Annual Report 2012 - Islami Bank Bangladesh Limited

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 : 88-01711-435638-9FAX : 88-02-9564532, 9568634; SWIFT : IBBLBDDH, E-mail : info@islamibankbd.com; Web-site : www.islamibankbd.com2Annual Report 2012

The Messages from The Holy Qur’an Annual Report 2012 3

Guidance from The Holy Hadith 4Annual Report 2012

ContentsStandard Disclosure Index 6Recognition par Excellence 10Looking Forward 12Corporate Objectives Values StructureVision 13Mission 14Strategic Objectives 15Core Values & Commitments 16Code of Conduct and Ethical Principles 17Corporate Profile 18Milestones 20Sponsors 21Board of Directors and its Committees 22Short Profile of Directors 23Shari‘ah Supervisory Committee 31Management Committee 32Executives 33Corporate Structure 36Directors ReportReport of the Board of Directors 72Corporate Governance 79CEO and CFO’s Declaration to the Board 98Certificate Regarding Compliance of BSEC 106NotificationGreen Banking 107Performance Review 112Case Study 134Market Disclosure under Pillar III of Basel II 141Risk Management 152ICT and Automation 161Corporate Communication and Business 167PromotionFinancial Review 174CSR: Sustainability Report 177Islami Bank Foundation 187Audit Committee Report 193Report of the Shari‘ah Supervisory195CommitteeProducts and Services 37Media Highlights 39Stakeholders’ Information 41Performance AnalysisGraphical Representation 46Segment Information 48Horizontal & Vertical Analysis 49Profitability, Dividends, Performance & 50Liquidity RatiosStatement of Value Added and its51DistributionFinancial Highlights 53Five Years Performance at a Glance 54Financial Calendar 56Management Report and CommentaryChairman’s Message 57Managing Director’s Round up 63Management Report and Analysis 67Financial StatementsAuditors’ Report 197Consolidated Financial StatementsConsolidated Balance Sheet 199Consolidated Profit and Loss Account 201Consolidated Cash Flow Statement 202Consolidated Statement of Changes in Equity 203Financial Statements of IBBLBalance Sheet 205Profit and Loss Account 207Cash Flow Statement 208Statement of Changes in Equity 209Liquidity Statement 210Notes to the Financial Statements 212Financial Statements of Offshore Banking Unit 272Financial Statements of IBSL 279Financial Statements of IBCML 297Branch Network 305Notice of 30 th Annual General Meeting 313Proxy Form & Attendance Slip 315Annual Report 2012 5

Standard Disclosure IndexDisclosure Checklist to the Key Sections of the Annual Report 2012ItemsRef. Page No.Corporate Objectives, Values & StructureClarity 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, 36Management Report / Commentary and Analysis including Director’s Report / Chairman’sReview/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 companyand its group companies during the period under review.• A brief summary of the Business and other risks facing the organization and steps taken toeffectively manage such risks112-133, 161-166, 4883-85, 152-160,225-228• 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 (includinghealth & safety)86-90, 178, 222-223• Information on company’s contribution to the national exchequer & to the economy 58-61, 176, 177-191Appropriateness of Disclosure of Accounting Policies and General Disclosure• Disclosure of adequate and properly worded accounting policies relevant to assets, liabilities,income and expenditure in line with best reporting standards212-232• Any specific accounting policies 213-217• Impairment of Assets 220• Changes in accounting policies/changes in accounting estimates 215Segment Information• Comprehensive segment related information bifurcating segment revenue, segment resultsand segment capital employed• Availability of information regarding different segments and units of the entity as well as nonsegmentalentities/units48, 68-69,235-239, 27148, 145-146, 2716Annual Report 2012

ItemsRef. Page No.Segment analysis of• Segment revenue 48, 271• Segment results 48, 271• Turnover 271• Operating profit 271• Carrying amount of net segment assets 271Financial 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 212-277Information about Corporate Governance• Board of Directors, Chairman and CEO 18, 22, 79-80• Audit Committee (composition, role, meetings, attendance, etc.) Internal Control & RiskManagement.22, 81-85, 95,193-194, 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- Other information44• 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, 91Stakeholders Information• Distribution of shareholding (Number of shares as well as category wise, e.g. Promoter group,FII etc.)42, 96, 250• Shares held by Directors/Executives and relatives of Directors/Executives 96-97• Redressal of investors complaints 44-45Graphical/Pictorial Data• Earnings per Share 46• Net Assets 46Annual Report 2012 7

ItemsRef. Page No.• Stock Performance 52• Shareholders’ Funds 46• Return on Shareholders Fund 50Horizontal/Vertical Analysis including followingOperating Performance (Income Statement)• Total Revenue• Operating profit• Profit before Tax• Profit after Tax• EPS49Statement of Financial Position (Balance Sheet)• Shareholders Fund• Property, Plant & Equipment• Net Current Assets• Long Term Liabilities/Current liabilitiesProfitability/Dividends/Performance and Liquidity Ratios• Gross Profit Ratio• Earning before Profit, Depreciation and Tax• Price earning ratio• Current Ratios46, 50• Return of Capital Employed• Debt Equity RatioStatement of Value Added and Its Distribution• Government as Taxes• Shareholders as dividend• Employees as bonus/remuneration• Retained by the entity51-52• Market share information of Company’s product/services• Economic value addedAdditional Disclosures• Sustainability Development Reporting 177-191• Human Resource Accounting 88-90• Any other good additional disclosures (Independence certification e.g. GNV / GRI) 90, 93Specific Areas for Banking SectorDisclosure of Ratings given by various rating agencies for Instruments issued by/of Bank for e.g.FD.CD. Tier-1 Perpetual BondsDetails of advances portfolio classification wise as per the direction issued by the central bank ofthe respective countries94, 228, 246114-129, 237-242,253-2558Annual Report 2012

ItemsRef. Page No.Disclosure for non-performing assets• Movements in NPA• Sector-wise breakup of NPA• Movement of Provisions made against NPA129, 147-148,240-243• Details of accounts restructured as per regulatory guidelinesMaturity pattern of key Assets and Liabilities (ALM) 211, 235-249Classification and valuation of investments as per regulatory guidelines/Accounting Standards 235-242Business 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) toTotal Investments (Assets)54, 155, 129Details of credit concentration / sector wise exposures 115-116, 145-147,239-240The break-up of ‘Provisions and contingencies’ included in the Profit and Loss Account 200-201, 206-207,221, 247Disclosure under regulatory guidelines 141-151, 95-106,250-258Details of Non Statutory investment portfolio 235-236Disclosure in respect of assets given on operating & finance lease 115, 237-238Disclosures for derivative investmentsN/ABank’s Network : List of Centers or Branches 305Annual Report 2012 9

Recognition par ExcellenceAs recognition of excellent performance, IBBL was rewarded withthe following prestigious rankings and awards in recent past:The Banker‣ IBBL is the only Bangladeshi Bank that hasentered into the World’s Top 1000 Banks List2012. IBBL has made Bangladesh proudof being among the best 1000 banks in theworld, ranked by ‘The Banker’, the UK’spremier financial magazine. This prestigiousranking is a clear testimony of IBBL’s stabilityand strength, and its leadership in financialsector of Bangladesh.IBBL has been ranked 17 th in the performancecategory (assessed by profits on capital), 70 thin Return on Asset (ROA), 660 th in Soundness(assessed on Capital Assets Ratio), 868 th inSize (assessed on Assets) and 1000 th inTier-1 capital. The last criterion is widelyaccepted as the most important measure forgauging the financial stability of a bank.The Top 1000 rankings are compiled from adatabase of over 5000 banks worldwide andare widely recognized by the global financialcommunity as the definitive guide to bankrankings and analysis.South Asian Federation ofAccountants (SAFA)‣ South Asian Federation of Accountants (SAFA)rewarded IBBL as Winner of the SAARCAnniversary Award for Corporate GovernanceDisclosures for the year 2011. SAFA awardedIBBL also with the 1 st Runner up title underPrivate Sector Banks (including Co-operativeBanks) in the best presented annual reportsfor the year 2011. SAFA declared IBBL as the‘Joint Winner’ in the ‘Corporate GovernanceDisclosure Award-2010’. SAFA also conferredIBBL the ‘Certificate of Merit’ in ‘BankingSector’ in the Best Presented Accounts &Reports Award for the year 2010.Institute of Chartered Accountants ofBangladesh (ICAB)‣ The Institute of Chartered Accountants ofBangladesh (ICAB) conferred IBBL with the1 st position under SAARC Anniversary Awardfor Corporate Governance for the year 2011.ICAB also conferred IBBL the 3 rd positionunder banking category in the Best PresentedAnnual Reports 2011 & 2010.Institute of Cost and ManagementAccountants of Bangladesh (ICMAB)‣ The Institute of Cost and ManagementAccountants of Bangladesh (ICMAB)glorified IBBL with the ICMAB National BestCorporate Award-2011, 2010 (First Positionamongst the Private Commercial Banks in10Annual Report 2012

Finance Minister Abul Maal Abudul Muhit, MP is handing over ICAB Award to the Managing Director of the BankIslamic Operation), ICMAB Best CorporatePerformance Award–2008 (Second Positionamongst the Private Commercial Banks)and the ICMAB National Best CorporateAward-2007 (First position among the LocalBanks).Goldman Sachs‣ Goldman Sachs, the leading wealthmanagement institution of the world, haschosen IBBL as proper place for investment.IBBL is seventh in the top ten companiesranked by Goldman Sachs in its portfolio‘GSN-11’.Business Asia‣ The “Business Asia” nominated IBBL as the‘Most Respected Company Awards 2012’ foroutstanding performance in Banking Sector.Other Recognitions‣ ICICI Bank, Hong Kong, conferred IBBL withthe “The Quality Recognition Award-2009” forU.S. Dollar Clearing (2009).‣ Bankers’ Forum recognized IBBL as the BestBank for Corporate Social Responsibility for2008 and 2009.‣ Exclusive economic weekly “The Industry”conferred IBBL with the Best Rated BankAward-2010, 2011 & 2012.‣ The CitiBank, NA recognised IBBL as the“Largest Contributor” in Foreign TradeOperations in Europe Bangladesh corridor in2009.‣ The UAE Exchange awarded IBBL formobilizing around 30% of total foreignremittance of the country.Global Finance‣ The Global Finance, a reputed USA-basedFinancial Magazine, recognized IBBL as thebest Islamic Financial Institution of the countryfor the years 2008, 2009, 2010 & 2011.Annual Report 2012 11

Looking ForwardAbig slice of the Annual Report containsmanagement’s innovative thinking and viewsbased on IBBL’s business, economy, futureprograms, circumstances and their implications.However, these statements do not guaranteeagainst certain risks and uncertainties, whichare difficult to predict. Therefore, actual futureresults and trends, forecaste in forward-lookingstatements, may differ significantly for thefollowing reasons:• Changes in national, economic and financialconditions• Changes in policies and actions of theGovernment or Regulatory Authorities• Changes in IBBL’s Policy framework• Changes in demand for IBBL‘s products.• Fluctuations in international prices, thatinfluence the foreign exchange market• Instability of profit rate• Unpredictability of capital market• Volatility in the money market• Changes in CRR and SLR of the banks• Changes in investment rate• Changes in corporate tax structure and VAT onbanking service• Increase in provision requirement reducingROA and ROE• Fall in the margin ratio for investment accounts• Instability in capital market arising fromspeculations• Preface of compliance issues raised by theinternational forums which is likely to affect theexport growth• Escalation of international prices of essentialsthat results in volatility in For. Ex market• Global embargo/unrest in Middle-eastcountries affecting flow of remittances andtrade• Increase in Competition within the financialindustry• Increase in inflationary pressure• Under utilization & change of different riskmanagement tools• Changes in accounting standards or practices• Unforeseen natural and other disasters,adverse weather and other similarcontingencies• Changes in technology and evolving bankingof dependable industry standards• Changing demographic developmentsincluding changing consumer spending, savingand borrowing habits• Risks related to legislation, regulation andtaxation12Annual Report 2012

VisionOur vision is to always strive to achieve superior financialperformance, be considered a leading Islami Bank by reputationand performance:• Our goal is to establish and maintain the modern bankingtechniques, to ensure the soundness and development of thefinancial system based on Islamic principles and to becomethe strong and efficient organization with highly motivatedprofessionals, working for the benefit of people, based uponaccountability, transparency and integrity in order to ensurestability 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

MissionTo establish Islamic banking through the introduction of a welfareoriented banking system and also ensure equity and justicein all economic activities, achieve balanced growth and equitabledevelopment through diversified investment operations particularlyin the priority sectors and less developed areas of the country.To encourage the socio- economic development and financialservices to the low-income community particularly in the rural areas.14Annual Report 2012

Strategic ObjectivesThe strategic objectives are to:• ensure customers’ satisfaction• ensure welfare-oriented banking• establish a set of managerial successionand adopt technological changes to ensuredevelopment of an Islamic Bank as a stablefinancial institution• emerge as a healthier & stronger bank at thetop of the banking sector and continue stablepositions in ratings, based on the volume ofquality assets• ensure diversification of investment by sector,size, economic purpose & geographicallocation and expand need-based Retail andSME/Women entrepreneur financing• invest in the thrust and priority sectors of theeconomy• strive hard to become a employer of choiceand nurturing & developing talent in aperformance-driven culture• pay more importance in human resources aswell as financial capital• ensure lucrative career path, attractivefacilities and excellent working environment• ensure zero tolerance on negligence incompliance with both Shari‘ah and regulatorydodies• provide impeccable and progressively bettercustomer services using latest technologies• train and develop human resourcescontinuously and provide adequate logisticsto satisfy customers’ need• be excellent in serving the cause of leastdeveloped community and area• motivate team members to take the ownershipof every job• achieve global standard• build and consolidate corporate culture• ensure Corporate Social Responsibilities(CSR) through all activities• promote use of solar energy and greenbanking culture and ecological balanceAnnual 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 & accountabilityCommitmentsIBBL reposes trust in and maintains commitment to:• Shari‘ah• the Regulators• the Shareholders• the Community• the Customers• the Employees• other stakeholders• Environment/ecology16Annual Report 2012

Code of Conduct and Ethical PrinciplesShari‘ah foundation of the ethics• Integrity• The principle of vicegerency of humanity onearth• Sincerity• Piety• Righteousness and making one’s work perfect• Allah-fearing conduct in everything• Accountability to Almighty AllahPrinciples of personal ethics• Trustworthiness• Legitimacy• Objectivity• Professional competence and diligence• Faith-driven conduct• Professional conduct and technical standardsRules of ethical conducta. Self-motivated rules influencing job performance• Allah-fearing state of mind• Adhering to the Shari‘ah and implementingits principles• Implementing justice and fairplay• Being quick to do good and articulating thetruth• Doing good to others• Adhering to truth and transparency instatementsb. Rules of conduct towards shareholders,managers and fellow employees• Developing the work through innovative andcreative ideas• Respecting the working hours of theinstitution• Getting acquainted with the directives• Safeguarding the institution’s assets, facilitiesand equipment• Refraining from parting to others if thisgoes against the interests and rights of theemployer.c. Rules of conduct towards those who deal withthe institution and related parties• Being keen on meet us the needs of thosewho deal with the institution• Giving rights to those who are entitled tothem justly• Preserving confidential information• Being careful about one’s conduct and workin one’sAnnual Report 2012 17

Corporate ProfileName of the Company : Islami Bank Bangladesh LimitedLegal Status : Public Limited Company10589Company Registration Number : C- Dated March 13, 1983485Number of Employees : 12,188Number of Branches : 276Number of Shareholders : 60,302Number of MPB holders : 27,723Tax Payer Identification Number (TIN) : 210-200-0887VAT Registration Number : 9015000857Chairman : Prof. Abu Nasser Muhammad Abduz ZaherManaging Director : Mohammad Abdul MannanCompany Secretary : Abu Reza Md. YeahiaChief Financial Officer : Mohammad Nesar Uddin, FCA, FCMACredit 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 CitySuite # 01-03, Level # 7, Plot # 15,Road # 103, Block-CEN(C)Gulshan Avenue, Dhaka-1212.2) M/S. ACNABINChartered Accountants(An independent member of BAKER TILLY INTERNATIONAL)BDBL Bhaban (13 th Floor)12, Kawran Bazar C/A, Dhaka-1215.18Annual Report 2012

Tax Consultant : M/S. K.M. Hasan & Co.Chartered AccountantsHometown Appartment (8 th & 9 th Floor)87, New Eskaton Road, Dhaka-1000.Investors’ EnquiryFor Share : Share Department63, Dilkusha Commercial Area, (5 th Floor), Dhaka-1000.PABX: 9551105, 9551062, 9550415; Ext-627,624,615& PABX: 9563040; Ext-369. Phone & Fax: 9564595E-mail: ibblshare@islamibankbd.comFor Mudaraba Perpetual Bond (MPB) : Bond Department63, Dilkusha Commercial Area(5 th Floor), Dhaka-1000.PABX: 9551105, 9551062, 9550415, Ext-626Phone: 9554579, Phone & Fax: 9564595For Islami Bank Securities Limited : Managing Director & CEO(Subsidiary Company of IBBL)Yousuf Chamber (5 th Floor)20, Dilkusha Commercial Area, Dhaka-1000.Phone: 7121040, Mobile: 01730736027E-mail: ibbldp@islamibankbd.comFor Offshore Banking : Off Shore Banking DepartmentInternational Banking WingHead OfficePABX : 88-2-9563040, 9560099, Ext. 116, 241,167Fax : 88-2-9554151, 9564532e-mail : kutub@islamibankbd.commshahjahan@islamibankbd.comAnnual Report 2012 19

Milestones• Incorporation : 13.03.1983• Certificate of Commencement of Business : 27.03.1983• Inauguration of 1 st 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 : 30.06.1985Subscription Closed : 14.07.1985• Listing in Dhaka Stock Exchange Limited : 02.07.1985• Listing in Chittagong Stock Exchange Limited : 07.03.1996• 1 st Rights Share IssueSubscription Opened : 10.07.1989Subscription Closed : 31.12.1989• 4 th Rights Share IssueSubscription Opened : 27.07.2003Subscription Closed : 25.08.2003• IBBL Head Office in its Own Tower : 10.03.2000• Opening of 100 th Branch : 12.06.1997• Opening of 200 th Branch : 21.06.2009• Opening of 250 th 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 100 th Own ATM Booth : 04.11.2011• Opening of 300 th Own ATM Booth : 31.12.2012• Agreement with OMNIBUS having 1520 ATMs : 25.11.2011• Formation of Subsidiary Companiesa. Islami Bank Securities Limited (IBSL) : 22.03.2010b. Islami Bank Capital Management Limited (IBCML) : 01.04.2010• 1 st Position in Inward Remittance Since : 31.12.2007• 100% Online Banking : 07.01.2011• Exclusive Sponsor for Beautification of Dhaka Cityon 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 Franchiseein 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 : 22.12.201220Annual Report 2012

SponsorsLocalMohammad Abdur Razzaque Laskar (Deceased)Mofizur Rahman (Deceased)Barrister Tamizul HaqueMohammad Younus (Deceased)Mohammad Shafiuddin Dewan (Deceased)Mohammad BashiruddinMohammad Hussain (Deceased)Nashiruddin Ahmed (Deceased)Mohammad Mosharraf Hossain, MPMohammad Malek Minar (Deceased)Zakiuddin AhmedM.A. Rasheed ChowdhuryEngr. Mustafa AnwarProf. Mohammad AbdullahSerajuddowlaThe Ibn Sina Trust(Repr. by Shah Abdul Hannan)Bangladesh Islamic Centre(Repr. by A.K.M. Nazir Ahmed)Islamic Economics Research Bureau(Repr. by Prof. Mohammad Sharif Hussain)Mohammad Nuruzzaman (Deceased)Abul QuasemA.K.Fazlul Haque (Deceased)Engr. Muhammad Dawood KhanBaitush Sharaf Foundation Ltd.(Repr. by Late Moulana Mohammad Abdul Jabbar)ForeignIslamic Development Bank, K.S.A.Kuwait Finance House (K.S.C.), Safat, KuwaitJordan Islamic Bank, JordanIslamic Investment and Exchange Corporation,Doha, QatarBahrain Islamic Bank, BahrainIslamic Banking System International HoldingS.A., LuxembourgAl-Rajhi Company for Currency Exchange andCommerce, Riyadh, K.S.A.(Present name: Al-Rajhi Company for Industry & Trade)Sheikh Ahmed Salah Jamjoom, K.S.A.Sheikh Fouad Abdul Hameed Al-Khateeb(Deceased), K.S.A.Dubai Islamic Bank, Dubai, U.A.E.The Public Institution for Social Security,Safat, KuwaitMinistry of Awqaf & Islamic Affairs, Kuwait(Present name: Kuwait Awqaf Public FoundationKuwait)Ministry of Justice, Department of Minors AffairsKuwait(Present name: The Public Authority for Minors AffairsKuwait)Annual Report 2012 21

Board and Its CommitteesBoard of DirectorsChairmanProf. Abu Nasser Muhammad Abduz ZaherRepr. of The Ibn Sina TrustVice ChairmenYousif Abdullah Al-Rajhi, K.S.A.Engr. Mustafa AnwarRepr. of the Public Institution for Social Security, KuwaitDirectorsEngr. Md. Eskander Ali KhanRepr. of Al-Rajhi Co. for Industry & Trade, K.S.A.Mohammad Abdullah Al JalahmaRepr. of Kuwait Awqaf Public Foundation, KuwaitMohamad Adnan MidaniRepr. of Islamic Development Bank, K.S.A.Md. Abul HossainRepr. of Investment Corporation of BangladeshDr. Abdulhameed Fouad Al-KhateebRepr. of Arabsas Travel & Tourist Agency, K.S.A.Abdullah Abdul Aziz Al-Rajhi, K.S.A.Salahuddin AhmedRepr. of Kuwait Finance House, KuwaitHafizul Islam MianRepr. of Islamic Education SocietyMd. Shahidul IslamMohammed Nazrul IslamMominul Islam PatwaryDepositor DirectorsMd. Abdus Salam, FCA, FCSHumayun Bokhteyar, ACPA, FCAIndependent DirectorsProfessor N R M Borhan Uddin, Ph.D.Prof. Dr. A.K.M. Sadrul IslamBarrister Mohammed Belayet HossainEx-Officio DirectorMohammad Abdul MannanManaging Director and CEOCompany SecretaryAbu Reza Md. YeahiaSenior Vice President & SecretaryExecutive CommitteeChairmanEngr. Md. Eskander Ali KhanMembersDr. Abdulhameed Fouad Al-KhateebHumayun Bokhteyar, ACPA, FCAMd. Abdus Salam, FCA, FCSMd. Abul HossainAudit CommitteeChairmanProfessor N R M Borhan Uddin, Ph.DMembersMd. Abdus Salam, FCA, FCSMohamad Adnan MidaniHumayun Bokhteyar, ACPA, FCA22Annual Report 2012

Short Profile of DirectorsProf. Abu Nasser Muhammad Abduz ZaherChairmanProf. Abu Nasser Muhammad Abduz Zaher, Chairman, Islami Bank Bangladesh Ltd.began his teaching profession in the early seventies and later served in the RoyalEmbassy of Kingdom of Saudi Arabia in Dhaka, Bangladesh for a long 13 years as theSecretary. 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) andIndustrialists & Businessmen Welfare Foundation (IBWF). He is Vice Chairman ofBangladesh Association of Banks (BAB). He is Advisor to Bangladesh Association ofPharmaceutical Industries. He is an honored personality for his pioneering steps inpromoting Islamic Banking in Bangladesh.Prof. Zaher was the Director of IBBL in different times and was Chairman of theExecutive 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 Centreand Syndicate member of the Manarat International University of Bangladesh.Prof. Zaher is playing a vital role in social welfare-related works. He is related withfounding and development of hundreds of educational institutions. He has patronizedto establish many renowned private hospitals and helped thousands of people fortreatment.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 inmany international seminars, symposia and conferences.Annual Report 2012 23

Yousif Abdullah Al-RajhiVice ChairmanYousif Abdullah Al-Rajhi is a Vice Chairman of the Board of Directors and a foreignDirector of the Bank. He completed his graduation in Business Administrationmajoring in Economics & Political Science from King Saud University, K.S.A. in 1986.Then he obtained M.A. degree in Development Administration from Western MichiganUniversity, USA in 1991. He also completed Internal Auditor Course, ChangeManagement & Leadership Course and Speed Reading and Development RoundAttendance Certificate Course.He is General Manager-cum CEO of Al-Rajhi Company for Industry and Trade, KSAhaving exposure of 27 years. He started his Banking career with Al-Rajhi Banking andInvestment Corporation, the most reputed Financial Institution in the Royal Kingdomof Saudi Arabia.Mr. Yousif has visited various eastern and western countries of the world andparticipated in many international seminars, symposia and conferences.Engr. Mustafa AnwarVice ChairmanEngr. Mustafa Anwar represents the Public Institution for Social Security, Kuwait asDirector in the Board of Islami Bank Bangladesh Ltd. He is a Founder Sponsor ofIslami Bank Bangladesh Limited. Currently he is a Vice Chairman Board of Directorsof the Bank. Mostafa Anwar is the Chairman & Managing Director of Birds Group, alarge business conglomerate in the RMG sector of Bangladesh; the group comprisesBirds Garments Ltd., Birds Garments Ltd. Unit-2, Birds RNR Fashions Ltd., BirdsApparels Ltd., Birds A & Z Ltd., Birds Fadrex Ltd., Khalifa Apparels Ltd., Civil GeneralConstruction 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 ofEngineering & Technology (BUET) in early nineteen sixties and began his career asan engineer of Bangladesh Water Development Board (BWDB).Engr. Mustafa Anwar is engaged in various social, educational and culturalorganizations 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.24Annual Report 2012

Engr. Md. Eskander Ali KhanChairman, Executive CommitteeEngr. 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 ExecutiveCommittee of the Bank. He is a well-known businessperson in Real Estate & PoultryHatchery and Tourism Sector in Bangladesh. He completed his graduation in ElectricalEngineering from Bangladesh University of Engineering and Technology (BUET) in1969. He served for a long time as electrical engineer in UAE. He is the Chairman ofIslami Bank Securities Ltd.Mohammed Abdullah Al JalahmaDirectorMohammed Abdullah Al Jalahma represents Kuwait Awqaf Public Foundation as aDirector in the Board of Islami Bank Bangladesh Ltd. He was appointed director in April06, 2009. He completed his graduation in Business Administration from the Universityof Concordia, Montreal, Quebec in 1985. He has 28 years working experiences inthe field of Charitable Foundation, Zakat House, Investment Department, BusinessAdministration, Modern and Developed Techniques in Managing Waqf, Building TeamWork, Protocol and Formalities, Promoting Positive Skills of Subordinators, LegalDimension in Real Estate Sector and Managing & Evaluating Property. At present, heis serving as Deputy Secretary General of Kuwait Awqaf Public Foundation, Kuwait.He has practical experience in establishing the Zakat House in Cairo, the waqfresidential Complex “Kuwait and Bahrain” in the Kingdom of Bahrain, the waqf fundfor attending to the disabled, being the first waqf fund to be initiated by Kuwait AwqafPublic Foudation and Kuwait Autistic Center as the first waqf project initiated by KuwaitAwqaf Public Foundation.He is also the member of Board of Directors of AI Dar Finance Company and AsianMuslem Committee belonging to the World Charitable Foundation.Mohamad Adnan MidaniDirectorMohamad Adnan Midani is a Chartered Accountant by profession. He completed hisBachelor 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 CanadianInstitution 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 BankBangladesh Limited since May 19, 2010.Annual Report 2012 25

Md. Abul HossainDirectorMd. Abul Hossain completed his Masters Degree in Statistics from JahangirnagarUniversity 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, SoftwareDevelopment Company and Specialized Financial Institution. Presently he is GeneralManager of Investment Corporation of Bangladesh. He represents InvestmentCorporation of Bangladesh in the Board of Directors of IBBL as elected Director. Healso represents Investment Corporation of Bangladesh in the Board of Directors ofAziz Pipes Limited as Chairman & NITOL Insurance Company Limited as well as AltexIndustries Ltd. as Director.Dr. Abdulhameed Fouad Al-KhateebDirectorDr. Abdulhameed Fouad Al-Khateeb represents Arabsas Travel & Tourist Agency,K.S.A. as Director of Islami Bank Bangladesh Ltd. He was appointed director on May15, 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-RajhiDirectorAbdullah Abdul Aziz Al-Rajhi is an elected Foreign Director of the Board of Directorsof Islami Bank Bangladesh Ltd. He was appointed director on May 15, 2012. He isholding 7.58% shares of the total Paid-up Capital of the Bank. He began his Bankingcareer with Al-Rajhi Banking and Investment Corporation, the most reputed FinancialInstitution in the Royal Kingdom of Saudi Arabia.26Annual Report 2012

Salahuddin AhmedDirectorSalahuddin Ahmed represents Kuwait Finance House, Kuwait as a director of IslamiBank Bangladesh Ltd. He was appointed as director on May 15, 2012. He is anIndian National. He completed his Bachelor of Commerce Degree from Universityof Lucknow, India in 1995. He obtained Post Graduate Diploma in BusinessAdministration (PGDBA) in 1998 and Diploma in Business Finance in 1996 fromInstitute of Chartered Financial Analyst of India. He joined in Kuwait Finance House in2007 and now a Senior Investment Manager. He has more than 13 years of workingexperience in the field of Corporate Finance and Investments. He also representsKuwait Finance House, Kuwait as director of Kuwait Finance House Research Limited.This is a premier research institution set up exclusively for promoting research in theIslamic Banking Field, apart from other investment research.Hafizul Islam MianDirectorMr. Hafizul Islam Mian is an elected Director of the Islami Bank Bangladesh Limited(IBBL) representing Islamic Education Society. He got his Masters with HonoursDegree in Economics from the University of Dhaka in 1971. Later he obtained MastersDegree in Financial Management from the Ulster University, Northern Ireland, U.K.Earlier he got a Diploma Degree in Manpower Studies (Manpower Planning andTraining) from the Manchester University, U.K in 1987.Mr. Islam retired as an Additional Secretary, Government of the People’s Republic ofBangladesh in 2008. He spent a long time efficiently imparting different types of trainingof the officers of all 29 cadres of the Government. Mr. Islam had to make extensivetours to attend seminars, conference and meetings at different countries during hisservices in the Government. He has now been assigned with the responsibilities of theChairman of a charitable social welfare organization named Islamic Aid Bangladesh.He is the Executive Chairman of the Centre for Coastal Development and Researchin Bangladesh.Annual Report 2012 27

Md. Shahidul IslamDirectorMd. Shahidul Islam is an elected Director of Islami Bank Bangladesh Ltd. He is theManaging Director of Green Park Housing Ltd., Dhaka. He is associated with anumber of social welfare organizations including Islami Bank Foundation. He spenta long time in K.S.A. and got his education in Arabic Language from King AbdulAziz University, K.S.A. On his return home, he has embarked in business. He is aDirector of Bangladesh Publications Ltd. He is also a member of the Board of Trustee,Bangladesh Islamic University (BIU). He was the Chairman of Audit Committeeof Islami Bank Bangladesh Limited. He is also the Vice Chairman of Islami BankSecurities 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 inmany international seminars, symposia and conferences.Mohammed Nazrul IslamDirectorProf. Mohammed Nazrul Islam is an elected Director of the Board of Directors ofIslami Bank Bangladesh Ltd. He obtained M.Sc. in Applied Geophysics in 1979. Heserved as a teaching Faculty in the Ministry of Education, Kingdom of Saudi Arabia indifferent colleges from 1979 to 2003. He was a Member of the Executive Committeeof Islami Bank Bangladesh Limited. Now he is the Secretary of Islamic Aid Bangladeshand a Director of Islami Bank Securities Limited (IBSL).Mominul Islam PatwaryDirectorMominul Islam Patwary is an elected Director of Islami Bank Bangladesh Ltd. Heobtained Masters Degree in Chemistry from the University of Dhaka. He was thefounder-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 participatedin many international seminars, symposia and conferences. He was Chairman ofthe 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 ofBangladesh Publication Ltd.28Annual Report 2012

Md. Abdus Salam, FCA, FCSDepositor DirectorMd. Abdus Salam, FCA, FCS is the elected Council Member for the term 2013-2015and the President of the Institute of Chartered Accountants of Bangladesh for the year2013. He was the elected Vice President of the Institute of Chartered Accountants ofBangladesh for 2010-2012 and the former Vice President of the Institute of CharteredSecretaries of Bangladesh. He is a Director of Ibn Sina Pharmaceuticals IndustriesLtd. (IPI) and the Chairman of the Audit Committee of IPI, a listed company withDhaka and Chittagong Stock Exchange Limited.Mr. Salam has been representing ICAB in education, training & CPD (ContinuingProfessional 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. Salamis a Director of Islami Bank Bangladesh Limited from the depositors’ category since2010. Mr. Salam has been serving over last two decades as a consultant in variousDevelopment Programmes financed by the World Bank, ADB, DFID, CIDA, etc. andalso worked for the Bangladesh Power Development Board, Ministry of Energy andMineral Resources, as the Director (Accounts) till 1990.Humayun Bokhteyar, ACPA, FCADepositor DirectorHumayun Bokhteyar obtained Accountancy Degree from Bangladesh and Australia.He has long senior level financial management experience with services andmanufacturing sectors in Bangladesh and Australia. He is a Chartered Accountanthaving exposure over 23 years. He is also an associate member of AustralianSociety of Certified Practicing Accountants and Institute of Cost and ExecutiveAccountant (ACEA) UK. Mr. Bokhteyar is the founder and Managing Partner ofPublic Accounting and Auditing Firm, M/s. Bokhteyar Humayun & Co., CharteredAccountants. He was elected as Depositor Director of Islami Bank BangladeshLimited on September 01, 2010.Professor N R M Borhan Uddin, Ph.D.Independent Director & Chairman, Audit CommitteeProfessor NRM Borhan Uddin obtained Ph.D. in Management from Stevens Instituteof Technology, New Jersey, USA. He also completed his MBA & MS degree from theUSA. At present, he is the Vice Chancellor of City University. He is a Member of theBoard of Directors and Executive Committee of ICB Securities Trading CompanyLimited and he was the Chairman of Green Land Pharmaceuticals Ltd., Tongi,Gazipur. He has been the Independent Director of Islami Bank Bangladesh Limitedsince July 24, 2010.Annual Report 2012 29

Professor Dr. A.K.M. Sadrul IslamIndependent DirectorProf. Dr. A.K.M. Sadrul Islam was nominated Independent Director of Islami BankBangladesh Limited on December 29, 2012. Dr. Islam completed M.Sc. Engineeringfrom Bangladesh University of Engineering & Technology (BUET) in 1984 andgot his Ph.D. in Mechanical Engineering from Imperial College of Science &Technology, University of London, U.K. in 1988. He was former Head and Professorof Mechanical Engineering Department of BUET and presently a Professor ofMechanical & Chemical Engineering Department and Head of Civil & EnvironmentalEngineering Department of Islamic University of Technology, a subsidiary organ ofOIC. He has also attained many Scholastic Award/Fellowships like Guest Professorat Saga University, Japan, Visiting Professor, at University Technology of Malaysia,INSPIRE Exploratory Grant, U.K., British Commonwealth Visiting Research Fellowat Loughborough University, U.K.Dr. Islam is currently the Chairman of Mechanical Engineering Division of Institutionof Engineers, Bangladesh (IEB) and the Secretary General of Bangladesh Societyof Mechanical Engineers (BSME). He is the Member of Board of Trustees of theIbn 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, symposiumsand conferences.Barrister Mohammed Belayet HossainIndependent DirectorBarrister Mohammed Belayet Hossain was nominated as Independent Directorof Islami Bank Bangladesh Limited on December 29, 2012. He completed Masterof Laws (LL.M.) from University of Chittagong. He obtained Barrister-at-Law fromthe Honourable Society of Lincoln’s Inn, London. He is a member of the ExecutiveCommittee of the Institute for Research and Development (IERF), Member and theCoordinator of the Legal Aid Team (Supreme Court) and Bangladesh Islamic LawResearch & Legal Aid Centre, Dhaka. He acted twice as one of the Panel Judges ofthe 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 andinternational commercial, maritime, academic and business entities. He regularlytakes part in seminars, talks and symposia as a Speaker/Lecturer/ Paper Presenteron different national and global issues.30Annual Report 2012

Shari‘ah Supervisory CommitteeSheikh Moulana Mohammad QutubuddinChairmanBaitush Sharaf Anjuman-e-Ittehad BangladeshMufti Sayed AhmadHead MuftiAl Jamiatus Siddikiah Darul Ulum(Madrasah-e-Furfura Sharif), Darussalam, DhakaProfessor Dr. Abu Bakr RafiquePro-Vice ChancellorInternational Islamic University ChittagongPrincipal Mohammad Serajul IslamEx-PrincipalMadrasha-e-Mesbahul Ulum, DhakaAbdur RaquibEx-Executive PresidentIslami Bank Bangladesh LimitedMufti Shamsuddin (Zia)Mufti & MuhaddisAl Jameatul Islamiah, Potia, ChittagongMoulana Abdus Shaheed NaseemPresidentBangladesh Quran Shikkha SocietyDr. Hasan Mohd. MoinuddinAssociate ProfessorDeptt. of Islamic StudiesInternational Islamic University Chittagong, Dhaka CampusProfessor Dr. A. S. M. Toriqul IslamDept. of Dawah & Islamic StudiesIslamic University, KushtiaDr. Mohammad Abdus SamadAssociate Professor & Head ofArabic Language & Literature DepartmentInternational Islamic University Chittagong, Dhaka CampusDr. Mohammad Monzur-e-ElahiAsstt. ProfessorNational UniversityMoulana Mohiuddin RabbaniMuhaddithFoizul Ulum Madrasha, DhakaKhatib, Railway Jame Masjid, Fulbaria, DhakaChairmanVice ChairmanMember-SecretaryMemberMemberMemberMemberMemberMemberMemberMemberMemberAnnual Report 2012 31

Management CommitteeMohammad Abdul MannanManaging Director & CEOMohd. Shamsul HaqueDeputy Managing DirectorMd. Habibur RahmanDeputy Managing DirectorMd. Nurul IslamDeputy Managing DirectorMuhammad Abul BasharDeputy Managing DirectorSyed Abdullah Mohammad SalehDeputy Managing DirectorMd. Habibur Rahman Bhuiyan, FCADeputy Managing DirectorA.K.M. Abdul Malek ChowdhuryDeputy Managing DirectorMd. Mahbub-ul-AlamDeputy Managing DirectorRafi Ahmed BeghExecutive Vice PresidentNurul Islam KhalifaExecutive Vice PresidentAbdus Sadeque BhuiyanExecutive Vice PresidentChairmanMemberMemberMemberMemberMemberMemberMemberMemberMemberMemberMember32Annual Report 2012

ExecutivesManaging Director & CEOMohammad Abdul MannanDeputy Managing DirectorsMohd. Shamsul HaqueMd. Habibur RahmanMd. Nurul IslamMuhammad Abul BasharSyed Abdullah Mohammed SalehMd. Habibur Rahman Bhuiyan, FCAA.K.M. Abdul Malek ChowdhuryMd. Mahbub-ul-AlamExecutive Vice PresidentsAbu Taher Mohammad SalehMd. Najibur RahmanRafi Ahmed BeghMd. Nurul Islam KhalifaAbul HossainMd. Nurul IslamMd. Azizur RahmanA.K.M. Harunur RashidMd. Mahfuzur RahmanMd. Abdul JalilAbdus Sadeque BhuiyanMd. Abdul JabbarMd. Rafiqul IslamMd. Shafiqur RahmanMd. Kabir HossainMd. ShamsuzzamanMd. Nazrul Islam KhanMd. Shamsul HudaMd. Obaidul HaqueMohammed Monirul MoulaAsheque Ahmad JebalMd. Abdur Rahman BanerjeeMahmood AhmedMd. Nurul IslamMd. Mohon MiahA. A.M. Habibur RahmanShafiqul MawlaMohammed Amirul IslamShaikh Mohammadas on 31.12.2012Mohammad AliMuhammad Ghulam SarwarMd. Ataur RahmanMd. Kawsar-ul-AlamAbu Naser Mohammed Nazmul BariMd. Mosharraf HossainMohammad Nesar Uddin, FCA, FCMASenior Vice PresidentsSayed Nasir UddinMd. ShahidullahMd. Mizanur RahmanA.H.M. Latif Uddin ChowdhuryMd. Mostafizur Rahman SiddiqueeTaher AhmedMohammad Jalal Uddin AkbarFaridul Hoque ChowdhuryMd. Giasuddin AhmedMd. Yeanur RahmanMd. Shahidur RahmanMd. Omar Faruk KhanMd. Motiar RahmanMd. Nizamul HoqueKazi Kamrul IslamMohammod UllahMd. Tofazzal Hossain KhanMd. Saleh IqbalAbu Reza Mohd. YeahiaMd. Shah AlamMd. Nayer AzamAhmed AliRana Mohammad RaihanMd. Moiz UddinMd. Altaf HossainMd. Faizul KabirMd. KhalequzzamanMd. Abdul QuddusMohammad Rokan UddinAbu Sayeed Md. IdrisMd. Siddiqur RahmanK.M. Munirul Alam Al-MamunA.K.M. Payer AhammedMuhammad Kamaluddin (Jasim)Md. Qaisar AliSalim AnwarMd. Abdus SalamMizanur RahmanMd. Osman GaniMd. Mahboob AlamAbu Noman Md. Siddiqur RahmanMd. Habibur RahmanMd. AbdullahZafar AlamMohammad Jamal UddinMazumderMd. Aminur RahmanMd. Shamsul HaqueMohammad SayeedullahMuhammad SolaimanSyed Sirajul HoqueMd. Abdus SobhanA.K.M. Shahidul Hoque KhandakerVice PresidentsSk. Md. HassanMd. Yeakub AliAbul Kalam Md. SaifullahMd. Abdul MatinMd. Ashraf HussainAbdullah JahangirSk. Moshiur RahmanMd. Sekander AliShahid Uddin AhmedMd. Saidur RahmanMd. SiddiquzzamanFayez Ahmed ChowdhuryMd. Akhtar HossainMd. Abdul MatinA.K.M. Nurul IslamMd. Zalal UddinMd. Manjurul IslamMohammad JalaluddinMd. Sharif Uddin PramanikMir Rahmat UllahAnnual Report 2012 33

Md. Mahbub-a-AlamJamal UddinRezaul Haque Mohd. Rafiqul IslamKazi Main Uddin KhademMuhd. Quamrul Bari ImamiA.K.M. Kawsar AlamMd. Farid UddinAbul Faiz Muhammad KamaluddinFarid AhmadMd. Akhter HossainAbdus Sabur KhanMd. Faiz AhmedMd. Mizanur Rahman MiziMohammed Shahid UllahMd. Shahidul IslamA.K.M. Abu SiddiquiAbdul GaniMd. Ashraf AliMd. Abdul MalekSikdar Muhammad ShihabuddinAhmad NoorMd. Ataur RahmanMohammed Sirajul AlamRafiq-ul-AlamMd. Abdus SaburKhorshed AhamedA.K.M. Shafiar RahmanAbdullah AnwarMd. Mustafizur RahmanMd. Ruhul AminMd. Monzur Morshed KhanMahmudur RahmanMohd. Ashraful IslamMohammad MasudMuhammad Nurul HoqMd. Anisul HaqueMuhammad Golam RabbaniMd. Mizanur Rahman BhuiyanMohammad Akhter HossenShahidullah MajumderG.M. Mohd. Gias Uddin QuaderBashir AhamedMd. Rafiqul IslamChowdhury Shamim Hasnain MahdiA.T.M. Shahidul HaqueMuhammad Zakir HussainAbdul Gafur Md. Qumrul IslamMd. Shahjahan AliMd. ShamsuddohaMd. Shahid AhmedMuhammad Hasnain AbidMd. Fakhrul IslamMd. Abu SufianMd. Zamshidur RahmanMd. Zillur Rahman PatwaryMajor Md. Yunus Ali (Retd.)Md. Maksudur RahmanMd. Enamul HuqMd. Shafiul AzamA.S.M. Rezaul KarimMd. Khalilur RahmanAbdul Hamid MiahMd. Ashraf ImamMd. Shahidul Haq AkandMd. Nazmul Hoda ShirajiMd. Gakir HossainMd. ZiaullahNazmus Sakib Md. Rezaur RahmanMd. Abdullah RashedMd. Rezaul IslamMd. Mozahidul IslamMd. Fourkan Uddin NizamiMd. Jainal AbedinMd. Zillur RahmanMd. Manirul IslamMd. Nasir UddinShah Md. Mahtubuddin Al-MamunMd. Nasim AhmedAbdul Kader SarderMd. Saroar HossainMd. Abul Kalam AzadMohd. Enayet Ullah SiddiqueeMd. Anowarul HaqueMd. Ibrahim BhuiyanKazi Mojibor RahmanAssistant Vice PresidentsMd. AbduzzaherSyed Md. Amir AliMohammad YusufMd. Rafiqul IslamMd. Shamsul AlamMd. Ibrahim KhalilShaikh Abdul MannanMd. Jashim UddinEnajuddin AhmedMd. Zakir HossainKhan Mosharraf HossainMd. Nurul IslamMd. Anwar HossainMasudur Rahman KhalifaS.A.M. Mizanur Rahman KhanAbdul MominMd. Mojibur RahmanMd. Shafiuddin TalukderMd. Mizanur RahmanS.M. Rezaul KarimMd. Khaled ShaifullahMuhammad ObaidullahMd. Abdur RahmanMohd. Yakub AliMoshtaqe AhmedMd. Akhter HossainMd. Nurul HossainMd. Habibur RahmanMd. Abul Kalam AzadShaick Farid AhmedNisar AhmedMd. Nurul AminMd. Aminul IslamMd. Murshed AlamMd. Shamsul Alam SiddiqueMd. Bozlur RahmanMohammad Hossain KhanMd. Monir HossainMd. Sarwar IslamMd. Zillur RahmanRuhul AminMd. Faruque Al-MamunMd. Ferose UddinMuhammad Zillur Rahman Al-MahmudMd. Ashraful AlamMd. Alimur RahmanMd. Mustafa KamalMohd. Shahid Uddin Akbar BhuiyanMuhammad Anisur RahmanMd. Zahirul IslamMohd. Shahjahan34Annual Report 2012

Nesar Uddin AhmadMd. Jamal UddinA.F.M. Anisur RahmanAbul Kasem Md. MostafaMunshi Rezaur RashidA.A.M. Mazharul IslamMd. MaznuzzamanA.K.M. Mahbub MorshedG.M. Abdur RazzakMd. Shahadat HossainNazimuddinA.K.M. Delowar HossainMuhammad Shahidul IslamMd. Abul KhairMd. Abdur Rob MridhaMd. Saifur Rahman ChowdhuryMd. Habibur RahmanMd. Matiur RahmanAhmad AliSheikh Abdus SalamMd. Hafizur RahmanMd. Anisur RahmanM. Zubayer Azam HelaliMd. AsaduzzamanMd. Saiful IslamMohd. Rafiqul IslamMd. Mahfuzul KarimAbul Laise Muhd. KhaledSaiful IslamMohammad Mohi UddinMd. Golam MostafaMd. Amzad HossainAhmed Zubayerul HuqMd. Zamal UddinMohd. Saiful HaqueMd. Moksudur Rahman MunshiAbul Kalam Md. Shamsul HaqueMohd. Anwar HossainMeah Md. Barkat UllahMohammad Nurul KarimMohammed Kutub UddinMd. Abdul JalilMahmud Hossain KhanMohd. Mosharrof HossainMd. Abu SayedMd. Afzal HossainMd. Masudul AlamDilshad ParveenMd. Nurullah BhuiyanB.M. Habibur RahmanMd. Harun-or-Rashid MondalMohammed Monzurul IslamChowdhuryMd. Shamsul AlamMohammed SanaullahMd. JakariaMd. Ashraf UddinDilruba HayatMd. Zahirul Islam BhuiyanAbdul Awal KhanS.M. Ali MowlaMd. Enayet UllahMd. Alauddin GaziMd. Nazrul Islam JomaddarSheikh Mohammad OmarMd. Helal Uddin DewanA.B. Muhammad MostafaM. Shamsuddin AhmedMd. Shah Alam BhuiyanMd. Abu Walid ChowdhuryS.M. Tanver HassanMd. Mosharraf HossainMd. Mahbub Al HassanMohd. Motahar HossainSohel AmanSheik Saidul HasanMd. Arifur RahmanSabina YesminMd. Omar FaruqueMd. Ashrafuddin SikderMd. Monzurul IslamShahidul AlamMd. Moniruzzaman SarkerMd. Dulal HossainMd. Jakir HossainMd. Monzoor-e-Elahi MiazeeMd. Abdur RazzaqueMd. Rezaul KarimMahmuda SultanaMd. Zakir HossainMd. Mahmud HasanMohammad EshaMd. Saiful AlamMd. Saiful IslamMd. Abdur RashidKazi Shah Omar FarukMd. Habibur Rahman MiahMd. Jashim UddinMd. Zahurul IslamMohammad Musleh UddinMd. Akram HossainA.K.M. SakawatullahMd. Abul Fazal KhanMd. Habibur RahmanFazle Bari Waseque AhmadMd. Amirul IslamMd. Shah AlamMohammad Nurul HossainH.M. Wahiduzzaman AkonMd. Alamgir KhalilS.M. Mizanur RahmanMd. Abu ZafarMd. Nuruzzaman HowladerMohammad Rezaul KarimMuhd. Shaukat AliAbdul NaserS.M. Abdul LatifMohammad Motaleb SarderMd. Shah Jalal SheikhMd. Solaiman AliSyed Muhammad MoyeenuddinMd. Abduz ZaherMd. Anwar HossainMd. Anwar HossainMd. Abdul Matin Sk.Md. MohiuddinMuhammad Shahidul AlamMd. Magfurur RahmanMd. Muzahidul IslamMohd. Nazim Uddin TalukderKhaled Mahmud RaihanShah Md. Jubaer, ACAAnnual Report 2012 35

Corporate StructureISLAMI BANK BANGLADESH LIMITEDShari’ah SupervisoryCommieeBOARD OF DIRECTORSChairmanReviewCommieeExecuve CommieeAudit CommieeIslami BankSecuries LimitedIslami Bank CapitalManagementLimitedIslami BankFoundaonMANAGING DIRECTORShari’ahSecretariatBoard SecretariatDivisionManagementCommiee (MC)Asset LiabilityCommiee(ALCO)Islami Bank Training& ResearchAcademyHumanResourcesDivisionResearch &DevelopmentDivisionOperaonsWingCorporateInvestmentWingRetailInvestmentWingInternaonalBankingWingDevelopmentWingInternalControl &ComplianceWingICTWingRiskManagementWingVigilance SquadMD’sSecretariatZones & CorporateBranches36Annual Report 2012

Products & ServicesLocal Currency Deposit Accounts1. Al-Wadeah Current Account2. Mudaraba Savings Account3. Mudaraba Term Deposit Account4. Mudaraba Special Notice Account5. Mudaraba Special Savings (Pension) Account6. Mudaraba Hajj Savings Account7. Mudaraba Savings Bond Account8. Mudaraba Waqf Cash Deposit Account9. Mudaraba Monthly Profit Deposit Account10. Mudaraba Muhar Savings Deposit Account11. Students Mudaraba Savings Account12. Mudaraba Farmers Saving Account13. Mudaraba NRB Savings Bond (MNSB)Deposit Products in Foreign Currency1. Mudaraba Foreign Currency Account (MFCA)2. Mudaraba Exporters’ Retention QuotaAccount (MERQ)3. Foreign Currency Account (FCA)4. Foreign Currency Account (ERQ)5. Foreign Currency Account of EPZ Enterprise6. Resident Foreign Currency Deposit Account(RFCD)7. Non-Resident Foreign Currency Account ofExchange Houses/BanksProducts in Off-shore Banking Unit (OBU)Deposit products1. Al-Wadeah Current Account2. Mudaraba Savings AccountInvestment Products1. Bill Financing (Mudaraba Documentary BillsUPAS)2. Import Financing3. Export Financing4. Short-term Murabaha5. Project Finance (HPSM term investment)Foreign Remittance Products1. Remittance Card2. Foreign Demand DraftForeign Remittance Services1. Central Crediting of Remittances2. Payment of 3 rd Bank Remittance throughTT & PO3. Payment of Spot Cash Remittances-Online and Web-based4. Centralised NRB Account Opening5. SMS Notification6. SMS Push Pull Service7. Maintaining of NRD & NRT AccountsInvestment Products1. Bai-Murabaha2. Bai-Muajjal3. Bai-Istijrar4. Bai-Salam5. Bai-IstisnaAnnual Report 2012 37

6. Hire Purchase under Shirkatul Melk (HPSM)7. Mudaraba8. Musharaka9. Musharaka Investment in Potato Storage10. Murabaha Post Import (MPI)11. Murabaha Import Bills (MIB)12. Murabaha Import LC13. Bai-Muajjal Back to Back Bills14. Bai-as-sarf (Foreign Documentary Bill: FDB)15. Bai-as-sarf (Foreign Currency Cheques/Drafts:FCD)16. Murabaha Foreign Currency Investment(MFCI)17. Musharaka Documentary Bill (MDB)18. Bai-Salam (Pre-shipment)19. Mudaraba NRB Entrepreneur InvestmentScheme (MNEIS)Welfare-oriented Special InvestmentSchemes1. Household Durable Scheme (HDS)2. Housing Investment Scheme (HIS)3. Real Estate Investment Program (REIP)4. Transport Investment Scheme (TIS)5. Car Investment Scheme (CIS)6. Investment Scheme for Doctors (ISD)7. Small Business Investment Scheme (SBIS)8. Agriculture Implements Investment Scheme(AIIS)9. Rural Development Scheme (RDS)10. Micro Enterprise Investment Scheme (MEIS)11. Urban Poor Develepment Scheme (UPDS)12. Micro Industries Investment Scheme(MIIS)13. Women Entrepreneurs Investment Scheme14. Palli Griha Nirman Beniyog Prakalpa15. NRB Entrepreneurs InvestmentScheme(NEIS)16. Solar Panel Investment Scheme(SPIS)ATM Services1. Cash Withdrawal2. Fund Transfer3. Mini Statement of Accounts4. Balance Enquiry5. Payment of Utility Bills (Electricity, Water,Phone and Gas etc.)Other Banking and Value Added Services1. Payment Order (PO)2. Demand Draft (DD)3. Telegraphic Transfer (TT)4. Locker Service5. Quard against TDR6. Counseling7. Online Banking8. SMS Banking9. Internet Banking (i-banking)10. IBBL Web portal facility11. Islami Bank mCash12. Letter of Credit13. Back-to-Back Letter of Credit14. Bank Guarantee15. Foreign Bank Guarantee16. Murabaha Import Bill under UPAS17. Export Bills Collection18. Substitute Cash Assistance19. SWIFT20. Outward Remittancea. Travel purposeb. Study purpose (Student File)c. Medical purposed. Others21. Inward remittancea. Encashment of cash Foreign Currencyb. Collection of F.C. Cheques/Draftsc. Payment of Foreign TT & DDd. OthersTreasury ActivitiesDealing Room Operations:1. Foreign Exchange Operations2. Money Market OperationsSpecial Services through Islami BankFoundation1. Islami Bank Hospitals2. Islami Bank Medical College, Rajshahi3. Islami Bank Community Hospitals4. Islami Bank Nursing Training Institute;5. Islami Bank Institute of Health Technology6. Islami Bank Homeopathic Clinics7. Monorom: Islami Bank Crafts & Fashion8. Islami Bank Service Centre9. Islami Bank Institute of Technology10. Islami Bank International School and College11. Islami Bank Model School12. Islami Bank Mohila Madrasah13. Bangladesh Cultural Centre14. Distressed Women Rehabilitation CentreTraining Services1. International : Officials of Foreign Banks onIslamic Banking2. National : Training of own work force & otherson Islamic BankingDiploma in Islami Bank38Annual Report 2012

Media HighlightsAnnual Report 2012 39

Media Highlights40Annual Report 2012

Stakeholders InformationSustainability reporting affords the Bank ameans to communicate and engage with itsstakeholders. Given the different nature of variousstakeholders, the Bank is compelled to strategicallydefine its key stakeholder audience to ensurepragmatism in engagement and reporting. Thusthe Bank defines its key stakeholders as investors,customers, employees, suppliers, communities andenvironment. Through stakeholder inclusivenessand strategic engagement, the Bank objectivelyaims to achieve conclusive and positive outcomesfor each of the identified stakeholders.Stakeholders Inclusiveness and EngagementEmployeesCustomersShareholders andInvestorsSuppliers and ServiceProvidersGovernment andother regulatorsCommunity• PermanentStaff• Contract staff• Outsourcedstaff• Probationers,Trainees andInterns• Retail customers• SMEs• Micro customers• Remittancecustomers• Cardholders• ibanking customers• SMS bankingcustomers• corporate entities• External tradecustomers• Institutionalinvestors• Individualinvestors• Resident &non-residentshareholders• MPB holders• Stockbrokers• CorrespondentBanks ande-remittance agents• Service providersrelated to theBranch expansion• Providers ofmaintenance,security• Suppliers of fixedassets• Landlords of leasedpremises• Central Bank• Ministry ofFinance,National Board ofRevenue, BSEC,DSE, CSE• ICAB, ICMAB• Rating Agencies• BankersAssociation• All BusinessChambers• External Auditors• Children,Women andElders• Graduatesand otherstudents inuniversities andother traininginstitutions• Professionalsand selfemployers• Differentcommunities• Civil societyStock DetailsSl. No. Particulars DSE CSE1 Share Symbol ISLAMIBANK ISLAMIBANK2 MPB Symbol IBBLPBOND IBBLPBOND3 Company Code 11104 220084 Share Listing Date 02.07.1985 07.03.19965 MPB Listing Date 25.11.2007 25.11.20076 Market Category ‘A’ ‘A’7 Electronic Share Yes Yes8 Market Lot (Nos) 100 1009 Face Value (Taka) 10 1010 Total Number of Shareholders (31.12.2012) 60,302 60,30211 IBBL Retained Position in DSE-20 CSE-30Annual Report 2012 41

Pattern of ShareholdingSl.No.ParticularsNo. of sharesas on31.12.2012Percentage(%)to total(Taka)No. of sharesas on31.12.2011Percentage(%)to total(Taka)01 Sponsors / DirectorsLocal :(Excluding Foreigners)81,655,170 06.528 816,551,700 60,791,430 06.074 607,914,30002 Foreigners(a) Foreign Sponsors/Directors(b) Excluding ForeignSponsors/Directors662,358.172 52.948 6,623,581,720 359,624,340 35.935 3,596,243,400126,865,760 10.141 1,268,657,600 227,604,180 22.743 2,276,041,800Sub-total 789,223,932 63.089 7,892,239,320 587,228,520 58.678 5,872,285,20003 Govt. of Bangladesh** 15,787 00.001 157,870 12,630 00.001 126,30004 Institutions(Excluding Foreigners)101,474,744 08.112 1,014,747,440 99,847,687 09.977 998,476,87005 General Public 278,594,367 22.270 2,785,943,670 252,890,933 25.270 2,528,909,330Total 1,250,964,000 100.00 12,509,640,000 1,000,771,200 100.00 10,007,712,000N.B.: Foreign:Local:789,223,932461,740,06863.0936.91--587,228,520413,542,68058.6841.32--** 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 Total1983 Initial Capital 0.50 0.501983 Sponsors71.50 72.00(a) Foreign = 56.00 Million(b) Bangladeshi = 11.50 Million(c) Govt.of Bangladesh = 4.00 Million1985 I.P.O 8.00 80.001990 1 st Rights/1989 (1R:1) 80.00 160.001996 2 nd Rights/1996 (1R:1) 160.00 320.002001 3 rd Rights/2000 (1R:1) 320.00 640.002003 4 th Rights/2003 (2R:1) 1,280.00 1,920.002004 Bonus/2003 (1B:5) - Stock Dividend @20% 384.00 2,304.002005 Bonus/2004 (1B:5) - Stock Dividend @20% 460.80 2,764.802006 Bonus/2005 (1B:4) - Stock Dividend @25% 691.20 3,456.002007 Bonus/2006 (1B:10) - Stock Dividend @10% 345.60 3,801.602008 Bonus/2007 (1B:4) - Stock Dividend @25% 950.40 4,752.002009 Bonus/2008 (3B:10) - Stock Dividend @30% 1,425.60 6,177.602010 Bonus/2009 (1B:5) - Stock Dividend @20% 1,235.52 7,413.122011 Bonus/2010 (35B:100) - Stock Dividend @35% 2,594.592 10,007.7122012 Bonus/2011 (1B:4) - Stock Dividend @25% 2,501.928 12,509.6442Annual Report 2012

Market Price InformationMonth-wise share price status in the Stock Exchanges in 2012MonthDSEHighest rate Lowest rate Average rate Highest rate Lowest rate Average rateCSEJanuary 55.70 45.50 51.53 56.50 46.00 51.53February 54.20 44.50 51.01 54.30 44.00 50.77March 58.00 47.30 54.27 56.50 48.00 54.17April 59.00 41.00 54.20 60.00 43.00 54.15May 50.00 39.90 44.62 46.00 40.00 44.48June 46.50 37.00 42.47 44.60 39.00 42.26July 43.50 35.90 42.74 41.30 37.00 42.47August 45.00 36.20 41.09 42.90 38.00 40.80September 44.20 37.70 42.27 44.30 40.00 42.15October 45.60 37.80 41.88 43.00 38.00 41.64November 45.00 37.00 41.60 42.50 39.00 41.48December 46.60 37.00 42.04 43.00 40.00 41.70During 2012 59.00 35.90 47.45 60.00 37.00 48.50Information on Share & Bond1. 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 ofTk.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 ofTk.10/- each fully subscribed by(i) Local Shareholders : 36.91%(ii) Foreign Shareholders : 63.09%3. Mudaraba Perpetual BondOn November 2007 the Bank issued Mudaraba Perpetual Bond for Tk.3,000,000,000/- through PrivatePlacement 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 2012Dhaka Stock Exchange Ltd. : Highest rate : Tk.1,050.00Lowest rate : Tk. 890.00Chittagong Stock Exchange Ltd. : Highest rate : Tk.1,068.00Lowest rate : Tk. 847.00Annual Report 2012 43

Accessing Annual Report 2012Annual Report 2012 and other information aboutIBBL may be viewed on Bank’s Website: www.islamibankbd.com. IBBL transmits copies ofAnnual Report to the Securities and ExchangeCommission, Bangladesh Bank, Dhaka StockExchange and Chittagong Stock Exchange fortheir reference.Queries on Corporate InformationQueries on any corporate information andpublished financial information may be directed tothe Company Secretary of Islami Bank BangladeshLimited in the following address:Company Secretary40, Dilkusha Commercial Area, (6 th Floor),Dhaka-1000. PABX: 9551105, 9551062, 9550415,Ext-627,624,615, & PABX: 9563040 Ext-369.Phone & Fax: 9564595Shareholders’ Inquiries andCommunicationShareholders and others may contact to sharedepartment any time for any sort of informationand query. To make the AGM more participatory,it is arranged in a well-known place &convenient time to allow shareholders to speakin the AGM freely and value their proposals andsuggestions. Any queries on shareholders suchas transfer of shares, changes of name andaddresses and payment of dividend may besent to the following address:Share Department63, Dilkusha Commercial Area, (5 th Floor),Dhaka-1000. PABX: 9551105, 9551062,9550415, Ext-627, 624, 615, & PABX: 9563040Ext-369. Phone & Fax: 9564595E-mail: ibblshare@islamibankbd.comRedressal of Investors’ ComplaintsIn the 29 th Annual General Meeting, someshareholders complained about different aspectsof the bank financial, development and services.Management of the bank has tried to mitigatevarious problems. They have taken cognizanceof the suggestions of the shareholders in rightearnest. Some of the mitigations are given below:Investors Suggestions and Their Implementation StatusSl.No.Complaints/SuggestionsRedressal of the Investors’ Complaints1 Some Hon’ble Shareholders demanded increasingthe number of ATM Booths with sophisticatedmachines in rural areas.2 One Shareholder thanked the Management fordisplaying a lucrative & attractive banner of AGM, butsuggested to include in future “Bismillahir RahmanirRahim” in the top of the banner.3 Few Shareholders requested to arrange futureAGMs on Friday or Saturday, if possible.4 They also requested the management of the Bank totake all out efforts to reduce the overdue, classified& written-off investment of the Bank to a minimumlevel. Some shareholders suggested taking effectivesteps for reducing provisions against non performinginvestment.The number of own ATM Booths in rural areas have beenincreased. Total ATM Booths own & shared have beenincreased from 1,135 to 1,820 during the year 2012.The word “Bismillahir Rahmanir Rahim” is to be written on thetop of the banner from next Annual General Meeting i.e. 30 thAGM.AGM will be arranged subject to availability of suitable venue.The following steps have been taken:i. Formed a Central Task Force at Head Office with theManaging Director in the chair.ii. Formed 13 Monitoring Committees at Head Office withthe Top-Executives of Head Office to monitor zone-wiserecovery activities.iii. Formed Task Force at Zonal Office and Branch level tofollow up the defaulter clients.iv. Pursuing Court Cases from Head Office, Zonal Office andBranch level for early settlement.v. Pursuing the clients for early payment of Bank’s dues foravoiding litigation through letters, reminders and personalvisit to the Business Establishments and Houses.44Annual Report 2012

Sl. No. Complaints/Suggestions Redressal of the Investors’ Complaints5 The Shareholders suggested rendering bettercustomer service by the Branch officials. SomeShareholders suggested providing adequate logisticsupport, introducing modern technology & betterdecoration, increasing the existing workforce at allbranches for improvement of customer service.6 Shareholders have suggested to extend moreinvestment facility for setting up ‘Solar System/Energy’.7 The shareholders have requested to considermore investment facilities to the Small and MediumEntrepreneurs.8 The shareholders have requested to expand theactivities of RDS to protect the people from the curseof interest and to alleviate poverty.9Though some shareholders alleged for not receivingthe Annual Report in time, most of the shareholdersthanked for dispatching Annual Report throughthe Branch network and receipt the same by themaximum shareholders.10 Some Shareholders suggested deploying moreinvestment in the agriculture sector in the rural area.11 Shareholders suggested establishing more branches/SME Centres in the rural area. One Shareholderrequested to open more branches at different placesin South-Eastern part of Bangladesh.12 Shareholders urged to distribute scholarship &arrange a celebrating program for the wards ofShareholders, who secured GPA-5 in every year.One of the Shareholders requested to distribute morescholarship among the poor & meritorious students.13 Shareholders suggested to send/publish AnnualReport through online/website.14 Shareholders suggested to develop the onlineservices of the Bank & reduce the online charges.15 One of the shareholders suggested to be morecautious about doubtful income & to take effectivesteps to reduce/remove the same.16 One Shareholder suggested strengthening the ‘ShareDepartment’ and ensuring proper housekeeping.The Chairman assured that the Branch Managers & 2 nd Officersshall be punished if they fail to render better & quality service tothe customers/clients irrespective of their position and gender.Management has already increased workforce from 11,465 to12,188 within 2012 with adequate logistic support as well asintroducing modern technology & well decoration at all branchesfor rendering better customer service by the branch officials.The Management has already taken initiatives to expandinvestment facility in the field of Boi-gas, ICS (ImprovedCooking Stoves) and Solar.From January to December 2012 bank disbursed Tk.199,310.00million which was only Tk.112,994.99 million in 2011.Present outstanding in SME is Tk.182,753.00 million which ishighest among all the 47 banks of the country.To protect the people from the curse of interest and to alleviatepoverty the Management has already expanded the activitiesof RDS program to 15,507 villages among 6,76,544 membersthroughout the country within this year. The growth of whichwas 21% over the year 2011.For ensuring proper receipt of Annual Report by the Hon’bleShareholders it will be distributed through the Branches of therespective area. The Management will look into the performanceof the courier service regarding delivery of the same to theShareholder.The Management has already increased more investmentfacilities to Agriculture Sector. The growth of which is 47%& 44% in Rural Investment (Micro-Credit) and AgriculturalInvestment respectively.Out of 276 branches 52 are rural Branches. The growth of whichis 12% more than previous year. IBBL has already launcheda new investment scheme namely “Urban Poor DevelopmentScheme (UPDS)”.The Chairman assured that the Management would takespecial attention to the vulnerable, poor & meritorious studentsfor assisting them. The Management of the bank decided toincrease scholarship to 400 students for 2 (two) years in H.S.Clevel and 400 students for 5 (five) years in Graduation level. Therate of increase is 100% .Annual Report is published through the website of IBBL (www.islamibankbd.com). Mentionable here that Annual Report of theprevious year has also been preserved in the mentioned webaddress.Online services are available at all Branches of the Bank andonline charges have already been revised. Cash Deposit/Withdrawal including Transfer amount within the DivisionalCity area is allowed to provide online banking facilities free ofcharges up to the limit of Tk.1,00,000/- for two times in a day.For reducing/removal of doubtful income the following stepshas already been resorted:i. Motivational program has been emphasized in everybranch of the bank.ii. Sharia’h audit is conducted at least once in each branchand twice in big branches in a year.iii. Off-site supervision and Off-site motivation have beenarranged from Head Office.iv. Motivation work has been arranged at the time of auditwork in every branch of the bank.Proper steps have been taken for strengthening the ‘ShareDepartment’ and ensuring proper housekeepingAnnual Report 2012 45

Graphical Representation 46Annual Report 2012

Graphical Representation Annual Report 2012 47

Segment Information 48Annual Report 2012

Horizontal & Vertical Analysis Annual Report 2012 49

Profitability, Dividend, Performance and Liquidity Ratios 50Annual Report 2012

Statement of Value Added and Its DistributionThis shows how IBBL has generated the wealthby providing banking services and how it wasdistributed among the main stakeholders of theBank, taking into account the amount retainedand re-invested for the replacement of assetsand improvement of operations. The comparativevalue added statement of the Bank for the year2012 and 2011 is given below:Value Added Statement(In Million Taka)Particulars 2012 2011Income from Banking Service 50,346 38,401Less: Cost of Services 28,014 20,386Value added by Banking Service 22,332 18,015Non-Banking Income - -Provision for Investment & Off-Balance Sheet exposures3,512 2,384Total Value Added 18,820 15,631Distribution of Value AdditionTo government (income tax) 6,526 5,477To providers of capital (Cashdividerd & bonus share)3,127 3,202To employees (Salaries, allowanceand other benefits)5,957 4,652Zakat 325 263Expansion and growthRetained by the entity 2,397 1,639Depreciation 442 369Deferred taxation 46 29Total 18,820 15,631Distribution of Value Addition 2012 Distribution of Value Addition 2011Income Tax(In million Taka)Economic Value Added StatementEconomic Value Added (EVA) is a financialperformance method to calculate the real economicprofit of the bank. It provides a measurement ofa company’s economic success or failure overa period of time. Such a yardstick is useful toinvestors who wish to place confidence with theBank to retain their fund for better earnings ascompared to other industry. Annual Report 2012 51

Comparative Economic Value AddedStatement for the Year 2012 and 2011(In million Taka)Particulars 2012 2011Shareholder’s equity 39,756 27,800Add: Accumulated provision for 11,091 8,170Investment (including Off B/S)Total Invested Fund 50,846 35,970Average Shareholders’ equity 43,408 25,647EarningsProfit after tax 5,524 4,841Add: Provisions 3,512 2,384Less: Written-off during the year (582) (427)Earnings for the year 8,455 6,798Cost of equity 7.87% 11.52%Capital charges 3,415 2,954Economic Value Added 5,040 3,844Market Value Added StatementMarket Value Added (MVA) statement indicatesthe variation between the total market value andthe total value of shares of a bank. A giganticMVA means the bank has produced huge assetsfor the shareholders. MVA is equivalent to thepresent value of all future expected economicvalue addition. The share market value of IBBLstood at Tk.53,541.26 million whereas the bookvalue of the share stood at Tk.39,755.64 million,resulting a Market Value Added of Tk.13,785.62million as of December 31, 2012.Calculation of Market Value AddedParticularsNumber ofSharesValueperShare(Tk.)Amount(MillionTaka)Market Value 1,250,964,000 42.80 53,541.26Book Value 1,250,964,000 31.78 39,755.64Market ValueAdded1,250,964,000 11.02 13,785.62Market Share InformationSl.No.ParticularsMarket Share of IBBL inthe Banking Sector (%)2012 (%) 2011 (%)1 Deposit 7.72 7.592 General Investment 8.40 8.163 Import 9.89 12.004 Export 10.52 11.005 Remittance 27.70 26.07Market Price at DSE: January toDecember 2012 Market Price at CSE: January toDecember 2012(In Taka)(In Taka) 52Annual Report 2012

Financial Highlights(In million Taka)Sl.No.Particulars 2012 20111 Paid-up Capital 12,509.64 10,007.712 Total Capital (Equity) 42,028.30 33,716.733 Capital Surplus/ (deficit) 10,877.10 7,960.244 Total Assets (excluding contra) 482,536.32 389,192.125 Total Deposits 417,844.14 341,853.676 Total Investments (excluding Investment in Shares/ Securities) 372,920.72 305,840.567 Total Contingent Liabilities and Commitments 110,044.18 113,420.938 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 4,841.4511 Amount of Classified Investment during the year 5,920.48 3,636.6912 Provision kept against Classified Investments 6,054.35 3,054.0013 Provision Surplus/ (deficit) - -14 Cost of Fund 9.32% 8.86%15 Profit Earning Assets 389,011.85 295,962.7316 Non-Profit Earning Assets 93,524.47 93,229.3917 Return on Investments 12.21% 10.87%18 Return on Assets 1.27% 1.35%19 Income from Investments 44,104.20 32,308.9020 Earnings per Share (Taka) (Restated 2011) 4.42 3.8721 Net Income per Share (Taka) 4.42 3.8722 Price Earning Ratio (Times) 9.68 11.2723 Net Asset Value (NAV) 39,755.51 27,800.2124 Net Asset Value (NAV) Per Share (Restated 2011) 31.78 22.2225 Net Operating Cash Flow Per Share (NOCFPS) (Restated 2011) 16.32 13.1126 Dividend Yield Per Share 5.84% 5.87%27 Dividend Payout Ratio 56.61% 66.15%28 Dividend Cover Ratio (Times) 1.77 1.5129 Operating Profit as % working fund 4.86% 4.22%Annual Report 2012 53

Five Years Performance at a GlanceSl.No.Balance Sheet Matrix(In million Taka)Particulars 2008 2009 2010 2011 20121 Authorized Capital 10,000.00 10,000.00 10,000.00 20,000.00 20,000.002 Paid up Capital 4,752.00 6,177.60 7,413.12 10,007.71 12,509.643 Share Premium 1.99 1.99 1.99 1.99 1.994 Reserve Fund 9,308.49 13,927.94 16,081.14 17,792.50 27,245.875 Retained Earnings 1,425.60 1,853.28 2,594.59 3,202.47 3,127.416 Shareholders Equity 14,060.49 20,105.54 23,494.26 27,800.21 39,755.517 Deposits (including Bills Payable) 202,115.45 244,292.14 291,934.60 341,853.67 417,844.148 Investments (including Investment in 187,586.55 225,752.41 275,493.94 322,772.83 399,930.79Shares and Securities)9 Investments (excluding Investment in 180,053.94 214,615.80 263,225.13 305,840.56 372,920.72Shares and Securities)10 Investment Deposit Ratio (as per BB89.08% 87.85% 90.17% 87.29% 85.18%guidelines)11 Total Assets (including Contra) 288,017.19 340,638.49 443,684.79 502,613.05 592,580.5012 Total Assets (excluding Contra) 230,879.14 278,302.84 330,586.12 389,192.12 482,536.3213 Fixed Assets 4,407.22 6,512.36 6,748.44 7,100.19 14,808.23Capital Matrix14 Total Risk Weighted Assets (RWA) (Basel II for 173,289.43 202,756.60 256,804.90 257,564.30 311,511.602012, 2011, 2010 & 2009, Basel I for 2008)15 Crore Capital- Tier- I 11,272.12 14,714.10 18,559.80 23,401.24 28,225.1016 Suplementary Capital (Tier- II) 7,299.96 8,905.70 9,840.20 10,315.49 13,803.2017 Regulatory Capital (Tier I, II & III) 18,572.08 23,619.80 28,400.00 33,716.73 42,028.3018Statutory Capital (Paid up Capital &Statutory Reserve)9,692.49 12,421.62 15,348.08 20,012.14 24,933.3019 Equity/Capital Surplus/(Deficit) 1,243.14 3,344.16 5,287.58 7,960.24 10,877.1020 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 Quality21 Amount of Classified Investment 4,311.13 5,063.40 4,655.63 8,292.32 14,212.8022 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 6,054.3524 General Provision against Unclassified2,315.74 2,700.00 3,443.00 3,996.00 3,935.90Investment25 General Provision on Off Balance Sheet570.83 510.00 930.00 1,120.00 1,100.45ItemsIncome & Expenditure Statement Matrix26 Investment Income 19,543.84 21,370.53 24,766.26 32,019.53 43,672.2327 Profit Paid on Deposit 12,162.10 13,076.99 14,471.89 18,401.22 25,870.4328 Net Investment Income 7,381.74 8,293.54 10,294.37 13,618.31 17,801.8054Annual Report 2012

