1633242136000_1_Annual Report-2020.pdf - CVC Finance ...

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PARTNERING

better futureTOWARDS

Since the start of pandemic, the world has been forced to embrace a change in what we do in our everyday life, effecting in a generational shift. Almost instantly, everyone is connecting online, everything has to be done on digital platforms. Social engagement has transformed into very different behavioral traits. Business processes has adapted to this new normal and altered irreversibly.

The earlier estimation that pandemic will be over soon by the year 2020 has been far from right. Covid-19 reared its deadly head and came back with more intensity and devastating impact leading to long term disruptions to the economy.

It is time for us to show resilience. Countries, societies, corporate entities, individuals are working unitedly to overcome the challenges and emerge stronger. Being a tech savvy institution, CVC Finance ensured working from home from the very beginning of COVID-19, proper health protocols has been put in place, stimulus packages has been rolled out, encouraged our employees to take vaccine to bring back the balance of the world to pre-pandemic time. What we are facing is not something expected nor anticipated. We are adopting and adapting to the new normal. It is as true for an individual as it is for an organization. CVC Finance is resolute on its promises. We are determined to protect our people, keep our customers interest safe, and grow our balance sheet as we recalibrate our efforts to capture on emerging opportunities. However COVID-19 has negatively impacted the profitability of the FIs due to rise in NPL.

Customer centricity is at the core of our strategies. Leveraging on our capabilities and enhanced technology we are determined to provide seamless service delivery to our customers all the while managing risks prudently.

With our strong corporate values steered by our experienced management team we are building a financial institution that will open a new frontier in the financial ecosystem of our country.

CVC Finance is a late entrant in a semi matured lending market mostly dominated by banks and top tier FI’s. Living on traditional lending is not feasible as the cost of fund is much higher compared to the banks and other top tier FI’s. A diversified revenue stream is essential to become a sustainable entity. Hence, CVC Finance would like to diversify its revenue streams and focus on non-funded fee based earnings. We have initiated the process of acquiring majority stake (60%) in a Merchant Banker and Portfolio Manager, CAPM Advisory Limited in order to diversifying our business. Besides we have applied to Bangladesh Bank seeking approval for commencement of Payment Service Provider (PSP) and Credit Card operations. In future, CVC Finance intends to mobilize rural micro savings and reach out to the unbanked segment to build an inclusive digital economy by leveraging technology.

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LETTER OF

Transmittal

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

Annual report for the year ended 31 December 2020

Enclosed please find a copy of the Annual Report together with the Audited Financial Statements including Balance Sheet as at 31 December 2020, Profit and Loss Account, Cash Flow Statement and Statement of Changes in Equity for the year ended 31 December 2020 along with Notes thereon of CVC Finance Limited for your kindinformation and record.

Thank you.

Sincerely yours,

SHAH WAREEF HOSSAIN Company Secretary

DEAR SIR(S),

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CONTENTS01 OVERVIEWWho We AreOur PhilosophiesKey MilestonesCode of Conducts & Ethical Practices Our Corporate ValuesProducts and ServicesShareholding StructureHighlights of Events

02 STEWARDSHIPCharter of the Board & its CommittesBoard of Directors Committees of the BoardMessage from the ChairmanManagement CommitteeMessage from the Managing DirectorOrganogram of the Company

21-46

22253536394346

03 MANAGEMENT DISCUSSION & PERFORMANCE ANALYSIS

04 SUCCESS STORIES

48-60

61-73

75-101

Key Operating and Financial Performance Analysis Horizontal and Vertical AnalysisHighlights as Required by Bangladesh BankValue Added StatementGovernment Ex-Chequer Statement General Review of the Future Prospects

495657585960

05 OPERATING ENVIRONMENT AND RISK MANAGEMENTThe Operating Environment Macroeconomic Environment AnalysisMarket Forces and Competitive Landscape Porter’s 5 ForcesAnalysis of SWOTReport of Risk ManagementRisk Management FrameworkPrincipal risks in FY 2020 and Actions Undertaken to MitigateBusiness Continuity Plan (BCP) at CVC FinancePerformance Metrics

7678818486889199

100

7-19

0910111315161718

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09 CVC FINANCE AT A GLANCE

10 NOTICE OF THE 6TH ANNUAL MEETING

PROXY FORM

CORPORATE PROFILE

06 SUSTAINABILITY REPORTINGOur Approach to SustainabilityEnvironmental Initiatives Social Responsibility InitiativeGreen Banking DisclosureGoing ConcernHuman Resource Management Information TechnologySustainable Development Goals

07 GOVERNANCE Corporate Governance StatementCorporate Governance FrameworkBoard Leadership and EffectivenessKey Activities of the Board During 2020 Committees of the BoardManagement Committee (MANCOM)Internal Control and Risk ManagementDisclosure Under Capital Adequacy and Market DisciplineReport of the Audit CommitteeDirectors Report 2020

123124125128129131132134141144

FINANCIAL STATEMENTSBalance Sheet Profit and Loss AccountCash Flow StatementStatement of Changes in EquityLiquidity StatementSignificant Accounting Policies and Notes to the Financial Statement

151154156158160161

08 AUDITED FINANCIAL STATEMENTSIndependent Auditor’s Report to the Shareholders

104105 106109112114118119

103-120

122-146

147-198

199

203

204

205

148

VIEWOVER

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whoweare

CVC Finance Limited is a reputable name in the country’s financial industry. Since its inception, it has been continuously contributing to the nation building. The world is fast changing, and we are adapting to the demands of the market through redesigning our service delivery process, enhancing our product portfolio, and reengineering our offerings to achieve customer delight. Our intention simple-We will be a step ahead of our competition with our tailor made offers to meet our customers ever evolving demands.

Licensed by Bangladesh Bank we have been incorporated in 2015. Our core strength is reinforced by the established corporate and state owned entities. Shadharon Bima Corporation, Investment Corporation of Bangladesh (ICB). Reputed local and foreign companies/business groups like Khan Brothers Ship Building Ltd, Amanat Shah Weaving Processing Ltd, Moon Ready Wears Ltd, Padma Glass Ltd and Kowloon Capital Ltd, Hong Kong are sponsors of CVC Finance.

The Board of CVC Finance Limited consists of experienced professionals and businessmen who comes from diversified background created a synergy in strategic decision making. Our Chairman, Mr. Mahmud Hussain has two decades of wide ranging local and global experience in financial service market with world recognized organizations including World Bank, Deutsche Bank and Citigroup UK. Our EC Chairman Mr. Syed Al Farooque, Managing Director of Wills Group, has setup a number of industrial units in Garments sector, established Non-Life Insurance, Lease Finance Venture Capital Private Equity Company and Asset Management Company in Financial sector and also earned reputation in the real-estate sector.

CVC Finance received “A+” in Long Term and “ST-2” in Short Term Credit Rating. The current NPL rate is 4.66% which is well below the industry average. CVC Finance has a sound capital base of BDT 1,155 million.

CVC Finance Limited intends to be a service oriented and technology driven financial institution in the country committed to sustainable business growth with strong financial performance ensuring good governance, best practices, customer satisfaction, compliance and maximum stakeholder’s value.

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Our

Philosophies

VISION

MISSION

To be the best & most professional Financial

Institution and maximize allstakeholders’ values.

Maximize values for both external & internal stakeholders through innovation, skill and

professionalism.

Offer comprehensive, professional & innovative financial solutions and services.

Establish an ethical, professional corporate governance and management structure.

Facilitate FDI & optimize use of capital to spur economic growth.

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Key

Milestones

31 March2015

Incorporation of the company and commencement of Business

01 September2016

MOU signed with Bangladesh Bank for re-finance scheme for Renewable energy &environment friendly financeable sector

27September2016

MOU signed with Bangladesh Bank for Brick kiln efficiency improvement project

16 July2015

License from Bangladesh Bank

29February2016

Formal commercial inauguration

01 August2016

Signing of first SME agreement

12 April2016

Signing of first lease agreement

09March2014

Letter of Intent

18 April2016

Signing of first Consumer Finance agreement

12 July2016

Signing of first term finance agreement

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28November2016

Participation Agreement between Bang-ladesh Bank and CVC Finance Under Re-Finance Scheme for Agro Processing re-finance, Small enterprise re-finances (including women entrepreneurship) and new entrepreneur re-finance

31 July2017

Collaboration agreement signed between OXFAM Bangladesh and CVC Finance for promoting access to finance (a2f) for rural based Micro, Small and Medium Enter-prise (MSMEs) to benefit marginalized farmers & women under the Enterprise Development Program (EDP).

20August2017

MOU for strategic partnership among Modhumoti Bank Limited, CVC Finance and CAPM Advisory Ltd. for providing ranges of financial transaction

22 May2018

Contract signing ceremony with Nathan Associates London Ltd and Oxford Policy Management Ltd. in Business Finance for 2018 the Poor in Bangladesh (BFP-B) Program

25September2018

Collaboration agreement signing ceremo-ny promoting access to finance for micro, small and medium enterprises (MSMEs) between CVC Finance and Enterprise Café Limited

25 July2019

Collaboration agreement signing ceremony with Enterprise Café Limited to promote access to finance (A2F) to rural based Micro, Small & Medium Enterprises (MSME) in the Mymensingh Kurigram, Gaibandha.

03 February2019

CVC Finance Limited has been renamed fromCAPM Venture Capital & Finance Limited.

19December2017

Collaboration agreement signing cere-mony between CVC Finance Limited and Agromach and Farming Service (AFS)

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Code of conduct is a set of rules outlining the norms, rules and responsibilities of, or proper practices for any organization. CVC Finance is a value driven organization with strict adherence to principles even if the situation sometimes provides temporary benefit to the Company. It is the principles, values, standards, or rules of behavior that guide the decisions, procedures and systems of an organization in a way that contributes to the welfare of its key stakeholders, and respects the rights of all constituents affected by its operations.

In line with that the service rule approved by the Board of Directors of CVC Finance, all employees shall require observing and complying with the norms of conduct, manner, behavior and ethical practices stated hereunder in activities they perform in the company. Conduct in such a manner that will enrich the image, dignity and reputation of the company.

Code of

Conduct

Shall discharge his duties honestly, faithfully, diligently and to the best of his abilities, devotion and efficiency.

Shall prevent and avoidpotential conflict of interest that may arise and influence one whilst he/she performs.

Shall not commit insubordtion or non-compliance with any legitimate, lawful or reason-able order or instruction of a superior.

Shall not conduct in such a manner as is likely to bring his private interest to conflict with his official duties.

Shall attend his dutypunctually and regularly.

Environmental and climatic protections should be taken in to account in all areas of lending/financing.Shall maintain secrecy regard-

ing the affairs of the company and also of its clients.

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Shall not accept directly or indirectly any gift, gratuity or reward or any offer of a gift on his behalf or on behalf of any other person from any one, which is likely to have a negative effect in the interest of the company.

Shall consider the risks and implications of their actions and in principle, should feel accountable for them, and for the potential adverse impacts.

Shall not involve and take part in any business dealing like shareholding, profit sharing, partnership of any business company or manufacturing industry or servicing center for their personal benefit.

ETHICALPRACTICES

Must give proper attention to the clients and make utmost ef-forts to render improved custom-er service at the quickest possi-ble time.

To act and encourage others to behave in a professional way and ethicalmanner.

Shall not bring or attempt to bring any form of outside influ-ence or pressure.

Use reasonable care and exercise independent professional judgment.

Shall comply with all applicable laws, rules and regulations, company policies and professional standards.

Shall comply with all current regulatory and legal requirements and endeavor to follow best industry practice.

Shall not take up additional job or employment with another organization or involve in any trade or business without the prior written approval of the management.

Shall not associate in any activities, which may be prejudicial to the interest of the company and subversive to the state.

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Our

CorporateValues

CUSTOMERCENTRIC

EMPLOYEE VALUE

INTEGRITY &ACCOUNTABILITY

We promote creativity and innovative financial solutions for customers. Our value proposition includes personalized service to the clients geared towards maximizing their satisfaction in a focused way.

We empower our people. We focus to train our employees for grooming future leaders and value them as we value our clients. We are committed to providing our employees with opportunities for professional and personal development.

We promote creativity and innovative financial solutions for customers. Our value proposition includes personalized service to the clients geared towards maximizing their satisfaction in a focused way.

SUSTAINABLEDEVELOPMENT

COMMUNITY LEADERS

Being a responsible corporate citizen, we give priority to the Country’ssustainable development with the mportance to growth and transparency.

We invest our time and resources to support the communities in which we live and work, improving the quality of life for everyone.

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Products and

ServicesCVC Finance is open to flourish new ideas, thinking and nontraditional innovative financing. For faster growth and wealth maximization, customers can get assistance from the company through the following fund and fee based debt products and services: Through categorizing the products and services by the aforesaid broad generic names, CVC Finance offers different products and services under the following broad heads: In all cases management shall follow the key features of the above products as mentioned by Bangladesh Bank in their “Products and Services Guidelines”. CVC Finance has a wide range of conventional and non-conventional financing products for its corporate and individual clients.

CORPORATE FINANCE

- Lease Finance- Term Loan- Work Order Finance

CONSUMER FINANCE

- Home Loan- Auto Loan- Personal Loan

DEPOSIT PRODUCTS

- Insured Deposit Scheme- Interest First Deposit - Regular Term Deposit- Income Scheme- Professional Deposit Scheme- Provident Fund/Gratuity Fund Deposit Scheme- Double Money- Triple Money- Millionaire Scheme- DPS Scheme

SME FINANCE

- SME Term Loan - SME Lease Finance- Women Entrepreneur Loan- Agriculture & Sustainable Finance

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Structure of

ShareholdingName of the Shareholders No. of Shares Held % of Total SharesA. Individuals 48,510,000 42.00%

Mr. Mahmud Hussain 3,465,000 3.00%

Mr. Syed Al Farooque 2,887,500 2.50%

Ms. Taslima Islam 6,930,000 6.00%

Mr. Naim Hossain 11,550,000 10.00%

Mr. Syed Badrul Alam 7,507,500 6.50%

Ms. Sarwat Khaled Simin 8,662,500 7.50%

Ms. Sabiha Khaleque 2,887,500 2.50%

Mr. Md. Nazrul Islam 2,310,000 2.00%

Mr. Rezaul Karim 2,310,000 2.00%

B. Institutional 41,580,000 36.00%

Khan Brothers Group 10,395,000 9.00%

Amanat Shah Weaving Processing Ltd. 9,240,000 8.00%

Moon Readywears Ltd. 11,550,000 10.00%

Padma Glass Ltd. 8,085,000 7.00%

Apsara Holding Ltd. 2,310,000 2.00%

C. Government 18,480,000 16.00%

Investment Corporation of Bangladesh 11,550,000 10.00%

Sadharan Bima Corporation 6,930,000 6.00%

D. Foreign 6,930,000 6.00%

Kowloon Capital Limited 6,930,000 6.00%

Total 115,500,000 100.00%

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Highlihts of

EVENTS2016

INAUGURATION CEREMONY

20183RD ANNUAL GENERAL MEETING

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2019

NAME CHANGE CEREMONY

20194TH ANNUAL GENERAL MEETING

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STEWARDSHIP

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Charter of the Board &

It’s CommitteesCharter of the Board and its committees refers the respective roles, responsibilities and authorities of the Board of Directors and its committees in setting the direction, the management and the control of the company’s overall business. Board charters have become an accepted part of the governance landscape. Many major inquiries, reports and leading practice recommendations refer to the need for board charters in delivering effective governance. The purpose of the charter is to clearly outline the structure of the Board and its committees to define the role of the Board and the committees as a whole through the identification of a schedule of powers reserved solely for the Directors and committee members. The charter further defines the specific responsibilities of the Board of Directors and committees, in order to enhancing coordination and communication between the Chief Executive and the Board and committee members more specifically, to clarify accountability of all parties for the benefit of the company.

The charter of the Board of Directors and its committees set out in line with Bangladesh Bank guidelines are as follows:

SETTING VISION/MISSION, FORMULATING STRATEGIC POLICY, DIRECTIONS, PLANS AND IMPLEMENTATION OF COMPANY’S GOAL.

ANALYTICAL REVIEW OF SUCCESS/FAILURE IN ACHIEVING THE TARGET AND KEY PERFORMANCE INDICATORS FOR THE EXECUTIVES

FORMATION OF SUB-COMMITTEE To form sub committees for facilitating company’s operation. FINANCIAL MANAGEMENT Approve budget, review of financial statements and others, setting procurement policy and approval of opening of company’s bank account. LOAN/LEASE/INVESTMENT APPROVAL Oversight of approval of syndicate loan, lease, investment and large loans. RISK MANAGEMENT Approve and implement Core Risk Management Guidelines, delegate power to the management and non-interference in decision regarding loan processing.

Internal Control and Compliance 1. Effective implementation of an integrated internal control system through Audit Committee2. Review of Internal Control & Compliance Department’s report by the Board Audit Committee.

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EXECUTIVE COMMITTEE To run the business smoothly and to have proper focus in financing the Board of Directors formulated the following charters for the Executive Committee:1. The committee will be responsible for proper scrutiny and evaluation of the proposals for facilities to be considered by CVC Finance Limited through an in-depth focusing in terms of financial viability of the credit proposals. 2. The committee will recommend the proposals to the Board. If the committee thinks proper, they may take any other decision regarding the proposals.3. If committee does not recommend any proposal to the Board, the proposal will be treated as cancelled.4. The report of the committee should be attached with the proposal memo to be placed before the Board. Approve and implement Core Risk Management Guidelines, delegate power to the management and non-interference in decision regarding loan processing.

INTERNAL CONTROL AND COMPLIANCE

BOARD AUDIT COMMITTEETo ensure the participation of Directors in company affairs through policy framing, proper directive to the management, to operate the different functions of company properly and in line with the Bangladesh Bank Circular # 13 dated 26 October 2011 the Board of Directors formulated the following duties and responsibilities for the Board Audit Committee:

INTERNAL CONTROL 1. Board Audit Committee will examine the existence of culture for internal control and risk management; executives responsibilities and functions and controlling of their jobs. 2. Board Audit Committee will examine management initiative regarding Computerization and MIS management of the Company. 3. Board Audit Committee will examine the management consideration on various recommendations provided by the Internal/External Auditor for developing internal control procedure/structure. 4. Board Audit Committee will examine the Risk Management procedure for implementation of work and control. 5. Board Audit Committee will examine the forgery, weakness of internal control etc. found by internal or external auditor or regulatory authority along with their recommendation to eliminate them and accordingly inform the Board regularly.

PUBLICATION OF THE FINANCIAL STATEMENTS 1. Board Audit Committee will verify that all the information is correctly and properly disclosed in the annual financial statements of the company and the financial statements are prepared on the basis of guidelines issued by Bangladesh Bank and other guidelines relating to the preparation of the financial statements. 2. Board Audit Committee will discuss with the management and the external auditor before finalization of the financial statements of the company. 3. The Chairman of the Board Audit Committee will be present before the shareholders in the annual general meeting for answering the questions regarding the financial statements and audit of the financial statements.

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INTERNAL AUDIT 1. Board Audit Committee will observe the functions of internal audit department and its structure and confirm that no limitation in preparing hindrance against the work of the internal audit department 2. Board Audit Committee will examine the capabilities and effectiveness of internal audit department. 3. Board Audit Committee will observe the management’s function regarding the implementation/elimination of the recommendations/errors/irregularities etc. found by the internal audit department. 4. Board Audit Committee will submit their recommendation to the Board of Directors regarding the change of any accounting principle if they think necessary.

EXTERNAL AUDIT1. Board Audit Committee will examine the audit report and audit procedure of the External Auditor of the company.2. Board Audit Committee will examine the implementation/elimination of the recommendation/observation/irregularities as provided by the external auditor in their report by the management properly.3. Board Audit Committee will submit their recommendation to the Board of Directors regarding appointment of external auditor of the company.

IMPLEMENTATION/EXISTENCE OF PRACTICE OF ACTS, RULES AND REGULATIONS

Board Audit Committee will examine the implementation/existence of practice of the acts, rules and regulation enforced by the Regulatory Authority like Bangladesh Bank and other organizations and also adopted by the Board of Directors of the company on regular basis.

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Board of

Directors

Mahmud Hussainis the Lead Promoter and founding Chairman of CVC Finance Limited. Mr. Hussain has more than two decades of wide ranging local and global experiences (including Tokyo, NY & London) in financial services’ markets with world recognized organizations including World Bank, Deutsche Bank, Salomon Smith Barney and Citigroup UK. Mr. Hussain worked for the Citigroup UK as Director of Capital markets & Banking. He possesses advanced level of understandings and knowledge on financial products and markets, capital market operations, financial management techniques, financial derivatives, asset management and fund management practices. Mr. Hussain has broad educational background covering different areas of finance and economics. He is a CFA charter holder, has MBA in Development Management from IBA, Dhaka University as well as MBA in Finance from International University of Japan. He also holds a Master’s degree in Mathematical Finance from Oxford University and a post-graduate Certificate in International Finance from Stern Business School of New York University. He is the founder as well as Managing Director & CEO of CAPM (Capital & Asset Portfolio Management) Company Limited. He also provides selective independent consultancy services internationally in the areas of strategic, financial, climate financing & development management. He also occasionally teaches advanced financial topics as Guest faculty. In recent past, Mr Hussain was also the Chairman of Bangladesh Government owned Sonali Bank (UK) Ltd and Bank of England (PRA) approved Independent NED (SMF9).

MAHMUD HUSSAINChairman

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Nasmin AnwarJoined ICB in 1987 as Senior Officer. She obtained her graduation and post-graduation degree in Economics from the Jahangirnagar University. She has been working in different divisions/departments including Central Accounts Department, Fund Management Department and Establishment Division of ICB in various capacities. She also served as the Additional Chief Executive Officer of ICB Securities Trading Company Limited (ISTCL). She has participated in different training courses on various subjects at home and abroad. Currently she is working as the General Manager of Operations Wing of ICB. She joined as nominated Director of ICB in the Board of CVC Finance Limited on July 25, 2020. She is also serving as the Director of Golden Son Limited, a public limited company.

NASMIN ANWARDirectorNominee Director byInvestment Corporation of Bangladesh (ICB)

Board of

Directors

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Bibekananda Sahahas a wide breadth of knowledge and experience of financial sec-tor who obtained associate-ship from Chartered Insurance In-stitute London, United Kingdom. He is the Nominee Director by Sadharan Bima Corporation in the board of CVC Finance.

He has completed his masters in Statistics and currently holding the position of General Manager in the Divison of Finance & Un-derwriting in Sadharan Bima Corporation.

BIBEKANANDA SAHADirectorNominated bySadharan Bima Corporation

Board of

Directors

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Tofayel Kabir Khanhas significant business leadership experience as well as first-hand experience of operating across our markets. He is a renowned businessman who is now the MD of Khan Brothers Shipbuilding Ltd.

Mr. Khan completed M.Com in Marketing from University of Dhaka and also have a MBA. After graduation, he gained experiences by working in marketing sector for 5 years in different companies and then joined his family business. Along with Khan Brothers Shipbuilding Ltd., he has also beneficial interests in companies like Khan Brothers PP Woven Bag Ind. Ltd., Khan Brothers PP Bag Ind. Ltd., Khan Brothers Slipways & Engr. Works Ltd., and Khan Brothers Shipping Lines Ltd. and currently holding the position of director in these companies. Mr. Khan is also the chairman of the Board Audit Committee in CVC Finance.

TOFAYEL KABIR KHANDirectorRepresentative ofKhan Brothers GroupChairman of the Board Audit Committee

Board of

Directors

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Rezaul Karimhas deep understanding and knowledge of financial sector. He is a young and dynamic entrepreneur & businessman who is actively involved in financial market of Bangladesh. He has completed his Bachelor of Business Administration in Finance & Accounting and International Business and currently is associated with organizations like Hazrat Amanat Shah Spinning Mills Ltd., Amanat Shah Weaving Processing Ltd., M. Helal & Brothers Textile Mills Ltd., Standard Composite (Pvt.) Ltd., Standard Company Ltd. and Amanat Shah Fabrics, (Pvt.) Ltd. as Director.

REZAUL KARIMDirectorRepresentative of Amanat Shah Weaving Processing Ltd.

Board of

Directors

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Syed Al Farooqueis a Sponsor Director and Chairman, Executive Committee of Express Insurance Limited and former Chairman of the Company. He obtained M. A. with B.A. (Hon’s) in Bangla Language and Literature from University of Dhaka.

He started business career in 1980 and set up number of Industrial units in RMG Sector. He was also involved in real estate sector with good reputation. He is also associated with media business and established celebrity and talent management company at home and abroad. He is the Managing Director of WILLS GROUP.

He had active role in BGMEA. He is a member of India-Bangladesh Chamber of Commerce and Industry (IBCCI), Dutch-Bangla Chamber of Commerce and Industry (DBCCI), Bangladesh German Chamber of Commerce & Industry (BGCCI). He was a member of the Executive Committee of Bangladesh Insurance Association (BIA) and played vital role in developing the Insurance Industry in the country.

Apart from business activities he is an internationally reputed cultural personality and renowned poet in the country. He is author of 50 books, and has been honored with 24 important awards nationally and internationally in Bangladesh, India, UK and USA for his literary contribution. He attended many international poetry and literary festivals, book fairs and business summits throughout the world. He is associated with many other social and cultural organizations including Bangla Academy, MuktiJuddho Jadughor , Baridhara Society, Chattogram Maa-O-Shishu Hospital, Muldhara (International Center for Writers, Journalists & Artists) and Syed Al Farooque center for creativity. As the Founder President of Muldhara and Shishu Shahitya Parishad he is working to expand Bangla language and culture all over the world.

He was the editor of weekly Akarshon, Chief Editor of Kishor Jagat, Associate editor of Shachitro Shomoy and Asia Editor of Curry Life, International magazine published from London. He is also a TV presenter, Motivational speaker, Reciter, Song-writer and Music-Poetry video director.

SYED AL FAROOQUEDirector

Board of

Directors

Chairman of theExecutive Committee

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Anwar Kamal Pashahas deep experience of managing complex international businesses across dynamic and changing markets. Anwar Kamal Pasha is the Nominated Director by Moon Readywears Limited in the board of CVC Finance. He is successfully running the business of Moon Readywears Limited as the Managing Director and also serving Setara Garments Ltd. and Sun Moon Apparels Ltd. as Director. He is the Chairman of Kamal Textile Mills Ltd. and Sark Knit Wear Ltd. and Managing Director of Pasha Denims Ltd. Mr. Pasha also owns Setara Embroidery Services & Design Centre.

ANWAR KAMAL PASHADirectorRepresentative of Moon Readywears Ltd.

Board of

Directors

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Asif Wahab Khanhas deep understanding and experience of emerging technolgies in the context of some of our key markets. He is currently the CEO of Padma Glass Limited. He has completed his Bachelor of Science in Chemical Engineering from Lehigh University, USA. Mr. Khan is also the CEO of Padma Group of Converters.

ASIF WAHAB KHANDirectorRepresentative of Padma Glass Ltd.

Board of

Directors

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Naim Hossainobtained his Bachelor of Business Administration from Florida Career College, Florida, USA and Master of Business Administration from South University, Florida, USA. Presently he is Chairmen of O.N Spinning Mills Limited, Abir Poultry Hatchery & Process Limited, Managing Director of Panama Composite Textile Mills Limited, Continental Spinning Mills Limited, Abir IT Limited, Director of Fareast Islami Securities Limited and also the Proprietor of M/S Millennium Enterprise, M/S Sonali Enterprise. Being determined to make a difference in the society through his work, Naim Hossain also associated with various social works.

A staunch advocate of professional management and strict adherence to highest quality standards, Naim Hossain’s leadership qualities have been instrumental making the company successful in a highly competitive industry. During the short tenure of business career he visited many countries for business purposes like USA, Canada, UK, Italy, Switzerland, Spain, Japan, UAE, Australia, China, Singapore, Malaysia, Thailand, India etc. which enriched his knowledge of the industry and latest technologies. He also participated in seminars and workshops on textile and spinning industry in China and India.

As a young and dynamic entrepreneur, industrialist and social worker Naim Hossain has been serving the nation for more than 10 (Ten) years in the field of industrial development, international trade and commerce, setting up and managing industry, business venture and social work. He is used to handle important policies with assistance of highly experienced and senior personnel of different business organs and look after the policy decisions with regard to business, administration, finance and also day to day activities of the organization.

NAIM HOSSAINDirector

Board of

Directors

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AKM Monirul Islamhas significant investment experience, strong risk management credentials and an in-depth knowledge of domestic market. He is the Representative of Apsara Holding Ltd. in the Board of CVC Finance. Along with this, Mr. Islam is also a Director of Fareast Islami Life Insurance Company Limited and nominated Director of Prime Insurance Company Limited, representing Ramisha BD Limited. He has done his graduation from a reputed public university of Bangladesh.

AKM MONIRUL ISLAMDirectorRepresentative of Apsara Holding Limited

Board of

Directors

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Committees of the

BOARD OF DIRECTORS

EXECUTIVECOMMITTEE

AUDITCOMMITTEE

MR. SYED AL FAROOQUEMS. NASMIN ANWAR

MR. MD REZAUL KARIMMR. ANWAR KAMAL PASHA

MR. AKM MONIRUL ISLAM

MR. TOFAYEL KABIR KHANMR. BIBEKANANDA SAHA

MR. ASIF WAHAB KHANMR. NAIM HOSSAIN

Chairman MemberMemberMemberMember

Chairman MemberMemberMember

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Message from the

Chairman

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DEAR SHAREHOLDERS:On behalf of the Board of Directors of CVC Finance Limited, I welcome you all to the 6th Annual General Meeting of the company and have the privilege of presenting before you the Annual Report and Audited Financial Statements for the year 2020.

OPERATING PERFORMANCE 2020 was an unprecedented year with the global COVID-19 pandemic creating upheavals in everyone’s daily life. Businesses and individuals were deeply affected as countries imposed stringent controls including economic lockdown to contain the spread of coronavirus. Many business operations were disrupted and the impact was extended to staff and their families.

The economy of Bangladesh has shown a strong resilience and managed to experience a moderate GDP growth of 5.24% in FY 2020. Despite facing the pandemic induced challenges in all economic sectors, high remittance inflow and lower imports contributed towards offsetting the lower exports resulting record foreign exchange reserves of USD 43 billion.

Suitable and timely measures taken by the government and Bangladesh Bank paved the way for the economic recovery of Bangladesh. Stimulus packages announced by the government and other initiatives such as borrower’s payment deferral, relaxed classification policy and reducing CRR & repo rate to boost liquidity, helped to deal with the initial economic shock. Banks and NBFIs put more effort on collection and adopted cautious approach in lending due to uncertain environment.

Despite the unprecedented disruptions caused by the pandemic, we have managed to generate a positive impact for our clients, our people, and our investors with a solid financial performance during 2020. Profit after tax (PAT) stood at BDT 29.71 million. We remained watchful in maintaining asset quality, recovering classified and written off loans, mobilizing deposits, and rationalizing costs. The company has closed the year with 4.66% NPL, way below the industry average of 10.51%. ROA and ROE stood at 0.54% and 2.35% respectively in FY 2020.

STAYING TRUE AS A FINANCIER The impact of COVID-19 pandemic has caused numerous companies to suffer a dip in their earnings and individuals to lose jobs or take pay cuts. As a committed and prudent financier, CVC Finance acted swiftly and responsibly by disbursing loans of BDT 6,450,000 under stimulus packages in order to help small and medium enterprises to survive the pandemic. We also provided loan period extensions to our customers under Bangladesh Bank circular letter no. 05 & 06/2020.

MAKING YOUR WELL-BEING OUR TOP PRIORITY At CVC Finance Limited, we put the well-being of our customers and staff as our top priority in the pandemic environment. In line with the government’s efforts to fight the spread of coronavirus and promote social distancing, we temporarily closed off our office operations and enabled a part of our staff to work from home.

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We have taken mandatory safety measures for our staff and customers, including those who are pregnant and aged. We continue to focus our efforts on driving sustainability and uplifting the communities. In 2020, we have contributed BDT 1 million to various organizations including donating BDT 500,000 to Prime Minister’s Relief Fund. We also partnered up with SAJIDA Foundation to enhance the infrastructure of 50 bed COVID-19 dedicated SAJIDA Narayanganj hospital.

DIGITALIZATION IS THE NEW WAYAmidst a time of rapid change and disruption, CVC Finance remains adaptable. We are working hard to offer better services to our customers to meet their financial needs while encouraging them to stay at home and reduce branch visits. We are working on implementing digital channels to broaden our digital footprint and provide seamless customer service. We are continuously building our efforts to stay relevant and provide the best experience to our valued customers, even throughout the pandemic.

OUTLOOK2020 had been an extremely eventful and challenging year. We are cautiously optimistic that the operating environment for 2021 will improve with the containment of the COVID-19 pandemic both globally and domestically, mainly because of vaccination programs. As we are all trying to respond to the pandemic, it is more apparent than ever that we are responsible for the well-being of one another. We will reach out wide and deep to build a more resilient organization, supported by our customers, partners, staff, and communities, to create new value by fostering development, and innovation and promoting financial inclusion for all.The financial industry’s operating environment is undergoing drastic changes, driven by the rapid digital transformation and the pandemic. We are paying close attention to the risks and are positioned for growth when the economy rebounds and consumers and businesses regain confidence for post COVID-19 recovery.

