Annual Report 2012

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%DVHGRQ,VODPLF6KDULµDK Annual Report 2012 1 REGISTERED OFFICE: Islami Bank Bangladesh Limited, 40, Dilkusha Commercial Area, Dhaka-1000, Bangladesh; GPO Box No.233; Phone : PABX (88-02) 9563040, 9560099, 9567161, 9567162; Mobile : 88-01711-435638-9 FAX : 88-02-9564532, 9568634; SWIFT : IBBLBDDH, E-mail : [email protected]; Web-site : www.islamibankbd.com

2 Annual Report 2012 The Messages from The Holy Qur’an

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Annual Report 2012 3 Guidance from The Holy Hadith

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&ƌŽŵďƵ^ĂǇĞĚ<ŚƵĚƌŝ;ZͿ͗dŚĞDĞƐƐĞŶŐĞƌŽĨůůĂŚ ;^tͿ ƐĂŝĚ͗ dŚĞ ƚƌƵƚŚĨƵů ŵĞƌĐŚĂŶƚ ǁŝůůďĞ ĂƐƐĞŵďůĞĚŽŶ ƚŚĞĂǇŽĨ :ƵĚŐŵĞŶƚ ǁŝƚŚ ƚŚĞ ƉƌŽƉŚĞƚƐ͕ŚŝŐŚůǇƚƌƵƚŚĨƵůĂŶĚŵĂƌƚǇƌƐ͘ ;:ĂŵĞƚdŝƌŵŝĚŚŝͿ

4 Annual Report 2012 Contents

Standard Disclosure Index 6 Directors Report Recognition par Excellence 10 Report of the Board of Directors 72 Looking Forward 12 Corporate Governance 79 CEO and CFO’s Declaration to the Board 98 Corporate Objectives Values Structure Certificate Regarding Compliance of BSEC 106 Vision 13 Notification Mission 14 Green Banking 107 Strategic Objectives 15 Performance Review 112 Core Values & Commitments 16 Case Study 134 Code of Conduct and Ethical Principles 17 Market Disclosure under Pillar III of Basel II 141 Risk Management 152 Corporate Profile 18 ICT and Automation 161 Milestones 20 Corporate Communication and Business 167 Sponsors 21 Promotion Board of Directors and its Committees 22 Financial Review 174 Short Profile of Directors 23 CSR: Sustainability Report 177 Shari‘ah Supervisory Committee 31 Islami Bank Foundation 187 Management Committee 32 Audit Committee Report 193 Executives 33 Report of the Shari‘ah Supervisory 195 Corporate Structure 36 Committee

Products and Services 37 Financial Statements Media Highlights 39 Auditors’ Report 197 Stakeholders’ Information 41 Consolidated Financial Statements Consolidated Balance Sheet 199 Consolidated Profit and Loss Account 201 Performance Analysis Consolidated Cash Flow Statement 202 Graphical Representation 46 Consolidated Statement of Changes in Equity 203 Segment Information 48 Financial Statements of IBBL Horizontal & Vertical Analysis 49 Balance Sheet 205 Profitability, Dividends, Performance & 50 Profit and Loss Account 207 Liquidity Ratios Cash Flow Statement 208 Statement of Value Added and its 51 Statement of Changes in Equity 209 Distribution Liquidity Statement 210 Financial Highlights 53 Notes to the Financial Statements 212 Five Years Performance at a Glance 54 Financial Statements of Offshore Banking Unit 272 Financial Statements of IBSL 279 Financial Calendar 56 Financial Statements of IBCML 297 Management Report and Commentary Chairman’s Message 57 Branch Network 305 Notice of 30th Annual General Meeting 313 Managing Director’s Round up 63 Proxy Form & Attendance Slip 315 Management Report and Analysis 67

Annual Report 2012 5 Standard Disclosure Index

Disclosure Checklist to the Key Sections of the Annual Report 2012

Items Ref. Page No.

Corporate Objectives, Values & Structure

Clarity and Presentation:

• Vision and Mission 13-14

• Overall strategic objectives 15

• Core values and code of conduct/ethical principles 16-17, 85

• Profile of the company 18-19, 75-78

• Director’s profiles and their representation on Board of other companies & organization chart 22-30, 231-232, 36

Management Report / Commentary and Analysis including Director’s Report / Chairman’s Review/CEO’s Review etc.

• A general review of the performance of the company 112-133, 57-70, 161-166

• Description of the performance of the various activities/products/segments of the company 112-133, 161-166, 48 and its group companies during the period under review.

• A brief summary of the Business and other risks facing the organization and steps taken to 83-85, 152-160, effectively manage such risks 225-228

• A general review of the future prospects/outlook 12, 70, 165-166

• Social responsibility initiatives (CSR) 60, 66, 70, 177-191

• Environment related initiatives 59, 66, 91, 107-111, 181-186

• Information on how the company contributed to its responsibilities towards the staff (including 86-90, 178, 222-223 health & safety)

• Information on company’s contribution to the national exchequer & to the economy 58-61, 176, 177-191

Appropriateness of Disclosure of Accounting Policies and General Disclosure

• Disclosure of adequate and properly worded accounting policies relevant to assets, liabilities, 212-232 income and expenditure in line with best reporting standards

• Any specific accounting policies 213-217

• Impairment of Assets 220

• Changes in accounting policies/changes in accounting estimates 215

Segment Information

• Comprehensive segment related information bifurcating segment revenue, segment results 48, 68-69, and segment capital employed 235-239, 271

• Availability of information regarding different segments and units of the entity as well as non- 48, 145-146, 271 segmental entities/units

6 Annual Report 2012 Items Ref. Page No.

Segment analysis of

• Segment revenue 48, 271

• Segment results 48, 271 • Turnover 271 • Operating profit 271 • Carrying amount of net segment assets 271

Financial Statements • Disclosures of all contingencies and commitments 200, 206, 224 • Comprehensive related party disclosures 231-232 • Disclosures of remuneration & facilities provided to Directors & CEO 86, 201, 207, 264 • Statement of Financial Position/Balance Sheet and relevant schedules 199-200, 205-206 • Income Statement/Profit and Loss Account and relevant schedules 201, 207 • Statement of Changes in Equity/Reserves & Surplus Schedule 203-204, 209-210 • Disclosure of Types of Share Capital 42-43, 249-252 • Statement of Cash Flow 202, 208 • Consolidated Financial Statement (CFS) 199-204 • Extent of compliance with the core IAS/IFRS or equivalent National standards 228-230 • Disclosures/Contents of Notes to Accounts 212-277

Information about Corporate Governance • Board of Directors, Chairman and CEO 18, 22, 79-80 • Audit Committee (composition, role, meetings, attendance, etc.) Internal Control & Risk 22, 81-85, 95, Management. 193-194, 230 • Ethics and Compliance. 17, 85 • Remuneration and other Committees of Board 22, 79-80,86 • Human Capital 86-90 • Communication to Shareholders & Stakeholders 90-91 - Information available on website 44 - Other information • Environmental and Social Obligations 91, 107-111, 177-191 • Management Review and Responsibility 93 • Disclosure by Board of Directors or Audit Committee on evaluation of quarterly reports 82 • Any other investor friendly information 41-44, 91

Stakeholders Information • Distribution of shareholding (Number of shares as well as category wise, e.g. Promoter group, 42, 96, 250 FII etc.) • Shares held by Directors/Executives and relatives of Directors/Executives 96-97 • Redressal of investors complaints 44-45

Graphical/Pictorial Data • Earnings per Share 46 • Net Assets 46

Annual Report 2012 7 Items Ref. Page No.

• Stock Performance 52

• Shareholders’ Funds 46

• Return on Shareholders Fund 50

Horizontal/Vertical Analysis including following

Operating Performance (Income Statement)

• Total Revenue

• Operating profit

• Profit before Tax

• Profit after Tax

• EPS 49

Statement of Financial Position (Balance Sheet)

• Shareholders Fund

• Property, Plant & Equipment

• Net Current Assets

• Long Term Liabilities/Current liabilities

Profitability/Dividends/Performance and Liquidity Ratios

• Gross Profit Ratio

• Earning before Profit, Depreciation and Tax

• Price earning ratio 46, 50 • Current Ratios

• Return of Capital Employed

• Debt Equity Ratio

Statement of Value Added and Its Distribution

• Government as Taxes

• Shareholders as dividend

• Employees as bonus/remuneration 51-52 • Retained by the entity

• Market share information of Company’s product/services

• Economic value added

Additional Disclosures

• Sustainability Development Reporting 177-191

• Human Resource Accounting 88-90

• Any other good additional disclosures (Independence certification e.g. GNV / GRI) 90, 93

Specific Areas for Banking Sector

Disclosure of Ratings given by various rating agencies for Instruments issued by/of Bank for e.g. 94, 228, 246 FD.CD. Tier-1 Perpetual Bonds

Details of advances portfolio classification wise as per the direction issued by the central bank of 114-129, 237-242, the respective countries 253-255

8 Annual Report 2012 Items Ref. Page No.

Disclosure for non-performing assets

• Movements in NPA 129, 147-148, • Sector-wise breakup of NPA 240-243 • Movement of Provisions made against NPA

• Details of accounts restructured as per regulatory guidelines

Maturity pattern of key Assets and Liabilities (ALM) 211, 235-249

Classification and valuation of investments as per regulatory guidelines/Accounting Standards 235-242

Business Ratio/Information

• Statutory Liquidity Reserve (Ratio) 234

• Net interest income as a percentage of working funds/operating cost – Efficiency ratio 55

• Return on Average Asset 55

• Cost/Income Ratio 55

• Net Asset Value per Share 53, 55

• Profit per employee 89

• Capital Adequacy Ratio 54, 143, 251

• Operating profit as a percentage of working funds 53

• Cash Reserve Ratio/Liquid Asset ratio 50, 233-234

• Dividend Cover ratio 53

• Gross Non-Performing assets to gross advance / Non-Performing Investments (Assets) to 54, 155, 129 Total Investments (Assets)

Details of credit concentration / sector wise exposures 115-116, 145-147, 239-240

The break-up of ‘Provisions and contingencies’ included in the Profit and Loss Account 200-201, 206-207, 221, 247

Disclosure under regulatory guidelines 141-151, 95-106, 250-258

Details of Non Statutory investment portfolio 235-236

Disclosure in respect of assets given on operating & finance lease 115, 237-238

Disclosures for derivative investments N/A

Bank’s Network : List of Centers or Branches 305

Annual Report 2012 9 Recognition par Excellence

As recognition of excellent performance, IBBL was rewarded with the following prestigious rankings and awards in recent past:

The Banker Anniversary Award for Corporate Governance Disclosures for the year 2011. SAFA awarded  IBBL is the only Bangladeshi Bank that has IBBL also with the 1st Runner up title under entered into the World’s Top 1000 Banks List Private Sector Banks (including Co-operative 2012. IBBL has made Bangladesh proud Banks) in the best presented annual reports of being among the best 1000 banks in the for the year 2011. SAFA declared IBBL as the world, ranked by ‘The Banker’, the UK’s ‘Joint Winner’ in the ‘Corporate Governance premier financial magazine. This prestigious Disclosure Award-2010’. SAFA also conferred ranking is a clear testimony of IBBL’s stability IBBL the ‘Certificate of Merit’ in ‘Banking and strength, and its leadership in financial Sector’ in the Best Presented Accounts & sector of Bangladesh. Reports Award for the year 2010. IBBL has been ranked 17th in the performance category (assessed by profits on capital), 70th Institute of Chartered Accountants of in Return on Asset (ROA), 660th in Soundness Bangladesh (ICAB) (assessed on Capital Assets Ratio), 868th in  Size (assessed on Assets) and 1000th in The Institute of Chartered Accountants of Tier-1 capital. The last criterion is widely Bangladesh (ICAB) conferred IBBL with the st accepted as the most important measure for 1 position under SAARC Anniversary Award gauging the financial stability of a bank. for Corporate Governance for the year 2011. ICAB also conferred IBBL the 3rd position The Top 1000 rankings are compiled from a under banking category in the Best Presented database of over 5000 banks worldwide and Annual Reports 2011 & 2010. are widely recognized by the global financial community as the definitive guide to bank Institute of Cost and Management rankings and analysis. Accountants of Bangladesh (ICMAB)

South Asian Federation of  The Institute of Cost and Management Accountants (SAFA) Accountants of Bangladesh (ICMAB) glorified IBBL with the ICMAB National Best  South Asian Federation of Accountants (SAFA) Corporate Award-2011, 2010 (First Position rewarded IBBL as Winner of the SAARC amongst the Private Commercial Banks in

10 Annual Report 2012 Finance Minister Abul Maal Abudul Muhit, MP is handing over ICAB Award to the Managing Director of the Bank

Islamic Operation), ICMAB Best Corporate Other Recognitions Performance Award–2008 (Second Position  amongst the Private Commercial Banks) ICICI Bank, Hong Kong, conferred IBBL with and the ICMAB National Best Corporate the “The Quality Recognition Award-2009” for Award-2007 (First position among the Local U.S. Dollar Clearing (2009). Banks).  Bankers’ Forum recognized IBBL as the Best Bank for Corporate Social Responsibility for Goldman Sachs 2008 and 2009.

 Goldman Sachs, the leading wealth  Exclusive economic weekly “The Industry” management institution of the world, has conferred IBBL with the Best Rated Bank chosen IBBL as proper place for investment. Award-2010, 2011 & 2012. IBBL is seventh in the top ten companies  The CitiBank, NA recognised IBBL as the ranked by Goldman Sachs in its portfolio “Largest Contributor” in Foreign Trade ‘GSN-11’. Operations in Europe Bangladesh corridor in 2009. Business Asia  The UAE Exchange awarded IBBL for  The “Business Asia” nominated IBBL as the mobilizing around 30% of total foreign ‘Most Respected Company Awards 2012’ for remittance of the country. outstanding performance in Banking Sector.

Global Finance

 The Global Finance, a reputed USA-based Financial Magazine, recognized IBBL as the best Islamic Financial Institution of the country for the years 2008, 2009, 2010 & 2011.

Annual Report 2012 11 Looking Forward

big slice of the Annual Report contains • Fall in the margin ratio for investment accounts management’s innovative thinking and views A • Instability in capital market arising from based on IBBL’s business, economy, future speculations programs, circumstances and their implications. However, these statements do not guarantee • Preface of compliance issues raised by the against certain risks and uncertainties, which international forums which is likely to affect the are difficult to predict. Therefore, actual future export growth results and trends, forecaste in forward-looking statements, may differ significantly for the • Escalation of international prices of essentials following reasons: that results in volatility in For. Ex market

• Changes in national, economic and financial • Global embargo/unrest in Middle-east conditions countries affecting flow of remittances and trade • Changes in policies and actions of the Government or Regulatory Authorities • Increase in Competition within the financial industry • Changes in IBBL’s Policy framework • Increase in inflationary pressure • Changes in demand for IBBL‘s products. • Under utilization & change of different risk • Fluctuations in international prices, that management tools influence the foreign exchange market • Changes in accounting standards or practices • Instability of profit rate • Unforeseen natural and other disasters, • Unpredictability of capital market adverse weather and other similar contingencies • Volatility in the money market • Changes in technology and evolving banking • Changes in CRR and SLR of the banks of dependable industry standards • Changes in investment rate • Changing demographic developments • Changes in corporate tax structure and VAT on including changing consumer spending, saving banking service and borrowing habits

• Increase in provision requirement reducing • Risks related to legislation, regulation and ROA and ROE taxation

12 Annual Report 2012 Vision

ur vision is to always strive to achieve superior financial Operformance, be considered a leading Islami Bank by reputation and performance:

• Our goal is to establish and maintain the modern banking techniques, to ensure the soundness and development of the financial system based on Islamic principles and to become the strong and efficient organization with highly motivated professionals, working for the benefit of people, based upon accountability, transparency and integrity in order to ensure stability of financial systems

• We will try to encourage savings in the form of direct investment

• We will also try to encourage investment particularly in projects, which are more likely to lead to higher employment.

Annual Report 2012 13 Mission

o establish Islamic banking through the introduction of a welfare Toriented banking system and also ensure equity and justice in all economic activities, achieve balanced growth and equitable development through diversified investment operations particularly in the priority sectors and less developed areas of the country.

To encourage the socio- economic development and financial services to the low-income community particularly in the rural areas.

14 Annual Report 2012 Strategic Objectives

The strategic objectives are to: • ensure lucrative career path, attractive facilities and excellent working environment • ensure customers’ satisfaction • ensure zero tolerance on negligence in • ensure welfare-oriented banking compliance with both Shari‘ah and regulatory • establish a set of managerial succession dodies and adopt technological changes to ensure • provide impeccable and progressively better development of an Islamic Bank as a stable customer services using latest technologies financial institution • train and develop human resources • emerge as a healthier & stronger bank at the continuously and provide adequate logistics top of the banking sector and continue stable to satisfy customers’ need positions in ratings, based on the volume of quality assets • be excellent in serving the cause of least developed community and area • ensure diversification of investment by sector, size, economic purpose & geographical • motivate team members to take the ownership location and expand need-based Retail and of every job SME/Women entrepreneur financing • achieve global standard • invest in the thrust and priority sectors of the • build and consolidate corporate culture economy • ensure Corporate Social Responsibilities • strive hard to become a employer of choice (CSR) through all activities and nurturing & developing talent in a performance-driven culture • promote use of solar energy and green • pay more importance in human resources as banking culture and ecological balance well as financial capital

Annual Report 2012 15 Core Values

• Trust in Almighty Allah • Strict observance of Islamic Shari‘ah • Highest standard of honesty, integrity & morale • Welfare banking • Equity and justice • Environmental consciousness • Personalized service • Adoption of changed technology • Proper delegation, transparency & accountability

Commitments

IBBL reposes trust in and maintains commitment to: • Shari‘ah • the Regulators • the Shareholders • the Community • the Customers • the Employees • other stakeholders • Environment/ecology

16 Annual Report 2012 Code of Conduct and Ethical Principles

Shari‘ah foundation of the ethics • Doing good to others • Integrity • Adhering to truth and transparency in • The principle of vicegerency of humanity on statements earth b. Rules of conduct towards shareholders, • Sincerity managers and fellow employees • Piety • Developing the work through innovative and • Righteousness and making one’s work perfect creative ideas • Allah-fearing conduct in everything • Respecting the working hours of the • Accountability to Almighty Allah institution • Getting acquainted with the directives Principles of personal ethics • Safeguarding the institution’s assets, facilities • Trustworthiness and equipment • Legitimacy • Refraining from parting to others if this • Objectivity goes against the interests and rights of the employer. • Professional competence and diligence • Faith-driven conduct c. Rules of conduct towards those who deal with • Professional conduct and technical standards the institution and related parties • Being keen on meet us the needs of those Rules of ethical conduct who deal with the institution a. Self-motivated rules influencing job performance • Giving rights to those who are entitled to • Allah-fearing state of mind them justly • Adhering to the Shari‘ah and implementing • Preserving confidential information its principles • Being careful about one’s conduct and work • Implementing justice and fairplay in one’s • Being quick to do good and articulating the truth

Annual Report 2012 17 Corporate Profile

Name of the Company : Islami Bank Bangladesh Limited

Legal Status : Public Limited Company

10589 Company Registration Number : C- Dated March 13, 1983 485

Number of Employees : 12,188

Number of Branches : 276

Number of Shareholders : 60,302

Number of MPB holders : 27,723

Tax Payer Identification Number (TIN) : 210-200-0887

VAT Registration Number : 9015000857

Chairman : Prof. Abu Nasser Muhammad Abduz Zaher

Managing Director : Mohammad Abdul Mannan

Company Secretary : Abu Reza Md. Yeahia

Chief Financial Officer : Mohammad Nesar Uddin, FCA, FCMA

Credit Rating Agency : Credit Rating Information and Services Ltd. (CRISL)

Auditors : 1) M/S. A. Qasem & Co. Chartered Accountants (A Cooperating firm of Pricewaterhouse Coopers) Gulshan Pink City Suite # 01-03, Level # 7, Plot # 15, Road # 103, Block-CEN(C) Gulshan Avenue, Dhaka-1212.

2) M/S. ACNABIN Chartered Accountants (An independent member of BAKER TILLY INTERNATIONAL) BDBL Bhaban (13th Floor) 12, Kawran Bazar C/A, Dhaka-1215.

18 Annual Report 2012 Tax Consultant : M/S. K.M. Hasan & Co. Chartered Accountants Hometown Appartment (8th & 9th Floor) 87, New Eskaton Road, Dhaka-1000.

Investors’ Enquiry For Share : Share Department 63, Dilkusha Commercial Area, (5th Floor), Dhaka-1000. PABX: 9551105, 9551062, 9550415; Ext-627,624,615 & PABX: 9563040; Ext-369. Phone & Fax: 9564595 E-mail: [email protected]

For Mudaraba Perpetual Bond (MPB) : Bond Department 63, Dilkusha Commercial Area (5th Floor), Dhaka-1000. PABX: 9551105, 9551062, 9550415, Ext-626 Phone: 9554579, Phone & Fax: 9564595

For Islami Bank Securities Limited : Managing Director & CEO (Subsidiary Company of IBBL) Yousuf Chamber (5th Floor) 20, Dilkusha Commercial Area, Dhaka-1000. Phone: 7121040, Mobile: 01730736027 E-mail: [email protected]

For Offshore Banking : Off Shore Banking Department International Banking Wing Head Office PABX : 88-2-9563040, 9560099, Ext. 116, 241,167 Fax : 88-2-9554151, 9564532 e-mail : [email protected] [email protected]

Annual Report 2012 19 Milestones

• Incorporation : 13.03.1983 • Certificate of Commencement of Business : 27.03.1983 • Inauguration of 1st Branch : 30.03.1983 • Formal Inauguration : 12.08.1983 • Formation of Shari‘ah Council : 01.05.1983 • Formation of Sadakah Tahbil as a CSR Wing : 04.07.1983 • Initial Public Offer (IPO) Subscription Opened : 30.06.1985 Subscription Closed : 14.07.1985 • Listing in Dhaka Stock Exchange Limited : 02.07.1985 • Listing in Chittagong Stock Exchange Limited : 07.03.1996 • 1st Rights Share Issue Subscription Opened : 10.07.1989 Subscription Closed : 31.12.1989 • 4th Rights Share Issue Subscription Opened : 27.07.2003 Subscription Closed : 25.08.2003 • IBBL Head Office in its Own Tower : 10.03.2000 • Opening of 100th Branch : 12.06.1997 • Opening of 200th Branch : 21.06.2009 • Opening of 250th Branch : 15.12.2010 • Joining/Agreement with CDBL : 29.12.2004 • In-house Core Banking Software : 02.04.2005 • Issuance of Mudaraba Perpetual Bond (MPB) : 25.11.2007 • Commencement of Broker House : 01.01.2008 • Opening of 100th Own ATM Booth : 04.11.2011 • Opening of 300th Own ATM Booth : 31.12.2012 • Agreement with OMNIBUS having 1520 ATMs : 25.11.2011 • Formation of Subsidiary Companies a. Islami Bank Securities Limited (IBSL) : 22.03.2010 b. Islami Bank Capital Management Limited (IBCML) : 01.04.2010 • 1st Position in Inward Remittance Since : 31.12.2007 • 100% Online Banking : 07.01.2011 • Exclusive Sponsor for Beautification of Dhaka City on the Occasion of ICC Cricket World Cup 2011 : 17.02.2011 • Launching of Offshore Banking Unit : 04.01.2011 • Launching of iBanking : 16.12.2011 • Title Sponsorship of National School Football Islami Bank Tournament 2011 : 30.11.2011 • Agreement with Bangladesh Cricket Board (BCB) for becoming Franchisee in Bangladesh Cricket League (BCL) : 18.10.2012 • Inauguration of mCash service : 27.12.2012 • Launching of Call Center : 27.12.2012 • Agreement with Grameen Shakti for installation of Bio-gas Plants : 30.12.2012 • Landmark of Tk. 400,000 million Deposit : 03.11.2012 • 7 million Deposit Account : 22.12.2012

20 Annual Report 2012 Sponsors

Local Foreign

Mohammad Abdur Razzaque Laskar (Deceased) Islamic Development Bank, K.S.A. Mofizur Rahman (Deceased) Kuwait Finance House (K.S.C.), Safat, Kuwait Barrister Tamizul Haque Jordan Islamic Bank, Jordan Mohammad Younus (Deceased) Islamic Investment and Exchange Corporation, Mohammad Shafiuddin Dewan (Deceased) Doha, Qatar Mohammad Bashiruddin Bahrain Islamic Bank, Bahrain Mohammad Hussain (Deceased) Islamic Banking System International Holding Nashiruddin Ahmed (Deceased) S.A., Luxembourg Mohammad Mosharraf Hossain, MP Al-Rajhi Company for Currency Exchange and Mohammad Malek Minar (Deceased) Commerce, Riyadh, K.S.A. Zakiuddin Ahmed (Present name: Al-Rajhi Company for Industry & Trade) M.A. Rasheed Chowdhury Sheikh Ahmed Salah Jamjoom, K.S.A. Engr. Mustafa Anwar Sheikh Fouad Abdul Hameed Al-Khateeb Prof. Mohammad Abdullah (Deceased), K.S.A. Serajuddowla Dubai Islamic Bank, Dubai, U.A.E. The Ibn Sina Trust The Public Institution for Social Security, (Repr. by Shah Abdul Hannan) Safat, Kuwait Bangladesh Islamic Centre Ministry of Awqaf & Islamic Affairs, Kuwait (Repr. by A.K.M. Nazir Ahmed) (Present name: Kuwait Awqaf Public Foundation Islamic Economics Research Bureau Kuwait) (Repr. by Prof. Mohammad Sharif Hussain) Ministry of Justice, Department of Minors Affairs Mohammad Nuruzzaman (Deceased) Kuwait (Present name: The Public Authority for Minors Affairs Abul Quasem Kuwait) A.K.Fazlul Haque (Deceased) Engr. Muhammad Dawood Khan Baitush Sharaf Foundation Ltd. (Repr. by Late Moulana Mohammad Abdul Jabbar)

Annual Report 2012 21 Board and Its Committees

Board of Directors

Chairman Depositor Directors Prof. Abu Nasser Muhammad Abduz Zaher Md. Abdus Salam, FCA, FCS Repr. of The Ibn Sina Trust Humayun Bokhteyar, ACPA, FCA

Vice Chairmen Independent Directors Yousif Abdullah Al-Rajhi, K.S.A. Professor N R M Borhan Uddin, Ph.D. Prof. Dr. A.K.M. Sadrul Islam Engr. Mustafa Anwar Barrister Mohammed Belayet Hossain Repr. of the Public Institution for Social Security, Kuwait Ex-Officio Director Directors Mohammad Abdul Mannan Engr. Md. Eskander Ali Khan Managing Director and CEO Repr. of Al-Rajhi Co. for Industry & Trade, K.S.A. Company Secretary Mohammad Abdullah Al Jalahma Abu Reza Md. Yeahia Repr. of Kuwait Awqaf Public Foundation, Kuwait Senior Vice President & Secretary Mohamad Adnan Midani Executive Committee Repr. of Islamic Development Bank, K.S.A. Chairman Md. Abul Hossain Engr. Md. Eskander Ali Khan Repr. of Investment Corporation of Bangladesh Members Dr. Abdulhameed Fouad Al-Khateeb Dr. Abdulhameed Fouad Al-Khateeb Repr. of Arabsas Travel & Tourist Agency, K.S.A. Humayun Bokhteyar, ACPA, FCA Abdullah Abdul Aziz Al-Rajhi, K.S.A. Md. Abdus Salam, FCA, FCS Md. Abul Hossain Salahuddin Ahmed Repr. of Kuwait Finance House, Kuwait Audit Committee Hafizul Islam Mian Chairman Repr. of Islamic Education Society Professor N R M Borhan Uddin, Ph.D Md. Shahidul Islam Members Md. Abdus Salam, FCA, FCS Mohammed Nazrul Islam Mohamad Adnan Midani Mominul Islam Patwary Humayun Bokhteyar, ACPA, FCA

22 Annual Report 2012 Short Profile of Directors

Prof. Abu Nasser Muhammad Abduz Zaher Chairman

Prof. Abu Nasser Muhammad Abduz Zaher, Chairman, Islami Bank Bangladesh Ltd. began his teaching profession in the early seventies and later served in the Royal Embassy of Kingdom of Saudi Arabia in Dhaka, Bangladesh for a long 13 years as the Secretary. He is now the Managing Director of Ibn Sina Pharmaceutical Industry Ltd., a prominent pharmaceutical company in Bangladesh.

Prof. Zaher is also the Chairman of Islamic Banks Consultative Forum (IBCF) and Industrialists & Businessmen Welfare Foundation (IBWF). He is Vice Chairman of Bangladesh Association of Banks (BAB). He is Advisor to Bangladesh Association of Pharmaceutical Industries. He is an honored personality for his pioneering steps in promoting Islamic Banking in Bangladesh.

Prof. Zaher was the Director of IBBL in different times and was Chairman of the Executive Committee. He is a Founder Member of Fouad Al Khateeb Foundation, Badshah Faisal Institute, Ibn Sina Trust Dhaka, Manarat International School & College, Ibn Tymia College, Islamic Education Society, Bangladesh Islamic Centre and Syndicate member of the Manarat International University of Bangladesh.

Prof. Zaher is playing a vital role in social welfare-related works. He is related with founding and development of hundreds of educational institutions. He has patronized to establish many renowned private hospitals and helped thousands of people for treatment.

Prof. Zaher visited more than 50 countries of the world, including KSA, Kuwait, UAE, Bahrain, Egypt, USA, Canada, UK, Switzerland, Austria, France, Germany, Italy, Denmark, Greece, Mozambique, South Africa, Turkey, Pakistan, Nepal, India, Myanmar, Thailand, South Korea, Japan, Malaysia, Singapore and participated in many international seminars, symposia and conferences.

Annual Report 2012 23 Yousif Abdullah Al-Rajhi Vice Chairman

Yousif Abdullah Al-Rajhi is a Vice Chairman of the Board of Directors and a foreign Director of the Bank. He completed his graduation in Business Administration majoring in Economics & Political Science from King Saud University, K.S.A. in 1986. Then he obtained M.A. degree in Development Administration from Western Michigan University, USA in 1991. He also completed Internal Auditor Course, Change Management & Leadership Course and Speed Reading and Development Round Attendance Certificate Course.

He is General Manager-cum CEO of Al-Rajhi Company for Industry and Trade, KSA having exposure of 27 years. He started his Banking career with Al-Rajhi Banking and Investment Corporation, the most reputed Financial Institution in the Royal Kingdom of Saudi Arabia.

Mr. Yousif has visited various eastern and western countries of the world and participated in many international seminars, symposia and conferences.

Engr. Mustafa Anwar Vice Chairman

Engr. Mustafa Anwar represents the Public Institution for Social Security, Kuwait as Director in the Board of Islami Bank Bangladesh Ltd. He is a Founder Sponsor of Islami Bank Bangladesh Limited. Currently he is a Vice Chairman Board of Directors of the Bank. Mostafa Anwar is the Chairman & Managing Director of Birds Group, a large business conglomerate in the RMG sector of Bangladesh; the group comprises Birds Garments Ltd., Birds Garments Ltd. Unit-2, Birds RNR Fashions Ltd., Birds Apparels Ltd., Birds A & Z Ltd., Birds Fadrex Ltd., Khalifa Apparels Ltd., Civil General Construction Ltd., Luba Prokousulli, Mag’s Eco-Earth Ltd. He was also Chairman & Advisor of several standing Committees of BGMEA.

He completed his graduation in Civil Engineering from Bangladesh University of Engineering & Technology (BUET) in early nineteen sixties and began his career as an engineer of Bangladesh Water Development Board (BWDB).

Engr. Mustafa Anwar is engaged in various social, educational and cultural organizations such as Ex-President & Founder member of Moitri Samity (Socio- Cultural organization); Editor, The Weekly Bikram; Trustee, Darul Ehsan University, Dhaka and Chairman, Shikor International School, Dhaka.

24 Annual Report 2012 Engr. Md. Eskander Ali Khan Chairman, Executive Committee

Engr. Md. Eskander Ali Khan represents Al-Rajhi Company for Industry & Trade, K.S.A. as Director of Islami Bank Bangladesh Ltd. He is Chairman of the Executive Committee of the Bank. He is a well-known businessperson in Real Estate & Poultry Hatchery and Tourism Sector in Bangladesh. He completed his graduation in Electrical Engineering from Bangladesh University of Engineering and Technology (BUET) in 1969. He served for a long time as electrical engineer in UAE. He is the Chairman of Islami Bank Securities Ltd.

Mohammed Abdullah Al Jalahma Director

Mohammed Abdullah Al Jalahma represents Kuwait Awqaf Public Foundation as a Director in the Board of Islami Bank Bangladesh Ltd. He was appointed director in April 06, 2009. He completed his graduation in Business Administration from the University of Concordia, Montreal, Quebec in 1985. He has 28 years working experiences in the field of Charitable Foundation, Zakat House, Investment Department, Business Administration, Modern and Developed Techniques in Managing Waqf, Building Team Work, Protocol and Formalities, Promoting Positive Skills of Subordinators, Legal Dimension in Real Estate Sector and Managing & Evaluating Property. At present, he is serving as Deputy Secretary General of Kuwait Awqaf Public Foundation, Kuwait.

He has practical experience in establishing the Zakat House in Cairo, the waqf residential Complex “Kuwait and Bahrain” in the Kingdom of Bahrain, the waqf fund for attending to the disabled, being the first waqf fund to be initiated by Kuwait Awqaf Public Foudation and Kuwait Autistic Center as the first waqf project initiated by Kuwait Awqaf Public Foundation.

He is also the member of Board of Directors of AI Dar Finance Company and Asian Muslem Committee belonging to the World Charitable Foundation.

Mohamad Adnan Midani Director

Mohamad Adnan Midani is a Chartered Accountant by profession. He completed his Bachelor of Commerce from Lebanese American University, Beirut, Lebanon in 1988. He obtained Graduate Diploma in Accountancy from the University of Concordia, Montreal, Quebec in 1994. He obtained his Chartered Accountancy from the Canadian Institution of Chartered Accounts.

He has more than twenty five years of diversified and valuable experiences in Auditing, Accounting and Management consulting in diverse business entities and industries.

Mr. Midani is the Manager Investment Division, Equity Investment Deptt. of IDB Jeddah, KSA. He has been representing Islamic Development Bank as Director of Islami Bank Bangladesh Limited since May 19, 2010.

Annual Report 2012 25 Md. Abul Hossain Director

Md. Abul Hossain completed his Masters Degree in Statistics from Jahangirnagar University in 1990. He is an Associate Member of Bangladesh Computer Society (AM- 1004). He has 20 years of working experience in the field of Govt. Service, Software Development Company and Specialized Financial Institution. Presently he is General Manager of Investment Corporation of Bangladesh. He represents Investment Corporation of Bangladesh in the Board of Directors of IBBL as elected Director. He also represents Investment Corporation of Bangladesh in the Board of Directors of Aziz Pipes Limited as Chairman & NITOL Insurance Company Limited as well as Altex Industries Ltd. as Director.

Dr. Abdulhameed Fouad Al-Khateeb Director

Dr. Abdulhameed Fouad Al-Khateeb represents Arabsas Travel & Tourist Agency, K.S.A. as Director of Islami Bank Bangladesh Ltd. He was appointed director on May 15, 2012. He is a Saudi National having Ph.D in Bio Medical Engineering and Asstt. Professor of King Abdul Aziz University, Jeddah, KSA.

Abdullah Abdul Aziz Al-Rajhi Director

Abdullah Abdul Aziz Al-Rajhi is an elected Foreign Director of the Board of Directors of Islami Bank Bangladesh Ltd. He was appointed director on May 15, 2012. He is holding 7.58% shares of the total Paid-up Capital of the Bank. He began his Banking career with Al-Rajhi Banking and Investment Corporation, the most reputed Financial Institution in the Royal Kingdom of Saudi Arabia.

26 Annual Report 2012 Salahuddin Ahmed Director

Salahuddin Ahmed represents Kuwait Finance House, Kuwait as a director of Islami Bank Bangladesh Ltd. He was appointed as director on May 15, 2012. He is an Indian National. He completed his Bachelor of Commerce Degree from University of Lucknow, India in 1995. He obtained Post Graduate Diploma in Business Administration (PGDBA) in 1998 and Diploma in Business Finance in 1996 from Institute of Chartered Financial Analyst of India. He joined in Kuwait Finance House in 2007 and now a Senior Investment Manager. He has more than 13 years of working experience in the field of Corporate Finance and Investments. He also represents Kuwait Finance House, Kuwait as director of Kuwait Finance House Research Limited. This is a premier research institution set up exclusively for promoting research in the Islamic Banking Field, apart from other investment research.

Hafizul Islam Mian Director

Mr. Hafizul Islam Mian is an elected Director of the Islami Bank Bangladesh Limited (IBBL) representing Islamic Education Society. He got his Masters with Honours Degree in Economics from the University of Dhaka in 1971. Later he obtained Masters Degree in Financial Management from the Ulster University, Northern Ireland, U.K. Earlier he got a Diploma Degree in Manpower Studies (Manpower Planning and Training) from the Manchester University, U.K in 1987.

Mr. Islam retired as an Additional Secretary, Government of the People’s Republic of Bangladesh in 2008. He spent a long time efficiently imparting different types of training of the officers of all 29 cadres of the Government. Mr. Islam had to make extensive tours to attend seminars, conference and meetings at different countries during his services in the Government. He has now been assigned with the responsibilities of the Chairman of a charitable social welfare organization named Islamic Aid Bangladesh. He is the Executive Chairman of the Centre for Coastal Development and Research in Bangladesh.

Annual Report 2012 27 Md. Shahidul Islam Director

Md. Shahidul Islam is an elected Director of Islami Bank Bangladesh Ltd. He is the Managing Director of Green Park Housing Ltd., Dhaka. He is associated with a number of social welfare organizations including Islami Bank Foundation. He spent a long time in K.S.A. and got his education in Arabic Language from King Abdul Aziz University, K.S.A. On his return home, he has embarked in business. He is a Director of Bangladesh Publications Ltd. He is also a member of the Board of Trustee, Bangladesh Islamic University (BIU). He was the Chairman of Audit Committee of Islami Bank Bangladesh Limited. He is also the Vice Chairman of Islami Bank Securities Ltd.

Md. Shahidul Islam has visited more than 30 countries of the world including India, Pakistan, Thailand, South Korea, Japan, Malaysia, Indonesia, Singapore, KSA, Kuwait, Qatar, Oman, UAE, Bahrain, Egypt, Turkey, UK, Austria, France, Germany, Spain, Italy, Greece, Sweden, Belgium, USA, Canada, Uganda and participated in many international seminars, symposia and conferences.

Mohammed Nazrul Islam Director

Prof. Mohammed Nazrul Islam is an elected Director of the Board of Directors of Islami Bank Bangladesh Ltd. He obtained M.Sc. in Applied Geophysics in 1979. He served as a teaching Faculty in the Ministry of Education, Kingdom of Saudi Arabia in different colleges from 1979 to 2003. He was a Member of the Executive Committee of Islami Bank Bangladesh Limited. Now he is the Secretary of Islamic Aid Bangladesh and a Director of Islami Bank Securities Limited (IBSL).

Mominul Islam Patwary Director

Mominul Islam Patwary is an elected Director of Islami Bank Bangladesh Ltd. He obtained Masters Degree in Chemistry from the University of Dhaka. He was the founder-member of Executive Committee of Society for Pharmaceutical Chemists. He held important positions in different Pharmaceutical Companies of the country. He visited more than 22 countries of the world including USA, UK, France, Sweden, Australia, Italy, Greece, Saudi Arabia, Kuwait, Oman, Qatar, Malaysia and participated in many international seminars, symposia and conferences. He was Chairman of the Executive Committee of Islami Bank Bangladesh Limited during December 12, 2003 to April 17, 2009 and May 18, 2011 to June 27, 2012. He is also a Director of Bangladesh Publication Ltd.

28 Annual Report 2012 Md. Abdus Salam, FCA, FCS Depositor Director

Md. Abdus Salam, FCA, FCS is the elected Council Member for the term 2013-2015 and the President of the Institute of Chartered Accountants of Bangladesh for the year 2013. He was the elected Vice President of the Institute of Chartered Accountants of Bangladesh for 2010-2012 and the former Vice President of the Institute of Chartered Secretaries of Bangladesh. He is a Director of Ibn Sina Pharmaceuticals Industries Ltd. (IPI) and the Chairman of the Audit Committee of IPI, a listed company with Dhaka and Chittagong Stock Exchange Limited.

Mr. Salam has been representing ICAB in education, training & CPD (Continuing Professional Development) Committee of South Asian Federation of Accountants (SAFA). He is the Founder President of the Institute for Supply Chain Management, Bangladesh- an affiliate of Institute for Supply Chain Management, USA. Mr. Salam is a Director of Islami Bank Bangladesh Limited from the depositors’ category since 2010. Mr. Salam has been serving over last two decades as a consultant in various Development Programmes financed by the World Bank, ADB, DFID, CIDA, etc. and also worked for the Bangladesh Power Development Board, Ministry of Energy and Mineral Resources, as the Director (Accounts) till 1990.

Humayun Bokhteyar, ACPA, FCA Depositor Director

Humayun Bokhteyar obtained Accountancy Degree from Bangladesh and Australia. He has long senior level financial management experience with services and manufacturing sectors in Bangladesh and Australia. He is a Chartered Accountant having exposure over 23 years. He is also an associate member of Australian Society of Certified Practicing Accountants and Institute of Cost and Executive Accountant (ACEA) UK. Mr. Bokhteyar is the founder and Managing Partner of Public Accounting and Auditing Firm, M/s. Bokhteyar Humayun & Co., Chartered Accountants. He was elected as Depositor Director of Islami Bank Bangladesh Limited on September 01, 2010.

Professor N R M Borhan Uddin, Ph.D. Independent Director & Chairman, Audit Committee

Professor NRM Borhan Uddin obtained Ph.D. in Management from Stevens Institute of Technology, New Jersey, USA. He also completed his MBA & MS degree from the USA. At present, he is the Vice Chancellor of City University. He is a Member of the Board of Directors and Executive Committee of ICB Securities Trading Company Limited and he was the Chairman of Green Land Pharmaceuticals Ltd., Tongi, Gazipur. He has been the Independent Director of Islami Bank Bangladesh Limited since July 24, 2010.

Annual Report 2012 29 Professor Dr. A.K.M. Sadrul Islam Independent Director

Prof. Dr. A.K.M. Sadrul Islam was nominated Independent Director of Islami Bank Bangladesh Limited on December 29, 2012. Dr. Islam completed M.Sc. Engineering from Bangladesh University of Engineering & Technology (BUET) in 1984 and got his Ph.D. in Mechanical Engineering from Imperial College of Science & Technology, University of London, U.K. in 1988. He was former Head and Professor of Mechanical Engineering Department of BUET and presently a Professor of Mechanical & Chemical Engineering Department and Head of Civil & Environmental Engineering Department of Islamic University of Technology, a subsidiary organ of OIC. He has also attained many Scholastic Award/Fellowships like Guest Professor at Saga University, Japan, Visiting Professor, at University Technology of Malaysia, INSPIRE Exploratory Grant, U.K., British Commonwealth Visiting Research Fellow at Loughborough University, U.K.

Dr. Islam is currently the Chairman of Mechanical Engineering Division of Institution of Engineers, Bangladesh (IEB) and the Secretary General of Bangladesh Society of Mechanical Engineers (BSME). He is the Member of Board of Trustees of the Ibn Sina Trust (IST) and Director of the Ibn Sina Pharmaceutical Industry Limited (IPI). Prof. Islam visited various countries of the world such as India, Sri Lanka, USA, UK, Canada, Malaysia, Japan, Sweden, Australia, China, Italy, Iran, Kuwait, Belgium, Singapore, Brunei for participating international seminars, symposiums and conferences.

Barrister Mohammed Belayet Hossain Independent Director

Barrister Mohammed Belayet Hossain was nominated as Independent Director of Islami Bank Bangladesh Limited on December 29, 2012. He completed Master of Laws (LL.M.) from University of Chittagong. He obtained Barrister-at-Law from the Honourable Society of Lincoln’s Inn, London. He is a member of the Executive Committee of the Institute for Research and Development (IERF), Member and the Coordinator of the Legal Aid Team (Supreme Court) and Bangladesh Islamic Law Research & Legal Aid Centre, Dhaka. He acted twice as one of the Panel Judges of the International Committee of the Red Cross (ICRC).

Barrister Hossain is a regular practitioner in the Hon’ble Supreme Court of Bangladesh. He has been dealing successfully with the legal affairs of various national and international commercial, maritime, academic and business entities. He regularly takes part in seminars, talks and symposia as a Speaker/Lecturer/ Paper Presenter on different national and global issues.

30 Annual Report 2012 Shari‘ah Supervisory Committee

Sheikh Moulana Mohammad Qutubuddin Chairman Chairman Baitush Sharaf Anjuman-e-Ittehad Bangladesh Mufti Sayed Ahmad Vice Chairman Head Mufti Al Jamiatus Siddikiah Darul Ulum (Madrasah-e-Furfura Sharif), Darussalam, Dhaka Professor Dr. Abu Bakr Rafique Member-Secretary Pro-Vice Chancellor International Islamic University Chittagong Principal Mohammad Serajul Islam Member Ex-Principal Madrasha-e-Mesbahul Ulum, Dhaka Abdur Raquib Member Ex-Executive President Islami Bank Bangladesh Limited Mufti Shamsuddin (Zia) Member Mufti & Muhaddis Al Jameatul Islamiah, Potia, Chittagong Moulana Abdus Shaheed Naseem Member President Bangladesh Quran Shikkha Society Dr. Hasan Mohd. Moinuddin Member Associate Professor Deptt. of Islamic Studies International Islamic University Chittagong, Dhaka Campus Professor Dr. A. S. M. Toriqul Islam Member Dept. of Dawah & Islamic Studies Islamic University, Kushtia Dr. Mohammad Abdus Samad Member Associate Professor & Head of Arabic Language & Literature Department International Islamic University Chittagong, Dhaka Campus Dr. Mohammad Monzur-e-Elahi Member Asstt. Professor National University Moulana Mohiuddin Rabbani Member Muhaddith Foizul Ulum Madrasha, Dhaka Khatib, Railway Jame Masjid, Fulbaria, Dhaka

Annual Report 2012 31 Management Committee

Mohammad Abdul Mannan Chairman Managing Director & CEO

Mohd. Shamsul Haque Member Deputy Managing Director

Md. Habibur Rahman Member Deputy Managing Director

Md. Nurul Islam Member Deputy Managing Director

Muhammad Abul Bashar Member Deputy Managing Director

Syed Abdullah Mohammad Saleh Member Deputy Managing Director

Md. Habibur Rahman Bhuiyan, FCA Member Deputy Managing Director

A.K.M. Abdul Malek Chowdhury Member Deputy Managing Director

Md. Mahbub-ul-Alam Member Deputy Managing Director

Rafi Ahmed Begh Member Executive Vice President

Nurul Islam Khalifa Executive Vice President Member

Abdus Sadeque Bhuiyan Executive Vice President Member

32 Annual Report 2012 Executives Executives

Managing Director & CEO Mohammad Ali Muhammad Kamaluddin (Jasim) Mohammad Abdul Mannan Muhammad Ghulam Sarwar Md. Qaisar Ali Deputy Managing Directors Md. Ataur Rahman Salim Anwar Md. Kawsar-ul-Alam Md. Abdus Salam Mohd. Shamsul Haque Abu Naser Mohammed Nazmul Bari Mizanur Rahman Md. Habibur Rahman Md. Mosharraf Hossain Md. Osman Gani Md. Nurul Islam Mohammad Nesar Uddin, FCA, FCMA Md. Mahboob Alam Muhammad Abul Bashar Abu Noman Md. Siddiqur Rahman Syed Abdullah Mohammed Saleh Senior Vice Presidents Md. Habibur Rahman Md. Habibur Rahman Bhuiyan, FCA Sayed Nasir Uddin Md. Abdullah A.K.M. Abdul Malek Chowdhury Md. Shahidullah Zafar Alam Md. Mahbub-ul-Alam Md. Mizanur Rahman A.H.M. Latif Uddin Chowdhury Mohammad Jamal Uddin Executive Vice Presidents Mazumder Md. Mostafizur Rahman Siddiquee Abu Taher Mohammad Saleh Md. Aminur Rahman Taher Ahmed Md. Najibur Rahman Md. Shamsul Haque Mohammad Jalal Uddin Akbar Rafi Ahmed Begh Mohammad Sayeedullah Faridul Hoque Chowdhury Md. Nurul Islam Khalifa Muhammad Solaiman Md. Giasuddin Ahmed Abul Hossain Syed Sirajul Hoque Md. Yeanur Rahman Md. Nurul Islam Md. Abdus Sobhan Md. Shahidur Rahman Md. Azizur Rahman A.K.M. Shahidul Hoque Khandaker Md. Omar Faruk Khan A.K.M. Harunur Rashid Md. Motiar Rahman Vice Presidents Md. Mahfuzur Rahman Md. Nizamul Hoque Sk. Md. Hassan Md. Abdul Jalil Kazi Kamrul Islam Md. Yeakub Ali Abdus Sadeque Bhuiyan Mohammod Ullah Abul Kalam Md. Saifullah Md. Abdul Jabbar Md. Tofazzal Hossain Khan Md. Abdul Matin Md. Rafiqul Islam Md. Saleh Iqbal Md. Ashraf Hussain Md. Shafiqur Rahman Abu Reza Mohd. Yeahia Abdullah Jahangir Md. Kabir Hossain Md. Shah Alam Sk. Moshiur Rahman Md. Shamsuzzaman Md. Nayer Azam Md. Sekander Ali Md. Nazrul Islam Khan Ahmed Ali Shahid Uddin Ahmed Md. Shamsul Huda Rana Mohammad Raihan Md. Saidur Rahman Md. Obaidul Haque Md. Moiz Uddin Md. Siddiquzzaman Mohammed Monirul Moula Md. Altaf Hossain Fayez Ahmed Chowdhury Asheque Ahmad Jebal Md. Faizul Kabir Md. Akhtar Hossain Md. Abdur Rahman Banerjee Md. Khalequzzaman Md. Abdul Matin Mahmood Ahmed Md. Abdul Quddus A.K.M. Nurul Islam Md. Nurul Islam Mohammad Rokan Uddin Md. Zalal Uddin Md. Mohon Miah Abu Sayeed Md. Idris Md. Manjurul Islam A. A.M. Habibur Rahman Md. Siddiqur Rahman Mohammad Jalaluddin Shafiqul Mawla K.M. Munirul Alam Al-Mamun Md. Sharif Uddin Pramanik Mohammed Amirul Islam A.K.M. Payer Ahammed Mir Rahmat Ullah Shaikh Mohammad as on 31.12.2012

Annual Report 2012 33 Md. Mahbub-a-Alam Abdul Gafur Md. Qumrul Islam Shaikh Abdul Mannan Jamal Uddin Md. Shahjahan Ali Md. Jashim Uddin Rezaul Haque Mohd. Rafiqul Islam Md. Shamsuddoha Enajuddin Ahmed Kazi Main Uddin Khadem Md. Shahid Ahmed Md. Zakir Hossain Muhd. Quamrul Bari Imami Muhammad Hasnain Abid Khan Mosharraf Hossain A.K.M. Kawsar Alam Md. Fakhrul Islam Md. Nurul Islam Md. Farid Uddin Md. Abu Sufian Md. Anwar Hossain Abul Faiz Muhammad Kamaluddin Md. Zamshidur Rahman Masudur Rahman Khalifa Farid Ahmad Md. Zillur Rahman Patwary S.A.M. Mizanur Rahman Khan Md. Akhter Hossain Major Md. Yunus Ali (Retd.) Abdul Momin Abdus Sabur Khan Md. Maksudur Rahman Md. Mojibur Rahman Md. Faiz Ahmed Md. Enamul Huq Md. Shafiuddin Talukder Md. Mizanur Rahman Mizi Md. Shafiul Azam Md. Mizanur Rahman Mohammed Shahid Ullah A.S.M. Rezaul Karim S.M. Rezaul Karim Md. Shahidul Islam Md. Khalilur Rahman Md. Khaled Shaifullah A.K.M. Abu Siddiqui Abdul Hamid Miah Muhammad Obaidullah Abdul Gani Md. Ashraf Imam Md. Abdur Rahman Md. Ashraf Ali Md. Shahidul Haq Akand Mohd. Yakub Ali Md. Abdul Malek Md. Nazmul Hoda Shiraji Moshtaqe Ahmed Sikdar Muhammad Shihabuddin Md. Gakir Hossain Md. Akhter Hossain Ahmad Noor Md. Ziaullah Md. Nurul Hossain Md. Ataur Rahman Nazmus Sakib Md. Rezaur Rahman Md. Habibur Rahman Mohammed Sirajul Alam Md. Abdullah Rashed Md. Abul Kalam Azad Rafiq-ul-Alam Md. Rezaul Islam Shaick Farid Ahmed Md. Abdus Sabur Md. Mozahidul Islam Nisar Ahmed Khorshed Ahamed Md. Fourkan Uddin Nizami Md. Nurul Amin A.K.M. Shafiar Rahman Md. Jainal Abedin Md. Aminul Islam Abdullah Anwar Md. Zillur Rahman Md. Murshed Alam Md. Mustafizur Rahman Md. Manirul Islam Md. Shamsul Alam Siddique Md. Ruhul Amin Md. Nasir Uddin Md. Bozlur Rahman Md. Monzur Morshed Khan Shah Md. Mahtubuddin Al-Mamun Mohammad Hossain Khan Mahmudur Rahman Md. Nasim Ahmed Md. Monir Hossain Mohd. Ashraful Islam Abdul Kader Sarder Md. Sarwar Islam Mohammad Masud Md. Saroar Hossain Md. Zillur Rahman Muhammad Nurul Hoq Md. Abul Kalam Azad Ruhul Amin Md. Anisul Haque Mohd. Enayet Ullah Siddiquee Md. Faruque Al-Mamun Muhammad Golam Rabbani Md. Anowarul Haque Md. Ferose Uddin Md. Mizanur Rahman Bhuiyan Md. Ibrahim Bhuiyan Muhammad Zillur Rahman Al- Mohammad Akhter Hossen Kazi Mojibor Rahman Mahmud Shahidullah Majumder Assistant Vice Presidents Md. Ashraful Alam G.M. Mohd. Gias Uddin Quader Md. Abduzzaher Md. Alimur Rahman Bashir Ahamed Syed Md. Amir Ali Md. Mustafa Kamal Md. Rafiqul Islam Mohammad Yusuf Mohd. Shahid Uddin Akbar Bhuiyan Chowdhury Shamim Hasnain Mahdi Md. Rafiqul Islam Muhammad Anisur Rahman A.T.M. Shahidul Haque Md. Shamsul Alam Md. Zahirul Islam Muhammad Zakir Hussain Md. Ibrahim Khalil Mohd. Shahjahan

34 Annual Report 2012 Nesar Uddin Ahmad Md. Abu Sayed Md. Zakir Hossain Md. Jamal Uddin Md. Afzal Hossain Md. Mahmud Hasan A.F.M. Anisur Rahman Md. Masudul Alam Mohammad Esha Abul Kasem Md. Mostafa Dilshad Parveen Md. Saiful Alam Munshi Rezaur Rashid Md. Nurullah Bhuiyan Md. Saiful Islam A.A.M. Mazharul Islam B.M. Habibur Rahman Md. Abdur Rashid Md. Maznuzzaman Md. Harun-or-Rashid Mondal Kazi Shah Omar Faruk A.K.M. Mahbub Morshed Mohammed Monzurul Islam Md. Habibur Rahman Miah G.M. Abdur Razzak Chowdhury Md. Jashim Uddin Md. Shahadat Hossain Md. Shamsul Alam Md. Zahurul Islam Nazimuddin Mohammed Sanaullah Mohammad Musleh Uddin A.K.M. Delowar Hossain Md. Jakaria Md. Akram Hossain Muhammad Shahidul Islam Md. Ashraf Uddin A.K.M. Sakawatullah Md. Abul Khair Dilruba Hayat Md. Abul Fazal Khan Md. Abdur Rob Mridha Md. Zahirul Islam Bhuiyan Md. Habibur Rahman Md. Saifur Rahman Chowdhury Abdul Awal Khan Fazle Bari Waseque Ahmad Md. Habibur Rahman S.M. Ali Mowla Md. Matiur Rahman Md. Enayet Ullah Md. Amirul Islam Ahmad Ali Md. Alauddin Gazi Md. Shah Alam Sheikh Abdus Salam Md. Nazrul Islam Jomaddar Mohammad Nurul Hossain Md. Hafizur Rahman Sheikh Mohammad Omar H.M. Wahiduzzaman Akon Md. Anisur Rahman Md. Helal Uddin Dewan Md. Alamgir Khalil M. Zubayer Azam Helali A.B. Muhammad Mostafa S.M. Mizanur Rahman Md. Asaduzzaman M. Shamsuddin Ahmed Md. Abu Zafar Md. Saiful Islam Md. Shah Alam Bhuiyan Md. Nuruzzaman Howlader Md. Abu Walid Chowdhury Mohd. Rafiqul Islam Mohammad Rezaul Karim S.M. Tanver Hassan Md. Mahfuzul Karim Muhd. Shaukat Ali Md. Mosharraf Hossain Abul Laise Muhd. Khaled Abdul Naser Md. Mahbub Al Hassan Saiful Islam S.M. Abdul Latif Mohd. Motahar Hossain Mohammad Mohi Uddin Mohammad Motaleb Sarder Sohel Aman Md. Golam Mostafa Md. Shah Jalal Sheikh Sheik Saidul Hasan Md. Amzad Hossain Md. Solaiman Ali Ahmed Zubayerul Huq Md. Arifur Rahman Syed Muhammad Moyeenuddin Md. Zamal Uddin Sabina Yesmin Md. Abduz Zaher Mohd. Saiful Haque Md. Omar Faruque Md. Anwar Hossain Md. Moksudur Rahman Munshi Md. Ashrafuddin Sikder Md. Anwar Hossain Abul Kalam Md. Shamsul Haque Md. Monzurul Islam Md. Abdul Matin Sk. Mohd. Anwar Hossain Shahidul Alam Md. Mohiuddin Meah Md. Barkat Ullah Md. Moniruzzaman Sarker Muhammad Shahidul Alam Mohammad Nurul Karim Md. Dulal Hossain Md. Magfurur Rahman Mohammed Kutub Uddin Md. Jakir Hossain Md. Muzahidul Islam Md. Abdul Jalil Md. Monzoor-e-Elahi Miazee Mahmud Hossain Khan Md. Abdur Razzaque Mohd. Nazim Uddin Talukder Mohd. Mosharrof Hossain Md. Rezaul Karim Khaled Mahmud Raihan Mahmuda Sultana Shah Md. Jubaer, ACA

Annual Report 2012 35 Corporate Structure

ISLAMI BANK BANGLADESH LIMITED Shari’ah Supervisory Commiee Review BOARD OF DIRECTORS Commiee Chairman

Audit Commiee Execuve Commiee

Islami Bank Capital Islami Bank Islami Bank Securies Limited Management Limited Foundaon

MANAGING DIRECTOR

Shari’ah Board Secretariat Secretariat Division

Management Asset Liability Commiee (MC) Commiee (ALCO)

Islami Bank Training Human Research & & Research Resources Development Academy Division Division

Internal Operaons Corporate Retail Internaonal Development ICT Risk Control & Wing Investment Investment Banking Wing Compliance Wing Management Wing Wing Wing Wing Wing

MD’s Vigilance Squad Secretariat

Zones & Corporate Branches

36 Annual Report 2012 Products & Services

Local Currency Deposit Accounts Investment Products 1. Bill Financing (Mudaraba Documentary Bills 1. Al-Wadeah Current Account 2. Mudaraba Savings Account UPAS) 3. Mudaraba Term Deposit Account 2. Import Financing 4. Mudaraba Special Notice Account 3. Export Financing 5. Mudaraba Special Savings (Pension) Account 4. Short-term Murabaha 6. Mudaraba Hajj Savings Account 5. Project Finance (HPSM term investment) 7. Mudaraba Savings Bond Account 8. Mudaraba Waqf Cash Deposit Account Foreign Remittance Products 9. Mudaraba Monthly Profit Deposit Account 1. Remittance Card 10. Mudaraba Muhar Savings Deposit Account 2. Foreign Demand Draft 11. Students Mudaraba Savings Account 12. Mudaraba Farmers Saving Account Foreign Remittance Services 13. Mudaraba NRB Savings Bond (MNSB) 1. Central Crediting of Remittances rd Deposit Products in Foreign Currency 2. Payment of 3 Bank Remittance through TT & PO 1. Mudaraba Foreign Currency Account (MFCA) 3. Payment of Spot Cash Remittances- 2. Mudaraba Exporters’ Retention Quota Online and Web-based Account (MERQ) 4. Centralised NRB Account Opening 3. Foreign Currency Account (FCA) 4. Foreign Currency Account (ERQ) 5. SMS Notification 5. Foreign Currency Account of EPZ Enterprise 6. SMS Push Pull Service 6. Resident Foreign Currency Deposit Account 7. Maintaining of NRD & NRT Accounts (RFCD) 7. Non-Resident Foreign Currency Account of Investment Products Exchange Houses/Banks 1. Bai-Murabaha 2. Bai-Muajjal Products in Off-shore Banking Unit (OBU) 3. Bai-Istijrar Deposit products 4. Bai-Salam 1. Al-Wadeah Current Account 5. Bai-Istisna 2. Mudaraba Savings Account

Annual Report 2012 37 6. Hire Purchase under Shirkatul Melk (HPSM) 6. Counseling 7. Mudaraba 7. Online Banking 8. Musharaka 8. SMS Banking 9. Musharaka Investment in Potato Storage 9. Internet Banking (i-banking) 10. Murabaha Post Import (MPI) 10. IBBL Web portal facility 11. Murabaha Import Bills (MIB) 11. Islami Bank mCash 12. Murabaha Import LC 12. Letter of Credit 13. Bai-Muajjal Back to Back Bills 13. Back-to-Back Letter of Credit 14. Bai-as-sarf (Foreign Documentary Bill: FDB) 14. Bank Guarantee 15. Bai-as-sarf (Foreign Currency Cheques/Drafts: 15. Foreign Bank Guarantee FCD) 16. Murabaha Import Bill under UPAS 16. Murabaha Foreign Currency Investment 17. Export Bills Collection (MFCI) 18. Substitute Cash Assistance 17. Musharaka Documentary Bill (MDB) 19. SWIFT 18. Bai-Salam (Pre-shipment) 20. Outward Remittance 19. Mudaraba NRB Entrepreneur Investment a. Travel purpose Scheme (MNEIS) b. Study purpose (Student File) c. Medical purpose Welfare-oriented Special Investment d. Others Schemes 21. Inward remittance 1. Household Durable Scheme (HDS) a. Encashment of cash Foreign Currency 2. Housing Investment Scheme (HIS) b. Collection of F.C. Cheques/Drafts 3. Real Estate Investment Program (REIP) c. Payment of Foreign TT & DD 4. Transport Investment Scheme (TIS) d. Others 5. Car Investment Scheme (CIS) 6. Investment Scheme for Doctors (ISD) Treasury Activities 7. Small Business Investment Scheme (SBIS) Dealing Room Operations: 8. Agriculture Implements Investment Scheme 1. Foreign Exchange Operations (AIIS) 2. Money Market Operations 9. Rural Development Scheme (RDS) 10. Micro Enterprise Investment Scheme (MEIS) Special Services through Islami Bank 11. Urban Poor Develepment Scheme (UPDS) Foundation 12. Micro Industries Investment Scheme(MIIS) 1. Islami Bank Hospitals 13. Women Entrepreneurs Investment Scheme 2. Islami Bank Medical College, Rajshahi 14. Palli Griha Nirman Beniyog Prakalpa 3. Islami Bank Community Hospitals 15. NRB Entrepreneurs Investment 4. Islami Bank Nursing Training Institute; Scheme(NEIS) 5. Islami Bank Institute of Health Technology 16. Solar Panel Investment Scheme(SPIS) 6. Islami Bank Homeopathic Clinics 7. Monorom: Islami Bank Crafts & Fashion ATM Services 8. Islami Bank Service Centre 1. Cash Withdrawal 9. Islami Bank Institute of Technology 2. Fund Transfer 10. Islami Bank International School and College 3. Mini Statement of Accounts 11. Islami Bank Model School 4. Balance Enquiry 12. Islami Bank Mohila Madrasah 5. Payment of Utility Bills (Electricity, Water, 13. Bangladesh Cultural Centre Phone and Gas etc.) 14. Distressed Women Rehabilitation Centre

Other Banking and Value Added Services Training Services 1. Payment Order (PO) 1. International : Officials of Foreign Banks on 2. Demand Draft (DD) Islamic Banking 3. Telegraphic Transfer (TT) 2. National : Training of own work force & others 4. Locker Service on Islamic Banking 5. Quard against TDR Diploma in Islami Bank

38 Annual Report 2012 Media Highlights

Annual Report 2012 39 Media Highlights

40 Annual Report 2012 Stakeholders Information

ustainability reporting affords the Bank a the Bank defines its key stakeholders as investors, Smeans to communicate and engage with its customers, employees, suppliers, communities and stakeholders. Given the different nature of various environment. Through stakeholder inclusiveness stakeholders, the Bank is compelled to strategically and strategic engagement, the Bank objectively define its key stakeholder audience to ensure aims to achieve conclusive and positive outcomes pragmatism in engagement and reporting. Thus for each of the identified stakeholders.

Stakeholders Inclusiveness and Engagement

Shareholders and Suppliers and Service Government and Employees Customers Community Investors Providers other regulators • Permanent • Retail customers • Institutional • Correspondent • Central Bank • Children, Staff • SMEs investors Banks and • Ministry of Women and e-remittance agents Elders • Contract staff • Micro customers • Individual Finance, investors • Service providers National Board of • Graduates • Outsourced • Remittance related to the Revenue, BSEC, and other staff customers • Resident & Branch expansion DSE, CSE students in • Probationers, non-resident • Cardholders universities and Trainees and shareholders • Providers of • ICAB, ICMAB • ibanking customers other training Interns • MPB holders maintenance, • Rating Agencies • SMS banking security institutions • Stockbrokers • Bankers customers • Professionals • Suppliers of fixed Association • corporate entities assets and self- • All Business employers • External trade • Landlords of leased Chambers customers premises • Different • External Auditors communities • Civil society

Stock Details

Sl. No. Particulars DSE CSE 1 Share Symbol ISLAMIBANK ISLAMIBANK 2 MPB Symbol IBBLPBOND IBBLPBOND 3 Company Code 11104 22008 4 Share Listing Date 02.07.1985 07.03.1996 5 MPB Listing Date 25.11.2007 25.11.2007 6 Market Category ‘A’ ‘A’ 7 Electronic Share Yes Yes 8 Market Lot (Nos) 100 100 9 Face Value (Taka) 10 10 10 Total Number of Shareholders (31.12.2012) 60,302 60,302 11 IBBL Retained Position in DSE-20 CSE-30

Annual Report 2012 41 Pattern of Shareholding

Sl. Particulars No. of shares Percentage (Taka) No. of shares Percentage (Taka) No. as on (%) as on (%) 31.12.2012 to total 31.12.2011 to total

01 Sponsors / Directors 81,655,170 06.528 816,551,700 60,791,430 06.074 607,914,300 Local : (Excluding Foreigners)

02 Foreigners (a) Foreign Sponsors/ 662,358.172 52.948 6,623,581,720 359,624,340 35.935 3,596,243,400 Directors

(b) Excluding Foreign 126,865,760 10.141 1,268,657,600 227,604,180 22.743 2,276,041,800 Sponsors/Directors

Sub-total 789,223,932 63.089 7,892,239,320 587,228,520 58.678 5,872,285,200 03 Govt. of Bangladesh** 15,787 00.001 157,870 12,630 00.001 126,300

04 Institutions 101,474,744 08.112 1,014,747,440 99,847,687 09.977 998,476,870 (Excluding Foreigners)

05 General Public 278,594,367 22.270 2,785,943,670 252,890,933 25.270 2,528,909,330 Total 1,250,964,000 100.00 12,509,640,000 1,000,771,200 100.00 10,007,712,000 N.B.: Foreign: 789,223,932 63.09 - 587,228,520 58.68 - Local: 461,740,068 36.91 - 413,542,680 41.32 -

** The shares have already been sold by the Government of Bangladesh but no transfer has yet been made in share register of the Bank.

Increase of Paid-up-Capital (In million Taka)

Year Particulars Increase Total 1983 Initial Capital 0.50 0.50 1983 Sponsors 71.50 72.00 (a) Foreign = 56.00 Million (b) Bangladeshi = 11.50 Million (c) Govt.of Bangladesh = 4.00 Million 1985 I.P.O 8.00 80.00 1990 1st Rights/1989 (1R:1) 80.00 160.00 1996 2nd Rights/1996 (1R:1) 160.00 320.00 2001 3rd Rights/2000 (1R:1) 320.00 640.00 2003 4th Rights/2003 (2R:1) 1,280.00 1,920.00 2004 Bonus/2003 (1B:5) - Stock Dividend @20% 384.00 2,304.00 2005 Bonus/2004 (1B:5) - Stock Dividend @20% 460.80 2,764.80 2006 Bonus/2005 (1B:4) - Stock Dividend @25% 691.20 3,456.00 2007 Bonus/2006 (1B:10) - Stock Dividend @10% 345.60 3,801.60 2008 Bonus/2007 (1B:4) - Stock Dividend @25% 950.40 4,752.00 2009 Bonus/2008 (3B:10) - Stock Dividend @30% 1,425.60 6,177.60 2010 Bonus/2009 (1B:5) - Stock Dividend @20% 1,235.52 7,413.12 2011 Bonus/2010 (35B:100) - Stock Dividend @35% 2,594.592 10,007.712 2012 Bonus/2011 (1B:4) - Stock Dividend @25% 2,501.928 12,509.64

42 Annual Report 2012 Market Price Information

Month-wise share price status in the Stock Exchanges in 2012

DSE CSE Month Highest rate Lowest rate Average rate Highest rate Lowest rate Average rate January 55.70 45.50 51.53 56.50 46.00 51.53

February 54.20 44.50 51.01 54.30 44.00 50.77

March 58.00 47.30 54.27 56.50 48.00 54.17

April 59.00 41.00 54.20 60.00 43.00 54.15

May 50.00 39.90 44.62 46.00 40.00 44.48

June 46.50 37.00 42.47 44.60 39.00 42.26

July 43.50 35.90 42.74 41.30 37.00 42.47

August 45.00 36.20 41.09 42.90 38.00 40.80

September 44.20 37.70 42.27 44.30 40.00 42.15

October 45.60 37.80 41.88 43.00 38.00 41.64

November 45.00 37.00 41.60 42.50 39.00 41.48

December 46.60 37.00 42.04 43.00 40.00 41.70

During 2012 59.00 35.90 47.45 60.00 37.00 48.50

Information on Share & Bond

1. Authorized Capital Tk.20,000,000,000/-

The Authorized Capital of the Bank is Tk.20,000,000,000/- divided into 2,000,000,000 ordinary shares of Tk.10/- each.

2. Paid-up Capital Tk.12,509,640,000/-

The Paid–up Capital of the Bank is Tk.12,509,640,000/- divided into 1,250,964,000 ordinary shares of Tk.10/- each fully subscribed by

(i) Local Shareholders : 36.91%

(ii) Foreign Shareholders : 63.09%

3. Mudaraba Perpetual Bond

On November 2007 the Bank issued Mudaraba Perpetual Bond for Tk.3,000,000,000/- through Private Placement and Repeat Public Offer divided into 3,000,000 Bonds of Tk.1,000/- each.

4. The price quotation of MPBs of the Bank in the DSE and CSE for the Year 2012 Dhaka Stock Exchange Ltd. : Highest rate : Tk.1,050.00 Lowest rate : Tk. 890.00 Chittagong Stock Exchange Ltd. : Highest rate : Tk.1,068.00 Lowest rate : Tk. 847.00

Annual Report 2012 43 Accessing Annual Report 2012 department any time for any sort of information and query. To make the AGM more participatory, Annual Report 2012 and other information about it is arranged in a well-known place & IBBL may be viewed on Bank’s Website: www. convenient time to allow shareholders to speak islamibankbd.com. IBBL transmits copies of in the AGM freely and value their proposals and Annual Report to the Securities and Exchange suggestions. Any queries on shareholders such Commission, Bangladesh Bank, Dhaka Stock as transfer of shares, changes of name and Exchange and Chittagong Stock Exchange for addresses and payment of dividend may be their reference. sent to the following address:

Queries on Corporate Information Share Department Queries on any corporate information and 63, Dilkusha Commercial Area, (5th Floor), published financial information may be directed to Dhaka-1000. PABX: 9551105, 9551062, the Company Secretary of Islami Bank Bangladesh 9550415, Ext-627, 624, 615, & PABX: 9563040 Limited in the following address: Ext-369. Phone & Fax: 9564595 E-mail: [email protected] Company Secretary 40, Dilkusha Commercial Area, (6th Floor), Redressal of Investors’ Complaints Dhaka-1000. PABX: 9551105, 9551062, 9550415, In the 29th Annual General Meeting, some Ext-627,624,615, & PABX: 9563040 Ext-369. shareholders complained about different aspects Phone & Fax: 9564595 of the bank financial, development and services. Management of the bank has tried to mitigate Shareholders’ Inquiries and various problems. They have taken cognizance Communication of the suggestions of the shareholders in right earnest. Some of the mitigations are given below: Shareholders and others may contact to share

Investors Suggestions and Their Implementation Status

Sl. Complaints/Suggestions Redressal of the Investors’ Complaints No.

1 Some Hon’ble Shareholders demanded increasing The number of own ATM Booths in rural areas have been the number of ATM Booths with sophisticated increased. Total ATM Booths own & shared have been machines in rural areas. increased from 1,135 to 1,820 during the year 2012.

2 One Shareholder thanked the Management for The word “Bismillahir Rahmanir Rahim” is to be written on the displaying a lucrative & attractive banner of AGM, but top of the banner from next Annual General Meeting i.e. 30th suggested to include in future “Bismillahir Rahmanir AGM. Rahim” in the top of the banner.

3 Few Shareholders requested to arrange future AGM will be arranged subject to availability of suitable venue. AGMs on Friday or Saturday, if possible.

4 They also requested the management of the Bank to The following steps have been taken: take all out efforts to reduce the overdue, classified i. Formed a Central Task Force at Head Office with the & written-off investment of the Bank to a minimum Managing Director in the chair. level. Some shareholders suggested taking effective steps for reducing provisions against non performing ii. Formed 13 Monitoring Committees at Head Office with investment. the Top-Executives of Head Office to monitor zone-wise recovery activities. iii. Formed Task Force at Zonal Office and Branch level to follow up the defaulter clients. iv. Pursuing Court Cases from Head Office, Zonal Office and Branch level for early settlement. v. Pursuing the clients for early payment of Bank’s dues for avoiding litigation through letters, reminders and personal visit to the Business Establishments and Houses.

44 Annual Report 2012 Sl. No. Complaints/Suggestions Redressal of the Investors’ Complaints 5 The Shareholders suggested rendering better The Chairman assured that the Branch Managers & 2nd Officers customer service by the Branch officials. Some shall be punished if they fail to render better & quality service to Shareholders suggested providing adequate logistic the customers/clients irrespective of their position and gender. support, introducing modern technology & better Management has already increased workforce from 11,465 to decoration, increasing the existing workforce at all 12,188 within 2012 with adequate logistic support as well as branches for improvement of customer service. introducing modern technology & well decoration at all branches for rendering better customer service by the branch officials. 6 Shareholders have suggested to extend more The Management has already taken initiatives to expand investment facility for setting up ‘Solar System/ investment facility in the field of Boi-gas, ICS (Improved Energy’. Cooking Stoves) and Solar.

7 The shareholders have requested to consider From January to December 2012 bank disbursed Tk.199,310.00 more investment facilities to the Small and Medium million which was only Tk.112,994.99 million in 2011. Entrepreneurs. Present outstanding in SME is Tk.182,753.00 million which is highest among all the 47 banks of the country. 8 The shareholders have requested to expand the To protect the people from the curse of interest and to alleviate activities of RDS to protect the people from the curse poverty the Management has already expanded the activities of interest and to alleviate poverty. of RDS program to 15,507 villages among 6,76,544 members throughout the country within this year. The growth of which was 21% over the year 2011. Though some shareholders alleged for not receiving For ensuring proper receipt of Annual Report by the Hon’ble 9 the Annual Report in time, most of the shareholders Shareholders it will be distributed through the Branches of the thanked for dispatching Annual Report through respective area. The Management will look into the performance the Branch network and receipt the same by the of the courier service regarding delivery of the same to the maximum shareholders. Shareholder. 10 Some Shareholders suggested deploying more The Management has already increased more investment investment in the agriculture sector in the rural area. facilities to Agriculture Sector. The growth of which is 47% & 44% in Rural Investment (Micro-Credit) and Agricultural Investment respectively. 11 Shareholders suggested establishing more branches/ Out of 276 branches 52 are rural Branches. The growth of which SME Centres in the rural area. One Shareholder is 12% more than previous year. IBBL has already launched requested to open more branches at different places a new investment scheme namely “Urban Poor Development in South-Eastern part of Bangladesh. Scheme (UPDS)”. 12 Shareholders urged to distribute scholarship & The Chairman assured that the Management would take arrange a celebrating program for the wards of special attention to the vulnerable, poor & meritorious students Shareholders, who secured GPA-5 in every year. for assisting them. The Management of the bank decided to One of the Shareholders requested to distribute more increase scholarship to 400 students for 2 (two) years in H.S.C scholarship among the poor & meritorious students. level and 400 students for 5 (five) years in Graduation level. The rate of increase is 100% . 13 Shareholders suggested to send/publish Annual Annual Report is published through the website of IBBL (www. Report through online/website. islamibankbd.com). Mentionable here that Annual Report of the previous year has also been preserved in the mentioned web address. 14 Shareholders suggested to develop the online Online services are available at all Branches of the Bank and services of the Bank & reduce the online charges. online charges have already been revised. Cash Deposit/ Withdrawal including Transfer amount within the Divisional City area is allowed to provide online banking facilities free of charges up to the limit of Tk.1,00,000/- for two times in a day. 15 One of the shareholders suggested to be more For reducing/removal of doubtful income the following steps cautious about doubtful income & to take effective has already been resorted: steps to reduce/remove the same. i. Motivational program has been emphasized in every branch of the bank. ii. Sharia’h audit is conducted at least once in each branch and twice in big branches in a year. iii. Off-site supervision and Off-site motivation have been arranged from Head Office. iv. Motivation work has been arranged at the time of audit work in every branch of the bank. 16 One Shareholder suggested strengthening the ‘Share Proper steps have been taken for strengthening the ‘Share Department’ and ensuring proper housekeeping. Department’ and ensuring proper housekeeping

Annual Report 2012 45 Graphical Representation

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50 Annual Report 2012 Statement of Value Added and Its Distribution

his shows how IBBL has generated the wealth Distribution of Value Addition 2012 Tby providing banking services and how it was distributed among the main stakeholders of the Bank, taking into account the amount retained /ŶĐŽŵĞdĂǆ WĂŝĚƚŽ and re-invested for the replacement of assets 'ŽǀĞƌŶŵĞŶƚ and improvement of operations. The comparative value added statement of the Bank for the year ^ĂůĂƌǇΘ ůůŽǁĂŶĐĞƐ 2012 and 2011 is given below: ZĞƚĂŝŶĞĚWƌŽĮƚ Value Added Statement ĂŬĂƚ (In Million Taka) 'ĞŶĞƌĂůZĞƐĞƌǀĞ ΘŝǀŝĚĞŶĚ Particulars 2012 2011 ĞƉƌĞĐŝĂƟŽŶ Income from Banking Service 50,346 38,401 Less: Cost of Services 28,014 20,386 Value added by Banking Service 22,332 18,015 Distribution of Value Addition 2011 Non-Banking Income - - Provision for Investment & Off- 3,512 2,384 Balance Sheet exposures

Total Value Added 18,820 15,631 /ŶĐŽŵĞdĂǆWĂŝĚ ƚŽ'ŽǀĞƌŶŵĞŶƚ Distribution of Value Addition ^ĂůĂƌǇΘ To government (income tax) 6,526 5,477 ůůŽǁĂŶĐĞƐ To providers of capital (Cash 3,127 3,202 ZĞƚĂŝŶĞĚWƌŽĮƚ dividerd & bonus share) To employees (Salaries, allowance ĂŬĂƚ 5,957 4,652 and other benefits) 'ĞŶĞƌĂůZĞƐĞƌǀĞ Zakat 325 263 ΘŝǀŝĚĞŶĚ Expansion and growth ĞƉƌĞĐŝĂƟŽŶ Retained by the entity 2,397 1,639 Depreciation 442 369 Deferred taxation 46 29 Income Tax Total 18,820 15,631 (In million Taka)

ϳϬϬϬ

Economic Value Added Statement ϲ͕ϱϮϲ ϲϬϬϬ

Economic Value Added (EVA) is a financial ϱ͕ϰϳϳ ϱϬϬϬ performance method to calculate the real economic ϰ͕ϭϬϵ profit of the bank. It provides a measurement of ϰϬϬϬ a company’s economic success or failure over ϯ͕Ϯϰϱ ϯ͕Ϯϱϯ a period of time. Such a yardstick is useful to ϯϬϬϬ investors who wish to place confidence with the Bank to retain their fund for better earnings as ϮϬϬϬ compared to other industry. ϮϬϬϴ ϮϬϬϵ ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ

Annual Report 2012 51 Comparative Economic Value Added Market Share Information Statement for the Year 2012 and 2011 Market Share of IBBL in Sl. (In million Taka) Particulars the Banking Sector (%) No. 2012 (%) 2011 (%) Particulars 2012 2011 1 Deposit 7.72 7.59 Shareholder’s equity 39,756 27,800 2 General Investment 8.40 8.16 Add: Accumulated provision for 11,091 8,170 Investment (including Off B/S) 3 Import 9.89 12.00 4 Export 10.52 11.00 Total Invested Fund 50,846 35,970 Average Shareholders’ equity 43,408 25,647 5 Remittance 27.70 26.07 Earnings Profit after tax 5,524 4,841 Market Price at DSE: January to Add: Provisions 3,512 2,384 December 2012 (In Taka) Less: Written-off during the year (582) (427) Earnings for the year 8,455 6,798 ,ŝŐŚĞƐƚƌĂƚĞ >ŽǁĞƐƚƌĂƚĞ Cost of equity 7.87% 11.52% ϳϬ Capital charges 3,415 2,954 ϲϬ

Economic Value Added 5,040 3,844 ϱϬ

ϰϬ

Market Value Added Statement ϯϬ

Market Value Added (MVA) statement indicates ϮϬ

the variation between the total market value and ϭϬ the total value of shares of a bank. A gigantic MVA means the bank has produced huge assets Ϭ :ĂŶ &Ğď DĂƌƉƌ DĂǇ :ƵŶ :Ƶů ƵŐ ^ĞƉ KĐƚ EŽǀ ĞĐ for the shareholders. MVA is equivalent to the present value of all future expected economic value addition. The share market value of IBBL Market Price at CSE: January to stood at Tk.53,541.26 million whereas the book December 2012 value of the share stood at Tk.39,755.64 million, (In Taka) resulting a Market Value Added of Tk.13,785.62 million as of December 31, 2012. ,ŝŐŚĞƐƚƌĂƚĞ >ŽǁĞƐƚƌĂƚĞ Calculation of Market Value Added ϳϬ ϲϬ Value Amount ϱϬ Number of per Particulars (Million Shares Share Taka) ϰϬ (Tk.) ϯϬ Market Value 1,250,964,000 42.80 53,541.26 ϮϬ Book Value 1,250,964,000 31.78 39,755.64 ϭϬ Market Value 1,250,964,000 11.02 13,785.62 Ϭ Added :ĂŶ &Ğď DĂƌ Ɖƌ DĂǇ :ƵŶ :Ƶů ƵŐ ^ĞƉKĐƚ EŽǀ ĞĐ

52 Annual Report 2012 Financial Highlights

(In million Taka)

Sl. Particulars 2012 2011 No.