Five Years Performance at a GlanceSl.No.Particulars 2008 2009 2010 2011 201229 Non Investment Income 4,212.50 4,033.84 5,362.64 6,381.76 6,673.5430 Total Income 23,756.33 25,404.37 30,128.90 38,401.29 50,345.7731 Administrative & other Exp. 4115.81 4,545.97 6,087.32 7,268.45 8,867.1032 Total Expenditure Excluding Provision 16,277.90 17,622.97 20,559.21 25,669.67 34,737.5333Provision for Investment, Off Balance Sheetitems & other Assets1,130.60 1,263.23 1,114.99 2,384.31 3,512.0734 Total Expenditure Including Provision 17,408.50 18,886.20 21,674.20 28,053.98 38,249.5935 Net Profit before Tax 6,347.83 6,517.66 8,454.71 10,347.31 12,096.1836 Net Profit after Tax 2,674.80 3,403.55 4,463.47 4,841.45 5,524.4437 Provision for Income Tax 3,245.08 3,253.23 4,108.98 5,505.87 6,571.74Foreign Exchange Business38 Import Business 168,329.00 161,230.00 246,281.00 301,207.00 284,58839 Export Business 93,962.00 106,424.00 148,421.00 178,244.00 197,09540 Remittance 140,404.00 194,716.00 214,629.00 236,607.00 300,91541 Total Foreign Exchange Business 402,695.00 462,370.00 609,331.00 716,058.00 782,598Distribution Network42 Number of Correspondent Banks 275 295 295 313 32043 Number of Foreign Correspondents 906 919 919 935 67644 Number of Shareholders 33,686 52,164 58,923 60,550 60,30245 Number of Employees 9,397 9,588 10,349 11,465 12,18846 Number of Branches *206 *231 *251 *266 *276Shareholders’ Information47 DividendCash … 10% … 7% 8%Stock 30% 20% 35% 25% 17%48 Net Assets Value (NAV) per Share (taka) 22.76 27.12 23.48 22.22 31.7849Earnings Per ShareOriginal (taka) 5.63 5.51 6.02 4.84 4.42Restated (taka) 2.14 2.72 3.57 3.87 4.4250 Market Value per Share (highest-taka) 83.00 89.00 90.00 83.98 59.00Financial Indicators51 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 0.7654 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 9.6857 Spread 4.53% 4.86% 4.87% 4.03% 4.10%* Including SME/Agriculture BranchesAnnual Report 2012 55

Financial Calendar 2012ItemsDateFinal Dividend for 2011 paid May 30, 2012Financial Statements for the year 2012 signed March 28, 201330 th Annual General Meeting to be held May 22, 2013Final Dividend for 2012 proposed to be paid June 20, 2013Interim Financial StatementsFor the 1 st quarter ended March 31, 2012 (unaudited) approved by the Board of Directors May 14, 2012For the 2 nd quarter/Half Yearly ended June 30, 2012 (unaudited) approved by the Board of Directors July 12, 2012For the 3 rd quarter ended September 30, 2012 (unaudited) approved by the Board of Directors October 29, 2012For the 4 th quarter/Year ended December 31, 2012 (audited) approved by the Board of Directors March 28, 2013Financial Calendar 2013 (Proposed)ItemsDateFinancial Statements for the year 2013 will be finalized and signed February 27, 201431 st Annual General Meeting will be held March 29, 2014Final Dividend for 2013 proposed to be paid April 28, 2014Interim Financial StatementsFor the 1 st quarter ended March 31, 2013 (unaudited) approved by the Board of Directors May 09, 2013For the 2 nd quarter/Half Yearly ended June 30, 2013 (unaudited) approved by the Board of Directors July 24, 2013For the 3 rd quarter ended September 30, 2013 (unaudited) approved by the Board of Directors October 23, 2013For the 4 th quarter/Year ended December 31,2013 (audited) approved by the Board of Directors February 27, 201456Annual Report 2012

Chairman’s MessageBismillahir Rahmanir RahimDear Shareholders,Assalamu Alaikum Wa Rahmatullah.It gives me immense pleasure to present to youthe Annual Report of Islami Bank BangladeshLtd. (IBBL) along with the Audited FinancialStatements for the year 2012. Alhamdullilah, in2012, IBBL made expected result in its overallbusiness activities, and like previous years,continued to play an important role in augmentingthe national economy. In the year under review,the Bank has reached new heights in terms offinancial performance and contributed to theoptimum welfare of the masses to become ÔgvwU Igvby‡li e¨vsKÕ (a bank of Land & People).Notable Financial PerformanceWe have passed the bygone year with significantsuccess despite prevailing local & globaleconomic scenario and a major policy changein investment rescheduling, classification &provisioning system introduced by our CentralBank. Our Bank achieved unique strength withhigh level of trust and confidence among thedepositors and investment clients besides peoplefrom all walks of the nation. We are proud to bethe partner of our clients across every changeof their lives, while we have continued to servethem better. With their overwhelming confidenceand support, total deposit of the Bank increasedto Tk.417,844 million (US $ 5,233 million) in2012, marking a growth of 22% or Tk.75,990million (US $ 952 million) over 2011. Total generalinvestment of the Bank increased to Tk.372,921million (US $ 4,670 million) in 2012, marking agrowth of 22% or Tk.67,080 million (US $ 840million) over 2011. IBBL’s volume of investmentand deposit is the second highest among the 47scheduled commercial banks of Bangladesh. Totalnumber of deposit accounts at year end 2012stood over 7 million wherein 1.9 million depositaccounts were newly added during the year whichAnnual Report 2012 57

signifies the people’s high confidence on IBBL.Total number of investment clients at the yearend stood over 0.7 million wherein 0.11 millionnew investment clients were inducted during theyear. Operating profit (Profit before provision) ofthe Bank during 2012 stood at Tk.15,608 million(US $ 195 million), demonstrating a growth rateof 23% over the year 2011. This operating profitranked top in the banking industry of Bangladesh.It is worth mentioning that all these enduringsustainability of our Bank have emanated from aresponsible business approach that has createdlong term stakeholder value through Shari‘ahcompliance, continuous process improvement,innovation & adoption of technology, stakeholderengagement and ethical, social, environmental &good governance practices.Foreign Remittance & ForeignExchange Business PerformanceInspite of narrowing down the scope of takingfurther Bangladeshi workers in some potentialcountries, IBBL’s remittance grew at 27% in2012. Our Bank’s total remittance has increasedby Tk.64,308 million (US $ 805 million) during2012 over 2011 to reach Tk.300,915 million (US$ 3,769 million). IBBL’s market share in foreignremittance was 27.70% in 2012. This waspossible due to the confidence reposed on usby our beloved expatriates whose satisfaction isone of our prime responsibilities as we were veryattentive and prompt to send their hard-earnedmoney through banking channel to their familymembers in the easiest and caring manner withinthe shortest possible time. IBBL handled exportbusiness of Tk.197,095 million (US $ 2,468million) during the year 2012, marking a growthof 11% or Tk.18,851 million (US $ 236 million)over the figures of 2011. The export volume ofour Bank in the bygone year was 10.52% oftotal export of Bangladesh. On the other hand,our Bank handled import business of Tk.284,588million (US $ 3,564 million) during the year 2012which is 9.89% of total import of the country. TotalForeign Exchange Business of our Bank stood atTk.782,598 million (US $ 9,801 million) in 2012with growth rate of 9.29% over 2011.Investment ServicesIBBL always maintained Investment-DepositRatio (IDR) at required level throughout the yearand devised a strategy to diversify the investmentduring the year across all business activities.As a result, the Bank maintained comfortableliquidity and was also a provider of funds inthe interbank market under various Shari‘ahcomplianttransaction structures. The Bank’sachievement of general investment against targetwas 106% and achievement of income frominvestment against target was 111% in 2012. Inthe year 2012, the Management of our Bank hasgiven emphasis on a new product of investment,i.e. Usance Payment at Sight (UPAS) throughOffshore Banking Unit (OBU).IndustrializationIBBL feels it obligatory to increase the contributionof industrial sector to the GDP substantially asindustrialization is the lifeblood of our economy.This feeling was translated into the Bank’sunflinching services to the growth of industriesespecially the import substitute and exportorientedones. We have financed many garments,spinning and textile, steel, edible oil refinery andcable industries exclusively. The Bank investedaround 51% of its investment portfolio in industrialsector whereas the contribution of industrial sectorin GDP of the country was around 31% in theyear 2011-12. Industrial investment of our Bankincreased by 25% in 2012 over 2011. IBBL rankedtop in the industrial finance in the country.Rural and Agricultural FinancingAs an organization enjoying the positionof business leadership, our commitment tosustainable banking remains strong as ever. Withthis end in view, we want to narrow down theeconomic gap between urban and rural areas. Wehave significantly expanded our branch network torural areas. 19% of our branches are located in therural areas and we have plans to open more SME/Agriculture Branches to support our agricultureand the rural economy. Rural and agriculturalinvestment of IBBL is gradually increasing overthe recent years and it has become 7% of totalinvestment demonstrating growth of Tk.5,359million (US $ 67 million) over the last year.58Annual Report 2012

RDS & UPDS ProgramIn 2012, our focus was essentially to furtherpenetrate the least developed economic sector,and as such, we followed a concerted strategyof network amplification with a view not only toengraving our footprint across the country but alsoto bringing the concept of Islamic banking to thevery doorsteps of every rural community and urbanpoor. Our initiatives towards covering individualseven at the grass root level of the socio-economicgroup have opened vistas of opportunities tocommunities who have for generations lived belowthe poverty line. We have expanded our businessin micro finance under Rural DevelopmentScheme (RDS) which is now operating in around15,507 villages of 61 districts out of 64 districtsof the country and Urban Poor DevelopmentScheme (UPDS) through 260 centers at Dhakaand Chittagong Metropolis having more than 0.73million members under the two schemes. We areempowering the underprivileged and developingthem into productive resources for the nation.Customer ServiceIBBL has built in-house core banking softwareto expedite the customer service. We haveintroduced all the modern services including ATM,SMS Banking and iBanking which are growingday by day. We have the largest online network inthe country. Alhamdulillah, we have successfullylaunched ‘M-cash’, the mobile financial serviceswith the slogan Ônv‡Z nv‡Z mv‡_ mv‡_Õ (Hand to Hand allthe times). People of all walks of life, including theunbanked people, will get the benefit of bankingservices throughout the country round the clockwith ease and security. We will introduce allforthcoming technologies to facilitate and ensurebest customer service.Special Care for NRBsIBBL considers the NRBs as the partner in nationbuildingand values them accordingly. The Bankintroduced web-based very quick remittancefacilities and spot cash system to enable thebeneficies of NRBs to withdraw cash withouthaving any Bank Account with us. NRBs can checktheir bank account from abroad through internet.We also introduced Mudaraba NRB Savings Bondfor the NRBs, NRB help desk at all the branches& at Head Office, Remittance Card to ease thewithdrawal of money sent by the NRBs, NRBEntrepreneurs Investment Scheme, etc. Total 28officials were deputed in 5 potential countries tohelp the NRBs to remit their hard-earned foreigncurrency in Bangladesh through banking channel.Employment CreationMillions of people were employed directly andindirectly through IBBL financed industries, SMEsand Rural projects over the years. Our Bank hasemployed 12,188 employees along with newlyemployed 1,152 people during the year 2012.We are steadfast with our programs to createemployment opportunity to alleviate poverty fromthe country by extending support to all, especiallythe young generation, by creating jobs andopportunities for self-confidence, self-employmentand self-reliance. Our Bank exerted its best effortsto alleviate poverty from the country by making thepeople self-reliant.Ecology and Green BankingIBBL is a bank for all sections of people that dealswith ethics, environment cognizance, economicjustice and green banking. In response to theUNEP’s charter, IBBL insists on going greento conserve the environment and to keep 3-Psnamely People, Planet and Profit for sustainabledevelopment. IBBL also puts highest commitmentand emphasis on complying with BangladeshBank’s Green Banking policy guidelines by meansof investing in eco-friendly projects and observingall the required Green Banking policies including4-R Principles namely Reduce, Reuse, Replaceand Recycle on day-to-day housekeeping processin the office. IBBL has started (i) educating theemployees in Green Banking and encouragingthem to ingrain the practice in their daily activitieswith the initiatives for creation of a paperlessoffice, (ii) taking care to protect environmentalpollution by Bank’s sanctioned projects, and (iii) aplantation program of “one man one plant” amongits staff and the customers by observing ‘plantationweek’. IBBL has been recognized as one of thetop 10 green banks by Bangladesh Bank.Annual Report 2012 59

Shari‘ah ComplianceStrict adherence to Shari‘ah principles is the corevalue of our business. IBBL kept the position ofShari‘ah Supervisory Authority above all bodies.We took different steps in managing our deposit& investment portfolio for achieving MaqasideAl-Shari‘ah. IBBL does not extend investmentfacilities which goes against the interest ofthe nation and human. During the year 2012,percentage of doubtful income decreased to 2.04%only reflecting high level of Shariah Compliance.Shariah compliant banking system contributes thebest for sustainability of the industry. Throughoutthe year, IBBL has emphasized to createawareness for total Shariah compliance amongthe entire workforce and the clients that hashelped in achieving such notable results.Regulatory ComplianceIBBL sincerely abide by 100% rules and regulationsissued by all the regulatory authorities. Our Bank’sgovernance practices and management systemsare designed to assist in conducting businesstransparently and with adequate delegation &accountability, particularly with regard to Shariah,Regulatory compliance, economic justice,environmental and social aspects. We protectthe interest of Bangladesh, and compliant withits people, its law and general discipline. IBBLhas been recognized by and rewarded for itscontribution, transparency and compliance cultureboth locally and internationally.International Recognition of IBBLIBBL is working hard for becoming a world classbank. Our Bank has been included in the Top 1000banks of the world in the July-2012 issue of thecentury-old reputed UK-based fortnightly financialmagazine ‘The Banker’ in terms of Tier-1 capital. Inthis report, IBBL has been placed in the 17 th positionin terms of profit on capital, 70 th position in termsof Return on Assets (ROA) and 868 th position interms of Assets size. This recognition, first of itskind given to a Bangladeshi financial institution,is indicative to the inclusion and acceptance ofBangladesh’s banking as per world standard. Apartfrom it, the “Business Asia” nominated IBBL as the“Most Respected Company Awards-2012” and theGoldman Sachs, the leading wealth managementinstitution of the world, chose IBBL as ‘the bestplace for investment’. IBBL has also become areference Bank to IDB which is a Bank of all Muslimcountries under OIC. Our Bank provides technicalassistance and facilitates for establishing Islamicbanking at home and abroad. So far we extendedtechnical support and trained manpower inestablishing Jaiz Bank in Nigeria. On being trainedfrom IBBL, Ceylon Bank of Sri Lanka has startedIslamic Banking and is operating successfully. Wehave also trained high-level officials of Uganda onIslamic Micro-Finance Operations.Corporate Culture & RecognitionSince inception, IBBL has been practicing corporateculture at all levels. IBBL has always been tryingto run the Bank professionally and showed itscompetence during last 29 years of operation. Theworkforce of IBBL starting from CEO down to aMessenger are very much involved and committedprofessionals and thus could develop the Bank asone of the highly complied one. We work under theguidelines of Bangladesh Bank, other RegulatoryAuthorities and policies framed by the Board ofDirectors without any interference from any corner.IBBL is the proud recipient of the ‘SAFA (SouthAsian Federation of Accountants) CorporateGovernance Award for 2010 & 2011’, ‘SAFAAward for Best Presented Reports-2011’, ICAB’s(Institute of Chartered Accountants of Bangladesh)‘SAARC Anniversary Award for CorporateGovernance-2011’ & ‘ICAB Best Presented AnnualReport-2011’, and ICMAB’s (Institute of Cost andManagement Accountants of Bangladesh) ‘ICMABBest Corporate Award for 2011 & 2012’, which arethe obvious recognitions of the Bank’s sustainedsuccess in every aspects of its operations.CSR ActivitiesEquitable and inclusive development is a challengethat drives our Bank’s social agenda. As a pioneerof welfare oriented Banking System, IBBLacknowledges its indebtedness to the society.Our contribution in discharging Corporate SocialResponsibilities is the highest among all the banksof Bangladesh. IBBL assisted affected people innatural calamities like Ayila and SIDR. We are alsogiving scholarship to thousands of students for their60Annual Report 2012

study who cannot afford education expenses attheir own. It is the Bank’s conscious responsibilitytowards the communities within and around whichit operates to provide adequate social benefits,particularly for those who are marginalized orunderprivileged. IBBL has taken several initiativesat the individual and organizational level forimproving the lives of less fortunate segments ofthe community. CSR expenditure of IBBL stoodat Tk.309 million (US $ 4 million) in 2012. TheBank’s strategy towards discharging communityresponsibility focuses on (i) education, (ii) health,(iii) humanitarian and disaster relief, (iv) sports,arts & culture, and (v) women empowerment. Thelarge number of social welfare activities of theBank as stated in the report reflects our sense ofresponsibility to the society at large.Contribution to National ExchequerBeing a responsible corporate entity, the Bankregularly pays corporate tax on time. IBBL is thehighest Corporate Taxpayer among the LocalBanks and is the second highest Taxpayer in theBanking sector of Bangladesh. During the year2012, it has contributed/paid total Tk.8,106 million(US$ 102 million) as Corporate Tax, deducted taxfrom different sources (i.e. profit paid on Deposits,salaries of the employees, payment to suppliers,vendors & customers etc.), Excise Duty and VAT.Bank’s financed business/industry houses arealso generating huge employment opportunity& paying a substantial amount of taxes to thenational exchequer regularly.Our Role in Islamic Money MarketIBBL played active role in development of IslamicMoney Market and participated in development ofinstruments like Bangladesh Government IslamicInvestment Bond (BGIIB) and Islamic InterbankFund Market (IIFM). We always extendedour support to fellow banks to help them inmaintaining their liquidity in case of need and didnot take advantage of the financial crisis. Ratherwe assisted other Islamic Banks, Islamic BankingBranches and Windows of Conventional Banksand Financial Institutions to meet their liquidity.The amount of IBBL’s placement to these banks& institutions at the end of 2012 was Tk.15,236million (US $ 191 million).Our SuccessAbove 20% of total liquidity and business of thebanking industry is in the hand of Islamic bankingoutlets. Following the phenomenal success historyof IBBL, 6 other full-fledged Islamic banks and 18conventional banks including state owned SonaliBank Ltd. & Agrani Bank Ltd. have started IslamicBanking Branches/operations in Bangladesh. It isalso very much encouraging that a good numberof private banks are trying to be converted intoIslamic ones. Banking activities of Bangladeshhave already been recognized as ‘at par’ withworld standard which is evidenced from the IBBL’sinclusion in the Top 1000 banks of the world bythe reputed financial magazine ‘The Banker’.Moreover, following the pioneering role of IBBL inCSR activities, other banks & financial institutionshave engaged themselves in CSR activities andBangladesh Bank is encouraging the same. Theseall are the success of Islamic banking and IBBL.Brand ImageIBBL’s comfortable capital adequacy, good assetsquality, good financial performance, comfortableliquidity, strong market position, considerableimprovement in non-funded business, experiencedtop management, wide operational network &strong corporate governance have given it anexcellent “Brand Image”.Our StrengthOur topmost strength is our total trust in Allah’shelp. Unity of thoughts and actions, goals of policymakers, shareholders and workforce had alwaysbeen one and that is our guiding principle, andAlhamdulillah, this is our key to success. Islamicbanking system so far proved its sustainability inthe recent worldwide recession. We also note withhighest appreciation the support and guidanceof the regulatory authorities including Ministry ofFinance, Securities and Exchange Commission,and Bangladesh Bank. The confidence ofdepositors and investment clients who are ourpartners in progress is another point of satisfaction.Annual Report 2012 61

Our LimitationsWe sincerely feel that we could not yet arrangeeasy and satisfactory customer service at all levels.Our depositors still need to remain in the queue forlong to deposit and withdraw money. We could notsatisfy needs of all investment clients. These areour limitations but we are trying hard to overcomethese limitations by arranging Alternate DeliveryChannels (ADCs) in widespread manners andintroducing more modern and innovative financialservices compliant with Islamic Shari‘ah.Our SloganOur slogan is “Islami Bank, My Bank”, and yearlyslogan of the Bank in the year 2012 was “Let’sgo to the 165 million people, let’s decorate ourcountry”. We are striving hard to expand ourbranch network and SME Service Centers to bringthe services of Islamic Banking at every door stepof the people of the country.Our DreamIBBL is working for becoming a world class bankand giving a complete message to the world thatShari‘ah based ethical banking system contributesthe best for sustainability of the world economywhich is so far proven in the prevailing adverseand eroding economic order. The dream andemotion of the workforce and stakeholders ofIBBL is to see their Bank at the pioneer position inthe industry at home & abroad and to be the rolemodel of the world in the field of Shari‘ah-basedbanking. IBBL has been giving all out efforts totranslate their dream into reality and to honor theemotion of its stakeholders.Our GratefulnessWe consider IBBL as an incomparable gift fromthe Almighty Allah for the people of Bangladesh.We value it and try to maintain this Amanah inspiteof our all weaknesses and limitations having fullconfidence in Allah’s Rahmat. We are grateful toAlmighty Allah (SWT) for His continued blessingson us.We would like to extend our sincere thanks andappreciation to all the regulatory authorities, ourdepositors, investment clients, local & foreignshareholders and all other stakeholders fortheir unfettered confidence. We would also liketo convey heartfelt thanks to the NRBs for theconfidence reposed on IBBL for their contributionto nation building.Our deepest gratitude to the Government, allregulatory bodies, our fellow Board Members,members of the Shari‘ah Supervisory Committee,Bangladesh Association of Banks, Association ofBankers, Bangladesh, the Bank’s officials and allStakeholders for their continuous and consistentsupport, encouragement, wisdom, input, guidanceand unrelenting mission in making IBBL a premierand fastest growing Islamic bank of Bangladesh.We have many more great things to achievetogether for the future, and we are confident thatwe will have IBBL’s indelible mark on Bangladesh’sfuture prosperity.Finally, we would like to offer our whole heartedcommitment that we are accountable to AlmightyAllah (SWT) and answerable to our Stakeholdersand to the people of our beloved country & greatnation.May Allah grant us success in all our endeavors.Prof. A.N.M.A. ZaherChairman62Annual Report 2012

Managing Director’s Round UpRespected Stakeholders,Assalamu Alaikum Wa Rahmatullah.It is my immense pleasure to pen the progresshighlightsof Islami Bank Bangladesh Limited, ourbeloved institution that emerged to ensure equityand justice in the field of all economic activities.We have been striving in last 29 years to fulfill thedream of millions of people in Bangladesh throughproviding need based banking and welfareoriented services.2012 was another landmark year for Islami BankBangladesh Limited. Notwithstanding a challengingeconomic landscape and an increasinglycompetitive operating environment, our Bankcontinued to grow and meet the expectation of ourstakeholders. The year witnessed, among others,the inclusion of IBBL in ‘Top 1000 World Banks’as the lone Bank of Bangladesh which, in turn,increased country’s image in the global arena.2012 was also the year that marked success in farreachingdelivery channels for greater proximitywith customers, upgrading to cutting-edgetechnology to support our business expansion,talent development to build our capability andmarketing and promotional initiatives to rejuvenatebank’s brand image. All these have been possiblewith entire confidence of our valued clients andabove all with the blessings of Almighty Allah.Global and National economic scenario2012 was indeed a year of transformation forglobal economy. It is not merely a year of financialtransformation but a year of political reform andchange. Major economies like US, China, Japan,Greece, France and Spain saw some politicalchanges which may redesign the landscape offuture global political economy. Last year, a numberof turmoils have engulfed the global financialsystem and international banks were underinvestigation by regulators in several countries.In the backdrop of economic turmoil in Euro zoneand standoff with US fiscal cliff, the immediate pastyear exposed a mixed blessing to the economyof Bangladesh. The apparel industry, agriculturesector and the wage earners’ remittance havesuccessfully tackled the trade deficit. Besides, cutdown of inflation to single digit has brought comfortAnnual Report 2012 63

in the citizen lives and amid the global economicturmoil the achievement of GDP was close totarget. The banking sector in the immediatepast year has experienced some reforms, policychanges and volatility in most indices. Besidesfocusing on price and financial stability, our centralbank put emphasis on financial inclusion, SMEloan, automation of services and contributingmore in CSR activities.Islamic BankingOver the years, Islamic finance has become one ofthe fastest growing segments in the internationalfinancial system. Islamic banks showed strongerresilience during the global financial crisis due totheir anchoring in the real economy and barringfrom investing in financial derivatives. GlobalIslamic Finance got its highest pace in last fewyears. The asset of this real finance reached toUSD1.6 trillion and is expected to grow at a higherrate than the industry average in next few years.In Bangladesh, Islamic Banking retained morethan 18% of total deposit and 21% of total loansand advances (investment) of the banking system.Considering the growth and its role in country’sfinancial sector, central bank took various steps tofacilitate Islamic Banking. Last year BangladeshBank introduced Islamic Interbank Fund Marketto mitigate the liquidity and to manage the fundin a better way under shariah principles. In theyear, Islamic Banks strengthened their strategicbondage in terms of liquidity, operationaluniformity, manpower development andshariah solutions. IBBL played a catalyst role inempowering fellow Banks towards Islamization ofBanking in Bangladesh. Islami banking communityparticipated in different international programsthat helped showcase country’s Islamic banking inglobal forum. World reputed media like Reuters,Gulf News and Islamic Finance published features/interview on Islamic banking in Bangladesh.Key Achievements & Developments of 2012In the backdrop of volatile global and countrypolitico economy as well as regulatory changes,Islami Bank Bangladesh Limited made excellentperformances in different areas of business. Someof the achievements are highlighted below:Balance Sheet ManagementOperating profit of the Bank for the year 2012 stoodat Tk. 15,608.24 million demonstrating an increaseby 22%. This achievement is the testimony of thestrength of Bank’s core business and its prudentmanagement. Profit before tax of the Bank was atTk.12,096 million with 17% growth and earningsper share was at Tk.4.42 compared to Tk.3.87 inthe previous year and capital adequacy ratio was13.53% (consolidated) at the end of the year. Thetotal assets of the Bank amounted to Tk.592,581million as on December 31, 2012 registering anincrease of Tk.89,968 million. The major increasein asset was recorded in aggregate investmentportfolio that grew by 22% during 2012.DepositSince beginning IBBL pursued the noble missionof being a Bank of mass people through openingaccounts with minimum initial deposit. We workfor increasing national savings to contributetowards country’s economic development. In2012, IBBL’s total deposit stood at Tk.417,844million marking a growth of 22% and market shareincreased to 7.72% from 7.59% in 2011. Lastyear, we introduced a new deposit product namedMudaraba School Students Saving Account thatreceived wide response of the young generation.Financial InclusionSince inception one of the prime focuses ofIBBL has been to maximize financial inclusion.We are working to bring financial services tothe un-banked people. We added around twomillion clients including 5.62 lac farmer’s and 78thousand student accounts to our deposit portfoliowhich is almost double than that in 2011 and thehighest number so far in a year. We have takenmany initiatives to reach the unbanked people andpoorer segments in most remote areas especiallythrough our RDS program.Investment: Further DiversificationIn 2012, Bank’s total Investment stood atTk.372,921 million registering a growth of 22%and market share increased to 8.40% from8.16% in 2011. The investment portfolio has beenfurther diversified in 2012 in terms of size, sector,economic purpose and rural-urban distributionaiming at ensuring distributive justice. Overthe years, Banking in Bangladesh witnessed amismatch with urban-rural ratio being 92% & 8%respectively. IBBL is trying to bring change in thisdistribution through increasing rural financing that64Annual Report 2012

eached to 14% of our investment in 2012. Weintroduced some new investment products suchas Urban Poor Development Scheme, Solar PanelInvestment Scheme in 2012 aiming at furtherdiversifying our investment portfolio.Asset QualityWe made qualitative and quantitative changein the asset management of the Bank. Withthe whole-hearted and integrated effort of allmanpower, we could achieve better results inour asset management. Due to global economicrecession and volatile domestic market scenarioour classified investment has increased last yearbringing the same to 3.81% of total investment.However, rescheduled investment reduced to1.98% and around 5,000 classified accounts havebeen adjusted in 2012.Foreign Exchange PortfolioIn 2012, total Foreign Exchange stood at Tk.782,598million with 9% growth over 2011. Import stoodat Tk.284,588 million last year with market shareat 10%. Export stood at Tk.197,095 million withmarket share 11%. Foreign remittance businesswas Tk.300,915 million with 28% market share.Shari‘ah ComplianceWe put utmost emphasis on total Shari‘ahcompliance which is the core value of IslamicBanking. We took different steps in managingour deposit-investment portfolio to ensure equityand justice for achieving Maqasid-e-Shariah.Awareness for shari‘ah compliance among theentire human resources and the clients has beena priority that helped improve the position for lastcouple of years. During the year 2012, doubtfulincome came down remarkably.Human Capital DevelopmentWe believe human resources are our greatestassets and recognize them as building blocksof bank’s performance and development. Thestrength of IBBL lies in the young and energeticteam who share uniform thinking and possesscommon goal of human welfare. We continueto pursue best practices for the development ofhuman resources. The bank remains focused onrecruiting the fresh graduates and implementingprograms to retain high quality human resources.We put utmost importance on total humandevelopment throughout the year 2012 andbrought qualitative change in the training programs.Intensive professional development program wereconducted to motivate less performing officials.Outside training at home and abroad has beenimparted to the officials while deserving oneshave been motivated and facilitated to pursueinternational standard professional degrees.Corporate GovernanceWe continue to make organizational and structuralchanges for ensuring corporate governance andstreamline operational procedures. Business unitslike Corporate, Retail, SME were restructured toensure effective decision making, quick disposaland better customer services. A separate Wingnamed Development Wing started functioning tolook after the issues of branding, public relationsand CSR activities. ICT Wing of the Bank has beenupgraded considering its multidimensional role inmodern banking. Internal Control and ComplianceWing (ICCW) has been strengthened and reorientedwith professional auditors and modernlogistics. Risk Management Wing (RMW) wasredesigned to look after the risk exposures andmanaging strategies. Research and DevelopmentDivision (R&D) has also been strengthened tomake our bank as a centre of excellence in thefinancial sector of Bangladesh.Branding & Public RelationsThough Islamic banking contributes one fifthof the country’s Banking sector, still the mode,mechanism and concept of this Shari‘ah basedproducts lack familiarity among the masses.As the pioneer in this sector, we took differentsteps for enhancing brand image and removingmisconception in Islamic Banking. Our activities,events and programs were duly covered in themedia throughout the year. We sponsored differentnational and international events, fairs, exposition& conferences that brought new dimensions andenhanced industry image of the bank.Information TechnologyIn order to provide prompt service to the valuedcustomers, our best efforts are given on automation,developing procedure and reducing manualoperations. We made substantial development intech-based services like internet banking, SMSbanking and KIOSK named Islami Bank DepositAnnual Report 2012 65

Machine. In order to widen access of unbankedpeople by taking advantages of countrywidemobile network coverage, we introduced mobilebanking services with brand name mCash in 2012.Environment-friendly BankingWe believe that every small green step takentoday would go a long way in building a greenerfuture and that every one of us can strive towardsa better global environment. IBBL is emphasizingon social, ethical and environment friendlyapproaches to business activity. Since inceptionwe have been pursuing the spirit of Green Bankingand have not, as such, made any investmentin environmentally hazardous areas. GreenBanking Unit of the bank has been strengthenedand we took some steps in line with central bankdirectives. We could substantially reduce the useof paper through automation and simplification.Welfare Activities (CSR)In 2012, we could maintain our image as theleading Bank in CSR through participating invarious social and human welfare issues. Wespent around Tk.309 million in different sectorslike education, disaster management, health,sports, welfare and humanitarian purpose. Ourparticipation as franchisee of Bangladesh CricketLeague and sponsoring National School FootballTournament were appreciated by the sports lovingpeople of the country.AccoladesThe Bank was listed in the ‘Top 1000 World Banks’of the world by the internationally reputed magazine‘the Banker’ in terms of tier-I capital, 868 th in termsof assets size, 70 th in terms of return on asset(ROA) and 17 th in terms of profit on capital.In recognition to our performance and goodgovernance, we received prestigious award fromdifferent national and international organizationsas mentioned below:• SAARC Anniversary Award for CorporateGovernance Disclosures & Best PresentedAnnual Reports by South Asian Federation ofAccountants (SAFA)• SAARC Anniversary Award for CorporateGovernance & Best Presented Annual Reportsby the Institute of Chartered Accountants ofBangladesh (ICAB)• National Best Corporate Award & BestCorporate Performance Award by the Instituteof Cost and Management Accountants ofBangladesh (ICMAB)• The Best Islamic Financial Institution of thecountry by Goldman Sachs• The Most respected company Award byBusiness Asia.Developments Focus in 2013• Providing comprehensive range of fullyshari‘ah compliant banking solutions• Investing in our people and transforminghuman resources to human capital• Continuous improvement of our product tomeet every household needs• Strengthening drive for financial inclusion andpoverty alleviation• Maintaining strong capital base and minimizing risk• Contributing more in industrialization, employmentgeneration and foreign trade business• Diversifying investment with emphasize onretail, SME and agricultural sector• Upholding brand image in remittance throughquality service to expatriates• Introducing products and services with supportof superior IT platform• Conducting business process re-engineeringin different functional areasConcluding WordsWe would conclude with sincere gratitude toBangladesh Bank for their valuable guidanceand continuous support. We are also grateful tothe Board of Directors for their visionary role andcontinuous encouragement. We thank high spiritedTeam IBBL for their dedication, commitment andrenewed vigor. We believe that the success of theBank has demonstrated the viability and credibilityof the Islamic Banking industry as a whole. Letus pray to Allah to give us vision, courage andstrength to achieve the target with excellence inthe years to come.(Mohammad Abdul Mannan)Managing Director &CEO66Annual Report 2012

Management Report and AnalysisWorld Economic ScenarioThe world economy suffered considerablyin 2012. Many developed economies arecaught in downward spiraling dynamics fromhigh unemployment, weak aggregate demandcompounded by fiscal austerity, high public debtburdens, and financial fragility.The economic woes of the developed countriesare spilling over to developing countries andeconomies in transition through weaker demandfor their exports and heightened volatility in capitalflows and commodity prices. Most low-incomecountries have held up relatively well so far, butare now also facing intensified adverse spillovereffects from the slowdown in both developed andmajor middle-income countries. The prospectsfor the next two years continue to be challenging,fraught with major uncertainties and risks slantedtowards the downside.Growth of world gross product (WGP) reached 2.2per cent in 2012 which remained well below theforecasted potential growth of 2.4 per cent in 2013and 3.2 per cent in 2014.Global unemployment remained very high,particularly among developed economies, with thesituation in Europe being the most challenging.The unemployment rate continued to climb,reaching a record high of nearly 12 per cent in theeuro area in 2012. Global financial system wasengulfed by a number of turmoil and several bankswere under regulatory investigation as someinternational banks alleged to have committedmoney laundering offences. Inspite of havingthis turmoil global economic situation the Islamicbanking has been growing faster in recent pastyears and can be foreseen to grow much faster inthe years to come.Bangladesh Economic ScenarioThe provisional figure for GDP growth for theyear 2012 was to the tune of 6.3 per cent; i.e. 0.7percentage points lower than the target. Accordingto the BBS estimate, a repeat strong performanceby the industry sector (9.5 per cent), particularly itsmanufacturing component (9.8 per cent) workedas key driver of the GDP growth in FY2012. Alongwith it, the construction sector surpassed itsgrowth target for FY2012 (6.6 per cent) to attaina robust 8.5 per cent growth. On the other hand,agriculture sector, particularly the crop productioncomponent, failed to maintain its remarkable trackrecord of the past two fiscal years.Services sector maintained its traditional 6 per centplus growth rate. It appears that the decline in GDPgrowth was mostly accounted for by the relativelydepressed performance in the agriculture sector,more particularly, its crop component. In contrast,industry sector, backed up by its manufacturingand construction sub‐sectors, improved theircontribution to growth. Indeed, out of 6.3 per centgrowth in FY2012, 2.8 per cent originated fromthe industry sector, the highest in recent history.Service sector’s growth contribution was limited toabout 2.9 per cent. On the other hand, growingdomestic demand sustained by robust remittanceflows had positive impact on the performance ofthe economy. In the second half of the year theinflation went down to single digit although nonfooditem’s inflation remained in double digit. Hallmarkscam, Government’s excessive borrowingfrom banks resulted in adverse effect on privateinvestment, series of accident and employees’dissatisfaction alongwith unstable energy supplyhampered RMG sector as well as country’seconomy.Bangladesh Banking SectorThe pace of development in the banking industryhas been significant over the past decades.Financial inclusion, though still low comparedto developing countries, have increasedsignificantly.In terms of soundness of the Islamic bankingsector, the banking sector has exhibited significantprogress.In 2012, the banking sector in Bangladesh hada lot of challenges passed through. Of them,financial, bad loan, volatility of foreign exchangemarket, pressure of government borrowing andAnnual Report 2012 67

high interest rate were mentionable. While thissector had some success, others includedstable call money market, higher growth in SMEand agriculture loan, opening farmers’ account,mobile and internet banking and green bankingetc. Industrialization was hampered becauseof higher spread rate. Some banks incurredhuge losses from the share market business.Because of increasing demand, more ruralbranches were opened.Business and Financial OverviewIn spite of having volatile global and nationaleconomic situation and regulatory changes in2012 Islami Bank Bangladesh Limited was ableto show consistent performance in most of thebusiness areas. It was possible because of bank’spolicy to bringing new customer in the bank arena;strengthen customers relationship providing bestservices, compliance of banking regulations andShariah rule. Sector-wise brief performance ofIBBL in 2012 alongwith its future strategies aregiven below:Profit before Income TaxIn 2012, the Bank earned highest profit in thecountry’s banking sector, which was Tk. 12,096million before tax. However, comprising theincome of two subsidiaries of IBBL like, IslamiBank Securities Limited (IBSL) and Islami BankCapital Management Limited (IBCML), theconsolidated profit before income tax in 2012 wasTk. 12,237 million.DepositIn 2012, the Bank touched the Tk. 400,000 milliondeposit milestone and at the end of the year thefigure reached Tk. 417,844 million. This was Tk.75,990 million higher than the year 2011 makinga growth of 22 per cent. This deposit growth ishighest in IBBL’s banking history. In 2012, IBBL’sdeposit share in the market reached 7.72 per centwhich was 7.59 per cent in 2011.General InvestmentIn 2012, IBBL’s investment reached to Tk. 372,921million increasing Tk. 67,080 million over theinvestment of 2011. This investment was 22 percent higher than the same was in 2011 and themarket share of investment reached to 8.40 percent in 2012 compared to 8.16 per cent in 2011.The major sectors of investment are corporate,SME, agriculture, housing, transportation, ruraldevelopment as noted below:• Corporate InvestmentThe Bank provides a variety of productsand services to large and medium corporateareas that include investment, trade financefor domestic and international transactions,project finance and syndication services,treasury, and business. The investmentpolicy of the Bank was to diversify investmentby size, sector, economic purpose andgeographical location which has positivelyshifted IBBL’s investment towards achievingMaqasid-al-Shariah.• SME InvestmentInvestment to SME sector forms a lion’s shareof IBBL’s investment portfolio and covered 47per cent of the Bank’s investment in 2012against 33 per cent in 2011. This constitutesa significant part of Bank investment, andexploits large business potentials in thissector.• Agriculture and Agro-based IndustrialInvestmentInvestment in Agriculture and Agro-basedIndustry stood at TK. 26,713 million showing25 percent growth in 2012, which was Tk.14,252 million in 2011. Allocation in this sectoras on December 31, 2012 is 7% percent oftotal investment.• Rural Development InvestmentSince its establishment, RDS’s performancehas been consistently and graduallyincreasing. In 2012, RDS investment stoodat 14 per cent as against 13 per cent of totalinvestment in 2011 with 24 per cent growth.In 2012, RDS performance focused betterthan ever, operating in around 15,507 villagesamong more than 733,520 members basingabout 24,623 centers of the country.On the other hand, 10 branches in 10 Thanasunder Dhaka and Chittagong metropolitancities started implementing the Urban PoorDevelopment Scheme (UPDS) in 2012.• Housing InvestmentIn 2012, the housing investment of the Bank68Annual Report 2012

stood at Tk. 23,231 million representing 6percent of total general investment. Thissector recorded a net increase of 1.98 percentin 2012 over 2011.• Transportation InvestmentIn 2012, Transport Investment of the Bankwas Tk. 6,449 million showing 2 percent shareof total investment.Foreign Exchange Business & TreasuryManagementThe foreign exchange business of the Bank had agrowth of 9.29 per cent in the year 2012 and stoodat Tk.782,592 million as against Tk.716,058 millionin 2011. Among 46 AD branches of IBBL 41 werebrought into centralized foreign trade processingsystem. IBBL’s Offshore Banking Unit (OBU)started full swing operation and UPAS (UsancePayment at Sight) business increased manifold.IBBL signed MoU with IFC for investment ofUS$100 million and introduced Mudaraba ForeignCurrency Investment for smooth operation ofthis growing business. IBBL’s exchange earningand money market income increased by 53 and37 per cent, respectively in 2012. The foreignexchange business contributed by import, exportand remittance are given below:• Import: In 2012, Import business of thebank stood at Tk. 284,588 million making anegative growth of 5.52 per cent against Tk.301,207 million in 2011. This negative growthcould be the effect of the Government policyof controlling/reducing import of the country.• Export: Export business handled by the Bankwas Tk.197,095 million with the growth rate of10.57 percent in the year 2012 as against Tk.178,244 million in 2011;• Foreign Remittance: Bank’s total remittancestood at Tk.300,915 million showing a growthrate of 27.17 percent in the year 2012 asagainst Tk. 236,607 million in the year 2011.The Bank has an integrated Treasury which coversboth domestic and global markets and funds. Thedealing rooms assist customers in managingtheir foreign currency exposures, simultaneouslymaintaining proprietary positions of the Bank.Information TechnologyThe Bank has set up a large and widespreadnetwork of ATMs, introducing of Mobile (mCash)and Internet Banking, Cash Deposit Machine-KISOK are notable. The Bank has covered 1,820ATMs and already issued 4 lacs ATM cards with35,000 transaction entries per day. The Bank hasdeveloped country’s largest online network havingdual connectivity holding largest Data Centre.It offers a variety of value-added services to theATM Card holders.In order to retain a competitive edge, the Bank’stechnological infrastructure is continuouslyupgraded. It has taken various initiatives toincrease technology use in its day-to-dayoperations. The bank has extended technologyto its Cheque Truncation System (CTS) andBangladesh Electronic Fund Transfer Network(BEFTN) for quick and easy transfer of fund.Capital ManagementThe Bank strives continual enhancement ofshareholders’ value through efficient use ofavailable capital in a manner that leads to a highreturn on equity. The Bank has also implementedthe Revised Guidelines on Risk Based CapitalAdequacy for Banks (BASEL II). In the year 2012the Bank maintained 13.53 as on 31.12.2012(consolidated) Capital Adequacy Ratio (CAR) asagainst required minimum 10.00 percent.Operations and ComplianceIn spite of volatile national and global economicsituation, the Bank adheres to the higheststandards of risk management and compliance.The compliance policies of the Bank areformulated following the standards and policiesof national and international regulatory and nonregulatorybodies. During the year, the regulatoryguidelines on “Know Your Customer (KYC)” normsimplementation were strengthened to preventfraud and forgery.Financial InclusionThe year 2012 can be considered the year offinancial inclusion for IBBL. In that year, the Bankput special drive to reach the unbanked peoplethrough different programs and was able toopen 5.62 lac farmers’ accounts, 78,000 Studentaccounts, 7,100 Mohor accounts and 17,400 CashWaqf accounts.Annual Report 2012 69

Green BankingThe Bank used to emphasize on social, ethicaland environmentally responsible approaches tobusiness activities. Keeping in view the spirit ofGreen Banking IBBL opened a Green BankingDepartment under its Risk Management Wing(RMW) and took some effective steps in line withCentral Bank’s directives. By now, the Bank wasable to reduce paper use substantially throughautomation and simplification of its activities.Besides, the Bank’s Green Banking policy is at thefinal stage of approval.CSR ActivitiesIBBL through its various CSR programs iscontributing significantly to develop socioeconomiccondition of Bangladesh. Bank spentaround Tk. 309 million as CSR expenditure invarious sectors such as disaster management,education, health, sports, art & culture,environment and others. In 2012, CSR programof IBBL received a momentum. IBBL participatedas franchise of Bangladesh Cricket League andsponsored National School Football Tournamentwhich was appreciated by population at differentstrata of society.Outlook for 2013In Bangladesh, 2013 is the year of national electionand so some political unrest is not unlikely whichmight hamper the normal economic activities ofthe country. Despite this limitation, the financialsector of Bangladesh is expected to keep growingand this will have positive impact on economy.IBBL will try to focus more on financial inclusionproviding technology based banking facilities toits existing and potential large customer base.Moreover, the Bank is always ready to meet thechallenges it might face in its pursuit of highergrowth and development, so that the year 2013would not be an exception. The short-term andmid-term strategies to achieve the desired successare as follows:• New and innovative products on deposit andinvestment• Bringing the SME under the main stream ofinvestment to absorb a huge section of peoplefor employment.• Proper decoration and maintenance ofall floors of the head office, zonal offices,branches and corporate branches.• Further extension of ATM services up toremote areas.• Increase of AD branches to widen foreignexchange business and remittanceoperations.• Opening of more branches at upazilas andcommercially important places• Vigorous steps will be adopted for recovery ofdefaulted investment• Measures will be taken to open 30 lac newaccounts in 2013 where by total 1 croreaccounts will be may be achieved• CSR activities will be streamlined byformulating a pragmatic CSR policy.• Automation activities will be strengthenedunder Green Banking to reduce dependenceon paper.• In 2013 efforts be geared to increase thenumber of branches to 300, Insha Allah.70Annual Report 2012

Directors’ ReportAnnual Report 2012 71

Report of The Board of DirectorsIn the name of Allah Most Gracious, Most MercifulAll praises are due to Allah, the Lord of theUniverse, and Peace and Blessings of Allahbe upon the Prophet Muhammad (Sm.) and hisDescendants and Companions.territory. Likewise, China, India, and Japan arehovering around uncertainty about future directionof their economies and scrambling to maintaineconomic growth.Esteemed ShareholdersAssalamu Alaikum wa Rahmatullah,On behalf of the Board of Directors, I takethe opportunity to welcome you all to the 30 thAnnual General Meeting of the Bank and havethe pleasure to place before you the AnnualReport 2012 along with the Auditors’ Report andAudited Financial Statements of the Bank forthe year ended December 31, 2012. I considerit appropriate to bring forth before you thecontemporary global economic scenario, changesthat took place around the world, how Bangladeshexperienced the same and various functional andadministrative aspects for the year 2012 in thefollowing chapters.Euro ZoneThe key challenge for the Euro zone pertains touncertainty about the growth outlook for Europefor 2013 and beyond. The case for strong growthin 2013 is weak. The most likely scenario for theEuro zone is a stabilization of production in thefirst half of 2013, followed by a slow and sluggishrecovery. For the whole year 2013, the Euro zoneis likely to achieve a growth rate hardly above zero(0.2 percent), and the crisis countries in Euro zonewill still have negative growth even if it is expectedto be less negative than in 2012.Euro Zone GDP Growth in 2012 and2013 (in %)Global Economic Outlook United StatesGlobal Economic Scenario2012 was a year of pronounced economicuncertainty for many countries and for most ofthem this trend is likely to linger into 2013. Fiscalcrisis in Europe threatened survival of the euro,though eventually disintegration could be avoided.The US could hardly avoid entering recessionaryThe US economic recovery shaken violently to ahalt in the final months of 2012 as the governmentslashed defense spending, businesses cut back,and fighting over the fiscal cliff. Its GDP shrankduring the fourth quarter, dropping at an annualrate of -0.1%. It was the US’s worst economicperformance since October 2009 expecting mildgrowth of about 1% in 2012.72Annual Report 2012

US GDP-Quarterly Growth: 2010 to 2012 (%) Negative GDP growth in the fourth quarter and thelikely outcomes of the fiscal cliff suggest that theUS economy will find itself in recessionary territoryin early 2013.Emerging Market EconomiesAmong the emerging market economies, China’seconomy, after slowing substantially in 2012,is showing signs of reverting to faster growth.PMI index for manufacturing moved into positiveterritory at the end of the year. Retail sales growthalso multiplied suggesting that the consumersector was improving. However, FDI into Chinadeclined consecutively in 2012. On the otherhand, outflow of FDI from China increased 25.8percent last year.Growing fiscal deficit, low investments, elevatedinflation, and high interest rates are looming overIndia’s outlook. The country’s GDP grew 5.3percent in the second quarter of the 2012-2013,one of its lowest quarterly growth rates in the lastdecade. Overall, the Indian economy is showingearly signs of a recovery. Industrial productiongrew 8.2 percent, supported by an improvementin services sector.Indonesia, Malaysia and Thailand experienceddeclining trend of growth in 2012. ASEAN asgroup is projected to grow at a slower pace of 5.5percent in 2013 against 5.7 percent in 2012.Finally, the entire greater Middle East—fromthe Maghreb to Afghanistan and Pakistan—issocially, economically, and politically unstable.Any further escalation of conflicts in Middle Eastmay significantly rise and increase oil prices by 20percent, leading to negative growth effects in theU.S., Europe, Japan, China, India and all otheradvanced economies and emerging markets thatare net oil importers.The National EconomyBangladeshi economy, with its growing globalinterconnectedness, can hardly be immune towhat in happening in the outer world. The Eurozone crisis is far from over. U.S.A struggles withrecovery. So jobs and income are likely to offsethere at home for what happened in the distant UScapital and in Euro zone. Yet Bangladesh can bebenefitted of the advantage created because ofpay hikes of RMG workers both in India and Chinaas evidenced by the higher demand orders comingfrom these two countries.Bangladeshi economy may face challenges in2013 from within as well. The root of the difficultiescan be traced back to policies pursued in thepast fiscal year with a mismatch in the budgetaryexpenditures far outstripping receipts. Any attemptto plug this deficit by excessive bank borrowingwould push up inflation. Enhancements inelectricity prices would have spiral effects on costof living thriving inflation rate up further defeatingthe monetary objective of taming inflation.The Banking SectorThe Banking sector in Bangladesh suffers fromhigh deposit and lending rates syndrome. Bothdeposit and lending rates are reigning at a higherlevel with a flat spread. The situation is createdout of bubbling and burst of capital market againsta persisting high inflation during the last threeyears. The situation led to deposit flights from thebanking sector to capital market leading to pushingup deposit and lending rates in future threateninghard-earned external competitiveness of oureconomy. The intervention by Bangladesh Bankin the nomenclature of accommodative monetarypolicy without having corresponding fiscal regimein place, led to reduction of general inflation rateby few points only, but not the non-food inflationat all, making it counterproductive eventuallycurtailing both export and import growth.Higher deposit rates have pushed up cost of fund in2012 leading to declining in foreign trade, therebyscaling down operating profits of banks last year.Average cost of fund was hovering between 11per cent and 12 per cent for most of the time in2012 which was 9.0 per cent to 10 per cent in theprevious year. The weighted average lending rateAnnual Report 2012 73

stood at 13.94 per cent in November 2012. As aresult, credit growth in private sector slowed downin 2012.The sluggish trend in the country’s capital market,cautious monetary policy, lower import paymentsand loan scams were responsible for lower level ofprofits of the banks in 2012.Islamic Banking around the WorldIslamic finance industry is one of the fastestgrowing segments of the global financial industry.In 2008 the size of the global Islamic bankingindustry was estimated about $820 billion.The size of the industry crossed $1.6 trillion by2012. The industry now comprises 430 Islamicbanks and financial institutions and around 191conventional banks having Islamic bankingwindows operating in more than 75 countries (3rdGlobal Islamic Finance Report 2012).Global Islamic finance maintained compoundannual growth rate (CAGR) of 18.82% from2006 to 2011. It is set to double in size between2011 and 2015 with the sector increasinglyviewed as a real alternative to conventionalfinance, expressed in a seminar organized byStandard & Poor’s in September 25, 2012. Theglobal crisis faced by conventional finance ledto Islamic Finance increasingly being viewed asa credible alternative. S&P expects the industryto grow 20% annually over period of 2011-2015.Islamic finance is gaining groud and has continuedto demonstrate its viability and competitiveness inthe globalised financial environment.Islamic finance draws its strength from servingthe real economy. An important feature of Islamicfinance is that it involves financial transactions thatmust be accompanied by an underlying economictransaction.Islamic Banking in BangladeshAt present, there are seven full-fledged Islamicbanks (IBs), nine conventional banks with Islamicbanking branches and eight other conventionalbanks operating with Islamic banking windows.Most of the State-Owned Banks are said to beplanning to open Islamic banking branches orwindows. By the end of 2012, there were 770Islamic banking branches and 30 Islami bankingwindows in Bangladesh.Islamic banks show commendable strengths intheir operation. Performance of Islamic banking inBangladesh is remarkable in terms of its growthand market share in the economy.As of 30.09.2012, annual deposit and investmentgrowth of IBs were 25.9% and 29.5% respectivelycompared to 19.9% and 21.1% growth of thebanking sector. Market share of IBs in depositand investment is recorded as 17.5%, and 20.7%respectively.Market Share of Islamic Banks (IBs) On the other hand, IB’s market share in industry,trade, agriculture, real estate and transportfinancing accounts as 19.0%, 23.8%, 3.3%, 20.9%and 13.3% respectively.Institutional Development of IslamicBanksIslamic Banks Consultative Forum (IBCF):IBCF, with Islamic Banks and Conventional Bankshaving Islamic Banking Branches as members,was established in 1995 for effective interaction,cooperation, promotion and furthering of the causeof Islamic banking in Bangladesh. Seven fullfledgedIslamic Banks and six Banks having IslamicBanking Branches are the members of the IBCF.Central Shari‘ah Board for Islamic Banks ofBangladesh (CSBIBB): CSBIBB was established in2001 to offer views and assistance to member banksin matters related to observance of uniform Islamicbanking policies and practices. It also promotesknowledge on Islamic Banking by organizingseminars and conducting training and research onIslamic Shari‘ah. Seven full-fledged Islamic Banksand ten Conventional Banks having Islamic BankingBranches are the members of CSBIBB.74Annual Report 2012

Islami Interbank Fund Market (IIFM): In orderto mitigate liquidity crisis of Shari‘ah based banksand financial institutions and for their bettermanagement, Bangladesh Bank introducedIslami Interbank Fund Market in 2012. Underthis arrangement an interested Islamic financialinstitution can place their surplus fund overnightat Bangladesh Bank. Islamic banks and bankshaving Islamic banking branches and windowsmay borrow from this fund overnight. IIFM isexpected to play a critical role in the developmentof Islamic Money Market in Bangladesh.Bangladesh Government Islamic InvestmentBond (BGIIB)The Ministry of Finance, Government ofBangladesh introduced the BGIIB in 2004. Theinstrument has been playing an important role indeveloping Islamic Money Market. The unit priceof the Bond is taka 1 (one) lac. One can purchasethe Bond for taka 1 (one) lac or multiple thereofhaving tenure of 6 (six) months, 1 (one) year or 2(two) years. The Bond is treated as a componentof Statutory Liquidity Ratio (SLR).IBBL is actively involved in buying and redeemingof the bond. The closing balance of IBBL againstthis Bond was Tk.23,434 million in 2012.Islami Bank Bangladesh LimitedIslami Bank Bangladesh Limited was incorporatedas the first Shari‘ah based interest-free bankin South-East Asia on the 13 th March 1983 asa public limited company. The first branch ofthe Bank i.e. Local Office at Motijheel in Dhakastarted functioning informally on 30 th March 1983.It was formally inaugurated on 12 th August 1983.The Bank was established with Tk.80.00 millionas paid up capital which has been increased toTk.12,509.64 million as on 31.12.2012. CorporateHeadquarter of the Bank, housed in an 18-storiedown modern building, is located at 40, DilkushaCommercial Area, Dhaka.Special Features of IBBLIBBL achieved stable growth and continuousprogress to become the leading private commercialbank of the country. The distinguished features ofIBBL are:• All activities are conducted on interest-freesystem based on Islamic Shari‘ah.• Investment is made through different modesas per Islamic Shari‘ah.• Investment-income is shared with Mudarabadepositors according to pre-agreed ratio,ensuring a reasonably fair rate of return ontheir deposits.• Introduction of welfare-oriented bankingto ensure equity and justice in all of itsoperations.• Extend socio-economic and financial servicesto people of all strata with a strong commitmentto rural upliftment.• Plays a vital role in human resourcesdevelopment and employment-generationparticularly among the unemployed youths.• Portfolio of investment and investment policyhave specially been tailored to achievingbalanced growth and equitable developmentthrough diversified investment operationsparticularly in the priority sectors and in theless developed areas of the national economy.• Ensures Shari‘ah compliance through regularand effective guidance provided by ourindependent and highly esteemed Shari‘ahSupervisory Committee consisting of 12members.• IBBL has some special Investment schemesfor different segments of the people to meettheir 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 tenyears committed by the Bank to the four Army Officers families.• It follows system of strong motivation amongstall the stakeholders to induce themselves tocontribute their best for their own wellbeing aswell as the wellbeing of the soceity itself.• IBBL is very much engaged in CSR activitiesand contributes every year a handsomeamount in this area.Our NetworkTo provide smooth services at the doorstep of thecustomers, IBBL goes on expanding its branchnetwork to all suitable places all over the country.The Bank opened 10 new Branches in 2012raising the total number of Branches from 266to 276. The Bank plans to gradually open morebranches covering important commercial placesboth in urban and rural areas.Out of total 276 Branches (including 30 SME/Agriculture Branches), 81.16%, i.e., 224 are UrbanBranches and 18.84%, i.e. 52 are Rural Branches.IBBL has the highest number of rural branchesamong the first generation Private Banks.Branch Cluster ManagementOur 272 Branches are managed and supervisedby the Zonal Offices. There are 14 (fourteen)Zonal Heads to run those branches smoothlyand efficiently. The remaining 4 (four) branchesare known as corporate branch and those arepresently looked after by Head Office. ZonalIncharges are responsible for effective control,close supervision and proper monitoring of thetotal operations of the branches as well as toassist them in the development of business in theirrespective jurisdiction.Number of Branches Subsidiary CompaniesIslami Bank Securities Limited (IBSL)Islami Bank Securities Limited (IBSL) is asubsidiary company of Islami Bank BangladeshLimited (IBBL) which was incorporated in March22, 2010 as a Public Limited Company under76Annual Report 2012

Inauguration of Bahaddarhat BranchCompanies Act, 1994 with the objective to carryout Business of Stock Broker & Dealer in thecapital Market. The overall increase of activitiesof Brokerage operation play an important rolein improvement of capital market of the countryand enhances earning capability of IBBL throughCorporate declaration.The Board of IBSL approved its products forproviding investment facilities to the prospectivecustomers to invest in secondary market havingthe option to operate under Investment Facilityand Non Investment Facility accounts. IBSL hasdiversified products with different category ofinvestment ceiling and other value added servicesfor the prospective customers. It also providesdifferent depository services to its BO accountholders as a full DP (Depository Participant)of CDBL. They can also avail the servicesthrough Member’s discretionary and Investors’discretionary accounts. The NRBs’ can alsoavail the services through NITA Account maintainwith AD Branches of IBBL. IBSL organizes“Investors Awareness Program” on regular basis.As per decision of the Board, IBSL has a planto open some branches in 2013 in all divisionalheadquarters of the country subject to approval ofthe concerned Authority.Islami Bank Capital Management Limited(IBCML)Islami Bank Capital Management Limited wasestablished in April 2010 under the CompaniesAct, 1994 as a Public Limited Company withAuthorized Capital of Tk.1000.00 million & Paid-Up Capital of Tk.300.00 million. The Company wasestablished as per Bangladesh Bank Letter No.BRPD(R-1)717/2011-47 dated 07 February 2010.The registered Office of the company is situated at63, Dilkusha C/A in Dhaka, Bangladesh.The main objectives of the company are to carry outall sorts of Merchant Banking businesses includingunderwriting and/or Management of issues, Publicoffer of Shares, Stocks, Debentures, Bondsetc., sale and purchase of Securities or transferthereof, Fund Management of clients, ManagingPortfolio Investment of any person or Company bymaking profitable Investment in various avenues.The Company is yet to start its operations.IBBL Exchange Singapore Pte. LtdIBBL Exchange Singapore Pte. Ltd. wasincorporated in Singapore as a subsidiary of IBBLfor money-remittance, changing, transmitting anddoing all matters and things incidental theretounder the Companies Act, CAP.50 of the Republicof Singapore.Annual Report 2012 77

Off-Shore Banking UnitsBangladesh Bank approved operation of Off-Shore Banking Units (OBU) of Islami BankBangladesh Limited located at Head OfficeComplex Branch-Dhaka, Uttara Branch-Dhakaand Agrabad Branch-Chittagong. Operations ofOff-Shore Banking Units (OBU) commenced onJanuary 4, 2011.National AffiliationsIBBL became member of the Dhaka StockExchange Limited in the year 2006. License forDepository Partnership (DP) from the Securitiesand Exchange Commission (SEC) and CentralDepository Bangladesh Ltd. (CDBL) was obtainedearlier. Function of Brokerage House and fullDP service were initiated on 1 January 2008obtaining the permission of Bangladesh Bank.The membership was transferred to Islami BankSecurities Ltd., a subsidiary company of IBBL in2010 as per requirement of Bangladesh Bank andSecurities & Exchange Commission.Membership in National BodiesIBBL is a member of the following institutions:a. Bangladesh Institute of Bank Management(BIBM)b. The Institute of Bankers, Bangladesh (IBB)c. Bangladesh Association of Banks(BAB)d. Bangladesh Foreign Exchange Dealers’Association (BAFEDA)e. Central Shari‘ah Board for Islamic Banks inBangladesh (CSBIBB)f. Islamic Banks Consultative Forum (IBCF)g. Dhaka Chamber of Commerce & Industry(DCCI)International AffiliationsIBBL is a member of the under noted foreignorganizations:a. Accounting and Auditing Organizationsfor Islamic Financial Institutions (AAOIFI),Manama, Bahrain and has become memberof its Board of Trustees.b. Islamic Financial Services Board (IFSB),Kuala Lumpur, Malaysia.c. General Council for Islamic Banks andFinancial Institutions (CIBAFI), Manama,Bahraind. International Islamic Financial Market (IIFM)Manama, Bahraine. International Islamic Centre for Reconciliationand Arbitration (IICRA)f. International Chamber of Commerce-Bangladesh (ICC-Bangladesh)g. American Chamber of Commerce inBangladesh (AmCham)IBBL’s Equity InvestmentIBBL has the equity investment in the follwinginstitutions:a. Central Depository Bangladesh Limited(CDBL)b. Karmasangsthan Bank (Employment Bank)c. Bangladesh Shipping Corporation (BSC)d. Bangladesh Aroma Tea Ltd.e. Financial Institutions and Investors PortfolioManagement Company Limited78Annual Report 2012

Corporate GovernanceCorporate Governance policies and practicesof IBBL are focused on ensuring properdelegation, transparency and accountabilityin the organization as a whole. The bank isstructured and developed in line with the acceptedCorporate Governance practices and guidelinesof Bangladesh Bank and the BangladeshSecurities and Exchange Commission’s (BSEC)notifications in this regard. While pursuing theinterest of Shareholders’ value addition, the bankhas attached utmost importance in setting up ofa well-defined compliance oriented organizationand business structure.Board of Directors, Chairmanand CEOPolicy on Appointment of DirectorsThe members of the Board of Directors of IBBL areappointed pursuant to the provision of CompaniesAct 1994, Securities and Exchange Regulationsand Memorandum & Articles of Association ofthe Bank. The Guidelines of Bangladesh Bank isstrictly complied with in the formation of the Board.Independent Directors and Depositor Directorsare appointed by the Board as per regulatoryrequirement.The Board is comprised of experienced memberswith diverse professional experiences such asbusiness, administration, banking & finance,accounting, general management representingGovernment service holder, engineers, fundmanagers which make the Board very efficientand balanced in deciding and directing variousissues of the Bank.The present Board consists of 19 (nineteen)non-executive members including 03 (three)Independent Directors and 02 (two) DepositorsDirectors excluding ex-officio Managing Director.The number of Board members is within the limitset by the Bangladesh Bank, the primary regulatorfor banking industry in Bangladesh.The Executive CommitteeThe Executive Committee, consisting of 5 (five)members, is entrusted with the responsibilities ofpolicy making and taking important and strategicdecisions as authorized by the Board within thenorms set by Bangladesh Bank.Non-Executive DirectorAll the Directors of IBBL are non-executiveDirectors except the Managing Director.Meeting of the Executive CommitteeAnnual Report 2012 79

Independent DirectorBoard has appointed 03 (three) IndependentDirectors in conformity with the latest corporategovernance notification guidelines of regulatoryauthorities. The Independent Directors enjoyfull independence in terms of carrying out theircoveted responsibilities. Independent Directorsare well conversant in the field of business andprofessional areas. The independent directorshave more than 12 (twelve) years of corporatemanagement / professional experiences.Chairman is Independent of ChiefExecutive Officer/Managing DirectorBeing appointed by the Board, the Chairman ofIBBL is independent of CEO. The Chairman of theBank is elected by the directors of the Bank. TheBoard of Directors has clearly defined roles andresponsibilities of the Chairman and the CEO.Independence of Board MembersThe Board members are also independent inexpressing their views and opinions freely. Thedirectors are also independent from managementand other relationships of the Bank that couldmaterially affect the activities of the Bank.The Role and Responsibilities of theBoard of DirectorsThe basic responsibility of the Board is to exercisebusiness judgment in good faith, in a manner thatthey reasonably believe to be in the best interests ofthe Bank, while complying with the applicable lawsand regulations, the Bank’s Articles of Associationand resolutions adopted by the shareholders. Themajor responsibilities of the Board, among others,are to set the direction, vision and policies of the Bankand to determine objectives and strategies to ensurethe effective discharge of the Bank’s functions andthe most efficient use of the Bank’s resources.Responsibilities of the Chairman ofBoard of DirectorsThe responsibilities of the Chairman as definedin the BRPD Circular No.06, dated February 04,2011 of Bangladesh Bank is fully complied with.The Chairman of the Board of Directors does notpersonally possess the jurisdiction to apply policymaking or executive authority. The chairmanalso does not participate in or interfere into theadministrative or operational and routine affairs ofthe bank.The Chairman conducts on-site inspection of anybranch of the bank or financing activities underthe purview of the oversight responsibilities ofthe Board. He calls for any information relating toBank’s operation or ask for investgation into anysuch affairs; he also submits such information orinvestigation report to the meeting of the Board orthe Executive Committee and if deems necessary,with the approval of the Board, he takes necessaryaction thereon in accordance with the set rulesthrough the CEO. The board also has the policyof appraising Bangladesh Bank regarding anycomplaints against CEO along with his statement.Duties and Responsibilities of CEO, CFO& Company SecretaryThe duties and responsibilities of Chief ExecutiveOfficer (CEO), Chief Financial Officer (CFO)and Company Secretary (CS), as defined by theregulators, are approved by the Board of Directors.Appointment of CFO, Head of Audit andCompany SecretaryThe bank appointed a Chief Financial Officer(CFO), a Head of Internal Audit (Internal Controland Compliance) and a Company Secretary (CS).The Board of Directors has defined clearly theroles, responsibilities and duties of the CFO, theHead of Internal Audit, and the CS.Independence of Non-ExecutiveDirectorsAll the non-executive Directors enjoy full freedomand independence. They also adhere to thecorporate governance practices and guidelines.Annual Appraisal of the Board’sPerformanceIn every Board meeting, the attendance ofthe Directors is considered and their activeparticipation in the various agenda is ensured.The performance of the Board is also appraised invarious ways like submission of the Performanceof the Bank in the Board meeting periodically,preparation and monitoring of budget, placingimplementation status of the Board’s decisions,transacting business issues which are within80Annual Report 2012

its power and placing implementation statusof Bangladesh Bank’s observations on variousissues. Furthermore, the performance report ofthe committees framed by the Board is also placedin the Board through which the performance ofthe Board members are regularly evaluated.Annual Evaluation of the CEO by theBoardThe Board has a policy of annual evaluation of theManaging Director. Additionally, the performanceevaluation of the CEO is conducted by the Boardthrough various reports like performance report ofthe bank, taking status of various assignments givenby the Board to the CEO and the Management,taking implementation status of Budget etc.Policy on Training of DirectorsThe Policy on training of Directors includesproviding training and information on all thelatest policy guidelines and circulars issued bythe regulatory authorities. Sometimes specialdiscussion sessions are arranged with theexperts. They also attend the programs organisedby various professional bodies at home andabroad on technical, professional and corporategovernance issues.Directors’ Knowledge and Expertise inFinance and AccountingThree Directors in the Board of the Bank areprofessionally qualified Chartered Accountants.They are well conversant in the field of accountingand finance. Other Directors are also wellconversant in the field of business, administrationand own professional areas.Number of Board MeetingsIn 2012, 20 (twenty) Board meetings were held.A detailed disclosure showing number of BoardMeetings held and status of participation of theDirectors is given in the later part.Attendance of CFO and CompanySecretaryThe CFO and the Company Secretary of thebank attend meetings of the Board of Directors,excluding those, which involve consideration of anagenda item relating to their personal matters.Directors’ Report on Compliance withBest Practice on Corporate GovernanceStatus of compliance of corporate governancechecklist is included in the Directors’ Report whichis dully certified by the external auditors of thebank.Accountability, Audit and FinancialReportingThe Board undertakes responsibilities for preparingand presenting a balanced and comprehensiveassessment of the Bank’s operations at the endof the each financial year through annual FinancialStatements and Annual Report and quarterly andhalf yearly announcement of results of the Bankto the Shareholders. The Audit Committee of theBoard assists in this respect by scrutinizing theinformation to be disclosed, and to ensure accuracy,adequacy, transparency and completeness.Vision, Mission and Strategy• The Vision and Mission of the Bank areapproved by the Board. These are disclosedin the annual report, bank’s website and otherpublications.• Business Objectives are focused and theareas of busineses are set out to attain vision,mission and strategic objectives.• The Strategies to achieve the BusinessObjectives are clraly set out and disclosed inthe previous section of this annual report.Audit CommitteeThe Audit Committee is responsible to the Boardof Directors. The duties of the Audit Committeeare clearly set forth in writing. The CompanySecretary acts as the secretary of the Committee.At least an independent director is required to fulfilthe quorum of the audit committee.Appointment and CompositionAudit Committee of the Bank, comprising of 4(four) Members, has been formed in compliancewith Bangladesh Bank & BSEC guidelines. TheCommittee is comprised of 2 (two) DepositorDirectors, an Independent Director and a ForeignDirector of the Board. Company Secretaryacts as the secretary of the Committee whileAnnual Report 2012 81

Meeting of the Audit Committeeother members of the Management attend theCommittee Meeting on invitation only.Chairman of the Audit CommitteeThe Chairman of the Audit Committee is anindependent Non-executive Director and heperforms his duties independently.Terms of Reference of Audit CommitteeThe Audit Committee of IBBL strictly observes theTerms of Reference of the Committee issued byBangladesh Bank through BRPD circular no. 12dated December 23, 2002. As per the terms of thesaid Circular, the Audit Committee plays a key rolein finalization of the Financial Statements of theBank. It also reviews the Internal Control Systemof the Bank, Internal Audit Reports, ExternalAudit Reports, Bangladesh Bank InspectionReports, Shari‘ah Inspection Report and providesnecessary Policy Guidelines.The Committee is empowered to investigate/question any employee of the Bank. It can also takeExternal Expert Counsel, if it deems necessary.Non-Executive DirectorAll the Members of the Audit Committee are NonexecutiveDirectors. No executive of IBBL are eligibleto become a member of the Audit Committee.Expertise in Finance and AccountingAll the members of the Audit Committee haveadequate knowledge in Accounting and Finance.of them, three are professional accountants havingdegrees on Chartered Accountancy, one of whomis also a Fellow Member of Chartered Secretariesand also serving as a President in the highestaccounting body of the country, the ICAB. Oneof the members is Vice Chancellor of a privateuniversity having PhD degree.Head of Internal Audit’s Access to AuditCommitteeHead of Internal Control and Compliance Winghas direct access to the Audit Committee and heattends the Audit Committee meetings regularly.Review and Evaluation of Quarterly ReportThe Audit Committee reviews and evaluates thequarterly reports and refers the same to the Board.Meeting of Audit CommitteeThe Audit Committee conducted 22 meetings during2012. The attendance status of the meeting is givenat the end of this Corporate Governance Report.82Annual Report 2012

