terroristfinancing.

Renewable FinancingUCL promotes energy diversityas a means of meeting thegrowing energy demand andsupply gap. Financing ofrenewable projects is in the priority list of ourinvestment.

We firmly believe thatbeing a responsiblebusiness directlycontributes to ourfinancial success,creates value for ourglobal stakeholders,serves as a primarybusiness strategy andstrengthens our positionas a market leader. Weare dedicated not onlyto meeting the needs ofour clients andshareholders, but alsoserving as aresponsible corporatecitizen through supportfor the diversecommunities andenvironments in whichwe live and work.


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New avenues andtechnologies arebeing pursuedcontinuously forprotection of theenvironment.Customers areencouraged to useenvironmental friendlymachinery andequipments tominimize the impacton environment.Concessionaryinterest rate is offeredto clients havingcertificates fromdepartment ofenvironment,Government ofBangladesh.

ENVIRONMENT INITIATIVE Putting partnership in action

or UCL, a commitment to environmental leadership is part of whowe are and how we operate, shaping just about everything from the

design of our facilities to how we serve customers to our financingpractices. And for good reason, our environmental focus is good for theplanet, but it's also a key factor in our success as a financial institution.What differentiates UCL's approach to the environment is that it'sgrounded in four pillars that embed the environment across our business:� Reducing the environmental footprint of our business operations� Responsible financing that includes proactive engagement of

environmental and related social risks� Developing green products and service options for our customers� Engaging employees and communities to raise environmental

awareness and make an impact Our regulator Bangladesh Bank has taken rigorous steps to encouragegreen banking in Bangladesh through the issuance of guidelines ongreen banking and Environmental Risk Management (ERM). It isencouraging banks and financial institutions in minimizing papertransactions and installing solar power system, opening up refinance linefor solar energy, bio-gas and effluent treatment plant (ETP) at reducedinterest rates. The central bank introduced Tk 2.0 billion refinancing linefor financing solar energy, biogas and effluent treatment plant (ETP) atonly 5 percent interest rate.

WHAT WE DOBuilding partnerships needed to address environmental problems is ourpriority. Environmental Initiative has a range of capabilities to addressenvironmental issues. We conduct our work through conversation withour customers to address environmental issues. We have been placingimportance more on environment complient projects for financing.

OUR INTERACTIONS AS FINANCIAL INSTITUTIONOn a more practical level, UCL interact with the environment in anumber of ways:� As investor - providing investment needed to achieve sustainable

development.� As innovator - developing products to encourage sustainable

development - e.g. in energy efficiency.� As powerful stakeholders - shareholders and lenders can exercise

considerable influence over the management of UCL.� As victim of environmental change - e.g. from climate change.

COMMITMENT FOR RESPONSIBLE INVESTMENTThere is growing interest from UCL in environmentally responsibleinvestment, and this has led to the development of some progressiveenvironmental investment initiatives as under:Sustainable operations : From minimizing paper transactions toenergy conservation in our offices, we are working to reduce ouroperational footprints on the environment.Sustainable lending : We take environmental protection into accountwhen making lending decisions. In corporate financing this meansincorporating environmental due diligence into the lending process, whichmay include site visits, varification of client’s environmental papers.Green products and services : We will explore developing newproducts and services that respond to customers demand for sustainablechoices like paperless statements.Community activities : We are planning to generously supportenvironmental organizations and projects initially in Dhaka city.

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CORPORATE CULTURE

orporate culture has an immense impact onUCL’s human resources, through knowledge

acquisition, job development, training, communicationand leading to job satisfaction. In this environmentimportant is placed on effective management, a cleardefinition of responsibility, straightforward workprocesses with minimum bureaucracy. In this wayUCL is able to serve its customer at its best helpingthem to achieve their goals.

BUSINESS PRINCIPLESIn order to ensure that our customers are getting thebest possible service, We have organized the tenets ofits culture into following business principles and theseprinciples are undertaken by all UCL’s operations.

Long-term relationshipsUCL’s main objective is to develop and maintainlong-term relationships with its clients.Their needs and interests are made a priority, sincetheir success consequently fuels our success, thusestablishing a common goal.

TeamworkThe best results are achieved onlywhen the employees of UCLand its customers worktogether as a team. Effectivecooperation and propercommunication ensurequick and professionalservice and provides thebasis for efficientteamwork.

Fun & flairBusiness becomes apleasure when anorganization takes part incelebrating its clients’ successes.Providing professional advice andachieving excellent results leads toshared enjoyment, underscoringcompany’s commitment to its clients.

Trumping bureaucracyCutting bureaucracy enables employees to respondquick to its clients’ needs. Short and straight lines ofcommunication, a clear definition of responsibilityand the delegation of power provide the customerswith sharp, quick and effective service.

Efficient decisionsEffective service to the customers is based oneffective and efficient decision-making. This isachieved through the devolution of power and opencommunication. This also makes for an exciting andhighly motivating work environment that attractstalents and qualified candidates.

Welcoming changeThe business environment is constantly undergoingchanges, bringing the company up against newchallenges. In order to assist clients in gaining acompetitive advantage, we need to keep ourselvesabreast of changing business practices and seeks toimplement changes ahead of the competition.

Identifying opportunitiesBy identifying opportunities where others seebusiness as usual, UCL is able to advise its clientseffectively and provide them with exceptionalchoices. We are confident that our employees are

able to perform this task by providingcustomers building their confidence

and encouraging their initiative.

Embracing competitionBoth UCL and its customersface intense competition ina rapidly changingbusiness environment.However, we viewcompetition as a powerfulmotivator, as a spur tokeep our business aheadof the times and providing

its customers with the bestpossible service in the

industry.

Intelligent risk takingUCL uses its expertise to advise its

clients on the risks they face andenable them to make informed decisions.

Up to date information and qualified personnelensure intelligent risk assessment and decision-making.

Passion for building businessesUCL is determined to build its customers businessesfor the benefit of the Company and its customers.

ElevenBusinessPrinciples

Rewardingtalent

Efficientdecisions

Trumping

bureaucracy

Fun and

flairTeamworkLong-term

relationship

Welcomingchange

Passion for buildingbusinesses

Intelligent risk

taking

Embracing

competition

Identifying

opportunities

UCL’s corporate culture centres on the common interests of the company and itscustomers by seeking to establish strong and long-term relationships between the two.Sustainability, in the context of human resources, means encouraging our employee tothink about the longer term rather than just focusing on immediate goals. This applies inall contexts, from succession planning and talent management to the way we work withemployee and community outside the Company.

Putting partnership in action

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The best possible business results can be achievedthrough a strong and committed team of UCL throughpersonnel and customers working in unison, focusingon the task at hand.

Rewarding talentTo ensure that our clients receive superior services,we reward those employees who perform mostsuccessfully. Our greatest resource is our employeesand it places great emphasis on retaining goodemployees, that is, those who provide the greatestbenefits to our customers.

POLICIES FOR EMPLOYEE BEHAVIOUR

Discipline� We will always put laws and social conventions

before profits.� We will act as ethical individuals and dignified

citizens.� We will not conceal damaging information

about our company or ourselves, and will quickly make such information available toconcerned parties.

� We will take a firm stand against antisocialforces, and refuse to have dealings with them.

Integrity� We will act in good faith in order to win the trust

of our customers.

� We value the maintenance of long-termrelationships of trust with our customers, localcommunities, and our shareholders.

� We will be fair in our dealings and with ourcompetition.

Harmony� We will act through the cooperation of all our

employees, who are united in their efforts toassess what is best for society.

� We value our connections with local communitiesas we aim to become a good corporate citizen.

� We will seek to achieve harmony between thenatural environment and our work.

Diligence� We will approach our work with an attitude of

fortitude and austerity.� We will continuously apply our originality and

ingenuity to develop our productivity.� We will immediately put good ideas into action.

Technical Improvement� We will seek to hone our creativity, believing that

innovation is the source of our competitiveness.� We will aim to attain the sound technological level

as we continuously improve our technology.� We will actively seek to acquire new knowledge

and skills without the fear of making mistakes.

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e recognize that Union Capital Limited has the corporateresponsibilities to the development of the community and the

country as a whole. We aspire to be known as an institution thatbuilds enduring relationship with and delivers value for our customers,shareholders, employees, government and the community where wedo business.

OUR PRIORITIES� Provide strong returns to shareholders� Pay fair share of taxes� Support small business and community economic development� Foster innovation and entrepreneurship� Purchase goods and services responsibly� Protect environment� Enhance market place� Build nation � Create employment

Companies both large and small can help shape the economies of acommunity and country in which they do business, simply throughtheir day-to-day business decisions and actions. Our ongoingobjective is to make sure that UCL businesses are taking on only risksthey understand and that are manageable within an acceptable level.Our most direct contribution comes through maintaining a strongbusiness with solid earnings and profits. This allows us to pay ouremployees and lenders and depositors, contribute taxes andrevenues to government and provide dividends to our shareholders.Our contribution to national economy is thus:

Providing financial products and services: As a financial servicesprovider, UCL contributes to the economic prosperity by providingfinancial products and services to the industrial undertakings includingSMEs which have become keys to economic growth of the countryand without opening up of the financial sector to semi urban and ruralareas, the projected growth of the economy will not be achievable.UCL has given strong focus in this area which is evident from thegrowth rate achieved during the year. Based on the financials as on31 December 2013, UCL has a total credit exposure with around3,137 customers of Tk.10,748.60 million. Such facilities wereextended mostly for importation of capital machineries and workingcapital and to portfolio investors as margin loan. UCL also managesIPOs of different companies to raise capital from the capital market.This is how UCL contributes to the industrialization and capital marketdevelopment of Bangladesh and thus helping employment generation.

Contribution toNATIONAL ECONOMY

DIRECT ECONOMIC VALUE GENERATED IN 2013(Taka in million)

* Operating costs include interest expenses, provision and management expenses excluding salaries and benefits

UCL’s Total 2013Revenue

1,663.80

Distributed Value Economic Value Retained

74.43

Operating cost 1,397.64Salaries and benefits 72.05Taxes 66.83Dividends 52.34Community giving 0.51

UCL is one of themajor employer,taxpayer andfinancial servicesprovider amongstthe non-bankingfinancialinstitutions inBangladesh. Ourrole in theeconomy isextensive. Oureveryday businessactivities touch thefinancial lives ofmillions of peopleand businesses.

UCL’s responsibilities to the developmentof the country as a whole

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Also the Company has mobilized term deposits of Tk.7,836.86 million from 311 depositors helping thembuild up savings for investment in national economy.

Paying fair share of taxes to Government: UCLcontributes to the economy paying out fair share oftaxes to Government in collection of revenues. TheCompany deducts withholding tax and VAT at sourcefrom payment of interest on term deposits, productsand services, salary & allowance to employees anddeposits the same to the government exchequer.Besides this the Company pays tax on its variousearnings i.e. income tax on its income as well as VATon its fee based income. During the year 2013 theCompany withheld and deposited tax & VAT atsource of Tk. 64.42 million, collected and depositedVAT and excise duty of Tk. 5.27 million. In 2013 theCompany also paid advance tax of Tk. 22.66 millionagainst the current assessment year.

Creating employment: We make an economicimpact by creating employment and a well-trainedhuman resource. UCL and its subsidiary companiesemployed as many as 127 employees as on 31December 2013. We believe that the humanresources act as the catalyst behind thedevelopment, success and future sustainability. TheHuman resources of the Company is guided by arobust HR Policy, attractive work place, competitivepay band and rewarding career opportunitiestransforming human resources in to human capital.During the year 2013, UCL spent total Tk. 0.64million for training and HR development and paid atotal amount of Tk. 72.05 million as salaries andallowances to its employees (2012: Tk. 56.99 million).

Maximizing shareholders' value: We recognize ourfiduciary duty to our shareholders and seek toestablish constructive relationships. We are focusedon maximizing long-term shareholders' value throughstrong financial performance and returns, disciplinedand profitable investments. Over the past manyyears, UCL has been paying a satisfactory dividendto its shareholders placing it among the top rankingnon-banking financial institutions. For the last fiveyears UCL paid dividend on an average more than33 percent to its shareholders.

Taking environment initiatives: Sustainabledevelopment, economic growth and a healthyenvironment are inter linked. In this backdrop, wetake supportive role in terms of providing financialservices by restricting and discouraging thoseprojects that cause pollution for environment andhealth hazard. In this regard, we have adopted GreenBanking Policy and formed a Committee for itsimplementation in all of our operational activities.

Supporting Community:�We always agree inbuilding prosperity by supporting a broad range ofcauses through donation and sponsorship. Weencourage our employees to participate in social andcharitable programs. As a part of its socialresponsibility, the Company contributes to variousfunds in the form of cash, warm cloth distribution,gives support to flood affected people and to thepeople who were affected by the natural calamities.

As the commitment of business to contribute tosustainable economic development of the countryand as a stakeholder of this society, Union CapitalLimited provides help and support in several ways toalleviate the sufferings of the society. In 2013 wemade the following contributions:

Society For Assistance to Hearing ImpairedChildren (SAHIC): SAHIC is a Non-GovernmentalVoluntary organization serves the unfortunate victimsof hearing impaired children in Bangladesh. Theyprovide pre-school education facility to the hearingimpaired children of low income group. Union CapitalLimited extends its financial support for thiseducation program on regular basis.

Union Capital Limited, under its CSR activities, hasbecome the “Foster-partnership” to sponsor theannual educational expenses of Tk. 360,000/- (takathree lac sixty thousand only) for the 20 (twenty)hearing impaired children of the “Rosi-FlowerIntegrated Pre-School for Hearing Impaired Children”

to make the opportunity of the hearing impairedchildren of low income family to take the educationwith free of cost for last three years. Moreover, UCLdonated a high resolution Multimedia projector andprojector screen to SAHIC for the education purposeas well as to make presentation to the visiting doctorsaround the world.

Financial Support to the Tornado affected people:A tornado lashed several villages in Sadar andAkhaura upazilas of Brahmanbaria on Friday, March22, 2013 afternoon. About twenty one people werekilled and over 500 injured as there was tornadohavoc in 21 villages of Sadar, Akhaura andBijaynagar upazilas of Brahmanbaria. The tornadodevastated innumerable thatched houses, uprooted


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thousands of trees, damaged crops, huge property.The affected people were passing the days in a veryterrible and miserable way. As they lost almost

everything they had, poor people, the major victim ofthis natural disaster, couldn’t meet their daily needslike food, cloths, medicine and were living directunder the open sky as they lost their houses too.

To help a little of them from this tornado havoc, themanagement of Union Capital Limited extended itshand to provide a token financial support to 50affected families for Tk. 2,000/- each to meet theirurgent requirements.

Pre-School Education Program: Retired PoliceOfficers’ Welfare Association Bangladesh undertookdifferent social activities among which they set up aschool and conduct education program for the poor,

underprivileged children working at the Mess/Barrackof Rajarbagh Police Lines. Union Capital Limitedwidens financial assistance to purchase of schoolbooks, bags, uniforms etc. for the students under thiseducation program.

Financial Assistance to the victims of ‘Savar RanaPlaza’ Tragedy: We all are aware about the terriblemassacre of ‘Savar Tragedy’ held on April 24, 2013.The death toll was about 1,134. To contribute for thevictims of ‘Savar Tragedy’ and for strengthening thecapacity of the Prime Minister’s Relief and WelfareFund to make affective response at times of suchnatural and national calamities, Union Capital Limiteddonated an amount of Tk. 5.00 lac in favor of PrimeMinister’s Relief and Welfare Fund.

Moreover, the employees of Union Capital Limitedcontributed their ‘one day salary’ to the ‘Prime Minister’sRelief Fund to help the victims of Savar tragedy.

Support to the Cold spell affected poor people :Because of the cold spell and dense fog, the normallife of poor people had been disrupted throughout thecountry in this year. As part of the Corporate SocialResponsibility, Union Capital Limited extended itshand to protect a little of them from the cold havoc bydistributing 2,000 pcs blankets in 03 different areas ofBangladesh.

Promoting growth of Small business: Smallbusiness is an important engine driving economicgrowth. Financing is essential for many smallbusinesses to start, operate or grow, and UCL offers ahost of credit solutions tailored to meet the needs ofdiverse businesses at various stages. We also strive toprovide the best possible products, financial services,advice and expertise to help this sector prosper.

Inclusive growth : We believe we create best valuefor our shareholders by also bringing value to thecommunity where we operate in. Because ourbusiness is not isolated from society but embeddedwithin it, the success of UCL is inextricably linked tothe wellbeing of the wider community. So along withcreating jobs and paying taxes, we seek to stimulatelocal enterprise, to support economic development, tocollaborate with governments and others on sharedchallenges and to help tackle the possible effects ofour investment activities - all essential underpinningsof our ongoing success aimed at increasingproductivity and incomes of the poor in several lowincome occupations which will continue as importantsources of employment. This way we, UCL group,grow with our shareholders, customers, lenders,employees, other stakeholders and the society as awhole.


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REPORT ON HUMAN RESOURCE

One of UCL’sprincipal strengths isthe quality anddedication of itsemployees and theirshared sense ofbeing part of a team.Their diverse vantagepoints and uniqueabilities create abroad range of skillsand knowledge thatunderpin our work. Inorder for UCL tocontinue its steadygrowth, it is essentialthat it retains keyemployees andprovides an attractiveopportunity for newpersonnel.

One of UCL’sprincipal strengths isthe quality anddedication of itsemployees and theirshared sense ofbeing part of a team.Their diverse vantagepoints and uniqueabilities create abroad range of skillsand knowledge thatunderpin our work. Inorder for UCL tocontinue its steadygrowth, it is essentialthat it retains keyemployees andprovides an attractiveopportunity for newpersonnel.

e are accountable to our clients and it is essential that theemployee we employ recognize the importance of this. Employee

that are motivated, reliable, well trained and committed deliver superiorservice levels and we look for these characteristics during therecruitment process. Our employee engagement levels are the highestwe have ever experienced.

OUR PRIORITIES� Foster a culture of employee engagement� Provide competitive compensation and total rewards� Enable growth through training and development opportunities� Respect diversity and promote inclusion

A CULTURE OF EMPLOYEE ENGAGEMENTAs our business and workforce grow and become more diverse, it’simportant that we continue fostering a strong sense of how we succeedtogether. We do this by making it easy for employees to understand theroles they play in fulfilling UCL’s strategies, helping employees growpersonally and professionally, and being committed to employeeengagement.We recognize that well-informed employees are more likely to align theiractions with company goals. Employeeshave many opportunities to learn andask questions about company goals,strategies and progress throughmeetings with senior management,regular formal communications and ourextensive intranet.We have a long history of listening andresponding to our employees, and weregularly seek feedback and comments.We gather employee input on ourprogress in key areas including careerdevelopment, performance enablement,employee engagement and workplaceculture. By understanding employees’views, UCL can take action to addresstheir needs and the company’s priorities.This results in high levels of employee engagement and a strongcommitment to clients.

DIVERSITY AND INCLUSIONUCL is a leader in valuing diversity. Our strength comes from acombination of what we have in common, like shared values andpurpose, and what makes us different, like experiences and perspectives.By bringing together those similarities and differences, we are able tobreak new ground and better serve our clients and communities.We believe in creating an inclusive environment for our employees, wherethey can feel valued, respected and supported – a place where employeescan develop their own unique abilities and realize their aspirations.

COMPETITIVE COMPENSATION AND TOTAL REWARDSAt the heart of an engaged workforce is a flexible, competitive andmeaningful rewards program. Our program is based on anunderstanding of what employees value. It recognizes that flexibility andchoice are the best response to meet our employees’ diverse needs.Our comprehensive approach rewards employees for their skills andcontributions by offering employees competitive compensation, benefitsand a positive work environment.

We offer a challengingworking environmentwhere everyone feelsvalued and respected.We are committed to theprinciple of equalopportunities and weensure that job applicantsand employees do notface discrimination on thegrounds of gender,marital status, race,ethnic origin, religiousbelief or age.


The strength forsustainable future

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GROWTH THROUGH TRAINING ANDDEVELOPMENTWe aim to create a learning culture and provideopportunities for our employees to fully apply theirknowledge and skills in the service of the company. Wewill help our employees to continue their development inthe interests of the company and its objectives. Employees expect ongoing career and learningopportunities to be a part of their total rewardsprogram and our commitment to continuous employeegrowth and development helps ensure we meet thecurrent and future needs of both our people and ourclients. Employees also have access to the trainingresources they need to learn and grow through our inhouse learning opportunities.

RECRUITMENTA great part of success in the financial servicesindustry depends, more than anything else, on theknow-how, experience, talent, and commitment ofhuman capital. For UCL to continue to succeed, thecompany must be able to attract, develop and retainqualified people. UCL’s employees should be able tobenefit from its strong business principles, its fast-moving and entrepreneurial spirit, and the broadopportunity for individual and team success.

CAREERS AND DEVELOPMENTThe people of UCL are part of a culture of integrityand leadership, which they have an active role increating. They form a community in which people’spotential and talents are cultivated with the aim ofestablishing lifelong careers. High-quality employeesare trained and fostered, with the goal of developingtomorrow’s leaders.Leadership is certainly among the strongest elementsfostered by UCL seeking to demonstrate leadershipboth in the industry and in the society where itoperates. In order to sustain this element of

leadership, strongemphasis is placed ondeveloping employeesthrough in-house trainingprogrammes as well asby supporting andorganizing educationalopportunities outsideUCL. As a forward-lookingenterprise, UCL strives tocontinually stimulate itsemployees to uphold thestate of the art in theirrespective fields. In order

to inspire trust and create added customer value, greatemphasis is placed on maintaining employees’knowledge and skills through training, development andinformative feedback. As in previous years, UCL placedgreat emphasis on training its managers and developingtheir leadership qualities. Moreover, the annual meetingwith employees, play a central role in making sure thatthe strategy and objectives for each year are clearlycommunicated and executed. It is vitally important thatthose who drive company’s success are fully informedof its vision, strategy, and focus for the year and know

what kind of contribution is expected of them asindividuals in order to achieve these.

JOB SATISFACTION AND RETENTIONA good workplace environment leads to greater jobsatisfaction, which works to everyone’s benefit.General job satisfaction and commitment proved to behigh compared to other companies. Morale at UCL ishigh and new employees feel they are well received.Furthermore, employees feel their opinions count atwork and are encouraged to express new ideas forimprovements. Moreover, information flow is effectiveand company’s objectives and visions are consideredclear.

SALARIES AND BENEFITSIn addition to a monthly salary, bonuses are paid tothose key employees and management who directlyaffect company’s performance. Bonus payments aresubject to the individual’s performance as well ascompany’s profits.

COMMUNICATIONUCL places great emphasis on keeping employeesinformed about UCL’s vision, strategy and focus.Moreover, the company provides regularcommunication to its employees with informationregarding current news, events and achievements.The open flow of information within UCL is important inorder to maintain efficient operations. Employeeengagement is facilitated through corporate intranet.Furthermore, the CEO and senior executives visitsdifferent offices of UCL which opens face-to-facedialogue between employees and senior management.Through these channels UCL supports a flatorganizational structure and encourages collaborationthroughout UCL.

EMPLOYEE MORALSAt UCL, employees stand for excellence in everythingthey do.� they help our customers become the best in class. � they foster creativity and innovation. � they strive to constantly improve our professional

skills.

At UCL, employees work with passion without obsession.� they do our jobs with enthusiasm. � they are proud of what they achieve together. � they balance our customers’, our colleagues’, our

own, and our investors’ needs.

At UCL, employees walk our talk.� they treat each other and our partners with trust,

fairness, and respect. � they honor our commitments and stand up for our

beliefs. � they speak with one voice internally and externally.

At UCL, employees feel responsible for their actions.� they take care in all they do and are aware of

possible outcomes and consequences.

A good workingenvironment is paramountto any company’s successand the wellbeing of itsemployees. At UCL westrive to create a flexibleand challenging frameworkthat always attracts topquality candidates andencourages existingemployees to continuouslyhone their skills and excelin their fields.

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� they take decisions and make results known. � they share information openly in the interest of UCL.

At UCL, employees cross borders.� they respect other opinions and discuss them

openly. � they support teamwork and the mutual exchange

of knowledge and people regardless of cultures,genders, segments, and levels.

HUMAN RESOURCE STRATEGY � Attract qualified personnel by creating a motivated

workplace;� Retain competent employees by creating a

superior workplace;� Provide new employees with appropriate training

from the outset;

� Encourage employees to maintain professional skillsand give them the opportunity to develop and grow;

� Ensure maximum employees success - empowerthe individual, provide an opportunity to showinitiative and command independent initiative;

� Maintain a spirit of ambition, efficient decision-making, flexibility and quick responses to changes;

� Create a strong management team;� Sustain an environment that supports a balance

between work and life;� Ensure equal opportunities, with regard to

employment, work facilities, assignments, training,job development and salaries;

� Align the interests of employees with the interestsof the organization.

UCL continues to maintain a very satisfactory positionin terms of people productivity. This is confirmed by thefollowing indicators:

2013 2012 2011Total Employee 89 95 98Net income per employee (BDT in million) 2.36 1.14 3.97Operating revenue per employee (BDT in million) 18.98 12.08 12.33Assets per employee (BDT in million) 146.69 110.48 100.94

Staff Strength 2013 2012 2011Senior Management 10 9 9Mid Level Management 22 43 44Junior Level Management 44 22 23Support Staff 13 21 22Total 89 95 98

Age analysis of the employees as at 31 December Age group Senior Mid level Junior level Support 2013 2012Year Management Management Management Staff Total Total51-60 2 1 0 0 3 341-50 3 2 0 2 7 1031-40 4 16 16 3 39 3421-30 1 3 28 8 40 48Total 10 22 44 13 89 95Average age of the employees as at 31 December 2013 was 30.72 years (2012 : 32.78)

Service analysis of the employees as at 31 DecemberService group Senior Mid level Junior level Support 2013 2012Year Management Management Management Staff Total TotalAbove 10 2 2 0 1 5 87-10 0 2 1 1 4 35-7 0 3 1 2 6 112-5 2 7 8 6 23 58Below 2 6 8 34 3 51 15Total 10 22 44 13 89 95Average service life of the employees as at 31 December 2013 was 2.73 years (2012 : 4.0)

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uman dimension is the key to organization’ssuccess. Several initiatives for development of

human resources to meet new challenges in thecompetitive business environment have gainedmomentum. UCL acknowledges the value of itshuman assets who are committed to achieveexcellence in all spheres. The Human resource profilegiven below in table shows that UCL has a mix ofenergetic youth and experienced seniors whoharmonize the efforts to achieve the company’s goals. Age 21-30 31-40 41-50 >50 TotalNo. of Employees 40 39 7 3 89Management Cadre 4 19 5 3 31Non Management Cadre 28 17 0 0 45Support Staff 8 3 1 1 13Average age 30.72Human resource, as it is a key to success, isconsidered as asset in many organizations and thusrelated expenditure is treated as investment. Thecost of human resource comprises of both capital(asset) and revenue (expenses). This cost isclassified into four main categories namely� Acquisition cost - incurred to acquire the right

employee for the job.� Development (training) cost - incurred to enrich

employees’ skills help them to increaseproductivity and thus training cost are .

� Welfare cost - incurred to improve the quality oflife i.e. to create a conducive workingenvironment.

� Other cost - for instance employee's safety, ex-gratia, and incentives.

The acquisition cost includes the recruitment cost,selection cost and placement cost. Training costcomprises of� formal training cost � on job training cost� special training cost � development programsWelfare cost comprises of medical expenditure,general and special allowance, canteen expenditureand other welfare expenditure.

Accounting Standard for Human ResourceInternational Accounting Standards (IAS) 38 definedintangible asset as "an intangible asset is anidentifiable non-monetary asset without physicalsubstance held for use in production or supply ofgoods or services, for rental or others oradministrative purposes”.IAS 38 requires that for an asset to be recognized asintangible asset it should be identifiable in a way thatit is possible to distinguish it from goodwill. In additionthe enterprise should have sufficient control of the

asset in order to meet the definition of intangibleasset. Based on this definition human resource isidentifiable and possible to separate it from goodwillthus can be recognized as intangible asset. Accordingto IAS 38 an asset is considered separable if a firmcould sell, rent, distribute or exchange the specificfuture benefit attributed to the asset without disposingof future economic benefits that flow from other assetin the same revenue activity. Though it is not possibleto sell, rent, exchange or distribute human asset,when an employee is relied his duty it does notrequire disposing of future economic benefit that flowfrom other asset thus has some qualities of intangibleassets. Furthermore IAS 38 states that for anintangible asset to be recorded at cost the followingcriteria must be met:It is probable that future economic benefit attributedto the asset will flow to the firm.Investment in human resource can be measuredreliably based on cost incurred for recruitment,selection training and development. Though theemployees can leave the organization at his own willunlike other asset it is probable that future economicbenefit will be derived from the employees during theduration of his employment. All this definition in IAS 38 indicates that it is possibleto treat investment in human resource as asset bycapitalizing cost related to human asset andrecording it in the balance sheet.

Significance of HR AccountingAll the companies that furnish information abouthuman resource value included such report as aseparate report from the main financial statement i.e.the income statement and the balance sheet. Thismeans that human resource accounting is not stillconsidered as part of financial statement butadditional materials for use by users of annualreport. Thus human resource accounting is in needof further development in order for human resourcedata to receive equal weight like other items in thebalance sheet and income statement. In order forhuman resource accounting to have significance andto be part of financial statement the value of humanresource as computed by various company shouldbe incorporated in the balance sheet.

Human resource accounting practice inBangladeshBangladesh like many other countries has not givenmuch consideration to issues related to humanresource accounting. In Bangladesh this concept isstruggling for acceptance and has not beenintroduced so far as a requirement. Neither theCompanies Act nor the Regulators do require thelisted companies to prepare HR Accounting to beattached in their annual report.

HUMAN RESOURCE ACCOUNTINGQuantitative information about the value of human resource

There are several areas in which non-monetary measurements may be evolved inaccounting and human resource accounting is probably one of these. To makevaluation of human resource objective and comparable there must be a universallyacceptable method of valuation.

H


Imade the decision to joinUCL which has been one

of the best decisions thatI’ve made. I love workingat UCL. I truly feel like it isa unique, employee-oriented company withstrong values and adedication to everyonewho works here sincerely.I feel like I am valued andthat I am really able tocontribute to the growthand culture of theCompany. I love it !

Ifeel like my work here isalways recognized -

never overlooked. Theatmosphere at UCL is oneof cooperation andsupport, which I think israre in today’s workplace.While many of my friendsare searching for new“more satisfying” jobs, Iknow I am very fortunateto have had the privilegeof being associated withUCL and working for acompany that I know I willstay with for years. UCL istruly a great place to work.

Ithought that I had workedfor good employers

before but working for UCLhas made me realise thatin fact they were merelyaverage. UCL iscompletely focused onbeing the best financialservice provider in themarket both from a qualityand ethical standpoint withno exceptions. UCL isconstantly pushing me tobe the best that I possiblycan be. I am aided in thisthrough professionalcourses in relevant areasand we constantly strivefor ‘best practice’. For meUCL is the mark againstwhich all other companiesare measured.

Ihave gained skills andexperience that I never

imagined. I am grateful forthe opportunity that I havebeen given and lookforward to many moreyears at UCL with thechance to keep growingwithin the company. I knowthat UCL is a financialservice provider and I takepride in my work because Iknow people are expectinga great product. I believein the excellence of theproducts myself whichmotivated me to providethe best products.

Our PeopleLead the way


Istarted at one of theleading financial institution

but didn’t get the type ofhands on experience withclients that I wanted. WhenI moved over to UCL, I wasgiven a great deal ofresponsibility – that allowsme to learn not only thebasics but advanced creditappraisal work.