1 Paid-up Capital 12,509.64 10,007.71

2 Total Capital (Equity) 42,028.30 33,716.73

3 Capital Surplus/ (deficit) 10,877.10 7,960.24

4 Total Assets (excluding contra) 482,536.32 389,192.12

5 Total Deposits 417,844.14 341,853.67

6 Total Investments (excluding Investment in Shares/ Securities) 372,920.72 305,840.56

7 Total Contingent Liabilities and Commitments 110,044.18 113,420.93

8 Investment Deposit Ratio (as per BB guidelines) 85.18% 87.29%

9 Percentage of Classified Investment against Total General Investments 3.81% 2.71%

10 Profit after Tax & Provision 5,524.44 4,841.45

11 Amount of Classified Investment during the year 5,920.48 3,636.69

12 Provision kept against Classified Investments 6,054.35 3,054.00

13 Provision Surplus/ (deficit) - -

14 Cost of Fund 9.32% 8.86%

15 Profit Earning Assets 389,011.85 295,962.73

16 Non-Profit Earning Assets 93,524.47 93,229.39

17 Return on Investments 12.21% 10.87%

18 Return on Assets 1.27% 1.35%

19 Income from Investments 44,104.20 32,308.90

20 Earnings per Share (Taka) (Restated 2011) 4.42 3.87

21 Net Income per Share (Taka) 4.42 3.87

22 Price Earning Ratio (Times) 9.68 11.27

23 Net Asset Value (NAV) 39,755.51 27,800.21

24 Net Asset Value (NAV) Per Share (Restated 2011) 31.78 22.22

25 Net Operating Cash Flow Per Share (NOCFPS) (Restated 2011) 16.32 13.11

26 Dividend Yield Per Share 5.84% 5.87%

27 Dividend Payout Ratio 56.61% 66.15%

28 Dividend Cover Ratio (Times) 1.77 1.51

29 Operating Profit as % working fund 4.86% 4.22%

Annual Report 2012 53 Five Years Performance at a Glance

(In million Taka)

Sl. Particulars 2008 2009 2010 2011 2012 No. Balance Sheet Matrix 1 Authorized Capital 10,000.00 10,000.00 10,000.00 20,000.00 20,000.00 2 Paid up Capital 4,752.00 6,177.60 7,413.12 10,007.71 12,509.64 3 Share Premium 1.99 1.99 1.99 1.99 1.99 4 Reserve Fund 9,308.49 13,927.94 16,081.14 17,792.50 27,245.87 5 Retained Earnings 1,425.60 1,853.28 2,594.59 3,202.47 3,127.41 6 Shareholders Equity 14,060.49 20,105.54 23,494.26 27,800.21 39,755.51 7 Deposits (including Bills Payable) 202,115.45 244,292.14 291,934.60 341,853.67 417,844.14 8 Investments (including Investment in 187,586.55 225,752.41 275,493.94 322,772.83 399,930.79 Shares and Securities) 9 Investments (excluding Investment in 180,053.94 214,615.80 263,225.13 305,840.56 372,920.72 Shares and Securities) 10 Investment Deposit Ratio (as per BB 89.08% 87.85% 90.17% 87.29% 85.18% guidelines) 11 Total Assets (including Contra) 288,017.19 340,638.49 443,684.79 502,613.05 592,580.50 12 Total Assets (excluding Contra) 230,879.14 278,302.84 330,586.12 389,192.12 482,536.32 13 Fixed Assets 4,407.22 6,512.36 6,748.44 7,100.19 14,808.23

Capital Matrix 14 Total Risk Weighted Assets (RWA) (Basel II for 173,289.43 202,756.60 256,804.90 257,564.30 311,511.60 2012, 2011, 2010 & 2009, Basel I for 2008) 15 Crore Capital- Tier- I 11,272.12 14,714.10 18,559.80 23,401.24 28,225.10 16 Suplementary Capital (Tier- II) 7,299.96 8,905.70 9,840.20 10,315.49 13,803.20 17 Regulatory Capital (Tier I, II & III) 18,572.08 23,619.80 28,400.00 33,716.73 42,028.30 Statutory Capital (Paid up Capital & 18 9,692.49 12,421.62 15,348.08 20,012.14 24,933.30 Statutory Reserve) 19 Equity/Capital Surplus/(Deficit) 1,243.14 3,344.16 5,287.58 7,960.24 10,877.10 20 Capital Adequacy Ratio (Basel II for 2012, 10.72% 11.65% 11.06% 13.09% 13.49% 2011, 2010 & 2009, Basel I for 2008) Assets Quality 21 Amount of Classified Investment 4,311.13 5,063.40 4,655.63 8,292.32 14,212.80 22 Classified Investment to Total Investment 2.39% 2.36% 1.77% 2.71% 3.81% 23 Provision against Classified Investment 1,883.43 2,490.00 1,840.00 3,054.00 6,054.35 24 General Provision against Unclassified 2,315.74 2,700.00 3,443.00 3,996.00 3,935.90 Investment 25 General Provision on Off Balance Sheet 570.83 510.00 930.00 1,120.00 1,100.45 Items Income & Expenditure Statement Matrix 26 Investment Income 19,543.84 21,370.53 24,766.26 32,019.53 43,672.23 27 Profit Paid on Deposit 12,162.10 13,076.99 14,471.89 18,401.22 25,870.43

28 Net Investment Income 7,381.74 8,293.54 10,294.37 13,618.31 17,801.80

54 Annual Report 2012 Five Years Performance at a Glance

Sl. Particulars 2008 2009 2010 2011 2012 No. 29 Non Investment Income 4,212.50 4,033.84 5,362.64 6,381.76 6,673.54 30 Total Income 23,756.33 25,404.37 30,128.90 38,401.29 50,345.77 31 Administrative & other Exp. 4115.81 4,545.97 6,087.32 7,268.45 8,867.10 32 Total Expenditure Excluding Provision 16,277.90 17,622.97 20,559.21 25,669.67 34,737.53 Provision for Investment, Off Balance Sheet 33 1,130.60 1,263.23 1,114.99 2,384.31 3,512.07 items & other Assets 34 Total Expenditure Including Provision 17,408.50 18,886.20 21,674.20 28,053.98 38,249.59 35 Net Profit before Tax 6,347.83 6,517.66 8,454.71 10,347.31 12,096.18 36 Net Profit after Tax 2,674.80 3,403.55 4,463.47 4,841.45 5,524.44 37 Provision for Income Tax 3,245.08 3,253.23 4,108.98 5,505.87 6,571.74 Foreign Exchange Business 38 Import Business 168,329.00 161,230.00 246,281.00 301,207.00 284,588 39 Export Business 93,962.00 106,424.00 148,421.00 178,244.00 197,095 40 Remittance 140,404.00 194,716.00 214,629.00 236,607.00 300,915 41 Total Foreign Exchange Business 402,695.00 462,370.00 609,331.00 716,058.00 782,598 Distribution Network 42 Number of Correspondent Banks 275 295 295 313 320 43 Number of Foreign Correspondents 906 919 919 935 676 44 Number of Shareholders 33,686 52,164 58,923 60,550 60,302 45 Number of Employees 9,397 9,588 10,349 11,465 12,188 46 Number of Branches *206 *231 *251 *266 *276 Shareholders’ Information Cash … 10% … 7% 8% 47 Dividend Stock 30% 20% 35% 25% 17% 48 Net Assets Value (NAV) per Share (taka) 22.76 27.12 23.48 22.22 31.78

49 Original (taka) 5.63 5.51 6.02 4.84 4.42 Earnings Per Share Restated (taka) 2.14 2.72 3.57 3.87 4.42 50 Market Value per Share (highest-taka) 83.00 89.00 90.00 83.98 59.00 Financial Indicators 51 Gross Profit Ratio 46.80% 48.52% 51.97% 52.08% 48.61% 52 Cost of Fund 9.56% 8.76% 8.65% 8.86% 9.32% 53 Cost Income Ratio/Efficiency Ratio 0.73 0.74 0.72 0.73 0.76 54 Return on Equity (ROE) 19.02% 16.93% 19.00% 17.42% 13.90% 55 Return on Assets (ROA) 1.27% 1.34% 1.47% 1.35% 1.27% 56 Price Earnings Ratio (Times) 10.78 12.87 13.29 11.27 9.68 57 Spread 4.53% 4.86% 4.87% 4.03% 4.10%

* Including SME/Agriculture Branches

Annual Report 2012 55 Financial Calendar 2012

Items Date

Final Dividend for 2011 paid May 30, 2012

Financial Statements for the year 2012 signed March 28, 2013

30th Annual General Meeting to be held May 22, 2013

Final Dividend for 2012 proposed to be paid June 20, 2013

Interim Financial Statements

For the 1st quarter ended March 31, 2012 (unaudited) approved by the Board of Directors May 14, 2012

For the 2nd quarter/Half Yearly ended June 30, 2012 (unaudited) approved by the Board of Directors July 12, 2012

For the 3rd quarter ended September 30, 2012 (unaudited) approved by the Board of Directors October 29, 2012

For the 4th quarter/Year ended December 31, 2012 (audited) approved by the Board of Directors March 28, 2013

Financial Calendar 2013 (Proposed)

Items Date

Financial Statements for the year 2013 will be finalized and signed February 27, 2014

31st Annual General Meeting will be held March 29, 2014

Final Dividend for 2013 proposed to be paid April 28, 2014

Interim Financial Statements

For the 1st quarter ended March 31, 2013 (unaudited) approved by the Board of Directors May 09, 2013

For the 2nd quarter/Half Yearly ended June 30, 2013 (unaudited) approved by the Board of Directors July 24, 2013

For the 3rd quarter ended September 30, 2013 (unaudited) approved by the Board of Directors October 23, 2013

For the 4th quarter/Year ended December 31,2013 (audited) approved by the Board of Directors February 27, 2014

56 Annual Report 2012 Chairman’s Message

Bismillahir Rahmanir Rahim

Dear Shareholders, provisioning system introduced by our Central Bank. Our Bank achieved unique strength with Assalamu Alaikum Wa Rahmatullah. high level of trust and confidence among the It gives me immense pleasure to present to you depositors and investment clients besides people the Annual Report of Islami Bank Bangladesh from all walks of the nation. We are proud to be Ltd. (IBBL) along with the Audited Financial the partner of our clients across every change Statements for the year 2012. Alhamdullilah, in of their lives, while we have continued to serve 2012, IBBL made expected result in its overall them better. With their overwhelming confidence business activities, and like previous years, and support, total deposit of the Bank increased continued to play an important role in augmenting to Tk.417,844 million (US $ 5,233 million) in the national economy. In the year under review, 2012, marking a growth of 22% or Tk.75,990 the Bank has reached new heights in terms of million (US $ 952 million) over 2011. Total general financial performance and contributed to the investment of the Bank increased to Tk.372,921 optimum welfare of the masses to become ÔgvwU I million (US $ 4,670 million) in 2012, marking a gvby‡li e¨vsKÕ (a bank of Land & People). growth of 22% or Tk.67,080 million (US $ 840 million) over 2011. IBBL’s volume of investment Notable Financial Performance and deposit is the second highest among the 47 scheduled commercial banks of Bangladesh. Total We have passed the bygone year with significant number of deposit accounts at year end 2012 success despite prevailing local & global stood over 7 million wherein 1.9 million deposit economic scenario and a major policy change accounts were newly added during the year which in investment rescheduling, classification &

Annual Report 2012 57 signifies the people’s high confidence on IBBL. Investment Services Total number of investment clients at the year IBBL always maintained Investment-Deposit end stood over 0.7 million wherein 0.11 million Ratio (IDR) at required level throughout the year new investment clients were inducted during the and devised a strategy to diversify the investment year. Operating profit (Profit before provision) of during the year across all business activities. the Bank during 2012 stood at Tk.15,608 million As a result, the Bank maintained comfortable (US $ 195 million), demonstrating a growth rate liquidity and was also a provider of funds in of 23% over the year 2011. This operating profit the interbank market under various Shari‘ah- ranked top in the banking industry of Bangladesh. compliant transaction structures. The Bank’s It is worth mentioning that all these enduring achievement of general investment against target sustainability of our Bank have emanated from a was 106% and achievement of income from responsible business approach that has created investment against target was 111% in 2012. In long term stakeholder value through Shari‘ah the year 2012, the Management of our Bank has compliance, continuous process improvement, given emphasis on a new product of investment, innovation & adoption of technology, stakeholder i.e. Usance Payment at Sight (UPAS) through engagement and ethical, social, environmental & Offshore Banking Unit (OBU). good governance practices. Industrialization Foreign Remittance & Foreign IBBL feels it obligatory to increase the contribution Exchange Business Performance of industrial sector to the GDP substantially as industrialization is the lifeblood of our economy. Inspite of narrowing down the scope of taking This feeling was translated into the Bank’s further Bangladeshi workers in some potential unflinching services to the growth of industries countries, IBBL’s remittance grew at 27% in especially the import substitute and export- 2012. Our Bank’s total remittance has increased oriented ones. We have financed many garments, by Tk.64,308 million (US $ 805 million) during spinning and textile, steel, edible oil refinery and 2012 over 2011 to reach Tk.300,915 million (US cable industries exclusively. The Bank invested $ 3,769 million). IBBL’s market share in foreign around 51% of its investment portfolio in industrial remittance was 27.70% in 2012. This was sector whereas the contribution of industrial sector possible due to the confidence reposed on us in GDP of the country was around 31% in the by our beloved expatriates whose satisfaction is year 2011-12. Industrial investment of our Bank increased by 25% in 2012 over 2011. IBBL ranked one of our prime responsibilities as we were very top in the industrial finance in the country. attentive and prompt to send their hard-earned money through banking channel to their family Rural and Agricultural Financing members in the easiest and caring manner within the shortest possible time. IBBL handled export As an organization enjoying the position business of Tk.197,095 million (US $ 2,468 of business leadership, our commitment to million) during the year 2012, marking a growth sustainable banking remains strong as ever. With of 11% or Tk.18,851 million (US $ 236 million) this end in view, we want to narrow down the over the figures of 2011. The export volume of economic gap between urban and rural areas. We our Bank in the bygone year was 10.52% of have significantly expanded our branch network to total export of Bangladesh. On the other hand, rural areas. 19% of our branches are located in the rural areas and we have plans to open more SME/ our Bank handled import business of Tk.284,588 Agriculture Branches to support our agriculture million (US $ 3,564 million) during the year 2012 and the rural economy. Rural and agricultural which is 9.89% of total import of the country. Total investment of IBBL is gradually increasing over Foreign Exchange Business of our Bank stood at the recent years and it has become 7% of total Tk.782,598 million (US $ 9,801 million) in 2012 investment demonstrating growth of Tk.5,359 with growth rate of 9.29% over 2011. million (US $ 67 million) over the last year.

58 Annual Report 2012 RDS & UPDS Program for the NRBs, NRB help desk at all the branches & at Head Office, Remittance Card to ease the In 2012, our focus was essentially to further withdrawal of money sent by the NRBs, NRB penetrate the least developed economic sector, Entrepreneurs Investment Scheme, etc. Total 28 and as such, we followed a concerted strategy officials were deputed in 5 potential countries to of network amplification with a view not only to help the NRBs to remit their hard-earned foreign engraving our footprint across the country but also currency in Bangladesh through banking channel. to bringing the concept of Islamic banking to the very doorsteps of every rural community and urban Employment Creation poor. Our initiatives towards covering individuals even at the grass root level of the socio-economic Millions of people were employed directly and group have opened vistas of opportunities to indirectly through IBBL financed industries, SMEs communities who have for generations lived below and Rural projects over the years. Our Bank has the poverty line. We have expanded our business employed 12,188 employees along with newly in micro finance under Rural Development employed 1,152 people during the year 2012. Scheme (RDS) which is now operating in around We are steadfast with our programs to create 15,507 villages of 61 districts out of 64 districts employment opportunity to alleviate poverty from of the country and Urban Poor Development the country by extending support to all, especially Scheme (UPDS) through 260 centers at Dhaka the young generation, by creating jobs and and Chittagong Metropolis having more than 0.73 opportunities for self-confidence, self-employment million members under the two schemes. We are and self-reliance. Our Bank exerted its best efforts empowering the underprivileged and developing to alleviate poverty from the country by making the them into productive resources for the nation. people self-reliant.

Customer Service Ecology and Green Banking

IBBL has built in-house core banking software IBBL is a bank for all sections of people that deals to expedite the customer service. We have with ethics, environment cognizance, economic introduced all the modern services including ATM, justice and green banking. In response to the SMS Banking and iBanking which are growing UNEP’s charter, IBBL insists on going green day by day. We have the largest online network in to conserve the environment and to keep 3-Ps the country. Alhamdulillah, we have successfully namely People, Planet and Profit for sustainable launched ‘M-cash’, the mobile financial services development. IBBL also puts highest commitment with the slogan Ônv‡Z nv‡Z mv‡_ mv‡_Õ (Hand to Hand all and emphasis on complying with Bangladesh the times). People of all walks of life, including the Bank’s Green Banking policy guidelines by means unbanked people, will get the benefit of banking of investing in eco-friendly projects and observing services throughout the country round the clock all the required Green Banking policies including with ease and security. We will introduce all 4-R Principles namely Reduce, Reuse, Replace forthcoming technologies to facilitate and ensure and Recycle on day-to-day housekeeping process best customer service. in the office. IBBL has started (i) educating the employees in Green Banking and encouraging Special Care for NRBs them to ingrain the practice in their daily activities IBBL considers the NRBs as the partner in nation- with the initiatives for creation of a paperless building and values them accordingly. The Bank office, (ii) taking care to protect environmental introduced web-based very quick remittance pollution by Bank’s sanctioned projects, and (iii) a facilities and spot cash system to enable the plantation program of “one man one plant” among beneficies of NRBs to withdraw cash without its staff and the customers by observing ‘plantation having any Bank Account with us. NRBs can check week’. IBBL has been recognized as one of the their bank account from abroad through internet. top 10 green banks by Bangladesh Bank. We also introduced Mudaraba NRB Savings Bond

Annual Report 2012 59 Shari‘ah Compliance Goldman Sachs, the leading wealth management institution of the world, chose IBBL as ‘the best Strict adherence to Shari‘ah principles is the core place for investment’. IBBL has also become a value of our business. IBBL kept the position of reference Bank to IDB which is a Bank of all Muslim Shari‘ah Supervisory Authority above all bodies. countries under OIC. Our Bank provides technical We took different steps in managing our deposit assistance and facilitates for establishing Islamic & investment portfolio for achieving Maqaside banking at home and abroad. So far we extended Al-Shari‘ah. IBBL does not extend investment technical support and trained manpower in facilities which goes against the interest of establishing Jaiz Bank in Nigeria. On being trained the nation and human. During the year 2012, from IBBL, Ceylon Bank of Sri Lanka has started percentage of doubtful income decreased to 2.04% Islamic Banking and is operating successfully. We only reflecting high level of Shariah Compliance. have also trained high-level officials of Uganda on Shariah compliant banking system contributes the Islamic Micro-Finance Operations. best for sustainability of the industry. Throughout the year, IBBL has emphasized to create Corporate Culture & Recognition awareness for total Shariah compliance among the entire workforce and the clients that has Since inception, IBBL has been practicing corporate helped in achieving such notable results. culture at all levels. IBBL has always been trying to run the Bank professionally and showed its Regulatory Compliance competence during last 29 years of operation. The workforce of IBBL starting from CEO down to a IBBL sincerely abide by 100% rules and regulations Messenger are very much involved and committed issued by all the regulatory authorities. Our Bank’s professionals and thus could develop the Bank as governance practices and management systems one of the highly complied one. We work under the are designed to assist in conducting business guidelines of Bangladesh Bank, other Regulatory transparently and with adequate delegation & Authorities and policies framed by the Board of accountability, particularly with regard to Shariah, Directors without any interference from any corner. Regulatory compliance, economic justice, IBBL is the proud recipient of the ‘SAFA (South environmental and social aspects. We protect Asian Federation of Accountants) Corporate the interest of Bangladesh, and compliant with Governance Award for 2010 & 2011’, ‘SAFA its people, its law and general discipline. IBBL Award for Best Presented Reports-2011’, ICAB’s has been recognized by and rewarded for its (Institute of Chartered Accountants of Bangladesh) contribution, transparency and compliance culture ‘SAARC Anniversary Award for Corporate both locally and internationally. Governance-2011’ & ‘ICAB Best Presented Annual Report-2011’, and ICMAB’s (Institute of Cost and International Recognition of IBBL Management Accountants of Bangladesh) ‘ICMAB Best Corporate Award for 2011 & 2012’, which are IBBL is working hard for becoming a world class the obvious recognitions of the Bank’s sustained bank. Our Bank has been included in the Top 1000 success in every aspects of its operations. banks of the world in the July-2012 issue of the century-old reputed UK-based fortnightly financial CSR Activities magazine ‘The Banker’ in terms of Tier-1 capital. In this report, IBBL has been placed in the 17th position Equitable and inclusive development is a challenge in terms of profit on capital, 70th position in terms that drives our Bank’s social agenda. As a pioneer of Return on Assets (ROA) and 868th position in of welfare oriented Banking System, IBBL terms of Assets size. This recognition, first of its acknowledges its indebtedness to the society. kind given to a Bangladeshi financial institution, Our contribution in discharging Corporate Social is indicative to the inclusion and acceptance of Responsibilities is the highest among all the banks Bangladesh’s banking as per world standard. Apart of Bangladesh. IBBL assisted affected people in from it, the “Business Asia” nominated IBBL as the natural calamities like Ayila and SIDR. We are also “Most Respected Company Awards-2012” and the giving scholarship to thousands of students for their

60 Annual Report 2012 study who cannot afford education expenses at Our Success their own. It is the Bank’s conscious responsibility towards the communities within and around which Above 20% of total liquidity and business of the it operates to provide adequate social benefits, banking industry is in the hand of Islamic banking particularly for those who are marginalized or outlets. Following the phenomenal success history underprivileged. IBBL has taken several initiatives of IBBL, 6 other full-fledged Islamic banks and 18 at the individual and organizational level for conventional banks including state owned Sonali improving the lives of less fortunate segments of Bank Ltd. & Agrani Bank Ltd. have started Islamic the community. CSR expenditure of IBBL stood Banking Branches/operations in Bangladesh. It is at Tk.309 million (US $ 4 million) in 2012. The also very much encouraging that a good number Bank’s strategy towards discharging community of private banks are trying to be converted into responsibility focuses on (i) education, (ii) health, Islamic ones. Banking activities of Bangladesh (iii) humanitarian and disaster relief, (iv) sports, have already been recognized as ‘at par’ with arts & culture, and (v) women empowerment. The large number of social welfare activities of the world standard which is evidenced from the IBBL’s Bank as stated in the report reflects our sense of inclusion in the Top 1000 banks of the world by responsibility to the society at large. the reputed financial magazine ‘The Banker’. Moreover, following the pioneering role of IBBL in Contribution to National Exchequer CSR activities, other banks & financial institutions have engaged themselves in CSR activities and Being a responsible corporate entity, the Bank Bangladesh Bank is encouraging the same. These regularly pays corporate tax on time. IBBL is the all are the success of Islamic banking and IBBL. highest Corporate Taxpayer among the Local Banks and is the second highest Taxpayer in the Banking sector of Bangladesh. During the year Brand Image 2012, it has contributed/paid total Tk.8,106 million IBBL’s comfortable capital adequacy, good assets (US$ 102 million) as Corporate Tax, deducted tax quality, good financial performance, comfortable from different sources (i.e. profit paid on Deposits, liquidity, strong market position, considerable salaries of the employees, payment to suppliers, improvement in non-funded business, experienced vendors & customers etc.), Excise Duty and VAT. top management, wide operational network & Bank’s financed business/industry houses are also generating huge employment opportunity strong corporate governance have given it an & paying a substantial amount of taxes to the excellent “Brand Image”. national exchequer regularly. Our Strength Our Role in Islamic Money Market Our topmost strength is our total trust in Allah’s IBBL played active role in development of Islamic help. Unity of thoughts and actions, goals of policy Money Market and participated in development of makers, shareholders and workforce had always instruments like Bangladesh Government Islamic been one and that is our guiding principle, and Investment Bond (BGIIB) and Islamic Interbank Alhamdulillah, this is our key to success. Islamic Fund Market (IIFM). We always extended banking system so far proved its sustainability in our support to fellow banks to help them in the recent worldwide recession. We also note with maintaining their liquidity in case of need and did highest appreciation the support and guidance not take advantage of the financial crisis. Rather of the regulatory authorities including Ministry of we assisted other Islamic Banks, Islamic Banking Finance, Securities and Exchange Commission, Branches and Windows of Conventional Banks and Financial Institutions to meet their liquidity. and Bangladesh Bank. The confidence of The amount of IBBL’s placement to these banks depositors and investment clients who are our & institutions at the end of 2012 was Tk.15,236 partners in progress is another point of satisfaction. million (US $ 191 million).

Annual Report 2012 61 Our Limitations Our Gratefulness

We sincerely feel that we could not yet arrange We consider IBBL as an incomparable gift from easy and satisfactory customer service at all levels. the Almighty Allah for the people of Bangladesh. Our depositors still need to remain in the queue for We value it and try to maintain this Amanah inspite long to deposit and withdraw money. We could not of our all weaknesses and limitations having full satisfy needs of all investment clients. These are confidence in Allah’s Rahmat. We are grateful to our limitations but we are trying hard to overcome Almighty Allah (SWT) for His continued blessings these limitations by arranging Alternate Delivery on us. Channels (ADCs) in widespread manners and We would like to extend our sincere thanks and introducing more modern and innovative financial appreciation to all the regulatory authorities, our services compliant with Islamic Shari‘ah. depositors, investment clients, local & foreign shareholders and all other stakeholders for Our Slogan their unfettered confidence. We would also like to convey heartfelt thanks to the NRBs for the Our slogan is “Islami Bank, My Bank”, and yearly confidence reposed on IBBL for their contribution slogan of the Bank in the year 2012 was “Let’s to nation building. go to the 165 million people, let’s decorate our country”. We are striving hard to expand our Our deepest gratitude to the Government, all branch network and SME Service Centers to bring regulatory bodies, our fellow Board Members, the services of Islamic Banking at every door step members of the Shari‘ah Supervisory Committee, of the people of the country. Bangladesh Association of Banks, Association of Bankers, Bangladesh, the Bank’s officials and all Our Dream Stakeholders for their continuous and consistent support, encouragement, wisdom, input, guidance IBBL is working for becoming a world class bank and unrelenting mission in making IBBL a premier and giving a complete message to the world that and fastest growing Islamic bank of Bangladesh. Shari‘ah based ethical banking system contributes We have many more great things to achieve the best for sustainability of the world economy together for the future, and we are confident that which is so far proven in the prevailing adverse we will have IBBL’s indelible mark on Bangladesh’s and eroding economic order. The dream and future prosperity. emotion of the workforce and stakeholders of IBBL is to see their Bank at the pioneer position in Finally, we would like to offer our whole hearted the industry at home & abroad and to be the role commitment that we are accountable to Almighty model of the world in the field of Shari‘ah-based Allah (SWT) and answerable to our Stakeholders banking. IBBL has been giving all out efforts to and to the people of our beloved country & great translate their dream into reality and to honor the nation. emotion of its stakeholders. May Allah grant us success in all our endeavors.

Prof. A.N.M.A. Zaher Chairman

62 Annual Report 2012 Managing Director’s Round Up

Respected Stakeholders, talent development to build our capability and marketing and promotional initiatives to rejuvenate Assalamu Alaikum Wa Rahmatullah. bank’s brand image. All these have been possible It is my immense pleasure to pen the progress- with entire confidence of our valued clients and highlights of Islami Bank Bangladesh Limited, our above all with the blessings of Almighty Allah. beloved institution that emerged to ensure equity and justice in the field of all economic activities. Global and National economic scenario We have been striving in last 29 years to fulfill the 2012 was indeed a year of transformation for dream of millions of people in Bangladesh through global economy. It is not merely a year of financial providing need based banking and welfare transformation but a year of political reform and oriented services. change. Major economies like US, China, Japan, 2012 was another landmark year for Islami Bank Greece, France and Spain saw some political Bangladesh Limited. Notwithstanding a challenging changes which may redesign the landscape of economic landscape and an increasingly future global political economy. Last year, a number competitive operating environment, our Bank of turmoils have engulfed the global financial continued to grow and meet the expectation of our system and international banks were under stakeholders. The year witnessed, among others, investigation by regulators in several countries. the inclusion of IBBL in ‘Top 1000 World Banks’ In the backdrop of economic turmoil in Euro zone as the lone Bank of Bangladesh which, in turn, and standoff with US fiscal cliff, the immediate past increased country’s image in the global arena. year exposed a mixed blessing to the economy 2012 was also the year that marked success in far- of Bangladesh. The apparel industry, agriculture reaching delivery channels for greater proximity sector and the wage earners’ remittance have with customers, upgrading to cutting-edge successfully tackled the trade deficit. Besides, cut technology to support our business expansion, down of inflation to single digit has brought comfort

Annual Report 2012 63 in the citizen lives and amid the global economic by 22%. This achievement is the testimony of the turmoil the achievement of GDP was close to strength of Bank’s core business and its prudent target. The banking sector in the immediate management. Profit before tax of the Bank was at past year has experienced some reforms, policy Tk.12,096 million with 17% growth and earnings changes and volatility in most indices. Besides per share was at Tk.4.42 compared to Tk.3.87 in focusing on price and financial stability, our central the previous year and capital adequacy ratio was bank put emphasis on financial inclusion, SME 13.53% (consolidated) at the end of the year. The loan, automation of services and contributing total assets of the Bank amounted to Tk.592,581 more in CSR activities. million as on December 31, 2012 registering an increase of Tk.89,968 million. The major increase Islamic Banking in asset was recorded in aggregate investment portfolio that grew by 22% during 2012. Over the years, Islamic finance has become one of the fastest growing segments in the international financial system. Islamic banks showed stronger Deposit resilience during the global financial crisis due to Since beginning IBBL pursued the noble mission their anchoring in the real economy and barring of being a Bank of mass people through opening from investing in financial derivatives. Global accounts with minimum initial deposit. We work Islamic Finance got its highest pace in last few for increasing national savings to contribute years. The asset of this real finance reached to towards country’s economic development. In USD1.6 trillion and is expected to grow at a higher 2012, IBBL’s total deposit stood at Tk.417,844 rate than the industry average in next few years. million marking a growth of 22% and market share In Bangladesh, Islamic Banking retained more increased to 7.72% from 7.59% in 2011. Last than 18% of total deposit and 21% of total loans year, we introduced a new deposit product named and advances (investment) of the banking system. Mudaraba School Students Saving Account that Considering the growth and its role in country’s received wide response of the young generation. financial sector, central bank took various steps to facilitate Islamic Banking. Last year Bangladesh Financial Inclusion Bank introduced Islamic Interbank Fund Market to mitigate the liquidity and to manage the fund Since inception one of the prime focuses of in a better way under shariah principles. In the IBBL has been to maximize financial inclusion. year, Islamic Banks strengthened their strategic We are working to bring financial services to bondage in terms of liquidity, operational the un-banked people. We added around two uniformity, manpower development and million clients including 5.62 lac farmer’s and 78 shariah solutions. IBBL played a catalyst role in thousand student accounts to our deposit portfolio empowering fellow Banks towards Islamization of which is almost double than that in 2011 and the Banking in Bangladesh. Islami banking community highest number so far in a year. We have taken participated in different international programs many initiatives to reach the unbanked people and that helped showcase country’s Islamic banking in poorer segments in most remote areas especially global forum. World reputed media like Reuters, through our RDS program. Gulf News and Islamic Finance published features/ interview on Islamic banking in Bangladesh. Investment: Further Diversification Key Achievements & Developments of 2012 In 2012, Bank’s total Investment stood at Tk.372,921 million registering a growth of 22% In the backdrop of volatile global and country and market share increased to 8.40% from politico economy as well as regulatory changes, 8.16% in 2011. The investment portfolio has been Islami Bank Bangladesh Limited made excellent further diversified in 2012 in terms of size, sector, performances in different areas of business. Some economic purpose and rural-urban distribution of the achievements are highlighted below: aiming at ensuring distributive justice. Over the years, Banking in Bangladesh witnessed a Balance Sheet Management mismatch with urban-rural ratio being 92% & 8% Operating profit of the Bank for the year 2012 stood respectively. IBBL is trying to bring change in this at Tk. 15,608.24 million demonstrating an increase distribution through increasing rural financing that

64 Annual Report 2012 reached to 14% of our investment in 2012. We We put utmost importance on total human introduced some new investment products such development throughout the year 2012 and as Urban Poor Development Scheme, Solar Panel brought qualitative change in the training programs. Investment Scheme in 2012 aiming at further Intensive professional development program were diversifying our investment portfolio. conducted to motivate less performing officials. Outside training at home and abroad has been Asset Quality imparted to the officials while deserving ones have been motivated and facilitated to pursue We made qualitative and quantitative change international standard professional degrees. in the asset management of the Bank. With the whole-hearted and integrated effort of all Corporate Governance manpower, we could achieve better results in our asset management. Due to global economic We continue to make organizational and structural recession and volatile domestic market scenario changes for ensuring corporate governance and our classified investment has increased last year streamline operational procedures. Business units bringing the same to 3.81% of total investment. like Corporate, Retail, SME were restructured to However, rescheduled investment reduced to ensure effective decision making, quick disposal 1.98% and around 5,000 classified accounts have and better customer services. A separate Wing been adjusted in 2012. named Development Wing started functioning to look after the issues of branding, public relations and CSR activities. ICT Wing of the Bank has been Foreign Exchange Portfolio upgraded considering its multidimensional role in In 2012, total Foreign Exchange stood at Tk.782,598 modern banking. Internal Control and Compliance million with 9% growth over 2011. Import stood Wing (ICCW) has been strengthened and re- at Tk.284,588 million last year with market share oriented with professional auditors and modern at 10%. Export stood at Tk.197,095 million with logistics. Risk Management Wing (RMW) was market share 11%. Foreign remittance business redesigned to look after the risk exposures and was Tk.300,915 million with 28% market share. managing strategies. Research and Development Division (R&D) has also been strengthened to Shari‘ah Compliance make our bank as a centre of excellence in the financial sector of Bangladesh. We put utmost emphasis on total Shari‘ah compliance which is the core value of Islamic Branding & Public Relations Banking. We took different steps in managing our deposit-investment portfolio to ensure equity Though Islamic banking contributes one fifth and justice for achieving Maqasid-e-Shariah. of the country’s Banking sector, still the mode, Awareness for shari‘ah compliance among the mechanism and concept of this Shari‘ah based entire human resources and the clients has been products lack familiarity among the masses. a priority that helped improve the position for last As the pioneer in this sector, we took different steps for enhancing brand image and removing couple of years. During the year 2012, doubtful misconception in Islamic Banking. Our activities, income came down remarkably. events and programs were duly covered in the media throughout the year. We sponsored different Human Capital Development national and international events, fairs, exposition We believe human resources are our greatest & conferences that brought new dimensions and assets and recognize them as building blocks enhanced industry image of the bank. of bank’s performance and development. The strength of IBBL lies in the young and energetic Information Technology team who share uniform thinking and possess In order to provide prompt service to the valued common goal of human welfare. We continue customers, our best efforts are given on automation, to pursue best practices for the development of developing procedure and reducing manual human resources. The bank remains focused on operations. We made substantial development in recruiting the fresh graduates and implementing tech-based services like internet banking, SMS programs to retain high quality human resources. banking and KIOSK named Islami Bank Deposit

Annual Report 2012 65 Machine. In order to widen access of unbanked . National Best Corporate Award & Best people by taking advantages of countrywide Corporate Performance Award by the Institute mobile network coverage, we introduced mobile of Cost and Management Accountants of banking services with brand name mCash in 2012. Bangladesh (ICMAB) . The Best Islamic Financial Institution of the Environment-friendly Banking country by Goldman Sachs We believe that every small green step taken . The Most respected company Award by today would go a long way in building a greener Business Asia. future and that every one of us can strive towards a better global environment. IBBL is emphasizing Developments Focus in 2013 on social, ethical and environment friendly . Providing comprehensive range of fully approaches to business activity. Since inception shari‘ah compliant banking solutions we have been pursuing the spirit of Green Banking and have not, as such, made any investment . Investing in our people and transforming in environmentally hazardous areas. Green human resources to human capital Banking Unit of the bank has been strengthened . Continuous improvement of our product to and we took some steps in line with central bank meet every household needs directives. We could substantially reduce the use . Strengthening drive for financial inclusion and of paper through automation and simplification. poverty alleviation Welfare Activities (CSR) . Maintaining strong capital base and minimizing risk . Contributing more in industrialization, employment In 2012, we could maintain our image as the generation and foreign trade business leading Bank in CSR through participating in various social and human welfare issues. We . Diversifying investment with emphasize on spent around Tk.309 million in different sectors retail, SME and agricultural sector like education, disaster management, health, . Upholding brand image in remittance through sports, welfare and humanitarian purpose. Our quality service to expatriates participation as franchisee of Bangladesh Cricket . Introducing products and services with support League and sponsoring National School Football of superior IT platform Tournament were appreciated by the sports loving people of the country. . Conducting business process re-engineering in different functional areas Accolades Concluding Words The Bank was listed in the ‘Top 1000 World Banks’ of the world by the internationally reputed magazine We would conclude with sincere gratitude to ‘the Banker’ in terms of tier-I capital, 868th in terms Bangladesh Bank for their valuable guidance of assets size, 70th in terms of return on asset and continuous support. We are also grateful to (ROA) and 17th in terms of profit on capital. the Board of Directors for their visionary role and continuous encouragement. We thank high spirited In recognition to our performance and good Team IBBL for their dedication, commitment and governance, we received prestigious award from renewed vigor. We believe that the success of the different national and international organizations Bank has demonstrated the viability and credibility as mentioned below: of the Islamic Banking industry as a whole. Let . SAARC Anniversary Award for Corporate us pray to Allah to give us vision, courage and Governance Disclosures & Best Presented strength to achieve the target with excellence in Annual Reports by South Asian Federation of the years to come. Accountants (SAFA) . SAARC Anniversary Award for Corporate Governance & Best Presented Annual Reports by the Institute of Chartered Accountants of Bangladesh (ICAB) (Mohammad Abdul Mannan) Managing Director &CEO

66 Annual Report 2012 Management Report and Analysis

World Economic Scenario manufacturing component (9.8 per cent) worked as key driver of the GDP growth in FY2012. Along he world economy suffered considerably with it, the construction sector surpassed its Tin 2012. Many developed economies are growth target for FY2012 (6.6 per cent) to attain caught in downward spiraling dynamics from a robust 8.5 per cent growth. On the other hand, high unemployment, weak aggregate demand agriculture sector, particularly the crop production compounded by fiscal austerity, high public debt component, failed to maintain its remarkable track burdens, and financial fragility. record of the past two fiscal years.

The economic woes of the developed countries Services sector maintained its traditional 6 per cent are spilling over to developing countries and plus growth rate. It appears that the decline in GDP economies in transition through weaker demand growth was mostly accounted for by the relatively for their exports and heightened volatility in capital depressed performance in the agriculture sector, flows and commodity prices. Most low-income more particularly, its crop component. In contrast, countries have held up relatively well so far, but industry sector, backed up by its manufacturing are now also facing intensified adverse spillover and construction sub‐sectors, improved their effects from the slowdown in both developed and contribution to growth. Indeed, out of 6.3 per cent major middle-income countries. The prospects growth in FY2012, 2.8 per cent originated from for the next two years continue to be challenging, the industry sector, the highest in recent history. fraught with major uncertainties and risks slanted Service sector’s growth contribution was limited to towards the downside. about 2.9 per cent. On the other hand, growing Growth of world gross product (WGP) reached 2.2 domestic demand sustained by robust remittance per cent in 2012 which remained well below the flows had positive impact on the performance of forecasted potential growth of 2.4 per cent in 2013 the economy. In the second half of the year the and 3.2 per cent in 2014. inflation went down to single digit although non- food item’s inflation remained in double digit. Hall- Global unemployment remained very high, mark scam, Government’s excessive borrowing particularly among developed economies, with the from banks resulted in adverse effect on private situation in Europe being the most challenging. investment, series of accident and employees’ The unemployment rate continued to climb, dissatisfaction alongwith unstable energy supply reaching a record high of nearly 12 per cent in the hampered RMG sector as well as country’s euro area in 2012. Global financial system was economy. engulfed by a number of turmoil and several banks were under regulatory investigation as some Bangladesh Banking Sector international banks alleged to have committed money laundering offences. Inspite of having The pace of development in the banking industry this turmoil global economic situation the Islamic has been significant over the past decades. banking has been growing faster in recent past Financial inclusion, though still low compared years and can be foreseen to grow much faster in to developing countries, have increased the years to come. significantly. In terms of soundness of the Islamic banking Bangladesh Economic Scenario sector, the banking sector has exhibited significant The provisional figure for GDP growth for the progress. year 2012 was to the tune of 6.3 per cent; i.e. 0.7 In 2012, the banking sector in Bangladesh had percentage points lower than the target. According a lot of challenges passed through. Of them, to the BBS estimate, a repeat strong performance financial, bad loan, volatility of foreign exchange by the industry sector (9.5 per cent), particularly its market, pressure of government borrowing and

Annual Report 2012 67 high interest rate were mentionable. While this The major sectors of investment are corporate, sector had some success, others included SME, agriculture, housing, transportation, rural stable call money market, higher growth in SME development as noted below: and agriculture loan, opening farmers’ account, • Corporate Investment mobile and internet banking and green banking etc. Industrialization was hampered because The Bank provides a variety of products of higher spread rate. Some banks incurred and services to large and medium corporate huge losses from the share market business. areas that include investment, trade finance Because of increasing demand, more rural for domestic and international transactions, branches were opened. project finance and syndication services, treasury, and business. The investment Business and Financial Overview policy of the Bank was to diversify investment by size, sector, economic purpose and In spite of having volatile global and national geographical location which has positively economic situation and regulatory changes in shifted IBBL’s investment towards achieving 2012 Islami Bank Bangladesh Limited was able Maqasid-al-Shariah. to show consistent performance in most of the business areas. It was possible because of bank’s • SME Investment policy to bringing new customer in the bank arena; Investment to SME sector forms a lion’s share strengthen customers relationship providing best of IBBL’s investment portfolio and covered 47 services, compliance of banking regulations and per cent of the Bank’s investment in 2012 Shariah rule. Sector-wise brief performance of against 33 per cent in 2011. This constitutes IBBL in 2012 alongwith its future strategies are a significant part of Bank investment, and given below: exploits large business potentials in this sector. Profit before Income Tax • Agriculture and Agro-based Industrial In 2012, the Bank earned highest profit in the Investment country’s banking sector, which was Tk. 12,096 million before tax. However, comprising the Investment in Agriculture and Agro-based income of two subsidiaries of IBBL like, Islami Industry stood at TK. 26,713 million showing Bank Securities Limited (IBSL) and Islami Bank 25 percent growth in 2012, which was Tk. Capital Management Limited (IBCML), the 14,252 million in 2011. Allocation in this sector consolidated profit before income tax in 2012 was as on December 31, 2012 is 7% percent of Tk. 12,237 million. total investment.

• Rural Development Investment Deposit Since its establishment, RDS’s performance In 2012, the Bank touched the Tk. 400,000 million has been consistently and gradually deposit milestone and at the end of the year the increasing. In 2012, RDS investment stood figure reached Tk. 417,844 million. This was Tk. at 14 per cent as against 13 per cent of total 75,990 million higher than the year 2011 making investment in 2011 with 24 per cent growth. a growth of 22 per cent. This deposit growth is In 2012, RDS performance focused better highest in IBBL’s banking history. In 2012, IBBL’s than ever, operating in around 15,507 villages deposit share in the market reached 7.72 per cent among more than 733,520 members basing which was 7.59 per cent in 2011. about 24,623 centers of the country.

General Investment On the other hand, 10 branches in 10 Thanas under Dhaka and Chittagong metropolitan In 2012, IBBL’s investment reached to Tk. 372,921 cities started implementing the Urban Poor million increasing Tk. 67,080 million over the Development Scheme (UPDS) in 2012. investment of 2011. This investment was 22 per cent higher than the same was in 2011 and the • Housing Investment market share of investment reached to 8.40 per In 2012, the housing investment of the Bank cent in 2012 compared to 8.16 per cent in 2011.

68 Annual Report 2012 stood at Tk. 23,231 million representing 6 Information Technology percent of total general investment. This The Bank has set up a large and widespread sector recorded a net increase of 1.98 percent network of ATMs, introducing of Mobile (mCash) in 2012 over 2011. and Internet Banking, Cash Deposit Machine- • Transportation Investment KISOK are notable. The Bank has covered 1,820 ATMs and already issued 4 lacs ATM cards with In 2012, Transport Investment of the Bank 35,000 transaction entries per day. The Bank has was Tk. 6,449 million showing 2 percent share developed country’s largest online network having of total investment. dual connectivity holding largest Data Centre. It offers a variety of value-added services to the Foreign Exchange Business & Treasury ATM Card holders. Management In order to retain a competitive edge, the Bank’s technological infrastructure is continuously The foreign exchange business of the Bank had a upgraded. It has taken various initiatives to growth of 9.29 per cent in the year 2012 and stood increase technology use in its day-to-day at Tk.782,592 million as against Tk.716,058 million operations. The bank has extended technology in 2011. Among 46 AD branches of IBBL 41 were to its Cheque Truncation System (CTS) and brought into centralized foreign trade processing Bangladesh Electronic Fund Transfer Network system. IBBL’s Offshore Banking Unit (OBU) (BEFTN) for quick and easy transfer of fund. started full swing operation and UPAS (Usance Payment at Sight) business increased manifold. Capital Management IBBL signed MoU with IFC for investment of The Bank strives continual enhancement of US$100 million and introduced Mudaraba Foreign shareholders’ value through efficient use of Currency Investment for smooth operation of available capital in a manner that leads to a high this growing business. IBBL’s exchange earning return on equity. The Bank has also implemented and money market income increased by 53 and the Revised Guidelines on Risk Based Capital 37 per cent, respectively in 2012. The foreign Adequacy for Banks (BASEL II). In the year 2012 exchange business contributed by import, export the Bank maintained 13.53 as on 31.12.2012 and remittance are given below: (consolidated) Capital Adequacy Ratio (CAR) as against required minimum 10.00 percent. • Import: In 2012, Import business of the bank stood at Tk. 284,588 million making a Operations and Compliance negative growth of 5.52 per cent against Tk. 301,207 million in 2011. This negative growth In spite of volatile national and global economic could be the effect of the Government policy situation, the Bank adheres to the highest of controlling/reducing import of the country. standards of risk management and compliance. The compliance policies of the Bank are • Export: Export business handled by the Bank formulated following the standards and policies was Tk.197,095 million with the growth rate of of national and international regulatory and non- 10.57 percent in the year 2012 as against Tk. regulatory bodies. During the year, the regulatory 178,244 million in 2011; guidelines on “Know Your Customer (KYC)” norms implementation were strengthened to prevent • Foreign Remittance: Bank’s total remittance fraud and forgery. stood at Tk.300,915 million showing a growth rate of 27.17 percent in the year 2012 as Financial Inclusion against Tk. 236,607 million in the year 2011. The year 2012 can be considered the year of The Bank has an integrated Treasury which covers financial inclusion for IBBL. In that year, the Bank both domestic and global markets and funds. The put special drive to reach the unbanked people dealing rooms assist customers in managing through different programs and was able to their foreign currency exposures, simultaneously open 5.62 lac farmers’ accounts, 78,000 Student maintaining proprietary positions of the Bank. accounts, 7,100 Mohor accounts and 17,400 Cash Waqf accounts.

Annual Report 2012 69 Green Banking Moreover, the Bank is always ready to meet the challenges it might face in its pursuit of higher The Bank used to emphasize on social, ethical growth and development, so that the year 2013 and environmentally responsible approaches to would not be an exception. The short-term and business activities. Keeping in view the spirit of mid-term strategies to achieve the desired success Green Banking IBBL opened a Green Banking are as follows: Department under its Risk Management Wing (RMW) and took some effective steps in line with • New and innovative products on deposit and Central Bank’s directives. By now, the Bank was investment able to reduce paper use substantially through • Bringing the SME under the main stream of automation and simplification of its activities. investment to absorb a huge section of people Besides, the Bank’s Green Banking policy is at the for employment. final stage of approval. • Proper decoration and maintenance of CSR Activities all floors of the head office, zonal offices, branches and corporate branches. IBBL through its various CSR programs is contributing significantly to develop socio • Further extension of ATM services up to economic condition of Bangladesh. Bank spent remote areas. around Tk. 309 million as CSR expenditure in • Increase of AD branches to widen foreign various sectors such as disaster management, exchange business and remittance education, health, sports, art & culture, operations. environment and others. In 2012, CSR program of IBBL received a momentum. IBBL participated • Opening of more branches at upazilas and as franchise of Bangladesh Cricket League and commercially important places sponsored National School Football Tournament which was appreciated by population at different • Vigorous steps will be adopted for recovery of strata of society. defaulted investment • Measures will be taken to open 30 lac new Outlook for 2013 accounts in 2013 where by total 1 crore accounts will be may be achieved In Bangladesh, 2013 is the year of national election and so some political unrest is not unlikely which • CSR activities will be streamlined by might hamper the normal economic activities of formulating a pragmatic CSR policy. the country. Despite this limitation, the financial sector of Bangladesh is expected to keep growing • Automation activities will be strengthened and this will have positive impact on economy. under Green Banking to reduce dependence IBBL will try to focus more on financial inclusion on paper. providing technology based banking facilities to • In 2013 efforts be geared to increase the its existing and potential large customer base. number of branches to 300, Insha Allah.

70 Annual Report 2012 Directors’ Report

Annual Report 2012 71 Report of The Board of Directors

In the name of Allah Most Gracious, Most Merciful

ll praises are due to Allah, the Lord of the territory. Likewise, China, India, and Japan are AUniverse, and Peace and Blessings of Allah hovering around uncertainty about future direction be upon the Prophet Muhammad (Sm.) and his of their economies and scrambling to maintain Descendants and Companions. economic growth.

Esteemed Shareholders Euro Zone Assalamu Alaikum wa Rahmatullah, The key challenge for the Euro zone pertains to uncertainty about the growth outlook for Europe On behalf of the Board of Directors, I take for 2013 and beyond. The case for strong growth the opportunity to welcome you all to the 30th in 2013 is weak. The most likely scenario for the Annual General Meeting of the Bank and have Euro zone is a stabilization of production in the the pleasure to place before you the Annual first half of 2013, followed by a slow and sluggish Report 2012 along with the Auditors’ Report and recovery. For the whole year 2013, the Euro zone Audited Financial Statements of the Bank for is likely to achieve a growth rate hardly above zero the year ended December 31, 2012. I consider (0.2 percent), and the crisis countries in Euro zone it appropriate to bring forth before you the will still have negative growth even if it is expected contemporary global economic scenario, changes to be less negative than in 2012. that took place around the world, how Bangladesh experienced the same and various functional and administrative aspects for the year 2012 in the Euro Zone GDP Growth in 2012 and following chapters. 2013 (in %)

Global Economic Outlook Ͳϴ Ͳϲ Ͳϰ ͲϮ ϬϮ ͲϬ͘ϰ ƵƌŽǌŽŶĞ Ϭ͘Ϯ Ϭ͘ϵ 'ĞƌŵĂŶǇ Ϭ͘ϵ ϲ ϭϰ ŽǁƚŚŝŶй ϱ ϭϮ ŽǁƚŚŝŶй &ƌĂŶĐĞ Ϭ͘ϭ ϰ ϭϬ Ϭ͘ϰ

ϴ ĂĚĞ'ƌ ϯ Ͳϭ͘ϱ ϲ ^ƉĂŝŶ Ͳϭ͘ϯ Ϯ ϰ ŽƌůĚ dƌ ŽƌůĚKƵƚƉƵƚ'ƌ ϭ Ϯ /ƚĂůǇ ͲϮ͘ϯ t

t ͲϬ͘ϳ Ž Ž ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ ϮϬϭϯ Ͳϲ͘Ϭ 'ƌĞĞĐĞ Ͳϰ͘Ϭ tŽƌůĚKƵƚƉƵƚ 'ƌŽǁƚŚ;йͿ ϱ͘ϭ ϯ͘ϴ ϯ͘ϯ ϯ͘ϲ ϮϬϭϮ ϮϬϭϯ tŽƌůĚdƌĂĚĞ ϭϮ͘ϲ ϱ͘ϴ ϯ͘Ϯ ϰ͘ϱ 'ƌŽǁƚŚ;йͿ United States

Global Economic Scenario The US economic recovery shaken violently to a halt in the final months of 2012 as the government 2012 was a year of pronounced economic slashed defense spending, businesses cut back, uncertainty for many countries and for most of and fighting over the fiscal cliff. Its GDP shrank them this trend is likely to linger into 2013. Fiscal during the fourth quarter, dropping at an annual crisis in Europe threatened survival of the euro, rate of -0.1%. It was the US’s worst economic though eventually disintegration could be avoided. performance since October 2009 expecting mild The US could hardly avoid entering recessionary growth of about 1% in 2012.

72 Annual Report 2012 US GDP-Quarterly Growth: 2010 to 2012 (%) advanced economies and emerging markets that are net oil importers.

ϰ͘ϱ ϰ ϰ͘ϭ The National Economy ϯ͘ϱ

ϯ͘ϭ Bangladeshi economy, with its growing global ϯ Ϯ͘ϲ Ϯ͘ϰ Ϯ͘ϯ Ϯ͘ϱ interconnectedness, can hardly be immune to Ϯ͘ϱ Ϯ͘Ϯ

Ϯ͘Ϭ what in happening in the outer world. The Euro Ϯ

ϭ͘ϱ ϭ͘ϯ ϭ͘ϯ zone crisis is far from over. U.S.A struggles with ϭ recovery. So jobs and income are likely to offset 'W'ƌŽǁƚŚŝŶй Ϭ͘ϱ here at home for what happened in the distant US Ϭ͘ ϭ Ϭ Ϭ͘ ϭ capital and in Euro zone. Yet Bangladesh can be Ϭϭ ϬϮ Ϭϯ Ϭϰ Ϭϭ ϬϮ Ϭϯ Ϭϰ Ϭϭ ϬϮ Ϭϯ Ϭϰ ͲϬ͘ϱ benefitted of the advantage created because of ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ pay hikes of RMG workers both in India and China as evidenced by the higher demand orders coming Negative GDP growth in the fourth quarter and the from these two countries. likely outcomes of the fiscal cliff suggest that the Bangladeshi economy may face challenges in US economy will find itself in recessionary territory 2013 from within as well. The root of the difficulties in early 2013. can be traced back to policies pursued in the past fiscal year with a mismatch in the budgetary Emerging Market Economies expenditures far outstripping receipts. Any attempt to plug this deficit by excessive bank borrowing Among the emerging market economies, China’s would push up inflation. Enhancements in economy, after slowing substantially in 2012, electricity prices would have spiral effects on cost is showing signs of reverting to faster growth. of living thriving inflation rate up further defeating PMI index for manufacturing moved into positive the monetary objective of taming inflation. territory at the end of the year. Retail sales growth also multiplied suggesting that the consumer The Banking Sector sector was improving. However, FDI into China declined consecutively in 2012. On the other The Banking sector in Bangladesh suffers from hand, outflow of FDI from China increased 25.8 high deposit and lending rates syndrome. Both percent last year. deposit and lending rates are reigning at a higher level with a flat spread. The situation is created Growing fiscal deficit, low investments, elevated out of bubbling and burst of capital market against inflation, and high interest rates are looming over a persisting high inflation during the last three India’s outlook. The country’s GDP grew 5.3 years. The situation led to deposit flights from the percent in the second quarter of the 2012-2013, banking sector to capital market leading to pushing one of its lowest quarterly growth rates in the last up deposit and lending rates in future threatening decade. Overall, the Indian economy is showing hard-earned external competitiveness of our early signs of a recovery. Industrial production economy. The intervention by Bangladesh Bank grew 8.2 percent, supported by an improvement in the nomenclature of accommodative monetary in services sector. policy without having corresponding fiscal regime Indonesia, Malaysia and Thailand experienced in place, led to reduction of general inflation rate declining trend of growth in 2012. ASEAN as by few points only, but not the non-food inflation group is projected to grow at a slower pace of 5.5 at all, making it counterproductive eventually percent in 2013 against 5.7 percent in 2012. curtailing both export and import growth.

Finally, the entire greater Middle East—from Higher deposit rates have pushed up cost of fund in the Maghreb to Afghanistan and Pakistan—is 2012 leading to declining in foreign trade, thereby socially, economically, and politically unstable. scaling down operating profits of banks last year. Any further escalation of conflicts in Middle East Average cost of fund was hovering between 11 may significantly rise and increase oil prices by20 per cent and 12 per cent for most of the time in percent, leading to negative growth effects in the 2012 which was 9.0 per cent to 10 per cent in the U.S., Europe, Japan, China, India and all other previous year. The weighted average lending rate

Annual Report 2012 73 stood at 13.94 per cent in November 2012. As a Islamic banks show commendable strengths in result, credit growth in private sector slowed down their operation. Performance of Islamic banking in in 2012. Bangladesh is remarkable in terms of its growth and market share in the economy. The sluggish trend in the country’s capital market, cautious monetary policy, lower import payments As of 30.09.2012, annual deposit and investment and loan scams were responsible for lower level of growth of IBs were 25.9% and 29.5% respectively profits of the banks in 2012. compared to 19.9% and 21.1% growth of the banking sector. Market share of IBs in deposit Islamic Banking around the World and investment is recorded as 17.5%, and 20.7% respectively. Islamic finance industry is one of the fastest growing segments of the global financial industry. In 2008 the size of the global Islamic banking Market Share of Islamic Banks (IBs) industry was estimated about $820 billion. The size of the industry crossed $1.6 trillion by Ϯϱ͘Ϭ 2012. The industry now comprises 430 Islamic banks and financial institutions and around 191 ϮϬ͘Ϭ conventional banks having Islamic banking ϭϱ͘Ϭ windows operating in more than 75 countries (3rd ϭϬ͘Ϭ Global Islamic Finance Report 2012).

DĂƌŬĞƚ^ŚĂƌĞŝŶй ϱ͘Ϭ Global Islamic finance maintained compound annual growth rate (CAGR) of 18.82% from Ϭ͘Ϭ 2006 to 2011. It is set to double in size between /ŶĚƵƐƚƌǇ dƌĂĚĞ Őƌŝ ZĞĂůƐƚĂƚĞ dƌĂŶƐƉŽƌƚ 2011 and 2015 with the sector increasingly /ƐDĂƌŬĞƚ^ŚĂƌĞ ϭϵ͘Ϭ Ϯϯ͘ϴ ϯ͘ϯ ϮϬ͘ϵ ϭϯ͘ϯ viewed as a real alternative to conventional finance, expressed in a seminar organized by On the other hand, IB’s market share in industry, Standard & Poor’s in September 25, 2012. The trade, agriculture, real estate and transport global crisis faced by conventional finance led financing accounts as19.0 %, 23.8%, 3.3%, 20.9% to Islamic Finance increasingly being viewed as and 13.3% respectively. a credible alternative. S&P expects the industry to grow 20% annually over period of 2011-2015. Institutional Development of Islamic Islamic finance is gaining groud and has continued Banks to demonstrate its viability and competitiveness in the globalised financial environment. Islamic Banks Consultative Forum (IBCF): IBCF, with Islamic Banks and Conventional Banks Islamic finance draws its strength from serving having Islamic Banking Branches as members, the real economy. An important feature of Islamic was established in 1995 for effective interaction, finance is that it involves financial transactions that cooperation, promotion and furthering of the cause must be accompanied by an underlying economic of Islamic banking in Bangladesh. Seven full- transaction. fledged Islamic Banks and six Banks having Islamic Banking Branches are the members of the IBCF. Islamic Banking in Bangladesh Central Shari‘ah Board for Islamic Banks of At present, there are seven full-fledged Islamic Bangladesh (CSBIBB): CSBIBB was established in banks (IBs), nine conventional banks with Islamic 2001 to offer views and assistance to member banks banking branches and eight other conventional in matters related to observance of uniform Islamic banks operating with Islamic banking windows. banking policies and practices. It also promotes Most of the State-Owned Banks are said to be knowledge on Islamic Banking by organizing planning to open Islamic banking branches or seminars and conducting training and research on windows. By the end of 2012, there were 770 Islamic Shari‘ah. Seven full-fledged Islamic Banks Islamic banking branches and 30 Islami banking and ten Conventional Banks having Islamic Banking windows in Bangladesh. Branches are the members of CSBIBB.

74 Annual Report 2012 Islami Interbank Fund Market (IIFM): In order to mitigate liquidity crisis of Shari‘ah based banks and financial institutions and for their better management, Bangladesh Bank introduced Islami Interbank Fund Market in 2012. Under this arrangement an interested Islamic financial institution can place their surplus fund overnight at Bangladesh Bank. Islamic banks and banks having Islamic banking branches and windows may borrow from this fund overnight. IIFM is expected to play a critical role in the development of Islamic Money Market in Bangladesh.

Bangladesh Government Islamic Investment Bond (BGIIB)

The Ministry of Finance, Government of Bangladesh introduced the BGIIB in 2004. The instrument has been playing an important role in developing Islamic Money Market. The unit price of the Bond is taka 1 (one) lac. One can purchase • Investment is made through different modes the Bond for taka 1 (one) lac or multiple thereof as per Islamic Shari‘ah. having tenure of 6 (six) months, 1 (one) year or 2 (two) years. The Bond is treated as a component • Investment-income is shared with Mudaraba of Statutory Liquidity Ratio (SLR). depositors according to pre-agreed ratio, ensuring a reasonably fair rate of return on IBBL is actively involved in buying and redeeming their deposits. of the bond. The closing balance of IBBL against this Bond was Tk.23,434 million in 2012. • Introduction of welfare-oriented banking to ensure equity and justice in all of its Islami Bank Bangladesh Limited operations. Islami Bank Bangladesh Limited was incorporated • Extend socio-economic and financial services as the first Shari‘ah based interest-free bank to people of all strata with a strong commitment in South-East Asia on the 13th March 1983 as to rural upliftment. a public limited company. The first branch of • Plays a vital role in human resources the Bank i.e. Local Office at Motijheel in Dhaka development and employment-generation th started functioning informally on 30 March 1983. particularly among the unemployed youths. It was formally inaugurated on 12th August 1983. The Bank was established with Tk.80.00 million • Portfolio of investment and investment policy as paid up capital which has been increased to have specially been tailored to achieving Tk.12,509.64 million as on 31.12.2012. Corporate balanced growth and equitable development Headquarter of the Bank, housed in an 18-storied through diversified investment operations own modern building, is located at 40, Dilkusha particularly in the priority sectors and in the Commercial Area, Dhaka. less developed areas of the national economy. • Ensures Shari‘ah compliance through regular Special Features of IBBL and effective guidance provided by our IBBL achieved stable growth and continuous independent and highly esteemed Shari‘ah progress to become the leading private commercial Supervisory Committee consisting of 12 bank of the country. The distinguished features of members. IBBL are: • IBBL has some special Investment schemes • All activities are conducted on interest-free for different segments of the people to meet system based on Islamic Shari‘ah. their specific needs.

Annual Report 2012 75 Prime Minister Sheikh Hasina is handing over cheque of taka 19 lac and 20 thousand for fourth year out of taka one crore and ninety two lac for ten years committed by the Bank to the four Army Officers families.

• It follows system of strong motivation amongst are known as corporate branch and those are all the stakeholders to induce themselves to presently looked after by Head Office. Zonal contribute their best for their own wellbeing as Incharges are responsible for effective control, well as the wellbeing of the soceity itself. close supervision and proper monitoring of the total operations of the branches as well as to • IBBL is very much engaged in CSR activities assist them in the development of business in their and contributes every year a handsome respective jurisdiction. amount in this area.

Number of Branches Our Network

To provide smooth services at the doorstep of the ϯϬϬ Ϯϳϲ Ϯϲϲ Ϯϱϭ customers, IBBL goes on expanding its branch ϮϱϬ network to all suitable places all over the country. ϮϬϬ The Bank opened 10 new Branches in 2012 ϭϲϵ raising the total number of Branches from 266 ϭϱϬ to 276. The Bank plans to gradually open more ϭϭϲ ϵϬ branches covering important commercial places ϭϬϬ ϰϵ both in urban and rural areas. ϱϬ ϭϯ Out of total 276 Branches (including 30 SME/ Ϭ Agriculture Branches), 81.16%, i.e., 224 are Urban ϭϵϴϱ ϭϵϵϬ ϭϵϵϱ ϮϬϬϬ ϮϬϬϱ ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ Branches and 18.84%, i.e. 52 are Rural Branches. IBBL has the highest number of rural branches among the first generation Private Banks. Subsidiary Companies Islami Bank Securities Limited (IBSL) Branch Cluster Management Islami Bank Securities Limited (IBSL) is a Our 272 Branches are managed and supervised subsidiary company of Islami Bank Bangladesh by the Zonal Offices. There are 14 (fourteen) Limited (IBBL) which was incorporated in March Zonal Heads to run those branches smoothly 22, 2010 as a Public Limited Company under and efficiently. The remaining 4 (four) branches

76 Annual Report 2012 Inauguration of Bahaddarhat Branch

Companies Act, 1994 with the objective to carry Islami Bank Capital Management Limited out Business of Stock Broker & Dealer in the (IBCML) capital Market. The overall increase of activities Islami Bank Capital Management Limited was of Brokerage operation play an important role established in April 2010 under the Companies in improvement of capital market of the country Act, 1994 as a Public Limited Company with and enhances earning capability of IBBL through Authorized Capital of Tk.1000.00 million & Paid- Corporate declaration. Up Capital of Tk.300.00 million. The Company was established as per Bangladesh Bank Letter No. The Board of IBSL approved its products for BRPD(R-1)717/2011-47 dated 07 February 2010. providing investment facilities to the prospective The registered Office of the company is situated at customers to invest in secondary market having 63, Dilkusha C/A in Dhaka, Bangladesh. the option to operate under Investment Facility and Non Investment Facility accounts. IBSL has The main objectives of the company are to carry out all sorts of Merchant Banking businesses including diversified products with different category of underwriting and/or Management of issues, Public investment ceiling and other value added services offer of Shares, Stocks, Debentures, Bonds for the prospective customers. It also provides etc., sale and purchase of Securities or transfer different depository services to its BO account thereof, Fund Management of clients, Managing holders as a full DP (Depository Participant) Portfolio Investment of any person or Company by of CDBL. They can also avail the services making profitable Investment in various avenues. through Member’s discretionary and Investors’ The Company is yet to start its operations. discretionary accounts. The NRBs’ can also avail the services through NITA Account maintain IBBL Exchange Singapore Pte. Ltd with AD Branches of IBBL. IBSL organizes IBBL Exchange Singapore Pte. Ltd. was “Investors Awareness Program” on regular basis. incorporated in Singapore as a subsidiary of IBBL As per decision of the Board, IBSL has a plan for money-remittance, changing, transmitting and to open some branches in 2013 in all divisional doing all matters and things incidental thereto headquarters of the country subject to approval of under the Companies Act, CAP.50 of the Republic of Singapore. the concerned Authority.

Annual Report 2012 77 Off-Shore Banking Units International Affiliations

Bangladesh Bank approved operation of Off- IBBL is a member of the under noted foreign Shore Banking Units (OBU) of Islami Bank organizations: Bangladesh Limited located at Head Office a. Accounting and Auditing Organizations Complex Branch-Dhaka, Uttara Branch-Dhaka for Islamic Financial Institutions (AAOIFI), and Agrabad Branch-Chittagong. Operations of Off-Shore Banking Units (OBU) commenced on Manama, Bahrain and has become member January 4, 2011. of its Board of Trustees. b. Islamic Financial Services Board (IFSB), National Affiliations Kuala Lumpur, Malaysia. IBBL became member of the Dhaka Stock c. General Council for Islamic Banks and Exchange Limited in the year 2006. License for Financial Institutions (CIBAFI), Manama, Depository Partnership (DP) from the Securities Bahrain and Exchange Commission (SEC) and Central d. International Islamic Financial Market (IIFM) Depository Bangladesh Ltd. (CDBL) was obtained Manama, Bahrain earlier. Function of Brokerage House and full DP service were initiated on 1 January 2008 e. International Islamic Centre for Reconciliation obtaining the permission of Bangladesh Bank. and Arbitration (IICRA) The membership was transferred to Islami Bank f. International Chamber of Commerce- Securities Ltd., a subsidiary company of IBBL in Bangladesh (ICC-Bangladesh) 2010 as per requirement of Bangladesh Bank and Securities & Exchange Commission. g. American Chamber of Commerce in Bangladesh (AmCham) Membership in National Bodies IBBL is a member of the following institutions: IBBL’s Equity Investment a. Bangladesh Institute of Bank Management IBBL has the equity investment in the follwing (BIBM) institutions: b. The Institute of Bankers, Bangladesh (IBB) a. Central Depository Bangladesh Limited (CDBL) c. Bangladesh Association of Banks(BAB) b. Karmasangsthan Bank (Employment Bank) d. Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) c. Bangladesh Shipping Corporation (BSC) e. Central Shari‘ah Board for Islamic Banks in d. Bangladesh Aroma Tea Ltd. Bangladesh (CSBIBB) e. Financial Institutions and Investors Portfolio f. Islamic Banks Consultative Forum (IBCF) Management Company Limited g. Dhaka Chamber of Commerce & Industry (DCCI)

78 Annual Report 2012 Corporate Governance

orporate Governance policies and practices The Board is comprised of experienced members Cof IBBL are focused on ensuring proper with diverse professional experiences such as delegation, transparency and accountability business, administration, banking & finance, in the organization as a whole. The bank is accounting, general management representing structured and developed in line with the accepted Government service holder, engineers, fund Corporate Governance practices and guidelines managers which make the Board very efficient of Bangladesh Bank and the Bangladesh and balanced in deciding and directing various Securities and Exchange Commission’s (BSEC) issues of the Bank. notifications in this regard. While pursuing the The present Board consists of 19 (nineteen) interest of Shareholders’ value addition, the bank non-executive members including 03 (three) has attached utmost importance in setting up of Independent Directors and 02 (two) Depositors a well-defined compliance oriented organization Directors excluding ex-officio Managing Director. and business structure. The number of Board members is within the limit set by the Bangladesh Bank, the primary regulator Board of Directors, Chairman for banking industry in Bangladesh. and CEO The Executive Committee Policy on Appointment of Directors The Executive Committee, consisting of 5 (five) The members of the Board of Directors of IBBL are members, is entrusted with the responsibilities of appointed pursuant to the provision of Companies policy making and taking important and strategic Act 1994, Securities and Exchange Regulations decisions as authorized by the Board within the and Memorandum & Articles of Association of norms set by Bangladesh Bank. the Bank. The Guidelines of Bangladesh Bank is strictly complied with in the formation of the Board. Non-Executive Director Independent Directors and Depositor Directors All the Directors of IBBL are non-executive are appointed by the Board as per regulatory Directors except the Managing Director. requirement.

Meeting of the Executive Committee

Annual Report 2012 79 Independent Director administrative or operational and routine affairs of the bank. Board has appointed 03 (three) Independent Directors in conformity with the latest corporate The Chairman conducts on-site inspection of any governance notification guidelines of regulatory branch of the bank or financing activities under authorities. The Independent Directors enjoy the purview of the oversight responsibilities of full independence in terms of carrying out their the Board. He calls for any information relating to coveted responsibilities. Independent Directors Bank’s operation or ask for investgation into any are well conversant in the field of business and such affairs; he also submits such information or professional areas. The independent directors investigation report to the meeting of the Board or have more than 12 (twelve) years of corporate the Executive Committee and if deems necessary, management / professional experiences. with the approval of the Board, he takes necessary action thereon in accordance with the set rules Chairman is Independent of Chief through the CEO. The board also has the policy of appraising Bangladesh Bank regarding any Executive Officer/Managing Director complaints against CEO along with his statement. Being appointed by the Board, the Chairman of IBBL is independent of CEO. The Chairman of the Duties and Responsibilities of CEO, CFO Bank is elected by the directors of the Bank. The & Company Secretary Board of Directors has clearly defined roles and responsibilities of the Chairman and the CEO. The duties and responsibilities of Chief Executive Officer (CEO), Chief Financial Officer (CFO) Independence of Board Members and Company Secretary (CS), as defined by the regulators, are approved by the Board of Directors. The Board members are also independent in expressing their views and opinions freely. The directors are also independent from management Appointment of CFO, Head of Audit and and other relationships of the Bank that could Company Secretary materially affect the activities of the Bank. The bank appointed a Chief Financial Officer (CFO), a Head of Internal Audit (Internal Control The Role and Responsibilities of the and Compliance) and a Company Secretary (CS). Board of Directors The Board of Directors has defined clearly the roles, responsibilities and duties of the CFO, the The basic responsibility of the Board is to exercise Head of Internal Audit, and the CS. business judgment in good faith, in a manner that they reasonably believe to be in the best interests of the Bank, while complying with the applicable laws Independence of Non-Executive and regulations, the Bank’s Articles of Association Directors and resolutions adopted by the shareholders. The major responsibilities of the Board, among others, All the non-executive Directors enjoy full freedom are to set the direction, vision and policies of the Bank and independence. They also adhere to the and to determine objectives and strategies to ensure corporate governance practices and guidelines. the effective discharge of the Bank’s functions and the most efficient use of the Bank’s resources. Annual Appraisal of the Board’s Performance Responsibilities of the Chairman of In every Board meeting, the attendance of Board of Directors the Directors is considered and their active The responsibilities of the Chairman as defined participation in the various agenda is ensured. in the BRPD Circular No.06, dated February 04, The performance of the Board is also appraised in 2011 of Bangladesh Bank is fully complied with. various ways like submission of the Performance The Chairman of the Board of Directors does not of the Bank in the Board meeting periodically, personally possess the jurisdiction to apply policy preparation and monitoring of budget, placing making or executive authority. The chairman implementation status of the Board’s decisions, also does not participate in or interfere into the transacting business issues which are within

80 Annual Report 2012 its power and placing implementation status Directors’ Report on Compliance with of Bangladesh Bank’s observations on various Best Practice on Corporate Governance issues. Furthermore, the performance report of the committees framed by the Board is also placed Status of compliance of corporate governance in the Board through which the performance of checklist is included in the Directors’ Report which the Board members are regularly evaluated. is dully certified by the external auditors of the bank. Annual Evaluation of the CEO by the Board Accountability, Audit and Financial Reporting The Board has a policy of annual evaluation of the Managing Director. Additionally, the performance The Board undertakes responsibilities for preparing evaluation of the CEO is conducted by the Board and presenting a balanced and comprehensive through various reports like performance report of assessment of the Bank’s operations at the end the bank, taking status of various assignments given of the each financial year through annual Financial by the Board to the CEO and the Management, Statements and Annual Report and quarterly and taking implementation status of Budget etc. half yearly announcement of results of the Bank to the Shareholders. The Audit Committee of the Policy on Training of Directors Board assists in this respect by scrutinizing the information to be disclosed, and to ensure accuracy, The Policy on training of Directors includes adequacy, transparency and completeness. providing training and information on all the latest policy guidelines and circulars issued by Vision, Mission and Strategy the regulatory authorities. Sometimes special discussion sessions are arranged with the • The Vision and Mission of the Bank are experts. They also attend the programs organised approved by the Board. These are disclosed by various professional bodies at home and in the annual report, bank’s website and other abroad on technical, professional and corporate publications. governance issues. • Business Objectives are focused and the areas of busineses are set out to attain vision, Directors’ Knowledge and Expertise in mission and strategic objectives. Finance and Accounting • The Strategies to achieve the Business Three Directors in the Board of the Bank are Objectives are clraly set out and disclosed in professionally qualified Chartered Accountants. the previous section of this annual report. They are well conversant in the field of accounting and finance. Other Directors are also well Audit Committee conversant in the field of business, administration The Audit Committee is responsible to the Board and own professional areas. of Directors. The duties of the Audit Committee are clearly set forth in writing. The Company Number of Board Meetings Secretary acts as the secretary of the Committee. At least an independent director is required to fulfil In 2012, 20 (twenty) Board meetings were held. the quorum of the audit committee. A detailed disclosure showing number of Board Meetings held and status of participation of the Directors is given in the later part. Appointment and Composition Audit Committee of the Bank, comprising of 4 Attendance of CFO and Company (four) Members, has been formed in compliance Secretary with Bangladesh Bank & BSEC guidelines. The Committee is comprised of 2 (two) Depositor The CFO and the Company Secretary of the Directors, an Independent Director and a Foreign bank attend meetings of the Board of Directors, Director of the Board. Company Secretary excluding those, which involve consideration of an acts as the secretary of the Committee while agenda item relating to their personal matters.

Annual Report 2012 81 Meeting of the Audit Committee

other members of the Management attend the Expertise in Finance and Accounting Committee Meeting on invitation only. All the members of the Audit Committee have Chairman of the Audit Committee adequate knowledge in Accounting and Finance. of them, three are professional accountants having The Chairman of the Audit Committee is an degrees on Chartered Accountancy, one of whom independent Non-executive Director and he is also a Fellow Member of Chartered Secretaries performs his duties independently. and also serving as a President in the highest accounting body of the country, the ICAB. One Terms of Reference of Audit Committee of the members is Vice Chancellor of a private The Audit Committee of IBBL strictly observes the university having PhD degree. Terms of Reference of the Committee issued by Bangladesh Bank through BRPD circular no. 12 Head of Internal Audit’s Access to Audit dated December 23, 2002. As per the terms of the Committee said Circular, the Audit Committee plays a key role in finalization of the Financial Statements of the Head of Internal Control and Compliance Wing Bank. It also reviews the Internal Control System has direct access to the Audit Committee and he of the Bank, Internal Audit Reports, External attends the Audit Committee meetings regularly. Audit Reports, Bangladesh Bank Inspection Reports, Shari‘ah Inspection Report and provides Review and Evaluation of Quarterly Report necessary Policy Guidelines. The Audit Committee reviews and evaluates the The Committee is empowered to investigate/ quarterly reports and refers the same to the Board. question any employee of the Bank. It can also take External Expert Counsel, if it deems necessary. Meeting of Audit Committee

Non-Executive Director The Audit Committee conducted 22 meetings during 2012. The attendance status of the meeting is given All the Members of the Audit Committee are Non- executive Directors. No executive of IBBL are eligible at the end of this Corporate Governance Report. to become a member of the Audit Committee.

82 Annual Report 2012 Objectives & Activities of the • Non-Audit Work: During 2012, External Auditors were not assigned any work except Audit Committee Statutory Audit and certification of corporate Governance as required by BSEC. Review of Internal Control The Audit Committee regularly reviews the Internal Selection of Appropriate Accounting Control System of the Bank. It ensures that the Policies Internal Control Systems are well conceived by all concerned and properly administrated at all levels. The issues related to selection of appropriate The Committee also monitors observance of Accounting Policies in line with IFRS, BFRS and Internal Control Practices with a regular interval. other Regulatory Guidelines were discussed in the Audit Committee meeting. The Accounting Policies are annually reviewed at the time of finalization of Role of Audit Committee in Ensuring Financial Statements. Regulatory Compliance The Committee reviewed and examined the Annual and Interim Financial Releases Financial Statements of 2012 of the Bank to see Audit Committee reviews Annual and Interim whether all the disclosures and information have Financial Statements release and recommends been incorporated in the Financial Statements the same to the Board for approval. properly and whether the Bank followed International Financial Reporting Standards (IFRS) adopted as Bangladesh Financial Reporting Reliability on the Management Standards (BFRS) by the Institute of Chartered Information Accountants of Bangladesh, Bank Company Act The Audit Committee ensures that all the information 1991, the Companies Act 1994, the Securities and used for computation of financial disclosures are Exchange Rules 1987, Dhaka and Chittagong Stock reliable. Exchange Listing Regulations and other Laws and Rules applicable in Bangladesh and Standards issued by the Accounting and Auditing Organization Internal Control & Risk Management for Islamic Financial Institutions (AAOIFI) etc. Directors’ Responsibility to Establish Review of External Audit Functions Internal Control • Effective Coordination of Externatal Audit The Board of Directors of IBBL is responsible to Functions: Before finalization of the Financial establish appropriate system of Internal Control. To Statements, the Committee met with the ensure appropriate level of Internal Control System, External Auditors and discussed various a good number of Manuals and Guidelines have issues relating to Financial Statements for the been introduced in line with global best practices year 2012. The Committee also reviewed the and Regulatory Guidelines. Delegation of powers progress of Audit from time to time. in various business, administrative and financial areas have also been approved by the Board. • Ensure Independence of External Auditors: The Committee ensures that the External Auditors perform the audit with due Features of Internal Control, Compliance independence. and Monitoring System • Review of External Auditors Findings: Internal Control and Compliance Wing (ICCW) of The Committee reviews findings of External IBBL is responsible for checking compliance of Auditors, action taken on each items Internal Control System. Any deviation is reported and necessary instructions given to the to the top Management, Audit Committee and to Management on the findings of the Auditors. the Board and necessary steps are taken to rectify • External Auditors’ appointment and the same. Reappointment: Every year the Audit As per Bangladesh Bank Guidelines and to Committee recommends Appointment/Re- strengthen the Control and Compliance Mechanism, appointment of External Auditors.

Annual Report 2012 83 the Bank has established Internal Control and Bangladesh Bank guidelines. All the issues are Compliance Wing consisting of three Divisions: periodically reviewed by the Audit Committee. a. Audit & Inspection Division: This division undertakes the audit and inspection of all Review of Adequacy of Internal Control operating units of the bank including Head System Office, based on an approved Audit Plan, The Board of Directors time to time reviews which is approved by the Audit Committee of the Internal Control System and necessary the bank. modification is done to improve the system and to As per guidelines of Bangladesh Bank, incorporate latest changes in the technology. Internal Control & Compliance Wing of IBBL submitted a summary report on the Audit Inspection by Bangladesh Bank findings during the year 2012 and placed the same to the Managing Director and to Bangladesh Bank conducted the Comprehensive the Audit Committee for their perusal and Inspection of IBBL, Head Office and its 27 guidance. selected Branches in 2013 based on the position as on 31.12.2012. Moreover, Bangladesh Bank During the year 2012, Bank’s Audit Team Inspection Team conducted inspection on our conducted Audit & Inspection of all Branches/ Head Office & 26 Branches during the year SME Agriculture Branches/Zonal Offices, 2012 on Foreign Trade and Foreign Currency Wing/Division/Department of Head Office. Transactions. Major Core Risk areas including Heads of 14 Zonal Offices also inspected others i.e. Consumer Financing, Small Enterprise Branches. Incumbent/In-charges of Branches Financing functions were also inspected by the also conducted their Self-Audit. Inspection Team. b. Compliance Division: The Compliance Division handles the Regulatory issues of Statutory Audit Bangladesh Bank and other Regulatory In the 29th, Annual General Meeting held on May Bodies and submits status of Regulatory 15, 2012, the Shareholders appointed M/S. A. issues quarterly to the Audit Committee. Qasem & Co. Chartered Accountants and M/S. The Compliance Division ensures that Bank ACNABIN, Chartered Accountants to audit the complies with all Regulatory requirements Financial Statements and Nostro Accounts of the while conducting its day-to-day business. They Bank for the year 2012. maintain liaison with the Regulatory Bodies Statutory Auditors also covered 56 Branches and for any Regulatory changes and notify the Head Office as part of the Annual Audit Program. same to all concerned. The Division works for Auditors covered 80per cent of the Risk-Weighted establishing compliance culture in the Bank. Assets.

c. Monitoring Division: Monitoring Division No partner or employees of the external audit firms evaluates / assesses/ monitors the operational possess any share of the Bank they audit at least performance of various branches based on during the tenure of their audit assignment of IBBL. the relevant Data/Audit Reports and analyze Statutory Auditors also submitted a Management those to assess the risk of branches and submit Report. This Report was discussed in the Meeting report to the Management. They help the Audit of Audit Committee and sent to Bangladesh Bank and Inspection Division to chalk out Risk Based as per requirement. The Audit Committee also Audit and Inspection Program for the branches. monitors its compliance through Internal Control The Monitoring Division also ensures internal and Compliance Wing. check at the time of performing certain functional areas through different tool like: DCFCL Risk Management (Departmental Control Functions Checklist), QOR (Quarterly Operation Report) and IDCL Identification of the Risks (Investment Documentation Checklist) following As per guidelines of Bangladesh Bank, The Risk

84 Annual Report 2012 Commerce Minister Ghulam Muhammad Quader, MP is handing over ICMAB Award

Management Wing (RMW) has been established everyone in the Bank since the code spells out in IBBL, which is responsible for identification and the expected standards of behaviour and sets the management of risks faced by the Bank. The details operating principles to be followed. Every official of our internal and external risk management ensures that the bank at all times maintains high mechanism is included in a separate section titled ethical standards and adequate internal control Risk Management of IBBL and steps have been measures are in place guarding against unethical taken to manage risks. practices and irregularities.

Strategies adopted to Manage and Statement of Ethics and Values Mitigate Risk IBBL has adopted core values, commitments Number of steps including conducting Stress Testing and code of conduct/ethical principles which are have been introduced to manage and mitigate risk. A strictly followed. These are included in the earlier broad detail is included in the separate section titled section of the report. Risk Management of IBBL. Communication of Statement of Ethics Ethics and Compliance The satement of ethics and business practices The Bank pays close attention to the moral concerns is approved by the Board of Directors and is in order to make the right ethical decisions on a circulated to all the directors and employees for day to day basis over and above observing the law, their acknowledgement. one of the basic professional requirements for the Bank. IBBL belives that upholding of critical interest Board’s Statement on Ethics and to the customers, employees, regulators alike to Compliance the Bank itself as secured, reliable and efficient banking system is one of the pillars of economic The Board of Directors of IBBL is committed to stability of any country. introduce high level of code of conduct and ethical principles. It also monitors strict compliance of the Enforcing a corporate code of ethics requires same. understanding and active participation by

Annual Report 2012 85 Effective Anti Corruption and Remuneration of Directors, Chairman, Anti-Fraud Program Managing Director and Senior IBBL follows anti fraud and anti corruption program Executives as per the guidelines of regulatory authorities to Honorarium paid to the Directors and others for prevent fraud and corruption. All tiers of employees attending meetings are as follows: are trained on the issues. For Board Meeting / Shari‘ah Supervisory Committee Meeting Tk.5,000.00. For Executive Whistle Blowing Policy Committee / Other Committee Meeting Tk.4,000.00 Our whistle blowing policy aims to promote As per Bangladesh bank BRPD Circular no. 09 th tranperancy and serves as a channel of corporate dated 19 September 1996, IBBL has prodived fraud risk management. The policy enables any only the following facilities to the Directors: staff member, who has a legitimate concern on • The Chairman of the Board of Directors is an existing or potential wrong-doing, done by any provided with a car, telephone, office chamber person within the Bank. Central Complaint cell has and private secretary been established and a vigilance team has also • In addition to the above Directors are been formed to protect fraud and error. Effective entitled to fees and other benefits for protection of whistle blowers is ensured. Risk attending the Board, Executive Committee, Management Unit (RMU) acts as the whistleblower Audit Committee and Shari‘ah Supervisory at IBBL. Committee meetings Remuneration Committee • Managing Director is paid salaries and allowances as per approval of the Board Committee Charter and Bangladesh Bank which is separately disclosed in the Financial Statements. Since it is not permitted as per Bangladesh Bank guidelines, separate committee of Board • The senior management is remunerated as on Remuneration has not been formed in IBBL. per standard pay structure of the bank being But the Board of Directors time to time evaluates approved by the Board. the remuneration paid to all level of employees, The Bank has fully complied with Bangladesh directors and others and decides on the issue. Bank circular and instruction in this regard.

Composition Human Capital The remuneration is decided by the Board Islami bank Bangladesh Limited views its of Directors where all the members are non- employees as the most valuable capital of the execuitive diretors. The Managing Director, Deputy organization with the potential to bring superior Managing Directors, Head of Human Resources, results. CFO and other related officials work on the issue as per guidance of the Board. Human Resources Development and Policies on Remuneration Management Key policies to decide on remuneration include In order to keep pace with the additional human market trend, inflation, job requirement, position in resources requirement and to enhance the other banks in the same area etc. employment opportunity in the country, periodic recruitment is done as per need of the Bank. In the year 2012, total 1,152 employees were Meetings on Remuneration Issues recruited and after this recruitment total number Several meetings of the executives and related of employees of the Bank increased to 12,188 Board members were held to finalize some including 407 female officials as on 31st December benefits paid to the employees during the year 2012 against 11,465 including 216 female officials 2012. as on 31st December 2011.

86 Annual Report 2012 Dr. Akbar Ali Khan, former Advisor to the Caretaker Government, is addressing an Executive Development Program

IBBL’s Human Resources Management always Merit Based Recruitment believes to look at the man behind the machine because only an educated, talented and skilled To acieve the long cherished objectives by employee can ensure the highest yield from the following the principle of merit based recruitment machine and hence the Bank always strives to with this end in view, IBBL has formulated its develop skills and competencies at all levels of Policy Mannual for Recruitment and Development the employees. of Human Resources. This policy is duly approved by the Board which is being followed meticulously Succession Planning to ensure right manpower for right position. The bank is well aware of the necessity to operate the business efficienctly and to maintain continuity. Performance Appraisal System IBBL has taken initiatives to develop succession IBBL follows a well-structured performance planning for its senior management positions as it recognizes that with a good succession plan, apprials system for evaluating the performance it can uphold its traditions, promote image, build of the employees. Standard appraisal system new values and ensure that the bank is prepared ensures justice to all the employees of the bank. for future challenges.

Manpower Position and Some Other Related Information Category 2012 2011 2010 2009 2008 Executive 387 347 316 284 262 Officer 7294 6782 6092 5646 5341 Sub-Staff 1953 1845 1627 1542 1483 Sub total 9634 8974 8035 7472 7086 Rural Development Scheme (RDS) 2191 2024 1837 1732 1928 Others (Temporary) 363 467 477 384 383 Total Manpower 12188 11465 10349 9588 9397 Total Branch 276 266 251 231 206 Per Branch Employee (including RDS & others) 44 43 41 42 46 Per Branch Employee (Excluding RDS & others) 36 34 32 32 34

Annual Report 2012 87 Orientation Program for Probationary Officers

Promotion, Reward & Motivation Bank’s Contribution towards the Staff

IBBL follows structured human resources manual IBBL is committed to treating all employees with for providing promotion, reward and motivation dignity and respect. The bank strives to maintain towards staff. During the year 2012, IBBL offered a comfortable working environment, irrespective promotion and reward that attained distinction in of individual differences. A high quality and dispersing challenges jobs. competent human resource is crucial to continue growth and success of any business entity, which Training and Development can be achieved by improving skill, knowledge and IBBL always strives for excellence in improving the productivity of employees. Customers’ perception ethical and professional standard of the officials and satisfaction ultimately determines relative or of the bank and reviewed the issue from time to absolute success or failure of an organization. In time. IBBL organized continuous training to its turn, we need a competent, well-trained, committed employes throughout the year in its own training and motivated team of human resources with institutue. In addition, employees of the bank also positive and sincere attitude towards customers particitaed different training program organized by that can develop, maintain and strengthen trust different institutes at home and abroad. and confidence in our customers that is crucial for our success. Grievance Management and Counseling All employees have the right to complain both Human Resource Accounting internally and externally and the HR department Human Resource Accounting involves accounting ensures full confidentiality of those complaints. for the Bank’s management and employees as For customers, a Complaint Handling Procedure “human assets” or “human capital” that provide has been developed and implemented by Service future benefits. Towards implementing Human Quality Department in handling complaints. In addition, a 24 hour hotline number is available Resource Accounting standard IBBL adopts to lodge any irregularities at any time, which transparent disclosure practices regarding its are accordingly redirected to the respective human resources. departments and HR for resolution.

