To the Shareholders of Southeast Bank Limited

COMMITTED TO SUSTAINABLE GROWTH TOGETHER

Nature has spirit and is the main seat of excellence. If we look deep into nature, we get a variety of lessons from its different components and forms. The gushing river heading towards the sea for awaited unison teaches us to face odds with courage and fortitude. The wonderful blooming flowers from the green teach us to smile. The lush green grass signaling safety teaches us to be patient and generous. A mountain with its huge strength teaches us determination. Beyond the clouds, the sky is always blue and the sun is always shining. They want us to be persistent and ready for the upcoming days. A small plant’s gradual turning into a giant tree teaches us to pursue growth trajectory with hope and tenacity. The change in nature with the advent of each season displays that actions explain a lot more than words do. Nature, as a whole, also teaches us integrity and stability. Nature has many forms and patterns, and teaches us the benefit of togetherness. It provides us sustenance and stimulates us to excel in performance. It is our bounden duty to protect and nurture nature.

In the cover picture, the plant is growing into a better and more advanced state by a process of evolution. So is our Bank. It is gradually evolving into a higher stage and stature by execution of the strategies of sustainable growth strongly supported by all stakeholders especially the loyal customers. We submit ourselves to the nature’s intelligence to rise up high. Our pursuit of sustainable growth path with the togetherness of customers is a quest for superior performance for continuous improvement. Ours is a safe depository for our all stakeholders. Our pledge is to make it a customers’ coveted destination and their preferred Bank to shape up their desired future. Together we shall grow, excel and our actions shall determine our destination. We firmly believe together we shall reach the goal we sincerely long for.

ANNUAL REPORT 2016

COMMITTED TO SUSTAINABLE GROWTH TOGETHER Table of Contents

SEBL AT A GLANCE Letter of Transmittal 4 Notice of the 22nd Annual General Meeting 5 Vision and Mission 7 Strategic Objectives, Planning and Priorities 9 Core Values, Code of Conduct and Ethical Principles 12 Corporate Profile 17 Corporate Philosophy and Business Model 18 22 Years of Glorious Journey 20 Awards and Recognitions 22 Corporate Organogram 25 Group Corporate Structure 26 Last 10 Years Financial Indicators 27 Forward Looking Ideology 28

PROFILE OF BOARD OF DIRECTORS AND REVIEW OF THE GROUP CHAIRMAN Composition of Board of Directors and its Committees 29 Directors’ Profiles and their representation on Board of other Companies 36 Directors’ Responsibility Statement 48 Review from the office of the Group Chairman 50 Managing Director’s Review and Corporate Management 64 DIRECTORS’ REPORT 69

CORPORATE GOVERNANCE Corporate Governance Report 85 Managing Director’s and CFO’s Declaration on Integrity of Financial Statements to the Board 99 Management Review, Responsibility and Evaluation 100 Credit Rating 143 Audit Committee (Composition, Role, Meetings, Attendance etc.) and Internal Control 144 Report of the Risk Management Committee 149 Evaluation of the Quarterly Financials by the Audit Committee and by the Board 151 Report of the Bank’s Shariah Supervisory Committee 152 Capital Plan 154 RISK MANAGEMENT AND CONTROL FRAMEWORK Report on Risk Management Framework, Mitigation Methodology and Risk Reporting by CRO 159 Disclosure on Risk Based Capital Adequacy (Basel III) 166 Capital Market Exposure 177

SUSTAINABILITY APPRAISAL AND INTEGRATED REPORTING Sustainability Report - At A Glimpse 180 Report on Corporate Social Responsibility 182 Environment Related Initiatives 186 Green Banking Initiatives – Environmental and Social Obligation 188 Integrated Reporting 189 Communication to Shareholders and Stakeholders 197

SEBL OUTLOOK Products and Services 218 Caring for the Employees (Health and Safety) 224 Career Development Program 225 Contribution to National Exchequer 226 Empowering Women 226 Financial Inclusion: Mobile Banking Services – Telecash 230 Service Excellence in Action 231 Bank’s Network: List of Branches and ATMs 232 Memories of 21st AGM 242

FINANCIAL STATEMENTS Independent Auditor’s Report to the Shareholders 260 Consolidated Balance Sheet 262 Consolidated Profit and Loss Account 264 Consolidated Cash Flow Statement 265 Consolidated Statement of Changes in Equity 266 Notes to the Financial Statements 272 FINANCIAL STATEMENTS OF ISLAMIC BANKING BRANCHES 344 FINANCIAL STATEMENTS OF OFFSHORE BANKING 354 FINANCIAL STATEMENTS OF SEBL SUBSIDIARIES 364

STANDARD DISCLOSURES CHECKLIST 419 SAFA Corporate Governance Disclosure Checklist 420 Integrated Reporting Checklist 422 SAFA Standard Disclosure Checklist 427 Important Financial Indicators with Quantitative and Qualitative Factors 430 Proxy Form and Attendance Slip 441 4 Southeast Bank Limited I Annual Report 2016

Letter of Transmittal

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

Annual Report of Southeast Bank Limited for the Year -2016

Dear Sir,

Thank you for supporting us in the preceding years.

It is our immense pleasure to lay before you the Bank’s Annual Report-2016 along with the Audited Financial Statements (consolidated and separate) as at and for the year ended 31st December, 2016. Annual Report-2016 of the Bank comprises Balance Sheet, Profit and Loss Accounts, Statement of Changes in Equity, Cash Flow Statement along with Notes to the Accounts.

Information given in our Annual Report-2016 is complete, full and in line with Bangladesh Accounting Standard and International Accounting Standard. We hope that the report will be of use to you today and tomorrow.

Best regards,

Yours sincerely,

Muhammad Shahjahan Additional Managing Director & Company Secretary Southeast Bank Limited I Annual Report 2016 5

Notice of the 22nd Annual SEBL at a glance General Meeting

Notice is hereby given to all members of Southeast Bank Limited that the 22nd Annual General Meeting of the Shareholders of the Company will be held on Monday, May 22, 2017 at 11.00 a.m. at Officers’ Club Dhaka, 26 Baily Road, Dhaka to transact the following business and adopt necessary resolutions:

AGENDA

1. To receive, consider and adopt the Profit and Loss Accounts of the Company for the year ended on 31st December, 2016 and the Balance Sheet as at that date together with the Reports of the Board and the Auditors thereon.

2. To declare dividend for the financial year ended 31st December, 2016.

3. To elect / re-elect Directors.

4. To appoint Auditors for the term until the next Annual General Meeting and fix their remuneration.

5. Miscellaneous, if any, with the permission of the chair.

All Members are requested to attend the meeting on the date, time and place mentioned above.

By order of the Board

Dated: May 07, 2017 Muhammad Shahjahan Additional Managing Director and Company Secretary NOTES a) The Record Date for the purpose was on April 27, 2017. b) Any member of the Company entitled to attend and vote at the general meeting may appoint a proxy to attend and vote on his/her behalf. Such proxy except for a Corporation must also be a member of the Company. An Attorney of a member need not himself/herself be a member. c) The instrument appointing a Proxy or the Power of Attorney duly signed by the Member and stamped with requisite stamp duty must be submitted at the Registered Office of the Company at least 48 hours before the meeting, i.e. latest by 11.00 a.m. of May 20, 2017. d) Attendance of the Shareholder/Attorney/Proxy shall be recorded up to 11.30 a.m. at the entrance of the venue. Attendance slip has to be submitted at the Registration Counter duly signed. The signature must agree with the recorded signature. e) Annual Report containing, among other papers, this Notice of the 22nd Annual General Meeting, Attendance Slip and Proxy Form are being sent to every member by post. The members may also collect “Proxy Form” from the Share Office of the Company. f) All members are requested to update: (i) The particulars of their Bank Account (ii) Change of Address and (iii) 12 Digits Tax Payer’s Identification Number (e-TIN) in their BOID through Depository Participants (DP) on or before May 15, 2017, with intimation to us. g) Brokerage Houses and DPs are requested to notify us in details showing Shareholder’s name, BOID Number, e-TIN, client- wise shareholding position, Bank Account Number, Routing Number etc. of their Margin Loan holders who hold shares of Southeast Bank Ltd. on the Record Date on or before May 15, 2017. h) If any individual shareholder fails to provide us his/her e-TIN within May 15, 2017, his/her Income Tax at source will be deducted from payable Dividend @15% (fifteen percent) instead to 10% (ten percent) as per amended Income Tax Ordinance 1984 (Section 54)

PS: As per Bangladesh Securities and Exchange Commission’s Circular No.SEC/CMRRCD/2009-193/154 dated October 24, 2013, “no benefit in cash or kind, other than in the form of cash dividend or stock dividend, shall be paid to the holders of equity securities” for attending the 22nd Annual General Meeting of the Bank. 6 Southeast Bank Limited I Annual Report 2016 Vision & Mission

Our vision, mission and value statements are the keys to the philosophy on which we base ourselves on, what we do and what we want to be Southeast Bank Limited I Annual Report 2016 7 Vision & Mission

Our vision, mission and value statements are the keys to the philosophy Mission on which we base ourselves on, what we High quality nancial services with state of the art technology. do and what we Fast customer service. want to be Sustainable growth strategy. High Ethical standards in business. Steady return on shareholders’ equity. Innovative banking at a competitive price. Attraction and retention of quality human resource. Commitment to Corporate Social Responsibility.

Vision To be a premier banking institution in Bangladesh and contribute signi cantly to the national economy. 8 Southeast Bank Limited I Annual Report 2016

Mission High quality nancial services with state of the art technology. Fast customer service. Sustainable growth strategy. High Ethical standards in business. Steady return on shareholders’ equity. Innovative banking at a competitive price. Attraction and retention of quality human resource. Commitment to Corporate Social Responsibility.

Vision To be a premier banking institution in Bangladesh and contribute signi cantly to the national economy. Southeast Bank Limited I Annual Report 2016 9

Strategic Objectives SEBL at a glance

a) Maintaining a high quality assets portfolio to achieve line with all six core risks in banking operation and strong and sustainable returns and to continuously green banking and environmental risk management. build shareholders’ value. i) Practicing efficient corporate governance and Mission b) Maintaining adequate capital in line with risk appetite compliance processes through meeting all regulatory of the Bank. requirements and disclosures in line with national High quality nancial services with state of the art technology. and international best practices by ensuring best c) Strengthening trust and partnerships with customers internal control monitoring practices. Fast customer service. by focusing on the Bank’s core values of quality Sustainable growth strategy. customer service, professionalism, teamwork and j) Upholding Bank’s brand image as a customer friendly integrity. bank through efficient and prompt customer service, High Ethical standards in business. product diversification with a view to establishing a d) Hiring professionals with strong background and Steady return on shareholders’ equity. long term profitable relationship with our customers. knowledge. Innovative banking at a competitive price. k) Serving the society as part of our Corporate Social e) Strengthening technologies that reduce operational Responsibility (CSR) by giving stipends to poor Attraction and retention of quality human resource. risks and promote the implementation of best students, distributing warm clothes to winter-hit practices in the industry. Commitment to Corporate Social Responsibility. people and contributing to the different relief fund. f) Developing innovative products and services that We also contribute to the society by paying taxes to attract our targeted customers and market segments. the national exchequer timely.

g) Exploring new avenues for growth and profitability. l) Extending banking services to the un-banked people for financial inclusion meeting socio-economic h) Practicing efficient risk management principles in requirements.

Priorities followed in 2016 The Bank had the following plans and road-map for business success in 2016.

i) Excellence in banking operations through vii) Efficient Internal Control and Regulatory Compliance maintaining strong fundamentals of Capital System Adequacy, Business Diversification and Exploring viii) Strong Human Resource Base Non-funded Business ix) Going green in the future of banking Vision ii) Prudent Asset Management iii) Prudent Liability Management To be a premier banking institution in iv) Excellence in Delivering Customer Service v) Effective Risk Management

Bangladesh and contribute vi) Effective IT Framework and System signi cantly to the national economy. 10 Southeast Bank Limited I Annual Report 2016

Strategic Priorities

We have strong conviction that SEBL will keep on Emphasizing Small and Medium Enterprises financing flourishing as a leading financial institution of Bangladesh, despite existence of external challenges: first, because Agricultural & Rural Credit through Micro Financial we have a visionary Board, dynamic management and Institutions an enthusiastic & skilled group of employee base that is committed to working together to provide our customers Sustainable financing for Energy efficiency and with excellent service; second, because we are building renewable energy projects on a solid foundation of key strengths, including a strong capital base, and excellent risk and cost management Arranging funds from overseas sources for Off-shore skills; third, because we are strategically diversifying our banking service and long term foreign currency loans business lines, products and locations; and finally, because for corporate clients we have a clear focus on our strategy and where we need to direct our efforts. Our strategic focus is built around a Integrated marketing development initiative by few key priorities that will guide our actions as we move creation of customer oriented culture forward over the next several years. They will serve as a roadmap to help us navigate through the new landscape in Mobilizing remittance as a source of foreign currency which we are now operating. Sustainable revenue growth, capital management, leadership, prudent risk & appetite Strategic priorities for Capital management & management, efficiency & expense management – will maintaining strong capital base: be the pillars of our strategy in upcoming years. They will play a critical role in our success and, given the ongoing SEBL is committed to consolidate its solid capital base to market uncertainty, they deserve a prominent place in our support the risks associated with our diversified businesses, strategic framework. while still providing investors with superior returns. We actively manage our capital to support the execution of Strategic priorities for sustainable revenue growth: our business strategies. Our goal is to achieve the lowest cost of capital by managing its mix and by building our Sustainable revenue growth comes from our ability to base through earnings and selective capital issues. build relationships with our customers and creating niche markets. We do this by providing our customers with Expediting borrowers’ rating exceptional service, such us: Concentrating on lending portfolio having lower Ensuring quality customer service at primary capital charge distribution channel such as Branch and development of alternative delivery channels to improve customer Strengthening internal Capital adequacy assessment experience process (ICAP) Developing and upgrading customized asset, Preemptive preparation for Basel –III compliance liability and transaction products for Retail, SME and Corporate clients Revising the capital allocation to business in line with Mobilizing low cost sustainable deposit from retail revised capital adequacy target ratios and institutional client base Strategic priorities for Leadership/HR capacity Increasing client base for financial inclusion and development wider market penetration SEBL’s success depends on having the right leaders to Diversification and increasing loan clients and execute our strategy. For this reason, leadership remains maintaining quality assets one of our strategic priorities. Our leadership strategy continues to build competitive advantage through Export expansion and diversification comprehensive development programs and tools.

Promoting Islamic banking through conventional Hiring the best talents in different arenas of Banking branches Southeast Bank Limited I Annual Report 2016 11 SEBL at a glance

Fostering a culture of creativity, innovation and Ensuring meticulous compliance of disbursement diversity with a view to achieving sustainable procedures and monitoring and follow-up of each business growth loan by the Branch manager to ensure in time recovery Developing a Human resource base by rendering training and motivation so that they remain capable Strengthening recovery drive to bring down NPL at a to lead new initiatives minimum level

Creating alignment between the leadership Ensuring efficient internal control and regulatory development strategy and the business strategy compliance in all levels of banking operations

Evaluating employees based on Key Performance Efficiency and expense management Indicators (KPIs) Expense management is a traditional strength at SEBL – Developing Human resource management system to and today, it’s more important than ever. While revenue transform the organization growth is ultimately decided by our customers & external factors, expenses are something we can control. At SEBL, Strategic priorities for prudent risk & apatite we are carefully monitoring our spending and looking for management ways to improve productivity by being innovative and doing more with less. Our priorities are: At SEBL, we are known for our risk management culture, characterized by a conservative approach and rigorous Clear cost saving strategies processes. We try to know our customer fully. But at the heart of our strength is experience and good judgment. Business process reengineering (BPR) in different business and operational areas to improve efficiency For Credit Risk, our focus is developing a strategic business plan for apatite management and structured Optimizing efficiency by budgetary control policy guideline and framework in order to manage default risk Paperless banking

Ensuring effective risk management system especially Implementing green office guide prudent management of Asset Liability risk, Foreign Exchange risk and Operational risk 12 Southeast Bank Limited I Annual Report 2016

CORE Our Values STRENGTHS

Serve as a compass for our action I Professionally Strong Board of Directors I Focus on Diversication and describe our direction. I Strong Capital Base I Quality Customer Service I Transparent and Quick Decision Making I Unique Corporate Culture I E cient Team of Performers I Sharp bifurcation Between Board and I Satised Customers Management Functions I I Eective Internal Control Strong Asset Base I Skilled Risk Management Core Values

I Integrity I Respect I Fairness CORE I Harmony I Team Spirit COMPETENCIES I Courtesy I Knowledge I Commitment I Experience and Expertise I Service Excellence I Customer Orientation and Focus I Insight and Spirit I Transparency I Enthusiasm for work I Determination I Business Ethics I Zeal for Improvement I Pursuit of Disciplined Growth Strategies I Reliability Southeast Bank Limited I Annual Report 2016 13

CORE Our Values STRENGTHS

Code of Conduct and Ethical Principles

Southeast Bank believes that its efforts to become a leading bank in the private sector can only be achieved and sustained by creating effective corporate governance, inculcating professionalism among its staff and strictly adhering to rules and regulations. We believe that our aims and objectives can only be realized fully and sustained over time by adherence to ethics that cannot always be built into sets of rules and regulations. This belief in ethics motivates the Bank in its dealings with those with whom it interacts.

A. WE ADHERE TO THE FOLLOWING PRINCIPLES IN B. WE BELIEVE IN THE FOLLOWING PRINCIPLES IN DEALING WITH CUSTOMERS DEALING WITH SHAREHOLDERS 1. Follow strict ethical banking practices. 1. Adequate disclosure of corporate information and operational results to help them take suitable 2. Provide fair treatment to all customers, depositors investment decisions / options. and borrowers without any discrimination. 2. Stable Dividend Policy 3. Provide speedy customer service at a very competitive cost. 3. Dialogue with them and implement their suggestions for improvement 4. Deal with customers in a transparent manner and without any hidden cost. 4. Equal treatment to all shareholders irrespective of their individual size of shareholding. 5. Maintain strict secrecy of customer account. 5. Effective Risk Management 6. Provide free financial advice to clients. 6. Maintenance of fairness and accuracy of financial 7. Deal quickly with complaints received from the reporting and records. customers. We endeavour continuously to build relationship of trust and understanding with our 7. Restrictions on insider trading. customers. C. WE ABIDE BY THE FOLLOWING PRINCIPLES IN 8. Give very competitive return to the depositors on DEALING WITH OUR REGULATORS their investment. 1. We are transparent in operations and governance. 9. Listen to our customers and work for improvement of customer service as per their suggestion. 2. We have a culture of timely compliance of regulatory requirements. 10. Keep relations with customers in weal and woe. 3. We take their suggestions with utmost importance 11. Keep promises that we make. and implement those for improvement of our corporate governance standard. 12. Take competitive service charges and rates. 4. We safeguard information and do not misuse it. 13. Discourage any sort of privilege/donation from customer Southeast Bank Limited I Annual Report 2016 15 SEBL at a glance

D. WE CONFORM TO THE FOLLOWING PRINCIPLES 7. We support the women as a community and IN RESPECT OF OUR EMPLOYEES contribute to women empowerment. 1. We do not discriminate on grounds of religion, sex 8. We are keen to move fast for green banking to protect or race at any stage. We recruit the best on the basis environment. of merit under a rigorous recruitment policy without any biasness or favoritism to anybody. F. WE DEVOTE TO THE FOLLOWING PRINCIPLES IN RESPECT OF NATIONAL INTEREST 2. We pay competitive compensation package for the really deserving employees. 1. We protect national interests. 3. We care for our employees and create an environment 2. We refrain from prohibited business. to work together with dignity. 3. We promote causes for national upliftment. 4. We have clearly defined duties and responsibilities for 4. We support nation building efforts from our position. each employee. No one is responsible for unassigned jobs. Commitments to Clients 5. We have a zero tolerance to any act of dishonesty. Ours is a customer focused modern banking institution in Bangladesh. We deliver unparalleled financial services 6. We provide a congenial work environment. to Retail, Small and Medium Scale Enterprises (SMEs), 7. We encourage freedom to our employees to Corporates, Institutions, Government, and individual give opinion for both qualitative and quantitative clients through branches across the country. Our business improvement of the Bank. initiatives center around the emerging demands of the market. Our commitments to the clients are as follows: 8. We take care of their health and safety. a) Provide service with high degree of professionalism 9. Our employees avoid conflict of interest. and use of modern technology. 10. Our employees obey code of conduct. b) Create long-term relationship based on mutual trust. 11. Professionalism, honesty, integrity and high moral c) Respond to customer needs with speed and accuracy. and ethical standards are the creed of our employees. d) Share their values and beliefs. E. WE UPHOLD THE UNDER NOTED PRINCIPLES IN RESPECT OF SOCIETY e) Grow as our customers grow. 1. We believe that the Bank gets business sustenance f) Provide products and services at competitive price. from the community in which it operates and, g) Ensure safety and security of customers’ valuables in therefore, it must remain responsive to the trust with us community and the society in reciprocity. 2. We discourage financing projects that are not environment-friendly. 3. We provide material support for protection of environment. 4. We give aid to the poor, helpless and natural calamity- hit people. 5. We support charitable ventures. 6. We give sponsorships to sports, culture, education, health-care and community development ventures. 16 Southeast Bank Limited I Annual Report 2016

Our Banking Heritage

Southeast Bank Limited is a second-generation bank The Bank’s operations are built upon unequivocal that was established in 1995 with a dream and a vision emphasis on effective corporate governance. The to become a pioneer banking institution of the country objective is to create, promote and build long-term and contribute significantly to the growth of the national company value. The Bank’s first and the highest priority economy. The Bank’s journey began when it was is to provide effective services and maximum satisfaction incorporated as a Public Limited Company on March 12, to the customers. The ethos of harmony and co-operation 1995. The Registrar of Joint Stock Companies and Firms is widely practiced in the Bank. We take pride in the issued the Certificate of Commencement of Business of fact that the public and private face of the Bank is one the Bank on the same date. The Southeast Bank received and identical. We believe that transparency in decision- its Banking License from the Bangladesh Bank on March making, monitoring mechanism and full disclosure to 23,1995. The Bank’s 1st branch was opened by Late M. shareholders and regulatory authorities are essential Saifur Rahman, the then Honourable Finance Minister of aspects of bank’s corporate governance and that they the Government of the People’s Republic of Bangladesh create an intense pressure to rationalize bank’s services as the Chief Guest at the commercial hub of the country and search for new competitive advantages. We work at 1, Dilkusha Commercial Area, Dhaka on May 25, 1995. ceaselessly within these parameters.

In its arduous journey since, Southeast Bank has succeeded A team of efficient professionals manages the Bank. They in realizing the dreams of those who established it. Today create and generate an environment of trust and discipline it is one of the country’s leading banks in the private sector that encourages everybody in the Bank to work together contributing significantly to the national economy. The for achieving the objectices of the Bank. The culture of Authorized Capital of the Bank today is BDT 15,000 million. maintaining congenial work-environment in the Bank has Its Paid-Up-Capital and Reserve reached BDT 34,056.28 further enabled the staff to benchmark themselves better million as on December 31, 2016. The Bank had 2,616 Staff against management expectations. A commitment to of whom 229 were Executives, 1,860 were Officers and 527 quality and excellence in service is the hallmark of their were other Staff as on December 31, 2016. identity.

The Southeast Bank was established by leading business Southeast Bank has become a synonym of quality banking personalities and eminent industrialists of the country services and products. It has a diverse array of products with stakes in various segments of the national economy. and services tailored carefully to cater to the needs of They established the Bank with a vision to bring efficient all segments of customers. Our operational strategies and professional banking service to the people and the are structured to address the special and often complex business community of Bangladesh to help the national needs of the customers. In the growth graph, the Bank has economy grow. The incumbent Chairman of the Bank is Mr. generated profit of BDT 2,435.07 million after provision Alamgir Kabir, FCA, a professional Chartered Accountant. and income tax in the year 2016. The curve keeps soaring The Bank’s Managing Director (Current Charge) is Mr. upward everyday making it one of the leading and most M. Kamal Hossain, a creative, experienced and eminent successful banking institutions in Bangladesh with a total banker of the country with 34 years of experience in asset base of BDT 291,798.01 million as on December 31, banking to his credit. 2016. Southeast Bank Limited I Annual Report 2016 17 Corporate Profile

Name of the Company : Southeast Bank Limited Legal Form : Public Limited Company Date of Inception : March 12, 1995 Company Registration No. : C-27985 (1831)/95 Authorized Capital : BDT 15,000 million Paid Up Capital : BDT 9,169.50 million Registered Office : Eunoos Trade Centre 52-53, Dilkusha C/A (Level 2,3,4,6 & 16), Dhaka-1000, Bangladesh Phone:+88 02 9571115, 9576415, 9555466 & 9578324 Fax: +88 02 9550093, 9550094 & 9550086 SWIFT: SEBDBDDHXXX, E-mail: [email protected] Website: www.southeastbank.com.bd Tax Payer Identification No. : 555495486932 VAT Registration No. : 19011025625 Chairman : Alamgir Kabir, FCA Managing Director (Current Charge) : M. Kamal Hossain Chief Risk Officer : S.M. Mainuddin Chowdhury Company Secretary & CAMLCO : Muhammad Shahjahan Chief Financial Officer : Mohammad Aminul Haque, FCA, ACMA (CIMA), CGMA Auditors : Rahman Rahman Huq, Chartered Accountants Tax Consultant : Akhter Abbas Khan & Co. Credit Rating Agency : Credit Rating Information and Services Limited(CRISL) Date of Opening of First Branch : May 25, 1995 Year of Initial Public Offer : 1999 Number of Employees : 2,616 No. of Branches : 128 (one hundred twenty eight) No. of Islamic Banking Branches : 05 (five) No. of Ladies Branches : 02 (two) No. of Off-Shore Banking Units : 02 (two) No. of Foreign Correspondents : 807 (eight hundred seven) Number of Outstanding Shares : 916,950,176 Listing Status (Shares) : Dhaka Stock Exchange (DSE) Symbol: SOUTHEASTB, Listing Date: April 10, 2000 Chittagong Stock Exchange (CSE) Symbol: SOUTHEASTB, Listing Date: April 24, 2000 Market Price Information DSE: BDT 18.70, Category A (as on 31.12.2016) CSE: BDT 18.80, Category A Investors’ Enquiry : Share Division Eunoos Trade Centre 52-53, Dilkusha C/A (Level-2), Dhaka-1000 Phone:+88 02 9567271, Fax: +88 02 9567273 Name of the Bank’s Subsidiaries : Southeast Bank Capital Services Limited Southeast Financial Services (UK) Limited Southeast Financial Services (Australia) Pty Limited Southeast Exchange Company (South Africa) Pty Ltd. 18 Southeast Bank Limited I Annual Report 2016

Corporate Philosophy and Business Model

Our corporate philosophy centers around our corporate Control Mechanism missions, business domain and management goals. We devote our talent and technology to the creation of Our control mechanism is practiced at all levels. We value for our stakeholders. Everyday our people bring strive to control the behavior of the employees. Our this philosophy to life and to their work. Our philosophy control mechanism is closely linked to efficiency, quality, cannot be bound by a few words or issues. Yet we narrate innovation and responsiveness to customers. the following: Quality and Productivity Customers Our philosophy is geared towards boosting productivity Our company philosophy is simple. It is customer-friendly and maintaining a reliable high quality service standard. and fully responsive to customer needs and expectations. In the process of delivery of service, co-ordination is the We carry out required research, analysis and survey to find essence of our business. Our philosophy is to achieve our out what the customers expect. We leverage technology goals through a combination of budgetary control, pay for and expertise to provide best services and convenience performance, incentive system, unique corporate culture to the customers. We spend money on things that matter that continuously stresses key values. to them and add value to the Bank in terms of image and profit. That is why our customer-base has been steadily Building Future expanding over the years. Our philosophy is to make decisions today to improve Human Resource performance tomorrow. We know a company which is successful has to continue to be successful. We do not fear Our people are smart, professional, well-qualified, our future, we shape it by our corporate conduct. energetic and sincere. They are passionate about what they do. Since they enjoy their work, it becomes easy for them to work hard. They do not follow any set model, rather they create models. They completely own what they plan and do.

Communication

Our philosophy is to reduce lines and layers of communication. We believe in free flow of ideas within the Management Team. The Senior Management Team is also open to ideas suggested by the lower level executives and officers. At the same time, our decision making process is short but quick. Southeast Bank Limited I Annual Report 2016 19

Business Model Canvas of SEBL at a glance Southeast Bank Limited

Key Partners Key Activities Value Proposition

Customers Deposit Complete Solution of Shareholders Lending Business Needs Employees International Trade One Stop Service for Regulators Remittance Personal Banking Strategic Partners Treasury Solutions Innovative Tailor-made Products Islamic Banking Timely, Cost-e ective and O -shore Banking Superior Services Geographically Well-spread Availability Key Resources

Highly Professional and Experienced Board Nationwide Network Worldwide Correspondent Cost Structure Network Interest Expense Highly Skilled Sta Revenue Streams Operating Expense Dedicated Service Attitude Capital Expenditure Wide Range of Products Interest Income Strong IT platform Investment Income Strong Capital Base Fees, Commission, etc. Other Operating Income

Customer Segments Delivery Channels Customer Care

Corporate Clients Branches KYC – Know Your Customer Small and Medium Enterprises ATMs Personal Visit Non-Banking Financial Internet Banking Phone Call/ Email/ SMS Institutions Mobile Banking Automated Services Banks Call Center Special Campaign Individuals/ Retail Clients Subsidiary Companies In-depth Analysis Institutional Clients Individual Solution Govt. and Non-Govt. Continuous Review Organizations Research and Development Receiving Feedback 20 Southeast Bank Limited I Annual Report 2016 22 Years of Glorious Journey 2004 2002 Registered as Depository Participant of CDBL Formation of SEBL 17.02.2004 Foundation 1st to Demat Shares in 12.03.2002 2000 CDS of CDBL in Banking Sector 16.05.2004

Listing with Dhaka Became a member Stock Exchange of Trade Finance Limited Program (TFP) of Asian 1995 12.04.2000 Development Bank (ADB) 20.10.2004 Incorporation of SEBL Listing with 12.03.1995 Chittagong Stock Exchange Limited Certificate of 24.04.2000 Commencement of Business 12.03.1995

License Issued by Bangladesh Bank 23.03.1995

Formal Inauguration 25.05.1995

Inauguration of 1st Branch 25.05.1995 1st Rights Share Issue

Subscription Opened Launching of 15.02.2003 Credit Card 01.01.2005 Subscription Closed 2nd Rights 15.03.2003 Share Initial Public Issue Launching of Commencement 2005 Offer (IPO) ATM of Islamic Banking Subscription 01.09.2001 business from Opened Subscription Chhagalnaiya Islamic 15.10.2006 Opened Banking Branch, Feni 25.11.1999 28.07.2003 Subscription Subscription License Issued from Closed Closed 2001 Bangladesh Bank as a 31.10.2006 05.12.1999 Primary Dealer 28.10.2003 1999 2003 2006 Southeast Bank Limited I Annual Report 2016 21

2014

Issuance of Subordinated Bond for BDT 2013 3,000.00 million. 11.11.2014 2011 Established Central Introduction of Green Award Payment Centre (CPC) 15.11.2014 at Head Office for Introduction of International Trade Incorporation of Southeast Exchange Internet Banking Payments 15.01.2013 Company (South Africa) Pty Limited 28.02.2011 15.12.2014 Incorporation of Launching of SEBL Southeast Financial Opening of Ladies Branches 29.12.2014 1st Mutual Fund Services (Australia) Pty 23.05.2011 Limited 18.03.2013 Signed first Short Formation of Southeast Term Rollover Loan Bank-The Financial Agreement with Express-Policy Research International Finance Institute Green Award Corporation (IFC) Trust 30.06.2013 28.06.2011 Establishment of 2009 Incorporation of Southeast Bank Green Southeast Financial School 12.09.2013 Introduction Services (UK) Limited of new Core 15.09.2011 Banking Software 100% Online Banking Signing of Revolving Credit 14.02.2009 17.09.2011 agreement for USD 5.00 million with Asian Development Bank Launching of 1st (ADB ) 31.03.2016 Off-shore Banking Unit 30.12.2009 Launching of client acquisition drive through ‘Nibir’ Campaign 15.05.2016 Launching of Telecash as Mobile Financial Services Product 29.01.2015 Issuance of Subordinated Bond for BDT 5,000.00 million Signed Unsecured Facility Agreement 02.08.2016 with Global Climate Partnership Fund (GCPF) 25.02.2015 Introduction of Bank’s Health Launching of ATM Introduction of Bank’s Modern and full- Care Centre 29.09.2016 and ATM Cards fledged Training Institute 21.05.2015 with own System Introduction of Bank’s E-Library 27.03.2010 Signed funded Loan Agreement with International Finance Corporation (IFC) 29.09.2016 05.08.2015 3rd Rights Launching of ‘Cash Express Share Issue Commissioning of ‘SWIFT Sanction Remit Card’ for beneficiary of Became a Screening Solution’ 30.08.2015 Foreign Wage Earner Expatriates Subscription member of Introduction of Central Monitory System 08.10.2016 Global Trade Opened (CMS) to monitor (24X7) all branches Finance 07.07.2010 25.10.2015 Bank awarded 1st position Program in “ICMAB Best Corporate Subscription Introduction of Real Time Gross (GTFP) of Award-2015” 26.10.2016 Closed Settlement (RTGS) 29.10.2015 International 29.07.2010 Finance Implementation of Credit Card Awarded ‘Tax Card and Trophy’ Management Software 23.11.2015 as 6th highest Tax Payers of the Corporation Incorporation of Partnership with MasterCard Bangladesh Country in the Banking Sector (IFC) Southeast Bank 23.04.2007 and launched the complete range of 24.11.2016 Capital Services Credit Cards (World, Platinum, Titanium Limited and Gold) and Prepaid Card 15.12.2015 Signed of agreement with 23.09.2010 Introduction of Bank’s Call Centre 24X7 Bangladesh Bank for ‘Green 2007 16.12.2015 Transformation Fund’ 01.12.2016 Introduction of Chip-based 2010 Credit Card 31.12.2015 2016 2015 22 Southeast Bank Limited I Annual Report 2016

Awards and Recognitions

Southeast Bank Limited has been awarded the First Position and indicators, sufficient disclosures for all stockholders as the best Corporate in the Banking Sector (Private and its commitment to quality Corporate Governance, Bank-Traditional Operation) by “ICMAB Best Corporate and compliance with legal and regulatory requirements. Award-2015”. The Institute of Cost and Management Former Managing Director of Southeast Bank Limited Accountants of Bangladesh (ICMAB) exhaustively received The Award from Abul Maal Abdul Muhith M. P., analyzed the Bank’s Annual Report -2015 and bestowed Hon’ble Minister, Ministry of Finance, Government of the the prestigious award of the “First Position” for Bank’s People’s Republic of Bangladesh in a ceremony held on outstanding performance, encouraging financial results October 26, 2016.

Muhammad Shahjahan, Additional Managing Director Government of the People’s Republic of Bangladesh. and Company Secretary, Southeast Bank Limited received Southeast Bank has been given the country’s 6th highest Tax Card and Crest from Md. Nojibur Rahman, Senior Tax Payers Award in the Banking Institutions Category for Secretary, Internal Resources Division (IRD) and Chairman the assessment year 2015-2016. National Board of Revenue (NBR), Ministry of Finance, Southeast Bank Limited I Annual Report 2016 23

Awards and Recognitions 24 Southeast Bank Limited I Annual Report 2016

Awards and Recognitions Southeast Bank Limited I Annual Report 2016 25 Corporate Organogram

Board of Directors

Risk Management Executive Board Audit Committee Committee Committee

Managing Director Board Audit Cell

P.S. to MD’s P. S Chairman Secretariat to MD

Additional Managing Director Additional Managing Additional Managing (Corporate Banking) Director (Retail Banking and Director (Company Affairs Technology Administration) and Islamic Banking)

Corporate Banking Information Board Internal Control Division Technology Division and Compliance Division Division International Share Division Retail Banking Division Human Resources Division Division SME and Agri. Islamic Banking Credit Division Card Division Training Division Institute Treasury Back Corporate Office Unit Alternative Marketing Division Legal Affairs and Delivery Channel Recovery Division Unit Financial Control Research and and Accounts Development Unit Division Management Information System Unit Central Remittance Compliance Unit Division Treasury Division Logistic and Deputy Managing General Services Director Division Risk Management Division Credit Risk Management Division Branches and General Banking Division

Estate Department 26 Southeast Bank Limited I Annual Report 2016

Group Corporate Structure CSR Wing Foundation Southeast Bank To carry out To SocialCorporate Responsibility (CSR) activities inrelated andan organized sustainable manner, ‘Southeast Bank was Foundation’ theestablished by Bank in-2002. It also runs an English Medium school named Southeast School atBank Green Dhaka. CSR related Total underExpenditure in SEB Foundation 2016 : 135.85 million BDT Exchange Southeast Africa) PtyAfrica) Ltd. Company (SouthCompany To collect remittance To Bangladeshifrom expatriates of South Africa for their beneficiaries in Bangladesh proper through Banking Channel the Bank established ‘Southeast Exchange (SouthCompany as Africa)Pty Limited’ a subsidiary company in 2014. of Incorporation:Date December 15,2014 up Capital: Paid RAND 6,632,179 Ownership in Interest Capital: 50.10 million BDT 100% In Percentage: Size: Asset RAND 13,020,605 Southeast Date ofDate Incorporation: 18,2013 March up Capital: Paid 312,082.90 AUD Ownership Interest in Capital: 25.06 million BDT 100% In Percentage: Size: Asset 52,303.19 AUD Financial Services Financial (Australia) Pty Ltd. (Australia) To collect remittance To Bangladeshifrom expatriates in Australia their beneficiariesfor in Bangladesh proper through Banking Channel, the Bank established ‘Southeast Financial Services (Australia) as a Pty Limited’ subsidiary company in 2013. Subsidiaries (UK) Ltd. Southeast Financial Services Financial To collect remittance To Bangladeshifrom expatriates in United Kingdom their for beneficiaries in Bangladesh through Bankingproper the BankChannel, established ‘Southeast ServicesFinancial as a (UK) Limited’ subsidiary company in 2011. of Incorporation:Date 22, 2011 February up Capital: Paid GBP 300,000 Ownership in Interest Capital: 38.49 million BDT 100% In Percentage: Size:Asset GBP 371,325 Ltd. Southeast Bank Limited Southeast Bank Capital ServicesCapital To carry on Merchant To Banking Operations way, in a structured the Bank established ‘Southeast Bank ServicesCapital as a Limited’ subsidiary company in 2010. of Incorporation:Date 23,2010 September up Capital: Paid million BDT.5,500 Ownership in Interest Capital: 5,489.93 million BDT 99.82% In Percentage: BDT Size: Asset 5,801.61 million Off-Shore Banking Units To cater to the to cater To off-shore demand for banking services, Southeast Bank established two (02) Off-shore Banking one in Units (OBUs), and the other DEPZ SEBL OBUs is CEPZ. a continuum provide of financial services such as FC Account Non-residents, for Usance Payable Sight (UPAS) At Documentary Credit, in Loan Term Time/ Currency, Foreign fledged export- Full import services etc. 2009. from Size: Asset 6,374.98 million BDT & Advances: Loans 6,327.28 million BDT Operating Profit: 107.79 million BDT Islamic Banking Besides conventional Besides conventional Banking, SEBL has 05 Islamic banking(five) Branches based on Islamic Shariah Separate where system Accounting is being maintained. a partAs of strategic business plan, Islamic Banking Service Desk (IBSD) has already been expanded to every conventional Branch. Size: Asset 20,606.07 million BDT Deposits: 16,740.57 million BDT Investment: 9,291.20 million BDT Operating Profit: 735.84 million BDT Main Operations Banking Conventional Conventional Southeast Bank Ltd., aSoutheast Bank Ltd., 2nd generation bank was incorporated as a Company Limited Public 12, 1995.on March Banking receiving After its 1st branchLicense, was opened on May the 25, 1995. Presently Bank has 128 Branches the across & 117 ATMs country. A number of attractive Deposits and Loan availableproducts are in its product basket. SEBL has launched Retail Banking, Debit Cards, Mobile Cards, Credit Banking (Telecash), Ladies Branches and to Centre 24/7 Call the needs of all to cater of customers. segments Size: Asset 265,011.95 million BDT Deposits: 213,771.32 million BDT & Advances: Loans million 173,746.47 BDT Operating Profit: 7,654.18 million BDT Southeast Bank Limited I Annual Report 2016 27

Last 10 Years’ Financial Indicators SEBL at a glance

38 152 964 598 140 4.28 15% 9,636 3.77% 1.90% 13.00% 19.90% 1,708.11 1,222.97 2,916.20 5,754.27 8,670.47 9,008.32 8,462.86 6,468.36 4,186.60 2,281.76 3,500.00 25% (4:1) 64,370.69 11,040.17 28,771.36 38,470.34 48,164.60 55,474.05 2007 BDT in million BDT

46 151 587 145 3.11 15% 1080 4.12% 1.09% 12,536 887.24 11.12% 12.06% 2,685.56 3,012.58 7,237.55 7,657.01 4,804.81 2,852.20 3,500.00 20% (5:1) 81,181.53 10,250.13 15,078.99 15,221.87 42,178.60 58,019.77 12,299.61 60,281.26 68,714.67 2008 -

56 148 589 146 3.24 1254 3.73% 1.66% 22,152 11.72% 16.51% 4,323.59 1,870.19 4,614.66 8,800.55 9,927.16 6,504.52 3,422.64 13,415.21 11,916.74 23,779.20 46,724.47 69,582.92 21,350.23 77,497.57 96,669.05 10,000.00 35% (20:7) 2009 112,676.98

76 240 645 152 3.77 10% 1373 4.26% 2.26% 66,898 11.25% 19.41% 4,463.64 2,763.93 6,769.26 9,331.55 6,930.84 20% (5:1) 16,100.81 22,781.19 28,082.25 58,158.06 18,869.07 93,981.20 17,196.80 10,265.96 10,000.00 2010 131,784.27 103,726.70 107,253.19

84 322 654 161 2.19 15% 1526 3.51% 1.32% 68,039 11.46% 10.47% 7,373.11 1,912.19 6,085.67 8,317.01 5% (20:1) 13,846.24 19,931.91 25,673.90 49,544.10 75,982.06 99,509.01 29,846.60 19,000.06 10,683.05 10,000.00 2011 158,078.59 107,288.56 127,178.22

94 355 691 183 15% 1655 4.47% 0.95% 8.42% 10.87% 7,677.51 1,648.72 5,495.19 1.89 64,060 8,732.86 17,638.99 23,134.18 21,506.65 41,455.40 84,464.20 39,011.28 19,597.54 10,864.68 10,000.00 - - 2012 111,537.50 126,968.97 152,901.24 191,276.30

103 414 778 211 16% 1704 3.94% 1.64% 10.90% 16.20% 7,795.65 3,378.82 6,700.20 5% (20:1) 20,218.11 26,918.30 17,226.41 39,299.10 95,220.40 57,589.06 21,807.57 3.68 65,413 8,732.86 13,074.71 10,000.00 2013 220,930.85 131,644.82 134,863.82 177,519.46 -

113 441 791 211 15% 1780 3.64% 1.67% 12.41% 16.51% 7,913.00 3,836.94 8,289.76 19,377.34 27,667.10 13,603.30 48,740.50 56,378.59 27,462.09 4.18 58,169 9,169.50 18,292.59 15,000.00 2014 112,137.60 155,691.00 147,070.81 189,472.54 236,608.40 -

122 487 811 220 3.35 15% 1889 4.25% 1.23% 11.52% 11.86% 7,885.23 3,069.42 8,034.27 18,226.45 26,260.72 15,245.19 60,708.50 58,829.27 28,509.53 46,285 9,169.50 19,340.03 15,000.00 2015 260,718.03 151,812.58 168,878.46 210,431.09 126,423.89

128 527 807 248 2.66 20% 2,089 4.89% 0.88% 9.06% 39,009 12.15% 8,947.16 2,435.07 8,503.22 9,169.50 17,114.35 25,617.57 16,369.36 64,665.84 61,731.63 34,056.28 24,886.78 15,000.00 2016 291,798.01 146,606.09 171,531.73 191,865.59 229,973.43 Number of Branches - Non Banking Number of Employees - BankingNumber of Employees Number of Shareholders Number of Foreign Correspondents Number of Foreign Number of Correspondent Banks Number of Correspondent

Capital AdequacyCapital Ratio Non-Performaning Loan Non-Performaning Return (ROA) on Asset Return on Equity (ROE) Bonus Shares Dividend Cash (%) Dividend Cash Earning per Share (BDT)Earning per Share

Total Assets Total Fixed Assets Fixed Net Profit after Tax and Provision Tax and after Net Profit Operating Profit Total Expenditure Total Total Income Total Guarantee Business including ILC Guarantee Foreign Remittance Foreign Export Business Import Business Investment Advance Deposit Total Capital (Tier-I+Tier-II) Capital Total Reserve Fund/ OthersReserve Fund/ Paid up Capital Paid Authorized Capital Authorized PARTICULARS 28 Southeast Bank Limited I Annual Report 2016

Forward Looking Ideology

A forward-looking statement is a statement that contains predictions, projections and possibilities. It relates to future events. It often predicts expected future business and financial performance. It contains words such as ‘expect’, ‘anticipate’, ‘believe’, ‘seek’, ‘will’, ‘may’, ‘would’, ‘presume’, ‘assure’, ‘hope’, so on and so forth. A forward-looking statement naturally addresses matters that are, to certain degrees, uncertain and may not happen. In most cases, a forward-looking statement is made in respect of company’s expected income, earning, business growth, horizontal expansion, cost structure, capital structure, dividends etc. Such a statement is made based on some assumptions about future events which may happen or may not happen.

This Annual Report-2016 of Southeast Bank Limited also contains forward- looking statements. Since there are uncertainties about the occurrence of the future events, those should be treated from that viewpoint in decision- making by the users of the Annual Report. Southeast Bank Limited I Annual Report 2016 29

Board of Directors SEBL at a glance

Independent Chairman Directors Alamgir Kabir, FCA A.H.M. Moazzem Hossain Dr. Quazi Mesbahuddin Ahmed

Directors M. A. Kashem Azim Uddin Ahmed Duluma Ahmed Jusna Ara Kashem Md. Akikur Rahman Rehana Rahman Sirat Monira

Advisor Zakir Ahmed Khan

Managing Director (CC) M. Kamal Hossain Board of Directors

From Left Standing

Zakir Ahmed Khan Advisor From Left Seating Dr. Quazi Mesbahuddin Ahmed Independent Director A.H.M. Moazzem Hossain Independent Director Sirat Monira Director M. A. Kashem Director Jusna Ara Kashem Director From Left Standing

Alamgir Kabir, FCA Chairman From Left Seating Azim Uddin Ahmed Director Md. Akikur Rahman Director Duluma Ahmed Director M. Kamal Hossain Managing Director (CC) Rehana Rahman Director 32 Southeast Bank Limited I Annual Report 2016

Committees of the Board of Directors

Executive Committee

Chairman Alamgir Kabir, FCA Members M. A. Kashem Azim Uddin Ahmed M. Kamal Hossain Southeast Bank Limited I Annual Report 2016 33

Audit Committee

Chairman A.H.M. Moazzem Hossain Members Duluma Ahmed Jusna Ara Kashem Rehana Rahman Dr. Quazi Mesbahuddin Ahmed 34 Southeast Bank Limited I Annual Report 2016

Risk Management Committee

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Chairman Alamgir Kabir, FCA Members M. A. Kashem Azim Uddin Ahmed A.H.M. Moazzem Hossain Southeast Bank Limited I Annual Report 2016 35

Shariah Supervisory Committee

Chairman Professor Moulana Mohammad Salah-Uddin (not in the picture) Members M. Kamaluddin Chowdhury Moulana Mohammad Kafiluddin Sarker Alamgir Kabir, FCA M. A. Kashem Azim Uddin Ahmed M. Kamal Hossain Directors’ Profiles and their representation on Board of other Companies

Mr. Alamgir Kabir, FCA was born on December 28, 1947. He did B.Com (Hons.) from the University of Dhaka and M.Com from Punjab University. He is a professional Chartered Accountant. He has wide experience and profound knowledge in Auditing, Accounting, Banking, Insurance and Financial Institutions both at home and abroad.

Mr. Kabir has been Chairman of the Board of Directors of the Bank since September 29, 2004. He is also the Chairman of the Executive Committee of the Board of Directors and the Risk Management Committee of the Board of Directors. He is the Chairman of its all subsidiary companies. He is also the Director of Asia Insurance Limited and Independent Director of National Life Insurance Co. Limited.

Mr. Kabir started his career in the year 1969 with Rahman Rahman Huq and Co., Chartered Accountants, Member Firm of KPMG, and continued with EWP Associates, Management Consultants, a sister concern of Rahman Rahman Huq and Co. and stayed there until 1979. In 1972, he was in-charge of Audit Team for the first statutory Audit of Accounts of Bangladesh Bank. He moved to Riyadh, Saudi Arabia in 1979 with Alamgir Kabir, FCA assignment in Saudi Accounting Bureau, Chartered Accountants, member Chairman firms of Coopers & Lybrand, Moores Rowland International and Inbucon International Ltd., as Management Consultant from 1979 to 1993. He returned to Bangladesh in 1993 with assignment in Bangladesh Securities and Exchange Commission as Member from 1993 to 1996 and also acted as the acting Chairman for a period. During his stay with BSEC, he substantially contributed to the development of the Capital Market of Bangladesh. From 1996 onward, he has been involved in different capacities in formation and development of Bank, Non-Banking Financial Institution, Insurance and Capital Market related Institutions and others.

From 1999 to 2003, Mr. Kabir was the founder Advisor of Export Import Bank of Bangladesh Limited of which his brother Late Shahjahan Kabir was the Founder Chairman. Both the brothers were involved in the formation of EXIM Bank and contributed to its rapid growth.

Mr. Kabir belongs to a family whose members are involved with Banks, Insurances and Financial Institutions. He is member of a number of associations and also associated with many social organizations where he is working very silently for the welfare of the people. Mr. Kabir is a widely traveled person across the globe. Southeast Bank Limited I Annual Report 2016 37 SEBL at a glance

Mr. M.A. Kashem was the Founder Chairman of Southeast Bank Limited. Currently, he is a Sponsor Director of the Bank. He is also a member of the Executive Committee and the Risk Management Committee of the Board of Directors of the Bank. He is a member of North South University Trustee Board.

Mr. Kashem is the former President of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI), the apex body of all the business communities of Bangladesh. He was the Chairman of Arbitration Tribunal of FBCCI. He is the past Chairman of the Association of Private Universities of Bangladesh (APUB) which represented all Private Universities of the country. Mr. Kashem was a member of Board of Trustees of Hamdard Laboratories (WAQF) Bangladesh, the leading producer of herbal medicines in the sub-continent for over 17 (Seventeen) years. He is the President of SAHIC Trust (Society for Assistance to Hearing Impaired Children), the only voluntary organization rendering health care assistance of the ear, nose and throat services to destitute and poor patients.

M. A. Kashem Mr. Kashem is an eminent industrialist, renowned patron of education, Director distinguished philanthropist and an active social worker. He is the winner of “President Export Trophy Award” for the year 1982-83 & 1983-84 for excellent export performance. Mr. Kashem also got “C.R. Das Gold” Medal for excellent contribution in the Industrial sector in the year 1995. He was awarded the “Highest Tax Prayer-2011” by National Board of Revenue (NBR) for Dhaka City Corporation.

Mr. Kashem was the leader of 20-member FBCCI Trade delegation to Far Eastern Countries in the year 1986. He was also the leader of 5 member Govt. delegations to U.K., U.S.A. and Canada sponsored by UNDP in 1987 and leader of 12 member EPB Govt. of Bangladesh delegations to EEC countries in 1985. As an industrialist, he travelled almost all major cities of the world many times on his own business and also led trade delegations.

As a philanthropist, Mr. Kashem set up a number of Schools, Madrashas, Moshjid, Club etc. and erected free dwelling houses for the poor and destitute people of his locality. He has established a Trust named M. Kashem Trust to foster education to the primary and mid-level students of schools in his locality. The Trust awarded stipends and Scholarships to the meritorious students during the last couple of years. Moreover, a General Hospital (Non-Profit) of 50 Beds in the name of “Tareque Memorial Hospital” is at present in operation at his home district. Mr. Kashem is a member of the Rotary Club of Dhaka West, Kurmitola Golf Club, Gulshan Club Limited, Bangladesh Diabetic Association, Dhaka, Bangladesh Red Crescent Society, National Shooting Club and Shishu Hospital, Chittagong. 38 Southeast Bank Limited I Annual Report 2016

Mr. Azim Uddin Ahmed was born on June 30, 1940. He is a graduate from the University of Dhaka. As a former Chairman of Southeast Bank Limited, he pushed the Bank forward. Currently, he is a Sponsor Director of the Bank. He is also a member of the Executive Committee and the Risk Management Committee of the Board of Directors of the Bank.

Mr. Azim Uddin Ahmed is a well-known business personality of the country. He is the Chairman of Mutual Food Products Limited, Mutual Milk Products Limited and Mutual Trading Co. Ltd. He is also the partner of Mutual Agro- complex, Mutual Departmental Store and Mutual Distribution and Silonia Agencies. Mr. Azim is the current chairman of the Board of Trustees of North South University and founder life member of North South University Foundation.

Mr. Azim is associated with a number of trade bodies and associations devoted to social work. He is the past President of Rotary Club of Dhaka North and Area Governor of Rotary District. He was the past President of Gulshan Club Ltd. He is the President of Baridhara Society. He served in Azim Uddin Ahmed different capacities in Dhaka Chamber of Commerce and Industry (DCCI), Director Federation of Bangladesh Chamber of Commerce and Industry (FBCCI) and Bangladesh Indenting Association. He is the current President of Bangladesh Consumer Products Manufacturers and Marketers Association. He represented Bangladesh as a member of Trade Delegation to Europe and many other Govt. and private trade delegations to European, American and Asian countries.

Mr. Azim is also engaged in philanthropic activities. He is the Founder of Azimia Islamia Senior Madrasha, Duluma Azim High School, Fatema Farzana Kindergarten and Purba Silonia Forkania Madrasha. He is a widely traveled person across the globe. Southeast Bank Limited I Annual Report 2016 39 SEBL at a glance

Mrs. Duluma Ahmed was born on July 7, 1947. She hails from a very respectable Muslim family. She is a Sponsor Director of the Bank and a member of the Audit Committee of the Board of Directors of the Bank. She is associated with business activities. She is the Director of Mutual Food Products Limited, Mutual Milk Products Ltd., Mutual Trading Co. Ltd. She is the partner of Mutual Distribution and Silonia Agencies.

Mrs. Duluma Ahmed is also associated with philanthropic activities. She is the Founder of Duluma Azim High School. She is the patron of Azimia Islamia Senior Madrasha and Fatema Farzana Kindergarten School in Chhagalnaiya. She is a member of Gulshan Ladies Community Club and Inner Wheel Club of Dhaka North. As a social worker, she is lavishly contributing to the poor and the needy section of the society. She traveled many countries of the world.

Duluma Ahmed Director 40 Southeast Bank Limited I Annual Report 2016

Mrs. Jusna Ara Kashem was born on December 7, 1951. She is a leading industrialist and business leader of the country. She is a Director of Rose Corner (Pvt.) Limited. She hails from a very respectable Muslim family of Rajshahi. She is a Sponsor Director of the Bank and a member of the Audit Committee of the Board of Directors of the Bank.

Mrs. Jusna Ara Kashem is associated with many humanitarian and philanthropic organizations and is the Vice Chairman of M. Kashem Foundation. This Foundation set up a 50 bed Hospital namely “Tareque Memorial Hospital” at Chhagalnaiya, Feni. Mrs. Jusna Ara Kashem is very amiable in nature and a good social worker.

Jusna Ara Kashem Director Southeast Bank Limited I Annual Report 2016 41 SEBL at a glance

Mr. Md. Akikur Rahman was born on February 15, 1945. He is a Sponsor Director of the Bank. He is a successful businessman. He is the Chairman of RAR Investment Limited of Murad Vill, Nower Road, Dorking Surrey, RH43Y, United Kingdom. He is also the Chairman of Dorking Muslim Community Association of 11/15, Hart Road, Doring, Surrey, RH4 1JS, United Kingdom. He is the Managing Director of RAR Holding Limited, 12-25, Prioy Prangan Tower, 19 Kemal Ataturk Avenue, Banani, Dhaka. He is also the Vice Chairman of International Medical College and Hospital, Gusholia, Tongi, Gazipur, Bangladesh. Mr. Akikur Rahman is associated with Southeast Bank Limited since its inception in 1995 as a Sponsor.

Md. Akikur Rahman Director 42 Southeast Bank Limited I Annual Report 2016

Mrs. Rehana Rahman was born on June 06, 1948 in a respectable Muslim family of Khulna. She is a graduate. She is a leading industrialist and a business leader. She is the Managing Director of Bengal Trade Ways Limited and a Director of Drift Packaging Limited. She is a member of the Board of Trustees of North South University Foundation. Formerly, she was the Chairman of North South University Foundation. She was appointed a Sponsor Director of the Bank by the Board of Directors in its 443rd meeting held on August 11, 2014. Her appointment as Director was approved by Bangladesh Bank by Letter dated August 31, 2014. She is a Member of the Audit Committee of the Board of Directors of the Bank. Mrs. Rehana Rahman is a widely traveled person and a social worker.

Rehana Rahman Director Southeast Bank Limited I Annual Report 2016 43 SEBL at a glance

Mrs. Sirat Monira was born on September 15, 1949. She obtained Master of Social Science (MSS) Degree from the University of Dhaka. She became a Director of Southeast Bank from ‘B’ Group i.e. Public Shareholders. She was also a member of Audit Committee of Board of Directors of the Bank. She is a member of Dhaka Ladies Club. She is a philanthropist. She widely traveled many countries across the globe.

Sirat Monira Director 44 Southeast Bank Limited I Annual Report 2016

Mr. A.H.M. Moazzem Hossain was born on January 01, 1948. He did B.A(Hons) and MA in Economics from the University of Dhaka. He was appointed Independent Director of the Bank on 24 December, 2012. He took over as the Chairman of the Audit Committee of the Board of Directors of the Bank. He is also a member of the Risk Management Committee of the Board of Directors of the Bank. Mr. Moazzem Hossain started his career as a banker with Habib Bank Limited, Pakistan in 1969. He also worked as Economic Investigator, Ministry of Finance, Government of Pakistan in 1970. Later, he joined the Bangladesh Observer, a leading national daily in 1971 and continued there until 1987.

He also worked in the New Nation, the United News of Bangladesh (UNB) as Executive Editor, The Daily Star as Economic Editor and in The Telegraph as Deputy Editor. Currently, he is the Editor of The Financial Express. He was also associated with Press Institute of Bangladesh and Bangladesh Sangbad Sangstha. He was a member of the board of directors of Janata Bank, a nationalized commercial bank of the country for five years. He attended a number of seminars and workshops abroad mostly at the invitation of the A. H. M. Moazzem Hossain host countries. He traveled many countries across the globe. Director Southeast Bank Limited I Annual Report 2016 45 SEBL at a glance

Dr. Quazi Mesbahuddin Ahmed was born on January 18, 1948. He holds BA (Hons.) and MA degrees in Economics from the University of Dhaka. He obtained MS Degree in Economics from the James Cook University of North Queensland, Australia. He did Masters as well as a PhD degree in Economics from the University of Illinois at Urbana-Champaign, USA. He was appointed as an Independent Director of the Bank in the 21st Annual General Meeting held on April 11, 2016. He is also a member of the Audit Committee of the Board of Directors of the Bank. Dr. Ahmed started his career at the Research Department of the Central Bank of Erstwhile Pakistan in February, 1969 and moved to the Planning Department of erstwhile East Pakistan in 1971.

He was the Economic Minister at the Bangladesh Embassy in Washington DC for 6 (six) years during 1997-2002. Dr. Ahmed was also the Additional Secretary in Economics Relation Division (ERD) of Ministry of Finance in 2003. He worked as Managing Director of Palli Karma Sahayak Foundation (PKSF) for over Five years from January 2008 to March 2013. Dr. Ahmed was a visiting fellow at the University of Western Australia during 1994. Dr. Quazi Mesbahuddin Ahmed He was an adjunct faculty at the economics department of East West Director University, Dhaka and a fellow of Palli Karma Sahayak Foundation. Dr. Quazi Mesbahuddin is a widely traveled person across the globe. He represented Bangladesh Government in many international forums. He attended a number of seminars, workshops and meetings relating to aid consortium. He has publications on development planning, macroeconomic performance, use of foreign aid, budgetary accounts, national income accounts etc. 46 Southeast Bank Limited I Annual Report 2016

Mr. M. Kamal Hossain was born on January 01, 1958. Mr. Hossain had an exemplary academic background. He did his MSS with distinction in Public Administration from the University of Chittagong in 1982. He started his banking career as a Probationary Officer with National Bank Limited in 1983. He spent 18 (eighteen) years in National Bank Limited holding important positions in different branches and Head Office.

Mr. M. Kamal Hossain has been serving Southeast Bank Limited (SEBL) as Managing Director (Current Charge) since the 29th March 2017. He joined SEBL in July 2003 as Vice President and prior to his current assignment, he served as Additional Managing Director of the Bank. During his years of journey with SEBL, he held the position of Head of Branch (HoB) of a number of Bank’s leading branches including Principal Branch.

During his 34 years long banking journey, Mr. Hossain gained extensive banking experience and developed wide range of expertise in almost all areas of commercial banking comprising Import, Export, Credit, General Banking, Human Resources, Accounts etc. Under his visionary leadership, M. Kamal Hossain SEBL is expected to evolve as a leading commercial bank of Bangladesh Managing Director with exemplary business and financial outcomes. (Current Charge) Mr. Hossain is an alumnus of the Public Administration Department of the University of Chittagong. He attended numerous seminars, workshops and training programs at home and abroad. He extensively visited the United States of America (USA), United Kingdom (UK), Switzerland, Germany, France, Spain, Australia, Canada, Myanmar, Turkey, Singapore, Malaysia, Thailand, China, Saudi Arabia, Oman, Qatar, India, etc. Mr. Hossain is married to Ms. Manoara Begum and blessed with two sons and one daughter. Southeast Bank Limited I Annual Report 2016 47 SEBL at a glance

Mr. Zakir Ahmed Khan, Former Finance Secretary to the Government of Bangladesh joined Southeast Bank as Advisor on 26 September, 2010. He carries with him vast experience and expertise gathered from home and abroad.

Mr. Khan did BA (Hons) and Masters in Economics from the University of Dhaka in 1968. He had graduate study in Development Economics and Development Administration as a Hubert Humphrey North-South Fellow at the Colorado State University, USA. He also did Master of Business Administration from Vrijie Universiteit, Brussels, Belgium.

Before joining Government Service in 1970, he briefly worked as a Research Associate in the Bureau of Economic Research and Institute of Education and Research and Lecturer in Economics, University of Dhaka. He also worked as a part time Lecturer in the Department of Finance, University of Dhaka.

During his 44 years of public service Mr. Khan held various senior level Zakir Ahmed Khan positions in the Ministries of Finance, Commerce, Establishment, Energy, Advisor Civil Aviation and Tourism, Cabinet Division and Bangladesh Audit and Accounts Department. He served as Finance Secretary and Secretary, Internal Resources Division and Chairman, National Board of Revenue for five years. He also briefly worked for a number of UN Agencies. Prior to his retirement in early 2009, he served as Alternate Executive Director of the World Bank for three and a half years.

He contributed a number of articles on public policy and public sector financial management to a number of national and international journals. He also made several key note presentations on public sector reforms and financial management in seminars and workshops at home and abroad. 48 Southeast Bank Limited I Annual Report 2016

Directors’ Responsibility Statement

Directors’ Responsibility Statement is outlined below in compliance with Bangladesh Bank BRPD Circular No. 11 dated 27 October 2013:

Work-Planning and Strategic Management Internal Control Management

The Board determines Bank’s objectives and goals and The Board remains vigilant on the internal control system chalks out strategies and work-plans on annual basis. It of the Bank in order to attain and maintain satisfactory specially engages itself in the affairs of making strategies qualitative standard of its loan/investment portfolio. The consistent with the determined objectives and goals and in Board establishes internal control system in such a way that the issues relating to structural change and reformation for the internal audit process can be conducted independently enhancement of institutional efficiency and other relevant by the concerned department. It reviews the reports policy matters. It analyzes and monitors the implementation submitted by its Committees especially regarding compliance of its decision on quarterly basis. with recommendations made in Internal and External Audit Reports and the Bangladesh Bank Inspection Reports as well The Board gives its analytical review as incorporated in the as reports on management of risks. Annual Report regarding the success or failure in achieving the business and other targets as set out in its annual work- Human Resources Management and Development plan and apprises the shareholders of its opinions and recommendations on future plans and strategies. It sets Policies relating to recruitment, promotion, transfer, the Key Performance Indicators (KPIs) for the CEO & Officers disciplinary action and punitive measures, human resource belonging to two tiers below the CEO and evaluates them development etc. and service rules are framed with the from time to time. approval of the Board. The Chairman or any Director in no way involves himself or interferes into or exercises influence over Credit and Risk Management any administrative affairs including recruitment, promotion, transfer and disciplinary measures as conducted under the set The policies, strategies, procedures etc. in respect of appraisal service rules. No member of the Board of Directors is included of loan/investment proposal, sanction, disbursement, in the selection committee for recruitment and promotion recovery, rescheduling and write-off of loans are made with to different levels. Recruitment, promotion, transfer and the Board’s approval under the purview of the existing laws, punishment of the officers immediate two tiers below the rules and regulations. The Board specifically delegates the CEO, however, rest upon the Board. Such recruitment and power of sanction of loan/investment and such delegations promotion are done complying with the service rules i.e., are suitably made amongst the CEO and his subordinate policies for recruitment and promotion. executives as far as desirable for efficient business operations. No Director interferes, directly or indirectly, in the process of The Board focuses its special attention on the development loan approval. of skills of Bank’s staff in different fields of its business activities including prudent appraisal of loan/investment proposals, the The Board frames policies for Risk Management and adoption of modern electronic and information technologies ensures their implementation. It monitors compliance at and the introduction of effective Management Information quarterly intervals through reviews of the reports of the Risk System (MIS). The Board gets these programs incorporated in Management Team. The Board monitors the compliance its annual work plan. of the guidelines of Bangladesh Bank regarding Key Risk Management. Southeast Bank Limited I Annual Report 2016 49 SEBL at a glance

The Board imposes Code of Ethics for every tier of employees The Board reviews the work of the Asset-Liability Committee and they follow it properly. It promotes healthy code of (ALCO) on regular basis. The Committee is working according conduct in the Bank for developing a compliant banking to Bangladesh Bank guidelines. operation. Appointment of Chief Executive Officer (CEO) Financial Management One of the major responsibilities of the Board of Directors is The annual budget and the statutory financial statements to appoint an honest, efficient, experienced and suitable CEO are finalized with the approval of the Board. It reviews and or Managing Director. The appointment of the CEO is made monitors monthly position of Bank’s income, expenditure, with the approval of the Bangladesh Bank. liquidity, non-performing asset, capital base and capital adequacy, maintenance of loan loss provision and steps taken Other Responsibilities of the Board for recovery of defaulted loans including legal measures. The Board follows and complies with all the responsibilities The Board frames the policies and procedures for Bank’s assigned to it by Bangladesh Bank from time to time. purchase and procurement activities and accordingly approves the delegation of power for making such On behalf of the Board of Directors, expenditures. The maximum possible delegation of such power of expenditures vests on the CEO and his subordinates. The decision on matters relating to infrastructure development and purchase of land, building, vehicles etc. for the purpose of Bank’s business are, however, adopted with Alamgir Kabir, FCA the approval of the Board. Chairman 50 Southeast Bank Limited I Annual Report 2016 Review from the office of the Group Chairman

Alamgir Kabir, FCA Group Chairman

Bismillahir Rahmanir Rahim

Dear Shareholders,

I warmly welcome you to the 22nd Annual General Meeting of the respected shareholders of the Bank. I sincerely thank you for your continued interest, support and patronage of Southeast Bank Limited over the years. I have minutely reviewed the operational performance of the Bank for the year 2016 to chart out our plans and programs for the next year. Based on it, I am privileged to place before you a report about the Bank for the year 2016 with an outlook for the years ahead. Southeast Bank Limited I Annual Report 2016 51 52 Southeast Bank Limited I Annual Report 2016

01. Review of Operational Result of fund. The private sector credit growth was 15.55 percent. Inter-bank call rate hovered around 2.75 percent Being backed by your patronage, I am pleased to announce to 3.00 percent. On the contrary, the deposit of our bank another set of record results in 2016. The results could be grew by 9.29 percent during the year. Consequently, achieved through our strategy of creating and developing the Bank’s Loan to Deposit Ratio stood at 83.43 percent. leading positions in our chosen areas of operations. And Since there was less demand for new investment, the success is not our destination, it is our journey. year 2016 ended up with a surplus investable fund for BDT 352,990.00 million. Our Bank did not have shortfall in Bank’s total asset increased by 11.92 percent in line with Cash Reserve Requirement in 2016. The Bank’s fund was the Bank’s policy of maintaining comfortable liquidity. prudently managed by Bank’s Treasury Unit for maximum Liquid assets to total assets stood at 9.30 percent at profit generation and there had not been any failure in the end of 2016. During the year, adequate focus was complying with regulatory requirements in this respect. aggressively put on liability management. It resulted in significant reduction of cost of fund (COF) and it reached 04. Risk Management 7.39 percent at year end. In the deposit mix of the Bank, the cost-free and low cost deposit reached 35.46 percent The Bank defines its overall risk strategy. We determine from 31.86 percent in 2015. The total deposit of the Bank the risk exposure on the basis of available capital including Islamic Banking Deposits increased by 9.29 cushion. Our risk management activities require that the percent over that of last year. It led to a healthy Loan to risk is identified, measured, aggregated and managed. Deposit Ratio of 83.43 percent. The net interest margin Accordingly, our risk policies aim to analyze and monitor of the Bank reached to 3.77 percent at the end of 2016. the risk within appropriate limits. We allocate sufficient The Bank was able to increase Net Interest Income to BDT resource to monitor and control core risk areas. 4,207.21 million from BDT 3138.46 million in 2015. Fee and other income during the year 2016 had a good growth of 05. Initiative to upgrade Business Continuity 7.81 percent over those of 2015. The good contribution System of Fee and other income to Bank’s total income is a clear testimony of Bank’s strength. The Bank’s operating Southeast Bank has a Business Continuity System and income increased to BDT 12,852.45 million in 2016 from Disaster Recovery Plan in place to deal with a number of BDT11,604.39 million in 2015. crises. These include natural disaster, such as, earthquake and floods, system failures due to Cyber-Terror incidents 02. Evaluation of the Performance of the Bank and other crises. The Bank is also working to increase Management its capability to cope with crises through training and educating employees. To have our customers use our The management of the Bank was proactive and prescient services with a sense of safety, we are continuing to in 2016 to handle Bank’s day-to-day affairs effectively in enhance the sophistication of our Business Continuity an environment of acute competition amongst banks System. and financial institutions. The demand for credit was low in the market in the year. The average lending rate 06. Our Response to Capital to Risk-Weighted witnessed a downward trend. Resultantly, bank’s dealing Assets Ratio (CRAR) spread got squeezed and impacted bank’s profitability. The efficiency of any service-oriented organization is Capital adequacy regulations are a framework aimed at primarily determined by the quality and character of the securing the soundness of the Bank through enhancement people working within it. The Board of Directors of the of capital. This framework has three dimensions; namely, Bank places top-most importance to recruit, develop and minimum capital requirement, self assessment and retain employees having required professional excellence supervisory reviews, and a market discipline enhanced and high level of integrity. through information disclosure. In such a situation, the whole management team performed appreciably to produce good operating To maintain sufficient capital for the Bank in line with the result in the year under review under the leadership of aforesaid framework, the Bank has established the basic the Managing Director. His team members deserve your policy for its capital management. The policy sets forth blessings and support for continuity of their best effort to (1) taking initiatives for maintaining sufficient level of bring in more qualitative changes in the Bank. capital, (2) taking proper measures for capital assessment, and (3) taking steps for the accurate calculation of capital 03. Liquidity Management of the Bank adequacy ratio. The Bank is gearing efforts to enhance the level of risk management of the Bank. During the year 2016, the entire banking sector was awash with liquidity in the wake of poor demand for borrowing Southeast Bank Limited I Annual Report 2016 53 SEBL at a glance

We try to maintain a strong capital base to support the in the Bank’s relationship with its all stakeholders on-going development of business of the Bank. We namely, shareholders, business associates, customers, prudently maintain a nice balance between the different management, employees, government, regulatory components of capital. Bank’s total capital reached BDT bodies and the community. It encompasses both 34,056.28 million as on 31 December, 2016. explicit and implicit contracts between the Bank and the stakeholders for (i) distribution of responsibilities, rights 07. Our Technology Use Platform and rewards, (ii) procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with Information Technology governance is an area that has their duties, privileges and roles, and (iii) procedure for been effectively addressed and is being upgraded for total proper supervision, control, and information flows to technology and control system cohesion. Most people serve a system of checks and balances. This framework is use the surface of the technology. We take for granted periodically reviewed by the Board and necessary changes the power and availability of unfathomable tools and and revisions are made. technology. We look for creative ways to deeply leverage existing infrastructure and platforms. We use common The Board of Directors exerts governance over all technology in uncommon ways. As the Bank grows, employees including the Managing Director. It makes we shall require to procure and put in place advanced sure that the business operations of the Bank adhere to all versions of our selected technology to cope with the applicable rules of corporate governance and regulatory emerging needs of the Bank and its customers. We believe requirements. This governance culture is included in its investment in technology facilitates access to untapped own customer values, policies and laws relating to its resources and improve competitive edge. Our people employees from the highest to the lowest level. The intent are also continuously learning use of latest technology is to increase the accountability of the company and technique and financial knowledge to help upgrade the avoid any deviation before they occur. We weed out and Bank. eliminate problems and issues that bar effective practice of corporate governance in the Bank. The Board’s supervision 08. Acclimatizing new employees results in a clear and more ethical organization and makes the Bank appealing to the customers and investors. So, New employees in our Bank need not spend weeks our themes of corporate governance are accountability, and months finding their feat in the Bank. We introduce fairness, transparency, compliance, risk management, etc. them to their work-family so that they know co-workers and feel comfortable reaching out for resource. This 11. Bank’s Cyber Security acclimatization contributes to their building confidence, feeling supported, becoming productive and realizing Recently the banking industry experienced serious their value sooner. We believe in training and equipping breaches of cyber security. Such incidents heightened them, not just engaging them. The new entrants do not fears for more such cyber attacks. Banks in Bangladesh, just add numbers, they add quality and value. They join to as elsewhere on the globe, are not immune from fill skill gap in the organization and to reach new heights the criminals’ target. The attacks become easy to be of professional excellence. perpetrated if an insider can be used to get the details needed to prepare the attacks. In the face of such a 9. Talent Management and Team Work situation and to ward off such attacks through hacking and tracking by use of technology, we have emphasized Our talent management is smart. We promote individuals’ the need for keeping in place appropriate control system brilliance to increase the value of the skills available to and risk assessment from time to time. Special monitoring them. No one excels at everything, but everyone excels at has been put in place in the area of SWIFT messaging something. We facilitate greater engagement and reap all system to prevent fraudulent attempts of transferring the competitive advantages that a productive, engaged money. We have also emphasized on expert guidance to and skillful workforce provides. Ultimately success is protect our intra-connections and effectuating payments. reliant upon skills of multiple individuals. There is no ‘I’ in We are upgrading our ICT security and risk management our team. Our team work divides the task and multiples policies to mitigate IT operational risks. the success. 12. Information about Subsidiary Companies as on 10. Our Corporate Governance 31st December, 2016

Our Corporate Governance is the framework of rules Southeast Bank has the following Foundation and and practices by which the Board of Directors of the Subsidiary Companies to carry on related activities and Bank ensures accountability, fairness and transparency business operations at home and abroad. 54 Southeast Bank Limited I Annual Report 2016

Name of the Foundation Country of Bank’s Year of Sl # Purpose / Subsidiary incorporation Ownership opening To carry on charitable activities 1. Southeast Bank Foundation Bangladesh - 2002 in an organized and sustainable manner. Southeast Bank Capital To carry on merchant banking 2. Bangladesh 99.816909% 2010 Services Limited operations. To collect remittance from Southeast Financial 3. United Kingdom 100% 2011 Bangladeshi expatriates for their Services (UK) Limited beneficiaries in Bangladesh. Southeast Financial To collect remittance from 4. Services (Australia) Pty Australia 100% 2013 Bangladeshi expatriates for their Limited beneficiaries in Bangladesh. Southeast Exchange To collect remittance from 5. Company (South Africa) South Africa 100% 2015 Bangladeshi expatriates for their Pty Limited beneficiaries in Bangladesh.

13. Issuance of Second Subordinated Bond 2012, 2013, 2014 and 2015 consecutively. The Institute of Cost and Management Accountants of Bangladesh Our Policy is to move forward with initiatives to enhance awarded our Bank First Position as the Best Corporate in the level of capital requirement of the Bank. Accordingly, the Banking Sector (Private Commercial Bank-Traditional the Board of Directors of the Bank in its 486th meeting Operation) for the Bank’s published accounts and reports held on April 11, 2016 approved Bank’s issuance of second for the year 2015. Recognitions encourage us to make Subordinated Bond for BDT 5.00 billion. After regulatory further qualitive and quantitative improvement in the clearance, we got the fund in our books of accounts on Bank. October 27, 2016. It significantly increased Bank’s Tier-II Capital in 2016. 17. Integrity: a condition for our business sustainability The first Subordinated Bond for BDT 3.00 billion was issued in 2014. Profit generation is an essential pre-requisite for ensuring our business success and growth in the Bank. It is not 14. Code of Conduct for Directors sufficient per se. Profit must be generated with the highest degree of honesty and integrity for promotion The Board of Directors of the Bank in its 410th meeting of Bank’s reputation. We emphasize the entrepreneurial held on December 24, 2012, among other things, ability of our employees. To do that, we do not simply approved the Code of Conduct for the Directors of the rely on an effective governance mechanism but also on a Bank. The Directors are sincere in abiding by the Code of set of shared values to which our colleagues can relate in Conduct. There had not been any breach of the Code of their working life. Fairness, respect, freedom, transparency, Conduct by any Director of the Bank. reciprocity, harmony, team spirit, courtesy, commitment, service excellence, enthusiasm for work and business 15. Loans to Directors ethics are essential for us to transform profit into value in a sustainable manner. No loan excepting Credit Card limit was allowed to any Director of the Bank in the year 2016. We provide useful behavioral framework for resolution of dilemma that our employees individually encounter while 16. Awards and Accolades doing their everyday activities. We help them make a responsible and consistent professional decision selflessly. Southeast Bank greatly weighs good corporate governance and operational excellence. These are our 18. Corporate Social Responsibility (CSR) Initiatives fundamental requirements in our aspiration to remain a leading banking institution in our country. We do have Every business should give something back to the strategy, intent and ability to take the Bank forward. Our community in which it operates. As a Bank born and bred Annual Report contains enough disclosures. We also in Bangladesh, we have also a deep commitment to the publish financial statements complying with all applicable Country’s economic development and preservation of Accounting Standards. In recognition, The Institute of the environment. We believe our conscious choice of Chartered Accountants of Bangladesh (ICAB) conferred protecting the environment today will lead to a better upon us the Certificate of Merit for our published accounts and sustainable tomorrow. Our CSR goes far beyond and reports for a number of years including for the years charity. We help achieve lasting changes in the lives of Southeast Bank Limited I Annual Report 2016 55

people. We are pledge-bound to carry out our business of Southeast Bank complies with all the provisions of law SEBL at a glance banking in an economically, environmentally and socially and the regulations of the regulatory bodies. We are responsible way. We support initiatives of individuals or pledge-bound not to allow our banking channel to be groups to protect wildlife habitat, curb effect of climate used by any criminal, terrorist, terrorist group or network change and improve conditions of communities. Our of terrorists to carry out any subversive activities in the CSR engagements are steadily increasing in depth and country or elsewhere on the globe. There is appropriate diversity both in expenditures, financial inclusion drives, structure in place at Bank’s Head Office and the branches greening the internal practices and processes, and in to deal with the menace. The Bank has also developed and lending to environmentally benign projects. We created implemented AML and CFT compliance policy. Under the Southeast Bank Foundation to carry out CSR related policy, customer due diligence is being done, transactions activities in a most organized way. In the year 2016, our of clients are being monitored, reporting to regulatory CSR related expenditure totaled BDT 135.85 million. authority are being made, sanction lists are being screened while allowing any transaction, and utmost care is being 19. Keynotes of our Environmental Policy exercised in case of handling walk-in and unknown customers. Self-assessment and independent testing are We get business sustenance and support from the being done to evaluate our compliance status in respect community and environment we operate in. Logically, of AML and CFT. We do not put any officer in operation we want to give back something in return to them. The without giving him training on AML and CFT. The policy keynotes of our environmental policy are given below: and procedure are periodically reviewed and updated to accommodate new and emerging issues. We comply with environment-related laws and regulations. 21. Public Disclosure We are environment-friendly in our core business The Bank’s disclosure controls and procedures are practices. designed to ensure that information required to be We apply energy saving devices at office. disclosed are disclosed timely and with full accuracy. We promote activities for environment protection. 22. Customers-Our Partners We operate in an environmentally responsible manner. Our customers do not just need a Bank. They need a partner which we are. As a partner, we provide them We make public disclosure about our environmental financial flexibility and speak the same language. With our policy. profound understanding of the business and missions of We confide in the society and the community. our customers and the challenges being faced by them, We lend our support to community development. we focus on delivering highly efficient products and services. We always work for new and better ways to serve We encourage our employee for efforts to protect them. environment in their private life. We support initiatives of individuals and institutions 23. Outlook in community development. Southeast Bank began its journey in 1995 and held We work in harmony with the society for mutual excellent position consecutively over the years. It earned advantage. good profit and declared dividend at encouraging rates We ensure that no harm is caused to the environment to the shareholders. Due to our long presence and as a result of our operations. successful journey over the last 22nd years, we have been able to deepen our relationship with customers. We had 20. Status of Anti-Money Laundering (AML) and another good year in 2016 and expect reasonably that Combating Financing of Terrorism (CFT) the momentum will continue in 2017 and beyond. Our Initiatives of the Bank continuous success over the years laid foundation for tangible results in the upcoming years. Money laundering and financing of terrorism have emerged as major threats to peace and growth of Our mistakes of the past have been examined, learned economies across the globe. To combat the criminal from and then left behind. We have shifted our focus on activities in Bangladesh, there are sufficient laws in the future and made sure our every employee re-engages place. Money Laundering Prevention Act – 2012 and himself in our journey into the future. Anti-Terrorism Act-2009 were enacted by the country’s Parliament. These laws were also amended. Apart from We are proud of our achievement, mindful of our the above, Bangladesh Financial Intelligence Unit (BFIU) weaknesses and careful of the future. I tend to be optimistic prescribes guidelines for prevention of money laundering about success in the next year. Our aim is for each of our and combating financing of terrorism. business to be market leader in its chosen areas through 56 Southeast Bank Limited I Annual Report 2016

the backing of superior quality customer service and wishers, the Government of the People’s Republic of salesmanship. More intelligent ways of doing business is Bangladesh, Bangladesh Bank, Registrar of Joint Stock expected to enable us to leapfrog old methods. The best Companies and Firms, the Bangladesh Securities and way for us to grow is to innovate and to be better than the Exchange Commission, the Dhaka Stock Exchange peers and others racing with us in competition. Limited, the Chittagong Stock Exchange Limited and all others concerned who have supported us and extended Our products and services are best in class. We deliver to us their valued co-operation. We look forward to their excellence. We strive for continuous improvement. We continued support, co-operation and guidance that plan to hold our discipline and continue to strengthen are our constant source of encouragement in the days the infrastructure, staff, officers, brand, information ahead. We reiterate with firm commitment that we will technology and customer relationship. We will continue remain disciplined, compliant and result-oriented in all to capitalize on our strength, remove weaknesses, make our endeavors and in return seek their continued co- use of opportunities and mitigate threats to reach new operation. heights of operational excellence. The Bank’s Board looks forward to making further progress in the upcoming years. I also thank the respected shareholders for attending the 22nd Annual General Meeting and contributing Bangladesh economy is growing from strength to meaningfully to the deliberations and adoption of strength. It is well-balanced and in good shape. resolutions against the agenda. Bangladesh has also improved its competitiveness for the fourth year according to Global Competitiveness Report. May the Almighty Allah in His infinite mercy bestow upon It has moved up one notch to 106 out of 138 countries on us His compassion and blessings. the Global Competitiveness Index for 2016-2017 prepared by Global Economic Forum. It is positive that Bangladesh Allah Hafiz has increased its score and is improving gradually. Besides, extreme poverty in Bangladesh declined further to 12.9% With warm regards, in the fiscal 2015-2016 according to World Bank. The latest official statistics put the country’s economic growth at Sincerely yours, 7.11% in the last fiscal. The growth of national economy denotes added business for banking industry.

Based on the state and trend of Bangladesh economy, we look to the future with energy and enthusiasm. However, Alamgir Kabir, FCA we will continue to place high-value importance on your Group Chairman support and encouragement for our business success.

24. Acknowledgement

I am thankful to the Almighty Allah for the business success of the Bank in 2016 amid competitive and unfavorable business environment. I also take the opportunity to thank the Directors of the Bank for their support and input during the year under review. Their collective wisdom substantially contributed to our success. I also thank our Management and the members of the staff under the leadership of the Managing Director for their loyalty, support and relentless efforts for Bank’s qualitative and quantitative improvements. I respect their zeal to work hard to reach newer heights of success. I conclude by conveying my very sincere and special thanks to our respected shareholders, valued customers, patrons, well- Southeast Bank Limited I Annual Report 2016 57

Senior Management Team

From Left

Shahidur Rahman Khan Senior Executive Vice President Pritish Kumar Sarker Senior Executive Vice President Muhammad Shahjahan Additional Managing Director S. M. Mainuddin Chowdhury Additional Managing Director M. Kamal Hossain Managing Director (Current Charge) Mohammed Gofran Additional Managing Director A.K.M Nurul Alam Additional Managing Director Haradhan Banik Senior Executive Vice President 58 Southeast Bank Limited I Annual Report 2016

Names of the Committees and their Members

Management Committee (MANCOM)

Sl. No. Name and Designation Position in MANCOM

1 M. Kamal Hossain, Managing Director (Current Charge) Chairman

2 Mohammed Gofran, AMD Member

3 S. M. Mainuddin Chowdhury, AMD Member

4 Muhammad Shahjahan, AMD Member

5 A.K.M Nurul Alam, AMD Member

6 Pritish Kumar Sarker, SEVP Member

7 Haradhan Banik, SEVP Member

8 Shahidur Rahman Khan, SEVP Member

9 Fahmida Chowdhury, EVP Member

10 Md. Shahjahan Sarker, EVP Member

11 Md. Mosharraf Hossain, SVP Member

12 Lt Col Md Abdur Rafique, psc (Retd), SVP Member

13 Shamim Ara Khanom, SVP Member

14 Md. Abul Kalam Howlader, SVP Member

15 Md. Amir Hossain Bhuian, SVP Member

16 Md. Abdus Sabur Khan, SVP Member

17 Khandaker Khaled Hassan, SVP Member

18 Mostofa Meer Khaled Omar, VP Member

19 Md. Minhazur Rahman, VP Member

20 A.K.M. Monirul Islam, VP Member

21 Mohammed Kamruzzaman, VP Member

22 Lt Cdr (Retd) Wares-Ul-Matin, VP Member

23 Abu Sabed Sayfullah, SAVP Member

24 Mohammad Aminul Haque, FCA, ACMA (CIMA), CGMA, SAVP Member

25 Md. Jahangir Kabir, SAVP Member

26 Navera Alam, SAVP Member

27 Mohammad Tanveer Rahman, AVP Member Southeast Bank Limited I Annual Report 2016 59 SEBL at a glance

Asset Liability Committee (ALCO)

Sl. No. Name and Designation Position in ALCO

1 M. Kamal Hossain, Managing Director (Current Charge) Chairman

2 Mohammed Gofran, AMD Member

3 S. M. Mainuddin Chowdhury, AMD Member

4 Muhammad Shahjahan, AMD Member

5 Pritish Kumar Sarker, SEVP Member

6 Shamim Ara Khanom, SVP Member

7 Mohammad Aminul Haque, FCA, ACMA (CIMA), CGMA, SAVP Member

8 Md. Jahangir Kabir, SAVP Member Secretary

Central Compliance Unit (CCU)

Sl. No. Name and Designation Position in CCU

1 Muhammad Shahjahan, AMD CAMLCO

2 Haradhan Banik, SEVP Deputy CAMLCO

3 Shahidur Rahman Khan, SEVP Member

4 Shamim Ara Khanom, SVP Member

5 Md. Abul Kalam Howlader, SVP Member

6 Md. Amir Hossain Bhuian, SVP Member

7 Khandaker Khaled Hassan, SVP Member

8 Abu Sabed Sayfullah, SAVP Member

9 Md. Feroj Hoshen, SAVP Member

10 Hafizur Rahman, SO Member 60 Southeast Bank Limited I Annual Report 2016

Committee for Evaluation of the Effectiveness Head Office Credit Review Committee of Management Reporting System (HOCRC-2)

Sl. Position in Sl. Position in Name and Designation Name and Designation No. CEEM No. HOCRC-2

1 S. M. Mainuddin Chowdhury, AMD Chairman 1 Pritish Kumar Sarker, SEVP Chairman 2 Shaidur Rahman Khan, SEVP Member 2 Md. Shahjahan Sarker, EVP Member Member 3 Mostofa Meer Khaled Omar, VP 3 Shamim Ara Khanom, SVP Member Secretary

4 Khandaker Khaled Hassan, SVP Member Tender Committee

5 Md Jahangir Kabir, SAVP Member Sl. Position in Name and Designation No. PC Mohammad Aminul Haque, FCA, Member 6 ACMA (CIMA), CGMA, SAVP Secretary 1 Mohammed Gofran, AMD Chairman

Integrity Committee 2 S. M. Mainuddin Chowdhury, AMD Member

Position 3 Md. Shahjahan Sarker, EVP Member Sl. Name and Designation in the No. Committee 4 Lt Cdr (Retd) Wares-Ul- Matin, VP Member

1 Muhammad Shahjahan, AMD Chairman 5 Abu Sabed Sayfullah, SAVP Member

2 Haradhan Banik, SEVP Focal Point Mohammad Aminul Haque, FCA, 6 Member ACMA (CIMA), CGMA, SAVP 3 Md. Abul Kalam Howlader, SVP Member Member 7 A.K.M. Moshiour Rahman, SPO 4 Khandaker Khaled Hassan, SVP Member Secretary

Mohammad Aminul Haque, FCA, 5 Member Procurement Committee ACMA (CIMA), CGMA, SAVP Sl. Position Name and Designation 6 Md. Feroj Hoshen, SAVP Member No. in PC

M. Kamal Hossain, Managing 1 Chairman Head Office Credit Review Committee Director (Current Charge) (HOCRC-1) 2 S. M Mainuddin Chowdhury, AMD Member Sl. Position in Name and Designation No. HOCRC-1 3 Shahidur Rahman Khan, SEVP Member

1 Mohammed Gofran, AMD Chairman 4 Md. Mosharraf Hossain, SVP Member

5 Lt Cdr (Retd) Wares-Ul- Matin, VP Member 2 Pritish Kumar Sarker, SEVP Member Mohammad Tanveer Rahman, Member 6 Member 3 Shaidur Rahman Khan, SEVP SAVP Secretary Member 7 A.K.M. Moshiour Rahman, SPO 4 Mostofa Meer Khaled Omar, VP Member Secretary Southeast Bank Limited I Annual Report 2016 61

Supervisors of the Branches Taskforce for Monitoring and Recovery SEBL at a glance of Rescheduled and Restructured Loans Sl. Name and Designation No. Position Sl. 1 Mohammed Gofran, AMD Name and Designation in the No. 2 S.M. Mainuddin Chowdhury, AMD Committee Head of 3 Muhammad Shahjahan, AMD 1 Mohammed Gofran, AMD Taskforce 4 Pritish Kumar Sarker, SEVP 2 Pritish Kumar Sarker, SEVP Member 5 Haradhan Banik, SEVP 3 Shahidur Rahman Khan, SEVP Member 6 Shaidur Rahman Khan, SEVP 4 Md. Shahjahan Sarker, EVP Member 7 Md. Shahjahan Sarker, EVP 8 Md. Mosharraf Hossain, SVP 5 Mostafa Meer Khaled Omar, VP Member 9 Shamim Ara Khanom, SVP 6 Md. Shaheen Miah, SAVP Member 10 Md. Amir Hossain Bhuian, SVP 7 Head of Respective Branch Member Member 11 Mohammad Omar Faruque, VP 8 Md. Minhazur Rahman, VP Secretary 12 Mostofa Meer Khaled Omar, VP 13 Md. Minhazur Rahman, VP Taskforce for Recovery of Written-Off 14 Md. Shaheen Miah, SAVP Loans Mohammad Aminul Haque, FCA, ACMA (CIMA), 15 CGMA, SAVP Sl. Position 16 Md. Jahangir Kabir, SAVP Name and Designation in the No. Committee 17 Abu Sabed Sayfullah, SAVP Head of 1 S.M. Mainuddin Chowdhury, AMD 18 Muhammad Wahidur Rahman Patwary, SAVP Taskforce 19 Kazi Abu Taher, SAVP 2 Pritish Kumar Sarker, SEVP Member 20 Syed Abu Naser, SAVP Lt Col Md Abdur Rafique, psc 3 Member 21 Mohammed Showkat Hayat Khan, SAVP (Retd), SVP 22 Mohammad Kamruzzaman, SAVP 4 Head of Respective Branch Member The Managing Director chairs the meeting of the 5 One Representative of ICCD Member Supervisors. Member 6 Md. Mosharraf Hossain, SVP Secretary IT Steering Committee 7 Md. Akhtaruzzaman, SPO Member Sl. Position Name and Designation in the No. Committee Taskforce for Recovery of Classified 1 S. M. Mainuddin Chowdhury, AMD Chairman Loans and Advances

2 Pritish Kumar Sarker, SEVP Member Position Sl. Name and Designation in the 3 Haradhan Banik, SEVP Member No. Committee 4 Md. Abul Kalam Howlader, SVP Member Head of Member 1 Pritish Kumar Sarker, SEVP 5 Khandaker Khaled Hassan, SVP Taskforce Secretary 2 Shahidur Rahman Khan, SEVP Member 6 Mohammed Kamruzzaman, VP Member 3 Md. Shahjahan Sarker, EVP Member 7 Kazi Md. Ehasanuzzaman VP Member Mohammad Aminul Haque, FCA, 4 Md. Mosharraf Hossain, SVP Member 8 Member ACMA (CIMA), CGMA, SAVP 5 Head of Respective Branch Member 9 Md. Jahangir Kabir SAVP Member Member 6 Md. Akhtaruzzaman, SPO 10 F.M. Iqbal Bahar Khan, AVP Member Secretary 62 Southeast Bank Limited I Annual Report 2016 CorporateManagement GovernanceCommittee of Disclosurethe Bank Checklist(MANCOM) Southeast Bank Limited I Annual Report 2016 63 64 Southeast Bank Limited I Annual Report 2016 Managing Director’s Review

M. Kamal Hossain Managing Director (Current Charge)

At the outset, I would like to express my immense gratitude to Almighty Allah that Southeast Bank performed remarkably well during 2016 and positioned itself admirably in the industry, despite a challenging environment for the banking industry i.e. lower interest margins, weak credit growth, non-performing loans and surplus liquidity etc. Surmounting these challenges, we are successfully steering ahead with great resilience. Southeast Bank’s stability and growth in the industry is a reflection of its dynamic structure, innovative products, prudent policies, persistent endeavor to render quality services to its valuable clients and its commitment to strictly comply with regulatory norms and requirements. Southeast Bank Limited I Annual Report 2016 65 66 Southeast Bank Limited I Annual Report 2016

Economic Roundup Earnings per share and Book Value per share were at BDT 2.66 and BDT 10.00 respectively. Return on In the backdrop of improved law and order situation, Equity was at 9.06 percent at the end of 2016. stable political environment in the country, better management of energy resources and declining trend Bank’s financial soundness is reflected in strong CRAR in global commodity prices, the year 2016 witnessed (Capital to Risk weighted Assets Ratio) which was marked improvement in key macroeconomic indicators 12.15 percent according to Basel III as on December which was reflected through economic growth and 31, 2016. rapid infrastructure development. The successful implementation of mega projects like Padma Bridge, The cost to income ratio stood only at 33.84 percent Rooppur Nuclear Power Plant, number of giant Flyovers, which is far below the industry average and it is a Metro Rail, Express Way etc. would usher in an era of testimony to the Bank’s commitment to achieving development and prosperity for the country. operational controls and efficiencies.

Business and Financial Achievements Risk Management

The financial results of the Bank reflect healthy growth We continue to prudently manage risk throughout in quality assets, earnings and shareholders’ equity. In the bank while maintaining a strong risk management spite of the challenges posed by changing interest rate culture. To achieve the desired objective, Southeast Bank environment, we managed to achieve exceptional results has put in place an efficient Risk Management System with consistent growth in profitability. The growth was to manage risk within acceptable levels and ensure that enabled by a strategy focusing on trimming down the cost fresh lending decisions are not only commercially viable of deposits through procuring low-cost deposits coupled but carry manageable credit risk. The objective of this with a strong risk management framework. Against this architecture is to ensure that the asset quality is sustained backdrop, I would like to give an overview of the Bank’s against economic shocks and sufficient capital buffers are performance in important parameters as below: available to withstand them.

Total deposits grew by BDT 19,542.34 million which Service Excellence is 9.29 percent more than that of last year. To provide a strong footing for managing the cost of deposits, Customer centricity is instilled in all our policies, systems bank consciously focused on procuring retail and processes. We have devised a service excellence deposits and in the process, high cost bulk deposits guideline to ensure superior customer service to our (FDRs) were reduced proportionately. Therefore, low- clients. We provide a wide array of products and services cost deposit grew by 21.62 percent and total low- to individuals, companies and institutional investors, with cost deposits stood at 35.46 percent of total deposits a convenience to transact, save and borrow in the best of as on December 31, 2016. ways possible. It is our ongoing endeavor to understand the unique requirements of our customers and to cater to Total asset base of the bank amounted to BDT these requirements to the best of our abilities. With this 291,798.01 million recording an impressive growth of end in view, we are continuously collecting feedback from 11.92 percent; while loans and advances increased by the customers to improve our services and exceed the 13.61 percent and stood at BDT 191,865.59 million. expectations of our customers. We have also successfully introduced a ‘Customer Charter’ in line with the guidelines The SME portfolio of the Bank increased by 19.62 of the Bangladesh Bank. percent to BDT 41,287.20 million. Initiative for Financial Inclusion In 2016 total Import business grew by 12.99 percent to BDT 171,531.73 million and Export business by The Bank has been chasing a very well thought out 15.96 percent to BDT 146,606.09 million. expansion plan with a view to taking its brand image to every corner of the country and ensure availability of state During the year, non-funded income contributed by of the art banking products and services to its valued business-related fees and commissions increased by clients. Southeast Bank opened six (6) new branches and 5.20 percent over that of last year. installed eleven (11) new ATM booths in different locations across the country reaching the total number of branches Operating profit of the bank grew by BDT 468.95 at one hundred twenty eight (128) and number of ATM million and reached BDT 8,503.22 million which booths at one hundred seventeen (117) as on December shows 5.84 percent growth over that of last year. 31, 2016. Bank’s presence in the unbanked areas of the Southeast Bank Limited I Annual Report 2016 67 SEBL at a glance country has brought a breakthrough in accelerating In the process recently, southeast Bank has introduced economic activities in remote areas. It displays our web based live chat solution for the convenience of its commitment to the national agenda of financial inclusion. customers in addition to 24X7 call center. The bank has also established three (03) exchange houses in Australia, United Kingdom and South Africa basically for Looking Ahead expediting inward remittance flow for the country. As we think about what the future holds, with the team Capital Base we have and the institution we have built, there is a good reason to be optimistic and excited about what Southeast Bank has built up a strong balance sheet lies ahead. The year 2017 is expected to be the year that provides a platform to accelerate business growth. of growth as major macro-economic fundamentals It is a highly capitalized Bank. We maintained capital remained fairly positive during 2016 which will continue significantly above the requirement of the regulator and to contribute to our economic growth and development. our Tier 1 common equity capital ratio today exceeds the Various development and policy initiatives taken by the minimum requirement of Basel-III standards. As such the Government are expected to drive the economy to a CRAR of the Bank stood at 12.15 percent as on December higher growth trajectory in the years ahead. Southeast 31, 2016 which is well above the regulatory requirement Bank is well positioned to benefit from the transformation of 10.625 percent. that is taking place in the banking landscape with low interest rates and intense pressure on margins and Impaired Asset Management volumes on one hand and technology driven exciting developments in new products and services on the other. For the banking sector, 2016 had been a turbulent one due to worsening asset quality and its implication on Our Strategies for 2017 the credit risk profile of banks. Deterioration in asset quality has an adverse impact on profitability and capital While celebrating the success of the Bank, the Management requirement for Basel III compliance. While the recovery also remains vigilant of the future challenges. In order to of non-performing loans remained a corner stone of our maintaining the current growth trends and capturing due strategy, the Bank did not shy away from new profitable share in a highly competitive operating environment, lending opportunities to strengthen the asset portfolio. it is required to continuously revamp its strategies and With all the concerted and coordinated efforts, the Bank keep adding on latest products and services by ensuring could restrict its non-performing loans to 4.89 percent. appropriate monitoring system to stay a step ahead of its competitors. Among others, the following are the Human Capital priorities for 2017:

Our people are undoubtedly the core asset of our bank Concerted efforts and aggressive marketing to and we acknowledge their hard work and dedication in procure more low-cost deposits with a view to elevating our bank to where it is today. We are always reducing cost of deposits and improving Net Interest conscious of the importance of retaining and attracting Margin (NIM) of the Bank. the best talents. Our human resource management policies are designed on the principles of care, capacity Emphasizing on Retail Credit, SME and Agri-credit to building, knowledge sharing and fairness. Besides hiring make the loan portfolio more diversified. best resource on purely merit basis, performance of every staff member is evaluated on a uniform yardstick Focusing on disciplined credit risk management to help promoting culture of merit and fair play in the especially credit appraisal process including organization. Our Training Institute is relentlessly working documentation and monitoring with a view to and implementing training programs based on training maintaining strong asset quality. need assessment of each employee. As banking industry is predicted to remain highly Leveraging Technology competitive with low interest margins, fee-based income and non-funded incomes shall be a strategic Technological leadership is an absolute necessity for imperative in 2017. the delivery of value to all our stakeholders amidst rapidly changing life styles and paradigms. Southeast Maintaining asset quality by restricting increment Bank is committed to place cutting edge technology at of non-performing assets through early detection, the forefront of our delivery channels and operations. monitoring, corrective action plans, shared It would also create a need to move forward with information and disclosures to keep future recurrence advanced technology as well as mitigation of cyber risks. in check. 68 Southeast Bank Limited I Annual Report 2016

Strengthening the recovery against rescheduled, Exchange Commission and other stakeholders who classified and written-off loans for reducing NPLs to helped us make 2016 yet another successful year. I take a large extent through intensive recovery measures this opportunity to extend my wholehearted appreciation and further arresting fresh slippages. to the management and staff for their indefatigable commitment and hard work that have resulted in such Taking all required steps to maintain its position commendable results. We shall continue to rely on their as a fully compliant bank in line with regulatory support, dedication and commitment in taking Southeast guidelines. Bank forward together to even greater heights.

Strictly enforcing ‘code of conduct’ for all employees and elevating standard of service to new heights of excellence for all stakeholders.

With our rock-solid energy, seamless team work, unwavering unity of purpose and faith in Allah, I have no doubt that together we will continue to meet the challenging expectations of our shareholders, customers, M. Kamal Hossain employees and regulators in the years to come, In-Shaa- Managing Director Allah. (Current Charge)

Note of Thanks

My heartfelt gratitude to our customers for enabling us to achieve record excellent performance in 2016. I am greatly indebted to our honorable Chairman and Board of Directors for their valuable guidance, our Foreign partners, Bangladesh Bank, Bangladesh Securities and Southeast Bank Limited I Annual Report 2016 69 Directors’ Report Evaluation of our performance to date and strategies to reach new heights of success and excellence 70 Southeast Bank Limited I Annual Report 2016

Directors’ Report

Bismillahir Rahmanir Rahim

Dear Shareholders,

The Board of Directors of Southeast Bank Limited takes this opportunity to welcome you all to the 22nd Annual General Meeting of the Shareholders and has immense pleasure to present before you the 22nd Annual Report of the Bank together with the Auditors’ Report for the year ended December, 2016.

1. World economic scenario in 2016 and prospect the possible geopolitical developments around the world. for 2017 All these lingering uncertainties together may have a significantly negative effect on global trade and growth In 2016, world economy grew by 2.3 percent and the prospects. projected growth in 2017 is 2.7 percent (source: Global Economic Prospects by World Bank Group, January 2017). 2. State of the Bangladesh Economy in 2016 and The moderation in growth in 2016 occurred because of Economic Trends slow growth in developed economies, persistent low commodity prices, timid global trade, thinning capital flows Because of prevailing economic and political stability and policy uncertainty. Commodity-export dependent in 2016, Bangladesh economy was able to achieve 7.11 developing economies of Africa, Latin America and Middle percent growth in GDP for the first time within the last East found it difficult to accustom to low prices for oil and nine years (source: Ministry of Planning). Industry played other key commodities. Except few Asian economies, the main role in higher GDP growth although service and commodity-import dependent countries could not take agriculture also made good contribution. Low fuel prices substantial leverage from the situation because of weak in the global market helped inflation rates to stay low demand in developed countries. Commodity exporting (5.38% at the end of the year). Export earnings increased at countries as a group grew at lower rate than commodity a higher rate than imports and export-GDP ratio increased importers. In 2016, growth of advanced economies is in FY2016 while import-GDP ratio declined. Remittance estimated to have slowed to 1.6 percent while Emerging flow to the country experienced a declining trend despite Market and Developing Economies (EMDEs) grew by 3.4 increase in the number of migrant workers. percent as previously estimated. Other macroeconomic indicators including foreign In 2017, advanced economies are projected to grow exchange reserve ($32 billion equivalent to 8 months by 1.8 percent and the US economy in particular by 2 import cost), stable exchange rate and credit flow in percent. Growth in EMDEs is expected to accelerate to private sector had been broadly in line with the target. 4.2 percent. Emerging Market and Developing Economies (EMDEs) representing commodity importing countries are In FY2016, investment as a share of GDP was 29.7 percent, expected to experience solid growth while the outlook lower than the target for the fiscal year. The economy is for EMDE regions dependent on commodity exports moving forward with big public sector development is likely to be mixed. This projection is however deeply projects, including Padma Bridge, metro rail, elevated constrained by the growing uncertainty in the policy expressway, flyovers, dozens of economic zones and stance of the new US administration, the impact of Brexit, new seaport. Capital markets have begun to make a growing challenges to globalization and free trade and turnaround because of policy shifts and buoyant liquidity. Southeast Bank Limited I Annual Report 2016 71

In 2016, the banking sector continued to face challenges Millionaire Deposit Scheme, SME Banking, Corporate like excess liquidity, rise of non-performing loans, lower Banking, Syndicate Loan, Monthly Savings Scheme, Directors’ Report capital adequacy etc. Fixed Deposit, Monthly Income Scheme, Pension Saving Scheme, Multi-Millionaire Gold Deposit Scheme(kept We expect, in 2017 Bangladesh economy will continue in abeyance for the time being), Mohor Saving Scheme, to be on a high growth trajectory with the objective to Zakat Account, Cash Wakfh Account, Wage Earner Pension achieve 7.2 percent growth. It is a realistic goal and should Scheme, SMS Banking etc. in addition to our traditional be achieved through maintaining macroeconomic credit and foreign trade related products and services. stability, increasing efficiency in project implementation as well as revenue mobilization, expediting private sector High quality customer service through the integration investment, building institutional capacity, improving of the latest and state of the art banking technology governance and bringing back stringent discipline in the and products is our tool to achieve success. Customers financial sector. are our first priority. We are trying hard to provide a system of one stop solutions for customers by providing 3. An overview of the Bank. a spectrum of services. Our employees have mastered new technology, enhanced their product knowledge and Southeast Bank Limited, a second generation private honed their skill to help customers meet their financial commercial bank, emerged in 1995 amid liberalization of goals. We want to be the best at helping customers global economies. Currently, its Authorized Capital is BDT become financially better off by providing free advice, 15,000.00 million and its capital and reserve reached BDT innovative leading-edge financial solutions, choice and 34,056.28 million as on December 31, 2016. Its vision is to convenience. Irrespective of customers’ size and type, we stand out as a premier banking institution in Bangladesh aim at delivering the best customer service by meeting and contribute significantly to the national economy. their unique and different needs in a professional, ethical, friendly and knowledgeable manner. The Bank, in the meantime, successfully completed twenty two years of banking operations registering We are pledge-bound to turn Southeast Bank into a modern significant growth in performance indicators. In 2016, the banking institution, dynamic in actions, progressive in Bank earned an after tax profit of BDT 2,435.07 million. The programs, honest in dealings, just in judgment, futuristic deposit of the Bank grew by 9.29 percent to BDT 229,973.43 in attitude, fair in approaches and devoted to high quality million and loans and advances by 13.61 percent to BDT service to customers. Our charted plans are aimed at 191,865.59 million compared to those of 2015. boosting modern management, advanced technology, good profitability, sound financial strength and fair image Operational excellence coupled with qualitative of the Bank. We are firmly committed to transparent, improvements continued to be of paramount importance responsible and accountable corporate governance with to the Bank. At present, the Bank has 128 branches and the participation of our strong and most capable team of 2 Off-Shore Banking Units across the country. Plans have professionals and under the prized policy directives and been made to raise another 10 branches in 2017. Our guidance of the Board of Directors of the Bank. journey towards greater operational success continues with increased energy and enthusiasm. Southeast Bank carries out its business activities keeping in mind its core values, norms of business, commitment As we face the stiff challenges ahead on the way to further to clients, society and the environment at large. Southeast improving the profitability of the Bank, we rely on our Bank in all its activities and operations tries to establish skilled and experienced workforce. Our strengths are our the Green Banking practice and attain a sustainable close and cordial partnership with customers, our firmly growth. The Bank in its all endeavors wants to assure its anchored presence in the country’s strategic places of shareholders a steady and competitive return on their commercial and business importance and global reach investment in line with the best among peer institutions. through our correspondent Banks for expansion of foreign trade, foreign exchange and remittance business. Our 4. Capital and Reserves product-basket encompasses Real Time Online Branch Banking, Islamic Banking, Merchant Banking, Dual Currency The Authorized Capital of the Bank was BDT 15,000.00 Visa Platinum Credit Card, Visa Travel Card, ATMs, Education million and paid-up capital was BDT 9,169.50 million as Loan Scheme, Consumer Loan, Double Benefit Scheme, of December 31, 2016. The Capital and Reserves (Tier-1 72 Southeast Bank Limited I Annual Report 2016

Capital and Tier-II Capital) stood at BDT 34,056.28 million 5. Capital to Risk Weighted Assets Ratio (CRAR) as compared to BDT 28,509.53 million in last year showing an increase of 19.46 percent. Southeast Bank maintained capital adequacy ratio of 12.15 percent of the risk-weighted assets as on December Capital and Reserve of the Bank as of December 31, 31, 2016 as against the minimum capital requirement of 2016 were as follows: 10.625 percent as set by Bangladesh Bank under Basel-III reporting through BRPD Circular No.18 dated December BDT in million 21, 2014 of Bangladesh Bank. Regulatory Capital Consolidated Solo Tier-I capital 6. Capital Market Scenario 1) Common Equity Tier-I - - During the year 2016, country’s Capital Markets did Capital (CET-1) not witness any noticeable performance, rather Capital Fully Paid up capital 9,169.50 9,169.50 Markets were lackluster like recent past years. At the Non-repayable share prevailing scenario of Capital Markets, if we compare premium account fundamentals of some financially strong listed companies Statutory reserve 9,170.00 9,170.00 with the trading prices of their stocks in exchanges, we can easily determine that their stock prices are still General reserve 247.65 247.65 under-valued in comparison to their year-end corporate Retained earnings 3,196.97 3,171.82 declarations. Daily turnover at the exchanges was under Minority interest in BDT 5,000.00 million almost throughout the year except 10.00 - subsidiaries during the month of December when it increased steadily Regulatory Adjustments above BDT 5,000.00 million level. Goodwill and all other 108.60 108.60 Intangible assets Some major parameters of both stock exchanges are depicted hereunder for a glimpse of performance of DSE 2) Additional Tier-1 Capital and CSE in 2016: (AT-1) 3) Total Tier-1 Capital (1+2) 21,685.52 21,650.38 DSEX, the bench mark price index of the prime bourse, Tier-2 Capital Dhaka Stock Exchange Limited improved marginally General provision by 8.78 percent from 4,629.64 on 30th December 2015 (unclassified loans, SMA, 3,569.50 3,569.50 to 5,036.05 on 30th December 2016. Chittagong Stock off balance sheet) Exchange Limited index, CSCX also improved from Subordinated debt 7,400.00 7,400.00 8,572.12 to 9,369.91 in the same period and gained 9.31 percent. Combined total yearly turnover of country’s Revaluation Reserves as two Stock Exchanges was 1,268.95 billion as against on December 31, 2015 1,119.87 billion in 2015, a gain of 13.31 percent. Market (50% of Fixed Assets 2,335.43 2,335.43 and Securities & 10% of capitalization at DSE at the close of the year 2016 stood Equities) at BDT 341,244.15 billion as against BDT 315,975.75 billion at the end of 2015, registering a gain of 8.00 percent. The All other preference shares total number of active BO Accounts in Central Depository Regulatory Adjustments System of CDBL was 2,947,952 at the end of 2016, which Revaluation Reserves for was 3,170,047 in 2015. Fixed Assets, Securities & Equity Securities (Phase in 934.17 934.17 Infusion of funds from Institutional Investors, Wealthy deductions as per Basel-III Individual Shareholders, Foreign Institutional Investors, Guidelines) Large number of Small Shareholders, etc. to stocks of 4) Total Tier-2 Capital 12,370.76 12,370.76 financially strong companies is now the most fundamental Regulatory Adjustments requirement for country’s ailing Capital Markets. Revaluation Reserves for Fixed Assets, Securities & 7. Southeast Bank Shares and Shareholders Equity Securities (Phase in 934.17 934.17 Investors always look for a company which can meet deductions as per Basel-III their needs for dividend and capital gain. Honorable Guidelines) shareholders, who are with us since our listing with Stock Goodwill and all other 108.60 108.60 Exchanges, witnessed a robust growth of our paid-up Intangible assets capital from BDT 300.00 million to BDT 9,169.50 million or Total eligible capital (3+4) 34,056.28 34,021.14 by 2,956.50 percent. For the last few years country’s Stock Southeast Bank Limited I Annual Report 2016 73

Markets have been remaining uncertain, inconsistent long period of time. Please see below the record of our and unstable. But because of our visionary leadership, declarations of Cash Dividend and Stock Dividend: our paid-up capital is growing and the trend of payment of dividend is still high. We have a large number of Cash Dividend: 15%-1999, 25%-2000, 30%-2001, 20%- shareholders which on 31st December 2016 stood at 2002, 20%-2003, 20%-2006, 15%-2007, 15%-2008, 10%- 39,009. Earning per Share, our Net Asset Value, our Trend 2010, 15%-2011, 15%-2012, 16%-2013, 15%-2014, 15%- 2015 and 20%-2016. of Payment of Dividend and growth of our Paid-up Capital Directors’ Report over the years are mentioned below: Stock Dividend: 10%-2000, 10%-2001, 10%-2002, 20%- i) Ten years Earning Per Share (EPS) of our Company: 2003, 30%-2004, 20%-2005, 8%-2006, 25%-2007, 20%- 2008, 35%-2009, 20%-2010, 5%-2011 and 5%-2013. Earning Per Share: 4.28-2007, 3.11-2008, 3.24-2009, 3.77-2010, 2.19-2011, 1.89-2012 3.68-2013, 4.18- 8. Deposits 2014, 3.35-2015 and 2.66-2016. Deposits create opportunity for the bank to extend credit ii) Ten years Net Asset Value (NAV) of our Company: facilities to its customers. Deposit mobilization is one of the core activities of commercial banks. A proper deposit Net Asset Value: 26.92-2007, 25.79-2008, 33.10- structure of a bank plays significant role in increasing 2009, 23.37-2010, 23.30-2011, 22.66-2012, 23.92-2013, its interest income. Besides, the bank can contribute to 26.77-2014, 29.67-2015 and 28.93-2016. the functioning of the broader financial system through providing fund to the deficit units. Southeast Bank iii) Year-wise Paid-up Capital and Authorized Capital maintained its liquidity position within the approved risk of the Bank : appetite and tolerance limits. Appropriate liquidity buffers From the commencement of our business, our prudent were held in line with regulatory requirements, taking into Board of Directors were planning that Bank’s capital account the risk profile and market conditions. base should be increased in harmony with the gradual The amount of total deposits of the Bank as on December growth of our Bank’s lending business by raising its paid- 31, 2016 stood at BDT 229,973.43 million as compared to up capital. Our present Paid-up Capital of BDT. 9,169.50 BDT 210,431.09 million in 2015. Competitive interest rates, million and Authorized Capital of BDT.15,000.00 million is attractive deposit products, deposit mobilization efforts of the result of that initial vision of strong capital base and the employees and confidence reposed by the customers which precisely brought us here. Bank’s Paid-up Capital in the bank contributed to the notable growth in deposits. increased by 2,956.50 percent since our listing. A chart of On the eve of the 21st anniversary, the bank conducted Bank’s Authorized Capital and Paid-up Capital of the last customer acquisition campaign “Nibir” and launched two five years is given below: exclusive products “Anonya” for women and “Bichokkhon” for senior citizens. This campaign not only improved the Authorized Paid Up Capital quantum of deposits but also brought about qualitative Year changes in deposit structure. Deposit-mix of the bank as (Taka in million) (Taka in million) on December 31, 2016 was as follows: 2016 BDT 15,000.00 BDT 9,169.50 Share BDT in 2015 BDT 15,000.00 BDT 9,169.50 Particulars in Total million 2014 BDT 15,000.00 BDT 9,169.50 Deposits a) Current and Other 2013 BDT 10,000.00 BDT 8,732.86 30,285.06 13.17% Deposits 2012 BDT 10,000.00 BDT 8,732.86 b) Savings Bank/Mudaraba 19,700.58 8.57% Savings Bank Deposits iv) Declaration of Dividend c) Special Notice Deposits / Since the listing with DSE & CSE in the year 2000, it Mudaraba Special Notice 25,012.17 10.88% has been demonstrated that Southeast Bank has got Deposits the capability of paying good rate of dividend to its d) Fixed and Scheme Shareholders. A company with large size of paid-up capital Deposits or Term 148,426.76 64.54% requires substantial amount of profit earning assets to Deposits pay off dividend. It shows our judgment in selecting e) Bill Payable Accounts 6,548.86 2.85% borrowers, our strength, sincerity and honesty to run our primary operation, i.e. banking business smoothly for a Total 229,973.43 100.00% 74 Southeast Bank Limited I Annual Report 2016

9. Lending and Investment policy, position and risk exposures. ALCO is typically Southeast Bank Limited is playing a pivotal role in the responsible for establishing, documenting and enforcing economic development of the country by ensuring all policies that involve asset and liability management, smooth credit flow in different sectors with balanced such as liquidity, interest rate and foreign exchange risk. diversification. The economy of our country has been As per Bangladesh Bank guideline, Southeast Bank has passing through a challenging times for last couple of a fully functional Asset Liability Committee (ALCO). The years, faced with the major problem of prolonged slow Managing Director is the Chairman of the Committee. investment position caused by uncertainties among the Other members of the Committee are Additional investors. Amidst so many adverse challenges during last Managing Directors and strategically important Divisional five years, Southeast Bank ensured its consistent growth Heads of Head Office. The meeting of the Asset Liability with perfect blend of quality and quantity. Resultantly, Committee is held every month. total lending of the Bank stood at BDT.191,865.59 million as 13. Internal Control and Compliance on 31st December, 2016 registering 13.61 percent growth The foundation of Internal Control and Compliance System over previous year. Bank’s total lending (consolidated) and of Southeast Bank Group is based on organizational its growth rate for the last five years are shown below: structure, policies, procedures and instructions provided by its Board of Directors and senior management and Outstanding at the as per the guidelines or instructions of the regulatory Year end of the year Growth Rate authorities. The Board always inspires a strong control and (BDT in million) compliance culture based on sound understanding of 2016 191,865.59 13.61% laws, regulations and best practices that is disseminated at 2015 168,878.46 14.83% all levels. Southeast Bank Group has designed, developed 2014 147,070.81 9.05% and implemented an integrated internal control and compliance framework set in line with the internal control 2013 134,863.82 6.21% and compliance policies. Internal Control and Compliance 2012 126,968.97 18.34% Policies of the Group include (i) Compliance, (ii) Information Security, (iii) Internal Audit, (iv) Risk Management, etc. Most importantly, the Bank has put in place solid The above functions are independent of the operational foundations through which to support it’s sustainable activities. The Audit Committee of the Group, on behalf growth and development of the business across the of the Board of Directors, reviews the various reports of segments in the industry. internal auditors, external auditors, Bangladesh Bank’s inspection team and its compliance status. It also receives 10. Guarantee Business regular reports on emerging risks in each of its meetings Bank Guarantees shortly named as ‘Guarantee’ is one of from different divisions and conducts an annual review the non-funded business products of the bank. The Bank of the adequacy and effectiveness of the system of risk issued guarantees amounting to BDT 16,369.36 million management as well as internal control. This system of during 2016 favoring different Government Authorities, internal control of Southeast Bank Group is capable of Ministries, Autonomous Bodies, Corporations, Private continually assessing and recognizing the material risks Companies, Individuals and Multinational Companies etc. that could adversely affect the achievement of the goals on behalf of valued clients. of Southeast Bank Group. This internal control system also ensures immediate reporting of all the identified 11. Investment Scenario significant weaknesses and control failures together with details of corrective actions being undertaken at The investment portfolio of the Bank in 2016 was BDT appropriate levels of the management. 61,731.63 million against BDT 58,829.27 million in the previous year. The portfolio of investment included 14. Performance of Selected Liability Products as Government Treasury Bills, Prize Bonds, Shares of Public on 31st December, 2016 Limited Companies etc. The Bank has always given Both Traditional and Islamic Banking emphasis on investment of funds in high yielding areas simultaneously maintaining Statutory Liquidity Type of No. of Deposit Requirements (SLR) as fixed by Bangladesh Bank time to Volume Accounts Account time. BDT in million CD 86,235 11,280.81 12. Asset Liability Committee (ALCO) SND 9,624 25,012.17 Asset Liability Committee (ALCO) consists of senior SB 441,694 19,700.58 level executives with the decision making capacity and responsibility to review, discuss and direct the financial FDR 71,466 114,612.21 Southeast Bank Limited I Annual Report 2016 75

Traditional Banking 16. Analysis of the Income and Expenditure Statements Deposit Type of No. of A brief analysis on Bank’s income and expenditure in 2016 Volume Accounts Accounts BDT in million is given below: MDS 4,296 1,921.51 Interest Income The interest income of the bank for the year 2016 was BDT DBS 15,801 15,494.18 Directors’ Report 16,972.33 million as compared to BDT 17,794.80 million in MGDS 800 493.50 the previous year. The income generated from Loans and PSS 57,590 7,374.30 Advances remained the main contributor. WPSS 1,451 152.75 Interest expenses Total interest expenses in 2016 was BDT 12,765.12 million MIS 632 733.31 as against BDT 14,656.34 million in 2015 posting a decrease MSS 37,807 3,207.68 of 12.90 percent. ESS 10 0.76 Net Interest Income SDBS 286 185.71 Net interest income of the Bank for the year 2016 stood at BDT 4,207.21 million as against BDT 3,138.46 million in MRGSS 1 0.002 the previous year resulting in an increase of 34.05 percent.

