directors report

Bismillahir Rahmanir Rahim Dear Fellow Shareholders The Board of Directors is pleased to welcome the honorable shareholders in the 13th Annual General Meeting of the Bank. The Directors' Report along with audited financial statements and auditors' report thereon for the year ended December 31, 2008 are presented before your kind-self. In the report, DBBL's operational performance of 2008 as compared to 2007 have been evaluated and analyzed within the prevailing business environment. The information and analysis may be read in conjunction with the DBBL's audited financial statements which have been prepared in accordance with Bangladesh Accounting Standards and applicable legal and regulatory requirements.
ECONOMY AND FINANCIAL MARKET

World Economic Environment and Outlook The world economy is facing a major downturn in the face of the most devastating financial shock in mature financial market since 1930s. The financial crises first erupted with the collapse of US sub prime mortgage in August 2007 following major corrections in housing markets in US and a number of advanced countries. The crises deepened further and entered a tumultuous new phase in September 2008, when among other, the insolvency of Lehman Brothers, One of the biggest investment banks in Wall Street threatened collapse of the entire financial system and badly shaken the confidence of consumers and investors so much so that credit market became almost frozen i.e. banks were not lending to consumers and businesses and inter-bank transactions were also stopped. The impact has been felt across the global financial system including emerging markets. US and European authorities have taken extraordinary measures aimed at stabilizing markets, including massive liquidity provision, prompt intervention and to resolve weak institutions, extension of deposit insurance, lower interest rates and big stimulus package to support targeted institutions or groups or public investments to create employments and generate income. However, the situation remains highly uncertain and subject to considerable downside risk. Many advanced economies are already in recession while growth in emerging economies is also weakening. Looking ahead financial conditions are likely to remain very difficult restraining global growth prospects. The world economy registered an unprecedented average growth of 5.0 percent a year for consecutive four years before 2008. The October 2008 issue of the IMF World Economic Outlook (WEO) projected 3.9 percent global output growth in 2008, down from the 5.0 percent rate registered in 2007. The advanced economies as a group (with 56.4 percent share in 2007 global output) are projected to grow by 1.5 percent, while the emerging market and developing countries as a group (with 43.6 percent share in 2007 global output) are projected to grow by 6.9 percent in 2008. Oil prices increased in February and stayed above USD 100 a barrel before declining to around USD 50 a barrel in November 2008 following severe crisis in the international financial markets. The non-fuel commodity price boom picked up at much higher levels in real terms than at any time in the past 20 years, despite some correction since mid-July 2008 amid the slowdown of the global economy. The growth of world trade volume in 2008 is projected to decline to 4.9 percent compared to 7.2 percent in 2007. The growth of exports from both the advanced economies and other emerging markets and developing countries are projected to decline to 4.3 percent and 6.3 percent, respectively, in 2008. The latest Global Financial Stability Report (GFSR) released by the IMF in October 2008 indicates that the global financial system has undoubtedly come under increasing strains and risks to financial stability that erupted in August 2007 have developed into the largest financial shock since the Great Depression. Equity markets have turned downward. Liquidity remains seriously impaired despite aggressive responses by major central banks, while concern about credit risks has intensified. Looking forward in 2009, in the face of financial crisis entering a new, more severe stage in September 2008, the global economy is projected to slow further to 3.0 percent growth, 0.9 percentage point lower than the July 2008 WEO

projection, with slowed activity in the advanced economies, while growth will also be moderate in the emerging and developing economies. The major downside risks include the risk arising from the still-unfolding events in financial markets. Global financial markets continue to be fragile and indicators of systemic risk remain strong. There is a need to continue strong efforts by the policymakers to deal with financial market turmoil in order to avoid a full-blown crisis of confidence or a credit crunch. The immediate priorities are to rebuild counterparty confidence, reinforce the capital and financial soundness of institutions, and ease liquidity strains. Longer-term reforms will be needed including improving mortgage market regulation, promoting the independence of rating agencies, broadening supervision, strengthening the framework of supervisory cooperation, and improving crisis resolution mechanisms. The key actions for adjustment in the imbalances suggested by the IMF include measures to increase savings in the United States; exchange rate appreciation, along with measures to boost domestic demand in emerging Asia; structural reform to boost domestic demand and growth in the euro area and Japan; and measures to increase demand in oil exporting countries. Monetary policymakers in the advanced economies face a delicate balancing act between alleviating the downside risks to growth and guarding against a buildup in inflation. In the United States, rising downside risks to output, amid considerable uncertainty about the financial turbulence and the deterioration in labor market conditions, justifies the Federal Reserve's interest rate cuts and a continuing bias toward monetary easing. Despite the weaker growth prospects for advanced economies, a number of emerging market economies still face overheating pressures and rising food prices, and further tightening may be required to contain inflation. With a flexible exchange rate regime, currency appreciation will tend to provide useful support for monetary tightening. Negotiations under WTO's Doha Development Round, restarted in August 2008 and ended without agreement because of sharp divisions among the US, India and China about access to agricultural markets in the developing world. A successful outcome to the negotiations is needed to strengthen the multilateral trading system and provide impetus to global economic growth.

State of the Bangladesh economy GDP growth The performance of the Bangladesh Economy in the face of a number of unfavorable factors in FY 2008 was remarkable showing signs of resilience of the economy and its strong growth potential. Despite political uncertainty, shaken business confidence, labor unrest in RMG sector and a spike in prices of oil, rice and most commodities in the international market real GDP grew by 6.2 percent in FY 2008, slightly lower than 6.4 percent of FY 2007. At current market price GDP of Bangladesh in FY 2008 was estimated at Taka 5,419.0 billion (Taka 4,675.0 billion in FY 2007). The strong growth was underpinned, on the supply side, by a moderate growth in the agricultural sector and continued strong growth in the industry sector and in the service sector. Economic growth was also aided by rapid growth in exports and surging remittances. The industry sector attained a satisfactory growth of 6.9% in FY 2008, lower than 8.4% of FY 2007. The growth was supported mainly by sustained growth in export-oriented manufacturing activities and expansion in domestic demand and sustained growth in the mining and quarrying sub sector as well as power, gas and water sub sector. Overall, the service sector grew by 6.7% in FY 2008, slightly lower than 6.9% recorded in FY 2007 and remaining well above the trend level. Agriculture sector achieved a moderate growth of 3.6% in FY 2008 following two consecutive floods, cyclone Sidr and a widespread outbreak of the avian flu in the country resulting mainly from a lower growth in animal farming and crops and horticulture subsector. The long term trend showing a shift of sectoral composition of GDP away from agriculture towards industry continued in FY 2008 while the share of industry sector increased to 29.7% from 29.4%, the share of agriculture sector in GDP came down to 20.9% from 21.4 % ; the share of the service sector in GDP increased to 49.4% from 49.2%. Government and Bangladesh Bank policy towards economic development With a view to achieving higher economic growth, the Government and Bangladesh Bank (BB) continued to adopt policies in bringing the economy back to its growth momentum. The Governments growth stimulating and poverty reduction programs coupled with prudent monetary policies of Bangladesh Bank contributed toward a strong GDP growth of 6.2% in FY 2008.

A partial view of a Blowroom section of a modern Spinning Mill at Narshingdi, financed by DBBL.

