CASE STUDY

TRANSPORT

Total Marks: 100 Time: 4 Hours

Instructions:

1. Check that your question paper contains all the exhibits as mentioned in page 3. The consecu-
tive page numbering may be found under the base line at the foot of each page.

2. Use the answer script provided by the Institute. Write your name, roll no., registration no. and
name of the subject on the upper portion of the cover page of the answer script.

3. Candidates are asked not to write any particulars of identification in any other place of the
answer script and additional pages if taken.

4. Questions must be answered in English.

5. The answer should be referenced to the relevant workings.

6. Answer script and additional page(s) taken to write answer, used or unused, must not be re-
moved or taken away from the Examination Hall.
Requirements & Marks Allocation:

You are Mizanur Rahman, a senior articled student of Ainul Alam Ahmed & Co. (AAA), Chartered
Accountants. The partner of the firm, Mr. Tanjir Ahmed FCA as an advisor of Evergreen Paribahan
Ltd. (Evergreen) has received an assignment e-mail from Mr. Alauddin Ahmed, Managing Director
(Exhibit - l). Mr. Tanj ir Ahmed FCA has asked you, Mizanur Rahman, to prepare a report covering all
the requirements stated in the e-mail of Alauddin Ahmed.

Requirements:

You are required to prepare a draft report to your principal Mr. Tanjir Ahmed FCA. Your report
should comprise the following elements:

.:. An executive summary

.:. Your responses to the detailed requirements (a), (b), (c), (d) and (e) set out in Exhibit-I.
.:. State clearly any assumption that you make.

Marks Allocation:
All of the marks in the Case Study are awarded for the demonstration of professional skills, allocated
broadly as follows:

Requirements Professional Skills Total

Assimilating Structuring Applying Conclusionsand Integrative&
and using Problemsand Judgment making multidiscipline
information solutions recommendations - ry skills
Executive 3 5 4 -'" - 15
Summary
Requirement (a) 9 12 9 6 2 38
Requirement (b) -'" 7 5 4 1 20
Requirement (c) I 1 2 1 - 05
Requirement (d) 1 2 2 2 - 07
Requirement (e) "-' -'" -'" 4 2 15
Total 20 30 25 20 5 100
In planning your report, you should be aware that not attempting one of the requirements, including
an executive summary, will have a significantly detrimental effect on your chances of success. In
addition, as indicated above, all four skills areas will be assessed under each of the four elements of
your report.
You should be clear that marks are awarded for demonstrating your professional skills, not for
reproducing facts from the case. In order to be successful, you will need to:

• Demonstrate your knowledge of the case material and make use of your analysis.
• Carryout relevant analysis of the problems and structure your proposed solutions.
• Apply your judgment on the basis of the analysis that you have carried out
• Draw conclusions from your analysis and judgment and develop them into practical commercial
recommendations.
• Ethical issues may cover the following topic-
Lack of professional independence or objectivity
Conflict of interest among stakeholders
Doubtful accounting or commercial practice or market competition or Market proximity
Inappropriate pressure to achieve a reported result.
Compliance of local laws and regulations
• Integrative & multidisciplinary skills may cover the following areas-
Social and economic impacts on public interests with regard to employment, business
competitiveness, wastage offuel, mental pressure, health hazard, air pollution and other
environmental issues, etc.
2
 LIST OF EXHIBITS

Exhibit Description Page

reference

1 E-mail from Mr. Alauddin Ahmed, Director & Chief Executive 4-6
Officer (CEO) of Evergreen Paribahan Ltd. to Tanjir Ahmed
FCA, Partner in AAA, Chartered Accountants dated 10
November 2018

2 Statements of Financial Position as at 30 June 2018 and 7-9

Statement of profit or Loss and other comprehensive income for
the year ended 30 June 2018 and statement of Cash flows for the
year ended 30 June 2018 and Statement of Changes in Equity for
the year ended 30 June 2018 of Evergreen Paribahan Ltd.

"
,)
Transport Sector in Bangladesh - Brief notes 10-11
.
4 E-mail dated 12 November 2018 from Alauddin Ahmed, Director & 12
CEO, Evergreen Paribahan Ltd. to Mr. Tanjir Ahmed FCA regard-
ing financial reporting and legal issues
5 E-Mail dated 11 November 2018 from Mr. Alauddin Ahmed to 13-14
Mr. Tanjir Ahmed FCA on Business expansion and Financing
Options.
6 Social and Economic Aspects of Transport and Traffic Conges- 15
tion in Bangladesh.

7 A write up on Book Building Issue and comparison with Fixed 16

price Issue.

3
 EXHIBIT-I
E-MAIL

From : Alauddin Ahmed, Director & CEO, Evergreen

To : Mr. Tanjir Ahmed FCA, Partner, AAA

Subject : Evaluation of business expansion proposal and investment viability based on past
performances & future prospects of the company and associated issues.

Date : 10 November 2018

Dear Mr. Tanjir,

r am pleased to inform you that the Board of Evergreen appointed you as its advisor on business
development and expansion projects. Your areas of works will be: initial public offering (IPO) of shares,
Issuance of Bond, evaluating investment options, Risk Management, Governance, Due Diligence,
Restructuring, etc. You will also be required as an advisor to carryout negotiation on behalf of the
company with the Government agencies including Bangladesh Bank, Bangladesh Securities and
Exchange Commissions (BSEC), BIDA on the above areas of works.