My experience so far ofUCL has been of

working within a welcomingand friendly team. Thekinds of work I have beendoing have been varied,interesting and challengingand there has always beensupport from the teamwhen I needed it.

Ireally enjoy working atUCL - the fantastic clients

and high quality of work,not to mention the people Iwork with - to me, thosethings are really important.

Ihave been with UCL forless than a year and

have been impressed withmy experience so far. I amproud to be part of suchan innovative, forward-thinking institution and thepeople make it a greatplace to work.

The atmosphere at UCLis very positive and

vibrant. My team here atUCL is very supportive andfriendly. The managementteam at UCL are veryopen, transparent anddown to earth.

Since I joined UCL I'vebeen overwhelmed by

the amount of goodwilltowards this company.Employees are highlyvalued here and when aworkforce is happy, itshows. I've never workedanywhere quite like it.

Iappreciate that ourleadership takes the time

to teach me what theyknow. I have gainedvaluable knowledge andinsight into the industryand services we offer.

It’s important for me to bepart of UCL that fosters

my career growth. Withhard work, I believe I amon a good career pathwhich will lead me to asenior position.


alue added is a measure of the economicstrength of a company and indicates how much

additional value (wealth) has been created by thecompany during the reporting period through utilizationof its capacity, capital, manpower and other resourcesand how it has been distributed among thecontributors of the value i.e. the stakeholders(employees, lenders, shareholders, government etc.).

Therefore, a value added statement (VAS) is regardedas a part of social responsibility accounting. It showsthe wealth or value created and attributed to allstakeholders rather than just the shareholders. Whilethe income statements reports on the income ofshareholders, the value added statement reports onthe income earned by a large group of stakeholders,all the providers of capital plus employees and the

VALUE ADDED STATEMENT A part of socialresponsibility accounting

government.(Figures in BDT)

2013 2012UCL UCL Group UCL UCL Group

VALUE ADDED367,023,399 371,305,584 32,568,724 61,022,104 Net interest income76,952,027 165,359,485 64,641,965 112,137,372 Fees earned including VAT12,204,398 27,394,754 52,010,889 43,080,943 Investment income39,335,962 42,272,225 93,258,472 95,636,803 Other income(37,184,725) (59,070,459) (31,715,196) (51,197,577) Management expenses(222,976,717) (255,622,840) (74,033,089) (85,192,189) Provision for doubtful losses235,354,345 320,409,693 136,731,766 175,487,456 TOTAL VALUE ADDED

DISTRIBUTION OF VALUE ADDEDIn payment to Employees

52,933,150 72,050,210 40,760,057 56,999,062 As salaries and allowances

In payment to Capital Providers109,909,326 109,909,326 52,337,775 52,337,775 As Dividend to shareholders

In payment to Government32,497,131 66,830,594 31,361,162 51,960,937 As Corporate tax

Expansion and business growth28,834,742 31,850,672 2,470,108 4,387,017 As Retained income9,423,027 9,802,664 9,802,664 9,802,666 As Depreciation

235,354,345 292,200,436 136,731,766 175,487,456 TOTAL DISTRIBUTION

DISTRIBUTION OF VALUE ADDED (UCL)■ 2013 ■ 2012 (Figure in Taka)

In payment to Employees

In payment to Capital Providers

In payment to Government

Expansion and business growth

52,933,150

109,909,326

32,497,131

38,257,769

40,760,057

52,337,775

31,361,162

12,272,772

DISTRIBUTION OF VALUE ADDED (GROUP■ 2013 ■ 2012 (Figure in Taka)

In payment to Employees

In payment to Capital Providers

In payment to Government

Expansion and business growth

72,050,210

109,909,326

66,830,594

41,653,337

56,999,062

52,337,775

51,960,937

14,189,683

V

MARKET VALUE ADDED

2012

1,353,298,534

1,556,681,728

2013

2,310,820,079

3,802,862,680

1,492,042,601

Market value of shares

Book value of shares

Market value added

2,909,980,262

2012

1,041,074,853

1,868,905,409

2013

1,792,197,273

3,802,862,680

2,010,665,407

2,909,980,262

UCL UCL Group

hile Economic Value Added (EVA) measures internalperformance, Market Value Added (MVA) is a measure of

external performance that indicates how the market has evaluated theCompany's performance in terms of market value of share comparedto book value of shares. MVA is the difference between the marketvalue of equity of a company and the book value of equity invested inthe company. Market value added is one of the market indicators ofvalue creation. MVA, and particularly any change in MVA, constitutes amore relevant measure of value than just developments in share price.A positive MVA indicates that the company could add value toshareholders' wealth. The following statement indicates the MVA as at31 December 2013 compared to the MVA of prior year:

Figures in BDT

2013UCL UCL Group3,802,862,680 3,802,862,680 Market value of shares outstanding

1,492,042,601 2,010,665,407 Book value of the share outstanding

2,310,820,079 1,792,197,273 MARKET VALUE ADDED

2012UCL UCL Group2,909,980,262 2,909,980,262 Market value of shares outstanding

1,353,298,534 1,868,905,409 Book value of the share outstanding

1,556,681,728 1,041,074,853 MARKET VALUE ADDED

External performance indicatorof value creation

W


conimic Value Added (EVA) is an overarchingmeasure used to measure the wealth

generation potential of the company. EVA is aninternal management performance measure thatcompares net operating profit to total cost of capital.Economic value added is also referred to aseconomic profit. The EVA is defined as:

EVA = Net operating profit minus tax minus costof capital

Economic value added is important because it isused as an indicator of how profitable companyprojects are and it therefore serves as a reflection ofmanagement performance.

The idea behind EVA is that businesses are only

truly profitable when they create wealth for theirshareholders, and the measure of this goes beyondcalculating net income. Economic value addedasserts that businesses should create returns at arate above their cost of capital.

It succinctly summerises how much and from wherea company created wealth. It includes the balancesheet in the calculation and encourages managers tothink about assets as well as expenses in theirdecisions.

It forces that economy to shift away from managingits profits to managing its wealth by permitting thecompany to monitor and measure wealth generation.The following table indicates the EVA for the years2013 and 2012:

(Figures in BDT)2013 2012

UCL UCL Group UCL UCL Group169,233,457 134,929,873 (91,889,249) (141,554,247) Economic Value Added (EVA)

394,217,915 464,213,432 160,202,133 193,877,918 Net operating profit(32,497,131) (66,830,594) (31,361,162) (51,960,937) Provision for taxes361,720,785 397,382,839 128,840,971 141,916,981 Net Operating Profit After Tax (NOPAT)

1,492,042,601 2,010,665,407 1,353,298,534 1,868,905,409 Shareholders' equity as on 31 December441,580,384 451,710,223 502,960,655 516,733,551 Accumulated provision for doubtful losses1,422,670,568 1,939,785,408 1,839,418,500 2,362,260,233 Average shareholders' equity13.53% 13.53% 12.00% 12.00% Cost of equity (%)*192,487,328 262,452,966 220,730,220 283,471,228 Cost of equity

Key ratios10.67 8.11 (7.97) (12.33) EVA/Operating revenue (%)11.90 6.96 (5.00) (5.99) EVA/Average shareholders' equity (%)8.75 8.52 5.01 4.94 Net profit after tax/Operating revenue (%)* Based on weighted average rate of Sanchay Patra issued by the Bangladesh Government plus 2% risk premium

2013

2012

2011

2010

2009

1,663.80

1,148.00

1,208.52

1,720.38

891.53

Operating revenue(BDT in mn)

Shareholders’ fund(BDT in mn)

2013

2012

2011

2010

2009

2,010.67

1,868.91

1,907.34

1,729.06

652.72

ECONOMIC VALUE ADDED Measures the wealthgeneration potential

E

FINANCIAL STATEMENTSOF THE GROUP AND UCL

IN THIS SECTION

Auditors' Report to the Shareholders 164

Consolidated Balance Sheet 166

Consolidated Profit and Loss Account 168

Consolidated Cash Flow Statement 170

Consolidated Statement of Changes in Equity 171

Balance Sheet of UCL 172

Profit and Loss Account of UCL 174

Profit and Loss Account (Merchant Banking Operation) 176

Cash Flow Statement of UCL 177

Statement of Changes in Equity of UCL 178

Statement of Liquidity Analysis of UCL 179

Notes to the Financial Statements 180


Hoda Vasi Chowdhury & CoChartered Accountants

Independent Correspondent Firm to Deloitte Touche Tohmatsu


We have audited the accompanying consolidated financial statements of Union Capital Limited and itssubsidiaries (the “Group”) as well as the separate financial statements of Union Capital Limited (“theCompany”) which comprise the consolidated and the separate balance sheet as at 31 December 2013,profit and loss account, statement of changes in equity, cash flow statement for the year then ended and asummary of significant accounting policies and other explanatory notes.

Management’s responsibility for the financial statementsManagement is responsible for the preparation and fair presentation of these consolidated financialstatements of the Group and also the separate financial statements of the Company in accordance withBangladesh Financial Reporting Standards (BFRS) as explained in note 2, the Financial Institutions Act1993, the rules and regulations issued by the Bangladesh Bank, the Securities and Exchange rules 1987,the Companies Act 1994 and other applicable laws and regulations, and for such internal control asmanagement determines is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.

Auditors’ responsibilityOur responsibility is to express an opinion on the consolidated financial statements of the Group and theseparate financial statements of the Company based on our audit. We conducted our audit in accordancewith Bangladesh Standards on Auditing (BSA). Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance whether the consolidatedfinancial statements of the Group and the financial statements of the Company are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in theconsolidated financial statements of the Group and the separate financial statements of the Company. Theprocedures selected depend on the auditors’ judgment, including the assessment of the risks of materialmisstatement of the consolidated financial statements of the Group and the financial statements of theCompany, whether due to fraud or error. In making those risk assessments, the auditors consider internalcontrol relevant to the entity’s preparation and fair presentation of the consolidated financial statements of theGroup and the financial statements of the Company in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the consolidated financial statements of the Group and the separate financial statements of the Company.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.

OpinionIn our opinion, the consolidated financial statements of the Group and also separate financial statements ofthe Company give a true and fair view of the consolidated financial position of the Group and the separatefinancial position of the Company as at 31 December 2013, and of its consolidated and separate financialperformance and cash flows for the year then ended in accordance with Bangladesh Financial ReportingStandards (BFRS) as explained in Note 2 and comply with the applicable sections of the FinancialInstitutions Act 1993, the rules and regulations issued by Bangladesh Bank, the Companies Act 1994, theSecurities and Exchange Rules 1987 and other applicable laws and regulations.

Auditors' Report to the Shareholders ofUnion Capital Limited and its subsidiaries

Hoda VasiChowdhury & Co

Hoda Vasi Chowdhury & CoChartered AccountantsDhaka, 4 March 2014

Report on Other Legal and Regulatory Requirements

We also report that

i) we have obtained all the information and explanations which to the best of our knowledge and belief werenecessary for the purposes of our audit and made due verification thereof;

ii) in our opinion, proper books of account as required by law have been kept by the Group and theCompany so far as it appeared from our examination of those books and proper returns adequate for thepurposes of our audit have been received from branches not visited by us;

iii) the consolidated balance sheet and consolidated profit and loss account of the Group and those of theCompany together with annexed notes dealt with by the report are in agreement with the books ofaccount and returns;

iv) the expenditure incurred was for the purposes of the Group and the Company’s business;

v) the consolidated financial position of the Group and those of the Company as at 31 December 2013and their profit for the year then ended have been properly reflected in the consolidated financialstatements of the Group and those of the Company, and these financial statements have been preparedin accordance with the generally accepted accounting principles;

vi) the consolidated financial statements of the Group and those of the Company have been drawn up inconformity with the Financial Institutions Act 1993 and in accordance with the accounting rules andregulations issued by the Bangladesh Bank to the extent applicable to the Company;

vii) adequate provisions have been made for leases and advances and other assets which are, in ouropinion, doubtful of recovery;

viii) the records and statements submitted by the branches have been properly maintained and consolidatedin the financial statements;

ix) the information and explanations required by us have been received and found satisfactory;

x) the Company has complied with relevant laws pertaining to capital and reserves and found satisfactory;

xi) the consolidated financial statements of the Group and those of the Company conform to the prescribedstandards set in the accounting regulations issued by Bangladesh Bank after consultation with theprofessional accounting bodies of Bangladesh;

xii) we have reviewed over 80% of the risk weighted assets of the Group and the Company during thecourse of our audit and we have spent over 1,645 person hours.



Consolidated Balance Sheetas at 31 December

(Figures in BDT)2013 2012 Notes

PROPERTY AND ASSETSCash

82,910 21,100 In hand (including foreign currencies)Balance with Bangladesh Bank and its agent bank

108,450,437 93,374,946 (including foreign currencies)108,533,347 93,396,046 4.a

Balance with other banks and financial institutions276,641,150 196,546,299 In Bangladesh- - Outside Bangladesh 276,641,150 196,546,299 5.a

- - Money at call and short notice Investments

- - Government1,627,749,003 1,442,144,605 Others 1,627,749,003 1,442,144,605 6.a Total investments

Loans, advances and leases10,748,602,289 7,728,556,206 Loans, advances and leases- - Bills purchased and discounted 10,748,602,289 7,728,556,206 7.a

18,243,065 22,705,788 8.a Fixed assets including land, building, furniture and fixtures1,125,820,151 1,011,995,781 9.a Other assets13,905,589,006 10,495,344,725 TOTAL ASSETS

LIABILITIES AND CAPITALLiabilities

1,988,792,036 1,989,439,426 10.a Borrowings from other banks, financial institutions and agents

Deposits and other accounts 7,374,991,783 4,321,421,786 11.a Term deposits461,863,431 276,879,475 12 Other deposits 7,836,855,214 4,598,301,261 Total deposits and other accounts

2,069,276,350 2,038,698,629 13.a Other liabilities11,894,923,599 8,626,439,316 Total liabilities

BAS 1.51 (d), 1.113 & 1.38

BAS 1.54 (i), 7.7

BAS 1.54 (d)

BAS 1.54 (d)

BAS 1.54 (d)

BAS 1.54 (a) BAS 1.55

BAS 1.54 (m)

BAS 1.54 (m)

BAS 1.55


Capital/shareholders' equity1,099,093,260 1,046,755,490 14 Paid up capital281,817,425 254,068,611 15 Statutory reserve- 7,000,000 Dividend equalization reserve505,500,000 505,500,000 Revaluation reserve124,254,553 55,581,160 16.a Retained earnings 2,010,665,237 1,868,905,261 Total equity attributable to equity holders of the Company 170 149 Non-controlling interest 13,905,589,006 10,495,344,725 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY

OFF-BALANCE SHEET ITEMSContingent liabilities

- - Letters of guarantee- - Irrevocable letters of credit- - Other contingent liabilities- - Total contingent liabilities

Other commitments986,200,000 400,000,000 45 Undisbursed contracted loans, advances and leases

986,200,000 400,000,000 TOTAL OFF BALANCE SHEET ITEMS

18.29 17.00 Net assets value per share (Year 2012: Restated)

The annexed notes 1 to 64 form an integral part of these financial statements.

sd/- sd/- sd/- sd/-Chairman Director Managing Director & CEO Company Secretary

Auditors' report to the shareholderssee annexed report of date

sd/-Dhaka, Hoda Vasi Chowdhury & Co.4 March 2014 Chartered Accountants


Consolidated Balance Sheet

BAS 1.54 (r), 1.78 (e) BAS 1.54 (r), 1.78 (e) BAS 1.54 (r), 1.78 (e) BAS 1.54 (r), 1.78 (e) BAS 1.54 (r), 1.78 (e)

BAS 1.55

BAS 1.55


(Figures in BDT)2013 2012 Notes1,428,774,949 897,149,239 18.a Interest income(1,057,469,365) (836,127,135) 19.a Interest paid on deposits and borrowings etc.371,305,584 61,022,104 Net interest income

27,394,754 43,080,943 20.a Investment income165,359,485 112,137,372 21.a Fees, commission, exchange and brokerage42,272,225 95,636,803 22.a Other operating income 606,332,049 311,877,222 Total operating income

64,970,210 53,039,062 23.a Salaries and other employee benefits18,679,585 18,206,821 24.a Rent, taxes, insurance, electricity etc. 804,662 248,891 Legal expenses3,323,908 3,214,392 25.a Postage, stamp, telecommunication etc.7,933,556 5,996,982 26.a Stationery, printing, advertisements etc.7,080,000 3,960,000 27 Managing Director's salary and fees1,111,500 755,000 28.a Directors' fees304,750 306,750 29.a Auditors' fees10,997,948 11,773,704 30.a Depreciation and repair of assets26,912,497 20,497,703 31.a Other expenses 142,118,616 117,999,305 Total operating expenses

464,213,432 193,877,917 Profit before provision

Provision for loans, advances, leases and investment134,982,012 8,947,231 13.1.a General provision109,589,808 146,673,512 13.1.b Specific provision11,051,020 (70,428,554) 13.2.a Provision for diminution in value of investment 255,622,840 85,192,188 Total provision 208,590,592 108,685,729 Total profit before tax

Provision for taxation69,093,869 53,217,334 13.4.a Current tax(2,263,275) (1,256,397) 9.2 Deferred tax66,830,594 51,960,937 141,759,998 56,724,792 Net profit after tax

Consolidated Profit and Loss Accountfor the year ended 31 December

BAS 1.51(d), 1.113 & 1.38BFRS 7.20 (b)BFRS 7.20 (b)BAS 1.85

BFRS 7.20 (b)BFRS 7.20 (c)BAS 1.85

BAS 1.104BAS 1.97BAS 1.97BAS 1.97BAS 1.97BAS 1.104BAS 1.97BAS 1.97BAS 1.97BAS 1.97BAS 1.85

BAS 1.85

BAS 1.97BAS 1.97BAS 1.97

BAS 1.82 (d)BAS 1.82 (d)

BAS 1.82 (f)



Attributable to 141,759,977 56,724,773 Shareholders of the Company21 19 Non-controlling interest

Appropriations 27,748,814 10,961,577 Statutory reserve114,011,164 45,763,196 Retained surplus

109,909,326 109,909,326 Weighted average no. of outstanding share

1.29 0.52 35.a Earnings per share (2012: Restated)





Consolidated Profit and Loss Account

BAS 1.83

BAS 33.66



Cash flows from operating activities1,425,820,639 897,149,239 Interest receipts(867,464,132) (836,127,135) Interest payments165,359,485 112,137,372 Fee and commission receipts5,328,264 17,314,431 Dividend receipts(70,457,940) (56,999,062) Cash payments to employees (27,599,515) (29,389,235) Cash payments to suppliers and management expenses (49,775,041) (155,740,065) Income taxes paid42,236,733 95,690,723 Receipts from other operating activities(29,133,409) (21,808,343) Payments for other operating activities594,315,084 22,227,925 Cash generated before changes in operating assets & liabilities

Increase/(decrease) in operating assets and liabilities - - Statutory deposits- - Purchase of trading securities (treasury bills)- - Loans, advances and leases to banks and financial institutions(3,238,805,906) (493,661,445) Loans, advances and leases to customers(61,786,054) 163,337,950 Other assets2,586,000,000 1,020,000,000 Deposits from banks and other financial institutions652,553,953 (408,333,489) Deposits from customers- - Other liabilities account of customers- - Trading liabilities(188,021,931) 45,212,124 Other liabilities(250,059,939) 326,555,140 Cash generated from operating assets and liabilities 344,255,146 348,783,065 Net cash generated from/(used) in operating activities

Cash flows from investing activities1,304,312,320 732,557,576 Proceeds from sale of securities(1,547,623,571) (921,325,111) Payments for purchases of securities(5,119,344) (8,160,706) Purchase of property, plant and equipment54,993 3,625,069 Proceeds from sale of property, plant and equipment(248,375,603) (193,303,172) Net cash used in investing activities

Cash flows from financing activities- (95,159,590) Dividend paid589,910,000 554,497,363 Receipts of long term loan(576,192,275) (634,147,839) Repayment of long term loan- 65 Non-controlling interest(14,365,116) (74,392,919) Net draw down/(payment) of short term loan(647,391) (249,202,920) Net cash generated from/(used ) in financing activities95,232,152 (93,723,027) Net (decrease)/increase in cash and cash equivalents- - Effects of exchange rate changes on cash and cash equivalents289,942,345 383,665,372 Cash and cash equivalents at beginning of the year 385,174,497 289,942,345 Cash and cash equivalents at end of the year

Cash and cash equivalents at end of the year represents82,910 21,100 Cash in hand108,450,437 93,374,946 Balance with Bangladesh Bank and its agent bank276,641,150 196,546,299 Balance with other banks and financial institutions 385,174,497 289,942,345

Supplemental schedule for non-cash financing activities52,337,770 95,159,590 Bonus share issued

Consolidated Cash Flow Statementfor the year ended 31 December

BAS 1.51(d) & 1.38

BAS 7.31 BAS 7.31 BAS 7.14 (b) BAS 7.31 BAS 7.14 (d) BAS 7.14 (c) BAS 7.35 BAS 7.14 (b) BAS 7.14 (c)

BAS 7.20 (a) BAS 7.20 (a) BAS 7.20 (a) BAS 7.20 (a)

BAS 7.20 (a)

BAS 7.16 (d) Bas 7.16 (c) BAS 7.16 (a) BAS 7.16 (b)

BAS 7.31 BAS 7.17 (c) BAS 7.17 (d)

BAS 7.17 (d)

BAS 7.45


(Figures in BDT) Dividend Non-Paid up Statutory equalization Revaluation Retained controlling capital reserve reserve reserve earnings interest Total Particulars

1,046,755,490 254,068,611 7,000,000 505,500,000 55,581,160 149 1,868,905,409 Balance as at 1 January 2013

- - - - 141,759,977 21 141,759,998 Net profit for the year 2013

- 27,748,814 - - (27,748,814) - - Transfer to statutory reserve

- - (7,000,000) - 7,000,000 - - Transfer to retained earnings

52,337,770 - - - (52,337,770) - - Issuance of bonus share (year 2012)

1,099,093,260 281,817,425 - 505,500,000 124,254,553 170 2,010,665,406 Balance as at 31 December 2013

951,595,900 243,107,034 55,000,000 505,500,000 152,137,144 65 1,907,340,143 Balance as at 1 January 2012

- - - - 56,724,772 19 56,724,791 Net profit for the year 2012

- - - - - 65 65 Non-controlling share capital

- 10,961,577 - - (10,961,577) - - Transfer to statutory reserve

- - (48,000,000) - 48,000,000 - - Dividend equalization reserve

95,159,590 - - - (95,159,590) - - Issuance of bonus share (year 2011)

- - - - (95,159,590) - (95,159,590) Payment of cash dividend (year 2011)

1,046,755,490 254,068,611 7,000,000 505,500,000 55,581,160 149 1,868,905,409 Balance as at 31 December 2012

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

BAS 1.51 (d)

BAS 1.106 (d)

BAS 1.106 (d)(i)

BAS 1.107

BAS 1.106 (d)

BAS 1.106 (d)(i)

BAS 1.107

BAS 1.107


Union Capital LimitedBalance Sheet

as at 31 December

BAS 1.51(d), 1.113 & 1.38BAS 1.38

BAS 1.54 (i), 7.7

BAS 1.54 (d)

BAS 1.54 (d)

BAS 1.54 (d)

BAS 1.54 (a) BAS 1.55

BAS 1.54 (m)

BAS 1.54 (m)

BAS 1.55


PROPERTY AND ASSETSCash

62,910 20,000 In hand (including foreign currencies)Balance with Bangladesh Bank and its agent bank

108,450,437 93,374,946 (including foreign currencies) 108,513,347 93,394,946 4

Balance with other banks and financial institutions265,267,920 131,275,753 In Bangladesh- - Outside Bangladesh

265,267,920 131,275,753 5 Total balance with other banks and financial institutions

- - Money at call and short notice

Investments- - Government344,721,150 522,393,455 Others 344,721,150 522,393,455 6 Total investments

Loans, advances and leases10,586,937,647 7,318,213,456 Loans, advances and leases- - Bills purchased and discounted

10,586,937,647 7,318,213,456 7 Total loans, advances and leases

16,481,629 22,705,788 8 Fixed assets including land, building, furniture and fixtures2,384,910,062 1,967,012,981 9 Other assets13,706,831,756 10,054,996,379 TOTAL ASSETS

LIABILITIES AND CAPITALLiabilities

1,988,792,036 1,989,439,426 10 Borrowings from other banks, financial institutions and agents

Deposits and other accounts 7,658,525,439 4,532,440,286 11 Term deposits461,863,431 276,879,475 12 Other deposits 8,120,388,870 4,809,319,761 Total deposits and other accounts

2,105,608,249 1,902,938,657 13 Other liabilities12,214,789,154 8,701,697,845 Total liabilities



Capital/shareholders' equity1,099,093,260 1,046,755,490 14 Paid up capital281,817,425 254,068,611 15 Statutory reserve- 7,000,000 Dividend equalization reserve111,131,917 45,474,434 16 Retained earnings 1,492,042,601 1,353,298,534 Total shareholders' equity

13,706,831,756 10,054,996,379 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

OFF-BALANCE SHEET ITEMSContingent liabilities- - Letters of guarantee- - Irrevocable letters of credit- - Other contingent liabilities

Other commitments986,200,000 400,000,000 45 Undisbursed contracted leases and loans

986,200,000 400,000,000 TOTAL OFF BALANCE SHEET ITEMS

13.58 12.31 Net assets value per share (2012: Restated)





Balance Sheet

BAS 1.54 (r), 1.78 (e) BAS 1.54 (r), 1.78 (e) BAS 1.54 (r), 1.78 (e) BAS 1.54 (r), 1.78 (e) BAS 1.54 (r), 1.78 (e)

BAS 1.55

BAS 1.55


Union Capital LimitedProfit and Loss Account

for the year ended 31 December

BAS 1.51(d), 1.113 & 1.38BFRS 7.20 (b)BFRS 7.20 (b)BAS 1.85

BFRS 7.20 (b)BFRS 7.20 (c)BAS 1.85

BAS 1.104BAS 1.97BAS 1.97BAS 1.97BAS 1.97BAS 1.104BAS 1.97BAS 1.97BAS 1.97BAS 1.97BAS 1.85

BAS 1.85

BAS 1.97BAS 1.97BAS 1.97

BAS 1.82 (d)BAS 1.82 (d)

BAS 1.82 (f)

(Figures in BDT)2013 2012 Notes1,457,870,872 942,637,193 18 Interest income(1,092,604,443) (910,068,469) 19 Interest paid on deposits and borrowings etc.365,266,429 32,568,724 Net interest income

12,204,398 52,010,889 20 Investment income76,952,027 64,641,965 21 Fees, commission, exchange and brokerage39,335,962 93,258,472 22 Other operating income 493,758,817 242,480,050 Total operating income

45,853,150 36,800,057 23 Salaries and other employee benefits11,907,949 11,622,223 24 Rent, taxes, insurance, electricity etc. 483,458 248,891 Legal expenses1,879,692 1,311,484 25 Postage, stamp, telecommunication etc.7,839,930 5,284,694 26 Stationery, printing, advertisements etc.7,080,000 3,960,000 27 Managing Director's salary and fees985,000 755,000 28 Directors' fees149,500 151,500 29 Auditors' fees10,530,850 11,034,444 30 Depreciation and repair of assets12,831,372 11,109,624 31 Other expenses 99,540,901 82,277,917 Total operating expenses

394,217,915 160,202,133 Profit before provision

Provision for loans, advances, leases and investments126,384,997 7,454,651 13.1 General provision109,589,808 146,673,512 13.1 Specific provision(12,998,089) (80,095,075) 13.2 Provision for diminution in value of investment222,976,716 74,033,088 Total provision

171,241,199 86,169,045 Total profit before tax

Provision for taxation34,760,406 32,617,559 13.4 Current tax(2,263,275) (1,256,397) 9.2 Deferred tax32,497,131 31,361,162

138,744,068 54,807,883 Net profit after tax



Appropriations 27,748,814 10,961,577 15 Statutory reserve110,995,255 43,846,306 Retained surplus 109,909,326 109,909,326 Weighted average no. of outstanding share

1.26 0.50 35 Earnings per share (2012: Restated)





Profit and Loss Account

BAS 33.66


Union Capital LimitedProfit and Loss Account

(Merchant Banking Operation)for the year ended 31 December

BAS 1.51(d), 1.113 & 1.38BFRS 7.20 (b)BFRS 7.20 (b)BAS 1.85BFRS 7.20 (b)BFRS 7.20 (c)BAS 1.85

BAS 1.104BAS 1.97BAS 1.97BAS 1.97BAS 1.97BAS 1.104BAS 1.97BAS 1.97BAS 1.85BAS 1.85

BAS 1.97BAS 1.97BAS 1.97

(Figures in BDT)2013 2012592,386,298 474,565,226 Interest income(540,116,919) (446,649,625) Interest paid on deposits and borrowings etc.52,269,379 27,915,601 Net interest income - - Investment income75,487,827 59,342,942 Fees, commissions, exchange and brokerage- - Other operating income 127,757,206 87,258,543 Total operating income

4,585,315 3,681,006 Salaries and other employee benefits1,190,795 1,162,222 Rent, taxes, insurance, electricity etc. 48,346 24,889 Legal expenses187,969 131,148 Postage, stamp, telecommunication etc.783,993 538,661 Stationery, printing, advertisements etc.708,000 396,000 Managing Director's salary and fees98,500 75,500 Directors' fees1,408,870 1,231,110 Other expenses 9,011,788 7,240,536 Total operating expenses118,745,418 80,018,007 Profit before provision

Provision for loans, advances and leases8,759,519 5,610,193 General provision- - Specific provision- - Provision for diminution in value of investments8,759,519 5,610,193 Total provision109,985,899 74,407,814 Total profit before tax







Cash flows from operating activities1,392,281,356 884,393,769 Interest receipts(990,844,191) (851,825,045) Interest payments35,970,012 64,641,965 Fee and commission receipts76,952,027 27,777,698 Dividend receipts(51,340,880) (40,760,057) Cash payments to employees (23,138,737) (20,605,572) Cash payments to suppliers and management expenses (22,658,128) (140,138,404) Income taxes paid39,300,470 93,312,392 33 Receipts from other operating activities(12,831,373) (11,109,624) 34 Payments for other operating activities443,690,557 5,687,122 Cash generated before changes in operating assets & liabilities

Increase/(decrease) in operating assets and liabilities- - Statutory deposits- - Purchase of trading securities (treasury bills)- - Loans, advances and leases to banks and financial institutions(3,769,583,983) (447,113,706) Loans, advances and leases to customers(342,975,678) 116,035,778 39 Other assets2,586,000,000 1,020,000,000 Deposits from banks and other financial institutions725,069,108 (296,314,989) Deposits from customers- - Other liabilities account of customers- - Trading liabilities464,521,502 99,210,163 38 Other liabilities (336,969,051) 491,817,246 Cash generated from operating assets and liabilities106,721,506 497,504,368 Net cash generated from/(used) in operating activities

Cash flows from investing activities1,292,827,020 707,815,266 Proceeds from sale of securities(1,196,627,183) (865,367,285) Payments for purchases of securities(3,218,377) (8,160,706) Purchase of property, plant and equipment54,993 3,625,069 Proceeds from sale of property, plant and equipment(50,000,000) (99,999,935) Investment in UniCap Investments Limited 43,036,452 (262,087,591) Net cash used in investing activities

Cash flows from financing activities- (95,159,590) Dividend paid589,910,000 554,497,363 Receipts of long term loan(576,192,275) (634,147,839) Repayment of long term loan(14,365,116) (74,392,919) Net draw down/(payment) of short term loan(647,391) (249,202,985) Net cash generated from/(used) in financing activities149,110,568 (13,786,208) Net (decrease)/increase in cash and cash equivalents - - Effects of exchange rate changes on cash and cash equivalents224,670,699 238,456,907 Cash and cash equivalents at beginning of the year 373,781,267 224,670,699 Cash and cash equivalents at end of the year