APPRECIATION I am sincerely grateful to all our valued customers, shareholders, and business partners for their continuous support, trust and confidence in us.I would also like to express my appreciation and thanks to my fellow Directors for their invaluable advice and guidance during the year and to the management and staff for their commitment and efforts in 2020.


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Management Committee

Shah Wareef Hossainis the Deputy Managing Director & Company Secretary of CVC Finance Limited. Mr. Wareef has more than 21 years of experience in the financial sector. He had worked with IPDC Finance, Bangladesh as the Chief Operating Officer prior joining to CVC Finance Limited. Before that, he had also worked in HSBC Bangladesh, Citi Bank NA, Dhaka, Bangladesh; Citi Bank Berherd, KL, Malaysia; American Express Bank Ltd, Dhaka. His expertise lies in the area of Administrative Management, Operations, Risk Management, Organizational Restructuring, Reengineering and Information Technology etc.Mr. Hossain has completed his Master in Applied Finance from Monash University, Melbourne, Australia, MBA (Marketing) from IBA (Institute of Business Administration), University of Dhaka, Bangladesh and B.Tech in Civil Engineering from IIT, Delhi, India.

Syed Minhaj Ahmedhas more than 20 years of experience in the financial sector working in different joint venture financial institutions and multinational bank ; such as Vanik Bangladesh Limited, GSP Finance Company (Bangladesh) Limited, Prime Finance & Investment Limited, National Finance Ltd., and Standard Chartered Bank.He worked in Lankan Alliance Finance Limited as Chief Operating Officer for a period of almost 3 years before joining CVC Finance Ltd and played a major role in setting up, recruitment, policy formulation and business generation of the company.Mr. Ahmed has completed his MBA (Finance) from IBA (Institute of Business Administration), University of Dhaka, Bangladesh, and M. Com (Finance) from University of Dhaka, Bangladesh.SYED MINHAJ AHMED

Managing Director

SHAH WAREEF HOSSAINDeputy Managing Director &

Company Secretary

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Mohammad Nejam Uddinis the Head of Corporate Finance at CVC Finance Limited. Mr. Nejam has more than 16 years of extensive experience in five Financial Institutions. He started his career with Prime Finance & Investment Ltd. as Management Trainee in 2004. He worked in International Leasing & Financial Services Ltd., National Finance Ltd., GSP Finance Company (Bangladesh) Limited, Uttara Finance and Investments Limited under different capacities. He attended various training/workshops at Bangladesh Bank, BIBM and different training organizations of Bangladesh. Mr. Nejam has completed his BBA and MBA (major in Finance) from Department of Finance, University of Dhaka, Bangladesh.

Faisal Aminis the Head of Operations at CVC Finance Limited. Mr. Amin has more than 14 years of experience in the financial sector. Mr. Amin worked in International Leasing & Financial Services Limited for a period of almost 10 years before joining CVC Finance Ltd and served in different departments, such as, Credit Administration, Special Asset Management, Branch Operation, Risk Management of the company. Mr. Amin has completed his BBA (Major in Management), MBA (Major in Management Information Systems) from Faculty of Business Studies, University of Dhaka.

MOHAMMAD NEJAM UDDINHead of Corporate Finance

FAISAL AMINHead of Operations

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Ariful Islam Chowdhury, ACAis the Head of Internal Control and Compliance at CVC Finance Limited. He is an Associate Member of the Institute of Chartered Accountants of Bangladesh (ICAB). Prior to joining in CVC finance Ltd. Mr. Chowdhury has served Khulna Power Company Ltd. as the Company Secretary. Mr. Chowdhury did his articleship in 2016 from Hoda Vasi Chowdhury & Co. a renowned Chartered Accountancy Firm affiliated with the globally reputed Chartered Accountancy Firm named Deloitte Touché Tohmatsu and qualified as Chartered Accountant in Dec, 2019. He has completed his Masters of Business Administration (MBA) and Bachelor of Business Administration (BBA) from International Islamic University Chittagong. He obtained vice chancellors gold medal award for his academic results in bachelor program. He has attended various training courses, seminars and workshops arranged by Bangladesh Securities and Exchange Commission, Dhaka Chamber of Commerce & Industry (DCCI), Dhaka & Chittagong Stock Exchange Ltd. and The Institute of Chartered Accountants of Bangladesh (ICAB).

Shakhawat Hossainis the Head of Accounts at CVC Finance Limited. Mr. Hossain has more than 16 years of experience in the field of Finance, Accounts, Internal Audit and Control related job in the world’s number one NGO (BRAC), Fine Arts Press Limited and Financial Institutions named Islamic Finance and Investment Limited. Mr. Hossain has completed his M.Com, MBA (Finance), Banking Diploma (Part-I), CA (Professional Level), Income Tax Practitioner (ITP).

ARIFUL ISLAM CHOWDHURY Head of Internal

Control and Compliance

SHAKHAWAT HOSSAINHead of Accounts


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Md. Forhad Hazariis the Head of Human Resources& Administration at CVC Finance Limited. He has more than 10 years of experience in the HR filed. He had worked with Rupayan Group, Square Group, and Nippon Express Bangladesh Limited. He is a Generalist Human Resources professional and worked in all the areas of Human Resources Field in his career. He has completed his Bachelor of Business Administration and Masters of Business Administration from University of Dhaka. He also completed Post-Graduation Diploma in Human Resources Management from Bangladesh Institute of Management Studies.

MD. FORHAD HAZARIHead of Human Resources

& Administration


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Message from the

Managing Director

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DEAR SHAREHOLDERS:We are operating in turbulent times. The Pandemic has hit business sectors in a violent manner - consumer demand has fallen, people have become very helpless and are not willing to open their wallets for anything unless it is absolutely necessary. The supply chain has been disrupted, companies are trying to fight the challenges through cutting costs to survive the following unprecedented losses brought about by COVID-19. The continuation of pandemic may force many companies to face massive losses and to wind up their businesses, or to declare bankruptcy. The consequent result is going to be a rise in default of loan repayments. To combat this situation and to aid the failing businesses, the government had declared several stimulus packages through Bangladesh Bank. However, a significant portion of the fund for the packages are coming from the banking network. The Bangladesh Bank has also directed all banks and FIs not to downgrade the classification of any borrowers for defaulted loans between the period of 1 January 2020 and 31 December 2020. The financial sector has been working with the government and the central bank actively since the outbreak of the pandemic to help businesses and individuals. While 2020 had been an extremely challenging year, we are hopeful that the operating environment for 2021 will improve with the increased accessibility of the vaccination programs. Local industries, global trade and economic activity will be going up and will reach the pre-pandemic state. Meanwhile, CVC Finance’s main strategy was to direct business resources towards collections rather than portfolio growth, deposit collection and servicing our deposit clients in this crucial time.Our prudent lending practice resulted in a bottom line of BDT 29.71 mn, with an ROA of 0.54% and ROE of 2.35% which has decreased a little from that of previous year.

COLLECTION AND PORTFOLIO QUALITYIn 2020, we have directed our business resources towards collections. Separate SAM department was created to ensure efficient management of irregular loan accounts. Collections returned back to almost normal levels which was about 70% range in any given month of 2020. At its worst, it went down to 13% during the general holidays. However, loan recovery and collections was severely affected due to debt moratoriums circulars. Collections from regular and overdue accounts and recovery from loan restructuring under Bangladesh Bank circular letter no. 05 & 06/2020 resulted in the NPLs to remain unchanged at 4.66% at the end of 2020. Adequate loan loss provisions have been made as required.The lending opportunity was comparatively less until the second quarter of 2020. We have disbursed total BDT 145.34 mn including BDT 6.45 mn under stimulus packages during 2020. We ended the year with a loan book of BDT 3,977.22 mn.

LIQUIDITY MANAGEMENTThe FI sector went through uncertain liquidity during the first half of 2020. To serve our deposit clients, our deposit operations remained fully functional. Even though, loan recovery and collections was severely affected due to debt moratoriums circulars, serving our deposit clients in this distressed time was our utmost priorities. Our all-out efforts towards deposit mobilization as well as improving the liquidity condition helped us to maintain a deposit portfolio of BDT 1,526.91 mn at the end of 2020. Along with serving the deposit clients, regularizing the bank payments was another top priority.

WELL-BEING OF OUR EMPLOYEES & CUSTOMERSMeasures have been taken to ensure the utmost safety of our employees while performing their duties during COVID-19 pandemic. We introduced our work-from-home policy for the betterment and safety of our employees. We have equipped our employees with the required skill sets and technical assistances so that they could perform their duties from home without any sort of disruptions. Many of our colleagues had COVID-19 related symptoms around the time. We encouraged them to keep themselves isolated to prevent the spread of the virus.

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SYED MINHAJ AHMEDManaging Director

We have continuously kept in touch with our colleagues regarding health and ensured that they remain cheered-up during this difficult time. While many organizations initiated layoffs and salary cuts, we adopted a zero pay-cut approach; and rather on boarded many recruits in several positions. Moreover, we recognized the efforts of our incentive-based colleagues by promoting the top-performers.Our continuous efforts towards sustainability reflected in our activities. We are always committed to uplift the communities we operate in. In 2020, we have contributed BDT 1 million to various organizations including donating BDT 500,000 to Prime Minister’s Relief Fund. We also partnered with SAJIDA Foundation to enhance the infrastructure of 50 bed dedicated to COVID-19 in SAJIDA Narayanganj hospital. We have collaborated with JAAGO Foundation to arrange an art competition among 50 underprivileged students of JAAGO named “Golden Brush” to support their mental health through co-curricular activity. The best 12 paintings were selected to be published on the desk calendar of CVC Finance Limited on 2021. We also sponsored two hour free self-defense classes which was conducted online and arranged by Wander Woman where 1000 female participants joined across the country.

LOOKING FORWARDThe on-going pandemic made us think that the financial industry’s operating environment will never be the same. Drastic changes driven by rapid digital transformation is taking place. Keeping that in mind, we are moving towards digital platform; several initiatives have been taken to offer better customer services to our clients. Multiple MoUs have been signed with renowned local and foreign partners. Separate Operations Department has been created to improve operational efficiency and ensure smooth and efficient service delivery. Dedicated teams for Asset Operations and Liability Operations will be working from the beginning of 2021. We aim to establish a dedicated Customer Service Team for deposit customers. We believe this will help us to improve customer loyalty and retain good customers with better customer experience. We are emphasizing on customer tailored wealth management solutions for high net-worth individual customer segment. We are putting our continuous efforts at scalability to reduce loan acquisition and management cost while improving operational efficiency. We are working hard for operational efficiency through the successful up-gradation of operational software which would improve productivity. Finally, planned promotional activities are being undertaken to enhance the organization’s overall brand value.

APPRECIATIONI would like to extend my sincere gratitude to the Chairman of the Board of Directors for his continuous support and the entire Board for their valuable guidance. I am very thankful to my colleagues for their commitment and dedication towards achieving a common goal even in the difficult times and driving the company forward. Last but not the least, my whole-hearted appreciation goes to our valued shareholders, customers, business partners and other stakeholders for keeping faith in us and for being a continuous inspiration to achieve more and deliver excellence.

All the best wishes,

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Organogram of the

Company

MANAGEMENTDISCUSSION

&PERFORMANCE

ANALYSIS

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Key Operating and Financial

Performance Analysis

2020 had been an extremely challenging year in terms of unstable operating environment during the first half of the year amidst lockdown. However, well-timed strategic maneuvers and prudent decisions by management teams enabled us to maintain our position and deliver solid financial results.

The following section contains detailed analysis of our financial performance.

• Compared to year end 2016, our loan portfolio grew by 331.72% or BDT 3,055.98 mn and reached to BDT 3,977.22 mn on 31 December 2020.

• Compared to year end 2016, deposit base also grew by 100.55% or BDT 765.56 mn and reached to BDT 1,526.91 mn on 31 December 2020.

• In 2020, Capital Adequacy Ratio was 24.94%, well above the requirement of 10% and over the years we have been able to maintain CAR above the regulatory requirement.

• From the shareholders’ point of view, CVC Finance’s Earn-ings Per Share stood at BDT 0.26 per share in 2020.

• One of the challenges in this difficult time was to keep the quality of the loan portfolio healthy. We put serious effort to keep the NPL at check. We could not keep the NPL ratio where we would have liked to but 4.66% in 2020 is still way below the industry average of over 10.51%.

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PROFITABILITY, EXPENSESAND PROVISIONS:

FINANCIAL HIGHLIGHTS

In 2020, total Operating Income (Net Interest Income + Non-Interest Income) fell to BDT 195.64 mn, reflecting a de-growth of 7.43% from 2019. Though Net Interest Income increased by 80.14%, Non-Interest Income decreased by 25.95% mainly due to a fall in loan disbursement fees and other income following increased focus on prudent lending during the year considering the Covid-19 stricken operating environment. Maintenance of loan portfolio at the same level requiring lower incremental general provision to be reserved. Provisions have been maintained for classified loans as per the provisioning policy set forth by Bangladesh Bank. Incremental provision of BDT 16.11 mn was charged during the year, which was BDT 33.12 mn lower than

that of 2019. In 2020, Operating Expenses stood at BDT 108.15 mn. While Operating Expenses grew by 8.49%, Operating Income declined by 7.43%, resulting a higher Cost to Income ratio of 55.28%, compared to 2019.

The management team has been putting continuous efforts at scalability to reduce loan acquisition and management cost while improving operational efficiency, developing process so that expenses remained steady.

Subsequently, CVC Finance recorded a Profit After Tax (PAT) of BDT 29.71 mn; delivering a Return on Asset (ROA) of 0.54% and Return on Equity (ROE) of 2.35%.

Performance BDT 2016 2017 2018 2019 2020

Net Interest Income (mn) 67.80 83.10 109.14 36.90 66.47

Non Interest Income (mn) 1.52 88.07 126.33 174.43 129.17

Operating Income (mn) 69.32 171.17 235.47 211.33 195.64

Operating Expenses (mn) 42.45 71.27 101.14 99.69 108.15

Cost to Income (%) 61.24 41.64 42.95 47.17 55.28

PBT&P (mn) 26.87 99.90 134.33 111.64 87.49

Provisions (mn) 8.67 29.51 20.31 49.23 16.11

PBT (mn) 18.20 70.39 114.02 62.41 71.37

Profit After Tax (mn) 10.46 40.80 71.13 37.44 29.71

ROA (%) 0.50 1.10 1.30 0.66 0.54

ROE (%) 0.97 3.70 6.14 3.04 2.35

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LENDING PORTFOLIO, CREDIT QUALITY AND RECOVERY:

In 2020, we maintained a well-diversified credit portfolio mostly concentrating on Corporate Finance. Considering the tough operating environment, we diverted our focus more towards collection rather than targeting portfolio growth to counter the increased level of credit risk and limit erosion in portfolio quality. Separate SAM department (earlier known as BSMR) created to ensure efficient management of irregular loan accounts. Collections returned back to almost normal levels about 70% range in any given month of 2020. At its worst, it went down to 13% during the general holidays. However, loan recovery and collections severely affected due to debt moratoriums circulars. Our all-out efforts helped to improve the non-performing loan ratio and keep it within 5%. Subsequently our provision coverage ratio came down for the year 2020 compared in the preceding year. We have disbursed total BDT 144.54 mn including BDT 6.45 mn under stimulus packages during 2020. We ended the year with a loan book of BDT 3,977.22 mn.

Our funding base had a de-growth of 5% in 2020 and moved to BDT 3.70 bn from BDT 3.90 bn in the previous year. Term Deposits comprises 93.59% of the funding basket, decreased by 8.10% in 2020. The NBFI sector went through highly uncertain liquidity scenario during the first half of 2020. To serve our deposit clients, our deposit operations fully remained functional. Even though, loan recovery and collections severely affected due to debt moratoriums circulars, servicing our deposit clients in this distress time was our one of the upmost priorities. Our all-out efforts towards deposit mobilization and improve the liquidity condition helped us to maintain a deposit portfolio of BDT 1.53 bn at the end of 2020.

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ASSET STRATEGY

Cashflow Statement Analysis:

Cash Flow from Operating Activities

DEPOSIT/LIABILITY STRATEGY

- Increase Fee based income through Corporate Services.

- Diversified Revenue Stream through associated businesses.

- Explore Digital Finance Channels.

- Focus on Quality Asset Portfolio while increase profitability.

- Diversification & Balanced Sectorial approach to reduce concentration risk.

- Refinance based financing for SME.

- Emphasis on asset-backed financing (Auto Loan & Home Loan).

- Maintain NPL Ratio within target level.

- Dedicated Customer Service Team for deposit customers to offer better customer experience.

- Focus on customer tailored wealth management solutions for High Net Worth Individual customer segment.

- Continuous efforts at scalability to reduce loan acquisition and management cost while improving operational efficiency.

Net cash inflow from operating activities in 2020 was BDT -45.7 mn which was BDT -811.36 mn in the preceding year. The pandemic situation slowed down business activity, resulting in lower disbursement compared to the previous year. Moratoriums provided to some clients due to the pandemic reduced cash inflows to an extent.

Cash Flow from Investing Activities The cash flow from investing activities moved to BDT -12.05 mn from BDT -11.21 mn.

Cash Flow from Financing Activities Net cash flow from financing activities to BDT 57.26 mn at the end of 2020 from BDT 929.33 mnin 2019. Overall, the cash and cash equivalent balance of the company remained at BDT 1342.42 mn.

Particulars 2020 2019

(A) Net cash from operating activities (45.70) (811.36)

(B) Net cash used in investing activities (12.05) (11.21)

(C) Net cash from financing activities 57.26 929.33

(D) Net increase/(Decrease) in cash and cash equivalents (A+B+C) (0.52) 106.77

(E) Cash and cash equivalents at beginning of the year 1,342.94 1,236.17

(F) Cash and cash equivalents at the end of the year (D+E) 1,342.42 1,342.94

Amount in BDT Million

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Horizontal and Vertical

Analysis

2020 2019

Sanction 209,784,860 769,395,777

Disbursement 144,250,455 902,523,332

Outstanding 3,977,217,125 4,133,964,755

Deposits 1,526,914,126 1,661,491,350

2020 2019

Operating Income 195,635,980 211,332,028

Operating Expenses 108,150,335 99,691,001

Profit Before Provision 87,485,645 111,641,027

Profit After Tax 29,705,073 37,444,670

Total Assets 5,473,934,544 5,635,643,713

Paid up Capital 1,155,000,000 1,155,000,000

Shareholders’ Equity 1,261,977,770 1,232,272,697

2020 2019

Debt Equity Ratio 3.34 : 1 3.57 : 1

Return on Assets (ROA) 0.54% 0.66%

Return on Equity (ROE) 2.35% 3.04%

Return on Investment (ROI) 0.75 0.91

Capital Adequacy Ratio (CAR) 24.94% 24.22%

Non-Performing Loan (NPL) 4.66% 6.17%

Earnings Per Share (EPS) 0.26 0.32

Net Asset Value (NAV) Per Share 10.93 10.67

Amount in BDT

Amount in BDT

FINANCIALPERFORMANCE

BUSINESSPERFORMANCE

FINANCIALRATIOS

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Highlights as Required by

Bangladesh BankCVC FINANCE LIMITED AS ON DECEMBER 31, 2020


Paid-up capital 1,155,000,000 1,155,000,000

Total capital (eligible) 1,000,000,000 1,000,000,000

Surplus/(shortage) capital 155,000,000 155,000,000

Total assets 5,473,934,544 5,635,643,713

Total deposits 1,526,914,126 1,661,491,350

Total loans, advances and leases 3,977,217,125 4,133,964,755

Total contingent liabilities and commitments - -

Loans to deposit ratio (total loans/total deposits) 2.60 2.49

% of classified loans against total loans 4.66% 6.17%

Profit after tax and provision 29,705,073 37,444,670

Classified loans, advances and leases during the year 185,401,727 255,250,676

Provisions kept against classified loans, advances and leases

123,613,855 107,551,848

Provision surplus/(deficit) against classified loans, ad-vances and leases

- -

Cost of fund 9.03% 9.39%

Interest earning assets 3,977,217,125 4,133,964,755

Non-interest earning assets 113,196,045 125,748,740

Return on investment (ROI) 0.75 0.91

Return on assets (ROA) 0.54 0.66

Income from investment 1,665,304 1,815,107

Operating profit per share 1.69 1.83

Earnings per share 0.26 0.32

Price Earnings Ratio 38.46 31.25

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Value Added

StatementVALUE ADDED STATEMENT - FOR THE YEAR ENDED 31 DECEMBER, 2020

Value added is a measure of wealth created by the FI through various business activities. The statement of value added shows the total wealth created and how it was distributed among stakeholders, including the Government, employees and shareholders.


Amount % Amount %

Operational income 631,932,306 666,982,855

Less: Cost of service rendered 464,386,414 486,808,006

Total Operating Expenses 108,150,335 99,691,001

Profit paid on deposits, Borrowing etc. 436,296,326 455,650,827

Less: Salaries & Allowances 64,316,384 58,801,693

Managing Director’s Salary & Allowances 6,705,000 3,386,000

Depreciation on Fixed Assets 9,038,863 6,346,130

Value added by operating activities 167,545,892 111 180,174,850 138

Less: Provission for doubtful accounts & future losses 16,062,007 11 49,233,244 38

Total Value Added 151,483,885 100 130,941,606 100

Figures in BDTVALUE ADDITION


Amount % Amount %

Provider to Capital: Shareholders as Dividend 115,500,000 76 115,500,000 88

Employees:

As Salaries and other benefits 71,021,384 47 62,187,693 47

Government:

Corporate Tax 41,668,437 28 24,963,113 19

To xpansion and growth:

Expansion and growth -76,705,936 -51 -71,709,200 -55

Total Distribution 151,483,885 130,941,606

Figures in BDTVALUE DISTRIBUTED TO:

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Government Ex-chequer

StatementCONTRIBUTION TO THE NATIONAL ECONOMYSince its inception, CVC Finance Limited has been a committed contributor in building the nation. We have consistently contributed to the economy of Bangladesh through monetary and non-monetary terms. We consider government of Bangladesh to be the most important stakeholder that play critical role in economic development of the country. As a responsible corporate citizen we are committed to be partner to the government in realizing vision 2041

TO EX-CHEQUER For the year 2020, CVC Finance Limited has deposited BDT 43.09m in AIT, BDT 2.80m in VAT, BDT 3m in excise duty in a transparent and timely manner. In total we made a payment of BDT 48.89m. This is in comparison to BDT 64.98 million in 2019, reflecting its fair and consistent commitment towards national contribution.

MARKET VALUE ADDED STATEMENT - FOR THE YEAR ENDED 31 DECEMBER, 2020

Market Value Added Statement reflects the company’s performance evaluated by the market through the share price. This amount is derived from the difference between market capitalization and book value of the shares outstanding. It signifies the enhancement of financial solvency as per-ceived by the market.

Figures in BDT


Face value per share 10 10

Market Value per Share 10 10

Number of Shares outstanding 115,500,000 115,500,000

Total market capitalization 1,155,000,000 1,155,000,000

Book value of paid up capital 1,155,000,000 1,155,000,000

Market Value Addition - -

2.80

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General Review of the

2020 had been an extremely strenuous and challenging year for everyone. We are cautiously optimistic that the operating environment for 2021 will improve with the containment of the COVID-19 pandemic both globally and domestically, mainly because of vaccination programs and the steps taken by the governments in home and worldwide to contain the spread of the pandemic. As we are all trying to respond to the pandemic, it is more apparent than ever that we are responsible for the well-being of one another. We will reach out wide and deep to build a more resilient organization, supported by our customers, partners, staff, and communities, to create new value by fostering development, and innovation and promoting financial inclusion for all.The financial industry’s operating environment is undergoing drastic changes, driven by the rapid digital transformation and the pandemic. We are paying close attention to the risks and are positioned for growth when the economy rebounds and consumers and businesses regain confidence for post COVID-19 recovery, with a firm focus on digitalization. We have identified our strategic priorities for the coming years. But these priorities are based on experience, estimation, and expectations which can be impacted by disruptions in the macroeconomic landscape which are beyond our control. Our strategic priority may materially differ due to changes in the business environment.

Future prospects

SUCCESSSTORIES

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BOLON DUCK HATCHERYStory of

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Mr. Md. Bazlur Rahman, MSC in Geography has started his carrier in the development sector at a renowned NGO for 15 years but he had a dream that one day he will establish modern ducklings producing hatchery. At last, the dream came true in 2007. Mr. Rahman finally left his job and initially started producing ducklings in traditional ways at Gaibandha district. In 64 decimal lands, with a very minimum investment by borrowing from friends and family and also from his personal savings he started stepping to the new beginning of creating his own story. Although he was doing fine but was not happy with the traditional producing system. Each month there’s only 500 ducklings were the highest production capacity. To commence his own hatchery, he tried to take financial support from relatives or other sources. But at this stage, no one was interested to help him. Finally, OXFAM vis-ited the project and discussed the present conditions of his business. After Collaboration, with CVC Finance Limited and OXFAM, Mr. Rahman got BDT 06 Million from CVC Finance at the lowest rate of interest, which is 9.5% PA only. Gradually, the hatchery becomes entrusted in 330 decimal lands at Gaibandha, fully automated 9 modern hatcheries with 1,10,000 ducklings per month producing capacity. Now almost 450 families grow duck from ducklings within this hatchery, produce eggs, and sell them at this hatchery and local market. On the other hand, they sell big duck at the local market and meet their protein needs. In this way the local people of this area developing day by day. The rest of the ducklings are supplied to Gaibandha and its adjoining districts. Now Mr. Rahman and the local people are very happy with CVC Finance as they could help to pull off such a huge successful project.

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A DOCTOR’S SUCCESSA tale of

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Tamanna Jannat Rimu, a recent graduate from M.A.G Osmani Medical College, Sylhet, has been working for a local garments where she was working with healthcare of garment workers. Rather than going for regular medicine practice, Ms. Rimu was passionate about engaging in developing healthcare for the mass people. Along with the work experience she had, higher studies in public health would help her achieve the desired goal. A degree on Public Health was something she was looking for. She was almost a graduate and the job she did didn’t allow her to go for a degree which would cost around 400 thousand in any private university. Most banks and FI’s did not find her eligible for a loan of this amount. But, CVC Finance did not let financing be a barrier between her and her dream. Rather, we wished to be a part of Dr. Rimu’s journey of sheer dedication when nobody supported her.CVC Finance Limited felt the urgency of her need and sanctioned and disbursed the loan amount within only 3 working days. Finally she got admitted in MPH program at NSU and successfully completed it. After completion of the program, she appeared for BCS Health Cadre and successfully passed. Now she is working in the field at Jamalpur Sadar Hospital. Since March 2020, she is a frontline fighter of COVID-19 in Bangladesh. During the pandemic, she played a crucial role of emergency treatment provider risking her own life. She believes that her diverse educational background will help her offer better healthcare treatment to the mass people which was her dream all along. CVC Finance salutes her dedication towards call of duty. We take pride in facilitating her journey of career development.Despite the need of financing for education, ‘Education loan’ hasn’t flourished in our market. Very few banks or NBFI has extended their service to this segment. Aligning to the goal of providing diversified service, CVC Finance Limited intents to help these students to facilitate their goals. We always encourage need based investment to any kind of financing.“Being a doctor was, for me, the ultimate opportunity to help neglected people. And CVC Finance Limited has made my journey smoother and has been my support in dire times.”

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CREATING NEW ENTREPRENEURSHIP

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Mr. S.M. Bayejed Hossain, Masters in Veterinary Medicine has started his carrier at a renowned feed mill as a sales manager but he had a dream of establishing his own feeds mill one day. At last in 2010, his dream came true. Mr. Hossain finally left his job and started a business named “Doctor Feeds Ltd”, his own feeds mill, by investing his personal savings as well as by borrowing from family and friends. Initially, he was using a rental factory to produce his products as it was not possible to start a factory with the minimum investment opportunity he had. Although he was doing fine, but he was not happy with the factory. To commence his own factory, he tried to take financial support from relatives or other source but at this stage nobody was interested to help him. Finally with suggestions from a well-wisher he visited CVC Finance Limited and discussed about the present conditions of his business. CVC Finance has always believed in small but promising aspects of the small and medium enterprises in the country with the belief of “Unique in creating new Entrepreneur”. Mr. S.M. Bayejed Hossain’s case was no different and soon, availed his very first loan amounting Taka 50.00 Million at a very low rate of interest that is 10% pa only. It is totally a green field finance of CVC Finance limited in Small and Medium enterprises. Most of the Bank and Financial Institutions not interested to finance at green field especially in CMSME Sector. We feel proud that Doctor Feeds Limited is contributing to GDP growth as well as has created employment opportunity for more than 150 people whereas the initial employee number was only 20. Everything was in order but the concern was not prepared to face the Covid-19 pandemic. Unfortunately, production was closed from March 25, 2020 to May 31, 2020. Monthly operational cost of the concern is about Taka 2.00 million. Again Mr. Bayejid faced a new challenge and was suffering from frustration. CVC Finance believes in sustainable partnership and was not interested to let a realized dream be lost. CVC Finance took initiative to provide him with Working Capital Finance Facility to manage the operational cost. With a very low cost financing from CVC Finance (@4% pa) Doctor Feeds re-started its production again. Gradually, the concern became entrusted by the people, fully automated and a renowned feed Mills in Mymensingh. Today, with a turnover of BDT 400 million, Mr. S.M. Bayejed Hossain’ has one suggestion for everyone “Success will be yours if you have a trusted partner like CVC Finance Limited.”

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SHAMIMA AKTERThe Story of

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This story is about Mrs. Shamima Akter, a housewife from Palagach, Gazipur who turned her life around. Although she could not receive education beyond primary school, she fought all the hurdles to successfully turn into an earning member of her family. Her husband’s garments job being the only source of income for her family, it was getting more and more difficult for her to bear the increasing expenses. She resided with her family, in her family inherited home with vast unused land. There are four members in her family – she, her husband & two sons. Her husband, Md. Saiful Alam was the only earning member. He was a garments factory worker. It was extremely difficult for them to maintain family expenses. Besides this, there was no other source of income. The family lived in a small tin made house with a kitchen & a bathroom which was inherited from Shamima’s father. They had a small kitchen garden which catered family needs. They had vacant lands but not sufficient fund to develop it. Mid to low income groups have been struggling to find affordable housing loan products. Very often, they have unused lands which they fail to convert into cash generating assets. Most banks and FI’s do not finance these groups. This is where CVC Finance Limited intervenes to introduce a loan product named ‘Abashon’ which is customized for these people. In Bangladesh, low income groups are struggling to afford urban housing. Few groups have sufficient vacant land but their cash flow is very less. Most of Bank/FI in Bangladesh ignores these groups. CVC Finance intends to help these low income group people. Thinking of housing problem of low income group people, CVC Finance launched Home Loan (Abashon) scheme to support them.Mrs. Shamima took a loan from a different source to build houses, but that charged her a large interest amount. Her cash flow was not enough to cover for her interest due and family expenses. She was getting into a spiral and on the other hand she did not want to sell her ancestral land. In her dire need, while every other bank and FI did not find her suitable for a home loan, CVC Finance was the only one to help her. CVC Finance wishes to promote need based investment and women empowerment. Also, CVC Finance goes beyond regular structural risk grading and focus on the need of the applicant. Her prospect of cash flow was- Mrs. Shamima’s total land was 20.60 decimal. One day Shamima thought she would build few tin made house on remaining vacant land and rent it out. But she didn’t have enough money to do it. Then she took a loan of Tk. 2 lac for 2 years from local NGO & made 4 tin made rooms. She received Tk. 10,000 as rental income from there but her rental income was not sufficient to pay the N.G.O’s installment. Therefore, she fell into trouble. If wanted she could have developed the land by selling proportionate land. But she didn’t want to sell her father’s property any way. To overcome this situation she tried to avail the home loan from local Bank/FI’s. But most of Bank/FI’s rejected her proposal due to insufficient cash flow. One day she shared this issue with her well-wisher Mr. Selim who is the customer of CVC Finance Limited. He suggested to contact with CVC Finance. Because Mr. Selim knows that CVC Finance always promotes need based investment & ready to support low income group people. Therefore, she came to CVC Finance and reported her problem with us. Considering the overall aspect CVC Finance decided to finance her. Considering her good intension for repayment, acceptable purpose, expected rental income & security value of the property, CVC Finance Limited disbursed Tk. 1,000,000 to build 15 nos semi pacca rooms.After getting the loan Mrs. Shamima utilized the fund properly and technically. She built 18 nos semi pacca rooms instead of 15 with 4 bathrooms & kitchen. After full completion of all rooms she rented 16 rooms @Tk. 4000. Now she lives in her own house of 2 room with her full family. This loan has turned around her future. At this moment, she is very much solvent. Her husband left the job & starting a business (grocery shop) as well as two children are studying in local renowned school.“That acceptance of loan request by CVC Finance has changed my life remarkably. I feel institutions like CVC Finance Limited has, in true manner, empowered people like us to grow and move ahead towards prosperity.”- The statement of Mrs. Shamima Akter.