Islamic Banking Investment Income In 2016, Bank’s income from investment was BDT 5,079.61 Deposit million as compared to BDT 5,158.54 million in the previous Type of No. of Volume year. Investment income consisted of interest earned on Accounts Accounts BDT in million treasury bills and bonds, capital gain, revaluation gain, MMDS 261 126.49 gain from sales of shares and dividend received from shares. MDBS 1,553 1,002.53 Other Income MMGDS 46 29.80 In 2016, commission, exchange and brokerage earnings MPSS 5,056 758.15 increased to BDT 2,903.03 million from BDT 2,759.46 MWPSS 161 31.00 million in 2015. This was due to enhanced business and trade related fee based activities. MMIS 79 136.36 Operating expenses MMSS 2,589 239.32 Operating expenses of the Bank was BDT 3,570.11 million MESS 38 6.64 in 2015 which reached BDT 4,349.23 million in 2016. MSDBS 28 10.98 Provision against Loans and Advances Hajj Sanchaya 9 1.11 In the year under review, provision against loans and advances was kept BDT 3,250.99 million as compared to TMMSS 127 17.22 BDT 2,245.05 million in 2015. MMRGSS 9 0.14 17. Asset Portfolio 15. Budget and Budgetary Control As on 31st December 2016, total assets of the Bank stood The Bank follows bottom up planning approach in at BDT 291,798.01 million. The break-up of total assets is preparation of annual budget and initially invites draft given below: proposals on different budgetary items including deposits, advances, profitability and other businesses Particulars BDT in million from the branches. The draft budget estimates are then Cash and Cash Equivalents 26,152.01 scrutinized and analyzed by the Head Office Management after discussion with the Heads of the respective Branches Investments 61,731.63 and reviewed and finalized in the “Business Policy and Loans and Advances 191,865.59 Managers’ Conference”. The Management of the bank makes constant efforts throughout the year to achieve Fixed Assets 8,947.16 the budgetary target. Senior Management Team at Head Other Assets 3,101.61 Office quarterly reviews the variances and the progress Total 291,798.01 towards achieving the budgetary goals. 76 Southeast Bank Limited I Annual Report 2016

18. Adoption of IAS and IFRS Return of Equity of the Bank for the last five (5) years is given below: The Institute of Chartered Accountants of Bangladesh (ICAB) adopted the International Accounting Standards Year Percentage (%) of ROE (IAS) and International Financial Reporting Standards 2016 9.06% (IFRS). Securities & Exchange Commission (SEC) and Bangladesh Bank also mandated the implementation of 2015 11.86% IAS & IFRS. These standards and reporting system have 2014 16.51% also been complied with by our Bank in preparation of the 2013 16.20% Financial Statements. 2012 8.42% 19. Growth in Operating Profit for the Last 5 years 22. Provision for Income Tax The Bank has earned operating profit of BDT 8,503.22 million in 2016 which comprises net interest income, The provision for income tax both current tax and deferred income from investment, commission, exchange etc. tax of the Bank was kept BDT 2,855.52 million for the year Operating profit in 2015 was BDT 8,034.27 million. The 2016 while it was BDT 2,448.07 million in the previous year. operating profit of the Bank for the last (5) five years is given below: 23. Profit Before Tax and Provision The Bank earned profit of BDT 8,503.22 million during the Operating Profit year before making any provision for bad and doubtful Year BDT in million debt, off-balance sheet exposures, unclassified loans and advances and before taxes etc. as against BDT 8,034.27 2016 8,503.22 million in the year 2015. 2015 8,034.27 24. Net Profit after Provision and Income Tax 2014 8,289.76 The Bank earned net profit of BDT 2,435.07 million during 2013 6,700.20 the year 2016 after making specific provision for classified 2012 5,495.19 loans, general provision for unclassified loans and off- balance sheet exposure, and after taxes etc. It was BDT 3,069.42 million in the year 2015. 20. Operating Income for the Last 5 years 25. Net Profit for the Last 5 years The operating income of the Bank stood at BDT 12,852.45 million at the end of 2016 while it was BDT 11,604.39 Net Profit after tax and provision was BDT 2,435.07 million million in 2015. The operating income of the Bank for the during the year 2016 which was BDT 3,069.42 million in last five (5) years is given below: the previous year. Net Profit for the last five (5) years is given below: Operating Income Year Net Profit BDT in million Year BDT in million 2016 12,852.45 2016 2,435.07 2015 11,604.39 2015 3,069.42 2014 11,617.19 2014 3,836.94

2013 9,684.80 2013 3,378.82

2012 7,831.62 2012 1,648.72

26. Statutory Reserve 21. Return on Equity for the Last 5 years The Bank transferred to statutory reserve BDT 272.69 Return on Equity (ROE) of the Bank was 9.06 percent in million. The total amount of statutory reserve stood at BDT 2016 while it was 11.86 percent in the previous year. The 9,170.00 million as on 31st December, 2016. Southeast Bank Limited I Annual Report 2016 77

27. Southeast Bank Capital Services Limited the year 2016. During the year 2016, Profit befor tax of the Company was BDT 78.81 million whereas the Profit Southeast Bank Capital Services Limited (SEBCSL) is a after Tax stood at BDT 59.07 million. Based on the current subsidiary company of Southeast Bank Limited. It was trend of Bangladesh capital market, it is expected that the incorporated on 23rd September 2010 as a Public Limited Company will reap good return from its investments and Company with Registrar of Joint Stock Companies and earn good profit in 2017 from operations. Firms under Company Act 1994. Initially, its Authorized Directors’ Report Capital was BDT 3000.00 million and Paid up Capital 28. Network Expansion Program was BDT 1000.00 million. Subsequently, Authorized Capital was enhanced from BDT 3000.00 million to BDT In today’s intense competition, most of the financial 6000.00 million. Its Paid up Capital was enhanced from institutions are striving hard to display their best possible BDT.1000.00 million to BDT 5500.00 million by issuing new efforts to be competitive. As customers are more shares. As the holding company, Southeast Bank Limited fragmented, Banks are trying to enrich their services owns 99.82% of the total shares of the company. and network to serve the customers. Southeast Bank, as a leading financial institution, always gives highest The company has a professional Board of Directors. It is priority to quicken its branch expansion programme to managed by a professional management team under the net the un-banked population across the country. It is policy guidelines of the Board. The Board comprises of the to be mentioned that business is the prime objective of following professionals: any branch expansion strategy of a bank and definitely a new branch is aimed at plugging geographical gaps Sl. No. Name of the Directors Position in their network. Our Bank invests in network expansion and new technology adoption to achieve competitive 01 Mr. Alamgir Kabir, FCA Chairman edge. Presently our bank is functioning with country- Mr. A.H.M Moazzem Hossain 02 Director wide network of 128 branches covering all divisions of the Independent Director country. Division-wise distribution of branches are given Mr. M. Kamal Hossain below: Managing Director 03 Director (Current Charge) Nominee of Urban Rural Southeast Bank Limited Division Total Branches Branches 04 Dr. Zaidi Sattar Director Dhaka 33 31 64 Mr. Md. Khursheed Alam Chittagong 12 18 30 05 Nominee of Director Southeast Bank Foundation Sylhet 07 05 12 Mr. Muhammad Shahjahan Khulna 04 04 08 Director 06 Managing Director Rajshahi 08 01 09 (Ex-officio) (Current Charge) Barisal 01 - 01 Rangpur 02 - 02 SEBCSL has been carrying out operation as a full-fledged Merchant Bank since its inception in 2010. The main focus Mymensingh 02 - 02 of the Company is disciplined operation of merchant Total 69 59 128 banking within the precinct of the regulatory rules and regulations. The main products and services of SEBCSL To facilitate the female entrepreneurs, the bank has set include, but not limited to, Portfolio Management, up two Ladies’ Branches in Dhaka city. The Bank is also Pre-IPO Placement, Underwriting Management, Issue offering Offshore Banking facilities through 02 (Two) Management and Corporate Advisory Services. The Offshore Banking Units (OBU) in Dhaka Export Processing Company’s own portfolio investment in the capital market Zone and Chittagong Export Processing Zone. also increased significantly over the years. Moreover, the Bank is providing “Shariah-Based Islamic The Company has 11 employees including Managing Banking Services” to the customers. Out of 128 (One Director (cc). They are honest, sincere, hard working, hundred twenty eight) Branches of the Bank, 05 (Five) committed, innovative and forward looking. They are Branches are designated as Islamic Banking Branches also devoted professionals who are relentlessly working located at Dhaka, Chittagong and Sylhet region. At present hard for the continuous growth and development of the Bank’s Authorized Dealer (AD) Branches are 21 (Twenty company. one). The Bank is also providing “Evening Banking Service” through 27 (Twenty seven) Branches to further augment The country’s capital markets have been showing signs its service delivery at extended banking hours. To expand of maturity and improvement since the second half of the geographical outreach and to cover more strategic 78 Southeast Bank Limited I Annual Report 2016

locations of business importance, SEBL has applied to capital adequacy. The Bank has published the disclosure Bangladesh Bank for opening 10 new branches in the year incorporating all the changes in the revised guidelines. The of 2017. Bank has also made a significant progress in implementing Basel-III and preparing itself to meet the upcoming 29. Implementation of Basel III challenges for implementing advanced approaches of calculating credit, market and operational risks. Bangladesh has entered into the Basel III regime from January 01, 2015. Bangladesh Bank revised the capital 30. Supervisory Review Process standard based on Basel III and planned to implement it gradually from 2015 to 2019. A Capital Conservation Buffer Supervisory Review Process (SRP) is the second pillar (CCB) of 2.5% is to be built up @ 0.625% each year from the of Basel-III framework. The aim of Pillar 2 processes is to beginning of 2016 to 2019. This is in addition to existing enhance the link among institution’s risk profile, its risk Minimum Capital Requirement (MCR) of 10%. It means management, risk mitigation systems and its capital CRAR requirement will be 12.50% from January 01, 2019. planning. Bank’s responsibility is to develop sound risk management processes that will adequately identify, To increase the quality and quantity of the capital base of measure, aggregate, and monitor its risks. The task of the the Bank, Basel III has introduced the following measures: SRP team is to review and evaluate the ICAAP (Internal Capital Adequacy Assessment Process) and the soundness 1. Tier 1 capital has been divided into two parts: Common of the internal governance processes within which it is Equity Tier 1 (CET1) and Additional Tier 1 (AT1). used.

2. The definition of capital has been made stringent. Tier SEBL has a 10 members SRP team at management level 3 capital has been eliminated. headed by the Managing Director. The team periodically reviews the risk assessment process and the requirement 3. The Bank has to maintain 3% leverage ratio along with of adequate capital against all plausible risks. The Bank Liquidity Coverage Ratio (LCR) of 100% or more and follows Bangladesh Bank guidelines ‘Revised Process Net Stable Funding Ratio (NSFR) of more than 100%. Document for SRP-SREP Dialogue on ICAAP’ to assess level of risks and capital requirement. It also reviews the Southeast Bank is well positioned in respect of capital policy documents that would supplement the whole risk and risk management. It has commenced reporting of mitigating process under SRP. The ICAAP report of 2015 CRAR, leverage and liquidity ratio from January 01, 2015 has already been sent to Bangladesh Bank and as per the following the new risk based capital adequacy framework. latest reports the Bank will require of BDT25,179.80 million The overall scenario as of December 31, 2016 under Pillar-I to act as cushion against risks under Pillar-I and Pillar-II of is depicted below: Basel-III. However, the Bank has been maintaining BDT 28,490.49 million as capital including Tier-I and Tier-II.

Solo Consolidated Leverage LCR NSFR The Board of Directors, the senior management and the CRAR CRAR Ratio operational units of the Bank are working together for 12.18% 12.15% 6.14% 118.50% 109.53% establishing sound risk management.

The Bank has a Supervisory Review Process (SRP) team 31. Corporate Governance comprising of members from the senior management. They participate in dialogues with the Supervisory One of the basic policies of the Bank is to strengthen its Review Process Evaluation (SREP) team of Bangladesh corporate governance status by establishing responsible Bank on the issue of maintenance of adequate capital management system and strengthening supervision. to compensate all the risks associated with business. Efforts are also being geared up to improve the Stress testing is an integral part of Supervisory Review transparency and accountability of the management. Process and is conducted through a prescribed format While putting efforts to achieve corporate objectives, given by Bangladesh bank where impact on Capital to Southeast Bank gives top priority to establishing Risk Weighted Asset Ratio (CRAR) is assessed taking into appropriate corporate governance standard at all levels account plausible shocks. and in all units. A report on Corporate Governance of the Bank in 2016 is included in this Annual Report. Pillar-III of Basel III aims at promoting market discipline through regulatory disclosure requirements. The reports 32. Declaration of the Compliance of BSEC on disclosure enable market participants to assess more Notification effectively key information relating to Bank’s regulatory The following disclosures are made in compliance of capital and risk exposures in order to instill confidence certain provisions contained in the BSEC Notification about the Bank’s exposure to risk and overall regulatory dated August 7, 2012. Southeast Bank Limited I Annual Report 2016 79

a) The financial statements prepared by the 36. Acknowledgement management present fairly its state of affairs, the result of its operations, cash flows and changes in equity. The Board expresses gratitude to the Almighty Allah for the success of the Bank in 2016. The Board extends thanks b) All transactions have been recorded in the accounting to the valued customers, patrons and well-wishers for records and are reflected in the financial statements. their continued support and co-operation to the Bank. Accounting books have been properly maintained in The Board also appreciates the dedicated services of Directors’ Report the Bank. the Senior Management Team, all Executives and other c) Appropriate accounting policies have been employees of the Bank. consistently applied in preparation of the financial statements and that the accounting estimates are The Board offers thanks to the Government of Bangladesh, based on reasonable and prudent judgment. Bangladesh Bank, Bangladesh Securities and Exchange Commission, Registrar of Joint Stock Companies and d) Bangladesh Accounting Standards (BAS)/Bangladesh Firms, Dhaka Stock Exchange Limited and Chittagong Financial Reporting Standards (BFRS) as applicable in Stock Exchange Limited for their appreciable support and Bangladesh have been followed except as outlined in co-operation to the Bank. Note No. 2.1 in the financial statements. The Board also expresses its appreciation to Rahman e) The system of internal control in the Bank is sound Rahman Huq, the Auditors of the Bank, for their efforts for in design and has been effectively implemented and timely completion of Audit. The Board of Directors also monitored. thanks both the print and electronic media personnel for giving media coverage to Bank’s different activities and f) There are no doubts upon the Bank’s ability to events. continue as a going concern.

Finally, the Board thanks the respected Shareholders 33. Declaration of Dividend and assures them that it will continue to add to the The Bank gives utmost importance on the principles of Shareholders’ wealth through further strengthening and sharing good achievements with respected shareholders development of the Bank in which they have placed their of the Bank. Accordingly, the Board of Directors in its 511th trust and confidence. meeting held on April 08, 2017 recommended 20 percent Cash Dividend for distribution amongst the shareholders for the year-2016. Sincerely

34. Corporate Social Responsibilities On behalf of the Board of Directors.

Southeast Bank manages its business in a responsible way and contributes to the society and environment in which it operates. A report on Corporate Social Responsibility of the Bank in 2016 is included in this Annual Report. Alamgir Kabir, FCA 35. Contribution to National Exchequer Chairman

During the fiscal year 2015-2016, Southeast Bank’s contribution to the National Exchequer was BDT.1,644.59 million. The bank’s contributions to the National Exchequer for the last five (5) years are given below:

Year BDT in million 2015 1,644.59 2014 2,519.31 2013 2,573.77 2012 2,069.85 2011 1,802.80 80 Southeast Bank Limited I Annual Report 2016 Corporate Governance Our Corporate Governance framework is a set of transparent rules, requirements and systems practiced by us with a high degree of integrity to meet the expectations that the stakeholders and the society place on us. Southeast Bank Limited I Annual Report 2016 81 Corporate Governance Our Corporate Governance framework is a set of transparent rules, requirements and systems practiced by us with a high degree of integrity to meet the expectations that the stakeholders and the society place on us. CORPORATE GOVERNANCE

Statement of Board of Directors on the Responsibility to Establish 82 Appropriate System of Internal Control Statement of Board of Directors on 84 Adequacy of Internal Control System Corporate Governance Report 85 Managing Director’s and CFO’s Declaration 99 on Integrity of Financial Statements to the Board Management Review, Responsibility and Evaluation 100 Compliance Report on BSEC’s Notification on Corporate Governance 128 Certificate on Compliance of Corporate Governance 134 Compliance of Bangladesh Bank’s Guidelines on Corporate Governance 135 Credit Rating 143 Audit Committee (Composition, Role, Meetings, Attendance etc.) 144 and Internal Control Report of the Risk Management Committee 149 Evaluation of the Quarterly Financials by the 151 Audit Committee and by the Board Report of the Bank’s Shariah Supervisory Committee 152 Capital Plan 154 Statement of Non Performing Loan 156 82 Southeast Bank Limited I Annual Report 2016

Statement of Board of Directors on Adequacy of Internal Control System

The Board of Directors is actively concerned with sound Internal Controls and Risk Management Practices for good corporate governance. In order to support the maintenance of a strong Internal Control Environment of Southeast Bank, the Board has established an organizational structure with clearly defined lines of responsibility, authority, limits and accountability aligned to business and operational requirements.

According to the instructions/guidelines of Bangladesh that consist of six core factors, i.e. Credit Risks; Asset and Bank (Central Bank), the Board has delegated specific Liability/Balance Sheet Risks; Foreign Exchange Risks; responsibilities to 03 (three) subcommittees (Executive Internal Control and Compliance Risks; Money Laundering Committee, Audit Committee and Risk Management Risks and Information and Communication Technology Committee). These committees have the authority to Risk. With this end in view, it has established 03 (three) lines examine particular issues and report back to the Board of defense concept - risk taking units, risk control units and with their recommendations. These committees also internal audit. The risk taking units are responsible for the assist the Board to perform its oversight functions in day to day management of risks inherent in their business ensuring the effectiveness of daily operations and that the activities while the risk control units are responsible operations of Southeast Bank are in accordance with the for setting the risk management framework and corporate objectives/goals, strategies, applicable laws and developing tools and methodologies. The internal audit, regulations, the annual budget as well as the policies and complementing these, provides independent assurance business directions that have been approved. of effectiveness of the risk management approach.

The Board of Southeast Bank has adopted necessary/ An effective management information system is in place required written policies and process guidelines including to support the organizational and procedural controls in Management Control Policy (MCP) as well as Internal order to managing the exposure soundly and prudently Control Policy (ICP). These Policies and process guidelines to mitigate it’s risks. The management of the Group assists are updated as and when required to ensure relevance the Board in the implementation of the policies and and compliance with current/applicable laws and procedures adopted by the Board and works actively to regulations and are made available to all employees. The manage and operate the Group in a sound and prudent MCP outlines the specific responsibilities of the various manner. parties, e.g. the Line Management, Internal Control Team, Audit Committee etc pertaining to Internal Control for An independent audit mechanism has been established Southeast Bank Ltd. The ICP creates awareness among all for undertaking regular reviews of operations of the Bank. the employees regarding internal control components Through these reviews, the adequacy and efficiency and the basic control policy of Southeast Bank. of financial and operating controls are examined and evaluated as well as significance of risks and impacts of The Board of Southeast Bank, in accordance with the non-compliance on the Bank are highlighted. Various guidance notes of Bangladesh Bank, has established an Internal Control Cycles or pre-defined Procedures, i.e effective and integrated risk management framework Compliance Review Work Program (e.g, Departmental Southeast Bank Limited I Annual Report 2016 83

Control Function Checklist, Quarterly Operation Report, Committee of the Board has active oversight on internal Loan Documentation Checklist, MANCOM Certificate, audit’s independence, scope of work and resources. It also Annual Summary Report, Annual Health Report, etc) have reviews the functions of Internal Control and Compliance, also been established to ensure efficient and effective particularly the scope of the annual audit plan and internal control. frequency of the internal audit activities.

At the beginning of each calendar year, a risk based The Board is satisfied that the System of Internal Control Corporate governance Audit/Inspection Plan on different Branches/ Divisions/ of the Group is effective and adequate and provide a Units is approved by the Audit Committee of the Board reasonable assurance in achieving objectives/goals of the and Internal Audits/Inspections are carried out on the Group with the following standards: basis of the approved plan. All the reports of Internal Auditors, External Auditors and Regulatory Authorities reliability of the financial information; with major deficiencies are discussed in the meetings of effectiveness and efficiency of operations; the Management and Audit Committee of the Board. The compliance with applicable laws and regulations; purpose of these meetings is to monitor the functioning of the internal controls during the financial year, so that adherence to management policies; necessary action can be taken where necessary. The safeguarding Bank’s Assets; management also follows up and reviews the status of prevention and detection of fraud and errors; actions taken on the recommendations provided by accuracy and completeness of the accounting the Internal Auditors, External Auditors and Regulatory records; etc. Authorities. However, the reality is that human error is always an The Board of Directors, through its Audit Committee, element in decision-making and the cost always has to reviews the effectiveness of the system of Internal Control be balanced against the benefits when accepting risks and Compliance annually. In support of this review, and implementing controls. Even minor mistakes due to the management conducts an Internal Control and human error may have significant effects, employees may Compliance Certification Process. The Audit Committee of conspire to circumvent internal controls and responsible the Board also reviews the actions taken on internal control managers may ignore internal agreements. issues identified in the reports submitted by the Internal Auditors, External Auditors and Regulatory Authorities and further evaluates the effectiveness and adequacy of the Internal Control System of the Group. The Audit Committee, where applicable, provides recommendations to improve on the effectiveness of risk management, Alamgir Kabir, FCA control and governance process of the Bank. The Audit Chairman 84 Southeast Bank Limited I Annual Report 2016

Statement of Board of Directors on the Responsibility to Establish Appropriate System of Internal Control

According to the Section 15(Kha) and 15(Ga) of Bank Company (amended) Act 2013, the Board of Directors of a Bank is responsible for setting up policies and implementation thereof in the Bank. The Board is also responsible for risk management, internal control, internal audit and compliance of the Bank. The Board is required to ensure effective internal audit and control system in the Bank.

An essential part of the Board’s responsibilities is to review but not absolute assurance, in achieving the policies, goals the effectiveness of internal control while management and objectives of the Bank. The Board of Southeast Bank is accountable to the Board for developing, operating also believes that a strong system of internal control has and monitoring the system of internal control and for significant role over the reliability of financial information/ providing assurance to the Board that it has done so. reporting; effectiveness and efficiency of operations; compliance with applicable laws, regulations and internal The Board of Southeast Bank acknowledges its overall policies, safeguarding its assets; early detection of fraud- responsibility for maintaining sound, adequate and forgery and protecting the Bank from the financial loss. effective internal control systems to safeguard the assets of the Bank and interest of the shareholders. The Board The Board of Southeast Bank has established an ongoing of Southeast Bank recognizes that achievement of the process for identifying, evaluating, monitoring and objectives of banking business depends on the success managing the significant risks faced by the Bank. All the of risk management. As such the internal control systems processes and guidelines of the Bank are reviewed and are primarily designed with a view to highlighting any updated time to time to suit the changes in business deviations from the limits and indicators which comprise environment or regulatory guidelines. the risk appetite of the Bank. The Board is of the view that the internal control framework is designed to manage the risks of Southeast Bank within an acceptable level/risk profile rather than eliminate the risk of failure to achieve the policies, goals and objectives of the Bank. The system Alamgir Kabir, FCA of internal controls can therefore only provide reasonable Chairman Southeast Bank Limited I Annual Report 2016 85

Corporate Governance Report

Conceptual Framework

Southeast Bank operates within the legal framework of the Companies Act-1994 and as a banking company, complies with the provisions of the Bank Company (Amendment) Act-2013. It also complies with the directives and guidelines issued from time to time by Bangladesh Bank and Bangladesh Securities and Exchange Commission. The Bank is responsibly managed and supervised in fulfillment of the objectives of adding value to the shareholders’ wealth and contributing to Corporate governance the national economy. Our Corporate Governance principles serve the goal of strengthening and consolidating company position with sustained growth objectives in materializing the trust placed in the company by the shareholders, clients, employees and the general public. Fair practice, accountability, transparency, compliance, value creation and corporate social responsibility are the pillars of our corporate governance. The Bank’s corporate governance structure comprises of the Shareholders, the Board, Bank Management, Regulatory Authorities, Independent External Auditors and the Employees.

Our Stakeholders

Our Stakeholders are individuals or groups that have an interest, claim or stake in the Company, in what we do and in how well we perform. All our Stakeholders are in an exchange relationship with us. Each of them supplies us with important resources and in exchange each expects that its interest is satisfied.

Board of Directors, Chairman and CEO

Policy on Appointment of Directors

Southeast Bank complies with the requirement of Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC) for appointment of Directors. As per regulations, all Directors, except nominated, independent or alternate director, maintain at least 2% shares in the Bank.

As per the Companies Act 1994, one-third of the Directors retire and if eligible, place themselves for reappointment which is approved in the Annual General Meeting.

As per the Bank Company Act 1991 (As amended in 2013), the Directors are appointed for a term of three years which can be extended by one term only subject to approval by the shareholders in the Annual General Meeting (AGM).

The term of appointment for an Independent Director is also three years which can be extended by one term subject to approval by the Shareholders in the AGM. For appointment of an Independent Director, the approval of BSEC is obtained to comply with its requirement.

All appointments of the Board is made subject to approval of Bangladesh Bank.

The Managing Director is also appointed subject to the approval received from Bangladesh Bank. However, unlike other Directors, he is not subject to retirement as long as he remains Managing Director.

Ownership Composition

As on 31 December 2016, the Directors of Southeast Bank Limited held 15.33 percent of total shares whereas Financial Institutions and General Public are holding 35.97 percent and 48.70 percent shares respectively. 86 Southeast Bank Limited I Annual Report 2016

31-12-2016 31-12-2015 Sl. Composition No. No. of Shares % to Total No. of Shares % to Total Held Shares Held Shares 1 Directors 140,573,157 15.33% 168,011,868 18.32% 2 General Public 446,527,386 48.70% 467,707,676 51.01% 3 Financial Institutions 329,849,633 35.97% 281,230,632 30.67% Total 916,950,176 100.00% 916,950,176 100.00%

Pattern of Shareholdings i) Shares held by Parent/Subsidiary/Associated Companies and other related Parties NIL ii) Ownership of Company’s Securities by the Members of Board of Directors.

Sl. Remuneration/ Remuneration Name Designation No. Meeting Drawn 1. Alamgir Kabir, FCA 19,944,672 199,446,720.00 2.18% 2. M. A. Kashem 20,307,060 203,070,600.00 2.21% 3. Azim Uddin Ahmed 25,490,735 254,907,350.00 2.78% 4. Duluma Ahmed 19,082,742 190,827,420.00 2.08% 5. Jusna Ara Kashem 18,339,525 183,395,250.00 2.00% 6. Md. Akikur Rahman 18,443,731 184,437,310.00 2.01% 7. Rehana Rahman 18,844,145 188,441,450.00 2.06% Sirat Monira, 8. 120,547 1,205,470.00 0.01% Representing Public Shareholders A.H.M. Moazzem Hossain 9. - - - Independent Director Dr. Quazi Mesbahuddin Ahmed 10. - - - Independent Director M. Kamal Hossain 11. - - - Managing Director (Current Charge) Total: 140,573,157 1,405,731,570.00 15.33%

iii) Shares held by Managing Director, Company Secretary, Chief Financial Officer, Head of Internal Control and Compliance and their spouses and minor children.

Sl. Shareholdings as Designation No. on 31.12.2016 a) M. Kamal Hossain Nil 1 Managing Director (Current Charge) b) Spouse / Minor Children of Managing Director Nil a) Muhammad Shahjahan Nil 2 Company Secretary b) Spouse / Minor Children of Company Secretary Nil a) Mohammad Aminul Haque, FCA, ACMA (CIMA), CGMA Nil 3 Chief Financial Officer b) Spouse / Minor Children of Chief Financial Officer Nil a) Haradhan Banik Nil 4 Head of Internal Control and Compliance b) Spouse / Minor Children of the Head of Internal Control and Compliance Nil Southeast Bank Limited I Annual Report 2016 87

iv) Shares held by top five salaried Executives in the regular services of the Bank.

Shareholdings as on Sl. No. Designation 31.12.2016 1. S. M. Mainuddin Chowdhury Nil Additional Managing Director 2. Ziaus Shams Chowdhury Nil Senior Executive Vice President 3. Pritish Kumar Sarker Nil Senior Executive Vice President 4. Nasim Sekander Nil Senior Executive Vice President 5. Haradhan Banik Nil Corporate governance Senior Executive Vice President v) List of Shareholders holdings 10% and above shares in the Paid-Up-Capital of the Bank. NIL Rotation and Retirement of Directors

In terms of Article 105 (i) of the Articles of Association of the Bank, one-third of the Directors for the time being or if their number is not three or multiples of three (3) then the number nearest to one third (1/3rd) shall retire in rotation from office. The following three (3) Directors will retire in the 22nd Annual General Meeting. i) M. A. Kashem ii) Rehana Rahman iii) Sirat Monira

The brief resume of the above Directors in compliance of Notification No.SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August, 2012 of Bangladesh Securities and Exchange Commission (BSEC) is appended in the Directors’ Profile in the Annual Report. Other information about them as required as per the aforesaid Notification is given below.

Name Expertise Memberships Directors in M. A. Kashem Banking Activities Executive Committee Rose Corner (Pvt.) Limited Risk Management Committee Rehana Rahman Banking Activities Audit Committee Bengal Tradeways Limited Sirat Monira Banking Activities - -

Non-Executive Directors

The Managing Director is the only Executive Director on the Board of Directors of the Bank. All other Directors including the Chairman are the Non-Executive Directors.

Independent Directors

In compliance with the Corporate Governance Guidelines of Bangladesh Securities and Exchange Commission (BSEC) and as per Section-15 of Bank Company (Amendment) Act-2013 regarding appointment of New Directors and the guidelines given by Bangladesh Bank in BRPD Circular No.11 dated 27 October, 2013, the Bank appointed 2 (two) Independent Directors observing all required formalities.

Independent Directors’ Independence

As per existing rules and regulations, Independent Directors are required not to have any significant relationship, whether pecuniary or otherwise, with the Bank, its top management and the Board. The Bank complies with the requirement and appoints Independent Directors who do not hold any shares in the Bank and do not have any family or other relationship with its Board of Directors and its executive management. 88 Southeast Bank Limited I Annual Report 2016

The Bank also ensures compliance with Bangladesh Bank’s guidelines and Bangladesh Securities and Exchange Commission’s requirements relating to appointment of Independent Directors and seeks prior approval from Bangladesh Securities and Exchange Commission and Bangladesh Bank before appointing a person as an Independent Director.

Chairman’s Independence

As per the requirements of Notification on Corporate Governance issued by the Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank’s requirements, the post of the Chairman and the CEO (Chief Executive Officer) will have to be held by different person. This compliance requirement has been ensured by the Bank. It has appointed Mr. Alamgir Kabir, FCA as the Chairman of the Board of Directors and the position of CEO (Managing Director-Current Charge) is held by Mr. M. Kamal Hossain. As per the Organogram of the Bank, Chairman and the Directors act as non-executives while the Managing Director is the sole executive director on the Board. In considering the appointment of the Chairman, procedures are observed to ensure that the independence of the Chairman is not hampered.

Chairman and the CEO

The Chairman is independent of the CEO, and this has been in practice since inception of the Bank. This also complies with clause 1.4 of the BSEC’s Notification on Corporate Governance Guidelines.

Independence of the Non-Executive Directors

The Non-Executive Directors enjoy full freedom in discharging their responsibilities. They sincerely try to attend all meetings of the Board and its any Committee of which they are members. They actively participate in discussion on any agenda for a well-thought-out decision.

Role and Responsibilities of the Board of Directors

Structure of the Board

The Board of Directors consists of 11 (eleven) Directors including the Managing Director. The Managing Director is an Executive Director (Ex-Officio). All other 10 (ten) Directors are non-executive directors. Of the 10 (ten) non-executive directors, 7 (seven) are sponsor directors, 1 (one) director is from the public shareholders and 2 (two) are independent directors.

Role and Responsibilities of the Board

The main roles and responsibilities of the Board of Directors as envisaged in the BRPD Circular No.11 dated 27 October, 2013 are the following:

1) approving suitable business strategies 2) fixation of operational budgets 3) approval of financial statements 4) review of Bank’s operational performance towards achievement of objectives 5) approval of policies and operational manuals to establish effective risk management in core banking areas and internal control. 6) reviewing company’s corporate governance standard for further improvement 7) determining Bank’s corporate social responsibility status and taking steps for its improvement 8) developing compliance culture in the Bank 9) approving proposals which are beyond the delegated business / financial / administrative powers of the Management 10) appointment of the Managing Director (CEO) and fixation of his benefits 11) purchase or acquire property for the Bank 12) providing welfare to the employees 13) making donation for any charitable ventures 14) devising annual work plan for goals and monitoring its pace of achievement. Southeast Bank Limited I Annual Report 2016 89

15) analyzing reasons for success or failure of Bank’s annual budget achievement 16) periodical review of Bank’s operational budget achievement 17) taking risk management initiatives 18) review of sufficiency and requirement for internal control efforts of the Bank 19) reviewing Bank’s human resource policy 20) Bank’s financial management and its periodical review 21) approving policies or taking Policy decisions for improvement of operation and compliance culture in the Bank.

Role of the Chairman

The Chairman of the Bank is elected from amongst the Directors after every Annual General Meeting in obedience to the

Articles of Association of the Bank. The functional areas of the Chairman and that of the Managing Director are sharply Corporate governance bifurcated within the rules of Bangladesh Bank. But they work in cohesion for the disciplined operation and growth of the Bank.

Responsibilities of the Chairman of the Board

The chairman discharges his responsibilities within the purview of the provisions contained in BRPD Circular No.11 dated 27 October, 2013. His main responsibilities are to :

Give leadership for Bank’s disciplined growth and operation. Ensure non-intervention of any Director in the routine affairs of the Bank. Ensure compliance with corporate governance requirements of regulatory bodies. Bring policies for Board’s deliberations and consideration for Bank’s reforms and development. Determine sense of direction for the Bank, etc.

Annual Appraisal of Board’s Performance

The shareholders elect the Directors in the Annual General Meeting. The directors are accountable to the shareholders. In the Annual General Meeting (AGM), the shareholders freely speak about the performance of the Bank and make a critical analysis of the performance of the Board of Directors. The Chairman replies to their queries made in the meeting. Their constructive suggestions are noted down and implemented for qualitative improvement of the Bank.

As per our existing policy, it is disclosed that no formal annual appraisal of the Board takes place in the Bank.

Role and Responsibilities of the Managing Director (CEO)

The main responsibilities and authorities of the Managing Director are enumerated below:

A. In terms of the financial, business and administrative authorities vested upon him by the Board, the CEO shall discharge his own responsibilities. He shall remain accountable for achievement of financial and other business targets by means of business plans, efficient implementation thereof and prudent administrative and financial management.

B. The CEO shall ensure compliance of the Bank Companies Act, 1991 and/or other relevant laws and regulations in the discharge of his functions in the bank.

C. The CEO shall include information on violation of any law, rules, regulation including Bank Company Act, 1991 while presenting memorandums before the Board or the Committees formed by the Board.

D. The CEO will provide all sorts of information to Bangladesh Bank about the violation of Bank Company Act, 1991 and/ or any violation of Laws, Rules and Regulations.

E. The recruitment and promotion of all staff of the Bank except those in the two tiers below him shall rest on the CEO. He shall act in such cases in accordance with the approved service rules on the basis of the human resources policy and sanctioned strength of employees as approved by the Board. The Board or the Chairman of any Committee of the Board or any Director does not get involved or intervene in such affairs. 90 Southeast Bank Limited I Annual Report 2016

F. The authority relating to transfer of and disciplinary measures against the staff, except those at two tiers below the CEO, shall rest on him, which he shall apply in accordance with the approved service rules. Besides, under the purview of the human resources policy as approved by the Board, he shall nominate officers for training. Besides, the CEO shall assume any other responsibility if the Board assigns within the purview of the Rules, Regulations, Acts and Articles of the Bank.

Annual Evaluation of Performance of the Managing Director (CEO) of the Bank

The Board of Directors prescribes the roles and responsibilities of the Chief Executive Officer (CEO) of the Bank. His performance is assessed on certain Key Performance Indicators (KPIs). A few mentionable KPIs for the CEO are to meet the annual budgetary targets of the Bank which was approved by the Board, maximize shareholder value measured through desired ROA, ROI, ROE, EPS and Risk Management as per expectation of the Board, sustainable growth in investment and revenue earning for the Bank, gradual reduction the NPL ratio and improvement in the scores for CAMELS rating. The Board evaluates the performance of the Managing Director in each month when the month-end financial performance of the Bank is placed before the Board for review. Apart from that, the Board seeks MD’s reports on various operational aspects periodically to assess the trend of movement of the Bank in various indicators. MD’s quality leadership to post better performance is always expected. The performance of the Managing Director is evaluated again annually by the Board based on Bank’s operational results mainly in the achievement of operational budgets.

Policy on Training of Directors

Most of the Directors of the Bank are on the Board for many years. They have acquired enough knowledge and acumen to lead the Bank well to the path of progress. The latest legislations on the financial sector and directives of the regulatory bodies are made available to them for their instant information in order that they can discharge their responsibilities effectively. They also attend various seminars and symposiums mainly on corporate governance organized by different professional bodies.

Corporate Governance Training and its Objectives

Corporate Governance has at its backbone a set of transparent relationships among the institution’s Management, Board, Shareholders and other stakeholders. With this in view, Southeast Bank has organized a special training on “Orientation for Potential Managers” where Heads of Branches designated from VP to EVP and a number of Heads of Departments of Head Office participated.

The main topics of the training were:

1. Corporate Governance in Banks-International best practices. 2. Banking Company Act, 1991 and stipulations on corporate governance and 3. Corporate Governance Regulations for banks in Bangladesh

A day long workshop on Corporate Governance was organized in 2016 to create a strong risk management culture. The main objectives of these training programs are: i. To determine the best practices suited to the organization through structured assessment. ii. To develop broad-spectrum insights into best practices to understand how they improve coherence in business directions and strategies, drive corporate responsibilities and improve company accountability for stakeholders’ confidence. iii. To shed light on specific strategies to mitigate risk and maximize opportunities by paving the skills, tools and frameworks for action plans to address challenges and boost Board’s performance. iv. To help the Board members develop the right strategies for change management and create advance plans for seamless change in order to identify internal and external opportunities and challenges, manage change or implement new approaches. v. To drive positive Board culture such as skills and leadership style. Southeast Bank Limited I Annual Report 2016 91

Directors’ Knowledge and Expertise in Finance and Accounting

Mr. Alamgir Kabir, FCA, Chairman of the Bank, is a Post-Graduate in commerce. He is also a qualified Chartered Accountant. One Independent Director is a Ph.D in Economics and another Independent Director is a B.A (Hons) and M.A in Economies. He is also a renowned expert in financial journalism. They have enough knowledge and expertise in the field of Accounting and Finance. Most of the other Directors are successful entrepreneurs and professionals. They are well conversant in business, economics and administration.

Directors’ Report in Compliance with Best Practices on Corporate Governance

The status of compliance with corporate governance guidelines of Bangladesh Bank and Bangladesh Securities and Exchange Commission has been given hereafter. Syful Shamsul Alam & Co., Chartered Accountants, duly certified the Bank’s Compliance Status which is re-produced in a page hereafter.

Board meetings and attendance Corporate governance

Presence of Directors in the Sl. Meetings, During their Tenure Remuneration/ Remuneration Name Designation No. No. of Meeting Drawn Present Absent Meetings 1 Alamgir Kabir, FCA Chairman 23 23 - 8000 X 23 BDT 184.000.00 Vice Chairman (Ceased to be 2 Ragib Ali Director on and 23 10 13 8000 X 10 BDT 80,000.00 from March 08, 2017) 3 M.A. Kashem Director 23 18 5 8000 X 18 BDT 144,000.00 4 Azim Uddin Ahmed Director 23 20 3 8000 X 20 BDT 160,000.00 5 Duluma Ahmed Director 23 21 2 8000 X 21 BDT 168,000.00 6 Jusna Ara Kashem Director 23 19 4 8000 X 19 BDT 152,000.00 7 Md. Akikur Rahman Director 23 13 10 8000 X 13 BDT 104,000.00 8 Rehana Rahman Director 23 21 2 8000 X 21 BDT 168,000.00 9 Sirat Monira Director 23 20 3 8000 X 20 BDT 160,000.00 Director Abdul Hye, Representing (Ceased to be 10 by Karnafuli Tea Co. Director on and 23 3 20 8000 X 3 BDT 24,000.00 Limited from March 08, 2017) Independent 11 A.H.M. Moazzem Hossain 23 23 - 8000 X 23 BDT 184.000.00 Director Independent Dr. Quazi Mesbahuddin Director 12 23 16 - 8000 X 16 BDT 128,000.00 Ahmed (Appointed on April 11, 2016) Independent Director 13 Dr. Zaidi Sattar (Ceased to be 23 1 - 8000 X 1 BDT 8,000.00 Director on April 11, 2016) Managing Director 14. Shahid Hossain (Resignation 23 23 - - - accepted on March 27, 2017)

Note: Mr. Ragib Ali could not attend 13 meetings because of his personal issues. 92 Southeast Bank Limited I Annual Report 2016

Related Party Transactions

During the year 2016, the Bank concluded business deals with the following organizations in which the directors had interest. It was determined on the basis of Common Directorship and Bank’s Subsidiaries.

Name of Organization Relationship Nature of transaction Asia Insurance Ltd. Common Director Insurance Coverage Share Capital Southeast Bank Capital Services Ltd. Subsidiary Company Invest on Loan Southeast Financial Services (UK) Ltd. Subsidiary Company Share Capital Southeast Financial Services (Australia) Pty Ltd. Subsidiary Company Share Capital Southeast Exchange Company (South Africa) Pty Ltd. Subsidiary Company Share Capital

Board’s Committees and their Responsibilities

The Board has constituted following 3(three) Committees:

i. Executive Committee

Composition: In compliance with the provisions contained in BRPD Circular No.11 dated 27 October, 2013, the Board of Directors re-constituted the Executive Committee comprising 4 (four) members. To comply with regulatory requirement, no member of the Audit Committee is included as a member of the Executive Committee.

Responsibilities: The Executive Committee is a body to deliberate on generally important issues and matters in the execution of operations of the Bank. The committee performs within the power delegated to it by the Board of Directors. The resolution of the Executive Committee are ratified by the Board of Directors. The minutes of the Executive Committee are sent to Bangladesh Bank for their review.

Attendance of members of the Executive Committee in meetings

Presence of Directors in the Meetings, During their Tenure Sl. Remuneration/ Remuneration Name Designation No. Meeting Drawn No. of Present Absent Meetings

1 Alamgir Kabir, FCA Chairman 8 8 - 8000 X 8 BDT 64,000.00

Member (Ceased to be Director on 2 Ragib Ali 8 2 6 8000 X 2 BDT 16,000.00 and from March 08, 2017)

3 M.A. Kashem Member 8 6 2 8000 X 6 BDT 48,000.00

4 Azim Uddin Ahmed Member 8 8 - 8000 X 8 BDT 64,000.00

Member Shahid Hossain (Resignation 5 8 8 - - - Managing Director accepted on March 27, 2017

Note: Mr. Ragib Ali could not attend 6 meetings because of his personal issues. Southeast Bank Limited I Annual Report 2016 93

ii. Audit Committee Composition of the Audit Committee: A 5-member Audit Committee was re-constituted by the Board in compliance with the relevant provisions contained in BRPD Circular No.11 dated 27 October, 2013 of Bangladesh Bank. As per rules, any member of the Executive Committee cannot be the member of the Audit Committee. A report of the Audit Committee is included in this Annual Report.

Chairman is an independent Non-Executive Director

The Chairman of the Audit Committee is a BSEC approved independent non-executive director. He is not involved in the day to day operations of the Bank. He is an experienced individual and qualified to be the Chairman of the Audit Committee. He did B.A (Hons) and MA in Economics from Dhaka University. He acted as the Director of Janata Bank Limited for 5 years. He is the Editor of financial daily The Financial Express.

All members are suitably qualified Corporate governance The members of the Audit Committee are qualified and have years of experience in banking and financial institutions. They are also very competent. Dr. Quazi Mesbahuddin Ahmed is a member of Audit Committee as another Independent Director of the Bank. He did his Masters as well as PhD in Economics from the University of Illinois at Urbana-Champaign, USA. He was the former Managing Director of Palli Karma Sahayak Foundation and Member (GED), Planning Commission Government of Bangladesh. He has publications on development planning, macroeconomic performance, use of foreign aid, budgetary accounts, national income accounts, etc.

Conflict of Interest

The Code of Ethics and Business Conduct require all employees to avoid situations where their personal interests conflict, or may appear to conflict with those of the Bank. Employees are advised to take particular care when they are responsible for dealing with customers, business associaties, agents on behalf of the Bank. Any failure to disclose a conflict of interest leads to a disciplinary action.

Internal Control and Compliance Division’s access to Audit Committee The Head of Internal Control and Compliance Division has direct access to the Audit Committee and can raise his concerns whenever required. Besides, he presents related memos for the Audit Committee for taking decisions. Recommendation for appointment of External Auditors The Audit Committee does an extensive review on the audit work done by the auditors after the audited financial statements have been signed. The Audit Committee evaluates the performance of auditors extensively and ensures that there were no threats to independence or any other issues with the auditors. The Audit Committee scrutinizes the applications of the auditors and recommends for appointment/reappointment of auditors for the next year.

Attendance of members of the Audit Committee in meetings

Presence of Directors in the Sl. Meetings, During their Tenure Remuneration/ Remuneration Name Designation No. No. of Meeting Drawn Present Absent Meetings 1 A.H.M. Moazzem Hossain Chairman 6 6 - 8000 X 6 BDT 48,000.00 2 Duluma Ahmed Member 6 5 1 8000 X 5 BDT 40,000.00 3 Jusna Ara Kashem Member 6 5 1 8000 X 5 BDT 40,000.00 4 Rehana Rahman Member 6 5 1 8000 X 5 BDT 40,000.00 Dr. Quazi Mesbahuddin 5 Member 6 4 2 8000 X 4 BDT 32,000.00 Ahmed Sirat Munira 6 (Ceased to be Member from Member 6 1 - 8000 X 1 BDT 8,000.00 April 11, 2016)

Appointment of External Auditors M/S Rahman Rahman Huq ‘A’ ranking Audit Firm has been appointed as the External Auditors of the Bank in the 21st Annual General Meeting held on April11, 2016 for the first term. They are eligible to re-appointment as per directives of 94 Southeast Bank Limited I Annual Report 2016

Bangladesh Bank in the ensuing 22nd Annual General Meeting. The External Auditors enjoy full freedom in their audit of accounts of the Bank and reporting to the shareholders. The competence and performance of the External Auditors are evaluated by the Bank’s Board Audit Committee.

Services not Provided by External Auditors M/S Rahman Rahman Huq are the external auditors of the Bank. The services as are specifically barred in the Securities and Exchange Commission Notification No.SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August, 2012 are not obtained from the external auditors.

Highlights on Central Bank Inspection

In the year 2016, Southeast Bank Limited (SEBL) received 45 (Forty Five) inspection Reports on Head office and different branches of SEBL from Bangladesh Bank. SEBL submitted compliances on said reports to Bangladesh Bank in time. Appropriate actions have been taken for implementation of the recommendations of Bangladesh Bank inspection Teams.

iii. Risk Management Committee

Composition: A 4-member Risk Management Committee was constituted by the Board in its 486th meeting held on April 11, 2016. A report of the Risk Management Committee is included in this Annual Report.

Attendance of members of the Risk Management Committee

Internal Control and Risk Management

Internal Control

The Board of Directors of Southeast Bank Group ensures maintenance of a sound system of internal control to safeguard assets. The Board through its Audit Committee conducts an annual review and evaluate effectiveness of the system of Internal Control of the Bank.

Establishment and Review of Internal Control System

A report on Establishment and Review of Internal Control System is included at in this report.

Identification of risk to which SEBL is exposed internally and externally

The risks related issues of the Bank are looked after by the Risk Management Committee of the Board. A report on Risk Management is included at page no. 149 of this Annual Report.

Vision, Mission and Strategy approved by the Board

Vision, Mission of the Bank

The vision, missions statement and the strategy of the Bank have been included in the beginning pages of the Annual Report. Those were approved by the Board. The Board firmly adheres to them. Southeast Bank Limited I Annual Report 2016 95

Business objectives and areas of business focus

The Board always sets business objectives and areas for focus in consistency with the market. The latest business objectives and areas of business focus can be found in the “Strategic Priorities Statement” of the Bank at page no. 10 in this Annual Report.

Strategies to achieve business objectives Our strategies to achieve business objectives are elaborately discussed in the “Strategic Objectives” as contained in this Annual Report at page no. 9.

Ethics and Compliance Code of Conduct for Directors

The Group Chairman’s Report contains the issue. Corporate governance

Code of Conduct for Bank’s Employees

Southeast Bank has a Code of Conduct and Ethical Guidelines for Bank’s employees which are integral parts of the Service Rules and Regulation for the employees of the Bank. The employees of the Bank comply with the code of conduct and requirements of ethical principles.

The Board’s commitment to establishing high level of ethics and compliance within the organization

The Board of Directors has always been deeply committed to establishing a high level of ethics and compliance among all employees of the Bank. It has always encouraged the management to ensure that everyone maintains a high ethical standard within the Bank. The Board guides the management on policies that should be adopted and followed by everyone in the Bank.

Management Committees and their responsibilities Ensuring effective corporate governance is one of the top priorities of the Bank management for realizing the objectives advocated in our management philosophy. A clearly defined organizational structure with definite lines of responsibility and delegation of powers to different echelon of the management are in place in the Bank. To streamline functions, the following Committees are actively working in the Bank: Management Committee (MANCOM)

A Management Committee (MANCOM) is working in the Bank. It is composed of senior members of the Management Team. Its main functions are to address general issues of importance, introduce new products, frame strategies for improvement of operations, evaluate different types of risks, monitor internal control structure and to review effectiveness of the internal control system. To streamline the management functions further and to quicken decision making process based on best analysis and appraisal, sub-committees of the Management Committee for the following issues were constituted:

(a) Product Development and Marketing (b) Strategic Planning Issues and (c) Corporate Governance and Administrative Issues. The following Sub-Committees of MANCOM are also functioning in the Bank: i) Head Office Credit Review Committee (HOCRC)

Two Credit Review Committees, one headed by the Additional Managing Director (Corporate Banking) of the Bank and the other headed by the Senior Executive Vice President, Credit Risk Management Division, have been constituted for appraisal and quick disposal of credit proposals. Credit proposals that do not merit considerations are declined. Credit proposals that merit considerations in the opinion of the Credit Review Committee are presented before the competent authority as per the delegation of business power for approval. ii) Asset Liability Management Committee (ALCO)

Asset Liability Management Committee consists of the Managing Director, Additional Managing Directors, the Deputy Managing Directors and strategically important Divisional Heads of Head Office. 96 Southeast Bank Limited I Annual Report 2016

iii) Central Compliance Unit

Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) are getting added importance day by day. All issues relating to AML and CFT are managed and monitored by the Bank. As required by the regulatory authority, Central Compliance Unit (CCU) has been working on the issues in the Bank.

iv) Integrity Committee

As instructed by Bangladesh Bank, a 6-Member Integrity Committee of the Bank headed by a Additional Managing Director was constituted on November 18, 2013. One Senior Executive Vice President of the Bank is the Focal Point of the Committee. The Committee sits in meeting to discharge its responsibilities effectively.

Function of Integrity Committee

The functional areas of the Integrity Committee include, but not limited to, implementation of National Integrity Strategy, implementation of Bank’s action-plan, resolving identified problems related to integrity, complaint management, reporting to the regulators, performing relevant activities in line with the guidelines of Bangladesh Bank regarding implementation of Integrity Strategy, etc.

v) Committee for Evaluation of the Effectiveness of Management Reporting System

As advised by Bangladesh Bank, a 9- Member Committee for Evaluation of Management Reporting System (MRS) has been constituted in the Bank with a Additional Managing Director as its head.

vi) Tender Committee

Transparency is very important in procuring things and services for the Bank. A 7-members Tender Committee is actively functioning in the Bank.

vii) Procurement Committee

The procurement policy of Southeast Bank Limited is designed to ensure that the purchase of all goods, services and works required for the satisfactory operation of the Bank is done in a transparent, timely and efficient manner.

viii) Taskforce for Monitoring and Recovery of Re-Scheduled and Re-Structured Loans

A 8-Member Taskforce for Monitoring and Recovery of Re-Scheduled and Re-Structured Loans are working in the Bank. The Taskforce frequently sits in meetings.

ix) Taskforce for recovery of classified and written-off loans

The increase of non-performing loans (NPLs) and written-off loans has a negative impact on profitability, capital adequacy, asset liability management and over all reputation of the Bank. Therefore, it was essential to strengthen recovery drive to downsize the non-performing/classified loans and written-off loans through cash recovery. From this point of view two taskforces with high level executives / officers were formed / reformed at Head Office in the year 2012 – both are headed by two Additional Managing Directors of the Bank.

The taskforces review the recovery progress of classified and written-off loans on monthly basis and provide necessary guidelines to the branches accordingly. The taskforces identify the reasons for becoming the loans non-performing in each and every individual case and chalk out the strategy of recovery upon discussion meeting / dialogue with the concerned borrowers at Head Office / Branch. The taskforces also review the court cases / suits against the defaulted borrowers and continue follow up with the panel lawyers of the Bank for early disposal of the suits. The members of the taskforces visit clients factory, office, security / mortgaged properties as and when needed. They also place their observations and recommendations before the competent authority for their guidance and next courses of action.

x) IT Steering Committee

An IT Steering Committee has been formed in 2012 comprising 06 (six) senior officials of the Bank for overall supervision of ICT Operations and ICT Projects Management. Southeast Bank Limited I Annual Report 2016 97

Supervisors’ Role In order to supervise and monitor the performance of the Branches, a supervisory system for the Branches has been prevailing in the Bank. The Branches are supervised by a group of executives working at Head Office. The Supervisors of the Branches monitor the activities of the Branches through regular contacts with Heads of Branches and evaluating their operational performance through periodic field visits. They work as focal points between Head Office and Branches to resolve functional problems of the Branches and provide proper guidelines in preparing business strategy and achieving budgetary goals.

The meetings of the Supervisors of the Branches with top management are held every two months. The performance of the supervisors is also evaluated in the meetings which are presided over by the Managing Director.

Remuneration Committee and Activities

The Bank cannot have more than three Committees of the Board of Directors as per law and rules of Bangladesh. For Corporate governance obvious reasons, activities relating to remuneration are done by the Board itself. However, the Management Committee of the Bank assists in the formulation of remuneration related policies and practices in alignment of Bank’s short and long- term business objectives. Benefits provided to the Directors and the Managing Director In accordance with the guidelines of Bangladesh Bank, the following facilities can only be given to the Directors.

An office chamber, one Private Secretary / Office Assistant, a telephone in office, one Chairman : mobile phone for use within the country and a full time car. Directors : Fees and other facilities for attending each meeting of the Board or its any Committee. Only those benefits as are agreed upon in his contractual appointment and as are Managing Director : approved by Bangladesh Bank.

Disclosure of key policies with regard to remuneration of directors, senior management and employees

All employees including the Senior Management employees are paid competitive remuneration package. The structure and level of remuneration are reviewed time to time based on Bank’s performance and affordability. The remuneration also stresses on ensuring internal and external pay equity.

Human Capital

The detailed discussion on Bank’s Human Capital has been presented at Page no. 191 of this Annual Report.

Communication to Shareholders and Stakeholders, and Company’s policy/strategy to facilitate effective communication with shareholders and other stakeholders Southeast Bank ensures that all shareholders are notified at least 14 days before the AGM so that all shareholders may attend it. Also all other types of accounts (Quarterly and Half yearly) or information are updated on the website and notified to all stakeholders on a duly basis. The Bank tries to maintain liaison with all major shareholders as far as possible and ensures that all stakeholders are informed of the bank’s activities on a routine basis. SEBL also holds dialogue with the shareholders as far as possible and practicable for the progress and wellbeing of the Bank.

The Directors appreciate the importance of general shareholders of the Bank and use the Bank’s AGM as an ample opportunity to communicate with them. SEBL provides copies of Annual Reports in order that these are made available to them well in advance for detailed and constructive discussion. It is the company’s policy to give the shareholders the opportunity to ask questions about its activities and prospects at the AGM. The Board also structures these meetings so that shareholders can vote on each agenda by proposing resolutions.

Company’s policy on ensuring participation of shareholders in the Annual General Meeting and providing reasonable opportunity for the shareholder participation in the AGM SEBL sincerely tries to ensure that all shareholders can participate in the AGM. Annual Reports are sent at least 14 days before the AGM to ensure all shareholders are notified about the event date, place and time. Also, SEBL always ensures that AGM is held at a convenient place where all shareholders may attend. Notices to shareholders are also published in 98 Southeast Bank Limited I Annual Report 2016

the daily newspapers and through the digital media as well. To ensure compliance with regulatory bodies, SEBL ensures that it publishes Bank’s Financial Statements in two widely circulated newspapers in English and Bangla and are sent to the stock exchanges and BSEC. SEBL ensures effective communication with the shareholders and encourages shareholder participation at the AGM. The good number of shareholders that spoke in the Bank’s each AGM in the past bear the testimony of the statement. SEBL connects with the investors through AGM, EGM, Annual Report and Company’s website. All of the Bank’s publications to the market may be retrieved through the Company’s website. Shareholders are offered the chance to evaluate the performance of the Board regarding the operation of the Bank. They are also given scope to make queries to the Company’s auditors concerning topics linked to the audit of the Company’s financial statements at the AGM.

Environmental and Social Obligations Southeast Bank integrates environmental and social obligation into all its business activities with the belief that success is not only measured by financial results. The Bank has a strong stake in the society through investments and projects which takes its banking role one step further. Southeast Bank supports its clients to be conscious about environmental issues. SEBL persuades its customers to avail facilities for renewable energy generation and other environmentally beneficial projects. The Bank has set guideline, namely “Southeast Shobuj Jibon” targeted to efficient use of electricity, water, paper and re-use of equipments. We believe that every small ‘GREEN’ step taken today would go a long way in building a greener tomorrow.

Sustainable Financing The Risk Management Committee of the Board of Directors supervises and takes decision in principle and provide strategic directions regarding sustainable banking and sustainable finance (environment friendly banking) of the Bank. The Committee also monitors that green financing activities of the Bank are taking place to achieve sustainable development goals as per guidelines of Bangladesh Bank.

Green Award As part of environmental and social obligation, SEBL wants to inspire the individuals and organizations working actively to preserve environment. With this end in view, the Bank has introduced ‘Southeast Bank-The Financial Express-Policy Research Institute Green Award’. The award aims at recognizing and honoring individuals and organizations for significant contributions towards achieving environmental sustainability through green business and operations, knowledge management and community engagement. The award also aims at boosting synergies between the Bank and the climate warriors for conserving environmental resources.

Dr. Mohammed Farashuddin, Chairman, Southeast Bank- The Financial Express-Policy Research Institute (SEBL-FE- PRI) Green Award Trust, Fazle Kabir, Governor, Bangladesh Bank, and Chief Guest of the ceremony, Alamgir Kabir, FCA, Chairman, Southeast Bank Limited along with other members of the Trust are seen in the Green Award distribution ceremony. Southeast Bank Limited I Annual Report 2016 99

Managing Director’s and CFO’s Declaration on Integrity of Financial Statements to the Board

Date: March 29, 2017

The Board of Directors Corporate governance Southeast Bank Limited Eunoos Trade Centre 52-53 Dilkusha C/A Dhaka-1000

Sub: Managing Director’s/CFO’s Declaration to the Board regarding integrity of financial statements.

We submit the following in our capacity of the Managing Director (CEO) and the Chief Financial Officer (CFO) of the Bank.

In accordance with the notification of Bangladesh Securities and Exchange Commission No. SEC/CMRRCD/2006-158/134/ Admin/44 dated 7 August, 2012, we solemnly declare that: i) We have reviewed the financial statements for the year 2016 and to the best of our knowledge and belief: a) These financial 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 picture of the company’s affairs and are in compliance with existing accounting standards and applicable laws. ii) To the best of our knowledge and belief, there is no transaction entered into the books of the bank during the year 2016 which is fraudulent, illegal or in violation of the Bank’s code of conduct.

Mohammad Aminul Haque, FCA, ACMA (CIMA), CGMA M. Kamal Hossain Chief Financial Officer Managing Director (Current Charge) 100 Southeast Bank Limited I Annual Report 2016

Management Review, Responsibility and Evaluation

Corporate Banking

The Corporate Banking Division of Southeast Bank is credit approval process, suitable credit administration, engaged in planning, developing and managing the measurement and monitoring process and adequate Bank’s corporate, commercial and institutional businesses control over credit risk. to ensure desired profitability and sustained growth in line with the Bank’s strategic plans, credit policies and business Southeast Bank sets specific industry-wise lending caps objectives. considering the existing concentration, risk appetite, future growth opportunities etc. Lending caps discourage Southeast Bank finances its corporate clients concentration of Bank’s global loan portfolio into one generally in the following ways – particular sector and encourage diversification of the total loan in various sectors with a view to minimizing Export Finance Work Order Finance concentration risk and to maximize the future growth of Project Finance Real Estate Finance the Bank. Trade Finance Syndicated Finance On the other hand, considering the cyclical aspects, Working Capital Finance economic condition, seasonal fluctuation, political environment, related risk factors as well as growth Besides, Southeast Bank has also set up a Cash appetite in each sector, Corporate financing activities Management Services Unit which mainly looks after follows a prudent sector wise budgetary allocation as per mobilization of low-cost/ no-cost funds of the corporate annual credit plan. houses by providing various tailor made services to them. In the coming years, the Bank will exert enhanced effort Based on the policy guidelines given by the Board of for more dynamism in such cash management activities. Directors and catering to the ongoing requirements of the entrepreneurs and the economy, the management of the In the year 2016, Southeast Bank’s strategic priorities Bank periodically updates the policies and strategies in were growth and profitability whilst maintaining asset line with policy-parameters of the Central Bank with due quality and strengthening the foundations for future approval of the Board of Directors. growth. During the period, the Bank continued to provide comprehensive and innovative banking solutions to its Export Finance corporate clients including financial institutions. The export sector in Bangladesh has grown up Maximization of profitability through promotion of significantly making a major contribution to the national lending products and appropriate loan pricing is the economy and is playing an important role in employment primary focus of the Bank’s Corporate Banking Division generation and foreign currency earnings. In the fiscal (CBD). Diversification of credit portfolio in promising and year 2015-16, Bangladesh exported goods worth USD productive sectors is also one of the prime objectives. The 34.25 billion where the contribution of RMG sector is 82 strategy of CBD is to maintain a prudent mix of various client percent. Southeast Bank has been financing in the export segments and products, economic sectors, geographical sector on priority basis and at present, a sizeable portion locations, currency and maturity commensurate with of Bank’s total loan portfolio belongs to around 250 export economic and business trend, life cycle of the products, clients. During the year 2016, the Bank has handled export demand-supply gap, social obligation etc. business to the tune of USD 1,862.61 million.

The overall credit policy of Southeast Bank has already A dedicated unit named as ‘RMG, Textile and Export been devised in accordance with Bangladesh Bank’s Financing Unit’ at Head Office has been handling the guidelines to ensure effective credit risk management and credit portfolio of export-oriented clients. This clientbase compliance with the regulatory framework. Corporate includes entrepreneurs in RMG - both Woven & Knit, Banking activities of Southeast Bank are carried out Sweater, Textiles, Home Textiles, Spinning, RMG accessories, addressing appropriate credit risk environment, sound Jute and Jute goods and Leather goods. Southeast Bank Southeast Bank Limited I Annual Report 2016 101

extends both project finance and working capital finance Project Finance to its export clients. Southeast Bank provides Project Finance for setting up The teams working in export financing in Head Office and / BMRE of Manufacturing and Service Industries. Project Branches not only conduct detailed and proper analysis Finance is generally provided in the form of Term Loan to of the clients’ requirements but also ensure meticulous facilitate the client for procurement of fixed assets, such compliance with Bank’s RMG /Export financing guidelines, as capital machinery, auxiliary machinery & equipment, Export and Import policies, Foreign Exchange regulations, shed / building etc. Project Finance is usually followed by Circulars of Bangladesh Bank and other prevailing rules Working Capital Finance to meet day to day operational and regulations of the regulatory bodies. Periodic visits are expenses of the project so that the project can run Corporate governance made to clients’ factories as a part of regular monitoring. profitably to repay the Bank’s dues. Graphical presentation of year-wise performance of Southeast Bank’s export business has been shown under A detailed appraisal called feasibility study is carried out “Sustainability Appraisal and Integrated Reporting”. before financing a project. The major aspects include Technical Appraisal, Marketing Appraisal, Financial Trade Finance Appraisal, Managerial Appraisal and Organizational Appraisal. Working Capital assessment is also done for A significant portion of the Bank’s credit portfolio is Working Capital Finance for the project to ensure smooth distributed amongst trading sector. The portfolio is operation of the project. diversified in commodity trading, construction and supply Since inception, Southeast Bank has been an active partner business, import financing, work order financing, stopgap of the private sector in developing large and medium scale funding, fixed asset procurement, bill purchase etc. industries of the country. The Bank has financed setting up This Trade Finance and General Credit unit of Corporate of various industrial units in the areas of Spinning, Textile, Banking deals with various client segments for different Garments, Pharmaceutical, Ceramic, Cement, Paper, economic purposes in trading, manufacturing and service Telecommunication, Steel etc. The Bank has also extended sectors. project finance to several service industries, such as hotel, The Trade Finance and General Credit proposals are resort, hospital, educational institution, transport, filling forwarded to Head Office by the Branches dispersed station etc. The Bank has also financed a good number of all over the country. The credit applications are then real estate projects. processed for approval by the Trade Finance and General Credit unit complying with Bank’s credit policy and Work Order Finance rules and regulations of Bangladesh Bank and other Southeast Bank provides financial support – both funded regulatory authorities. During this process, the officials & non-funded credit facilities to the contractors to execute meet the clients and visit their business premises for work orders issued by various departments/ divisions of better understanding of their needs and for appropriate Government as well as different private organizations evaluations of their proposals. This process of appraisal acceptable to the Bank. The Bank participated in several is done for all types of credit facilities including Term mega projects of the Government by financing the Loan, Overdraft, Time Loan, Letter of Credit, Loan against relevant contractors. In 2016, the Bank continued to Trust Receipt, different types of Bank Guarantees such facilitating reputed contractors having sound track record as Bid Bond, Performance Guarantee, Advance Payment for accomplishment of project of LGED, RHD, Railway, City Guarantee, Security Bond, Customs Guarantee etc. Corporation and other organizations. Bank’s work order financing products also cater to the need of contractors In the year 2016, a good number of corporate clients have engaged in execution of supply orders. availed Trade Finance and General Credit products from the Bank. During this period, the Bank extended facilities Real Estate Finance in the form of working capital credit as well as Term Loan to both existing and new clients in the fields of food items, Real estate is an important sector for the development of edible oil, other consumer items, food processing, rice an economy. Private sector real estate business has a huge mill, feed mill, petroleum, chemical, printing & packaging, growth prospect in this densely-populated country since publishing, ship breaking, construction materials, furniture a large segment of population belonging to middle and & saw mill, IT, electronic goods, deemed export etc. growing middle class prefer to buy apartments. Despite 102 Southeast Bank Limited I Annual Report 2016

such potential opportunity, the housing sector has been the private sector and it was obviously a major challenge facing setback since 2007/2008. The real estate sector had for Southeast Bank. The Bank has always focused on the to suffer severe sales-decline during this period. There is a ‘quality’ aspect of credit with cautious augmentation of long queue of unsold flats now. All the entrepreneurs in its credit portfolio. During the year 2016, the Bank exerted this sector have been suffering from sluggish sales trend. continuous and all-out effort to attract more ‘quality’ customers to maintain the ongoing growth of loans & Banks and other financial institutions seem to be reluctant advances and strengthen further its credit portfolio. to finance the developers in the prevailing condition of this sector. In the year 2016, Southeast Bank’s policy was In 2016 the Bank successfully accelerated growth of its to maintain the portfolio in real estate sector in a good funded business. The accumulated loans and advances of shape and side by side to finance new real estate projects the Bank stood at BDT 191,865.59 million as on 31.12.2016 having extraordinary potentials. The Bank is of the opinion compared to previous year’s position at BDT 168,878.46 that the full opportunity of the housing finance sector can million registering a growth of 13.61 percent over the be realized only if all-out efforts are made to develop the previous year. The Bank was able to maintain a prudent housing finance market on sustainable and sound footing. Loan Deposit Ratio throughout the year and it stood at 83.43 percent at the year end. Syndicated Finance Graphical presentation of year-wise trend of loans and The main objective of the Syndicated finance and Club the distribution of loans in respect of different sectors, finance is to spread and share the credit risk among and divisions, areas have been shown under “Sustainability with all the participating Banks for specific investment. Appraisal and Integrated Reporting”. Southeast Bank is acting as one of the Lead Arrangers as well as participants in the Banking industry of the country Non-funded Business for development/ operation of different projects under Syndication/ Club Financing Arrangement. Some of the The Bank registered a positive growth of 12.99 percent in sectors financed by the Bank through Syndication are import business in 2016 as compared to that of previous textile, cement, steel, ceramic, refined sugar & oil, paper year. The volume of import business payments (FOB) in & pulp, aviation, hospital, University, telecom, power, 2016 was USD 2,179.29 million while the same in 2015 aviation etc. was USD 1,928.76 million. The main import commodities As a Lead Bank, Southeast Bank arranged a good number were capital machinery, raw cotton, scrap vessels, cement of Syndication deal with total facility of around BDT clinkers, wheat, edible oil, petroleum products, yarn, 3500.00 million. On the other hand, Bank’s participation fabrics, garment accessories and other consumer items. in different Syndicated/ Club finance arrangement was around BDT 9000.00 million till 2016. In 2016 the Bank The export business of the Bank increased by 15.96 participated in a number of Syndication deal with total percent in 2016. In the year 2016 the volume of the Bank’s approval of BDT 1150.00 million and USD 12.50 million in export business was USD 1,862.61 million which was USD petroleum refinery and steel sectors. 1,606.20 million in the previous year. The main export commodities were readymade garments, knitwear, frozen Performance in 2016 food, shrimp, handicrafts, jute & jute goods etc.

Funded Business The Bank registered a positive growth in Bank Guarantee business too. The volume of this business was BDT In 2016, the Banking Industry of Bangladesh experienced 16,369.36 million in 2016 while it was BDT 15,245.19 a slow credit growth due to sluggish credit demand by million in 2015, posting a growth of 7.37 percent. Southeast Bank Limited I Annual Report 2016 103

Retail Banking

Southeast Bank has started its Retail Banking Division in result of collective efforts of the bank retail advances grew 2012. Since then Southeast Bank has been offering very by 35.82 percent during last year while NPL was only 2.16 good services to its customers in every aspect of retail percent. banking. This year with the help of deposit campaign bank’s liability marketing team has gathered substantial Success of Retail Banking depends on diversified product amount of low cost / no cost fund which is very essential offering and importance of retail deposit for the bank is for the bank. At the same time through our branch, Retail enormous. By predicting emerging challenges to the Banking Division has disbursed good number of retail banking sector Southeast bank has introduced two new loans as well. deposit products. Feedback from the customers is very positive regarding the features of the products. Corporate governance Southeast bank is structured in a way so that all the retail products and services can be accessible from all the Retail Banking Division of Southeast bank is prepared branches of the bank. Therefore, our retail loan portfolio is and well structured to face any future challenges and not based on only divisional cities. To tap the opportunity dedicated to attaining sustainable growth in Retail of the rural areas bank has also introduced Rural Home business by providing good quality service with minimum Loan under prudential guideline of Bangladesh Bank. As a turnaround time.

Retail Lone Composition

2% 8%

Home lone Rural home lone Car lone 40% Personal lone

50%

Make a bar chart on growth

Year Number of A/C Growth A/C Volume (BDT in millions) Growth of Volume

2014 1770 N/A 577 N/A

2015 1931 9.10% 734 27.31%

2016 2160 11.86% 997 35.82% 104 Southeast Bank Limited I Annual Report 2016

SME, Agri-Credit and Financial Inclusion

Small & Medium Enterprises subdued investments. The Bank continued to pursue a strategy of calibrated growth of the SME portfolio, Small and medium enterprises (SMEs) play a significant with higher focus on managing concentration risks, role in Bangladesh’s economic development, generating diversification of portfolio, monitoring and enhancement large scale employment and facilitating inclusive growth. of collateral. A strong SME sector is crucial for building a resilient and dynamic corporate sector. At the same time, SMEs also Outstanding SME loan of the Bank as on December 31, 2016 face multiple challenges in terms of scale of production, stood at BDT.41,287.20 million while it was BDT.28,946.70 increasing competition and rapid adoption of innovative million as on December 31, 2015, registering a growth of practices in their operations. Southeast Bank offers a 42.63 percent. In 2016, the Bank disbursed BDT.40,206.00 comprehensive suite of banking products and solutions to million to clients through all its branches, which is 13.73 SMEs for meeting their business and growth requirements. percent higher than that of 2015. Our long-standing experience of partnering with SMEs has enabled us to develop non-traditional techniques for Growth to our loan to Small and Micro Enterprises is assessing credit risks. These techniques are unique and very remarkable. Since we felt that access to finance for provide appropriate solutions customized to their needs. smaller segment of SMEs is more challenging, we have The Bank also offers supply chain financing solutions concentrated more in this segment and as a consequence and small-ticket funding to the channel partners of large in last year small, micro & cottage enterprises outstanding corporate clients. The Bank has set up dedicated desks in experienced 21.95 percent growth making Small all branches to assist SMEs. Year 2016 continued to remain Enterprises 51.45 percent of SME portfolio. a challenging year for SMEs due to the gradual pick-up in economic activity, high leverage among corporates and SME Disbursement over the Year BDT in million 21000 18126 21200 26501 25000 30877 27500 35349 30000 40000 SME Business-Disbursement Growth BDT in million Year Target Achivment 2012 21000 18126 2013 21200 26501 2014 25000 30877 2015 27500 35349 Target Achivment Target Achivment Target Achivment Target Achivment Target Achivment 2016 30000 40000 2012 2013 2014 2015 2016 BDT in million Year 2012 2013 2014 2015 2016 Target 21000 21200 25000 27500 30000 Achivment 18126 26501 30877 35349 41287

Sectorwise Disbursement in SME Chart Titel 8%

Micro 25% Small Medium Service Trade Manufacturing

21% 42% 54% 50% Southeast Bank Limited I Annual Report 2016 105

SME Strategy Rural and Inclusive Banking

In 2016 the bank successfully implemented a medium Bangladesh rural market presents significant growth term SME strategy and segregated SME Business and opportunities as the market adapts to rapidly growing underwriting from other Business Segments. Now SME mobile connectivity and access to formal financial loan is also separated from Agricultural loan as Bank has services. The Bank’s rural lending strategy is focused on created a separate Agri. Credit cell this year. As evident leveraging these trends and building a sustainable model in our disbursement in SME segment and due to Branch for extending financial services to rural customers. This is expansion in SME centric areas SME business continues being made possible by offering them a comprehensive to remain the fastest growing business segment in product suite backed by Mobile based technology Service. the Bank. Almost all the branches opened during year The Bank has set up a distribution network over the last 2016 are located in areas where SME business has high few years to reach customers in this market. The Bank has potential. Bank will initiate a focus group discussion on developed customized financial products and services to SME development where all Branches will participate to cater to a wide range of rural customers including farmers, find ways for augmenting SME Business traders, processors as well as rural entrepreneurs. Bank is Corporate governance disbursing easy loan to Tk 10.00 account holders under a Bangladesh Bank refinancing scheme. School Banking is also a part of our financial inclusion strategy.

SME The Bank offers various types of loans covering the entire Banking Performance agricultural value chain including loans to seed/input dealers, crop loans and loans for purchasing irrigation Asset equipment, raising cattle and purchasing farm equipments Quality trough MFI (Micro Financial Institutions) linkage. Revenue Operating Generation E ciency Agricultural and Rural Credit Agriculture is the main life-blood for the economy of Market & Sales Bangladesh. Almost 47 percent of the total labor force of Delivery Products the country and 85 percent of rural workers of the country Credit IT & Risk are directly involved with agricultural activities like crops, MIS Management fisheries, livestock and forestry which ensure food security,

Strategy: SME create self-employment, diversification of income focus and generating activities and better standard of living for the Execution Capabilities people. Agriculture, as a sector contributes 17 percent to the national GDP.

Agricultural credit has significant importance for the socio-economic development of the country since it Cluster Based SME Financing has increased production in agriculture sector. This is also a priority sector of both the Government and the Currently, cluster-based SME development is a popular Bangladesh Bank to ensure food security and nutrition, approach for entrepreneurship development, SME poverty alleviation, employment generation and promotion and industrialization with a view to facilitating accelerate the financial inclusion program. To see our employment generation and poverty alleviation country as a middle income country, our GDP growth around the world, especially in emerging economies. should be over 7% which may not be possible without In Bangladesh it is considered as the most effective, 4%-4.5% agricultural growth. Considering the above, economically viable and maximum output-oriented Southeast Bank Limited has been continuing proactive approach for economic development. policy and program to boost up agriculture financing to the farmers and agricultural entrepreneurs with utmost As per guidelines of Bangladesh Bank, SEBL has already importance. adopted a cluster-based financing approach for SMEs in some industrial sectors such as Textile, RMG Accessories, We also believe that if the nation’s agriculture and rural Food processing, Dairy & Poultry, Fisheries etc. We are based economy walks through a techno-based eco- hopeful that we will be able to expand cluster based friendly process, all the targeted goals will be achieved in SME financing all over the country in the upcoming years a sustainable way. With the same vision, Bangladesh Bank through development of new clusters. announces a farmer-friendly agriculture and rural credit policy for each fiscal year. Keeping this in mind, our bank Southeast Bank is planning to role out a Cluster Financing sets the agriculture and rural credit policy for each fiscal for Hosiery industry in Pabna in collaboration with SME year. Our bank has also set sector wise (crops cultivation, foundation in 2017. irrigation machinery, agriculture machinery, pisciculture 106 Southeast Bank Limited I Annual Report 2016

farming, cattle/dairy and beef fattening, poultry farming, from 01 July, FY 2010-2011 under interest-loss subsidy crop storing and marketing, poverty alleviation program facilities of the Government. The Central Bank (BB) has and other activities related to agriculture) and branch advised all banks that credit facilities shall be allowed at wise yearly and monthly target for smooth allocation of rebate rate (4%) under interest loss compensation scheme agriculture credit. Our bank also extends Agriculture / of Government for cultivation of pulse, oil seeds and Rural Credit as one of the major tools to bring the rural and spices. Bank may receive 6% interest loss compensation unbanked people specially the farmers into the banking from Government through Central Bank after realizing channel as financial inclusion program which plays a vital cultivation of the loan from borrower in full. Southeast role in the rural economic development of the country. Bank Limited has positive intention to contribute in In the absence of own branch network, the bank extends flourishing these crops in the country with a view to agriculture credit facility through third party networks like reducing import dependency. In line with this, the Bank well reputed NGOs / MFIs. It is worth mentioning that while has financed a sizeable amount in cultivation of maize, oil using third party network for agriculture financing, the seeds and spices. Credit facilities are allowed at rebate rate bank selects the NGOs/MFIs very meticulously to ensure (4%) for cultivation of maize, oil seeds and spices under proper utilization of the fund. The Bank has disbursed a interest loss compensation from Government. During the quite large portfolio of agriculture loans during the year, year of 2016, our bank has disbursed Tk.1.90 million among which are listed below. 7 farmers against the target of Tk.1.50 million at rebate rate (4 percent) for cultivation of maize, oil seeds and spices. All Loan disbursed these indicate our endeavor to bring more and more un- Disbursement Sector of disbursement during 2016 banked rural people in banking system by providing them at percent (%) (BDT in million) with agriculture credit at a lower interest rate. Crops / Vegetables 2160.37 61.0 cultivation Loan disbursed Crops during 2016 No. of clients Fisheries 389.57 11.0 (BDT in million) Livestock 733.11 20.7 Oil seeds 0.50 1 Irrigation equipment 106.25 3.0 Maize 1.00 4 Crop storage & marketing 35.42 1.0 Spices 0.40 2 Solar 10.62 0.3 Total 1.90 7 Poverty Alleviation 106.25 3.0 Target and achievement Total 3541.59 100 Southeast Bank Limited has achieved the Agricultural/ Agricultural loan disbursement during 2016 Rural Credit disbursement target of Tk. 279.39 crore (achievement is 116.41% of the target) against total target 11% of Tk. 240.00 crore for the FY 2015-2016. In line with the Agricultural & Rural Credit Policy and Programme of 20% Bangladesh Bank, a target of agricultural credit amounting to Tk.295.00 crore has been set for Southeast Bank Limited for the FY 2016-2017. Out of total target, Tk. 167.23 crore has been disbrused during the period from July 2016 to December 2016 which is 56.69% of the yearly target. 3% 1% Achievement in FY Target Achievement percent (%) 3% 0.3% 61% 2015-16 240.00 279.39 116.41

Crops & vegetables cultivation Corp storage & marketing Fisheries Solar Agricultural / Rural Credit disbursement Livestock Poverty Alleviation target & achievement 2015-16 Irrigation equipment BDT in crore 240.00 279.39 116.41 Agriculture loan @4% rebate interest rate There is a large demand for pulses, oil seeds, spices and maize in the country. But the production of these crops is not sufficient. As a result, we have to spend huge amount of foreign currency for importing them. In order to encourage production of such crops and disburse loan to this sector, Bangladesh Bank has set the concessional interest rate of credit disbursed in the cultivation of Achievement in pulses, oil seeds, spices and maize at farmers level at 4% Target Achievement percent (%) Southeast Bank Limited I Annual Report 2016 107 Corporate governance

Women Entrepreneur Financing Development of women entrepreneurs is an embedded element of SME financing. In our experience we observed that “Access to Finance” is a major challenge for a business owned by women especially during the initial years of starting a business. To address the issue, Southeast Bank has come forward to help the women entrepreneurs and has given utmost emphasis on the growth & development of women entrepreneurship. The Bank has a separate dedicated product named “Southeast Shuprova” for women entrepreneurs. To encourage women Southeast Bank provides loan to the women entrepreneurs at much easier terms & conditions including low interest, relaxed collateral requirement etc. Bangladesh Bank’s refinancing windows also help women led enterprises. Southeast Bank has 2 exclusive branches dedicated to provide banking services to women enterpreneurs.

In 2016 the Bank has disbursed BDT 1,610.80 million to business exclusively owned by women (SME) entrepreneurs

Success Story of an Woman Entrepreneur Secondary School Certificate (SSC) passed Suchana started her career at Ramganj of Laxmipur district. Initially she used to take orders from local tailoring shops. Later she started doing Block, Batik etc. Since her husband was staying abroad, she herself had to take care of her family and children. Of her two sons, one was handicapped. For this reason she came to Dhaka to get her son admitted to a special school. But all these adversities could not hold back her entrepreneurial spirit. After arriving Dhaka, she hired a shop at Bailey Road in 2011 investing Tk.4.00 lac and started trading business of saree. In the same year, she expanded her business by taking another shop with Tk.7.00 lac at “Fortune Shopping Mall” located at Mouchack Intersection. Now she is a successful woman entrepreneur. At present, her capital stands at about Tk.30.00 lac. We are proud of financing a hardworking entrepreneur like her and be a part of her adventure.

A Portrait of SME Entrepreneur 108 Southeast Bank Limited I Annual Report 2016

Glimpses of Some Projects Financed by SEBL Southeast Bank Limited I Annual Report 2016 109 Corporate governance 110 Southeast Bank Limited I Annual Report 2016

Glimpses of Some Projects Financed by SEBL Southeast Bank Limited I Annual Report 2016 111 Corporate governance 112 Southeast Bank Limited I Annual Report 2016

Islamic Banking

Southeast Bank Limited caters both Conventional and Major Activities in the Year 2016 Islamic banking services. Out of total 128 branches, 05 (five) branches are designated Islamic Banking Branches i) 04 (Four) meetings of Bank Shari’ah Supervisory of the Bank. To enjoy a very strong branding image Committee were held where different operational with good market reputation in the Banking sector, a issues, policies and strategies were reviewed. Strategic Business Plan has already been put in place in the Bank after approval of the Board for expansion of ii) To provide premier banking services to holy Hajj Islamic Banking Operations. The Strategic Business Plan Pilgrims, Southeast Bank signed Memorandum of encompasses introduction of Islamic Banking Service Understanding (MOU) with Hajj Agencies Association Desk (IBSD) in Bank’s Conventional Banking Branches of Bangladesh (HAAB), Ministry of Religious Affairs and through the use of Bank’s online banking facilities. It also Sonali Bank Limited to collect Hajj Pre-Registration branded the bank’s Islamic Banking services as Southeast and Registration Fee from the Hajj Pilgrims and Hajj Tijarah. The Islamic Banking operations are completely Agencies. Side by side, most of the HAAB members are separate from conventional banking. Separate accounting involved in IATA ticket, visa processing and overseas system for Islamic banking branches is being maintained. employment business in addition to their Hajj and Umrah related business. We provided financial support At present 97 staff members are working in the 5 Islamic to the Hajj agencies as needed throughout the year Banking Branches. The Bank arranges regular training by way of Bank Guarantee and other working capital programs for them on operation of Islamic Banking. finance. The Bank is an active member of the Central Shari’ah Board for Islamic Banks of Bangladesh and Islamic Banks’ iii) Five special review meetings with the HOBs and MOs Consultative Forum. It is deeply committed to run its of Bank’s Islamic Banking Branches were conducted Islamic Banking operations by strictly complying with all for overall business review and charting future course Shariah requirements. of actions for improvement. Financial Analysis iv) 02 (Two) Training Programs were conducted on Islamic Since inception of the Bank, Islamic banking business Banking Operations, IT issues and Islamic Banking of Southeast Bank marked steady growth in all areas - Service Desk (IBSD) for the officers of the Bank. deposit, investment and profit. With only 5 branches, around 8.53 % of Southeast Bank’s business (in terms of v) The Muraqib of the Bank conducted Shariah inspection profit) is being achieved from Islamic Banking operation of the Islamic Banking Branches and submitted his with only 4 percent of manpower. As on December 31, reports to the Shariah Supervisory Committee. The 2016, the deposit and investment of Islamic Banking Committee reviewed the report. Branches were BDT.16,740.60 million and BDT.9,291.20 million. During the period 2016, total import and export The Islamic Banking Branches (IBB) have made businesses handled by the Islamic Banking Branches were considerable progress in the Year 2016. It is expected that BDT.5,392.29 million and BDT.7,354.80 million respectively. by the prized guidance and policy directives of Bank’s Non Performing Investment of Islamic Banking Branches Board and Management, the Islamic Banking operation was 8.07 percent of their total investment in 2016. The will progress further in 2017 and earn business success in performance of the Islamic Banking Branches during the different indicators, In Sha Allah. year 2016 is also reflected in its Balance Sheet and Profit and Loss Account as are included in this report. Southeast Bank Limited I Annual Report 2016 113

International Business Operations

From the very outset of the commencement of business International Division consists of different units for the ease back in 1995, Southeast Bank Limited (SEBL) has been of operation and it relentlessly coordinates, supervises facilitating significant volume of International Trade and and supports International Trade and Foreign Exchange Foreign Exchange transactions of the country. Widely transactions of AD branches through following units- cherished as one of the leading banks in supporting Trade Finance and Foreign Exchange transactions of the country, Correspondence Banking As of December Corporate governance Southeast Bank is constantly improving its capacity and Financial Institutions 31, 2016 to satisfactorily serve its valued clients. Establishment Unit 79 Countries of a large and effective network of correspondences Central Payment Center 248 Banks worldwide to cater to the growing demand of quality (CPC) Unit 35 Nostro trade services of the clients is the core strategy of Reconciliation Unit Accounts international business operations of the Bank. Southeast Reporting Unit 807 Bank has earned enough trust from its valued clients by EDF, Cash Incentive and Fund Correspondents serving them leveraging its large relationship network. Management Unit IFC, ADB & GCPF The Bank is constantly expanding its relationship with SWIFT Operations and high street banks of different countries. As of December Sanctions Screening Unit 31, 2016 Southeast Bank had established Relationship Management Apllication (RMA) with 807 correspondents Correspondence Banking and Financial Institutions in 79 countries all over the world. Unit Correspondence Banking and Financial Institutions Currently SEBL is maintaining 35 (Thirty Five) Nostro unit is the main international contact point of the Bank. Accounts in major currencies including 10 (Ten) Nostros Being the heart of International Division, this unit plays under Asian Clearing Union (ACU) and 01 (One) Nostro for a pivotal role in facilitating foreign trade transactions of Off-shore Banking Unit (OBU) to support foreign exchange AD branches. With a pool of bright and professionally transactions. SEBL is also enjoying hefty confirmation lines sound officials correspondence banking and financial of over USD 500.00 million as well as funded credit lines institutions unit has meantime expanded the international with more than 50 reputed banks worldwide. network of the bank up to 807 RMA relationship with Business Highlights 248 banks in 79 countries. Side by side building and nurturing correspondent network, Correspondence 2016 2015 Growth in Banking and Financial Institutions team looks after L/C (BDT in (BDT in Percentage advising, confirmation, negotiation, discounting and Million) Million) foreign guarantee, etc. This team also plays the key role in Import Business 171,531.73 151,812.58 12.99 partnering with Development Finance Institutions (DFIs) Export Business 146,606.09 126,423.89 15.96 and sourcing fund for Off-shore Banking Units (OBUs) of the Bank. International Division Partnering with multilateral development finance International Division, having decentralized trade institutions is one of the key strategic focuses of the Bank operations through 21 (Twenty One) Authorized Dealer as such relationship provides benefits in many ways. The (AD) branches in important commercial hubs of the Correspondence Banking and Financial Institutions unit country, plays a crucial role in overall supervision and of International Division has been constantly working control of foreign trade and foreign exchange business to strengthen relationships with DFIs as well as other of the Bank. With major focus on trade, International financial institutions worldwide. Currently, the Bank has Division also coordinates L/C confirmation, negotiation, relationship with following DFIs- discounting, foreign guarantee, trade payments, nostro reconciliation, reporting, etc. A large pool of bright and International Finance Corporation (IFC) - Southeast dedicated professionals having international certification Bank is one of the very early members of Global Trade on trade products and procedures supervise and support Finance Program (GTFP) of IFC from Bangladesh. The international trade and foreign exchange business of the Bank has a hefty credit line under GTFP of IFC which Bank using state of the art technology. support the Bank in L/C confirmation and guarantee 114 Southeast Bank Limited I Annual Report 2016

business internationally. IFC is also providing a funded EDF, Cash Incentives and Fund Management Unit facility for off-shore banking units of the Bank. Export Development Fund (EDF) and Cash Incentives have Asian Development Bank (ADB) - Southeast Bank become very important source of funding for exporters is availing a sturdy credit line under Trade Finance now days. To ensure efficient handling of these special Program (TFP) of ADB for L/C confirmation and funds, EDF, Cash incentives and Fund Management unit other eligible international guarantee. The Bank in of International Division plays a very important role. the reporting year has signed a Revolving Credit Besides, this unit manages foreign currency funds in the Agreement (RCA) with ADB for a revolving funded 35 (Thirty Five) Nostro accounts of the Bank for ensuring facility under TFP. timely payment against imports and outward remittances. This unit also looks after disbursement and repayment of Global Climate Partnership Fund (GCPF) - With a Long Term Financing Facility (LTFF) under Financial Sector commitment to the society and environment, the Support Project (FSSP) and Green Transformation Fund Bank partnered with Global Climate Partnership (GTF) of Bangladesh Bank. Fund (GCPF), a public-private partnership initiative registered in Luxemburg. GCPF uses public funding SWIFT Operations and Sanctions Screening Unit in order to mitigate climate change and drive sustainable growth in developing and emerging Being a member entity of the Global SWIFT.NET since 2000, Southeast Bank facilitates cross border trade markets. The Bank is currently availing an unsecured transactions, inward/outward remittance etc. of the Bank funded facility from GCPF for financing energy through state of the art secured infrastructure. SWIFT efficiency projects that reduce projected greenhouse Operation Unit works as an authenticated communication gas (GHG) emissions by at least 20% and renewable medium of the Bank in International Division, Head Office. energy generation projects. All AD branches are connected to Global SWIFT Network Central Payment Unit via Data center at Head Office and currently facilitating seamless delivery of SEBL’s innovative Trade and FEX Equipped with state of the art technological infrastructure business products and services to the valued clients. The and dedicated professionals Central Payment Unit Bank has already established one of the most resilient, looks after and facilitate fully centralized trade payment secured and dedicated network architecture through services at Head Office. The Bank has gained satisfactory adopting industry best practices e.g hosting SWIFT level of efficiency in transactions settlement and fund server at Demilitarized Zone (DMZ), using APNIC IP pool management of nostro accounts of the Bank after to connect to SWIFT Gateway, adoption of multifactor centralization of trade payment. Central Payment Center authentication framework, strict monitoring over SWIFT (CPC) has also substantial contribution to the income of workstations, etc. The Bank continuously evaluates the the Bank. The Bank is now working for centralization of robust control procedures already in place for operations outward remittance under CPC. like centralized trade payment, NOSTRO reconciliation, adhering to additional layer of authorization etc., so that Reconciliation Unit Bank’s information in SWIFT network remain always safe and secured. From the regulatory perspective as well as operational perspective, timely reconciliation of transactions made SWIFT Operation has also implemented ‘SWIFT Sanction through different nostro accounts of the Bank is a must. To Screening Solution’, a fully automated cloud based ensure regulatory and operational requirements, nostro secured portal from SWIFT that screens both incoming reconciliation unit of International Division regularly and outgoing SWIFT transactions against sanction lists reconciles foreign exchange transactions of the Bank using (OFAC, UN, US, EU etc.) for combating sanction and automated reconciliation software. Nostro reconciliation terrorist financing related threats. Customers of the Bank unit also acts as a watchdog to combat fraud, forgeries may feel relaxed more than ever before, knowing the and errors in foreign exchange transactions. banking channel is free from infiltration by any criminal or unscrupulous parties for money laundering and financing Reporting Unit of terrorism.

Timely reporting of foreign exchange transactions is a Important Events of International Division in 2016 mandatory requirement of regulators of the country. The 1. Signing of Revolving Credit Agreement for USD 5.00 reporting unit of International Division reports foreign million with Asian Development Bank (ADB) under exchange transactions of the Bank periodically and on their Trade Finance Program (TFP) on March 31, 2016. demand basis to Bangladesh Bank and other regulators. Over the years the Bank gained remarkable efficiency in 2. Signing with Sustainable Finance Department (SFD) reporting due to dedication and expertise of the reporting of Bangladesh Bank for participation in USD 200.00 unit in all manual and online reporting of foreign exchange million Green Transformation Fund (GTF) on December transactions to Bangladesh Bank. 01, 2016. Southeast Bank Limited I Annual Report 2016 115

Off-Shore Banking Operations

The Bank obtained permission from Bangladesh Bank for OBU of the Bank offers following products and operation of Off-shore Banking Unit (OBU) on June 24, services to valued clients - 2008 and commenced OBU operation on December 30, Foreign Currency Deposit Account of Non-residents 2009 by inaugurating first OBU in Dhaka Export Processing Zone (DEPZ). Second OBU of the Bank was inaugurated on Export-Import services to A- category industrial units April 18, 2010 in Chittagong Export Processing Zone (CEPZ). Over the years OBU has become an important strategic of Export Processing Zones (EPZ) and Economic Zone business unit due to growing demand of cheaper foreign (EZ).

currency loan and Usance Payable At Sight (UPAS) Letter Corporate governance of Credit from the clients. The overall operation of the Off- Financing Usance Payable At Sight (UPAS) shore Banking Units is controlled and supervised by Off- Documentary Credit shore Banking, Head Office Cell of International Division. Southeast Bank OBUs provide a continuum of financial Short Term Foreign Currency Loan to ADs doe services such as deposit taking, money transmissions, trade finance, credit facilities, etc. Side by side supporting purchase of Export Bills in Foreign Currency A Category industrial units of EPZ, OBUs of the Bank are Foreign Currency Term Loan to eligible resident also supporting on-shore clients within the purview set industrial units. out by the Bangladesh Bank.

Business Highlights of OBU

2016 2015 Growth in % In USD Mill: In BDT Mill: In USD Mill In BDT Mill: Total Deposits & Borrowing 77.68 6,114.44 61.37 4,817.96 26.58 Total Loans & Advances 80.38 6,327.72 62.38 4,897.19 28.86 Total Operating Profit 1.38 107.79 0.75 58.89 84.00

Total Deposits & Borrowing Total Lones & Advances Total Operating Pro t Fig in USD mil Fig in USD mil Fig in USD mil

61.37 77.68 62.38 80.38 0.75 1.38 TH 26.58% TH 28.86% TH 84% GROW GROW GROW

2015 2016 2015 2016 2015 2016 116 Southeast Bank Limited I Annual Report 2016

Treasury Management

To cater to the needs of different treasury solutions in SEBL exerts all out efforts to develop an active secondary different economic environments by the customers, market of government securities by participating both in Southeast Bank has a very dynamic and innovative treasury the Primary Auction and the secondary transactions of the team. The team is committed to offer better prices and same. excellent services with an array of different products which best fit the changing environment. Through forecasting As the market has been observing huge liquidity surplus the market scenario in terms of liquidity, interest rate and consistently, demand for these instruments has increased exchange rate movement, SEBL treasury has contributed manifold. With strong co-ordination among money remarkably well in 2016 and also helped the Bank to earn a market and FX desk, fixed income desk was able to consistent profit over the years. SEBL treasury has separate maintain an optimum portfolio of government securities designated desks to ensure optimum treasury solutions which contributed significantly to the overall profit of which are depicted below: the Bank. This desk also analyzes the effective duration, impact of rate shock on the value of the portfolio as well as Money Market Desk evaluates the total return from the risk-return perspective. Fixed Income Desk Asset Liability Management Desk The desk also exploited the market opportunity of huge Foreign Exchange Desk demand, maintained a sizable portfolio in trading book Corporate Service Desk and earned capital gain by buying and selling these securities in the secondary market. Money Market Desk Asset Liability Management Desk Money market desk assumes the responsibility of In banking, Asset-Liability Management is the practice of maintaining the Cash Reserve Requirement (CRR) along managing the risks that arise due to mismatches between with local currency fund management of the Bank. This the assets and liabilities of the Bank. In this dynamic desk also ensures that the Bank remains sufficiently liquid financial market environment banks face several risks to meet all its financial obligations and commitments to such as Liquidity Risk, Interest Rate Risk, Credit Risk and the customers of the Bank even in the stressed liquidity Operational Risk etc. Asset-Liability Management (ALM) is condition. a strategic management tool to manage Interest Rate and Liquidity Risk faced by banks. Money market was overburdened with excess liquidity throughout the year of 2016. Slower private sector credit Asset-Liability Management properly addresses the risks growth coupled with reduced government borrowing that arise in the banking business. The main objectives from banking sector and access to foreign currency loan and functions of Asset-Liability Management desk are the contributed to the extremely liquid market scenario. A following: total of BDT 355.99 billion surplus funds was parked in Bangladesh Bank bill by the banking sector. Call money Liquidity risk management of the bank rate was hovering around 2.75% to 3.00%. In such a scenario, money market desk with timely integration Management of market risks including interest rate to fixed income and foreign exchange desk of treasury and exchange rate risk ensured optimum utilization of fund while maximizing Planned growth of assets and liabilities the profitability of the Bank. Undertaking financial hedge positions Overall fund management of the bank The desk handled around BDT 1,740 million on daily basis Trading risk management; and while maintaining optimum local currency liquidity of the Bank. Regulatory compliance

Fixed Income Desk The year 2016 was a challenging year for bank’s Asset- liability management. The banking sector was awash with Main responsibility of fixed income desk of treasury team surplus liquidity with very minimum opportunity to invest. is to look after the Primary Dealership activities of the Bank Southeast Bank with strong acumen and insight went and also to maintain required amount of government for planned growth of assets and liabilities so that Net approved securities for maintenance of Statutory Liquidity Interest Income (NII) registers a steady growth. Interest Requirement (SLR) as per Bangladesh Bank directives. rate in the market was in a decreasing trend for both Southeast Bank Limited I Annual Report 2016 117

asset and liabilities; so it was a challenge for the ALM to the exchange rate movement of USD and other currencies ensure a reasonable spread. The ALM desk was proactive against BDT and set the exchange rates of major foreign in revising the rate of interest on deposit products so that currencies for settling different transactions. The desk interest rate risk is minimized as well as the profitability of successfully maintained favorable Net Open Position the bank is safeguarded. The ALM is responsible for the (NOP) throughout the year. While maintaining favorable management of balance sheet gap in order to mitigate NOP, the desk also ensured maximum level of foreign the liquidity and interest rate risk of the bank. The ALM currency liquidity and explored the market opportunities desk of Southeast Bank has been complying with the through SWAP, Placement and Forward transactions

BASEL III requirement of maintaining Liquidity Coverage which helped the Bank to earn more profit. Corporate governance Ratio (LCR) and Net Stable Funding Ratio (NSFR) and reporting it to Bangladesh Bank on a regular basis. Apart The interbank foreign exchange market was quite stable from this the desk also reports to the Board of Directors and liquid until end of October’2016. Thereafter, USD about some liquidity ratios and other important financial started to appreciate against BDT and stood at 78.78 indicators in every meeting as stipulated in the new ALM which was 78.40 at the end of June’2016. The inward guideline of Bangladesh Bank. remittance at the end of 2016 stood at USD 824 million compared to USD 778 million at the end 2015 recording a To address and mitigate various risks involved in the 5.91 percent growth. business, ALM desk of the Treasury Division prepares Asset-Liability Committee (ALCO) paper each month and Corporate Service Desk conducts monthly Asset-Liability meeting where all the Treasury Division of Southeast Bank provides superior issues associated with ALM are discussed and instructions services to its corporate clients through its diversified are given accordingly. The ALM desk also reviews and corporate service desk. The main responsibility of this revises the Asset-liability Management policy of the desk is to ensure maximum utilization of the fund of the bank every year according to the policy guidelines of corporate customers. Basically different renowned life Bangladesh Bank. insurance companies are our corporate customers and Foreign Exchange Desk they are maintaining a sizable amount of government securities portfolio with our bank. Corporate Service Foreign Exchange (FX) desk consisting of experienced Desk of our treasury division gives its customers time and skilled dealers having foreign training are engaged in befitting advices so that they can maximize their return by foreign currency transactions. The desk closely monitored discovering new investment opportunities. 118 Southeast Bank Limited I Annual Report 2016

Foreign Remittance

Southeast Bank is a brand for its representation among the In order to ensure hassle free pick up of remittances, nonresident Bangladeshis and their family members at we make payments through all the available means like home and abroad. Apart from providing premier services, mobile banking system, BEFTN, over the counter payment we are facilitating the Bangladeshi workers by Account system, online account deposit and replenishment of Opening programs. Furthermore, we are marketing remit card. These have taken smooth remittance service different products of the Bank through our subsidiaries, within the reach of beneficiaries anywhere in the country correspondents and contractual marketing agents among in the simplest way. Both the remitter and the receiver the expatriates. are communicated through an auto-generated SMS confirming that the money has already been deposited Southeast Bank has designed its products as per the needs even in off banking hours. of the nonresident Bangladeshis and their family members by extending remittance receiving points through sub- We have initiated instant deposit system under agencyships with local scheduled commercial banks, API (Application Program Interface). Our foreign Mobile Financial Services and Micro Finance Institutions. correspondents will be able to deposit remittance In addition, beneficiaries of remittance are receiving instantly in the accounts maintained with Southeast Bank. money on real time through My Remit Cards. The card Now, three subsidiaries (Own Exchange Companies) of holders can withdraw money from ATMs and do shopping the Bank located in the United Kingdom, Australia and using this card at any time (24X7). This Card helps us retain South Africa are serving the Non Resident Bangladeshis in some money in the banking system. the respective countries of operation.

Although the flow of remittance has slowed down recently, All the staff members of the Remittance Division are we were able to achieve positive growth of remittance in dedicated to rendering efficient & prompt services both our Bank. In the year 2016, Bank collected USD 824 million to the remitters and the beneficiaries. as wage earners’ remittance. Inward Foreign Remittance plays a vital role in lessening the bank’s dependency on Southeast Bank treats the expatriate workers as genuine inter-bank market for payment of import bills. development partners of Bangladesh.

Country-wise percentage of remittance inflow in 2016 Country wise Percentage of Remittance In ow in 2016 Country Amount (USD) Percentage 22% USA 180,617,621.21 22 Oman 8,505,000.00 1 UK 40,152,844.11 5 South Africa 11,591,804.95 1 1% USA UAE 11,037,572.00 1 5% Australia 11,187.00 1 Oman 1% UK KSA 58,746,285.42 7 1% South Africa Others 513,873,010.6 62 1% Total 824,535,325.34 100 UAE 7% Australia KSA Inow of Foreign Remittance over the Years 62% Others USD in million 544 505 629 778 824 Inflow of Foreign Remittance over the years

Year USD in Million 2012 544 2013 505 2014 629 2015 778 2016 824 2012 2013 2014 2015 2016 Southeast Bank Limited I Annual Report 2016 119

SEBL Credit Card

Credit Card is a unique consumer financial product that offers credit and provides the means of payment at the same time. Credit Card also facilitates charge free repayment period and repayment in installments. With that unique profile Credit Card has been the convenient means by which people around the world spend trillions of money. It is no wonder that Credit Card is becoming popular in Bangladesh day by day and eventually will become centre to the financial lives of the most Bangladeshi consumers in future. Beside that the world is heading towards the concept of cashless society where physical cash transaction is being replaced by electronic transaction. Payment through Card is the most popular medium of cashless electronic transaction. The market size of credit card is enormous in our country compared to the number of credit card issued so far. There are 2.5 million taxpayers who submitted tax return in this year are eligible for credit card in terms of income level. But all the card issuers of the country could issue 0.7 million credit cards in total as of date. Corporate governance

Southeast Bank has been issuing Credit Card since the year 2005 and has shown sincerity and efficiency in meeting customer demands. The year 2016 has been the year of embracing the cutting-edge technology with product diversification and newer features. Following are the benchmarks of the year:

Year wise transaction growth in Bangladesh Business opportunity BDT in million

39000 57000 62700 14080 16570

28%

72%

2011 2012 2013 2014 2015 Tapped Untapped

Chip Card: EMV Chip card has been introduced replacing the conventional magnetic strip card. This most advanced technology prevents fraudulent use of the card and ensures faster transaction processing.