Cash and cash equivalents at end of the year represents62,910 20,000 Cash in hand108,450,437 93,374,946 Balance with Bangladesh Bank and its agent bank265,267,920 131,275,753 Balance with other banks and financial institutions 373,781,267 224,670,699 Total

Supplemental schedule for non-cash financing activities52,337,770 95,159,590 Bonus share issued

Union Capital LimitedCash Flow Statement


BAS 1.51(d) & 1.38

BAS 7.31 BAS 7.31 BAS 7.14 (b) BAS 7.31 BAS 7.14 (d) BAS 7.14 (c) BAS 7.35 BAS 7.14 (b) BAS 7.14 (c)

BAS 7.20 (a) BAS 7.20 (a) BAS 7.20 (a) BAS 7.20 (a)

BAS 7.20 (a)

BAS 7.16 (d) Bas 7.16 (c) BAS 7.16 (a) BAS 7.16 (b)

BAS 7.31 BAS 7.17 (c) BAS 7.17 (d) BAS 7.17 (d)

BAS 7.45


Union Capital LimitedStatement of Changes in Equity


BAS 1.51 (d)

BAS 1.106 (d)

BAS 1.106 (d)(i)

BAS 1.107

BAS 1.107

BAS 1.106 (d)

BAS 1.106 (d)(i)

BAS 1.107

(Figures in BDT) DividendPaid up Statutory equalization Retainedcapital reserve reserve earnings Total Particulars

1,046,755,490 254,068,611 7,000,000 45,474,434 1,353,298,534 Balance as at 1 January 2013

- - - 138,744,068 138,744,068 Net profit for the year 2013

- 27,748,814 - (27,748,814) - Transfer to statutory reserve

- - (7,000,000) 7,000,000 - Transfer to retained earnings

52,337,770 - - (52,337,770) - Issuance of bonus share (year 2012)

1,099,093,260 281,817,425 - 111,131,917 1,492,042,601 Balance as at 31 December 2013

951,595,900 243,107,034 55,000,000 143,947,308 1,393,650,242 Balance as at 1 January 2012

- - - 54,807,883 54,807,883 Net profit for the year 2012

- 10,961,577 - (10,961,577) - Transfer to statutory reserve

- - (48,000,000) 48,000,000 - Transfer to retained earnings

95,159,590 - - (95,159,590) - Issuance of bonus share (year 2011)

- - - (95,159,590) (95,159,590) Payment of cash dividend (year 2011)

1,046,755,490 254,068,611 7,000,000 45,474,434 1,353,298,534 Balance as at 31 December 2012


Union Capital LimitedStatement of Liquidity Analysis

(Maturity of Assets and Liabilities)for the year ended 31 December

(Figures in BDT) aboveUp to 1 month 1-3 months 3-12 months 1-5 years 5 years Total Particulars

Assets62,910 - - - - 62,910 Cash in hand108,450,437 - - - - 108,450,437 Balance with Bangladesh Bank

and its agent bank(s)2,215,353 178,423,529 84,629,039 - - 265,267,920 Balance with banks and other

financial institutions- - - - - - Money at call and short notice47,803,267 38,377,021 258,540,863 - - 344,721,150 Investments1,066,325,384 1,740,028,374 4,839,340,284 2,099,402,843 841,840,762 10,586,937,647 Loans, advances and leases- - - - 16,481,629 16,481,629 Fixed assets including premises,

furniture and fixtures247,002,893 324,130,485 340,820,543 1,147,042,373 325,913,768 2,384,910,062 Other assets1,471,860,243 2,280,959,408 5,523,330,728 3,246,445,216 1,184,236,160 13,706,831,756 Total assets

Liabilities912,447,369 95,116,534 337,631,070 643,597,063 - 1,988,792,036 Borrowings from banks and

financial institutions462,643,324 1,075,200,136 4,119,363,291 1,556,782,410 444,536,278 7,658,525,439 Deposits17,050,000 40,350,000 9,997,555 271,950,126 122,515,750 461,863,431 Other deposits25,023,746 342,037,469 1,026,733,685 648,120,462 63,692,887 2,105,608,249 Provision and other liabilities 1,417,164,439 1,552,704,139 5,493,725,601 3,120,450,061 630,744,915 12,214,789,154 Total liabilities

54,695,804 728,255,269 29,605,127 125,995,155 553,491,245 1,492,042,601 Net liquidity gap

BAS 1.65 BAS 1.51 (c)


BAS 1.112 (a)

1. GENERAL INFORMATION1. 1 Domicile, legal form and country ofincorporationUnion Capital Limited (''the Company'') was set up forthe purpose of purchasing investment bankingbusiness of Bangladesh Branch Office of PeregrineCapital Limited, Hong Kong, along with all itsspecified assets and share capital of SES CompanyLimited, its related concern. This transaction waseffected on 04 February 1998. From that date, theCompany started to operate as "Union CapitalLimited - proposed".Union Capital Limited was registered as a publiclimited company under the Companies Act, 1994 withthe Registrar of Joint Stock Companies ofBangladesh on 09 August 1998. On 12 August 1998,the Company obtained permission from BangladeshBank to operate as a non-banking financial institutionunder the Financial Institutions Act, 1993. TheCompany also registered as a full-fledged MerchantBanker with the Bangladesh Securities andExchange Commission on 10 April 2002. TheCompany went for Initial Public Offering in May 2007and listed it shares in both Dhaka Stock Exchangeand Chittagong Stock Exchange in July 2007.The registered office of the Company is located atNoor Tower (5th floor), 1/F Free School Street, 73Sonargaon Road, Dhaka 1205. The operations of theCompany is being carried out through its five (5)offices located in Dhaka, Chittagong and Sylhet.

1.2 Principal activitiesThe activities of the Company encompass a widerange of services, broadly classified as fund based andfee based activities and brokerage services. TheCompany also offers different deposit schemes as well.Fund based servicesFund based services include lease finance, termfinance, real estate finance, SME finance, hirepurchase, bridge finance, bill discounting, factoringand margin loan etc.Fee based activitiesFee based activities include managing IPOs,underwriting of securities, portfolio management,corporate financial services. Deposit schemesThe Company offers various deposit schemes tocater the deposit from the valued customers. Depositschemes include Term deposit, Monthly incomedeposit, Double money deposit, Triple moneydeposit, Monthly saving scheme, Millionaire plus,Profit first deposit.

1.3 Information regarding subsidiary companiesAs on 31 December 2013 Union Capital has twosubsidiaries to include for preparation of consolidatedfinancial statements as per Bangladesh Accounting

Standard (BAS) 27: Consolidated and SeparateFinancial Statements. A brief description of thesubsidiaries is described below:

1.3.1 UniCap Securities LimitedUniCap Securities Limited (formerly SES CompanyLimited) is a private limited company registered underthe Companies Act, 1994. The Company wasincorporated in Bangladesh on 09 October 1995. TheCompany has changed its name to UniCap SecuritiesLimited on 21 October 2013 and the registered officeof the Company is situated at Richmond Concord(6th Floor), 68 Gulshan Avenue, Gulshan 1, Dhaka1212. It is a member of Dhaka and Chittagong StockExchange and a depository participant of CentralDepository of Bangladesh Limited (CDBL). Principalactivities of the Company is to carry out all kinds ofinvestment business in shares and stock, brokerageand dealing of securities. It also extends margin loanto its customers against their margin for investment inthe listed securities. The required margin level ismonitored daily and pursuant to establishedguidelines, customers are required to depositadditional margin to reduce the position, wherenecessary. As Union Capital owns 99.99% of thevoting shares of UniCap Securities Limited and hascontrol, it is a subsidiary. Out of 5 (five) directors, 04(four) directors have been nominated by UnionCapital to represent in the Board of the Company.

1.3.2 UniCap Investments LimitedUniCap Investments Limited a wholly ownedsubsidiary of Union Capital Limited was incorporatedin Bangladesh with the Registrar of Joint StockCompanies and Firms (RJSC) vide registration no. C-93014/11 dated 24 May 2011 as a public limitedcompany under the Companies Act, 1994. Theaddress of the Company's registered office is A-ABhaban, 9th floor, 23 Motijheel C/A, Dhaka-1000.Principal activities of the Company is to deliver awhole range of investment banking services includingmerchant banking activities such as issuemanagement, underwriting, portfolio managementand corporate advisory. Union Capital holds 99.99%shares in the Company. Out of 13 (thirteen) directors,3 (three) directors have been nominated from UnionCapital to represent in the Board of the Company.

2 BASIS OF PREPARATIONThe financial statements are prepared on thehistorical cost basis and therefore, do not take intoconsideration the effect of inflation. The financialstatements have been prepared and the disclosuresof information have been made in accordance withthe DFIM circular no. 11 dated 23 December 2009and requirement of the Financial Institutions Act,1993, the Companies Act, 1994, the BangladeshSecurities and Exchange Rules 1987, the ListingRules of Dhaka Stock Exchange and ChittagongStock Exchange, Guidelines from Bangladesh Bank,

Notes to the Financial Statementsas at and for the year ended 31 December 2013

BAS

1.13

8 (a

)BAS 1.51 (c)

BAS

1.10

(e)

BAS

1.13

8 (b

)


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entsend of the reporting period that have a significant risk

of resulting in a material adjustment to the carryingamount of assets, liabilities, income and expenseswithin the next financial year.In accordance with the guidelines as prescribed byBAS 37: Provisions, Contingent Liabilities andContingent Assets, provisions are recognized in thefollowing situations:Provisions Provisions are liabilities that are uncertain in timing oramount. Provisions are recognized when: the Grouphas a present legal or constructive obligation as aresult of past events; it is more likely than not that anoutflow of resources will be required to settle theobligation; and the amount has been reliablyestimated. Provisions are normally made forrestructuring costs and legal claims.Contingent liabilityA contingent liability is a possible obligation thatarises from past events and whose existence will beconfirmed only by the occurrence or non-occurrenceof one or more uncertain future events not whollywithin the control of the Group; or the Group has apresent obligation as a result of past events but is notrecognized because it is not likely that an outflow ofresources will be required to settle the obligation; orthe amount cannot be reliably estimated. Contingentliabilities normally comprise legal claims underarbitration or court process in respect of which aliability is not likely to occur.Contingent assetA contingent asset is possible asset that arises frompast events and whose existence will be confirmedonly by the occurrence or non-occurrence of one ormore uncertain future events not wholly within thecontrol of the Group. Contingent assets are neverrecognized, rather they are disclosed in the financialstatements when they arise.

2.5 Statement of compliance The financial statements of Union Capital Limitedinclude the Balance Sheet, Profit and Loss Account,Cash Flow Statement, Statement of Changes inEquity, Liquidity Statement and Notes to theFinancial Statements. These financial statements arerequired to be prepared and presented within aframework of rules and guidelines - some mandatoryand some recommendatory. The Companies Act,1994 requires the production of the following as apart of the annual report:a) Board of Directors’ reportb) Auditors’ reportc) Balance sheet andd) Profit and loss accountIn addition to the above, the Bangladesh Securitiesand Exchange Rules, 1987 (as amended in 1997)requires the production of a Cash Flow Statementand Statement of Changes in Shareholders’ Equityas a part of the Annual Report. The Companies Act,1994 provides basic requirements for accounting andreporting applicable to all companies incorporated inBangladesh. Bangladesh Securities and ExchangeCommission (BSEC) regulates financial reportingpractices of listed companies. Listed companies are

Bangladesh Accounting Standards (BAS) andBangladesh Financial Reporting Standards (BFRS)and other applicable laws and regulations.In the year 2009, Bangladesh Bank issued DFIMcircular no.11 dated 23 December 2009 suggestinguniform presentation and disclosure requirementwithin the industry. As a result, we compromised withthe usual presentation of the financial statements.There are some areas where application of BAS andBFRS differs from the application suggested by theBangladesh Bank through DFIM circulars. AsBangladesh Bank is our primary regulator; we arerequired to follow the guidelines of Bangladesh Bank.At the same time we are also required to follow theguidelines issued by Bangladesh Securities andExchange Commission (BSEC). For mitigatingpresentation and disclosure conflict we prepare thefinancial statements following DFIM circulars andpresent separate disclosure where deviations exist.

2.1 Reporting periodThe financial statements of the Company consistentlycover one calendar year from 1 January to 31December.

2.2 Directors' responsibilty statementThe Board of Directors takes the responsibility for thepreparation and presentation of these consolidatedand separate financial statements.

2.3 Accounting estimatesPreparation of financial statements requiresmanagement to make judgments, estimates andassumptions that affect the reported amount of assetsand liabilities, income and expenses. The estimatesand underlying assumptions are based on historicalexperience and various other factors that are believedto be reasonable under the circumstances. Actualresult could differ from estimates. The estimates and underlying assumptions arereviewed on an ongoing basis. Revisions of theaccounting estimates are recognized in the period inwhich the estimates are revised.Significant areas requiring the use of managementestimates in these financial statements relate to theuseful life of depreciable assets and provisions forloans/leases. However, assumptions and judgmentsmade by management in the application ofaccounting policies that have significant effect on thefinancial statements are not expected the result inmaterial adjustment to the carrying amounts of assetsand liabilities in the next year.

2.4 Risk and uncertainty for use of estimatesThe preparation of financial statements in conformitywith Bangladesh Accounting Standards requiresManagement to make estimates and assumptionsthat affect the reported amounts of revenues andexpenses, assets and liabilities, and disclosurerequirements for contingent assets and liabilitiesduring and the date of the financial statements.These financial statements contained informationabout the assumptions it made about the future andother major sources of estimation uncertainty at the

BAS

1.12

5BA

S 1.

125

BAS

1.12

5BA

S 1.

125

BAS

37.1

4BA

S 1.

16

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ents

SL No. BAS/BFRS ApplicabilityBAS 1 Presentation of Financial Statements (2008) *BAS 2 Inventories N/ABAS 7 Cash Flow Statements AppliedBAS 8 Accounting Policies, Changes in Accounting Estimates & Errors AppliedBAS 10 Events After the Reporting Period AppliedBAS 11 Construction Contracts N/ABAS 12 Income Taxes AppliedBAS 16 Property, Plant and Equipment AppliedBAS 17 Leases AppliedBAS 18 Revenue AppliedBAS 19 Employee Benefits AppliedBAS 20 Accounting for Government Grants and Disclosure of Government Assistance N/ABAS 21 The Effects of Changes in Foreign Exchange Rates AppliedBAS 23 Borrowing Costs AppliedBAS 24 Related Party Disclosures AppliedBAS 26 Accounting and Reporting by Retirement Benefit Plans N/ABAS 27 Consolidated and Separate Financial Statements AppliedBAS 28 Investments in Associates N/ABAS 31 Interests in Joint Venture N/ABAS 32 Financial Instruments: Presentation *BAS 33 Earnings Per Share AppliedBAS 34 Interim Financial Reporting AppliedBAS 36 Impairment of Assets AppliedBAS 37 Provisions, Contingent Liabilities and Contingent Assets AppliedBAS 38 Intangible Assets AppliedBAS 39 Financial Instruments: Recognition and Measurement *BAS 40 Investment Property N/ABAS 41 Agriculture N/ABFRS 2 Share Based Payment N/ABFRS 3 Business Combination N/ABFRS 4 Insurance Contracts N/ABFRS 5 Non-current Assets Held for Sale and Discontinued Operation N/ABFRS 6 Exploration for and Evaluation of Mineral Resources N/ABFRS 7 Financial Instruments: Disclosures *BFRS 8 Operating Segments AppliedBFRS 10 Consolidated Financial Statements AppliedBFRS 11 Joint Arrangements N/ABFRS 12 Disclosure of Interests in Other Entities N/ABFRS 13 Fair Value Measurement N/A* As the regulatory requirements differ with the standards, relevant disclosures are made in accordance withBangladesh Bank's requirements (please see note 3.30).N/A = Not Applicable

and reporting standards as applicable in Bangladesh.Approved accounting standards comprise ofInternational Accounting Standards (IAS) andInternational Financial Reporting Standards (IFRS) asadopted by the Institute of Chartered Accountants ofBangladesh. As of 31 December 2013 status andapplicability of Bangladesh Accounting Standards(BAS) and Bangladesh Financial Reporting Standards(BFRS) in the case of Union Capital are as under:

required to comply with BSEC’s accounting anddisclosure requirements. The Rules 1987 asamended in 1997, requires listed companies to followBangladesh Accounting Standards (BAS) andBangladesh Financial Reporting Standards (BFRS)as adopted by the Institute of Chartered Accountantsof Bangladesh (ICAB). These financial statements have been prepared andpresented in accordance with the approved accounting


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ents2.6 Consistency

In accordance with the BFRS framework for thepresentation of financial statements together withBAS 1 and BAS 8, Union Capital applies theaccounting disclosure principles consistently fromone period to the next. Where selecting and applyingnew accounting policies, changes in accountingpolicies applied, correction of errors, the amountsinvolved are accounted for and disclosedretrospectively in accordance with the requirement ofBAS-8. We however have applied the sameaccounting and valuation principles in 2013 as infinancial statements for 2012.

2.7 SegmentsA segment is a distinguishable component of thecompany that engaged in providing different types ofproducts and services, which is subject torequirement by local regulatory authority. BangladeshSecurities & Exchange Commission requirespreparation of separate financials for MerchantBanking Unit. Company’s primary reporting segmentis business division, which corresponds with the waythe operating businesses are organized andmanaged within the Company.The Company has two reportable segments on thedate of the reporting namely, Merchant BankingOperations and Financing Operations. Merchantbanking operations include managing IPOs,underwriting of securities, management of investor’sportfolio and other financial advisory services.Operating results of merchant banking operationhave been presented separately as well asconsolidated with that of the results of income fromfinancing operations.

2.8 Basis of consolidation of operations ofsubsidiaries The financial statements of the Company and itssubsidiaries have been consolidated in accordancewith Bangladesh Accounting Standard 27:Consolidated and Separate Financial Statements.The consolidation of the financial statement has beenmade after eliminating all material intra groupbalances, income and expenses arising from intra-group transactions.The total profits of the Company and its subsidiariesare shown in the consolidated profit and loss accountwith the proportion of profit after taxation pertaining tominority shareholders being deducted as ‘Non-controlling Interest’. All assets and liabilities of theCompany and of its subsidiaries are shown in theconsolidated balance sheet. The interest of minorityshareholders of the subsidiaries are shownseparately in the consolidated balance sheet underthe heading ‘Non-controlling Interest’.

2.9 Going concernThe Company has adequate resources to continue inoperation for foreseeable future. For this reason theDirectors continue to adopt going concern basis inpreparing the financial statements. The current creditfacilities and resources of the Company providesufficient funds to meet the present requirements ofits existing businesses and operations.

3 SIGNIFICANT ACCOUNTING POLICIES3.1 Lease operationsUnder BAS 17, lease operations are divided intofinance leases and operating leases. Unlike operatinglease, a finance lease is a lease that transferssubstantially all the risks and rewards incident toownership of an asset to the lessee. Title may or maynot eventually be transferred.

Union Capital Limited as a lessorUnder finance leases, Union Capital Limitedrecognizes the leased assets in the balance sheet asinvestment in lease assets at an amount equal to thenet investment in the lease. The lease payments arebroken down into the finance charge and theredemption payment. The redemption paymentreduces the amount of the outstanding liability (netinvestment); the finance charge is treated as interestincome. Interest and similar income is recognized onthe basis of a constant, periodic rate of return relatingto the net investment outstanding. In contrast, assets held under operating leases arerecognized and valued using the same principles as,property, plant and equipment. Union Capital doesnot hold any property under operating lease.Union Capital�Limited as a LesseeUnder finance lease, the asset is recognized asproperty, plant and equipment, and the obligation asa liability. Each asset is stated at the lower of thefollowing two values: either the fair value of the leaseasset at the inception of the lease or, the presentvalue of the minimum lease payments which ever islower. In calculating the present value of theminimum lease payments, the interest rate implicit inthe lease is applied. Lease payments relating to finance leases arebroken down into two components: the financecharge and the redemption payment. The redemptionpayment reduces the residual liability and the financecharges are shown as interest expenses.

3.2 Term finance and other financeSuch investments are stated at un-amortizedamount. The recovery of principal amount isamortised and the carrying amount is adjusted withthe principal recovery and stated at un amortizedprincipal amount.Investments are classified as non-accrual when thereis no longer reasonable assurance of the timelycollection of the full amount of principal and interest.Whenever a payment is 3 months past due,investments are classified as non accrual even if theyare fully secured and collection efforts are reasonablyexpected to result in repayment within 6 months. When loans/leases are identified as non accrual, therecognition of accrued interest is discontinued andcredited to interest suspense account. Interestreceived on non-accrual investments are credited toprofit & loss account on cash basis. Non-accrualinvestments are returned to performing status whenrequired amounts including interest need to classifyas regular has been collected.

3.3 Margin loan Union Capital extends margin loan to the portfolioinvestors at an agreed ratio (between investors deposit

BAS

1.45

BAS

27.1

2

BAS 1.10(e)

BAS

17.3

1

BFR

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BAS

17.8

BAS

17.8

BAS

17.2

0BA

S 17

.49

& 17

.50

BAS

1.11

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.12

and loan amount) of purchased securities against therespective investor account. The investors are tomaintain the margin as per set rules and regulations.The margin is monitored on daily basis as it changesdue to change in market price of shares. If the marginfalls below the minimum requirement, the investors arerequired to deposit additional fund to maintain themargin as per rules otherwise the securities are sold tobring the margin to the required level.

3.4 Investments in subsidiary A subsidiary is an entity in which the Company hascontrol as per as shareholding (more than 50percent) or voting right is concerned. As on thereporting date Union Capital Limited has twosubsidiary company namely ‘UniCap InvestmentsLimited’ and ‘UniCap Securities Limited’.Consolidated Financial Statements have beenprepared for subsidiary investment as perBangladesh Accounting Standards 27: Consolidatedand Separate Financial Statements. Interest of theminority is shown as minority interest as separate lineitem of the shareholders equity which includes sharecapital of minority portion as well as profit earned thatgoes to the non-controlling interest.

3.5 Investment in securities Investment in securities are classified broadly in twocategories and accounted for as under:Investment in listed securities:Investments in listed securities are carried at cost.Adequate provision has been made considering eachindividual investment (where cost is less than marketprice) as guided by Bangladesh Bank. Unrealizedgain or losses are not recognized in the profit andloss account. Investment in unlisted securities:Investment in unlisted securities is reported at costunder cost method. Adjustment is given for anyshortage of book value over cost for determining thecarrying amount of investment in unlisted securities.

3.6 ReceivablesAccounts receivablesThe main item included rentals/installments due fromthe clients but not received. No such receivables areaccounted for if the loans are classified as bad andloss. Receivables carry interest for the periods forwhich the delay continues in payments of theamounts due from the clients continues. Suchinterest is not recognized as income until it isreceived in cash. Receivables from clients are statedat their nominal value. Other receivablesOthers receivables includes mainly receivable frombrokerage houses against sale of securities, accruedIDCP (Interest During Construction Period) andinterest receivable. These receivables do not carryany interest and are stated at their nominal value asreduced by appropriate allowances for estimatedirrecoverable amounts.

3.7 Cash and cash equivalentsCash and cash equivalents comprise cash in hand,balance with Bangladesh Bank and its agent bank,and balance with other banks and financial institutions.

3.8 Liquidity statement The liquidity statement of assets and liabilities as onthe reporting date has been prepared on residualmaturity term as per the following bases:a) Balance with other banks and financial

institutions, money at call and short notice, etc.are on the basis of their maturity term.

b) Investments are on the basis of their respectivematurity.

c) Leases, loans and advances are on the basis oftheir repayment schedule.

d) Fixed assets are on the basis of their useful lives.e) Other assets are on the basis of their

realization/amortization.f) Borrowings from other banks, financial institutions

and agents are as per their maturity/repaymentterms.

g) Deposits and other accounts are on the basis oftheir maturity term and past trend of withdrawal by the depositors.

h) Provisions and other liabilities are on the basis oftheir payment / adjustments schedule.

3.9 Fixed assets including land, building,furniture and fixturesFreehold assetsThe cost of an item of property, plant and equipmentis recognized as an asset if, and only if, it is probablethat the future economic benefits associated with theitem will flow to the Company and the cost of the itemcan be measured reliably. Property, plant andequipments are stated at cost less accumulateddepreciation in compliance with the BangladeshAccounting Standards (BAS) 16: Property, Plant andEquipment. The cost of acquisition of an assetcomprises its purchase price and any directlyattributable cost of bringing the assets to its workingcondition for its intended use inclusive of inwardfreight, duties and non-refundable taxes if any. Pre-operating expenses and borrowing costsIn respect of major projects involving construction,related pre-operational expenses form part of thevalue of assets capitalized. Expenses capitalised alsoinclude applicable borrowing cost considering therequirement of BAS 23: Borrowing Costs.Subsequent expenditureThe Company recognizes in the carrying amount ofan item of property, plant and equipment the cost ofreplacing part of such an item when that cost isincurred if it is probable, that the future economicbenefits embodied with the item will flow to theCompany and the cost of the item can be measuredreliably. Expenditure incurred after the assets havebeen put into operation, such as repairs andmaintenance is normally charged off as revenueexpenditure in the period in which it is incurred. Insituation where it can be clearly demonstrated that theexpenditure has resulted in an increase in the futureeconomic benefit expected to be obtained from theuse of the fixed assets, the expenditure is capitalizedas an additional cost of the assets. All other costs arerecognized to the profit and loss account asexpenses. All up-gradation/enhancement aregenerally charged off as revenue expenditure unlessthey bring similar significant additional benefits.


BAS

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BAS

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BAS

16.7

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entsDisposal of fixed assets including land, building,

furniture and fixturesOn disposal of fixed assets, the cost and accumulateddepreciation are eliminated and gain or loss on suchdisposal is reflected in the profit and loss account,which is determined with reference to the net bookvalue of the assets’ and net sales proceeds. Depreciation on fixed assets including land,building, furniture and fixturesDepreciation of an asset begins when the asset isavailable for use. Depreciation is provided for theperiod in use of the assets. Full month’s depreciationhas been charged on additions irrespective of datewhen the related assets are put into use and nodepreciation is charged for the month of disposal.Depreciation is provided at the following rates onstraight-line basis over the periods appropriate to theestimated useful lives of the different types of assets:Motor vehicles 20% per annumElectric equipment 20% per annumFurniture & fixtures 20% per annumOffice Decoration 33% per annumMobile phone 20% per annumStaff appliance 20% per annum

3.10 Intangible assetComponentsThe main item included in intangible asset is software.Basis of recognitionAn Intangible Asset shall only be recognized if it isprobable that future economic benefits that areattributable to the asset will flow to the Company andthe cost of the asset can be measured reliably inaccordance with BAS 38: Intangible Assets.Accordingly, these assets are stated in the BalanceSheet at cost less accumulated amortization.Subsequent expenditureSubsequent expenditure on intangible asset iscapitalized only when it increases the future economicbenefits embodied in the specific assets to which itrelates. All other expenditure is expensed as incurred.AmortizationIntangible asset is valued at amortized cost andwritten down within 5 to 10 years.

3.11 Merchant Bank operationAs stipulated in the Bangladesh Securities andExchange Commission (Merchant Banker andPortfolio Manager) Rules 1996, the services of issuemanagement, portfolio management, underwriting ofshares and securities and advisory services fall underthe purview of Merchant Banking operation.Accordingly, profit and loss account of MerchantBanking operation includes income under the headsstated above. As advised by Bangladesh Securitiesand Exchange Commission (BSEC), the Compnayformed a separate subsidiary named "UniCapInvestments Limited" for its Merchant BankingOperation. The Compnay has applied to the BSEC totransfer the existing merchant banking liceses ofUnion Capital Limited in the name of UniCapInvestments Limited. After getting approval fromBSEC, the Company's existing merchant bankingservices will be provided by its subsidiary, UniCapInvestments Limited.

3.12 Bank loansInterest bearing bank loans are recorded at theproceeds received. Interest on bank loans inaccounted for on an accrued basis to profit and lossaccount under the head of financial expense at theimplicit rate of interest. The accrued expenses arenot added to carrying amounts of the loans.

3.13 Borrowing costsAll borrowing costs are recognized in the profit orloss account in the period in which they are incurred.

3.14 Accrued expenses and other payablesLiabilities are recognized for the goods and servicesreceived, whether paid or not for those goods andservices. Payables are not interest bearing and arestated at their nominal value.

3.15 Provision for doubtful lossesThe provision for doubtful losses is maintained at alevel that management considers adequate to absorbidentified credit related losses in the portfolio as wellas losses that have been incurred but are not yetidentifiable.The provision is increased by the provision fordoubtful losses, which is charged to profit and lossaccount, and decreased by the amount of write-offs,net of reverses.The provision is determined based on management’sidentification and evaluation of problem accounts,estimated probable losses that exist on the remainingportfolio and on other factors including thecomposition and quality of the portfolio and changesin economic condition.The provision is estimated based on two principles:1. Bangladesh Accounting Standards (BAS) 37:Provisions, contingent liabilities and contingentassets, and 2. Bangladesh Bank guidelines.Methodology for measuring the appropriate level ofthe provision relies on several key elements, whichinclude both quantitative and qualitative factors asset forth in the Bangladesh Bank guidelines. FIDcircular 08 dated August 03, 2002 and subsequentup-dictation by Bangladesh Bank in this regard is thebasis for calculating the provision for doubtful losses.

3.16 Income taxIncome tax expense represents the sum of the taxcurrently payable and deferred tax.a. Current taxThe tax currently payable is based on taxable profitfor the year. Taxable profit differs from profit asreported in the profit and loss account because itexcludes items of income or expense that are taxableor deductible in other years or are never taxable ordeductible. Company’s liability for current tax iscalculated using tax rates that have been enacted asat the balance sheet date.b. Deferred taxAs per Bangladesh Accounting Standard (BAS) 12:Income Taxes, deferred tax is recognized ondifferences between the carrying amounts of assetsand liabilities in the financial statements and thecorresponding tax bases used in the computation oftaxable profit and are accounted for using the

BAS

16.6

7BA

S 16

.73(

b)BA

S 38

.8

BAS

39.4

3

BAS

38.2

4BA

S 38

.72

BAS

38.9

7BF

RS

8.20

BAS

39.4

3BA

S 23

.9BA

S 12

.46

BAS

12.1

5BA

S 37

.14


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es to

the

Fina

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tem

ents

BAS

18.3

5 (a

)BA

S 18

.30

(a)

balance sheet liability method. Deferred taxliabilities are generally recognized for all taxabletemporary differences. Deferred tax assets aregenerally recognized for all deductible temporarydifferences to the extent that it is probable thattaxable profits will be available against which suchdifferences can be utilized.Deferred tax is calculated at the tax rates, which areexpected to apply in the period when the liability issettled or the asset is realized. Deferred tax ischarged or credited to profit and loss account.Deferred tax assets and liabilities are offset whenthere is a legally enforceable right to set off currenttax assets against current tax liabilities and UnionCapital intends to settle its current tax assets andliabilities on a net basis.