A partial view of a fully compliant Ring Spinning Mill at Bhaluka, Mymensingh financed by DBBL.

The fiscal policy in FY 2008 was meant for pro-poor economic growth and supporting private sector investment. The Government pursued a set of objectives which were attuned to poverty reduction. These strategies included, among others, creation of employment opportunities, removal of infrastructure constraints, improvement of law and order situation, establishment of fiscal discipline, unfettered development of private sector, human resources development, social sector investment, further widening of social safety net programs, and strengthening of financial management. Bangladesh Bank pursued growth supportive and prudent monetary policy stance during FY 2008 to ease the uptrend in inflationary tendency and to provide support for the highest sustainable real output growth.

External sector Exports and imports achieved robust growth in FY 2008, and remittances from workers abroad showed a strong and steady growth. Export increased by 15.7% from US$ 12,053 .0 million in FY 2007 to US$ 13,945.0 million in FY 2008 while imports increased by 25.6% from US$ 15,511.0 million to US$ 19,486.0 million. At the same time remittance increased by 32.4% from US$ 5,979.0 million in FY 2007 to US$ 7,915.0 million in FY 2008. As a result, country's current account balance exhibited a notable surplus of US$ 672.0 million in FY 2008 compared to surplus of US$ 936.0 million in FY 2007. The current account balance as a percentage of GDP stood at 0.85% in FY 2008 against 1.37% in FY 2007. The surplus in overall balance of payments came down to US $ 604.0 million in FY 2008 from US$ 1,493.0 million in FY 2007. Gross foreign exchange reserve increased by US$ 1,072.0 million to US$ 6,149.0 million at the end of FY 2008 that was equivalent to 3.8 months' import. Inflation The rising trend of inflation measured by CPI continued throughout FY 2008 mainly due to higher prices of oil, food and some other imported goods in the international market, disruptions of productions and supply caused by repeated floods and cyclone, higher domestic production cost of essential goods and business syndications. Annual average inflation measured by 12-months average movements in CPI, increased from 7.2% in June 2007 to 9.9% in june 2008. There was a notable increase in food prices component of CPI inflation from 8.1% in June 2007 to 12.3% in June 2008 and non-food component of CPI also increased from 5.9% in June 2007 to 6.3% in June 2008. Savings and investments Domestic savings -GDP ratio decreased from 20.4% in FY 2007 to 20.1% in FY 2008 while investment -GDP ratio decreased marginally from 24.5% of FY 2007 to 24.2% in FY 2008. The savings -investment gap, correspondingly, remained the same at 4.1% in FY 2008 and FY 2007, financed by net factor income from abroad. Public finance Revenue receipts in FY 2008 were Taka 605.4 billion, 22.4% higher than revenue of Taka 494.7 billion in FY 2007. Tax revenue was 79.3% within total revenue. Public expenditure amounted to Taka 936.1 billion in FY 2008, 40.1% higher than Taka 668.4 billion in FY 2007. Public expenditure comprised of Taka 522.5 billion current expenditure, Taka 188.6 billion other expenditure and Taka 225.0 billion development expenditure which was reduced by 15.1% from original target of Taka 265.0 billion. Consistent with the growth and poverty reduction objectives, 29.1 % of total outlay was spent for the infrastructure sector and 24.7 % for the social sector. The deficit in revised FY 2008 budget stood at Taka 330.7 billion or 6.2% of GDP at current prices. The domestic borrowing component of the deficit financing was Taka 199.2 billion (3.7% of GDP) in FY 2008 in which bank borrowing was Taka 104.0 billion (1.9% of GDP). Revenue as a percentage of GDP increased to 11.3% as compared to 10.6% in FY 2007, while public expenditure as a percentage of GDP increased from 14.3% in FY 2007 to 17.5 % in FY 2008. Accordingly, overall budget deficit increased from 3.7% of GDP in FY 2007 to 6.2% in FY 2008.

Future outlook for the Bangladesh economy By maintaining macroeconomic stability through prudent fiscal and monetary policy with supportive external sector policy and progress in advancing structural reforms, against the backdrop of recent natural disasters and food crisis, the near and medium term economic prospects of Bangladesh appear favorable. In the updated Medium Term Macroeconomic Framework (MTMF) of Poverty Reduction Strategy Paper (PRSP) under the base case scenario, the real GDP growth has been projected to increase gradually to 6.5 percent in FY09, 7.0 percent in FY10, and 7.2 percent in FY11, aided by sustained macroeconomic stability, increased business and investment facility, increased growth in the industry and services sector, buoyancy in the overall agricultural sector growth, expansion and diversification of the export base, increased efficiency and technological progress, and ongoing implementation of economic reform programs.

A partial view of a Ring Spinning Mill at Bhaluka, Mymensingh financed by DBBL.

To support the pro-poor growth targets envisaged in the MTMF, the gross domestic investment is projected to increase gradually from 24.4 percent of GDP in FY09 to 26.3 percent in FY10 and 27.0 percent in FY11 supported by introduction and implementation of pro-industrialization and investment friendly economic policies and strategies. Inflation is projected to decline gradually from 9.0 percent in FY09 to 7.0 percent in FY11, with an appropriately monetary policy stance aimed at ensuring reasonable price stability and providing support to sustainable and high output growth. The outlook envisaged in the MTMF faces several near and medium term downside risks and uncertainties originating from (i) the probable rising inflationary pressures, (ii) the probable volatility in prices of oil and other commodities in the world market, (iii) floods and other natural disasters, and climate change, (iv) infrastructure constraints (especially power, gas, ports, and transportation), (v) probable adverse effects in the RMG export growth due to falling growth prospects in U.S. and the country's other major trade partners, and (vi) probable adverse impact of global slowdown on aid inflow and workers' remittances. Besides, failure to meet following challenges may add to the problems: (i) ensuring food security, (ii) increasing productivity, (iii) diversifying export products and markets, and (iv) smooth transition to democracy. The depth and severity of the recent global financial crisis as well as its impact on Bangladesh Economy is still unfolding. However, Bangladesh is relatively insulated from the financial slide, but the global growth outlook, especially the growth prospect in the U.S. and the country's other major trade partners, has weakened which could create adverse impact on foreign aid, remittances and export growth, particularly export growth of RMGs.

partial view of export oriented Knit Composite Factory at Kanchpur, Rupganj, Narayanganj financed by DBBL.

Bangladesh needs to remain alert regarding its competitiveness of exports especially in the price-sensitive RMGs. Therefore, for survival in the increasingly competitive global garment trade, a competitive RMG sector needs to be built with upgrading infrastructures, developing financial capacity of manufacturers, labour compliance standards, design and product development capability, advanced production facilities, long term business relationship, and the development of internationally reputed customer bases. Efforts need to be made for larger access for our RMG products in the markets where access still remains limited such as Australia and Japan. On the other- hand, to reduce the overwhelming dependence on RMG, measures need to be taken to diversify the exports.

Recently, the World Bank in its report "Doing Business 2009" ranked Bangladesh above China, India, Pakistan and the median Low Income Country (LIC) for required time and procedures to start a business. Simplifying foreign borrowing by the private sector, rationalizing the foreign exchange transactions to encourage increased FDI and foreign portfolio investment, particularly in medium and large-scale industries and enterprises, including infrastructure building, and above all sound macro-economic management and positive political developments with a sound economic environment would make Bangladesh a middle income economy by the end of the next decade.