Objectives & Activities of theAudit CommitteeReview of Internal ControlThe Audit Committee regularly reviews the InternalControl System of the Bank. It ensures that theInternal Control Systems are well conceived by allconcerned and properly administrated at all levels.The Committee also monitors observance ofInternal Control Practices with a regular interval.Role of Audit Committee in EnsuringRegulatory ComplianceThe Committee reviewed and examined theFinancial Statements of 2012 of the Bank to seewhether all the disclosures and information havebeen incorporated in the Financial Statementsproperly and whether the Bank followedInternational Financial Reporting Standards (IFRS)adopted as Bangladesh Financial ReportingStandards (BFRS) by the Institute of CharteredAccountants of Bangladesh, Bank Company Act1991, the Companies Act 1994, the Securities andExchange Rules 1987, Dhaka and Chittagong StockExchange Listing Regulations and other Laws andRules applicable in Bangladesh and Standardsissued by the Accounting and Auditing Organizationfor Islamic Financial Institutions (AAOIFI) etc.Review of External Audit Functions• Effective Coordination of Externatal AuditFunctions: Before finalization of the FinancialStatements, the Committee met with theExternal Auditors and discussed variousissues relating to Financial Statements for theyear 2012. The Committee also reviewed theprogress of Audit from time to time.• Ensure Independence of ExternalAuditors: The Committee ensures that theExternal Auditors perform the audit with dueindependence.• Review of External Auditors Findings:The Committee reviews findings of ExternalAuditors, action taken on each itemsand necessary instructions given to theManagement on the findings of the Auditors.• External Auditors’ appointment andReappointment: Every year the AuditCommittee recommends Appointment/Reappointmentof External Auditors.• Non-Audit Work: During 2012, ExternalAuditors were not assigned any work exceptStatutory Audit and certification of corporateGovernance as required by BSEC.Selection of Appropriate AccountingPoliciesThe issues related to selection of appropriateAccounting Policies in line with IFRS, BFRS andother Regulatory Guidelines were discussed in theAudit Committee meeting. The Accounting Policiesare annually reviewed at the time of finalization ofFinancial Statements.Annual and Interim Financial ReleasesAudit Committee reviews Annual and InterimFinancial Statements release and recommendsthe same to the Board for approval.Reliability on the ManagementInformationThe Audit Committee ensures that all the informationused for computation of financial disclosures arereliable.Internal Control & Risk ManagementDirectors’ Responsibility to EstablishInternal ControlThe Board of Directors of IBBL is responsible toestablish appropriate system of Internal Control. Toensure appropriate level of Internal Control System,a good number of Manuals and Guidelines havebeen introduced in line with global best practicesand Regulatory Guidelines. Delegation of powersin various business, administrative and financialareas have also been approved by the Board.Features of Internal Control, Complianceand Monitoring SystemInternal Control and Compliance Wing (ICCW) ofIBBL is responsible for checking compliance ofInternal Control System. Any deviation is reportedto the top Management, Audit Committee and tothe Board and necessary steps are taken to rectifythe same.As per Bangladesh Bank Guidelines and tostrengthen the Control and Compliance Mechanism,Annual Report 2012 83

the Bank has established Internal Control andCompliance Wing consisting of three Divisions:a. Audit & Inspection Division: This divisionundertakes the audit and inspection of alloperating units of the bank including HeadOffice, based on an approved Audit Plan,which is approved by the Audit Committee ofthe bank.As per guidelines of Bangladesh Bank,Internal Control & Compliance Wing of IBBLsubmitted a summary report on the Auditfindings during the year 2012 and placedthe same to the Managing Director and tothe Audit Committee for their perusal andguidance.During the year 2012, Bank’s Audit Teamconducted Audit & Inspection of all Branches/SME Agriculture Branches/Zonal Offices,Wing/Division/Department of Head Office.Heads of 14 Zonal Offices also inspectedBranches. Incumbent/In-charges of Branchesalso conducted their Self-Audit.b. Compliance Division: The ComplianceDivision handles the Regulatory issues ofBangladesh Bank and other RegulatoryBodies and submits status of Regulatoryissues quarterly to the Audit Committee.The Compliance Division ensures that Bankcomplies with all Regulatory requirementswhile conducting its day-to-day business. Theymaintain liaison with the Regulatory Bodiesfor any Regulatory changes and notify thesame to all concerned. The Division works forestablishing compliance culture in the Bank.c. Monitoring Division: Monitoring Divisionevaluates / assesses/ monitors the operationalperformance of various branches based onthe relevant Data/Audit Reports and analyzethose to assess the risk of branches and submitreport to the Management. They help the Auditand Inspection Division to chalk out Risk BasedAudit and Inspection Program for the branches.The Monitoring Division also ensures internalcheck at the time of performing certain functionalareas through different tool like: DCFCL(Departmental Control Functions Checklist),QOR (Quarterly Operation Report) and IDCL(Investment Documentation Checklist) followingBangladesh Bank guidelines. All the issues areperiodically reviewed by the Audit Committee.Review of Adequacy of Internal ControlSystemThe Board of Directors time to time reviewsthe Internal Control System and necessarymodification is done to improve the system and toincorporate latest changes in the technology.Inspection by Bangladesh BankBangladesh Bank conducted the ComprehensiveInspection of IBBL, Head Office and its 27selected Branches in 2013 based on the positionas on 31.12.2012. Moreover, Bangladesh BankInspection Team conducted inspection on ourHead Office & 26 Branches during the year2012 on Foreign Trade and Foreign CurrencyTransactions. Major Core Risk areas includingothers i.e. Consumer Financing, Small EnterpriseFinancing functions were also inspected by theInspection Team.Statutory AuditIn the 29 th, Annual General Meeting held on May15, 2012, the Shareholders appointed M/S. A.Qasem & Co. Chartered Accountants and M/S.ACNABIN, Chartered Accountants to audit theFinancial Statements and Nostro Accounts of theBank for the year 2012.Statutory Auditors also covered 56 Branches andHead Office as part of the Annual Audit Program.Auditors covered 80per cent of the Risk-WeightedAssets.No partner or employees of the external audit firmspossess any share of the Bank they audit at leastduring the tenure of their audit assignment of IBBL.Statutory Auditors also submitted a ManagementReport. This Report was discussed in the Meetingof Audit Committee and sent to Bangladesh Bankas per requirement. The Audit Committee alsomonitors its compliance through Internal Controland Compliance Wing.Risk ManagementIdentification of the RisksAs per guidelines of Bangladesh Bank, The Risk84Annual Report 2012

Commerce Minister Ghulam Muhammad Quader, MP is handing over ICMAB AwardManagement Wing (RMW) has been establishedin IBBL, which is responsible for identification andmanagement of risks faced by the Bank. The detailsof our internal and external risk managementmechanism is included in a separate section titledRisk Management of IBBL and steps have beentaken to manage risks.Strategies adopted to Manage andMitigate RiskNumber of steps including conducting Stress Testinghave been introduced to manage and mitigate risk. Abroad detail is included in the separate section titledRisk Management of IBBL.Ethics and ComplianceThe Bank pays close attention to the moral concernsin order to make the right ethical decisions on aday to day basis over and above observing the law,one of the basic professional requirements for theBank. IBBL belives that upholding of critical interestto the customers, employees, regulators alike tothe Bank itself as secured, reliable and efficientbanking system is one of the pillars of economicstability of any country.Enforcing a corporate code of ethics requiresunderstanding and active participation byeveryone in the Bank since the code spells outthe expected standards of behaviour and sets theoperating principles to be followed. Every officialensures that the bank at all times maintains highethical standards and adequate internal controlmeasures are in place guarding against unethicalpractices and irregularities.Statement of Ethics and ValuesIBBL has adopted core values, commitmentsand code of conduct/ethical principles which arestrictly followed. These are included in the earliersection of the report.Communication of Statement of EthicsThe satement of ethics and business practicesis approved by the Board of Directors and iscirculated to all the directors and employees fortheir acknowledgement.Board’s Statement on Ethics andComplianceThe Board of Directors of IBBL is committed tointroduce high level of code of conduct and ethicalprinciples. It also monitors strict compliance of thesame.Annual Report 2012 85

Effective Anti Corruption andAnti-Fraud ProgramIBBL follows anti fraud and anti corruption programas per the guidelines of regulatory authorities toprevent fraud and corruption. All tiers of employeesare trained on the issues.Whistle Blowing PolicyOur whistle blowing policy aims to promotetranperancy and serves as a channel of corporatefraud risk management. The policy enables anystaff member, who has a legitimate concern onan existing or potential wrong-doing, done by anyperson within the Bank. Central Complaint cell hasbeen established and a vigilance team has alsobeen formed to protect fraud and error. Effectiveprotection of whistle blowers is ensured. RiskManagement Unit (RMU) acts as the whistleblowerat IBBL.Remuneration CommitteeCommittee CharterSince it is not permitted as per BangladeshBank guidelines, separate committee of Boardon Remuneration has not been formed in IBBL.But the Board of Directors time to time evaluatesthe remuneration paid to all level of employees,directors and others and decides on the issue.CompositionThe remuneration is decided by the Boardof Directors where all the members are nonexecuitivediretors. The Managing Director, DeputyManaging Directors, Head of Human Resources,CFO and other related officials work on the issueas per guidance of the Board.Policies on RemunerationKey policies to decide on remuneration includemarket trend, inflation, job requirement, position inother banks in the same area etc.Meetings on Remuneration IssuesSeveral meetings of the executives and relatedBoard members were held to finalize somebenefits paid to the employees during the year2012.Remuneration of Directors, Chairman,Managing Director and SeniorExecutivesHonorarium paid to the Directors and others forattending meetings are as follows:For Board Meeting / Shari‘ah SupervisoryCommittee Meeting Tk.5,000.00. For ExecutiveCommittee / Other Committee Meeting Tk.4,000.00As per Bangladesh bank BRPD Circular no. 09dated 19 th September 1996, IBBL has prodivedonly the following facilities to the Directors:• The Chairman of the Board of Directors isprovided with a car, telephone, office chamberand private secretary• In addition to the above Directors areentitled to fees and other benefits forattending the Board, Executive Committee,Audit Committee and Shari‘ah SupervisoryCommittee meetings• Managing Director is paid salaries andallowances as per approval of the Boardand Bangladesh Bank which is separatelydisclosed in the Financial Statements.• The senior management is remunerated asper standard pay structure of the bank beingapproved by the Board.The Bank has fully complied with BangladeshBank circular and instruction in this regard.Human CapitalIslami bank Bangladesh Limited views itsemployees as the most valuable capital of theorganization with the potential to bring superiorresults.Human Resources Development andManagementIn order to keep pace with the additional humanresources requirement and to enhance theemployment opportunity in the country, periodicrecruitment is done as per need of the Bank.In the year 2012, total 1,152 employees wererecruited and after this recruitment total numberof employees of the Bank increased to 12,188including 407 female officials as on 31st December2012 against 11,465 including 216 female officialsas on 31st December 2011.86Annual Report 2012

Dr. Akbar Ali Khan, former Advisor to the Caretaker Government, is addressing an Executive Development ProgramIBBL’s Human Resources Management alwaysbelieves to look at the man behind the machinebecause only an educated, talented and skilledemployee can ensure the highest yield from themachine and hence the Bank always strives todevelop skills and competencies at all levels ofthe employees.Succession PlanningThe bank is well aware of the necessity to operatethe business efficienctly and to maintain continuity.IBBL has taken initiatives to develop successionplanning for its senior management positions asit recognizes that with a good succession plan,it can uphold its traditions, promote image, buildnew values and ensure that the bank is preparedfor future challenges.Merit Based RecruitmentTo acieve the long cherished objectives byfollowing the principle of merit based recruitmentwith this end in view, IBBL has formulated itsPolicy Mannual for Recruitment and Developmentof Human Resources. This policy is duly approvedby the Board which is being followed meticulouslyto ensure right manpower for right position.Performance Appraisal SystemIBBL follows a well-structured performanceapprials system for evaluating the performanceof the employees. Standard appraisal systemensures justice to all the employees of the bank.Manpower Position and Some Other Related InformationCategory 2012 2011 2010 2009 2008Executive 387 347 316 284 262Officer 7294 6782 6092 5646 5341Sub-Staff 1953 1845 1627 1542 1483Sub total 9634 8974 8035 7472 7086Rural Development Scheme (RDS) 2191 2024 1837 1732 1928Others (Temporary) 363 467 477 384 383Total Manpower 12188 11465 10349 9588 9397Total Branch 276 266 251 231 206Per Branch Employee (including RDS & others) 44 43 41 42 46Per Branch Employee (Excluding RDS & others) 36 34 32 32 34Annual Report 2012 87

Orientation Program for Probationary OfficersPromotion, Reward & MotivationIBBL follows structured human resources manualfor providing promotion, reward and motivationtowards staff. During the year 2012, IBBL offeredpromotion and reward that attained distinction indispersing challenges jobs.Training and DevelopmentIBBL always strives for excellence in improving theethical and professional standard of the officialsof the bank and reviewed the issue from time totime. IBBL organized continuous training to itsemployes throughout the year in its own traininginstitutue. In addition, employees of the bank alsoparticitaed different training program organized bydifferent institutes at home and abroad.Grievance Management and CounselingAll employees have the right to complain bothinternally and externally and the HR departmentensures full confidentiality of those complaints.For customers, a Complaint Handling Procedurehas been developed and implemented by ServiceQuality Department in handling complaints. Inaddition, a 24 hour hotline number is availableto lodge any irregularities at any time, whichare accordingly redirected to the respectivedepartments and HR for resolution.Bank’s Contribution towards the StaffIBBL is committed to treating all employees withdignity and respect. The bank strives to maintaina comfortable working environment, irrespectiveof individual differences. A high quality andcompetent human resource is crucial to continuegrowth and success of any business entity, whichcan be achieved by improving skill, knowledge andproductivity of employees. Customers’ perceptionand satisfaction ultimately determines relative orabsolute success or failure of an organization. Inturn, we need a competent, well-trained, committedand motivated team of human resources withpositive and sincere attitude towards customersthat can develop, maintain and strengthen trustand confidence in our customers that is crucial forour success.Human Resource AccountingHuman Resource Accounting involves accountingfor the Bank’s management and employees as“human assets” or “human capital” that providefuture benefits. Towards implementing HumanResource Accounting standard IBBL adoptstransparent disclosure practices regarding itshuman resources.88Annual Report 2012

Orientation Program for Assistant OfficersThe Bank calculates some items related to humanresources accounting mentioned below which areconsidered with due importance in the decisionmaking process.Employee ProductivitySl.No.(In million taka)Particulars 2012 20111 Total deposit per employee 54.21 47.912 Total investment per employee 50.94 45.283 Total income per employee 6.42 5.264 Total expenses per employee 4.46 3.545 Profit before provision per1.96 1.73employee6 Profit before taxes per1.58 1.45employee7 Salary and allowances per 0.72 0.61employee8 Salary and allowances aspercentage of operating profitbefore provision37% 35%The figures are for mainstream onlyHealthcare, Safety Standards andModern Working EnvironmentIBBL is the pioneer of welfare banking whichconstantly endeavors to bring about a sortof radical change in the level of prosperityand well-being of the countrymen as well asof its employees. A lot of programs aiming toemployee-welfare, Healthcare, Safety Standards& Working Environment covering the followingsare there in IBBL:• Non-refundable financial help fromEmployees’ Benevolent Fund• Non-refundable financial grant from bank’sfund• Awarding of prize against essay competition• Staff House Building investment facilities• Staff Household Durables Scheme• ‘Quard’ against Provident Fund• ‘Quard’ against Benevolent Fund• Burial expenses• Recreation program• Honorarium for passing Banking Diplomaexamination• Awarding of cash, crest & certificate of meritto the meritorious university students• Awarding of scholarships to help educate themeritorious wards of the employeesAnnual Report 2012 89

Trainning Course on Islamic banking for Agrani Bank Offcials• Awarding of cash prize and certificate of meritto the meritorious wards of bank employees• Medical allowance is paid to each employee,which is tax-free.• In order to provide highly sophisticatedand encouraging working environment, allthe IBBL offices including head office andbranches are equipped with modern facilitieswith air-conditioning and generator for powerback up.• All IBBL offices including head office andbranches are equipped with fire fightingmaterial and have multiple exit points foremergency exit.Corporate StructureCorporate Structure of IBBL is shown at page no. 36Global Reporting Initiative (GRI)The Global Reporting Initiative (GRI) is a nonprofitorganization that promotes economic,environmental and social sustainability. GRIprovides all companies and organizations with acomprehensive sustainability reporting frameworkthat is widely used around the world. In line withthe above, Islami Bank Bangladesh Limited. hasstarted to incorporate the components of standarddisclosures in annual report in the broad areasof Profile Disclosure, Management Approach,Performance Indicators and Labor Practices asstipulated in the Content Index of Financial ServiceSector Supplement. IBBL complies with most ofthe disclosure requirements as stated in the Index.Communication to Shareholders& StakeholdersPolicy on Communication withShareholders and StakeholdersIBBL follows specific policy to facilitate effectivecommunication with the shareholders andstakeholders. IBBL has a separate Departmentnamed Share Department to keep communicationwith the shareholders, Bondholders and otherrelated stakeholders. Shareholders and othersmay contact at any time to this Department forany sort of information and query. IBBL providesupdated information in its website for all the stakeholders of the bankPolicy on Ensuring Participation ofShareholders at AGMTo make the AGM more participatory, IBBL declaresdate of AGM well ahead of time, circulate Annual90Annual Report 2012

29th Annual General MeetingReports and other documents in time, arrangeAGM in a well-known place and convenient time,allows shareholders to speak in the AGM freelyand value their proposals and suggestions.Environmental and SocialObligationsPolicies on Social and EnvironmentalResponsibilityFreshly, the issue of climatic change is beingaddressed seriously all over the world. It isidentified that Bangladesh being a southerndelta is under serious threat of natural disaster.A detailed discussion regarding environmentand social obligation of IBBL is included in theCorporate Social Responsibilities report.Specific Policies undertaken bythe BankIBBL, being a responsible bank, has taken someinitiatives in this regard such asa. Measures taken within the organizationb. Measures taken with the customersc. Measures taken with the community.Investors Friendly InformationInvestment in IBBL’s share is very reliable due tocomfortable capital adequacy, good asset quality,excellent financial performance, comfortableliquidity, strong market position and experiencedtop Management. Besides, return on IBBL’s shareis excellent. IBBL ranked 17 th position among thetop 1000 banks around the globe in trems of profiton capital.IBBL ranks top to the Foreign Investors. The Bankhas also reputation for Shari‘ah based bankingmanagement. There is very little fluctuation in theIslami Bank share price. There is no rumour inthe Islami Bank share. Therefore, Investors relygreatly on this share. Goldman Sachs, the leadingwealth management institution of the world, haschosen share of IBBL in their portfolio GSN-11 asthe best in Bangladesh. Therefore, the companyhas invested a good amount of their investiblefund in IBBL shares.In addition, the leading wealth managementinstitutions of the world have chosen share ofIBBL in their portfolio. 28 Foreign Companies havepurchased 6.34 per cent shares of total Paid-upCapital of the Bank through Standard CharteredBank. Among them JP Morgan Chase Bank ofLuxembourg has already purchased 2.71 per centshares of total Paid-up Capital of the Bank solely.Annual Report 2012 91

Glimpses of 29th AGM92Annual Report 2012

Management Review & ResponsibilityManaging Director is the Chief ExecutiveOfficer (CEO) of the Bank. Bank has approvedOrganizational Structure (Organogram) withclear functional separation and segregation ofprocessing/functioning (Front and Back office)authorities. This ensures Core Risk Managementpractice and compliance across the Bank.Bank’s functions and plans also consider variousregulatory limits and restrictions to be riskcompliant.Management Committee is the main body ofmanagement and decision making in the bank.Besides, there are ALCO and Risk Managementwing (RMW) for designated functions andresponsibilities. Each of these forums has specificTerms of Reference approved by the Board.Above all, the bank is governed by the rules,regulations, guidelines, directions and policiesas applicable for the banking business andoperations.The Management CommitteeManagement Committee of the bank comprises 12(twelve) top-level executives, having over 25 yearsexperiances and sound knowledge in Islamicbanking. It is headed by the Managing DirectorCEO of the Bank. The Committee exerts financial,administrative and business discretionary powersdelegated by the Board and is also responsiblefor implementation of the policies and guidelinesapproved by the Board. The ManagementCommittee scrutinizes the issues thoroughlybefore placing these to the Executive Committee/Board. The Management Committee evaluatesthe performance of the Bank critically, adoptsstrategic action plan to achieve various targets ofthe bank set by the Board of Directors.Asset-Liability Committee (ALCO)The Asset-Liability Committee (ALCO) of the Bankis comprised of 10 (ten) members from the topmanagement which meet at least once in a monthto review the liquidity position of the bank, maturitywise grouping of assets and liabilities, depositsand investment pricing and liquidity contingencyplan in order to manage the Balance Sheet Riskin a better way. The ALCO is entrusted with theresponsibility of ensuring the Bank’s adequateliquidity at all times to meet its obligations whenbecomes due without compromising the earningpotential of the Bank. In every ALCO meeting, thecommittee reviews actions taken in previous ALCOmeeting, economic and market status and outlook,liquidity risk related to balance sheet, profit ratestructure etc. Special ALCO meeting is arrangedas and when any contingent situation arises.The Shari‘ah Supervisory CommitteeAs per Islamic Banking Guidelines, issued byBangladesh Bank, the Shari‘ah SupervisoryCommittee has been formed consisting of 12members including Shari‘ah scholars, renownedlawyers and eminent economists. The Shari‘ahSupervisory Committee of IBBL gives opinionsand guidelines to implement and comply withthe Shari‘ah principles in all activities of the Bankparticularly in the modes of investment. TheCommittee is governed by a bye-laws approvedby the Board of Directors.The representatives of the Committee attenddifferent meetings of the Bank, like Board ofDirectors, Executive Committee, Audit Committee,and Annual Business Development Meetings andConferences to give opinions and oversee theactivities of the Bank from Shari`ah perspective.The Committee also evaluates performance of theofficials in terms of their Shari`ah compliance.Shari‘ah Supervisory Committee &Sub-committee MeetingIn the year 2012, 4 (four) meetings of Shari‘ahSupervisory Committee and 18 (eighteen)meetings of Shari‘ah Sub-Committee were held.Members of Shari‘ah Supervisory Committeeattended 26 (twenty six) seminars as discussanton the occasion of opening new Branches andAgriculture Branches and participated in BusinessDevelopment Meetings arranged by severalZones and Head Office.Shari‘ah InspectionAs part of major responsibilities of the Committeeit also conducted Shari‘ah inspections in 266branches including 30 SME/Agriculture Branchesthrough Muraqibs during 2012 to ensure that theShari‘ah principles are implemented and compliedwith, or, on the contrary, to detect if there is anydeviation or lapse that has taken place in theBranches of the Bank.Annual Report 2012 93

Regulatory ComplianceBank has been following related guidelinesincluding submission of Quarterly, Half-yearly andYearly financial statements and other statutoryreports.Any significant development in the business isforth-with disclosed in the form of price sensitivedeclarations adhering proper rules/guidelines/directives. Bank also ensures submission ofreturns to regulatory bodies in full-complianceof the requirements and appropriate disclosuresensuring transparency and accountability.Board of Directors ensures adequate disclosuresfor the shareholders and other stakeholders.Delegation of PowerManagement Committee of the Bank has beenempowered with appropriate administrativefinance and business decision-making authoritiesas per the guidelines of Bangladesh Bank whereasthe Board of Directors and its committees areentrusted with formulation of standard policiesand procedures. Management Committee of theBank has been delegated with the authority ofapproving Investment up to a given limit. Boardhas approved the procurement policies to coverthe purchase of goods and services and otherprocurements of the Bank.Besides, various manuals, policies and guidelineswere approved by the Board from time to timewith levels of authority and process of delegationvaried across the Bank.Credit Rating of the BankIBBL continuous to maintain highest rating amongthe private sector banks of the country. Thedescription of latest credit rating of the bank isdelineated below:IBBL obtained the “AA+” rating in the long termhas been determined on the basis of goodfundamentals such as:• Comfortable capital adequacy• Good asset quality• Good financial performance• Comfortable liquidity• Strong market position• Considerable improvement in non-fundedbusiness• Experienced top management• Wide operational network• Carrier of Islamic Banking Flagship inBangladesh• Significant rated corporate exposuresBoard of Directors’ Responsibilityin Respect of Audited FinancialStatementsThe Board of Directors ensure that financialstatements give a true and fair view of the Bank’sstate of affairs, results, changes in equity andcash flows of 2012. In preparing the financialstatements, the bank uses appropriate accountingpolicies, supported by reasonable as well asprudent judgments and estimates to ensure that allapplicable accounting standards have been followedat the time of preparing the financial statements.Relationship of Board of Directors withthe AuditorsThe Board has established transparent andappropriate relationships with its external auditorsthrough the Audit Committee. The externalauditors have an obligation to bring any significantlapses/irregularities in the Bank’s system ofinternal control and compliance to the attention ofManagement, Audit Committee and the Board.Name ofthe RatingCompanyCredit RatingInformationand ServicesLimited(CRISL)ParticularsSurveillanceRatingDate of Declaration of Rating: June 22, 2012Outlook: StableLong-termAA+ (Double A+)(High Safety)Bank rated in this category is adjudgedto be of high quality, offer higher safetyand have high credit quality. This levelof rating indicates a corporate entitywith a sound credit profile and withoutsignificant problems. Risks are modestand may vary slightly from time to timebecause of economic conditionsShort-termST-1(Highest Grade)Highest certainty of timelypayment. Short-term liquidityincluding internal fund generationis very strong and access toalternative sources of funds isoutstanding. Safety is almost riskfree like Government short-termobligationsRemarksBased onAudited FinancialStatements as of31 December 2011and is valid up toJune 30, 2012 forlong term94Annual Report 2012

Relationship of Board of Directors withthe Shareholders and InvestorsThe Board recognizes the importance of timely andproper dissemination of information with regard tothe Bank’s performance and other issues affectingthe interests of the shareholders, investors andthe general public.One of the most important means of communicationto the Shareholders is the Annual Report, whichcontains comprehensive and sufficient detailsabout the financial results, performance and otherimportant activities of the Bank.Directors’ Attendance in the Board Meeting, Executive Committee Meeting and AuditCommittee MeetingSl.NoName of DirectorsPositionEligible toAttendBoard Executive Committee Audit CommitteeAttendedEligible toAttendAttendedEligible toAttend1 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 EC5 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 1411 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 2014 Jb. Humayun Bokhteyar, ACPA, FCA Depositor Director 20 17 50 47 8 715 Professor NRM Borhan Uddin Ph.D Independent 20 20 - - 22 21Director &Chairman of AC16 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 - - - - - -Director20 Barrister Mohammed Belayet Hossain IndependentDirector- - - - - -AttendedAnnual Report 2012 95

Statement of Shares held by Directors & their Spouses and Minor Children as on31.12.2012Sl.No.Name of DirectorsStatusNo. ofShares1 2 3 4The Ibn Sina TrustChairman 28,459,512Repr. by Prof. Abu Nasser Muhammad Abduz Zaher01. Prof. Abu Nasser Muhammad Abduz Zaher Self 55,800Mrs. Hamida KhatunWife of Prof. Abu NasserMuhammad Abduz Zaher101,762Abdullah Abdul Aziz Al-Rajhi, K.S.A.Director02. Yousif Abdullah Al-Rajhi, K.S.A.Vice-Chairman94,877,137S/O- Abdullah Abdul Aziz Al-Rajhi holding of 7.58% shares of the totalPaid-up Capital of the Bank.03. Yousif Abdullah Al-Rajhi, , K.S.A. Self 77,650The Public Institution for Social Security, KuwaitVice-Chairman 80,843,00004. Repr. by Engr. Mustafa AnwarEngr. Mustafa Anwar Self 2,957,912Al-Rajhi Co. for Industry & Trade, K.S.A.Director 124,305,850Repr. by Engr. Md. Eskander Ali Khan05.Engr. Md. Eskander Ali Khan Self 1,241,287Shahanara Begum & Engr. Md. Eskander Ali Khan Joint Account 26,32506.Kuwait Awaqaf Public Foundation, KuwaitDirector 53,884,100Repr. by Mohammad Abdullah Al Jalahma07.Islamic Development Bank, K.S.A.Director 93,852,825Repr. by Mohamad Adnan Midani08. Investment Corporation of BangladeshDirector 33,792,662Repr. by Md. Abul HossainArabsas Travel & Tourist Agency, K.S.A.Director 125,094,537Repr. by Dr. Abdulhameed Fouad Al-KhateebDr. Abdulhameed Fouad Al-Khateeb Self 7,143,92509. Linah Mahmoud H. NaseefWife of Dr. Abdulhameed2,225Fouad Al-KhateebMrs. Mona BarakehWife of Dr. Abdulhameed1,725Fouad Al-Khateeb10.Kuwait Finance House, KuwaitDirector 65,706,125Repr. by Salahuddin Ahmed11.Islamic Education SocietyDirector 30,525Repr. by Hafizul Islam Mian12.Md. Shahidul Islam Director 2,097,050Mrs. Mahfuza Khatun Wife of Md. Shahidul Islam 666,887Mohammed Nazrul Islam Director 268,51213. Mrs. Salina BegumWife of Mohammed Nazrul 229,175IslamMominul Islam Patwary Director 48,70014. Mrs. Maleka ParveenWife of Mominul Islam41,425Patwary15. Md. Abdus Salam, FCA, FCS Depositor Director 016. Humayun Bokhteyar, ACPA, FCA Depositor Director 017. Professor NRM Borhan Uddin, Ph.D Independent Director 0Prof. Dr. A.K.M. Sadrul Islam Independent Director 5,78718. Mrs. Nazmun Nahar IslamWife of Prof. Dr. A.K.M.67,375Sadrul Islam19. Barrister Mohammed Belayet Hossain Independent Director 0Mohammad Abdul Mannan Managing Director & CEO 240,67520. Mrs. Maksuda BegumWife of Mohammad Abdul50,087Mannan96Annual Report 2012

Statement of Shares held by CEO, Company Secretary, CFO, Head of Internal Audit andtheir Spouses and Minor Children as on 31.12.2012Sl.No.01.02.03.04.NameStatusNo. ofSharesMohammad Abdul Mannan Managing Director & Chief Executive Officer (CEO) 240,675Mrs. Maksuda BegumW/O. Mohammad Abdul Mannan,Managing Director & CEO50,087Abu Reza Md. Yeahia Senior Vice President & Company Secretary 2,800Mrs. Shahinoor AktherMd. Habibur Rahman Bhuiyan, FCAMrs. Tahmina RahmanW/O. Abu Reza Md. Yeahia,Senior Vice President & Company SecretaryDeputy Managing Director & Head of Internal Control &Compliance Wing (ICCW)W/O. Md. Habibur Rahman Bhuiyan,Deputy Managing Director & Head of Internal Control &Compliance Wing (ICCW)1,51213,987Mohammad Nesar Uddin, FCA, FCMA Executive Vice President & Chief Financial Officer (CFO) 25Mrs. Majeda AkterW/O. Mohammad Nesar Uddin, FCA, FCMA,Executive Vice President & CFO7,2251,337Statement of Shares held by top 5 (five) Salaried Employees other than the Directors,CEO, Company Secretary, CFO, Head of Internal Audit (ICCW) as on 31.12.2012Sl.No.NameDesignationNo. ofShares01. Md. Habibur Rahman Deputy Managing Director, CIW 42,87502. Md. Nurul Islam Deputy Managing Director, DW 72503. Mohammad Abul Bashar Deputy Managing Director, ICTW 23,10004. Syed Abdullah Mohammed Saleh Deputy Managing Director, RIW 8705. A.K.M. Abdul Malek Chowdhury Deputy Managing Director, RMW 775Annual Report 2012 97

28 March, 2013The Board of DirectorsIslami Bank Bangladesh BankIslami Bank Tower40, Dilkusha C/ADhaka-1000Sub: CEO/CFO’s Declaration to the BoardIn accordance with the notification of Bangladesh Securities and Exchange CommissionNo. SEC/CMRRCD/2006-158/134/Admin/44 dated 07, August, 2012, we declare that forthe financial year ended 31 December, 2012:i) We have reviewed the financial statements for the year and that to the best of ourknowledge and belief:a) These statements do not contain any materially untrue statement or do not omitany material fact or contain statements that might be misleading;b) These financial statements together present a true and fair view of the company’saffairs and are in compliance with existing accounting standards and applicablelaws;ii) There are, to the best our knowledge and belief, no transactions carried out or recordedinto by the Bank during the year are fraudulent, illegal or violating Bank’s code ofconduct.Mohammad Abdul MannanManaging DirectorMohammad Nesar Uddin FCA, FCMAChief Financial Officer98Annual Report 2012

Compliance Status of BSEC Guidelines for Corporate GovernanceStatus of Compliance by IBBL with the Corporate Governance (CG) Guidelines issued by BSEC throughNotification No. SEC/CMRRCD/2006-158/134/Admin/44 dated 07 August 2012:ConditionNo.TitleCompliance StatusCompliedNotComplied1 2 3 4 51 Board of Directors1.1 Board’s size: Board members shall not be less than 5 (five) and morethan 20 (twenty)1.2 Independent Director√Remarks1.2(i)1.2(ii)1.2(ii)a)1.2(ii)b)At least one fifth (1/5) of the total number of directors in the company’sboard shall be independent directors.For the purpose of this clause “Independent Director” means a Director:Independent Directors do not hold any share or holds less than onepercent (1%) shares of the total paid-up capital.Independent Directors are not connected with the company’s Sponsoror Director or shareholder who holds one percent (1%) or more shares.*√√√1.2(ii)c)1.2(ii)d)1.2(ii)e)1.2(ii)f)1.2(ii)g)1.2(ii)h)1.2(ii)h(i)1.2(ii)h(iii)1.2(ii)h(iv)1.2(ii)h(v)1.2(ii)h(vi)Independent Directors do not have any other relationship, whetherpecuniary or otherwise, with the company or its subsidiary/associatedcompanies;Independent Directors are not members, directors or officers of anystock exchange;Independent Directors are not Shareholder, Directors or Officers of anymember of stock exchange or an intermediary of the capital market;Independent Directors are not the partners or executives during thepreceding 3 (three) years of the concerned company’s statutory auditfirm;They are not the Independent Directors in more than 3 (three) listedcompanies;They have not been convicted by a court of competent jurisdiction asa defaulter in payment of any loan to a bank or a Non-Bank FinancialInstitution (NBFI);They have not been convicted for a criminal offence involving moralturpitude.The independent director(s) shall be appointed by the board of Directorsand approved by the shareholders in the Annual General Meeting(AGM).The post of independent Director(s) cannot remain vacant for more than90 (ninety) days.The Board shall lay down a code of conduct of all Board members andannual compliance of the code to be recorded.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)1.3(iii)The Independent Director must have at least 12 (twelve) years ofcorporate management/professional experiences.In special cases the above qualifications may be relaxed subject toapproval of the Commission.√√√√√√√√√√√√N/A*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

ConditionNo.TitleCompliance StatusCompliedNotComplied1 2 3 4 51.4 Separate Chairman and CEO and their clearly defined roles andresponsibilities.1.5 Directors’ Report to Shareholders1.5(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 ProfitMargin.√Remarks1.5(v) Discussion on continuity of any Extra-ordinary gain or loss. √ IBBL doesnot have suchgains or loss1.5(vi)1.5(vii)1.5(viii)1.5(ix)Basis for related party transactions- a statement of all related partytransactions should be disclosed in the annual report.Utilization of proceeds from public issues, rights issues and/or throughany others instruments.An explanation if the financial results deteriorate after the companygoes for Initial Public Offering (IPO), Repeat Public Offering (RPO),Rights Offer, Direct Listing, etc.If significant variance occurs between Quarterly Financial performanceand Annual Financial Statements the management shall explain aboutthe 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 issuercompany 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)1.5(xiv)1.5(xv)1.5(xvi)1.5(xvii)1.5(xviii)1.5(xix)Appropriate accounting policies have been consistently applied inpreparation of the financial statements and that the accounting estimatesare based on reasonable and prudent judgment.International Accounting Standards (IAS)/Bangladesh AccountingStandards (BAS)/International Financial Reporting Standards (IFRS)/Bangladesh Financial Reporting Standards (BFRS), as applicablein Bangladesh, have been followed in preparation of the financialstatements and any departure there-from has been adequatelydisclosed.The system of internal control is sound in design and has been effectivelyimplemented and monitored.There are no significant doubts upon the issuer company’s ability tocontinue as a going concern. If the issuer company is not consideredto be a going concern, the fact along with reasons thereof should bedisclosed.Significant deviations from the last year’s operating results of theissuer company shall be highlighted and the reasons thereof should beexplained.Key operating and financial data of at least preceding 5 (five) years shallbe summarized.If the issuer company has not declared dividend (cash or stock) for theyear, the reasons thereof shall be given.√√√√√√√√√There wereno such casein 2012N/AN/AN/AN/A100Annual Report 2012

ConditionNo.1.5(xx)1.5(xxi)1.5(xxi)a)1.5(xxi)b)1.5(xxi)c)1.5(xxi)d)1.5(xxii)TitleCompliance StatusCompliedNotComplied1 2 3 4 5The number of Board meetings held during the year and attendance byeach director shall be disclosed.√RemarksThe pattern of shareholding shall be reported to disclose the aggregate number of shares (along withname wise details where stated below) held by:-Parent/Subsidiary/Associated Companies and other related parties(name wise details);Directors, Chief Executive Officer, Company Secretary, Chief FinancialOfficer, Head of Internal Audit and their spouses and minor children(name wise details);Executives (top five salaried employees of the company other thanstated in 1.5 (xxi)b);Shareholders holding ten percent (10%) or more votes interest in thecompany (name wise details).In case of the appointment/re-appointment of a Director the company shall disclose the followinginformation 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)cNames of companies in which the person also holds the directorshipand the membership of committees of the Board.2.00 Chief Financial Officer (CFO), Head of Internal Audit & Company Secretary2.1 Appointment of CFO, Head of Internal Audit and Company Secretaryand their clearly defined roles, responsibilities and duties.2.2 Attendance of CFO and the Company Secretary at Board of Directorsmeeting.3. Audit Committee3. (i) The company shall have an Audit Committee as a sub-committee of theBoard of Directors.3. (ii) The Audit Committee shall assist the Board of Directors in ensuring thatthe financial statements reflect true and fair view of the state of affairsof the company and in ensuring a good monitoring system within thebusiness.3. (iii) The Audit Committee shall be responsible to the Board of Directors. Theduties of the Audit Committee shall be clearly set forth in writing.3.1 Constitution of the Audit Committee3.1(i) The Audit Committee shall be composed of at least 3 (three) members. √3.1(ii)3.1(iii)Constitution of Audit Committee with Board Members including oneindependent director.All members of the audit committee should be “financially literate”and at least 1(one) member shall have accounting or related financialmanagement experience.3.1(iv) Filling of Casual Vacancy in Committee N/A3.1(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 withoutat least 1 (one) independent director.3.2 Chairman of the Audit Committee3.2(i) Chairman of the Audit Committee shall be an independent director. √3.2(ii)Chairman of the audit committee shall remain present in the AnnualGeneral Meeting (AGM).√√√√√√√√√√√√√√Annual Report 2012 101

ConditionNo.TitleCompliance StatusCompliedNotComplied1 2 3 4 53.3 Role of Audit Committee3.3(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)3.3(vi)Review along with the management, the annual financial statementsbefore submission to the board for approval.Review along with the management, the quarterly and half yearlyfinancial statements before submission to the board for approval.3.3(vii) Review the adequacy of internal audit function. √3.3(viii)3.3(ix)3.3(x)Review statement of significant related party transactions submitted bythe management.Review Management Letters/ Letter of Internal Control weakness issuedby statutory auditors.When money is raised through Initial Public Offering (IPO)/RepeatPublic Offering (RPO)/Rights Issue the company shall disclose to theAudit 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 offinancial results.3.4 Reporting of the Audit Committee3.4.1 Reporting to the Board of Directors3.4.1(i)The Audit Committee shall report on its activities to the Board ofDirectors.3.4.1 (ii) The Audit Committee shall immediately report to the Board of Directorson the following findings, if any:3.4.1(ii)a) Report on conflicts of interests; √3.4.1(ii)b)3.4.1(ii)c)3.4.1(ii)d)Suspected or presumed fraud or irregularity or material defect in theinternal control system;Suspected infringement of laws, including securities related laws, rulesand regulations;any other matter which shall be disclosed to the Board of Directorsimmediately.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 Auditors4.(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 orfinancial 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. √√√√√√√√√√√RemarksN/A102Annual Report 2012

ConditionNo.4.(viii)TitleCompliance StatusCompliedNotComplied1 2 3 4 5No partner or employee of the external audit firms shall possess anyshare of the company they audit at least during the tenure of their auditassignment of that company.5. Subsidiary Company5.(i)5.(ii)5.(iii)5.(iv)5.(v)Provisions relating to the composition of the Board of Directors of theholding company shall be made applicable to the composition of theBoard of Directors of the subsidiary company.At least 1 (one) independent director on the Board of Directors of theholding company shall be a director on the Board of Directors of thesubsidiary company.The minutes of the Board meeting of the subsidiary company shall beplaced for review at the following Board meeting of the holding company.The minutes of the respective Board meeting of the holding companyshall state that they have reviewed the affairs of the subsidiary companyas well.The Audit Committee of the holding company shall also review thefinancial statements, in particular the investments made by thesubsidiary company.6. Duties of Chief Executive Officer (CEO) and Chief Financial Officer (CFO)6.(i)6.(i)a)6.(i)b)6.(ii)They have reviewed financial statements for the year and that to thebest of their knowledge and belief :-These statements do not contain any materially untrue statementor do not omit any material fact or contain statements that might bemisleading;These statements together present a true and fair view of the company’saffairs and are in compliance with existing accounting standards andapplicable laws.There are, to the best of knowledge and belief, transactions entered intoby the company during the year are not fraudulent, illegal or don’t of thecompany’s code of conduct.7. Reporting and Compliance of Corporate Governance7 (i) The company shall obtain a certificate from a practicing ProfessionalAccountant/Secretary (Chartered Accountant/Cost and ManagementAccountant/Chartered Secretary) regarding compliance of conditions ofCorporate Governance Guidelines of the Commission and shall sendthe same to the shareholders along with the Annual Report on a yearlybasis.7 (ii) The directors of the company shall state, in accordance with theAnnexure attached, in the directors’ report whether the company hascomplied with these conditions.√√√√√√√√√√√√RemarksAnnual Report 2012 103

Compliance Status of Bangladesh Bank’s Guidelines for CorporateGovernanceSl.ParticularsNo.1. Responsibilities and authorities of the board of directors:a. Work-planning and Strategic Management:i. The Board shall determine the objectives and goals and to this end shall chalk out strategiesand works plan on annual basis. It shall specially engage itself in the affairs of making strategiesconsistent with the determined objectives and goals and in the issues relating to structuralchange and reorganization for enhancement of institutional efficiency and other relevant policymatters. It shall analyze/monitor at quarterly basis the development of implementation of thework-plans.ii.The Board shall have its analytical review incorporated in the Annual Report on the success/failure in achieving the business and other targets as set out in its annual work-plan and shallapprise the shareholders of its opinions/recommendations on future plans and strategies. It shallset the Key Performance Indicators (KPIs) for the CEO and other senior executives and have itevaluated at times.b. Lending and Risk Management: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 theboard’s approval under the purview of the existing laws, rules and regulations. The Board shallspecifically distribute the power of sanction of loan/investment and such distribution shoulddesirably be made among the CEO and his subordinate executives as much as possible. Nodirector, 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 shallmonitor at quarterly rests the compliance thereof.c. Internal control management:The Board shall be vigilant on the internal control system of the bank to attain and maintainsatisfactory qualitative standard of its loan / investment portfolio. It shall review quarterly the reportssubmitted by its audit committee regarding compliance of recommendations made in internal andexternal audit reports and the Bangladesh Bank inspection reports.d. Human Resources Management and Development:i. Policies relating to recruitment, promotion, transfer, disciplinary and punitive measures, humanresources development etc. and service rules shall be framed and approved by the Board. Thechairman or the directors shall in no way involve themselves or interfere in or influence overany administrative affairs including recruitment, promotion, transfer and disciplinary measures asexecuted under the set service rules. No member of the Board of Directors shall be included in theselection committees for recruitment and promotion at different levels. Recruitment and promotionto the immediate two tiers below the CEO shall, however, rest upon the board. Such recruitmentand promotion shall have to be carried out complying with the service rules i.e., policies forrecruitment and promotion.ii. The Board shall focus its special attention to the development of skills of Bank’s compliedstaff in different fields of its business activities including prudent appraisal of loan / investmentproposals, and to the adoption of modern electronic and information technologies and theintroduction of effective Management Information System (MIS). The Board shall get theseprograms incorporated in its annual work plan.e. Financial Management:i. The annual budget and the statutory financial statements shall finally be prepared with theapproval of the Board. It shall at quarterly rests review /monitor the positions in respect ofBank’s income, expenditure, liquidity, non-performing asset, capital base and adequacy,maintenance of loan loss provision and steps taken for recovery of defaulted loans includinglegal measures.ii.The Board shall frame the policies and procedures for Bank’s purchase and procurementactivities 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 theapproval of the board.ComplianceStatusCompliedCompliedCompliedCompliedCompliedCompliedCompliedCompliedComplied104Annual Report 2012

Sl.No.f. Formation of supporting Committees:ParticularsFor decision on urgent matters, an executive committee, whatever name called, may be formed withthe directors. There shall be no committee or sub-committee of the Board other than the executivecommittee and the audit committee. No alternate director shall be included on these committees.g. Appointment of CEO: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 centralbank (Bangladesh Bank)2 Responsibilities of the Chairman of the Board of Directors:a. As the chairman of the board of directors (or chairman of any committee formed by the board or anydirector) 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 thebank.b. The Chairman may conduct on-site inspection of any bank-branch or financing activities underthe purview of the oversight responsibilities of the board. He may call for any information relatingto bank’s operation or ask for investigation into any such affairs; he may submit such informationor investigation report to the meeting of the Board or the executive committee and if deemednecessary, with the approval of the Board, he shall effect necessary action thereon in accordancewith the set rules through the CEO. However, any complaint against the CEO shall have to beapprised 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 theoffice and a vehicle in the business-interest of the bank subject to the approval of the board.3 Responsibilities of the Adviser:The adviser, whatever name called, shall advise the Board of Directors or the CEO on such issues onlyfor which he is engaged in terms of the conditions of his appointment. He shall neither have access tothe process of decision-making nor shall have the scope of effecting executive authority in any mattersof 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 authoritiesas follows:a. In terms of the financial, business and administrative authorities vested upon him by the Board,the CEO shall discharge his own responsibilities. He shall remain accountable for achievement offinancial and other business targets by means of business plan, efficient implementation thereofand prudent administrative and financial management.b. The CEO shall ensure compliance of the Bank Companies Act, 1991 and / or other relevant lawsand 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 orof 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 shallrest on the CEO. He shall act in such cases in accordance with the approved service rules onthe basis of the human resources policy and sanctioned strength of employees as approved bythe board. The board or the chairman of any committee of the board or any director shall not getinvolved or interfere in such affairs. The authority relating to transfer of and disciplinary measuresagainst the staff, except those at one tier below the CEO shall rest on him, which he shall apply inaccordance with the approved service rules. Besides, under the purview of the human resourcespolicy as approved by the board, he shall nominate officers for training etc.5 Meetings of the Board of Directors:One Meeting of the board of Directors per month can be held usually but it can be more than one uponnecessity. 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:Number of members of the EC cannot exceed 7 members as per BB BRPD Circular Letter No. 2 dated15 February 2010 and more than one member from one family shall not be included on the EC as per BBCircular Letter No. 4 dated 14 March 20107 Training of the Directors:The Directors of the Board will acquire appropriate knowledge of the Banking laws and other relevantlaws, rules and regulations to effectively discharge the responsibilities as a director of the bank.ComplianceStatusCompliedCompliedCompliedCompliedCompliedCompliedN/ACompliedCompliedCompliedCompliedCompliedCompliedCompliedAnnual Report 2012 105

Certificate on Compliance of Conditions of Corporate Governanceto the Shareholders of Islami Bank Bangladesh LimitedWe, in respect of Islami Bank Bangladesh Limited (the Bank), have examined the status ofits 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 statusthereof is the responsibility of the management of the Bank. Our responsibility is to providea certificate about whether the Bank is in compliance with the said conditions of CorporateGovernance based on our examination. Our examination for the purpose of issuing thiscertificate was limited to the procedures including implementation thereof as adopted bythe Bank for ensuring the compliance of the conditions of Corporate Governance andcorrect reporting of the status of the compliance on the attached statement on the basis ofevidence gathered and representation received. It is neither an audit nor an expression ofopinion on the financial statements of the Bank.To the best of our information and according to the explanations given to us we certify thatIslami Bank Bangladesh Limited has, except condition no. 1.2(i) as reported by the bankon the attached status of compliance statement, complied with the conditions of CorporateGovernance stipulated in the above mentioned BSEC’s notification dated 07 August 2012.Mohammed Hamidul Islam, FCA Md. MoniruzzamanPartnerPartnerICAB Enrollment Number: 912 ICAB Enrollment Number: 787Dhaka, For A. Qasem & Co. For ACNABIN28 March 2013 Chartered Accountants Chartered Accountants106Annual Report 2012

Green BankingObserving uninterrupted global warming,increasing trend of carbon emission, otherenvironmental pollutions and overall globalenvironment adversities and hence perceivingthe urgency to protect the globe from probableenvironmental calamities and to ensure continuoussupply of scarce natural resources for futuregeneration, a new approach to Green Bankinghas been prescribed by Bangladesh Bank through“Policy Guidelines for Green Banking” vide BRPDCircular No. 02 dated 27 February, 2011. Gettingthe comprehensive policy from the Central Bank,Green Banking activities of IBBL has received anew impetus. Green Banking practices of IBBLare mainly concentrated in its internal operations,Investment, Corporate Social Responsibilities(CSR) activities and automation.By nature and from Shari‘ah point of view, IBBLhas tremendous responsibility for establishmentof environment friendly banking for the greaterinterest of the hu-mankind and the earth.Moreover, being the largest private sectorcommercial bank and having the maximumstakeholders, IBBL has ample scope forpromoting environment-friendly activities andraising awareness among the masses to keep theglobe habitable.Phase-wise Functions of Green BankBangladesh Bank addressed the Green Bankingactivities for the Banks in Bangladesh to beimplemented in 3 (three) phases as under:Islamic Bank Bangladesh Limited began greenbanking operations at the end of November 2011as per BB circulated policy guidelines for GreenBanking, vide BRPD Circular No. 02 dated 27,February 2011.Achievement of Green Bankingactivities-2012Green Banking DepartmentIn accordance with the Bangladesh Bank’s policyguidelines on Green Banking, the Green BankingDepartment was formed in an emergency boardmeeting held on 24.09.2011 and is functioning underthe supervision of the Bank’s Risk ManagementWing. Moreover, the Executive Committee (EC)looks after the Green Banking activities.Policy formulation and GovernanceIBBL has formulated the green banking policy toaccommodate the guidelines of Bangladesh Bank.Phase-wise Functions of Green BankPhase-I (Jan to Dec- 2011) Phase-II (Jan to Dec- 2012) Phase-III (Jan to Dec 2013)‣ Policy Formulation &Governance‣ Incorporation of EnvironmentalRisk in CRM/ IRM‣ Initiating In-house EnvironmentManagement‣ Introducing Green financeCreation of Climate Risk FundIntroducing Green MarketingOnline Banking‣ Supporting Employee Training,‣ Consumer Awareness andGreen Events‣ Reporting Green BankingPractices‣ Sector Specific EnvironmentalPolicies‣ Green Strategic Planning‣ Setting up Green Branches‣ Improved In-house EnvironmentManagement‣ Formulation of Bank SpecificEnvironmental Risk ManagementPlan and Guidelines‣ Rigorous Programs to EducateClients to be undertaken.‣ Disclosure and Reporting ofGreen Banking Activities.Designing and IntroducingInnovative Products.‣ To introduce environment friendlyinnovative green products to addressthe core environmental challenges ofthe country‣ To avoid negative impacts onenvironment through banking activities.Reporting in Standard Format withExternal Verification‣ To publish independent Green AnnualReport following internationallyaccepted format like Global ReportingInitiatives (GRI) targeting thestakeholders duly verified by anindependent agency or acceptablethird party.Annual Report 2012 107

Effluent Treatment Plant (ETP) of a project financed by the BankGreen Office Guide, Green Instructions are alsocirculated time to time for the smooth functioningof green activities. Besides, sector-specific GreenBanking Policies are being formulated which willcome into effect soon.Green LeaderWe demonstrated our leadership in the areaof environmental sustainability by popularisingthe concept of “green banking” in the country.Bangladesh Bank designated us as one of the topGreen Banks in 2012.Green FinanceIBBL Green Energy has been designed to financerenewable energy sector i.e. solar energy,ETP, bio-gas, agro SMEs and farmers. As onDecember, 2012 IBBL made investment of Tk.27,007.60 million to the concerns needing ownEffluent Treatment Plant.Waste Management InvestmentA Cloro-Alkali Plant producing Caustic Sodainvested by the Bank gives Chlorine (liquid) &Hydrogen as byproducts which are hazardousfor environment. To use this byproduct as rawmaterials for producing other economic products,the Bank invested further for additional plants.Other environment friendly projects financed byIBBL are:a. Rice Bran Oil production.b. Electricity production from Rice Huskc. Energy Saving Bulbsd. 100% export-oriented Jute yarn & bagsmanufacturing plante. Auto Brick Manufacturing Units that emits lesscarbon and requires 50% energy compared tocommon brick projects.f. CNG refueling & Conversion unit helps reducecarbon at atmosphere.g. Besides, we have recycle plants for plastic,iron & steel scrap recycling plants which helpreduce environmental hazard.Bio-Gas PlantsIBBL signed an MoU with Grameen Shakti oninstallation of bio-gas plants in the rural areas.This initiative will help improve the livelihood of therural people and remove the gap between the richand the poor by reducing income inequality.Green ProductsIBBL has introduced various new green productswhich ultimately reduce carbon emission.i-banking, M-Cash, Online banking, SMSBanking, Call Center and Phone Banking aresuch products. It is allowing the customers to dobanking transaction without coming to the bankphysically. Expansion of ATM network is greatlyreducing the carbon emission. A brief report onGreen Products is given below:Digitalization of DocumentMost of the documents of the Bank are convertedinto softcopy. Books of Accounts are fully automatedand made electronic. Lion’s share of the internaland external communication are done throughauthenticated e-mail. All kinds of Foreign TradeServices of the Bank are handled through CentralizedTrade Processing. Besides, all circulars, Memorandaand queries are issued through Intranet.108Annual Report 2012

Online BankingAll branches of the Bank are under online network.Clients can now easily deposit, withdraw, remit fundand check account balances from 276 branches.IBBl is contributing in online Banking throughATM banking. There are internet banking, mobilebanking and M-cash service. In 2012 a majorchange and development brought in automation ofBanking.Installation of IP PhoneIBBL has installed IP-Phone services in the HeadOffice, Zonal Offices and at all AD Branches. Asa result, all high Executives, Divisional In-chargesand Branch Incumbents now easily communicatewithout physical travel which help to reducecarbon emission.Climate Risk FundIBBL has distributed Taka 52.00 million (forflood Tk. 7.00 million and Disaster, Health &Environment Tk. 45.00 million) in the year 2012(which was Tk. 48.05 million in 2011) among theclimate victims due to devastating flood, chillingcold, severe drought etc. in different parts of thecountry.Detail position of Fael Khair Agro-Inputs ProgramSl.No.Particulars1 Total Administrativecost2 Administrative cost-2012Amount/PersonTk.156.00 millionTk.40.00 millionMarketing, Training & CapacityBuildingGreen Marketing3 Number ofemployees (2012)4 Number ofbeneficiaries (2012)228 person(Bank deputed SO& above 11 & 217Foundation)50,000 personsAfter introduction of SMS banking, green marketingis gaining momentum. Employment noticesare given on website and online applicationsare invited and entertained. Clients are alsoencouraged to modify their products line, set upmodern machinery from environmental viewpoint.Green Banking TrainingTo promote and adopt the comprehensive ideaon Green Banking activities, IBTRA arrangedGreen Banking training programs in Dhaka anddifferent Zones in 2012. Besides, officials of theBank attended the training programs/workshops/seminars on Green Banking issues arranged byBangladesh Bank Training Academy and BIBMthis year (2012).Training Performance in the year 20121 Number of Course23Conducted2 Participants of Employee 1144training programs3 Participants of customer Nilawareness programs4 Expenditure Tk.4,21,850/-Fael Khair Agro-Inputs ProgramIslami Bank Foundation (IBF) has been operating“Fael Khair Agro-Inputs Program (FKAIP), a profit/interest free quard program for the Sidr victims inthe southern part of Bangladesh since 2008 underan agency agreement with Islamic DevelopmentBank (IDB) with an amount of US$9.00 millionequivalent to BDT 616.00 million approximately.Exclusive Sponsorship of Dhaka CityBeautificationIBBL beautifies different parts of the city byplanting trees and orchid. IBBL also utilizes thescope to spread the beauty of Bangladeshi nature,culture, history and heritage etc. successfully ondifferent occasions.PlantationEvery year IBBL plants a large number of treesall over the country to rpotect the environment. In2012 the Bank planted about 5,06,000 number ofvarious types of plants (forest, fruit and medicinal)which cost Tk. 11.43 million all over the country.Annual Report 2012 109

Islami Bank Call CentreSolar pannel at Islami Bank TowerIn-house Environmental ManagementIBBL has taken a number of initiatives in thisregard. A Green office Guide is about to be shortlypublished to practise Green Management in theoffice for which we can ensure more efficientuse of resources and reduction of waste, saveenergy and money, and help improve our workingenvironment. Some initiatives of In-houseEnvironmental Management are given below:Waste ManagementWaste minimization through demandmanagement, reuse and recycling are thepreferred methods of reducing solid waste.However, where solid waste cannot be eliminated,we are committed to careful management anddisposal. In the processing of investment Proposal(trade/projects), the waste management systemof the industry is given weightage.Other Green Banking PositionSl. No.12345ParticularsSolar panel installed in Head Office and 21branches.Introduced measures for saving electricity, water,Gas, Fuel and Introduced paper consumption.Introduced use of scrap/one side used papersfor note pad.Installation/erection/set up of energy efficientequipment/ machine (Generators, Energy bulbsetc).Introduced auto shutdown of electricalequipment.Energy ManagementThe Bank encourages customers to adopt energyefficient practices in their businesses by providinginvestments for such purposes.Water ManagementOur water consumption is mainly associated withrest room, ablution and lunchroom facilities onbank premises. We are committed to improvingour water use and conservation practices. Weencourage reducing use of water in our facilitiesand also encourage large borrowers to conserveand recycle water.Environmental Risk Assessment in CRMIBBL has incorporated the environmentalscanning to assess investment risk of the clientsand refrained from financing projects which wouldhave direct adverse impact on water pollution,health, encroachment of rivers and deforestation.Green TravelIBBL always encourages the officials for Greentravel for any business travel which reduceenvironmental impact. In this regard, the Bankuse hybrid autos, solar panels and uses publictransport and car pooling system.Ethical BankingBanks have a direct impact on the communityaround them. That impact is two dimensional: the110Annual Report 2012

Tree Plantation in Dhaka Cityway they operate i.e. internal operations and thetypes of companies they finance. IBBL takes care ofboth the dimensions in its operation.Many ethical issues such as the environmentalconduct of business customers are now part ofstandard risk assessment and prudent banking.IBBL has been trying to follow the EquatorPrinciples, a set of guidelines developed formanaging social and environmental issuesrelated to the financing of development projects.Our investment is based on Islamic values asdefined by the principles of Shari‘ah (Islamiclaw). The Islamic Shari‘ah attempts to maximizesocial welfare. Consequently, Islamic investmentinvolves the screening out of those companieswhose primary business does not conform to theShari‘ah principles.Management approach to Green BankingThe Bank has been actively supportive ofsustainable green finance and has continued toincrease its visibility and exposure to the sector.Prospects for business from alternative andsustainable finance in the green sector remainpositive, especially given the strong growthexpectations for Bangladesh. In line with theseexpectations the Bank has actively sought toenlarge its portfolio of green investments.During the process of investment evaluationof all potential projects, the Bank engages in asystematic assessment of environmental riskto determine the project’s environmental, socialand ethical risks. The Bank adopts processes toassess the environmental and social risks andopportunities arising from its client’s businessactivities and manages the Bank’s exposure tothem. The sustainability system ensures thatsustainability considerations play a core role in theBank’s decision-making process for investmentassessment.From an operational perspective and driven by thedesire to reduce its own impact on the environment,IBBL will shortly introduce performance evaluationand measurement of sustainability criteria withinthe function of the Bank.The Bank’s Green Pledge serves as thefundamental base for impact reduction andcatalyses for behavioral change both within andoutside the organization. The basic principles ofthe Green Pledge have been communicated toemployees, customers, suppliers and the widersocial circles within which the Bank operates.From the above details of performance, it isevident that our achievements in the field ofGreen Banking activities are significant, althoughwe had shortage of experienced workforce,required resources, and necessary tools. Wehave still a wide area for improving GreenBanking activities as desired by the CentralBank. Our efforts at enriching and expandinggreen banking activities continue unabated.Annual Report 2012 111

Performance ReviewInauguration of Araaihazar BranchThe Bank through its 276 branches (including30 SME/Agriculture Branches) successfullymobilized Tk.417,844 million Deposit from7,031,297 Depositors and deployed Tk.372,921million as general Investment into 710,741accounts up to 31 st December 2012. In the year2012, total income of the Bank was Tk.50,346million showing 31% growth in 2012 as against27% growth in 2011 and total Expenditure was Tk.34,738 million showing 35% increase in 2012 asagainst 25% increase in 2011 resulting in pre-taxprofit of Tk.12,096 million showing 17% growth in2012 as against 22% growth in 2011. The Boardof Directors of the Bank recommended 25% (8%cash + 17% stock) Dividend to the shareholdersfor the year 2012.DepositWithout multidimensional and diversified products,any financial institution especially a Bank canhardly survive and thrive in competition with otherbanks effectively. Keeping this in view, IBBL hasintroduced 18 deposit products so far. Historicaltrend of the deposit mobilization shows a cleardirection of doubling its deposit base in every 5(five) years.Account Opening Status from 2008 to 2012 Mobilization of DepositsThe year 2012 was another successful year ofmobilization of deposit. Total Deposit stood atTK. 417,844 million as on 31 st December 2012 asagainst Tk. 341,854 million of the preceding yearregistering a growth of Tk. 75,990 million, i.e. 22%growth as compared to 17% in 2011.112Annual Report 2012

Deposit: 2008 to 2012 Bank of over 7 Million DepositorsTotal number of depositors of IBBL increasedto 7,031,297 as on 31 st December 2012 from6,004,731 of the preceding year. 1.90 million newdeposit accounts were opened in 2012.New Deposit ProductsIn the year 2012 two new deposit products namelyStudents Mudaraba Saving Account, MudarabaFarmers Saving Account have been introduced.Welfare-Oriented Special Deposit ProductsMudaraba Waqf Cash DepositResponding to a noble cause, this Account maycreate cash waqf at a time or may start with aminimum deposit of Tk.1,000/- and the subsequentdeposit shall be made by installments in thousandTaka or in multiple of thousand Taka. Profit of thisaccount is utilized for social and human welfare asper instruction of the account holders.Growth of Deposit by ProductSl.Deposit in Million Taka Growth Deposit MixTypes of DepositNo.2012 2011 % 2012 20111 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 Mudaraba Hajj SavingsAny Muslim intending to perform Hajj may openHajj Savings Account. The Accountholder canselect one among the 25 alternatives basedon duration ranging from 1 year to 25 years forbuilding up savings by monthly installments.A total of 703 Hajj pilgrims deposited moneyto perform the Holy Hajj during 2012. This yearIBBL’s position in extending services to the Hajjpilgrims under government package was secondin position, next to Sonali Bank.Mudaraba Special Savings (Pension)SchemeConsidering the increase demands from thepeople of all walks of the country special andattractive savings schemes on the basis of theIslamic Shari‘ah have been introduced to enableand encourage them to save money dependingon their ability when they normally retire from theiractive economic life. IBBL has specially introduced‘Mudaraba Special Savings (Pension) Scheme’.In this sceme, a person obtains the opportunityto build up savings by small monthly instalmentsfor getting an attractive amount at the end of aspecified term or a monthly amount for a specificperiod on the expiry of the 5 years or 10 years term.Mudaraba Monthly Profit Deposit SchemeAny individual may open account under thisscheme, depositing a minimum amount of Taka1,00,000/- and multiples thereof at a time, for 3years or 5 years. Monthly provisional profit isgiven to the account just after completion of onemonth from the date of opening of the account.The profit amount is adjusted on completion ofeach accounting year after declaration of final rateof profit.Mudaraba Muhor SavingsAs per Islamic Shari‘ah, it is fard for a husband topay Muhorana to his wife. The Bank introduces thisaccount to facilitate payment of Muhorana. Anyconscious husband may open account in the nameof his wife on monthly installment basis.Students Mudaraba SavingsStudents aged below 18 years shall be eligible toopen Students Mudaraba Savings Account in asingle name with his father/mother. Initial depositof this account is Tk.100/- and profit is given onbalance of Tk.100/-. No charge is applicable on thisaccount except excise duty and tax as per govt.policy. The account may be continued as MudarabaSavings Account in their own name when the studentbecomes adult. Attractive prizes are distributedamong the top 10 depositors every month.Mudaraba Farmers SavingsOnly a genuine farmer can open this account byinitial deposit of Tk.10/-. Farmers, Association orCo-operative society of farmers, shall be eligible toopen Mudaraba Farmers Savings Account (MFSA).This MFSA may also be opened by the father/mother/legal guardian (farmer) in favor of a minor.Mudaraba NRB Savings BondOnly the Non-Resident Bangladeshis aged18 years and above shall be eligible to openMudaraba NRB Savings Bond Account insingle or joint names. Service charge, accountclosing fee and account maintenance fee shallnot applicable to this account. Profit shall bedistributed in this account on daily product basis.As per clients demand maximum 90% quard maybe allowed against total outstanding balance.General InvestmentsBank Investment increased to Tk.372,921 millionas on 31.12.2012 from Tk. 305,841 million as on31.12.2011 showing an increase of Tk.67,080million, i.e., 22% growth against 10.03% investmentgrowth of the Banking sector. This higher investment114Annual Report 2012

growth of the Bank in 2012 was due to the thrustgiven to promote investment for effective utilizationof depositors’ fund. The percentage growth ofIBBL Investment in 2011 was 16.19%. The shareof investment of IBBL in banking sector as on31.12.2012 was 8.40%. Trend of investment showsa clear direction of doubling in last 5 years.Sector-Wise InvestmentsSector-wise distribution of investment as on 31 stDecember 2012 vis-à-vis the correspondingperiod of the last year is given below:Sector wise Investment PositionInvestment: 2008 to 2012Amount in million Taka Sector-wise InvestmentSl.No.SectorAmount2012 2011% to TotalInvestmentAmount(In million Taka)% to TotalInvestment1 Industrial (excluding SME) 108,930 29.21 122,270 39.982 Commercial 44,488 11.26 38,234 12.503 Real Estate 23,231 5.46 16,966 5.554 Agriculture 20,992 5.78 20,923 6.845 Transport 6,887 1.90 6,457 2.116 SME 168,393 46.39 100,991 33.02Total 372,921 100 305,841 100Mode-wise Investment(In million Taka)2012 2011ModeAmount% to TotalInvestmentAmount% to TotalInvestmentBai-murabaha 221,632 59.43 177,136 57.92HPSM 96,056 25.76 89,070 29.12Bai Muajjal 18,295 4.91 15,912 5.20Bill Purchased & Negotiation 9,531 2.56 2,744 0.91Quard 9,156 2.46 5,614 1.83Bai- Salam 4,532 1.22 3,528 1.15Mudaraba - 0.00 2,266 0.74Musharaka 13,719 3.68 9,571 3.13Total 372,921 100 305,841 100Annual Report 2012 115

IBBL has formulated a Five Year Business Plan(2012–2016) which is under implementation.Investment plan has been formulated keepingin view the national economic priorities anddiversification of the Investment portfolios by size,sector, geographical area, economic purpose andsecurities.Investment in Industrial SectorThe Bank’s investment in industrial sector issubstantially higher compared to those of othercommercial banks. Total Investment for projectsfinance together with Working Capital stood atTk.189,193 million as on 31 st December 2012 asagainst Tk.150,788 million as on 31 st December2011 resulting in 25.47% growth.Contribution of IBBL to IndustrializationIBBL has contributed significantly to thedevelopment of industrial sector of the country.It is the only bank that has deployed 50.73% ofits total investment in industrial sector and outof which export-oriented garment industriesoccupied 44.85%. In addition to large scaleindustries, bank also finance medium and smallscaleindustries keeping its primary focus on needbased industry. A brief description of industrialfinancing by IBBL follows:Industry-wise Investment of the Bank in 2012Sl. No. Particulars No. of Projects 2012(In million Taka)% of TotalAmount1 2 3 4 51 Textile-Spinning, Weaving & Dyeing 421 71,761 37.932 Steel, Re-rolling & Engineering 203 21,946 11.603 Agro based Industry 950 17,614 9.314 Garments & Garments Accessories 575 13,092 6.925 Food & Beverage 50 7,636 4.046 Cement Industry 9 1,854 0.987 Pharmaceuticals 36 2,289 1.218 Poultry, Poultry Feed & Hatchery 110 624 0.339 Sanitary rares 49 275 0.1510 Chemicals, Toiletries & Petroleum 161 3,973 2.1011 Printing & Packaging 157 3,330 1.7612 Power (Electricity) 8 4,162 2.2013 Ceramic &Bricks 217 2,460 1.3014 Health care (hospital & others) 54 2,079 1.1015 Plastic Industries 65 715 0.3816 Petrol-Pump & CNG Filling Station 63 940 0.5017 Information Technology 11 550 0.2918 Hotel & resturent 177 656 0.3519 Other Industries 305 33,237 17.55Total 3,621 189,193 100116Annual Report 2012

IBBL is the leading financer in Garments IndustryGarment IndustryBangladesh earns a significant amount of foreigncurrency by exporting ready-made garments.IBBL contributed greatly to establish the garmentindustries of the country. From the very inception,this bank plays a pioneer role in developing thegarment industries and its backward linkageindustries. Most of the leading export-orientedgarment industries of the country initially initiatedtheir business taking small size investmentfrom IBBL. Gradually they have developed theirindustries into a large one. Thus by nourishinggarment sector, IBBL has strengthened ournational economy in three ways i.e. i) Employmentgeneration ii) Earning foreign currency and iii)Women empowerment.Textile SectorTextile sector needs huge capital Investment.IBBL, being the largest private commercial bank,has been investing in textile sector since long.Huge number of spinning mills, weaving mills,dyeing finishing mills of textile sector has been setupwith IBBL Investment. Most of these mills areset up with brand new state of the art technologicalmachines. This contributes immensely towardsvalue addition in RMG.Pharmaceuticals & Health CareTo boost up the medicine industry, the Bank providedinvestment facilities of Tk. 267.71 million to 71Drug and Pharmaceuticals Industry. Moreover 54Industries among hospital, clinic and pathologicalcenters have been created by the Bank finance ofTk. 1,090 million from there people are receivinghealth services.Housing IndustryThe Bank has widened its helping hand to 13,330clients by disbursing Tk.23,069.60 million housinginvestment at individual level and Tk.161.35 millionto 65 developers companies. Present outstandingin housing investment is Tk.23,231.00 million in2012 that is 6% of total Investment having growthrate of 28.95%.Agro-based IndustryThere is no alternative to setting up the agrobasedindustry for the qualitative improvement ofthe sector. IBBL provides facilities by which thelogistics including raw materials for the agro-basedindustry can be procured easily. Few examples ofthis success are: Automatic Rice Mill, Flour Mill,Edible Oil, Jute Mill, Fishery and Poultry & Dairy,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 developmentElectricity & Power IndustryIBBL has financed 8 power plants by investingTk.4,635 million. It also financed Tk.1233.60million for the production of electric instruments.Moreover, 788 clients were provided withinvestment of Tk.1067.60 million for producingand procuring electronics goods. Apart from powerplants and electrical goods, we are also working onsolar power and an investment scheme under thename and style “Solar Panel Investment Scheme”has already been introduced.Transport IndustryIslami Bank has been providing investmentfacilities to the experienced, innovative and newentrepreneurs for purchasing modern vehicles(Road, Water & Air). To develop the transportsector, IBBL has disbursed substantial amountof investment which is the highest among allnationalized and private commercial banks ofBangladesh and the proportion of our investmentis 1.78%. Besides, IBBL financed 60 Filling/CNGstations against present balance of investment ofTk.523.30 million.Information Technology IndustryIBBL has already extended financial supportamounting Tk. 549.70 million to 11 clients forproducing and procuring hardware & software.IBBL is also working to develop innovativeentrepreneurs to embank upon big investment inthis sector.SME InvestmentThe role of Small and Medium Enterprises (SMEs)is indispensable for overall economic developmentof a country particularly for a developing countrylike Bangladesh. Bangladesh Bank has givenemphasis to the development of the SME sectorof the country financing through the commercialbanks. IBBL, since its inception, has beencontinuing SME financing for its development.The Bank management has adopted a new SMEPolicy comprising 2(two) special schemes namelyWomen Entrepreneurs’ Investment Scheme andNon-Resident Entrepreneurs’ Investment Schemefor boosting up of SME investment.IBBL also undertakes various initiatives fordevelopment of SMEs & Women entrepreneurslike arranging training for the entrepreneurs,creating awareness on the importance of SMEsthrough media, by participating in fairs, roadshows, seminars, workshops etc. It also trainsthe Greenfield enterprises how to access financethrough banking channel and benefit from Islamicmodes & products for SME Investment, etc.118Annual Report 2012

Outstanding SME Investment of Islami BankBangladesh Limited is Tk.182,753.00 million ason 31.12.2012 against 46,269 clients. It is 47% ofthe Bank’s total investment. PCBs has been raised by 3% as on 31.12.2012from 31.12.2011.Contribution of IBBL to the national SME has beenraised by 5% as on 31.12.2012 from 31.12.2011and contribution to the total SME exposure ofWelfare-oriented Investment SchemesIn addition to the normal commercial andindustrial investment operations, IBBL has 14Special Investment Schemes targeting differenteconomic groups. The schemes are implementedand expanded to meet the specific and welfareoriented needs of different groups of peopleparticularly the under-privileged downtroddenand the neglected section of population of thecountry. To uplift the lifestyle of these people,some welfare-oriented special investmentschemes as under have been undertaken:IBBL’s SME Exposures of Different Banks of the CountryYear IBBL PCBs SMEExposure% of IBBL to PBs Total NationalExposure2011 108,670 484,292 22 810,992 132012 182,753 719,845 25 1,008,132 18Scheme-wise Investment of the Bank(In million Taka)% of IBBL to TotalNational Exposure(In million Taka)Sl. No. Name of Scheme 2012 2011 2010 2009 20081 2 3 4 5 6 7i. Rural Development Scheme (RDS) 10,390 7,072.02 5,110.00 3,752.20 3,011.72ii. House-hold Durables Scheme 955 1,070.01 961.64 686.49 638.40iii. Investment Scheme for Doctors 32 13.91 15.27 17.06 15.34iv. Transport Investment Scheme 6,887 6,706.50 4,732.15 3,630.48 3,087.55v. Car Investment Scheme 113 152.05 138.79 53.81 41.16vi. Small Business Investment Scheme (SBIS) 2,774 2,347.60 1,703.44 1,159.63 1,104.65vii. Micro-Industries Investment Scheme 36 38.18 47.44 50.39 31.50viii. Agricultural Implements Investment Scheme 278 209.60 127.15 76.64 27.21ix. Housing Investment Scheme 316 366.68 418.92 452.67 429.24x. Real Estate Investment Program (REIP) 23,231 12,485.24 10,154.95 7,933.20 7,183.26Sub-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 8.65Annual Report 2012 119

Women entrepreneurship under SME InvestmentHousehold Durable Investment SchemeLow-income people involved in diverse professionsget benefit out of this scheme. They are providedwith household products like refrigerator, TV,motor-cycle, furniture, ornaments, computer etc.under this financing scheme.Housing Investment SchemeThe Bank has introduced this scheme to ease theserious housing problem in the urban areas and tomake arrangement for comfortable accommodationof the fixed income group such as: officials ofthe defense services, permanent officials ofgovernment, semi-government and autonomousorganizations, faculty members of the establisheduniversities, university colleges & medical colleges,graduate engineers, doctors and establishedprofessionals, international financial organizations,donor agencies, foreign embassies etc., officials ofreputed local public limited companies.Real Estate InvestmentReal Estate Finance plays a pivotal role in improvingstandard of living, empowering the middle-incomeand lower-income groups and thereby promotingequitable growth in the society. It does not onlyprovide physical shelter but also upgrade the livesof the dwellers in terms of skills enhancement,income generation, increased security, health, selfconfidenceand human dignity. IBBL has steadygrowth in the Real Estate Sector.Transport Investment SchemeTo ease the existing transportation problem andto accelerate the pace of economic growth anddevelopment of the country, particularly throughexpansion of trade, commerce and industry, theBank has taken up this sceme.Car investment SchemeTo enable officials, business houses andbusiness executives and professionals to moveby transports in discharging their responsibilitiespunctually, IBBL has introduced Car InvestmentScheme for the mid and high ranking officials of thegovernment and semi-government organizations,corporations, executives and directors of bigbusiness houses and companies and also forpersons of different professional groups on easypayment terms and conditions.Investment Scheme for DoctorsThe scheme is meant for fresh medical graduatesintending to et up medical centres. IBBL comesforward for their aid to help them procure medicalequipment or to set up diagnostic laboratory,pharmacy, clinic etc.120Annual Report 2012