3.17 Employees benefit plansUnion Capital offers a number of benefit plans whichincludes contributory provident fund and gratuityscheme.a. Contributory provident fundThe Company operates a contributory provident fundfor its permanent employees. The fund is approvedby the National Board of Revenue (NBR),administered separately by a Board of Trustees andis funded by equal contribution from the Companyand the employees. This fund is invested separatelyfrom the Company’s assets.b. Gratuity schemeThe Company operates an unfunded gratuity scheme(which is a defined benefit scheme as specified inBAS 19: Employee Benefits). Employees are entitledto gratuity benefit after completion of minimum fiveyears of service with the Company. The gratuity iscalculated on the last basic pay and is payable at therate of one month's basic pay for every completedyear of service up to ten years of service, one andhalf months basic pay for every completed year ofservice up to fifteen years of service and two monthsbasic pay for more than fifteen years of service. Fullprovision for gratuity has been made in the accountsfor the existing employees based on their years ofservice with the Company. Gratuity amount is subjectto a maximum ceiling of 50 (fifty) basic only.c. Employee home loan schemeTo secure long-term commitment of deservingemployees the Company introduced Home LoanPolicy. An employee who is in service for acontinuous period of at least five years (in 3 yearsservice with Union Capital) is entitled to avail homeloan to purchase residential apartment, purchaseland and construction of house thereon etc. Interestrate of the loan is 6 percent per annum.d. Employee car schemeThe Company provides car loan facility to theemployees as per loan scheme. The Companyprovides full time car facility to the employees fromthe position of Executive Vice President. e. Employee personal loan schemeUnion Capital provides personal loan facility to theemployee as per loan scheme.

3.18 Branch accoutingThe Company has four branches with no overseasbranch as on 31 December 2013. Accounts of thebranches are maintained at the head office fromwhich these accounts are drawn up.

3.19 Write offWrite off describes a reduction in recognised value. Itrefers to recognition of the reduced or zero value ofan asset. Generally, it refers to an investment forwhich a return on the investment is now impossibleor unlikely. The item’s potential return is thuscanceled and removed (“written off”) from theCompany's balance sheet.Recovery against debts written off/provided for iscredited to revenue. Income is recognized whereamounts are either recovered and /or adjustedagainst securities/properties of advances thereagainst or are considered recoverable.

3.20 Interest suspense accountAccrued interest on lease finance, term finance, realestate finance, hire purchase agreement classified asSpecial Mention Account (SMA), Sub-Standard (SS),Doubtful (DF) and Bad & Loss (BL) are notrecognized as income rather transferred to interestsuspense accounts in compliance with BangladeshBank guidelines. Recovery of overdue credited tointerest suspense account is recognised as incomeon cash basis.

3.21 Revenue recognitionRevenue is recognized in accordance withBangladesh Accounting Standard (BAS) 18: Revenueunless otherwise mentioned or otherwise guided bythe separate BAS/BFRS.a. Lease income The excess of gross lease rentals over the cost ofthe leased assets constitutes the total unearnedincome at the commencement of the execution oflease. This income is allocated over the period oflease that reflects a constant periodic return on thenet investment. The pattern of the periodic return is,however, differs in case of structured lease financedepending on the structure of the particular leasecontract. Income is recognized when it is earned, i.e.income on due installments on unclassified leasesirrespective of whether received or not. Income is nottaken into profit and loss account when a lease isclassified as SMA and above and kept in interestsuspense account. Interest on classified lease isrecognized on cash basis.b. Income from term financeInterest income on term finance is recognized onaccrual basis. Installment comprises both interestand principal. Interest part of the installments thatbecome receivable is recognized as income in thefinancial statements. Interest on term financeceases to be taken into income when such termfinance are classified as SMA and above and keptin interest suspense account. Interest onclassified term finances is recognized as incomeon cash basis.


BAS

1.78

(d)

BAS

18.3

0 (a

)BA

S 18

.29

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entsc. Income from real estate finance

Interest income from real estate finance is recognizedon accrual basis. Interest portion of the installmentsthat become receivable is recognized as income inthe financial statements. Interest on such financeceases to be taken into income when such finance isclassified as SMA and above and kept in interestsuspense account. Interest on classified finance isrecognized as income on cash basis.d. Income from margin loanIncome from margin loan is recognized on accrualbasis. Such income is calculated considering dailymargin loan balance of the respective parties.Income is recognized on quarterly rest.e. Income from secured term financeIncome from secured term finance is recognized onaccrual basis.f. Dividend incomeDividend on ordinary sharesDividend income from ordinary shares is recognizedwhen the shareholders’ legal rights to receivepayments have been established i.e. during theperiod in which dividend is declared in the AnnualGeneral Meeting. Dividend declared but not receivedis recognized as deemed dividend.Dividend on preference sharesDividend from preference shares is recognized oncash basis.g. Fee based incomeFee based income is recognized on accrual basis.h. Gain on sale of securitiesCapital gain on disposal of securities listed in thestock exchanges is recorded on cash basis i.e. onlywhen the securities are sold in the market.Unrealized capital gains are not accounted for in theprofit and loss account.

3.22 Event after the reporting period

Proposed dividendThe proposed dividend is not recognized as a liabilityin the balance sheet in accordance with the BAS 10:Events After the Balance Sheet Date. Dividendpayable to the Company’s shareholders arerecognized as a liability and deducted fromshareholders equity in the period in which theshareholders right to receive payment is established.Bangladesh Accounting Standard (BAS) 1:Presentation of Financial Statements also requiresthe dividend proposed after the balance sheet datebut before the financial statements are authorized forissue, be disclosed in the notes to the financialstatements. Accordingly, the Company has disclosedthe same in the notes to the financial statements.All material events occurring after the balance sheetdate has been considered and where necessary,adjusted for or disclosed in note 55.

3.23 Impairment of assetsThe carrying amounts of the Company’s assets arereviewed at each balance sheet date to determine

whether there is any indication of impairment. If anysuch indication exists, the assets recoverable amountis estimated.Any impairment loss is recognized whenever thecarrying amount of an asset exceeds its recoverableamount. Impairment losses are recognized in theprofit and loss account.

3.24 Related party transactionsAs per Bangladesh Accounting Standard (BAS) 24:Retaled Party Disclosures, parties are considered tobe related if one of the party has the ability to controlthe other party or exercise significant influence overthe other party in making financial and operatingdecisions. All transactions involving related partiesarising in normal course of business are conducted atarm’s length basis at normal commercial rates on thesame terms and conditions as third party transactionsusing valuation models.

3.25 Statutory reserveFinancial Institutions Regulations 1994 requires Non-bank Financial Institutions to transfer 20 percent of itscurrent year’s profit to reserve fund until such reserveequals to its paid up share capital. In conformity withthe above requirement, the Company transferred 20percent of its net profit to statutory reserve beforedeclaration of dividend.

3.26 Guarantee, commitments and contingenciesCorporate guarantee represents irrevocableassurance that the Company will make payments inthe event that a client cannot meet its obligation tothird parties. The term of this guarantee is for oneyear and renewable at the expiry of the term. In the normal course of operations, the Companyprovides indemnifications, which are often standardcontractual terms to counter parties in transactionssuch as purchase agreements, service agreements,contract with employees and leasing transactions.This indemnification clause may require us tocompensate the counter parties for cost incurred as aresult of charges in laws and regulations or litigationclaims that may be suffered by the counter party as aconsequence of the transaction. The terms of theseindemnifications clause vary based upon thecontract.

3.27 LitigationThe Company is not a party to any lawsuits exceptthose arising in the normal course of business, whichwere filed against the default clients for non-performance in loans/leases repayment and againstvarious level of tax authority regarding some disputedtax issues. The Company, however, providesadequate provisions as per guidelines of BangladeshBank and BAS 37.

3.28 Earnings per share The Company calculates Earnings Per Share (EPS)in accordance with BAS 33: Earnings Per Sharewhich has been shown on the face of Profit and Lossaccount, and the computation of EPS is stated in thenotes to the financial statements.

BAS

18.3

0 (a

)BA

S 18

.30

(a)

BAS 18.30 (a)

BAS

18.3

0 (c

)BA

S 18

.20

BAS

1.10

7BA

S 36

.9

BAS

24.1

7BA

S 37

.27

BAS

1.98

(f)


Not

es to

the

Fina

ncia

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tem

ents

BAS

1.11

4 (d

) (ii)

a. Basic earnings per shareThis represents earnings for the year attributable toordinary shareholders. As there was no preferencedividend or extra ordinary items, the net profit aftertax for the year has been considered as fullyattributable to the ordinary shareholders.b. Diluted earnings per shareDiluted earnings per share reflects the potentialdilution that could occur if additional ordinary sharesare assumed to be issued under securities orcontracts that entitle their holders to obtain ordinaryshares in future, to the extent such entitlement is notsubject to unresolved contingencies.Effect of dilution to weighted average number ofordinary shares is given for potential ordinary shares.At 31 December 2013, there was no scope for dilutionand hence no diluted EPS is required to be calculated.c. Weighted average number of ordinary sharesoutstanding during the yearThis represents the number of ordinary sharesoutstanding at the beginning of the year plus thenumber of ordinary shares issued during the yearmultiplied by a time-weighting factor. The time-weighting factor is the numbers of days the specificshares were outstanding as a proportion of the totalnumber of days in the year.

3.29 Uniform accounting policiesThe financial statements of Union Capital Limited,UniCap Securities Limited and UniCap InvestmentsLimited have been prepared in accordance with theuniform principles of accounting.

3.30 Disclosure of deviations from fewrequirements of BAS/BFRS due to mandatorycompliance of Bangladesh Bank’s requirements Bangladesh Bank is the prime regulatory body for allNon-banking Financial Institutions in Bangladesh.Some requirements of Bangladesh Bank contradictwith those of BAS/BFRS. As such the Company hasdeparted from those contradictory requirements ofBAS/BFRS in order to comply with the rules andregulations of Bangladesh Bank, which are disclosedin note no. 62 and 63 of these financial statements.

3.31 Financial risk managementThe risk of the Company is defined as the possibilityof losses, financial or otherwise. The riskmanagement of the Company covers core risk areasof financing namely, credit risk, liquidity risk, marketrisk that includes interest rate risk and equity risk,operational risk and reputation risk arising frommoney laundering incidences. The Company'sobjective of the risk management is that it takes wellcalculative business risks while safeguarding itscapital, financial resources and profitability fromvarious risks. In this context, the Company took stepsto implement Bangladesh Bank's guidelines andsome of the best practices as under:

3.31.1 Credit riskIt arises mainly from lending, trade finance, leasingand treasury businesses. This can be described as

potential loss arising from the failure of a counterparty to perform as per contractual agreement withthe Company. The failure may result fromunwillingness of the counter party or decline inhis/her financial condition. Therefore, the Company’scredit risk management activities have beendesigned to address all these issues.The Company has segregated duties of theofficers/executives involved in credit related activities.A separate Corporate Division has been formed atHead Office which is entrusted with the duties ofmaintaining effective relationship with the customer,marketing of credit products, exploring new businessopportunities, etc. Moreover, credit approval,administration, monitoring and recovery functionshave been segregated. For this purpose, threeseparate units have been formed within the creditdivision. These are (a) Credit Risk Management Unit,(b) Credit Administration Unit and (c) CreditMonitoring and Recovery Unit. Credit RiskManagement Unit is entrusted with the duties ofmaintaining asset quality, assessing risk in lending toa particular customer, sanctioning credit, formulatingpolicy/strategy for lending operation, etc.A thorough assessment is done before sanction ofany credit facility at Credit Risk Management Unit.The risk assessment includes borrower risk analysis,financial analysis, industry analysis, historicalperformance of the customer, security of theproposed credit facility etc. The assessment processstarts at Corporate Division by the RelationshipManager/Officer and ends at Credit RiskManagement Unit when it is approved/declined bythe competent authority. Credit approval authority hasbeen delegated to the Managing Director. Proposalbeyond his delegation are approved/declined by theExecutive Committee and/or the Board.In determining Single borrower/Large loan limit, theinstructions of Bangladesh Bank are strictly followed.Loans are classified as per Bangladesh Bank’sguidelines.

3.31.2 Liquidity riskThe object of liquidity risk management is to ensurethat all foreseeable funding commitments and depositwithdrawals can be met when due. To this end, theCompany is maintaining a diversified and stablefunding base comprising of core retail and corporatedeposits and institutional balance. Management ofliquidity and funding is carried out by TreasuryDepartment under an approved policy guidelines.Treasury front office is supported by a very structuredback office. The liquidity management is monitoredby Asset Liability Committee (ALCO) on regularbasis. A written contingency plan is in place tomanage extreme situation.

3.31.3 Market riskThe exposure of market risk of the Company isrestricted to interest rate risk and equity risk.

3.31.4 Interest rate riskInterest rate risk may arise either from trading portfolioand non-trading portfolio. The short-term movement in


BAS

33.1

0BA

S 33

.31

BAS

1.19

Not

es to

the

Fina

ncia

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tem

entsinterest rate is negligible or nil. Interest

rate risk of non-trading business arisesfrom mismatches between the futureyield of an asset and its funding cost.ALCO monitors the interest ratemovement on regular basis.

3.31.5 Equity riskIt arises from movement in marketvalue of equities. The risks aremonitored by Merchant Banking Wingunder a well designed policyframework.

3.31.6 Operational RiskAppropriate internal control measuresare in place at Union Capital toaddress operational risks. TheCompany has also established aninternal control & compliancedepartment (ICCD) to addressoperational risk and to frame andimplement policies to encounter suchrisks. This department assessesoperational risk across the Companyas a whole and ensures that anappropriate framework exists toidentify, assess and mange operationalrisk. The function of ICCD is toconstant vigilance against leakage ofShareholders value by identifying,assessing, measuring, managing andtransferring operational risk resultingfrom inadequate or failed internalcontrol processes, people and systemor from external events.

3.32 Basel II and its implementationBasel II accords are the internationalstandards for creating regulations abouthow much capital is needed to putaside to guard against the various typesof financial and operational risks thatthe Financial Institutions face.To cope with the international bestpractices and to make the capital morerisks sensitive as well as more shockresilient, guidelines on ‘CapitalAdequacy and Market Discipline(CAMD) have been introduced byBangladesh Bank from 01 January2012 regarding Minimum CapitalRequirement (MCR), Capital AdequacyRatio (CAR), and Disclosurerequirement as stated in the guidelinesto be followed by all financialinstitutions for the purpose of statutorycompliance. In line with the requirementof the guidelines, the Company hasalready formed BASEL ImplementationUnit (BIU) to ensure timelyimplementation of BASEL II accord.Calculation of CAR and MCR aredetailed out in note no. 14.

(Figures in BDT)2013 20124 CASH

In hand62,910 20,000 Local currency- - Foreign currencies 62,910 20,000

Balance with Bangladesh Bank108,450,437 93,374,946 Local currency- - Foreign currencies 108,450,437 93,374,946108,513,347 93,394,946 Total

4.a CASH (Consolidated)In hand

62,910 20,000 Union Capital Ltd.20,000 1,100 UniCap Securities Ltd.- - UniCap Investments Ltd. 82,910 21,100

Balance with Bangladesh Bank108,450,437 93,374,946 Union Capital Ltd.- - UniCap Securities Ltd.- - UniCap Investments Ltd. 108,450,437 93,374,946 108,533,347 93,396,046 Total

4.1 Cash reserve requirement (CRR) and statutory liquidityreserve (SLR)Cash reserve requirement and statutory liquidity reserve have beencalculated and maintained in accordance with FID circular no. 6dated 6 November 2003.

4.1.1 Cash reserve requirement (CRR)2.5% of total term deposits

105,345,688 88,693,548 Required reserve112,515,981 93,374,946 Actual reserve held 7,170,293 4,681,398 Surplus(deficit)

4.1.2 Statutory liquidity reserve (SLR)5% of average liabilities

217,159,650 181,411,274 Required reserve222,888,301 224,670,700 Actual reserve held5,728,651 43,259,426 Surplus/(deficit)

4.1.3 Held for cash reserve requirement (CRR)108,450,437 93,374,946 Balance with Bangladesh

Bank and its agent bank(s)

4.1.4 Held for statutory liquidity reserve (SLR)62,910 20,000 Cash in hand108,450,437 93,374,946 Balance with Bangladesh Bank &

its agent bank(s) as per statement265,267,920 131,275,753 Balance with other banks and

financial institutions (note-5)373,781,267 224,670,700

BAS

1.77

BAS

1.77


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the

Fina

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ents


4.1.5 Cash in handCash in hand represents the amount under imprestsystem of petty cash to meet petty cash expenses bothfor head office and branch offices. Under this system,the Company maintains Tk. 62,910 (year 2012 Taka20,000). As per Bangladesh Bank guidelines, NBFIcannot make any cash transaction except petty cash.4.1.6 Balance with Bangladesh Bank & its agentbankDeposit with Bangladesh Bank is non-interest bearingand maintained to meet the cash reserve

requirement (CRR). As required by BangladeshBank, CRR @ 2.5 percent is required to maintainwith Bangladesh Bank current account on alldeposits taken from depositors other than Banks andFinancial Institutions. On 31 December 2013 there isno shortage in CRR.

5 BALANCE WITH OTHER BANKS ANDFINANCIAL INSTITUTIONSThis represents balance with various banks andfinancial institutions in Bangladesh.


Fixed deposit account20,000,000 20,000,000 Shahjalal Islami Bank Limited, Dhaka Main Branch50,000,000 50,000,000 Social Islami Bank Limited, Babu Bazar Branch5,663,750 5,000,000 LankaBangla Finance Limited8,965,289 8,059,601 Prime Bank Limited, Motijheel Branch 84,629,039 83,059,601

Current account212,176 85,198 Mutual Trust Bank Limited, Dilkusha Branch715,555 717,055 Southeast Bank Limited, Islamic Banking Branch126,014 3,012,975 Prime Bank Limited, Motijheel Branch183,065 184,106 The City Bank Limited, Principal Branch432,001 225,067 Standard Bank Limited, Dhanmondi Branch453 1,133,288 Shahjalal Islami Bank Limited, Dhaka Main Branch78,736 80,352 The Trust Bank Limited, Sena Kallayan Bhaban Branch74,499 75,649 BRAC Bank Limited, Gulshan Branch45,714 46,984 Janata Bank Limited, Local Office- 38,225 Mercantile Bank Limited, Elephant Road Branch19,966 21,236 EXIM Bank (BD) Limited, Motijheel Branch16,884 17,412 AB Bank Limited, Karwan Bazar Branch- 9,232 Southeast Bank Limited, Principal Branch1 1 BASIC Bank Limited, Shantinagar Branch- 4,721 The Premier Bank Limited, Kawran Bazar Branch287,687 - State Bank of India, Dhaka Office282 972 Social Islami Bank Limited, Babu Bazar Branch22,278 23,548 Uttara Bank Limited, Local Office- 1,739 EXIM Bank (BD) Limited, Panthapath Branch42 - NCC Bank Limited, Mirpur Branch 2,215,353 5,677,760

Short term deposit20,488,119 4,210,013 HSBC, Dhaka Main Office28,421,657 6,147,844 HSBC, Dhaka Main Office70,593 70,593 HSBC, Dhaka Main Office1,957,895 1,875,255 Southeast Bank Limited, Islamic Banking Branch100,667,917 28,528,989 Bank Asia Limited, Corporate Branch3,888,824 1,487,836 Dhaka Bank Limited, Local Office 128,969 126,123 Prime Bank Limited, Motijheel Branch- 91,739 National Bank Limited, Kawran Bazar Branch22,799,555 - Mutual Trust Bank Limited, Principal Branch 178,423,529 42,538,392 265,267,920 131,275,753 Total

BAS

1.77

Not

es to

the

Fina

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ents



Maturity wise grouping2,215,353 5,677,760 Up to 1 month178,423,529 42,538,392 1 month to 3 months84,629,039 83,059,601 3 months to 1 year- - 1 year to 5 years- - More than 5 years 265,267,920 131,275,753 Total

5.a. BALANCE WITH OTHER BANKS AND FINANCIAL INSTITUTIONS (consolidated)265,267,920 131,275,753 Union Capital Ltd.

6,295,686 65,222,501 UniCap Securities Ltd.288,611,200 211,066,545 UniCap Investments Ltd.560,174,806 407,564,799 Total283,533,656 211,018,500 Less: Inter-company transactions276,641,150 196,546,299 Balance as at 31 December

6 INVESTMENTSThis represents investment made by the Company in listed securities. The investment is made up as under:- - Government securities 344,721,150 522,393,455 Other investments (note 6.1)344,721,150 522,393,455 Total

6.1 Other investments(Figures in BDT) CostOrdinary share No of Company Market Value 2013 2012Listed securities 40 228,485,894 344,721,150 522,393,455Balance at 31 December 40 228,485,894 344,721,150 522,393,455

Listed securities:Investments have been recorded at cost and adequate provision for diminution in value of investment as perBangladesh Bank guidelines has been made. Market value of securities has been determined on the basis of thevalue of securities at the last trading date of the year (Last trading date for 2013 was 30 December).

Sector wise investment in listed securities at cost (Figures in BDT)2013 201224,661,438 54,752,208 Banking companies56,155,890 96,688,215 Non Banking Financial Institutions 68,252,252 41,702,414 Insurance companies79,467,851 86,431,816 Investment companies- 65,776,526 Fuel & power116,183,719 177,042,276 Manufacturing companies and others344,721,150 522,393,455 Total

BAS

1.77

BAS

1.77

percent including the CRR of 2.5 percent on totalliabilities, excluding loans from banks and financialinstitutions. Union Capital Limited maintains thisreserve mostly in the form of deposits.

Fixed deposits are maintained with commercial banksand Non-bank financial institutions for maintainingstatutory liquidity reserve as required by BangladeshBank. Bangladesh Bank regulations require tomaintain statutory liquidity reserve (SLR) @ 5

Not

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Maturity wise grouping (Figures in BDT)2013 2012- - Up to 1 month

86,180,288 78,359,018 1 month to 3 months258,540,863 444,034,437 3 months to 1 year- - 1 year to 5 years- - More than 5 years

344,721,150 522,393,455 Total

6.a INVESTMENTS (consolidated) 344,721,150 522,393,455 Union Capital Ltd.956,797,108 919,751,150 UniCap Securities Ltd.326,230,745 - UniCap Investments Ltd.1,627,749,003 1,442,144,605 Balance as on 31 December

7 LOANS, ADVANCES AND LEASESThis represents loans, advances and leases financed fully in Bangladesh.1,907,028,019 1,786,889,061 Lease finance (note 7.1)44,454,378 88,607,133 Advance against lease finance (note 7.2)4,485,154,108 2,109,167,465 Term finance (note 7.3)3,996,002,533 3,160,183,348 Margin loan (note 7.4)132,541,767 150,310,373 Loan against deposits (note 7.5)21,756,841 23,056,076 Staff loan (note 7.6)10,586,937,647 7,318,213,456 Total

7. 1 Lease finance1,515,710,803 1,285,487,716 Principal outstanding (note 7.1.1)391,317,216 501,401,345 Accounts receivable1,907,028,019 1,786,889,061 Total

7. 1.1 Principal outstanding 2,126,658,169 1,762,323,130 Gross rental receivables(610,947,366) (476,835,414) Unearned lease income1,515,710,803 1,285,487,716 Net investment

7. 2 Advance against lease financeThese represent amount paid for procurement of lease assets, which are yet to be executed. On execution oflease, advances will be transferred to lease finance.

BAS

1.77

BAS

1.77

BAS

1.77

BAS

1.77

BAS

1.61

BAS

17.4

7 (b

)

7. 3 Term finance 4,301,129,032 1,944,265,362 Principal outstanding (note 7.3.1)184,025,077 164,902,103 Accounts receivable4,485,154,108 2,109,167,465 Total

Term finance includes finance already executed and advance to be executed on later date as per terms ofagreement. Such advances carry interest at an agreed rate until the advances are executed.

7. 3.1 Movement of term finance (Principal outstanding) is made up as under:1,944,265,362 2,225,020,521 Balance at 1 January 2,903,654,500 667,157,007 Investment during the year(546,790,831) (947,912,166) Recovery during the year4,301,129,032 1,944,265,362 Balance at 31 December

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BAS

1.77

BAS

1.77

BAS

1.77

BAS

1.61

7. 4 Margin loan This represents net disbursement of margin loan to the portfolio investors for purchasing shares listed in the stockexchanges against their margin. Loans are fully secured by way of lien on shares purchased under margin loanaccount.Movements of margin loan is made up as under:(Figures in BDT)2013 20123,160,183,348 2,595,775,788 Balance at 1 January 1,058,005,127 672,290,894 Investment during the year(222,185,942) (107,883,334) Recovery during the year3,996,002,533 3,160,183,348 Balance at 31 December

7. 5 Loan against deposits This represents outstanding loans given to depositors against term deposits. As per Company’s policy, UnionCapital Limited finances to depositors up to 95% of TDR value. Interest is charged on such loan @ 3% abovethe interest offered on TDR.Movement of loan against term deposit is as under:

150,310,373 8,277,786 Balance at 1 January 117,557,000 196,510,000 Investment during the year(135,325,606) (54,477,413) Recovery/adjustment during the year132,541,767 150,310,373 Balance at 31 December

7. 6 Staff loan Staff loan includes loan provided to the eligible employees as per Company’s approved policy16,588,762 16,534,599 Employees home loan3,557,895 4,250,366 Employees car loan1,610,184 2,271,111 Personal loan21,756,841 23,056,076 Balance at 31 December

7. 7 Residual maturity grouping of loans, advances and leases - - Repayable on demand1,066,325,384 935,522,235 Upto 1 months1,740,028,374 527,922,989 Not more than 3 months4,839,340,284 4,351,322,533 3 months to 1 year2,099,402,843 914,622,668 1 year to 5 years841,840,762 588,823,031 More than 5 years10,586,937,647 7,318,213,456 Total

7. 8 Loans, advances and leases on the basis of significant concentration 140,356,235 192,373,376 a) Directors and their concerns21,756,841 23,056,076 b) Chief executive and other senior executives10,424,824,571 7,102,784,004 c) Customer groups10,586,937,647 7,318,213,456 Total

d. Details of large loans, advances and leases As per Section 14 (1) (ga) of the Financial Institutions Act 1993 a financial institution can not sanction any loans,advances and leases exceeding 30 percent of its capital (capital plus reserve) without permission fromBangladesh Bank. As at 31 December 2013 the Company has no such loan.

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e. Sector wise loans, advances and leases As per Bangladesh Bank circular, sector wise loans and advances are as follows:

Sector1,074,760,259 251,209,582 Trade and Commerce

Industry210,689,751 454,670,071 Garments and Knitwear945,642,145 530,789,304 Textile24,910,512 25,136,261 Jute and Jute Products441,921,695 312,793,324 Food Products and Processing Industry 185,507,557 7,429,986 Plastic Industry- - Leather and Leather-Goods664,748,375 299,443,872 Iron, Steel and Engineering 352,476,049 124,262,980 Pharmaceuticals and Chemicals110,718,247 23,334,267 Cement and Allied Industry3,719,899 9,072,849 Telecommunication and Information Technology283,642,349 149,333,446 Paper, Printing and Packaging - - Glass, Glassware and Ceramic Industry

320,058,840 221,795,127 Ship Manufacturing Industry12,718,520 27,522,507 Electronics and Electrical Products548,779,091 271,809,987 Power, Gas, Water and Sanitary Service294,411,570 343,958,799 Transport and Aviation- - Agriculture 181,674,224 203,384,687 Housing

Others3,996,002,533 3,160,183,348 Merchant Banking- - Margin Loan934,556,031 902,083,059 Others10,586,937,647 7,318,213,456 Total

7. 9 Geographical location wise loans, advances and leases 8,208,229,380 5,911,999,874 Dhaka Division2,142,889,306 1,320,629,064 Chittagong Division198,707,212 23,790,238 Rajshahi Division12,201,237 36,658,019 Khulna Division24,910,512 25,136,261 Sylhet Division10,586,937,647 7,318,213,456 Total

7. 10 Particulars of loans, advances and leases2013 2012 SL Particulars5,201,434,512 4,345,148,883 I. Financing considered good in respect of

which the company is fully secured3,676,664,997 1,462,165,589 II. Financing considered good in respect of which

the company is partially secured1,658,663,026 1,471,157,267 III. Financing considered good against which the company

holds no security other than the debtors' personal guarantee50,175,112 39,741,717 IV. Financing considered good secured by the personal

undertaking of one or more parties in addition to the personal guarantee of the debtors

- - V. Financing adversely classified, provision not maintained there against

10,586,937,647 7,318,213,456 Total

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2013 2012 SL Particulars21,756,841 23,056,076 VI. Financing due by directors or officers of the company or any

of them either separately or jointly with any other persons140,356,235 192,373,376 VII. Financing due from companies or firms in which the directors

of the company have interest as directors, partners or managing agents or in case of private companies as members

21,756,841 23,056,076 VIII.Maximum total amount of advances, including temporary advances made at any time during the year to directors or managers or officers of the company or any of them either separately or jointly with any other person

140,356,235 192,373,376 IX Maximum total amount of advances, including temporary advances granted during the year to the companies or firms in which the directors of the company have interest as directors, partners or managing agents or in case of private companies as members

- - X. Due from banking companies and other financial institutions429,963,357 146,673,512 XI. Classified loans, advances and leases on which interest

has not been charged282,626,133 102,853 a) Amount of written off loans, advances and leases1,833,707 - b) Amount realized against the debts previously written off117,488,659 266,806,133 c) Provision kept against loans and advances

classified as bad/loss44,381,258 292,318,016 d) Amount of interest creditable to the interest

suspense accountXII. Cumulative amount of the written off loans/leases:

102,853 102,853 Opening balance284,356,987 - Add: Amount written off during the year1,833,707 - Less: Amount recovered during the year282,626,133 102,853 Cumulative to date284,441,917 84,930 The amount of written off loans for which law suit filed

7. 11 Classification wise loans, advances and leases Unclassified

9,141,246,226 5,688,777,213 Standard509,177,539 440,240,401 Special mention account (SMA)9,650,423,765 6,129,017,614 Unclassified

Classified140,209,031 307,544,457 Sub-standard (SS)214,974,487 259,960,408 Doubtful (DF)581,330,364 621,690,977 Bad/loss (BL)936,513,882 1,189,195,842 Classified

10,586,937,647 7,318,213,456 Total8.85% 16.25% Rate of classified loans, leases and advnaces

7.12 Particulars of required provision for loans, advances and leasesRequired provision has been made for loans, leases and advances as per Bangladesh Bank guidelines. As perguidelines, provisions at the following rate have been made in the accounts depending on the classification status.Loans, advances and leases up to 5 years term Classification status Provision (%)Up to 2 months Standard 13 to 5 months SMA 56 to 11 months SS 2012 to 17 months DF 5018 months and above BL 100


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Loans, advances and leases exceeding 5 years term Classification status Provision (%)Up to 5 months Standard 16 to 11 months SMA 512 to 17 months SS 2018 to 23 months DF 5024 months and above BL 100However, as per DFIM Circular number -03 dated 29 April 2013, provision at the rate of 0.25 percent has beenmade against 'Small and Medium Enterprises (SME)' loan falling under the classification status of standard.Required provision according to classification status is mentioned below:

(Figures in BDT)2013 2012 Base for Provision Provision Rate provision Unclassified - general provision177,773,377 56,887,772 1% 9,141,246,226 Standard24,676,440 20,540,096 5% 493,528,798 Special mention account202,449,817 77,427,868 9,634,775,024

Classified - specific provision11,605,018 42,226,296 20% 58,025,088 Sub-standard84,763,157 80,031,004 50% 169,526,313 Doubtful117,928,459 266,806,133 100% 117,928,459 Bad/loss214,296,633 389,063,433 345,479,860416,746,450 466,491,301 Required provision for loans, advances and leases418,333,334 466,715,515 Total provision maintained for loans, advances and leases1,586,884 224,214 Excess provision for loans, advances and leases

7.a LOANS, ADVANCES AND LEASES (consolidated)(Figures in BDT)2013 201210,586,937,647 7,318,213,456 Union Capital Ltd.511,664,642 410,342,750 UniCap Securities Ltd.- - UniCap Investments Ltd. 11,098,602,289 7,728,556,206 Total350,000,000 - Less: Inter-company transactions

10,748,602,289 7,728,556,206 Balance as on 31 December

8 FIXED ASSETS INCLUDING LAND, BUILDING, FURNITURE AND FIXTURESCost:

6,081,773 5,812,976 Furniture and fixtures16,846,626 16,846,626 Office decoration24,063,843 22,653,803 Electric equipment1,542,500 1,542,500 Owned vehicles8,760,000 8,760,000 Leased vehicles1,980,831 1,381,631 Intangible assets (software)412,002 412,002 Mobile phones41,328 41,328 Staff appliances59,728,904 57,450,867 Total cost43,247,275 34,745,079 Less: Accumulated depreciation and amortization16,481,629 22,705,788 Written down value as at 31 DecemberDetails are shown in Annexure - A.