Money, Credit and Financial Market

Money and credit growth

Bangladesh Bank pursued prudent monetary policy in FY 2008. Broad money grew by 17.6% in FY 2008 which was higher than 17.0% growth in FY 2007 while domestic credit grew by 21.8% higher than 14.4% growth in FY 2007. Credit to the private sector increased by 24.9% compared to 15.0% in FY 2007 reflecting increased activities in real sector. On the other hand, public sector credit grew by 11.9 % compared to 12.4% in FY 2007 mainly due to downsizing of ADP. Monetary policy stance and interest rate scenario

Bangladesh Bank pursued growth supportive and prudent monetary policy stance during FY08 to ease the uptrend in inflationary tendency and to provide support for the highest sustainable output growth. To adhere to its pro-growth monetary policy stance, BB prudently used monetary policy instruments at its disposal during FY08. As part of its policy stance BB emphasized more on increased credit flow to the agriculture, SMEs and housing sector. The major policy rates remained unchanged at preceding years level. The spread between short term and long-term rates of government securities narrowed down reflecting BBs commitment to reduce inflationary pressure. Moreover, BBs continuous efforts to rationalize lending rate also succeeded in FY 2008. The declining trend of interest rates continued in FY08. Weighted average interest rate on bank advances recorded a decrease to 12.3 percent as of end June 2008 from 12.8 percent as of end June 2007, while that on bank deposits increased slightly to 7.0 percent from 6.9 percent in FY 2007. As a result, net spread between advances and deposits declined to 5.3% from 5.9%.

Money market A healthy, transparent and dynamically evolving financial system helps mobilize savings and allocate resources, ensure safe and efficient payment and settlement arrangements and ease financial crisis management. Efforts continued in FY 2008 to establish a healthy and transparent financial system in the country. There were signs of strain both in the interbank call market and forex market. Volatility in these two markets was tamed through repo operation and intervention by BB. Efficient monetary operation, especially use of shorter term monetary instruments such as repo , reverse repo, collateralized continuous liquidity support from A partial view of export oriented Knit Composite Factory having kintting, dyeing, finishing and garments facitiles at Jarun, Konabari, Gazipur financed by DBBL. Bangladesh Bank to the primary dealers and

Bangladesh Bank Bills helped to

keep the money

market sound and stable during the FY 2008. A

number of steps were taken for activation of secondary markets of bills/bonds. As a result, the overall money market situation was moderate during FY 2008. The weighted average interest rates in call money market started increasing from March 2008 to come down by June 2008. Credit growth driven by growing economic and business activities created some liquidity pressure in the banking system. BB provided liquidity support to keep call money rate reasonably stable in FY 2008. As a result, the weighted average interest rate in the call money market moved within the range of 6.9% to 14.8% during FY 2008. The repo injects required money in the system and provides banks with necessary funds to maintain their liquidity. While pursuing a cautious monetary policy, Bangladesh Bank kept this window open for the banks to maintain the market liquidity at desired level. The A partial view of a dyeing section of an export oriented Textile Industry at Bhobanipur, Gazipur financed by DBBL. interest rate on repo auctions was 8.5% in FY 2008 as against 8.0% - 9.0% in FY 2007. While repo injects money in the system, the reverse repo takes it away from the system. As a counterpart of repo auctions,

the daily reverse repo auctions were held in FY 2008. The reverse repo auctions were used to maintain intended level of liquidity in the market as well as to contain credit growth. The interest rate on reverse repo auctions remained unchanged at the previous year level of 6.5% per annum during FY 2008.

A carefully coordinated use of repo and reverse repo transactions, liquidity support to primary dealers and auction of Bangladesh Bank bills played key role in stabilizing the money market and interest rates in banking sector during FY 2008. Foreign exchange market

Bangladesh Bank introduced floating exchange rate in May 2003 for Taka. Under the arrangement, the banks are free to set their own rates for inter-bank and customer level transactions. Taka is convertible for current international transactions. Repatriation of profits or disinvestment proceeds on non-resident FDI and portfolio investments are freely permitted. The exchange rate is being determined in the market on the basis of market demand and supply forces of the respective currencies. However, to avoid any unusual volatility in the exchange rate BB occasionally intervenes in the market when it deems necessary to maintain stability in the foreign exchange market designed to

ensuring the competitiveness of Bangladeshi products in the international markets, encouraging inflow of remittances, maintaining internal price stability and maintaining balance in external account position.

Foreign exchange market of the country enjoyed good liquidity in FY 2008 mainly due to more than expected foreign currency inflow (equivalent to US $ 7.9 billion) throughout the year from Bangladeshi nationals working abroad along with the usual export proceeds. As a result, the exchange rate of Bangladesh Taka remained almost stable in FY 2008 and moved within the range of Taka 68.48 to 68.85 during FY 2008. However, in 1st quarter of FY 2008 foreign exchange market experienced modest pressure due to higher demand in the market which subsequently eased . The exchange rate started at 68.85 in FY 2008 and closed at 68.53 at the close of FY 2008. Remittance

Inward remittance from Bangladeshi nationals abroad continued to play an important role in strengthening the current account balance. Over the last few years, various steps have been taken to boost the flow of remittance through the banking channel. These include expansion of activities of drawing arrangements, review of statements received from foreign banks /exchange houses, close monitoring and supervision of banks. Besides, scheduled banks have ensured quick delivery of remittances by reducing lead-time to the beneficiaries in Bangladesh, which brought substantial development in the delivery system. Drawing arrangements have been made between 39 Bangladeshi banks and 270 foreign banks/exchange houses situated throughout the globe. Annual remittance threshold from various regions of the world has been refixed upward. For these measures remittances recorded substantial growth by 32.4% from US $ 5,979 million in FY 2007 to US$ 7,915 milion in FY2008. Remittance as a percentage of GDP increased to 10.02% in FY 2008 from 8.72% in FY 2007.

Development in banking sector During FY 2008, Bangladesh Bank continued ongoing reforms in financial market by tightening of prudential regulations, improvement of supervisory oversight, expanding transparency and market disclosures with a view to improving overall efficiency and stability of the financial system. The banking sector in the country is mainly divided into three segmentsState-owned banks, private commercial banks and foreign commercial banks. PCBs are the fastest growing segment in the market, having more than 50% market share.

The following policy measures were taken in FY 2008 by Bangladesh Bank to improve corporate governance and stability of the banking sector and to extend services of banking companies towards customers and SMEs: Total capital requirement of banking companies increased from Taka 2.0 billion to Taka 4.0 billion that should be maintained on or before August 11, 2011 that is over & above 10% capital adequacy ratio. .50% of revaluation reserve against held to maturity securities has been also accepted as Tier-2 capital. General provision against off balance sheet items was increased from 0.5% to 1.0% in 2008. During the year opening of SME centers were allowed with a view to support growing and high potential SMEs in the country with permission to receive application, disburse, monitor and recover SME loans and receive foreign remittance & deliver the same in local currency. Priority will be given to women entrepreneurs involved in the promotion of SMEs. Oriental Bank was reconstructed under "The Oriental Bank Ltd (Reconstruction) Scheme, 2007" and renamed as ICB Islamic Bank Limited to safeguard the interest of depositors and banking sector as a whole. It may be noted that the bank had been suffering from a huge shortfall in capital and provision, large amount of classified loans, inefficient management and acute liquidity crises which brought it on the brink of collapse. .SCBs were further strengthened in 2008 to allow them to operate on a prudent and commercial basis to make them efficient, profitable and accountable to the respective authorities and to make the banking sector more competitive. A partial view of embroidery unit of a composite knit garments industry at Fatullah, Narayanganj financed by DBBL. .Bangladesh Bank continued to strengthen corporate governance system in commercial banks by making a provision for appointing two depositor directors in every bank.