Reward Point: Cardholders earn Reward Point whenever they purchase using card. Reward Points can be redeemed for waiver of card fee and cash reward.

EMI Pay: EMI based payment solution is a feature that allows cardholder to repay certain large purchases in equal monthly installments over an extended specific repayment period.

Discount Partners: The Bank has partnered with a good number of retail outlets, restaurants, hotels and fashion houses where cardholders get attractive discounts while they pay using our card.

Free visit at Balaka Lounge and Skylounge: The bank has made access available to Balaka Lounge and Skylounge at Shahjalal International Airport for its World and Platinum Cardholders free of cost. 120 Southeast Bank Limited I Annual Report 2016

Since inception, the bank has been maintaining a steady growth in credit card business. Like previous years, 2016 was also a successful year with good business growth to the tune of 17.80 percent in net profit, 22 percent in card base and 25.57 percent on outstanding balance over the position of the last year.

Year-Wise Growth of Card Business BDT in million 55.25 65.30 74.70 88.00

2013 2014 2015 2016

The Bank is also working on exploring new dimensions of business and services. E-Commerce Acquiring is one of them. The Bank has been in card issuing business since the beginning of card operation. Now the Bank is focusing on E-Commerce Acquiring. We are in the process of establishing an online payment gateway through which customers will be able to pay online for goods and services. We have been observing a geometrical increase of online transactions in Asia as it is the most convenient way of ordering goods and services and pay for it.

Local prepaid card is another product that we are looking forward to introduce soon. There is a significant segment of customers who do not have enough means to prove credit worthiness, do not want to be burdened with credit facility or do not maintain bank account with us. Most of the population of our country still remains unbanked. There are also senior citizens and students who are either old or minor in ages whom we cannot grant credit card. Local prepaid card might be the right kind of product in order to reach that larger segment of customers.

A two-factor authentication is another service in process. It is a second line authentication system on transaction over internet and it prevents fraudulent use of the card.

We are very hopeful that with the present and upcoming features we will be able to provide better customer service than ever. Southeast Bank Limited I Annual Report 2016 121

Alternative Delivery Channel

Alternative delivery channel (ADC) has enabled the Bank to serve the customers beyond Banking hours. ADC team of SEBL is providing 24X7 service for customers’ convenience through Debit Cards and ATMs. ADC team is working relentlessly to provide new and improved services.

Growth Corporate governance ADC has implemented world class technology and re- engineered process to ensure faster, smooth and better service. This leads to a noteworthy growth in SEBL Debit Card Transaction Number, Transaction amount and Debit Card Issuance. SEBL Debit Card Features Transaction Amount

SEBL Debit Card holders can now do transactions at At the end of 2016, total transaction amount by SEBL Debit any ATM all over the country through National Payment Card and ATM was BDT 736.89 crore. In comparison to the Switch of Bangladesh (NPSB) network. year 2015, Transaction amount has increased by 14.48%

SEBL is the first Bank in Bangladesh to implement secured Successful Transaction Amount PIN based transactions on other banks’ Point of sales (POS) In Crore terminals to comply with Bangladesh Bank. SEBL Debit 643.68 736.89 Card Holders now can purchase from different outlets at PIN enabled POS terminals.

2015 2016 SEBL ATM SEBL Debit Card Growth At the end of 2016, our live ATMs were 127 across the country. Moreover, ADC has taken imperative initiatives At the end of year 2016, our total number of issued SEBL for rapid expansion of ATM Booths at suitable locations to Debit Card was 1,29,900. The number of card has increased facilitate our existing customers and penetrate potential by 35.32% in comparison to the year 2015. clients across the country.

Total 127 ATMs of SEBL No of issued Debit Card

25 95,993 129,900

2 Dhaka 14 Chittagong Barishal Khulna 11 Rajshahi Rangpur 67 2 6 Sylhet 2015 2016 122 Southeast Bank Limited I Annual Report 2016

Credit Risk Management in SEBL

The responsibility of managing credit risk of the Bank is Credit Approval Department vested upon Credit Risk Management (CRM) Division, which is entrusted with the task of overseeing various Within this framework, Credit Approval Department risk management measures envisaged under the credit analyzes the credit proposals, assesses different risk risk management policy. CRM Division is playing among elements covering Management, Financial, Marketing, others the following major roles in line with the Credit Risk Technical, Environmental etc. aspects associated with Management Guidelines of the Bank: the business, verifies the offered securities physically, visits projects and finds out the mitigating factors which Formulation and/or up-gradation of different policies, help the management to expedite the decision making procedures, strategies, guidelines related to credit risk process. The Bank follows a well defined multi layered management and credit operation of the bank with a discretionary power structure for approval of any credit view to mitigating its inherent risks. facility in accordance with Bank’s credit policy. The main functions of the Department are as follows: Coordinating functions of Credit Approval Department and Credit Administration Department. To scrutinize the credit proposals in line with Bank’s Credit Policy, Risk elements and Bangladesh Bank’s Assisting Corporate Banking Division regarding Policy/regulations. the business issues through in-depth analysis and evaluation of credit proposals as well as the To assess risks inherent in the credit proposals with compliance issues in order to mitigate different credit due diligence i.e. identification of credit risk, risk risks. mitigation measure (if any) from assessment of credit requirement, evaluate proposed facility pricing etc. Ensuring due diligence in credit approval process. To ensure that all credit lines are approved in Ensuring proper implementation of all the approved accordance with Bank’s credit policy under defined plans, policies and strategies of the Bank regarding approval authorities conferred by the Board. credit portfolio for achievement of the organizational goals. To issue sanction advices to the respective branches incorporating all the applicable terms and conditions Setting different internal limits (with due approval with a view to protecting interest of the Bank upon from the competent authority) for diversifying the approval of the competent authority. credit portfolio to avoid concentration risks. To liaison/correspond with Bangladesh Bank and Review and supervision of sectoral allocation/ other external agencies/regulatory bodies on various distribution of loans and advances, maturity gap issues as and when required. analysis and intimate the same to the Board of Directors on quarterly basis. Credit Administration Department

Review and re-fixation of interest/profit rate based The Credit Administration Department is assigned to look on cost of fund, cost of equity, cost of liquidity, risk after post approval process such as to establish better appetite and market trend etc. against loans and control over loan portfolio by helping completion of advances /investment both for conventional and documentation, scrutinizing the checklist of documents, Islamic Banking operations as and when required. limit, rate of interest, tenor etc. in a systematic manner and allow subsequent disbursement, ensuring utilization Credit Risk Management (CRM) Division of the Bank is of fund, monitoring and compliance of all covenants and comprised of two departments named Credit Approval conditions precedent. This Department makes constant Department and Credit Administration Department. Two follow up of the credits just after its sanction and continues Departments work separately without compromising its efforts to keep the credits performing and unclassified. interest of the bank. This Department also acts as a bridge between the branch Southeast Bank Limited I Annual Report 2016 123

and the management as well as between management Loan documentation status has improved and Board of Directors by providing information in respect significantly due to regular monitoring and follow-up of health of the loans and advances. Main functions of the Department are segregated in the following four Priorities for 2017 categories: Introducing Centralized Limit Loading and Corporate governance Disbursement Function; Disbursement system in 2017 with a view to restricting unauthorized disbursement and bringing Monitoring Function; stability in assets quality through mitigating the Compliance Function; associated risks Custodial Function. Establishing a separate MIS wing to keep proper Major Achievements in 2016 history/records of credit portfolio elaborately and extensively Credit Risk Management Guidelines of the Bank has been reviewed and updated in line with the Strengthening Monitoring of standard credit New Guidelines on Credit Risk Management by portfolio so that slippage of performing loans into Bangladesh Bank, present and upcoming domestic non-performing loans can be restricted and sound and international economic conditions etc. asset quality can be ensured

A number of policies like- Valuation Methodologies, Curving the trend of non-performing loans of the Documentation methodologies, Revision of Interest/ bank down through proper monitoring and recovery Profit rate has been reviewed, updated and approved of existing non-performing loans by the Board of Directors Establishing a full-fledged documents Analysis Unit A well crafted Risk Appetite Statement has been equipped with expert documents analyst under prepared and approved by the Board Credit Administration Department to ensure proper and flawless documentation Through continuous monitoring and vigorous persuasion, sound health of the asset quality has been maintained and non-performing loans of the Bank could be restricted below 5% of the total loan portfolio 124 Southeast Bank Limited I Annual Report 2016

Risk Management Practices within SEBL

Sound Risk Management and balancing risk-reward trade- There are other miscellaneous issues like submission of offs are critical to the Bank’s success. Business and revenue the decisions and recommendations of the Committee growth are, therefore, to be weighed in the context before the Board quarterly, compliance of the instructions of the implicit risks in the Bank’s business strategy. As a of the regulatory authorities from time to time, evaluation financial institution SEBL is exposed to certain amount report of the internal and external audit reports etc. of risks which are associated with its lending, trade- service business and operational activities. Managing Activities of Risk Management Division and mitigating such risks are always a prioritized concern The Risk Management Division (RMD) of SEBL was of SEBL to build public trust and confidence which is established to comply the direction of Bangladesh Bank necessary for mobilizing private savings for investment (DOS (EW)1164/14(southeast) 2009-452 dated 10-06- to facilitate economic growth. Therefore, effective risk 2009) for strengthening risk management activities management activities are a prerequisite for the Bank to of the bank. RMD looks after effectiveness of the Core achieve its business objectives. SEBL is committed towards Risks Management of the Bank and also ensures the embedding a risk culture in its organization and embraces capital management of the Bank under Basel Accords in risk management as a core competency that allows it to association with the directives of Bangladesh Bank time optimize risk-taking through objectivity and transparency. to time. RMD is responsible to manage and measure risk SEBL has always taken cognizance of the risks associated on the basis of the bank’s approved risk parameters and with conducting banking business. In this connection, the regulatory requirements. Functions of RMD are furnished Bank has tailored its risk management program to its need below in summary: and circumstances.

SEBL’s Risk Management Strategy Communicating views to the Board and senior management regarding the Risk Management SEBL has clear risk management objectives and a well- culture and risk concentration all over the bank established strategy to address them, through core risk Collecting all relevant data related to the risk and capital adequacy related risk management processes indicators from different models and information and encompasses all the activities that affect its risk system at the earliest profile. At strategic level, our risk management objectives are as follows Assessing the quality, completeness and correctness of those data To ensure active involvement of the Board of Directors Designing bank’s overall risk management strategy and senior management; Developing, testing, and observing use of models for To ensure that business growth plans are properly measuring and monitoring risks supported by effective risk infrastructure; Preparing and taking approval of various policies like To implement risk strategy approved by the Board of ICAAP, Stress test policy, Disclosure policy etc. Directors; Developing and using risk assessment tools and To develop policies and procedures for identifying, methodologies measuring and controlling risk; Identifying and monitoring unauthorized limits To provide all reports required by the Board and overriding and analyse possible scenarios through its committees for the effective performance of stress testing risk management oversight functions; Preparing Minimum Capital Requirement (MCR) To optimize risk/return decisions by taking them report as closely as possible to the business, while Preparing different financial parts of different establishing strong and independent review and Covenants (IFC, ADB, GCPF etc.) challenge structures; Preparing the Risk Management Report on Monthly To ensure that business growth plans are properly basis and Comprehensive Risk Management Report supported by effective risk infrastructure; (CRMR) on Semi-annual basis To help executives improving the control and co- Ensuring management of Credit Rating ordination of risk taking across the busines; Southeast Bank Limited I Annual Report 2016 125

Preparing and analysing the liquidity risk through between the Bank’s Assets and Liabilities. On the other Liquidity Coverage Ratio (LCR) on Monthly basis and hand, different risk factors are judged using three different Net Stable Funding Ratio (NSFR) on quarterly basis shocks: minor, moderate and major shocks. The risk factors are : performing loan downgraded to Bad/Loss, increase in Analysing the overall impact on Bank’s capital base NPL due to default of top 10 borrowers, negative shift in for the credit, market and operational activities and NPLs categories, decrease in the FSV of collateral, change assist the management in streamlining the strategy

in interest rate, FEX shock, equity shock and liquidity stress. Corporate governance for minimizing the impact on capital requirement Preparing disclosures under Pillar-III and any other Risk Management Report financial reporting as recognized by Bangladesh Bank Risk Management Division (RMD) prepares Risk Basel -III Implementation Management Report (RMR) on monthly and semi annual basis consisting information of six key risks areas Central Bank of the country is always cautious about (e.g. Credit Risk, Market Risk, Liquidity Risk, Operational the need to keep the capital of individual Bank as per Risk, Foreign exchange risk and ICT risk) from all related international standard and for this reason, Bangladesh divisions. Thereafter, it is presented in the monthly meeting Bank has declared the roadmap for implementation of Risk Management Committee conducted under the of BASEL III in banking sector effective from January supervision of Risk Management Division (RMD). 01, 2015. As per the phase wise arrangements for Basel-III implementation the Bank has started implementing Basel- A report of the same is submitted to Bangladesh Bank and III from January 2015. The Bank has taken initiatives to the decisions are communicated to relevant divisions of improve the Capital to Risk Weighted Asset Ratio (CRAR) in the bank for implementation. Another half yearly report line with the Basel-III guideline. Besides the Bank has also namely CRMR is also prepared by RMD. Different tools started maintaining different ratios like Leverage Ratio, and techniques are applied to analyse data and to make Liquidity Coverage Ratio (LCR), and Net Stable Funding recommendations. Horizontal and vertical analyses of Ratio (NSFR) as per Basel-III requirement. monthly and half yearly data are used to compare the development of each risk parameter. Recommendations Stress Testing are made over the changes of the risk position of a particular risk. Stress Testing is one of the effective and popular ways to alert bank management with regard to adverse Liquidity Ratios unexpected outcomes related to variety of risks and provides an indication how much capital adequacy ratio According to the revised road map issued vide BRPD (CAR) might be needed to absorb losses, if any shocks Circular No.18/2014; banks have to maintain the minimum occur. standard of Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) from January 2015. The threshold In the context of ICAAP under Pillar II of Basel III, banks limit for LCR has been fixed at 100% or more and for NSFR consider Stress Testing as a diagnostic tool to improve it is greater than 100 %. Liquidity Coverage Ratio (LCR) is the understanding of its risk profile. Bangladesh Bank the ratio of unencumbered High Quality Liquid Assets has advised to conduct quarterly Stress Testing to (HQLA) to net cash outflows over the next 30 calendar measure resilience of the Bank. Therefore as a part of risk days. Liquidity Coverage Ratio (LCR) is designed to test management, the Bank prepares stress testing report a bank’s ability to withstand a liquidity crisis over a 30- on quarterly basis to check out four major risks (interest day period. On the other hand, Net Stable Funding Ratio rate risk, credit risk, equity price risk, liquidity risk) under (NSFR) aims to establish a minimum acceptable amount of different levels of magnitude to ensure optimum allocation stable funding based on the liquidity characteristics of an of capital across its risk profile. In Stress Testing of the Bank institution’s assets and activities over a one year horizon. different analytical tools are used, like sensitivity analysis The amount of stable funding available is calculated which assesses the impact on an institution’s financial through applying weights to different categories of condition of a move in one particular risk factor, scenario liability which is then, compared with the amount of test which tends to consider the impact of simultaneous stable funding required, calculated by applying weights moves in a number of risk factors, and duration GAP to the institution’s assets and off-balance sheet items analysis which is the analysis of the gap in duration including potential liquidity exposure 126 Southeast Bank Limited I Annual Report 2016

Prevention of Money Laundering

Money Laundering (ML) and Terrorist Financing (TF) are The Group has strengthened its process of submitting major threats to the world’s Financial Service Industry. CTR and STR through goAML Software set down by Southeast Bank Group is pledge-bound not to allow BFIU. It has given added concentration on Customer Due its banking channel to be used by any criminal, terrorist Diligence (CDD) Process. The CDD measures include KYC or network of terrorists to carry out subversive activities Procedure, KYE Procedure, Customer Acceptance Policy, or militancy in the country and elsewhere. The Bank is Customer Identification Process, Verification Process, committed to ensuring the best corporate governance Transaction Monitoring, etc. SEBL is utilizing automated practices and aims at protecting the Bank and its screening mechanism in respect of various Sanction Lists, employees, shareholders, management and customers e.g. sanction lists of UNSCR, OFAC, AUSTRAC, EU, and local from the adverse effect of ML and TF. Government. In this connection, the screening software of the Group ‘S3’ for Core Banking Systems and ‘SWIFT’ for Considering the social and political cost of ML and international transaction have been put in place and are TF, Southeast Bank Group always attempts to thwart being used for combating the threats. occurrence of both ML and TF in its day-to-day activities. In order to be compliant with FATF recommendations, SEBL has also taken reasonable attempts to ensure instructions and guidelines of BFIU and relevant laws and that all the officials are fully informed of the AML and regulations, Southeast Bank Group is always sincere to the CFT Compliance requirements. The Group does never implementation of its AML and CFT compliance program. excuse any violation of applicable legislations or rules or In the recent past, the Group took a number of initiatives regulations or policies or procedures or industry guidance, on the issue of AML and CFT compliance. etc relating to AML and CFT in the conduct of business of the Group. An eleven-member Central Compliance Unit (CCU) at Head Office has been established to ensure compliance with AML and CFT requirements properly. Anti-Money laundering Division of the Bank is assisting the CCU continuously. In this respect, the Chief Anti-Money Laundering Compliance Officer (CAMLCO) leads CCU and AMLD to ensure oversight of all aspects of the bank’s AML and CFT activities including corrective actions to be taken to address the deficiencies identified through the inspection of BFIU, Independent Testing Procedure and Self- Assessment Report. Deputy CAMLCO, Head of Anti-Money Laundering Division and Branch Anti-Money Laundering Compliance Officers (BAMLCOs) also exercise care and caution to prevent acts of ML and TF through the use of Southeast Bank Group service outlets. Southeast Bank Limited I Annual Report 2016 127

Information Technology (IT) and Cyber Security Measures

Information Technology in Banks has greatly contributed its network connectivity from Office LAN and internet to improve operational efficiency, transparency, speed access of SWIFT user PCs and file sharing with other PCs and accuracy in banking transactions. The customers have also been blocked. Several training on ICT Security are benefited by getting a number of options for doing and Risk Management has been arranged throughout banking through a different delivery channels according the year at the Training Institute of the Bank as part of to their convenience. The business people are also getting awareness buildup among the employees of the Bank. As Corporate governance benefit of faster realization of receivables from their clients the business processes and initiatives are now driven by IT, and making payments to their suppliers instantly and therefore, the Bank will continue investing in IT to ensure securely through various established payment channels. sound and secure IT operation.

This year, the Bank has scaled its technology infrastructure Internet Banking: The Bank is offering different services to create a contemporary, secure and robust infrastructure to its clients, like inter-Bank Fund transfer, utility bill and and taken several initiatives to protect its information student’s tuition fees payment. All these transactional assets from cyber threats. SEBL has established its Data services have been secured through implementation Center (DC) and Disaster Recovery Site (DRS) keeping of Hardware / Software token based Two Factor in mind future expandability to meet emerging needs Authentication (2-FA). This year the Bank has brought and for high availability. During setup of Data Center, more Utility Service Providers and Educational Institutions environmental security has been provided highest under I-Banking service for utility bill and student’s tuition priority. This year more manpower (experienced and fresh) fee payment at customer’s convenience from home or has been recruited for capacity expansion of IT. The Core office. SEBL’s I-Banking module has further been upgraded Banking Software (CBS) has been upgraded to its latest with more features and functionalities and to strengthen release to enhance existing features and functionalities security to perform various financial transactions. SMS and ensure transaction security. and E-Mail Alert services are available for any transaction performed through online / Internet Banking or using The Bank has reviewed its ICT infrastructure and taken Debit / Credit Card. pragmatic steps to procure state of the art IT Security solutions (Hardware and Software) for implementation The available transactional services are: of multi-layer security with multiple security solutions for Network, Mailing System, Web/Internet and the end Intra and Inter Bank Fund Transfer users devices. Various policies and procedures including Utility Bills and Student Tuition Fees Payment ICT Security Policy have been revised to minimize Mobile Air time Recharge technological and operational risks and comply with SEBL’s Credit Card Bill Payment ICT Security Guideline-2015 of Bangladesh Bank. The Business Continuity Plan (BCP) and Disaster Recovery FDR and Scheme Deposit Account Opening Plan have also been revised. The SWIFT payment channel has been reviewed and restructured through separating 128 Southeast Bank Limited I Annual Report 2016

BSEC Guidelines for Corporate Governance: Our Compliance Status of compliance with the conditions imposed by Bangladesh Securities and Exchange Commission Notification No.SEC/CMRRCD/2006-158/134/ Admin/44 dated 07 August 2012

Compliance Status (Put √ in the Condition Title appropriate column) Remarks No. Complied Not complied The number of the board members of the company shall not be less than 5 (five) and more than 20 (twenty): Provided, however, that in case of banks and non-bank financial institutions, insurance companies and statutory bodies for which separate 1.1 primary regulators like Bangladesh Bank, Insurance √ Development and Regulatory Authority, etc. exist, the Boards of those companies shall be constituted as may be prescribed by such primary regulators in so far as those prescriptions are not inconsistent with the aforesaid condition. At least one fifth (1/5) of the total number 1.2(i) of directors in the company’s board shall be √ independent directors. Who either does not hold any share in the company 1.2(ii)(a) or holds less than one percent (1%) shares of the √ total paid-up shares of the company Who is not a sponsor of the company and is not connected with the company’s any sponsor or director or shareholder who holds one percent (1%) or more shares of the total paid-up shares of the company on the basis of family relationship. 1.2(ii)(b) √ His/her family members also should not hold above mentioned shares in the company Provided that spouse, son, daughter, father, mother, brother, sister, son-in-law and daughter-in-law shall be considered as family members who does not have any other relationship, whether 1.2(ii)(c) pecuniary or otherwise, with the company or its √ subsidiary/associated companies; who is not a member, director or officer of any 1.2(ii)(d) √ stock exchange; who is not a shareholder, director or officer of any 1.2(ii)(e) member of stock exchange or an intermediary of √ the capital market; who is not a partner or an executive or was not a partner or an executive during the preceding 3 1.2(ii)(f) √ (three) years of the concerned company’s statutory audit firm; who shall not be an independent director in more 1.2(ii)(g) √ than 3 (three) listed companies; who has not been convicted by a court of competent jurisdiction as a defaulter in payment 1.2(ii)(h) √ of any loan to a bank or a Non-Bank Financial Institution (NBFI); who has not been convicted for a criminal offence 1.2(ii)(i) √ involving moral turpitude The independent director(s) shall be appointed 1.2(iii) by the board of directors and approved by the √ shareholders in the Annual General Meeting (AGM). Southeast Bank Limited I Annual Report 2016 129

Compliance Status (Put √ in the Condition Title appropriate column) Remarks No. Complied Not complied The post of independent director(s) cannot remain No such event 1.2(iv) N/A vacant for more than 90 (ninety) days. occurred The Board shall lay down a code of conduct of all 1.2(v) Board members and annual compliance of the √ code to be recorded. The tenure of office of an independent director 1.2(vi) shall be for a period of 3 (three) years, which may √ be extended for 1 (one) term only. Independent Director shall be a knowledgeable individual with integrity who is able to ensure 1.3(i) compliance with financial, regulatory and corporate √ Corporate governance laws and can make meaningful contribution to business. The person should be a Business Leader/Corporate Leader/ Bureaucrat/ University Teacher with Economics or Business Studies or Law background /Professionals like Chartered Accountants, Cost & 1.3(ii) √ Management Accountants, Chartered Secretaries. The independent director must have at least 12 (twelve) years of corporate management/ professional experiences. In special cases the above qualifications may 1.3(iii) be relaxed subject to prior approval of the N/A Commission. The Position of the Chairman of the Board and 1.4 Chief Executive Officer of the company shall be √ filled by different individuals. Industry outlook and possible future developments 1.5(i) √ in the industry. 1.5(ii) Segment-wise or product-wise performance. √ Presented in 1.5(iii) Risks and concerns. √ note 3.20 A discussion on Cost of Goods sold, Gross Profit 1.5(iv) √ Margin and Net Profit Margin Discussion on continuity of any Extra-Ordinary gain 1.5(v) N/A or loss. Basis for related party transactions- a statement of Presented in 1.5(vi) all related party transactions should be disclosed in √ note 69.3.1 the annual report Utilization of proceeds from public issues, rights 1.5(vii) N/A issues and/or through any others instruments. An explanation if the financial results deteriorate after the company goes for Initial Public Offering 1.5(viii) N/A (IPO), Repeat Public Offering (RPO), Rights Offer, Direct Listing, etc. If significant variance occurs between Quarterly Financial performance and Annual Financial 1.5(ix) N/A Statements the management shall explain about the variance on their Annual Report. Remuneration to directors including independent 1.5(x) √ directors 130 Southeast Bank Limited I Annual Report 2016

Compliance Status (Put √ in the Condition Title appropriate column) Remarks No. Complied Not complied The financial statements prepared by the management of the issuer company present fairly 1.5(xi) √ its state of affairs, the result of its operations, cash flows and changes in equity. Proper books of account of the issuer company 1.5(xii) have been maintained. Appropriate accounting policies have been consistently applied in preparation of the financial 1.5(xiii) √ statements and that the accounting estimates are based on reasonable and prudent judgment. International Accounting Standards (IAS)/ Bangladesh Accounting Standards (BAS)/ International Financial Reporting Standards (IFRS)/ Bangladesh Financial Reporting Standards (BFRS), 1.5(xiv) √ as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there-from has been adequately disclosed. The system of internal control is sound in design 1.5(xv) and has been effectively implemented and √ monitored. There are no significant doubts upon the issuer company’s ability to continue as a going concern. 1.5(xvi) If the issuer company is not considered to be a √ going concern, the fact along with reasons thereof should be disclosed. Significant deviations from the last year’s operating 1.5(xvii) results of the issuer company shall be highlighted √ and the reasons thereof should be explained. Key operating and financial data of at least 1.5(xviii) √ preceding 5 (five) years shall be summarized If the issuer company has not declared dividend 1.5(xix) (cash or stock) for the year, the reasons thereof shall N/A be given. The number of Board meetings held during the 1.5(xx) year and attendance by each director shall be √ disclosed. Parent/Subsidiary/Associated Companies and 1.5(xxi)(a) √ other related parties (name wise details); Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal 1.5(xxi)(b) √ Audit and their spouses and minor children (name wise details); 1.5(xxi)(c) Executives; √ Shareholders holding ten percent (10%) or more 1.5(xxi)(d) √ voting interest in the company (name wise details). 1.5(xxii)(a) a brief resume of the director; √ nature of his/her expertise in specific functional 1.5(xxii)(b) √ areas; Names of companies in which the person also Presented-in 1.5(xxii)(c) holds the directorship and the membership of √ Annexure - F committees of the board. Southeast Bank Limited I Annual Report 2016 131

Compliance Status (Put √ in the Condition Title appropriate column) Remarks No. Complied Not complied The company shall appoint a Chief Financial Officer (CFO), a Head of Internal Audit (Internal Control and Compliance) and a Company Secretary (CS). The 2.1 √ Board of Directors should clearly define respective roles, responsibilities and duties of the CFO, the Head of Internal Audit and the CS The CFO and the Company Secretary of the companies shall attend the meetings of the Board of Directors, provided that the CFO and/or the 2.2 Company Secretary shall not attend such part of √

a meeting of the Board of Directors which involves Corporate governance consideration of an agenda item relating to their personal matters The company shall have an Audit Committee as a 3(i) √ subcommittee of the Board of Directors. The Audit Committee shall assist the Board of Directors in ensuring that the financial statements 3(ii) reflect true and fair view of the state of affairs of √ the company and in ensuring a good monitoring system within the business. The Audit Committee shall be responsible to 3(iii) the Board of Directors. The duties of the Audit √ Committee shall be clearly set forth in writing. 3.1(i) Constitution of Audit Committee √ Inclusion of independent Director on the Audit 3.1(ii) √ Committee All members of the Audit Committee are ˝financially 3.1(iii) √ literate˝ When the term of service of the Committee members expires or there is any circumstance causing any Committee member to be unable to hold office until expiration of the term of service, thus making the number of the Committee members to be lower than the prescribed number 3.1(iv) √ of 3 (three) persons, the Board of Directors shall appoint the new Committee member(s) to fill up the vacancy(ies) immediately or not later than 1 (one) month from the date of vacancy(ies) in the Committee to ensure continuity of the performance of work of the Audit Committee. The company secretary shall act as the secretary of 3.1(v) √ the Committee. The quorum of the Audit Committee meeting shall 3.1(vi) not constitute without at least 1 (one) independent √ director 3.2(i) Chairman of the Committee √ Presence of the Chairman of the Audit Committee 3.2(ii) √ in the AGM 3.3(i) Oversee the financial reporting process. √ Monitor choice of accounting policies and 3.3(ii) √ principles. 3.3(iii) Monitor Internal Control Risk management process. √ 132 Southeast Bank Limited I Annual Report 2016

Compliance Status (Put √ in the Condition Title appropriate column) Remarks No. Complied Not complied Oversee hiring and performance of external 3.3(iv) √ auditors. Review along with the management, the annual 3.3(v) financial statements before submission to the √ board for approval. Review along with the management, the quarterly 3.3(vi) and half yearly financial statements before √ submission to the board for approval. 3.3(vii) Review the adequacy of internal audit function √ Review statement of significant related party 3.3(viii) √ transactions submitted by the management. Review Management Letters/ Letter of Internal 3.3(ix) √ Control weakness issued by statutory auditors. When money is raised through Initial Public Offering (IPO)/Repeat Public Offering (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 3.3(x) 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. The Audit Committee shall report on its activities to 3.4.1(i) √ the Board of Directors. 3.4.1(ii)(a) report on conflicts of interests; N/A suspected or presumed fraud or irregularity or 3.4.1(ii)(b) N/A material defect in the internal control system; suspected infringement of laws, including 3.4.1(ii)(c) N/A securities related laws, rules and regulations; any other matter which shall be disclosed to the 3.4.1(ii)(d) N/A Board of Directors immediately 3.4.2 Reporting to the Authorities N/A Reporting to the Shareholders and General 3.5 - Investors 4(i) Appraisal or valuation services or fairness opinions. √ Financial information systems design and 4(ii) √ implementation. Book-keeping or other services related to the 4(iii) √ accounting records or financial statements. 4(iv) Broker-dealer services. √ 4(v) Actuarial services. √ 4(vi) Internal audit services. √ Any other service that the Audit Committee 4(vii) √ determines No partner or employees of the external audit firms shall possess any share of the company they audit 4(viii) √ at least during the tenure of their audit assignment of that company. Audit/Certification Services on Compliance of the 4(ix) √ corporate Governance as required. Southeast Bank Limited I Annual Report 2016 133

Compliance Status (Put √ in the Condition Title appropriate column) Remarks No. Complied Not complied Provisions relating to the composition of the Board of Directors of the holding company shall be made 5(i) N/A applicable to the composition of the Board of Directors of the subsidiary company. At least 1 (one) independent director on the Board of Directors of the holding company shall be a 5(ii) N/A director on the Board of Directors of the subsidiary company The minutes of the Board meeting of the subsidiary 5(iii) company shall be placed for review at the following √ Board meeting of the holding company Corporate governance The minutes of the respective Board meeting of the holding company shall state that they have 5(iv) √ reviewed the affairs of the subsidiary company also. The Audit Committee of the holding company shall 5(v) also review the financial statements, in particular √ the investments made by the subsidiary company. these statements do not contain any materially 6(i)(a) untrue statement or omit any material fact or √ contain statements that might be misleading; these statements together present a true and fair view of the company’s affairs and are in compliance 6(i)(b) √ with existing accounting standards and applicable laws. There are, to the best of knowledge and belief, no transactions entered into by the company during 6(ii) √ the year which are fraudulent, illegal or violation of the company’s code of conduct. The company shall obtain a certificate from a practicing Professional Accountant/Secretary (Chartered Accountant/ Cost and Management Accountant/Chartered Secretary) regarding 7(i) √ compliance of conditions of Corporate Governance Guidelines of the Commission and shall send the same to the shareholders along with the Annual Report on a yearly basis. The directors of the company shall state, in accordance with the Annexure attached, in 7(ii) √ the directors’ report whether the company has complied with these conditions. 134 Southeast Bank Limited I Annual Report 2016 Southeast Bank Limited I Annual Report 2016 135

Compliance of Bangladesh Bank’s Guidelines on Corporate Governance

Bangladesh Bank Guidelines for Corporate Governance: Our Status of Compliance with BRPD Circular No.11 of 27th October 2013.

Compliance Sl No. Particulars Remarks Status Constitution of Board of Directors For appointment of new Directors and removal of Directors Bangladesh √ Bank’s approval to be obtained. 1. Eligibility and Qualification of Directors, maximum number of Directors √ Corporate governance on the Board of Directors. Appointment of Independent Director. √ Maximum 2 Directors from one family. √ Appointment of New Directors Section 15.4 of Bank Company (Amendment) Act-2013 requires that 1.1 application for obtaining approval of Bangladesh Bank to appoint new √ Directors should be sent along with some specified declarations and approval of Bangladesh Securities and Exchange Commission. 1.2 Vacancy of Office of a Director (a) Vacancy as per Section 108 (i) of Companies Act 1994 and Vacancy No such event as per Section 17 of Bank Company Act 1991. (b) i) Bar to become a Director who was removed by operation of No such event Section 17 of Bank Company Act 1991. ii) Bar to transfer share by a Director who was removed by No such event operation of Section 17 of Bank Company Act 1991. Removal of Director and dissolution of the Board by Bangladesh C No such event Bank. Removal of Directors and Dissolution of the Board 1.3 No such event For removal of a Director, Bangladesh Bank’s approval to be obtained.

1.4 Appointment of Alternate Directors

(a) To appoint alternate director in place of original Director, documentary evidence of foreign visit and return of original No such event Director shall be kept in records. Any deviation from this shall be reported to Bangladesh Bank by the Bank’s Chief Executive Officer. (b) Copy of resolution for appointment of Alternate Director by the Board of Directors along with original Director’s probable date of No such event return are to be sent to Bangladesh Bank. (c) Any loan defaulter and anybody who is not eligible to be appointed as Director under Bank Company Act or Companies Act or any No such event other law or rules shall not be appointed as Alternate Director. (d) No Alternate Director shall be appointed as a member of any There is no Alternate committee of the Board of Directors. Director on the Board of SEBL (e) No credit facilities to Alternate Director or to entities where he has √ No such event interest shall be allowed. All requirements of Law, Rules and Directives applicable to a √ No such event Directors are also equally applicable to an Alternate Director. 2. Depositor Director No requirement for appointment of Depositor Director. The tenure of √ office of current Depositor Directors shall be determined by the Board. 136 Southeast Bank Limited I Annual Report 2016

Compliance Sl No. Particulars Remarks Status 3. Particulars of Directors (a) Updated list of Directors; √ (b) Distribution of list of Directors to the scheduled Banks and NBFIs √ (c) Updated profile of Directors in the website. √ 4. Responsibility and Power of the Board of Directors Board of Directors is responsible for policy framing and √ implementation, Risk Management, Internal Control, Internal Audit and ensuring compliance of Internal Audit objections etc. 4.1 Responsibility and Powers of the Board of Directors (a) Work Plan and Strategic Management i) Board shall determine Bank’s goals and objectives and devise strategies and work plan. Progress towards √ achievement of work plan shall be reviewed quarterly by the Board. ii) Board of Directors shall include its analytical/critical review of Bank’s achievement and its failures in the Bank’s Annual Report. It shall also inform the shareholders about √ the Bank’s future work plan and strategies. KPI(s) of CEO and two grades below the CEO shall be determined and evaluated by the Board of Directors. (b) Credit and Risk Management Board of Directors shall approve re-schedule & write off of i) √ credit within existing Laws and Rules & Regulations. Board shall delegate power to approve credit/investment. √ All policies relating to credit evaluation sanction, recovery √ re-schedule and write-off shall be approved by the Board. ii) Board of Directors review Risk Management Policy on quarterly √ basis Implementation of guidelines of Bangladesh Bank about major √ risks shall also be monitored by the Board. (c) Management of Internal Control Board of Directors shall closely monitor Internal Control System in order to maintain qualitative standard of Credit/Investment. Board of Directors shall review on quarterly basis the reports of √ the Audit Committee submitted before it regarding compliance status of suggestions and recommendation of inspection report of Internal Audit, External Auditors and Inspection Team of Bangladesh Bank. (d) Human Resource Management and Development of Human Resource i) All policies and service Rules relating to Human Resources √ of the Bank shall be approved by the Board. The appointment, promotion, transfer and disciplinary action against an executive up to two grades below the √ CEO shall made/taken by the Board. ii) Board of Directors shall give special emphasis on Training for enhancement of capability of Bank’s Executives and √ Officers for accurate assessment of Credit/Investment proposals. Modern electronic and information technology and Management Information System (MIS) shall be stressed √ up and included in the annual work-plan. Southeast Bank Limited I Annual Report 2016 137

Compliance Sl No. Particulars Remarks Status iii) Board of Directors shall devise Code of Ethics for all grades of Executives and Officers and it should be meticulously √ complied with by all Executives and Officers. Board of Directors shall promote high ethical standard for the purpose of developing a culture of compliance in the √ Bank. (e) Financial Management i) Bank’s Annual Budget and Statutory Financial Statements shall be prepared with the approval of the Board of Directors. Bank’s Income, Expenditure, Liquidity, Expired √ / Unrecovered Loans, Capital Base and Capital Adequacy, Provision, classified loans etc must be reviewed by the Corporate governance Board on quarterly basis. ii) Purchase and Procurement Policy shall be devised by the √ Board of Directors. Delegation of powers in this behalf shall be approved by √ the Board. Board’s prior approval shall be required to purchase Land, Building, Establishment, construction, Vehicle etc on √ business consideration. iii) Board of Directors shall review whether Asset-Liability Committee (ALCO) is formed and functioning observing √ the directives of Bangladesh Bank. (f) Appointment of Chief Executive Officer Board of Director shall appoint a honest, skilled, experienced √ and a suitable person as Chief Executive Officer. Appointment of CEO shall require Bangladesh Bank’s approval. (g) Board’s added Duty Board shall ensure proper execution and compliance of any √ duty vested upon it by Bangladesh Bank. 4.2 Meeting of Board of Directors One meeting of the Board in each month and if required more than one meeting in a month. But minimum one meeting of the Board shall be held in a quarter. 4.3 Responsibilities of Chairman of Board of Directors (a) Chairman’s area of activities. √ (b) He may visit a branch or Bank’s financial project. √ He may order for an enquiry, if required. √ He may take actions through the CEO with the approval of the √ Board. (c) An Office Room, a personal Secretary / Assistant, one Peon / MLSS, Telephone at the office, one Mobile Phone and a vehicle √ may be provided to the chairman with the approval of Board. 5. Constitution of Supporting Committee Every Bank Company shall constitute one Executive Committee, one Audit Committee and one Risk Management Committee consisting of members of the Board of Directors. 5.1 Executive Committee In order to resolve urgent matters and day to day or / routine work during interval of meeting of Board of Directors, it shall constitute an √ Executive Committee. (a) Structure √ 138 Southeast Bank Limited I Annual Report 2016

Compliance Sl No. Particulars Remarks Status (b) Eligibility of the Members of the Executive Committee √ (c) Responsibilities and Duties of the Executive Committee √ (d) Calling Meeting of the Executive Committee √ 5.2 Audit Committee Audit Committee to be constituted to carry out supervisory role on presentation of Financial Reports, Internal Control System, Auditing √ System, compliance of existing Laws and Rules and Regulations of regulators.

(a) Structure √ (b) Qualification of Members of Audit Committee √ (c) Duties and Responsibilities of the Audit Committee √ (A) Internal Control √ (B) Publication of Financial Reports √ (C) Internal Audit √ (D) External Audit √ (E) Compliance of existing Laws and Rules √ (F) Miscellaneous Work √ (d) Calling Meeting of the Audit Committee √ Risk Management Committee Risk Management Committee shall be formed in order to play an effective role in lowering possible risks in respect of implementation of strategies and work-plan formulated by Board of Directors. Risk Management Committee shall analyze the policy / system of lowering risks properly by the management and maintenance of √ required capital against Risks and Provision for Reserve for Credit Risk, Foreign Exchange Risk, Internal Control and Compliance Risk, Money Laundering Risk, Information and Communication Technology Risk, Operation Risk, Interest Rate Risk, Liquidity Risks shall be looked after by the Risk Management Committee etc. (a) Structure √ (b) Qualification of Committee Members √ (c) Responsibilities and Duties of the Risk Management Committee √ (A) Risk Identification and Control Strategy √ (Av) Preparation of Organizational Structures √ (B) Review of Risk Management Policy and approval (C) Preparation of Information and Reporting System √ (D) Supervision of Implementation of Overall Risk Management √ Policy (E) Miscellaneous Work √ (d) Calling Meeting of the Risk Management Committee √ 6. Training of Directors √ This Circular is issued to implement Section 15, 15 Kha and 15 Ga of 7. - - Bank Company (Amended) Act, 2013. with immediate 8. Enforcement of the Circular. - effect Southeast Bank Limited I Annual Report 2016 139

BRPD Circular No.18 of 27th October 2013 Appointment and responsibilities of Chief Executive Officer (CEO)

Sl. Compliance Particulars No. Status A Rules and regulations for appointment of the CEO 1 Moral Integrity: In case of appointment to the post of CEO, satisfaction in respect of the concerned person should be ensured to the effects that: a) He has not been convicted by any Criminal Court of Law. Complied b) He has not been punished for violating any rules, regulations or procedures / norms set by any regulatory authority. c) He was not associated with any such company / organization; registration or license of which has been cancelled. 2 Experience and Suitability: a) For appointment as a CEO, the concerned person must have experience in banking profession Corporate governance for at least 15 (fifteen) years as an active officer and at least 2 (two) years experience in a post immediate below the CEO of a bank. b) He must have a Master’s Degree at minimum from any recognized university. Higher academic education in the field of Economics, Banking and Finance or Business Administration will be Complied treated as additional qualification for the concerned person. c) In respect of service, the concerned person should have excellent track record of performance. d) Satisfaction should be ensured that the concerned person was not dismissed from service when he was chairman/director/official of any company. e) Any director of any bank or financial institution or any person who has business interest in the concerned bank will not be eligible for appointment to the post of CEO. 3 Transparency and financial integrity: Before making appointment as a CEO, satisfaction should be ensured to the effects that: a) The concerned person was not involved in any illegal activity while performing duties in his own or banking profession. Complied b) He has not deferred payment to creditors or has not compromised with his creditors to be relieved from debts or he is not a loan defaulter. c) He is not a tax defaulter. 4 Age Limit: No person crossing the age of 65 years shall hold the post of CEO of a Bank. Complied 5 Tenure: The tenure of the CEO shall not be more than 03 (three) years, which is renewable. If the Complied candidate has less than 3 years left to attain 65 years, he/she can be appointed for the shorter person. 6 Guidelines in fixing the salary and allowance: Banks are required to follow the guidelines stated Complied below while determining the salary and allowances of the CEO and submitting such proposals to BB.B. a) In fixing the salary and allowances of the CEO, financial condition, scope of operation, business- volume and earning capacity of the Bank; qualifications, achievement of the candidate in the Complied past, age and experience and the remuneration paid to the persons occupying same position in the peer banks shall have to be taken into consideration. b) Total salary shall be comprised of direct salary covering ‘Basic Salary’ and ‘House Rent’ and allowances as ‘Others’. The allowances (e.g., provident fund, utility bill, leave-fare assistance) in ‘Others’ head should be specified in amount/ceiling. Besides, other facilities (e.g., car, fuel, driver etc), as far as possible, shall have to be converted in the monetary value and thus Complied determining monthly total salary, it shall have to be mentioned in the proposal submitted to BB. In the proposal, Basic Salary, House Rent, Festival Allowance, other allowances and other facilities shall have to be specified in Taka amount. c) Without improving the bank’s major financial indicator like-CAMELS, annual salary increment Complied will not be payable. d) Terms of salary-allowances and other facilities as specified in the terms and conditions of appointment cannot be changed during the tenure. In case of renewal, proposal may be Complied made for re-fixation of the salary considering the work performance of the current CEO. e) The CEO so appointed shall not get any other direct or indirect facilities (e.g., dividend, commission, club expenses, etc.) other than the salary-allowances and other facilities as Complied enumerated in clause (b) above. f) The bank shall not pay any income tax for the CEO, i.e. the CEO so appointed shall have to Complied pay it. 140 Southeast Bank Limited I Annual Report 2016

Sl. Compliance Particulars No. Status 7 Inventive Bonus: The CEO will gent incentive bonus subject to paying incentive bonus to all executives/officers/workers of the bank and the said bonus amount will not exceed BDT 1,000,000 Complied in a year. 8 Honorarium for attending the Board Meeting: Being a salaried executive, CEO will not get any Complied honorarium for attending the Board meeting or Board formed Committee meeting 9 Evaluation Report: For reappointment of the CEO, the Chairman of the bank shall have to submit a Complied Board approved evaluation report to BB. 10 Prior Approval from Bangladesh Bank: Prior approval from Bangladesh Bank is mandatory before appointing CEO as per section 15(4) & (5) of Bank Company Act 1991 (amended up to 2013). For processing such approval, along with the proposal signed by the Chairman of the BoD, the selected Complied person’s complete resume, offer letter (mentioning the direct & indirect remuneration and facilities) and copy of Board’s approval must be submitted to BB. The selected person must also submit declarations as per Annexure A & Annexure B to BB. 11 Decision of Bangladesh Bank is final: The decision of BB for appointment of the CEO will be treated as final and the CEO such appointed cannot be terminated, released or removed from his/her Complied office without prior approval from BB. B Responsibilities and Authorities of the CEO: The CEO of the bank, whatever name called, shall Complied discharge the responsibilities and exercise the authorities as follows: a) In terms of the financial, business and administrative authorities vested upon him by the BoD, the CEO shall discharge his own responsibilities. He shall remain accountable for achievement Complied of financial and other business targets by means of business plan, efficient implementation thereof and prudent administrative and financial management. b) The CEO shall ensure compliance of the Bank Company Act 1991 and other relevant laws and Complied regulations in discharging routing functions of the bank. c) The CEO include clearly any violation from Bank Company Act 1991 and/or other relevant laws and regulations in the “Memo” presented to the meeting of the BoD or any other Complied Committee(s) engaged by the BoD. d) The CEO shall report to Bangladesh Bank of issues in violation of the Bank Company Act 1991 Complied or of other laws/regulations. e) The recruitment and promotion of all staffs of the bank except those in the two tiers below him/her shall rest on the CEO. He/she shall act in such cases in accordance with the approved Complied service rules on the basis of the human resources policy and approved delegation of employees as approved by the BoD. f) The authority relating to transfer of and disciplinary measures against the staff, except those at two tiers below the CEO, shall rest on him/her, which he/she shall apply in accordance with the approved service rules. Besides, under the purview of the human resources policy as approved by the BoD, he/she shall nominate officers for training etc. Southeast Bank Limited I Annual Report 2016 141

Status of compliance with the conditions imposed by Bangladesh Bank BRPD Circular Letter No.19 dated 27 October 2013 on Contractual appointment of Advisor and Consultant.

Compliance Sl No. Particulars Remarks Status

A Rules and regulations for appointment of an Advisor

1 Experience and Suitability Complied

Responsibilities of the Advisor: The roles and responsibilities of the Advisor are defined specifically. The Advisor can advise the 2 Complied Board of Directors or CEO only on those matters specified in the appointment letter.atters specified in the appointment letter.

3 Prior approval from Bangladesh Bank Complied Corporate governance

4 Remuneration and other facilities of Advisor Complied

Tenure of Advisor: The tenure of the Advisor shall be maximum 5 Complied 01(one) year which is renewable.

Appointment of Former-executive: For ensuring good governance, any former Director, CEO or any other Executive of the 6 Complied bank will not be eligible to become an Advisor in the same bank immediately after their retirement or resignation.

B Rules and regulations for appointment of a Consultant

Terms of reference of Consultant: Consultant can be appointed 1 for specialized tasks like tax, law and legal procedures, engineering Complied and technical works, information technology, etc.

Responsibilities of a Consultant: The responsibilities or terms of 2 reference of a Consultant are specified. He does not involve in any Complied activities beyond his terms of references.

Appointment of a Consultant: A Consultant can be appointed No Consultant in with the approval of the BoD. After such appointment the bank shall 3 Complied office as on st31 send the Consultant’s complete resume, terms of reference and December 2016. details of remuneration to Bangladesh Bank immediately.

Tenure of a Consultant: The tenure of a Consultant should be 4 consistent with the terms of reference but would not exceed 02 Complied (two) years.

5 Remuneration/honorarium of a Consultant Complied

Appointment of Former-executive: For ensuring good governance, any former Director, CEO or any other Executive of the 6 Complied bank will not be eligible to appointment as a Consultant in the same bank immediately after their retirement or resignation. 142 Southeast Bank Limited I Annual Report 2016

Certificate of MANCOM Regarding the Effectiveness of Internal Control Policy, Practice and Procedure

March 27, 2016

Internal Control is a process effected by the Board of The Management Committee is satisfied that Internal Directors, Senior Management and personnel of all levels. Control Policy, Practice and Procedure of the Bank are It is not solely a procedure or policy that is performed at effective and these provide a reasonable assurance a certain point of time rather it is continually operating at in achieving objectives of the Bank in respect of (i) all levels within the Bank. As per guidelines of Bangladesh reliability of the financial information; (ii) effectiveness and Bank, the Board of Directors and Senior Management efficiency of operations; (iii) compliance with applicable are required to take appropriate steps for establishing laws and regulations; (iv) adherence to management appropriate culture to facilitate an effective internal policies; (v) safeguarding of Bank’s assets; (vi) prevention control process and for monitoring its effectiveness on and detection of fraud and errors; and (vii) accuracy an ongoing basis; however, each individual within the and completeness of the accounting records. However, organization must participate in the process. internal control environment of the Bank will further be strengthened after implementation of the processes as The MANCOM received an updated “Review Report on mentioned in the revised “Guidelines on Internal Control the Risk Management of Internal Control & Compliance of and Compliance in Banks” provided by Bangladesh Bank the Bank” and reviewed the internal control mechanism vide BRPD Circular No.03 dated 08.03.2016. in place and different issues on risk management of Internal Control and Compliance, e.g appropriateness and effectiveness of Internal Control Environment; Internal Control Objective; Internal Control Policy Guidelines; Organization Structure; Process Guidelines and Internal Control Process of the Bank. The Committee also reviewed Shahid Hossain the key points of Bangladesh Bank’s last inspection report Managing Director on ICC of the Bank alongwith the Bank’s compliance (Former) thereof. Southeast Bank Limited I Annual Report 2016 143

Credit Rating on the Bank

Credit Rating Information and Services Limited (CRISL) has reaffirmed the long term rating of Southeast Bank Limited at AA (Pronounced as Double A) and the short term rating at ST-2 based on audited financials up to 31st December, 2015 and unaudited financials up to 31st March, 2016 and other relevant qualitative as well as quantitative information up to the date of rating.

Surveillance Rating Corporate governance Explanation Rating (2014) Rating (2015)

Long Term Long Term The Bank rated AA (High Safety) in credit rating is adjudged to be AA AA of high quality, offers higher safety and has high credit quality. This Double A Double A level of rating indicates a corporate entity with a sound credit profile (High Quality and High (High Quality and High and without significant problems. Risks are modest and may vary Safety) Safety) slightly from time to time because of economic conditions.

The Bank rated ST-2 (High Grade) in the short term in credit rating Short term Short term is considered to have high certainty of timely payment. Liquidity ST-2 ST-2 factors are strong and supported by good fundamental protection High Grade High Grade factors. Risk factors are very small.

Outlook Stable

Date of Rating June 23, 2016

Validity Up to June 22, 2017

144 Southeast Bank Limited I Annual Report 2016

Audit Committee (Composition, role, meetings, attendance, etc) and Internal Control

The Audit Committee is an important functional Committee of the Board of Directors of the Bank. It is assigned with oversight of financial reporting, disclosure, regulatory compliance and disciplined banking operation complying with the rules and norms of banking. Feature and Composition

The Audit Committee was lastly re-constituted by the Board of Directors in its 486th meeting held on April 11, 2016. The membership and attendance of the members of the Audit Committee are given below:

Sl. Meetings Members Position Attendance Remarks No held Mr. A.H.M. Moazzem Hossain 1. Chairman 6 6 a) The Members who could not (Independent Director) attend any meeting were granted 2. Mrs. Duluma Ahmed Member 6 5 leave of absence. 3. Mrs. Jusna Ara Kashem Member 6 5 b) Mrs. Rehana Rahman was 4. Mrs. Rehana Rahman Member 6 5 appointed member of the Audit Committee on 11-04-2016. 5. Mrs. Sirat Monira Member 6 1 c) Mrs. Sirat Monira ceased to be member of the Audit Committee on 11-04-2016. Dr. Quazi Mesbahuddin Ahmed 6. Member 6 4 (Independent Director) d) Dr. Quazi Mesbahuddin Ahmed was appointed member of the Audit Committee on11-04-2016

Quorum ii. Presence of 03 (three) members shall form quorum. Presence of 3 (three) members constitutes quorum for iii. The tenure of office of the Audit Committee shall be validly holding a meeting of the Audit Committee. for 3 years. Head of Internal Control and Compliance of Head iv. The Company Secretary shall act as Secretary to the Office attended the meeings to present the agenda. On Audit Committee. invitation, Senior Executives of the Bank including the v. The terms of reference of the Audit Committee Managing Director, Chief Financial Officer (CFO) and Head shall also be as specified in the BRPD Circular of Risk Management Division attended the meetings to No.11 dated October 27, 2013 of Bangladesh Bank meet instant queries of the Audit Committee to make and provisions contained in Notification No.SEC/ its decisions fact-based. In addition, Heads of Branches CMRRCD/2006-158/134/Admin 144 dated 07 whose audit reports were placed to the Audit Committee August, 2012 of Bangladesh Securities and Exchange were also present in the meetings to respond to the issues Commission (BSEC). raised in the reports of Internal Control and Compliance Division. vi. Mr. Zakir Ahmed Khan, Advisor of the Bank, shall remain present in every meeting of the Audit Terms of Reference of the Audit Committee Committee as far as possible and shall give his advice i. Mr. A.H.M. Moazzem Hossain, in his capacity as the and suggestions for improvement of Bank’s operations Independent Director, shall be the Chairman of the and strict compliance of rules of both the Bank and its Audit Committee. regulators. Southeast Bank Limited I Annual Report 2016 145

Charter of the Audit Committee to report to the Bangladesh Securities and Exchange Commission about anything which has material impact The Audit Committee is constituted by the Board of on the financial condition and result of operation of the Directors for the primary purpose of assisting the Board in : Bank. But such reporting was not necessitated in 2016 as Overseeing the integrity of the company’s financial nothing which has/had material impact on the financial statement. condition and results of operation had occurred in the Bank during the year 2016. Overseeing the improvement of corporate governance standard of the company. Deliberations of the Audit Committee in 2016 Overseeing the Company’s system of disclosure, During the year 2016, the Audit Committee carried out its internal controls and procedure. regular functions on areas pertaining to its responsibilities. Overseeing Bank’s internal control over financial The issues it discussed and the decisions it took for reporting. improvement of operational performance of the Bank are Corporate governance Overseeing Bank’s compliance with ethical standards listed below: adopted by the company. i. The Inspection plan of the Bank for the year 2016 was Making reports and recommendations to the Board. approved. Roles and Responsibilities ii. Management Information System (MIS) Report for the year 2015 was reviewed by the Audit Committee and The role of Audit Committee is to assist the Board in suitable decisions were given. discharging its duties and responsibilities for financial reporting, corporate governance, internal control, green iii. The Audit Committee reviewed the status of key banking, and environmental and climate change risks. financial and business indicators of Bank and thanked The added roles of the Audit Committee include, but not the Management for the good work on Management limited to, the followings: Information System (MIS). i. Overseeing the financial reporting process. iv. Position of classified, re-scheduled and written-off loans of the Bank was repeatedly discussed. The Audit ii. Monitoring choice of accounting policies and Committee advised to bring down classified loans by principles. recovery and regularization. It also advised for recovery iii. Monitoring Internal Control Risk Management process. of written-off loans and regularization of re-scheduled iv. Overseeing hiring and performance of external loans. auditors. v. The Committee studied the status of collaterals held v. Reviewing the annual financial statements before against classified loans and gave its decisions for submission to the Board for approval. improving and strengthening security back up against loans and advances. vi. Reviewing the quarterly and half yearly financial statements before submission to the Board for vi. The Committee recommended for appointment of approval. bank’s external auditors for the year 2016. vii. Reviewing the adequacy of internal audit functions. vii. The Audit Committee minutely examined the Head Office Comprehensive Inspection Reports on Bank’s viii. Reviewing statement of significant party transactions different branches and gave suitable decisions. submitted by the management. ix. Reviewing Management Letters/ Letter of Internal viii. The Audit Committee examined the certificate of the Control Weakness issued by Statutory Auditors. Management Committee regarding the effectiveness of Internal Control, Policy, Practice and Procedures. x. Reviewing the raising of fund through Repeat Public Offering/ Rights Issue and its use and application. ix. The Audit Committee reviewed periodic recovery positions of the Bank against classified, re-scheduled xi. Monitoring internal control process. and written-off loans and gave suitable decisions. xii. Maintaining oversight regulatory compliance, ethics x. The Audit Committee periodically examined position and whistleblower hotlines of classified loans and provision requirement there xiii. Reviewing Audit Committee’s own terms of reference. against. Accordingly, it gave suitable decisions. Reporting of the Audit Committee xi. The Audit Committee reviewed the quarterly, half yearly and annual financial statements before their The Audit Committee reported its findings and submission to the Board for final review and approval. observations to the Board of Directors. It is also required 146 Southeast Bank Limited I Annual Report 2016

xii. The Audit Committee reviewed the report on the xx. The Audit Committee advised the Management to position of Southeast Bank Ltd. (Health Report) and correctly assess fund requirement of a borrower and to gave suitable decisions for improving the Bank’s refrain from allowing high exposure disproportionate Financial Health (CAMELS Rating). to business needs in an account. xiii. The Committee reviewed the Bank’s Self Assessment xxi. The Committee expressed the considered opinion of Anti-Fraud Internal Controls and advised to put that Special Mention Accounts (SMAs) need to be in place enough control measures following the effectively monitored for their timely regularization. guidelines given by the Bangladesh Bank to avert Appraisals of such loans are done by the concerned attempts of frauds and forgeries in the Bank. credit officers. Hence, they shall monitor the respective SMA Accounts. The system of monitoring of SMAs be xiv. The Audit Committee thoroughly reviewed the effectively put in place and supervised. progress report of task forces on recovery of classified, written off and rescheduled loans and gave its xxii. The Audit Committee advised that office orders of decisions for improving and strengthening recovery dismissal/termination of officials for gross misconduct efforts substantially. should be copied to appropriate authorities and circulated through the internal web-portal of the Bank xv. The Audit Committee thoroughly reviewed the for information of all after observing due procedures. findings of the Bangladesh Bank Inspection Team on different branches and instructed management Report to the Board to take appropriate actions to prevent repetition of All findings and decisions of the Audit Committee were lapses identified in their inspection reports. reported to the Board and the Board closely reviewed xvi. The Audit Committee reviewed the Annual Summary them. Report on Audit Findings-2015 and advised for strong Minutes of Audit Committee to Bangladesh Bank monitoring of non-performing loans of different branches for their timely adjustment and turning The minutes of meetings of the Audit Committee were them into performing loans. The Committee also sent to Bangladesh Bank for their information. advised to obtain additional collateral against the loan Reporting to the Regulatory Authorities where there is no collateral or inadequate collateral on best effort basis to safeguard Bank’s interest. There had not been any occurrence in the Bank that required reporting to the relevant authorities by the Bank’s xvii. The Committee carried out in-depth review of audit Audit Committee. findings of the Branches in pursuance of the respective Heads of Branches and gave directives to rectifying the lapses / irregularities within the deadlines set by the Committee. xviii. The Committee reiterated its decision about zero A.H.M. Moazzem Hossain tolerance to repetition of lapses identified by the Chairman Bangladesh Bank Inspection Team as well as ICCD. xix. The Committee advised that recovery drives be geared up by strengthening and, where necessary, by further streamlining the system of recovery. Southeast Bank Limited I Annual Report 2016 147

Internal Control and Compliance

Effective internal control is essential to a bank for efficient Establish Annual Inspection Plan. management of its risks. It is commonly agreed that a Review of Annual Summary Report of the lapses/ bank requires a strong and effective system of internal irregularities raised in the Internal Inspection Reports. controls to ensure operation of the bank safely and soundly. Indeed, internal control is the foundation of safe Review of Annual Health Report of the bank. and sound banking. A good system of internal controls, Review of safety and security issues of the bank etc. Corporate governance when properly designed and consistently enforced, will broadly facilitate the management to: The management of SEBL has put in place a successful and effective system of internal control in line with standard Safeguard the bank’s resources; guidelines and guidance note of Bangladesh Bank in order Ensure effective and efficient operations of the bank; to control and mitigate the risks of Internal Control and Compliance as well as to keep the bank on sound course Achieve the goals and objectives of the bank; toward profitability goals, achievement of its mission and Enforce efficient managerial guards; improvement of its performance. The aspects of SEBL relating to risk control and mitigation are as under: Produce reliable financial information and reports;

Comply with applicable laws, regulations and internal Control Environment: An appropriate and effective policies of the bank; internal control environment is in place to ensure Become responsive to the changes so that the bank that the bank is managed and controlled in a can adapt such changes quicker than its competitors; sound and prudent manner. The Board of Directors of the bank is actively concerned with sound Reduce the possibility of significant errors and corporate governance and diligently discharging irregularities and help in timely detection thereof; its responsibilities. Bank Management proactively Early detect fraud / forgeries and protect the bank discharges their responsibilities and supervises the from financial loss there against, etc. activities of the bank.

Control Activities and Segregation of Duties: The Southeast Bank Ltd. (SEBL) has established the following management of SEBL has set up an appropriate Internal Control Cycles or pre-defined Procedures, i.e control structure with control activities defined Compliance Review Work Program to identify and measure at every business level, i.e. top level review and the risk of internal control and compliance of the bank: appropriate activity control for different divisions/ units and branches/departments. The management Define terms of reference through adopting relevant has also established an appropriate segregation of policy, manuals, processes, procedures and practices. duties with necessary authority, job description/flow Evaluate the control function through establishing chart of works etc. to maintain an effective internal Departmental Control Function Checklist control structure. (DCFCL), Quarterly Operation Report (QOR), Loan Documentation Checklist (LDC). Management Information System: SEBL has established an effective management information Utilize the approved Methodology of Risk Assessment system to support the organizational and procedural for undertaking Risk Based Inspection. controls. SEBL uses a new version of Core Banking Evaluate the effectiveness of internal control system Software (CBS) named ‘Bank ULTIMUS’. Access control through establishing MANCOM Certificate. of the CBS is properly defined and exercised. Data Center for backup of data and information has been Review of periodical self assessment of Anti-Fraud established. Testing of system’s backup procedure Internal Control Report. and contingency plan are done regularly. 148 Southeast Bank Limited I Annual Report 2016

Monitoring of Activities and Correcting Deficiencies: to contribute positively towards strengthening the The activities of SEBL are monitored on an ongoing system of managing the risk of Internal Control & basis so that adopted policy, manuals, processes, Compliance of the bank. They utilize the various procedures and practices are being adhered to. Key internal control cycle, i.e. compliance review work and high risk items are identified and monitored as program to evaluate the adequacy and effectiveness part of daily activities and periodical evaluation is of internal controls in the operation and business done by the business lines and internal inspection process of the bank. team. Internal control deficiencies identified by business lines, internal control team or other control Inspection Teams of ICCD of SEBL carry out risk based personnel are reported timely and promptly to the surprise and comprehensive inspection, special inspection, appropriate management level and addressed investigation, IT inspection on different Branches and immediately. Divisions at Head Office of the Bank and submit report thereof. They also conduct independent testing on AML Independent Audit Mechanism: SEBL has established and CFT compliance at branch level. Necessary remedial an independent audit/inspection mechanism to measures/corrective steps are taken on the suggestions/ monitor the effectiveness of the organizational and observations made in the said reports. The summary of procedural controls of the Bank. Internal Control key points of the reports are also presented and discussed and Compliance Division of the Bank with its three in the meeting of the Audit Committee of the Board of units (Compliance Unit, Monitoring Unit, Audit and Directors. Appropriate actions are also taken as per the Inspection Unit) is performing the supervisory and decisions of the Audit Committee for protecting the monitoring works to manage the risks. They are Bank’s interest. performing their day to day activities with an intention Southeast Bank Limited I Annual Report 2016 149

Report of the Risk Management Committee

The Bank Company (Amendment) Act-2013, inter alia, provided for constitution of a Risk Management Committee of the Board of Directors of every Bank. Bangladesh Bank issued BRPD Circular No.11 dated October 27, 2013 delineating, among other things, the composition and functions of the Risk Management Committee especially in the areas of Bank’s core risk-related issues.

Feature and Composition Corporate governance The Board of Directors of the Bank in its 486th meeting held on April 11, 2016 re-constituted the Risk Management Committee comprising the following Directors of the Bank. One Independent Director was included in the Committee. The membership of the Risk Management Committee of the Board of Directors of the Bank and members’ attendance in its meetings in 2016 are given below:

Sl. Meetings Members Position Attendance Remarks No held 1. Alamgir Kabir, FCA Chairman 4 4 Ragib Ali 2. (Ceased to be Director on and Member 4 1 The Members who could not from March 08, 2017) attend any meeting showing 3. M. A. Kashem Member 4 4 genuine ground were granted 4. Azim Uddin Ahmed Member 4 4 leave of absence A. H. M. Moazzem Hossain 5. Member 4 4 (Independent Director)

Note: Mr. Ragib Ali could not attend 3 meetings because of his personal issues.

Structure of the Risk Management Committee v. Reporting its decisions and recommendations to the Board. i. The Chairman of the Board of Directors of the Bank shall be the Chairman of the Risk Management vi. Overseeing the implementation of related guidelines Committee. issued by the regulatory bodies from time to time. ii. Presence of 3 (three) members in a meeting of the Reporting of the Risk Management Committee Committee shall form quorum. iii. The Company Secretary of the Bank shall act as the As required, the Risk Management Committee reported its Secretary to the Risk Management Committee. decisions and recommendations to the Board of Directors for review. Functions of the Risk Management Committee Deliberation of the Risk Management Committee in The broad functional areas of the Risk Management 2016 Committee are the following: During the year 2016, the Risk Management Committee i. Risk assessment and risk control strategy. discharged its functions in areas relating to its responsibilities. The issues it discussed and the decisions it ii. Review of Risk Policy and its approval. took for improvement of risk management scenario in the Bank are enumerated below: iii. Review of the Information Management and reporting system of the Bank. 1. Advised the management to regularly monitor the large loans to protect Bank’s exposure and obtain iv. Overseeing the overall implementation of Risk additional securities from such borrowers on best Management Policy of the Bank. effort basis to reduce charge on Bank’s capital. 150 Southeast Bank Limited I Annual Report 2016

2. Advised the management to persuade the existing 17. The advice and guidelines of Bangladesh Bank as good corporate and SME borrowers for their credit given in the comprehensive risk rating letter be rating to reduce charge on Bank’s capital. complied with for qualitative improvement of the Bank. 3. Periodically reviewed the maturity and duration gaps of Bank’s assets and liabilities and advised the 18. Reviewed the Liquidity Coverage Ratio (LCR) and Net management for their prudent management. Stable Funding Ratio (NSFR) of the Bank from time to time against minimum requirement set by the 4. Advised the management to monitor the Non regulator. Performing Loans of the bank constantly to bring those back to performing status. 19. Advised the management to strictly follow the single borrower exposure limit as per the guidelines of 5. Early Warning System be strengthened and post-loan Bangladesh Bank. monitoring process be intensified for effective credit risk management. 20. Loans to large borrowers not be increased unless sufficiently covered by additional collaterals. 6. Advised the management to get Credit Rating of the large borrowers to reduce charge on Bank’s capital. 21. Reviewed Bangladesh Bank’s report on SEBL’s Risk Rating and Stress Testing. 7. The Heads of Branches be asked to exercise added due diligence in assessing credit proposals. 22. Loans to RMG and Textile sectors be regularly monitored to keep them within the sectorial 8. Loan to a customer shall be disbursed only after allocation. completion of documentation formalities. 23. The Heads of Branches be asked to diversify their 9. Off-Balance Sheet items of the Bank be handled with loans and manage related risks efficiently. more care and caution so that these don’t turn into funded exposure. Reporting to the Board 10. Advised for diversification of Bank’s loan portfolio as far as possible and practicable. The decisions and recommendations of the Risk Management Committee were submitted before the 11. Reviewed the Capital to Risk-weighted Assets Board of Directors for review and the Board closely Ratio (CRAR) of the Bank from time to time against reviewed them. minimum requirement.

12. Advised the management to improve asset quality Minutes of the Risk Management Committee to by taking pragmatic steps. A balance between the Bangladesh Bank growth of asset and capital be maintained to improve the Bank’s Capital to Risk-weighted Assets Ratio The minutes of meetings of the Risk Management (CRAR). Committee were submitted to Bangladesh Bank for their information. 13. Large loans shall be reduced gradually within a reasonable level.

14. Rules for single borrower exposure limit shall be strictly followed and performance of the top Alamgir Kabir, FCA borrowers shall be regularly monitored. Chairman 15. All out efforts shall be given for recovery of non- Risk Management Committee performing loans as well as for creation of new quality assets to increase Bank’s profitability.

16. Effective measures be geared up for recovery of Bank’s dues from the top defaulters. Southeast Bank Limited I Annual Report 2016 151

Evaluation of the Quarterly Financials by the Audit Committee and by the Board

BDT in million

2016 2015 2016 2015 2016 2015 2016 2015 1 Jan16 1 Jan 1 Jan 1 Jan 1 Jan 1 Jan 1st Jan 1st Jan Corporate governance Particulars to 31 15 to 31 16 to 30 15 to 30 16 to 30 15 to 30 16 to 31 15 to 31 Dec 16 Dec 15 Sep 16 Sep 15 June 16 June 15 Mar 16 Mar 15 4th Qtr. 4th Qtr. 3rd Qtr. 3rd Qtr. 2nd Qtr. 2nd Qtr. 1st Qtr. 1st Qtr. Balance Sheet ------Cash 17,835 15,997 17,541 13,812 16,487 14,593 14,306 14,446 Money at call and on short notice 4,271 923 3,822 2,134 3,325 627 1,113 648 Loans and advances/investments 191,866 168,878 187,505 166,204 181,450 160,177 174,428 151,106 Fixed assets including premises, 8,947 7,885 8,718 7,876 8,638 7,882 8,331 7,907 furniture and fixtures Other assets 3,102 4,813 3,118 5,558 4,526 3,554 4,829 4,118 Total assets 291,798 260,718 289,004 257,937 276,404 245,430 265,479 242,823 Borrowings from other banks, financial 7,372 4,557 5,249 7,590 7,018 7,816 7,034 8,340 institutions and agents Subordinated bond 8,000 3,000 3,000 - 3,000 - 3,000 - Deposits and other accounts 229,973 210,431 234,293 206,958 220,406 197,059 211,081 193,743 Other liabilities 19,919 15,514 19,428 17,053 19,631 15,983 16,562 16,827 Total liabilities 265,264 233,502 261,970 231,602 250,055 220,858 237,677 218,910 Paid up capital 9,170 9,170 9,170 9,170 9,170 9,170 9,170 9,170 Total shareholders' equity 26,524 27,207 27,025 26,327 26,341 24,562 27,793 23,903 Total liabilities and shareholders' equity 291,798 260,718 289,004 257,937 276,404 245,430 265,479 242,823 Off- Balance Sheet Items 113,911 88,522 103,350 93,867 101,312 96,729 93,116 99,160 Profit And Loss Account ------Net interest income/net profit on 4,207 3,138 3,357 2,279 2,270 1,509 1,095 774 investments Total operating income (A) 12,852 11,604 9,363 8,617 6,098 5,717 2,871 2,779 Total operating expenses (B) 4,349 3,570 3,005 2,537 1,888 1,592 906 766 Profit before provision (C=A-B) 8,503 8,034 6,358 6,080 4,210 4,125 1,965 2,012 Net profit after taxation 2,435 3,069 2,280 2,348 1,307 1,672 542 770 Earnings Per Share (EPS) 2.66 3.35 2.49 2.56 1.42 1.82 0.59 0.84

As per the regulatory requirement of Bangladesh Securities and Exchange Commission (BSEC), Bank has prepared and presented Quarter Ended Financial Statements. These statements are prepared in accordance with BAS (Bangladesh Accounting Standards). The statements are sent to Audit committee for review. After review by the Audit Committee and approval by the Board, the statements are finally submitted to Bangladesh Securities and Exchange Commission (BSEC). Afterwards, the Quarter Ended Financial Statements are published in several daily newspapers. The statement is also published in the website of the bank. 152 Southeast Bank Limited I Annual Report 2016

Report of the Bank’s Shariah Supervisory Committee

Bismillahir Rahmanir Rahim

We solemnly pray to Allah, Subhanhu Wa Ta’ala for bestowal of His unbound blessing upon us and granting us tawfique to fulfill Shariah requirements in our Islamic Banking Operations. May Allah also grant us ability to reap the full benefits of Shariah-based banking in our Bank.

In the year 2016, Southeast Bank Limited catered Islamic Banking services through the following 05 (five) designated Islamic banking branches:

Branch Name Address 01 Chhagalnaiya Branch, Feni Mir Shopping Complex, Chhagalnaiya, Feni 02 Cox’s Bazar Branch, Cox’s Bazar Asha Shopping Complex, 430-431 Bazar Ghata, Cox’s Bazar 03 Bandar Bazar Branch, Sylhet Karimullah Market, Bandar Bazar, Sylhet. 04 Motijheel Branch, Dhaka 125, Motijheel C/A, Motijheel, Dhaka. Ali Villa, 1640/1861 (new), CDA avenue, Asian Highway, East 05 CDA Avenue Branch, Chittagong Nasirabad, Chittagong

The Bank constituted a Shariah Supervisory Committee to During the Year 2016, Shariah Supervisory Committee oversee the Shariah compliance in Bank’s Islamic Banking. of Southeast Bank Limited held 04(four) formal The following veterans versed in Islamic jurisprudence meetings. are the Faquih Members on the Shariah Supervisory Committee: The Shariah Supervisory Committee advised to extend the Islamic Banking Services Desks to all the 1. Professor Moulana Mohammad Salah-Uddin newly opened Branches of the Bank.

Chairman The Shariah Supervisory Committee advised to Khateeb, Baitul Mukaram National Mosque, Dhaka, arrange Shariah Inspection of every Branch twice in a and former Principal, Madrasha-e-Alia, Dhaka year and ensure compliance of shariah requirements 2. Mr. M. Kamaluddin Chowdhury in Bank’s Islamic Banking operations. Member Former Managing Director of Islami Bank Bangladesh Training Program on Islamic Banking were arranged. Ltd. and Shahjalal Islami Bank Ltd. Members of Shariah Supervisory Committee and 3. Moulana Mohammad Kafiluddin Sarker experts in Islamic Banking were invited to speak to Member the participants in such training programs. Principal, Dhaka Nesaria Kamil Madrasa and Katib, Aminbagh Jame Mosque The people that work in Bank’s Islamic Banking Branches as well as Islamic Banking Division at Head The Shariah Supervisory Committee also reviewed Office are sufficiently trained to offer best Islamic different operational issues including those referred by banking services complying Shariah principles. the Management of the Bank. It gave necessary guidelines and counseling. The Islamic Banking Branches were advised to move aggressively to procure more low-cost and no-cost We report the following to the Shareholders in respect of deposit by increasing the number of Accounts and Islamic Banking operation of the Bank. number of deposit customers of the Islamic Banking Branches to improve deposit-mix. Southeast Bank Limited I Annual Report 2016 153

The Shariah Supervisory Committee advised to park The Management of the Bank confirmed that all more fresh investment clients in the Islamic Banking the Islamic Banking Branches were inspected by Branches. the Muraquib in 2016. It was observed from the inspection reports that compliance of Shariah has The Shariah Supervisory Committee approved the significantly improved during the year.

Branding of Islamic Banking products within one Corporate governance folder named “Tijarah”. The Committee also advised ii) No deviation of any Shariah requirement was that the folder containing the salient features of reported to the Shariah Supervisory Committee by Bank’s Islamic Banking Products be supplied to the Management. the Islamic Banking Branches. The instruction was complied. iii) The accounts of Islamic Banking Operations of Southeast Bank Limited were kept separate from The Shariah Supervisory Committee advised to conventional banking ones. continue frequent training programs on Islamic Banking to develop quality human resources for Islamic Banking Service Desks. The advice has been iv) Efforts regarding engagement of buying agents taken in right earnest by the Bank’s Management at branch level and their eagerness to attain the expected level in shariah compliance while discharging their duties and responsibilities have The Shariah Supervisory Committee approved the been strengthened. documentation checklist for Shariah compliance.

Shariah Inspection reports of Islamic Banking May Allah give us tawfique to achieve His satisfaction through implementation of Shariah in every sphere of our Operation of the Bank for the year 2016 life including those applicable to banking transactions. Ameen. The Bank engaged one Muraquib for Shariah inspection of Bank’s five Islamic Banking Branches. The Muraquib has been performing his duties satisfactorily. i) The Shariah Supervisory Committee stressed upon Prof. Moulana Mohammad Salah-Uddin frequent inspection of the Islamic Banking Branches. Chairman 154 Southeast Bank Limited I Annual Report 2016

Capital Plan

Capital is one of several ways for the Bank to fund itself, undertaken along with submissions to the Management alongside deposits and other sources of funding. It Level Risk Committee, SRP (Supervisory Review Process) absorbs losses, promotes public confidence, helps team, ALCO, MANCOM, Board Risk Committee and the restrict excessive asset growth, and provides protection Board. to depositors. It provides a measure of assurance to the public that the Bank will continue to provide financial The Bank continues to monitor regulatory developments services even when losses have been incurred, thereby very closely and analyze the potential capital impacts helping to maintain confidence in the banking system to ensure maintenance of a strong capital position that and minimize liquidity concerns. A bank with insufficient exceeds the minimum regulatory requirements and risk capital can easily go bust if it suffers large losses. Therefore, appetite and is consistent with market expectations. SEBL performs proactive capital planning that incorporates Considerations include: more robust financial and operational risk assessments which will have the following benefits for the Bank: Internal risk appetite (including stress testing).

Assisting in the identification, assessment, monitoring Regulatory policies and guidance. and mitigation of the Bank’s risks. Market conditions and expectations. Increasing the Management and the Board’s understanding of the Bank’s current risk profile. Capital Management in SEBL

Helping the Management and the Board to define its Capital Management lies at the core of SEBL’s strength risk tolerance. and sustainability goals. The construction of capital starts with Common Equity Tier 1 (CET1) and other classes of Facilitating the quantification of risk thresholds. capital such as Additional Tier 1 (AT1) and Tier 2. Capital Management involves the optimization and efficient use Assisting in the development of action plans to of capital required by the Bank’s businesses, the outcomes manage key risks. of stress testing, the requirements of the market and the regulators and the supply of adequate forms of capital at Aiding in contingency planning. acceptable prices. The starting point for a capital plan is the annual budget cycle which forecasts the Bank’s Balance Sheet trajectory The Bank has capital management framework including over a five year forward looking horizon. The budget cycle policies and procedures that are designed to measure incorporates assumptions about the future shape and actual and projected capital performance against risk direction of the Balance Sheet of the Bank. It includes appetite, ensures that it continues to comply with assumptions around the future path of Risk Weighted regulatory requirements and is positioned to meet Assets, profitability and tax. The future direction of projected future changes to its capital requirements. regulation which are known (for example phasing in of BAESL III requirements) or expected is also taken into Southeast Bank maintains a sufficient level of capital account. The capital plans are then tested for capital that allows it to operate over its strategic horizon with adequacy and measured against the Bank’s risk appetite an agreed risk appetite in pursuit of its business strategy, framework using a range of stress scenarios covering taking into account regulatory requirements, support for adverse economic conditions as well as other adverse customers and to provide confidence to stakeholders. factors that could impact the Bank. In addition, the The Bank issued a Basel III compliant Tier 2 Subordinated Bank maintains a recovery plan which sets out a range bond for BDT 5,000 million in 2016. It has also improved of potential mitigating actions that could be taken in its capital mix with a Basel III compliant subordinated response to an extreme stress. capital instrument. Besides, the Bank is able to accumulate additional capital through the reduction in Risk Weighted Regular reporting of actual and projected capital and Assets, accumulation of profits over time, by raising new leverage ratios including those in stressed scenarios, is equity via, for example, a rights issue or Tier 2 capital Southeast Bank Limited I Annual Report 2016 155

by issuing subordinated debt. The Bank is also able to Capital Requirement under Basel III manage the demand for capital through management actions including adjusting its lending strategy through Basel III aims to improve the quality of capital, increase business disposals. capital levels and remove inconsistencies in the definition of capital as explained in the table below-

Increased quality, quantity and

consistency of capital Corporate governance > Increased focus on common equity tier (CET I) > Increased capital levels

Capital conservation buffer > 2.5% CET I capital buffer by 2019 to decrease pro-cyclicality > Build up capital during favourable economic conditions that can be drawn on during times of stress.

SEBL adopted the Basel III framework introduced by the Central bank. It came into effect on January 2015 and the Bank has been compliant with the minimum requirements from that date. The Bank is well positioned to comply with the requirements that are subject to phase-in rules within 2019 as per the following table-

Particulars 2015 2016 2017 2018 2019 Minimum Common Equity Tier-1 (CET-1) Capital Ratio 4.50% 4.50% 4.50% 4.50% 4.50% Capital Conservation Buffer - 0.625% 1.25% 1.875% 2.50% Minimum CET-1 plus Capital Conservation Buffer 4. 50% 5.125% 5.75% 6.375% 7.00% Minimum T-1 Capital Ratio 5.50% 5.50% 6.00% 6.00% 6.00% Minimum Total Capital Ratio 10.00% 10.00% 10.00% 10.00% 10.00% Minimum Total Capital plus Capital Conservation Buffer 10.00% 10.625% 11.25% 11.875% 12.50% 156 Southeast Bank Limited I Annual Report 2016

Statement of Non-Performing Loan (NPL)

Loan classifications are expression of different degrees of of unclassified and classified loans of the bank as on risk against non-repayment of any loan by the borrower 31.12.2016 was as follows: based on past due days. In general, the asset quality of the banking industry came under severe pressure during Amount the year due to broader macroeconomic factors as well Status BDT in Percentage as issues specific to certain sectors in the economy. The Million banking industry on a collective basis saw a sharp spike in non-performing assets. Maintenance of quality of asset in Unclassified Loans such an economic condition has been a great challenge. Standard 171,314.82 90.47 By the grace of the Almighty Allah and as an evidence Special Mention Account 8,792.35 4.64 of collective effort of both Head Office management Sub-Total 180,107.17 95.11 and Branch officials, Southeast Bank could arrest the deterioration of loan portfolio and maintain the highest Classified Loans standards of governance in respect of recognition and Sub-Standard 1,567.13 0.83 provisioning of non-performing loans. Maintenance of Doubtful 587.80 0.31 asset Quality has been given top priority by restricting non-performing assets through early detection, Bad/Loss 7,102.86 3.75 monitoring, corrective action plans, shared information Sub Total 9,257.79 4.89 and disclosures to keep future recurrence in check. Grand Total 189,364.96 100

Industry Scenario of Non-Performing Loans Impact of Non-performing Loans

The Banking sector of Bangladesh is trapped in a gridlock Non-performing assets have multidimensional impact of non-performing loans (NPL). The overall banking sector on the Bank and its profitability. The higher NPL indicates has passed through an adverse business environment incremental non-income generating assets. NPL affects during 2016. A number of factors like slow growth of banks’ profitability adversely and reduces return on investment, uncertainty among the investors, financial investment (ROI) and hampers the capital adequacy ratio scams especially in state owned Banks, fund diversion, (CAR). At the same time, it has a great impact on reputation sluggishness in real estate sector, excess liquidity, of the Bank. etc impacted the performances of banking industry. Establishing or maintaining good governance, managing Provisioning NPL including collecting bad loans and increasing profitability were major challenges for 2016 since Provisioning is the computation and maintenance of recovery from rescheduled/restructured loans were not required provisions against the impaired as well as regular encouraging. Major industrial sectors did not perform in portfolio including off-balance sheet items. Specific loan line with expectations mainly due to procedural delays loss provisions in respect of non-performing advances and infrastructural bottlenecks. Therefore, many of are made based on the degree of impairment of loans rescheduled/restructured loans have become classified and advances as per guidelines of Bangladesh Bank. The again due to failure of repayment of instalments. Bank also maintains general provisions for its standard loans and off-balance sheet items as per the regulatory Classification Status of Credit Portfolio requirement. In addition, the Bank keeps some additional provision as per the advice of Bangladesh Bank. The Bank classifies its loan portfolio in accordance with the rules and regulations set by Bangladesh Bank from time to The Bank exerts its best endeavor to reduce the existing time. In case of need, the Bank classifies some loans on classified loans by way of cash recovery and rescheduling qualitative judgment too. Our Bank Management always in some deserving cases and writing-off the loans remains vigilant to arrest new loans from being classified, complying the rules and regulation of Bangladesh Bank. minimize the existing non-performing loans by way of As a result of concerted effort, the Bank could restrict the cash recovery and regularize through rescheduling to the amount of non-performing loans to BDT 9,257.79 million deserving cases under the purview of Bangladesh Bank’s which was 4.89% of total loans as on December 31, 2016. guidelines. Amidst adverse trend of loan classification, At the same time, the Bank kept provisions of BDT 7,297.78 Southeast Bank could restrict its classified loan position million for classified/unclassified loans and off balance to BDT 9,257.79 million which was 4.89% of total loans sheet items against required provisions of BDT 5,984.91 and advances as on December 31, 2016. The status million. Southeast Bank Limited I Annual Report 2016 157

Loan Write-offs Officials of Legal Affairs & Recovery Division of Head Office are regularly visiting the branches with Minimizing the amount of non-performing loans through defaulted loans and meeting the defaulted clients to writing-off of bad loans is an internationally accepted find out ways for settlement/adjustment of bad loans practice to keep the balance sheet sound. Southeast of the bank outside the court. Bank has started writing-off of loans since 2004. Impaired loans are written-off when there is no longer any realistic Considering the client’s business/financial condition, prospect of recovery of part, or the entire loan in a shorter long-drawn legal procedures, time value of money Corporate governance span of time. concept several measures like rescheduling with longer repayment period, concessional interest rate Initiatives taken for recovery of Non-Performing and in few cases settlement arrangement with waiver Loans (NPL) of a portion of interest are allowed to recover the loans. In order to arrest NPL, our focus was not only on reducing NPL portfolio, but also avoiding further NPL. In line with After exhausting all recovery efforts suits are filed that, we have strengthened our recovery and monitoring with Artha Rin Adalat as well as CMM court to recover drives, utilized external sources where found suitable, non-performing loans. All cases are properly followed strengthened our legal team, intensified recovery up jointly by the Branch and Head Office. In case of initiatives by establishing a task force for sizeable recovery. inadequate collateral security initiatives are taken Southeast Bank has taken the following initiatives to to attach other properties of the client/guarantor/ recover the non-performing loans: mortgagor through the court.

Defaulted clients are being continuously pursued In respect of certificate owned properties all possible jointly by the Branch and the Head Office officials steps are taken to obtain the possession of the through letters, phone calls, visits to their business properties from the court as well as to sell out those places and residences and holding meetings at Head through auction at a competitive price. Office and branches. Court cases are constantly monitored through the A strong ‘Taskforce’ comprising senior level executives panel lawyers of the bank. In case of need senior of Head office and Heads of Respective Branches has lawyers are appointed to conduct the court cases been formed for recovery of classified loans of the of the Bank. Efforts are taken to recover bad loans Bank. Taskforce is actively reviewing the recovery through early disposal of court cases. position of those loans in their monthly meeting and giving necessary directions/guidelines to gear up the A 06-member special committee has been recovery process. constituted comprising 03-officials of Legal Affairs & Recovery Division of Head Office and 03-officials of Respective Branches have been given targets for the concerned branch to follow up the big cases of recovery of classified loans at the beginning of the the branch for early disposal. year and achievement of target by the branches is reviewed by Head Office continuously. In case Top Management of the Bank always remain vigilant of need, branches are given necessary guidelines/ to monitor and review all the relevant aspects; provides assistance to achieve the recovery target of the necessary directions and guidance time to time; to ensure branches. asset quality through reducing NPL ratio of the Bank. 158 Southeast Bank Limited I Annual Report 2016 Risk Management and Control Framework Our risk Management and Control Measures are aimed at remaining disciplined, reducing risks and augmenting success. Southeast Bank Limited I Annual Report 2016 159 Risk Management and Control Report on Risk Management Framework Framework, Mitigation Methodology & Our risk Management and Control Measures are aimed Risk Reporting by Chief Risk Officer at remaining disciplined, reducing risks and The world is passing through a very uncertain time both augmenting success. economically and politically. Although global growth is estimated to be 2.70 percent in 2017 according to World Bank’s latest projections; the stagnant global trade, subdued investment and above all heightened policy uncertainty are the downside risks for global growth. Protectionist policies announced by the new US administration, likely fallout from Brexit and growing popularity of populism and anti- globalization rhetorics in the US and Europe pose serious threats to global trade, multilateralism and geopolitical environment. While the withdrawal of US from Trans Pacific Partnership (TPP) may have some positive inpact on our trade Risk management with the US no one knows to what extent abandonment of multilateralism would be replaced by bilateralism. Thus, Bangladesh will have to watch carefully the likely developments in policy directions outside its boderes and take advantage of the situation as they come by in days to come.

The Bangladesh economy has demonstrated resilience and is on a consistent upward growth trajectory as reflected in a number of indicators such as GDP growth of 7.11 percent, a five-year low average CPI inflation of 5.50 per cent, moderate private sector credit growth of 15.55 per cent, foreign currency reserve of over 32 billion and current account balance of 3.70 billion in FY 2015-16. All the macroeconomic indicators are expected to remain stable and favorable in 2017 for attaining GDP growth target of 7.20 per cent. The banking sector is however presently burdened with excess risks in an integrated approach to generate consistent and liquidity, swelling Non Performing Loan (NPL), decreasing steady income keeping the risk of doing business within limit. interest rate spread, falling remittance, and the threat of We have risk management framework in place to identify, cyber attacks. Promising macroeconomic environment, prioritize, manage and mitigate the risks we face. The process growth oriented and pragmatic monetary policy, increasing is forward looking which keeps us aware of future risks. It public and private sector investment and stronger regulatory ensures addressing the risks in a consistent and systematic supervision are expected to invigorate the banking sector way through robust internal control. We set the overall level in 2017. In the midst of all these uncertainties the financial of risk that can be absorbed and accommodated. We accept sector will not be immune from risks. risk taking as part of our strategy to get financial and non- financial returns commensurate with the risk. Southeast Bank In the era of financial liberalization, risk management has tries to ensure that risk taking is prudent, within limit and been a much talked about issue in the financial industry informed. around the globe. The increased deregulation in the financial sector and its global consequences in the form of financial Southeast Bank always strives for excellence in all its endeavors turmoil have stirred the regulators to rein in the defiant to effectively manage risks. Identifying and addressing market for financial discipline. In Bangladesh we have also felt various kinds of risks is a continuous process and the Bank has the heat; and the central bank focused more on regulations, established an effective framework to revise and update the control mechanisms and limits so that financial soundness of framework as and when needed. Our commitment is to be the financial institutions is ensured. a fully compliant, transparent, resilient and sustainable bank.

Risk is directly proportionate to return. The more risk a bank takes, the more profit it can expect. But exposure to excessive risk may lead to vulnerabilities and force it out of the business. Thus maintaining a trade-off between risk S. M. Mainuddin Chowdhury and return is the prime objective of the risk management Additional Managing Director activities of our bank. Southeast Bank aims to administer & Chief Risk Officer (CRO) 160 Southeast Bank Limited I Annual Report 2016

Risk Management in SEBL

Overview Maintaining stakeholder confidence: To ensure that SEBL is valued and trusted by stakeholders to attain SEBL has a robust and integrated risk management its strategic objectives. framework which sets out elaborately the responsibilities and the accountabilities for risk management of the Bank. 2. Policies: Policies have been established for the The framework consists of two key components- management of each risk type which are subject to annual Board review and approval. They 1. Strategy and Risk Appetite: The Bank has established specify responsibility for managing each risk and a strategy as well as articulated a statement of risk requirements for measurement and reporting. The appetite that is consistent with that strategy. The Risk Management Framework outlines the formal risk appetite statement describes and measures the structure for the flow of risk information and reporting amount and types of risk that the Bank is prepared to from business areas to the risk management take in executing its strategy. committees and the Board. It also defines how The strategic risk appetite objectives are: strategic direction and guidance is cascaded down from the Board and risk management committees. Maintaining capital adequacy: To ensure that there is sufficient capital resources to meet regulatory Risk Management at Management level of the Bank requirements and to cover the potential unexpected losses. The three lines of defense model is used for the management of risk. It provides a clear set of principles Delivering stable earnings growth: To ensure by which a cohesive operating model is implemented sustainable growth based on a longer-term risk- that provides a framework for the articulation of versus reward consideration. accountabilities and responsibilities for managing risk across the Bank. SEBL’s risk management approach is Ensuring stable and efficient access to funding and premised on the following three lines of defense: liquidity: To ensure optimum liquidity to meet its all financial obligations.

Primarily responsible for risk management. The process of assessing, evaluating and measuring risk is integrated into the day-to-day activities 1st Line of Business Unit of the business. This process includes implementing the Bank’s risk Defense Management/Branches management framework, identifying issues and taking remedial action where required. Business unit management is also accountable for reporting to the Head Office management and regulatory bodies.

Head Office management Prepare policies in line with the regulatory and economic changes. by different specialized divisions and committees The business unit risk management functions implement the Bank’s 2nd Line of like: MANCOM; ALCO, risks management framework and policy in the business units and Head Defense Strategic Committee, Office Management approves risk within specific mandates and provide Product Committee are an independent overview of the effectiveness of risk management by the other major committees. first line of defense.

a) Ensure that the Bank will comply with laws and regulations as well as a)Internal Control and policies, plans, internal rules and procedures, and decrease the risk of Compliance unexpected losses or damage to the Bank’s reputation. 3rd Line of Defense b) Provides an independent assessment of the adequacy and effectiveness b) Risk Management of the overall risk management framework and risk governance structures, Division and reports to risk management committee of the Board. Southeast Bank Limited I Annual Report 2016 161

Risk Management at Board level

Three separate committees of Board named: Executive Committee, Audit Committee and Risk Management Committee, are responsible for risk management and operations of the Bank.

Executive Committee of the Board: The Executive Committee can take all necessary decisions or can approve cases within power delegated by the Board of Directors. However, all decisions taken in the Executive Committee should be ratified in the next Board.

Risk Management Audit Committee of the Board: Structure The Audit Committee assists the Board in fulfilling its oversight responsibilities. The committee reviews the financial reporting process, the system of internal control and management of financial risks, the supervision of the audit process, and the Bank’s process for monitoring compliance with laws and regulations.

Risk Management Committee of the Board: Board Risk Management Committee is responsible for mitigating risks arising from strategies and policies formulated by the Board.

Risk Management Committees and Reporting Line Risk management

Board of Directors

Audit Committee Managing Risk Management of the Board Director Committee of the Board

Internal Control and Management Level Compliance Division Risk Committee

MANCOM ALCO Risk Management Division

Risk management of the Bank has risk oversight for core risks along with Environmental risk are described the following core risk areas: below:

01. Credit Risk Management 1. Credit Risk Management 2. Asset-Liability Risk Management Credit risk entails the risk of loss that may occur from any 3. Foreign Exchange Risk Management borrower’s failure to abide by the terms and conditions of any financial contract, principally the failure to make 4. Internal Control and Compliance Risk Management required payments to the Bank against a loan received by 5. Money Laundering Risk Management the Borrower. Southeast Bank has a comprehensive credit 6. Information and Communication Technology Risk risk management policy, which deals with identification, Management assessment, measurement and mitigation of credit risk. Credit Risk Management process of the bank is articulated Apart from the core risks mentioned above, the through various Board approved policies viz. Credit Risk Environmental risk is one of the major risks that has been Management Policy, Delegation of Business Powers to considered as an integral part of credit risk. The Bank’s risk Individual Executives/Officers for loans and advances, management processes, policies and mitigations of the Valuation Methodology, Standardized Recovery/ 162 Southeast Bank Limited I Annual Report 2016

Collection Procedure etc. The Bank measures, monitors Upon approval a letter, conveying the sanction of loans, and manages credit risk at an individual borrower level is issued in four copies (for the Branch, CAD, ICCD and and at the portfolio level as well. The Bank’s structured Corporate Banking) by the credit approval Department of and standardized credit approval process includes a well- CRM. (if declined, the same is communicated accordingly.) established procedure of comprehensive appraisal based on the guidelines- Credit Risk Management Policy of the iii. Credit Risk Monitoring Process Bank and rules and regulations of Bangladesh Bank and other regulatory authorities. This policy is being reviewed The Credit Risk Management activities of the Bank aim at and updated annually incorporating the new instructions ensuring that there is no undue deterioration in quality of regulators, considering the global and local economic of individual assets within the portfolio. It also aims trend and based on appetite of the Bank. Bank’s Credit Risk at continuing improvement of the overall quality of Management practices are based on policy directives duly assets at the portfolio level, by deploying appraisal skills, approved by the Board which, inter-alia, encompasses the ensuring adherence to credit basics/lending guidelines, followings: maintaining documentation standards and complying with the rules and regulations of regulatory authorities i. Credit marketing. while leaving enough room for flexibility and innovation. ii. Credit approval processes/risk assessment and ways The primary monitoring is done by branches’ relationship officers/managers as well as Head of Branch regarding and means of mitigation. their performances, business, transaction and turnover, iii. Credit Risk monitoring processes. repayment behavior etc. iv. Credit Risk mitigation processes. Simultaneously, the Credit Administration Department i. Credit Marketing under CRM Division is assigned to look after post approval process such as to establish better control over loan All the branches are the ambassadors of the Bank located portfolio by helping completion of documentation, at the door step of the customers and they are the primary scrutinizing the checklist of documents, setting limits and contact point with the clients. Branch officials and Direct tenor and pricing of loans etc. in a systematic manner Sales Executives promote the business of the Bank and sell and allow subsequent disbursement, ensuring utilization the products and services to the prospective customers. of fund, monitoring and compliance of all covenants They establish contact with the potential clients and park and conditions precedent. This Department keeps them to the Bank as per the directives of Head Office in constant follow-up of the credits right from its sanction line with the Credit Risk Management Guidelines, annual and continues its efforts to keep the credits performing sectoral allocation, strategies and policies to achieve the and unclassified. Besides, overall portfolio of the bank is targets. reviewed at regular intervals and brought to the notice of senior level management regarding concentration risks, ii. Credit Approval Process geographical distribution, downgradation along with early alert list (if any) for information & their guidance. The Credit Officer at Branch level acts as relationship officer These coherent activities altogether help the bank to and is held responsible to ensure the accuracy of the maintain sound health of the credit portfolio and to attain entire credit application/ proposal submitted for approval. a sustainable growth. A thorough credit and risk assessment is conducted prior to granting any loan. The Corporate Banking Division, iv. Credit Risk Mitigation Process SME & Agri Credit Division, Islamic Banking Division, Retail Banking Division of Head Office are actively involved The bank makes all possible efforts to mitigate risks in scrutinizing, analyzing, assessing and processing the associated with credit accounts through suitable credit proposal and in some cases marketing (syndication collaterals, guarantors, insurance coverage etc. wherever finance). The Credit Risk Management Division is involved it is considered feasible and desirable. In addition to that, in evaluation and in-depth analysis of risks associated terms and conditions under which credit is sanctioned with the individual borrower and in finding out the also go a long way to mitigate risks associated with credit. mitigating factors to minimize those risks. Then the Regular monitoring and control of accounts also add to respective credit officers of Head Office further process the risk mitigation. In order to mitigate risks, the Bank takes the proposal embodying and complying the observations necessary guarantees and documents including charge of CRM and place the proposal to Head Office Credit documents. Review Committee (HOCRC) for consideration/decision. 2. Asset-Liability Risk Management Upon recommendation of Head Office Credit Review Committee, the competent authority (as per delegated Asset Liability Risk Management (ALM) can be defined as business power) may approve or decline the proposal. a mechanism to address the risk faced by a bank due to a Managing Director may recommend the proposals which mismatch between assets and liabilities either as a result are beyond the Managing Director’s delegated authority of liquidity or changes in interest rates. Liquidity is an to the EC / BoD as per delegation for approval/ decision. institution’s ability to meet its liabilities either by borrowing Southeast Bank Limited I Annual Report 2016 163

or converting assets. Apart from liquidity, a bank may also Measurement and Mitigation of Interest Rate Risk: have a mismatch due to changes in interest rates as banks typically tend to borrow short term and lend long term. Effective Interest Rate Risk management is a key component of earnings, capital preservation, and growth. Liquidity Risk We measure Interest Rate Risk (IRR) through Gap Analysis of Rate Sensitive Assets and Liabilities to estimate the Liquidity risk refers to the risk of a bank’s inability to meet probable impact on Net Interest Income of the bank. its financial obligations as they fall due without incurring Where rate sensitive assets are more than rate sensitive unacceptable costs or losses through fund raising and liabilities (i.e. positive gap) an increase in interest rate will assets liquidation. Liquidity risk can also arise due to bank’s impact the Net Interest Income positively and vice versa. incapability to manage unexpected decrease or change in funding sources. It can negatively affect the earnings Another gauge to measure IRR is Duration Gap Analysis and growth potential if the liquidity position constrains which is used to predict the likely impact of interest rate a bank from undertaking a transaction at normal market movements on the net worth of the bank. By changing rates/prices. the durations of investment assets, we try to obtain the Measurement and Mitigation of Liquidity Risk desired impact of interest rate movements on the Balance Sheet of the bank. Southeast Bank has a well established liquidity strategy, policy and procedure in line with the Bangladesh Bank 3. Foreign Exchange Risk Management guidelines that establishes an appropriate and properly controlled liquidity risk environment. The ALCO, which The uncertainty about fluctuations in exchange rates oversees the liquidity and other risks of the bank, manages leads to Foreign Exchange Risk. Typically, a depreciating Risk management the liquidity by ensuring the followings: currency leads to gains from assets and losses from liabilities whereas an appreciating currency results in the Preparation of Structural Liquidity Profile (SLP) of opposite. In the foreign exchange business, banks also face Assets and Liabilities in different time buckets as per the risk of default of the counter parties or settlement risk. Bangladesh Bank Guideline. The foreign exchange positions arise from the following activities: Maintenance of a cushion of high quality, unencumbered, liquid assets that can be used, Trading in foreign currencies through spot, forward without impediment, to obtain funding in times of and option transactions as a market maker or position stress; taker, including the unheeded positions arising from customer-driven foreign exchange transactions; Remaining present in the inter-bank market by regular borrowing and lending side by side maintaining Holding foreign currency positions in the banking credibility and good reputation with the depositors book (e.g. in the form of loans, bonds, deposits or / lenders to make sure that liabilities matured are cross-border investments); or promptly renewed. Engaging in derivative transactions that are Diversification in the sources (including denominated in foreign currency for trading or counterparties, instruments, currencies and hedging purposes. markets) and tenor of funding, and regular review of concentration limits; Bank has formulated a Foreign Exchange Risk Management The BASEL III guideline provided two effective Manual as per the guidelines given by Bangladesh Bank to monitoring tools to measure the liquidity named measure, monitor and control different foreign exchange Liquidity Coverage Ratio (LCR) and Net Stable risks. Apart from this manual, Bank also applies other Funding Ratio (NSFR) which our bank is maintaining standard tools to minimize foreign exchange risks, some from the beginning. of which are given below:

Interest Rate Risk Maintaining Net Open Position (NOP) within the limit set by Bangladesh Bank. Interest rate risk is the risk to income or capital arising from fluctuation in the interest rates. Changes in interest rates Setting counterparty limit which includes forward, also affect the underlying value of the assets and liabilities placement, SWAP limits for foreign exchange of the bank because the present value of future cash flows transactions. changes when interest rates change. Interest Rate Risk, if assumed correctly, can be an important source of profit Setting limits for the foreign exchange dealers and share value. However, excess Interest Rate Risk can (intraday open position limit, stop loss limit, per deal significantly jeopardize the bank’s income and capital limit, trigger limit). base. 164 Southeast Bank Limited I Annual Report 2016

Reconciling Nostro accounts periodically as per the by the inspection team as per direction of the competent instruction of Bangladesh Bank. authority.

Calculating VaR (Value at Risk) to measure the highest All the irregularities/lapses identified by the inspection possible loss of holding of foreign currency. team were aggregated in inspection report and those reports were sent to the respective branch/division for 4. Internal Control and Compliance Risk compliance. All the branches/divisions sent compliance Management report to the ICCD within the time frame. Major observations and summary of the report were discussed The risk of Internal Control and Compliance is one of the in the Audit Committee of the Board. Implementation of Core Risks in Banking Industry. In today’s environment, decision of the Committee is being monitored by ICCD. it is commonly agreed that a bank requires a strong and effective system of internal controls, if the bank’s authority 5. Money Laundering Risk Management desires to be operated safely and soundly. Failure of understanding and managing the risks of Internal Control Southeast Bank is constantly vigilant to money laundering and Compliance may greatly increase the possibility that prevention and combating the financing of terrorism to some risks will go unrecognized and uncontrolled. mitigate reputational, legal and regulatory risks. In this respect, it exercises zero tolerance. The management of Southeast Bank has put in place an effective system of internal control in line with standard The Bank has put the following tasks in place for mitigating guidelines and Bangladesh Bank Guidance Notes on the risk of money laundering, terrorist financing and Internal Control and Compliance in order to keep the Bank proliferation financing at home and abroad: on course towards profitability goals, achievement of its mission and improvement of the performance and to Maintaining an enterprise-wide Anti- Money- minimize surprises along the way. The management has Laundering and Anti-Terrorist Financing Policy. also established sophisticated organizational structure to exercise strong culture within the Bank by implementing Compiling with applicable Anti-Money Laundering & policy guidelines of internal controls appropriately and Terrorist Financing laws and regulations as made by strengthening internal controls system. Bangladesh Financial Intelligence Unit.

Internal control and Compliance Division (ICCD) of Reporting all identified suspicious transactions/ Southeast Bank has 03 units named Audit and Inspection activities to the extent that it can do so under all Unit, Monitoring Unit and Compliance Unit. applicable foreign and domestic laws.

a) Audit and Inspection Unit conducts internal Monitoring banking functions of the branches and inspections (comprehensive/surprise) on all the concerned divisions in respect of compliance of Branches and Divisions of our Bank to identify related laws and regulations of regulators. lapses/ irregularities therein and to rectify those in an effective way. Retaining all customer related documents for a period specified by Bangladesh Bank. b) Monitoring Unit ensures effective implementation of control functions. Off-site monitoring under Training staffs on AML and CFT requirements and Monitoring Unit is done on the operational activities maintaining the records. of the Branches from Head Office. If any unusual transaction or activity is identified/observed by Off- Doing Enhanced Due Diligence (EDD) for high risk Site Supervision Team, respective branch is informed customers. to take immediate corrective action. Conducting awareness building program on AML c) Compliance Unit is responsible for ensuring that the and CFT requirements round the year. Bank remains fully compliant with the regulation prescribed by the regulatory authority. 6. Information and Communication Technology Risk Management During the year 2016, inspection teams of ICCD conducted comprehensive and surprise inspection of 103 branches The adoption of technology in the Banking industry and 08 divisions. Besides, Foreign Exchange operations of is growing faster and a variety of delivery and payment all the AD branches had been inspected by the inspection channels for electronic banking are being offered to the team. ICT inspection team inspected 42 branches and 03 customers. However, information technology based divisions of HO on ICT operation and policy compliance banking products and services invite more internal and of SEBL to mitigate the ICT risk. A number of special external vulnerabilities and risks. Therefore, it is necessary inspections for investigation and inquiry were carried out for the Bank to ensure that the risks are properly identified Southeast Bank Limited I Annual Report 2016 165

and mitigated through a prudent ICT risk management environmental responsibility but also present business strategy. opportunities such as innovative financial products and investments in sustainable forestry and renewable The Bank took a number of steps to protect its core energy. This will help us better manage our risks, develop business operation and other delivery channels from ICT expertise, and provide clients with solutions to evolving related risk. These are mainly: exposures.