8.a FIXED ASSETS INCLUDING LAND, BUILDING, FURNITURE AND FIXTURES (consolidated)16,481,629 22,705,788 Union Capital Ltd.1,761,436 - UniCap Securities Ltd.- - UniCap Investments Ltd.18,243,065 22,705,788 Balance as on 31 December


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(Figures in BDT)2013 2012347,498,771 297,498,771 Investment in subsidiary (note 9.1)43,961,030 106,558,674 Accrued interest491,550,919 490,151,040 Others883,010,719 894,208,485 Income generating other assets6,385,104 9,675,229 Advance office rent171,574 912,200 Advance to employees37,500 37,500 Deposits with T & T, water etc.705,194,547 682,536,419 Advance corporate tax263,003,368 28,665,990 Receivable from brokerage houses against sale of Shares381,932,137 314,074,305 Receivable from subsidiary company1,287,376 1,287,376 Transfer price receivable10,714,663 8,451,388 Deferred tax assets (note 9.2)133,173,074 27,164,089 Others1,501,899,343 1,072,804,496 Non income generating other assets2,384,910,062 1,967,012,981 TotalManagement considers all the other assets as good.

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9.1.2 Investment in UniCap Investments Ltd.UniCap Investments Limited, a public limited companyincorporated in Bangladesh, is a wholly owned subsidiary ofUnion Capital Limited of which Union Capital Limited holds99.99 percent share of the said company. An aggregate amountof Taka 249,999,870 was invested in UniCap InvestmentsLimited which includes Taka 99,999,935, Taka 99,999,935 andTaka 50,000,000 for the year 2011, 2012 and 2013 respectively.

9.2 Deferred tax assetDeferred tax has been calculated based on deductible/taxable temporary difference arising due to difference in thecarrying amount of the assets and its tax base in accordancewith the provision of Bangladesh Accounting Standard (BAS)12: Income Taxes and under the guidelines of BangladeshBank DFIM circular no.07 dated 31 July 2011.

9.1 Investment in subsidiary9.1.1 Investment in Unicap SecuritiesLimitedUniCap Securities Limited, a private limitedcompany incorporated in Bangladesh, is awholly owned subsidiary of Union CapitalLimited, the entire issued shares of which wereacquired by the Company at a nominal value ofTaka one (1) in 1998. During the year 2003, anamount of Taka 2,498,900 was invested inUniCap Securities Limited against 24,989ordinary shares of Taka 100 each. Further, in2005, 2009 and 2010, Taka 10,000,000, Taka35,000,000 and Taka 50,000,000 respectivelywere also invested in UniCap Securities Limitedagainst allotment of 100,000, 350,000 and500,000 ordinary shares of Taka 100 each.

(Taxable)/deductible Carring amount attemporary difference Tax base balance sheet Assets13,559,922 30,041,551 16,481,629 Fixed assets net of depreciation

Liabilities11,651,050 - 11,651,050 Employee gratuity fund25,210,972 30,041,551 28,132,67942.50% Applicable tax rate10,714,663 Deferred tax assets as on December 31,20138,451,388 Deferred tax assets as on December 31,2012 2,263,275 Deferred tax income during the year 2013

9.a OTHER ASSETS (consolidated)2,384,910,062 1,967,012,981 Union Capital Ltd.245,098,267 132,470,251 UniCap Securities Ltd.23,089,272 5,126,181 UniCap Investments Ltd.2,653,097,601 2,104,609,413 Total1,527,277,450 1,092,613,632 Less: Inter-company transactions1,125,820,151 1,011,995,781 Balance as on 31 December


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10 BORROWINGS FROM OTHER BANKS, FINANCIAL INSTITUTIONS AND AGENTS(Figures in BDT)2013 2012

Borrowings from other banksIn BangladeshSecured long term loans

974,659,353 1,084,663,843 Bank loan (note 10.1)Unsecured

81,897,918 4,000,000 Bangladesh Bank (Small Enterprise refinancing scheme-JICA) (note 10.2)

12,500,000 - Bangladesh Bank(Women entreprenure refinance scheme (Note 10.3)

- 3,671,094 Fund from Bangladesh Bank (note 10.4)882,739,374 897,104,489 Short term borrowing (note 10.5)977,137,292 904,775,583 1,951,796,645 1,989,439,426 - - Outside Bangladesh1,951,796,645 1,989,439,426 Borrowings from banks

Borrowings from financial institutions36,995,391 - The UAE-Bangladesh Investment Company Limited 1,988,792,036 1,989,439,426 Total

10.1 Bank loanThis represents long term loan taken from different commercial banks, and is made up as under:1,084,663,843 1,162,201,207 Balance at 1 January 450,000,000 550,000,000 Received during the year (560,004,490) (627,537,364) Repayment during the year 974,659,353 1,084,663,843 Balance at 31 December Loans are secured by way of first charge on all fixed and floating assets of the company, ranking pari passuamong all the lenders. The period of such loans ranges from three to five years.

10.1.1 Break up of bank loans:- 66,505,124 BASIC Bank Limited

46,001,010 130,112,085 Mutual Trust Bank Limited 43,435,687 - NCC Bank Limited200,013,256 - Premier Bank Limited 221,211,086 345,907,220 Shahjalal Islami Bank Limited35,862,453 - Southeast Bank Limited88,206,956 67,914,793 Standard Bank Limited22,079,213 33,597,716 State Bank of India - 72,901,919 Trust Bank Limited55,760,141 88,582,065 United Commercial Bank Limited262,089,552 279,142,921 Uttara Bank Limited974,659,354 1,084,663,843 Total secured long term loans

10.2 SMESPD fundFund received from Japan International Cooperation Agency (JICA) through Bangladesh Bank. Details are asunder:4,000,000 - Balance at 1 January 87,410,000 4,000,000 Received during the year (9,512,082) - Repayment during the year 81,897,918 4,000,000 Balance at 31 December

Fund is disbursed on reimbursement basis againstsubmission of the projects with requisite papers anddocuments.

10.3 Bangladesh Bank (Women entreprenurerefinance scheme)This fund was reimbursed from Bangladesh Bankunder refinancing scheme against financing towomen entreprenure. The period of loan ranges fromone to five years, matching the terms of respectiveprojects. Details are as under:

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(Figures in BDT)2013 2012- - Balance at 1 January 12,500,000 - Received during the year - - Repayment during the year

12,500,000 - Balance at 31 December

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Break up of short term borrowings

10.5.1 Short term loans2,739,374 90,165,734 United Commercial Bank Limited- 40,234,334 Shahjalal Islami Bank Limited- 50,790,404 Mutual Trust Bank Limited- 45,914,017 State Bank of India2,739,374 227,104,489 Total

10.5.2 Call Loans50,000,000 50,000,000 Bangladesh Development Bank Limited330,000,000 50,000,000 BASIC Bank Limited60,000,000 - Mutual Trust Bank Limited110,000,000 - Premier Bank Limited - 40,000,000 Pubali Bank Limited- 130,000,000 Southeast Bank Limited

80,000,000 70,000,000 Standard Bank Limited200,000,000 230,000,000 The City Bank Limited- 100,000,000 United Commercial Bank Limited

50,000,000 - The Farmers Bank Limited880,000,000 670,000,000 Total

882,739,374 897,104,489 Total short term borrowings

10.5.3 Security against borrowings from other banks and financial institutions1,011,654,745 1,084,663,843 Secured977,137,292 904,775,583 Unsecured1,988,792,036 1,989,439,426 Total

10.6 Maturity wise grouping880,000,000 670,000,000 Repayable on demand32,447,369 31,995,287 Up to 1 month95,116,534 311,580,464 1 month to 3 months337,631,070 327,298,426 3 months to 1 year643,597,063 648,565,249 1 year to 5 years- - More than 5 years

1,988,792,036 1,989,439,426 Total

(Figures in BDT)2013 20123,671,094 9,784,206 Balance at 1 January - 497,363 Received during the year

(3,671,094) (6,610,475) Repayment during the year - 3,671,094 Balance at 31 December

10.5 Short-term borrowingsThis represents money at call and on short noticeand bank overdraft availed to meet short-term fundrequirements.Money at call and on short notice As on the reporting date Tk. 880,000,000 wasreceived from different banks as money at call andshort notice. According to FID circular no. 05,dated June 08, 2005, non-banking financialinstitution can avail call money facility maximumupto 15 percent of its net assets. Based on thecircular mentioned above, the maximum limit ofcall money for the company was Tk. 1,156.05million (calculated based on the half yearly reportof 2013 of the Company).

10.4 Fund from Bangladesh BankThis fund was reimbursed from Bangladesh Bankunder refinancing scheme against financing to small& medium enterprises as well as agricultural projects.The period of loan ranges from one to five years,matching the terms of respective projects. Details areas under:

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10.a BORROWINGS FROM OTHER BANKS, FINANCIAL INSTITUTIONS AND AGENTS (consolidated)(Figures in BDT)2013 20121,988,792,036 1,989,439,426 Union Capital Limited802,279,406 314,000,000 UniCap Securities Limited303,249,548 74,305 UniCap Investments Limited3,094,320,990 2,303,513,731 Total1,105,528,954 314,074,305 Less: Inter-company transactions1,988,792,036 1,989,439,42 Balance as on 31 December

11 TERM DEPOSITThis comprises interest bearing deposits from individuals and organizations for period ranging from 6 months to10 years. 3,806,000,000 1,220,000,000 Banks and financial institutions3,239,180,294 2,690,670,605 Other institutions7,045,180,294 3,910,670,605 Total institutional deposits547,369,145 524,621,681 Term deposit65,100,000 97,100,000 Income deposit876,000.00 48,000.00 Monthly savings scheme613,345,145 621,769,681 Total individual deposits7,658,525,439 4,532,440,286 Total

Movements of deposits is made up as under:4,532,440,286 3,670,482,776 Balance at 1 January 6,187,743,278 2,912,876,052 Received/renewed during the year(3,061,658,125) (2,050,918,542) Repayment during the year7,658,525,439 4,532,440,286 Balance at 31 December

Maturity wise grouping- - Repayable on demand462,643,324 378,196,161 Repayable within 1 month3,848,634,251 2,758,471,763 1 month to 6 months1,345,929,176 1,326,445,360 6 months to 1 year1,556,782,410 68,577,002 1 year to 5 years444,536,278 750,000 5 years to 10 years- - More than 10 years- - Unclaimed deposits for 10 years or more

7,658,525,439 4,532,440,286 Balance at 31 December

11.a TERM DEPOSITS (consolidated)7,658,525,439 4,532,440,286 Union Capital Limited- - UniCap Securities Limited

- - UniCap Investments Limited7,658,525,439 4,532,440,286 Total283,533,656 211,018,500 Less: Inter-company transactions7,374,991,783 4,321,421,786 Balance as on 31 December

12 OTHER DEPOSITSThe amount received from clients as advance against finance and cash security deposit on the stipulation that theamount will be either adjusted with the outstanding rentals/installments or repaid at the end of term. This is madeup as under:276,879,475 415,451,973 Balance at 1 January 871,523,066 866,790,226 Received during the year (686,539,111) (1,005,362,724) Repayment during the year 461,863,431 276,879,475 Balance at 31 December

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Breakup of other deposits on the basis of category of finance is as under(Figures in BDT)2013 201250,396,046 48,884,761 Lease advance72,119,704 44,623,909 Term finance advance339,347,681 183,370,806 Cash security461,863,431 276,879,475 Balance as on 31 DecemberAdvance and security deposit reduce the exposure with the clients and thereby reduce the risks. No interest ispayable on advances while cash security deposits are interest bearing.

13 OTHER LIABILITIES418,333,334 466,715,515 Provision for loans, advances and leases (note 13.1)23,247,050 36,245,140 Provision for diminution in value of investments (note 13.2)174,701,994 292,318,016 Interest suspense (note 13.3)811,049,691 776,289,286 Provision for tax (note 13.4)383,952,565 282,192,313 Financial expenses payable (note 13.5)4,594,220 6,697,243 Obligation under capital lease (note 13.6)657,870 10,000 Excise duty12,328,312 1,094,284 Withholding tax payable 482,274 348,301 VAT payable276,260,939 41,028,559 Accrued expenses and other payable (note 13.7)2,105,608,249 1,902,938,657 Total

13.1 Provision for loans, advances and leasesManagement, on the basis of analysis of portfolio and guidelines issued by Bangladesh Bank has determinedprovisions for doubtful losses. The provision is considered adequate to cover the possible future losses.204,036,701 77,651,703 General provision on unclassified loans, advances and leases214,296,633 389,063,812 Specific provision on classified loans, advances and leases418,333,334 466,715,515 Provision as on 31 DecemberMovement in general provision on unclassified loans/leases77,651,704 70,197,053 Provision as on 1 January126,384,997 7,454,651 Add: Provision made/(released) during the year204,036,701 77,651,704 Provision as on 31 DecemberTotal provision includes 20 percent shortfall in of portfolio investors fund that has been provided as per BangladeshSecurities and Exchange Commission (BSEC) circular no. SEC/CMRRCD/2009-193/155 dated 9 December 2013.

13.1.a Provision for loans, advances and leases (consolidated)126,384,997 7,454,651 Union Capital Limited8,597,015 1,492,580 UniCap Securities Limited- - UniCap Investments Limited134,982,012 8,947,231 Total

13.1.b Movement in specific provision on classified loans/leases389,063,812 242,390,300 Provision as on 1 January(284,356,987) - Less: Fully provided debts written off during the year1,833,707 - Add: Recoveries of amounts previously written off- - Add: Specific provision made during the year for other accounts(1,833,707) - Less: Provision no longer required- - Less: Adjustment for write off109,589,808 146,673,512 Add: Net charge to profit and loss account214,296,633 389,063,812 Provision as on 31 December

13.1.c Provision for loans, advances and leases (consolidated)418,333,334 466,715,516 Union Capital Limited10,129,839 1,532,824 UniCap Securities Limited- - UniCap Investments Limited428,463,173 468,248,340 Balance as on 31 December

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13.2 Provision for diminution in value of investments(Figures in BDT)2013 201236,245,140 116,340,214 Provision as on 1 January(12,998,089) (80,095,075) Add: Provision made/(released) during the year (note 13.2.1)23,247,050 36,245,139 Provision as on 31 DecemberAs on 31 December 2013, the amount of dimunution in the value of investment in shares was Tk. 116.24 millionfor which 20 percent has been made in the accounts as per Bangladesh Securities and Exchange Commission(BSEC) circular number SEC/CMRRCD/2009-193/155 dated 9 December 2013.

13.2.1 Allocation of provision for diminution in value of investments(12,998,089) (80,095,075) Listed securities- - Unlisted securities(12,998,089) (80,095,075) Total

13.2.a Provision for diminution in value of investments (consolidated)(12,998,089) (80,095,074) Union Capital Limited14,687,715 9,666,520 UniCap Securities Limited9,361,394 - UniCap Investments Limited11,051,020 (70,428,554) Total

13.3 Interest suspense292,318,016 195,156,647 Balance as on 1 January44,381,258 97,161,369 Add: Transferred during the year88,840,980 - Less: Amount of interest suspense recovered73,156,301 - Less: Write off during the year174,701,994 292,318,016 Balance as on 31 December

Bangladesh Bank FID circular no. 3 of 2006 requiresthat interest on loans/leases classified as SMA andabove will be credited to interest suspense account,instead of crediting the same to income account. Inaccordance with the above circular interest onvarious facilities classified as SMA, SS, DF and BL,has been set-aside in this account.

13.3.1 Product wise interest suspense accounts135,843,602 232,100,303 On lease finance38,858,392 60,217,713 On term finance174,701,994 292,318,016 Total

13.4 Provision for taxProvision for tax comprises provision for current taxand provision for deferred tax as well.

Provision for current taxThe company calculated taxable profit/losses basedon Income Tax Ordinance 1984 and determinedcurrent tax liability as per applicable rate enacted byFinance Act 2013.

Tax on capital gainThe Government through Finance ACT 2010imposed tax on capital gain from sale of listedcompanies shares @10 percent effective from 1stJuly 2010, which is considered in this report.

776,289,286 743,671,727 Balance at 1 January34,760,406 32,617,559 Provision made during the year- - Transferred to/(from)

811,049,692 776,289,286 Balance at 31 December

While estimating the current income tax for the yearended 31 December 2013, the Company hasconsidered certain types of allowances made duringthe year as an admissible expense for income tax incurrent period.

Shortfall, if any between the current tax and taxultimately payable by the Company shall be chargedto the profit and loss at the time of final settlement.

13.4.a Provision for current tax (consolidated)34,760,406 32,617,559 Union Capital Ltd.26,000,000 14,771,450 UniCap Securities Limited8,333,463 5,828,324 UniCap Investments Ltd. 69,093,869 53,217,334 Total

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13.5 Financial expensesThis comprises interest accrued on bank loans, termdeposits and security deposits.

13.6 Obligation under capital leaseThis represents fixed assets acquired under capital

lease. Lease rentals are payable on monthly basiswhich include principal repayment and financialcharges as per repayment schedule. The Companyhas the option to purchase the assets uponcompletion of lease period and has the intention toexercise it.

(Figures in BDT)2013 2012Principal Principal Financial charges Minimum leaseoutstanding outstanding for future periods payments1,128,991 2,093,024 647,315 1,776,306 Within one year 3,465,229 4,604,219 935,962 4,401,191 More than one year4,594,220 6,697,243 1,583,277 6,177,497 Total

13.7 Accrued expenses and other payable(Figures in BDT)2013 2012261,457,811 29,156,274 Portfolio investors' fund (note 13.7.1)14,803,128 11,872,285 Management expenses - - Others payables

276,260,939 41,028,559 Balance as on 31 December

Portfolio investors' fundThis represents fund of portfolio investors depositedwith Union Capital for investment in different listedsecurities at investors’ discretion as per regulation 30of the Bangladesh Securities and ExchangeCommission (Merchant Bankers & Portfolio Manager)Regulations, 1996.

13.7.1 Portfolio investors' fundThis represents the balance of deposits made withthe Company by the portfolio investors to takemargin loan and buy marketable securities. Thebalance of fund has been arrived at as follows:

1,800,703,468 2,656,806,351 Deposit made by the portfolio investors for purchases of securities3,996,002,533 3,160,183,348 Margin loan extended for purchase of securities5,796,706,001 5,816,989,699 Total4,867,374,065 5,253,925,257 Less: Investment in securities667,874,125 533,908,168 Interest and other charges5,535,248,190 5,787,833,425 Total261,457,811 29,156,274 Balance of fund at the end of the year

13.a OTHER LIABILITIES (consolidated)2,105,608,249 1,902,938,657 Union Capital Limited305,746,943 602,720,173 UniCap Securities Limited82,170,873 14,154,651 UniCap Investments Limited2,493,526,065 2,519,813,481 Total424,249,715 481,114,852 Less: Inter-company transactions2,069,276,350 2,038,698,629 Balance as on 31 December

14 SHARE CAPITALAs at 31 December 2013, a total number of 109,909,326 (FY 2012: 104,675,549) ordinary shares of Tk.10 eachwere issued, subscribed and fully paid up. Details are as follows:Authorized capital2,000,000,000 2,000,000,000 200,000,000 ordinary shares of Tk. 10 each Issued, subscribed and paid up capital:1,046,755,490 951,595,900 104,675,549 ordinary shares of Tk.10 each52,337,770 95,159,590 5,233,777 bonus shares1,099,093,260 1,046,755,490 Total 109,909,326

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No. of Directors/ Executives Represented by shares held PercentageEnrilco Limited Mr. Nadeem A. Chaudhury 5,032,834 4.58Palmal Garments Hosiery Ltd. Mrs. Tajrina Sikder 10,695,156 9.73Palmal Garments Hosiery Ltd. Mr. Kazi Russel MahbubEC Securities Ltd. Mr. Chowdhury Tanzim Karim 7,935,120 7.22EC Securities Ltd. Mrs. Rumana SharifMr. M. A. Salam Self 6,884,070 6.26Mr. M. Faizur Rahman Self 5,224,543 4.94Mr. Nasir A. Choudhury Self 4,890,672 4.45Mrs. Meherunnesa Haque Self 2,226,292 2.02Mr. Kazi Golam Samiur Rahman Self 3,937,201 3.58Mr. N. H. Khan, Independent Director Self Nil NilMr. Ziaul Hasan Siddiqui, Independent Director Self Nil NilMd. Akter H. Sannamat FCA, FCS, Managing Director & CEO N/A Nil Nil

Composition of shareholdingsComposition of shareholdings as on 31 December 2013 was as under:No. of Shareholders No. of Shares Percentage2013 2012 2013 2012 2013 20125 5 26,035,009 24,795,249 23.69 23.69 Sponsors (Institutions)14 14 34,883,984 33,791,897 31.74 32.28 Sponsors (Individuals)304 272 21,413,980 17,373,933 19.48 16.60 General Public (Institutions) 9,847 9,874 27,576,353 28,714,470 25.09 27.43 General Public (Individuals)10,170 10,165 109,909,326 104,675,549 100.00 100.00

Range of shareholdingsThe distribution schedule of shareholdings as on 31 December 2013 was as under:No. of Shareholders No. of Shares Percentage2013 2012 2013 2012 2013 20123,937 2,764 634,235 673,454 0.58 0.64 Less than 500 shares5,266 6,276 8,439,920 10,447,410 7.68 9.98 500 to 5,000 shares501 607 3,437,775 4,318,807 3.13 4.13 5,001 to 10,000 shares236 269 3,171,119 3,792,494 2.89 3.62 10,001 to 20,000 shares83 74 1,942,267 1,848,091 1.77 1.77 20,001 to 30,000 shares28 40 978,729 1,380,154 0.89 1.32 30,001 to 40,000 shares20 22 907,468 973,509 0.83 0.93 40,001 to 50,000 shares34 43 2,410,569 3,142,768 2.19 3.00 50,001 to 100,000 shares46 54 18,552,471 20,061,679 16.88 19.17 100,001 to 1,000,000 shares19 16 69,434,773 58,037,183 63.17 55.44 Over 1,000,000 shares10,170 10,165 109,909,326 104,675,549 100.00 100.00 Total


DFIM circular no. 14 dated 28 December 2011, thefinancial institutions are required to follow theprudential guidelines on Capital Adequacy andMarket Discipline (CAMD) from 01 January 2012.Details are as under:

Capital requirementThe Company is subject to the regulatory capitalrequirement as stipulated in DFIM circular no 05dated 4 July 2011 of Bangladesh Bank that afinancial institution is required to have a minimumpaid up capital of Tk. 1,000 million. Moreover, as per

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2013 2012Solo basisCore capital (Tier-1)

1,099,093,260 1,046,755,490 Paid up capital- - Share premium281,817,425 254,068,611 Statutory reserves- - General reserves- 7,000,000 Dividend equalization reserves111,131,917 45,474,434 Retained earnings1,492,042,602 1,353,298,535 Sub-Total

Supplimentary capital (Tier-2)204,036,701 137,523,436 General provision (Unclassified loans upto specified

limit+SMA +Off Balance Sheet exp.)- - Asset revaluation reserves up to 50%- - Revaluation reserve for securities upto 45%- - All other preference shares- - Other (if any item approved by Bangladesh Bank)204,036,701 137,523,436 Sub-Total1,696,079,302 1,490,821,971 Total eligible capital (A)11,510,352,821 11,001,874,911 Total risk weighted assets (RWA) (B)1,151,035,282 1,100,187,491 Required capital based on risk weighted assets (10% of B) (C)545,044,020 390,634,479 Capital surplus (A-C)14.74% 13.55% Capital adequacy ratio (%) (A/B*100)

Consolidated basisCore capital (Tier-1)

1,099,093,260 1,046,755,490 Paid up capital- - Share premium281,817,425 254,068,611 Statutory reserves- - General reserves- 7,000,000 Dividend equalization reserves170 149 Non-controlling interest124,254,553 55,581,159 Retained earnings1,505,165,407 1,363,405,409 Sub-Total

Supplimentary capital (Tier-2)124,700,648 145,566,139 General provision (Unclassified loans upto

specified limit+SMA +Off Balance Sheet exp.)252,750,000 252,750,000 Asset revaluation reserves up to 50%- - Revaluation reserve for securities upto 45%- - All other preference shares- - Other (if any item approved by Bangladesh Bank)377,450,648 398,316,139 Sub-Total 1,882,616,055 1,761,721,548 Total eligible capital (A)12,013,868,830 11,645,291,102 Total risk weighted assets (RWA) (B)1,201,386,883 1,164,529,110 Required capital based on risk weighted assets (10% of B) (C )681,229,172 597,192,438 Capital surplus (A-C)15.67% 15.13% Capital adequacy ratio (%) (A/B*100)


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15 STATUTORY RESERVE(Figures in BDT)2013 2012254,068,611 243,107,034 Balance as on 1 January27,748,814 10,961,577 Add: Transferred from profit during the year281,817,425 254,068,611 Balance as on 31 December

16 RETAINED EARNINGS45,474,434 143,947,308 Balance as on 1 January(52,337,770) (95,159,590) Less: Issuance of bonus shares (2012)- (95,159,590) Less: Payment of cash dividend (Year 2011)7,000,000 48,000,000 Add: Transfer from dividend equalization reserve138,744,068 54,807,883 Add: Profit after tax for the year (27,748,814) (10,961,577) Less: Transferred to statutory reserve111,131,917 45,474,434 Balance as on 31 December

16.a RETAINED EARNINGS (Consolidated)55,581,160 152,137,144 Balance as on 1 January(52,337,770) (95,159,590) Less: Issuance of bonus shares (2012)- (95,159,590) Less: Payment of cash dividend (Year 2011)7,000,000 48,000,000 Add: Transfer from dividend equalization reserve141,759,977 56,724,773 Add: Profit after tax for the year (27,748,814) (10,961,577) Less: Transferred to statutory reserve124,254,553 55,581,160 Balance as on 31 December

17 INCOME STATEMENTIncome

1,457,870,872 942,637,193 Interest, discount and similar income (note 18)35,970,012 27,777,698 Dividend income (note 20)76,952,027 64,641,965 Fees, commission, exchange and brokerage (note 21) (23,765,614) 24,233,191 Gains less losses arising from investment in securities (note 20)39,335,962 93,258,472 Other operating income (note 22)1,586,363,259 1,152,548,519 Total income

Expenses1,092,604,443 910,068,469 Interest paid on deposits, borrowings etc. (Note 19)76,178,680 60,133,850 Administrative expenses (note 17.1)10,530,850 11,034,444 Depreciation and impairment on company assets 12,831,373 11,109,624 Other operating expenses 222,976,715 74,033,089 Provision for leases, loans, advances and investments1,415,122,060 1,066,379,475 Total expenses

17.1 Administrative expenses45,853,150 36,800,057 Salary and allowances (note 23)11,907,949 11,622,223 Rent, taxes, insurance, electricity, etc (note 24)483,458 248,891 Legal expenses 1,879,692 1,311,484 Postage, stamp, telecommunication, etc (note 25)7,839,930 5,284,694 Stationery, printings, advertisements, etc (note 26)7,080,000 3,960,000 Managing Director's salary and allowances (note 27)985,000 755,000 Directors' fees (note 28)149,500 151,500 Auditors' fees (note 29)76,178,680 60,133,850 Total

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(Figures in BDT)2013 2012204,996,372 129,736,508 Income from lease finance542,135,636 278,445,109 Income from term finance592,386,298 474,565,226 Income from margin loan (note 18.1)116,696,383 58,243,424 Interest on loan to subsidiaries1,656,183 1,646,926 Income form other finance1,457,870,872 942,637,193 Total

18.1 Interest from margin loanThis represents interest accrued on total margin loan of all customers of merchant bank including those havingnegative equity. Till today no customer has applied for any waiver or suspension of such interest . They haveaccepted our interest claim and every month we forward their updated account statements. Those customers areactive and doing regular business with us. So we believe the interest accrued on margin loan is realizable fromthe customers.

18.a INTEREST INCOME (Consolidated)1,457,870,872 942,637,193 Union Capital Limited87,600,460 72,455,269 UniCap Securities Limited35,172,435 - UniCap Investments Limited1,580,643,767 1,015,092,462151,868,818 117,943,223 Less: Inter-company transactions1,428,774,949 897,149,239 Total

19 INTEREST PAID ON DEPOSITS, BORROWINGS, etc.177,393,076 214,108,442 Interest on bank loan1,473,918 37,222 Interest on JICA fund65,698 460,141 Interest on fund from Bangladesh Bank151,667 - Interest on women entreprenure fund817,658,494 535,876,705 Interest on term deposits69,987,082 139,439,570 Interest on money at call & short notice23,840,700 18,113,496 Interest on cash security deposit919,357 715,515 Interest on obligation under capital leases1,114,451 1,317,378 Bank charges1,092,604,443 910,068,469 Total

Allocation of the above expenses is as under552,487,524 463,418,844 Financing operation540,116,919 446,649,625 Merchant banking operation (a) 1,092,604,443 910,068,469 Total(a) Interest paid on deposits, borrowings etc have been allocated to Merchant Banking Unit applying the weightedaverage rate of borrowed fund on the basis of daily usage of fund used for margin loan provided to the portfolioinvestors.

19.a INTEREST PAID ON DEPOSITS, BORROWINGS etc. (consolidated)1,092,604,443 851,825,045 Union Capital Limited92,790,905 59,699,799 SES Company Limited23,942,835 - UniCap Investments Limited1,209,338,183 911,524,844 151,868,818 75,397,709 Less: Inter-company transactions1,057,469,365 836,127,135 Total

20 INVESTMENT INCOME(23,765,614) 24,233,191 Capital gain on sale of securities (note 20.1)35,970,012 27,777,698 Dividend income12,204,398 52,010,889 Total


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20.1 Capital gain/(loss) on sale of securities (Figures in BDT)2013 201257,706,853 51,251,025 Gain on sales of shares (81,472,467) (27,017,834) Loss on sales of shares(23,765,614) 24,233,191 Net gain/(loss) from sale of securities

20.a INVESTMENT INCOME (consolidated)12,204,398 52,010,889 Union Capital Limited7,936,616 13,070,054 UniCap Securities Limited41,753,740 - UniCap Investments Limited61,894,754 65,080,943 34,500,000 22,000,000 Less: Inter-company transactions27,394,754 43,080,943 Total

21 FEES, COMMISSION, EXCHANGE AND BROKERAGE1,037,950 1,775,000 Issue management fee (a)426,250 3,524,023 Underwriting commission (b)75,487,827 59,342,942 Portfolio management fee and other charges (c)76,952,027 64,641,965 Total

Allocation of the above income is as under:1,464,200 5,299,023 Financing operation75,487,827 59,342,942 Merchant banking operation 76,952,027 64,641,965 Totala. Issue management fee includes fees received by the Company during the year for managing initial public

offerings (IPO), rights issues etc.b. Underwriting commissions includes commission received from Public issues for underwriting of the issued

securities. Underwriting commission is determined as per rules of the Bangladesh Securities & ExchangeCommission.

c. The amount includes fee and charges received from portfolio account holders for managing portfolio accountsby the Company.