Evergreen is a leading public transportation group, employing more than 1,200 people. The company
offers both local and long-distance (inter-city) bus services. Evergreen's countrywide operations are
organized into two geographical regions: Eastern services and Northern services.

Evergreen was founded in Chottogram in late 1980s. It's head office is now in Dhaka. 60% of
Evergreen's revenues are earned from eastern operations. Evergreen group is in the process of
introducing new lines of transport services. Now the management of the company is keen to add 50
new air-conditioned buses to cover Dhaka city services in different routes with 44 Volvo Buses &
Dhaka-Kolkata-Dhaka passenger services with 6 Mercedes-Benz Buses and 6 rockets (water transport)
services.

Please find the financial statements of Evergreen Paribahan Ltd. for the year ended 30 June 2018
(Exhibits 2). Besides the issues mentioned below, please take into consideration the relevant
information provided in Exhibits 3 to 7 for your analysis and to draw your conclusion and
recommendations for the requirements stated in page 6 below:

Shareholdings and key management issue

Evergreen is incorporated in Bangladesh in 1980. The authorized share capital is divided into
10,000,000 shares Tk. 100 each 40% of which are fully paid-off. The sponsor directors and
shareholding position is as follows:

• 50% of paid up capital are owned by Mr. Alauddin Ahmed, Director & CEO
• 20% of paid up capital are owned by 2 non-resident individuals from U.K.
• 30% of paid up capital are owned by the family and friends of Mr. Alauddin Ahmed

Recently Sohag Group purchased 20% shares of the Evergreen from the two non-resident individuals.
Sohag Group was not very renowned business conglomerate in Bangladesh. It is widely believed that
this group is growing with political patronization without which it would not be possible to buy the
shares from the foreign shareholders of Evergreen. The chairman of Sohag Group is the president for
the transport workers association and politically exposed person. The Board of Evergreen appointed an
independent director, namely Shamim Ahmed FCA in the Board. Rajib Haque is the Chief Financial
Officer (CFO) who is not a qualified accountant but a business graduate having 5 years' experience in
Transport Company. The independent director is a close friend of T. Haque, Chairman of the Sohag
Group.

4
Appointment of Directors and External Auditors

MHC & Co. Chartered Accountants has been audited the company for the year ended June 30, 2017
and June 30, 2018. The statutory audit of Evergreen for the year ended on 30 June 2018 was signed off
by the auditor on 22 October 2018 with an unqualified opinion. The accounts were approved in the
Board meeting dated 26 October 2018 and placed in the Annual General Meeting (AGM) dated 30
November 2018.

One-third of the existing directors of Evergreen retired and reappointed being el igible for further one
year except a director who is replaced by T. Haque, nominated by Sohag Group.

The existing auditor is eligible to reappoint for the year 2018-19 and he expressed his willingness to be
the auditor of the company which was approved in the AGM dated 30 November 2018 at the existing
fees. Accordingly, the auditors submitted necessary papers to RJSC on time. However, new director
Mr. T Haque, who is nominated by Sohag Group wants to appoint second audit firm, ABC & Co.,
Chartered Accountants as a joint auditor for the year 2018-19. The audit fees will be shared by the both
firms equally.

Advisory and related fees

Your remuneration will be Tk. 4,00,000 for evaluation of Evergreen and due diligence of Business
expansion & for providing related services for obtaining Evergreen's IPO approval at highest possible
premium or availing bank loan! lease finance or issuing Subordinated bond, as the case may be and Tk.
200,000 per month for next 2 years will be given for providing the advisory services for business effi-
ciency and strategic decisions.

Tax Planning and some operating issues of Evergreen

The company submitted Income Tax Return for the assessment year 2016-17 showing net profit before
tax 180,000. As per return the tax liability showed Tk. 75,600. The concerned DCT served notice for
the accounting year 2015-16 to the company while the management could not produce sufficient books
of accounts supporting such profits and so on. The DCT completed assessment on 12 November 2016
under section 84 ofI.T.O. 1984 calculating net profit Tk. 581,500. The tax rate for unlisted company
for assessment year 2015-2016 was 35%. The company paid-off the demanded tax and tax paid over
provisions was not reflected in the subsequent year's financial statements. The DCT disallowed charge
for other expenses Tk. 300,000 for accounting year 20 \6-17. But Evergreen has preferred appeal against
this which is now pending at tax appellate tribunal, which may be decided against the company.
Possibilities for similar disallowances are there for subsequent year also.

Financing strategy:
The competitor companies obtained approval ofIPO at 25% premium. Evergreen expects approval from
BSEC for its premium at a similar rate. Evergreen will go for initial public offering of shares of Tk.
100 crore to purchase new buses and rockets. AAA is expected to handle the matter diligently to obtain
premium approval from BSEC. Alternatively, Evergreen may borrow for longer term by issuing
subordinate bond or obtain Bank loan at available market rate.

Profit remittance and related tax

The Evergreen declared cash dividend for 2015-16. But it could not remit the dividend amount
pertaining to the non-resident shareholders because of central bank's objections that the company
declared the dividend "out of capital" and made in adequate tax provisions. The management of the
company is under pressure from the non-resident shareholders to remit their share of dividend as the
local shareholders have already received the same. Moreover, profit remittance required 15 percent tax
deducted at source which might be disputable under double tax treaty agreement between UK and
Bangladesh.