Dying Industry financed by IBBLIBBL financed Spinning IndustrySmall Business Investment SchemeSmall business persons and entrepreneursof different cities and villages get investmentfacilities from this scheme which is contributinggreatly to generate income and employment andto develop standard of life of different segments oflow income people. This Bank provides differenttypes of agricultural instruments, equipment foroperating small trade and finance, small shop,light transport, photo copy machine, tailoringmachine, machinery for small and cottage industryetc. under this scheme.Agricultural Implements InvestmentSchemeKeeping the view of the people-orientation andwelfare objectives of the Bank, this scheme hasbeen introduced to provide power tillers, powerpumps, shallow tube-wells, thresher machinesetc. on easy terms to the unemployed rural youthsfor self-employment and to farmers to help themaugment production in the agriculture sector.Micro-Industries Investment SchemeTo create a wider base for industries and toencourage establishment of micro-industriesin different areas of the country by the potentialentrepreneurs and to diversify the Bank’sinvestment portfolio, the Bank has introduced‘Micro Industries investment Scheme’. Differentsectors including food and agriculture basedindustries, plastic & rubber industries, forestry andfurniture industries, engineering industries, serviceindustries, electrical accessories industries,computer technology industries, paper productsindustries, handicrafts industries, fishery & livestock farming, hollow bricks, roof tiles and anyother viable micro-industries have been identifiedfor financing under the scheme.Rural Housing Investment SchemeThis scheme was launched to extend housingfacility to the rural people living within 5 kilometersarea of a IBBL branch. Employees of public, semipublicor autonomous institutions, non-residentBangladeshis and businesspersons are preferredfor this investment. Easy term investment is givenfor constructing new houses, repair of old housesand purchasing ready-made flats and houses etc.Women Entrepreneurs SchemeIBBL has introduced “Women EntrepreneursInvestment Scheme” to help women contributeto GDP, generate income & employment and todevelop their socio-economic condition. Under thisScheme Bangladeshi nationals aged between 18-50 years, genuine women entrepreneurs, womenalready engaged in business, self-employmentactivities as owners, skilled and semi-skilledfemale persons having practical experience in therespective field may apply for investment.NRB Investment SchemeFor promoting investment among non-residentBangladeshis and for encouraging them toremit money through banking channel, IBBLhas launched NRB Entrepreneurs Scheme.Expatriates aged between 18 to 60 years or theirfamily members who run account with IBBL forremitting money are eligible for this investment.Annual Report 2012 121

Some Projects Financed by IBBLSugar FactorySpinning MillShip Building IndustryPharmaceutical IndustryCable IndustryStill Re-rolling Mill122Annual Report 2012

Some Projects Financed by IBBLPoly Fiber IndustryEnergy Bulb IndustryFinancing in agro-equipmentsHorticulture ProjectTyre and Tube FactoryIBBL financed Brick FieldAnnual Report 2012 123

Inauguration of Urban Poor Development SchemeMicro-Investment Activities underRDS & UPDSRural Development Scheme (RDS) wasintroduced in 1995 to meet investment needs ofagriculture and rural sector and create opportunityfor employment generation and raise incomeof the rural poor to alleviate poverty. So far, outof 276 branches, 197 carry out RDS activities in61 districts of the country. The Bank launchedanother micro-investment scheme for urban poorin 2012 in the name of “Urban Poor DevelopmentScheme (UPDS)” on pilot basis under its 10 urbanbranches. These two schemes enables IBBL toachieve financial inclusion of poor women of rural& urban areas. These two schemes enable IBBLto achieve financial inclusion of poor women ofrural & urban.RDS: Coverage and ExpansionThe target groups are organised as membersin the selected villages/areas in groups underdifferent centres. At present, 733,520 membersreceive financial services under 24,623 centres in15,371 villages. Ratio of female members underthe schemes is 85%. Expansion of RDS in the last5 years is shown in the following table:RDS & UPDS Investment(In million taka)Sl. Particular RDS UPDS Total01 Micro Investment Client No. 418,839 2,886 421,70702 Micro Enterprise Client No. 52,651 408 53,05903 Quard Client No. 1,543 - 1,54304 Total client 473,033 3276 476,30905 Outstanding of MI (in million Taka) 5985.75 49.87 6035.6206 Outstanding ME (in million Taka) 4321.67 35.87 4357.5407 Outstanding of Quard (in million Taka) 7.79 - 7.7908 Total outstanding investment 10,315.21 85.74 10,400.95124Annual Report 2012

Institutional DevelopmentSl.No.Particular 2008 2009 Growth(%)2010 Growth(%)2011 Growth(%)2012 Growth(%)01 No. of village 10,676 10,751 1 11,482 7 12,857 12 15,507 2102 No. of Centre 21,193 22,261 5 20,833 (6) 22,206 7 24,623 1103 No. of Member 577,740 492,475 (15) 523,941 6 608,703 16 733,520 2104 No. of InvestmentClient321,848 312,036 (3) 319,859 3 382,319 20 474,766 24RDS & UPDS Investment (2008-2012)(In million taka)Sl. Particular 2008 2009 2010 2011 201201 MI client 311,655 292,967 291,293 343,304 421,70702 ME client 9,829 19,069 28,566 39,015 53,05903 Total 321,484 312,036 319,859 382,319 474,76604 % of MEIS client 3 6 9 10 1104 MI Investment 2,522.79 2,671.29 3,186.28 4,234.18 6035.6205 ME investment 488.93 1,080.91 1,923.77 2,837.85 4357.5406 Total 3,011.72 3,752.20 5,110.05 7,072.03 10,393.1607 % of MEIS investment 16 29 38 40 42RDS Investment ProgramUnder both RDS & UPDS, three types of investmentfacilities are provided to the beneficiaries namely(a) Micro-investment (collateral-free investmentmaximum Tk.50,000/- provided to the poor indifferent income generating activities); (b) MicroenterpriseInvestment (collateralized investmentmaximum Tk.300,000/- provided to the graduatedand other micro-clients and (c) Quard Program(cost-free loan maximum Tk.10,000/- provided tothe distressed & hardcore poor for rehabilitationand water & sanitation). Allocation for QuardProgram is given from RDS Welfare Fund. Sincethe inception of the Bank cumulative disbursementunder the above three types of investment stoodat Tk. 56,809.93 million. Investment under boththe Schemes as on 31 December 2012 may beseen below:Graduation ProgramThe graduated RDS members (who already haveavailed the highest limit under RDS) and the localsmall entrepreneurs are provided with investmentfacilities under ‘Micro Enterprise Investment Annual Report 2012 125

Dr. Selina Hayat Ivy, Mayor of Narayanganj City Corporation is addressing an RDS ProgramScheme (MEIS)’ up to a maximum ceiling of Tk.300,000. At present 53,434 clients are enjoyinginvestment facilities under MEIS out of whomgraduated RDS members are 9,618 which shares18% of total MEIS clients.Savings ProgramThe members under the Schemes have to depositcompulsory weekly savings with the Bank at leastTk.20/- per week. But they are encouraged todeposit more in view to develop their own equityquickly. The volume of savings of RDS membersreached Tk. 3,300.85 million as on 31 st December,2012. Year-wise cumulative savings under RDS isshown in the following graph: RDS Social Safety-net Programs 2012(In million Taka)Sl. No. Program Beneficiary Amount Percentage Share01 Education Program (Alo + An-Noor) 14,572 28.18 3902 Training Program 68,220 7.82 1103 Health Program 22,780 25.67 3604 Relief & Rehabilitation Program 1,622 9.89 1405 Total expenditure from RDS Welfare Fund 107,194 71.56 10006 Environment Protection Program (Plantation)(from mainstream fund)- 11.4207 Grand Total 107,194 82.98126Annual Report 2012

Social Safety-net (Welfare Activities)Program under RDSAs poverty alleviation needs a combination offinancial and non-financial programs, differentwelfare services are conducted under RDS in theareas of (1) Education, (2) Training, (3) Health,(4) Relief & Rehabilitation and (5) Environment.In this respect a Welfare Fund has beendeveloped by segregating 1% profit against RDSinvestment. An amount of Tk.82.98 million hasso far been spent for social safety-net programsunder RDS during the year 2012 which table isshown in previous page.Details of the Programs and program-wiseperformance are mentioned below:Education ProgramThere are 3 (three) activities under EducationProgram which includes: (a) Scholarship, (b)Academic Award & (c) Establishment of Institutions(pre-primary school & maqtab).Pre-primary School (ALO): Last year, 114 PreprimarySchools for the beginners were establishedin different remote villages under the title of “ALO:Pre-primary School”. Each school is operated bya single female teacher with a target to prepare25-30 students every year for getting admission inClass I in the local primary schools.Maqtab (An-Noor): In 2012, 114 maqtabsnamed “An-Noor” program began in the suitablemosques. Each of the maqtab is being operatedby the concerned Imam for imparting elementaryreligious teachings to about 30 students as wellas getting them able to recite the Holy Qurancorrectly.Activities under Education Program during theyear (from January to December 2012) at a glanceare shown in the following table:Training ProgramThere are three types of training activities viz. (a)Leadership Training, (b) Skill Development Training,and (c) Self-employment Training.Health ProgramUnder health program 3 types of assistance areprovided: (a) Water & Sanitation, (b) MedicalAssistance and (c) Gift for newborn baby.Relief & Rehabilitation ProgramUnder the relief & rehabilitation program 3 types ofassistance are provided to the poor and distressedmembers: (a) Waiver of Bank’s dues, (b) Quard forrehabilitation and (c) Relief & Donations.Education Program under Rural Development SchemeAnnual Report 2012 127

Shanti Nath changes her fate by weaving Mats for othersEnvironmentIBBL implements Plantation Program during therainy season every year. Plantation Program isconducted by giving free saplings to the RDSmembers. Every year, the Bank has been providingsaplings, especially of the fruit plants, one perRDS member since 2003. During the year 2012, atotal of 506,000 saplings were distributed/plantedat the cost of Tk. 11.42 million. Since inception,a total of 2,828,723 saplings were distributed ata cost of Tk.243.00 million. However, the Bankconducts the Program with its mainstream fund.Urban Poor Development Scheme (UPDS)About 3.50 million extreme poor live in the urbanareas as slum dwellers. They live hand to mouthand lead a sub human life. Considering the above,Islami Bank Bangladesh Limited launched anothernew microfinance scheme in the name of “UrbanPoor Development Scheme (UPDS)” in the year2012 to extend microfinance activities among theurban poor. Activities of the scheme were startedunder 10 urban branches in Dhaka and Chittagongcities on pilot basis.Agricultural InvestmentIslami Bank Bangladesh Limited provides adequateimportance to agricultural/rural investment since itsinception. Accordingly, two investment schemes vizAgricultural Implement Investment Scheme (AIIS)and Rural Development Scheme (RDS) wereintroduced in 1992 & 1995 respectively for effectivedevelopment of agriculture and rural economy.Comparative Position of Agri-Investment in the Country(In million Taka)Disbursement% of Growth Over theTarget% of AchievementFiscal YearPrevious YearNational IBBL National IBBL National IBBL National IBBL2007-2008 83,090 2,750 85,810 5,140 103 188 62 202008-2009 93,790 6,600 92,850 6,240 99 95 8 212009-2010 115,000 8,800 111,170 8,410 97 96 20 352010-2011 126,174 9,500 121,844 10,210 97 107 10 212011-2012 138,000 10,000 131,320 11,703 95 117 15 15128Annual Report 2012

Dr. Atiur Rahman, Governor of Bangladesh Bank is handing over award to Jessore Branch Manager of IBBL for highest agricultural investmentIn 2012, the Bank disbursed Tk.12,500.00million in agriculture sector against its target ofTk. 12,000.00 million having a growth of 29%over the previous year. At the end of the year,agriculture financing (excluding agro-basedindustry) accounted 2.40% of total investment ofthe Bank. Besides, under the special programof Bangladesh Bank (investment in cultivation ofpulse, oil seed, spices & maize at discounted rateof profit 4%), IBBL disbursed Tk.9.63 million in theprevious fiscal year (2011-2012).Sector-wise Disbursement ofAgricultural InvestmentSector(In million Taka)AchievementCrops 3,359Fisheries 1,246Livestock 1,801Agricultural Implement 272Poverty Alleviation 3,106Storage 1,101Others 818Total 11,703Asset QualityIBBL continues to maintain strong asset quality.Investment facilities are allowed in a manner sothat credit expansion goes on ensuring optimumasset quality. Investment facilities are extended tocustomers who comply with the Bank’s norms andprincilples.Non-performing InvestmentNon-performing Loans and Advances of the Stateowned Commercial Banks, Private CommercialBanks and Foreign Commercial Banks in 2012stood respectively at 23.87%, 4.58% and 3.53%against industry of 10.03%.IBBL’s position was better than national nonperformingInvestment position. ClassifiedInvestment as on 31.12.2012 was 3.81% of totalinvestment. Investment overdue but not classifiedas on 31.12.2012 was 1.08% of total investment.Status of NPI in IBBL(In million Taka)Sl No. Particulars 20121 NPI (NPL) Ratio at IBBL 3.81%2 Industry Average of NPL 10.03%3 Required Provision 5,718.664 Provision Maintained 5,718.665 Provision Maintained Ratio 100%Annual Report 2012 129

anches, i.e. branches having licences to handleImport, Export and Remittance business in 2012ImportDuring 2012 the Bank opened 54,412 importLetters of Credit for Tk.284,588 million as against47,191 Letters of Credit for Tk. 301,207 million in2011 showing 15.30% growth in number of LCs.Major items of import consist of the following:Import Position of IBBLForeign Exchange BusinessIBBL plays a very important role in the Country’sForeign Exchange Business of the country. TotalForeign Exchange Business handled duringthe year 2012 was Tk.782,598 million. Thecomparative figures are given below:Total Foreign Exchange business handled by theBank demonstrated a growth of 9.29% in 2012over 2011. There were 46 Authorized Dealer (AD)Foreign Exchange Business of the Bank(In million Taka)Particulars2012 2011 % of growth in 2012over 2011Amount % of Total Amount % of totalImport 284,588 36.36 301,207 42.06 -5.51Export 197,095 25.18 178,244 24.89 10.57Remittance 300,915 38.45 236,607 33.04 27.17Total 782,598 100 716,058 100 9.29Import Position(In million Taka)Sl. No.Items2012 2011Amount % of total Amount % of total1 2 3 4 5 61 Raw Cotton, Yarn, Fabrics & Accessories 112,886 39.66 100,773 33.462 Capital Machinery 14,621 5.13 12,871 4.273 Fertilizer 24,378 8.56 30,285 10.054 Wheat 6,118 2.14 8,092 2.695 Iron, Steel & Other base Metals 8,082 2.83 8,096 2.696 Motor Vehicles 3,411 1.19 4,639 1.547 Chemicals 8,668 3.04 7,284 2.428 Edible Oil (Crude & Refined) 16,457 5.78 21,240 7.059 Rice 301 0.10 952 0.3210 Scrap Vessel 7,343 2.58 1729 0.5711 Others 82,323 28.92 105,246 34.94Total 284,588 100 301,207 100130Annual Report 2012

Rural woman processing paddy in a terraceExportDuring 2012 the Bank handled 54,188 ExportBills for Tk.197,095 million as against 45,433Export Bills for Tk.178,244 million in 2011 showing10.57% growth in amount. Major export financeditems were the following:Export Position of IBBLForeign RemittanceTotal remittance collection stood Tk. 300,915million in 2012 which was Tk. 64,308 million higherthan the total remittance of Tk. 236,607.00 millionreceived in 2011. IBBL attained 27.17% growth and27.70% market share in the country’s remittanceduring 2012. IBBL is considered market leader inForeign Remittance collection for providing propermarketing and carrying customer services.Exchange House ArrangementBank has established remittance arrangementwith 114 Exchange Houses in 17 countries of theworld for facilitating remittance services. IBBL as amember of Bangladesh Electronic Funds TransferNetwork (BEFTN) is routing 90% of its 3 rd bankremittance by using BEFTN.SMS & Centralized Account OpeningIBBL has introduced SMS (short message service)for the expatriates and their beneficiaries in thisyear. Under this arrangement, expatriates canupdate about their account balance at any timefrom abroad. Besides IBBL now opens depositaccounts for the expatriate customers centrallywhich inspires them to remit money throughbanking channel.Remittance CardThe Bank also introduced Remittance Card for theexpatriates and their beneficiaries by which theycan send money without having a bank account.The Cardholders can draw money 24 hourss fromATM and from bank counter within banking hours.Web Portal SystemIBBL has also introduced web portal system underwhich the expatriate account holder can checkaccount balance of his account and also canAnnual Report 2012 131

Export PositionSl.No.Items2012 2011Amount % to total Amount % to total(In million Taka)Growth % in 2012over 2011i. Garments and Textile 158,851 80.59 142,734 80.07 11.29ii. Frozen Foods & Vegetables 1,980 1.00 1,074 0.60 84.35iii. Jute & Jute Goods 9,992 5.06 7,898 4.43 26.51iv. Leather 134 0.06 73 0.04 83.56v. Tea 89 0.04 2 -vi. Chemical 361 0.18 - -vii. Others 25,688 13.03 26,463 14.84 -1Total 197,095 100 178,244 100 10.57transfer fund from his account to other accountmaintained with IBBL.NRB Customer CareIBBL has a Centralized Customer Service Departmentwith efficient officials to solve any problem related toforeign remittance at home and abroad.IBBL’s Representative in AbroadTo encourage Bangladeshi expatriates forsending their hard earned foreign currencythrough Banking channel. To assist them foropening account from abroad, 28 officials ofthe Bank are working in Kingdom of SaudiArabia (KSA), UAE, Bahrain, Qatar, Oman andSingapore.Comparative Position of RemittanceRelationship with Correspondents in AbroadIslami Bank Bangladesh Limited has establishedand has been maintaining networking relationwith financial institutions around the globe tofacilitate foreign trade. Financial InstitutionsDepartment (FID) plays vital role in linkingwith the major financial institutions abroad forfacilitating growing volume of internationaltrade and remittance business. A brief picture ofrelationship status of IBBL is as follows:IBBL’s Foreign Business NetworkSl.No.ItemsNumber1 Number of Nostro accounts 372 Number of currencies Nostro A/Csare maintained3 Number of RMA (Arrangementfor authenticated financialcommunications)105734 Number of Countries with RMA 785 Number of Banks with RMA 2336 RMA established in 2012 96Correspondent Banks paid Visit to Our BankDuring this year, 48 foreign correspondentsnamely Standard Chartered, Citi N.A., Mashreq,JP Morgan Chase, Commerz AG, ICICI India,Axis India, UBAE Italy, Sumito Mitsubishi BankingCorporation Japan, Doha Commercial Bank Qatar,United Bank UAE, Deutsche Bank Germany,Unicredito Italiono Bank Italy, Habib AG ZurichSwitzerland, Bank of Montreal Canada, ZorcherKantonal Switzerland, Bank Soha, Rabo BankNetherland, HDFC India, Askari Bank, NationalBank of Oman, Bank Muscat Oman etc. visitedthe Bank and shared views and ideas on mutualbusiness interests.132Annual Report 2012

IBBL financed one third of Country’s investment in the food industry-Rice Mill is one of thoseVisit by International AgenciesThe undermentioned International Agenciesvisited our Bank during the year 2012. InternationalFinance Corporation (IFC), World Bank Group,Islamic Corporation for the Development of thePrivate Sector (ICD) of IDB Group, InternationalMonetary Fund (IMF) and Asian DevelopmentBank (ADB) visited the Bank on different schedulesand discussed with the Senior Managementmutual business potentials.Foreign Trade Processing from aCentral HubIslami Bank Bangladesh Ltd. handles substantialvolume of Foreign Trade business of the countrywhich is increasing day by day. To handle thehuge volume of Foreign Trade Business of theBank in a better and more efficient way, IBBLstarted Centralized Trade Processing in 2010 byestablishing Central Processing Center (CPC). Nowthe Center is processing Foreign Trade Products ofAD Branches from a single processing center.IBBL is the pioneer among the local banks intrade centralization maintaining the InternationalStandard (scan based) in the country which is verymuch significant for a Mega Bank like IBBL.Offshore Banking Units (OBU)Islami Bank Bangladesh Limited obtainedpermission from Bangladesh Bank to operate3(three) Off-Shore Banking Units (OBU) locatedat Head Office Complex Corp. Branch, Dhaka,Agrabad Branch, Chittagong and Uttara Branch,Dhaka. The operations include to receive depositfrom Non-Residents in Foreign Currency andto discount usance import documents of ADBranches in Foreign Currency under UPAS(Usance payment at sight) arrangement.Performance of UPAS ( Usance Payment at Sight) in 2012 through OBU:SL. No.ParticularsNos. ofIssueAmount inmillion USDAmount inmillion BDT1 No. of AD Branches availing UPAS facility 102 Total L/Cs opened by AD under UPAS in 2012 713 226.31 18070.833 Import Bills Settled under UPAS in 2012 549 171.20 13670.304 Outstanding UPAS import Bills 396 124.45 9938.785 Income earned by OBUs from UPAS import Bills 1.79 142.31Annual Report 2012 133

Case StudyPoultry Farm Changes Anjuara’sDaysAnjuara’s paternal family was not so solvent.Unlike others, their poverty was not that abject.Accepting the little deficit and discontent, Anjuaraof Mirkamary village of Ishwardi, was passinghappy days in her father’s family.But misfortune suddenly engulfed her in such away that she was as if thrown in a sea. It happenedimmediately after she got married. The financialcondition of her father-in-law’s family was not good.They were passing days in woes. They were livingin a joint family. In this situation Anjuara’s husbandBabul Islam was separated from his father’s family.Babul owned a small piece of agricultural land ashis share. They could meet a few months demandby the crops of the land. It was not possible forthem to run the family round the year by limitedcrops of their agricultural land. In this miserablecondition of the family, they have been blessed witha child. Instead of becoming happy for having thefirst child, it increased their tension more. Anjuaralamented thinking of her child’s future.Anjuara would rear some hens as her hobby.Sometimes she would sell some eggs to buy otherdaily essentials. Very often she would sell one ortwo hens to meet emergency of the family. Anjuarathought if she had more hens she could havecontributed more to her family. Thinking more andmore about this, a plan of setting up poultry farmhit her brain.Anjuara shared the idea with her husband. Herhusband also liked the idea. From poultry farmAnjuara could earn money staying at home. Herhusband did not like Anjuara to go outside. Anjuaraalso did not like to go outside for earning. But theproblem was to have enough money to set up afarm. Anjuara’s husband Babul discussed with hiswell-wishers poultry about farm idea. In this waythe matter reached the ear of field officer of thelocal unit of Rural Development Scheme (RDS) ofIslami Bank Bangladesh Limited. Field Officer metBabul. He proposed Babul Islam about financingto set up a poultry farm. He also suggested themto be a member of RDS unit to get investment.134Annual Report 2012

Anjuara became a member of Rabeya Basri (R)unit of RDS in 2005. A few days later the banksanctioned 8 thousand taka investment to Anjuara.By this investment they built a teen-shed house,bought chicken, poultry feed and other essentialsfor the farm. Anjuara’s husband would assist herto run the farm side by side his own work. In thefirst phase they made handsome profit sellinghens and eggs. After paying installment of thefirst phase Anjuara took more investment in thesecond phase. Their profit kept increasing. Later,they took big amount of investment. Their projectkept expanding. In the last phase she took aninvestment of 40 thousand taka. One thousandnew chickens were added to the farm. In this waythe size of the poultry farm of Anjuara expendedday by day. Poverty turned fugitive and theyneeded no looking back.Rubia: An Embodiment ofEnterprising SpritRubia Khatun, a dweller of West Baghail village ofPakshi, Pabna is a lady of competitive zeal. Herhusband used to work in other’s land as a daylaborer. They have a seven member family. It wasdifficult to run the family from one man’s earning.They were passing days in woes. They used tolive in a small congested house. They could notsend their children to school. They had a tube wellbut no sanitary latrine. On the whole they wereleading a miserable life.Rubia was thinking how she could help herhusband. She came to know about RuralDevelopment Scheme (RDS) of Islami Bank. Shebecame a member of 39 Sumaya unit of Areanumber 7 of Pakshi branch in 2006. She tookan initial investment of Tk. 7,000/- and boughta cow. This cow gave birth to two calves inconsecutive two years. She started earning byselling milk. Later she bought more cows takingfresh investment. She took 5 bigha lands as leasefor her cows. Later she bought a paddy threshermachine. She built a house and kitchen. As of nowshe took 93 thousand taka as investment from theBank.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 familycompleting primary schooling. Her three childrenbecame carpenters. They built sanitary latrine.Now she wants to build a pucca house by takinginvestment.Annual Report 2012 135

Chitra becomes Self-reliant by Dairy FarmChitra Saha, an inhabitant of Norottom village ofBegumgang upazial of Noakhali district has becomeself reliant by dairy farm. Her husband was a daylabourer. But by their joint efforts they have changedthe face of their family. Their two sons are continuingstudy. The economic condition of Chitra’s familywas not so good before joining Rural DevelopmentScheme (RDS). Chitra sought to be self reliant. Sheplanned to build a dairy farm. To fulfill the dream, shetook an investment of Tk 5,000/- and bought a cow.Her condition started changing gradually. She tookmore investments from IBBL. Untill reported timeshe owns four cows. Chitra expressed her gratitudefor proper guidance and financial backing of IslamiBank for her success.Madhobi’s Mat CraftsMadhobi Rani, a housewife, is an inhabitant ofArongshile of Bogra district. She is also poor,like most of the inhabitants of her village. But herpoverty is not comparable to other villagers. Sheis rather ultra-poor and landless. She used to staymaking a small house in other’s land.Madhobi Rani’s husband Lakkhan Debnath makesmat and sell it in the local market. Madhobi alsoused to assist her husband to make mat. Butregular buying of foods was not possible for hisfive-member family.This story goes back to 2006. Madhobi registeredherself as a member of Rural DevelopmentScheme of Islami Bank Bangladesh Limited. Shetook an investment of 5 thousand taka. With this,they bought more canes than earlier to producemat. Their profit began multiplying by degrees.They took investment of 10 thousand taka insecond phase. At that time they rented a housein Mirzapur Bazar for selling mat. They started tokeep melamine utensils in the shop besides mat.Selling was going on well. Paying bank installment,they took further investment. Their productioncapacity increased. Instead of making mat theystarted collecting readymade mat from the villageand selling in to other shops. Gradually they turnedthemselves as wholesale traders.At present they have goods in their shop worth 5lac taka. Two employees work in the shop. Theybought 2 decimals of land and built a teen-shedstructure there. They have now tube-well andsanitary latrine. Madhobi couple is now leading ahappy life.136Annual Report 2012

Nilufa becomes Self-reliantMaking Paper-packet (Thonga)Nilufa’s family was a needy one. They were havenots.They used to stay in a shabby house. Butthey coped with this situation by honesty, integrityand hard work and brought themselves to thesolvent class.Nilufa’s husband Nasir Ahmad is a “thonga” maker.But he could not expand his business for lack ofcapital. So they were unable to lead a solventlife. They had only one child. They could not runeven the three member small family smoothly forpoverty. They were passing days in woes. In themeantime Allha’s blessings were bestowedupon them. They met the demand of capital byRural Development Scheme (RDS) of IslamiBank Bangladesh Limited. Blessing wind hitthe sail of their business. Change of life started.Nasir would sell those “thonga” in the market. Theystarted making profit from thonga trade. From theearning they continued paying regularly the bankinstallments. The Bank sanctioned them freshinvestment after payment of first phase. In secondphase they got investment of Tk 10,000/-. In fifthphase they took an investment of 25 thousand taka.They built a new house breaking the shabby one.They own a tube well. They have also a sanitarylatrine now. In the meantime, they were blessedwith two more children. They don’t have to face anyproblem now although they have several mouths tofeed. They can afford to maintain the family easily.This is the story of 2001. They got introduced tofield officer of RDS of Islami Bank BangladeshLimited. Nilufa became a member of HazratMariam (R) unit of RDS following the suggestionof the field officer. A few days later she receivedan investment of Tk 5,000/- from the Bank. Withthis money they started Thonga making business.Her husband used to collect paper roamingaround village after village. They could make“thonga” with those papers staying at home.Annual Report 2012 137

Solvency through Cottage IndustryCottage industry has brought fortuneto Shamsunnahar of Maizdicoart.Shamsunnahar has not only changedher own fate but also played a roleto bring fortune to many familiesincluding her neighbours. It waspossible for her dream, effort andsincerity to change her own condition.Rural Development Scheme (RDS)of Islami Bank Bangladesh Limitedstood beside Shamsunnahar totranslate her dream into a reality.There are six members inShamsunnahar’s family. Her husbandis a daily basis part-time messenger.Shamsunnahar’s family was notrunning properly with her husband’smeagre income. They were passingdays in woes. Shamsunnahar used to lament seeing her children’s sad face. She always thought if she couldhave 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 RuralDevelopment Scheme, in 1996. She took investment of Tk 5,000/-. She bought bamboos and canes with thisinvestment and started producing handicrafts like “Dala”, “Kula”, “Chaluni” (riddle) etc. Dealers come homeand 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 herchildren 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 changeluck of many including her.Momina Begum’s Nursery Says ‘No’ to PovertyMomina Begum, an inhabitant ofJoldhaka Upazila of Nilfamari district,became a member of Rural DevelopmentScheme of Islami Bank BangladeshLimited in 2006. In first phase she tookan investment of 10 thousand takaand started nursery business with herhusband. Later she took one lac takainvestment in phasewise. Nurserybusiness kept expanding for their jointefforts. At present their nursery is on32 decimals of land where there were30 varieties of flowers, fruits and otherwood tree seedlings. Every monththey sell seedlings worth Tk. 30,000/-. Besides paying installments as perschedule, she also brought solvency toher family. Momina Begum is grateful toIslami Bank for her success.138Annual Report 2012

Meena Defeats PovertyThe girl had great eagerness for education. Shefelt too good to go to school. But feeling fine isnot enough; one must have the ability to bear theexpenses of education. Meena Begum’s familyhad not have the ability to bear it. So, MeenaBegum’s school-life ended when she enrolled inclass five. Meena’s father was a small vendor. Itwas very difficult for him to bring regular breads &butter for a seven-members family.After giving up school, Meena’s regular task wasto assist his father in the shop. HardworkingMeena looked after the shop properly when herfather would go to market to buy goods for shop.Meena would not face any problem to sell goods,weighing and pricing. Within a short time Meenabecome a complete shopkeeper.Later, this experience to run a shop has played agreat role to change her life. It enabled her to leada solvent family life.Meena begum, an inhabitant of Patnitala Upazilaof Naogan district, got married immediate aftershe stepped in 18. Her husband was a daylabourer. There is scarcity of work in the area.So, one cannot get rid of poverty even after hardwork. In this situation, a new member came totheir family after two years of marriage. They wereblessed with a daughter. Expenditure of the familyincreased many fold. As a result the situationdeteriorated. Meena started finding out a way toget rid of poverty circle. Meena always remainedin deep thinking about how to increase income. Atlast grocery trade came to her brain. She learnedmany tricks of trade while she helped her father torun the shop. She has no doubt to earn sufficientfrom grocery trade if she could start with handsomecapital. Thus Meena started to dream about settingup a grocery. She discussed her plan with herhusband. But her husband showed little interest.How he would show interest? It needs huge moneyto set up a grocery. From where would they getso much money? They are too poor and could notarrange such amount of money.However, suddenly an opportunity surfaced. RuralDevelopment Scheme just began its operationin their village. Meena became a member of thescheme. She took an investment of 5 thousandtaka. With this investment she set up a smallgrocery. With one portion of her little profit shepays installment of the Bank as per schedule; andinvested to increase goods in the shop. After this,if any profit remained, she kept it to herself forfuture use.After paying the installments of the first phase, shegot further investment from the Bank. She alsopaid it as per schedule. Then the Bank sanctionedher increased investment every time. In this wayshe took 25, 28, 32, 36 and 40 thousand takainvestment phasewise. Eventually, Meena’s shopbegan to expand. Solvency came to her family. Atpresent there are goods in her shop worth abouttaka 2 hundred thousand. Now she owns of someland. She got sufficient paddy from her three bighaland. Meena Begum now leading a happy familywith her husband and offspring.Annual Report 2012 139

Siddika Begum Conquers PovertySiddika Begum of Dinajpurdistrict embodies a goodexample of success byhard work, discipline andentrepreneurship. SiddikaBegum started a poultryfarm with 50 hens in 2005.But for lack of capital, herfarm was about to beclosed. In this situationIslami Bank came forwardto rescue her. SiddikaBegum enlisted herselfas a member of RuralDevelopment Scheme,Hazrat Umme Salma(R) unit of Islami BankBangladesh Limited.Initially she took aninvestment of 8 thousandtaka. Paying the regular installments she took more and more fresh investment from the Bank. Her businesskept expanding. She has 4 hundred hens in her farm now and collects 3 hundred eggs per day. She invested6 lac taka to expand the farm. At present, her monthly profit is about 2 lac taka. Siddika Begum was assistedby her husband, sister in law and brother in law to build the dreamt farm. She was all praise to Allah andexpressed gratitude to Islami Bank Bangladesh Limited for her success. Rural Development Scheme ofIslami Bank Bangladesh Limited feel contented seeing the success of Siddka Begum.Successful RDS-Client Laxmi RaniThere is a saying that industry is a key tosuccess. Laxmi Rani of Panchasar became amember of Rural Development Scheme, unitnumber-06 of Munshiganj Islami Bank branch.Initially she took an investment of Tk 5,000/- andstarted producing ‘belon’, ‘piri’, ‘fuldani’ (flowervase), ‘rehal’, dalghutuni and other children toysfrom wood. Shops of mela (fair) and hat, Bazaar,kept Laxmi Rani’s productivity. She needed nolooking back since then. Journey of changingdestiny set in. Gradually the Bank increasedsanction and she took one lac taka investment.Now she runs a business which is worth severallac taka. Children are continuing studies. Her one son is an MBBS student in the final year. Addressing in aget-together ceremony of RDS branch Laxmi Rani said, “Our success would not have been possible if IslamiBank did not stand beside us.”140Annual Report 2012

Market Disclosure under Pillar-III of Basel-IIThe purpose of Market Discipline in Basel II is to establish more transparent and more disciplined financialmarket so that stakeholders can assess the position of a Bank regarding holding of assets and to identifythe 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 ApplicationQualitative Disclosuresa. The name of the top Islami Bank Bangladesh Limitedcorporate entity in theThe Consolidated Financial Statements of the Bank include the financial statements of (i) Islamigroup to which thisBank Bangladesh Limited (including Off-Shore Banking Units (OBUs) (ii) Islami Bank Securitiesguidelines applies:Limited (iii) Islami Bank Capital Management Limited.b. An outline of differencesA brief description of the Bank (Main Operation) and its subsidiaries is given below:on the basis ofconsolidation for Islami Bank Bangladesh Limitedaccounting and regulatory Islami Bank Bangladesh Limited was incorporated on March 13, 1983 as a Public Limitedpurposes, with a brief Company (Banking Company) with limited liability under the Companies Act 1994 as andescription 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 bankare 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 (includingtreatment; and (iii) that 30 SME/ Agriculture Branches) and 300 own ATM booths all over Bangladesh. The shares ofare neither consolidated the Bank are listed with both the Stock Exchanges of the country, i.e. Dhaka Stock Exchangenor deducted (e.g. where Limited and Chittagong Stock Exchange Limited.the investment is risk -Subsidiary Companiesweighted).i) Islami Bank Capital Management Limited (IBCML)IBCML is a fully owned subsidiary of IBBL. IBCML was established in April 2010 under theCompanies Act 1994 as a Public Limited Company with Authorized Capital of Tk.1000.00million & Paid-Up Capital of Tk.300.00 million. The Company was established as perBangladesh Bank Letter No. BRPD(R-1)717/2010-47 dated 07 February 2010. Theregistered 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 asa Public Limited Company under Companies Act, 1994 to carry out business of StockBroker & Dealer in the capital market. The overall increase of activities in Brokerageoperation plays an important role in the improvement of capital market of the country andenhances 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 ShoreBanking unit in its 3 Branches under International Banking Wing.c. Any restrictions, or othermajor impediment, ontransfer of funds orregulatory capital withinthe groupQuantitative Disclosuresd. The aggregate amount ofcapital deficiencies in allsubsidiaries not includedin the consolidation thatare deducted and name(s)of such subsidiaries.- Not Applicable.- Not Applicable.Annual Report 2012 141

Capital StructureQualitative Disclosuresa. Summary information onthe terms and conditionsof the main features ofall capital instruments,especially in the caseof capital instrumentseligible for inclusion inTier 1 or Tier 2.As per the guidelines of Bangladesh Bank, Tier-1 Capital of IBBL consists of (i) Fully PaidupCapital, (ii) Statutory Reserve, (iii) General Reserve (iv) Non-Repayable Share PremiumAccount (v) Retained Earnings (vi) Dividend Equalization Account and (vii) Minority Interest inSubsidiaries (viii) Non-Cumulative irredeemable Preference Shares.Tier-2 Capital consists of applicable amount of (i) General Provision (against Un-classifiedInvestments, Off-Balance Sheet exposure & Off-Shore Banking Units) (ii) Assets RevaluationReserves up to 50%, (iii) Revaluation Reserve for Securities up to 50% and (iv) SubordinatedDebt (Mudaraba Perpetual Bond) (up to max. 30% of eligible Tier-I capital). (v) RevaluationReserve for equity instruments up to 10% (vi) All Other Preference Shares.Quantitative Disclosuresb. The Amount of Tier 1 Capital, with Break-upParticularsAs on December 31, 2012 (Inmillion Taka)SoloConsolidatedTier-I (Core Capital)i Fully paid-up Capital 12,509.64 12,509.64ii Statutory Reserve 12,423.66 12,423.66iii Non-repayable Share Premium account 1.99 1.99iv General Reserve 130.44 130.44v Retained Earnings 3,127.41 3,033.20vi Minority interest in Subsidiaries 0.06vii Non-cumulative irredeemable preference shares - -viii Dividend equalization account 32.00 32.00ix Other (if any item approved by Bangladesh Bank) - -Sub-Total (Core Capital) A (i to ix) 28,225.14 28,130.99a. Tier 2 and Tier 3 Capitali Tier 2 capital 13,803.19 13,803.19ii Tier-3 (Eligible for market risk only) - -Sub Total (Suplementary Capital) B (i+ii) 13,803.19 13,803.19b) Other deductions from capital - -c) Total Eligible Capital (A+B) 42,028.33 41,934.18Capital AdequacyQualitative Disclosuresa. A summary discussionof the Bank’s approachto assess the adequacyof its capital to supportcurrent and futureactivities.The Bank has adopted Standardized Approach (SA) for computation of capital charge forinvestment risk and market risk, and Basic Indicator Approach (BIA) for operational risk.Assessment of capital adequacy is carried out in conjunction with the capital adequacyreporting to Bangladesh Bank. The Bank has maintained capital adequacy ratio at 13.53%& 13.49% on the basis of “Consolidated” and “Solo” respectively as against the minimumregulatory requirement of 10%. Tier-I capital adequacy ratio under “Consolidated” basis is9.08% and “Solo” basis is 9.06% as against the minimum regulatory requirement of 5%. TheBank’s policy is to manage and maintain strong Capital Adequacy Ratio through investinghigh rating grade investment clients. The Bank maintains adequate capital that is sufficient toabsorb all material risks associated with the Bank. The Bank also ensures that the levels ofcapital comply with regulatory requirements and satisfy the external rating agencies and otherall stakeholders including depositors.142Annual Report 2012

Quantitative DisclosuresParticularsAs on December 31, 2012(In million Taka)SoloConsolidatedb) Capital requirements for Investment (Credit) Risk: 28,220.80 28,049.59c) Capital requirements for Market Risk 468.50 468.50d) Capital requirements for Operational Risk 2,461.86 2,470.78e) Total Capital Requirement 31,151.16 30,988.87Capital Adequacy Ratio:Total CAR13.49% 13.53%Tier- I CAR 9.06% 9.08%Tier-II CAR 4.43% 4.45%Investment (Credit) RiskQualitative Disclosuresa) The General Qualitative disclosure requirement with respect to credit risk, including:i) Definitions of pastdue and impaired (foraccounting purposes):- As per the Bangladesh Bank guidelines, any Investment if not repaid within the fixedexpiry date will be treated as Past Due/ Overdue.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:• ‘Sub-standard’ if it is past due/over due for 03(three) months or beyond but less than06 months;• `Doubtful’ if it is past due/over due for 06 (six) months or beyond but less than 09(nine) months;• `Bad/Loss’ if it is past due/over due for 09 months or beyond from the date of expiryor 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 uptoTk. 10.00 Lacs is not repaid within the due date, the amount of unpaid installment(s) will betermed as `pass due or over due installment’. In case of such types of Fixed Term Loans:• `Sub-standard’ if the amount of `past due installment is equal to or more than theamount of installment(s) due within 06 (six) months, the entire Investment (jloan) willbe classified as “Sub-standard”.• `Doubtful’ if the amount of past due installment is equal to or more than the amountof installment(s) due within 09 (nine) months, the entire Investment (loan) will beclassified as “Doubtful”.• ‘Bad/Loss’ if the amount of’ defaulted installment’ is equal to or more than theamount of installment(s) due within 12 (twelve) months, the entire Investment/loanwill be classified as “Bad/Loss”.b. In case of any installment(s) or part of installment(s) of a Fixed Term Loan amounting morethan 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 TermLoans:• ‘Sub-standard’ if the amount of’ past due Installment is equal to or more than theamount of installment(s) due within 03 (three) months, the entire Investment (loan)will be classified as “Sub-standard”.• ‘Doubtful’ if the amount of past due installment is equal to or more than the amountof installment(s) due within 06 (six) months, the entire Investment (loan) will beclassified as “Doubtful”.Annual Report 2012 143

• ‘Bad/Loss’ if the amount of’ defaulted installment’ is equal to or more than theamount of installment(s) due within 09 (nine) months, the entire Investment/loan willbe 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 saidirregular status continues, the Investment (credit) will be classified as ‘Substandard ‘ after aperiod of 12 months, as ‘Doubtful’ after a period of 36 months and as ‘Bad/Loss’ after a periodof 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 periodof 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 ofBangladesh bank Guidelines issued from time to time.ii)Description ofapproaches followedfor specific and generalallowances andstatistical method;The rates of provision are given below:a. General Provision: The Bank maintains General Provision in the following way :1. @ 0.25% against all unclassified loans of Small and Medium Enterprise (SME) asdefined by the SME & Special Programmes Department of Bangladesh Bank fromtime 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 bemaintained @ 2% on the unclassified amount for (i) Housing Finance and (ii)Investments/Loans for Professionals to set up business under Consumer FinancingScheme.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 MentionAccount’.5. @1% on the off-balance sheet exposures. (Provision will be on the total exposureand amount of cash margin or value of eligible collateral will not be deducted whilecomputing Off-balance sheet exposure.)b. Specific Provision: Banks will maintain provision at the following rates in respect ofclassified 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’, irregularand regular Investment accounts) : 5%2. ‘Bad/Loss’ : 100%iii)Decision of the Bank’sInvestment (Credit)Risk ManagementPolicy;The Bank has put in place a well-structured Investment/Credit Risk Management Policy knownas Investment Risk Manual approved by the Board. The Policy document defines organizationstructure, role and responsibilities and, the processes whereby the Investment (Credit) Riskscarried by the Bank can be identified, quantified and managed within the framework that theBank considers consistent with its mandate and risk tolerance.Authorities are properly delegated ensuring check and balance in investment operationat every stage i.e. screening, assessing risk, identification, management and mitigation ofinvestment risk as well as monitoring, supervision and recovery of investments with provisionfor 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, ApprovalAuthority, Internal Audit Approval Process, Investment (Credit) Administration, Investment(Credit) Monitoring, Investment (Credit) Recovery etc. which forms integral part in monitoringof Investment (Credit) Risk in the Bank. Status of investments is regularly reported to the Board/Executive Committee of the Bank.144Annual Report 2012

Quantitative Disclosuresb) Total gross Investment/Credit risk exposuresbroken down by majortypes of Investmentexposure.c) GeographicalDistribution ofexposures, broken downin significant areas bymajor types of creditexposure.Total gross Investment/ Credit risk exposures broken down by major types ofInvestment exposure of the Bank are as under:ParticularsAs on December31, 2012(In million Taka)Mode wise InvestmentBai – Murabaha 213,741.40Bai - Muajjal 17,806.98Hire Purchase under Shirkatul Melk 93,495.82Purchase & Negotiation 7,454.20Bai- as- Sarf (FDB)/FCD 1,823.29Musharaka Documentary Bill (MDB) 13,224.69Musharaka 129.06Mudaraba 9,938.78Bai – Salam 4,411.15Murabaha Foreign Currency Investment 1, 983.17Quard 8,912.18Total 372,920.72Geographical Distribution of exposures, broken down in significant areas by majortypes of Investment/ credit exposure of the Bank is shown below:ParticularsAs on December31, 2012(In million Taka)In Rural Areas 50,190.82In Urban Areas 322,729.90Total 372,920.72Division wise distribution of Investment/ credit exposure of the Bank are asunder:Name of DivisionAs on December31, 2012(In million Taka)Dhaka Division 213,608.99Chittagong Division 81,072.97Khulna Division 31,511.80Rajshahi Division 28,304.68Barisal Division 3,729.20Sylhet Division 7,160.08Rangpur Division 7,533.00Total 372,920.72Annual Report 2012 145

d) Industry orcounterparty typedistribution ofexposures, brokendown by major typesof investment/ creditexposure.Industry or counterparty type distribution of exposures, broken down by major typesof investment/credit exposure of the Bank is shown below:ParticularsEconomic purpose wise InvestmentAs on December31, 2012(In million Taka)Trade & Commerce 105,786.72Real Estate 21,754.90Transport 6,449.04Agriculture (including fertilizer & agriculture implements) 26,713.44Industrial investment 189,193.42Others 23,023.20Total 372,920.72ParticularsAs on December31, 2012(In million Taka)Industrial InvestmentTextile- Spinning, Weaving & Dyeing 71,761.06Steel, Re-Rolling & Engineering 21,946.44Agro-based Industry 17,613.90Garments & Garments Accessories 13,092.18Food & Beverage 7,635.53Cements Industry 1,854.10Pharmaceuticals 2,289.24Poultry, Poultry Feed & Hatchery 624.34Sanitary Wares 274.56Chemicals, Toiletries & Petroleum 3,973.06Printing & Packaging 3,329.78Power (Electricity) 4,162.26Ceramic & Bricks 2,459.51Health care ( Hospital & Others) 2,079.08Plastic Industries 715.13Petrol Pump & CNG Filling Station 940.45Information Technology 549.75Hotels & Restaurants 656.33Other Industries 33,236.71Total 189,193.42146Annual Report 2012

e) Residual contractualmaturity breakdownof the whole portfolio,broken down by majortypes of investment/credit exposure.f) By major industry orcounterparty typeResidual contractual maturity breakdown of the whole portfolio, broken down bymajor types of investment/credit exposure of the Bank.ParticularsAs on December31, 2012(In million Taka)Repayable on Demand -Upto 1 monthOver 1 month but not more than 3 month 105,104.74Over 3 months but not more than 1 year 108,070.74Over 1 year but not more than 5 years 82,343.34More than 5 years 77,401.90Total 372,920.72i) Amount of impaired Investment/ loans and if available, past due investment/ loansprovided separatelyThe amount of classified/ past due investment of the Bank is shown below:ParticularsAs on December31, 2012(In million Taka)Past Due -Special Mention Account (SMA) 16,571.77Sub Standard 2,094.31Doubtful 1,295.18Bad & loss 10,823.31Total 30,784.57ii)Specific and General ProvisionSpecific and General Provisions were made on the amount of classified and unclassifiedinvestments/ loans, Off- balance Sheet exposure of the Bank according to BangladeshBank guidelines.ParticularsAs on December31, 2012(In million Taka)Unclassified Investment 3,935.90Classified Investment 6,054.35Off Balance Sheet Exposure 1,100.45Total 11,090.70iii)Charges for specific allowances and charge - offs during the periodDuring the period the specific and general provision, were made on the amount ofclassified investment, Un classified Investment and Off Balance sheet exposures.ParticularsAs on December31, 2012(In million Taka)Provision on Unclassified Investment (60.10)Provision on Classified Investment 3,582.28Provision on Off Balance Sheet Exposure (19.55)Total 3,502.63Annual Report 2012 147

g) Gross Non PerformingAssets (NPAs)Non Performing Assets (NPAs) to outstanding Investments of Islami Bank BangladeshBank stood at 3.16% as on December 31, 2012.i) Movement of Non Performing Assets (NPAs)ParticularsAs on December31, 2012(In million Taka)Opening Balance 8,292.32Additions 5,920.48Reductions -Closing Balance 14,212.80ii)Movement of specific provisions for NPAsParticularsAs on December31, 2012(In million Taka)Opening Balance 3,054.00Provisions made during the period 3,724.02Write-off/Write-back of excess provisions 581.93Recovery from write-off 141.74Closing Balance 6,054.35Equities: Disclosures for Banking Book PositionsQualitative disclosuresa) The general qualitative disclosures requirement with respect to equity risk, including:• Differentiation between holdingson which capital gains areexpected and those takenunder other objectives includingfor relationship and strategicreasons; and• Discussion of important policiescovering the valuation andaccounting of equity holdings inthe banking book. This includesthe accounting techniques andvaluation methodologies used,including key assumptions andpractices affecting valuation aswell as significant changes inthese practices.Investment in equity securities are broadly categorized into two parts:i) Quoted Securities (common or preference share & mutual fund) traded in thesecondary market (Trading Book Assets).ii) Unquoted securities are categorized as banking book equity exposures whichare further sub-divided into two groups: unquoted securities which are investedwithout 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 aregoing to be traded in the secondary market after completing required formalities.Unquoted securities are valued at cost.The primary objective is to investment in equity securities for the purpose of capitalgain by selling them in future or held for dividend income. Dividends received fromthese equity securities are accounted for as and when received and right to receivewhen established. Both Quoted and Un-Quoted equity securities are valued at costand necessary provisions are maintained if the prices fall below the cost price.As per Bangladesh Bank guidelines, the HFT equity securities are revaluated once aweek using marking to market concept and HTM equity securities are amortized oncea year according to Bangladesh Bank guideline.The HTM equity securities are also revaluated if any, are reclassified to HFT categoryon the approval of Board of Directors.148Annual Report 2012

Quantitative DisclosuresAs on December 31, 2012(In million Taka)Particulars Solo Consolidateda) Value disclosed in the balance sheet of investments, as well as the fair value of thoseinvestments, for quoted securities a comparison to publicly quoted share values wherethe share price is materially different from fair value.b) The cumulative realized gains (losses) arising from sales and liquidations in thereporting period.54.70 54.70- -c) Total unrealized gains (losses). 34.70 34.70d) 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 asthe aggregate amounts and the type of equity investments subject to any supervisory provisions regarding regulatorycapital requirements.• Specific Market Risk 5.47 5.47• General Market Risk 5.47 5.47Profit Rate Risk in the Banking BookQualitative Disclosuresa) The general qualitative disclosurerequirement including thenature of Profit Rate Risk inthe Banking Book (PRRBB)and key assumptions, includingassumptions regarding investmentprepayments and behavior of nonmaturitydeposits, and frequency ofPRRBB measurement.Profit rate risk is the risk where changes in market profit rates might adversely affect theBank’s financial condition. Changes in profit rates affect both the current earnings (earningsperspective) as well as the net worth of the bank (economic value perspective). Re-pricingrisk is often the most apparent source of profit rate risk for a bank and is often gauged bycomparing the volume of a bank’s assets that mature or re-price within a given time periodwith the volume of liabilities that do so.The short term impact of changes in profit rates is on the bank’s Net Investment Income (NII).In a longer term, changes in profit rates impact the cash flows on the assets, liabilities and offbalancesheet items, giving rise to a risk to the net worth of the bank arising out of all re-pricingmismatches and other profit rate sensitive position.Quantitative Disclosuresb) The increase(decline) in earningsor economic value (orrelevant measure usedby management) forupward and downwardrate shocks accordingto management’smethod for measuringPRRBB, brokendown by currency (asrelevant)Particulars 1-90 days Over 3Months to6 MonthsAs on December 31, 2012(In million Taka)Over 6Months to9 MonthsOver 9Months to12 MonthsRate Sensitive Assets 95,736.80 47,056.06 58,056.06 69,056.06Rate Sensitive Liabilities 93,890.80 42,740.70 56,425.10 67,320.40GAP 1,846.00 4,315.36 1,630.96 1,735.66Cumulative Gap 1,846.00 6,161.36 7,792.32 9,527.98Adjusted profit rate changes (PRC) 1.00% 1.00% 1.00% 1.00%Quarterly earnings impact (Cum. Gap*PRC) 461.50 1,540.34 1,948.08 2,382.00Accumulate earning impact to date 461.50 2,001.84 3,949.92 6,331.92Earning impact/Avg. Quarterly Net Profit 0.11% 0.51% 1.01% 1.62%Annual Report 2012 149

Market RiskQualitative Disclosuresa) i) Views of BOD on trading /investment activitiesThe Board approves all policies related to market risk, sets limits and reviewscompliance on a regular basis. The objective is to provide cost effective funding tofinance asset growth and trade-related transactions.ii)iii)Methods used to measureMarket riskMarket Risk ManagementsystemStandardized rule based approach was been used to measure the Market risk. Thetotal capital requirement in respect of market risk is the aggregate capital requirementcalculated for each of the risk sub-categories. For each risk category minimum capitalrequirement is measured in terms of two separately calculated capital charges for“specific risk” and “general market risk”.The Treasury Division manages market risk covering liquidity, profit rate and foreignexchange 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 formitigating market riskThere are approved limits for credit deposit ratio, liquid assets to total assets ratio,maturity mismatch, commitments for both on-balance sheet and off-balance sheetitems and borrowing from money market and foreign exchange position. The limitsare monitored and enforced regularly to protect the market risks. The exchange rateof the Bank is monitored regularly and the prevailing market condition, exchange rate,foreign exchange position and transactions are reviewed to mitigate foreign exchangerisks.Quantitative DisclosuresAs on December 31, 2012 (In million Taka)Solo Consolidatedb) The Capital Requirements forProfit (Interest) rate risk -Equity position risk 10.94 10.94Foreign exchange risk 457.56 457.56Commodity risk. -Total Capital Requirement 468.50 468.50Operational RiskQualitative Disclosuresa) i) Views of BOD on system toreduce Operational RiskOperational risk implies the risk of loss or harm resulting from inadequate or failure ofinternal processes, people and systems or from external events. Capability to carryout a large number of transactions effectively and accurately while complying withapplicable laws and rules constitutes operational risk management activities of thebank.ii)Performance gap of executivesand staffsThe policy for operational risks including internal control & compliance risk is approvedby the Board taking into account relevant guidelines of Bangladesh Bank. AuditCommittee of the Board directly oversees the activities of Internal Control & Complianceto protect against all operational risks.IBBL has a policy to provide competitive package and best working environment toattract and retain the most talented people available in the industry. IBBL’s strongbrand image plays an important role in employee motivation. As a result, there is nosignificant performance gap.iii) Potential external events - No potential external events are expected to expose the Bank to significantoperational risk.150Annual Report 2012

iv)Policies and processes formitigating operational riskv) Approach to calculating capitalcharge for operational risk- The policy for operational risks including internal control & compliance risk isapproved by the Board taking into account relevant guidelines of BangladeshBank. Policy guidelines on Risk Based Internal Audit (RBIA) system is inoperation. As per RBIA branches are rated according to their risk grading/scoring audit procedure and required frequent audit to the Branches are operatedby the Audit Division. In addition, there is a Vigilance Cell established in theBank to reinforce operational risk management of the Bank and to minimize thesame. Bank’s anti-money laundering activities are headed by (Chief Anti MoneyLaundering Compliance Officer) CAMLCO and their activities are devoted toprotect 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 everytransaction to protect against operational risk.- Basic Indicator Approach is used for calculating capital charge for operational riskas of the reporting date.Quantitative DisclosuresAs per the risk based Capital Adequacy Framework, the capital charge for operational risk is equal to 15% of average positiveannual 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, 2012Capital Requirement Solo ConsolidatedOperational Risk 2461.87 2,470.78Stress TestingBangladesh Bank through its DOS Circular No. 01 dated 21.04.2010 and subsequent DOS Circular No. 01 dated 23.02.2011introduced “Guidelines on Stress Testing” wherein Stress Testing has been stated as one of the sophisticated technique used todetermine the reactions of different financial institutions under a set of exceptional, but plausible assumptions through a series ofbattery of tests. At institutional level, stress testing techniques provide a way to quantify the impact of changes in a number of riskfactors 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 theimpact of possible changes in economic environment on the financial system. These tests help the regulators identify structuralvulnerabilities 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 “Banksshall carry out stress testing in line with the revised guideline on quarterly basis i.e. on March 31, June 30 September30 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 “SimpleSensitivity 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 completedwhich shows that the bank has adequate capital to absorb minor and moderate individual shocks. However, some additionalcapital may be required under major level combined shocks.Annual Report 2012 151

Risk ManagementThe Chairman addressing half yearly Managers’ ConferenceRisk Concept and Risk ManagementRisk implies a situation that threatens or limitsan organization’s ability to achieve its goal.Risk in a banking organization is the possibilitythat the outcome of an action or event couldbring up adverse impacts. Banking operations aremainly exposed to Investment Risk, Market Risk,Operational Risk, and Residual Risk, InvestmentConcentration Risk, Liquidity Risk, Strategic Risk,Environmental Risk, Interest Rate Risk etc. RiskManagement means a process for identifying,measuring and mitigating all sorts of foreseeablerisks for sustainable growth of an organization andits Shareholders’ value.Formation of Risk Management WingTo ensure effective risk management, RiskManagement Unit was introduced in November,2009. The unit was functioning like a committeecomprising of members from different Divisions.In April 2011, a separate Risk ManagementUnit headed by a senior executive has beenformed. Later on, understanding the importanceof risk management of such a leading entity inthe industry, the Board of Directors has givenhighest emphasis on risk governance and riskmanagement and upgraded the unit into anindependent and separate Risk ManagementWing in its 193 rd meeting held on 14.05.2012.Formation of Core Risk ManagementCommittees along with their ToRsIBBL exclusively manages 6 (six) core risksand has designed its own Risk ManagementGuidelines in accordance with the guidelinesprescribed by the Central Bank and formed 6core risk management committees which conductmeeting periodically. The major concerns of thecommittees are as under:a. Investment Risk Management Committeesupervises and monitors investmentconcentration, investment risk grading,corporate clients rating, non-performinginvestment, residual risk against investment,provision against classified investment,investment mix, asset quality etc.152Annual Report 2012

. Foreign Exchange Risk ManagementCommittee oversees foreign exchange risk,treasury, net open position, import & exportbusiness, dealing room operations andanti-money laundering aspects in foreignexchange transactions etc.c. Information & Communication TechnologyRisk Management Committee monitors andsupervises the risks related to data security,physical security, network security, disasterrecovery, fraud, forgery, system failure andbusiness continuity etc.d. Anti Money Laundering Risk ManagementCommittee looks after the money launderingactivities, STR, CTR, KYC and TP relatedcompliances. The Committee also supervisesand monitors the entire transactional activitiesof the Bank including money launderingaspects involved with foreign exchangetransactions.e. Internal Control and Compliance RiskManagement Committee assesses andmitigates the risk related to compliance withregulatory requirements, set rules of theBank, internal checking system, lapses, fraud,forgeries, violations of the set rules etc.f. Asset Liability Committee (ALCO) looksafter the asset-liability risk, liquidity risk,Investment Deposit Ratio (IDR), deposit mix,investment mix, gap analysis etc. under directguidance of the Managing Director.Basel Guidelines and its ComplianceIBBL has constituted Stress Testing Committeeand Assessment of Capital under Basel-II Accord Committee to look after the StressTesting & Basel-II related risk issues. Addressingthe Investment Risk, Market Risk, OperationalRisk and other risks associated with the bankingoperations, IBBL has been linking its risk profilewith the capital which is the major risk absorbingtool. Currently the capital adequacy of IBBL is13.49% (solo basis) wherein the industry averageis only 10.46%.IBBL is committed to continuous improvementof Bank’s internal procedure for assessing thespecific risk situation, ongoing adjustment andfurther development of new methods of riskmanagement and internal control, coveringexternal factors and risk areas which are nottaken into account or partially taken into accountwhile calculating Minimum Capital Requirements,quantifying the risks under pillar 2 of Basel-II, stresstesting, Internal Capital Adequacy Assessmentprocess (ICAAP), setting capital targets that arecommensurate with the Bank’s risk profile andcontrol environment etc. For adequate supervisionof capital functions and risks, Bank has formed aSupervisory Review Process Team (SRPT) asstipulated in Bangladesh Bank’s guidelines.Formation of Risk ManagementCo-ordination Committee (RMCC)IBBL has also formed a strong Risk ManagementCo-ordination Committee (RMCC) in January,2012 comprising heads of all the risk managingorgans of the Bank which are overseen by RiskManagement Wing. The committee sits at leastonce in a month or more when necessary. In themeeting of RMCC, all the existing/identified andforeseeable/potential risks issues are discussedand make recommendations to the concerned risktaking organs to address, measure and take stepsto mitigate the risk factors.Existing Functional Structure of RMW Risk Management AreasIBBL has already introduced all the guidelinesfor managing the risk areas in accordance withthe guidelines/instructions given/prescribed byBangladesh Bank which are under:Asset Liability Risk ManagementTo deal with Balance Sheet Risk, IBBL hasconstituted a dedicated committee, called theAsset Liability Committee (ALCO) comprisingAnnual Report 2012 153

of the senior officials Bank to make importantdecisions related to the Balance Sheet, Liquidity& Profit Rate risks of the Bank.The Asset Liability Committee monitors BalanceSheet Risk and Liquidity Risk of the Bank. TheALCO generally meets at least once month andreviews liquidity requirement, the maturity of Assetsand Liabilities, Deposit and Investment pricingstrategy/transfer pricing, Sensitivity of Assets andLiabilities, Key Management Indicators and theLiquidity Contingency Plan of the Bank. In everyALCO meeting, the key points of the discussionare recorded and the action points are highlightedto ensure implementation. As a part of regulatoryrequirement, the management reviews the ALMManual and its components regularly. Quarterlyposition of Investment-Deposit Ratio (IDR) of theBank is given below:Investment Risk ManagementInvestment Risk is one of the major risks facedby the bank. This can be described as potentiallosses arising from the failure of counterparty toperform according to agreement with the Bank.The failure may result from unwillingness ofthe counterparty or decline in his/her economiccondition, market situation etc. With each andevery coin of investment, there is an involvementof risk. In broad sense, credit risk includes:• Investment Default Risk - The risk of losswhen the bank considers that the obligor isunlikely to pay its investment obligations in fullor the obligor is more than 90 days past dueon any material investment obligation;• Concentration Risk - The risk associated withany single exposure or a set of exposures withthe potential to produce large enough lossesto threaten a bank’s core operations. It mayarise in the form of single name concentrationor industry concentration.• Country Risk - The risk of loss arising whena sovereign state freezes foreign currencypayments (transfer/conversion risk) or whenit defaults on its obligations (sovereign risk).Political unrest, degradation of internal lawand order are also included in country risk.In such situation, both entrepreneurs andthe banks are discouraged in investmentactivities.• Environment Risk-The risk of environmentalcalamities which arise while banks deploy itsfund to industry, trade and service sector.In this context, Investment Risk ManagementCommittee (IRMC) of the Bank is entrusted with theduties of maintaining asset quality, assessing riskin investment to a particular customer, appraising,sanctioning investment, formulating policy/strategyfor investment operations, sectoral assessment,salvaging sick units, nursing the runningunits, diversification of its investment portfolio,consideration of environment impacts whilefinancing etc. The Investment Risk ManagementCommittee is also entrusted to comply with theCRM Guidelines, monitoring & updating thebank’s investment policy. Moreover, the committeeanalyzes the investment portfolio on the basis ofBasel Guideline and attempts to restructure theinvestment portfolio. The rating status of corporateinvestment clients of IBBL is as under:Amount ofCorporateInvestmentNo. ofClientsRatedRatedAmountRiskWeightedAsset (RWA)273,344.57 931 234,711 123,246154Annual Report 2012

In million takaRisk Weight Investment Amount RWA20% 33,700 6,74050% 169,122 84,561100% 31,779 31,779150% 110 165Total 234,711 123,246NPIAmount inmillion tk.% to GeneralInvestmentOverdue 9,611 2.58%Classified 14,213 3.81%Written Off 3,018 0.81% Moreover, Investment Administration Division(IAD) and Offsite Supervision Teams in the Bank’sInvestment Wing/Divisions are in place to monitorcontinuously the development of business/projectsfrom beginning and ongoing situations to mitigatethe Investment Risk of the Bank. Thus, the Bank’sInvestment Risk Management activities have beendesigned to address all these issues.Non-performing assets of the Bank increased a bitin 2012 owing to imposition of BRPD Circular No.14 and 15 dated 23.09.2012.Foreign Exchange Risk ManagementForeign Exchange Risk is defined as the adverseexchange rate movement in the market. The Bankis exposed in profit rate risk and settlement risk onaccount of its foreign exchange business. ForeignExchange businesses are involved in import,export and remittances including other auxiliaryservices. IBBL is dealing with a substantialvolume of foreign trade and remittance businessof the country which is growing very rapidly in abetter & efficient way with international standards.In 2012, IBBL faced hindrances in achievingimport and export business target due to adversefluctuation in foreign exchange rate.Foreign Exchange risks are measured andmonitored by Treasury Division. Treasury Divisionconsists of separate Front Office, Back Office andMid Office. The Treasury Front Office (DealingRoom) independently performs the deals and theTreasury Back Office is responsible for verificationof the deals and passing of their entries in thebooks of accounts.The Foreign Exchange Risk is minimized throughproper Market analysis, Real time pricing ofForeign Exchange and Money Market product,Fixation of different market related limits (Daylight,Overnight, Stop Loss and Management ActionTrigger) and Counter parties Credit limits set by themanagement and ensure adherence of the limitsby the Treasury Front Office. All Foreign Exchangetransactions are revalued at weighted averageexchange rate as provided by Bangladesh Bankat the end of each month. All Nostro Accounts arereconciled regularly and outstanding entries arereviewed by the management for its settlement/recompilation. The open position maintained bythe bank at the end of day is within the stipulatedlimit prescribed by the Bangladesh Bank.Internal Control and Compliance RiskManagementOperational loss may arise from errors and fraudsdue to lack of internal control and compliance.Failure of Internal Control system may invitevarious risks for banks and jeopardize bank’sinterest. Internal Control is a management processdesigned to achieve effectiveness and efficiencyof operations, reliable financial reporting, andcompliance with laws and regulations. With aview to overcome such lapses and verification ofasset quality, quality of customer services, overallsecurity arrangement, operational efficiency andregulatory issues as guided through differentcirculars, manuals from Head Office and otherregulatory bodies, IBBL organizes its managementthrough Internal Control & Compliance Wingconsisting of three Divisions namely (i) Audit& Inspection Division (ii) Compliance Division,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 BankThe Audit Committee of the Board subsequentlyreviews the lapses identified by the Audit &Inspection Division, Bangladesh Bank and otherregulators. The key points of the reports presentedby the concerned division are discussed in themeeting of the Audit Committee. Subsequentlyappropriate actions are taken as per decisionsof the said Committee for protecting the Bank’sinterest. Thus Internal Control & Compliance(ICC) system of IBBL always plays active role inmitigating operational risk and contributes in theprocess of being a fully compliant bank.Money Laundering Risk ManagementMoney Laundering Risk is defined as the loss ofreputation and expenses incurred as penalty forbeing negligent in prevention of money launderingand terror financing. In order to ensure the bestcorporate governance practices and aimingat protecting the Bank and its Employees,Shareholders, Management and Customers,IBBL is committed to comply with all the applicableRules of the Anti Money Laundering.For mitigating risks, the bank has formed CentralCompliance Unit (CCU) under the leadership ofthe Chief Anti-Money Laundering ComplianceOfficer (CAMLCO) at Anti-Money LaunderingDepartment, Branches Control Division in HeadOffice. An independent CCU of the Bank isperforming supervisory and monitoring activitiesfor the event of the aforesaid programs on Anti-Money Laundering and Anti Terrorism Financing.They also ensure that the Bank complies withthe Anti Money Laundering and Anti TerrorismFinancing Legislations. Anti Money LaunderingCompliance Units are also functioning under theleadership of the Branch Anti-Money LaunderingCompliance Officer (BAMLCO) and Zonal Anti-Money Laundering Compliance Officer at Branchesand Zonal Offices respectively, who independentlyreview the transactions of the accounts to verifySuspicious Transaction Report (STR).A Manual and Policy Guideline for prevention ofmoney laundering was developed and approvedby the Board of Directors of the bank. IBBL hasintroduced uniform Account Opening Forms, KYC(Know Your Customer) profile, and TP (TransactionProfile) and CTR (Cash Transactions Report) inthe bank as per instruction of Bangladesh Bank.IBBL has already issued circulars from time totime for providing necessary instructions forprevention of money laundering activities and alsofor combating financial terrorism. Moreover, IBBLhas conducted a number of Training Sessions/Workshops to create awareness and to developthe skills of the officials for identification ofsuspicious transactions.IBBL has exclusively completed the KYCprocedure of legacy accounts (accountsopened before April 30, 2002) by December,156Annual Report 2012

Central Server of the Bank2009 before one month of deadline fixed bythe Bangladesh Bank. To establish fruitfulAnti-Money Laundering drive at Branch level,IBBL introduced ALM rating systems throughself-assessment report & independent testingprocedure as per instruction of BangladeshBank.Information & CommunicationTechnology Risk ManagementThe Bank has adequately addressed anInformation & Communication Technology (ICT)Risk Management which ensures ICT securityfunctions and operations in a more effectivemanner. It is an in-depth exercise and continualprocess. The ICT Risk Management exercisemainly include minimizing financial and imageloss to the institution in such events as naturaldisasters, technological failure, human errors etc.The Bank uses own developed Core BankingSoftware to perform all types of transactionsincluding Local/Online/Internet in a securedway. To take care of its core banking system, aseparate security module has been incorporatedin the software which manages different roles fordifferent users. All financial transactions can betracked for future audit perposes. The Bank usesCentral Data Centre travelling through networkuses encryption and descryption mechanism.In line with the Central Bank Directives, theBank has re-drawn its own ICT Policies for itsoperations and services. Under these policyguidelines, a security policy has also beenworked out. To adhere to what is laid down inthe policy, the implementation has been madethrough Active Directory Service (ADS), PasswordPolicy, Kerberos Policy, Audit Policy, GroupPolicy, User Rights, Permission Policy etc. Tosecure network resources from public network,the Bank has introduced Virtual Private Network(VPN), Access Control List (ACL), IP Filteringand TCP/UDP service blocking through routerand firewall devices. It has already centralizedthe administrative control to access the Network,Mailing system and Internet. IBBL has introducedDisaster Recovery Site (DRS), Data Center asconsequence of Business Continuity Plan (BCP)of IBBL and Trained the officials to cope with anycontigencies. The Bank always tries to employsufficient and qualified technical staff to create acongenial atmosphere for safe banking businessthrough automation.Other Major Risks Associated with theBusiness Activities of IBBLBangladesh Bank vide their BRPD Circular no.13 dated 21.04.2010 forwarded a guideline onSupervisory Review Evaluation Process (SREP).According to principle 1 of the Guideline onAnnual Report 2012 157

Supervisory Review Process, Banks shouldhave a process for assessing their overall capitaladequacy in relation to their risk profile and astrategy for maintaining their capital levels. Inaccordance with the same, IBBL has an adeptSupervisory Review Process Team (SRPT) andthis SRPT follows a comprehensive InternalCapital Adequacy Assessment Process (ICAAP)which considers the following risk areas in additionto aforesaid core risk areas to enable the BankManagement to assess, on an ongoing basis, therisks that are inherent in its activities and materialto the institution:a) Market Riskb) Operational Riskc) Liquidity Riskd) Investment Concentration Riske) Residual Riskf) Business Riskg) Profit Rate Risk in Banking Bookh) Risk under Islamic Bankingi) Any other Risks identified.Market RiskThe following policies are followed by the Bank toreduce or minimize the market risk:a) Investment in shares & securities are madeconsidering the risk weight thereagainst.However, to maintain minimum capital charge,equity position are observed on reportingdate;b) Foreign exchange position is monitored tomaintain at minimum lelvel;c) The Asset Liability Management Committee(ALCO) of the Bank regularly meets toassess the changes in profit rate risk, marketcondition and asset liability maturity gapanalysis, pricing of products and therebytakes effective measures to monitor andcontrol profit rate risk. To manage the marketrisk IBBL arranges the funding facilities withcompetitive profit rate to match with maturity.Operational RiskOperational Risk is the potential loss arising frombreakdown in bank’s systems and procedures,internal control, compliance requirements orcorporate governance practices that results inhuman error, fraud, failure, damage of reputation,delay to perform or compromise of the Bank’sinterest by employees.Appropriate Internal Control measures are in placeat IBBL to address operational risk. Internal Control& Compliance Wing (ICCW) assesses operationalrisk across the Bank as a whole and ensures thatan appropriate framework exists to identify, assess,and manage operational risk. IBBL also developpolicies, processes and procedures for managingoperational risk and continuous vigilance againstleakage by identifying, assessing, measuring,managing and transfer of operational risk resultingfrom inadequate or failed internal process, peopleand system or from external events.Residual RiskIBBL follows the following policies to reduce orminimize the residual risk:a) Documentaion are done properly and legallyto minimize the documentation risk;b) Valuation of collaterals are done accuratelyand the liquidation value of collaterals areconsidered to minimize the legal risk orliquidity risk;c) Residual value of collaterals are considered;d) In case of guarantee, refusal or delay byguarantor to pay are considered.To avoid complexity and hindrances for recovery ofinvestment by disposal of collaterals, utmost careis taken in accepting collaterals before sanctioninginvestment. The Bank’s Investment AdministrationDivision (IAD) looks after these issues.Liquidity RiskLiquidity risk management of IBBL is wellmanaged by the Treasury Department consideringthe availability of fund to meet its investmentrequirement. In addition the Asset LiabilityManagement Committee (ALCO) of the Bankmeets frequently to oversee and administer themismatches in liquidity, if any, and recommendsfor mitigating and encountering the risk.Month-wise position of surplus liquidity of the Bankin 2012 is as under:158Annual Report 2012