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HASEN AUTO RICE MILLS LTDThe Story of

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When Mr. Nurul Islam was young, he used to accompany his father to supervise his trading business named “Hasen Traders”. This was how he started to become attracted towards business. He had only one dream that one day he would establish an auto rice mills industry at Kapasia, Gazipur. At last, in 2013, his dream came true. Mr. Nurul Islam initially established an auto Rice mills named “Hasen Auto Rice Mills Ltd” with a very minimum investment by borrowing from friends and family, and also from his existing trading concern and that was the beginning of his own story. But the fund was not sufficient as needed. So, the business wasn’t running well due to liquidity crisis. Therefore he tried to take financial support from relatives or other sources but at this stage nobody was interested to help him. At last, with the suggestion of a well-wisher he visited CVC Finance Limited and discussed about the present condition of his business. CVC Finance has always been a name that has believed in small but promising aspects of the small enterprise in the country also with the belief of “Unique in creating new Entrepreneur”. Mr. Nurul’s case was no different and soon he equipped with his very first loan amounting Taka 25.00 Million at a very minimum interest rate that is only 10% per annum.

We know Macro objectives of industrialization are

∙ To provide employment to working labor force ∙ To increase GDP∙ To supply consumer, capital and intermediary goods ∙ To support agriculture and service sectors∙ To improve balance of payment positive by promoting export industry and Import substitute industries.

We feel proud that Hasen Auto Rice Mills Ltd is contributing to GDP growth as well as has created employment opportunity for more than 100 people where as the initial employee was only 15.

Everything was in order but the concern was not prepared to face the shake of Covid-19 pandemic. Unfortunately production was closed from March 25, 2020 to May 31, 2020. Monthly operational cost of the concern is about tk. 2.50 million. Again Mr. Nurul Islam falls in a new challenge and was suffering from frustration. CVC Finance believes in sustainable partnership and was not interested to end a sweet dream. CVCFL take initiative to provide Working Capital Finance Facility to manage the operational cost. Gradually, the proprietorship trading concern becomes entrusted, fully automated and renowned Rice Mills in Gazipur. Today with a turnover of BDT 650 million, Mr. Nurul Islam has one suggestion for everyone “Success will be yours if you have a trusted partner like CVC Finance Limited.

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EMPOWERING NEW WOMEN ENTREPRENEUR

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This is me, Sayeda Sarmin Ahamed, proprietor of “Clay Station”. Considering lack of recreation center, and to pass leisure time doing creative activities enjoying the spiritual tranquility of own creation with clay I have commenced my own concern namely “Clay Station”. No doubt, it is a different and unique initiative. Natural environment, lucid air and playing with clay is an amazing feeling. It was my dream to be a successful entrepreneur from childhood. I believe that, Bangladesh, as a rapidly developing nation, stands to gain the most from the inclusion of women in the business world. Women’s economic participation and their ownership and control of productive assets speed up development, help overcome poverty and reduce inequalities. With that belief and my uncompromising desire along with my husband’s inspiration, I took the risk to be an entrepreneur. I started with a very minimum investment by borrowing from friends and family and also from my personal savings. And that was the beginning of my own story. In the meantime, my initiative was welcomed by local and foreign clients which was very helpful to expand my business. To fulfil my dream, I tried to take financial support from relatives or Banks but at that stage nobody was interested to help and then I realized that a business is often easy to perceive on pen and paper but it is difficult to conceive in reality. Actually no one was interested to finance a new venture. And, this lengthy processing procedure and documentation made me hopeless. Although the demand of my product and services was increasing day by day, I still have decided not to expand the business.

With very little hope I visited the website of CVC Finance Limited. It made me happy when I saw the Slogan of SME Finance Department of CVC Finance, “Unique in creating new Entrepreneur”

With a positive hope, I contacted CVC Finance. I was surprised with the tremendous service. I received my required financial support within 15 days which was beyond my imagination. Finally, I have expanded my business with the financial support of CVC Finance. Different famous schools are now interested to receive my products and services as it is a very effective way to shake up the creativity of infant students besides entertainment. On the other hand, different group of companies are using our clay made products as souvenir at different occasions.

Again, I really appreciate the marvelous service of CVC Finance Limited. I strongly believe that CVC Finance Limited will always be there with the new entrepreneur like me. I have one suggestion for everyone “Success will be yours if you have a trusted partner like CVC Finance Limited.

OPERATINGENVIRONMENT &RISK MANAGEMENT

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The Operating

EnvironmentWe are going through a time that is unprece-dented in known human history. Covid 19 pan-demic hit hard in various intensity in multiple waves accumulating human tolls which con-tinues to raise concerns. Countries around the world went on lockdown to manage the health crisis, encouraging people to maintain social dis-tancing. Since March 2020 Bangladesh is also exposed to this pandemic. Policy makers imple-mented different sort of lockdown measures to control it but with each new wave the pandem-ic brought new challenges. We are still battling it out. The lifestyle as we were habituated have been changed overnight. Offices have gone on-line. However, these various restrictions have their economic consequences. Supply interrup-tions, demand shocks, and conservative business approach has contracted global economy. World Economy has contracte3.3% in 2020.

Bangladesh economy has been growing steadily from 6 percent to 8 percent over the last dec-ade. According to BBS, despite economic down-turn resulting from Bangladesh registered an economic growth of 5.24% compared to 8.15% of 2019. The economic growth recorded is due to government expenditure as there has been reduced economic activity elsewhere. Tourism and transportation went down to a fraction of its pre-covid level for example. However, Bang-ladesh has recorded highest ever remittance in-flow in the last fiscal year. Private sector cred-it growth had gone down to 8.37% growth by December, 2020. Government borrowing from banks also increased. However, the liquidity sce-nario improved in the last year.

Economy 2020 2021 2022World -3.30% 6.00% 4.40%

Advanced Economies -4.70% 5.10% 3.60%

Emerging Economies -2.20% 6.40% 5.70%

Developing Asia -1.00% 8.60% 6.00%

WORLD LIQUIDITY SCENARIO

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Source 2020 2021 2022Government Data 5.24% 7.24% N/A

IMF 3.80% 5.00% 7.50%

ADB 5.20% 6.80% 7.20%

However, this could have been worse as IMF predicted the contraction of economy could have been three times as large if not for the extra ordinary policy support from governments across the globe. And because of this IMF predicts that world economy will grow at a pace of 6% in 2021 and moderating to 4.4% in 2022.

Bangladesh government has declared so far 23 stimulus packages since pandemic hit our country to keep the economy on check. Almost 70 per cent of the packages have been implemented as of April 2021. With the addition of these five new packages, the total amount of assistance is now BDT 1.31 trillion which is 4.84% of national GDP. Our Foreign reserve have grown significantly over this period owing to a surplus in the overall balance of payment. As

of June, 2021 foreign reserve hit USD 46 Billion mark, the ever highest recorded in the history of Bangladesh. The national economy is showing early signs of recovery through a rebound in exports, strong remittance inflows, and on going vaccination program as mentioned through World Bank reports. The gradual comeback of the Bangladesh economy is reassuring. If this trend continues and sustains, Bangladesh will probably stand out as one of the most resilient countries to bounce back early from the negative consequences of the coronavirus crisis.

The condition and prospect and condition of national and global economy along with policy support in parallel to industry competitiveness affects our operations and business.

BANGLADESH GDP GROWTH RATE

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Macroeconomic Environment

Analysis

POLITICAL DIMENSION

IMPACT ASSESSMENT

OUR RESPONSE

ECONOMIC DIMENSION

Government laws affect the country’s financial sector. The government can intervene in the matters of banking whenever, leaving the industry susceptible to political influence. This includes corruption amongst political parties or specific legislative laws such as trade restrictions, tariffs, and political stability. Since 2009, the current government has been effectively controlling political affairs. The overall situation is stable. And this continuing stability helped maintain a positive GDP growth despite pandemic raging across the country and world at large. We are still on track to graduate from LDC to MIC by 2024. Now, challenges remain in improving the country’s position in ease of doing business and competitiveness index.

A prolonged period of political stability translates into business growth and economic prosperity. A politically stable situation is encouraging for new entrepreneurial initiatives and expansion projects from existing enterprises. Public investments are going to an infrastructural development project, and improved private investment is anticipated.

We are focused on financing in priority industries as identified by the government. CVC Finance has a well-diversified portfolio to reduce risk or volatility. Our focus will remain on the quality acquisition and regularizing default accounts. The companies’ management continuously assesses the environment and adapts its business strategies accordingly.

Bangladesh showed extreme resilience and prudent policy application to record a 5.24% GDP growth in a pandemic stricken fiscal year. Even though slower growth than the average growth Bangladesh has been consistently maintaining over the past decade, but the performance is higher than neighboring countries. Experts expected that the BD economy would be the biggest climber between 2020 and 2034. But COVID-19, the deadly virus the world has ever seen, has flipped the whole scenario. Due to COVID-19, The World Bank revised its prediction that Bangladesh’s GDP growth would plunge to 2.0-3.0 % in the 2020-21 fiscal year. The entire South Asian and Asian region was expected to grow as well. However, the COVID-19 pandemic created economic paralysis in several areas. Currently, Bangladesh is at 40th position, as per recent analysis by international donner agencies economy of Bangladesh is expected to grow and climb to 25th spot. However, increasing NPL in the Financial industry has been the most controversial topic from the microeconomic aspect. Apart from the COVID-19 impact, frequent rescheduling and write-offs aggravated the situation. The

In this ever-changing dynamic business environment, to remain competitive and to create sustainable competitive advantage respond to macro-economic changes need to be prompt. An organization can achieve maximum success when it can differentiate itself in the marketplace from the competitors. Financial companies cannot behave independently and provide services based on specific laws affecting their growth and offerings. At CVC Finance, we conduct situational analysis in political, Economic, Social, Technological, Environmental, and Legal dimensions. While undertaking such research, we identify issues that impact our operational environment and address the degree of the impact. The outcomes of this analysis are used for finding out the opportunities and threats in our SWOT analysis.

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IMPACT ASSESSMENT

OUR RESPONSE

IMPACT ASSESSMENT

SOCIAL DIMENSION

TECHNOLOGICAL DIMENSION

The breakout of deadly COVID-19 has exposed financial service companies to a series of challenges. Balance sheet management has put many NBFI’s in difficulty in matching short buckets. Implementation of single-digit interest rates has created pressure for financial institutions to undertake structural reform, resulting in a squeezed profit. On the other hand, reducing the cost of funds for banks has created immense pressure for NBFI’s as good borrowers take over their existing facilities to banks.

CVC Finance will have to face an increased challenge in terms of stiffer competition and reduced margin. We will make structural reform to grow strongly in the Corporate and SME & Retail segment by improving reach.

The rising middle-income group will be the driving force to increase local consumption. Approximately 67% of middle-income groups are salaried, and consumers are now more informed about the products and services available in the market. Now, consumers desire a seamless financing experience using technology-based platforms. Apart from this, COVID-19 has triggered housing demand among growing middle-income people as rental payment was a prime concern for this segment.

Bangladesh has fulfilled the criteria set forth by the United Nations in terms of Per Capital Gross National Income (GNI), Human Asset Index (HAI), and Economic Vulnerability Index (EVI) to graduate from LDC countries in 2018. The official graduation will take place in 2024. All this parameter indicates that living standard has improved. Bangladesh GNI now stands at $2,227 from $2,024 in 2019 an increase of 10.02%. Bangladesh has been doing extraordinary in other social indicators too. There has been significant improvement in life expectancy, infant and maternal mortality. Boston Consulting Group forecasted Bangladesh’s Middle and AffluentClass (MAC) population to reach around 34 million people by 2025, under conservative circumstances. Even discounting for the pandemic, this will be a key driver behind the growth in local consumption demand in the upcoming years

On the global scale, the fourth industrial revolution has become the talking point. Technological advancement has made customers more sophisticated and altered expectation levels. A technological shift has made it possible to avail services remotely and gain product knowledge across the industry, thus helping customers to make informed decisions. Bangladesh now consumes close to 1 terabyte per second bandwidth, which summarizes the digital footprint of users. Bangladesh has 605 GBPS of capacity which meets 62% of the total demand. Plans are underway to establish 3rd undersea internet connectivity. Apart from financial institutions, other service providers from different industries such as telecom, tourism, and hospitality are increasingly investing in developing mobile and internet platforms to reach and convert consumers.

current challenge for NBFI’s is to tackle these short-term NPL arising from regulatory imposition while coping with the changing business environment due to COVID-19.

OUR RESPONSEThe rising social lifestyle standard will be spread across the country, so increasing the geographic reach through offering small ticket size loans is a priority. To meet the aspirations, these income groups will require innovative and convenient financial solutions. Our long-term focus is to create precise segmentation, develop specific products based on customer needs, and establish superior customer relationship management.

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LEGAL DIMENSION

OUR RESPONSE

ENVIRONMENTAL DIMENSION

IMPACT ASSESSMENT

OUR RESPONSE

IMPACT ASSESSMENT

The financial industry follows strict laws regarding privacy, consumer laws, and trade structures to confirm frameworks within the industry. Such systems are required for customers in the allocated country and international users. The government is adopting and implementing tighter rules and regulations to increase compliance among businesses.

CVC Finance is always aware of legal and regulatory compliance issues. So, we are committed to creating such an organization-wide culture that promotes work ethics, values, and integrity followed by everyone in the organization.

Environmental issues are factored in with urgency in the business processes. Environmental pollution due to carbon emission is a concern to the sustainability of the earth. So, globally and nationally, the focus is on making businesses more environmentally friendly and sustainable. This has been shaped as a result of a growing threat to the climate.

As Bangladesh is a critically vulnerable country, financial institutions as an engine drive the supply of money, and the nation’s economy must ensure that financial incentives do not force their actions; instead, their actions must address environmental issues out of self-interest. If sustainability is compromised, it will ultimately threaten the sustainability of financial institutions.

CVC Finance is committed to sustainable development by creating long-term value for our stakeholders, the environment, and the community. Our Agriculture and Sustainable Finance unit has been performing well in enhancing its focus on green financing since its launch in 2016. We emphasize financing in industries that promotes green business.

Regulatory bodies have undertaken remarkable regulatory and supervisory initiatives over the years in line with the internationally accepted standards and compliance requirements.

IMPACT ASSESSMENT

OUR RESPONSE

Technological evolution will facilitate financial institutions to bring operational efficiency. Financial institutes will need to create an ecology to keep up with the customers’ convenience-driven demands. In-depth data analysis will pave the way to provide well-tailored financial solutions to the customers. Technology will also expose economic systems to exposure of data theft and other security-related issues.

CVC Finance has made considerable investments in technology and is in the process of upgrading to a state-of-the-art core banking system. We are focused on simplifying and automating our platforms. To attract and retain retail customers, we plan to launch digital financial services in parallel to traditional services. Our effort to DFS will make financial services accessible and affordable to all individuals and businesses, as branch operation is increasingly becoming less viable for NBFI.

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COMPETITIVE RIVALRY

CVC Finance is taking a progressive view for developing its strategy. The goals of the company circulate being customer-centric, sustainable, and competent. With sustainable growth, operating systems need to be introduced after a careful and comprehensive analysis of the company’s position in the industry and the external factors that can affect the organization in its operation. The five forces model, developed by Michael Porter, is a business analysis tool that surveys the relative strength of five primary forces that govern competition within nearly any industry. This analysis reflects the competition level among the leading companies in an industry and considers four other factors that affect the industry and its success. To create wealth for our stakeholders, we have delved into detail for CVC in the imminent future.

Impact-HighOur country’s financial service industry has 60 commercial banks, another five non-scheduled banks, and 34 other NBFIs, which is very high in terms of the population’s bankable segment. Switching cost from the customer’s perspective is insignificant because of the high concentration of competitors. However, competitiveness in an industry depends on the degree of intensity and the extent of rivalry. As multiple FIs are fighting for the same segment of clients, the intensity of rivalry increases. More and more FIs are now targeting lucrative SME and retail segment; even the government itself has identified SMEs as the growth driver for the future.

Business ImpactCompetition is likely to increase as three new schedule banks, and one new NBFI has started their operation and wants to acquire customers from other FIs. Leveraging technology to achieve efficiency will significantly define the rivalry among the competitors. To gain significant market share, late movers will have to offer smarter solutions in the marketplaceOur Perspective We are striving to achieve operational excellence with our continued investment in technology. Our goal is to retain our existing customer, which will help us sustain in the competitive environment. To attract customers from new segments, we are renovating our current product matrix and finding new ways of delivering values to clients with enhanced customer experience.

Market Forces and competitive landscape

Porter’s 5 forces

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BARGAINING POWER OFSUPPLIERS

BARGAINING POWER OFBUYERS

Impact: Moderate to HighPrimary providers of funds come from different segments of our customer base. A critical factor in determining bargaining power is the control over rates and our cost of funds. However, at a greater level market determines the rate of interest. Also, the central bank exercises commanding power to restrict rates. Central Bank also influences the cost of funds through various refinancing schemes and policy support tools. As a consequence of this, bargaining power fluctuates between medium to high as per the market scenario.

Business Impact Resources are unreasonably distributed among the depositors as the majority portion of deposits is held by few depositors. Because of this, depositors in particular institutions exercise high bargaining power during tight liquidity conditions. Also, policies implemented by the central bank have implications in the market.

Our Perspective We are focusing on diversifying our deposit providers to reduce dependency. Our effort will continue mobilizing term deposits to reduce reliance on the money market which adds to the bargaining power of the counterparty. Apart from this, we are gradually expanding the retail deposit base in our effort to diversify.

Impact: ModerateRecent trend shows that buyer power is increasing due to low switching cost as the number of financial institutes in the industry is higher than needed. In addition to that, several institutions are in the line of getting a license from the regulatory body. Higher fixed cost in operation also triggers financial institutions to attract and acquire new customers, enabling buyers to exhibit rate-sensitive behavior. A few years back, retail and SME customers generally tend to show less price-sensitive behavior. But now they have an increasing number of sources. Rising competition among the financial institutes has made them exhibit this price-sensitive behavior.Corporate customers are significantly price sensitive. Despite faced with a liquidity crisis, they exercise their bargaining power because of price competitiveness among existing FIs.

Business ImpactIn terms of interest rate preference, corporate customers are expected to have diminished leverage. However, this will lead to FI’s pursuing superior customer relationship management and faster processing to retain and acquire customers. Attracting SMEs and retail clients will depend on the FI’s ability to customize the solution to meet customer needs effectively.

Our Perspective We are focusing on enhancing relationship management with the existing corporate client segment and increasing the overall involvement with our company. This year, to drive down the overall cost of funds, we will intensively focus on retail segments that will expand our customer base and create a defensive ground to sustain within this competitive environment. Our priority will be widening the revenue pie coming from interest income.

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THREAT OF NEW ENTRY THREAT OF SUBSTITUTION

Impact: ModerateIn 2019, 3 more banks and 1 NBFI were given approval on which two banks and the NBFI started in 2020. These new banks are entering a crowded industry, even though the newly launched institutions’ performances are unsatisfactory. Along with this, several applications for getting the license for banks and NBFIs are in the pipeline, making new entrants’ threat even high.There are also increasing internal threats of new entrants as more and more financial institutions target the SME and retail segment of the customers. In the long run, there could be a merger and acquisition scenario to consolidate the industry.

Impact AssessmentNew entrants sooner or later decrease the profitability of the existing established companies. But there is a remarkable impact on stakeholders’ trust and confidence if new institutions are not performing on the expected level.

Our Perspective Since there is increasing competition in the SME and retail segment as demographic dividend is expected to come from the middle-class segment of the population. There are already fast movers in this segment that established their footprint across the country with significant market share. We hope to achieve substantial pie of the industry by providing customized financial solution and prompt services

Impact: HighIf we consider the NBFI industry solely then the threat is moderate to low. But if we think of loan products from banks as substitute products, then the threat is high. Apart from this, a signif-icant danger of substitutes comes from NBFIs as well, as they are already offering specialized financial solutions with easier terms and condi-tions. In addition to that, in some segments, the threat comes from the non-financial sector. For instance, many consumer goods providers (i.e., car, home appliances, and furniture manufac-turers) provide EMI basis payment without the participation of financial institutions.

Card businesses are also facing the threat of the rapid emergence of Fin-tech services with their swift payment system. They also have scope for innovating ways to cater the individual borrowing need.

Impact AssessmentAdapting to the needs and requirements of the SME and especially retail segments is the key to gaining market share in the segment. We will always have to be vigilant on the policy incentives and invest heavily on the technological front to gain an early mover advantage.

Our Perspective As substitute products can deteriorate our revenue and profit stream, we have to constantly stay alert for future breakthroughs and remain adjustable to changes in this competitive industry. achieve substantial pie of the industry by providing customized financial solution and prompt services

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Analysis of

SWOTAt CVC Finance, we have introduced SWOT analysis, a framework for evaluating our competitive position and developing strategies for sustainable business growth. We embrace a realistic, fact-based, & data-driven framework to engineer our way forward by dispelling the pre-conceived beliefs and grey areas. After analyzing our business structure, operating framework, microenvironment analysis, and position in the industry, we finally embark on the SWOT analysis. Identification of SWOTs is imperative because they can inform later steps in planning to achieve the objective. First, decision-makers should consider whether the objective is attainable, given the SWOTs. This SWOT analysis will facilitate our investors and readers a full awareness of all the factors involved in making a business decision, and the extent to which they can have an impact. It would also enable us to reinforce our existing strengths, convert weaknesses into strengths, capitalize on opportunities and reduce threats. CVC Finance can particularly benefit from this SWOT analysis because it will allow our business to see where we are standing and plan more efficiently and capitalize on our strengths. It also allows us to break down goals and objectives into manageable portions, a time-saver in an economic climate caught up by slow or stagnant growth.

STRENGTHS

OPPORTUNITIES

WEAKNESS

THREATS

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STRENGTHS

OPPORTUNITIES

THREATS

WEAKNESS

CVC Finance has already built a reputation among its investors and clients for the high quality of its services, product innovation, productivity, sustainable financial performance, and good corporate governance.

- Capable Board and Directors from diversified backgrounds.- Human Resources: At CVC Finance, we are exclusively dependent on Human Resources; therefore, they are considered human capital. Our Human Capital has brought phenomenal successes for the company through “Discipline, Individual Efficiency, Customer Service, Quality and Team Work.”

- Customer-centered

- We are delivering customers’ desired products and services to create true customers’ value.

- We understand and honor the customer’s needs, as well as serve them indifferently and promptly.

- We maintain strict secrecy of customers’ accounts at all times unless asked by any regulatory authority

- We provide clear, understandable, & accurate information to our customers within the frame of mutual trust.

- We are keeping customers informed with all of our banking and financial product.

As consumers increasingly manage their daily lives digitally, we are trying to reach them through online and mobile channels. We are spending on digital platforms which could improve customer experience and enhance engagement. We believe that a well-executed digital branding campaign can increase customers’ interactions and benefit from social sharing.

We are trying to re-building our portfolio by focusing on SME, Agri finance, and Retail sector.

Our business is heavily concentrated in Dhaka City. Now, we are planning to expand our business in rural areas by creating sub-branches or agent points.

- Innovative products and services

- Growing local entrepreneurs.

- Developing Rural Market.

- Use of modern technologies.

- Intense competition in corporate lending drives commercial banks and NBFI’s to focus more on SME and consumer financing.

- Implementation of single-digit interest rates in the banking industry puts NBFI’s at risk of losing fresh new borrowers.

- Recent scams of renowned NBFI’s are eroding the confidence of customers and depositors, thus accelerating the funding crisis.

- The digitalization of the banking industry is paving the way for cybercrimes

- Less publicity and branding in comparison with leading NBFI’s

- Over-reliance on Corporate segment credit

- Geographic Concentration

Addressing our weakness

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Report of

Risk ManagementRisk management functions are embedded at the core of the companies’ value creation model as we accept risk in the ordinary course of business. The objective of risk management is to secure the assets and their reputation and ensure continued financial and organizational sustainability. Significant resources are devoted to this critical function to ensure that it is well articulated, communicated, and understood by all employees of the organization as it is a shared responsibility. The principal objectives are to ensure that risks accepted align with the company’s risk appetite and strategic priorities by an appropriate trade-off between expected risk and reward, enabling delivery of maximum value to key stakeholders. Sound risk management always remained a top strategic priority to CVC Finance. We strive for a robust approach to bring in the best solution to the risk and return problem.

The companies’ risk management approach is underpinned by a sound and robust Risk Management Framework. The framework is designed in line with the regulatory standards and industry best practices.

- Ensure our risk appetite responds appropriately to changes in the operating environments and manage the exposures accordingly.- Proactive measures to maintain superior asset quality and strengthen the recovery efforts to squeeze NPL.- Maintain a sound liquidity position under the prevailing stressed condition and be complied with all regulatory requirements.- Embed a resilient risk culture through the organization; thus, every member becomes

aware of managing risk respective to their levels.- Continues endeavor to strengthen our capabilities to mitigate ICT risk and creatingcyber risk awareness.- Strengthening operational risk management activities by developing a comprehensive framework for identification, assessment, measurement & mitigation techniques of operational risk.

KEY INITIATIVES IN 2020

RISK MANAGEMENT AND INTERNAL CONTROL SYSTEM

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In support of business strategies, risk management has become an essential catalyst for strategic decisions when matching the necessary levels of risk taken with the desired number of rewards. Risk management is the company’s core discipline which is based on a collection of key concepts that serve as the basis for driving a solid culture, policies, and processes for risk management:

The risk appetite is established in a bottom-up approach to de-velop an ownership culture at the functional level and approved by the board. It articulates the nature, type, and status of risk the company is willing to take within a specified period.

ESTABLISH RISK APPETITE & STRATEGY

The approach to capital management is pushed through strategic goals and money owed for the relevant regulatory, economic and commercial environment in which the company operates.

ASSIGN ADEQUATE CAPITAL

The company actively promotes a strong risk culture where em-ployees are encouraged to take accountability for identifying risks and for challenging inappropriate actions.

PROMOTE STRONG RISK CULTURE

Implementation of comprehensive risk systems, policies, and tech-niques to ensure that practices and processes for risk management are successful at all levels.

IMPLEMENT SOUND RISK FRAMEWORKS, POLICIES,

AND PROCEDURE

Robust risk management processes are in place to actively identify, measure, control, monitor, and report risks inherent in all products and activities are undertaken by the company.

EXECUTE STRONG RISK MANAGEMENT PRACTICE

AND PROCESSES

Adequate resources, facilities, and systems are set up to allow ef-fective risk management.

ENSURE SUFFICIENT RESOURCES AND SYSTEM

INFRASTRUCTURE

There is a vibrant, influential, and compact institutional govern-ance structure with concisely described, fine, and constant lines of the organization’s obligation.

ENSURE PROPER GOVERNANCE AND

OVERSIGHT FUNCTION

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Risk Management

Framework The company’s risk management framework is applied on an enterprise-wide basis and consists of four key elements:

1. RISK GOVERNANCE AND OVERSIGHT

2. RISK APPETITE

3. RISK CULTURE

4. RISK MANAGEMENT PRACTICE AND PROCESS.

1. RISK GOVERNANCE AND OVERSIGHTA formalized, consistent and efficient governance structure is established in the organization that facilitates the board and senior management’s active participation in the risk management process to ensure a uniform perception of risk across the company. Our governance model places responsibility and ownership in maintaining an acceptable degree of freedom and division of duties among

the three lines of defense. The management of risk broadly takes place at different hierarchical levels and is emphasized through various levels of committees, business lines, control, and reporting functions.

The companies risk management framework is predicated on the three lines of defense model. Within this model, functional business line staff and management (the first line) acquire and own the risks. In contrast, the risk management forum and other control functions (the second line) provide independent oversight and objective challenge to the first line of defense and monitoring and control of risk. Finally, the internal audit department (the third line) assures that control objectives are achieved by the first and second lines of defense.

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ROLE OF BOARDThe Board acknowledges its role in developing robust risk management and internal control framework for the company and evaluating its adequacy and effectiveness in identifying, analyzing, and responding to risks to achieve its objectives.

The Board of CVC Finance plays a significant role in the supervision of risks and assessing the overall level and categories of risk that the company is prepared to accept to achieve its strategic objectives (Risk Appetite). The board actively participates in setting the goals and strategies of the company and ensures that the relevant risks are appropriately mitigated within its agreed risk appetite.Risk Management Committee is the ultimate policy-making platform for a company’s risk management. The committee supervises:

- Identification and assessment of company’s risks and guide management to formulate the strategies.

- Implementation of effective risk governance culture.

- Periodic review and approval of the company’s risk management policy.

- Implementations of Risk management policy.

MANAGEMENT RESPONSIBILITYManagement is responsible for implementing the board’s policies and procedures on risk and control, and its roles include:

- Identifying and evaluating the risks relevant to the company’s business and the achievement of business objectives and strategies

- Framing relevant policies and measures to manage these risks in line with the company’s strategic vision and overall risk appetite

- Designing, implementing, and monitoring the effective implementation of risk management and internal control system

- Implementing corrective actions to address the compliance deficiencies as directed by the board.

- Reporting to the board on any changes to the risks or emerging risks and mitigation actions taken promptly.

- Own the risks associated with business activities

- Exercise business judgement to evaluate risk

- Ensure activities within the Institution’s Risk appetite and Risk Management Policies

- Independent monitoring and oversight function

- focus on governance framework and control Systems.

- Audit findings reported to management and audit committee of the board.

- Independently facilitate and monitor the implementation of effective risk management practices

- Responsible for policy development, measurement &reporting, limits & controls, oversight & monitoring.

- Provide objective challenge to the first line of defense

- Provide training, tools and advice to support policy and compliance

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4. RISK MANAGEMENT PRACTICES & PROCESSESRisk management practices and procedures provide for comprehensive enterprise-wide detection, assessment, control, monitoring, and reporting of risk exposure.

- Risks inherent in products, processes, and business strategies are defined, recognized, and assessed. - Enable early risk identification and ensure that sound risk man-agement procedures are in place for product risk management and control. - Adopt a forward-looking approach to detect emerging risks to ensure adequate measures are taken to minimize the company’s exposure.

IDENTIFICATION

- Develop risk measurement strategies across multiple risk factor dimensions to ensure constant reassessment and risk detection.MEASUREMENT

- Implement risk mitigation strategies to manage current risks or, on some occasions, to prevent the occurrence of new or emerging threats.

CONTROLS

- Monitor forward-looking key risk indicators and early warning signals to ensure that sufficient and timely action can mitigate any potential risk to the company.- Report the implementation status regularly to the Management Level and the Board of Risk Committees as well.

MONITORING & REPORTING

2. RISK APPETITERisk Appetite refers to the broad types and levels of risks a company is willing to undertake in implementing its business strategy. The risk appetite is ingrained in the strategic planning process. It remains dynamic and responsive to the changing internal and external drivers such as market conditions, stakeholders’ expectations, and internal capabilities. Setting the risk appetite is an exercise where a company’s risk capital is allocated effectively, and risk limits are set within the organization’s placed risk strategy. Thus, the risk appetite is set, ensuring central business units align with the board of directors’ business objectives. Considering the importance and regulatory requirement, the Risk Management Forum of CVC Finance develop a risk appetite statement.

3. RISK CULTUREThe company’s risk governance structure, risk appetite, and risk management tools are influenced by the organization’s risk culture. The risk culture is built upon:

- Tone from the top: Clear and consistent communication from leaders on risk behavior expectations and the importance of CVC Finance’s values.

- Accountability: Under the three lines of defense model, all CVC Finance employees are held accountable for risk ownership and their actions in every business function.

- Training: CVC Finance continually reinforces risk culture by providing practical and informative compulsory and elective training modules online and offline for relevant employees.

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Strategic priority

Mitigation Actions

Maintaining healthy asset quality with optimal risk-reward considerations as well as managing risks efficiently while reaching untapped segments.

Proactively perform regular portfolio scrutinization and conducted stress tests on high-risk sectors to identify and monitor emerging risks to promptly take appropriate remedial actions.

Specialized team have developed having robust industry-specific knowledge to identify and assess risks and opportunities arising from critical industries (e.g., ready-made garments, construction, agriculture, etc.)

Continuously trace customers’ cash flow and match it with purpose statement to identify fund utilization, fund diversion, and seasonal impact over the business.

Conduct regular market visits to get customers’ feedback to reinforce a need-based credit structuring policy.

Implemented two-step document verification when refinancing and updating personal net worth (PNW) statement each year to safeguard the organization’s interest.

ACTIONS UNDERTAKEN TO MITIGATE

Credit RiskThis risk comprises default risk,

recovery risk, and credit con-centration risk. This risk arises

from the failure of an obligor or counterparty to perform their

contractual obligations per agreed terms. Additionally, Fund

diversion, over financing, cash crunch, and wrong product can

ignite credit risk.

IDENTIFICATION

Principal Risks in FY 2020 and

Actions Undertakento Mitigate Risk

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Review of collateral documents and a project visit by CVC Finance employees to check acceptability.