5
Corporate Social Responsibility
Evergreen has adopted a Social Responsibility (CSR) Policy in 2013, which acts as a guide towards
planning and executing the company's CSR activities. Evergreen runs extensive volunteering works for
the improvement of the under privileged people of the country. Under this program, the company
arrange health awareness seminar, fire awareness seminar etc. In 2017-2018 the company did the
following:

• The company has paid a donation ofTk. 1.50 lakh to a NGO who works for HIV where one of
the directors of Evergreen is a trustee.
• The company contributed Tk. 0.20 lakh each year to the Health Program at Char Area of a
district from which one of the directors hails from, for the free treatment of the poor people in
this locality.
• In past, Evergreen appointed course completed (CC) articled students in their accounts
department. Like past years, two CC students who has been assigned for carrying out 2018
audit has shown keen interest to join as employee of Evergreen.
• Also Evergreen supported the medical expenses for treatment of under privileged and poor
people in the country since inception. The company is under cost pressure.

You are advised to -

(a) Prepare a draft report, including an executive summary, evaluating the performances of
Evergreen after making the required adjustments (including issues mentioned in Exhibit 4) to
the audited financial statements and advising the feasibility of the business expansion plan,
suggesting the best alternative to finance the said plan.

(b) Critically comment on the strategic planning of the business and evaluate the strengths,
weaknesses, opportunities and threats (SWOT) of Evergreen and based on the SWOT,
recommend to the Board with justification, expansion of Evergreen.

(c) Suggest the Board of the Evergreen regarding appointment of ABC & Co. Chartered
Accountant as joint auditor after appointment of MHC & Co. Chartered Accountants in the
AGM as the Statutory Auditor of the company at the existing fees for both the firms for the
year 2018-19.

(d) Comment on the Bangladesh Bank's objections to the remittance of the dividend for 2015-16
and suggest the Board the way forward to resolve the issue with Bangladesh Bank as well as
foreign shareholders.

(e) Assess the economic and social impact of Evergreen plays to make a sustainable economy and
evaluate the ethical issues with regard to the proposed acquisition and doing business in
Bangladesh.

I look forward to receiving your draft report on or before 17 December 2018.

Yours sincerely,

Alauddin Ahmed
Managing Director

6
 Exhibit - 2
EVERGREEN PARIBAHAN LTD.
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018

Amount in Taka
PARTICULARS
30.06.2018 30.06.2017
ASSETS:

Non-Current Assets 195,208,613 515,854,384

Property, Plant and Equipment 174,207,903 493,066,335
Deferred Expenses 21,000,710 22,788,049
Motor Car and fleets 1,107,000,000 1,230,000,000
Current Assets 915,804,144 533,422,486
Inventories 205,838,257 210,077,780

Trade and Other Receivables 215,872,658 227,954,578

Advance. Deposit & Prepayments 93,773,620 93,608,291
Land and Building Construction Held for sale 398,465,000 -

Cash and Cash Equivalents 1,854,609 1,781,837

2,218,012,757 2,279,276,870
EQUITY AND LIABILITY:

Shareholders' Equity 516,603,353 552,566,799

Share Capital 429,201,045 429,201,045
Capital Reserve 26,094,843 26,094,843
Revaluation Surplus 32,818,179 239,402,021
Retained Earnings 28,489,286 (142,131,110)

Non-Current Liabilities 1,113,107,958 1,320,597,821

Secured Loan 1,107,000,000 1,278,033,692
Debenture 316,515 316,515
Deferred Tax Liability 5,791,443 42,247,614
Current Liabilities and Provisions 588,301,446 406,112,250
Short term Loan 48,140,077 291,447,146
Trade Payables 2,462,977 2,604,228
Dividend Payable 4,292,010 4,292,010
Liabilities for Expenses 9,031,207 7,398,229
Provision for Income Tax 60,871,505 46,659,835
Liabilities for Other Finance 463,503,670 53,710,802

2,218,012,757 2,279,276,870
Net Assets Value (NA V) 12.04 12.87

7
 EVERGREEN PARIBAHAN LTD.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2018
Amount in Taka
PARTICULARS
30.06.2018 30.06.2017
Revenue 41,611,659 90,800,666
Cost of Sales 33,580,982 70,464,023
Gross Profit 8,030,677 20,336,643
Operating Expenses 27,872,928 44,667,348
Financial Expenses 41,926,542 44,397,972

Profit (loss) from operations (61,768,793) (68,728,677)

Non-operating Income 2 332,289,478 (1,621,905)

Loss: Due to Flood in 2015 (19,992,416)

Obsolete Inventory due to flood in 2000 (29,098,090)
Inherited from GOB (13,536,902)

Profit (loss) after non operating income 270,520,685 (132,977,990)

Contribution to WPPF

Net profit/(loss) before tax 270,520,685 (132,977,990)

Provision for Income Tax 14,940,000 1,200,079
Provision for Obsolete Inventories 50,807,392

Provision for Bad and Doubtful Receivable 94,806,662

Provision for registration, mutation and other cost 26,106,500

Net profit/(Ioss) after tax 83,860,131 (134,178,069)