(In million Taka) Investment/Credit Concentration RiskIBBL adopts the following policies to reduce orminimize the Investment Concentration Risk:a) Risk of default is important in concentrationrisk. To minimize the investment concentrationrisk to diversify the investment by size toreduce the classified investment. In 2011,the rural investment of IBBL was 12.93% ofthe total investment of the Bank. In 2012, therural investment became 13.83% of the totalinvestment of the Bank. In 2011, the urbaninvestment of the Bank was 87.07% of the totalinvestment which has increased to 86.17%of the total investment. Risk ManagementWing has been delivering continuous effortsto ensure diversification of the investmentportfolio;b) Special attention is drawn to investmentin SME sector and investment secured byresidential property and commercial realestate;c) Whether the Bank’s investment isconcentrated in areas of higher or lower thanaverage risk based on their volume, type,amount and industry;d) Reviews the result of stress tests to identifyand respond to potential changes in marketconditions that can adversely impact thebank’s performance.The Bank’s Investment Administration Division(IAD) is exclusively working on the above issues.Profit Rate Risk in the Banking BookTo reduce profit rate risk in the Banking book, thefollowing measures are usually taken by IBBL:a) Profit rate is fixed up considering theexpectation of the depositors;b) Profit are associated with the instruments andportfolios, maturities and the rate index usedfor re-pricing;c) Gap analysis has been introduced in finalizingthe profit rate;d) Accommodation through sharing profit withthe Mudaraba Depositors (by giving morethan 65% of the investment income, whennecessary).Risks under Islamic Bankinga) Fiduciary Risk: Where Mudarabah Depositors’funds are commingled with the Bank’s ownfunds, the bank shall ensure that the bases forasset, revenue, expense and profit allocationsare established, applied and reported in amanner consistent with the Bank’s fiduciaryresponsibilities;b) Rate of Return Risk: Banks are exposed torate of return risk in the context of their overallbalance sheet exposures. An increase inbenchmark rates may result in the Mudarabadepositors having expectations of a higherrate of return. Rate of return risk differs fromrisk in that banks are concerned with theresult of their investment activities at the endof investment holding period. Such resultscannot be pre-determined exactly;c) Displaced Commercial Risk: Banks may beunder market pressure to pay a return thatexceeds the rate that has been earned onassets financed by the Mudaraba depositorswhen the return on assets is under performingas compared with the competitors’ rates.In such case, banks may decide to waivetheir rights to part or its entire mudaribshare of profits in order to satisfy and retainits fund providers and dissuade them fromwithdrawing their funds.Asset Liability Management Committee(ALCO) of IBBL regularly meets to assessthe fiduciary risk, rate of return risk anddisplaced commercial risk if any in IBBL, andAnnual Report 2012 159

ecommends mitigating and encountering theabove risks;d) Sharia’h Compliance Risk: IBBL is alwaysaware about compliance Sharia’h rules in allof its operations. Since IBBL is performing inthe dual banking system, some transactionsseem doubtful. The independent Sharia’hBoard keeps keen observations on the day today transactions of the Bank and they declareall the doubtful income as suspended whichcannot be brought into the total income of theBank.Concluding RemarksThe Risk Management Wing (RMW) of the Bankcontinuously monitors the risk components arisesfrom day to day banking activities, changes ineconomic & market scenario closely, assesses,analyzes, evaluates, quantifies & searches out theways to mitigate those risks. RMW also arrangesmeeting with the conveners of the operationalrisk management committees on monthly basisregarding steps taken to minimize the risks andpolicy taken to keep the Bank sound & sustainable.The Wing submits report quarterly to theDepartment of Off-site Supervision, BangladeshBank enclosing previous three minutes of themeetings along with related papers. The Wingalso submits report to the CEO/MD and the AuditCommittee of the Bank as per Terms of Referenceof the RMU provided by Bangladesh Bankregarding areas to be improved in accordancewith the prescribed policy and adopted strategies.160Annual Report 2012

ICT and AutomationInauguration of an ATM BoothIT-enabled Bank to an IT driven OneSince its inception, IBBL has focused onthe use of Information Technology to easeBanking hassles and to offer smooth services tocustomers. Whenever a new technology arrivedin the banking arena, the Bank immediately tooksleps to adopt it for making banking transactionssimpler & easier than before.In wake of that, the Bank now boasts of possessingself-developed Core Banking System, AlternativeDelivery Channel Systems and some enterpriseresource planning (ERP) systems. It has thelargest online banking network in the country. ItsATM network is extended across the whole countrywith access to other renowned ATM Networksmaking the reach even bigger. The Bank is fullygeared up with state of the art IT infrastructureand setups like Data Center, Disaster RecoverySite, and Contact Center to meet up regulatoryrequirements as well as to be line with the worldtrends towards technology.The Bank has also taken initiatives to offercustomers new and innovative ways of banking.It has Remittance Card for beneficiaries of foreignremittance earners, long existing ATM (debit) Cardfor on the spot cash withdrawal, and ElectronicFund Transfer (EFT), SMS Banking, & InternetBanking as alternative channels of delivery andpayment. Most importantly, to provide financialaccess to the poor and unbanked populationof the country, the Bank has launched MobileFinancial Services which will fulfill all requirementsof financial inclusion as envisioned by theGovernment of Bangladesh.Mobile Financial Services-Islami BankmCashIslami Bank mCash, a newly started MobileFinancial initiative of IBBL, is already on track withplans to offer an enabling environment for all tobecome banked and perform small scale bankingtransactions. It has been specially designed sothat any mobile phone and any carrier can be usedAnnual Report 2012 161

Inauguration of Islami Bank mCash Serviceensuring maximum reach. Also apart from theBank branches, the service footprints of mCashhave been extended by including individualagents and other network based agents all overthe country to make it available even in the mostremote area.The underlying System of mCash has beendeveloped by IBBL itself to cut huge setup costand to incorporate present and future businessrequirements easily and cost effectively. WithmCash IBBL is planning to include vast segmentof the population, especially the unbankedpopulation into the fold of basic banking serviceswith comfort and trust.Currently, a range of exciting services like Cash-in,Cash-out, person to person Fund transfer, Mobileairtime recharge, fund transfer between CBS andmCash accounts and installment payment (MSS,MMS, Hajj, etc.) are being provided to the mCashcustomers.Communications made Easy-IBBL Contact CenterTo provide smart, appropriate, state of the artsupport services to clients, Branches and HeadOffice of IBBL concurrently IBBL has recentlyestablished its own Contact Center. It is equippedwith most modern call center facilities to offercustomers and other enquirers’ latest informationagainst their queries either directly by a humanagent or by the system through Interactive VoiceResponse (IVR). As part of the Contact centersetup, all the Branches, offices and ATM boothshave been equipped with IP Phones throughwhich communications are being made at lowercosts and higher availability.The IVR system of the Contact Center is alsoused in phone banking and mobile banking wherecustomers can perform banking transactions ontheir own without intervention of any support andservice staff.Card Based Services-IBBL ATM NetworkIBBL started providing outsourced ATM basedservice to its customers in 2001. In 2009, theBank established its own ATM system and startedbuilding its ATM Network. Now it has 300 ownATMs situated all across the country. The numberof the Bank’s existing ATM card holders nowstands at more than 5 lacs. They have options touse all those IBBL ATMs & 1520 ATMs of otherATM Networks.On 2012, the ATM switch has been replaced witha state of the art one to offer more features andfacilities to customers. The Bank is on the vergeof rolling out VISA (World’s largest retail electronic162Annual Report 2012

payment network) enabled debit cards andKhidmah Cards (Shariah compliant Credit Card ofIBBL) which can be used at any global e-outlets(ATMs and/or POS).Recently, IBBL has also set a number of IslamiBank Deposit Machines (IDM) at different placesoffering cash deposit facility to customers wherethey deposit cash inside an envelope and enterthe envelope in the IDM. Designated officials thencollect, count and credit the cash to respectiveclient accounts during assigned hours.Heart of IBBL-eIBS (Core BankingSystem)Based on open source technologies and mostsecure Database Management System, ORACLE,eIBS is the in-house developed fully fledged CoreBanking System of IBBL-the first and only Bankin Bangladesh to build up and possess suchsystem of its own. It has all banking modulesfully integrated within it running seamlessly at allbranches.As part of next level integration, different othersystems like Mobile Banking, Internet Banking,SMS Banking and Phone Banking have beenintegrated with eIBS. Now customers enjoy doingbanking transactions from one system to anothereffortlessly and with great comfort.On-line BankingHaving the largest online banking network in thecountry, IBBL has also equipped all 276 brancheswith dual connectivity using Fiber Optics and RadioLinks to provide flawless ‘Any Branch Banking’ toclients. As a result, both the revenue and numberof online transactions have showed positivegrowth every year. On an average, nearly 35,000transactions per day are now performed by thebranches with volume of about Tk. 6,700 millionsusing on-line remote deposits and withdrawals.Business Continuity Planning ofIBBL-Data Center (DC) & DisasterRecovery Site (DRS)The largest in the banking sector of Bangladesh,IBBL Data Center automatically uploads andstores data from all the branches round the clock.This data are used as backup for emergencysituations and report preparation for differentWings/Divisions/Departments of Head Office.Recently, the Data Center (DC) has been extendedto incorporate new systems, hardware and othercomponents.The Bank also has a Disaster Recovery Site (DRS)at a separate place in line with the guidelinesof Bangladesh Bank (Central Bank). The DRSacts as a replication establishment of the Bank’sexisting Data Center.Internet Banking (iBanking) and SMSBankingTo take banking services to the doorsteps ofcustomers, IBBL put emphasis on alternate deliverychannels like iBanking and SMS Banking. TheBank offers a range of Internet Banking (iBanking)& SMS Banking Services to its customers. Newservices have been added to the services. Toname a few, ‘iTransfer’ & ‘iRecharge’ using IBBL’siBanking have become very popular. The formeris used to transfer fund from any of a customer’sIBBL account to any other IBBL whereas the latteris used to recharge talk-time to any postpaid orprepaid mobile numbers of all Telecom Operatorsof Bangladesh.Through SMS push service, foreign remittersand beneficiaries can automatically receiveinformative SMS in their mobile phones once aremittance amount is credited in their accountsor drawn by the beneficiary. Through SMS pushpullservice, any client can perform informativeSMS Banking (i.e. latest balance information, lastthree transactions, etc.) using his/her mobile fromanywhere which also reduces customer’s hasslesof visiting branches premises.In addition, the Bank has by now implementedSMS notification during cash withdrawal of certainamount from ATM and very soon SMS notificationfor cheque encashment will be implemented.Management Information System (MIS)To allow instant access to necessary informationto all stakeholders of the Bank Management, IBBLhas developed a strong Central ManagementInformation System (MIS) for the Bank. It containsBranch Accounts related, General Ledger related,Zone level, Central level and other importantinformation for supervising, monitoring anddecision taking issues of the Management & alsoAnnual Report 2012 163

Agreement with Airtel for mCash Servicefor regulatory compliance. Already Branch MIS,Zonal MIS and consolidation of Central MIS withmore than 300 formats have been developed.Other developments include: Rationalized InputTemplates (RIT) for Central Bank Enterprise DataWarehouse (EDW), Centralized Payroll System,Shariah Auditing and Monitoring System & AnnualClosing reports related to Deposit/Investment/Foreign Exchange. Steps have been taken fordevelopment of Branch MIS in Centralizationapproach as well to be in line with the futureCentralized Banking System.Implementation of BangladeshAutomated Clearing House (BACH)of Bangladesh BankIn compliance with the Bangladesh Bank’sinstructions to automate clearing of interbankinstruments (including cheques and wire transfers),namely Bangladesh Automated Clearing House(BACH), IBBL developed two separate systems-Bangladesh Automated Cheque ProcessingSystem (BACPS) and Bangladesh ElectronicFund Transfer Network (BEFTN). Throughimplementation of the BACPS system, sameday clearing of instruments is now possible. TheSystem has been deployed to 243 branchesof IBBL where BACH is in operation. Using theown BEFTN system, all branches of IBBL arecapable of sending and receiving electronicfunds through BEFTN. Now, huge amount of thirdbank remittance and dividend/refund warrant arepaid everyday using this BEFTN system whichis also capable of providing person to person(P2P), business to business (B2B), and person tobusiness (P2B) payments.Enabling the Bank Human Resourceswith IT skills, Training andTechnologiesIBBL has always taken initiatives to equip its beageworkforce with modern IT skills and equipment.Already, under ‘one man one PC’ strategy set bythe Management, all officers and executives havebeen provided with PCs. This has paved wayfor productivity and promptness in the workingenvironment. Additionally, laptops were providedto selected Zonal Heads and Divisional Heads toenhance communication and correspondence.And all MC and EC members have been equippedwith tablet PCs (iPad) so that they can performquick, informed perusal and decisive actionsduring the Meetings in paperless manner.164Annual Report 2012

IBBL is keen on preparing its workforce withadequate and latest IT training. For that,trainings are organized at different levels and bydifferent authorities. The Islami Bank Trainingand Research Academy (IBTRA) prepares theircourses incorporating sufficient & related ITclasses. Apart from that, the ICT Wing of the Bankarranges Zone wise training programs on regularbanking services or special training programswhenever a new service/technology is introducedby the Bank.Green Banking through Automationand Reduction of Paper UsageRespecting the Bank’s commitment to GreenBanking, steps have been taken to reduce theusage of papers in all working paradigms of theBank. Already the proceedings of the MC and EChave been automated by implementing IPad usingwi-fi connectivity.Integration with the National PaymentSwitch (NPS)IBBL is one of the 17 banks which were selected byBangladesh Bank for the first phase implementationof National Payment Switch Bangladesh (NPSB).Required connectivity and hand shaking betweenIBBL Switch and the NPS of Bangladesh Bankare being done. Once complete, IBBL customerswill enjoy Inter-Bank electronic transactions aswell as facility to use ATMs and POS & otherelectronic Banking terminals which will empowerthe customers to have Any Card-Any ATM/POS-Any Bank facilities.Capacity Building for Shari‘ahSupervisionBeing a Shari‘ah based bank, IBBL must ensureproper compliance in every operations andproceedings of the Bank. In line with that, allShari‘ah Supervisors (Muraqibs) have beenequipped with automated system. This has shownremarkable improvement in monitoring Shari‘ahcompliance through off site supervision and hasalso helped to create awareness about reducedcases of Shari‘ah lapses.IT Plan 2013Centralization Initiatives-CBS, CIPPSand RDSThe Bank’s ultimate goal has been centralizationof the CBS (eIBS) and other systems to achievesingle point operability for all services andsupports. For that separate centralization projectsi.e. Implementation & migration of CBS fromdistributed to central approach, Centralizationof RDS Software, & development of CentralizedInvestment Proposal Processing System (CIPPS)being run. The CIPPS will be of special interest asit will make the system of appraising Investmentproposal efficient in terms of speed.Restructuring of WAN Architecture &Establishment of Hot DRSA strong Infrastructure is the backbone andkey to building and maintaining a sound ITbased business system. To cope with the everincreasing needs of upcoming services, IBBLis restructuring its existing WAN architecturewith provision for alternative connectivity, largerprocessing capacity, storage and more optionsfor backup and restoration. The restructuringof the Wide Area Network of the Bank will becompleted by the first quarter of 2013. In addition,establishment of a Hot DRS (Disaster RecoverySite) is also in progress which will contain bothdata and system replica of all major services andwill have capability to automatically start operatingif the main systems crash.Paperless Management of Events andBusiness SystemsContinuing the automation initiatives, plans havebeen taken to automate other Meetings. Alsodevelopment of required system for automationof Wings/Divisions like Internal Control &Compliance Wing/Law Department, etc. is goingon. Eventually, all business and official processesand procedures will be automated to minimizepaper usage and optimize green banking.Annual Report 2012 165

Development of Enterprise ResourcePlanning (ERP)In the past, IBBL has developed various ERPsystems including HRM, Payroll, IT audit, etc.to fast track business processes. The trendwill continue in 2013 as well with developmentof Control and Compliance Tracking System,building of Data Warehouse and Data ArchivalSystem, and development of Document ArchivalSystem (Content Management), etc.Extension of Mobile Financial Services(mCash)In the coming year, full efforts will be geared tofurther extend bank’s innovative Mobile FinancialServices, mCash. As part of the extension plan,applications of mCash and other systems will beintegrated with ATM to offer more expressive pointsof cash withdrawal. Also POS based biometricsystem will be introduced in mCash so thatuneducated, unbanked population of the countrycan be included in formal financial services easily.Taking the Card Services ForwardEmphasis will be given to another most importantservice portfolio, Cards Services. In 2013, IBBLhave plans to Implement Islami Shari‘ah BasedCredit Card, “Khidmah”. Other types of cards i.e.VISA enabled Debit Card, Travelers’ Card & Prepaidcard will be rolled out soon. Also installationof more Islami Bank Deposit Machines (IDM) willbe completed this year increasing the reach andoption of depositing cash and payment instrumentsfor customers. In addition, implementation ofPoint of Sales (POS) will be done throughout thecountry for services in the Branches and by RDSofficials adding value to our existing services to agreat extent.166Annual Report 2012

Corporate Communication and Business PromotionMeet the PressPublic RelationsPublic Relations is an immense need forreputation of any organization. Brandingcreates an image and a perception that capture themind of the customers and hereby it is essentialfor all products. IBBL has moved forward withthe visionary image of conveying the message ofexcellent service in the heart of the people. PublicRelations Department in IBBL was created mainlyto fulfill this purpose. Since its inception, theDepartment has been involved in many successfulventures that helped to create a new image andpositive perception among our valued clients.Imbued with the sky touching view andleadership of the top management, PublicRelations Department has been operating tomeet the needs of the time. It worked with highenthusiasm to develop the standard and imageof the Bank from the very beginning of its journey.With their ceaseless efforts in communicatingwith the media and common people over thetime Public Relations Department has gained amomentum in gradual development in size andperformance. In comparison to the previous daysand with development of the Bank’s business, theDepartment is performing in a vibrant manner withvisible multidimensional publicity measures.IBBL has divided PR activities in internal andexternal ways. IBBL internal publicity measuresincludes publications of different magazines,journal and different types of books and distributingthem among our workforce for updating themabout the Bank’s position. External publicityincludes coverage in different print, electronic& social media and making close and intimaterelations with the outside people.The year 2012 was a year of landmark for PublicRelations of the Bank. It added a new dimension toth Bank’s efforts to expand exposure and publicityactivities. CSR activities of the Bank were givenpriority in all the publicity activities round the year.Preaching of moral and ethical values also receiveddue priority in the publicity process for differentpromotional items. New ideas are being developed increating television commercials and documentaries.Throughout the year Public Relations DepartmentAnnual Report 2012 167

accomplished various activities regarding publicity,publication, public relations and event management.The department achieved appreciation from thepeople in and beyond the Bank.Media CoverageMedia coverage for the Bank has visibly increasedin the year. IBBL was in the leading positionregarding coverage of news in print and electronicmedia along with web based news sites. Eachmonth, the Bank got an average of 3325 columninches coverage on various events in the nationaldailies and weeklies. News of all the importantprograms of the Bank are being published in almostall the recognized newspapers. Besides, articlesand features on Islamic Banking prospects andIBBL products along with our top managements’interviews were published in reputed Dailies.Globally renowned Gulf News and Reutersinterviewed the Bank’s Managing Director. Almostevery leading news paper of the country publishedthe Gulf News interview.Coverage in the electronic media also increasedto a new height. The Bank got around 125 minutesof news coverage each month which also showan increasing trend. Almost all the TV channelstelecast news of the Bank on different programsround the year.AdvertisementAdvertisements of various types and length werepublished in print & electronic media round theyear. Around 113 official advertisements includingfinancial statement, balance sheet, AGM notice,tender and recruitment notice; and 162 promotionaladvertisements like branch opening and ATM,months long campaign programs, productadvertisement and on occasions of newspapers &TV channels’ founding anniversary were publicized.About 486 issues of different magazine, periodicals,souvenirs published our advertisements ondifferent products and themes. Design of differentadvertisement of the Bank was improved.The Bank opened a new dimension in its publicityby branding business and international newssegment in different television channels by floatingTV Commercials round the year. The Bank alsosponsored TV magazine programs.Sponsorship & ParticipationThe Bank earned huge publicity in the year 2012sponsoring the National School Football IslamiBank Tournament, an event unprecedented inthe country’s grass root sport history. About 5,000school teams comprising one lakh students fromall over the country participated in the tournamentheld in 480 upazilas. Positive image of the Bankwas created among the schoolmen, parents andReception program in honour of AHM Mustafa Kamal, MP, the newly elected Vice President of International Cricket Council168Annual Report 2012

Seminar and Iftar Mahfilsport enthusiasts. During the year, the Banksponsored East Zone Team in the first timefranchisee-based longer version national crickettournament namely Bangladesh Cricket League.The Bank sponsored a number of organizationsand forums on the occasion of their conference,convention, seminars and other celebrations.IBBL participated and sponsored trade fair,tourism fairs, SME and other fairs round theyear. The Bank’s attractive pavilion of aestheticstandard in the Dhaka International Trade Fair-2012 captured large visitors and was awarded thebest pavilion prize.Other PublicityThe Bank continued road side publicity withbillboards at Banglamotor, Ruposhi Bangla point,Gulishthan, Bangabhavan gate, Matijheel ShaplaChattar and Bijoy Sarani. Digital board displayswere arranged on the occasion of differentnational programs and fairs. The Bank sponsoredKamalapur to Rajarbag road-median beautificationFarewell Reception to Sami Al-Hindi, Counselor and Deputy Head of Mission of Royal Embassi of Saudi ArabiaAnnual Report 2012 169

Inauguration of ‘Setubandhoner 100 Din’ (Bridging of 100 Days) Programprogram by color showy and herbal plants. Anumber of quality documentaries were made on theBank’s performance and its CSR activities. Thesewere displayed on various Bank programs acrossthe country.Public & Media RelationsDuring the year the Bank devised a slogan ‘SholoKoti Manusher Kache Jai, Amader Desh Amra Sajai’and observed two multi purpose campaign programsnamely ‘Setu-bandhoner 100 Din’ & ‘Antorik Sebar3 mas’. A number of public programs includingdiscussion seminar, clients meeting, NRB gettogether, peoples representative & elite assembly,Shari`ah conscious meeting, professionals’ assembly,entrepreneur development program etc. wereorganized across all the branches on the occasion.Through these programs, the Bank was able to fulfillits aim of proving itself as a transparent, accountableand benevolent financial entity in this country.The Bank also arranged reception program forBangladesh Cricket Board President Mr. AHMMostafa Kamal MP for assuming his responsibilitiesas ICC Vice President. With a view to consolidegood relations with the media, a good number ofbilateral and person-to-person meetings betweenthe top management of the Bank with Editors,Senior Journalists and Reporters from prominentprint and electronic media were arranged. Meet thePress was arranged to clarify the Bank’s positionconcerning various emerging issues. In recentdays the Bank has been able to engender a verymuch positive image among the media houses ofthe country. It also reflects more interviews of ourpolicy makers & top executives and their attendingin TV talk shows.PublicationsPublications of the Bank increased remarkably in2012 in addition to witnessing qualitative change.All the publications were updated in standard form.Publications of periodicals were regularized. Fivebooks, booklets and manuals were published inthe year including ‘Islamic Banking in Bangladesh:An Alternative Paradigm for Sustainable SocioeconomicDevelopment’ and updated `IslamiBank: 30 Years of Progress’. Four issues each forIslami Bank house-magazine Porikroma and RDSmagazine Palli Unnayon Barta were published.Twelve folders were published in modified versionand these were also reprinted.Public Relation Division (PRD) has planned anddesigned publications of Diary and Calendar.Banner, festoon and dangler were printed on branchopening, month long programs and other occasions.Greeting cards were distributed on the eve of Eids,New Years and other occasions. Desk calendarsand Sehri-ifter schedules were published.170Annual Report 2012

Inauguration of ‘Antorik Sebar 3 Mas’ (3 Months for Cordial Sercvice) Special ProgramEvent ManagementIn the events of branch opening and monthlong programs, PRD helped in the availabilityof seminar paper, printing of invitation cards,banners, folders, danglers and media coverage.Iftar Mahfil was arranged during the Ramadan inwhich people of all segments participated.IBBL has kept its momentum of business successdespite confronting adverse global and macroeconomic scenario. Amid the alarming period ofglobal recession, the Bank has been able to keepits head high by the grace of Almighty Allah andceaseless efforts of its workforce. In order to raisethe Bank to a new height competing with othersin home and abroad. IBBL is trying to developquality publicity & public relations for the Bank.Public Relations is ready to gear up its activities toachieve all targets set by the Bank in coming days.Annual Report 2012 171

EventsIBBL Pavilion at Dhaka International Trade FairG.M. Quader, MP, Minister for Commerce handing over Crestfor Best Pavilion in Dhaka International Trade FairMuhammad Faruq Khan, MP, Minister for Civil Aviation &Tourism visits IBBL Stall at Asian Tourism FairEngr. Khandaker Mosharraf Hossain, MP, Minister forExpatriates Welfare & Overseas Employment visitsIBBL Stall at International Immigrants Day FairDilip Barua, Minister for Industry visits IBBL Stall at SME FairIBBL’s Rally observing the International Immigrants Day172Annual Report 2012

SportsChampion Team of National School Football Islami BankTournament 2011A Match of the National School Football TournamentSpectators in a National School Football Islami BankTournament MatchAgreement with BCB for owning Team in first classBangladesh Cricket LeagueIslami Bank East Zone Cricket TeamA Match of Islami Bank East Zone TeamAnnual Report 2012 173

Financial ReviewIncomeThe Bank earned Total Income of Tk.50,346million during the year 2012 as against Taka38,401 million of preceding year registering 31%growth over the last year. Investment IncomeThe Bank earned total Investment Income ofTk.43,672 million during the year 2012 as againstTaka 32,020 million of preceding year registering36% growth over the last year. Investment incomefor the year 2012 was 87% of the total incomecompared to 83% in the year 2011.Non-investment IncomeThe Bank earned total Non-Investment Incomeof Tk.6,674 million during the year 2012 asagainst Tk.6,382 million of preceding year. Non-Investment Income for the year 2012 was 13% ofthe total income compared 17% in the year 2011.ExpensesTotal Expenditure of the Bank was Tk.38,250(including previsions for investments and otherassets) million during the year 2012 as againstTk.28,054 million of preceding year registering36% growth compared to the last year.Profit Paid on Deposits (PPD)The Bank disbursed Tk.25,870 million among theMudaraba Depositors and Mudaraba PerpetualBond holders as Profit in 2012, being 70.04% of theinvestment income earned through deployment ofMudaraba Fund as against minimum 65.00%,which was Tk.18,401 million in 2011 being 68.60 %of the same. Investment Income for the year 2012and 2011 were Tk.43,672 million and Tk.32,020million respectively.Profit paid to the depositors for the year 2012was paid as per the weightage and rates. Insome deposit products additional amount ofprofit was paid over the rate and rates as perweightage. The weightage are presented in thenext page:Administrative & Other ExpensesTotal Administrative & other expenses for the year2012 was Tk. 8,867 million as against Tk. 7,268million in 2011 showing 22% growth over lastyear and which was 24% of the total expenditurein 2012 compared to 26% in the year 2011.174Annual Report 2012

Weightage and Final Profit Rates of DepositSl.No.Particulars of DepositsWeightageFinal Rate of2012 (%)Final Rateof 2011 (%)1 2 3 4 51 Mudaraba Hajj Savings Accounta) Above 10 years Term 1.35 11.97 10.06b) Up to 10 years Term 1.30 11.53 9.692 Mudaraba Waqf Cash Deposit Account 1.35 11.97 10.063 Mudaraba Special Savings (Pension) Account (MSS)a) 10 years Term 1.30 11.53 9.69b) 5 years Term 1.10 9.75 8.204 Mudaraba Muhor Savings Account (MMS)a) 10 years Term 1.30 11.53 9.69b) 5 years Term 1.10 9.75 8.205 Mudaraba NRB Savings Bond Account10 years Term 1.35 11.97 10.065 years Term 1.25 11.08 9.326 Mudaraba Perpetual Bond (MPB) 1.25 13.58 13.207 Mudaraba Savings Bond (MSB)a) 8 years Term 1.25 11.08 10.00b) 5 years Term 1.10 10.00 9.108 Mudaraba Monthly Profit Deposit Scheme (MMPDS) Accounta) 5 years Term 1.20 11.50 10.00b) 3 years Term 1.00 11.20 9.009 Mudaraba Term Deposits Accounta) 36 Months 1.00 11.20 9.00b) 24 Months 0.98 11.00 8.50c) 12 Months 0.96 10.50 8.00d) 06 Months 0.92 10.50 8.00e) 03 Months 0.88 10.50 8.0010 Mudaraba Savings (including RDS) Account 0.75 6.65 5.5911 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 5.0014 Mudaraba Foreign Currency Deposit Account 0.75 1.66 1.53Comparative operating result of IBBL for the year 2012 vis-à-vis 2011(In million Taka)Particulars 2012 2011Total Income 50,345.77 38,401.29Less: Profit Paid to Depositors 25,870.43 18,401.22Total Operating Income 24,475.34 20,000.07Less: Administrative & Other Expenses 8,867.10 7,268.45Profit before Tax & Provision 15,608.24 12,731.63Less: Provision for Investment including Off Balance Sheet items & Other Assets 3,512.07 2,384.31Total Profit before Taxes 12,096.18 10,347.32Annual Report 2012 175

Appropriations(In million Taka)Particulars 2012 2011Total Profit/(Loss) beforeTaxes12,096.18 10,347.31Reserve FundThe Reserve fund of the Bank increased toTk.27,245.87 million as on 31 st December, 2012from Tk.17,792.50 million of the preceding year.Provision for Tax:Current Tax 6,525.84 5,476.47Deferred Tax 45.90 29.40Net Profit/ (Loss) after Tax 5,524.44 4,841.45AppropriationStatutory Reserve 2,419.24 2,069.46General Reserve (22.21) (430.48)Retained Earnings (ProposedDividend)3,127.41 3,202.47Total 5,524.44 4,841.45Mudaraba Perpetual BondIn the year 2007 Islami Bank Bangladesh Limitedissued Mudaraba Perpetual Bond (MPB) of Tk.3,000 million under the Mudaraba Principles ofIslamic Shari‘ah with the approval of BangladeshBank (Central Bank) as well as Securities andExchange Commission (SEC). The MPB is listedwith Dhaka Stock Exchange Limited (DSE) andChittagong Stock Exchange Limited (CSE) andtrading of the same started on 25 th November2007. Subject to approval of financial statementsin the Annual General Meeting the MPB holderswill receive profit at 13.58% per annum for theyear 2012 which has been determined as follows:Final Rate of 8 Years MudarabaSavings BondAdd: 10% of the rate ofProposed Dividend (25%)TotalDividend11.08% P.A2.50% P.A13.58.% P.AThe Board of Directors recommended 17% stockand 8% cash Dividend for 2012 on the Paid-upCapital of Tk.12,509.64 million for approval by theshareholders in the 30 th Annual General Meeting. Contribution to National ExchequerIBBL regularly pays corporate tax on time. TheBank also deposit excise duty, withheld tax andVAT to Govt. exchequer on time deducting fromemployees salary as well as customers andvendors.IBBL is the highest Corporate Taxpayer among theLocal Banks and is the second highest Taxpayerin the Banking sector of Bangladesh.Contribution to National ExchequerSl.No.Particulars 2012(In million Taka)Total upto 20121 Corporate Tax 3,631.01 26,097.812 Tax Deduction atSource on PPD3 Tax Deducted atSources-others2,117.29 10,809.861,023.87 2,777.414 Value Added Tax (VAT) 357.84 1,460.075 Excise Duty 924.25 4,657.896 Deduction from salariesof the Employees50.23 233.607 Total 8,106.11 46,036.64176Annual Report 2012

CSR: Sustainability ReportIBBL Chairman is handing over Winter Cloths to Prime Minister Sheikh Hasina for Prime Minister’s Relief FundCorporate Social Responsibility (CSR) is a formof corporate self-regulation integrated into abusiness model. CSR policy functions as a builtin,self-regulating mechanism whereby a businessmonitors and ensures its active compliancewith the spirit of the law, ethical standards, andinternational norms. CSR is a process that aims toembrace responsibility for the company’s actionsand create a positive impact through its activitieson the environment, consumers, employees,communities, stakeholders and all other membersof the public.For entiancing social face of Islamic Banking–Islami Bank Bangladesh Limited has beeninvolved in charitable activities since itsinception through creation of “Sadaqah Tahbil”.Thereafter, the same has been done throughIslami Bank Foundation (IBF) converting theSadaqah Tahbil into a full-fledged foundationon May 20, 1991. To comply with the instructionof the Central Bank, IBBL has started doing thesaid CSR through creation of Corporate SocialResponsibility Division (CSRD) at Head Officesince 16 th July 2009.Responsibility to the Shareholders• IBBL has been discharging its responsibilitiesto safeguard the interest of the shareholdersby complying with Shari‘ah, law of the land,building a strong and efficient managementand enhancing shareholders value andfinancial performance;Table: CSR Position of IBBL in Banking Sector of Bangladesh(In million Taka)Particulars 2009 2010GrowthGrowth2011Rate (%)Rate (%)CSR Expenditure of total Banking Sector 553.80 2329.80 321 2188.33 -6CSR Expenditure of IBBL 116.27 232.63 100 410.70 76.55Share of IBBL in CSR Expenditure (%) 21 10 -52 19 137Annual Report 2012 177

• Detailed performance including resultsand important activities of the bank arecommunicated to the shareholders throughAnnual Report;• Shareholders are also encouraged to evaluateBank’s performance and to give their valuablesuggestions in the AGMs.Responsibility to the EmployeesThe Bank is always aware of continuousdevelopment of knowledge, competencies andattitude of the employees, comfortable andmodern working environment as well as justifiedand competitive compensation packages for them.• The recruitment process of the Bank strictlyfollows “IBBL Recruitment Policy”;• Develop professional knowledge, skill andattitude of the employees, the Bank hasestablished its own training academy named‘Islami Bank Training & Research Academy(IBTRA)’;• The Bank adheres strictly to the ILO labourpractices and standards as well as locallabour laws and regulations;• Employees are allowed to operate trade unionactivities in the Bank;• The Bank has developed a comprehensivepay-scale for the employees, the ratio of thehighest and lowest level in the pay-scalehas been maintained at a lower ratio of 12:1(DMD:MCG);• ‘Contributory Provident Fund’,‘Superannuation Fund’ and ‘Gratuity Fund’have been introduced by the bank foremployees benefit;• To meet-up housing need and ensurecomfortable life, employees are provided withinvestment at a discounted rate under SHBISand SHDS;• The executives of the Bank are provided withcar either from bank management or under“Car Scheme for the Employees of the Bank”;• Human rights are upheld at every aspect ofthe Bank’s operations. The Bank does notemploy workers under the legal minimum age,prohibits the use of all forms of forced labour,respects employees’ rights to join, form or notjoin a labour union, respects the principles ofcollective bargaining, provides health & safetyat work. The policy is non-discriminatory toage, race or sex, prohibits sexual harassment,limits work to standard accepted hours andcondemns the use of corporal punishment.Scholarship Program of the Bank178Annual Report 2012

Col. (Rtd.) Shawkat Ali, Deputy Speaker in a cheque hand over ceremonyResponsibility to the Customers• One can open a savings account with Tk. 500,a current account with Tk. 1,000 and a specialsavings scheme (pension scheme) withminimum monthly instalment of Tk. 100 only;• The rural poor are allowed to maintain savingsaccount by depositing weekly instalment ofTk. 10/- only under Bank’s Rural DevelopmentScheme (RDS);• Our benevolent investment schemes are:Rural Development Scheme (RDS), SmallBusiness Investment Scheme (SBIS), HousingInvestment Scheme (HIS), Real EstateInvestment Program (REIP), HouseholdDurable Scheme (HDS), Investment Schemefor the Doctors (ISD), Women Entrepreneur’sInvestment Scheme (WEIS), Micro IndustrialInvestment Scheme (MIIS) and AgricultureImplements Investment Scheme (AIIS);• The most important contribution of the bank inthis regard is the creation of huge employmentopportunities in its financed projects as wellas at IBBL. At present more than 12,000employees are working in IBBL and millions inits financed projects;• Through its wide-ranged network of 276branches and utilising mobile phonetechnology, IBBL serves a huge numberof rural families by channelling foreignremittance;• Every branch of the Bank keeps a ‘ComplaintBox’ to facilitate the customers, lodgingcomplaints against services of the bank orparticular employee(s);• Regular meetings are held with the selectedcustomers in different levels of managementto discuss on their business issues andsuggest them for further improvement;• The customers of the bank have by now beenextended to online ATM services. The Bankhas already started Web Portal, SMS Bankingand Spot Cash services;• IBBL considers the customers as its partnersand develops relationship through itsemployees as well as by organising variousprograms in different occasions.Responsibility to the SuppliersSuppliers play a fundamental role in the Bank’smicro environment. The bank develops itsrelationships with suppliers’ organizations on thebasis of value and trust;oThe Bank has a purchase committee whichis responsible for procurements across thenumber of people instead of one or a fewAnnual Report 2012 179

Chief Whip Md. Abdus Shahid, MP, distributing blanket to the cold stricken people at Sreemangaloensuring that the concerned employees andthe bank are trusted and respected;All procurements follow a transparent tenderprocedure. Price negotiations are conductedby designated teams and committees.Suppliers’ information is treated as confidentialfor fair dealing of the process;o In accordance with bank’s ‘CorporateProcurement Strategy’, it strives to incorporateenvironmental and social considerations intothe procurement process;o The bank recognises its responsibility toencourage suppliers to minimize negativeooenvironmental and social effects associatedwith the products and services they provide;To ensure an equitable share of wealth to alarge number of suppliers, the Bank invitesfresh enlistment after every two years.Existing suppliers are also re-enlisted toevaluate their strengths and weaknesses aswell as to categorise suppliers based on theirhistorical performance;The bank follows a concerted policy of nondiscriminationagainst small scale suppliers,whilst 76% of the suppliers’ portfolio can becategorised as micro level entrepreneurs.Sector-wise CSR Expenditure of IBBL from 1983-2012(In milion Taka)SectorDisasterManagement1983-2009 2010 2011 2012 TotalAmount Beneficiary Amount Beneficiary Amount Beneficiary Amount Beneficiary Amount Beneficiary217.61 452,291 64.06 158,760 21.79 32,928 87.93 597,866 391.39 1,241,845Education 285.34 265,197 67.8 98,787 56.17 128,925 83.8 3,014 493.11 495,923Health 873.62 6,055,481 64.11 721,160 25.78 128,556 39.75 19,230 1,003.26 6,924,427Sports 60.83 413,622 12.00 2 248.75 636 1.61 144 323.19 414,404Art & Culture 68.75 187,107 11.22 41,964 7.15 643 8.24 11 95.36 229,725Environment 0 0 7.36 15,240 0.48 3 12.48 493,822 20.32 509,065Others 61.31 56,674 11.87 655 50.55 118,115 75.38 34,438 199.11 209,882Total 1567.46 7,430,372 238.42 10,36,568 410.67 409,806 309.19 11,48,525 2,525.74 100,25,271180Annual Report 2012

Ambulance handover CeremonyResponsibility to the CommunityThe Bank is very much conscious about itsresponsibility towards the communities withinwhich it operates. The Bank takes severalinitiatives in individual and organizational levelfor development of the community. IBBL takesseveral programs to improve the lives of the peopleespecially to the less fortunate segments of thecommunity. An amount of Tk. 2525.74 million wasspent for 100,25,271 beneficiaries by IBBL during1983-2012 for this purpose. IBBL contributed Tk.309.19 million for 11,48,525 beneficiaries this year.Bank’s strategy towards discharging communityresponsibility focuses on: (1) Education, (2)Health, (3) Disaster Management (4) Sports, arts& culture, & (5) Women empowerment.Sector-wise CSR Expenditure of IBBLfrom 1983-2012 Sector-wise CSR Expenditure for theyear 2012Education ProgramHuman being can not develop properly withouteducation. IBBL is engaged in the promotionof education sector of the country from thevery beginning. IBBL spent an amount of Tk.493.11 million amongst 495,923 beneficiariesduring 1983-2012 for this purpose. Last yearthis contribution was Tk. 83.80 million for 3,014beneficiaries including regular scholarships to 800students.The Bank has been providing scholarship tothe poor students securing GPA 5 in SSC &HSC examinations since 2010 under its directscholarship program. During the last two years,Annual Report 2012 181

the Bank provided scholarship to 800 (HSC 400[male 200 & female 200] + 400 under graduatestudents [male 200 & female 200]) studentsunder this program @ Tk. 1,000/- & Tk. 1,500/-per month for the period of 02 years & 03 to 05years for HSC & Graduation level respectively.Recently, the management of the Bank hasdecided to increase the scholarship from 200 to400 [male 200 & female 200] students both HSC& Graduation level from the year of 2012.In addition to the aforesaid students, IBBL hasbeen providing scholarship to 400 meritoriousbut poor students under its Special ScholarshipProgram since 2011.• It may be mentioned here that, IBBL hastaken a 10 years plan for scholarship, where10,800 students will be benefited from thescholarship. For this purpose Tk. 356.22million will be spent;• The bank also provides scholarship for PhDstudents since 2007. An amount of Tk. 6.20million was spent for this purpose so far;• Every year the Bank awards to the meritoriouswards of the employees for outstandingresults. An amount of Tk. 14.48 million hasso far been spent for 1350 beneficiaries since1993;• IBBL awards scholarship to MBA students(Banking & Finance) for their outstandingresults. An amount of Tk. 1.12 million hasbeen given to 103 students since 1991;• Different research organizations andeducational institutes were provided withfinancial assistance for research andeducational purposes;• IBBL has so far established one MedicalCollege, one Health Technology Institute,one Nursing Training Institute, six TechnicalInstitutes, one English medium school,one Bangla medium school and one girl’smadrasha under its Foundation managementto contribute development in the educationsector of the country.• Lump-sum financial assistance has also beengiven by the Bank for education purpose oncase to case basis;Scholarship Program of the Bank182Annual Report 2012

Detail Particulars of Scholarship(In millionTaka)Sl.No.Name of the ProgramNo. ofstudentsBudgetAlreadygivenOrganizingExpensesTotalexpenseRemarks1 HSC Level -2010 200 6.48 4.78 1.51 6.29 Period July 2010 -June 20122 Graduation Level -2010 200 14.40 8.88 8.88 Period July 2010 -June 20143 HSC Level -2011 200 5.90 3.56 0.97 4.53 Period July 2011 -June 20134 Graduation Level -2011 200 15.32 5.35 0.96 6.31 Period July 2011 -June 20155 Special Scholarship 2011 400 5.17 4.26 0.52 4.78 For year 20116 Special Scholarship 2012 400 7.78 6.77 0.80 7.57 For year 2012Total 1600 55.05 33.60 4.76 38.367 HSC Level -2012 (underprocess)8 Graduation Level -2012(under process)400 11.90 Period July 2012 -June 2014400 31.10 Period July 2012 -June 2016Total 2000 98.05Year-wise Expenditure to Education 1. IBBL established six fully owned hospitalsand seven community hospitals with a totalof 1021 beds creating employment of 561doctors and 411 other employees;2. A good number of charitable dispensariesare operated by local initiatives mainly in therural areas with the help of IBBL. Every yearabout two lac patients are provided treatmentfacilities from these dispensaries.Expenditure in Health Sector Health-care ProgramPeople faces a perilous situation due to hazardousmedicare system of the country. IBBL takesseveral initiatives in individual and organizationallevel for developing health sector of Bangladesh.IBBL spent Tk. 1003.26 million for health sectorduring 1983-2012 among 69,24,427 beneficiaries.During the year 2012 Tk. 39.75 million wasprovided to 19,230 beneficiaries for this purpose.Apart from these, IBBL has taken some sustainableinitiatives for developing medicare system of thecountry which are as follows: Disaster ManagementBangladesh is a developing country fighting withpoverty and natural disasters. Being a corporatecitizen of the country, IBBL always stands besideAnnual Report 2012 183

Cheque handover ceremony at the office of DU Vice Chancellor Prof. Dr. A.A.M.S Arefin Siddiquethe distressed humanity. An amount of Tk. 391.39million was spent by IBBL from 1983-2012 for thispurpose. This year IBBL contributed Tk. 87.93million to 597,866 beneficiaries in this sector.To encourage the people involving in humanitarianactivities, IBBL devised a deposit product namely“Cash Waqf Deposit Scheme”;Besides, Tk. 1.92 million was paid to the familiesof 4 martyred army officials, killed in BDR mutiny,as their annual family expenditure;The Bank also spent Tk. 7.74 million for distributionof relief among flood affected people of the country.Sports, Arts & CultureIBBL always comes forward to assist the victims ofnatural or social disasters. During this year IBBLdistributed winter cloths to the poor for an amountof Tk. 71.02 million;The Bank provides financial assistance to needyand heavily indebted individuals to meet up theirvarious emergency family needs; Disaster Management Sports, Arts and Cultural ProgramSports, arts and cultural programs make a nationphysically and mentally sound and healthy.Engaging with this type of works young peoplecould be able to avoid many socially undesirableactivities, like: taking drugs, involving forbiddenunderworld parties, hijacking money from innocentpeople etc. This is why IBBL sponsors various184Annual Report 2012

IBBL Vice Chairman is handing over Cheque to Women Entrepreneur Association of Bangladesh for establishing ‘WEAB Training Centre Cum Outletsports and cultural events every year. During2012 the bank contributed Tk. 9.85 million forthis purpose. To uphold and promote the cultureof the nation, IBBL has established ‘BangladeshSangskritic Kendra’.Others ActivitiesApart from the aforesaid CSR activities, IBBLtakes many other initiatives as CSR activities suchas:1. Every year IBBL distributes food items to Alimand poor families as a Tohfa-e-Ramadan.This year an amount of Tk. 53.39 million wasspent for this purpose.Others CSR Activities 2. IBBL distributes ‘Kurbani Meat’ received fromKingdom of Saudi Arabia (KSA) and IslamicDevelopment Bank (IDB) as a gift to thedestitute people of Bangladesh every year.This year an amount of Tk. 3.53 million wasspent for distributing the meat.In 2012, IBBL spent an amount of Tk. 75.38 millionfor other CSR activities.Women Empowerment ProgramIBBL is very much conscious about the prevailingconditions of the women in our society. Keepingthis in view, it takes various programs forempowering the women like awareness building,training, financing etc. The programs include:* Encourage husbands in making easy paymentof the Mohor, the Bank introduced a depositscheme namely “Mudaraba Mohor DepositScheme”;* Rural poor women are organised under RuralDevelopment Scheme and encouraged tomake savings at least Tk. 10/- per week withthe Bank;* The Bank has deviced an investment schemeexclusively for the women namely “InvestmentScheme for the Women Entrepreneurs”;Annual Report 2012 185

* Number of female members under bank’sRural Development Scheme (RDS) is 517,398which is 85% of total RDS members;* The Bank has established a rehabilitationcentre for the distressed women namely“Islami Bank Distressed Women RehabilitationCentre”. Distressed and destitute womenare given shelter, education, training andemployment opportunities there.Responsibility to the EnvironmentThe main theme of environmental responsibility isto create ‘No Harm’ to the environment in view ofkeeping it healthy for future generation. Now adaysclimatic change is addressed seriously all overthe world. It is identified that Bangladesh, being asouthern delta, is under serious threat of naturaldisaster. In view of the above, the corporationsare recommended to pay due attention to thefollowings:1. Reducing the use of non-renewable energy& materials (electricity, gas, fuel, paper,stationeries etc.) and to increase use ofrenewable or recyclable energy & materials(solar power, bio-gas, electronic media ofcommunication etc.);2. Reduction of industrial carbon emission;3. The Bank is directly in involvement inplantation activities at rural and urban areasalong with distribution of the saplings incountry areas to protect environment4. Scrutiny of negative impacts of thecorporations on environment and takingnecessary mitigating measures there against.For this purpose IBBL contributed an amount ofTk. 20.32 million for 5,09,065 beneficiaries from1983 to 2012.Expenditure for Environment Sector wise Market Share of IBBL in CRS Activities(In million Taka)Sector2010 2011Banking Sector IBBL % of IBBL Banking Sector IBBL % of IBBLDisaster Management 460.41 64.06 14 188.03 21.79 12Education 400.79 67.8 17 612.48 56.17 9Health 689.07 64.11 9 520.42 25.78 5Sports 265.23 12.00 5 359.07 248.75 69Art & Culture 328.91 11.22 3 171.52 7.15 4Environment 59.78 7.36 12 138.07 0.48 1Others 125.58 11.87 9 198.73 50.55 25Total 2,329.80 238.42 10 2,188.33 410.67 19186Annual Report 2012

Islami Bank FoundationBy the grace of Almighty Allah, Islami Bank Foundation, since its inception, has been working for the serviceof 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 theFoundation, to achieve its cherished objectives, has been implementing its regular programs and undertakensome unique projects. A brief description of the programs and projects implemented by the Foundation in 2012is given below:Item-wise Expenditure of Islami Bank Foundation in 2012Sl.No.Items1 Income GenerationSewing Machine, Self-employment Project & Self employment Program.2 EducationModel Forkania Maktabs, Scholarship for poor & meritorious students, Financial support for educationalinstitutions, Lump-sum grant for poor and meritorious students, Mobile library, Slum development etc.3 Health & MedicareSupporting charitable dispensaries, Lump-sum help for treatment, Arsenic Mitigation Programme,Sanitary latrine construction, Circumcision camp, Mobile eye camp & Midwifery training Program.4 Humanitarian HelpLump-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 & RehabilitationDistribution of relief materials among the people affected by Tornado, flood, Sidor Tidal surge & distributionof sacrificial meat and Operating cost of Fael Khair Program etc.6 Literature, Cultural & Publication ProgrammesDistribution of Islamic books and periodicals, Helping Youth clubs and Voluntary organizations, Assistancefor child & youth development & Bangladesh cultural centre and Construction of Mosque etc.7 Special ProjectsIslami 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), IslamiBank International School & College, Dhaka, Islami Bank Institute of Technologies, Islami Bank MohilaMadrasha, and IBF Projects cox’s bazar etc.8 Capital ExpenditureIBH Complex, Kakrail, IBF Office Purchase, Furniture & Fixture of IBF office, Investment for HDS &SHBIS etc.9 Operating ExpensesAdministrative expenses, Salary & allowances Postage, conveyance etc.Annual Report 2012 187

ICU at Islami Bank HospitalA brief description regarding the special projectsare given below:HospitalsSix Islami Bank Hospitals (two located in Dhaka,two in Rajshahi, one in Khulna and one in Barisal),extend services in the field of Medicine, Surgery,Gynae, Pediatric, E.N.T, Urology, Neurosurgery,Skin, Eye, Orthopedic, Cardiology etc. at a costwithin the reach of common people. In the year2012, a total number of 65,372 patients receivedfree treatment facilities from Islami Bank Hospitals.Community HospitalsThe activities of seven Islami Bank CommunityHospitals at Satkhira, Manikgonj, Rangpur,Jhenaidah, Dinajpur, Faridpur and Naogaon aregoing on in full swing. Four more communityhospitals are going to be commissioned soon inMadaripur, Noakhali, Mymensingh and Feni. Inthe year 2012, a total number of 8,655 patientsreceived free treatment facilities from Islami BankCommunity Hospitals.Health EducationIslami Bank Medical CollegeThe activities of Islami Bank Medical College,Rajshahi are runing satisfactorily. The classesof the students of 10 different batches are beingconducted full in swing. The construction workof the south block of the hospital building atNaodapara, the own site of the College, is alreadycompleted and construction of the academybuilding is going on. There were 374 students inthe college in 2012 and 68 students were awardedMBBS degree.Islami Bank Medical College HospitalNursing InstituteThere is a great dearth of qualified nurses in ourcountry and, therefore, quality treatment servicesare being hampered to a great extent. Keeping inview the above situation, Islami Bank Foundation(IBF) established a Nursing Training Institute inRajshahi to create employment opportunity for theyouths and meet the increasing needs of qualifiednurses. A total of 197 students were studying in theinstitute in 2012.188Annual Report 2012

Islami Bank Institute of HealthTechnologyProper diagnosis of diseases is vital in renderingproper treatment facilities to patients. In our countrythere is a good number of hospitals/ clinics anddiagnostic centers. But most of them do not havenecessary technical manpower to do pathologicaland radiological tests. Therefore, the patients haveto suffer frequently because of wrong diagnosis ofdiseases. IBF has, therefore, established a HealthTechnology Institute in Rajshahi in the nameof “Islami Bank Institute of Health Technology”.Courses on Pharmacy, Dentistry, Radiology &Imaging, Pathology are offered the institute. A totalnumber of 369 students were in studying in 2012.Midwifery Training ProgramUsually the traditional birth attendants conduct thenormal delivery in rural ares. They do not haveany formal training in this regard and, therefore,a good number of mothers and babies die at thetime of delivery stage. Many of them, though donot die, suffer even whole life for wrong handlingof the traditional birth attendants. Consideringthe above situation Islami Bank Foundation hasintroduced Midwifery Training Program with thehelp of Islami Bank Hospitals and Islami BankCommunity Hospitals.Health Care ServicesCircumcision ProgramIBF executes a good number of CircumcisionProgram in rural areas in Bangladesh throughhospitals established by it. Qualified and expertdoctors give treatment facilities to the poorchildren. The children are also given releventmedicine, ‘Lungi’ and ‘Guernsey’ are offered in theinstitute at free of cost.Mobile Eye CampIn the year 2012, a total number of 590 patientsreceived eye treatment through Mobile Eye Camparranged in IBBL hospitals.Charitable DispensariesIBF has been conducting a good number ofCharitable Dispensaries in rural areas in differentparts of the country. Some of the charitabledispensaries are rendering allopathic treatmentwhile the others are providing homoeopathictreatment. Usually a qualified doctor givesprescription to the patients once or twice in aweek without any fee. The patients are also givennecessary medicine at free of cost. In the year2012, so far 101,869 patients received treatmentfacilities through the charitable dispensaries.Dental Treatment in Islami Bank HospitalAnnual Report 2012 189

Technical EducationIslami Bank Institute of TechnologySix units of Islami Bank Institute of Technology,two in Dhaka, one in Bogra, one in Sylhet, onein Chittagong and another in Khulna, have beenworking satisfactorily to provide skill developmenttraining to the unemployed youths to make themself -reliant and to transform the country into atechnologically sound nation. In the meantime,IBIT Dhaka (2 Units), Chittagong, Sylhet and Bograhave got the affiliation of Bangladesh TechnicalEducation Board. In the year 2012, a total numberof 2,066 students were studying in the IBITs.General EducationIslami Bank International School andCollegeAs Dhaka, the capital of Bangladesh, is turning tobe a mega city, a good number of English MediumSchools are creeping up which follows curriculumwithout conforming fully to the need of the country.As an attempt to combine modern educationwith moral values for a total development of thechildren, IBF has established English mediuminternational school and college at 147 GreenRoad, Dhaka. In the year 2012, a total number of266 students were studying in the school.Islami Bank Model School and CollegeIslami Bank Model School and College is one ofthe important projects of IBF. To impart moderneducation with moral values, the school wasstarted at Mirpur, Dhaka where a qualified HeadMaster was appointed. In the year 2012, a totalnumber of 633 students were studying in theinstitution.Islami Bank Mohila MadrashaIslami Bank Mohila Madrasha is one of theimportant projects of IBF. To render moderneducation with moral values the Madrasha wasestablished in Mirpur, Dhaka where a qualifiedHead Mistress was appointed. In the year 2012a total number of 143 students were studying inthe school.Scholarship ProgramScholarship program is one of the importantactivities of IBF. Under this program, scholarshipsare given to the students of Colleges, Madrashaand Universities at home and abroad. Moreover,scholarship is offered to the researchers to obtainMPhil and PhD degrees. In the year 2012, a totalof eight PhD holders received scholarship fromthe Foundation.Class Room of Islami Bank Institute of Technology190Annual Report 2012

Monorom, Islami Bank Crafts and Fashions HouseModel Forquania MaktabModel Forkania Maktab project is one of theimportant projects of IBF. Maktabs run by IBFprovides rural children with the facilities oflearning The Holy Quran as well as English andBangla alphabets and elementary knowledgeof Mathematics helping them a lot to read in theSchool and Madrasha. In the year 2012, so far22,255 students were studying in the ForkaniaMaktabs.Bangladesh Sangskritic KendraTo save our youth force from derailment, it isessential to uphold and promote the culture whichis of our own. Keeping in view the above, IBF hasestablished Bangladesh Sangskritic Kendra inDhaka and Rajshahi and establishing of another32 centers are under process.Islami Bank Women RehabilitationCentreAs part of service to the distressed humanity IBFhas established a centre for shelter, training andrehabilitation of the hapless, helpless, distressed,shelterless widows and divorced women underthe name and style of “Islami Bank WomenRehabilitation Centre” at Mirpur, Dhaka.Monoram - Islami Bank Crafts andFashionsTwo units of Monoram-Islami Bank Crafts andFashions are in operation at Basundhara Cityand the Grand plaza of Moghbazar in the heart ofDhaka city and have been playing a significant rolein uplifting the condition of the poor and distressedwomen through channeling sales opportunity oftheir products.A total of 3,746 employees are serving in the IBFHead Office and in different projects offices.Thus, the Foundation, through its multifariouswelfare programs, is ceaselessly working toserve the distressed humanity and change thesocio-economic status of the un-privileged andneglected section of the society.Annual Report 2012 191

AppreciationThe Board of Directors expresses sinceregratitude to the Almighty Allah for enablingthe bank to achieve steady progress in allaspects of operation during the year 2012. TheBoard extends thanks to the Ministry of Finance,Bangladesh Bank, Bangladesh Securities andExchange Commission, Dhaka Stock ExchangeLimited, Chittagong Stock Exchange Limited,National Board of Revenue, Registrar of JointStock Companies, Statutory Auditors and theGovernment Agencies for providing necessaryassistance, guidance, support and co-operation atvarious stages of operations of the Bank. With deepsense of gratitude, the Board also keeps on recordthe excellent co-operation, exchange of views andconstant support of Islamic Development Bank(IDB), other national and overseas Islamic Banksand Financial Institutions.The Board appreciates the support and cooperationreceived from overseas correspondentsof the bank all over the world. The Boardparticularly records its appreciation for theShari‘ah Supervisory Committee whose guidancehas enabled the Bank to conduct its businesscomplying Islamic principles. The Board ofDirectors also extends the best compliments to allof its valued shareholders, depositors, investmentclients, print and electronic media and otherstakeholders and well-wishers and expressesthanks and gratitude to them for their valuablesupport and confidence reposed on the Bank.The Board would like to express its greatappreciation and thanks to all the officials and staffof the Bank for their untiring efforts, leadership anddedication for bringing about a better performanceof the Bank during the year under report.To conclude, notwithstanding the fact that Islamicbanks have been able to shield themselvesfrom the spillover impact of the global economicrecession, no one can predict the extent to whichthe Islamic finance principles will serve to protectthem from the looming financial crisis. Whilstsome have pointed out that it is already knottedwith the mainstream finance whereby its future isas risky as any other part of the global financialindustry, experts in Islamic finance believe thattheir way of carrying out financing operationshas shielded them from the global credit crunchand hence, the model stands on its own merit.London, Singapore, Paris and Hongkong, thefinancial hubs of the world, are competing witheach other be benefitted out of Islamic finance.Reputed banks like, Standard Chartered , HSBCand Citi Bank have already set up Islamic bankingsubsidiaries that are flourishing.May Allah, the most Merciful bestow on uscourage, dedication, patience and fortitude toserve the cause of Islam and of Bangladesh andrun the bank as per the vision and mission putforth and tenets of Islamic Shari‘ah. Ameen.Dated, DhakaMay 22, 2013On behalf of the Board of DirectorsProf. A.N.M.A. ZaherChairman192Annual Report 2012

Audit Committee ReportIn compliance with the BRPD Circular No. 12,dated 23 December 2002, the formal AuditCommittee of IBBL started functioning dulyappointed by the Bank’s Board of Directors with aview to ensuring the achievement of objectives ofthe Bank, efficiency of operations, and compliancewith the applicable laws, regulations and internalpolicies to make the Bank a unique, strong anddependable organization for all stakeholdersspecifically shareholders, depositors and thesociety as a whole. In this context, the present AuditCommittee comprising of 4(four) members hasbeen appointed by the Bank’s Board of Directorsfor 03(three) years. Pursuant to the instructions ofBangladesh Securities and Exchange Commissionand the Bangladesh Bank, an Independent Directorand two Directors on behalf of the Depositors havebeen included in the Committee.Composition of the AuditCommitteeAs per regulatory guidelines, the CompanySecretary of the bank is the Secretary of the AuditCommittee.functions: ensured effective co-ordination ofexternal audit function, ensured independence ofexternal auditors, reviewed the external auditorsfindings in order to be satisfied that appropriateaction has been taken.Meeting of the Audit CommitteeDuring the year 2012, the Audit Committee of thebank held 22 meetings. Proceedings of the AuditCommittee meetings were reported timely andregularly to the Board of Directors.During the period, the Committee performed,amongst others, the following key functions:1. Carefully evaluated the level of complianceof the Corporate Governance Guidelines ofthe Bangladesh Securities and ExchangeCommission, dated 07.08.2012.2. Evaluated the compliance culture across theBank.3. Reviewed the existing risk managementprocedures for ensuring an effective internalcheck and control system of the Bank.The composition of the present Audit Committee of the BankSl. No.NameStatus in the Board ofDirectorsStatus in the AuditCommittee1. Professor NRM Borhan Uddin, Ph.D. Independent Director Chairman2. Janab Mohamad Adnan Midani(Representative, Islamic Development Bank, KSA.)Foreign DirectorMember3. Janab Md. Abdus Salam, FCA, FCS Depositor Director Member4. Janab Humayun Bokhteyar, ACPA, FCA Depositor Director MemberStatement of the Audit CommitteeThe Audit Committee during its review stated thatthe internal controls of the bank are well conceived,properly administered and satisfactorily monitored.The committee also stated that during itsinvolvement in the review of the external audit4. Pursued the Audit Calendar for the periodunder review and advised to follow the auditprogram meticulously.5. Reviewed the risk grading of the branchesprepared on the basis of audit and inspectionreports.Annual Report 2012 193

6. Discussed the internal and external auditreports and advised the management torectify all lapses revealed in the reports.Additionally from time to time the concernedHead of Wings/Divisions/Branches and otherOffices of the Bank were invited to attendthe meeting of the Audit Committee in orderto augment the process of regularization oflapses and irregularities.7. Discussed the Bangladesh Bank inspectionreports on the Branches and Head office andadvised the management to rectify all lapses.8. Advised the management to complete all thedocumentation formalities carefully and retaineach and every document accurately.9. Reviewed the reports on overdue, classified,rescheduled, written off investment andother non-performing assets and directed toexert all-out efforts to reduce non-performingassets.10. Suggested to take up the matters withconcerned lawyers for early disposal of thesuits for recovery of the Bank’s dues.11. Advised the management to ensure fullcompliance of regulatory issues meticulously.12. Advised the management to ensure fullShari‘ah compliance in all areas of business.13. Suggested some measures for capacitybuilding of the internal auditors and to furtherstrengthen the internal audit function.Statutory Auditors AppointmentThe Audit Committee duly recommends to theBoard for appointing Statutory Auditors in theAnnual General Meeting.Selection of Accounting PolicyThe Audit Committee reviewed the accountingpolicies adopted by the bank and ensured that thepolicies were properly applied in preparation of theFinancial Statements of the Bank.Statements to the Board and ensured thatauthentic and reliable Financial Information havebeen incorporated in preparing those FinancialStatements and in other interim reports.Review of Financial StatementsThe Audit Committee reviewed and examined theFinancial Statements 2012 of the bank to confirmwhether all the disclosures and information havebeen incorporated in the Financial Statementsand whether the Bank followed InternationalAccounting Standards(IAS) and InternationalFinancial Reporting Standards (IFRS) adoptedas Bangladesh Accounting Standards(BAS)and Bangladesh Financial Reporting Standards(BFRS) by the Institute of Chartered Accountantsof Bangladesh, Bank Company Act 1991,Bangladesh Bank Guidelines, the Companies Act1994, the Bangladesh Securities and ExchangeCommission Rules and other laws and rulesapplicable in Bangladesh and also Standardsissued by the Accounting and Auditing Organizationfor Islamic Financial Institutions (AAOIFI), Bahrain,etc. The Committee recommended the FinancialStatements for consideration of the Board.Meeting with the Statutory AuditorsThe Committee met with the Statutory Auditorsfor finalization of financial statements. Itproperly addresses the issues mentioned in theManagement Letter for taking appropriate actionby the management.AcknowledgementThe Committee expressed its profound thanksand gratitude to the Members of the Board,Management, Auditors and all the RegulatoryAuthorities, in particular, Bangladesh Bankand the Bangladesh Securities and ExchangeCommission for their excellent support whileperforming its coveted duties and responsibilities.Interim Financial ReportsThe Audit Committee reviewed and recommendedthe quarterly and the half yearly FinancialProfessor NRM Borhan Uddin, PhDChairmanAudit Committee194Annual Report 2012

Report of the Shari`ah Supervisory CommitteeDuring the year 2012, the Shari`ah SupervisoryCommittee met and reviewed differentoperational activities, including those referred to it bythe Board of Directors as well as the Management ofthe Bank and gave opinions and decisions related toShari`ah. The Honourable members of the Shari`ahSupervisory Committee attended 09 seminarsorganized by the Management of the Bank on theeve of inauguration of new branches and 17 Shari`ahawareness programs arranged by the Head Officeand different Zones. Apart from this, the Shari`ahSecretariat conducted Shari`ah inspection at 266branches (including 30 SME/Krishi Branches) duringthe period excluding new 10 branches of the Bankestablished in 2012 and submitted detailed reportthereon.The duty of the Shari`ah Supervisory Committee is togive independent opinions and necessary guidelinesupon observing and reviewing the activities of thebank and the responsibility of the bank is to ensurethat the Bank conducts its business in accordancewith the rules and principles of Islamic Shari`ah.The Shari`ah Supervisory Committee, after reviewingthe Shari`ah inspection reports, Audited Reports i.e.Balance Sheet, Profit & Loss Accounts and otherFinancial Statements of the Bank for the year 2012,gives the following opinions:1. Shari`ah compliance has significantly beenimproved during the year 2012 compared tolast few years due to different steps takenby the bank such as motivational programs,administrative measures, intensive supervisionand cooperation rendered by the Board ofDirectors, Shari`ah Supervisory Committeeand Management authority and due to creatingShari`ah awareness at branch level and sincereefforts of the manpower of the Bank.2. The investments and transactions performedby Islami Bank Bangladesh Limited during theyear, have been made in accordance with theprinciples of Islamic Shari`ah.3. Profit distributed to deposit accounts has beenmade in accordance with Islamic Shari`ah.4. The income detected as doubtful as perprinciples and rules of Islamic Shari`ah has notbeen included in the distributable income of thebank.5. The calculation of Zakat on the Zakatable assetof the bank has been made in compliance withthe rules and the principles of Islamic Shari`ah.It is pertinent to state that Islami Bank doesnot deduct the Zakat from depositors andshareholders accounts. It is the responsibility ofthe Depositors and Shareholders to pay Zakaton their deposits and shares respectively.6. More precautionary measures are required tobe adopted in appointing Buying Agents in thebranches and to ascertain the duties of theagents and the branches properly.7. The Rural Development Scheme (RDS) is apraiseworthy effort of Islami Bank for povertyeradication of the country. It is essential totake more effective precautionary measures forShari`ah compliance in this respect.May Allah (SWT) bestow us with the best of Tawfiquein gaining His satisfaction through implementingShari`ah in every sphere of our life. Ameen.Sheikh Moulana Mohammad QutubuddinChairmanProfessor Dr. Abu Bakr RafiqueMember SecretaryAnnual Report 2012 195

Auditors’ Report&Audited Financial StatementsofIslami Bank Bangladesh Limitedand its Subsidiaries196Annual Report 2012

Auditors’ Reportto the Shareholders of Islami Bank Bangladesh LimitedWe have audited the accompanying consolidated financial statements of Islami Bank Bangladesh Limited andits 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 andthe consolidated and the separate Profit & Loss Accounts, Statements of Changes in Equity and Cash FlowStatements for the year then ended, and a summary of significant accounting policies and other explanatoryinformation.Management’s Responsibility for the Consolidated and the Separate Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statementsof the Group and the separate financial statements of the Bank in accordance with Bangladesh FinancialReporting Standards (BFRSs), the Bank Company Act 1991, the policies, guidelines, rules and regulationsissued by Bangladesh Bank, the Companies Act 1994, the Securities and Exchange Rules, 1987, principlesof Islamic Shari‘ah and other applicable laws and regulations and for such internal control as managementdetermines is necessary to enable the preparation of financial statements that are free from materialmisstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; andmaking accounting estimates that are reasonable in the circumstances.Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements of the Group and theseparate financial statements of the Bank based on our audit. We conducted our audit in accordance withBangladesh Standards on Auditing (BSA). Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the consolidated financialstatements 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 inthe consolidated financial statements of the Group and the separate financial statements of the Bank. Theprocedures selected depend on the auditors’ judgment, including the assessment of the risks of materialmisstatement of the consolidated financial statements of the Group and the separate financial statementsof the Bank, whether due to fraud or error. In making those risk assessments, we consider internal controlsrelevant to the entity’s preparation and fair presentation of the consolidated financial statements of the Groupand the separate financial statements of the Bank in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’sinternal control. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overallpresentation of the consolidated financial statements of the Group and the separate financial statements ofthe Bank.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion.OpinionIn our opinion, the financial statements referred to above which have been prepared in the format prescribedby Bangladesh Bank vide Circular No. 15 dated 09 November 2009 give a true and fair view of the financialpositions of the Group and the Bank as at 31 December 2012 and their financial performances and cashflows for the year then ended in accordance with Bangladesh Financial Reporting Standards and comply withAnnual 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 otherapplicable laws and regulations.We also report that,i) we have obtained all the information and explanations which to the best of our knowledge and beliefwere necessary for the purposes of our audit and made due verification thereof;ii)iii)iv)in our opinion, proper books of account as required by law have been kept by the Group and theBank so far as it appeared from our examination of those books and proper returns adequate for thepurposes of our audit have been received from branches not visited by us;the consolidated balance sheet and the profit and loss account of the Group and the separatebalance sheet and the profit and loss account of the Bank together with the annexed notes 1 to 44dealt with by the report are in agreement with the books of account and returns;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 forthe year ended 31 December 2012 have been properly reflected in the consolidated financialstatements of the Group and the separate financial statements of the Bank and the consolidatedfinancial statements of the Group and the separate financial statements of the Bank have beenprepared in accordance with the generally accepted accounting principles;vi)the consolidated financial statements of the Group and the separate financial statements of theBank have been drawn up in conformity with the Bank Company Act 1991 and in accordance withthe accounting rules and regulations issued by the Bangladesh Bank and the financial statementsconform to the prescribed standards set in the accounting regulations issued by Bangladesh Bankafter 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 andconsolidated 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 havespent 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 toprevent probable frauds and forgeries;xii) Cash Reserve Requirement (CRR) and Statutory Liquidity Reserve (SLR) with Bangladesh Bankhave been maintained as per rule;xiii) As far as it was revealed from our test checks, the existing rules, regulations and procedures forsanctioning and disbursement of investment have been followed properly; andxiv) the capital adequacy ratio (CAR), as required by law, has been maintained adequately during theyear.Dhaka,28 March 2013A. Qasem & Co.Chartered AccountantsACNABINChartered Accountants198Annual Report 2012

Islami Bank Bangladesh Limited and its SubsidiariesConsolidated Balance SheetAs at 31 December 2012Property and AssetsNotes31.12.2012 31.12.2011TakaTakaCash in hand 7(a) 41,774,012,643 40,631,914,271Cash in hand (including foreign currency) 6,308,274,680 4,655,996,987Balance with Bangladesh Bank & its agent bank(s) (including foreign35,465,737,963 35,975,917,284currency)Balance with other banks & financial institutions 8(a) 24,524,933,077 16,853,296,480In Bangladesh 17,432,561,802 13,140,359,824Outside Bangladesh 7,092,371,275 3,712,936,656Placement with banks & other financial institutions - -Investments in shares & securities 9(a) 25,560,064,458 15,853,181,923Government 23,504,977,770 13,927,177,770Others 2,055,086,688 1,926,004,153Investments 372,920,722,887 305,790,180,873General investments etc. 10(a) 340,479,756,413 287,861,385,224Bills purchased & discounted 11(a) 32,440,966,474 17,928,795,649Fixed assets including premises 12(a) 14,816,765,447 7,110,249,574Other assets 13(a) 3,052,992,955 3,136,781,099Non - banking assets - -Total property and assets 482,649,491,467 389,375,604,220Liabilities and CapitalLiabilitiesPlacement from banks & other financial institutions - -Deposits & other accounts 14(a) 417,845,688,579 341,855,262,815Mudaraba savings deposits 151,012,262,458 132,051,082,776Mudaraba term deposits 97,278,542,378 65,167,293,216Other mudaraba deposits 117,807,137,348 103,114,794,140Al- wadeeah current and other deposit accounts 47,531,708,061 38,658,697,588Bills payable 4,216,038,334 2,863,395,095Mudaraba perpetual bond 3,000,000,000 3,000,000,000Other liabilities 19(a) 21,903,809,274 16,713,922,449Deferred tax liabilities 20(a) 238,628,851 192,664,063Total liabilities 442,988,126,704 361,761,849,327Capital/shareholders’ equity 39,661,364,763 27,613,754,893Paid - up capital 12,509,640,000 10,007,712,000Statutory reserve 12,423,662,342 10,004,426,808Other reserves 11,694,797,161 4,585,606,725Retained earnings 37(a) 3,033,205,973 3,015,952,005Non-controlling interest 37(b) 59,287 57,355Total liabilities & shareholders’ equity 482,649,491,467 389,375,604,220Annual Report 2012 199

Islami Bank Bangladesh Limited and its SubsidiariesConsolidated Balance SheetAs at 31 December 2012Off-balance Sheet ItemsContingent liabilitiesNotes31.12.2012 31.12.2011TakaTakaAcceptances & endorsements - -Letters of guarantee 7,297,485,550 7,302,242,465Irrevocable letters of credit (including back to back bills) 87,161,261,558 86,901,920,097Bills for collection 15,571,833,223 17,727,239,489Other contingent liabilities 13,600,712 1,489,529,264Total 110,044,181,043 113,420,931,315Other commitmentsDocumentary 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 110,044,181,043 113,420,931,315The annexed notes form an integral part of these financial statements.Prof. NRM Borhan Uddin Ph.DDirectorMd. Abdus Salam FCA, FCSDirectorHumayun Bokhteyar, ACPA, FCADirectorMohammad Abdul MannanManaging DirectorThis is the consolidated balance sheet referred to in our separate report of even date.Dhaka28 March 2013A. Qasem & Co.Chartered AccountantsACNABINChartered Accountants200Annual Report 2012

Islami Bank Bangladesh Limited and its SubsidiariesConsolidated Profit & Loss AccountFor the year ended 31 December 2012Operating incomeNotes2012 2011TakaTakaInvestment income 43,672,225,981 32,019,532,444Profit paid on mudaraba deposits (25,870,425,237) (18,401,218,085)Net investment income 17,801,800,744 13,618,314,359Income from investments in shares & securities 27(a) 484,361,836 331,004,637Commission, exchange & brokerage income 28(a) 5,260,647,661 5,297,455,786Other operating income 29(a) 1,122,169,884 876,633,643Total operating income 24,668,980,125 20,123,408,425Operating expensesSalary & allowances 5,961,421,881 4,655,983,050Rent, taxes, insurances, electricity etc. 30(a) 655,576,460 507,063,897Legal expenses 13,479,293 15,257,288Postage, stamps and telecommunication etc. 31(a) 111,528,843 94,267,115Stationery, printing and advertisement etc. 32(a) 267,730,060 198,418,476Chief executive’s salary & fees 5,280,000 5,280,000Directors’ fees & expenses 33(a) 10,066,840 9,530,986Shari‘ah supervisory committee’s fees & expenses 2,584,829 2,749,283Auditors’ fees 2,168,000 1,593,400Charges on investment losses - -Depreciation and repair to bank’s assets 35(a) 504,441,086 409,590,979Zakat expenses 324,772,772 262,929,404Other expenses 36(a) 1,029,710,622 1,128,991,237Total operating expenses 8,888,760,686 7,291,655,115Profit/ (loss) before provision 15,780,219,439 12,831,753,310Provision for investments & off- balance sheet items 3,502,625,602 2,384,314,796Provision for diminution in value of investments in shares 30,969,670 289,077,029Other provisions 9,441,066 -Total provision 3,543,036,338 2,673,391,825Total profit/(loss) before taxes 12,237,183,101 10,158,361,485Provision for taxation for the periodCurrent tax 19.6(a) 6,574,464,832 5,504,252,091Deferred tax 20(b) 45,964,788 29,515,743Net profit/ (loss) after tax 5,616,753,481 4,624,593,651Net profit after tax attributable to: 5,616,753,481 4,624,593,651Equity holders of IBBL 37(a) 5,616,751,549 4,624,597,748Non-controlling interest 1,932 (4,097)Retained earnings from previous year 3,015,952,005 2,624,924,708Add: Net profit after tax (attributable to equity holders of IBBL) 5,616,751,549 4,624,597,748Profit available for appropriation 8,632,703,554 7,249,522,456Appropriation: 8,632,703,554 7,249,522,456Statutory reserve 2,419,235,534 2,069,463,066General reserve (22,205,793) (430,484,615)Dividend 3,202,467,840 2,594,592,000Retained earnings 3,033,205,973 3,015,952,005Consolidated earnings per share 39(a) 4.49 3.70The annexed notes form an integral part of these financial statements.Prof. NRM Borhan Uddin Ph.DDirectorMd. Abdus Salam FCA, FCSDirectorHumayun Bokhteyar, ACPA, FCADirectorMohammad Abdul MannanManaging DirectorThis is the consolidated profit & loss account referred to in our separate report of even date.Dhaka28 March 2013A. Qasem & Co.Chartered AccountantsACNABINChartered AccountantsAnnual Report 2012 201

