LETTER OF TRANSMITTAL To: All Shareholders, Bangladesh Bank, Bangladesh Securities and Exchange Commission, Registrar of Joint Stock Companies & Firms, Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited Dear Sir(s), Re: Annual Report under reference of the year ended on December 31, 2016 We forward herewith copy(s) of Annual Report-2106 of Prime Bank Limited along with Audited Financial Statements as on the position of December 31, 2016 for your kind perusal and record please. The Annual Report-2016 includes Income Statements, Cash Flow Statements along with notes thereon on the financials of Prime Bank Limited, its Subsidiaries namely Prime Exchange Co. Pte. Limited, Singapore, PBL Exchange (UK) Limited, PBL Finance (Hong Kong) Limited, Prime Bank Investment Limited, Prime Bank Securities Limited and Prime Bank Foundation. Best regards. Yours sincerely, Mohammed Ehsan Habib Company Secretary Prime Bank Annual Report 2016 1 CONTENTS General Information Risk Management and Control Environment Statement Regarding Forward Looking Approach 5 Risk Management Framework & Vision & Mission 6 Mitigation Methodology 145 Core Values 6 Market Discipline Disclosure on Risk Based Culture 7 Capital (Basel-III) 156 Strategic Priority 8 Sustainability Analysis Corporate Profile 9 Sustainability Report 183 Awards and Recognition 12 Social Responsibility Initiatives (CSR) 185 Five Years at a Galance 14 Prime Bank Foundation 186 22 Years of Glorious Journey 16 Prime Bank Cricket Club 210 Group Corporate Structure 20 Green Banking Report 211 Corporate Organogram 21 Environmental & Social Initiatives 215 Corporate Philosophy 22 Brand and Teamwork 23 Integrated Reporting Integrated Reporting 218 Board of Directors and Management Profile Statement of Value Added and its Distribution 231 Composition of Board and Committees 25 Economic Value Added Statement 232 Board of Directors 26 Market Value Added Statement 233 Senior Management & Committees 34 Shareholders’ Information Message from the Chairman and Managing Director Shareholders’ Information 235 From the office of the Chairman 39 (a) Distribution of Shareholdings Managing Director & CEO’s Review 42 (b) Shareholdings of the Directors Corporate Governance (c) Redressal of Investors Complaints Directors’ Report 47 Key Financial Data & Key Ratios-PBL 237 Corporate Governance Report 55 Horizontal/Vertical Analysis 240 CEO & CFO’s Declaration to the Board 84 Graphical Presentation-PBL 248 Report on the Activities of the Audit Committee 85 Segment Analysis 251 Report on Risk Management by Chief Risk Officer 87 Stock Performance - Market Price Information 254 Report on the Activities of the Risk Management Economic Impact Report 255 Committee 89 Capital Adequacy 255 Report of Prime Bank Shari’ah Supervisory Committee 91 Liquidity Statement 256 Ethics & Compliance 92 Payment of Dividends 256 Human Capital 93 Disclosure on Non Performing Assets 257 Capital Plan 94 Financial Statements Statement of Non-Performing Loan 96 Independent Auditors’ Report to the Shareholders 259 Business Review and Analysis Consolidated Balance Sheet 261 Consolidated Profit and Loss Account 263 Management Report & Analysis 101 Consolidated Cash Flow Statement 265 Financial Analysis 126 Consolidated Statement of Changes in Equity 267 Business Segment Analysis 132 Balance Sheet of PBL 268 Employee Report 133 Profit and Loss Account 270 Products and Services 138 Cash Flow Statement 271 Statement of Changes in Equity 273 Notes to the Financial Statements 274 Prime Bank 2 Annual Report 2016 Financial Statements of Islamic Branches Financial Statements - PBL Exchange (UK) Ltd. Balance Sheet 355 Independent Auditors’ Report to the Members of PBL Exchange (UK) Ltd. 448 Profit and Loss Account 357 About Prime Bank Cash Flow Statement 358 Profit and Loss Account 449 Statements of Changes in Equity 359 Balance Sheet 451 Notes to the Financial Statements 360 Statement of Changes in Equity 452 Cash Flow Statement 453 Financial Statements of Offshore Banking Unit Notes to the Financial Statements 454 Balance Sheet 375 Profit and Loss Account 376 Financial Statements - PBL Finance (Hong Kong) Ltd. Cash Flow Statement 377 Independent Auditors’ Report to the Shareholders of PBL Finance (Hong Kong) Ltd. 462 Notes to the Financial Statements 378 Statement of Income and Retained Earnings 464 Governance Corporate Financial Statements - Prime Bank Investment Limited Statement of Financial Position 465 Auditors’ Report to the Shareholders 385 Statement of Cash Flows 466 Statement of Financial Position 386 Notes to the Financial Statements 467 Statement of Profit or Loss & Other Comprehensive Income 387 Prime Bank Foundation Statement of Changes in Equity 388 