Earnings Per Share (EPS) Basic l.95 (3.13)
Earnings Per Share (EP ) - Restated l.95 (3.13)

Note 1: Retained Earnings

The break up of the above amount is as under:
Balance as on 1st January (142,131,110) 9,377,608
5% cash dividend declared for the year 2015-16 (20,438,145)
Balance after 5% cash dividend (142,131,110) (11,060,537)
Net profit for the year 83,860,131 (134,178,069)
Add: Depreciation Revaluation Assets 2,796,903 3,107,497
Add: Accumulated Bank Interest Waived 83,963,362
Closing Balance 28,489,286 (142,131,110)

Note-2: Non Operating Income

Disposal of vehicles (261,286) (1,621,905)
Capital gain on disposal of fixed assets 332,432,328
Interest Received from FDR 118,436
332,289,478 (1,621,905)

8
 EVERGREEN PARIBAHAN LTD.
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018

Amount in Taka
PARTICULARS
30.06.2018 I 30.06.2017
A. Cash flows from operating activates:
Cash collection from Sales & Other Income 53,693,579 123,052,590

Payment to suppliers and creditors for (20,705,200) (51,947,529)

expenses

Paid for operating Expense (21,526,972) (30.527,394)

Paid to Financial Expenses (41,926,542) (44,397,972)

Advance, deposit & Prepayment (147,591) (32,469,383)

Dividend Paid (17,168,042)

Income Tax Paid (746,068) (440,385)

Net Cash provided/(Used by operating (31,358,794) (23,370,721)
activities

B. Cash flows from Investing Activines :

Addition to Fixed Assets (251,770) ( 12,390,208)

Interest Income 118,436 1,044,663

Disposal of Fixed Asset 870,000

Net Cash provided/(Used)by investing 736,666 (11,345,545)
activities
C. Cash flow from Financing Activities:

Loan (207,377,413)
Lease & other Finance 238,072,314
Net cash provided/(used) from financing 30,694,901
activities

D. Net cash flows during the year (A+B+C) 72,773 30,240,472

E. Opening cash & cash equivalents 32,309,232 2,068,760

F. Closing cash & cash equivalents 32,382,005 32,309,232
Net operating cash flow per share (073) (1.26)

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018

For the year ended 30 June 2018

Share Capital Capital Revaluation Retained Total
Particulars
Reserve Reserve Earnings
As at 1st July 2017 429,20 I ,045 26,094,843 239,402,021 (142,131,110) 552,566,799
Net Profit for the year 83,860,131 83,860,131
Accmulated Bank Interest waived 83,963,362 83,963,362
Adjustment-Held for sale (203,786,939) (203,786,939)
Depreciation on Revaluation (2,796,903) 2,796,903
At at 30 June 2018 429,201,045 26,094,843 32,818,179 28,489,286 516,603,353

For the year ended 30 June 2017

Share Capital Capital Revaluation Retained Total
Particulars Reserve Reserve Earnings

As at 1st July 2016 429,20 I ,045 26,094,843 241,810,331 10,399,514 707,505,733

5% Cash Dividend - (21,460,052) (21,460,052)
Net Profit (Loss) for the year (134,178,069) (134,178,069)
Depreciation all Revaluation (3,107,497) 3,107,497 -
Depreciation tax on Revaluation 699,187 699,187
At at 30 June 2017 429,201,045 26,094,843 239,402,021 (142,131,110) 552,566,799

9
 EXHIBIT- 3

Transport Sector in Bangladesh - Brief notes

Bangladesh Economy and transport sector

Bangladesh is projected to be among the fastest growing Countries in 2018 with the expected GDP
growth on. 1 percent, supported by vigorous domestic demand, according to a new report of the United
Nations. The UN's World Economic Situation and Prospects 2018 Report says: "The Bangladesh econ-
omy is set to continue expanding at a rapid pace, underpinned by strong domestic demand, especially
large infrastructure projects and new initiatives in the energy sector." In Bangladesh, the GDP growth
rate for FY 2017-2018 is 7.86 percent and expected to grow 8.00 percent in 2018-2019. Total population
is around 168 million and urbanization rate is 38%. Around 14 million people live in Dhaka, the capital
of Bangladesh. Around 85% people have no transport facility, rather they use public transport services
to travel inter-city and at town.

The government of Bangladesh has taken mega projects and it is expected to complete those by 2021.
The main projects are- Padma Bridge, 4 lane high way projects, Metro rail etc. which will be remarkable
for the infrastructural development of the country. Currently airlines, Bus, train, water-way are being
used to travel intercity.

Currently, public transport raises critical issues for the government of Bangladesh. Many people use
buses and trains for travel from a town to another. Also, an efficient and attractive public transport
service encourages car owners to make some journeys by bus or train, with reductions in road conges-
tion and pollution. In Bangladesh, public transport is efficient and reliable for many years. Both private
and public sector run the bus, waterway and air services but only train services are running under public
sector. Most of the large bus operators runs the fleets under contract. They aimed to make profits any
way. The bus services were protected through the law that required bus operators to seek route licences
for each route that they planned to operate. This reduced competition between bus operators, making it
potentially more profitable to operate routes that might not have had large passenger numbers.