Islami Bank Bangladesh Limited and its SubsidiariesConsolidated Cash Flow StatementFor the year ended 31 December 2012Cash flows from operating activitiesNote2012 2011TakaTakaInvestment income 42,092,371,173 32,019,532,444Profit paid on mudaraba deposits (24,290,570,429) (16,954,828,500)Income/ dividend receipt from investments in shares & securities 484,361,836 331,004,637Fees & commission receipt in cash 5,260,647,661 5,297,455,786Recovery from written off investments 107,882,331 77,081,305Payments 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 1,014,287,553 799,552,338Payments for other operating activities (2,189,000,103) (2,020,929,003)(i) Operating profit before changes in operating assets 11,307,952,826 10,594,792,392Changes in operating assets and liabilitiesIncrease/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) 501,270,743Increase/decrease of deposits received from customers 76,377,684,681 47,970,108,822Increase/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 4,355,743,131Net cash flows from operating activities (A)=(i+ii) 20,561,569,714 14,950,535,523Cash flows from investing activitiesProceeds 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 activitiesReceipts from issue of debt instruments - -Payment for redemption of debt instruments - -Receipts from issuing ordinary share/ rights share - 48,000Dividend paid in Cash (700,539,840) -Net cash flows from financing activities (C) (700,539,840) 48,000Net increase/(decrease) in cash (A+B+C) 8,817,038,740 11,317,093,196Add/(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 46,168,117,555Cash & cash equivalents at the end of the year 42(a) 66,298,945,720 57,485,210,751The annexed notes form an integral part of these financial statements.Prof. NRM Borhan Uddin Ph.DDirectorMd. Abdus Salam FCA, FCSDirectorHumayun Bokhteyar, ACPA, FCADirectorMohammad Abdul MannanManaging DirectorThis is the consolidated cash flow statement referred to in our separate report of even date.Dhaka28 March 2013A. Qasem & Co.Chartered AccountantsACNABINChartered Accountants202Annual Report 2012

Islami Bank Bangladesh Limited and its SubsidiariesConsolidated Statement of Changes in EquityFor the year ended 31 December 2012(Amount in Taka)Particulars Paid-up capitalSharepremiumStatutoryreserveGeneral/ otherreserves *AssetsrevaluationreserveRevaluationreserve ofsecuritiesRetainedearningsNon-controllinginterestTotal1 2 3 4 5 6 7 8 9 10(2+3+4+5+6+7+8+9)Balance as at 01 January 2012 10,007,712,000 1,989,633 10,004,426,808 184,645,772 4,308,071,320 90,900,000 3,015,952,005 57,355 27,613,754,893Changes in accounting policy restated balance - - - - - - - - -Surplus/ (deficit) on account of revaluation ofproperties- - - - 7,190,900,000 - - - 7,190,900,000Surplus/ (deficit) on account of revaluation ofinvestments (shares & securities)- - - - - (56,200,000) - - (56,200,000)Currency translation differences - - - (3,303,771) - - - - (3,303,771)Net gain and losses not recognized in the incomestatement- - - - - - - - -Net profit for the period - - - - - - 5,616,751,549 1,932 5,616,753,481Transfer to reserve - - 2,419,235,534 (22,205,793) - - (2,397,029,741) - -Dividend: -Bonus shares 2,501,928,000 - - - - - (2,501,928,000) - -Cash dividend - - - - - - (700,539,840) - (700,539,840)Issue of share capital - - - - - - - - -Total shareholders’ equity as on 31 December201212,509,640,000 1,989,633 12,423,662,342 159,136,208 11,498,971,320 34,700,000 3,033,205,973 59,287 39,661,364,763Add: Mudaraba perpetual bond - - - - - - - - 3,000,000,000Add: General provision for unclassified investmentsand off- balance sheet items- - - 5,036,350,000 - - - - 5,036,350,000Adjustment for currency translation differences - - - 3,303,771 - - - - 3,303,771Less: 50.00% of assets revaluation reserve - - - - (5,749,485,660) - - - (5,749,485,660)Less: 50.00% of revaluation reserve of securities - - - - - (17,350,000) - - (17,350,000)Total equity as on 31 December 2012 12,509,640,000 1,989,633 12,423,662,342 5,195,486,208 5,749,485,660 17,350,000 3,033,205,973 59,287 41,934,182,874*Note : General / other reserves 2012 2011General reserve 152,645,772 583,130,387Dividend equalization account 32,000,000 32,000,000Total 184,645,772 615,130,387Annual Report 2012 203

Particulars Paid-up capitalIslami Bank Bangladesh Limited and its SubsidiariesConsolidated Statement of Changes in EquitySharepremiumFor the year ended 31 December 2011 (Amount in Taka)StatutoryreserveGeneral/ otherreserves *AssetsrevaluationreserveRevaluationreserve ofsecuritiesRetainedearningsNon-controllinginterest1 2 3 4 5 6 7 8 9 10(2+3+4+5+6+7+8+9)Balance as at 01 January 2011 7,413,120,000 1,989,633 7,934,963,742 615,130,387 4,313,460,000 621,000,000 2,624,924,708 13,452 23,524,601,922Changes in accounting policy restated balance - - - - - - - - -Surplus/ (deficit) on account of revaluation of properties - - - - - - - -Surplus/ (deficit) on account of revaluation ofinvestments (shares & securities)- - - - (5,388,680) (530,100,000) - - (535,488,680)Currency translation differences - - - - - - - - -Net gain and losses not recognized in the incomestatement- - - - - - - - -Net profit for the period - - - - - - 4,624,597,748 (4,097) 4,624,593,651Transfer to reserve - - 2,069,463,066 (430,484,615) - (1,638,978,451) - -Dividend:Bonus shares 2,594,592,000 - - - - - (2,594,592,000) - -Cash dividend - - - - - - - - -Issue of share capital - - - - - - - 48,000 48,000Total shareholders’ equity as on 31 December 2011 10,007,712,000 1,989,633 10,004,426,808 184,645,772 4,308,071,320 90,900,000 3,015,952,005 57,355 27,613,754,893Add: Mudaraba perpetual bond - - - - - - - - 3,000,000,000Add: General provision for unclassified investmentsand off- balance sheet items- - - 5,116,000,000 - - - - 5,116,000,000Less: 50.00% of assets revaluation reserve - - - - (2,154,035,660) - - - (2,154,035,660)Less: 50.00% of revaluation reserve of securities - - - - - (45,450,000) (45,450,000)Total equity as on 31 December 2011 10,007,712,000 1,989,633 10,004,426,808 5,300,645,772 2,154,035,660 45,450,000 3,015,952,005 57,355 33,530,269,233TotalProf. NRM Borhan Uddin Ph.DDirectorHumayun Bokhteyar, ACPA, FCADirectorMd. Abdus Salam FCA, FCSDirectorMohammad Abdul MannanManaging DirectorThis is the consolidated statement of changes in equity referred to in our separate report of even date.Dhaka28 March 2013A. Qasem & Co.Chartered AccountantsACNABINChartered Accountants204Annual Report 2012

Islami Bank Bangladesh LimitedBalance SheetAs at 31 December 2012Property and AssetsNotes31.12.2012 31.12.2011TakaTakaCash in hand 7.0 41,774,009,647 40,631,897,477Cash in hand (including foreign currency) 6,308,271,684 4,655,980,193Balance with Bangladesh Bank & its agent bank(s) (including foreign35,465,737,963 35,975,917,284currency)Balance with other banks & financial institutions 8.0 23,048,348,207 15,577,309,475In Bangladesh 15,955,976,932 11,864,372,819Outside Bangladesh 7,092,371,275 3,712,936,656Placement with banks & other financial institutions - -Investments in shares & securities 9.0 27,010,073,770 16,932,273,770Government 23,504,977,770 13,927,177,770Others 3,505,096,000 3,005,096,000Investments 10.0 372,920,722,887 305,840,563,170General investments etc. 340,479,756,413 287,911,767,521Bills purchased & discounted 11.0 32,440,966,474 17,928,795,649Fixed assets including premises 12.0 14,808,228,329 7,100,192,269Other assets 13.0 2,974,933,877 3,109,886,617Non - banking assets - -Total property and assets 482,536,316,717 389,192,122,778Liabilities and CapitalLiabilitiesPlacement from banks & other financial institutions - -Deposits & other accounts 14.0 417,844,142,245 341,853,672,959Mudaraba savings deposits 151,012,262,458 132,051,082,776Mudaraba term deposits 97,278,542,378 65,167,293,216Other mudaraba deposits 15.0 117,807,137,348 103,114,794,140Al- wadeeah current and other deposit accounts 16.0 47,530,161,727 38,657,107,732Bills payable 17.0 4,216,038,334 2,863,395,095Mudaraba perpetual bond 18.0 3,000,000,000 3,000,000,000Other liabilities 19.0 21,698,433,977 16,345,905,454Deferred tax liabilities 20.0 238,230,992 192,330,992Total liabilities 442,780,807,214 361,391,909,405Capital/ shareholders’ equity 39,755,509,503 27,800,213,373Paid - up capital 21.2 12,509,640,000 10,007,712,000Statutory reserve 22.0 12,423,662,342 10,004,426,808Other reserves 23.0 11,694,797,161 4,585,606,725Retained Earnings 3,127,410,000 3,202,467,840Total liabilities & shareholders’ equity 482,536,316,717 389,192,122,778Annual Report 2012 205

Islami Bank Bangladesh LimitedBalance SheetAs at 31 December 2012Off-balance Sheet ItemsNotes31.12.2012 31.12.2011TakaTakaContingent liabilitiesAcceptances & endorsements - -Letters of guarantee 24.0 7,297,485,550 7,302,242,465Irrevocable letters of credit (including back to back bills) 87,161,261,558 86,901,920,097Bills for collection 15,571,833,223 17,727,239,489Other contingent liabilities 13,600,712 1,489,529,264Total 110,044,181,043 113,420,931,315Other commitmentsDocumentary 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 othercommitments- -Total - -Total off-balance sheet items including contingent liabilities 110,044,181,043 113,420,931,315The annexed notes form an integral part of these financial statements.Prof. NRM Borhan Uddin Ph.DDirectorMd. Abdus Salam FCA, FCSDirectorHumayun Bokhteyar, ACPA, FCADirectorMohammad Abdul MannanManaging DirectorThis is the balance sheet referred to in our separate report of even date.Dhaka28 March 2013A. Qasem & Co.Chartered AccountantsACNABINChartered Accountants206Annual Report 2012

Operating incomeIslami Bank Bangladesh LimitedProfit & Loss AccountFor the year ended 31 December 2012Notes2012 2011TakaTakaInvestment income 25.0 43,672,225,981 32,019,532,444Profit paid on mudaraba deposits 26.0 (25,870,425,237) (18,401,218,085)Net investment income 17,801,800,744 13,618,314,359Income from investments in shares & securities 27.0 431,970,748 289,370,090Commission, exchange & brokerage income 28.0 5,249,699,981 5,284,102,499Other operating income 29.0 991,873,131 808,291,910Total operating income 24,475,344,604 20,000,078,858Operating expensesSalary & allowances 5,951,305,071 4,646,993,224Rent, taxes, insurances, electricity etc. 30.0 652,494,766 503,637,923Legal expenses 13,479,293 15,257,288Postage, stamps and telecommunication etc. 31.0 111,417,653 94,161,200Stationery, printing and advertisement etc. 32.0 267,547,822 198,119,152Chief executive’s salary & fees 5,280,000 5,280,000Directors’ fees & expenses 33.0 10,066,840 9,254,986Shari‘ah supervisory committee’s fees & expenses 34.0 2,584,829 2,749,283Auditors’ fees 2,070,000 1,567,500Charges on investment losses - -Depreciation and repair to bank’s assets 35.0 500,228,968 407,057,924Zakat expenses 324,772,772 262,929,404Other expenses 36.0 1,025,852,252 1,121,440,847Total operating expenses 8,867,100,266 7,268,448,731Profit/ (loss) before provision 15,608,244,338 12,731,630,127Provision for investments & off- balancesheet items (Note 19.2, 19.3 & 19.4)3,502,625,602 2,384,314,796Provision for diminution in value of investments in shares - -Other provisions 19.5 9,441,066 -Total provision 3,512,066,668 2,384,314,796Total profit/(loss) before taxes 12,096,177,670 10,347,315,331Provision for taxation for the periodCurrent tax 19.6 6,525,837,929 5,476,469,040Deferred tax 20.0 45,900,000 29,400,000Net profit/ (loss) after tax 5,524,439,741 4,841,446,291Retained earnings from previous year 3,202,467,840 2,594,592,000Add: Net profit after tax 5,524,439,741 4,841,446,291Profit available for appropriation 8,726,907,581 7,436,038,291Appropriation: 8,726,907,581 7,436,038,291Statutory reserve 2,419,235,534 2,069,463,066General reserve (22,205,793) (430,484,615)Dividend 3,202,467,840 2,594,592,000Retained earnings 37.0 3,127,410,000 3,202,467,840Earnings per share (EPS) 39.0 4.42 3.87The annexed notes form an integral part of these financial statements.Prof. NRM Borhan Uddin Ph.DDirectorMd. Abdus Salam FCA, FCSDirectorHumayun Bokhteyar, ACPA, FCADirectorThis is the profit & loss account referred to in our separate report of even date.Dhaka28 March 2013A. Qasem & Co.Chartered AccountantsMohammad Abdul MannanManaging DirectorACNABINChartered AccountantsAnnual Report 2012 207

Islami Bank Bangladesh LimitedCash Flow StatementFor the year ended 31 December 2012Cash flows from operating activitiesNote2012 2011TakaTakaInvestment income 42,092,371,173 32,019,532,444Profit paid on mudaraba deposits (24,290,570,429) (16,954,828,500)Income/ dividend receipt from investments in shares & securities 431,970,748 289,370,090Fees & commission receipt in cash 5,249,699,981 5,284,102,499Recovery from written off investments 107,882,331 77,081,305Payments 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 883,990,800 731,210,605Payments for other operating activities (2,180,853,649) (2,010,895,339)(i) Operating profit before changes in operating assets 11,181,001,094 10,500,703,787Changes in operating assets and liabilitiesIncrease/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) 501,270,743Increase/decrease of deposits received from customers 76,428,110,500 47,971,410,361Increase/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 5,894,416,833Net cash flows from operating activities (A)=(i+ii) 20,410,650,708 16,395,120,620Cash flows from investing activitiesProceeds 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 activitiesReceipts 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 10,475,910,801Add/(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 45,733,296,151Cash & cash equivalents at the end of the year 42.0 64,822,357,854 56,209,206,952The annexed notes form an integral part of these financial statements.Prof. NRM Borhan Uddin Ph.DDirectorMd. Abdus Salam FCA, FCSDirectorHumayun Bokhteyar, ACPA, FCADirectorMohammad Abdul MannanManaging DirectorThis is the cash flow statement referred to in our separate report of even date.Dhaka28 March 2013A. Qasem & Co.Chartered AccountantsACNABINChartered Accountants208Annual Report 2012

Particulars Paid-up capitalIslami Bank Bangladesh LimitedStatement of Changes in EquityFor the year ended 31 December 2012SharepremiumStatutoryreserveGeneral/ otherreserves *AssetsrevaluationreserveRevaluationreserve ofsecuritiesRetainedearnings(Amount in Taka)1 2 3 4 5 6 7 8 9 (2+3+ 4+5+6+7+ 8)Balance as at 01 January 2012 10,007,712,000 1,989,633 10,004,426,808 184,645,772 4,308,071,320 90,900,000 3,202,467,840 27,800,213,373Changes in accounting policy restated- - - - - - - -balanceSurplus/ (deficit) on account ofrevaluation of propertiesSurplus/ (deficit) on account ofrevaluation of investments (shares &securities)- - - - 7,190,900,000 - 7,190,900,000- - - - - (56,200,000) - (56,200,000)Currency translation differences - - - (3,303,771) - - - (3,303,771)Net gain and losses not recognized inthe income statement- - - - - - - -Net profit for the period - - - - - - 5,524,439,741 5,524,439,741Transfer to reserve - - 2,419,235,534 (22,205,793) - - (2,397,029,741) -Dividend:Bonus shares 2,501,928,000 - - - - - (2,501,928,000) -Cash dividend - - - - - - (700,539,840) (700,539,840)Issue of share capital - - - - - - - -Total shareholders’ equity as on 31December 201212,509,640,000 1,989,633 12,423,662,342 159,136,208 11,498,971,320 34,700,000 3,127,410,000 39,755,509,503Add: Mudaraba perpetual bond - - - - - - - 3,000,000,000Add: General provision for unclassifiedinvestments and off- balance sheet items- - - 5,036,350,000 - - - 5,036,350,000Adjustment for currency translationdifferences- - - 3,303,771 - - - 3,303,771Less: 50.00% of assets revaluationreserve- - - - (5,749,485,660) - - (5,749,485,660)Less: 50.00% of revaluation reserve ofsecurities- - - - - (17,350,000) - (17,350,000)Total equity as on 31 December 2012 12,509,640,000 1,989,633 12,423,662,342 5,198,789,979 5,749,485,660 17,350,000 3,127,410,000 42,028,327,614Total*Note : General / other reserves 2012 2011General reserve 152,645,772 583,130,387Dividend equalization account 32,000,000 32,000,000Total 184,645,772 615,130,387Annual Report 2012 209

Particulars Paid-up capitalSharepremiumIslami Bank Bangladesh LimitedStatement of Changes in EquityFor the year ended 31 December 2011StatutoryreserveGeneral/ otherreservesAssetsrevaluationreserveRevaluationreserve ofsecuritiesRetainedearnings(Amount in Taka)1 2 3 4 5 6 7 8 9 (2+3+ 4+5+6+7+ 8)Balance as at 01 January 2011 7,413,120,000 1,989,633 7,934,963,742 615,130,387 4,313,460,000 621,000,000 2,594,592,000 23,494,255,762Changes in accounting policy restatedbalance- - - - - - - -Surplus/ (deficit) on account ofrevaluation of properties- - - - - - - -Surplus/ (deficit) on account ofrevaluation of investments (shares &- - - - (5,388,680) (530,100,000) - (535,488,680)securities)Currency translation differences - - - - - - - -Net gain and losses not recognized inthe income statement- - - - - - - -Net profit for the period - - - - - - 4,841,446,291 4,841,446,291Transfer to reserve - - 2,069,463,066 (430,484,615) - - (1,638,978,451) -Dividend:Bonus shares 2,594,592,000 - - - - - (2,594,592,000) -Cash dividend - - - - - - - -Issue of share capital - - - - - - - -Total shareholders’ equity as on 31December 201110,007,712,000 1,989,633 10,004,426,808 184,645,772 4,308,071,320 90,900,000 3,202,467,840 27,800,213,373Add: Mudaraba perpetual bond - - - - - - - 3,000,000,000Add: General provision for unclassifiedinvestments and off- balance sheet items- - - 5,116,000,000 - - - 5,116,000,000Less: 50.00% of assets revaluation reserve - - - - (2,154,035,660) - - (2,154,035,660)Less: 50.00% of revaluation reserve ofsecurities- - - - - (45,450,000) - (45,450,000)Total equity as on 31 December 2011 10,007,712,000 1,989,633 10,004,426,808 5,300,645,772 2,154,035,660 45,450,000 3,202,467,840 33,716,727,713TotalProf. NRM Borhan Uddin Ph.DDirectorHumayun Bokhteyar, ACPA, FCADirectorMd. Abdus Salam FCA, FCSDirectorMohammad Abdul MannanManaging DirectorThis is the statement of changes in equity referred to in our separate report of even date.Dhaka28 March 2013A. Qasem & Co.Chartered AccountantsACNABINChartered Accountants210Annual Report 2012

Islami Bank Bangladesh LimitedLiquidity StatementAssets & liabilities analysisAs at 31 December 2012Particulars Up to 1 Month 1 - 3 Months 3 - 12 Months 1 - 5 yearsMore than 5years1 2 3 4 5 6Total 31.12.2012 Total 31.12.20117=(2 + 3 + 4 +5 + 6)ASSETSCash in hand 6, 308,271,684 - - - - 6,308,271,684 4,655,980,193Balance with other banks & financial institutions 34,524,086,170 14,800,000,000 9,190,000,000 - - 58,514,086,170 51,553,226,759Placement with Banks & other Financial Institutions - - - - - - -Investments (in shares & securities) 54,700,000 4,000,000,000 15,434,000,000 4,000,000,000 3,521,373,770 27,010,073,770 16,932,273,770General investments etc. 31,791,392,460 73,313,354,365 108,070,736,432 82,343,342,943 77,401,896,687 372,920,722,887 305,840,563,170Fixed assets including premises (land & building), furniture and fixtures - - 305,043,651 406,658,946 14,096,525,732 14,808,228,329 7,100,192,269Other assets 209,265,864 1,589,625,634 615,435,843 374,868,902 185,737,634 2,974,933,877 3,109,886,617Non - banking assets - - - - - - -Total assets 72,887,716,178 93,702,979,999 133,615,215,927 87,124,870,791 95,205,533,823 482,536,316,717 389,192,122,778LIABILITIESPlacement from banks & other financial institutions - - - - - - -Deposits 50,491,777,908 86,118,226,950 117,306,521,119 86,900,534,735 77,027,081,533 417,844,142,245 341,853,672,959Other accounts - - - - - - -Provision & other liabilities 1,742,432,651 518,436,527 1,816,543,853 5,967,635,497 11,653,385,449 21,698,433,977 16,345,905,454Deferred tax liability/ (assets) - - - - 238,230,992 238,230,992 192,330,992Mudaraba perpetual bond - - - - 3,000,000,000 3,000,000,000 3,000,000,000Total liabilities 52,234,210,559 86,636,663,477 119,123,064,972 92,868,170,232 91,918,697,974 442,780,807,214 361,391,909,405Net liquidity gap 20,653,505,619 7,066,316,523 14,492,150,955 (5,743,299,441) 3,286,835,849 39,755,509,503 27,800,213,3738Prof. NRM Borhan Uddin Ph.DDirectorHumayun Bokhteyar, ACPA, FCADirectorMd. Abdus Salam FCA, FCSDirectorMohammad Abdul MannanManaging DirectorThis is the liquidity statement referred to in our separate report of even date.Dhaka28 March 2013A. Qasem & Co.Chartered AccountantsACNABINChartered AccountantsAnnual Report 2012 211

Islami Bank Bangladesh Limited and its SubsidiariesNotes to the consolidated financial statementsFor the year ended 31 December 20121.0 The Bank and its activities1.1 Islami Bank Bangladesh Limited (“the Bank”/”IBBL”) was established as a Public Limited BankingCompany in Bangladesh in 1983 as the first interest free Shari‘ah based Scheduled CommercialBank in the South East Asia. Naturally, its modus operandi is substantially different from those of otherconventional 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 theBank are being conducted on the precepts of Islam. The Shari‘ah Supervisory Committee consistsof 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 StockExchange Limited and the shares of the Bank are listed with both the Stock Exchanges. The Bank carriesout its business activities through its Head Office in Dhaka, 14 Zonal Offices and 276 branches including 30SME/Agriculture branches in Bangladesh. The Principal place of business is the Registered Office at IslamiBank Tower, 40, Dilkusha Commercial Area, Dhaka-1000, Bangladesh.These financial statements as at and for the year ended 31 December 2012 include the consolidated financialstatements and the separate financial statements of the Bank. The consolidated financial statements comprisethe financial statements of the Bank and its subsidiaries (mentioned in Note - 1.4, together referred to as “theCompanies”).1.2 Nature of business/principal activities of the Bank1.2.1 Commercial banking servicesAll kinds of commercial banking services are provided by the Bank to the customers following the principles ofIslamic Shari‘ah, the provisions of the Bank Company Act, 1991, Bangladesh Bank’s directives and directivesof other regulatory authorities.1.2.2 Islamic micro-financeIslamic 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 sothat the members are really benefitted. IBBL provides this services under the umbrella of Rural DevelopmentScheme (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). IslamiBank mCash offers different services through Mobile phone that include free and quick opening of customeraccount, deposit and withdrawal of cash money, fund transfer from one account to another, receivingremittance from abroad, knowing account balance and mini-statement, giving and receiving salary, mobilerecharge 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 BangladeshLimited 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 commencedthe operation of its Off-shore Banking Unit from 08.02.2011 at Head Office Complex Branch, Dhaka, andfrom 27.09.2011 at Agrabad Branch, Chittagong. Operations of OBU located at Uttara Branch, Dhaka hasnot been started yet. Due to having different functional currency (Note 2.3), the operation of OBU has beenconsidered as “foreign operation” for reporting purposes and relevant financial reporting standards have beenapplied accordingly (Note 3.2.2).212Annual Report 2012

1.4 Subsidiaries of the Bank1.4.1 Islami Bank Securities Limited (IBSL)As per Securities and Exchange Commission’s (SEC) Letter No. SEC/Reg/CSE/MB/ 2009/444 dated20.12.2009 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 andstock dealer activities.The share capital of Islami Bank Securities Ltd. is Tk. 2,700,000,000/- divided into 2,700,000 shares ofTk.1,000/ each out of which share capital of IBBL is Tk. 2,699,946,000/- divided into 2,699,946 shares ofTk.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. Requiredcapital was transferred to IBSL on 25.05.2010 which is operating business under the license issued by theSecurities & Exchange Commission (SEC).As a stock broker, IBSL acts as an agent in the purchase and sale of Shari‘ah approved listed securitiesand realizes commission on transactions in accordance with approved commission schedule. FinancialStatements 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 throughLetter 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 managementetc. 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 sharesof Tk.1,000/ each out of which share capital of IBBL is Tk.299,993,000/- divided into 299,993 shares ofTk.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 operationof 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 underprocess to incorporate in Singapore for money-remittance, changing, transmitting and doing all matters andthings incidental thereto under the Companies Act, CAP. 50 of the Republic of Singapore.2.0 Basis of preparation2.1 Statement of complianceThe 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 preparedbasically as per provisions of the “Guidelines for Islamic Banking” issued by Bangladesh Bank throughBRPD Circular No. 15 dated 09.11.2009 with reference to the provisions of the Bank Company Act, 1991as amended by Bangladesh Bank BRPD Circular No.14 dated 25.06.2003 & Bangladesh Bank’s othercirculars/instructions and in accordance with International Financial Reporting Standards (IFRSs) adopted asBangladesh 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 StockExchanges’ Listing Regulations and other laws and rules applicable in Bangladesh, Standards issued bythe Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), as a member of thatorganization.In case the requirement of guidelines and circulars issued by Bangladesh Bank differ with those of otherregulatory authorities and financial reporting standards, the guidelines and circulars issued by BangladeshBank prevails. As such the Bank has departed from those contradictory requirements of BFRSs in order tocomply with the rules and regulations of Bangladesh Bank which are disclosed below:Annual Report 2012 213

i) Provision on investments and off-balance sheet exposuresAs per BAS 39 “Financial Instruments: Recognition and Measurement”, an entity should start theimpairment assessment by considering whether objective evidence of impairment exists for financialassets that are individually significant. For financial assets are not individually significant, theassessment can be performed on an individual or collective (portfolio) basis and investments shouldbe presented net of provisions. Instead of complying with the above, the Bank has made provision oninvestments and off-balance sheet exposures as per Bangladesh Bank circulars (Note -3.16.1) andprovision on investments has been presented separately as a liability in the financial statements.ii)Other comprehensive incomeAs per BAS 1 “Presentation of Financial Statements”, Other Comprehensive Income is a componentof financial statements or the elements of Other Comprehensive Income (OCI) are to be included ina Single Statement of Comprehensive Income. Instead the Bank prepare it financial statements asper prescribed guidelines of Bangladesh Bank where there is no scope to include the OCI nor theelements of OCI in a single Profit & Loss Account. However elements of OCI, if any, are shown in thestatements of changes in equity.iii)Financial instruments - presentation and disclosureIn several cases Bangladesh Bank guidelines categorize, recognize, measure and present financialinstruments differently from those prescribed in BAS 39 “Financial Instruments: Recognition andMeasurement”, BFRS 7 “Financial Instruments: Disclosures” and BAS 32 “Financial Instruments:Presentation”. In those cases Bangladesh Bank guidelines have been followed.iv)Financial guaranteesAs per BAS 39 “Financial Instruments: Recognition and Measurement” financial guarantees arecontracts that require an entity to make specified payments to reimburse the holder for a loss it incursbecause a specified debtor fails to make payment when due in accordance with the terms of a debtinstrument. Financial guarantee liabilities are recognized initially at their fair value, and the initial fairvalue is amortized over the life of the financial guarantee. Whereas as per Bangladesh Bank, financialguarantees such as Letter of Credit (L/C), Letter of Guarantee (L/G) should be treated as off-balancesheet items. No liability is recognized for the guarantee except the cash margin.v) Cash flow statementAs per BAS 7 “Statement of Cash Flows”, Cash flow statement can be prepared either in directmethod or in indirect method. The presentation is selected to present these cash flows in a mannerthat is most appropriate for the business or industry. Bangladesh Bank guidelines have been followedinstead of BAS 7.vi)Balance with Bangladesh BankBalance with Bangladesh Bank Principal Account as Cash Reserve Requirment (CRR) should betreated 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 andcash equivalents.Vii)RevenueAs per BAS 18 “Revenue”, revenue should be recognized on accrual basis but due to the uniquenature of Islamic Banks, income from investment under Mudaraba, Musharaka, Bai-Salam and Baias-Sarfmodes 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 issueThe consolidated financial statements and the separate financial statements of the Bank have been authorizedfor issue by the Board of Directors on 28 March 2013.214Annual Report 2012

2.1.2 New standards adopted but not yet effectiveA number of new International Financial Reporting Standards (IFRSs) have been adopted by The Institute ofChartered Accountants of Bangladesh (ICAB) as Bangladesh Financial Reporting Standards (BFRSs) whichare 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 StatementsBFRS 11 Joint ArrangementsBFRS 12 Disclosure of Interests in Other Entities andBFRS 13 Fair Value MeasurementBFRS 10 introduces a single control model to determine whether an investee should be consolidated. BFRS11 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 insubsidiaries, joint arrangements, associates and unconsolidated structured entities. It requires the disclosureof information about the nature, risks and financial effects of these interests. BFRS 13 provides a singlesource of guidance on how fair value is measured, and replaces the fair value measurement guidance that iscurrently dispersed throughout BFRSs.2.2 Basis of measurementThe financial statements have been prepared on the historical cost basis except for the following materialitems:- Land is recognized at cost at the time of acquisition and subsequently measured at fair value followingrevaluation model as per BAS 16 “Property Plant & Equipment”.- Investments in quoted shares are revalued at the year end at market price as per Bangladesh Bankcircular.2.3 Functional and presentation currencyThe consolidated financial statements and the separate financial statements of the Bank are presented inBangladeshi Taka (Taka/Tk./BDT) which is the functional currency of the Bank and its subsidiaries exceptOff-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 otherwiseindicated.2.4 Use of estimates and judgmentsThe preparation of the consolidated financial statements and the separate financial statements of the Bank inconformity with BFRSs require management to make judgments, estimates and assumptions that affect theapplication of accounting policies and the reported amount of assets, liabilities, income and expenses. Actualresults may differ from these estimates.Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimatesare 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 accountingpolicies that have the most significant effect on the amounts recognized and presented in the consolidatedfinancial statements and the separate financial statements of the Bank are included in following notes/statements:a) Note 19.6 Current tax liabilitiesb) Note 20.0 Deferred tax liabilitiesc) Note 35.0 Depreciationd) Note 19.2-19.5 Provisions for investments and other assetse) Note 23.1 Asset revaluation reservef) Liquidity statement Assets & liabilities analysisAnnual Report 2012 215

2.5 Cash flow statementCash Flow Statement is prepared in accordance with BAS 7 “Statement of Cash Flows”, and as per “Guidelinesfor Islamic Banking” issued by Bangladesh Bank through BRPD Circular No. 15 dated 09.11.2009 andBRPD Circular No.14 dated 25.06.2003. The Statement shows the structure of changes in cash and cashequivalents during the financial year.2.6 Statement of changes in equityStatement of Changes in Equity has been prepared in accordance with BAS 1 “Presentation of FinancialStatements”, and as per “Guidelines for Islamic Banking” issued by Bangladesh Bank through BRPD CircularNo. 15 dated 09.11.2009 and BRPD Circular No.14 dated 25.06.2003.2.7 Liquidity statementLiquidity Statement has been prepared in accordance with the residual/remaining maturity of Assets andLiabilities as on 31 December 2012 and as per “Guidelines for Islamic Banking” issued by Bangladesh Bankthrough BRPD Circular No. 15 dated 09.11.2009 and BRPD Circular No.14 dated 25.06.2003 as per thefollowing 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 morethan 5 (five) years.2.8 Reporting periodThese financial statements of the Bank and its subsidiaries cover one calendar year from 1 January 2012 to31 December 2012.3.0 Significant accounting policiesThe accounting policies set out below have been applied consistently to all periods presented in theconsolidated 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 issuedby Bangladesh Bank (Note 3.16.1).Certain comparative amounts in the financial statements have reclassified and rearranged to conform to thecurrent year’s presentation.3.1 Basis of consolidation3.1.1 SubsidiariesSubsidiaries are entities controlled by the Parent. Control exists when the Parent has the power to govern thefinancial and operating policies of an entity, so as to obtain economic benefits from its activities. The financialstatements of subsidiaries are included in the consolidated financial statements from the date that controlcommences until the date that control ceases.3.1.2 Transactions eliminated on consolidationInter-company balances and transactions, and any unrealized income and expenses (except for foreigncurrency transaction gains and losses) arising from inter-company transactions are eliminated in preparingconsolidated 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 heldby the Bank in the separate financial statements are eliminated against the corresponding share capital ofsubsidiaries in the consolidated financial statements.216Annual Report 2012

3.2 Foreign currency3.2.1 Foreign currency transactionsTransactions in foreign currencies are translated into the respective functional currencies (Bangladeshi Takain case of IBBL Main Operations and US Dollar in case of OBU) at the spot exchange rates ruling at thedate of transactions as per BAS 21 “The Effects of Changes in Foreign Exchange Rates”. Monetary assetsand liabilities held in US Dollar at the reporting date are retranslated into the functional currency in BDT atthe weighted average revaluation rate of inter-bank market as determined by Bangladesh Bank. Monetaryassets and liabilities denominated in other foreign currencies at the reporting date are first translated into USDollar at buying rates of New York closing of the previous day and then retranslated from US Dollar into thefunctional currencies in the same specified above.Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value areretranslated 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 theexchange rate at the date of the transaction.Foreign exchange differences (rates at which transactions were initially recorded and the rate prevailing onthe reporting date/date of settlements) of the monetary items are recognized in the profit and loss.3.2.2 Foreign operationsThe assets and liabilities of foreign operations (Note - 1.3) are translated to Bangladeshi Taka at spot exchangerates prevailing at the reporting date. The income and expenses of foreign operations are translated atspot exchange rates at the date of transactions as long as practicable otherwise average rate of exchangehas been used. Foreign currency differences arising on translation are recognized in other comprehensiveincome and presented in the foreign currency translation reserve (translation reserve) in equity.3.3 Revenue3.3.1 Investment incomeIncome 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 andcommission 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 itfixes the sale price of the assets at a higher level in such a way to cover its expected rate of return. Suchincome is recognized on realization basis.Profit/Rent/Compensation accrued on Special Mention Account and Classified Investments are suspendedand 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 incomeIn case of investment, Mudaraba fund gets preference over cost free fund. The investment income earnedthrough deployment of Mudaraba Fund is shared by the Bank and the Mudaraba depositors at the pre-agreedratio.3.3.2 Income from investment in Bangladesh Government Islamic Investment Bond (BGIIB) & Islamic InterbankFund Market (IIFM)Profit from investment in Bangladesh Government Islamic Investment Bond (BGIIB) & Islamic Inter-bankFund Market (IIFM) is accounted for on accrual basis.3.3.3 Fees, commission and exchange incomeFees, Commission and Exchange Income on services provided by the Bank are recognized as and when therelated services are performed. Commission charged to customers on letter of credit and letter of guaranteeare credited to Income at the time of effecting the transactions.Annual Report 2012 217

3.3.4 Dividend incomeDividend income from investments is accounted for when the right to receive income is established.3.4 Income tax expensesIncome tax expenses comprise current and deferred taxes. Income taxes are recognized in profit or lossexcept to the extent that it relates to items recognized directly in equity, in which case it is recognized inequity.3.4.1 Current taxCurrent tax is the expected tax payable on the taxable income for the year, using tax rates enacted orsubstantially 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 2011Business income 42.50% 42.50%Dividend income 20.00% 20.00%3.4.2 Deferred tax3.5 ZakatDeferred tax is recognized in compliance with BAS 12 “Income Taxes” and BRPD Circular no. 11 dated 12December 2011, providing for temporary differences between the carrying amounts of assets and liabilitiesfor financial reporting purposes and amounts used for taxation purposes. Deferred tax is measured at the taxrates that are expected to be applied to the temporary differences when they reverse, based on the laws thathave been enacted or substantively enacted by the date of balance sheet. Deferred tax assets and liabilitiesare offset as there is a legally enforceable right to offset current tax liabilities and assets, and they relate toincome 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 availableagainst which the deductible temporary difference can be utilized. Deferred tax assets are reviewed at eachdate of balance sheet and are reduced to the extent that it is no longer probable that the related tax benefitwill be realized.Zakat is paid by the Bank at the rate of 2.58% (instead of 2.50% as the Bank maintains its financial statementsfollowing 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 SupervisoryCommittee and Banglades Bank guidelines.Zakat is charged in the Profit & Loss Account of the Bank as per “Guidelines for Islamic Banking” issued byBangladesh 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 Shareholdersand Depositors respectively.3.5.1 Management and other expensesExpenses incurred by the Bank are recognized on accrual basis.3.6 Cash and cash equivalentsCash and cash equivalents include notes and coins in hand, balances held with Bangladesh Bank and its agentbank and highly liquid financial assets that are subject to an insignificant risk of changes in their fair value.3.7 InvestmentsInvestments 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 ofsale of good/ services to customer/ client.Unearned Income- the amount of unrealized portion of profit/ value addition of fixed assets under HirePurchase Under Shirkatul Melk (HPSM) investment for gestation period.However, provision for investments are not net-off with investments.218Annual Report 2012

3.8 Investment in shares and securitiesInvestments in share and securities (other than government treasury securities) are initially measured at fairvalue (which is actually the cost) and subsequently accounted for depending on their classification as eitherheld to maturity, fair value through profit or loss, or available for sale.Investment in Bangladesh Government Islamic Investment Bond (BGIIB) is measured both initially andsubsequently 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 andcirculars 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 fixedmaturity that the entity has the positive intent and ability to hold to maturity, and which are not designated asat fair value through profit or loss or as available for sale. These are measured at amortized cost at each yearend by taking into account any discount or premium on acquisition. Any increase or decrease in value of suchinvestments 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 recognizedimmediately 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 orare not classified as another category of financial assets. Available-for-sale investments comprise generallyequity securities. Unquoted equity securities whose fair value cannot reliably be measured are carried atcost. 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 fairvalue changes, other than impairment losses are presented as reserve in equity.3.9 Investment in subsidiariesInvestments in subsidiaries are accounted for under cost method of accounting in the Bank’s FinancialStatements in accordance with BAS 27 “Consolidated and Separate Financial Statements”.3.10 Fixed assets3.10.1 Recognition and measurementItems of fixed assets excluding land and building are measured at cost less accumulated depreciation andaccumulated impairment losses. Land and building is recognized at cost at the time of acquisition andsubsequently measured at revalued amounts which is the fair value at the time of revaluation done byindependent 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 dated20 April 1993 & 15 June 1993 respectively and BRPD Circular No.10 dated 25 November 2002 & BRPDCircular No.09 dated 31 December 2008. Deficit arising on subsequent revaluation is adjusted against thebalance in the Revaluation reserve account. Revaluation is carried out with sufficient regularity to ensure thatthe 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 selfconstructedassets 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 thecosts 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 thatequipment.Any gain or loss on disposal of an item of fixed assets (calculated as the difference between the net proceedsfrom disposal and the carrying amount of the item) is recognized in profit or loss.3.10.2 Subsequent costsSubsequent costs is capitalized only when it is probable that the future economic benefits associated with thecosts will flow to the entity. Ongoing repairs and maintenance is expensed as incurred.3.10.3 DepreciationItems of fixed assets are depreciated from the date that they are installed and are ready for use, or in respectof 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 estimatedresidual values using either of straight-line (SLM) or reducing balance method (RBM) over their estimateduseful 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 RatesBuilding 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 ifappropriate.3.10.4 Capital work in progressFixed assets that is being under construction/acquisition is accounted for as capital work in progress untilconstruction/acquisition is completed and measured at cost. The work in progress is transferred to cost of thatfixed assets when the construction is completed and it becomes available to use.3.10.5 DerecognitionAn item of fixed assets is derecognized upon disposal or when no economic benefits are expected from itsuse or disposal. Any gain or loss arising on derecognition of the asset is recognized in profit or loss.3.11 Lease paymentsPayments made under operating leases are recognized in profit or loss on a straight-line basis over the termof the lease.3.12 Other assetsOther assets include all other financial assets, other income receivable, advance against expenses etc.3.13 Non-banking assetsNon-banking assets are acquired on account of the failure of a client to repay the investment in time afterreceiving the decree from the court regarding the right and title of the mortgaged property.3.14 Impairment of non-financial assetsThe 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 suchindication exists, then the asset’s recoverable amount is estimated. An impairment loss is recognized if thecarrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount.220Annual Report 2012

3.15 Deposits and other accountsDeposit and other accounts include Al Wadeeah current deposit as well as savings, term and other Mudarabadeposits. Deposits by customers and banks are recognized when the Bank enters into contractual agreementswith the counterparties. These items are brought to Financial Statements at the gross value of the outstandingbalance.3.15.1 Profit paid on depositsAs per Mudaraba principle, agreement between the Mudaraba depositors and the Bank, the Mudarabadepositors are entitled to get minimum 65% of the investment income earned through deployment ofMudaraba Fund as per weightage assigned to each type of Mudaraba deposit. In the year 2012, IBBL paid70.04% of Investment Income earned through deployment of Mudaraba Fund. Moreover, in some MudarabaDeposits, additional rate was allowed over the rate as per weightage. Mudaraba Depositors do not share anyincome derived from various banking services where the use of fund is not involved and any income derivedfrom Investing Bank’s Equity and other Cost Free Fund. Al-Wadeeah Depositors do not share any income ofthe Bank.Profit is paid/provided to Mudaraba Deposit accounts at provisional rate on half-yearly/yearly basis consideringoverall growth, performance and profitability of the Bank during the year. Final Rates of profit of any accountingyear are declared after finalization of Shari‘ah Inspection report and certifying the Investment Income of the Bankby the statutory auditors.3.16 ProvisionsProvision is recognized if, as a result of a past event, the Companies has a present legal or constructiveobligation that can be estimated reliably, and it is probable that an outflow of economic benefits wouldbe required to settle the obligation, in accordance with the BAS 37 “Provisions, Contingent Liabilities andContingent Assets”.3.16.1 Provision for investments and off-balance sheet exposuresProvision for Investment for the year 2012 is made as per latest instruction of Bangladesh Bank through BRPDCircular 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 BCDCircular 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 dated05.06.2006 and BRPD circular No. 32, dated 27.10.2010. Investments have not been classified against whichorder 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 BangladeshBank through BRPD Circular No.14 dated 23 September 2012 and BRPD Circular No.19 dated 27 December2012. However, the same for previous year was made as per BRPD circular No.08 dated 07.08.2007 and BRPDCircular No.10 dated 18.09.2007.The rates of provision for the year 2012 and 2011 are given below:ParticularsSmall and Medium Enterprise (SME)FinancingConsumer Investment for House Building& ProfessionalOther than House Building &ProfessionalAll Other (Except Short-term Agricultural andMicro-Credits)2012 2011ClassificationUC SMA SS DF BL UC SMA SS DF BL0.25% 5% 20% 50% 100% 1% 5% 20% 50% 100%2% 5% 20% 50% 100% 2% 5% 20% 50% 100%5% 5% 20% 50% 100% 5% 5% 20% 50% 100%1% 5% 20% 50% 100% 1% 5% 20% 50% 100%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 assetsProvision for other assets is made as per instruction of Bangladesh Bank through BRPD circular No.14 dated25.06.2001.3.16.3 Provision for nostro accountsProvision for nostro accounts is to be made on the unreconciled debit balance of nostro account overmore than 3 months as on the reporting date in accordance with the guideline of Foreign Exchange PolicyDepartment of Bangladesh Bank, FEPD Circular no. FEPD (FEMO) / 01/2005-677 dated 13 September2005. There was no unreconciled entries outstanding for more than 3 months and no provision has beenmade in this regard.3.17 Employee benefitsThe Bank provides various long-term and short-term benefits to the employees under different schemes.3.17.1 Defined contribution planA defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributionsinto a separate entity and has no legal or constructive obligation to pay further amounts. Obligations forcontributions to defined contribution plan are recognized as personnel expense in profit or loss in theperiods during which related services are rendered by employees. The Bank maintains one funded definedcontribution plan for its employees - Provident fund.3.17.1.1 Provident fundThe 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 IBBLEmployees Provident Fund as at 31 December 2012.3.17.2 Defined benefit plansA defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Bank’snet obligation in respect of defined benefit plans is calculated separately for each plan by estimating theamount of future benefit that employees have earned in return for their service in the current and priorperiods. The Bank has two funded defined benefit plans - Gratuity fund and Superannuation fund.3.17.2.1 Gratuity fundThe Gratuity Fund for the regular and confirmed employees of IBBL was established on 1st day of March1986. The employees who serve at least 7 (seven) years at IBBL are normally entitled to get gratuityequivalent 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 stoodat Tk.2,328.28 million as at 31 December 2012. Actuarial valuation of the gratuity fund was done up to theyear 2010 by ACFIN (Actuarial & Financial Consultants).3.17.2.2 Superannuation fundThe Fund came into force with effect from the 19th June, 2008. It was established for financial help tothe 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 ofTrustees and retirement from the service. Tk. 20 million has been provided by the Bank during the year 2012to the Fund. The Fund balance was Tk. 367.28 million as at 31 December 2012. Actuarial valuation of thesuperannuation fund was done up to the year 2011 by ACFIN (Actuarial & Financial Consultants).3.17.3 Short-term employee benefitsShort-term employee benefit obligations are measured on an undiscounted basis and are expensed as therelated service is provided. A liability is recognized for the amount expected to be paid if the Companieshas a present legal or constructive obligation to pay this amount as a result of past service provided by theemployee, and the obligation can be estimated reliably.222Annual Report 2012

3.17.4 Other employee benefitsOther employee benefits include which are not included in short-term employee benefits, post-employmentbenefits and other termination benefits.3.17.4.1 Benevolent fundThe Benevolent Fund for the regular and confirmed employees of Islami Bank Bangladesh Limited wasestablished in the year 1986. This Fund is mainly used for payment of scholarship to the meritorious studentsamong the children of IBBL’s officers and sub-staff, to allow short term quard/grant to meet some unexpectedand certain needs of the staff of IBBL like accident, clinical treatment, marriage ceremony of the employeesand 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 reserves3.18.1 Capital3.18.1.1 Authorized CapitalAuthorized Capital is the maximum amount of share capital that the Bank is authorized to raise as per itsMemorandum and Articles of Association.3.18.1.2 Paid-up CapitalPaid-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 PremiumShare premium arose from sale of some un-subscribed Right Share for the year 1996 at Market price and canbe utilized as per section 57 of the Companies Act, 1994.3.18.3 Statutory reserveAs per section 24 of the Bank Company Act, 1991, at least 20% or more of the net profit before tax istransferred to statutory reserve every year.3.18.4 Assets revaluation reserveThis represents the difference between the book value and the re-valued amount of premises (Land andBuilding) 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 isconsidered 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, BRPDCircular No. 09 dated 31 December 2008 and BRPD Circular No. 24 dated 03 August 2010.3.18.5 Revaluation reserve of securitiesInvestment 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.15dated 31.10.2005, DOS Circular Letter No.10 dated 11.09.2006, BRPD Circular No.03 dated 12.03.2008and DOS Circular Letter No.05 dated 26.05.2008. The shares have been revalued as on 30.12.2012 on thebasis of closing market price of Dhaka Stock Exchange Limited (DSE). The surplus is credited to RevaluationReserve on securities account (Note - 3.8.3) and 50% of the same has been taken as a component ofSupplementary Capital as per Bangladesh Bank BRPD Circular No.03 dated 12.03.2008 and BRPD CircularNo.09 dated 31.12.2008 and shown in the Statement of Changes in Equity as on 31 December 2012 as perBangladesh Bank guidelines. However, deficit arising on such revaluation is debited to Revaluation reserveon securities account.3.18.6 Non-controlling interestNon-controlling interest is the portion of the profit or loss and net assets of the subsidiaries of IBBL (IslamiBank 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 interestAnnual Report 2012 223

equiring consolidation be achieved without exceeding 50% ownership as per the BAS 27 “Consolidated andSeparate Financial Statements”. Non-controlling interest belongs to other investors and is reported on theconsolidated 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 lossaccount 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 LetterNo. BRPD (P-1)661/14(a)/2006-1437 dated 07.05.2006 and Securities and Exchange Commission LetterNo. SEC/CI/CPLC-118/2006/385 & SEC/CI/RPO-01/2007/386 both dated 10.06.2007. It is treated as acomponent of Supplementary Capital as Subordinated Debt. The instrument having face value of Tk.1,000each is subordinated to the claims of other creditors and depositors. In the case of liquidation the subordinateddebt holders would be paid just before paying to the shareholders assuming there are assets to distributeafter all other liabilities and debts have been paid. The Mudaraba Perpetual Bond (MPB) is perpetual innature i.e. never ending maturity.3.20 Other liabilitiesOther 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 BangladeshBank, Bangladesh Financial Reporting Standards (BFRS) etc.3.21 Contingent liabilitiesAny possible obligation that arises from past events and the existence of which will be confirmed only bythe occurrence or non-occurrence of one or more uncertain future events not wholly within the control of theBank; orAny present obligation that arises from past events but is not recognized because, it is not probable that anoutflow of resources embodying economic benefits will be required to settle the obligation, is considered ascontingent liability.Contingent liabilities are not recognized but disclosed in the financial statements unless possibility of anoutflow of resources embodying economic benefits is reliably estimated.Contingent assets are not recognized in the financial statements as this may result in the recognition ofincome which may never be realized.3.22 Off-balance sheet itemsOff-balance sheet items are disclosed under Contingent liabilities & other commitments and required provisionon Off-balance sheet exposures have been made in accordance with Bangladesh Bank guidelines (Note3.16.1).3.23 Earnings per share (EPS)The Bank presents basic and diluted (when dilution is applicable) earnings per share (EPS) for its ordinaryshares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Bankwith the weighted average number of ordinary shares outstanding during the period, adjusted for the effectof change in number of shares for bonus issue, share split and reverse split. Diluted EPS is determined byadjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinaryshares outstanding, for the effects of all dilutive potential ordinary shares. However, dilution of EPS is notapplicable for these financial statements as there was no dilutive potential ordinary shares during the relevantperiods. Hence no Diluted EPS has been calculated. Consolidated basic EPS has also been calculated andpresented in the same manner.3.24 Segment reportingAn operating segment is a component of the Bank that engages in business activities from which it may earnrevenues and incur expenses, including revenues and expenses that relate to transactions with any of theBank’s other components. All operating segments’ operating results are reviewed regularly by the Bank’sManagement (as being the chief operating decision maker) to make decisions about resources to be allocatedto the segment and to assess its performance, and for which discrete financial information is available.224Annual Report 2012

Segment results that are reported to the Managment include items directly attributable to a segment as wellas the items that can be allocated on a reasonable basis.Details about segment reporting has been given at Annexure - D3.25 Off-settingThe value of any asset or liability as shown in the balance sheet is not off-set by way of deduction fromanother liability or assets unless there exist legal right thereof. Financial assets and financial liabilities areoffset and the net amount is presented in the balance sheet when there is a legally enforceable right to offsetthe recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle theliability simultaneously.3.26 Materiality and aggregationEach material class of similar items is presented separately in the financial statements. Items of dissimilarnature or function are presented separately unless they are immaterial as permitted by BAS 1 “Presentationof Financial Statements”.3.27 Inter-branch transactionsTransactions with regard to inter branches are reconciled regularly and there is no difference in this accountas on 31 December 2012.3.28 Revenue, gains, expenses & losses prohibited by Shari‘ahIncome which is irregular (doubtful) as per Shari‘ah is not included in the distributable income of the Bank. Bankcharges compensation on overdue Bai-Murabaha and Bai-Muazzal investments. Such compensation is alsonot included in the distributable income of the Bank. The total amount of doubtful income and compensationare included in investment income and temporarily used to create provision for bad and doubtful investmentsas per decision of Shari‘ah Supervisory Committee. Since doubtful income and compensation are included ininvestment income, applicable income tax on these items is duly paid to the Govt. account. However, realizedamount 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 accountwith Bangladesh Bank are not credited to income, since it is not permissible as per Shari‘ah. These aretransferred/utilized for charitable purposes after payment of income tax thereon.3.29 Dividend paymentsFinal dividend is recognized when it is approved by the shareholders in Annual General Meeting (AGM). Theproposed dividend for the year 2012, therefore, has not been recognized as a liability however disclosed inthe balance sheet in accordance with BAS 10 “Events after the Reporting Period”. Dividend payable to theBank’s shareholders is recognized as a liability and deducted from the shareholders’ equity in the period inwhich the shareholders’ right to receive the payment is established.3.30 Events after the reporting periodAll material events after the reporting period that provide additional information about the Companies’/Bank’sposition at the balance sheet date are reflected in the financial statements as per BAS 10 “Events after theReporting Period”. Events after the reporting period that are not adjusting events are disclosed in the noteswhen material.3.31 Risk managementThe risk of a bank is defined as the possibility of losses, financial or otherwise. The Risk Management of theBank covers 6 (six) Core Risk Areas of Banking industry i.e. Investment (Credit) Risk Management, ForeignExchange Risk Management, Asset-Liability Management, Prevention of Money Laundering, Internal Control& Compliance Risk Management and Information & Communication Technology Risk Management. Therisk management procedures in the core risk areas has been devised in line with the core risk managementguideline of Bangladesh Bank.As per instruction of Bangladesh Bank, IBBL formed a Risk Management Wing (RMW) to formulate riskassessment and management policies, methodologies, guidelines and procedures for risk identification, riskmeasurement, 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 RiskPolicy for safeguarding the Bank’s capital, its financial resources and profitability from various risks. In thiscontext, the Bank implemented all the guidelines of Bangladesh Bank as under:3.31.1 Investment (Credit) Risk ManagementInvestment (Credit) risk is one of the major risks faced by the Bank. This can be described as potential lossarising from the failure of counter party to perform as per contractual agreement with the Bank. The failuremay 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 theseissues.3.31.2 Foreign Exchange Risk ManagementForeign Exchange Risk is the current or prospective risk to earnings and capital arising from adversemovements in currency exchange rates. The Bank is exposed to profit rate risk and settlement risk on accountof its foreign exchange business. Foreign Exchange business includes trading of foreign currency, purchaseand sell of foreign currencies relating to import, export, remittances and other ancillary services. IBBL isdealing with a substantial volume of foreign trade and remittance business of the country which exposes theBank to foreign exchange risk. IBBL has adopted foreign exchange risk manual through which the foreignexchange operation are dealt with.Foreign Exchange risks are measured and monitored by the Treasury Division. Treasury Division consists ofseparate Front Office, Back Office and Mid Office. The Treasury Front Office (Dealing Room) independentlyperforms the deals and the Treasury Back Office is responsible for verification of the deals and passing oftheir entries in the books of account.The Foreign Exchange Risk is minimized through proper market analysis, real time pricing of ForeignExchange, fixation of different market related limits (daylight, overnight, stop loss and management actiontrigger) and counter parties credit limits set by the management and ensure adherence to the limits by theTreasury Front Office. All Foreign Exchange transactions are revalued at weighted average exchange rateas provided by Bangladesh Bank at the end of each month. All Nostro Accounts are reconciled regularly andoutstanding entries are reviewed by the management for its settlement/recompilation. The open positionmaintained 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 isresponsible for verification of the deals and passing of their entries in the books of accounts. All foreignexchange transactions are revalued at weighted average exchange rate as provided by Bangladesh Bankat the end of each month. All Nostro accounts are reconciled on a monthly basis and outstanding beyond 30days is reviewed by the Management for its settlements/ reconciliation.3.31.3 Asset Liability ManagementThe Asset Liability Committee (ALCO) of the Bank monitors balance sheet risk, liquidity risks, investmentdeposit ratio (IDR), deposit mix, investment mix, gap analysis etc under the leadership of MD/CEO of theBank. The Balance Sheet risk is defined as potential change in earnings due to change in rate of profit, foreignexchange rates which are not trading nature. Asset Liability Committee (ALCO) reviews liquidity requirementof the Bank, the maturity of assets and liabilities, deposit and investment pricing strategy, sensitivity of assetsand liabilities, management indicators/ratios and the liquidity contingency plan. The primary objective ofthe ALCO is to monitor and avert significant volatility in Net Investment Income (NII), investment value andexchange earnings.3.31.4 Prevention of Money LaunderingAnti Money Laundering risk is defined as the loss of reputation and expenses incurred as penalty for beingnegligent in prevention of money laundering. For mitigating the risks, the Bank has formed 05(five) membersCentral 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 Officesand Branches, where the transactions of the accounts are independently reviewed to verify SuspiciousTransaction Reports (STRs). A Manual for prevention of money laundering was developed and approvedby the Board of Directors. IBBL has introduced (a) Uniform Account Opening Form (AOF), (b) Know YourCustomer (KYC) Profile and (c) Transaction Profile (TP) in the Bank as per instructions of Bangladesh Bank.226Annual Report 2012

IBBL had already issued 61 (Sixty One) circulars providing necessary instructions for Prevention of MoneyLaundering activities and also for combating of Financial Terrorism.Moreover, IBBL had conducted a good number of training sessions/workshops to create awareness anddevelopment of the skill of the officials for identifying suspicious transactions. IBBL introduced a PolicyGuideline to combat terrorist financing in the light of Anti Terrorism Act (Amendment) Act, 2012 coupled withthe 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 April2002). To establish fruitful Anti Money Laundering drive at branch level, IBBL introduced AML Rating systemssuch as excellent/good/satisfactory/marginal through self Assessment Report & Independent TestingProcedure as per instruction of Bangladesh Bank.3.31.5 Internal Control and ComplianceOperational loss may arise from errors and frauds due to lack of internal control and compliance. Witha view to overcome such lapses and verification of Asset quality, quality of customer’s service, overallsecurity arrangement operational efficiency and regulatory issues as guided through different circulars,manuals from Head Office and other regulatory bodies, Bank organize its management through InternalControl & Compliance Wing (ICCW). ICCW consists of three Divisions namely (1) Audit & InspectionDivision, (2) Compliance Division and (3) Monitoring Division to develop sound, sustainable and securedgrowth of the Bank.(1) Audit & Inspection DivisionInternal Audit and Inspection Division undertakes periodical and special audit of the Branches,Divisions and Departments of Head Office to review operational effectiveness and internal & externalcompliance 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 InspectionDivision. The Audit Committee also review Bangladesh Bank Inspection Reports and other issuesindicated in the Bangladesh Bank guidelines. Necessary steps/measures are taken on the basis ofobservation & 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 Auditreports are reviewed by the Division regularly and necessary guidance and suggestion are given withcontinuous follow-up there against.(2) Compliance DivisionThe Compliance Division handles the ‘regulatory issues of Bangladesh Bank as well as other regulatorybodies’ and submits ‘status report on regulatory compliance’ quarterly to the Audit Committee as perBRPD Circular No.12 dated 23.12.2002.The Compliance Division ensures the Bank complies with all regulatory requirements while conductingits day to day business. The Compliance Division maintains liaison with the regulatory bodies for anyregulatory changes and notify the same to all concerned.(3) Monitoring DivisionThis division performs the following:i) Assesses the risk of the functional areas of the Branches described in the DepartmentalControl Function Checklist (DCFCL) and determines the frequency of Audit/Inspection of thebranches based on the gravity of risks involved.ii)iii)Monitors the Internal Control Functions through the Quarterly Operations Report (QOR) andother mechanisms.Checks the Completion of Investment Documentation.Annual Report 2012 227

3.31.6 Information and Communication Technology Risk ManagementThe 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 includesminimizing financial and image loss to the institution in all events such as natural disasters, technologicalfailures, human errors etc. The Bank uses own developed Core Banking Software to perform all types oftransactions including local/ online/ internet in a secured way. To take care of its core banking system, aseparate security module has been incorporated in the software which manages different roles for differentusers. 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 orinconsistencies. 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 andservices. Under these policy guidelines, a security policy has also been worked out. To abide by and adhere towhat 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 orderto 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. Ithas already centralized the administrative control to access the network, mailing system and internet. IBBLhas introduced Business Continuity Plan (BCP) for its entire network and trained the officials to cope up withany contingencies.3.32 Credit rating reportCredit Rating Information and Services Ltd. CRISL (a joint venture rating agency of Rating Agency MalaysiaBerhad (RAM), JCR-VIS Credit Rating Company Ltd., Pakistan, Prime Commercial Bank Ltd., Pakistan andLocal Corporate/ Sponsors, Bangladesh) was engaged by the Bank for the purpose of rating the Bank since2002 as per Bangladesh Bank BRPD Circular No.06 dated 5 July 2006. CRISL assigned AA+ rating in thelong term (indicates high safety and high credit quality) and ST-1 in the short term (highest certainty of timelyrepayment) to IBBL based on the financials up to 31 December 2011.3.33 Regulatory and legal complianceAmong others, the Bank complied with the requirements of the following circular, rules and regulations:a) The Bank Company Act, 1991b) The Companies Act, 1994c) BRPD Circular No. 14 dated 25.06.2003 and “Guidelines for Islamic Banking” issued by Bangladesh Bankthrough BRPD Circular No. 15 dated 09.11.2009d) Other circulars, rules and regulations issued by Bangladesh Bank from time to timee) The Securities and Exchange Rules, 1987f) The Securities and Exchange Ordinance, 1969g) The Securities and Exchange Commission Act, 1993h) Income Tax Ordinance, 1984i) VAT Act, 1991j) Standards issued by AAOIFIk) The Stamp Act-1899l) The Customs Act-1969m) The Money Laundering Prevention Act, 2012n) The Anti Terrorism (Amendment) Act, 2012 etc.228Annual Report 2012

4.0 Compliance with Financial Reporting Standards as applicable in BangladeshThe Companies/Bank complied, as per Para 12 of Securities & Exchange Rule 1987, with the followingBangladesh Accounting Standards (BASs) and Bangladesh Financial Reporting Standards (BFRSs) asadopted by Institute of Chartered Accountants of Bangladesh (ICAB) in preparing the financial statements ofIBBL, subject to departure described in note - 2.1, where we have followed Bangladesh Bank guidelines:Sl.No.BFRSNo.BFRS TitleCompliance Status1 1 First-time adoption of International Financial Reporting Standards Not Applicable2 2 Share-based Payment Not Applicable3 3 Business Combinations Not Applicable4 4 Insurance Contracts Not Applicable5 5 Non-current Assets Held for Sale and Discontinued Operations Not Applicable6 6 Exploration for and Evaluation of Mineral Resources Not Applicable7 7 Financial Instruments: Disclosures Complied8 8 Operating Segments Complied9 10 Consolidated Financial Statements Not yet effective, effectivefrom 1 January 201310 11 Joint Arrangements Do11 12 Disclosure of Interests in other Entities Do12 13 Fair Value Measurement DoSl.No.BASNo.BAS TitleComplianceStatus1 1 Presentation of Financial Statements Complied2 2 Inventories Not Applicable3 7 Statement of Cash Flows Complied4 8 Accounting Policies, Changes in Accounting Estimates and Errors Complied5 10 Events after the Reporting Period Complied6 11 Construction Contracts Not Applicable7 12 Income Taxes Complied8 16 Property, Plant & Equipment Complied9 17 Leases Complied10 18 Revenue Complied11 19 Employee Benefits Complied12 20 Accounting for Government Grants and Disclosure of Government Assistance Not Applicable13 21 The Effects of Changes in Foreign Exchange Rates Complied14 23 Borrowing Costs Not Applicable15 24 Related Party Disclosures Complied16 26 Accounting and Reporting by Retirement Benefit Plans Not Applicable17 27 Consolidated and Separate Financial Statements CompliedAnnual Report 2012 229

Sl.No.BASNo.BAS TitleComplianceStatus18 28 Investments in Associates Not Applicable19 31 Interest in Joint Ventures Not Applicable20 32 Financial Instruments: Presentation Complied21 33 Earnings per Share Complied22 34 Interim Financial Reporting Complied23 36 Impairment of Assets Complied24 37 Provisions, Contingent Liabilities and Contingent Assets Complied25 38 Intangible Assets Complied26 39 Financial Instruments: Recognition and Measurement Complied27 40 Investment Property Not Applicable28 41 Agriculture Not Applicable5.0 Audit committeeAs per Bangladesh Bank BRPD circular No.12 dated 23 December 2002, the Audit Committee was formed bythe Board of Directors of the Bank consisting of the Board Members. As at 31 December 2012 the followingdirectors were the members of the Audit Committee:Sl.Name of the MemberNo.1 Prof. NRM Borhan Uddin,Ph.D.2 Janab Md. Abdus Salam,FCA, FCSStatus with theBankIndependentDirectorStatus withthe CommitteeChairmanEducational QualificationB.Com (Hon’s), M.Com(Management) C.U. MBA, M.S, Ph.D(USA)Depositor Director Member B.Com (Hon’s), M.Com (Accounting)D.U, FCA, FCS3 Janab Mohamad Adnan Midani Foreign Director Member Bachelor in Commerce, GraduateDiploma in Accounting, CharteredAccountant (Canada)4 Janab Humayun Bokhteyar,ACPA, FCADepositor Director Member B.Com (Hon’s), M.Com (Accounting),ACPA, FCAAudit Committee of the Board met in 22 occasions in the year 2012. They met in 04 occasions regardingfinalization of financial statements for the year 2012 with the Senior Management of the Bank in which amongothers, the following issues were discussed:(i)(ii)(iii)The Committee examined the financial statements of 2012 of the Bank to see whether all thedisclosures and information have been incorporated in the financial statements & whether the Bankfollowed Bangladesh Financial Reporting Standards (BFRSs) and other procedures in preparingfinancial statements.In finalizing the financial statements for the year 2012, several alternatives and various pertinentissues, 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 AuditCommittee.The Committee discussed the management letter issued by the external auditors and detailsInspection Report submitted by Bangladesh Bank, compliance status of those reports, internal check& control systems and provided appropriate guidelines to the Management for overall improvement ofthe Management and Accounting system and minimization of various types of risks.230Annual Report 2012

(iv)Like previous years, the Committee also exchanged views with the statutory auditors and managementof the Bank before finalization of the financial statements of the Bank.6.0 Related party disclosuresAs 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 perBAS 24.Related Parties include the Bank’s Directors, key management personnel, associates, companies undercommon directorship etc. as per BAS 24 “Related Party Disclosures”. All transactions involving relatedparties arising in the normal course of business are conducted at arm’s length at normal commercial rates onthe 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 31December 2012:Sl.Name of the DirectorsNo1 Prof. Abu Nasser Muhammad AbduzZaherStatus with theBankChairmanName of the related Firms/Companies/Institutions/Parties etc.Representative of IBN SinaPharmaceutical Ind. Ltd, The Ibn SinaTrust, Manarat Trust and Fouad AbdulHameed Al-Khateeb Foundation.Remarks2 Jb. Yousif Abdullah Al – Rajhi Vice – Chairman Not applicable Foreign Director3 Engr. Mustafa Anwar Vice – Chairman Birds Garments Ltd. andRepresentative of the Public Institutionfor Social Security, Kuwait .4 Jb. Mohammad Abdullah Al Jalahma Director Representative of Kuwait Awqaf Foreign DirectorPublic Foundation5 Jb. Mohamad Adnan Midani Director Representative of Islamic Development Foreign DirectorBank, K S A.6 Jb. Md. Abul Hossain Director Representative of InvestmentCorporation of Bangladesh.7 Engr. Md. Eskander Ali Khan Director KEARI Limited & Diganta MediaCorporation Limited8 Dr. Abdulhameed Fouad Al-Khateeb Director Representative of Arabsas Travel & Foreign DirectorTourist Agency, KSA.9 Jb. Abdullah Abdul Aziz- Al -Rajhi Director Not applicable Foreign Director10 Jb. Salauddin Ahmed Director Representative of Kuwait Finance Foreign DirectorHouse, Kuwait.11 Jb. Hafizul Islam Mian Director Representative of Islamic EducationSociety12 Jb. Md. Shahidul Islam Director Not applicable13 Jb. Mohammed Nazrul Islam Director Not applicable14 Jb. Mominul Islam Patwary Director Not applicable15 Prof. NRM Borhan Uddin Ph.D Independent Not applicableDirector16 Jb. Humayun Bokhteyar, ACPA, FCA Depositor Not applicableDirector17 Jb. Md. Abdus Salam, FCA, FCS Depositor Not applicableDirector18 Prof. Dr. A.K.M Sadrul Islam Independent Not applicableDirector19 Barrister Mohammed Belayet Hossain Independent Not applicableDirector20 Jb. Mohammad Abdul Mannan ManagingDirectorNot applicableEx-OfficioDirectorAnnual Report 2012 231

6.2 Related party transactionsa) The Bank invested to the following Firms/ Trusts/ Individuals where the Directors of the Bank are related:SL.No.Name of the Account/Firm/Trust etc.1 Fouad Al-KhateebHospitalName of the DirectorProf. Abu NasserMuhammad AbduzZaher (Chairman)2 Ibn Sina Trust Prof. Abu NasserMuhammad AbduzZaher (Chairman)3 Mrs. ShahanaraBegum4 Mohammad AbdulMannanEngr. Md. EskanderAli Khan (Director)Jb. Mohammad AbdulMannan ManagingDirector & Ex - OfficioDirectorRelationshipof the Directorwith the Firm/Trust etc.PurposeClassifiedPositionOutstanding(Million Taka)2012 2011Director HPSM (Project) Un Classified 19.89 21.1Guarantor Purchase ofHouse, BMRE& Import ofMachinery- do- 461.81 516.1Husband Housing - do- 1.84 2.03Himself Housing - do- 3.26 3.41(b) Other related partiesSL.No.Name of the related partyNature ofrelationshipNature of transactionClosing balance2012 20111 Islami Bank Capital Management Limited Subsidiary Bank balance 558,782 8,251,2712 Islami Bank Securities Limited Subsidiary Bank balance 107,079,309 24,315,6053 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 Boothhave been hired with advance rent of Tk.1, 43, 42,400.00 only from wife of Janab Md. Shahidul Islam, one of thedirectors of the Bank situated at 36-37, Probal Housing Ltd. Adabar, Dhaka for premises of Mohammadpur KrishiMarket 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 CircularNo. 15 dated 09 November, 2009.232Annual Report 2012

31.12.2012 31.12.20117.0 Cash in hand Taka TakaCash in hand (including foreign currency) (Note. 7.1) 6,308,271,684 4,655,980,193Balance with Bangladesh Bank & its agent bank(s) (including foreigncurrency) (Note. 7.2)35,465,737,963 35,975,917,28441,774,009,647 40,631,897,4777.1 Cash in hand (including foreign currency)i) In local currency 6,258,670,140 4,636,830,566ii) In foreign currency 49,601,544 19,149,6276,308,271,684 4,655,980,1937.2 Balance with Bangladesh Bank & its agent bank(s) (including foreigncurrency)Balance with Bangladesh Bank (a)In local currency 28,274,172,480 31,775,538,300In foreign currency 5,519,323,733 2,224,285,040Balance with Sonali Bank Ltd. (as agent of Bangladesh Bank) (b)33,793,496,213 33,999,823,340In local currency 1,672,241,750 1,976,093,944In foreign currency - -1,672,241,750 1,976,093,944(a)+(b) 35,465,737,963 35,975,917,2847.3 Cash Reserve Requirement (CRR) and Statutory Liquidity Ratio (SLR) have been calculated and maintained inaccordance 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 perBangladesh 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 January1987, 5.50% from 15.05.2010 to 14.12.2010 as per Bangladesh Bank Letter No. MPD/116/2010-604 dated 13.05.2010and 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 31.12.20117.3.1 Cash Reserve Requirement (CRR) Taka TakaRequired Reserve (6.00% of average time and demand liabilities) 23,916,835,320 19,886,266,260Actual reserve held with Bangladesh Bank (in local currency) 28,246,172,480 31,775,538,300Surplus / (deficit) 4,329,337,160 11,889,272,040Maintained (%) 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 LetterNo. MPD/116/2010-604 dated 13.05.2010 and 11.50% from 15.12.2010 as per Bangladesh Bank MPD Circular No.05dated 01 December 2010. The Bank maintained SLR above requirement throughout the year.Annual Report 2012 233

31.12.2012 31.12.20117.4.1 Statutory Liquidity Ratio (SLR) Taka TakaRequired Reserve (11.50% of average time and demand liabilities) 45,840,601,000 38,115,344,000Actual reserve maintained 59,715,385,914 52,290,512,437Surplus / (deficit) 13,874,784,914 14,175,168,437Maintained (%) 14.98% 15.78%7.4.2 Components of Statutory Liquidity Ratio (SLR)Cash in hand including foreign currency 6,308,271,684 4,655,980,193Balance with Bangladesh Bank & its agent bank 29,918,414,230 33,723,632,244Unencumbered approved securities:Investment in shares of Bangladesh Shipping Corporation 54,700,000 110,900,000Bangladesh Government Islamic Investment Bond 23,434,000,000 13,800,000,000Total 59,715,385,914 52,290,512,4377(a)Consolidated cash in handi) Cash in hand (including foreign currency) 6,308,274,680 4,655,996,987Islami Bank Bangladesh Limited 6,308,271,684 4,655,980,193Islami Bank Securities Limited 2,996 16,372Islami Bank Capital Management Limited - 422ii) Balance with Bangladesh Bank & its agent bank(s) (including foreigncurrency)35,465,737,963 35,975,917,284Balance with Bangladesh Bank 33,793,496,213 33,999,823,340Balance with Sonali Bank Ltd. (as agent of Bangladesh Bank) 1,672,241,750 1,976,093,944Total (i+ii) 41,774,012,643 40,631,914,2718.0 Balance with other banks & financial institutions In Bangladeshi) In current account 616,996,187 528,689,926ii)In Mudaraba savings & MTDR account with other islamic banks / financialinstitutions15,338,980,745 11,335,682,893Sub total (a) 15,955,976,932 11,864,372,819Outside Bangladesh (Note 8.1)i) In current account 6,957,762,676 3,712,863,185ii)In Mudaraba savings & MTDR account with other islamic banks / financialinstitutions- -iii) Balance with Offshore Banking Units (OBU) 134,608,599 73,471Sub total (b) 7,092,371,275 3,712,936,656Grand total (a+b) 23,048,348,207 15,577,309,475234Annual Report 2012