Upgradation of Core Banking Software (CBS); To keep its commitment, Southeast Bank has adopted a comprehensive environmental policy. The policy will Deployment of new Debit Switch and Debit Card be implemented with an Environmental Management Management System; System that includes planning, training, implementation, measurement, reporting and review, and will apply to new Introduction of chip based credit card (Visa and business and existing business that comes up for renewal Master); or extension. Specifically, we will integrate environmental and social awareness into the credit analysis and financing Reviewing of ICT Security and Risk Management decision process and incorporate it, where appropriate, Policy to cope with the evolving changes in the ICT as part of our due diligence review. We will train relevant environment; employees to take responsibility for and implementation of these policies. Performance of the internal vulnerability assessment (VA); and According to the policy Risk management Periodic ICT Audit and inspection (internal and SEBL defines the term “environment” to include both external) in different Divisions and Branches. ecological (such as physical and biological) aspects and related social aspects (such as worker protection The Bank took considerable measures from time to time and community issues). to mitigate identified vulnerabilities and risks. The Bank is gradually implementing various ICT related security SEBL recognizes that taking ecological and social solutions to ensure further security of the threat factors aspects into account is part of good business and (like: Network, Mail, Web/Internet, ATM and SWIFT leads to sustainable development. The Bank believes Operation etc.). As the ICT risk management is an ongoing that this approach enhances the client’s competitive process, the Bank is constantly assessing risk by analyzing advantage and that economic growth and a healthy threats and vulnerabilities within its risk management environment go hand in hand. framework and taking appropriate actions to mitigate and maintain an acceptable level of risk. SEBL prioritizes and actively seeks to finance projects with direct or indirect environmental benefits. 7. Environmental Risk Management SEBL assesses the environmental aspects of all loan Southeast Bank recognizes that balancing non-financial applications. factors such as environmental and social issues with financial priorities is an essential part of good corporate SEBL commits itself to act as a good corporate citizen citizenship, in addition to being fundamental to risk and will continually pursue improvements in its management and the protection of investors. We have operations and apply best practices in environmental a direct impact on the environment through our daily management in its internal operations. consumption of energy and paper/ink resources. Our actions have potential indirect effect on the environment SEBL seeks business partners who share our vision and through the provision of financial services to projects commitment to sustainable development. We are located at environmentally sensitive areas. We recognize committed to work together with them to promote that the policies and practices we adopt today will shape sound, coordinated and effective approaches to not only our lives but also those of future generations. environmental issues. We therefore have an opportunity to make a positive contribution to environmental and social concerns At the end of 2016, Bank formed a new Sustainable Finance by enacting appropriate policies so that our business Unit as per Bangladesh Bank guideline. Terms of Reference operations do not degrade the environment or cause of the Unit includes implementation of Environmental social harm. Such policies not only indicate positive and social risk management policy. 166 Southeast Bank Limited I Annual Report 2016

Disclosure on Risk Based Capital Adequacy (Basel III)

Bangladesh Bank vide its BRPD Circular No.18 dated reports the outcomes to Bangladesh Bank, as a part of December 21, 2014 implemented revised regulatory Pillar-II of Basel-III. capital framework for banks in line with Basel III in Bangladesh with effect from January 01, 2015. In a nutshell the purpose of this Disclosure Report is to Implementation process of this framework has started set out how Southeast Bank Ltd. complies with the Pillar- in January 2015 and will continue till December 2019. III requirements under Basel-III. The following detailed The new Basel III has incorporated strengthening capital qualitative and quantitative disclosures are prepared framework, enhancing risk coverage, risk based capital in accordance with guidelines on Risk Based Capital requirement with leverage ratio, reducing procyclicality Adequacy (Basel-III) framework by Bangladesh Bank on and promoting countercyclical buffers, addressing December 2014. These disclosures are purported to systemic risk and introducing global liquidity standard. affirm the information on Minimum Capital Requirement (MCR) under Pillar-I and Supervisory Review Process (SRP) Under this framework, Bank has to maintain 2.5 percent under Pillar-II and ensure transparency about the capital additional capital buffer with the minimum capital adequacy framework, risk assessment and mitigation requirement 10%. Besides, in order to avoid building-up methodologies, risk exposure in various spectrum so that excessive on-and off-balance sheet leverage, the Bank is the stakeholders of the industry can examine the risk required to maintain minimum 3 percent leverage ratio. related compliance of the Bank. Here, Leverage Ratio expresses total tier-I capital (after A) SCOPE OF APPLICATION related deduction specified by BB) to total exposure i.e. on balance sheet and off- balance sheet exposure Qualitative Disclosures (after related deduction specified by BB) which is to be submitted to Bangladesh Bank on quarterly basis. a) The name of the top corporate entity to which this framework applies: Southeast Bank Limited. To ensure strong liquidity base, the Bank is also required to b) The quantitative disclosures are made on the basis maintain two other liquidity ratios i.e. Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NFSR). The of consolidated audited financial statements of standard maintenance limit of these ratios is set as ≥100% the Bank and its Subsidiaries as at and for the year and >100% respectively. LCR was introduced to ensure ended December 31, 2016 prepared under relevant short-term resilience of Bank’s liquidity risk profile by International Accounting and Financial Reporting ensuring that it has sufficient high quality liquid assets Standards as adopted by the Institute of Chartered (HQLA) to survive an acute stress scenario lasting for Accountants of Bangladesh (ICAB) and related one month. Whereas, NSFR was introduced to ensure circulars/instructions issued by Bangladesh Bank resilience over a longer horizon (1 year) by creating from time to time. In preparing consolidated financial additional incentives for the Bank to fund its activities with statements, the Bank and its subsidiaries’ financial more stable sources of funding on an ongoing structural statements are combined on a line by line basis basis. The Bank prepares LCR and NSFR and submits by adding together like items of assets, liabilities, to Bangladesh Bank on monthly and quarterly basis equity, income and expenses. However all intra respectively. group balances, transactions, profits and losses are eliminated in full. The Pillar-II of Basel-III framework is the Supervisory Review Process (SRP). According to the key principles of SRP the c) Southeast Bank Limited has four subsidiaries and the Banks shall have a process for assessing overall capital descriptions are given below. adequacy in relation to their risk profile and a strategy for maintaining their capital at an adequate level. SRP covers Southeast Bank Capital Services Limited additional risks like Residual Risk, Concentration Risk, Date of Incorporation: September 23, 2010 Liquidity Risk, Reputation Risk, Strategic Risk, Settlement Risk etc. The Bank assessed its additional capital Date of Commencement: September 23, 2010 requirement under Pillar-II and submitted the statements Authorized Capital : BDT.6,000 million on Internal Capital Adequacy Assessment Process (ICAAP) Paid up Capital : BDT.5,500 million to Bangladesh Bank for the year 2015. The Bank conducts Ownership Interest in Capital : BDT.5,489.93 million stress testing on its financials on quarterly basis and (99.82%) Southeast Bank Limited I Annual Report 2016 167

Southeast Financial Services (UK) Limited up capital, statutory reserve, general reserve, retained earnings, minority interest in subsidiaries etc. Date of Incorporation: February 22, 2011 Date of Commencement: September 26, 2011 Tier-2 capital is composed of general provision, subordinated debt, revaluation reserves etc. Paid up Capital : BDT 38.49 million Ownership Interest in Capital : 100.00% Capital requirement rules The Bank is required to maintain the following ratios on an Southeast Financial Services (Australia) Pty Limited ongoing basis: Date of Incorporation: March 18, 2013 i. Common Equity Tier 1 of at least 4.5% of the total Date of Commencement: March 18, 2013 RWA. Capital : BDT 25.06 million ii. Tier-1 capital will be at least 6.0% of the total RWA. Ownership Interest in Capital : 100.00% iii. Minimum CRAR of 10% of the total RWA. Southeast Exchange Company (South Africa) Pty iv. Additional Tier 1 capital can be admitted maximum Limited up to 1.5% of the total RWA or 33.33% of CET1, Date of Incorporation: December 15, 2014 whichever is higher. Date of Commencement: December 15, 2014 v. Tier 2 capital can be admitted maximum up to 4.0%

Capital : BDT 50.10 million of the total RWA or 88.89% of CET1, whichever is Risk management Ownership Interest in Capital : 100.00% higher. vi. In addition to minimum CRAR, Capital Conservation The BRPD circular 02 dated 16 January 2014 regarding Buffer (CCB) of 2.5% of the total RWA is being ‘Single Borrower Exposure Limit’ is being applied by the introduced which will be maintained in the form of Bank in determining maximum amount of finance to the CET1. subsidiaries of the Bank. As on year end 2016, the Bank had a credit line to Southeast Capital Services Ltd of BDT Following is the phase-in arrangement for the 2863.90 million. implementation of minimum capital requirements: Quantitative Disclosures Particulars 2015 2016 2017 2018 2019 d) Southeast Bank Ltd has four subsidiaries: Southeast Minimum Bank Capital Services Limited, Southeast Financial Common Equity Services (UK) Limited, Southeast Financial Services 4.5% 4.50% 4.50% 4.50% 4.50% Tier-1 Capital (Australia) Pty Limited and Southeast Exchange Ratio Company (SouthAfrica) Pty Limited. Assets and liabilities of these subsidiaries are consolidated with Capital the financials of the parent company. There is no Conservation - 0.625% 1.25% 1.875% 2.50% capital deficiency in the financial year 2016. Buffer

B) CAPITAL STRUCTURE Minimum CET- 1 plus Capital 4. 5% 5.125% 5.75% 6.375% 7.00% Qualitative Disclosures Conservation Buffer a) The regulatory capital under Basel-III is composed of (I) Tier-1 (Going-concern Capital) and (II) Tier-2 (Gone- Minimum 5.50% 5.50% 6.00% 6.00% 6.00% concern Capital). From regulatory capital perspective, T-1CapitalRatio going-concern capital is the capital which can absorb Minimum Total losses without triggering bankruptcy of the Bank and 10.00% 10.00% 10.00% 10.00% 10.00% gone-concern capital is the capital which will absorb Capital Ratio losses only in a situation of liquidation of the Bank. Minimum Total Capital Tier-1 capital is composed of (a) Common Equity Tier 1 plus Capital 10.00% 10.625% 11.25% 11.875% 12.50% and (b) Additional Tier 1 Conservation Buffer Common Equity Tier 1 (CET1) capital consists of paid- 168 Southeast Bank Limited I Annual Report 2016

Quantitative Disclosures C) CAPITAL ADEQUACY BDT in million b) Regulatory Capital: Consolidated Solo Qualitative Disclosures

Tier-1 capital a) The Bank is presently following Standardized Approach 1) Common Equity Tier- 21,685.52 21,650.38 for assessing and mitigating Credit Risk, Standardized 1 Capital (CET-1) Rule Based Approach for quantifying Market Risk Fully Paid-up capital 9,169.50 9,169.50 and Basic Indicator Approach for Operational Risk to Non- repayable share calculate Minimum Capital Requirement (MCR) under premium account pillar-I of Basel-III framework as per the guidelines of Bangladesh Bank. Statutory reserve 9,170.00 9,170.00 General reserve 247.65 247.65 Quantitative Disclosures BDT in million Retained earnings 3,196.97 3,171.82 Dividend equalization Capital Adequacy Consolidated Solo Reserve Capital requirement for b) 24,624.15 24,952.49 Minority interest in 10.00 Credit Risk subsidiaries Capital requirement for c) 1,500.50 1,068.73 Regulatory Adjustments Market Risk Capital requirement for Goodwill and all other 108.60 108.60 d) 1,915.58 1,904.58 Intangible assets Operational Risk 2) Additional Tier-1 - - Minimum capital 28,040.23 27,925.80 Capital (AT-1) requirement(MCR) 3) Total Tier-1 capital 21,685.52 21,650.38 Total capital maintained 34,056.28 34,021.14 (1+2) Capital surplus over 6,016.05 6,095.34 Tier-2 capital MCR General 3,569.50 3,569.50 Capital to Risk provision(unclassified e) Weighted Assets 12.15% 12.18% loans, SMA, off balance Ratio(CRAR) sheet) CET-1 to RWA ratio 7.73% 7.75% Subordinated debt 7,400.00 7,400.00 Tier-1 Capital to RWA 7.73% 7.75% Revaluation Reserves as 2,335.43 2,335.43 ratio on December 31, 2014 Tier-2 Capital to RWA (50% of Fixed Assets 4.41% 4.43% and Securities & 10% of ratio Equities) Capital Conservation f) 0.625% 0.625% All other preference shares Buffer (Required) Regulatory Adjustments Available Capital under g) Revaluation Reserves for 934.17 934.17 Pillar 2 Requirement 6,016.05 6,095.34 Fixed Assets, Securities & Equity Securities (Phase in D) CREDIT RISK deductions as per Basel-III Guidelines) Qualitative Disclosures 4) Total Tier-2 capital 12,370.76 12,370.76 a) Credit risk is the potential loss that may arise from a c) Regulatory borrower’s failure to repay a loan or meet its obligation in Adjustments accordance with agreed term. Revaluation Reserves for 934.17 934.17 Fixed Assets, Securities & Equity Securities (Phase in Credit Approval deductions as per Basel-III Guidelines) Bank’s credit risk management guideline has been Goodwill and all other 108.60 108.60 prepared in line with Bangladesh Bank guidelines Intangible assets illustrating the approval process, delegation of authority and other credit related important issues. The approval d) Total eligible capital 34,056.28 34,021.14 process segregates relationship management/marketing (3+4) from the approval authority. The approval authorities are delegated to different levels of management and Board. Southeast Bank Limited I Annual Report 2016 169

Board of Directors of the Bank has the highest level of minimum components to appraise a credit and there are authority to approve any credit proposal and delegate other analyses depending on the nature of credit. such authority to the competent authority (EC, MD, DMD, Branch Manager). The Corporate Banking Division The bank follows the CRG manual of Bangladesh Bank receives the proposals from the branches and thereafter circulated on December 11, 2005 through BRPD circular scrutinizes, analyzes and processes in conformity with no. 18. Borrowers are assigned risk grades based on the Credit Risk Management (CRM) guidelines of Bangladesh qualitative and quantitative factors of their business. There Bank and forward the memorandum embodying their are 08 grades based on the marks obtained in qualitative recommendations to the CRM division for scrutiny and quantitative factors. The grades and factors are: and to ensure that all regulatory procedures/rules and regulations etc. are complied with. After exercising due Short Grading marks Number diligence by CRM, they convey their observations to Name Corporate Banking/Islamic Banking/SME and Agri Credit Superior SUP 85-100 1 Division for submitting the proposals to Head Office Credit Review Committee (HOCRC) and finally forward it Good GD 75-84 2 to the competent authority for approval. Acceptable ACCPT 65-74 3 Marginal/Watch list MG/WL 55-64 4 Credit Administration Special Mention SM 45-54 5 The Bank accomplishes documentations and makes Substandard SS 35-44 6 disbursements with utmost care to reduce the potential credit risk. The disbursement authority is given to the Doubtful DF 25-34 7 Risk management branches within approved limit after the completion Bad & Loss BL <25 8 of necessary documentation. Furthermore, the bank constantly monitors clients’ repayment behaviors, Qualitative and Quantitative factors/ fulfillment of conditions given before disbursement and Weight compliance of covenants in post disbursement period. principal risk components Financial Risk 50% Credit Monitoring Business/Industry Risk 18% The loan portfolio with classification status is reviewed Management Risk 12% periodically and brought to the notice of Board of Directors of the Bank and senior level management Security Risk 10% regarding down gradation, overdue, special mention Relationship Risk 10% account (SMA), classified and rescheduled portfolio along with early alert list for their information and guidance. The Credit Risk Mitigation Branches are communicated through letters and circulars for implementation of efficient credit risk management in Potential credit risks are mitigated by taking primary a proper manner including adherence to the Bank’s and and collateral securities. There are other risk mitigants Bangladesh Bank’s rules and regulations. They have also like netting agreements and other guarantees. The legal been advised to follow the guidelines of comprehensive certainty and enforceability of the mitigants are verified recovery/collection procedures and systems to keep the by the professionals of the respected fields. Collateral sound wealth of credit portfolio of the bank. types which are eligible for risk mitigation include cash, residential, commercial and industrial property, land Credit Assessment and Grading and machinery; marketable securities etc. Collaterals are physically verified by the officials of the Branches and Know Your Client (KYC) is the first step to analyze any credit Head Office. At the same time, these are also valued by proposal. Banker-Customer relationship is established independent third party surveyor in accordance with the through opening of CD/SB accounts of the customers. credit policy and procedures. Proper introduction, photographs of the account holders/ signatories, passports etc., and all other required papers as Past Due and Impaired Credit per Bank’s policy are obtained during account opening. Physical verification of customer address is done prior to A claim that has not been paid as of its due date is termed credit appraisal. At least three Cs, i.e., Character, Capital as past due claim. Payment may be for repayment/ and Capacity of the customers are confirmed. Credit renewal/rescheduling or as an installment of a loan. Appraisals include the details of amount and type of For loan classification and maintenance of specific and loan(s) proposed, purpose of loan (s), result of financial general provision, Bank follows BRPD circular no-14 and analysis, loan Structure (Tenor, Covenants, Repayment 19 of 2012, 05 of 2013 and 16 of 2014 and as advised by Schedule, Interest), security arrangements. The above are Bangladesh Bank from time to time. 170 Southeast Bank Limited I Annual Report 2016

Approaches followed for specific and general Maximum 50% of the market value of land and allowances: building mortgaged with the bank 50% of the average market value for last 06 months or Consumer Loans Short Financing to All 50% of the face value, whichever is less, of the shares Term traded in stock exchange. Particulars Other SMEF BHs/ other Agri than HF LP MBs/ Credit Subjective Judgment Credit HF, LP SDs Considering the nature and performance of a loan, the Standard 2.5% 5% 2% 2% 0.25% 2% 1% bank can also classify a particular loan on the basis of SMA - 5% 2% 2% 0.25% 2% 1% subjective judgment taking into consideration the factors such as uncertainty or doubt of repayment, continuous SS 5% 20% 20% 20% 20% 20% 20% loss of capital, adverse situation, decrease of value of DF 5% 50% 50% 50% 50% 50% 50% securities, legal suit etc. However, regardless of all rules B/L 100% 100% 100% 100% 100% 100% 100% and regulations the central bank can classify any loan on the basis of their subjective judgment and can instruct NB: CF=CONSUMER FINANCING, HF=HOUSING FINANCE, the bank to make additional provision on non-performing LP=LOANS FOR PROFESSIONALS TO SET UP loans. BUSINESS, SMA=SPECIAL MENTION ACCOUNT, SS=SUBSTANDARD, DF=DOUBTFUL, B/L=BAD/LOSS, Quantitative Disclosures BHs/ MBs,/SDs= LOANS TO BROKERAGE HOUSES/ b) Total gross credit risk exposures broken down by MERCHANT BANKS/STOCK DEALERS. major types of credit exposure: Base for Provision Total gross credit risk exposures by major types: Bangladesh For the following types of eligible collaterals, provision Bank guidelines on Basel III, stipulated to segregate bank’s is maintained at the stated rates mentioned above on asset portfolio into different categories, and the following the base for provision. Base for provision is calculated table shows our gross exposure in each asset category. deducting interest suspense and the value of eligible BDT in million collateral from outstanding classified loans. i. Deposit with the same bank under lien against the Particulars Consolidated Solo loan a Cash 17,835.45 17,831.24 ii. Government bond/savings certificate under lien, Claims on Bangladesh iii. Guarantee given by Government or Bangladesh b Government and 54,299.80 54,299.80 Bangladesh Bank Bank. c Claims on Banks & NBFIs 18,582.83 18,516.32 For all other eligible collaterals, the provision will be d Claims on Corporate 110,350.61 110,350.61 maintained at the stated rates mentioned above on the balance calculated as the greater of the following two e Claims on SME 35,348.11 35,348.11 amounts: Claims under Credit Risk f 9,505.23 9,505.23 i. Outstanding balance of the classified loan less the Mitigation amount of Interest Suspense and the value of eligible Claims categorized as collateral; and retail portfolio (excluding g SME, Consumer finance 686.42 686.42 ii. 15% of the outstanding balance of the loan. and Staff loan ) up to 1 Eligible Collateral crore

The following collateral is included as eligible h Consumer finance 1,411.62 1,411.62 Claims fully secured by collateral in determining base for provision: i 863.44 863.44 residential property 100% of deposit under lien against the loan Claims fully secured by j 2,675.48 2,675.48 100% of the value of government bond/savings commercial real estate certificate under lien

100% of the value of guarantee given by Government 1. Past Due Claims that or Bangladesh Bank is past due for 60 days k or more (Risk weights 100% of the market value of gold or gold ornaments are to be assigned net of pledged with the bank. specific provision): 50% of the market value of easily marketable commodities kept under control of the bank Southeast Bank Limited I Annual Report 2016 171

c) Geographical distribution of exposures Particulars Consolidated Solo BDT in million Where specific provisions Dhaka 138,473.58 are less than 20% of the outstanding amount of 12,382.14 12,382.14 Chittagong 37,770.74 the past due claim Where specific provisions Rajshahi 4,397.76 are no less than 20% of Sylhet 4,874.44 the outstanding amount 1,358.47 1,358.47 of the past due claim Region Khulna 2,264.04 Where specific provisions Based are more than 50% of Rangpur 901.46 the outstanding amount 535.62 535.62 of the past due claim Barisal 158.02 2. Claims fully secured Mymensingh 524.91 against residential

property that are past Total 189,364.96 due for more than 60

days and/or impaired Domestic 189,364.96 45.86 45.86 specific provision held Country there-against is less than Based Overseas 20% of outstanding

amount Risk management 3. Loans and claims d) Major Industry wise distribution of exposures (Industrial Loan) fully secured against BDT in million residential property that are past due for more Textile and Garments Industries than 60 days and/or 48,935.90 impaired and specific 1.10 1.10 including Spinning Industries provision held there- against is no less than Food and allied Industries 6,149.35 20% of outstanding amount Pharmaceutical Industries 747.70 l Capital Market Exposure 2,500.64 0.01 Chemical, Fertilizer, etc. 78.41 Investment in equity and other regulatory Cement and Ceramic Industries 3,455.07 capital instruments issued by other banks Service Industries 2,724.60 and Merchant Banks/ Brokerage Houses/ m 6,779.52 Exchange Houses which 1,261.49 Other Industries 21,148.18 are not listed in the Stock Exchanges (other than Total 83,239.21 those deducted from capital) held in banking book e) Residual contractual maturity breakdown of the Investments in premises, whole portfolio n plant and equipment 8,947.16 8,613.69 BDT in million and all other fixed assets On demand 43,794.11 Claims on all fixed assets o under operating lease Less than three months 24,803.47 p All other assets More than three months but less than 50,941.23 i) Claims on GoB & BB 1,297.88 1,297.88 one year ii) Staff loan 207.62 207.62 More than one year but less than five 47,341.37 iv) Claims on Offshore years - - Banking Unit More than five years 22,484.78 v) Others 1,803.73 1,662.15 Total 189,364.96 Total 281,900.72 284,372.34 172 Southeast Bank Limited I Annual Report 2016

f) Major Industry type amount of impaired loans Quantitative Disclosures BDT in million b) Values of investments as disclosed in the Balance Agriculture 6.80 Sheet: BDT in million Large and Medium Scale Industries 2,001.10 Consolidated Solo Small and Cottage Industry 262.60 Cost Market Cost Market Exports 116.10 Price Price Price Price Commercial Lending 3,362.30 Unquoted 61.49 61.49 61.49 61.49 Share Finance to NBFIs 0.00 Quoted Real Estate 1,503.90 6,170.34 5,138.13 3,893.72 2,979.31 Share Retail Banking 33.00 Transport & Communication 270.90 c) For Banking Book Equity BDT in million Credit Card 63.20 Consolidated Solo Others 1,638.00 The cumulative realized Total 9,257.79 gains (losses) arising from - - sales and liquidations in the g) Gross Non Performing Assets (NPAs) BDT in million reporting period

Gross Non Performing Assets (NPAs) d) For Banking Book Equity

Nonperforming assets to outstanding Consolidated Solo 4.89% loans and advances Total unrealized - - gains(losses) Movement of Non Performing Assets Total latent revaluation (NPAs): - - gains (losses) Opening balance 7,193.80 Any amounts of the above - - included in Tier 2 capital Additions 7,226.90 e) Reductions 5,162.90 BDT in million Closing balance 9,257.79 Capital Particulars Requirement Movement of specific provisions for NPAs: Unquoted Share 7.69 7.69 Opening balance 2,323.30 Quoted Share 1,027.63 595.86 Provision made during the period 2,433.70

Write off 1,028.70 As equities do not have any maturity, we have calculated risk weighted assets for unquoted equities on the basis of Write back of excess provisions - fixed risk weight which is 125% of investment value. And for quoted share capital charge is 10% for both specific Closing balance 3,728.30 and market risks.

E) EQUITIES: DISCLOSURES FOR BANKING BOOK F) INTEREST RATE RISK IN THE BANKING BOOK (IRRBB) POSITIONS Qualitative Disclosures Qualitative Disclosures Interest rate risk affects the bank’s financial condition due a) Banking book positions consist of those assets which to adverse movements in interest rates of interest sensitive are bought for holding until they mature. The bank assets. Changes in interest rates have two types of impact: treats unquoted equities as banking book assets. Unquoted equities are not traded in the bourses or in i. Earnings perspective: It affects a bank’s earnings the secondary market, they are shown in the balance by changing its net interest income and the level sheet at cost price and no revaluation reserve is of other interest sensitive income and operating created against these equities. expenses. Southeast Bank Limited I Annual Report 2016 173

ii. Economic value perspective: The economic value earnings perspective, the bank uses Maturity Gap analysis, of future cash flows changes when interest rate Duration Gap analysis, Sensitivity Analysis and marked to changes. market method and for measuring foreign exchange risk, the bank uses VaR analysis. At present SEBL is following the Bangladesh Bank prescribed format for assessing the economic value due We use standardized (Rule Based) method for calculating to interest rate shock. capital charge against market risks for minimum capital requirement of the Bank under Basel-III. Quantitative Disclosures Market Risk Management System i. Earnings perspective:

Here, we have used maturity gap method to measure The Bank has its own Market Risk Management System changes in earnings due to changes in interest rates which includes Asset Liability Risk Management (ALM) BDT in million and Foreign Exchange Risk Management under the core risk management guidelines. Net Up to 12 interest Asset Liability Management (ALM): The ALM policy Month Percentage changes in income specifically deals with liquidity risk management and (Cumulative interest rate and interest rate risk management framework. Gap) re-pricing impact Foreign Exchange Risk Management: Foreign exchange 1% increase in interest Risk management (240.38) risk arises when the bank is involved in foreign currency rate transactions. These include foreign currency exchange, 1% decrease in interest 240.38 placement, investments, loans, borrowings and different rate contractual agreements. We use different hedging 2% increase in interest techniques to mitigate foreign exchange risks. (480.76) rate (24,038.42) 2% decrease in interest Policies and processes for mitigating market risk are 480.76 rate mentioned below: 3% increase in interest (721.14) rate Risk Management and reporting is based on parameters such as Maturity Gap Analysis, Duration 3% decrease in interest 721.14 Gap Analysis, VaR etc, in line with the global best rate practices.

G) MARKET RISK Risk Profiles are analyzed and mitigating strategies/ Qualitative Disclosures processes are suggested by the Asset Liability Committee (ALCO). View of the Board of Directors on trading/investment activities Foreign Exchange Net Open Position (NOP) limits (Day limit / Overnight limit), deal-wise trigger Market risk arises due to changes in the market variables limits, Stop-loss limit, Profit / Loss in respect of such as interest rates, foreign currency exchange rates, cross currency trading are properly monitored and equity prices and commodity prices. The financial exception reporting is regularly carried out. instruments that are held with trading intent or to hedge against various risks, are purchased to make profit from Holding of equities is monitored regularly so that spreads between the bid and ask price are subject to investment remains within the limit as set by market risk. SEBL is exposed to market risk mostly stemming Bangladesh Bank. from Government Treasury Bills and Bonds, Shares of listed Public Limited Companies, foreign currency etc. Asset Liability Management Committee (ALCO) analyzes market and determines strategies to attain Methods used to measure Market Risk business goals.

There are several methods used to measure market risk Reconciliation of foreign currency transactions and the bank uses those methods which are deemed fit for a particular scenario. For measuring interest risk from 174 Southeast Bank Limited I Annual Report 2016

Quantitative Disclosures the inspection teams of Bangladesh Bank and External Auditors conduct inspection of different branches and The capital requirements for: divisions at Head Office of the Bank and submit reports BDT in million presenting the findings of the inspections. Necessary Particulars Consolidated Solo control measures and corrective actions have been taken on the suggestions or observations made in these reports. Interest rate risk 430.47 430.47 Approach for calculating capital charge for Equity position risk 1,027.63 595.86 operational risk Foreign exchange risk 42.40 42.40 The Bank has adopted Basic Indicator Approach (BIA) to Commodity risk - - compute capital charge against operational risk under Total 1500.50 1068.73 Basel-III as per Bangladesh Bank Guidelines.

Quantitative Disclosures H) OPERATIONAL RISK BDT in million Qualitative Disclosures Particulars Consolidated Solo Views of the Board of Directors on system to reduce The capital Operational Risk requirements for 1,915.58 1,904.58 operational risk Operational risk is the risk which may arise directly or indirectly due to failure or breakdown of system, people Calculation of Capital Charge for Operational Risk and process. This definition includes legal risk, but (Consolidated) excludes strategic and reputation risk. The bank manages these risks through a control based environment in which Basic Indicator Approach processes are documented, authorization is independent and transactions are reconciled and monitored. This is Gross 15% of Average supported by a periodic process conducted by ICCD, and Year Income Average GI monitoring external operational risk events, which ensure (GI) GI that the bank stays in line with the international best practices. December, 2014 12,670.92

Performance Gap of Executives and Staffs December, 2015 12,071.43 12,770.56 1,915.58 December, 2016 13,569.32 The bank believes that training and knowledge sharing is the best way to reduce knowledge gap. Therefore, it Total GI 38,311.67 arranges trainings on a regular basis for its employees to develop their expertise. The bank offers competitive I) LIQUIDITY RATIO pay package to its employees based on performance and merit. It always tries to develop a culture where all Qualitative Disclosures employees can apply his/her talent and knowledge to Views of the Board of Directors on system to reduce work for the organization with high ethical standards Liquidity Risk in order to add more value to the company and for the economy. Southeast Bank Limited has proficient Board of Directors that has always been giving utmost importance to Policies and processes for mitigating operational minimizing the liquidity risk of the bank. In order to reduce risk liquidity risk strict maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Reserve (SLR) is also being The Bank has adopted policies which deal with managing emphasized on a regular basis. Apart from these as part different Operational Risk. Bank strongly follows KYC norms of Basel-III requirement Liquidity Coverage Ratio (LCR) for its customer dealings and other banking operations. and Net Stable Funding Ratio (NSFR) are also maintained The Internal Control and Compliance Division of the Bank, under the guidance of our honorable Board of Directors. Southeast Bank Limited I Annual Report 2016 175

Methods used to measure Liquidity Risk Banks have a range of financial incentives to operate with In order to measure liquidity risk various methods are high leverage. But it creates risk when it crosses a certain being used which are as follows: point. Therefore, the Board views that sound prudential controls are needed to ensure that the organization GAP analysis is being done regularly that deals with maintains a balance between its debt and equity. The the mismatch of assets and liabilities in different Board also believes that the bank should maintain its time buckets like 0-30 days, 31-90 days, 91-180 days, leverage ratio on and above the regulatory requirements 181-270 days, 271-365 days and beyond 1 year. In which will eventually increase the public confidence in our monthly ALCO paper, we show this GAP analysis the organization. based on which different strategic decisions are taken in order to reduce liquidity risk that may arise Policies and processes for managing excessive on due to the mismatch between assets and liabilities. and off-balance sheet leverage Cash flow forecasting is another technique to The leverage ratio is a non ¬risk based approach to the measure liquidity risk that may arise due to future measurement of leverage. The ratio acts as a ‘backstop’ cash flow mismatch. In our monthly ALCO paper we against the risk-based capital requirements and is show this cash flow forecasting. also designed to constrain excess leverage. There are three types of leverage: balance sheet, economic, and Liquidity Risk Management system embedded. Under Basel III, the Bank has to maintain a As part of liquidity risk management system, we have leverage ratio in excess of 3% of its exposures. The leverage Board approved liquidity contingency plan. In this ratio is intended to achieve the following objectives: liquidity contingency plan, we have incorporated all the a) Constrain the build-up of leverage in the bank Risk management strategic decisions to tackle any sort of liquidity crisis. As b) Reinforce the risk based requirements with an easy to per the Bangladesh Bank ALM guideline, this liquidity understand and a non-risk based measure. contingency plan is reviewed annually which is approved by the Board of Directors. To manage excessive leverage, the Bank follows all regulatory requirements for capital, liquidity, Policies and processes for mitigating Liquidity risk commitment, Advance Deposit Ratio (ADR), Maximum Cumulative Outflow (MCO), large exposures as well as risk We have Board approved policies named “Medium to Long management which are eventually reinforcing standards Term Liquidity Management Policy (LMP)” for mitigating set by Bangladesh Bank. The aim is to ensure that the high liquidity risk. This policy is reviewed annually and placed leverage inherent in banking business models is carefully before the Board of Directors for their kind approval. and prudently managed. Quantitative Disclosures Approach for calculating exposure BDT in million Leverage ratio reflects the Bank’s tier 1 capital (the Liquidity Coverage Ratio (LCR) 118.50% numerator) over total exposure (the denominator), which Net Stable Funding Ratio (NSFR) 109.53% includes its balance sheet exposures and certain off- balance sheet exposures. Stock of High quality liquid assets 72,491.18 Total net cash outflows over the next 61,174.85 The capital measure for the leverage ratio is based on 30 calendar days the Tier 1 capital. The exposure measure for the leverage Available amount of stable funding 239,231.80 ratio follows the accounting measure of exposure. In order to measure the exposure consistently with financial Required amount of stable funding 218,417.32 accounts, the followings are applied by the bank:

J) LEVERAGE RATIO 1. On balance sheet, non-derivative exposures will be Qualitative Disclosures net of specific provisions and valuation adjustments 2. Physical or financial collateral, guarantee or credit risk Views of the Board of Directors on system to reduce mitigation purchased is not considered to reduce on- excessive leverage balance sheet exposure. Leverage is an inherent and essential part of modern 3. Netting of loans and deposits is not considered. banking business. In other words, banks are highly leveraged organizations which facilitate leverage for Off-balance sheet (OBS) items are calculated by applying others. Leverage, in simple terms, is the extent to which a a uniform 100% credit conversion factor (CCF). For any bank funds its assets with borrowings rather than capital. commitments that are unconditionally cancellable at any More debt relative to capital means a higher level of time by the bank without prior notice, a CCF of 10% is leverage. applied. 176 Southeast Bank Limited I Annual Report 2016

Quantitative Disclosures The risk and compliance related employees are carrying BDT in million out the activities independently in line with delegation of powers and job descriptions approved by appropriate Particulars Consolidated Solo authorities. c. Description of the ways in which current and Leverage Ratio 6.14% 6.13% future risks are taken into account in the On balance sheet remuneration processes: 288,083.49 288,205.42 exposure When implementing remuneration measures, the Bank considers business risk, financial and liquidity risk, Off balance sheet 65,343.13 65,343.13 compliance and reputational risk for each official. exposure Various types of measures are taken into account in Total exposure 353,318.01 353,439.95 determining these risks. The measures focus on the organizational goals set for operational areas. Asset quality K) REMUNERATION (NPL ratio), cost-income ratio, net profit growth etc. are used for measuring the risks. Qualitative Disclosure a. Information relating to the bodies that oversee The performance of each employee is evaluated for a remuneration: particular period especially annually against performance indicators set and agreed with the officials at the The Human Resources Division of the Bank oversees beginning of the year. Performance differs from employee the remuneration in line with its HR policy under direct to employee and this affects the remuneration package. guidance of the Board of Directors of the Bank. In the year 2016, there has been no material change that A committee comprising of few members of senior could create impact on the remuneration. Management (Additional Managing Director and Deputy Managing Directors) led by the Managing Director is d. Description of the ways in which the bank seeks responsible for formulating remuneration policy. The to link performance during a performance Head of Human Resources Division acts as the Member measurement period with levels of remuneration: Secretary of the committee. The Bank has one set of Performance Appraisal Form (PAF) The remuneration committee is the main body for to evaluate the performance of all categories of officials of overseeing the Bank’s remuneration. The committee the bank. The PAF has 3 (Three) parts i.e. (i) Key Performance reviews the position of remuneration and recommend Indicators, (ii) Personal Attributes and (iii) Job Related Skills to the Board of Directors for approval taking into and Competencies. Key Performance Indicators (KPIs) are consideration present cost of living index, rate of inflation deposit, investment and profit target oriented. and the existing remuneration of peer banks. The Bank does not have any external consultant in Decisions about promotion, granting of annual increment preparing and implementing the remuneration policy. and incentive bonus are linked to the performance of the employees against set Key Performance Indicators. The Bank follows a non-discriminatory policy in respect of remuneration and benefits for Head quarter and regions. e. Description of the ways in which the bank seek However, a foreign posting allowance in remuneration to adjust remuneration to take account of longer- is in practice for employees who are posted outside term performance: Bangladesh. The Bank does not seek to adjust remuneration to take b. Information relating to the design and structure account of longer-term performance. of remuneration processes: f. Description of the different forms of variable The motto of the remuneration policy is to attract remuneration that the bank utilizes and the and retain productive employees who can contribute rationale for using these different forms substantially to the overall growth of the Bank. The The Bank pays variable remuneration such as, Technical remuneration policy is carefully designed and regularly Allowance for the officials of Information Technology updated to provide adequate incentives so that the Division, Alternative Delivery Channel (ADC) Unit, employees are fully committed to do their best to achieve Surveillance Allowance for the Head/Supervisor, In- the operational goals of the Bank. charges & Operators of Central Monitoring System The committee reviewed the salary structure of a few (CMS) of Head Office and Charge Allowance for Heads of grades in the year 2016 and the authority concerned Branches. Those allowances are paid taking into account approved upward revision of the pay packages of the the special and technical nature of the job they perform. employees of those grades as an incentive for posting better result. Southeast Bank Limited I Annual Report 2016 177

Quantitative Disclosure

Number of meetings held by the main body overseeing 03 (three) meetings of remuneration committee were held and remuneration during the financial year and remuneration no remuneration was paid to the members paid to its matter Number of employees having received a variable 212 employees received a variable remuneration in the year remuneration award during the financial year 2016 Number and total amount of guaranteed bonuses awarded 2 (two) guaranteed bonuses were awarded and the total during the financial year amount of bonus was Taka 139.34 Million Number and total amount of sign on awards made during No amount was paid as sign-on awards the financial year Number and total amount of severance payments made No payment was paid as severance during financial year Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other Not Applicable forms. Total amount of deferred remuneration paid out in the financial year Amount Particulars Breakdown of amount of remuneration awards for the (BDT in million) financial year to show: Fixed 139.34 Total

fixed and variable. Variable 10.51 149.85 Risk management deferred and non-deferred. Deferred 0 different forms used (cash, shares and share linked instruments, other forms) Non- deferred 149.85 Form used (cash) 149.85 Quantitative information about employee’s exposure to implicit (e.g. fluctuation in the value of shares or performance units) and explicit adjustments (e.g. clawbacks or similar Not Applicable reversals or downward revaluation of awards) of deferred remuneration and retained remuneration: Total amount of outstanding deferred remuneration and retained remuneration exposed to ex post explicit and/or Not Applicable implicit adjustments Total amount of reductions during the financial year due to Not Applicable ex post explicit adjustments Total amount of reductions during the financial year due to Not Applicable ex post implicit adjustments

Capital Market Exposure

Southeast Bank Limited (SEBL) has its own portfolio investment in the listed shares. Despite the dull scenario in the capital market, SEBL has done fairly well due to its prudent managerial capacity and adopting right decision at the right time. Bank’s total exposure in the capital market was BDT 4,523.50 million (21.53 percent of total capital of the bank) as on December 31, 2016. The Bank’s loan exposure to Southeast Bank Capital Services Limited for BDT.2833.20 million was fully paid off by way of increase of Paid up Capital of the Subsidiary Company to BDT 5,500.00 million. It was approved by Bangladesh Bank by their Letter No. BRPD(R-1)717/2016-4328 dated 28 June, 2016. The total exposure of the Bank is within the prescribed exposure limit of 25 percent as per Bank Companies Act (Amendment) Act 2013. The capital market experienced downward trend in the year 2016 though in the last quarter of 2016 the market rebounded a bit. It is hoped that the market will improve further in 2017 and we will be able to gain more from the capital market investment in 2017 complying with all applicable rules and regulations of the regulatory authority. 178 Southeast Bank Limited I Annual Report 2016 Sustainability Appraisal and Integrated Reporting

The pressure of adversity is the most powerful sustainer of accountability Southeast Bank Limited I Annual Report 2016 179 Sustainability Appraisal and Integrated Reporting

The pressure of adversity is the most powerful sustainer of accountability

SUSTAINABILITY APPRAISAL AND INTEGRATED REPORTING

Sustainability Report - At A Glimpse 180 Report on Corporate Social Responsibility 182 Environment Related Initiatives 186 Green Banking Initiatives – Environmental and Social Obligation 188 Integrated Reporting 189 Report on Human Capital and HR Accounting 191 Contribution to National Economy 193 Value Added Statement 194 Economic Value Added Statement 195 Market Value Added Statement 196 Communication to Shareholders and Stakeholders 197 180 Southeast Bank Limited I Annual Report 2016

Sustainability Report – At A Glimpse

General Overview development is a development that meets the needs of the present without compromising the ability of future Prosperity, environmental protection, and social justice generations to meet their own needs. Our core purpose are considered to be the core of every economy. is to serve them as well as our communities. We provide Sustainable Banking creates long-term resilient and trust and growth through serving customer, offering sustainable economic, social and environmental values. It products and services, and carrying out other activities. also facilitates development of a responsible and inclusive strategy through transparent and efficient utilization of Client centricity is becoming firmly embedded in our resources. culture. We always offer simple, transparent, and cost effective products and services which help our customers We believe sustainability must lie at the heart of business to choose the right product. We actively involve our if it is to achieve the long-term success that allows it to clients in developing and improving our services. Every contribute to the economic well-being of society. Our product and service is examined to see what value it adds success as a Bank is linked intrinsically to the welfare of for them and how it contributes to building lasting client the society. To achieve this we align our business and relationships. sustainability strategies as closely as possible. We believe that sustainability and business go hand in hand. Currently, the Bank is offering different types of products and services according to our customer needs. As a result, Sustainability Report our customer base is increasing day by day. Besides conventional and Islamic banking services, the Bank This sustainability report articulates how we perceive and provides alternative delivery channels like ATM, internet practice sustainability at SEBL, the way we incorporate banking, online banking and mobile banking (Telecash) sustainability into our business model, both in terms etc. of business opportunities and risk management. Our strategy for sustainability is rooted into four steps: Serving Society and Environment

We believe that a stable environment and a strong economy are correlated and precondition for progress of the country. We acknowledge our social responsibility Serving Customers well and align our business strategies with our culture. SEBL is working towards improving the energy efficiency of its operations and optimizing the use of resources. We are concentrating our efforts on reducing our energy consumption and waste generation. We track energy Supporting Human consumption and waste production at our branches and Communities Sustainability Resources offices in order to make adjustments where possible.

The Bank strives to ensure that its operations are environment friendly. To promote green banking the bank has a policy which serves the following objectives: Serving Society & Environment Reducing paperwork, utilizing email to disseminate information, saving important information electronically instead of using paper, encouraging double-sided printing etc;

Serving Customers Reducing electricity consumption, using energy efficient electronic equipments, replacing normal Sustainable development is achieved when people bulbs with energy saving bulbs and turning off grow and fulfill their needs in harmony with the rest of computers, lights, fans, air coolers during unoccupied the society and the planet. This implies respect for and times; protection of the environment, human rights, labor rights and business ethics. The customers are at the Introducing online banking that allows the customers heart of everything we do. Our definition of sustainable to transfer funds and pay bills through the Internet; Southeast Bank Limited I Annual Report 2016 181

Reducing giving loans to environmentally harmful Engage employees with the Bank and its purpose projects; Help our people develop continuously and create Creating awareness amongst the stakeholders about a Culture of Excellence in which employees are environmental and socially responsible business encouraged and enabled to develop their expertise practices; and sharpen their skills.

Human Resources Provide an extensive leadership development program which grooms managers to become The Bank considers its human resources as its prime inspiring leaders. assets and grooms them to excel in every sphere of life. By providing right technical and professional training, Sustainable Communities the Bank keeps its employees up to date with the latest technologies and changes so that they can effectively The Bank is closely related with the communities where it contribute to the Bank’s strategy of sustainable runs its business. It encourages and engages in programs development. that promote social and economic development focusing on health, sports and education. We always extend our The Bank has a safety policy to ensure sound health of the hands towards disadvantaged and vulnerable groups staff. This ties in nicely with our HR policy and our ambition of the society. We launched and contributed in different to be the best place to work. To this end, we offer our programs with the desire to generate more social impact employees a range of facilities to support their physical, through our activities. It enables us to more effectively mental, emotional and spiritual well-being. The Bank’s steer the building of expertise and to help people in a healthy, safe and good working conditions enhance job more systematic way. Our focus is on sports, arts & culture,

enjoyment and reduce the chance of illness, accidents, education, and entrepreneurship, and on identifying the Sustainability report injuries and damage. The Bank rewards high performance links between them. We are participating in programs and superior delivery, but equally gives emphasis on how which make a distinctive contribution to our society. those results are achieved. Moreover, the Bank has created a trust in association with Our Human Resource strategy is designed to attract, The Financial Express and Policy Research Institute as retain, and motivate the best people in many ways: part of its Corporate Social Responsibility (CSR) to create awareness in green retention and green business. Provide a Positive Working Environment

Recognize, Reward and Reinforce the Right Behavior 182 Southeast Bank Limited I Annual Report 2016

Report on Corporate Social Responsibility

Our CSR activities follow transparent business practices Environment that are based on ethical values, compliance with legal and regulatory requirement and respect for people, The Bank continuously strives to ensure that its operations communities and the environment. We are responsible are environment-friendly and discourages financing for the totality of our impact on people and the planet, projects contrary to it. It has extended its helping hands beyond making profit. Our corporate social responsibility to initiatives of community leaders for environment is about addressing the needs of all the stakeholders in a protection and development. It is one of the leading way that advances its business and makes a positive and participants in the beautification of Dhaka city. meaningful contribution to the society. Regulators Employees Southeast Bank firmly believes that it is an imperative to The Bank offers its employees very competitive pay comply with the relevant laws, rules and regulations of package and bonus that are reviewed on a continuous all regulatory authorities to be a responsible corporate basis in line with the market dynamics. It provides the citizen. employees a safe and congenial work environment. It also offers its employees handsome retirement benefits by Community way of Contributory Provident Fund, Gratuity etc. a) We take into active consideration the impact of Customers our activities on all groups of people involved and affected by our business operations. Focusing on the need of customers is fundamental to banking business. Southeast Bank discharges this vital b) Our credit policy has been redesigned to avoid responsibility by offering financial products and services concentration of Bank’s credit in major cities and to that truly meet their needs. In discharging this vital encourage distribution of credit in priority sectors responsibility, the Bank always strives to maintain the particularly in Agriculture and SMEs. highest standard of ethics in the conduct of its business. c) In 2016, the Bank contributed BDT 27,119,394 to Shareholders finance its scholarship program, green school project and the ‘SEBL-The Financial Express-Policy Research The Southeast bank is fully committed to protect the Institute’ Green Award Trust. interest of its shareholders. It always endeavors to enhance shareholders’ value by optimizing financial performance Green Award at least cost. Corporate citizenship to us means thinking long term The Bank’s Business Associates and working to integrate social and environmental considerations into how we run our business. We want to The Bank continuously endeavors to create a long-lasting inspire the individuals and organizations who are actively win-win relationship with its suppliers and business working to preserve environment. With that end in view, associates for mutual growth. the Board of Directors of the Bank in its 395th meeting held on March 14, 2012 decided to give Green Awards to Southeast Bank Limited I Annual Report 2016 183

institutions and Women Entrepreneurs for really making significant contribution to the preservation of environment. The award was named, ‘Southeast Bank- The Financial Express – Policy Research Institute Green Award’. Accordingly, a Green Award Trust has been created comprising the following personalities as trustees:

Sl No Name Background Status Chairperson, Board of Trustees, East West 1. Mohammed Farashuddin, Ph.D University, Former Governor, Bangladesh Chairman Bank A renowned business personality and 2. Yussuf Abdullah Harun, FCA Member former president of the FBCCI 3. Dr. Zaidi Sattar Chairman, Policy Research Institute Member 4. A.H.M. Moazzem Hossain Editor, The Financial Express Member President, Bangladesh Society for Training 5. Saadat Husain, Ph.D and Development and Former Cabinet Member Secretary, Govt. of Bangladesh Advisor, Southeast Bank Limited, Former 6. Zakir Ahmed Khan Secretary, Ministry of Finance, Govt. of Member Bangladesh Managing Director (Current Charge), 7. M. Kamal Hossain Member Southeast Bank Limited Professor Emeritus, Centre for Climate 8. Professor Ainun Nishat, Ph.D Change and Environmental Research, BRAC Member University Former Dean & Professor of Department of 9. Professor Shahnaz Huq Hussain Geography and Environment, University of Member

Dhaka Sustainability report Independent Director, Southeast Bank Ltd., 10. Dr. Quazi Mesbahuddin Ahmed Former Managing Director, Palli Karma- Member Sahayak Foundation (PKSF) Manager, CSR & Administration, Southeast 11. Md. Khursheed Alam Member Secretary Bank Foundation

The Green Awards were decided to be given in the following two categories:

Category 1: Leadership in Sustainable Green Business and Operation

Category 2: Leadership in Sustainable Community Development and Poverty Reduction.

A few CSR expenditures of the Bank in 2016 are given below

Amount in Recipient Organization/ Sl. No. Date Purpose BDT Individuals Dhaka University Alumni To sponsor "Hironmoyee Alumni 1 18/01/2016 2,000,000 Association (DUAA) Melobondho -2016" program. Law and order coordination To contribute in the CCTV 2 27/01/2016 2,500,000 committee of Dhaka Metropolitan Surveillance project to ensure security Police (DMP) Seven Bereaved family members of To support the bereaved families in 3 24/02/2016 3,360,000 BDR carnage their living Society for the Welfare of Autistic To sponsor a workshop on Autism to 4 1/03/2016 500,000 Children create awareness Bangladesh Society of For organizing "6th South Asian 5 8/03/2016 200,000 Neurosurgeons Neurosurgical Congress" 184 Southeast Bank Limited I Annual Report 2016

Amount in Recipient Organization/ Sl. No. Date Purpose BDT Individuals For the construction of "Proyash Army Head Quarter, Adjutant 6 26/04/2016 10,000,000 School" for physically challenged General's Branch children Mr. Md. Shohel Rana, a damaged To help him in the medical treatment 7 29/03/2016 250,000 kidney patient of his damaged kidneys For carrying out the relief work for 8 26/06/2016 15,000,000 Prime Minister's Relief Fund the poor and deprived people of the country To procure rickshaw van and plastic The Mayor of Chittagong city 9 18/07/2016 200,000 bin to keep the environment neat and corporation clean Faculty of Business Studies, Dhaka 10 27/07/2016 2,700,000 For installation of a lift in MBA Building University. For carrying out relief work for flood 11 7/8/2016 7,500,000 Prime Minister's Relief Fund affected people of the country To sponsor and contribute to their 12 28/08/2016 500,000 Sammilito Nagorik Samaj activity for social upliftment For construction of the mosque in the 13 5/9/2016 1,000,000 Ratanpur Jame Moshjid village Mr. Pear Ahmed, Assistant Teacher, For medical treatment of cancer of 14 23/10/2016 500,000 Daiya BIBI Azimiya Islamia Madrasha his son For purchasing a Double Cabin Pick-up Van to support the law 15 29/11/2016 2,462,872 Bhaluka Model Thana enforcement activity of Bhaluka Model Thana. Department of Information 16 29/11/2016 6,540,000 Science and Library Management, For modernization of computer lab University of Dhaka Arts Faculty, Arts Building, 17 15/12/2016 7,210,000 For modernization of the building University of Dhaka Department of Information 18 15/12/2016 3,850,000 Science and Library Management, For modernization of the building University of Dhaka For purchasing blankets to help them 19 22/12/2016 17,420,000 For cold-hit people in the cold For the distribution of winter clothes 20 6/12/2016 10,000,000 Prime Minister's Relief Fund for cold-hit people of the country Southeast Bank Limited I Annual Report 2016 185

Southeast Bank Foundation (SEBF)

With a view to discharging Corporate Social Responsibilities Foundation has established an English medium school in a most organized way, Southeast Bank Foundation was “Southeast Bank Green School” at Mohammadpur, one of founded by Southeast Bank Limited. Because of having the densely populated areas of Dhaka Metropolitan City. effective and organized frameworks, it has succeeded It comprises of two adjacent buildings centrally located in in undertaking a number of CSR programs, such as, the midst of a number of Housing Societies. Scholarship for poor but meritorious students, English medium school etc. On September 2013, the journey of the first session of the school began. The school offers classes for children aged The scholarship program of SEBF began its march in the 3 through kindergarten all the way up to 10th grade (O’ year 2009. It is aimed at helping the promising and brilliant level) and follows edexcel British curriculum. The school learners coming from poor families. The scholarship as is equipped with all available modern amenities and launched had two dimensions: one for school level and facilities. Currently, 19 teachers are putting their relentless the other for HSC level students. The program was further effort to teach the students. As a part of the extra- strengthened by covering scholarship at graduation level curricular activities, the teachers and students celebrate all in 2011. national- cultural events. With its ongoing performance, the school has succeeded in drawing keen interest among At the school level, the Foundation materializes its project the dwellers of the area. We are very much optimistic that with the sincere co-operation of SEBL branches. In the in no time, it will emerge as one of the leading schools year 2015, the foundation took care of 52 students and in Dhaka city. Based on the experience of this school, the out of them 32 will appear at the SSC examination of 2017. Foundation is contemplating to expand its branches in other locations of Dhaka city. For students of the higher secondary level, the news of scholarship initially comes into light through the CSR expenditure under Southeast Bank Foundation advertisement in the widely read daily newspapers. In for the year 2016 Sustainability report addition, it is also made available in the Bank’s web site. In 2014, the total recipients of scholarship at the HSC level Education was 206. In the session 2015-16, the Foundation received around 1600 applications for scholarship. After scrutiny Scholarship Project and conducting viva voce, the Foundation eventually finalized a list of 200 candidates for the scholarship. Thus Level Amount (Tk.) the total number of scholarship recipients stands at 400. In School (class vi-x) 870,400 the year 2016 (session 2016-17), around 1000 scholarship seekers have sent their application to the Foundation. The College level 8,826,500 scrutiny of the applications is under way. University level 6,360,000 Total expenditure on Scholarship 16,056,900 The announcement of scholarship for the students project of the Graduation level is also first published in the daily newspapers. It is also made available in the Bank’s Southeast Bank Green School project 10,087,397 website. In the academic session 2011-2012, scholarships Total expenditure on education 26,144,297 were awarded to 75 applicants. In the academic session 2012-2013, as many as 75 students were nominated Others Amount (Tk.) for scholarship. In the next session 2013-2014, total 60 students were selected for the purpose. Again for the Donation to Late Poet Samsur 480,000 session 2014-15, the Foundation managed to select yet Rahman family another 60 candidates. Thus the number of recipients of Total expenditure on others 480,000 scholarship at the graduation level in the reporting year stands at 270. Grand Total 26,624,297

Southeast Bank Green School In 2016, Southeast Bank spent total BDT 135.85 million as donations for education, sports, art, culture, promotion Considering the predominating demand for quality of national heritage, improvement of the condition of education at the grooming stage of life, the Foundation autistic children, promotion of women entrepreneurs, initiated a school project for the kids of families with health-care, community development, relief operation, moderate income. To materialize this dream, the winter-clothes for the cold-hit poor people, etc. 186 Southeast Bank Limited I Annual Report 2016

Environment Related Initiatives

Southeast Bank aims at facilitating to build a sustainable Enhancing online coverage for clients; for example: business that brings benefit to our stakeholders, society, ATM, SMS Banking, Internet Banking, mobile Banking environment and economy as a whole. Our existing etc. Environmental Policy provides a framework for managing our environmental impacts, including climate change by The Bank has adopted and implemented a green establishing a set of commitments to deliver. office guide named ‘Southeast Shobuj Jibon’ for the Bank. Salient features of this Green Office Guide are Highlights of ‘Sustainable Finance Activities’ of the Bank as follows:

In 2016 Bangladesh Bank instructed to form a ‘Southeast Shobuj Jibon’ is an initiative that moves “Sustainable Finance Unit” by abolishing existing beyond our processes and our customers to cost Green Banking Unit. The new Unit consists of six (06) efficient automated channels for building awareness and members under the supervision of Head of Credit consciousness for environmental issues. The Bank will Risk Management (CRM) Division. introduce a monthly news letter to distribute among the employees of the Bank to create green awareness which As per the directives of Bangladesh Bank Southeast Bank adopted a policy namely “Guidelines on will provide attention to the following aspects: Environmental Risk Management (ERM)” on Social, Climate Change and Environmental Risk Save Paper Save Trees (Every ton of paper involves 17 Management (SCERM) in 2011. trees).

A separate policy guidelines for ‘Green Banking’ was Maximum communication through e-mail adopted in 2011. Purchase recycled paper.

Green Finance activities of the Bank: Print on reusable sheets.

Print multiple pages on single sheets of paper. Environmental 2014 2015 2016 Activities Set defaults to print double-sided and print on both sides. Direct Green BDT.7.80 BDT.32.50 BDT.9.45 Finance million million million Print only the pages required.

In-direct Preview documents before printing. BDT.13400.00 BDT.17500.00 BDT.14100.00 Green million million million Finance Increase margin width of the documents. Introduction of Biometric Attendance system. Southeast Bank arranged several training programs and workshops on green banking and environmental Change the default font size from 12 point to 10 risk management. which would shrink your document by about 10%. Use e-mail statements. Environmental Risk has been incorporated in credit proposals and plays important role in decision Using post-consumer waste recycled paper internally making. (copy and printer paper) and externally (brochures, etc.) The Bank has introduced Green Awards to encourage Shredding and recycling all paper internally individuals and organizations who are actively working to protect the environment and tackle the Sharing electronic files, voice mail and e-mail instead risks of climate change through green business, of paper memos environment-friendly operations, community investment and knowledge management. Both side printing (two-sided) when possible as well as limiting printed materials. Southeast Bank Limited I Annual Report 2016 187

Conserve Energy, Conserve Natural Resources Turn off the tap while brushing teeth and of course after use. Plant or help plant more trees and preventing the cutting of the existing ones, contribute towards the making of a Always use a cloth bag. Do not use paper or plastic healthy planet at no extra cost. bags for your grocery.

Pay your bills online. For every 38,000 bills paid online, Global Climate Partnership Fund 5,058 pounds of greenhouse gases are avoided and two tons of trees are preserved. SEBL takes pride for its partnership with a prominent Energy Fund named Global Climate Partnership Fund Use Car pools to go to work. Avoiding 10 miles (GCPF) managed by RespoosAbility AG of Switzerland. of driving every week would eliminate about 500 In 2016, we could drawdown 2nd tranche of USD 5.00 pounds of carbon dioxide emissions a year. million after successfully utilizing USD 5.00 million in the year 2015. Drive responsibly. Every gallon of gas burned emits 20 pounds of carbon dioxide. SEBL under a technical assistance of GCPF engaged Frankfurt School of Management and Finance (a renowned Use LED lights. Compact Fluorescents Lights produce European Educational Institution) for capacity building in the same amount of light as normal bulbs, but use Energy Efficiency and Renewable energy financing. about a quarter of the electricity and last ten times Sustainability report longer. Under Another technical assistance of the fund, world Unplug electronics. Cell phone chargers, TVs, DVD famous “Enclude” Advisory Group of Netherlands is players, stereos, microwaves and other electronics helping the Bank develop a Social and Environmental with transformers continue to draw power, even Management Guideline that will be rolled out in 2017. when they’re off or not charging anything, as long as they’re plugged in. 188 Southeast Bank Limited I Annual Report 2016

Green Banking Initiatives- Environmental and Social Obligation

Green banking or Sustainable finance refers to any form environment to reduce paper usage and help save trees of financial service integrating environmental, social and and to reduce energy & water consumption. In 2016, governance (ESG) criteria into the business or investment southeast Bank developed a new Social and Environmental decisions for the lasting benefit of both clients and society Risk management system in line with Bangladesh Bank’s at large. draft guide line, IFC’s Performance Standard (PS) and Global Climate Partnership Fund Guidelines. Southeast Bank recognizes that balancing non-financial factors such as environmental and social issues with The Bank prioritizes and actively seeks projects with direct financial priorities is an essential part of good corporate or indirect environmental benefits which will contribute in citizenship, in addition to being fundamental to risk reducing pollution in the country. management and protecting investors. Environmental Due Diligence Checklist is meticulously We recognize that the policies and practices we adopt followed whicle financing new customers and extending today will shape not only our lives but also those of credit facilities to existing customers. Environmental future generations. We therefore have an opportunity Risk Rating (EnvRR) is now mandatory for all individual to make a positive contribution to environmental and customers (corporate, institutional, personal, small and social concerns by enacting policies designed so that our medium enterprise) whose aggregate facilities are above business operations do not degrade the environment or the following financing thresholds: cause social harm. Such policies not only indicate positive environmental responsibility, but also present business For Small and Medium Enterprise-financing >BDT 2.5 opportunities such as innovative financial products and million investments in sustainable forestry and renewable energy. This will help us better manage our risks, develop expertise For Corporate-Financing> BDT 10 million and provide clients with solutions to evolving exposures. For Real Estate-Financing> BDT 10 million To demonstrate our commitment, Southeast Bank has adopted a comprehensive environmental and social policy. Comparative position of Environmental Risk Rating The policy implemented with Social & Environmental conducted by the Bank is as follows: Management System that includes planning, training, implementation, measurement, reporting and review and Environmental 2014 2015 2016 applies to new business and existing business that comes Activities up for renewal or enhancements. Specifically, we integrate Around Around 630 Around 680 environmental and social awareness into the credit 600 projects/ projects/ analysis and financing decision process and incorporate Environmental projects/ clients loan clients loan it, where appropriate, as part of our due diligence review. Risk Rating clients loan proposal proposal We train relevant employees to take responsibility for and proposal were rated. were rated. implementation of these policies. were rated.

In this connection, various steps have been taken to minimize the bank’s direct operational impact to the Southeast Bank Limited I Annual Report 2016 189

Integrated Reporting

Southeast Bank Limited is always committed to implement challenges that have material impact on Southeast Bank the principles of integrated reporting. This Integrated and its ability to be a sustainable business entity that Report provides information on how we create value, consistently delivers value to its stakeholders. considering both qualitative and quantitative matters that may influence our stakeholders’ decision-making. Assurance Approach: Our business operation is based on trust and competency. We have an assurance model comprising three lines of We do believe that the stakeholders are the supreme defenses to ensure the validity and authenticity of the arbiters regarding the legitimacy and the sustainability information provided in the Annual Report. Our combined of the entity. Hence, we are committed to leave no stone assurance model has three parts namely, Management unturned for the assurance of our integrated thinking. Review, Internal Audit Assurance and External Audit Assurance. We believe that our approach represents a steady and considerable level of integrated thinking, which we We have engaged different external assurers and auditors continue to deepen as we execute our strategy within our to ensure the credibility of the report. organization. We recognize that embedding integrated thinking at every level of our organization forms part of Financial Statements Audit Rahman Rahman Huq our longer-term work to create a culture in which risk Corporate Governance Syful Shamsul Alam & Co. management, compliance, ethics and social responsibility compliance are coordinated with the effective and innovative TAX Consultant Akhter Abbas Khan & Co. accomplishment of our clients’ needs. This comprehensive approach is reflected in our report this year. Legal Advisors The Legal Edge Credit Rating Information Credit Rating Agency Scope and Boundary of the Report and Services Ltd. (CRISL) The Integrated Report covers the period from January 1 to December 31, 2016. The report covers all operational Assured Sustainability report and Reliable Management Internal Audit Extternal Audit Information areas and businesses of Southeast Bank Limited and Review Assurance Assurance to the its subsidiaries. In the report, we have considered the Stakeholders reporting of both Financial and Nonfinancial issues as Non financial information including the strengths and Chart: Combined Assurance Model of information to Stakeholders weaknesses has material impacts on the decision making of the Stakeholders and sustainable growth of the Bank. We do believe that our capitals including Human, Financial, Intellectual, Natural, Manufactured, Social The report is intended to address the information and Relationship Capital have significant impact on the requirements of long-term investors. We also present integrated thinking and sustainable value creation of information relevant to other key stakeholders, including the bank. These capitals are interrelated with the value our staff, clients, regulators and communities etc. creation for the stakeholders and the society through a We have prepared and presented financial statements broad range of activities. and other reports in compliance with the requirements of Key drivers that Create Value to our organization Banking Companies Act, 1991 (Amendment in 2013) Bangladesh Bank Regulations 1. Ensuring quality customer service to ensure customer Companies Act 1994 satisfaction. Bangladesh Accounting Standards 2. Maintaining high quality assets portfolio to achieve Bangladesh Financial Reporting Standards strong and sustainable returns. Financial Institutions Act 1993 3. Practicing efficient corporate governance and Securities and Exchange Rules 1987 compliance processes through meeting all regulatory The Income Tax Ordinance, 1984 requirements and making disclosures. And other applicable laws and regulations of the bank 4. Increasing client base for financial inclusion. 5. Strengthening technologies that reduce operational Materiality risks and promote implementation of best practices In the preparation of this Integrated Report, we have in the industry. focused particularly on those issues, opportunities and 190 Southeast Bank Limited I Annual Report 2016

Value Creation Process

1. Lending & Investment 5. Our Technological brilliance in Business Operation Lending to clients create assets that help us derive interest income ensuring our financial growth and strength of the Our brilliance in business operation is clinched through bank. the Technological development to ensure the operational performance and security of the transactions. Lending through Loan Products Strategic investments Incessant Banking Service Emphasizing Small and Medium Enterprise Financing Efficient Electronic Fund Transfer System Long term Foreign Currency loan for corporate clients Competent Core Banking System (CBS) Agricultural and renewable energy financing Mobile and Online Banking

2. Funding 6. Excellence in Client Service

Funding allows the bank to collect deposits and loans Strengthening trust and partnerships with customers by from our valued customers and investors in various forms focusing on the Bank’s core values of quality customer to facilitate the lending and business operation of the service, professionalism, teamwork and integrity. Bank. Speedying Customer Service through customer need Mobilizing Low Cost Deposit from retail client base recognition Capital Accretions Design prominent product facilities Arranging Funds from overseas sources for Offshore Initiating customer oriented culture Banking service Strengthening trust and partnerships with customers Loans from Other Banks Growing as our customers grow Central Bank Loans and Refinance 7. Strong Corporate Governance and Resource 3. Accessibility to the market Management

With the accessibility to the market, our various business Strong Governance with Regulatory obligation and products and services work as instruments to explore compliance enables the management to manage the markets and utilize resources with diverse investment resources with professional efficiency and accountability. options. Meeting all regulatory requirements and disclosures Explore New market through branch establishment Hiring professionals with strong background and Business And Product segmentation knowledge Direct Marketing Effective Risk Management Efficient Internal Control and Regulatory Compliance 4. Employing efficient personnel System

Our efficient workforce with proper planning of career development and performance appraisal work professionally for the accomplishment of the organizational goal.

Planned Work Schedule Proficient Recruitment and Selection Scrutinized Performance Appraisal State-of-the-Art Training and Development Southeast Bank Limited I Annual Report 2016 191

Report on Human Capital and HR Accounting

Human Resources Division (HRD) of Southeast Bank Organizational Chart Limited is responsible to manage its human resources in an effective manner, develop their skills and knowledge The Bank has an organizational chart which outlines and motivate them to give best efforts for the growth and the roles, responsibilities and relationships amongst development of the Bank. individuals within the Bank. The Organizational Chart of Southeast Bank Limited is revised from time to time to HRD of the bank is committed to achieving excellence in respond to emerging situations and challenges. It helps to acquiring, developing and retaining talented employees determine the working relationship amongst employees, through formulation and implementation of appropriate chain of command, work specialization, authority and recruitment policies, compensation and employee span of control. The job descriptions of each and every welfare package and promotion policies. The Bank has employee are laid out in details and their Key Performance established a fully equipped training institute where many Indicators (KPIs) are determined on the basis of job in-house training courses are offered to develop various descriptions. Their performance evaluation is done on the banking knowledge as needed by the employees of the basis of achievements of their KPIs. Bank. Employees are also sent for training in other training institutes at home and abroad for development of their The Senior Management Team skills and familiarizing them with the latest technological developments in the banking industry. Career counseling The Bank has a Senior Management team consisting and guidance is an area where increasing attention of Additional Managing Directors and Divisional Heads is being given for creating required scope for career of Head Office. The team is headed by its Managing advancement of employees. Director. The members of the team are academically and professionally highly qualified and vastly experienced Sustainability report Human Capital – Capacity Building in their respective fields. The team is supported by the Heads of Divisions. The members of the team are devoted Investments in skills development, accelerating to effective governance, protecting the interest of all employees’ professional and personal development are stakeholders and promoting the long-term sustainability essential components of the Bank’s human resource. of the bank. The Bank considers its employees as the most valuable assets. Southeast Bank is committed to strengthening the The senior management team is responsible for setting capacity of its employees and holding them accountable bank’s business strategy, prioritizing the allocation to thrive and achieve their full potential. The Bank spends of bank’s overall resources, monitoring adherence to considerable resources in building the capacities of its bank’s core principles and views, driving higher returns employees. Human Resources capacity building equips to stakeholders and ensuring good services to the employees to achieve organizational goals and objectives. customers. The team is also responsible to share their views with one other and provide suggestions from time Bank takes a holistic approach for leadership development to time to the Managing Director in making decisions for which encompasses corporate culture, individual developing the strategic plan, diversifying the customer leadership capabilities and team work. The bank promotes service, increasing quality asset and upholding the image the continuous professional and personal development of the Bank. The team monitors the performance of the of its employees. The bank develops short, medium and Bank and makes decisions on the day to day operational long term plans for recruitment of employees and make activities of the bank. The team is accountable to the sure that new recruits are not only trained to do the job Managing Director and exercises their power within their but also continue to grow and develop new skills in their delegated authority. job. This practice has contributed to substantial growth of productivity for organizational development. Human Resource Accounting (HRA)

In the year 2016, as part of capacity building of human Success and failure of an organization purely depends resources, a total number of 215 officials of different grades on its human resources. HRA is the managerial technique were sent to various training programs/ workshops/ which helps the management to identify the cost for seminars at home and abroad. Out of total 215 officials, human resources. HRA of the bank measures the cost 111 officials were trained in Bangladesh Institute of Bank relating to recruitment, selection, compensation and Management (BIBM), 42 officials in Bangladesh Bank training. Training Academy (BBTA) and 62 officials in other institutes at home and abroad. 192 Southeast Bank Limited I Annual Report 2016

An overview of HRA for last five years (2012 to 2016) is given below (BDT in million)

Particulars 2012 2013 2014 2015 2016 Employee (Person) 2010 2118 2221 2376 2616 Operating cost per employee 1.13 1.27 1.49 1.51 1.60 Training cost per employee (excluding sub-staff) 0.0015 0.00096 0.0016 0.0018 0.0027 Operating profit per employee 2.70 3.25 3.70 3.39 3.25 Salary cost as % of operating profit 18.04 18.22 16.29 17.40 20.25

Human Resource Position

The permanent officials of the Bank as on December 31, 2016 were 2089 out of which 229 were Executives (Assistant Vice President and above) and 1860 were Officers. In addition, 527 employees worked as Sub-Staff.

Human Resources by Age Group in the Year 2016

Age Group Total Percentage (%) Below 30 435 16.63 % 30 – 39 1256 48.01 % 40 – 49 779 29.78 % 50 and above 146 5.58 % Total 2616 100.00%

Creation of new employment opportunity Recruitment status for last five years (2012 to 2016)

The HRD of the bank primarily focuses on HR planning, Fresh recruiting and staffing. The bank is constantly Experienced BDT in million strengthening its work force. To create new employment Total opportunity, the Bank regularly recruits a good number of young, energetic and self-motivated fresh post-graduates 207 113 177 197 284 from different disciplines of the renowned academic institutions. As per Bank’s strategic plans, a good number of new jobs will be created in the year 2017 for filling 35 30 in existing vacancies and expansion of its business by 35 62 67 opening a few new Branches.

In the year 2016, the Bank recruited a total number of 284 172 78 147 135 217 Employees (fresh entrants 217 and experienced bankers 67) to strengthen its team and sustain its fast development programs. 2012 2013 2014 2015 2016

Apart from the above as part of social responsibility, in the year 2016, 601 numbers of students of different reputed universities of Bangladesh were given opportunity to complete their internship program in the Bank. Southeast Bank Limited I Annual Report 2016 193

Contribution to National Economy

Banking industry is said to be the nerve and vein of a brick kiln, bio-gas, solar home system, establishment of modern economy. It plays a pivotal role for development ETP, ensuring work environment and security for workers of the economy of a country. In the last 5-years Bangladesh of textile and Garments Industry, green industry, fire & witnessed a GDP growth of around 6.50 percent and safety measures e.t.c. In 2016, import business of BDT achieved 7.01 percent in 2016. It has been largely driven 171,531.70 million and export business of BDT 146,606.10 by its exports of readymade garments, remittances and million were transacted through SEBL. Remittances help in the domestic agriculture sector. Southeast Bank Limited macroeconomic development process of our country as it (SEBL) has been contributing to the growth of national provides significant sources of foreign currency, increases economy by providing different services to the economy. national income, finances imports and contributes to SEBL has wide network of 128 branches located at improve the balance of payment situation. During 2016, strategic places of commercial and business importance the Bank mobilized total inward remittances of BDT all over the country. Through the countrywide network, 64,665.80 million and the same was distributed to the it has invested BDT 247,491.40 million during the year beneficiaries through bank’s wide branch network across 2016 in different areas including garments, textiles, the country. In 2015-2016 fiscal year, SEBL deposited pharmaceuticals, ICT, import of essential food items and BDT 1,644.59 million to the government exchequer capital machinery, working capital finance e.t.c and thus as corporate income tax. Also BDT 302.52 million and helped achieve the expected GDP growth of the country as BDT 290.98 million were collected and deposited to the well as generate employment opportunity for the people government exchequer as VAT and exercise duty. The Bank of the country. The role of Small and Medium Enterprises mobilized total deposits of BDT 229,973.43 million which

(SMEs) is indispensible for overall economic development contributed to the formation of country’s capital. Sustainability report of Bangladesh. During the year 2016 SEBL invested BDT 41,727.60 million in SME sector and BDT 3,241.60 million As ever, SEBL is committed to be an active partner for in agricultural sector of the country. SEBL is helping the contributing to the ongoing economic development of economy by providing assistance in import and export the country and to attain the targeted GDP growth of over business and thus facilitate economic activities of the 8.00 percent in the near future by providing all sorts of country. The Bank also invested BDT.18,181.51 million in financial services within the limits of its capacity. environment friendly projects i.e renewable energy, auto 194 Southeast Bank Limited I Annual Report 2016

Value Added Statement

The value added statement for the Bank shows how the value is created and distributed among different stakeholders of the Bank. Value added to the Bank stood at BDT 7352.70 million as of December 31, 2016 as against BDT 7,230.60 million in 2015. BDT in million 2016 2015 Particulars % % Taka Taka Income from Banking Services: Interest and similar income on loan portfolios 16,972.33 17,794.80 Investment income 5,079.61 5,158.54 Commission, Exchange and Brokerage 2,903.03 2,759.46 Other Operating Income 662.60 547.93 25,617.57 26,260.73 Less: Cost of Services & Supplies Interest paid on Deposits & Borrowings 12,765.12 14,656.34 Rent, Taxes, Insurance, Lighting etc. 801.04 658.26 Legal expenses 0.60 1.49 Postage, Stamp, Telegram & Telephone 166.45 147.33 Stationery, Printing, Advertisement 132.23 112.62 Directors' Fees and Expenses 2.91 2.65 Audit Fee 1.60 1.04 Repairs to Bank's property 94.93 59.20 Other expenses 1,087.36 874.41 15,052.24 16,513.34 Value Added by the Banking Services 10,565.33 9,747.39 Add: Non-banking income - - Less: Provision for loans and advances/investments Specific provision on loan loss (2,360.99) (2,039.77) Transfer to general provision (890.00) (205.28) Provision for Off-Balance Sheet Exposures (249.50) 19.65 Provision for diminution in value of Investment 403.60 (269.48) Provision for Other Assets (115.74) (21.91) (3,212.62) (2,516.79) Value Added 7,352.70 7,230.60 Distribution of Value Addition Employees-as Salaries and Allowances 1,753.44 23.85% 1,433.13 19.82% Transfer to SEBL Foundation 300.00 4.08% 300.00 4.15% Provider of Capital - as dividend 1,833.90 24.94% 1375.43 19.02% Government - as income tax 2,855.52 38.84% 2,448.07 33.86% Expansion & Growth: Statutory Reserve 272.69 3.71% 1104.50 15.28% Retained Earnings 28.48 0.39% 289.49 4.00% Depreciation 308.67 4.20% 279.98 3.87% 7,352.70 100% 7,230.60 100%

Wealth Distribution of 2016 Wealth Distribution of 2015 Percentage Percentage 4% 4% 4% 15% 0.4% 24% To employees as salaries and 4% allowances 20% To SEBL Foundation 4% To Shareholders as dividend To Government as income tax Statutory Reserve 4% Retained Earnings 39% 25% Depreciation 34% 19% Southeast Bank Limited I Annual Report 2016 195

Economic Value Added Statement

Economic Value Added (EVA) indicates the true economic profit of a company. EVA is an estimate of the amount by which earnings exceed or fall short of required minimum return for shareholders at comparable risks. EVA of the bank stood at BDT 1383.86 Million as of December 31, 2016 as against BDT 3,559.17 million in 2015.

Economic Value Added BDT in million 2016 2015 Particulars Taka Taka

Total Revenue 25,617.57 26,260.72

Less: Expenses (Interest & Operating) (17,114.35) (18,226.45)

Less: Corporate Tax (2,855.52) (2,448.07)

Less: Capital Charges (4,263.85) (2,027.03)

Economic Value Added 1,383.86 3,559.17

Capital Charges = Required Rate of Return X Total Capital & Reserves Sustainability report

Required Rate of Return (12.52%) = Weighted average rate of 10 years treasury bond @ 10.52% +Risk Premium @ 2% in 2016 (Weighted average rate of 10 years treasury bond @ 5.11% +Risk Premium @ 2% in 2015)

Total Capital & Reserves = BDT 34,056.28 million in 2016 (BDT 28,509.53 million in 2015)

Economic Value Added = Total Revenue - (Expenses + Corporate Tax + Capital Charges)

BDT in million

878.72 936.23 2012.92 3561.16 1383.86

2012 2013 2014 2015 2016 196 Southeast Bank Limited I Annual Report 2016

Market Value Added Communication Statement to Shareholders & Stakeholders Market Value Added (MVA) is the difference between the equity market value of a company and the book value of equity invested in the company. A high MVA indicates that the company has created substantial wealth for the shareholders. MVA is equivalent to the present value of all future expected Economic Value Added (EVA). The equity market value of the Bank stood at BDT 17192.82 million whereas the book value of equity stood at BDT 9169.50 million, resulting a Market Value Added of BDT 8,023.32 million as of December 31, 2016 as against BDT 7,014.67 million in 2015.

Market Value Added BDT in million 2016 2015 Particulars Taka Taka

Market Value of Equity 17,192.82 16,184.17

Less: Book Value of Equity (Share Capital) (9,169.50) (9,169.50)

Market Value Added 8,023.32 7,014.67

Total Number of Shares outstanding 916,950,176 916,950,176

Market Value per Share 18.75 17.65

Market Value of Total Equity = [Total Number of shares outstanding X Market value per share as on 31.12.16]

Market Value Added = [Market Value of Total Equity] - [Book Value of Equity]

Market Value Addition BDT in million

8,732.86 6,898.96 8,665.18 7,014.67 8,023.32

2012 2013 2014 2015 2016 Communication to Shareholders & Stakeholders 198 Southeast Bank Limited I Annual Report 2016

Financial Highlights

BDT in million Group Bank

Change Change Particulars 2016 2015 2016 2015 % %

Performance During the Year Net Interest Income 4,207.21 3,138.46 34.05% 4,203.21 3,265.57 28.71% Non Interest Income 8,645.24 8,465.93 2.12% 8,492.73 8,367.74 1.49% Operating Income 12,852.45 11,604.39 10.76% 12,695.94 11,633.32 9.13% Operating Profit 8,503.22 8,034.27 5.84% 8,497.82 8,043.94 5.64% Profit After Tax 2,435.07 3,069.42 -20.67% 2,416.37 3,082.48 -21.61%

Year End Financial Position Loans 191,865.59 168,878.46 13.61% 189,364.96 169,378.86 11.80% Investments 61,731.63 58,829.27 4.93% 59,455.01 56,888.41 4.51% Deposits 229,973.43 210,431.09 9.29% 230,533.70 210,435.77 9.55% Shareholders Equity 26,523.56 27,206.66 -2.51% 26,522.86 27,224.92 -2.58% Total Assets 291,798.01 260,718.03 11.92% 291,993.00 260,253.04 12.20%

Earning per share(BDT) 2.66 3.35 -20.73% 2.64 3.36 -21.61% Dividend (%) 20% 15% 33.33% 20% 15% 33.33% Price earning ratio(times) 7.06 5.27 34.02% 7.12 5.25 35.52% Net asset value per share (BDT) 28.93 29.67 -2.51% 28.93 29.69 -2.58% Market price per share(BDT) 18.75 17.65 6.23% 18.75 17.65 6.23%

Ratios (%) Capital adequacy ratio (as per Basel III) 12.15% 11.52% 5.44% 12.18% 11.60% 4.99% Non performing loans 4.89% 4.25% 15.11% 4.89% 4.25% 15.11% Cost to income ratio 33.84% 30.77% 9.99% 33.07% 30.85% 7.17% Southeast Bank Limited I Annual Report 2016 199

Key Financial Data, Ratios and Graphical Presentation

BDT in million Particulars 2016 2015 2014 2013 2012 BALANCE SHEET MATRIX Authorized Capital 15,000.00 15,000.00 15,000.00 10,000.00 10,000.00 Paid up Capital 9,169.50 9,169.50 9,169.50 8,732.86 8,732.86 Reserve Fund & Surplus 24,886.78 19,340.03 18,292.59 13,074.71 10,864.68 Total Shareholders’ Equity 26,523.56 27,206.66 24,543.21 21,929.15 19,784.12 Deposits 229,973.43 210,431.09 189,472.54 177,519.46 152,901.24 Loans and Advances 191,865.59 168,878.46 147,070.81 134,863.82 126,968.97 Investments 61,731.63 58,829.27 56,378.59 57,589.06 39,011.28 Fixed Assets 8,947.16 7,885.23 7,913.00 7,795.65 7,677.51 Total Assets 291,798.01 260,718.03 236,608.40 220,930.85 191,276.30 Total Off Balance Sheet Items 113,910.63 88,522.24 92,184.70 82,126.39 71,863.58 Interest Earning Assets 254,120.97 225,546.44 203,449.40 192,452.88 165,980.25 Non-Interest Earning Assets 37,677.04 35,171.59 33,159.00 28,477.97 25,296.05 INCOME STATEMENT MATRIX Interest Income 16,972.33 17,794.80 19,233.89 19,200.64 17,394.05 Sustainability report Interest Expenses 12,765.12 14,656.34 16,049.91 17,233.51 15,302.55 Investment Income 5,079.61 5,158.54 5,274.27 4,782.65 3,258.44 Non-Interest Income 3,565.64 3,307.39 3,158.93 2,935.02 2,481.68 Non-Interest Expenses 4,349.23 3,570.11 3,327.43 2,984.60 2,336.44 Total Income 25,617.57 26,260.72 27,667.09 26,918.31 23,134.17 Total Expenditure 17,114.35 18,226.45 19,377.34 20,218.11 17,638.99 Operating Profit 8,503.22 8,034.27 8,289.75 6,700.20 5,495.18 Profit before Tax 5,290.60 5,517.48 6,760.66 6,078.82 3,603.84 Net Profit after Tax 2,435.07 3,069.42 3,836.94 3,378.82 1,648.72 CAPITAL MATRIX Risk Weighted Assets 280,402.29 247,250.88 221,249.27 200,098.46 180,327.66 Tier-I Capital 21,685.52 21,211.19 19,882.29 17,608.48 15,560.00 Tier-II Capital 12,370.76 7,298.35 7,579.80 4,199.09 4,037.54 Total Capital 34,056.28 28,509.53 27,462.09 21,807.57 19,597.54 Capital Surplus/(Deficit) 4,263.54 3,784.44 5,337.16 1,797.72 18,032.77 Tier I Capital ratio 7.73% 8.57% 8.99% 8.80% 8.63% Tier II Capital ratio 4.41% 2.95% 3.43% 2.10% 2.24% Total Capital to Risk Weighted Assets Ratio 12.15% 11.52% 12.41% 10.90% 10.87% CREDIT QUALITY Classified Loans 9,257.79 7,193.82 5,387.74 5,350.24 5,687.92 Provision for Unclassified Loans 2,430.00 1,540.00 1,334.72 1,220.28 1,210.28 Provision for Classified Loans 3,728.28 2,323.29 2,673.49 2,656.72 2,326.31 Provision for Contingent Liabilities 1,139.50 890.00 909.65 813.04 711.31 Percentage of NPLs to total Loans and 4.89% 4.25% 3.64% 3.94% 4.47% Advances 200 Southeast Bank Limited I Annual Report 2016

BDT in million Particulars 2016 2015 2014 2013 2012 FOREIGN EXCHANGE BUSINESS Import 171,531.73 151,812.58 155,691.00 131,644.82 111,537.50 Export 146,606.09 126,423.89 112,137.60 95,220.40 84,464.20 Remittance (Inward) 64,665.84 60,708.50 48,740.50 39,299.10 41,455.40 OPERATING PROFIT RATIOS Credit Deposit Ratio 83.43% 80.25% 78.09% 76.44% 83.21% Cost of Deposit & Borrowing 5.51% 7.12% 8.32% 10.01% 10.20% Administrative Cost 1.88% 1.69% 1.69% 1.72% 1.66% Yield on Loans and Advances 9.41% 11.30% 13.52% 14.96% 15.13% Spread 3.90% 4.18% 5.20% 4.95% 4.84% Return on Assets 0.88% 1.23% 1.67% 1.64% 0.95% Return on Equity 9.06% 11.86% 16.51% 16.20% 8.42% Debt Equity Ratio 10.00 8.58 8.64 9.07 8.6 PERFORMANCE RATIOS Net Profit per Employee 0.92 1.30 1.72 1.58 0.83 Net Profit per Branch 19.02 25.16 33.96 32.80 17.54 Operating profit as % of Working Fund 2.91% 3.08% 3.50% 3.03% 2.89% Net Interest income as % of Working Fund 1.44% 1.20% 1.35% 0.89% 1.10% Efficiency Ratio 33.84% 30.77% 28.64% 30.82% 29.83% Ratio of Fees Income 22.59% 23.78% 22.96% 25.20% 26.22% Salary Exp. to total Operating Exp. 40.32% 39.88% 40.92% 42.55% 42.51% Salary Exp. to Fees Income 60.40% 51.59% 51.05% 52.03% 48.37% Cost to Income Ratio 33.84% 30.77% 28.64% 30.82% 29.83% DIVIDEND ISSUE & RIGHT ISSUE Cash 20% 15% 15% 16% 15% Stock - - - 5% - Right Issue 1R:2 - - - - SHARES INFORMATION MATRIX No. of Shares Outstanding 9,169.50 9,169.50 9,169.50 9,169.50 8,732.86 Earnings Per Share (Actual Figure) 2.66 3.35 4.18 3.68 1.89 Number of Shareholders (Actual Figure) 39,009 46,285 58,169 65,413 64,060 Market Value Per Share-DSE (Actual Figure) 18.70 17.60 19.40 17.90 20.00 Price Earnings Ratio 7.06 5.27 4.67 4.91 10.52 Net Assets Value Per Share 28.93 29.67 26.77 23.92 22.66 Dividend Cover Ratio 0.75 0.45 0.36 0.54 0.79 OTHER INFORMATION Number of Branches 128 122 113 103 94 Number of Islamic Windows 5 5 5 5 5 Number of Employees 2616 2376 2221 2118 2010 Number of Foreign Correspondents 807 811 790 778 691 Southeast Bank Limited I Annual Report 2016 201

Horizontal and Vertical Analysis

Horizontal Analysis

Balance Sheet BDT in million 2016 2015 2014 2013 2012 Particulars 2016 2015 2014 2013 2012 (%) (%) (%) (%) (%) PROPERTY AND ASSETS Cash In hand (including foreign 173% 2,432.62 136% 1,903.29 114% 1,598.09 129% 1,802.67 100% 1,402.35 currencies) Balance with Bangladesh Bank (including foreign 163% 15,402.83 149% 14,093.70 147% 13,859.38 116% 10,955.39 100% 9,432.42 currencies) Balance with other banks - - - - - and financial institutions In Bangladesh 114% 2,860.09 87% 2,187.97 170% 4,283.51 107% 2,706.54 100% 2,517.87 Outside Bangladesh 153% 1,185.13 155% 1,203.35 191% 1,482.74 90% 695.51 100% 774.44 Money at call and on short 441% 4,271.34 95% 923.45 57% 548.3 104% 1,008.90 100% 969.1 notice

Investments - - - - - Sustainability report Government 159% 54,299.80 154% 52,620.79 147% 50,185.30 149% 50,860.91 100% 34,077.31 Others 151% 7,431.83 126% 6,208.48 126% 6,193.29 136% 6,728.16 100% 4,933.97 Loans, cash credit, overdrafts 151% 182,661.82 133% 161,556.32 117% 141,778.21 107% 129,184.62 100% 121,239.44 etc./investments Bills purchased and 161% 9,203.77 128% 7,322.14 92% 5,292.59 99% 5,679.20 100% 5,729.53 discounted Fixed assets including premises, furniture and 117% 8,947.16 103% 7,885.23 103% 7,913.00 102% 7,795.65 100% 7,677.51 fixtures Other assets 123% 3,101.61 191% 4,813.31 138% 3,473.97 139% 3,513.30 100% 2,522.35 Total assets 153% 291,798.01 136% 260,718.03 124% 236,608.40 116% 220,930.85 100% 191,276.30 Liabilities - - - - - Borrowings from other banks, financial institutions and 108% 7,371.64 66% 4,556.92 70% 4,815.92 116% 7,921.43 100% 6,853.95 agents Subordinated bond 8,000.00 3,000.00 3,000.00 - - Deposits and other - - - - - accounts Current/Al-wadeeah current 248% 30,285.06 190% 23,179.89 155% 18,935.05 116% 14,212.91 100% 12,201.09 accounts and other accounts Bills payable 373% 6,548.86 121% 2,127.21 154% 2,701.46 109% 1,914.53 100% 1,755.50 Savings bank/Mudaraba 231% 19,700.58 216% 18,419.86 159% 13,531.82 166% 14,118.81 100% 8,515.19 savings bank deposits Fixed deposits/Mudaraba 133% 173,438.93 128% 166,704.14 118% 154,304.20 113% 147,273.21 100% 130,429.45 fixed deposits Other liabilities 170% 19,919.38 132% 15,513.93 126% 14,766.54 116% 13,550.33 100% 11,729.24 Total liabilities - - - - - 202 Southeast Bank Limited I Annual Report 2016

BDT in million 2016 2015 2014 2013 2012 Particulars 2016 2015 2014 2013 2012 (%) (%) (%) (%) (%) Capital/shareholders' equity - - - - - Paid up capital 105% 9,169.50 105% 9,169.50 105% 9,169.50 100% 8,732.86 100% 8,732.86 Statutory reserve 175% 9,170.00 170% 8,897.31 149% 7,792.81 123% 6,444.82 100% 5,236.10 Revaluation reserve 113% 4,763.89 141% 5,968.13 110% 4,670.87 102% 4,331.54 100% 4,231.90 Other reserve 100% 247.65 100% 247.65 100% 247.65 100% 247.65 100% 247.65 Foreign currency translation 102144% (24.45) 116439% (27.87) (1015%) 0.24 1651% (0.40) 100% (0.02) reserve Retained earnings 239% 3,196.97 221% 2,951.94 199% 2,662.14 163% 2,172.67 100% 1,335.63 Total shareholders' equity 134% 26,523.56 138% 27,206.66 124% 24,543.21 111% 21,929.15 100% 19,784.12 Non-controlling interest 129% 10.00 121% 9.43 131% 10.18 135% 10.48 100% 7.76 Total liabilities and 153% 291,798.01 136% 260,718.03 124% 236,608.40 116% 220,930.85 100% 191,276.30 shareholders' equity Acceptances and 172% 43,813.55 143% 36,223.42 121% 30,725.22 129% 32,847.49 100% 25,416.70 endorsements Letters of guarantee 107% 15,154.12 94% 13,395.24 100% 14,253.37 114% 16,230.48 100% 14,188.45 Irrevocable letters of credit 174% 32,881.30 132% 24,992.38 165% 31,246.71 105% 19,925.64 100% 18,908.74 Bills for collection 141% 17,830.30 102% 12,812.74 117% 14,739.31 97% 12,300.43 100% 12,616.80 Other contingent liabilities 201% 1,474.68 150% 1,098.46 166% 1,220.08 112% 822.34 100% 732.88 Other Commitments 2,756.66 ------Total off-balance sheet items including contingent 159% 113,910.63 123% 88,522.24 128% 92,184.70 114% 82,126.39 100% 71,863.58 liabilities Southeast Bank Limited I Annual Report 2016 203

Horizontal Analysis Profit and Loss Account BDT in million 2016 2015 2014 2013 2012 Particulars 2016 2015 2014 2013 2012 (%) (%) (%) (%) (%) Operating Income Interest income/profit on 98% 16972.33 102% 17794.8 111% 19233.9 110% 19200.64 100% 17394.05 investments Interest paid/profit shared on 83% 12765.12 96% 14656.34 105% 16049.91 113% 17233.51 100% 15302.55 deposits and borrowings etc. Net interest income/net profit on 201% 4207.21 150% 3138.46 152% 3183.99 94% 1967.13 100% 2091.5 investments Investment income 156% 5079.61 158% 5158.54 162% 5274.27 147% 4782.65 100% 3258.44 Commission, exchange and 141% 2903.03 134% 2759.46 130% 2666.73 119% 2440.37 100% 2053.68 brokerage Other operating income 155% 662.6 128% 547.93 115% 492.2 116% 494.65 100% 428.01 Total operating income (A) 164% 12852.45 148% 11604.39 148% 11617.19 124% 9684.8 100% 7831.62 Salaries and allowances 175% 1741.46 143% 1423.68 137% 1361.48 128% 1269.82 100% 993.27 Rent, taxes, insurance, electricity etc. 206% 801.04 169% 658.26 146% 569.34 126% 491.84 100% 389.06 Legal expenses 90% 0.60 224% 1.49 92% 0.62 135% 0.90 100% 0.67 Postage, stamp, telecommunication 162% 166.45 143% 147.33 141% 145.63 126% 129.59 100% 103.06 etc. Stationery, printing, advertisements 123% 132.23 105% 112.62 106% 113.72 105% 112.64 100% 107.52 etc. Managing Director's salary and fees 106% 11.97 83% 9.45 83% 9.45 83% 9.45 100% 11.35

Directors' fees and expenses 108% 2.91 98% 2.65 127% 3.43 68% 1.84 100% 2.7 Sustainability report Auditors' fees 221% 1.60 143% 1.04 184% 1.34 114% 0.83 100% 0.73 Depreciation and repair of bank's 159% 403.6 133% 339.18 140% 356.79 120% 305.33 100% 254.64 assets Other expenses 230% 1087.36 185% 874.41 162% 765.65 140% 662.36 100% 473.44 Total operating expenses (B) 186% 4349.23 153% 3570.11 142% 3327.43 128% 2984.6 100% 2336.44 Profit before provision (C=A-B) 155% 8503.22 146% 8034.27 151% 8289.76 122% 6700.2 100% 5495.19 General provision 2433% 890 561% 205.28 313% 114.45 27% 10 100% 36.58 Specific provision 182% 2360.99 157% 2039.77 75% 974.01 41% 537.81 100% 1299 Provision for off-balance sheet items 159% 249.5 (13)% (19.65) 62% 96.61 65% 101.73 100% 157.03 Provision for diminution in value of (104)% (403.6) 70% 269.48 85% 329.03 (11)% (41.3) 100% 386.94 investments Other provisions 981% 115.74 186% 21.91 127% 15 111% 13.14 100% 11.8 Total provision (D) 170% 3212.62 133% 2516.79 81% 1529.1 33% 621.37 100% 1891.35 Total profit before taxation (C-D) 147% 5290.6 153% 5517.48 188% 6760.66 169% 6078.82 100% 3603.84 Provision for taxation 146% 2855.52 125% 2448.07 150% 2923.72 138% 2700 100% 1955.12 Net profit after taxation 148% 2435.07 186% 3069.42 233% 3836.94 205% 3378.82 100% 1648.7 Retained surplus during the year 232% 2162.38 211% 1964.92 267% 2488.95 233% 2170.1 100% 931.9 Earnings per share (Tk.) 141% 2.66 177% 3.35 221% 4.18 195% 3.68 100% 1.89 204 Southeast Bank Limited I Annual Report 2016

Vertical Analysis Balance Sheet BDT in million

2016 2015 2014 2013 2012 Particulars 2016 2015 2014 2013 2012 (%) (%) (%) (%) (%) PROPERTY AND ASSETS Cash In hand (including foreign 1% 2,432.62 1% 1,903.29 1% 1,598.09 1% 1,802.67 1% 1,402.35 currencies) Balance with Bangladesh Bank and its agent banks(including foreign 5% 15,402.83 5% 14,093.70 6% 13,859.38 5% 10,955.39 5% 9,432.42 currencies) Balance with other banks and - - 0% - 0% - 0% - - - financial institutions In Bangladesh 1% 2,860.09 1% 2,187.97 2% 4,283.51 1% 2,706.54 1% 2,517.87 Outside Bangladesh 0% 1,185.13 0% 1,203.35 1% 1,482.74 0% 695.51 0% 774.44 Money at call and on short notice 1% 4,271.34 0% 923.45 0% 548.3 0% 1,008.90 1% 969.1 Investments - - 0% - 0% - 0% - - - Government 19% 54,299.80 20% 52,620.79 21% 50,185.30 23% 50,860.91 18% 34,077.31 Others 3% 7,431.83 2% 6,208.48 3% 6,193.29 3% 6,728.16 3% 4,933.97 Loans and advances/investments - - 0% - 0% - 0% - - - Loans, cash credit, overdrafts etc./ 63% 182,661.82 62% 161,556.32 60% 141,778.21 58% 129,184.62 63% 121,239.44 investments Bills purchased and discounted 3% 9,203.77 3% 7,322.14 2% 5,292.59 3% 5,679.20 3% 5,729.53 Fixed assets including premises, 3% 8,947.16 3% 7,885.23 3% 7,913.00 4% 7,795.65 4% 7,677.51 furniture and fixtures Other assets 1% 3,101.61 2% 4,813.31 1% 3,473.97 2% 3,513.30 1% 2,522.35 Non - banking assets ------Total assets 100% 291,798.01 100% 260,718.03 100% 236,608.40 100% 220,930.85 100% 191,276.30 LIABILITIES AND CAPITAL - - - - - Liabilities - - - - - Borrowings from other banks, 3% 7,371.64 2% 4,556.92 2% 4,815.92 4% 7,921.43 4% 6,853.95 financial institutions and agents Subordinated bond 3% 8,000.00 1% 3,000.00 1% 3,000.00 0% - 0% - Deposits and other accounts 0% - 0% - 0% - 0% - 0% - Current/Al-wadeeah current 10% 30,285.06 9% 23,179.89 8% 18,935.05 6% 14,212.91 6% 12,201.09 accounts and other accounts Bills payable 2% 6,548.86 1% 2,127.21 1% 2,701.46 1% 1,914.53 1% 1,755.50 Savings bank/Mudaraba savings 7% 19,700.58 7% 18,419.86 6% 13,531.82 6% 14,118.81 4% 8,515.19 bank deposits Fixed deposits/Mudaraba fixed 59% 173,438.93 64% 166,704.14 65% 154,304.20 67% 147,273.21 68% 130,429.45 deposits Bearer certificates of deposit 0% - 0% - 0% - 0% - 0% - Other deposits 0% - 0% - 0% - 0% - 0% - Other liabilities 7% 19,919.38 6% 15,513.93 6% 14,766.54 6% 13,550.33 6% 11,729.24 Capital/shareholders' equity 0% - 0% - 0% - 0% - 0% - Paid up capital 3% 9,169.50 4% 9,169.50 4% 9,169.50 4% 8,732.86 5% 8,732.86 Statutory reserve 3% 9,170.00 3% 8,897.31 3% 7,792.81 3% 6,444.82 3% 5,236.10 Revaluation reserve 2% 4,763.89 2% 5,968.13 2% 4,670.87 2% 4,331.54 2% 4,231.90 Other reserve 0% 247.65 0% 247.65 0% 247.65 0% 247.65 0% 247.65 Foreign currency translation 0% -24.45 0% -27.87 0% 0.24 0% -0.4 0% -0.02 reserve Retained earnings 1% 3,196.97 1% 2,951.94 1% 2,662.14 1% 2,172.67 1% 1,335.63 Total shareholders' equity 26,523.56 27,206.66 24,543.21 21,929.15 0% 19,784.12 Non-controlling interest 0% 10 0% 9.43 0% 10.18 0% 10.48 0% 7.76 Total liabilities and 100% 291,798.01 100% 260,718.03 100% 236,608.40 100% 220,930.85 100% 191,276.30 shareholders' equity OFF-BALANCE SHEET ITEMS ------Acceptances and endorsements 38% 43,813.55 41% 36,223.42 33% 30,725.22 40% 32,847.49 35% 25,416.70 Letters of guarantee 13% 15,154.12 15% 13,395.24 15% 14,253.37 20% 16,230.48 20% 14,188.45 Irrevocable letters of credit 29% 32,881.30 28% 24,992.38 34% 31,246.71 24% 19,925.64 26% 18,908.74 Bills for collection 16% 17,830.30 14% 12,812.74 16% 14,739.31 15% 12,300.43 18% 12,616.80 Other contingent liabilities 1% 1,474.68 1% 1,098.46 1% 1,220.08 1% 822.34 1% 732.88 Other commitments 2% 2,756.66 - - - - Total off-balance sheet items 100% 113,910.63 100% 88,522.24 100% 92,184.70 100% 82,126.39 100% 71,863.58 including contingent liabilities Southeast Bank Limited I Annual Report 2016 205

Vertical Analysis Profit and Loss Account BDT in million

2016 2015 2014 2013 2012 Particulars 2016 2015 2014 2013 2012 (%) (%) (%) (%) (%)

Operating Income Interest income/profit on 66% 16,972.33 68% 17,794.80 70% 19,233.90 71% 19,200.64 75% 17,394.05 investments Interest paid/profit shared on 50% 12,765.12 56% 14,656.34 58% 16,049.91 64% 17,233.51 66% 15,302.55 deposits and borrowings etc. Net interest income/net profit on 16% 4,207.21 12% 3,138.46 12% 3,183.99 7% 1,967.13 9% 2,091.50 investments Investment income 20% 5,079.61 20% 5,158.54 19% 5,274.27 18% 4,782.65 14% 3,258.44 Commission, exchange and 11% 2,903.03 11% 2,759.46 10% 2,666.73 9% 2,440.37 9% 2,053.68 brokerage Other operating income 3% 662.60 2% 547.93 2% 492.20 2% 494.65 2% 428.01 Total operating income (A) 50% 12,852.45 44% 11,604.39 42% 11,617.19 36% 9,684.80 34% 7,831.62 Salaries and allowances 7% 1,741.46 5% 1,423.68 5% 1,361.48 5% 1,269.82 4% 993.27 Rent, taxes, insurance, electricity etc. 3% 801.04 3% 658.26 2% 569.34 2% 491.84 2% 389.06 Legal expenses 0% 0.60 0% 1.49 0% 0.62 0% 0.90 0% 0.67 Postage, stamp, telecommunication 1% 166.45 1% 147.33 1% 145.63 0% 129.59 0% 103.06 etc. Stationery, printing, advertisements 1% 132.23 0% 112.62 0% 113.72 0% 112.64 0% 107.52 etc. Managing Director's salary and fees 0% 11.97 0% 9.45 0% 9.45 0% 9.45 0% 11.35 Directors' fees and expenses 0% 2.91 0% 2.65 0% 3.43 0% 1.84 0% 2.70 Sustainability report Auditors' fees 0% 1.60 0% 1.04 0% 1.34 0% 0.83 0% 0.73 Depreciation and repair of bank's 2% 403.60 1% 339.18 1% 356.79 1% 305.33 1% 254.64 assets Other expenses 4% 1,087.36 3% 874.41 3% 765.65 2% 662.36 2% 473.44 Total operating expenses (B) 17% 4,349.23 14% 3,570.11 12% 3,327.43 11% 2,984.60 10% 2,336.44 Profit before provision (C=A-B) 33% 8,503.22 31% 8,034.27 30% 8,289.76 25% 6,700.20 24% 5,495.19 General provision 3% 890.00 1% 205.28 0% 114.45 0% 10.00 0% 36.58 Specific provision 9% 2,360.99 8% 2,039.77 4% 974.01 2% 537.81 6% 1,299.00 Provision for off-balance sheet items 1% 249.50 0% (19.65) 0% 96.61 0% 101.73 1% 157.03 Provision for diminution in value of -2% (403.60) 1% 269.48 1% 329.03 0% (41.30) 2% 386.94 investments Other provisions 0% 115.74 0% 21.91 0% 15.00 0% 13.14 0% 11.80 Total provision (D) 13% 3,212.62 10% 2,516.79 6% 1,529.10 2% 621.37 8% 1,891.35 Total profit before taxation (C-D) 21% 5,290.60 21% 5,517.48 24% 6,760.66 23% 6,078.82 16% 3,603.84 Provision for taxation 11% 2,855.52 9% 2,448.07 11% 2,923.72 10% 2,700.00 8% 1,955.12 Net profit after taxation 10% 2,435.07 12% 3,069.42 14% 3,836.94 13% 3,378.82 7% 1,648.72 206 Southeast Bank Limited I Annual Report 2016

Segment Information

Sector wise Investment Operating Revenue 7% 7% 21% 21% 1%

1% 1% 8% 23% 92% 1% 1% 5% 11%

Agriculture Finance to NBFIs Conventational banking Industry Real Estate Islamic Banking Working capital nancing Transport & communication O-shore Banking Export credit Small Enterprise nancing Commercial credit Miscellaneous Small and cottage industries

Revenue Sources Expenditure Mix 20% 19%

11% 14%

3% 12% 66% 55%

Interest Income Interest paid Investment Income Operating Expenses Commission, exchange and brokerage Provision Other Operating Income Tax

Division wise Loans Area wise Loans 20%

2% 7% 1% 1% 0% 0%

73% 93%

Dhaka Rajshahi Khulna Barisal Rural Area Chittagong Sylhet Rangpur Mymensingh Urban Area Southeast Bank Limited I Annual Report 2016 207

Graphical Presentation

Market price per share Price earning ratio

20.00 17.90 19.40 17.60 18.75 10.52 4.91 4.67 5.27 7.06

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Sustainability report Earning per share Total assets BDT in million

1.89 3.68 4.18 3.35 2.66 191,276 220,931 236,608 260,718 291,798

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 208 Southeast Bank Limited I Annual Report 2016

Loans and advances Deposits Dividend Shareholders’ equity BDT in million BDT in million BDT in million

126,969 134,864 147,071 168,878 191,866 152,901 177,519 189,473 210,431 229,973 15% 21% 15% 15% 20% 19,784 21,929 24,543 27,207 26,524

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Import business Operating income Return on equity Return on average assets BDT in million BDT in million

111,538 131,645 155,691 151,813 171,532 7,832 9,685 11,617 11,604 12,852 8.42% 16.20% 16.51% 11.86% 9.06% 0.95% 1.64% 1.67% 1.23% 0.88%

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Operating pro t Pro t before tax Non performing loans Investment BDT in million BDT in million BDT in million

5,495 6,700 8,290 8,034 8,503 3,604 6,079 6,761 5,517 5,291 4.47% 3.94% 3.64% 4.25% 4.89% 39,011 57,589 56,379 58,829 61,732

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Southeast Bank Limited I Annual Report 2016 209

Loans and advances Deposits Dividend Shareholders’ equity BDT in million BDT in million BDT in million

126,969 134,864 147,071 168,878 191,866 152,901 177,519 189,473 210,431 229,973 15% 21% 15% 15% 20% 19,784 21,929 24,543 27,207 26,524

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Import business Operating income Return on equity Return on average assets BDT in million BDT in million

111,538 131,645 155,691 151,813 171,532 7,832 9,685 11,617 11,604 12,852 8.42% 16.20% 16.51% 11.86% 9.06% 0.95% 1.64% 1.67% 1.23% 0.88% Sustainability report

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Operating pro t Pro t before tax Non performing loans Investment BDT in million BDT in million BDT in million

5,495 6,700 8,290 8,034 8,503 3,604 6,079 6,761 5,517 5,291 4.47% 3.94% 3.64% 4.25% 4.89% 39,011 57,589 56,379 58,829 61,732

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 210 Southeast Bank Limited I Annual Report 2016

Export business Operating expense BDT in million BDT in million

84,464 95,220 112,138 126,424 146,606 2,336 2,985 3,327 3,570 4,349

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Total provision Pro t after tax BDT in million BDT in million

1,891 621 1,529 2,517 3,213 1,649 3,379 3,837 3,069 2,435

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Southeast Bank Limited I Annual Report 2016 211

Distribution of Shareholders in 2016

Name of the Category Number of Shares Percentage Sponsors 296,760,231 32.36 Financial Institutions & Investor A/C Holders 336,576,964 36.71 General Public 283,612,981 30.93 TOTAL 916,950,176 100.00

Distribution of Shareholders Percentage

32.36

30.93 Sponsors Financial Institutions & Investor A/C Holders General Public

36.71 Sustainability report

Shares held by the Directors in 2016

Sl. Name of the Directors Designation Shares Percentage No. 1 Alamgir Kabir, FCA Chairman 19,944,672 2.18 Ragib Ali 2 Vice Chairman 28,026,291 3.06 (ceased to be Director on and from March 8, 2017) 3 M.A. Kashem Director 20,307,060 2.21 4 Azim Uddin Ahmed Director 25,490,735 2.78 5 Duluma Ahmed Director 19,082,742 2.08 6 Jusna Ara Kashem Director 18,339,525 2.00 7 Md. Akikur Rahman Director 18,443,731 2.01 8 Rehana Rahman Director 18,844,145 2.06 9 Sirat Monira Director 120,547 0.01 Abdul Hye (Representing Karnafuli Tea Co. Limited) 10 Director 162,420 0.02 (Ceased to be Director on and from March 8, 2017) 11 A.H.M. Moazzem Hossain Director - - 12 Dr. Quazi Mesbahuddin Ahmed Director - - Managing 13 M. Kamal Hossain Director - - (Current Charge) Total Shares - 140,573,157 18.41 212 Southeast Bank Limited I Annual Report 2016

Market Price Information

DSE CSE Total Month Month Month Total Total Volume on Month High Month Low High Low Volume Volume DSE & CSE Jan-16 17.80 16.80 13,369,892 17.80 17.00 473,210 13,843,102 Feb-16 17.70 16.90 7,638,876 17.60 16.70 658,591 8,297,467 Mar-16 17.60 14.50 12,083,761 17.70 14.40 1,212,997 13,296,758 Apr-16 15.10 13.70 6,483,648 15.00 13.50 533,730 7,017,378 May-16 15.00 13.50 6,181,544 15.70 13.40 299,983 6,481,527 Jun-16 15.90 14.50 7,190,504 15.80 14.70 336,907 7,527,411 Jul-16 16.50 15.80 5,734,704 16.50 15.70 241,660 5,976,364 Aug-16 16.50 15.60 6,993,428 16.50 15.00 300,154 7,293,582 Sep-16 16.70 14.80 5,375,753 16.70 15.80 324,157 5,699,910 Oct-16 17.50 16.30 11,689,124 18.00 16.20 476,993 12,166,117 Nov-16 18.10 16.80 10,307,877 18.20 16.70 1,212,253 11,520,130 Dec-16 18.80 16.90 16,124,892 18.90 17.30 899,260 17,024,152

Month-wise High Low Share Price in Dhaka Stock Exchange Limited (DSE)

20 18 16 14 12 10 High 8 6 Low 4 2 0

y t v Jul Jan Feb Mar Apr Ma Jun Aug Sep Oc No Dec

Month-wise High Low Share Price in Chittagong Stock Exchange Limited (CSE)

20 18 16 14 12 10 High 8 6 Low 4 2 0

y g t v Jul Jan Feb Mar Apr Ma Jun Au Sep Oc No Dec Southeast Bank Limited I Annual Report 2016 213

Financial Calendar

Financial Calendar 2016 Business policy and Planning Conference held and Annual Budget discussed Chittagong Division January 22, 2016 Sylhet Division January 28, 2016 Dhaka & Barisal Division February 06, 2016 Khulna, Rajshahi & Rangpur Division February 12, 2016 Audited Consolidated Financial Statements for the year 2015 finalized and signed March 02, 2016 Publication of Financial Statements for the year 2015 in two news papers March 24, 2016 21st Annual General Meeting held April 11, 2016 Final Dividend for 2015 for payment May 02, 2016

Interim Financial Statements For the 1st quarter ended March 31, 2016 (unaudited) published in two widely May 15, 2016 circulated news papers For the 2nd quarter ended June 30, 2016 (unaudited) published in two widely July 30, 2016 circulated news papers For the 3rd quarter ended September 30, 2016 (unaudited) published in two October 31, 2016 widely circulated news papers Sustainability report

Financial Calendar 2017 Audited Financial Statements for the year 2016 will be finalized and signed April 08, 2017 22nd Annual General Meeting will be held May 15, 2017 Final Dividend for the year 2016 proposed to be paid June 06, 2017

Interim Financial Statements( Proposed) For the 1st quarter ended March 31, 2017 (unaudited) approved by the Board of April 25, 2017 Directors For the 2nd quarter ended June 30, 2017 (unaudited) approved by the Board of July 25, 2017 Directors For the 3rd quarter ended September 30, 2017 (unaudited) approved by the Board October 25, 2017 of Directors 214 Southeast Bank Limited I Annual Report 2016

Stakeholders’ Engagement Process

Our Relationship-Activity with Stakeholders: The following table discusses various aspects of stakeholders, their engagement process and our responses:

Our Frequency of Methodologies used for Mode of Engagement Their Priorities Stakeholders Engagement Feedback Customer Feedback Survey Monthly Innovative products Customer Feedback Survey Branches/ATM/Retail Banking Frequently and services and Card Agent As and when Service Quality Information Brochure required Competitive Pricing Newspaper and Electronic As and when Flexibility in offerings Customers Media advertisements required No undisclosed Cost Corporate website Continuous Ethical banking Call Centre Frequently Extra ordinary service Customer education and Any time awareness Complaint Box Annual Report Annually Results of operation Concerns of existing and Annual General Meeting Annually Business ethics prospective shareholders Extra-Ordinary General As and when Sustainable Growth are addressed Meetings required Assets Quality Periodical dialogue Shareholders Corporate Disclosures As and when Financial Risk Management Price Sensitive Information required Process. Interim Financial Statements As and when Risk Management Culture required Timely debt/ investment Quarterly recovery Managers’ Conference, Annually, Half-Yearly Staff Welfare Salary packages revised Workshops, Seminars. & as when felt Measures and adjusted considering Cross Functioning Training necessary Remuneration linked industry scenario. Program As and when with performance Comprehensive Training Internet Portal required Whistle blowing and other development Website Continuous mechanism program. Employees Awareness about news/ Continuous Training and Health and safety standards developments in the business Daily workshop program. are maintained including, sector Health Centre and Gym in Team building through Corporate Office. development of cross-cutting working groups On-site surveillance by the As and when felt Proper compliance Ensuring strict compliance Bangladesh Bank necessary with laws and with all regulatory matters Off-site supervision As and when required Regulations. Focus on Compliance Regulators Directives and Circulars As and when required Timely payment of Culture in the Bank Filing of Returns and Within deadlines all regulatory dues. Statements As and when required Timely reporting Meetings Adherence to proper As Required Transparency Rigorous observance of procurement regulations while Timely payment of Bank’s procurement policy maintaining a good business their bills. Business relationship with the service Associates providers. Regular interaction on issues for mutual benefit Invest in Environment Friendly Continuous Financial Inclusion Charitable ventures Projects Annually Micro/SME Contribution to education, Awards to entrepreneurs for Continuous/ Financing health, disaster mgt. & outstanding performance in Annually Green Banking environmental sector sustainable development and As and when Sustainable Financial Inclusion through protection of environment. required operations Mobile Banking and Environment Green School/ Student As and when Transparency I-Banking Operations and Society Scholarship Program required Return to the society Donation to Govt. Fund/ As and when felt Individual on regular basis to necessary promote citizens’ welfare Sponsoring efforts for protection of environment Other CSR Activities Southeast Bank Limited I Annual Report 2016 215

Redressal of Investors Complaints

Southeast Bank ensures equal treatment to all Way of Redress of Investors’ Complaints shareholders. The Bank does not discriminate between An investor can complain through email info@ minority and majority shareholders. To ensure equal southeastbank.com.bd treatment of all shareholders, the bank created various An investor can make a written complaint through mechanisms, such as: letter. i) Shareholders who are unable to attend the The company maintains investor grievance file in shareholders’ meeting are provided with proxy forms which full details of every written compliant are kept. to nominate proxy to attend and vote on their behalf. The proxy forms which are in accordance with the We have 3 designated persons who look after the standard format, are sent along with the annual investor grievances within a timeframe. report. The full details of the written complaint are passed ii) The shareholders’ meetings proceed in accordance on to the concerned department. The compliance with the order of agenda, without adding new officer of the Company must be apprised of it as soon and uninformed agenda, to give shareholders as it is received. the opportunity to study the information on the A letter or email is sent to the investor who has given agenda before the poll. Moreover, important submitted written complaint by the designated information for the shareholders’ meetings are person or compliance officer acknowledging receipt not changed abruptly to the disadvantage of the of the complaint and informing him/her of the shareholders. process for suitable decision. iii) The bank sees the importance of the consideration If necessary, the points of complaints are thoroughly of transactions which may have conflict of interest Sustainability report enquired into. or may be connected or related transactions, and abides by good corporate governance principles, Availability of information about Southeast Bank including the rules and regulations of the Bangladesh Limited Securities and Exchange Commission and the Dhaka Annual Report of each year and other relevant information Stock Exchange and Chittagong Stock Exchange about SEBL may be viewed on SEBL’s website www. transactions. Directors, management and those southeastbank.com.bd. The Bank provides copies of who are related persons do not participate in the Annual Reports to the Bangladesh Securities and Exchange consideration to approve such transactions. Commission, Bangladesh Bank, Dhaka Stock Exchange iv) The bank continues to have regular communication Limited and Chittagong Stock Exchange Limited for their with the shareholders through periodic updates of reference. Investors may read them at public reference performance and at any other time when it believes room or library. it to be done in the best interest of shareholders generally. Investors’ Inquiries v) At times, the investors lodge complaints. These Queries relating to shareholdings, for example, transfer complaints are timely resolved. Investors at times of shares and payment of dividend, are to be sent to the lodge complaints through DSE and CSE. Those are following address: also timely taken up and resolved. The concerned investors and the DSE/CSE are informed of the Investors’ Relation Department resolution of the complaint. Address : Southeast Bank Limited SEBL follows the following principles in dealing with Head Office Share Division, the Investors Eunoos Trade Centre (Level-2) 52-53, Dilkhusha C/A, Dhaka-1000 Fair treatment Web Address : www.southeastbank.com.bd Timeliness in the resolution of investors’ complaints Name of Contact Person : Mohammad Omar Faruque Information to investors about the resolution of their Vice President complaints E-mail: [email protected] Phone : +8802 9567271 Friendliness with all investors and all investor (10:00 A.M. to 6:00 P.M.) segments. Fax : +8802 9567273 Protection of investors’ interest. 216 Southeast Bank Limited I Annual Report 2016 SEBL Outlook We are proud of our achievements and careful of our future. We will continue to capitalize on our strengths, address our weaknesses, seize opportunities in the face of threats to become market leader in all areas. Southeast Bank Limited I Annual Report 2016 217 SEBL Outlook We are proud of our achievements and careful of our future. We will continue to capitalize on our strengths, address our weaknesses, seize opportunities in the face of threats to become market leader in all areas.