Evergreen's history
Mahbubur Rahman established Evergreen as a road haulage garage in Chottogram for the maintenance
and repair of vehicles and buses. The business grew steadily but remained a family-owned company.
Subsequently the shares were transferred to the extended family members of Mr. Rahman and the cur-
rent ownership structures are stated in Exhibit -1. Mr. Alauddin (son of Mr. Mahbubur Rahman) had
considerable experience of organising coach trips for tourists and other groups, hiring buses and drivers
from local operators. Rasel one of the friends of Mr. Alauddin worked in the garage meant that he
understood the challenges of maintaining and operating buses and other vehicles. Mr. Alauddin used
his knowledge of the travel business and his contacts to manage the commercial aspects of newly-
established coach business and Rasel kept the small fleet of old buses running both safely and reliably.
Evergreen grew slowly and steadily, despite competition from much larger and long-established private
carriers. Evergreen competed aggressively against other operators in every route that it operated in,
primarily through cutting fares. Evergreen's pricing was often sufficiently low to force many competi-
tors out of business, thereby enabling Evergreen has now 09 inter-city routes and 7 local bus companies
with a fleet of over 250 vehicles and over 1,200 staff.

Group strategy
The key elements of Evergreen's business strategy to deliver long-term shareholder value are:
• To deliver organic growth across all of Evergreen's operations by providing safe, reliable,
customer-centred transport services that deliver excellent customer experience at a
competitive rate.
• To acquire businesses that complement Evergreen's existing operations, in areas where
Evergreen's management has proven expertise and which offer prospective returns on capital
that exceed Evergreen's weighted average cost of capital.
• To maintain and grow the business by bidding for selected government contracts for
education or health transport and other bus contracts.
10
The regulatory environment
Route permission and licensing of routes are essential for running bus services in Bangladesh. The rules
are necessary because of public safety, both for passengers and for other road users. Furthermore, bus
services are generally heavily subsidised by local governments. Where this is the case, they are closely
monitored to ensure that any bus operator in receipt of government fiscal subsidies is capable of offering
a reliable service.

Bus drivers to hold licences before they can be permitted to carry fare-paying passengers on the public
roads. These licences are granted only after the driver has completed training and passed both written
and practical tests. There are also detailed background checks for criminal convictions. Trainee drivers
can practise their skills on public roads provided they are under the supervision of a qualified bus driver
and provided there are no passengers on board.

Recent Government Initiatives

In budget 2018-19, the government has given fiscal concessions to import hybrid vehicles in view of
its eco-friendly characteristics. In advanced countries, electric vehicles are now plying instead of trans-
ports run on fossil oils. Electric transports will accrue, double benefits to Bangladesh Economy. It will
lessen the import of fossil oil and improve the environment causing asthma and other health hazard.
The government also has enacted Road Transport Act 2018 to combat growing incidence of reckless
driving and to improve road safety. As per the new law if anybody gets seriously injured or killed in a
motor vehicle related accident, it will be considered as an offense under the penal code 1860. The pun-
ishment causing death to a person by reckless driving is up to 5 years or a fine or both under the penal
code. A person must be at least 18 years of old to get driving license and 21 years to get a professional
license. The law has a provision for keeping 12 points for a driver and the driver will lose points for
committing offenses, like drunk driving, illegal overtaking, reckless and dangerous driving and viola-
tion of traffic signals and speed limits. When the points come down to zero, the driving licenses will be
cancelled. No vehicle owner can appoint a driver without a valid driving license. The law has also set
working hours for drivers, conductors and helpers which has to be followed diligently by the appointing
authorities.

Revenue sources
Most of the Evergreen's bus services carry fare-paying passengers. Passengers can buy tickets for each
individual journey that they take, or they can pay in advance for season tickets that permit them
unlimited travel on a designated route for either a week or a month. Season tickets are popular with
commuters because they are slightly cheaper than buying a ticket for each individual journey.

Market opportunity
The government believes that there is still scope for developing bus travel. The government has taken
initiatives and enacted Road Transport Act 2018. The government wishes to encourage bus travel
because it reduces road congestion and causes less pollution. It is clearly in the interests of all bus
operators to increase demand for bus services. Public transport has always been viewed as causing less
environmental damage than private cars. Many major cities are developing initiatives to encourage
greater use of buses. For example, dedicated bus lanes can mean that a bus journey is less likely to be
delayed by heavy traffic at peak times. Park-and-ride facilities enable motorists to drive to a car park
on the outskirts of a city before completing their commute using a shuttle bus to the city centre. There
have been further developments that are aimed at making public transport cheaper and more efficient.
Developments such as driverless buses and trams will reduce wage bills. Many cities are actively
discouraging car drivers by increasing parking charges and reducing the number of parking spaces.
Improved traffic monitoring and traffic management systems are improving bus journey times.

Competition
Sohag Paribahan Ltd. is the largest competitor of Evergreen in inter-city public transport services.
Sohag also operates exclusively in North and Eastern districts of the country, where its market share is
slightly higher than Evergreen's share. Sohag offers very similar services to Evergreen. The two
companies have a mutual respect and rarely undercut one another's prices by more than a few taka only.