Auditors’ Report 472 Statement of Cash Flows 389 Statement of Financial Position (Balance Sheet) 473 Notes to the Financial Statements 390 Income and Expenditure Statement 474 Statement of Changes in Equity 475 Financial Statement- Prime Bank Securities Limited Receipts and Payments Statement 476 Auditors’ Report to the Shareholders 409 Statement of Financial Position 410 Supplementary Information Other Information Statement of Profit or Loss & Human Resource Accounting 479 Other Comprehensive Income 411 Financial Calendar 2016 481 Statement of Changes in Equity 412 Financial Highlights-Group & PBL 482 Statement of Cash Flows 413 Financial Highlights-PBL 484 Notes to the Financial Statements 414 Glimpses of 21st AGM 485 Branch Network 486 Financial Statements- Prime Exchange Co. PTE. LTD., Some PBL Activities During 2016 493 Singapore nd Notice of the 22 Annual General Meeting 494 Independent Auditors’ Report Information Shareholders’ List of Acronyms 495 to the Member of Prime Exchange Co. Pte. Ltd. 429 Proxy Form 496 Statement of Profit or Loss & Other Comprehensive Income 431 Statement of Financial Position 432 Statement of Changes in Equity 433 Statement of Cash Flows 434 Notes to the Financial Statements 435 Financial Statements Financial Prime Bank Annual Report 2016 3 GENERAL INFORMATION Statement Regarding Forward Looking Approach - Vision & Mission - Core Values - Culture - Strategic Priorities - Corporate Proile - Awards and Recognition - Five Years at a Galance - 22 Years of Glorious Journey - Group Corporate Structure - Corporate Organogram - Corporate Philosophy - Brand and Teamwork - Prime Bank 4 Annual Report 2016 STATEMENT REGARDING FORWARD LOOKING APPROACH About Prime Bank We’re working to build a “fortress balance sheet” by strengthening liquidity, credit reserve positions, asset quality and overall capital adequacy; Develop the bottom line through improved recovery processes. Recovery of NPL will be the Bank’s priority area and there is significant room for performance of Corporate Governance Corporate improvement; Develop innovative risk models on qualitative and quantitative data; Continue to invest in green banking and technology to achieve cost and time efficiency, sustainable development, improve productivity, quality and faster service to ensure customer satisfaction; We’re increasing our lending to small and medium-sized businesses and extending credit through other innovative approaches; Other Information We are strong supporters of comprehensive regulatory reform. We support many of the steps that have been taken to protect consumers in the financial services sector. If properly implemented, reform should contribute to future stability of the financial system; Building up of maximum earning capacity ensuring stakeholder’s satisfaction complying with relevant laws and regulation; Shareholders’ Information Shareholders’ We have a long-standing pay-for-performance philosophy that ties with executive performance. In addition, consistent with our compensation principles, our executive compensation program provides a mix of salary, benefits and incentives paid over time; Continuous development of overall banking services without compromising any unlawful activities; Maintaining corporate sustainability and continues to be an issue of critical importance to us and those we serve. We recognize our responsibility to take action Financial Statements Financial to reduce environmental footprint, while having an opportunity to use our business resources to enable our clients, customers and employees to reduce their own environmental impacts. Prime Bank Annual Report 2016 5 OUR VISION To be the best Private Commercial Bank in Bangladesh in terms of eiciency, capital adequacy, asset quality, sound management and proitability having strong liquidity. OUR MISSION To build Prime Bank Limited into an eicient, market driven, customer focused institution with good corporate governance structure. Continuous improvement of our business policies, procedures and eiciency through integration of technology at all levels. OUR CORE VALUES DELIVER We deliver high standards for our customers, clients and shareholders. We share a passion for serving the inancial needs of people, companies and institutional investors. COMMITMENT We are fully committed to achieving success for our customers, our teams and ourselves through compliance of regulatory guidelines. TRUST We have trust in our team. We work together to deliver the full capabilities of our Bank to all of our constituents. We strive to be consistent and straightforward in our interactions. SUCCEED We know we succeed only when our customers, communities and environment succeed. We do business in an