A partial view of dyeing, printing and finishing section of an export oriented home textile industry at QC Nagar, Pagar, Tongi, Gazipur financed by DBBL.

Capital market The capital market passed another year of growth in 2008 raising the total market capitalization to GDP ratio to 19.26 % against 15.88% of 2007. Dhaka Stock Exchange (DSE) total market capitalization crossed Taka 1.0 trillion -mark in 2008 for the first time. DSE Market capitalization stood at Taka 1,043.8 billion on December 30, 2008 while it was Taka 759.6 billion on January 01, 2008. The daily average turnover at DSE recorded its highest achievement at Taka 2.818 billion in 2008 against Taka 1.362 billion in 2007. Turnover at the DSE recorded its highest mark with total transaction of Taka 5.905 billion on October 12, 2008. The benchmark General Index declined by 7.10 % to 2,795.34 points on the closing session from 3,008.91 of the opening session.

Global stock markets have taken a beating in the year 2008 due to global financial crises. Stock prices in all the major stock exchanges in USA, EU, Japan and regional exchanges like India and Pakistan have fallen sharply. In comparison, DSE has performed reasonably well. According to Bloomberg, New York based prestigious information services company, for the first eleven months of 2008, the DSE was the sixth best performing exchange in the world on a currency-adjusted basis. According to 23 world indices, DSE has performed the best.

Investors remained enthusiastic on the securities market until last quarter as their confidence was restored due to concerted efforts by SEC and DSE to develop the securities market. Institutional investors channeled huge funds into the market. However, in the last quarter of 2008 performance of DSE (both price and turnover) remained depressed due to lack of confidence for uncertainty in global financial crises which may adversely affect our export, remittance and foreign aid flow. The securities market has been facing some fundamental problems due to lack of adequate shares in the market. As a result, some of the issues marked unusual rise in 2008 only to decline later in the year. Under this background, the DSE sees investors awareness as cornerstone of the countrys growing securities market. It is advised that investors should make their investment decision based on company fundamentals, price level and disclosed information avoiding rumor based speculation. It is expected that the momentum in country's stock market will be sustained with growing awareness of investors, enabling policy environment pursued by the authority and listing of fresh securities from attractive sectors like telecommunications, power, gas, energy and other infrastructure sectors.

REVIEW OF BUSINESS OPERATIONS AND STRATEGY Principal activities The principal activities of DBBL are to provide all kinds of commercial banking products and services to the customers including project finance, working capital finance and trade finance for corporate customers, SME loans to small traders & businesses; and house building loan, car loan and wide range of life style and need based loans for retail customers. There are various deposit products particularly suitable for retail and institutional customers. DBBL's state of the art IT platform and online banking system provide the largest ATM network and POS services of the country through which customers are getting any branch and anytime banking. IT network also provides SMS banking, alert banking and internet banking services. EMV compliant various Debit and Credit cards of MasterCard Worldwide and VISA International, and DBBL's propriety cards are in operation. The EMV feature shields DBBL customers from any kind of frauds as per the guidelines provided by MasterCard and VISA. In addition, international cards (VISA and MasterCard) of different local and international banks are accepted at DBBL's ATMs for withdrawal of money and at POS terminals for payments of shopping, hotel and dining bills etc.

Strategic plan for positioning the company for future growth through capacity building

As part of its strategic plan, DBBL continued to invest heavily to improve and expand IT network, ATM services and card services along with branch network, business promotion and CSR activities. Though expenses on such investments in 2008 apparently reduced expected profit growth, however, these will substantially improve our A partial view of an export oriented composite knit garments industry at Bhobanipur, Gazipur financed by DBBL. capacity to deliver customer services with a wide range of products and services that can be matched with the best in the industry by strengthening IT platform, expanding

distribution channels and communication networks and improving productivity. DBBL's strategic objective is to have a clear competitive advantage over its competitors to provide the full range of banking services via multiple delivery channels the lowest cost. Brand positioning through state-of-the-art-technology at

Throughout its operation for last 13 years, DBBL has established itself as a different bank from others. It has differentiated itself as a leader in technology by reaching the latest banking services to its customers through largest ATM network in the country at free or affordable cost. DBBL has created an unprecedented example by providing this unique service at subsidized cost not only to its own customers but also to customers of many other banks. It has also established itself as a Bank that cares for the society. All the business activities of DBBL are done A partial view of an export oriented Cycle Manufacturing Industry at Mawna, Sreepur, Gazipur financed by DBBL. in full conformity with social, ethical and environmental standards. DBBL is the pioneer in CSR programs in the country. It has been intensifying its resources and efforts on a continuous basis to reach the distressed & needy people of the society to bring smile on their face and to improve their quality of living.

Customer focus and customers' right DBBL's performance cannot be judged by just looking at profit figures. DBBL considers that it is the customers' right to get modern, online and full ranges of banking services at an affordable price at anytime and anywhere. DBBL's service cost is the lowest in the industry and in many cases services provided through ATM are free. DBBL is committed to put the customers interest first. In line with its central vision; DBBL is promise -bound to extend personalized services to the full satisfaction of the customers that should be the best in the industry.

Capital management plan and capital adequacy ratio During 2008, Shareholders' equity (Tier-1 capital) increased to Taka 2,911.2 million being 6.91% of risk-weighted assets (RWA) and supplementary capital (Tier-2 capital) increased to Taka 1,704.8 million being 4.05% of RWA. Tier2 capital was also strengthened by revaluation of held to maturity securities as of December 31, 2008. It will strengthen the capital base of the company and provide long-term growth and stability to the Bank. It may be noted that as per Bangladesh Bank regulation subordinated loan is eligible as Tier-2 capital up to 30% of Tier-1 capital. 50% of assets revaluation reserve and 50% of revaluation reserve on held to maturity securities are eligible as Tier-2 capital. In line with long-term capital management plan of the Bank and keeping in view the implementation of Basel II requirement, strong capital adequacy ratio was maintained in 2008 which reached 10.96% at the end of the year that was well above statutory requirement of 10.00%.