8.1 Currency-wise amount and exchange rate of Balance with other banks & financial institutionsoutside BangladeshForeign currency Amount in F.C Exchange rate 2012 2011US Dollar 69,181,628.61 79.8499 5,524,146,126 3,409,460,700Great Britain Pound 783,979.70 129.1013 101,212,798 27,001,605Saudi Riyal 440,340.83 21.2922 9,375,825 1,012,508EURO 6,232,590.10 105.5695 657,971,421 191,234,926YEN 33,297,184.00 0.9278 30,893,127 308,472Canadian Dollar 94,156.23 80.1062 7,542,498 -Swiss Franc 40,339.53 87.4300 3,526,885 2,399,498Singapore Dollar 2,273,005.58 65.2368 148,283,610 36,281,130Australian Dollar 104,005.88 82.7804 8,609,648 17,265,264ACU Dollar 7,524,234.06 79.8499 600,809,337 27,972,553Total 7,092,371,275 3,712,936,65631.12.2012 31.12.20118.2 Maturity - wise classification Taka Takai) Repayable on demand 8,058,348,207 5,307,309,475With a residual maturity ofii) Not more than 3 months 14,800,000,000 10,080,000,000iii) Over 3 months but not more than 1 year 190,000,000 190,000,000iv) Over 1 year but not more than 5 years - -v) More than 5 years - -Total 23,048,348,207 15,577,309,4758(a)Consolidated Balance with other banks & financial institutionsIslami Bank Bangladesh Limited 23,048,348,207 15,577,309,475Islami Bank Securities Limited 1,117,605,602 940,640,396Islami Bank Capital Management Limited 358n,979,268 335,346,60924,524,933,077 16,853,296,4809.0 Investments in shares & securitiesA. Year-2012Particularsa) GovernmentNo. ofshareFace value as at31 Dec. 2012(Taka)Value as at31 Dec. 2012(Taka)Remarksi) Bangladesh Shipping Corporation 200,000 20,000,000 54,700,000 Quotedii) Karmasangsthan Bank 100,000 10,000,000 10,000,000 Un-Quotediii) Central Depository Bangladesh Ltd. 1,827,777 6,277,770 6,277,770 Un-Quotediv) Bangladesh Government Islamic14 23,434,000,000 23,434,000,000 Un-QuotedInvestment Bond (Islamic Bond)Total government (a) 2,127,791 23,470,277,770 23,504,977,770Annual Report 2012 235

Particularsb) Subsidiary companiesNo. ofshareFace value as at31 Dec. 2012(Taka)Value as at31 Dec. 2012(Taka)Remarksi) Islami Bank Securities Limited 2,699,946 2,699,946,000 2,699,946,000 Un-Quotedii) Islami Bank Capital Management299,993 299,993,000 299,993,000 Un-QuotedLimitedSub total (b) 2,999,939 2,999,939,000 2,999,939,000c) Othersi) Bangladesh Aroma Tea Ltd.* 1,570 157,000 157,000 De-listedii) Investment in Financial Institutions& Investors Portfolio Management 500,000 5,000,000 5,000,000 Un-QuotedCo. Ltd.iii) Mudaraba Subordinated Debt of First 1,000 500,000,000 500,000,000 Un-QuotedSecurity Islami Bank Ltd.Sub total (c ) 502,570 505,157,000 505,157,000Sub total others (b+c) 3,502,509 3,505,096,000 3,505,096,000Current 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-2011Particularsa) GovernmentNo. ofshareFace value as at31 Dec. 2011(Taka)Value as at31 Dec. 2011(Taka)Remarksi) Bangladesh Shipping Corporation 200,000 20,000,000 110,900,000 Quotedii) Karmasangsthan Bank 100,000 10,000,000 10,000,000 Un-Quotediii) Central Depository Bangladesh Ltd. 1,827,777 6,277,770 6,277,770 Un-Quotediv)Bangladesh Government IslamicInvestment Bond (Islamic Bond)9 13,800,000,000 13,800,000,000 Un-QuotedTotal government (a) 2,127,786 13,836,277,770 13,927,177,770b) Subsidiary companiesi) Islami Bank Securities Limited 2,699,946 2,699,946,000 2,699,946,000 Un-Quotedii)Islami Bank Capital ManagementLimited299,993 299,993,000 299,993,000 Un-QuotedSub total (b) 2,999,939 2,999,939,000 2,999,939,000c) Othersi) Bangladesh Aroma Tea Ltd.* 1,570 157,000 157,000 De-listedii)Investment in Financial Institutions& Investors Portfolio ManagementCo. Ltd.500,000 5,000,000 5,000,000 Un-QuotedSub total (c ) 501,570 5,157,000 5,157,000Sub total other than Govt. (b+c) 3,501,509 3,005,096,000 3,005,096,000Current 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.236Annual Report 2012

9.1 Revaluation of shares & securitiesAll Shares and Securities are shown at cost price other than the Shares of Bangladesh Shipping Corporation whichhave been recognized at closing market price as on 30.12.2012 of Dhaka Stock Exchange Ltd. (DSE) as per BRPDCircular No.14 dated 25.06.2003.31.12.2012 31.12.20119.2 Maturity grouping of investments in shares & securities Taka Takai) Repayable on demand - -With a residual maturity ofii) 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 13,800,000,000v) More than 5 years 3,521,373,770 3,132,273,770Total 27,010,073,770 16,932,273,7709(a)Consolidated investments in shares & securitiesIslami Bank Bangladesh Limited 24,010,134,770 13,932,334,770Islami Bank Securities Limited 1,549,929,688 1,920,847,153Islami Bank Capital Management Limited - -25,560,064,458 15,853,181,92310.0 Investments 372,920,722,887 305,840,563,17010.1 Maturity-wise classificationi) Repayable on demand - -With a residual maturity ofii) Not more than 3 months 105,104,746,825 21,106,240,983iii) Over 3 months but not more than 1 year 108,070,736,432 175,593,775,942iv) Over 1 year but not more than 5 years 82,343,342,943 39,231,017,419v) More than 5 years 77,401,896,687 69,909,528,826Total 372,920,722,887 305,840,563,17010.2.1 Mode - wise investmenta) In Bangladeshi) Bai - Murabaha 213,741,402,717 175,511,513,441ii) Bai - Muajjal 17,806,978,467 13,185,804,874iii) Hire Purchase under Shirkatul Melk 93,495,818,382 89,070,456,408iv) Purchase & Negotiation 7,454,201,426 7,453,764,668v) Bai- as- Sarf (FDB)/FCD 1,823,290,744 941,880,898vi) Musharaka Documentary Bill (MDB) 13,224,692,617 9,533,150,083vii) Musharaka 129,062,696 37,695,176viii) Mudaraba/ Mudaraba Documentary Bills 9,938,781,687 58,727,487ix) Bai - Salam 4,411,145,681 3,528,065,906x) Murabaha Foreign Currency Investment 1,983,165,751 905,120,199xi) Quard 8,912,182,719 5,614,384,030Sub total (a) 372,920,722,887 305,840,563,170Annual Report 2012 237

31.12.2012 31.12.2011TakaTakab) Out side bangladeshi) 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) 372,920,722,887 305,840,563,17010.2.2 Geographical location wise classification of investmentsi) Within Bangladesha. In rural areas 50,190,827,825 39,545,184,817b. In urban areas 322,729,895,062 266,295,378,353Sub total (a+b) 372,920,722,887 305,840,563,170ii) Outside Bangladesh - -Total (i + ii) 372,920,722,887 305,840,563,17010.2.3 Division wise classification of investmentsName of the divisioni) Dhaka division 213,608,990,006 183,456,543,045ii) Chittagong division 81,072,965,129 61,255,402,347iii) Khulna division 31,511,801,191 26,656,473,297iv) Rajshahi division 28,304,682,858 12,989,780,538v) Barisal division 3,729,207,227 2,774,654,622vi) Sylhet division 7,160,077,877 5,867,105,666vii) Rangpur division 7,532,998,599 12,840,603,655Total 372,920,722,887 305,840,563,170238Annual Report 2012

10.3 Investment on the basis of significant concentration including billspurchased and discounted31.12.2012Taka31.12.2011Takaa) Investment to directors 470,734,005 539,223,000b) Investment to chief executive & other senior executives 583,464,569 520,138,000c) Sector wise other investments:i) Trade & commerce 105,786,724,685 97,814,685,436ii) Real estate 21,754,895,256 16,962,546,320iii) Transport 6,449,044,943 6,464,232,625iv) Agriculture (including fertilizer & agriculture implements) 26,713,440,000 21,353,825,365v) Industrial investment 189,193,421,687 150,788,448,965vi) Others 21,968,997,742 11,397,463,459Total 372,920,722,887 305,840,563,17010.3.1 Classification of industrial investments (v)i) Textile- spinning, weaving & dyeing 71,761,064,846 70,316,682,862ii) Steel, re-rolling & engineering 21,946,436,916 7,103,203,502iii) Agro-based industry 17,613,907,559 16,137,017,826iv) Garments & garments accessories 13,092,184,781 10,533,257,130v) Food & beverage 7,635,525,984 6,258,627,856vi) Cements industry 1,854,095,533 1,965,206,224vii) Pharmaceuticals 2,289,240,403 1,903,791,698viii) Poultry, poultry feed & hatchery 624,338,292 934,685,749ix) Sanitary wares 274,562,345 158,142,533x) Chemicals, toiletries & petroleum 3,973,061,855 3,838,099,970xi) Printing & packaging 3,329,783,018 2,729,330,343xii) Power (electricity) 4,162,255,277 4,012,440,549xiii) Ceramic & bricks 2,459,514,482 1,884,935,950xiv) Health care ( hospital & others) 2,079,082,752 1,704,166,189xv) Plastic industries 715,132,452 445,009,497xvi) Petrol pump & CNG filling station 940,450,228 783,708,523xvii) Information technology 549,745,695 -xviii) Hotel & restaurant 656,329,948 537,975,366xix) Other industries 33,236,709,321 19,542,167,198189,193,421,687 150,788,448,96510.3.2 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 13Amount of investments 68,933,400,000 62,288,500,000Classified amount thereon Nil NilMeasures taken for recovery Not Applicable Not ApplicableTotal capital of the Bank was Tk. 42,028.33 million as at 31 December 2012 (Tk. 33,716.73 million as on 31 December2011).(Taka in million)Annual Report 2012 239

Sl.No.Name of clientsSanctionedlimitOutstanding as on 31.12.2012Funded Non-funded Total1 S. Alam Super Edible Oil Ltd. 13,531.00 5,968.80 485.40 6,454.20 12,247.102 S. Alam Refined Sugar Industry Ltd. 10,825.00 6,377.10 8.50 6,385.60 10,447.603 Nassa Group 9,667.20 3,410.00 2,455.70 5,865.70 2,796.404 Zaber & Zubair Fabrics Ltd. 7,807.20 3,988.20 3,771.50 7,759.70 5,957.505 Abul Khair Steels Ltd. 7,653.90 3,848.60 50.10 3,898.70 5,847.606 Farzana Oil Refineries and its sister concern 7,500.00 3,789.00 2,814.40 6,603.40 1,731.707 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 5,188.4010 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 3,412.1012 Abdul Monem Sugar Refinery Ltd. 4,472.00 3,361.00 2,440.30 5,801.30 4,390.1013 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 3,801.3015 S. Alam Vegetable Oil Ltd. and its sister concern 8,581.40 - - - 1,956.3016 S. Alam Cold Rolled Steel Mills Ltd and its sister 4,585.30 - - - 2,191.40concern17 Energyprima Ltd. 3,822.80 - - - 2,321.00Total 53,857.80 15,075.60 68,933.40 62,288.502011Sanctioned limit of Investment clients from serial no. 15 to 17 have not been shown under the large investments thisyear 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 millionas on 31.12.2012.10.4 Classification status - wise investments31.12.2012Taka31.12.2011TakaUnclassified :i) Unclassified including staff investment 342,136,151,887 294,101,606,170ii) Special mention account (SMA) 16,571,771,000 3,446,633,000Total unclassified (i+ii) 358,707,922,887 297,548,239,170Classified :iii) Substandard 2,094,313,000 3,152,326,000iv) Doubtful 1,295,180,000 802,794,000v) Bad and Loss 10,823,307,000 4,337,204,000Total classified (iii+iv+v) 14,212,800,000 8,292,324,000Grand total ( i to v) 372,920,722,887 305,840,563,17010.5 Pledged collaterals against investmentsLand & building 406,212,673,667 342,497,619,606MTDR, securities etc. 8,700,929,149 8,204,641,842Share certificates 133,933,000 153,602,000Total 415,047,535,816 350,855,863,448240Annual Report 2012

31.12.2012Taka31.12.2011Taka10.6 Particulars of investmentsi) Investments considered good in respect of which the bank is fully secured 359,644,364,887 296,002,215,813ii) Investments considered good in respect of which the Bank holds debtors’- -personal securityiii) Investments considered good and secured by personal security of one ormore persons in addition to personal security of debtors13,276,358,000 9,838,347,357iv) Investments considered bad or doubtful not provided for - -Total 372,920,722,887 305,840,563,170v) Investments due by directors or employees of the bank or any of them eitherseverally or jointly with any other personsvi) Investments due by directors or employees of the bank are interested asdirectors, partners, managing agents or in the case of private companies asmembersvii) Total amount of investments, including temporary investments, made anytime during the year to directors or employees of the bank or any of themeither severally or jointly with any other persons6,807,607,013 4,623,123,923486,794,000 537,197,0006,807,607,013 4,623,123,923viii) Total amount of investments, including temporary investments granted 486,794,000 537,197,000during the year to the Companies or firms in which the directors of the bankare interested as directors, partners, managing agents or, in the case ofprivate companies as membersix) Investments due from other banks - -x) Classified investments:a) Classified investments on which compensation has not been charged 10,488,058,099 2,521,553,000b) Provision for classified investments 6,054,350,000 3,054,000,000c) Provision kept against investments classified as bad debts 5,480,005,979 2,419,253,000d) Amount credited to profit/ rent /compensation suspense account 1,614,963,041 1,124,832,602xi)Particulars of written off investmentsa) Cumulative amount of investment written off since inception to 31st 4,673,131,725 4,304,438,917December last yearb) Amount of investment written off during this year 475,804,996 368,692,808c) Total amount written Off (a + b) 5,148,936,721 4,673,131,725d) Amount recovered against written off investment up to this year (*) 1,239,122,544 1,131,240,213e) Amount waived against written off investment up to this year (*) 892,321,422 816,541,212f) Amount of investment written off against which suit has been filed to recover 5,148,936,721 4,673,131,725the same* During the year of 2012, Tk.76,100,209/- was waived and Tk.107,882,331/- was recovered from the clients in cashfrom written off investments.10(a)Consolidated general investmentsIslami Bank Bangladesh Limited 340,479,756,413 287,861,385,224Islami Bank Securities Limited - -Islami Bank Capital Management Limited - -340,479,756,413 287,861,385,224Annual Report 2012 241

11.0 Bills purchased & discounted 31.12.2012Taka31.12.2011Takai) Payable in Bangladesh 20,678,894,043 14,777,933,406ii) a) Payable outside Bangladesh excluding OBUs 1,823,290,744 941,880,898b) Payable outside Bangladesh -OBUs 9,938,781,687 2,208,981,345Total (i+ii) 32,440,966,474 17,928,795,64911(a)Consolidated bills purchased & discountedIslami Bank Bangladesh Limited 32,440,966,474 17,928,795,649Islami Bank Securities Limited - -Islami Bank Capital Management Limited - -32,440,966,474 17,928,795,64911.1 Maturity-wise classification of bills purchased & discountedPayable within 1 month 6,963,105,648 1,544,448,972Over 1 month but less than 3 months 10,360,752,341 8,558,880,734Over 3 months but less than 6 months 9,444,682,753 3,668,091,7446 months or more 5,672,425,732 4,157,374,199Total 32,440,966,474 17,928,795,64912.0 Fixed assets including premises, furniture and fixtures (Annexure-A)Cost / revaluationi) Land 7,516,684,798 2,448,166,198ii) Building 6,051,400,444 3,825,850,374iii) Construction/ capital work-in-process 75,726,010 89,553,599iv) Furniture and fixtures 654,861,489 522,200,017v) Mechanical appliances 2,336,557,939 1,677,728,983vi) Motor vehicles 499,193,740 448,904,045vii) Books 4,030,146 3,352,357viii) Others - -Total cost / revaluation 17,138,454,568 9,015,755,573Less: Accumulated depreciation 2,330,226,239 1,915,563,304Net book value at the end of the year 14,808,228,329 7,100,192,26912.1 Revaluation of land & buildingAs per Bangladesh Bank BCD Circular Letter No. 12 & 18 dated April 20, 1993; June 15, 1993; BRPD Circular No.10dated November 25, 2002; circular No. 09 dated 31 December 2008 and circular No. 24 dated 03 August 2010, theBank 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 7,100,192,269Islami Bank Securities Limited 8,537,118 10,057,305Islami Bank Capital Management Limited - -14,816,765,447 7,110,249,574242Annual Report 2012

13.0 Other assets 31.12.2012Taka31.12.2011Takai) Stock of stationery in hand 90,992,981 81,933,430ii) Stamps in hand 7,008,385 5,757,533iii) Advance rent paid 468,694,508 318,468,622iv) Security deposits paid account 14,316,664 11,889,592v) Suspense account and advance against expenses 1,544,727,886 1,057,538,718vi) Clearing adjustment - 3,740,390vii) Accrued income 652,542,776 370,050,000viii) Deferred revenue expenses 36,652 120,896ix) IB General account (Note - 13.2) - 1,174,141,085x) F.C. clearing adjustment 166,313,216 86,246,351xi) Receivables from Seylon Bank PLC 30,300,809 -Total 2,974,933,877 3,109,886,61713.1 Classification status of other assetsi) Unclassified 2,906,316,657 3,059,435,808ii) Doubtful 5,052,168 4,310,521iii) Bad/ Loss 63,565,052 46,140,288Total 2,974,933,877 3,109,886,61713.2 IB General accountUn-reconciled entries of Inter branch transactions in BangladeshAge Number Amount in Taka Amount in Takai) Upto 3 months (*) -- 1,174,141,085ii) Over 3 months but not more than 6 months -- -Total (i+ii) -- 1,174,141,08513.3 Un-reconciled entries of inter branchtransactions outside BangladeshAge Number Amount in Taka Amount in Takaiii) Upto 3 months -- -iv) Over 3 months but not more than 6 months -- -Total (iii+iv) -- -13(a)Consolidated other assetsIslami Bank Bangladesh Limited 2,974,933,877 3,109,886,617Islami Bank Securities Limited 54,961,761 21,223,259Islami Bank Capital Management Limited 23,097,317 5,671,2233,052,992,955 3,136,781,09914.0 Deposits & other accounts 417,844,142,245 341,853,672,95914.1 Maturity wise classification of deposits are as underi) Re-payable on demand 6,510,898,064 5,323,422,542With a residual maturity ofii) Re- payable within 1 month 43,464,043,635 32,276,166,386iii) Over 1 month but within 6 months 145,012,895,226 144,240,891,174iv) Over 6 months but not more than 1 year 58,411,852,843 50,027,025,270v) Over 1 year but not more than 5 years 86,900,534,735 40,101,545,906vi) Over 5 years but within 10 years 76,991,548,158 68,887,358,476vii) Unclaimed Deposits for 10 years or more 35,533,375 42,785,782Sub-total 417,327,306,036 340,899,195,536Annual Report 2012 243

14.2 Maturity grouping of Inter- bank deposits are as under31.12.2012Taka31.12.2011Takai) Re-payable on demand - -With a residual maturity ofii) Re- payable within 1 month 516,836,209 954,477,423iii) 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 516,836,209 954,477,423Total (14.1+14.2) 417,844,142,245 341,853,672,95914.3 Sector wise break up of deposits and other accountsGovernment 281,845,000 286,791,000Other banks’ deposit 516,836,209 954,477,423Other public 632,958,000 467,209,000Foreign currency 8,424,114,868 5,428,528,193Private 407,988,388,168 334,716,667,343Total 417,844,142,245 341,853,672,95914(a)Consolidated deposits & other accountsIslami Bank Bangladesh Limited 417,844,142,245 341,853,672,959Islami Bank Securities Limited 1,546,334 1,589,856Islami Bank Capital Management Limited - -417,845,688,579 341,855,262,81515.0 Other mudaraba depositsi) Mudaraba Special Notice Deposits 5,567,121,259 5,634,330,224ii) Mudaraba Hajj Deposits 1,242,464,874 1,043,030,009iii) Mudaraba Savings Bond 16,519,073,679 16,830,988,729iv) Mudaraba NRB Savings Bond 604,535,851 346,075,652v) Mudaraba Special Savings (Pension) Deposits 73,973,554,643 65,491,911,409vi) Mudaraba Monthly Profit Deposit Scheme 16,621,377,317 12,372,579,383vii) Mudaraba Muhor Savings 322,778,703 271,758,892viii) Mudaraba Waqf Cash Deposit 367,221,198 260,787,843ix) Mudaraba School Student Savings 92,120,561 221,727x) Mudaraba Farmers Savings A/C 212,915,387 -xi) Mudaraba Foreign Currency Deposits 2,283,973,876 863,110,272Total 117,807,137,348 103,114,794,14015.1 Other banks’ deposits with IBBLi) Al Wadeeah Current Deposits 320,114,462 218,208,634ii) Mudaraba Special Notice Deposits 172,362,850 690,942,091iii) Mudaraba Savings Account 24,358,897 45,326,698Total 516,836,209 954,477,423244Annual Report 2012

31.12.2012Taka31.12.2011Taka16.0 Al Wadeeah current & other deposits accountsi) Al Wadeeah Current Deposits 21,887,260,661 18,138,997,045ii) Convertible Taka Account 151,708 151,708iii) Non Resident Investors Taka Account 60,477,340 1,777,227iv) Non Resident FC of Exchange House / Banks 652,743,899 604,701,479v) Non Resident Taka Account 1,616,426,355 2,316,171,519vi) Foreign Currency Deposit 160,345,351 332,445,892vii) Foreign Currency Deposit ERQ 708,068,919 502,775,915viii) Other FC Deposit 53,214,981 52,134,239ix) Foreign Currency: Security Deposit 79,845,269 71,207,276x) Foreign Currency Held against Back to Back L/C 3,072,592,970 2,465,309,495xi) Foreign Currency held against Cash L/C 516,742,944 134,321,673xii) Foreign Demand Draft /TT Payable 864,696,605 369,831,950xiii) Foreign Currency Deposit against Foreign Bank Guarantee 31,890,054 32,690,002xiv) Security Deposit - Investment 7,061,190 13,827,933xv) Security Deposit - L/C (Wes) 3,568,000 6,995,889xvi) Security Deposit - Foreign L/C General 4,368,709,141 3,615,013,346xvii) Security Deposit - Back to Back L/C (Inland) - -xviii) Security Deposit - Bank Guarantee 502,275,091 453,746,749xix) Security Deposits - Foreign Bill Negotiation( FBN)/ MDB 210,422 209,422xx) Security Deposit - IBP/ FDB/ Bai-As-Sarf 12,752,877 4,867,457xxi) Security Deposit - Inland L/C 76,966,167 77,927,351xxii) Profit Payable 11,111,509,935 7,432,035,127xxiii) Remittance Card Account 3,242,947 1,571,066xxiv) Sundry Deposits (Note-16.1) 1,739,407,111 2,028,397,972xxv) Mobile Wallet A/C 1,790 -Total 47,530,161,727 38,657,107,73216.1 Break-up of sundry depositsi) Sundry creditors 206,701,610 413,875,601ii) Supervision charge 50,174,772 45,844,625iii) Security deposit L/G 417,184 4,858,594iv) Security money payable 116,329,781 87,797,259v) Security money locker 8,521,793 5,662,560vii) Marginal deposit 665,191,363 582,516,538vi) Bank guarantee 1,843,035 4,437,444viii) Excise duty 14,177,900 10,676,780ix) Closed account profit 136,296,851 121,204,547x) Sundry deposit others 196,354,720 455,633,207xi) Govt.tax & VAT 64,795,126 13,888,432xii) RDS welfare fund & RDS RIP 263,940,795 268,458,586xiii) Karmasangsthan Bank 10,000,000 10,000,000xiv) Other earnings (Note-16.2) 4,662,181 3,543,799Total 1,739,407,111 2,028,397,972Annual Report 2012 245

16.2 Break-up of other earnings31.12.2012Taka31.12.2011Takai) Opening balance 3,543,799 1,927,874ii) Received from B. Bank FC clearing A/c 3,880,301 5,627,035iii) Received from foreign correspondents/banks 1,403,840 522,398iv) Total receipt during the year (ii+iii) 5,284,141 6,149,433v) Less : 4,165,759 4,533,508Income tax provision @ 42.50% 2,245,759 2,613,508Transferred/ paid for charitable activities 1,920,000 1,920,000vi) Closing balance (i+iv-v) 4,662,181 3,543,79917.0 Bills payablei) P.O. payable 2,675,110,054 1,841,425,532ii) T.T. payable 54,728,558 41,770,783iii) D.D. payable 803,555,182 715,105,982iv) FC bills payable 5,181,274 5,181,274v) BEFTN payable 219,567,306 67,736,255vi) Spot cash payable 457,895,960 192,175,269Total 4,216,038,334 2,863,395,09518.0 Mudaraba Perpetual Bond 3,000,000,000 3,000,000,000Islami Bank Bangladesh Limited issued Mudaraba Perpetual Bond (MPB) under the mudaraba principles of IslamicShari‘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. TheInvestment Corporation of Bangladesh (ICB) is the Trustee of the MPB.The MPB is listed with Dhaka Stock ExchangeLtd. & Chittagong Stock Exchange Ltd. and trading of the same started from 25 November 2007.19.0 Other liabilities 31.12.2012Taka31.12.2011Takai) Provision for classified & unclassified investments and off- balance sheet 11,090,700,000 8,170,000,000iItems (Note- 19.2, 19.3 & 19.4)ii) Provision for other assets (Note-19.5) 96,550,000 87,108,934iii) Current tax (Note-19.6) 6,501,756,770 4,766,417,040iv) Zakat payable 794,105,590 600,754,117v) Dividend payable 10,617,022 10,658,477vi) Foreign correspondents charges 2,584,977 4,338,095vii) Incentive bonus payable 1,186,768,125 1,106,260,523viii) Payable against expenditure 96,893,767 257,626,081ix) Clearing adjustment 415,621 -x) Transfer delivery adjustment 762,104 1,055,693xi) Profit/ rent /compensation suspense account (Note - 19.7) 1,614,963,041 1,124,832,603xii) Substitute cash assistance - -xiii) Un-earned exchange 24,836,877 210,364,129xiv) BEFTN adjustment 15,369,847 6,237,987xv) Provident/SAF/Benevolent fund collection 30,215,984 251,775xvi) IB General account (Note - 19.8) 231,894,252 -Total 21,698,433,977 16,345,905,454246Annual Report 2012

31.12.2012Taka31.12.2011Taka19.1 Provision for investments including bad & doubtful investmentscurrent year provision for investmentsUnclassified investments including OBU & off-balance sheet items 4,307,754,000 4,948,313,000Special mention account 728,596,000 167,687,000Substandard 234,152,000 341,322,000Doubtful 340,180,000 293,425,000Bad and loss 5,480,018,000 2,419,253,00011,090,700,000 8,170,000,00019.2 Provision for classified investmentsi) Provision held at the beginning of the year 3,054,000,000 1,840,000,000ii) 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 1,890,656,796v) 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 1,641,314,796Total provision held at the end of the year 6,054,350,000 3,054,000,00019.3 General provision on unclassified investmenti) Provision held at the beginning of the year 3,996,000,000 3,443,000,000ii) Addition during the year (60,100,000) 553,000,000iii) Balance at the end of the year 3,935,900,000 3,996,000,000Total 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 itemsProvision held at the beginning of the year 1,120,000,000 930,000,000Add. Provision made/ (no longer required) during the year (19,550,000) 190,000,000Provision held as on 31st December 1,100,450,000 1,120,000,000Total provision ( Note- 19.2+19.3+19.4) 11,090,700,000 8,170,000,00019.5 Other provisionsProvision for other assetsOpening balance 87,108,934 87,108,934Add: Provision made during the year 9,441,066 -Closing balance 96,550,000 87,108,93419.6 Current tax liabilityBalance of provision on 01 January 6,519,438,311 4,528,458,836Add: Provision made during the year (19.6.1) 6,525,837,929 5,476,469,040Add: Other provision made during the year 79,265,181 2,613,508Less: Settlement for previous year 4,237,371,275 3,488,103,073Total (a) 8,887,170,146 6,519,438,311Advance taxBalance of advance tax on 01 January 1,753,021,271 1,195,301,698Add: Payment made during the year 4,869,763,379 4,045,822,646Less: Settlement for previous year 4,237,371,275 3,488,103,073Total ( b) 2,385,413,375 1,753,021,271Net balance as at 31 December (a-b) 6,501,756,771 4,766,417,040Annual Report 2012 247

19.6.1 Provision for current tax made during the year31.12.2012Taka31.12.2011TakaIncome tax @ 42.50% for 2012 & 2011 on taxable profit (A) 6,604,737,555 5,515,003,546Add: Income tax @ 20% on dividend income 365,555 560,000Add: Excess profit tax - -Less: Provision already kept 79,265,181 -Estimated provision required as at 31 December (i) 6,525,837,929 5,515,563,546Provision heldBalance at 1st January 6,519,438,311 4,528,458,836Less: Tax for previous year 4,237,371,275 3,488,103,073Actual provision for tax held (ii) 2,282,067,036 1,040,355,763Estimated provision needs to be made (i-ii) 4,243,770,893 4,475,207,783Provision actually made during the year 6,525,837,929 5,515,563,546A. Computation of taxable profitProfit before tax 12,096,177,670 10,347,315,330Less: Dividend income 1,827,777 2,800,000Profit before tax (excluding dividend income) 12,094,349,893 10,344,515,330Add : Inadmissible expenditure 4,539,191,483 3,187,832,881Less : Further allowable expenditure 1,092,982,423 555,869,280Estimated taxable profit for the year (A) 15,540,558,953 12,976,478,931Provision for tax for the year ended on 31.12.2012 has been made as per Income Tax Ordinance, 1984 applying prevailingrates 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/writpetitions against tax assessment orders of different levels of tax authorities to the appropriate tax authorities and High Courton different disputed issues. Adequate provisions for those assessment years have been made in the books of accounts.19.6(a)31.12.2012Taka31.12.2011TakaConsolidated current tax liabilityIslami Bank Bangladesh Limited 6,525,837,929 5,476,469,040Islami Bank Securities Limited 33,207,118 14,651,359Islami Bank Capital Management Limited 15,419,785 13,131,6926,574,464,832 5,504,252,09119.7 Profit/ rent/ compensation suspense accounti) Balance at the beginning of the year 1,124,832,603 921,401,227ii) Amount transferred to suspense account during the year 3,299,199,279 1,234,700,647iii) 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 1,124,832,60319.8 IB General accountUn-reconciled entries of inter branch transactions in bangladeshMaturity Number Amount in Taka Amount in Takai) 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 14.03.2013.248Annual Report 2012

31.12.2012Taka31.12.2011Taka19(a)Consolidated other liabilitiesIslami Bank Bangladesh Limited 21,698,433,977 16,345,905,454Islami Bank Securities Limited 174,582,154 352,582,542Islami Bank Capital Management Limited 30,793,143 15,434,45321,903,809,274 16,713,922,44920.0 Deferred tax liabilitiesAt the beginning of the year 192,330,992 162,930,992Add: Addition during the year 45,900,000 29,400,000Exchange difference - -At the end of the year 238,230,992 192,330,99220(a)Provision for deferred tax has been made on all temporary differences between the tax base and the carrying amountsfor financial reporting purpose as per Bangladesh Accounting Standard (BAS) -12 “Income Taxes”. Tax base representsthe written down value of assets with adjustment used for tax purpose. Tax rate prevailing at the balance sheet date isused to determine Deferred Tax.31.12.2012Taka31.12.2011TakaConsolidated deferred tax liabilitiesIslami Bank Bangladesh Limited 238,230,992 192,330,992Islami Bank Securities Limited 397,859 333,071Islami Bank Capital Management Limited - -238,628,851 192,664,06320(b)Consolidated deferred tax income/expensesIslami Bank Bangladesh Limited 45,900,000 29,400,000Islami Bank Securities Limited 64,788 115,743Islami Bank Capital Management Limited - -45,964,788 29,515,74321.0 Share capital21.1 Authorized capitalThe 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 capitalThe shareholders of the bank in their 29th Annual General Meeting held on May 15, 2012 approved 25% StockDividend (Bonus Share) for the year 2011, thus Paid-up Capital of the Bank was increased from Tk.10,007.71 millionto Tk.12,509.64 million during the year 2012; as detailed below:31.12.2012Taka100,07,71,200 ordinary shares of Tk.10 each 10,007,712,00025,01,92,800 Ordinary Shares of Tk.10 each issued as Bonus Share 2,501,928,000Total 12,509,640,000Annual 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 ofSecurities & Exchange Commission (SEC). As such all applicable comparatives have been re-stated considering facevalue 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 eachfully subscribed by:ParticularsNo. of Sharesas on31 Dec, 2012% of Total31.12.2012Amount inTaka31.12.2011Amount inTaka(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’sRepublic of Bangladesh**15,787 0.001% 157,870 126,300Sub 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 registerof the Bank as yet.b) Break up of share holding and percentage thereofHoldings No. ofShareholdersTotal Holdings/No. of SharesPercentage(%)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 followCapital Requirement rules on the basis of Risk Weighted Assets and revised Risk Based Capital Adequacy Frameworkin line with Basel II simultaneously for one year i.e. parallel run for the year 2009 and full operation of Basel II was startedfrom 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 dated29.12.2010 issued revised Guidelines on Risk Based Capital Adequacy for Banks (Revised Regulatory CapitalFramework 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 andOperational Risk. Details of calculation as on 31 December 2012 as per Basel II are given below:250Annual Report 2012

31.12.2012(Consolidated)31.12.2012(Solo)(Amount in Crore Taka)31.12.2011(Consolidated)A. Regulatory capital1. Tier-1 (Core capital) (Note 21.3.1) 2,813.10 2,822.51 2,321.462. Tier-2 (Supplementary capital) (Note 21.3.2) 1,380.32 1,380.32 1,031.553. Tier-3 (Additional supplementary capital) (Note 21.3.3) - - -4. Total regulatory capital (1+2+3) 4,193.42 4,202.83 3,353.01B. Total Risk Weighted Assets (RWA) (Note 21.3.4) 30,988.86 31,151.16 25,543.13C. 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 2,554.31G. Surplus capital (A-F) 1,094.53 1,087.71 798.7021.3.1 Tier-1 (Core capital)1.1 Fully paid-up capital/capital deposited with BB 1,250.96 1,250.96 1,000.771.2 Statutory reserve 1,242.37 1,242.37 1,000.441.3 Non-repayable share premium account 0.20 0.20 0.201.4 General reserve 13.04 13.04 15.261.5 Retained earnings 303.32 312.74 301.591.6 Non-controlling interest in subsidiaries 0.01 - -1.7 Non-cumulative irredeemable preferences shares - - -1.8 Dividend equalization account 3.20 3.20 3.201.9 Sub-total: (1.1 to 1.8) 2,813.10 2,822.51 2,321.46Deductions 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 2,321.46Annual Report 2012 251

(Amount in Crore Taka)31.12.2012(Consolidated)31.12.2012(Solo)31.12.2011(Consolidated)21.3.2 Tier-2 (Supplementary capital)2.1 General provision (unclassified investment and off balancesheet exposure)503.64 503.63 511.602.2 Assets revaluation reserves up to 50% 574.95 574.95 215.402.3 Revaluation reserves of securities up to 50% 1.74 1.74 4.552.4 Revaluation reserves for equity instruments up to 10% - - -2.5 All other preference shares - - -2.6 Perpetual subordinated debt (Mudaraba Perpetual Bond) 300.00 300.00 300.002.7 Others (if any item approved by Bangladesh Bank) - - -2.8 Sub-total (2.1 to 2.7) 1,380.32 1,380.32 1,031.552.9 Deductions, if any - - -2.10 Total Eligible Tier-2 Capital (2.8 - 2.9) 1,380.32 1,380.32 1,031.5521.3.3 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 1,031.555. Total regulatory capital (1.19+4) 4,193.42 4,202.83 3,353.0121.3.4 Risk Weighted Assets (RWA) forAmount in Crore1. 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 2,696.142. Market Risk 468.50 468.50 192.203.Operational risk 2,470.78 2,461.87 2,053.68Total Risk Weighted Assets (1+2+3) 30,988.87 31,151.16 25,543.13252Annual Report 2012

A. Investment (credit) risk on balance sheet exposures as on 31.12.2012 & 31.12.2011 ( consolidated)SL.No.Exposure typeBB’s ratinggrade *RiskweightExposureRWA as on31.12.2012(Consolidated)(Amount in Crore Taka)RWA as on31.12.2011(Consolidated)1 2 3 4 5 6= (4X5) 7a) Cash and cash equivalents 0% 3,737.28 - -b)Claims on Bangladesh Government and0% 2,544.78 - -Bangladesh Bankc)Claims on other sovereigns & central0% - - -BanksClaims on Bank for International0% - - -d) Settlements, International MonetaryFund and European Central BankClaims on Multilateral Development- - -Banks (MDBs)i) IBRD , IFC, ADB, AFDB, EBRD,0% - - -IADB, EIB, EIF, NIB, CDB, IDB, CEDBe)1 20% - - -2,3 50% - - -ii) Other MDBs4,5 100% - - -6 150% - - -Unrated 50% - - -1 20% - -2,3 50% - -f)Claims on Public Sector Entities (otherthan government) in Bangladesh4,5 100% - - -6 150% - - -Unrated 50% - - -Claims on banks - -1 20% - - -2,3 50% 72.52 36.26 27.49g) i) Maturity over 3 months4,5 100% 4.77 4.77 8.046 150% - -Unrated 100% 4.00 4.00 -ii) Maturity less than 3 months 20% 2,296.72 459.34 313.861 20% 2,712.72 542.54 496.012 50% 15,144.22 7,572.11 5,985.10h) Claims on corporates3, 4 100% 2,765.78 2,765.78 3,574.095, 6 150% 19.97 29.96 23.58Unrated 125% 2,975.45 3,719.31 4,750.28PSE N/A - - -Corporate N/A 7.41 9.26 19.48Retail & N/A 19.47 14.60 30.50NBFIsi) Claims under Credit Risk mitigation Consumer N/A - - -Residential N/A - - -PropertyCommercial N/A - - -Real EstateSub total 32,305.10 15,157.95 15,228.42Annual Report 2012 253

Investment (credit) risk on balance sheet exposures as on 31.12.2012 & 31.12.2011 (Consolidated) contd…(Amount in Crore Taka)Fixed risk groups:j) Claims categorized as retail portfolio & small enterprise(excluding consumer investment)RiskweightExposureRWA as on31.12.2012(Consolidated)RWA as on31.12.2011(Consolidated)75% 4,778.51 3,583.88 2,696.97k) Consumer finance 100% 71.06 71.06 88.96l) Claims fully secured by residential property 50% 1,279.56 639.78 587.66m) Claims fully secured by commercial real estate property 100% 268.15 268.15 167.50n)Past due claims ( risk weights are to be assigned net ofspecific provision):1.The claim (other than claims secured by eligible residentialproperty) that is past due for more than 90 days and/orimpaired will attract risk weight as follows:- Where specific provisions are less than 20 per cent of theoutstanding amount of the past due claim ;- Where specific provisions are not less than 20 per cent ofthe outstanding amount of the past due claim ;- Where specific provisions are more than 50 per cent of theoutstanding amount of the past due claim.2. Claims fully secured against residential property that arepast due for more than 90 days and/or impaired specificprovision held there-against is less than 20% of outstandingamount.3. Loans and claims fully secured against residential propertythat are past due by 90 days and /or impaired and specificprovision held there-against is more than 20% of outstandingamount- - -- - -150% 1,297.86 1,946.79 285.24100% 241.79 241.79 72.3850% 334.68 167.34 122.76100% 220.85 220.85 11.3275% 70.84 53.13 150.98o Capital market exposures 125% 124.55 155.69 202.05p Investments in venture capital 150% - - -q)r)Unlisted equity Investments and regulatory capitalinstruments issued by other banks (other than thosededucted from capital) held in banking bookInvestments in premises, plant and equipment and all otherfixed assets125% 50.01 62.52 -100% 913.01 913.01 495.60s) Claims on all fixed assets under operating lease 100% - - -t)All other assets -i) Claims on GoB & BB (eg. Advanced income tax,reimbursement of patirakkha/ shadharon shanchay patra,etc.)0% - - -ii) Staff loan/ investment 20% 569.27 113.85 88.60iii) Cash items in process of collection 20% - -iv) Claims on Off-shore Banking Units (OBU) 100% 993.88 993.88v) Other assets 100% 257.45 257.45 402.67Sub total 11,471.47 9,689.18 5,372.69Grand total 43,776.57 24,847.12 20,601.11254Annual Report 2012

B. Investment (credit) risk off- balance sheet exposures as on 31.12.2012 & 31.12.2011 (Consolidated)SL.No.Exposure typea) Claims on Bangladesh Government andBangladesh BankBB’s ratinggradeRiskweightExposureRWA as on31.12.2012(Consolidated)(Amount in Crore Taka)RWA as on31.12.2011(Consolidated)0% - - -b) Claims on other sovereigns & central banks 0% - - -c) Claims on Bank for International Settlements,International Monetary Fund and EuropeanCentral Bankd)e)f)g)Claims on Multilateral Development Banks(MDBs)i) IBRD , IFC, ADB, AFDB, EBRD, IADB, EIB,EIF, NIB, CDB, IDB, CEDB0% - - -0% - - -0% - - -ii) Other MDBs 1 20% - - -Claims on Public Sector Entities (other thangovernment) in BangladeshClaims on banks2,3 50% - - -4,5 100% - - -6 150% - - -Unrated 50% - - -1 20% - - -2,3 50% - - -4,5 100% - - -6 150% - - -Unrated 50% - - -i) Maturity over 3 months 1 20% 27.19 5.44 8.292,3 50% 98.21 49.11 58.424,5 100% 12.34 12.34 8.076 150% 0.03 0.05 0.11Unrated 100% 202.19 202.19 174.56ii) Maturity less than 3 months 20% - - -Claims on corporates 1 20% 50.23 10.05 45.412,3 50% 633.84 316.92 530.394,5 100% 84.06 84.06 206.126 150% - - 0.06Unrated 125% 1,221.86 1,527.33 1,157.71h) Claims as retail portfolio & small enterprise 75% 1,326.66 995.00 507.01i) (excluding consumer Investment)Consumer investment100% - - -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 2,696.14Annual Report 2012 255

C. Capital requirements for: Market risk as on 31.12.2012 & 31.12.2011(Amount in Crore Taka)SL.No.ParticularsCapital charge forSpecificriskGeneralmarket riskTotalRWA as on31.12.2012(Consolidated)RWA as on31.12.2011(Consolidated)a) Profit rate risk - - - -b) Equity position risk 0.55 0.55 1.09 10.94 22.20c) Foreign exchange risk - 45.76 45.76 457.56 170.00d) Commodity risk - - - - -e) Total 0.55 46.30 46.85 468.50 192.20D. Capital requirements for: Operational risk as on 31.12.2012 and 31.12.2011Sl.No.YearGrossIncome (GI)AverageGI15% ofAverageGIRisk WeightedAssets31.12.2012RWA31.12.20111 2 3 4 5 6 = (5X10) 71 1 January 2011 to 31 December 2011 2,063.742 1 January 2010 to 31 December 2010 1,602.10 1,647.19 247.08 2,470.78 2,053.683 1 January 2009 to 31 December 2009 1,275.72Total gross income 4,941.56Disclosure under pillar III (market discipline) as on 31.12.2012 & 31.12.2011 as per Bangladesh Bank BRPD CircularNo. 24 dated 03.08.2010a) Market discipline (disclosures):A. Banking book assets1. Cash in hand & balance with BB (excluding FC) 6,189.84 5,307.872. Money at call3. Investment (HTM) 2,695.54 1,682.14a. Government 2,343.40 1,380.00b. Qualifying (banks, etc) - -c. Others 352.14 302.144. Investment (loans & advances) (a+b) 37,124.19 30,470.17a. Classified (SMA. SS, DF & BL to be shown separately) 3,078.46 1,173.95Special Mention Account (SMA) 1,657.18 344.66Sub standards 209.43 314.79Doubtful 129.52 80.71Bad/loss 1,082.33 433.79b. Unclassified 34,045.73 29,296.225. Risk weighted assets (investment and off-balance sheet) 27,871.84 23,297.24a. Below 100% RW 15,438.63 11,649.43b. 100% RW 5,045.22 5,209.31c. Above 100% RW 7,387.98 6,438.506. Rated status (investment and off-balance sheet)a. Rated assets 21,624.01 19,763.46b. Unrated assets 4,410.60 4,916.537. Other assets (including fixed assets) 2,164.34 898.27A. Total banking book assets (1+2+3+4+7) 48,173.91 38,358.45256Annual Report 2012

B. Trading book assets31.12.2012(Consolidated)(Amount in Crore Taka)31.12.2011(Consolidated)1. FC held in hand 4.96 1.912. FC held in BB & Nostro account 1,247.71 593.723. Investment (trading) 5.47 11.09a. Govt.(part of govt. HTM if held above the required SLR amount) 5.47 11.09b. HFT - -c. AFS (if any) - -B. Total trading book assets (1+2+3) 1,258.14 606.72Total assets (A+B) 49,432.05 38,965.17b) Investment (credit) risk on banking bookQuantative disclosuresParticularsA) Total exposures of credit risk1. Funded 43,774.37 36,180.26a) Domestic 43,390.66 35,649.44b) Overseas 383.71 530.822. Non-funded 9,487.30 10,748.12a) Domestic 6,493.75 6,549.14b) Overseas 2,993.55 4,198.983. Distribution of risk exposure by claims - -A. Claims on sovereigns and central banks 2,544.78 1,472.21B. Claims on other official entities - -C. Claims on banks and securities firms 2,300.72 1,569.27D. Claims on corporate 25,233.14 21,840.27E. Claims included in the retail portfolio & SME enterprises 4,778.51 3,595.96F. Claims secured by residential property 1,279.56 1,175.32G. Claims secured by commercial real estate 268.15 167.50H. Claims against consumer investment 71.06 88.96I. Other categories:– Past due investment/NPI 3,078.46 1,173.95– Off-balance sheet items 9,487.30 10,748.124. Credit Risk MitigationClaims secured by financial collateral 32.27 82.91Net exposure after the application of haircuts. 26.88 56.26Claims secured by eligible Guarantee - -c) Market risk on trading BookParticularsCapital requirements for:i) Profit (interest) rate risk; - -ii) Equity position risk; 1.09 2.22iii) Foreign exchange risk; and 45.76 17.00iv) Commodity risk - -Annual Report 2012 257

d) Operational risk31.12.2012(Consolidated)(Amount in Crore Taka)31.12.2011(Consolidated)ParticularsCapital requirements for operational risk 247.08 205.37e) Maintenance of specific provisionParticularsA) Gross Non Performing Assets (NPAs) 3,078.46 1,173.95Non Performing Assets ( NPAs) to outstanding investment 8.29% 3.85%B) Movement of Non Performing Assets ( NPAs)1. Opening balance 621.30 705.302. Additions 2,457.16 468.653. Reductions - -4. Closing balance 3,078.46 1,173.95Movement of specific provisions for NPAs1. Opening balance 184.00 184.002. Provisions made during the period 163.99 189.063. Write-off 42.73 42.734. Write-back of excess provisions - 24.935. Closing balance 305.26 305.40f) Maintenance of regulatory capitalParticularsA) Amount of Tier-1 Capitali) Fully paid-up capital 1,250.96 1,000.77ii) Statutory reserve 1,242.37 1,000.44iii) Non-repayable share premium account 0.20 0.20iv) General reserve 13.04 15.26v) Retained earnings 303.32 301.59vi) Dividend equalization account 3.20 3.20Total Tier-I Capital 2,813.09 2,321.46B) Amount deducted from Tier-1 Capitali) Goodwill - -ii) Shortfall - -iii) Others - -C) Total amount of Tier 2 capital (net of deductions from Tier 2capital).i) General provision (unclassified investment +SMA+Off balance sheet exposure)503.64 511.60ii) Assets revaluation reserves up to 50% 574.95 215.40iii) Revaluation reserves of securities up to 50% 1.74 4.55iv) Subordinated debt (Mudaraba Perpetual Bond) 300.00 300.00Total Tier-II Capital 1,380.32 1,031.55D) Total eligible capital. 4,193.42 3,353.01258Annual Report 2012

31.12.2012(Consolidated)(Amount in Crore Taka)31.12.2011(Consolidated)g) Capital adequacyParticularsA) Amount of regulatory capital to meet unforeseen loss:i) Amount to meet (investment) credit risk 2,804.82 2,329.73ii) Amount to meet market risk 46.85 19.22iii) Amount to meet operational risk. 247.08 205.37B) Some additional capital over MCR maintained 1,094.67 798.692012 201122.0 Statutory reserve Taka TakaOpening balance 10,004,426,808 7,934,963,742Add: Addition made this year 2,419,235,534 2,069,463,066Closing balance 12,423,662,342 10,004,426,808At least 20% of net profit is transferred to statutory reserve account each year until the cumulative balance equal tothe amount of paid up capital account as per Section 24 of the Bank Company Act 1991.23.0 Others reserves 31.12.2012(Consolidated)31.12.2011(Consolidated)a) General reserveOpening balance 152,645,772 583,130,387Add: Addition/(adjustment) made this year (22,205,793) (430,484,615)Sub total (i) 130,439,979 152,645,772b) Share premium 1,989,633 1,989,633c) Assets revaluation reserve (Note 23.1) 11,498,971,320 4,308,071,320d) Dividend equalization account 32,000,000 32,000,000e) Revaluation reserve of securities (Note 23.2) 34,700,000 90,900,000Sub total (ii) 11,567,660,953 4,432,960,953f) Translation reserveOpening 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 4,585,606,72523.1 Assets revaluation reserveOpening balance 4,308,071,320 4,313,460,000Addition during the year 7,190,900,000 -Adjustment during the year - (5,388,680)Closing balance 11,498,971,320 4,308,071,320Annual Report 2012 259

23.2 Revaluation reserve of securities31.12.2012(Consolidated)(Amount in Crore Taka)31.12.2011(Consolidated)Opening balance 90,900,000 621,000,000Adjustment during the year (56,200,000) (530,100,000)Revaluation made during the year - -Closing balance 34,700,000 90,900,00024.0 Letter of guarantee 2012 2011TakaTaka(a) Claim against the bank which is not acknowledged as debt - -(b) Money for which the bank is contingently liable in respectof guarantees issued favouring :i) Directors - -ii) Government 765,910,552 568,167,638iii) Bank and other financial institutions 453,724 38,536,812iv) Others 6,531,121,274 6,695,538,015Total 7,297,485,550 7,302,242,46524.1 Security pledged against Mudaraba Perpetual Bond (MPB) liabilities ofTk. 3,000 Million:4,489,100,000 4,489,100,00025.0 Investment incomeIncome from general investmentBai Murabaha 25,625,826,162 18,634,820,811Musharaka /Musharaka Documentary Bills 1,650,848,673 1,608,584,495Bai Muajjal 2,342,455,272 1,638,051,953Hire Purchase under Shirkatul Melk 11,000,357,892 8,562,558,621Bai Salam 360,052,627 222,309,941Mudaraba - (284,569,341)Mudaraba : Profit on Islamic Inter-Bank Fund Market (IIFM) 18,564,179 -Bai -As- Sarf (FDB /FCD), IBP, MFCI and UPAS 161,405,959 181,133,837Investment income: Off-shore Banking Unit (OBU) 144,514,613 29,328,468Others (Compensation Realisable/ Realised) 422,217,534 642,928,187Sub Total (i) 41,726,242,911 31,235,146,972Profit on deposits with other banks & financial institutionsa) In Bangladesh 1,945,983,070 784,385,472b) Outside Bangladesh - -Sub total (ii) 1,945,983,070 784,385,472Grand total (i + ii) 43,672,225,981 32,019,532,444260Annual Report 2012

25.1 Investment income derived from the fund deployed by31.12.2012(Consolidated)(Amount in Crore Taka)31.12.2011(Consolidated)i) Mudaraba deposits 37,216,308,026 27,241,499,763ii) Other deposits/fund 6,033,700,421 4,464,150,000Total 43,250,008,447 31,705,649,76326.0 Profit Paid on Mudaraba Depositsi) Profit paid on Mudaraba Savings Deposit 7,120,587,950 5,524,806,727ii) Profit paid on Mudaraba Term Deposit Account 7,805,821,402 4,593,371,538iii) Profit paid on other Mudaraba Deposits 10,536,615,885 7,887,039,820iv) Profit paid on Placement - -v) Profit paid on Mudaraba Perpetual Bond (MPB) 407,400,000 396,000,000Total 25,870,425,237 18,401,218,085The mudaraba depositors are entitled to get minimum 65% of investment income earned through deploymentof mudaraba fund as per weightages. In 2012, 70.04% (2011: 68.60%) of profit earned through deployment ofmudaraba fund has been distributed/provided to the mudaraba depositors & MPB holders. It may be mentioned herethat in some mudaraba deposits, additional rate was allowed over the rate arrived as per weightage. An additionalamount equivalent to 10.00% of the rate of dividend has been provided for MPB holders of the Bank for the year2012 (2011: 10.00%).27.0 Income from investments in shares & securities 31.12.2012(Consolidated)31.12.2011(Consolidated)i. Inside BangladeshBangladesh Government Islamic Investment Bond (BGIIB) 430,142,971 286,570,090Bangladesh Shipping Corporation (BSC) - 2,000,000Central Depository Bangladesh Ltd. (CDBL) 1,827,777 800,000Islami Bank Securities Limited - -Sub total (i) 431,970,748 289,370,090ii. Outside Bangladesh - -Sub total (ii) - -Grand total (i+ii) 431,970,748 289,370,09027(a)Consolidated income from investments in shares & securitiesIslami Bank Bangladesh Limited 431,970,748 289,370,090Islami Bank Securities Limited 52,391,088 41,634,547Islami Bank Capital Management Limited - -484,361,836 331,004,637Annual Report 2012 261

28.0 Commission, exchange & brokerage income 2012Taka2011Takai) Commission income 2,881,472,975 2,720,250,757ii) Exchange income (Note 28.1) 2,368,227,006 2,563,851,742iii) Brokerage income - -Total 5,249,699,981 5,284,102,49928.1 Exchange incomeGross exchange gain 2,368,227,006 2,563,851,742Less: exchange loss - -Net exchange gain 2,368,227,006 2,563,851,74228(a)Consolidated commission, exchange & brokerage incomeIslami Bank Bangladesh Limited 5,249,699,981 5,284,102,499Islami Bank Securities Limited 10,947,680 13,353,287Islami Bank Capital Management Limited - -5,260,647,661 5,297,455,78629.0 Other operating incomei) Rent on locker 8,487,036 7,297,482ii) Telephone/ trunk call charge recovered 6,196,861 13,503,912iii) P&T charge recovered 56,287,453 56,166,715iv) Legal expenses recovered 8,560,772 3,695,063v) E & TA fees recovered 918,097 762,713vi) Income from ATM & SWIFT 196,520,743 129,976,766vii) Account maintenance charges realised 497,006,788 433,909,216viii) Service charges recovered 27,595,345 21,476,427ix) Service charges recovered: OBU 1,733,870 147,319x) Rent on premises realised 2,932,580 2,705,587xi) Sale proceeds of tender schedule 1,152,000 658,500xii) Profit on sale of bank’s car 8,468,394 1,686,695xiii) Written-off investment recovery 107,882,331 77,081,305xiv) Recruitment fees recovered 22,544,564 38,805xv) MICR cheque charge realised 4,114,960 2,703,433xvi) Others 41,471,337 56,481,972Total 991,873,131 808,291,91029(a)Consolidated other operating incomeIslami Bank Bangladesh Limited 991,873,131 808,291,910Islami Bank Securities Limited 88,546,014 32,668,939Islami Bank Capital Management Limited 41,750,739 35,672,7941,122,169,884 876,633,643262Annual Report 2012

30.0 Rent, taxes, insurances, electricity etc.2012Taka2011Takai) Rent, rates and taxes 221,603,303 181,463,859ii) Insurance 227,345,201 196,414,855iii) Electricity and lighting 203,546,262 125,759,209Total 652,494,766 503,637,92330(a)Consolidated rent, taxes, insurances, electricity etc.Islami Bank Bangladesh Limited 652,494,766 503,637,923Islami Bank Securities Limited 2,481,976 2,812,501Islami Bank Capital Management Limited 599,718 613,473655,576,460 507,063,89731.0 Postage, stamps, telecommunications etc.i) Postage 45,713,904 38,947,737ii) SWIFT charges 24,470,465 18,228,691iii) Telephone 32,160,956 28,553,702iv) Fax & internet 9,072,328 8,431,070v) Stamps charges - -Total 111,417,653 94,161,20031(a)Consolidated postage, stamps, telecommunications etc.Islami Bank Bangladesh Limited 111,417,653 94,161,200Islami Bank Securities Limited 111,190 105,915Islami Bank Capital Management Limited - -111,528,843 94,267,11532.0 Stationery, printing and advertisement etc.i) Paper & table stationery 23,462,435 20,190,385ii) Printing and stationery (registers and forms) 126,863,357 100,246,876iii) Advertisement & publicity 117,222,030 77,681,891Total 267,547,822 198,119,15232(a)Consolidated stationery, printing and advertisement etc.Islami Bank Bangladesh Limited 267,547,822 198,119,152Islami Bank Securities Limited 182,238 299,324Islami Bank Capital Management Limited - -267,730,060 198,418,476Annual Report 2012 263

33.0 Directors’ fees and expenses2012Taka2011Takai) Directors’ fees for attending board/ executive committee/ other committeesmeeting4,054,653 3,823,202ii) TA/DA/hotel fare for local & foreign directors 5,437,108 4,297,934iii) Others 575,079 1,133,850Total 10,066,840 9,254,98633.1 Rate of fees for attending board/ executive committee/ othercommittees meetingi) For board meeting 5,000 5,000ii) For executive committee/ other committees meeting 4,000 4,00033(a)Consolidated directors’ fees and expensesIslami Bank Bangladesh Limited 10,066,840 9,254,986Islami Bank Securities Limited - 276,000Islami Bank Capital Management Limited - -10,066,840 9,530,98634.0 Shari‘ah supervisory committee’s fees & expensesi) Shari‘ah supervisory members’ fees for attending meeting 613,000 873,000ii) TA/DA./hotel fare 1,736,894 1,676,142iii) Others 234,935 200,141Total 2,584,829 2,749,28334.1 Rate of fees for attending shariah supervisory meetingi) For shariah supervisory meeting 5,000 5,000ii) For sub-committee meeting 4,000 4,00035.0 Depreciation and repair to bank’s assetsi) Depreciation: Premises (building) 83,575,987 82,775,792ii) Depreciation: Furniture & fixtures and other fixed assets 358,744,320 285,730,929Sub total (i+ii) 442,320,307 368,506,721iii) Repair of bank’s properties/assets 57,908,661 38,551,203Grand total (i+ii+iii) 500,228,968 407,057,92435(a)Consolidated depreciation and repair to bank’s assetsIslami Bank Bangladesh Limited 500,228,968 407,057,924Islami Bank Securities Limited 4,212,118 2,533,055Islami Bank Capital Management Limited - -504,441,086 409,590,979264Annual Report 2012

36.0 Other expenses2012Taka2011Takai) TA/ DA 120,908,726 91,441,801ii) Repairs to rented premises 7,723,198 2,673,408iii) Motor car running & maintenance 59,160,857 57,089,362iv) Periodicals & newspapers 7,159,809 5,305,031v) Entertainment 121,131,737 100,480,640vi) Overtime 37,719,553 26,934,811vii) Training expenses 42,857,896 35,992,212viii) Meeting expenses 21,014,598 18,200,706ix) Bank charges 32,319,098 22,822,548x) Uniforms 9,590,920 8,783,230xi) Conveyance 9,797,586 8,297,826xii) Honorarium & cash award 24,099,641 12,620,042xiii) Membership fees 5,356,400 8,265,327xiv) Staff welfare 12,963,907 10,987,589xv) Evening banking allowance 2,493,817 2,320,335xvi) Computer expenses 29,113,672 23,290,845xvii) Wages 39,201,952 37,257,969xviii) Discomfort allowance 11,128,028 9,600,059xix) Air condition maintenance 1,630,558 998,910xx) WASA / gas expenses 8,821,234 7,317,312xxi) Washing charges 9,082,553 7,062,985xxii) Transportation charges 2,930,126 1,445,384xxiii) ATM charges 58,009,434 14,511,135xxiv) Reuters charges 6,644,453 6,132,552xxv) Business development expenses 148,542,267 464,907,850xxvi) Photocopy expenses 15,187,129 11,590,079xxvii) Upkeep of office premises 14,637,605 10,452,001xxviii) Clearing house expenses 418,752 522,358xxix) Bonus share issue expenses 6,013,176 5,712,366xxx) Rating expenses 460,000 397,000xxxi) Band width charges 76,884,762 51,089,823xxxii) Other regulatory fees and expenses 8,006,697 5,038,735xxxiii) MPB expenses 1,971,366 980,715xxxiv) Recruitment expenses 5,699,488 8,855,855xxxv) Others 17,499,081 17,885,154xxxvi) Loss on sale of bank’s fixed asset 199,828 281,429xxxvii) Khidmah card expenses 3,175,755 230,909xxxviii) Other RDS expenses 46,296,593 23,664,554Total 1,025,852,252 1,121,440,84736.1 Motor car running and maintenanceAs on 31.12.2012 the Bank had 253 (Two hundred fifty three) Motor Vehicles (Cars -205, Jeeps -11, Pickup-35 andMicrobuses -2) . The Motor Vehicles are used for carrying cash, development works and for other important worksof 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/- incurredduring the year 2011 for repairs, maintenance, purchase of fuel & lubricants and insurance etc. for the motorvehicles of the bank.Annual Report 2012 265

36.2 VAT related to expendituresAll the expenditures reported in this Financial Statements are inclusive of VAT except for specific items which areexempted from VAT by appropriate authority2012Taka2011Taka36(a) Consolidated other expensesIslami Bank Bangladesh Limited 1,025,852,252 1,121,440,847Islami Bank Securities Limited 3,849,775 7,529,815Islami Bank Capital Management Limited 8,595 20,5751,029,710,622 1,128,991,23737.0 Retained earnings: movement of surplus in profit & loss accountRetained earnings as on 1 January 3,202,467,840 2,594,592,000Addition during the year 3,127,410,000 3,202,467,840Total 6,329,877,840 5,797,059,840Less: 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 3,202,467,84037(a)Consolidated retained earningsRetained earnings as on 1 January 3,015,952,005 2,624,924,708Add: Net profit attributable to equity holders of IBBL 5,616,751,549 4,624,597,748Sub-total 8,632,703,554 7,249,522,456Less:Transfer to/(from) statutory reserve 2,419,235,534 2,069,463,066Transfer to/(from) general reserve (22,205,793) (430,484,615)Dividend paid (Bonus share & cash dividend) 3,202,467,840 2,594,592,000Sub-total 5,599,497,581 4,233,570,451Balance of retained earnings as at 31 December 3,033,205,973 3,015,952,00537(b) Non-controlling interest As on01.01.2012Share of profit orloss for the yearIslami Bank Securities Limited 49,758 1,332 51,090 49,758Islami Bank Capital7,597 600 8,197 7,597Management Limited57,355 1,932 59,287 57,355The 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 represent0.0020% 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 ofTk.1,000/ each out of which share capital of minority is Tk.7,000/- divided into 7 shares of Tk.1,000/- each whichrepresent 0.0023% of total share of the subsidiary Company.38.0 Events after reporting periodThe Board of Directors of the Bank in its 201st meeting held on March 28, 2013 recommended 17% Stock Dividendand 8% Cash Dividend for the year 2012 subject to approval of the shareholders in the ensuing 30th Annual GeneralMeeting to be held on May 22, 2013.39.0 Earnings per share (EPS)a) Attributable profit for the year 5,524,439,741 4,841,446,291b) Weighted average number of ordinary share during the year 1,250,964,000 1,250,964,000Basic earnings per share (EPS) (a ÷ b) 4.42 3.87Previous year’s figures have been adjusted due to issuance of 250,192,800 bonus shares during the year 2012 against25% Stock Dividend of 2011 as per guidelines of BAS 33, “Earnings per share”. Diluted earnings per share is not applicablesince there is no possibility of dilution of shares during the year.266Annual Report 2012

2012Taka2011Taka39(a)Consolidated earnings per shareConsolidated profit after tax 5,616,753,481 4,624,593,651Less: Profit attributable to non-controlling interest 1,932 (3,650)Attributable profit for distribution to shareholders of IBBL 5,616,751,549 4,624,597,301Weighted average number of ordinary share during the year 1,250,964,000 1,250,964,000Consolidated basic earnings per share 4.49 3.7040.0 Net asset value per share (NAV)a) Capital/shareholders’ equity for the year 39,755,509,503 27,800,213,373b) Weighted average number of ordinary share during the year 1,250,964,000 1,250,964,000Net asset value per share (NAV) (a ÷ b) 31.78 22.22Net asset value per share (NAV) has been disclosed as per the Securities and Exchange Commission’s NotificationNo.SEC/CMRRCD/2009-193/Admin/03-31 dvvated June 1, 2009. Previous year’s number of ordinary shares hasbeen adjusted to conform current year’s presentation due to issuance of 250,192,800 bonus shares during the year2012 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 16,395,120,620b) Weighted average number of ordinary share during the year 1,250,964,000 1,250,964,000Net operating cash flow per share (NOCFPS) (a ÷ b) 16.32 13.11Net operating cash flow per share (NOCFPS) has been disclosed as per the Securities and Exchange Commission’sNotification No.SEC/CMRRCD/2009-193/Admin/03-31 dated June 1, 2009. Previous year’s number of ordinary shareshas been adjusted to conform current year’s presentation due to issuance of 250,192,800 bonus shares during theyear 2012 against stock dividend of 2011.42.0 Reconciliation of cash and cash equivalent at the end of the yeari) Cash in hand 6,308,271,684 4,655,980,193ii) Balance with Bangladesh Bank and its agent banks (Sonali Bank Ltd.) 35,465,737,963 35,975,917,284iii) Balance with other banks and financial institutions 23,048,348,207 15,577,309,475Total 64,822,357,854 56,209,206,95242(a)Consolidated cash and cash equivalentsIslami Bank Bangladesh Limited 64,822,357,854 56,209,206,952Islami Bank Securities Limited 1,117,608,598 940,656,768Islami Bank Capital Management Limited 358,979,268 335,347,03166,298,945,720 57,485,210,75143 Operating lease payments disclosureNon-cancellable operating lease rentals for the Bank are payable as follows: 2012 2011Taka (in million) Taka (in million)Less than 1 year 300 220Between 1 and 5 years 2,175 2,095More than 5 years 7,530 7,45010,005 9,76544.0 Currency wise exposuresCurrency wise exposures are shown at Annexure-C.Prof. NRM Borhan Uddin Ph.DDirectorMd. Abdus Salam FCA, FCSDirectorHumayun Bokhteyar, ACPA, FCADirectorDated: Dhaka28 march 2013Mohammad Abdul MannanManaging DirectorAnnual Report 2012 267

Islami Bank Bangladesh LimitedFixed Assets ScheduleAs on 31 December 2012Annexure - A(Amount in Taka)Cost Depreciation Written down valueParticularsBalance as at01.01.2012Additionduring theyearSale /adjustmentduring theyearTotal as at31.12.2012Charged upto01.01.2012Chargedduring theyearAdjustmentduring theyearTotal as at31.12.2012as at31.12.2012as at31.12.20111 2 3 4 5 (2 + 3 - 4) 6 7 8 9 (6+ 7 - 8) 10 (5 - 9) 11A. PremisesLand 2,558,584,798 - - 2,558,584,798 - - - - 2,558,584,798 2,558,584,798Building 3,715,431,774 103,168,670 - 3,818,600,444 451,207,960 83,575,987 - 534,783,947 3,283,816,497 3,264,223,814Construction/capitalwork in process89,553,599 36,235,412 50,063,001 75,726,010 - - - - 75,726,010 89,553,599Sub total (A) 6,363,570,171 139,404,082 50,063,001 6,452,911,252 451,207,960 83,575,987 - 534,783,947 5,918,127,307 5,912,362,211B. RevaluationLand - 4,958,100,000 - 4,958,100,000 - - - - 4,958,100,000 -Building - 2,232,800,000 - 2,232,800,000 - - - - 2,232,800,000 -Sub total (B) - 7,190,900,000 - 7,190,900,000 - - - - 7,190,900,000 -Sub total (A+B) 6,363,570,171 7,330,304,082 50,063,001 13,643,811,252 451,207,960 83,575,987 - 534,783,947 13,109,027,307 5,912,362,211C. Other fixed assetsFurniture and fixtures 522,200,017 133,493,417 831,945 654,861,489 207,975,593 39,734,015 11,400 247,698,208 407,163,281 314,224,424Mechanical appliances 1,677,728,983 669,077,267 10,248,311 2,336,557,939 968,936,458 257,022,469 6,720,814 1,219,238,113 1,117,319,826 708,792,525Motor vehicles 448,904,045 75,162,516 24,872,821 499,193,740 284,992,704 61,610,673 20,967,189 325,636,188 173,557,552 163,957,019Books 3,352,357 677,789 - 4,030,146 2,496,268 377,163 3,648 2,869,783 1,160,363 856,090Sub Total (C) 2,652,185,402 878,410,989 35,953,077 3,494,643,314 1,464,401,023 358,744,320 27,703,051 1,795,442,292 1,699,201,022 1,187,830,058Total (A+B+ C) 9,015,755,573 8,208,715,071 86,016,078 17,138,454,566 1,915,608,983 442,320,307 27,703,051 2,330,226,239 14,808,228,329 7,100,192,269Prof. NRM Borhan Uddin Ph.DDirectorDated: Dhaka28 march 2013Humayun Bokhteyar, ACPA, FCADirectorMd. Abdus Salam FCA, FCSDirectorMohammad Abdul MannanManaging Director268Annual Report 2012

Islami Bank Bangladesh LimitedConsolidated Fixed Assets ScheduleAs on 31 December 2012Annexure - B(Amount in Taka)ParticularsBalance as at01.01.2012Additionduring theyearCost Depreciation Written down valueSale /adjustmentduring theyearTotal as at31.12.2012Charged upto01.01.2012Chargedduring theyearAdjustmentduring theyearTotal as at31.12.2012as at31.12.20121 2 3 4 5 (2 + 3 - 4) 6 7 8 9 (6+ 7 - 8) 10 (5 - 9) 11as at31.12.2011A. PremisesLand 2,558,584,798 - - 2,558,584,798 - - - - 2,558,584,798 2,558,584,798Building 3,715,431,774 103,168,670 - 3,818,600,444 451,207,960 83,575,987 - 534,783,947 3,283,816,497 3,264,223,814Construction/capital 89,553,599 36,235,412 50,063,001 75,726,010 - - - - 75,726,010 89,553,599work in processSub total (A) 6,363,570,171 139,404,082 50,063,001 6,452,911,252 451,207,960 83,575,987 - 534,783,947 5,918,127,307 5,912,362,211B. RevaluationLand - 4,958,100,000 - 4,958,100,000 - - - - 4,958,100,000 -Building - 2,232,800,000 - 2,232,800,000 - - - - 2,232,800,000 -Sub total (B) - 7,190,900,000 - 7,190,900,000 - - - - 7,190,900,000 -Sub total (A+B) 6,363,570,171 7,330,304,082 50,063,001 13,643,811,252 451,207,960 83,575,987 - 534,783,947 13,109,027,307 5,912,362,211C. Other fixed assetsFurniture and fixtures 524,302,247 133,548,417 831,945 657,018,719 208,286,287 39,988,885 11,400 248,263,772 408,754,947 316,015,960Mechanical appliances 1,682,834,298 670,087,971 10,248,311 2,342,673,958 969,974,271 258,395,989 6,720,814 1,221,649,446 1,121,024,512 712,860,027Motor vehicles 454,380,045 75,302,516 24,872,821 504,809,740 286,270,437 62,708,174 20,967,189 328,011,422 176,798,318 168,155,286Books 3,352,357 677,789 - 4,030,146 2,496,268 377,163 3,648 2,869,783 1,160,363 856,090Sub Total (C) 2,664,868,947 879,616,693 35,953,077 3,508,532,563 1,467,027,263 361,470,211 27,703,051 1,800,794,423 1,707,738,140 1,197,887,363Total (A+B+ C) 9,028,439,118 8,209,920,775 86,016,078 17,152,343,815 1,918,235,223 445,046,198 27,703,051 2,335,578,370 14,816,765,447 7,110,249,574Prof. NRM Borhan Uddin Ph.DDirectorHumayun Bokhteyar, ACPA, FCADirectorMd. Abdus Salam FCA, FCSDirectorMohammad Abdul MannanManaging DirectorDated: Dhaka28 march 2013Annual Report 2012 269

Islami Bank Bangladesh LimitedCurrency wise ExposuresAs at 31 December 2012Annexure - C(Amount in Taka)ASSETSTaka Equivalent Taka of US Dollar Equivalent Taka of GBP Equivalent Taka of EUROEquivalent Taka of Other2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 20111 2 3 4 5 6 7 8 9 10 11 12 13Cash in hand 6,258,670,140 4,636,830,566 48,820,755 17,470,523 433,780 431,863 120,271 872,694 226,738 374,547 6,308,271,684 4,655,980,193Balance with Bangladesh Bank & its 29,946,414,230 33,751,632,244 5,460,770,198 2,181,429,684 27,365,677 25,083,350 30,908,698 17,456,067 279,160 315,939 35,465,737,963 35,975,917,284agent bankBalance with banks & other financialinstitutionsPlacement with other banks & financialinstitutionsCurrencyTotal Taka15,955,976,932 11,864,372,819 5,524,146,126 3,409,460,700 101,212,798 27,001,605 657,971,421 191,234,926 809,040,930 85,239,425 23,048,348,207 15,577,309,475- - - - - - - - - - - -Investments (in shares & securities) 27,010,073,770 16,932,273,770 - - - - - - - - 27,010,073,770 16,932,273,770Investments 372,920,722,887 305,840,563,170 - - - - - - - - 372,920,722,887 305,840,563,170Fixed assets including premises 14,808,228,329 7,100,192,269 - - - - - - - - 14,808,228,329 7,100,192,269Other assets 2,808,620,661 3,109,886,617 165,538,395 - 5,570 - 769,251 - - - 2,974,933,877 3,109,886,617Non banking assets - - - - - - - - - - - -Total assets 469,708,706,949 383,235,751,455 11,199,275,474 5,608,360,907 129,017,825 52,516,818 689,769,641 209,563,687 809,546,828 85,929,911 482,536,316,717 389,192,122,778LIABILITIESPlacement from Bangladesh Bank, otherbanks, financial institutions and agentsEquivalent Taka of OtherTaka Equivalent Taka of US Dollar Equivalent Taka of GBP Equivalent Taka of EUROTotal TakaCurrency2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011- - - - - - - - - - - -Deposits 405,940,238,836 333,532,419,074 7,199,194,036 5,047,106,191 16,100,832 23,659,114 472,275,043 386,781,740 295,164 311,745 413,628,103,911 338,990,277,864Bills payable 4,216,038,334 2,863,395,095 - - - - - - - - 4,216,038,334 2,863,395,095Other liabilities 21,936,664,969 16,538,236,446 - - - - - - - - 21,936,664,969 16,538,236,446Mudaraba Perpetual Bond 3,000,000,000 3,000,000,000 - - - - - - - - 3,000,000,000 3,000,000,000Total liabilities 435,092,942,139 355,934,050,615 7,199,194,036 5,047,106,191 16,100,832 23,659,114 472,275,043 386,781,740 295,164 311,745 442,780,807,214 361,391,909,405Net position 34,615,764,810 27,301,700,840 4,000,081,438 561,254,716 112,916,993 28,857,704 217,494,598 (177,218,053) 809,251,664 85,618,166 39,755,509,503 27,800,213,373Prof. NRM Borhan Uddin Ph.DDirectorHumayun Bokhteyar, ACPA, FCADirectorMd. Abdus Salam FCA, FCSDirectorMohammad Abdul MannanManaging DirectorDated: Dhaka28 march 2013270Annual Report 2012