11
 EXHIBIT- 4

E-MAIL

Dated : 12 November 2018

From : Alauddin Ahmed, Director & CEO, Evergreen
To : Mr. Tanjir Ahmed FCA

Subject : Financial reporting and legal issues

Financial Reporting
The Finance Manager of Evergreen prepares quarterly accounts for the Director and CEO. At the end
of the third quarter of 2017-18, the Finance Manager identified that net assets and net assets to loan
ratio were below the level required by a bank covenant that the company had entered into with the
lender, Unique Bank. The following week the Finance Manager identified that amended quarterly
accounts had been sent to the bank by the Director & CEO, in which the receivables figure had been
increased. The same issue arose at the end of the fourth quarter of2017-18, and again the Finance
Manager noted that the accounts sent to the bank included a different receivables figure from those that
he had prepared and approved in the Annual General Meeting (AGM).

Evergreen charged depreciation on the office equipment and IT software at 20 percent on straight line
basis for which income tax authority disallowed such depreciation charges; instead, they allowed
depreciation at 20% under reducing balance method.
The company did not make provisions for the year 2017-18 @5% of net profit before tax for workers profit
participation fund (WPPF) in its accounts as per Bangladesh Labor Act 2006.
Land and Building Construction Held for sale: three factors forced the company to sale the garage and
parking plot at Chittagong. firstly, the location of the garage/workshop at Nasirabad, Chittagong. the
plot was 10 feet below the Baizid Bostami road at the west and the Mirza Khal in the East. from the
year 2000 to 2016, there were 6 flood occurrences those caused damage to preserved fuel and vehicle
running materials, spare-parts, work in process, plant & machinery and the electric sub-station. the
garage/workshop remained under insurance coverage but the claims for tk. 5.58 crore which was not
paid by the insurance company. the company took the claim to the court. the judge court awarded a
verdict for tk. 2.20 crore for payment to the company but the insurance company preferred an appeal to
the high court which is still pending.

Forfeited portion of Provident Fund (PF)

Evergreen offers 10% contributory Provident Fund and Gratuity Scheme as per Labour Act 2006.
National Board of Revenue (NBR) recognized the employee benefit plans. However, employee must
serve 5 years continuously to get the company portion in the fund. The interest or profit earned on the
PF invested in different eligible securities. The average employee turnover of Evergreen is 15% before
completing 5 years in the company. In that case company forfeited the employer's contribution in the
PF and the outgoing employee only gets own contribution and accumulated percentage of profit earned
in the PF. However, Evergreen PF Trusty Board did not refund the forfeited portion of PF to the Profit
& Loss account of the Evergreen group. The Employee also paid higher income tax and got investment
allowance on the company portion of the PF though s/he did not get the fund.

Working Hours for employees

The customer services in transport industry is around 24 hours. The company run on 8 hours shifting
duty basis. But normally people works long hours being the Evergreen is growing and expected to grow
more in coming years. It creates a culture to provide customers services first with their happiness. The
Evergreen has taken the "Empathy" instead of "Sympathy" principle in serving and supporting custom-
ers' itinerary. Work life balance may be hampered which is expected to be for next couple of years. The
employees react to the long hours working.

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 EXHIBIT- 5

EMAIL

Dated : 11 November 2018

From : Mr. Alauddin Ahmed
To : Mr. Tanjir Ahmed FCA
Subject : Business Expansion and Financing Options

Business Expansion
Evergreen has created a good impact in public transport. The passengers have confidence on the quality
of the vehicles, drivers and support and services given by Evergreen. The required investment and other
information relating to business expansion plan are as follows:

Volvo Mercedes Benz Rocket

No of vehicles to be purchased 44 6 6
Capital cost per vehicle 14,000,000 23,000,000 41,000,000
Total cost 616,000,000 138,000,000 246,000,000
Life expectancy (years) 6 8 10
Annual depreciation Straight line basis Straight line basis Straight line basis
Residual value Tk. 4,000,000 Tk.800,000 Tk.2,000,000
Per Kilometre running cost in-
Tk.25 Tk.200 Tk.140
eluding fuel, staff & other costs

The Mercedes Benz to be used in the Dhaka-Kolkata-Dhaka services are modern express vehicles
fully fitted with comfortable seats with passenger seat belts and equipped with Wi-Fi. These come in
40-seater models; baggage can be stowed by the driver in the ample luggage area. There are on-board
toilet and catering facilities.

The Volvo buses to be used in Dhaka City Services which will be 50 seaters models. These can also
be deployed in special services to airports on special occasion, office trips and school trips. These are
also fitted with passenger seat belts and equipped with Wi-Fi. There is an adequate baggage area for
light luggage.

The Rockets to be used in the water-way transport are 3 storied and each rocket has 50 double cabins,
30 single cabins, 5 VIP cabins and 50 economy class bench services.

Fare Chart

Dhaka-Kolkata-Dhaka: Round trip Tk. 9,500, Single: Tk. 5,000; 6 trips per week per bus; Buss will be
full. Dhaka- Kolkata distance is about 700 k.m. Average fare Tk. 8,300 per seat.
Dhaka City Services: Expected to generate per day average: Tk. 33,000. Each bus will run around 1200
k.m. per day.
Rocket services: Expected to earn gross revenue from ticket selling per trip average: Tk. 2,00,000.
A verage run 400 k.m. per single trip.
The servicing & repairing time is estimated to 5%.