Expansion of branches The Bank opened 15 new branches in 2008 to reach 64 branches at the end of the year spreading the branch network throughout the country. Another 15 branches will be opened in 2009 to expand the branch and distribution network. These will bring up-to-date banking services to our existing and potential customers. At the same time it will optimize utilization of our strong delivery channels, increase our resource position and business potentials that will maximize profitability and shareholders' value. DBBL's strategy is to reach the doorsteps of customers to provide full range of banking services based on state- of -the- art- technology and IT platform at free or affordable cost. Further development in Information Technology Dutch-Bangla Bank is the first and only bank in Bangladesh which invested more than Taka 1.5 billion in developing the largest ICT infrastructure in the banking sector of the country. Since its inception, the Bank has been continuously striving towards bringing world-class technology driven banking services, conveniences and satisfaction to its customers setting a milestone in the banking sector of the country. As a technology driven bank, we have implemented world reputed online banking software - Flexcube at all its 64 branches and 5 SME Service Centers with the following delivery channels: Any Branch Banking Online ATM/POS service Internet Banking service under the domain www.dbbl.com.bd SMS and Alert banking service The Bank has upgraded its IT system successfully for further strengthening and securing the automation of banking services. The Bank also implemented Online Synchronous Disaster Recovery Site (DRS) to provide uninterrupted and reliable banking services to the valued customers. DBBLs synchronous DRS is the first time in Bangladesh. Dutch-Bangla Banks ATM network is the largest ATM network in the country comprising of 350 units of ATMs at the end of 2008. DBBL has 750 units of POS terminals at various merchant locations. All the ATMs and POS terminals are made EMV (Europay, MasterCard and VISA)

compliant for the first time in Bangladesh to ensure the security of our valued customers. The ATM/POS network of the DBBL accepts the following cards: EMV compliant chip cards of all the Banks in the world Non-EMV Visa and MasterCard Cards of all the Banks in the world DBBLs Proprietary Cards (NEXUS). DBBL has also introduced EMV compliant Chip based VISA Credit Card for the first time in Bangladesh which is the most secured multi-currency card in the world. The EMV security policy has been introduced by Europay, MasterCard and VISA jointly to protect capturing card data and duplication of a card.

A partial view of a Pharmaceutical Industry at Tongi, Gazipur.

DBBL has set another milestone in the history of banking sector by adding two units of Mobile ATM booths to its exiting ATM network. DBBL has become the first bank in the country to provide such unique service and convenience to the customers. The DBBL Mobile ATM Booth, which is outfitted in a custom-made van, is available anywhere anytime and allow customers to deposit cash/cheque, withdraw cash, inquire account balance, print mini statement and to access all other services offered by a standard ATM. DBBL has opted other banks for joining and enjoying its ATM/POS network. Customers of the following member banks are now enjoying the DBBL ATM/POS network:

A partial view of UAE-Bangladesh joint-venture pharmaceutical company at Sreepur, Gazipur financed by DBBL

01. Mutual Trust Bank Limited 02. Standard Chartered Bank 03. Prime Bank Limited 04. Bank Asia Limited 05. Southeast Bank Limited 06. National Credit & Commerce Bank Limited 07. United Commercial Bank Limited 08. Commercial Bank of Ceylon Plc, Dhaka 09. The City Bank Limited 10. First Security Bank Limited 11. Mercantile Bank Limited 12. Trust Bank Limited 13. Jamuna Bank Limited 14. Shahjalal Islami Bank Limited

EMV Visa Credit card DBBL has started issuing EMV Credit Card (Visa) for the first time in Bangladesh. With this security feature (EMV), all the DBBL credit cardholders are protected from any kind of frauds at home and abroad. At present, all the non-EMV credit card holders need to inform their respective banks before going and after coming back from abroad to avoid unwanted transaction using the card. But even after undertaking these precautions, occasionally cards are found to be hacked or data compromised. While an EMV card may look similar to a normal card, the technology on it and supporting it is revolutionary. It uses an onboard computer chip instead of a magnetic strip and relies on DBBLs data center for on the spot verification. It features built-in encryption algorithms mandated by Visa and MasterCard which are impossible to duplicate or modify. It was designed and researched by Visa and MasterCard to be the most advanced card and eliminates the security problems of normal cards. Future initiatives Dutch-Bangla Bank will install another 500 ATMs and 50 Deposit Kiosk by the end of June, 2009. Bangladesh Bank has taken several reform measures to improve safety and effieciency in the payment systems. As part of this reform, Bangladesh Bank is going to introduce first paperless Automated Clearing House in the country which is called as Bangladesh Automated Cheque Processing System (BACPS) and Bangladesh Electronic Fund Transfer Network (BEFTN). DBBL has undertaken necessary initiatives to comply with the above-noted policy of the Bangladesh Bank. As a first step, DBBL has introduced Magnetic Ink Character Recognition (MICR) encoded cheque books for its customers as per the standard set by Bangladesh Bank. Dutch-Bangla Bank has also taken initiatives to make its IT infrastructure as Green IT. Environment friendly options like virtualization, power management and proper recycling habits towards certifying our data centers as Green are under our active consideration. A payment gateway is an essential part of an Online Payment System. It is necessary in order to process all of the following inter-bank on-line transactions: 1. Account-to-account transfer transactions or debit/credit card transactions on the web for on-line merchant payment against purchase of goods and services, 2. 3. payment. Inter-bank ATM/POS transactions using debit/credit cards, and Inter-bank Internet or SMS banking transactions for fund transfer (instant remittance) and utility bill

Since there is no such system in Bangladesh, Dutch-Bangla Bank is actively considering to implement a payment gateway to facilitate the above inter-bank transactions. This will be the first payment gateway setup in the country to drive e-commerce transactions. Retail banking and lending under SME scheme Considering future market direction and to capitalize on our robust IT platform and the strongest ATM network DBBL strengthened its Retail Banking Division in 2008. The Division has been operating in new premises with central processing and monitoring of retail loans. A number of retail loan products aimed at specific target groups were introduced in 2008 to cater the growing mprove yield and spread on total loan portfolio. The loan products included housing loan, auto loan, professional loan and other consumer loans to purchase consumer durables and to meet other needs of customers related to healthcare, education, travel, marriage, festival etc. A number of retail deposit schemes were also added in 2008 including Power Account i.e. interest bearing current account for salaried customers.

In future retail banking operation will be further intensified to increase DBBL's market share in this segment with introduction of more products and services.

SME lending scheme was launched in 2008 as a priority sector. Expansion of retail banking operation and SME lending will be strongly supported by adequate manpower, robust IT and ATM network, various promotional activities as well as faster and better customer services.

Human resource development A competent, committed and fully motivated team of human resources is the main driving force for performing at the highest level in a fiercely competitive financial market like Bangladesh. Accordingly, the Bank's strategy is to attract, retain and motivate the most talented people in the industry. The Bank's HR policies are based on trust and relationship. The Bank's policy is to look after people who want to make a long-term career with the Bank because trust and relationship are built over time. Remuneration package may be an important factor to motivate for joining a company, but it is not the only one. In case of DBBL, it is excellence of DBBL with good values, fairness, potential for success, scope to develop a broad interesting career etc. which attract people to join and work with DBBL. The number of DBBL staff increased by 440 in 2008. At the end of 2008, number of staff stood at 1,229 compared to 789 at the end of 2007. The corporate culture at DBBL as grew over last 13 years is such that the members of the staff have ample opportunities to take initiative and responsibilities. The challenge is to maintain a business like, committed corporate culture that matches DBBL's mission. Achieving results and taking responsibility are important components of the culture we pursue, one in which management and staff work together and are mutually accountable. DBBL always encourages excellence in performance by rewards and recognition.

A partial view of a reputed Ice Cream Manufacturing Industry at Kadamtali, I/A, Shyampur, Dhaka.