Defined precise target market and risk acceptance criteria, including lending parameters and risk-return expectations to ensure that risk-returns are within our risk appetite and risk standards.

Review CIB on regular intervals and trace financial ratios, specifically debt-equity and DSCR.

Established stringent monitoring mechanism to review products and sectoral lending cap and discouraging sectors.

Enhanced data authority and risk reporting mechanism to ensure that risks are comprehensively and accurately identified to support well-informed decision-making for our businesses and clients

ACTIONS UNDERTAKEN TO MITIGATE

Market RiskEmerges in the form of Interest

Rate Risk and Equity Price Risk. Due to adverse market

movements, the risk of potential loss in financial instruments’

value, such as market instruments, debt securities, and

equities.

IDENTIFICATION

Strategic priority

Mitigation Actions

Optimizing profitability of marked-to-market products within the constraints of liquidity and market risk appetite for the organization

Strictly follow Board-approvedinvestment policy, market Risk Policy, and limit packages cap exposure in line with the strategic risk appetite.

Improved the quality of the risk reports, including the profit & loss to market movements and risk positions.

Conduct gap analysis regularly so that there is no chance of deviation from the approved limit.

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Strategic priority

Mitigation Actions

To maintain healthy liquidity compared to the organization’s balance sheet size to tide over any unforeseen stress scenario.

Maintaining competitive cost of funds.

The organization’s liquidity and interest rate risk management framework are spelled out in our Asset Liability-Management policy.

A robust mechanism to comprehensively track cash flow mismatches under normal and stressed conditions and critical ratios has also been implemented.

An extensive intraday liquidity risk management framework has been developed for monitoring intraday positions during the day.

Continuous monitoring of CRR, SLR, funding profile, balance sheet movement, and key ALM ratios.

Tracking major changes in the macro-economic environment and acting accordingly.

Implemented contingency funding plan as an indispensable part of liquidity management.

Diversification of funding portfolio with easily accessible secured credit line

Liquidity RiskFor an NBFI, liquidity risk

emerges in two forms- Funding Liquidity and Market Liquidity.

Liquidity risk is a risk to an institution’s earnings, capital,

and reputation arising from its inability or unexpected higher

cost to meet its contractual obligations promptly without incurring unacceptable losses

when they are due.

ACTIONS UNDERTAKEN TO MITIGATEIDENTIFICATION

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Strategic priority

Mitigation Actions

Leverage digitization to enhance custom-er satisfaction and heightened operation-al efficiency.

- A Board-approved governance structure is in place with a detailed framework and processes, internal controls, information technology, and fraud monitoring mechanisms.

- Top-level management has set an appropriate tone through effective employee engagement and proactive communication between the cross-functional department.

- Established independent control and support functions that monitor operational risk daily.

- Segregated dual control mechanism (maker and checker concept) to minimize the error and prevent fraud.

- Implemented a File Management (E-Doc) system for protection against any possible data loss.

- A business continuity plan (BCP) and Disaster recovery plan (DRP) are in place to smooth out an operation during adverse conditions.

- Required documents have been vetted by qualified legal personnel.

- Multiple telecommunication channels and alternative power sources have ensured to enable business continuity plan.

Operational RiskOperational risk is the risk of

financial losses related to a breakdown in internal control

and corporate governance. Such breakdown can result from

inadequate or failed internal processes, controls, systems,

and procedures due to employee error or breach, fraud, or exter-nal events. Operational risk has the most distressing impact on the organization and is difficult

to anticipate.


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Strategic priority

Mitigation Actions

To achieve targeted business volumes and margins for expanding through or-ganic business growth.

Conduct market survey and quarterly business review to compare our position with industry benchmark.

Prepare funding need projection on a monthly, quarterly, and yearly basis along with the cost of fund.

Inclusive planning across the organization through collaboration from all businesses and departments.

Prepare monthly forecast based on inputs from all business departments and liability team and reviewing reasons for variances.

Financial analysis is conducted every month to identify variances from the budget.

Implemented intelligent KPI module within the company for benchmarking with best practices from both local and global arena.

Designed a network system throughout the organization to facilitate the data col-lection and analysis to measure our oper-ational risk exposure.

Service Level Agreements with external vendors have ensured to mitigate system risk arise from network redundancy.

Developed IT dashboard to monitor day-to-day IT risk within the organizational set-up.

Strategic RiskStrategic risk is the risk

of suffering an operating income shortfall due to

improper positioning or improper implementation of strategies. The strategic risk

may arise from changes to the competitive landscape

or regulatory framework or ineffective positioning in the

macroeconomic environment. The strategic risk could also

occur due to a failure to execute strategy and/or failure to effectively take actions to

address underperformance.


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Strategic priority

Mitigation Actions

Initiated necessary software development to enhance data visualization and standardization of reports to capture and communicate more concise and actionable way.

To protect client data with top-notch security and to keep the operation smooth.

IT Department conducted a comprehensive staff training program on information system security awareness to all users in response to recent cyber-attack threats.

Continuously enhance security controls such as our cyber defense capability and oversight of our outsourced vendors.

To check the effectiveness of the prevention control system, the IT department conducted surveillance via internal detection controls.

IT infrastructures have been updated regularly to minimize the risk of disruptions and mitigate the risk of any single point of failure.

Continuous cyber risk assessment on our outsourced service providers to ensure they comply with our security requirements.

Future technological needs of the organization were reviewed and identified as part of the strategic plan.

Information Technology RiskRisk arises due to system

breakdown, disruptions, or not updating technological

infrastructure. IT risk impacts privacy, accessibility, and

integrity of information and services related to information technology, leading to financial

losses and reputational risk to the organization. IT risk comprises system failure, information security, and

business continuity risk


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Strategic priority

Mitigation Actions

Remaining up-to-date and complying with the regulatory requirements.

The CVC Finance Board and top management have set an appropriate attitude to align internal policies and procedures with national laws and regulations.

Maintaining continuous engagement with regulatory authorities.

Periodically review existing policies, processes to strengthen the internal control environment so that, proactive actions can be taken in response to new and upcoming regulations.

Scanning regulators’ websites regularly to stay up-to-date with the latest changes and established timely communication of updates to the concerned departments.

Continuous enhancements to our process to respond to key regulatory trends.

Continuous efforts to improve our compliance and awareness culture to meet applicable laws, regulations, and supervisory expectations.

Conducted organization-wide training program on AML/CFT policies and procedures to assess cash transaction, KYC, and customer risk grading.

Continuously monitor media reports to keep updated regarding AML issues.

Regulatory RiskRegulatory risk can arise from the defective transactions and

failing to take appropriate measures to protect assets

owned by the company. These frequent regulation changes could also adversely impact

the organizations’ competitive position and capacity to conduct

business efficiently.


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Strategic priority

Strategic priority

Mitigation Actions

Mitigation Actions

Ensuring that the resource must be channeled towards a non-environment-challenging sector.

Delivering superior customer experience through wide range of products and services.

Conduct rigorous checking of project category and purpose statement before disbursing a facility.

Regularly follow up with clients’ Environmental Clearance Certificate within a specified deadline.

Perform Environmentally and Social Due Diligence on a defined interval.

Established monthly/ quarterly reporting system to top management on activities regarding ESR-related activities.

- We have redesigned our website to create a one-stop service platform for our customers to manage their queries, complaints better, and fulfill their needs.- Continuous monitoring of laws and regulations and ensuring those are compiled accordingly.- Continuous collaboration between the three lines of defense to safeguard the organization’s information assets, secure data storage, enhance risk and control metrics and comply with related regulatory requirements.- A non-financial risk policy is under development which will incorporate a broader range of emerging non-financial risk comprising holistic governance model, roles and responsibilities, control system, monitoring and reporting of non-financial risks exposures on a timely basis.

Social & Environmental Risk

Reputation Risk

The risk of loss arising from the failure to address environmental, social, and corporate governance

concerns, thus impacting business operations in a

sustainable, responsible, and ethical manner.

The risk of potentiality for negative publicity, public

perception, or uncontrollable events may harm its reputation,

affecting its revenue. This risk arises from actions and word-of-

mouth of internal and external stakeholders.


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What are the key plans under the BCP?

The world we are living in is becoming increasingly unpredictable, having a solid back-up and alternative arrangement is necessary. At CVC Finance, we have introduced a well-defined Business Continuity Plan (BCP) and communicating the plan as the COVID-19 impact disrupted our operational layout. Our BCP is based on regulatory guidelines and subject to regular review. It is guided by a business continuity policy and procedure with clearly defined roles and responsibility. CVC Finance adopted a proactive approach and implemented multiple measures both before and after imposition of the country wide lockdown Starting from March 26, 2020 the Company began to communicate all messages to safeguard health of CVC Finance employees.

CVC Finance rose to the challenge of delivering customer services during the outbreak of the COVID-19 pandemic. Our first priority was to ensure the safety of our people who were advised to either work from their homes or from a nearby locations. The Crisis Management Team Prioritized critical functions such as IT and Treasury to ensure minimal or no business disruption.

PRE-LOCKDOWN- Formation of the Central Emergency Response Team comprising of MD, DMD and Head of HR and Head of IT.- Launched BCP - IT, HR and Risk team’s set-up guidelines for work from home.

POST-LOCKDOWN- Released guidelines on work-from-home.- Message from CVC Finance Top management emailed to all employees- Monitored key metrics and published daily dashboards- Worked out post lockdown plan for scale up operations

Resume critical business operations after a disaster

Deal with site-level emergency at office premise involving life safety issue such as fire.

Recover critical business applications during hardware/network/power failure

Tackle organization wide disasters such as pandemic, terrorist attack and cyber-attack.

Facilitate an organized and speedy response to any pandemic incident threatening CVC Finance’s employees or disrupting critical business functions

ENSURING SEAMLESS OPERATIONS

ENSURING BUSINESS CONTINUITY DURING THE LOCKDOWN TO FIGHT COVID-19

An overview of the BCP

BUSINESS CONTINUITY EMERGENCY RESPONSE

IT DISASTER RECOVERY

CRISIS MANAGEMENT

PANDEMIC RESPONSE

Business Continuity Plan (BCP) at

CVC Finance

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Performance

Metrics

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Group Name Total AmountPercentage of Total

Portfolio

Group -1 246,539,318.2 6.20%

Group -2 247,338,461.5 6.22%

Group -3 207,447,700.0 5.22%

Group -4 216,728,106.7 5.45%

Group -5 373,358,728.5 9.39%

Group -6 190,349,442.3 4.79%

Group -7 273,129,672.0 6.87%

TOP 7 GROUP EXPOSURE

SUSTAINABILITYREPORTING

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Our Approach to

Sustainability

ECONOMICSUSTAINABILITY

ENVIRONMENTALSUSTAINABILITY

SOCIALSUSTAINABILITY

OUR ACTIVITIES :

OUR ACTIVITIES :

OUR ACTIVITIES :

Nurturing Entrepreneurs

Environmental Initiatives

CSR Initiatives

Capacity development

Developing green products

Collaboration with development agencies

Emphasize on organic business growth

Going paperless

Sustainability at CVC Finance

EconomicSustainability

Environmental Sustainability

Social Sustainability

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Environmental

InitiativeKEY INITIATIVES IN 2020

ENERGY CONSERVATION

GOING PAPERLESS

To develop an in-house attitude towards the environment and society, every month an employee from each of the floors was nominated as the “Sustainability leader” regardless of designation. His/her duty was to promote sustainability through creating awareness to replace plastic products and conserve electricity wherever possible.

CVC Finance aims to be a paperless office that will conserve physical space and money. In line with this goal, CVC Finance has implemented an e-file management system in 2020. Going forward we will gradually decrease the need for preserving paper-based documents and customer files. To reduce the consumption of papers CVC Finance has also taken the following initiatives-

- Notifying co-workers to turn off electrical appliances when not in use.

- Keeping the air condition temperature within 22 to 24 degrees Celsius.

- Encouraged video conferencing to collaborate and manage vendors which leads to less usage of fuel thus reducing carbon emission.

- Set printer default setting to double-sided print and use both sides of the paper for photocopying.

- Keep a “recycled paper” box near every printer to encourage employees to use as draft paper for the unofficial purpose.

- Encourage employees to use smaller fonts to reduce paper usage.

- Encourage careful revision before printing to avoid errors and re-printing

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Social Responsibility

InitiativePRIME MINISTER’S RELIEF FUND (BLFCA FUND)

To support the government’s efforts in the fight against Covid-19, Bangladesh Leasing and Finance Companies Association (BLFCA) contributed Tk 9.5 crore to the Prime Minister’s Relief and Welfare Fund. At a time of great peril, CVC Finance Limited also stands by the disadvantaged and marginal population of the country.

Bangladesh is in its 50 years of independence this year and aims to enter into a new chapter in 2021 through observing the golden jubilee of our independence. But, COVID-19 has disrupted and brought the whole world to a halt and Bangladesh is no exception from this. In this standstill circumstances, CVC Finance Limited together with JAAGO Foundation has arranged an online art competition named “Golden Brush” among 50 underprivileged students of JAAGO to support their mental health through a co-curricular activity that would help them to unfold their imagination. The 50 underprivileged children participated from 11 different locations

in Bangladesh. The themes of the art competition were Bangladesh in its 50 years of independence, Digital Bangladesh, World after COVID-19, and the Word you want to live in. We believe with the concerted efforts of all of us, we will be able to present a better society to our future generation. To celebrate the Golden Jubilee of our independence, CVC Finance has taken the initiative . to publish the best 12 artworks by these children in its desk calendar of 2021. We believe that all of us together can make the world a better place for our future generation by unfolding a new horizon of thoughts.

JAAGO FOUNDATION

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Sexual harassment and violence have become a buzzword in the news channels and print media. To bring a long-term solution to the problem a lot of things to be done that ranges from law re-form, stricter implementation, introducing sex education as a part of the national curriculum, and many more. While these should be on top of the priority list, it is also necessary to devel-op a better understanding of self-defense and awareness. To tackle this situation CVC Finance Limited in cooperation with Wander Woman has sponsored two-hour online free self-defense classes, particularly for females. A total of 1000 female participants joined the workshop across the country. The classes provided awareness,

techniques, and strategies that would equip fe-males with verbal, mental, and physical skills to tackle any unwanted situation by professional trainers.

As a responsible corporate citizen, CVC Finance has strong stance against sexual harassment and gender-based violence. The situation in Bangladesh is far from ideal and there is still a long way to go to create a safe community for women and children. A concerted effort ranging from stricter law reform & stricter enforcement to introduction of sex education to women em-powerment is required.

SELF-DEFENSE WORKSHOP FOR FEMALE

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Since the onset of the COVID-19 pandemic, SAJIDA Narayanganj hospital has been converted into a COVID isolation and treatment center which is providing free of cost services (including medication, food, and ambulance) to COVID-19 patients. To strengthen the healthcare facilities to cope with the COVID-19 crisis, Sajida Foundation, in cooperation with CVC Finance Ltd. has expanded their healthcare service by installing three new semi-critical units with oxygen management facilities to treat moderately infected patients. Since April 2020, the Narayanganj COVID isolation center has

taken care of more than 1000 Covid-19 positive patients from over 32 districts of Bangladesh. CVC Finance feels privileged to stand in together with the front-line fighters (doctors, nurses, and support staff) in the face of this adversity. Their relentless effort has protected and saved lives, and their sincere compassion has touched the hearts of the patients and community it serves. Sajida Foundation aims to profoundly impact the lives of the urban poor while driving sustainable innovations throughout the nation. It currently works in 26 districts with 3,655 change-makers across Bangladesh.

SAJIDA FOUNDATION

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Green Banking

Disclosure We believe that we will not be judged by our financial performances, we will be judged how responsible we were to the environment while making profit.

The biggest challenge that humanity faces today is climate change. Low lying countries like Bangladesh are much more vulnerable to climate related crises. The Board of CVC Finance recognized that CVC Finance Limited can, and should, make a real contribution to tackling climate change, and help the country to accelerate the transition to a carbon efficient economy. CVC Finance approaches the challenge to help accelerate the transition in a positive, thoughtful, authentic and open way. The Board recognized that delivering on this ambition would involve balancing the needs and expectations of a range of key stakeholders and that gaining a detailed understanding of the views of those stakeholders would be key to making meaningful progress. That starts with aligning our financing with the Paris Climate Agreement – the international treaty on climate change adopted in 2015.That is why every sort of business activity should be in line with the betterment of the environment during making any profit. CVC Finance believes that each small step to “Go Green” will take Bangladesh to a long way in building a better future, Based on the guideline issued by the Bangladesh Bank through DOS Circular # 01 dated June, 01, 2008 CVC Finance designed its products and service in such a way that:

- Ensure that it does not have any negative impact on the economic,social and environmental issues;

- Ensure that it mitigates the negative impacts and bolsterthe benevolent impacts;

- Ensure that its action programs and community investments reduces social exclusion and inequality and addresses the keys to sustainable development challenges;

- Select borrowers in scrutiny of the environmental and social impacts of their proposed undertakings.

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At CVC Finance Limited we take energy management very seriously. It just not only makes our operational activity more aligned with the vision of the sustainability it also directly reflects on the year end profitability of our business. We have developed an in-house attitude towards this cause. We have elected a sustainability leader each month from our exiting employee pool regardless of designation to spearhead our continuous commitment to be more energy efficient operation. We have systematically developed energy efficient way of doing business. We have cut back on our electricity consumption by carefully arranging work spaces to optimize light and air conditioner use. Our workers have shown their commitment by always careful about using energy while at workplace. We have been collaborating with our stakeholders and cut back on our consumption of fossil fuel too.

OUR INTERNAL PHILOSOPHY

ENERGY MANAGEMENT

REDUCE, REUSE AND RECYCLE

Our waste management efforts have been structured around Reduce-Reuse-Recycle. We mostly deal with 3 types of nonhazardous waste materials—

1. E-WASTE (ELECTRONIC EQUIPMENT)

2. DRY-WASTE (PAPERS, TISSUES)

3. WET-WASTE (CAFETERIA WASTE, SEWAGE)

We are trying to reduce anything that we can. We are gradually trying to be a paperless organization going forward. We are reuse already used papers for drafting and day to day activities. We have encouraged our employees to reduce printing waste by carefully checking printing and have elaborated them on reducing font sizes to reduce consumption of papers. We are also minimizing our one time use plastic equipment to be more environment friendly. Re-use and recycle where possible and disposing-off non-recyclable items responsibly are emphasized, which minimizes the impact on the environment. It is expected that by adopting straightforward, environment friendly initiatives, the company will raise awareness amongst stakeholders and the wider community.

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NATURAL RESOURCE MANAGEMENT INTERNAL POLICY SUPPORTAND EXTERNAL POLICY COMPLIANCE

NATURAL RESOURCE MANAGEMENT

We have a constant focus on consuming natural resources very efficiently in our day-to-day operation. As mentioned earlier in this chapter we have initiated energy management principle we have also encouraged our employees to be conscious about using natural resources like water. We want to minimize our carbon emission by cutting down on carbon emission, fossil fuel and other resource consumption and optimize our use of land and focus on the conservation of plants and biodiversity where we operate.

The company regularly reviews its environmental policy to ensure that it reflects changes in regulations and best practices. In line with the growing global environmental consciousness, CVC Finance has always been keen on portraying a brand image that promotes environmental sustainability. Detailed due diligence is performed by company’s relationship managers and credit risk analysts to identify environmental impacts of projects with possible critical environmental implications.Client compliance with Environmental Conservation Act 1995 and Environmental Conservation Rules, 1997 is thoroughly investigated during the project appraisal process. Besides, a report on environmental checklist prepared by the company’s Internal Control and Compliance department is regularly presented before the company’s risk management forum’s meeting

Environment, Health and Safety parameters are integral to our overall credit risk assessment and monitoring process. We strictly follow our internal and Bangladesh Bank guidelines in selecting projects to finance.

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Going

ConcernIn preparing the consolidated financial statement, the respective Board of Directors of CVC Finance is responsible for assessing the ability of organization to continue as a going concern, disclosing, as applicable, matters related to going concern, and using going concern basis of accounting. In light of the analysis summarized below, the Board has assessed the Group’s current viability, and confirms that the Directors have a reasonable expectation that the company will be able to continue in operation and meet its liabilities and there is no intent nor the need for the organization to cease its operation.The following assessment is based on the accounting period ended on or after December 31, 2020.

CVC Finance has a wide range of Loans/Leases Products. It has a lending portfolio of BDT 3,977.22 mn. Currently, the corporate segment holds 83% of the loan and lease portfolio with large and medium sized corporate businesses. Diversified product range consists of lease finance for purchasing of machineries and equipment, term loan for business expansion, BMRE, infrastructure development, and Work Order Finance for existing reputed corporate. The company also offers SME Loan and lease finance, women entrepreneur loan for emerging entrepreneurs. For Consumer segment, the company offers Home Loan, Auto Loan and Personal Loan.

The current deposit portfolio of CVC Finance is more than BDT 1,526.73 mn. Deposits products ranging from Regular Term Deposits to Millionaire schemes to Monthly installment-based DPS products. The company offers plain vanilla Regular Term Deposit products, Income Schemes for pensioners who prefer periodic interest payments. Long term savers can multiply their investment after a fixed term by investing in our Double Money, Triple Money schemes and small saver can choose from DPS products as a long term investment.

FINANCIAL INDICATIONS

DIVERSIFIED INVESTMENT AND DEPOSIT PORTFOLIO

- Fixed term debt with realistic renewal or repayment.- At the end of financial year 2020, total borrowing from other banks and financial institutions was BDT 2,175.23 mn. Based on our past experience, it can be said that there is every possibility that a major part of the debt would be renewed further or can be repaid from our existing cash flow. - Continuous financial support by lenders/ depositors- The Company enjoys a good track record and reputation in the settlement of its obligation with its lenders/ depositors. Total deposit portfolio stood at BDT 1,526.73 mn at the end of 2020.- Positive key financial ratios- The Company’s financial ratios indicate sound financial strength and prospects

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OPERATING INDICATIONS

OTHER INDICATIONS

Strengthening of Human Capital

Maintenance of Capital Adequacy Ratio (CAR)

Strong equity base

Strong Credit rating

Monitoring Compliance

During the year 2020, the Company has recruited 44 new employees, which resulted in a net headcount to 96 at the end of the year 2020.

As per the guidelines, Financial Institutions (FIs) are required to maintain a CAR @ 10%. In 2020, CVC Finance Limited had maintain the minimum CAR requirements of 10%.

As on December 31, 2020, total equity of CVC Finance stands at BDT 1261.98 mn (BDT 1,155 mn Paid-up Capital) reflects the Company’s long-term viability.

CVC Finance received “A+” in Long Term and “ST-2” in Short Term Credit Rating reflects the stability of the company.

Compliance with our Code of Conduct and Ethics is embedded in our employment contracts, recruitment and performance management activities. We have set explicit targets for compliance, commencing at executive management level. All employees are required to comply with our Code of Conduct and Ethics and report conduct that may be in breach of the law, the Code or policy. Advice on CVC Finance’s policies, practices and management systems is available via our Human Resources department. Any employee, contractor or consultant can confidentially report concerns about conduct, practices or issues to our HR department. To help our employees in applying the principles of our Code of Conduct and Ethics and the Conduct and Ethics Policy Framework, we have developed a training course regularly for the newly appointed employees. Case studies are provided to assist staff in translating the Code and related policies into real-life situations. All employees are required to complete this training course each year. Declarations within the course require each employee to confirm whether they understand the Code’s principles, have complied with them over the previous 12 months and agree to comply with them in the future. Compliance is a key result area examined as part of our performance management process and failure to complete required compliance training can be a factor in determining the employee’s entitlement to performance based remuneration and could lead to termination of employment in serious cases. Additionally, employees are required to undertake issue specific training for topics such as anti-money laundering and combating terrorist financing, fraud, corruption and privacy. Our ‘HR Manual’ covers our Code of Conduct and Ethics, standards and behaviors, and important policies and procedures such as our ‘Anti-Bribery Policy’ and ‘Fraud and Corruption Policy’.

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COUNSELING SUCCESSION PLANNING

Human Resource

ManagementOur people are our most valued asset. They make critical difference to our success and our investment in them protects and strengthen our culture. CVC has six pronged Human Resources development program.

Since the beginning our priority is to have a working environment that takes care of the health and well being of our colleagues. CVC has initiated one-to-one counseling to its employee to ensure that employees can work stress free and find smooth work-life integration. Our focus is to help our employees focus and prioritize workflow in a way that they can minimize frustration and burnout. Mentorship is one of our signature HR initiatives where we provide a detailed orientation of our work process, culture and ethics to every new recruits so that they can prepare and start comfortably.We want to be a future proof organization and be ready for any challenges. We choose role models from our young and high potential pool of employees and nurture their career with highest exposure so that they can grow to be our next business leaders.Employee training and development is a priority at CVC Finance. In an everchanging business environment we strive to have a pool of efficient employees. To achieve that headed by our top management we always review our training modules and try to equip our employees with best knowledge and skill required for doing their jobs.

CVC Finance is a new entrant in the financial industry and thus faces competition of all sorts. It aims big and thus planning for a long term requires succession planning. To pass the baton to the fresh bloods, high performing youngsters are groomed and developed. A 9 box model is followed in this regard where the high performers with high potentials are rewarded. But CVC Finance believes more in the future potential. Thus employees with moderate performance but with high potential get the highest priority. New recruits are groomed so that they can take the institution to its aimed target.

PROCESS

Step 1. Identify Key Areas and Positions

Step 2. Identify Capabilities required for Key Areas and Positions

Step 3. Identify Interested Employees and Assess them against Capabilities Step 4. Develop and Implement Succession and Knowledge Transfer PlansStep 5. Evaluate Effectiveness

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CAREER PROGRESSION

360 DEGREE VIEW

ALIGNMENT OF COMPETENCY, ROLEAND COMPANY MISSION

CVC Finance believes that employees should develop overall skills other than their respective field related skills.

It is necessary for an institution to train it employees in different connected departments to get a 360 view of workflow. With this view, role playing is introduced where an employee is assigned to multiple departments each for a fixed time. Employees are rotated on a regular basis to ensure they get better exposure to the firm’s activities and get to know the company well.

RECOGNITION AND AWARDS

The cumulative efforts of the employees represents the company. CVC Finance rewards these efforts time to time to keep the employees motivated.

Ms. Shegupta Sharmin, Executive, Finance and Accounts was awarded with the “National Integrity 2019-2020” recognition for her contribution.

Mr. Sadi Mohammdad Shaikat, Senior Executive, Finance and Accounts was awarded with “Beyond the call of duty” recognition in 2020.During the pandemic and enforced lockdown, he was the only employee to continue physical office to perform mandatory duties. CVC Finance is proud to have Mr. Sadi in its team who rises beyond his call of duty risking his own safety. CVC Finance believes Mr. Sadi would be a role model for all the employees.

Integrity

Beyond the call of duty

Employees are allocated to different roles and functions based on the business requirement and their own set of skills and their preferences. CVC Finance tries to ensure that employee satisfaction is met within the goal of the company.

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EMPLOYEE WELLNESS AND CARE

The HR team kept constant communication with the employees about their physical and mental health. The employees and office staffs felt supported due to this regular communication.

Basic safety rules and programs like hand wash, sanitization, disinfection of whole office area, mitigate a bit of employee’s concerns and anxiety. By proactively thinking about the organization’s best health practices, safety and health equipment was provided in required places. The employees and staffs were continuously updated about the Health guidelines for basic precautions.Encourage social distancing by asking staff to not only limit travel and large group gatherings, but also avoid handshakes, hugs, and other physical interactions.Human Resources department was also a part of the CVC Finance’s COVID planning team that executed employee messaging, return to work policies, cleaning protocol and signage.

As soon as the nationwide lockdown was enforced, CVC Finance was quick to follow suit. HR and IT joined hands to ensure work from home in just 7 days. Employees continued to work from home till May 2020, when the lockdown was relaxed. Employees of CVC Finance continued working in resilience to keep the economy running but COVID-19 did get to us. Out of 80 employees, unfortunately 7 of them had faced this trauma of COVID-19. All of them recovered soon with no severe complications

CVC Finance enforced strict safety measures in this pandemic.

- 14 days quarantine was mandatory on anyone having symptoms to ensure overall safety.- To boost the morale of the affected employees, HR regularly communicated them about their health and psyche.

COVID-19 pandemic has hit the economy hard and financial sector was amongst the first to take the hit. When there was widespread pay cuts and layoffs in the industry, CVC Finance stood firm to support its employees at their need. We have engaged with our colleagues more than ever, counselled them about their anxiety and fear because we believe that we are what we are only because of our collective efforts. CVC Finance announced no salary cuts or layoffs, rather there were new recruitments in the pandemic. We are one of the few NBFI in the sector who took the risk to onboard new employees we believe that we can fight this pandemic if we are strong together.

Basic Safety Rules and Equipment

Lockdown and implementation of WFH

No layoffs, No Salary Cuts

COVID-19 WARRIORS OF CVC

CVC FINANCE organized a webinar on COVID-19 experience. The seven COVID-19 warriors who fought the pandemic and came out victorious were kind enough to share their experience. All the employees were aware of the potential health hazards and all of them were regularly given reminder of the health protocols they should maintain.

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LEARNING CULTURE

Skilled workforce will inevitably boost the company’s performance and thus CVC FINANCE focuses on continuous development of workforce. This process starts with training need identification. Depending on the nature of work and relevant skills needed, individuals are identified for training. COVID -19 has hindered physical training but opened a new door through online training. To be one of the best technology driven organization we are embracing learning process in digital platform. It has been a tremendous effort by CVC Finance to train their resources through various skill development modules like HR transformation skill, IFRS, Banking Credit Analysis, Anti-Harassment, Code of Conduct, Organic Facebook Marketing, Information Security, Excel and PowerPoint in the year 2020 and covered 57 employees with certification. We are looking forward to integrating e-learning process with more subject matters in near future.

E-learning refers to trainings provided via a digital device which allows technology to facilitate learning anytime and anywhere. The brief statistics of this process in CVC Finance is shown in the following diagram.

Enabled E-learning Process

E-Learning Statistics

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Information

TechnologyThe Financial Services Sector of Bangladesh has always been the forerunner when it comes to integrating Information technology in business. For Financial Services, Information Technology plays a critical role for a number of reasons, but the most important reason being the exchange of information. In today’s technology driven world, any business leveraging Information Technology will always have a strategic and competitive advantage over their competitors. Effectively using Information Technology will not only result in a business being ahead of competition, but also ensure that it survives the harsh world that is becoming increasingly tech dependent. As a new financial company in the financial industry, CVC Finance Limited is comparatively ahead in business automation and infrastructure development. We are continuously working to adopt new technologies in our business process to facilitate both the client and the employees. As Information Technology is key to the success in the modern world, CVC Finance Limited has invested significantly in IT with a view to building a robust and scalable IT infrastructure. In this continuous development process, CVC Finance Limited has already implemented a standard and secured IT infrastructure. CVC Finance’s IT infrastructure ensures high availability of resources and information to the end users. Business critical systems in Data Center are configured with on-site high availability, load balancing and redundancy features to experience smooth operation.In addition to the IT infrastructure, CVC Finance Limited has introduced various software solutions to upscale its business process/services by removing process complexities to facilitate end users. In this consequence CVC Finance Limited has implemented an integrated core financial system ‘EFS-Core Financial System’ to automate the financial backbone. To provide faster services to customers, CVC Finance Limited has introduced solutions like ‘SMS Alert Service’. CVC Finance is also working on ’Internet

Banking’, a value added service for customers. This may help CVC Finance’s clients to get some necessary information and statements through a predefined portal using internet. CVC Finance has also started using a very effective and efficient treasury management solution named ‘eTesoro’ with a variety of functionality that enables our Treasury Department to function at its fullest. Our Human Resource department has already been automated by using the ‘HR & Payroll’ management software solution including leave management system. TO enhance our digital footprint, we have undertaken a number of initiatives which may help us to establish ourselves as one of the leading tech-oriented financial institution.Moreover, for further enhancement of the operational process and to take effective managerial decision our IT team has already implemented various in-house solutions like ‘CMS-Customer Monitoring System’, ‘Inventory and Fixed Asset Management System’, ‘Performance Appraisal System’, ‘TMS-Task Management System’ and others as per requirement. Our IT team has also refurbished our website which now includes electronic recruitment system.During the COVID-19 pandemic, it has become mandatory to facilitate employees to work from their homes in order for them to stay safe from coronavirus. Considering the situation and regulatory guideline, CVC Finance has established a secured VPN system for its employees to facilitate a secured work from home infrastructure. As we want to establish ourselves as one of the best technology driven financial institution to provide services to our customers and stockholders, we are continuously exploring the latest technology to incorporate. Future technological developments of the Company is reviewed periodically as part of the strategic plan.

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Sustainable Development Goal and

CVC Finance

Agenda 2030, came into force on January 01, 2016 has been adopted by Bangladesh. This is blueprint for all UN member nations including Bangladesh for fostering peace and prosperity. It aims for a global partnership to reduce inequality among and within nation. It has 17 Sustainable Development Goals (SDG) that formulates a guideline that will have impact in overall social development.