21.a FEES, COMMISSION, EXCHANGE AND BROKERAGE (consolidated)76,952,027 64,641,965 Union Capital Limited88,407,458 47,495,407 UniCap Securities Limited- - UniCap Investments Limited165,359,485 112,137,372 Total

22 OTHER OPERATING INCOME11,814,354 40,723,276 Delinquent interest, IDCP etc.681,146 857,103 Renewals and proceeds12,026,170 8,986,643 Interest on deposits35,492 (53,920) Gain/(loss) on sale of fixed assets14,778,800 42,745,371 Others39,335,962 93,258,472 Total

Allocation of the above income is as under:39,335,962 93,258,472 Financing operation- - Merchant banking operation 39,335,962 93,258,472 Total

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(Figures in BDT)2013 201239,335,962 93,258,472 Union Capital Limited2,936,263 2,378,331 UniCap Securities Limited- - UniCap Investments Limited42,272,225 95,636,803 Total

23 SALARIES AND OTHER EMPLOYEE BENEFITS41,396,355 32,183,684 Salaries & allowances4,456,795 4,616,373 Festival and incentive bonus45,853,150 36,800,057 TotalSalaries and allowances include contribution to approved Provident Fund and Gratuity Fund amounting to Tk.2,236,642 and Tk. 2,053,893 for the year 2013 and 2012 respectively.

23.a SALARIES AND OTHER EMPLOYEE BENEFITS (consolidated)45,853,150 36,800,057 Union Capital Limited19,117,060 16,239,005 UniCap Securities Limited- - UniCap Investments Limited64,970,210 53,039,062 Total

24 RENT, TAXES, INSURANCE, ELECTRICITY etc.9,951,832 9,750,804 Office rent, rates and taxes206,918 223,089 Insurance1,749,200 1,648,330 Power and electricity11,907,949 11,622,223 Total

24.a RENT, TAXES, INSURANCE, ELECTRICITY etc. (consolidated)11,907,949 11,622,223 Union Capital Limited6,771,636 6,584,598 UniCap Securities Limited- - UniCap Investments Limited18,679,585 18,206,821 Total

25 POSTAGE, STAMP, TELECOMMUNICATION etc.203,396 134,182 Postage731,879 561,323 Telegram, telex, fax and e-mail944,417 615,979 Telephone - office1,879,692 1,311,484 Total

25.a POSTAGE, STAMP, TELECOMMUNICATION etc. (consolidated)1,879,692 1,311,484 Union Capital Limited1,444,216 1,902,908 UniCap Securities Limited- - UniCap Investments Limited3,323,908 3,214,392 Total

26 STATIONERY, PRINTING, ADVERTISEMENTS etc.1,508,048 709,234 Printing and stationery6,331,883 4,575,460 Advertisement and publicity7,839,930 5,284,694 Total

26.a STATIONERY, PRINTING, ADVERTISEMENTS etc.(consolidated)7,839,930 5,284,694 Union Capital Limited93,626 712,288 UniCap Securities Limited- - UniCap Investments Limited7,933,556 5,996,982 Total


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12 11 Total Board Meetings (nos.)9 5 Total Board Audit Committee Meetings (nos.)10 9 Total Board Executive Committee Meetings (nos.)985,000 755,000 Total fees paid 12 12 Total members of the Board (nos.)5 5 Quorum for Board Meeting (nos.)9.17 9.27 Average number of Directors present in the Board Meetings (nos.)2 2 Quorum for Board Audit Committee Meeting (nos.)4.44 3.8 Average no. of Directors present in the Audit Committee Meetings (nos.)2 2 Quorum for Board Executive Committee Meeting (nos.)4.47 4.11 Average no. of Directors present in the Executive Committee Meetings (nos.)

28.a DIRECTORS' FEES (consolidated)985,000 755,000 Union Capital Limited126,500 - UniCap Securities Limited- - UniCap Investments Limited1,111,500 755,000 Total

29 AUDITORS’ FEES130,000 130,000 Auditors’ fee9,500 21,500 VAT on audit fee149,500 151,500 Total

29.a AUDITORS’ FEES (consolidated)149,500 151,500 Union Capital Limited97,750 97,750 UniCap Securities Limited57,500 57,500 UniCap Investments Limited304,750 306,750 Total

30 DEPRECIATION AND REPAIR OF ASSETS7,359,157 8,160,857 Depreciation of fixed assets-freehold1,752,000 1,394,068 Depreciation of fixed assets-leasehold vehicle311,870 247,739 Amortization of intangible assets1,107,823 1,231,780 Repairs and maintenance10,530,850 11,034,444 Total

30.a DEPRECIATION AND REPAIR OF ASSETS (consolidated)10,530,850 11,034,444 Union Capital Limited467,098 739,260 UniCap Securities Limited- - UniCap Investments Limited10,997,948 11,773,704 Total


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In 2013 Managing Director's salary and allowancescovers the period of January to December 2013, onthe other hand in 2012 the same was for the periodof July to December 2012. In addition toremuneration, he is also provided with Company'scar and cell phone.

28 DIRECTORS' FEESThe Company pays fees to its Directors for attendingthe Board meetings and its Committee meetings aspermitted by the Bangladesh Bank. As perBangladesh Bank's DFIM circular no. 03 dated 24February 2010, a Director may be paid fees forattending Board or its Committee meetings whichshall not exceed Tk. 5,000 for attending eachmeeting. Details are as under:

27 MANAGING DIRECTOR'S SALARY AND FEES(Figures in BDT)2013 20127,080,000 3,960,000 Managing Director’s Salary and Fees

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(Figures in BDT)2013 2012169,000 140,774 HR development4,935,450 4,139,493 Travelling and conveyance1,271,149 1,021,571 Motor vehicle expenses1,497,968 1,724,111 Subscription and fees61,849 30,201 Books, magazines, newspapers, etc2,573,406 3,094,753 AGM expenses (note 31.1)1,812,549 958,721 Entertainment and public relation & others510,000 - Donation12,831,372 11,109,624 Total

31.1 AGM expenses 30,000 36,317 Rent for venue1,696,250 2,160,054 Printing of annual report and database146,300 126,242 Publication of notice657,180 705,000 Entertainment43,676 67,140 Others2,573,406 3,094,753 Total

31.a OTHER EXPENSES (consolidated)12,831,372 11,109,624 Union Capital Limited13,833,662 9,289,868 UniCap Securities Limited247,463 98,211 UniCap Investments Limited26,912,497 20,497,703 Total- - Less: Inter-company transactions26,912,497 20,497,703 Total

32 MANAGEMENT EXPENSESManagement expenses include salaries, other employee benefits and proportionate other management expenses.It is determined on the basis of proportionate operating revenue of Merchant Banking Unit.

33 RECEIPTS FROM OTHER OPERATING ACTIVITIES11,814,354 40,723,276 Delinquent interest, IDCP etc.681,146 857,102 Renewals and proceeds12,026,170 8,986,643 Interest on deposits14,778,800 42,745,371 Others39,300,470 93,312,392 Total

34 PAYMENTS FOR OTHER OPERATING ACTIVITIES169,000 140,774 HR development4,935,450 4,139,493 Travelling and conveyance1,271,149 1,021,571 Motor vehicle expenses1,497,968 1,724,111 Subscription and fees61,849 30,201 Books, magazines, newspapers, etc2,573,406 3,094,753 AGM expenses (note 31.1)1,812,550 958,721 Entertainment and public relation & others510,000 - Donation12,831,373 11,109,624 Total

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35 EARNINGS PER SHAREEarnings Per Share (EPS) is calculated inaccordance with Bangladesh Accounting Standard33: Earnings Per Share which has been shown onthe face of Profit and Loss account.

Basic earnings per shareThe calculation of basic earnings per share at 31December 2013 was based on the profit attributableto ordinary shareholders of Tk. 138,744,068 (2012:Tk. 54,807,883) and a weighted average number ofordinary shares outstanding for the year ended 31December 2013 of 109,909,326 (2012: 104,675,549).


Profits attributable to ordinary shareholders138,744,068 54,807,883 Net profit for the year

Weighted average number of ordinary shares104,675,549 95,159,590 Ordinary shares at 1 January5,233,777 9,515,959 Bonus shares issued109,909,326 104,675,549 Weighted average number of ordinary shares at 31 December 109,909,326 109,909,326 Restated weighted average number of ordinary shares 1.26 0.52 Earnings per share 1.26 0.50 Earnings per share (restated)

Diluted earnings per shareThe dilutive effect relates to the average number of potential ordinary share held under option of convertibility. Therewas no such dilutive potential ordinary share during the year 2013 and hence no diluted earnings per share isrequired to be calculated.

35.a EARNINGS PER SHARE (consolidated)Profits attributable to ordinary shareholders

141,759,977 56,724,791 Net profit for the year (consolidated)Weighted average number of ordinary shares

104,675,549 95,159,590 Ordinary shares at 1 January5,233,777 9,515,959 Bonus shares issued109,909,326 104,675,549 Weighted average number of ordinary shares at 31 December 109,909,326 109,909,326 Restated weighted average number of ordinary shares 1.29 0.54 Earnings per share- consolidated1.29 0.52 Earnings per share- consolidated (restated)

36 OPERATING SEGMENT REPORT(Figures in BDT) 2013Core Business Merchant Banking Total Revenue and profit

External revenue312,997,050 52,269,379 365,266,429 Net Interest Income12,204,398 - 12,204,398 Investment Income1,464,200 75,487,827 76,952,027 Fees, commission, exchange and brokerage39,335,962 - 39,335,962 Other operating Income- - - Inter-segment revenue

366,001,610 127,757,206 493,758,817 Total segment revenue81,106,086 9,011,788 90,117,874 Other operating expenses

Major non-cash expenses9,423,027 - 9,423,027 Depreciation214,217,197 8,759,519 222,976,716 Provision for future losses304,746,310 17,771,307 322,517,617 61,255,300 109,985,899 171,241,199 Reportable segment profit before tax

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Core Business Merchant Banking Total Revenue and profitExternal revenue

4,653,123 27,915,601 32,568,724 Net Interest Income52,010,889 - 52,010,889 Investment Income5,299,023 59,342,942 64,641,965 Fees, commission, exchange and brokerage93,258,472 - 93,258,472 Other operating Income- - - Inter-segment revenue155,221,507 87,258,543 242,480,050 Total segment revenue65,234,717 7,240,536 72,475,253 Other operating expenses

Major non-cash expenses9,802,664 - 9,802,664 Depreciation68,422,895 5,610,193 74,033,088 Provision for future losses143,460,276 12,850,729 156,311,005 11,761,231 74,407,814 86,169,045 Reportable segment profit before taxSegment assets and liabilities The necessary information regarding assets and liabilities of operating segments in not separable and individuallyidentifiable for this purpose. For this reason the assets and liabilities of the respective segments is has not beenpresented here.

36.a OPERATING SEGMENT REPORT (consolidated)(Figures in BDT) 2013Core Merchant Revenue and profitBusiness Banking Subsidiary Total External revenue312,997,050 52,269,379 24,300,460 371,305,584 Net Interest Income12,204,398 - 49,690,356 27,394,754 Investment Income1,464,200 75,487,827 88,407,458 165,359,485 Fees, commission, exchange and brokerage39,335,962 - 2,936,263 42,272,225 Other operating Income- - - - Inter-segment revenue366,001,610 127,757,206 165,334,537 606,332,049 Total segment revenue81,106,086 9,011,788 42,438,184 132,556,058 Other operating expenses

Major non-cash expenses9,423,027 - 139,531 9,562,558 Depreciation214,217,197 8,759,519 32,646,124 255,622,840 Provision for future losses304,746,310 17,771,307 75,223,839 397,741,456 61,255,300 109,985,899 90,110,698 208,590,592 Reportable segment profit before tax

(Figures in BDT) 2012Core Merchant Revenue and profitBusiness Banking Subsidiary Total External revenue20,351,033 27,915,601 12,755,470 61,022,104 Net Interest Income30,010,889 - 13,070,054 43,080,943 Investment Income5,299,023 59,342,942 47,495,407 112,137,372 Fees, commission, exchange and brokerage93,258,472 - 2,378,331 95,636,803 Other operating Income- - - - Inter-segment revenue

148,919,417 87,258,543 75,699,262 311,877,222 Total segment revenue65,234,717 7,240,536 35,721,386 108,196,639 Other operating expenses

Major non-cash expenses9,802,664 - 2 9,802,666 Depreciation

68,422,895 5,610,193 11,159,101 85,192,188 Provision for future losses143,460,276 12,850,729 46,880,489 203,191,494 5,459,141 74,407,814 28,818,773 108,685,729 Reportable segment profit before tax


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ents Segment assets and liabilities

The necessary information regarding assets and liabilities of operating segments in not separable and individuallyidentifiable for this purpose. For this reason the assets and liabilities of the respective segments is has not beenpresented here.

37 AVERAGE EFFECTIVE TAX RATEThe average effective tax rate is calculated below as per Bangladesh Accounting Standard (BAS) 12: IncomeTaxes.(Figures in BDT)2013 201232,497,131 31,361,162 Tax expenses171,241,199 86,169,044 Accounting profit before tax

18.98% 36.39% Average effective tax rate

37.a AVERAGE EFFECTIVE TAX RATE (consolidated)The consolidated average effective tax rate is calculated below as per Bangladesh Accounting Standard (BAS)12: Income Taxes.(Figures in BDT)2013 201266,830,594 51,960,937 Tax expenses208,590,592 108,685,729 Accounting profit before tax32.04% 47.81% Average effective tax rate

38 INCREASE/(DECREASE) IN OTHER LIABILITIES.117,616,023 97,161,369 Interest suspense 101,760,252 30,554,142 Financial expenses payable(2,103,023) 602,906 Obligation under capital lease647,870 5,650 Excise duty11,234,028 55,541 Withholding tax payable 133,973 190,750 VAT payable235,232,380 (29,360,195) Accrued expenses and other payable 464,521,502 99,210,163 Total

39 (INCREASE)/DECREASE IN OTHER ASSETS62,597,644 (17,078,963) Accrued interest3,290,125 9,107,298 Advance office rent740,626 (418,193) Advance to employees(234,337,378) 217,030,103 Receivable from brokerage houses against sale of shares(67,857,832) (34,074,305) Receivable from subsidiary company- 137,500 Transfer price receivable(107,408,863) (58,667,662) Others(342,975,678) 116,035,778 Total


40 MARKTE CAPITALISATION AND SHARE PRICEMarket capitalization of the Company, which is thenumber of ordinary shares in issue multiplied by themarket value of a share. Total number of ordinaryshares outstanding as at 31 December 2013 was109,909,326 and the market value per share of lasttrading day (30 December 2013) was Tk. 34.60 inDSE. Thus market capitalization based on DSE valuewas Tk. 3,802.86 million (Year 2012: Tk. 2,910 million).

Market for Union Capital’s ordinary sharesThe Company's ordinary shares are traded on theDhaka Stock Exchange (DSE) and ChittagongStock Exchange (CSE) under the symbol of‘UNIONCAP’. The following table indicates the highand low prices for shares of Union Capital, asreported by DSE and CSE.

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entsDSE CSE

Quarter High Low High Low

High low share price

First quarter 32.90 24.40 32.80 23.40 Second quarter 32.20 19.70 32.00 19.10 Third quarter 36.90 27.20 36.00 26.70 Fourth quarter 35.30 27.00 35.10 26.90

No. of shareholders There were 10,170 shareholders as per share register as on 31 December 2013.

BAS

24.1

2, 2

4.17

party loans/leases were made at the competitiveterms including interest rates and collateralrequirements, as those offered to other customers ofsimilar credentials. During 2013, there were noloans/leases to related parties that were charged off.Union Capital also takes deposits from its relatedparties. The rates on deposits offered to them alsosimilar to those offered to other depositors. Total on-balance sheet exposure with the related parties as at31 December 2013 was as under:

41 RELATED PARTY TRANSACTIONS Union Capital in normal course of business carriedout a number of transactions with other entities thatfall within the definition of related party contained inBangladesh Accounting Standard 24: Related PartyDisclosures. The Company extends loans/leases torelated parties including its directors and relatedcompanies. At 31 December 2013, related partyloans/leases was Tk. 515.32 million representing34.50 percent of shareholders equity. These related

(Figures in BDT) Nature of2013 2012 Name of the related party Relationship transaction (3,000,000) (3,000,000) Chowdhury Tanzim Karim Director Term deposit(115,704,394) (107,866,362) Green Delta Insurance Company Limited Common Directors Term deposit- (3,100,000) Kazi Golam Samiur Rahman Director Term deposit(20,000,000) (20,000,000) Meherunnesa Haque Director Term deposit(1,000,000) (1,000,000) N. H. Khan Independent Director Term deposit(283,533,656) (211,018,500) UniCap Investments Limited Subsidiary Company Term deposit- (11,013,950) Dr. Sabita Rezwana Rahman Shareholder Term deposit(4,852,401) (6,141,725) Kazi Golam Rahman Shareholder Term deposit47,143,561 30,394,522 Green Delta Insurance Company Limited Common Directors Lease finance93,212,674 137,807,200 Barisal Power Company Limited Common Directors Term finance12,774,764 11,628,519 Barnali Fabrics Ltd. Shareholder Lease finance11,888,966 11,102,843 Fortuna Agro Fisheries ltd. Shareholder Term finance- 688,920 M. A. Salam Director Lease finance- 273,718 M. Faizur Rahman Director Lease finance296,782 477,654 Nadeem A. Chaudhury Director Lease finance871,003,946 740,779,406 UniCap Securities Limited Subsidiary Company Inter-company327,145,218 74,305 UniCap Investments Limited Subsidiary Company Inter-company 935,375,460 570,086,550 Total

42 PARTICULARS OF THE DIRECTORSSl. Name of the Directors/ Represented % of shares as at No. shareholding company by Designation Present address 31 December 20131 EC Securities Ltd. Chowdhury Chairman East Coast Center, SWG-8

Tanzim Karim Gulshan Avenue, Dhaka 12127.22

2 EC Securities Ltd. Rumana Sharif Director East Coast Center, SWG-8Gulshan Avenue, Dhaka 1212

3 Palmal Garments Tajrina Sikder Director House # 2/B, Road # 29Hosiery Ltd. Gulshan – 1, Dhaka-1212 9.73

4 Palmal Garments Kazi Russel Director House # 2/B, Road # 29Hosiery Ltd. Mahbub Gulshan – 1, Dhaka-1212

5 Enrilco Limited Nadeem A. Director 3/21,Barokot House, Iqbal RoadChaudhury Asad Avenue, Mohmmadpur, Dhaka 4.58

6 Mr. M. Faizur Rahman Self Director House no. 33, Road no. 12Baridhara, Dhaka 4.94



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ents 7 M. A. Salam Self Director House # 336, Road # 23

New DOHS, Mohakhali, Dhaka 6.268 Meherunnesa Haque Self Director House no.73, Road no.7/A

Dhanmondi R/A, Dhaka 1205 2.029 Kazi Golam Samiur Self Director Royal Concord, Apt # 604

Rahman House # 54, Road # 84Gulshan -2, Dhaka 1212 3.58

10 Nasir A. Choudhury Self Director House # 5, Road # 82Gulshan-2, Dhaka 4.45

11 N. H. Khan Self Independent A-2, House # 59, Road # 28Director Gulshan - 1, Dhaka -

12 Ziaul Hasan Siddiqui Self Independent 6-C-1, Baily HeightsDirector 2 New Ratan Colony, New Baily Road

PO: Shantinagar, Ramna, Dhaka 1217 -

43 DIRECTORS AND THE ENTITIES IN WHICH THEY HAVE INTERESTSl. Name of the Directors Designation Entities where they have interest1 Chowdhury Tanzim Karim Chairman 1. UniCap Investments Limited

2. UniCap Securities Ltd.2 Rumana Sharif Director Pubali Bank Ltd.3 Tajrina Sikder Director 1. Palmal Garments Hosiery Ltd.

2. Palmal Garments Washing Ltd.3. Amazon Garments Ltd.4. NKK Knitwear Ltd.5. Max Speed Plastic Ltd.6. Designer Line (Pvt.) Ltd.7. UniCap Investments Ltd.8. UniCap Securities Ltd.

4 Kazi Russel Mahbub Director Floral Accessories Ltd.5 Nadeem A. Chaudhury Director 1. Enrilco Limited

2. Green Delta Securities Ltd.6 M. Faizur Rahman Director 1. Asian Surveyors Ltd.

2. Credit Rating Agency of Bangladesh Ltd.3. Pubali Bank Ltd.4. Tiger Tours Limited5. UniCap Securities Ltd.

7 M. A. Salam Director 1. SAS Holdings Ltd.2. Ekushey Television Ltd.3. Semisam International Ltd.4. SAS Fashion Wear Ltd.5. One Bank Ltd.

8 Meherunnesa Haque Director 1. Palmal Garments Washing Ltd.2. Palmal Knitwear Factory Ltd.3. Palmal Styles Ltd.4. Palmal Packaging Ltd.5. NKK Knitwear Ltd.6. NKK Sweaters Ltd.7. Pragati Fashionwear Ltd.8. Amazon Garments Ltd.9. Al-Hamra Garments Ltd.10. UniCap Investments Ltd.11. UniCap Securities Ltd.

9 Kazi Golam Samiur Rahman Director Nil10 Nasir A. Choudhury Director Green Delta Insurance Company11 N. H. Khan Independent Director UniCap Securities Ltd.12 Ziaul Hasan Siddiqui Independent Director 1. UniCap Investments Limited

2. Summit Power Ltd.3. Summit Uttaranchal Power Co. Ltd.4. Summit Purbanchal Power Co. Ltd.5. Summit Narayangonj Power Co. Ltd.6. UniCap Securities Ltd.

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ents44 DISCLOSURES ON THE BOARD AUDIT COMMITTEE

Composition of audit committeeThe audit committee consists of the following Directors of the Board: Name Status with Status with Educational

the Company the Committee QualificationN. H. Khan Independent Director Chairman Post Graduate from

University of DhakaM. Faizur Rahman Director Member Graduate from University of DhakaNadeem A. Chaudhury Director Member Graduate in Civil EngineeringTajrina Sikder Director Member Graduate from

ABAC University of ThailandZiaul Hasan Siddiqui Independent Director Member Post Graduate from

University of Dhaka


Audit Committee meetings held during the yearSl. Meeting no. Meeting date1 18th Audit Committee Meeting 24-Feb-132 19th Audit Committee Meeting 28-Feb-133 20th Audit Committee Meeting 28-Apr-134 21st Audit Committee Meeting 29-May-135 22nd Audit Committee Meeting 19-Jun-136 23rd Audit Committee Meeting 21-Jul-137 24th Audit Committee Meeting 23-Sep-138 25th Audit Committee Meeting 10-Oct-139 26th Audit Committee Meeting 31-Oct-13

The committee discussed the following issuesduring the year a) Reviewed the draft consolidated financial

statements for the year ended 31 December2012 along with auditors report thereon andrecommended it to the Board of Directors forconsideration’

b) Reviewed the internal control functions andrecommended before the Board for enhancementof the activities streamlining operational risk

c) Reviewed with the senior management of theCompany’s policies and procedures to preventillegal or unethical activities, key accountingpolicies and procedures, internal controls,significant areas of risk, legal or regulatorymatters that may have an impact on the financial

statements, and any other matters that may affectfinancial reporting

d) Reviewed the reports submitted by the InternalControl and Compliance Department and advisedmanagement for timely implementation and followup

e) Recommended to the Board for appointment ofauditors for the year 2013 and fixation of theirremuneration

f) Reviewed the management letter of externalauditors submitted for the year ended on 31December 2012

g) Reviewed the quarterly, half yearly financialstatements for the year 2013

h) Reviewed the inspection report of BangladeshBank for the year 2012 and managementresponse thereon

i) Reviewed quarterly operation report of theCompany for the year 2013

45 BUSINESS COMMITMENTSThe Company makes various commitments in thenormal course of business. No material losses areanticipated as a result of these transactions. Thesebusiness commitments are quantified below:

(Figures in BDT)2013 2012986,200,000 400,000,000 Lease and term finance commitments outstanding at 31 December- - Real estate finance commitments outstanding at 31 December 986,200,000 400,000,000

46 CAPITAL EXPENDITURE COMMITMENTSThere was no capital expenditure contracted but notincurred or provided as at 31 December 2013. Therewas no material capital expenditure authorised by theBoard but not contracted as at 31 December 2013.

47 UNACKNOWLEDGED DEBTThe Company had no claim, legal or other, against itwhich has not been acknowledged as debt at thebalance sheet date.

48 NEW CONTRACTS/SANCTIONS ANDDISBURSEMENTSDuring the year the Company contracted anddisbursed the following amount:


Not

es to

the

Fina

ncia

l Sta

tem

ents

BAS

1.51

(d)

BAS

21BA

S 1.

38BA

S 10

.21

49 LEGAL PROCEEDINGSThe Company is not currently a defendant or aplaintiff in any material lawsuits or arbitration. Fromtime to time, however, the Company is involved as aplaintiff in some actions taken against the defaultclients in the ordinary course of business for non-payment of rentals/ installments. We believe that theultimate dispositions of those matters will befavorable and will have no material adverse effect onbusiness, financial conditions or results of operations.

50 BOARD MEETINGS AND NUMBER OFDIRECOTRSDuring the year 2013, 12 (twelve) Board meetingswere held. As on 31 December 2013, there were 10members in the Board, excluding two IndependentDirectors and the Managing Director. As per FIDcircular no. 09 dated 11 September 2002, a non-banking financial institution shall have maximum 11(eleven) Directors in the Board. The ManagingDirector is an ex-officio Director having no voting right.

51 NUMBER OF EMPLOYEESAs of 31 December 2013 a total number of 89employees were employed in Union Capital Limited.Each of the employees received salary more than Tk.36,000 per annum during the year 2013.

52 REPORTING CURRENCY AND LEVEL OFPRECESIONThe figures in the financial statements representBangladesh currency (Taka/Tk.), which has beenrounded off to the nearest integer.

53 IMPACT OF INFLATION AND CHANGINGPRICESFinancial Institutions are affected differently byinflation than those of industrial ventures. Whileindustrial and manufacturing companies generallyhave significant investments in inventories and fixedassets, financial institutions ordinarily do not havesuch investment. As a result, financial institutions aregenerally in a better position than industrial venturesto respond to inflationary trends by monitoring thespread between interest cost and interest incomeyields through adjustments of maturities and interestrates of assets and liabilities. Financial statements presented herein have beenprepared in accordance with International AccountingStandards and International Financial Reporting

Standards as adopted by the Institute of CharteredAccountants of Bangladesh (ICAB), which requiredthe measurement of the financial position andoperating results in terms of historical costs.However, in some cases, particular BAS/BFRSspecifically suggests to measure someassets/liabilities at fair value. Such as, BAS 39suggests to measure investment in tradablesecurities at its fair value by crediting shareholders’equity.

54 MERCHANT BANKING OPERATIONBangladesh Securities and Exchange Commission(BSEC) has approved transfer of the merchantbanking liceses of Union Capital Limited in the nameof UniCap Investments Limited on 30 December2013 and from 1 January 2014 the operation ofmerchant banking has been operated in the name ofits wholly owned subsidiary, UniCap InvestmentsLimited.

55 EVENTS AFTER THE REPORTING PERIOD

55.1 Dividend for the year 2013The Board of the Directors in its 187th meeting heldon 4 March 2014 recommended 10 percent stockdividend amounting to Tk. 109,909,326 for the yearended 31 December 2013 subject to the approval ofthe shareholders in the ensuing 16th Annual GeneralMeeting (AGM).

55.1 OthersNo other material event occurred after the reportingperiod, which could materially affect the amounts ordisclosures in these financial statements.

56 FOREIGN CURRENCY EXPOSURE PROFILEThere were no foreign currency monetary assets orliabilities that would give rise to gains or losses in theprofit and loss account.

57 COMPARATIVE FIGURES Comparative information has been disclosed inrespect of the year 2012 for all numerical data in thefinancial statements and also the narrative anddescriptive information when it is relevant for betterunderstanding of the current year’s financialstatements. Figures of the year 2012 have beenrestated, reclassified and rearranged wheneverconsidered necessary to ensure comparability withthe current period.


Contracts/ Contracts/Disbursements Sanctions Disbursements Sanctions3,668,861,900 4,355,061,900 1,047,440,007 1,106,400,000 Lease and term finance- - - - Real estate finance - - - - Car loan 3,668,861,900 4,355,061,900 1,047,440,007 1,106,400,000 Total


Not

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Fina

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ents58 FINANCIAL HIGHLIGHTS

Key financial highlights of the Company are annexedas Annexure-B.

59 GEOGRAPHICAL AREA OF OPERATIONSUnion Capital Limited is currently operating inChittagong and Sylhet along with its other branchesat Gulshan and Motijheel in Dhaka.

60 INTERIM FINANICAL STATEMENTSUnion Capital Limited publishes its interim financialstatements quarterly as required by the BangladeshSecurities and Exchange Commission.

61 CHANGE IN AND DISAGREEMENT WITHAUDITORSThere were no changes and disagreement with theAuditors on accounting and financial disclosures.

62 DEPARTURE FROM BANGLADESHACCOUNTING STANDARD (BAS) 1According to DFIM Circular no. 11 dated 23December 2009 there is no scope to use the name orinclude Statement of Financial Position and OtherComprehensive Income. As such the Company doesnot use the caption and also not prepare the same.

63 DEPARTURE FROM BAS 39The requirement of DFIM circular no. 11 dated 23December 2009 contradict with the requirement ofBAS 39. As per BAS 39 investment in shares fallseither under “at fair value through profit and lossaccount” or under “available for sale” where anychange in the fair value at the year end is to be takento profit and loss account or revaluation reserverespectively. Union Capital Limited followed theguidelines of Bangladesh Bank's circular under whichinvestment in both quoted and unquoted shares wererecognized at cost and required provision has beenmade for the losses arising from diminution in valueof investment.

64 APPROVAL OF THE FINANCIAL STATEMENTSThese financial statements were authorized for issueby the Board of Directors of the Company on 4March 2014.


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S 16

.73

(e)(v

ii)BA

S 16

.73

(e)(i

)BA

S 16

.73


Annexure-BHighlights(as per Bangladesh Bank Guidelines)

2013 2012 Particulars

1,099.09 1,046.76 Paid-up capital

1,696.08 1,490.82 Total capital

545.04 390.63 Capital surplus

13,706.83 10,055.00 Total assets

8,120.39 4,809.32 Total deposits

10,586.94 7,318.21 Total loans, advances and leases

986.20 400.00 Total contingent liabilities and commitments

1.30 1.52 Credit deposit ratio

8.85 16.25 Percentage of classified loans against total loans, advances and leases

138.74 54.81 Profit after tax and provision

936.51 1,189.20 Amount of classified loans during current year

214.30 389.06 Provisions kept against classified loans

1.59 0.22 Provision surplus against classified loan

13.41 15.50 Cost of fund (%)

11,141.21 7,671.22 Interest earnings assets

2,565.62 2,383.78 Non-interest earnings assets

9.75 3.99 Return on investment (ROI) (%)

1.01 0.55 Return on assets (ROA) (%)

12.20 52.01 Income from investment

1.26 0.50 Earnings per share (restated :2012)

1.26 0.50 Net income per share (restated:2012)

27.41 53.09 Price earnings ratio

FINANCIAL STATEMENTS OFSUBSIDIARY COMPANIES

IN THIS SECTION

UniCap Securities Limited


Statement of Financial Position 225

Statement of Comprehensive Income 226

Statement of Cash Flows 227

Statement of Changes in Equity 228


UniCap Investments Limited


Statement of Financial Position 232

Statement of Comprehensive Income 233

Statement of Cash Flows 234

Statement of Changes in Equity 235



Hoda Vasi Chowdhury & CoChartered Accountants

Independent Correspondent Firm to Deloitte Touche Tohmatsu

Hoda Vasi Chowdhury & CoChartered AccountantsDhaka, 11 Februay 2014


We have audited the accompanying financial statements of UniCap Securities Limited, previously knownas SES Company Limited (the “Company”) which comprise the Statement of Financial Position (BalanceSheet) as at 31 December 2013, and the related statement of Comprehensive Income (Profit and LossAccount), Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and asummary of significant accounting policies and other explanatory notes.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements inaccordance with Bangladesh Accounting Standards (BAS) and Bangladesh Financial ReportingStandards (BFRS), the Companies Act 1994, the Securities and Exchange Rules 1987 and otherapplicable laws and regulations. This responsibility includes: designing, implementing and maintaininginternal control relevant to the preparation and fair presentation of financial statements that are free frommaterial misstatement, whether due to fraud or error; selecting and applying appropriate accountingpolicies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standardsrequire that we comply with relevant ethical requirements and plan and perform the audit to obtainreasonable assurance whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on our judgement, including the assessment ofthe risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, the auditor considers internal control relevant to the entity’s preparation and fairpresentation of the financial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

OpinionIn our opinion, the Financial Statements prepared in accordance with Bangladesh Accounting Standards(BAS) and Bangladesh Financial Reporting Standards (BFRS), give a true and fair view of the state ofthe Company’s affairs as at 31 December 2013 and of the results of its operations and its cash flows forthe year then ended and comply with the Companies Act 1994, the Securities and Exchange Rules 1987and other applicable laws and regulations.