88 Annual Report 2012 Orientation Program for Assistant Officers

The Bank calculates some items related to human and well-being of the countrymen as well as resources accounting mentioned below which are of its employees. A lot of programs aiming to considered with due importance in the decision employee-welfare, Healthcare, Safety Standards making process. & Working Environment covering the followings are there in IBBL:

Employee Productivity • Non-refundable financial help from (In million taka) Employees’ Benevolent Fund

Sl. • Non-refundable financial grant from bank’s No. Particulars 2012 2011 fund 1 Total deposit per employee 54.21 47.91 2 Total investment per employee 50.94 45.28 • Awarding of prize against essay competition 3 Total income per employee 6.42 5.26 • Staff House Building investment facilities 4 Total expenses per employee 4.46 3.54 5 Profit before provision per 1.96 1.73 • Staff Household Durables Scheme employee 6 Profit before taxes per 1.58 1.45 • ‘Quard’ against Provident Fund employee • ‘Quard’ against Benevolent Fund 7 Salary and allowances per 0.72 0.61 employee • Burial expenses 8 Salary and allowances as 37% 35% percentage of operating profit • Recreation program before provision

The figures are for mainstream only • Honorarium for passing Banking Diploma examination

Healthcare, Safety Standards and • Awarding of cash, crest & certificate of merit Modern Working Environment to the meritorious university students

IBBL is the pioneer of welfare banking which • Awarding of scholarships to help educate the constantly endeavors to bring about a sort meritorious wards of the employees of radical change in the level of prosperity

Annual Report 2012 89 Trainning Course on Islamic banking for Agrani Bank Offcials

• Awarding of cash prize and certificate of merit disclosures in annual report in the broad areas to the meritorious wards of bank employees of Profile Disclosure, Management Approach, Performance Indicators and Labor Practices as • Medical allowance is paid to each employee, stipulated in the Content Index of Financial Service which is tax-free. Sector Supplement. IBBL complies with most of • In order to provide highly sophisticated the disclosure requirements as stated in the Index. and encouraging working environment, all the IBBL offices including head office and branches are equipped with modern facilities Communication to Shareholders with air-conditioning and generator for power & Stakeholders back up. Policy on Communication with • All IBBL offices including head office and Shareholders and Stakeholders branches are equipped with fire fighting material and have multiple exit points for IBBL follows specific policy to facilitate effective emergency exit. communication with the shareholders and stakeholders. IBBL has a separate Department Corporate Structure named Share Department to keep communication with the shareholders, Bondholders and other Corporate Structure of IBBL is shown at page no. 36 related stakeholders. Shareholders and others may contact at any time to this Department for Global Reporting Initiative (GRI) any sort of information and query. IBBL provides updated information in its website for all the stake The Global Reporting Initiative (GRI) is a non- holders of the bank profit organization that promotes economic, environmental and social sustainability. GRI provides all companies and organizations with a Policy on Ensuring Participation of comprehensive sustainability reporting framework Shareholders at AGM that is widely used around the world. In line with To make the AGM more participatory, IBBL declares the above, Islami Bank Bangladesh Limited. has date of AGM well ahead of time, circulate Annual started to incorporate the components of standard

90 Annual Report 2012 29th Annual General Meeting

Reports and other documents in time, arrange Investors Friendly Information AGM in a well-known place and convenient time, allows shareholders to speak in the AGM freely Investment in IBBL’s share is very reliable due to and value their proposals and suggestions. comfortable capital adequacy, good asset quality, excellent financial performance, comfortable liquidity, strong market position and experienced Environmental and Social top Management. Besides, return on IBBL’s share is excellent. IBBL ranked 17th position among the Obligations top 1000 banks around the globe in trems of profit on capital. Policies on Social and Environmental Responsibility IBBL ranks top to the Foreign Investors. The Bank has also reputation for Shari‘ah based banking Freshly, the issue of climatic change is being management. There is very little fluctuation in the addressed seriously all over the world. It is Islami Bank share price. There is no rumour in identified that Bangladesh being a southern the Islami Bank share. Therefore, Investors rely delta is under serious threat of natural disaster. greatly on this share. Goldman Sachs, the leading A detailed discussion regarding environment wealth management institution of the world, has and social obligation of IBBL is included in the chosen share of IBBL in their portfolio GSN-11 as Corporate Social Responsibilities report. the best in Bangladesh. Therefore, the company has invested a good amount of their investible Specific Policies undertaken by fund in IBBL shares. the Bank In addition, the leading wealth management IBBL, being a responsible bank, has taken some institutions of the world have chosen share of initiatives in this regard such as IBBL in their portfolio. 28 Foreign Companies have purchased 6.34 per cent shares of total Paid-up a. Measures taken within the organization Capital of the Bank through Standard Chartered b. Measures taken with the customers Bank. Among them JP Morgan Chase Bank of c. Measures taken with the community. Luxembourg has already purchased 2.71 per cent shares of total Paid-up Capital of the Bank solely.

Annual Report 2012 91 Glimpses of 29th AGM

92 Annual Report 2012 Management Review & Responsibility becomes due without compromising the earning potential of the Bank. In every ALCO meeting, the Managing Director is the Chief Executive committee reviews actions taken in previous ALCO Officer (CEO) of the Bank. Bank has approved meeting, economic and market status and outlook, Organizational Structure (Organogram) with liquidity risk related to balance sheet, profit rate clear functional separation and segregation of structure etc. Special ALCO meeting is arranged processing/functioning (Front and Back office) as and when any contingent situation arises. authorities. This ensures Core Risk Management practice and compliance across the Bank. Bank’s functions and plans also consider various The Shari‘ah Supervisory Committee regulatory limits and restrictions to be risk As per Islamic Banking Guidelines, issued by compliant. Bangladesh Bank, the Shari‘ah Supervisory Committee has been formed consisting of 12 Management Committee is the main body of members including Shari‘ah scholars, renowned management and decision making in the bank. lawyers and eminent economists. The Shari‘ah Besides, there are ALCO and Risk Management Supervisory Committee of IBBL gives opinions wing (RMW) for designated functions and and guidelines to implement and comply with responsibilities. Each of these forums has specific the Shari‘ah principles in all activities of the Bank Terms of Reference approved by the Board. particularly in the modes of investment. The Above all, the bank is governed by the rules, Committee is governed by a bye-laws approved regulations, guidelines, directions and policies by the Board of Directors. as applicable for the banking business and The representatives of the Committee attend operations. different meetings of the Bank, like Board of Directors, Executive Committee, Audit Committee, The Management Committee and Annual Business Development Meetings and Management Committee of the bank comprises 12 Conferences to give opinions and oversee the (twelve) top-level executives, having over 25 years activities of the Bank from Shari`ah perspective. experiances and sound knowledge in Islamic The Committee also evaluates performance of the banking. It is headed by the Managing Director officials in terms of their Shari`ah compliance. CEO of the Bank. The Committee exerts financial, administrative and business discretionary powers Shari‘ah Supervisory Committee & delegated by the Board and is also responsible Sub-committee Meeting for implementation of the policies and guidelines approved by the Board. The Management In the year 2012, 4 (four) meetings of Shari‘ah Committee scrutinizes the issues thoroughly Supervisory Committee and 18 (eighteen) before placing these to the Executive Committee/ meetings of Shari‘ah Sub-Committee were held. Board. The Management Committee evaluates Members of Shari‘ah Supervisory Committee the performance of the Bank critically, adopts attended 26 (twenty six) seminars as discussant strategic action plan to achieve various targets of on the occasion of opening new Branches and the bank set by the Board of Directors. Agriculture Branches and participated in Business Development Meetings arranged by several Zones and Head Office. Asset-Liability Committee (ALCO) The Asset-Liability Committee (ALCO) of the Bank Shari‘ah Inspection is comprised of 10 (ten) members from the top management which meet at least once in a month As part of major responsibilities of the Committee to review the liquidity position of the bank, maturity it also conducted Shari‘ah inspections in 266 wise grouping of assets and liabilities, deposits branches including 30 SME/Agriculture Branches and investment pricing and liquidity contingency through Muraqibs during 2012 to ensure that the plan in order to manage the Balance Sheet Risk Shari‘ah principles are implemented and complied in a better way. The ALCO is entrusted with the with, or, on the contrary, to detect if there is any responsibility of ensuring the Bank’s adequate deviation or lapse that has taken place in the liquidity at all times to meet its obligations when Branches of the Bank.

Annual Report 2012 93 Regulatory Compliance IBBL obtained the “AA+” rating in the long term has been determined on the basis of good Bank has been following related guidelines fundamentals such as: including submission of Quarterly, Half-yearly and • Comfortable capital adequacy Yearly financial statements and other statutory reports. • Good asset quality • Good financial performance Any significant development in the business is • Comfortable liquidity forth-with disclosed in the form of price sensitive declarations adhering proper rules/guidelines/ • Strong market position directives. Bank also ensures submission of • Considerable improvement in non-funded returns to regulatory bodies in full-compliance business of the requirements and appropriate disclosures • Experienced top management ensuring transparency and accountability. • Wide operational network Board of Directors ensures adequate disclosures • Carrier of Islamic Banking Flagship in for the shareholders and other stakeholders. Bangladesh • Significant rated corporate exposures Delegation of Power Board of Directors’ Responsibility Management Committee of the Bank has been in Respect of Audited Financial empowered with appropriate administrative finance and business decision-making authorities Statements as per the guidelines of Bangladesh Bank whereas The Board of Directors ensure that financial the Board of Directors and its committees are statements give a true and fair view of the Bank’s entrusted with formulation of standard policies state of affairs, results, changes in equity and and procedures. Management Committee of the cash flows of 2012. In preparing the financial Bank has been delegated with the authority of statements, the bank uses appropriate accounting approving Investment up to a given limit. Board policies, supported by reasonable as well as has approved the procurement policies to cover prudent judgments and estimates to ensure that all the purchase of goods and services and other applicable accounting standards have been followed procurements of the Bank. at the time of preparing the financial statements.

Besides, various manuals, policies and guidelines were approved by the Board from time to time Relationship of Board of Directors with with levels of authority and process of delegation the Auditors varied across the Bank. The Board has established transparent and appropriate relationships with its external auditors Credit Rating of the Bank through the Audit Committee. The external auditors have an obligation to bring any significant IBBL continuous to maintain highest rating among lapses/irregularities in the Bank’s system of the private sector banks of the country. The internal control and compliance to the attention of description of latest credit rating of the bank is Management, Audit Committee and the Board. delineated below:

Name of Long-term Short-term the Rating Particulars AA+ (Double A+) ST-1 Remarks Company (High Safety) (Highest Grade) Credit Rating Surveillance Bank rated in this category is adjudged Highest certainty of timely Based on Information Rating to be of high quality, offer higher safety payment. Short-term liquidity Audited Financial and Services and have high credit quality. This level including internal fund generation Statements as of Limited of rating indicates a corporate entity is very strong and access to 31 December 2011 (CRISL) with a sound credit profile and without alternative sources of funds is and is valid up to significant problems. Risks are modest outstanding. Safety is almost risk June 30, 2012 for and may vary slightly from time to time free like Government short-term long term because of economic conditions obligations Date of Declaration of Rating: June 22, 2012 Outlook: Stable

94 Annual Report 2012 Relationship of Board of Directors with the Shareholders and Investors The Board recognizes the importance of timely and One of the most important means of communication proper dissemination of information with regard to to the Shareholders is the Annual Report, which the Bank’s performance and other issues affecting contains comprehensive and sufficient details the interests of the shareholders, investors and about the financial results, performance and other the general public. important activities of the Bank.

Directors’ Attendance in the Board Meeting, Executive Committee Meeting and Audit Committee Meeting

Board Executive Committee Audit Committee Sl. Name of Directors Position Eligible to Eligible to Eligible to No Attended Attended Attended Attend Attend Attend 1 Jb. A.N.M.A. Zaher Chairman 20 20 - - - -

2 Jb. Yousif Abdullah Al-Rajhi Vice Chairman 20 2 - - - -

Jb. Kazi Harun-ar-Rashed (Alternate on Alternate Director 1 1 - - - - behalf of Jb. Yousif Abdullah Al-Rajhi) 3 Engr. Mustafa Anwar Vice Chairman 20 19 - - - -

4 Engr. Md. Eskander Ali Khan Director & 20 20 50 50 - - Chairman of EC 5 Jb. Md. Khurshed Hossain Director 3 3 - - - -

Jb. Md. Abul Hossain Director 17 17 25 25 - -

6 Dr. Abdulhameed Fuad Al-Khateeb Director 20 6 50 1 - -

7 Jb. Mohamad Adnan Midani Director 20 4 - - 22 -

8 Jb. Mohammad Abdullah AlJalahma Director 20 7 - - - -

9 Jb. Hafizul Islam Mian Director 8 7 25 23 - -

10 Jb. Md. Shahidul Islam Director 8 7 - - 14 14

11 Engr. Muhammad Dawood Khan Director 6 6 25 24 - -

12 Jb. Mohammed Nazrul Islam Director 8 8 25 23 - -

13 Jb. Md. Abdus Salam, FCA, FCS Depositor Director 20 14 25 24 22 20

14 Jb. Humayun Bokhteyar, ACPA, FCA Depositor Director 20 17 50 47 8 7

15 Professor NRM Borhan Uddin Ph.D Independent 20 20 - - 22 21 Director & Chairman of AC 16 Jb. Salahuddin Ahmed Director 15 4 - - - -

17 Jb. Mominul Islam Patwary Director 8 8 25 24 - -

18 Jb. Abdullah Abdul Aziz Al-Rajhi Director 15 - - - - -

Prof. Dr. A.K.M. Sadrul Islam (Alternate on Alternate Director 1 1 - - - - behalf of Jb. Abdullah Abdul Aziz Al-Rajhi) 19 Prof. Dr. A.K.M. Sadrul Islam Independent ------Director 20 Barrister Mohammed Belayet Hossain Independent ------Director

Annual Report 2012 95 Statement of Shares held by Directors & their Spouses and Minor Children as on 31.12.2012

Sl. No. of Name of Directors Status No. Shares 1 2 3 4 The Ibn Sina Trust Chairman 28,459,512 Repr. by Prof. Abu Nasser Muhammad Abduz Zaher 01. Prof. Abu Nasser Muhammad Abduz Zaher Self 55,800 Mrs. Hamida Khatun Wife of Prof. Abu Nasser 101,762 Muhammad Abduz Zaher Abdullah Abdul Aziz Al-Rajhi, K.S.A. Director

02. Yousif Abdullah Al-Rajhi, K.S.A. Vice-Chairman 94,877,137 S/O- Abdullah Abdul Aziz Al-Rajhi holding of 7.58% shares of the total Paid-up Capital of the Bank. 03. Yousif Abdullah Al-Rajhi, , K.S.A. Self 77,650 The Public Institution for Social Security, Kuwait Vice-Chairman 80,843,000 04. Repr. by Engr. Mustafa Anwar Engr. Mustafa Anwar Self 2,957,912 Al-Rajhi Co. for Industry & Trade, K.S.A. Director 124,305,850 Repr. by Engr. Md. Eskander Ali Khan 05. Engr. Md. Eskander Ali Khan Self 1,241,287 Shahanara Begum & Engr. Md. Eskander Ali Khan Joint Account 26,325 Kuwait Awaqaf Public Foundation, Kuwait Director 53,884,100 06. Repr. by Mohammad Abdullah Al Jalahma Islamic Development Bank, K.S.A. Director 93,852,825 07. Repr. by Mohamad Adnan Midani 08. Investment Corporation of Bangladesh Director 33,792,662 Repr. by Md. Abul Hossain Arabsas Travel & Tourist Agency, K.S.A. Director 125,094,537 Repr. by Dr. Abdulhameed Fouad Al-Khateeb Dr. Abdulhameed Fouad Al-Khateeb Self 7,143,925 09. Linah Mahmoud H. Naseef Wife of Dr. Abdulhameed 2,225 Fouad Al-Khateeb Mrs. Mona Barakeh Wife of Dr. Abdulhameed 1,725 Fouad Al-Khateeb Kuwait Finance House, Kuwait Director 65,706,125 10. Repr. by Salahuddin Ahmed Islamic Education Society Director 30,525 11. Repr. by Hafizul Islam Mian Md. Shahidul Islam Director 2,097,050 12. Mrs. Mahfuza Khatun Wife of Md. Shahidul Islam 666,887 Mohammed Nazrul Islam Director 268,512 13. Mrs. Salina Begum Wife of Mohammed Nazrul 229,175 Islam Mominul Islam Patwary Director 48,700 14. Mrs. Maleka Parveen Wife of Mominul Islam 41,425 Patwary 15. Md. Abdus Salam, FCA, FCS Depositor Director 0 16. Humayun Bokhteyar, ACPA, FCA Depositor Director 0 17. Professor NRM Borhan Uddin, Ph.D Independent Director 0 Prof. Dr. A.K.M. Sadrul Islam Independent Director 5,787 18. Mrs. Nazmun Nahar Islam Wife of Prof. Dr. A.K.M. 67,375 Sadrul Islam 19. Barrister Mohammed Belayet Hossain Independent Director 0 Mohammad Abdul Mannan Managing Director & CEO 240,675 20. Mrs. Maksuda Begum Wife of Mohammad Abdul 50,087 Mannan

96 Annual Report 2012 Statement of Shares held by CEO, Company Secretary, CFO, Head of Internal Audit and their Spouses and Minor Children as on 31.12.2012

Sl. No. of Name Status No. Shares Mohammad Abdul Mannan Managing Director & Chief Executive Officer (CEO) 240,675 01. Mrs. Maksuda Begum W/O. Mohammad Abdul Mannan, 50,087 Managing Director & CEO Abu Reza Md. Yeahia Senior Vice President & Company Secretary 2,800 02. Mrs. Shahinoor Akther W/O. Abu Reza Md. Yeahia, 1,512 Senior Vice President & Company Secretary Md. Habibur Rahman Bhuiyan, FCA Deputy Managing Director & Head of Internal Control & 13,987 Compliance Wing (ICCW) 03. Mrs. Tahmina Rahman W/O. Md. Habibur Rahman Bhuiyan, 7,225 Deputy Managing Director & Head of Internal Control & Compliance Wing (ICCW) Mohammad Nesar Uddin, FCA, FCMA Executive Vice President & Chief Financial Officer (CFO) 25 04. Mrs. Majeda Akter W/O. Mohammad Nesar Uddin, FCA, FCMA, 1,337 Executive Vice President & CFO

Statement of Shares held by top 5 (five) Salaried Employees other than the Directors, CEO, Company Secretary, CFO, Head of Internal Audit (ICCW) as on 31.12.2012

Sl. No. of Name Designation No. Shares 01. Md. Habibur Rahman Deputy Managing Director, CIW 42,875 02. Md. Nurul Islam Deputy Managing Director, DW 725 03. Mohammad Abul Bashar Deputy Managing Director, ICTW 23,100 04. Syed Abdullah Mohammed Saleh Deputy Managing Director, RIW 87 05. A.K.M. Abdul Malek Chowdhury Deputy Managing Director, RMW 775

Annual Report 2012 97 28 March, 2013

The Board of Directors Islami Bank Bangladesh Bank Islami Bank Tower 40, Dilkusha C/A Dhaka-1000

Sub: CEO/CFO’s Declaration to the Board

In accordance with the notification of Bangladesh Securities and Exchange Commission No. SEC/CMRRCD/2006-158/134/Admin/44 dated 07, August, 2012, we declare that for the financial year ended 31 December, 2012:

i) We have reviewed the financial statements for the year and that to the best of our knowledge and belief:

a) These statements do not contain any materially untrue statement or do not omit any material fact or contain statements that might be misleading;

b) These financial statements together present a true and fair view of the company’s affairs and are in compliance with existing accounting standards and applicable laws;

ii) There are, to the best our knowledge and belief, no transactions carried out or recorded into by the Bank during the year are fraudulent, illegal or violating Bank’s code of conduct.

Mohammad Abdul Mannan Mohammad Nesar Uddin FCA, FCMA Managing Director Chief Financial Officer

98 Annual Report 2012 Compliance Status of BSEC Guidelines for Corporate Governance

Status of Compliance by IBBL with the Corporate Governance (CG) Guidelines issued by BSEC through Notification No. SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012:

Compliance Status Condition Title Not Remarks No. Complied Complied 1 2 3 4 5 1 Board of Directors 1.1 Board’s size: Board members shall not be less than 5 (five) and more √ than 20 (twenty)

1.2 Independent Director 1.2(i) At least one fifth (1/5) of the total number of directors in the company’s *√ board shall be independent directors. 1.2(ii) For the purpose of this clause “Independent Director” means a Director: 1.2(ii)a) Independent Directors do not hold any share or holds less than one √ percent (1%) shares of the total paid-up capital. 1.2(ii)b) Independent Directors are not connected with the company’s Sponsor √ or Director or shareholder who holds one percent (1%) or more shares.

1.2(ii)c) Independent Directors do not have any other relationship, whether √ pecuniary or otherwise, with the company or its subsidiary/associated companies; 1.2(ii)d) Independent Directors are not members, directors or officers of any √ stock exchange; 1.2(ii)e) Independent Directors are not Shareholder, Directors or Officers of any √ member of stock exchange or an intermediary of the capital market; 1.2(ii)f) Independent Directors are not the partners or executives during the √ preceding 3 (three) years of the concerned company’s statutory audit firm; 1.2(ii)g) They are not the Independent Directors in more than 3 (three) listed √ companies; 1.2(ii)h) They have not been convicted by a court of competent jurisdiction as √ a defaulter in payment of any loan to a bank or a Non-Bank Financial Institution (NBFI); 1.2(ii)h(i) They have not been convicted for a criminal offence involving moral √ turpitude. 1.2(ii)h(iii) The independent director(s) shall be appointed by the board of Directors √ and approved by the shareholders in the Annual General Meeting (AGM). 1.2(ii)h(iv) The post of independent Director(s) cannot remain vacant for more than √ 90 (ninety) days. 1.2(ii)h(v) The Board shall lay down a code of conduct of all Board members and √ annual compliance of the code to be recorded. 1.2(ii)h(vi) The tenure of office of an independent Director shall be for 3 (three) √ years, which may be extended for 1 (one) term only. 1.3 Qualification of Independent Director (ID) 1.3(i) Independent Director shall be knowledgeable individual with integrity √ 1.3(ii) The Independent Director must have at least 12 (twelve) years of √ corporate management/professional experiences. 1.3(iii) In special cases the above qualifications may be relaxed subject to N/A approval of the Commission.

*3 (three) Independent Directors as 1/5th of 14 elected directors (excluding independent and depositors directors) have been appointed. However, 1 (One) more Independent Director will be appointed at the earliest as required considering 1/5th of the total number of directors.

Annual Report 2012 99 Compliance Status Condition Title Not Remarks No. Complied Complied 1 2 3 4 5 1.4 Separate Chairman and CEO and their clearly defined roles and √ responsibilities.

1.5 Directors’ Report to Shareholders

1.5(i) Industry outlook and possible future developments in the industry. √ 1.5(ii) Segment-wise or product-wise performance. √ 1.5(iii) Risks and concerns √ 1.5(iv) A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit √ Margin. 1.5(v) Discussion on continuity of any Extra-ordinary gain or loss. √ IBBL does not have such gains or loss 1.5(vi) Basis for related party transactions- a statement of all related party √ There were transactions should be disclosed in the annual report. no such case in 2012 1.5(vii) Utilization of proceeds from public issues, rights issues and/or through √ any others instruments. 1.5(viii) An explanation if the financial results deteriorate after the company N/A goes for Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Offer, Direct Listing, etc. 1.5(ix) If significant variance occurs between Quarterly Financial performance N/A and Annual Financial Statements the management shall explain about the variance on their Annual Report. 1.5(x) Remuneration to directors including independent directors. √ 1.5(xi) The financial statements prepared by the management of the issuer √ company present fairly its state of affairs, the result of its operations, cash flows and changes in equity. 1.5(xii) Proper books of account of the issuer company have been maintained. √ 1.5(xiii) Appropriate accounting policies have been consistently applied in √ preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment. 1.5(xiv) International Accounting Standards (IAS)/Bangladesh Accounting √ Standards (BAS)/International Financial Reporting Standards (IFRS)/ Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there-from has been adequately disclosed. 1.5(xv) The system of internal control is sound in design and has been effectively √ implemented and monitored. 1.5(xvi) There are no significant doubts upon the issuer company’s ability to √ continue as a going concern. If the issuer company is not considered to be a going concern, the fact along with reasons thereof should be disclosed. 1.5(xvii) Significant deviations from the last year’s operating results ofthe N/A issuer company shall be highlighted and the reasons thereof should be explained. 1.5(xviii) Key operating and financial data of at least preceding 5 (five) years shall √ be summarized. 1.5(xix) If the issuer company has not declared dividend (cash or stock) for the N/A year, the reasons thereof shall be given.

100 Annual Report 2012 Compliance Status Condition Title Not Remarks No. Complied Complied 1 2 3 4 5 1.5(xx) The number of Board meetings held during the year and attendance by √ each director shall be disclosed. 1.5(xxi) The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name wise details where stated below) held by:- 1.5(xxi)a) Parent/Subsidiary/Associated Companies and other related parties √ (name wise details); 1.5(xxi)b) Directors, Chief Executive Officer, Company Secretary, Chief Financial √ Officer, Head of Internal Audit and their spouses and minor children (name wise details); 1.5(xxi)c) Executives (top five salaried employees of the company other than √ stated in 1.5 (xxi)b); 1.5(xxi)d) Shareholders holding ten percent (10%) or more votes interest in the √ company (name wise details). 1.5(xxii) In case of the appointment/re-appointment of a Director the company shall disclose the following information to the shareholders: 1.5(xxii)a A brief resume of the director; √ 1.5(xxii)b Nature of his/her expertise in specific functional areas; √ 1.5(xxii)c Names of companies in which the person also holds the directorship √ and the membership of committees of the Board. 2.00 Chief Financial Officer (CFO), Head of Internal Audit & Company Secretary 2.1 Appointment of CFO, Head of Internal Audit and Company Secretary √ and their clearly defined roles, responsibilities and duties. 2.2 Attendance of CFO and the Company Secretary at Board of Directors √ meeting. 3. Audit Committee 3. (i) The company shall have an Audit Committee as a sub-committee of the √ Board of Directors. 3. (ii) The Audit Committee shall assist the Board of Directors in ensuring that √ the financial statements reflect true and fair view of the state of affairs of the company and in ensuring a good monitoring system within the business. 3. (iii) The Audit Committee shall be responsible to the Board of Directors. The √ duties of the Audit Committee shall be clearly set forth in writing. 3.1 Constitution of the Audit Committee 3.1(i) The Audit Committee shall be composed of at least 3 (three) members. √ 3.1(ii) Constitution of Audit Committee with Board Members including one √ independent director. 3.1(iii) All members of the audit committee should be “financially literate” √ and at least 1(one) member shall have accounting or related financial management experience. 3.1(iv) Filling of Casual Vacancy in Committee N/A 3.1(v) The company secretary shall act as the secretary of the Committee. √ 3.1(vi) The quorum of the Audit Committee meeting shall not constitute without √ at least 1 (one) independent director. 3.2 Chairman of the Audit Committee 3.2(i) Chairman of the Audit Committee shall be an independent director. √ 3.2(ii) Chairman of the audit committee shall remain present in the Annual √ General Meeting (AGM).

Annual Report 2012 101 Compliance Status Condition Title Not Remarks No. Complied Complied 1 2 3 4 5 3.3 Role of Audit Committee 3.3(i) Oversee the financial reporting process. √ 3.3(ii) Monitor choice of accounting policies and principles. √ 3.3(iii) Monitor Internal Control Risk management process. √ 3.3(iv) Oversee hiring and performance of external auditors. √ 3.3(v) Review along with the management, the annual financial statements √ before submission to the board for approval. 3.3(vi) Review along with the management, the quarterly and half yearly √ financial statements before submission to the board for approval. 3.3(vii) Review the adequacy of internal audit function. √ 3.3(viii) Review statement of significant related party transactions submitted by √ the management. 3.3(ix) Review Management Letters/ Letter of Internal Control weakness issued √ by statutory auditors. 3.3(x) When money is raised through Initial Public Offering (IPO)/Repeat N/A Public Offering (RPO)/Rights Issue the company shall disclose to the Audit Committee about the uses/applications of funds by major category (capital expenditure, sales and marketing expenses, working capital, etc), on a quarterly basis, as a part of their quarterly declaration of financial results. 3.4 Reporting of the Audit Committee 3.4.1 Reporting to the Board of Directors 3.4.1(i) The Audit Committee shall report on its activities to the Board of √ Directors. 3.4.1 (ii) The Audit Committee shall immediately report to the Board of Directors √ on the following findings, if any: 3.4.1(ii)a) Report on conflicts of interests; √ 3.4.1(ii)b) Suspected or presumed fraud or irregularity or material defect in the √ internal control system; 3.4.1(ii)c) Suspected infringement of laws, including securities related laws, rules √ and regulations; 3.4.1(ii)d) any other matter which shall be disclosed to the Board of Directors √ immediately. 3.4.2 Reporting of anything having material financial impact to the Commission. √ 3.5 Reporting to the Shareholders and General Investors √ 4. External/Statutory Auditors 4.(i) Appraisal or valuation services or fairness opinions. √ 4.(ii) Financial information systems design and implementation. √

4.(iii) Book-keeping or other services related to the accounting records or √ financial statements. 4.(iv) Broker-dealer services. √ 4.(v) Actuarial services. √ 4.(vi) Internal audit services. √ 4.(vii) Any other service that the Audit Committee determines. √

102 Annual Report 2012 Compliance Status Condition Title Not Remarks No. Complied Complied 1 2 3 4 5 4.(viii) No partner or employee of the external audit firms shall possess any √ share of the company they audit at least during the tenure of their audit assignment of that company. 5. Subsidiary Company 5.(i) Provisions relating to the composition of the Board of Directors of the √ holding company shall be made applicable to the composition of the Board of Directors of the subsidiary company.

5.(ii) At least 1 (one) independent director on the Board of Directors of the √ holding company shall be a director on the Board of Directors of the subsidiary company. 5.(iii) The minutes of the Board meeting of the subsidiary company shall be √ placed for review at the following Board meeting of the holding company. 5.(iv) The minutes of the respective Board meeting of the holding company √ shall state that they have reviewed the affairs of the subsidiary company as well. 5.(v) The Audit Committee of the holding company shall also review the √ financial statements, in particular the investments made by the subsidiary company. 6. Duties of Chief Executive Officer (CEO) and Chief Financial Officer (CFO) 6.(i) They have reviewed financial statements for the year and that to the √ best of their knowledge and belief :- 6.(i)a) These statements do not contain any materially untrue statement √ or do not omit any material fact or contain statements that might be misleading; 6.(i)b) These statements together present a true and fair view of the company’s √ affairs and are in compliance with existing accounting standards and applicable laws. 6.(ii) There are, to the best of knowledge and belief, transactions entered into √ by the company during the year are not fraudulent, illegal or don’t of the company’s code of conduct. 7. Reporting and Compliance of Corporate Governance 7 (i) The company shall obtain a certificate from a practicing Professional √ Accountant/Secretary (Chartered Accountant/Cost and Management Accountant/Chartered Secretary) regarding compliance of conditions of Corporate Governance Guidelines of the Commission and shall send the same to the shareholders along with the Annual Report on a yearly basis. 7 (ii) The directors of the company shall state, in accordance with the √ Annexure attached, in the directors’ report whether the company has complied with these conditions.

Annual Report 2012 103 Compliance Status of Bangladesh Bank’s Guidelines for Corporate Governance

Sl. Compliance Particulars No. Status 1. Responsibilities and authorities of the board of directors: a. Work-planning and Strategic Management: Complied i. The Board shall determine the objectives and goals and to this end shall chalk out strategies and works plan on annual basis. It shall specially engage itself in the affairs of making strategies consistent with the determined objectives and goals and in the issues relating to structural change and reorganization for enhancement of institutional efficiency and other relevant policy matters. It shall analyze/monitor at quarterly basis the development of implementation of the work-plans. ii. The Board shall have its analytical review incorporated in the Annual Report on the success/ Complied failure in achieving the business and other targets as set out in its annual work-plan and shall apprise the shareholders of its opinions/recommendations on future plans and strategies. It shall set the Key Performance Indicators (KPIs) for the CEO and other senior executives and have it evaluated at times. b. Lending and Risk Management: Complied i. The policies, strategies, procedures etc. in respect of appraisal of loan / investment proposal, sanction, disbursement, recovery, reschedulement and write-off thereof shall be made with the board’s approval under the purview of the existing laws, rules and regulations. The Board shall specifically distribute the power of sanction of loan/investment and such distribution should desirably be made among the CEO and his subordinate executives as much as possible. No director, however, shall interfere, directly or indirectly, in the process of loan approval. ii. The Board shall frame policies for risk management and get them complied with and shall Complied monitor at quarterly rests the compliance thereof. c. Internal control management: Complied The Board shall be vigilant on the internal control system of the bank to attain and maintain satisfactory qualitative standard of its loan / investment portfolio. It shall review quarterly the reports submitted by its audit committee regarding compliance of recommendations made in internal and external audit reports and the Bangladesh Bank inspection reports. d. Human Resources Management and Development: Complied i. Policies relating to recruitment, promotion, transfer, disciplinary and punitive measures, human resources development etc. and service rules shall be framed and approved by the Board. The chairman or the directors shall in no way involve themselves or interfere in or influence over any administrative affairs including recruitment, promotion, transfer and disciplinary measures as executed under the set service rules. No member of the Board of Directors shall be included in the selection committees for recruitment and promotion at different levels. Recruitment and promotion to the immediate two tiers below the CEO shall, however, rest upon the board. Such recruitment and promotion shall have to be carried out complying with the service rules i.e., policies for recruitment and promotion. ii. The Board shall focus its special attention to the development of skills of Bank’s complied Complied staff in different fields of its business activities including prudent appraisal of loan / investment proposals, and to the adoption of modern electronic and information technologies and the introduction of effective Management Information System (MIS). The Board shall get these programs incorporated in its annual work plan.

e. Financial Management: Complied i. The annual budget and the statutory financial statements shall finally be prepared with the approval of the Board. It shall at quarterly rests review /monitor the positions in respect of Bank’s income, expenditure, liquidity, non-performing asset, capital base and adequacy, maintenance of loan loss provision and steps taken for recovery of defaulted loans including legal measures. ii. The Board shall frame the policies and procedures for Bank’s purchase and procurement Complied activities and shall accordingly approve the distribution of power for making such expenditures. The maximum possible delegation of such power shall rest on the CEO and his subordinates. The decision on matters relating to infrastructure development and purchase of land, building, vehicles etc. for the purpose of the Bank’s business shall, however, be adopted with the approval of the board.

104 Annual Report 2012 Sl. Compliance Particulars No. Status f. Formation of supporting Committees: Complied For decision on urgent matters, an executive committee, whatever name called, may be formed with the directors. There shall be no committee or sub-committee of the Board other than the executive committee and the audit committee. No alternate director shall be included on these committees. g. Appointment of CEO: Complied The Board shall appoint a competent CEO for the bank with the approval of the Bangladesh Bank. h. The Board shall ensure fulfilling any other responsibility (ies) appropriately assigned by the central Complied bank (Bangladesh Bank) 2 Responsibilities of the Chairman of the Board of Directors: Complied a. As the chairman of the board of directors (or chairman of any committee formed by the board or any director) does not personally possess the jurisdiction to apply policymaking or executive authority, he shall not participate in or interfere into the administrative or operational and routine affairs of the bank.

b. The Chairman may conduct on-site inspection of any bank-branch or financing activities under Complied the purview of the oversight responsibilities of the board. He may call for any information relating to bank’s operation or ask for investigation into any such affairs; he may submit such information or investigation report to the meeting of the Board or the executive committee and if deemed necessary, with the approval of the Board, he shall effect necessary action thereon in accordance with the set rules through the CEO. However, any complaint against the CEO shall have to be apprised to Bangladesh Bank through the Board along with the statement of the CEO. c. The Chairman may be offered an office-room, a personal secretary/assistant, a telephone at the Complied office and a vehicle in the business-interest of the bank subject to the approval of the board. 3 Responsibilities of the Adviser: N/A The adviser, whatever name called, shall advise the Board of Directors or the CEO on such issues only for which he is engaged in terms of the conditions of his appointment. He shall neither have access to the process of decision-making nor shall have the scope of effecting executive authority in any matters of the bank including financial, administrative or operational affairs. 4 Responsibilities and authorities of the CEO: The CEO of the bank, whatever name called, shall discharge the responsibilities and effect the authorities as follows:

a. In terms of the financial, business and administrative authorities vested upon him by the Board, Complied the CEO shall discharge his own responsibilities. He shall remain accountable for achievement of financial and other business targets by means of business plan, efficient implementation thereof and prudent administrative and financial management. b. The CEO shall ensure compliance of the Bank Companies Act, 1991 and / or other relevant laws Complied and regulations in discharge of routine functions of the bank.

c. The CEO shall report to Bangladesh Bank of issues violative of the Bank Companies act, 1991 or Complied of other laws / regulations and, if required, may apprise the Board post facto. d. The recruitment and promotion of all staff of the Bank except those in the two tiers below him shall Complied rest on the CEO. He shall act in such cases in accordance with the approved service rules on the basis of the human resources policy and sanctioned strength of employees as approved by the board. The board or the chairman of any committee of the board or any director shall not get involved or interfere in such affairs. The authority relating to transfer of and disciplinary measures against the staff, except those at one tier below the CEO shall rest on him, which he shall apply in accordance with the approved service rules. Besides, under the purview of the human resources policy as approved by the board, he shall nominate officers for training etc.

5 Meetings of the Board of Directors: Complied One Meeting of the board of Directors per month can be held usually but it can be more than one upon necessity. No less than one meeting of the Board in three months is to be held. 6 Number of members of Executive Committee (EC) of the Board: Complied Number of members of the EC cannot exceed 7 members as per BB BRPD Circular Letter No. 2 dated 15 February 2010 and more than one member from one family shall not be included on the EC as per BB Circular Letter No. 4 dated 14 March 2010 7 Training of the Directors: Complied The Directors of the Board will acquire appropriate knowledge of the Banking laws and other relevant laws, rules and regulations to effectively discharge the responsibilities as a director of the bank.

Annual Report 2012 105 Certificate on Compliance of Conditions of Corporate Governance to the Shareholders of Islami Bank Bangladesh Limited

We, in respect of Islami Bank Bangladesh Limited (the Bank), have examined the status of its compliance with conditions of Corporate Governance issued by Bangladesh Securities & Exchange Commission (BSEC) vide its notification no. SEC/CMRRCD/2006-158/134/ Admin/44 dated 07 August 2012.

The compliance with the said conditions of Corporate Governance and reporting the status thereof is the responsibility of the management of the Bank. Our responsibility is to provide a certificate about whether the Bank is in compliance with the said conditions of Corporate Governance based on our examination. Our examination for the purpose of issuing this certificate was limited to the procedures including implementation thereof as adopted by the Bank for ensuring the compliance of the conditions of Corporate Governance and correct reporting of the status of the compliance on the attached statement on the basis of evidence gathered and representation received. It is neither an audit nor an expression of opinion on the financial statements of the Bank.

To the best of our information and according to the explanations given to us we certify that Islami Bank Bangladesh Limited has, except condition no. 1.2(i) as reported by the bank on the attached status of compliance statement, complied with the conditions of Corporate Governance stipulated in the above mentioned BSEC’s notification dated 07 August 2012.

Mohammed Hamidul Islam, FCA Md. Moniruzzaman Partner Partner ICAB Enrollment Number: 912 ICAB Enrollment Number: 787 Dhaka, For A. Qasem & Co. For ACNABIN 28 March 2013 Chartered Accountants Chartered Accountants

106 Annual Report 2012 Green Banking

bserving uninterrupted global warming, Phase-wise Functions of Green Bank Oincreasing trend of carbon emission, other environmental pollutions and overall global Bangladesh Bank addressed the Green Banking environment adversities and hence perceiving activities for the Banks in Bangladesh to be the urgency to protect the globe from probable implemented in 3 (three) phases as under: environmental calamities and to ensure continuous Islamic Bank Bangladesh Limited began green supply of scarce natural resources for future banking operations at the end of November 2011 generation, a new approach to Green Banking as per BB circulated policy guidelines for Green has been prescribed by Bangladesh Bank through Banking, vide BRPD Circular No. 02 dated 27, “Policy Guidelines for Green Banking” vide BRPD February 2011. Circular No. 02 dated 27 February, 2011. Getting the comprehensive policy from the Central Bank, Green Banking activities of IBBL has received a Achievement of Green Banking new impetus. Green Banking practices of IBBL activities-2012 are mainly concentrated in its internal operations, Investment, Corporate Social Responsibilities Green Banking Department (CSR) activities and automation. In accordance with the Bangladesh Bank’s policy By nature and from Shari‘ah point of view, IBBL guidelines on Green Banking, the Green Banking has tremendous responsibility for establishment Department was formed in an emergency board of environment friendly banking for the greater meeting held on 24.09.2011 and is functioning under interest of the hu-mankind and the earth. the supervision of the Bank’s Risk Management Wing. Moreover, the Executive Committee (EC) Moreover, being the largest private sector looks after the Green Banking activities. commercial bank and having the maximum stakeholders, IBBL has ample scope for promoting environment-friendly activities and Policy formulation and Governance raising awareness among the masses to keep the IBBL has formulated the green banking policy to globe habitable. accommodate the guidelines of Bangladesh Bank.

Phase-wise Functions of Green Bank

Phase-I (Jan to Dec- 2011) Phase-II (Jan to Dec- 2012) Phase-III (Jan to Dec 2013)

 Policy Formulation &  Sector Specific Environmental Designing and Introducing Governance Policies Innovative Products.  Incorporation of Environmental  Green Strategic Planning  To introduce environment friendly Risk in CRM/ IRM  Setting up Green Branches innovative green products to address  Initiating In-house Environment the core environmental challenges of  Improved In-house Environment the country Management Management   Introducing Green finance To avoid negative impacts on  Formulation of Bank Specific environment through banking activities. Creation of Climate Risk Fund Environmental Risk Management Introducing Green Marketing Plan and Guidelines Reporting in Standard Format with Online Banking External Verification  Rigorous Programs to Educate   Supporting Employee Training, Clients to be undertaken. To publish independent Green Annual  Report following internationally Consumer Awareness and  Disclosure and Reporting of Green Events accepted format like Global Reporting Green Banking Activities. Initiatives (GRI) targeting the  Reporting Green Banking stakeholders duly verified by an Practices independent agency or acceptable third party.

Annual Report 2012 107 Effluent Treatment Plant (ETP) of a project financed by the Bank

Green Office Guide, Green Instructions are also e. Auto Brick Manufacturing Units that emits less circulated time to time for the smooth functioning carbon and requires 50% energy compared to of green activities. Besides, sector-specific Green common brick projects. Banking Policies are being formulated which will f. CNG refueling & Conversion unit helps reduce come into effect soon. carbon at atmosphere.

Green Leader g. Besides, we have recycle plants for plastic, iron & steel scrap recycling plants which help We demonstrated our leadership in the area reduce environmental hazard. of environmental sustainability by popularising the concept of “green banking” in the country. Bio-Gas Plants Bangladesh Bank designated us as one of the top Green Banks in 2012. IBBL signed an MoU with Grameen Shakti on installation of bio-gas plants in the rural areas. Green Finance This initiative will help improve the livelihood of the rural people and remove the gap between the rich IBBL Green Energy has been designed to finance and the poor by reducing income inequality. renewable energy sector i.e. solar energy, ETP, bio-gas, agro SMEs and farmers. As on Green Products December, 2012 IBBL made investment of Tk. 27,007.60 million to the concerns needing own IBBL has introduced various new green products Effluent Treatment Plant. which ultimately reduce carbon emission. i-banking, M-Cash, Online banking, SMS Waste Management Investment Banking, Call Center and Phone Banking are such products. It is allowing the customers to do A Cloro-Alkali Plant producing Caustic Soda banking transaction without coming to the bank invested by the Bank gives Chlorine (liquid) & physically. Expansion of ATM network is greatly Hydrogen as byproducts which are hazardous reducing the carbon emission. A brief report on for environment. To use this byproduct as raw Green Products is given below: materials for producing other economic products, the Bank invested further for additional plants. Digitalization of Document Other environment friendly projects financed by Most of the documents of the Bank are converted IBBL are: into softcopy. Books of Accounts are fully automated a. Rice Bran Oil production. and made electronic. Lion’s share of the internal and external communication are done through b. Electricity production from Rice Husk authenticated e-mail. All kinds of Foreign Trade c. Energy Saving Bulbs Services of the Bank are handled through Centralized Trade Processing. Besides, all circulars, Memoranda d. 100% export-oriented Jute yarn & bags and queries are issued through Intranet. manufacturing plant

108 Annual Report 2012 Online Banking Climate Risk Fund

All branches of the Bank are under online network. IBBL has distributed Taka 52.00 million (for Clients can now easily deposit, withdraw, remit fund flood Tk. 7.00 million and Disaster, Health & and check account balances from 276 branches. Environment Tk. 45.00 million) in the year 2012 IBBl is contributing in online Banking through (which was Tk. 48.05 million in 2011) among the ATM banking. There are internet banking, mobile climate victims due to devastating flood, chilling banking and M-cash service. In 2012 a major change and development brought in automation of cold, severe drought etc. in different parts of the Banking. country.

Installation of IP Phone Detail position of Fael Khair Agro- Inputs Program IBBL has installed IP-Phone services in the Head Office, Zonal Offices and at all AD Branches. As Sl. Particulars Amount/Person a result, all high Executives, Divisional In-charges No. and Branch Incumbents now easily communicate 1 Total Administrative Tk.156.00 million without physical travel which help to reduce cost carbon emission. 2 Administrative cost- Tk.40.00 million 2012 3 Number of 228 person Marketing, Training & Capacity employees (2012) (Bank deputed SO & above 11 & 217 Building Foundation) 4 Number of 50,000 persons Green Marketing beneficiaries (2012) After introduction of SMS banking, green marketing is gaining momentum. Employment notices Fael Khair Agro-Inputs Program are given on website and online applications Islami Bank Foundation (IBF) has been operating are invited and entertained. Clients are also encouraged to modify their products line, set up “Fael Khair Agro-Inputs Program (FKAIP), a profit/ modern machinery from environmental viewpoint. interest free quard program for the Sidr victims in the southern part of Bangladesh since 2008 under Green Banking Training an agency agreement with Islamic Development Bank (IDB) with an amount of US$9.00 million To promote and adopt the comprehensive idea equivalent to BDT 616.00 million approximately. on Green Banking activities, IBTRA arranged Green Banking training programs in Dhaka and different Zones in 2012. Besides, officials of the Exclusive Sponsorship of Dhaka City Bank attended the training programs/workshops/ Beautification seminars on Green Banking issues arranged by Bangladesh Bank Training Academy and BIBM IBBL beautifies different parts of the city by this year (2012). planting trees and orchid. IBBL also utilizes the scope to spread the beauty of Bangladeshi nature, Training Performance in the year 2012 culture, history and heritage etc. successfully on different occasions. 1 Number of Course 23 Conducted Plantation 2 Participants of Employee 1144 training programs Every year IBBL plants a large number of trees all over the country to rpotect the environment. In 3 Participants of customer Nil awareness programs 2012 the Bank planted about 5,06,000 number of various types of plants (forest, fruit and medicinal) 4 Expenditure Tk.4,21,850/- which cost Tk. 11.43 million all over the country.

Annual Report 2012 109 Islami Bank Call Centre Solar pannel at Islami Bank Tower

In-house Environmental Management Energy Management IBBL has taken a number of initiatives in this The Bank encourages customers to adopt energy regard. A Green office Guide is about to be shortly efficient practices in their businesses by providing published to practise Green Management in the investments for such purposes. office for which we can ensure more efficient use of resources and reduction of waste, save Water Management energy and money, and help improve our working Our water consumption is mainly associated with environment. Some initiatives of In-house rest room, ablution and lunchroom facilities on Environmental Management are given below: bank premises. We are committed to improving our water use and conservation practices. We Waste Management encourage reducing use of water in our facilities Waste minimization through demand and also encourage large borrowers to conserve management, reuse and recycling are the and recycle water. preferred methods of reducing solid waste. However, where solid waste cannot be eliminated, Environmental Risk Assessment in CRM we are committed to careful management and IBBL has incorporated the environmental disposal. In the processing of investment Proposal scanning to assess investment risk of the clients (trade/projects), the waste management system and refrained from financing projects which would of the industry is given weightage. have direct adverse impact on water pollution, health, encroachment of rivers and deforestation. Other Green Banking Position

Sl. No. Particulars Green Travel Solar panel installed in Head Office and 21 1 branches. IBBL always encourages the officials for Green travel for any business travel which reduce Introduced measures for saving electricity, water, 2 Gas, Fuel and Introduced paper consumption. environmental impact. In this regard, the Bank Introduced use of scrap/one side used papers use hybrid autos, solar panels and uses public 3 for note pad. transport and car pooling system. Installation/erection/set up of energy efficient 4 equipment/ machine (Generators, Energy bulbs etc). Ethical Banking Introduced auto shutdown of electrical 5 Banks have a direct impact on the community equipment. around them. That impact is two dimensional: the

110 Annual Report 2012 Tree Plantation in Dhaka City way they operate i.e. internal operations and the to determine the project’s environmental, social types of companies they finance. IBBL takes care of and ethical risks. The Bank adopts processes to both the dimensions in its operation. assess the environmental and social risks and opportunities arising from its client’s business Many ethical issues such as the environmental activities and manages the Bank’s exposure to conduct of business customers are now part of them. The sustainability system ensures that standard risk assessment and prudent banking. sustainability considerations play a core role in the IBBL has been trying to follow the Equator Principles, a set of guidelines developed for Bank’s decision-making process for investment managing social and environmental issues assessment. related to the financing of development projects. From an operational perspective and driven by the Our investment is based on Islamic values as desire to reduce its own impact on the environment, defined by the principles of Shari‘ah (Islamic IBBL will shortly introduce performance evaluation law). The Islamic Shari‘ah attempts to maximize and measurement of sustainability criteria within social welfare. Consequently, Islamic investment the function of the Bank. involves the screening out of those companies whose primary business does not conform to the The Bank’s Green Pledge serves as the Shari‘ah principles. fundamental base for impact reduction and catalyses for behavioral change both within and Management approach to Green Banking outside the organization. The basic principles of the Green Pledge have been communicated to The Bank has been actively supportive of employees, customers, suppliers and the wider sustainable green finance and has continued to social circles within which the Bank operates. increase its visibility and exposure to the sector. Prospects for business from alternative and From the above details of performance, it is sustainable finance in the green sector remain evident that our achievements in the field of positive, especially given the strong growth Green Banking activities are significant, although expectations for Bangladesh. In line with these we had shortage of experienced workforce, expectations the Bank has actively sought to required resources, and necessary tools. We enlarge its portfolio of green investments. have still a wide area for improving Green Banking activities as desired by the Central During the process of investment evaluation Bank. Our efforts at enriching and expanding of all potential projects, the Bank engages in a systematic assessment of environmental risk green banking activities continue unabated.

Annual Report 2012 111 Performance Review

Inauguration of Araaihazar Branch

he Bank through its 276 branches (including direction of doubling its deposit base in every 5 T30 SME/Agriculture Branches) successfully (five) years. mobilized Tk.417,844 million Deposit from 7,031,297 Depositors and deployed Tk.372,921 Account Opening Status from 2008 to 2012 million as general Investment into 710,741 accounts up to 31st December 2012. In the year ϴ͕ϬϬϬ͕ϬϬϬ 2012, total income of the Bank was Tk.50,346 ϳ͕ϬϬϬ͕ϬϬϬ million showing 31% growth in 2012 as against ϲ͕ϬϬϬ͕ϬϬϬ ϱ͕ϬϬϬ͕ϬϬϬ ϳ͕Ϭϯϭ͕Ϯϵϳ 27% growth in 2011 and total Expenditure was Tk. ϰ͕ϬϬϬ͕ϬϬϬ ϲ͕ϬϬϰ͕ϳϯϭ 34,738 million showing 35% increase in 2012 as ϯ͕ϬϬϬ͕ϬϬϬ ϰ͕ϵϯϵ͕ϱϬϮ against 25% increase in 2011 resulting in pre-tax Ϯ͕ϬϬϬ͕ϬϬϬ ϰ͕ϱϵϭ͕ϰϲϯ ϰ͕ϯϲϭ͕ϴϵϲ profit of Tk.12,096 million showing 17% growth in ϭ͕ϬϬϬ͕ϬϬϬ Ϭ 2012 as against 22% growth in 2011. The Board ϮϬϬϴ ϮϬϬϵ ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ of Directors of the Bank recommended 25% (8% EŽ͘ŽĨĞƉŽƐŝƚŽƌƐ ϰ͕ϯϲϭ͕ϴϵϲ ϰ͕ϱϵϭ͕ϰϲϯ ϰ͕ϵϯϵ͕ϱϬϮ ϲ͕ϬϬϰ͕ϳϯϭ ϳ͕Ϭϯϭ͕Ϯϵϳ cash + 17% stock) Dividend to the shareholders ĐĐŽƵŶƚ/ŶĐƌĞĂƐĞĚ ϱϱϵ͕ϭϴϳ ϮϮϵ͕ϱϲϳ ϯϰϴ͕Ϭϯϵ ϭ͕Ϭϲϱ͕ϮϮϵ ϭ͕ϬϮϲ͕ϱϲϲ 'ƌŽǁƚŚй ϭϱй ϱй ϴй ϮϮй ϭϳй for the year 2012.

Deposit Mobilization of Deposits Without multidimensional and diversified products, The year 2012 was another successful year of any financial institution especially a Bank can mobilization of deposit. Total Deposit stood at st hardly survive and thrive in competition with other TK. 417,844 million as on 31 December 2012 as banks effectively. Keeping this in view, IBBL has against Tk. 341,854 million of the preceding year introduced 18 deposit products so far. Historical registering a growth of Tk. 75,990 million, i.e. 22% trend of the deposit mobilization shows a clear growth as compared to 17% in 2011.

112 Annual Report 2012 Deposit: 2008 to 2012 New Deposit Products

/ŶŵŝůůŝŽŶdĂŬĂ In the year 2012 two new deposit products namely Students Mudaraba Saving Account, Mudaraba Farmers Saving Account have been introduced. ϰϭϳ͕ϴϰϰ

ϯϰϭ͕ϴϱϰ Welfare-Oriented Special Deposit Products Ϯϵϭ͕ϵϯϱ

Ϯϰϰ͕ϮϵϮ Mudaraba Waqf Cash Deposit ϮϬϮ͕ϭϭϱ Responding to a noble cause, this Account may create cash waqf at a time or may start with a

ϮϬϬϴ ϮϬϬϵ ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ minimum deposit of Tk.1,000/- and the subsequent deposit shall be made by installments in thousand Bank of over 7 Million Depositors Taka or in multiple of thousand Taka. Profit of this account is utilized for social and human welfare as Total number of depositors of IBBL increased per instruction of the account holders. to 7,031,297 as on 31st December 2012 from 6,004,731 of the preceding year. 1.90 million new deposit accounts were opened in 2012.

Growth of Deposit by Product

Sl. Deposit in Million Taka Growth Deposit Mix Types of Deposit No. 2012 2011 % 2012 2011 1 Mudaraba Savings 151,012 132,052 14.36% 36.15% 38.63% 2 Mudaraba Special Savings (pension) 73,546 65,492 12.30% 17.61% 19.16% 3 Mudaraba Term 97,278 65,167 49.28% 23.29% 19.06% 4 Current & Contingency 41,524 34,091 21.35% 9.90% 9.97% 5 Mudaraba Savings Bond 16,519 16,831 -1.85% 3.95% 4.92% 6 Mudaraba Monthly Profit Deposit 16,621 12,373 34.34% 3.98% 3.62% 7 Mudaraba SND 5,995 5,634 6.40% 1.44% 1.65% 8 Bills Payable 4,216 2,863 47.26% 1.01% 0.84% 9 Mudaraba Hajj 1,242 1,043 19.12% 0.30% 0.31% 10 Mudaraba Muhor Savings 323 272 18.67% 0.08% 0.08% 11 Mudaraba Waqf Cash Deposit 367 261 40.70% 0.09% 0.08% 12 Mudaraba NRB Savings Bond 605 346 74.72% 0.14% 0.10% 13 Mudaraba Foreign Currency Deposit 2,284 863 164.66% 0.55% 0.25% 14 Foreign Currency Deposit 160 332 -51.70% 0.04% 0.10% 15 FC Deposit ERQ 708 503 40.77% 0.17% 0.15% 16 FC held against B/B L/C 3,073 2,465 24.65% 0.74% 0.72% 17 FC held against Cash L/C 517 134 285.63% 0.12% 0.04% 18 FDD/FTT Payable 865 370 133.70% 0.21% 0.11% 19 Non-Resident FC of Exchange House/Banks 519 605 -14.27% 0.12% 0.18% 20 FC Security Deposit 80 71 12.46% 0.02% 0.02% 21 FC Deposit against Foreign Bank Guarantee 32 33 -3.36% 0.01% 0.01% 22 Other FC Deposit 53 52 2.34% 0.01% 0.02% 23 Students Mudaraba Savings 92 - - 0.02% - 24 Mudaraba Farmers Savings 213 - - 0.03% - Total Deposit 417,844 341,853 21.72% 100.00% 100.00%

Annual Report 2012 113 Deposit Mix as on 31.12.2012 month from the date of opening of the account. The profit amount is adjusted on completion of

each accounting year after declaration of final rate of profit.

Mudaraba Muhor Savings As per Islamic Shari‘ah, it is fard for a husband to pay Muhorana to his wife. The Bank introduces this account to facilitate payment of Muhorana. Any conscious husband may open account in the name of his wife on monthly installment basis. 0XGDUDED6DYLQJV'HSRVLWV &XUUHQW &RQWLQJHQF\ 0XGDUDED7HUP'HSRVLWV 0XGDUDED0RQWKO\3UIW'HS 6FKHPHV 0XGDUDED6SHFLDO6DYLQJV6FKHPH 0XGDUDED6DYLQJV%RQG Students Mudaraba Savings 0XGDUDED61' 2WKHUV Students aged below 18 years shall be eligible to open Students Mudaraba Savings Account in a Mudaraba Hajj Savings single name with his father/mother. Initial deposit of this account is Tk.100/- and profit is given on Any Muslim intending to perform Hajj may open balance of Tk.100/-. No charge is applicable on this Hajj Savings Account. The Accountholder can account except excise duty and tax as per govt. select one among the 25 alternatives based policy. The account may be continued as Mudaraba on duration ranging from 1 year to 25 years for Savings Account in their own name when the student building up savings by monthly installments. becomes adult. Attractive prizes are distributed A total of 703 Hajj pilgrims deposited money among the top 10 depositors every month. to perform the Holy Hajj during 2012. This year IBBL’s position in extending services to the Hajj Mudaraba Farmers Savings pilgrims under government package was second in position, next to Sonali Bank. Only a genuine farmer can open this account by initial deposit of Tk.10/-. Farmers, Association or Co-operative society of farmers, shall be eligible to Mudaraba Special Savings (Pension) open Mudaraba Farmers Savings Account (MFSA). Scheme This MFSA may also be opened by the father/ Considering the increase demands from the mother/legal guardian (farmer) in favor of a minor. people of all walks of the country special and attractive savings schemes on the basis of the Mudaraba NRB Savings Bond Islamic Shari‘ah have been introduced to enable Only the Non-Resident Bangladeshis aged and encourage them to save money depending 18 years and above shall be eligible to open on their ability when they normally retire from their Mudaraba NRB Savings Bond Account in active economic life. IBBL has specially introduced single or joint names. Service charge, account ‘Mudaraba Special Savings (Pension) Scheme’. closing fee and account maintenance fee shall In this sceme, a person obtains the opportunity not applicable to this account. Profit shall be to build up savings by small monthly instalments distributed in this account on daily product basis. for getting an attractive amount at the end of a As per clients demand maximum 90% quard may specified term or a monthly amount for a specific be allowed against total outstanding balance. period on the expiry of the 5 years or 10 years term. General Investments Mudaraba Monthly Profit Deposit Scheme Bank Investment increased to Tk.372,921 million Any individual may open account under this as on 31.12.2012 from Tk. 305,841 million as on scheme, depositing a minimum amount of Taka 31.12.2011 showing an increase of Tk.67,080 1,00,000/- and multiples thereof at a time, for 3 million, i.e., 22% growth against 10.03% investment years or 5 years. Monthly provisional profit is growth of the Banking sector. This higher investment given to the account just after completion of one

114 Annual Report 2012 growth of the Bank in 2012 was due to the thrust Sector-Wise Investments given to promote investment for effective utilization st of depositors’ fund. The percentage growth of Sector-wise distribution of investment as on 31 IBBL Investment in 2011 was 16.19%. The share December 2012 vis-à-vis the corresponding of investment of IBBL in banking sector as on period of the last year is given below: 31.12.2012 was 8.40%. Trend of investment shows a clear direction of doubling in last 5 years. Sector wise Investment Position

Investment: 2008 to 2012 ϭϴϬ͕ϬϬϬ ϭϲϬ͕ϬϬϬ ϭϰϬ͕ϬϬϬ ϭϮϬ͕ϬϬϬ ϭϬϬ͕ϬϬϬ ϴϬ͕ϬϬϬ DŝůůŝŽŶdĂŬĂ ϲϬ͕ϬϬϬ ϰϬ͕ϬϬϬ ϮϬ͕ϬϬϬ

Amount in million Taka Ͳ ^D /ŶĚƵƐƚƌŝĂů ŽŵŵĞƌĐŝĂů ZĞĂůƐƚĂƚĞ ŐƌŝĐƵůƚƵƌĞ dƌĂŶƐƉŽƌƚ $KLHYHPHQW KƵƚƐƚĂŶĚŝŶŐĂƐŽŶϮϬϭϮ ϭϲϴ͕ϯϵϯ ϭϬϴ͕ϵϯϬ ϰϰ͕ϰϴϴ Ϯϯ͕Ϯϯϭ ϮϬ͕ϵϵϮ ϲ͕ϴϴϳ *URZWK$PRXQW KƵƚƐƚĂŶĚŝŶŐĂƐŽŶϮϬϭϭ ϭϬϬ͕ϵϵϭ ϭϮϮ͕ϮϳϬ ϯϴ͕Ϯϯϰ ϭϲ͕ϵϲϲ ϮϬ͕ϵϮϯ ϲ͕ϰϱϳ *URZWK

Sector-wise Investment (In million Taka)

2012 2011 Sl. Sector % to Total % to Total No. Amount Amount Investment Investment 1 Industrial (excluding SME) 108,930 29.21 122,270 39.98 2 Commercial 44,488 11.26 38,234 12.50 3 Real Estate 23,231 5.46 16,966 5.55 4 Agriculture 20,992 5.78 20,923 6.84 5 Transport 6,887 1.90 6,457 2.11 6 SME 168,393 46.39 100,991 33.02 Total 372,921 100 305,841 100

Mode-wise Investment (In million Taka) 2012 2011 Mode % to Total % to Total Amount Amount Investment Investment Bai-murabaha 221,632 59.43 177,136 57.92 HPSM 96,056 25.76 89,070 29.12 Bai Muajjal 18,295 4.91 15,912 5.20 Bill Purchased & Negotiation 9,531 2.56 2,744 0.91 Quard 9,156 2.46 5,614 1.83 Bai- Salam 4,532 1.22 3,528 1.15 Mudaraba - 0.00 2,266 0.74 Musharaka 13,719 3.68 9,571 3.13 Total 372,921 100 305,841 100

Annual Report 2012 115 IBBL has formulated a Five Year Business Plan against Tk.150,788 million as on 31st December (2012–2016) which is under implementation. 2011 resulting in 25.47% growth. Investment plan has been formulated keeping in view the national economic priorities and Contribution of IBBL to Industrialization diversification of the Investment portfolios by size, sector, geographical area, economic purpose and IBBL has contributed significantly to the securities. development of industrial sector of the country. It is the only bank that has deployed 50.73% of its total investment in industrial sector and out Investment in Industrial Sector of which export-oriented garment industries The Bank’s investment in industrial sector is occupied 44.85%. In addition to large scale substantially higher compared to those of other industries, bank also finance medium and small- commercial banks. Total Investment for projects scale industries keeping its primary focus on need finance together with Working Capital stood at based industry. A brief description of industrial Tk.189,193 million as on 31st December 2012 as financing by IBBL follows:

Industry-wise Investment of the Bank in 2012 (In million Taka)

% of Total Sl. No. Particulars No. of Projects 2012 Amount

1 2 3 4 5

1 Textile-Spinning, Weaving & Dyeing 421 71,761 37.93

2 Steel, Re-rolling & Engineering 203 21,946 11.60

3 Agro based Industry 950 17,614 9.31

4 Garments & Garments Accessories 575 13,092 6.92

5 Food & Beverage 50 7,636 4.04

6 Cement Industry 9 1,854 0.98

7 Pharmaceuticals 36 2,289 1.21

8 Poultry, Poultry Feed & Hatchery 110 624 0.33

9 Sanitary rares 49 275 0.15

10 Chemicals, Toiletries & Petroleum 161 3,973 2.10

11 Printing & Packaging 157 3,330 1.76

12 Power (Electricity) 8 4,162 2.20

13 Ceramic &Bricks 217 2,460 1.30

14 Health care (hospital & others) 54 2,079 1.10

15 Plastic Industries 65 715 0.38

16 Petrol-Pump & CNG Filling Station 63 940 0.50

17 Information Technology 11 550 0.29

18 Hotel & resturent 177 656 0.35

19 Other Industries 305 33,237 17.55

Total 3,621 189,193 100

116 Annual Report 2012 IBBL is the leading financer in Garments Industry

Garment Industry Pharmaceuticals & Health Care

Bangladesh earns a significant amount of foreign To boost up the medicine industry, the Bank provided currency by exporting ready-made garments. investment facilities of Tk. 267.71 million to 71 IBBL contributed greatly to establish the garment Drug and Pharmaceuticals Industry. Moreover 54 industries of the country. From the very inception, Industries among hospital, clinic and pathological this bank plays a pioneer role in developing the centers have been created by the Bank finance of garment industries and its backward linkage Tk. 1,090 million from there people are receiving industries. Most of the leading export-oriented health services. garment industries of the country initially initiated their business taking small size investment Housing Industry from IBBL. Gradually they have developed their The Bank has widened its helping hand to 13,330 industries into a large one. Thus by nourishing clients by disbursing Tk.23,069.60 million housing garment sector, IBBL has strengthened our investment at individual level and Tk.161.35 million national economy in three ways i.e. i) Employment to 65 developers companies. Present outstanding generation ii) Earning foreign currency and iii) in housing investment is Tk.23,231.00 million in Women empowerment. 2012 that is 6% of total Investment having growth rate of 28.95%. Textile Sector Agro-based Industry Textile sector needs huge capital Investment. IBBL, being the largest private commercial bank, There is no alternative to setting up the agro- has been investing in textile sector since long. based industry for the qualitative improvement of Huge number of spinning mills, weaving mills, the sector. IBBL provides facilities by which the dyeing finishing mills of textile sector has been set- logistics including raw materials for the agro-based up with IBBL Investment. Most of these mills are industry can be procured easily. Few examples of set up with brand new state of the art technological this success are: Automatic Rice Mill, Flour Mill, machines. This contributes immensely towards Edible Oil, Jute Mill, Fishery and Poultry & Dairy, value addition in RMG. Salt, Sugar,Food and Beverage, Cold Storage, Fertilizer, Oil and Electricity from Rice Bran etc.

Annual Report 2012 117 IBBL financed Several Power Plants for infrastructural development

Electricity & Power Industry producing and procuring hardware & software. IBBL is also working to develop innovative IBBL has financed 8 power plants by investing entrepreneurs to embank upon big investment in Tk.4,635 million. It also financed Tk.1233.60 this sector. million for the production of electric instruments. Moreover, 788 clients were provided with SME Investment investment of Tk.1067.60 million for producing and procuring electronics goods. Apart from power The role of Small and Medium Enterprises (SMEs) plants and electrical goods, we are also working on is indispensable for overall economic development solar power and an investment scheme under the of a country particularly for a developing country name and style “Solar Panel Investment Scheme” like Bangladesh. Bangladesh Bank has given has already been introduced. emphasis to the development of the SME sector of the country financing through the commercial Transport Industry banks. IBBL, since its inception, has been continuing SME financing for its development. Islami Bank has been providing investment facilities to the experienced, innovative and new The Bank management has adopted a new SME entrepreneurs for purchasing modern vehicles Policy comprising 2(two) special schemes namely (Road, Water & Air). To develop the transport Women Entrepreneurs’ Investment Scheme and sector, IBBL has disbursed substantial amount Non-Resident Entrepreneurs’ Investment Scheme of investment which is the highest among all for boosting up of SME investment. nationalized and private commercial banks of IBBL also undertakes various initiatives for Bangladesh and the proportion of our investment development of SMEs & Women entrepreneurs is 1.78%. Besides, IBBL financed 60 Filling/CNG like arranging training for the entrepreneurs, stations against present balance of investment of creating awareness on the importance of SMEs Tk.523.30 million. through media, by participating in fairs, road shows, seminars, workshops etc. It also trains Information Technology Industry the Greenfield enterprises how to access finance IBBL has already extended financial support through banking channel and benefit from Islamic amounting Tk. 549.70 million to 11 clients for modes & products for SME Investment, etc.

118 Annual Report 2012 PCBs has been raised by 3% as on 31.12.2012 OutstandingzĞĂƌǁŝƐĞ^D/ SME InvestmentŶǀĞƐƚŵĞŶƚŽĨ/> of Islami Bank Bangladesh Limited is Tk.182,753.00 million as from 31.12.2011. ϮϬϬϬϬϬ on 31.12.2012 against 46,269 clients. ItϭϴϮϳϱϯ is 47% of ϭϴϬϬϬϬ the Bank’s total investment. ^DǆƉŽƐƵƌĞŽĨ/>ǀƐWƐ ϭϲϬϬϬϬ

Ă ϭϰϬϬϬϬ ĂŬ ϭϮϬϬϬϬ ϭϬϴϲϳϬ ϭϬϬϬϬϬ /ů ϳϴϰϱϲ ϭϴϮ͕ϳϱϯ ϴϬϬϬϬ Ϯϱй /ŶŵŝůůŝŽŶd ϲϬϬϬϬ ϰϵϯϯϳ ϰϬϬϬϬ ϮϬϬϬϬ KƚŚĞƌWƐ Ϭ ϮϬϬϵ ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ ϱϯϳ͕ϬϵϮ zĞĂƌ ϳϱй

^DǆƉŽƐƵƌĞŽĨ/>ǀƐEĂƟŽŶĂůǆƉŽƐƵƌĞ

/ů ϭϴϮ͕ϳϱϯ ϭϴй Welfare-oriented Investment Schemes In addition to the normal commercial and industrial investment operations, IBBL has 14 Special Investment Schemes targeting different EĂƟŽŶĂůĞǆƉŽƐƵƌĞ economic groups. The schemes are implemented ŽƚŚĞƌƚŚĂŶ/> ϴϮϱ͕ϯϳϵ and expanded to meet the specific and welfare ϴϮй oriented needs of different groups of people particularly the under-privileged downtrodden and the neglected section of population of the Contribution of IBBL to the national SME has been country. To uplift the lifestyle of these people, raised by 5% as on 31.12.2012 from 31.12.2011 some welfare-oriented special investment and contribution to the total SME exposure of schemes as under have been undertaken:

IBBL’s SME Exposures of Different Banks of the Country (In million Taka) Year IBBL PCBs SME % of IBBL to PBs Total National % of IBBL to Total Exposure Exposure National Exposure 2011 108,670 484,292 22 810,992 13 2012 182,753 719,845 25 1,008,132 18

Scheme-wise Investment of the Bank (In million Taka) Sl. No. Name of Scheme 2012 2011 2010 2009 2008 1 2 3 4 5 6 7 i. Rural Development Scheme (RDS) 10,390 7,072.02 5,110.00 3,752.20 3,011.72 ii. House-hold Durables Scheme 955 1,070.01 961.64 686.49 638.40 iii. Investment Scheme for Doctors 32 13.91 15.27 17.06 15.34 iv. Transport Investment Scheme 6,887 6,706.50 4,732.15 3,630.48 3,087.55 v. Car Investment Scheme 113 152.05 138.79 53.81 41.16 vi. Small Business Investment Scheme (SBIS) 2,774 2,347.60 1,703.44 1,159.63 1,104.65 vii. Micro-Industries Investment Scheme 36 38.18 47.44 50.39 31.50 viii. Agricultural Implements Investment Scheme 278 209.60 127.15 76.64 27.21 ix. Housing Investment Scheme 316 366.68 418.92 452.67 429.24 x. Real Estate Investment Program (REIP) 23,231 12,485.24 10,154.95 7,933.20 7,183.26 Sub-total 45,012 30,461.79 23,410.00 17,812.57 15,570.03 (Investment under Schemes) Total Investment 372,921 305,841 263,225 214,616 180,054 % to total Investment 12.07 9.96 8.89 8.30 8.65

Annual Report 2012 119 Women entrepreneurship under SME Investment

Household Durable Investment Scheme confidence and human dignity. IBBL has steady growth in the Real Estate Sector. Low-income people involved in diverse professions get benefit out of this scheme. They are provided Transport Investment Scheme with household products like refrigerator, TV, motor-cycle, furniture, ornaments, computer etc. To ease the existing transportation problem and under this financing scheme. to accelerate the pace of economic growth and development of the country, particularly through Housing Investment Scheme expansion of trade, commerce and industry, the Bank has taken up this sceme. The Bank has introduced this scheme to ease the serious housing problem in the urban areas and to make arrangement for comfortable accommodation Car investment Scheme of the fixed income group such as: officials of To enable officials, business houses and the defense services, permanent officials of business executives and professionals to move government, semi-government and autonomous by transports in discharging their responsibilities organizations, faculty members of the established punctually, IBBL has introduced Car Investment universities, university colleges & medical colleges, Scheme for the mid and high ranking officials of the graduate engineers, doctors and established government and semi-government organizations, professionals, international financial organizations, corporations, executives and directors of big donor agencies, foreign embassies etc., officials of business houses and companies and also for reputed local public limited companies. persons of different professional groups on easy payment terms and conditions. Real Estate Investment

Real Estate Finance plays a pivotal role in improving Investment Scheme for Doctors standard of living, empowering the middle-income The scheme is meant for fresh medical graduates and lower-income groups and thereby promoting intending to et up medical centres. IBBL comes equitable growth in the society. It does not only forward for their aid to help them procure medical provide physical shelter but also upgrade the lives equipment or to set up diagnostic laboratory, of the dwellers in terms of skills enhancement, pharmacy, clinic etc. income generation, increased security, health, self-

120 Annual Report 2012 Dying Industry financed by IBBL IBBL financed Spinning Industry

Small Business Investment Scheme stock farming, hollow bricks, roof tiles and any other viable micro-industries have been identified Small business persons and entrepreneurs for financing under the scheme. of different cities and villages get investment facilities from this scheme which is contributing greatly to generate income and employment and Rural Housing Investment Scheme to develop standard of life of different segments of This scheme was launched to extend housing low income people. This Bank provides different facility to the rural people living within 5 kilometers types of agricultural instruments, equipment for area of a IBBL branch. Employees of public, semi- operating small trade and finance, small shop, public or autonomous institutions, non-resident light transport, photo copy machine, tailoring Bangladeshis and businesspersons are preferred machine, machinery for small and cottage industry for this investment. Easy term investment is given etc. under this scheme. for constructing new houses, repair of old houses and purchasing ready-made flats and houses etc. Agricultural Implements Investment Scheme Women Entrepreneurs Scheme

Keeping the view of the people-orientation and IBBL has introduced “Women Entrepreneurs welfare objectives of the Bank, this scheme has Investment Scheme” to help women contribute been introduced to provide power tillers, power to GDP, generate income & employment and to pumps, shallow tube-wells, thresher machines develop their socio-economic condition. Under this etc. on easy terms to the unemployed rural youths Scheme Bangladeshi nationals aged between 18- for self-employment and to farmers to help them 50 years, genuine women entrepreneurs, women augment production in the agriculture sector. already engaged in business, self-employment activities as owners, skilled and semi-skilled Micro-Industries Investment Scheme female persons having practical experience in the To create a wider base for industries and to respective field may apply for investment. encourage establishment of micro-industries in different areas of the country by the potential NRB Investment Scheme entrepreneurs and to diversify the Bank’s investment portfolio, the Bank has introduced For promoting investment among non-resident ‘Micro Industries investment Scheme’. Different Bangladeshis and for encouraging them to sectors including food and agriculture based remit money through banking channel, IBBL industries, plastic & rubber industries, forestry and has launched NRB Entrepreneurs Scheme. furniture industries, engineering industries, service Expatriates aged between 18 to 60 years or their industries, electrical accessories industries, family members who run account with IBBL for computer technology industries, paper products remitting money are eligible for this investment. industries, handicrafts industries, fishery & live

Annual Report 2012 121 Some Projects Financed by IBBL

Sugar Factory Spinning Mill

Ship Building Industry Pharmaceutical Industry

Cable Industry Still Re-rolling Mill

122 Annual Report 2012 Some Projects Financed by IBBL

Poly Fiber Industry Energy Bulb Industry

Financing in agro-equipments Horticulture Project

Tyre and Tube Factory IBBL financed Brick Field

Annual Report 2012 123 Inauguration of Urban Poor Development Scheme

Micro-Investment Activities under achieve financial inclusion of poor women of rural & urban areas. These two schemes enable IBBL RDS & UPDS to achieve financial inclusion of poor women of Rural Development Scheme (RDS) was rural & urban. introduced in 1995 to meet investment needs of agriculture and rural sector and create opportunity RDS: Coverage and Expansion for employment generation and raise income The target groups are organised as members of the rural poor to alleviate poverty. So far, out in the selected villages/areas in groups under of 276 branches, 197 carry out RDS activities in different centres. At present, 733,520 members 61 districts of the country. The Bank launched receive financial services under 24,623 centres in another micro-investment scheme for urban poor 15,371 villages. Ratio of female members under in 2012 in the name of “Urban Poor Development the schemes is 85%. Expansion of RDS in the last Scheme (UPDS)” on pilot basis under its 10 urban 5 years is shown in the following table: branches. These two schemes enables IBBL to

RDS & UPDS Investment (In million taka)

Sl. Particular RDS UPDS Total

01 Micro Investment Client No. 418,839 2,886 421,707

02 Micro Enterprise Client No. 52,651 408 53,059

03 Quard Client No. 1,543 - 1,543

04 Total client 473,033 3276 476,309

05 Outstanding of MI (in million Taka) 5985.75 49.87 6035.62

06 Outstanding ME (in million Taka) 4321.67 35.87 4357.54

07 Outstanding of Quard (in million Taka) 7.79 - 7.79

08 Total outstanding investment 10,315.21 85.74 10,400.95

124 Annual Report 2012 Institutional Development

Sl. Particular 2008 2009 Growth 2010 Growth 2011 Growth 2012 Growth No. (%) (%) (%) (%) 01 No. of village 10,676 10,751 1 11,482 7 12,857 12 15,507 21

02 No. of Centre 21,193 22,261 5 20,833 (6) 22,206 7 24,623 11

03 No. of Member 577,740 492,475 (15) 523,941 6 608,703 16 733,520 21

04 No. of Investment 321,848 312,036 (3) 319,859 3 382,319 20 474,766 24 Client

RDS & UPDS Investment (2008-2012) (In million taka)

Sl. Particular 2008 2009 2010 2011 2012

01 MI client 311,655 292,967 291,293 343,304 421,707

02 ME client 9,829 19,069 28,566 39,015 53,059

03 Total 321,484 312,036 319,859 382,319 474,766

04 % of MEIS client 3 6 9 10 11

04 MI Investment 2,522.79 2,671.29 3,186.28 4,234.18 6035.62

05 ME investment 488.93 1,080.91 1,923.77 2,837.85 4357.54

06 Total 3,011.72 3,752.20 5,110.05 7,072.03 10,393.16

07 % of MEIS investment 16 29 38 40 42

RDS Investment Program dƌĞŶĚŽĨDŝĐƌŽͲ/ŶǀĞƐƚŵĞŶƚΘDŝĐƌŽ Under both RDS & UPDS, three types of investment ŶƚĞƌƉƌŝƐĞ/ŶǀĞƐƚŵĞŶƚƵŶĚĞƌZ^ΘhW^ facilities are provided to the beneficiaries namely (a) Micro-investment (collateral-free investment ϭϱ͕ϬϬϬ͘ϬϬ maximum Tk.50,000/- provided to the poor in different income generating activities); (b) Micro- ϭϬ͕ϬϬϬ͘ϬϬ enterprise Investment (collateralized investment maximum Tk.300,000/- provided to the graduated ϱ͕ϬϬϬ͘ϬϬ and other micro-clients and (c) Quard Program (cost-free loan maximum Tk.10,000/- provided to the distressed & hardcore poor for rehabilitation Ͳ and water & sanitation). Allocation for Quard Program is given from RDS Welfare Fund. Since the inception of the Bank cumulative disbursement Z^'ƌĂĚƵĂƟŽŶůŝĞŶƚƐWŽƐŝƟŽŶ under the above three types of investment stood ϭϬϬϬϬ at Tk. 56,809.93 million. Investment under both ϴϰϴϮ ϴϴϵϬ the Schemes as on 31 December 2012 may be ϴϬϬϬ seen below: ϱϳϭϯ ϲϬϬϬ

ϯϳϰϵ Graduation Program ϰϬϬϬ ϭϵϯϮ The graduated RDS members (who already have ϮϬϬϬ availed the highest limit under RDS) and the local Ϭ small entrepreneurs are provided with investment ϮϬϬϴ ϮϬϬϵ ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ facilities under ‘Micro Enterprise Investment

Annual Report 2012 125 Dr. Selina Hayat Ivy, Mayor of Narayanganj City Corporation is addressing an RDS Program

Scheme (MEIS)’ up to a maximum ceiling of Tk. 300,000. At present 53,434 clients are enjoying ƵŵƵůĂƟǀĞ^ĂǀŝŶŐƐŝŶZ^ investment facilities under MEIS out of whom ;ŝŶŵŝůůŝŽŶdĂŬĂͿ graduated RDS members are 9,618 which shares ϰϬϬϬ͘ϬϬ 18% of total MEIS clients. ϯϯϬϬ͘ϴϱ

ϯϬϬϬ͘ϬϬ ϮϯϰϬ͘ϰϱ Savings Program ϭϰϴϴ͘ϳϳ ϭϳϳϱ͘ϱϳ ϮϬϬϬ͘ϬϬ The members under the Schemes have to deposit ϭϮϳϬ͘ϱϬ compulsory weekly savings with the Bank at least ϭϬϬϬ͘ϬϬ Tk.20/- per week. But they are encouraged to Ϭ͘ϬϬ deposit more in view to develop their own equity ϮϬϬϴ ϮϬϬϵ ϮϬϭϬ ϮϬϭϭ ϮϬϭϮ quickly. The volume of savings of RDS members reached Tk. 3,300.85 million as on 31st December, 2012. Year-wise cumulative savings under RDS is shown in the following graph:

RDS Social Safety-net Programs 2012 (In million Taka) Sl. No. Program Beneficiary Amount Percentage Share 01 Education Program (Alo + An-Noor) 14,572 28.18 39 02 Training Program 68,220 7.82 11 03 Health Program 22,780 25.67 36 04 Relief & Rehabilitation Program 1,622 9.89 14 05 Total expenditure from RDS Welfare Fund 107,194 71.56 100 06 Environment Protection Program (Plantation) - 11.42 (from mainstream fund) 07 Grand Total 107,194 82.98

126 Annual Report 2012 Social Safety-net (Welfare Activities) Maqtab (An-Noor): In 2012, 114 maqtabs Program under RDS named “An-Noor” program began in the suitable mosques. Each of the maqtab is being operated As poverty alleviation needs a combination of by the concerned Imam for imparting elementary financial and non-financial programs, different religious teachings to about 30 students as well welfare services are conducted under RDS in the as getting them able to recite the Holy Quran areas of (1) Education, (2) Training, (3) Health, correctly. (4) Relief & Rehabilitation and (5) Environment. In this respect a Welfare Fund has been Activities under Education Program during the developed by segregating 1% profit against RDS year (from January to December 2012) at a glance investment. An amount of Tk.82.98 million has are shown in the following table: so far been spent for social safety-net programs under RDS during the year 2012 which table is Training Program shown in previous page. There are three types of training activities viz. (a) Details of the Programs and program-wise Leadership Training, (b) Skill Development Training, performance are mentioned below: and (c) Self-employment Training.

Education Program Health Program There are 3 (three) activities under Education Under health program 3 types of assistance are Program which includes: (a) Scholarship, (b) provided: (a) Water & Sanitation, (b) Medical Academic Award & (c) Establishment of Institutions Assistance and (c) Gift for newborn baby. (pre-primary school & maqtab). Relief & Rehabilitation Program Pre-primary School (ALO): Last year, 114 Pre- primary Schools for the beginners were established Under the relief & rehabilitation program 3 types of in different remote villages under the title of “ALO: assistance are provided to the poor and distressed Pre-primary School”. Each school is operated by members: (a) Waiver of Bank’s dues, (b) Quard for a single female teacher with a target to prepare rehabilitation and (c) Relief & Donations. 25-30 students every year for getting admission in Class I in the local primary schools.

Education Program under Rural Development Scheme

Annual Report 2012 127 Shanti Nath changes her fate by weaving Mats for others

Environment Islami Bank Bangladesh Limited launched another new microfinance scheme in the name of “Urban IBBL implements Plantation Program during the Poor Development Scheme (UPDS)” in the year rainy season every year. Plantation Program is conducted by giving free saplings to the RDS 2012 to extend microfinance activities among the members. Every year, the Bank has been providing urban poor. Activities of the scheme were started saplings, especially of the fruit plants, one per under 10 urban branches in Dhaka and Chittagong RDS member since 2003. During the year 2012, a cities on pilot basis. total of 506,000 saplings were distributed/planted at the cost of Tk. 11.42 million. Since inception, Agricultural Investment a total of 2,828,723 saplings were distributed at a cost of Tk.243.00 million. However, the Bank Islami Bank Bangladesh Limited provides adequate conducts the Program with its mainstream fund. importance to agricultural/rural investment since its inception. Accordingly, two investment schemes viz Urban Poor Development Scheme (UPDS) Agricultural Implement Investment Scheme (AIIS) About 3.50 million extreme poor live in the urban and Rural Development Scheme (RDS) were areas as slum dwellers. They live hand to mouth introduced in 1992 & 1995 respectively for effective and lead a sub human life. Considering the above, development of agriculture and rural economy.