In addition, to strive hard for winning the challenges in a fiercely competitive market, the management has been constantly pursuing the following areas: To attract and retain best professionals in the industry. Job evaluation, job enrichment, performance target, performance evaluation and performance based compensation and incentives.

.Evaluating the training need of individual employees including training need for introducing new products, services and technology. Arranging high quality training at home and abroad so that DBBL executives can have competitive advantage in the market. Encouraging its employees to develop and broaden existing knowledge and skills and to acquire new skills and expertise. Reviewing and updating organiz ational structure on a regular basis to have a structure which can give strong support to the strategic objectives of the Bank.

Correspondent banking relationship At present, DBBL has correspondent banking relationship with 115 countries through more than 85 foreign banks. As a result, we can route Letters of Credit (L/C) to all important business centers of the world. We are maintaining adequate number of nostro accounts in major currencies with the key players in the world market to facilitate export and import transaction needs of our valued clients. DBBL's excellent service with competitive charges provides a good correspondent banking solution for the valued clients of DBBL. We are also enjoying L/C confirmation limits for more than US$35.00 million from different leading banks and financial institutions of the world. DBBL has established Taka Drawing Arrangements with various exchange houses located in USA, UAE, Kuwait, Italy, Canada etc. Moreover, arrangements of DBBL with Western Union, USA and Express Money of UAE Exchange Center, UAE enable people to get direct inward remittances from every corners of the globe. Remittance inflow of DBBL rose significantly by 136.7 % to US $ 75.7 million during the year 2008 from US $ 31.9 million in 2007.

REVIEW OF FINANCIAL POSITION AND RESULTS Summary Healthy business and profit growth despite political uncertainty and global financial crises Despite political uncertainty and global economic crises, DBBL registered healthy business and profit growth in 2008 while being cautious to protect against any risk that may be arising from political or economic crises. The deposit of the Bank increased by 22.5% from Taka 42,110.1 million in 2007 to Taka 51,575.7 million in 2008, loans & advances increased by 41.8% from Taka 29,403.1 million in 2007 to Taka 41,698.3 million in 2008, while import business increased by 23.4% and export business increased by 17.7%. Operating profit grew by 47.9% from Taka 1,438.7 million to Taka 2,127.2 million and net profit after tax increased from Taka 479.8 million to Taka 821.6 million showing an impressive growth of 71.2%. Lower cost of fund resulting in higher net interest income, increase of non- interest income particularly from online banking services and comparatively lower growth in operating expenses due to improved operational efficiency and productivity contributed to notable growth in operating profit. Impressive growth in net profit after tax grew at a faster rate than operating profit for lower loan loss provision in 2008. Return on equity was 29.6% in 2008 compared to 24.0% in 2007.

Higher investments in branch expansion, IT platform, ATM network, card services and human resource though contained profit growth in 2008, however, these will increase resource capacity, increase distribution network, improve efficiency in operations, augment resource flow to expand customer base and to provide much better and faster customer services. As a result, in the long term it will bring substantial and sustainable benefits for the Bank.

Summary of operating results is given below: In million Taka Change (%)

Particulars 2008 Interest income Interest expenses Net interest income Investment income No interest income Total operating income Total operating expenses Profit before provision Provision for loans and adavances (including off-balance sheet exposures) and charges on loan losses Other provisions Contribution to Dutch-Bangla Bank Foundation Profit before taxes Provision for taxation (current and deferred) Net profit after taxation 1 93 1,776 954 822 5,454 3,636 1,818 622 1,200 3,640 1,512 2,127 256

Amount 2007 4,879 3,690 1,190 631 857 2,678 1,239 1,439 363

11.8% -1.4% 52.8% -1.4% 40.0% 35.9% 22.0% 47.9% -29.3%

54 1,022 542 480 73.7% 73.7% 75.9% 71.2%

Composition of revenue 2008 (%)

Net interest income

During the year 2008, the net interest income of the Bank rose by Taka 627.8 million or 52.8% to Taka 1,817.7 million from Taka 1,189.9 million of the previous year. Net interest income increased mainly due to higher average loan portfolio and lower cost of fund resulting from improved depoist mix. Cost of fund declined from 8.44% of 2007 to 7.66% in 2008 while yield on loans and advances declined from 13.85% in 2007 to 13.62% in 2008 mainly due to reduction in interest rate for regulatory compliance. However, the share of net interest income to the total income of the Bank increased to 49.9% in 2008 compared to 44.4% of the previous year.

Non- interest income

The non interest income consists of the commission, exchange and other operating income of the Bank. Total noninterest income of DBBL increased by Taka 342.8 million or 40.0% in 2008 over the previous year. Commission and exchange income increased by Taka 149.4 million or 21.0% during the year 2008. Notable growth was achieved in other operating income which grew by Taka 193.4 million to Taka 340.5 million in 2008 from Taka 147.1 million in 2007 marking a rise by 131.5%. Other operating income increased due to growing services provided by online banking network of the Bank.

Total operating expenses

Total operating expenses of the Bank during the year grew by Taka 272.9 million or 22.0%. Higher operating espenses were necesary to support the overall business and profit growth of the Bank during the year 2008. Higher expenses were also required to support capacity building and expansion of distribituion network and delivery channels. 15 new branches and 5 SME centers were opened in 2008. 143 ATM units including 2 mobile ATM units were installed in 2008. Recruitment of new personnel, maintenance and upgradation of IT network, introduction of new retail products, increasing CSR activities are attributable to higher operating expenses. The Banks cost (excluding the charges for loan losses) to income ratio improved to 41.6% for the year 2008 from 46.3% of the previous year which signifies improvement in overall operating efficiency and productivity of resources.

Provision for loans and off-balance sheet exposures

Total provision for loans and off-balance sheet exposures decreased by Taka 185.2 million or 74.1% during the year 2008. However, the specific provisions against loans substantailly reduced by Taka 301 million or 120.4% during the year due to maintaining overall quality of loan portfolio resulting from better screening and close monitoring and supervision of loan portfolio particularly non-performing loans. While the provision for off-balance sheet exposures increased by Taka 33.2 million to Taka 126.2 million from Taka 93.0 million of the preceding year due to higher volume of off-balance sheet exposures and compliance with the Bangladesh Bank requirement for increasing the level of provision from 0.50% of previous year to 1.00% at the end of 2008.

Contribution to Dutch-Bangla Bank Foundation In addition to the Banks direct contribution to corporate social responsibility programs, DBBL established the Dutch-Bangla Bank Foundation in 2001 for carrying out CSR programs aimed at social causes and distressed people in the society. It is the Banks policy to contributre 5% of its pretax profit to Dutch-Bangla Bank Foundation which increased to Taka 93.5 million in 2008 compared to Taka 53.8 million in the previous year. Profit before taxes During the year 2008, the net profit before taxes of the Bank increased significantly by Taka 753.8 million or 73.7% to Taka 1,776.1 million from the previous years amount of Taka 1,022.2 million. This increase was mainly attributed to higher operating profit and lower loan loss provisions for improvement of the quality of assets that required lower specific provision for loans & advances. Provision for taxation As per Income Tax Ordinance, 1984, an amount of Taka 913.7 million has been charged as provision for current tax compared to Taka 756.4 million of 2007. However, Taka 40.7 million has been charged as deferred tax expenses in 2008 compared to Taka 214.0 million as deferred tax income for the year 2007. The effective tax rate increased to 53.7% as compared to 53.1% in 2007 against a nominal rate of 45%. Effective tax rate was higher mainly because loan loss provision was not considered tax-deductible expense in line with prevailing Income Tax law. Net profit after taxation Net profit after taxation grew by Taka 341.8 million to Taka 821.7 million from Taka 479.8 million of the preceding year marking a growth of 71.2%. The growth in after tax profit contributed to higher Tier-1 capital and total capital adequacy ratio.