We are fully committed to the cause of UN SDG. We have adopted SDGs in our business and operating policies to reengineer our market opportunities while safeguarding the interest of the community that we serve. The following chart address how we contribute to the nation building in accordance with UN SDGs.

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GOVERNANCE

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Corporate Governance

Statement

The Board of Directors (Board) of CVC Finance Limited believes that good corporate governance (CG) practices enable the company to operate more efficiently, improve access to capital, mitigate risks, and facilitate better oversight of the business, management and operations of the company. In the long-term, good CG practices allow the company to be more accountable and transparent, and also contribute towards value creation for all its stakeholders. The Board to ensure that our CG Framework remains resilient and is able to adapt to the demands of the rapidly changing operating environment.

CVC Finance Limited is subject to a comprehensive regulatory regime and the Board is committed to ensure that a robust CG Framework is in place by keeping abreast of the latest developments in respect of the CG regulatory framework and requirements. Our CG Framework is based on the following key statutory provisions, best practices, policies and guidelines:

This statement sets out a summary of the CVC Finance’s CG practices during FY 2020.

1. Financial Institutions Act, 1993

2. The Companies Act, 1994

3. The Negotiable Instruments Act, 1881

4. Money Loan Court Act, 2003

5. Money Laundering Prevention Act, 2012

6. Anti-Terrorism (Amendment)Act, 2012 and

7. All Regulations, Guidelines, Circular and Letter issued by Bangladesh Bank/the Government.

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Corporate governance

Framework

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Board Leadership and

EffectivenessTHE ROLE OF THE BOARD

BOARD COMPOSITION AND SUCCESSION PLANNING

RECRUITMENT AND APPOINTMENT OF DIRECTORS

The Board directs and oversees the business and affairs of the company by periodically reviewing and approving the overall strategies and significant policies. The Board also establishes the company’s core values and adopts proper standards to ensure that the company operates with integrity, and complies with the relevant rules and regulations.

The Board believes that the success of the company’s strategy requires the same to be aligned with good governance practices. To achieve this, a strong system of risk management and internal controls have been put in place to ensure that the company’s risk appetites are set and risks identified, assessed and managed effectively.

Apart from setting the tone from the top and establishing the core values, the Board also monitors the management’s execution of strategy and financial performance. While

the Board’s ultimate focus is on long-term sustainable growth, the Board also ensures that the management strikes the right balance between short term and long-term goals.

The Board has been closely monitoring not only the impact of the on-going pandemic on the economy and the company’s overall financial performance, but also on the general health and welfare of the staff and employees. The Board has addressed the issue on how to continue servicing customers in this challenging environment. Agenda items and matters discussed at the Board and Board Committee meetings have been re-aligned accordingly, to address various issues and challenges. These include addressing work from home requirements of the staff, and rolling out various measures to help deserving customers.

A description of the roles and responsibilities of the Board Charter as follows:

- Review the overall size and composition of the Board- Review the composition of Board Committees- Review the succession plan for the Board and Board Committees

- Review the overall size and composition of the Board- Review the composition of Board Committees- Review the succession plan for the Board and Board Committees - Review the background, skills and experience of potential candidates for appointments on the Board

- Consider the re-appointments and re-elections of Directors- Review the appointment and re-appointment of Board Committees

RECRUITMENT AND APPOINTMENT OF SENIOR OFFICERS

SUCCESSION PLANNING OF SENIOR MANAGEMENT

- Consider the proposals to renew the employment contracts of senior officers- Appointment of Managing Director and below two tier senior officers

- Review and recommend the New Talent Assessment- Receive updates on succession plan of senior Management

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REMUNERATION GOVERNANCE

BOARD SIZE, COMPOSITION AND DIVERSITY

- Review and approve the total rewards (salary increment and promotion) for the employees

APPROVAL OF BUSINESS PROPOSAL- Review and approve the business proposals beyond Management/Executive Committee approval limit

All the Directors are non-Executive Directors. Among them, 03 are Sponsor/Shareholder Directors while 07 are Nominated Directors. The Board considers diversity from a number of different aspects, including gender, age, educational background, professional experience, skills, knowledge and length of service.

- Ensuring corporate governance practices during carrying out day to day business

The Board of CVC Finance comprises with 10 members. The Directors are reputed professionals and entrepreneurs possess a wide range of local and international experience, expertise and specialized skills to assist in decision-making and leading the company for the benefit of its shareholders.

The meetings of the Board of Directors are presided over by the chairman. Written notice of the Board meetings mentioning agenda along with working papers are circulated ahead of the meeting; minutes are correctly recorded, signed by the Chairman and circulated.

During pandemic time CVC Finance Limited continues to hold its meeting through virtual platform by using zoom abiding all regulatory compliances.Ten (10) Board meetings were held during the financial year ended 31 December 2020. The number of Directors required to constitute a quorum is six (6), out of the ten (10) Directors.

Name of the Director Status Board Attended

Mr. Mahmud HussainSponsor /

Shareholder DirectorChairman 10

Ms. Nasmin AnwarNominated

DirectorMember 6

Mr. Bibekananda SahaNominated

DirectorMember 9

Mr. Tofayel Kabir KhanNominated

DirectorMember 8

Mr. Rezaul KarimNominated

DirectorMember 4

Mr. Syed Al FarooqueSponsor /

Shareholder DirectorMember 9

Mr. Anwar Kamal PashaNominated

DirectorMember 8

Mr. Asif Wahab KhanNominated

DirectorMember 7

Mr. Naim HossainSponsor /

Shareholder DirectorMember 8

Mr. AKM Monirul IslamNominated

DirectorMember 10

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SEPARATION OF ROLES OF THE CHAIRMAN AND MANAGING DIRECTOR

DIRECTORS’ REMUNERATION

The roles and responsibilities of the Chairman and the Managing Director are separated by a clear division of responsibilities which are defined and approved by the Board in line with best practices to ensure the appropriate supervision of management. This distinction allows for better understanding and distribution of jurisdictional responsibilities and accountabilities. The clear hierarchical structure with its focused approach, facilitates efficiency and expedites informed decision-making.

Directors are not entitled to any remuneration other than attending the meeting of the Board and its committees. Bangladesh Bank vide its DFIM Circular No. 13 dated November 30, 2015, re-fixed the maximum limit of remuneration to the Directors for attending meetings of the Board and its committees at Taka 8,000 per meeting per Director.

• BANKING

• INSURANCE

• ASSET MANAGEMENT

• CAPITAL MARKET

• SHIPBUILDING INDUSTRY

• TEXTILE, SPINNING AND RMG SECTOR

• CHEMICAL ENGINEERING SECTOR

• TRADING BUSINESS AND

• INFORMATION TECHNOLOGY ETC

The current skills and experience of the Board include the following:

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Key Activities of the

Board during 2020 AMONG THE AREAS/MATTERS REVIEWED, DELIBERATED AND APPROVED BY THE BOARD DURING FY 2020 WERE AS FOLLOWS:

- BUSINESS STRATEGY OF VARIOUS SEGMENTS WITHIN THE COMPANY

- BUDGET AND BUSINESS PLAN FOR 2021

- CVC FINANCE’S NEXT 3 YEARS LONG-TERM STRATEGY AND PLANS

- FOCUS ON DEVELOPING ALTERNATIVE CHANNEL TO COLLECT FUND AT

A LOWER COST OPTION ACROSS THE COUNTRY.

- MORE DIVERSIFIED INCOME STREAM BY MAKING PROPER

DISTRIBUTION AMONG DIFFERENT ALLOWABLE PRODUCTS AND

SERVICES THROUGH SUBSIDIARIES

- STRENGTHENING TECHNOLOGY AND CYBER DEFENSE CAPABILITY

- COMPANY’S INCLUSIVENESS AND DIVERSITY AGENDA

- REVIEW OF THE COMPANY’S HISTORY AND PROGRESS OF

DIGITAL PLANS

- RECOVERY AND RESOLUTION PLAN

- IMITATING VARIOUS PROJECTS FOR OPERATIONAL EFFICIENCY

AND BETTER CUSTOMER SERVICES

- LEGAL DEVELOPMENTS, IMPACT AND CHALLENGES IN LIGHT OF

THE COVID-19 PANDEMIC

- TOTAL REWARDS AND REMUNERATION FOR THE COMPANY

- RECOMMENDATION FOR THE APPOINTMENT OF EXTERNAL AUDITORS

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Committees of the

BoardIn Compliance with Bangladesh Bank guidelines, CVC Finance Limited, being a financial institution can only form two subcommittees of the Board:

No other subcommittee of the Board is permitted by Bangladesh Bank. Each Committee is governed by a formal charter approved by the Board, setting out its objectives, responsibilities, structures and operations.

The Executive Committee of CVC Finance comprises with 05 members. During 2020, a total of seven (07) EC meetings were held. Presence of 03 members constitutes quorum of any EC meeting.

The Company Secretary acts as the secretary of the committee & the Managing Director also present in the meeting.

- The Executive Committee (EC) acts as the representative of the Board and be mandated by the Board.- The EC helps in providing approval/decisions about Investment and other operational matters in quick intervals, as and when necessary. The EC is empowered to provide approval within the sanctioning amount of 20.00 million. - The committee reviews the overdue status of the company and guide the management to recover them. - The committee follow up the Litigation Status of the company on a regular basis. - The EC assess all cases of reschedule and renewal of investment accounts and provide decision regarding approval/non-approval/terms and conditions- The EC assess proposals for rate revision/revision of terms and conditions and restructuring proposals and provide decision regarding approval/non-approval/terms and conditions - The EC reviews the Investment proposals where disbursement/capitalization amount exceeds 10% of sanctioned amount and provide post facto approval.- The committee reviews the quarterly management report of the company and provide necessary feedback to the management regarding operational trends and performance of the company.

EXECUTIVE COMMITTEE AUDIT COMMITTEE

EXECUTIVE COMMITTEE (EC)

Terms of Reference (ToR):

Name of the Member Status in the Committee Attended

Mr. Syed Al Farooque Chairman 7

Ms. Nasmin Anwar Member 3

Mr. Rezaul Karim Member 6

Mr. Anwar Kamal Pasha Member 3

Mr. AKM Monirul Islam Member 7

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Audit Committee (AC) is a sub-committee of the Board formed in compliance with the requirements of DFIM Circular No. 13, dated 26 October 2011 of the Bangladesh Bank.

The Audit Committee (AC) of CVC Finance comprises with 04 members. During 2020, a total four (04) Audit Committee (AC) meetings were held. The number of Directors required to constitute a quorum is two third of the members of the Audit Committee.

The Company Secretary acts as the secretary of the committee. The Managing Director & Head of ICC also present in the meeting.

- The Audit Committee (AC) assesses whether the Management creates proper culture of internal control and risk management within the organization- Whether adequate check and balance exists within the company- Ensures adherence to recommendations of various inspection teams- Checks all financial transactions are properly reflected in the financial statement- Checks financial statements are duly complied with all regulations- Ensures proper and smooth functioning of Internal Audit Unit- Appoints External Auditor- Review of the report of the external auditor- Observes that the irregularities raised by External Audit are duly addressed and complied by the management - Ensures compliance of all regulatory requirements- Quarterly review report to the Board regarding irregularities- Chairman of the Audit Committee shall remain present in the Annual General Meeting (AGM)

AUDIT COMMITTEE (AC)

Terms of Reference (ToR):

Name of the Member Status in the Committee Attended

Mr. Tofayel Kabir Khan Chairman 4

Mr. Bibekananda Saha Member 4

Mr. Asif Wahab Khan Member 3

Mr. Naim Hossain Member 4

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(MANCOM)To ensure that the company’s vision, mission are adhered to, we have our Management Committee (MANCOM), who are entrusted to set objectives and lead from the front. On the back of the Board’s exemplary guidance, the Management and its various sub-committees determines company’s strategic objectives such as areas of business focus; policies, monitoring and process improvements.

Mr. Syed Minhaj ahMedManaging director

Mr. Shah Wareef hoSSaindeputy Managing director

Mr. Md. ariful iSlaM choWdhury acahead of icc

Mr. MohaMMed nejaM uddin head of corporate finance

Mr. Md. ShakhaWat hoSSainhead of accountS

Mr. Md. faiSal aMinhead of operationS

Mr. Md. forhad hazarihead of hr & adMin

CHAIRMAN

MeMbeR

MeMbeR

MeMbeR

MeMbeR

MeMbeR SeCRetARy

MeMbeR

Status in the Committee

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Internal Control and

Risk ManagementThe company has a comprehensive system of internal controls in place, designed to ensure that risks are mitigated and that the company’s objectives are attained. The Board recognizes its responsibility to present a fair, balanced and understandable assessment of the company’s position and prospects. It is accountable for reviewing and approving the effectiveness of internal controls operated, including financial, operational and compliance controls, and risk management.

The Framework provides the key principles and guidelines for managing Compliance Risk within the company. It serves as a guide for Compliance function alongside Board of Directors, Senior Management and all employees in all jurisdictions in understanding, complying and managing compliance risk. It is adopted and implemented across by operating entities across the company.

The key elements of the internal control system established by the Board that provides effective governance and oversight of internal controls include:

• Organization StructureThe Board has established an organization structure with clearly defined lines of responsibility, authority limits and accountabilities, aligned with business and operations requirements to support the maintenance of a strong control environment.

• Annual Business Plan and BudgetThe Board deliberates and approves the annual business plan and budget for the year. The performance achievements are reviewed monthly against the targeted results, allowing time for the appropriate responses and required remedial actions to be taken. The Board regularly reviews reports from the Management on key operational statistics, as well as legal and regulatory matters.

• Other Board CommitteesThere are other Board Committees set up to assist the Board in executing its overall governance responsibilities and oversight function. They are the Executive Committee and Audit Committee. These Committees are authorized to examine all matters within the scope defined in their respective terms of reference and report to the Board with their recommendations.

• Regular Updates and Communication of Risk Management Principles, Policies, Procedures and Practices

Risk management principles, policies, procedures and practices are reviewed and updated regularly to ensure relevance to the current business environment as well as compliance with applicable laws.

• The overarching principles for the management of compliance risk across the company;• The overall strategy in managing compliance risk to ensure uniformity in practices across the company in meeting regulatory and legal obligations;•The minimum expected standards for compliance risk management; and• The roles and responsibilities of compliance risk management.

COMPLIANCE FRAMEWORK

INTERNAL CONTROL SYSTEM

The Framework outlines:

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• Standard Practice InstructionPolicies and procedures are in place to ensure compliance with internal controls and the prescribed laws and regulations. These policies and procedures are set out in the company’s Standard Practice Instructions (SPIs) and are updated from time to time in accordance with changes to the business environment or regulatory guidelines. These SPIs are communicated to all employees.

• Core Values and Code of Ethics and ConductThe company’s Core Values are the essential guiding principles to drive behavioral ethics while fulfilling our collective responsibility to serve our mission of Humanizing Financial Services. It is further complemented by the Code of Ethics and Conduct that sets out sound principles and standards of good practice to be observed by all employees.

• Fraud ManagementThe company instils a culture of vigilance amongst employees in handling and combating fraud as well as to deter future occurrences. Robust and comprehensive tools/infrastructure and programs are emplaced to ensure risks resulting from fraud are identified, escalated/reported and managed in a decisive and timely manner. Stern disciplinary action is taken against employees involved in fraud.

• Whistleblowing Policy and ProceduresCVC Finance Limited is committed to the highest standard of ethics and integrity in its conduct of business and operations. Company’s Whistleblowing Policy and Procedures encapsulate the governance and standards to promote an ethical, responsible and secure whistleblowing practice.

• Anti-Bribery and Corruption Policy and ProceduresCVC Finance Limited adopts a zero tolerance approach against all forms of bribery and corruption in carrying out its daily operations.

• Financial Crime ComplianceCVC Finance Limited is committed to fight financial crimes and ensure compliance with the relevant laws and regulations. Financial crime risks are managed to protect the integrity and reputation of CVC Finance. The company has established comprehensive controls to anticipate, prevent, detect and respond to money laundering terrorist financing and sanctions risks.

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Disclosure Under Capital Adequacy &

Market DisciplineCapital is the foundation of any business. In a Financial Institution, capital is a prime factor to con-sider when assessing the safety and soundness. It acts as a cushion in case the value of the FI’s as-sets decline and liability rises. Maintaining a minimum capital level is of extreme importance for a Financial Institution so that adequate protection against risk can be ensured. A strong Capital Man-agement Policy protects an organization by identifying and mitigating risks, as well as establishes a base of confidence by depositors, creditors, and other stakeholders.

Capital Adequacy gives a view on a Financial Institution’s financial strength and stability. Adequate capital provides assurance to the stakeholders on the company’s ability to provide consistent services.

CVC FINANCE LIMITED (CVC FINANCE) is a progressive financial institution in the field of financial Market by establishing its brand image through its diversified products and services. The company also intends to create its image as a trusted company in the mind of the customers. Continuing to maintain this reputation and also enrich to the signified goodwill it always ensures timely submission of all reports and disclosures.

THE BASEL-IIdisclosures presented in these documents are related to CVC Finance for the year ended December 31, 2020. These disclosures have been made in accordance with Prudential Guidelines on Capital Adequacy and Market Discipline for Financial Institutions introduced by Department of Financial Institutions and Markets.

The Basel-II framework consists of the following three pillars:

PILLAR-I: MINIMUM CAPITAL REQUIREMENTCVC Finance must hold minimum regulatory capital against Credit, Market and Operational Risk inherent with its financing sector.

PILLAR-II: SUPERVISORY REVIEW PROCESS (SRP)SRP basically deals with other risks factors faced by CVC Finance but not covered in pillar-I. The key principle of SRP is that CVC Finance have a process for assessing overall capital adequacy in relation to their risk profile and a strategy for maintaining their capital at an adequate level.

PILLAR-III: MARKET DISCIPLINEThe purpose of Market Discipline in the Revised Capital Adequacy Framework is to complement the minimum capital requirement and the supervisory review process. The aim of introducing Market Discipline in the revised capital framework is to establish more transparent and more disciplined financial market so that stakeholders can assess the position of CVC Finance regarding holding of assets and to identify the risks relating to the assets and capital adequacy to meet probable loss of assets.

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1) SCOPE OF APPLICATION

Qualitative Disclosures:

The name of the corporate entity in the group to which the guidelines applies:

CVC FINANCE LIMITEDThe financial statements have been prepared in accordance with Bangladesh Accounting Standard (BAS). Any restrictions, or other major impediments, on transfer of funds or regulatory capital with-in the group are not applicable.

2) CAPITAL STRUCTURE

Qualitative Disclosure: The assets, liabilities, revenue and expenses of all profit center divisions are related in CVC Finance’s audited financial statement as of year ended December 31, 2020.

Summary information on the terms and conditions of the main features of all capital instruments, especially in the case of capital instruments eligible for inclusion in Tier I or in Tier II.

Tier II capital includes

General provision up to a limit of 1.25% of Risk Weighted Asset (RWA) for Credit Risk;

Revaluation reserves;

50% Revaluation reserve for fixed assets;

All other preference shares;

Conditions for maintaining regulatory capital:

The calculation of Tier I capital, and Tier II capital shall be subject to the following conditions:

The amount of Tier 2 capital will be limited to 100% of the amount of Tier I capital.

50% of revaluation reserves for fixed assets and 45% of revaluation reserves for securities are eligible for Tier II capital.

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Particulars Amount in CrorePaid-up Capital 115.5

Statutory Reserve 4.32

Non-repayable Share premium account -

General Reserve -

Retained Earnings 6.37

Minority interest in Subsidiaries -

Non-Cumulative Irredeemable Preference Shares -

Dividend Equalization Account -

Other (if any item approved by Bangladesh Bank) -

Total Tier-1 Capital 126.2

Deduction from Tier-1 Capital -

Tier-2 (Supplementary Capital) -

General Provision (Unclassified loans up to specified limit + SMA+ off balance sheet exposure)

6.66

Total Tier-2 Capital 6.66

Total Eligible Capital 132.86

TOTAL ELIGIBLE CAPITAL (IN CRORE BDT)

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3) CAPITAL ADEQUACY


CVC Finance Limited (CVC Finance) with its focused strategy on risk management has always been consistent in maintaining capital adequacy ratio above the regulatory requirements. CVC Finance has been successfully managing the incremental growth of the Risk Weighted Assets by ensuring di-versification of the portfolio in SME, Retail and Corporate segments. However, RWA is also managed by taking collaterals against its loans. CVC Finance strives to extend its relationship with corporate clients having good credit ratings. While computing the capital adequacy, CVC Finance has applied Standardized Approach.

Qualitative Disclosure:

Based on the data derived, the Capital Adequacy Ratio (CAR) is calculated. CVC Finance follows the standard CAR measurement method.

Capital Adequacy Ratio = (Core Capital + Supplementary Capital) / Risk Weighted Assets

Particulars Amount in Crore BDT RWA for Credit Risk 441.15

RWA for Market Risk 3.80

RWA for Operational Risk 87.76

Total RWA 532.72 Minimum Capital requirement (10% of RWA) 53.27

Maintained Capital 132.86

Total Capital Adequacy Ratio 24.94

TOTAL CAPITAL ADEQUACY RATIO

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4) CREDIT RISK Credit risk refers to the probability that a counter party will not repay its financial obligations in due time. As a lending institution CVC Finance never eliminates its credit risk, moreover it always tries to manage and reduce to a minimum level.

CORPORATE CREDIT POLICY CVC Finance is managing its Credit Risk through a Board directed and approved Corporate Credit Policy in line with the Bangladesh Bank Core Risk Management Guidelines, which outlined robust processes and procedures to ensure the quality of its assets portfolio. The Credit Policy also contains the general principles to govern the implementation of detailed lending procedures and risk grading systems of the borrowers. And, as such, it specifically addresses the areas of (a) Loan Originating; (b) Credit Approval; (c) Credit Administration; (d) Risk Management; and (e) Monitoring, Collection and Recovery activities.

CREDIT RISK MANAGEMENT An independent Credit Risk Management (CRM) Department is in place, at CVC Finance, to scrutinize projects from a risk-weighted point of view and assist the management in creating a high quality credit portfolio and maximize returns from risk assets. Research team of CRM

regularly reviews market situation and exposure of CVC Finance in various industrial sub-sectors. CRM has been segregated from Credit Administration Department in line with Central Bank’s Guidelines. CRM assess credit risks and suggest mitigations before recommendation of every credit proposal while Credit Administration confirms that adequate security documents are in place before disbursement.

CREDIT APPROVAL PROCESS To ensure both speedy service and mitigation of credit risk, the approval process is maintained through a multilayer system. Depending on the size of the loan, a multilayer approval system is designed. As smaller loans are very frequent and comparatively less risky, lower sanctioning authority is set to improve the turnaround time and associated risk. Bigger loans require more scrutiny as the associated risk is higher. So sanctioning authority is higher as well.

Quantitative DisclosureIndustry-wise distribution of exposures, broken down by types of credit exposure as on December 31, 2020:

Sector Amount in CroreGarments and knitwear 17.83

Textile 1.68

Food products and process industry. 56.94

Leather and leather goods 1.07

Iron, steel and engineering 66.03

Cement and allied industry 25.67

Telecom and IT 30.78

Paper, Printing & Packaging 0.26

Ship Manufacturing 13.92

Power, gas, water, and sanitary service. 36.54

Trade and commerce 40.52

Agriculture 17.01

Housing 18.59

Hospital 8.34

Service Industry 36.56

Others 25.99

Total 397.72

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5) EQUITIES: BANKING BOOK POSITIONSQualitative DisclosureThe general qualitative disclosure requirement with respect to equity risk, including: Differentiation between holdings on which capital gains are expected and those taken under other objectives including for relationship and strategic reasons; and Total equity shares holdings are for capital gain purpose.Discussion of important policies covering the valuation and accounting of equity holdings

in the banking book positions. This includes the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation as well as significant changes in these practices.Shares are valued at cost prices and if the total cost of a particular share is lower than the market value of that particular share, then provision are maintained as per terms and condition of regulatory authority.

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7) INTEREST RATE IN THE BANKING BOOKQualitative DisclosureThe general qualitative disclosure requirement including the nature of interest risk and key assumptions, including assumptions regarding loan prepayments and behavior of non-maturity deposits. Interest rate risk in the banking book arises from mismatches between the future yield of an assets and their funding cost. Assets Liability Committee (ALCO) monitors the interest rate movement on a regular basis. CVC Finance measure the Interest Rate Risk by calculation Duration Gap i.e. a positive Duration Gap affect company’s profitability adversely with the increment of interest rate and a negative Duration Gap increase the company’s profitability with the reduction of interest rate.

8) OPERATIONAL RISKQualitative DisclosureOperational risk addresses the risk associated with fraud, forgery, which are unauthorized activities, error, omission, system failure and external events among others. Some more operational events are including operational errors, non-compliance with internal regulations, non-compliance of legal requirements; launching new products without adequate operational support.

PARTICULAR AMOUNT

Operational Risk Crore BDT87.76

6) MARKET RISKQualitative DisclosureMarket risk is the risk that may affect company’s earnings and capital due to changes in the market level of interest rates, securities, equities as well as the volatilities of those prices. Volatility of money market, which ultimately imposes upward pressure on interest rate structure, may erode the company’s profitability.

MARKET RISK MANAGEMENT SYSTEMAsset Liability ManagementALCO of the company monitors Balance Sheet and liquidity risk of the company. This Committee also reviews country’s overall economic position, company’s liquidity position, ALM ratios, Interest Rate Risk, Capital Adequacy, Deposit Advance Growth, Cost of Deposit, Market Interest Rate, Loan Loss Provision adequacy, deposit and lending pricing strategy.Market AnalysisMarket analysis over interest rate movements are reviewed by the Treasury of the company. The type and level of mismatch interest rate risk of the company is managed and monitored from two perspectives, being an economic value perspective and an earning perspective.GAP AnalysisALCO has established guidelines in line with central Bank’s policy for the management of assets and liabilities, monitoring and minimizing interest rate risks at an acceptable level. ALCO in its regular monthly meeting analyzes Interest Rate Sensitivity by computing GAP i.e. the difference between Rate Sensitive Assets and Rate Sensitive Liability and take decision of enhancing or reducing the GAP according to prevailing market situation aiming to mitigate interest rate risk.Continuous MonitoringCompany’s treasury manages and controls day-to-day trading activities under the supervision of ALCO that ensures continuous monitoring of the level of assumed risks.

Quantitative Disclosur

PARTICULAR AMOUNT

Market Risk Crore BDT3.80

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Report of the

Audit Committee Board Audit committee of CVC Finance Limited works as the subcommittee of the Board. It efforts to ensure implementation of the process set out in the business plan and policies within its scope. The committee also looks after compliance of corporate governance guidelines and rules & regulations of the Company’s regulators. Scope of work of the Audit Committee

The scope of work of the Audit Committee of CVC Finance is determined by directives from its principal regulators, the Bangladesh Bank (BB) and the Board. These include, but not limited to, exercising oversight over:

The internal control system and risk management process of the company

Financial reporting

The activities of Internal Control and Compliance (ICC) Department.

Interaction with external auditors (hiring and performance)

Compliance with regulatory requirements

Other responsibilities,e.g. review management letter issued by auditor, inspection report of Bangladesh Bank, etc.

The Committee presents a summary of its activities to shareholders and other interested parties by means of this report.

MEETINGSDuring the period under review (1st January 2020 to 31st December 2020) 4 (four) meetings of the Committee were held. The Managing Director attended the meetings by invitation. Members of the senior management of the Company were invited to participate at meetings as and when required. The proceedings of the Board Audit Committee meetings are regularly reported to the Board of Directors.

Activities

As set out by Bangladesh Bank in addition to other responsibilities the Committee is responsible for the following matters.

FINANCIAL REPORTING:The Committee Supports the Board of Directors to discharge their responsibilities for preparation of Financial Statements by:

Reviewing the systems and procedures to ensure that all transactions are completely and accurately recorded in the books of accounts;

Determining the most appropriate accounting policies;

Strict adherence and compliance with the Bangladesh Accounting Standards and recommended best accounting practices; and

Reviewing the Annual Financial Statements and the Quarterly Financial Statements prepared for publication, prior to submission to the Board.

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INTERNAL CONTROLS AND RISK MANAGEMENTThe Board believes, with concurrence of the Audit Committee, that the systems of internal control, including financial, operational and compliance control and risk management system maintained by the Company’s management that was in place throughout the financial year and up to the date of this report, is adequate to meet the needs of the Company in its current business environment. However, the Board also notes that no system of internal controls can provide absolute assurance in this regard, or absolute assurance against the occurrence of material errors, poor judgment in decision making, human error, losses fraud or other irregularities. The Committee:

Reviews the processes for identification, recording, evaluation and management of all significant risks throughout the Company and other entities of the group;

Evaluates the procedures made by the management for building a suitable management information system (MIS) including computerization system and its application;

Considers the internal control strategies recommended by internal auditor and external auditor and

Reviews the existing risk management procedures for ensuring an effective internal checking system.

INTERNAL AUDIT The Audit Committee approves the terms

of reference of internal audit, audit plan and reviews the effectiveness of the internal audit functions.

The Committee supports the internal audit team to work on the adequacy of the system of internal control, risk based audit approach and ensures that no unjustified restrictions or limitations are made.

The Committee also reviews the findings and recommendations made by the internal auditors for removing and controlling the irregularities detected.

INTERNAL AUDIT:

The Audit Committee approves the terms of reference of internal audit, audit plan and reviews the effectiveness of the internal audit functions.

The Committee supports the internal audit team to work on the adequacy of the system of internal control, risk based audit approach and ensures that no unjustified restrictions or limitations are made.

The Committee also reviews the findings and recommendations made by the internal auditors for removing and controlling the irregularities detected.

EXTERNAL AUDIT:

The Committee reviews the auditing performance of the external auditors and their audit reports;

It also reviews the Findings and recommendations made by the external auditor for removing the irregularities detected and takes necessary actions.

It make recommendation to the Board about appointment of the external auditors.

Hoda Vasi Chowdhury & Co., Chartered Accountants acted as external auditor for the period according to their appointment. The external auditors are not engaged by the Company on any material non-audit work such as:

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EXTERNAL AUDIT The Committee reviews the auditing performance of the external auditors and their audit

reports. It also reviews the Findings and recommendations made by the external auditor for

removing the irregularities detected and takes necessary actions. It make recommendation to the Board about appointment of the external auditors.

Appraisal or valuation services or fairness opinions: Financial information systems design and implementation; Book-keeping or other services related to the accounting records or financial statement; and

internal audit services; Broker-dealer services; Internal audit services, etc.

REGULATORY COMPLIANCE:

The Committee ensures that Company’s procedures are in place to ensure compliance with laws and regulations formed by the regulatory authorities (Bangladesh Bank and other bodies) and internal policies approved by the Board. The Committee monitors due compliance with all requirements through different reports submitted to it.

OTHER RESPONSIBILITIES:

Audit Committee examines the management letter submitted by external auditor, inspection report of Bangladesh Bank, internal audit report and any other report they think to be reviewed. It also reports to the board regarding findings, recommendations, regularization of error and omissions, fraud and forgeries and other irregularities as detected. It also performs other oversight functions as requested by the board and evaluates its performance on regular basis.

ACKNOWLEDGEMENT

The Audit Committee of the Board expressed its sincere thanks to the members of the Board, Management and the auditors for their relentless support in carrying out the Committee’s duties and responsibilities.

MR. TOFAYEL KABIR KHANChairman, Audit Committee

HODA VASI CHOWDHURY & CO., Chartered Accountants acted as external auditor for the period according to their appointment. The external auditors are not engaged by the Company on any material non-audit work such as:

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Directors

Report 2020ECONOMY, FINANCIAL SECTOR & BUSINESS OUTLOOK:

2020 was an unprecedented year with the global Covid-19 pandemic creating upheavals in everyone’s daily life. Businesses and individuals were deeply affected as countries impose stringent controls including economic lockdown to curb the spread of coronavirus. Many business operations were disrupted and the impact was extended to staff and their families. The economy of Bangladesh yet has shown a strong resilience and managed to experience a moderate GDP growth of 5.24% in FY 2020. Despite facing the pandemic induced challenges in all economic sectors, high remittance inflow and lower imports contributed to offset the lower exports resulting in record foreign exchange reserves of USD 43 billion.Suitable and timely measures taken by the government and Bangladesh Bank paved the way for the economic recovery of Bangladesh. Stimulus package announced by the government and other initiatives such as borrower’s payment deferral, relaxed classification policy and reducing CRR & repo rate to boost liquidity helped to deal with the initial economic shock. Banks and NBFIs put more efforts on collection and adopted cautious approach in lending due to uncertain environment.Due to loan moratorium facility provided by Bangladesh Bank, the overall NPL ratio stood at 10.51% at the end of June 2020. In 2020, ROA and ROE of the NBFI sector dropped to 0.24% and 2.21% compared to those of 1.04% and 7.64% respectively in 2019. Total deposits decreased by 2.43% in 2020 compared to 2019. On the other hand, Loan and Advances also decreased by 1.28% in 2020 as compared to 2019. Private sector credit grew slowly because of bank/NBFIs’ cautiousness towards quality lending as well as investors’ stickiness to survival strategies during the COVID-19 period instead of expanding their businesses. The NBFI sector, as a whole, was able to maintain

the required level of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) ratios as on June 30, 2020. Some important initiatives taken by Bangladesh Bank in 2020 are as follows:

- Slashing cash reserve ratio (CRR) & Statutory Liquidity Ratio (SLR) ratio requirement. - 360-day special repo facility for banks and financial institutions.- Payment by deferral (PBD) facility on loan payments for 2020 without downgrading or classifying the borrowers. - Instruction on maintaining status quo of loan classification as of 31 December 2019 without downgrading or classifying the borrowers. - Instruction for waiver of late payment fee/charge/penal interest/additional revenue or any other fee/charge due to delayed credit card bill payment. - Implementation of government’s stimulus packages worth more than BDT 1.21 trillion mainly for export oriented industry, large industries and service sector. - Refinance Facilities under Stimulus Packages provided to banks for disbursement to target sectors. - Setting cap on distribution of cash and stock dividend. Banking and NBFI sector has already been struggling with high volumes of NPL, weak corporate governance, major scams and various irregularities. Banks and NBFIs played a crucial role in implementing different stimulus packages announced by the government. Managing stressed assets and expediting the recovery process will be high priority for the banking and NBFI sector in the post-moratorium era. Moreover, constant supervision and vigilance are required for channeling funds of the stimulus packages to the affected large industries, CMSME, and the agriculture sector.