Comparative Position of Agri-Investment in the Country (In million Taka) Disbursement % of Growth Over the Target % of Achievement Fiscal Year Previous Year National IBBL National IBBL National IBBL National IBBL 2007-2008 83,090 2,750 85,810 5,140 103 188 62 20 2008-2009 93,790 6,600 92,850 6,240 99 95 8 21 2009-2010 115,000 8,800 111,170 8,410 97 96 20 35 2010-2011 126,174 9,500 121,844 10,210 97 107 10 21 2011-2012 138,000 10,000 131,320 11,703 95 117 15 15

128 Annual Report 2012 Dr. Atiur Rahman, Governor of Bangladesh Bank is handing over award to Jessore Branch Manager of IBBL for highest agricultural investment

In 2012, the Bank disbursed Tk.12,500.00 Asset Quality million in agriculture sector against its target of IBBL continues to maintain strong asset quality. Tk. 12,000.00 million having a growth of 29% Investment facilities are allowed in a manner so over the previous year. At the end of the year, that credit expansion goes on ensuring optimum agriculture financing (excluding agro-based asset quality. Investment facilities are extended to industry) accounted 2.40% of total investment of customers who comply with the Bank’s norms and the Bank. Besides, under the special program princilples. of Bangladesh Bank (investment in cultivation of pulse, oil seed, spices & maize at discounted rate Non-performing Investment of profit 4%), IBBL disbursed Tk.9.63 million in the Non-performing Loans and Advances of the State previous fiscal year (2011-2012). owned Commercial Banks, Private Commercial Banks and Foreign Commercial Banks in 2012 Sector-wise Disbursement of stood respectively at 23.87%, 4.58% and 3.53% against industry of 10.03%. Agricultural Investment

(In million Taka) IBBL’s position was better than national non- performing Investment position. Classified Sector Achievement Investment as on 31.12.2012 was 3.81% of total investment. Investment overdue but not classified Crops 3,359 as on 31.12.2012 was 1.08% of total investment. Fisheries 1,246 Status of NPI in IBBL Livestock 1,801 (In million Taka) Agricultural Implement 272 Sl No. Particulars 2012 Poverty Alleviation 3,106 1 NPI (NPL) Ratio at IBBL 3.81%

Storage 1,101 2 Industry Average of NPL 10.03% 3 Required Provision 5,718.66 Others 818 4 Provision Maintained 5,718.66 Total 11,703 5 Provision Maintained Ratio 100%

Annual Report 2012 129 branches, i.e. branches having licences to handle ^ĞĐƚŽƌĞͲǁŝƐĞŝƐďƵƌƐĞŵĞŶƚŽĨ Import, Export and Remittance business in 2012 ŐƌŝĐƵůƚƵƌĂů/ŶǀĞƐƚŵĞŶƚ;йͿ 2WKHUV Import 6WRUDJH During 2012 the Bank opened 54,412 import &URSV Letters of Credit for Tk.284,588 million as against 47,191 Letters of Credit for Tk. 301,207 million in 3RYHUW\ 2011 showing 15.30% growth in number of LCs. $OOHYLDWLRQ Major items of import consist of the following:

)LVKHULHV

$JULFXOWXUDO Import Position of IBBL /LYHVWRFN ,PSOHPHQW

,QPLOOLRQ7DND Foreign Exchange Business IBBL plays a very important role in the Country’s Foreign Exchange Business of the country. Total Foreign Exchange Business handled during the year 2012 was Tk.782,598 million. The comparative figures are given below: Total Foreign Exchange business handled by the 9ROXPH Bank demonstrated a growth of 9.29% in 2012 *URZWK over 2011. There were 46 Authorized Dealer (AD)

Foreign Exchange Business of the Bank (In million Taka)

2012 2011 % of growth in 2012 Particulars Amount % of Total Amount % of total over 2011 Import 284,588 36.36 301,207 42.06 -5.51 Export 197,095 25.18 178,244 24.89 10.57 Remittance 300,915 38.45 236,607 33.04 27.17 Total 782,598 100 716,058 100 9.29

Import Position (In million Taka) 2012 2011 Sl. No. Items Amount % of total Amount % of total 1 2 3 4 5 6 1 Raw Cotton, Yarn, Fabrics & Accessories 112,886 39.66 100,773 33.46 2 Capital Machinery 14,621 5.13 12,871 4.27 3 Fertilizer 24,378 8.56 30,285 10.05 4 Wheat 6,118 2.14 8,092 2.69 5 Iron, Steel & Other base Metals 8,082 2.83 8,096 2.69 6 Motor Vehicles 3,411 1.19 4,639 1.54 7 Chemicals 8,668 3.04 7,284 2.42 8 Edible Oil (Crude & Refined) 16,457 5.78 21,240 7.05 9 Rice 301 0.10 952 0.32 10 Scrap Vessel 7,343 2.58 1729 0.57 11 Others 82,323 28.92 105,246 34.94 Total 284,588 100 301,207 100

130 Annual Report 2012 Rural woman processing paddy in a terrace

Export Exchange House Arrangement

During 2012 the Bank handled 54,188 Export Bank has established remittance arrangement Bills for Tk.197,095 million as against 45,433 with 114 Exchange Houses in 17 countries of the Export Bills for Tk.178,244 million in 2011 showing world for facilitating remittance services. IBBL as a 10.57% growth in amount. Major export financed member of Bangladesh Electronic Funds Transfer rd items were the following: Network (BEFTN) is routing 90% of its 3 bank remittance by using BEFTN. Export Position of IBBL SMS & Centralized Account Opening ,QPLOOLRQ7DND IBBL has introduced SMS (short message service)

for the expatriates and their beneficiaries in this year. Under this arrangement, expatriates can update about their account balance at any time

from abroad. Besides IBBL now opens deposit accounts for the expatriate customers centrally which inspires them to remit money through

banking channel. 9ROXPH *URZWK Remittance Card

The Bank also introduced Remittance Card for the Foreign Remittance expatriates and their beneficiaries by which they Total remittance collection stood Tk. 300,915 can send money without having a bank account. million in 2012 which was Tk. 64,308 million higher The Cardholders can draw money 24 hourss from than the total remittance of Tk. 236,607.00 million ATM and from bank counter within banking hours. received in 2011. IBBL attained 27.17% growth and 27.70% market share in the country’s remittance Web Portal System during 2012. IBBL is considered market leader in IBBL has also introduced web portal system under Foreign Remittance collection for providing proper which the expatriate account holder can check marketing and carrying customer services. account balance of his account and also can

Annual Report 2012 131 Export Position (In million Taka)

2012 2011 Sl. Growth % in 2012 Items No. Amount % to total Amount % to total over 2011

i. Garments and Textile 158,851 80.59 142,734 80.07 11.29

ii. Frozen Foods & Vegetables 1,980 1.00 1,074 0.60 84.35

iii. Jute & Jute Goods 9,992 5.06 7,898 4.43 26.51

iv. Leather 134 0.06 73 0.04 83.56

v. Tea 89 0.04 2 -

vi. Chemical 361 0.18 - -

vii. Others 25,688 13.03 26,463 14.84 -1

Total 197,095 100 178,244 100 10.57

transfer fund from his account to other account with financial institutions around the globe to maintained with IBBL. facilitate foreign trade. Financial Institutions Department (FID) plays vital role in linking NRB Customer Care with the major financial institutions abroad for facilitating growing volume of international IBBL has a Centralized Customer Service Department trade and remittance business. A brief picture of with efficient officials to solve any problem related to relationship status of IBBL is as follows: foreign remittance at home and abroad. IBBL’s Foreign Business Network IBBL’s Representative in Abroad Sl. Items Number To encourage Bangladeshi expatriates for No. sending their hard earned foreign currency 1 Number of Nostro accounts 37 through Banking channel. To assist them for opening account from abroad, 28 officials of 2 Number of currencies Nostro A/Cs 10 are maintained the Bank are working in Kingdom of Saudi Arabia (KSA), UAE, Bahrain, Qatar, Oman and 3 Number of RMA (Arrangement 573 for authenticated financial Singapore. communications) 4 Number of Countries with RMA 78 Comparative Position of Remittance 5 Number of Banks with RMA 233 6 RMA established in 2012 96 ,QPLOOLRQ7DND Correspondent Banks paid Visit to Our Bank During this year, 48 foreign correspondents namely Standard Chartered, Citi N.A., Mashreq, JP Morgan Chase, Commerz AG, ICICI India, Axis India, UBAE Italy, Sumito Mitsubishi Banking Corporation Japan, Doha Commercial Bank Qatar, United Bank UAE, Deutsche Bank Germany, 9ROXPH *URZWK Unicredito Italiono Bank Italy, Habib AG Zurich 6KDUH Switzerland, Bank of Montreal Canada, Zorcher Kantonal Switzerland, Bank Soha, Rabo Bank Netherland, HDFC India, Askari Bank, National Relationship with Correspondents in Abroad Bank of Oman, Bank Muscat Oman etc. visited Islami Bank Bangladesh Limited has established the Bank and shared views and ideas on mutual and has been maintaining networking relation business interests.

132 Annual Report 2012 IBBL financed one third of Country’s investment in the food industry-Rice Mill is one of those

Visit by International Agencies establishing Central Processing Center (CPC). Now the Center is processing Foreign Trade Products of The undermentioned International Agencies AD Branches from a single processing center. visited our Bank during the year 2012. International Finance Corporation (IFC), World Bank Group, IBBL is the pioneer among the local banks in Islamic Corporation for the Development of the trade centralization maintaining the International Private Sector (ICD) of IDB Group, International Standard (scan based) in the country which is very Monetary Fund (IMF) and Asian Development much significant for a Mega Bank like IBBL. Bank (ADB) visited the Bank on different schedules and discussed with the Senior Management Offshore Banking Units (OBU) mutual business potentials. Islami Bank Bangladesh Limited obtained permission from Bangladesh Bank to operate Foreign Trade Processing from a 3(three) Off-Shore Banking Units (OBU) located Central Hub at Head Office Complex Corp. Branch, Dhaka, Agrabad Branch, Chittagong and Uttara Branch, Islami Bank Bangladesh Ltd. handles substantial Dhaka. The operations include to receive deposit volume of Foreign Trade business of the country from Non-Residents in Foreign Currency and which is increasing day by day. To handle the to discount usance import documents of AD huge volume of Foreign Trade Business of the Branches in Foreign Currency under UPAS Bank in a better and more efficient way, IBBL (Usance payment at sight) arrangement. started Centralized Trade Processing in 2010 by

Performance of UPAS ( Usance Payment at Sight) in 2012 through OBU:

Nos. of Amount in Amount in SL. No. Particulars Issue million USD million BDT 1 No. of AD Branches availing UPAS facility 10 2 Total L/Cs opened by AD under UPAS in 2012 713 226.31 18070.83 3 Import Bills Settled under UPAS in 2012 549 171.20 13670.30 4 Outstanding UPAS import Bills 396 124.45 9938.78 5 Income earned by OBUs from UPAS import Bills 1.79 142.31

Annual Report 2012 133 Case Study

Poultry Farm Changes Anjuara’s Anjuara would rear some hens as her hobby. Days Sometimes she would sell some eggs to buy other daily essentials. Very often she would sell one or Anjuara’s paternal family was not so solvent. two hens to meet emergency of the family. Anjuara Unlike others, their poverty was not that abject. thought if she had more hens she could have Accepting the little deficit and discontent, Anjuara contributed more to her family. Thinking more and of Mirkamary village of Ishwardi, was passing more about this, a plan of setting up poultry farm happy days in her father’s family. hit her brain. But misfortune suddenly engulfed her in such a Anjuara shared the idea with her husband. Her way that she was as if thrown in a sea. It happened husband also liked the idea. From poultry farm immediately after she got married. The financial Anjuara could earn money staying at home. Her condition of her father-in-law’s family was not good. husband did not like Anjuara to go outside. Anjuara They were passing days in woes. They were living also did not like to go outside for earning. But the in a joint family. In this situation Anjuara’s husband Babul Islam was separated from his father’s family. problem was to have enough money to set up a Babul owned a small piece of agricultural land as farm. Anjuara’s husband Babul discussed with his his share. They could meet a few months demand well-wishers poultry about farm idea. In this way by the crops of the land. It was not possible for the matter reached the ear of field officer of the them to run the family round the year by limited local unit of Rural Development Scheme (RDS) of crops of their agricultural land. In this miserable Islami Bank Bangladesh Limited. Field Officer met condition of the family, they have been blessed with Babul. He proposed Babul Islam about financing a child. Instead of becoming happy for having the to set up a poultry farm. He also suggested them first child, it increased their tension more. Anjuara to be a member of RDS unit to get investment. lamented thinking of her child’s future.

134 Annual Report 2012 Anjuara became a member of Rabeya Basri (R) first phase Anjuara took more investment in the unit of RDS in 2005. A few days later the bank second phase. Their profit kept increasing. Later, sanctioned 8 thousand taka investment to Anjuara. they took big amount of investment. Their project By this investment they built a teen-shed house, kept expanding. In the last phase she took an bought chicken, poultry feed and other essentials investment of 40 thousand taka. One thousand for the farm. Anjuara’s husband would assist her new chickens were added to the farm. In this way to run the farm side by side his own work. In the the size of the poultry farm of Anjuara expended first phase they made handsome profit selling day by day. Poverty turned fugitive and they hens and eggs. After paying installment of the needed no looking back.

Rubia: An Embodiment of Enterprising Sprit Rubia Khatun, a dweller of West Baghail village of Pakshi, Pabna is a lady of competitive zeal. Her husband used to work in other’s land as a day laborer. They have a seven member family. It was difficult to run the family from one man’s earning. They were passing days in woes. They used to live in a small congested house. They could not send their children to school. They had a tube well but no sanitary latrine. On the whole they were leading a miserable life.

Rubia was thinking how she could help her husband. She came to know about Rural Development Scheme (RDS) of Islami Bank. She became a member of 39 Sumaya unit of Area number 7 of Pakshi branch in 2006. She took an initial investment of Tk. 7,000/- and bought a cow. This cow gave birth to two calves in consecutive two years. She started earning by selling milk. Later she bought more cows taking fresh investment. She took 5 bigha lands as lease for her cows. Later she bought a paddy thresher machine. She built a house and kitchen. As of now she took 93 thousand taka as investment from the Bank.

There is no sign of poverty in Rubia’s family now. It has been possible for taking RDS investment. There are four earning members now in her family completing primary schooling. Her three children became carpenters. They built sanitary latrine. Now she wants to build a pucca house by taking investment.

Annual Report 2012 135 Chitra becomes Self-reliant by Dairy Farm

Chitra Saha, an inhabitant of Norottom village of planned to build a dairy farm. To fulfill the dream, she Begumgang upazial of Noakhali district has become took an investment of Tk 5,000/- and bought a cow. self reliant by dairy farm. Her husband was a day Her condition started changing gradually. She took labourer. But by their joint efforts they have changed more investments from IBBL. Untill reported time the face of their family. Their two sons are continuing she owns four cows. Chitra expressed her gratitude study. The economic condition of Chitra’s family for proper guidance and financial backing of Islami was not so good before joining Rural Development Bank for her success. Scheme (RDS). Chitra sought to be self reliant. She

Madhobi’s Mat Crafts mat. Their profit began multiplying by degrees. Madhobi Rani, a housewife, is an inhabitant of They took investment of 10 thousand taka in Arongshile of Bogra district. She is also poor, second phase. At that time they rented a house like most of the inhabitants of her village. But her in Mirzapur Bazar for selling mat. They started to poverty is not comparable to other villagers. She keep melamine utensils in the shop besides mat. is rather ultra-poor and landless. She used to stay Selling was going on well. Paying bank installment, making a small house in other’s land. they took further investment. Their production Madhobi Rani’s husband Lakkhan Debnath makes capacity increased. Instead of making mat they mat and sell it in the local market. Madhobi also started collecting readymade mat from the village used to assist her husband to make mat. But and selling in to other shops. Gradually they turned regular buying of foods was not possible for his themselves as wholesale traders. five-member family. At present they have goods in their shop worth 5 This story goes back to 2006. Madhobi registered lac taka. Two employees work in the shop. They herself as a member of Rural Development bought 2 decimals of land and built a teen-shed Scheme of Islami Bank Bangladesh Limited. She structure there. They have now tube-well and took an investment of 5 thousand taka. With this, sanitary latrine. Madhobi couple is now leading a they bought more canes than earlier to produce happy life.

136 Annual Report 2012 Nilufa becomes Self-reliant Nasir would sell those “thonga” in the market. They Making Paper-packet (Thonga) started making profit from thonga trade. From the earning they continued paying regularly the bank Nilufa’s family was a needy one. They were have- installments. The Bank sanctioned them fresh nots. They used to stay in a shabby house. But investment after payment of first phase. In second they coped with this situation by honesty, integrity phase they got investment of Tk 10,000/-. In fifth and hard work and brought themselves to the phase they took an investment of 25 thousand taka. solvent class. They built a new house breaking the shabby one. Nilufa’s husband Nasir Ahmad is a “thonga” maker. They own a tube well. They have also a sanitary But he could not expand his business for lack of latrine now. In the meantime, they were blessed capital. So they were unable to lead a solvent with two more children. They don’t have to face any life. They had only one child. They could not run problem now although they have several mouths to even the three member small family smoothly for feed. They can afford to maintain the family easily. poverty. They were passing days in woes. In the meantime Allha’s blessings were bestowed upon them. They met the demand of capital by Rural Development Scheme (RDS) of Islami Bank Bangladesh Limited. Blessing wind hit the sail of their business. Change of life started.

This is the story of 2001. They got introduced to field officer of RDS of Islami Bank Bangladesh Limited. Nilufa became a member of Hazrat Mariam (R) unit of RDS following the suggestion of the field officer. A few days later she received an investment of Tk 5,000/- from the Bank. With this money they started Thonga making business.

Her husband used to collect paper roaming around village after village. They could make “thonga” with those papers staying at home.

Annual Report 2012 137 Solvency through Cottage Industry

Cottage industry has brought fortune to Shamsunnahar of Maizdicoart. Shamsunnahar has not only changed her own fate but also played a role to bring fortune to many families including her neighbours. It was possible for her dream, effort and sincerity to change her own condition. Rural Development Scheme (RDS) of Islami Bank Bangladesh Limited stood beside Shamsunnahar to translate her dream into a reality.

There are six members in Shamsunnahar’s family. Her husband is a daily basis part-time messenger. Shamsunnahar’s family was not running properly with her husband’s meagre income. They were passing days in woes. Shamsunnahar used to lament seeing her children’s sad face. She always thought if she could have done something. She wished if she could have some extra income side by side her husband.

One day her wish came into true. Shamsunnahar registered herself as a member of Ma Halima Unit of Rural Development Scheme, in 1996. She took investment of Tk 5,000/-. She bought bamboos and canes with this investment and started producing handicrafts like “Dala”, “Kula”, “Chaluni” (riddle) etc. Dealers come home and take them buying. As a result, Shamsunnahar got opportunity to earn extra money staying at home. With this earning, she was able to built a new house with corrugated teen. She is now capable to send her children to school. Seeing the success of Shamsunnahar, many came forward to set up cottage industry. Shamsunnahar helped them by giving suggestions and planning. In this way Shamsunnahar helped to change luck of many including her.

Momina Begum’s Nursery Says ‘No’ to Poverty

Momina Begum, an inhabitant of Joldhaka Upazila of Nilfamari district, became a member of Rural Development Scheme of Islami Bank Bangladesh Limited in 2006. In first phase she took an investment of 10 thousand taka and started nursery business with her husband. Later she took one lac taka investment in phasewise. Nursery business kept expanding for their joint efforts. At present their nursery is on 32 decimals of land where there were 30 varieties of flowers, fruits and other wood tree seedlings. Every month they sell seedlings worth Tk. 30,000/- . Besides paying installments as per schedule, she also brought solvency to her family. Momina Begum is grateful to Islami Bank for her success.

138 Annual Report 2012 Meena Defeats Poverty last grocery trade came to her brain. She learned many tricks of trade while she helped her father to The girl had great eagerness for education. She run the shop. She has no doubt to earn sufficient felt too good to go to school. But feeling fine is from grocery trade if she could start with handsome not enough; one must have the ability to bear the capital. Thus Meena started to dream about setting expenses of education. Meena Begum’s family up a grocery. She discussed her plan with her had not have the ability to bear it. So, Meena husband. But her husband showed little interest. Begum’s school-life ended when she enrolled in How he would show interest? It needs huge money class five. Meena’s father was a small vendor. It to set up a grocery. From where would they get was very difficult for him to bring regular breads & so much money? They are too poor and could not butter for a seven-members family. arrange such amount of money.

After giving up school, Meena’s regular task was However, suddenly an opportunity surfaced. Rural to assist his father in the shop. Hardworking Development Scheme just began its operation Meena looked after the shop properly when her in their village. Meena became a member of the father would go to market to buy goods for shop. scheme. She took an investment of 5 thousand Meena would not face any problem to sell goods, taka. With this investment she set up a small weighing and pricing. Within a short time Meena grocery. With one portion of her little profit she become a complete shopkeeper. pays installment of the Bank as per schedule; and invested to increase goods in the shop. After this, Later, this experience to run a shop has played a if any profit remained, she kept it to herself for great role to change her life. It enabled her to lead future use. a solvent family life. After paying the installments of the first phase, she Meena begum, an inhabitant of Patnitala Upazila got further investment from the Bank. She also of Naogan district, got married immediate after paid it as per schedule. Then the Bank sanctioned she stepped in 18. Her husband was a day her increased investment every time. In this way labourer. There is scarcity of work in the area. she took 25, 28, 32, 36 and 40 thousand taka So, one cannot get rid of poverty even after hard investment phasewise. Eventually, Meena’s shop work. In this situation, a new member came to began to expand. Solvency came to her family. At their family after two years of marriage. They were present there are goods in her shop worth about blessed with a daughter. Expenditure of the family taka 2 hundred thousand. Now she owns of some increased many fold. As a result the situation land. She got sufficient paddy from her three bigha deteriorated. Meena started finding out a way to land. Meena Begum now leading a happy family get rid of poverty circle. Meena always remained with her husband and offspring. in deep thinking about how to increase income. At

Annual Report 2012 139 Siddika Begum Conquers Poverty

Siddika Begum of Dinajpur district embodies a good example of success by hard work, discipline and entrepreneurship. Siddika Begum started a poultry farm with 50 hens in 2005. But for lack of capital, her farm was about to be closed. In this situation Islami Bank came forward to rescue her. Siddika Begum enlisted herself as a member of Rural Development Scheme, Hazrat Umme Salma (R) unit of Islami Bank Bangladesh Limited. Initially she took an investment of 8 thousand taka. Paying the regular installments she took more and more fresh investment from the Bank. Her business kept expanding. She has 4 hundred hens in her farm now and collects 3 hundred eggs per day. She invested 6 lac taka to expand the farm. At present, her monthly profit is about 2 lac taka. Siddika Begum was assisted by her husband, sister in law and brother in law to build the dreamt farm. She was all praise to Allah and expressed gratitude to Islami Bank Bangladesh Limited for her success. Rural Development Scheme of Islami Bank Bangladesh Limited feel contented seeing the success of Siddka Begum.

Successful RDS-Client Laxmi Rani There is a saying that industry is a key to success. Laxmi Rani of Panchasar became a member of Rural Development Scheme, unit number-06 of Munshiganj Islami Bank branch. Initially she took an investment of Tk 5,000/- and started producing ‘belon’, ‘piri’, ‘fuldani’ (flower vase), ‘rehal’, dalghutuni and other children toys from wood. Shops of mela (fair) and hat, Bazaar, kept Laxmi Rani’s productivity. She needed no looking back since then. Journey of changing destiny set in. Gradually the Bank increased sanction and she took one lac taka investment. Now she runs a business which is worth several lac taka. Children are continuing studies. Her one son is an MBBS student in the final year. Addressing in a get-together ceremony of RDS branch Laxmi Rani said, “Our success would not have been possible if Islami Bank did not stand beside us.”

140 Annual Report 2012 Market Disclosure under Pillar-III of Basel-II

he purpose of Market Discipline in Basel II is to establish more transparent and more disciplined financial Tmarket so that stakeholders can assess the position of a Bank regarding holding of assets and to identify the risks relating to the assets and capital adequacy to meet probable loss of assets. For the said purpose, this “Disclosures on Risk Based Capital (Basel II)” is made as per Bangladesh Bank’s Guideline.

Scope of Application Qualitative Disclosures a. The name of the top Islami Bank Bangladesh Limited corporate entity in the The Consolidated Financial Statements of the Bank include the financial statements of (i) Islami group to which this Bank Bangladesh Limited (including Off-Shore Banking Units (OBUs) (ii) Islami Bank Securities guidelines applies: Limited (iii) Islami Bank Capital Management Limited. b. An outline of differences A brief description of the Bank (Main Operation) and its subsidiaries is given below: on the basis of consolidation for Islami Bank Bangladesh Limited accounting and regulatory Islami Bank Bangladesh Limited was incorporated on March 13, 1983 as a Public Limited purposes, with a brief Company (Banking Company) with limited liability under the Companies Act 1994 as an description of the entities interest-free Islamic Shari‘ah based commercial bank and initiated its operation on March 30, within the group (i) that 1983 with the permission of Bangladesh Bank. The authorized and paid up capital of the bank are fully consolidated; (ii) respectively stood at Tk.200,000 million and Tk.12,509.64 million as on December 31, 2012. that are given a deduction Presently the Bank operates its business through Head Office having 276 Branches (including treatment; and (iii) that 30 SME/ Agriculture Branches) and 300 own ATM booths all over Bangladesh. The shares of are neither consolidated the Bank are listed with both the Stock Exchanges of the country, i.e. Dhaka Stock Exchange nor deducted (e.g. where Limited and Chittagong Stock Exchange Limited. the investment is risk - Subsidiary Companies weighted). i) Islami Bank Capital Management Limited (IBCML) IBCML is a fully owned subsidiary of IBBL. IBCML was established in April 2010 under the Companies Act 1994 as a Public Limited Company with Authorized Capital of Tk.1000.00 million & Paid-Up Capital of Tk.300.00 million. The Company was established as per Bangladesh Bank Letter No. BRPD(R-1)717/2010-47 dated 07 February 2010. The registered office of IBCML is located at 63, Dilkusha C/A, Dhaka, Bangladesh. ii) Islami Bank Securities Limited (IBSL) IBSL is also a fully owned subsidiary of IBBL. IBSL was incorporated in March 2010 as a Public Limited Company under Companies Act, 1994 to carry out business of Stock Broker & Dealer in the capital market. The overall increase of activities in Brokerage operation plays an important role in the improvement of capital market of the country and enhances earning capability of IBBL through corporate declaration. Off-shore Banking Unit (OBU) Off-shore Banking Unit is a separate business unit governed by the applicable rules & regulations and guidelines of Bangladesh Bank. IBBL obtained permission to operate Off Shore Banking unit in its 3 Branches under International Banking Wing. c. Any restrictions, or other major impediment, on - Not Applicable. transfer of funds or regulatory capital within the group Quantitative Disclosures d. The aggregate amount of - Not Applicable. capital deficiencies in all subsidiaries not included in the consolidation that are deducted and name(s) of such subsidiaries.

Annual Report 2012 141 Capital Structure Qualitative Disclosures a. Summary information on As per the guidelines of Bangladesh Bank, Tier-1 Capital of IBBL consists of (i) Fully Paid- the terms and conditions up Capital, (ii) Statutory Reserve, (iii) General Reserve (iv) Non-Repayable Share Premium of the main features of Account (v) Retained Earnings (vi) Dividend Equalization Account and (vii) Minority Interest in all capital instruments, Subsidiaries (viii) Non-Cumulative irredeemable Preference Shares. especially in the case Tier-2 Capital consists of applicable amount of (i) General Provision (against Un-classified of capital instruments Investments, Off-Balance Sheet exposure & Off-Shore Banking Units) (ii) Assets Revaluation eligible for inclusion in Reserves up to 50%, (iii) Revaluation Reserve for Securities up to 50% and (iv) Subordinated Tier 1 or Tier 2. Debt (Mudaraba Perpetual Bond) (up to max. 30% of eligible Tier-I capital). (v) Revaluation Reserve for equity instruments up to 10% (vi) All Other Preference Shares.

Quantitative Disclosures

b. The Amount of Tier 1 Capital, with Break-up As on December 31, 2012 (In million Taka) Particulars Solo Consolidated

Tier-I (Core Capital)

i Fully paid-up Capital 12,509.64 12,509.64

ii Statutory Reserve 12,423.66 12,423.66

iii Non-repayable Share Premium account 1.99 1.99

iv General Reserve 130.44 130.44

v Retained Earnings 3,127.41 3,033.20

vi Minority interest in Subsidiaries 0.06

vii Non-cumulative irredeemable preference shares - -

viii Dividend equalization account 32.00 32.00

ix Other (if any item approved by Bangladesh Bank) - -

Sub-Total (Core Capital) A (i to ix) 28,225.14 28,130.99

a. Tier 2 and Tier 3 Capital i Tier 2 capital 13,803.19 13,803.19 ii Tier-3 (Eligible for market risk only) - - Sub Total (Suplementary Capital) B (i+ii) 13,803.19 13,803.19

b) Other deductions from capital - - c) Total Eligible Capital (A+B) 42,028.33 41,934.18

Capital Adequacy Qualitative Disclosures a. A summary discussion The Bank has adopted Standardized Approach (SA) for computation of capital charge for of the Bank’s approach investment risk and market risk, and Basic Indicator Approach (BIA) for operational risk. to assess the adequacy Assessment of capital adequacy is carried out in conjunction with the capital adequacy of its capital to support reporting to Bangladesh Bank. The Bank has maintained capital adequacy ratio at 13.53% current and future & 13.49% on the basis of “Consolidated” and “Solo” respectively as against the minimum activities. regulatory requirement of 10%. Tier-I capital adequacy ratio under “Consolidated” basis is 9.08% and “Solo” basis is 9.06% as against the minimum regulatory requirement of 5%. The Bank’s policy is to manage and maintain strong Capital Adequacy Ratio through investing high rating grade investment clients. The Bank maintains adequate capital that is sufficient to absorb all material risks associated with the Bank. The Bank also ensures that the levels of capital comply with regulatory requirements and satisfy the external rating agencies and other all stakeholders including depositors.

142 Annual Report 2012 Quantitative Disclosures

As on December 31, 2012 Particulars (In million Taka) Solo Consolidated b) Capital requirements for Investment (Credit) Risk: 28,220.80 28,049.59 c) Capital requirements for Market Risk 468.50 468.50

d) Capital requirements for Operational Risk 2,461.86 2,470.78

e) Total Capital Requirement 31,151.16 30,988.87

Capital Adequacy Ratio: 13.49% 13.53% Total CAR Tier- I CAR 9.06% 9.08%

Tier-II CAR 4.43% 4.45%

Investment (Credit) Risk Qualitative Disclosures a) The General Qualitative disclosure requirement with respect to credit risk, including: i) Definitions of past - As per the Bangladesh Bank guidelines, any Investment if not repaid within the fixed due and impaired (for expiry date will be treated as Past Due/ Overdue. accounting purposes): Bangladesh Bank issued Circulars from time to time for strengthening Investment (Credit) discipline and brings provisioning. All Investments/ loans &advances will be grouped into four (4) categories for the purpose of classification, namely (a) Continuous Investment/Loan (b) Demand Investment/Loan (c) Fixed Term Investment/Loan & (d) Short-term Agricultural & Micro Investment. The above Investment (Credit) are classified as follows: Continuous and Demand Investments/ loans are classified as: l ‘Sub-standard’ if it is past due/over due for 03(three) months or beyond but less than 06 months; l `Doubtful’ if it is past due/over due for 06 (six) months or beyond but less than 09 (nine) months; l `Bad/Loss’ if it is past due/over due for 09 months or beyond from the date of expiry or claim by the bank or from the date of creation of forced loan.

Fixed term Investment (Loans), which is repayable by installments(s) are classified as:- a. In case of any installment(s) or part of installment(s) of a Fixed Term Loan amounting upto Tk. 10.00 Lacs is not repaid within the due date, the amount of unpaid installment(s) will be termed as `pass due or over due installment’. In case of such types of Fixed Term Loans: l `Sub-standard’ if the amount of `past due installment is equal to or more than the amount of installment(s) due within 06 (six) months, the entire Investment (jloan) will be classified as “Sub-standard”. l `Doubtful’ if the amount of past due installment is equal to or more than the amount of installment(s) due within 09 (nine) months, the entire Investment (loan) will be classified as “Doubtful”. l ‘Bad/Loss’ if the amount of’ defaulted installment’ is equal to or more than the amount of installment(s) due within 12 (twelve) months, the entire Investment/loan will be classified as “Bad/Loss”. b. In case of any installment(s) or part of installment(s) of a Fixed Term Loan amounting more than Tk. 10.00 Lacs is not repaid within the due date, the amount of unpaid installment(s) will be termed as ‘past due or over due installment’. In case of such types of Fixed Term Loans: l ‘Sub-standard’ if the amount of’ past due Installment is equal to or more than the amount of installment(s) due within 03 (three) months, the entire Investment (loan) will be classified as “Sub-standard”. l ‘Doubtful’ if the amount of past due installment is equal to or more than the amount of installment(s) due within 06 (six) months, the entire Investment (loan) will be classified as “Doubtful”.

Annual Report 2012 143 l ‘Bad/Loss’ if the amount of’ defaulted installment’ is equal to or more than the amount of installment(s) due within 09 (nine) months, the entire Investment/loan will be classified as “Bad/Loss”.

Short-term Agricultural and Micro-Investment are classified as: If not repaid within the due date as stipulated in the Investment (loan) agreement. If the said irregular status continues, the Investment (credit) will be classified as ‘Substandard ‘ after a period of 12 months, as ‘Doubtful’ after a period of 36 months and as ‘Bad/Loss’ after a period of 60 months from the stipulated due date as per Investment (loan) agreement. A continuous Investment, Demand or a Term Investment which will remain overdue for a period of 02 (two) months or more will be put into the Special Mention Account (SMA). The Bank follows the specific and general provision for investment/ loan on the basis of Bangladesh bank Guidelines issued from time to time.

ii) Description of The rates of provision are given below: approaches followed a. General Provision: The Bank maintains General Provision in the following way : for specific and general allowances and 1. @ 0.25% against all unclassified loans of Small and Medium Enterprise (SME) as statistical method; defined by the SME & Special Programmes Department of Bangladesh Bank from time to time and @ 1% against all unclassified Investments (other than Investments/ loans under Consumer Financing, Loans to Brokerage House, Merchant Banks, Stock dealers etc., Special Mention Account as well as SME Financing.) 2. @ 5% on the unclassified amount for Consumer Financing whereas it has to be maintained @ 2% on the unclassified amount for (i) Housing Finance and (ii) Investments/Loans for Professionals to set up business under Consumer Financing Scheme. 3. @ 2% on the unclassified amount for Investments/Loans to Brokerage House, Merchant Banks, Stock dealers, etc. 4. @ 5% on the outstanding amount of Investments/loans kept in the ‘Special Mention Account’. 5. @1% on the off-balance sheet exposures. (Provision will be on the total exposure and amount of cash margin or value of eligible collateral will not be deducted while computing Off-balance sheet exposure.) b. Specific Provision: Banks will maintain provision at the following rates in respect of classified Continuous, Demand and Fixed Term Investments/Loans: 1. Sub-standard : 20% 2. Doubtful : 50% 3. Bad/Loss : 100% c. Provision for Short-term Agricultural and Micro- Investments: 1. All Investment (credit) except ‘Bad/Loss’ (i.e. ‘Doubtful’, ‘Sub-standard’, irregular and regular Investment accounts) : 5% 2. ‘Bad/Loss’ : 100%

iii) Decision of the Bank’s The Bank has put in place a well-structured Investment/Credit Risk Management Policy known Investment (Credit) as Investment Risk Manual approved by the Board. The Policy document defines organization Risk Management structure, role and responsibilities and, the processes whereby the Investment (Credit) Risks Policy; carried by the Bank can be identified, quantified and managed within the framework that the Bank considers consistent with its mandate and risk tolerance. Authorities are properly delegated ensuring check and balance in investment operation at every stage i.e. screening, assessing risk, identification, management and mitigation of investment risk as well as monitoring, supervision and recovery of investments with provision for Early Warning System and Grading of Investment clients as Blue, Green, Grey, Yellow, Red and Brick Red. Bank has framed Investment Policy, Investment (Credit) Assessment & Risk Grading, Approval Authority, Internal Audit Approval Process, Investment (Credit) Administration, Investment (Credit) Monitoring, Investment (Credit) Recovery etc. which forms integral part in monitoring of Investment (Credit) Risk in the Bank. Status of investments is regularly reported to the Board /Executive Committee of the Bank.

144 Annual Report 2012 Quantitative Disclosures b) Total gross Investment/ Total gross Investment/ Credit risk exposures broken down by major types of Credit risk exposures Investment exposure of the Bank are as under: broken down by major Particulars As on December types of Investment 31, 2012 exposure. (In million Taka) Mode wise Investment Bai – Murabaha 213,741.40 Bai - Muajjal 17,806.98 Hire Purchase under Shirkatul Melk 93,495.82 Purchase & Negotiation 7,454.20 Bai- as- Sarf (FDB)/FCD 1,823.29 Musharaka Documentary Bill (MDB) 13,224.69 Musharaka 129.06 Mudaraba 9,938.78 Bai – Salam 4,411.15 Murabaha Foreign Currency Investment 1, 983.17 Quard 8,912.18 Total 372,920.72 c) Geographical Geographical Distribution of exposures, broken down in significant areas by major Distribution of types of Investment/ credit exposure of the Bank is shown below: exposures, broken down in significant areas by Particulars As on December major types of credit 31, 2012 exposure. (In million Taka)

In Rural Areas 50,190.82

In Urban Areas 322,729.90

Total 372,920.72

Division wise distribution of Investment/ credit exposure of the Bank are as under:

Name of Division As on December 31, 2012

(In million Taka)

Dhaka Division 213,608.99

Chittagong Division 81,072.97

Khulna Division 31,511.80

Rajshahi Division 28,304.68

Barisal Division 3,729.20

Sylhet Division 7,160.08

Rangpur Division 7,533.00

Total 372,920.72

Annual Report 2012 145 d) Industry or Industry or counterparty type distribution of exposures, broken down by major types counterparty type of investment/credit exposure of the Bank is shown below: distribution of exposures, broken Particulars As on December 31, 2012 down by major types of investment/ credit (In million Taka) exposure. Economic purpose wise Investment Trade & Commerce 105,786.72

Real Estate 21,754.90

Transport 6,449.04

Agriculture (including fertilizer & agriculture implements) 26,713.44

Industrial investment 189,193.42

Others 23,023.20

Total 372,920.72

Particulars As on December 31, 2012

(In million Taka)

Industrial Investment Textile- Spinning, Weaving & Dyeing 71,761.06

Steel, Re-Rolling & Engineering 21,946.44

Agro-based Industry 17,613.90

Garments & Garments Accessories 13,092.18

Food & Beverage 7,635.53

Cements Industry 1,854.10

Pharmaceuticals 2,289.24

Poultry, Poultry Feed & Hatchery 624.34

Sanitary Wares 274.56

Chemicals, Toiletries & Petroleum 3,973.06

Printing & Packaging 3,329.78

Power (Electricity) 4,162.26

Ceramic & Bricks 2,459.51

Health care ( Hospital & Others) 2,079.08

Plastic Industries 715.13

Petrol Pump & CNG Filling Station 940.45

Information Technology 549.75

Hotels & Restaurants 656.33

Other Industries 33,236.71

Total 189,193.42

146 Annual Report 2012 e) Residual contractual Residual contractual maturity breakdown of the whole portfolio, broken down by maturity breakdown major types of investment/credit exposure of the Bank. of the whole portfolio, Particulars As on December broken down by major 31, 2012 types of investment/ (In million Taka) credit exposure. Repayable on Demand - Upto 1 month Over 1 month but not more than 3 month 105,104.74 Over 3 months but not more than 1 year 108,070.74 Over 1 year but not more than 5 years 82,343.34 More than 5 years 77,401.90 Total 372,920.72 f) By major industry or i) Amount of impaired Investment/ loans and if available, past due investment/ loans counterparty type provided separately The amount of classified/ past due investment of the Bank is shown below:

Particulars As on December 31, 2012 (In million Taka) Past Due - Special Mention Account (SMA) 16,571.77 Sub Standard 2,094.31 Doubtful 1,295.18 Bad & loss 10,823.31 Total 30,784.57

ii) Specific and General Provision Specific and General Provisions were made on the amount of classified and unclassified investments/ loans, Off- balance Sheet exposure of the Bank according to Bangladesh Bank guidelines.

Particulars As on December 31, 2012 (In million Taka) Unclassified Investment 3,935.90 Classified Investment 6,054.35 Off Balance Sheet Exposure 1,100.45 Total 11,090.70

iii) Charges for specific allowances and charge - offs during the period During the period the specific and general provision, were made on the amount of classified investment, Un classified Investment and Off Balance sheet exposures.

Particulars As on December 31, 2012 (In million Taka) Provision on Unclassified Investment (60.10) Provision on Classified Investment 3,582.28 Provision on Off Balance Sheet Exposure (19.55) Total 3,502.63

Annual Report 2012 147 g) Gross Non Performing Non Performing Assets (NPAs) to outstanding Investments of Islami Bank Bangladesh Assets (NPAs) Bank stood at 3.16% as on December 31, 2012. i) Movement of Non Performing Assets (NPAs)

Particulars As on December 31, 2012 (In million Taka) Opening Balance 8,292.32 Additions 5,920.48 Reductions - Closing Balance 14,212.80

ii) Movement of specific provisions for NPAs

Particulars As on December 31, 2012 (In million Taka) Opening Balance 3,054.00 Provisions made during the period 3,724.02 Write-off/Write-back of excess provisions 581.93 Recovery from write-off 141.74 Closing Balance 6,054.35

Equities: Disclosures for Banking Book Positions

Qualitative disclosures a) The general qualitative disclosures requirement with respect to equity risk, including:

• Differentiation between holdings Investment in equity securities are broadly categorized into two parts: on which capital gains are i) Quoted Securities (common or preference share & mutual fund) traded in the expected and those taken secondary market (Trading Book Assets). under other objectives including for relationship and strategic ii) Unquoted securities are categorized as banking book equity exposures which reasons; and are further sub-divided into two groups: unquoted securities which are invested without any expectation that these will be quoted in near future i.e. held to maturity (HTM). And securities those are acquired under private placement or IPO and are going to be traded in the secondary market after completing required formalities. Unquoted securities are valued at cost. • Discussion of important policies The primary objective is to investment in equity securities for the purpose of capital covering the valuation and gain by selling them in future or held for dividend income. Dividends received from accounting of equity holdings in these equity securities are accounted for as and when received and right to receive the banking book. This includes when established. Both Quoted and Un-Quoted equity securities are valued at cost the accounting techniques and and necessary provisions are maintained if the prices fall below the cost price. valuation methodologies used, As per Bangladesh Bank guidelines, the HFT equity securities are revaluated once a including key assumptions and week using marking to market concept and HTM equity securities are amortized once practices affecting valuation as a year according to Bangladesh Bank guideline. well as significant changes in these practices. The HTM equity securities are also revaluated if any, are reclassified to HFT category on the approval of Board of Directors.

148 Annual Report 2012 Quantitative Disclosures As on December 31, 2012 (In million Taka) Particulars Solo Consolidated

a) Value disclosed in the balance sheet of investments, as well as the fair value of those 54.70 54.70 investments, for quoted securities a comparison to publicly quoted share values where the share price is materially different from fair value.

b) The cumulative realized gains (losses) arising from sales and liquidations in the - - reporting period. c) Total unrealized gains (losses). 34.70 34.70 d) Total latent revaluation gains (losses) - - Any amounts of the above included in Tier – 2 capital. - - e) Capital requirements broken down by appropriate equity groupings, consistent with the bank’s methodology, as well as the aggregate amounts and the type of equity investments subject to any supervisory provisions regarding regulatory capital requirements. • Specific Market Risk 5.47 5.47 • General Market Risk 5.47 5.47

Profit Rate Risk in the Banking Book

Qualitative Disclosures a) The general qualitative disclosure Profit rate risk is the risk where changes in market profit rates might adversely affect the requirement including the Bank’s financial condition. Changes in profit rates affect both the current earnings (earnings nature of Profit Rate Risk in perspective) as well as the net worth of the bank (economic value perspective). Re-pricing the Banking Book (PRRBB) risk is often the most apparent source of profit rate risk for a bank and is often gauged by and key assumptions, including comparing the volume of a bank’s assets that mature or re-price within a given time period assumptions regarding investment with the volume of liabilities that do so. prepayments and behavior of non- maturity deposits, and frequency of The short term impact of changes in profit rates is on the bank’s Net Investment Income (NII). PRRBB measurement. In a longer term, changes in profit rates impact the cash flows on the assets, liabilities and off- balance sheet items, giving rise to a risk to the net worth of the bank arising out of all re-pricing mismatches and other profit rate sensitive position.

Quantitative Disclosures As on December 31, 2012 (In million Taka) b) The increase Particulars 1-90 days Over 3 Over 6 Over 9 (decline) in earnings Months to Months to Months to or economic value (or 6 Months 9 Months 12 Months relevant measure used Rate Sensitive Assets 95,736.80 47,056.06 58,056.06 69,056.06 by management) for Rate Sensitive Liabilities 93,890.80 42,740.70 56,425.10 67,320.40 upward and downward rate shocks according GAP 1,846.00 4,315.36 1,630.96 1,735.66 to management’s Cumulative Gap 1,846.00 6,161.36 7,792.32 9,527.98 method for measuring Adjusted profit rate changes (PRC) 1.00% 1.00% 1.00% 1.00% PRRBB, broken down by currency (as Quarterly earnings impact (Cum. Gap*PRC) 461.50 1,540.34 1,948.08 2,382.00 relevant) Accumulate earning impact to date 461.50 2,001.84 3,949.92 6,331.92 Earning impact/Avg. Quarterly Net Profit 0.11% 0.51% 1.01% 1.62%

Annual Report 2012 149 Market Risk

Qualitative Disclosures a) i) Views of BOD on trading / The Board approves all policies related to market risk, sets limits and reviews investment activities compliance on a regular basis. The objective is to provide cost effective funding to finance asset growth and trade-related transactions.

ii) Methods used to measure Standardized rule based approach was been used to measure the Market risk. The Market risk total capital requirement in respect of market risk is the aggregate capital requirement calculated for each of the risk sub-categories. For each risk category minimum capital requirement is measured in terms of two separately calculated capital charges for “specific risk” and “general market risk”.

iii) Market Risk Management The Treasury Division manages market risk covering liquidity, profit rate and foreign system exchange risks with oversight from Asset-Liability Management Committee (ALCO) comprising senior executives of the Bank. ALCO is chaired by the Managing Director. ALCO meets at least once a month.

iv) Policies and processes for There are approved limits for credit deposit ratio, liquid assets to total assets ratio, mitigating market risk maturity mismatch, commitments for both on-balance sheet and off-balance sheet items and borrowing from money market and foreign exchange position. The limits are monitored and enforced regularly to protect the market risks. The exchange rate of the Bank is monitored regularly and the prevailing market condition, exchange rate, foreign exchange position and transactions are reviewed to mitigate foreign exchange risks.

Quantitative Disclosures

As on December 31, 2012 (In million Taka) Solo Consolidated b) The Capital Requirements for Profit (Interest) rate risk - Equity position risk 10.94 10.94 Foreign exchange risk 457.56 457.56 Commodity risk. - Total Capital Requirement 468.50 468.50

Operational Risk

Qualitative Disclosures

a) i) Views of BOD on system to Operational risk implies the risk of loss or harm resulting from inadequate or failure of reduce Operational Risk internal processes, people and systems or from external events. Capability to carry out a large number of transactions effectively and accurately while complying with applicable laws and rules constitutes operational risk management activities of the bank.

The policy for operational risks including internal control & compliance risk is approved by the Board taking into account relevant guidelines of Bangladesh Bank. Audit Committee of the Board directly oversees the activities of Internal Control & Compliance to protect against all operational risks. ii) Performance gap of executives IBBL has a policy to provide competitive package and best working environment to and staffs attract and retain the most talented people available in the industry. IBBL’s strong brand image plays an important role in employee motivation. As a result, there is no significant performance gap. iii) Potential external events - No potential external events are expected to expose the Bank to significant operational risk.

150 Annual Report 2012 iv) Policies and processes for - The policy for operational risks including internal control & compliance risk is mitigating operational risk approved by the Board taking into account relevant guidelines of Bangladesh Bank. Policy guidelines on Risk Based Internal Audit (RBIA) system is in operation. As per RBIA branches are rated according to their risk grading/ scoring audit procedure and required frequent audit to the Branches are operated by the Audit Division. In addition, there is a Vigilance Cell established in the Bank to reinforce operational risk management of the Bank and to minimize the same. Bank’s anti-money laundering activities are headed by (Chief Anti Money Laundering Compliance Officer) CAMLCO and their activities are devoted to protect against all money laundering and terrorist finance related activities. Apart from that, there is adequate check & balance at every stage of operation, authorities are properly segregated and there is at least dual control on every transaction to protect against operational risk. v) Approach to calculating capital - Basic Indicator Approach is used for calculating capital charge for operational risk charge for operational risk as of the reporting date.

Quantitative Disclosures As per the risk based Capital Adequacy Framework, the capital charge for operational risk is equal to 15% of average positive annual Gross Income of the previous three years: In line with the above, the Bank has adopted the Basic Indicator Approach for computing capital to operation risk.

As on December 31, 2012 Capital Requirement Solo Consolidated Operational Risk 2461.87 2,470.78

Stress Testing Bangladesh Bank through its DOS Circular No. 01 dated 21.04.2010 and subsequent DOS Circular No. 01 dated 23.02.2011 introduced “Guidelines on Stress Testing” wherein Stress Testing has been stated as one of the sophisticated technique used to determine the reactions of different financial institutions under a set of exceptional, but plausible assumptions through a series of battery of tests. At institutional level, stress testing techniques provide a way to quantify the impact of changes in a number of risk factors on the assets and liabilities portfolio of the institution.

Bangladesh Bank also mentions in the said circular that at the system level, stress tests are primarily designed to quantify the impact of possible changes in economic environment on the financial system. These tests help the regulators identify structural vulnerabilities and the overall risk exposure that could cause disruption of financial markets.

Bangladesh Bank Circular No. 01 dated 23.02.2011 introduced “Guidelines on Stress Testing” wherein advised that “Banks shall carry out stress testing in line with the revised guideline on quarterly basis i.e. on March 31, June 30 September 30 and December 31 and submitted the same to Bangladesh Bank within 30 days of each quarter end”. IBBL has already prepared a stress testing report in line with the Bangladesh Bank’s guidelines which initially focus on “Simple Sensitivity and Scenario Analysis” of the following five risk factors. • Profit/ Interest rate; • Forced sale value of collateral; • Non- performing Investments (NPIs); • Equity/Share prices ; and • Foreign Exchange rate. The result of stress testing based on the financial performance of the Bank as on December 31, 2012 has also been completed which shows that the bank has adequate capital to absorb minor and moderate individual shocks. However, some additional capital may be required under major level combined shocks.

Annual Report 2012 151 Risk Management

The Chairman addressing half yearly Managers’ Conference

of risk management of such a leading entity in Risk Concept and Risk Management the industry, the Board of Directors has given isk implies a situation that threatens or limits highest emphasis on risk governance and risk Ran organization’s ability to achieve its goal. management and upgraded the unit into an Risk in a banking organization is the possibility independent and separate Risk Management rd that the outcome of an action or event could Wing in its 193 meeting held on 14.05.2012. bring up adverse impacts. Banking operations are mainly exposed to Investment Risk, Market Risk, Formation of Core Risk Management Operational Risk, and Residual Risk, Investment Committees along with their ToRs Concentration Risk, Liquidity Risk, Strategic Risk, Environmental Risk, Interest Rate Risk etc. Risk IBBL exclusively manages 6 (six) core risks Management means a process for identifying, and has designed its own Risk Management measuring and mitigating all sorts of foreseeable Guidelines in accordance with the guidelines risks for sustainable growth of an organization and prescribed by the Central Bank and formed 6 its Shareholders’ value. core risk management committees which conduct meeting periodically. The major concerns of the committees are as under: Formation of Risk Management Wing To ensure effective risk management, Risk a. Investment Risk Management Committee Management Unit was introduced in November, supervises and monitors investment 2009. The unit was functioning like a committee concentration, investment risk grading, comprising of members from different Divisions. corporate clients rating, non-performing In April 2011, a separate Risk Management investment, residual risk against investment, Unit headed by a senior executive has been provision against classified investment, formed. Later on, understanding the importance investment mix, asset quality etc.

152 Annual Report 2012 b. Foreign Exchange Risk Management taken into account or partially taken into account Committee oversees foreign exchange risk, while calculating Minimum Capital Requirements, treasury, net open position, import & export quantifying the risks under pillar 2 of Basel-II, stress business, dealing room operations and testing, Internal Capital Adequacy Assessment anti-money laundering aspects in foreign process (ICAAP), setting capital targets that are exchange transactions etc. commensurate with the Bank’s risk profile and control environment etc. For adequate supervision c. Information & Communication Technology of capital functions and risks, Bank has formed a Risk Management Committee monitors and Supervisory Review Process Team (SRPT) as supervises the risks related to data security, stipulated in Bangladesh Bank’s guidelines. physical security, network security, disaster recovery, fraud, forgery, system failure and business continuity etc. Formation of Risk Management Co-ordination Committee (RMCC) d. Anti Money Laundering Risk Management Committee looks after the money laundering IBBL has also formed a strong Risk Management activities, STR, CTR, KYC and TP related Co-ordination Committee (RMCC) in January, compliances. The Committee also supervises 2012 comprising heads of all the risk managing and monitors the entire transactional activities organs of the Bank which are overseen by Risk of the Bank including money laundering Management Wing. The committee sits at least aspects involved with foreign exchange once in a month or more when necessary. In the transactions. meeting of RMCC, all the existing/identified and foreseeable/potential risks issues are discussed e. Internal Control and Compliance Risk and make recommendations to the concerned risk assesses and Management Committee taking organs to address, measure and take steps mitigates the risk related to compliance with to mitigate the risk factors. regulatory requirements, set rules of the Bank, internal checking system, lapses, fraud, forgeries, violations of the set rules etc. Existing Functional Structure of RMW f. Asset Liability Committee (ALCO) looks after the asset-liability risk, liquidity risk, %DVHO,, Investment Deposit Ratio (IDR), deposit mix, 2IIVLWH &PW 6WUHVV 6XSHUYLVLRQ 7HVWLQJ investment mix, gap analysis etc. under direct 7HDP &PW guidance of the Managing Director. 6WUHVV ,QY 7HVWLQJ 5LVN0JW &PW &PW ZŝƐŬDŐƚ͘ 50: ŽͲŽƌĚŝŶĂƟŽŶ Basel Guidelines and its Compliance 0RQH\ ŽŵŵŝƩĞĞ $/&2 /DXQG5LVN IBBL has constituted Stress Testing Committee 0JW&PW and Assessment of Capital under Basel- ,&& ,&7 5LVN0JW 5LVN0JW II Accord Committee to look after the Stress &PW )([5LVN &PW Testing & Basel-II related risk issues. Addressing 0JW&PW the Investment Risk, Market Risk, Operational Risk and other risks associated with the banking operations, IBBL has been linking its risk profile Risk Management Areas with the capital which is the major risk absorbing tool. Currently the capital adequacy of IBBL is IBBL has already introduced all the guidelines 13.49% (solo basis) wherein the industry average for managing the risk areas in accordance with is only 10.46%. the guidelines/instructions given/prescribed by Bangladesh Bank which are under: IBBL is committed to continuous improvement of Bank’s internal procedure for assessing the Asset Liability Risk Management specific risk situation, ongoing adjustment and further development of new methods of risk To deal with Balance Sheet Risk, IBBL has management and internal control, covering constituted a dedicated committee, called the external factors and risk areas which are not Asset Liability Committee (ALCO) comprising

Annual Report 2012 153 of the senior officials Bank to make important arise in the form of single name concentration decisions related to the Balance Sheet, Liquidity or industry concentration. & Profit Rate risks of the Bank. • Country Risk - The risk of loss arising when The Asset Liability Committee monitors Balance a sovereign state freezes foreign currency Sheet Risk and Liquidity Risk of the Bank. The payments (transfer/conversion risk) or when ALCO generally meets at least once month and it defaults on its obligations (sovereign risk). reviews liquidity requirement, the maturity of Assets Political unrest, degradation of internal law and Liabilities, Deposit and Investment pricing and order are also included in country risk. strategy/transfer pricing, Sensitivity of Assets and In such situation, both entrepreneurs and Liabilities, Key Management Indicators and the the banks are discouraged in investment Liquidity Contingency Plan of the Bank. In every activities. ALCO meeting, the key points of the discussion • Environment Risk-The risk of environmental are recorded and the action points are highlighted calamities which arise while banks deploy its to ensure implementation. As a part of regulatory fund to industry, trade and service sector. requirement, the management reviews the ALM Manual and its components regularly. Quarterly In this context, Investment Risk Management position of Investment-Deposit Ratio (IDR) of the Committee (IRMC) of the Bank is entrusted with the Bank is given below: duties of maintaining asset quality, assessing risk in investment to a particular customer, appraising, 4XDUWHUO\,'53RVLWLRQ sanctioning investment, formulating policy/strategy for investment operations, sectoral assessment, salvaging sick units, nursing the running units, diversification of its investment portfolio, consideration of environment impacts while financing etc. The Investment Risk Management Committee is also entrusted to comply with the CRM Guidelines, monitoring & updating the bank’s investment policy. Moreover, the committee analyzes the investment portfolio on the basis of ,'5 Basel Guideline and attempts to restructure the investment portfolio. The rating status of corporate investment clients of IBBL is as under: Investment Risk Management Amount of No. of Rated Risk Investment Risk is one of the major risks faced Corporate Clients Amount Weighted by the bank. This can be described as potential Investment Rated Asset (RWA) losses arising from the failure of counterparty to 273,344.57 931 234,711 123,246 perform according to agreement with the Bank. The failure may result from unwillingness of the counterparty or decline in his/her economic condition, market situation etc. With each and every coin of investment, there is an involvement of risk. In broad sense, credit risk includes: • Investment Default Risk - The risk of loss when the bank considers that the obligor is unlikely to pay its investment obligations in full $PRXQWLQPLOOLRQ or the obligor is more than 90 days past due on any material investment obligation; 2XWVWDQGLQJ • Concentration Risk - The risk associated with any single exposure or a set of exposures with 5:$ the potential to produce large enough losses to threaten a bank’s core operations. It may

154 Annual Report 2012 In million taka volume of foreign trade and remittance business of the country which is growing very rapidly in a Risk Weight Investment Amount RWA better & efficient way with international standards. 20% 33,700 6,740 In 2012, IBBL faced hindrances in achieving 50% 169,122 84,561 import and export business target due to adverse fluctuation in foreign exchange rate. 100% 31,779 31,779 Foreign Exchange risks are measured and 150% 110 165 monitored by Treasury Division. Treasury Division Total 234,711 123,246 consists of separate Front Office, Back Office and Mid Office. The Treasury Front Office (Dealing Amount in % to General Room) independently performs the deals and the NPI million tk. Investment Treasury Back Office is responsible for verification of the deals and passing of their entries in the Overdue 9,611 2.58% books of accounts. Classified 14,213 3.81% The Foreign Exchange Risk is minimized through Written Off 3,018 0.81% proper Market analysis, Real time pricing of Foreign Exchange and Money Market product, Fixation of different market related limits (Daylight, 4XDUW\HUO\6WDWXVRI13, Overnight, Stop Loss and Management Action Trigger) and Counter parties Credit limits set by the

N management and ensure adherence of the limits by the Treasury Front Office. All Foreign Exchange transactions are revalued at weighted average exchange rate as provided by Bangladesh Bank $PRXQWLQPLOOLRQ 7 at the end of each month. All Nostro Accounts are reconciled regularly and outstanding entries are 2YHUGXH &ODVVLILHG reviewed by the management for its settlement/ :ULWWHQ2II recompilation. The open position maintained by the bank at the end of day is within the stipulated 2YHUGXH &ODVVLILHV :ULWWHQ2II limit prescribed by the Bangladesh Bank.

Moreover, Investment Administration Division Internal Control and Compliance Risk (IAD) and Offsite Supervision Teams in the Bank’s Management Investment Wing/Divisions are in place to monitor continuously the development of business/projects Operational loss may arise from errors and frauds from beginning and ongoing situations to mitigate due to lack of internal control and compliance. the Investment Risk of the Bank. Thus, the Bank’s Failure of Internal Control system may invite Investment Risk Management activities have been various risks for banks and jeopardize bank’s designed to address all these issues. interest. Internal Control is a management process designed to achieve effectiveness and efficiency Non-performing assets of the Bank increased a bit of operations, reliable financial reporting, and in 2012 owing to imposition of BRPD Circular No. compliance with laws and regulations. With a 14 and 15 dated 23.09.2012. view to overcome such lapses and verification of asset quality, quality of customer services, overall Foreign Exchange Risk Management security arrangement, operational efficiency and Foreign Exchange Risk is defined as the adverse regulatory issues as guided through different exchange rate movement in the market. The Bank circulars, manuals from Head Office and other is exposed in profit rate risk and settlement risk on regulatory bodies, IBBL organizes its management account of its foreign exchange business. Foreign through Internal Control & Compliance Wing Exchange businesses are involved in import, consisting of three Divisions namely (i) Audit export and remittances including other auxiliary & Inspection Division (ii) Compliance Division, services. IBBL is dealing with a substantial and (iii) Monitoring Division to develop sound, sustainable and secured growth of the Bank.

Annual Report 2012 155 Organizing Anti Money Laundering program as lead Bank

The Audit Committee of the Board subsequently for the event of the aforesaid programs on Anti- reviews the lapses identified by the Audit & Money Laundering and Anti Terrorism Financing. Inspection Division, Bangladesh Bank and other They also ensure that the Bank complies with regulators. The key points of the reports presented the Anti Money Laundering and Anti Terrorism by the concerned division are discussed in the Financing Legislations. Anti Money Laundering meeting of the Audit Committee. Subsequently Compliance Units are also functioning under the appropriate actions are taken as per decisions leadership of the Branch Anti-Money Laundering of the said Committee for protecting the Bank’s Compliance Officer (BAMLCO) and Zonal Anti- interest. Thus Internal Control & Compliance Money Laundering Compliance Officer at Branches (ICC) system of IBBL always plays active role in and Zonal Offices respectively, who independently mitigating operational risk and contributes in the review the transactions of the accounts to verify process of being a fully compliant bank. Suspicious Transaction Report (STR).

A Manual and Policy Guideline for prevention of Money Laundering Risk Management money laundering was developed and approved Money Laundering Risk is defined as the loss of by the Board of Directors of the bank. IBBL has reputation and expenses incurred as penalty for introduced uniform Account Opening Forms, KYC being negligent in prevention of money laundering (Know Your Customer) profile, and TP (Transaction and terror financing. In order to ensure the best Profile) and CTR (Cash Transactions Report) in corporate governance practices and aiming the bank as per instruction of Bangladesh Bank. at protecting the Bank and its Employees, IBBL has already issued circulars from time to Shareholders, Management and Customers, time for providing necessary instructions for IBBL is committed to comply with all the applicable prevention of money laundering activities and also Rules of the Anti Money Laundering. for combating financial terrorism. Moreover, IBBL has conducted a number of Training Sessions/ For mitigating risks, the bank has formed Central Workshops to create awareness and to develop Compliance Unit (CCU) under the leadership of the skills of the officials for identification of the Chief Anti-Money Laundering Compliance suspicious transactions. Officer (CAMLCO) at Anti-Money Laundering Department, Branches Control Division in Head IBBL has exclusively completed the KYC Office. An independent CCU of the Bank is procedure of legacy accounts (accounts performing supervisory and monitoring activities opened before April 30, 2002) by December,

156 Annual Report 2012 Central Server of the Bank

2009 before one month of deadline fixed by In line with the Central Bank Directives, the the Bangladesh Bank. To establish fruitful Bank has re-drawn its own ICT Policies for its Anti-Money Laundering drive at Branch level, operations and services. Under these policy IBBL introduced ALM rating systems through guidelines, a security policy has also been self-assessment report & independent testing worked out. To adhere to what is laid down in procedure as per instruction of Bangladesh the policy, the implementation has been made Bank. through Active Directory Service (ADS), Password Policy, Kerberos Policy, Audit Policy, Group Information & Communication Policy, User Rights, Permission Policy etc. To secure network resources from public network, Technology Risk Management the Bank has introduced Virtual Private Network The Bank has adequately addressed an (VPN), Access Control List (ACL), IP Filtering Information & Communication Technology (ICT) and TCP/UDP service blocking through router Risk Management which ensures ICT security and firewall devices. It has already centralized functions and operations in a more effective the administrative control to access the Network, manner. It is an in-depth exercise and continual Mailing system and Internet. IBBL has introduced process. The ICT Risk Management exercise Disaster Recovery Site (DRS), Data Center as consequence of Business Continuity Plan (BCP) mainly include minimizing financial and image of IBBL and Trained the officials to cope with any loss to the institution in such events as natural contigencies. The Bank always tries to employ disasters, technological failure, human errors etc. sufficient and qualified technical staff to create a The Bank uses own developed Core Banking congenial atmosphere for safe banking business Software to perform all types of transactions through automation. including Local/Online/Internet in a secured way. To take care of its core banking system, a separate security module has been incorporated Other Major Risks Associated with the in the software which manages different roles for Business Activities of IBBL different users. All financial transactions can be Bangladesh Bank vide their BRPD Circular no. tracked for future audit perposes. The Bank uses 13 dated 21.04.2010 forwarded a guideline on Central Data Centre travelling through network Supervisory Review Evaluation Process (SREP). uses encryption and descryption mechanism. According to principle 1 of the Guideline on

Annual Report 2012 157 Supervisory Review Process, Banks should internal control, compliance requirements or have a process for assessing their overall capital corporate governance practices that results in adequacy in relation to their risk profile and a human error, fraud, failure, damage of reputation, strategy for maintaining their capital levels. In delay to perform or compromise of the Bank’s accordance with the same, IBBL has an adept interest by employees. Supervisory Review Process Team (SRPT) and Appropriate Internal Control measures are in place this SRPT follows a comprehensive Internal at IBBL to address operational risk. Internal Control Capital Adequacy Assessment Process (ICAAP) & Compliance Wing (ICCW) assesses operational which considers the following risk areas in addition risk across the Bank as a whole and ensures that to aforesaid core risk areas to enable the Bank an appropriate framework exists to identify, assess, Management to assess, on an ongoing basis, the and manage operational risk. IBBL also develop risks that are inherent in its activities and material policies, processes and procedures for managing to the institution: operational risk and continuous vigilance against a) Market Risk leakage by identifying, assessing, measuring, b) Operational Risk managing and transfer of operational risk resulting from inadequate or failed internal process, people c) Liquidity Risk and system or from external events. d) Investment Concentration Risk e) Residual Risk Residual Risk f) Business Risk IBBL follows the following policies to reduce or minimize the residual risk: g) Profit Rate Risk in Banking Book a) Documentaion are done properly and legally h) Risk under Islamic Banking to minimize the documentation risk; i) Any other Risks identified. b) Valuation of collaterals are done accurately and the liquidation value of collaterals are Market Risk considered to minimize the legal risk or liquidity risk; The following policies are followed by the Bank to reduce or minimize the market risk: c) Residual value of collaterals are considered;

a) Investment in shares & securities are made d) In case of guarantee, refusal or delay by considering the risk weight thereagainst. guarantor to pay are considered. However, to maintain minimum capital charge, equity position are observed on reporting To avoid complexity and hindrances for recovery of date; investment by disposal of collaterals, utmost care is taken in accepting collaterals before sanctioning b) Foreign exchange position is monitored to investment. The Bank’s Investment Administration maintain at minimum lelvel; Division (IAD) looks after these issues. c) The Asset Liability Management Committee (ALCO) of the Bank regularly meets to Liquidity Risk assess the changes in profit rate risk, market Liquidity risk management of IBBL is well condition and asset liability maturity gap managed by the Treasury Department considering analysis, pricing of products and thereby the availability of fund to meet its investment takes effective measures to monitor and requirement. In addition the Asset Liability control profit rate risk. To manage the market Management Committee (ALCO) of the Bank risk IBBL arranges the funding facilities with meets frequently to oversee and administer the competitive profit rate to match with maturity. mismatches in liquidity, if any, and recommends for mitigating and encountering the risk. Operational Risk Month-wise position of surplus liquidity of the Bank Operational Risk is the potential loss arising from in 2012 is as under: breakdown in bank’s systems and procedures,

158 Annual Report 2012 (In million Taka) Profit Rate Risk in the Banking Book To reduce profit rate risk in the Banking book, the $YDLODEOH6XUSOXV/LTXLGLW\ following measures are usually taken by IBBL:

a) Profit rate is fixed up considering the

expectation of the depositors; b) Profit are associated with the instruments and portfolios, maturities and the rate index used for re-pricing; c) Gap analysis has been introduced in finalizing the profit rate; 6XUSOXV/LTXLGLW\ d) Accommodation through sharing profit with the Mudaraba Depositors (by giving more than 65% of the investment income, when Investment/Credit Concentration Risk necessary).

IBBL adopts the following policies to reduce or minimize the Investment Concentration Risk: Risks under Islamic Banking a) Fiduciary Risk: Where Mudarabah Depositors’ a) Risk of default is important in concentration funds are commingled with the Bank’s own risk. To minimize the investment concentration funds, the bank shall ensure that the bases for risk to diversify the investment by size to asset, revenue, expense and profit allocations reduce the classified investment. In 2011, are established, applied and reported in a the rural investment of IBBL was 12.93% of manner consistent with the Bank’s fiduciary the total investment of the Bank. In 2012, the responsibilities; rural investment became 13.83% of the total b) Rate of Return Risk: Banks are exposed to investment of the Bank. In 2011, the urban rate of return risk in the context of their overall investment of the Bank was 87.07% of the total balance sheet exposures. An increase in investment which has increased to 86.17% benchmark rates may result in the Mudaraba of the total investment. Risk Management depositors having expectations of a higher Wing has been delivering continuous efforts rate of return. Rate of return risk differs from risk in that banks are concerned with the to ensure diversification of the investment result of their investment activities at the end portfolio; of investment holding period. Such results b) Special attention is drawn to investment cannot be pre-determined exactly; in SME sector and investment secured by c) Displaced Commercial Risk: Banks may be residential property and commercial real under market pressure to pay a return that estate; exceeds the rate that has been earned on assets financed by the Mudaraba depositors c) Whether the Bank’s investment is when the return on assets is under performing concentrated in areas of higher or lower than as compared with the competitors’ rates. average risk based on their volume, type, In such case, banks may decide to waive amount and industry; their rights to part or its entire mudarib share of profits in order to satisfy and retain d) Reviews the result of stress tests to identify its fund providers and dissuade them from and respond to potential changes in market withdrawing their funds. conditions that can adversely impact the Asset Liability Management Committee bank’s performance. (ALCO) of IBBL regularly meets to assess The Bank’s Investment Administration Division the fiduciary risk, rate of return risk and (IAD) is exclusively working on the above issues. displaced commercial risk if any in IBBL, and

Annual Report 2012 159 recommends mitigating and encountering the economic & market scenario closely, assesses, above risks; analyzes, evaluates, quantifies & searches out the ways to mitigate those risks. RMW also arranges d) Sharia’h Compliance Risk: IBBL is always meeting with the conveners of the operational aware about compliance Sharia’h rules in all risk management committees on monthly basis of its operations. Since IBBL is performing in regarding steps taken to minimize the risks and the dual banking system, some transactions policy taken to keep the Bank sound & sustainable. seem doubtful. The independent Sharia’h The Wing submits report quarterly to the Board keeps keen observations on the day to Department of Off-site Supervision, Bangladesh day transactions of the Bank and they declare Bank enclosing previous three minutes of the all the doubtful income as suspended which meetings along with related papers. The Wing cannot be brought into the total income of the also submits report to the CEO/MD and the Audit Bank. Committee of the Bank as per Terms of Reference Concluding Remarks of the RMU provided by Bangladesh Bank regarding areas to be improved in accordance The Risk Management Wing (RMW) of the Bank with the prescribed policy and adopted strategies. continuously monitors the risk components arises from day to day banking activities, changes in

160 Annual Report 2012 ICT and Automation

Inauguration of an ATM Booth

IT-enabled Bank to an IT driven One The Bank has also taken initiatives to offer customers new and innovative ways of banking. ince its inception, IBBL has focused on It has Remittance Card for beneficiaries of foreign Sthe use of Information Technology to ease remittance earners, long existing ATM (debit) Card Banking hassles and to offer smooth services to for on the spot cash withdrawal, and Electronic customers. Whenever a new technology arrived Fund Transfer (EFT), SMS Banking, & Internet in the banking arena, the Bank immediately took Banking as alternative channels of delivery and sleps to adopt it for making banking transactions payment. Most importantly, to provide financial simpler & easier than before. access to the poor and unbanked population of the country, the Bank has launched Mobile In wake of that, the Bank now boasts of possessing Financial Services which will fulfill all requirements self-developed Core Banking System, Alternative of financial inclusion as envisioned by the Delivery Channel Systems and some enterprise Government of Bangladesh. resource planning (ERP) systems. It has the largest online banking network in the country. Its ATM network is extended across the whole country Mobile Financial Services-Islami Bank with access to other renowned ATM Networks mCash making the reach even bigger. The Bank is fully Islami Bank mCash, a newly started Mobile geared up with state of the art IT infrastructure Financial initiative of IBBL, is already on track with and setups like Data Center, Disaster Recovery plans to offer an enabling environment for all to Site, and Contact Center to meet up regulatory become banked and perform small scale banking requirements as well as to be line with the world transactions. It has been specially designed so trends towards technology. that any mobile phone and any carrier can be used

Annual Report 2012 161 Inauguration of Islami Bank mCash Service

ensuring maximum reach. Also apart from the customers and other enquirers’ latest information Bank branches, the service footprints of mCash against their queries either directly by a human have been extended by including individual agent or by the system through Interactive Voice agents and other network based agents all over Response (IVR). As part of the Contact center the country to make it available even in the most setup, all the Branches, offices and ATM booths remote area. have been equipped with IP Phones through which communications are being made at lower The underlying System of mCash has been costs and higher availability. developed by IBBL itself to cut huge setup cost and to incorporate present and future business The IVR system of the Contact Center is also requirements easily and cost effectively. With used in phone banking and mobile banking where mCash IBBL is planning to include vast segment customers can perform banking transactions on of the population, especially the unbanked their own without intervention of any support and population into the fold of basic banking services service staff. with comfort and trust.

Currently, a range of exciting services like Cash-in, Card Based Services-IBBL ATM Network Cash-out, person to person Fund transfer, Mobile IBBL started providing outsourced ATM based airtime recharge, fund transfer between CBS and service to its customers in 2001. In 2009, the mCash accounts and installment payment (MSS, Bank established its own ATM system and started MMS, Hajj, etc.) are being provided to the mCash building its ATM Network. Now it has 300 own customers. ATMs situated all across the country. The number of the Bank’s existing ATM card holders now Communications made Easy- stands at more than 5 lacs. They have options to IBBL Contact Center use all those IBBL ATMs & 1520 ATMs of other ATM Networks. To provide smart, appropriate, state of the art support services to clients, Branches and Head On 2012, the ATM switch has been replaced with Office of IBBL concurrently IBBL has recently a state of the art one to offer more features and established its own Contact Center. It is equipped facilities to customers. The Bank is on the verge with most modern call center facilities to offer of rolling out VISA (World’s largest retail electronic

162 Annual Report 2012 payment network) enabled debit cards and Wings/Divisions/Departments of Head Office. Khidmah Cards (Shariah compliant Credit Card of Recently, the Data Center (DC) has been extended IBBL) which can be used at any global e-outlets to incorporate new systems, hardware and other (ATMs and/or POS). components.

Recently, IBBL has also set a number of Islami The Bank also has a Disaster Recovery Site (DRS) Bank Deposit Machines (IDM) at different places at a separate place in line with the guidelines offering cash deposit facility to customers where of Bangladesh Bank (Central Bank). The DRS they deposit cash inside an envelope and enter acts as a replication establishment of the Bank’s the envelope in the IDM. Designated officials then existing Data Center. collect, count and credit the cash to respective client accounts during assigned hours. Internet Banking (iBanking) and SMS Banking Heart of IBBL-eIBS (Core Banking To take banking services to the doorsteps of System) customers, IBBL put emphasis on alternate delivery Based on open source technologies and most channels like iBanking and SMS Banking. The secure Database Management System, ORACLE, Bank offers a range of Internet Banking (iBanking) eIBS is the in-house developed fully fledged Core & SMS Banking Services to its customers. New Banking System of IBBL-the first and only Bank services have been added to the services. To in Bangladesh to build up and possess such name a few, ‘iTransfer’ & ‘iRecharge’ using IBBL’s system of its own. It has all banking modules iBanking have become very popular. The former fully integrated within it running seamlessly at all is used to transfer fund from any of a customer’s branches. IBBL account to any other IBBL whereas the latter is used to recharge talk-time to any postpaid or As part of next level integration, different other prepaid mobile numbers of all Telecom Operators systems like Mobile Banking, Internet Banking, of Bangladesh. SMS Banking and Phone Banking have been integrated with eIBS. Now customers enjoy doing Through SMS push service, foreign remitters banking transactions from one system to another and beneficiaries can automatically receive effortlessly and with great comfort. informative SMS in their mobile phones once a remittance amount is credited in their accounts On-line Banking or drawn by the beneficiary. Through SMS push- pull service, any client can perform informative Having the largest online banking network in the SMS Banking (i.e. latest balance information, last country, IBBL has also equipped all 276 branches three transactions, etc.) using his/her mobile from with dual connectivity using Fiber Optics and Radio anywhere which also reduces customer’s hassles Links to provide flawless ‘Any Branch Banking’ to of visiting branches premises. clients. As a result, both the revenue and number of online transactions have showed positive In addition, the Bank has by now implemented growth every year. On an average, nearly 35,000 SMS notification during cash withdrawal of certain transactions per day are now performed by the amount from ATM and very soon SMS notification branches with volume of about Tk. 6,700 millions for cheque encashment will be implemented. using on-line remote deposits and withdrawals. Management Information System (MIS) Business Continuity Planning of To allow instant access to necessary information IBBL-Data Center (DC) & Disaster to all stakeholders of the Bank Management, IBBL Recovery Site (DRS) has developed a strong Central Management The largest in the banking sector of Bangladesh, Information System (MIS) for the Bank. It contains IBBL Data Center automatically uploads and Branch Accounts related, General Ledger related, stores data from all the branches round the clock. Zone level, Central level and other important This data are used as backup for emergency information for supervising, monitoring and situations and report preparation for different decision taking issues of the Management & also

Annual Report 2012 163 Agreement with Airtel for mCash Service

for regulatory compliance. Already Branch MIS, of IBBL where BACH is in operation. Using the Zonal MIS and consolidation of Central MIS with own BEFTN system, all branches of IBBL are more than 300 formats have been developed. capable of sending and receiving electronic Other developments include: Rationalized Input funds through BEFTN. Now, huge amount of third Templates (RIT) for Central Bank Enterprise Data bank remittance and dividend/refund warrant are Warehouse (EDW), Centralized Payroll System, paid everyday using this BEFTN system which Shariah Auditing and Monitoring System & Annual is also capable of providing person to person Closing reports related to Deposit/Investment/ (P2P), business to business (B2B), and person to Foreign Exchange. Steps have been taken for business (P2B) payments. development of Branch MIS in Centralization approach as well to be in line with the future Enabling the Bank Human Resources Centralized Banking System. with IT skills, Training and Technologies Implementation of Bangladesh Automated Clearing House (BACH) IBBL has always taken initiatives to equip its beage workforce with modern IT skills and equipment. of Bangladesh Bank Already, under ‘one man one PC’ strategy set by In compliance with the Bangladesh Bank’s the Management, all officers and executives have instructions to automate clearing of interbank been provided with PCs. This has paved way instruments (including cheques and wire transfers), for productivity and promptness in the working namely Bangladesh Automated Clearing House environment. Additionally, laptops were provided (BACH), IBBL developed two separate systems- to selected Zonal Heads and Divisional Heads to Bangladesh Automated Cheque Processing enhance communication and correspondence. System (BACPS) and Bangladesh Electronic And all MC and EC members have been equipped Fund Transfer Network (BEFTN). Through with tablet PCs (iPad) so that they can perform implementation of the BACPS system, same quick, informed perusal and decisive actions day clearing of instruments is now possible. The during the Meetings in paperless manner. System has been deployed to 243 branches

164 Annual Report 2012 IBBL is keen on preparing its workforce with IT Plan 2013 adequate and latest IT training. For that, trainings are organized at different levels and by Centralization Initiatives-CBS, CIPPS different authorities. The Islami Bank Training and Research Academy (IBTRA) prepares their and RDS courses incorporating sufficient & related IT The Bank’s ultimate goal has been centralization classes. Apart from that, the ICT Wing of the Bank of the CBS (eIBS) and other systems to achieve arranges Zone wise training programs on regular single point operability for all services and banking services or special training programs supports. For that separate centralization projects whenever a new service/technology is introduced i.e. Implementation & migration of CBS from by the Bank. distributed to central approach, Centralization of RDS Software, & development of Centralized Green Banking through Automation Investment Proposal Processing System (CIPPS) and Reduction of Paper Usage being run. The CIPPS will be of special interest as it will make the system of appraising Investment Respecting the Bank’s commitment to Green proposal efficient in terms of speed. Banking, steps have been taken to reduce the usage of papers in all working paradigms of the Restructuring of WAN Architecture & Bank. Already the proceedings of the MC and EC have been automated by implementing IPad using Establishment of Hot DRS wi-fi connectivity. A strong Infrastructure is the backbone and key to building and maintaining a sound IT Integration with the National Payment based business system. To cope with the ever Switch (NPS) increasing needs of upcoming services, IBBL is restructuring its existing WAN architecture IBBL is one of the 17 banks which were selected by with provision for alternative connectivity, larger Bangladesh Bank for the first phase implementation processing capacity, storage and more options of National Payment Switch Bangladesh (NPSB). for backup and restoration. The restructuring Required connectivity and hand shaking between of the Wide Area Network of the Bank will be IBBL Switch and the NPS of Bangladesh Bank completed by the first quarter of 2013. In addition, are being done. Once complete, IBBL customers establishment of a Hot DRS (Disaster Recovery will enjoy Inter-Bank electronic transactions as Site) is also in progress which will contain both well as facility to use ATMs and POS & other data and system replica of all major services and electronic Banking terminals which will empower will have capability to automatically start operating the customers to have Any Card-Any ATM/POS- if the main systems crash. Any Bank facilities. Paperless Management of Events and Capacity Building for Shari‘ah Business Systems Supervision Continuing the automation initiatives, plans have Being a Shari‘ah based bank, IBBL must ensure been taken to automate other Meetings. Also proper compliance in every operations and development of required system for automation proceedings of the Bank. In line with that, all of Wings/Divisions like Internal Control & Shari‘ah Supervisors (Muraqibs) have been Compliance Wing/Law Department, etc. is going equipped with automated system. This has shown on. Eventually, all business and official processes remarkable improvement in monitoring Shari‘ah and procedures will be automated to minimize compliance through off site supervision and has paper usage and optimize green banking. also helped to create awareness about reduced cases of Shari‘ah lapses.

Annual Report 2012 165 Development of Enterprise Resource system will be introduced in mCash so that Planning (ERP) uneducated, unbanked population of the country can be included in formal financial services easily. In the past, IBBL has developed various ERP systems including HRM, Payroll, IT audit, etc. Taking the Card Services Forward to fast track business processes. The trend will continue in 2013 as well with development Emphasis will be given to another most important of Control and Compliance Tracking System, service portfolio, Cards Services. In 2013, IBBL building of Data Warehouse and Data Archival have plans to Implement Islami Shari‘ah Based System, and development of Document Archival Credit Card, “Khidmah”. Other types of cards i.e. System (Content Management), etc. VISA enabled Debit Card, Travelers’ Card & Pre- paid card will be rolled out soon. Also installation Extension of Mobile Financial Services of more Islami Bank Deposit Machines (IDM) will (mCash) be completed this year increasing the reach and option of depositing cash and payment instruments In the coming year, full efforts will be geared to for customers. In addition, implementation of further extend bank’s innovative Mobile Financial Point of Sales (POS) will be done throughout the Services, mCash. As part of the extension plan, country for services in the Branches and by RDS applications of mCash and other systems will be officials adding value to our existing services to a integrated with ATM to offer more expressive points great extent. of cash withdrawal. Also POS based biometric

166 Annual Report 2012 Corporate Communication and Business Promotion

Meet the Press

Public Relations performance. In comparison to the previous days and with development of the Bank’s business, the ublic Relations is an immense need for Department is performing in a vibrant manner with Preputation of any organization. Branding visible multidimensional publicity measures. creates an image and a perception that capture the mind of the customers and hereby it is essential IBBL has divided PR activities in internal and for all products. IBBL has moved forward with external ways. IBBL internal publicity measures the visionary image of conveying the message of includes publications of different magazines, excellent service in the heart of the people. Public journal and different types of books and distributing Relations Department in IBBL was created mainly them among our workforce for updating them to fulfill this purpose. Since its inception, the about the Bank’s position. External publicity Department has been involved in many successful includes coverage in different print, electronic ventures that helped to create a new image and & social media and making close and intimate positive perception among our valued clients. relations with the outside people.

Imbued with the sky touching view and The year 2012 was a year of landmark for Public leadership of the top management, Public Relations of the Bank. It added a new dimension to Relations Department has been operating to th Bank’s efforts to expand exposure and publicity meet the needs of the time. It worked with high activities. CSR activities of the Bank were given enthusiasm to develop the standard and image priority in all the publicity activities round the year. of the Bank from the very beginning of its journey. Preaching of moral and ethical values also received With their ceaseless efforts in communicating due priority in the publicity process for different with the media and common people over the promotional items. New ideas are being developed in time Public Relations Department has gained a creating television commercials and documentaries. momentum in gradual development in size and Throughout the year Public Relations Department

Annual Report 2012 167 accomplished various activities regarding publicity, Advertisement publication, public relations and event management. The department achieved appreciation from the Advertisements of various types and length were people in and beyond the Bank. published in print & electronic media round the year. Around 113 official advertisements including financial statement, balance sheet, AGM notice, Media Coverage tender and recruitment notice; and 162 promotional Media coverage for the Bank has visibly increased advertisements like branch opening and ATM, in the year. IBBL was in the leading position months long campaign programs, product regarding coverage of news in print and electronic advertisement and on occasions of newspapers & media along with web based news sites. Each TV channels’ founding anniversary were publicized. month, the Bank got an average of 3325 column About 486 issues of different magazine, periodicals, inches coverage on various events in the national souvenirs published our advertisements on dailies and weeklies. News of all the important different products and themes. Design of different programs of the Bank are being published in almost advertisement of the Bank was improved. all the recognized newspapers. Besides, articles The Bank opened a new dimension in its publicity and features on Islamic Banking prospects and by branding business and international news IBBL products along with our top managements’ segment in different television channels by floating interviews were published in reputed Dailies. TV Commercials round the year. The Bank also Globally renowned Gulf News and Reuters sponsored TV magazine programs. interviewed the Bank’s Managing Director. Almost every leading news paper of the country published the Gulf News interview. Sponsorship & Participation

Coverage in the electronic media also increased The Bank earned huge publicity in the year 2012 to a new height. The Bank got around 125 minutes sponsoring the National School Football Islami of news coverage each month which also show Bank Tournament, an event unprecedented in an increasing trend. Almost all the TV channels the country’s grass root sport history. About 5,000 telecast news of the Bank on different programs school teams comprising one lakh students from round the year. all over the country participated in the tournament held in 480 upazilas. Positive image of the Bank was created among the schoolmen, parents and

Reception program in honour of AHM Mustafa Kamal, MP, the newly elected Vice President of International Cricket Council

168 Annual Report 2012 Seminar and Iftar Mahfil sport enthusiasts. During the year, the Bank 2012 captured large visitors and was awarded the sponsored East Zone Team in the first time best pavilion prize. franchisee-based longer version national cricket tournament namely Bangladesh Cricket League. Other Publicity

The Bank sponsored a number of organizations The Bank continued road side publicity with and forums on the occasion of their conference, billboards at Banglamotor, Ruposhi Bangla point, convention, seminars and other celebrations. Gulishthan, Bangabhavan gate, Matijheel Shapla IBBL participated and sponsored trade fair, Chattar and Bijoy Sarani. Digital board displays tourism fairs, SME and other fairs round the were arranged on the occasion of different year. The Bank’s attractive pavilion of aesthetic national programs and fairs. The Bank sponsored standard in the Dhaka International Trade Fair- Kamalapur to Rajarbag road-median beautification

Farewell Reception to Sami Al-Hindi, Counselor and Deputy Head of Mission of Royal Embassi of Saudi Arabia

Annual Report 2012 169 Inauguration of ‘Setubandhoner 100 Din’ (Bridging of 100 Days) Program

program by color showy and herbal plants. A Press was arranged to clarify the Bank’s position number of quality documentaries were made on the concerning various emerging issues. In recent Bank’s performance and its CSR activities. These days the Bank has been able to engender a very were displayed on various Bank programs across much positive image among the media houses of the country. the country. It also reflects more interviews of our policy makers & top executives and their attending Public & Media Relations in TV talk shows.