Further to our opinion in the above paragraph, we state that:i) we have obtained all the information and explanations which to the best of our knowledge and belief

were necessary for the purpose of our audit and made due verification thereof;ii) in our opinion, proper books of account as required by law have been kept by the Company so far

as it appeared from our examination of those books; iii) the Company’s statement of financial position and statement of comprehensive income dealt with by

the report are in agreement with the books of account and returns; andiv) the expenditure incurred were for the purpose of the Company’s business.

Auditors' Report to the Shareholders ofUniCap Securities Limited


(Figures in BDT)2013 2012 Notes613,610,789 611,067,579 Shareholders' equity 100,000,000 100,000,000 4 Share capital 507,500,000 507,500,000 5 Revaluation reserve 6,110,789 3,567,579 Retained earnings

357,862,829 314,000,000 Long term liabilities 350,000,000 314,000,000 6 Long term loan 7,862,829 - 7 Deferred liability- employee gratuity 971,473,618 925,067,579 Total capital employed

931,590,514 919,751,150 Non-current assets 518,500,000 518,500,000 8 Membership of stock exchanges 411,329,078 401,251,150 9 Investment in listed securities 1,761,436 - 10 Property, plant & equipments

752,948,756 608,036,602 Current assets 127,969,689 105,870,238 11 Advances, deposits and prepayments 501,534,803 410,342,750 12 Margin loan to clients 111,501,167 25,890,864 13 Receivable from stock exchanges 5,627,411 709,149 14 Other receivables 6,315,686 65,223,601 15 Cash and cash equivalents

713,065,652 602,720,173 Current liabilities 89,099,383 57,278,796 16 Payable to clients 651,399 1,073,395 17 Payable to stock exchanges 42,538,474 1,091,587 18 Accruals and payables 452,279,406 426,779,406 19 Short term loan - 14,000,000 20 Dividend payable (interim) 128,496,989 102,496,989 21 Provision for current tax 39,883,105 5,316,429 Net current assets971,473,618 925,067,579 Total assets

The annexed notes 1-40 form an intergral part of these financial statements.

sd/- sd/- sd/-Chairman Director Chief Executive Officer

Auditor's report to the shareholder's of UniCap Securities Limitedsee annexed report of date

sd/- Dhaka Hoda Vasi Showdhury & Co.11 February 2014 Chartered Accountants

UniCap Securities LimitedStatement of Financial Position

as at 31 December



186,880,797 135,399,062 OPERATING INCOME 88,407,458 47,495,407 22 Brokerage commission7,936,616 13,070,055 23 Income from investment87,600,460 72,455,269 24 Interest on margin Loan2,936,263 2,378,331 25 Other operating income

135,052,856 95,265,476 OPERATING EXPENSES 92,790,905 59,699,799 26 Financial expenses12,240,750 7,659,779 27 Laga, howla and CDBL charges30,021,201 27,905,897 28 Management expenses

51,827,940 40,133,586 OPERATING PROFIT

23,284,730 11,159,101 PROVISION FOR FUTURE LOSSES8,597,015 1,492,581 29 Provision for doubtful debts14,687,715 9,666,520 29 Provision for diminution in value of investments

28,543,210 28,974,485 PROFIT BEFORE TAX

26,000,000 14,771,450 21 Provision for current tax

2,543,210 14,203,035 NET PROFIT AFTER TAX

2.54 14.20 30 EARNINGS PER SHARE (EPS) OF TK. 100 EACH

The annexed notes 1-40 form an intergral part of these financial statements.

sd/- sd/- sd/-Chairman Director Chief Executive Officer

Auditor's report to the shareholder's of UniCap Securities Limitedsee annexed report of date

sd/- Dhaka Hoda Vasi Showdhury & Co.11 February 2014 Chartered Accountants

UniCap Securities LimitedStatement of Comprehensive Income




CASH FLOW FROM OPERATING ACTIVITIES28,543,210 28,974,485 Profit before tax

Adjustment for items not involving movement of cash:139,531 2 Depreciation and amortization7,862,829 - Employee- Gratuity23,284,730 11,159,101 Provision for doubtful losses 78,091,605 40,133,588 Profit after adjustment

Changes in working capital components:(99,789,068) (48,040,319) Increase in margin loan to clients(4,918,262) (699,210) Increase in other receivables (85,610,303) 258,450,641 (Increase)/decrease in receivable from stock exchanges(19,078,715) (14,070,640) Increase in advance income tax(3,020,736) - Increase of other advances31,820,587 (259,383,651) Increase/(decrease) in payable to clients(421,996) (99,159,113) Decrease in payable to stock exchanges25,500,000 53,909,699 Increase of short term loan19,998 (3,141,876) Increase/(decrease) in withholding tax & VAT41,426,889 745,345 Increase in liabilities for expenses (54,241,306) (71,255,536) Cash (used in)/generated from operating activities- - Income tax paid (54,241,306) (71,255,536) Net cash (used in)/generated from operating activities

CASH FLOW FROM INVESTING ACTIVITIES(1,900,967) - Purchase of fixed assets(24,765,643) (42,415,356) Investment in securities(26,666,610) (42,415,356) Net cash used in investing activities

CASH FLOW FROM FINANCING ACTIVITIES(14,000,000) - Cash divident paid350,000,000 104,000,000 Receipts from long term loan(314,000,000) (70,000,000) Repayment of long term loan22,000,000 34,000,000 Net cash from financing activities(58,907,915) (79,670,891) NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS65,223,601 144,894,493 Opening cash and cash equivalents6,315,686 65,223,602 CLOSING CASH AND CASH EQUIVALENTS

UniCap Securities LimitedStatement of cash flows



(Figures in BDT) Retained Revaluation ShareTotal Earnings Reserve Capital Particulars

For 2013611,067,579 3,567,579 507,500,000 100,000,000 Balance at 1 January2,543,210 2,543,210 - - Net Profit for the year 613,610,789 6,110,789 507,500,000 100,000,000 Balance at 31 December

For 2012610,864,544 3,364,544 507,500,000 100,000,000 Balance at 1 January 14,203,035 14,203,035 - - Net Profit for the year (14,000,000) (14,000,000) - - Interim cash dividend 611,067,579 3,567,579 507,500,000 100,000,000 Balance at 31 December

UniCap Securities LimitedStatement of Changes in Equity


1 COMPANY AND ITS ACTIVITIES1.1 Legal status of the CompanySES Company Limited was incorporated with theRegistrar of Joint Stock Companies and Firms (RJSC)vide registration no. C-29454 (742)/95 dated 9 October1995 under the Companies Act, 1994 as a privatelimited company. The name of the Company has beenchanged to UniCap Securities Limited ("the Company")and registered RJSC on 21 October 2013. Theregistered office of the Company situated at RichmondConcord (6th Floor), 68 Gulshan Avenue, Gulshan 01,Dhaka-1212, Bangladesh.

1.2 Principal activities of the CompanyPrincipal activities of the Company is to carry outbusiness of investments in shares and brokerage anddealing of securities under the license from theBangladesh Securities & Exchange Commission. TheCompany having membership at both Dhaka andChittagong Stock Exchange Limited (membershipnumber 163 and 082 respectively) and also fullservice depository participant of CDBL.As a Stock Broker and Stock Dealer, the Comapnycater services to the institutional and individualinvestors for trading of securities under BangladeshSecurities and Exchange Commission (Stock-Dealer,Stock-Broker & Authorized Representative) Rules2000 and to extend margin loan facilities to theinvestors under Margin Rules 1999.

2 BASIS OF PREPARATION2.1 Components of the financial StatementsThe financial statements have been prepared with dueconsideration of Bangladesh Accounting Standardsand Bangladesh Financial Reporting Standards. Thefinancial statements comprises of the following ascomplied with Bangladesh Accounting Standards 1:a) Statement of financial position b) Statement of comprehensive income c) Statement of cash flows d) Statement of changes in equity e) Notes to the financial statements

2.2 Statement of complianceThe financial statements have been prepared inaccordance with the Bangladesh AccountingStandards (BAS) and Bangladesh FinancialReporting Standards (BFRS), the Companies Act1994, Bangladesh Securities and ExchangeCommission Rule 1987 and other applicable lawsand regulations.

2.3 Basis of measurementThe financial statements have been prepared on thehistorical cost basis except for investments in stockexchanges which are measured at fair value.

2.4 Functional and presentational currencyThese financial statements are prepared inBangladesh Taka (Taka/Tk.), which is the Company’sfunctional currency. All financial informationpresented in Taka has been rounded to the nearestinteger.

2.5 Use of estimates and judgmentsThe preparation of financial statements requiresmanagement to make judgments, estimates andassumptions that affect the application of accountingpolicies and the reported amounts of assets,liabilities, income and expenses. Actual results maydiffer from these estimates. The most significantareas where estimates and judgements have beenmade are on valuation of investments and taxation.Estimates and underlying assumptions are reviewedon an ongoing basis. Revision of accountingestimates are recognized in the period in which theestimate is revised and in any future periodsaffected.

2.6 Going concern basisThe Company has adequate resources to continue inthe operation for the forseeable future. For thisreason the Directors continue to adopt going concernbasis in preparing the financial statement. Thecurrent credit facilities and adequate resources of theCompany provide sufficient funds to meet the presentrequirements of its existing business and operations.

2.7 Reporting periodFinancial statements of the Company consistentlycover one calendar year from 1 January to 31December.

3 SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have beenapplied consistently to all periods presented in thesefinancial statements.

3.1 Revenue recognitionRevenue is recognized only when it is probable thatthe economic benefits associated with thetransaction will flow to the enterprise in accordancewith the Bangladesh Accounting Standard (BAS) 18:Revenue.Brokerage commission is recognized as incomewhen trades are executed.Interest on margin loan is recognized on accrualbasis. Such income is calculated on daily margin loanbalance of the respective parties. Income isrecognized on monthly basis.Dividend income is recognized when right to receivepayment is established.


UniCap Securities LimitedNotes to the financial statementsFor the year ended 31 December 2013

Capital gain or loss on sale of securities is accountedfor only when shares are sold in market and gain isrealized or loss is incurred.

3.2 Earnings per shareThe Company calculates its earnings per share(EPS) in accordance with BAS 33: Earnings PerShare, which has been shown on the face of profitand loss statement.

3.3 Property, plant and equipment3.3.1 Recognition and measurementItems of property, plant and equipment are measuredat cost less accumulated depreciation andimpairment losses, if any. Cost includes expendituresthat are directly attributable to the acquisition of theasset. 3.3.2 Subsequent costsThe cost of replacing part of an item of property,plant and equipment is recognised in the carryingamount of the item if it is probable that the futureeconomic benefits embodied within the part will flowto the Company and its cost can be measuredreliably. The costs of the day-to-day servicing ofproperty, plant and equipment are recognised in theprofit and loss account as incurred.3.3.3 DepreciationDepreciation is charged to property, plant andequipment on a straight line basis at rates varyingfrom 10 percent to 25 percent in order to write themoff over their useful economic life.

3.4 Intangible assets3.4.1 Recognition and measurementComputer software acquired by the Company, whichhave finite useful lives, are measured at cost lessaccumulated amortisation.3.4.2 Subsequent costsSubsequent expenditure is capitalised only when itincreases the future economic benefits embodied inthe specific asset to which it relates. All otherexpenditure is recognised in profit or loss whenincurred.3.4.3 Amortisation of intangible assetsIntangible assets are amortised at the rate of 33percent on straight line method.

3.5 Investment in stock exchanges formembershipInvestments for membership are initially recognized atcost and are subsequently remeasured at fair valuebased on quoted bid prices. Surplus arising fromchanges in the fair value of investment for membershipare transferred to revaluation reserve account.

3.6 Investment in listed securitiesInvestment in quoted shares and unquoted sharesare initially recognized at cost plus transaction coststhat are directly attributable to acquisition of shares.After initial recognition investment in quoted shareshas been revalued at market price at reporting date.


Required provision has been made for impairmentwhen the market value of investments fall below thecost.

3.7 Cash and cash equivalentsCash and cash equivalents consist of cash in hand,bank balances and deposits held with banks andfinancial institution and short term liquid investmentsthat are readily convertible to known amount of cashand that are subject to insignificant risk of change invalue.

3.8 Laga, howla and CDBL chargesThe charges of stock exchanges booked on daily basisas per trading after receiving the trading note andCentral Depository Bangladesh Ltd. (CDBL) booked onmonthly basis, after receiving the bill from CDBL.

3.9 Borrowing CostsBorrowing cost is charged to profit and loss accountas per Bangladesh Accounting Standard 23:Borrowing Cost.

3.10 Bad debt3.10.1 Provision for bad debtsThe Company creates provision for doubtful debts onyearly basis considering collection during the yearand value of shares held as security.3.10.2 Recovery of bad debtsAny recovery is adjusted with the provision for baddebts in the period of recovery.

3.11 Related party disclosureAs per BAS - 24: Related Party Disclosures, partiesare considered to be related if one has the ability tocontrol or exercise significant influence over other inmaking financial and operating decisions.

3.12 Taxation Provision for tax is assessed under section 82C ofthe Income Tax Ordinance (ITO) 1984 on incomefrom Company's normal course of business and at37.5 percent on the Company's income from othersources. Under Section 82C, income tax deductedunder certain Sections of the ITO is treated as finaldischarge of tax liabilities from that source.

3.13 Contributory provident fundThe Company operates a contributory provident fundscheme for its permanent employees. Provident fundis administered by a separate Board of Trustees andis funded by equal contribution both from theCompany and the employees. The contributions areinvested separately from the Company's assets.

3.14 Gratuity schemeThe Company operates a gratuity scheme to retainand motivates its employees for long term retention.Gratuity scheme is applicable for all its permanentemployees who have completed their continuousservice at least for five years. Provision for gratuity ismade annually based on terms of gratuity scheme.

Established : 1958


House 25, Road 13ABlock D, BananiDhaka 1213, Bangladesh

Phones: (880-2) 989-4258 & 989-4346Fax: 882-5153E-mails: (i) [email protected] (ii) [email protected]

House 25, Road 13A, Block DBanani, Dhaka 1213, BangladeshDated, 28 January 2014


Auditors' Report to the Shareholders of UniCap Investments Limited

We have audited the accompanying financial statements of UniCap Investments Limited (the company),which comprise the statement of financial position (balance sheet) as at 31 December 2013, statement ofcomprehensive income (profit and loss statement), statement of cash flows and statement of changes inequity for the year then ended and a summary of significant accounting policies and other explanatory notes.

Management's responsibility for the financial statementsManagement is responsible for the preparation and fair presentation of these financial statements inaccordance with Bangladesh Accounting Standards and Bangladesh Financial Reporting Standards, theCompanies Act 1994 and other applicable laws and regulations. This responsibility includes: designing,implementing and maintaining internal control relevant to the preparation and fair presentation of financialstatements that are free from material misstatements, whether due to fraud or error; selecting and applyingappropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors' responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with Bangladesh Standards on Auditing. Those standards require that we complywith relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditors' judgement, including the assessmentof the risks of material misstatement of the financial statements, whether due to fraud or error. In makingthose risk assessments, we consider internal control relevant to the entity's preparation and fair presentationof the financial statements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.

OpinionIn our opinion, the financial statements, prepared in accordance with Bangladesh Accounting Standards andBangladesh Financial Reporting Standards, give a true and fair view of the state of the company’s affairs asat 31 December 2013 and of the results its operations and its cash flows for the year then ended and complywith the requirements of Companies 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 purposes of our audit and made due verification thereof;

b) in our opinion, proper books of account as required by law have been kept by the company so far as itappeared from our examination of those books; and

c) the statement of financial position (balance sheet) and statement of comprehensive income (profit andloss statement) dealt with by the report are in agreement with the books of account and returns.




SOURCES OF FUND250,000,000 200,000,000 5 Share capital2,510,796 2,038,076 6 Retained earnings 252,510,796 202,038,076 Shareholders' equity- - Long -Term Liabilities252,510,796 202,038,076 Total Capital Employed

APPLICATIONS OF FUNDNon-Current Assets

316,869,351 - Investment in securities

Current Assets288,611,200 211,066,545 4 Cash and cash equivalents4,611,867 3,595,160 10 Interest receivable on term deposit9,569,219 1,531,021 Advance income tax8,908,186 - 11 Receivable against share trading 311,700,471 216,192,726 Total Current Assets

Current Liabilities23,953,170 57,500 7 Accrued expenses303,249,548 74,305 Accounts payable34,500,000 8,000,000 8 Dividend payable - interim14,356,309 6,022,845 9 Provision for taxation 376,059,026 14,154,650 Total current liabilities

(64,358,555) 202,038,076 Net Current Assets

252,510,796 202,038,076 Total Assets

See annexed notes

sd/- sd/- sd/-Chairman Director Director

Signed in terms of our report of even date annexed

sd/- Dhaka S. F. AHMED & CO28 January 2014 Chartered Accountants


Statement of Financial Position as at 31 December



Statement of Comprehensive Income For the year ended 31 December

(Figures in BDT)2013 2012 Notes35,172,435 15,697,910 10 Interest income41,099,740 - 11 Investment Income654,000 - Dividend 76,926,175 15,697,910 Total income

23,905,478 - Interest expenses37,357 15,440 Bank charge10,800 - Professional fees224,463 79,771 Subscription and fees57,500 57,500 Audit fee22,999 3,000 Other expenses24,258,597 155,711 Total expenses

52,667,577 15,542,199 Profit before tax 8,333,463 5,828,324 Provision for taxation 44,334,114 9,713,875 Net profit after tax

Other comprehensive income9,361,394 - Changes in fair value of financial assets 34,972,720 9,713,875 Total comprehensive income

1.40 0.49 Earnings Per Share (EPS)

See annexed notes

sd/- sd/- sd/-Chairman Director Director

Signed in terms of our report of even date annexed

sd/- Dhaka S. F. AHMED & CO28 January 2014 Chartered Accountants



Cash flow from operating activities35,172,435 15,697,910 Interest income (23,905,478) - Interest Payment654,000 - Dividend receipts(353,119) (155,711) Payments for expenses(8,038,198) (1,531,021) Advance income taxes paid3,529,640 14,011,178 Cash generated from operating activities before changes

in operating assets and liabilitiesChanges in operating activities

(8,908,186) (2,332,910) Increase in accounts receivable(1,016,707) - Increase in accounts receivable from TDR23,895,670 - Increase in accrued expenses303,175,244 74,305 Increse in accounts payable317,146,021 (2,258,605)320,675,661 11,752,573 Net cash from/(used in) operating activities

CASH FLOW FROM INVESTING ACTIVITIES(326,230,745) - Investment in shares41,099,740 - Income from share trading(285,131,005) - Net cash from/(used in) investing activities

CASH FLOW FROM FINANCING ACTIVITIES50,000,000 100,000,000 Issue of share capital(8,000,000) - Dividend paid 42,000,000 100,000,000 Net cash from financing activities

77,544,655 111,752,573 Net charges in cash and cash equivalents211,066,545 99,313,972 Opening cash and cash equivalents288,611,200 211,066,545 Closing cash and cash equivalents


Statement of Cash FlowsFor the year ended 31 December


(Figures in BDT) Statement of Retained Comprehensive Share

Total Earnings income Capital Particulars202,038,076 2,038,076 - 200,000,000 Balance at 01 January 201350,000,000 - - 50,000,000 Share issued during the period44,334,114 - 44,334,114 - Net profit for the period- 44,334,114 (44,334,114) - Transfer to retained earnings(9,361,394) (9,361,394) - - Net change in fair value of financial assets(34,500,000) (34,500,000) - - Interim cash dividend252,510,796 2,510,796 - 250,000,000 Balance at 31 December 2013

100,324,201 324,201 - 100,000,000 Balance at 01 January 2012100,000,000 - - 100,000,000 Share issued during the year9,713,875 - 9,713,875 - Net profit for the year- 9,713,875 (9,713,875) - Transfer to retained earnings(8,000,000) (8,000,000) - - Interim cash dividend202,038,076 2,038,076 - 200,000,000 Balance at 31 December 2012

UniCap Investments LimitedStatement of Changes in Equity



1. REPORTING ENTITYUniCap Investments Limited (the Company), asubsidiary of Union Capital Limited is a publiccompany limited by shares was incorporated inBangladesh on 24 May 2011 vide certificate ofincorporation no. C-93014/11 under the CompaniesAct 1994. The registered office of the Company issituated at A-A Bhaban, 23 Motijheel CommercialArea, Dhaka 1000.

Nature of businessUniCap Investments Limited delivers a whole rangeof investment banking services including merchantbanking activities such as issue management,underwriting, portfolio management and corporateadvisory.

2. SIGNIFICANT ACCOUNTING POLICIES2.1 Basis of preparation of financial statementThe financial statements of UniCap InvestmentsLimited include the Statement of Financial Position(Balance Sheet), Statement of ComprehensiveIncome (Profit and Loss Statement), Statement ofCash Flows, Changes in Equity and notes to theaccounts. These financial statements have beenprepared under the historical cost convention on agoing concern basis in accordance with BangladeshAccounting Standards (BAS)/ Bangladesh FinancialReporting Standards (BFRS), the Companies Act1994 and Bangladesh Securities and ExchangeCommission (Merchant Banker and PortfolioManager) Regulations 1996.

2.2 Provision for taxationProvision for current income tax is made at the rateof 37.5 percent on the accounting profit of theCompany without considering taxable allowancesand disallowances.

2.3 Cash and cash equivalentsCash and cash equivalents include cash in hand,bank balances and fixed deposits which are heldand are available for use by the Company.

2.4 CurrencyThe amounts in the Financial Statements have beenrounded off to the nearest Taka.

2.5 Cash Flow StatementsThe net cash flow from operating activities isdetermined for the year under direct method as perBAS-7.

2.6 Events after reporting periodEvents after the reporting period that provideadditional information about the Company's positionat the reporting period are reflected in the financialstatements. Events after the reporting period thatare not adjusting event are disclosed in the notewhen material.No material event had occurred after the reportingperiod, which could substantially effect the valuesreported in the financial statements.

UniCap Investments LimitedNotes to the financial statementsFor the year ended 31 December 2013


SHAREHOLDERS’ADDITIONAL INFORMATION

IN THIS SECTION

Letter of invitation from the Chairman 238

Questions form for Annual General Meeting 239

Notice of 16th Annual General Meeting 241

Form of Proxy 243

Financial Calender 2013 245

Company Milestones 246

Redressal of Investors complaint 247

Other useful Information for Shareholders 248

Definitions 250

General Index 254

CG Index 256

LETTER OF INVITATION

FROM THE CHAIRMAN

extend a warm invitation to you to attend in the 16th Annual General Meeting of Union CapitalLimited to be held on 31 March 2014 at 10:30 am at LGED Auditorium, Agargaon, Dhaka. Included in

this document are the following:� The Notice of the Annual General Meeting setting out the businesses to be transacted;� Annexure I to the Notice of the Annual General Meeting setting out explanatory notes regarding

proxies and resolutions as well as important notes about the Annual General Meeting;� A form of proxy.The agenda as set out in the notice will be put to the shareholders for approval which will ensure an exactreflection of the views of the shareholders.I would like to remind the shareholders of their right to raise questions at the Annual General Meeting. As itis not always possible to answer every question raised at the Annual General Meeting, and to ensure thatall matters of particular interest to shareholders are covered, shareholders may use the attached questionform to raise questions in advance. From these question forms the most relevant and important topics willbe assessed and I will endeavour to address these at the Annual General Meeting. This advance notice ofrelevant questions will, of course, not prevent any shareholder from raising questions at the appropriatetime during the meeting.The question form can be forwarded to the Company Secretary, Union Capital Limited, Noor Tower, 73 Sonargoan Road, Dhaka-1205, to be received no later than 06:00 pm on Thursday, 27 March 2014, orhanded in at the time of registering attendance at the Annual General Meeting, should the first option nothave been chosen.

Yours faithfully,

sd/-Chowdhury Tanzim KarimChairmanDhaka, 15 March 2014

HEAD OFFICEUnion Capital LimitedNoor Tower, 73 Sonargoan RoadDhaka-1205Tel: +88 02 9662888Fax +88 02 8616878www.unicap-bd.com


I

Name of shareholder

Address

BO ID

Number of shares held

Telephone

Fax

Email

Signature

Questions

Agendum no.


QUESTION FORM FOR

ANNUAL GENERAL MEETING


Question form for Annual General Meeting


Union Capital Limited[Incorporated in Bangladesh][Registration number: C-36021(321/98)[Share code: UNIONCAP]

otice is hereby given to the shareholders recorded in the DepositoryRegister of Union Capital Limited on 13 March 2014 that the 16th

Annual General Meeting of the Company will be held on Monday, the 31 March 2014 at 10:30 am at the LGED Auditorium, Agargaon, Dhaka todeal with the following businesses in the manner required by theCompanies Act, 1994:

ORDINARY BUSINESS

AGM 14-16-01 : Receive and adopt the audited financial statementsof the Company as of and for the year ended 31 December 2013 together with the reports of theAuditors and Directors thereon;

AGM 14-16-02 : Declaration of dividend for the year 2013;

AGM 14-16-03 : Re-appointment of Directors;

AGM 14-16-04 : Appointment of the Auditors of the Company forthe year 2014 and fixation of their remuneration;

AGM 14-16-05 : Approval of the appointment of the IndependentDirector;

SPECIAL BUSINESS

AGM 14-16-06 : Issuance of Non-convertible Preference Shares;

By order of the Board,

sd/-Tauhidul Ashraf FCSSVP & Company Secretary Dhaka, 15 March 2014

NOTES1. The 13 March 2014 is the ‘Record Date’ to determine the shareholders’

entitlement to the dividend and their eligibility to attend and vote at the meeting.

2. The Board of Directors recommended 10 percent Stock Dividend for the year2013 subject approval of the shareholders.

3. A member eligible to attend and vote at the Annual General Meeting may appointa proxy to attend, speak and vote or abstain from voting in his/her/its/their stead.The Proxy Form duly completed and stamped must be deposited at theRegistered Office of the Company no later than 72 hours before the timeappointed for holding the meeting.

4. Members are requested to notify change of their address, if any, through theirrespective Depository Participants well in advance.

5. Annual Report, Attendance Slip and Proxy Form along with the notice will besent to all the Members by courier service/post. The Members may also collectthe Proxy Form from the Registered Office of the Company.

SPECIAL NOTEAs per BSEC’s Notification dated 24 October 2000 and 2013, no foodbox/gift/gift coupon etc. will be given at the Annual General Meeting.

NOTICE OF THE 16THANNUAL GENERAL MEETING

N


ITEM ONEPRESENTATION OF ANNUAL FINANCIALSTATEMENTS AND REPORTSIn terms of the Companies Act, 1994, the Directorsare required to present to the Shareholders at theAnnual General Meeting the annual financialstatements, incorporating the Directors’ Report andAuditors’ Report, for the year ended 31 December2013. The Directors' Report, the Financial Statementsand the Auditors Report for the year ended 31December 2013 are contained in this Annual Report.

ITEM TWODECLARATION OF DIVIDENDThe Board of Directors in its meeting held on 4 March2014 recommended 10 percent Stock Dividend i.e 10shares for every 100 shares held for the year 2013subject to the approval of the shareholders in theAnnual General Meeting. Bonus shares, if approved,will be transferred to the respective BO Account ofthe shareholders within April 2014. The dividend willbe paid to the shareholders whose name appeared inthe Depository Register of shareholders at the closeof business on 13 March 2014 being the record date.

ITEM THREERE-APPOINTMENT OF DIRECTORSIn terms of the Company’s Articles of Association, one-third of the Directors are required to retire at eachAnnual General Meeting and may make themselvesavailable for re-election. Accordingly, Chowdhury TanzimKarim, Mr. Nadeem A. Chaudhury, Mrs. Meherunnesa Haqueand Mr. Nasir A. Choudhury will retire by rotation andbeing eligible offered themselves for re-appointment.Moreover, as per Regulation 86 of the Companies Act,1994 any Director appointed by the Board during theperiod since the last Annual General Meeting isrequired to retire and is eligible for election at the nextAnnual General Meeting. Accordingly, Capt. MinhazurReza Chowdhury, nomineted by EC Securities Limitedand Mr. Mohammad Nurun Nabi FCA, IndependentDirecor who was appointed by the Board during theyear shall retire in the 16th Annual General Meetingand eligible for re- appointment. Biographical detailsof the Directors of the Company retiring at the AGMare set out on pages 48 to 52 of this annual report.

ITEM FOURAPPOINTMENT OF EXTERNAL AUDITORSThe Financial Institutions Act, 1993 stipulated that anauditor of a financial institution cannot be appointedfor more than three consecutive years. M/S. HodaVasi Chowdhury & Co., Chartered Accountants hascompleted their second year of audit and hence

eligible for re-appointment. The Audit Committeeproposes for re-appointment of existing Auditors M/S.Hoda Vasi Chowdhury & Co. for the year 2014 tohold office from the conclusion of the 16th AnnualGeneral Meeting until the conclusion of the nextAnnual General Meeting of Union Capital Limited.Section 210(10) of the Companies Act, 1994 givesauthority to the shareholders of Union Capital Limitedto fix the remuneration of the Auditors (proposed tobe re-appointed). The Auditors’ remuneration foraudit services paid to the Auditors for the financialyear ended 31 December 2013 amounted to Tk.130,000/- plus VAT. On recommendation of the AuditCommittee, the Board in its meeting held on 4 March2014 recommended for re-appointment of theexisting Auditors at a remuneration of Tk. 140,000plus VAT.

ITEM FIVEAPPOINTMENT OF INDEPENDENT DIRECTORAs per BSEC’s Notification of 7 August 2012, theappointment of Independent Director should beapproved by the shareholders in the Annual GeneralMeeting. Mr. Mohammad Nurun Nabi, FCS wasappointed by the Board on 9 February 2014 asIndependent Director in compliance with thecondition of BSEC’s notification. The shareholdersare now required to approve the appointment of theIndependent Director.

ITEM SIXISSUANCE OF NON-CONVERTIBLEPREFERENCE SHAREThe Board of Directors of Union Capital Limited inits 184th Meeting held on 18 December 2013approved the proposal for issuance of Non-convertible Preference Share to the tune of Tk. 500million subject to the approval of the shareholdersand regulatory authorities. The objective of issuanceof the preference share is to improve the capitaladequacy ratio of the Company by strengthening theTier II capital of the Company. We have alreadyapplied to Bangladesh Bank for its consent. Afterhaving consent from Bangladesh Bank andapproved by the shareholders in the Annual GeneralMeeting, the Information Memorandum for issuanceof Non-convertible Preference Share would besubmitted to the Bangladesh Securities andExchange Commission for raising fund.