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FINANCIAL PERFORMANCE OF CVC FINANCE:

Despite intensified challenges, CVC Finance managed its portfolio efficiently closing the year 2020 with an NPL of 4.66% which is lower than that of industry average (10.51% as of June 2020).The prime focus during the year has been upholding service excellence, maintaining asset quality, recovering classified and written off loans, mobilization of deposits, and rationalizing costs. A brief review of financial performances of the company are as follows:

- Net interest income (NII) which contributed 33.98% of total operating income increased by 80.14% in 2020 compared to last year.

- Non-interest income which contributed rest 66.03% decreased by 25.95% mainly due to a fall in loan disbursement fees and other income following increased focus on prudent lending during the year considering the Covid-19 stricken operating environment.

- Compared to last year, operating income decreased by 7.43% and operating expense increased by 8.49%. As a consequence, operating profit decreased by 21.64% and reached BDT 87.49 million in 2020. - Maintenance of loan portfolio at the same level requiring lower incremental general provision to be reserved. Provisions have been maintained for classified loans as per the provisioning policy set forth by the Central Bank. Incremental provision of BDT 16.11 mn was charged during the year, which was BDT 33.12 mn lower than that of 2019.

- Finally, profit after tax (PAT) decreased by 20.66% and reached to 29.71 million in 2020.

- ROA and ROE have decreased in 2020 due to higher growth of equity compared to growth of profit after tax. At the end of 2020, Return on Asset (ROA) was 0.54% and Return on Equity (ROE) was 2.35%

CORPORATE GOVERNANCE AND RISK MANAGEMENT:Robust internal control system helps CVC Finance to ensure achieving goals and aspirations sustainably. This control system also ensures that the company complies with local laws and regulations as well as policies, plans, internal and external rules, guidelines and procedures, and subsequently decrease the risk of unexpected loss or damage to the financial institution. The Board has delegated the responsibility of overall supervision of internal control system to Audit Committee of the Board. The key functionalities that have been established in reviewing adequacy and integrity of the system of internal control.

Performance 2019 2020

Net Interest Income 36.9 66.47

Non-Interest Income 174.43 129.17

Operating Income 211.33 195.63

Operating Expenses 99.69 108.15

Cost to Income 47.17% 55.28%

PBT & Provisions 111.64 87.48

Provisions 49.23 16.11

PBT 62.41 71.37

Profit After Tax 37.44 29.70

ROA 0.66% 0.54%

ROE 3.04% 2.35%

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- Different committees have been formed consisting of relative stakeholders with expertise on the subject matter to assist the Board in guiding the company’s operation in line with corporate mission, vision and strategies. -The internal audit department of the company checks for compliance with policies and procedures and the effectiveness of the internal control system on regular basis and highlights significant findings in respect of any non-compliance. - The Audit Committee of the Board reviews the internal control findings identified by the Internal Audit, Inspection Team of Bangladesh Bank, External Auditors and Management, and evaluates the adequacy and effectiveness of the risk management and internal control systems. - The Board of Directors holds meetings at suitable intervals with senior management, internal auditors, external auditors and the Audit Committee for evaluating the effectiveness of internal control system and provides necessary guidance. - The internal audit department has direct access to the Audit Committee as and when required to ensure submission of internal audit findings to the Audit Committee without any management intervention.

FINANCIAL REPORTING:- The Financial Statements (FS) are prepared in accordance with applicable International Financial Reporting Standards (IFRSs) and relevant circulars/instructions issued by Bangladesh Bank (BB) and any departure from IFRS due to BB regulation has been adequately disclosed in the notes to the FS. - Proper books of account as required by law have been maintained by CVC Finance. - Appropriate accounting policies have been consistently applied in preparation of the financial statements.

CSR ACTIVITIES:We continue to focus our efforts on driving sustainability and uplifting the communities. In 2020, we have contributed BDT 1 million to various organizations including donating BDT 500,000 to Prime Minister’s Relief Fund. We also partnered with SAJIDA Foundation to enhance the infrastructure of 50 bed Covid-19 dedicated SAJIDA Narayanganj hospital.

We have collaborated with JAAGO Foundation to arrange an art competition among 50 underprivileged students of JAAGO named “Golden Brush” to support their mental health through co-curricular activity. The best 12 paintings published on the desk calendar of CVC Finance Limited on 2021. We also sponsored online two hour free self-defense classes arranged by Wander Woman where 1000 female participants joined across the country.

CONTRIBUTION TO NATIONAL EXCHEQUER:CVC Finance regularly pays corporate tax on time, sometime even before it falls due if demanded by the tax authority. We also deposit excise duty, withheld tax and VAT to govt. exchequer on time deducted from customers, employees’ salary as well as on bills from third parties including vendors. During the calendar year 2020 we contributed BDT 41.67 million to national exchequer as tax, VAT and excise duty. On behalf of the Board of Directors.


AUDITEDFINANCIAL

STATEMENTS

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Independent Auditor’s Report to the Shareholders of CVC Finance Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of CVC Finance Limited (the “Company”), which comprise balance sheet as at 31 December 2020, and the profit and loss account, statement of changes in equity and cash flow statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2020, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as explained in note 2.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), Ban-gladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank, and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code and the Institute of Chartered Accountants of Bangladesh (ICAB) Bye Laws. We believe that the audit evidence we have obtained is sufficient and appropri-ate to provide a basis for our opinion.

Other matters

The financial statements of the company for the year ended 31 December 2019, were audited by the another auditor who expressed an unmodified opinion on those statements on 23 February 2020.

Other information

Management is responsible for the other information. The other information comprises all of the information in the Annual Report other than the financial statements and our auditor’s report thereon. The Annual Report is expected to be made available to us after the date of this auditor’s report.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is mate-rially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. When we read the annual report, if we conclude that there is a material misstate-ment therein, we are required to communicate the matter to the board of directors of the company.

Responsibilities of Management and Those Charged with Governance for the Financial State-ments and Internal Controls

Management is responsible for the preparation and fair presentation of the financial statements of the Com-pany in accordance with IFRSs as explained in note 2, and for such internal control as management deter-mines is necessary to enable the preparation of financial statements that are free from material misstate-ment, whether due to fraud or error.

In preparing these financial statements, management is 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 management either intends to liquidate the Company or to cease opera-tions, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Chartered Accountants

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Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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 ISAs 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 financial statements.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evi-dence 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.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting esti-mates and related disclosures made by management.

• Conclude on the appropriateness of management’s 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 auditor’s report to the related disclosures in the 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 auditor’s 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 financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance 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.

Report on other Legal and Regulatory Requirements

In accordance with the Companies Act, 1994, the Securities and Exchange Rules 1987, the Financial Institu-tions Act, 1993 and the rules and regulations issued by Bangladesh Bank, 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;

(ii) in our opinion, proper books of account as required by law have been kept by the Company so far as it appeared from our examination of those books;

(iii) the balance sheet and profit and loss account together with the annexed notes dealt with by the re-port are in agreement with the books of account and returns;

(iv) the expenditures incurred were for the purpose of the Company’s business for the year;

(v) the financial statements of the Company have been drawn up in conformity with the Financial Insti-tutions Act, 1993 and in accordance with the accounting rules and regulations which were issued by Bangladesh Bank to the extent applicable to the Company;

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(vi) adequate provisions have been made for loans, advances, leases, investment and other assets which are, in our opinion, doubtful of recovery and Bangladesh Bank’s instructions in this regard have been followed properly;

(vii) the financial statements of the Company conform to the prescribed standards set in the accounting regulations which were issued by Bangladesh Bank after consultation with the professional account-ing bodies of Bangladesh;

(viii) the records and statements which were submitted by the branches have been properly maintained and recorded in the financial statements;

(ix) statements sent to Bangladesh Bank have been checked on sample basis and no inaccuracy has come to our attention;

(x) taxes and other duties were collect to be and deposited in the Government treasury by the Company as per Government instructions found satisfactory based on test checking;

(xi) nothing has come to our attention that the Company has adopted any unethical means i.e. ‘window dressing’ to inflate the profit and mismatch between the maturity of assets and liabilities;

(xii) proper measures have been taken to eliminate the irregularities mentioned in the inspection report of Bangladesh Bank and the instructions which were issued by Bangladesh Bank and other regulatory authorities have been complied properly as disclosed to us by management;

(xiii) based on our work as mentioned above under the auditor’s responsibility section, the internal control and the compliance of the Company is satisfactory, and effective measures have been taken to pre-vent possible material fraud, forgery and internal policies are being followed appropriately;

(xiv) the Company has complied with relevant laws pertaining to capital, reserve and net worth, cash and liquid assets and procedure for sanctioning and disbursing loans/leases found satisfactory;

(xv) we have reviewed over 80% of the risk weighted assets of the Company and we have spent around 1,000 person hours for the audit of the books and accounts of the Company;

(xvi) the Company has complied with relevant instructions which were issued by Bangladesh Bank rele-vant to classification, provisioning and calculation of interest suspense;

(xvii) the Company has complied with the ‘First Schedule’ of the Financial Institutions Act, 1993 in prepar-ing these financial statements; and

(xviii) all other issues which in our opinion are important for the stakeholders of the Company have been adequately disclosed in the audit report.

Dhaka, 19 June, 2021

DVC: 2106231512AS939749

SHAIKH HASIBUR RAHMAN, FCAEnrolment no. 1512Hoda Vasi Chowdhury & CoChartered Accountants

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PROPERTY AND ASSETS

Cash 3.0 21,207,454 38,041,464

Cash in hand (including foreign currencies) 3.1 194,195 128,673

Balance with Bangladesh Bank & and its agent banks 3.2 21,013,259 37,912,791

(Including foreign currencies)

Balance with other banks and financial institutions 4.0 1,321,215,617 1,304,894,177

In Bangladesh 4.1 1,321,215,617 1,304,894,177

Outside Bangladesh 4.2 - -

Money at Call on Short Notice 5.0 - -

Investments 6.0 13,235,822 880,685

Government 6.1 - -

Others 6.2 13,235,822 880,685

Loans, advances and leases 3,977,217,125 4,133,964,755

Loans, cash credits, overdrafts, leases etc. 7.0 3,977,217,125 4,133,964,755

Bills purchased and discounted - -

Fixed assets including premises, furniture and fix-tures 8.0 27,862,481 32,113,893

Other assets 9.0 113,196,045 125,748,740

Non-business assets - -

Total assets 5,473,934,544 5,635,643,713

PARTICULARS Notes December 31, 2020 December 31, 2019

Amount in BDT

BALANCE SHEET

CVC FINANCE LIMITED

As at 31 December, 2020

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LIABILITIES AND CAPITAL

Liabilities

Borrowings from other banks, financial institutions 10.0 2,175,226,559 2,235,478,288

and agents

Deposits and other accounts 11.0 1,526,914,126 1,661,491,350

Current deposits - -

Bills payable - -

Savings deposits 11.1 761,000 -

Term deposits 11.2 1,428,975,852 1,567,853,764

Bearer certificates of deposits - -

Other deposits 11.3 97,177,274 93,637,586

Other liabilities 12.0 509,816,089 506,401,378

Total liabilities 4,211,956,774 4,403,371,016

Capital/Shareholders’ equity 1,261,977,770 1,232,272,697

Paid-up Capital 13.2 1,155,000,000 1,155,000,000

Statutory reserve 14.0 43,247,421 37,306,406

Revaluation reserve 15.0 - -

Retained earnings 16.0 63,730,349 39,966,291

Total liabilities & Shareholders’ equity 5,473,934,544 5,635,643,713


Amount in BDT

153Page-

The annexed notes from an integral part of these financial statements.


Amount in BDT

CONTINGENT LIABILITIES

Acceptances and endorsements - -

Letters of guarantee - -

Irrevocable letters of credit - -

Bills for collection - -

Other contingent liabilities - -

- -

OTHER COMMITMENTS

Documentary credits and short term trade related transactions

- -

Forward assets purchased and forward deposits placed - -

Undrawn note issuance and revolving underwriting facilities

- -

Spot and foreign exchange rate contract - -

Undrawn formal standby facilities, credit lines and other - - Commitments

- -

Total Off-Balance Sheet items including contingent liabilities

- -

Net Asset Value Per Share (NAVPS) 35.0 10.93 10.67

OFF BALANCE SHEET ITEMS

CVC FINANCE LIMITED

Md. Shakhawat HossainHead of Finance & Accounts

Shah Wareef HossainDMD & Company Secretary

Syed Minhaj AhmedManaging Director

Mahmud HussainChairman


DVC: 2106231512AS939749

Shaikh Hasibur Rahman, FCAEnrolment no. 1512Hoda Vasi Chowdhury & CoChartered Accountants

As at 31 December, 2020

154Page-

Interest income 18.0 502,762,693 492,553,522

Less: Interest expenses on borrowings, deposits etc. 19.0 (436,296,326) (455,650,827)

Net interest income 66,466,367 36,902,695

Investment income 18.1 1,665,304 1,815,107

Commission, exchange and brokerage 20.0 24,030,961 44,861,759

Other operating income 21.0 103,473,348 127,752,468

129,169,613 174,429,333

Total Operating income 195,635,980 211,332,028

Salaries and allowances 23.0 64,316,384 58,801,693

Rent, taxes,insurances, electricity etc. 24.0 17,482,242 17,240,002

Postage, stamps, telecommunication etc. 25.0 629,510 679,774

Stationery, printings, advertisements etc. 26.0 1,057,499 2,727,800

Managing Director’s salary and allowances 27.0 6,705,000 3,386,000

Directors’ fees 28.0 952,000 1,224,000

Auditors’ fees 29.0 115,000 103,500

Depreciation and repair of company’s assets 30.0 9,038,863 6,346,130

Other operating expenses 31.0 7,853,836 9,182,102

Total operating expenses 108,150,335 99,691,001

Profit before provision 87,485,645 111,641,027

Provision for loan, advances and leases 32.0 16,062,007 49,058,812

Provision for diminution in value of investments 32.1 50,128 174,432

Other provision - -

Total provision 16,112,135 49,233,244

Profit before taxes 71,373,510 62,407,783

Provision for taxation 33.0 41,668,437 24,963,113

Current tax 41,668,437 24,963,113

Deferred tax - -

Net profit after taxation 29,705,073 37,444,670

Retained surplus brought forward from previous year 39,966,291 115,010,555

69,671,364 152,455,225

PROFIT AND LOSS ACCOUNT

CVC FINANCE LIMITED


Amount in BDT

For the year ended 31 December, 2020

155Page-

Appropriations

Statutory reserve 5,941,015 7,488,934

Dividend equalization fund - 105,000,000

Special reserve fund - -

Retained surplus 63,730,349 39,966,291

69,671,364 152,455,225

Earning Per Share (EPS) 34.0 0.26 0.32


Amount in BDT







DVC: 2106231512AS939749

Shaikh Hasibur Rahman, FCAEnrolment no. 1512Hoda Vasi Chowdhury & CoChartered Accountants

156Page-

CASH FLOW STATEMENT

CVC FINANCE LIMITED

A.Cash flows from operating activities

Interest received 419,489,904 492,553,522

Interest paid (394,584,185) (455,650,827)

Fees and commission received 24,030,961 44,861,759

Cash paid to emoloyees (71,021,384) (62,187,693)

Cash paid to suppliers (1,687,009) (2,727,800)

Income taxes paid (17,280,843) (51,770,179)

Received from other operating activities 105,138,652 127,752,468

Payments for other operating activities (26,403,079) (28,429,378)

Cash generated from operating activities before changes in operating assets and liabilities 37,683,017 64,401,871

Increase/decrease in operating assets and liabilities

Statutory deposit - -

Trading securities - -

Loans, advances and leases 156,747,630 (3,008,838,625)

Other assets 12,552,696 9,779,324

Deposit and other accounts (134,577,224) 952,424,094

Net drawdown of short term loans (64,764,632) 964,575,140

Other liabilities on account of customers (58,694,890) 93,211,858

Other liabilities 5,323,613 113,086,556

(83,412,807) (875,761,653)

Net cash from operating activities (45,729,789) (811,359,782)

B.Cash flows from investing activities

Proceeds from sale of securities 5,097,522 1,815,107

Payments for purchase of securities (12,355,137) (880,685)

Purchase of fixed assets including premises, furniture and fix-tures (4,787,451) (12,140,953)

Proceeds from sale of fixed assets including premises, furniture and fixtures -

-

(Increase)/decrease regarding purchase and sale of subsidiary - -

Net cash used in investing activities (12,045,066) (11,206,531)

PARTICULARS December 31, 2020 December 31, 2019

Amount in BDT

For the year ended 31 December, 2020

157Page-

C.Cash flows from financing activities

Receipt of borrowings from other banks, financial institutions and agents 108,914,264 1,160,991,314

Repayment of borrowings from other banks, financial institu-tions and agents (51,651,978) (231,659,851)

Net cash from financing activities 57,262,286 929,331,463

D.Net increase/(Decrease) in cash and cash equivalents (A+B+C) (512,568) 106,765,150

Effects of exchange rate changes on cash and equivalents - -

E.Cash and cash equivalents at beginning of the year 1,342,935,640 1,236,170,489

F.Cash and cash equivalents at the end of the year (D+E) 1,342,423,071 1,342,935,639

Cash and cash equivalents at the end of the year

Cash in hand (including foreign currencies) 194,195 128,673

Balance with Bangladesh Bank and its agent banks (including foreign currencies) 21,013,259 37,912,791

Balance with other banks and financial institutions 1,321,215,617 1,304,894,176

Money at call and short notice - -

1,342,423,071 1,342,935,640


Amount in BDT






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161Page-

NOTES TO THE FINANCIAL STATEMENTCVC FINANCE LIMITED

1. Company and its activities

1.1 Domicile, legal form, country of incorporation and status of the company

CVC Finance Limited was incorporated in Bangladesh as a public limited company on 31 March 2015 under the companies Act, 1994 vide registration # C-122113/15 after initial approval and issuance of letter of intent from Bangladesh Bank. The registered office of the company is situated at Safura Tower (Level – 5), 20 Kemal Ataturk Avenue, Banani, Dhaka - 1213. The Company is registered as a Financial Institution under the Financial Institutions Act, 1993. However subsequently the FI license was issued in July, 2015 and full operation of the Company started in February 2016.

1.2 Address of Corporate office and place of business of the company

The Corporate office of the company is at Green Grandeur Tower (Level 7 & 10), 58/E, Kamal Ataturk Avenue, Banani, Dhaka-1213, Bangladesh. Company’s principal office is also situated at the same address and at present, the company has no branch office in Bangladesh or abroad.

1.3 Principal activities of the company

The company concentrates its activities for full payout leases and term finances, extended based on recovering the full capital cost of the asset/finance, plus imputed interest charges. The company eventually will seek to broaden its leasing and financing services by entering into vendor programs with asset suppliers, underwriters, brokers, leveraged leases, lease syndications, sale and lease back finances, financing for business expansions and temporarily financed assets. The company may extend guarantees for lease/finance obligations to other institutions/companies subject to the Laws and Rules of the Government of the Peoples’ Republic of Bangladesh.

1.4 Nature of operation of the company

The company extends lease finance for all types of machinery, equipment, household durables including vehicles for the purpose of industrial, commercial, agricultural, and personal use in Bangladesh and also term finance to its clients within the purview of the Law.

2 Basis of preparation and significant accounting policies.

2.1 Statement of compliance

The financial statements of the company have been prepared on a going concern basis following accrual basis of accounting except for cash flow statement and investment in marketable securities which are stated at market value in accordance with International Financial Reporting Standards (IFRS) except the circumstances where local regulations differ, and in compliance with the companies Act, 1994, the financial Institutions Act, 1993 and other applicable laws and regulations.

The presentation of the financial statements has been made as per the requirements of DFIM Circular No: 11, dated December 23, 2009 issued by the Department of Financial Institutions and Markets (DFIM) of the Bangladesh Bank. The activities and accounting heads mentioned in the prescribed form, which are not applicable for the financial institutions, have been kept blank in the financial statements.

The requirements of accounting standards as per IFRS that have been departed to comply with Bangladesh Bank requirements have been disclosed in detail in Note-2.3. However, this departure with IFRS has been made by following all of the relevant provisions of IAS-1 and the details disclosures are given in Note-2.3 by following the provision of Para 20 of IAS 1 Presentation of Financial Statements.

2.2 Basis of measurement

This financial statements have been prepared based on International Accounting Standards (IASs) and International Financial Reporting Standards (IFRS) and no adjustment has been made for inflationary factors affecting the financial statements. The accounting policies, unless otherwise stated, have been consistently applied by the Company and are consistent with those of the previous year.

2.3 Disclosure of deviations from few requirements of IFRS due to mandatory compliance with Bangladesh Bank’s requirements

Bangladesh Bank (the local Central Bank) is the prime regulatory body for Financial Institution in Bangladesh. Some requirements of Bangladesh Bank’s rules and regulations contradict with those of financial instruments and general provision standards of IFRS. As such the company has departed from those contradictory requirements of IFRS in order to comply with the rules and regulations of Bangladesh Bank, which are disclosed below along with financial impact where applicable:

As at and for the year ended 31 December, 2020

162Page-

SL

. N

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onth

s af

ter t

he re

port

ing

date

); or

b) fu

ll lif

etim

e ex

pect

ed c

redi

t los

ses

(exp

ecte

d cr

edit

loss

es th

at re

sult

from

all

poss

ible

def

ault

even

ts o

ver t

he li

fe o

f the

fin

anci

al in

stru

men

t).

As

per F

ID c

ircul

ar N

o. 0

8, d

ated

03

Aug

ust 2

00

2, F

ID c

ircul

ar N

o. 0

3,

date

d 0

3 M

ay 2

00

6 a

nd F

ID c

ircul

ar

No.

03,

dat

ed 2

9 A

pril

2013

, a g

ener

al

prov

isio

n at

0.2

5%

to 5

% u

nder

di

ffere

nt c

ateg

orie

s of

unc

lass

ified

lo

ans

(goo

d/st

anda

rd lo

ans)

has

to b

e m

aint

aine

d irr

espe

ctiv

e of

obj

ectiv

e ev

iden

ce o

f im

pairm

ent o

n le

ase,

lo

ans

and

adva

nces

.

Als

o pr

ovis

ion

for s

ub-s

tand

ard

inve

stm

ents

, dou

btfu

l inv

estm

ents

an

d ba

d lo

sses

has

to b

e pr

ovid

ed

at 2

0%

, 50

% a

nd 1

00

% re

spec

tivel

y fo

r inv

estm

ents

dep

endi

ng o

n th

e du

ratio

n of

ove

rdue

.

In fi

nanc

ial s

tate

men

ts,

an a

mou

nt o

f Tak

a 16

.06

m

illio

n ha

s be

en in

crea

sed

agai

nst g

ener

al p

rovi

sion

fo

r lea

ses,

loan

s an

d ad

vanc

es fo

r the

yea

r end

31

.12.2

020

. Acc

umul

ated

pr

ovis

ion

for l

ease

s,

loan

s an

d ad

vanc

es a

s at

31

.12.2

020

sta

nd a

t Tak

a 12

3.6

1 m

illio

n.

163Page-

SL

. N

atu

re o

f D

ep

art

ure

Tit

le o

f IF

RS

Tre

atm

en

t o

f IF

RS

Tre

atm

en

t A

do

pte

d a

s p

er

Ba

ng

lad

esh

Ba

nk

Fin

an

cia

l o

r P

rese

nta

tio

n

Eff

ect

of

the

De

pa

rtu

re

2Re

cogn

ition

of

inte

rest

in

com

e fo

r SM

A a

nd

clas

sifie

d le

ase,

loan

s an

d ad

vanc

es

IFR

S 9

“F

inan

cial

In

stru

men

ts”

Inco

me

from

fina

ncia

l ass

ets

mea

sure

d at

am

ortiz

ed c

ost i

s re

cogn

ized

thro

ugh

effec

tive

inte

rest

rate

met

hod

over

the

term

of t

he in

vest

men

t. O

nce

a fin

anci

al

asse

t is

impa

ired,

inve

stm

ent i

ncom

e is

re

cogn

ized

in p

rofit

and

loss

acc

ount

on

the

sam

e ba

sis

base

d on

revi

sed

carr

ying

am

ount

.

As

per F

ID c

ircul

ar N

o. 0

3, d

ated

0

3 M

ay 2

00

6, o

nce

an in

vest

men

t on

leas

es, l

oans

and

adv

ance

s is

te

rmed

as

“Spe

cial

Men

tion

Acc

ount

(S

MA

)”, in

tere

st in

com

e fr

om s

uch

inve

stm

ents

are

not

allo

wed

to b

e re

cogn

ized

as

inco

me,

rath

er th

e re

spec

tive

amou

nt n

eeds

to b

e cr

edite

d as

a li

abili

ty a

ccou

nt li

ke:

inte

rest

sus

pens

e ac

coun

t.

Dur

ing

the

year

an

amou

nt

of T

K. 1

13,6

59,

862/

- re

cogn

ized

as

a lia

bilit

y in

the

inte

rest

sus

pens

e ac

coun

t.

3Pr

esen

tatio

n of

cas

h an

d ca

sh

equi

vale

nt

IAS

7 “S

tate

men

t of

Cas

h Fl

ows”

Cas

h eq

uiva

lent

are

sho

rt te

rm, h

ighl

y liq

uid

inve

stm

ents

that

are

read

ily

conv

ertib

le to

kno

wn

amou

nts

of c

ash

and

only

incl

ude

thos

e in

vest

men

ts w

hich

are

fo

r a s

hort

tenu

re li

ke: 3

mon

ths

or le

ss

perio

d.

In th

e lig

ht o

f abo

ve, b

alan

ce w

ith

Ban

glad

esh

Ban

k an

d fix

ed te

rm d

epos

its

shou

ld b

e tr

eate

d as

inve

stm

ent a

sset

ra

ther

than

cas

h eq

uiva

lent

as

it is

illiq

uid

asse

t and

not

ava

ilabl

e fo

r use

in d

ay to

da

y op

erat

ions

.

Ban

glad

esh

Ban

k ha

s is

sued

te

mpl

ates

for fi

nanc

ial s

tate

men

ts

vide

DFI

M c

ircul

ar N

o. 1

1, da

ted

23

Dec

embe

r 20

09

whi

ch w

ill s

tric

tly b

e fo

llow

ed b

y al

l ban

ks a

nd N

BFI

s.

The

tem

plat

es o

f fina

ncia

l sta

tem

ents

pr

ovid

ed d

etai

l pre

sent

atio

n fo

r st

atem

ent o

f cas

h flo

ws.

Fina

ncia

l Sta

tem

ents

fo

r 31.1

2.20

20 a

nd

corr

espo

ndin

g ye

ar

31.12

.20

19 h

ave

been

pr

epar

ed a

s pe

r gui

delin

e (D

FIM

circ

ular

No.

11,

date

d 23

Dec

embe

r 20

09

) of

Ban

glad

esh

Ban

k.

164Page-

SL

. N

atu

re o

f D

ep

art

ure

Tit

le o

f IF

RS

Tre

atm

en

t o

f IF

RS

Tre

atm

en

t A

do

pte

d a

s p

er

Ba

ng

lad

esh

Ba

nk

Fin

an

cia

l o

r P

rese

nta

tio

n

Eff

ect

of

the

De

pa

rtu

re

4M

easu

rem

ent

of d

efer

red

tax

asse

t

IAS

12

“Inc

ome

Tax”

A d

efer

red

tax

asse

t sha

ll be

reco

gniz

ed

for a

ll de

duct

ible

tem

pora

ry d

iffer

ence

s to

th

e ex

tent

that

it is

pro

babl

e th

at ta

xabl

e pr

ofit w

ill b

e av

aila

ble

agai

nst w

hich

the

dedu

ctib

le te

mpo

rary

diff

eren

ce c

an b

e ut

ilize

d.

As

per D

FIM

circ

ular

No.

7, d

ated

31

July

20

11, n

o de

ferr

ed ta

x as

set c

an

be re

cogn

ized

for a

ny d

educ

tible

te

mpo

rary

diff

eren

ce a

gain

st le

ase,

lo

ans

and

adva

nces

.

Dur

ing

this

yea

r the

re is

no

impa

ct in

the

finan

cial

st

atem

ents

due

to th

is

depa

rtur

e as

the

com

pany

di

d no

t con

side

r any

de

duct

ible

tem

pora

ry

diffe

renc

e ag

ains

t lea

ses,

lo

ans

and

adva

nces

.

5Pr

esen

tatio

n an

d di

sclo

sure

of

Fin

anci

al

Stat

emen

ts

and

Fina

ncia

l In

stru

men

ts

IAS

1 “P

rese

ntat

ion

of F

inan

cial

St

atem

ents

”

IFR

S 9

“F

inan

cial

In

stru

men

ts”

and

IFR

S 7

“Fin

anci

al

Inst

rum

ents

: D

iscl

osur

e”

Oth

er C

ompr

ehen

sive

Inco

me

(OC

I) is

a

com

pone

nt o

f fina

ncia

l sta

tem

ents

or

the

elem

ents

of O

CI a

re to

be

incl

uded

in

a s

ingl

e ot

her c

ompr

ehen

sive

inco

me

stat

emen

t.

IAS

1 re

quire

s se

para

te li

ne it

em fo

r in

tang

ible

ass

ets

on th

e fa

ce o

f sta

tem

ent

of fi

nanc

ial p

ositi

on.

IFR

S 9

and

IFR

S 7

requ

ire s

peci

fic

pres

enta

tion

and

disc

losu

re re

latin

g to

all

finan

cial

inst

rum

ents

.

Ban

glad

esh

Ban

k ha

s is

sued

te

mpl

ates

for fi

nanc

ial s

tate

men

ts

vide

DFI

M c

ircul

ar N

o. 1

1, da

ted

23

Dec

embe

r 20

09

whi

ch w

ill s

tric

tly b

e fo

llow

ed b

y al

l ban

ks a

nd N

BFI

s.

The

tem

plat

es o

f fina

ncia

l sta

tem

ents

is

sued

by

Ban

glad

esh

Ban

k do

not

in

clud

e ot

her c

ompr

ehen

sive

inco

me

(OC

I) no

r are

the

elem

ents

of o

ther

co

mpr

ehen

sive

inco

me

allo

wed

to

incl

ude

in a

sin

gle

com

preh

ensi

ve

inco

me

stat

emen

t. In

tang

ible

s as

sets

are

not

sep

arat

ely

pres

ente

d on

the

face

of s

tate

men

t of

fina

ncia

l pos

ition

; rat

her i

t is

pres

ente

d al

ong

with

the

line

item

of

fixed

ass

ets.

As

per B

angl

ades

h B

ank

guid

elin

es,

finan

cial

inst

rum

ents

are

cat

egor

ized

, re

cogn

ized

and

mea

sure

d di

ffere

ntly

fr

om th

ose

pres

crib

ed in

IAS

39.

As

such

som

e di

sclo

sure

and

pr

esen

tatio

n re

quire

men

ts o

f IFR

S 7

and

IAS

32 h

ave

not b

een

mad

e in

the

acco

unts

.

Fina

ncia

l Sta

tem

ents

for

the

year

end

31.1

2.20

20

and

corr

espo

ndin

g ye

ar

of 3

1.12.

2019

hav

e be

en

prep

ared

as

per g

uide

line

(DFI

M c

ircul

ar N

o. 1

1, da

ted

23 D

ecem

ber 2

00

9) o

f B

angl

ades

h B

ank.