During the year the Bank devised a slogan ‘Sholo Publications Koti Manusher Kache Jai, Amader Desh Amra Sajai’ and observed two multi purpose campaign programs Publications of the Bank increased remarkably in namely ‘Setu-bandhoner 100 Din’ & ‘Antorik Sebar 2012 in addition to witnessing qualitative change. 3 mas’. A number of public programs including All the publications were updated in standard form. discussion seminar, clients meeting, NRB get Publications of periodicals were regularized. Five together, peoples representative & elite assembly, books, booklets and manuals were published in Shari`ah conscious meeting, professionals’ assembly, the year including ‘Islamic Banking in Bangladesh: entrepreneur development program etc. were An Alternative Paradigm for Sustainable Socio- organized across all the branches on the occasion. economic Development’ and updated `Islami Through these programs, the Bank was able to fulfill Bank: 30 Years of Progress’. Four issues each for its aim of proving itself as a transparent, accountable Islami Bank house-magazine Porikroma and RDS and benevolent financial entity in this country. magazine Palli Unnayon Barta were published. Twelve folders were published in modified version The Bank also arranged reception program for and these were also reprinted. Bangladesh Cricket Board President Mr. AHM Mostafa Kamal MP for assuming his responsibilities Public Relation Division (PRD) has planned and as ICC Vice President. With a view to consolide designed publications of Diary and Calendar. good relations with the media, a good number of Banner, festoon and dangler were printed on branch bilateral and person-to-person meetings between opening, month long programs and other occasions. the top management of the Bank with Editors, Greeting cards were distributed on the eve of Eids, Senior Journalists and Reporters from prominent New Years and other occasions. Desk calendars print and electronic media were arranged. Meet the and Sehri-ifter schedules were published.

170 Annual Report 2012 Inauguration of ‘Antorik Sebar 3 Mas’ (3 Months for Cordial Sercvice) Special Program

Event Management

In the events of branch opening and month economic scenario. Amid the alarming period of long programs, PRD helped in the availability global recession, the Bank has been able to keep of seminar paper, printing of invitation cards, its head high by the grace of Almighty Allah and banners, folders, danglers and media coverage. ceaseless efforts of its workforce. In order to raise Iftar Mahfil was arranged during the Ramadan in the Bank to a new height competing with others which people of all segments participated. in home and abroad. IBBL is trying to develop quality publicity & public relations for the Bank. IBBL has kept its momentum of business success Public Relations is ready to gear up its activities to despite confronting adverse global and macro achieve all targets set by the Bank in coming days.

Annual Report 2012 171 Events

IBBL Pavilion at Dhaka International Trade Fair G.M. Quader, MP, Minister for Commerce handing over Crest for Best Pavilion in Dhaka International Trade Fair

Muhammad Faruq Khan, MP, Minister for Civil Aviation & Engr. Khandaker Mosharraf Hossain, MP, Minister for Tourism visits IBBL Stall at Asian Tourism Fair Expatriates Welfare & Overseas Employment visits IBBL Stall at International Immigrants Day Fair

Dilip Barua, Minister for Industry visits IBBL Stall at SME Fair IBBL’s Rally observing the International Immigrants Day

172 Annual Report 2012 Sports

Champion Team of National School Football Islami Bank A Match of the National School Football Tournament Tournament 2011

Spectators in a National School Football Islami Bank Agreement with BCB for owning Team in first class Tournament Match Bangladesh Cricket League

Islami Bank East Zone Cricket Team A Match of Islami Bank East Zone Team

Annual Report 2012 173 Financial Review

Income Profit Paid on Deposits (PPD) The Bank earned Total Income of Tk.50,346 The Bank disbursed Tk.25,870 million among the million during the year 2012 as against Taka Mudaraba Depositors and Mudaraba Perpetual 38,401 million of preceding year registering 31% Bond holders as Profit in 2012, being 70.04% of the growth over the last year. investment income earned through deployment of Mudaraba Fund as against minimum 65.00%, 7RWDO,QFRPH which was Tk.18,401 million in 2011 being 68.60 % ,QPLOOLRQ7DND of the same. Investment Income for the year 2012 and 2011 were Tk.43,672 million and Tk.32,020 million respectively.

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DND 7

Investment Income

$PRXQWLQ0LOOLRQ The Bank earned total Investment Income of 33' Tk.43,672 million during the year 2012 as against Taka 32,020 million of preceding year registering 36% growth over the last year. Investment income Profit paid to the depositors for the year 2012 for the year 2012 was 87% of the total income compared to 83% in the year 2011. was paid as per the weightage and rates. In some deposit products additional amount of Non-investment Income profit was paid over the rate and rates as per weightage. The weightage are presented in the The Bank earned total Non-Investment Income of Tk.6,674 million during the year 2012 as next page: against Tk.6,382 million of preceding year. Non- Investment Income for the year 2012 was 13% of Administrative & Other Expenses the total income compared 17% in the year 2011. Total Administrative & other expenses for the year Expenses 2012 was Tk. 8,867 million as against Tk. 7,268 million in 2011 showing 22% growth over last Total Expenditure of the Bank was Tk.38,250 year and which was 24% of the total expenditure (including previsions for investments and other in 2012 compared to 26% in the year 2011. assets) million during the year 2012 as against Tk.28,054 million of preceding year registering 36% growth compared to the last year.

174 Annual Report 2012 Weightage and Final Profit Rates of Deposit

Sl. Final Rate of Final Rate Particulars of Deposits Weightage No. 2012 (%) of 2011 (%)

1 2 3 4 5

1 Mudaraba Hajj Savings Account a) Above 10 years Term 1.35 11.97 10.06 b) Up to 10 years Term 1.30 11.53 9.69 2 Mudaraba Waqf Cash Deposit Account 1.35 11.97 10.06 3 Mudaraba Special Savings (Pension) Account (MSS) a) 10 years Term 1.30 11.53 9.69 b) 5 years Term 1.10 9.75 8.20 4 Mudaraba Muhor Savings Account (MMS) a) 10 years Term 1.30 11.53 9.69 b) 5 years Term 1.10 9.75 8.20 5 Mudaraba NRB Savings Bond Account 10 years Term 1.35 11.97 10.06 5 years Term 1.25 11.08 9.32 6 Mudaraba Perpetual Bond (MPB) 1.25 13.58 13.20 7 Mudaraba Savings Bond (MSB) a) 8 years Term 1.25 11.08 10.00 b) 5 years Term 1.10 10.00 9.10 8 Mudaraba Monthly Profit Deposit Scheme (MMPDS) Account a) 5 years Term 1.20 11.50 10.00 b) 3 years Term 1.00 11.20 9.00 9 Mudaraba Term Deposits Account a) 36 Months 1.00 11.20 9.00 b) 24 Months 0.98 11.00 8.50 c) 12 Months 0.96 10.50 8.00 d) 06 Months 0.92 10.50 8.00 e) 03 Months 0.88 10.50 8.00 10 Mudaraba Savings (including RDS) Account 0.75 6.65 5.59 11 Students Mudaraba Savings Account 0.75 6.65 - 12 Mudaraba Farmers Savings Account 0.90 7.98 - 13 Mudaraba Special Notice Deposit Account 0.55 5.00 5.00 14 Mudaraba Foreign Currency Deposit Account 0.75 1.66 1.53 Comparative operating result of IBBL for the year 2012 vis-à-vis 2011 (In million Taka) Particulars 2012 2011 Total Income 50,345.77 38,401.29 Less: Profit Paid to Depositors 25,870.43 18,401.22 Total Operating Income 24,475.34 20,000.07 Less: Administrative & Other Expenses 8,867.10 7,268.45 Profit before Tax & Provision 15,608.24 12,731.63 Less: Provision for Investment including Off Balance Sheet items & Other Assets 3,512.07 2,384.31 Total Profit before Taxes 12,096.18 10,347.32

Annual Report 2012 175 Appropriations Reserve Fund (In million Taka) The Reserve fund of the Bank increased to st Particulars 2012 2011 Tk.27,245.87 million as on 31 December, 2012 from Tk.17,792.50 million of the preceding year. Total Profit/(Loss) before 12,096.18 10,347.31 Taxes Provision for Tax: 5HVHUYH)XQG ,QPLOOLRQ7DND Current Tax 6,525.84 5,476.47

Deferred Tax 45.90 29.40

Net Profit/ (Loss) after Tax 5,524.44 4,841.45

Appropriation Statutory Reserve 2,419.24 2,069.46

General Reserve (22.21) (430.48)

Retained Earnings (Proposed 3,127.41 3,202.47 Dividend) Total 5,524.44 4,841.45

Contribution to National Exchequer Mudaraba Perpetual Bond IBBL regularly pays corporate tax on time. The In the year 2007 Islami Bank Bangladesh Limited Bank also deposit excise duty, withheld tax and issued Mudaraba Perpetual Bond (MPB) of Tk. VAT to Govt. exchequer on time deducting from 3,000 million under the Mudaraba Principles of employees salary as well as customers and Islamic Shari‘ah with the approval of Bangladesh vendors. Bank (Central Bank) as well as Securities and Exchange Commission (SEC). The MPB is listed IBBL is the highest Corporate Taxpayer among the with Dhaka Stock Exchange Limited (DSE) and Local Banks and is the second highest Taxpayer Chittagong Stock Exchange Limited (CSE) and in the Banking sector of Bangladesh. trading of the same started on 25th November 2007. Subject to approval of financial statements Contribution to National Exchequer in the Annual General Meeting the MPB holders will receive profit at 13.58% per annum for the (In million Taka) year 2012 which has been determined as follows: Sl. Total up Particulars 2012 No. to 2012 Final Rate of 8 Years Mudaraba 11.08% P.A 1 Corporate Tax 3,631.01 26,097.81 Savings Bond 2 Tax Deduction at 2,117.29 10,809.86 Add: 10% of the rate of 2.50% P.A Source on PPD Proposed Dividend (25%) 3 Tax Deducted at 1,023.87 2,777.41 Total 13.58.% P.A Sources-others 4 Value Added Tax (VAT) 357.84 1,460.07 Dividend 5 Excise Duty 924.25 4,657.89 6 Deduction from salaries 50.23 233.60 The Board of Directors recommended 17% stock of the Employees and 8% cash Dividend for 2012 on the Paid-up 7 Total 8,106.11 46,036.64 Capital of Tk.12,509.64 million for approval by the shareholders in the 30th Annual General Meeting.

176 Annual Report 2012 CSR: Sustainability Report

IBBL Chairman is handing over Winter Cloths to Prime Minister Sheikh Hasina for Prime Minister’s Relief Fund

orporate Social Responsibility (CSR) is a form Thereafter, the same has been done through Cof corporate self-regulation integrated into a Islami Bank Foundation (IBF) converting the business model. CSR policy functions as a built- Sadaqah Tahbil into a full-fledged foundation in, self-regulating mechanism whereby a business on May 20, 1991. To comply with the instruction monitors and ensures its active compliance of the Central Bank, IBBL has started doing the with the spirit of the law, ethical standards, and said CSR through creation of Corporate Social international norms. CSR is a process that aims to Responsibility Division (CSRD) at Head Office embrace responsibility for the company’s actions since 16th July 2009. and create a positive impact through its activities on the environment, consumers, employees, Responsibility to the Shareholders communities, stakeholders and all other members of the public. • IBBL has been discharging its responsibilities to safeguard the interest of the shareholders For entiancing social face of Islamic Banking– by complying with Shari‘ah, law of the land, Islami Bank Bangladesh Limited has been building a strong and efficient management involved in charitable activities since its and enhancing shareholders value and inception through creation of “Sadaqah Tahbil”. financial performance;

Table: CSR Position of IBBL in Banking Sector of Bangladesh (In million Taka) Growth Growth Particulars 2009 2010 2011 Rate (%) Rate (%) CSR Expenditure of total Banking Sector 553.80 2329.80 321 2188.33 -6 CSR Expenditure of IBBL 116.27 232.63 100 410.70 76.55 Share of IBBL in CSR Expenditure (%) 21 10 -52 19 137

Annual Report 2012 177 • Detailed performance including results • The Bank has developed a comprehensive and important activities of the bank are pay-scale for the employees, the ratio of the communicated to the shareholders through highest and lowest level in the pay-scale Annual Report; has been maintained at a lower ratio of 12:1 (DMD:MCG); • Shareholders are also encouraged to evaluate Bank’s performance and to give their valuable • ‘Contributory Provident Fund’, suggestions in the AGMs. ‘Superannuation Fund’ and ‘Gratuity Fund’ have been introduced by the bank for Responsibility to the Employees employees benefit;

The Bank is always aware of continuous • To meet-up housing need and ensure development of knowledge, competencies and comfortable life, employees are provided with attitude of the employees, comfortable and investment at a discounted rate under SHBIS modern working environment as well as justified and SHDS; and competitive compensation packages for them. • The executives of the Bank are provided with • The recruitment process of the Bank strictly car either from bank management or under follows “IBBL Recruitment Policy”; “Car Scheme for the Employees of the Bank”;

• Develop professional knowledge, skill and • Human rights are upheld at every aspect of attitude of the employees, the Bank has the Bank’s operations. The Bank does not established its own training academy named employ workers under the legal minimum age, ‘Islami Bank Training & Research Academy prohibits the use of all forms of forced labour, (IBTRA)’; respects employees’ rights to join, form or not join a labour union, respects the principles of • The Bank adheres strictly to the ILO labour collective bargaining, provides health & safety practices and standards as well as local at work. The policy is non-discriminatory to labour laws and regulations; age, race or sex, prohibits sexual harassment, • Employees are allowed to operate trade union limits work to standard accepted hours and activities in the Bank; condemns the use of corporal punishment.

Scholarship Program of the Bank

178 Annual Report 2012 Col. (Rtd.) Shawkat Ali, Deputy Speaker in a cheque hand over ceremony

Responsibility to the Customers of rural families by channelling foreign remittance; • One can open a savings account with Tk. 500, a current account with Tk. 1,000 and a special • Every branch of the Bank keeps a ‘Complaint savings scheme (pension scheme) with Box’ to facilitate the customers, lodging minimum monthly instalment of Tk. 100 only; complaints against services of the bank or particular employee(s); • The rural poor are allowed to maintain savings account by depositing weekly instalment of • Regular meetings are held with the selected Tk. 10/- only under Bank’s Rural Development customers in different levels of management Scheme (RDS); to discuss on their business issues and suggest them for further improvement; • Our benevolent investment schemes are: Rural Development Scheme (RDS), Small • The customers of the bank have by now been Business Investment Scheme (SBIS), Housing extended to online ATM services. The Bank Investment Scheme (HIS), Real Estate has already started Web Portal, SMS Banking Investment Program (REIP), Household and Spot Cash services; Durable Scheme (HDS), Investment Scheme • IBBL considers the customers as its partners for the Doctors (ISD), Women Entrepreneur’s and develops relationship through its Investment Scheme (WEIS), Micro Industrial employees as well as by organising various Investment Scheme (MIIS) and Agriculture programs in different occasions. Implements Investment Scheme (AIIS); • The most important contribution of the bank in Responsibility to the Suppliers this regard is the creation of huge employment Suppliers play a fundamental role in the Bank’s opportunities in its financed projects as well micro environment. The bank develops its as at IBBL. At present more than 12,000 relationships with suppliers’ organizations on the employees are working in IBBL and millions in basis of value and trust; its financed projects; o The Bank has a purchase committee which • Through its wide-ranged network of 276 is responsible for procurements across the branches and utilising mobile phone number of people instead of one or a few technology, IBBL serves a huge number

Annual Report 2012 179 Chief Whip Md. Abdus Shahid, MP, distributing blanket to the cold stricken people at Sreemangal

ensuring that the concerned employees and environmental and social effects associated the bank are trusted and respected; with the products and services they provide;

o All procurements follow a transparent tender o To ensure an equitable share of wealth to a procedure. Price negotiations are conducted large number of suppliers, the Bank invites by designated teams and committees. fresh enlistment after every two years. Suppliers’ information is treated as confidential Existing suppliers are also re-enlisted to for fair dealing of the process; evaluate their strengths and weaknesses as well as to categorise suppliers based on their o In accordance with bank’s ‘Corporate historical performance; Procurement Strategy’, it strives to incorporate environmental and social considerations into o The bank follows a concerted policy of non- the procurement process; discrimination against small scale suppliers, whilst 76% of the suppliers’ portfolio can be o The bank recognises its responsibility to categorised as micro level entrepreneurs. encourage suppliers to minimize negative

Sector-wise CSR Expenditure of IBBL from 1983-2012 (In milion Taka)

1983-2009 2010 2011 2012 Total Sector Amount Beneficiary Amount Beneficiary Amount Beneficiary Amount Beneficiary Amount Beneficiary Disaster 217.61 452,291 64.06 158,760 21.79 32,928 87.93 597,866 391.39 1,241,845 Management Education 285.34 265,197 67.8 98,787 56.17 128,925 83.8 3,014 493.11 495,923

Health 873.62 6,055,481 64.11 721,160 25.78 128,556 39.75 19,230 1,003.26 6,924,427

Sports 60.83 413,622 12.00 2 248.75 636 1.61 144 323.19 414,404

Art & Culture 68.75 187,107 11.22 41,964 7.15 643 8.24 11 95.36 229,725

Environment 0 0 7.36 15,240 0.48 3 12.48 493,822 20.32 509,065

Others 61.31 56,674 11.87 655 50.55 118,115 75.38 34,438 199.11 209,882

Total 1567.46 7,430,372 238.42 10,36,568 410.67 409,806 309.19 11,48,525 2,525.74 100,25,271

180 Annual Report 2012 Ambulance handover Ceremony

Responsibility to the Community Sector-wise CSR Expenditure for the The Bank is very much conscious about its year 2012 responsibility towards the communities within which it operates. The Bank takes several initiatives in individual and organizational level for development of the community. IBBL takes several programs to improve the lives of the people especially to the less fortunate segments of the community. An amount of Tk. 2525.74 million was spent for 100,25,271 beneficiaries by IBBL during 1983-2012 for this purpose. IBBL contributed Tk. 'LVDVWHU0DQDJHPHQW $UW &XOWXUH 309.19 million for 11,48,525 beneficiaries this year. (GXFDWLRQ (QYLURQPHQW Bank’s strategy towards discharging community +HDOWK 2WKHUV responsibility focuses on: (1) Education, (2) 6SRUWV Health, (3) Disaster Management (4) Sports, arts & culture, & (5) Women empowerment. Education Program Sector-wise CSR Expenditure of IBBL Human being can not develop properly without from 1983-2012 education. IBBL is engaged in the promotion of education sector of the country from the very beginning. IBBL spent an amount of Tk. 493.11 million amongst 495,923 beneficiaries during 1983-2012 for this purpose. Last year this contribution was Tk. 83.80 million for 3,014 beneficiaries including regular scholarships to 800 students. The Bank has been providing scholarship to 'LVDVWHU0DQDJHPHQW (GXFDWLRQ the poor students securing GPA 5 in SSC & +HDOWK 6SRUWV HSC examinations since 2010 under its direct $UW &XOWXUH (QYLURQPHQW 2WKHUV scholarship program. During the last two years,

Annual Report 2012 181 the Bank provided scholarship to 800 (HSC 400 • Every year the Bank awards to the meritorious [male 200 & female 200] + 400 under graduate wards of the employees for outstanding students [male 200 & female 200]) students results. An amount of Tk. 14.48 million has under this program @ Tk. 1,000/- & Tk. 1,500/- so far been spent for 1350 beneficiaries since per month for the period of 02 years & 03 to 05 1993; years for HSC & Graduation level respectively. Recently, the management of the Bank has • IBBL awards scholarship to MBA students decided to increase the scholarship from 200 to (Banking & Finance) for their outstanding 400 [male 200 & female 200] students both HSC results. An amount of Tk. 1.12 million has & Graduation level from the year of 2012. been given to 103 students since 1991;

In addition to the aforesaid students, IBBL has • Different research organizations and been providing scholarship to 400 meritorious educational institutes were provided with but poor students under its Special Scholarship financial assistance for research and Program since 2011. educational purposes;

• It may be mentioned here that, IBBL has • IBBL has so far established one Medical taken a 10 years plan for scholarship, where College, one Health Technology Institute, 10,800 students will be benefited from the one Nursing Training Institute, six Technical scholarship. For this purpose Tk. 356.22 Institutes, one English medium school, million will be spent; one Bangla medium school and one girl’s • The bank also provides scholarship for PhD madrasha under its Foundation management students since 2007. An amount of Tk. 6.20 to contribute development in the education million was spent for this purpose so far; sector of the country.

• Lump-sum financial assistance has also been given by the Bank for education purpose on case to case basis;

Scholarship Program of the Bank

182 Annual Report 2012 Detail Particulars of Scholarship (In millionTaka) Sl. No. of Already Organizing Total Name of the Program Budget Remarks No. students given Expenses expense 1 HSC Level -2010 200 6.48 4.78 1.51 6.29 Period July 2010 - June 2012

2 Graduation Level -2010 200 14.40 8.88 8.88 Period July 2010 - June 2014 3 HSC Level -2011 200 5.90 3.56 0.97 4.53 Period July 2011 - June 2013 4 Graduation Level -2011 200 15.32 5.35 0.96 6.31 Period July 2011 - June 2015 5 Special Scholarship 2011 400 5.17 4.26 0.52 4.78 For year 2011 6 Special Scholarship 2012 400 7.78 6.77 0.80 7.57 For year 2012 Total 1600 55.05 33.60 4.76 38.36 7 HSC Level -2012 (under 400 11.90 Period July 2012 - process) June 2014 8 Graduation Level -2012 400 31.10 Period July 2012 - (under process) June 2016

Total 2000 98.05

Year-wise Expenditure to Education 1. IBBL established six fully owned hospitals and seven community hospitals with a total 7KLV\HDU &XPXODWLYH of 1021 beds creating employment of 561

,QPLOOLRQWDND doctors and 411 other employees; 2. A good number of charitable dispensaries are operated by local initiatives mainly in the rural areas with the help of IBBL. Every year about two lac patients are provided treatment facilities from these dispensaries.

Expenditure in Health Sector

8SWR 7KLV\HDU &XPXODWLYH

,QPLOOLRQWDND

Health-care Program

People faces a perilous situation due to hazardous medicare system of the country. IBBL takes several initiatives in individual and organizational level for developing health sector of Bangladesh. IBBL spent Tk. 1003.26 million for health sector during 1983-2012 among 69,24,427 beneficiaries. 8SWR During the year 2012 Tk. 39.75 million was provided to 19,230 beneficiaries for this purpose. Disaster Management Apart from these, IBBL has taken some sustainable Bangladesh is a developing country fighting with initiatives for developing medicare system of the poverty and natural disasters. Being a corporate country which are as follows: citizen of the country, IBBL always stands beside

Annual Report 2012 183 Cheque handover ceremony at the office of DU Vice Chancellor Prof. Dr. A.A.M.S Arefin Siddique

the distressed humanity. An amount of Tk. 391.39 Besides, Tk. 1.92 million was paid to the families million was spent by IBBL from 1983-2012 for this of 4 martyred army officials, killed in BDR mutiny, purpose. This year IBBL contributed Tk. 87.93 as their annual family expenditure; million to 597,866 beneficiaries in this sector. The Bank also spent Tk. 7.74 million for distribution To encourage the people involving in humanitarian of relief among flood affected people of the country. activities, IBBL devised a deposit product namely “Cash Waqf Deposit Scheme”; Sports, Arts & Culture IBBL always comes forward to assist the victims of natural or social disasters. During this year IBBL 7KLV\HDU &XPXODWLYH distributed winter cloths to the poor for an amount ,QPLOOLRQWDND of Tk. 71.02 million; The Bank provides financial assistance to needy and heavily indebted individuals to meet up their various emergency family needs;

Disaster Management

7KLV\HDU &XPXODWLYH ,QPLOOLRQWDND 8SWR

Sports, Arts and Cultural Program Sports, arts and cultural programs make a nation physically and mentally sound and healthy. Engaging with this type of works young people could be able to avoid many socially undesirable activities, like: taking drugs, involving forbidden underworld parties, hijacking money from innocent 8SWR people etc. This is why IBBL sponsors various

184 Annual Report 2012 IBBL Vice Chairman is handing over Cheque to Women Entrepreneur Association of Bangladesh for establishing ‘WEAB Training Centre Cum Outlet sports and cultural events every year. During 2. IBBL distributes ‘Kurbani Meat’ received from 2012 the bank contributed Tk. 9.85 million for Kingdom of Saudi Arabia (KSA) and Islamic this purpose. To uphold and promote the culture Development Bank (IDB) as a gift to the of the nation, IBBL has established ‘Bangladesh destitute people of Bangladesh every year. Sangskritic Kendra’. This year an amount of Tk. 3.53 million was spent for distributing the meat.

Others Activities In 2012, IBBL spent an amount of Tk. 75.38 million Apart from the aforesaid CSR activities, IBBL for other CSR activities. takes many other initiatives as CSR activities such as: Women Empowerment Program

1. Every year IBBL distributes food items to Alim IBBL is very much conscious about the prevailing and poor families as a Tohfa-e-Ramadan. conditions of the women in our society. Keeping This year an amount of Tk. 53.39 million was this in view, it takes various programs for spent for this purpose. empowering the women like awareness building, training, financing etc. The programs include: Others CSR Activities * Encourage husbands in making easy payment 7KLV\HDU &XPXODWLYH of the Mohor, the Bank introduced a deposit scheme namely “Mudaraba Mohor Deposit ,QPLOOLRQWDND Scheme”;

* Rural poor women are organised under Rural Development Scheme and encouraged to make savings at least Tk. 10/- per week with the Bank; * The Bank has deviced an investment scheme exclusively for the women namely “Investment Scheme for the Women Entrepreneurs”; 8SWR

Annual Report 2012 185 * Number of female members under bank’s 2. Reduction of industrial carbon emission; Rural Development Scheme (RDS) is 517,398 3. The Bank is directly in involvement in which is 85% of total RDS members; plantation activities at rural and urban areas * The Bank has established a rehabilitation along with distribution of the saplings in centre for the distressed women namely country areas to protect environment “Islami Bank Distressed Women Rehabilitation 4. Scrutiny of negative impacts of the Centre”. Distressed and destitute women corporations on environment and taking are given shelter, education, training and necessary mitigating measures there against. employment opportunities there. For this purpose IBBL contributed an amount of Responsibility to the Environment Tk. 20.32 million for 5,09,065 beneficiaries from 1983 to 2012. The main theme of environmental responsibility is to create ‘No Harm’ to the environment in view of Expenditure for Environment keeping it healthy for future generation. Now adays climatic change is addressed seriously all over the world. It is identified that Bangladesh, being a (QYLURQPHQW southern delta, is under serious threat of natural disaster. In view of the above, the corporations 7KLV\HDU&XPXODWLYH are recommended to pay due attention to the ,QPLOOLRQWDND followings:

1. Reducing the use of non-renewable energy & materials (electricity, gas, fuel, paper, stationeries etc.) and to increase use of renewable or recyclable energy & materials (solar power, bio-gas, electronic media of communication etc.);

Sector wise Market Share of IBBL in CRS Activities (In million Taka)

2010 2011 Sector Banking Sector IBBL % of IBBL Banking Sector IBBL % of IBBL

Disaster Management 460.41 64.06 14 188.03 21.79 12

Education 400.79 67.8 17 612.48 56.17 9

Health 689.07 64.11 9 520.42 25.78 5

Sports 265.23 12.00 5 359.07 248.75 69

Art & Culture 328.91 11.22 3 171.52 7.15 4

Environment 59.78 7.36 12 138.07 0.48 1

Others 125.58 11.87 9 198.73 50.55 25

Total 2,329.80 238.42 10 2,188.33 410.67 19

186 Annual Report 2012 Islami Bank Foundation

y the grace of Almighty Allah, Islami Bank Foundation, since its inception, has been working for the service Bof the distressed humanity and playing a significant role in social service and development. The activities of the Foundation has increased manifold with the passage of time. Since inception the Foundation, to achieve its cherished objectives, has been implementing its regular programs and undertaken some unique projects. A brief description of the programs and projects implemented by the Foundation in 2012 is given below:

Item-wise Expenditure of Islami Bank Foundation in 2012

Sl. Items No. 1 Income Generation Sewing Machine, Self-employment Project & Self employment Program. 2 Education Model Forkania Maktabs, Scholarship for poor & meritorious students, Financial support for educational institutions, Lump-sum grant for poor and meritorious students, Mobile library, Slum development etc. 3 Health & Medicare Supporting charitable dispensaries, Lump-sum help for treatment, Arsenic Mitigation Programme, Sanitary latrine construction, Circumcision camp, Mobile eye camp & Midwifery training Program. 4 Humanitarian Help Lump-sum grant for distressed, Assistance to orphanages, Assistance for marriage of poor girls, Assistance for construction of dwelling houses, Islami Bank Women Rehabilitation Centre etc. 5 Relief & Rehabilitation Distribution of relief materials among the people affected by Tornado, flood, Sidor Tidal surge & distribution of sacrificial meat and Operating cost of Fael Khair Program etc. 6 Literature, Cultural & Publication Programmes Distribution of Islamic books and periodicals, Helping Youth clubs and Voluntary organizations, Assistance for child & youth development & Bangladesh cultural centre and Construction of Mosque etc. 7 Special Projects Islami Bank Hospitals, Islami Bank Community Hospitals, Islami Bank Medical College, Rajshahi, Islami Bank Medical College Nursing Institute, Rajshahi, Islami Bank Institute of Technology, Rajshahi, Monoram-Islami Bank Crafts & Fashion, Islami Bank Model School and College ( Bangla Medium), Islami Bank International School & College, Dhaka, Islami Bank Institute of Technologies, Islami Bank Mohila Madrasha, and IBF Projects cox’s bazar etc. 8 Capital Expenditure IBH Complex, Kakrail, IBF Office Purchase, Furniture & Fixture of IBF office, Investment for HDS& SHBIS etc. 9 Operating Expenses Administrative expenses, Salary & allowances Postage, conveyance etc.

Annual Report 2012 187 ICU at Islami Bank Hospital

A brief description regarding the special projects Health Education are given below: Islami Bank Medical College Hospitals The activities of Islami Bank Medical College, Rajshahi are runing satisfactorily. The classes Six Islami Bank Hospitals (two located in Dhaka, of the students of 10 different batches are being two in Rajshahi, one in Khulna and one in Barisal), conducted full in swing. The construction work extend services in the field of Medicine, Surgery, of the south block of the hospital building at Gynae, Pediatric, E.N.T, Urology, Neurosurgery, Naodapara, the own site of the College, is already Skin, Eye, Orthopedic, Cardiology etc. at a cost completed and construction of the academy within the reach of common people. In the year building is going on. There were 374 students in 2012, a total number of 65,372 patients received the college in 2012 and 68 students were awarded free treatment facilities from Islami Bank Hospitals. MBBS degree.

Community Hospitals Islami Bank Medical College Hospital The activities of seven Islami Bank Community Nursing Institute Hospitals at Satkhira, Manikgonj, Rangpur, There is a great dearth of qualified nurses in our Jhenaidah, Dinajpur, Faridpur and Naogaon are country and, therefore, quality treatment services going on in full swing. Four more community are being hampered to a great extent. Keeping in hospitals are going to be commissioned soon in view the above situation, Islami Bank Foundation Madaripur, Noakhali, Mymensingh and Feni. In (IBF) established a Nursing Training Institute in the year 2012, a total number of 8,655 patients Rajshahi to create employment opportunity for the received free treatment facilities from Islami Bank youths and meet the increasing needs of qualified Community Hospitals. nurses. A total of 197 students were studying in the institute in 2012.

188 Annual Report 2012 Islami Bank Institute of Health Health Care Services Technology Circumcision Program Proper diagnosis of diseases is vital in rendering IBF executes a good number of Circumcision proper treatment facilities to patients. In our country Program in rural areas in Bangladesh through there is a good number of hospitals/ clinics and hospitals established by it. Qualified and expert diagnostic centers. But most of them do not have doctors give treatment facilities to the poor necessary technical manpower to do pathological children. The children are also given relevent and radiological tests. Therefore, the patients have medicine, ‘Lungi’ and ‘Guernsey’ are offered in the to suffer frequently because of wrong diagnosis of institute at free of cost. diseases. IBF has, therefore, established a Health Technology Institute in Rajshahi in the name of “Islami Bank Institute of Health Technology”. Mobile Eye Camp Courses on Pharmacy, Dentistry, Radiology & In the year 2012, a total number of 590 patients Imaging, Pathology are offered the institute. A total received eye treatment through Mobile Eye Camp number of 369 students were in studying in 2012. arranged in IBBL hospitals.

Midwifery Training Program Charitable Dispensaries

Usually the traditional birth attendants conduct the IBF has been conducting a good number of normal delivery in rural ares. They do not have Charitable Dispensaries in rural areas in different any formal training in this regard and, therefore, parts of the country. Some of the charitable a good number of mothers and babies die at the dispensaries are rendering allopathic treatment time of delivery stage. Many of them, though do while the others are providing homoeopathic not die, suffer even whole life for wrong handling treatment. Usually a qualified doctor gives of the traditional birth attendants. Considering prescription to the patients once or twice in a the above situation Islami Bank Foundation has week without any fee. The patients are also given necessary medicine at free of cost. In the year introduced Midwifery Training Program with the 2012, so far 101,869 patients received treatment help of Islami Bank Hospitals and Islami Bank facilities through the charitable dispensaries. Community Hospitals.

Dental Treatment in Islami Bank Hospital

Annual Report 2012 189 Technical Education Islami Bank Model School and College Islami Bank Institute of Technology Islami Bank Model School and College is one of the important projects of IBF. To impart modern Six units of Islami Bank Institute of Technology, education with moral values, the school was two in Dhaka, one in Bogra, one in Sylhet, one started at Mirpur, Dhaka where a qualified Head in Chittagong and another in Khulna, have been Master was appointed. In the year 2012, a total working satisfactorily to provide skill development number of 633 students were studying in the training to the unemployed youths to make them institution. self -reliant and to transform the country into a technologically sound nation. In the meantime, IBIT Dhaka (2 Units), Chittagong, Sylhet and Bogra Islami Bank Mohila Madrasha have got the affiliation of Bangladesh Technical Islami Bank Mohila Madrasha is one of the Education Board. In the year 2012, a total number important projects of IBF. To render modern of 2,066 students were studying in the IBITs. education with moral values the Madrasha was established in Mirpur, Dhaka where a qualified General Education Head Mistress was appointed. In the year 2012 a total number of 143 students were studying in Islami Bank International School and the school. College

As Dhaka, the capital of Bangladesh, is turning to Scholarship Program be a mega city, a good number of English Medium Scholarship program is one of the important Schools are creeping up which follows curriculum activities of IBF. Under this program, scholarships without conforming fully to the need of the country. are given to the students of Colleges, Madrasha As an attempt to combine modern education and Universities at home and abroad. Moreover, with moral values for a total development of the scholarship is offered to the researchers to obtain children, IBF has established English medium international school and college at 147 Green MPhil and PhD degrees. In the year 2012, a total Road, Dhaka. In the year 2012, a total number of of eight PhD holders received scholarship from 266 students were studying in the school. the Foundation.

Class Room of Islami Bank Institute of Technology

190 Annual Report 2012 Monorom, Islami Bank Crafts and Fashions House

Model Forquania Maktab rehabilitation of the hapless, helpless, distressed, shelterless widows and divorced women under Model Forkania Maktab project is one of the the name and style of “Islami Bank Women important projects of IBF. Maktabs run by IBF Rehabilitation Centre” at Mirpur, Dhaka. provides rural children with the facilities of learning The Holy Quran as well as English and Bangla alphabets and elementary knowledge Monoram - Islami Bank Crafts and of Mathematics helping them a lot to read in the Fashions School and Madrasha. In the year 2012, so far Two units of Monoram-Islami Bank Crafts and 22,255 students were studying in the Forkania Fashions are in operation at Basundhara City Maktabs. and the Grand plaza of Moghbazar in the heart of Dhaka city and have been playing a significant role Bangladesh Sangskritic Kendra in uplifting the condition of the poor and distressed women through channeling sales opportunity of To save our youth force from derailment, it is their products. essential to uphold and promote the culture which is of our own. Keeping in view the above, IBF has A total of 3,746 employees are serving in the IBF established Bangladesh Sangskritic Kendra in Head Office and in different projects offices. Dhaka and Rajshahi and establishing of another Thus, the Foundation, through its multifarious 32 centers are under process. welfare programs, is ceaselessly working to serve the distressed humanity and change the Islami Bank Women Rehabilitation socio-economic status of the un-privileged and Centre neglected section of the society. As part of service to the distressed humanity IBF has established a centre for shelter, training and

Annual Report 2012 191 Appreciation

he Board of Directors expresses sincere To conclude, notwithstanding the fact that Islamic Tgratitude to the Almighty Allah for enabling banks have been able to shield themselves the bank to achieve steady progress in all from the spillover impact of the global economic aspects of operation during the year 2012. The recession, no one can predict the extent to which Board extends thanks to the Ministry of Finance, the Islamic finance principles will serve to protect Bangladesh Bank, Bangladesh Securities and them from the looming financial crisis. Whilst Exchange Commission, Dhaka Stock Exchange some have pointed out that it is already knotted Limited, Chittagong Stock Exchange Limited, with the mainstream finance whereby its future is National Board of Revenue, Registrar of Joint as risky as any other part of the global financial Stock Companies, Statutory Auditors and the industry, experts in Islamic finance believe that Government Agencies for providing necessary their way of carrying out financing operations assistance, guidance, support and co-operation at has shielded them from the global credit crunch various stages of operations of the Bank. With deep and hence, the model stands on its own merit. sense of gratitude, the Board also keeps on record London, Singapore, Paris and Hongkong, the the excellent co-operation, exchange of views and financial hubs of the world, are competing with constant support of Islamic Development Bank each other be benefitted out of Islamic finance. (IDB), other national and overseas Islamic Banks Reputed banks like, Standard Chartered , HSBC and Financial Institutions. and Citi Bank have already set up Islamic banking subsidiaries that are flourishing. The Board appreciates the support and cooperation received from overseas correspondents May Allah, the most Merciful bestow on us of the bank all over the world. The Board courage, dedication, patience and fortitude to particularly records its appreciation for the serve the cause of Islam and of Bangladesh and Shari‘ah Supervisory Committee whose guidance run the bank as per the vision and mission put has enabled the Bank to conduct its business forth and tenets of Islamic Shari‘ah. Ameen. complying Islamic principles. The Board of Directors also extends the best compliments to all of its valued shareholders, depositors, investment On behalf of the Board of Directors clients, print and electronic media and other stakeholders and well-wishers and expresses thanks and gratitude to them for their valuable support and confidence reposed on the Bank. Dated, Dhaka Prof. A.N.M.A. Zaher The Board would like to express its great May 22, 2013 Chairman appreciation and thanks to all the officials and staff of the Bank for their untiring efforts, leadership and dedication for bringing about a better performance of the Bank during the year under report.

192 Annual Report 2012 Audit Committee Report

n compliance with the BRPD Circular No. 12, functions: ensured effective co-ordination of Idated 23 December 2002, the formal Audit external audit function, ensured independence of Committee of IBBL started functioning duly external auditors, reviewed the external auditors appointed by the Bank’s Board of Directors with a findings in order to be satisfied that appropriate view to ensuring the achievement of objectives of action has been taken. the Bank, efficiency of operations, and compliance with the applicable laws, regulations and internal Meeting of the Audit Committee policies to make the Bank a unique, strong and dependable organization for all stakeholders During the year 2012, the Audit Committee of the specifically shareholders, depositors and the bank held 22 meetings. Proceedings of the Audit society as a whole. In this context, the present Audit Committee meetings were reported timely and Committee comprising of 4(four) members has regularly to the Board of Directors. been appointed by the Bank’s Board of Directors During the period, the Committee performed, for 03(three) years. Pursuant to the instructions of amongst others, the following key functions: Bangladesh Securities and Exchange Commission and the Bangladesh Bank, an Independent Director 1. Carefully evaluated the level of compliance and two Directors on behalf of the Depositors have of the Corporate Governance Guidelines of been included in the Committee. the Bangladesh Securities and Exchange Commission, dated 07.08.2012.

Composition of the Audit 2. Evaluated the compliance culture across the Committee Bank. As per regulatory guidelines, the Company 3. Reviewed the existing risk management Secretary of the bank is the Secretary of the Audit procedures for ensuring an effective internal Committee. check and control system of the Bank.

The composition of the present Audit Committee of the Bank

Status in the Board of Status in the Audit Sl. No. Name Directors Committee 1. Professor NRM Borhan Uddin, Ph.D. Independent Director Chairman 2. Janab Mohamad Adnan Midani Foreign Director Member (Representative, Islamic Development Bank, KSA.) 3. Janab Md. Abdus Salam, FCA, FCS Depositor Director Member

4. Janab Humayun Bokhteyar, ACPA, FCA Depositor Director Member

4. Pursued the Audit Calendar for the period Statement of the Audit Committee under review and advised to follow the audit The Audit Committee during its review stated that program meticulously. the internal controls of the bank are well conceived, 5. Reviewed the risk grading of the branches properly administered and satisfactorily monitored. prepared on the basis of audit and inspection The committee also stated that during its reports. involvement in the review of the external audit

Annual Report 2012 193 6. Discussed the internal and external audit Statements to the Board and ensured that reports and advised the management to authentic and reliable Financial Information have rectify all lapses revealed in the reports. been incorporated in preparing those Financial Statements and in other interim reports. Additionally from time to time the concerned Head of Wings/Divisions/Branches and other Offices of the Bank were invited to attend Review of Financial Statements the meeting of the Audit Committee in order The Audit Committee reviewed and examined the to augment the process of regularization of Financial Statements 2012 of the bank to confirm lapses and irregularities. whether all the disclosures and information have 7. Discussed the Bangladesh Bank inspection been incorporated in the Financial Statements reports on the Branches and Head office and and whether the Bank followed International advised the management to rectify all lapses. Accounting Standards(IAS) and International Financial Reporting Standards (IFRS) adopted 8. Advised the management to complete all the as Bangladesh Accounting Standards(BAS) documentation formalities carefully and retain and Bangladesh Financial Reporting Standards each and every document accurately. (BFRS) by the Institute of Chartered Accountants of Bangladesh, Bank Company Act 1991, 9. Reviewed the reports on overdue, classified, Bangladesh Bank Guidelines, the Companies Act rescheduled, written off investment and 1994, the Bangladesh Securities and Exchange other non-performing assets and directed to Commission Rules and other laws and rules exert all-out efforts to reduce non-performing applicable in Bangladesh and also Standards assets. issued by the Accounting and Auditing Organization 10. Suggested to take up the matters with for Islamic Financial Institutions (AAOIFI), Bahrain, concerned lawyers for early disposal of the etc. The Committee recommended the Financial suits for recovery of the Bank’s dues. Statements for consideration of the Board.

11. Advised the management to ensure full compliance of regulatory issues meticulously. Meeting with the Statutory Auditors

12. Advised the management to ensure full The Committee met with the Statutory Auditors Shari‘ah compliance in all areas of business. for finalization of financial statements. It properly addresses the issues mentioned in the 13. Suggested some measures for capacity Management Letter for taking appropriate action building of the internal auditors and to further by the management. strengthen the internal audit function. Acknowledgement Statutory Auditors Appointment The Committee expressed its profound thanks The Audit Committee duly recommends to the and gratitude to the Members of the Board, Board for appointing Statutory Auditors in the Management, Auditors and all the Regulatory Annual General Meeting. Authorities, in particular, Bangladesh Bank and the Bangladesh Securities and Exchange Selection of Accounting Policy Commission for their excellent support while performing its coveted duties and responsibilities. The Audit Committee reviewed the accounting policies adopted by the bank and ensured that the policies were properly applied in preparation of the Financial Statements of the Bank.

Interim Financial Reports Professor NRM Borhan Uddin, PhD Chairman The Audit Committee reviewed and recommended the quarterly and the half yearly Financial Audit Committee

194 Annual Report 2012 Report of the Shari`ah Supervisory Committee

uring the year 2012, the Shariàh Supervisory and Management authority and due to creating DCommittee met and reviewed different Shariàh awareness at branch level and sincere operational activities, including those referred to it by efforts of the manpower of the Bank. the Board of Directors as well as the Management of 2. The investments and transactions performed the Bank and gave opinions and decisions related to by Islami Bank Bangladesh Limited during the Shariàh. The Honourable members of the Shariàh year, have been made in accordance with the Supervisory Committee attended 09 seminars principles of Islamic Shariàh. organized by the Management of the Bank on the 3. Profit distributed to deposit accounts has been eve of inauguration of new branches and 17 Shariàh made in accordance with Islamic Shariàh. awareness programs arranged by the Head Office and different Zones. Apart from this, the Shariàh 4. The income detected as doubtful as per Secretariat conducted Shariàh inspection at 266 principles and rules of Islamic Shariàh has not branches (including 30 SME/Krishi Branches) during been included in the distributable income of the the period excluding new 10 branches of the Bank bank. established in 2012 and submitted detailed report 5. The calculation of Zakat on the Zakatable asset thereon. of the bank has been made in compliance with The duty of the Shariàh Supervisory Committee is to the rules and the principles of Islamic Shariàh. give independent opinions and necessary guidelines It is pertinent to state that Islami Bank does upon observing and reviewing the activities of the not deduct the Zakat from depositors and bank and the responsibility of the bank is to ensure shareholders accounts. It is the responsibility of that the Bank conducts its business in accordance the Depositors and Shareholders to pay Zakat with the rules and principles of Islamic Shariàh. on their deposits and shares respectively. The Shariàh Supervisory Committee, after reviewing 6. More precautionary measures are required to the Shariàh inspection reports, Audited Reports i.e. be adopted in appointing Buying Agents in the Balance Sheet, Profit & Loss Accounts and other branches and to ascertain the duties of the Financial Statements of the Bank for the year 2012, agents and the branches properly. gives the following opinions: 7. The Rural Development Scheme (RDS) is a 1. Shariàh compliance has significantly been praiseworthy effort of Islami Bank for poverty improved during the year 2012 compared to eradication of the country. It is essential to last few years due to different steps taken take more effective precautionary measures for by the bank such as motivational programs, Shariàh compliance in this respect. administrative measures, intensive supervision May Allah (SWT) bestow us with the best of Tawfique and cooperation rendered by the Board of in gaining His satisfaction through implementing Directors, Shariàh Supervisory Committee Shariàh in every sphere of our life. Ameen.

Sheikh Moulana Mohammad Qutubuddin Professor Dr. Abu Bakr Rafique Chairman Member Secretary

Annual Report 2012 195 Auditors’ Report & Audited Financial Statements of Islami Bank Bangladesh Limited and its Subsidiaries

196 Annual Report 2012 Auditors’ Report

to the Shareholders of Islami Bank Bangladesh Limited We have audited the accompanying consolidated financial statements of Islami Bank Bangladesh Limited and its subsidiaries, (“the Group”) as well as the separate financial statements of Islami Bank Bangladesh Limited (“the Bank”) which comprise the consolidated and the separate Balance Sheets as at 31 December 2012 and the consolidated and the separate Profit & Loss Accounts, Statements of Changes in Equity and Cash Flow Statements for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated and the Separate Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements of the Group and the separate financial statements of the Bank in accordance with Bangladesh Financial Reporting Standards (BFRSs), the Bank Company Act 1991, the policies, guidelines, rules and regulations issued by Bangladesh Bank, the Companies Act 1994, the Securities and Exchange Rules, 1987, principles of Islamic Shari‘ah and other applicable laws and regulations and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements of the Group and the separate financial statements of the Bank based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements of the Group and the separate financial statements of the Bank are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements of the Group and the separate financial statements of the Bank. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements of the Group and the separate financial statements of the Bank, whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements of the Group and the separate financial statements of the Bank in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements of the Group and the separate financial statements of the Bank.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above which have been prepared in the format prescribed by Bangladesh Bank vide Circular No. 15 dated 09 November 2009 give a true and fair view of the financial positions of the Group and the Bank as at 31 December 2012 and their financial performances and cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards and comply with

Annual Report 2012 197 the Bank Company Act 1991, the policies, guidelines, rules and regulations issued by Bangladesh Bank, the Companies Act 1994, the Securities and Exchange Rules 1987, principles of Islamic Shari‘ah and other applicable laws and regulations.

We also report that, i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof; ii) in our opinion, proper books of account as required by law have been kept by the Group and the Bank so far as it appeared from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us; iii) the consolidated balance sheet and the profit and loss account of the Group and the separate balance sheet and the profit and loss account of the Bank together with the annexed notes 1 to 44 dealt with by the report are in agreement with the books of account and returns; iv) the expenditure incurred was for the purpose of the Group’s and the Bank’s business; v) the financial positions of the Group and the Bank as at 31 December 2012 and their profits for the year ended 31 December 2012 have been properly reflected in the consolidated financial statements of the Group and the separate financial statements of the Bank and the consolidated financial statements of the Group and the separate financial statements of the Bank have been prepared in accordance with the generally accepted accounting principles;

vi) the consolidated financial statements of the Group and the separate financial statements of the Bank have been drawn up in conformity with the Bank Company Act 1991 and in accordance with the accounting rules and regulations issued by the Bangladesh Bank and the financial statements conform to the prescribed standards set in the accounting regulations issued by Bangladesh Bank after consultation with the professional accounting bodies of Bangladesh; vii) adequate provisions have been made for investments and other assets which are, in our opinion, doubtful of recovery; viii) the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements; ix) the information and explanations required by us have been received and found satisfactory; x) we have covered over 80% of the risk weighted assets of the Bank through our audit and we have spent more than 7,600 person-hours for the audit of books and accounts of the Bank; xi) it appeared from our test checks that the internal control system was satisfactory and adequate to prevent probable frauds and forgeries; xii) Cash Reserve Requirement (CRR) and Statutory Liquidity Reserve (SLR) with Bangladesh Bank have been maintained as per rule; xiii) As far as it was revealed from our test checks, the existing rules, regulations and procedures for sanctioning and disbursement of investment have been followed properly; and xiv) the capital adequacy ratio (CAR), as required by law, has been maintained adequately during the year.

Dhaka, A. Qasem & Co. ACNABIN 28 March 2013 Chartered Accountants Chartered Accountants

198 Annual Report 2012 Islami Bank Bangladesh Limited and its Subsidiaries Consolidated Balance Sheet As at 31 December 2012

31.12.2012 31.12.2011 Property and Assets Notes Taka Taka

Cash in hand 7(a) 41,774,012,643 40,631,914,271 Cash in hand (including foreign currency) 6,308,274,680 4,655,996,987 Balance with Bangladesh Bank & its agent bank(s) (including foreign 35,465,737,963 35,975,917,284 currency) Balance with other banks & financial institutions 8(a) 24,524,933,077 16,853,296,480 In Bangladesh 17,432,561,802 13,140,359,824 Outside Bangladesh 7,092,371,275 3,712,936,656 Placement with banks & other financial institutions - - Investments in shares & securities 9(a) 25,560,064,458 15,853,181,923 Government 23,504,977,770 13,927,177,770 Others 2,055,086,688 1,926,004,153 Investments 372,920,722,887 305,790,180,873 General investments etc. 10(a) 340,479,756,413 287,861,385,224 Bills purchased & discounted 11(a) 32,440,966,474 17,928,795,649 Fixed assets including premises 12(a) 14,816,765,447 7,110,249,574 Other assets 13(a) 3,052,992,955 3,136,781,099 Non - banking assets - - Total property and assets 482,649,491,467 389,375,604,220

Liabilities and Capital Liabilities Placement from banks & other financial institutions - - Deposits & other accounts 14(a) 417,845,688,579 341,855,262,815 Mudaraba savings deposits 151,012,262,458 132,051,082,776 Mudaraba term deposits 97,278,542,378 65,167,293,216 Other mudaraba deposits 117,807,137,348 103,114,794,140 Al- wadeeah current and other deposit accounts 47,531,708,061 38,658,697,588 Bills payable 4,216,038,334 2,863,395,095

Mudaraba perpetual bond 3,000,000,000 3,000,000,000 Other liabilities 19(a) 21,903,809,274 16,713,922,449 Deferred tax liabilities 20(a) 238,628,851 192,664,063 Total liabilities 442,988,126,704 361,761,849,327

Capital/shareholders’ equity 39,661,364,763 27,613,754,893 Paid - up capital 12,509,640,000 10,007,712,000 Statutory reserve 12,423,662,342 10,004,426,808 Other reserves 11,694,797,161 4,585,606,725 Retained earnings 37(a) 3,033,205,973 3,015,952,005 Non-controlling interest 37(b) 59,287 57,355 Total liabilities & shareholders’ equity 482,649,491,467 389,375,604,220

Annual Report 2012 199 Islami Bank Bangladesh Limited and its Subsidiaries Consolidated Balance Sheet As at 31 December 2012

31.12.2012 31.12.2011 Off-balance Sheet Items Notes Taka Taka Contingent liabilities

Acceptances & endorsements - - Letters of guarantee 7,297,485,550 7,302,242,465 Irrevocable letters of credit (including back to back bills) 87,161,261,558 86,901,920,097 Bills for collection 15,571,833,223 17,727,239,489 Other contingent liabilities 13,600,712 1,489,529,264 Total 110,044,181,043 113,420,931,315

Other commitments Documentary credits, short term and trade related transactions - - Forward assets purchased and forward deposits placed - - Undrawn note issuance, revolving and underwriting facilities - - Undrawn formal standby facilities, credit lines and other commitments - - Total - -

Total off-balance sheet items including contingent liabilities 110,044,181,043 113,420,931,315

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

Prof. NRM Borhan Uddin Ph.D Md. Abdus Salam FCA, FCS Director Director

Humayun Bokhteyar, ACPA, FCA Mohammad Abdul Mannan Director Managing Director

This is the consolidated balance sheet referred to in our separate report of even date.

Dhaka A. Qasem & Co. ACNABIN 28 March 2013 Chartered Accountants Chartered Accountants

200 Annual Report 2012 Islami Bank Bangladesh Limited and its Subsidiaries Consolidated Profit & Loss Account For the year ended 31 December 2012

2012 2011 Operating income Notes Taka Taka

Investment income 43,672,225,981 32,019,532,444 Profit paid on mudaraba deposits (25,870,425,237) (18,401,218,085) Net investment income 17,801,800,744 13,618,314,359 Income from investments in shares & securities 27(a) 484,361,836 331,004,637 Commission, exchange & brokerage income 28(a) 5,260,647,661 5,297,455,786 Other operating income 29(a) 1,122,169,884 876,633,643 Total operating income 24,668,980,125 20,123,408,425 Operating expenses Salary & allowances 5,961,421,881 4,655,983,050 Rent, taxes, insurances, electricity etc. 30(a) 655,576,460 507,063,897 Legal expenses 13,479,293 15,257,288 Postage, stamps and telecommunication etc. 31(a) 111,528,843 94,267,115 Stationery, printing and advertisement etc. 32(a) 267,730,060 198,418,476 Chief executive’s salary & fees 5,280,000 5,280,000 Directors’ fees & expenses 33(a) 10,066,840 9,530,986 Shari‘ah supervisory committee’s fees & expenses 2,584,829 2,749,283 Auditors’ fees 2,168,000 1,593,400 Charges on investment losses - - Depreciation and repair to bank’s assets 35(a) 504,441,086 409,590,979 Zakat expenses 324,772,772 262,929,404 Other expenses 36(a) 1,029,710,622 1,128,991,237 Total operating expenses 8,888,760,686 7,291,655,115 Profit/ (loss) before provision 15,780,219,439 12,831,753,310 Provision for investments & off- balance sheet items 3,502,625,602 2,384,314,796 Provision for diminution in value of investments in shares 30,969,670 289,077,029 Other provisions 9,441,066 - Total provision 3,543,036,338 2,673,391,825 Total profit/(loss) before taxes 12,237,183,101 10,158,361,485 Provision for taxation for the period Current tax 19.6(a) 6,574,464,832 5,504,252,091 Deferred tax 20(b) 45,964,788 29,515,743 Net profit/ (loss) after tax 5,616,753,481 4,624,593,651 Net profit after tax attributable to: 5,616,753,481 4,624,593,651 Equity holders of IBBL 37(a) 5,616,751,549 4,624,597,748 Non-controlling interest 1,932 (4,097) Retained earnings from previous year 3,015,952,005 2,624,924,708 Add: Net profit after tax (attributable to equity holders of IBBL) 5,616,751,549 4,624,597,748 Profit available for appropriation 8,632,703,554 7,249,522,456 Appropriation: 8,632,703,554 7,249,522,456 Statutory reserve 2,419,235,534 2,069,463,066 General reserve (22,205,793) (430,484,615) Dividend 3,202,467,840 2,594,592,000 Retained earnings 3,033,205,973 3,015,952,005 Consolidated earnings per share 39(a) 4.49 3.70 The annexed notes form an integral part of these financial statements.

Prof. NRM Borhan Uddin Ph.D Md. Abdus Salam FCA, FCS Director Director

Humayun Bokhteyar, ACPA, FCA Mohammad Abdul Mannan Director Managing Director

This is the consolidated profit & loss account referred to in our separate report of even date.

Dhaka A. Qasem & Co. ACNABIN 28 March 2013 Chartered Accountants Chartered Accountants

Annual Report 2012 201 Islami Bank Bangladesh Limited and its Subsidiaries Consolidated Cash Flow Statement For the year ended 31 December 2012

2012 2011 Cash flows from operating activities Note Taka Taka

Investment income 42,092,371,173 32,019,532,444 Profit paid on mudaraba deposits (24,290,570,429) (16,954,828,500) Income/ dividend receipt from investments in shares & securities 484,361,836 331,004,637 Fees & commission receipt in cash 5,260,647,661 5,297,455,786 Recovery from written off investments 107,882,331 77,081,305 Payments to employees (5,966,701,881) (4,661,263,050) Cash payments to suppliers (317,323,649) (237,072,771) Income tax paid (4,888,001,666) (4,055,740,794) Receipts from other operating activities 1,014,287,553 799,552,338 Payments for other operating activities (2,189,000,103) (2,020,929,003) (i) Operating profit before changes in operating assets 11,307,952,826 10,594,792,392 Changes in operating assets and liabilities Increase/decrease of statutory deposits - - Increase/decrease of net trading securities - - Increase/decrease of placement to other banks - - Increase/decrease of investments to customers (67,080,159,717) (44,065,049,847) Increase/decrease of other assets 109,479,065 (467,914,988) Increase/decrease of deposits from other banks (437,641,214) 501,270,743 Increase/decrease of deposits received from customers 76,377,684,681 47,970,108,822 Increase/decrease of other liabilities account of customers - - Increase/decrease of trading liabilities - - Increase/decrease of other liabilities 284,254,073 417,328,401 (ii) Cash flows from operating assets and liabilities 9,253,616,888 4,355,743,131 Net cash flows from operating activities (A)=(i+ii) 20,561,569,714 14,950,535,523 Cash flows from investing activities Proceeds from sale of securities 1,173,962,731 - Payment for purchase of securities/BGIIB (11,257,091,966) (2,903,755,860) Payment for purchase of securities/membership - - Purchase/sale of property, plants & equipments (960,861,899) (729,734,467) Purchase/sale of subsidiaries - - Net cash flows from investing activities (B) (11,043,991,134) (3,633,490,327) Cash flows from financing activities Receipts from issue of debt instruments - - Payment for redemption of debt instruments - - Receipts from issuing ordinary share/ rights share - 48,000 Dividend paid in Cash (700,539,840) - Net cash flows from financing activities (C) (700,539,840) 48,000 Net increase/(decrease) in cash (A+B+C) 8,817,038,740 11,317,093,196 Add/(less): effects of exchange rate changes on cash & cash equivalent (3,303,771) - Add: cash & cash equivalents at beginning of the year 57,485,210,751 46,168,117,555 Cash & cash equivalents at the end of the year 42(a) 66,298,945,720 57,485,210,751 The annexed notes form an integral part of these financial statements.

Prof. NRM Borhan Uddin Ph.D Md. Abdus Salam FCA, FCS Director Director

Humayun Bokhteyar, ACPA, FCA Mohammad Abdul Mannan Director Managing Director

This is the consolidated cash flow statement referred to in our separate report of even date.

Dhaka A. Qasem & Co. ACNABIN 28 March 2013 Chartered Accountants Chartered Accountants

202 Annual Report 2012

- - - - - 3,303,771 32,000,000 (3,303,771) 583,130,387 615,130,387 (17,350,000) (56,200,000) (700,539,840) 5,036,350,000 3,000,000,000 5,616,753,481 7,190,900,000 2011 Total 41,934,182,874 39,661,364,763 27,613,754,893 (Amount in Taka) (Amount (5,749,485,660) 10(2+3+4+5+6+7+8+9) - -

------1,932 59,287 59,287 57,355 9 2012 32,000,000 interest 152,645,772 184,645,772 Non-controlling

------8 earnings Retained 3,015,952,005 (700,539,840) 3,033,205,973 3,033,205,973 5,616,751,549 (2,397,029,741) (2,501,928,000) -

------7 17,350,000 34,700,000 90,900,000 (17,350,000) (56,200,000) securities reserve of Revaluation ------6 Assets reserve 5,749,485,660 7,190,900,000 4,308,071,320 revaluation 11,498,971,320 11,498,971,320 (5,749,485,660)

------5 3,303,771 (3,303,771) 159,136,208 184,645,772 (22,205,793) 5,195,486,208 5,036,350,000 reserves * General/ other ------4 reserve Statutory 2,419,235,534 12,423,662,342 12,423,662,342 10,004,426,808

------For the year ended 31 December 2012 3 Share premium 1,989,633 1,989,633 1,989,633 ------Islami Bank Bangladesh Limited and its Subsidiaries Consolidated Statement of Changes in Equity 2 2,501,928,000 12,509,640,000 12,509,640,000 10,007,712,000 Paid-up capital 1 Particulars *Note : General / other reserves General reserve Dividend equalization account Total equity as on 31 December 2012 Total Total Less: 50.00% of revaluation reserve securities Less: 50.00% of assets revaluation reserve Adjustment for currency translation differences Add: General provision for unclassified investments balance sheet items and off- Add: Mudaraba perpetual bond Total shareholders’ equity as on 31 December shareholders’ Total 2012 Transfer to reserve Transfer Issue of share capital Net profit for the period Dividend: Bonus shares Cash dividend Currency translation differences Net gain and losses not recognized in the income statement Surplus/ (deficit) on account of revaluation properties Surplus/ (deficit) on account of revaluation investments (shares & securities) Balance as at 01 January 2012 Changes in accounting policy restated balance

Annual Report 2012 203

------48,000 (45,450,000) (535,488,680) 5,116,000,000 5,116,000,000 3,000,000,000 4,624,593,651 Total (Amount in Taka) (Amount 23,524,601,922 27,613,754,893 33,530,269,233 (2,154,035,660) 10(2+3+4+5+6+7+8+9) ------Managing Director 13,452 57,355 57,355 48,000 (4,097) Mohammad Abdul Mannan 9 interest Non-controlling ------8 ACNABIN earnings Retained 2,624,924,708 3,015,952,005 3,015,952,005 4,624,597,748 (2,594,592,000) (1,638,978,451) Chartered Accountants ------7 90,900,000 45,450,000 621,000,000 (45,450,000) (530,100,000) securities reserve of Revaluation ------Director 6 (5,388,680) Assets reserve Md. Abdus Salam FCA, FCS Md. 4,313,460,000 4,308,071,320 2,154,035,660 revaluation (2,154,035,660) ------5 615,130,387 184,645,772 (430,484,615) 5,116,000,000 5,116,000,000 5,300,645,772 reserves * General/ other ------A. Qasem & Co. Chartered Accountants 4 reserve Statutory 7,934,963,742 2,069,463,066 10,004,426,808 10,004,426,808 ------For the year ended 31 December 2011 Director 3 Share premium 1,989,633 1,989,633 1,989,633 ------Islami Bank Bangladesh Limited and its Subsidiaries Consolidated Statement of Changes in Equity Humayun Bokhteyar, ACPA, FCA ACPA, Humayun Bokhteyar, 2 7,413,120,000 2,594,592,000 Paid-up capital 10,007,712,000 10,007,712,000 1 Particulars Director Prof. NRM Borhan Uddin Ph.D Changes in accounting policy restated balance Add: Mudaraba perpetual bond Add: General provision for unclassified investments balance sheet items and off- Balance as at 01 January 2011 Surplus/ (deficit) on account of revaluation investments (shares & securities) Less: 50.00% of revaluation reserve securities Less: 50.00% of assets revaluation reserve Surplus/ (deficit) on account of revaluation properties 2011 December 31 on as equity shareholders’ Total Currency translation differences Net gain and losses not recognized in the income statement Net profit for the period Total equity as on 31 December 2011 Total Transfer to reserve Transfer Dividend: Bonus shares Cash dividend Issue of share capital This is the consolidated statement of changes in equity referred to our separate report even date. Dhaka 28 March 2013

204 Annual Report 2012 Islami Bank Bangladesh Limited Balance Sheet As at 31 December 2012

31.12.2012 31.12.2011 Property and Assets Notes Taka Taka

Cash in hand 7.0 41,774,009,647 40,631,897,477 Cash in hand (including foreign currency) 6,308,271,684 4,655,980,193 Balance with Bangladesh Bank & its agent bank(s) (including foreign 35,465,737,963 35,975,917,284 currency) Balance with other banks & financial institutions 8.0 23,048,348,207 15,577,309,475 In Bangladesh 15,955,976,932 11,864,372,819 Outside Bangladesh 7,092,371,275 3,712,936,656 Placement with banks & other financial institutions - - Investments in shares & securities 9.0 27,010,073,770 16,932,273,770 Government 23,504,977,770 13,927,177,770 Others 3,505,096,000 3,005,096,000 Investments 10.0 372,920,722,887 305,840,563,170 General investments etc. 340,479,756,413 287,911,767,521 Bills purchased & discounted 11.0 32,440,966,474 17,928,795,649 Fixed assets including premises 12.0 14,808,228,329 7,100,192,269 Other assets 13.0 2,974,933,877 3,109,886,617 Non - banking assets - - Total property and assets 482,536,316,717 389,192,122,778

Liabilities and Capital Liabilities Placement from banks & other financial institutions - - Deposits & other accounts 14.0 417,844,142,245 341,853,672,959 Mudaraba savings deposits 151,012,262,458 132,051,082,776 Mudaraba term deposits 97,278,542,378 65,167,293,216 Other mudaraba deposits 15.0 117,807,137,348 103,114,794,140 Al- wadeeah current and other deposit accounts 16.0 47,530,161,727 38,657,107,732 Bills payable 17.0 4,216,038,334 2,863,395,095 Mudaraba perpetual bond 18.0 3,000,000,000 3,000,000,000 Other liabilities 19.0 21,698,433,977 16,345,905,454 Deferred tax liabilities 20.0 238,230,992 192,330,992 Total liabilities 442,780,807,214 361,391,909,405

Capital/ shareholders’ equity 39,755,509,503 27,800,213,373 Paid - up capital 21.2 12,509,640,000 10,007,712,000 Statutory reserve 22.0 12,423,662,342 10,004,426,808 Other reserves 23.0 11,694,797,161 4,585,606,725 Retained Earnings 3,127,410,000 3,202,467,840 Total liabilities & shareholders’ equity 482,536,316,717 389,192,122,778

Annual Report 2012 205 Islami Bank Bangladesh Limited Balance Sheet As at 31 December 2012

31.12.2012 31.12.2011 Off-balance Sheet Items Notes Taka Taka

Contingent liabilities Acceptances & endorsements - - Letters of guarantee 24.0 7,297,485,550 7,302,242,465 Irrevocable letters of credit (including back to back bills) 87,161,261,558 86,901,920,097 Bills for collection 15,571,833,223 17,727,239,489 Other contingent liabilities 13,600,712 1,489,529,264 Total 110,044,181,043 113,420,931,315

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

Prof. NRM Borhan Uddin Ph.D Md. Abdus Salam FCA, FCS Director Director

Humayun Bokhteyar, ACPA, FCA Mohammad Abdul Mannan Director Managing Director

This is the balance sheet referred to in our separate report of even date.

Dhaka A. Qasem & Co. ACNABIN 28 March 2013 Chartered Accountants Chartered Accountants

206 Annual Report 2012 Islami Bank Bangladesh Limited Profit & Loss Account For the year ended 31 December 2012 2012 2011 Operating income Notes Taka Taka

Investment income 25.0 43,672,225,981 32,019,532,444 Profit paid on mudaraba deposits 26.0 (25,870,425,237) (18,401,218,085) Net investment income 17,801,800,744 13,618,314,359

Income from investments in shares & securities 27.0 431,970,748 289,370,090 Commission, exchange & brokerage income 28.0 5,249,699,981 5,284,102,499 Other operating income 29.0 991,873,131 808,291,910 Total operating income 24,475,344,604 20,000,078,858 Operating expenses Salary & allowances 5,951,305,071 4,646,993,224 Rent, taxes, insurances, electricity etc. 30.0 652,494,766 503,637,923 Legal expenses 13,479,293 15,257,288 Postage, stamps and telecommunication etc. 31.0 111,417,653 94,161,200 Stationery, printing and advertisement etc. 32.0 267,547,822 198,119,152 Chief executive’s salary & fees 5,280,000 5,280,000 Directors’ fees & expenses 33.0 10,066,840 9,254,986 Shari‘ah supervisory committee’s fees & expenses 34.0 2,584,829 2,749,283 Auditors’ fees 2,070,000 1,567,500 Charges on investment losses - - Depreciation and repair to bank’s assets 35.0 500,228,968 407,057,924 Zakat expenses 324,772,772 262,929,404 Other expenses 36.0 1,025,852,252 1,121,440,847 Total operating expenses 8,867,100,266 7,268,448,731 Profit/ (loss) before provision 15,608,244,338 12,731,630,127 Provision for investments & off- balance 3,502,625,602 2,384,314,796 sheet items (Note 19.2, 19.3 & 19.4) Provision for diminution in value of investments in shares - - Other provisions 19.5 9,441,066 - Total provision 3,512,066,668 2,384,314,796 Total profit/(loss) before taxes 12,096,177,670 10,347,315,331 Provision for taxation for the period Current tax 19.6 6,525,837,929 5,476,469,040 Deferred tax 20.0 45,900,000 29,400,000 Net profit/ (loss) after tax 5,524,439,741 4,841,446,291 Retained earnings from previous year 3,202,467,840 2,594,592,000 Add: Net profit after tax 5,524,439,741 4,841,446,291 Profit available for appropriation 8,726,907,581 7,436,038,291 Appropriation: 8,726,907,581 7,436,038,291 Statutory reserve 2,419,235,534 2,069,463,066 General reserve (22,205,793) (430,484,615) Dividend 3,202,467,840 2,594,592,000 Retained earnings 37.0 3,127,410,000 3,202,467,840 Earnings per share (EPS) 39.0 4.42 3.87 The annexed notes form an integral part of these financial statements.

Prof. NRM Borhan Uddin Ph.D Md. Abdus Salam FCA, FCS Director Director

Humayun Bokhteyar, ACPA, FCA Mohammad Abdul Mannan Director Managing Director This is the profit & loss account referred to in our separate report of even date. Dhaka A. Qasem & Co. ACNABIN 28 March 2013 Chartered Accountants Chartered Accountants

Annual Report 2012 207 Islami Bank Bangladesh Limited Cash Flow Statement For the year ended 31 December 2012 2012 2011 Cash flows from operating activities Note Taka Taka

Investment income 42,092,371,173 32,019,532,444 Profit paid on mudaraba deposits (24,290,570,429) (16,954,828,500) Income/ dividend receipt from investments in shares & securities 431,970,748 289,370,090 Fees & commission receipt in cash 5,249,699,981 5,284,102,499 Recovery from written off investments 107,882,331 77,081,305 Payments to employees (5,926,585,071) (4,652,273,224) Cash payments to suppliers (317,141,411) (236,773,447) Income tax paid (4,869,763,379) (4,045,822,646) Receipts from other operating activities 883,990,800 731,210,605 Payments for other operating activities (2,180,853,649) (2,010,895,339) (i) Operating profit before changes in operating assets 11,181,001,094 10,500,703,787 Changes in operating assets and liabilities Increase/decrease of statutory deposits - - Increase/decrease of net trading securities - - Increase/decrease of placement to other banks - - Increase/decrease of investments to customers (67,080,159,717) (42,615,432,144) Increase/decrease of other assets 134,952,740 (499,447,139) Increase/decrease of deposits from other banks (437,641,214) 501,270,743 Increase/decrease of deposits received from customers 76,428,110,500 47,971,410,361 Increase/decrease of other liabilities account of customers - - Increase/decrease of trading liabilities - - Increase/decrease of other liabilities 184,387,305 536,615,012 (ii) Cash flows from operating assets and liabilities 9,229,649,614 5,894,416,833 Net cash flows from operating activities (A)=(i+ii) 20,410,650,708 16,395,120,620 Cash flows from investing activities Proceeds from sale of securities - - Payment for purchase of securities/BGIIB (10,134,000,000) (5,193,563,150) Payment for purchase of securities/membership - - Purchase/sale of property, plants & equipments (959,656,195) (725,646,669) Purchase/sale of subsidiaries - - Net cash flows from investing activities (B) (11,093,656,195) (5,919,209,819) Cash flows from financing activities Receipts from issue of debt instruments - - Payment for redemption of debt instruments - - Receipts from issuing ordinary share/ rights share - - Dividend paid in Cash (700,539,840) - Net cash flows from financing activities (C) (700,539,840) - Net increase/(decrease) in cash (A+B+C) 8,616,454,673 10,475,910,801 Add/(Less): effects of exchange rate changes on cash & cash equivalent (3,303,771) - Add: cash & cash equivalents at beginning of the year 56,209,206,952 45,733,296,151 Cash & cash equivalents at the end of the year 42.0 64,822,357,854 56,209,206,952 The annexed notes form an integral part of these financial statements.

Prof. NRM Borhan Uddin Ph.D Md. Abdus Salam FCA, FCS Director Director

Humayun Bokhteyar, ACPA, FCA Mohammad Abdul Mannan Director Managing Director

This is the cash flow statement referred to in our separate report of even date.

Dhaka A. Qasem & Co. ACNABIN 28 March 2013 Chartered Accountants Chartered Accountants

208 Annual Report 2012

- - - - - 3,303,771 32,000,000 (3,303,771) 583,130,387 615,130,387 2011 (56,200,000) (17,350,000) Total (700,539,840) 5,524,439,741 7,190,900,000 5,036,350,000 3,000,000,000 (Amount in Taka) (Amount 27,800,213,373 39,755,509,503 42,028,327,614 (5,749,485,660) 9 (2+3+ 4+5+6+7+ 8) ------8 2012 32,000,000 152,645,772 184,645,772 earnings Retained (700,539,840) 3,202,467,840 5,524,439,741 3,127,410,000 3,127,410,000 (2,501,928,000) (2,397,029,741) ------7 17,350,000 90,900,000 34,700,000 (56,200,000) (17,350,000) securities reserve of Revaluation ------6 Assets reserve revaluation 7,190,900,000 4,308,071,320 5,749,485,660 11,498,971,320 11,498,971,320 (5,749,485,660) ------5 3,303,771 (3,303,771) 184,645,772 159,136,208 reserves * (22,205,793) 5,036,350,000 5,198,789,979 General/ other ------4 reserve Statutory 2,419,235,534 10,004,426,808 12,423,662,342 12,423,662,342 ------Islami Bank Bangladesh Limited Statement of Changes in Equity For the year ended 31 December 2012 3 Share premium 1,989,633 1,989,633 1,989,633 ------2 2,501,928,000 10,007,712,000 12,509,640,000 12,509,640,000 Paid-up capital 1 Particulars Balance as at 01 January 2012 Changes in accounting policy restated balance Surplus/ (deficit) on account of revaluation of properties Add: General provision for unclassified balance sheet items investments and off- Cash dividend Dividend: Bonus shares Transfer to reserve Transfer Currency translation differences Net gain and losses not recognized in the income statement Net profit for the period Surplus/ (deficit) on account of revaluation of investments (shares & securities) Adjustment for currency translation differences Less: 50.00% of assets revaluation reserve Issue of share capital equity as on 31 shareholders’ Total December 2012 Total equity as on 31 December 2012 Total Less: 50.00% of revaluation reserve securities Add: Mudaraba perpetual bond *Note : General / other reserves General reserve Dividend equalization account Total

Annual Report 2012 209

------Total (45,450,000) (535,488,680) 5,116,000,000 5,116,000,000 4,841,446,291 3,000,000,000 23,494,255,762 33,716,727,713 27,800,213,373 (2,154,035,660) (Amount in Taka) 9 (2+3+ 4+5+6+7+ 8) ------Managing Director Mohammad Abdul Mannan 8 earnings Retained 2,594,592,000 3,202,467,840 4,841,446,291 3,202,467,840 (2,594,592,000) (1,638,978,451) ------ACNABIN 7 Chartered Accountants 45,450,000 90,900,000 621,000,000 (45,450,000) (530,100,000) securities reserve of Revaluation ------Director 6 (5,388,680) Assets reserve revaluation 4,313,460,000 2,154,035,660 4,308,071,320 (2,154,035,660) Md. Abdus Salam FCA, FCS Md. ------5 reserves 615,130,387 184,645,772

(430,484,615) 5,116,000,000 5,116,000,000 5,300,645,772 General/ other A. Qasem & Co. ------Chartered Accountants 4

reserve Statutory 7,934,963,742 2,069,463,066 10,004,426,808 10,004,426,808 ------Islami Bank Bangladesh Limited Statement of Changes in Equity For the year ended 31 December 2011 3 Director Share premium 1,989,633 1,989,633 1,989,633 ------Humayun Bokhteyar, ACPA, FCA ACPA, Humayun Bokhteyar, 2 7,413,120,000 2,594,592,000 10,007,712,000 10,007,712,000 Paid-up capital 1 Particulars Director Prof. NRM Borhan Uddin Ph.D Balance as at 01 January 2011 Changes in accounting policy restated balance Surplus/ (deficit) on account of revaluation of properties Add: General provision for unclassified balance sheet items investments and off- Less: 50.00% of assets revaluation reserve Surplus/ (deficit) on account of revaluation of investments (shares & securities) Less: 50.00% of revaluation reserve securities equity as on 31 December 2011 Total Currency translation differences Net gain and losses not recognized in the income statement Cash dividend Dividend: Bonus shares Transfer to reserve Transfer Net profit for the period Issue of share capital Add: Mudaraba perpetual bond Total shareholders’ equity as on 31 shareholders’ Total December 2011 This is the statement of changes in equity referred to our separate report even date. Dhaka 28 March 2013

210 Annual Report 2012 - - - - 8 192,330,992 4,655,980,193 3,109,886,617 7,100,192,269 3,000,000,000 51,553,226,759 16,932,273,770 27,800,213,373 16,345,905,454 305,840,563,170 389,192,122,778 341,853,672,959 361,391,909,405 Total 31.12.2011 Total - - - - Managing Director 5 + 6) Mohammad Abdul Mannan 238,230,992 6,308,271,684 2,974,933,877 3,000,000,000 7=(2 + 3 4 58,514,086,170 14,808,228,329 27,010,073,770 39,755,509,503 21,698,433,977 372,920,722,887 482,536,316,717 417,844,142,245 442,780,807,214 Total 31.12.2012 Total ------6 ACNABIN years 185,737,634 238,230,992 More than 5 3,521,373,770 3,000,000,000 3,286,835,849 11,653,385,449 11,653,385,449 14,096,525,732 77,401,896,687 95,205,533,823 77,027,081,533 91,918,697,974 Chartered Accountants ------5 374,868,902 406,658,946 1 - 5 years 4,000,000,000 5,967,635,497 82,343,342,943 87,124,870,791 86,900,534,735 92,868,170,232 (5,743,299,441) Director ------4 Md. Abdus Salam FCA, FCS Md. 615,435,843 305,043,651 9,190,000,000 1,816,543,853 3 - 12 Months 15,434,000,000 14,492,150,955 117,306,521,119 117,306,521,119 119,123,064,972 119,123,064,972 108,070,736,432 133,615,215,927 ------3 518,436,527 1,589,625,634 4,000,000,000 7,066,316,523 1 - 3 Months 86,118,226,950 86,118,226,950 14,800,000,000 73,313,354,365 93,702,979,999 86,636,663,477 A. Qasem & Co. ------Chartered Accountants Liquidity Statement As at 31 December 2012 Assets & liabilities analysis 2 54,700,000 Islami Bank Bangladesh Limited 209,265,864 6, 308,271,684 1,742,432,651 72,887,716,178 52,234,210,559 20,653,505,619 Up to 1 Month 34,524,086,170 31,791,392,460 50,491,777,908 Director Humayun Bokhteyar, ACPA, FCA ACPA, Humayun Bokhteyar, 1 Particulars Director Prof. NRM Borhan Uddin Ph.D Placement with Banks & other Financial Institutions Balance with other banks & financial institutions ASSETS Cash in hand Non - banking assets Other assets Fixed assets including premises (land & building), furniture an d fixtures Investments (in shares & securities) General investments etc. Total assets Total LIABILITIES Placement from banks & other financial institutions Other accounts Deposits Total liabilities Total Net liquidity gap Deferred tax liability/ (assets) Mudaraba perpetual bond Provision & other liabilities This is the liquidity statement referred to in our separate report of even date. Dhaka 28 March 2013

Annual Report 2012 211 Islami Bank Bangladesh Limited and its Subsidiaries Notes to the consolidated financial statements For the year ended 31 December 2012

1.0 The Bank and its activities 1.1 Islami Bank Bangladesh Limited (“the Bank”/”IBBL”) was established as a Public Limited Banking Company in Bangladesh in 1983 as the first interest free Shari‘ah based Scheduled Commercial Bank in the South East Asia. Naturally, its modus operandi is substantially different from those of other conventional Commercial Banks. The Bank conducts its business on the Shari‘ah principles of Mudaraba, Musharaka, Bai-Murabaha, Bai-Muajjal, Hire Purchase under Shirkatul Melk, Bai-Salam and Bai-as- Sarf etc. There is a Shari‘ah Supervisory Committee in the Bank who ensures that the activities of the Bank are being conducted on the precepts of Islam. The Shari‘ah Supervisory Committee consists of prominent Shari‘ah scholars, reputed Bankers, renowned Lawyers and eminent Economists. There are two Stock Exchanges in Bangladesh viz. Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited and the shares of the Bank are listed with both the Stock Exchanges. The Bank carries out its business activities through its Head Office in Dhaka, 14 Zonal Offices and 276 branches including 30 SME/Agriculture branches in Bangladesh. The Principal place of business is the Registered Office at Islami Bank Tower, 40, Dilkusha Commercial Area, Dhaka-1000, Bangladesh. These financial statements as at and for the year ended 31 December 2012 include the consolidated financial statements and the separate financial statements of the Bank. The consolidated financial statements comprise the financial statements of the Bank and its subsidiaries (mentioned in Note - 1.4, together referred to as “the Companies”). 1.2 Nature of business/principal activities of the Bank 1.2.1 Commercial banking services All kinds of commercial banking services are provided by the Bank to the customers following the principles of Islamic Shari‘ah, the provisions of the Bank Company Act, 1991, Bangladesh Bank’s directives and directives of other regulatory authorities. 1.2.2 Islamic micro-finance Islamic micro-finance represents micro-finance and the Islamic finance industry. Under Islamic micro-finance, major focus is given on improvement of living standard of poor people. The projects are closely monitored so that the members are really benefitted. IBBL provides this services under the umbrella of Rural Development Scheme (RDS) and Urban Poor Development Scheme (UPDS). 1.2.3 Mobile financial services -”mCash” IBBL has launched mobile financial services from 27 December 2012 under the name “Islami Bank mCash” as per Bangladesh Bank approval (reference no. DCMPS/PSD/37/(W)/2012-321 dated 14 June 2012). Islami Bank mCash offers different services through Mobile phone that include free and quick opening of customer account, deposit and withdrawal of cash money, fund transfer from one account to another, receiving remittance from abroad, knowing account balance and mini-statement, giving and receiving salary, mobile recharge and payment of utility bill, merchant bill payment etc. 1.3 Off-shore banking unit (OBU) Bangladesh Bank has approved the operation of Off-Shore Banking Unit (OBU) of Islami Bank Bangladesh Limited located at Head Office Complex Branch- Dhaka, Uttara Branch- Dhaka and Agrabad Branch- Chittagong through letter no. BRPD (P-3)744(111)/2010-1032 dated 28 March, 2010. The Bank commenced the operation of its Off-shore Banking Unit from 08.02.2011 at Head Office Complex Branch, Dhaka, and from 27.09.2011 at Agrabad Branch, Chittagong. Operations of OBU located at Uttara Branch, Dhaka has not been started yet. Due to having different functional currency (Note 2.3), the operation of OBU has been considered as “foreign operation” for reporting purposes and relevant financial reporting standards have been applied accordingly (Note 3.2.2).

212 Annual Report 2012 1.4 Subsidiaries of the Bank 1.4.1 Islami Bank Securities Limited (IBSL) As per Securities and Exchange Commission’s (SEC) Letter No. SEC/Reg/CSE/MB/ 2009/444 dated 20.12.2009 and approval of Bangladesh Bank through Letter No. BRPD (R-1)717/2010-47 dated 07.02.2010; IBBL established a subsidiary Company named “Islami Bank Securities Limited” to operate stock broker and stock dealer activities. The share capital of Islami Bank Securities Ltd. is Tk. 2,700,000,000/- divided into 2,700,000 shares of Tk.1,000/ each out of which share capital of IBBL is Tk. 2,699,946,000/- divided into 2,699,946 shares of Tk.1,000/- each which represent 99.998% of total share of the subsidiary Company. IBSL was incorporated on 22.03.2010 and date of commencement of business was 23.05.2010. Required capital was transferred to IBSL on 25.05.2010 which is operating business under the license issued by the Securities & Exchange Commission (SEC). As a stock broker, IBSL acts as an agent in the purchase and sale of Shari‘ah approved listed securities and realizes commission on transactions in accordance with approved commission schedule. Financial Statements of the Company are shown at Annexure - E. 1.4.2 Islami Bank Capital Management Limited (IBCML) As per Bangladesh Bank BRPD Circular No. 12 dated 14.10.2009 and approval of Bangladesh Bank through Letter No. BRPD (R-1)717/2010-47 dated 07.02.2010, IBBL established another subsidiary Company named “Islami Bank Capital Management Limited” to operate portfolio management, underwriting, issue management etc. IBCML was incorporated on 01.04.2010 and required capital was transferred on 06.07.2010. The share capital of Islami Bank Capital Management Ltd. is Tk.300,000,000/- divided into 300,000 shares of Tk.1,000/ each out of which share capital of IBBL is Tk.299,993,000/- divided into 299,993 shares of Tk.1,000/- each which represent 99.998% of total share of the subsidiary Company. Permission of Bangladesh Securities and Exchange Commission (BSEC) is yet to be received for operation of IBCML. Financial Statements of the Company are shown at Annexure - F. 1.4.3 IBBL Exchange Singapore Pte. Ltd. Another subsidiary of Islami Bank Bangladesh Limited named ‘IBBL Exchange Singapore Pte. Ltd.’ is under process to incorporate in Singapore for money-remittance, changing, transmitting and doing all matters and things incidental thereto under the Companies Act, CAP. 50 of the Republic of Singapore.