Financing Options

Scheme 1: Initial Public Offer (IPO) of shares: Evergreen is keen to go for IPO of shares for
Tk.l00 crore at an expected premium of25% subject to share valuation either by fixed
price method or book building method and approval of Bangladesh Securities &
Exchange Commission (BSEC).

13
Scheme 2: Issue of Subordinate Bond or Bank Loan: The management of Evergreen consulted
the investment plan with the existing investment banker, underwriters, leasing compa-
nies for financing through bond issue. The bond will have following features:
~ Rate of interest: 7% per annum (p.a)
~ Dividend participation. If Evergreen declares dividend more than 7%, the bond
holders will be entitled for 50% of the difference between bond interest and divi-
dend rates.
~ Cumulative clause. Iffor any reason, any due instalment of the bond remains arear,
the Evergreen will have to pay the arrear instalment together next due instalment
and maximum three due instalments can be accumulated. More than 3 arrear in-
stalments will attract interest @12% p.a. which has to be paid at the time of pay-
ment of the instalment.
~ Repayment. 20 half-yearly equal instalments.

Scheme 3: Availing Loan/Lease: The management consulted with the existing bankers to get a
bank loan for Tk. 100 crore at a market interest rate repayable equally in 10 years.
Currently, the company availed loan at 9 percent per annum. Alternatively, a leasing
company may be approached for financing the expansion plan at similar terms and
condition of the bank.
Market risk and expected return
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the
market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the
expected rate of return of an asset based on its beta and expected market returns. The average risk-free
rate of return is 6%. The expected beta (0) for Evergreen Bank Ltd. is 1.25. The average expected
market return from investment in similar securities (comprising of dividend and capital gain yield) is
10% per annum. (Source: DSE Market review November 25,2018). Present value factors ofTk. 1 for
5 years as follows:

Discount rate % Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

10 0.909 0.826 0.751 0.683 0.621 0.564 0.513
11 0.901 0.812 0.731 0.659 0.593 0.535 0.482
12 0.893 0.797 0.712 0.636 0.567 0.507 0.452
13 0.885 0.783 0.693 0.613 0.543 0.480 0.425
. .
The market capitalization of all secunties listed 111 DSE Ltd. as on November 25, 2018 was Tk .
2,131,135 million and market PIE Ratio is 10.94 where transport sector's Market Capitalization was
Tk. 361,971 million and sector's Price earnings (PIE) ratio was 9.18. The consumer products sector's
dividend yield was 2.00 percent per annum and Sector's 6 months' average return was 3.5 percent.
Other similar stock's market price and EPS in DSE were as follows:

Sl. Company Face Value NAV(Taka) Market Price EPS for the year
No. (Taka) Nov 30, 2018 (June -Nov 2018: ending 30 June
6-Month Average) (Taka) 2018
a B c D e F
1 Sohag Paribahan 10 17.28 34.00 2.60
2 Khaleq Paribahan 10 13.25 75.93 2.82
"
.)
SA Paribahan 10 15.85 18.71 3.31
4 Eagle Paribahan 10 21.25 15.87 2.85
5 ENA Paribahan 10 11.15 35.32 1.55

Capital Market Scenario 2017-18

The volume of public offerings was oversubscribed, more than 14 times in FY 2017-18, indicating a
shortage of new securities in the primary market. Nine companies have collected new equity of BDT
0.4 billion from the capital market in FY2017-2018, which was lower than BDT 5.3 billion collected
by II companies in FY2016-17. Of which, BDT 0.1 billion collected through private placements and
BOT 0.3 billion collected through public placements. In FY20 16-17, equity issued through private and
public placements were BOT 0.8 billion and BDT 3.5 billion respectively.

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 EXHIBIT- 6

Social and Economic Aspects of Transport and Traffic Congestion in Bangladesh

Traffic congestion With more than 250,000 vehicles in Bangladesh and the country's population and
infrastructure, traffic congestion wastes fuel and time and makes travel difficult. It also makes existing
public transport inefficient, adding unsafe levels of noise and air pollution. Noise and pollution are
stressful, and lead to medical conditions such as cardiovascular disease and hypertension. Traffic
congestion varies during the day, necessitating planning and longer trips; this impacts productivity,
cutting across social and economic status. Although walking is a major travel mode of the low-income
majority, pedestrian needs are ignored in transport planning. Almost 80 percent of traffic fatalities in
Dhaka are pedestrians struck by a fuel-based vehicle. Although private cars are four percent of total
vehicles, they occupy about 70 percent of road space. Public transport must be stressed in any future
policy.

Road Conditions With continued economic development, Dhaka is beginning to experience severe
traffic congestion. This is impacting the quality of life for inhabitants of the metropolitan area, the
nation's largest. The government and other concerned bodies have been looking at 15 key policy issues,
including safety, pedestrian preferences, public transport, non-motorised transport, travel demand
management and mass transit systems, and made almost 70 policy recommendations. Ten
comprehensive transport strategies were evaluated, using a baseline of no Bus rapid transit (BRT) or
metro service, and a number of alternatives were explored. The adopted plan included roads, a three-
line Mass Rapid Transit (MRT) and three-line BRT. It included provisions for 54 new roads in and
around the city, three-part elevated expressways and a circular waterway programme.

'Traffic jam' silent killer: The impact on human health, mental condition and air pollution.