SEBL OUTLOOK

Products and Services 218 Media Highlights 220 Caring for the Employees (Health and Safety) 224 Career Development Program 225 Contribution to National Exchequer 226 Empowering Women 226 Environment - Responsive Bank 227 SEBL Green School 228 Financial Inclusion: Mobile Banking Services – Telecash 230 Connecting with Customers 230 Service Excellence in Action 231 Bank's Network: List of Branches and ATMs 232 Memories of 21st AGM 242 Worldwide Correspondents Network 244 218 Southeast Bank Limited I Annual Report 2016 Products and Services

CONVENTIONAL VALUE ADDED BANKING DEPOSIT SERVICES PRODUCTS Student File Saving Bank Account (SB) Locker Service CARD SERVICES Current Deposit Account (CD) Insurance Coverage Short Notice Deposit (SND) Deposit Scheme Fixed Deposit Receipt (FDR) SEBL VISA Credit Card Monthly Saving Scheme (MSS) Senior Citizen Scheme SEBL Debit Card- My Card Monthly Income Scheme (MIS) Passport Endorsement SEBL VISA Platinum Credit Card Pension Savings Scheme (PSS) Individual Remittance SEBL My Remit Card Double Benefit Scheme (DBS) (Inward and Outward) SEBL Dual Currency Wage Earners Pension Savings Internet Banking Service VISA Credit Card Scheme (WEPSS) Anonya(™) SEBL VISA Virtual Card Bichokkhon(™)

ISLAMIC BANKING DEPOSIT PRODUCTS Mudaraba Savings Bank Account Al-Wadiah Current Deposit Account Mudaraba Short Notice Deposit Mudaraba Monthly Savings Scheme Mudaraba Monthly Income Scheme TREASURY SERVICES Mudaraba Pension Savings Scheme Mudaraba Double Benefit Scheme Fixed-income Investment Portfolio Service Mudaraba Millionaire Deposit Scheme (Individual and Corporate) Mudaraba Term Deposit Receipt Foreign Exchange Fund Management (Spot, Hajj Sanchaya Prokalpo Forwards, SWAPS) Mudaraba Super Double Benefit Scheme Treasury Auction Management (Primary Dealer) Mudaraba Cash Waqf Bank’s Liquidity and Fund Management Mudaraba Mohor Savings Scheme Export/Import Fund Management Secondary Transaction of Govt. Securities Southeast Bank Limited I Annual Report 2016 219

SME & AGRI. LOAN IMPORT SERVICES

Southeast Shopan Documentary Credit: Southeast Shikhor a. Opening Import Documentary Credit Southeast Shuprova (Local and Foreign) Southeast Shopnil b. Arranging Add Confirmation through Southeast Agri. Loan Foreign Correspondent Banks c. Arranging Discounting through Foreign Correspondent Banks ADDITIONAL SERVICES Post Import Finance : PROVIDED BY OFF- a. Trust Receipt (TR) SHORE BANKING UNIT b. Time Loans (TL) c. Term Loans Usance Payable At Sight (UPAS) facility to the Documentary Documentary Collection services: Credit opened by the AD a. Documentary Collections against Branches Payment (D/P) Time Loan in Foreign Currency to b. Documentary Collections against the AD Branches Acceptance (D/A) Term Loan in Foreign Currency Issuing Shipping Guarantee

CORPORATE LOAN EXPORT SERVICES Working Capital Finance Advising Export Documentary Credit Term Finance Transferring Export Documentary Credit Project Finance Opening Back- to-Back Documentary Credit Syndication & Club Finance (Local & Foreign) Work Order Finance Real Estate Finance Foreign Documentary Bills Collection: Trade Finance a. Documentary Collections against Payment (D/P) Commercial Finance b. Documentary Collections against Acceptance (D/A) Export Finance Pre-shipment Finance: Packing Credit Loan to NBFI Post-shipment Finance: a. Foreign Documentary Bills Purchase (FDBP) b. Purchase/Discounting Export Bills (Local) c. Export Development Fund (EDF) from Bangladesh Bank RETAIL BANKING d. Cash Incentive from Bangladesh Bank SERVICES Foreign Currency (FC) Account Resident Foreign Currency Deposit Account (RFCD) SEBL Home Loan Non-Resident Foreign Currency Deposit Account (NFCD) SEBL Personal Loan Non-Resident Taka Account (NRTA) SEBL Car Loan Export Retention Quota (ERQ) Account 220 Media Highlights Southeast Bank Limited I Annual Report 2016 221 Southeast bank outlook 222 Southeast Bank Limited I Annual Report 2016 Southeast Bank Limited I Annual Report 2016 223 Southeast bank outlook 224 Southeast Bank Limited I Annual Report 2016

Caring for the Employees (Health and Safety)

The compensation and benefit package for the employees of the bank is designed by taking into consideration the strategic goals and business objectives of the Bank. Other than the salary, the bank provides various cash and non- monetary benefits to its employees i.e. contributory provident fund, gratuity, incentive bonus, encashment of un- availed leave, car maintenance allowance and house furnishing allowance, etc. It revises the salary structure of the Bank periodically for inflation adjustment and better living of its employees.

The bank believes that good health and safety of the employees make a significant contribution to the bank’s profitability and ensure continual improvement in health and safety standards. The bank ensures appropriate health and safety system in its work places. It has established “Southeast Bank Health Care Center” at Head Office to provide health advice and First Aid treatment for both the male and female employees of the Bank.

Bank gives great emphasis on keeping the employees’ health fit and active. To support the healthcare facility of the employees, bank has established a health care centre at its Head Office which can be used separately by both male and female employees. Bank has already established an e-library and going to start a cafeteria at Head Office.

Bank provides financial assistance to support special medical care of the employees. In 2016, bank donated BDT 1,425,615.00 million to employees for their medical treatment. Southeast Bank Limited (SEBL) believes that sound physical and mental fitness of the employees is the key to sustainable growth of the bank.

To facilitate day care services for the children of employees of the bank, it has established a Day Care Center at Mothijheel, Dhaka jointly with 21 other private commercial Banks. This facility gives comfort to our employees and help them discharge their duties with more satisfaction. Southeast Bank Limited I Annual Report 2016 225

Career Development Program

The career development program of Southeast Bank Limited is designed to provide self-understanding and necessary tools to its employees to pursue a meaningful career and prepare themselves for higher level positions within the Bank. The Bank’s Career Development Program intends to help its employees to explore and to sort out their interests, abilities and strategically develop towards job goals.

The Bank considers its employees as the most valuable asset. The Career Development Program of the Bank contains training, workshops, seminars and specialized programs. Each and every year the Bank devotes considerable amount of resources for continuous development of the employees through in-depth operational and professional training relating to laws and practices, rules and regulations of trade finance, investment/loans and advances, day to day banking operation, reporting and compliance, Information Technology, leadership, time and stress management, skill development and global banking competencies etc. The Bank has a wide span of 8000 sft own Training Institute located at the business hub of Dilkusha C/A, Dhaka. Southeast Bank Training Institute conducts Training Needs Assessment (TNA) on regular basis to identify the Training Needs of the Employees of the Bank.

In the year 2016, Southeast Bank Training Institute has conducted a total of 96 (Ninety Six) training courses, workshops, seminars and round table discussions including Foundation Training Courses for newly recruited freshers in the positions of Probationary Officer, Trainee Officer, Trainee Cash Officer at its institute. It has also conducted 2 (two) outreach training programs at Chittagong and Sylhet. The participants of the courses/workshops/seminars were from all levels of Officers according to the contents of the programs. A good number of senior level Executives also participated in several workshops/seminars.

Apart from the above, a total number of 215 officials of different grades participated in training/ workshops/seminars in various institutions at home and abroad under Career Development Program of the Bank in the year 2016. Southeast bank outlook 226 Southeast Bank Limited I Annual Report 2016

Contribution to National Exchequer

During the fiscal year 2015-2016, Southeast Bank’s contribution to the National Exchequer was BDT 1,644.59 million. The Bank’s contributions to the National Exchequer for the last five (5) years are given below:

Year Amount in million 2015 1.644.59 2014 2,519.31 2013 2,573.77 2012 2,069.85 2011 1,802.80

Southeast Bank has been awarded the country’s 6th highest Tax Payers in the Banking Institution Category for the assessment year 2015-2016. Empowering Women

Southeast Bank Limited (SEBL) believes in the empowerment of women for sustainable and balanced development of the Bank. It will not be possible to achieve the organizational goal without active participation of female workforce of the Bank. In support of female empowerment, the bank gives priority to recruitment of qualified female employees and ensures their career progression. The Bank does not allow any discrimination between male and female employees and it encourages the women to take up leadership opportunity for balanced development of the bank. As part of women empowerment, SEBL established two ladies branches namely, Moghbazar Ladies Branch and Dhanmondi Ladies Branch where all the employees are women including the Heads of Branches. Out of total number of 2089 officials of the Bank as on 31st December, 2016, 446 employees i.e. 22 percent were female. Southeast Bank Limited I Annual Report 2016 227

Environment - Responsive Bank

SEBL takes pride in its partnership with a prominent energy fund named Global Climate partnership Fund (GCPF) managed by RespoosAbility AG of Switzerland. In 2016 we could drawdown 2nd trench of USD 5.00 million after successfully utilizing USD 5.00 million in year 2015.

SEBL under a technical assistance of GCPF engaged Frankfurt School of Management and Finance -a renowned European Educational institution for capacity building in Energy Efficiency and Renewable energy financing.

Under another technical assistance of the fund world famous “Enclude” advisory group of Netherlands is helping the Bank develop a social and environmental management guideline that will be rolled out in early 2017.

Environmental and social risk means the risk of causing pollution or destruction of the natural environment (land, water, air. natural habitats, animals and plant species) and violation 228 Southeast Bank Limited I Annual Report 2016

SEBL Green School

Introduction Extra Academic Activity

Southeast Bank Green School is a noble venture of Our school has already been implementing many plans Southeast Bank Limited. It started functioning from 2013. and projects. We offer enough extra-curriculum activities The aim of the school is to provide quality education in for the students to ignite their inner zeal and longing English Medium to the students at a reasonably lower cost for learning. Our teachers and students do not confine affordable to the parents of the locality. The school has also themselves within the boundary of academic activities. extra-curriculum activities for students. The school aims at They travel beyond and involve themselves in extra- creating a right human resource who enter to learn and curriculum activities like annual sports, science fair, ultimately go forth to serve the society. graduation ceremony, several competitions on singing, dancing, debate, drama, recitation, art, etc.. School Curriculum Our participation in celebration of events The school is based on Edexcel British Curriculum. The school offers classes from pre-play (starts with age 2.5 years We integrate our students in the celebration of national old) to 10th grade (O’level). At present, the school has 21 occasions and traditional events. It is intended to develop dedicated teachers. They serve under the supervision of in them the seeds of patriotism. We come out with specially an experienced principal. . designed programs on the occasions of the International Southeast Bank Limited I Annual Report 2016 229

Mother Language, Independence Day, Victory Day, Pohela Looking forward Baishak etc. We have completed a very successful year in 2016. With Technology-Based Education its ongoing performance, the school has succeeded in drawing keen interest among the dwellers of the area. The school is equipped with all modern equipments We look forward with much energy and optimism to and facilities. To facilitate learning of our students, we the upcoming academic sessions. It will herald further have a science laboratory and a computer laboratory. development and innovation both in academic and We encourage our students to elevate their thoughts infrastructural areas. Based on the success already independently and comfortably in Social Club along with achieved, we are confident that Southeast Bank Green the classroom activities. School will develop further and emerge as an ideal temple of learning within a short period of time. 230 Southeast Bank Limited I Annual Report 2016

Financial Inclusion: Mobile Banking Services – Telecash

Mobile Financial Service (MFS): Southeast Bank Limited (SEBL) has been providing mobile financial services with the brand name of TeleCash to its customers since January 29, 2015. Around 55,000 customers have been enrolled so far in the TeleCash network. Among them, 32,000 customers are availing TeleCash services through the channels of USSD and Android-based Mobile Apps according to their convenience. Utility Bills Payment, Tuition Fees Payment and mobile Top- up services are the most prominent services out of its wide range of services. Near about 5200 authorized agents across the country are under the TeleCash distribution channel to serve mobile financial services to the remote customers and majority of them are unbanked people. Monthly average transaction of TeleCash is BDT.855 million by considering last six months transaction. Recently TeleCash has joined the pilot project of ‘Access to MFS for women in Bangladesh’ which has been jointly initiated by International Finance Corporation (IFC) and Bangladesh Bank. SEBL is trying to execute school banking program (i.e. educational institution-based financial literacy and financial services program) by deploying its TeleCash MFS delivery channel. SEBL is planning to incorporate QR (Quick Response) Code Technology with TeleCash MFS System to bring a unique dimension in electronic banking concept. Core objective of TeleCash is to achieve customer satisfaction by ensuring instant and secure transaction and park no-cost deposit for the Bank.

Connecting with Customers

Southeast Bank Limited (SEBL) offers a wide range of products and services to corporate, SME and retail customers to meet the tailormade requirements of all segments of customers. On the eve of the Bank’s 21st Anniversary, it launched a special deposit campaign named “Nibir” from 15 May 2016 to 30 June 2016 which offered some attractive benefits on Savings/Current accounts for Women and Senior Citizen. “Anannya” is an exclusive savings product for women and “Bichokkhon” is an attractive savings product for Senior Citizens. The campaign was a resounding success as it could mobilize large number of deposit customers and a significant volume of low cost deposit. The Bank will continue to introduce unique and innovative products and services to connect with its existing and potential customers and to meet their ever evolving financial needs. Southeast Bank Limited I Annual Report 2016 231

Service Excellence in Action

Service Excellence is one of the core values of Southeast Bank Limited. The Bank focuses on providing fast and high quality customer service with state of the art technology. Various methods have been adopted such as, 24X7 Call Center, Central Monitoring System (CMS), Web Chat Service to provide customer service in the most hassle-free way. Short code 16206 is now used round the clock 24X7 to address telephonically the business needs and queries of the clients. Through CCTV, all the activities of the branches are monitored by Head Office Central Monitoring System. Recently, bank introduced customer service through Web Chat. It enables live interaction between the client and bank’s customer service executives to meet clients’ banking queries.

We resolve customer complaints fairly, consistently and promptly. Every branch has a dedicated “Customer Service and Compliant Management Desk” for dispute resolution. Customers can lodge complaints in person or through other available means such as letter, telephone, facsimile and email. Compliant Lodgment Forms are available at all our branches. We deal quickly with complaints received from the customers. We seek ideas and suggestions of the customers on how we can serve them better. The customers can give their valuable feedback through Service Quality Forms available at all branches under sealed envelope. The branches send the sealed envelopes containing Service Quality feedback received from the clients to the Head Office for evaluation of customer opinion. The opinion/feedback of the customers are scrutinized and widely discussed in the monthly Management Committee meeting and necessary steps are taken for improvement of customer service.

Branch Supervisors at Head Office work relentlessly to ensure service excellence. Supervisors periodically visit the branches to monitor various performance areas including quality of customer service of the branches. In the Mangers’ Conferences, different aspects of branches are elaborately reviewed and necessary steps are taken for further improvement of the service quality of the bank. As part of off-site supervision, the supervisors can monitor their respective branches’ activities through Central Monitoring System (CMS)-(a state of art technology) which has been placed at the Bank’s Head Office. According to BRPD Circular No.07 dated July 05, 2015, Southeast Bank is the pioneer among peer banks, to set-up this technological solution in order to become compliant and diciplined. Southeast bank outlook 232 Southeast Bank Limited I Annual Report 2016

Bank’s Network: List of Branches and ATMS

02 12 02 09 64

01 30 08

BRANCHES AND ATMS

> DHAKA DIVISION (64) > RAJSHAHI DIVISION (09) > CHITTAGONG DIVISION (30) > RANGPUR DIVISION (02) > SYLHET DIVISION (12) > BARISAL DIVISION (01) > KHULNA DIVISION (08) > MYMENSINGH DIVISION (02) Southeast Bank Limited I Annual Report 2016 233

DHAKA DIVISION (64) Agargaon Branch Ashulia Branch (Rural) Plot # E-4/B (1st Floor) Helim Shopping Complex Principal Branch Agargaon Administrative Area, (Opposite Fantasy Kingdom Main Gate) 1, Dilkusha Commercial Area, Sher-e-Bangla Nagar, Mohammadpur, Ashulia, Dhaka Dhaka-1000. Dhaka-1207, Tel: 58151717, 9132747, Tel: 7788440, 7788420 Tel: 9563101, 9550081, 9567271 9134247, 58150498, 58153934 Fax: 7788441 Fax: 88-02-9551575 Fax: 9132704 Narayanganj Branch Imamganj Branch Banani Branch Holing # 26-29, S. M Maleh Road Bhuiyan Market Plot No.71, Block-B, Kemal Ataturk Tanbazar, Narayanganj 163/2, Mitford Road, Dhaka Avenue, Banani, Dhaka Tel: 7648201, 7648202, 7648203, 02 Tel: 7314801, 7316423, 7318567, Tel: 9860363, 8861697, 8859518, 7634331, Fax: 7648200 7316644, Fax: 88-02-7314801 8859987, 8861629 Fax: 88-02-9841960 Savar Branch (Rural) 12 Plot # A-109, Bazar Road (1st Floor) Bangshal Branch Motijheel Branch Pourasava & P.S. : Savar, Dhaka 14/3, North South Road, Dhaka (Islamic Banking) 125, Motijheel C/A Tel: 7743691, 7743692, 7743693, Tel: 7121248, 7121251, 9567163, (1st Floor), Dhaka-1000 7743694, Fax: 7743690 02 7176116, 7176117 Tel: 9567286, 9567202, 9567303, Fax: 88-02-9567164 09 9567262, Fax: 9567701 Mouchak Branch Karnaphuli Point (1st Floor) Gulshan Branch Aganagar Branch (Rural) 70, New Circular Road, Malibagh, 64 House # 82 CES (F) 1, Gulshan Avenue, “Mahboob Plaza” (1st & 2nd Floor) Dhaka, Tel: 8333347, 8333676, 8333678, Dhaka. Tel: 9883491, 98834 01-5, Aganagar, Keraniganj, Dhaka 8333679, Fax: 8333348 9883492, Fax: 88-02-9883495 Tel: 7772516, 7761133 Fax: 7761155 Konabari Branch (Rural) Dhanmondi Branch Plot # A-147/148, BSCIC I/R House # 23 (New), Corporate Branch Union: Konabari, Road # 16 (New)/27 (Old) Eunoos Trade Centre (Ground Floor) P.S.: Joydebpur, Dist.: Gazipur Dhanmondi R/A, Dhaka 01 52-53, Dilkusha C/A, Dhaka-1000 Tel: 9298840, 9298836, 9298838, 30 Tel: 8122474, 9123183, 9123518, Tel: 9567764, 9551444, 9554447, 9298839, Fax: 9298837 9123167, Fax: 88-02-9111427 9564878, Fax: 9571424 Tongi Branch (Rural) 08 Uttara Branch Shyamoli Branch 8/B, Anarkoli Road (1st Floor) House # 1, Road # 11, Sector # 1 Southeast bank outlook ASA Tower (2nd Floor) Tongi Bazar, Gazipur Uttara, Dhaka-1230 23/3 & 23/14, Khilji Road, Block # B, Tel: 9816647, 9816648, 9816650-51 Tel: 8922538, 8923680, 8916538 Mohammadpur, Shyamoli, Dhaka Fax: 9816649 Fax: 88-02-8923781 Tel: 8123551, 8112250, 8128678, 8112227, Fax: 8120687 Bashundhara Branch Kawran Bazar Branch Plot # 142, Block # B Jamuna Bhaban (1st Floor), 2, Kawran Joypara Branch (Rural) Bashundhara R/A, Baridhara, Dhaka-1212 Bazar C/A, Dhaka-1215 Begum Aysha Shopping Complex Tel: 8401031, 8401032, 8401034-5 Tel: 9136112, 8189737, 9139276, (1st Floor), Holding # 222, Fax: 8401033 8189738-40, Fax: 88-02-9136510 Joypara Pourasava Thana: Dohar, Dist.: Dhaka Sat Mashjid Road Branch New Eskaton Branch Tel: 06223-56040, 56041, 56042 ADC Empire Plaza (1st & 2nd Floor) Chowdhury Centre Fax: 06223-56040 Ext.-111 Plot # 183 (Old) 91 (New), 23/Ka, New Eskaton Road, Road # 22 (Old) 12/A (New) BRANCHES AND ATMS (1st Floor), P.S. : Ramna, Dhaka-1000 Kakrail Branch Sat Mashjid Road, Dhanmondi, Dhaka Tel: 9360953, 9340001, 9330176, Toma Tower (1st & 2nd Floor) Tel: 8191167, 8191168, 8191170, 9340796, Fax: 88-02-9362177 > DHAKA DIVISION (64) > RAJSHAHI DIVISION (09) 77/1, VIP Road, Kakrail, Dhaka 8191171, Fax: 8191169 Tel: 9356115, 9356116, 9340852-3 New Elephant Road Branch > CHITTAGONG DIVISION (30) > RANGPUR DIVISION (02) Fax: 9355990 Mohammadpur Branch Kazi Bhaban Axis Delvista (1st Floor) 39, New Elephant Road > SYLHET DIVISION (12) > BARISAL DIVISION (01) Madhabdi Branch (Rural) 7/1, Aorongozeb Road, Block-A, (1st and 2nd Floor) Khatian # 28 (1st Floor), Madhabdi Mohammadpur Housing Estate > KHULNA DIVISION (08) > MYMENSINGH DIVISION (02) Dhanmondi, Dhaka-1205 Pauroshava, PS & Dist.: Narshingdi Mohammadpur, Dhaka Tel: 9674588, 9674327, 9674324-5 Tel: 9446127, 9446125 Tel: 8129649, 8129604, 9101254, Fax: 88-02-9674326 Fax: 9446126 58150961, Fax: 9119583 234 Southeast Bank Limited I Annual Report 2016

Pragati Sarani Branch Joydebpur Branch (Rural) Mohakhali Branch Plot # Ga-25/5/1, Shahjadpur Holding # 235, Block # K, Shib Bari More “Bay’s” (1st Floor) Pragati Sarani, Gulshan, Dhaka B.I.D.C Road, Ward # 3, Gazipur 50, Mohakhali C/A, Dhaka Tel: 8899238-9, 8899610, 8899240 Pauroshova, Thana: Joydebpur, Tel: 9882523, 9885712, 9882527, Fax: 8899208 Dist.: Gazipur. 9885710, Fax: 9885711 Tel: 9252852, 9252851 Mawna SME/Krishi Branch Fax: 9252850 Banasree Branch (Rural) Holding # 1497, Mawna Bazar Road Twin Tower, House # 13, Block # C, (1st Floor), Sreepur Pauroshava Donia Branch (Rural) Main Road, Banasree Project, East Ward # 8, Thana : Sreepur, Dist.: Gazipur “Chowdhury Complex” (1st Floor), Rampura, Dhaka Tel: 068-2552900, 068-2552901 Village: Noyapara, Mouza: Dhania Mob: 01730-781279 Fax: 068-2552902 Union: Dhania, Thana: Demra, Dist.: Dhaka. Tel: 7547955, 7548055 Bandura Branch (Rural) Tangail SME/Krishi Branch Fax: 7548122 Puraton Bandura Bazar “Noor Plaza”, Holding # 263, Mouza: Puraton Bandura, Tangail Main Road Rupnagar Branch Union: Bandura Ward # 13, Pauroshava & “Rangan”, Plot # 14, Road # 11 Thana: Nawabgonj, Dist.: Dhaka Thana: Tangail, Dist.: Tangail Ward # 7, Rupnagar Residential Area Mob: 01730-781278 Tel: 0921-51336, Fax: 0921-62798 Mirpur Housing Estate, Dhaka City Sarulia Branch Corporation, Mirpur, Dhaka Madanpur SME/Krishi Branch Samsul Haque Nilu Shopping Complex Tel: 8031924, 8051981 Ekata Samabay Super Market (2nd Floor) Mouza: Sarulia, Union: Sarulia Fax: 8051965 Mouza: Chanpur, Union: Madanpur Thana: Demra, Dist.: Dhaka Thana: Bandar, Dist.: Narayanganj Mob.: 01730-792169 Kamrangirchar Branch (Rural) Tel: 7648083, 7648081 “Elham Square”, Rony Market Road Fax: 7648082 Kapasia Branch (Rural) Mouza: Char Kamrangirchar Akter Market Narsingdi SME/Krishi Branch Union: Sultangonj, Kapasia Main Road “Islam Plaza” (1st Floor) Thana: Kamrangirchar, Dist.: Dhaka, Thana: Kapasia, Dist.: Gazipur Holding # 1, Maddha Kanda Para Tel: 55160210, 55160209 Mob.: 01766-673597 Sadar Road, Ward # 4, Narsingdi Fax: 55160211 Pauroshava, Thana: Narsingdi Sadar, Mirpur Branch Dist.: Narsingdi, Tel: 9452082, 9452080 Bhulta Branch (Rural) Simpletree Fax: 9452081 Bhulta Bus Stand, Plot # 01, Road # 08, Block-C, Section-06 Union: Golakandail, Thana: Rupgonj, Mirpur Housing Estate, Pallabi, Dhaka Rokeya Sarani Branch Dist.: Narayanganj Mob.: 01766-673595 “Kusholi Bhaban” Mob.: 01755-637195 Holding # 238/1, West Kafrul, Rokeya Ashulia Bazar Branch (Rural) Sarani, Mirpur, Ward # 16 Dakhin Khan Branch (Rural) Shahid Sonamia Plaza, Dhaka City Corporation, “Faisal Mansion” Bangabandhu Road Thana: Sher-e-Bangla Nagar Shah Kabir Mazar Road Ashulia Bazar, Mouza: Boro Ashulia Dhaka. Tel: 9103249, 9103251, 9103246, Village: Moshair, Mouza: Uttar Khan Union & Thana: Ashulia, Dist.: Dhaka 9103247, Fax: 9103248 Union: Dakhin Khan Adarsha Union Mob.: 01755-630358 Parishad, Thana: Dakhin Khan, Islampur Branch Dist.: Dhaka. Balivadra Branch (Rural) “Adel Complex” (1st, 2nd & 3rd Floor) Tel: 8953290, 8953292 Bhandari Latif Super Market, 40, Islampur Road, Dhaka - 1100 Fax: 8953299 Balivadra Bazar, Mouza: Ganakbari, Tel: 57394570, 57396174, 57394538, Union: Damsona 57394589, Fax: 57396175 Gopaldi Branch (Rural) Thana: Ashulia, Dist.: Dhaka Gopaldi Bazar, Union: Sadasadi Mob.: 01755-630359 Hemayetpur Branch (Rural) Thana: Araihazar, Dist.: Narayanganj Hemayetpur Super Market (2nd Floor) Mob.: 01755-637194 Kalibari Branch (Rural) Mouza: Kulashur, Union: Tetuljora Sobur Market, Duptara Adorsha Bazar Thana: Savar, Dist.: Dhaka Ati Bazar Branch (Rural) Sattabhandi Bhuiyan Para (Kalibari) Tel: 7747914, 7747464, 7747915, Mouza: Ati, Union: Sakta Mouza & Union: Duptara, 7747916, Fax: 7747465 Thana: Keranigonj, Dist.: Dhaka Thana: Araihazar, Dist.: Narayanganj Tel: 55103281, 55103282 Mob.: 01939-900570 Munshigonj Branch Fax: 55103280 “B. M Complex” (1st Floor) Rajbari Branch House # 55, Jubillee Road, Ward # 3 Hasnabad Branch (Rural) “Saleha Akkas Tower” Munshigonj Pauroshava, Thana: “Roky Tower”, Hasnabad, Mouza: Ekuria Holding # 237, Binodpur (College Road) Munshigonj Sadar, Dist.: Munshigonj Union: Subatta, Thana: Keranigonj, Ward # 08, Thana : Rajbari Sadar Tel: 7620594, 7620591, 7620592, Dist.: Dhaka Pauroshava : Rajbari, Dist.: Rajbari 7620593, Fax: 7620595 Mob: 01730-781277 Mob.: 01934-448903 Southeast Bank Limited I Annual Report 2016 235

Dhanmondi Ladies Branch CHITTAGONG Feni Branch “Rupayan Khan Plaza” DIVISION (30) Surma Sadan (1st and 2nd Floor), Plot # 500/A (Old) / 18 (New), Road # 7, 176, 177 and 178 Trunk Road Dhanmondi R/A, Dhaka Agrabad Branch Thana - Feni Sadar, Dist. - Feni Mob.: 01934-448906 Faruk Mahal, 93, Agrabad Commercial Tel: 0331-63004, 62884, 61362, 61852 Area, Chittagong Fax: 0331-62884 Ext.-102 Moghbazar Ladies Branch Tel: 031-721152, 031-713097-8, “Hall Mars”, Holding # 66 (Old) 031-7130 94-5, 031-721151-3 Bashurhat Branch (Rural) Outer Circular Road, 05 (New) Shahid Fax: 88-031-713096 Ayesha Motaleb New Market Sangbadik Salina Parvin Sarak Holding # 428, Main Road, Ward # 5, Khatunganj Branch Boro Mogbazar, Dhaka 410/411, Khatunganj, Chittagong Bashurhat Pauroshava, Companyganj, Mob.: 01934-448905 Tel: 031-2863594, 031-621934, Noakhali. Tel: 03223-56415, 56461 031-620166-7, 031-620516 Fax: 03223-56430 Kazi Nazrul Islam Avenue Branch Fax: 88-031-62 05 17 “Rupayan Trade Centre” Chowmuhani Branch (Rural) 114, Kazi Nazrul Islam Avenue, Dhaka Jubilee Road Branch Hossain Market Mob.: 01755-624864 96, Jubilee Road, Chittagong Holding # 276-284, D. B Road Tel: 031-635265, 031-611712-5, Chowmuhani Pauroshava, Sherpur Branch 031-635245, 031-635246 Thana: Begumganj, Dist.: Noakhali Fax: 88-031-611716 Muslim Market Tel: 0321-53534, 0321-53535, Holding # 166, Shahid Bulbul Sarak Halishahar Branch 0321-54018, Fax: 0321-54018 Munshi Bazar, Ward No.: 02, House # 3, Block # G Pourasava: Sherpur Port Connecting Road, Halishahar Momin Road Branch Thana: Sherpur Sadar, Dist.: Sherpur Housing Estate Equity Central, 42-43, Momin Road Mob.: 01705-403797 Halishahar, Chittagong Chittagong City Corporation Tel: 031-727949, 031-716826, P.S.: Kotwali, Dist.: Chittagong Ghior Branch (Rural) 031-2526183, 031-2526184 Tel: 031-2857345, 031-2857346, Mouza+Union: Ghior, Upazila : Ghior , Fax: 88-031-727949 031-2857347, 031-2857348 Dist.: Manikganj Fax: 031-2857349 Mob.: 01705-403799 CDA Avenue Branch (Islamic Banking) Madambibir Hat Branch (Rural) Balla Branch (Rural) Ali Villa, 1640/1861 (New), CDA Avenue Madambibir Hat, Union-Bhatiary Asian Highway, East Nasirabad Mouza & Union: Balla P.S.: Sitakunda, Dist.: Chittagong Panchliash, Chittagong P.S.: Kalihati, Dist.: Tangail Tel: 031-2781001, 031-2781003, Tel: 031-652150, 031-654875, Mob.: 01705-403798 031-2781004, 031-2781005 031-2552385-6 Fax: 031-2781002 Southeast bank outlook Fax: 031-2552387 Malibagh Branch ABN Tower, 45, Siddheswari Circular Pahartali Branch Comilla Branch Road, Dhaka, Mob.: 01787-694948 Hajrat Taiyabia Complex 359/328, Jhawtala Singair Branch (Rural) Holding # 801 (New), 1st Kandir Paar, Thana: Kotwali, Comilla Singair New Market D.T Road, Alongkar Mour Tel: 081-64278, 081-64280, Holding No.: 2/2, Kansha Road Abdul Alir Hat, Pahartali, Chittagong 081-64279, 081-61322 Ward No.: 04, Pourasava + P.S.: Singair Tel: 031-2771001, 031-2771002-4 Fax: 081-61321 Dist.: Manikganj Fax: 031-2771005 Mob.: 01934-448918 Lohagara SME/Krishi Branch Cox’s Bazar Branch Mostafa City Center, (Islamic Banking) R. K. Mission Road Branch Mouza: Amirabad Thana:- Lohagara, Asha Shopping Complex Nir Chhayabithi Union: Amirabad, Dist.: Chittagong 430-431, Bazar Ghata 53, 53/1, R. K. Mission Road, Dhaka Tel: 0303-456623, 01713-065986 (Mob.) (1st Floor), Cox’s Bazar Fax: 0303-456624 Mob.: 01934-448919 Tel: 0341-63406, 0341-51053 Fax: 0341-64742 Brahmanbaria SME/Krishi Branch Monipur Bazar Branch (Rural) Shikder Plaza, Holding # 1001 “Isha Chowdhury Tower” Chhagalnaiya Branch Dr. Faridul Huda Road, Ward # 4 Pirozali Road, Monipur Bazar (Islamic Banking) Union: Bhawal Gor, P.S.: Gazipur Sadar Mir Shopping Complex (1st Floor) Pauroshava & Thana: Brahmanbaria Dist.: Gazipur Chhagalnaiya Bazar, P.S.: Chhagalnaiya, Dist.: Brahmanbaria Mob.: 01934-448920 Feni. Tel: 03322-78302, 78432 Tel: 0581-58202 Fax: 03322-78302 Ext.-111 Fax: 0581-58201 236 Southeast Bank Limited I Annual Report 2016

Hathazari SME/Krishi Branch Companigonj Branch (Rural) Shahjalal Uposhahar Branch S. A Shopping Complex, “Saudia Manjil” (1st & 2nd Floor) Plot # 07, Block # D, Main Road, Hathazari Bus Stand R.S Khatian # 395, Companigonj Shahjalal Uposhahar, Sylhet Rangamati Road, Plot # 14238, Mouza: North Tirish, Union: 15 No. Tel: 0821-713057, 0821-713052, Khatian # 2517, Mouza: Fatika, Nobipur (West), Nabinagar Road, 0821-713062, 0821-811655 Union: Fatehpur Thana: - Hathazari Thana: Muradnagar, Dist.: Comilla Fax: 88-0821-711820 Dist.: Chittagong, Tel: 031-2601855 Tel: 08026-59011, 59004 Fax: 031-2601856 Fax: 08026-59017 Bandar Bazar Branch (Islamic Banking) Shebarhat SME/Krishi Branch Chakaria Branch (Rural) Karimullah Market (1st Floor) Shebarhat Bazar, Mouza – Razarampur “Society Jame Mosque Complex” Bandar Bazar, Sylhet Feni Chowmuhani Sarak (1st Floor) Mouza: Chiringa, Chakaria Pauroshova Tel: 0821-810322, 812246, 4116495, Thana: Chakaria, Dist.: Cox’s Bazar Thana – Shenbag, District - Noakhali 4011350, 0821-721243 Tel: 03422-56161, 03422-56162 Tel: 01713-065972 Fax: 0821-2831455 Fax: 03422-56163 Kulaura Branch Sonagazi SME/Krishi Branch Miabazar Branch (Rural) Aziz Rowshon Shopping Centre and Holding # 431, Ward #4, Pauroshava & Haji Siraj Mansion Garden City, Holding No. 334, Thana: Sonagazi, Dist.: Feni Mouza: Ashrabpur, Union: 2 No. Ujirpur Ward No. 3, Pourasava: Kulaura Tel: 03325-76386, 76377 Thana: Chauddagram, Dist.: Comilla Thana: Kulaura, Dist.: Moulvi Bazar Fax: 03325-76386 Mob.: 01766-665140 Tel: 08624-56208 Oxygen More Branch Haidergonj Branch (Rural) Fax: 08624-56208 Holding No.405, Kulgaon Gazi Super Market Hetimgonj Branch (Rural) Chittagong City Corporation Haidergonj Bazar, Mouza: Char Ababil Khoyruganj Jame Masjid Market Oxygen Mour, Ward # 2, Thana: Bayezid Union: Char Ababil, Upazila: Raypur Complex (1st Floor) Bostami, Dist.: Chittagong Dist.: Laxmipur Thana: Golapgonj, Dist.: Sylhet Tel: 031-2584018, 2584019, Mob.: 01766-673599 Tel: 0821-840374, 840373 2584020, 2584059 Teknaf Branch (Rural) Fax: 0821-840372 Fax: 031-2584017 Alo Shopping Complex, PC-177, K K Para, Main Road, Ward No.: 03, Pathantula Branch Chowdhury Hat SME/Krishi Branch Pourashova: Teknaf, Thana: Teknaf Haque Mansion of Modina Market “Halim Mansion”, (1st Floor) Dist.: Cox’s Bazar Thana: Jalalabad, Dist.: Sylhet Chowdhury Hat, Mouza: Chikandandi Mob.: 01934-448900 Tel: 0821-728745, 0821-724300 Union: Fateyabad, Fax: 0821-724300 Thana: Hathazari, Chittagong Gunabati Branch (Rural) Tel: 031-2584007, 031-2584006 Mouza: Gunabati, Union: 12 No. Tazpur SME/Krishi Branch Fax: 031-2584005 Gunabati Tazpur Bazar, Mouza: Boraya, P.S.: Chouddogram, Dist.: Comilla Union: 8 No Tazpur Mob.: 01709-633280 Potherhat Branch (Rural) Thana: Balagonj, Dist.: Sylhet “Khaiz Ahmed Shopping Centre” Tel: 08242-56191, Fax: 08242-56191 (1st Floor), Mouza: Noapara, SYLHET DIVISION (12) P.O: Gujra Noapara, Union: 13 No. Laldighirpaar Branch Biswanath SME/Krishi Branch Noapara, Thana: Raujan, Dist.: Chittagong Mubarak Tower “Haji Monir Uddin Market” Tel: 031-2573214, 031-2573216, 1794/1788, New Market, Sylhet Natun Bazar, Biswanath, Mouza - 031-2573217, Fax: 031-2573215 Tel: 0821-710955, 0821-715382, Mashala, Union/Pourashova: Biswanath 0821-710218 Thana: Biswanath, Dist.: Sylhet Fatikchari Branch (Rural) Fax: 88-0821-710102 Tel: 08224-56205 “Mir Jahanara Complex” (1st Floor) College Road (Bibir Hat), Moulvibazar Branch Beanibazar SME/Krishi Branch Khatian # 4989, Union: Dhurang, Jarif Tower “Panchakhanda Haragabinda High Thana: Fatikchari, Chittagong 199/2, M. Saifur Rahman Road, School Market” Tel: 030-2256317, 030-2256316 Moulvibazar, Tel: 0861-53727-9 834, Beanibazar-Sylhet Road, Fax: 030-2256315 Fax: 88-0861-53730 P.S.: Beanibazar, Dist.: Sylhet Tel: 08223-56164, Fax: 08223-56165 Kotwali Branch Chouhatta Branch “Equity Anitri” (1st Floor) Manru Shopping City Charkhai Branch (Rural) Holding # 32, Shahid Sohrawardy Road Plot # 4953/4943 (1st Floor) Anisha Complex Ward # 33, Chittagong City Corporation Chouhatta Mirboxtola Road Mouza: Kamar Gram, Union: 2 No. Thana: Kotwali, Dist.: Chittagong Chouhatta, Sylhet Charkhai, Thana: Beanibazar, Tel: 031-632750, 632751, 632752 Tel: 0821-720276, 0821-720276 Dist.: Sylhet Fax: 88-0821-720276 Fax: 031-632753 Mob.: 01766-665141 Southeast Bank Limited I Annual Report 2016 237

KHULNA DIVISION (8) RAJSHAHI DIVISION (9) Natore Branch “Lily Plaza”, Holding No.: 838, Kanaikhali Khulna Branch Bogra Branch Ward No.: 04, Pourasava: Natore P.S.: Natore Sadar, Dist.: Natore Haji Hanif Complex Bhandari Manjil (2nd Floor) Mob.: 01712-803701 12 & 13, Khan Jahan Ali Road, Khulna 776-777 Barogola, Bogra Tel: 041-730606, 041-7314 06, Tel: 051-68083, 68084, 68085, 68086 Fax: 051-51939 RANGPUR 041-731306, 041-731606 Fax: 88-041-731506 DIVISION (2) Rajshahi Branch Plot # 447, Mangol Bhaban (2nd Floor) Rangpur Branch Jessore SME/Krishi Branch Alupatti Mour, P.O.: Ghoramara RDRS Complex Holding # 11, R. N. Road, Ward # 2 P.S: Boalia, Dist.: Rajshahi Holding # 9416, Jail Road, Pauroshava: Jessore, Kotwali, Jessore Tel: 0721-812203, 0721-812204, Radhaballab, Rangpur Tel: 0421-67683, 0721-812205, 0721-812206 Tel: 0521-64672, 64673, 64778, 64779 Fax: 0421-68094 Fax: 0721-812207 Fax: 0521-64780

Satkhira SME/Krishi Branch Naogaon Branch Dinajpur Branch Holding # 808/837, Ganeshtola Holding # 5896, Polash Pole, (1st Floor) “Kazi Habibur Rahman Market” Jail Road, Dinajpur Municipal Shahid Nazmul Sarak Old Hospital Road (Bridge Mour) Pauroshava: Naogaon, Corporation, Ward # 3, Thana: Kotwali, (Satkhira Old Bus Stand) Thana: Naogaon Sadar, Dist.: Naogaon Dist.: Dinajpur Ward # 08, Satkhira Paurashava Tel: 0741-63227, 0741-63286, Tel: 0531-52025, 0531-52026 Thana: Satkhira, Dist.: Satkhira Fax: 0531-52024 0741-63397, 0741-61274 Tel: 0471- 63568, 62508 Fax: 0741-61831 Fax: 0471- 63569 BARISAL Chapainawabganj Branch DIVISION (1) Sir Iqbal Road Branch Holding # 8, Boro Indara More, “Noor Jahan Plaza” Ward # 15, Chapainawabganj Municipal Barisal Branch 155, Sir Iqbal Road, Khulna Corporation, Thana: Nawabganj Sadar 54 Sadar Road (1st Floor) Dist.: Chapainawabganj Kotwali, Barisal Tel: 041-721056, 731848, 724471 Tel: 0781-51717, 0781-51718 Tel: 0431-2176601, 0431-2176602, Fax: 041-722852 Fax: 0781-51716 0431-2176603-04 Fax: 0431-64056 Rupdia Bazar Branch (Rural) Sirajganj Branch “Bhowmik Super Market”, Basak Plaza MYMENSINGH Mouza: Zirat, Union: 12 No. Norendrapur 947-948, Shaheed Suharawardy Road, DIVISION (2) Sirajganj,

P.S.: Jessore Sadar, Dist.: Jessore Southeast bank outlook Mob.: 01709-633282 Mob.: 01766-665142 Mymensingh Branch “Minar Complex”, Holding # 09 Baneshwar Branch (Rural) Dumuria Branch (Rural) Mukti Joddha Sarani (Choto Bazar) Al-Haj Amzad Hossain Market R. R. Plaza, Mouza: Araji Sajiyara Ward # 08, Pauroshava: Mymensing Mouza: Shibpur, Union: Baneshwar Thana: Kotwali Sadar, Dist.: Mymensing Union: 11 No. Dumuria Thana: Puthia, Dist.: Rajshahi Mob.: 01934-448904 P.S.: Dumuria, Dist.: Khulna Mob.: 01766-673596 Mob.: 01705-403796 Off-Shore Banking Unit, DEPZ Pabna Branch Zone Servicing Building-1 Kushtia Branch “Khairul Tower” Room # 77 (3rd Floor), 116, Mawlana Mohammed Ali Road Aneek Tower Dhaka EPZ, Ganakbari, (Narikel Bagan Road), Ward # 3 295, Nowab Sirajuddoula Road Savar, Dhaka, Tel: 7788628-9 (Shibrampur) Pabna Pauroshava, Ward # 03, Pauroshava : Kushtia Thana: Pabna Sadar, Dist.: Pabna Off-Shore Banking Unit, CEPZ P.S.: Kushtia Sadar, Dist.: Kushtia Mob.: 0731-65027, 65032, 65059, 65073 Zone Service Complex (1st Floor) Mob.: 071-71845, 071-71895 Fax: 0731-65089 East Wing North Chittagong EPZ Chittagong, Tel: 031-740780 Chuadanga Branch Ishwardi Branch Fax: 031-740779 “Brothers Tower” “Adib Rana Plaza” 994/930 &1017, Station Road Holding No.: 686-06, Thana Road Ward # 07, Thana: Ishwardi Ward No.: 03, Pourasava: Chuadanga Pauroshava: Ishwardi, Dist.: Pabna P.S.: Chuadanga Sadar, Dist.: Chuadanga Mob.: 01787-678778 Mob.: 01934-448917 238 Southeast Bank Limited I Annual Report 2016

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> DHAKA DIVISION (64) > RAJSHAHI DIVISION (09) > CHITTAGONG DIVISION (30) > RANGPUR DIVISION (02) > SYLHET DIVISION (12) > BARISAL DIVISION (01) > KHULNA DIVISION (08) Southeast Bank Limited I Annual Report 2016 239

Dhaka Division NSU ATM Aganagar Br. ATM North South University Campus ATM P.S.: Keraniganj, Mouza: Subadda, Din Corporate Br. ATM Booth Plot 15, Block-B, Complex, Kodomtoli Circle, Eunoos Trade Centre (Ground Floor), Bashundhara, Dhaka-1229 Keranigonj, Dhaka Plot #52-53, Dilkusha C/A, Dhaka-1000 Narayanganj Br. ATM Pirjongi Mazar ATM Uttara Br. ATM-ATM-1- Sector-1 Holding #44, Mohim Ganguly Road, Pirjongi Shah Mazar, House #1, Road #11, Sector #1, Uttara, Taan Bazar, Narayanganj Motijheel Coloney Jamee Masjid Dhaka-1230 Complex Market, Shop No# 08, Uttara - ATM-2, Sector 14 Pirjongi Shah Mazar, Outer Circular Gulshan Br. ATM Plot No:20, Road No: 12, Road, Paltan Thana, Dhaka City House #82 CES (F) Sector No: 14, Uttara Residential Corporation, Dhaka. 1, Gulshan Avenue Dhaka Model Town, Dhaka-1230 Elephant Road, ATM-2, Hatirpool 02 Dhanmondi Br. ATM ACS Textile ATM Holding No # 149/1, Elephant Road House#23 (New), Road#16 (New)/ ACS Textiles (Bangladesh) Limited, (Presently- Dr. Kudrat -e- Khuda Road), 27(Old), Dhanmondi R/A, Dhaka Tetlabo, Word No: 03, P.O: Parabo, P.S: Thana # Kalabagan, Dhaka 12 Rupgonj, Narayanganj Pragati Sarani Br. ATM Dholaipar ATM Elephant Road-ATM-1 Plot No. GA - 25/5/1, Shahjadpur 169/A/2 Dolaipar, Dhaka-1204 Concord Arcadia Pragoti Sarani, Gulshan, Dist.: Dhaka Concord Arcadia Shopping Mall, Plot Tangail Br. ATM Banani Br. ATM No. 1 & 2, Road No: 04, Dhanmondi Noor Plaza, Holding # 263, 09 Main Road, Tangail-1900 64 Plot #71, Block #B, Kamal Ataturk Residential Area, Dhaka Avenue, Banani, Dhaka Green Road-Comfort Hospital ATM Satmasjid Road Br. ATM ADC Empire Plaza, Holding No# 91, Dhonia Br. ATM 167, Green Road Road No# 12/A, Satmasjid Road, Chowdhury Complex” (1st & 2nd Floor) (Besides Comfort Hospital) Dhanmondi, Dhaka 440-441, Noyapara, Donia, Jatrabari, Bhulta Br. ATM Dhaka - 1236 Bhulta Bus Stand, Union: Golakandail, Boro Mogh Bazar ATM Thana: Rupgonj, Dist.: Narayanganj Shitol Bhaban Mouchak Br. ATM 625, Boro Moghbazar, Red Crescent Karnaphuli Point (1st Floor), 70 New Dokkhinkhan Road, Dhaka City Corporation, Circular Road, Malibagh, Dhaka 01 Faisal Mansion, Shah Kabir Mazar Road, Ramana Thana, Dhaka 30 P.S # Dakshin Khan, Dhaka Madobdi Br. ATM Shahabuddin Medical College ATM Madhabdi Pauroshava, Thana: Joydebpur Shahabuddin Medical College, 08 Narsingdi, Dist: Narsingdi Taj Tower,82, Shibbari more, Plot No-12, Road No-113/A,

Joydebpur, Gazipur Gulshan Model Town, Gulshan-2, Southeast bank outlook Savar Br. ATM Dhaka-1212 Plot # A -109, Bazar Road (1st Floor), New Eskaton ATM-1 Pauroshava & P.S.: Savar, Dhaka Chowdhury Center, 23/Ka, Kapasia Br. ATM New Eskaton Road (1st Floor), Akhter Market, 874, Kapasia Main Road, Rokeya Sarani Br. ATM P.S.: Ramna, Dhaka - 1000 Village: Kapasia, Mouza: Banar Hawla, “Khusholi Bhaban”, Holding # 1, West Union : Kapasia, Kapasia Thana, Kafrul Rokeya Sarani, Ward # 16, Dhaka Shimanto Square ATM District : Dhaka City Corporation, Thana: Sher -e-Bangla Shimanto Square Market, BGB, Dhanmondi-02, Dhaka-1205 Nagar, Mirpur, Dhaka Farr Ceramics ATM “Farr Ceramics”, Basundhara Br. ATM Bakshi Bazar, Bagshal-ATM Noulapara (Bhabaniur), Monipur, Plot#142, Block# B, Bashundhara R/A, Dhaka Medical City Corporation Union: Vaoalergor, Baridhara, Dhaka -1212 Market, Shop No-50, Bakshi Bazar, Dhaka Gazipur Sadar Thana, Gazipur Hemayetpur Br. ATM Hemayetpur Super Market Mohammadpur Br. ATM Hasnabad Br. ATM (2nd Floor), Thana: Savar, Axis Delvista (1st .Floor), Holding Rocky Tower, Subatta, Keranigonj Thana, Dhaka > DHAKA DIVISION (64) > RAJSHAHI DIVISION (09) District: Dhaka No:7/1, Block - A, Aurongajeb Road, Mohmmadpur Housing Estate, Kamrangirchar Br. ATM > CHITTAGONG DIVISION (30) > RANGPUR DIVISION (02) Ashulia Br. ATM Mohammadpur Helim Shopping Complex,(Opposite At the ground floor of Rony Market Bhaban, Holding No. 648-649, > SYLHET DIVISION (12) > BARISAL DIVISION (01) Fantasy Kingdom), Ashulia, Dhaka Principal Br. ATM Holding No: 1, Dilkusha C/A, Dilkusha Rasulpur, Market Road, > KHULNA DIVISION (08) Konabari Br. ATM Road, Annex Building Hotel Purbani Ward No. 56, Plot # A-147/148, BSCIC I/R, International, Ward: 32, Motijheel Dhaka South City Corporation, Union: Konabari, P.S. - Joydebpur, Thana, Dhaka City Corporation, Dhaka Kamrangirchar Thana, Dhaka Dist - Gazipur 240 Southeast Bank Limited I Annual Report 2016

Rupnagar Br. ATM Malibag Br. ATM Potherhat Br. ATM “Rangan”, Plot # 14, Road # 11,Ward # “Fakhr-E-Nur ABN Tower”, Holding # Khaiz Ahmed Shopping Centre” 7, Rupnagar Residential Area,Mirpur 45, Siddeswari Circular Road, Ward No: (1st Floor), Raujan, Housing Estate, Dhaka City 19, Ramna Thana, Dhaka South City Chittagong Corporation,Thana: Mirpur, Dist.: Dhaka Corporation, Dhaka. Jubilee Road Br. ATM MBA Bhaban ATM Joydebpur, ATM-2 Haji Golam Rasul Market, At the ground floor of Administrative “OK Tower”, Holding No: F-214/10, 96 Jubilee Road, Chittagong. Building, Faculty of Business Studies, Hakkani Housing Society, University of Dhaka, Shahabag Rajbari-Jourpukur Road, Ward No: 28, CDA Avenue ATM 1 & 2 Thana, Dhaka South City Corporation, Gazipur City Corporation, Joydebpur Ali Villa, 1640/1861 (New), Dhaka-1000 Thana, District: Gazipur CDA Avenue, Asian Highway, East Nasirabad, Thana - Panchliash, Bhulta-ATM-2 Balla Br. ATM Dist.: Chittagong Panchrukhi Bazar, Araihazar Balla, Mouza :Balla, Union:Balla, MP Tower Building, Panchrukhi Bazar, Thana: Kalihati, District: Tangail Chakaria Br. ATM Araihazar, Mouza Name: Panchrukhi, “Society Jame Mosque Complex”, Union : Panchrukhi, Araihazar Thana, Ghior Br. ATM Chiringa, Chakaria Pauroshova,Thana: District : Narayangonj Ghior, Union: Ghior, Thana: Ghior, Chakaria, Dist.: Cox’s Bazar District: Manikganj Ashulia Bazar Br. ATM Hathazari Br. ATM “Shahid Sonamia Plaza”, Ashulia Bazar, Navana New Bury ATM S. A. Shipping Complex Hathazari Bus Bangobondu Road, Ashulia Union, “Navana Newbury Place”, Road/Holding Stand, Ranganati Road, Plot # 14238, Ashulia Thana, Dhaka No.4/1/A, Area: Subhanbagh, Mirpur Thana: Hathazari, Dist: Chittagong Road, Ward No.17, Kalabagan Thana, Kalibari Br. ATM Basurhat Br. ATM Dhanmondi-1213, Dhaka South City “Sabur Market”, Dhuptara Adarsha Kabirhat Road, Basurhat Bazar , Corporation, Dhaka Bazar, Kalibari, Village: Shapta Bandi Basurhat Pourusava, PS: Companygonj, Bhuyian Para, Mouza: Dhuptara, Union: Dist. Noakhali Latif Bawany Jute Mills ATM Dhuptara Union Parishad, Thana: Latif Bawany Jute Mills Ltd. Araihazar, District: Narayangonj Companyganj Br. ATM Demra, Dhaka. Saudia Manjil (1st & 2nd Floor), Balivhadra Br. ATM Nabinagar Road, Thana: Muradnagar, Wari Br. ATM “Vhandari Latif Super Market”, Village: Dist.: Comilla 4/2 Joykali Mondir, Wari, Dhaka Balivhadra Bazar, Mouza: Ganakbari, Union: Swanirvar Damsona Union Chowdhury Hat Br. ATM Parishad, Thana: Ashulia, District: Dhaka Imamganj Br. ATM S.N. Tower, Dadaram Sharok Road, Bhuiyan Market, 163/2, Chowdhury Hat Bazar Mirpur Br. ATM Metford Road, Dhaka “Simpletree” Plot # 01, Road # 8, Section Chowmuhani Br. ATM # 6, Mirpur, Ward # 6, Dhaka City Agargaon Br. ATM Tara Manjil, Holding No# 72, Feni Road, Corporation, Thana: Pallabi, District: 248-1/G, West Agargaon, Hajipur, PS# Begumgonj, Chowmuhani Dhaka under the supervision of Mirpur Sher-e-Bangla Nagar, Dhaka Pourashava, Noakhali Branch, Dhaka Singair Br. ATM Cox’s Bazar Br. ATM M&M Shopnaloy, Plot# A-12, Kolatoli, Tongi Br. ATM “Singair New Market”, Holding # 02/02, “Kazi Market”, Holding No: 8/B, Anarkoli Kansha Road, Singair Bazar, Singair Main Road, Cox’s Bazar Road, Ward No: 57, Gazipur City Pauroshava, Ward # 04, Corporation, Thana:Tongi, Gazipur. Upazilla/Thana: Singair, Mia Bazar Br. ATM District: Manikganj Hazi Siraj Mansan, Chowddrogram Rajbari Br. ATM Thana, Comilla “Saleh Akkas Tower”, Holding # 237, Chittagong Binodpur (College Road), Ward # 08, Division Haidergonj Br. ATM Rajbari Porusova, Rajbari Sadar Thana, Kazi Super market, Haidergonj Bazar, Dist.-Rajbari. Halishahar Br. ATM Mouza-Char Ababil, Mymensignh Br. ATM House # 03, Block - G, Port Connecting Union-Char Ababil, Raipir, Laxmipur Minar Complex, Holding No: 09, Road, Halishahar Housing Estate, Moktijodda Sarani (Choto Bazar), Ward Halishahar, Chittagong No: 08, Mymensingh Porosuva, Kotwali Fatikchari Br. ATM Mir Jahanara Complex, College Road, Sadar Thana, District: Mymensingh Agrabad Br. ATM Bibirhat, Mouza : North Dhurung, Jahan Building, 59, Agrabad BTI Premier Plaza- ATM Thana: Fatikchari, Chittagong Commercial Area, Chittagong “bti Premier Plaza”, Holding No: Plot: Cha 90/A, Pragoti Sarani, Badda Road, Madambibir Hat Br. ATM Oxygen Moor Br. ATM Dhaka North City Corporation, Gulshan Madambibir Hat Union, Bhatiary, 405, Kulgao, Oxygen More, Biozid Thana, Dhaka.. P.S.: Sitakunda, Dist. :Chittagong Bostami, Chittagong Southeast Bank Limited I Annual Report 2016 241

Shebarhat Br. ATM Khulna Division Bogra, Borogola ATM Jahanara & Sons Market, Mouza: Raja 288/325, 289/326, Jamil Shopping Rampur, Union : 7 No Mohammadpur, Khulna Br. ATM Center, Borogola, Rangpur Road, Bogra Senbagh Thana, Noakhali Haji Hanif Complex (1st floor), 12 & 13, Khan Jahan Ali Road, Khulna. Baneswar Br. ATM Teknaf Br. ATM “Alhaj Amjad Hossain Market”, “Alo Shopping Complex’, Teknaf Sir Iqbal Road Br. ATM Village: Kolahata, Mouza: Shibpur, Pauroshova, Ward No # 03, Thana: 155, Sir Iqbal Road, Khulna Union: Baneswar, Thana: Potia, Teknaf, District: Cox’s Bazar (Thanar Moor) District: Rajshahi Tareque Medical Hospital ATM Satkhira Br. ATM “Tareque Memorial Hospital Complex”, Rajshahi-ATM-2 896, Palash Pole (Ground Floor), Dhaka-Chittagong old Main Road Uposhahar New Market, Rajshahi Shahid Kajal Sarak (Satkhira Bus Stand), (Banshpara), Chhagalniya Thana, Feni Uposhahar New Market, Holding Satkhira Pouroshova, Thana: Satkhira, No: 10, Ward No: 14, Rajshahi City Coral Reef ATM District: Satkhira Corporation, Boalia Thana, Rajshahi “Coral Reef Mannan Plaza”, Main Jessore Br. ATM Road, Bazar Ghata, Cox’s Bazar City Rajshahi-ATM-3 11, R.N. Road, Thana: Kotwali, Corporation, Sadar -Cox’s Bazar Thana, Greater Road, Rajshahi Dist.: Jessore District: Cox’s Bazar. Greater Road, Ward No: 13, Rajshahi Rupdia Br. ATM City Corporation, Boalia Thana, Rajshahi Momin Road Br. ATM Bhoumik Super Market, Rupdia Bazar, “Equity Central”, Holding No: 42-43, Rajshahi-ATM-4 Momin Road, Ward No: 32, Chittagong Vill: Zirat, Union: 14 no Narendropur, Natore Road, Rajshahi City Corporation, Thana: Kotwali, Jessore Rokeya Bhaban, Holding No: 219, Chittagong.. Dumuria Br. ATM Natore Road, Ward No: 22, Rajshahi City Gunabati Br. ATM “R.R. Plaza”, Village: Araji Sajiara, Mouza: Corporation, Boalia Thana, Rajshahi Gunabati Bazar”, Village: Gunabati, Araji Sajiara, Union: 11 No. Dumuria Thana: Choddogram, District: Comilla Union, Thana: Dumuria, District: Khulna. Pabna Br. ATM Khairul Tower, Maowlana Mohammad Kotwali Br. ATM Kahishpur Jute Mills ATM Ali Road (Narikel Bagan Road), Ward “Equity Anitri”, Holding No: 32, Hossain Khalishpur Jute Mills Ltd. No: 03 (Shibrampur), Pabna Porosuva, Shahid Sarwardi Road, Chittagong Khalishpur, Khulna Pabna Sadar Thana, District: Pabna City Corporation, Kotwali Thana, Chittagong. Eastern Jute Mills ATM Iswardi Br. ATM Eastern Jute Mills Ltd. Atra Industrial Holding # 994/930 & 1017, Ishwardi Sylhet Division Area, Khulna. Porosova, Ishwardi Thana, District: Pabna Ragib Rabeya Medical College and Kushtia Br. ATM Hospital ATM Aneek Tower, 295, Nowab Sirajuddoula Southeast bank outlook Jalalabad Ragib-Rabeya Medical Road Ward # 03, Pauroshava : Kushtia Rangpur Division College and Hospital, Road: P.S.: Kushtia Sadar, Dist.: Kushtia Sunamgonj, Pathantula, Sylhet -3100 Dinajpur Br. ATM Chuadanga Br. ATM Holding # 880/837, Ganesh Tola Jail Shahjalal Uposhar “Brothers Tower”, Holding # 0686-06, Road, Dinajpur Municipal Corporation, Block# D, Main Road, Shahjalal Thana Road, Chuadanga Pauroshava, Ward # 3, Thana: Dinajpur Sadar, Uposhahar, Sylhet Ward # 03, Thana: Chuadanga Sadar, Dist: Dinajpur District: Chuadanga Moulvibazar Br. ATM Rangpur Jarip Tower, 199/2, Road No: 59, Rajshahi Division Shah Murad Complex, RK Road, Central Road (Saifur Rahman Road), Medical Moor, Rangpur Thana : Moulvibazar, Moulvibazar Chapainawabgonj Br. ATM Boro Indara More, Chapainawabganj VIP Tower ATM Barisal Division VIP Tower, Plot No: 3714, VIP Road Bogra ATM-1 Sylhet, Sylhet City Corporation, Kotwali Mofiz Paglar Moor, Bogra Nazirerpool ATM Than, Sylhet Holding No: 1367-000, Birsreshta Naogaon Br. ATM Captain Mohiuddin Jahangir Sarok Kazirtula ATM Shahid Matiul Isalm Poura Market, (Nazirerpool), Ward No: 19, Barisal City Mujibur Rahman Complex, Holding No: Naogaon Pourashava, Thana: Naogaon Corporation, Kotwali Thana, Barisal 1469, 1470, 1471, 1472, Kazirtula Main sadar, Dist.: Naogaon Road, Kotwali Than, Sylhet Sadar Road ATM Kulaura Br. ATM Rajshahi ATM-1, Laxmipur Holding No: 241, Sadar Road (Opposite Aziz Rowshon Shopping Center & Holding No: 634, Sher-Sha Road, of Barisal Zila School), Ward No: 10, Garden City, Kulaura Pourashava, Laxmipur, Rajshahi Barisal City Corporation, Kulaura Thana, District: Moulvibazar Kotwali Thana, Barisal. 242 Southeast Bank Limited I Annual Report 2016

Memories of 21st AGM Southeast Bank Limited I Annual Report 2016 243 Southeast bank outlook 244 Southeast Bank Limited I Annual Report 2016

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ALGERIA CITIBANK N.A. ALGERIA HSBC BANK ARGENTINA SA ARGENTINA BANK OF TOKYO-MITSUBISHI LTD. BNP PARIBAS SUCURSHL BANK OF CHINA LIMITED, SYDNEY BNP PARIBAS AUSTRAILA BANK OF AMERICA, N.A. SYDNEY CITIBANK N.A. HSBC BANK AUSTRALIA LIMITED AUSTRALIA JPMORGAN CHASE BANK, N.A. MIZUHO CORPORATE BANK, LTD. SYDNEY BRANCH NATIONAL AUSTRALIA BANK LIMITED SUMITOMO MITSUI BANKING CORPORATION SYDNEY BRANCH SUNCORP-METWAY LIMITED BANK AUSTRIA AG CREDITANSTALT BANK AUSTRIA AG COMMERZBANK AG, NIEDERLASSUNG WIEN WIEN AUSTRIA CITIBANK INTERNATIONAL PLC - AUSTRIA BRANCH CREDIT AANSTALT AG RAIFFEISENLANDESBANK NIEDEROESTERREICH-WIEN AG ALUBAF ARAB INTERNATIONAL BANK B.S.C. (C) ARAB INVESTMENT COMPANY, THE BMI BANK BSC (C) BNP PARIBAS MANAMA, FULL COMMERCIAL BRANCH (FCB) BAHRAIN CITIBANK N.A. HSBC BANK MIDDLE EAST ICICI BANK LTD UNITED BANK LIMITED WOORI BANK, MANAMA BANGLADESH BANK AB BANK LIMITED AGRANI BANK LIMITED AL-ARAFAH ISLAMI BANK LTD BANGLADESH COMMERCE BANK LTD. BANGLADESH DEVELOPMENT BANK LIMITED (BDBL) BANGLADESH KRISHI BANK BANK ASIA LTD BASIC BANK LIMITED BRAC BANK LIMITED CITIBANK N.A. BANGLADESH CITY BANK LIMITED THE COMMERCIAL BANK OF CEYLON DHAKA BANK LIMITED DUTCH-BANGLA BANK LTD EASTERN BANK LTD. EXPORT IMPORT BANK OF BANGLADESH LTD FIRST SECURITY ISLAMI BANK LIMITED THE FARMERS BANK LIMITED HABIB BANK LTD. HONGKONG AND SHANGHAI BANKING CORPORATION LTD, THE ICB ISLAMIC BANK LIMITED Southeast Bank Limited I Annual Report 2016 245

IFIC BANK LIMITED. ISLAMI BANK BANGLADESH LTD JAMUNA BANK LIMITED JANATA BANK LIMITED MEGHNA BANK LIMITED. MERCANTILE BANK LIMITED MIDLAND BANK LIMITED MODHUMOTI BANK LIMITED. MUTUAL TRUST BANK LIMITED NATIONAL BANK LIMITED NATIONAL CREDIT AND COMMERCE BANK LIMITED NATIONAL BANK OF PAKISTAN NRB COMMERCIAL BANK LIMITED NRB BANK LIMITED NRB GLOBAL BANK LIMITED BANGLADESH ONE BANK LIMITED. PRIME BANK LIMITED. PRIMIER BANK LIMITED. PUBALI BANK LIMITED. SOUTH BANGLA AGRICULTURE AND COMMERCE BANK LTD. SHAHJALAL BANK LIMITED. SONALI BANK LIMITED SOCIAL ISLAMI BANK LTD. STANDARD BANK LIMITED. STANDARD CHARTERED BANK STATE BANK OF INDIA TRUST BANK LIMITED. UNITED COMMERCIAL BANK LTD. UNION BANK LIMITED UTTARA BANK LIMITED. WOORI BANK, DHAKA BANK OF TOKYO-MITSUBISHI LTD. BNP PARIBAS S.A. CBC BANQUE S.A. COMMERZBANK AG Southeast bank outlook DEXIA BANK SA FORTIS BANQUE S.A/NV BELGIUM FORTIS BANQUE S.A/NV (HEAD OFFICE) ING BELGIUM NV/SA KBC BANK NV KBC BANK NV SUMITOMO MITSUI BANKING CORPORATION SYDNEY BRANCH UNION BANK OF INDIA KBC BANK NV BHUTAN BANK OF BHUTAN HSBC BANK BRASIL S.A. - BANCO MULTIPLO BANCO VOTORANTIM S.A. BRAZIL BANCO SANTANDER (BRASIL) S.A. HSBC BANK BRASIL S.A. - BANCO MULTIPLO DEUTSCHE BANK S.A. - BANCO ALEMAO CITIBANK EUROPE PLC, ORGANIZACNI SLOZKA CZECH REPUBLIC CESKOSLOVENSKA OBCHODNI BANKA, A.S. UNICREDIT BANK CZECH REPUBLIC,A.S. BANK OF NOVA SCOTIA BANQUE NATIONALE DU CANADA BNP PARIBAS CANADA, MONTREAL CANADA BNPPARIBAS CANADA BANK OF MONTREAL, THE HABIB CANADIAN BANK 246 Southeast Bank Limited I Annual Report 2016

HSBC BANK CANADA ICICI BANK CANADA INTESABCI S.P.A STATE BANK OF INDIA TORONTO-DOMINION BANK CAMBODIA SHINHAN KHMER BANK CHILE SCOTI SUD AMERICANO ANSHAN CITY COMMERCIAL BANK AXIS BANK LIMITED SHANGHAI BRANCH BANK OF CHINA BANK OF COMMUNICATIONS BANK OF DALIAN BANK OF HEBEI (FORMERLY SHIJIAZHUANG CITY COMMERCIAL BANK) BANK OF JIANGSU CO LTD BANK OF NOVA SCOTIA BANK OF TOKYO-MITSUBISHI LTD. BANK OF TOKYO-MITSUBISHI LTD. BANK OF JINHUA (FORMERLY JINHUA CITY COMMERCIAL BANK) BANK OF TIANJIN CO., LTD. BANK OF HUZHOU CO.,LTD BNP PARIBAS (SUISSE) SA BSI SA CHINA DEVELOPMENT BANK CHINA MERCHANTS BANK CHINA CITIC BANK CHINA EVERBRIGHT BANK LTD CITIBANK N.A. CITIBANK N.A. CHINA HANGZHOU UNITED RURAL COMMERCIAL BANK CO.LTD HSBC BANK,THE HUA XIA BANK JANGSU JIANGNAN RURAL COMMERCIAL BANK CO. LTD. INDUSTRIAL AND COMMERCIAL BANK OF CHINA ICICI BANK, CHINA ING BELGIUM NV/SA, BRUSSELS, GENEVA BRANCH (FORMERLY BBL BRUXELLES, SUCCURSALE DE GENEVE) INTESABCI S.P.A IANGSU JIANGNAN RURAL COMMERCIAL BANK CO.,LTD.(FORMALY JIANGSU WUJIN RURAL BANK) JPMORGAN CHASE BANK (CHINA) COMPANY LIMITED JPMORGAN CHASE BANK (CHINA) COMPANY LIMITED JPMORGAN CHASE BANK (CHINA) COMPANY LIMITED KBC BANK NV LINSHANG BANK CO. LTD (FORMERLY LINYI CITY COMMERCIAL BANK CO., LTD) MIZUHO CORPORATE BANK (CHINA),LTD. MIZUHO CORPORATE BANK LTD NINGBO YUYAO RURAL COOPERATIVE BANK POSTAL SAVINGS BANK OF CHINA STANDARD CHARTERED BANK, CHINA SWEDBANK AB YANTAI BANK CO., LTD. ZHEJIANG NANXUN RURUAL COOPERATIVE BANK STANDARD CHARTERED BANK SUMITOMO MITSUI BANKING CO. THE BANK OF NEW YORK MELLON, SHANGHAI BRANCH WOORI BANK (CHINA) LIMITED CHINA YINZHOU BANK WELLS FARGO BANK, NA, SHANGHAI BRANCH (FORMERLY KNOWN AS WACHOVIA) BANK OF CHINA BANK OF CHINA ICICI BANK LIMITED Southeast Bank Limited I Annual Report 2016 247

ZHEJIANG ZHUJI RURAL COMMERCIAL BANK COMPANY LIMITED ZHEJIANG SHAOXING COUNTY RURAL COOPERATIVE BANK JIANGSU WUJIANG RURAL COMMERCIAL BANK WOORI BANK SHANGHAI BRANCH (RETAINED BRANCH) NORDEA BANK FINLAND PLC CAYMAN ISLANDS HSBC BANK BRASIL S.A. - BANCO MULTIPLO (GRAND CAYMAN BRANCH) SVENSKA HANDELSBANKEN DANSKE BANK FINLAND POHJOLA PANKKI OYJ (POHJOLA BANK PLC) PART OF DANSKE BANK GROUP) DANSKE BANK A/S NORDEA BANK DENMARK A/S DENMARK NORDEA BANK SYDBANK A/S UNIBANK A/S CREDIT AGRICOLE EGYPT EGYPT CITIBANK CAIRO MASHREQ BANK INTESA SANPAOLO SPA BANCO DE SABADELL S.A BANK OF TOKYO-MITSUBISHI LTD. BNP-PARIBUS SA BANQUE PALATINE COMMERZBANK AG FRANCE CREDIT AGRICOLE INDOSUEZ. CREDIT AGRICOLE SA HSBC FRANCE (FORMERLY HSBC CCF) KBC BANK NV PARIS MIZUHO CORPORATE BANK LTD SUMITOMO MITSUI BANKING CO. UNION DE BANQUES ARABES.ET KBC BANK DEUTSCHLAND AG AKBANK AG BANK OF TOKYO-MITSUBISHI LTD. LANDESBANK BADEN-WUERTTEMBERG Southeast bank outlook BANK OF TOKYO-MITSUBISHI LTD. GERMANY BAYERISCHE HYPO-UND VEREINS BANK BNP PARIBAS DEUTCHLAND JPMORGAN CHASE BANK, N.A CITIBANK N.A. COMMERZBANK AG COMMERZBANK AG COMMERZBANK AG COMMERZBANK AG DANSKE BANK DEUTSCHE BANK AG DEUTSCHE BANK AG DEUTSCHE BANK PRIVAT-UND GESCHAEFTSKUNDEN AG DRESDNER BANK AG FORTIS BANK, NIEDERLASSUNG DEUTSCHLAND GERMANY HSBC TRINKAUS UND BURKHARTD HSBC TRINKAUS UND BURKHARDT AG HSH NORDBANK AG (MERGER OF HAMBURGISCHE LANDESBANK AND LANDESBANK SCHLESWIG- HOLSTEIN) ING BHF-BANK AKTIENGESELLS ING BHF-BANK AKTIENGESELLS CHAFT ING BHF-BANK AKTIENGESELLS CHAFT INTESABCI S.P.A J.P.MORGAN CHASE BANK 248 Southeast Bank Limited I Annual Report 2016

JPMORGAN CHASE BANK, N.A., FRANKFURT BRANCH KBC BANK NV NIEDERLASSUNG DEUTSCHLAND MAINZER VOLKSBANK E.G. MIZUHO CORPORATE BANK, LTD., DUESSELDORF BRANCH NASSAUISCHE SPARKASSE NORDEA BANK FINLAND PLC NIEDERLASSUNG DEUTSCHLAND SEB AG SHINHAN BANK EUROPE GMBH SPARKASSE KOELNBONN (FORMER STADTSPARKASSE KOELN) GERMANY SPARKASSE KREFELD STADT-UND KREISSPARKASSE LEIPZIG SUMITOMO MITSUI BANKING CORPORATION SPARKASSE HERFORD, COMMERCIAL AND SAVINGS BANK STANDARD CHARTERED BANK SYDBANK A/S VEREINS-UND WESTBANK WGZ BANK AG WESTDEUTSCHE GENOSSENSCHAFTS-ZENTRALBANK KREISSPARKASSE STEINFURT WESTFALENBANK AG GREECE EGNATIA BANK S.A . GUYANA HSBC BANK BRASIL S.A. - BANCO MULTIPLO (GRAND CAYMAN BRANCH) AXIS BANK LIMITED AB INTERNATIONAL FINANCE LTD BANCO SANTANDER, S.A. HONG KONG BRANCH BANK OF AMERICA, N.A. HONG KONG BANK OF NOVA SCOTIA BANK OF TOKYO-MITSUBISHI LTD. BANK OF TOKYO-MITSUBISHI UFJ, LTD., THE BANCA MONTE DEI PASCHI DI SIENA SPA - BANCO BILBAO VIZCAYA ARGENTARIA, S.A., HONG KONG BRANCH BANK ONE, N.A. BNP PARIBAS CITIBANK (HONG KONG) LIMITED CITIBANK N.A. COMMERZBANK AG DBS BANK (HONG KONG) LIMITED DEUTSCHE BANK AG EBL FINANCE (HK) LIMITED HANG SENG BANK LIMITED HONG KONG HBZ FINANCE LTD. HSBC, HONG KONG ICICI BANK LTD INTESA SANPAOLO SPA HONG KONG INDUSTRIAL AND COMMERCIAL BANK OF CHINA INDUSTRIAL BANK OF KOREA, HONG KONG BRANCH JPMORGAN CHASE BANK, N.A., HONG KONG BR. KBC BANK NV, HONG KONG MASHREQ ASIA LTD. MIZUHO CORPORATE BANK LTD NATIXIS (FORMERLY NATEXIS BANQUES POPULAIRES) SHINHAN ASIA LTD. SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) HONG KONG BRANCH STATE BANK OF INDIA STANDARD CHARTERED BANK SUMITOMO MITSUBI BANKING CO. THE BANK OF NEW YORK MELLON, HONG KONG BRANCH UBAF UNION BANK OF ARABIES UNICREDIT BANK AG HONG KONG BRANCH (HYPOVEREINS BANK HONG KONG BRANCH) Southeast Bank Limited I Annual Report 2016 249

UNICREDIT BANK AG HONG KONG BRANCH (HYPOVEREINS BANK HONG KONG BRANCH) WELLS FARGO BANK, N.A. WOORI BANK, HONG KONG UNICREDIT BANK HUNGARY ZRT. HUNGARY CITIBANK EUROPE PLC HUNGARIAN BRANCH AXIS BANK LIMITED ARAB BANGLADESH BANK BANK OF AMERICA, N.A. MUMBAI BANK OF NOVA SCOTIA, THE BANK OF TOKYO-MITSUBISHI LTD. BANK OF TOKYO-MITSUBISHI LTD. CITIBANK N.A. DEUTSCHE BANK AG HDFC BANK LIMITED HSBC BANK,THE ICICI BANK LIMITED INDIA INDUSTRIAL BANK OF INDIA JPMORGAN CHASE BANK MASHREQ BANK MIZUHO CORPORATE BANK LTD PUNJAB NATIONAL BANK SHINHAN ASIA LTD. SONALI BANK STANDARD CHARTERED BANK SUMITOMO MITSUI BANKING C0. UNION BANK OF INDIA UNITED BANK OF INDIA UTI BANK LTD BANK BNP PARIBAS INDONESIA ANZ PANIN BANK, P.T. BANK DBS INDONESIA, PT BANK MEGA PT BANK NEGARA INDONESIA - PT (PERSERO) BANK OF NEGEAR BANK OF TOKYO-MITSUBISHI LTD. INDONESIA Southeast bank outlook BANK RAKYAT INDONESIA CITIBANK, N.A. JPMORGAN CHASE BANK, N.A HSBC BANK,THE PT BANK OCBC NISP TBK STANDARD CHARTERED BANK WOORI BANK, INDONESIA P.T. JAKARTA BANK SADERAT IRAN IRAN BANK MELLI IRAN ABN AMRO BANK NV CITIBANK N.A. IRELAND WELLS FARGO BANK INTERNATIONAL NATIONAL IRISH BANK (PART OF DANSKE BANK GROUP) UGF BANCA SPA BANCA ANTONVENETA SPA BANCA CARIM-CASSA DI RISPARMIO DI RIMINI SPA BANCA CARIPE SPA (BANCO POPOLARE GROUP) BANCA COMM.ITALIANA ITALY BANCA DELLE MARCHE SPA BANCA DI CIVIDALE S.P.A. BANCA DI TRENTO E BOLZANO S.P.A. BANCA MONTE DEI PASCHI DI SIENA S.P.A. BANCA POPOLARE DI SONDRIO BANCA NAZIONALE DEL LAVORO S.P.A. 250 Southeast Bank Limited I Annual Report 2016

BANCA NUOVA SPA BANCA POPOLARE DE VERONA BANCA POPOLARE DELL'EMILIA ROMAGNA BANCA POPOLARE DI CREMA S.P.A. (BANCO POPOLARE GROUP) BANCA POPOLARE DI CREMONA SPA (BANCO POPOLARE GROUP) BANCA POPOLARE DI INTRA BANCA POPOLARE DI LODI SPA (BANCO POPOLARE GROUP) BANCA POPOLARE DI VICENZA SCPARL BANCA POPOLARE FRIULADRIA SPA BANCA POPOLARE DI NOVARA SPA (BANCO POPOLARE GROUP) BANCO DI NAPOLI SPA BANCO POPOLARE SOC. COOP. BANK OF TOKYO-MITSUBISHI LTD. BANCA UBAE SPA BANCA POPOLARE VALCONCA CASSA DEI RISPARMI DI FORLI' E DELLA ROMAGNA SPA CASSA DI RISPARMIO DEL FRIULI VENEZIA GIULIA SPA CASSA DI RISPARMIO DEL VENETO S.P.A. CASSA DI RISPARMIO DI CESENA S.P.A. CASSA DI RISPARMIO DI FIRENZE S.P.A. CASSA DI RISPARMIO DI LUCCA PISA LIVORNO SPA (BANCO POPOLARE GROUP) CASSA DI RISPARMIO IN BOLOGNA SPA - CARISBO SPA CASSA DI RISPPARMIO DI PADOVA E ROVIGO SPA COMMERZBANK AG CREDITO BERGAMASCO S.P.A. (BANCO POPOLARE GROUP) CREDITO DI ROMAGNA SPA CREDITO ITALIANO SPA CREDITO VALTELLINESE BANK EFIBANCA S.P.A. (BANCO POPOLARE GROUP) INTESA SANPAOLO SPA (FORMERLY BANCA INTESA SPA) INTESA SANPAOLO SPA (FORMERLY BANCA INTESA SPA) HSBC BANK PLC MIZUHO CORPORATE BANK, LTD. MILAN BRANCH UBI BANCA (UNIONE DI BANCHE ITALIANE) S.C.P.A. UNICREDIT BANCA DI ROMA S.P.A. UNICREDIT BANK AG (HYPOVEREINSBANK) VENETO BANCA HOLDING S.C.P.A. UNICREDIT S.P.A. BANK OF NOVA SCOTIA ASAHI BANK LTD,(FORMERLY--BANK,LTD) BANK OF TOKYO-MITSUBISHI LTD. BNP PARIBAS S.A-TOKYO CHIBA KOGYO BANK,LTD. CITIBANK N.A. COMMERZBANK AG DEUTSCHE BANK AG HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED,THE JAPAN INTESABCI S.P.A MIZUHO CORPORATE BANK LTD OKAZAKI SHINKIN BANK, THE RESONA BANK, LTD HOKURIKU BANK, LTD.,THE SHINHAN ASIA LTD. STANDARD CHARTERED BANK SUMITOMO MITSUI BANKING CO. SUMITOMO MITSUI BANKING CO. UBAF UNION BANQUE ARABIES Southeast Bank Limited I Annual Report 2016 251

WELL FARGO BANK WOORI BANK, TOKYO JORDAN JORDAN INVESTMENT & FINAN.BK. DUBAI BANK KENYA LTD KENYA CITIBANK N.A. NAIROBI BANK OF NOVA SCOTIA BANK OF TOKYO-MITSUBISHI LTD. BANK SUMITOMO BANKING CO. BNP PARIBAS CITIBANK KOREA INC DAEGU BANK LTD,THE HSBC BANK,THE INDUSTRIAL BANK OF KOREA JPMORGAN CHASE BANK, N.A KOOKMIN BANK KOREA KOREA DEVELOPMENT BANK, THE KOREA EXCHANGE BANK MIZUHO CORPORATE BANK LTD NATIONAL BANK OF PAKISTAN, SEOUL BRANCH KOREA SHINHAN BANK STANDARD CHARTERED BANK SUHYUP BANK (FORMERLY NATIONAL FEDERATION OF FISHERIES COOPERATIVES) SUMITOMO MITSUI BANKING CORPORATION UBAF UNION BANQUE ARABIES WELL FARGO BANK WOORI BANK NATIONAL BANK OF KUWAIT KUWAIT BNP PARIBAS KUWAIT CITIBANK N.A. CITIBANK BEIRUT LEBANON BANK OF BEIRUT S.A.L. NORDEA BANK S.A. LUXEMBOURG BANQUE DE COMMERCE ET DE PLACEMENTS S.A. SUCCURSALE DE LUXEMBOURG HSBC TRINKAUS UND BURKHARDT (INTERNATIONAL) SA DANSKE BANK INTERNATIONAL S.A. Southeast bank outlook COMMERZBANK AG LATVIA NORDEA BANK FINLAND PLC LATVIA BRANCH LITHUANIA NORDEA BANK FINLAND PLC LITHUANIA BRANCH Liechtenstein LGT BANK AG MEXICO HSBC MEXICO, S.A. INSTITUCION DE BANCA MULTIPLE, GRUPO FINANCIER HSBC FIMBANK PLC MALTA AKBANK T.A.S. (MALTA BRANCH) MACAU HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, THE STANDARD CHARTERED BANK CITIBANK MAGHREB MOROCCO ATTIJARIWAFA BANK (FORMERLY BANQUE COMMERCIALE DU MAROC) MAURITIUS MAURITIUS COMMERCIAL BANK LTD., THE BANK OF NOVA SCOTIA BANK MUAMALAT MALAYSIA BERHAD BANK MUAMALAT MALAYSIA BERHAD (6175-W) CITIBANK BERHAD HSBC BANK MALAYSIA BERHAD,MY MALAYSIA AM BANK (M) BERHAD JPMORGAN CHASE BANK, N.A MALAYAN BANKING BERHAD RHB BANK BERHAD STANDARD CHARTERED BANK MIZUHO CORPORATE BANK, LTD., LABUAN BRANCH 252 Southeast Bank Limited I Annual Report 2016

ABN AMRO BANK N.V. (FORMELY KNOWN AS FORTIS BANK (NEDERLAND) N.V.) ABN AMRO BANK N.V. ABN AMRO BANK N.V. AKBANK NV COMMERZBANK AG NETHERLAND DEUTSCHE BANK A.G. AMSTERDAM HOLLANDSCHE BANK-UNIE N.V ING BANK N.V. KOREA EXCHANGE BANK, AMSTERDAM BRANCH YAPI KREDI BANK NEDERLAND N.V. NEPAL NEPAL BANGLADESH BANK LIMITED BANK OF NEWZEALAND CITIBANK NA NEW ZEALAND BRANCH NEW ZEALAND HSBC(HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, THE) NATIONAL NOMINEES LIMITED DEN NORSKE BANK FOKUS BANK, PART OF DANSKE BANK GROUP NORWAY NORDEA BANK FINLAND PLC NORDEA BANK NORGE ASA UNION BANK OF NORWAY BANK SOHAR OMAN BANKMUSCAT SAOG ASKARIBANK LIMITED BANKISLAMI PAKISTAN LIMITED BANK AL HABIB LIMITED. CITIBANK N.A. HABIB METROPOLITAN BANK LIMITED HSBC BANK MIDDLE EAST LIMITED PAKISTAN MASHREQ BANK NIB BANK LIMITED ASKARIBANK LIMITED PRIME COMMERCIAL BANK LTD SONERI BANK LIMITED UNITED BANK LIMITED. STANDARD CHARTERED BANK KOREA EXCHANGE BANK PANAMA POWSZECHNA KASA OSZCZEDNOSCI BANK POLSKI SA ASIAN DEVELOPMENT BANK MIZUHO CORPORATE BANK, LTD., MANILA BRANCH HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, THE PHILLIPINES CITIBANK,N.A., MANILA BRANCH NORDEA BANK POLSKA S.A. KOREA EXCHANGE BANK BANK OF TOKYO-MITSUBISHI LTD. BANCO ESPIRITO SANTO S.A. PORTUGAL BANCO ESPIRITO SANTO S.A. CITIBANK INTERNATIONAL PLC BANK HANDLOWYW WARSZAWIE SA BANK POLSKA KASA OPIEKI SA - BANK PEKAO SA POLAND DANSKE BANK A/S S.A. ODZIAL W POLSCE BNP PARIBAS S.A. BRANCH IN POLAND MASHREQ BANK COMMERCIAL BANK OF QATAR, LTD. QATAR NATIONAL BANK QATAR STANDARD CHARTERED BANK UNITED BANK LIMITED, DOHA HSBC BANK MIDDLE EAST LIMITED Southeast Bank Limited I Annual Report 2016 253

UNICREDIT TIRIAC BANK SA ROMANIA PIRAEUS BANK ROMANIA UNICREDIT BANK SRBIJA A.D. BANK FOR FOREIGN TRADE COMMERZBANK AG ZAO CITIBANK, MOSCOW RUSSIA UNICREDIT BANK ZAO WOORI BANK MOSCOW UNICREDIT BANK ZAO MOSCOW BUSINESS WORLD BANK SENEGAL CITIBANK N.A. SAUDI BRITISH BANK AL RAJHI BANK BANK AL BILAD BANQUE SAUDI FRANSI SAUDI ARABIA BNP PARIBAS SAUDI ARABIA EMIRATES NBD BANK PSC NATIONAL COMMERCIAL BANK, THE SAUDI HOLLANDI BANK AXIS BANK LIMITED ABN AMRO BANK N.V., SINGAPORE BANK OF AMERICA, N.A. SINGAPORE BANK OF NOVA SCOTIA BANK OF TOKYO-MITSUBISHI LTD. BNP PARIBAS - SINGAPORE BRANCH CITIBANK N.A. COMMERZBANK AG CREDIT LYONNAIS DBS BANK LTD. DEUTSCHE BANK AG EMIRATES NBD BANK PSC HABIB BANK LIMITED HSBC BANK,THE ICICI BANK LIMITED INDIAN OVERSEAS BANK Southeast bank outlook INDIAN BANK SINGAPORE INTESA SANPAOLO S.P.A. (FORMER SANPAOLO IMI), SINGAPORE BRANCH, SINGAPORE JPMORGAN CHASE BANK, N.A. KBC BANK NV KOREA EXCHANGE BANK, SINGAPORE BRANCH MIZUHO CORPORATE BANK LTD MALAYAN BANKING BERHAD NATIONAL BANK OF KUWAIT S.A.K., THE NORDEA BANK FINLAND PLC, SINGAPORE NATIXIS BANK SHINHAN BANK SKANDINAVISKA ENSKILDA BANKEN AB (PUBL) STANDARD CHARTERED BANK STATE BANK OF INDIA SUMITOMO MITSUI BANKING CO. UCO BANK UBAF UNION BANQUE ARABIES UNICREDIT BANK AG SINGAPORE BRANCH (HYPOVEREINSBANK AG SINGAPORE BRANCH) WOORI BANK, SINGAPORE CESKOSLOVENSKA OBCHODNA BANKA, A.S. SLOVAKIA CITIBANK EUROPE PLC, POBOCKA ZAHRANICNEJ BANKY SLOVENIA UNICREDIT BANKA SLOVENIJA D.D. FIRSTRAND BANK LTD SOUTH AFRICA CITIBANK SOUTH AFRICA 254 Southeast Bank Limited I Annual Report 2016

BANCO ATLANTICO S.A ARESBANK, S.A. BANCO PASTOR S.A. BANKIA S.A. BANCO POPULAR ESPANOL, S.A. CATALUNYA BANC, S.A. (CATALUNYACAIXA) CAJAMAR CAJA RURAL, SOCIEDAD COOPERATIVA DE CREDITO SVENSKA HANDELSBANKEN CAIXA D'ESTALVIS I PENSIONS DE BARCELONA (LA CAIXA)-CAJA DE AHORROS Y PENSIONES DE BARCELONA CAJA MEDITERRANEO BANCO BILBAO VIZCAYA(ARG)S.A SPAIN BANCO DE SABADELL S.A BANCO SANTANDER S.A. BANK OF TOKYO-MITSUBISHI LTD. BNP PARIBAS SUCURSHL ENESPANA BANCO ESPANOL DE CREDITO SVENSKA HANDELSBANKEN CAJA DE AHORROS DE VALENC SKANDINAVISKA ENSKILDA BANKEN KBC BANK N.V. CAJA DE AHORROS DE VALENCIA, CASTELLON Y ALICANTE (BANCAJA) COMMERZBANK AG CITIBANK N.A. SRI LANKA COMMERCIAL BANK OF CEYLON PLC SRILANKA ICICI BANK LTD STANDARD CHARTERED BANK MASHREQ BANK DANSKE BANK DEN NORSKE BANK NORDEA BANK SWEDEN AB SWEDEN SKANDINAVISKA ENSKILDA BANKEN NORDEA BANK AB (PUBL) SVENSKA HADELSBANKEN SWEDBANK BANQUE CANTONALE VAUDOISE BANQUE DE COMMERCE ET DE PLACEMENTS S.A. BANCA POPOLARE DI SONDRIO (SUISSE) BANQUE CANTONALE DE GENEVE BHF BANK (SCHWEIZ) AG BANCA ALETTI E C. (SUISSE) SA (BANCO POPOLARE GROUP) COMMERZBANK AG CREDIT AGRICOLE (SUISSE)SA CREDIT SUISSE AG SWITZERLAND CREDIT EUROPE BANK ATLANTIC FORFAITIERUNGS AG HABIB BANK AG ZURICH NORDEA BANK S.A., LUXEMBURG, ZWEIGNIEDERLASSUNG, ZUERICH. RAIFFEISENBANK A.S. UNITED BANK AG ZURICH ZUERCHER KANTONALBANK UBS AG UBS AG (HEAD OFFICE, AD UNION BANCAIRE PRIVEE, GENEVA BANK OF AMERICA, N.A. TAIPEI BANK OF NOVA SCOTIA BANK OF TOKYO-MITSUBISHI LTD. TAIWAN CITIBANK N.A. CITIBANK TAIWAN LIMITED DBS BANK (TAIWAN) LTD Southeast Bank Limited I Annual Report 2016 255

HSBC BANK,THE HUA NAN COMMERCIAL BANK, LTD. JPMORGAN CHASE BANK, N.A. KBC BANK NV KBC BANK NV KRUNG THAI BANK PUBLIC COMPANY LIMITED LAND BANK OF TAIWAN MIZUHO CORPORATE BANK LTD MEGA INTERNATIONAL COMMERCIAL BANK CO., LTD. STANDARD CHARTERED BANK SUMITOMO MITSUI BANKING CO. SHANGHAI COMMERCIAL AND SAVINGS BANK, LTD., THE THE BANK OF NEW YORK MELLON, TAIPEI BRANCH TAISHIN INTERNATIONAL BANK THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD. WELL FARGO BANK BANK OF TOKYO-MITSUBISHI LTD. MIZUHO CORPORATE BANK, LTD., (FORMERLY THE DAI-ICHI KANGYO BANK, LTD., BANGKOK BRANCH) CITIBANK N.A. EXPORT-IMPORT BANK-IMPO HSBC BANK,THE ISLAMIC BANK OF THAILAND THILAND CITIBANK N.A. MIZUHO BANK, LTD., BANGKOK BRANCH SUMITOMO MITSUI BANKING CO. THANACHART BANK PUBLIC COMPANY LIMITED KASIKORNBANK PUBLIC COMPANY LIMITED TMB BANK PUBLIC COMPANY LIMITED STANDARD CHARTERED BANK TANZANIA CITIBANK TANZANIA LTD TUNISIA BANQUE TUNISO-LIBYENNE TEKSTIL BANKASI A.S. AKBANK T.A.S. AKTIF YATIRIM BANKASI A.S. CITIBANK N.A. Southeast bank outlook TURKEY ODEABANK A.S. ICBC TURKEY BANK A.S. (FORMERLY TEKSTIL BANKASI A.S.) TURKIYE HALK BANKASI A.S. (HEAD OFFICE) TURKIYE CUMHURIYETI ZIRAAT BANKASI A.S. TURK EKONOMI BANKASI A.S. AXIS BANK LIMITED, DIFC BRANCH (REGULATED BY DFSA) ABU DHABI COMMERCIAL BANK BANK OF TOKYO-MITSUBISHI UFJ, LTD., BNP PARIBAS, ABU DHABI BNP PARIBAS, DUBAI CITIBANK N.A. COMMERCIAL BANK OF DUBAI DUBAI ISLAMIC BANK EMIRATES NBD BANK PSC UAE CREDIT EUROPE BANK (DUBAI) LTD HABIB BANK AG ZURICH HSBC BANK MIDDLE EAST MASHREQ BANK PSC NOOR ISLAMIC BANK NATIONAL BANK OF UMM AL QAIWAIN PSC. SMBC DUBAI UNION NATIONAL BANK UAE EXCHANGE CENTER UNITED BANK LTD. 256 Southeast Bank Limited I Annual Report 2016

STANDARD CHARTERED BANK NATIONAL BANK OF FUJAIRAH ABN AMRO BANK NV AKBANK NV LONDON BRANCH BANCA MONTE DEI PASCHI DI SIENA SPA - LONDON BRANCH BANK MANDIRI (EUROPE) LIMITED BANK MANDIRI (EUROPE) LTD. BANK NEGARA INDONESIA (PERSERO) P.T., LONDON BRANCH BANK OF AMERICA, N.A. LONDON BANK OF NOVA SCOTIA BANK OF NOVA SCOTIA BANK OF TOKYO-MITSUBISHI LTD. BANCO POPOLARE BNP PARIBAS FINANCE PLC BRITISH ARAB COMMERCIAL BANK PLC CITIBANK N.A. COMMERZBANK AG CREDIT AGRICOLE S.A. LONDON BRANCH DANSKE BANK FORTIS BANK SA/NV GULF INTERNATIONAL BANK (UK) LIMITED HABIB BANK AG ZURICH HABIBSONS BANK LIMITED HABIB-UK PLC UK HSBC BANK PLC ICICI BANK UK PLC ING BANK N.V., LONDON BRANCH ING BHF-BANK AKTIENGESELLS INTESABCI S.P.A JPMORGAN CHASE BANK, N.A. KBC BANK NV KEYBANK NATIONAL ASSOCIATION MASHREQ BANK PSC MIZUHO CORPORATE BANK LTD NORDEA BANK FINLAND PLC LONDON BRANCH NORTHERN BANK (PART OF DANSKE BANK GROUP) NATIONAL BANK OF ABU DHABI QIB (UK) PLC SHINHAN BANK EUROPE GMBH SONALI BANK (UK) LTD STANDARD CHARTERED BANK SUISSE CREDIT CAPITAL (2009) LTD. SUMITOMO MITSUI BANKING CO. UNITED NATIONAL BANK WELLS FARGO BANK, N.A. WELLS FARGO SECURITIES INTERNATIONAL LIMITED WOORI BANK, LONDON ABN AMRO BANK NV ATLANTIC BANK OF NEW YORK ABN AMRO CAPITAL USA LLC BANCA MONTE DEI PASCHI DI SIENA SPA - BANK OF AMERICA BANK OF AMERICA, N.A USA BANK OF AMERICA, N.A. BANK OF NEW YORK BANK OF THE WEST BANK OF NOVA SCOTIA BANK OF TOKYO-MITSUBISHI LTD. BANKERS TRUST COPANY Southeast Bank Limited I Annual Report 2016 257

BNP PARIBAS U.S.A - NEW YORK BRANCH CATHAY BANK CITIBANK N.A. CITY NATIONAL BANK COMERICA BANK CREDIT LYONNAIS EAST-WEST BANK FIRST TENNESSEE BANK N.A. FLEET NATIONAL BANK FRENCH AMERICAN BANKING CO HABIB AMERICAN BANK LTD HABIB BANK LIMITED HSBC BANK ICICI BANK LIMITED INTERNATIONAL FINANCE CORPORATION INTESABCI S.P.A JPMORGAN BANK CHASE BANK KBC BANK NV USA KEB NY FINANCIAL CORP. KEYBANK MASHREQ BANK MERCHANTS BANK OF CALIFORINA MIZUHO CORPORATE BANK LTD NATIONAL BANK OF PAKISTAN NATIONAL CITY BANK CLEVELA NORDEA BANK FINLAND PLC, NEW YORK BRANCH SHINHAN BANK STERLING NATIONAL BANK STANDARD CHARTERED BANK SUMITOMO MITSUI BANKING CO. TD BANK, N.A. UNITED BANK LTD. U.S.BANK (FORMERLY FIRST BANK) WELLS FARGO BANK WOORI AMERICA BANK, NEW YORK Southeast bank outlook WOORI BANK, LOS ANGELES WOORI BANK, NEW YORK UZBEKISTAN NATIONAL BANK FOR FOREIGN ECONOMIC ACTIVITY OF THE REPUBLIC OF UZBEKISTAN URUGUAY EXPRINTER (URUGUAY) S.A. PJSC 'CITIBANK' UKRAINE UNEX JOINT STOCK BANK DIAMANT BANK JOINT STOCK BANK ASIA COMMERCIAL BANK CITIBANK N.A. BANK OF TOKYO MITSUBISHI JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM HSBC BANK (VIETNAM) LTD. JPMORGAN CHASE BANK KOREA EXCHANGE BANK, HANOI BRANCH VIETNAM MIZUHO CORPORATE BANK LTD SHINHAN BANK STANDARD CHARTERED BANK SUMITOMO MITSUI BANKING CO. THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED, HANOI BRANCH WOORI BANK, HANOI WOORIBANK HOCHIMINH 258 Southeast Bank Limited I Annual Report 2016 Financial Statements Southeast Bank Limited I Annual Report 2016 259

FINANCIAL STATEMENTS

Independent Auditor's Report to the Shareholders 260 Consolidated Balance Sheet 262 Consolidated Profit and Loss Account 264 Consolidated Cash Flow Statement 265 Consolidated Statement of Changes in Equity 266 Balance Sheet 267 Profit and Loss Account 269 Cash Flow Statement 270 Statement of Changes in Equity 271 Notes to the Financial Statements 272

FINANCIAL STATEMENTS OF ISLAMIC BANKING BRANCHES Balance Sheet 344 Profit and Loss Account 345 Notes to the Financial Statements 346

FINANCIAL STATEMENTS OF OFF-SHORE BANKING Balance Sheet 354 Profit and Loss Account 356 Notes to the Financial Statements 357

FINANCIAL STATEMENTS OF SEBL SUBSIDIARIES Financial statements Financial Statements of Southeast Bank Capital Services Ltd. 364 Financial Statements of Southeast Financial Services (UK) Ltd 378 Financial Statements of Southeast Financial Services (Australia) Pty Ltd 391 Financial Statements of Southeast Exchange Company (South Africa) Pty Ltd 399 260 Southeast Bank Limited I Annual Report 2016

Independent auditor’s report to the shareholders of Southeast Bank Limited

Report on the financial statements

We have audited the accompanying consolidated financial statements of Southeast Bank Limited and its subsidiaries (the “Group") as well as the separate financial statements of Southeast Bank Limited (the “Bank”), which comprise the consolidated balance sheet and the separate balance sheet as at 31 December 2016, and the consolidated and separate profit and loss accounts, consolidated and separate statements of changes in equity and consolidated and separate cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s responsibility for the financial statements and internal controls

Management is responsible for the preparation of consolidated financial statements of the Group and also separate financial statements of the Bank that give a true and fair view in accordance with Bangladesh Financial Reporting Standards as explained in note 2 and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements of the Group and also separate financial statements of the Bank that are free from material misstatement, whether due to fraud or error. The Bank Company Act, 1991 and the Bangladesh Bank Regulations require the Management to ensure effective internal audit, internal control and risk management functions of the Bank. The Management is also required to make a self- assessment on the effectiveness of anti-fraud internal controls and report to Bangladesh Bank on instances of fraud and forgeries. Auditor's responsibility

Our responsibility is to express an opinion on these consolidated financial statements of the Group and the separate financial statements of the Bank based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements of the Group and separate financial statements of the Bank are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements of the Group and separate financial statements of the Bank. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements of the Group and separate financial statements of the Bank, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of consolidated financial statements of the Group and separate financial statements of the Bank that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements of the Group and also separate financial statements of the Bank. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion

In our opinion, the consolidated financial statements of the Group and also separate financial statements of the Bank give a true and fair view of the consolidated financial position of the Group and the separate financial position of the Bank as at 31 December 2016, and of its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards as explained in note 2. Southeast Bank Limited I Annual Report 2016 261

Report on other legal and regulatory requirements

In accordance with the Companies Act 1994, Securities and Exchange Rules 1987, the Bank Company Act, 1991 and the rules and regulations issued by Bangladesh Bank, we also report the following: a) we have obtained all the information and explanation which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; b) to the extent noted during the course of our audit work performed on the basis stated under the Auditor’s Responsibility section in forming the above opinion on the consolidated financial statements of the Group and the separate financial statements of the Bank and considering the reports of the Management to Bangladesh Bank on anti-fraud internal controls and instances of fraud and forgeries as stated under the Management’s Responsibility for the Financial Statements and Internal Control: i) internal audit, internal control and risk management arrangements of the Group and the Bank as disclosed in Notes 2.2 (i,ii, and iii) of the financial statements appeared to be materially adequate; and ii) nothing has come to our attention regarding material instances of forgery or irregularity or administrative error and exception or anything detrimental committed by employees of the Bank and its related entities other than matters disclosed in these financial statements; c) financial statements of all subsidiaries of the Bank have been audited by other auditors and have been properly reflected in the consolidated financial statements; d) in our opinion, proper books of account as required by law have been kept by the Group and the Bank so far as it appeared from our examination of those books; e) the consolidated balance sheet and consolidated profit and loss account of the Group and the separate balance sheet and separate profit and loss account of the Bank dealt with by the report are in agreement with the books of account; f) the expenditure incurred was for the purposes of the Bank’s business; g) the consolidated financial statements of the Group and the separate financial statements of the Bank have been drawn up in conformity with prevailing rules, regulations and accounting standards as well as with related guidance issued by Bangladesh Bank; h) adequate provisions have been made for advances which are, in our opinion, doubtful of recovery; i) the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements; j) the information and explanation required by us have been received and found satisfactory; Financial statements k) we have reviewed over 80% of the risk weighted assets of the Bank and we have spent around 5,200 person hours for the audit of the books and accounts of the Bank; and Other matter

The consolidated financial statements of the Group and also separate financial statements of the Bank as at and for the year ended 31 December 2015 were audited by another auditor who expressed an unmodified opinion on those statements on 2 March 2016.

Rahman Rahman Huq Dhaka, 08 April 2017 262 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited and its subsidiaries Consolidated Balance Sheet As at 31 December 2016

2016 2015 Note Taka Taka

PROPERTY AND ASSETS Cash 4 In hand (including foreign currencies) 2,432,620,307 1,903,292,780 Balance with Bangladesh Bank and its agent banks (including foreign currencies) 15,402,827,761 14,093,697,688 17,835,448,068 15,996,990,468 Balance with other banks and financial institutions 5 In Bangladesh 2,860,092,475 2,187,972,750 Outside Bangladesh 1,185,128,939 1,203,350,315 4,045,221,414 3,391,323,065 Money at call and on short notice 7 4,271,344,100 923,451,500 Investments 8 Government 54,299,803,894 52,620,785,540 Others 7,431,830,566 6,208,480,661 61,731,634,460 58,829,266,201 Loans and advances/investments 10 Loans, cash credit, overdrafts etc./investments 182,661,818,983 161,556,322,321 Bills purchased and discounted 9,203,770,254 7,322,136,224 191,865,589,237 168,878,458,545 Fixed assets including premises, furniture and fixtures 12 8,947,162,556 7,885,226,411 Other assets 14 3,101,610,244 4,813,314,263 Non-banking assets - - Total assets 291,798,010,079 260,718,030,453 LIABILITIES AND CAPITAL

Liabilities Borrowings from other banks, financial institutions and agents 16 Subordinated bond 8,000,000,000 3,000,000,000 Other borrowings 7,371,635,082 4,556,919,852 15,371,635,082 7,556,919,852 Deposits and other accounts 18 Current/Al-wadeeah current accounts and other accounts 30,285,059,627 23,179,887,835 Bills payable 6,548,856,941 2,127,206,788 Savings bank/Mudaraba savings bank deposits 19,700,582,409 18,419,861,332 Fixed deposits/Mudaraba fixed deposits 173,438,929,873 166,704,137,174 229,973,428,850 210,431,093,129 Other liabilities 20 19,919,384,323 15,513,931,810 Total liabilities 265,264,448,255 233,501,944,791

Capital/shareholders' equity Paid up capital 22.2 9,169,501,760 9,169,501,760 Statutory reserve 23 9,170,000,000 8,897,307,905 Revaluation reserve 24 4,763,888,676 5,968,128,051 Other reserves 25 247,650,000 247,650,000 Foreign currency translation reserve 26 (24,449,246) (27,870,748) Retained earnings 27 3,196,967,474 2,951,940,410 Total shareholders' equity 26,523,558,664 27,206,657,378 Non-controlling interest 29 10,003,160 9,428,284 Total liabilities and shareholders' equity 291,798,010,079 260,718,030,453 Southeast Bank Limited I Annual Report 2016 263

Southeast Bank Limited and its subsidiaries Consolidated Balance Sheet As at 31 December 2016

Other commitments Documentary credits and short term trade-related transactions - - Forward assets purchased and forward deposits placed 2,756,664,000 - Undrawn note issuance and revolving underwriting facilities - - Undrawn formal standby facilities, credit lines and other commitments - - Total other commitments 2,756,664,000 - Total off-balance sheet items including contingent liabilities 113,910,626,784 88,522,244,812

The annexed notes 1 to 69 form an integral part of these financial statements.

Chairman Director Director Managing Director (CC) Financial statements As per our report of same date.

Dhaka, Date: 08 April 2017 Auditor Rahman Rahman Huq Chartered Accountants 264 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited and its subsidiaries Consolidated Profit and Loss Account For the year ended 31 December 2016

2016 2015 Note Taka Taka

Interest income/profit on investments 32 16,972,326,566 17,794,795,961 Interest paid/profit shared on deposits and borrowings etc. 34 (12,765,116,463) (14,656,338,002) Net interest income/net profit on investments 4,207,210,103 3,138,457,959 Investment income 36 5,079,606,748 5,158,537,123 Commission, exchange and brokerage 38 2,903,034,957 2,759,457,588 Other operating income 40 662,602,892 547,933,577 8,645,244,597 8,465,928,288 Total operating income (A) 12,852,454,700 11,604,386,247 Salaries and allowances 42 1,741,464,516 1,423,681,923 Rent, taxes, insurance, electricity, etc. 44 801,036,278 658,260,750 Legal expenses 599,813 1,491,730 Postage, stamp, telecommunication, etc. 46 166,450,976 147,329,178 Stationery, printing, advertisements, etc. 48 132,234,398 112,623,969 Managing Director's salary and fees 50 11,975,000 9,450,000 Directors' fees 51 2,912,276 2,650,734 Auditors' fees 53 1,599,917 1,040,000 Depreciation and repair 54 403,602,733 339,176,671 Other expenses 56 1,087,356,457 874,406,519 Total operating expenses (B) 4,349,232,364 3,570,111,474 Profit before provision (C=A-B) 8,503,222,336 8,034,274,773 Provision for loans and advances/investments 21.1 General provision 890,000,000 205,278,770 Specific provision 2,360,990,098 2,039,766,952 3,250,990,098 2,245,045,722 Provision for diminution in value of investments 58 (403,600,751) 269,481,899 Other provisions 21.5 365,235,000 2,263,106 Total provision (D) 3,212,624,347 2,516,790,727 Total profit before taxation (E=C-D) 5,290,597,989 5,517,484,046 Provision for taxation 60 Current 2,790,553,126 2,308,068,504 Deferred 64,971,265 140,000,000 2,855,524,391 2,448,068,504 Net profit after taxation 2,435,073,598 3,069,415,542 Net profit after taxation attributable to: Equity holders' of the Bank 2,434,965,442 3,070,132,933 Non-controlling interest 108,156 (717,391) Net profit after taxation 2,435,073,598 3,069,415,542 Appropriations Statutory reserve 23 272,692,095 1,104,495,904 272,692,095 1,104,495,904 Retained surplus during the year 2,162,381,503 1,964,919,638 Earnings per share (par value Taka 10) 66 2.66 3.35 The annexed notes 1 to 69 form an integral part of these financial statements.

Chairman Director Director Managing Director (CC) As per our report of same date.