2.0 Basis of preparation 2.1 Statement of compliance The operations of the Bank and its subsidiaries are in strict compliance with the rules of Islamic Shari‘ah. The consolidated financial statements and the separate financial statement of the Bank have been prepared basically as per provisions of the “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated 09.11.2009 with reference to the provisions of the Bank Company Act, 1991 as amended by Bangladesh Bank BRPD Circular No.14 dated 25.06.2003 & Bangladesh Bank’s other circulars/instructions and in accordance with International Financial Reporting Standards (IFRSs) adopted as Bangladesh Financial Reporting Standards (BFRSs) by the Institute of Chartered Accountants of Bangladesh (ICAB); the Companies Act, 1994; the Securities and Exchange Rules, 1987; Dhaka and Chittagong Stock Exchanges’ Listing Regulations and other laws and rules applicable in Bangladesh, Standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), as a member of that organization. In case the requirement of guidelines and circulars issued by Bangladesh Bank differ with those of other regulatory authorities and financial reporting standards, the guidelines and circulars issued by Bangladesh Bank prevails. As such the Bank has departed from those contradictory requirements of BFRSs in order to comply with the rules and regulations of Bangladesh Bank which are disclosed below:

Annual Report 2012 213 i) Provision on investments and off-balance sheet exposures As per BAS 39 “Financial Instruments: Recognition and Measurement”, an entity should start the impairment assessment by considering whether objective evidence of impairment exists for financial assets that are individually significant. For financial assets are not individually significant, the assessment can be performed on an individual or collective (portfolio) basis and investments should be presented net of provisions. Instead of complying with the above, the Bank has made provision on investments and off-balance sheet exposures as per Bangladesh Bank circulars (Note -3.16.1) and provision on investments has been presented separately as a liability in the financial statements.

ii) Other comprehensive income As per BAS 1 “Presentation of Financial Statements”, Other Comprehensive Income is a component of financial statements or the elements of Other Comprehensive Income (OCI) are to be included in a Single Statement of Comprehensive Income. Instead the Bank prepare it financial statements as per prescribed guidelines of Bangladesh Bank where there is no scope to include the OCI nor the elements of OCI in a single Profit & Loss Account. However elements of OCI, if any, are shown in the statements of changes in equity.

iii) Financial instruments - presentation and disclosure In several cases Bangladesh Bank guidelines categorize, recognize, measure and present financial instruments differently from those prescribed in BAS 39 “Financial Instruments: Recognition and Measurement”, BFRS 7 “Financial Instruments: Disclosures” and BAS 32 “Financial Instruments: Presentation”. In those cases Bangladesh Bank guidelines have been followed.

iv) Financial guarantees As per BAS 39 “Financial Instruments: Recognition and Measurement” financial guarantees are contracts that require an entity to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are recognized initially at their fair value, and the initial fair value is amortized over the life of the financial guarantee. Whereas as per Bangladesh Bank, financial guarantees such as Letter of Credit (L/C), Letter of Guarantee (L/G) should be treated as off-balance sheet items. No liability is recognized for the guarantee except the cash margin.

v) Cash flow statement As per BAS 7 “Statement of Cash Flows”, Cash flow statement can be prepared either in direct method or in indirect method. The presentation is selected to present these cash flows in a manner that is most appropriate for the business or industry. Bangladesh Bank guidelines have been followed instead of BAS 7.

vi) Balance with Bangladesh Bank Balance with Bangladesh Bank Principal Account as Cash Reserve Requirment (CRR) should be treated as other assets as it is not available for use in the day to day operations as per BAS 7 “Statement of Cash Flows”. But as per Bangladesh Bank guideline it has been treated as cash and cash equivalents.

Vii) Revenue As per BAS 18 “Revenue”, revenue should be recognized on accrual basis but due to the unique nature of Islamic Banks, income from investment under Mudaraba, Musharaka, Bai-Salam and Bai- as-Sarf modes is accounted for on realization basis as per AAOIFI and Bangladesh Bank guidelines.

[Note 4 includes Compliance with Financial Reporting Standards as applicable in Bangladesh] 2.1.1 Authorization of the financial statements for issue The consolidated financial statements and the separate financial statements of the Bank have been authorized for issue by the Board of Directors on 28 March 2013.

214 Annual Report 2012 2.1.2 New standards adopted but not yet effective A number of new International Financial Reporting Standards (IFRSs) have been adopted by The Institute of Chartered Accountants of Bangladesh (ICAB) as Bangladesh Financial Reporting Standards (BFRSs) which are effective on or after 01 January 2013 and hence not been applied in preparing these financial statements. The new BFRSs are as follows: BFRS 10 Consolidated Financial Statements BFRS 11 Joint Arrangements BFRS 12 Disclosure of Interests in Other Entities and BFRS 13 Fair Value Measurement BFRS 10 introduces a single control model to determine whether an investee should be consolidated. BFRS 11 is not expected to have any impact on the Bank, because it does not have interest in joint ventures. BFRS 12 brings together into a single standard all the disclosure requirements about an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. It requires the disclosure of information about the nature, risks and financial effects of these interests. BFRS 13 provides a single source of guidance on how fair value is measured, and replaces the fair value measurement guidance that is currently dispersed throughout BFRSs. 2.2 Basis of measurement The financial statements have been prepared on the historical cost basis except for the following material items: - Land is recognized at cost at the time of acquisition and subsequently measured at fair value following revaluation model as per BAS 16 “Property Plant & Equipment”. - Investments in quoted shares are revalued at the year end at market price as per Bangladesh Bank circular. 2.3 Functional and presentation currency The consolidated financial statements and the separate financial statements of the Bank are presented in Bangladeshi Taka (Taka/Tk./BDT) which is the functional currency of the Bank and its subsidiaries except Off-shore Banking Unit (OBU) where functional currency is US Dollar (USD). All financial information presented in Taka has been rounded to the nearest integer, except when otherwise indicated. 2.4 Use of estimates and judgments The preparation of the consolidated financial statements and the separate financial statements of the Bank in conformity with BFRSs require management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future period affected. Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized and presented in the consolidated financial statements and the separate financial statements of the Bank are included in following notes/ statements: a) Note 19.6 Current tax liabilities b) Note 20.0 Deferred tax liabilities c) Note 35.0 Depreciation d) Note 19.2-19.5 Provisions for investments and other assets e) Note 23.1 Asset revaluation reserve f) Liquidity statement Assets & liabilities analysis

Annual Report 2012 215 2.5 Cash flow statement Cash Flow Statement is prepared in accordance with BAS 7 “Statement of Cash Flows”, and as per “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated 09.11.2009 and BRPD Circular No.14 dated 25.06.2003. The Statement shows the structure of changes in cash and cash equivalents during the financial year. 2.6 Statement of changes in equity Statement of Changes in Equity has been prepared in accordance with BAS 1 “Presentation of Financial Statements”, and as per “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated 09.11.2009 and BRPD Circular No.14 dated 25.06.2003. 2.7 Liquidity statement Liquidity Statement has been prepared in accordance with the residual/remaining maturity of Assets and Liabilities as on 31 December 2012 and as per “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated 09.11.2009 and BRPD Circular No.14 dated 25.06.2003 as per the following basis: i) Balance with other banks and financial institutions, etc are on the basis of their respective maturity term; ii) Investments in shares & securities are on the basis of their respective maturity; iii) General investments are on the basis of their recovery/repayment schedule; iv) Fixed assets are on the basis of their useful lives; v) Other assets are on the basis of their realization/amortization; vi) Deposits and other accounts are on the basis of their maturity and payments; vii) Provisions and other liabilities are on the basis of their adjustment/settlement; viii) Due to perpetual in nature/maturity, Mudaraba perpetual bond (MPB) is reported under maturity more than 5 (five) years. 2.8 Reporting period These financial statements of the Bank and its subsidiaries cover one calendar year from 1 January 2012 to 31 December 2012.

3.0 Significant accounting policies The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial statements and the separate financial statements of the Bank (together referred to as ‘financial statements’) except provision for investment which have been changed due to new circular issued by Bangladesh Bank (Note 3.16.1). Certain comparative amounts in the financial statements have reclassified and rearranged to conform to the current year’s presentation. 3.1 Basis of consolidation 3.1.1 Subsidiaries Subsidiaries are entities controlled by the Parent. Control exists when the Parent has the power to govern the financial and operating policies of an entity, so as to obtain economic benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. 3.1.2 Transactions eliminated on consolidation Inter-company balances and transactions, and any unrealized income and expenses (except for foreign currency transaction gains and losses) arising from inter-company transactions are eliminated in preparing consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. The investments in shares of subsidiaries held by the Bank in the separate financial statements are eliminated against the corresponding share capital of subsidiaries in the consolidated financial statements.

216 Annual Report 2012 3.2 Foreign currency 3.2.1 Foreign currency transactions Transactions in foreign currencies are translated into the respective functional currencies (Bangladeshi Taka in case of IBBL Main Operations and US Dollar in case of OBU) at the spot exchange rates ruling at the date of transactions as per BAS 21 “The Effects of Changes in Foreign Exchange Rates”. Monetary assets and liabilities held in US Dollar at the reporting date are retranslated into the functional currency in BDT at the weighted average revaluation rate of inter-bank market as determined by Bangladesh Bank. Monetary assets and liabilities denominated in other foreign currencies at the reporting date are first translated into US Dollar at buying rates of New York closing of the previous day and then retranslated from US Dollar into the functional currencies in the same specified above. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction. Foreign exchange differences (rates at which transactions were initially recorded and the rate prevailing on the reporting date/date of settlements) of the monetary items are recognized in the profit and loss.

3.2.2 Foreign operations The assets and liabilities of foreign operations (Note - 1.3) are translated to Bangladeshi Taka at spot exchange rates prevailing at the reporting date. The income and expenses of foreign operations are translated at spot exchange rates at the date of transactions as long as practicable otherwise average rate of exchange has been used. Foreign currency differences arising on translation are recognized in other comprehensive income and presented in the foreign currency translation reserve (translation reserve) in equity.

3.3 Revenue 3.3.1 Investment income Income from general investments is accounted for on accrual basis except investments under Musharaka, Mudaraba, Bai-Salam and Bai-as-Sarf modes of Investment. Income from investment under Mudaraba, Musharaka, Bai-Salam and Bai-as-Sarf modes is accounted for on realization basis. Besides, fees and commission income are recognized when earned. The Bank does not charge any rent during the gestation/ interim period of investment against Hire Purchase under Shirkatul Melk (HPSM) mode of investment but it fixes the sale price of the assets at a higher level in such a way to cover its expected rate of return. Such income is recognized on realization basis. Profit/Rent/Compensation accrued on Special Mention Account and Classified Investments are suspended and accounted for as per circulars issued by the Bangladesh Bank in this regard from time to time. Profit on deposits with other banks & financial institutions is accounted for on accrual basis. 3.3.1.1 Sharing of investment income In case of investment, Mudaraba fund gets preference over cost free fund. The investment income earned through deployment of Mudaraba Fund is shared by the Bank and the Mudaraba depositors at the pre-agreed ratio.

3.3.2 Income from investment in Bangladesh Government Islamic Investment Bond (BGIIB) & Islamic Inter- bank Fund Market (IIFM) Profit from investment in Bangladesh Government Islamic Investment Bond (BGIIB) & Islamic Inter-bank Fund Market (IIFM) is accounted for on accrual basis.

3.3.3 Fees, commission and exchange income Fees, Commission and Exchange Income on services provided by the Bank are recognized as and when the related services are performed. Commission charged to customers on letter of credit and letter of guarantee are credited to Income at the time of effecting the transactions.

Annual Report 2012 217 3.3.4 Dividend income Dividend income from investments is accounted for when the right to receive income is established. 3.4 Income tax expenses Income tax expenses comprise current and deferred taxes. Income taxes are recognized in profit or loss except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity. 3.4.1 Current tax Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the reporting date and any adjustment to the tax payable in respect of previous years. Provision for current income tax has been made on taxable income of the Bank as per following rates:

Type of income 2012 2011 Business income 42.50% 42.50% Dividend income 20.00% 20.00%

3.4.2 Deferred tax Deferred tax is recognized in compliance with BAS 12 “Income Taxes” and BRPD Circular no. 11 dated 12 December 2011, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the date of balance sheet. Deferred tax assets and liabilities are offset as there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the deductible temporary difference can be utilized. Deferred tax assets are reviewed at each date of balance sheet and are reduced to the extent that it is no longer probable that the related tax benefit will be realized. 3.5 Zakat Zakat is paid by the Bank at the rate of 2.58% (instead of 2.50% as the Bank maintains its financial statements following Gregorian Year) and calculated on the closing balances of Share Premium, Statutory Reserve, General Reserve and Dividend Equalization Accounts as per guidelines of AAOIFI, Shari‘ah Supervisory Committee and Banglades Bank guidelines. Zakat is charged in the Profit & Loss Account of the Bank as per “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated 09.11.2009 and guidelines of AAOIFI. Zakat on Paid up Capital and Deposits is not paid by the Bank, since it is the responsibility of the Shareholders and Depositors respectively. 3.5.1 Management and other expenses Expenses incurred by the Bank are recognized on accrual basis. 3.6 Cash and cash equivalents Cash and cash equivalents include notes and coins in hand, balances held with Bangladesh Bank and its agent bank and highly liquid financial assets that are subject to an insignificant risk of changes in their fair value. 3.7 Investments Investments are stated in the Balance Sheet net off profit receivable and unearned income. Profit Receivable – the amount of unexpired portion of profit charged on murabaha investment at the time of sale of good/ services to customer/ client. Unearned Income- the amount of unrealized portion of profit/ value addition of fixed assets under Hire Purchase Under Shirkatul Melk (HPSM) investment for gestation period. However, provision for investments are not net-off with investments.

218 Annual Report 2012 3.8 Investment in shares and securities Investments in share and securities (other than government treasury securities) are initially measured at fair value (which is actually the cost) and subsequently accounted for depending on their classification as either held to maturity, fair value through profit or loss, or available for sale. Investment in Bangladesh Government Islamic Investment Bond (BGIIB) is measured both initially and subsequently at cost, which is also the fair value. IBBL can not invest in interest-based government securities like T-bond, T-bill etc. So the instructions and circulars related to accounting for those instruments are not applicable for the Bank. 3.8.1 Held to Maturity (HTM) Held-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the entity has the positive intent and ability to hold to maturity, and which are not designated as at fair value through profit or loss or as available for sale. These are measured at amortized cost at each year end by taking into account any discount or premium on acquisition. Any increase or decrease in value of such investments is recognized in equity. 3.8.2 Held for Trading (HFT)/Fair value through profit or loss (FVTPL) Some investment in shares and securities are designated at fair value, with fair value changes recognized immediately in profit or loss. 3.8.3 Available-for-sale (AFS) Available-for-sale investments are non-derivative investments that are designated as available-for-sale or are not classified as another category of financial assets. Available-for-sale investments comprise generally equity securities. Unquoted equity securities whose fair value cannot reliably be measured are carried at cost. All other available-for-sale investments are carried at fair value and changes recognized in equity (Note 3.18.5). Dividend income is recognized in profit or loss when the right to receive income is established. Other fair value changes, other than impairment losses are presented as reserve in equity. 3.9 Investment in subsidiaries Investments in subsidiaries are accounted for under cost method of accounting in the Bank’s Financial Statements in accordance with BAS 27 “Consolidated and Separate Financial Statements”. 3.10 Fixed assets 3.10.1 Recognition and measurement Items of fixed assets excluding land and building are measured at cost less accumulated depreciation and accumulated impairment losses. Land and building is recognized at cost at the time of acquisition and subsequently measured at revalued amounts which is the fair value at the time of revaluation done by independent valuer and any surplus on revaluation is shown as equity component until the disposal of asset, as per BAS 16 “Property, Plant & Equipment” and Bangladesh Bank BCD Circular Letter No. 12 & 18 dated 20 April 1993 & 15 June 1993 respectively and BRPD Circular No.10 dated 25 November 2002 & BRPD Circular No.09 dated 31 December 2008. Deficit arising on subsequent revaluation is adjusted against the balance in the Revaluation reserve account. Revaluation is carried out with sufficient regularity to ensure that the carrying amount of assets does not differ materially from their fair value. Cost includes expenditures that are directly attributable to the acquisition of assets. The cost of self- constructed assets includes the following:

- the cost of materials and direct labour;

- any other cost directly attributable to bringing the asset to a working condition for the intended use;

- when the Companies have an obligation to remove the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located; and

- capitalized borrowing costs.

Annual Report 2012 219 Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. Any gain or loss on disposal of an item of fixed assets (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss. 3.10.2 Subsequent costs Subsequent costs is capitalized only when it is probable that the future economic benefits associated with the costs will flow to the entity. Ongoing repairs and maintenance is expensed as incurred. 3.10.3 Depreciation Items of fixed assets are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. Depreciation is calculated to write-off the cost/revalued amount of items of fixed assets less their estimated residual values using either of straight-line (SLM) or reducing balance method (RBM) over their estimated useful lives and recognized in profit and loss. Land is not depreciated. The estimated rate of depreciation for the current and comparative years of fixed assets are as follows:

Items Method Rates Building Reducing balance 2.50% Furniture and fixtures -Do- 10.00% Mechanical appliances -Do- 20.00% Books -Do- 30.00% Motor vehicles Straight-line 20.00% Computers -Do- 25.00%

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

3.10.4 Capital work in progress Fixed assets that is being under construction/acquisition is accounted for as capital work in progress until construction/acquisition is completed and measured at cost. The work in progress is transferred to cost of that fixed assets when the construction is completed and it becomes available to use.

3.10.5 Derecognition An item of fixed assets is derecognized upon disposal or when no economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.

3.11 Lease payments Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease.

3.12 Other assets Other assets include all other financial assets, other income receivable, advance against expenses etc.

3.13 Non-banking assets Non-banking assets are acquired on account of the failure of a client to repay the investment in time after receiving the decree from the court regarding the right and title of the mortgaged property.

3.14 Impairment of non-financial assets The carrying amounts of the non-financial assets, other than investment property and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognized if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount.

220 Annual Report 2012 3.15 Deposits and other accounts Deposit and other accounts include Al Wadeeah current deposit as well as savings, term and other Mudaraba deposits. Deposits by customers and banks are recognized when the Bank enters into contractual agreements with the counterparties. These items are brought to Financial Statements at the gross value of the outstanding balance. 3.15.1 Profit paid on deposits As per Mudaraba principle, agreement between the Mudaraba depositors and the Bank, the Mudaraba depositors are entitled to get minimum 65% of the investment income earned through deployment of Mudaraba Fund as per weightage assigned to each type of Mudaraba deposit. In the year 2012, IBBL paid 70.04% of Investment Income earned through deployment of Mudaraba Fund. Moreover, in some Mudaraba Deposits, additional rate was allowed over the rate as per weightage. Mudaraba Depositors do not share any income derived from various banking services where the use of fund is not involved and any income derived from Investing Bank’s Equity and other Cost Free Fund. Al-Wadeeah Depositors do not share any income of the Bank. Profit is paid/provided to Mudaraba Deposit accounts at provisional rate on half-yearly/yearly basis considering overall growth, performance and profitability of the Bank during the year. Final Rates of profit of any accounting year are declared after finalization of Shari‘ah Inspection report and certifying the Investment Income of the Bank by the statutory auditors. 3.16 Provisions Provision is recognized if, as a result of a past event, the Companies has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits would be required to settle the obligation, in accordance with the BAS 37 “Provisions, Contingent Liabilities and Contingent Assets”. 3.16.1 Provision for investments and off-balance sheet exposures Provision for Investment for the year 2012 is made as per latest instruction of Bangladesh Bank through BRPD Circular No.14 dated 23 September 2012 and BRPD Circular No.19 dated 27 December 2012. However, provision for investment for previous year was made as per instruction of Bangladesh Bank through BCD Circular No.34 dated 16.11.1989, BCD Circular No.20 dated 27.12.1994, BCD Circular No.12 dated 04.09.1995, BRPD Circular No.16 dated 06.12.1998, BRPD Circular No. 09 dated 18.06.2002, BRPD Circular No. 05 dated 05.06.2006 and BRPD circular No. 32, dated 27.10.2010. Investments have not been classified against which order staying classification has been issued by the Hon’ble High Court. Provision for off-balance sheet exposures for the year 2012 is also made as per latest instruction of Bangladesh Bank through BRPD Circular No.14 dated 23 September 2012 and BRPD Circular No.19 dated 27 December 2012. However, the same for previous year was made as per BRPD circular No.08 dated 07.08.2007 and BRPD Circular No.10 dated 18.09.2007. The rates of provision for the year 2012 and 2011 are given below:

2012 2011 Particulars Classification UC SMA SS DF BL UC SMA SS DF BL Small and Medium Enterprise (SME) 0.25% 5% 20% 50% 100% 1% 5% 20% 50% 100% Financing Consumer Investment for House Building 2% 5% 20% 50% 100% 2% 5% 20% 50% 100% & Professional Other than House Building & 5% 5% 20% 50% 100% 5% 5% 20% 50% 100% Professional All Other (Except Short-term Agricultural and 1% 5% 20% 50% 100% 1% 5% 20% 50% 100% Micro-Credits) Short-term Agricultural and Micro-Credits 5% 100% 5% 100% Investment to Stock Dealers & Stock Broker 2% 2% Off Balance Sheet Items 1% 1%

Annual Report 2012 221 3.16.2 Provision for other assets Provision for other assets is made as per instruction of Bangladesh Bank through BRPD circular No.14 dated 25.06.2001.

3.16.3 Provision for nostro accounts Provision for nostro accounts is to be made on the unreconciled debit balance of nostro account over more than 3 months as on the reporting date in accordance with the guideline of Foreign Exchange Policy Department of Bangladesh Bank, FEPD Circular no. FEPD (FEMO) / 01/2005-677 dated 13 September 2005. There was no unreconciled entries outstanding for more than 3 months and no provision has been made in this regard.

3.17 Employee benefits The Bank provides various long-term and short-term benefits to the employees under different schemes.

3.17.1 Defined contribution plan A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plan are recognized as personnel expense in profit or loss inthe periods during which related services are rendered by employees. The Bank maintains one funded defined contribution plan for its employees - Provident fund. 3.17.1.1 Provident fund The Provident Fund is for the regular and confirmed employees who works for a minimum period of 5(five) years at IBBL and it came into force with effect from 1st day of March 1986. The fund receives contributions @ 10% of the basic pay both from employees and employer. Tk. 3,075.85 million was available in the IBBL Employees Provident Fund as at 31 December 2012.

3.17.2 Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Bank’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current andprior periods. The Bank has two funded defined benefit plans - Gratuity fund and Superannuation fund. 3.17.2.1 Gratuity fund The Gratuity Fund for the regular and confirmed employees of IBBL was established on 1st day of March 1986. The employees who serve at least 7 (seven) years at IBBL are normally entitled to get gratuity equivalent to 1(one) month’s basic pay. Employees served for minimum 12 years get 1.5 (one and a half) months’ basic pay and employees served for 20 years get 2 (two) months’ basic pay. The Fund balance stood at Tk.2,328.28 million as at 31 December 2012. Actuarial valuation of the gratuity fund was done up to the year 2010 by ACFIN (Actuarial & Financial Consultants). 3.17.2.2 Superannuation fund The Fund came into force with effect from the 19th June, 2008. It was established for financial help to the members of the IBBL Employees’ Superannuation Fund and their families in case of retirement, death, physical disability of employee while in service or of any incidence of like nature acceptable to the Board of Trustees and retirement from the service. Tk. 20 million has been provided by the Bank during the year 2012 to the Fund. The Fund balance was Tk. 367.28 million as at 31 December 2012. Actuarial valuation of the superannuation fund was done up to the year 2011 by ACFIN (Actuarial & Financial Consultants).

3.17.3 Short-term employee benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Companies has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

222 Annual Report 2012 3.17.4 Other employee benefits Other employee benefits include which are not included in short-term employee benefits, post-employment benefits and other termination benefits. 3.17.4.1 Benevolent fund The Benevolent Fund for the regular and confirmed employees of Islami Bank Bangladesh Limited was established in the year 1986. This Fund is mainly used for payment of scholarship to the meritorious students among the children of IBBL’s officers and sub-staff, to allow short term quard/grant to meet some unexpected and certain needs of the staff of IBBL like accident, clinical treatment, marriage ceremony of the employees and their dependents etc. Tk. 10.00 million has been provided by the Bank during the year 2012 to the Fund. The Fund balance was Tk. 124.93 million as at 31 December 2012. 3.18 Share capital and reserves 3.18.1 Capital 3.18.1.1 Authorized Capital Authorized Capital is the maximum amount of share capital that the Bank is authorized to raise as per its Memorandum and Articles of Association. 3.18.1.2 Paid-up Capital Paid-up Capital represents total amount of shareholders’ capital that has been paid in full by the shareholders. Shareholders are entitled to receive dividend as approved from time to time in the Annual General Meeting. 3.18.2 Share Premium Share premium arose from sale of some un-subscribed Right Share for the year 1996 at Market price and can be utilized as per section 57 of the Companies Act, 1994. 3.18.3 Statutory reserve As per section 24 of the Bank Company Act, 1991, at least 20% or more of the net profit before tax is transferred to statutory reserve every year. 3.18.4 Assets revaluation reserve This represents the difference between the book value and the re-valued amount of premises (Land and Building) of the Bank as assessed by professional valuers in the year 2000, 2002, 2003, 2004, 2005, 2006, 2009 and 2012 as per guideline issued by Bangladesh Bank, which was reviewed by the statutory auditors. This reserve is not distributable. However, to calculate Capital Adequacy Ratio (CAR), 50% of the same is considered as a component of supplementary capital as per Bangladesh Bank BCD Circular Letter No. 12 & 18 dated 20 April 1993 & 15 June 1993 respectively, BRPD Circular No.10 dated 25 November 2002, BRPD Circular No. 09 dated 31 December 2008 and BRPD Circular No. 24 dated 03 August 2010. 3.18.5 Revaluation reserve of securities Investment in shares of Bangladesh Shipping Corporation is held for fulfilment of Statutory Liquidity Reserve (SLR) as per Bangladesh Bank Letter No. BCD (P)744(23)(II)/1030 dated 08.11.1983, BRPD Circular No.15 dated 31.10.2005, DOS Circular Letter No.10 dated 11.09.2006, BRPD Circular No.03 dated 12.03.2008 and DOS Circular Letter No.05 dated 26.05.2008. The shares have been revalued as on 30.12.2012 on the basis of closing market price of Dhaka Stock Exchange Limited (DSE). The surplus is credited to Revaluation Reserve on securities account (Note - 3.8.3) and 50% of the same has been taken as a component of Supplementary Capital as per Bangladesh Bank BRPD Circular No.03 dated 12.03.2008 and BRPD Circular No.09 dated 31.12.2008 and shown in the Statement of Changes in Equity as on 31 December 2012 as per Bangladesh Bank guidelines. However, deficit arising on such revaluation is debited to Revaluation reserve on securities account. 3.18.6 Non-controlling interest Non-controlling interest is the portion of the profit or loss and net assets of the subsidiaries of IBBL (Islami Bank Securities Limited & Islami Bank Capital Management Limited) that is not owned by the Parent (IBBL). The magnitude of the non-controlling interest in the subsidiary Company is generally less than 50% of outstanding shares. It is, however, possible (e.g. through special voting rights) that a controlling interest

Annual Report 2012 223 requiring consolidation be achieved without exceeding 50% ownership as per the BAS 27 “Consolidated and Separate Financial Statements”. Non-controlling interest belongs to other investors and is reported on the consolidated balance sheet of the parent Company (IBBL) to reflect the claim on assets belonging to other, non-controlling shareholders. Also, non-controlling interest is reported on the consolidated profit and loss account as a share of profit belonging to non-controlling shareholders. 3.19 Subordinated debt-Mudaraba Perpetual Bond (MPB) Mudaraba Perpetual Bond (MPB) was issued by the Bank as per approval of Bangladesh Bank Letter No. BRPD (P-1)661/14(a)/2006-1437 dated 07.05.2006 and Securities and Exchange Commission Letter No. SEC/CI/CPLC-118/2006/385 & SEC/CI/RPO-01/2007/386 both dated 10.06.2007. It is treated as a component of Supplementary Capital as Subordinated Debt. The instrument having face value of Tk.1,000 each is subordinated to the claims of other creditors and depositors. In the case of liquidation the subordinated debt holders would be paid just before paying to the shareholders assuming there are assets to distribute after all other liabilities and debts have been paid. The Mudaraba Perpetual Bond (MPB) is perpetual in nature i.e. never ending maturity. 3.20 Other liabilities Other liabilities comprise items such as provision for investment, provision for taxes, profit/rent suspense, accrued expenses, etc. Other liabilities are recognized in the balance sheet as per guidelines of Bangladesh Bank, Bangladesh Financial Reporting Standards (BFRS) etc. 3.21 Contingent liabilities Any possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or Any present obligation that arises from past events but is not recognized because, it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, is considered as contingent liability. Contingent liabilities are not recognized but disclosed in the financial statements unless possibility of an outflow of resources embodying economic benefits is reliably estimated. Contingent assets are not recognized in the financial statements as this may result in the recognition of income which may never be realized. 3.22 Off-balance sheet items Off-balance sheet items are disclosed under Contingent liabilities & other commitments and required provision on Off-balance sheet exposures have been made in accordance with Bangladesh Bank guidelines (Note 3.16.1). 3.23 Earnings per share (EPS) The Bank presents basic and diluted (when dilution is applicable) earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bank with the weighted average number of ordinary shares outstanding during the period, adjusted for the effect of change in number of shares for bonus issue, share split and reverse split. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares. However, dilution of EPS is not applicable for these financial statements as there was no dilutive potential ordinary shares during the relevant periods. Hence no Diluted EPS has been calculated. Consolidated basic EPS has also been calculated and presented in the same manner. 3.24 Segment reporting An operating segment is a component of the Bank that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Bank’s other components. All operating segments’ operating results are reviewed regularly by the Bank’s Management (as being the chief operating decision maker) to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

224 Annual Report 2012 Segment results that are reported to the Managment include items directly attributable to a segment as well as the items that can be allocated on a reasonable basis. Details about segment reporting has been given at Annexure - D 3.25 Off-setting The value of any asset or liability as shown in the balance sheet is not off-set by way of deduction from another liability or assets unless there exist legal right thereof. Financial assets and financial liabilities are offset and the net amount is presented in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. 3.26 Materiality and aggregation Each material class of similar items is presented separately in the financial statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by BAS 1 “Presentation of Financial Statements”. 3.27 Inter-branch transactions Transactions with regard to inter branches are reconciled regularly and there is no difference in this account as on 31 December 2012. 3.28 Revenue, gains, expenses & losses prohibited by Shari‘ah Income which is irregular (doubtful) as per Shari‘ah is not included in the distributable income of the Bank. Bank charges compensation on overdue Bai-Murabaha and Bai-Muazzal investments. Such compensation is also not included in the distributable income of the Bank. The total amount of doubtful income and compensation are included in investment income and temporarily used to create provision for bad and doubtful investments as per decision of Shari‘ah Supervisory Committee. Since doubtful income and compensation are included in investment income, applicable income tax on these items is duly paid to the Govt. account. However, realized amount of doubtful income and compensation are transferred/utilized for charitable purposes. Interest received from the balances held with foreign banks and from foreign currency clearing account with Bangladesh Bank are not credited to income, since it is not permissible as per Shari‘ah. These are transferred/utilized for charitable purposes after payment of income tax thereon. 3.29 Dividend payments Final dividend is recognized when it is approved by the shareholders in Annual General Meeting (AGM). The proposed dividend for the year 2012, therefore, has not been recognized as a liability however disclosed in the balance sheet in accordance with BAS 10 “Events after the Reporting Period”. Dividend payable to the Bank’s shareholders is recognized as a liability and deducted from the shareholders’ equity in the period in which the shareholders’ right to receive the payment is established. 3.30 Events after the reporting period All material events after the reporting period that provide additional information about the Companies’/Bank’s position at the balance sheet date are reflected in the financial statements as per BAS 10 “Events after the Reporting Period”. Events after the reporting period that are not adjusting events are disclosed in the notes when material. 3.31 Risk management The risk of a bank is defined as the possibility of losses, financial or otherwise. The Risk Management of the Bank covers 6 (six) Core Risk Areas of Banking industry i.e. Investment (Credit) Risk Management, Foreign Exchange Risk Management, Asset-Liability Management, Prevention of Money Laundering, Internal Control & Compliance Risk Management and Information & Communication Technology Risk Management. The risk management procedures in the core risk areas has been devised in line with the core risk management guideline of Bangladesh Bank. As per instruction of Bangladesh Bank, IBBL formed a Risk Management Wing (RMW) to formulate risk assessment and management policies, methodologies, guidelines and procedures for risk identification, risk measurement, risk monitoring, deciding acceptable level of risk and risk controlling.

Annual Report 2012 225 The prime objective of the Risk Management Wing is that the Bank takes well calculative Business Risk Policy for safeguarding the Bank’s capital, its financial resources and profitability from various risks. In this context, the Bank implemented all the guidelines of Bangladesh Bank as under: 3.31.1 Investment (Credit) Risk Management Investment (Credit) risk is one of the major risks faced by the Bank. This can be described as potential loss arising from the failure of counter party to perform as per contractual agreement with the Bank. The failure may result from unwillingness or inability of the counter party in discharging his / her financial obligation. Therefore, Bank’s Investment (Credit) risk management activities have been designed to address all these issues. 3.31.2 Foreign Exchange Risk Management Foreign Exchange Risk is the current or prospective risk to earnings and capital arising from adverse movements in currency exchange rates. The Bank is exposed to profit rate risk and settlement risk on account of its foreign exchange business. Foreign Exchange business includes trading of foreign currency, purchase and sell of foreign currencies relating to import, export, remittances and other ancillary services. IBBL is dealing with a substantial volume of foreign trade and remittance business of the country which exposes the Bank to foreign exchange risk. IBBL has adopted foreign exchange risk manual through which the foreign exchange operation are dealt with. Foreign Exchange risks are measured and monitored by the Treasury Division. Treasury Division consists of separate Front Office, Back Office and Mid Office. The Treasury Front Office (Dealing Room) independently performs the deals and the Treasury Back Office is responsible for verification of the deals and passing of their entries in the books of account. The Foreign Exchange Risk is minimized through proper market analysis, real time pricing of Foreign Exchange, fixation of different market related limits (daylight, overnight, stop loss and management action trigger) and counter parties credit limits set by the management and ensure adherence to the limits by the Treasury Front Office. All Foreign Exchange transactions are revalued at weighted average exchange rate as provided by Bangladesh Bank at the end of each month. All Nostro Accounts are reconciled regularly and outstanding entries are reviewed by the management for its settlement/recompilation. The open position maintained by the bank at the end of the day is within the stipulated limit prescribed by the Bangladesh Bank. Treasury Front Office (Dealing Room) independently performs the deals and the Treasury Back Office is responsible for verification of the deals and passing of their entries in the books of accounts. All foreign exchange transactions are revalued at weighted average exchange rate as provided by Bangladesh Bank at the end of each month. All Nostro accounts are reconciled on a monthly basis and outstanding beyond 30 days is reviewed by the Management for its settlements/ reconciliation. 3.31.3 Asset Liability Management The Asset Liability Committee (ALCO) of the Bank monitors balance sheet risk, liquidity risks, investment deposit ratio (IDR), deposit mix, investment mix, gap analysis etc under the leadership of MD/CEO of the Bank. The Balance Sheet risk is defined as potential change in earnings due to change in rate of profit, foreign exchange rates which are not trading nature. Asset Liability Committee (ALCO) reviews liquidity requirement of the Bank, the maturity of assets and liabilities, deposit and investment pricing strategy, sensitivity of assets and liabilities, management indicators/ratios and the liquidity contingency plan. The primary objective of the ALCO is to monitor and avert significant volatility in Net Investment Income (NII), investment value and exchange earnings. 3.31.4 Prevention of Money Laundering Anti Money Laundering risk is defined as the loss of reputation and expenses incurred as penalty for being negligent in prevention of money laundering. For mitigating the risks, the Bank has formed 05(five) members Central Compliance Unit (CCU) under the leadership of the Chief Anti Money Laundering Compliance Officer (CAMLCO) at Head Office. Anti Money Laundering Compliance Units are also functioning at Zonal Offices and Branches, where the transactions of the accounts are independently reviewed to verify Suspicious Transaction Reports (STRs). A Manual for prevention of money laundering was developed and approved by the Board of Directors. IBBL has introduced (a) Uniform Account Opening Form (AOF), (b) Know Your Customer (KYC) Profile and (c) Transaction Profile (TP) in the Bank as per instructions of Bangladesh Bank.

226 Annual Report 2012 IBBL had already issued 61 (Sixty One) circulars providing necessary instructions for Prevention of Money Laundering activities and also for combating of Financial Terrorism.

Moreover, IBBL had conducted a good number of training sessions/workshops to create awareness and development of the skill of the officials for identifying suspicious transactions. IBBL introduced a Policy Guideline to combat terrorist financing in the light of Anti Terrorism Act (Amendment) Act, 2012 coupled with the Money Laundering Prevention Act- 2012 approved by the Board of Directors of the Bank.

IBBL has exclusively completed the KYC procedures of Legacy Accounts (accounts opened before 30 April 2002). To establish fruitful Anti Money Laundering drive at branch level, IBBL introduced AML Rating systems such as excellent/good/satisfactory/marginal through self Assessment Report & Independent Testing Procedure as per instruction of Bangladesh Bank.

3.31.5 Internal Control and Compliance Operational loss may arise from errors and frauds due to lack of internal control and compliance. With a view to overcome such lapses and verification of Asset quality, quality of customer’s service, overall security arrangement operational efficiency and regulatory issues as guided through different circulars, manuals from Head Office and other regulatory bodies, Bank organize its management through Internal Control & Compliance Wing (ICCW). ICCW consists of three Divisions namely (1) Audit & Inspection Division, (2) Compliance Division and (3) Monitoring Division to develop sound, sustainable and secured growth of the Bank.

(1) Audit & Inspection Division

Internal Audit and Inspection Division undertakes periodical and special audit of the Branches, Divisions and Departments of Head Office to review operational effectiveness and internal & external compliance requirements. Bank has introduced Risk Based Internal Audit and grading of the branches. The Audit Committee of the Board subsequently review the lapses identified by Audit and Inspection Division. The Audit Committee also review Bangladesh Bank Inspection Reports and other issues indicated in the Bangladesh Bank guidelines. Necessary steps/measures are taken on the basis of observation & suggestion of the Committee.

The Audit & Inspection Division conducts investigations against complaints received from customers, anonymous person, management & others and submits the reports to the competent authority. Periodical Inspection reports of Zonal Heads, Shari‘ah Inspections & Branch Manager’s self Audit reports are reviewed by the Division regularly and necessary guidance and suggestion are given with continuous follow-up there against.

(2) Compliance Division The Compliance Division handles the ‘regulatory issues of Bangladesh Bank as well as other regulatory bodies’ and submits ‘status report on regulatory compliance’ quarterly to the Audit Committee as per BRPD Circular No.12 dated 23.12.2002.

The Compliance Division ensures the Bank complies with all regulatory requirements while conducting its day to day business. The Compliance Division maintains liaison with the regulatory bodies for any regulatory changes and notify the same to all concerned.

(3) Monitoring Division This division performs the following:

i) Assesses the risk of the functional areas of the Branches described in the Departmental Control Function Checklist (DCFCL) and determines the frequency of Audit/Inspection of the branches based on the gravity of risks involved.

ii) Monitors the Internal Control Functions through the Quarterly Operations Report (QOR) and other mechanisms.

iii) Checks the Completion of Investment Documentation.

Annual Report 2012 227 3.31.6 Information and Communication Technology Risk Management The Bank has adequately addressed Information and Communication Technology (ICT) Risk Management. It is an in-depth exercise and continual process. The (ICT) Risk Management exercise mainly includes minimizing financial and image loss to the institution in all events such as natural disasters, technological failures, human errors etc. The Bank uses own developed Core Banking Software to perform all types of transactions including local/ online/ internet in a secured way. To take care of its core banking system, a separate security module has been incorporated in the software which manages different roles for different users. All financial transactions can be tracked for future audit purposes. The Bank uses Central Data Centre to replicate transactions in branches in case of data failure or inconsistencies. Data travelling through network uses encryption and decryption mechanism. In line with the Bangladesh Bank directives, the bank has approved its own ICT, policies for its operations and services. Under these policy guidelines, a security policy has also been worked out. To abide by and adhere to what is laid down in the policy; the implementation has been made through Active Directory Services (ADS), Password Policy, Kerberos Policy, Audit Policy, Group Policy, User Rights, Permission Policy etc. In order to secure network resources from public network, the Bank has introduced Virtual Private Network (VPN), Access Control List (ACL), IP filtering and TCP/UDP service blocking through router and firewall devices. It has already centralized the administrative control to access the network, mailing system and internet. IBBL has introduced Business Continuity Plan (BCP) for its entire network and trained the officials to cope up with any contingencies. 3.32 Credit rating report Credit Rating Information and Services Ltd. CRISL (a joint venture rating agency of Rating Agency Malaysia Berhad (RAM), JCR-VIS Credit Rating Company Ltd., Pakistan, Prime Commercial Bank Ltd., Pakistan and Local Corporate/ Sponsors, Bangladesh) was engaged by the Bank for the purpose of rating the Bank since 2002 as per Bangladesh Bank BRPD Circular No.06 dated 5 July 2006. CRISL assigned AA+ rating in the long term (indicates high safety and high credit quality) and ST-1 in the short term (highest certainty of timely repayment) to IBBL based on the financials up to 31 December 2011. 3.33 Regulatory and legal compliance Among others, the Bank complied with the requirements of the following circular, rules and regulations: a) The Bank Company Act, 1991 b) The Companies Act, 1994 c) BRPD Circular No. 14 dated 25.06.2003 and “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated 09.11.2009 d) Other circulars, rules and regulations issued by Bangladesh Bank from time to time e) The Securities and Exchange Rules, 1987 f) The Securities and Exchange Ordinance, 1969 g) The Securities and Exchange Commission Act, 1993 h) Income Tax Ordinance, 1984 i) VAT Act, 1991 j) Standards issued by AAOIFI k) The Stamp Act-1899 l) The Customs Act-1969 m) The Money Laundering Prevention Act, 2012 n) The Anti Terrorism (Amendment) Act, 2012 etc.

228 Annual Report 2012 4.0 Compliance with Financial Reporting Standards as applicable in Bangladesh The Companies/Bank complied, as per Para 12 of Securities & Exchange Rule 1987, with the following Bangladesh Accounting Standards (BASs) and Bangladesh Financial Reporting Standards (BFRSs) as adopted by Institute of Chartered Accountants of Bangladesh (ICAB) in preparing the financial statements of IBBL, subject to departure described in note - 2.1, where we have followed Bangladesh Bank guidelines:

Sl. BFRS BFRS Title Compliance Status No. No. 1 1 First-time adoption of International Financial Reporting Standards Not Applicable

2 2 Share-based Payment Not Applicable

3 3 Business Combinations Not Applicable

4 4 Insurance Contracts Not Applicable

5 5 Non-current Assets Held for Sale and Discontinued Operations Not Applicable

6 6 Exploration for and Evaluation of Mineral Resources Not Applicable

7 7 Financial Instruments: Disclosures Complied

8 8 Operating Segments Complied

9 10 Consolidated Financial Statements Not yet effective, effective from 1 January 2013 10 11 Joint Arrangements Do

11 12 Disclosure of Interests in other Entities Do

12 13 Fair Value Measurement Do

Sl. BAS BAS Title Compliance No. No. Status 1 1 Presentation of Financial Statements Complied

2 2 Inventories Not Applicable

3 7 Statement of Cash Flows Complied

4 8 Accounting Policies, Changes in Accounting Estimates and Errors Complied

5 10 Events after the Reporting Period Complied

6 11 Construction Contracts Not Applicable

7 12 Income Taxes Complied

8 16 Property, Plant & Equipment Complied

9 17 Leases Complied

10 18 Revenue Complied

11 19 Employee Benefits Complied

12 20 Accounting for Government Grants and Disclosure of Government Assistance Not Applicable

13 21 The Effects of Changes in Foreign Exchange Rates Complied

14 23 Borrowing Costs Not Applicable

15 24 Related Party Disclosures Complied

16 26 Accounting and Reporting by Retirement Benefit Plans Not Applicable

17 27 Consolidated and Separate Financial Statements Complied

Annual Report 2012 229 Sl. BAS Compliance BAS Title No. No. Status 18 28 Investments in Associates Not Applicable

19 31 Interest in Joint Ventures Not Applicable

20 32 Financial Instruments: Presentation Complied

21 33 Earnings per Share Complied

22 34 Interim Financial Reporting Complied

23 36 Impairment of Assets Complied

24 37 Provisions, Contingent Liabilities and Contingent Assets Complied

25 38 Intangible Assets Complied

26 39 Financial Instruments: Recognition and Measurement Complied

27 40 Investment Property Not Applicable

28 41 Agriculture Not Applicable

5.0 Audit committee As per Bangladesh Bank BRPD circular No.12 dated 23 December 2002, the Audit Committee was formed by the Board of Directors of the Bank consisting of the Board Members. As at 31 December 2012 the following directors were the members of the Audit Committee:

Sl. Status with the Status with Name of the Member Educational Qualification No. Bank the Committee 1 Prof. NRM Borhan Uddin, Independent Chairman B.Com (Hon’s), M.Com Ph.D. Director (Management) C.U. MBA, M.S, Ph.D (USA) 2 Janab Md. Abdus Salam, Depositor Director Member B.Com (Hon’s), M.Com (Accounting) FCA, FCS D.U, FCA, FCS 3 Janab Mohamad Adnan Midani Foreign Director Member Bachelor in Commerce, Graduate Diploma in Accounting, Chartered Accountant (Canada) 4 Janab Humayun Bokhteyar, Depositor Director Member B.Com (Hon’s), M.Com (Accounting), ACPA, FCA ACPA, FCA

Audit Committee of the Board met in 22 occasions in the year 2012. They met in 04 occasions regarding finalization of financial statements for the year 2012 with the Senior Management of the Bank in which among others, the following issues were discussed:

(i) The Committee examined the financial statements of 2012 of the Bank to see whether allthe disclosures and information have been incorporated in the financial statements & whether the Bank followed Bangladesh Financial Reporting Standards (BFRSs) and other procedures in preparing financial statements.

(ii) In finalizing the financial statements for the year 2012, several alternatives and various pertinent issues, such as impact of doubtful income, dividend, compensation, profit paid on deposits (PPD), Capital Adequacy Ratio (CAR) & Risk Weighted Assets (RWA) etc. were considered by the Audit Committee.

(iii) The Committee discussed the management letter issued by the external auditors and details Inspection Report submitted by Bangladesh Bank, compliance status of those reports, internal check & control systems and provided appropriate guidelines to the Management for overall improvement of the Management and Accounting system and minimization of various types of risks.

230 Annual Report 2012 (iv) Like previous years, the Committee also exchanged views with the statutory auditors and management of the Bank before finalization of the financial statements of the Bank.

6.0 Related party disclosures As per BAS 24 “Related Party Disclosures”, a related party is a person or entity that is related to the entity (i.e. IBBL) that is preparing its financial statements. Related party transaction is a transfer of resources, services, or obligations between a reporting entity and a related party, regardless of whether a price is charged as per BAS 24.

Related Parties include the Bank’s Directors, key management personnel, associates, companies under common directorship etc. as per BAS 24 “Related Party Disclosures”. All transactions involving related parties arising in the normal course of business are conducted at arm’s length at normal commercial rates on the same terms and conditions as third party transactions using valuation modes, as admissible.

6.1 Name of the Directors along with all related Firms/ Companies/ Institutions/Parties as at 31 December 2012:

Sl. Status with the Name of the related Firms/ Name of the Directors Remarks No Bank Companies/Institutions/Parties etc. 1 Prof. Abu Nasser Muhammad Abduz Chairman Representative of IBN Sina Zaher Pharmaceutical Ind. Ltd, The Ibn Sina Trust, Manarat Trust and Fouad Abdul Hameed Al-Khateeb Foundation. 2 Jb. Yousif Abdullah Al – Rajhi Vice – Chairman Not applicable Foreign Director 3 Engr. Mustafa Anwar Vice – Chairman Birds Garments Ltd. and Representative of the Public Institution for Social Security, Kuwait . 4 Jb. Mohammad Abdullah Al Jalahma Director Representative of Kuwait Awqaf Foreign Director Public Foundation 5 Jb. Mohamad Adnan Midani Director Representative of Islamic Development Foreign Director Bank, K S A. 6 Jb. Md. Abul Hossain Director Representative of Investment Corporation of Bangladesh. 7 Engr. Md. Eskander Ali Khan Director KEARI Limited & Diganta Media Corporation Limited 8 Dr. Abdulhameed Fouad Al-Khateeb Director Representative of Arabsas Travel & Foreign Director Tourist Agency, KSA. 9 Jb. Abdullah Abdul Aziz- Al -Rajhi Director Not applicable Foreign Director 10 Jb. Salauddin Ahmed Director Representative of Kuwait Finance Foreign Director House, Kuwait. 11 Jb. Hafizul Islam Mian Director Representative of Islamic Education Society 12 Jb. Md. Shahidul Islam Director Not applicable 13 Jb. Mohammed Nazrul Islam Director Not applicable 14 Jb. Mominul Islam Patwary Director Not applicable 15 Prof. NRM Borhan Uddin Ph.D Independent Not applicable Director 16 Jb. Humayun Bokhteyar, ACPA, FCA Depositor Not applicable Director 17 Jb. Md. Abdus Salam, FCA, FCS Depositor Not applicable Director 18 Prof. Dr. A.K.M Sadrul Islam Independent Not applicable Director 19 Barrister Mohammed Belayet Hossain Independent Not applicable Director 20 Jb. Mohammad Abdul Mannan Managing Not applicable Ex-Officio Director Director

Annual Report 2012 231 6.2 Related party transactions

a) The Bank invested to the following Firms/ Trusts/ Individuals where the Directors of the Bank are related:

Relationship Outstanding Name of the Account/ SL. Name of the Direc- of the Director Classified (Million Taka) Firm/ Purpose No. tor with the Firm/ Position Trust etc. Trust etc. 2012 2011 1 Fouad Al-Khateeb Prof. Abu Nasser Director HPSM (Project) Un Classified 19.89 21.1 Hospital Muhammad Abduz Zaher (Chairman) 2 Ibn Sina Trust Prof. Abu Nasser Guarantor Purchase of - do- 461.81 516.1 Muhammad Abduz House, BMRE Zaher (Chairman) & Import of Machinery 3 Mrs. Shahanara Engr. Md. Eskander Husband Housing - do- 1.84 2.03 Begum Ali Khan (Director) 4 Mohammad Abdul Jb. Mohammad Abdul Himself Housing - do- 3.26 3.41 Mannan Mannan Managing Director & Ex - Officio Director

(b) Other related parties

SL. Nature of Closing balance Name of the related party Nature of transaction No. relationship 2012 2011

1 Islami Bank Capital Management Limited Subsidiary Bank balance 558,782 8,251,271

2 Islami Bank Securities Limited Subsidiary Bank balance 107,079,309 24,315,605

3 Islami Bank Securities Limited Subsidiary Mudaraba investment Nil 50,382,297

(c) As per requirement of the Bank and with the approval of Board and Bangladesh Bank, 4800 sft floor space @ Tk.80.00 per sft per month (2nd & 3rd floor) and 96 sft at ground floor @ 120.00 per sft per month for ATM Booth have been hired with advance rent of Tk.1, 43, 42,400.00 only from wife of Janab Md. Shahidul Islam, one of the directors of the Bank situated at 36-37, Probal Housing Ltd. Adabar, Dhaka for premises of Mohammadpur Krishi Market Branch, Dhaka.

(d) Investment to related parties is effected as per requirement of section 27 of Bank Company Act, 1991.

(e) Share issued to Directors and Executives without consideration or exercisable at discount is Nil.

(f) Other disclosures are not applicable as required by BRPD Circular No. 14 dated 25 June, 2003 and BRPD Circular No. 15 dated 09 November, 2009.

232 Annual Report 2012 31.12.2012 31.12.2011

7.0 Cash in hand Taka Taka

Cash in hand (including foreign currency) (Note. 7.1) 6,308,271,684 4,655,980,193

Balance with Bangladesh Bank & its agent bank(s) (including foreign 35,465,737,963 35,975,917,284 currency) (Note. 7.2)

41,774,009,647 40,631,897,477

7.1 Cash in hand (including foreign currency) i) In local currency 6,258,670,140 4,636,830,566 ii) In foreign currency 49,601,544 19,149,627

6,308,271,684 4,655,980,193

7.2 Balance with Bangladesh Bank & its agent bank(s) (including foreign currency)

Balance with Bangladesh Bank (a)

In local currency 28,274,172,480 31,775,538,300

In foreign currency 5,519,323,733 2,224,285,040

33,793,496,213 33,999,823,340

Balance with Sonali Bank Ltd. (as agent of Bangladesh Bank) (b)

In local currency 1,672,241,750 1,976,093,944

In foreign currency - -

1,672,241,750 1,976,093,944

(a)+(b) 35,465,737,963 35,975,917,284

7.3 Cash Reserve Requirement (CRR) and Statutory Liquidity Ratio (SLR) have been calculated and maintained in accordance with the Section 25 & 33 of the Bank Company Act, 1991 and subsequent BRPD Circular No. 11 & 12, both dated August 25, 2005 & Bangladesh Bank MPD Circular No. 4 & 5 both dated 01 December 2010 and as per Bangladesh Bank’s Letter No. BCD (P) 744 (23)/ 5 dated 03 January 1987.

CRR of the Bank was 5.00% up to 14.05.2010 as per Bangladesh Bank Letter No. BCD(P)744(23)/ 5 dated 03 January 1987, 5.50% from 15.05.2010 to 14.12.2010 as per Bangladesh Bank Letter No. MPD/116/2010-604 dated 13.05.2010 and 6.00% from 15.12.2010 as per Bangladesh Bank MPD Circular No.4 dated 01 December 2010 on total Time & Demand Liabilities daily on bi-weekly average basis whereas CRR position should not be less than 5.50% in any day. As per guidelines given by Bangladesh Bank, IBBL maintained CRR above requirement throughout the year.

31.12.2012 31.12.2011

7.3.1 Cash Reserve Requirement (CRR) Taka Taka

Required Reserve (6.00% of average time and demand liabilities) 23,916,835,320 19,886,266,260

Actual reserve held with Bangladesh Bank (in local currency) 28,246,172,480 31,775,538,300

Surplus / (deficit) 4,329,337,160 11,889,272,040

Maintained (%) 7.09% 9.59%

7.4 Statutory Liquidity Ratio SLR of the Bank was 10.00% up to 14.05.2010 as per Bangladesh Bank Letter No. BCD(P)744(23)/ 5 dated 03 January 1987, 10.50% from 15.05.2010 to 14.12.2010 as per Bangladesh Bank Letter No. MPD/116/2010-604 dated 13.05.2010 and 11.50% from 15.12.2010 as per Bangladesh Bank MPD Circular No.05 dated 01 December 2010. The Bank maintained SLR above requirement throughout the year.

Annual Report 2012 233 31.12.2012 31.12.2011 7.4.1 Statutory Liquidity Ratio (SLR) Taka Taka

Required Reserve (11.50% of average time and demand liabilities) 45,840,601,000 38,115,344,000 Actual reserve maintained 59,715,385,914 52,290,512,437

Surplus / (deficit) 13,874,784,914 14,175,168,437 Maintained (%) 14.98% 15.78%

7.4.2 Components of Statutory Liquidity Ratio (SLR) Cash in hand including foreign currency 6,308,271,684 4,655,980,193 Balance with Bangladesh Bank & its agent bank 29,918,414,230 33,723,632,244

Unencumbered approved securities: Investment in shares of Bangladesh Shipping Corporation 54,700,000 110,900,000 Bangladesh Government Islamic Investment Bond 23,434,000,000 13,800,000,000

Total 59,715,385,914 52,290,512,437

7(a) Consolidated cash in hand i) Cash in hand (including foreign currency) 6,308,274,680 4,655,996,987 Islami Bank Bangladesh Limited 6,308,271,684 4,655,980,193 Islami Bank Securities Limited 2,996 16,372 Islami Bank Capital Management Limited - 422

ii) Balance with Bangladesh Bank & its agent bank(s) (including foreign 35,465,737,963 35,975,917,284 currency) Balance with Bangladesh Bank 33,793,496,213 33,999,823,340 Balance with Sonali Bank Ltd. (as agent of Bangladesh Bank) 1,672,241,750 1,976,093,944

Total (i+ii) 41,774,012,643 40,631,914,271

8.0 Balance with other banks & financial institutions In Bangladesh i) In current account 616,996,187 528,689,926 ii) In Mudaraba savings & MTDR account with other islamic banks / financial 15,338,980,745 11,335,682,893 institutions

Sub total (a) 15,955,976,932 11,864,372,819 Outside Bangladesh (Note 8.1) i) In current account 6,957,762,676 3,712,863,185 ii) In Mudaraba savings & MTDR account with other islamic banks / financial - - institutions iii) Balance with Offshore Banking Units (OBU) 134,608,599 73,471

Sub total (b) 7,092,371,275 3,712,936,656 Grand total (a+b) 23,048,348,207 15,577,309,475

234 Annual Report 2012 8.1 Currency-wise amount and exchange rate of Balance with other banks & financial institutions outside Bangladesh

Foreign currency Amount in F.C Exchange rate 2012 2011 US Dollar 69,181,628.61 79.8499 5,524,146,126 3,409,460,700 Great Britain Pound 783,979.70 129.1013 101,212,798 27,001,605 Saudi Riyal 440,340.83 21.2922 9,375,825 1,012,508 EURO 6,232,590.10 105.5695 657,971,421 191,234,926 YEN 33,297,184.00 0.9278 30,893,127 308,472 Canadian Dollar 94,156.23 80.1062 7,542,498 - Swiss Franc 40,339.53 87.4300 3,526,885 2,399,498 Singapore Dollar 2,273,005.58 65.2368 148,283,610 36,281,130 Australian Dollar 104,005.88 82.7804 8,609,648 17,265,264 ACU Dollar 7,524,234.06 79.8499 600,809,337 27,972,553 Total 7,092,371,275 3,712,936,656

31.12.2012 31.12.2011 8.2 Maturity - wise classification Taka Taka i) Repayable on demand 8,058,348,207 5,307,309,475 With a residual maturity of ii) Not more than 3 months 14,800,000,000 10,080,000,000 iii) Over 3 months but not more than 1 year 190,000,000 190,000,000 iv) Over 1 year but not more than 5 years - - v) More than 5 years - - Total 23,048,348,207 15,577,309,475

8(a) Consolidated Balance with other banks & financial institutions

Islami Bank Bangladesh Limited 23,048,348,207 15,577,309,475 Islami Bank Securities Limited 1,117,605,602 940,640,396 Islami Bank Capital Management Limited 358n,979,268 335,346,609 24,524,933,077 16,853,296,480

9.0 Investments in shares & securities

A. Year-2012 Face value as at Value as at No. of Particulars 31 Dec. 2012 31 Dec. 2012 Remarks share (Taka) (Taka) a) Government i) Bangladesh Shipping Corporation 200,000 20,000,000 54,700,000 Quoted ii) Karmasangsthan Bank 100,000 10,000,000 10,000,000 Un-Quoted iii) Central Depository Bangladesh Ltd. 1,827,777 6,277,770 6,277,770 Un-Quoted iv) Bangladesh Government Islamic 14 23,434,000,000 23,434,000,000 Un-Quoted Investment Bond (Islamic Bond) Total government (a) 2,127,791 23,470,277,770 23,504,977,770

Annual Report 2012 235 Face value as at Value as at No. of Particulars 31 Dec. 2012 31 Dec. 2012 Remarks share (Taka) (Taka) b) Subsidiary companies i) Islami Bank Securities Limited 2,699,946 2,699,946,000 2,699,946,000 Un-Quoted ii) Islami Bank Capital Management 299,993 299,993,000 299,993,000 Un-Quoted Limited Sub total (b) 2,999,939 2,999,939,000 2,999,939,000

c) Others i) Bangladesh Aroma Tea Ltd.* 1,570 157,000 157,000 De-listed ii) Investment in Financial Institutions & Investors Portfolio Management 500,000 5,000,000 5,000,000 Un-Quoted Co. Ltd. iii) Mudaraba Subordinated Debt of First 1,000 500,000,000 500,000,000 Un-Quoted Security Islami Bank Ltd. Sub total (c ) 502,570 505,157,000 505,157,000 Sub total others (b+c) 3,502,509 3,505,096,000 3,505,096,000 Current year grand total (a+b+c) 5,630,300 26,975,373,770 27,010,073,770

*100% provision was made against probable losses in shares of Bangladesh Aroma Tea Ltd.

B. Year-2011 Face value as at Value as at No. of Particulars 31 Dec. 2011 31 Dec. 2011 Remarks share (Taka) (Taka) a) Government i) Bangladesh Shipping Corporation 200,000 20,000,000 110,900,000 Quoted ii) Karmasangsthan Bank 100,000 10,000,000 10,000,000 Un-Quoted iii) Central Depository Bangladesh Ltd. 1,827,777 6,277,770 6,277,770 Un-Quoted iv) Bangladesh Government Islamic 9 13,800,000,000 13,800,000,000 Un-Quoted Investment Bond (Islamic Bond) Total government (a) 2,127,786 13,836,277,770 13,927,177,770

b) Subsidiary companies i) Islami Bank Securities Limited 2,699,946 2,699,946,000 2,699,946,000 Un-Quoted ii) Islami Bank Capital Management 299,993 299,993,000 299,993,000 Un-Quoted Limited Sub total (b) 2,999,939 2,999,939,000 2,999,939,000

c) Others i) Bangladesh Aroma Tea Ltd.* 1,570 157,000 157,000 De-listed ii) Investment in Financial Institutions & Investors Portfolio Management 500,000 5,000,000 5,000,000 Un-Quoted Co. Ltd. Sub total (c ) 501,570 5,157,000 5,157,000 Sub total other than Govt. (b+c) 3,501,509 3,005,096,000 3,005,096,000 Current year grand total (a+b+c) 5,629,295 16,841,373,770 16,932,273,770

*100% provision was made against probable losses in shares of Bangladesh Aroma Tea Ltd.

236 Annual Report 2012 9.1 Revaluation of shares & securities All Shares and Securities are shown at cost price other than the Shares of Bangladesh Shipping Corporation which have been recognized at closing market price as on 30.12.2012 of Dhaka Stock Exchange Ltd. (DSE) as per BRPD Circular No.14 dated 25.06.2003. 31.12.2012 31.12.2011 9.2 Maturity grouping of investments in shares & securities Taka Taka i) Repayable on demand - - With a residual maturity of ii) Not more than 3 months 4,054,700,000 - iii) Over 3 months but not more than 1 year 15,434,000,000 - iv) Over 1 year but not more than 5 years 4,000,000,000 13,800,000,000 v) More than 5 years 3,521,373,770 3,132,273,770 Total 27,010,073,770 16,932,273,770

9(a) Consolidated investments in shares & securities

Islami Bank Bangladesh Limited 24,010,134,770 13,932,334,770 Islami Bank Securities Limited 1,549,929,688 1,920,847,153 Islami Bank Capital Management Limited - - 25,560,064,458 15,853,181,923

10.0 Investments 372,920,722,887 305,840,563,170

10.1 Maturity-wise classification i) Repayable on demand - - With a residual maturity of ii) Not more than 3 months 105,104,746,825 21,106,240,983 iii) Over 3 months but not more than 1 year 108,070,736,432 175,593,775,942 iv) Over 1 year but not more than 5 years 82,343,342,943 39,231,017,419 v) More than 5 years 77,401,896,687 69,909,528,826 Total 372,920,722,887 305,840,563,170

10.2.1 Mode - wise investment a) In Bangladesh i) Bai - Murabaha 213,741,402,717 175,511,513,441 ii) Bai - Muajjal 17,806,978,467 13,185,804,874 iii) Hire Purchase under Shirkatul Melk 93,495,818,382 89,070,456,408 iv) Purchase & Negotiation 7,454,201,426 7,453,764,668 v) Bai- as- Sarf (FDB)/FCD 1,823,290,744 941,880,898 vi) Musharaka Documentary Bill (MDB) 13,224,692,617 9,533,150,083 vii) Musharaka 129,062,696 37,695,176 viii) Mudaraba/ Mudaraba Documentary Bills 9,938,781,687 58,727,487 ix) Bai - Salam 4,411,145,681 3,528,065,906 x) Murabaha Foreign Currency Investment 1,983,165,751 905,120,199 xi) Quard 8,912,182,719 5,614,384,030 Sub total (a) 372,920,722,887 305,840,563,170

Annual Report 2012 237 31.12.2012 31.12.2011

Taka Taka

b) Out side bangladesh

i) Bai - Murabaha - -

ii) Bai - Muajjal - -

iii) Hire Purchase under Shirkatul Melk - -

iv) Purchase & Negotiation - -

v) Bai- as- Sarf (FDB)/FCD - -

vi) Musharaka Documentary Bill (MDB) - -

vii) Musharaka - -

viii) Overseas Investment - -

ix) Bai - Salam - -

x) Quard - -

xi) Others - -

Sub total (b) - -

Grand total (a+b) 372,920,722,887 305,840,563,170

10.2.2 Geographical location wise classification of investments

i) Within Bangladesh

a. In rural areas 50,190,827,825 39,545,184,817

b. In urban areas 322,729,895,062 266,295,378,353

Sub total (a+b) 372,920,722,887 305,840,563,170

ii) Outside Bangladesh - -

Total (i + ii) 372,920,722,887 305,840,563,170

10.2.3 Division wise classification of investments

Name of the division

i) Dhaka division 213,608,990,006 183,456,543,045

ii) Chittagong division 81,072,965,129 61,255,402,347

iii) Khulna division 31,511,801,191 26,656,473,297

iv) Rajshahi division 28,304,682,858 12,989,780,538

v) Barisal division 3,729,207,227 2,774,654,622

vi) Sylhet division 7,160,077,877 5,867,105,666

vii) Rangpur division 7,532,998,599 12,840,603,655

Total 372,920,722,887 305,840,563,170

238 Annual Report 2012 10.3 Investment on the basis of significant concentration including bills 31.12.2012 31.12.2011 purchased and discounted Taka Taka a) Investment to directors 470,734,005 539,223,000 b) Investment to chief executive & other senior executives 583,464,569 520,138,000 c) Sector wise other investments: i) Trade & commerce 105,786,724,685 97,814,685,436 ii) Real estate 21,754,895,256 16,962,546,320 iii) Transport 6,449,044,943 6,464,232,625 iv) Agriculture (including fertilizer & agriculture implements) 26,713,440,000 21,353,825,365 v) Industrial investment 189,193,421,687 150,788,448,965 vi) Others 21,968,997,742 11,397,463,459 Total 372,920,722,887 305,840,563,170

10.3.1 Classification of industrial investments (v) i) Textile- spinning, weaving & dyeing 71,761,064,846 70,316,682,862 ii) Steel, re-rolling & engineering 21,946,436,916 7,103,203,502 iii) Agro-based industry 17,613,907,559 16,137,017,826 iv) Garments & garments accessories 13,092,184,781 10,533,257,130 v) Food & beverage 7,635,525,984 6,258,627,856 vi) Cements industry 1,854,095,533 1,965,206,224 vii) Pharmaceuticals 2,289,240,403 1,903,791,698 viii) Poultry, poultry feed & hatchery 624,338,292 934,685,749 ix) Sanitary wares 274,562,345 158,142,533 x) Chemicals, toiletries & petroleum 3,973,061,855 3,838,099,970 xi) Printing & packaging 3,329,783,018 2,729,330,343 xii) Power (electricity) 4,162,255,277 4,012,440,549 xiii) Ceramic & bricks 2,459,514,482 1,884,935,950 xiv) Health care ( hospital & others) 2,079,082,752 1,704,166,189 xv) Plastic industries 715,132,452 445,009,497 xvi) Petrol pump & CNG filling station 940,450,228 783,708,523 xvii) Information technology 549,745,695 - xviii) Hotel & restaurant 656,329,948 537,975,366 xix) Other industries 33,236,709,321 19,542,167,198 189,193,421,687 150,788,448,965

10.3.2 Details of investment to customers group (10.00% of equity and above) Number of clients with amount of sanctioned limit of investments exceeding 10.00% of total capital of the Bank & classified amount thereon are given below: Number of clients 14 13 Amount of investments 68,933,400,000 62,288,500,000 Classified amount thereon Nil Nil Measures taken for recovery Not Applicable Not Applicable Total capital of the Bank was Tk. 42,028.33 million as at 31 December 2012 (Tk. 33,716.73 million as on 31 December 2011).

(Taka in million)

Annual Report 2012 239 Sl. Sanctioned Outstanding as on 31.12.2012 Name of clients 2011 No. limit Funded Non-funded Total 1 S. Alam Super Edible Oil Ltd. 13,531.00 5,968.80 485.40 6,454.20 12,247.10 2 S. Alam Refined Sugar Industry Ltd. 10,825.00 6,377.10 8.50 6,385.60 10,447.60 3 Nassa Group 9,667.20 3,410.00 2,455.70 5,865.70 2,796.40 4 Zaber & Zubair Fabrics Ltd. 7,807.20 3,988.20 3,771.50 7,759.70 5,957.50 5 Abul Khair Steels Ltd. 7,653.90 3,848.60 50.10 3,898.70 5,847.60 6 Farzana Oil Refineries and its sister concern 7,500.00 3,789.00 2,814.40 6,603.40 1,731.70 7 Mosharaf and Brothers 6,901.10 3,529.90 - 3,529.90 - 8 Sheikh Brothers 5,900.00 4,395.80 1,144.30 5,540.10 - 9 Ananda Shipyard & Slipways Ltd. 5,885.00 4,391.40 - 4,391.40 5,188.40 10 Noapara Trading 4,949.10 2,563.20 1,582.80 4,146.00 - 11 Yunus Plastic Ind. Ltd. & its Sister concern 4,777.90 2,033.00 141.10 2,174.10 3,412.10 12 Abdul Monem Sugar Refinery Ltd. 4,472.00 3,361.00 2,440.30 5,801.30 4,390.10 13 The Delta Spinning Mills Ltd. 4,350.00 2,671.90 132.70 2,804.60 - 14 Mosharaf Composite Textile Mills Ltd. 4,230.00 3,529.90 48.80 3,578.70 3,801.30 15 S. Alam Vegetable Oil Ltd. and its sister concern 8,581.40 - - - 1,956.30 16 S. Alam Cold Rolled Steel Mills Ltd and its sister 4,585.30 - - - 2,191.40 concern 17 Energyprima Ltd. 3,822.80 - - - 2,321.00 Total 53,857.80 15,075.60 68,933.40 62,288.50

Sanctioned limit of Investment clients from serial no. 15 to 17 have not been shown under the large investments this year due to increase of Capital/ Equity of the Bank from Tk.33,716.73 million as on 31.12.2011 to Tk. 42,028.33 million as on 31.12.2012.

31.12.2012 31.12.2011 Taka Taka 10.4 Classification status - wise investments

Unclassified : i) Unclassified including staff investment 342,136,151,887 294,101,606,170 ii) Special mention account (SMA) 16,571,771,000 3,446,633,000 Total unclassified (i+ii) 358,707,922,887 297,548,239,170

Classified : iii) Substandard 2,094,313,000 3,152,326,000 iv) Doubtful 1,295,180,000 802,794,000 v) Bad and Loss 10,823,307,000 4,337,204,000 Total classified (iii+iv+v) 14,212,800,000 8,292,324,000 Grand total ( i to v) 372,920,722,887 305,840,563,170

10.5 Pledged collaterals against investments Land & building 406,212,673,667 342,497,619,606 MTDR, securities etc. 8,700,929,149 8,204,641,842 Share certificates 133,933,000 153,602,000 Total 415,047,535,816 350,855,863,448

240 Annual Report 2012 31.12.2012 31.12.2011 Taka Taka

10.6 Particulars of investments i) Investments considered good in respect of which the bank is fully secured 359,644,364,887 296,002,215,813 ii) Investments considered good in respect of which the Bank holds debtors’ - - personal security iii) Investments considered good and secured by personal security of one or 13,276,358,000 9,838,347,357 more persons in addition to personal security of debtors iv) Investments considered bad or doubtful not provided for - -

Total 372,920,722,887 305,840,563,170 v) Investments due by directors or employees of the bank or any of them either 6,807,607,013 4,623,123,923 severally or jointly with any other persons vi) Investments due by directors or employees of the bank are interested as 486,794,000 537,197,000 directors, partners, managing agents or in the case of private companies as members vii) Total amount of investments, including temporary investments, made any 6,807,607,013 4,623,123,923 time during the year to directors or employees of the bank or any of them either severally or jointly with any other persons viii) Total amount of investments, including temporary investments granted 486,794,000 537,197,000 during the year to the Companies or firms in which the directors of the bank are interested as directors, partners, managing agents or, in the case of private companies as members ix) Investments due from other banks - - x) Classified investments:

a) Classified investments on which compensation has not been charged 10,488,058,099 2,521,553,000 b) Provision for classified investments 6,054,350,000 3,054,000,000 c) Provision kept against investments classified as bad debts 5,480,005,979 2,419,253,000 d) Amount credited to profit/ rent /compensation suspense account 1,614,963,041 1,124,832,602 xi) Particulars of written off investments a) Cumulative amount of investment written off since inception to 31st 4,673,131,725 4,304,438,917 December last year b) Amount of investment written off during this year 475,804,996 368,692,808 c) Total amount written Off (a + b) 5,148,936,721 4,673,131,725 d) Amount recovered against written off investment up to this year (*) 1,239,122,544 1,131,240,213 e) Amount waived against written off investment up to this year (*) 892,321,422 816,541,212 f) Amount of investment written off against which suit has been filed to recover 5,148,936,721 4,673,131,725 the same * During the year of 2012, Tk.76,100,209/- was waived and Tk.107,882,331/- was recovered from the clients in cash from written off investments.

10(a) Consolidated general investments

Islami Bank Bangladesh Limited 340,479,756,413 287,861,385,224 Islami Bank Securities Limited - - Islami Bank Capital Management Limited - - 340,479,756,413 287,861,385,224

Annual Report 2012 241 11.0 Bills purchased & discounted 31.12.2012 31.12.2011 Taka Taka

i) Payable in Bangladesh 20,678,894,043 14,777,933,406 ii) a) Payable outside Bangladesh excluding OBUs 1,823,290,744 941,880,898 b) Payable outside Bangladesh -OBUs 9,938,781,687 2,208,981,345 Total (i+ii) 32,440,966,474 17,928,795,649

11(a) Consolidated bills purchased & discounted Islami Bank Bangladesh Limited 32,440,966,474 17,928,795,649 Islami Bank Securities Limited - - Islami Bank Capital Management Limited - - 32,440,966,474 17,928,795,649

11.1 Maturity-wise classification of bills purchased & discounted Payable within 1 month 6,963,105,648 1,544,448,972 Over 1 month but less than 3 months 10,360,752,341 8,558,880,734 Over 3 months but less than 6 months 9,444,682,753 3,668,091,744 6 months or more 5,672,425,732 4,157,374,199 Total 32,440,966,474 17,928,795,649

12.0 Fixed assets including premises, furniture and fixtures (Annexure-A) Cost / revaluation i) Land 7,516,684,798 2,448,166,198 ii) Building 6,051,400,444 3,825,850,374 iii) Construction/ capital work-in-process 75,726,010 89,553,599 iv) Furniture and fixtures 654,861,489 522,200,017 v) Mechanical appliances 2,336,557,939 1,677,728,983 vi) Motor vehicles 499,193,740 448,904,045 vii) Books 4,030,146 3,352,357 viii) Others - - Total cost / revaluation 17,138,454,568 9,015,755,573 Less: Accumulated depreciation 2,330,226,239 1,915,563,304 Net book value at the end of the year 14,808,228,329 7,100,192,269

12.1 Revaluation of land & building

As per Bangladesh Bank BCD Circular Letter No. 12 & 18 dated April 20, 1993; June 15, 1993; BRPD Circular No.10 dated November 25, 2002; circular No. 09 dated 31 December 2008 and circular No. 24 dated 03 August 2010, the Bank revalued its land and building by the professional valuers for the year 2000, 2002, 2003, 2004, 2005, 2006, 2009 & 2012 respectively which was reviewed by the statutory auditors.

12(a) Consolidated fixed assets including premises, furniture and fixtures (Annexure-B) Islami Bank Bangladesh Limited 14,808,228,329 7,100,192,269 Islami Bank Securities Limited 8,537,118 10,057,305 Islami Bank Capital Management Limited - - 14,816,765,447 7,110,249,574

242 Annual Report 2012 13.0 Other assets 31.12.2012 31.12.2011 Taka Taka i) Stock of stationery in hand 90,992,981 81,933,430 ii) Stamps in hand 7,008,385 5,757,533 iii) Advance rent paid 468,694,508 318,468,622 iv) Security deposits paid account 14,316,664 11,889,592 v) Suspense account and advance against expenses 1,544,727,886 1,057,538,718 vi) Clearing adjustment - 3,740,390 vii) Accrued income 652,542,776 370,050,000 viii) Deferred revenue expenses 36,652 120,896 ix) IB General account (Note - 13.2) - 1,174,141,085 x) F.C. clearing adjustment 166,313,216 86,246,351 xi) Receivables from Seylon Bank PLC 30,300,809 - Total 2,974,933,877 3,109,886,617

13.1 Classification status of other assets i) Unclassified 2,906,316,657 3,059,435,808 ii) Doubtful 5,052,168 4,310,521 iii) Bad/ Loss 63,565,052 46,140,288 Total 2,974,933,877 3,109,886,617

13.2 IB General account Un-reconciled entries of Inter branch transactions in Bangladesh Age Number Amount in Taka Amount in Taka i) Upto 3 months (*) - - 1,174,141,085 ii) Over 3 months but not more than 6 months - - - Total (i+ii) - - 1,174,141,085

13.3 Un-reconciled entries of inter branchtransactions outside Bangladesh Age Number Amount in Taka Amount in Taka iii) Upto 3 months - - - iv) Over 3 months but not more than 6 months - - - Total (iii+iv) - - -

13(a) Consolidated other assets Islami Bank Bangladesh Limited 2,974,933,877 3,109,886,617 Islami Bank Securities Limited 54,961,761 21,223,259 Islami Bank Capital Management Limited 23,097,317 5,671,223 3,052,992,955 3,136,781,099

14.0 Deposits & other accounts 417,844,142,245 341,853,672,959

14.1 Maturity wise classification of deposits are as under i) Re-payable on demand 6,510,898,064 5,323,422,542 With a residual maturity of ii) Re- payable within 1 month 43,464,043,635 32,276,166,386 iii) Over 1 month but within 6 months 145,012,895,226 144,240,891,174 iv) Over 6 months but not more than 1 year 58,411,852,843 50,027,025,270 v) Over 1 year but not more than 5 years 86,900,534,735 40,101,545,906 vi) Over 5 years but within 10 years 76,991,548,158 68,887,358,476 vii) Unclaimed Deposits for 10 years or more 35,533,375 42,785,782 Sub-total 417,327,306,036 340,899,195,536

Annual Report 2012 243 31.12.2012 31.12.2011 Taka Taka 14.2 Maturity grouping of Inter- bank deposits are as under

i) Re-payable on demand - - With a residual maturity of ii) Re- payable within 1 month 516,836,209 954,477,423 iii) Over 1 month but within 6 months - - iv) Over 6 months but not more than 1 year - - v) Over 1 year but not more than 5 years - - vi) Over 5 years but within 10 years - - Sub-total 516,836,209 954,477,423 Total (14.1+14.2) 417,844,142,245 341,853,672,959

14.3 Sector wise break up of deposits and other accounts

Government 281,845,000 286,791,000 Other banks’ deposit 516,836,209 954,477,423 Other public 632,958,000 467,209,000 Foreign currency 8,424,114,868 5,428,528,193 Private 407,988,388,168 334,716,667,343 Total 417,844,142,245 341,853,672,959

14(a) Consolidated deposits & other accounts

Islami Bank Bangladesh Limited 417,844,142,245 341,853,672,959 Islami Bank Securities Limited 1,546,334 1,589,856 Islami Bank Capital Management Limited - - 417,845,688,579 341,855,262,815

15.0 Other mudaraba deposits

i) Mudaraba Special Notice Deposits 5,567,121,259 5,634,330,224 ii) Mudaraba Hajj Deposits 1,242,464,874 1,043,030,009 iii) Mudaraba Savings Bond 16,519,073,679 16,830,988,729 iv) Mudaraba NRB Savings Bond 604,535,851 346,075,652 v) Mudaraba Special Savings (Pension) Deposits 73,973,554,643 65,491,911,409 vi) Mudaraba Monthly Profit Deposit Scheme 16,621,377,317 12,372,579,383 vii) Mudaraba Muhor Savings 322,778,703 271,758,892 viii) Mudaraba Waqf Cash Deposit 367,221,198 260,787,843 ix) Mudaraba School Student Savings 92,120,561 221,727 x) Mudaraba Farmers Savings A/C 212,915,387 - xi) Mudaraba Foreign Currency Deposits 2,283,973,876 863,110,272 Total 117,807,137,348 103,114,794,140

15.1 Other banks’ deposits with IBBL

i) Al Wadeeah Current Deposits 320,114,462 218,208,634 ii) Mudaraba Special Notice Deposits 172,362,850 690,942,091 iii) Mudaraba Savings Account 24,358,897 45,326,698 Total 516,836,209 954,477,423

244 Annual Report 2012 31.12.2012 31.12.2011 Taka Taka

16.0 Al Wadeeah current & other deposits accounts i) Al Wadeeah Current Deposits 21,887,260,661 18,138,997,045 ii) Convertible Taka Account 151,708 151,708 iii) Non Resident Investors Taka Account 60,477,340 1,777,227 iv) Non Resident FC of Exchange House / Banks 652,743,899 604,701,479 v) Non Resident Taka Account 1,616,426,355 2,316,171,519 vi) Foreign Currency Deposit 160,345,351 332,445,892 vii) Foreign Currency Deposit ERQ 708,068,919 502,775,915 viii) Other FC Deposit 53,214,981 52,134,239 ix) Foreign Currency: Security Deposit 79,845,269 71,207,276 x) Foreign Currency Held against Back to Back L/C 3,072,592,970 2,465,309,495 xi) Foreign Currency held against Cash L/C 516,742,944 134,321,673 xii) Foreign Demand Draft /TT Payable 864,696,605 369,831,950 xiii) Foreign Currency Deposit against Foreign Bank Guarantee 31,890,054 32,690,002 xiv) Security Deposit - Investment 7,061,190 13,827,933 xv) Security Deposit - L/C (Wes) 3,568,000 6,995,889 xvi) Security Deposit - Foreign L/C General 4,368,709,141 3,615,013,346 xvii) Security Deposit - Back to Back L/C (Inland) - - xviii) Security Deposit - Bank Guarantee 502,275,091 453,746,749 xix) Security Deposits - Foreign Bill Negotiation( FBN)/ MDB 210,422 209,422 xx) Security Deposit - IBP/ FDB/ Bai-As-Sarf 12,752,877 4,867,457 xxi) Security Deposit - Inland L/C 76,966,167 77,927,351 xxii) Profit Payable 11,111,509,935 7,432,035,127 xxiii) Remittance Card Account 3,242,947 1,571,066 xxiv) Sundry Deposits (Note-16.1) 1,739,407,111 2,028,397,972 xxv) Mobile Wallet A/C 1,790 - Total 47,530,161,727 38,657,107,732

16.1 Break-up of sundry deposits i) Sundry creditors 206,701,610 413,875,601 ii) Supervision charge 50,174,772 45,844,625 iii) Security deposit L/G 417,184 4,858,594 iv) Security money payable 116,329,781 87,797,259 v) Security money locker 8,521,793 5,662,560 vii) Marginal deposit 665,191,363 582,516,538 vi) Bank guarantee 1,843,035 4,437,444 viii) Excise duty 14,177,900 10,676,780 ix) Closed account profit 136,296,851 121,204,547 x) Sundry deposit others 196,354,720 455,633,207 xi) Govt.tax & VAT 64,795,126 13,888,432 xii) RDS welfare fund & RDS RIP 263,940,795 268,458,586 xiii) Karmasangsthan Bank 10,000,000 10,000,000 xiv) Other earnings (Note-16.2) 4,662,181 3,543,799 Total 1,739,407,111 2,028,397,972

Annual Report 2012 245 31.12.2012 31.12.2011 Taka Taka 16.2 Break-up of other earnings

i) Opening balance 3,543,799 1,927,874 ii) Received from B. Bank FC clearing A/c 3,880,301 5,627,035 iii) Received from foreign correspondents/banks 1,403,840 522,398 iv) Total receipt during the year (ii+iii) 5,284,141 6,149,433 v) Less : 4,165,759 4,533,508 Income tax provision @ 42.50% 2,245,759 2,613,508 Transferred/ paid for charitable activities 1,920,000 1,920,000 vi) Closing balance (i+iv-v) 4,662,181 3,543,799

17.0 Bills payable

i) P.O. payable 2,675,110,054 1,841,425,532 ii) T.T. payable 54,728,558 41,770,783 iii) D.D. payable 803,555,182 715,105,982 iv) FC bills payable 5,181,274 5,181,274 v) BEFTN payable 219,567,306 67,736,255 vi) Spot cash payable 457,895,960 192,175,269 Total 4,216,038,334 2,863,395,095

18.0 Mudaraba Perpetual Bond 3,000,000,000 3,000,000,000

Islami Bank Bangladesh Limited issued Mudaraba Perpetual Bond (MPB) under the mudaraba principles of Islamic Shari‘ah as per approval of Bangladesh Bank (Central Bank) as well as Securities and Exchange Commission (SEC). The unit price of MPB is Tk.1,000/-. Credit Rating Information & Services Ltd.(CRISL) assigned A+ rating to MPB. The Investment Corporation of Bangladesh (ICB) is the Trustee of the MPB.The MPB is listed with Dhaka Stock Exchange Ltd. & Chittagong Stock Exchange Ltd. and trading of the same started from 25 November 2007.