Explanatory notes to the notice of AGM

Annexure I


FORM OF PROXYUnion Capital Limited[Incorporated in Bangladesh][Registration number: C-36021(321/98)[Share code: UNIONCAP]

or use of the shareholders of Union Capital Limited who on the Record Date of 13 March 2014 are entitledto exercise any voting rights in relation to the resolutions to be proposed at the Annual General Meeting to

be held on 31 March 2014 at 10:30 am at the LGED Auditorium, Agargaon, Dhaka or at any adjournment thereof.Should a shareholder not wish to attend the Annual General Meeting in person, such shareholder may providehis/her/its/their nominee with his/her/its voting instruction and such nominee will complete all necessarydocumentations in order to attend and vote at the Annual General Meeting.I/We _________________________________________________________________________________of (address) ____________________________________________________________________________being the holder(s) of _________ordinary shares in the company, appoint Mr. ______________________________________________________________________ as my/our proxy to act for me/us and on my/our behalfat the annual general meeting that will be held for the purpose of passing ordinary resolutions to be proposedthereat or at any adjournment thereof, and to vote for and/or against such resolutions and/or to abstain fromvoting in respect of the ordinary shares registered in my/our name(s), in accordance with the followinginstructions:

Number of votesORDINARY BUSINESS (one vote per ordinary share)Agendum For Against Abstain

AGM 14-16-01 : Receive and adopt the audited financial statements ofthe Company as of and for the year ended 31 December2013 together with the reports of the auditors andDirectors thereon;

AGM 14-16-02 : Declaration fo dividend for the year 2013;

AGM 14-16-03 : Re-appointment of Directors;

AGM 14-16-04 : Appointment of the Auditors of the Company for the year2014 and fixation of their remuneration;

AGM 14-16-05 : Approval of the appointment of Independent Director;

SPECIAL BUSINESS

AGM 14-16-06 : Issuance of Non-convertible Preference Share

A proxy may not delegate his/her/its/their authority to any other person. This form of proxy will lapse and cease tobe in force and effect immediately after the Annual General Meeting of the Company to be held on 31 March 2014at 10:30 am at the LGED Auditorium, Agargaon, Dhaka or at any adjournment thereof, unless it is revoked earlier.

Signed at (place) ___________________________________________ on (date) ____________ March 2014

Signature _____________________________________________________________________________

Attested by me _________________________________________________________________________

(where applicable)

Please read the notes given on next page.

F

UMMARY OF RIGHTS OF A SHAREHOLDERTO BE REPRESENTED BY PROXY AS

CONTAINED IN SECTION 85 OF THE COMPANIESACT 1994 AND NOTES TO THE FORM OF PROXY

1 Each holder entitled to attend and vote at theAnnual General Meeting is entitled to appoint aproxy to attend, participate in, speak and vote orabstain from voting in place of that holder at theAnnual General Meeting.

2 A proxy appointment must be in writing, datedand signed by the holder appointing the proxy.

3 A holder’s instructions to the proxy have to beindicated by the insertion of the relevant numberof votes exercisable by that holder in theappropriate box provided. Failure to comply withthis will be deemed to vote in favour of theordinary resolutions at the Annual GeneralMeeting.

4 A holder or his/her/its/their proxy is not obliged tovote in respect of all the ordinary shares held bysuch holder or represented by such proxy, but thetotal number of votes for or against the ordinaryresolutions and in respect of which anyabstention is recorded may not exceed the totalnumber of votes to which the holder orhis/her/its/their proxy is entitled.

5 Documentary evidence establishing the authorityof a person signing this form of proxy in arepresentative capacity has to be attached to thisform of proxy, unless previously recorded by theCompany Secretary. Examples of satisfactoryidentification include a valid National ID card, avalid driving licence or a valid passport.

6 Any alterations or corrections to this form of proxymust be initialled by the authorized signatory/signatories.

7 The completion and lodging of this form of proxywill not preclude the original shareholder fromattending the Annual General Meeting andspeaking and voting in person thereat to theexclusion of any proxy appointed in terms hereof,should such holder wish to do so, in which casethis proxy will be suspended accordingly.

8 Form of Proxy have to be lodged with or postedto the Company Secretary, Union Capital Limited,Noor Tower, 73 Sonargoan Road, Dhaka-1205before a proxy may exercise any voting rights ofa holder at the Annual General Meeting. TheForm of Proxy is requested to be received nolater than 6:00 pm on 27 March 2014.

9 Holders attending the Annual General Meetingwill be offered the opportunity of putting questionsto the Directors and Management. A questionform has been included in this report on page239 for this purpose.


NOTES TO FORM OF PROXY

S

FINANCIAL CALENDAR 20132012 Dec Financial year-end - 31 December;

2013 Feb Annual results and announcement of final dividendon 28 February for 2013;

Mar Notice of 15th AGM;

Publications and posting of 2012 Annual Reports;

15th Annual General Meeting held on 31 March;

Apr Final dividend payment;

First-quarter Business Results;

Jul Half-year Business Results;

Oct Third-quarter Business Results;

Dec Financial year-end - 31 December

2014 Jan

Mar Annual results and announcement of final dividendon 4 March for 2014;

Notice of 16th AGM;

Publications and posting of Annual Reports;

16th Annual General Meeting;

Apr Final dividend payment

First-quarter Business Results (expected)

ANNUAL GENERAL MEETINGUCL’s Annual General Meeting will be held on Monday, 31 March2014, at 10:30 am; Venue: LGED Auditorium, Agargaon, Dhaka.

DISTRIBUTION POLICYAll reports are available in English and can be downloaded fromCompany website www.unicap-bd.com.Despite UCL’s initiatives on sustainability, we have not condensedour printed annual report. This report has been distributed to currentshareholders. Shareholders, the public and prospective investors may request aprinted copy of this version via email at [email protected].

CONTENT OF THE REPORTThis Annual Report is targeted primarily at our current shareholdersand potential investors. It has been prepared to assist all ourstakeholders in making an informed assessment of the UCL’songoing ability to create and sustain value. All necessary informationmay be available online at www.unicap-bd.com.

INVESTOR RELATIONSName: Tauhidul Ashraf FCSDepartment of Corporate AffairsTel: +88 02 9662888Email: [email protected]

UCL Groupprides itself onsupplyingstakeholders withupdatedinformation on aregular basis.This informationcan be found atwww.unicap-bd.com underInvestorRelations.


Taking over from Peregrine Capital Limited Incorporation as a Public Limited CompanyCommencement of BusinessLicense from Bangladesh Bank

Signing of 1st Lease Agreement

Holding of 1st AGM

Registered as Merchant Bank

Adjudged ‘AA’ credit rating

Opening of Chittagong BranchListing with DSE & CSE

Opening of Sylhet Branch

Opening of Motijheel Branch

Opening of Gulshan Branch

ICAB National Award 2011

Adjudged Overall Winner in SAFA Award 2012 in all SectorRanked First in SAFA Award 2012 in Financial Service SectorRanked Second in ICAB National Award 2012Transfer of Merchant Bank Licence in the name ofSubsidiary UniCap Investments Limited

2006


COMPANY MILESTONES The progress markers


Redressal of

INVESTORS’ COMPLAINT

Investorcomplaintsconstitute animportant voiceof investor, andthis policy detailscomplainthandling througha structuredgrievanceredressalframework.Complaintredressal issupported by areviewmechanism tominimize therecurrence ofsimilar issues infuture.

INVESTORS REDRESSAL POLICYWe at UCL Group believe that Investor service is animportant imperative for sustained business growth and wewant to ensure that our investors receive exemplaryservice across different areas of operations of the Group.Prompt and efficient service is essential to retainingexisting relationships and investor satisfaction is critical toUCL. Investor complaints constitute an important voice ofinvestor, and this policy details complaint handling througha structured grievance redressal framework. Complaintredressal is supported by a review mechanism, tominimize the recurrence of similar issues in future. UCLfollows the following principles:� Investors must be treated fairly at all times;� Complaints raised by investors must be dealt with

courtesy and in a timely manner;� Investors are informed of avenues to raise their

complaints within the organization, � Complaints are treated efficiently and fairly;� UCL employees work in good faith and without

prejudice, towards the interests of the investors.

HOW DO WE REDRESS INVESTOR COMPLAINTS � The Company has a designated investor grievances

email id [email protected] on which aninvestor can make a complaint.

� An Investor can make a written complaint throughletter also.

� The Company maintains investor grievance register inwhich full detail of every written complaint shall enter.

� Designated person shall login to look after the investorgrievances on daily basis.

� The full detail of the written complaint must be passedto the concerned department and inform thecompliance officer of the Company as soon as it isreceived.

� A letter or email must be written to all the investor whohave submitted written complaints by the designatedperson or Compliance Officer acknowledging receipt ofthe complaint and informing them it will be dealt with.

� Audit & Compliance Department will obtain allinformation available on the complaint which isconsidered necessary for a proper investigation, lookinto all the necessary information and resolve thesesoon as possible.

� UCL must resolve investor complaint within sevendays of the receipt of the same except the complicatedcase.

� A serious complaint must be referred to the CEO andeven to Directors of the Company if so warrants.

� The Compliance Officer of the Company shall reviewthe investor complaint register on weekly basis to findout whether complaint has been resolved within timeor not.

The voice of the shareholders


CAPITAL FORMATION HISTORYThe history of raising of share capital of UCL is given below:

Time line Mode of raising capital No. of shares Amount in Taka

09 August 1998 As per MOA & AOA 5,050,000 50,500,000

26 June 2004 20% Bonus Share 1,010,000 10,100,000

27 July 2004 Rights Share 1,683,335 16,833,350

28 December 2004 Rights Share 5,526,235 55,262,350

17 February 2005 Rights Share 318,067 3,180,670

19 March 2005 Rights Share 118,066 1,180,660

28 May 2005 18% Bonus Share 2,388,523 23,885,230

28 May 2006 20% Bonus Share 3,218,846 32,188,460

24 July 2007 Initial Public Offer 7,500,000 75,000,000

23 July 2008 30% Bonus Share 8,043,922 80,439,220

17 May 2009 20% Bonus Share 6,971,398 69,713,980

19 May 2010 30% Bonus Share 12,548,517 125,485,170

3 May 2011 75% Bonus Share 40,782,681 407,826,810

8 April 2012 10% Bonus Share 9,515,959 95,159,590

31 March 2013 5% Bonus Share 5,233,777 52,337,770

31 March 2014 10% Bonus Share* 10,990,932 109,909,320

End of the year 120,900,258 1,209,002,580* Subject to approval of Shareholders in 16th AGM.

KEY SHARE INFORMATION (As on 31 December) 2013 2012 2011Total no. of shareholders 10,170 10,165 9,757Share price (Taka) 34.60 27.8 60.5No. of outstanding shares 109,909,326 104,675,549 95,159,590Market Capitalization (Taka in million) 3,802.86 2,909.98 5,757.16

SHAREHOLDERSAt the end of 2013, there were 10,170 shareholders in UCL as against10,165 shareholders at the end of 2012. The Sponsor Shareholders hold60,918,993 no shares of Tk.10 each which represent 55.43 percent of thetotal paid up shares of the Company.

COMPOSITION OF SHAREHOLDINGS (%)

Sponsors(Institutions)23.69

General Public(Individuals)25.09

Sponsors(Individuals)31.74

General Public(Institutions)19.48

Other UsefulINFORMATION FOR SHAREHOLDERS Shareholders’ rights

to access


LEGAL FORMPublic Limited Company incorporated in Bangladeshon 9 August 1998 under Companies Act, 1994 andlisted with Dhaka and Chittagong Stock Exchange

COMPANY REGISTRATION NUMBERC-36021(321)/98 Dated 9 August 1998

BANGLADESH BANK LICENSE NUMBERFID(L) / 19 Dated 12 August 1998

REGISTERED AND CORPORATE OFFICENoor Tower73 Sonargaon Road, Dhaka 1205, BangladeshTel: +880 (2) 966 2888, Fax: +880 (2) 861 6878Email: [email protected]

CORPORATE WEBSITEwww.unicap-bd.com

BRANCH OFFICESMain BranchNoor Tower73 Sonargaon RoadDhaka 1205, BangladeshTel: +880 (2) 966 2888Fax: +880 (2) 861 6878

Chittagong BranchAyub Trade Centre1269/B Sk. Mujib Road, Agrabad C/AChittagong 4100, BangladeshTel: +880 (31) 251 3353 - 54Fax: +880 (31) 251 3356

Sylhet BranchBengal Shopping ComplexSobhanighat, MehendibaghBishaw RoadSylhet 3100, BangladeshTel: +880 (821) 728438-41Fax: +880 (821) 728437

Motijheel BranchA-A Bhaban, 23 Motijheel C/ADhaka 1000, BangladeshTel: +880 (2) 9515946 - 55Fax: +880 (2) 7169075

Gulshan BranchRichmond Concord68 Gulshan AvenueDhaka 1212, BangladeshTel: +880 (2) 882 0366Fax: +880 (2) 882 5740

AUDITORSHoda Vasi Chowdhury & Co.Chartered AccountantsBTMC Bhaban, 7-9 Karwan Bazar C/ADhaka-1215, Bangladesh

LEGAL ADVISORA. Hossain & Associates3/B Outer Circular RoadMoghbazer, Dhaka.

Hasan & Associates65-66 Motijheel C/ADhaka-1000.

STOCK BROKER/DEALERUniCap Securities Limited (Former SES CompanyLimited)(Membership DSE-163; CSE-82)

TAX CONSULTANTSK. M. Hasan & Co.Chartered AccountantsHometown Apartment87 New Eskaton Road, Dhaka-1000

STOCK LISTINGBourse Symbol Date of listingDSE UNIONCAP 24 July 2007CSE UNIONCAP 24 July 2007

PRINCIPAL BANKERSThe Hong Kong and Shanghai Banking Corporation LimitedState Bank of IndiaBank Asia LimitedUnited Commercial Bank LimitedMutual Trust Bank Limited

SUBSIDIARY COMPANYUniCap Securities LimitedUniCap Investments Limited

INVESTORS INQUIRIESDepartment of Corporate AffairsPhone: +880 (2) 966 2888Email: [email protected]

MEMBERSHIPSBangladesh Leasing & Finance Companies AssociationBangladesh Merchant Bankers Association (BMBA)Dhaka Chamber of Commerce and Industry (DCCI)Bangladesh Association of Publicly Listed CompaniesFederation of Bangladesh Chamber of Commerceand Industry (FBCCI)The Institute of Bankers, Bangladesh (IBB)

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DEFINITIONSBANGLADESH FINANCIAL REPORTING STANDARDSBangladesh Financial Reporting Standards (BFRS) means thosestandards adopted by the ICAB. UCL’s consolidated financial results areprepared in accordance with BFRS.

BANK RATEThe rate at which Bangladesh Bank discounts approved securities,treasury bills etc. Bank rate is used by Bangladesh Bank as a means ofregulating the money on demand and checking the growth of inflation inthe country.

BASEL CAPITAL ACCORDThe new Basel Capital Accord (Basel II) of the Bank for InternationalSettlements is an improved capital adequacy framework accomplishedby closely aligning banks’ capital requirements with improved modernrisk management practices and sophisticated risk assessmentcapabilities. It further ensures the risk sensitivity of the minimum capitalrequirements by including supervisory reviews and market disciplinethrough enhanced disclosure.

BUSINESS RISKBusiness risk arises from the specific business activities of a companyand the effects these could have on its earnings.

BOOK VALUE PER SHAREBook value of shareholders equity divided by the number of ordinaryshares outstanding.

CAPITAL ADEQUACY RATIOThe capital adequacy of UCL is measured in terms of the BangladeshBank requirements. The ratio is calculated by dividing the primary (Tier1) and secondary (Tier 2) capital by the risk-weighted assets.

CAMEL RATINGIt is a measure for examining a financial institution or bank - the fivethings to examine are:� Capital Adequacy � Asset Quality� Management Quality � Earnings� Liquidity

CASH RESERVE REQUIREMENT (CRR)CRR is a statutory requirement of maintaining cash balance withBangladesh Bank applicable for banks and financial institutions. An NBFIis required to maintain @ 2.5% of its average balance of term depositswith Bangladesh Bank current account. Deposits taken from banks andfinancial institutions are not considered in determining CRR.

CREDIT AND COUNTERPARTY RISKCredit and counterparty risk is the potential loss due to the failure of aborrower, endorser, guarantor or counterparty to repay a loan or honoranother predetermined financial obligation.

COLLATERALAssets pledged as security for a loan or other obligation. Collateral isgenerally cash or a highly rated security.

We would notalways be ableto avoid technicalterms, but wecan explainthem, and ifthere are anyopen question,answer thempersonally.

Interpret the hieroglyphics

FULLY DILUTED BASISThe relevant earnings figure is adjusted for theassumed adjustments to income that would havebeen earned on the issue of shares issued fromdilutive instruments. The resultant earnings aredivided by the weighted average number of ordinaryshares and other dilutive instruments (i.e. potentialordinary shares) outstanding at the period end,assuming they had been in issue for the period.

EFFICIENCY RATIO (COST-TO-INCOME RATIO)Total expenses as a percentage of income fromnormal operations (net interest income plus non-interest revenue).

EQUITY RATIO/CAPITAL RATIOIndicator showing the relation of equity to totalassets.

FAIR VALUEThe amount of consideration that would beexchanged in an arm’s length transaction betweenknowledgeable and willing parties, under nocompulsion to act.

FAILING TO PROPERLY MANAGE REGULATORYRISKFailing to properly manage regulatory risk may resultin regulatory sanctions being imposed, and couldharm our reputation.

FISCAL YEAR (FY)FY means the fiscal year commencing from 1 Julyending on 30 June.

FREE FLOAT SHARESThe ordinary shares of the company which are freefor trading in the stock exchanges. Shares on whichthere is no restriction or lock-in condition for transferor sale imposed by the regulatory authorities areconsidered as free float shares. Sponsors shares of alisted company are locked-in for 3 years from thedate of publication of prospectus.

GOING CONCERNThe ability of a concern to continue its operation for aforeseeable future.

IMPAIRMENT OF LOANS AND ADVANCESImpairment of loans and advances arises wherethere is objective evidence that the group will not beable to collect an amount due. The impairment is thedifference between the carrying amount and theestimated recoverable amount.

CONTINGENT LIABILITIESA situation existing at reporting date, where pastevents have led to a possible obligation the outcomeof which depends on uncertain future events, but theoutcome is not sufficiently probable or reliablymeasurable to warrant recognising the liability at thisreporting date

CORE (TIER 1) CAPITALCore capital consists of issued ordinary share capitaland retained earnings and reserves, less regulatorydeductions.

DEFAULT RISKThe risk that a client may be unable to makepayments of rentals/installments on time.

DEFAULTED ADVANCEAny advance or group of advances that has triggeredrelevant definition of default criteria for that portfoliothat is in line with Bangladesh Bank regulationsrelating to NBFIs.

DEFERRED TAXATION ASSETSDeferred taxation assets are the amounts of incometaxation recoverable in future periods in respect of: � deductible temporary differences arising due to

differences between the taxation and accountingtreatment of transactions; and

� the carrying forward of unused taxation losses.

DEFERRED TAXATION LIABILITIESDeferred taxation liabilities are the amounts ofincome taxation payable in future periods due todifferences between the taxation and accountingtreatment of transactions.

DEFINITION OF DEFAULTAt a minimum, a default is deemed to have occurredwhere a loan is overdue for more than 150 days.

DIVERSIFICATIONDistribution of investments among various sectorsand geographic region to minimize risk.

EARNING ASSETSThose assets of a bank or financial institution whichearn an income for the institution i.e. loans andleases, advances and money at call & short notice tobanks etc.

EARNINGS PER SHAREBASIC EARNINGS BASISIncome attributable to equity holders for the perioddivided by the weighted average number of ordinaryshares in issue during the period.


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PAST DUEA financial asset is past due when a counterparty hasfailed to make a payment when contractually due.

PROXYA proxy is a written document authorizing the personnamed therein to attend and vote at a meeting forand in place of the Original Shareholder.

PROVISION FOR DOUBTFUL DEBTSThe amount of revenue charged to profit and lossaccount to absorb losses inherent in the investmentportfolio. The provision is increased by theallowances for loans/leases which is charged againstcurrent year's operating results.

RECORD DATEThe date fixed by the Board at least 14 days beforethe date of Annual General Meeting to determine theeligibility of shareholders to attend and vote at themeeting and the right to current dividend.

RELATED PARTIESParties where one party has the ability to control theother party or exercise significant influence over theother party in making financial and operatingdecisions.

REPO RATEThe rate at which Bangladesh Bank lends money tobanks.

RETURN ON AVERAGE ASSETSAn indicator of how profitable a company is relative toits total assets. ROA gives an idea as to how efficientmanagement is at using its assets to generateearnings. Calculated by dividing profit before tax byits total average assets.

RETURN ON AVERAGE EQUITYReturn on equity measures a small Company’sprofitability by revealing how much profit a companygenerates with the outstanding shareholders money.Calculated by dividing net profit after tax by averageshareholders equity.

RETURN ON AVERAGE INVESTMENTA performance measure used to evaluate theefficiency of investment or to compare the efficiencyof a number of different investments. To calculateROI, profit before tax is divided by the cost of theaverage investment.

REVERSE REPO RATEThe rate at which banks park surplus liquidity withBangladesh bank.

REGULATORY RISKRegulatory risk is the risk of not complying withregulatory requirements, regulatory changes orregulators’ expectations.

LIQUIDITY AND FUNDING RISKLiquidity and funding risk is the potential loss ifCompany is unable to meet financial commitments ina timely manner at reasonable prices as they fall due.Financial commitments include liabilities to depositorsand suppliers, and lending, investment and pledgingcommitments.

MARKET CAPITALIZATIONThe Company’s closing share price multiplied by thenumber of shares in issue.

MARKET RISKMarket risk is the potential for a negative impact onthe balance sheet and/or income statement resultingfrom adverse changes in the value of financialinstruments as a result of changes in certain marketvariables. These variables include interest rates,foreign exchange rates, equity and commodity pricesand their implied volatilities, as well as creditspreads, credit migration and default.

NET ASSET VALUE PER SHARETotal equity attributable to equity holders of thecompany divided by the number of shares in issue,shares held by group entities.

NET INTEREST INCOMEThe difference between interest earned on assets(such as loans and securities) and interest incurredon liabilities (such as deposits and subordinatedindebtedness).

NET INTEREST MARGINNet interest margin as a percentage of average assets.

NON-PERFORMING ASSETSConsists of total sum of non-accrual loans/leases,experiencing 6 months or more delinquent. Aloan/lease is considered non-performing when thetotal or a part thereof is past due for 6 months ormore even if the finance is well secured and in theprocess of collection.

NON-ACCRUAL LOANS/LEASESA loan/lease is automatically classified as a non-accrual when it is past due for 3 months or more andno matter the Management is confident about itscollectibility of the entire amount at the time when aloan/lease is placed on non-accrual status. Aloan/lease is generally returned to accrual status whenthe loan/lease is less than 3 months past due and theCompany has reasonable assurance that the loan willbe fully collectible and is in the process of collection.

OPERATIONAL RISKOperational risk is the potential loss resulting frominadequate or failed internal processes or systems,human interactions or external events, but excludesbusiness risk.


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These definitions should be read in conjunctionwith the group’s accounting policies, which alsoclarify certain terms used.

SMALL AND MEDIUM ENTERPRISESThis asset class covers all exposures to small andmedium enterprises (SME) that are classified ascorporate and retail based on criteria prescribed bythe Regulator.

SUBSIDIARY COMPANYA Company is a subsidiary of another company, if theparent company holds more than 50% of the nominalshares and controls the composition of its Board ofDirectors.

THIN MARKETThe stock market where there are very few bids tobuy and few offers to sell any shares, so the price isdistorted.

TIER 2 CAPITALIt is the supplementary capital made up of generalprovision, 50 percent of revaluation reserve for fixedassets, 45 percent of revaluation reserve forsecurities and preference shares less regulatorydeductions.

UNREALIZED CAPITAL GAINSCapital gains that reflect the price appreciation ofcurrently held unsold shares; such gains are notaccounted for until realized.

WEIGHTED AVERAGE NUMBER OF SHARESThe number of shares in issue increased by sharesissued during the period, weighted on a time basisfor the period during which they participated in theincome of the group, less shares held by groupentities, weighted on a time basis for the periodduring which the entities held these shares.

RETURN ON EQUITY (ROE)Net income, less preferred share dividends andpremium on redemptions, expressed as a percentageof average common shareholders’ equity.

RISK MANAGEMENTThe process of identifying the level of risk an entitywants, measuring the level of risk the entity has,taking actions that bring the actual level of risk to thedesired level of risk and monitoring the actual level ofrisk so that it continues to be aligned with the desiredlevel of risk.

RISK-WEIGHTED ASSETSRisk-weighted assets (RWA) are determined byapplying risk weights to balance sheet assets and off-balance-sheet financial instruments according to therelative credit risk of the counterparty. The riskweighting for each balance sheet asset and off-balance sheet financial instrument is regulated byBanglagesh Bank regulations in the respectivecountries of the other banking licences.

SEGMENTAL REPORTINGOPERATIONAL SEGMENTA distinguishable component of the group, based onthe market on which each business area focuses,that is subject to risks and returns that are differentfrom those of other operating segments.

GEOGRAPHICAL SEGMENTA distinguishable component of the group that isengaged in providing services within a particulareconomic environment and is subject to risks andreturns that are different from those of componentsoperating in other economic environments.

STATUTORY LIQUIDITY RATIO (SLR)Bangladesh Bank requires a non-bank financialinstitution to maintain liquid reserve @ 5% withbanks/financial institutions on its total liabilitiesexcluding funds from banks/financial institutions. Thisincludes 2.5% of CRR.


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GENERAL INDEXCORPORATE OBJECTIVES, VALUES & STRUCTUREVision 06

Mission 07

Overall Strategic Objectives 10

Core Values 09

Business Principles 12

Ethical Principles 15

Profile of the Group 04

Directors Profile 48

Organization Chart 138

DIRECTORS REPORT/CHAIRMAN’S & CEO’S REVIEWReview of performance of the group 22

Description of performance of products 27-31, 65-67

Segments of the company 183, 212-213

Summary of risk & its mitigation 33-36

Future outlook 76

Social Responsibility initiatives 142

Environmental releted initiatives 148

Contribution towards employees 151, 154

Contribution to national economy 151

DISCLOSURE OF ACCOUNTING POLICIESAccounting policies 183

Impairment of Assets 187

Segment information 183, 212-213

Changes in accounting policies and estimates 25, 181

FINANCIAL STATEMENTSConsolidate financial statements 166-171

Contingencies and commitments 187, 217

Related partly disclosure 215

Remuneration and facilities to Directors 99, 210

Remuneration and facilities to MD & CEO 98, 210

Statement of financial Position of UCL 172

Income Statement of UCL 174

Statement of cash flow of UCL 177

Statement of changes in equity of UCL 178

Disclosure of share capital 77-78, 203-205, 248

Compliance with IAS/IFRS 182

Notes to the financial statements 180


A reference for quick view

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SPECIFIC DISCLOSURESCredit Rating 71

Portfolio classification & Sector wise exposure 191, 197

Non-performing assets 30, 195

Movement of Non-performing Assets 195

Movement of Provisions 201-202

Details of Non-performing Assets Structure 195

Maturity Pattern of assets & liabilities 29, 179

Valuations of Investment/assets 184

Business Ratios 40

Sector wise exposure 43, 194

Breakup of provisions 201-202

Disclosure and regulatory guidelines 108, 113, 222

Operating & Finance lease 183

Branch/company’s network 249

CORPORATE GOVERNANCEBoard of Directors 48-52

Chairman and CEO 18, 20, 48, 52

Audit Committee & its role 79

Audit Committee Charter 79

Internal Control 81

Risk Management 117

Ethics and compliance 96, 103, 108

Committees of the Board 53

Human Capital 151, 157

Communications with shareholders 38, 74

Environmental & Social Obligations 142, 148-149

Management review and responsibility 22, 85-86, 136

Evaluation of quarterly reports 72

Other investors’ friendly information 248-249

STAKEHOLDERS INFORMATIONDistributions of shareholdings 78, 204

Share holdings of Directors and Sr. Executives 78, 204

Redressal of investors complaints 247

GRAPHICAL/PICTORIAL DATA 41-44

HORIZONTAL/VERTICAL PERFORMANCE SUMMARY Operating performance 40-44

Financial performance 40-44

Profitability, liquidity and other ratios 40-44

STATEMENTS OF VALUE ADDED Value added and its distributions 160

Economic Value Added 162

Company’s products & services 16

ADDITIONAL DISCLOSURESSustainability development report 140-154

Human Resource Accounting 157


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CG INDEXBOARD OF DIRECTORS, CHAIRMAN AND CEO

Policy on appointment of Directors 90

Representation of non-executive Directors 91

Independent Director on the Board 91

Disclosure on Director’s independence 91, 92

Independence of Chairman and CEO 91

Responsibilities of the Chairman 91

Disclosure of independence of non-executive Directors 92

Scheme for annual appraisal of the Boards’ performance 91

Policy on annual evaluation of the CEO 93

Policy on training of Directors 92

Directors knowledge and expertise in finance and accounting 92

Number of meetings of the Board and participation of each Director 98

Report on compliance on Corporate Governancereviewed by external auditors 107

VISION/MISSION AND STRATEGY

Company’s vision and mission statements 6, 7

Business objectives 8

Areas of business 4, 16

Business focus 4

Business strategies 10

AUDIT COMMITTEE

Appointment and composition 94

Chairman of the Audit Committee 94

Terms of reference of Audit Committee 56

Number of Non-executive Directors in Audit Committee 95

Qualification and expertise of the members of the Audit Committee 48, 94

Access of the Head of internal audit to the Audit Committee 95

Number of meetings and attendance by members of Audit Committee 98

Objective of Audit Committee 79

Activities of Audit Committee 80

Statement of Audit Committee on internal control 80

Statement of Audit Committee regarding compliance with Laws & Regulations 95

Audit Committee on involvement in review of external audit function 95

Audit committee involvement in selection of appropriate accounting policies 95

Audit committee involvement in the review of annual and interim financial releases 95

INTERNAL CONTROL AND RISK MANAGEMENT

Directors’ responsibility to establish appropriate system of internal control 96

Key features and monitoring of the internal control system 82, 95

Review the adequacy of the system of internal controls 95

Disclosure of the information of risks 32-36

Management and mitigation of the risks 32-36

ETHICS AND COMPLIANCE

Disclosure of statement of ethical principles and values 103

Communication of the Ethics & business practices to the employees 105

Board’s commitment to establishing high level of ethics & compliance 75

Anti-fraud programs and controls, including protection of whistle blowers 99

REMUNERATION COMMITTEE

Charter of the committee 97

Composition of the committee 97

Policies with regard to remuneration of Directors, senior management and employees 97

Number of meetings and work performed 97

Remuneration of Directors, Chairman, CEO and senior executives 98

HUMAN CAPITAL

Policies and practices with respect to Human Resources 154

Organizational Chart 138

COMMUNICATION TO SHAREHOLDER ANDSTAKEHOLDERS

Company’s policy and strategy 101

Company’s policy on ensuring participation of shareholders in the AGM 38, 73, 101

ENVIRONMENTAL AND SOCIAL OBLIGATION

Company’s policies and practices 148

Activities undertaken by the entity 142

reduce - union capital limited subsidiaries having 5 branch officess located in dhaka, chittagong,...

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