Auditor Dhaka, Rahman Rahman Huq Date: 08 April 2017 Chartered Accountants Southeast Bank Limited I Annual Report 2016 265

Southeast Bank Limited and its subsidiaries Consolidated Cash Flow Statement For the year ended 31 December 2016

2016 2015 Note Taka Taka

A. Cash flows from operating activities: Interest receipts in cash 21,465,956,048 22,649,008,849 Interest payments (13,436,169,366) (15,065,727,470) Dividend receipts 206,501,017 169,586,070 Fees and commission receipts in cash 38 2,903,034,957 2,759,457,588 Recoveries on loans previously written-off 72,709,902 174,604,278 Cash payments to employees (1,753,439,516) (1,433,131,923) Cash payments to suppliers (680,680,071) (410,177,004) Income taxes paid (1,857,082,933) (2,544,706,496) Receipts from other operating activities 62 658,098,860 547,079,920 Payments for other operating activities 64 (2,171,105,188) (1,847,880,920) Operating profit before changes in operating assets and liabilities (i) 5,407,823,710 4,998,112,892 Increase (decrease) in operating assets and liabilities Sale of trading securities 1,890,405,541 705,788,371 Purchase of trading securities (3,044,094,011) (420,588,600) Loans and advances to customers (24,196,787,280) (21,807,652,336) Other assets 2,181,098,442 (1,779,218,427) Deposits from other banks 7,814,715,230 (258,998,658) Deposits from customers 20,213,388,624 21,367,938,895 Other liabilities 1,261,627,976 729,018,180 Cash generated from (used in) operating assets and liabilities (ii) 6,120,354,522 (1,463,712,575) Net cash from operating activities (A=i+ii) 11,528,178,232 3,534,400,317 B. Cash flows from investing activities: Proceeds from sale of securities 53,629,810,359 51,230,852,388 Payments for purchase of securities (56,304,115,364) (57,543,612,089) Purchase of fixed assets (1,359,221,862) (245,198,107) Sale of fixed assets 5,141,124 2,516,411 Net cash used in investing activities (B) (4,028,385,743) (6,555,441,397) C. Cash flows from financing activities: Dividends paid (1,375,425,264) (1,375,425,264) Financial statements Payment against lease obligation (8,388,117) (15,486,885) Net cash used in financing activities (C) (1,383,813,381) (1,390,912,149) D. Net increase (decrease) in cash and cash equivalents (A+B+C) 6,115,979,108 (4,411,953,229) E. Effects of exchange rate changes on cash and cash equivalents 25,257,242 979,724 F. Cash and cash equivalents at beginning of the period 21,006,750,533 25,417,724,038 G. Cash and cash equivalents at end of the period (D+E+F) 27,147,986,883 21,006,750,533 Cash and cash equivalents at end of the period represents Cash in hand (including foreign currencies) 4 2,432,620,307 1,903,292,780 Balance with Bangladesh Bank and its agent banks (including foreign currencies) 4 15,402,827,761 14,093,697,688 Balance with other banks and financial institutions 5 4,045,221,414 3,391,323,065 Money at call and on short notice 7 4,271,344,100 923,451,500 Treasury bills 9.1.1 991,930,001 689,598,000 Prize bond 9.1.1 4,043,300 5,387,500 27,147,986,883 21,006,750,533 266 Southeast Bank Limited I Annual Report 2016 Taka Taka ------Total equity Total 4,263,359 2,435,073,598 27,216,085,662 (40,000,000) of the Group of the Group (1,204,239,375) (300,000,000) (1,375,425,264) (200,000,000) (1,199,976,016) 27,213,889,506 26,533,561,824 27,216,085,662 (2,196,156) ------Taka Non- interest 466,720 108,156 10,003,160 controlling controlling 9,428,284 9,895,004 9,428,284 Taka Total ------4,263,359 2,434,965,442 27,203,994,502 26,523,558,664 27,206,657,378 (40,000,000) (1,204,239,375) (300,000,000) (1,375,425,264) (200,000,000) (1,199,976,016) 27,206,657,378 (2,662,876) Taka - - - - - earnings Retained 841,857 (40,000,000) 841,857 2,434,965,442 2,951,940,410 (272,692,095) (300,000,000) (1,375,425,264) (200,000,000) 2,949,277,534 3,196,967,474 2,951,940,410 (2,662,876) ------Taka Taka 3,421,502 reserve reserve 3,421,502 (27,870,748) (27,870,748) (24,449,246) (27,870,748) Translation Translation ------Taka Other reserves 247,650,000 247,650,000 247,650,000 247,650,000 Taka reserve ------Revaluation Revaluation (1,204,239,375) 5,968,128,051 4,763,888,676 5,968,128,051 (1,204,239,375) 5,968,128,051 Taka ------reserve Statutory 272,692,095 8,897,307,905 9,170,000,000 8,897,307,905 8,897,307,905 Taka ------capital Paid up Paid 9,169,501,760 9,169,501,760 9,169,501,760 9,169,501,760 Particulars Statutory reserve Transfer to SEBL Foundation to Transfer Transfer to Employees Welfare Fund Welfare Employees to Transfer Transfer to Green Award Trust Award Green to Transfer Restated balance Restated Changes in accounting policy/ Prior year adjustments Changes in accounting policy/ year Prior revaluation Surplus/deficit of properties on account of revaluation Surplus/deficit of investments on account of year for the Net profit 2015 31 December as at Balance Balance as at 1 January as at Balance 2016 Currency translation differences Cash dividend Cash Net gains and losses not recognized in Net gains and losses not recognized statement the income Issue of share capital/ Bonus share Issue of share Appropriation made during the year Appropriation Balance as at 31 December 2016 31 December as at Balance Southeast Bank Limited and its subsidiariesSoutheast Bank Limited in Equity of Changes Statement Consolidated ended 31 December 2016 the year For Southeast Bank Limited I Annual Report 2016 267

Southeast Bank Limited Balance Sheet As at 31 December 2016

2016 2015 Note Taka Taka

PROPERTY AND ASSETS Cash 4.1 In hand (including foreign currencies) 2,428,412,898 1,903,292,780 Balance with Bangladesh Bank and its agent banks (including foreign currencies) 15,402,827,761 14,093,697,688 17,831,240,659 15,996,990,468 Balance with other banks and financial institutions 6 In Bangladesh 2,860,092,475 2,187,972,750 Outside Bangladesh 1,118,618,354 1,149,021,361 3,978,710,829 3,336,994,111 Money at call and on short notice 7 4,271,344,100 923,451,500 Investments 9 Government 54,299,803,894 52,620,785,540 Others 5,155,205,613 4,267,629,032 59,455,009,507 56,888,414,572 Loans and advances/investments 11 Loans, cash credit, overdrafts etc./investments 180,161,187,214 162,056,722,487 Bills purchased and discounted 9,203,770,254 7,322,136,224 189,364,957,468 169,378,858,711 Fixed assets including premises, furniture and fixtures 13 8,613,686,700 7,751,078,875 Other assets 15 8,478,052,796 5,977,253,927 Non - banking assets - - Total assets 291,993,002,059 260,253,042,164

LIABILITIES AND CAPITAL Liabilities Borrowings from other banks, financial institutions and agents 17 Subordinated bond 8,000,000,000 3,000,000,000 Other borrowings 7,363,947,263 4,519,780,424 15,363,947,263 7,519,780,424 Deposits and other accounts 19

Current/Al-wadeeah current accounts and other accounts 30,845,332,890 23,184,569,410 Financial statements Bills payable 6,548,856,941 2,127,206,788 Savings bank/Mudaraba savings bank deposits 19,700,582,409 18,419,861,332 Fixed deposits/Mudaraba fixed deposits 173,438,929,873 166,704,137,174 230,533,702,113 210,435,774,704 Other liabilities 21 19,572,488,052 15,072,571,985 Total liabilities 265,470,137,428 233,028,127,113 Capital/shareholders' equity Paid up capital 22.2 9,169,501,760 9,169,501,760 Statutory reserve 23 9,170,000,000 8,897,307,905 Revaluation reserve 24 4,763,888,676 5,968,128,051 Other reserve 25 247,650,000 247,650,000 Retained earnings 28 3,171,824,195 2,942,327,335 Total shareholders' equity 26,522,864,631 27,224,915,051 Total liabilities and shareholders' equity 291,993,002,059 260,253,042,164 268 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited Balance Sheet As at 31 December 2016

2016 2015 Note Taka Taka OFF-BALANCE SHEET ITEMS Contingent liabilities Acceptances and endorsements 30.1 43,813,553,641 36,223,420,210 Letters of guarantee 30.2 15,154,116,600 13,395,240,916 Irrevocable letters of credit 30.3 32,881,303,677 24,992,379,957 Bills for collection 30.4 17,830,304,866 12,812,744,729 Other contingent liabilities 30.5 1,474,684,000 1,098,459,000 Total contingent liabilities 111,153,962,784 88,522,244,812 Other commitments Documentary credits and short term trade-related transactions - - Forward assets purchased and forward deposits placed 2,756,664,000 - Undrawn note issuance and revolving underwriting facilities - - Undrawn formal standby facilities, credit lines and other commitments - - Total other commitments 2,756,664,000 - Total off-balance sheet items including contingent liabilities 113,910,626,784 88,522,244,812

The annexed notes 1 to 69 form an integral part of these financial statements.

Chairman Director Director Managing Director (CC)

As per our report of same date.

Dhaka, Date: 08 April 2017 Auditor Rahman Rahman Huq Chartered Accountants Southeast Bank Limited I Annual Report 2016 269

Southeast Bank Limited Profit and Loss Account For the year ended 31 December 2016

2016 2015 Note Taka Taka

Interest income/profit on investments 33 16,988,878,395 17,918,296,225 Interest paid/profit shared on deposits and borrowings etc. 35 (12,785,664,559) (14,652,724,337) Net interest income/net profit on investments 4,203,213,836 3,265,571,888 Investment income 37 5,014,416,110 5,125,174,462 Commission, exchange and brokerage 39 2,847,697,916 2,724,003,399 Other operating income 41 630,611,620 518,566,500 8,492,725,646 8,367,744,361 Total operating income (A) 12,695,939,482 11,633,316,249 Salaries and allowances 43 1,720,787,663 1,399,383,806 Rent, taxes, insurance, electricity, etc. 45 781,507,962 644,286,649 Legal expenses 583,977 1,283,794 Postage, stamp, telecommunication, etc. 47 165,740,473 146,538,853 Stationery, printing, advertisements, etc. 49 130,657,839 111,489,118 Managing Director's salary and fees 50 11,975,000 9,450,000 Directors' fees 52 2,697,276 2,610,734 Auditors' fees 1,000,000 1,000,000 Depreciation and repair of bank's assets 55 372,736,739 321,444,898 Other expenses 57 1,010,435,457 951,884,557 Total operating expenses (B) 4,198,122,386 3,589,372,409 Profit before provision (C=A-B) 8,497,817,096 8,043,943,840 Provision for loans and advances/investments 21.1 General provision 890,000,000 205,278,770 Specific provision 2,360,990,098 2,039,766,952 3,250,990,098 2,245,045,722 Provision for diminution in value of investments 59 (364,779,225) 274,155,492 Other provisions 21.5 365,235,000 2,263,106 Total provision (D) 3,251,445,873 2,521,464,320 Total profit before taxation (C-D) 5,246,371,223 5,522,479,520 Provision for taxation 61 Current 2,765,000,000 2,300,000,000 Deferred 65,000,000 140,000,000 2,830,000,000 2,440,000,000 Net profit after taxation 2,416,371,223 3,082,479,520 Appropriations Statutory reserve 23 272,692,095 1,104,495,904 Financial statements 272,692,095 1,104,495,904 Retained surplus during the year 2,143,679,128 1,977,983,616 Earnings per share (par value Taka 10) 67 2.64 3.36 The annexed notes 1 to 69 form an integral part of these financial statements.

Chairman Director Director Managing Director (CC) As per our report of same date.

Auditor Dhaka, Rahman Rahman Huq Chartered Accountants Date: 08 April 2017 270 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited Cash Flow Statement For the year ended 31 December 2016

2016 2015 Note Taka Taka

A. Cash flows from operating activities: Interest receipts in cash 21,482,507,877 22,772,509,113 Interest payment (13,377,940,965) (15,062,113,805) Dividend receipts 171,780,691 131,633,489 Fees and commission receipts in cash 39 2,847,697,916 2,724,003,399 Recoveries on Loans previously written-off 72,709,902 174,604,278 Cash payments to employees (1,732,762,663) (1,408,833,806) Cash payments to suppliers (679,103,512) (408,742,152) Income taxes paid (1,847,199,924) (2,535,875,626) Receipts from other operating activities 63 626,107,588 517,712,843 Payments for other operating activities 65 (2,134,111,013) (1,820,501,267) Operating profit before changes in operating assets and liabilities (i) 5,429,685,897 5,084,396,466 Increase (decrease) in operating assets and liabilities Sale of trading securities 1,717,610,078 265,378,290 Purchase of trading securities (2,542,420,203) (322,445,392) Loans and advances to customers (21,195,755,345) (21,422,307,226) Other assets (1,971,677,448) (1,798,912,238) Deposits from other banks 7,844,166,839 (231,521,530) Deposits from customers 20,768,980,312 21,372,903,220 Other liabilities 1,256,507,386 580,771,990 Cash generated from (used in) operating assets and liabilities (ii) 5,877,411,619 (1,556,132,886) Net cash from operating activities (A=i+ii) 11,307,097,516 3,528,263,580 B. Cash flows from investing activities: Proceeds from sale of securities 53,629,810,359 51,230,852,388 Payments for purchase of securities (56,304,115,364) (57,543,612,089) Purchase of fixed assets (1,129,882,695) (246,747,420) Sale of fixed assets 4,942,879 2,516,411 Net cash used in investing activities (B) (3,799,244,821) (6,556,990,710) C. Cash flows from financing activities: Dividends paid (1,375,425,264) (1,375,425,264) Payment against lease obligation (8,388,117) (15,486,885) Net cash used in financing activities (C) (1,383,813,381) (1,390,912,149) D. Net increase (decrease) in cash and cash equivalents (A+B+C) 6,124,039,314 (4,419,639,279) E. Effects of exchange rate changes on cash and cash equivalents 807,996 945,864 F. Cash and cash equivalents at beginning of the period 20,952,421,579 25,371,114,994 G. Cash and cash equivalents at end of the period (D+E+F) 27,077,268,889 20,952,421,579 Cash and cash equivalents at end of the period represents Cash in hand (including foreign currencies) 4.1 2,428,412,898 1,903,292,780 Balance with Bangladesh Bank and its agent banks (including foreign currencies) 4.1 15,402,827,761 14,093,697,688 Balance with other banks and financial institutions 6 3,978,710,829 3,336,994,111 Money at call and on short notice 7 4,271,344,100 923,451,500 Treasury bills 9.1.1 991,930,001 689,598,000 Prize bond 9.1.1 4,043,300 5,387,500 27,077,268,889 20,952,421,579 Southeast Bank Limited I Annual Report 2016 271 Taka Taka Total Total ------807,996 435,000 2,416,371,223 (40,000,000) (200,000,000) (300,000,000) (1,375,425,264) (1,204,239,375) 27,224,915,051 26,522,864,631 27,225,350,051 27,224,915,051 (1,203,431,379) - - - - - Taka Taka 807,996 435,000 earnings Retained 807,996 2,416,371,223 2,942,327,335 (40,000,000) (200,000,000) (300,000,000) (272,692,095) (1,375,425,264) 2,942,762,335 2,942,327,335 3,171,824,195 ------Taka Taka 247,650,000 247,650,000 247,650,000 247,650,000 Other reserves ------Taka Taka reserve reserve 5,968,128,051 5,968,128,051 Revaluation Revaluation (1,204,239,375) 5,968,128,051 4,763,888,676 (1,204,239,375) ------Taka Taka reserve reserve 272,692,095 Statutory 8,897,307,905 9,170,000,000 8,897,307,905 8,897,307,905 ------Taka Taka 9,169,501,760 9,169,501,760 9,169,501,760 9,169,501,760 Paid up capital Paid Financial statements Particulars Transfer to Green Award Trust Award Green to Transfer Transfer to Employees Welfare Fund Welfare Employees to Transfer Transfer to SEBL Foundation to Transfer Statutory reserve Balance as at 31 December 2015 31 December as at Balance Balance as at 31 December 2016 31 December as at Balance Appropriation made during the year Appropriation Issue of share capital/ Bonus share Issue of share Cash dividend Cash Net profit for the year for the Net profit Net gains and losses not recognized in the income statement in the income Net gains and losses not recognized Surplus/deficit on account of revaluation Surplus/deficit of investments on account of Currency translation differences Surplus/deficit on account of revaluation Surplus/deficit of properties on account of Restated balance Restated Changes in accounting policy/ prioradjustments year Balance as at 1 January as at Balance 2016 Southeast Bank Limited in Equity of Changes Statement ended 31 December 2016 the year For 272 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited and its Subsidiaries Notes to the Financial Statements As at and for the year ended 31 December 2016

1 Reporting entity 1.1 Status of the Bank Southeast Bank Limited (the “Bank”) is a scheduled commercial bank in the private sector established under the Bank Companies Act, 1991 and incorporated in Bangladesh on March 12, 1995 as a public limited company to carry out banking business in Bangladesh. The registered office of the Bank is located at Eunoos Trade Centre 52-53, Dilkusha Commercial Area (Level 2, 3, 4, 6 & 16), Dhaka-1000. The consolidated financial statements of the Bank as at and for the year ended 31 December 2016 comprise the Bank and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). 1.2 Principal activities of the Bank The Bank has 128 (2015: 122) branches, with no overseas branch as on 31 December 2016. Out of 128 branches 5 (2015: 5) branches of Islamic banking, the rest 123 (2015: 117) branches run on commercial conventional basis, of which 15 (2015: 15) SME / agricultural branches are located across the country. The Bank offers services for all commercial banking needs of the customers, which includes deposit banking, loans and advances, export import financing, inland and international remittance facility etc. The Bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited as a publicly traded company. The Bank operates Islamic banking in 5 branches designated for the purpose in complying with the rules of Islamic Shariah the modus operandi. The Bank has four subsidiaries, one for its merchant banking operation (for details see note 1.5) and another three for its remittance business of which one in the United Kingdom (for details see note 1.6), one in Australia (for details see note 1.7) and other one in South Africa (for details see note 1.8). 1.3 Islamic Banking The Bank obtained the Islamic Banking branches permission vide letter no. BRPD(P)745(22)/2003-2525 dated 28 June 2003, BRPD(P)745(22)/2004-1801 dated 9 May 2004 and BRPD(P)745(22)/2004-3957 dated 13 October 2004. The Islamic banking branches are governed under the rules and regulations of Bangladesh Bank. Separate financial statements of Islamic Banking Branches are shown in Annexure-G, G.1 and G.2 . The financial statements of the Islamic banking branches have also been prepared as per the Bank Companies Act, 1991 (amended up to 2013), BFRSs and other prevailing laws and regulations applicable in Bangladesh. A separate balance sheet and profit and loss account are shown in Annexure-G and G.1 and the figures appearing in the annexure have been converted into relevant heads of financial statements under conventional banking for consolidation and incorporation in these financial statements. 1.4 Off-Shore Banking In order to cater the varied financial needs of 100% foreign owned/joint venture industrial units and foreign entities located in Export Processing Zones of the country, the Bank obtained Off-Shore Banking License on 24 June 2008 vide letter no. BRPD(P-3)744(98)/2008-2213 from Bangladesh Bank. Presently the Bank has 2 (2015: 2) off-shore banking units - one at Dhaka Export Processing Zone and the other at Chittagong Export Processing Zone. Off-shore banking unit is governed under the rules and regulations of Bangladesh Bank. Separate financial statements of Off- Shore Banking Units are shown in Annexure-H, H.1 and H.2. 1.5 Southeast Bank Capital Services Limited Southeast Bank Capital Services Limited is a subsidiary of Southeast Bank Limited which was incorporated on 23 September 2010 and commenced its operation from 1 December 2010. The Bank transferred its Merchant Banking operation to the newly formed subsidiary company in pursuance of the direction of Bangladesh Bank vide DOS Circular No. 4 dated 15 June 2010. The principal activities of this subsidiary company is to provide quality services to the prospective institutional and individual investors in the capital market. It is decisively providing the following services: i) Portfolio Management Services ii) Underwriting of Share iii) Issue Management Services etc. Copy of the audited financial statements is attached in Appendix A. Southeast Bank Limited I Annual Report 2016 273

1.6 Southeast Financial Services (UK) Ltd Southeast Financial Services (UK) Ltd (the "Company") was incorporated as a private limited company with Companies House of England and Wales under registration no. 7539137 on 22 February 2011. The company is a wholly owned subsidiary of Southeast Bank Limited. Earlier on 28 October 2010, Southeast Bank Limited got the approval of Bangladesh Bank to establish a wholly owned subsidiary in the United Kingdom. Southeast Financial Services (UK) Limited obtained Certificate of Registration for Money Laundering Regulation (MLR) on 12 April 2011 from Her Majesty Customs and Excise. The company was granted registration from Financial Services Authority (FSA) on 21 July 2011 as Small Payment Institution (SPI) to carry out Money Service Business (MSB) under Payment Services Regulations 2009. The Company commenced its operation of business on 26 September 2011. The registered office is located at 22 New Road, London E1 2AX, United Kingdom. The principal activities of the Company are to carry on the remittance business as well as to undertake and participate in transactions, activities and operations generally carried on or undertaken by Exchange House. The subsidiary is registered in the United Kingdom (UK). Audit of financial statements of this subsidiary is not required as per rules 7 regulations of UK. The financial statements including accountant's report of this subsidiary is attached in Appendix B. 1.7 Southeast Financial Services (Australia) Pty Ltd Southeast Financial Services (Australia) Pty Limited (the "Company") was incorporated as a private limited company with Australian Business Register (ABR) under registration no. 40160673165 on 08 October 2012. The Company is a wholly owned subsidiary of Southeast Bank Limited. The principal activities of the Company are to carry on the remittance business as well as to undertake and participate in transactions, activities and operations generally carried on or undertaken by Exchange House. The subsidiary is registered in Australia. Audit of financial statements of this subsidiary is not required as per the Corporations Act 2001 of Australia. The Financial Statements of the Company is certified by SolTax Pty Ltd. The financial statements including accountant's report of this subsidiary is attached in Appendix C. 1.8 Southeast Exchange Company (South Africa) Pty Ltd Southeast Exchange Company (South Africa) Pty Limited (the "Company") was incorporated as a private limited company with The Companies and Intellectual Property Commission under registration no. 2011/008619/07 on 15 April 2011. The Company is a wholly owned subsidiary of Southeast Bank Limited. The principal activities of the Company are to carry on the remittance business as well as to undertake and participate in transactions, activities and operations generally carried on or undertaken by Exchange House. The subsidiary is registered in South Africa. The Financial Statements of the Company is audited by H Tayob and Co. The financial statements of this Company is attached in Appendix D. 2 Basis of preparation 2.1 Statement of compliance The Financial Reporting Act, 2015 (FRA) has been enacted in 2015. Under the FRA, the Financial Reporting Council (FRC) is to be formed and it is to issue financial reporting standards for public interest entities such as banks. Section 38 of the Bank Company Act, 1991 (amended up to 2013) has been replaced in 2015 by two new sub-sections to require banks to prepare their financial statements under such financial reporting standards.

The FRC is yet to be formed and as such no financial reporting standards have been issued as per the provi- Financial statements sions of the FRA. Hence, the consolidated financial statements of the Bank and its subsidiaries and the separate financial statements of the Bank as at and for the year ended 31 December 2016 have been prepared in accordance with Bangladesh Financial Reporting Standards (BFRSs) and the requirements of the Bank Company Act, 1991, the rules and regulations issued by Bangladesh Bank (BB), the Companies Act, 1994, the Securities and Exchange Rules, 1987. In case any requirement of the Bank Company Act, 1991 and provisions and circulars issued by BB differ with those of BFRSs, the requirements of the Bank Company Act, 1991 and provisions and circulars issued by BB shall prevail. Material departures from the requirements of BFRSs are as follows: i) Investment in shares and Securities BFRS: As per requirements of BAS 39 investment in shares and securities generally falls either under “at fair value through profit and loss account” or under “available for sale” where any change in the fair value (as measured in accordance with BFRS 13) at the year-end is taken to profit and loss account or revaluation reserve respectively. Bangladesh Bank: As per BRPD circular no. 14 dated 25 June 2003 investments in quoted shares and unquoted shares are revalued at the year end at market price and as per book value of last audited balance sheet respectively. Provision should be made for any loss arising from diminution in value of investment. 274 Southeast Bank Limited I Annual Report 2016

ii) Revaluation gain (loss) on Government securities BFRS: As per requirement of BAS 39 where securities; i.e. T-Bills and T-Bonds will fall under the category of Held for Trading (HFT), any change in the fair value of HFT assets is recognized through profit and loss account. Securities; i.e. T-bills designated as Held to Maturity (HTM) are measured at amortized cost method and interest income is recognized through the profit and loss account. Bangladesh Bank: HFT securities are revalued on the basis of mark to market and at year end any gains on revaluation of securities which have not matured as at the balance sheet date are recognized in other reserves as a part of equity and any losses on revaluation of securities which have not matured as at the balance sheet date are charged in the profit and loss account. Interest on HFT securities including amortization of discount are recognized in the profit and loss account. HTM securities which have not matured as at the balance sheet date are amortized at the year end and gains on amortization are recognized in other reserve (loss are recognized in profit and loss account) as a part of equity. iii) Provision on loans and advances BFRS: As per BAS 39 an entity should start the impairment assessment by considering whether objective evidence of impairment exists for financial assets that are individually significant. For financial assets are not individually significant, the assessment can be performed on an individual or collective (portfolio) basis. Bangladesh Bank: As per BRPD circular no. 14 dated 23 September 2012, BRPD circular no. 19 dated 27 December 2012 and BRPD circular no. 05 dated 29 May 2013 a general provision at 0.25% to 5% under different categories of unclassified loans (good/standard loans) has to be maintained regardless of objective evidence of impairment. Also provision for sub-standard loans, doubtful loans and bad/losses has to be provided at 20%, 50% and 100% respectively for loans and advances depending on the duration of overdue. Again as per BRPD Circular No.10 dated 18 September 2007 and BRPD Circular No. 14 dated September 23, 2012, the Bank is required to maintain provision @ 1% against Off-Balance Sheet Exposures. Such provision policies are not specifically in line with those prescribed by BAS 39. However, if there is any stay order issued by the Honorable High Court Division of the Supreme Court of Bangladesh against any non-performing loans for reporting such loans as unclassified category, the Bank maintains at least general provision for such loans under unclassified loan category as per Bangladesh Bank guidelines. Where Bangladesh Bank suggests any additional provision to be maintained for such loans, the Bank also complies with that. iv) Recognition of interest in suspense BFRS: Loans and advances to customers are generally classified as 'loans and receivables' as per BAS 39 and interest income is recognized through effective interest rate method over the term of the loan. Once a loan is impaired, interest income is recognized in profit and loss account on the same basis based on revised carrying amount. Bangladesh Bank: As per BRPD circular no. 14 dated 23 September 2012, once a loan is classified, interest on such loans is not allowed to be recognized as income, rather the corresponding amount needs to be credited to an interest in suspense account, which is presented as liability in the balance sheet. v) Other comprehensive income BFRS: As per BAS 1 Other Comprehensive Income (OCI) is a component of financial statements or the elements of OCI are to be included in a Single Comprehensive Income statement. Bangladesh Bank: Bangladesh Bank has issued templates for financial statements which will strictly be followed by all banks. The templates of financial statements issued by Bangladesh Bank do not include Other Comprehensive Income nor are the elements of Other Comprehensive Income allowed to be included in a single Other Comprehensive Income (OCI) statement. As such the Bank does not prepare the OCI statement. However, elements of OCI, if any, are shown in the statements of changes in equity. vi) Financial instruments - presentation and disclosure In several cases Bangladesh Bank guidelines categorize, recognize, measure and present financial instruments differently from those prescribed in BAS 39. As such some disclosure and presentation requirements of BFRS 7 and BAS 32 cannot be made in the accounts. vii) Repo transactions BFRS: When an entity sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) at a fixed price on a future date (repo or stock lending), the arrangement is accounted for as a deposit, and the underlying asset continues to be recognized in the entity’s financial statements. This transaction will be treated as loan and the difference between selling price and repurchase price will be treated as interest expense. Southeast Bank Limited I Annual Report 2016 275

Bangladesh Bank: As per BRPD guidelines, when a bank sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) at a fixed price on a future date (repo or stock lending), the arrangement is accounted for as a normal sales transactions and the financial assets are derecognized in the seller’s book and recognized in the buyer’s book. viii) Financial guarantees BFRS: As per BAS 39, financial guarantees are contracts that require an entity to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are recognized initially at their fair value, and the initial fair value is amortized over the life of the financial guarantee. The financial guarantee liability is subsequently carried at the higher of this amortized amount and the present value of any expected payment when a payment under the guarantee has become probable. Financial guarantees are included within other liabilities. Bangladesh Bank: As per BRPD 14, financial guarantees such as L/C, L/G will be treated as Off-Balance Sheet items. No liability is recognized for the guarantee except the cash margin. ix) Cash and cash equivalents BFRS: Cash and cash equivalent items should be reported as cash item as per BAS 7. Bangladesh Bank: Some cash and cash equivalent items such as ‘money at call and on short notice’, Treasury bills, Prize bonds are not shown as cash and cash equivalent. Money at call and on short notice presented on the face of the balance sheet, Treasury bills and Prize bonds are shown in Investments. x) Non-banking assets BFRS: No indication of non-banking asset is found in any BFRS. Bangladesh Bank: As per BRPD 14, there must exist a face item named non-banking assets. xi) Cash flow statement BFRS: Cash flow statement can be prepared using either in direct method or in indirect method. The presentation is selected to present these cash flows in a manner that is most appropriate for the business or industry. The method selected is applied consistently. Bangladesh Bank: As per BRPD 14, cash flow is the mixture of direct and indirect method. xii) Balance with Bangladesh Bank: (Cash reserve ratio) BFRS: Balance with Bangladesh Bank should be treated as other asset as it is not available for use in day to day operations as per BAS 7. Bangladesh Bank: Balance with Bangladesh Bank is treated as cash and cash equivalents. xiii) Presentation of intangible asset BFRS: Intangible asset must be identified and recognized, and the disclosure must be given as per BAS 38. Bangladesh Bank: There is no requirement for regulation of intangible assets in BRPD 14. xiv) Off-balance sheet items BFRS: There is no concept of off-balance sheet items in any BFRS; hence there is no requirement of disclosure

of off-balance sheet items on the face of the balance sheet. Financial statements Bangladesh Bank: As per BRPD 14, off balance sheet items (e.g. Letter of credit, Letter of guarantee etc.) must be disclosed separately in face of balance sheet xv) Disclosure of appropriation of profit BFRS: There is no requirement to show appropriation of profit in the face of statement of comprehensive income. Bangladesh Bank: As per BRPD 14, an appropriation of profit should be disclosed in the face of profit and loss account. xvi) Loans and advance net of provision BFRS: Loans and advances should be presented net of provisions. Bangladesh Bank: As per BRPD 14, provision on loans and advances are presented separately as liability and cannot be netted off against loans and advances. xvii) Recovery of written off loans BFRS: As per BAS 1, an entity shall not offset assets and liabilities or income and expenses, unless required or permitted by any BFRS. Again recovery of written off loans should be charged to profit & loss account as per BAS 18. 276 Southeast Bank Limited I Annual Report 2016

Bangladesh Bank: As per BRPD 14, recoveries of amount previously written off should be adjusted with the specific provision for loans and advances. (Also refer to note 3.21 Compliance of BFRSs) 2.2 The Bank’s compliance with related pronouncements by Bangladesh Bank i) Internal control The objective of internal control is to ensure that management has reasonable assurance that (i) operations are effective, efficient and aligned with strategy, (ii) financial reporting and management information is reliable, complete and timely accessible, (iii) the entity is in compliance with applicable laws and regulations as well as its internal policies and ethical values including sustainability, and (iv) assets of the company are safeguarded and frauds & errors are prevented or detected. Southeast Bank Limited has established an effective internal control system whose primary aim is to ensure the overall control of risks and provide reasonable assurance that the objectives set by the Bank will be met. It has designed to develop a high level risk culture among the personnel of the Bank, establish efficient and qualified operating model in the Bank, ensure reliability of internal and external information including accounting and financial information, secure the Bank’s operations and assets, and comply with laws, regulatory requirements and internal policies. The Board of Directors of Southeast Bank Limited, through its Audit Committee, periodically reviews the effectiveness of Bank’s internal control system covering all the material controls, including financial, operational and compliance controls, risk management systems, the adequacy of resources, qualifications and experience of staff of the accounting and financial reporting functions. Board Audit Committee reviews the actions taken on internal control issues identified by the internal and external auditors and regulatory authorities. It has active oversight on the internal audit’s independence, scope of work and resources and it also reviews the functions of Internal Control & Compliance Division of head office, particularly the scope of the annual audit plan and frequency of the internal audit activities. ii) Risk management Banking business faces uncertainties in its operating environment, which, if not managed and mitigated, would not only disrupt the achievement of its strategic and operational objectives, but may also cause extensive financial and reputational loss. Effective risk management enables Banks to take better and informed decisions that substantially improve the probability of achieving their strategic and operational objectives. In this connection, every Bank has come forward to establish a general framework to manage the risk factors considering Bangladesh Bank’s guidelines. As one of the leading Banks in Bangladesh, Southeast Bank Limited (SEBL) has established approved policies in compliance with central bank’s guidelines covering major risk areas such as: (a) Credit (b) Foreign Exchange (c) Asset Liability Management (d) Money Laundering Prevention (e) Internal Control & Compliance (f) Information and Communication Technology. For strengthening and updating risk management system, the Bank has developed a manual for core risks assessment in light of the Bangladesh Bank’s Risk Management Guidelines. The purpose of this assessment is to inform management about the loopholes of full fledged implementation of core risks management, risk management culture, restructure minimum standard and assist in the ongoing improvement. Reports on Risk Management (RRM) are being prepared on monthly, quarterly and semiannually basis and is reviewed in the monthly risk management meeting to have management opinion on the issues identified in RRM. iii) Internal audit Internal audit is the continuous and systematic process of examining and reporting on the activities of an organization undertaken by the specially assigned staff(s). Internal auditor works as the Eyes & Ears of the management. It may therefore be used to bridge the gap between management & shop floor. It can assure the management that the internal controls are adequate and in operations, the policies and systems laid down are being adhered to and accounting records provided by the all levels are correct. Internal audit mechanism is used as an important element to ensure good governance of SEBL. Internal audit activity of SEBL is effective and it provides senior management with a number of important services. These include detecting and preventing errors and fraud, testing internal control, and monitoring compliance with own policies & procedures, applicable rules & regulations, instructions/ guidelines of regulatory authority etc. Southeast Bank Limited I Annual Report 2016 277

During the year 2016, Audit & Inspection Unit of ICCD conducted inspection on most of the branches and some of the important divisions of head office of the Bank as per plan and submitted reports presenting the findings of the audits/ inspections to the appropriate authorities. The bank conducted the risk grading of branches as per Bangladesh Bank guideline. Necessary control measures and corrective actions have been taken on the suggestions or observations made in these reports. The key points of the Reports have also been discussed in the meetings of the Audit Committee of the Board and necessary steps have been taken according to the decision of the said Committee for correct functioning of Internal Controls & Compliance of the Bank. iv) Fraud and forgeries Fraud can happen anywhere. Though, only relatively few major frauds are picked up by the media, huge sums are lost by all kinds of businesses against huge number of smaller frauds. The risks of fraud is increasing day by day as a result of growing globalization, more competitive markets, rapid developments in technology, periods of economic difficulty, etc. Banks by virtue of the nature of activities undertaken and its operating environment are vulnerable to frauds, which take place when aggressive business strategy and process for quick growth is adopted without adequate/ appropriate internal controls or non-adhering of operating standards/ controls. In the recent past, incidence of frauds in the Banking industry has increased which calls for concerted steps in investigating the frauds and identifying the fraudsters for eventual criminal prosecution and internal punitive action. It will never be possible to eliminate all frauds and no system is completely fraud proof, since many fraudsters are able to bypass control systems put in place. SEBL pays attention on anti-fraud internal controls for prevention of fraud and forgery. SEBL assesses/evaluates the effectiveness of its anti-fraud internal control measures on quarterly basis as per the items/areas mentioned in the prescribed checklist of Bangladesh Bank. 2.3 Basis of measurement

The financial statements of the Bank have been prepared on the historical cost basis except for the following:

● Government Treasury Bills and Bonds designated as 'Held for Trading (HFT)' at present value using marking to market concept with gain crediting revaluation reserve

● Government Treasury Bills and Bonds designated as 'Held to Maturity (HTM)' and remeasured Government Treasury Bond at present value using amortisation concept ● Investment in shares of listed companies ● Land and buildings are measured at fair value

2.4 Functional and presentation currency These financial statements are presented in Bangladesh Taka (Taka/Tk) which is the Bank's functional currency. Except as otherwise indicated, financial information presented in Taka has been rounded to the nearest integer. 2.5 Use of estimates and judgments The preparation of these financial statements in conformity with Bangladesh Bank circulars and BFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting

policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from Financial statements these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect in the year ending 31 December 2017 is included in the following notes: a) Note 3.3.3 : Rate of provision for loans, advances/investments b) Note 3.3.4 : Useful lives of depreciable assets c) Note 21.3.2 : Provision for deferred tax d) Note 24 : Assets revaluation reserve

2.6 Reporting period These financial statements cover one calendar year from 1 January 2016 to 31 December 2016. 278 Southeast Bank Limited I Annual Report 2016

2.7 Cash flow statement Cash flow statement has been prepared in accordance with the BRPD Circular No. 14 dated 25 June 2003 issued by the Banking Regulation & Policy Department of Bangladesh Bank. 2.8 Statement of changes in equity The Statement of changes in equity reflects information about the increase or decrease in net assets or wealth.

2.9 Liquidity statements The consolidated and separate liquidity statement of assets and liabilities as on the reporting date has been prepared on residual maturity term which has been given in the statement. Consolidated liquidity statements of the Group and the separate liquidity statements of the Bank have been furnished in Annexure-B and Annexure-B.1 respectively. 3 Significant accounting policies The accounting policy set out below have applied consistently to all periods presented in these consolidated financial statements of the Group and those of the Bank, and have been applied consistently by the group entities. 3.1 Basis of consolidation The consolidated financial statements include the financial statements of Southeast Bank Limited and its four subsidiaries Southeast Bank Capital Services Limited, Southeast Financial Services (UK) Limited, Southeast Financial Services (Australia) Pty Ltd and Southeast Exchange Company (South Africa) Pty Ltd made up to the end of the financial year. 3.1.1 Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date; i.e. when control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The Group measures goodwill at the acquisition date as:

● the fair value of the consideration transferred; plus

● the recognised amount of any non-controlling interests in the acquiree; plus

● if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less ● the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred. 3.1.2 Non-controlling interest For each business combination, the Group elects to measure any non-controlling interests in the acquiree either: ● at fair value; or ● at their proportionate share of the acquiree’s identifiable net assets, which are generally at fair value.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners. Adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary. Subsidiaries are the entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Southeast Bank Limited I Annual Report 2016 279

3.1.3 Transactions eliminated on consolidation Intra-group balances, and income and expenses (except for foreign currency transaction gains or losses) arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. 3.2 Foreign currency 3.2.1 Foreign currency transactions Transactions in foreign currencies are translated into the respective functional currency of the operation at the spot exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency at the spot exchange rate at the date that the fair value was determined. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Foreign currency differences arising on translation are recognised in profit or loss, except for differences arising on translation of equity investments in respect of which an election has been made to present subsequent changes in fair value in equity. 3.2.2 Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into Taka at spot exchange rates at the reporting date. The income and expenses of foreign operations, are translated into Taka at average exchange rates. Foreign currency differences are presented in the foreign currency translation reserve in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interest. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of the net investment in the foreign operation and presented in the translation reserve in equity. 3.3 Assets and basis of their valuation 3.3.1 Cash and cash equivalents Cash and cash equivalents include notes and coins on hand, unrestricted balances held with Bangladesh Bank and its agent bank, balance with other banks and financial institutions, money at call and on short notice, investments in treasury bills and prize bond. 3.3.2 Investments All investment securities are initially recognised at cost, including acquisition charges associated with the investment. Premiums are amortised and discounts are accredited. Held to Maturity

Investments which have, 'fixed or determinable payments' and are intended to be held to maturity are Financial statements classified as 'Held to Maturity'. Held for Trading Investment classified in this category are acquired principally for the purpose of selling or repurchasing in short trading or if designated as such by the management. Re-measured bond As per DOS circular letter no. 2 dated 19 January 2012, Treasury bond held in HFT category by the Primary Dealer (PD) may be re-measured at amortized cost instead of fair value. Revaluation As per the DOS Circular letter no. 5 dated 26 May 2008, HFT securities are revaluated each week using Marking to Market concept and HTM securities are amortised once a year according to Bangladesh Bank guidelines. Value of investments has been shown as under: Government Treasury Bills and Bonds (HFT) At present value (using marking to market concept) Government Treasury Bills and Bonds (HTM) At present value (using amortisation concept) Re-measured Government Treasury Bonds At present value (using amortisation concept) 280 Southeast Bank Limited I Annual Report 2016

Bangladesh Government Islamic Bond At cost Prize Bonds At cost Unquoted shares At cost or net book value of the last audited balance sheet whichever is lower Quoted shares At cost or market value whichever is lower at balance sheet date Details are shown in notes 8 and 9.

3.3.3 Loans and advances/ investments and provisions for loans and advances/ investments a) Loans and advances of conventional Banking/Investments of Islamic Banking branches are stated in the Balance Sheet on gross value. b) Provision for loans and advances is made on the basis of periodical review by the management and of instructions contained in Bangladesh Bank BRPD Circular Nos. 14 and 15 of 23 September 2012, BRPD Circular No. 19 of 27 December 2012, BRPD Circular No. 05 of 29 May 2013 and BRPD circular No. 16 of 18 November 2014. The rates of provision for different classifications are given below: Particulars Rate General provision on: All unclassified loans and advances/investments except followings 1% Small and medium enterprise financing 0.25% Housing finance (HF) and loans for professionals (LP) to set up business under consumer financing scheme 2% Consumer financing 5% Loan to Brokerage Houses (BHs)/Merchant Banks (MBs)/ Sponsor Directors (SDs) against shares 2% Special mention account (SMA) 0.25%-5%

Specific provision on:

Substandard loans and advances/investments 20% Doubtful loans and advances/investments 50% Bad/loss loans and advances/investments 100%

Provisions for Short term Agricultural and Micro-Credits All credits except 'Bad/Loss' 2.5%-5% (i.e. Doubtful, Substandard, irregular and regular credit) Bad/Loss 100%

c) Loans and advances are written off to the extent that i) there is no realistic prospect of recovery, and ii) against which legal cases are filed and classified as bad/loss as per guidelines of Bangladesh Bank.

These write off however will not undermine/affect the claim amount against the borrower. Detailed memorandum records for all such write off accounts are maintained and followed up. d) Amounts receivable on credit cards are included in advances to customers at the amounts expected to be recovered.

Details are shown in notes 10 and 11.

3.3.4 Fixed assets and depreciation Recognition and measurement Items of fixed assets excluding land are measured at cost/revaluation less accumulated depreciation and accumulated impairment losses, if any. Land is measured at revaluation. Cost includes expenditure that are directly attributable to the acquisition of asset and bringing to the location and condition necessary for it to be capable of operating in the intended manner. When parts of an item of fixed asset have different useful lives, they are accounted for as separate items (major components) of fixed assets. Southeast Bank Limited I Annual Report 2016 281

The gain or loss on disposal of an item of fixed asset is determined by comparing the proceeds from disposal with the carrying amount of the item of fixed asset, and is recognised in other income/other expenses in profit or loss. Subsequent costs The cost of replacing a component of an item of fixed assets is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the day-today servicing of fixed assets are recognised in profit or loss as incurred. Depreciation Depreciation is recognised in profit or loss on reducing balance method, except motor vehicles which are depreciated on straight line basis, over the estimated useful lives of each part of an item of fixed assets since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. In case of acquisition of fixed assets, depreciation is charged from the month of acquisition, whereas depreciation on disposed off fixed assets is charged up to the month prior to the disposal. Asset category-wise depreciation rates for the current and comparative years are as follows:

Category of assets Rate of depreciation Land Nil Buildings 4% Furniture and fixtures 10% Office appliances 20% Professional and reference books 30% Electrical appliances 20% Computer 20% ATM Booth 20% Motor vehicles 20%

Depreciation methods, useful lives and residual values are reassessed at each reporting date and adjusted, if appropriate. 3.3.5 Leased assets – lessee Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Other leases are operating leases and are not recognised in the Group’s Balance Sheet. 3.4 Liabilities and basis of their valuation 3.4.1 Borrowings from other banks, financial institutions and agents Borrowings from other banks, financial institutions and agents includes refinance from Bangladesh Bank against agro-based credit, SME Loan etc., interest-bearing borrowings against securities from Bangladesh Bank and call borrowing from other banks. These items are brought to financial statements at the gross value of the outstanding balance. Details are shown in notes 16 and 17. Financial statements 3.4.2 Deposits and other accounts Deposits and other accounts include non interest-bearing current deposit redeemable at call, interest bearing on demand and short-term deposits, savings deposit and fixed deposit. These items are brought to financial statements at the gross value of the outstanding balance. Details are shown in notes 18 and 19. 3.4.3 Other liabilities Other liabilities comprise items such as provision for loans and advances/investments, provision for taxation, interest payable, interest suspense, accrued expenses, obligation under finance lease etc. Other liabilities are recognised in the balance sheet according to the guidelines of Bangladesh Bank, Income Tax Ordinance, 1984 and internal policy of the Bank. Details are shown in notes 20 and 21. 3.5 Capital/Shareholders' equity 3.5.1 Authorised capital Authorised capital is the maximum amount of share capital that the Bank is authorised by its Memorandum and Articles of Association. Details are shown in note 22.1 282 Southeast Bank Limited I Annual Report 2016

3.5.2 Paid up capital Paid up capital represents total amount of shareholder capital that has been paid in full by the ordinary shareholders. Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to vote at shareholders’ meetings. In the event of a winding-up of the Bank, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any residual proceeds of liquidation. Details are shown in note 22.2. 3.5.3 Statutory reserve Statutory reserve has been maintained @ 20% of profit before tax in accordance with provisions of section 24 of the Bank Companies Act 1991, until such reserve equals to its paid up capital together with the share premium. 3.5.4 Revaluation reserve Revaluation reserve arises from the revaluation of land and buildings as well as the revaluation of Treasury bills and bonds (HFT & HTM) in accordance with the DOS circular no. 5 dated 26 May 2008 and DOS(SR) 1153/120/2010 dated 8 December 2010. The tax effects on revaluation gain are measured and recognised in the financial statements as per BAS 12: Income Taxes. Details are shown in note 24.

3.6 Contingent liabilities A contingent liability is -

A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or A present obligation that arises from past events but is not recognised because:

- it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or - the amount of the obligation cannot be measured with sufficient reliability.

Contingent liabilities are not recognised but disclosed in the financial statements unless the possibility of an outflow of resources embodying economic benefits is reliably estimated. Contingent assets are not recognised in the financial statements as this may result in the recognition of income which may never be realised. 3.7 Revenue recognition 3.7.1 Interest income (Conventional Banking) Interest on loans and advances is calculated on daily product basis and accrued at the end of each month, but charged to customers' accounts on quarterly basis. Interest accrued on loans and advances fall under Sub Standards (SS) and Doubtful (DF) category are credited to interest suspense account instead of income account. Interest is not charged on bad and loss loans as per guideline of Bangladesh Bank. Such interest is kept in separate memorandum account. Interest on classified loans and advances is accounted for on a cash receipt basis. Interest income from fixed deposit with other banks and call lending to other banks is recognized on accrual basis. 3.7.2 Profit on investment (Islamic Banking) Mark-up on investment is taken into income account proportionately from profit receivable account. Overdue charge/compensation on classified investments is transferred to profit suspense account instead of income account. 3.7.3 Investment income Income on investments is recognised on accrual basis. Investment income includes discount on treasury bills and interest on treasury bonds. Capital gain on investments in shares is also included in investment income. Capital gain is recognised when it is realised. 3.7.4 Fees and commission income The Bank earns fees and commissions from diverse range of services provided to its customers. Fees and commission income is recognised on a realisation basis. Commission charged to customers on letters of credit and letters of guarantee are credited to income at the time of effecting the transactions. Southeast Bank Limited I Annual Report 2016 283

3.8 Interest paid on borrowing and other deposits (Conventional Banking) Interest paid and other expenses are recognised on accrual basis.

3.9 Profit shared on deposits (Islamic Banking) Profit shared to mudaraba deposits is recognised on accrual basis as per provisional rate.

3.10 Dividends Dividend income is recognised when the right to receive income is established. Usually this is the ex-dividend date for equity securities. Dividends are presented in investment income. 3.11 Lease payments Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. 3.12 Employee benefits 3.12.1 Provident Fund Provident fund benefits are given to the staff of the Bank in accordance with the registered provident fund rules. The commissioner of Income Tax, Large Tax Payers Unit (LTU), Dhaka has approved the Provident Fund as a recognized fund within the meaning of section 2(52) read with the provisions of part - B of the First Schedule of Income Tax Ordinance 1984. The fund is operated by a Board of Trustees consisting of 6 (six) members of the Bank. All confirmed employees of the Bank are contributing 10% of their basic salary as subscription of the fund. The Bank also contributes equal amount to the fund. Contributions made by the Bank are charged as expense and the bank bears no further liability. Interest earned from the investments is credited to the members' account on half yearly basis. Members are eligible to get both the contribution after 5 (five) years of continuous service from the date of their membership. 3.12.2 Gratuity Fund Gratuity fund benefits are given to the staff of the Bank in accordance with the approved gratuity fund rules. National Board of Revenue has approved the gratuity fund as a recognized gratuity fund with effect from December 2001. The fund is operated by a Board of Trustees consisting of 7 (seven) members of the Bank. Employees are entitled to gratuity benefit after completion of minimum 7 (seven) years of service in the Bank. The amount payable at the date of balance sheet is recognised and accounted for as at that date based on actual rate. The gratuity is calculated on the basis of last basic pay and is payable at the rate of one month's basic pay for every completed year of service. The amount so calculated are transferred to the fund and charged to expenses of the Bank. 3.12.3 Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash

bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as Financial statements a result of past service provided by the employee and the obligation can be estimated reliably. 3.12.4 Workers' Profit Participation Fund (WPPF) As per Bangladesh Labour Act 2006 and SRO no. 336/Law/2010, all companies fall within the scope of WPPF are required to provide 5% of its profit before charging such expense to their eligible employees within the stipulated time. The Bank obtained opinion from its legal advisor regarding this issue. The legal advisor opined that, "Southeast Bank Limited being governed by Banking Companies Act, 1991 is obliged to follow the provisions of Banking Companies Act, 1991, and Banking Companies Act, 1991 being a special law, provisions of this Act shall prevail over Bangladesh Labour Laws, 2006 (amended in 2013) which is a general law. Thus, we take the view that the Bank is not bound to form a WPPF under Bangladesh Labour Laws, 2006 (amended in 2013)". Consistent with the industry practice and in accordance with the legal opinion and the Bank Company Act, 1991 (amended in 2013), no provision has been made for WPPF. 3.13 Provisions and accrued expenses In compliance with BAS-37, provisions and accrued expenses are recognized in the consolidated and separate financial statements when the Group/Bank has a legal or constructive obligation as a result of past event, it is probable that an outflow of economic benefit will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. 284 Southeast Bank Limited I Annual Report 2016

3.14 Provision for Off-Balance Sheet Exposures In compliance with Bangladesh Bank guidelines off-balance sheet items are disclosed under contingent liabilities. As per BRPD Circular No.10 dated 18 September 2007 and BRPD Circular No. 14 dated 23 September 2012, the Bank is required to maintain provision @ 1% against off-balance sheet exposures. Details are shown in note 21.5.1 (C). 3.15 Provision for Nostro Accounts According to guideline of Foreign Exchange Policy Department of Bangladesh Bank, Circular No. FEOD (FEMO)/01/2005-677 dated 13 September 2005, Bank is not required to make provision regarding the un- reconciled debit balance as at Balance Sheet date since there was no debit entries more than three month. 3.16 Tax expense Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity. 3.16.1 Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Details are shown in note 21.3.1.

3.16.2 Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: ● temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; ● temporary differences related to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future; and ● temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities against current tax assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax relating to unrealised surplus on revaluation of held to maturity (HTM) securities and held for trading (HFT) securities and land and buildings are recognised directly in revaluation reserve as a part of equity and is subsequently recognised in profit and loss account on maturity of the security and disposal of land and buildings. Details are shown in note 21.3.2. 3.16.3 Tax exposures In determining the amount of current and deferred tax, the Bank takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Bank to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. 3.17 Impairment of non-financial assets The carrying amounts of the Group’s and the Bank's non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its Cash Generating Unit (CGU) exceeds its estimated recoverable amount. Southeast Bank Limited I Annual Report 2016 285

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs) and then to reduce the carrying amount of the other assets in the CGU (group of CGUs) on a pro rata basis. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 3.18 Earnings per share The Group and the Bank present basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Group/ Bank by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees. Details are shown in notes 66 and 67. 3.19 Reconciliation of inter-bank/inter-branch account Books of accounts with regard to inter-bank (in Bangladesh and outside Bangladesh) are reconciled regularly and there are no material differences which may affect the financial statements significantly. Un-reconciled entries in case of inter-branch transactions as at the reporting date are not material. 3.20 Risk management In the context of Banking and Finance 'Risk' has always been at the heart of banking. As a consequence, it has become more important for banks to manage effectively the various types of risk they confront, including market, credit, liquidity, operations, and information technology risk. Effective risk management is an essential element of our operations and strategy. The Bank monitors risk at all levels throughout its operations and has established units to manage various types of risk. Our risk management framework is designed to identify, manage and mitigate the risk of any failure to achieve business objectives. The risk management of the Bank covers following six core risk areas: i) Credit Risk ii) Foreign Exchange Risk

iii) Asset Liability Management Risk Financial statements iv) Money Laundering Risk v) Internal Control & Compliance Risk; and vi) Information and Communication Technology Risk

The Bank’s risk management policy and process are composed with all the structures, policies, process and strategies in the line with the guidelines of central bank and other regularity authorities. The Bank endeavors to maximize profits through the development of an integrated risk management system. 3.20.1 Credit risk Credit risk is the possibility that a borrower or counter party will fail to repay the borrowed money as per the agreed terms and conditions. Managing Credit risk of the Bank in an efficient manner has become one of the most crucial tasks for the management. Given the fast changing, dynamic global economy, implementation of Basel-III and the increasing pressure of globalization and liberalization it is essential that banks have robust credit risk management policies and procedures that are sensitive and responsive to these changes. 286 Southeast Bank Limited I Annual Report 2016

A thorough assessment & due diligence are done before sanction of any credit facility at Credit Risk Management Division (CRM) of the Bank. The risk assessment includes borrower risk analysis, financial analysis, industry analysis, historical performance of the customer, security of the proposed credit facilities and various critical risk factors. The assessment process starts at Branch Credit department by the Officer and ends at Credit Risk Management Division (CRM) in Head Office where it is approved / declined by the competent authority. Credit approval authority has been partially delegated to the individual executives. Proposal beyond their delegation are approved / declined by the Board / Executive Committee (EC) of the Board. 3.20.2 Foreign Exchange Risk Foreign exchange risk is the exposure of an institution to the potential impact of movements in foreign exchange rates. The risk is that adverse fluctuations in exchange rates may result in a loss in earnings. As per the guidelines of Bangladesh Bank, Southeast Bank Limited has developed a detailed Foreign Exchange Risk Management policies to minimize different types of risks associated with foreign exchange transactions. The Bank has also developed different strategies to handle foreign exchange risk by setting different types of limits and risk parameters to measure and monitor foreign exchange risk exposure of the Bank. The foreign exchange desk of treasury division is involved in foreign exchange dealing activities with different counterparts; the treasury back office is engaged in transfer of funds and passing of the transaction entries in the books of accounts, and the mid office is responsible for verification of the deals. All foreign exchange transactions are revalued at market rate as per the directive of Bangladesh Bank. All nostro accounts are reconciled on a monthly basis and outstanding entries beyond 30 days are reviewed by the management for its settlement. 3.20.3 Asset Liability Management Banks are exposed to the several risks such as Liquidity Risk, Interest Rate Risk, Foreign Exchange Risk, Credit Risk and Operational Risk etc. Monitoring and controlling of these risks is vital to the survival of a financial institution. Asset-Liability Management is a tool to oversee whether different balance sheet risks are properly identified, appropriate policies and procedures are well established to control and limit these risks. Asset-Liability Committee (ALCO) reviews country’s overall economic position, the Bank’s liquidity position, key performance ratios, interest rate risk, deposit and advance growth, cost of deposit & yield on advances, deposit & lending pricing strategy and different forecasted balance sheet risks of the Bank. 3.20.4 Money Laundering Risk Money laundering is the generic term used to describe the process by which criminals disguise the original ownership and control the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source. If money laundering is done successfully, it allows the criminals to maintain control over their proceeds and ultimately to provide a legitimate cover for their source of income. Money laundering plays a fundamental role in facilitating the ambitions of the drug trafficker, the terrorist, the organized criminal, the insider dealer, the tax evader as well as many others who need to avoid the attention from the authorities that sudden wealth brings from illegal activities. By engaging in this type of activity it is hoped to place the proceeds beyond the reach of any asset forfeiture laws. Southeast Bank Limited (SEBL) has implemented an enterprise-wide AML (Anti-Money Laundering) and CFT (Combating the Financing of Terrorism) compliance program, which covers all the activities of the Bank and is reasonably designed to comply with applicable laws and regulations. It is the policy of SEBL to take all reasonable and appropriate steps to prevent persons engaged in money laundering, fraud, or other financial crime, including the financing of terrorists or terrorist operations, from utilizing SEBL products and services. SEBL makes every effort to remain in full compliance with all applicable AML and CFT laws, rules and standards in the jurisdictions in which it does business. In order to facilitate compliance with AML and CFT requirements, SEBL has appointed one of its Senior Executives as the CAMLCO (Chief Anti-Money Laundering Compliance Officer) and a team of employees with experience on AML and CFT requirements under law to oversee the Bank's AML and CFT program. SEBL has developed and implemented written AML and CFT policies, procedures, internal controls and systems, which include (but not limited to) a customer identification program and procedures; procedures to collect and refresh, as appropriate, customer due diligence information; processes to assess risk; processes and systems to monitor customer transactions and activity; processes and systems to identify and report suspicious activity; and, processes to keep required records. SEBL educates its all employees on AML and CFT requirements and activities and also subjects its AML and CFT program to regular independent testing. SEBL cooperates fully with law enforcement and regulatory investigations and inquiries in identifying the criminals involve in Money Laundering and Terrorist Activities/Financing. Southeast Bank Limited I Annual Report 2016 287

3.20.5 Internal Control & Compliance Risk Internal control is fundamental to the successful operation and day-to-day running of a business and it assists the bank in achieving its business objectives. It encompasses all controls incorporated into the strategic, governance and management processes, covering the bank’s entire range of activities and operations, and not just those directly related to financial operations and reporting. Its scope is not confined to those aspects of a business that could broadly be defined as compliance matters, but extends also to the performance aspects of a business. SEBL has established a System of Internal Control, which is designed to manage all the risks of failure to a reasonable level, achieve aims and objectives/goals of the Bank and this System provides reasonable assurance of effective & efficient operations covering all controls including financial & operational controls, reliability of the financial information, compliance with applicable laws & regulations, adherence to management policies, safeguarding of Bank’s Assets, prevention & detection of fraud & errors, and accuracy & completeness of the accounting records. The Board of Directors of SEBL regularly reviews the effectiveness of internal control process through its Audit Committee and the Audit Committee plays an effective role amongst the Board of Directors, Management, Shareholders, Depositors and develops an efficient, powerful and a safe banking system. The committee also performs a very important role for publishing Bank’s financial statements, developing an appropriate internal control system and maintains an effective communication with internal and external auditors. It significantly contributes in controlling and monitoring various risks factors that arise from the business activities of the Bank. Board Audit Committee reviews the actions taken on internal control issues identified in the reports prepared by the internal & external auditors and regulatory authorities. It has active oversight on the internal audit’s independence, scope of work and resources and it also reviews the functions of Internal Control & Compliance Division of Head Office, particularly the scope of the annual audit plan and frequency of the internal audit activities. 3.20.6 Information and communication technology The Bank has Centralized Core Banking Software (CBS) and providing online banking services to its clients through 128 Branches across the country. The Core Banking Software (CBS) has further been upgraded to its latest release to enhance existing features and functionalities and secure online banking transaction. The Bank is offering 24/7 banking services through establishing country wide alternate delivery channels, like ATM and Mobile Financial Service (MFS). It has also introduced Internet Banking service. For customer convenience, the Bank is collecting utility bills of DPDC, DESCO, WASA, Titas Gas and BTCL, PDB and Student Tuition Fees of North-South, BRAC and Asia Pacific University through its alternate delivery channels other than over the counter of its online Branches. Two Factor Authentication System (2-FA) has been introduced for doing inter- bank fund transfer or to pay utility bills/student tuition fees through Internet Banking system. SMS and E-Mail Alert services are available for any debit/credit transaction through online and internet banking or using Bank’s Debit / Credit Card as a deterrent against fraudulent transaction attempts. Data replication and synchronization between DC (Data Center) and DRS (Disaster Recovery Site) has been established through two dark fiber optic cables to ensure availability of data / information. The Bank has also deployed Web Gateway and Web Application Firewall to further strengthen its system infrastructure. This will secure its internal network and server system by way of giving protection of information that flows to and from the internet. The Bank has reviewed and taken instant steps to procure and deploy industry leading IT security solutions to plug off security gaps. Bank’s ICT Security Policy has been revised according to the guideline on ICT Security for Banks and NBFIs of Bangladesh Bank which was published in October 2015 to cope with evolving changes in the ICT environment. The Business Continuity Plan (BCP) and Disaster Recovery Plan (DRP) and ICT Risk Financial statements Management Policy have also been revised. Gradual implementation of the different policies is being carried out. The network connectivity of the SWIFT payment channel has been reviewed and restructured to ensure security and minimize operational risks. As part of building awareness on ICT Security and Risk among the employees of the Bank, regular training program is being arranged. 3.20.7 Environmental Risk Management (ERM) Environmental Risk is a facilitating element of credit risk arising from environmental issues and applicable across all financing transactions undertaken by the Bank. The responsibilities of Credit Risk Management functions are: i) to be aware of environmental issues confronting the various sectors, ii) to review the completed due- diligence checklist and the environmental risk rating, iii) to integrate environmental risk considerations into the credit risk assessment and iv) to specify financing conditions/covenants , if any, are required. Environmental risk is assessed by Environmental Due Diligence (EDD) Checklists. It is a set of questionnaire provided by Bangladesh Bank. There are eleven checklists, one for general purpose and ten others for ten specific sectors for environmental risk rating. For a specific sector both General EDD and Specific EDD checklists are applicable and for other than these specific sectors only General EDD checklist is applicable to determine the environmental risk rating (EnvRR). The EnvRR can be High, Moderate or Low depending on the borrower’s business activity and the vulnerability of the location of the business activity. 288 Southeast Bank Limited I Annual Report 2016

3.21 Compliance of Bangladesh Financial Reporting Standards (BFRSs)

Name of the standards Ref. Status First-time Adoption of Bangladesh Financial Reporting Standards BFRS-1 Not applicable Share-based Payment BFRS-2 Not applicable Business Combinations BFRS-3 Applied Insurance Contracts BFRS-4 Not applicable Non-current Assets Held for Sale and Discontinued Operations BFRS-5 Not applicable Exploration for and Evaluation of Mineral Resources BFRS-6 Not applicable Financial Instruments: Disclosures BFRS-7 * Applied Operating Segments BFRS-8 ** Applied Consolidated Financial Statements BFRS-10 Applied Joint Arrangements BFRS-11 Not applicable Disclosure of Interests in other Entities BFRS-12 Applied Fair Value Measurement BFRS-13 * Applied Regulatory Deferral Accounts BFRS-14 Not applicable Presentation of Financial Statements BAS-1 * Applied Inventories BAS-2 Not Applicable Statement of Cash Flows BAS-7 * Applied Accounting Policies, Changes in Accounting Estimates and Errors BAS-8 Applied Events after the Reporting Period BAS-10 Applied Construction Contracts BAS-11 Not Applicable Income Taxes BAS-12 Applied Property, Plant and Equipment BAS-16 Applied Leases BAS-17 Applied Revenue BAS-18 Applied Employee Benefits BAS-19 Applied Accounting for Government Grants and Disclosure of BAS-20 Not Applicable Government Assistance The Effects of Changes in Foreign Exchange Rates BAS-21 Applied Borrowing Costs BAS-23 Applied Related Party Disclosures BAS-24 Applied Accounting and Reporting by Retirement Benefit Plans BAS-26 Not Applicable Separate Financial Statements BAS-27 Applied Investments in Associates BAS-28 Not Applicable Interests in Joint Ventures BAS-31 Not Applicable Financial Instruments: Presentation BAS-32 * Applied Earnings per Share BAS-33 Applied Interim Financial Reporting BAS-34 Applied Impairment of Assets BAS-36 Applied Provisions, Contingent Liabilities and Contingent Assets BAS-37 * Applied Intangible Assets BAS-38 * Applied Financial Instruments: Recognition and Measurement BAS-39 * Applied Investment property BAS-40 Not Applicable Agriculture BAS-41 Not Applicable * Subject to departure described in note 2.1 ** Subject to departure described in note 3.25 Southeast Bank Limited I Annual Report 2016 289

New standards: The Institute of Chartered Accountants of Bangladesh (ICAB) has adopted following new standards during the year 2015-2016. All previously adopted reporting standards are consistently applied by the Bank to the extent relevant for the Bank.

New standards Summary of the requirements Possible impact on financia

BFRS 9 Financial BFRS 9 replaces the existing guidance in The Bank is assessing the Instruments BAS 39 Financial Instruments: Recognition potential impact on its financial and Measurement. BFRS 9 includes statements resulting from the revised guidance on the classification and application of BFRS 9. measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from BAS 39. BFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. BFRS 15 Revenue BFRS 15 establishes a comprehensive The Bank is assessing the from Contracts with framework for determining whether, how potential impact on its financial Customers much and when revenue is recognised. statements resulting from the It replaces existing revenue recognition application of BFRS 15. guidance, including BAS 18 Revenue, BAS 11 Construction Contracts and BFRIC 13 Customer Loyalty Programmes. BFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted.

3.22 Credit Rating of the Bank As per the BRPD circular No.6 dated 5 July 2006, the bank has done its credit rating by Credit Rating Information and Services Limited (CRISL) based on the audited financial statements dated 31 December 2015

Particulars Date of Rating Long term Short term AA ST-2 Double A Surveillance Rating 23-Jun-16 (High quality and High (High Grade) Safety) Outlook Stable 3.23 Correspondence items Financial statements Correspondence items are maintained to have control over all items of importance and for such transactions where the Bank has only a business responsibility and no legal commitment. Stock of travelers cheques, savings certificates, wage earners bond and others fall under the correspondence items. 3.24 Offsetting Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Group and the Bank have a legal right to set off the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under BFRSs, or for gains and losses arising from a group of similar transactions such as in the Group’s trading activity. 290 Southeast Bank Limited I Annual Report 2016

3.25 Operating segments The Group and the Bank have no identified operating segment and as such presentation of segmental reporting is not made in the financial statements as per BFRS 8. However, geographical and business segments wise limited disclosures are furnished in Annexure-I.

3.26 Going concern basis of accounting

These financial statements have been prepared on the assessment of the Bank’s ability to continue as a going concern. The Bank has neither any intention nor any legal or regulatory compulsion to liquidate or curtail materially the scale of any of its operations. The key financial parameters (including liquidity, profitability, asset quality, provision sufficiency and capital adequacy) of the Bank continued to exhibit a healthy trend for couple of years. Besides, the management is not aware of any material uncertainties that may cast significant doubt upon the Bank’s ability to continue as a going concern.

3.27 Approval of financial statements The financial statements were approved by the board of directors on 8 April 2017. 3.28 General Figures of previous year have been rearranged, whenever necessary, to conform the current year's presentation. Southeast Bank Limited I Annual Report 2016 291

2016 2015 Note Taka Taka

4 Consolidated cash In hand (including foreign currencies): Southeast Bank Limited 4.1 2,428,412,898 1,903,292,780 Southeast Exchange Company (South Africa) Pty Ltd 4,164,053 - Southeast Financial Services (Australia) Pty Ltd 43,356 - 2,432,620,307 1,903,292,780 Balance with Bangladesh Bank and its agent banks (including foreign currencies): Southeast Bank Limited 4.1 15,402,827,761 14,093,697,688 17,835,448,068 15,996,990,468 4.1 Cash In hand: Local currency 2,381,811,031 1,850,553,332 Foreign currencies 46,601,867 52,739,448 2,428,412,898 1,903,292,780 Balance with Bangladesh Bank: Local currency 14,733,980,769 13,333,892,854 Foreign currencies 378,978,102 586,094,753 15,112,958,871 13,919,987,607 Balance with Sonali Bank Limited (as agent of Bangladesh Bank): Local currency 289,868,890 173,710,081 Balance with Bangladesh Bank and its agent banks 15,402,827,761 14,093,697,688 (including foreign currencies) 17,831,240,659 15,996,990,468 4.2 Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) have been calculated and maintained in accordance with section 33 of the Bank Companies Act, 1991 (Amended up to 2013), MPD Circular nos. 4 and 5 dated 1 December 2010 and MPD Circular no. 1 and 2 dated 23 June 2014 and 10 December 2013 respectively and DOS Circular no. 1 dated 19 January 2014. The statutory Cash Reserve Ratio on the Bank's demand and time liabilities at the rate of minimum 6.0% on daily basis and 6.50% on bi-weekly basis for conventional and Islamic banking has been calculated and maintained with Bangladesh Bank in current account and 13% Statutory Liquidity Ratio for conventional banking and 5.50% Statutory Liquidity Ratio for Islamic banking on the same liabilities has also been maintained in the form of treasury bills, bonds and debentures including excess cash reserve balance with Bangladesh Bank. Both the reserves maintained by the Bank are in excess of the statutory requirements, as shown below: 4.2.1 a) Cash Reserve Ratio (CRR) for Conventional Banking 6.50% of average Demand and Time Liabilities:

Required reserve (Average daily on bi-weekly basis) 14,028,676,662 12,257,453,364 Financial statements Actual reserve held 14,188,314,690 12,559,045,682 Surplus 159,638,028 301,592,318 b) Cash Reserve Ratio (CRR) for Islamic Banking 6.50% of average Demand and Time Liabilities: Required reserve (Average daily on bi-weekly basis) 815,652,913 783,041,796 Actual reserve held 870,294,183 834,839,164 Surplus 54,641,270 51,797,368 292 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka

4.2.2 a) Statutory Liquidity Ratio (SLR) for Conventional Banking Required reserve (13% of average Demand and Time Liabilities:) 28,057,353,324 24,514,906,728 Actual reserve held 56,373,180,749 54,255,264,173 Surplus 28,315,827,425 29,740,357,445 Held for Statutory Liquidity Ratio of Conventional Banking: Cash in hand 2,289,521,421 1,817,641,355 Balance with agent bank (Sonali Bank Limited) as per statement 274,217,000 155,245,000 Excess cash reserve 159,638,028 301,592,318 Government Securities (HFT) 21,205,497,000 21,864,407,000 Government Securities (HTM) 32,440,264,000 30,110,991,000 Other eligible securities/ Prize Bond 4,043,300 5,387,500 56,373,180,749 54,255,264,173 b) Statutory Liquidity Ratio (SLR) for Islamic Banking Required reserve (5.50 % of average Demand and Time Liabilities:) 690,167,850 662,573,830 Actual reserve held 859,075,747 777,844,023 Surplus 168,907,897 115,270,193 Held for Statutory Liquidity Ratio of Islamic Banking: Cash in hand 138,891,477 85,651,425 Balance with agent bank (Sonali Bank Limited) as per statement 15,543,000 395,230 Excess cash reserve 54,641,270 51,797,368 Government Securities (HTM) 650,000,000 640,000,000 859,075,747 777,844,023 5 Consolidated balance with other banks and financial institutions In Bangladesh: Southeast Bank Limited 6 2,860,092,475 2,187,972,750 Southeast Bank Capital Services Limited 581,276,914 21,374,639 3,441,369,389 2,209,347,389 Less: Inter company balance eliminated 581,276,914 21,374,639 2,860,092,475 2,187,972,750 Outside Bangladesh: Southeast Bank Limited 6 1,118,618,354 1,149,021,361 Southeast Financial Services (UK) Ltd 2,542,480 3,473,088 Southeast Financial Services (Australia) Pty Ltd 177,967 2,268,786 Southeast Exchange Company (South Africa) Pty Ltd 63,790,138 48,587,080 1,185,128,939 1,203,350,315 4,045,221,414 3,391,323,065 6 Balance with other banks and financial institutions In Bangladesh 6.1 2,860,092,475 2,187,972,750 Outside Bangladesh 6.2 1,118,618,354 1,149,021,361 3,978,710,829 3,336,994,111 Also refer to note 6.3 for maturity wise grouping Southeast Bank Limited I Annual Report 2016 293

2016 2015 Note Taka Taka

6.1 In Bangladesh Current account with: Agrani Bank Limited 575,850 575,850 Al Arafah Islami Bank Limited 14,894,941 14,011,899 BRAC Bank Limited 5,001 1,774,610 BRAC Bank Limited (El Dorado Network) 543,506 3,964,484 Commercial Bank of Ceylon PLC 13,337 13,337 EXIM Bank Limited 8,758,775 7,120,339 The Farmers Bank Limited 6,614,752 2,553,122 Jamuna Bank Limited 34,804,125 27,253,637 Meghna Bank Limited 3,129,809 2,316,169 Mercantile Bank Limited 5,538,588 5,410,710 Modumoti Bank Limited 2,301,653 2,569,738 Mutual Trust Bank Limited 13,832,137 17,869,673 National Bank Limited 19,074 12,210 One Bank Limited 1,742,091 3,735,933 Prime Bank Limited 2,008 3,158 Sonali Bank Limited (326,533) 2,589,257 Shahjalal Islami Bank Limited 550,000 550,000 Trust Bank Limited 3,160,509 3,160,509 Union Bank Limited 14,251,563 6,194,312 United Commercial Bank Limited 16,782,341 5,345,854 NRB Commercial Bank Limited 100,000 100,000 South Bangla Agriculture & Commerce Bank Limited 491,452 1,611,292 127,784,979 108,736,093 Savings deposits account with: EXIM Bank Limited - 110,557 Social Islami Bank Limited - 108,679 - 219,236 Short term deposits account with: AB Bank Limited 28,005 28,004 The City Bank Limited 1,106,755 1,106,755 Eastern Bank Limited 29,556 29,556 EXIM Bank Limited 120,792 184,254 Standard Chartered Bank 4,232,231 2,430,368 Sonali Bank Limited 26,789,812 25,238,139 Uttara Bank Limited 345 345 32,307,496 29,017,421 Fixed deposits with other banks: The Farmers Bank Limited - 50,000,000

NRB Global Bank Limited 250,000,000 - Financial statements One Bank Limited 500,000,000 - Social Islami Bank Limited 300,000,000 - The ICB Islamic Bank Limited - 1,000,000,000 1,050,000,000 1,050,000,000 Fixed deposits with financial institutions: Bay Leasing and Investment Limited 500,000,000 450,000,000 Fareast Finance and Investment Limited - 100,000,000 Industrial and Infrastructure Development Finance Company Limited 100,000,000 - IPDC Finance Limited 200,000,000 - International Leasing and Financial Services Limited 100,000,000 200,000,000 Union Capital Limited 100,000,000 - Bangladesh Industrial Finance Company Limited 150,000,000 50,000,000 GSP Finance Company (Bangladesh) Limited - 200,000,000 Investment Corporation of Bangladesh 500,000,000 - 1,650,000,000 1,000,000,000 2,860,092,475 2,187,972,750 294 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka

6.2 Outside Bangladesh Current account Interest bearing: Standard Chartered Bank, New York, USA 79,939,791 162,867,320 Standard Chartered Bank, New York OBU 2,502,922 25,993,493 Citibank N.A, New York, USA 12,320,169 6,230,285 Standard Chartered Bank, London, UK 35,706,219 10,421,686 Mashreq Bank PSC, New York, USA 378,944,176 536,105,342 Wells Fargo Bank, N.A., New York, USA 43,158,173 17,096,588 Citibank AG, Frankfurt, Germany 2,966,473 (4,849,259) Standard Chartered Bank, Calcutta, India 5,150,727 16,498,010 AB Bank Ltd., Mumbai, India 34,012,582 15,948,685 ICICI Bank Ltd., Mumbai, India 3,331,684 3,140,691 JP Morgan Chase Bank N.A., New York, USA 144,963,770 42,798,605 Habib American Bank, New York, USA 54,519,931 15,442,516 Mashreq Bank, Mumbai, India 13,876,284 16,181,958 Mashreq Bank, Mumbai, India 1,278,977 6,467,370 Sonali Bank (UK) Ltd. USD 54,288,239 102,989,122 Sonali Bank (UK) Ltd. GBP 16,012,568 8,114,118 Sonali Bank (UK) Ltd. EURO 2,442,370 4,772,406 885,415,055 986,218,936 Non-interest bearing: Bank of Nova Scotia, Toronto, Canada - 2,517,501 United Bank Limited, Karachi, Pakistan 12,773,370 289,179 Standard Chartered Bank, Colombo, Srilanka 15,961,921 9,240,541 Standard Chartered Bank, Mumbai (AEB), India 1,987,849 1,982,525 Habib Allied Intl Bank, UK EUR 6,024,463 - Bank of Tokyo, Mitsubishi, JPY 1,258,241 - Nepal Bangladesh Bank Ltd., Kathmandu, Nepal 3,789,947 2,357,015 Bank of Bhutan, Pheuntsholing, Bhutan 6,233,334 2,994,202 Commerz Bank AG, Frankfurt, Germany EURO 4,947,574 598,944 Commerz Bank AG, Frankfurt, Germany USD 39,325,786 41,682,998 U.B.A.F., Tokyo, Japan - 5,482,794 Zuercher Kantonal Bank, Zurich, Switzerland 10,784,568 10,945,034 National Australia Bank Ltd., Melbourne, 7,725,805 21,916,941 Australia HDFC Bank, Mumbai, India 83,931,106 54,238,086 Habib Bank AG Zurich, Zurich, Switzerland 1,830,346 1,951,850 Mashreq Bank PSC, Dubai, UAE 2,229,915 144,445 Habib Metropoliton Bank Ltd., Karachi, Pakistan 28,769,758 4,408,327 Al Rajhi Bank, Saudi Arabia 5,629,316 2,052,043 233,203,299 162,802,425 1,118,618,354 1,149,021,361 Details of Balance with other banks-Outside Bangladesh shown in Annexure-C. 6.3 Maturity grouping of balance with other banks and financial institutions On demand 1,246,403,333 1,094,955,029 Not more than three months 2,632,307,496 2,042,039,082 More than three months but not more than six months 100,000,000 200,000,000 More than six months but not more than one year - - More than one year but less than five years - - Above five years - - 3,978,710,829 3,336,994,111 Southeast Bank Limited I Annual Report 2016 295

2016 2015 Note Taka Taka

7 Money at call and on short notice In bank: The ICB Islamic Bank Limited 11,300,000 15,300,000 NRB Commercial Bank Limited - 220,000,000 NRB Bank Limited - 40,000,000 Bank Al Falah Ltd. - 100,000,000 Habib Bank Limited, Dhaka - 150,000,000 Midland Bank Limited 200,000,000 - Modhumoti Bank Limited 200,000,000 - BRAC Bank Limited 230,000,000 - NCC Bank Limited 800,000,000 - 1,441,300,000 525,300,000 In non-banking financial institutions (public and private): Phoenix Finance and Investment Limited 190,000,000 - IPDC Finance Limited 100,000,000 - LankaBangla Finance Ltd. 100,000,000 - 390,000,000 - In foreign currency: AB Bank Limited 708,399,900 398,151,500 BRAC Bank Limited 314,844,400 - Premier Bank Limited 314,844,400 - NCC Bank Limited 236,133,300 - Social Islami Bank Limited 157,422,200 - Commercial Bank of Ceylon PLC 236,133,300 - Mutual Trust Bank Limited 78,711,100 - Eastern Bank Limited 393,555,500 - 2,440,044,100 398,151,500 4,271,344,100 923,451,500 8 Consolidated Investments Government securities: Southeast Bank Limited 9 54,299,803,894 52,620,785,540 54,299,803,894 52,620,785,540 Others: Southeast Bank Limited 9 5,155,205,613 4,267,629,032 Southeast Bank Capital Services Limited 2,276,624,953 1,940,851,629 7,431,830,566 6,208,480,661 61,731,634,460 58,829,266,201 9 Investments

Government securities: Financial statements Conventional Banking 9.1.1 53,649,803,894 51,980,785,540 Islamic Banking 9.2.1 650,000,000 640,000,000 54,299,803,894 52,620,785,540 Others: Conventional Banking 9.1.2 2,267,841,260 1,093,455,544 Islamic Banking 9.2.2 2,887,364,353 3,174,173,488 5,155,205,613 4,267,629,032 59,455,009,507 56,888,414,572 Also refer to notes 9.3 to 9.8 for further analysis, maturity wise grouping, market value information, sector wise investment, etc. 296 Southeast Bank Limited I Annual Report 2016

2016 2015 Taka Taka

9.1 Conventional Banking 9.1.1 Government Securities Treasury Bills 364 days Treasury Bills 991,930,001 985,535,100 991,930,001 985,535,100 Assured Repo with Bangladesh Bank/ Others (at book value) - (295,937,100) 991,930,001 689,598,000 Prize Bonds 4,043,300 5,387,500 Bangladesh Bank Bills - - 4,043,300 5,387,500 Government Bonds 2 Years BGTB HTM 1,324,190,350 172,000,000 5 Years BGTB HTM 5,059,213,001 4,095,252,659 10 Years BGTB HTM 13,114,179,977 12,226,663,613 15 Years BGTB HTM 6,496,362,680 4,664,118,802 20 Years BGTB HTM 5,484,568,752 3,890,282,974 Remeasured 5 years BGTB HTM - 4,102,785,342 Remeasured 10 years BGTB HTM 961,749,167 959,887,889 2 Years BGTB HFT 3,197,926,886 5,866,512,662 5 Years BGTB HFT 9,452,112,789 8,647,430,447 10 Years BGTB HFT 7,184,666,536 5,254,892,396 15 Years BGTB HFT 167,447,843 1,155,363,067 20 Years BGTB HFT 211,412,612 250,610,189 52,653,830,593 51,285,800,040 53,649,803,894 51,980,785,540 9.1.2 Others Shares in listed companies 1,006,352,650 878,467,734 Shares in un-listed companies 61,488,610 214,987,810 Bonds 1,200,000,000 - 2,267,841,260 1,093,455,544 9.2 Islamic banking 9.2.1 Government securities Bangladesh Government Islamic bond 650,000,000 640,000,000 650,000,000 640,000,000 9.2.2 Others Shares in listed companies 2,887,364,353 3,174,173,488 2,887,364,353 3,174,173,488 9.3 Investments classified as per Bangladesh Bank Circular Held for trading (HFT) 21,209,539,967 21,869,794,261 Held to maturity (HTM) 33,090,263,927 30,750,991,279 Other securities 5,155,205,613 4,267,629,032 59,455,009,507 56,888,414,572 9.4 Maturity-wise grouping of investment On demand 4,043,300 5,387,500 Not more than three months 2,343,870,935 3,965,660,049 More than three months but not more than one year 7,032,299,074 9,737,790,409 More than one year but not more than five years 25,889,694,776 22,646,851,734 Above five years 24,185,101,422 20,532,724,880 59,455,009,507 56,888,414,572 Southeast Bank Limited I Annual Report 2016 297

9.5 Cost and market value of investments 9.5.1 Government securities

2016 2015 Cost price Market price Market price Taka Taka Taka Conventional Banking Treasury Bills 991,337,930 991,930,001 689,598,000 Bangladesh Government Treasury Bond 52,958,226,446 52,653,830,593 51,285,800,040 Prize Bonds 4,043,300 4,043,300 5,387,500 53,953,607,676 53,649,803,894 51,980,785,540 Islamic Banking Bangladesh Government Islamic Bond 650,000,000 650,000,000 640,000,000 54,603,607,676 54,299,803,894 52,620,785,540

9.5.2 Others (Investment in Shares) 2016 2015 Market price Cost price Cost price Taka Taka Taka

Conventional Banking Shares in listed companies 816,353,273 1,006,352,650 878,467,734 Shares in un-listed companies 61,488,610 61,488,610 214,987,810 877,841,883 1,067,841,260 1,093,455,544 Islamic Banking Shares in listed companies 2,162,953,949 2,887,364,353 3,174,173,488 2,162,953,949 2,887,364,353 3,174,173,488 Shares in listed companies Investments have been recorded at cost and adequate provision has been maintained for probable future losses as per Bangladesh Bank guidelines. Market value of shares has been determined on the basis of the value of shares at the last trading day of the year.

9.6 Sector wise investment of shares 2016 2015 Market price Cost price Cost price Taka Taka Taka

Shares in listed companies (A) Banks and NBFI 1,102,737,124 2,055,989,695 2,610,329,218 Insurance Companies 552,623,098 573,997,079 523,211,903 Fuel and Power Companies 138,175,934 151,199,550 25,531,440 Financial statements Mutual Fund 438,541,544 365,642,276 401,538,326 Manufacturing & Other 747,229,522 746,888,403 492,030,335 2,979,307,222 3,893,717,003 4,052,641,222

2016 2015 Shares in un-listed companies (B) Net book value Cost price Cost price Taka Taka Taka

Banks and NBFI 166,935,993 54,183,820 57,683,820 Manufacturing - - 149,999,200 Others 33,830,764 7,304,790 7,304,790 200,766,757 61,488,610 214,987,810 Total investment of shares (C=A+B) 3,955,205,613 4,267,629,032 The investments in shares of unlisted companies are shown at cost or net book value of the last audited balance sheet, whichever is lower. 298 Southeast Bank Limited I Annual Report 2016

2016 Differences (Provision to be Market price Cost price required) Taka Taka Taka 9.7 Market price and cost price of investments in ordinary shares as on 31 December 2016

1 Asia Insurance Limited 40,720,872 76,805,098 (36,084,226) 2 Bay Leasing & Investment Limited 306,804,802 643,319,328 (336,514,526) 3 EXIM Bank 1st Mutual Fund 91,050,036 93,296,119 - 4 EXIM Bank Limited 338,449,996 696,815,163 (358,365,167) 5 IFIC Bank 1st Mutual Fund 7,867,060 11,905,461 - 6 Islami Bank Limited 15,992,708 16,412,876 (420,168) 7 Lafarge Surma Cement Limited 131,028,398 155,264,542 (24,236,144) 8 National Life Insurance Co. Limited 456,695,360 397,735,353 58,960,007 9 Prime Bank Limited 242,721,782 433,586,851 (190,865,069) 10 Rupali Bank Limited 2,172,142 9,074,723 (6,902,581) 11 Standard Bank Limited 15,241,258 15,940,654 (699,396) 12 Titas Gas Trans. Co. Ltd. 89,160,973 92,298,169 (3,137,196) 13 SEBL MF 335,500,000 250,000,000 85,500,000 14 Trust Bank 1st Mutual Fund 4,124,448 10,440,696 (3,896,572) 15 Trust Bank Limited 1,190,000 1,189,740 260 16 NCC Bank Limited 36,887,183 49,228,082 (12,340,899) 17 One Bank Limited 32,585,297 35,307,295 (2,721,998) 18 Eastern Bank Limited 37,511,413 52,068,101 (14,556,688) 19 RN Spinning 3,446,079 4,459,649 (1,013,570) 20 Premier Cement Mills Limited 40,032,240 48,428,204 (8,395,964) 21 Prime Finance Limited 7,884,394 26,958,933 (19,074,539) 22 Premier Leasing & Finance Limited 18,234,930 26,902,718 (8,667,788) 23 Generation Next Fashion Limited 37,121,088 65,982,996 (28,861,908) 24 Union Capital Limited 12,218,995 14,012,426 (1,793,431) 25 Bangladesh LAMPS LTD 12,740,943 16,791,948 (4,051,005) 26 Bangladesh Submarine Cable Co. Ltd. 31,913,837 46,266,367 (14,352,530) 27 Delta Life Insurance Limited 55,206,866 99,456,628 (44,249,762) 28 Aftab Automobiles Limited 61,249,892 94,751,115 (33,501,223) 29 Global Heavy Chemicals Limited 24,917,993 34,247,190 (9,329,197) 30 Fuwang Food 160,000 125,956 34,044 31 Delta Spinners Limited 2,577,850 3,719,475 (1,141,625) 32 Envoy Textile Mills Ltd. 839,244 1,157,799 (318,555) 33 Meghna Petroleum Limited 11,955,946 16,651,636 (4,695,690) 34 ACME Laboratories Limited 285,575,400 151,004,255 134,571,145 35 Matin Spinning Mills Limited 11,400,720 14,044,434 (2,643,714) 36 Ifad Autos 400,800 324,726 76,074 37 Aman Feed Ltd. 13,708,853 14,321,866 (613,013) 38 Orion Pharma 8,257,915 8,110,242 147,673 39 Olympic Aceessories ltd 2,165,027 1,947,978 217,049 40 ACI Formulation 11,109,984 11,887,880 (777,896) 41 BRAC Bank Limited 9,666,665 9,935,565 (268,900) 42 Apolo Ispat 205,000 148,688 56,312 43 IPDC Finance Limited 6,998,445 7,044,521 (46,076) 44 Phoenix Finance & Investment Ltd. 6,160,100 6,268,931 (108,831) 45 BSC 4,702,000 4,699,724 2,276 46 Fuwang Ceramic 1,829,100 1,592,344 236,756 47 Emerald Oil 591,000 461,698 129,302 48 S ALAM 3,730,000 4,004,908 (274,908) 49 LankaBangla Finance Limited 8,799,563 8,579,814 219,749 Southeast Bank Limited I Annual Report 2016 299

2016 Differences (Provision to be Market price Cost price required) Taka Taka Taka 50 Saif Power Tec Ltd. 34,991,612 35,704,991 (713,379) 51 ICB 3,217,451 3,343,974 (126,523) 52 Khan Brothers 1,477,688 1,471,488 6,200 53 BSRM Limited 12,760,000 17,059,559 (4,299,559) 54 Yeakin Polymer 69,385 20,749 48,636 55 Fortune Shoes Ltd.. 511,200 432,229 78,971 56 ShahjiBazar Power Company Ltd. 27,097,510 32,184,686 (5,087,176) 57 Baraka Power 9,961,505 10,065,059 (103,554) 58 GQ Ballpen 2,148,274 2,308,967 (160,693) 59 BSRM Steel Mills Ltd. 5,568,000 6,146,439 (578,439) 2,979,307,222 3,893,717,006 (905,705,624) Actual provision 905,705,624 Surplus/(deficit) -

As at 31 December 2016, the value of investment cell which includes all investment in shares, corporate bond, debenture, mutual fund and total market value of other capital certificates and loan facilities given to own subsidiary company or companies directly or indirectly involved in capital market affairs stood at Tk 2,100.91 (2015: 1,960.08) crores which is 21.53% (2015: 36.37%) of total sum of paid up capital, statutory reserve and retained earnings of the bank. 9.8 Transactions of Repo and Reverse-repo during the year

Minimum Maximum Daily average outstanding outstanding outstanding Taka Taka Taka 2016 Securities sold under repo i) With Bangladesh Bank - - - ii) With other Banks & FIs 102,379,665 1,922,396,270 297,493,731 Securities purchased under reverse repo i) With Bangladesh Bank - - - ii) With other Banks & FIs 148,297,350 1,275,868,120 23,960,609 2015 Securities sold under repo i) With Bangladesh Bank 294,950,000 3,590,955,000 230,726,383

ii) With other Banks & FIs 2,477,729,244 244,107,750 449,183,076 Financial statements Securities purchased under reverse repo i) With Bangladesh Bank 300,000,000 2,350,000,000 36,843,779 ii) With other Banks & FIs 15,166,352 1,108,374,030 94,121,541 2016 2015 Taka Taka 10 Consolidated loans and advances/investments Loans, cash credit, overdrafts etc./investments: Southeast Bank Limited 11 180,161,187,214 162,056,722,487 Southeast Bank Capital Services Limited 2,500,642,443 2,363,503,025 182,661,829,657 164,420,225,512 Less: Inter company balance eliminated 10,674 2,863,903,191 182,661,818,983 161,556,322,321 Bills purchased and discounted: Southeast Bank Limited 11 9,203,770,254 7,322,136,224 9,203,770,254 7,322,136,224 191,865,589,237 168,878,458,545 300 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 11 Loans and advances/investments

Loans, cash credit, overdrafts etc./investments 11.1 180,161,187,214 162,056,722,487 Bills purchased and discounted 11.14 9,203,770,254 7,322,136,224 189,364,957,468 169,378,858,711

11.1 Loans, cash credit, overdrafts etc./Investments In Bangladesh: Conventional Banking Demand loan 5,025,639,557 4,551,141,658 Time loan 20,064,629,716 16,711,508,514 Term loan 69,051,082,952 60,080,906,138 Agricultural credit-Term 933,182,554 535,330,860 Agricultural credit-Time 1,105,435,895 964,023,377 Agricultural credit-OD 94,413,590 39,729,457 Consumer credit scheme 4,924,067 7,544,224 Car loan 73,227,474 51,040,857 Personal loan 373,219,780 367,078,166 Home loan 515,726,845 265,658,130 Cash credit and overdrafts 45,296,952,050 38,617,922,709 Bills Against Letter of Credit (BLC) 294,075,920 212,508,158 Loan re-finance housing sector 20,349,457 21,447,159 Loan against Trust Receipt (LTR) 13,378,652,768 17,067,432,717 Advances-packing credit (PC) 2,397,107,920 2,084,196,551 House building loan-staff 188,907,457 180,324,168 Digital device 185,449 403,990 Export Development Fund (EDF) 11,112,134,762 7,058,645,348 Loan against cash incentive 130,507,407 123,693,689 Loan-credit card 1,135,680,036 904,417,015 171,196,035,656 149,844,952,885

Islamic Banking Demand investment 242,699,956 39,653,688 Bai-Muajjal (Time) investment 310,841,197 259,042,064 Bai-Muajjal Time under CCS 55,960,365 43,418,633 Bai-Murabaha-BLC 32,499,080 6,738,157 Bai-Murabaha-LTR 476,095,001 1,199,083,998 Bai-Salam 84,436,201 73,641,541 Staff house building investment 8,362,607 8,648,005 Investment against cash incentive 17,327,114 9,932,898 Export Development Fund (EDF) 633,716,266 394,527,668 Bai-Muajjal-investment 3,269,956,321 6,350,895,335 Murabaha-investment 624,262,832 562,799,707 Hire purchase-investment 3,208,994,618 3,263,282,206 Quard against MTDR - 105,702 8,965,151,558 12,211,769,602 180,161,187,214 162,056,722,487 Outside Bangladesh - - 180,161,187,214 162,056,722,487 Southeast Bank Limited I Annual Report 2016 301

2016 2015 Taka Taka 11.2 Performing loans and advances/investments

Gross loans and advances/investments 189,364,957,468 169,378,858,711 Non-performing loans and advances/investments (9,257,788,205) (7,193,823,963) 180,107,169,263 162,185,034,748

11.3 Maturity-wise grouping of loans and advances/ Investments

On demand 43,794,108,537 39,477,070,239 Less than three months 24,803,469,746 20,774,326,085 More than three months but less than one year 50,941,232,848 48,736,933,155 More than one year but less than five years 47,341,367,857 37,652,834,591 More than five years 22,484,778,480 22,737,694,641 189,364,957,468 169,378,858,711

11.4 Concentration of loans and advances/ Investments

Advances to allied concerns of directors - - Advances to chief executive and other senior executives 72,967,000 66,078,000 Advances to customers' group: Advances to large and medium industries 83,239,207,953 74,011,200,000 Advances to small and cottage industries 1,875,500,000 1,082,000,000 Commercial lending 39,031,160,279 41,015,100,000 Export financing 14,375,200,000 9,744,600,000 Real estate 14,994,200,000 13,046,400,000 Consumer credit scheme 60,884,432 50,962,857 Other loans and advances 35,715,837,804 30,362,517,854 189,364,957,468 169,378,858,711 Details of large loan/investments

As at 31 December 2016 there were 25 (2015: 28) clients with whom amount of outstanding loans and advances exceeded 10% of the total capital of the Bank. Total capital of the Bank was Tk 34,021.14 million as at 31 Decem- ber 2016 (Tk. 28,490.49 million as at 31 December 2015). The Bank complies with the requirements of the section 26 (b) of the Bank Companies Act 1991 as amended in 2013 in connection with the general limitations of credit line. Details are shown in Annexure-D.

11.5 Sector-wise allocation of loans and advances

2016 2015 Financial statements % of % of total Taka total Taka loan loan Agriculture 1.29% 2,438,900,000 0.92% 1,554,400,000 Industry (other than working capital) 23.10% 43,734,198,080 22.86% 38,720,100,000 Working capital financing 20.86% 39,505,009,874 20.84% 35,291,100,000 Export credit 7.59% 14,375,200,000 5.75% 9,744,600,000 Commercial credit 20.61% 39,031,160,279 24.22% 41,015,100,000 Small and cottage industries 0.99% 1,875,500,000 0.64% 1,082,000,000 Others: a) Finance to NBFIs 0.64% 1,213,000,000 0.60% 1,018,800,000 b) Real Estate 7.92% 14,994,200,000 7.70% 13,046,400,000 c) Transport & communication 0.76% 1,446,700,000 0.78% 1,325,200,000 d) Small Enterprise financing 11.21% 21,231,811,601 11.16% 18,896,200,000 e) Miscellaneous 5.03% 9,519,277,634 4.54% 7,684,958,711 100.00% 189,364,957,468 100.00% 169,378,858,711 302 Southeast Bank Limited I Annual Report 2016

2016 2015 Taka Taka

11.6 Industry-wise loans and advances (Industrial Loan) Textile and garments industries including spinning industries 48,935,900,000 38,256,800,000 Food and allied industries 6,149,345,353 5,580,700,000 Pharmaceutical industries 747,703,027 718,400,000 Chemical, fertilizer, etc. 78,410,637 150,900,000 Cement and ceramic industries 3,455,073,480 3,381,900,000 Service industries 2,724,598,492 2,221,200,000 Other industries 21,148,176,964 23,701,300,000 83,239,207,953 74,011,200,000 11.7 Category-wise Small Medium Enterprise loans and advances (SME) Service sector 10,190,100,000 4,862,854,509 Trading sector 25,062,000,000 21,869,170,231 Industrial sector 6,035,000,000 7,782,155,638 41,287,100,000 34,514,180,378 11.8 Geographical location-wise allocations of loans and advances

2016 2015 % of % of total Taka total Taka loan loan Urban: Dhaka region 69.96% 132,470,612,723 69.77% 118,174,627,186 Chittagong region 18.10% 34,265,791,215 21.02% 35,604,749,224 Rajshahi region 2.07% 3,918,908,039 1.35% 2,293,150,022 Sylhet region 1.76% 3,334,117,812 2.08% 3,527,342,515 Khulna region 0.64% 1,203,827,539 0.88% 1,495,952,883 Rangpur region 0.48% 901,462,668 0.44% 750,949,679 Barisal region 0.08% 158,019,720 0.05% 90,222,155 Mymensingh region 0.28% 524,914,224 0.05% 79,589,318 93.35% 176,777,653,940 95.65% 162,016,582,982 Rural: Dhaka region 3.17% 6,002,966,153 2.74% 4,639,965,758 Chittagong region 1.85% 3,504,951,864 1.44% 2,433,193,648 Sylhet region 0.81% 1,540,320,041 0.14% 232,130,495 Rajshahi region 0.25% 478,849,898 0.03% 56,985,828 Khulna region 0.56% 1,060,215,572 0.00% - 6.65% 12,587,303,528 4.35% 7,362,275,729 100.00% 189,364,957,468 100.00% 169,378,858,711 11.9 Classification of loans and advances Unclassified: Standard including staff loan 90.47% 171,314,821,176 91.70% 155,315,330,299 Special Mention Account (SMA) 4.63% 8,792,348,087 4.06% 6,869,704,449 95.11% 180,107,169,263 95.75% 162,185,034,748 Classified: Sub-standard 0.83% 1,567,127,630 0.90% 1,517,889,736 Doubtful 0.31% 587,799,462 0.73% 1,240,806,394 Bad/loss 3.75% 7,102,861,113 2.62% 4,435,127,833 4.89% 9,257,788,205 4.25% 7,193,823,963 100.00% 189,364,957,468 100.00% 169,378,858,711 Southeast Bank Limited I Annual Report 2016 303

The amount reported above under standard category includes certain non-performing loan accounts with an aggregate outstanding amount of Tk.14,037.6 million at 31 December 2016 which have not been reported as classified loans at year-end on the basis of stay order from the Honorable High Court Division of the Supreme Court of Bangladesh. The amount of interest suspense and eligible securities available against these loans as at 31 December 2016 were Tk.1,323 million and Tk. 2,310.4 million respectively. As at 31 December 2016, an aggregate amount of Tk.138.3 million has been kept as general provision applicable for loans under standard category.

In connection with these loans Bangladesh Bank suggested vide letter reference no. DBI-1/78/2017-1206 dated 27 March 2017 to maintain additional provision of Tk. 767.6 million in 2016. The Bank has provided such additional provision in the financial statements of 2016.