Dhaka city's traffic system is considered to be one of the most chaotic in the world. The gridlock for
hours causes serious air and noise pollution and thus worsens the overall environmental condition. The
residents are compelled to undergo physical stress and suffer financial losses in terms of person-hours
wastage. Due to traffic jam a substantial portion of working hours has to be left on streets which indi-
rectly put adverse impact on economy. Apart from mental and health problems, this capital city is caus-
ing major loss in the economy of Bangladesh. Due to traffic jam per annum extra fuel consumption cost
is BDT 11,228 crore, which is huge money for a country like Bangladesh. The city itsel f is contributing
63 percent loss of person-hours is also known as VOT (Value of Travel Time Savings). While the
general people suffer, the traffic jam has already created negative impact on physical and mental health.
It is alarming that 73 percent of people in Dhaka city are suffering from some kind of physical or mental
discomfort due to traffic jam. The sufferings due to waiting in traffic jam, according to the survey by
the two universities, cause breathing problem, headache, mental stress, hearing problem, unexpected
sweating, tiredness, and eye sore.

The general public urged to reduce sound pollution. with the vast majority in favor of improved traffic
control, banning industrial activity and brick breaking machines in urban areas, placing limits on the
decibels allowed in different areas, and banning use of microphone for processions, advertising, and
election campaigns. Regarding air pollution, traffic jam significantly contributes poll ution through S02.
CO, C02, N20, 02 produced from running engines while vehicles are caught up in the traffic jam
for longer periods of time. The vehicles emit SOx, NOx, which are lighter than air but very dangerous
for human health and may cause death. Vehicles having faulty engines release unburnt suspended par-
ticle matter (SPM) which causes cancer to human body. Vehicles run by compressed natural gas (CNG)
release unburnt fuel. The unburnt fuel is heavier than air, so they want to go down, but cannot go down
because ofrepulsion of the road. SPM are normally positively charged, and due to friction between the
tyre and road all day long, the roads become positively charged also. So, it creates repulsion which
makes the particle to keep in such a level which is easier to inhale by human. The particles remain
deadly for children and aged people too. Regarding solutions to the traffic gridlock being described as
nightmare experience in social media, most of the people think that traffic jams can be reduced by
creating awareness. Other than awareness campaign, more flyovers, mass transit public transports, strict
law enforcement can reduce traffic jam.
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 Exhibit -7

A write up on Book Building Issue and comparison with Fixed price Issue

lnitial Public offering (IPO) can be made through the fixed price method, book building method or a
combination ofboth.

Book Building Method- Book Building is a process through which an issuer attempts to determine the
price to offer its security based on demand from institutional investors. Under the process, the price of
an IPO/FPO share will be determined through an automated bidding to be participated by different
financial institutions and then the share will be opened for the IPOIFPO participant at the cut-off price
determined during the book building process. The bidding will be handled through a uniform and
integrated automated system of the stock exchanges, or any other organization as decided by the
Commission, especially developed for book building method. The entire procedure of price discovery
under book building method is delineated below:
• The issuer/issue manager shall issue invitation to the eligible institutional investors, both in
writing and through publication in at least 5 (five) widely circulated national dailies, giving at
least 10 (ten) working days' time, to the road show/presentation/seminar indicating time and
venue of such event.
• The invitation letter shall accompany an information document containing all relevant infor-
mation covering the proposed issue of the issuer. The eligible institutional investors shall sub-
mit indicative price to the issuer/issue manager, signed jointly by the Chief Executive Officer
(CEO) and the Financial Analyst, highlighting the factors taken into consideration in support
of the indicative price, within the next 3(three) working days ofthe said road show/presentation!
seminar;
• The indicative price band will be fixed based on the past performance, expected future earnings
of the issuer and the PE ratio of other peer companies in the industry. The indicative price shall
be the basis for formal price building with an upward and downward band of20% of indicative
price within which eligible institutional investors shall bid for the allocated amount of security.
• Issuer in association with issue manager and eligible institutional investors quote an indicative
price in the prospectus with the rationale for such price and submit the prospectus to the Com-
mission with copy to the stock exchanges.
• The indicative price range shall be determined as per price indications obtained from at least
15 (fifteen) el igible institutional investors covering at least 3 (three) different categories includ-
ing at least 5 (five) merchant banks of such investors.
• No institutional investor shall be allowed to quote for more than 10% of the total security of-
fered for sale, subject to maximum of 5 (Five) bids. The volume and value of bid at different
prices will be displayed on the monitor of the said system without identifying the bidder. The
institutional bidders will be allotted security on pro-rata basis at the weighted average price of
the bids that would clear the total number of securities being issued to them.
• The securities will be offered to the general investors, NRBs and Mutual Funds at the cut-off
price determined during the book building process.
Difference between shares offer through Book Building and Fixed price
Features Fixed price process Book building process
Pricing Price at which the securities are of- Price at which the securities will be offered/
fered/ allotted is known in ad- allotted is not known in advance [0 the inves-
vance to the investor. LOr.Only an indicative price range is known.
Demand Demand for the securities offered Demand for the securities offered can be
is known only after the closure of known everyday as the book is built.
the issue.
Payment Payment i r made at the ti me 0 f Payment only after allocation.
subscription wherein refund is
given after allocation.

16