A partial view of a waste recycling project (with composting facility) at Bhulta, Rupganj, Narayanganj financed by DBBL. The project is approved and registered as a Clean Development Mechanism (CDM) project under the Kyoto Protocol.

Significant profitability ratio

Review of balance sheet Total Liabilities The Banks liabilities (except shareholdersequity) as at 31 December 2008 increased to Taka 57,461.5 million compared to Taka 47,036.9 million at the end of 2007 showing a growth of 22.2%. The liability mainly included deposits which increased to 89.8% of the total liabilities in 2008 from 89.5% in 2007. Summary of liabilities is given below: In million Taka

Deposits The deposit grew by Taka 9,465.5 million (22.5%) in 2008 from Taka 42,110.1 million to Taka 51,575.7 million. The growth was supported by expansion of branch network, opening of new ATM booths and SME service centers at different business hubs of the country. In 2008 deposit mix improved substantially. Online banking with expanded ATM network and tailor made customer services helped increase confidence of customers in DBBL. As a result, number of savings and current accounts as well as amount of deposits increased significantly. Share of cost free or low cost deposits increased to 50.7% of total deposits in 2008 (44.7% in 2007). Because of improved deposit mix, weighted average cost of fund declined to 7.66% in 2008 from 8.44 % in 2007 The savings deposits of the Bank increased by Taka 4,502.1 million to Taka 12,212.0 million from Taka 7,709.9 million of the preceding year showing a significant growth of 58.4% in 2008. The share of savings deposits along with other low cost deposits increased to 50.7% in 2008 from 44.7% in 2007. The share of high cost fixed depoists came down to 49.3% of total deposits in 2008 from 55.3% though absolute amount of fixed deposit increased by Taka 2,120.8 million (9.1%). The deposit mix is given below:

Borrowing from other banks, financial institutions and agents Borrowing from other banks, financial institutions and agents stood at Taka 593.6 million at the end of 2008 compared to Taka 632.7 million at the end of 2007. The Banks borrowing includes borrowing against refinance from Bangladesh Bank for financing under SME scheme and financing under housing scheme. Besides, the Bank has been availing credit lines facilities from the Rupantarita Prakritik Gas Company Limited (RPGCL) for financing CNG buses / chassis under Dhaka Clean Fuel project and credit lines from FMO, The Netherlands. In order to support some of the preferred sectors of the economy, DBBL has extended soft term credit facilities financed by FMO, The Netherlands as follows: Under a foreign currency loan for US$ 8.75 million from Netherlands Development Finance Company (FMO) DBBL is advancing credit lines to export oriented RMG units at an interest rate of 11.85 percent p.a. for procurement of capital machinery. To develop small-scale entrepreneur, a long-term local currency loan equivalent to EURO 5.00 million was also arranged from Netherlands Development Finance Company (FMO) to finance small-scale enterprises engaged in manufacturing, agriculture, transport, tourism and productive trade & commerce and service industries. The loan amount was increased to EURO 7.50 million to include residential housing finance only for fixed income group. Subordinated debt With another Subordinated loan for Taka 487.2 million obtained in 2008 total amount of subordinated loan increased to Taka 1,423 million at the end of 2008. Subordinated loans have been arranged from FMO for financing housing sector of the country and to strengthen Tier-2 capital of the Bank. Subordinated loan is eligible as Tier -2 capital of the Bank subject to regulatory limit. Shareholdersequity As at 31 December 2008, DBBLs shareholdersequity increased to Taka 3,220.6 million from Taka 2,334.4 million of 2007 registering an increase by Taka 886.2 million (37.9%). The increase resulted from Taka 821.7 million after tax profit and Taka 64.5 miilion revaluation reserve on held to maturity securities. After issuing bonus shares @3.94719 shares for existing 1 share of Taka 100 each paid-up share capital of the Bank increased by Taka 797.87 million and stood at Taka 1,000 million at the end of 2008. The statutory reserve increased to Taka 1,197.5 million at the end of 2008 from Taka 842.3 million of 2007. The paidup capital and statutory reserve together stood at Taka 2,197.5 million as at December 31, 2008. As per Bangladesh Bank regulation, paid-up capital and statutory reserve should be increased to at least Taka 4,000.0 million latest by Aug 11, 2011 of which paid up capital should be minimum Taka 2,000.0 million. Capital management plan and capital adequacy ratio Strong Capital Adeauacy ratio was maintained in 2008 which reached 10.96% at the end of the year that was well above statutory requirement of 10.00%. Shareholders' equity (Tier-1 capital) increased to Taka 2,911.2 million being 6.91% of risk weighted assets (RWA) and supplementary capital (Tier-2 capital) increased to Taka 1,704.8 million being 4.05% of RWA. The details of risk-weighted assets, requirement of capital, actual capital and capital adequacy ratio are given below:

Risk weighted assets

Total assets Total assets of DBBL as at 31 December 2008 stood at Taka 60,682.1 million compared to Taka 49,371.3 million of 2007 depicting a growth by Taka 11,310.7 million (22.9%). Loans and advances is the largest component of assets followed by investments. The summary of assets is given below: In million Taka

Cash in hand and balances with Bangladesh Bank and its agent bank (s) (including foreign currencies) As at 31 December 2008, cash in hand and balances with Bangladesh Bank and its agent banks (including foreign currencies) stood at Taka 5,126.7 million as against Taka 4,193.1 million of 2007 registering a growth by Taka 933.6 million (22.3%). The increased cash was required to provide uninterrupted cash services to our growing customer bases and customer needs. Online transaction facilities with 64 branches, 350 ATMs and growing number of accounts substantially increased cash requirement in branches and ATMs. Higher balance with Bangladesh Bank was required to maintain CRR Ratio consistent with higher deposits. Balance with other banks and financial institutions The Treasury Division of the Bank has to maintain some short term deposit (STD) accounts and current deposit (CD) accounts with other banks in and outside the country for smooth functioning of treasury operations and trade finance. A portion of the excess fund, if any, after meeting the requirement to finance loan portfolio and investments including SLR, is placed with other banks and financial institutions as term deposits for optimizing the profit of the Bank. As at 31 December 2008, balance outstanding with other banks and financial institutions substantially reduced to Taka 1,901.5 million from Taka 4,853.6 million at the end of 2007 for higher utilisation of funds in loan portfolio. Money at call & short notice Money at call and short notice stood at Taka 2,500.0 million at the end of 2008 compared to Taka 2,050.0 million at the end of 2007. The average yield on fund placement at call & short notice of the Bank was 12.82% for 2008 as against 7.92% of 2007. Short term excess fund is placed in money market to augment return on fund. Investments The Bank's investment stood at Taka 5,385.4 million at the end of 2008 that was lower by 8.9% from Taka 5,909.3 million in 2007. The surplus investment was shifted to loans & advances in 2008. The investments mainly included Government securities for Taka 5,366.4 million (99.6% of total investment) maintained mainly to cover SLR requirement. In addition, investments were planned in a way to provide sufficient liquidity and flexibility in treasury operations and to boost aggregate yield which increased from 11.38% in 2007 to 11.72% in 2008. Treasury team of the Bank was very much watchful to manage market risk & uncertainty and ensure maximum return from investments in security, term deposits and call money market. During the year under review, the Bank was able to maintain cash reserve requirements (CRR) and statutory liquidity requirements (SLR) successfully. Loans and Advances Loans and advances stood at Taka 41,698.3 million at the end of 2008, a growth of 41.8% over Taka 29,403.1 million in 2007. The Bank continued to consolidate and diversify its portfolio in 2008 to have a diversified client base and portfolio distributed across the sectors to reduce client specific and industry specific concentration and to reduce overall portfolio risk. Considering future market direction and to capitalize on our robust IT platform and the strongest ATM network a number of retail loan products aimed at specific target group were launched in 2008 to augment fee income and improve yield and spread on total loan portfolio. At the end of 2008, DBBLs total outstanding retail portfolio stood at Taka 621.9 million compared to Taka 9.8 million of 2007. Weighted average rate of return decreased to 13.62% in 2008 from 13.85% in 2007.