2016 2015 Taka Taka 11.10 Particulars of loans and advances i) Debts considered good in respect of which the bank is fully secured; 155,162,481,958 131,029,202,890 ii) Debts considered good for which the bank holds no other security than the debtors' personal security; 12,149,368,473 14,387,425,624 iii) Debts considered good secured by the personal liabilities of one or more parties in addition to the personal security of the debtors; 22,053,107,036 23,962,230,197 iv) Debts adversely classified; provision not maintained - - v) Debts due by directors or officers of the bank or any of them either severally or jointly with any other persons; 197,859,451 189,805,585 vi) Debts due by companies or firms in which the directors or officers of the bank are interested as directors, partners or managing agents or, in case of private companies, as members; - - vii) Maximum total amount of advances, including temporary advances made any time during the year to directors or managers or officers of the bank or any of them either severally or jointly with any other persons; 197,859,451 189,805,585 viii) Maximum total amount of advances, including temporary advances granted during the year to companies or firms in which the directors of the bank are interested as directors, partners or managing agents or, in case of private companies, as members; - - ix) Due from banking companies; - - x) Classified loans/investments for which interest has not been charged: (a) Increase/(decrease) of provision (specific) 1,404,996,225 (350,206,903)

Amount of debts written off 1,012,890,775 2,452,261,045 Financial statements Amount realised against the debts previously written off 72,709,902 174,604,278 (b) Provision against the debt classified as bad/loss at the date of balance sheet 2,956,142,427 1,707,744,942 (c) Amount of interest charged in suspense account 3,549,523,832 2,832,654,051 xi) Loans written off: ● Current year 1,130,516,095 2,963,802,165 ● Cumulative to-date 9,076,603,000 8,050,306,676 ● The amount of written off loans for which lawsuit filed 9,076,603,000 8,050,306,676 304 Southeast Bank Limited I Annual Report 2016

11.11 Particulars of required provision for loans and advances/investments 2016 2015 Outstanding Base for Required Required Status as at 31 Dec provision % of provision provision 2016 required provision Taka Taka Taka Taka

For loans and advances/ Investments:

Unclassified-general provision All unclassified loans (other than small enterprises, housing finance, Loan to MBs loans for professional, consumer financing and special mention account) 130,240,699,926 130,240,699,926 1% 1,302,407,000 1,178,158,981

Small and medium enterprise financing 35,940,138,752 35,940,138,752 0.25% 89,850,351 75,775,474

Loan to BHs/MBs/SDs against shares 1,418,736,083 1,418,736,083 2% 28,374,722 82,317,321

Housing and loan for professional 631,759,684 631,759,684 2% 12,635,194 7,980,279

Consumer finance 1,458,331,315 1,458,331,315 5% 72,916,567 62,066,145

Agriculture finance 1,427,885,352 1,427,885,352 2.50% 35,697,134 31,101,800

Staff loan 197,270,064 197,270,064 1% 1,972,701 1,889,723

Special Mention Account (SMA) 8,792,348,087 8,705,458,297 0.25%-5% 117,685,493 98,500,037 1,661,539,162 1,537,789,760

Classified-specific provision: Sub-standard 1,567,127,630 576,068,882 5%-20% 114,289,342 128,161,657 Doubtful 587,799,462 228,127,330 50% 113,835,313 279,926,029 Bad/loss 7,102,861,113 2,956,142,427 100% 2,956,142,427 1,707,744,942 189,364,957,468 183,780,618,112 3,184,267,082 2,115,832,628

Required provision for loans and advances (A) 4,845,806,244 3,653,622,388

Total provision maintained (B) 6,158,284,306 3,863,288,081

Excess provision as at 31 December (C=B-A) 1,312,478,062 209,665,693

* Provision for loans and advances has been kept as per Bangladesh Bank letter reference no: DBI-1/78/2017- 1206 dated 27 March 2017. Southeast Bank Limited I Annual Report 2016 305

2016 2015 Taka Taka 11.12 Suits filed by the Bank (Branch wise details) Aganagar Branch 24,601,270 57,354,953 Agargaon Branch 46,495,055 32,208,767 Agrabad Branch 3,400,105,252 1,694,861,880 Banani Branch 478,744,788 478,377,367 Bandar Bazar Branch 33,472,439 31,862,743 Bangshal Branch 756,783,708 302,426,168 Bogra Branch 102,439,383 95,118,164 CDA Avenue Branch 1,001,878,996 568,628,205 Chapainawabgonj Branch 6,670,345 - Chouhatta Branch 32,123,958 31,481,125 Corporate Branch 56,546,456 58,392,487 Cox's Bazar Branch 67,768,272 59,302,319 Dhanmondi Branch 1,828,021,588 1,816,479,159 Gulshan Branch 119,890,152 255,942,698 Halishahar Branch 1,824,036,037 1,824,036,037 Imamgonj Branch 298,675,545 304,124,658 Jubilee Road Branch 40,036,273 39,543,618 Kakrail Branch 41,352,380 41,352,380 Kawranbazar Branch 98,482,809 4,437,057 Khatungonj Branch 859,750,230 859,750,230 Khulna Branch 98,484,842 98,088,592 Konabari Branch 1,862,261 1,862,261 Kotowali Branch 74,826,552 74,826,552 Kulaura Branch 9,078,456 9,078,456 Laldighirpar Branch 113,465,769 107,401,973 Madambibirhat Branch 27,584,384 27,584,384 Mohammadpur Branch 10,406,570 10,406,570 Momin Road Branch 109,818,537 109,818,537 Mouchak Branch 79,543,346 79,543,346 Moulvibazar Branch 171,254,940 157,084,193 Naogaon Branch 7,375,594 7,375,594 Narayangonj Branch 54,511,315 57,204,744

New Elephant Road Branch 127,592,586 127,592,586 Financial statements New Eskaton Branch 171,552,903 171,552,903 Pahartoli Branch 826,535,766 814,940,063 Principal Branch 5,515,730,861 5,615,943,766 Progoti Soroni Branch 61,593,200 61,593,200 Rupnagar Branch 5,582,437 - Shahjalal Uposhahar Branch 138,193,352 128,539,223 Sir Iqbal Road Branch 14,315,940 - Uttara Branch 270,340,241 270,340,241 19,007,524,788 16,486,457,199 306 Southeast Bank Limited I Annual Report 2016

2016 2015 Taka Taka 11.13 Listing of assets pledged as security/collaterals Nature of the secured assets Shares & Securities 1,295,544,654 779,939,729 Merchandise 2,956,323,198 5,316,351,142 Machinery with other fixed asset and financial obligation 7,794,104,888 8,002,585,325 Real estate with financial obligation 140,515,613,690 125,630,176,235 Financial obligation only 10,714,696,416 5,310,266,244 "(Insurance policies, savings certificates, bank deposit etc)" Miscellaneous- i) Crops/stock of crops hypothecation 2,058,718,058 3,424,026,215 ii) Guarantee of individuals/institutions 20,977,372,216 18,318,775,687 ii) Others 3,052,584,348 2,596,738,134 189,364,957,468 169,378,858,711 11.14 Bills purchased and discounted Conventional Banking In Bangladesh 2,632,005,815 2,099,077,877 Outside Bangladesh 6,245,714,954 5,064,117,418 8,877,720,769 7,163,195,295 Islamic Banking In Bangladesh 248,139,426 140,539,240 Outside Bangladesh 77,910,059 18,401,689 326,049,485 158,940,929 9,203,770,254 7,322,136,224 11.15 Maturity grouping of bills discounted and purchased Within one month 3,311,763,128 2,230,552,240 More than one month but less than three months 2,758,723,516 2,755,870,023 More than three months but less than six months 1,928,586,180 1,782,847,068 More than six months 1,204,697,430 552,866,893 9,203,770,254 7,322,136,224 11.16 Information about restructured loan as per Bangladesh Bank's BRPD Circular no. 4 dated 29 January 2015 Loans amounting to Tk. 3,103.80 million (outstanding Tk. 3,117.60 million as on 31 December 2016) of Keya Group, Gulshan Branch, Dhaka have been restructured by extension of validity of Term Loan for 12-years & conversion of demand loan into 06-years Term Loan including one year moratorium under the purview of BRPD Circular # 04 dated 29 January 2015. The status of the loans is unclassified and reported as SMA as per Bangladesh Bank's guidelines. Accordingly, 2% provision has been made. 12 Consolidated fixed assets including premises, furniture and fixtures Cost: Southeast Bank Limited 10,406,610,372 9,276,727,677 Southeast Bank Capital Services Limited 405,480,073 176,908,853 Southeast Financial Services (UK) Ltd 8,456,935 9,989,882 Southeast Financial Services (Australia) Pty Ltd 2,422,206 2,440,636 Southeast Exchange Company (South Africa) Pty Ltd 5,022,585 4,259,695 10,827,992,171 9,470,326,743 Less: Accumulated depreciation Southeast Bank Limited 1,792,923,672 1,525,648,802 Southeast Bank Capital Services Limited 77,764,768 50,574,583 Southeast Financial Services (UK) Ltd 6,323,279 6,594,017 Southeast Financial Services (Australia) Pty Ltd 1,596,346 1,465,330 Southeast Exchange Company (South Africa) Pty Ltd 2,221,550 817,600 1,880,829,615 1,585,100,332 Written down value at the end of the year 8,947,162,556 7,885,226,411 There were no capitalized borrowing cost related to the acquisition of fixed assets during the year (2015: nil). Details of consolidated amounts have not been provided as such amounts are insignificantly different from those of the Banks. Southeast Bank Limited I Annual Report 2016 307

2016 2015 Note Taka Taka 13 Fixed assets including premises, furniture and fixtures Cost: Land 5,775,037,313 5,348,446,725 Buildings 1,898,987,918 1,524,312,748 Furniture and fixtures 1,124,644,629 993,739,499 Office appliances 14,193,473 12,142,094 Computer 180,392,040 113,605,311 Electrical appliances 1,108,311,271 1,004,834,193 ATM Booth 174,746,153 158,100,064 Motor vehicles 130,297,575 121,547,043 10,406,610,372 9,276,727,677 Less: Accumulated depreciation Buildings 410,635,626 357,278,241 Furniture and fixtures 509,258,430 447,598,059 Office appliances 8,854,864 7,660,051 Computer 62,231,950 40,537,969 Electrical appliances 640,516,858 537,942,747 ATM Booth 80,142,933 59,176,131 Motor vehicles 81,283,011 75,455,604 1,792,923,672 1,525,648,802 Written down value at the end of the year 8,613,686,700 7,751,078,875 Details are shown in Annexure-E. 14 Consolidated other assets Southeast Bank Limited 15 8,478,052,796 5,977,253,927 Southeast Bank Capital Services Limited 115,351,911 269,542,908 Southeast Financial Services (UK) Ltd 25,059,186 24,153,678 Southeast Financial Services (Australia) Pty Ltd 1,923,109 1,807,474 Southeast Exchange Company (South Africa) Pty Ltd 980,261 550,000 8,621,367,263 6,273,307,987 Less: Investment in subsidiary: In Bangladesh 5,452,930,000 1,394,930,000 Outside Bangladesh 65,100,021 65,063,724 5,518,030,021 1,459,993,724 Intercompany balance 1,726,998 - 3,101,610,244 4,813,314,263 15 Other assets 8,478,052,796 5,977,253,927 15.1 Classification of other assets

i) Investment in shares of subsidiary companies: Financial statements - In Bangladesh 15.3 5,452,930,000 1,394,930,000 - Outside Bangladesh 15.4 65,100,021 65,063,724 ii) Stationery, stamps, printing materials, etc. 54,324,003 48,134,002 iii) Advance rent and advertisement 421,683,670 336,304,591 iv) Interest accrued on investment but not collected, commission and brokerage receivable on shares and debentures, and other income receivables 1,403,482,450 1,025,207,893 v) Security deposits 2,282,039 2,275,239 vi) Preliminary, formation and organisational expenses, renovation, development and prepaid expenses 489,509,292 1,156,827,743 vii) Branch adjustment 15.5 - 1,328,252,847 viii) Suspense account 153,037,756 200,451,481 ix) Others 435,703,565 419,806,407 8,478,052,796 5,977,253,927 308 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 15.2 Non-income generating other assets i) Stationery, stamps, printing materials, etc. 54,324,003 48,134,002 ii) Advance rent and advertisement 421,683,670 336,304,591 iii) Branch adjustment 15.5 - 1,328,252,847 iv) Suspense account 153,037,756 200,451,481 v) Preliminary, formation and organisational expenses, renovation, development and prepaid expenses 489,509,292 1,156,827,743 1,118,554,721 3,069,970,664 15.3 Investment in shares of subsidiary company in Bangladesh Cost 5,489,930,000 1,489,930,000 Less: Provision for impairment loss (37,000,000) (95,000,000) 5,452,930,000 1,394,930,000 15.4 Investment in shares of subsidiary companies outside Bangladesh Cost 113,660,069 113,623,772 Less: Provision for impairment loss (48,560,048) (48,560,048) 65,100,021 65,063,724 15.5 Branch adjustment (Debit) General accounts debit - 3,221,095,847 General accounts credit - 1,892,843,000 - 1,328,252,847 15.6 Particulars of required provision for other assets

Base for provision Rate (%) Taka

2016 Legal expenses for defaulting borrowings 6,602,196 50% 3,301,098 Legal expenses for defaulting borrowings 59,465,461 100% 59,465,461 Others 97,209,000 50% 48,604,500 Others 48,782,784 100% 48,782,784 Protested bills 3,581,157 100% 3,581,157 Nostro account balance - 100% - Required provision on other assets 163,735,000 Total provision maintained 163,735,000 Excess provision -

2015 Legal expenses for defaulting borrowings 5,832,404 50% 2,916,202 Legal expenses for defaulting borrowings 46,091,888 100% 46,091,888 Protested bills 3,615,397 100% 3,615,397 Nostro account balance - 100% - Required provision on other assets 52,623,487 Total provision maintained 71,000,000 Excess provision 18,376,513 Southeast Bank Limited I Annual Report 2016 309

2016 2015 Note Taka Taka

16 Consolidated borrowings from other banks, financial institutions and agents Subordinated bond: Southeast Bank Limited 17 8,000,000,000 3,000,000,000 8,000,000,000 3,000,000,000 Other borrowings: Southeast Bank Limited 17 7,363,947,263 4,519,780,424 Southeast Bank Capital Services Limited 7,698,493 2,901,042,619 7,371,645,756 7,420,823,043 Less: Inter company balance eliminated 10,674 2,863,903,191 7,371,635,082 4,556,919,852 15,371,635,082 7,556,919,852

17 Borrowings from other banks, financial institutions and agents Subordinated Bond 17.2.ii 8,000,000,000 3,000,000,000 Other borrowings 17.2.i +17.3 7,363,947,263 4,519,780,424 15,363,947,263 7,519,780,424

17.1 Borrowing from other banks, financial institutions and agents

In Bangladesh 17.2 9,625,908,073 3,163,013,774 Outside Bangladesh 17.3 5,738,039,190 4,356,766,650 15,363,947,263 7,519,780,424 17.2 In Bangladesh

i. Secured: Refinance against agro-based credit from Bangladesh Bank 8,784,992 12,919,537 Refinance for housing sector from Bangladesh Bank 30,013,624 21,755,851 Refinance against SME loan from Bangladesh Bank 7,850,000 9,853,571 Refinance against Solar energy, Bio Gas & ETP Scheme from Bangladesh Bank 3,866,844 7,508,176 Refinance against RPGCL 75,392,613 110,976,639 Bangladesh Bank Islamic Bond 1,500,000,000 - 1,625,908,073 163,013,774 ii. Unsecured: Subordinated Bond Financial statements Rupali Bank Limited 1,250,000,000 1,000,000,000 Sonali Bank Limited 1,750,000,000 750,000,000 Agrani Bank Limited 950,000,000 500,000,000 Pubali Bank Limited 1,300,000,000 300,000,000 Mercantile Bank Limited 250,000,000 250,000,000 Saudi-Bangladesh Industrial and Agricultural Investment Company Ltd. 200,000,000 200,000,000 Sadharan Bima Corporation 100,000,000 - Uttara Bank Limited 200,000,000 - Dhaka Bank Limited 750,000,000 - National Life Insurance Limited 750,000,000 - Janata Bank Limited 500,000,000 - 8,000,000,000 3,000,000,000 Total (iii=i+ii) 9,625,908,073 3,163,013,774 310 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 17.3 Outside Bangladesh Secured Borrowing from International Finance Corporation (IFC) 1,180,666,500 1,177,504,500 Borrowing from MASHREQ BANK PSC-USD 393,555,500 - Borrowing from Commercial Bank of Qatar - 1,491,505,700 Borrowing from Global Climate Partnership Fund S.A. 787,111,000 392,501,500 Borrowing from ICICI Bank, Hongkong - 549,502,100 Borrowing from RAK BANK, UAE 1,416,799,800 745,752,850 Borrowing from Bank Muscat, Oman 393,555,500 - Borrowing from FGB, UAE 1,180,666,500 - Borrowing from ADB 385,684,390 - 5,738,039,190 4,356,766,650 Unsecured - - 5,738,039,190 4,356,766,650 17.4 Maturity grouping of borrowings Repayable on demand - 52,037,135 Repayable within one month 1,393,555,500 110,976,639 Over one month but within six months 3,530,377,350 2,786,760,650 Over six months but within one year 1,526,995,340 1,177,504,500 Over one year 8,913,019,073 3,392,501,500 15,363,947,263 7,519,780,424 18 Consolidated deposits and other accounts Current/Al-wadeeah current accounts and other accounts Southeast Bank Limited 30,845,332,890 23,184,569,410 Southeast Bank Capital Services Limited 21,003,651 16,693,064 30,866,336,541 23,201,262,474 Less: Inter company balance eliminated 581,276,914 21,374,639 30,285,059,627 23,179,887,835 Bills payable Southeast Bank Limited 6,548,856,941 2,127,206,788 Southeast Bank Capital Services Limited - - 6,548,856,941 2,127,206,788 Savings bank/Mudaraba savings bank deposits Southeast Bank Limited 19,700,582,409 18,419,861,332 Southeast Bank Capital Services Limited - - 19,700,582,409 18,419,861,332 Fixed deposits/Mudaraba fixed deposits Southeast Bank Limited 173,438,929,873 166,704,137,174 Southeast Bank Capital Services Limited - - 173,438,929,873 166,704,137,174 229,973,428,850 210,431,093,129 19 Deposits and other accounts Current/Al-wadeeah current accounts and other accounts Current/Al-wadeeah current deposits 10,325,582,928 8,580,318,120 Foreign currency deposits 955,223,540 822,460,651 Sundry deposits 19.1 19,564,526,422 13,781,790,639 30,845,332,890 23,184,569,410 Bills payable Payment order issued 6,544,011,764 2,116,401,698 Demand draft 4,845,177 10,805,090 6,548,856,941 2,127,206,788 Savings bank/Mudaraba savings bank deposits 19,700,582,409 18,419,861,332 Fixed deposits/Mudaraba fixed deposits Fixed deposits/Mudaraba fixed deposits 114,612,212,666 128,735,942,147 Special notice/Mudaraba special notice deposits 25,012,168,173 23,325,303,495 Scheme deposits 31,923,436,868 12,080,726,463 Interest payable on FDR/Scheme 1,891,112,166 2,562,165,069 173,438,929,873 166,704,137,174 230,533,702,113 210,435,774,704 Southeast Bank Limited I Annual Report 2016 311

2016 2015 Note Taka Taka 19.1 Sundry deposits Margin under letter of credit 2,371,615,981 2,579,058,314 Margin against IBP 436,626 388,943 Margin against FBP 61,007,589 106,298,525 Margin under letter of guarantee 959,140,248 753,822,647 Margin under export proceeds 4,336,873 - Margin against time loan to issue pay order 61,704,891 25,614,612 Deposit held against FDBP/IDBP, export bills etc. 19,456,399 66,253,425 FC held against EDF L/C 10,935,473,081 6,438,473,901 Accounts payable 168,310 58,492 Telegraphic transfer 911,042 975,934 Margin on acceptance 4,955,318,557 3,705,283,123 Remittance awaiting disposal 35,073,275 4,034,291 Others 159,883,550 101,528,432 19,564,526,422 13,781,790,639 19.2 Deposits from banks and others Inter-bank deposits 19.3 5,583,333,738 11,701,953,424 Other deposits 224,950,368,375 198,733,821,280 230,533,702,113 210,435,774,704 19.3 Inter-bank deposits

EXIM Bank Limited 6,461,754 3,963,579,057 Mercantile Bank Limited 239,288 235,417 AB Bank Limited 2,488,046 6,673,675 Social Islami Bank Limited 4,230,200 244,853,611 BRAC Bank Limited 45,769 45,842 Shahjalal Islami Bank Limited 433,626 218,522,464 Al-Arafa Islami Bank Limited 565,983,998 1,110,397,115 Commercial Bank of Ceylon Plc. 390,000,000 - Islami Bank Bangladesh Limited 3,208,051,238 4,007,008,533 First Security Islami Bank Limited 7,077,931 8,953,756 Dhaka Bank Limited 213,089 214,739 IFIC Bank Limited 255,406 250,687 United Commercial Bank Limited 500,000,000 1,000,000,000 The City Bank Limited 9,810,644 9,504,551 Citibank N.A. 185,520,586 129,366,266 The Trust Bank Limited 4,963 5,947 NRB Commercial Bank Limited 747,504 710,017 Mutual Trust Bank Limited 781,492 1,153,135 Meghna Bank Limited 988,204 478,612 Financial statements NCC Bank Limited - 500,000,000 Prime Bank Limited 700,000,000 500,000,000 5,583,333,738 11,701,953,424 19.4 Sector-wise deposits Government 5,415,989,663 4,339,796,234 Deposit money banks 5,583,333,738 11,701,953,422 Other public 22,754,898,930 19,408,302,537 Foreign currency 975,352,673 889,386,816 Private 195,804,127,109 174,096,335,695 230,533,702,113 210,435,774,704 19.5 Unclaimed Deposits and valuables Payment Order 482,443 81,351 482,443 81,351 312 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 19.6 Analysis of residual maturity grouping of deposits Inter-bank deposits: Payable on demand 191,014,838 3,900,228,399 Within one month 1,692,318,900 5,801,725,025 More than one month but less than six months 3,700,000,000 2,000,000,000 More than six months but less than one year - - More than one year but less than five years - - More than five years but less than ten years - - 5,583,333,738 11,701,953,424 Other Deposits: Payable on demand 3,862,485,162 9,281,332,483 Within one month 45,180,881,100 21,091,924,267 More than one month but less than six months 38,086,500,000 82,224,903,770 More than six months but less than one year 79,864,100,000 27,302,161,680 More than one year but less than five years 41,774,400,000 44,624,741,090 More than five years but less than ten years 16,182,002,113 14,208,757,990 224,950,368,375 198,733,821,280 230,533,702,113 210,435,774,704 20 Consolidated other liabilities Southeast Bank Limited 21 19,572,488,052 15,072,571,985 Southeast Bank Capital Services Limited 309,418,341 399,452,170 Southeast Financial Services (UK) Limited 18,831,655 19,009,233 Southeast Financial Services (Australia) Pty Ltd 1,881,449 4,328,367 Southeast Exchange Company (South Africa) Pty Ltd 18,491,824 18,570,055 19,921,111,321 15,513,931,810 Less: Inter company balance eliminated 1,726,998 - 19,919,384,323 15,513,931,810 21 Other liabilities Provision for loans and advances/investments 21.1 6,158,284,306 3,863,288,081 Interest suspense account 21.2 3,549,523,832 2,832,654,051 Provision for taxation 21.3 4,998,658,798 3,654,456,280 Obligation under finance lease 21.4 10,265,943 18,654,060 Accrued expenses 11,784,329 9,866,847 Interest payable on borrowings 93,508,887 14,732,390 Accounts payable-Bangladesh Bank 53,746,147 45,147,874 Accounts payable-others 587,702,202 399,098,655 Provision for diminution in the market value of share 59 905,705,624 1,725,241,065 Other provisions 21.5.1 1,326,235,000 972,878,000 Unearned income 388,476,342 680,406,920 Branch adjustment 21.6 592,435,184 - Withholding tax 895,161,458 855,147,762 Provision for audit fees 1,000,000 1,000,000 19,572,488,052 15,072,571,985 Southeast Bank Limited I Annual Report 2016 313

2016 2015 Note Taka Taka 21.1 Provision for loans and advances/investments A. General Balance as at 1 January 1,540,000,000 1,334,721,230 Add: Provision made during the year On standard loans and advances/investments etc. 870,814,544 139,033,953 On Special Mention Account (SMA) 19,185,456 66,244,817 890,000,000 205,278,770 Less: Provision no longer required - - Balance as at 31 December 2,430,000,000 1,540,000,000 B. Specific Balance as at 1 January 2,323,288,081 2,673,494,984 Less: Fully provided debt write off during the year (1,012,890,775) (2,452,261,045) Add: Recoveries of amounts previously written off 72,709,902 174,604,278 Add: Specific provision for the year 2,360,990,098 2,039,766,952 Less: Recoveries and provisions no longer required - - Less: Interest waiver during the year (15,813,000) (112,317,088) Net charge to Profit & Loss A/C 1,404,996,225 (350,206,903) Balance as at 31 December 3,728,284,306 2,323,288,081 C. Total provision on loans and advances/investments (A+B) 6,158,284,306 3,863,288,081 * Provision for loans and advances has been kept as per Bangladesh Bank letter reference no: DBI 1/78/2017-1206 dated 27 March 2017. 21.2 Interest suspense account Balance as at 1 January 2,832,654,051 2,365,612,512 Add: Amount transferred to "interest suspense" account during the year 1,790,397,963 1,868,832,473 4,623,052,014 4,234,444,985 Less: Amount of interest suspense recovered during the year 892,575,369 869,905,545 Amount written off during the year 117,625,320 511,541,120 Interest waiver during the year 63,327,493 20,344,269 1,073,528,182 1,401,790,934 Balance as at 31 December 3,549,523,832 2,832,654,051 21.3 Provision for taxation Provision for current tax 21.3.1 3,607,144,155 2,689,344,079 Deferred tax liabilities 21.3.2 1,391,514,643 965,112,201 4,998,658,798 3,654,456,280 21.3.1 Provision for current tax Provision Balance as at 1 January 10,966,854,123 11,846,498,876 Financial statements Provision made during the year 2,765,000,000 2,300,000,000 13,731,854,123 14,146,498,876 Adjustments made during the year - (3,179,644,753) Balance as at 31 December 13,731,854,123 10,966,854,123 Advance tax Balance as at 1 January 8,277,510,044 8,940,257,721 Paid during the year 1,847,199,924 2,535,875,626 10,124,709,968 11,476,133,347 Adjustments made during the year - (3,198,623,303) Balance as at 31 December 10,124,709,968 8,277,510,044

Net balance as at 31 December 3,607,144,155 2,689,344,079

Provision for current tax of Tk. 2,765,000,000 has been made @ 40.00% as prescribed by Finance Act 2016 of the accounting profit made by the Bank after considering some of the add backs to income and disallowances of expenditure as per the Income Tax Ordinance and Rules 1984 and in compliance of para 46 of BAS 12 "Income Tax". 314 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 21.3.2 Deferred tax liabilities

Deferred tax liabilities are attributable to the following:

Revaluation reserve of land 615,761,213 615,761,213 Revaluation reserve of buildings 125,911,051 125,911,051 Fixed assets- except land and revaluation reserve of buildings 21.3.3.1 275,536,360 210,536,360 Revaluation reserve of HTM securities 21.3.3.2 4,060,523 12,903,577 Revaluation reserve of HFT securities 21.3.3.3 370,245,496 - 1,391,514,643 965,112,201 Deferred tax is calculated using the tax rates expected to apply in the periods in which the assets will be realised or the liabilities settled, based on tax rates and laws enacted, by the balance sheet date. Following are the descriptions for each individual item of the deferred tax that are recognised by the Bank as a temporary difference with expected time of realisation. Revaluation reserve of land As the land is not depreciable and as per local tax rules revaluation gain is not taxable. However, the tax office will charge taxes on capital gain which is the same amount of revaluation gain whether recovered through use or sale. Hence a taxable temporary difference arises against which the Bank recognises deferred tax liabilities. However, the outstanding amount of deferred tax will be automatically released with the disposal of the assets. Revaluation reserve of buildings Buildings are depreciable assets. Its revalued carrying amount will be recovered through use and this will generate taxable income which exceeds the depreciation that will be allowable for tax purposes in future periods. As a result taxable temporary difference will arise. Fixed assets- except land and revaluation reserve of buildings

Accounting depreciation is not tax allowable expenses. Rather, the tax office will allow tax depreciation as per 3rd Schedule of the Income Tax Ordinance 1984. Hence a temporary difference arises due to the different depreciation rates and methodology against which the Bank recognizes deferred tax. This is an ongoing item as there is a difference between the tax depreciation rate and the accounting depreciation rate. However, the outstanding amount of deferred tax will be automatically released with the expiry of the economic useful life of the assets. Revaluation reserves of HTM and HFT securities

Deferred tax relating to unrealised interest on the revaluation of Held to Maturity (HTM) and Held for Trading (HFT) securities is recognised directly in other reserves as a part of equity and is subsequently recognised in the profit and loss account on maturity of the securities. The deferred tax recognised against this will be fully reversed at the maturity of all related securities. 2016 2015 Taka Taka 21.3.3 Movement of deferred tax liabilities

Balance as at 1 January 965,112,201 839,075,601 Provision made for deferred tax liabilities Charged to profit and loss account 65,000,000 140,000,000 Charged to revaluation reserve 371,434,778 4,768,630 436,434,778 144,768,630 1,401,546,979 983,844,231 Adjustment made during the year for revaluation reserve (10,032,336) (18,732,030) Balance as at 31 December 1,391,514,643 965,112,201 Southeast Bank Limited I Annual Report 2016 315

2016 2015 Note Taka Taka 21.3.3.1 Deferred tax on fixed assets- except land and revaluation reserve of buildings Balance as at 1 January 210,536,360 70,536,360 Charge to profit and loss account 65,000,000 140,000,000 Balance as at 31 December 275,536,360 210,536,360

21.3.3.2 Deferred tax on revaluation reserve of HTM securities

Balance as at 1 January 12,903,577 26,866,977 Charge to revaluation reserves 1,189,282 4,768,630 Adjustment during the year (10,032,336) (18,732,030) Balance as at 31 December 4,060,523 12,903,577

21.3.3.3 Deferred tax on revaluation reserve of HFT securities

Balance as at 1 January - - Charge to revaluation reserves 370,245,496 - Adjustment during the year - Balance as at 31 December 370,245,496 -

21.4 Obligation under finance lease

Balance as at 1 January 18,654,060 34,140,945 Addition during the year - - 18,654,060 34,140,945 Adjustment during the year (8,388,117) (15,486,885) Balance as at 31 December 10,265,943 18,654,060

21.4.1 Aging analysis of liabilities under finance lease

Minimum lease Financial charge for Principal payment future periods outstanding Taka Taka Taka

2016 Payable within 1 year 9,258,860 1,108,945 8,149,915 Payable more than 1 year but less than 2 years 2,318,297 202,269 2,116,028 Payable more than 2 years but less than 5 years - - - 11,577,157 1,311,214 10,265,943

2015 Financial statements Payable within 1 year 11,148,047 2,656,495 8,491,552 Payable more than 1 year but less than 2 years 9,258,860 1,108,945 8,149,915 Payable more than 2 years but less than 5 years 2,214,862 202,269 2,012,593 22,621,769 3,967,709 18,654,060

2016 2015 Note Taka Taka

21.5 Other provisions charged to profit and loss Provision for other assets 21.5.1 (A) 92,735,000 10,035,106 Provision for good borrowers 21.5.1 (B) 23,000,000 11,878,000 Provision for off-balance sheet exposures 21.5.1 (C) 249,500,000 (19,650,000) 365,235,000 2,263,106 316 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 21.5.1 Other Provisions A) Provision for other assets Balance as at 1 January 71,000,000 60,964,894 Addition during the year 92,735,000 10,035,106 163,735,000 71,000,000 Adjustment during the year - - Balance as at 31 December 163,735,000 71,000,000

B) Provision for good borrowers Balance as at 1 January 11,878,000 - Addition during the year 23,000,000 11,878,000 34,878,000 11,878,000 Adjustment during the year (11,878,000) - Balance as at 31 December 23,000,000 11,878,000

C) Provision for off-balance sheet exposures

Balance as at 1 January 890,000,000 909,650,000 Provision made during the year 249,500,000 - 1,139,500,000 909,650,000 Adjustments made during the year - (19,650,000) Balance as at 31 December 1,139,500,000 890,000,000

D) Total other provisions (A+B+C) 1,326,235,000 972,878,000

21.6 Branch adjustment (credit)

General accounts debit 928,625,816 - General accounts credit 1,521,061,000 - 592,435,184 -

Branch adjustment account represents outstanding interbranch and head office transactions (net) originated but yet to be responded at balance sheet date. However, the un-respondent entries of 31 December 2016 are given below:

No. of unrespondent entries Unrespondent entries (Taka) Debit Credit Debit Credit

Upto 3 months 594 1,526 928,625,816 1,521,061,000 Over 3 months but within 6 months - - - - Over 6 months but within 1 year - - - - Over 1 year but within 5 years - - - - 594 1,526 928,625,816 1,521,061,000 Southeast Bank Limited I Annual Report 2016 317

2016 2015 Note Taka Taka 22 Share Capital

22.1 Authorised 1,500,000,000 Ordinary shares of Tk 10 each 15,000,000,000 15,000,000,000

22.2 Issued, subscribed and paid up

378,164,970 ordinary shares of Tk 10 each issued for cash 3,781,649,700 3,781,649,700

538,785,206 ordinary shares of Tk 10 each issued as bonus shares 5,387,852,060 5,387,852,060 916,950,176 9,169,501,760 9,169,501,760

22.3 Dividends

The following dividends were declared and paid by the Bank for the year ended 31 December.

1.50 Taka per ordinary share for 2015 (1.50 Taka per ordinary 1,375,425,264 1,375,425,264 share for 2014 After the end of the reporting period, the following dividends were proposed by the directors. The dividends have not been provided for and no tax consequences. 2.00 Taka per ordinary share for 2016 and 1.50 Taka per ordinary 1,833,900,352 1,375,425,264 share for 2015 22.4 Share capital at a glance from inception Number of Capital Cumulative Year Particulars shares amount (Taka) (Taka) 1995 Opening / Sponsors Capital 1,000,000 100,000,000 100,000,000 1996 None - - 100,000,000 1997 25% Stock Dividend 250,000 25,000,000 125,000,000 1998 20% Stock Dividend 250,000 25,000,000 150,000,000 1999 Initial Public Offer (IPO) 1,500,000 150,000,000 300,000,000 2000 10% Stock Dividend 300,000 30,000,000 330,000,000 2001 10% Stock Dividend 330,000 33,000,000 363,000,000 2002 10% Stock Dividend 363,000 36,300,000 399,300,000 Right Issue @ 1:2 1,650,000 165,000,000 564,300,000 2003 20% Stock Dividend 1,128,600 112,860,000 677,160,000 2004 30% Stock Dividend 2,031,480 203,148,000 880,308,000 2005 20% Stock Dividend 1,760,616 176,061,600 1,056,369,600 Right Issue @1:1 10,563,696 1,056,369,600 2,112,739,200 2006

8% Stock Dividend 1,690,191 169,019,100 2,281,758,300 Financial statements 2007 25% Stock Dividend 5,704,395 570,439,500 2,852,197,800 2008 20% Stock Dividend 5,704,395 570,439,500 3,422,637,300 2009 35% Stock Dividend 11,979,230 1,197,923,000 4,620,560,300 Right Issue @1:2 23,102,801 2,310,280,100 6,930,840,400 2010 20% Stock Dividend 13,861,680 1,386,168,000 8,317,008,400 Stock split (1:10) 748,530,756 - 8,317,008,400 2011 5% Stock Dividend 41,585,042 415,850,420 8,732,858,820 2012 None - - 8,732,858,820 2013 5% Stock Dividend 43,664,294 436,642,940 9,169,501,760 2014 None - - 9,169,501,760 2015 None - - 9,169,501,760 318 Southeast Bank Limited I Annual Report 2016

22.5 Classification of shareholders by holding

Number of holders % of total holding 2016 2015 2016 2015

Less than 500 shares 12,031 14,760 0.22 0.26 501 to 5,000 shares 21,160 24,891 3.91 4.58 5,001 to 10,000 shares 2,744 3,149 2.10 2.40 10,001 to 20,000 shares 1,521 1,791 2.31 2.71 20,001 to 30,000 shares 471 538 1.27 1.45 30,001 to 40,000 shares 217 252 0.82 0.95 40,001 to 50,000 shares 121 141 0.60 0.70 50,001 to 1,00,000 shares 309 327 2.45 2.56 1,00,001 to 10,00,000 shares 311 311 9.63 9.91 Over 10,00,000 shares 124 125 76.69 74.48 39,009 46,285 100.00 100.00

22.6 Initial public offer (IPO)

Out of the total issued, subscribed and fully paid up capital of the bank 1,500,000 (after stock split: 15,000,000) ordinary shares of Tk 100 (after stock split: Tk. 10) each amounting to Tk 150,000,000 was raised through public offering on shares in 1999. 22.7 Name of the Directors and their shareholdings in the year 2016

As at 31 Sl. As at 1 January Name of the directors Status December no. 2016 2016 1 Mr. Alamgir Kabir, FCA Chairman 19,694,672 19,944,672 "Mr. Ragib Ali 2 (ceased to be Director on and from March Vice Chairman 28,026,291 28,026,291 8, 2017)" 3 Mr. M. A. Kashem Director 20,307,060 20,307,060 4 Mr. Azim Uddin Ahmed Director 25,490,735 25,490,735 5 Mrs. Duluma Ahmed Director 19,082,742 19,082,742 6 Mrs. Jusna Ara Kashem Director 18,339,525 18,339,525 7 Mr. Md. Akikur Rahman Director 18,443,731 18,443,731 8 Mrs. Rehana Rahman Director 18,344,145 18,844,145 9 Mrs. Sirat Monira Director 120,547 120,547 "Mr. Abdul Hye (Representing Karnafuli Tea Co. Limited) 10 Director 162,420 162,420 (Ceased to be Director on and from March 8, 2017)" Independent 11 Mr. A. H. M. Moazzem Hossain - - Director Independent 12 Dr. Quazi Mesbahuddin Ahmed - - Director Managing Director 13 Mr. M. Kamal Hossain - - (Current Charge) 168,011,868 168,761,868 Southeast Bank Limited I Annual Report 2016 319

2016 2015 Note Taka Taka

22.8 Capital to Risk weighted Asset Ratio (CRAR) of the Bank

The calculation of CRAR has been done as per BRPD Circular no. 07 dated 31 March 2014 and the Basel-III guideline December 2014 vide BRPD Circular no. 18 dated 21 December 2014. Common equity Tier-1 capital (Going Concern Capital) Paid up capital 9,169,501,760 9,169,501,760 Share premium - - Statutory reserve 23 9,170,000,000 8,897,307,905 General reserve 25 247,650,000 247,650,000 Retained earnings 28 3,171,824,195 2,942,327,335 21,758,975,955 21,256,787,000 Add: Additional Tier 1 capital - - Less: Regulatory adjustments 108,599,195 64,641,458 A) Total common equity Tier 1 capital 21,650,376,760 21,192,145,542

Tier 2 Capital (Gone -Concern Capital) Subordinated bond 7,400,000,000 3,000,000,000 General provision maintained against unclassified loan/investments 2,430,000,000 1,540,000,000 General provision on off-balance sheet items 1,139,500,000 890,000,000 Asset revaluation reserve 2,101,404,750 2,101,404,750 Revaluation reserve of Government securities 234,027,984 234,027,984 13,304,932,734 7,765,432,734 Less: Regulatory adjustments 934,173,094 467,086,547 Total Tier 2 capital 12,370,759,640 7,298,346,187 B) Total capital 34,021,136,400 28,490,491,729

C) Risk Weighted Assets (RWA)

Credit Risk On-balance sheet 197,023,731,313 171,797,949,395 Off-balance sheet 52,501,153,245 47,096,419,890 249,524,884,558 218,894,369,285 Market risk 10,687,308,524 9,476,714,296 Operational risk 19,045,800,808 17,229,996,177 Total RWA 279,257,993,890 245,601,079,758

D) Required common equity Tier 1 Capital 12,566,609,725 11,052,048,589

Required Tier 1 Capital (5.5% of RWA) 15,359,189,664 13,508,059,387

E) Required total capital 10.625% of RWA (2015: 10%) 29,671,161,851 24,560,107,976 Financial statements

F) Surplus common equity Tier 1 Capital(A-D) 9,083,767,035 10,140,096,953

G) Surplus total capital (B-E) 4,349,974,549 3,930,383,753

Capital to risk-weighted assets ratio:

On common equity Tier 1 capital against standard of minimum 4.5% 7.75% 8.63% On Tier 1 capital - against standard of minimum 5.5% 7.75% 8.63% On total capital - against standard of minimum 10.625% (2015:10%) 12.18% 11.60% 320 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 22.9 Leverage Ratio of the Bank A) Tier 1 capital considering all regulatory adjustments 21,650,376,760 21,192,145,542 B) On-balance sheet exposure 288,205,418,780 257,929,754,083 C) Off-balance sheet exposure 65,343,127,141 53,959,699,503 D) Deduction from on and off balance sheet 108,599,195 64,641,458 exposure / Regulatory adjustment E) Total exposure (B+C-D) 353,439,946,726 311,824,812,128 Leverage ratio (A/E) 6.13% 6.80% Liquidity coverage ratio 118.50% 140.77% Net stable funding ratio 109.53% 107.60% 22.10 Capital to Risk weighted Asset Ratio (CRAR) of the Group Common Equity Tier 1 Capital Paid up capital 9,169,501,760 9,169,501,760 Share premium - - Statutory reserve 23 9,170,000,000 8,897,307,905 General reserve 25 247,650,000 247,650,000 Non- controlling interest 29 10,003,160 9,428,284 Retained earnings 27 3,196,967,474 2,951,940,410 21,794,122,394 21,275,828,359 Add: Additional Tier 1 capital - - Less: Regulatory adjustments 108,599,195 64,641,458 A) Total common equity Tier 1 capital 21,685,523,199 21,211,186,901 Tier 2 capital (Gone- Concern Capital) Subordinated bond 7,400,000,000 3,000,000,000 General provision maintained against unclassified loan/investments 2,430,000,000 1,540,000,000 General provision on off-balance sheet items 1,139,500,000 890,000,000 Asset revaluation reserve 2,101,404,750 2,101,404,750 Revaluation reserve of Government securities 234,027,984 234,027,984 13,304,932,734 7,765,432,734 Less: Regulatory adjustments 934,173,094 467,086,547 Total Tier 2 capital 12,370,759,640 7,298,346,187

B) Total capital 34,056,282,839 28,509,533,088 C) Risk weighted assets (RWA) Credit risk On-balance sheet 193,740,348,940 169,788,524,420 Off-balance sheet 52,501,153,245 47,096,419,890 246,241,502,185 216,884,944,310 Market risk 15,004,950,584 13,052,166,626 Operational risk 19,155,835,724 17,313,773,484 Total RWA 280,402,288,493 247,250,884,420 D) Required common equity Tier 1 capital 12,618,102,982 11,126,289,799 Required Tier 1 capital (5.5% of RWA) 15,422,125,867 13,598,798,643 E) Required total capital 10.625% of RWA (2015: 10%) 29,792,743,152 24,725,088,442 F) Surplus common equity Tier 1 capital (A-D) 9,067,420,217 10,084,897,102 G) Surplus total capital (B-E) 4,263,539,686 3,784,444,646 Capital to risk- weighted asset ratio: On common equity Tier 1 capital - against standard of minimum 4.5% 7.73% 8.57% On Tier 1 capital - against standard of minimum 5.5% 7.73% 8.57% On total capital-against standard of minimum 10.625% of RWA (2015:10%) 12.15% 11.52% Southeast Bank Limited I Annual Report 2016 321

2016 2015 Note Taka Taka 22.11 Leverage ratio of the Group

A) Tier 1 capital considering all regulatory adjustments 21,685,523,199 21,183,282,293 B) On-balance sheet exposure 288,083,485,568 258,394,742,372 C) Off-balance sheet exposure 65,343,127,141 53,959,699,503 D) Deduction from on and off balance sheet 108,599,195 64,641,458 exposure /Regulatory adjustment E) Total exposure (B+C-D) 353,318,013,514 312,289,800,417 Leverage ratio (A/E) 6.14% 6.78% Liquidity coverage ratio 118.50 140.77% Net stable funding ratio 109.53% 107.60% 23 Statutory reserve Balance as at 1 January 8,897,307,905 7,792,812,001 Addition during the year 272,692,095 1,104,495,904 Balance as at 31 December 9,170,000,000 8,897,307,905 24 Revaluation reserve Revaluation reserve of land and buildings: Balance as at 1 January 4,944,481,764 4,944,481,764 Addition during the year - - 4,944,481,764 4,944,481,764 Deferred tax liabilities (741,672,265) (741,672,265) Balance as at 31 December 4,202,809,499 4,202,809,499 Revaluation reserve on HTM securities: Balance as at 1 January 31,062,627 71,177,255 Addition during the year 2,973,204 12,198,938 34,035,831 83,376,193 Adjustment during the year (24,264,378) (52,313,566) 9,771,453 31,062,627 Deferred tax liabilities (4,060,523) (12,903,577) Balance as at 31 December 5,710,930 18,159,050 Revaluation reserve on HFT securities: Balance as at 1 January 1,747,159,502 427,129,047 Addition during the year 1,437,433,310 2,942,233,152 3,184,592,812 3,369,362,199 Adjustment during the year (2,258,979,069) (1,622,202,697)

925,613,743 1,747,159,502 Financial statements Deferred tax liabilities (370,245,496) - Balance as at 31 December 555,368,247 1,747,159,502 4,763,888,676 5,968,128,051 25 Other reserves General reserve: Balance as at 1 January 247,650,000 247,650,000 Addition during the year - - Balance as at 31 December 247,650,000 247,650,000 26 Foreign currency translation reserve Balance as at 1 January 27,870,748 243,022 (Adjustments)/addition during the year (3,421,502) 27,627,726 Balance as at 31 December 24,449,246 27,870,748 The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. 322 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 27 Consolidated retained earnings

Southeast Bank Limited 28 3,171,824,195 2,942,327,335 Southeast Bank Capital Services Limited (36,442,114) (94,939,716) Southeast Financial Services (UK) Ltd (21,927,930) (22,785,689) Southeast Financial Services (Australia) Pty Ltd (16,753,827) (17,223,301) Southeast Exchange Company (South Africa) Pty Ltd* 14,707,102 1,001,733 Less: Elimination for impairment of investment in subsidiary 85,560,048 143,560,048 3,196,967,474 2,951,940,410 * Opening retained earnings of Southeast Exchange Company (South Africa) Pty Ltd has been adjusted to conform with its audited financial statements. 28 Retained earnings

Balance as at 1 January 2,942,327,335 2,638,523,119 Currency translation differences 807,996 945,864 Prior year adjustment 435,000 300,000 2,943,570,331 2,639,768,983 Retained surplus for the year 2,143,679,128 1,977,983,616 5,087,249,459 4,617,752,599 Less: Transfer to SEBL Foundation* 300,000,000 300,000,000 Transfer to Employees Welfare Fund* 200,000,000 - Transfer to Green Award Trust* 40,000,000 - Cash dividend paid 1,375,425,264 1,375,425,264 1,915,425,264 1,675,425,264 Retained earnings carried forward 3,171,824,195 2,942,327,335

* The Board of Directors in its 504th meeting held on 29 December 2016 has decided to transfer Tk. 30 crore to SEBL Foundation, Tk. 20 crore to Staff Welfare Fund and Tk. 4 crore to Southeast Bank Green Award Trust from retained earnings of the Bank. 29 Non-controlling interest

Paid up capital 5,500,000,000 1,500,000,000 Retained earnings (36,508,959) (95,581,382) Total net assets 5,463,491,041 1,404,418,618

Non-controlling interest 0.183091% (2015: 0.67133%) of net assets 10,003,160 9,428,284

Non-controlling interest arises only for Southeast Bank Capital Services Limited since all other subsidiaries are wholly owned by Southeast Bank Limited. 30 Contingent liabilities

30.1 Acceptances and endorsements

Acceptance under Letters of Credit (LC) - other than back to back 28,774,137,644 23,373,332,515 Acceptance under Letters of Credit -back to back 15,039,415,997 12,850,087,695 43,813,553,641 36,223,420,210

30.2 Letters of guarantee

Local 12,150,518,547 10,266,430,750 Foreign 3,003,598,053 3,128,810,166 15,154,116,600 13,395,240,916 Southeast Bank Limited I Annual Report 2016 323

2016 2015 Note Taka Taka 30.2.1 Balance for which the Bank is contingently liable in respect of guarantee issued favouring: Directors or officers 4,857,301 4,783,060 Government - - Banks and other financial institutions 51,189,342 81,078,227 Others 15,098,069,957 13,309,379,629 15,154,116,600 13,395,240,916

30.3 Irrevocable Letters of Credit (L/C) Back to back L/C 13,920,027,996 11,323,226,669 Others 18,961,275,681 13,669,153,288 32,881,303,677 24,992,379,957

30.4 Bills for collection

Local 8,626,271,866 5,856,105,661 Foreign 9,204,033,000 6,956,639,068 17,830,304,866 12,812,744,729

30.5 Other contingent liabilities

Value of Bangladesh Sanchaypatra & others 1,474,684,000 1,098,459,000

31 Income statement

Income: Interest, discount and similar income 21,860,782,434 22,691,325,422 Dividend income 171,780,691 131,633,489 Fees, commission and brokerage 1,716,151,498 1,713,156,821 Gains less losses arising from dealing securities (92,035,077) 204,718,261 Gains less losses arising from investment securities 62,766,457 15,793,515 Gains less losses arising from dealing in foreign currencies 1,131,546,418 1,010,846,578 Other operating income 630,611,620 518,566,500 25,481,604,041 26,286,040,586 Expenses: Interest, fees and commission 12,785,664,559 14,652,724,337 Administrative expenses 2,907,702,764 2,372,891,418 Other operating expenses 1,011,019,434 953,168,351 Depreciation on banking assets 279,400,188 263,312,640 16,983,786,945 18,242,096,746 Financial statements Income over expenses 8,497,817,096 8,043,943,840

32 Consolidated interest income/profit on investments Southeast Bank Limited 33 16,988,878,395 17,918,296,225 Southeast Bank Capital Services Limited 98,716,858 125,781,000 Southeast Financial Services (Australia) Pty Ltd - 23,843 Southeast Exchange Company (South Africa) Pty Ltd 3,159,897 2,839,532 17,090,755,150 18,046,940,600 Less: Inter company balance eliminated 118,428,584 252,144,639 16,972,326,566 17,794,795,961 324 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 33 Interest income/profit on investments Interest on loans and advances (Conventional Banking): Interest on loans and advances 15,723,721,273 16,574,625,488 Interest on placement with other banks and financial institutions 235,799,541 276,652,770 Interest on foreign currency balances 41,032,156 15,215,538 16,000,552,970 16,866,493,796 Profit on investment (Islamic Banking): Profit on investments 960,821,860 965,947,429 Profit on placement with other banks 27,503,565 85,855,000 988,325,425 1,051,802,429 16,988,878,395 17,918,296,225

34 Consolidated interest paid/profit shared on deposits and borrowings etc. Southeast Bank Limited 35 12,785,664,559 14,652,724,337 Southeast Bank Capital Services Limited 97,880,488 255,758,304 12,883,545,047 14,908,482,641 Less: Inter company balance eliminated 118,428,584 252,144,639 12,765,116,463 14,656,338,002 35 Interest paid/profit shared on deposits and borrowings etc. Interest paid on deposits (Conventional Banking): Interest on deposits 11,055,657,345 12,622,563,921 Interest on borrowings 632,784,047 542,801,433 Interest on repurchase agreement (repo) 17,128,657 72,434,392 Interest on refinance 6,122,088 10,285,260 Interest on foreign bank accounts 688,517 194,742 11,712,380,654 13,248,279,748 Profit shared on deposits (Islamic Banking): Profit paid on deposits 1,033,652,397 1,343,581,570 Profit on refinance borrowings 39,631,508 60,863,019 1,073,283,905 1,404,444,589 12,785,664,559 14,652,724,337 36 Consolidated investment income Southeast Bank Limited 37 5,014,416,110 5,125,174,462 Southeast Bank Capital Services Limited 65,190,638 33,362,661 5,079,606,748 5,158,537,123 37 Investment income Interest income from Government securities 37.1 4,850,203,187 4,773,029,197 Capital gain on Government securities 37.2 165,315,064 719,429,991 Revaluation gain (loss) on Government securities 37.3 (257,350,141) (514,711,730) Dividend on investment in shares 171,780,691 131,633,489 Gain on sale of investment in shares 62,766,457 15,793,515 Interest income from investment in bonds 21,700,852 - 5,014,416,110 5,125,174,462 37.1 Interest income from Government securities Interest on treasury bills 50,888,907 239,535,791 Interest on treasury bonds/T&T bonds 5,212,036,586 4,835,121,203 Interest on Bangladesh Bank bills 12,775,336 6,711,914 5,275,700,829 5,081,368,908 Interest expenses on treasury bills - - Interest expenses on treasury bonds (425,497,642) (308,339,711) (425,497,642) (308,339,711) Net interest income from Government securities 4,850,203,187 4,773,029,197 Southeast Bank Limited I Annual Report 2016 325

2016 2015 Note Taka Taka 37.2 Capital gain on Government securities Capital gain on treasury bills 33,613,398 98,425,984 Capital gain on treasury bonds/T&T bonds 470,308,910 731,661,716 503,922,308 830,087,700

Capital loss on treasury bills (10,522,317) (8,331,996) Capital loss on treasury bonds/T&T bonds (328,084,927) (102,325,713) (338,607,244) (110,657,709) Net capital gain on Government securities 165,315,064 719,429,991

37.3 Revaluation gain (loss) on Government securities

Revaluation gain on treasury bills 34,853,444 25,849,050 Revaluation gain on treasury bonds 1,123,041,580 449,723,766 Revaluation gain on Bangladesh Bank bills 331,058 19,708 1,158,226,082 475,592,524

Revaluation loss on treasury bills (36,796,312) (22,675,968) Revaluation loss on treasury bonds (1,378,764,241) (967,628,286) Revaluation loss on Bangladesh Bank bills (15,670) - (1,415,576,223) (990,304,254) Net revaluation gain (loss) on Government securities (257,350,141) (514,711,730)

38 Consolidated commission, exchange and brokerage

Southeast Bank Limited 39 2,847,697,916 2,724,003,399 Southeast Bank Capital Services Limited 442,368 154,998 Southeast Financial Services (UK) Ltd 17,672,592 19,999,820 Southeast Financial Services (Australia) Pty Ltd 283,051 715,009 Southeast Exchange Company (South Africa) Pty Ltd 36,939,030 14,584,362 2,903,034,957 2,759,457,588

39 Commission, exchange and brokerage Commission and brokerage 1,716,151,498 1,713,156,821 Exchange gain 39.1 1,131,546,418 1,010,846,578 2,847,697,916 2,724,003,399 39.1 Exchange gain Exchange gain from revaluation/trade of foreign currency 1,084,482,265 979,255,985 Exchange gain from credit card 47,064,153 31,590,593 1,131,546,418 1,010,846,578 Financial statements 40 Consolidated other operating income Southeast Bank Limited 41 630,611,620 518,566,500 Southeast Bank Capital Services Limited 33,385,795 31,107,205 Southeast Financial Services (UK) Ltd 956,063 1,503,333 Southeast Financial Services (Australia) Pty Ltd 994,837 5,243 Southeast Exchange Company (South Africa) Pty Ltd 241,617 109,376 666,189,932 551,291,657 Less: Inter company balance eliminated 3,587,040 3,358,080 662,602,892 547,933,577 326 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 41 Other operating income Remittance fees 383,507 232,871 Service and incidental charges 75,606,799 68,803,075 Other fees - telephone and postage 48,779,453 41,362,545 Income from ATM services 23,717,399 14,540,945 Income from credit card 84,365,797 69,282,425 Income from retail banking 6,203,956 4,377,757 Other Fees - SWIFT and others 187,078,571 164,828,036 Gain on sale of fixed assets 41.1 4,504,032 853,657 Income from telecash 1,544,548 432,573 Miscellaneous income 198,427,558 153,852,616 630,611,620 518,566,500 41.1 Gain on sale of fixed assets

Cost: Motor vehicles 1,950,826 2,956,000 Furniture and fixtures - 116,769 Office appliances 43,200 - Electrical appliances 1,725,338 1,504,190 3,719,364 4,576,959 Accumulated depreciation: Motor vehicles 1,882,200 1,675,067 Furniture and fixtures - 41,123 Office appliances 43,200 - Electrical appliances 1,355,117 1,198,015 3,280,517 2,914,205 Written down value 438,847 1,662,754 Sale proceeds of the above fixed assets 4,942,879 2,516,411 Gain on sale of fixed assets 4,504,032 853,657 42 Consolidated salaries and allowances

Southeast Bank Limited 43 1,720,787,663 1,399,383,806 Southeast Bank Capital Services Limited 8,625,400 11,696,995 Southeast Financial Services (UK) Ltd 7,711,740 7,853,081 Southeast Financial Services (Australia) Pty Ltd 333,190 2,039,009 Southeast Exchange Company (South Africa) Pty Ltd 4,006,523 2,709,032 1,741,464,516 1,423,681,923 43 Salaries and allowances

Basic salary 859,905,510 654,328,225 Allowances 528,545,144 459,126,067 Bonus 259,398,089 228,817,202 Provident fund 72,938,920 57,112,312 1,720,787,663 1,399,383,806

44 Consolidated rent, taxes, insurance, electricity etc. Southeast Bank Limited 45 781,507,962 644,286,649 Southeast Bank Capital Services Limited 16,836,502 8,242,562 Southeast Financial Services (UK) Ltd 3,811,899 4,140,741 Southeast Financial Services (Australia) Pty Ltd 377,117 2,938,733 Southeast Exchange Company (South Africa) Pty Ltd 2,089,838 2,010,145 804,623,318 661,618,830 Less: Inter company balance eliminated 3,587,040 3,358,080 801,036,278 658,260,750 Southeast Bank Limited I Annual Report 2016 327

2016 2015 Note Taka Taka 45 Rent, taxes, insurance, electricity etc. Rent, rates and taxes 506,634,063 391,707,570 Insurance 175,031,301 164,455,956 Electricity and lighting 99,842,598 88,123,123 781,507,962 644,286,649 46 Consolidated postage, stamp, telecommunication etc. Southeast Bank Limited 47 165,740,473 146,538,853 Southeast Bank Capital Services Limited 128,918 142,424 Southeast Financial Services (UK) Ltd 183,062 310,829 Southeast Financial Services (Australia) Pty Ltd 21,703 103,425 Southeast Exchange Company (South Africa) Pty Ltd 376,820 233,647 166,450,976 147,329,178 47 Postage, stamp, telecommunication etc. Postage 44,488,954 37,338,508 Telephone /Telex 14,263,286 12,711,247 Electronic banking service 3,461 125,000 FC Charge (Nostro) 5,409,679 2,605,770 VSAT on-line 45,683,245 42,060,483 Reuters services 1,962,811 1,879,528 Other Fees - SWIFT and others 53,929,037 49,818,317 165,740,473 146,538,853 48 Consolidated stationery, printing, advertisements etc.

Southeast Bank Limited 49 130,657,839 111,489,118 Southeast Bank Capital Services Limited 202,117 200,311 Southeast Financial Services (UK) Ltd 607,780 346,291 Southeast Financial Services (Australia) Pty Ltd - 16,844 Southeast Exchange Company (South Africa) Pty Ltd 766,662 571,405 132,234,398 112,623,969 49 Stationery, printing, advertisements etc. Office stationery 21,152,613 18,314,078 Printing stationery 41,971,518 31,346,737 Security stationery 22,542,957 17,357,258 Computer stationery 12,055,150 12,003,521 Publicity and advertisement 32,935,601 32,467,524 Financial statements 130,657,839 111,489,118

50 Managing Director's salary and fees Basic salary 4,793,333 3,900,000 House rent 1,497,500 1,200,000 House maintenance 895,833 600,000 Leave fare concession 1,497,500 1,200,000 Utility 595,000 - Special allowance 895,834 900,000 Bonus 1,800,000 1,650,000 11,975,000 9,450,000 51 Consolidated directors' fees Southeast Bank Limited 52 2,697,276 2,610,734 Southeast Bank Capital Services Limited 215,000 40,000 2,912,276 2,650,734 328 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 52 Directors' fees

Directors' fees 2,344,000 1,649,000 Directors' haltage and travelling 353,276 961,734 2,697,276 2,610,734 Each Director is paid TK. 8,000/-from 15 October 2015 per meeting per attendance. 53 Consolidated auditors' fees Southeast Bank Limited 1,000,000 1,000,000 Southeast Bank Capital Services Limited 40,000 40,000 Southeast Exchange Company (South Africa) Pty Ltd 559,917 - 1,599,917 1,040,000 54 Consolidated depreciation and repair Depreciation: Southeast Bank Limited 55 279,400,188 263,312,640 Southeast Bank Capital Services Limited 27,190,185 14,093,586 Southeast Financial Services (UK) Ltd 888,708 1,091,829 Southeast Financial Services (Australia) Pty Ltd 152,406 497,887 Southeast Exchange Company (South Africa) Pty Ltd 1,039,886 981,349 308,671,373 279,977,291 Repair: Southeast Bank Limited 55 93,336,551 58,132,258 Southeast Bank Capital Services Limited 1,255,742 673,000 Southeast Financial Services (UK) Ltd 100,822 161,603 Southeast Financial Services (Australia) Pty Ltd - 10,893 Southeast Exchange Company (South Africa) Pty Ltd 238,245 221,626 94,931,360 59,199,380 403,602,733 339,176,671 55 Depreciation and repair of bank's assets A. Depreciation: Buildings 53,357,385 48,619,767 Furniture and fixtures 61,317,791 56,984,104 Professional and reference books - 95,360 Office appliances 1,238,052 1,062,247 Computer 19,968,426 13,529,237 Electrical appliances 107,395,523 100,824,170 ATM Booth 20,857,361 21,141,517 Motor vehicles 15,265,650 21,056,238 279,400,188 263,312,640 B. Repair: Furniture and fixtures 35,969,647 5,754,714 Office and electrical appliances 23,976,704 21,824,795 Motor vehicles 4,258,022 3,640,520 Repair, maintenance and utilities 29,132,178 26,912,229 93,336,551 58,132,258 Total (C=A+B) 372,736,739 321,444,898 56 Consolidated other expenses Southeast Bank Limited 57 1,010,435,457 951,884,557 Southeast Bank Capital Services Limited 5,369,534 3,462,957 Southeast Financial Services (UK) Ltd 4,359,925 3,423,049 Southeast Financial Services (Australia) Pty Ltd 12,489 89,168 Southeast Exchange Company (South Africa) Pty Ltd 9,179,052 10,546,788 Adjustment for impairment loss of investment in subsidiary 58,000,000 (95,000,000) 1,087,356,457 874,406,519 Southeast Bank Limited I Annual Report 2016 329

2016 2015 Note Taka Taka 57 Other expenses

Security and cleaning 148,841,877 127,232,340 Entertainment 116,860,733 46,674,147 Car expenses 164,676,795 130,489,223 Books and periodicals 898,728 976,679 Subscription and donation 115,669,497 60,498,693 Travelling expenses 11,164,330 9,859,639 Finance charge on leased assets 3,035,011 4,944,097 Conveyance 12,223,285 11,633,629 Fuel 8,897,361 8,397,740 Training/seminar 5,739,140 3,448,952 Uniforms and apparels 5,307,757 4,007,760 Medical expenses 104,721 74,702 Gratuity 45,000,000 62,000,000 Professional expenses 6,360,999 6,839,375 Expenses for CIB report 714,180 544,370 Expenses regarding credit card 38,096,943 50,265,397 Expenses regarding retail banking & agriculture 72,976,339 60,970,927 Expenses regarding call centre 1,281,797 937,221 Expenses relating to ATM services 14,747,512 3,788,855 Expenses regarding mobile banking services-Telecash 8,001,219 2,926,838 Impairment loss from investment in subsidiary (58,000,000) 95,000,000 Miscellaneous 287,837,233 260,373,973 1,010,435,457 951,884,557

58 Consolidated provision for diminution in value of investments

Southeast Bank Limited 59 (364,779,225) 274,155,492 Southeast Bank Capital Services Limited (38,821,526) (4,673,593) (403,600,751) 269,481,899

59 Provision for diminution in value of investments

Dealing securities- Quoted Required provision for the year 9.7 905,705,624 1,725,241,065 Provision has already been maintained last year (1,725,241,065) (1,457,858,600) Provision released for disposal of shares during the year 454,756,216 6,773,027 Provision maintained during the year (364,779,225) 274,155,492 Financial statements 60 Consolidated provision for taxation

Current tax: Southeast Bank Limited 61 2,765,000,000 2,300,000,000 Southeast Bank Capital Services Limited 19,740,876 7,590,516 Southeast Exchange Company (South Africa) Pty Ltd 5,812,250 477,988 2,790,553,126 2,308,068,504 Deferred tax: Southeast Bank Limited 61 65,000,000 140,000,000 Southeast Exchange Company (South Africa) Pty Ltd (28,735) - 64,971,265 140,000,000 2,855,524,391 2,448,068,504 61 Provision for taxation Current tax 2,765,000,000 2,300,000,000 Deferred tax 65,000,000 140,000,000 2,830,000,000 2,440,000,000 330 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 62 Consolidated cash received from other operating activities Southeast Bank Limited 63 626,107,588 517,712,843 Southeast Bank Capital Services Limited 29,798,755 27,749,126 Southeast Financial Services (UK) Ltd 956,063 1,503,333 Southeast Financial Services (Australia) Pty Ltd 994,837 5,243 Southeast Exchange Company (South Africa) Pty Ltd 241,617 109,375 658,098,860 547,079,920

63 Cash received from other operating activities

Remittance fees 383,507 232,871 Service and incidental charges 75,606,799 68,803,075 Other Fees-Telephone and Postage 48,779,453 41,362,545 Income from ATM services 23,717,399 14,540,945 Income from Credit Card 84,365,797 69,282,425 Other Fees - SWIFT and others 187,078,571 164,828,036 Income from Retail Banking 6,203,956 4,377,757 Income from Telecash 1,544,548 432,573 Miscellaneous income 198,427,558 153,852,616 626,107,588 517,712,843

64 Consolidated payments for other operating activities

Southeast Bank Limited 65 2,134,111,013 1,820,501,267 Southeast Bank Capital Services Limited 24,047,813 12,801,254 Southeast Financial Services (UK) Ltd 9,063,488 8,382,513 Southeast Financial Services (Australia) Pty Ltd 411,309 3,159,063 Southeast Exchange Company (South Africa) Pty Ltd 3,471,565 3,036,823 2,171,105,188 1,847,880,920

65 Payments for other operating activities

Rent rates and taxes 864,196,369 754,051,071 Postage 165,740,473 146,538,853 Directors' fees 2,697,276 2,610,734 Repairs 93,336,551 58,132,258 Legal expense 583,977 1,283,794 Audit fees 1,000,000 1,000,000 Other expenses 1,006,556,367 856,884,557 2,134,111,013 1,820,501,267

66 Consolidated earnings per share

Net profit after tax for the year ended 31 December (Taka) 2,434,965,442 3,070,132,933 Number of ordinary shares outstanding 916,950,176 916,950,176 Earnings per share (EPS) (Taka) 2.66 3.35

67 Earnings per share Net profit after tax for the year ended 31 December (Taka) 2,416,371,223 3,082,479,520 Number of ordinary shares outstanding 916,950,176 916,950,176 Earnings per share (EPS) (Taka) 2.64 3.36 Southeast Bank Limited I Annual Report 2016 331

68 Group entities

Country of Ownership interest % Name of subsidiary incorporation 2016 2015 Southeast Bank Capital Services Limited Bangladesh 99.816909 99.32867 Southeast Financial Services (UK) Ltd England and Wales 100 100 Southeast Financial Services (Australia) Pty Ltd Australia 100 100 Southeast Exchange Company (South Africa) Pty Ltd South Africa 100 100 69 General

69.1 Audit Committee

The Audit Committee was lastly re-constituted by the Board of Directors in its 486th meeting held on 11 April 2016. The membership and attendance of the members of the Audit Committee are given below:

Sl. Meetings Name Position Attendance Remarks no. held Mr. A.H.M. Moazzem Hossain a) The Members who could 1 Chairman 5 5 (Independent Director) not attend any meeting were granted leave of absence. 2 Mrs. Duluma Ahmed Member 5 4 b) Ms. Rehana Rahman was 3 Mrs. Jusna Ara Kashem Member 5 5 appointed as member of the Audit Committee on 11-04- 4 Mrs. Rehana Rahman Member 5 4 2016. c) Ms. Sirat Monira ceased to be 5 Mrs. Sirat Monira Member 5 1 member of the Audit Committee on 11-04-2016. Dr. Quazi Mesbahuddin d) Dr. Quazi Mesbahuddin 6 Ahmed (Independent Member 5 3 Ahmed was appointed as Director) member of the Audit Committee on 11-04-2016.

On invitation, Senior Executives of the Bank including the Managing Director, Chief Financial Officer (CFO), Head of Internal Control and Compliance and Head of Bank’s Risk Management Division attended the meetings to meet instant queries of the Audit Committee to make its decisions fact-based. The academic qualifications of the members of the Audit Committee are given below:

Sl. Status with the Name Educational Qualification no. committee

1 Mr. A.H.M. Moazzem Hossain Chairman MA in Economics Financial statements 2 Mrs. Duluma Ahmed Member Graduate 3 Mrs. Jusna Ara Kashem Member HSC 4 Mrs. Rehana Rahman Member Graduate 5 Mrs. Sirat Monira Member MSS 6 Dr. Quazi Mesbahuddin Ahmed Member B.A (Hons), M.A., MEC, MSC., Ph. D. in Economics Terms of reference of the Audit Committee

i) Mr. A.H.M. Moazzem Hossain, in his capacity as the Independent Director, shall be the Chairman of the Audit Committee. ii) Presence of 03 (three) members shall form quorum. iii) The tenure of office of the Audit Committee shall be for 3 years. iv) The Company Secretary shall act as Secretary to the Audit Committee. 332 Southeast Bank Limited I Annual Report 2016

v) The terms of reference of the Audit Committee shall also be as specified in the BRPD Circular No.11 dated October 27, 2013 of Bangladesh Bank and provisions contained in Notification No.SEC/ CMRRCD/2006-158/134/Admin 144 dated 07 August, 2012 of Bangladesh Securities and Exchange Commission (BSEC). vi) Mr. Zakir Ahmed Khan, Advisor of the Bank, shall remain present in every meeting of the Audit Committee as far as possible and shall give his advice and suggestions for improvement of Bank’s operations and strict compliance of rules of both the Bank and its regulators. Charter of the Audit Committee

The Audit Committee is constituted by the Board of Directors for the primary purpose of assisting the Board in: - Overseeing the integrity of the company’s financial statement. - Overseeing the improvement of corporate governance standard of the company. - Overseeing the Company’s system of disclosure, internal controls and procedure. - Overseeing Bank’s internal control over financial reporting. - Overseeing Bank’s compliance with ethical standards adopted by the company. - Making reports and recommendations to the Board.

Roles and responsibilities

The role of Audit Committee is to assist the Board in discharging its duties and responsibilities for financial reporting, corporate governance, internal control, green banking, and environmental and climate change risks. The added roles of the Audit Committee are to: i) Overseeing the financial reporting process. ii) Monitoring choice of accounting policies and principles. iii) Monitoring Internal Control Risk management process. iv) Overseeing hiring and performance of external auditors. v) Review the annual financial statements before submission to the Board for approval. vi) Reviewing the quarterly and half yearly financial statements before submission to the Board for approval vii) Reviewing the adequacy of internal audit functions viii) Reviewing statement of significant related party transactions submitted by the management. ix) Reviewing Management Letters/ Letter of internal control weakness issued by external auditors. x) Reviewing the raising of fund through repeat public offering/ rights issue and its use and application. xi) Monitoring internal control process. xii) Maintaining oversight regulatory compliance, ethics and whistleblower hotlines. xiii) Reviewing Audit Committee’s own terms of reference. 69.2 Risk Management Committee of the Board of Directors of the Bank

Feature and composition

The Board of Directors of the Bank in its 486th meeting held on April 11, 2016 re-constituted the Risk Management Committee comprising the following Directors of the Bank. One Independent Director was included in the Committee. The membership of the Risk Management Committee of the Board of Directors of the Bank and members’ attendance in its meetings in 2016 are given below:

Sl. Meetings Members Position Attendance Remarks no. held 1 Mr. Alamgir Kabir, FCA Chairman 4 4 The Members 2 Mr. Ragib Ali Member 4 3 who could (ceased to be Director on and from not attend any March 8, 2017) meeting showing genuine ground 3 Mr. M. A. Kashem Member 4 4 were granted 4 Mr. Azim Uddin Ahmed Member 4 4 leave of absence 5 Mr. A. H. M. Moazzem Hossain Member 4 4 (Independent Director) Southeast Bank Limited I Annual Report 2016 333

Structure of the Risk Management Committee (RMC) i) The Chairman of the Board of Directors of the Bank shall be the chairman of the RMC. ii) Presence of 3 (three) members in a meeting of the Committee shall form quorum. iii) The Company Secretary of the Bank shall act as the Secretary to the RMC.

Functions of the Risk Management Committee

The broad functional areas of the Risk Management Committee are the following:

i) Risk assessment and risk control strategy. ii) Review of risk policy and its approval. iii) Review of the information kept by the Management of the Bank and approval of reporting system. iv) Overseeing the overall implementation of Risk Management Policy of the Bank. v) Reporting its decisions and recommendations to the Board. vi) Overseeing the implementation of related guidelines issued by the regulatory bodies from time to time. 69.3 Related party/(ies)

Particulars of Directors of the Bank as at 31 December: % of % of Sl. shares shares Name of persons Designation Present address No. as at 31 as at 31 Dec 2016 Dec 2015 1 Mr. Alamgir Kabir, FCA Chairman 226, Dilu Road, New Eskaton, 2.18% 2.15% Dhaka 2 Mr. Ragib Ali Vice House No.06, Road No.76, (ceased to be Director on and Chairman Gulshan, Dhaka 3.06% 3.06% from March 8, 2017) 3 Mr. M. A. Kashem Director 73/C, Gulshan Avenue, 2.21% 2.21% Dhaka-1212 4 Mr. Azim Uddin Ahmed Director Plot No.51, Road No.09, 2.78% 2.78% Block-F,Banani, Dhaka 5 Mrs. Duluma Ahmed Director Plot No.51, Road No.09, 2.08% 2.08% Block-F,Banani, Dhaka 6 Mrs. Jusna Ara Kashem Director 73/C, Gulshan Avenue, 2.00% 2.00% Dhaka-1212 7 Mr. Md. Akikur Rahman Director Sonarpara, Nobarun-227, 2.01% 2.01% Sylhet 8 Mrs. Rehana Rahman Director House No.10, Road No.68, 2.06% 2.00% Gulshan, Dhaka 9 Mrs. Sirat Monira Director 226, Dilu Road (Ground 0.01% 0.01% Floor),New Eskaton, Dhaka 10 Karnafuli Tea Company Limited Director 67, Motijheel C/A (2nd floor),

(represented by Mr. Abdul Hye) Dhaka-1000 Financial statements 0.02% 0.02% (ceased to be Director on and from March 8, 2017) 11 Mr. A. H. M. Moazzem Hossain Independent Apartment # A-16, Building Director # 03, Ramna Estate Complex, - - Bara Moghbazar, Dhaka-1217 12 Dr. Quazi Mesbahuddin Ahmed Independent Flat No.C/3, House No.01, Director Road No.36, Gulshan, - - Dhaka-1212 13 Mr. M. Kamal Hossain Managing Southeast Bank Limited, Director Head Office, 52-53 Dilkusha - - (Current C/A, Dhaka-1000 Charge) *As per SEC notification no-SEC/CMRRCD/2009-193/119/Admin/34, dated: 22/11/2011; "Each director other than independent director(s)/ nominated director(s) of any listed company shall hold minimum 2% (two percent) shares of the paid-up capital. Otherwise there shall be a casual vacancy of director". But Mrs. Sirat Monira and Mr. Abdul Hye holds 0.01% and 0.02% respectively of total outstanding share who became Director(s) from B Group i.e. public shareholders. 334 Southeast Bank Limited I Annual Report 2016

69.3.1 Related party transactions During the year 2016, the Bank concluded business deals with the following organizations in which the directors had interest: Transaction value for the Balance outstanding as at Name of Nature of year ended 31 December 31 December Relationship Organization transaction 2016 2015 2016 2015 Taka Taka Taka Taka Asia Insurance Common Insurance 48,939,025 51,428,563 - - Ltd. Director coverage

Southeast Bank Share capital 4,000,000,000 500,000,000 5,489,930,000 1,489,930,000 Subsidiary Capital Services Interest 118,428,584 252,144,639 - - company Limited Loan - - 10,674 2,863,903,191 Southeast Subsidiary Financial Share capital - - 38,493,247 38,493,247 company Services (UK) Ltd Southeast Financial Subsidiary Services Share capital 36,297 - 25,063,712 25,027,415 company (Australia) Pty Ltd Southeast Exchange Subsidiary Share capital - - 50,103,110 50,103,110 Company (South company Africa) Pty Ltd 69.3.2 Loans and advances to directors and their related concern

Nature of Amount Name of party Name of the director Related by Status transaction in Taka

Mr. Azim Uddin Ahmed Bank Monorom Traders Director 4,783,061 Regular Mrs. Duluma Ahmed Guarantee

Mr. Ragib Ali Bank Rajnagar Tea Company Director 41,349 Mr. Abdul Hye Guarantee Regular Ltd. (Both of them ceased to be Director on and from March 8, 2017)

Mr. Ragib Ali Bank Director 32,891 The Sylhet Tea Co. Ltd. Mr. Abdul Hye Guarantee Regular (Both of them ceased to be Director on and from March 8, 2017) Mr. M.A. Kashem Mr. M. A. Kashem Director Credit Card 93,329 Regular Mr. Azim Uddin Ahmed Mr. Azim Uddin Ahmed Director Credit Card 153,846 Regular Mrs. Duluma Ahmed Mrs. Duluma Ahmed Director Credit Card 46,948 Regular Mrs. Suraiya Begum Mr. Alamgir Kabir, FCA Chairman’s wife Credit Card 110,961 Regular Director’s Ms. Sultana Kashem Mr. M. A. Kashem Credit Card 77,627 Regular daughter Director’s Ms. Farzana Azim Mr. Azim Uddin Ahmed Credit Card 106,676 Regular daughter Mr. Mamun Azim Mr. Azim Uddin Ahmed Director’s son Credit Card 169,441 Regular

The Bank complies with the requirements of the section 26 (c) of the Banking Companies Act 1991 as amended in 2013 in connection to the transactions executed with persons related to the Banks. Southeast Bank Limited I Annual Report 2016 335

69.4 Events after the reporting period

The Board of Directors in its 511 th meeting held on 8 April 2017 has recommended a cash dividend @ 20% subject to the approval of the shareholders at the next Annual General Meeting.

The Board of Directors also decided to issue Right Share at the rate of 1:2 (i.e. one Right Share for every two existing shares of Tk.10 each held by a shareholder) with a premium of Tk. 2.50 only for each new share (i.e. one Right Share price shall be Tk.12.50 only) subject to the approval of the regulatory authorities and the shareholders in the 8th Extra-Ordinary General Meeting scheduled to be held on 22 May 2017.

69.5 Number of employees

The number of employees engaged for the whole year or part thereof in 2016 who received a total yearly remuneration of Tk 36,000 or above were 2,616. The total number of employees were 2,376 in 2015.

69.6 Share trading

The Bank started trading its ordinary shares in Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) through CDBL from 16 May 2004. The closing market price of the share as on 31 December 2016 was Tk. 18.70 (2015: Tk.17.60) for each Tk.10 per value of share at DSE and Tk. 18.80 (2015: Tk.17.70) for each Tk.10 per value of share at CSE.

69.7 Pattern of Shareholding

Breakup of shareholding pattern as per clause 1.5 (xxi) of Securities and Exchange Commission notification No.SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012 issued under Section 2CC of the Securities and Exchange Ordinance, 1969, is as follows:

a) Parent/Subsidiary/Associated companies and other related parties (name wise details):

Sl. no. Name of the Company Shareholding Structure

1 Southeast Bank Capital Services Limited 99.816909% owned by Southeast Bank Limited

2 Southeast Bank Financial Services (UK) Ltd 100% owned by Southeast Bank Limited

3 Southeast Financial Services (Australia) Pty Ltd 100% owned by Southeast Bank Limited

4 Southeast Exchange Company (South Africa) Pty Ltd 100% owned by Southeast Bank Limited

69.8 Highlights on the overall activities of the Bank

Highlights on the overall activities of the Bank have been furnished in Annexure-A. Financial statements 336 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited Annexure-A Highlights on the overall activities as at and for the year ended 31 December 2016

Sl. no. Particulars 2016 2015 1 Paid-up capital Taka 9,169,501,760 9,169,501,760 2 Total capital Taka 34,021,136,400 28,490,491,729 3 Capital surplus Taka 4,349,974,549 3,930,383,753 4 Total assets Taka 291,993,002,059 260,253,042,164 5 Total deposits Taka 230,533,702,113 210,435,774,704 6 Total loans and advances/investments Taka 189,364,957,468 169,378,858,711 7 Total contingent liabilities and commitments Taka 111,153,962,784 88,522,244,812 8 Credit deposit ratio 82.14% 80.49% 9 Percentage of classified loans/investments against total loans and advances/investments 4.89% 4.25% 10 Profit after tax and provision Taka 2,416,371,223 3,082,479,520 11 Amount of classified loans/investments Taka 9,257,788,205 7,193,823,963 12 Provisions kept against classified loans/investments Taka 3,728,284,306 2,323,288,081 13 Provision surplus/(deficit) against classified loans/investments Taka 1,312,478,062 209,665,693 14 Cost of fund 7.32% 8.81% 15 Interest earning assets Taka 251,553,828,013 225,988,551,344 16 Non-interest earning assets Taka 40,439,174,046 34,264,490,820 17 Return on investment (ROI) 0.93% 1.32% 18 Return on assets (ROA) [PAT/ Average assets] 0.88% 1.24% 19 Income from investment Taka 5,014,416,110 5,125,174,462 20 Capital adequacy 12.18% 11.60% 21 Dividends a) Stock dividends 0% 0% b) Cash dividends 20% 15% 22 Earnings per share Taka 2.64 3.36 23 Net income per share Taka 2.64 3.36 24 Price earning ratio Times 7.12 5.25 Southeast Bank Limited I Annual Report 2016 337 Annexure-B Taka Taka Total Total - - 3,101,610,244 8,947,162,556 4,271,344,100 4,045,221,414 61,731,634,460 19,919,384,323 17,835,448,068 191,865,589,237 229,973,428,850 15,371,635,082 26,533,561,824 291,798,010,079 265,264,448,255 Taka Taka ------2,282,039 7,061,622,672 22,484,778,480 21,112,614,535 14,852,500,000 16,182,002,113 Above 5 years 5 years Above 8,167,174,573 65,513,797,726 41,164,621,040 24,349,176,686 Taka Taka ------1-5 years 1-5 years 925,212,857 1,885,539,884 4,998,658,798 44,881,367,857 19,382,607,972 46,774,400,000 1,526,995,340 67,074,728,570 13,774,674,432 53,300,054,138 Taka Taka ------153,037,756 4,816,887,000 1,218,610,829 54,241,232,848 11,194,204,409 74,864,100,000 3-12 months 3-12 months 3,530,377,350 60,429,768,433 89,588,681,759 (29,158,913,326) Taka Taka ------617,595,142 745,000,000 9,127,300,000 1,416,332,618 24,223,469,746 41,786,500,000 1-3 months 1-3 months 1,254,200,000 35,384,697,506 43,785,700,000 (8,401,002,494) Taka Taka - - - - 1,403,482,450 7,292,224,953 4,271,344,100 1,410,277,967 2,981,521,116 2,982,948,068 46,034,740,306 50,366,426,737 892,887,819 Up to 1 month 1 month Up to 9,154,182,172 63,395,017,844 54,240,835,672 Financial statements Particulars Total assets (A) Total Non banking assets Other assets Fixed assets including premises, furniture and fixtures furniture assets including premises, Fixed Loans and advances/investments Loans Investments Net liquidity gap (A - B) Net liquidity gap (A Money at call and on short notice Total liabilities (B) Total Balance with other banks and financial institutions Provision and other liabilities Provision Assets: in hand Cash Liabilities: Bangladesh Bank, financial institutions from Borrowings other banks, and agents Deposits Southeast Bank Limited and its subsidiariesSoutheast Bank Limited Liquidity Statement Consolidated analysis) and liabilities maturity (Assets as at 31 December 2016 338 Southeast Bank Limited I Annual Report 2016 - - Taka Taka Total Total Annexure-B.1 8,613,686,700 8,478,052,796 59,455,009,507 19,572,488,052 15,363,947,263 17,831,240,659 189,364,957,468 3,978,710,829 4,271,344,100 230,533,702,113 26,522,864,631 291,993,002,059 265,470,137,428 Taka Taka ------21,112,614,535 7,061,622,672 5,520,312,060 8,167,174,573 22,484,778,480 16,182,002,113 14,852,500,000 71,031,827,747 24,349,176,686 46,682,651,061 Above 5 years 5 years Above Taka Taka ------1-5 years 1-5 years 19,382,607,972 925,212,857 1,552,064,028 4,998,658,798 1,526,995,340 44,881,367,857 46,774,400,000 66,741,252,714 53,300,054,138 13,441,198,576 ------Taka Taka 153,037,756 3,530,377,350 54,241,232,848 74,864,100,000 10,847,308,138 4,816,887,000 1,218,610,829 3-12 months 3-12 months 89,241,785,488 60,429,768,433 (28,812,017,055) Taka Taka ------476,007,673 745,000,000 9,127,300,000 1,254,200,000 24,223,469,746 41,786,500,000 1-3 months 1-3 months 1,350,000,000 (8,608,922,581) 43,785,700,000 35,176,777,419 - - - - Taka Taka 885,200,000 1,403,482,450 2,981,521,116 2,978,740,659 43,534,108,537 50,926,700,000 4,271,344,100 5,015,600,000 1,410,100,000 3,819,954,630 54,793,421,116 58,613,375,746 Up to 1 month 1 month Up to Particulars Loans and advances/investments Loans and fixtures furniture assets including premises, Fixed Other assets liabilities (B) Total Money at call and on short notice Investments Non banking assets assets (A) Total Liabilities: Bangladesh Bank, financial from Borrowings other banks, institutions and agents Deposits and other liabilities Provision - B) Net liquidity gap (A Assets: in hand Cash Balance with other banks and financial institutions Southeast Bank Limited Liquidity Statement analysis) and liabilities maturity (Assets as at 31 December 2016 Southeast Bank Limited I Annual Report 2016 339 3,140,691 4,772,406 6,230,285 8,114,118 6,467,370 17,096,588 25,993,493 10,421,686 16,498,010 15,442,516 15,948,685 16,181,958 42,798,605 (4,849,259) Taka Taka 986,218,936 102,989,122 162,867,320 536,105,342 Annexure-C Equivalent Equivalent 78.50 78.50 78.50 78.50 78.50 85.82 78.50 85.82 85.82 78.50 78.50 78.50 78.50 78.50 78.50 116.38 116.38 rate 2015 Exchange Exchange 89,545 40,009 55,612 79,366 69,718 75,363 217,790 331,126 210,165 196,719 203,167 206,139 545,203 (56,507) 1,311,958 2,074,735 6,829,341 FC 12,479,450 amount 2,502,922 3,331,684 5,150,727 2,442,369 2,966,473 1,278,977 43,158,173 35,706,219 54,519,931 12,320,169 16,012,566 34,012,582 13,876,284 54,288,239 79,939,791 Taka Taka 144,963,770 378,944,176 885,415,055 Equivalent Equivalent 78.71 78.71 96.44 78.71 78.71 78.71 82.25 78.71 82.25 96.44 82.25 78.71 78.71 78.71 78.71 78.71 78.71 rate Exchange Exchange 2016 31,798.85 42,328.00 65,438.38 36,068.63 15,550.78 FC 548,311.14 370,224.75 692,658.73 156,523.91 166,028.47 432,119.26 176,293.87 689,715.16 29,696.19 11,124,453.47 1,015,610.14 1,841,719.53 4,814,367.68 amount EUR EUR GBP GBP USD USD USD USD USD USD USD USD type ACUD ACUD ACUD ACUD ACUEUR Currency Currency Financial statements Mashreq Bank PSC, New York, USA York, Bank PSC, NewMashreq Wells Fargo Bank, N.A., New York, USA York, Bank, N.A., New Fargo Wells Standard Chartered Bank, New York OBU York Chartered Bank,Standard New JP Morgan Chase Bank, New York, USA York, Chase Bank,JP Morgan New Standard Chartered Bank,Standard UK London, ICICI Bank Ltd., Mumbai, India ICICI Bank Ltd., Standard Chartered Bank,Standard Kolkata, India Habib American Bank, New York, USA York, Habib American Bank, New Citibank, NA, New York, USA York, Citibank, NA, New Sonali Bank (UK) Ltd. Citibank AG, Frankfurt, Germany Frankfurt, Citibank AG, Sonali Bank (UK) Ltd. Bank,Mashreq Mumbai, India Interest bearing: Interest USA York, Chartered Bank,Standard New Arab Bangladesh Bank Ltd., Mumbai, India Arab Bangladesh Bank Ltd., Sonali Bank (UK) Ltd. Bank,Mashreq Mumbai, India Name of the Bank Southeast Bank Limited with other banks-OutsideBalance Account) Bangladesh (Nostro as at 31 December 2016 340 Southeast Bank Limited I Annual Report 2016 - - - - 598,944 289,179 144,445 4,408,327 1,982,525 1,951,850 9,240,541 2,357,015 2,994,202 2,517,501 5,482,794 2,052,043 41,682,998 10,945,034 21,916,941 54,238,086 Taka Taka 1,149,021,361 162,802,425 Annexure-C Equivalent Equivalent 0.65 78.50 78.50 79.37 78.50 85.82 78.50 78.50 79.37 78.50 56.58 57.32 20.91 78.50 21.37 78.50 - - - - rate 2015 Exchange Exchange - - - - 6,979 3,684 6,758 56,157 24,593 30,026 38,143 44,494 98,145 25,255 530,992 117,713 137,907 382,355 690,928 8,409,247 FC 10,603,375 23,082,824 amount - - - 6,024,463 1,987,849 1,830,346 4,947,574 3,789,947 6,233,334 7,725,805 5,629,316 2,229,915 1,258,241 28,769,758 39,325,786 15,961,921 12,773,370 10,784,568 83,931,106 Taka Taka 1,118,618,354 233,203,299 Equivalent Equivalent 0.68 82.25 78.71 78.71 76.68 78.71 82.25 78.71 78.71 76.68 78.71 56.72 20.97 78.71 21.43 78.71 rate - - - - Exchange Exchange - 2016 - - 73,250.00 25,255.00 23,870.21 60,156.37 48,150.10 79,192.56 FC 5,119,700 365,510.81 499,621.86 202,791.23 162,281.68 140,645.46 136,211.42 268,459.79 104,068.79 16,244,153 1,066,318.55 1,863,915.73 amount SAR EUR EUR YEN YEN CHF CHF AED USD CAD AUD type ACUD ACUD ACUD ACUD ACUD ACUD ACUD Currency Currency Bank of Tokyo-Mitsubishi, JPY Tokyo-Mitsubishi, Bank of Habib Allied Intl Bank, UK Habib Bank AG Zurich, Zurich, Switzerland Habib Bank AG Habib Metropoliton Bank Ltd., Karachi, Bank Ltd., Pakistan Habib Metropoliton Standard Chartered Bank,Standard India Mumbai (AEB), Commerz Bank AG, Frankfurt, Germany Frankfurt, Commerz Bank AG, Standard Chartered Srilanka Bank,Standard Colombo, KantonalZuercher Bank, Zurich, Switzerland Bank of Nova Scotia, Toronto, Canada Toronto, Scotia, Bank of Nova Commerz Bank AG, Frankfurt, Germany Frankfurt, Commerz Bank AG, Nepal Bangladesh Bank Ltd., Kathmandu, Nepal Nepal Bangladesh Bank Ltd., Karachi, Bank Limited, United Pakistan Non-interest bearing: Non-interest Al Rajhi Bank, Saudi Arabia Bank of Bhutan, Pheuntsholing, Bhutan Bank of Bhutan, Pheuntsholing, U.B.A.F., Tokyo, Japan Tokyo, U.B.A.F., Mashreq Bank PSC, Dubai, UAE Mashreq Melbourne, Australia Bank Ltd., National Australia HDFC Bank, Mumbai, India Name of the Bank Southeast Bank Limited with other banks-OutsideBalance Account) Bangladesh (Nostro as at 31 December 2016 Southeast Bank Limited I Annual Report 2016 341

Southeast Bank Limited Annexure-D Details of Large Loan as at 31 December 2016

2016 2015 Number of clients 25 28 Amount of outstanding advances (Amount in million Taka) 86,912.40 77,807.30 Amount of classified advances (Amount in million Taka) NIL NIL Measures taken for recovery (Taka) NIL NIL Client-wise break up is as follows: (Amount in million Taka)

Outstanding as at 31 Outstanding as at 31 December 2016 December 2015 Sl. no. Name of clients Non Non Funded Total Funded Total funded funded 1 Abul Khair Group 69.60 2,266.40 2,336.00 1,060.30 2,414.80 3,475.10 2 ACS Textiles (Bangladesh) Limited and its related concerns 2,128.50 1,207.50 3,336.00 2,236.90 1,701.10 3,938.00 3 Bashundhara Group 1,301.10 3,558.60 4,859.70 2,124.80 965.50 3,090.30 4 Designer Fashion Ltd. and its related concerns (Formerly named as Designer Jeans Ltd.) 799.00 521.30 1,320.30 838.50 616.00 1,454.50 5 Caixa Bank, S.A. LA Caixa - - - - 2,802.30 2,802.30 6 Capital Banani One Ltd. and its related concerns 4,872.80 - 4,872.80 4,347.40 - 4,347.40 7 Cassiopea Fashion ltd. and its related concerns 488.60 1,591.20 2,079.80 446.90 1,139.80 1,586.70 8 Crown Wears (Pvt.) Ltd. and its related concerns 499.70 3,568.10 4,067.80 464.70 2,139.90 2,604.60 9 Deshbandhu Sugar Mills Ltd. and its related concerns 3,929.80 2,645.10 6,574.90 3,800.70 2,508.70 6,309.40 10 Grameen Phone Limited - 1,146.60 1,146.60 - 893.70 893.70 11 Irish Design Limited and its related concerns 670.20 1,383.70 2,053.90 601.30 1,064.60 1,665.90 12 Jaj Bhuiyan Textiles mills and its related concerns 2,301.00 55.80 2,356.80 1,918.00 665.60 2,583.60 13 KDS Group - - - 160.90 569.00 729.90 14 Keya Group 3,512.10 5,614.50 9,126.60 3,419.00 2,500.30 5,919.30 15 Aaron Denim Limited and its related concerns 2,261.80 890.20 3,152.00 2,007.70 544.00 2,551.70 16 Maksons Spinning Mills ltd. 2,341.60 2,095.90 4,437.50 2,493.30 184.00 2,677.30 17 Meghna Group - 6,778.50 6,778.50 277.60 3,483.00 3,760.60 18 Mother Steel ltd. and its related concerns 701.30 452.90 1,154.20 486.20 20.10 506.30 19 N. R. Group 390.70 1,366.80 1,757.50 290.30 1,013.90 1,304.20 Financial statements 20 Partex Group 1,033.70 2,412.20 3,445.90 1,307.90 1,792.10 3,100.00 21 S. Alam Super Edible Oil Ltd. - - - 179.60 3,975.80 4,155.40 22 Yunusco (BD) Limited and its related concerns (Formarly named as Shore to Shore (BD) Ltd.) 1,263.10 1,640.30 2,903.40 764.80 1,355.00 2,119.80 23 Southeast Bank Capital Services Ltd. - - - 3,099.70 - 3,099.70 24 T. K. Group - 3,182.20 3,182.20 - 2,936.80 2,936.80 25 Rupayan Housing Estate Limited and its related concerns 4,554.80 2.10 4,556.90 3,406.00 - 3,406.00 26 Chittagong Asian Apparels Ltd. and its related concerns 1,748.30 1,765.90 3,514.20 1,600.40 910.60 2,511.00 27 Snowtex Apparels Limited and its related concerns 1,897.90 1,427.50 3,325.40 1,047.40 1,053.10 2,100.50 28 Generation Next Fashions Limited 975.40 1,280.90 2,256.30 1,092.80 1,084.50 2,177.30 29 Designtex Fashions Limited and its related concerns 1,006.40 1,310.80 2,317.20 - - - Total 38,747.40 48,165.00 86,912.40 39,473.10 38,334.20 77,807.30 342 Southeast Bank Limited I Annual Report 2016 31 Taka Taka as at as at - - - - Written Written Annexure-E December December 7,772,948 5,775,037,313 1,488,352,292 7,772,948 8,726,413 2,692,399 5,338,609 94,603,220 41,241,616 down value value down 11,418,812 7,751,078,875 8,594,494,940 8,613,686,700 8,605,913,752 612,693,800 118,160,090 459,068,000 31 Taka Taka as at as at - - - - Balance Balance 629,181,591 December December 12,897,158 401,670,312 1,792,923,672 1,627,777,018 165,146,654 1,561,891 8,854,864 59,120,427 11,335,267 62,231,950 80,142,933 22,162,584 1,614,879,860 106,026,227 410,635,626 1,525,648,802 year year Taka Taka ------(1,982,362) during the (9,438,243) (2,687,073) for disposal for (704,711) 388,407 109,441 1,725,555 Adjustment Adjustment (45,826) (43,239) (12,125,316) (658,885) (6,470,475) (9,438,243) (4,162,526) Depreciation Depreciation Taka Taka during ------the year the year Charged Charged 4,817,210 1,969,283 279,400,187 274,582,977 272,613,694 265,597 4,817,210 1,703,686 1,238,052 53,357,385 61,052,193 19,968,426 20,857,361 10,448,440 263,312,640 105,691,837 Taka Taka as at as at - - - - Balance Balance 1 January 169,767,687 11,632,586 1,342,120 7,660,051 63,741,460 10,290,466 40,537,969 59,176,131 11,714,144 106,026,227 357,278,241 340,229,712 527,652,280 1,268,806,637 1,355,881,114 1,525,648,801 1,344,248,528 of % 4% 10% 20% 20% 10% 20% 10% 20% 20% 20% 30% 20% - - dep. dep. Rate Taka Taka as at as at - - Balance Balance 4,254,290 24,315,970 172,919,602 66,893,375 20,061,680 14,193,473 63,404,200 106,026,227 180,392,040 174,746,153 9,276,727,677 5,775,037,313 1,898,987,918 1,014,364,112 1,088,249,591 31 December 31 December 10,233,690,770 10,406,610,372 10,209,374,800 Taka Taka ------during the year the year Disposal (688,484) (5,667,158) (26,943,802) (20,973,403) (9,438,242) (833,303) (833,303) (9,438,242) (4,234,350) (11,535,161) (10,701,858) (43,240) (68,626) ------Taka Taka during the year the year Revalued Revalued Cost/Revaluation Cost/Revaluation Taka Taka - - during - - - - - the year the year Additions Additions 3,825,000 550,000 3,275,000 2,094,619 1,150,856,098 1,150,856,098 1,147,031,098 66,786,729 20,880,439 18,257,400 273,691,222 426,590,588 374,675,170 131,043,614 106,702,539 Taka Taka as at as at - - Balance Balance 1 January 182,357,844 3,704,290 21,324,273 9,276,727,677 9,094,369,833 9,073,045,560 76,331,617 17,619,983 12,142,094 45,215,426 106,026,227 884,008,982 113,605,311 987,214,210 158,100,064 9,029,980,257 5,348,446,725 1,524,312,748 Particulars Motor vehicles Furniture and fixtures Furniture Electrical Appliances Furniture and fixtures Furniture Land Buildings Furniture and fixtures Furniture Office appliances Computer Electrical appliances ATM Booth ATM Professional and reference and reference Professional books Motor vehicles Balance as at 31 December 2016 31 December as at Balance Balance as at 31 December 2015 Leased assets Leased Residence of executives: Residence Own assets Office: Southeast Bank Limited and fixtures furniture assets including premises, Schedule of fixed as at 31 December 2016 Southeast Bank Limited I Annual Report 2016 343

Southeast Bank Limited Annexure-F Names of Directors and their interest in different entities

Names of firms/companies in which interested as Sl. Status with % of Name proprietor/ director/ Position No. the Bank Shareholdings managing agent/ guarantor/ employee/ partner, etc. Asia Insurance Limited Director 6.40% 1 Mr. Alamgir Kabir, FCA Chairman Independent National Life Insurance Co. Ltd. Nil Director Managing The Sylhet Tea Co. Limited 21.46% Director Mr. Ragib Ali Vice Rajnagar Tea Co. Limited Do 41.66% 2 (ceased to be Director on and Chairman Union Syndicate Limited Do 22.55% from March 8, 2017) Doloi Tea Co. Limited Chairman 99.98% Panchaghar Tea Co. Limited Do 25.76% 3 Mr. M. A. Kashem Director Rose Corner (Pvt.) Limited Chairman 50.00% Managing Mutual Food Products Ltd. 44.78% Director Mutual Milk Products Ltd. Do 52.00% 4 Mr. Azim Uddin Ahmed Director Chairman & Mutual Trading Co. Limited Managing 71.30% Director Mutual Food Products Ltd. Chairman 31.78% 5 Mrs. Duluma Ahmed Director Mutual Milk Products Ltd. Do 16.00% Mutual Trading Co. Limited Director 12.96% 6 Mrs. Jusna Ara Kashem Director Rose Corner (Pvt) Ltd. Director 20.00% 7 Mr. Md. Akikur Rahman Director - - Nil Managing 8 Mrs. Rehana Rahman Director Bengal Tradeways Limited 74.61% Director 9 Mrs. Sirat Monira Director - - Nil Karnafuli Tea Company Limited (represented by Mr. Abdul Hye) 10 Director - - Nil (ceased to be Director on and from March 8, 2017) International Publication Ltd. Independent 11 Mr. A.H.M. Moazzem Hossain (Owning company of the Director 1.33% Financial statements Director Financial Express) Independent 12 Dr. Quazi Mesbahuddin Ahmed - - Nil Director Managing Director 13 Mr. M. Kamal Hossain - - Nil (Current Charge) 344 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited Annexure-G Islamic Banking Branches Balance Sheet As at 31 December 2016

2016 2015 Note Taka Taka

PROPERTY AND ASSETS Cash 1 In hand (including foreign currencies) 138,891,477 85,651,425 Balance with Bangladesh Bank and its agent banks (including foreign currencies) 885,846,050 835,234,394 1,024,737,527 920,885,819 Balance with other banks and financial institutions 2 In Bangladesh 300,122,666 221,110 Outside Bangladesh - - 300,122,666 221,110 Money at call and on short notice - - Investments in shares and securities 3 Government 650,000,000 640,000,000 Others 2,887,364,353 3,174,173,488 3,537,364,353 3,814,173,488 Investments 4 General Investments etc. 8,965,151,558 12,211,769,601 Bills purchased and discounted 326,049,485 158,940,930 9,291,201,043 12,370,710,531 Fixed assets including premises, furniture and fixtures 5 20,834,669 21,977,545 Other assets 6 6,431,807,594 7,756,135,005 Non - banking assets - - Total assets 20,606,067,852 24,884,103,498 LIABILITIES AND CAPITAL Liabilities Borrowings from other banks, financial institutions and agents 7 1,500,000,000 - Deposits and other accounts 8 Current/Al-wadeeah current accounts and other accounts 1,308,121,942 1,030,499,965 Bills payable 333,143,196 105,260,070 Savings bank/Mudaraba savings bank deposits 1,663,579,436 5,130,145,722 Fixed deposits/Mudaraba fixed deposits 13,435,727,150 15,752,155,994 16,740,571,724 22,018,061,751 Other liabilities 9 2,365,496,128 2,866,041,747 Total liabilities 20,606,067,852 24,884,103,498 OFF-BALANCE SHEET ITEMS Contingent liabilities Acceptances and endorsements 10.1 849,894,171 1,190,152,160 Letters of guarantee 10.2 908,652,217 711,261,320 Irrevocable letters of credit 10.3 727,081,836 674,363,740 Bills for collection 10.4 1,013,397,994 894,904,882 Other contingent liabilities - - 3,499,026,218 3,470,682,102 Southeast Bank Limited I Annual Report 2016 345

Southeast Bank Limited Annexure-G.1 Islamic Banking Branches Profit and Loss Account For the year ended 31 December 2016

2016 2015 Note Taka Taka

Profit on investments 11 1,871,410,563 2,301,101,633 Profit shared on deposits and borrowings etc. 12 (1,073,283,905) (1,448,561,806) Net profit on investments 798,126,658 852,539,827 Commission, exchange and brokerage 13 71,521,015 59,885,760 Other operating income 14 27,758,952 26,078,464 99,279,967 85,964,224 Total operating income (A) 897,406,625 938,504,051 Salaries and allowances 15 78,885,814 65,896,637 Rent, taxes, insurance, electricity etc. 16 37,555,015 28,818,708 Legal expenses 36,500 16,450 Postage, stamp, telecommunication etc. 17 8,217,481 7,476,055 Stationery, printing, advertisements etc. 18 3,273,577 3,331,088 Depreciation and repair of bank's assets 19 7,415,589 6,063,055 Other expenses 20 26,177,936 23,641,527 Total operating expenses (B) 161,561,912 135,243,520 Profit before provision (C=A-B) 735,844,713 803,260,531 Provision for investments 9.1 General provision (56,358,307) 66,516,369 Specific provision 440,905,620 (233,058,135) 384,547,313 (166,541,766) Provision for off-balance sheet items 9.2 283,441 (399,591,185) Provision for diminution in value of investments 9.3 (587,847,712) 722,967,262 Total provision (D) (203,016,958) 156,834,311 Total profit before tax (C-D) 938,861,671 646,426,220 Financial statements 346 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited Annexure-G.2 Islamic Banking Branches Notes to the Financial Statements As at and for the year ended 31 December 2016

2016 2015 Note Taka Taka

1 Cash

In hand: Local currency 138,859,993 85,572,925 Foreign currencies 31,484 78,500 138,891,477 85,651,425 Balance with Bangladesh Bank: Local currency 870,294,183 834,839,164 Foreign currencies - - 870,294,183 834,839,164 Balance with Sonali Bank Limited (as agent of Bangladesh Bank): Local currency 15,551,867 395,230 885,846,050 835,234,394 1,024,737,527 920,885,819

1.1 Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) have been calculated and maintained in accordance with section 33 of the Bank Companies Act 1991, MPD Circular nos. 4 and 5 dated 1 December 2010 and MPD Circular no. 1 and 2 dated 23 June 2014 and 10 December 2013 and DOS Circular No. 1 dated 19 January 2014. The statutory Cash Reserve Ratio on the Shariah-based Islamic Bank's demand and time liabilities at the rate of minimum 6.0% on daily basis and 6.50% on bi-weekly basis been calculated and maintained with Bangladesh Bank in current account and 5.50% Statutory Liquidity Ratio on the same liabilities has also been maintained in the form of treasury bills, bonds and debentures including excess cash reserve balance with Bangladesh Bank. Both the reserves maintained by the Bank are in excess of the statutory requirements, as shown below:

1.1.1 a) Cash Reserve Ratio (CRR) for Islamic Banking

Required reserve (6.50% of average Demand and Time Liabilities:) 815,652,913 783,041,796 Actual reserve held (Average daily on bi-weekly basis): 870,294,183 834,839,164 Surplus 54,641,270 51,797,368

b) Statutory Liquidity Ratio (SLR) for Islamic Banking

Required reserve (5.50 % of average Demand and Time Liabilities:) 690,167,850 662,573,830 Actual reserve held 859,075,477 777,844,023 Surplus 168,907,627 115,270,193

Held for Statutory Liquidity Ratio of Islamic Banking:

Cash in hand 138,891,477 85,651,425 Balance with agent bank (Sonali Bank Ltd.) as per 15,543,000 395,230 statement Excess cash reserve 54,641,000 51,797,368 Government Securities (HTM) 650,000,000 640,000,000 859,075,477 777,844,023 Southeast Bank Limited I Annual Report 2016 347

2016 2015 Note Taka Taka 2 Balance with other banks and financial institutions In Bangladesh 2.1 300,122,666 221,110 Outside Bangladesh - - 300,122,666 221,110 2.1 In Bangladesh Current account with: Sonali Bank Limited 740 740 740 740 Savings deposits account with: EXIM Bank Limited - 110,557 Social Investment Bank Limited - 108,679 - 219,236 Short term deposits account with: Sonali Bank Limited 1,134 1,134 EXIM Bank Limited 120,792 - 121,926 1,134 Fixed deposits with other banks: Social Islami Bank Limited 300,000,000 - 300,000,000 - 300,122,666 221,110 3 Investments in shares and securities Bangladesh Government Islamic Bond 650,000,000 640,000,000 Others 3.1 2,887,364,353 3,174,173,488 3,537,364,353 3,814,173,488 3.1 Others

Shares in listed companies 2,887,364,353.00 3,174,173,488 Shares in un-listed companies - - 2,887,364,353 3,174,173,488 Provision for diminution in the market value of shares (722,164,321) (1,310,012,033) 2,165,200,032 1,864,161,456 3.2 Investments classified as per Bangladesh Bank Circular

Held to maturity (HTM) 650,000,000 640,000,000 Other securities 2,887,364,353 3,174,173,488 3,537,364,353 3,814,173,488 Financial statements 3.3 Cost and market value of investments 3.3.1 Government securities

2016 2015 Cost price Market price Market price Taka Taka Taka Bangladesh Government Islamic Bond 650,000,000 650,000,000 640,000,000 650,000,000 650,000,000 640,000,000

3.3.2 Others (Investment in shares) 2016 2015 Market price Cost price Cost price Taka Taka Taka

Shares in listed companies 2,162,953,949 2,887,364,353 3,174,173,488 Shares in un-listed companies - - - 2,162,953,949 2,887,364,353 3,174,173,488 348 Southeast Bank Limited I Annual Report 2016

3.4 Market price, cost price and related provision of investments as on 31 December 2016

2016 Differences Name of the Company Market price Cost price (Provision to be Taka Taka Required) 1 Bay Leasing & Investment Limited 306,804,803 643,319,328 (336,514,525) 2 EXIM Bank 1st Mutual Fund 91,050,036 93,296,119 - 3 EXIM Bank Limited 338,449,996 696,815,163 (358,365,167) 4 Lafarge Surma Cement Ltd. 131,028,398 155,264,542 (24,236,144) 5 National Life Insurance Co. Limited 456,695,360 397,735,353 58,960,007 6 Titas Gas Trans. Co. Ltd. 89,160,973 92,298,169 (3,137,196) 7 RN Spinning 3,446,079 4,459,649 (1,013,570) 8 Premier Cement Mills Limited 40,032,240 48,428,204 (8,395,964) 9 Prime Finance Limited 7,884,394 26,958,933 (19,074,539) 10 Premier Leasing & Finance Limited 18,234,930 26,902,718 (8,667,788) 11 Generation Next Fashion Limited 37,121,088 65,982,996 (28,861,908) 12 Union Capital Limited 12,218,995 14,012,426 (1,793,431) 13 Bangladesh LAMPS LTD 12,740,943 16,791,948 (4,051,005) 14 Bangladesh Submarine Cable Co. Ltd. 31,913,837 46,266,367 (14,352,530) 15 Delta Life Insurance Limited 55,206,866 99,456,628 (44,249,762) 16 Aftab Automobiles Limited 61,249,892 94,751,115 (33,501,223) 17 Global Heavy Chemicals Limited 24,917,992 34,247,190 (9,329,198) 18 Fuwang Food 160,000 125,956 34,044 19 Delta Spinners Limited 2,577,850 3,719,475 (1,141,625) 20 Envoy Textile Mills Ltd. 839,244 1,157,799 (318,555) 21 Meghna Petroleum Limited 11,955,946 16,651,636 (4,695,690) 22 ACME Laboratories Limited 285,575,400 151,004,255 134,571,145 23 Matin Spinning Mills Limited 11,400,720 14,044,434 (2,643,714) 24 Ifad Autos 400,800 324,726 76,074 25 Aman Feed Ltd. 13,708,854 14,321,866 (613,012) 26 ACI Formulation 11,109,984 11,887,880 (777,896) 27 IPDC Finance Ltd. 6,998,445 7,044,521 (46,076) 28 Phoenix Finance & Investment Ltd. 6,160,100 6,268,931 (108,831) 29 BSC 4,702,000 4,699,724 2,276 30 Fuwang Ceramic 1,829,100 1,592,344 236,756 31 S ALAM 3,730,000 4,004,908 (274,908) 32 LankaBangla Finance Limited 8,799,562 8,579,814 219,748 33 Saif Power Tec Ltd. 34,991,612 35,704,991 (713,379) 34 BSRM Limited 12,760,000 17,059,559 (4,299,559) 35 ShahjiBazar Power Company Ltd. 27,097,510 32,184,686 (5,087,176) 2,162,953,949 2,887,364,353 (722,164,321) Actual provision 722,164,321 Surplus/(deficit) - 2016 2015 Note Taka Taka 4 Investments

Investments 4.1 8,965,151,558 12,211,769,601 Bills purchased and discounted 4.2 326,049,485 158,940,930 9,291,201,043 12,370,710,531 Southeast Bank Limited I Annual Report 2016 349

2016 2015 Note Taka Taka 4.1 Investments In Bangladesh Demand Investment 242,699,956 39,653,688 Bai-Muajjal (Time) Investment 310,841,197 259,042,064 Bai-Muajjal Time under CCS 55,960,365 45,738,419 Bai-Murabaha-BLC 32,499,080 6,738,157 Bai-Murabaha-LTR 476,095,001 1,199,083,998 Bai-Salam (PACKING CREDIT) 84,436,201 73,641,542 Staff House Building Investment 8,362,607 6,328,219 Export Development Fund (EDF) against LC 633,716,266 394,527,668 Investment against Cash Incentive 17,327,114 9,932,898 Bai-Muajjal - Investment 3,269,956,321 6,350,895,335 Murabaha - Investment 624,262,832 562,799,707 Hire purchase - Investment 3,208,994,618 3,263,282,206 Izarah - Investment - 105,700 8,965,151,558 12,211,769,601 Outside Bangladesh - - 8,965,151,558 12,211,769,601 4.2 Bills purchased and discounted In Bangladesh 248,139,426 140,539,241 Outside Bangladesh 77,910,059 18,401,689 326,049,485 158,940,930 5 Fixed assets including premises, furniture and fixtures Cost: Furniture and fixture 20,161,166 18,414,466 Office Appliances 81,620 581,620 Electrical Appliances 26,276,457 24,355,701 Motor Vehicles 2,620,000 2,620,000 ATM Booth 3,915,270 4,820,105 53,054,513 50,791,892 Less: Accumulated depreciation Furniture and fixture 11,270,813 9,812,806 Office Appliances 81,618 504,737 Electrical Appliances 18,515,303 16,642,945 Motor Vehicles 611,339 87,334 ATM Booth 1,740,771 1,766,525

32,219,844 28,814,347 Financial statements Written down value as at 31 December 20,834,669 21,977,545 6 Classification of other assets i) Stationery, stamps, printing materials, etc. 600,598 642,187 ii) Advance rent and advertisement 31,963,867 15,877,032 iii) Interest accrued on investment but not collected, commission and brokerage receivable on shares and debentures, and other income receivables 5,791,241 131,241 iv) Security deposits 69,460 69,460 v) Preliminary, formation and organisational expenses, renovation, development and prepaid expenses 4,154,592 3,335,680 vii) Suspense account 2,404,214 5,034,090 viii) Silver - - ix) Head office general account 6,384,977,192 7,728,329,525 X) Others 1,846,430 2,715,790 6,431,807,594 7,756,135,005 350 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 7 Borrowing from other banks, financial institutions and agents

In Bangladesh 7.1 1,500,000,000 - Outside Bangladesh - - 1,500,000,000 -

7.1 In Bangladesh

Secured Borrowing against securities from Bangladesh Bank 1,500,000,000 - 1,500,000,000 - Unsecured - - 1,500,000,000 -

8 Deposits and other accounts

Al-wadeeah current accounts and other accounts Al-wadeeah current deposits 386,612,640 365,847,770 Foreign currency deposits 25,072,729 26,757,443 Sundry deposits 896,436,573 637,894,752 1,308,121,942 1,030,499,965 Bills payable Payment order issued 332,989,460 105,081,077 T.T. payable 100,700 125,707 Demand draft 53,036 53,286 333,143,196 105,260,070

Mudaraba savings bank deposits 1,663,579,436 5,130,145,722

Mudaraba fixed deposits Mudaraba fixed deposits 11,682,637,461 13,951,911,085 Mudaraba Special notice deposits 675,707,267 625,271,927 Scheme deposits 981,521,681 1,015,417,570 Interest Payable on FDR/Scheme 95,860,741 159,555,412 13,435,727,150 15,752,155,994 16,740,571,724 22,018,061,751

9 Other liabilities

Provision for investments 9.1 1,023,198,841 637,201,528 Provision for off-balance sheet exposures 9.2 34,990,262 34,706,821 Interest suspense account 123,540,202 135,050,659 Obligation under finance lease - - Accrued expenses 1,003,044 85,000 Interest payable on borrowings 4,001,370 - Accounts payable - Bangladesh Bank - - Accounts payable - others 1,568,524 979,793 Provision for diminution in the market value of share 9.2 722,164,321 1,310,012,033 Provision for other assets - - Unearned income 388,476,342 680,406,920 Withholding tax 66,562,222 67,598,993 2,365,946,128 2,866,041,747 Southeast Bank Limited I Annual Report 2016 351

2016 2015 Note Taka Taka 9.1 A. General provision for investments

Balance as at 1 January 124,744,414 58,228,045 Provision made during the year - 66,516,369 124,744,414 124,744,414 Adjustments made during the year (56,358,307) - Balance as at 31 December 68,386,107 124,744,414 B. Specific provision for investments

Balance as at 1 January 512,457,114 745,515,249 Recoveries of amounts previously written off 1,441,000 - Provision made during the year 440,905,620 - 954,803,734 745,515,249 Adjustments made during the year - (233,058,135) Balance as at 31 December 954,803,734 512,457,114 C. Total provision on investments (C=A+B) 1,023,189,841 637,201,528

9.2 Provision for off-balance sheet exposures

Balance as at 1 January 34,706,821 434,298,006 Provision made during the year 283,441 - 34,990,262 434,298,006 Adjustments made during the year - (399,591,185) Balance as at 31 December 34,990,262 34,706,821 9.3 Provision for diminution in the market value of share

Balance as at 1 January 1,310,012,033 587,044,771 Provision made during the year - 722,967,262 1,310,012,033 1,310,012,033 Adjustments made during the year (587,847,712) - Balance as at 31 December 722,164,321 1,310,012,033

10 Contingent liabilities

10.1 Acceptances and endorsements

Acceptance under Letters of credit - Import 267,075,882 654,937,680 Acceptance under Letters of credit - Export 582,818,289 535,214,480 849,894,171 1,190,152,160

10.2 Letters of guarantee Financial statements Local 790,957,217 692,391,320 Foreign 117,695,000 18,870,000 908,652,217 711,261,320

10.2.1 Balance for which the Bank is contingently liable in respect of guarantee issued favouring: Directors or officers - - Government - - Banks and other financial institutions - - Others 908,652,217 711,261,320 908,652,217 711,261,320 10.3 Irrevocable letters of credit (L/C) Back to back L/C 328,505,407 375,225,832 Others 398,576,429 299,137,908 727,081,836 674,363,740 352 Southeast Bank Limited I Annual Report 2016

2016 2015 Note Taka Taka 10.4 Bills for collection

Local 519,166,618 599,526,326 Foreign 494,231,376 295,378,556 1,013,397,994 894,904,882 11. Profit on investment Demand investment 9,166,698 3,135,713 Bai-Muajjal (Time) investment 29,191,073 19,315,006 Bai-Muajjal time under CCS 6,076,491 5,678,947 Bai-Murabaha-BLC 7,132,582 5,038,070 Bai-Murabaha-LTR 78,329,760 164,424,716 Bai-Salam (PACKING CREDIT) 8,598,552 6,648,440 Staff house building investment 257,208 316,890 Staff car loan investment 166,130 464,143 Investment against cash incentive 1,707,058 994,744 Bai-Muajjal - Investment 403,072,130 453,633,383 Murabaha - Investment 56,450,361 63,004,321 Hire purchase - Investment 323,550,262 211,452,358 Izarah - Investment - 54,106 Quard against MTDR - 14,659 Interest on savings accounts 18,524 - Interest on special term deposit STD 3,300,000 - Bills purchased and discounted 37,123,554 31,771,932 Interest on placement with other banks 24,185,041 85,855,000 Interest branch interest income 883,085,139 1,249,299,205 1,871,410,563 2,301,101,633 12. Profit shared on deposits and borrowings etc. Profit shared on deposits (Islamic Banking Branch): 80,923,783 187,470,478 Mudaraba Savings Deposits (MSB) 49,073,389 24,810,112 Mudaraba Short Term Deposits (MSTD) 903,655,225 1,131,300,980 Mudaraba Fixed Term Deposits (MFDR) 39,631,508 60,869,206 Interest on Re-finance borrowings - 44,111,030 Inter Branch interest expenses 1,073,283,905 1,448,561,806 13 Commission, exchange and brokerage Commission and brokerage 60,283,607 52,899,859 Exchange gain 11,237,408 6,985,901 71,521,015 59,885,760 14 Other operating income Remittance fees 351,761 201,481 Service and incidental charges 5,547,600 5,326,747 Other fees-telephone and postage 2,831,104 2,178,043 Income from retail banking 84,480 262,683 Other fees - SWIFT 8,362,968 7,483,894 Miscellaneous income 10,581,039 10,625,616 27,758,952 26,078,464 15 Salaries and allowances Basic salary 39,540,655 30,882,057 Allowances 24,090,710 21,143,291 Bonus 11,770,082 11,100,653 Provident fund 3,484,367 2,770,636 78,885,814 65,896,637 Southeast Bank Limited I Annual Report 2016 353

2016 2015 Note Taka Taka 16 Rent, taxes, insurance, electricity etc. Rent, rates and taxes 23,940,299 15,990,000 Insurance 9,316,439 8,800,826 Electricity and lighting 4,298,277 4,027,882 37,555,015 28,818,708 17 Postage, stamp, telecommunication etc. Postage 2,150,441 1,916,248 Telephone /Telex 411,530 475,698 VSAT on-line 2,241,596 2,199,119 SWIFT services 3,413,914 2,884,990 8,217,481 7,476,055 18 Stationery, printing, advertisements etc. Office stationery 862,027 767,155 Printing stationery 1,147,213 1,497,034 Security stationery 1,001,573 785,199 Computer stationery 250,094 278,842 Publicity and advertisement 12,670 2,858 3,273,577 3,331,088 19 Depreciation and repair of bank's assets Depreciation: Furniture and fixtures 873,253 1,003,308 Office appliances - - Electrical appliances 1,712,153 2,104,553 Motor vehicles 524,004 87,334 ATM Booth 592,011 453,255 3,701,421 3,648,450

Repair: Furniture and fixtures 318,002 368,175 Office and electrical appliance 1,933,309 1,269,593 Repair and maintenance computers 172,965 197,200 Motor vehicles 106,130 98,040 Repair, maintenance and utilities 1,183,762 481,597 3,714,168 2,414,605 7,415,589 6,063,055 20 Other expenses Financial statements Security and cleaning 5,511,574 4,793,648 Entertainment 1,509,768 1,296,432 Car expenses 6,697,612 5,961,640 Books and periodicals 33,272 35,426 Subscription and donation 55,000 3,000 Travelling expenses 564,269 389,550 Conveyance 321,351 264,590 Fuel 187,131 121,480 Uniforms and apparels 187,949 156,837 Loss on sale of fixed assets 44,498 - Finance charge on leased assets - 523,489 Expenses for CIB report 6,370 4,080 Expenses regarding retail banking 18,800 202,058 Miscellaneous 11,040,342 9,889,297 26,177,936 23,641,527 354 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited Annexure-H Off-Shore Banking Unit, Bangladesh Balance Sheet As at 31 December 2016

2016 2015 Note USD Taka Taka

PROPERTY AND ASSETS Cash In hand (including foreign currencies) - - - Balance with Bangladesh Bank and its agent banks - - - (including foreign currencies) - - -

Balances with other banks and financial institutions 3 In Bangladesh 393,079 30,939,647 25,288,318 Outside Bangladesh 31,799 2,502,922 25,993,493 424,878 33,442,569 51,281,811 Money at Call and on short notice - - - Investments Government - - - Others ------Loans and advances 4 Loans, cash credit & overdrafts etc. 22,435,600 1,765,930,769 1,254,004,353 Bills purchased and discounted 57,950,547 4,561,351,334 3,643,187,365 80,386,147 6,327,282,103 4,897,191,718 Fixed assets including premises, furniture and fixtures 5 21,601 1,700,220 2,118,263 Other assets 6 159,516 12,555,735 14,505,983 Non-banking assets - - - Total assets 80,992,142 6,374,980,627 4,965,097,775

LIABILITIES AND CAPITAL

Liabilities Borrowings from other banks, financial institutions and agents 7 77,405,000 6,092,632,695 4,795,975,829 Deposits and other accounts 8 Current accounts and other accounts 66,230 5,213,018 8,845,370 Bills payable - - - Savings bank deposits - - - Fixed deposits 210,847 16,595,974 13,142,470 277,077 21,808,992 21,987,840 Other liabilities 9 1,050,221 82,342,885 63,371,404 Total liabilities 78,732,298 6,196,784,572 4,881,335,073

Capital/shareholders' equity Paid up capital - - - Statutory reserve - - - Other reserves - - - Foreign currency losses - - - Retained earnings 10 2,259,844 178,196,055 83,762,702 Total shareholders' equity 2,259,844 178,196,055 83,762,702 Total liabilities and shareholders' equity 80,992,142 6,374,980,627 4,965,097,775 Southeast Bank Limited I Annual Report 2016 355

Southeast Bank Limited Off-Shore Banking Unit, Bangladesh Balance Sheet As at 31 December 2016

2016 2015 Note USD Taka Taka OFF-BALANCE SHEET ITEMS

Contingent liabilities Acceptances and endorsements - - 156,738,710 Letters of guarantee - - - Irrevocable letters of credit 115,439 9,086,309 33,235,820 Bills for collection 2,427,026 191,033,922 22,613,972 2,542,465 200,120,231 212,588,502 - - - Other commitments Documentary credits and short term trade-related transactions - - - Forward assets purchased and forward deposits placed - - - Undrawn note issuance and revolving underwriting facilities - - - Undrawn formal standby facilities, credit lines and other - - - commitments Claims against the Bank not acknowledged as debt ------Other memorandum items Value of travelers' cheques on hand - - - Value of Bangladesh Sanchay Patra on hand - - - Total off-balance sheet items including contingent liabilities 2,542,465 200,120,231 212,588,502 Financial statements 356 Southeast Bank Limited I Annual Report 2016

Southeast Bank Limited Annexure-H.1 Off-Shore Banking Unit, Bangladesh Profit and Loss account For the year ended 31 December 2016

2016 2015 Note USD Taka Taka

Interest income 11 4,046,078 317,159,565 219,271,868 Interest paid on deposits and borrowings etc. 12 (2,731,554) (214,118,055) (158,653,769) Net interest income 1,314,524 103,041,510 60,618,099 Commission, exchange & brokerage 13 189,999 14,893,415 8,119,730 Other operating income 13.1 89,495 7,015,243 4,687,108 279,494 21,908,658 12,806,838 Total operating income (A) 1,594,018 124,950,168 73,424,937

Salaries and allowances 14 45,786 3,589,013 3,258,804 Rent, taxes, insurance, electricity etc. 15 12,243 959,695 854,789 Legal expenses 44 3,449 699,603 Postage, stamp, telecommunication 16 15,003 1,176,104 1,076,393 Stationery, printing, advertisements etc. 17 1,610 126,208 114,076 Depreciation and repair of bank's assets 18 5,891 461,737 414,823 Other expenses 19 138,296 10,840,461 8,130,434 Total operating expenses (B) 218,873 17,156,667 14,548,922 Operating profit (C=A-B) 1,375,145 107,793,501 58,876,015 Provision for loans and advances General provision 9.1 182,337 14,292,821 30,569,299 Specific provision - - - 182,337 14,292,821 30,569,299 Provision for diminution in value of investments - - Other provisions 9.2 (1,656) (124,682) 186,385 Total provision (D) 180,681 14,168,139 30,755,684 Total profit before tax (C-D) 1,194,464 93,625,362 28,120,331 Southeast Bank Limited I Annual Report 2016 357

Southeast Bank Limited Annexure-H.2 Off-Shore Banking Unit, Bangladesh Notes to the Financial Statements As at and for the year ended 31 December 2016

1 Status of the unit

Off-shore Banking Unit (OBU) is a separate business unit of Southeast Bank Limited, governed under the Rules and Guidelines of Bangladesh Bank. The Bank obtained permission to operate OBU vide Letter No. BRPD(P-3)744(98)/2008-2213 dated June 24, 2008. The Bank presently has 2 (two) OBUs – one at Export Processing Zone, Dhaka and the other at Export Processing Zone, Chittagong. OBU boosts up foreign trade by extending finance to industrial units inside and outside the Export Processing Zone (EPZ) area. OBU is free to make loans/advances to persons/institutions not resident in Bangladesh and to make loans/advances to Type-A (wholly foreign owned) units in the EPZs in Bangladesh. Industrial units outside the EPZs and Type-B and Type-C industrial units within the EPZs in Bangladesh may avail term loans in foreign currencies from OBU subject to compliance with the guidelines issued by the Board of Investment for borrowing abroad by industrial units Bangladesh. 2 Significant accounting policies and basis of preparations

2.1 Basis of preparation

The financial statements are prepared on the basis of a going concern and represent the financial performance and financial position of the OBU. The financial statements of the OBU are prepared in accordance with the Bank Companies Act 1991, in particular, Banking Regulation and Policy Department (BRPD) Circular No. 14 dated June 25, 2003, other Bangladesh Bank Circulars and Bangladesh Financial Reporting Standards (BFRS). 2.2 Foreign currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates, i.e., the functional currency. The financial statements are presented in Taka which is the Bank’s functional and presentation currency. Figures appearing in the financial statements have been rounded off to the nearest Taka. Assets & liabilities and income & expenses have been converted into Taka currency @ US$1 = Tk. 78.7111 (closing rate as at 31 December 2016) and Tk. 78.3869 (average rate which represents the year end) respectively. 2.3 Basis of Accounting

OBU maintains its accounting records in USD from which accounts are prepared according to the Bank Companies Act, 1991, Bangladesh Financial Reporting Standards and other applicable directives issues by Bangladesh Bank.