165Page-

SL

. N

atu

re o

f D

ep

art

ure

Tit

le o

f IF

RS

Tre

atm

en

t o

f IF

RS

Tre

atm

en

t A

do

pte

d a

s p

er

Ba

ng

lad

esh

Ba

nk

Fin

an

cia

l o

r P

rese

nta

tio

n

Eff

ect

of

the

De

pa

rtu

re

6Pr

epar

atio

n of

“S

tate

men

t of

Cas

h Fl

ows”

IAS

7 “S

tate

men

t of

Cas

h Fl

ows”

The

Cas

h flo

w s

tate

men

t can

be

prep

ared

us

ing

eith

er th

e di

rect

met

hod

or th

e in

dire

ct m

etho

d. T

he p

rese

ntat

ion

is

sele

cted

to p

rese

nt th

ese

cash

flow

s in

a

man

ner t

hat i

s m

ost a

ppro

pria

te fo

r the

bu

sine

ss o

r ind

ustr

y. T

he m

etho

d se

lect

ed

is a

pplie

d co

nsis

tent

ly.

As

per D

FIM

Circ

ular

No.

11,

date

d 23

D

ecem

ber 2

00

9, C

ash

flow

sta

tem

ent

has

been

gui

ded

by th

e B

angl

ades

h B

ank

whi

ch is

the

mix

ture

of d

irect

an

d in

dire

ct m

etho

d.

Fina

ncia

l Sta

tem

ents

for

the

year

end

31.1

2.20

20

and

corr

espo

ndin

g pe

riod

of 2

019

hav

e be

en

prep

ared

as

per g

uide

line

(DFI

M c

ircul

ar N

o. 1

1 da

ted

23 D

ecem

ber 2

00

9) o

f B

angl

ades

h B

ank.

7C

urre

nt/

Non

-cur

rent

di

stin

ctio

n

IAS-

1 “P

rese

ntat

ion

of F

inan

cial

St

atem

ent”

As

per P

ara

60

of I

AS-

1 “P

rese

ntat

ion

of

Fina

ncia

l sta

tem

ent”

An

entit

y sh

all p

rese

nt

curr

ent a

nd n

on-c

urre

nt a

sset

s an

d cu

rren

t an

d no

n-cu

rren

t lia

bilit

ies

as s

epar

ate

clas

sific

atio

n in

its

stat

emen

t of fi

nanc

ial

posi

tion.

As

per D

FIM

circ

ular

No.

11,

date

d 23

D

ecem

ber 2

00

9, B

angl

ades

h B

ank

has

issu

ed te

mpl

ates

for fi

nanc

ial

stat

emen

ts w

hich

is a

pplic

able

for

all t

he F

inan

cial

Inst

itutio

ns. I

n th

is

tem

plat

es th

ere

is n

o cu

rren

t and

non

-cu

rren

t seg

men

tatio

n of

ass

ets

and

liabi

litie

s

Fina

ncia

l Sta

tem

ents

for

the

year

end

31.1

2.20

20

and

corr

espo

ndin

g pe

riod

of 2

019

hav

e be

en

prep

ared

as

per g

uide

line

(DFI

M c

ircul

ar N

o. 1

1, da

ted

23 D

ecem

ber 2

00

9)

of B

angl

ades

h B

ank.

M

oreo

ver,

the

liqui

dity

st

atem

ent s

how

s th

e ag

ing

profi

le o

f all

finan

cial

ass

ets

and

liabi

litie

s fr

om w

here

cu

rren

t/no

n-cu

rren

t por

tion

of a

sset

s an

d lia

bilit

ies

can

be o

btai

ned.

166Page-

SL

. N

atu

re o

f D

ep

art

ure

Tit

le o

f IF

RS

Tre

atm

en

t o

f IF

RS

Tre

atm

en

t A

do

pte

d a

s p

er

Ba

ng

lad

esh

Ba

nk

Fin

an

cia

l o

r P

rese

nta

tio

n

Eff

ect

of

the

De

pa

rtu

re

8O

ff-ba

lanc

e sh

eet i

tem

sIA

S 1

“Pre

sent

atio

n of

Fin

anci

al

Stat

emen

ts”

Ther

e is

no

conc

ept o

f off-

bala

nce

shee

t ite

ms

in a

ny IF

RS;

hen

ce th

ere

is n

o re

quire

men

t for

dis

clos

ure

of o

ff-ba

lanc

e sh

eet i

tem

s on

the

face

of t

he b

alan

ce

shee

t.

As

per D

FIM

Circ

ular

No.

11,

date

d 23

D

ecem

ber 2

00

9, o

ff-ba

lanc

e sh

eet

item

s (e

.g. l

ette

r of c

redi

t, le

tter o

f gu

aran

tee

etc.

) mus

t be

disc

lose

d se

para

tely

on

the

face

of t

he b

alan

ce

shee

t.

Fina

ncia

l Sta

tem

ents

for

the

year

end

31.1

2.20

20

and

corr

espo

ndin

g pe

riod

of 3

1.12.

2019

hav

e be

en

prep

ared

as

per g

uide

line

(DFI

M c

ircul

ar N

o. 1

1, da

ted

23 D

ecem

ber 2

00

9) o

f B

angl

ades

h B

ank.

Ther

e is

no

finan

cial

impa

ct

for t

his

depa

rtur

e bu

t th

ere

is a

dis

clos

ure

in th

e fin

anci

al s

tate

men

ts

9Im

pairm

ent o

f m

argi

n lo

an

(loan

s an

d re

ceiv

able

s

IFR

S 9

“F

inan

cial

in

stru

men

ts”

Mea

sure

men

t afte

r ini

tial r

ecog

nitio

n at

am

ortiz

ed c

ost a

nd re

cord

ing

of c

hang

es

thro

ugh

profi

t and

loss

.

As

per B

angl

ades

h Se

curit

ies

and

Exch

ange

Com

mis

sion

(BSE

C) c

ircul

ar

No.

SEC

/CM

RR

CD

/20

09

-19

3/19

6

date

d 28

Dec

embe

r 20

16, p

rovi

sion

s fo

r the

yea

r 20

16 o

n im

pairm

ent o

f pr

inci

pal p

ortio

n of

mar

gin

loan

may

be

kep

t at 2

0%

on

each

qua

rter

fo

r the

five

qua

rter

s st

artin

g fr

om

Dec

embe

r 20

16.

Ther

e is

no

such

impa

ct fo

r th

is d

epar

ture

.

167Page-

SL

. N

atu

re o

f D

ep

art

ure

Tit

le o

f IF

RS

Tre

atm

en

t o

f IF

RS

Tre

atm

en

t A

do

pte

d a

s p

er

Ba

ng

lad

esh

Ba

nk

Fin

an

cia

l o

r P

rese

nta

tio

n E

ffe

ct

of

the

De

pa

rtu

re

10C

ompl

ete

set

of fi

nanc

ial

stat

emen

ts

IAS

1 “P

rese

ntat

ion

of F

inan

cial

St

atem

ents

”

As

per I

AS

1: “P

rese

ntat

ion

of

Fina

ncia

l Sta

tem

ents

’’ co

mpl

ete

set o

f fina

ncia

l sta

tem

ents

are

i)

stat

emen

t of fi

nanc

ial p

ositi

on,

ii) s

tate

men

t of p

rofit

or l

oss

and

othe

r com

preh

ensi

ve in

com

e,

iii) s

tate

men

t of c

hang

es in

equ

ity,

iv) s

tate

men

t of c

ash

flow

s,

v) n

otes

, com

pris

ing

sign

ifica

nt

acco

untin

g po

licie

s an

d ot

her

expl

anat

ory

info

rmat

ion

and

vi)

stat

emen

t of fi

nanc

ial p

ositi

on

at th

e be

ginn

ing

of p

rece

ding

pe

riod

for r

etro

spec

tive

rest

atem

ent.

As

per D

FIM

circ

ular

No.

11,

date

d 23

Dec

embe

r 20

09,

com

plet

e se

t of

finan

cial

sta

tem

ents

are

i) b

alan

ce s

heet

, ii)

pro

fit a

nd lo

ss a

ccou

nt,

iii) s

tate

men

t of c

ash

flow

s,

iv) s

tate

men

t of c

hang

es in

equ

ity,

v) s

tate

men

t of l

iqui

dity

, vi

) not

es, c

ompr

isin

g si

gnifi

cant

ac

coun

ting

polic

ies

and

othe

r ex

plan

ator

y in

form

atio

n.

Fina

ncia

l Sta

tem

ents

for t

he

year

end

31.1

2.20

20 a

nd

corr

espo

ndin

g pe

riod

of

31.12

.20

19 h

ave

been

pre

pare

d as

per

gui

delin

e (D

FIM

circ

ular

N

o. 1

1, da

ted

23 D

ecem

ber

200

9) o

f Ban

glad

esh

Ban

k.

Ther

e is

no

finan

cial

impa

ct fo

r th

is d

epar

ture

in th

e fin

anci

al

stat

emen

ts.

11In

tang

ible

ass

etIA

S 1

“Pre

sent

atio

n of

Fin

anci

al

Stat

emen

ts”

As

per I

AS

1: “P

rese

ntat

ion

of

Fina

ncia

l Sta

tem

ents

’’ pa

ra 5

4:

the

stat

emen

t of fi

nanc

ial p

ositi

on

shal

l inc

lude

sep

arat

e lin

e ite

m fo

r in

tang

ible

ass

ets.

As

per D

FIM

Circ

ular

No.

11,

date

d 23

D

ecem

ber 2

00

9, th

ere

is n

o op

tion

for

sepa

rate

line

item

for i

ntan

gibl

e as

set

in th

e ba

lanc

e sh

eet.

We

pres

ent i

ntan

gibl

e as

set i

n th

e ba

lanc

e sh

eet a

s pa

rt o

f fixe

d as

sets

an

d pr

ovid

e de

tails

in a

nnex

ure-

A a

s se

para

te li

ne it

em.

Fina

ncia

l Sta

tem

ents

for t

he

year

end

31.1

2.20

20 a

nd

corr

espo

ndin

g pe

riod

of 2

019

ha

ve b

een

prep

ared

as

per

guid

elin

e (D

FIM

circ

ular

No.

11,

date

d 23

Dec

embe

r 20

09

) of

Ban

glad

esh

Ban

k.Th

e In

tang

ible

ass

et (T

ally

ER

P 9

) pre

sent

ed in

the

bala

nce

shee

t as

part

of fi

xed

asse

ts a

nd

prov

ide

deta

ils in

ann

exur

e-A

as

sepa

rate

line

item

.

168Page-

SL

. N

atu

re o

f D

ep

art

ure

Tit

le o

f IF

RS

Tre

atm

en

t o

f IF

RS

Tre

atm

en

t A

do

pte

d a

s p

er

Ba

ng

lad

esh

Ba

nk

Fin

an

cia

l o

r P

rese

nta

tio

n E

ffe

ct

of

the

De

pa

rtu

re

12O

ther

co

mpr

ehen

sive

in

com

e

IAS

1 “P

rese

ntat

ion

of F

inan

cial

St

atem

ents

”

As

per I

AS

1: “P

rese

ntat

ion

of

Fina

ncia

l Sta

tem

ents

’’ O

ther

C

ompr

ehen

sive

Inco

me

(OC

I) is

a c

ompo

nent

of fi

nanc

ial

stat

emen

ts o

r the

ele

men

ts o

f O

CI a

re to

be

incl

uded

in a

sin

gle

OC

I sta

tem

ent.

Ban

glad

esh

Ban

k ha

s is

sued

tem

plat

es

for fi

nanc

ial s

tate

men

ts w

hich

will

st

rictly

be

follo

wed

by

finan

cial

in

stitu

tions

. The

tem

plat

es o

f fina

ncia

l st

atem

ents

issu

ed b

y B

angl

ades

h B

ank

do n

ot in

clud

e ot

her c

ompr

ehen

sive

in

com

e (O

CI)

nor a

re th

e el

emen

ts o

f O

CI a

llow

ed to

be

incl

uded

in a

sin

gle

OC

I sta

tem

ent.

As

such

the

finan

cial

inst

itutio

n do

es

not p

repa

re th

e ot

her c

ompr

ehen

sive

in

com

e st

atem

ent.

How

ever

, ele

men

ts

of O

CI,

if an

y, a

re s

how

n in

the

stat

emen

ts o

f cha

nges

in e

quity

.

Fina

ncia

l Sta

tem

ents

for t

he

year

end

31.1

2.20

20 a

nd

corr

espo

ndin

g pe

riod

of

31.12

.20

19 h

ave

been

pre

pare

d as

per

the

guid

elin

e an

d te

mpl

ates

issu

ed b

y B

angl

ades

h B

ank.

Ther

e is

no

finan

cial

impa

ct fo

r th

is d

epar

ture

in th

e fin

anci

al

stat

emen

ts.

13D

iscl

osur

e of

pr

esen

tatio

n of

pr

ofit

N/A

Ther

e is

no

requ

irem

ent t

o sh

ow

appr

opria

tion

of p

rofit

in th

e fa

ce

of s

tate

men

t of c

ompr

ehen

sive

in

com

e.

As

per D

FIM

circ

ular

no

11, d

ated

23

Dec

embe

r 20

09,

an

appr

opria

tion

of

profi

t sho

uld

be d

iscl

osed

in th

e fa

ce o

f pr

ofit a

nd lo

ss a

ccou

nt

Fina

ncia

l Sta

tem

ents

for t

he

year

end

31.1

2.20

20 a

nd

corr

espo

ndin

g pe

riod

of 2

019

ha

ve b

een

prep

ared

as

per

guid

elin

e (D

FIM

circ

ular

No.

11,

date

d 23

Dec

embe

r 20

09

) of

Ban

glad

esh

Ban

k.Th

ere

is n

o fin

anci

al im

pact

for

this

dep

artu

re in

the

finan

cial

st

atem

ents

.

169Page-

2.4 Components of the financial statements The financial statements comprise of (As per DFIM Circular No. 11, Dated December 23, 2009):

a) Balance Sheet as at 31 December 2020; b) Profit and Loss Account for the year ended 31 December 2020; c) Statement of Cash Flows for the year ended 31 December 2020; d) Statement of Changes in Equity for the year ended 31 December 2020; e) Liquidity Statement for the year ended 31 December 2020; f) Notes to the Financial Statements for the year ended 31 December 2020. 2.5 Directors’ responsibility statement The Board of Directors’ takes the responsibility for the preparation and presentation of these financial statements.2.6 Date of authorization This financial statements have been authorized for issue by the Board of Directors at its 65th meeting dated June

19, 2021.2.7 Comparative information As per paragraph 38 of IAS 1: “Presentation of Financial Statements” the company has disclosed comparative

information in respect of the previous period for all amounts reported in the current period’s financial statements. Figures of the previous period have been rearranged whenever considered necessary to ensure comparability with

the current year.2.8 Events after the balance sheet date All materials events occurring after the balance sheet date are considered and where necessary, adjusted for, or

disclosed accordingly. 2.9 Reporting period Financial statements of the company cover one calendar year from 01 January, 2020 to 31 December, 2020

consistently. 2.10 Presentation and functional currency and level of precision The financial statements are presented in Bangladesh Taka (BDT) currency, which is the company’s functional

currency. All financial information presented in Taka has been rounded off to the nearest BDT.2.11 Use of estimates and judgments The preparation of financial statements in conformity with International Accounting Standards (IASs) and

International Financial Reporting Standards (IFRS) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. It also requires disclosures of contingent assets and liabilities at the date of the financial statements.

The most critical estimates and judgments are applied to the following: - Provision for impairment of loans, leases, investments, income tax and deferred tax. - Useful life of depreciable assets The estimates and associated assumptions are based on historical experience and various other factors that are

believed to be reasonable under the circumstances, the result of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. However, the estimates and underlying assumptions are reviewed on an ongoing basis and the revision is recognized in the period in which the estimates are revised. In accordance with the guidelines as prescribed by IAS 37, “Provisions, Contingent Liabilities and Contingent Assets”, provisions are recognized in the following situations:

Provisions Provisions are liabilities that are uncertain in timing or amount. Provisions are recognized when the company has

a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

2.12 Accounting for term finance & other finances Books of accounts for term finance operation are maintained based on the accrual method of accounting.

Outstanding loans, along with the accrued interest thereon, for short-term finance, and unrealised principal for long-term finance, real estate finance, car loans and other finances are accounted for as term finance assets of the Company. Interest earnings are recognised as operational revenue periodically.

2.13 Investment in securities Investment in marketable ordinary shares has been shown at market price on an aggregate portfolio basis.

Investment in non-marketable shares has been valued at cost or intrinsic value whichever is lower. Full provision for diminution in value of shares as on closing of the year on an aggregate portfolio basis is made in the financial statements as required by Bangladesh Bank DFIM circular No. 02 dated 31 January 2012.

2.14 Property and equipment

170Page-

i) Recognition and measurement Own assets Items of own fixed assets are measured at cost less accumulated depreciation and any accumulated impairment

losses. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the assets to its working condition for its intended use as per International Accounting Standard (IAS) 16, “Property, Plant and Equipment”.

ii) Subsequent expenditure on fixed assets Subsequent expenditure is capitalized only when it increases the future economic benefit from the assets and that

cost can be measured reliably. All other expenditures are recognized as an expense as and when they are incurred. iii) Depreciation Depreciation is charged to amortize the cost of assets, over their estimated useful lives, using the straight-line

method in accordance with IAS-16: “Property, Plant and Equipment”. Full depreciation is charged on additions irrespective of date when the related assets are put into use and no depreciation is charged from the month of disposal. Asset category wise depreciation rates are as follows:

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognized in the profit and loss account.Depreciation methods, useful lives and residual values, if any are reviewed at the balance sheet date.

2.15 Intangible assets and amortization of intangible assets Recognition & Measurement Intangible assets comprise the value of computer software. Intangible assets acquired separately are measured

on initial recognition at cost and are carried at cost less accumulated amortization and accumulated impairment losses, if any.

Amortization Amortization is calculated using the straight line method to write down the cost of intangible assets to their

residual values over their estimated useful lives based on the management best estimates of 3(three) years. Subsequent expenditure Subsequent expenditure on software assets is capitalized only when it increases the future economic benefits in

the specifications to which it relates. All other expenditure is expensed as incurred.2.16 Revenue recognition Revenue is only recognised when it meets the following five steps model framework as per IFRS 15: “Revenue from

Contracts with Customers” a) identify the contract (s) with a customers;

b) identify the performance obligations in the contract;c) determine the transaction price;d) allocate the transaction price to the performance obligations in the contract;e) recognise revenue when (or as) the entity satisfies a performance obligation.

Interest income from loans and other sources is recognised on an accrual basis of accounting. Interest on term loans and short term finance Interest on term loan and short term finance are recognized as revenue on an accrual basis and interest income on

term loan is not recognized where any portion of interest is in arrear for more than three months. Fee based revenues Fees on services rendered by the company are recognized as and when services are rendered. Dividend income Dividend is recognised as income when the right to receive income is established. Profit or loss on sale of securities Profit or loss arising from the sale of securities is accounted for only when the securities are sold/offloaded. 2.17 Interest suspense account Lease income earned, interest on term finance overdue beyond three months period and interest on real estate

Particulars of Property, Plant & Equipment Rates

Computer & computer accessories 20.00%

Furniture and fixtures 10.00%

Motor vehicles 20.00%

Office decoration 15.00%

Office equipment 20.00%

171Page-

finance overdue beyond nine months period and interest on short term finance overdue beyond permitted credit term plus ninety days period are not recognised as revenue and are credited to the interest suspense account.

2.18 Accounts receivable Accounts receivable at the balance sheet date is stated at amounts which are considered realizable. Specific

allowance is made for receivable considered to be doubtful for recovery.2.19 Securitization Securitization of various leases/loans result in sale of these assets to Special Purpose Vehicles (‘SPVs’), which, in

turn issue securities to investors. Financial assets are partially or wholly derecognized when the control of the contractual rights in the securitized assets is lost.

2.20 Borrowing cost Borrowing cost is capitalized for the period from the dates of respective disbursements to the date of execution

of lease. On execution of lease, advance including capitalized borrowing cost is transferred to the gross lease receivables.

Borrowing costs are recognized as expense in the year in which they are incurred unless capitalization is permitted under Bangladesh Accounting Standard (IAS) 23: “Borrowing Costs”.

2.21 Cash flow statements Cash flow statement is prepared in accordance with IAS 7: “Cash Flow Statement”, DFIM circular # 11 dated 23

December 2009 and as recommended by the Securities and Exchange Rules 1987. The cash flow statement shows the structure of and changes in cash and cash equivalents during the financial year. Cash and cash equivalents include notes and coins on hand, unrestricted balance held with the Bangladesh Bank and its agent bank including balances with other commercial banks. It is broken down into operating activities, investing activities and financing activities. The direct method is used to show the operating activities.

According to IAS 7: “Cash Flow Statements”, cash comprises cash in hand and demand deposits and cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Considering the provisions of IAS 7 and IAS 1, cash in hand, fixed deposits and bank balances have been considered as cash and cash equivalents.

2.22 Statement of changes in equity The statement of changes in equity is prepared in accordance with IAS 1: “Presentation of Financial Statements”

and DFIM Circular # 11 dated 23 December 2009.2.23 Liquidity statement “The liquidity statement of assets and liabilities as on the reporting date has been prepared in accordance with the

guidelines issued by Bangladesh Bank through DFIM circular # 11 dated 23 December 2009 as per following bases:a) Balance with other banks and financial institutions are on the basis of their maturity term.b) Investments are on the basis of their residual maturity term.c) Loans, advances and leases are on the basis of their repayment/maturity schedule.d) Fixed assets are on the basis of their useful lives.e) Other assets are on the basis of their adjustment terms.f) Borrowings from other banks, financial institutions and agents as per their maturity/ repayment terms.g) Deposits and other accounts are on the basis of their maturity term and behavioral past trends.h) Other liabilities are on the basis of their settlement terms.”

2.24 Conversion of foreign currency transactions Foreign currency transactions are translated into Taka at rates prevailing at the respective dates of transactions,

while foreign currency monetary assets at the end of the year are reported at the rates prevailing on the balance sheet date. Exchange gains or losses arising out of the said conversions are recognized as income or expense for the year after netting off.

2.25 Branch accounting The Company has one branches, with no overseas branch as on 31 December 2020. Accounts of the branches are

maintained at the head office from which these accounts are drawn up.2.26 Provision for doubtful accounts and future losses Provision has been made at estimated rates on outstanding exposures, based on aging and continuous review

of the receivables, as per the Bangladesh Bank Provisioning policy. A general provision has been made by the company to cover unforeseen losses on all leases and loans excluding those for which a specific provision has been kept. The provision is considered adequate to meet any probable future losses.

2.27 Accounting for investment in leases “As per IFRS 16: “Leases”, the company recognizes leased assets in the balance sheet and presents them as receivable

at an amount equal to the net investment in the lease. Under a finance lease all the risks and rewards incident to legal ownership are transferred by the company, and thus the lease payment receivable is treated as repayment of principal and finance income to reimburse and reward for its investment and services. The recognition of finance income is based on a pattern reflecting a constant periodic rate of return on the net investment outstanding in

172Page-

respect of the finance lease.”2.28 Recognition of leased assets Company’s leased assets are stated at the gross lease receivables less the unearned lease income. Lease payments

relating to the accounting period are applied against the gross investment in the lease to reduce both the principal and the unearned lease income.

2.29 Recognition of term finances Term finances are stated at the initial investment less accumulated principal amortization calculated under effective

interest rate method. Initial investment represents principal finance and capitalization of interest accumulated before starting repayment and amortization rate under effective interest rate method represents the rate that exactly discounts the expected stream of future cash payments through maturity.

2.30 Borrowings from other banks, financial institutions and agents “In conformation to IAS 30: “Disclosures in the Financial Statements of Banks and similar Financial Institutions”

and DFIM circular # 11 dated 23 December 2009 issued by Bangladesh Bank, borrowings from other banks, financial institutions and agents are placed into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date.”

2.31 Deposits and other accounts “The company takes term deposits from banks, financial institutions and general public at various rates against

issuance of fixed deposits receipts within the parameters set by Bangladesh Bank through different circulars.The company places the deposits and other accounts into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date considering the IAS 30: “Disclosures in the Financial Statements of Banks and Similar Financial Institutions” and DFIM circular # 11 dated 23 December 2009 issued by Bangladesh Bank.”

2.32 Employees’ benefit obligation Defined contribution plan The Company operates a contributory provident fund scheme for its permanent employees. Provident fund is

administered by a Board of Trustees and is funded by equal contributions both by the employees and the Company at a predetermined rate. The contributions are invested separately from the Company’s asset.

2.33 Taxation IAS 12: “Income Taxes” and Income Tax ordinance 1984 have been used for the calculation of current tax expense.

Provision for income tax represents the sum of the current tax expense. 2.34 Current tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any

adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any, in accordance with provisions of Income Tax Ordinance, 1984. It is measured using tax rates enacted or substantively enacted at the reporting date. Applicable tax rate for the Company for the year 2020 is based on Finance Act 2020. For the purpose of these financial statements, management has assumed that the existing tax rates will be applicable for Income year 2020 as well, which are mentioned below:

2.35 Impairment of long-lived assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that

the book value of the assets may not be recovered. Accordingly, the company estimates the recoverable amount of the assets. Impairment losses, if any, is recognized in the profit and loss account when the estimated recoverable amount of an asset is less than its carrying amount.

The Company’s existing accounting policy for uncertain income tax treatments is consistent with the requirements

of IFRIC 23 Uncertainty over Income Tax Treatments, which became effective on 1 January 2019. 2.36 Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cash at bank, term deposits and investment in call loan that are

readily convertible to a known amount of cash (with less than three months maturity) and that are subject to an insignificant risk of change in value.

2.37 Bank loans Bank loans are recorded at the proceeds received. Interest on bank loans is accounted for on accrual basis and

charged to profit and loss account.

Regular business tax rate Rates

CVC- Non traded Financial institution 40.00%

Other business tax rate Rates

Dividend income 20.00%

Capital gain on sale of fixed assets 15.00%

Capital gain on sale of marketable securities 10.00%

173Page-

Name of the IAS IAS No. Status

Presentation of Financial Statements 1 Applied *

Inventories 2 N/A

Statements of Cash Flow 7 Applied

Accounting policies, changes in accounting estimates and errors 8 Applied

Events after the reporting period 10 Applied

Income taxes 12 Applied

Property, plant and equipment 16 Applied

Employee benefits 19 Applied

Accounting for government grants and disclosure of government assistance 20 N/A

The Effects of Changes in Foreign Exchange Rates 21 Applied

Borrowing costs 23 Applied

2.38 Borrowing costs Interest on borrowings of fund from different sources is recognized as financial expenses according to IAS 23:

“Borrowing Costs”. Interest amount represents the amount paid and accrued up to the end of the year.2.39 Related party disclosure As per International Accounting Standards (IAS) 24 Related Party Disclosures, parties are considered to be related

if one of the party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. The company has no related party transactions during the year.

2.40 Earnings per share (EPS) The company calculates earnings per share (EPS) in accordance with IAS 33: “Earnings per Share” shown on the face

of the profit and loss account while, the computation of EPS is stated in note-34. Basic earnings This represents earnings for the year attributable to ordinary shareholders. As there was no preference dividend,

minority interest or extra ordinary items, the net profit after tax for the year has been considered as fully attributable to the ordinary shareholders.

Weighted average number of ordinary shares outstanding during the yearThis represents the number of ordinary shares outstanding at the beginning of the year plus the number of ordinary share issued during the year multiplied by a time-weighting factor. The time-weighting factor is the number of days the specific shares outstanding as a proportion of the total number of days during the year.”

2.41 Statutory reserves As per Financial Institutions Regulation 1994, every Non-Banking Financial Institution (NBFI) is required to transfer

at least 20% of its current year’s profit to the fund until such reserve fund equals to its paid up share capital and share premium (if any). In conformity with the above requirement, the Company transfers 20% of net profit to statutory reserve before declaration of dividend.

2.42 Events after the balance sheet date All material events occurring after the balance sheet date has been considered and where necessary, adjusted for

or disclosed. 2.43 Contingent liabilities and contingent assets The Company does not recognize contingent liability and contingent asset but discloses the existence of

contingent liability in the financial statements. A contingent liability is a probable obligation that arises from past events whose existence will be confirmed by

occurrence or non-occurrence of uncertain future events not within the control of the Company or a present obligation that is not recognized because outflow of resources is not likely or obligation cannot be measured reliably.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.

2.44 Status of compliance of International Accounting Standards and International Financial Reporting Standards

In addition to compliance with local regulatory requirements, in preparing the Financial Statements, CVC applied following IAS and IFRS:

174Page-

Name of the IFRS IFRS No. Status

Share based payment 2 N/A

Business combination 3 N/A

Insurance contracts 4 N/A

Non-current assets held for sale and discontinued operation 5 N/A

Exploration for and evaluation of mineral resources 6 N/A

Financial instruments: disclosures 7 Applied *

Operating segments 8 N/A

Financial instruments 9 Applied

Consolidated financial statements 10 N/A

Joint arrangement 11 N/A

Disclosure of interest in other entities 12 N/A

Fair value measurement 13 Applied *

Regulatory deferral accounts 14 N/A

Revenue from contract with customers 15 Applied

Leases 16 N/A

N/A = Not Applicable

* As the regulatory requirements differ with the standards, relevant disclosures have been made in accordance with Bangladesh Bank’s requirements

2.45 BASEL II & its implementation To cope with the international best practices and to make the capital more risks sensitive as well as more shock

resilient, guidelines on ‘Basel Accord for Financial Institutions (BAFI)’ have been introduced from January 01, 2011 on test basis by the Bangladesh Bank. At the end of test run period, Basel Accord regime has started and the guidelines namely “Prudential Guidelines on Capital Adequacy and Market Discipline for Financial Institutions (CAMD)” have come fully into force from January 01, 2012 with its subsequent supplements/revisions. Instructions regarding Minimum Capital Requirement (MCR), Adequate Capital, and Disclosure requirement as stated in these guidelines have to be followed by all FIs for the purpose of statutory compliance. As per CAMD guidelines, Financial Institutions should maintain a Capital Adequacy Ratio (CAR) of minimum 10%. In line with CAMD guideline’s requirement, the company is in the process of introducing necessary initiatives to ensure implementation of BASEL II accord. Latest status of Capital Adequacy Ratio (CAR) has been shown in note - 13.4.

Name of the IAS IAS No. Status

Related party disclosures 24 Applied

Accounting and reporting by retirement benefit plans 26 N/A

Separate financial statements 27 N/A

Investment in associates and joint ventures 28 N/A

Financial reporting in hyperinflationary economics 29 N/A

Interests in joint ventures 31 N/A

Financial instruments: presentation 32 Applied

Earnings per share 33 Applied

Interim financial reporting 34 Applied

Impairment of assets 36 Applied

Provisions, contingent liabilities and contingent assets 37 Applied

Intangible assets 38 Applied

Investment property 40 N/A

Agriculture 41 N/A

175Page-

2.46 Financial risk management CVC always concentrates on delivering high value to its stakeholders through appropriate trade-off between risk

and return. A well-structured and proactive risk management system is in place within the company to address risks relating to credit, market, liquidity, operations and anti-money laundering. In addition to the industry best practices for assessing, identifying and measuring risks, CVC also considers guidelines for managing core risks of financial instructions issued by the country’s central bank, Bangladesh Bank, vide FID Circular No. 10 dated September 18, 2005 for management of risks and, more recently, DFIM Circular No. 03 dated January 24, 2016.

Credit Risk To encounter and mitigate credit risk the company employed multilayer approval process, policy for maximum exposure limit of sector or groups, policy for customers’ assets maximum exposure limit, mandatory search for credit report from credit information bureau, looking into payment performance of customer before financing, frequent review of clients, taking collateral, seeking external legal opinion, maintaining neutrality in politics and following arm’s length approach in related party transactions, regular review of market situation and industry exposure etc.

Market RiskThe Asset Liability Committee (ALCO) of the company regularly meets to assess the changes in interest rate, market conditions, carry out asset liability maturity gap analysis, re-pricing of products and thereby takes effective measures to monitor and control interest rate risk.

Liquidity Risk Liquidity requirements are managed on a day-to-day basis by the treasury division which is responsible for ensuring

that sufficient funds are available to meet short term obligations, even in a crisis scenario, and for maintaining a diversity of funding sources. Treasury division maintains liquidity based on historical requirements, anticipated funding requirements from operation, current liquidity position, collections from financing, available sources of funds and risks and returns.

Operational Risk Appropriate internal control measures are in place, at CVC Finance, to address operational risks. CVC Finance has

also established internal control & compliance department (ICCD) to address operational risk and to frame and implement policies to encounter such risks.

Compliance risk Compliance risk is defined as the current or prospective risk of legal sanction and/or material financial loss that

an organization may suffer as a result of its failure to comply with laws, its own regulations, code of conduct, and standards of the best practice as well as from the possibility of incorrect interpretation of laws or regulations. In general, compliance risk management is embedded in the day to day to business processes and practices of the company.

Money laundering and terrorist financing risk In The company, money laundering and terrorist financing risk takes two broad dimensions:

a) Business risk i.e. the risk that the company may be used for money laundering or terrorism financing and b) Regulatory risk i.e. the risk that the company fails to meet regulatory obligations under the Money Laundering Prevention Act 2012 and Anti-Terrorism Act 2009 (amended in 2013).