19.0 Other liabilities 31.12.2012 31.12.2011 Taka Taka

i) Provision for classified & unclassified investments and off- balance sheet 11,090,700,000 8,170,000,000 iItems (Note- 19.2, 19.3 & 19.4) ii) Provision for other assets (Note-19.5) 96,550,000 87,108,934 iii) Current tax (Note-19.6) 6,501,756,770 4,766,417,040 iv) Zakat payable 794,105,590 600,754,117 v) Dividend payable 10,617,022 10,658,477 vi) Foreign correspondents charges 2,584,977 4,338,095 vii) Incentive bonus payable 1,186,768,125 1,106,260,523 viii) Payable against expenditure 96,893,767 257,626,081 ix) Clearing adjustment 415,621 - x) Transfer delivery adjustment 762,104 1,055,693 xi) Profit/ rent /compensation suspense account (Note - 19.7) 1,614,963,041 1,124,832,603 xii) Substitute cash assistance - - xiii) Un-earned exchange 24,836,877 210,364,129 xiv) BEFTN adjustment 15,369,847 6,237,987 xv) Provident/SAF/Benevolent fund collection 30,215,984 251,775 xvi) IB General account (Note - 19.8) 231,894,252 - Total 21,698,433,977 16,345,905,454

246 Annual Report 2012 31.12.2012 31.12.2011 Taka Taka 19.1 Provision for investments including bad & doubtful investments current year provision for investments Unclassified investments including OBU & off-balance sheet items 4,307,754,000 4,948,313,000 Special mention account 728,596,000 167,687,000 Substandard 234,152,000 341,322,000 Doubtful 340,180,000 293,425,000 Bad and loss 5,480,018,000 2,419,253,000 11,090,700,000 8,170,000,000

19.2 Provision for classified investments i) Provision held at the beginning of the year 3,054,000,000 1,840,000,000 ii) Fully provided investment written off/ transferred (581,925,602) (427,314,796) iii) Recoveries of amounts previously written off 107,882,331 - iv) Provision made during the year 3,724,020,271 1,890,656,796 v) Recoveries and provision no longer required (249,627,000) (249,342,000) vi) Net charge to profit & loss account/(no longer required) 3,582,275,602 1,641,314,796 Total provision held at the end of the year 6,054,350,000 3,054,000,000

19.3 General provision on unclassified investment i) Provision held at the beginning of the year 3,996,000,000 3,443,000,000 ii) Addition during the year (60,100,000) 553,000,000 iii) Balance at the end of the year 3,935,900,000 3,996,000,000 Total provision for investments including bad & doubtful investments 9,990,250,000 7,050,000,000 (Note-19.2+19.3)

19.4 General provision on off-balance sheet items Provision held at the beginning of the year 1,120,000,000 930,000,000 Add. Provision made/ (no longer required) during the year (19,550,000) 190,000,000 Provision held as on 31st December 1,100,450,000 1,120,000,000 Total provision ( Note- 19.2+19.3+19.4) 11,090,700,000 8,170,000,000

19.5 Other provisions Provision for other assets Opening balance 87,108,934 87,108,934 Add: Provision made during the year 9,441,066 - Closing balance 96,550,000 87,108,934

19.6 Current tax liability Balance of provision on 01 January 6,519,438,311 4,528,458,836 Add: Provision made during the year (19.6.1) 6,525,837,929 5,476,469,040 Add: Other provision made during the year 79,265,181 2,613,508 Less: Settlement for previous year 4,237,371,275 3,488,103,073 Total (a) 8,887,170,146 6,519,438,311

Advance tax Balance of advance tax on 01 January 1,753,021,271 1,195,301,698 Add: Payment made during the year 4,869,763,379 4,045,822,646 Less: Settlement for previous year 4,237,371,275 3,488,103,073 Total ( b) 2,385,413,375 1,753,021,271 Net balance as at 31 December (a-b) 6,501,756,771 4,766,417,040

Annual Report 2012 247 31.12.2012 31.12.2011 Taka Taka 19.6.1 Provision for current tax made during the year

Income tax @ 42.50% for 2012 & 2011 on taxable profit (A) 6,604,737,555 5,515,003,546 Add: Income tax @ 20% on dividend income 365,555 560,000 Add: Excess profit tax - - Less: Provision already kept 79,265,181 - Estimated provision required as at 31 December (i) 6,525,837,929 5,515,563,546

Provision held Balance at 1st January 6,519,438,311 4,528,458,836 Less: Tax for previous year 4,237,371,275 3,488,103,073 Actual provision for tax held (ii) 2,282,067,036 1,040,355,763 Estimated provision needs to be made (i-ii) 4,243,770,893 4,475,207,783 Provision actually made during the year 6,525,837,929 5,515,563,546

A. Computation of taxable profit Profit before tax 12,096,177,670 10,347,315,330 Less: Dividend income 1,827,777 2,800,000 Profit before tax (excluding dividend income) 12,094,349,893 10,344,515,330 Add : Inadmissible expenditure 4,539,191,483 3,187,832,881 Less : Further allowable expenditure 1,092,982,423 555,869,280 Estimated taxable profit for the year (A) 15,540,558,953 12,976,478,931

Provision for tax for the year ended on 31.12.2012 has been made as per Income Tax Ordinance, 1984 applying prevailing rates applicable on the net profit. Income tax assessment have been completed by the Deputy Commissioner of Taxes (DCT) up to the accounting year 2010 and income tax return has been submitted for the year 2011. The Bank filed appeals/writ petitions against tax assessment orders of different levels of tax authorities to the appropriate tax authorities and High Court on different disputed issues. Adequate provisions for those assessment years have been made in the books of accounts.

31.12.2012 31.12.2011 Taka Taka 19.6(a) Consolidated current tax liability Islami Bank Bangladesh Limited 6,525,837,929 5,476,469,040 Islami Bank Securities Limited 33,207,118 14,651,359 Islami Bank Capital Management Limited 15,419,785 13,131,692 6,574,464,832 5,504,252,091

19.7 Profit/ rent/ compensation suspense account i) Balance at the beginning of the year 1,124,832,603 921,401,227 ii) Amount transferred to suspense account during the year 3,299,199,279 1,234,700,647 iii) Amount recovered from suspense account during the year (2,690,666,841) (949,793,238) iv) Amount written-off / waived during the year (118,402,000) (81,476,033) Balance at the end of the year 1,614,963,041 1,124,832,603

19.8 IB General account Un-reconciled entries of inter branch transactions in bangladesh

Maturity Number Amount in Taka Amount in Taka i) Upto 3 months (*) 3,320 231,894,252 - ii) Over 3 months but not more than 6 months - - - iii) More than 6 months - - - Total (i+ii+iii) 3,320 231,894,252 - (*) All the outstanding entries in the above mentioned IB General Account have been fully adjusted within 14.03.2013.

248 Annual Report 2012 31.12.2012 31.12.2011 Taka Taka

19(a) Consolidated other liabilities

Islami Bank Bangladesh Limited 21,698,433,977 16,345,905,454 Islami Bank Securities Limited 174,582,154 352,582,542 Islami Bank Capital Management Limited 30,793,143 15,434,453 21,903,809,274 16,713,922,449

20.0 Deferred tax liabilities

At the beginning of the year 192,330,992 162,930,992 Add: Addition during the year 45,900,000 29,400,000 Exchange difference - - At the end of the year 238,230,992 192,330,992

Provision for deferred tax has been made on all temporary differences between the tax base and the carrying amounts for financial reporting purpose as per Bangladesh Accounting Standard (BAS) -12 “Income Taxes”. Tax base represents the written down value of assets with adjustment used for tax purpose. Tax rate prevailing at the balance sheet date is used to determine Deferred Tax. 31.12.2012 31.12.2011 Taka Taka 20(a) Consolidated deferred tax liabilities Islami Bank Bangladesh Limited 238,230,992 192,330,992 Islami Bank Securities Limited 397,859 333,071 Islami Bank Capital Management Limited - - 238,628,851 192,664,063

20(b) Consolidated deferred tax income/expenses

Islami Bank Bangladesh Limited 45,900,000 29,400,000 Islami Bank Securities Limited 64,788 115,743 Islami Bank Capital Management Limited - - 45,964,788 29,515,743

21.0 Share capital

21.1 Authorized capital The authorized capital of the Bank is Tk.20,000,000,000 divided into 2,000,000,000 ordinary shares of Tk.10 each.

21.2 Paid up capital The shareholders of the bank in their 29th Annual General Meeting held on May 15, 2012 approved 25% Stock Dividend (Bonus Share) for the year 2011, thus Paid-up Capital of the Bank was increased from Tk.10,007.71 million to Tk.12,509.64 million during the year 2012; as detailed below:

31.12.2012 Taka

100,07,71,200 ordinary shares of Tk.10 each 10,007,712,000 25,01,92,800 Ordinary Shares of Tk.10 each issued as Bonus Share 2,501,928,000 Total 12,509,640,000

Annual Report 2012 249 The denomination of share has been changed from Tk.100/- each to Tk.10/- each with market lot of 100 shares w.e.f. 04.12.2011 by the shareholders in its Extra Ordinary General Meeting (EGM) held on 28.10.2011 as per requirement of Securities & Exchange Commission (SEC). As such all applicable comparatives have been re-stated considering face value of shares at Tk.10/- each.

a) The Paid-up Capital of the Bank is Tk.1250,96,40,000 divided into 125,09,64,000 ordinary shares of Tk.10 each fully subscribed by: No. of Shares 31.12.2012 31.12.2011 Particulars as on % of Total Amount in Amount in 31 Dec, 2012 Taka Taka

(i) Sponsors/ promoters 744,013,342 59.48% 7,440,133,420 4,204,157,700 (ii) General public 506,934,871 40.52% 5,069,348,710 5,803,428,000 (iii) Government of the People’s 15,787 0.001% 157,870 126,300 Republic of Bangladesh** Sub Total (a) 1,250,964,000 100.00% 12,509,640,000 10,007,712,000

** The shares have already been sold by the Government of Bangladesh but no transfer has been made in share register of the Bank as yet.

b) Break up of share holding and percentage thereof Holdings No. of Total Holdings/ Percentage Shareholders No. of Shares (%)

Less than 500 Shares 34,886 5,442,691 0.43% 500 to 5,000 Shares 19,224 32,251,709 2.58% 5,001 to 10,000 Shares 2,622 18,380,355 1.47% 10,001 to 20,000 Shares 1,628 23,099,067 1.85% 20,001 to 30,000 Shares 555 13,516,483 1.08% 30,001 to 40,000 Shares 311 10,832,224 0.87% 40,001 to 50,000 Shares 173 7,811,683 0.62% 50,001 to 100,000 Shares 373 25,830,434 2.06% 100,001 to 1,000,000 Shares 445 124,941,551 9.99% Over 1,000,000 Shares 85 988,857,803 79.05% Total 60,302 1,250,964,000 100.00%

21.3 Capital adequacy as per Basel - II as on 31 December 2012 (Consolidated)

Bangladesh Bank through BRPD Circular No. 09 dated 31.12.2008 has instructed to all Scheduled Banks to follow Capital Requirement rules on the basis of Risk Weighted Assets and revised Risk Based Capital Adequacy Framework in line with Basel II simultaneously for one year i.e. parallel run for the year 2009 and full operation of Basel II was started from January 2010 which has been duly complied by IBBL.

Subsequently, Bangladesh Bank through BRPD Circular No. 24 dated 03.08.2010 & BRPD Circular No. 35 dated 29.12.2010 issued revised Guidelines on Risk Based Capital Adequacy for Banks (Revised Regulatory Capital Framework in line with Basel II). In accordance with Risk Based Capital Adequacy guidelines of Bangladesh Bank, Risk Weighted Assets of the Bank has been increased due to introduction of 2 (two) new risk areas i.e. Market Risk and Operational Risk. Details of calculation as on 31 December 2012 as per Basel II are given below:

250 Annual Report 2012 (Amount in Crore Taka)

31.12.2012 31.12.2012 31.12.2011 (Consolidated) (Solo) (Consolidated)

A. Regulatory capital 1. Tier-1 (Core capital) (Note 21.3.1) 2,813.10 2,822.51 2,321.46 2. Tier-2 (Supplementary capital) (Note 21.3.2) 1,380.32 1,380.32 1,031.55 3. Tier-3 (Additional supplementary capital) (Note 21.3.3) - - - 4. Total regulatory capital (1+2+3) 4,193.42 4,202.83 3,353.01

B. Total Risk Weighted Assets (RWA) (Note 21.3.4) 30,988.86 31,151.16 25,543.13 C. Capital Adequacy Ratio (CAR) (as against required above 10.00% 13.53% 13.49% 13.13% ) D. Core capital to RWA (as against required minimum 5.00%) 9.08% 9.06% 9.09% E. Supplementary capital to RWA 4.45% 4.43% 4.04% F. Minimum Capital Requirement (MCR) 3,098.89 3,115.12 2,554.31 G. Surplus capital (A-F) 1,094.53 1,087.71 798.70

21.3.1 Tier-1 (Core capital)

1.1 Fully paid-up capital/capital deposited with BB 1,250.96 1,250.96 1,000.77 1.2 Statutory reserve 1,242.37 1,242.37 1,000.44 1.3 Non-repayable share premium account 0.20 0.20 0.20 1.4 General reserve 13.04 13.04 15.26 1.5 Retained earnings 303.32 312.74 301.59 1.6 Non-controlling interest in subsidiaries 0.01 - - 1.7 Non-cumulative irredeemable preferences shares - - - 1.8 Dividend equalization account 3.20 3.20 3.20 1.9 Sub-total: (1.1 to 1.8) 2,813.10 2,822.51 2,321.46

Deductions from Tier-1 (Core capital)

1.10 Book value of goodwill - - - 1.11 Shortfall in provisions required against classified assets - - - 1.12 Shortfall in provisions required against investment in shares - - - 1.13 Remaining deficit on account of revaluation of investment in - - - securities after netting off from any other surplus on the securities. 1.14 Reciprocal crossholdings of bank capital /subordinated debt - - - 1.15 Any investment exceeding the approved limit - - - 1.16 Investment in subsidiaries which are not consolidated - - - 1.17 Others, if any - - - 1.18 Sub total (1.10 to 1.17) - - - 1.19. Total eligible tier-1 capital (1.9-1.18) 2,813.10 2,822.51 2,321.46

Annual Report 2012 251 (Amount in Crore Taka)

31.12.2012 31.12.2012 31.12.2011 (Consolidated) (Solo) (Consolidated)

21.3.2 Tier-2 (Supplementary capital)

2.1 General provision (unclassified investment and off balance 503.64 503.63 511.60 sheet exposure) 2.2 Assets revaluation reserves up to 50% 574.95 574.95 215.40 2.3 Revaluation reserves of securities up to 50% 1.74 1.74 4.55 2.4 Revaluation reserves for equity instruments up to 10% - - - 2.5 All other preference shares - - - 2.6 Perpetual subordinated debt (Mudaraba Perpetual Bond) 300.00 300.00 300.00 2.7 Others (if any item approved by Bangladesh Bank) - - - 2.8 Sub-total (2.1 to 2.7) 1,380.32 1,380.32 1,031.55 2.9 Deductions, if any - - - 2.10 Total Eligible Tier-2 Capital (2.8 - 2.9) 1,380.32 1,380.32 1,031.55

21.3.3 Tier-3 (Additional supplementary capital) 3.1 Short-term subordinated debt - - - 4. Total supplementary capital (2.10+3.1) 1,380.32 1,380.32 1,031.55 5. Total regulatory capital (1.19+4) 4,193.42 4,202.83 3,353.01

21.3.4 Risk Weighted Assets (RWA) for Amount in Crore 1. Investment (credit) risk 28,049.59 28,220.79 23,297.25 (i) On-balance sheet 24,847.12 25,018.33 20,601.11 (ii) Off-balance sheet 3,202.47 3,202.47 2,696.14 2. Market Risk 468.50 468.50 192.20 3.Operational risk 2,470.78 2,461.87 2,053.68 Total Risk Weighted Assets (1+2+3) 30,988.87 31,151.16 25,543.13

252 Annual Report 2012 A. Investment (credit) risk on balance sheet exposures as on 31.12.2012 & 31.12.2011 ( consolidated)

(Amount in Crore Taka) RWA as on RWA as on SL. BB’s rating Risk Exposure type Exposure 31.12.2012 31.12.2011 No. grade * weight (Consolidated) (Consolidated) 1 2 3 4 5 6= (4X5) 7 a) Cash and cash equivalents 0% 3,737.28 - - Claims on Bangladesh Government and 0% 2,544.78 - - b) Bangladesh Bank Claims on other sovereigns & central 0% - - - c) Banks Claims on Bank for International 0% - - - d) Settlements, International Monetary Fund and European Central Bank Claims on Multilateral Development - - - Banks (MDBs) i) IBRD , IFC, ADB, AFDB, EBRD, 0% - - - IADB, EIB, EIF, NIB, CDB, IDB, CEDB 1 20% - - - e) 2,3 50% - - - ii) Other MDBs 4,5 100% - - - 6 150% - - - Unrated 50% - - - 1 20% - - 2,3 50% - - Claims on Public Sector Entities (other f) 4,5 100% - - - than government) in Bangladesh 6 150% - - - Unrated 50% - - - Claims on banks - - 1 20% - - - 2,3 50% 72.52 36.26 27.49 g) i) Maturity over 3 months 4,5 100% 4.77 4.77 8.04 6 150% - - Unrated 100% 4.00 4.00 - ii) Maturity less than 3 months 20% 2,296.72 459.34 313.86 1 20% 2,712.72 542.54 496.01 2 50% 15,144.22 7,572.11 5,985.10 h) Claims on corporates 3, 4 100% 2,765.78 2,765.78 3,574.09 5, 6 150% 19.97 29.96 23.58 Unrated 125% 2,975.45 3,719.31 4,750.28 PSE N/A - - - Corporate N/A 7.41 9.26 19.48 Retail & N/A 19.47 14.60 30.50 NBFIs i) Claims under Credit Risk mitigation Consumer N/A - - - Residential N/A - - - Property Commercial N/A - - - Real Estate Sub total 32,305.10 15,157.95 15,228.42

Annual Report 2012 253 Investment (credit) risk on balance sheet exposures as on 31.12.2012 & 31.12.2011 (Consolidated) contd…

(Amount in Crore Taka)

RWA as on RWA as on Risk Fixed risk groups: Exposure 31.12.2012 31.12.2011 weight (Consolidated) (Consolidated) j) Claims categorized as retail portfolio & small enterprise 75% 4,778.51 3,583.88 2,696.97 (excluding consumer investment) k) Consumer finance 100% 71.06 71.06 88.96 l) Claims fully secured by residential property 50% 1,279.56 639.78 587.66 m) Claims fully secured by commercial real estate property 100% 268.15 268.15 167.50 Past due claims ( risk weights are to be assigned net of - - - specific provision): 1.The claim (other than claims secured by eligible residential - - - property) that is past due for more than 90 days and/or impaired will attract risk weight as follows: - Where specific provisions are less than 20 per cent of the 150% 1,297.86 1,946.79 285.24 outstanding amount of the past due claim ; - Where specific provisions are not less than 20 per cent of 100% 241.79 241.79 72.38 the outstanding amount of the past due claim ; n) - Where specific provisions are more than 50 per cent of the 50% 334.68 167.34 122.76 outstanding amount of the past due claim. 2. Claims fully secured against residential property that are 100% 220.85 220.85 11.32 past due for more than 90 days and/or impaired specific provision held there-against is less than 20% of outstanding amount. 3. Loans and claims fully secured against residential property 75% 70.84 53.13 150.98 that are past due by 90 days and /or impaired and specific provision held there-against is more than 20% of outstanding amount o Capital market exposures 125% 124.55 155.69 202.05 p Investments in venture capital 150% - - - Unlisted equity Investments and regulatory capital 125% 50.01 62.52 - q) instruments issued by other banks (other than those deducted from capital) held in banking book Investments in premises, plant and equipment and all other 100% 913.01 913.01 495.60 r) fixed assets s) Claims on all fixed assets under operating lease 100% - - - All other assets - i) Claims on GoB & BB (eg. Advanced income tax, 0% - - - reimbursement of patirakkha/ shadharon shanchay patra, etc.) ii) Staff loan/ investment 20% 569.27 113.85 88.60 t) iii) Cash items in process of collection 20% - - iv) Claims on Off-shore Banking Units (OBU) 100% 993.88 993.88 v) Other assets 100% 257.45 257.45 402.67 Sub total 11,471.47 9,689.18 5,372.69 Grand total 43,776.57 24,847.12 20,601.11

254 Annual Report 2012 B. Investment (credit) risk off- balance sheet exposures as on 31.12.2012 & 31.12.2011 (Consolidated)

(Amount in Crore Taka)

RWA as on RWA as on SL. BB’s rating Risk Exposure type Exposure 31.12.2012 31.12.2011 No. grade weight (Consolidated) (Consolidated) a) Claims on Bangladesh Government and 0% - - - Bangladesh Bank b) Claims on other sovereigns & central banks 0% - - - c) Claims on Bank for International Settlements, 0% - - - International Monetary Fund and European Central Bank Claims on Multilateral Development Banks 0% - - - (MDBs) i) IBRD , IFC, ADB, AFDB, EBRD, IADB, EIB, 0% - - - EIF, NIB, CDB, IDB, CEDB

d) ii) Other MDBs 1 20% - - - 2,3 50% - - - 4,5 100% - - - 6 150% - - - Unrated 50% - - - Claims on Public Sector Entities (other than 1 20% - - - government) in Bangladesh 2,3 50% - - - e) 4,5 100% - - - 6 150% - - - Unrated 50% - - - Claims on banks i) Maturity over 3 months 1 20% 27.19 5.44 8.29 2,3 50% 98.21 49.11 58.42

f) 4,5 100% 12.34 12.34 8.07 6 150% 0.03 0.05 0.11 Unrated 100% 202.19 202.19 174.56 ii) Maturity less than 3 months 20% - - - Claims on corporates 1 20% 50.23 10.05 45.41 2,3 50% 633.84 316.92 530.39 g) 4,5 100% 84.06 84.06 206.12 6 150% - - 0.06 Unrated 125% 1,221.86 1,527.33 1,157.71 h) Claims as retail portfolio & small enterprise 75% 1,326.66 995.00 507.01 i) (excluding consumer Investment) 100% - - - Consumer investment j) Claims fully secured by residential property 50% - - - k) Claims fully secured by commercial real estate 100% - - - l) Investment in venture capital 150% - - - m) All other assets 100% - - - Total 3,656.62 3,202.47 2,696.14

Annual Report 2012 255 C. Capital requirements for: Market risk as on 31.12.2012 & 31.12.2011 (Amount in Crore Taka)

Capital charge for RWA as on RWA as on SL. Particulars Specific General Total 31.12.2012 31.12.2011 No. risk market risk (Consolidated) (Consolidated)

a) Profit rate risk - - - - b) Equity position risk 0.55 0.55 1.09 10.94 22.20 c) Foreign exchange risk - 45.76 45.76 457.56 170.00 d) Commodity risk - - - - - e) Total 0.55 46.30 46.85 468.50 192.20

D. Capital requirements for: Operational risk as on 31.12.2012 and 31.12.2011

15% of Risk Weighted Sl. Gross Average RWA Year Average Assets No. Income (GI) GI 31.12.2011 GI 31.12.2012 1 2 3 4 5 6 = (5X10) 7 1 1 January 2011 to 31 December 2011 2,063.74 2 1 January 2010 to 31 December 2010 1,602.10 1,647.19 247.08 2,470.78 2,053.68 3 1 January 2009 to 31 December 2009 1,275.72 Total gross income 4,941.56 Disclosure under pillar III (market discipline) as on 31.12.2012 & 31.12.2011 as per Bangladesh Bank BRPD Circular No. 24 dated 03.08.2010

a) Market discipline (disclosures): A. Banking book assets 1. Cash in hand & balance with BB (excluding FC) 6,189.84 5,307.87 2. Money at call 3. Investment (HTM) 2,695.54 1,682.14 a. Government 2,343.40 1,380.00 b. Qualifying (banks, etc) - - c. Others 352.14 302.14 4. Investment (loans & advances) (a+b) 37,124.19 30,470.17 a. Classified (SMA. SS, DF & BL to be shown separately) 3,078.46 1,173.95 Special Mention Account (SMA) 1,657.18 344.66 Sub standards 209.43 314.79 Doubtful 129.52 80.71 Bad/loss 1,082.33 433.79 b. Unclassified 34,045.73 29,296.22 5. Risk weighted assets (investment and off-balance sheet) 27,871.84 23,297.24 a. Below 100% RW 15,438.63 11,649.43 b. 100% RW 5,045.22 5,209.31 c. Above 100% RW 7,387.98 6,438.50 6. Rated status (investment and off-balance sheet) a. Rated assets 21,624.01 19,763.46 b. Unrated assets 4,410.60 4,916.53 7. Other assets (including fixed assets) 2,164.34 898.27 A. Total banking book assets (1+2+3+4+7) 48,173.91 38,358.45

256 Annual Report 2012 (Amount in Crore Taka)

31.12.2012 31.12.2011 B. Trading book assets (Consolidated) (Consolidated)

1. FC held in hand 4.96 1.91 2. FC held in BB & Nostro account 1,247.71 593.72 3. Investment (trading) 5.47 11.09 a. Govt.(part of govt. HTM if held above the required SLR amount) 5.47 11.09 b. HFT - - c. AFS (if any) - - B. Total trading book assets (1+2+3) 1,258.14 606.72 Total assets (A+B) 49,432.05 38,965.17 b) Investment (credit) risk on banking book Quantative disclosures Particulars A) Total exposures of credit risk 1. Funded 43,774.37 36,180.26 a) Domestic 43,390.66 35,649.44 b) Overseas 383.71 530.82 2. Non-funded 9,487.30 10,748.12 a) Domestic 6,493.75 6,549.14 b) Overseas 2,993.55 4,198.98 3. Distribution of risk exposure by claims - - A. Claims on sovereigns and central banks 2,544.78 1,472.21 B. Claims on other official entities - - C. Claims on banks and securities firms 2,300.72 1,569.27 D. Claims on corporate 25,233.14 21,840.27 E. Claims included in the retail portfolio & SME enterprises 4,778.51 3,595.96 F. Claims secured by residential property 1,279.56 1,175.32 G. Claims secured by commercial real estate 268.15 167.50 H. Claims against consumer investment 71.06 88.96 I. Other categories: – Past due investment/NPI 3,078.46 1,173.95 – Off-balance sheet items 9,487.30 10,748.12 4. Credit Risk Mitigation Claims secured by financial collateral 32.27 82.91 Net exposure after the application of haircuts. 26.88 56.26 Claims secured by eligible Guarantee - - c) Market risk on trading Book Particulars Capital requirements for: i) Profit (interest) rate risk; - - ii) Equity position risk; 1.09 2.22 iii) Foreign exchange risk; and 45.76 17.00 iv) Commodity risk - -

Annual Report 2012 257 (Amount in Crore Taka) 31.12.2012 31.12.2011 (Consolidated) (Consolidated) d) Operational risk Particulars Capital requirements for operational risk 247.08 205.37

e) Maintenance of specific provision Particulars A) Gross Non Performing Assets (NPAs) 3,078.46 1,173.95 Non Performing Assets ( NPAs) to outstanding investment 8.29% 3.85% B) Movement of Non Performing Assets ( NPAs) 1. Opening balance 621.30 705.30 2. Additions 2,457.16 468.65 3. Reductions - - 4. Closing balance 3,078.46 1,173.95 Movement of specific provisions for NPAs 1. Opening balance 184.00 184.00 2. Provisions made during the period 163.99 189.06 3. Write-off 42.73 42.73 4. Write-back of excess provisions - 24.93 5. Closing balance 305.26 305.40

f) Maintenance of regulatory capital Particulars A) Amount of Tier-1 Capital i) Fully paid-up capital 1,250.96 1,000.77 ii) Statutory reserve 1,242.37 1,000.44 iii) Non-repayable share premium account 0.20 0.20 iv) General reserve 13.04 15.26 v) Retained earnings 303.32 301.59 vi) Dividend equalization account 3.20 3.20 Total Tier-I Capital 2,813.09 2,321.46 B) Amount deducted from Tier-1 Capital i) Goodwill - - ii) Shortfall - - iii) Others - -

C) Total amount of Tier 2 capital (net of deductions from Tier 2 capital). i) General provision (unclassified investment +SMA+ 503.64 511.60 Off balance sheet exposure) ii) Assets revaluation reserves up to 50% 574.95 215.40 iii) Revaluation reserves of securities up to 50% 1.74 4.55 iv) Subordinated debt (Mudaraba Perpetual Bond) 300.00 300.00 Total Tier-II Capital 1,380.32 1,031.55 D) Total eligible capital. 4,193.42 3,353.01

258 Annual Report 2012 (Amount in Crore Taka)

31.12.2012 31.12.2011 (Consolidated) (Consolidated) g) Capital adequacy Particulars A) Amount of regulatory capital to meet unforeseen loss: i) Amount to meet (investment) credit risk 2,804.82 2,329.73 ii) Amount to meet market risk 46.85 19.22 iii) Amount to meet operational risk. 247.08 205.37 B) Some additional capital over MCR maintained 1,094.67 798.69

2012 2011 22.0 Statutory reserve Taka Taka

Opening balance 10,004,426,808 7,934,963,742 Add: Addition made this year 2,419,235,534 2,069,463,066 Closing balance 12,423,662,342 10,004,426,808 At least 20% of net profit is transferred to statutory reserve account each year until the cumulative balance equal to the amount of paid up capital account as per Section 24 of the Bank Company Act 1991.

23.0 Others reserves 31.12.2012 31.12.2011 (Consolidated) (Consolidated)

a) General reserve Opening balance 152,645,772 583,130,387 Add: Addition/(adjustment) made this year (22,205,793) (430,484,615) Sub total (i) 130,439,979 152,645,772

b) Share premium 1,989,633 1,989,633 c) Assets revaluation reserve (Note 23.1) 11,498,971,320 4,308,071,320 d) Dividend equalization account 32,000,000 32,000,000 e) Revaluation reserve of securities (Note 23.2) 34,700,000 90,900,000 Sub total (ii) 11,567,660,953 4,432,960,953 f) Translation reserve Opening balance - - Add: Addition/ (adjustment) made this year (3,303,771) - Sub total (iii) (3,303,771) - Grand total (i + ii+iii) 11,694,797,161 4,585,606,725

23.1 Assets revaluation reserve

Opening balance 4,308,071,320 4,313,460,000 Addition during the year 7,190,900,000 - Adjustment during the year - (5,388,680) Closing balance 11,498,971,320 4,308,071,320

Annual Report 2012 259 (Amount in Crore Taka)

31.12.2012 31.12.2011 (Consolidated) (Consolidated) 23.2 Revaluation reserve of securities

Opening balance 90,900,000 621,000,000 Adjustment during the year (56,200,000) (530,100,000) Revaluation made during the year - - Closing balance 34,700,000 90,900,000

24.0 Letter of guarantee 2012 2011 Taka Taka (a) Claim against the bank which is not acknowledged as debt - - (b) Money for which the bank is contingently liable in respect of guarantees issued favouring : i) Directors - - ii) Government 765,910,552 568,167,638 iii) Bank and other financial institutions 453,724 38,536,812 iv) Others 6,531,121,274 6,695,538,015 Total 7,297,485,550 7,302,242,465

24.1 Security pledged against Mudaraba Perpetual Bond (MPB) liabilities of 4,489,100,000 4,489,100,000 Tk. 3,000 Million:

25.0 Investment income Income from general investment Bai Murabaha 25,625,826,162 18,634,820,811 Musharaka /Musharaka Documentary Bills 1,650,848,673 1,608,584,495 Bai Muajjal 2,342,455,272 1,638,051,953 Hire Purchase under Shirkatul Melk 11,000,357,892 8,562,558,621 Bai Salam 360,052,627 222,309,941 Mudaraba - (284,569,341) Mudaraba : Profit on Islamic Inter-Bank Fund Market (IIFM) 18,564,179 - Bai -As- Sarf (FDB /FCD), IBP, MFCI and UPAS 161,405,959 181,133,837 Investment income: Off-shore Banking Unit (OBU) 144,514,613 29,328,468 Others (Compensation Realisable/ Realised) 422,217,534 642,928,187 Sub Total (i) 41,726,242,911 31,235,146,972

Profit on deposits with other banks & financial institutions a) In Bangladesh 1,945,983,070 784,385,472 b) Outside Bangladesh - - Sub total (ii) 1,945,983,070 784,385,472 Grand total (i + ii) 43,672,225,981 32,019,532,444

260 Annual Report 2012 (Amount in Crore Taka)

31.12.2012 31.12.2011 (Consolidated) (Consolidated) 25.1 Investment income derived from the fund deployed by

i) Mudaraba deposits 37,216,308,026 27,241,499,763 ii) Other deposits/fund 6,033,700,421 4,464,150,000 Total 43,250,008,447 31,705,649,763

26.0 Profit Paid on Mudaraba Deposits

i) Profit paid on Mudaraba Savings Deposit 7,120,587,950 5,524,806,727 ii) Profit paid on Mudaraba Term Deposit Account 7,805,821,402 4,593,371,538 iii) Profit paid on other Mudaraba Deposits 10,536,615,885 7,887,039,820 iv) Profit paid on Placement - - v) Profit paid on Mudaraba Perpetual Bond (MPB) 407,400,000 396,000,000 Total 25,870,425,237 18,401,218,085

The mudaraba depositors are entitled to get minimum 65% of investment income earned through deployment of mudaraba fund as per weightages. In 2012, 70.04% (2011: 68.60%) of profit earned through deployment of mudaraba fund has been distributed/provided to the mudaraba depositors & MPB holders. It may be mentioned here that in some mudaraba deposits, additional rate was allowed over the rate arrived as per weightage. An additional amount equivalent to 10.00% of the rate of dividend has been provided for MPB holders of the Bank for the year 2012 (2011: 10.00%). 27.0 Income from investments in shares & securities 31.12.2012 31.12.2011 (Consolidated) (Consolidated)

i. Inside Bangladesh

Bangladesh Government Islamic Investment Bond (BGIIB) 430,142,971 286,570,090 Bangladesh Shipping Corporation (BSC) - 2,000,000 Central Depository Bangladesh Ltd. (CDBL) 1,827,777 800,000 Islami Bank Securities Limited - - Sub total (i) 431,970,748 289,370,090

ii. Outside Bangladesh - - Sub total (ii) - - Grand total (i+ii) 431,970,748 289,370,090

27(a) Consolidated income from investments in shares & securities

Islami Bank Bangladesh Limited 431,970,748 289,370,090 Islami Bank Securities Limited 52,391,088 41,634,547 Islami Bank Capital Management Limited - - 484,361,836 331,004,637

Annual Report 2012 261 28.0 Commission, exchange & brokerage income 2012 2011 Taka Taka

i) Commission income 2,881,472,975 2,720,250,757 ii) Exchange income (Note 28.1) 2,368,227,006 2,563,851,742 iii) Brokerage income - - Total 5,249,699,981 5,284,102,499

28.1 Exchange income

Gross exchange gain 2,368,227,006 2,563,851,742 Less: exchange loss - - Net exchange gain 2,368,227,006 2,563,851,742

28(a) Consolidated commission, exchange & brokerage income

Islami Bank Bangladesh Limited 5,249,699,981 5,284,102,499 Islami Bank Securities Limited 10,947,680 13,353,287 Islami Bank Capital Management Limited - - 5,260,647,661 5,297,455,786

29.0 Other operating income

i) Rent on locker 8,487,036 7,297,482 ii) Telephone/ trunk call charge recovered 6,196,861 13,503,912 iii) P&T charge recovered 56,287,453 56,166,715 iv) Legal expenses recovered 8,560,772 3,695,063 v) E & TA fees recovered 918,097 762,713 vi) Income from ATM & SWIFT 196,520,743 129,976,766 vii) Account maintenance charges realised 497,006,788 433,909,216 viii) Service charges recovered 27,595,345 21,476,427 ix) Service charges recovered: OBU 1,733,870 147,319 x) Rent on premises realised 2,932,580 2,705,587 xi) Sale proceeds of tender schedule 1,152,000 658,500 xii) Profit on sale of bank’s car 8,468,394 1,686,695 xiii) Written-off investment recovery 107,882,331 77,081,305 xiv) Recruitment fees recovered 22,544,564 38,805 xv) MICR cheque charge realised 4,114,960 2,703,433 xvi) Others 41,471,337 56,481,972 Total 991,873,131 808,291,910

29(a) Consolidated other operating income Islami Bank Bangladesh Limited 991,873,131 808,291,910 Islami Bank Securities Limited 88,546,014 32,668,939 Islami Bank Capital Management Limited 41,750,739 35,672,794 1,122,169,884 876,633,643

262 Annual Report 2012 2012 2011 Taka Taka 30.0 Rent, taxes, insurances, electricity etc.

i) Rent, rates and taxes 221,603,303 181,463,859 ii) Insurance 227,345,201 196,414,855 iii) Electricity and lighting 203,546,262 125,759,209 Total 652,494,766 503,637,923

30(a) Consolidated rent, taxes, insurances, electricity etc.

Islami Bank Bangladesh Limited 652,494,766 503,637,923 Islami Bank Securities Limited 2,481,976 2,812,501 Islami Bank Capital Management Limited 599,718 613,473 655,576,460 507,063,897 31.0 Postage, stamps, telecommunications etc.

i) Postage 45,713,904 38,947,737 ii) SWIFT charges 24,470,465 18,228,691 iii) Telephone 32,160,956 28,553,702 iv) Fax & internet 9,072,328 8,431,070 v) Stamps charges - - Total 111,417,653 94,161,200

31(a) Consolidated postage, stamps, telecommunications etc.

Islami Bank Bangladesh Limited 111,417,653 94,161,200 Islami Bank Securities Limited 111,190 105,915 Islami Bank Capital Management Limited - - 111,528,843 94,267,115

32.0 Stationery, printing and advertisement etc.

i) Paper & table stationery 23,462,435 20,190,385 ii) Printing and stationery (registers and forms) 126,863,357 100,246,876 iii) Advertisement & publicity 117,222,030 77,681,891 Total 267,547,822 198,119,152

32(a) Consolidated stationery, printing and advertisement etc.

Islami Bank Bangladesh Limited 267,547,822 198,119,152 Islami Bank Securities Limited 182,238 299,324 Islami Bank Capital Management Limited - - 267,730,060 198,418,476

Annual Report 2012 263 2012 2011 Taka Taka 33.0 Directors’ fees and expenses

i) Directors’ fees for attending board/ executive committee/ other committees 4,054,653 3,823,202 meeting ii) TA/DA/hotel fare for local & foreign directors 5,437,108 4,297,934 iii) Others 575,079 1,133,850 Total 10,066,840 9,254,986

33.1 Rate of fees for attending board/ executive committee/ other committees meeting

i) For board meeting 5,000 5,000 ii) For executive committee/ other committees meeting 4,000 4,000

33(a) Consolidated directors’ fees and expenses Islami Bank Bangladesh Limited 10,066,840 9,254,986 Islami Bank Securities Limited - 276,000 Islami Bank Capital Management Limited - - 10,066,840 9,530,986

34.0 Shari‘ah supervisory committee’s fees & expenses

i) Shari‘ah supervisory members’ fees for attending meeting 613,000 873,000 ii) TA/DA./hotel fare 1,736,894 1,676,142 iii) Others 234,935 200,141 Total 2,584,829 2,749,283

34.1 Rate of fees for attending shariah supervisory meeting

i) For shariah supervisory meeting 5,000 5,000 ii) For sub-committee meeting 4,000 4,000

35.0 Depreciation and repair to bank’s assets

i) Depreciation: Premises (building) 83,575,987 82,775,792 ii) Depreciation: Furniture & fixtures and other fixed assets 358,744,320 285,730,929 Sub total (i+ii) 442,320,307 368,506,721 iii) Repair of bank’s properties/assets 57,908,661 38,551,203 Grand total (i+ii+iii) 500,228,968 407,057,924

35(a) Consolidated depreciation and repair to bank’s assets

Islami Bank Bangladesh Limited 500,228,968 407,057,924 Islami Bank Securities Limited 4,212,118 2,533,055 Islami Bank Capital Management Limited - - 504,441,086 409,590,979

264 Annual Report 2012 2012 2011 Taka Taka 36.0 Other expenses

i) TA/ DA 120,908,726 91,441,801 ii) Repairs to rented premises 7,723,198 2,673,408 iii) Motor car running & maintenance 59,160,857 57,089,362 iv) Periodicals & newspapers 7,159,809 5,305,031 v) Entertainment 121,131,737 100,480,640 vi) Overtime 37,719,553 26,934,811 vii) Training expenses 42,857,896 35,992,212 viii) Meeting expenses 21,014,598 18,200,706 ix) Bank charges 32,319,098 22,822,548 x) Uniforms 9,590,920 8,783,230 xi) Conveyance 9,797,586 8,297,826 xii) Honorarium & cash award 24,099,641 12,620,042 xiii) Membership fees 5,356,400 8,265,327 xiv) Staff welfare 12,963,907 10,987,589 xv) Evening banking allowance 2,493,817 2,320,335 xvi) Computer expenses 29,113,672 23,290,845 xvii) Wages 39,201,952 37,257,969 xviii) Discomfort allowance 11,128,028 9,600,059 xix) Air condition maintenance 1,630,558 998,910 xx) WASA / gas expenses 8,821,234 7,317,312 xxi) Washing charges 9,082,553 7,062,985 xxii) Transportation charges 2,930,126 1,445,384 xxiii) ATM charges 58,009,434 14,511,135 xxiv) Reuters charges 6,644,453 6,132,552 xxv) Business development expenses 148,542,267 464,907,850 xxvi) Photocopy expenses 15,187,129 11,590,079 xxvii) Upkeep of office premises 14,637,605 10,452,001 xxviii) Clearing house expenses 418,752 522,358 xxix) Bonus share issue expenses 6,013,176 5,712,366 xxx) Rating expenses 460,000 397,000 xxxi) Band width charges 76,884,762 51,089,823 xxxii) Other regulatory fees and expenses 8,006,697 5,038,735 xxxiii) MPB expenses 1,971,366 980,715 xxxiv) Recruitment expenses 5,699,488 8,855,855 xxxv) Others 17,499,081 17,885,154 xxxvi) Loss on sale of bank’s fixed asset 199,828 281,429 xxxvii) Khidmah card expenses 3,175,755 230,909 xxxviii) Other RDS expenses 46,296,593 23,664,554 Total 1,025,852,252 1,121,440,847

36.1 Motor car running and maintenance As on 31.12.2012 the Bank had 253 (Two hundred fifty three) Motor Vehicles (Cars -205, Jeeps -11, Pickup-35 and Microbuses -2) . The Motor Vehicles are used for carrying cash, development works and for other important works of the bank. Some vehicles are attached with the senior executives of the bank as per transport policy of the bank. A sum of Tk.60,858,475/- was incurred during the year ended on 31.12.2012 as against Tk.58,837,857/- incurred during the year 2011 for repairs, maintenance, purchase of fuel & lubricants and insurance etc. for the motor vehicles of the bank.

Annual Report 2012 265 36.2 VAT related to expenditures All the expenditures reported in this Financial Statements are inclusive of VAT except for specific items which are exempted from VAT by appropriate authority 2012 2011 Taka Taka 36(a) Consolidated other expenses Islami Bank Bangladesh Limited 1,025,852,252 1,121,440,847 Islami Bank Securities Limited 3,849,775 7,529,815 Islami Bank Capital Management Limited 8,595 20,575 1,029,710,622 1,128,991,237

37.0 Retained earnings: movement of surplus in profit & loss account Retained earnings as on 1 January 3,202,467,840 2,594,592,000 Addition during the year 3,127,410,000 3,202,467,840 Total 6,329,877,840 5,797,059,840 Less: Amount transferred to Paid-up Capital (bonus share) & cash dividend (3,202,467,840) (2,594,592,000) Balance of retained earnings as at 31 December 3,127,410,000 3,202,467,840

37(a) Consolidated retained earnings Retained earnings as on 1 January 3,015,952,005 2,624,924,708 Add: Net profit attributable to equity holders of IBBL 5,616,751,549 4,624,597,748 Sub-total 8,632,703,554 7,249,522,456 Less: Transfer to/(from) statutory reserve 2,419,235,534 2,069,463,066 Transfer to/(from) general reserve (22,205,793) (430,484,615) Dividend paid (Bonus share & cash dividend) 3,202,467,840 2,594,592,000 Sub-total 5,599,497,581 4,233,570,451 Balance of retained earnings as at 31 December 3,033,205,973 3,015,952,005

37(b) Non-controlling interest As on Share of profit or 01.01.2012 loss for the year

Islami Bank Securities Limited 49,758 1,332 51,090 49,758 Islami Bank Capital 7,597 600 8,197 7,597 Management Limited 57,355 1,932 59,287 57,355 The share capital of Islami Bank Securities Ltd. is Tk.2700,000,000/- divided into 2,700,000 shares of Tk.1,000/ each out of which share capital of minority is Tk.54,000/- divided into 54 shares of Tk.1,000/- each which represent 0.0020% of total share of the subsidiary Company. The share capital of Islami Bank Capital Management Ltd. is Tk.300,000,000/- divided into 300,000 shares of Tk.1,000/ each out of which share capital of minority is Tk.7,000/- divided into 7 shares of Tk.1,000/- each which represent 0.0023% of total share of the subsidiary Company.

38.0 Events after reporting period The Board of Directors of the Bank in its 201st meeting held on March 28, 2013 recommended 17% Stock Dividend and 8% Cash Dividend for the year 2012 subject to approval of the shareholders in the ensuing 30th Annual General Meeting to be held on May 22, 2013.

39.0 Earnings per share (EPS) a) Attributable profit for the year 5,524,439,741 4,841,446,291 b) Weighted average number of ordinary share during the year 1,250,964,000 1,250,964,000

Basic earnings per share (EPS) (a ÷ b) 4.42 3.87 Previous year’s figures have been adjusted due to issuance of 250,192,800 bonus shares during the year 2012 against 25% Stock Dividend of 2011 as per guidelines of BAS 33, “Earnings per share”. Diluted earnings per share is not applicable since there is no possibility of dilution of shares during the year.

266 Annual Report 2012 2012 2011 Taka Taka

39(a) Consolidated earnings per share Consolidated profit after tax 5,616,753,481 4,624,593,651 Less: Profit attributable to non-controlling interest 1,932 (3,650) Attributable profit for distribution to shareholders of IBBL 5,616,751,549 4,624,597,301 Weighted average number of ordinary share during the year 1,250,964,000 1,250,964,000 Consolidated basic earnings per share 4.49 3.70

40.0 Net asset value per share (NAV) a) Capital/shareholders’ equity for the year 39,755,509,503 27,800,213,373 b) Weighted average number of ordinary share during the year 1,250,964,000 1,250,964,000 Net asset value per share (NAV) (a ÷ b) 31.78 22.22 Net asset value per share (NAV) has been disclosed as per the Securities and Exchange Commission’s Notification No.SEC/CMRRCD/2009-193/Admin/03-31 dvvated June 1, 2009. Previous year’s number of ordinary shares has been adjusted to conform current year’s presentation due to issuance of 250,192,800 bonus shares during the year 2012 against stock dividend of 2011.

41.0 Net operating cash flow per share (NOCFPS) a) Net cash flows from operating activities 20,410,650,708 16,395,120,620 b) Weighted average number of ordinary share during the year 1,250,964,000 1,250,964,000

Net operating cash flow per share (NOCFPS) (a ÷ b) 16.32 13.11 Net operating cash flow per share (NOCFPS) has been disclosed as per the Securities and Exchange Commission’s Notification No.SEC/CMRRCD/2009-193/Admin/03-31 dated June 1, 2009. Previous year’s number of ordinary shares has been adjusted to conform current year’s presentation due to issuance of 250,192,800 bonus shares during the year 2012 against stock dividend of 2011. 42.0 Reconciliation of cash and cash equivalent at the end of the year

i) Cash in hand 6,308,271,684 4,655,980,193 ii) Balance with Bangladesh Bank and its agent banks (Sonali Bank Ltd.) 35,465,737,963 35,975,917,284 iii) Balance with other banks and financial institutions 23,048,348,207 15,577,309,475 Total 64,822,357,854 56,209,206,952

42(a) Consolidated cash and cash equivalents Islami Bank Bangladesh Limited 64,822,357,854 56,209,206,952 Islami Bank Securities Limited 1,117,608,598 940,656,768 Islami Bank Capital Management Limited 358,979,268 335,347,031 66,298,945,720 57,485,210,751

43 Operating lease payments disclosure Non-cancellable operating lease rentals for the Bank are payable as follows: 2012 2011 Taka (in million) Taka (in million)

Less than 1 year 300 220 Between 1 and 5 years 2,175 2,095 More than 5 years 7,530 7,450 10,005 9,765 44.0 Currency wise exposures Currency wise exposures are shown at Annexure-C.

Prof. NRM Borhan Uddin Ph.D Md. Abdus Salam FCA, FCS Director Director

Humayun Bokhteyar, ACPA, FCA Mohammad Abdul Mannan Director Managing Director Dated: Dhaka 28 march 2013 Annual Report 2012 267 - - - 856,090 11 as at 89,553,599 314,224,424 708,792,525 163,957,019 31.12.2011 (Amount in Taka) 5,912,362,211 5,912,362,211 5,912,362,211 5,912,362,211 7,100,192,269 1,187,830,058 2,558,584,798 3,264,223,814 Annexure - A Managing Director Written down value Written 1,160,363 as at 75,726,010 10 (5 - 9) 407,163,281 173,557,552 31.12.2012 Mohammad Abdul Mannan 1,117,319,826 1,117,319,826 1,699,201,022 2,558,584,798 3,283,816,497 5,918,127,307 4,958,100,000 2,232,800,000 7,190,900,000 14,808,228,329 13,109,027,307 - - - - - 2,869,783 Total as at Total 9 (6+ 7 - 8) 31.12.2012 534,783,947 534,783,947 534,783,947 247,698,208 325,636,188 1,795,442,292 2,330,226,239 1,219,238,113 1,219,238,113 ------3,648 8 11,400 11,400 year 6,720,814 during the 27,703,051 20,967,189 27,703,051 Adjustment - - - - - Director Depreciation 7 377,163 year Charged 83,575,987 83,575,987 83,575,987 39,734,015 61,610,673 during the 442,320,307 257,022,469 358,744,320 - - - - - Md. Abdus Salam FCA, FCS Md. 6 2,496,268 451,207,960 451,207,960 451,207,960 207,975,593 968,936,458 284,992,704 01.01.2012 1,915,608,983 1,464,401,023 Charged upto 4,030,146 75,726,010 654,861,489 499,193,740 Total as at Total 31.12.2012 As on 31 December 2012 5 (2 + 3 - 4) 6,452,911,252 6,452,911,252 2,558,584,798 3,818,600,444 4,958,100,000 2,232,800,000 7,190,900,000 2,336,557,939 3,494,643,314 13,643,811,252 13,643,811,252 Fixed Assets Fixed Schedule 17,138,454,566 Islami Bank Bangladesh Limited ------Director 4 year 831,945 Sale / 10,248,311 10,248,311 during the 86,016,078 50,063,001 50,063,001 50,063,001 24,872,821 35,953,077 adjustment - Cost Humayun Bokhteyar, ACPA, FCA ACPA, Humayun Bokhteyar, 3 677,789 year 36,235,412 75,162,516 Addition 103,168,670 139,404,082 669,077,267 133,493,417 878,410,989 during the 8,208,715,071 4,958,100,000 2,232,800,000 7,190,900,000 7,330,304,082 - - - 2 3,352,357 89,553,599 01.01.2012 522,200,017 448,904,045 9,015,755,573 2,558,584,798 3,715,431,774 6,363,570,171 6,363,570,171 1,677,728,983 2,652,185,402 Balance as at Director 1 Particulars Prof. NRM Borhan Uddin Ph.D Total (A+B+ C) Total A. Premises Land Building Construction/capital work in process Sub total (A) B. Revaluation Land Building Sub total (B) Sub total (A+B) C. Other fixed assets Furniture and fixtures Mechanical appliances Motor vehicles Books Sub Total (C) Sub Total Dated: Dhaka 28 march 2013

268 Annual Report 2012 11 as at 31.12.2011 (Amount in Taka) 1,197,887,363 7,110,249,574 712,860,027 168,155,286 856,090 5,912,362,211 5,912,362,211 316,015,960 5,912,362,211 5,912,362,211 - - - 3,264,223,814 89,553,599 2,558,584,798 Annexure - B Managing Director Written down value Written as at 10 (5 - 9) Mohammad Abdul Mannan 31.12.2012 1,707,738,140 14,816,765,447 1,121,024,512 176,798,318 1,160,363 13,109,027,307 408,754,947 5,918,127,307 4,958,100,000 2,232,800,000 7,190,900,000 3,283,816,497 75,726,010 2,558,584,798 Total as at Total 9 (6+ 7 - 8) 31.12.2012 1,800,794,423 2,335,578,370 1,221,649,446 328,011,422 2,869,783 534,783,947 248,263,772 534,783,947 - - - 534,783,947 - - 8 year during the Adjustment 27,703,051 27,703,051 6,720,814 20,967,189 3,648 - 11,400 ------Director Depreciation 7 year Charged during the 361,470,211 361,470,211 445,046,198 258,395,989 62,708,174 377,163 83,575,987 39,988,885 83,575,987 - - - 83,575,987 - - Md. Abdus Salam FCA, FCS Md. 6 01.01.2012 Charged upto 1,467,027,263 1,918,235,223 969,974,271 286,270,437 2,496,268 451,207,960 208,286,287 451,207,960 - - - 451,207,960 - - Total as at Total As on 31 December 2012 31.12.2012 5 (2 + 3 - 4) 3,508,532,563 17,152,343,815 2,342,673,958 504,809,740 4,030,146 13,643,811,252 13,643,811,252 657,018,719 6,452,911,252 6,452,911,252 4,958,100,000 2,232,800,000 7,190,900,000 3,818,600,444 75,726,010 2,558,584,798 Islami Bank Bangladesh Limited Director 4 year Consolidated Fixed Assets Schedule Consolidated Fixed Sale / during the adjustment 35,953,077 86,016,078 10,248,311 10,248,311 24,872,821 - 50,063,001 831,945 50,063,001 - - - - 50,063,001 - Cost Humayun Bokhteyar, ACPA, FCA ACPA, Humayun Bokhteyar, 3 year Addition during the 879,616,693 8,209,920,775 670,087,971 75,302,516 677,789 7,330,304,082 133,548,417 139,404,082 4,958,100,000 2,232,800,000 7,190,900,000 103,168,670 36,235,412 - - - - 2 3,352,357 89,553,599 01.01.2012 454,380,045 524,302,247 Balance as at 9,028,439,118 9,028,439,118 2,664,868,947 1,682,834,298 6,363,570,171 6,363,570,171 3,715,431,774 2,558,584,798 Director 1 Particulars Prof. NRM Borhan Uddin Ph.D Total (A+B+ C) Total Motor vehicles Books (C) Sub Total C. Other fixed assets Furniture and fixtures Mechanical appliances B. Revaluation Land Building Sub total (B) Sub total (A+B) Construction/capital work in process Sub total (A) Building A. Premises Land Dated: Dhaka 28 march 2013

Annual Report 2012 269 - - - 13 2011 2011 4,655,980,193 2,863,395,095 3,109,886,617 3,000,000,000 7,100,192,269 15,577,309,475 35,975,917,284 16,932,273,770 27,800,213,373 16,538,236,446 305,840,563,170 338,990,277,864 361,391,909,405 389,192,122,778 (Amount in Taka) Annexure - C - - - Total Taka Total Total Taka Total 12 2012 2012 Managing Director 6,308,271,684 4,216,038,334 2,974,933,877 3,000,000,000 23,048,348,207 35,465,737,963 27,010,073,770 39,755,509,503 14,808,228,329 21,936,664,969 413,628,103,911 413,628,103,911 372,920,722,887 442,780,807,214 482,536,316,717 Mohammad Abdul Mannan ------11 2011 2011 311,745 311,745 311,745 311,745 374,547 315,939 85,929,911 85,929,911 85,239,425 85,618,166 ------Currency Currency 10 226,738 279,160 295,164 295,164 2012 2012 809,040,930 809,546,828 Equivalent Taka of Other Equivalent Taka Equivalent Taka of Other Equivalent Taka 809,251,664 ------9 872,694 2011 2011 17,456,067 191,234,926 209,563,687 386,781,740 386,781,740 (177,218,053) ------8 Director 120,271 769,251 2012 2012 Equivalent Taka of EURO Equivalent Taka Equivalent Taka of EURO Equivalent Taka 30,908,698 657,971,421 472,275,043 217,494,598 472,275,043 689,769,641 ------7 Md. Abdus Salam FCA, FCS Md. 2011 2011 431,863 23,659,114 23,659,114 23,659,114 23,659,114 27,001,605 25,083,350 28,857,704 52,516,818 ------5,570 6 433,780 2012 2012 27,365,677 16,100,832 16,100,832 Equivalent Taka of GBP Equivalent Taka Equivalent Taka of GBP Equivalent Taka 112,916,993 112,916,993 101,212,798 129,017,825 ------5 2011 2011 17,470,523 561,254,716 3,409,460,700 2,181,429,684 5,608,360,907 5,047,106,191 5,047,106,191 As at 31 December 2012 ------Currency wise Exposures Islami Bank Bangladesh Limited 4 2012 2012 48,820,755 165,538,395 Director 5,524,146,126 5,460,770,198 4,000,081,438 7,199,194,036 7,199,194,036 11,199,275,474 11,199,275,474 Equivalent Taka of US Dollar Equivalent Taka Equivalent Taka of US Dollar Equivalent Taka - - - 3 2011 2011 Humayun Bokhteyar, ACPA, FCA ACPA, Humayun Bokhteyar, 4,636,830,566 2,863,395,095 7,100,192,269 3,000,000,000 3,109,886,617 11,864,372,819 11,864,372,819 16,932,273,770 33,751,632,244 16,538,236,446 27,301,700,840 305,840,563,170 383,235,751,455 333,532,419,074 355,934,050,615 - - - Taka Taka 2 2012 2012 6,258,670,140 4,216,038,334 3,000,000,000 2,808,620,661 27,010,073,770 15,955,976,932 29,946,414,230 14,808,228,329 21,936,664,969 34,615,764,810 372,920,722,887 469,708,706,949 405,940,238,836 435,092,942,139 1 Director ASSETS LIABILITIES Prof. NRM Borhan Uddin Ph.D Placement with other banks & financial institutions Investments (in shares & securities) Cash in hand Balance with banks & other financial institutions Balance with Bangladesh Bank & its agent bank Investments Fixed assets including premises Bills payable Other liabilities Net position Non banking assets assets Total Placement from Bangladesh Bank, other banks, financial institutions and agents Deposits Mudaraba Perpetual Bond liabilities Total Other assets Dated: Dhaka 28 march 2013

270 Annual Report 2012 - - 6,382,817,545 6,174,089,429 Consolidated Consolidated 32,350,537,081 12,831,753,310 18,286,162,580 44,156,587,817 13,949,318,996 15,780,219,439 24,668,980,125 20,123,408,425 (18,401,218,085) (7,291,655,115) (8,888,760,686) (25,870,425,237) (Amount in Taka) Annexure - D 83,131,630 Common Common 5,021,686,866 4,705,687,623 3,587,015,335 3,141,597,313 2,725,142,321 2,778,974,661 7,382,815,281 1,566,383,309 1,343,854,689 5,866,739,634 4,345,357,970 (4,262,226,340) (9,262,904,834) (4,522,884,945) (6,726,319,649) 112,483,697 112,483,697 652,861,452 299,833,652 185,392,546 959,253,531 954,032,186 Chittagong Chittagong North Zone North Zone (368,721,722) (244,765,106) 1,958,993,652 1,022,920,256 1,994,881,235 1,018,626,091 1,322,753,908 1,204,018,637 (1,052,851,258) (1,624,822,431) 278,193,654 321,313,698 363,374,587 Chittagong Chittagong (311,062,563) South Zone South Zone (400,847,701) (267,305,104) 1,820,999,111 1,820,999,111 2,865,284,521 1,987,789,191 4,609,058,124 1,457,624,524 1,553,694,007 1,908,255,188 2,309,102,889 (1,685,853,651) (2,310,206,370) 189,114,561 189,114,561 203,724,563 971,464,377 834,674,032 950,371,060 (209,113,654) (431,139,115) (664,583,652) (982,516,532) (325,904,906) 2,163,094,563 1,177,785,612 3,072,583,652 1,381,510,175 1,160,578,938 (1,230,214,388) Rajshahi Zone Rajshahi Zone 204,807,521 399,973,657 618,445,978 102,264,532 132,792,584 740,916,890 484,121,137 350,368,136 720,710,510 873,709,474 Bogra Zone Bogra Zone 1,319,294,685 1,338,832,654 (978,351,452) (925,194,197) (370,342,374) (389,588,337) 223,901,254 301,561,257 290,143,698 265,992,461 758,630,192 646,990,721 868,048,356 (591,067,511) (377,631,932) 1,459,115,867 1,459,115,867 1,571,532,587 1,168,972,169 2,597,979,254 1,024,622,653 Khulna Zone Khulna Zone (1,114,463,652) (1,652,908,339) Zone Zone For the year ended 31 December 2011 338,744,236 366,123,681 (587,812,430) (439,605,778) 2,112,320,622 2,112,320,622 Dhaka North Dhaka North 1,761,812,365 2,989,793,652 1,302,883,654 2,177,029,101 3,140,521,245 2,185,802,719 1,927,960,907 2,515,773,337 2,551,926,400 (2,725,304,509) (2,106,874,587) Islami Bank Bangladesh Limited Consolidated segment reporting For the year ended 31 December 2012 Zone Zone 515,792,654 799,553,654 285,353,652 440,439,785 (573,209,139) (472,862,508) 2,672,941,236 1,539,273,374 2,879,971,452 1,631,941,238 1,599,518,515 1,251,417,887 1,824,627,026 2,072,381,023 Dhaka South Dhaka South (1,856,490,732) (1,840,553,652) Zone Zone 642,062,541 (511,765,104) (563,226,805) 2,711,419,906 2,711,419,906 4,558,049,115 4,558,049,115 1,451,884,563 7,856,012,563 3,617,929,656 2,790,255,642 3,353,482,447 5,069,814,219 (2,389,111,412) (2,755,481,245) (1,913,433,652) (6,572,551,254) Dhaka Central Dhaka Central 12,103,914,562 ------Branchs Branchs Controlled Controlled Head Office Head Office (479,508,944) 2,740,929,680 1,174,234,652 9,283,932,357 3,435,655,388 3,915,164,332 (1,893,268,025) (4,649,734,652) Particulars Particulars Net investment income Investment income Investment income Profit paid on mudaraba deposits Profit received/(paid) on IB Genearl Account Commission, exchange & other income There are 16 operating segments including subsidiaries as on 31 December 2012. Out of which only 9 reportable per BFRS 8 “Operating segments”. Hence other non-reportable segments have been shown as under ‘Common’. Profit paid on mudaraba deposits Profit received/(paid) on IB Genearl Account Commission, exchange & other income Net investment income Operating Profit Operating Profit Total operating income Total operating income Total Total operating expenses Total operating expenses Total B. Segmental assets and liabilities assets the reason this For purpose. this for identifiable individually and separable not are subsidiaries) (except segments operating of liabilities and assets regarding information necessary The and liabilities of the respective segments have not been presented here.

Annual Report 2012 271 Islami Bank Bangladesh Limited (Off-Shore Banking Unit) Balance Sheet As at 31 December 2012

31.12.2012 31.12.2011 Property and assets Notes USD Taka USD Taka

Cash in hand - - - - Cash in hand (including foreign currency) - - - - Balance with Bangladesh Bank & its agent - - - - bank(s) (including foreign currency)

Balance with other banks & financial 1,685,770.41 134,608,599 355,723.54 29,117,003 institutions In Bangladesh 2.0 1,685,770.41 134,608,599 355,723.54 29,117,003 Outside Bangladesh - - - - Placement with banks & other financial - - - - institutions

Investments in shares & securities - - - - Government - - - - Others - - - - Investments 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,345 General investments etc. - - - - Bills purchased & discounted 3.0 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,345 Fixed assets - - - - Other assets - - - - Non - banking assets - - - - Total property and assets 126,154,075.15 10,073,390,286 27,342,932.85 2,238,098,348

Liabilities and Capital

Liabilities

Placement from banks & other financial 5.0 124,468,304.74 9,938,781,687 26,988,106.91 2,209,054,816 institutions

Deposits & other accounts - - - - Mudaraba Savings Deposits - - - - Mudaraba Term Deposits - - - - Other Mudaraba Deposits - - - - Al- Wadeeah Current and other deposit - - - - accounts Bills payable - - - -

Other liabilities 1,244,683.05 99,387,817 - - Deferred tax liabilities /(assets) - - - - Total liabilities 125,712,987.79 10,038,169,504 26,988,106.91 2,209,054,816

Capital/ share-holders’ equity 441,087.36 35,220,782 354,825.94 29,043,532 Paid - up capital - - - - Statutory reserve - - - - Other /translation reserves 6.0 - (3,303,771) - - Retained earnings 7.0 441,087.36 38,524,553 354,825.94 29,043,532 Total liabilities & shareholders’ equity 126,154,075.15 10,073,390,286 27,342,932.85 2,238,098,348

272 Annual Report 2012 31.12.2012 31.12.2011 Notes USD Taka USD Taka Off-balance sheet items

Contingent liabilities

Acceptances & endorsements - - - - Letters of guarantee - - - - Irrevocable letters of credit (including back - - - - to back bills) Bills for collection - - - - Other contingent liabilities - - - - Total - - - -

Other commitments

Documentary credits, short term and trade - - - - related transactions Forward assets purchased and forward - - - - deposits placed Undrawn note issuance, revolving and - - - - underwriting facilities Undrawn formal standby facilities, credit - - - - lines and other commitments Total - - - - Total off-balance sheet items including - - - - contingent liabilities

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

Annual Report 2012 273 Islami Bank Bangladesh Limited (Off-Shore Banking Unit) Profit & Loss Account For the year ended 31 December 2012

31.12.2012 31.12.2011 Notes USD Taka USD Taka Operating income

Investment income 8.0 1,766,978.25 144,514,613 358,345.98 29,328,468 Profit paid on mudaraba deposits (6,641.23) (538,410) - - Net investment income 1,760,337.02 143,976,203 358,345.98 29,328,468

Income from investments in shares & securi- - - - - ties Commission, exchange & brokerage 9.0 - - - - income Other operating income 10.0 21,200.00 1,733,870 1,800.02 147,319 Total operating income 1,781,537.02 145,710,073 360,146.00 29,475,787

Operating expenses

Salary & allowances 11.0 11,792.05 967,751 5,320.06 432,255 Rent, taxes, insurances, electricity etc. - - - - Legal expenses - - - - Postage, stamps and telecommunication - - - - etc. Stationery, printing and advertisement etc. - - - - Chief executive’s salary & fees - - - - Directors’ fees & expenses - - - - Shari‘ah supervisory committee’s fees & - - - - expenses Auditors’ fees - - - - Charges on investment losses - - - - Depreciation and repair to bank’s assets - - - - Zakat expenses - - - - Other expenses 83,974.56 6,829,952 - - Total operating expenses 95,766.61 7,797,703 5,320.06 432,255 Profit/ (loss) before provision 1,685,770.41 137,912,370 354,825.94 29,043,532

Provision for investments & off- balance 1,244,683.05 99,387,817 - - sheet items Provision for diminution in value of invest- - - - - ments in shares Other provisions - - - - Total provision 1,244,683.05 99,387,817 - -

Total profit/(loss) before taxes 441,087.36 38,524,553 354,825.94 29,043,532

Provision for taxation for the period Current tax 12.0 - - - - Deferred tax 12.0 - - - - Net profit/ (loss) after tax 441,087.36 38,524,553 354,825.94 29,043,532 Retained earnings from previous year - - - - Less: Interim dividend paid - - - - Add: Net profit after tax 441,087.36 38,524,553 354,825.94 29,043,532 Profit available for appropriation 441,087.36 38,524,553 354,825.94 29,043,532 Less: Appropriation Statutory reserve - - - - General reserve - - - - Retained earnings 441,087.36 38,524,553 354,825.94 29,043,532 The annexed notes form an integral part of these financial statements.

274 Annual Report 2012 Islami Bank Bangladesh Limited (Off-Shore Banking Unit) Cash Flow Statement For the year ended 31 December 2012

31.12.2012 31.12.2011 USD Taka USD Taka

Cash flows from operating activities Investment income 1,766,978.25 144,514,613 358,345.98 29,328,468 Profit paid on mudaraba deposits (6,641.23) (538,410) - - Income/ dividend receipt from investments in shares - - & securities Fees & commission receipt in cash - - - - Recovery from written off investments - - - - Payments to employees (11,792.05) (967,751) (5,320.06) (432,255) Cash payments to suppliers - - - - Income tax paid - - - - Receipts from other operating activities 21,200.00 1,733,870 1,800.02 147,319 Payments for other operating activities (83,974.56) (6,829,952) - - i) Operating profit before changes in operating 29,043,532 1,685,770.41 137,914,370 354,825.94 assets & liabilities

Changes in operating assets and liabilities

Increase/decrease of statutory deposits - - - - Increase/decrease of net trading securities - - - - Increase/decrease of placement to other banks - - - - Increase/decrease of investments to customers (97,481,095.43) (7,729,800,342) (26,987,209.31) (2,208,981,345) Increase/decrease of other assets - - - - Increase/decrease of deposits from other banks 98,724,880.88 7,829,114,688 26,988,106.91 2,209,054,816 Increase/decrease of deposits received from custom- - - - - ers Increase/decrease of other liabilities account of - - - - customers Increase/decrease of trading liabilities - - - - Increase/decrease of other liabilities (1,599,508.99) (131,735,120) - - (ii) Cash flows from operating assets and liabilities (355,723.54) (32,420,774) 897.60 73,471 Net cash flows from operating activities (A)=(i+ii) 1,330,046.87 105,491,596 355,723.54 29,117,003

Cash flows from investing activities

Proceeds from sale of securities - - - - Payment for purchase of securities/membership - - - - Purchase/sale of property, plants & equipments - - - - Purchase/sale of subsidiaries - - - - Net cash flows from investing activities (B) - - - -

Cash flows from financing activities

Receipts from issue of debt instruments - - - - Payment for redemption of debt instruments - - - - Receipts from issuing ordinary share/ rights share - - - - Dividend paid in cash - - - - Net cash flows from financing activities (C) - - - -

Net increase/(decrease) in cash (A+B+C) 1,330,046.87 105,491,596 355,723.54 29,117,003

Add/(less) effects of exchange rate changes on cash - - - - & cash equivalent Add:cash & cash equivalents at beginning of the year 355,723.54 29,117,003 - - Cash & cash equivalents at the end of the year 1,685,770.41 134,608,599 355,723.54 29,117,003

Annual Report 2012 275 Islami Bank Bangladesh Limited (Off-Shore Banking Unit) Notes to the financial statements For the year ended 31 December 2012 1.0 Status of the Company Off-shore Banking Units (OBU) of Islami Bank Bangladesh Ltd. governed under the rules and guidelines of Bangla- desh Bank. The Bank obtained permission from Bangladesh Bank for operating of Off-shore Banking Units located at Head Office Complex Branch, Dhaka, Agrabad Branch, Chittagong and Uttara Branch, Dhaka vide Bangladesh Bank letter no. BRPD (P-3)744 (111)/2010-1032 dated 28 March 2010. The Bank has Commenced the operation of its Off-shore Banking Units from 08.02.2011 at Head Office Complex Branch, Dhaka and from 27.09.2011 at Agrabad Branch, Chittagong. Operations of OBU located at Uttara Branch, Dhaka will be started within shortly. 1.1 Principal activities The principal activities of the OBU are to provide mudaraba investment against payment of import bills under UPAS (Usance Payment at Sight) to its customers of Off-shore Banking Units in Bangladesh. 1.2 Significant accounting policies and basis of preperation of financial statements 1.2.1 Basis of accounting The Off-shore Banking Units maintain its accounting records in USD from which accounts are prepared according to the Bank Company Act, 1991, Bangladesh Financial Reporting Standards (BFRSs) and other applicable directives issued by Bangladesh Bank. 1.2.2 Use of estimates and judgments The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the report amounts of assets, liabilities, income and experiences. Actual results may differ from these estimates. The figures (Taka) appearing in these Financial Statements have been rounded off to the nearest integer. 1.2.3 Foreign currency transactions a. Foreign currencies transaction Foreign currency transactions are converted in to equivalent Taka using the ruling exchange rates on the dates of respective transactions as per BAS-21 “The Effects of changes in Foreign Exchange Rates”. Foreign currency balances held in US Dollars are converted into Taka at weighted average rate of inter-bank market as determined by Bangladesh Bank on the closing date of every month. b. Transaction gains and losses The resulting exchange transaction gains and losses are included in the profit and loss account. 1.2.4 Cash flow statement Cash flow statement has been prepared in accordance with the BAS-7 “Cash flow statement” under direct method as recommended in the BRPD Circular No. 14, dated June 25, 2003 issued by the Banking Regulation and Policy Department of Bangladesh Bank. 1.2.5 Reporting period The financial statements cover from January 01 to December 31, 2012. 1.3 Assets and basis of their valuation 1.3.1 Cash and cash equivalents Cash and cash equivalents include notes and coins on hand, unrestricted balances held with Bangladesh Bank and highly liquid financial assets which are subject to insignificant risk of changes in their fair value, and are used by the unit’s management for its short-term commitments. 1.3.2 Investments Investment of OBU are stated in the balance sheet on gross/net basis. Profit is calculated on daily product basis but charged and account for on realisation/cash basis. 1.4 Allocation of common expenses Establishment expenses in the nature of rent, rates, taxes, management expenses, printing and stationery, electricity, postage, stamps, telecommunication and audit fees etc. have not been separately accounted for in the financial statements, but staff costs ( salaries and allowances) are separately accounted for OBU.

276 Annual Report 2012 31.12.2012 31.12.2011 USD Taka USD Taka

2.0 Balance with other banks & financial institutions In Bangladesh (balance with treasury) 1,685,770.41 134,608,599 355,723.54 29,117,003 Outside Bangladesh - - - - Total 1,685,770.41 134,608,599 355,723.54 29,117,003

3.0 Investments 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,345

3.1 Bills purchased & discounted Payable in Bangladesh - - - - Payable outside Bangladesh 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,345 Total 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,345

4.0 Deposits & other accounts Bank’s deposits - - - - Customers deposits - - - - Total - - - -

5.0 Borrowing from other banks, financial institutions and agents Bangladesh Bank - - - - Islami Bank Bangladesh Ltd. 124,468,304.74 9,938,781,687 26,988,106.91 2,209,054,816 Total 124,468,304.74 9,938,781,687 26,988,106.91 2,209,054,816

6.0 Translation reserve Balance as on 1 January - - - - Addition/(adjustment) during the year (3,303,771) - - Balance of retained earnings as at 31 December - (3,303,771) - -

7.0 Retained earnings: movement of surplus in profit & loss account Retained earnings as on 1 January - - - - Addition during the year 441,087.36 38,524,553 354,825.94 29,043,532 Less: Foreign exchange gain - - - - Balance of retained earnings as at 31 December 441,087.36 38,524,553 354,825.94 29,043,532

8.0 Investment income Mudaraba documentary bills 1,766,978.25 144,514,613 358,345.98 29,328,468

9.0 Commission, exchange & brokerage income Exchange income - - - -

10.0 Other Income - Service charge realized 21,200.00 1,733,870 1800.02 147,319

11.0 Salary & allowances : i) Basic pay 7,060.03 579,554 3,092.31 251,250 ii) House rent allowance 2,917.75 239,648 1,546.16 125,626 iii) Medical allowance 791.48 64,820 430.15 34,950 iv) Entertainment allowance - - - - v) Conveyance allowance 437.47 35,800 203.07 16,499 vi) Bank contribution to P.F. 585.32 47,929 48.37 3,930 Total 11,792.05 967,751 5,320.06 432,255

12.0 Provision for tax Provision for current and deferred tax have not been separately accounted for in the financial statements of OBU. These are accounted for directly in the main financial statements of the Bank.

Annual Report 2012 277 Annexure-E

Financial Statements of Islami Bank Securities Limited (IBSL)

278 Annual Report 2012 Islami Bank Securities Limited (IBSL)

Report of the Directors The directors present their report and financial statements for the year ended 31 December 2012.

Principal activities The principal activities of the company are to open BO account under full DP of Central Depository Bangladesh Limited (CDBL), provide Demate & Remate under full DP of CDBL, provide trading facility under brokerage license, provide investment facility under Musharaka Mode and maintain own portfolio under dealer account.

Directors The following Directors have held the office of the Company as on the reporting date: 1. Engr. Md. Eskander Ali Khan, Chairman (Appointed 29 March, 2010) 2. Md. Shahidul Islam, Vice Chairman (Appointed 29 March, 2010) 3. Md. Nazrul Islam (Appointed 29 March, 2010) 4. Professor N R M Borhan Uddin, Ph.D. (Appointed 07 February, 2013) 5. Mohd. Shamsul Haque (Appointed 29 March, 2010) 6. Md. Habibur Rahman (Appointed 29 March, 2010) 7. Md. Nurul Islam (Appointed 29 March, 2010) 8. Engr. Muhammad Abul Bashar (Appointed 06 September, 2011)

Auditor ACNABIN Chartered Accountants was appointed as auditor of the Company.

Statement of directors’ responsibilities The directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable laws and regulations.

Statement of disclosure to auditor So far as the directors are aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

Status of the Company ISLAMI BANK SECURITIES LIMITED was incorporated on the 22 March 2010 under the Companies Act, 1994 as a public limited company. It is a subsidiary company of Islami Bank Bangladesh Limited (IBBL) that holds all the shares of the company except 54 (fifty four) shares being held by six individual shareholders. The registered office of the company is situated at 20, Dilkusha, C/A in Dhaka, Bangladesh.

On behalf of the Board

Eng. Md. Eskander Ali Khan Chairman

Annual Report 2012 279 Independent Auditor’s Report

to the Shareholders of ISLAMI BANK SECURITIES LIMITED We have audited the accompanying financial statements of ISLAMI BANK SECURITIES LIMITED which comprise the Statement of Financial Position as at 31 December 2012 and the Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Financial Reporting Standards (BFRS) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the risk assessment of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements give a true and fair view of the financial position of ISLAMI BANK SECURITIES LIMITED as at 31 December 2012 and its financial performance and its cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards (BFRS), Companies Act, 1994 and other applicable laws and regulations.

Date: Dhaka ACNABIN 10 March 2013 Chartered Accounts

280 Annual Report 2012 ISLAMI BANK SECURITIES LIMITED Statement of Financial Position as at 31 December 2012

31.12.2012 31.12.2011 Notes Taka Taka Assets: Non-Current Assets 314,779,703 316,896,286 Property, Plant & Equipment 3 8,537,118 10,057,305 Membership at Cost 4 304,453,399 304,453,399 Preliminary Expenses 5 324,075 432,100 Deferred Revenue Expenses 6 1,465,111 1,953,482 Current Assets 2,416,257,463 2,286,811,170 Cash & Bank Balances 7 296,279,119 86,648,966 Investment in Securities 8 1,245,476,289 1,327,316,725 Accounts Receivables 9 33,973,309 9,674,234 Advances, Deposits & Prepayments 10 1,328,296 2,779,710 Advance Income Tax 11 17,870,970 6,383,735 Investment in MTDR 12 821,329,479 854,007,801 Total Assets 2,731,037,166 2,603,707,456

Liabilities & Equity: Equities 2,554,510,819 2,487,896,719 Share Capital 13 2,700,000,000 2,700,000,000 Retained Earnings (145,489,181) (212 ,103,281) Non-Current Liabilities Deferred Tax Liability 14 397,859 333,071 Current Liabilities 176,128,488 115,477,666 Accounts Payables 15 137,325,257 47,539,013 Provision for Income Tax 16 36,827,715 15,300,321 Provision for Expenses 17 429,182 666,179 Other Current Liabilities 18 1,546,334 1,589,856 Investment from IBBL (HOCB) 19 - 50,382,297 Total Equity & Liabilities 2,731,037,166 2,603,707,456

The annexed notes form an integral part of these Financial Statements.

Managing Director Director Chairman

This is the Statement of Financial Position referred to in our separate report of even date.

Dated: Dhaka ACNABIN 10 March 2013 Chartered Accountants

Annual Report 2012 281 ISLAMI BANK SECURITIES LIMITED Statement of Comprehensive Income for the year ended 31 December 2012

2012 2011 Notes Taka Taka Operating Income Investment Income 20 139,022,005 70,813,001 Brokerage Commission 21 10,947,680 13,353,288 Other Operating Income 22 1,915,097 3,490,485 Total Operating Income 151,884,782 87,656,774

Operating Expenses Salary & Allowances 23 10,116,810 9,187,108 Rent, Tax, Insurance & Electricity 24 2,481,976 2,812,501 BO Accounts Maintenance Expenses 1,240,400 1,357,600 Brokerage Expenses 25 575,408 734,009 Postage, Stamps and Telecommunications 26 111,190 105,915 Stationery, Printing and Advertisements 27 182,238 299,370 Repair & Maintenances 28 889,832 566,890 CDS Charges 913,767 1,781,942 Depreciation 2,725,891 2,426,110 Amortization 29 596,395 596,395 License Renewal Expenses 30 103,400 72,500 Other Expenses 31 1,016,799 1,420,746 Auditor’s Fees 75,000 5,000 Business Development Expenses - 909,350 Director’s Fees & Expenses - 276,000 Total Operating Expenses 21,029,106 22,551,437 Operating Profit 130,855,676 65,105,338 Unrealized gain (Loss) arising from investment in securities 32 (30,969,670) (289,077,029) Profit (Loss) before Tax 99,886,006 (223,971,691) Less: Tax Expenses Current Tax 33,207,118 14,651,359 Deferred Tax 64,788 115,743 33,271,906 14,767,102 Net Profit (Loss) after Tax 66,614,100 (238,738,793) Other Comprehensive Income - - Total Comprehensive Income for the Year 66,614,100 (238,738,793)

The annexed notes form an integral part of these Financial Statements.

This is the Statement of Comprehensive Income referred to in our separate report of even date.

Dated: Dhaka ACNABIN 10 March 2013 Chartered Accountants

282 Annual Report 2012 ISLAMI BANK SECURITIES LIMITED Statement of Cash Flows for the year ended 31 December 2012

2012 2011 Notes Taka Taka A. Cash Flows from Operating Activities: Net Profit after Tax 66,614,100 (238,738,793) Adjustment for non-cash items: 34,291,956 292,356,226 Depreciation 2,725,891 2,426,110 Amortization 596,395 596,395 Unrealized gain (loss) in market value of securities 30,969,670 289,077,029 Loss on sale of fixed assets - 256,692 Cash Flows before Working Capital Changes (a) 100,906,056 53,617,433 Changes in Working Capital (b) 76,763,011 (78,233,741) Increase (Decrease) in accounts payable 89,786,244 (109,842,421) Increase (Decrease) in provision for income tax 21,527,394 6,782,197 Increase (Decrease) in provision for expenses (236,997) (3,852,659) Increase (Decrease) in other current liabilities (43,522) (2,561,280) Increase (Decrease) in deferred tax liabilities 64,788 115,743 Decrease (Increase) in advance, deposit & prepayments 1,451,414 2,843,921 Decrease (Increase) in accounts receivable (24,299,075) 34,664,493 Decrease (Increase) in advance income tax (11,487,235) (6,383,735) Net Cash Flows from Operating Activities (a+b) 177,669,067 (24,616,308) B. Cash Flows from Investing Activities: Acquisition of fixed assets (1,205,704) (4,489,898) Investments in Securites (1,123,091,966) (698,704,196) Sale of investment in securities (Cost of sale) 1,173,962,731 580,234,296 Investments in MTDR (72,863,329) (854,007,801) Encashment of Investments in MTDR 105,541,651 - Received from sale of fixed assets - 402,100 Deferred revenue expenses - (2,441,852) Net Cash used in Investment Activities 82,343,383 (979,007,351) C. Cash Flows from Financing Activities: Repayment of investment availed from IBBL(HOCB) (50,382,297) (2,441,292,512) Receipt from issue of share capital - 2,400,000,000 Investment availed from IBBL(HOCB) - 1,000,000,000 Net Cash Flows from Financing Activities (50,382,297) 958,707,488 Net Increase (Decrease) in Cash & Bank balances (A+B+C) 209,630,153 (44,916,171) Add: Cash & Bank balances at the beginning of the year 86,648,966 131,565,137 Cash & Bank balances at the end of the year 296,279,119 86,648,966 The annexed notes form an integral part of these Financial Statements.

Managing Director Director Chairman

This is the Statement of Cash Flows referred to in our separate report of even date.

Dated: Dhaka ACNABIN 10 March 2013 Chartered Accountants

Annual Report 2012 283 ISLAMI BANK SECURITIES LIMITED Statement of Changes in Equity for the year ended 31 December 2012

Amount in Taka

Particulars Paid-up Capital Retained Total Equity Earnings

Opening balance as at 01 January 2011 (Note: 2.22) 300,000,000 26,635,512 326,635,512

Issue of share capital 2,400,000,000 - 2,400,000,000

Total comprehensive income for the year - (238,738,793) (238,738,793)

Balance as at 31 December 2011 2,700,000,000 (212,103,281) 2,487,896,719

Opening balance as at 01 January 2012 2,700,000,000 (212,103,281) 2,487,896,719

Total comprehensive income for the year - 66,614,100 66,614,100

Balance as at 31 December 2012 2,700,000,000 (145,489,181) 2,554,510,819

Managing Director Director Chairman

This is the Statement of Changes in Equity referred to in our separate report of even date.

Dated: Dhaka ACNABIN 10 March 2013 Chartered Accountants

284 Annual Report 2012 ISLAMI BANK SECURITIES LIMITED Notes to the Financial Statements as at and for the year ended 31 December 2012

1.0 Status of the Company

ISLAMI BANK SECURITIES LIMITED was incorporated on the 22 March 2010 under the Companies Act, 1994 as a public limited company. It is a subsidiary company of Islami Bank Bangladesh Limited (IBBL) that holds all the shares of the company except 54 (fifty four) shares being held by six individual shareholders. The registered office of the company is situated at 20, Dilkusha, C/A inDhaka, Bangladesh.

1.1 Nature of Business

The main objective of the company is to carry on the business of a stock broker and stock dealer house that is to buy, sell and deal in shares, stocks, debenture, bonds and other securities, and to carry on any business as permissible for a broker and dealer house duly licensed by the Bangladesh Securities and Exchange Commission (BSEC).

2.0 Significant Accounting Policies & Basis of Preparation of Financial Statements

2.1 Statement of Compliance

The financial statements have been prepared in accordance with--

a) Bangladesh Financial Reporting Standards (BFRS) except recognition of SND and MTDR profit that are recognized on cash basis and measurement of investment in securities under own portfolio as per BAS- 39 “ Financial Instrument: Recognition and Measurement”,

b) Companies act 1994,

c) and other relevant laws and regulations applicable in Bangladesh.

2.2 Basis of Preparation

The financial statements of the company have been prepared as a going concern basis based on the historical cost convention.

2.3 Basis of Reporting

The financial statements are prepared and presented for external users by the company in accordance with identified financial reporting framework. Presentation has been made in compliance withthe requirement of BAS-1- “Presentation of Financial Statements”.

2.4 Components of Financial Statements

The financial statements referred to here comprise:

a. Statement of Financial Position

b. Statement of Comprehensive Income

c. Statement of Cash Flows

d. Statement of Changes in Equity and

e. Notes to the Financial Statements

Annual Report 2012 285 2.5 Statement of Cash Flows

Statement of cash flows is prepared in accordance with the Bangladesh Accounting Standard-7 “Statement of Cash Flows” applying indirect method.

2.6 Reporting Period

These financial statements cover one calendar year from 1 January to 31 December 2012.

2.7 Property, Plant and Equipment (PP&E)

All Property ,Plant and Equipment are stated at cost less accumulated depreciation as per BAS-16 “ Property, Plant and Equipment”. The cost of acquisition of an asset comprises its purchase price and any directly attributable cost of bringing the assets to its working condition for its intended use inclusive of inward freight, duties and non-refundable taxes.

The company recognizes the cost of purchasing new assets or cost of replacing new assets in the carrying amount of an item of property, plant and equipment when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the company and the cost of the item can be measured reliably. Expenditure incurred after the assets have been put into operation, such as repair and maintenances is normally charged off as revenue expenditure in the period in which it is incurred.

2.7.1 Depreciation Policy

Depreciation is charged at the following rates on a straight line method on motor vehicles and computers & software and other assets are depreciated on reducing balance method according to their respective percentage given below. Yearly depreciation has then been charged proportionately to 365 days.

Items Rate Mechanical appliances 20-25% Computers 25% Furniture & fixtures 10-20% Motor vehicles 20%

2.8 Investment in Membership

Investment in membership are stated at cost. The cost of acquisition of a membership comprises its purchase price and any directly attributable cost of completing compliance requirements relevant to it inclusive of stamp duty and non-refundable taxes, etc.