2.4 Functional and presentation currency Financial statements

The Financial Statements of OBU are presented in both USD and Bangladesh Taka (Taka/Tk.) except as otherwise indicated. Financial information presented in Taka and USD has been rounded off to the nearest integer. and financial information presented in USD has been rounded into two decimal points. 358 Southeast Bank Limited I Annual Report 2016

2016 2015 Note USD Taka Taka 3 Balance with other banks and financial institutions

In Bangladesh 3.1 393,079 30,939,647 25,288,318 Outside Bangladesh 3.2 31,799 2,502,922 25,993,493 424,878 33,442,569 51,281,811

3.1 In Bangladesh

Southeast Bank Limited 393,079 30,939,647 25,288,318 Other commercial bank - - - 393,079 30,939,647 25,288,318

3.2 Outside Bangladesh (current account)

Standard Chartered Bank, New York 31,799 2,502,922 25,993,493

4 Loans and advances

Loans, cash credit, overdrafts etc. 4.1 22,435,600 1,765,930,769 1,254,004,353 Bills purchased and discounted 4.2 57,950,547 4,561,351,334 3,643,187,365 80,386,147 6,327,282,103 4,897,191,718

4.1 Loans, cash credit, overdrafts etc.

In Bangladesh - - - Outside Bangladesh 4.1.1 22,435,600 1,765,930,769 1,254,004,353 22,435,600 1,765,930,769 1,254,004,353

4.1.1 Outside Bangladesh

Time loan 5,341,060 420,400,688 541,122,980 Term loan 16,050,898 1,263,383,837 638,664,332 Overdraft 37,109 2,920,921 2,949,219 Advance-LTR 1,006,533 79,225,323 71,267,822 22,435,600 1,765,930,769 1,254,004,353

4.2 Bills purchased and discounted

In Bangladesh - - - Outside Bangladesh 57,950,547 4,561,351,334 3,643,187,365 57,950,547 4,561,351,334 3,643,187,365

5 Fixed assets including premises, furniture and fixtures Cost: Furniture and fixtures 40,730 3,205,905 3,157,511 Electrical appliances 21,014 1,654,017 1,649,587 61,744 4,859,922 4,807,098 Less: Furniture and fixtures 21,803 1,716,144 1,490,283 Electrical appliances 18,340 1,443,558 1,198,552 40,143 3,159,702 2,688,835 Written down value as at 31 December 21,601 1,700,220 2,118,263 Southeast Bank Limited I Annual Report 2016 359

2016 2015 Note USD Taka Taka 6 Other assets Accrued interest on bill purchased and discounted 713 56,116 55,965 Prepaid interest expenses-ICICI - - 2,910,071 Prepaid management fee GCPF 84,591 6,658,410 3,528,428 Prepaid interest mashreq 65,167 5,129,340 - Prepaid expense-IFC monitoring fee 5,750 452,590 7,817,321 Insurance 146 11,447 5,603 Advance office rent 2,149 169,121 168,668 Head office general account 1,000 78,711 - Accounts receivable others - - - Others - - 19,927 159,516 12,555,735 14,505,983

7 Borrowing from other banks, financial institutions and agents Borrowings from IFC 15,000,000 1,180,666,500 1,177,504,500 Borrowings from Mashreq bank PSC-USD 5,000,000 393,555,500 - Borrowings from GCPF 10,000,000 787,111,000 392,501,500 Borrowings from ICIC - - 549,502,100 Borrowings from Bank Muscat, Oman 5,000,000 393,555,500 - Borrowings from CBQ - - 1,491,505,700 Borrowings from ADB 4,900,000 385,684,390 - Borrowings from FGB, UAE 15,000,000 1,180,666,500 - Borrowings from RAK Bank ,UAE 18,000,000 1,416,799,800 745,752,850 Borrowings from Head Office 4,505,000 354,593,505 439,209,179 77,405,000 6,092,632,695 4,795,975,829 8 Deposit accounts

Current accounts 8.1 66,230 5,213,018 8,845,370 Fixed deposits 210,847 16,595,974 13,142,470 277,077 21,808,992 21,987,840 8.1 Current deposits Current accounts 19,755 1,554,917 3,167,981 Margin against L/C 11,544 908,631 3,323,582 Sundry creditors 204 16,057 1,627,783 Sundry deposit FCY 34,727 2,733,413 726,024 66,230 5,213,018 8,845,370 Financial statements

9 Other liabilities Interest payable on borrowings 17,576 1,383,457 10,007,761 Interest payable on FDR 1 61 59 Accrued expenses payable 1,562 122,964 27,244 Interest payable-IFC loan 31,620 2,488,845 2,230,455 Interest payable on RAK Bank, UAE 60,000 4,722,667 - Interest payable on Bank Muscat, Oman 42,328 3,331,677 - Interest payable on FGB, UAE 33,364 2,626,091 - Interest payable on ADB 30,404 2,393,099 - Interest payable-CBQ Loan - - - Provision for unclassified loans and advances 9.1 807,941 63,272,821 48,980,000 Provision for off-balance sheet exposures 9.2 25,425 2,001,203 2,125,885 Other provisions - - - 1,050,221 82,342,885 63,371,404 360 Southeast Bank Limited I Annual Report 2016

2016 2015 Note USD Taka Taka 9.1 Provision for unclassified loans and advances Balance as at 1 January 625,604 48,980,000 18,410,701 Provision made during the year 182,337 14,292,821 30,569,299 807,941 63,272,821 48,980,000 Adjustments made during the year - - - Balance as at 31 December 807,941 63,272,821 48,980,000 9.2 Other provisions Provision for off-balance sheet exposures Balance as at 1 January 27,081 2,125,885 1,939,500 Add: Provision made during the year - - 186,385 27,081 2,125,885 2,125,885 Less: Adjustments made during the year (1,656) (124,682) - Balance as at 31 December 25,425 2,001,203 2,125,885 10 Retained earnings Balance as at 1 January 1,065,380 83,762,702 54,696,491 Add/less: foreign currency translation gain for last year - 807,991 945,880 1,065,380 84,570,693 55,642,371 Addition during the year 1,194,464 93,625,362 28,120,331 2,259,844 178,196,055 83,762,702 Add/less: foreign exchange gain (loss) - - - Balance as at 31 December 2,259,844 178,196,055 83,762,702 11 Interest income on investment Interest Income from loans and advances 959,475 75,210,306 48,268,010 Interest on overdraft 1,306 102,359 104,889 Interest income from bill purchased and discounted 3,085,297 241,846,900 170,898,969 4,046,078 317,159,565 219,271,868 12 Interest paid on deposits and borrowings etc. Interest on IFC loan 662,347 51,919,334 14,472,797 Interest expense on mashreq bank loan 100,944 7,912,722 47,595,535 Interest on CBQ loan 456,651 35,795,422 50,649,008 Interest expenses -GCPE loan 360,612 28,267,290 13,125,581 Interest expenses -ICIC bank 93,275 7,311,538 10,545,132 Interest expenses -RAK bank,UAE 475,640 37,283,968 914,724 Interest expenses -Bank Muscat, Oman 204,341 16,017,653 - Interest expenses FGB, UAE 115,999 9,092,776 - Interest expenses ADB 30,404 2,383,242 - Interest on FDR 19 1,483 884 Interest on calls and placement 231,322 18,132,627 21,350,108 2,731,554 214,118,055 158,653,769 13 Commission, exchange & brokerage Commission and other charges 189,999 14,893,415 8,119,730 189,999 14,893,415 8,119,730 13.1 Other operating income Other income- SWIFT 7,783 610,087 429,521 Miscellaneous income 13,982 1,096,011 972,766 Rebate from trade payments 67,730 5,309,145 3,284,821 89,495 7,015,243 4,687,108 Southeast Bank Limited I Annual Report 2016 361

2016 2015 Note USD Taka Taka 14 Salaries and allowances

Basic salary 21,663 1,698,081 2,009,151 Allowances 15,619 1,224,312 663,246 Provident fund contribution 1,927 151,046 126,848 Bonus 6,577 515,574 459,559 45,786 3,589,013 3,258,804

15 Rent, taxes, insurance, electricity etc.

Rent, rates and taxes 10,101 791,789 699,799 Insurance 217 17,001 22,315 Electricity and lighting 1,925 150,905 132,675 12,243 959,695 854,789 16 Postage, stamp, telecommunication etc.

Postage 126 9,852 11,631 Expenses regarding On-line - - - Internet service 4,550 356,688 192,357 SWIFT charges 6,706 525,690 654,889 FC Nostro charges 3,086 241,906 171,023 Telephone 535 41,968 46,493 15,003 1,176,104 1,076,393

17 Stationery, printing, advertisements etc.

Office and printing stationery 1,610 126,208 114,076 1,610 126,208 114,076

18 Depreciation and repair of bank's assets

Depreciation on own assets: Furniture and fixtures 2,819 220,945 231,091 Electrical appliances 3,072 240,792 183,732 5,891 461,737 414,823

19 Other expenses

Entertainment 311 24,358 22,121 Management fee GCPF 10,355 811,691 393,808 Expense- IFC front-end fee 99,583 7,806,029 3,929,990 Financial statements Expense-IFC commitment free - - 1,808,011 Expense-IFC portfolio monitoring expense 4,250 333,144 - Travelling expenses and allowance 218 17,090 6,613 House maintenance (Executive ) 2,272 178,082 168,004 Repair, maintenance and utilities 554 43,391 32,840 Books and periodicals 93 7,265 9,214 Conveyance 557 43,623 58,926 Miscellaneous 20,103 1,575,788 1,700,907 138,296 10,840,461 8,130,434 362 Southeast Bank Limited I Annual Report 2016 Annexure-I Total Taka Taka - - 5,290,597,989 2,435,073,598 12,852,454,700 12,852,454,700 12,852,454,700 (3,212,624,347) (4,349,232,364) (2,855,524,391) 291,798,010,079 291,798,010,079 - - - - 22,083,601 67,571,434 67,571,434 40,340,544 40,340,544 16,300,086 40,340,544 (5,783,515) (18,256,943) Taka Taka Exchange Exchange Southeast Africa) PtyAfrica) Ltd Company (South Company - - - - - 380,983 (896,905) 2,926,936 2,926,936 1,277,888 1,277,888 1,277,888 380,983 Ltd Taka Taka Services Financial Financial Southeast (Australia) Pty (Australia) Outside Bangladesh - - - - - 948,883 948,883 29,735,322 29,735,322 18,628,655 18,628,655 18,628,655 (17,679,772) Taka Taka Financial Financial Southeast Services (UK) Ltd 38,821,526 96,268,131 190,067,803 211,109,675 170,326,927 211,109,675 (59,863,398) (19,740,876) Taka Taka (114,841,544) SEBL Capital SEBL Capital 5,220,323,938 5,220,323,938 Services Limited 93,625,362 93,625,362 124,950,168 124,950,168 124,950,168 (14,168,139) (17,156,667) Taka Taka - - - - Off Shore 6,374,980,627 6,374,980,627 Banking Unit Inside Bangladesh 114,841,544 SEBL Taka Taka 4,983,491,357 2,153,491,357 12,456,147,770 12,570,989,314 12,456,147,770 (3,237,277,734) (4,235,378,679) (2,830,000,000) 280,102,471,822 280,102,471,822 (Conventional & (Conventional Islamic Banking) Particulars Profit (loss) before tax (loss) before Profit Provision against loans & advances and others Provision Segment liabilities Segment Allocated expenses Allocated Segment assets Segment Operating profit (profit before unallocated unallocated before (profit Operating profit expenses and tax) Income Net profit Total Income Total Less: Inter income/expense segmental Less: tax tax including deferred for Provision I) Geographical Segment I) Geographical Southeast Bank Limited and its subsidiariesSoutheast Bank Limited Geographical and Business Segment Southeast Bank Limited I Annual Report 2016 363 - Annexure-I Total Taka Taka 5,290,597,989 2,435,073,598 12,852,454,700 12,852,454,700 12,852,454,700 (3,212,624,347) (4,349,232,364) (2,855,524,391) 291,798,010,079 291,798,010,079 - - 22,083,601 67,571,434 67,571,434 40,340,544 16,300,086 40,340,544 40,340,544 (5,783,515) Taka Taka (18,256,943) Exchange Exchange Southeast Africa) PtyAfrica) Ltd Company (South Company - - - 380,983 380,983 (896,905) 2,926,936 2,926,936 1,277,888 1,277,888 1,277,888 Ltd Taka Taka Services Financial Financial Southeast (Australia) Pty (Australia) Outside Bangladesh - - - 948,883 948,883 29,735,322 29,735,322 18,628,655 18,628,655 18,628,655 Taka Taka (17,679,772) Financial Financial Southeast Services (UK) Ltd 38,821,526 96,268,131 Taka Taka 190,067,803 211,109,675 170,326,927 211,109,675 (59,863,398) (19,740,876) (114,841,544) 5,220,323,938 5,220,323,938 SEBL Capital SEBL Capital Services Limited - - Taka Taka 938,861,671 203,016,958 897,406,625 938,861,671 897,406,625 897,406,625 Islamic (161,561,912) Banking 20,606,067,852 20,606,067,852 Inside Bangladesh Taka Taka 114,841,544 Banking 4,138,255,048 1,308,255,048 Financial statements 11,683,691,313 11,683,691,313 11,798,532,857 (3,454,462,831) (4,090,973,434) (2,830,000,000) 265,871,384,597 265,871,384,597 Conventional Conventional including OBU Particulars Profit (loss) before tax (loss) before Profit Provision against loans & advances and others Provision Segment liabilities Segment Allocated expenses Allocated Segment assets Segment Operating profit (profit before unallocated unallocated before (profit Operating profit expenses and tax) Net profit Total income Total Less: Inter income segmental Less: tax tax including deferred for Provision II) Business Segment Income Southeast Bank Limited and its subsidiariesSoutheast Bank Limited Geographical and Business Segment 364 Southeast Bank Limited I Annual Report 2016

Appendix-A

Audited Financial Statements of Southeast Bank Capital Services Limited Southeast Bank Limited I Annual Report 2016 365

AUDITOR’S REPORT TO THE SHAREHOLDERS OF SOUTHEAST BANK CAPITAL SERVICES LIMITED

We have audited the accompanying financial statements of Southeast Bank Capital Services Limited which comprises the Statement of Financial Position as at December 31, 2016 and the related Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Shareholders Equity, Statement of Cash Flows and for the year ended and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Financial Reporting standards (BFRS), the companies Act 1994, and other applicable laws and regulations, This responsibility includes designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh standards on Auditing (BSA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the financial statements prepared in accordance with Bangladesh Financial Reporting Standards (BFRS), give a true and fair view of the state of the company’s affairs as at December 31, 2016 and its cash flows for the year ended and comply with the companies Act 1994 and other applicable laws and regulations. We also report that: (i) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; Financial statements

(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 and proper returns adequate for the purpose of our audit have been received from branches not visited by us;

(iii) The financial statements dealt with by the report are in agreement with the books of account and returns.

Dhaka Pinaki & Company Dated: 23.03.2017 Chartered Accountants 366 Southeast Bank Limited I Annual Report 2016

Southeast Bank Capital Services Ltd. Statement of Financial Position As at 31 December 2016

2016 2015 PARTICULARS Note Taka Taka

ASSETS A. NON-CURRENT ASSETS 327,715,305 126,334,270 Property, Plant and Equipment 04 327,715,305 126,334,270 B. CURRENT ASSETS 5,473,896,220 4,595,272,201 Margin Loan 05 2,500,642,443 2,363,503,024 Accounts Receivable 06 35,890,284 17,631,297 Advances, Deposits and Prepayments 07 79,461,626 251,911,612 Investment in Quoted Shares 08 2,276,624,953 1,940,851,629 Cash and Cash Equivalents 09 581,276,914 21,374,639 C. TOTAL ASSETS [A + B] 5,801,611,525 4,721,606,471 EQUITY AND LIABILITIES D. CAPITAL AND RESERVE 5,463,491,041 1,404,418,618 Share Capital 10 5,500,000,000 1,500,000,000 Retained Earnings 11 (36,508,959) (95,581,382) E. NON-CURRENT LIABILITIES - - - - F. CURRENT LIABILITIES 338,120,484 3,317,187,852 Margin Deposit 12 21,003,651 16,693,063 Accounts Payable - - Advance Received for Rent 13 13,095,140 19,091,280 Collection in Transit 14 67,035,027 27,320,020 Loan From ICB 15 7,687,819 37,139,427 Bank Overdraft 10,674 2,863,903,191 Provision for Corporate Income Tax 16 61,831,939 42,091,063 Provision for Diminution in Value of Investments 17 114,303,939 153,125,465 Accrued Expenses 18 486,276 114,684,052 Other Liabilities 19 52,666,021 43,140,292 G. TOTAL EQUITY AND LIABILITIES [D + E + F] 5,801,611,525 4,721,606,471

Chairman Director Managing Director (C.C.) PINAKI & COMPANY Chartered Accountants Southeast Bank Limited I Annual Report 2016 367

Southeast Bank Capital Services Ltd. Statement of Profit or Loss and Other Comprehensive Income For the year ended December 31, 2016

2016 2015 PARTICULARS Note Taka Taka Income: Interest on Portfolio Loan 76,502,732 125,781,000 Interest on Fixed Deposit - - Portfolio Management Fee 15,192,687 16,095,484 Documentation Charge 22,087 78,887 Settlement Fee 14,385,736 11,484,801 Commission on Underwriting 442,368 120,001 Income on Investment Shares 30,470,312 (4,589,920) Commission on Issue Management - 34,996 Dividend Income 34,720,326 37,952,581 Other Income 20 3,785,285 3,358,080 Interest on SND Acc. 22,214,126 80,092 IPO Application Commission - 9,862 Total Income 197,735,660 190,405,863 Expenses: Salary & Allowances 21 8,625,400 9,836,715 Financial Expenses 22 97,880,488 255,758,304 Printing & Stationery 202,117 209,108 Local Conveyances 15,550 12,480 Entertainment 247,863 225,393 House Service & Utilities 154,000 244,800 House Maintenance 614,000 720,000 Telephone & Postage 128,918 142,425 Office Rents and Other Rates & Taxes 16,831,652 8,242,562 Miscellaneous Expenses 42,854 77,177 CDBL Expenses 2,068,918 1,644,216 Car Maintenance 361,490 895,480 Misc. Contractual Services 778,165 738,599 Bank Charges 29,570 28,209 Director Remuneration 215,000 40,000 Other Professional Service Charge 132,250 115,000 Audit Fees 40,000 40,000 Corporate Expenses (Subscription) 887,875 105,000 Repair , Maintenance & Utilities 1,255,742 1,088,745 Trainning & Seminar 37,000 90,000 Interest Waiver on Margin Loan - - Financial statements Electricity & Lighting 4,850 2,340 Depreciation 27,190,185 14,093,586 Total Expenses 157,743,888 294,350,140 Net Profit Before Provision 39,991,772 (103,944,277) Add/(Less): Provision for Diminution in Value of Investments 23 38,821,526 4,673,592 Profit/(Loss) Before Tax 78,813,298 (99,270,685) Less: Provision for Corporate Income Tax 19,740,876 (7,590,516) Retained Earnings Carried Forward 59,072,422 (106,861,201)

Chairman Director Managing Director (C.C.) PINAKI & COMPANY Chartered Accountants 368 Southeast Bank Limited I Annual Report 2016

Southeast Bank Capital Services Ltd. Statement of Changes in Shareholders Equity For the year ended December 31, 2016

(Amount in Taka) General Retained Particulars Share Capital Total Reserve Earnings Balance as on 01.01.2016 1,500,000,000 - (95,581,382) 1,404,418,618 Add: during the year 4,000,000,000 - - 4,000,000,000 Retained earnings during the year - - 59,072,422 59,072,422 Balance as on 31.12.2016 5,500,000,000 - (36,508,960) 5,463,491,040

Statement of Changes in Shareholders Equity For the year ended December 31, 2015

(Amount in Taka) General Retained Particulars Share Capital Total Reserve Earnings Balance as on 01.01.2015 1,000,000,000 - 11,279,819 1,011,279,819 Add: during the year 500,000,000 - - 500,000,000 Retained earnings during the year - - (106,861,201) (106,861,201) Balance as on 31.12.2015 1,500,000,000 - (95,581,382) 1,404,418,618 Southeast Bank Limited I Annual Report 2016 369

Southeast Bank Capital Services Ltd. Statement of Cash Flows For the year ended December 31, 2016

2016 2015 (Restated) Taka Taka

Cash flow from operating activities Cash receipt from Customer 58,243,745 110,173,485 Cash Received from Others 64,298,475 26,592,192 Cash paid to Employee and Suppliers (23,045,110) (20,885,763) Advances, Deposits and Prepayments 182,332,995 7,817,520 Income Tax Paid (9,883,009) (8,830,870) Margin Loan (137,139,419) (8,717,985) Margin Deposit 4,310,588 (3,366,142) Advance Received for Rent (5,996,140) (5,984,640) Collection in Transit 39,715,007 749,823 Net cash provided by operating activities 172,837,132 97,547,620 Cash flow from investing activities Investment in Quoted Shares (508,568,787) (105,585,806) Disposal of Investment in Quoted Shares 172,795,463 17,536,549 Acquisition of Fixed Asset (Land) (228,571,220) - Interest on SND 22,214,126 80,092 Income from Dividend 34,720,326 37,952,581 Net cash used in investing activities (507,410,091) (50,016,584) Cash flow from financing activities Net Increase/(Decrease) in Overdraft (2,863,892,516) (376,627,124) Net Increase/(Decrease) ICB Loan- Pronodona Scheme (29,451,609) (27,477,129) Interest Paid on Overdraft (210,342,810) (138,016,287) Interest on ICB Loan - Pronodona Scheme (1,837,830) (3,812,312) Increase share capital 4,000,000,000 500,000,000 Net cash used in financing activities 894,475,234 (45,932,852)

Increase/(decrease) in cash and cash equivalents 559,902,275 1,598,184

Cash and cash equivalents at the opening 21,374,639 19,776,455

Cash and cash equivalents at the closing 581,276,914 21,374,639 Financial statements 370 Southeast Bank Limited I Annual Report 2016

Southeast Bank Capital Services Ltd. Notes to the Financial Statements As at December 31, 2016

1.0 Legal Status and Nature of the Company Southeast Bank Capital Services Limited (hereinafter referred to as “the Company”) was incorporated in Bangladesh as a public limited company on 23.09.2010 under the Companies Act 1994 and granted registration number C-87139/10. 1.1 Address of the Registered Office The company operates its activities from Eunoos Trade Center, 52/53 Dilkusha C/A, Dhaka-1000. 1.2 Nature of Business Activities: The main object of Southeast Bank Capital Services Limited is to carry on the business of merchant banking under the Bangladesh Securities and Exchange Commission (Merchant Banking and Portfolio Management) Rules 1996. 2.0 Significant Accounting Policies 2.1 Statement of Compliance The financial statements of Southeast Bank Capital Services Limited have been prepared in accordance with the Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), Companies Act 1994 and other applicable laws and regulations. 2.2 Measurement Bases Used in Preparing the Financial Statements The elements of financial statements have been measured on “Historical Cost” basis, which is one of the most commonly adopted base provided in “the framework for the preparation and presentation of financial statements” issued by the International Accounting Standard Board (IASB). 2.3 Going Concern Financial Statements have been prepared on going concern basis as there was no significant doubt or uncertainty to continue the operation of the company in the foreseeable future. 2.4 Components of Financial Statements: According to International Accounting Standard (IAS) – 1, as adopted by ICAB as BAS – 1 “presentation of financial statements “the complete set of financial statements includes the following components: i) Statement of Financial Position ii) Statement of Profit or Loss and Other Comprehensive Income iii) Statement of Changes in Shareholders Equity iv) Statement of Cash Flows and v) Notes to the Financial Statements. 3.0 Principal Accounting Policies: 3.1 Cash Flow Statement Cash Flow Statement is prepared in accordance with BAS 7 “Cash Flow Statement”. The cash flow from the operating activities have been presented under Direct Method as prescribed by the Securities and Exchange Rules 1987 and considering the provisions of Paragraph 18(b) of BAS-7 which provides that “Enterprises are encouraged to report Cash Flow from Operating Activities using the Direct Method”. 3.2 Reporting Currency and Level of Precision: The figures in the financial statements represent Bangladesh Currency (Taka), which have been rounded-off to the nearest Taka. 3.3 The board at its meeting dated 26-12-2016 identified certain parties quite unable to accommodate interest on its portfolio loan which were considered totally unrealizable and as such kept the same out of interest during the year. 3.4 Others: a) There is no claim against the company, which has not been acknowledged as debt in the Statement of Financial Position. b) There was no contingent liability as on 31-12-2016. c) Figures of the previous year have been rearranged, wherever considered necessary to conform to current year’s presentation. d) The Statement of Cash flows for the year ended 31st December 2015 has been restated for fair presentation. Southeast Bank Limited I Annual Report 2016 371

Southeast Bank Capital Services Ltd. Notes to the Financial Statements As at December 31, 2016

2016 2015 No. Particulars Note Taka Taka

04. Property, Plant and Equipment Details of Property, Plant and Equipment and Depreciation as on December 31, 2016 are shown in the annexed Schedule - A. This is arrived at as follows: Written Down Value (a-b) 327,715,305 126,334,270 Opening Balance - At Cost 176,908,853 176,908,853 Add: Addition during the year ( At Cost) 228,571,220 - 405,480,073 176,908,853 Less : Adjustment during the year - - Closing Balance (a) 405,480,073 176,908,853 Accumulated Depreciation Opening Balance 50,574,583 36,480,997 Add: Charged during the year 27,190,185 14,093,586 77,764,768 50,574,583 Less : Adjustment during the year - - Closing Balance (b) 77,764,768 50,574,583 05 Margin Loan 2,500,642,443 2,363,503,024 As per Last Account 2,363,503,024 2,354,785,039 Add: During the year 1,836,503,044 1,438,263,990 4,200,006,068 3,793,049,029 Less: Received during the year 1,699,363,625 1,429,546,006 06 Accounts Receivable 35,890,284 17,631,297 BLI Securities Ltd. 06.1 35,328,355 3,748,872 AD Holdings Ltd. 06.2 399,584 409,183 Int. Leasing Securities Ltd. 06.3 121,654 2,260,237 National Securities & Consultants Ltd. 06.4 2,788 457,544 IIDFC 06.5 37,903 10,755,461 06.1 BLI Securities Ltd. 35,328,355 3,748,872

As per Last Account 3,748,872 479,335 Financial statements Add/Less: Net balancing figure during the year 31,579,483 3,269,537 06.2 AD Holdings Ltd. 399,584 409,183 As per Last Account 409,183 345,726 Add/Less: Net balancing figure during the year (9,599) 63,457 06.3 Int. Leasing Securities Ltd. 121,654 2,260,237 As per Last Account 2,260,237 1,150,761 Add/Less: Net balancing figure during the year (2,138,583) 1,109,476 06.4 National Securities & Consultants Ltd. 2,788 457,544 As per Last Account 457,544 47,961 Add/Less: Net balancing figure during the year (454,756) 409,583 06.5 IIDFC 37,903 10,755,461 As per Last Account 10,755,461 - Add/Less: Net balancing figure during the year (10,717,558) 10,755,461 372 Southeast Bank Limited I Annual Report 2016

Southeast Bank Capital Services Ltd. Notes to the Financial Statements As at December 31, 2016

2016 2015 No. Particulars Note Taka Taka

07 Advances, Deposits and Prepayments 79,461,626 251,911,612 Lease Rental (Eunoos Center) 07.1 14,802,960 22,204,440 Corporate Income Tax 07.2 51,291,888 41,408,879 Interior Decoration and Air Conditioning-(As per Last Account) 13,078,428 13,078,428 Security Deposits-(As per Last Account) 238,915 238,915 Office Space Purchase-(As per Last Account) - 174,780,200 Advance for Misc. Expenses 20,835 200,750 Advance for Salary 28,600 - 07.1 Lease Rental (Eunoos Center) 14,802,960 22,204,440 As per Last Account 22,204,440 30,222,710 Less : Adjustment during the year 7,401,480 8,018,270 07.2 Corporate Income Tax 51,291,888 41,408,879 As per Last Account 41,408,879 32,578,009 Add: Addition during the year 9,883,009 8,830,870 51,291,888 41,408,879 Less : Adjustment during the year - - 08 Investment in Quoted Shares 08.01 2,276,624,953 1,940,851,629 As per Last Account 1,940,851,629 1,852,802,372 Add: Net investment during the year 335,773,324 88,049,257 08.01 The total amount is invested as under: Exim Bank Ltd. 97,872,791 97,872,791 Bay Leasing & Investment Ltd. 382,935,045 255,014,682 VIPB( Non Listed) 3,500,000 - National Life Insurance Co. Ltd. 1,501,719,117 1,384,784,845 Asia Insurance Co. Ltd. 39,043,100 39,043,100 Delta Life Insurance Co. Ltd. 75,668,264 63,233,226 Rupali Life Insurance Co. Ltd. 9,203,333 1,673,266 Greemen One : Sceem Two 352,526 - Appolo Ispat 5,358,122 - Titas Gas 15,838,465 - Generation Next Fashion Ltd 667,731 - Beximco pharma 221,962 - ACI Ltd. 38,231,777 - BATA Shoes 1,434,152 - Fortune Shoes Ltd.(IPO) 102,470 - FU-Wang Ceramic 1,656,378 - Unique Hotels & Resorts Ltd. 28,506,765 19,391,600 Bangladesh Shipping Corporation - 4,533,015 Prime Bank Ltd. 74,312,955 74,312,955 Orion Pharma Ltd - 992,148 2,276,624,953 1,940,851,629

09 Cash and Cash Equivalents 581,276,914 21,374,639 Cash in hand - - Cash at bank 09.1 581,276,914 21,374,639 Southeast Bank Limited I Annual Report 2016 373

Southeast Bank Capital Services Ltd. Notes to the Financial Statements As at December 31, 2016

2016 2015 No. Particulars Note Taka Taka 09.1 Cash at Bank 581,276,914 21,374,639 Southeast Bank Ltd -CD A/C- 1100007409 5,398,400 47,300,701 Southeast Bank Ltd -SND-13100000785(Public Issue) 512,098,296 6,038,517 Southeast Bank Ltd -Al- Wadiah A/C- 11100006778 63,780,218 (31,964,579)

10 Share Capital 5,500,000,000 1,500,000,000 Authorised Capital 600,000,000 shares of TK. 10/- each 6,000,000,000 3,000,000,000 Issued and Subscribed Capital 550,000,000 shares of TK. 10/- each Paid up Capital 550,000,000 shares of TK. 10/- each 5,500,000,000 1,500,000,000 11 Retained Earnings (36,508,959) (95,581,382) As per Last Account (95,581,382) 11,279,819 Add: Profit/Loss during the year 59,072,422 (106,861,201) 12 Margin Deposit 21,003,651 16,693,063 As per Last Account 16,693,063 20,059,205 Add:During the year 230,147,989 255,653,970 246,841,052 275,713,175 Less: Paid during the year 225,837,401 259,020,112 13 Advance Received for Rent 13,095,140 19,091,280 As per Last Account 19,091,280 25,075,920 Add:Received During the year - - 19,091,280 25,075,920 Less : Adjustment during the year 5,996,140 5,984,640 14 Collection in Transit 67,035,027 27,320,020 As per Last Account 27,320,020 26,570,197 Add: Received During The Year 2,715,903,852 1,934,805,184

2,743,223,872 1,961,375,381 Financial statements Less: Paid during the year 2,676,188,845 1,934,055,361 15 Loan From ICB 7,687,819 37,139,427 As per Last Account 37,139,427 64,616,556 Add: Received during the year - 7,822,360 37,139,427 72,438,916 Less: Paid during the year 29,451,609 35,299,489

16 Provision for Corporate Income Tax 61,831,939 42,091,063 As per Last Account 42,091,063 34,500,547 Add: Addition during the year (Tax on Dividend Income U/S 54) 19,740,876 7,590,516 61,831,939 42,091,063 Less : Adjustment during the year - - 17 Provision for Diminution in Value of Investments Schedule-B 114,303,939 153,125,465 Opening Balance 153,125,465 157,799,057 Add:/(Less): During the year (38,821,526) (4,673,592) 374 Southeast Bank Limited I Annual Report 2016

Southeast Bank Capital Services Ltd. Notes to the Financial Statements As at December 31, 2016

2016 2015 No. Particulars Note Taka Taka 18 Accrued Expenses 486,276 114,684,052 Interest on ICB Loan 44,846 216,646 Interest on Overdraft - 114,128,352 Excise Duty & Bank Charge 40,375 31,500 CDBL Bill 271,813 265,254 Audit Fee 40,000 40,000 News paper Bill 644 - Other Expenses 88,598 - Closing Allowance - 2,300 19 Other Liabilities 52,666,021 43,140,292 Accounts Payable (Others) 41,603,981 37,176,292 IPO Application Fund 10,702,600 5,964,000 Provident Fund 359,440 - 20 Other Income 3,785,285 3,358,080 Rental Income 3,587,040 3,358,080 Miscellaneous Income 198,245 - 21 Salary & Allowances 8,625,400 9,836,715 Salary & Allowances 6,544,600 6,985,411 Festival Bonus 661,100 625,400 Incentive Bonus - 453,000 Leave Fare Concession 1,046,600 1,123,471 Provident Fund Contribution 373,100 389,433 Leave Encashment - 104,000 Gratuity - 156,000 22 Financial Expenses 97,880,488 255,758,304 Interest on Bank Overdraft 96,214,458 252,144,639 Interest on ICB Loan 1,666,030 3,613,665 23 Provision for Diminution in Value of Investments 38,821,526 4,673,592 Opening Balance 153,125,465 157,799,057 Less: Required on December 31, 2016 114,303,939 153,125,465 Southeast Bank Limited I Annual Report 2016 375 Schedule - A 20,312 3,182,922 327,715,305 14,091,187 11,805,000 298,615,884 31.12.2016 W.D.V as on W.D.V - - 5,334,529 3,482,068 1,279,688 67,668,483 77,764,768 31.12.2016 Balance as on Balance - - 20,313 789,480 27,190,185 1,565,688 24,814,704 the year Depreciation Depreciation Charged during Charged - - 50,574,583 3,768,841 2,692,588 1,259,375 42,853,779 01.01.2016 Balance as on Balance 10% 20% 50% 10% Rate of % Rate 6,664,990 1,300,000 19,425,716 11,805,000 405,480,073 366,284,367 31.12.2016 Balance as on Balance Cost Cost - - - the year 30,000 7,060,000 228,571,220 221,481,220 Addition during Addition Financial statements 4,745,000 6,634,990 1,300,000 19,425,716 144,803,147 176,908,853 01.01.2016 Balance as on Balance Total Total Name of Assets Land & Fixture Furniture Electrical Appliance SoftwareComputer Buildings Property, Plant and Equipment Plant Property, Southeast Services Bank Capital Ltd. Statements the Financial to Notes at December 31, 2016 As 376 Southeast Bank Limited I Annual Report 2016

Southeast Bank Capital Services Ltd. Schedule to the Financial Statements As at December 31, 2016

Diminution in Value of Investments Schedule-B Net Difference Particulars Cost Price Market Price (Provision Required)

Exim Bank Ltd. 97,872,791 59,492,640 (38,380,151) Bay Leasing & Investment Ltd. 382,935,046 318,854,883 (64,080,163) VIPB( Non Listed) 3,500,000 - - National Life Insurance Co. Ltd. 1,501,719,117 1,575,602,207 73,883,090 Asia Insurance Co. Ltd. 39,043,100 23,725,191 (15,317,909) Delta Life Insurance Co. Ltd. 75,668,265 51,424,708 (24,243,557) Rupali Life Insurance Co. Ltd. 9,203,333 8,349,626 (853,707) Greemen One : Sceem Two 352,526 388,326 35,800 Appolo Ispat 5,358,121 7,407,421 2,049,300 Titas Gas 15,838,465 15,493,322 (345,143) Generation Next Fashion Ltd 667,731 825,680 157,949 Beximco pharma 221,962 215,090 (6,872) ACI Ltd. 38,231,778 29,538,938 (8,692,840) BATA Shose 1,434,152 1,347,560 (86,592) Fortune Shoes Ltd.(IPO) 102,470 520,548 418,078 FU-Wang Ceramic 1,656,379 1,934,471 278,092 Unique Hotels & Resorts Ltd. 28,506,766 24,487,632 (4,019,134) Prime Bank Ltd. 74,312,955 39,212,775 (35,100,180) Orion Pharma Ltd - -

2,276,624,957 2,158,821,018 (114,303,939) Southeast Bank Limited I Annual Report 2016 377

Appendix-B

Financial Statements of Southeast Financial Services (UK) Ltd Financial statements 378 Southeast Bank Limited I Annual Report 2016 Southeast Bank Limited I Annual Report 2016 379 Financial statements 380 Southeast Bank Limited I Annual Report 2016 Southeast Bank Limited I Annual Report 2016 381

SOUTHEAST FINANCIAL SERVICES (UK) LTD DIRECTORS’ REPORT FOR THE YEAR ENDED 31 DECEMBER 2016

The directors present their report and accounts for the year ended 31 December 2016 PRINCIPAL ACTIVITIES The principal activity of the company in the year under review was MONEY REMITTANCE DIRECTORS The directors who served during the year and their interests in the share capital of the company were as follows:

2016 2015 No. No. ALAMGIR KABIR, FCA 0 0 SHAHID HOSSAIN 0 0 MUHAMMAD NAZMUL HUDA AZAD 0 0

DIRECTORS RESPONSIBILITIES

The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice)

The financial statements are required by law to give a true and fair view of the state of affairs of the company and of the profit or loss for that period.

The report of the directors has been prepared in accordance with the special provisions within Part 15 of the Companies Act 2006.

This report was approved by the board on 13 January 2017 Financial statements

MUHAMMAD NAZMUL HUDA AZAD Director 382 Southeast Bank Limited I Annual Report 2016

SOUTHEAST FINANCIAL SERVICES (UK) LTD ACCOUNTANTS’ REPORT TO THE BOARD OF DIRECTORS ON THE FINANCIAL STATEMENTS OF SOUTHEAST FINANCIAL SERVICES (UK) LTD FOR THE YEAR ENDED 31 DECEMBER 2016

In order to assist you to fulfill your duties under the Companies Act 2006, we have prepared for your approval the accounts of SOUTHEAST FINANCIAL SERVICES (UK) LTD for the year ended 31 December 2016 as set out on pages 5 to 9 from the company's accounting records and from information and explanations you have given us. As a practising member of the Chartered Institute of Management Accountants (CIMA), we are subject to its ethical and other professional requirements which are detailed on their website. This report is made solely to the Board of Directors of SOUTHEAST FINANCIAL SERVICES (UK) LTD, as a body, in accordance with the terms of our engagement letter dated 28 December 2011. Our work has been undertaken solely to prepare for your approval the accounts of SOUTHEAST FINANCIAL SERVICES (UK) LTD and state those matters that we have agreed to state to the Board of Directors of SOUTHEAST FINANCIAL SERVICES (UK) LTD, as a body, in this report, in accordance with the requirements of the Chartered Institute of Management Accountants (CIMA) as detailed on their website. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than SOUTHEAST FINANCIAL SERVICES (UK) LTD and its Board of Directors as a body for our work or for this report.

It is your duty to ensure that SOUTHEAST FINANCIAL SERVICES (UK) LTD has kept adequate accounting records and to prepare statutory accounts that give a true and fair view of the assets, liabilities, financial position and profitability of SOUTHEAST FINANCIAL SERVICES (UK) LTD. You consider that SOUTHEAST FINANCIAL SERVICES (UK) LTD is exempt from the statutory audit requirement for the year. We have not been instructed to carry out an audit or a review of the accounts of SOUTHEAST FINANCIAL SERVICES (UK) LTD. For this reason, we have not verified the accuracy or completeness of the accounting records or information and explanations you have given to us and we do not, therefore, express any opinion on the statutory accounts.

Jahan & Co Chartered Management Accountants 22 Osborn Street London E1 6TD 13 January 2017 Southeast Bank Limited I Annual Report 2016 383

SOUTHEAST FINANCIAL SERVICES (UK) LTD PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2016

2016 2015 Note £ £

TURNOVER 2 176,454 180,698 GROSS PROFIT 176,454 180,698 Distribution costs (2,963) (702) Administrative expenses (164,503) (146,245) OPERATING PROFIT 3 8,988 33,751 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 8,988 33,751

PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 8,988 33,751 PROFIT FOR THE FINANCIAL YEAR 8,988 33,751 Financial statements 384 Southeast Bank Limited I Annual Report 2016

SOUTHEAST FINANCIAL SERVICES (UK) LTD BALANCE SHEET AT 31 DECEMBER 2016

2016 2015 Notes £ £ FIXED ASSETS Tangible assets 5 21,972 29,199 Current Asset Debtors (amounts falling due within one year) 6 258,055 207,683 Cash at bank and in hand 26,182 29,862 284,237 237,545 CREDITORS: Amounts falling due within one year 7 193,925 163,448 NET CURRENT ASSETS 90,312 74,097 TOTAL ASSETS LESS CURRENT LIABILITIES 112,284 103,296

CAPITAL AND RESERVES

Called up share capital 8 300,000 300,000 Profit and loss account 9 (187,716) (196,704) SHAREHOLDERS' FUNDS 112,284 103,296

For the year ending 31 December 2016 the company was entitled to exemption under section 477 of the Companies Act 2006 relating to small companies.

The members have not required the company to obtain an audit in accordance with section 476 of the Companies Act 2006.

The directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts.

These accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies regime. Approved by the board on 13 January 2017 and signed on their behalf by

MUHAMMAD NAZMUL HUDA AZAD Director Southeast Bank Limited I Annual Report 2016 385

SOUTHEAST FINANCIAL SERVICES (UK) LTD NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2016

1. ACCOUNTING POLICIES 1a. Basis Of Accounting The accounts have been prepared under the historical cost convention and in accordance with the Financial Reporting Standard for Smaller Entities (effective January 2015). 1b. Cash Flow Statement The Company is exempt from including a statement of cash flows in its accounts in accordance with Financial Reporting Standard for Smaller Entities (effective January 2015). 1c. Depreciation Depreciation has been provided at the following rates in order to write off the assets over their estimated useful lives. Short Leasehold Properties straight line 14.28% Fixtures and Fittings reducing balance 20% Equipment reducing balance 20% 1d. Turnover Turnover represents the invoiced value of goods and services supplied by the company, net of value added tax and trade discounts. 2. TURNOVER The turnover and pre-tax result is attributable to MONEY REMITTANCE. 2016 2015 £ £ Remittance Commissions 86,752 93,049 Exchange Gain 80,646 75,016 Fees Income 9,056 12,633 176,454 180,698 3. OPERATING PROFIT Operating Profit is stated after charging: Depreciation 8,418 9,175 8,418 9,175 4. TAX ON ORDINARY ACTIVITIES Financial statements 5. TANGIBLE FIXED ASSETS Short Fixtures

Leasehold and Total Equipment Properties Fittings £ £ £ £ Cost At 1 January 2016 30,000 47,262 8,635 85,897 Additions - 311 880 1,191 At 31 December 2016 30,000 47,573 9,515 87,088 Depreciation At 1 January 2016 20,700 30,368 5,630 56,698 For the year 4,200 3,441 777 8,418 At 31 December 2016 24,900 33,809 6,407 65,116 Net Book Amounts At 31 December 2016 5,100 13,764 3,108 21,972 At 31 December 2015 9,300 16,894 3,005 29,199 386 Southeast Bank Limited I Annual Report 2016

SOUTHEAST FINANCIAL SERVICES (UK) LTD NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 2016

2016 2015 £ £ 6. DEBTORS Amounts falling due within one year: Trade debtors 244,526 193,104 Other debtors 13,529 14,579 258,055 207,683 Trade debtors represent money in transit from merchant service providers. Other Debtors balance includes Prepayments of £2529, Rent Deposit of £9000 and Amount Receivable from Parent of £2000 7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR Taxation and social security 3,118 2,991 Other creditors 190,807 160,457 193,925 163,448 Other creditors balance includes TT Payable balance of £186,046, Accrued Expenses of £2676 and Suspense Account balance of £2085. TT Payable balance is not reconciled with the Parent Company balance 8. SHARE CAPITAL Allotted, issued and fully paid: 300000 Ordinary shares of £ 1 each 300,000 300,000 300,000 300,000 9. PROFIT AND LOSS RESERVE Opening balance (196,704) (230,455) Profit for the year 8,988 33,751 (187,716) (196,704) Southeast Bank Limited I Annual Report 2016 387

SOUTHEAST FINANCIAL SERVICES (UK) LTD TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2016

2016 2015 £ £ Turnover 176,454 180,698 Cost of Sales: Gross Profit 176,454 180,698 176,454 180,698 Less: Distribution costs 2,963 702 Administrative expenses 164,503 146,245 167,466 146,947 Net profit for the year before taxation 8,988 33,751 Net profit for the year after taxation 8,988 33,751 Retained losses brought forward (196,704) (230,455) Retained losses carried forward (187,716) (196,704)

This page does not form part of the Company's Statutory Accounts and is prepared for the information of the Directors only. Financial statements 388 Southeast Bank Limited I Annual Report 2016

SOUTHEAST FINANCIAL SERVICES (UK) LTD PROFIT AND LOSS ACCOUNT SUMMARIES FOR THE YEAR ENDED 31 DECEMBER 2016

2016 2015 £ £ Distribution Costs: Advertising and sales promotion 2,839 531 Travel and Subsistence 124 171 2,963 702

Administrative Expenses: Rent, Rates & Insurance 33,645 31,987 Business Insurance 904 882 Heat, light & water 1,558 1,927 Waste Disposal - 192 Cleaning 972 589 Wages - regular 72,020 64,585 Staff Bonus - 1,000 Staff welfare 1,027 407 Training - 253 Repairs & maintenance 955 1,358 Computer and IT costs 420 350 Accountancy fees 3,800 3,800 Legal and Professional expenses 150 1,339 Stationery & office supplies 2,918 2,379 Telephone 1,734 2,612 Fees & Subscriptions 989 933 Customer Due Diligence 432 432 Security costs 908 651 Bank charges 33,653 21,394

Depreciation and Amortisation: Depreciation of short leasehold properties 4,200 4,200 Depreciation of fixtures and fittings 3,441 4,224 Depreciation of equipment 777 751 164,503 146,245 This page does not form part of the Company's Statutory Accounts and is prepared for the information of the Directors only. Southeast Bank Limited I Annual Report 2016 389

SOUTHEAST FINANCIAL SERVICES (UK) LTD 455/8986421677 CORPORATION TAX COMPUTATION FOR THE PERIOD 01/01/2016 - 31/12/2016

£ Profit as per Accounts 01/01/2016 - 31/12/2016 8,988 Add: Depreciation & Asset Disposal 8,418 8,418 Less: General Pool Allowances 7,005 (7,005) Trading Profit 10,401 Losses brought forward and used against profits (10,401) Capital Allowances General Pool 01/01/2016 - 31/12/2016 pool b/f 38,916 additions disposals 38,916 wda (18%) 7,005 7,005 wdv 31,911 Corporation tax chargeable Trading and professional profits 10,401.00 Losses brought forward 10,401.00 Net trading and professional profits .00 Bank building society or other interest and profits .00 Income from UK land and buildings .00 Annual profits and gains not falling under any heading .00 Profit before charges and reliefs .00

Profits chargeable to corporation tax .00 Financial statements Totals Tax Tax payable .00

Tax reconciliation

MEMO: Summary of trading losses Losses brought forward 186,579 Losses brought forward used against profits 10,401 Losses carried forward 176,178 390 Southeast Bank Limited I Annual Report 2016

Appendix-C

Financial Statements of Southeast Financial Services (Australia) Pty Ltd Southeast Bank Limited I Annual Report 2016 391

Southeast Financial Services (Australia) Pty Ltd ABN 40 160 673 165

FINANCIAL REPORT For the year ended 31 December 2016

Prepared by: SolTax Pty Ltd Level 2, 356 Chapel Road Bankstown NSW 2200 Financial statements 392 Southeast Bank Limited I Annual Report 2016

Southeast Financial Services (Australia) Pty Ltd ABN 40 160 673 165

FINANCIAL REPORT

Contents

Page

Trading Statement 2

Balance Sheet 3

Notes to Financial Statement 4

Director’s Declaration 5

Compilation Report 6 Southeast Bank Limited I Annual Report 2016 393

Southeast Financial Services (Australia) Pty Ltd ABN 40 160 673 165 TRADING, PROFIT AND LOSS STATEMENT For the year ended 31 December 2016

December 2016 December 2015 $ $ INCOME Commission Collected 438.76 4,794.24 Exchange gain 4,416.15 7,480.00 Interest Earned 0.09 409.31 Other Income 17,063.80 90.00 21,918.80 12,773.55

EXPENDITURE Advertising - 110.00 Bank charges 179.02 388.33 Depreciation - SB general pool 2,614.13 8,546.99 Electricity - 822.95 Entertainment - - Insurance 149.36 1,136.93 Legal Services - 834.19 Motor vehicle expenses: - - Other vehicle expenses 35.2 725.90 Parking - - Office supplies - 89.57 Postage - 47.00 Printing and Stationery - 89.57 Rental expenses 6,319.08 48,488.00 Repair and maintenance - 187.00 Security - 416.46 Superannuation 415.00 4,519.98 Telephone, mobile and fax 372.25 1,728.44 Wages 5,300.00 30,482.75 Total 15,384.04 98,614.06

PROFIT/LOSS BEFORE INCOME TAX 6,534.76 (85,840.51) Financial statements 394 Southeast Bank Limited I Annual Report 2016

Southeast Financial Services (Australia) Pty Ltd ABN 40 160 673 165 BALANCE SHEET As on 31 December 2016

December 2016 December 2015 $ $ ASSETS Current Assets Cash on Hand 763.45 32.20 Westpac Cheque Account - 321645 19.15 2,323.87 St George Freedom Account- 10775735 2,839.08 30,006.73 St George Saver Account 158.11 - SEBL Account 883.68 383.68 Westpac Cash Reserve - 321653 117.44 6,902.37 Receivables 13,860.87 12,467.99 Office Bond Deposit 19,119.04 19,119.04 37,760.82 71,235.88 Non-current Assets SB general pool 42,652.06 42,652.06 Less accumulated depreciation (28,109.69) (25,607.81) 14,542.37 17,044.25 TOTAL ASSETS 52,303.19 88,280.13 LIABILITIES Current Liabilities Remittance Payable - - PAYG Withhold Payable 11,696.35 10,958.85 SEBL Account 29,526.62 62,293.46 Rent Payable 12,016.29 15,809.07 Superannuation payable 4,624.99 4,209.99 Provision for GST (24,734.28) (17,629.70) 33,129.97 75,641.67 EQUITY Share Capital 312,082.90 312,082.90 Retained Earnings Accumulated Losses beginning of the year (299,444.44) (213,603.93) Prior Year Adjustments - - Gain/Losses for the Period 6,534.76 (85,840.51) TOTAL EQUITY (292,909.68) (299,444.44) Total Liability & Equity 52,303.19 88,280.13 Southeast Bank Limited I Annual Report 2016 395

Southeast Financial Services (Australia) Pty Ltd ABN 40 160 673 165 NOTES TO THE FINANCIAL STATEMENTS For the period ended 31 December 2016

NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNT POLICY a. This financial report is a special purpose financial report prepared for use by directors and members of the company. The directors have determined that the company is not a reporting entity. The financial report is prepared in accordance with the requirements of the following Australian Accounting Standards: AASB 1031: Materiality

AASB 110: Events after the Balance Sheet Date

The financial report is prepared on an accruals basis and is based on historic costs and does not take into account changing money values or, except where specifically stated, current valuations of non-current assets. The following specific accounting policies, which are consistent with the previous period unless otherwise stated, have been adopted in the preparation of this report: b. Property Plant and equipment

Property, Plant and equipment are carried at cost, independent or directors’ valuation. All assets, excluding freehold land and buildings are depreciated over their useful lives to the company. c. Inventories

Inventories are measured at the lower of its cost and net realizable value. Costs are assigned on a first-in first- out basis and include direct materials, direct labour, and appropriate proportion of variable and fixed overhead expenses. Financial statements 396 Southeast Bank Limited I Annual Report 2016

Southeast Financial Services (Australia) Pty Ltd ABN 40 160 673 165 DIRECTORS’ DECLARATIONS

The directors have determined that the company is not a reporting entity. The directors have determined that this special purpose financial report should be prepared in accordance with the accounting policies outlines in Note 1 to the financial statements. The directors of the company declared that: 1. The financial statements and the notes attached present fairly the company’s financial position as at 31/12/2016 and its performance for the period ended on that date in accordance with the accounting policies described in Note 1 to the financial statements; 2. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with the resolution of the Board of Directors:

Manager & Director:

Khandoker Ziaul Karim Dated: 16/01/2017 Southeast Bank Limited I Annual Report 2016 397

Southeast Financial Services (Australia) Pty Ltd ABN 40 160 673 165 COMPILATION REPORT

Scope

On the basis of information provided by the directors of Southeast Financial Services (Australia) Pty Ltd, we have compiled in accordance with APES 315: Compilation of Financial Information the special purpose financial report of Southeast Financial Services (Australia) Pty Ltd for the period ended 31/12/2016. The specific purpose for which the special purpose financial report has been prepared is set out in Note 1. The extent to which Accounting Standards and other mandatory professional reporting requirements have or have not been adopted in the preparation of the special purpose financial report is set out in Note 1. The directors are solely responsible for the information contained in the special purpose financial report and have determined that the accounting policies used are consistent with the financial reporting requirements of Southeast Financial Services (Australia) Pty Ltd constitution and are appropriate to meet the needs of the directors and members of the company. Our procedures use accounting expertise to collect, classify and summarize the financial information, which the directors provided into a financial report. Our procedures do not include verification or validation procedures. No audit or review has been performed and accordingly no assurance is expressed. To the extent permitted by law, we do not accept liability for any loss or damage which any person, other than the company, may suffer arising from any negligence on our part. No person should rely on the special purpose financial report without having an audit or review conducted. The special purpose financial report was prepared for the benefit of the directors and members of Southeast Financial Services (Australia) Pty Ltd and the purpose identified above. We do not accept responsibility to any other person for the contents of the special purpose financial report.

Name of the Firm SolTax Pty Ltd

Name of the Partner Hasan Shahiad

SolTax Pty Ltd

Level 2, 356 Chapel Road Financial statements Bankstown NSW 2200

Date: 16/01/2017 398 Southeast Bank Limited I Annual Report 2016

Appendix-D

Financial Statements of Southeast Exchange Company (South Africa) Pty Ltd Southeast Bank Limited I Annual Report 2016 399

SOUTHEAST EXCHANGE COMPANY (SOUTH AFRICA) (PTY) LTD (REGISTRATION NUMBER 2011/008619/07)

ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2016 Financial statements 400 Southeast Bank Limited I Annual Report 2016

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016

General Information Country of incorporation and domicile South Africa Nature of business and principal activities Facilitator of funds remittance Directors Alamgir Kabir Shahid Hossain Registered office 9 Dolly Rathebe Road Corner Mint Road Fordsburg Johannesburg 2092 Business address 9 Dolly Rathebe Road Corner Mint Road Fordsburg Johannesburg 2092 Holding company Southeast Bank Limited incorporated in Bangladesh Bankers Standard Bank of South Africa First National Bank Auditors GL Palmer and Company Registered Auditors Secretaries KPMG Inc

Tax reference number 9084402180

Level of Assurance These annual financial statements have been audited in compliance with the applicable requirements of the South African Reserve Bank Preparer The annual financial statements were independently compiled by: MM Zackey CA(SA) Issued 03 February 2017 Southeast Bank Limited I Annual Report 2016 401

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Index

The reports and statements set out below comprise the annual financial statements presented to the shareholder:

Contents page

Independent Auditors' Report 3 - 5 Directors' Responsibilities and Approval 6 Directors' Report 7 -9 Statement of Financial Position 10 Statement of Comprehensive Income 11 Statement of Changes in Equity 12 Statement of Cash Flows 13 Accounting Policies 14 -16 Notes to the Annual Financial Statement 17 -20

The following supplementary information does not form part of the annual financial statements and is unaudited:

Detailed Income Statement 21 - 22 Financial statements 402 Southeast Bank Limited I Annual Report 2016

Independent Auditors’ Report To the shareholder of Southeast Exchange Company (South Africa) (Pty) Ltd

Opinion We have audited the annual financial statements of Southeast Exchange Company (South Africa) (Pty) Ltd. Set out on pages 10 to 20, which comprise the Statement of Financial Position as at 31 December 2016, and the Statement of Comprehensive Income, Statement of Changes in Equity and statement of Cash Flows for the year then ended, and notes to the Annual Financial Statements, including significant accounting policies.

In our opinion, the annual financial statements present fairly, in all material respects, the financial position of Southeast Exchange Company (South Africa) (Pty) Ltd As at 31 December 2016, and its financial performance and cash flows for the year then ended in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities and the requirements of the Companies Act 71 of 2008. Basis for opinion We conducted our audit in accordance with the International Standards on Auditing. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the annual financial statements section of our report. We are independent of the company in accordance with the Independent Regulatory Board for Auditors Code of Professional Conduct for Registered Auditors (IRBA Code) and other independence requirements applicable to performing audits of financial statements in South Africa. We have fulfilled our other ethical responsibilities in accordance with the IRBA Code and in accordance with other ethical requirements applicable to performing audits in South Africa. The IRBA Code is consistent with the International Ethics Standards Board for Accountants Code of Ethics for Professional Accountants (Parts A and B). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the annual financial statements of the current period. These matters were addressed in the context of our audit of the annual financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined that there are no key audit matters to communicate in our report. Other information The directors are responsible for the other information. The other information comprises the Directors’ Report as required by the Companies Act 71 of 2008, which we obtained prior to the date of this report. Other information does not include, the annual financial statements and our auditors’ report thereon. Our opinion on the annual financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audit of the annual financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the annual financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Annual Financial Statements The directors are responsible for the preparation and fair presentation of the annual financial statements in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities and the requirements of the Companies Act 71 of 2008, and for such internal control as the directors determine is necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error. Southeast Bank Limited I Annual Report 2016 403

In preparing the annual financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the Annual Financial Statements Our objectives are to obtain reasonable assurance about whether the annual financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual financial statements.

As part of an audit in accordance with the International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the annual financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the annual financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the company to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the annual financial statements, including the disclosures, and whether the annual financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Financial statements We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

GL PALMER AND COMPANY Registered Auditors Philippos Philippou (CA) SA Partner Johannesburg 03 February 2017 404 Southeast Bank Limited I Annual Report 2016

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Directors’ Responsibilities and Approval

The directors are required by the Companies Act 71 of 2008, to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the company as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with the International Financial Reporting Standard for Small and Medium-sized Entities. The external auditor is engaged to express an independent opinion on the annual financial statements. The annual financial statements are prepared in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgments and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the company and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the company and all employees are required to maintain the highest ethical standards in ensuring the company’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the company is on identifying, assessing, managing and monitoring all known forms of risk across the company. While operating risk cannot be fully eliminated, the company endeavours to minimize it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss.

The directors have reviewed the company’s cash flow forecast for the year to 31 December 2017 and, in the light of this review and the current financial position, they are satisfied that the company has or has access to adequate resources to continue in operational existence for the foreseeable future. The external auditors are responsible for independently auditing and reporting on the company's annual financial statements. The annual financial statements have been examined by the company's external auditors and their report is presented on pages 3 to 5. The annual financial statements set out on pages 7 to 22, which have been prepared on the going concern basis, were approved and signed by the directors on 03 February 2017:

Alamgir Kabir M. Kamal Hossain

Johannesburg Southeast Bank Limited I Annual Report 2016 405

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Directors’ Report

The directors have pleasure in submitting their report on the annual financial statements of Southeast Exchange Company (South Africa) (Pty) Ltd for the year ended 31 December-2016.

1. Nature of business

Southeast Exchange Company (South Africa) (Pty) Ltd was incorporated and operates in South Africa with interests in the facilitator of funds remittance industry. There have been no material changes to the nature of the company's business from the prior year.

2. Review of financial results and activities

The annual financial statements have been prepared in accordance with the International Financial Reporting Standard for Small and Medium size Entities and the requirements of the Companies Act 71 of 2008. The accounting policies have been applied consistently compared to the prior year.

Full details of the financial position, results of operations and cash flows of the company are set out in these annual financial statements.

3. Share capital 2016 2015 Authorised Number of Shares Ordinary shares 4 000 4 000

2016 2015 2016 2015 Issued R R Number of Shares Ordinary shares 120 120 120 120

There have been no changes to the authorised or issued share capital during the year under review.

4. Control over unissued shares

The unissued ordinary shares are the subject of a general authority granted to the directors in terms of section 38 of the Companies Act 71 of 2008.

5. Dividends

No dividends were declared or paid to the shareholder during the year under review (2015-Nil)

6. Directors Financial statements The directors in office at the date of this report are as follows :

Directors Alamgir Kabir Shahid Hossain There have been no changes to the directorate for the year under review. 7. Directors' interests in contracts

During the financial year, no contracts were entered into which directors or officers of the company had an interest and which significantly affected the business of the company.

8. Property, plant and equipment There was no change in the nature of the property, plant and equipment of the company or in the policy regarding their use. At 31 December 2016 the company's investment in property , plant and equipment amounted to R493 140(2015 -R573 536), of which R1 14 840(2015 - R48 194) were introduced in the current year through additions . 406 Southeast Bank Limited I Annual Report 2016

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Directors’ Report

9. Special resolutions

No special resolutions, the nature of which might be significant to the shareholder in its' appreciation of the state of affairs of the company were made by the company during the period covered by this report .

10. Events after the reporting period

The directors are not aware of any material event which occurred after the reporting date and up to the date of this report

11. Going concern

The directors believe that the company has adequate financial resources to continue in operation for the foreseeable future and accordingly the annual financial statements have been prepared on the going concern basis. The directors have satisfied themselves that the company is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. The directors are not aware of any new material changes that may adversely impact the company. The directors are also not aware of any material non-compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect the company.

12. Litigation statement

The company is not currently involved in any claims or lawsuits, which individually or in the aggregate, are expected to have a material adverse effect on the business or its assets.

13. Auditors

GL Palmer and Company continued in office as auditors of the company for 2016.

At the AGM, the shareholder will be requested to reappoint GL Palmer and Company as the independent external auditors of the company and to confirm Mr. Philippos Philippou (CA) SA as the designated lead audit partner of the 2017 financial year.

14. Secretaries

The company secretaries are KPMG Inc.

Business address 85 Empire Road Parktown Johannesburg 2198

15. Date of authorisation for issue of financial statements

The annual financial statements have been authorised for issue by the directors on 03 February 2017. No authority was given to anyone to amend the financial statements after the date of issue . Southeast Bank Limited I Annual Report 2016 407

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Statement of financial position as at 31 December 2016

Figures in Rand Note 2016 2015

Assets

Non-current Assets 2 493,140 573,536 Property, plant and equipment 3 25,017 19,622 Deferred tax 518 157 593,158

Current Assets Trade and other receivables 4 971 689 26 282 Current tax receivable 122 764 - Cash and cash equivalents 5 11 016 877 9 651 392 12 111 330 9 677 674 12 629 487 10 270 832

Total Assets

Equity and liabilities Equity Share capital 6 6 632 179 6 632 179 Retained income 2 741 705 (318 597) 9 373 884 6 313 582

Liabilities Non-Current Liabilities 7 89 347 70 077 Operating lease liability

Current Liabilities Trade and other payables 8 3 166 256 3 887 173 Total Liabilities 3 255 603 3 957 250 Total Equity and Liabilities 12 629 487 10 270 832 Financial statements 408 Southeast Bank Limited I Annual Report 2016

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Statement of Comprehensive Income

12 months 10 months ended ended Figures in Rand Note 31 December 31 December 2016 2015

Revenue 9 6 935 214 1 669 486 Other income 10 45 363 800 Operating expenses (3 427 693) (1 666 378) Operating profit 3 552 884 3 908 Investment revenue 11 593 263 494 080 Finance costs 12 (4) - Profit before taxation 4 146 143 497 988 Taxation 13 (1 085 841) 6 809 Profit for the year 3 060 302 504 797 Other comprehensive income - - Total Comprehensive income for the year 3 060 302 504 797 Southeast Bank Limited I Annual Report 2016 409

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Statement of Changes in Equity

Share Share Total share Retained Figures in Rand Capital Total equity premium capital income and Reserves

Balance at 01 March 2015 6 594 179 - 6 594 179 (823 394) 5 770 785 Profit for the year - - - 504 797 504 797 Other comprehensive income - - - - - Total comprehensive income for the period - - - 504 797 504 797 Shareholder's contributions 38 000 38 000 - 38 000 Total Changes 38 000 38 000 - 38 000 Balance at 31 December 2015 6 594 179 38 000 6 632 179 (318 597) 6 313 582 Profit for the year 3 060 302 3 060 302 Other comprehensive income - - - - - Total comprehensive income for the year - - - 3 060 302 3 060 302 Shareholder's contribution 38 000 (38 000) - - - Total Changes 38 000 (38 000) - - - Balance at 31 December 2016 6 632 179 - 6 632 179 2 741 705 9 373 884 Note 6 6 6 Financial statements 410 Southeast Bank Limited I Annual Report 2016

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Statement of Cash Flows

12 months 10 months ended ended Figures in Rand Note 31 December 31 December 2016 2015

Cash flows from operating activities

Cash generated from operations 14 2 101 066 2 193 821 Interest income 593 263 494 080 Finance costs (4) - Tax paid 15 (1 214 000) - Net cash from operating activities 1 480 325 2 687 901

Cash flows from investing activities

Purchase of property, plant and equipment 2 (114 840) (48 194)

Cash flows from financing activities

Proceeds on share premium 6 - 38 000

Total cash movement for the year 1 365 485 2 677 707 Cash at the beginning of the year 9 651 392 6 973 685 Total cash at end of the year 5 11 016 877 9 651 392 Southeast Bank Limited I Annual Report 2016 411

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Accounting Policies

1. Presentation of annual financial statements The annual financial statements have been prepared in accordance with the International Financial Reporting Standard for Small and Medium-sized Entities, and the Companies Act 71 of 2008. The annual financial statements have been prepared on the historical cost basis, and incorporate the principal accounting policies set out below. They are presented in South African Rand.

These accounting policies are consistent with those applied in the previous year.

1.1 Property, plant and equipment Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses.

Cost include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised.

Depreciation is provided using the straight-line method to write down the cost, less estimated residual value over the useful life of the property, plant and equipment as follows:

Average useful Item Depreciation life Leasehold improvements Straight line 5 years Office equipment Straight line 3 years Computer equipment Straight line 3 years

The residual value, depreciation method and useful life of each asset are reviewed only where there is an indication that there has been a significant change from the previous estimate.

1.2 Financial instruments

Initial measurement Financial instruments are initially measured at the transaction price (including transaction costs except in the initial measurement of financial assets and liabilities that are measured at fair value through profit or loss) unless the arrangement constitutes, in effect, a financing transaction in which case it is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.

Financial instruments at amortised cost

These include loans, trade receivables and trade payables. Those debt instruments which meet the criteria in section

11.8(b) of the standard, are subsequently measured at amortised cost using the effective interest method. Debt Financial statements instruments which are classified as current assets or current liabilities are measured at the undiscounted amount of the cash expected to be received or paid, unless the arrangement effectively constitutes a financing transaction.

At each reporting date, the carrying amounts of assets held in this category are reviewed to determine whether there is any objective evidence of impairment. If there is objective evidence, the recoverable amount is estimated and compared with the carrying amount. If the estimated recoverable amount is lower, the carrying amount is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.

1.2 Financial instruments (continued)

Financial instruments at cost Commitments to receive a loan are measured at cost less impairment.

Equity instruments that are not publicly traded and whose fair value cannot otherwise be measured reliably are measured at cost less impairment. 412 Southeast Bank Limited I Annual Report 2016

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Accounting Policies

1.3 Tax Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. The tax liability reflects the effect of the possible outcomes of a review by the tax authorities. Deferred tax assets and liabilities A deferred tax liability is recognised for all taxable temporary differences. A deferred tax asset is recognised for all deductible temporary differences and for the carry forward of unused tax losses and unused tax credits. Deferred tax assets and liabilities are measured at an amount that includes the effect of the possible outcomes of a review by the tax authorities using tax rates that, on the basis of enacted or substantively enacted tax law at the end of the reporting period, are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. Deferred tax asset balances are reviewed at every reporting date. When necessary, a valuation allowance is recognised against the deferred tax assets so that the net amount equals the highest amount that is more likely than not to be realised on the basis of current or future taxable profit. Tax expenses Tax expense is recognised in the same component of total comprehensive income or equity as the transaction or other event that resulted in the tax expense. 1.4 Leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the lessee. All other leases are operating leases. Operating leases – lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term unless: another systematic basis is representative of the time pattern of the benefit from the leased asset, even if the • payments are not on that basis, or the payments are structured to increase in line with expected general inflation (based on published indexes or • statistics) to compensate for the lessor’s expected inflationary cost increases. Any contingent rents are expensed in the period they are incurred. 1.5 Share capital and equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

1.6 Revenue Interest is recognised, in profit or loss, using the effective interest rate method. Service fees included in the price of the product are recognised as revenue over the period during which the service is performed. 1.7 Foreign exchange Foreign currency transactions Exchange differences arising on monetary items are recognised in profit or loss in the period in which they arise. The foreign exchange component of a non-monetary item is recognised consistently with any other gains or losses on those items, in other comprehensive income or in profit or loss. Southeast Bank Limited I Annual Report 2016 413

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Notes to the Annual Financial Statements

12 months 10 months ended 31 ended 31 Figure in Rand December December 2016 2015

2. Property, plant and equipment

2016 2015 Accumulated Carrying Accumulated Carrying Cost Cost depreciation value depreciation value Leasehold improvements 625 800 (260 750) 365 050 600 000 (130 000) 470 000 Office equipment 20 093 (6 613) 13 480 10 493 (2 049) 8 444 Computer equipment 238 365 (123 755) 114 610 158 925 (63 833) 95 092 Total 884 258 (391 118) 493 140 769 418 (195 882) 573 536

Reconciliation of property, plant and equipment - 2016 Opening Additions Depreciation Total balance Leasehold improvements 470 000 25 800 (130 750) 365 050 Office equipment 8 444 9 600 (4 564) 13 480 Computer equipment 95 092 79 440 (59 922) 114 610 573 536 114 840 (195 236) 493 140

3. Deferred tax Deferred tax asset

Operating lease accrual 25 017 19 622

Reconciliation of deferred tax asset

At beginning of year 19 622 12 812 Movement in operating lease accrual 5 395 6 810 25 017 19 622

4. Trade and other receivables Cash in transit 946 889 - Deposits 24 800 24 800 Financial statements Prepayments - 1 482 971 689 26 282

5. Cash and cash equivalents Cash and cash equivalents consist of: Cash on hand 733 108 - Bank balances 10 283 769 9 651 392 11 016 877 9 651 392

Included in the above bank balances figure at year end, is an amount of R 5 000 000 (2015 - R 5 000 000) which is an unimpaired capital requirement of the South African Reserve Bank. 414 Southeast Bank Limited I Annual Report 2016

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Notes to the Annual Financial Statements

12 months 10 months ended 31 ended 31 Figure in Rand December December 2016 2015 6. Share capital Authorised 4000 Ordinary shares of no par value

3880 unissued ordinary shares are under the control of the directors in terms of a resolution of members passed at the last annual general meeting. This authority remains in force until the next annual general meeting.

Issued Ordinary 6 632 179 6 594 179 Reserves - 38 000 6 632 179 6 632 179

Reserves consist of capital contributions made by the shareholder.

7. Operating lease accrual Lease accrual 89 347 70 077

8. Trade and other payables

Trade payables 2 922 368 3 764 773 Value added tax 52 402 - Accrual for audit fees 74 100 122 400 Other payables 117 386 - 3 166 256 3 887 173

9. Revenue Commissions and transaction fees 4 237 061 1 861 181 Exchange gain income/(loss) 2 698 153 (191 695) 6 935 214 1 669 486

10. Other income Query, cancellation and amendment income - 200 Sundry income 45 363 600 45 363 800

11. Investment revenue Interest revenue Bank 593 263 494 080

12. Finance costs Interest paid 4 - 13. Taxation Major components of the tax expense (income) Current Local income tax - current period 1 091 236 - Deferred Deferred tax (5 395) (6 809) 1 085 841 (6 809) Southeast Bank Limited I Annual Report 2016 415

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Notes to the Annual Financial Statements

12 months 10 months ended 31 ended 31 Figure in Rand December December 2016 2015 Reconciliation of the tax expense Reconciliation between accounting profit and tax expense. Accounting profit 4 146 143 497 988 Tax at the applicable tax rate of 28% (2015: 28%) 1 160 920 139 437

Tax effect of adjustments on taxable income Non-deductible expenses 94 617 78 848 Temporary differences (89 222) (72 038) Assessed tax loss brought forward (75 079) (221 326) 1 091 236 (75 079) 14. Cash generated from operations Profit before taxation 4 146 143 497 988 Adjustments for: Depreciation 195 236 144 306 Interest received (593 263) (494 080) Finance costs 4 - Movements in operating lease assets and accruals 19 270 24 318 Changes in working capital: Trade and other receivables (945 407) 116 188 Trade and other payables (720 917) 1 905 101 2 101 066 2 193 821 15. Tax paid Current tax for the year recognised in profit (loss) or loss (1 091 236) - Balance at end of the year (122 764) - (1 214 000) - 16. Directors' remuneration No emoluments were paid to the directors or any individuals holding a prescribed office during the year.

17. Auditors' remuneration Financial statements Fees 65 000 52 500 Adjustment for previous year 40 123 - 105 123 52 500 18. Related parties Relationships Holding company Southeast Bank Limited

Related party balances and transactions with entities over which the company has control, joint control or significant influence

Related party balances Amounts included in Trade Payables regarding related parties Southeast Bank Limited 2 922 368 3 764 773 19. Comparative figures The comparative figures are for a 10 month period. Certain comparative figures have been reclassified to conform with changes in presentation in the current year. 416 Southeast Bank Limited I Annual Report 2016

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Detailed Income Statement

12 months 10 months Figure in Rand Note ended 31 ended 31 December 2016 December 2015

Revenue 4 237 061 1 861 181 Commissions and transaction fees 2 698 153 (191 695) Exchange gain income/(loss) 9 6 935 214 1 669 486

Other income Query, cancellation and amendment income - 200 Sundry income 45 363 600 Interest received 11 593 263 494 080 638 626 494 880

Expenses (Refer to next page) (3 427 693) (1 666 378) Operating profit 4 146 147 497 988 Finance costs 12 (4) - Profit before taxation 4 146 143 497 988 Taxation 13 (1 085 841) 6 809 Profit for the year 3 060 302 504 797

The supplementary information presented does not form part of the annual financial statements and is unaudited Southeast Bank Limited I Annual Report 2016 417

Southeast Exchange Company (South Africa) (Pty) Ltd Annual Financial Statements for the year ended 31 December 2016 Detailed Income Statement

12 months 10 months Figure in Rand Note ended 31 ended 31 December 2016 December 2015 Operating expenses Accounting fees 128 187 28 342 Advertising 62 264 30 301 Auditors remuneration 17 105 123 52 500 Bank charges 403 867 134 804 Cash carrying charges 638 699 - Cleaning - 19 000 Computer expenses 30 531 - Depreciation 195 236 144 306 Employee costs 750 469 380 000 Entertainment 51 642 30 335 Insurance 29 264 - Lease rentals on operating lease 337 919 281 599 Municipal expenses 25 179 23 000 Office expenses 8 862 - Postage 16 892 4 450 Printing and stationery 81 675 51 625 Profit and loss on exchange differences 180 131 - Rates and taxes - 746 Repairs and maintenance 44 730 31 804 Security 215 672 385 766 Staff costs 1 746 - Telephone and fax 53 855 31 374 Travel - local 65 750 36 426 3 427 693 1 666 378

The supplementary information presented does not form part of the annual financial statements and is unaudited Financial statements 418 Southeast Bank Limited I Annual Report 2016

Terminology

AD Authorized Dealer ALCO Asset Liability Committee ATM Automated Teller Machine BB Bangladesh Bank (Central Bank of Bangladesh) B/L Bad/Loss BAS Bangladesh Accounting Standards CRR Cash Reserve Requirement CRG Credit Risk Grading CSR Corporate Social Responsibility CPI Consumer Price Index CDBL Central Depository Bangladesh Limited CBS Core Banking Software CRISL Credit Rating and Information Services Ltd. DEPZ Dhaka Export Processing Zone DP Depository Participants EPS Earnings Per Share EPZ Export Processing Zone FY Fiscal Year (July to June) GDP Gross Domestic Product GRI Global Reporting Initiative HOB Head of Branch IT Information Technology IMF International Monetary Fund IAS International Accounting Standards IPO Initial Public Offering LC Letter of Credit MANCOM Management Committee NII Net Interest Income NIM Net Interest Margin NPL Non Performing Loan OBU Of shore Banking Unit IR Integrated Reporting POS Point of Sale PV Present Value RWA Risk Weighted Assets RMG Readymade Garments ROA Return on Assets ROE Return on Equity R&D Research and Development SAFA South Asian Federation of Accountants SME Small and Medium Enterprise SOP Standard Operating Procedure SLR Statutory Liquidity Ratio RMA Relationship Management Application SWIFT Society for Worldwide Interbank Financial Telecommunication SEBCSL Southeast Bank Capital Service Limited SEFSL Southeast Financial Services (UK) Limited SEFSPL Southeast Financial Services (Australia) Pty Limited SEECPL Southeast Exchange Company (South Africa) Pty Ltd Southeast Bank Limited I Annual Report 2016 419

Standard Disclosure Checklist Financial statements 420 Southeast Bank Limited I Annual Report 2016

SAFA Corporate Governance Disclosure Checklist

Items Page No. 1. BOARD OF DIRECTORS, CHAIRMAN AND CEO 1.1 Company's policy on appointment of directors disclosed. 85 Adequate representation of non executive directors i.e. one third of the Board, subject to a 1.2 87 minimum of two At least one independent director on the board and disclosure / affirmation of the Board on 1.3 87 such director’s independence. 1.4 Chairman to be independent of CEO 88 Responsibilities of the Chairman of the Board appropriately defined and disclosed. Disclosure 1.5 89 of independence of Non Executive Directors Existence of a scheme for annual appraisal of the boards performance and disclosure of the 1.6 89 same. 1.7 Disclosure of policy on annual evaluation of the CEO by the Board. 90 Disclosure of policy on training (including details of the continuing training program) of 1.8 directors and type and nature of training courses organized for directors during the year 90 Existence of a scheme for annual appraisal of the boards performance At least one director having thorough knowledge and expertise in finance and accounting to 1.9 provide guidance in the matters applicable to accounting and auditing standards to ensure 91 reliable financial reporting. Disclosure of number of meetings of the board and participation of each director (at least 4 1.10 91 meetings are required to be held) Directors issue a report on compliance with best practices on Corporate Governance that is 1.11 91 reviewed by the external auditors 2. VISION / MISSIONS AND STRATEGY Company’s vision / mission statements are approved by the board and disclosed in the annual 2.1 7-8 report. 2.2 Identification of business objectives and areas of business focus disclosed 9 2.3 General description of strategies to achieve the company's business objectives 10-11 3. AUDIT COMMITTEES 3.1 Appointment and Composition 93 3.1.1 Whether the Audit Committee Chairman is an independent Non – Executive Director 93 Whether it has specific terms of reference and whether it is empowered to investigate / 3.1.2 144-145 question employees and retain external counsel 3.1.3 More than two thirds of the members are to be Non Executive Directors 87 All members of the audit committee to be financially literate and at least one member to have 3.1.4 93 expert knowledge of finance and accounting. 3.1.5 Head of internal audit to have direct access to audit committee 93 The committee to meet at least four times a year and the number of meetings and 3.1.6 93 attendance by individual members disclosed in the annual report. 3.2 Objectives & Activities Statement on Audit Committee’s review to ensure that internal controls are well conceived 3.2.1 145 properly administered and satisfactorily monitored Statement to indicate audit committees role in ensuring compliance with Laws, Regulations 3.2.2 145 and timely settlements of Statutory dues Southeast Bank Limited I Annual Report 2016 421

3.2.3 Statement of Audit committee involvement in the review of the external audit function - Ensure effective coordination of external audit function - Ensure independence of external auditors - To review the external auditors findings in order to be satisfied that appropriate action is being taken - Review and approve any non audit work assigned to the external auditor and ensure that such work does not compromise the independence of the external auditors. 144-146 - Recommend external auditor for appointment/ reappointment Statement on Audit committee involvement in selection of appropriate accounting policies 3.2.4 that are in line will applicable accounting standards and annual review. Statement of Audit Committee involvement in the review and recommend to the Board of 3.2.5 Directors, annual and interim financial releases 3.2.6 Reliability of the management information used for such computation 4. INTERNAL CONTROL & RISK MANAGEMENT 4.1 Statement of Director's responsibility to establish appropriate system of internal control 82 Narrative description of key features of the internal control system and the manner in which 4.2 144-145, 160-161 the system is monitored by the Board, Audit Committee or Senior Management. 4.3 Statement that the Director's have reviewed the adequacy of the system of internal controls 82-83 4.4 Disclosure of the identification of risks the company is exposed to both internally & externally 161-165 4.5 Disclosure of the strategies adopted to manage and mitigate the risks 124-125 5. ETHICS AND COMPLIANCE Disclosure of statement of ethics and values, covering basic principles such as integrity, 5.1 14-15 conflict of interest, compliance with laws and regulations etc.. Dissemination / communication of the statement of ethics & business practices to all directors 5.2 54,96 and employees and their acknowledgement of the same Board’s statement on its commitment to establishing high level of ethics and compliance 5.3 95 within the organization Establishing effective anti-fraud programs and controls, including effective protection of 5.4 147-148 whistle blowers, establishing a hot line reporting of irregularities etc. 6. REMUNERATION COMMITTEE 6.1 Disclosure of the charter (role and responsibilities) of the committee 97 Disclosure of the composition of the committee (majority of the committee should be non- 6.2 97 executive directors, but should also include some executive directors) Disclosure of key policies with regard to remuneration of directors, senior management and 6.3 97 employees 6.4 Disclosure of number of meetings and work performed 95-96 6.5 Disclosure of remuneration of directors, chairman, chief executive and senior executives. 97 7. HUMAN CAPITAL Disclosure of general description of the policies and practices codified and adopted by the company with respect to Human Resource Development and Management, including 7.1 191-192 succession planning, merit based recruitment, performance appraisal system, promotion and Financial statements reward and motivation, training and development, grievance management and counseling. 7.2 Organizational Chart 25 8. COMMUNICATION TO SHAREHOLDERS & STAKEHOLDERS Disclosure of the Company's policy / strategy to facilitate effective communication with 8.1 97-98 shareholders and other stake holders Disclosure of company’s policy on ensuring participation of shareholders in the Annual 8.2 General Meeting and providing reasonable opportunity for the shareholder participation in 97-98 the AGM. 9. ENVIRONMENTAL AND SOCIAL OBLIGATIONS Disclosure of general description of the company's policies and practices relating to social and 9.1 environmental responsibility of the entity 186-88 Disclosure of specific activities undertaken by the entity in pursuance of these policies and 9.2 practices 422 Southeast Bank Limited I Annual Report 2016

Integrated Reporting Checklist

Items Page No. 1. Elements of an Integrated Report 1.1 Organizational overview and external environment An integrated report should disclose the main activities of the organization and the environment of which it operates. An integrated report should identify the organization’s mission and vision, and provides essential context by identifying matters such as: • The organization’s: • culture, ethics and values • ownership and operating structure including size of the organization, location of its operations) • principal activities and markets • competitive landscape and market positioning (considering factors such as the threat of new competition and substitute products or services, the bargaining power of customers and suppliers, and the intensity of competitive rivalry) • position within the value chain • Key quantitative information 12-15 e.g., the number of employees, revenue and number of countries in which the organization operates 211 highlighting, in particular, significant changes from prior periods 219 • Significant factors affecting the external environment and the organization’s response 190 (include aspects of the legal, commercial, social, environmental and political context that affect the 70-71 organization’s ability to create value in the short, medium or long term) 53 Eg: • The legitimate needs and interests of key stakeholders • Macro and micro economic conditions stability, globalization, and industry trends • Market forces, such as the relative competitors and customer demand • The speed and effect of technological change • Societal issues, such as population and demographic changes, human rights, health, poverty, collective values and educational systems • Environmental challenges, such as climate change, the loss of ecosystems, and resource shortages as planetary limits are approached • The legislative and regulatory environment in which the organization operates • The political environment in countries where the organization operates and other countries that may affect the ability of the organization to implement its strategy

1.2 Governance An integrated report should how does the organization’s governance structure support its ability to create value in the short, medium and long term. An integrated report needs to provide an insight about how such matters as the following are linked to its ability to create value:

• The organization’s leadership structure, including the skills and diversity (e.g., range of backgrounds, gender, competence and experience) of those charged with governance and whether regulatory 80-98 requirements influence the design of the governance structure • Specific processes used to make strategic decisions and to establish and monitor the culture of the organization, including its attitude to risk and mechanisms for addressing integrity and ethical issues • Particular actions those charged with governance have taken to influence and monitor the strategic direction of the organization and its approach to risk management • How the organization’s culture, ethics and values are reflected in its use of and effects on the capitals, including its relationships with key stakeholders Southeast Bank Limited I Annual Report 2016 423

Items Page No. • Whether the organization is implementing governance practices that exceed legal requirements/ Key Policies • The responsibility those charged with governance take for promoting and enabling innovation • How remuneration and incentives are linked to value creation in the short, medium and long term, including how they are linked to the organization’s use of and effects on the capitals. 1.3 Stakeholder Identification/ relationships An integrated report should identify its key stakeholders and provide insight into the nature and quality of the organization’s relationships with its key stakeholders, including how and to what extent the organization understands, takes into account and responds to their legitimate needs and interests.

Capitals 214-215 An integrated report needs to provide insight about the resources and the relationships used and affected by the organization, which are referred to collectively as the capitals and how the organization interacts with the capitals to create value over the short, medium and long term 189 An integrated report need to identify the various forms of capitals which are essential for the success of its business operations. Eg: financial, manufactured, intellectual , human, social and relationship,and natural, However an entity can do its own classification of capitals based on its business activities. An entity needs to ensure that it does not overlook a capital that it uses or affects.

1.4 Business model An integrated report should describe the organization’s business model An integrated report need to describe the business model, including key: • Inputs • Business activities • Outputs • Outcomes Features that can enhance the effectiveness and readability of the description of the business model include: • Explicit identification of the key elements of the business model • A simple diagram highlighting key elements, supported by a clear explanation of the relevance of those elements to the organization • Narrative flow that is logical given the particular circumstances of the organization • Identification of critical stakeholder and other (e.g., raw material) dependencies and important factors affecting the external environment • Connection to information covered by other Content Elements, such as strategy, risks and 19 opportunities, and performance (including KPIs and financial considerations, like cost containment and revenues).

Inputs 206-211 An integrated report shows how key inputs relate to the capitals on which the organization depends, 218-219 Financial statements or that provide a source of differentiation for the organization, to the extent they are material to understanding the robustness and resilience of the business model.

Business activities An integrated report describes key business activities. This can include: • How the organization differentiates itself in the market place (e.g., through product differentiation, market segmentation, delivery channels and marketing) • The extent to which the business model relies on revenue generation after the initial point of sale (e.g., extended warranty arrangements or network usage charges) • How the organization approaches the need to innovate • How the business model has been designed to adapt to change.

When material, an integrated report discusses the contribution made to the organization’s long term success by initiatives such as process improvement, employee training and relationships management. 424 Southeast Bank Limited I Annual Report 2016

Items Page No. Outputs An integrated report identifies an organization’s key products and services. There might be other outputs, such as by-products and waste (including emissions), that need to be discussed within the business model disclosure depending on their materiality.

Outcomes An integrated report describes key outcomes, including: • Both internal outcomes (e.g., employee morale, organizational reputation, revenue and cash flows) and external outcomes (e.g., customer satisfaction, tax payments, brand loyalty, and social and environmental effects) 72-76 • Both positive outcomes (i.e., those that result in a net increase in the capitals and thereby create value) and negative outcomes (i.e., those that result in a net decrease in the capitals and thereby diminish value). Organizations with multiple business models Some organizations employ more than one business model (e.g., when operating in different market segments). This requires a distinct consideration of each material business model as well as commentary on the extent of connectivity between the business models (such as the existence of synergistic benefits)

1.5 Performance An integrated report needs to explain the extent to which the organization has achieved its strategic objectives for the period and what are its outcomes in terms of effects on the capitals?

An integrated report should contain qualitative and quantitative information about performance that may include matters such as: • Quantitative indicators with respect to targets and risks and opportunities, explaining their significance, their implications, and the methods and assumptions used in compiling them • The organization’s effects (both positive and negative) on the capitals, including material effects on capitals up and down the value chain • The state of key stakeholder relationships and how the organization has responded to key stakeholders’ legitimate needs and interests • The linkages between past and current performance, and between current performance and the 197-215 organization’s outlook.

KPIs that combine financial measures with other components (e.g., the ratio of greenhouse gas emissions to sales) or narrative that explains the financial implications of significant effects on other capitals and other causal relationships (e.g., expected revenue growth resulting from efforts to enhance human capital) may be used to demonstrate the connectivity of financial performance with performance regarding other capitals. In some cases, this may also include monetizing certain effects on the capitals (e.g., carbon emissions and water use).

Include instances where regulations have a significant effect on performance (e.g., a constraint on revenues as a result of regulatory rate setting) or the organization’s non-compliance with laws or regulations may significantly affect its operations.

1.6 Risks and opportunities An integrated report should explain what are the specific risks and opportunities that affect the organization’s ability to create value over the short, medium and long term, and how is the organization dealing with them?

This can include identifying: • The specific source of risks and opportunities, which can be internal, external or, commonly, a mix 158-165 of the two. 166-177 • The organization’s assessment of the likelihood that the risk or opportunity will come to fruition and the magnitude of its effect if it does. • The specific steps being taken to mitigate or manage key risks or to create value from key opportunities, including the identification of the associated strategic objectives, strategies, policies, targets and KPIs. Southeast Bank Limited I Annual Report 2016 425

Items Page No. 1.7 Strategy and resource allocation

An integrated report should describe it strategic direction (Where does the organization want to go and how does it intend to get there)

An integrated report need to identify: • The organization’s short, medium and long term strategic objectives • The strategies it has in place, or intends to implement, to achieve those strategic objectives • The resource allocation plans it has to implement its strategy • How it will measure achievements and target outcomes for the short, medium and long term.

This can include describing: • The linkage between the organization’s strategy and resource allocation plans, and the information covered by other Content Elements, including how its strategy and resource allocation plans: 9-11 • relate to the organization’s business model, and what changes to that business model might be necessary to implement chosen strategies to provide an understanding of the organization’s ability to adapt to change • are influenced by/respond to the external environment and the identified risks and opportunities affect the capitals, and the risk management arrangements related to those capitals • What differentiates the organization to give it competitive advantage and enable it to create value, such as: • the role of innovation • how the organization develops and exploits intellectual capital • the extent to which environmental and social considerations have been embedded into th organization’s strategy to give it a competitive advantage • Key features and findings of stakeholder engagement that were used in formulating its strategy and resource allocation plans.

1.8 Outlook An integrated report should explain what challenges and uncertainties is the organization likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance?

An integrated report should highlight anticipated changes over time and provides information on • The organization’s expectations about the external environment the organization is likely to face in the short, medium and long term • How that will affect the organization • How the organization is currently equipped to respond to the critical challenges and uncertainties that are likely to arise.

The discussion of the potential implications, including implications for future financial performance may include: Financial statements 9

160-165 • The external environment, and risks and opportunities, with an analysis of how these could affect the achievement of strategic objectives • The availability, quality and affordability of capitals the organization uses or affects (e.g., the continued availability of skilled labour or natural resources), including how key relationships are managed and why they are important to the organization’s ability to create value over time.

An integrated report may also provide lead indicators, KPIs or objectives, relevantinformation from recognized external sources, and sensitivity analyses. If forecasts or projections are included in reporting the organization’s outlook, a summary of related assumptions is useful. Comparisons of actual performance to previously identified targets further enables evaluation of the current outlook.

Disclosures about an organization’s outlook in an integrated report should consider the legal or regulatory requirements to which the organization is subject. 426 Southeast Bank Limited I Annual Report 2016

Items Page No. 1.9 Basis of preparation and presentation An integrated report should answer the question: How does the organization determine what matters to include in the integrated report and how are such matters quantified or evaluated? An integrated report describes its basis of preparation and presentation, including: • A summary of the organization’s materiality determination process • Brief description of the process used to identify relevant matters, evaluate their importance and narrow them down to material matters • Identification of the role of those charged with governance and key personnel in the identification 189 and prioritization of material matters. • A description of the reporting boundary and how it has been determined Eg: Include process used for identifying the reporting boundary, geographic scope, the entities represented in the report and the nature of the information provided for each entity • A summary of the significant frameworks and methods used to quantify or evaluate material matters (e.g., the applicable financial reporting standards used for compiling financial information, a company- defined formula for measuring customer satisfaction, or an industry based framework for evaluating risks). 2. Responsibility for an integrated report An integrated report should include a statement from those charged with governance that includes: • An acknowledgement of their responsibility to ensure the integrity of the integrated report • An acknowledgement that they have applied their collective mind to the preparation and presentation of the integrated report • Their opinion or conclusion about whether the integrated report is presented in accordance with the Framework 189 or, if it does not include such a statement , it should explain: • What role those charged with governance played in its preparation and presentation • What steps are being taken to include such a statement in future reports • The time frame for doing so, which should be no later than the organization’s third integrated report that references this Framework. 3. Other Qualitative Characteristics of an Integrated Report Conciseness An integrated report should be concise. 9-10 An integrated report need to include sufficient context to understand the organization’s strategy, governance, performance and prospects without being burdened with less relevant information 3.2 Reliability and completeness An integrated report should include all material matters, both positive and negative, in a 189 balanced way and without material error 3.3 Consistency and comparability The information in an integrated report should be presented: • On a basis that is consistent over time • In a way that enables comparison with other organizations to the extent it is material to the organization’s own ability to create value over time. Eg: • Using benchmark data, such as industry or regional benchmarks 198-200 • Presenting information in the form of ratios (e.g., research expenditure as a percentage of sales, or carbon intensity measures such as emissions per unit of output) • Reporting quantitative indicators commonly used by other organizations with similar activities, particularly when standardized definitions are stipulated by an independent organization (e.g., an industry body). 3.4 Connectivity of information An integrated report should show a holistic picture of the combination, interrelatedness and dependencies between the factors that affect the organization’s ability to create value over time. Eg: Connectivity between – Capitals 189 - Content elements - Past , Present & Future - Finance and other information 3.5 Materiality An integrated report should disclose information about matters that substantively affect the 189-190 organization’s ability to create value over the short, medium and long term 3.6 Assurance on the Report • The policy and practice relating to seeking assurance on the report, • the nature and scope of assurance provided for this particular report 189 • any qualifications arising from the assurance, and the nature of the relationship between the organization and the assurance providers Southeast Bank Limited I Annual Report 2016 427

SAFA Standard Disclosure Index

Disclosure checklist to the key sections of the Annual Report - 2016

Items Ref. Page No. CORPORATE OBJECTIVES, VALUES & STRUCTURE CLARITY AND PRESENTATION Vision and Mission 6-8 Overall strategic objectives 9 Core values and code of conduct/ethical principles 12-15 Profile of the Company 17 Director’s profiles and their representation on Board of other companies & Organizations Chart 36-47,25 MANAGEMENT REPORT AND ANALYSIS INCLUDING DIRECTOR’S REPORT / CHAIRMAN’S REVIEW/CEO’S REVIEW ETC. A general review of the performance of the company 50-56 Description of the performance of the various activities / products / segments of the company 72-76 and other companies of the group during the period under review. A brief summary of the Business and other Risks facing the organization and steps taken to 158-165 effectively manage such risks A general review of the future prospects/outlook. 28,55-56 Information on how the company contributed to its responsibilities towards the staff (including 192,224-225 health & safety) Information on company's contribution to the national exchequer and to the economy 78,226 SUSTAINABILITY REPORTING Corporate Social Responsibility (CSR) Initiatives 54,182-185 Environment Related Initiatives 186-187 Environmental and Social Obligations 188 Integrated Reporting 189-190 APPROPRIATIONS OF DISCLOSURE OF ACCOUNTING POLICIES AND GENERAL DISCLOSURE Disclosure of adequate and properly worded accounting policies relevant to assets, liabilities, Income and expenditure in line with best reporting standards. Any Specific accounting policies 272-290 Impairment of Assets Changes in accounting policies/Changes in accounting estimates SEGMENT INFORMATION Comprehensive segment related information bifurcating segment revenue, segment results and segment capital employed Availability of information regarding different segments and units of the entity as well as non- segmental entities/units

SEGMENT ANALYSIS OF Financial statements 206-211,362-363 - Segment Revenue - Segment Results - Turnover - Operating profit - Carrying amount of Net Segment assets FINANCIAL STATEMENTS (INCLUDING FORMATS) Disclosures of all contingencies and commitments 322 Comprehensive related party disclosures 333 Disclosures of Remuneration & Facilities provided to Directors & CEO 327-328 Statement of Financial Position / Balance Sheet and relevant schedules 267 Income Statement / Profit and Loss Account and relevant schedules 269 428 Southeast Bank Limited I Annual Report 2016

Items Ref. Page No. Statement of Changes in Equity / Reserves & Surplus Schedule 271 Disclosure of Types of Share Capital 317 Statement of Cash Flow 270 Consolidated Financial Statements (CFS) 262 Extent of compliance with the core IAS/IFRS or equivalent National Standards 288 Disclosures / Contents of Notes to Accounts 272 INFORMATION ABOUT CORPORATE GOVERNANCE Board of Directors, Chairman and CEO 85-86 Audit Committee (Composition, role, meetings, attendance, etc) Internal Control and Risk 144-150 Management Ethics and Compliance 95 Remuneration and other Committees of Board 97,32 Human Capital 191 Communication to Stakeholders - Information available on website 197-215 - Other information Management Review and Responsibility 100-127 Disclosure by Board of Directors of Audit Committee on evaluation of quarterly reports 151 Any other investor-friendly information 215 RISK MANAGEMENT AND CONTROL ENVIRONMENT Description of the Risk Management Framework 158-165 Risk Mitigation Methodology 158-165 Disclosure of Risk Reporting 125 STAKEHOLDERS INFORMATION Distribution of shareholders (Number of shares as well as category wise, e.g Promoter group, 211 FII etc) Shares held by Directors/Executives and relatives of Directors/Executives 211 Redress of investors complaints 215 GRAPHICAL/ PICTORIAL DATA Earnings per Share 207 Net Assets 209 Stock Performance 207 Shareholders’ Funds 209 Return on Shareholders Fund 209 HORIZONTAL/VERTICAL ANALYSIS OF DIFFERENT PERFORMANCE/OPERATION INDICATORS Operating Performance (Income Statement) - Total Revenue - Operating profit - Profit before Tax - Profit after Tax - EPS 198-200 Statement of Financial Position (Balance Sheet) - Shareholders Fund - Property Plant and Equipment - Net Current Assets - Long Term Liabilities/Current Liabilities PROFITABILITY/DIVIDENDS/ PERFORMANCE AND LIQUIDITY RATIOS Gross Profit Ratio Earning before Interest, Depreciation and Tax Price Earning Ratio 198-200 Current Ratios Return on Capital Employed Debt Equity Ratio Southeast Bank Limited I Annual Report 2016 429

Items Ref. Page No. VALUE ADDED STATEMENT AND ITS DISTRIBUTION Taxes Paid to the Government Dividend Paid to Shareholders Bonus/Remuneration Paid to Employees 194-196 Retained by the entity Market share information of the Company’s product/services Economic value added ADDITIONAL DISCLOSURES Sustainability Development Reporting 180 Human Resource Accounting 191-192 Geographical Presence 233 SPECIFIC AREA FOR BANKING SECTOR Disclosure of ratings given by various rating agencies for instruments issued by /of Bank. 143 Details of loans and advances portfolio: classification wise as per the direction of Bangladesh Bank Disclosure for Non Performing Assets - Movements in NPA - Sector-wise breakup of NPA 156-157 - Movement of Provisions made against NPA - Details of accounts restructured as per regulatory guidelines Maturity Pattern of Key Assets and Liabilities Classification and valuation of investments as per regulatory guidelines/Accounting Standards BUSINESS RATIO/INFORMATION - Statutory Liquidity Reserve (Ratio) - Net interest income as a percentage of working funds / Operating cost - Efficiency Ratio - Return on Average Asset - Cost / Income Ratio - Net Asset Value Per Share - Profit per Employee 25,198-200 - Capital Adequacy Ratio - Operating profit as a percentage of working funds / Return on Asset - Cash Reserve Ratio / Liquid Asset ratio - Dividend Cover Ratio - Gross Non-Performing Assets to Gross Advances/Non-Performing Loans (Assets) to Total Loans (Assets) Details of credit concentration/Sector vise exposures 301-302 The break-up of ‘Provisions and contingencies’ included in the Profit and Loss Account 312-113 Disclosure under regulatory guidelines (Market Discipline- Pillar 3 Disclosures under Basel-III) 319-320 Details of Non-Statutory investment portfolio 295

Disclosure in respect of assets given on operating & finance lease 315 Financial statements Disclosures for derivative investments 295-300 Bank's Network : List of Branches or Centers 232 430 Southeast Bank Limited I Annual Report 2016

Important Financial Indicators with Quantitative and Qualitative Factors

Items Page No. A Quantitative Factors Profitability 1 ROA (before Tax) 2 ROE (After Tax) 3 NIM 27,198-202 4 Return of Average weighted Asset 5 Efficiency ratio Capital Adequacy 1 Risk Weighted Asset 2 Internal Capital Generation Ratio 319-321 3 Leverage Ratio Asset Quality 1 Gross NPL Ratio 2 Net NPL Ratio 156-157 3 Gross NPL Coverage 4 SMA to Credit Portfolio Liquidity and Funding 1 Liquid Asset Ratio 52,174-175 2 Loan to Deposit Ratio B Qualitative Factors Capital Adequacy 1 Capital Buffer 154-155 2 Trend of Internal Capital Growth Asset Quality 1 Trend of Non Performing Assets 2 Credit Growth/Outreach 156,27,301-302 3 Exposure Concentration 4 Priority Sector Financing Board and Management 1 Organization Development 25-26,29,34- 2 Director's Profile 47,80-98 3 Corporate Governance Earnings 1 Bank Vs Industry Earnings 2 Earnings Stability 198-210 3 Movement of Profitability Indicators Liquidity 1 Liquidity and Deposit Base 73-75 Quality of Accounts & Disclosure 1 Quality of Accounts/ Compliance 260-261,272-363 2 Disclosure Risk Management & Compliance 1 Risk Management Guidelines 2 Related Party Transaction 159-165,92,177 3 Capital Market Exposure Franchise Value 1 Foreign Affiliation 2 Credit Rating of the Bank 3 Contribution of National Exchequer 244-257,143,226, 182-185 4 Contribution of CSR Activities

Market Presence 1 Market Share 196,232-237, 2 Branch Network 218-219 3 Product Diversification Events 2016

Southeast Bank Limited donated BDT10.00 million to the Prime Minister’s Relief and Welfare Fund for blankets for country’s cold-hit poor people. Honorable Prime Minister Sheikh Hasina is seen receiving the Cheque from Alamgir Kabir, FCA, Chairman of the Bank. Azim Uddin Ahmed, Director of Southeast Bank was also present on the occasion.

Azim Uddin Ahmed, Director, Southeast Bank handed over a Cheque for BDT 7.50 million to Prime Minister Sheikh Hasina on August 09, 2016 in Dhaka as donation for Prime Minister’s Relief Fund.

Azim Uddin Ahmed, Director, Southeast Bank handed over a Cheque for Tk. 15.00 million to the Honorable Prime Minister Sheikh Hasina at Gonobhaban on June 27, 2016 in Dhaka as donation for Prime Minister’s Relief Fund. 432 Southeast Bank Limited I Annual Report 2016

Southeast Bank Foundation organized a reception on 27 February 2016 for the Higher Secondary and Graduation level meritorious students coming from different poor families for disbursement of scholarships. Dr. Atiur Rahman, former Governor, Bangladesh Bank, was present on the occasion as the Chief Guest. Alamgir Kabir, FCA, Chairman, Southeast Bank Limited was present as the special guest.

Southeast Bank Limited signed a Memorandum of Understanding with Hajj Agencies Association of Bangladesh (HAAB) on February 01, 2016 at Southeast Bank, Head Office. Shahid Hossain, Former Managing Director of Southeast Bank Limited and the President of HAAB Mohammad Ibrahim Bahar, signed the agreement on behalf of their respective organizations.

Southeast Bank Limited signed an Agreement with Bangladesh Bank for Participation in Green Transformation Fund. Manoj Kumar Biswas, General Manager, Sustainable Finance Department, Bangladesh Bank and Shahid Hossain, Former Managing Director, Southeast Bank Limited signed the agreement on behalf of their respective organizations. Shitangshu Kumar (S.K.) Sur Chowdhury, Deputy Governor, Bangladesh Bank was the Chief Guest of the signing ceremony. Southeast Bank Limited I Annual Report 2016 433

Shahid Hossain, Former Managing Director of Southeast Bank unveiled the newly designed product “Ananya” along with its first Account Holder Hasnat Ara Haque.

Mohammed Gofran, Additional Managing Director of Southeast Bank unveiled the Campaign “NIBIR” at the Bank’s Agrabad Branch with valued clients of the Bank. Financial statements

Shahid Hossain, Former Managing Director of Southeast Bank unveiled the newly designed product “Bichokkhon” along with its first Account Holder Muhammad Mahmood. 434 Southeast Bank Limited I Annual Report 2016

Southeast Bank launched a new product in the name and style “Southeast- Cash Express Remit Card” in collaboration with World Wide Cash Express, UAE for the expatriates’ family members. Shahid Hossain, Former Managing Director of Southeast Bank formally launched “Southeast-Cash Express Remit Card” service.

Southeast Bank Limited launches EMI PAY (Equal Monthly Installment Plan) service. The formal launching ceremony was held on April 26, 2016 at the Bank’s Head Office, Dhaka. Shahid Hossain, Former Managing Director of the Bank formally launched this service for Southeast Bank Card Members.

Southeast Bank signed an agreement with bKash to provide payment and collection service to bKash distributors through the bank’s branches network as well as transmission of real time collection information to bKash through online link. Shahid Hossain, Former Managing Director of Southeast Bank and Kamal Quadir, Chief Executive Officer of bKash Limited signed the agreement on behalf of their respective organizations on 22 August, 2016. Southeast Bank Limited I Annual Report 2016 435

Southeast Bank facilitated the modernization and automation works of the Department of Information Science and Library Management as part of Bank’s Corporate Social Responsibility. The inauguration of the “modernization and automation works” of the Department of Information Science and Library Management, University of Dhaka was held on June 06, 2016. Prof. Dr. A A M S Arefin Siddique, Vice-Chancellor of University of Dhaka was present as Chief Guest. Shahid Hossain, Former Managing Director of Southeast Bank was also present as the Special Guest. Muhammad Shahjahan, Additional Managing Director of the Bank was also present in the function.

Southeast Bank donated Tk.5.00 million on June 23, 2016 for the installation of a Capsule Lift for Teachers at the MBA Bhaban of the University of Dhaka as a part of its Corporate Social Responsibility in the area of education. In the cheque handing over ceremony, Prof. Dr. A A M S Arefin Siddique, Vice-Chancellor, University of Dhaka, Shahid Hossain, Former Managing Director of Southeast Bank and Prof. Shibli Rubayat-Ul- Islam, Dean, Faculty of Business Studies, University of Dhaka and Muhammad Shahjahan, Additional Managing Director of Southeast Bank were present. Financial statements Southeast Bank gave financial support for renovation modernization of Computer Laboratory of Department of Information Science and Library Management, University of Dhaka as part of Bank’s Corporate Social Responsibility. The inauguration of the Computer Laboratory was held on November 13, 2016. Prof. Dr. A A M S Arefin Siddique, Vice- Chancellor of University of Dhaka graced the occasion as Chief Guest. Shahid Hossain, Former Managing Director of Southeast Bank Limited was also present in the ceremony as the Special Guest. Professor Dr. Muhammad Mezbah-ul-Islam, Chairman of the Department of Information Science and Library Management, University of Dhaka chaired the function. 436 Southeast Bank Limited I Annual Report 2016

Annisul Huq, Mayor, Dhaka North City Corporation, received the cheque from Shahid Hossain, Former Managing Director, Southeast Bank. As a part of CSR activities, Southeast Bank donated Tk.2.50 million on January 21, 2016 at the office of the Dhaka City Corporation (North) for installation of CCTV Cameras primarily at the Diplomatic Zone of Dhaka city to ensure safety and security to the communities.

Southeast Bank opened a Municipal Tax Collection Booth at Feni Pourashava on October 10, 2016 at College Road, Feni. Nizam Uddin Hajari, MP and Member, Parliamentary Standing Committee on the Ministry of Health and Family Welfare formally inaugurated Booth as Chief Guest. Haji Alauddin, Mayor, Feni Pourashava; Abdur Rahman, Upazila Chairman, Feni Sadar, Feni Pourashava; Shahid Hossain, Former Managing Director, Southeast Bank were also present as Special Guest in the program.

Southeast Bank Limited, as a part of its Corporate Social Responsibility, donated One Double Cabin Pick-up Van to “Valuka Model Thana” Valuka, Mymensingh on November 02, 2016. S.M. Mainuddin Chowdhury, Additional Managing Director of the Southeast Bank handed over the key of One Double Cabin Pick-up Van to A K M Shahidul Hoque, bpm, ppm, Inspector General of Police, Bangladesh Police in presence of Fahmi Gulandaz Babel, Member of Parliament, Mymensingh-10. Southeast Bank Limited I Annual Report 2016 437

Southeast Bank inaugurated its Malibagh Branch at Siddheswari Circular Road, Dhaka on May 29, 2015. Mohammed Gofran, Additional Managing Director of the Bank formally inaugurated the Branch as the Chief Guest.

Southeast Bank and Bangladesh Telecommunications Company Limited (BTCL) signed an agreement. Under this agreement, SEBL will facilitate BTCL customers’ bill collection through its branch network and delivery channels, and transmit real time collection information to BTCL through online link. S. M. Mainuddin Chowdhury, Deputy Managing Director of Southeast Bank and Golam Fakhruddin Ahmed Chowdhury, Managing Director, BTCL signed the agreement on behalf of their respective organizations. Financial statements

Southeast Bank signed an MoU with Bakhrabad Gas Distribution Company Limited for collection of Gas bills. The signed MoU was exchanged between Shahid Hossain, Former Managing Director of Southeast Bank and M. A. Hannan Azad, Secretary of Bakhrabad Gas Distribution Company Limited. 438 Southeast Bank Limited I Annual Report 2016

Southeast Bank signed a Memorandum of Understanding with Infrastructure Development Company Limited on February 07, 2016 for a strategic partnership for Renewable Energy and Infrastructure projects. Shahid Hossain, Former Managing Director of Southeast Bank Limited signed the agreement on behalf of the Bank.

An agreement was signed between Southeast Bank and Le Meridien Dhaka. Under this agreement, Southeast Bank Credit Cardholders can now enjoy luxurious lodging, dining, fitness centre and laundry services at Le Meridien Dhaka at attractive discounts up to 15% on the regular price. S. M. Mainuddin Chowdhury, Additional Managing Director of the Bank and Ashwini Nayar, General Manager of Le Meridien Dhaka exchanged copies of the agreement. Senior officials from the both sides were present at the signing ceremony.

An agreement was signed between Southeast Bank and US-Bangla Airlines on October 20, 2016. Under this agreement, Southeast Bank Credit Cardholders can avail EMI (Equal Monthly Installment) facility up to 6 months @ 0% interest. Shahid Hossain, Former Managing Director and Md. Shafiqul Islam, Head of Sales and Marketing of US- Bangla Airlines signed the Agreement on behalf of their respective organizations. Southeast Bank Limited I Annual Report 2016 439

Southeast Bank Limited opened its 125th Branch at Chuadanga on December 08, 2016. Muhammad Shahjahan, Additional Managing Director and Company Secretary, Southeast Bank, formally inaugurated the Chuadanga Branch as the Chief Guest.

Southeast Bank and Election Commission (EC) signed an agreement on May 15, 2016. Under this agreement, Southeast Bank will collect fees against NID related services for the commission. S. M. Mainuddin Chowdhury, Additional Managing Director of Southeast Bank and Md. Anowar Hossain, Director (Administration and Finance) of EC signed the agreement on behalf of their respective organizations. Financial statements

Southeast Bank Limited opened its 127th Branch at R.K.Mission Road, Dhaka on December 26, 2016. Shahid Hossain, Former Managing Director, Southeast Bank formally inaugurated the R, K, Mission Road Branch as the Chief Guest. 440 Southeast Bank Limited I Annual Report 2016

Notes Registered Office: 52-53, Dilkusha C/A, Dhaka-1000

PROXY FORM I/We……………………………………………....………………………..…of………………………………………… ……………………………………………………. being a member of Southeast Bank Limited, do hereby appoint Mr./Mrs.……………………………………………….of……………………………………………. as my/our proxy to attend and vote on my/our behalf at the 22nd Annual General Meeting of the company to be held on May 22, 2017 and at any adjournment thereof.

As witness my/our hand this …………………day of ……………….. 2017.

……………………………… ………………………. Signature of Shareholder(s) Signature of PROXY No. of Shares held…………………………………….. Revenue Folio/BOID # Stamp Tk.20.00 Folio No.

BO ID No.

Note: i. Signature must agree with the recorded signature. ii. A Member entitled to attend and vote at the 22nd AGM may appoint a proxy to attend and vote on his/her behalf. The Proxy Form duly stamped must be deposited at the Registered Office of the Company at least 48 hours before the time set for the Meeting, i.e. 11:00 a.m. of May 20, 2017. Signature Verified

Proxy Reg. No …………………… ………………………….. Authorized Signatory

Registered Office: 52-53, Dilkusha C/A, Dhaka-1000

ATTENDANCE SLIP

I/We hereby record my/our attendance at the 22nd Annual General Meeting being held today, the Monday, May 22, 2017 at 11:00 a.m. at Officers’ Club Dhaka, 26 Baily Road, Dhaka.

Name of the Shareholder(s) / Proxy (in Block Letters) No. of Shares Folio No. BO ID No. Name of the Proxy (If any)

…………………………………… …………………………. Signature of Shareholder(s)/Proxy Signature verified by

REQUEST : Please bring your copy of Annual Report to the Meeting. IMPORTANT : To facilitate registration formalities at the Meeting Place, shareholder(s) are requested to bring the attendance slip duly filled in. N.B. : General Meeting can only be attended by the honorable shareholders or properly constituted Proxy/Attorney. Therefore, any friend or child accompanying the honorable shareholders or proxies can not be allowed into the Meeting. PS: As per Bangladesh Securities and Exchange Commission’s Circular No.SEC/CMRRCD/2009-193/154 dated October 24, 2013, “no benefit in cash or kind, other than in the form of cash dividend or stock dividend, shall be paid to the holders of equity securities” for attending the 22nd Annual General Meeting of the Bank. Southeast Bank Limited Registered Office: Eunoos Trade Centre 52-53, Dilkusha C/A (Level 2,3,4,6 & 16), Dhaka-1000, Bangladesh Phone:+88 02 9571115, 9576415, 9555466 & 9578324 SWIFT: SEBDBDDHXXX, E-mail: [email protected] Website: www.southeastbank.com.bd