To mitigate the risks, The Company, while adhering to various guidelines and circulars issued by the Bangladesh Financial Intelligence Unit (BFIU), put in place a strict compliance program consisting of the following components:

a) Development and implementation of internal policies, procedures and controls to identify and report instances of money laundering and terrorism financing;

b) Creation of structure and sub-structure within the organization, headed by a Central Compliance Unit (CCU), for AML and CFT compliance;

c) Appointment of an AML/CFT Compliance Officer, known as the Chief Anti Money Laundering Officer (CAMLCO), to lead the CCU;

d) Independent audit function including internal and external audit function to test the programs; e) Ongoing employee training programs.

176Page-

3.0 Cash

Cash in hand (note-3.1) 194,195 128,673

Balance with Bangladesh Bank & and its agent banks (note-3.2) 21,013,259 37,912,791

21,207,454 38,041,464

3.1 Cash in hand (including foreign currencies)

In local currency 194,195 128,673

In foreign currency - -

194,195 128,673

3.2 Balance with Bangladesh Bank & and its agent banks

In local currency 21,013,259 37,912,791

In foreign currency - -

21,013,259 37,912,791

3.3 Cash Reserve Requirement (CRR) and Statutory Liquidity Requirement (SLR)

a) Cash Reserve Requirement (CRR): 1.5% of

Average Demand and Time Liabilities

Required reserve 19,043,816 37,342,527

Actual reserve held with Bangladesh Bank 19,970,223 38,281,154

Surplus/(Deficit) 926,407 938,627

b) Statutory Liquidity Requirement (SLR): 5% of

Average Demand and Time Liabilities:

Required reserve 100,152,933 113,627,642

Actual reserve held 1,211,633,466 1,329,248,880

Surplus/(Deficit) 1,111,480,533 1,215,621,238

4.0 Balance with other banks and financial institutions

In Bangladesh 4.1 Current accounts (note-4.1.1) 19,341 39,536

Short notice deposit accounts (note-4.1.2) 147,248,657 8,685,709

Fixed deposit accounts (note-4.1.3) 1,173,947,618 1,296,168,931

1,321,215,617 1,304,894,177

4.2 Outside Bangladetsh - -

1,321,215,617 1,304,894,177

The company does not maintain any account outside Bangla-desh.


Amount in BDT

177Page-


Amount in BDT

4.1.1 Current accounts

BASIC Bank - Shyamoli Br. 1,140 3,504

Midland Bank Limited - Gulshan Branch - -

Modhumoti Bank Ltd. - Bangla Motor Br. 11,855 33,305

Social Islami Bank Limited - Gulshan Branch 4,310 -

Trust Bank Limited - Banani Branch 2,037 2,727

19,341 39,536

4.1.2 Short notice deposit accounts

Jamuna Bank Limited - Banani Branch 2,232,162 237,027

Mercantile Bank Ltd - Banani Branch 209,077 140,313

Mercantile Bank Ltd - Naogoan Branch 434,202 1,603,034

Shahjalal Islami Bank Ltd. - Banani Branch 143,649,176 6,697,076

Trust Bank Limited - Gulshan Branch - -

Trust Bank Limited - Banani Branch 724,041 8,260

147,248,657 8,685,709

4.1.3 Fixed deposit accounts

Jamuna Bank Limited 797,870,582 733,334,211

Trust Bank Limited 242,810,023 439,553,487

Social Islami Bank Limited 133,267,013 123,281,233

1,173,947,618 1,296,168,931

5.0 Money at Call on Short Notice

Financial Institutions - -

Banks - -

- -

6.0 Investments

Government (note-6.1) - -

Others (note-6.2) 13,235,822 880,685

13,235,822 880,685

6.1 Government

Treasury Bills - -

3 Years T & T Bond - -

5 Years Treasury Bond - -




Prize Bonds - -

- -

178Page-


Amount in BDT

6.2 Others (Annexure-B)

Primary Shares 2,821,320 -

Secondary Shares 10,414,502 880,685

13,235,822 880,685

7.0 Loans, advances and leases

a) Inside Bangladesh

Investment in Lease Finance 425,322,606 447,109,805

Investment in Term Finance 3,033,498,994 3,044,589,689

Investment in SME Finance 268,608,593 303,103,950

Investment in Real Estate 188,235,644 282,887,748

Investment in Work Order Finance 56,512,087 50,348,512

Investment in Staff Loan 5,039,201 5,925,051

3,977,217,125 4,133,964,755

b) Outside Bangladesh - -

Total 3,977,217,125 4,133,964,755

7.1.1 Investment in Lease Finance

Principal outstanding 424,431,752 433,070,837

Accounts receivable 890,855 14,038,968

Advance against lease finance - -

Other Payables - -

Total 425,322,606 447,109,805

7.1.1.a Principal outstanding

Gross lease receivables 433,070,837 551,590,199

Unearned lease income (8,639,086) (118,519,362)

424,431,752 433,070,837

7.1.1.b Advance against lease finance

Local equipment - -

7.1.2 Term finances

Term Loan Finance (note-7.1.2.a) 3,033,498,994 3,044,589,689

SME Finance (note-7.1.2.b) 268,608,593 303,103,950

Work order finance (note-7.1.2.c) 56,512,087 50,348,512

Home loan finance (note-7.1.2.d) 188,235,644 282,887,749

Staff loan (note-7.1.2.e) 5,039,201 5,925,051

Total 3,551,894,519 3,686,854,950

179Page-


Amount in BDT

7.1.2.a Term Loan Finance

Principal outstanding 2,785,596,910 2,889,780,959

Accounts receivable 247,902,084 154,808,729

Principal 168,967,503 129,804,017

Interest 78,934,581 25,004,712

Other Payables - -

3,033,498,994 3,044,589,689

7.1.2.b SME Finance



Principal 3,693,902 29,964,668

Interest 1,355,973 -

Other Payables - -

268,608,593 303,103,950

7.1.2.c Work order finance



Principal - -

Interest 11,013,519 3,677,305

Other Payables - -

56,512,087 50,348,512

7.1.2.d Home loan finance



Principal 697,319 7,044,694

Interest 2,754,220 -

Other Payables - -

188,235,644 282,887,749

7.1.2.e Staff loan


Accounts receivable - -

Principal - -

Interest - -

Other Payables - -

5,039,201 5,925,051

180Page-


Amount in BDT

7.2 Classification of loans, advances and Lease Finance

Unclassified

Standard - SME 201,666,947 222,476,670

Standard - Other than SME 3,556,715,350 3,186,741,847

Special Mentioned Account (SMA) 33,433,101 469,495,562

3,791,815,398 3,878,714,079

Classified

Sub-standard 23,989,838 100,659,239

Doubtful 161,411,889 154,591,437

Bad & Loss - -

185,401,727 255,250,676

Total 3,977,217,125 4,133,964,755

% of Classification Loan/Lease 4.66% 6.17%

7.3 Base for Provision for loans, advances and Lease Finance

Unclassified

Standard - SME 201,666,947 222,476,670

Standard - Other than SME 3,556,715,347 3,186,741,848


3,789,349,243 3,859,942,533

Classified

Sub-standard 11,390,043 75,034,681

Doubtful 81,922,355 75,170,201

Bad & Loss - -

93,312,398 150,204,882

Base for provision for loans, advances and Lease Finance 3,882,661,641 4,010,147,415

7.4 Provision for loans, advances and Lease Finance

Status (Rate %)

Unclassified

Standard - SME 0.25 504,167 556,191.65

Standard - Other than SME 1 35,567,153 31,867,419

Special Mentioned Account (SMA) 5 1,548,347 22,536,201

37,619,668 54,959,811

181Page-


Amount in BDT

Classified (Rate %)

Sub-standard 0.20 45,033,009 15,006,936

Doubtful 0.50 40,961,178 37,585,100

Bad & Loss 1 - -

85,994,186 52,592,037

Required provision for loans, advances and Lease Finance 123,613,855 107,551,848

Total provision maintained (note-12.2) 123,613,855 107,551,848

Exess/(short) provision - -

8.0 Fixed assets including premises, furniture and fixtures

At cost less accumulated depreciation (Annexure-A)

Cost

Opening balance 50,230,982 38,090,029

Addition during the year 4,787,451 12,140,953

Disposal during the year - -

Closing balance at cost 55,018,433 50,230,982

Depreciation

Opening balance 18,158,685 11,849,218

Addition during the year 9,002,099 6,309,467

Adjustment on disposal during the year - -

Accumulated Depreciation 27,160,784 18,158,685

Carrying value 27,857,649 32,072,297

Intangible Assets

At cost less accumulated depreciation (Annexure-B)

Cost

Opening balance 110,000 110,000

Addition during the year - -

Disposal during the year - -

Closing balance at cost 110,000 110,000

Depreciation

Opening balance 68,404 31,741

Addition during the year 36,764 36,663

Adjustment on disposal during the year - -

Accumulated depreciation 105,168 68,404

Carrying value 4,832 41,596

Total Fixed Assets 27,862,481 32,113,893

182Page-


Amount in BDT

9.0 Other assets

Inside Bangladesh

Income generating :

Interest receivable on FDR 43,599,895 47,618,596

Interest Receivable-COVID-19 CMSME Stimulus Package 112,499 -

Legal Bill Receivable 2,576,750 37,868

46,289,144 47,656,464

Non income genarating :

Advance deposit and prepaid expenses (note 9.1) 13,287,780 9,779,324

Tax deduction at sources 29,074,782 25,720,418

Advace payment of income tax 24,544,338 42,592,534

66,906,901 78,092,276

Total 113,196,045 125,748,740

9.1 Advance deposit and prepaid expenses

Security money for office space - Green Grandeur Tower 5,572,380 5,572,380

Security money for office space - Sales Office 200,000 200,000

Advance for investment in share 3,512,975 849,444

Other advances 27,425 3,500

Advance against salary - 179,000

Advance against software 3,975,000 2,975,000

13,287,780 9,779,324

10.0 Borrowings from other banks, financial institutions and agents

In Bangladesh (note-10.1) 2,175,226,559 2,235,478,288

Outside Bangladesh - -

2,175,226,559 2,235,478,288

10.1 In Bangladesha. Long term liabilities

Bank Overdraft :

Jamuna Bank Ltd. 778,530,910 678,459,539

Modhumoti Bank Ltd. 51,168,501 49,997,142

Social Islami Bank Ltd. 132,753,336 122,516,457

Trust Bank Ltd. 228,369,268 334,513,508

1,190,822,015 1,185,486,646

183Page-


Amount in BDT

Credit Line :

BASIC Bank Ltd. 135,344,379 131,736,729

Jamuna Bank Ltd. 119,774,010 112,977,561

Midland Bank Ltd. 96,092,282 100,463,734

Modhumoti Bank Ltd. 404,133,427 387,513,289

755,344,098 732,691,314

Total Long Term Liabilities 1,946,166,112 1,918,177,960

b. Short Term Loan

Call Loan

Sonali Bank Ltd 87,100,000 90,000,000

Modhumoti Bank Ltd 19,100,000 4,300,000

Agrani Bank Ltd. - 20,000,000

106,200,000 114,300,000

Treasury Line

National Finance Ltd. 8,000,000 35,000,000

Modhumoti Bank Limited 45,000,000 80,000,000

53,000,000 115,000,000

Total Short Term Loan 159,200,000 229,300,000

c. Refinance Scheme

Bangladesh Bank 69,860,447 88,000,328

69,860,447 88,000,328

11.0 Deposits and other accounts 11.1 Savings deposits 761,000 - 11.2 Term deposits (note-11.2) 1,428,975,852 1,567,853,764 11.3 Other deposit (note-11.3) 97,177,274 93,637,586

1,526,914,126 1,661,491,350

11.2 Term deposits

Deposit from banks and financial institutions 195,500,000 199,000,000

Deposit from other than banks and financial institutions 1,233,475,852 1,368,853,764

1,428,975,852 1,567,853,764

11.3 Other deposits

Non interest bearing security deposits

Security deposit - SD 27,501,768 17,416,080

Security deposit-Agromach and farming services 200,000 -

27,701,768 17,416,080

184Page-


Amount in BDT

Interest bearing security deposits

Security deposit - SDIB 69,475,506 76,221,506

69,475,506 76,221,506

Total other deposits 97,177,274 93,637,586

12.0 Other liabilities

Payables & accrued expenses (12.1) 179,626,479 198,198,924

Liability under finance lease 419,151 1,761,753

Vehicle Loan (DMD’s Car)-SCB 1,818,777 -

Interest suspense 113,659,862 107,222,728

Provision for lease finance, loans and advances (12.2) 123,613,855 107,551,848

Provision for diminution in value of investment 224,560 174,432

Provision for income tax (12.3) 90,453,405 91,491,693

Contribution to PF (12.4) - -

509,816,089 506,401,378

12.1 a) Payables & accrued expenses

Interest Payables

Interest payable on deposits from banks and FI’S 7,856,921 2,138,083

Interest payable on deposits from other than banks and FI’S 77,399,802 88,048,774

Monthly saving scheme - interest payable 66,831 44,747

Interest payables on security deposits 12,031,972 8,891,635

LTL Credit Line Interest Payable 42,396,335 -

Interest payables on refinance scheme 1,083,518 -

140,835,380 99,123,239

b) Other Payables

Payables for TAX /VAT deducted at source 1,737,430 3,386,736

Sundry Receipt (CVCFL Client) 34,516,969 93,211,858

Liability for expenses 2,460,591 2,449,091

Others 76,110 28,000

38,791,100 99,075,685

Total 179,626,479 198,198,924

12.2 Provision for Lease Finance, loans and advances

Unclassified

Standard - SME 504,167 556,192

Standard - Other than SME 35,567,153 31,867,418


37,619,668 54,959,811

185Page-


Amount in BDT

Classified

Sub-standard 45,033,009 15,006,936

Doubtful 40,961,178 37,585,101

Bad & Loss - -

85,994,186 52,592,037

Provision for loans, advances and Lease Finance 123,613,855 107,551,848

12.3 Provision for income tax

The company calculated its tax liability considering the BAS 12: “Income Taxes”. Details calculation of tax liability as at 31 December, 2020 is as follows:

Opening Balance 91,491,693 66,528,580

Add: Provision made during the year (note-33.0) 28,549,403 24,963,113

Add: Excess provision of income tax for the FY 31.12.2017 (note-33.0) 13,119,034 -

Less: Settlement of previous year’s tax liability (42,706,725) -

Closing Balance 90,453,405 91,491,693

Current tax liability represents tax calculated @40% on profit before tax.

12.4 Contribution to PF

Opening balance - -

Add: Provision made during the year 2,519,783 -

Less: Transfer to Provident fund & Paid to Employee 2,519,783 -

Closing balance - -

13.0 Share Capital

13.1 Authorized Capital

500,000,000 ordinary shares of Tk.10 each 5,000,000,000 5,000,000,000

13.2 Issued, Subscribed and Fully Paid up capital

Opening Balance: Paid up Capital of 105,000,000 No. of Shares Tk.10 each 1,155,000,000 1,050,000,000

Add: 10% of Stock Dividend on Outstanding No. of Shares 10,500,000 - 105,000,000

1,155,000,000 1,155,000,000

186Page-


Amount in BDT

13.3 Capital Adequacy

As per the section 4(GHA) of the Financial Institution Rule, 1994 and subsequeently updated vide DFIM circular no. 5 dated 24 July 2011 the minimum paid-up capital of the Financial instituion(FI) shall be BDT 100 crore; provided that the sum of paid-up-capital and reserve shall not be less then the minimum capi-tal required under the risk-based assets of the company, criteria determined by the Bangladesh bank.

Tier – I (Core Capital)

Paid up Capital 1,155,000,000 1,155,000,000

Share Premium account - -

Statutory Reserve 43,247,421 37,350,909

Retained Earnings 63,730,349 40,144,305

Other reserve - -

1,261,977,770 1,232,495,214

Tier –II (Supplementary Capital)

General Provision 66,590,017 59,300,000

66,590,017 59,300,000

A.Total Capital 1,328,567,787 1,291,795,214

B. Required Capital 1,000,000,000 1,000,000,000

C. Surplus/ (Deficiency) (A - B) 328,567,787 291,795,214

13.4 Minimum Capital Requirement (MCR) under Basel Accord for Financial Institutions (BAFI)

Total Eligible Capital 1,328,567,787 1,291,795,214

Tier - 1 Capital 1,261,977,770 1,232,495,214

Tier - 2 Capital 66,590,017 59,300,000

Total Risk Weighted Assets (RWA) 5,327,201,396 5,333,864,208

On Balance Sheet 4,411,544,083 4,740,523,315

Market Risk 38,025,510 2,921,641

Operational Risk 877,631,803 590,419,252

Capital Adequacy Ratio (CAR) 24.94 24.22

Core Capital to RWA 23.69 23.11

Supplementary Capital to RWA 1.25 1.11

Minimum Capital Requirment (MCR) 532,720,140 533,386,421

Surplus/ (Defficiency) 4,794,481,257 4,800,477,787

187Page-


Amount in BDT

14.0 Statutory reserve

In compliance with the clause no 6 of Financial Institutions Regulations, 1994, Financial Institution is re-quired to transfer at least 20% of it’s profit after tax and before appropriation of dividend in a particular year, if the financial institution’s sum of Share Premium Account (if any) and Statutory Reserves is less than the paid up capital of that financial institution. Accordingly, 20% of current year’s profit after tax has been transferred to Statutory Reserves Account.

Opening Balance 37,306,406 29,817,472

Add: Transferred during the year 5,941,015 7,488,934

Closing Balance 43,247,421 37,306,406

15.0 Revaluation Reserve

Opening Balance - -

Addition During the Year - 105,000,000

Issued bonus During the Year - (105,000,000)

Closing Balance - -

16.0 Retained Earning / Surplus

Opening Balance 39,966,291 115,010,557

Current year profit 29,705,073 37,444,670

Less : Statutory Reserve (5,941,015) (7,488,934)

Less: Dividend Equalization Fund - (105,000,000)

63,730,349 39,966,291

188Page-


Amount in BDT

17.0 Income statement

Income

Interest income (note-18.0) 502,762,693 492,553,522

Investment income (18.1) 1,665,304 1,815,107

Commission, exchange and brokerage (note-20.0) 24,030,961 44,861,759

Other operating income (note-21.0) 103,473,348 127,752,468

631,932,306 666,982,856

Expenses

Interest expenses on deposits, borrowings, etc. (note-19.0) 436,296,326 455,650,827

Administrative expenses (note-22.0) 91,257,635 84,162,769

Depreciation on company’s fixed assets (note-30.0) 9,038,863 6,346,130

Other operating expenses (note-31.0) 7,853,836 9,182,102

544,446,661 555,341,829

87,485,645 111,641,027

18.0 Interest income

Interest Income-Lease Finance 51,255,431 60,289,468

Interest Income-Term Finance 396,159,667 346,261,891

Interest Income-SME Finance 26,306,024 33,323,549

Interest Income-Real Estate 21,436,706 43,369,626

Interest Income-Work Order Finance 7,071,520 8,570,057

Interest Income-Staff Loan-Vehicle 533,344 738,930

502,762,693 492,553,522

18.1 Investment income

Gain From Investment in Shares 1,633,835 1,650,345

Dividend Income 31,469 164,762

1,665,304 1,815,107

19.0 Interest expenses on deposits, borrowings, etc. a) Interest expenses on Term Deposit

Interest on term deposits,bank and financial institutions 27,448,568 44,976,197

Interest on term deposits,other than bank and financial institutions 151,554,318 162,685,489

Interest on Monthly Saving Scheme 40,501 44,747

Deposit mobilization expenses 160,501 384,111

179,203,888 208,090,543

b) Interest expenses on security deposits

Interest on security deposits 4,971,309 5,949,349

4,971,309 5,949,349

189Page-


Amount in BDT

c) Interest expenses on credit line, Bank overdraft

Finance charge for obligation under finance lease 164,345 320,621

Interest Expense - Vehicle Loan (DMD’s Car)-SCB 71,172 -

Financial expenses 5,362,646 4,469,704

Interest expenses on call loan 5,274,777 6,352,092

Interest expenses on bank overdraft 103,792,337 123,698,423

Interest expenses on credit line 118,833,349 95,801,132

Interest expenses on treasury line 13,012,806 7,345,000

Interest expenses on refinance scheme 5,609,698 3,609,564

Vendor Commission- Auto Loan - 14,400

252,121,129 241,610,936

Total (a+b+c) 436,296,326 455,650,827

20.0 Commission, exchange and brokerage

Processing fee 244,180 907,311

Early Settlement Charge 1,107,465 969,240

Penal Interest 22,598,462 42,764,124

Cheque Clearing Charge 104 -

Documentation Fee 46,700 -

Legal & Vetting Fee 1,532 216,583

Insurance Premium 1,493 4,500

Stamp Fee 31,025 -

24,030,961 44,861,759

21.0 Other operating income

Interest Income on Fixed Deposit (FDR) 103,389,008 109,689,353

Interest Income on Short Notice Deposit (SND) 84,340 -

Other Income - 18,063,114

103,473,348 127,752,468

22.0 Administrative expenses

Salary and allowances (note-23) 64,316,384 58,801,693

Rent, taxes, insurance, electricity, etc. (note-24) 17,482,242 17,240,002

Postage, stamp, telecommunication, etc. (note-25) 629,510 679,774

Stationery, printing, advertisement, etc. (note-26) 1,057,499 2,727,800

Managing Director’s salary and allowances (note-27) 6,705,000 3,386,000

Directors’ fees (note-28) 952,000 1,224,000

Auditors’ fees (note-29) 115,000 103,500

91,257,635 84,162,769

190Page-

23.0 Salary and allowances

Salary and other allowances - Regular Employees 51,643,990 50,297,048

Festival Bonus - Regular Employees 3,349,476 4,171,846

FI’s Contribution to Employees Provident Fund 2,519,783 -

Festival Bonus- Liability Sales 285,588 192,500

Festival Bonus - Agent Office Naogaon - 64,000

Salary and other allowances - DFS 168,000 -

Salary and other allowances - Liability Sales 5,641,147 3,105,687

Salary & Allowances - Agent Office Naogaon 594,400 704,000

Salary & Allowances - Enterprise Café Mymenshingh 114,000 266,612

64,316,384 58,801,693

24.0 Rent, taxes, insurance, electricity, etc.

Office Rent - HO & PB 13,969,953 13,969,953

Office Rent - Agent Office Naogaon 69,000 165,000

Office Rent - Liability Sales 702,072 253,000

Office Rent - Enterprise Café - Mymensingh 10,000 50,000

VAT Expenses 40,800 -

Electricity - Liability Sales Office 68,330 19,939

Electricity, gas and water - HO & PB 1,269,922 1,475,858

Service charges - HO & PB 1,215,792 1,215,792

Service Charges - Liability Sales Office 113,373 35,460

Utility Bill - Agent Office Naogaon 23,000 55,000

17,482,242 17,240,002

25.0 Postage, stamp, telecommunication, etc.

Courier Bill 24,402 21,923

Newspaper 10,491 10,877

Non Judicial/Special Adhesive Stamp 130,425 164,077

Internet Bill - HO & PB 296,428 287,862

Internet Bill - Liability Sales Office 27,150 -

Internet Bill - Agent Office Naogaon 6,600 3,000

Telephone Bill - Agent Office Naogaon 13,800 36,611

Mobile Bill - Enterprise Café - Mymensingh 1,500 8,500

Telephone Bill - HO & PB 118,714 146,924

629,510 679,774


Amount in BDT

191Page-

26.0 Stationery, printing, advertisement, etc.

Stationery - HO & PB 151,327 206,670

Stationery - Agent Office Naogaon - 34,667

Stationary - Enterprise Cafe Mymensingh - 12,520

Printing - HO & PB 424,442 586,388

Printing - Agent Office Naogaon - 805

Publicity and advertisement 481,730 1,886,750

1,057,499 2,727,800

27.0 Managing Director’s salary and allowances

Gross Salary 5,292,000 2,789,200

Mobile Bill 48,000 16,800

Leave Fare Assistance 900,000 470,000

Festival Bonus 465,000 -

Furniture Allowance - 110,000

6,705,000 3,386,000

As per the paragraph 16 of IAS 24: “Related party Disclosures “regarding key management personnel, Managing Director is the key management personnel. His benefit is given below:

(a) Short term employee benefits: 6,705,000 3,386,000

(b) Post-employment benefits; - -

(c) Other long-term benefits - -

(d) Termination benefits; and - -

(e) Share-based payment - -

Total 6,705,000 3,386,000

28.0 Directors’ fees

Board of Directors 624,000 856,000

Board Audit Committee 120,000 168,000

Executive Committee 208,000 200,000

952,000 1,224,000

In compliance with Bangladesh Bank’s circular No. DFIM Circular No. 13, dated 30 November 2015, BDT 8,000 has been paid to directors of the board excluding the Managing Director for attending per meeting of the board and its sub-committees of CVC Finance Limited.


Amount in BDT

192Page-

29.0 Auditors’ fees

Auditors’ fees including VAT @ 15.00% 115,000 103,500

115,000 103,500

30.0 Depreciation and repairs of company’s assets

Depreciation on company’s fixed assets (Annexure-A) 9,038,863 6,346,130

9,038,863 6,346,130

31.0 Other operating expenses

Office maintenance - HO & PB 671,297 816,070

Office maintenance-Agent Office - 28,900

Office Maintenance-Enterprise Cafe Mymensingh - 11,300

Office Maintenance - Liability Sales Office 800 20,950

Traveling and conveyance 504,443 581,506

Traveling and conveyance - Agent Office Naogaon 1,370 62,716

Travelling & Conveyance-Enterprise Cafe Mymensingh 3,000 35,020

Motor Vehicle Maintenance-Employees Car 1,208,141 1,264,416

Motor Vehicle fuel - MD’s Car 360,000 184,000

Motor Vehicle Insurance expenses-MD’s Car 55,971 33,907

Motor Vehicle other expenses-MD’s Car 192,422 114,141

Motor Vehicle Fuel - Chairman’s Car 75,724 134,453

Motor Vehicle Insurance expenses-Chairman’s Car 75,121 49,520

Motor Vehicle Maintenance-Chairman’s Car 32,990 23,015

Motor Vehicle others-Chairman’s Car 47,347 97,606

Motor Vehicle Insurance expenses-DMD’s Car 67,889 -

Motor Vehicle Fuel - Agent Office 23,000 60,000

Entertainment Meeting 148,805 591,688

Entertainment and public relation 701,630 1,194,909

Entertainment- Liability Sales Office 29,259 2,247

Entertainment -Agent Office Naogaon 7,365 163,194

Entertainment -Enterprise Cafe Mymenshing - 6,035

Professional fees 117,550 798,407

AGM Expenses 351,743 118,300

Books & Preiodicals - 1,710

Bank charges 836,590 966,330

Security A/C Charges 111,069 58,593

CIB service charges 24,279 120,293

Computer Related Accessories 327,896 288,128

Fees & Subscription 253,169 439,054

Guarantee Commission fee - 30,397

Legal Expense 55,000 -

Repair & Maintenance - HO & PB 324,654 587,035


Amount in BDT

193Page-

Repair & Maintenance - Agent Office Naogaon - 570

Promotional Expenses 98,529 146,548

Crockeries items 14,890 8,910

Crockeries Items-Enterprise Cafe Mymenshing - 12,800

Crocrkeries Items-Sales Office - 8,795

CSR Expenses 999,000 30,000

Training, Seminar, Conference Expense 132,893 90,639

7,853,836 9,182,102

32.0 Provision for loans, advances and leases

General provision on unclassified loans, advances and leases (17,340,143) (3,533,225)

Specific provision on classified loans, advances and leases 33,402,150 52,592,037

16,062,007 49,058,812

32.1 Provision for Diminution in Value of Investment

Provision for Share Investment 50,128 174,432

50,128 174,432

33.0 Provision for income tax

This represents amount provided for income tax on profit before tax for the year ended 31 December, 2020. The amount has arrived as follows:

Amount provided on current year’s profit 28,549,403 24,963,113

Add: Expense charged for the FY 31.12.2017 13,119,034 -

Less: Excess provision of income tax - -

Amount provided for current tax 41,668,437 24,963,113

Amount provided for deferred tax - -

41,668,437 24,963,113

Excess provision of income tax represents amount provided for the FY 31.12.2017 as tax expenses in the financial statements which is excess of tax settlement by the tax authority. For this excess amount an accounting effect has been given in accordance with para 36 of BAS-8: “Accounting Policies, Changes in Accounting Estimates and Errors”.


Amount in BDT

194Page-

34.0 Diluted Earning per share (DEPS)

Earning Per Share as shown in the face of the Profit and Loss Account is calculated in accordance with IAS 33: “Earning Per Share”.

Basic Earning Per Share has been calculated as follows:

Net profit after tax for the year (A) 29,705,073 37,444,670

Weighted average number of ordinary shares at 31 Decem-ber, 2020 (B) 115,500,000 115,500,000

Earning Per Share (A/B) 0.26 0.32

35.0 Net Asset Value (NAV) Per Share

Net Asset (total assets less total liabilities) (A) 1,261,977,770 1,232,272,697

Total number of ordinery shares outstanding (B) 115,500,000 115,500,000

Net Asset Value (NAV) Per Share (A/B) 10.93 10.67

36.0 Net Operating Cash Flow Per Share (NOCFPS)

Net Operating Cash Flows (A) (45,729,789) (811,359,782)

Total number of ordinary shares outstanding (B) 115,500,000 115,500,000

Net Operating Cash Flow Per Share (A/B) (0.40) (7.02)

37.0 Related Party Disclosure

The company has no related party transactions during the year.

38.0 Foreign remittance

There were no foreign remittance during the year 2020. 39.0 Number of employees

The Company paid an aggregate amount more than BDT 36,000 per annum to 98 employees, who were in employment for full year or part of the year 2020.

40.0 Contingent Liabilities

There are no contingent liabilities at the balance sheet date.


Amount in BDT





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198Page-

Annexure-DFinancial

YearAssessment

YearProfit Before

TaxProvision for

TaxStatus

2015-2016 2016-2017 39,012,101 12,320,814 Assessment has been completed



2018-2019 2019-2020 114,018,450 42,890,402 At Commissioner Level for Assessement

2019-2020 2020-2021 62,407,783 24,963,113 At DCT Level for Assessement

INCOME TAX STATUS IN DIFFERENT YEARS

CVC FINANCE LIMITED

199Page-

CVC Finance

At a Glance

200Page-

201Page-

202Page-

203Page-

Notice of the 6th

Annual General MeetingNotice of the

By the order of the Board of Directors

August 10, 2021

Agendum #

AGM2021-06-01

AGM2021-06-04

AGM2021-06-02

AGM2021-06-05

AGM2021-06-06

AGM2021-06-03

Agendum

To receive and adopt the Directors Report and the Audited Financial Statements for the year ended December 31, 2020 together with Auditors’ Report thereon.

Election of Directors in place of those who will retire by rotation in accordance with the provision of Articles of Association of the Company.

To declare dividend for the year ended December 31, 2020.

Update on On-going Strategy Implementation

To transact any other business (if any) with the permission of the chair.

To appoint the statutory Auditor for the year 2021 and to fix their remuneration

Notice is hereby given that the 6th Annual General Meeting of the Shareholders of CVC Finance Limited will be held on Saturday, the 28th day of August 2021 at 03.00 p.m. using digital platform to transact the following businesses:

6TH ANNUAL GENERAL MEETING OF THE SHAREHOLDERS


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Corporate

Profile

Name of the Company CVC Finance Limited

Legal Form Public Limited Company

Date of Incorporation 31-March-15

Company Registration No. C-122113/15

Bangladesh Bank License No. DFIM(L)/36 dated. 16-Jul-15

Tax payer Identification No. 270708931952

BIN No. 002345553-0101

Paid Up Capital BDT 1,155 Million

Chairman Mr. Mahmud Hussain

Managing Director Mr. Syed Minhaj Ahmed

Company Secretary Mr. Shah Wareef Hossain

Head OfficeLevel-10, Green Gradeur Tower, 58/E Kemal Attaturk Avenue, Banani, Dhaka.

Principal BranchLevel-7, Green Gradeur Tower, 58/E Kemal Attaturk Avenue, Banani, Dhaka.

AuditorHoda Vasi Chowdhury & Co., Chartered Accountants

Credit Rating A+ (Long Term), ST-2 (Short Term)

Credit Rating Agency Alpha Rating

Bankers

Sonali Bank Ltd, Agrani Bank Ltd, BASIC Bank Ltd, Jamuna Bank Ltd, Shahjalal Islami Bank Ltd, Trust Bank Ltd, Modhumoti Bank Ltd, Social Islami Bank Ltd, Merchantile Bank Ltd, Midland Bank Ltd.

Legal Advisors

Legal Salvation Center, AHM Kamal & Partners, Tareque & Associates, Shahinshah & Associates, Seraj & Associates, Lexes & Legists, Lex Juris, G Sorrowar & Associates, Quader Chambers, Law & Remidy and BLACK & WHITE.

Membership with AssociationsBangladesh Leasing & Finance Companies Association (BLFCA)

1633242136000_1_Annual Report-2020.pdf - CVC Finance ...

Documents

Transcript of 1633242136000_1_Annual Report-2020.pdf - CVC Finance ...