2.9 Advance Income Tax

The amount of advance income tax are mainly deduction of tax at sources by bank on profits arisen from bank deposits (SND), MTDR profit and dividend income received against securities owned by the company under portfolio investment.

2.10 Preliminary and Deferred Revenue Expenses

These are recognized as an asset if it is probable that future economic benefits that are attributable to the asset will flow to the entity and cost of the asset can be measured reliably. All the preliminary and deferred revenue expenses have been recognized as assets and as per Board’s decision all these assets will be amortized over the period of 5 (five) years or at a rate of 20% commencing from the year 2011. All these assets are stated in financial position at cost less accumulated amortization.

2.11 Provision for Taxation

Provision for current income tax has been made in compliance with relevant provisions of income tax law.

286 Annual Report 2012 2.12 Deferred Taxation

Deferred tax liabilities are the amount of income taxes payable in future periods in respect of taxable temporary differences. Deferred tax assets are the amount of income taxes recoverable in future periods in respect of deductible temporary differences. Deferred tax assets and liabilities are recognized for the future tax consequences of timing differences arising between the carrying values of assets, liabilities, income and expenditure and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted at the balance sheet date. The impact on the account of changes in the deferred tax assets and liabilities has also been recognized in the statement of comprehensive income as per BAS-12 “Income Taxes”.

2.13 Investment in Securities

Investment in securities means purchase of shares of quoted/listed companies in DSE & CSE through stock dealer account. Investment is made in shariah complied securities for trading purpose and investment purpose for short term, mid term and long term duration. Investment is valued at the lower of cost or market value on the last date of reporting period and relevant unrealized gain (loss) is recognized in income statement duly.

2.14 Dividend Income

All dividends received or receivable against the investment in securities hold under dealer account have been considered as dividend income in comprehensive income statement. Dividend is recognized on accrual basis and date of AGM of the company declaring dividend is considered as recognition base of accrual dividend.

2.15 Capital Gain

The difference between cost price and net sales price of the securities is considered as capital gain. The gain reported as income is only realized gain by selling different securities during the accounting year.

2.16 Musharaka Investment & Income

Musharaka investment means the margins (Investment facilities) provided to eligible clients under brokerage operation in Musharaka principle/ mode of finance. As per Musharaka principle, profits arisen through capital gain and dividend from this investment are shared between company and client as per agreed ratio and loss is shared as per equity participation ratio. This investment is valued at the lower of cost or market value on the last date of reporting period and relevant unrealized gain (loss) is recognized in income statements duly.

2.17 Provisions

All provision is recognized on the financial statement date if, as a result of past events, the company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.

2.18 Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand and cash at bank, which are held and available for use by the company without any restriction and are readily convertible to a known amount of cash and that are subject to an insignificant risk of change in value.

2.19 Advance, Deposits and Prepayments

Advances are initially measured at cost. After initial recognition, advances are carried at cost less deductions, adjustments or charges to other account heads. Deposits are measured at payment value. Prepayments are initially measured at cost. After initial recognition, prepayments are carried at cost less charges to income statement.

Annual Report 2012 287 2.20 Event after the Reporting Period

As per BAS - 10 “Events after the balance sheet date”, events after the reporting period are those events, favorable and unfavorable, that occur between the end of the reporting period and the date when the financial statements are authorized for issue. Two types of events can be identified: i) those that provide evidence of conditions that existed at the end of the reporting period (Adjusting events after the reporting period); and ii) those that are indicative of conditions that arose after the reporting period (Non- adjusting events after the reporting period). There was no material events which have occurred after the reporting period which could affect the values stated in the financial statements.

2.21 Related Party Disclosure A party is related to the company if: a. Directly or indirectly, through one or more intermediaries, that party controls, is controlled by, or is under common control with the entity; has an interest in the entity that gives it significant influence; or has joint control over the entity. b. The party is an associate c. The party is a joint venture in which the entity is a venturer d. The party is a member of the key management personnel of the entity or of its parent. e. The party is a close family member of any individual referred to in (a) or (d). f. The party is an entity that is controlled, jointly controlled, or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly any individual referred to in (d) or (e). g. The party is a postemployment benefit plan for the benefit of employees of the entity or of any entity that is a related party of the entity. i. Nature & type of related party transaction of the company

Name of related party Relationship Nature of transaction Amount Islami Bank Bangladesh Limited (IBBL) Parent- subsidiary Bank balance 107,079,309 Islami Bank Bangladesh Limited (IBBL) Parent- subsidiary Investment in MTDR 821,329,479 Islami Bank Bangladesh Limited (IBBL) Parent- subsidiary Accounts payable 100,001,000 Islami Bank Bangladesh Limited (IBBL) Parent- subsidiary Investment from IBBL 50,382,297 Islami Bank Bangladesh Limited (IBBL) Parent- subsidiary Profit from Bank on MTDR 80,461,443 Managing Director Key management Short-term employee benefits 2,234,270 personnel (Salary & allowance)

2.22 General

a. The financial statements are presented in Bangladeshi Taka (BDT) currency, which is the company’s functional currency.

b. The figures appearing in these financial statements are expressed in Taka currency and rounded off to the nearest Taka.

c. Previous year’s figures have been rearranged, where necessary, to conform to current year’s presentation. In 2010, a repayment of investment from IBBL wrongly shown as an expense. It was an error at that time so subsequently it was rectified retrospectively restating the opening balance of retained earnings of 2011 in the statement of changes in equity. Since the overall effect of this error is not material to the financial statements as a whole of subsequent years hence no complete restated opening balance of all balance sheet items has been presented in these financial statements.

288 Annual Report 2012 31.12.2012 31.12.2011 Taka Taka 3 Property, Plant & Equipment Cost Opening balance at cost 12,683,545 8,937,500 Add: Assets purchased during the year 1,205,704 4,489,898 Less: Sale/Adjustment during the year - 743,853 Closing value at cost (a) 13,889,249 12,683,545 Depreciation Opening balance 2,626,240 285,191 Add: Depreciation charged during the year 2,725,891 2,426,110 Less: Adjustment during the year - 85,061 Closing balance of depreciation (b) 5,352,131 2,626,240 Written Down Value (a - b) 8,537,118 10,057,305 Details are given in Appendix-I

4 Membership at Cost DSE 24,453,399 24,453,399 CSE 280,000,000 280,000,000 304,453,399 304,453,399

5 Preliminary Expenses Total value at cost as at 31.12.2012 540,125 540,125 Less: Accumulated amortization as at 31.12.2012 (216,050) (108,025) 324,075 432,100 6 Deferred Revenue Expenses Total value at cost as at 31.12.2012 2,441,852 2,441,852 Less: Accumulated amortization as at 31.12.2012 (976,741) (488,370) 1,465,111 1,953,482 7 Cash & Bank Balances Cash in hand 2,996 16,372 Cash at Bank 296,276,123 86,632,594 296,279,119 86,648,966

8 Investment in Securities Own portfolio (Note 8.1) 1,215,619,167 1,302,642,757 Musharaka portfolio (Note 8.2) 29,857,122 24,673,968 1,245,476,289 1,327,316,725 8.1 Own Portfolio Opening balance at cost 1,591,719,786 1,497,923,853 Add: Shares purchased during the year 1,116,095,487 999,387,067 Less: Cost of shares sold during the year (1,173,962,732) (580,234,296) Adjustment against loss realization - (325,356,838) Closing balance of investment at cost 1,533,852,541 1,591,719,786 Less: Unrealized gain/(loss) on own portfolio (318,233,374) (289,077,029) Closing balance of investment 1,215,619,167 1,302,642,757

Annual Report 2012 289 31.12.2012 31.12.2011 Taka Taka 8.2 Musharaka Portfolio Musharaka investment at cost 31,670,447 24,673,968 Less: Unrealized gain (Loss) on portfolio (1,813,325) - Closing balance of investment 29,857,122 24,673,968

9 Accounts Receivable Receivable from DSE 989,809 1,296,065 Receivable from clients 700,845 474,569 Dividend receivable 2,242,200 7,903,600 Receivable from DSE (Dealer) 30,040,455 - 33,973,309 9,674,234

10 Advances, Deposits & Prepayments Advance office rent for head office 1,242,500 2,733,500 Prepaid insurance premium 43,796 46,210 Prepaid Motor Car Maintenance 42,000 - 1,328,296 2,779,710

11 Advance Income Tax Opening balance 6,383,735 - Add: Advance tax paid during the year (Note 11.1) 17,870,970 6,383,735 Less: Adjustment against tax assessment (6,383,735) - 17,870,970 6,383,735

11.1 Advance Tax paid During the Year TDS on Bank deposit profit 8,406,626 2,510,492 TDS against dividend income 3,353,203 1,949,560 TDS on brokerage commission by CSE 907 1,923,683 TDS on brokerage commission by DSE 1,110,234 - Advance income tax 5,000,000 - 17,870,970 6,383,735

12 Investment in MTDR Opening balance 854,007,801 - Add: New/Reinvestment during the year 72,863,329 854,007,801 Less: Encashment during the year (105,541,651) - 821,329,479 854,007,801

13 Share Capital Authorized Capital 5,000,000 ordinary shares of Taka 1,000 each. 5,000,000,000 5,000,000,000

290 Annual Report 2012 Paid- up Capital 31.12.2012 31.12.2011 Taka Taka

27,00,000 ordinary shares of Taka 1,000 only each: No. of Name of shareholder Percentage shares 1) IBBL (Represented by four directors) 2,699,946 99.9982 2,699,946,000 2,699,946,000 2) Janab Mohd. Shamsul Haque 9 0.0003 9,000 9,000 3) Janab Md. Habibur Rahman 9 0.0003 9,000 9,000 4) Janab Md. Nurul Islam 9 0.0003 9,000 9,000 5) Janab Muhammad Abul Bashar 9 0.0003 9,000 9,000 6) Janab Abu Taher Mohammad Saleh 9 0.0003 9,000 9,000 7) Janab Syed Abdullah Mohammad Saleh 9 0.0003 9,000 9,000 2,700,000 100.00 2,700,000,000 2,700,000,000

31.12.2012 31.12.2011 Amount in Taka Amount in Taka 14 Deferred Tax Liability Accounting base of fixed assets 7,563,057 5,859,038 Tax base of fixed assets 6,502,099 4,970,848 Taxable temporary difference (TTD) 1,060,958 888,190 Deferred tax liabilities ( 37.5% of TTD) 397,859 333,071

15 Accounts Payable Payable to clients 128,525,872 41,891,007 Payable to DSE 3,083 4,134,012 Payable to DSE (Dealer) 10,397 1,281,719 Payable to CSE (Dealer) 8,770,905 189,137 Software annual maintenance fees 15,000 30,000 Payable to CSE - 13,138 137,325,257 47,539,013 16 Provision for Income Tax Opening balance 15,300,321 8,518,124 Add: Provision of income tax for the year 33,207,118 14,651,359 Less: Adjustment against assessment (11,679,724) (7,869,162) Adjustment against advance tax (6,383,735) - Payment of tax for settlement (5,295,989) (7,869,162) 36,827,715 15,300,321 17 Provision for Expenses Auditor’s fees 75,000 55,000 CDS charges 129,246 29,760 Electricity bills 3,612 4,842 Network expenses 18,050 18,050 Newspaper bills 1,226 1,234 Office rents 101,534 406,134 Professional & consultancy fees 35,000 35,000 Service charges 15,750 13,250 Telephone bills 16,167 17,852 Wages 25,500 51,066 Water bills 3,400 3,668 Office maintenance 4,697 - Motor car maintenances - 30,323 429,182 666,179

Annual Report 2012 291 31.12.2012 31.12.2011 Taka Taka 18 Other Current Liabilities Security deposit from clients 1,120,779 1,129,779 Security deposits payable on fixed assets (Note 18.1) 409,348 460,077 Sundry creditors 16,207 - 1,546,334 1,589,856

18.1 Security Deposits Payable on Fixed Assets Talukder enterprise 103,500 103,500 Computer source 145,500 145,500 Digilog system 5,550 5,550 Partex furniture 16,530 16,530 Gazi communication 33,180 33,180 Net com. 39,088 39,088 Leads corporation 66,000 - Islam brothers - 116,729 409,348 460,077

19 Investment from IBBL (HOCB) Opening balance 50,382,297 1,500,000,000 Add: Investment received during the year - 1,000,000,000 Less: Repayment/Adjustment of investment (50,382,297) (2,449,617,703) - 50,382,297 20 Investment Income Dividend from investment in securities 11,283,464 17,985,227 Profit from Bank on SND 6,300,071 2,874,624 Profit from Bank on MTDR 80,461,443 26,303,830 Capital gains (Note 21.1) 40,977,027 23,649,320 139,022,005 70,813,001

20.1 Capital Gains Capital gains from sale of securities 40,099,005 71,323,796 Capital gains from Musharaka investment 878,022 689,352 Less: Adjustment against capital loss - (48,363,828) 40,977,027 23,649,320 21 Brokerage Commissions Commission on CSE turnover 8,882 66 Commission on DSE turnover 10,938,798 13,353,222 10,947,680 13,353,288 22 Other Operating Income Account opening fees 216,000 309,600 BO accounts maintenance fees 1,549,000 1,697,500 Dividend from Musharaka investment (Margin 130,597 20,108 account) Documentation fee (Margin account) 5,000 15,500 Miscellaneous income 14,500 28,979 Cash back rebate from CDBL - 930,199 Demeat fees - 6,109 Recruitment fees - 444,100 Share transfer fees - 38,390 1,915,097 3,490,485

292 Annual Report 2012 31.12.2012 31.12.2011 Taka Taka 23 Salary & Allowances Salary 9,042,796 8,264,585 Eid bonus 918,465 725,241 Wages 155,549 134,989 Daily allowances - 58,968 Overtime allowance - 3,325 10,116,810 9,187,108 24 Rents, Taxes, Insurance & Electricity Office rents 2,293,041 2,615,604 Renewal of tax token for motor vehicles 11,604 11,604 Insurance premiums 54,969 75,041 Electricity bills 122,362 110,252 2,481,976 2,812,501

25 Brokerage Expenses DSE Howla charges 128,840 161,438 DSE Laga charges 444,093 570,601 Investors’ protection fund charges 1,955 1,970 CSE Howla charges 202 - CSE Laga charges 318 - 575,408 734,009

26 Postage, Stamps and Telecommunications Telephone bills 110,875 88,214 Postage 315 481 Stamps - 17,220 111,190 105,915 27 Stationery, Printing & Advertisements Stationeries expenses 158,238 273,974 Advertisements 24,000 25,350 Photocopy expenses - 46 182,238 299,370 28 Repair & Maintenance Motor car running & maintenance 508,577 341,012 Office maintenances 59,312 16,015 Other repair & maintenance 40,343 10,930 Software annual maintenance fees 65,000 80,000 Network support 216,600 118,933 889,832 566,890 29 Amortization Amortization of preliminary expense 108,025 108,025 Amortization of deferred revenue expenses 488,370 488,370 596,395 596,395 30 License Renewal Expenses Renewal fees for Depository Participant (DP) 4,000 4,000 Renewal fees for DSE membership 20,000 20,000 Other renewal fees 4,400 48,500 Renewal fees for CSE membership 20,000 - Renewal of trade license fees 55,000 - 103,400 72,500

Annual Report 2012 293 31.12.2012 31.12.2011 Amount in Taka Amount in Taka 31 Other Expenses Annual subscription fees 9,700 20,000 Bank charges 85,565 78,109 Conveyances 13,399 25,119 Computer accessories 128,910 270,655 Electronic expenses 56,303 7,600 Entertainments 150,212 271,561 Internet bills 72,450 67,874 Miscellaneous expenses 23,541 11,397 Newspaper, magazine & periodicals 15,646 20,199 Professional & consultancy fees 70,000 49,030 Service charges 177,717 178,940 Tour & travels 5,000 102,267 Water bills 47,682 55,053 BO accounts maintenance subsidy 145,274 - Software expenses 15,400 - Loss on sale of fixed assets - 256,692 Photograph expenses - 1,250 Training programme expenses - 5,000 1,016,799 1,420,746 32 Unrealized Gain (Loss) Arising from Investment in Securities Against own portfolio during the year (Note 32.1) (29,156,345) (289,077,029) Against musharaka portfolio during the year (Note 32.2) (1,813,325) - (30,969,670) (289,077,029) 31.12.2012 31.12.2011 Taka Taka 32.1 Against Own Portfolio During the Year Investment in securities at market as at 31.12.2012 1,098,993,789 1,302,642,757 Investment in securities at cost price as at 31.12.2012 1,533,852,541 1,591,719,786 Total unrealized gain (loss) as at 31.12.2012 (434,858,752) (289,077,029) Less: Opening balance of unrealized gain (loss) (289,077,029) - Total unrealized loss for the year 2012 (145,781,723) (289,077,029) Less: 80% provision which are kept for adjustment in next four Quarters 116,625,378 - (29,156,345) -

As per Directive # SEC/CMRRCD/2009-193/144 dated 27 February 2013 of Bangladesh Securities and Exchange Commission, 20% provision has been made for unrealized loss arising out of year-end (31.12.2012) revaluation of shares purchased through Own Portfolio. The Directive prohibits payment of cash dividend if the company makes less than 100% provision on such unrealized loss. 32.2 Against Musharaka Portfolio During the Year Investment in securities at market as at 31.12.2012 22,603,822 - Investment in securities at cost as on 31.12.2012 31,670,447 - Total unrealized gain (loss) as at 31.12.2012 (9,066,625) - Less: Opening balance of unrealized gain(loss) - - Total unrealized loss for the year 2012 (9,066,625) - Less: 80% provision which are kept for adjustment in next four Quarters 7,253,300 - (1,813,325) -

294 Annual Report 2012 1,078,287 8,537,118 8,537,118 3,240,766 1,591,666 2,626,399 4,198,267 2,935,030 1,791,536 1,132,472 Appendix- I as at as at 10,057,305 W.D.V. W.D.V. 31.12.2011 31.12.2012 565,564 534,689 768,105 310,694 269,708 5,352,131 2,375,234 1,876,644 1,277,733 2,626,240 31.12.2011 31.12.2012 Balance as at Balance as at ------8,088 85,061 33,326 43,647 Adjustment Adjustment Depreciation Depreciation 254,870 739,446 312,254 264,981 279,210 2,426,110 2,426,110 2,725,891 1,097,501 1,108,539 1,095,200 the year the year Charged during Charged during 36,747 31,766 34,145 310,694 285,191 768,105 182,533 269,708 2,626,240 1,277,733 01.01.2011 01.01.2012 Balance as at Balance as at 5,616,000 2,157,230 4,503,043 5,476,000 3,703,135 2,102,230 1,612,976 1,402,180 13,889,249 12,683,545 31.12.2011 31.12.2012 Balance as at Balance as at as at 31 December 2012 ------61,500 743,853 492,353 190,000 ISLAMI BANK SECURITIES LIMITED Adjustment Adjustment - Cost Cost Schedule of Property, Plant & Equipment Schedule of Property, 55,000 140,000 799,908 367,180 210,796 1,205,704 4,489,898 1,081,083 3,041,635 Addition Addition 723,000 5,476,000 2,102,230 8,937,500 3,703,135 1,513,500 5,476,000 1,225,000 1,402,180 12,683,545 01.01.2011 01.01.2012 Balance as at Balance as at Particulars Particulars Total as at 31.12.2012 Total Motor vehicles Furniture & fixture Total as at 31.12.2011 Total Computer & Software Furniture & fixture Motor vehicles Mechanical Appliances Computer & Software Mechanical Appliances b) Year : 2011 Year b) a) Year : 2012 Year a)

Annual Report 2012 295 Annexure-F

Financial Statements of Islami Bank Capital Management Limited (IBCML)

296 Annual Report 2012 Auditor’s Report

to the Shareholders of Islami Bank Capital Management Limited

We have audited the accompanying financial statements of Islami Bank Capital Management Limited which comprise the Statement of Financial Position as of 31 December 2012 and the related Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows and a summary of significant accounting policies and other explanatory information.

Management Responsibilities for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the financial statements give a true and fair view of the financial position of Islami Bank Capital Management Limited as of 31 December 2012, and of its financial performance and its cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards and comply with the Companies Act 1994, the Securities and Exchange Act 1993, the Securities and Exchange Rules 1987, conditions for Registration issued by the Securities and Exchange Commission and other applicable laws and regulations. We also report that: a) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof; b) in our opinion, proper books of account as required by law have been kept by the company so far as it appeared from our examination of those books; c) these financial statements dealt with by this report are in agreement with the books of account and returns; and d) the expenditure incurred was for the purpose of business of the Islami Bank Capital Management Limited.

Dhaka, ACNABIN 12 March 2013 Chartered Accountants

Annual Report 2012 297 Islami Bank Capital Management Limited Statement of Financial Position As at 31 December 2012

31.12.2012 31.12.2011 Notes Taka Taka ASSETS Non-current assets Preliminary expenses 3 537,485 537,485 Total non-current assets 537,485 537,485

Current assets Cash & bank balances 4 358,979,268 335,347,031 Prepaid rent 5 458,500 1,008,700 Advance income tax 6 22,101,332 4,125,038 Total current assets 381,539,100 340,480,769 Total assets 382,076,585 341,018,254

EQUITIES AND LIABILITIES Equities Share capital 7 300,000,000 300,000,000 Retained earnings 51,283,442 25,583,801 Total equity 351,283,442 325,583,801

Liabilities Non-current liabilities - - Current Liabilities Accrued expenses 8 23,000 20,900 Provision for income tax 9 30,770,065 15,350,280 Other payables 10 78 63,273 Total current liabilities 30,793,143 15,434,453 Total equities and liabilities 382,076,585 341,018,254

The annexed notes form an integral part of the Statement of Financial Position.

Director Director Director Chairman

This is the Statement of Financial Position referred to in our report of even date.

Dhaka, ACNABIN 12 March 2013 Chartered Accountants

298 Annual Report 2012 Islami Bank Capital Management Limited Statement of Comprehensive Income For the year ended 31 December 2012

2012 2011 Notes Taka Taka

Other income 11 41,750,739 35,672,794 Total income 41,750,739 35,672,794

Less: Operating expenses

Bank charge 12 6,650 20,575 Office rent 13 599,718 613,473 Entertainment expenses 1,945 - Audit fees 23,000 20,900 Total operating expenses 631,313 654,948 Profit before tax 41,119,426 35,017,846 Provision for income tax 15,419,785 13,131,692 Profit after tax 25,699,641 21,886,154

The annexed notes forms an integral part of the Statement of Comprehensive Income.

Director Director Director Chairman

This is the Statement of Comprehensive Income referred to in our report of even date.

Dhaka, ACNABIN 12 March 2013 Chartered Accountants

Annual Report 2012 299 Islami Bank Capital Management Limited Statement of Changes in Equity For the year ended 31 December 2012

(Amount in Taka)

Paid-up Capital Retained Earnings Total

Particulars

Balance as at 01 January 2011 - 3,697,647 3,697,647

Issue of share capital 300,000,000 - 300,000,000

Net profit for the year - 21,886,154 21,886,154

Balance as at 31 December 2011 300,000,000 25,583,801 325,583,801

Balance as at 01 January 2012 300,000,000 25,583,801 325,583,801

Issue of share capital - - -

Net profit for the year - 25,699,641 25,699,641

Balance as at 31 December 2012 300,000,000 51,283,442 351,283,442

300 Annual Report 2012 Islami Bank Capital Management Limited Statement of Cash Flows For the year ended 31 December 2012

2012 2011 Taka Taka Cash flows from operating activities Profit before tax 41,119,426 35,017,846 Adjustment - - Adjusted operating profit before changes in working capital 41,119,426 35,017,846

Changes in working capital: Decrease in prepaid rent 550,200 550,200 (Increase) in advance income tax (17,976,294) (3,534,413) (Decrease)/increase in other payables (63,195) 59,231 Increase/(decrease) in accrued expenses 2,100 (2,100) Net cash (used in)/generated from operating activities (A) 23,632,237 32,090,764

Cash flow from investing activities (B) - -

Cash flows from financing activities (C) - -

Net increase/(decrease) in cash & cash equivalent for the period (A+B+C) 23,632,237 32,090,764 Add: Cash & bank balance at beginning of the year 335,347,031 303,256,267 Cash & bank balances at end of the year 358,979,268 335,347,031

Annual Report 2012 301 Islami Bank Capital Management Limited Notes to the Financial Statements For the year ended 31 December 2012

1. Status of the Company

Islami Bank Capital Management Ltd. was incorporated on 01 April 2010 under the Companies Act, 1994 as a Public Limited Company. It is a subsidiary company of Islami Bank Bangladesh Limited. Islami Bank Bangladesh Limited holds all the shares of the company except 7 shares which are held by 7 individuals. The company has been established as per Bangladesh Bank letter # BRPD (R- 1)717/2010-47 dated 7 February 2010. The registered office of the company is situated at 63 Dilkusha, Dhaka.The main objectives of the company are to carry on business of Merchant Banking in all its aspects including Underwriting and/or management of issue, public offer of shares, stocks, debentures, bonds, etc.; sale or purchase of securities or transfer thereof; fund management for clients, underwriting of shares, stocks, debentures, bonds, etc.; managing portfolio investments of any person or company, by investment in various avenues, etc.

2. Significant accounting policies

2.1 Basis of presentation of financial statements

The financial statements of the company have been prepared applying accrual basis of accounting under historical cost convention in accordance with Bangladesh Financial Reporting Standards (BFRS) and other applicable laws and regulations.

2.2 Revenue recognition

Revenue is recognised only when it is probable that the economic benefits associated with the transaction will flow to the entity. Revenue during the period is recognised by way of profit on Mudaraba Deposits.

2.3 Statement of cash flows

Statement of Cash Flow has been presented under indirect method.

2.3 General

The figures appearing in these Financial Statements have been rounded off to the nearest integer.

31.12.2012 31.12.2011 3. Preliminary expenses Taka Taka

Incorporation fees 474,625 474,625 Trade license fees 13,100 13,100 TIN certificate fees 2,500 2,500 Professional fees 41,800 41,800 Bank charges for issuing MICR cheque 150 150 CIB service charge 500 500 SEC application Fees 1,000 1,000 Stamps 600 600 Register & seal 310 310 Miscellaneous 2,900 2,900 537,485 537,485

302 Annual Report 2012 31.12.2012 31.12.2011 Taka Taka 4. Cash & bank balances

Cash in hand - 422 Cash at bank & other financial institution (Note 4.1) 358,979,268 335,346,609 358,979,268 335,347,031

4.1 Cash at bank & other financial institution Name of bank & institution Islami Bank Bangladesh Limited 558,782 8,251,270 Shahjalal Islami Bank Limited 252,795,518 226,744,438 EXIM Bank Limited 63,140,750 56,633,731 First Security Bank Limited 42,483,218 43,717,170 Islami Bank Securities Limited 1,000 - 358,979,268 335,346,609

5. Prepaid rent Advance payment for office rent 1,008,700 1,558,900 Less: Adjusted during the year 550,200 550,200 458,500 1,008,700 6. Advance income tax Opening balance 4,125,038 590,625 Deducted at source during the year: 4,156,362 3,534,413 Shahjalal Islami Bank Ltd. 723,002 623,679 Exim Bank Bangladesh Ltd. 2,894,564 2,496,604 First Security Islami Bank Ltd. 538,796 414,130 Paid by IBCML during the year 13,819,933 - 22,101,332 4,125,038

7. Share capital

Authorised capital 1,000,000 ordinary shares of Tk.1,000 each. 1,000,000,000 1,000,000,000 Issued, subscribed and paid up capital 300,000 ordinary shares of Tk.1,000 each fully paid 300,000,000 300,000,000 Details of shareholding are as under: Name of the shareholders No. of Share Islami Bank Bangladesh Limited 299,993 299,993,000 299,993,000 Janab M. Fariuddin Ahmad 1 1,000 1,000 Janab Mohammad Abdul Mannan 1 1,000 1,000 Janab Md. Setaur Rahman 1 1,000 1,000 Janab Gulam Moula Choudhury 1 1,000 1,000 Janab A.K.M Malek Chowdhury 1 1,000 1,000 Janab Nurul Islam Khalifa 1 1,000 1,000 Janab Abdus Sadeque Bhuiyan 1 1,000 1,000 300,000 300,000,000 300,000,000

Annual Report 2012 303 31.12.2012 31.12.2011 Taka Taka 8. Accrued expenses Audit fees 20,000 20,000 Add: VAT 3,000 900 23,000 20,900

9. Provision for income tax Opening balance 15,350,280 2,218,588 Add: Provision made during the year 15,419,785 13,131,692 Less: Settlement during the year - - 30,770,065 15,350,280

10. Other payables Other payable 78 - VAT payable on rent - 63,273 78 63,273

11. Other income 2012 2011 Taka Taka Profit from MTD & MSND accounts: Name of bank Shahjalal Islami Bank Limited 7,230,022 6,236,785 EXIM Bank Limited 28,945,643 24,966,042 First Security Bank Limited 5,387,961 4,141,300 Islami Bank Bangladesh Limited 187,113 328,667 41,750,739 35,672,794 41,750,739 35,672,794

12. Bank charge Account maintenance charge of IBSL 500 - Account maintenance charge of banks 1,150 575 Excise duty 5,000 20,000 6,650 20,575 13. Office rent Rent 550,200 550,200 VAT 49,518 63,273 599,718 613,473

304 Annual Report 2012 Particulars of Head Office, Zonal Offices, Branches and SME/Krishi Shakha

Head Office Zonal Offices Sl. Phone Number & Sl. Name of the Office Phone Number & Name of the Office & Address No. E-mail Address No. & Address E-mail Address 1 Head Office PABX: 02- 9563040, 1 Dhaka Central Zone 8362278, 8332094 Islami Bank Tower, 9560099 01730-326106, 30 Anjuman Mofidul Islam Road, E-mail: dhakacentral@ 40, Dilkusha C/A, Dhaka-1000 01713-438566, web-site: Kakrail, Dhaka islamibankbd.com www.islamibankbd. com 2 Dhaka South Zone 8319300, 8312941 30 Anjuman Mofidul Islam Road, E-mail:dhakasouth@ Head Office PABX-9568312, 9568346, Kakrail, Dhaka islamibankbd.com (Vigilance Squad, AMD, Law, 9567856; RDD 3 8322068, 9355702 Recovery) (Mob. 01755-538502) Dhaka North Zone 28, Dilkusha C/A, Dhaka-1000. 30 Anjuman Mofidul Islam Road, E-mail: dhakanorth@ Kakrail, Dhaka. islamibankbd.com PABX: 02- 9563040, Head Office (IAD,Retail, 4 Chittagong North Zone (031) 716294, 2523273 Consumer & Real Estate 9560099 03, CDA, Sheikh Mujib Road., E-mail: ctgnorth@ Investment Division) Agrabad C/A, Chittagong islamibankbd. com 39, Dilkusha C/A, Dhaka-1000. 5 Chittagong South Zone (031) 715650, 726598, Head Office (BCD) PABX: (02) 7113750, 03, CDA, Sheikh Mujib Road., 01755-532603 E-mail: 20, Dilkusha (9th Floor) C/A, 7113542 01755-524571 Agrabad C/A, Chittagong ctgsouth@islamibankbd. com Dhaka-1000, (BACH Manager) 6 Khulna Zone 041-722988, 723941, Head Office (Marketing Division) PABX: (02) 7113750, 4, Old Jessore Road, Khulna 812533, 01730-727390, 20, Dilkusha (9th Floor) C/A, 7113542 E-mail:[email protected] Dhaka-1000 7 Bogra Zone 051-69310,69410 801,Thana Road, Bogra E-mail:bograzone@ Head Office (CSD) PABX # 7113750, 7113542 islamibankbd .com 20, Dilkusha (6th Floor) C/A, 8 Sylhet Zone 0821-710093, 723627, Dhaka-1000 2/1, Main Road, J-Block, Shahjalal E-mail:sylhetzone@ Head Office (Engineering PABX # 7113750, 7113542, Upashahar, Sylhet islamibankbd .com Division) 9571475, 9571506, 95715 9 Comilla Zone 081-63375, 77072, 20, Dilkusha ( 8th Floor) C/A, 74, 9571602, 7115575, Paduar Bazar, Biswa Road, E-mail: comillazone @ Dhaka-1000 71 15521,Fax -88-02- Comilla-3500. islamibankbd.com 9571574 10 Barisal Zone 0431-72016, 0431-72018, Head Office (CSRD) PABX: (02) 7120015, Kuwait Plaza , Sagardi Bazar, E-mail:barisalzone@ 20, Dilkusha (6th Floor) C/A, 9571602; Ext: 756 to 758. Barisal islamibankbd.com Dhaka-1000 11 Rajshahi Zone 0721-812737, 771543, Head Office {RDD,CIB,Share, 9564595 (Share), 9554635 356, Station Road, Rajshahi Email:Zone_rajshahi@ FAD ( Recon, PF, Salary, Bills, (FAD-Recon) islamibankbd.com Budget & 10% Income Tax ) Fax: 88-02- 9564595 12 Mymensingh Zone 091-65745, 01730-729739 63, Dilkusha C/A, Dhaka-1000 Islami Bank Plaza, 76/A, Choto E-mail: mymensinghzone@ Bazar, Mymensingh. islamibankbd.com Head Office (ICTW),IBW 01730-730162 To Otobi Building, 14 Dilkusha (7th & 01730-730167 13 Noakhali Zone (0321) 63102, (0321) 9th Floor), Dhaka. Sufia Shopping Centre, Main Road, noakhalizone@ Moijdee Court, Noakhali. islamibankbd.com Foreign Remittance Services 01730-730162 To 14 Rangpur Zone 0521-55463 rangpurzone@ Division. 01730-730167 Almi Bari, 30, Jail Road, islamibankbd.com IBW, Otobi Building, 14 Dilkusha Dhap, Rangpur. (7th & 9th Floor), Dhaka. BACH & DBA Section; FTPD, 01730-736076, ICTD Support Team, Otobi 01755-532492; Dhaka Division Building, 14 Dilkusha, Dhaka. 01755-524570 Sl. Name of the Branch Phone Number & Head Office (ICCW) Dhaka, 9355371, 9355372, No. & Address E-mail Address Islami Bank Hospital Complex, 9346181, 1 Araihazar Branch 01755 – 629462 30, Anjuman Mofidul Islam Road, Fax-88-02- 9355371 Bazar Masjid Road, Araihazar Kakrail, Bazar, Narayanganj- 1450. Card Division 01755-521990 2 Badda Branch 01730-328873 ICTD, Head Office, 62, Shaid Kha/194, Pragati Sarani E-mail: badda@ Tajuddin Ahmed Sharoni, Maddhya Badda, Dhaka-1212 islamibankbd.com Mohakhali, Dhaka-1212 3 Bangshal Branch* (02) 9556826, 7175792 IBTRA 02-9133411, 8127625, 222, Bangshal Road, Dhaka . E-mail: bangshal@ 13-A/2-A, Block-B, Babar Road, 9139951, E-mail: dib. islamibankbd.com Mohammadpur, Dhaka-1207 [email protected]

Annual Report 2012 305 Sl. Name of the Branch Phone Number & Dhaka Division No. & Address E-mail Address Sl. Name of the Branch Phone Number & 24 Gopalganj Branch 02-6685005, 01711- No. & Address E-mail Address 727, Madrasha Road, Gopalganj. 693941, E-mail:gopalgonj@ 4 Baridhara Branch 01755-551138 islamibankbd.com Abed Ali Tower, Ka/59, Progati E-mail: baridhara@ 25 Gulshan Branch* (02) 8825424, 01711- Sharani, Gulshan, Dhaka- 1212 islamibankbd.com PBL Tower , 39 (old), 17 (new) 693915, E-mail: gulshan@ North Gulshan C/A, Dhaka-1212. islamibankbd.com 5 Bhairab Branch (0294) 70289, 01711- 26 Gulshan Circle-1 Br. 02-8850352 82 & 84 Misti Patty, Bhairab, 431278, E-mail:bhairab@ 6, SW(H), Gulshan Avenue, E-mail:gulshan1@ Kishoreganj islamibankbd .com Gulshan-1, Dhaka. islamibankbd.com 6 Bhulta Branch (03895) 787027, 27 Haji Camp Branch 02-8919293, 01711- Haji Shopping Complex 01713-425963 E-mail: Ashkona, Uttara, Dhaka 693944, E-mail:hajicamp @ Bhulta, Rupganj, Narayanganj, [email protected] islamibankbd.com 28 Head Office Complex Branch* 02-9570911, 01755-521991, 7 Board Bazar Branch 02-9292942 Islami Bank Tower, 40, Dilkusha E-mail: hocc@islamibankbd. Chairman Plaza, Dhaka-Mymensing 01730-703852, E-mail : C/A, Dhaka-1000. com Main Road, Gazipur-1704. boardbazar@islamibankbd. 29 IDB Bhaban Branch 02-9183161-2, E-mail: com E/8 - A, Begum Rokeya Sharani, idbbhaban@islamibankbd. 8 Bakshiganj Branch 01730-727391, 01755- Agargaon, Dhaka-1207 com Haji Sonaullah Mansion, 636217 30 Islampur Branch* (2) 7393918, 01711- Bakshiganj, Jamalpur 41-42, Islampur Road, Dhaka 693909, E-mail: islampur @ 9 Cantonment Branch (02) 9872397 islamibankbd.com 24, Mamata Shopping Complex, 01711-693934 31 Jamalpur Branch 0981-63356, 01711- Uttar Kafrul, Dhaka Cantonment, mail:cantonment@ 3604/3181, Jam-e-Masjid Road, 693922, E-mail:jamalpur@ Dhaka-1206. islamibankbd.com Jamalpur. islamibankbd.com 10 Chawk Mugaltuly Branch* (02) 7318013, 7313508, 32 Jatrabari Branch (02) 7546200, 93, Chawk Mugaltully, Dhaka E-mail: cmb@islamibankbd. 69, Shahid Faruque Sarak, South E-mail: jatrabari@ Com Jatrabari, Dhaka-1204, islamibankbd.com 11 Damodya Branch 06023-56332 33 Kanchpur Branch 02-7691556, Sheikh Ali Ashraf Complex, 01713-425964 Chittagong Road, Siddhirganj, E-mail: recon.kanchpur@ Damodya, Shariatpur. E-mail : recon.damodya@ Narayanganj islamibankbd.com islamibankbd.com 34 Kawran Bazar Branch* (02) 9125759 , 01711- 12 Dohar Branch (038946) 80405, 13, Kazi Nazrul Islam Avenue, 439094, E-mail: kawran@ Papel Shopping Centre, Joypara, 01730-034852 Dhaka, islamibankbd.com Dohar, Dhaka E-mail:dohar@ 35 Khilgaon Branch 02-7216464, 01714- islamibankbd.com 1419/2, Block-A, Khilgaon, Taltala, 015532, E-mail: khilgaon @ 13 Mirpur-1 Branch (02) 8058252, Dhaka-1219 islamibank bd.com Rabiul Plaza, Mirpur-1, Dhaka-1216, 01711-693938 36 Kishoreganj Branch 0941-62441, 0941-61675, darussalam@islamibankbd. 1404, Mohammadi Mansion, Bara 01711-693920, E-mail: com Bazar, Kishoreganj. [email protected] 14 Dhanmondi Branch (02) 9129333, 37 Konabari Branch 01755-580984 Rangs Nilu Square, 1,3,5, Sat 01730-729738, Ranu Super Market, Konabari, E-mail: konabari@ Masjhid Road, Dhanmondi dhanmondi@islamibankbd. Gazipur- 1346. islamibankbd.com R/A,Dhaka-1209 com 38 Kotiadi Branch 01755-554479, 15 Elephant Road Branch* (02) 8626214, 01711- 2473, Kotiadi Hospital Road, E-mail: kotiadi@ Chowrangi Bhaban, 124/A, 693940 elephantroad@ Kotiadi, Kishoreganj- 2330 islamibankbd.com Elephant Road, Dhaka-1205 islamibankbd.com 39 Lalbag Branch (02) 9615341, 01730- 16 Faridpur Branch 0631-63081,65592, 01711- Road, Apex Building, Labagh, 703856, E-mail: lalbagh@ 83/1, Mujib Sarak, Faridpur 693921 Dhaka-1211. islamibankbd.com [email protected] 40 Local Office * (02) 9552897-98, E-mail: 17 Farmgate Branch* (02) 9121114, 01711- 75, Motijheel C/A, Dhaka-1000 logb @islamibankbd.com; Malek Tower, 31 Tejkuni Para, 693912, [email protected]; Farmgate, Dhaka-1215 E-mail:farmgate@ 41 Madaripur Branch 0661-62074, 01714-040473, islamibankbd.com Melborn Plaza, Puran Bazar, E-mail : recon.mad aripur@ 18 Foreign Exchange Branch * (02) 9569413, 9565756 Madaripur-7900 islamibankbd.com 41, Dilkusha C/A.Dhaka, E-mail: fex@islamibankbd. 42 Madhabdi Branch 02-9446497, 01711- com Madhabdi Bazar, Narsingdi 693933, E-mail: mad 19 Fulbaria Branch (09023) 73204, 01730- [email protected] Haji Ibrahim Super Market, 333624, E-mail: fulbaria@ 43 Manikganj Branch 0651-61618,01711-693926, Fulbaria, Mymensingh. islamibankbd.com Syed Market , 60, Shaheed Rafiq E-mail: manikgonj @ 20 Ganakbari Branch 01713-425966, Sarak, Manikganj. islamibankbd.com Balivadra Bazar, Ganakbari, Dhaka, E-mail: ganakbari@ 44 Mawna Chowrasta Branch 06825-52763 , 01730- islamibankbd.com Shahidullah Complex, Sreepur 034874, E-mail: mawna@ 21 Gandaria Branch 01755-580980 Road, Gazipur. islamibankbd.com 95/5/D, Distrilary Road, (Dayaganj E-mail: gandaria@ 45 Mirpur Branch * (02) 9005650, 01711- Chowrasta), Dhaka - 1204 islamibankbd.com House No-35/ka, Road No-1, 693911, E-mail:mirpur@ 22 Gazipur Chowrasta Branch (02) 9252204, E-mail: Mirpur (Gool Chakkar), Dhaka. islamibankbd.com Anupam Super Market, Chandana, gazipurchowrasta@ 46 Madhupur Branch 038975-88189 E-mail: Gazipur. islamibankbd.com Pilot Super Market, Modhupur, madhupur@islamibankbd. 23 Gazipur Sadar Branch 01755 – 629468, Tangail. com Shibbari Moor, B.I.D.C.Road E-mail: gazipursadar@ Gazipur – 1700. islamibankbd.com

306 Annual Report 2012 Sl. Name of the Branch Phone Number & Sl. Name of the Branch Phone Number & No. & Address E-mail Address No. & Address E-mail Address 47 Mohakhali Branch (02) 8829400, E-mail: 70 Savar Branch (02) 7745777, 01711- Bhaban , 89, Mohakhali C/A, mohakhali@islamibankbd. B-37/1, Jaleshar, Bazar Bus Stand, 693928, E-mail: savar@ Dhaka-1212 com Savar, Dhaka islamibankbd. Com 48 Mohammadpur Krishi Market (02) 8142833, 01714- 71 Shariatpur Branch (0601) 61418, 01714- Branch, Probal Housing, 36-37, 036080, E-mail: krishi Dubai Plaza, 241/242, Sadar Road, 041437, E-mail: shariatpur@ Ring Road, Dhaka-1207. [email protected] Shariatpur. islamibankbd.com 49 Motijheel Branch (02) 9514980, 01713- 72 Sherpur Branch 0931-61618, 01711- 9/1, Motijheel C/A, Dhaka-1000. 164489, E-mail: motijheel @ Muslim Market, Shaheed Bulbul 693927, E-mail: sherpur@ islamibankbd.com Sarak, Sherpur islamibankbd.com 50 Mouchak Branch * (02) 9345946, 01711- 73 Shyamoli Branch* (02) 9123527, 01755- Hosaf Twin Tower, Malibag, 693913, E-mail: mouchak @ 15/4, Mirpur Road, Shyamali, 521677, E-mail: shyamoli @ Dhaka–1217 islamibankbd.com Dhaka-1207. islamibankbd.com 51 MoghbazarBranch (02) 8317910, 01730- 74 Shyampur Branch 02- 7446699, 01714- WAQFBhaban, 4, NewEskaton 727389, E-mail: mosbazar 227/3, Karimullarbag, Postagola, 037942, E-mail: shyampur Road, Moghbazar,haka-1000. @islamibankbd.com Shyampur, Dhaka. @islamibankbd.com 52 Munshiganj Branch 0691-63405, 01711-693925, 75 Sreenagar Branch 06925-65350 480, Main Road E-mail: mushigonj @ Sheikh Market, Jhumur Cinema Hall E-mail: srenagar@ Munshiganj-1500 islamibankbd.com Road, Sreenagar, Munshiganj-1550 islamibankbd.com 53 Mymensingh Branch 091- 67255, 01711-693923, 76 Takerhat Branch 06623-56277, 01714- 76/A, Chotto Bazar, Mymensingh E-mail: mymensingh @ Takerhat, Rajoir, Madaripur 098019, E-mail: takerhat @ islamibankbd.com islamibankbd.com 54 Narayanganj Branch* (02) 7630400, 01711- 77 Tangail Branch 0921-54361, 55603, 01711- 79, Bangabandhu Road, 693943, E-mail: narayanganj 301-307 Par Dighulia, Tangail 693924, E-mail: tangail @ Narayanganj @islamibankbd.com islamibankbd.com 55 Narsingdi Branch* 02-9462313, 01711-693919, 78 Tarakandi Branch 01711-693947, 01730- 139, Sutapatty, Narsingdi -1600 E-mail: narsingdi @ Jamuna Shar Karkhana, 709284, E-mail: tarakandi islamibankbd.com Tarakandi, Jamalpur. @islamibankbd.com 56 Naria Branch (0601) 59158 01755- 79 Tongi Branch 02-9813853, 01711- Maa Complex, Girls School Road, 629469, E-mail: naria@ 19, Main Road, Tongi, Gazipur 693946, E-mail: tongi@ Naria, Shariatpur- 6025 islamibankbd.com islamibankbd.com 57 Nitaiganj Branch 01755-551142, 80 Trishal Branch 01755-554480 1, R. K. Dash Road ,Nitaiganj E-mail :nitaiganj@ Zame Masjid Road, Trishal, E-mail: trishal@ Narayanganj- 1400 islamibankbd.com Mymensingh. islamibankbd.com 58 Nawabganj Branch 06225 - 56235 01730- 81 Uttara Branch* 8920500, 01711-693936, Nawabganj, Dhaka. 333625 E-mail: nawabgonj Kushal Centre, Dhaka-Mymensingh E-mail: uttara@ @islamibankbd.com Road, Uttara, Dhaka-1230. islamibankbd. Com 59 Nawabpur Road Branch* (02)9557258, 7126250, 82 VIP Road Branch* 9359442,01730-730169, 210-211 Nawabpur Road, Dhaka E-mail: nawabpur@ 30, V.I.P. Road, Kakrail, Dhaka E-mail: viproad@ islamibankbd.com islamibankbd.com 60 Netrakona Branch (0951) 62557, 01714- 83 Wiseghat Branch 01755 – 629464 Hashem Plaza, 166, Chhotta Bazar, 038570, E-mail: netrokona@ 8/2B, Wiseghat Road, E-mail: wiseghat@ Netrakona islamibankbd.com Dhaka- 1100. islamibankbd.com 61 New Market Branch* 9667320, 01711-693910, 84 Zinzira Branch 7762452,01711-693931, Doza Mansion , E-mail: newmarket@ Zinzira Thana Road, E-mail: zinzira@ 23,Mirpur Road, Dhaka islamibankbd.com Keraniganj, Dhaka islamibankbd.com 62 Palash Branch ( 06254) 88062, 01711- 85 Amin Bazar Branch 02-9020360, Shar Karkhana Gate, Khanepur, 693930, Email- palash@ 755, Begun Bari, Amin Bazar, E-mail: ibblamin@bttb. Palash, Narsingdi. islamibankbd.com Dhaka. net.bd. 63 Pallabi Branch 02-8034754, 9004796, Ahmed Food Plaza, Block-A, E-mail: pallabi@ Section-11, Pallabi, Mirpur, Dhaka. islamibankbd.com SME/Krishi Shakha 64 Paltan Branch* 7176162, 07111-622474 Sl. Name of the SME/ Phone Number & Darus Salam Arked E-mail: paltan@ No. Krishi Shakha E-mail Address 14, Purana Paltan, Dhaka -1000 islamibankbd.com 1 Alanga SME/Krishi Shakha 01730-097280 E-mail: 65 Panthapath Branch 02-8141962, 01730-034850, Madina Shapping Complex, Alanga [email protected] Tridhara Tower, 67, Lake Circus, E-mail: panthapath @ Bus Stand, Kalihati, Tangail – 1974. West Panthapath, Dhaka. islamibankbd.com 2 Bandura SME/Krishi Shakha 01730-097281 66 Rajbari Branch 0641-66242, 66311, 01714- Bandura Bazar, Nawabganj, Dhaka. E-mail: sme.bandura@ 77/1, Nahar Plaza, Station Road, 016407, E-mail: ibblraj@ islamibankbd.com Rajbari-7700 bttb.net.bd 3 .01730-097289 67 Ramna Branch* 9563417, 01711-693914, Zirani Bazar SME/Krishi Shakha Dawn Plaza, 9, Banga Bandhu Email: ramna@ R. S.Plaza, BKSP, Ashulia Dhaka. E-mail: ziranibazar@ Avenue, Dhaka islamibankbd. Com islamibankbd.com 68 Rampura Branch* 8359475,01711-431277, 4 Muktagacha SME/Krishi Shakha 09028-75160, 01713- 394, DIT Road, West Rampura, E-mail: rampura@ 81, Barha Masjid Super Market, 425923, E-mail: muktaga Dhaka islamibank bd.com Muktagacha, Mymensingh [email protected] 69 Sadarghat Branch 7113194, 01711-693918 5 Kalampur SME/Krishi Shakha 01730-326102 34/A, P.K. Ray Road, E-mail: sadarghat@ Kalampur Bazar Masjid Market, E-mail: kalampur@ Bangla Bazar, Dhaka. islamibank bd.com Dhamrai, Dhaka. islamibankbd.com

Annual Report 2012 307 Sl. Name of the SME/ Phone Number & Sl. Name of the Branch Phone Number & No. Krishi Shakha E-mail Address No. & Address E-mail Address 6 Sonargaon SME/Krishi Shakha (06723) 56295, 01730- 17 Chauddagram Branch 01714-004855 Bhuiyan Plaza, Mugrapara, 326860, E-mail: sonargaon 216, Abdul Jalil Shopping Mall, E-mail: chauddagram@ Sonargaon, Narayanganj-1441. @islamibankbd.com Chauddagram Bazar, Comilla. islamibankbd. com 7 Bhanga SME/Krishi Shakha (06323) 56331, 01730- 18 Chawk Bazaar Branch 031-611244 Munshi Bhaban, Bhanga Bazar 706796, E-mail: bhanga@ Fayaz Mansion , 191/192 (new) 01711-889908, Faridpur islamibankbd.com Lalchand Road, Chawk Bazar, E-mail: chawkbazar@ 8 01730-097285 Chormuguria SME/Krishi Shakha Chittagong islamibankbd.com Yusuf Plaza, Chormuguria Bazar E-mail: chormuguria@ 19 Chiringa Branch 03422-56472, 56083, Road, Madaripur. islamibankbd.com Chokoria Shopping Complex, 01713-164492, E-mail:chi Chiringa, Cox’s Bazar. ringa @islamibankbd.com Chittagong Division 20 Chhagalnaiya Branch 03322-78478, 01713- New Market, Chhagalnaiya, Feni 425932 E-mail: chhagal Sl. Name of the Branch Phone Number & [email protected] No. & Address E-mail Address 21 Chowmuhani Branch * 0321-52027, 51537,01755- 1 Agrabad Branch* 031-2511382, 01711- 856, Feni Road Chowmuhani, 521311, Email : chowmuh 03, CDA, Sheikh Mujib Road., 889901, Email: agrabad @ Noakhali. ani @islamibankbd. Com Agrabad C/A, Chittagong islamibankbd. Com 22 College Road Branch 01755-551140 2 Anderkilla Branch* 031-2852006, 01711- Gafur Plaza, 597, College Road Email : collegeroad@ G.A. Bhaban , 36-37, Nazir Ahmed 889904, E-mail: anderkilla Feni- 3900 islamibankbd.com Chowdhury Road, Anderkilla, Chittagong @islamibankbd.com 23 Comilla Branch 081-65935, 66633, 01711 3 Ashuganj Branch 0383-4080017, 01755- B.M Thikana Tower, 77/71-78/72 -889937, E-mail: comilla@ Hajee Zahirul Haque Munshi Shopping 545514, E-mail: ashuganj @ Kandirpar, Comilla -3500. islamibankbd.com Complex , Station Road, B. Baria islamibankbd.com 24 Companiganj Branch 08026- 59099, 01714- Companiganj Bazar, Muradnagar, 048906, E-mail: compani 4 Bancharampur Branch 08523-56027, 01714-098018 Comilla gonj @islamibankbd.com Bancharampur, Brahmanbaria. E-mail: Bancharampur@ 25 Kosba Branch 01755-554481 islamibankbd.com Shimanta Complex, Kosba, E-mail: kosba@ 5 Bahaddarhat Branch 01755-629460 Brahmanbaria - 3460 islamibankbd.com Manila Plaza, (3rd Floor) E-mail: bahaddarhat@ 26 Cox’s Bazar Branch 0341-63302, 01711- 3537/A, Bahaddarhat Moor, islamibankbd.com 209, Main Road, Cox’s Bazaar. 889968, E-mail: cox’s Chandgaon, Chittagong- 4212 bazar@islamibankbd. Com 6 Bank Road Branch 0321-53251, 53509, 01714 27 Dagunbhuiyan Branch 03323-79479, 01730- Rubi Plaza, South Bazar, -089574, E-mail: bank Ishaque Shopping Complex , 034871, E-mail: dagunbh Chaumuhani, Noakhali. [email protected] Dagunbhuiyan, Feni. [email protected] 7 Baraiyarhat Branch 01714-041436 28 Dewanhat Branch 031-2514082, 031- Three Star Shopping Complex, E-mail: baraiyarhat@ Sheikh Kamal Complex, 257/A, 2514083,01713-425932 Shantirhat Road, Baraiyarhat, islamibankbd.com D.T. Road, Dewanhat,Chittagong E-mail: dewanhat@ Mirsharai, Chittagong. islamibankbd.com 8 Bashurhat Branch 03223-56383, 01711-889951 29 Eidgah Branch 03432-58541, 01711- Jahanara Super Market , Uttar Bazar, E-mail: bashurhat @ Hajee Shafiq Shopping Centre, 431276, E-mail: eidgaon @ Main Road, Bashurhat, Noakhali. islamibankbd. com Eidgah, Cox’s Bazaar. islamibankbd. Com 30 08422-64236,01714- 9 Bandarban Branch 01730-034872 Faridganj Branch Kalabagan Bazaar, Faridganj, 037940, E-mail: faridgonj @ 49, A,B, Central Mosque Road, E-mail: bandarban@ Chandpur. islamibankbd.com Bandarban. islamibankbd.com 10 Bangodda Bazar Branch 01755-554482, 31 Fatikchari Branch 03022-56176, 01711- Bangodda Bazaar, Nangalkot, E-mail: bangodda@ Amanat Market, Bibirhat, Fatikchari, 404452, E-mail: fatikchari @ Comilla- 3550. islamibankbd.com Chittagong islamibankbd.com 11 Brahmanbaria Branch 0851-59456, 01711- 32 Feni Branch 0331- 74548,E-mail: feni@ Court Road, Brahmanbaria-3400 889942, E-mail: ibblbbaria 248/249, S.S.K. Road, Feni. islamibankbd.com @hotmail.com 12 CDA Avenue Branch (031) 651733, 2551599, Chittagong Shopping Complex, 01711-889909, E-mail: cda 33 Gouripur Branch 08023-55491, 01714- C.D.A.Avenue, Chittagong avenue@islami bankbd.com Shamiha Plaza, Gouripur Bazar 089573, E-mail: gouripur @ Daudkandi, Comilla. islamibankbd.com 13 Chaktai Branch 031-634453, 842433, st Mia Khan Bhaban (1 floor), 2867474, E-mail: chaktai@ 34 Hajiganj Branch 08424-75281,01711- New Chaktai, Chow Rasta Moor, islamibankbd. com 213, Makimabad Bara Masjid 889963, E-mail: hajiganj@ Chittagong-4000. Complex, Hajiganj, Chandpur. islamibankbd.com 14 Chandpur Branch 0841-63655, 01711-889965, 35 Halishahar Branch 01755-580981 E-mail: Mir Shopping Complex, J.M. Sen E-mail: chandpur @ Halishahar Housing Estate, Halishahar@islamibankbd. Gupta Road,Chandpur-3600. islamibankbd. com Chittagong- 4100 com 15 Chandraganj Branch 01755-551139 36 Hathazari Branch 031-2601437, 01755- Chandraganj Newmarket, E-mail: chandraganj@ Md. Solaiman Building , Hathazari 545518, E-mail: ibblhat@ Laxmipur- 3708. islamibankbd.com Bazar, Chittagong. colbd.com 16 Chatkhil Branch 03222-75178, 01713- 37 Jubilee Road Branch* 031-612617, E-mail: jubileer 4829, Chatkhil Kamil Madrasha Super 335785, E-mail: chatkhil@ 200/B, Jubilee Road, Chittagong [email protected] Market, Chatkhil, Noakhali- 3870. islamibankbd.com

308 Annual Report 2012 Sl. Name of the Branch Phone Number & Sl. Name of the Branch Phone Number & No. & Address E-mail Address No. & Address E-mail Address 38 Keranihat Branch 03036-56002, 01730- 61 Khagrachari Branch 01730-333621 Keranihat, Satkania, Chittagong. 034901, E-mail: keranihat @ Mini super Market, Bazarshahi E-mail: khagrachari@ islamibankbd.com Zame Masjid Road, Khagrachari. islamibankbd.com 39 Khatunganj Branch* 031-620744, 01711-889903, 62 O.R. Nizam Road Branch 031-2555309 82, Azim Market, Khatunganj, E-mail: khatunganj @ M.M. Tower, 1105, Asian Highway, E-mail-ornizamroad@ Chittagong. islamibankbd. Com Panchlaish, Chittagong-4000 islamibankbd.com 40 Laksham Branch 08032-51332, 51137, 63 Matlab Branch 08426-56052, 01713- Daulatganj Bazar, Laksham, 01711-889945, E-mail: Agrani Super Market, 258792, E-mail: matlab@ Comilla. [email protected] Matlab, Chandpur-3640 islamibankbd.com 41 Luxmipur Branch (0381) 55680, 01711- 64 Raozan Branch 01730-338558 Haji Abad Bhaban, Godown Road, 889943, E-mail: Laxmipur @ 201, Chowdhury Market, Fakirhat, E-mail: raozan@ Laxmipur. islamibankbd. Com Raozan, Chittagong- 4340. islamibankbd.com 42 Lohagara Branch 03034-56159, 01199- 65 Chandina Branch 08022-56371, 01730- M. Rahman Market, Lohagara, 790078, E-mail: lohagara @ Haji Ali Mansion, Chandina Bazar, 338560, E-mail: chandina Chittagong. islamibankbd.com Comilla- 3510. @islamibankbd.com 43 Maijdee Court Branch 0321-61885, 01711-431275, 66 Banshkhali Branch (03037)-56250, 01730- Shopping Sufia Centre, Main Road, E-mail: maijdee court@ Sheikh Tower, Jaldi, Banshkhali 736026, E-mail: banshkha Maijdee Court, Noakhali. islamibankbd. com Chittagong- 4390. [email protected] 44 Pahartali Branch 031-752599, 750901, Bandar Bitan Market, Customs 01711-889910, E-mail: pa Academy-4219, Chittagong hartali@islamibankbd. com SME/Krishi Shakha 45 Bandartila Branch 031-741747, 01730- Sl. Name of the SME/ Phone Number & 2152/2348, Sharif Plaza, Airport 328874, E-mail: banda No. Krishi Shakha E-mail Address Road, Bandar, Chittagong-4218, [email protected] 1 Coatbazar SME/ Krishi Shakha (03427) 56292, 01730- 46 Nabinagar Branch 01713-141981 E-mail: na Fazlul Haque Plaza, 097284, E-mail: coatbazar@ Nabinagar, Brahmanbaria. [email protected] Coatbazar,Ukhiya, Cox’s Bazar islamibankbd.com 47 Nazumeah Hat Branch (031)2571533 2 Barodarogahat SME/Krishi Shakha 01730-326103 Ali Shopping Centre, Nazumeah Hat, E-mail: nazumeahat@ Irani Vola Market, Sitakunda, E-mail: arodarogerhat@ Captai Road, Hathazari, Chittagong. islamibankbd.com Chittagong- 4310. islamibankbd.com 48 Patiya Branch 03035-56560, 01711- 3 Moheshkhali SME/ Krishi Shakha (03424) 74426 (03424) Alam Plaza, Shaheed Abdus Sabur 889967, E-mail: patiya@ Dighi Road, Gorak Ghata Bazar E-mail:moheskhali@ Road, Patiya, Chittagong islamibankbd.com Moheshkhali, Cox's Bazar-4710 islamibankbd. com 49 Raipur Branch 03822-56477, 01714- 4 Mirerswarai SME/ Krishi Shakha 03024 – 56273, 01755- Miajee Super Market, 842, Upazila 004857, E-mail: raipur@ Maa Tower, Mirerswarai , Chittagong 636212, E-mail: mirer Parishad Road, Raipur, Laxmipur. islamibankbd.com -: 4320. [email protected] 50 Ramganj Branch 03824-75488,01714- 5 Burichong SME/Krishi Shakha 01730-700063 Chand Super Market 037943, E-mail: ramganj @ Bhaban, M.A. Gani Road, Burichong E-mail: burichong@ Kala Bagan, Ramganj, Laxmipur islamibankbd.com Bazaar, Comilla- 3520 islamibankbd.com 51 Rangamati Branch 0351-63312, 01199- 6 Parshuram SME/Krishi Shakha 01730-341042, Rangamati Sadar, Rangamati 792137, E-mail: rangamati Haji Kalim Uddin Plaza, 385,Thana E-mail: arshuram@ @islamibankbd.com Road, Parshuram, Feni- 3940 islamibankbd.com 52 Ramu branch (03425) 56202 7 01730-326100, Bye Pass Fatekhanrkul, Ramu, E-mail: ramu@ Daudkandi SME/Krishi Shakha Ahmadia Plaza, Daudkandi Bazar, E-mail: daudkandi@ Cox’s Bazar- 4730. islamibankbd.com Comilla islamibankbd.com 53 Sandwip Branch 01714-098451, 01730- 8 01730-097283, New Upazila Complex, Sandwip 048037, E-mail: sandwip @ Chaprashirhat SME/Krishi Shakha Chaprashirhat New Market, E-mail: chaprashirhat@ Chittagong. islamibankbd.com Kabirhat, Noakhali islamibankbd.com 54 Senbag Branch 03225-56014 9 08522 – 56190, 01730- 134,Bhuiyan Super Market, College 01730-034851, Akhura SME/Krishi Shakha Noorjahan Manjeel, Akhura-Chandura 326104, E-mail:akhura@ Road, Senbag, Noakhali Road, Akhura, B. Baria-3450 islamibankbd.com 55 Sitakunda Branch 03028-56419, 01711- Madrasha Market, D.T .Road, 439096, E-mail: sitakunda Sitakunda, Chittagong-4310, @islamibankbd.com Khulna Division 56 Sonagazi Branch 03325-76086,01714- Main Road, Sonagazi, Feni 036536, E-mail: sonagazi @ Sl. Name of the Branch Phone Number islamibankbd.com No. & Address E-mail Address 57 Station Road Branch* 031-615353, 01730- 1 Bagerhat Branch 0468-63127, 01711-889920, 526, Station Road, Ghosal 730168, E-mail-station Hajee Shamsuddin Plaza E-mail: bagerhat@ Quarter, Chittagong [email protected] Kazi Nazrul Islam Road, Bagerhat. islamibankbd.com 58 Subarnachar Branch 03228-52175 2 Benapole Branch 04228-75704,01711- Char Aman Ullah, Char Jabbar, E-mail: subarnachar@ S S Super Market, Benapole Port, 889923, E mail: benapole @ Nonkhali- 3812. islamibankbd.com Jessore. islamibankbd.com 59 Teknaf Branch 03426-75126,01819- 3 Chowgacha Branch 042244-56021,01713- Bazar Road, Teknaf, 836573, E-mail: teknaf@ Nur Ali Mridha Market, Chowgacha, 335786, E mail: chowga Cox’s Bazaar islamibankbd.com Jessore. [email protected] 60 Terry Patty Branch 01755-551141 4 Chuadanga Branch 0761-64200, 64300, 01711- Phari Road, Chawk Bazar, E-mail: terrypotti@ Thana Road, Chuadang. 432089, Remit.chuadanga@ Comilla- 3500. islamibankbd.com islamibankbd.com

Annual Report 2012 309 Khulna Division SME/Krishi Shakha Sl. Name of the Branch Phone Number Sl. Name of the SME/ Phone Number & No. & Address E-mail Address No. Krishi Shakha E-mail Address 5 Daulatpur Branch 041-760414 271, Khan A. Sabur Road, E-mail: daulatpur@ 1 Dak Banglabazar SME/Krishi (04532) 51010 Daulatpur, Khulna islamibankbd.com Shaka E-mail: dakbangla@ Dak Bangla Bazar, Jhenaidah islamibankbd.com 6 Jessore Branch* 0421-62521 7-8, Rail Road, Jessore. E-mail: jessore@ 2 Fultala Bazar SME/Krishi Shaka . 01713-438545, islamibankbd. com Joytun Tower, Fultala Bazar, E-mail: fultala@ Fultala, Khulna- 9210. islamibankbd.com 7 Jhenaidah Branch 0451-62757,01711-889918, Hossain Shahid Sohrawardi Road, E-mail: ibbljhenai dah@ 3 Jibon Nagar SME/Krishi Shakha 01730-703854, Jhenaidah. yahoo.com Jibon Nagar, E-mail: jibonnagar @ Chuadanga- 7230 islamibankbd.com 8 Jhikorgacha Branch 04225-71353, 01711- 68, Hanif Super Market 889958, E-mail: ibbljhena Jhikorgacha, Jessore. [email protected] Rajshahi Division 9 Kalaroa Branch 04724-75357 Haji Market, Shahid Muktijodda E-mail: kalaroa@ Sl. Name of the Branch Phone Number & Sarak, Kalaroa Bazar, Satkhira. islamibankbd.com No. & Address E-mail Address 04725-56221, 56112, 1 Belkuchi Branch 07522-56330, 01713- Kaliganj Branch 10 E-mail: kaliganj@ Altaf Plaza, Mukundaganj Bazar, 141982, E-mail: belkuchi Kaliganj,Satkhira, islamibankbd.com Belkuchi, Sirajganj. @islamibankbd.com 11 Kaliganj Branch, Jhenaidah 04523-56035 2 Bogra Branch* 051-65494 Kaliganj, Jhenaidah. E-mail: kaligonj@ 801, Thana Road, Bogra. E-mail: bogra@ islamibankbd.com islamibankbd.com 12 Khulna Branch* 041-730531,01711- 3 Chanchkoir Branch 07724-74038,01713- 4, Old Jessore Road, Khulna 889911,01711-807622 C.M Market, Chanchkoir Bazar, 425935, E-mail: chanch E-mail: [email protected] Gurudashpur, Natore [email protected] 13 Coat Chandpur Branch 01730-333622, 01755- 4 Chapai Nawabganj Branch* 0781-61138,01711- Kotchandpur Bazar, Jhenaidah 542876, E-mail: kotchan Munsur Mansion, 68, Bara Indara 889965, Email: ibblcng@ [email protected] More, Chapai Nawabganj. bttb.net.bd 14 Kumarkhali Branch 07025-76681, 01714- 5 Dupchanchia Branch 05024-51046, 01714- Fayez Khan Tower, Kumarkhali, 004856, E-mail: ibblkumr @ Dupchanchia New Market, 025932, E-mail: dupchan Kushtia -7010. bttb.net.bd Dupchanchia, Bogra. [email protected] 15 Kushtia Branch* 071-62244, 61313 6 Highway Branch 05029-88018 Lovely Tower, 55/1, Nawab Email: kus htia@ islami Sheikh Super Market, Sherpur, E-mail: highway@ Sirajuddula Road, Kushtia. bankbd. com Bogra. islamibankbd.com 16 Magura Branch 0488-63305, 01714-025 7 Ishwardi Branch 07326-63511, 01711- Sayed Atar Ali Road, Magura 934, 01755-636214, Station Road, Ishwardi, Pabna. 438348, E-mail: ishwardi E-mail: [email protected] @islamibankbd.com 17 Meherpur Branch 0791-63112, 01714- 8 Joypurhat Branch 0571- 2962, 62862 Ripon Tower, Main Road, 082126, E-mail: ibblmehe Fouzia Market, Sadar Road, E-mail: Joypurhat@ Meherpur-7100. @bttb.net.bd Joypurhat. islamibankbd.com 9 07332-54104 18 Mongla Branch 04658-73340, 01711- Kashinathpur Branch 1/3, Main Road, Mongla, Bagerhat 889922, E-mail: mongla@ Kashinathpur Bazar, Santhia, E-mail: Kashinathpur@ islamibankbd.com Pabna. islamibankbd.co 10 Naogaon Branch 0741-62393 19 Morrelganj Branch 04656-56107, 01714- 690, Sadar Road E-mail: naogaon @ Morrelganj, Bagerhat 016406, E-mail: morrel Naogaon-6500 islamibankbd.com [email protected] 11 Natore Branch 0771-62630, 01711- 20 Narail Branch (0481) 62111, 01755- Al-Falah Super Market 240/241, 889932, 01713-249356 Jame-e-Masjid Market, Narail. 521677, E-mail: narail@ Rajshahi Dhaka Road, Natore E-mail: [email protected] islamibankbd.com 12 Nazipur Branch 07428-63040 21 Noapara Branch 04222-71770 Nazipur Bus Stand, Nazipur, E-mail: nazipur@ Noapara, Jessore E-mail: noapara@ Patnitola, .Naogaon. islamibankbd.com islamibankbd.com 13 New Market Branch, Rajshahi 0721-812663 22 Paikgacha Branch 04027-56057, 01711- 219, Sultanabad, Station Road, E-mail: newmarketraj@ Kabir Plaza, Paikgacha, Khulna 432104, -mail: paikgacha Boalia, Rajshahi- 6100 islamibankbd.com @islamibankbd.com 14 Pabna Branch* 0731-65621,66324, 01711- 23 Paradah Branch 01714-098450, 071- 50/246, Abdul Hamid Road, Trafic 889927, E-mail: pabna@ Poradah, Kushtia 65010, E-mail: poradah@ Moor, Pabna-6600 islamibankbd.com islamibankbd.com 15 Rajshahi Branch* 0721-774767 Email : 24 Satkhira Branch 0471-63287 269, Alupotty, Ghoramara rajshahi@islamibankbd. Bara Bazar Road, Satkhira E-mail: satkhira@ Boalia, Rajshahi-6100 com islamibankbd. com 16 Rohanpur Branch (07823) 74246, 01713 25 Shyamnagar Branch 01755-580982, Mohazan Super Market, 438511, E-mail: rohanpur M. M. Plaza, Nokipur E-mail: shyamnagar@ Rohanpur, Chapai Nawabganj. @islamibankbd.com Shyamnagar, Satkhira- 9450 islamibankbd.com 17 Santhia Branch 07327-56211, 01714- 26 KDA Avenue Branch ,041-733633, 01713- Tania Super Market, Santhia 035554, E-mail: santhia@ 181,Khan A. Sabur Road, Shibbari 185038, E-mail: kdaaven Bazar, Pabna. islamibankbd.com Mour, Khulna-9310 ue@islamibankbd. com,

310 Annual Report 2012 Sl. Name of the Branch Phone Number & No. & Address E-mail Address Barisal Division 18 Sapahar Branch 01755-629461, Sl. Name of the Branch Phone Number & Sapahar New Market, Sapahar, E-mail: shapahar@ No. & Address E-mail Address Sapahar, Naogaon- 6560 islamibankbd.com 4 Jhalokathi Branch 0498-62716, 19 Setabganj Branch 01755-554478 14, Batasha Patty Road, Email: islamibankjkt@ Setabganj Chowrasta E-mail: setabganj@ Bochaganj, Dinajpur- 5325. islamibankbd.com Jhalokathi. yahoo.com, 5 Miarhat Branch 01713-425965, 20 Shahjadpur Branch 0751-63769 Kourikhara, Nesarabad E-mail: miarhat@ Late Abdul Hafiz Khan Market, E-mail: shahjadpur@ Pirojpur. islamibankbd.com Shahjadpur, Sirajganj. islamibankbd.com 6 Patuakhali Branch 0441-62283 21 Shibganj Branch 07825- 75107, 01711- 29, Sadar Road, Adalat Para, E-mail: patuakhali@ Main Road, Shibganj, 438346, E-mail: shibganj Patuakhali. islamibankbd.com Chapainawabganj- 6340. @islamibankbd.com 7 Pirojpur Branch 0461-62571, 22 Sirajganj Branch 0751-62435 Zilla Parishad Super Market, E-mail: pirojpur@ A.B.Super Market, 791,S.S.Road, E-mail: sirajganj@ Pirojpur-8500 islamibankbd.com Sirajganj. islamibankbd.com 8 Torki Branch 01714-097886 23 Mohadevpur Branch 01730-328870, E-mail: Kishmat Plaza, Upozila Road mohadevepur@ Masjid Market, Torki Bandar, E-mail: torki@ Mohadevpur, Naogaon- 6530 islamibankbd.com Gournadi, Barisal. islamibankbd.com 24 Baragola Branch 051-66450,01730-338559, 9 Bhandaria Branch 04623-56360, Jamil Building, Rangpur Road E-mail: baragola @ Hawlader Market, Bhandaria, E-mail: bhandaria@ Baragola, Bogra -5800. islamibankbd.com Pirojpur- 8550. islamibankbd.com 25 Ullahpara Branch (07529) 56134 10 Charfashion Branch 01755 – 629465 Gulisthan Mour, Ullapara, E-mail: ullapara @ Taz Plaza, 250, Sadar Road E-mail: charfashion@ Sirajganj-6760 islamibankbd.com Charfashion, Bhola- 8340 islamibankbd.com 26 Baneswar Branch 01730-700064, Baneswar Bazaar, Puthia, E-mail: baneswar@ 11 Hatkhola (0431) 2177234, Rajshahi-6260. islamibankbd.com Chawkbazar Branch E-mail: hatkhola@ Hatkhola Road, Barisal- 8200. islamibankbd.com SME/SME/Krishi Shakha Sl. Name of the SME/ Phone Number & SME/Krishi Shakha No. Krishi Shakha E-mail Address Sl. Phone Number & Name of the SME/Krishi Shakha 1 Keshorehat SME/Krishi Shakha 01730-097287 No. E-mail Address Eakram Plaza, Keshorehat, E-mail: keshorehat@ 1. Borhanuddin SME/Krishi 01730-326105 Rajshahi. islamibankbd.com Shakha E-mail: borhanuddin@ 2 Shantahar SME/Krishi Shakha 01713-438502, 26, Raniganj Road, Borhanuddin, islamibankbd.com Bhola- 8320 203/2M. M. Plaza, Bogra Road, E-mail: shantahar@ Shantahar, Bogra -5891. islamibankbd.com 3 Kahalu SME/Krishi Shakha 05026-56049 Sylhet Division Alhaj Super Market, Railget E-mail: kahalu@ Charmatha, Kahalu, Bogra. islamibankbd.com Sl. Name of the Branch Phone Number & 4 Nandigram SME/Krishi Shakha (05027) 76085 No. & Address E-mail Address Bogra- Nator Road E-mail: nandigram@ 1 Amberkhana Branch 0821-712102, 01711- Nandigram, Bogra- 5860. islamibankbd.com Century Shopping 889938, E-mail: amberk 5 Sujanagar SME/Krishi Shakha 01713-015450 Centre, Amberkhana, Sylhet hana@ islamibankbd.com 41/B, College Road E-mail: sujanagar@ 2 Barolekha Branch 08622-56492, 01713- Sujanagar, Pabna-6660. islamibankbd.com Haji Abdul Ali Trade Centre, 425931, E-mail: barolekha 6 Mohastangarh SME/Krishi 01730-097286, Barolekha, Moulvi Bazar. @islamibankbd.com Shakha E-mail:mohastangor @ Mohastangarh, Shibgonj, Bogra. islamibankbd.com 3 Beani Bazar Branch 03799-288658 Haji Nuruddin Mansion, Main Road, E-mail: beanibazar @ South Beani Bazar, Sylhet. islamibankbd.com 4 Biswanath Branch 038911-82105, Barisal Division Puran Bazar, Biswanath , Sylhet. E-mail: biswanath@ Sl. Name of the Branch Phone Number & islamibankbd.com No. & Address E-mail Address 5 Chatak Branch 01711-432105, 1 Barguna Branch 0448-62088, Bagbari, Chhatak, E-mail: chhatak@ 9, Nazrul Islam Sarak 01714-009230 Sunamganj. islamibankbd.com Barguna Email: [email protected]. 6 Goala Bazar Branch 08242-56720, 2 Barisal Branch 0431-64524 Goalabazar, Balaganj, Sleet E-mail: Goalabazar@ 132/121, Sajrini Super Market, E-mail: barisal@ islamibankbd.com East Bogra Road, Barisal-8200. islamibankbd.com 7 Habiganj Branch 0831-52611, 01711- 3 Bhola Branch 0491-62774, 01711- Kalibari Road, Habiganj 889949, E-mail: habiganj Kornophuly Complex, 889919, E-mail: bhola@ @islamibankbd.com 3373, Sadar Road, Bhola, islamibankbd.com 8 Jagannathpur Branch 08727-56010,01713- 4 Jhalokathi Branch 0498-62716, Al-Jannath Plaza, Jagannathpur, 335778, E-mail: jagannat 14, Batasha Patty Road, Email: islamibankjkt@ Sunamganj. [email protected] Jhalokathi. yahoo.com,

Annual Report 2012 311 Sl. Name of the Branch Phone Number & Sylhet Division No. & Address E-mail Address Sl. Name of the Branch Phone Number & 4 Dhap Branch 01755-580983 No. & Address E-mail Address Almi Bari, 30 Jail Road E-mail: dhap@ Rangpur- 5400 islamibankbd.com 9 Kanaighat Branch 08233-56062, 01714- 5 Gaibandha Branch 0541-61722 Kanaighat Bazar, Kanaighat, 048905, E-mail: kanaighat Parkview Super Market, E-mail: gaibandha @ Sylhet. @islamibankbd.com Gaibandha-5700 islamibankbd.com 10 Kulaura Branch (08624) 56634, 56289, 6 Gobindaganj Branch 01711-889957, 01713 S.A. Shopping Centre, Dakshin E-mail: kulaura@ Zahir Complex, Biswa Road, 41507, E-mail: gobinda Bazar, Kulaura, Moulvi Bazar. islamibankbd.com Gobindaganj, Gaibandha [email protected] 11 Laldighirpar Branch 0821-714436 7 Jaldhaka Branch 05524-64046, 01714 Al- Karim Plaza, Laldighirpar, E-mail:laldighirpar@ Dalia Road, Jaldhaka 037946, E-mail: jhaldhaka Sylhet. islamibankbd.com Nilphamari @islamibankbd.com 12 Moulvi Bazar Branch 0861-62830, 52680, 8 Kurigram Branch 0581-61722, 01711 67,Central Road, E-mail: moulvibazar@ 16,Bazar Road, 435012, E-mail: ibblkuri@ Moulvi Bazaar. islamibankbd.com Kurigram. yahoo.com 9 Lalmonirhat Branch 0591-61006, 01714-040449, 13 Sreemangal Branch 08626- 88224, 08626- Mogolhat Gate, Puran Bazar, E-mail: lalmonirhat @ Sreemangal, Sreemangal, 71120, E-mail: sreemangal Lalmonirhat islamibankbd.com Moulvi Bazar-3210. @islamibankbd.com 10 Nilphamari Branch 0551-61619, 01711- 14 Sylhet Branch* 716282, 01711-889939 Upon the Butterfly Show Room, 438345, 01713-164487, 288, Taltola, Sleet. E-mail: sylhet@ Hazi Mohsin Road E-mail: nilphamari@ islamibankbd. Com Nilphamari islamibankbd.com 15 Sunamganj Branch 01730-034873 11 Panchagarh Branch 0568-61890, 01714-016298, Ahsan Mansion, Station Road, E-mail: sunamganj@ Panchagarh Central Mosque E-mail: panchagarh @ Sunamganj. islamibankbd.com Market, Tetulia Road, anchagarh. islamibankbd.com 16 Zindabazar Branch 01730-328872, 12 Rangpur Branch 0521-63576, 66003, Jallarpar Road, Zindabazar, E-mail: zindabazar@ Motahar Commercial Complex, 01711-438343, E-mail: Sylhet-3100 islamibankbd.com G. L. Ray Road, Rangpur. [email protected] 13 Saidpur Branch* 05526-73122, 01711- 17 Dakshin Surma Branch 01730-703853, (0821) Dinajpur Road, Saidpur, 438340, E-mail: saidpur@ 779, Humayun Rashid Chattar, 841909, E-mail: Nilphamari . islamibankbd.com Kotwali, Sylhet-3100. southsurma@islamibankbd. 14 Sundarganj Branch 05427-64216, 01730 com Janata Market, 116, College Road, 333623, E-mail: sundarganj Sundargonj, Gaibandha. @islamibankbd.com SME/Krishi Shakha 15 Thakurgaon Branch 0561-53467, 01711- Masjid Market, Chowrasta, 814535, E-mail: thakurgaon Sl. Phone Number & E-mail Name of the SME/Krishi Shakha Thakurgaon. @islamibankbd.com No. Address 1 Shayestagonj SME/Krishi 08332-56800, 01730- Shakha 097288, E-mail: shayesta SME/Krishi Shakha Shayestagonj, Hobigonj. [email protected] Sl. Phone Number & Name of the SME/Krishi Shakha 2 Nabiganj SME/Krishi Shakha 01730-736025, (08328) No. E-mail Address Sherpur Road, Nabigonj, 56121, E-mail: nabiganj @ 1 Patrgram SME/Krishi Shakha 01730-703851 Hoboganj. islami bankbd.com Asir plazam, Main Road, Patgram, E-mail: patgram@ lalmonirhat 5540, islamibankbd.com Rangpur Division * Authorized dealer in Foreign Exchange. Sl. Name of the Branch Phone Number & No. & Address E-mail Address 1 Birampur Branch 05322-56540, 01714- Main Road, Birampur 013395; E-mail: ibblbirm @ Dinajpur bttb.net.bd 2 Bhurungamari Branch 01755 – 629467; Kashem Market, Bazar Road, E-mail: bhurungamari@ Bhurungamari, Kurigram- 5670 islamibankbd.com 3 Dinajpur Branch* 01714-093951, 01755 Hasna plaza, Station Road 545515, E-mail: dinajpur @ Dinajpur-5200 islamibankbd.com

312 Annual Report 2012 Notice of 30th Annual General Meeting Notice is hereby given that the 30th Annual General Meeting of Islami Bank Bangladesh Limited will be held on Wednesday, the 22nd May, 2013 at 10.00 AM at Bangabandhu International Conference Centre (BICC), Agargaon, Sher-e-Bangla Nagar, Dhaka for transacting the following business: Agenda 01. To approve the minutes of the 29th Annual General Meeting held on 15th May 2012. 02. To receive, consider and adopt the Audited Financial Statements for the year that ended on 31st December 2012 and Reports of the Directors and Auditors thereon. 03. To approve Dividend for the year that ended on 31st December 2012. 04. To appoint Auditor(s) and to fix up their remunerations for the year 2013. 05. To elect Directors. 06. To approve appointment of Independent Directors. All the honourable Shareholders of the Bank are requested to kindly make it convenient to attend the Meeting in time. By order of the Board of Directors

Dated: Dhaka (Abu Reza Md. Yeahia) 20th April, 2013 Company Secretary ------Notes: a) Record date is 11/04/2013 i.e. the shareholders whose names will appear in the CDS (Central Depository System) / Company’s Register on 11/04/2013 will be entitled to get dividend for the Year 2012 against their shareholdings. b) A member eligible for attending and voting at the Annual General Meeting may appoint a proxy on his / her behalf. c) Power of Attorney / Proxy forms must be submitted to the Registered Office or Share Department (63 Dilkusha C/A, 5th Floor, Dhaka) of the Company at least 48 (Forty Eight) hours before the Meeting i.e. 10.00 AM on Monday, the 20th May, 2013. Revenue Stamp of Tk.20/- (Taka Twenty) only shall have to be affixed on the proxy form. d) The last date for submitting nomination papers at the registered office for election of Directors is 15th May, 2013, Wednesday up to 10.00 AM and Last date of withdrawal of nomination paper is 18th May, 2013, Saturday up to 12.00 noon. Scrutiny of nomination papers will be completed on the same day by 5.00 PM. e) List of the valid candidates for election of Directors will be hung in the Notice Board at the Registered Office on 18th May, 2013 in the afternoon. f) Election procedures and rules thereto will be available at the Registered Office of the Company / Meeting place. g) Annual Report, Attendance Slip and Proxy Form along with the notice will be sent to the honourable shareholders by post / courier. The honourable shareholders may also collect Proxy Forms etc. from the Share Department of the Company. h) Directors’ Report and Audited Financial Statements of the Bank for the year ended 31st December 2012 together with the Auditors’ Report thereon shall be available on Bank’s website (www.islamibankbd.com) from 01/05/2013 onward. i) Entry is reserved only for the honourable Shareholders and Proxies / Attorneys. Attendance slip (duly signed) must be submitted to the Registration Counter at the time of entrance. Registration Counter shall remain open till 11.00 AM. ------

Annual Report 2012 313 Design and Concept

Design and Concept: Ar. Md. Tareq Haider, IDEA Cover Design: Ar. Moushumi Ahmed, IDEA Design Assistance: Md. Nahid uz Zaman, IDEA Email: [email protected]

Printed by:

314 Annual Report 2012 PROXY FORM

I/We ------being a member(s) of lslami Bank Bangladesh Limited do hereby appoint Jaban------of ------as my/our Proxy to attended and vote on behalf of me/us at the 30th Annual General Meeting of the Company to be held on Wednesday, the 22nd May 2013 at 10.00 AM at Bangabandhu International Conference Centre (BICC), Agargaon, Sher-e-Bangla Nagar, Dhaka and any adjourment thereof.

As witness my/our hand this ------day of ------2013.

Folio No.: ------BO A/C No.:

Tk. 20.00 (twenty) only ------Signature of the Proxy with date No. of Share(s) Revenue Stamp Signature of the Shareholder with date

N.B.: This Form of Proxy, duly signed (as recorded with the bank), stamped and completed must be submitted to the Registered Office or Share Department (63 Dilkusha C/A, 5th Floor, Dhaka) of the Company at least 48 (Forty Eight) hours before the Meeting.

------The 30th Annual General Meeting dated on Wednesday the 22nd May, 2013 ATTENDANCE SLIP

I do hereby submit the Attendance slip in connection with the 30th Annual General Meeting of Islami Bank Bangladesh Limited held today Wednesday, the 22nd May, 2013 at Dhaka .

Name of the Shareholder : ------Signature of the Shareholder: ------

Folio No.: ------BO A/C No.:

No. of Share(s)

Name of the Attorney/ Proxy: ------Signature of the Attorney/Proxy:------

N.B.: The honourable Shareholders are requested to handover the Attendance Slip at the entrance of the Meeting Hall.

Annual Report 2012 315 316 Annual Report 2012