Classified loan as a percentage of portfolio remained close to last year at 3.27%. However, full provision was made against classified loans. Serious efforts are being continued to bring down the amount and percentage of classified loan by exploring all options including legal actions and out of court settlements depending on merit of the cases. To clean up the balance sheet, loans considered to be bad were written off for a further amount of Taka 289.9 million in 2008 that was in addition to Taka 123.7 million written off up to 2007. As a result, a cumulative amount of Taka 615.4 million was written off up to December 31, 2008. The summary of loans and advances along with risk status is given below:

Review of off-balance sheet items as at 31 December 2008 Total outstanding amount (net off margin) of off-balance sheet exposures of the Bank increased to Taka 21,916.2 million at the end of 2008 from Taka 18,599.0 million of 2007 registering a growth of 17.8%. The letters of credit (net off margin) stood at Taka 6,871.4 million at the end of 2008 compared to Taka 6,256.9 million of 2007 registering a growth of 9.8%. The letters of guarantee (net off margin) increased to Taka 2,264.4 million in 2008 from Taka 1,662.3 million of 2007 showing a growth of 36.2%. Import and Export business During the year under review, import business of DBBL recorded growth of 23.4% (11.2% in 2007) while export trade grew by 17.7% (2.2% in 2007). Outlook for 2009 In the business plan and budget for 2009, deposits are projected to grow by 55.1% to Taka 80,000.0 million and loans are projected to increase by 31.9% to Taka 55,000.0 million. Import and export business are expected to rise by

36.4% to Taka 60,000.0 million and 44.7% to Taka 58,000.0 million respectively. With better quality of assets, higher net interest income as well as growing non-founded business, healthy growth in operation and tax profit is expected in 2009. The above growth will be supported by expansion of branches, ATM network, up gradation of IT and online banking system to provide better and faster customer services. Human resource will be strengthened to improve operational efficiency and productivity. A number of new products and services particularly in SME and retail segments will be introduced to provide winder choice to the customers. Appropriation of profit The financial results and recommended appropriation of profit for the year 2008 Particular Net profit tax Retained earning brought forward from previous years Profit available for appropriations Appropriations recommended by the Board of Directors Transfer to statutory reserved fund. Proposed dividend (bonus share @50% i.e. 1 share for existing 2 shares of Taka 100 each) Relational earnings carried forward are given below: In million Taka 2008 2007 821.67 210.88 1032.55 355.21 500.00 177.33 479.81 733.39 1213.20 204.45 797.87 210.88

The Bank earned a net after tax profit of Taka 821.7 million in 2008 that was 71.3% higher than Taka 479.8 million in 2007. Dividend policy and utilization of retained profit The Bank has been pursuing a dividend policy that must ensure satisfactory return for shareholders as well as sustainable growth of the Bank with strong capital adequacy ratio to protect greater interest depositors and shareholders. Election of the Directors In terms of Article 113 of the Articles of Association of the Company, at every Ordinary General Meeting, one-third of the Directors for the time being if their number is not three or multiple of three, then the number nearest to one-third shall retire from the office. Accordingly, as per Article 114, Mr. Shahabuddin Ahmed will retire from the General Shareholders Group. As per Bangladesh Bank regulation, he is not eligible for re-election. A new director from General Shareholders Group will be elected by the shareholders in the Thirteen Annual General Meeting. Mr. Bernhard Frey continued as a nominated Director as nominated by Ecotrim Hong Kong Limited in 2008 and Mr. Bernhard Frey continued as nominated Dirctor as nominated by Ecotrim Hong Kong Limited. As per Aricle 114, Mr. Bernhard Frey will retire from Sponsor Shareholders Group and he is eligible for re-election and accordingly offered himself for re-election from the Sponsor Shareholders Group.

In term of Article 108 of the Articles of Association, the following Directors were appointed by the Board since last Annual General Meeting held on April 17, 2008. Mr. Abedur Rashid Khan (Sponsor Director). Mr. Sayem Ahmed (Sponsor Director) Dr. Irshad Kamal Khan (Independent Director) Dr. Syed Fakhrul Ameen (Director from Depositors) Mr. Chowdhury M. Ashraf Hossain (Director from Depositors) Dr. Irshad Kamal Khan was appointed as an Independed Director in compliance with SEC regulations. Dr. Syed Fakhrul Ameen and Mr. Chowdhury M. Ashraf Hossain were appointed as Directors from depositors of the Bank in compliance with Bangladesh Bank regulations.

All the directors appointed since last Annual General Meeting will retire from the office of the directors in this Annual General Meeting and they are eligible for re-election. Accordingly, they offered themselves for re-election. Meetings of the Directors Nine (09) Meeting of the Board of Directors and 52 (fifty two) meeting of the Executive Committee fo the Board were held during the year under review. The Audit Committee of the Board also held five (05) meetings during the year under review. Appointment of Auditors Our existing Auditors M/s. Hoda Vasi Chowdhury & Co. Chartered Accountants (Independent Correspondent Firm to Deloitte Touche Tohmatsu) has completed audit of 2008 as second year of their audit and as per Bangladesh Banks BRPD Circular Letter No.12 dated July 11, 2001 they are eligible for re-appointment. They have experessed their willingness to continue as auditors for 2009. The auditors will be appointed and their remuneration will be fixed for the year 2009 by the honorable shareholders in this Annual General Meeting. Gratitude The members of the Board of Directors fo DBBL would like to express their gratitude to all shareholders, valued clients, patrons, all employees and well-wishers for their continued support and cooperation, without which the Bank would not be able to achieve its present position. We are also indebted to the Government of Bangladesh, Bangladesh Bank, Securities and Exchanges for their continued support and co-operation. We look forward for your continuous support and best wishes for meeting the formidable challenges lying ahead. With best regards On behalf of the Board of the Directors Abul Hasnat Md. Rashidul Islam Chairman.