Islami Bank Bangladesh LimitedConsolidated segment reportingFor the year ended 31 December 2012Annexure - D(Amount in Taka)ParticularsHead OfficeControlledBranchsDhaka CentralZoneDhaka SouthZoneDhaka NorthZoneKhulna Zone Bogra Zone Rajshahi ZoneChittagongSouth ZoneChittagongNorth ZoneCommon ConsolidatedInvestment income 9,283,932,357 7,856,012,563 2,879,971,452 3,140,521,245 2,597,979,254 1,338,832,654 3,072,583,652 4,609,058,124 1,994,881,235 7,382,815,281 44,156,587,817Profit paid on mudaraba deposits (1,893,268,025) (2,389,111,412) (1,856,490,732) (2,725,304,509) (1,652,908,339) (925,194,197) (1,230,214,388) (2,310,206,370) (1,624,822,431) (9,262,904,834) (25,870,425,237)Profit received/(paid) on IB (4,649,734,652) (2,755,481,245) 515,792,654 1,761,812,365 223,901,254 204,807,521 (664,583,652) (311,062,563) 652,861,452 5,021,686,866 -Genearl AccountNet investment income 2,740,929,680 2,711,419,906 1,539,273,374 2,177,029,101 1,168,972,169 618,445,978 1,177,785,612 1,987,789,191 1,022,920,256 3,141,597,313 18,286,162,580Commission, exchange & other 1,174,234,652 642,062,541 285,353,652 338,744,236 290,143,698 102,264,532 203,724,563 321,313,698 299,833,652 2,725,142,321 6,382,817,545incomeTotal operating income 3,915,164,332 3,353,482,447 1,824,627,026 2,515,773,337 1,459,115,867 720,710,510 1,381,510,175 2,309,102,889 1,322,753,908 5,866,739,634 24,668,980,125Total operating expenses (479,508,944) (563,226,805) (573,209,139) (587,812,430) (591,067,511) (370,342,374) (431,139,115) (400,847,701) (368,721,722) (4,522,884,945) (8,888,760,686)Operating Profit 3,435,655,388 2,790,255,642 1,251,417,887 1,927,960,907 868,048,356 350,368,136 950,371,060 1,908,255,188 954,032,186 1,343,854,689 15,780,219,439There are 16 operating segments including subsidiaries as on 31 December 2012. Out of which only 9 are reportable as per BFRS 8 “Operating segments”. Hence other non-reportablesegments have been shown as under ‘Common’.For the year ended 31 December 2011ParticularsHead OfficeControlledBranchsDhaka CentralZoneDhaka SouthZoneDhaka NorthZoneKhulna Zone Bogra Zone Rajshahi ZoneChittagongSouth ZoneChittagongNorth ZoneCommon ConsolidatedInvestment income - 12,103,914,562 2,672,941,236 2,989,793,652 1,571,532,587 1,319,294,685 2,163,094,563 2,865,284,521 1,958,993,652 4,705,687,623 32,350,537,081Profit paid on mudaraba deposits - (1,913,433,652) (1,840,553,652) (2,106,874,587) (1,114,463,652) (978,351,452) (982,516,532) (1,685,853,651) (1,052,851,258) (6,726,319,649) (18,401,218,085)Profit received/(paid) on IB- (6,572,551,254) 799,553,654 1,302,883,654 301,561,257 399,973,657 (209,113,654) 278,193,654 112,483,697 3,587,015,335 -Genearl AccountNet investment income - 3,617,929,656 1,631,941,238 2,185,802,719 758,630,192 740,916,890 971,464,377 1,457,624,524 1,018,626,091 1,566,383,309 13,949,318,996Commission, exchange & other- 1,451,884,563 440,439,785 366,123,681 265,992,461 132,792,584 189,114,561 363,374,587 185,392,546 2,778,974,661 6,174,089,429incomeTotal operating income - 5,069,814,219 2,072,381,023 2,551,926,400 1,024,622,653 873,709,474 1,160,578,938 1,820,999,111 1,204,018,637 4,345,357,970 20,123,408,425Total operating expenses - (511,765,104) (472,862,508) (439,605,778) (377,631,932) (389,588,337) (325,904,906) (267,305,104) (244,765,106) (4,262,226,340) (7,291,655,115)Operating Profit - 4,558,049,115 1,599,518,515 2,112,320,622 646,990,721 484,121,137 834,674,032 1,553,694,007 959,253,531 83,131,630 12,831,753,310B. Segmental assets and liabilitiesThe necessary information regarding assets and liabilities of operating segments (except subsidiaries) are not separable and individually identifiable for this purpose. For this reason the assetsand liabilities of the respective segments have not been presented here.Annual Report 2012 271

Islami Bank Bangladesh Limited (Off-Shore Banking Unit)Balance SheetAs at 31 December 2012Property and assetsNotes31.12.2012 31.12.2011USD Taka USD TakaCash in hand - - - -Cash in hand (including foreign currency) - - - -Balance with Bangladesh Bank & its agent- - - -bank(s) (including foreign currency)Balance with other banks & financial1,685,770.41 134,608,599 355,723.54 29,117,003institutionsIn Bangladesh 2.0 1,685,770.41 134,608,599 355,723.54 29,117,003Outside Bangladesh - - - -Placement with banks & other financialinstitutions- - - -Investments in shares & securities - - - -Government - - - -Others - - - -Investments 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,345General investments etc. - - - -Bills purchased & discounted 3.0 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,345Fixed assets - - - -Other assets - - - -Non - banking assets - - - -Total property and assets 126,154,075.15 10,073,390,286 27,342,932.85 2,238,098,348Liabilities and CapitalLiabilitiesPlacement from banks & other financialinstitutions5.0 124,468,304.74 9,938,781,687 26,988,106.91 2,209,054,816Deposits & other accounts - - - -Mudaraba Savings Deposits - - - -Mudaraba Term Deposits - - - -Other Mudaraba Deposits - - - -Al- Wadeeah Current and other deposit- - - -accountsBills 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 2,209,054,816Capital/ share-holders’ equity 441,087.36 35,220,782 354,825.94 29,043,532Paid - 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 29,043,532Total liabilities & shareholders’ equity 126,154,075.15 10,073,390,286 27,342,932.85 2,238,098,348272Annual Report 2012

Off-balance sheet itemsNotes31.12.2012 31.12.2011USD Taka USD TakaContingent liabilitiesAcceptances & endorsements - - - -Letters of guarantee - - - -Irrevocable letters of credit (including back- - - -to back bills)Bills for collection - - - -Other contingent liabilities - - - -Total - - - -Other commitmentsDocumentary credits, short term and trade- - - -related transactionsForward assets purchased and forward- - - -deposits placedUndrawn note issuance, revolving and- - - -underwriting facilitiesUndrawn formal standby facilities, credit- - - -lines and other commitmentsTotal - - - -Total off-balance sheet items includingcontingent 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 AccountFor the year ended 31 December 2012Operating incomeNotes31.12.2012 31.12.2011USD Taka USD TakaInvestment income 8.0 1,766,978.25 144,514,613 358,345.98 29,328,468Profit paid on mudaraba deposits (6,641.23) (538,410) - -Net investment income 1,760,337.02 143,976,203 358,345.98 29,328,468Income from investments in shares & securities- - - -Commission, exchange & brokerage 9.0 - - - -incomeOther operating income 10.0 21,200.00 1,733,870 1,800.02 147,319Total operating income 1,781,537.02 145,710,073 360,146.00 29,475,787Operating expensesSalary & allowances 11.0 11,792.05 967,751 5,320.06 432,255Rent, 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 &- - - -expensesAuditors’ 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 5,320.06 432,255Profit/ (loss) before provision 1,685,770.41 137,912,370 354,825.94 29,043,532Provision for investments & off- balance1,244,683.05 99,387,817 - -sheet itemsProvision for diminution in value of investments- - - -in sharesOther provisions - - - -Total provision 1,244,683.05 99,387,817 - -Total profit/(loss) before taxes 441,087.36 38,524,553 354,825.94 29,043,532Provision for taxation for the periodCurrent tax 12.0 - - - -Deferred tax 12.0 - - - -Net profit/ (loss) after tax 441,087.36 38,524,553 354,825.94 29,043,532Retained earnings from previous year - - - -Less: Interim dividend paid - - - -Add: Net profit after tax 441,087.36 38,524,553 354,825.94 29,043,532Profit available for appropriation 441,087.36 38,524,553 354,825.94 29,043,532Less: AppropriationStatutory reserve - - - -General reserve - - - -Retained earnings 441,087.36 38,524,553 354,825.94 29,043,532The annexed notes form an integral part of these financial statements.274Annual Report 2012

Islami Bank Bangladesh Limited (Off-Shore Banking Unit)Cash Flow StatementFor the year ended 31 December 201231.12.2012 31.12.2011USD Taka USD TakaCash flows from operating activitiesInvestment income 1,766,978.25 144,514,613 358,345.98 29,328,468Profit paid on mudaraba deposits (6,641.23) (538,410) - -Income/ dividend receipt from investments in shares- -& securitiesFees & 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 1,800.02 147,319Payments for other operating activities (83,974.56) (6,829,952) - -i) Operating profit before changes in operating29,043,5321,685,770.41 137,914,370 354,825.94assets & liabilitiesChanges in operating assets and liabilitiesIncrease/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 2,209,054,816Increase/decrease of deposits received from customers- - - -Increase/decrease of other liabilities account of- - - -customersIncrease/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 73,471Net cash flows from operating activities (A)=(i+ii) 1,330,046.87 105,491,596 355,723.54 29,117,003Cash flows from investing activitiesProceeds 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 activitiesReceipts 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 29,117,003Add/(less) effects of exchange rate changes on cash- - - -& cash equivalentAdd: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 29,117,003Annual Report 2012 275

1.0 Status of the CompanyIslami Bank Bangladesh Limited (Off-Shore Banking Unit)Notes to the financial statementsFor the year ended 31 December 2012Off-shore Banking Units (OBU) of Islami Bank Bangladesh Ltd. governed under the rules and guidelines of BangladeshBank. The Bank obtained permission from Bangladesh Bank for operating of Off-shore Banking Units locatedat Head Office Complex Branch, Dhaka, Agrabad Branch, Chittagong and Uttara Branch, Dhaka vide BangladeshBank letter no. BRPD (P-3)744 (111)/2010-1032 dated 28 March 2010. The Bank has Commenced the operation ofits Off-shore Banking Units from 08.02.2011 at Head Office Complex Branch, Dhaka and from 27.09.2011 at AgrabadBranch, Chittagong. Operations of OBU located at Uttara Branch, Dhaka will be started within shortly.1.1 Principal activitiesThe 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 statements1.2.1 Basis of accountingThe Off-shore Banking Units maintain its accounting records in USD from which accounts are prepared according tothe Bank Company Act, 1991, Bangladesh Financial Reporting Standards (BFRSs) and other applicable directivesissued by Bangladesh Bank.1.2.2 Use of estimates and judgmentsThe preparation of financial statements requires management to make judgments, estimates and assumptions thataffect 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 havebeen rounded off to the nearest integer.1.2.3 Foreign currency transactionsa. Foreign currencies transactionForeign currency transactions are converted in to equivalent Taka using the ruling exchange rates on the dates ofrespective transactions as per BAS-21 “The Effects of changes in Foreign Exchange Rates”. Foreign currency balancesheld in US Dollars are converted into Taka at weighted average rate of inter-bank market as determined byBangladesh Bank on the closing date of every month.b. Transaction gains and lossesThe resulting exchange transaction gains and losses are included in the profit and loss account.1.2.4 Cash flow statementCash flow statement has been prepared in accordance with the BAS-7 “Cash flow statement” under direct methodas recommended in the BRPD Circular No. 14, dated June 25, 2003 issued by the Banking Regulation and PolicyDepartment of Bangladesh Bank.1.2.5 Reporting periodThe financial statements cover from January 01 to December 31, 2012.1.3 Assets and basis of their valuation1.3.1 Cash and cash equivalentsCash and cash equivalents include notes and coins on hand, unrestricted balances held with Bangladesh Bank andhighly liquid financial assets which are subject to insignificant risk of changes in their fair value, and are used by theunit’s management for its short-term commitments.1.3.2 InvestmentsInvestment of OBU are stated in the balance sheet on gross/net basis. Profit is calculated on daily product basis butcharged and account for on realisation/cash basis.1.4 Allocation of common expensesEstablishment 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 financialstatements, but staff costs ( salaries and allowances) are separately accounted for OBU.276Annual Report 2012

31.12.2012 31.12.2011USD Taka USD Taka2.0 Balance with other banks & financial institutionsIn Bangladesh (balance with treasury) 1,685,770.41 134,608,599 355,723.54 29,117,003Outside Bangladesh - - - -Total 1,685,770.41 134,608,599 355,723.54 29,117,0033.0 Investments 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,3453.1 Bills purchased & discountedPayable in Bangladesh - - - -Payable outside Bangladesh 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,345Total 124,468,304.74 9,938,781,687 26,987,209.31 2,208,981,3454.0 Deposits & other accountsBank’s deposits - - - -Customers deposits - - - -Total - - - -5.0 Borrowing from other banks, financialinstitutions and agentsBangladesh Bank - - - -Islami Bank Bangladesh Ltd. 124,468,304.74 9,938,781,687 26,988,106.91 2,209,054,816Total 124,468,304.74 9,938,781,687 26,988,106.91 2,209,054,8166.0 Translation reserveBalance 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 inprofit & loss accountRetained earnings as on 1 January - - - -Addition during the year 441,087.36 38,524,553 354,825.94 29,043,532Less: Foreign exchange gain - - - -Balance of retained earnings as at 31 December 441,087.36 38,524,553 354,825.94 29,043,5328.0 Investment incomeMudaraba documentary bills 1,766,978.25 144,514,613 358,345.98 29,328,4689.0 Commission, exchange & brokerage incomeExchange income - - - -10.0 Other Income - Service charge realized 21,200.00 1,733,870 1800.02 147,31911.0 Salary & allowances :i) Basic pay 7,060.03 579,554 3,092.31 251,250ii) House rent allowance 2,917.75 239,648 1,546.16 125,626iii) Medical allowance 791.48 64,820 430.15 34,950iv) Entertainment allowance - - - -v) Conveyance allowance 437.47 35,800 203.07 16,499vi) Bank contribution to P.F. 585.32 47,929 48.37 3,930Total 11,792.05 967,751 5,320.06 432,25512.0 Provision for taxProvision for current and deferred tax have not been separately accounted for in the financial statements of OBU. Theseare accounted for directly in the main financial statements of the Bank.Annual Report 2012 277

Annexure-EFinancial StatementsofIslami Bank Securities Limited (IBSL)278Annual Report 2012

Islami Bank Securities Limited (IBSL)Report of the DirectorsThe directors present their report and financial statements for the year ended 31 December 2012.Principal activitiesThe principal activities of the company are to open BO account under full DP of Central Depository BangladeshLimited (CDBL), provide Demate & Remate under full DP of CDBL, provide trading facility under brokeragelicense, provide investment facility under Musharaka Mode and maintain own portfolio under dealer account.DirectorsThe 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)AuditorACNABIN Chartered Accountants was appointed as auditor of the Company.Statement of directors’ responsibilitiesThe directors are responsible for preparing the Directors’ Report and the financial statements in accordancewith applicable laws and regulations.Statement of disclosure to auditorSo far as the directors are aware, there is no relevant audit information of which the company’s auditor isunaware. Additionally, the directors have taken all the necessary steps that they ought to have taken asdirectors in order to make themselves aware of all relevant audit information and to establish that the company’sauditor is aware of that information.Status of the CompanyISLAMI 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) thatholds all the shares of the company except 54 (fifty four) shares being held by six individual shareholders. Theregistered office of the company is situated at 20, Dilkusha, C/A in Dhaka, Bangladesh.On behalf of the BoardEng. Md. Eskander Ali KhanChairmanAnnual Report 2012 279

Independent Auditor’s Reportto the Shareholders ofISLAMI BANK SECURITIES LIMITEDWe have audited the accompanying financial statements of ISLAMI BANK SECURITIES LIMITED whichcomprise the Statement of Financial Position as at 31 December 2012 and the Statement of ComprehensiveIncome, Statement of Changes in Equity and Statement of Cash Flows for the year then ended and a summaryof significant accounting policies and other explanatory information.Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements inaccordance with Bangladesh Financial Reporting Standards (BFRS) and for such internal control asmanagement determines is necessary to enable the preparation of financial statements that are free frommaterial misstatement, whether due to fraud or error.Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted ouraudit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we complywith ethical requirements and plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditor’s judgment, including the risk assessmentof material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity’s preparation and fair presentationof the financial statements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates 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 ouraudit opinion.OpinionIn our opinion, the financial statements give a true and fair view of the financial position of ISLAMI BANKSECURITIES LIMITED as at 31 December 2012 and its financial performance and its cash flows for the yearthen ended in accordance with Bangladesh Financial Reporting Standards (BFRS), Companies Act, 1994 andother applicable laws and regulations.Date: DhakaACNABIN10 March 2013 Chartered Accounts280Annual Report 2012

ISLAMI BANK SECURITIES LIMITEDStatement of Financial Positionas at 31 December 2012Notes31.12.2012Taka31.12.2011TakaAssets:Non-Current Assets 314,779,703 316,896,286Property, Plant & Equipment 3 8,537,118 10,057,305Membership at Cost 4 304,453,399 304,453,399Preliminary Expenses 5 324,075 432,100Deferred Revenue Expenses 6 1,465,111 1,953,482Current Assets 2,416,257,463 2,286,811,170Cash & Bank Balances 7 296,279,119 86,648,966Investment in Securities 8 1,245,476,289 1,327,316,725Accounts Receivables 9 33,973,309 9,674,234Advances, Deposits & Prepayments 10 1,328,296 2,779,710Advance Income Tax 11 17,870,970 6,383,735Investment in MTDR 12 821,329,479 854,007,801Total Assets 2,731,037,166 2,603,707,456Liabilities & Equity:Equities 2,554,510,819 2,487,896,719Share Capital 13 2,700,000,000 2,700,000,000Retained Earnings (145,489,181) (212 ,103,281)Non-Current LiabilitiesDeferred Tax Liability 14 397,859 333,071Current Liabilities 176,128,488 115,477,666Accounts Payables 15 137,325,257 47,539,013Provision for Income Tax 16 36,827,715 15,300,321Provision for Expenses 17 429,182 666,179Other Current Liabilities 18 1,546,334 1,589,856Investment from IBBL (HOCB) 19 - 50,382,297Total Equity & Liabilities 2,731,037,166 2,603,707,456The annexed notes form an integral part of these Financial Statements.Managing Director Director ChairmanThis is the Statement of Financial Position referred to in our separate report of even date.Dated: DhakaACNABIN10 March 2013 Chartered AccountantsAnnual Report 2012 281

ISLAMI BANK SECURITIES LIMITEDStatement of Comprehensive Incomefor the year ended 31 December 2012Operating IncomeInvestment Income 20 139,022,005 70,813,001Brokerage Commission 21 10,947,680 13,353,288Other Operating Income 22 1,915,097 3,490,485Total Operating Income 151,884,782 87,656,774Notes2012Taka2011TakaOperating ExpensesSalary & Allowances 23 10,116,810 9,187,108Rent, Tax, Insurance & Electricity 24 2,481,976 2,812,501BO Accounts Maintenance Expenses 1,240,400 1,357,600Brokerage Expenses 25 575,408 734,009Postage, Stamps and Telecommunications 26 111,190 105,915Stationery, Printing and Advertisements 27 182,238 299,370Repair & Maintenances 28 889,832 566,890CDS Charges 913,767 1,781,942Depreciation 2,725,891 2,426,110Amortization 29 596,395 596,395License Renewal Expenses 30 103,400 72,500Other Expenses 31 1,016,799 1,420,746Auditor’s Fees 75,000 5,000Business Development Expenses - 909,350Director’s Fees & Expenses - 276,000Total Operating Expenses 21,029,106 22,551,437Operating Profit 130,855,676 65,105,338Unrealized 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 ExpensesCurrent Tax 33,207,118 14,651,359Deferred Tax 64,788 115,74333,271,906 14,767,102Net 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: DhakaACNABIN10 March 2013 Chartered Accountants282Annual Report 2012

ISLAMI BANK SECURITIES LIMITEDStatement of Cash Flowsfor the year ended 31 December 2012A. Cash Flows from Operating Activities:Net Profit after Tax 66,614,100 (238,738,793)Adjustment for non-cash items: 34,291,956 292,356,226Depreciation 2,725,891 2,426,110Amortization 596,395 596,395Unrealized gain (loss) in market value of securities 30,969,670 289,077,029Loss on sale of fixed assets - 256,692Cash Flows before Working Capital Changes (a) 100,906,056 53,617,433Changes 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 6,782,197Increase (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 64,788 115,743Decrease (Increase) in advance, deposit & prepayments 1,451,414 2,843,921Decrease (Increase) in accounts receivable (24,299,075) 34,664,493Decrease (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) 1,173,962,731 580,234,296Investments in MTDR (72,863,329) (854,007,801)Encashment of Investments in MTDR 105,541,651 -Received from sale of fixed assets - 402,100Deferred 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 - 2,400,000,000Investment availed from IBBL(HOCB) - 1,000,000,000Net Cash Flows from Financing Activities (50,382,297) 958,707,488Net 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 86,648,966 131,565,137Cash & Bank balances at the end of the year 296,279,119 86,648,966The annexed notes form an integral part of these Financial Statements.Notes2012Taka2011TakaManaging Director Director ChairmanThis is the Statement of Cash Flows referred to in our separate report of even date.Dated: DhakaACNABIN10 March 2013 Chartered AccountantsAnnual Report 2012 283

ISLAMI BANK SECURITIES LIMITEDStatement of Changes in Equityfor the year ended 31 December 2012Amount in TakaParticulars Paid-up Capital RetainedEarningsTotal EquityOpening balance as at 01 January 2011 (Note: 2.22) 300,000,000 26,635,512 326,635,512Issue of share capital 2,400,000,000 - 2,400,000,000Total comprehensive income for the year - (238,738,793) (238,738,793)Balance as at 31 December 2011 2,700,000,000 (212,103,281) 2,487,896,719Opening balance as at 01 January 2012 2,700,000,000 (212,103,281) 2,487,896,719Total comprehensive income for the year - 66,614,100 66,614,100Balance as at 31 December 2012 2,700,000,000 (145,489,181) 2,554,510,819Managing Director Director ChairmanThis is the Statement of Changes in Equity referred to in our separate report of even date.Dated: DhakaACNABIN10 March 2013 Chartered Accountants284Annual Report 2012

ISLAMI BANK SECURITIES LIMITEDNotes to the Financial Statementsas at and for the year ended 31 December 20121.0 Status of the CompanyISLAMI BANK SECURITIES LIMITED was incorporated on the 22 March 2010 under the CompaniesAct, 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 individualshareholders. The registered office of the company is situated at 20, Dilkusha, C/A in Dhaka,Bangladesh.1.1 Nature of BusinessThe main objective of the company is to carry on the business of a stock broker and stock dealer housethat is to buy, sell and deal in shares, stocks, debenture, bonds and other securities, and to carry onany business as permissible for a broker and dealer house duly licensed by the Bangladesh Securitiesand Exchange Commission (BSEC).2.0 Significant Accounting Policies & Basis of Preparation of Financial Statements2.1 Statement of ComplianceThe financial statements have been prepared in accordance with--a) Bangladesh Financial Reporting Standards (BFRS) except recognition of SND and MTDR profitthat are recognized on cash basis and measurement of investment in securities under own portfolioas 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 PreparationThe financial statements of the company have been prepared as a going concern basis based on thehistorical cost convention.2.3 Basis of ReportingThe financial statements are prepared and presented for external users by the company in accordancewith identified financial reporting framework. Presentation has been made in compliance with therequirement of BAS-1- “Presentation of Financial Statements”.2.4 Components of Financial StatementsThe financial statements referred to here comprise:a. Statement of Financial Positionb. Statement of Comprehensive Incomec. Statement of Cash Flowsd. Statement of Changes in Equity ande. Notes to the Financial StatementsAnnual Report 2012 285

2.5 Statement of Cash FlowsStatement of cash flows is prepared in accordance with the Bangladesh Accounting Standard-7“Statement of Cash Flows” applying indirect method.2.6 Reporting PeriodThese 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 andany directly attributable cost of bringing the assets to its working condition for its intended use inclusiveof inward freight, duties and non-refundable taxes.The company recognizes the cost of purchasing new assets or cost of replacing new assets in the carryingamount of an item of property, plant and equipment when that cost is incurred if it is probable that thefuture economic benefits embodied with the item will flow to the company and the cost of the item can bemeasured reliably. Expenditure incurred after the assets have been put into operation, such as repair andmaintenances is normally charged off as revenue expenditure in the period in which it is incurred.2.7.1 Depreciation PolicyDepreciation 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 respectivepercentage given below. Yearly depreciation has then been charged proportionately to 365 days.ItemsRateMechanical appliances 20-25%Computers 25%Furniture & fixtures 10-20%Motor vehicles 20%2.8 Investment in MembershipInvestment in membership are stated at cost. The cost of acquisition of a membership comprises itspurchase price and any directly attributable cost of completing compliance requirements relevant to itinclusive of stamp duty and non-refundable taxes, etc.2.9 Advance Income TaxThe amount of advance income tax are mainly deduction of tax at sources by bank on profits arisenfrom bank deposits (SND), MTDR profit and dividend income received against securities owned by thecompany under portfolio investment.2.10 Preliminary and Deferred Revenue ExpensesThese are recognized as an asset if it is probable that future economic benefits that are attributable tothe asset will flow to the entity and cost of the asset can be measured reliably. All the preliminary anddeferred revenue expenses have been recognized as assets and as per Board’s decision all theseassets will be amortized over the period of 5 (five) years or at a rate of 20% commencing from the year2011. All these assets are stated in financial position at cost less accumulated amortization.2.11 Provision for TaxationProvision for current income tax has been made in compliance with relevant provisions of income tax law.286Annual Report 2012

2.12 Deferred TaxationDeferred tax liabilities are the amount of income taxes payable in future periods in respect of taxabletemporary differences. Deferred tax assets are the amount of income taxes recoverable in future periodsin respect of deductible temporary differences. Deferred tax assets and liabilities are recognized for thefuture 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 measuredusing tax rates and tax laws that have been enacted or substantially enacted at the balance sheetdate. The impact on the account of changes in the deferred tax assets and liabilities has also beenrecognized in the statement of comprehensive income as per BAS-12 “Income Taxes”.2.13 Investment in SecuritiesInvestment in securities means purchase of shares of quoted/listed companies in DSE & CSE throughstock dealer account. Investment is made in shariah complied securities for trading purpose andinvestment purpose for short term, mid term and long term duration. Investment is valued at the lower ofcost or market value on the last date of reporting period and relevant unrealized gain (loss) is recognizedin income statement duly.2.14 Dividend IncomeAll dividends received or receivable against the investment in securities hold under dealer account havebeen considered as dividend income in comprehensive income statement. Dividend is recognized onaccrual basis and date of AGM of the company declaring dividend is considered as recognition base ofaccrual dividend.2.15 Capital GainThe difference between cost price and net sales price of the securities is considered as capital gain. Thegain reported as income is only realized gain by selling different securities during the accounting year.2.16 Musharaka Investment & IncomeMusharaka investment means the margins (Investment facilities) provided to eligible clients underbrokerage operation in Musharaka principle/ mode of finance. As per Musharaka principle, profits arisenthrough capital gain and dividend from this investment are shared between company and client asper agreed ratio and loss is shared as per equity participation ratio. This investment is valued at thelower of cost or market value on the last date of reporting period and relevant unrealized gain (loss) isrecognized in income statements duly.2.17 ProvisionsAll provision is recognized on the financial statement date if, as a result of past events, the companyhas a present legal or constructive obligation that can be estimated reliably, and it is probable that anoutflow of economic benefits will be required to settle the obligation.2.18 Cash and Cash EquivalentsCash and cash equivalents comprise cash in hand and cash at bank, which are held and available foruse by the company without any restriction and are readily convertible to a known amount of cash andthat are subject to an insignificant risk of change in value.2.19 Advance, Deposits and PrepaymentsAdvances are initially measured at cost. After initial recognition, advances are carried at cost lessdeductions, 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 lesscharges to income statement.Annual Report 2012 287

2.20 Event after the Reporting PeriodAs per BAS - 10 “Events after the balance sheet date”, events after the reporting period are thoseevents, favorable and unfavorable, that occur between the end of the reporting period and the datewhen 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 (Adjustingevents after the reporting period); andii) those that are indicative of conditions that arose after the reporting period (Non- adjusting eventsafter the reporting period).There was no material events which have occurred after the reporting period which could affect thevalues stated in the financial statements.2.21 Related Party DisclosureA party is related to the company if:a. Directly or indirectly, through one or more intermediaries, that party controls, is controlled by, or isunder 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 associatec. The party is a joint venture in which the entity is a venturerd. 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 whichsignificant 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 entitythat is a related party of the entity.i. Nature & type of related party transaction of the companyName of related party Relationship Nature of transaction AmountIslami Bank Bangladesh Limited (IBBL) Parent- subsidiary Bank balance 107,079,309Islami Bank Bangladesh Limited (IBBL) Parent- subsidiary Investment in MTDR 821,329,479Islami Bank Bangladesh Limited (IBBL) Parent- subsidiary Accounts payable 100,001,000Islami Bank Bangladesh Limited (IBBL) Parent- subsidiary Investment from IBBL 50,382,297Islami Bank Bangladesh Limited (IBBL) Parent- subsidiary Profit from Bank on MTDR 80,461,443Managing Director Key management Short-term employee benefits 2,234,270personnel(Salary & allowance)2.22 Generala. The financial statements are presented in Bangladeshi Taka (BDT) currency, which is the company’sfunctional currency.b. The figures appearing in these financial statements are expressed in Taka currency and rounded offto the nearest Taka.c. Previous year’s figures have been rearranged, where necessary, to conform to current year’spresentation. In 2010, a repayment of investment from IBBL wrongly shown as an expense. It wasan error at that time so subsequently it was rectified retrospectively restating the opening balance ofretained earnings of 2011 in the statement of changes in equity. Since the overall effect of this error isnot material to the financial statements as a whole of subsequent years hence no complete restatedopening balance of all balance sheet items has been presented in these financial statements.288Annual Report 2012

31.12.2012Taka31.12.2011Taka3 Property, Plant & EquipmentCostOpening balance at cost 12,683,545 8,937,500Add: Assets purchased during the year 1,205,704 4,489,898Less: Sale/Adjustment during the year - 743,853Closing value at cost (a) 13,889,249 12,683,545DepreciationOpening balance 2,626,240 285,191Add: Depreciation charged during the year 2,725,891 2,426,110Less: Adjustment during the year - 85,061Closing balance of depreciation (b) 5,352,131 2,626,240Written Down Value (a - b) 8,537,118 10,057,305Details are given in Appendix-I4 Membership at CostDSE 24,453,399 24,453,399CSE 280,000,000 280,000,000304,453,399 304,453,3995 Preliminary ExpensesTotal value at cost as at 31.12.2012 540,125 540,125Less: Accumulated amortization as at 31.12.2012 (216,050) (108,025)324,075 432,1006 Deferred Revenue ExpensesTotal value at cost as at 31.12.2012 2,441,852 2,441,852Less: Accumulated amortization as at 31.12.2012 (976,741) (488,370)1,465,111 1,953,4827 Cash & Bank BalancesCash in hand 2,996 16,372Cash at Bank 296,276,123 86,632,594296,279,119 86,648,9668 Investment in SecuritiesOwn portfolio (Note 8.1) 1,215,619,167 1,302,642,757Musharaka portfolio (Note 8.2) 29,857,122 24,673,9681,245,476,289 1,327,316,7258.1 Own PortfolioOpening balance at cost 1,591,719,786 1,497,923,853Add: Shares purchased during the year 1,116,095,487 999,387,067Less: 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 1,591,719,786Less: Unrealized gain/(loss) on own portfolio (318,233,374) (289,077,029)Closing balance of investment 1,215,619,167 1,302,642,757Annual Report 2012 289

31.12.2012Taka31.12.2011Taka8.2 Musharaka PortfolioMusharaka investment at cost 31,670,447 24,673,968Less: Unrealized gain (Loss) on portfolio (1,813,325) -Closing balance of investment 29,857,122 24,673,9689 Accounts ReceivableReceivable from DSE 989,809 1,296,065Receivable from clients 700,845 474,569Dividend receivable 2,242,200 7,903,600Receivable from DSE (Dealer) 30,040,455 -33,973,309 9,674,23410 Advances, Deposits & PrepaymentsAdvance office rent for head office 1,242,500 2,733,500Prepaid insurance premium 43,796 46,210Prepaid Motor Car Maintenance 42,000 -1,328,296 2,779,71011 Advance Income TaxOpening balance 6,383,735 -Add: Advance tax paid during the year (Note 11.1) 17,870,970 6,383,735Less: Adjustment against tax assessment (6,383,735) -17,870,970 6,383,73511.1 Advance Tax paid During the YearTDS on Bank deposit profit 8,406,626 2,510,492TDS against dividend income 3,353,203 1,949,560TDS on brokerage commission by CSE 907 1,923,683TDS on brokerage commission by DSE 1,110,234 -Advance income tax 5,000,000 -17,870,970 6,383,73512 Investment in MTDROpening balance 854,007,801 -Add: New/Reinvestment during the year 72,863,329 854,007,801Less: Encashment during the year (105,541,651) -821,329,479 854,007,80113 Share CapitalAuthorized Capital5,000,000 ordinary shares of Taka 1,000 each. 5,000,000,000 5,000,000,000290Annual Report 2012

Paid- up Capital 31.12.2012Taka31.12.2011Taka27,00,000 ordinary shares of Taka 1,000 only each:Name of shareholderNo. ofsharesPercentage1) IBBL (Represented by four directors) 2,699,946 99.9982 2,699,946,000 2,699,946,0002) Janab Mohd. Shamsul Haque 9 0.0003 9,000 9,0003) Janab Md. Habibur Rahman 9 0.0003 9,000 9,0004) Janab Md. Nurul Islam 9 0.0003 9,000 9,0005) Janab Muhammad Abul Bashar 9 0.0003 9,000 9,0006) Janab Abu Taher Mohammad Saleh 9 0.0003 9,000 9,0007) Janab Syed Abdullah Mohammad Saleh 9 0.0003 9,000 9,0002,700,000 100.00 2,700,000,000 2,700,000,00031.12.2012Amount in Taka31.12.2011Amount in Taka14 Deferred Tax LiabilityAccounting base of fixed assets 7,563,057 5,859,038Tax base of fixed assets 6,502,099 4,970,848Taxable temporary difference (TTD) 1,060,958 888,190Deferred tax liabilities ( 37.5% of TTD) 397,859 333,07115 Accounts PayablePayable to clients 128,525,872 41,891,007Payable to DSE 3,083 4,134,012Payable to DSE (Dealer) 10,397 1,281,719Payable to CSE (Dealer) 8,770,905 189,137Software annual maintenance fees 15,000 30,000Payable to CSE - 13,138137,325,257 47,539,01316 Provision for Income TaxOpening balance 15,300,321 8,518,124Add: Provision of income tax for the year 33,207,118 14,651,359Less: 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 15,300,32117 Provision for ExpensesAuditor’s fees 75,000 55,000CDS charges 129,246 29,760Electricity bills 3,612 4,842Network expenses 18,050 18,050Newspaper bills 1,226 1,234Office rents 101,534 406,134Professional & consultancy fees 35,000 35,000Service charges 15,750 13,250Telephone bills 16,167 17,852Wages 25,500 51,066Water bills 3,400 3,668Office maintenance 4,697 -Motor car maintenances - 30,323429,182 666,179Annual Report 2012 291

31.12.2012Taka31.12.2011Taka18 Other Current LiabilitiesSecurity deposit from clients 1,120,779 1,129,779Security deposits payable on fixed assets (Note 18.1) 409,348 460,077Sundry creditors 16,207 -1,546,334 1,589,85618.1 Security Deposits Payable on Fixed AssetsTalukder enterprise 103,500 103,500Computer source 145,500 145,500Digilog system 5,550 5,550Partex furniture 16,530 16,530Gazi communication 33,180 33,180Net com. 39,088 39,088Leads corporation 66,000 -Islam brothers - 116,729409,348 460,07719 Investment from IBBL (HOCB)Opening balance 50,382,297 1,500,000,000Add: Investment received during the year - 1,000,000,000Less: Repayment/Adjustment of investment (50,382,297) (2,449,617,703)- 50,382,29720 Investment IncomeDividend from investment in securities 11,283,464 17,985,227Profit from Bank on SND 6,300,071 2,874,624Profit from Bank on MTDR 80,461,443 26,303,830Capital gains (Note 21.1) 40,977,027 23,649,320139,022,005 70,813,00120.1 Capital GainsCapital gains from sale of securities 40,099,005 71,323,796Capital gains from Musharaka investment 878,022 689,352Less: Adjustment against capital loss - (48,363,828)40,977,027 23,649,32021 Brokerage CommissionsCommission on CSE turnover 8,882 66Commission on DSE turnover 10,938,798 13,353,22210,947,680 13,353,28822 Other Operating IncomeAccount opening fees 216,000 309,600BO accounts maintenance fees 1,549,000 1,697,500Dividend from Musharaka investment (Margin130,597 20,108account)Documentation fee (Margin account) 5,000 15,500Miscellaneous income 14,500 28,979Cash back rebate from CDBL - 930,199Demeat fees - 6,109Recruitment fees - 444,100Share transfer fees - 38,3901,915,097 3,490,485292Annual Report 2012

31.12.2012Taka31.12.2011Taka23 Salary & AllowancesSalary 9,042,796 8,264,585Eid bonus 918,465 725,241Wages 155,549 134,989Daily allowances - 58,968Overtime allowance - 3,32510,116,810 9,187,10824 Rents, Taxes, Insurance & ElectricityOffice rents 2,293,041 2,615,604Renewal of tax token for motor vehicles 11,604 11,604Insurance premiums 54,969 75,041Electricity bills 122,362 110,2522,481,976 2,812,50125 Brokerage ExpensesDSE Howla charges 128,840 161,438DSE Laga charges 444,093 570,601Investors’ protection fund charges 1,955 1,970CSE Howla charges 202 -CSE Laga charges 318 -575,408 734,00926 Postage, Stamps and TelecommunicationsTelephone bills 110,875 88,214Postage 315 481Stamps - 17,220111,190 105,91527 Stationery, Printing & AdvertisementsStationeries expenses 158,238 273,974Advertisements 24,000 25,350Photocopy expenses - 46182,238 299,37028 Repair & MaintenanceMotor car running & maintenance 508,577 341,012Office maintenances 59,312 16,015Other repair & maintenance 40,343 10,930Software annual maintenance fees 65,000 80,000Network support 216,600 118,933889,832 566,89029 AmortizationAmortization of preliminary expense 108,025 108,025Amortization of deferred revenue expenses 488,370 488,370596,395 596,39530 License Renewal ExpensesRenewal fees for Depository Participant (DP) 4,000 4,000Renewal fees for DSE membership 20,000 20,000Other renewal fees 4,400 48,500Renewal fees for CSE membership 20,000 -Renewal of trade license fees 55,000 -103,400 72,500Annual Report 2012 293

31 Other Expenses31.12.2012Amount in Taka31.12.2011Amount in TakaAnnual subscription fees 9,700 20,000Bank charges 85,565 78,109Conveyances 13,399 25,119Computer accessories 128,910 270,655Electronic expenses 56,303 7,600Entertainments 150,212 271,561Internet bills 72,450 67,874Miscellaneous expenses 23,541 11,397Newspaper, magazine & periodicals 15,646 20,199Professional & consultancy fees 70,000 49,030Service charges 177,717 178,940Tour & travels 5,000 102,267Water bills 47,682 55,053BO accounts maintenance subsidy 145,274 -Software expenses 15,400 -Loss on sale of fixed assets - 256,692Photograph expenses - 1,250Training programme expenses - 5,00032 Unrealized Gain (Loss) Arising from Investment in Securities1,016,799 1,420,746Against 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) -32.1 Against Own Portfolio During the Year(30,969,670) (289,077,029)31.12.2012Taka31.12.2011TakaInvestment in securities at market as at 31.12.2012 1,098,993,789 1,302,642,757Investment in securities at cost price as at 31.12.2012 1,533,852,541 1,591,719,786Total 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 ExchangeCommission, 20% provision has been made for unrealized loss arising out of year-end (31.12.2012) revaluation ofshares purchased through Own Portfolio. The Directive prohibits payment of cash dividend if the company makes lessthan 100% provision on such unrealized loss.32.2 Against Musharaka Portfolio During the YearInvestment 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) -As per Directive # SEC/CMRRCD/2009-193/144 dated 27 February 2013 of Bangladesh Securities and ExchangeCommission, 20% provision has been made for unrealized loss arising out of year-end (31.12.2012) revaluation ofshares purchased through Musharaka Portfolio. The Directive prohibits payment of cash dividend if the company makesless than 100% provision on such unrealized loss.294Annual Report 2012

Appendix-Ia) Year : 2012ISLAMI BANK SECURITIES LIMITEDSchedule of Property, Plant & Equipmentas at 31 December 2012ParticularsBalance as at01.01.2012Cost Depreciation W.D.V.as atAddition AdjustmentBalance as at31.12.2012Balance as at01.01.2012Charged duringthe yearAdjustmentBalance as at31.12.201231.12.2012Mechanical Appliances 1,402,180 210,796 - 1,612,976 269,708 264,981 - 534,689 1,078,287Computer & Software 3,703,135 799,908 - 4,503,043 768,105 1,108,539 - 1,876,644 2,626,399Furniture & fixture 2,102,230 55,000 - 2,157,230 310,694 254,870 - 565,564 1,591,666Motor vehicles 5,476,000 140,000 - 5,616,000 1,277,733 1,097,501 - 2,375,234 3,240,766Total as at 31.12.2012 12,683,545 1,205,704 - 13,889,249 2,626,240 2,725,891 - 5,352,131 8,537,118b) Year : 2011ParticularsBalance as at01.01.2011Cost Depreciation W.D.V.as atAddition AdjustmentBalance as at31.12.2011Balance as at01.01.2011Charged duringthe yearAdjustmentBalance as at31.12.201131.12.2011Mechanical Appliances 1,225,000 367,180 190,000 1,402,180 34,145 279,210 43,647 269,708 1,132,472Computer & Software 723,000 3,041,635 61,500 3,703,135 36,747 739,446 8,088 768,105 2,935,030Furniture & fixture 1,513,500 1,081,083 492,353 2,102,230 31,766 312,254 33,326 310,694 1,791,536Motor vehicles 5,476,000 - - 5,476,000 182,533 1,095,200 - 1,277,733 4,198,267Total as at 31.12.2011 8,937,500 4,489,898 743,853 12,683,545 285,191 2,426,110 85,061 2,626,240 10,057,305Annual Report 2012 295

Annexure-FFinancial StatementsofIslami Bank Capital Management Limited (IBCML)296Annual Report 2012

Auditor’s Reportto the Shareholders of Islami Bank Capital Management LimitedWe have audited the accompanying financial statements of Islami Bank Capital Management Limited which comprisethe 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 andother explanatory information.Management Responsibilities for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance withBangladesh Financial Reporting Standards and for such internal control as management determines is necessary toenable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.Auditor’s ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted ouraudit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whether the financial statementsare free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditor’s judgment including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, theauditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statementsin order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonableness of accounting estimates made by management, as well asevaluating 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.OpinionIn our opinion, the financial statements give a true and fair view of the financial position of Islami Bank CapitalManagement Limited as of 31 December 2012, and of its financial performance and its cash flows for the year thenended in accordance with Bangladesh Financial Reporting Standards and comply with the Companies Act 1994, theSecurities and Exchange Act 1993, the Securities and Exchange Rules 1987, conditions for Registration issued bythe 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 werenecessary 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 appearedfrom our examination of those books;c) these financial statements dealt with by this report are in agreement with the books of account and returns; andd) the expenditure incurred was for the purpose of business of the Islami Bank Capital Management Limited.Dhaka,ACNABIN12 March 2013 Chartered AccountantsAnnual Report 2012 297

Islami Bank Capital Management LimitedStatement of Financial PositionAs at 31 December 2012Notes31.12.2012Taka31.12.2011TakaASSETSNon-current assetsPreliminary expenses 3 537,485 537,485Total non-current assets 537,485 537,485Current assetsCash & bank balances 4 358,979,268 335,347,031Prepaid rent 5 458,500 1,008,700Advance income tax 6 22,101,332 4,125,038Total current assets 381,539,100 340,480,769Total assets 382,076,585 341,018,254EQUITIES AND LIABILITIESEquitiesShare capital 7 300,000,000 300,000,000Retained earnings 51,283,442 25,583,801Total equity 351,283,442 325,583,801LiabilitiesNon-current liabilities - -Current LiabilitiesAccrued expenses 8 23,000 20,900Provision for income tax 9 30,770,065 15,350,280Other payables 10 78 63,273Total current liabilities 30,793,143 15,434,453Total equities and liabilities 382,076,585 341,018,254The annexed notes form an integral part of the Statement of Financial Position.Director Director Director ChairmanThis is the Statement of Financial Position referred to in our report of even date.Dhaka,ACNABIN12 March 2013 Chartered Accountants298Annual Report 2012

Islami Bank Capital Management LimitedStatement of Comprehensive IncomeFor the year ended 31 December 2012Notes2012 2011TakaTakaOther income 11 41,750,739 35,672,794Total income 41,750,739 35,672,794Less: Operating expensesBank charge 12 6,650 20,575Office rent 13 599,718 613,473Entertainment expenses 1,945 -Audit fees 23,000 20,900Total operating expenses 631,313 654,948Profit before tax 41,119,426 35,017,846Provision for income tax 15,419,785 13,131,692Profit after tax 25,699,641 21,886,154The annexed notes forms an integral part of the Statement of Comprehensive Income.Director Director Director ChairmanThis is the Statement of Comprehensive Income referred to in our report of even date.Dhaka,ACNABIN12 March 2013 Chartered AccountantsAnnual Report 2012 299

Islami Bank Capital Management LimitedStatement of Changes in EquityFor the year ended 31 December 2012(Amount in Taka)Paid-up Capital Retained Earnings TotalParticularsBalance as at 01 January 2011 - 3,697,647 3,697,647Issue of share capital 300,000,000 - 300,000,000Net profit for the year - 21,886,154 21,886,154Balance as at 31 December 2011 300,000,000 25,583,801 325,583,801Balance as at 01 January 2012 300,000,000 25,583,801 325,583,801Issue of share capital - - -Net profit for the year - 25,699,641 25,699,641Balance as at 31 December 2012 300,000,000 51,283,442 351,283,442300Annual Report 2012

Islami Bank Capital Management LimitedStatement of Cash FlowsFor the year ended 31 December 20122012 2011TakaTakaCash flows from operating activitiesProfit before tax 41,119,426 35,017,846Adjustment - -Adjusted operating profit before changes in working capital 41,119,426 35,017,846Changes 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) 59,231Increase/(decrease) in accrued expenses 2,100 (2,100)Net cash (used in)/generated from operating activities (A) 23,632,237 32,090,764Cash 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 32,090,764Add: Cash & bank balance at beginning of the year 335,347,031 303,256,267Cash & bank balances at end of the year 358,979,268 335,347,031Annual Report 2012 301

Islami Bank Capital Management LimitedNotes to the Financial StatementsFor the year ended 31 December 20121. Status of the CompanyIslami 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 heldby 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 itsaspects 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, underwritingof shares, stocks, debentures, bonds, etc.; managing portfolio investments of any person or company,by investment in various avenues, etc.2. Significant accounting policies2.1 Basis of presentation of financial statementsThe financial statements of the company have been prepared applying accrual basis of accountingunder historical cost convention in accordance with Bangladesh Financial Reporting Standards (BFRS)and other applicable laws and regulations.2.2 Revenue recognitionRevenue is recognised only when it is probable that the economic benefits associated with thetransaction will flow to the entity. Revenue during the period is recognised by way of profit on MudarabaDeposits.2.3 Statement of cash flowsStatement of Cash Flow has been presented under indirect method.2.3 GeneralThe figures appearing in these Financial Statements have been rounded off to the nearest integer.31.12.2012 31.12.20113. Preliminary expenses Taka TakaIncorporation fees 474,625 474,625Trade license fees 13,100 13,100TIN certificate fees 2,500 2,500Professional fees 41,800 41,800Bank charges for issuing MICR cheque 150 150CIB service charge 500 500SEC application Fees 1,000 1,000Stamps 600 600Register & seal 310 310Miscellaneous 2,900 2,900537,485 537,485302Annual Report 2012

4. Cash & bank balances31.12.2012 31.12.2011TakaTakaCash in hand - 422Cash at bank & other financial institution (Note 4.1) 358,979,268 335,346,609358,979,268 335,347,0314.1 Cash at bank & other financial institutionName of bank & institutionIslami Bank Bangladesh Limited 558,782 8,251,270Shahjalal Islami Bank Limited 252,795,518 226,744,438EXIM Bank Limited 63,140,750 56,633,731First Security Bank Limited 42,483,218 43,717,170Islami Bank Securities Limited 1,000 -358,979,268 335,346,6095. Prepaid rentAdvance payment for office rent 1,008,700 1,558,900Less: Adjusted during the year 550,200 550,200458,500 1,008,7006. Advance income taxOpening balance 4,125,038 590,625Deducted at source during the year: 4,156,362 3,534,413Shahjalal Islami Bank Ltd. 723,002 623,679Exim Bank Bangladesh Ltd. 2,894,564 2,496,604First Security Islami Bank Ltd. 538,796 414,130Paid by IBCML during the year 13,819,933 -22,101,332 4,125,0387. Share capitalAuthorised capital1,000,000 ordinary shares of Tk.1,000 each. 1,000,000,000 1,000,000,000Issued, subscribed and paid up capital300,000 ordinary shares of Tk.1,000 each fully paid 300,000,000 300,000,000Details of shareholding are as under:Name of the shareholdersNo. ofShareIslami Bank Bangladesh Limited 299,993 299,993,000 299,993,000Janab M. Fariuddin Ahmad 1 1,000 1,000Janab Mohammad Abdul Mannan 1 1,000 1,000Janab Md. Setaur Rahman 1 1,000 1,000Janab Gulam Moula Choudhury 1 1,000 1,000Janab A.K.M Malek Chowdhury 1 1,000 1,000Janab Nurul Islam Khalifa 1 1,000 1,000Janab Abdus Sadeque Bhuiyan 1 1,000 1,000300,000 300,000,000 300,000,000Annual Report 2012 303

31.12.2012 31.12.2011TakaTaka8. Accrued expensesAudit fees 20,000 20,000Add: VAT 3,000 90023,000 20,9009. Provision for income taxOpening balance 15,350,280 2,218,588Add: Provision made during the year 15,419,785 13,131,692Less: Settlement during the year - -30,770,065 15,350,28010. Other payablesOther payable 78 -VAT payable on rent - 63,27378 63,27311. Other income 2012 2011TakaTakaProfit from MTD & MSND accounts:Name of bankShahjalal Islami Bank Limited 7,230,022 6,236,785EXIM Bank Limited 28,945,643 24,966,042First Security Bank Limited 5,387,961 4,141,300Islami Bank Bangladesh Limited 187,113 328,66741,750,739 35,672,79441,750,739 35,672,79412. Bank chargeAccount maintenance charge of IBSL 500 -Account maintenance charge of banks 1,150 575Excise duty 5,000 20,0006,650 20,57513. Office rentRent 550,200 550,200VAT 49,518 63,273599,718 613,473304Annual Report 2012

Particulars of Head Office, Zonal Offices,Branches and SME/Krishi ShakhaHead OfficeZonal OfficesSl.Name of the Office & AddressNo.1 Head OfficeIslami Bank Tower,40, Dilkusha C/A, Dhaka-1000Head Office(Vigilance Squad, AMD, Law,Recovery)28, Dilkusha C/A, Dhaka-1000.Head Office (IAD,Retail,Consumer & Real EstateInvestment Division)39, Dilkusha C/A, Dhaka-1000.Head Office (BCD)20, Dilkusha (9 th Floor) C/A,Dhaka-1000,Head Office (Marketing Division)20, Dilkusha (9th Floor) C/A,Dhaka-1000Head Office (CSD)20, Dilkusha (6th Floor) C/A,Dhaka-1000Head Office (EngineeringDivision)20, Dilkusha ( 8th Floor) C/A,Dhaka-1000Head Office (CSRD)20, Dilkusha (6th Floor) C/A,Dhaka-1000Head Office {RDD,CIB,Share,FAD ( Recon, PF, Salary, Bills,Budget & 10% Income Tax )63, Dilkusha C/A, Dhaka-1000Head Office (ICTW),IBWOtobi Building, 14 Dilkusha (7th &9th Floor), Dhaka.Foreign Remittance ServicesDivision.IBW, Otobi Building, 14 Dilkusha(7th & 9th Floor), Dhaka.BACH & DBA Section; FTPD,ICTD Support Team, OtobiBuilding, 14 Dilkusha, Dhaka.Head Office (ICCW)Islami Bank Hospital Complex,30, Anjuman Mofidul Islam Road,Kakrail,Card DivisionICTD, Head Office, 62, ShaidTajuddin Ahmed Sharoni,Mohakhali, Dhaka-1212IBTRA13-A/2-A, Block-B, Babar Road,Mohammadpur, Dhaka-1207Phone Number &E-mail AddressPABX: 02- 9563040,9560099 01730-326106,01713-438566, web-site:www.islamibankbd. comPABX-9568312, 9568346,9567856; RDD(Mob. 01755-538502)PABX: 02- 9563040,9560099PABX: (02) 7113750,7113542 01755-524571(BACH Manager)PABX: (02) 7113750,7113542PABX # 7113750, 7113542PABX # 7113750, 7113542,9571475, 9571506, 9571574, 9571602, 7115575,71 15521,Fax -88-02-9571574PABX: (02) 7120015,9571602; Ext: 756 to 758.9564595 (Share), 9554635(FAD-Recon)Fax: 88-02- 956459501730-730162 To01730-73016701730-730162 To01730-73016701730-736076,01755-532492;01755-524570Dhaka, 9355371, 9355372,9346181,Fax-88-02- 935537101755-52199002-9133411, 8127625,9139951, E-mail: dib.ibtra@islamibankbd.comSl.No.Name of the Office& Address1 Dhaka Central Zone30 Anjuman Mofidul Islam Road,Kakrail, Dhaka2 Dhaka South Zone30 Anjuman Mofidul Islam Road,Kakrail, Dhaka3 Dhaka North Zone30 Anjuman Mofidul Islam Road,Kakrail, Dhaka.4 Chittagong North Zone03, CDA, Sheikh Mujib Road.,Agrabad C/A, Chittagong5 Chittagong South Zone03, CDA, Sheikh Mujib Road.,Agrabad C/A, Chittagong6 Khulna Zone4, Old Jessore Road, Khulna7 Bogra Zone801,Thana Road, Bogra8 Sylhet Zone2/1, Main Road, J-Block, ShahjalalUpashahar, Sylhet9 Comilla ZonePaduar Bazar, Biswa Road,Comilla-3500.10 Barisal ZoneKuwait Plaza , Sagardi Bazar,Barisal11 Rajshahi Zone356, Station Road, Rajshahi12 Mymensingh ZoneIslami Bank Plaza, 76/A, ChotoBazar, Mymensingh.13 Noakhali ZoneSufia Shopping Centre, Main Road,Moijdee Court, Noakhali.14 Rangpur ZoneAlmi Bari, 30, Jail Road,Dhap, Rangpur.Sl.No.Name of the Branch& AddressDhaka Division1 Araihazar BranchBazar Masjid Road, AraihazarBazar, Narayanganj- 1450.2 Badda BranchKha/194, Pragati SaraniMaddhya Badda, Dhaka-12123 Bangshal Branch*222, Bangshal Road, Dhaka .Phone Number &E-mail Address8362278, 8332094E-mail: dhakacentral@islamibankbd.com8319300, 8312941E-mail:dhakasouth@islamibankbd.com8322068, 9355702E-mail: dhakanorth@islamibankbd.com(031) 716294, 2523273E-mail: ctgnorth@islamibankbd. com(031) 715650, 726598,01755-532603 E-mail:ctgsouth@islamibankbd. com041-722988, 723941,812533, 01730-727390,E-mail:ibblzokl@bttb.net.bd051-69310,69410E-mail:bograzone@islamibankbd .com0821-710093, 723627,E-mail:sylhetzone@islamibankbd .com081-63375, 77072,E-mail: comillazone @islamibankbd.com0431-72016, 0431-72018,E-mail:barisalzone@islamibankbd.com0721-812737, 771543,Email:Zone_rajshahi@islamibankbd.com091-65745, 01730-729739E-mail: mymensinghzone@islamibankbd.com(0321) 63102, (0321)noakhalizone@islamibankbd.com0521-55463 rangpurzone@islamibankbd.comPhone Number &E-mail Address01755 – 62946201730-328873E-mail: badda@islamibankbd.com(02) 9556826, 7175792E-mail: bangshal@islamibankbd.comAnnual Report 2012 305

Sl.No.Name of the Branch& AddressDhaka Division4 Baridhara BranchAbed Ali Tower, Ka/59, ProgatiSharani, Gulshan, Dhaka- 12125 Bhairab Branch82 & 84 Misti Patty, Bhairab,Kishoreganj6 Bhulta BranchHaji Shopping ComplexBhulta, Rupganj, Narayanganj,7 Board Bazar BranchChairman Plaza, Dhaka-MymensingMain Road, Gazipur-1704.8 Bakshiganj BranchHaji Sonaullah Mansion,Bakshiganj, Jamalpur9 Cantonment Branch24, Mamata Shopping Complex,Uttar Kafrul, Dhaka Cantonment,Dhaka-1206.10 Chawk Mugaltuly Branch*93, Chawk Mugaltully, Dhaka11 Damodya BranchSheikh Ali Ashraf Complex,Damodya, Shariatpur.12 Dohar BranchPapel Shopping Centre, Joypara,Dohar, Dhaka13 Mirpur-1 BranchRabiul Plaza, Mirpur-1, Dhaka-1216,14 Dhanmondi BranchRangs Nilu Square, 1,3,5, SatMasjhid Road, DhanmondiR/A,Dhaka-120915 Elephant Road Branch*Chowrangi Bhaban, 124/A,Elephant Road, Dhaka-120516 Faridpur Branch83/1, Mujib Sarak, Faridpur17 Farmgate Branch*Malek Tower, 31 Tejkuni Para,Farmgate, Dhaka-121518 Foreign Exchange Branch *41, Dilkusha C/A.Dhaka,19 Fulbaria BranchHaji Ibrahim Super Market,Fulbaria, Mymensingh.20 Ganakbari BranchBalivadra Bazar, Ganakbari, Dhaka,21 Gandaria Branch95/5/D, Distrilary Road, (DayaganjChowrasta), Dhaka - 120422 Gazipur Chowrasta BranchAnupam Super Market, Chandana,Gazipur.23 Gazipur Sadar BranchShibbari Moor, B.I.D.C.RoadGazipur – 1700.Phone Number &E-mail Address01755-551138E-mail: baridhara@islamibankbd.com(0294) 70289, 01711-431278, E-mail:bhairab@islamibankbd .com(03895) 787027,01713-425963 E-mail:bulta@islamibankbd.com02-929294201730-703852, E-mail :boardbazar@islamibankbd.com01730-727391, 01755-636217(02) 987239701711-693934mail:cantonment@islamibankbd.com(02) 7318013, 7313508,E-mail: cmb@islamibankbd.Com06023-5633201713-425964E-mail : recon.damodya@islamibankbd.com(038946) 80405,01730-034852E-mail:dohar@islamibankbd.com(02) 8058252,01711-693938darussalam@islamibankbd.com(02) 9129333,01730-729738,dhanmondi@islamibankbd.com(02) 8626214, 01711-693940 elephantroad@islamibankbd.com0631-63081,65592, 01711-693921faridpur@islamibankbd.com(02) 9121114, 01711-693912,E-mail:farmgate@islamibankbd.com(02) 9569413, 9565756E-mail: fex@islamibankbd.com(09023) 73204, 01730-333624, E-mail: fulbaria@islamibankbd.com01713-425966,E-mail: ganakbari@islamibankbd.com01755-580980E-mail: gandaria@islamibankbd.com(02) 9252204, E-mail:gazipurchowrasta@islamibankbd.com01755 – 629468,E-mail: gazipursadar@islamibankbd.comSl.No.Name of the Branch& Address24 Gopalganj Branch727, Madrasha Road, Gopalganj.25 Gulshan Branch*PBL Tower , 39 (old), 17 (new)North Gulshan C/A, Dhaka-1212.26 Gulshan Circle-1 Br.6, SW(H), Gulshan Avenue,Gulshan-1, Dhaka.27 Haji Camp BranchAshkona, Uttara, Dhaka28 Head Office Complex Branch*Islami Bank Tower, 40, DilkushaC/A, Dhaka-1000.29 IDB Bhaban BranchE/8 - A, Begum Rokeya Sharani,Agargaon, Dhaka-120730 Islampur Branch*41-42, Islampur Road, Dhaka31 Jamalpur Branch3604/3181, Jam-e-Masjid Road,Jamalpur.32 Jatrabari Branch69, Shahid Faruque Sarak, SouthJatrabari, Dhaka-1204,33 Kanchpur BranchChittagong Road, Siddhirganj,Narayanganj34 Kawran Bazar Branch*13, Kazi Nazrul Islam Avenue,Dhaka,35 Khilgaon Branch1419/2, Block-A, Khilgaon, Taltala,Dhaka-121936 Kishoreganj Branch1404, Mohammadi Mansion, BaraBazar, Kishoreganj.37 Konabari BranchRanu Super Market, Konabari,Gazipur- 1346.38 Kotiadi Branch2473, Kotiadi Hospital Road,Kotiadi, Kishoreganj- 233039 Lalbag BranchRoad, Apex Building, Labagh,Dhaka-1211.40 Local Office *75, Motijheel C/A, Dhaka-100041 Madaripur BranchMelborn Plaza, Puran Bazar,Madaripur-790042 Madhabdi BranchMadhabdi Bazar, Narsingdi43 Manikganj BranchSyed Market , 60, Shaheed RafiqSarak, Manikganj.44 Mawna Chowrasta BranchShahidullah Complex, SreepurRoad, Gazipur.45 Mirpur Branch *House No-35/ka, Road No-1,Mirpur (Gool Chakkar), Dhaka.46 Madhupur BranchPilot Super Market, Modhupur,Tangail.Phone Number &E-mail Address02-6685005, 01711-693941, E-mail:gopalgonj@islamibankbd.com(02) 8825424, 01711-693915, E-mail: gulshan@islamibankbd.com02-8850352E-mail:gulshan1@islamibankbd.com02-8919293, 01711-693944, E-mail:hajicamp @islamibankbd.com02-9570911, 01755-521991,E-mail: hocc@islamibankbd.com02-9183161-2, E-mail:idbbhaban@islamibankbd.com(2) 7393918, 01711-693909, E-mail: islampur @islamibankbd.com0981-63356, 01711-693922, E-mail:jamalpur@islamibankbd.com(02) 7546200,E-mail: jatrabari@islamibankbd.com02-7691556,E-mail: recon.kanchpur@islamibankbd.com(02) 9125759 , 01711-439094, E-mail: kawran@islamibankbd.com02-7216464, 01714-015532, E-mail: khilgaon @islamibank bd.com0941-62441, 0941-61675,01711-693920, E-mail:kishoreganj@bttb.net.bd01755-580984E-mail: konabari@islamibankbd.com01755-554479,E-mail: kotiadi@islamibankbd.com(02) 9615341, 01730-703856, E-mail: lalbagh@islamibankbd.com(02) 9552897-98, E-mail:logb @islamibankbd.com;fex1.lo@islamibankbd.com;0661-62074, 01714-040473,E-mail : recon.mad aripur@islamibankbd.com02-9446497, 01711-693933, E-mail: madhabdi@islamibankbd.com0651-61618,01711-693926,E-mail: manikgonj @islamibankbd.com06825-52763 , 01730-034874, E-mail: mawna@islamibankbd.com(02) 9005650, 01711-693911, E-mail:mirpur@islamibankbd.com038975-88189 E-mail:madhupur@islamibankbd.com306Annual Report 2012

Sl.No.Name of the Branch& Address47 Mohakhali BranchBhaban , 89, Mohakhali C/A,Dhaka-121248 Mohammadpur Krishi MarketBranch, Probal Housing, 36-37,Ring Road, Dhaka-1207.49 Motijheel Branch9/1, Motijheel C/A, Dhaka-1000.50 Mouchak Branch *Hosaf Twin Tower, Malibag,Dhaka–121751 MoghbazarBranchWAQFBhaban, 4, NewEskatonRoad, Moghbazar,haka-1000.52 Munshiganj Branch480, Main RoadMunshiganj-150053 Mymensingh Branch76/A, Chotto Bazar, Mymensingh54 Narayanganj Branch*79, Bangabandhu Road,Narayanganj55 Narsingdi Branch*139, Sutapatty, Narsingdi -160056 Naria BranchMaa Complex, Girls School Road,Naria, Shariatpur- 602557 Nitaiganj Branch1, R. K. Dash Road ,NitaiganjNarayanganj- 140058 Nawabganj BranchNawabganj, Dhaka.59 Nawabpur Road Branch*210-211 Nawabpur Road, Dhaka60 Netrakona BranchHashem Plaza, 166, Chhotta Bazar,Netrakona61 New Market Branch*Doza Mansion ,23,Mirpur Road, Dhaka62 Palash BranchShar Karkhana Gate, Khanepur,Palash, Narsingdi.63 Pallabi BranchAhmed Food Plaza, Block-A,Section-11, Pallabi, Mirpur, Dhaka.64 Paltan Branch*Darus Salam Arked14, Purana Paltan, Dhaka -100065 Panthapath BranchTridhara Tower, 67, Lake Circus,West Panthapath, Dhaka.66 Rajbari Branch77/1, Nahar Plaza, Station Road,Rajbari-770067 Ramna Branch*Dawn Plaza, 9, Banga BandhuAvenue, Dhaka68 Rampura Branch*394, DIT Road, West Rampura,Dhaka69 Sadarghat Branch34/A, P.K. Ray Road,Bangla Bazar, Dhaka.Phone Number &E-mail Address(02) 8829400, E-mail:mohakhali@islamibankbd.com(02) 8142833, 01714-036080, E-mail: krishimarket@islamibankbd.com(02) 9514980, 01713-164489, E-mail: motijheel @islamibankbd.com(02) 9345946, 01711-693913, E-mail: mouchak @islamibankbd.com(02) 8317910, 01730-727389, E-mail: mosbazar@islamibankbd.com0691-63405, 01711-693925,E-mail: mushigonj @islamibankbd.com091- 67255, 01711-693923,E-mail: mymensingh @islamibankbd.com(02) 7630400, 01711-693943, E-mail: narayanganj@islamibankbd.com02-9462313, 01711-693919,E-mail: narsingdi @islamibankbd.com(0601) 59158 01755-629469, E-mail: naria@islamibankbd.com01755-551142,E-mail :nitaiganj@islamibankbd.com06225 - 56235 01730-333625 E-mail: nawabgonj@islamibankbd.com(02)9557258, 7126250,E-mail: nawabpur@islamibankbd.com(0951) 62557, 01714-038570, E-mail: netrokona@islamibankbd.com9667320, 01711-693910,E-mail: newmarket@islamibankbd.com( 06254) 88062, 01711-693930, Email- palash@islamibankbd.com02-8034754, 9004796,E-mail: pallabi@islamibankbd.com7176162, 07111-622474E-mail: paltan@islamibankbd.com02-8141962, 01730-034850,E-mail: panthapath @islamibankbd.com0641-66242, 66311, 01714-016407, E-mail: ibblraj@bttb.net.bd9563417, 01711-693914,Email: ramna@islamibankbd. Com8359475,01711-431277,E-mail: rampura@islamibank bd.com7113194, 01711-693918E-mail: sadarghat@islamibank bd.comSl.No.Name of the Branch& Address70 Savar BranchB-37/1, Jaleshar, Bazar Bus Stand,Savar, Dhaka71 Shariatpur BranchDubai Plaza, 241/242, Sadar Road,Shariatpur.72 Sherpur BranchMuslim Market, Shaheed BulbulSarak, Sherpur73 Shyamoli Branch*15/4, Mirpur Road, Shyamali,Dhaka-1207.74 Shyampur Branch227/3, Karimullarbag, Postagola,Shyampur, Dhaka.75 Sreenagar BranchSheikh Market, Jhumur Cinema HallRoad, Sreenagar, Munshiganj-155076 Takerhat BranchTakerhat, Rajoir, Madaripur77 Tangail Branch301-307 Par Dighulia, Tangail78 Tarakandi BranchJamuna Shar Karkhana,Tarakandi, Jamalpur.79 Tongi Branch19, Main Road, Tongi, Gazipur80 Trishal BranchZame Masjid Road, Trishal,Mymensingh.81 Uttara Branch*Kushal Centre, Dhaka-MymensinghRoad, Uttara, Dhaka-1230.82 VIP Road Branch*30, V.I.P. Road, Kakrail, Dhaka83 Wiseghat Branch8/2B, Wiseghat Road,Dhaka- 1100.84 Zinzira BranchZinzira Thana Road,Keraniganj, Dhaka85 Amin Bazar Branch755, Begun Bari, Amin Bazar,Dhaka.Sl.No.SME/Krishi ShakhaName of the SME/Krishi Shakha1 Alanga SME/Krishi ShakhaMadina Shapping Complex, AlangaBus Stand, Kalihati, Tangail – 1974.2 Bandura SME/Krishi ShakhaBandura Bazar, Nawabganj, Dhaka.3 Zirani Bazar SME/Krishi ShakhaR. S.Plaza, BKSP, Ashulia Dhaka.4 Muktagacha SME/Krishi Shakha81, Barha Masjid Super Market,Muktagacha, Mymensingh5 Kalampur SME/Krishi ShakhaKalampur Bazar Masjid Market,Dhamrai, Dhaka.Phone Number &E-mail Address(02) 7745777, 01711-693928, E-mail: savar@islamibankbd. Com(0601) 61418, 01714-041437, E-mail: shariatpur@islamibankbd.com0931-61618, 01711-693927, E-mail: sherpur@islamibankbd.com(02) 9123527, 01755-521677, E-mail: shyamoli @islamibankbd.com02- 7446699, 01714-037942, E-mail: shyampur@islamibankbd.com06925-65350E-mail: srenagar@islamibankbd.com06623-56277, 01714-098019, E-mail: takerhat @islamibankbd.com0921-54361, 55603, 01711-693924, E-mail: tangail @islamibankbd.com01711-693947, 01730-709284, E-mail: tarakandi@islamibankbd.com02-9813853, 01711-693946, E-mail: tongi@islamibankbd.com01755-554480E-mail: trishal@islamibankbd.com8920500, 01711-693936,E-mail: uttara@islamibankbd. Com9359442,01730-730169,E-mail: viproad@islamibankbd.com01755 – 629464E-mail: wiseghat@islamibankbd.com7762452,01711-693931,E-mail: zinzira@islamibankbd.com02-9020360,E-mail: ibblamin@bttb.net.bd.Phone Number &E-mail Address01730-097280 E-mail:alanga@islamibankbd.com01730-097281E-mail: sme.bandura@islamibankbd.com.01730-097289E-mail: ziranibazar@islamibankbd.com09028-75160, 01713-425923, E-mail: muktagacha@islamibankbd.com01730-326102E-mail: kalampur@islamibankbd.comAnnual Report 2012 307

Sl.No.Name of the SME/Krishi Shakha6 Sonargaon SME/Krishi ShakhaBhuiyan Plaza, Mugrapara,Sonargaon, Narayanganj-1441.7 Bhanga SME/Krishi ShakhaMunshi Bhaban, Bhanga BazarFaridpur8 Chormuguria SME/Krishi ShakhaYusuf Plaza, Chormuguria BazarRoad, Madaripur.Sl.No.Chittagong DivisionName of the Branch& Address1 Agrabad Branch*03, CDA, Sheikh Mujib Road.,Agrabad C/A, Chittagong2 Anderkilla Branch*G.A. Bhaban , 36-37, Nazir AhmedChowdhury Road, Anderkilla, Chittagong3 Ashuganj BranchHajee Zahirul Haque Munshi ShoppingComplex , Station Road, B. Baria4 Bancharampur BranchBancharampur, Brahmanbaria.5 Bahaddarhat BranchManila Plaza, (3rd Floor)3537/A, Bahaddarhat Moor,Chandgaon, Chittagong- 42126 Bank Road BranchRubi Plaza, South Bazar,Chaumuhani, Noakhali.7 Baraiyarhat BranchThree Star Shopping Complex,Shantirhat Road, Baraiyarhat,Mirsharai, Chittagong.8 Bashurhat BranchJahanara Super Market , Uttar Bazar,Main Road, Bashurhat, Noakhali.9 Bandarban Branch49, A,B, Central Mosque Road,Bandarban.10 Bangodda Bazar BranchBangodda Bazaar, Nangalkot,Comilla- 3550.11 Brahmanbaria BranchCourt Road, Brahmanbaria-340012 CDA Avenue BranchChittagong Shopping Complex,C.D.A.Avenue, Chittagong13 Chaktai BranchMia Khan Bhaban (1 st floor),New Chaktai, Chow Rasta Moor,Chittagong-4000.14 Chandpur BranchMir Shopping Complex, J.M. SenGupta Road,Chandpur-3600.15 Chandraganj BranchChandraganj Newmarket,Laxmipur- 3708.16 Chatkhil Branch4829, Chatkhil Kamil Madrasha SuperMarket, Chatkhil, Noakhali- 3870.Phone Number &E-mail Address(06723) 56295, 01730-326860, E-mail: sonargaon@islamibankbd.com(06323) 56331, 01730-706796, E-mail: bhanga@islamibankbd.com01730-097285E-mail: chormuguria@islamibankbd.comPhone Number &E-mail Address031-2511382, 01711-889901, Email: agrabad @islamibankbd. Com031-2852006, 01711-889904, E-mail: anderkilla@islamibankbd.com0383-4080017, 01755-545514, E-mail: ashuganj @islamibankbd.com08523-56027, 01714-098018E-mail: Bancharampur@islamibankbd.com01755-629460E-mail: bahaddarhat@islamibankbd.com0321-53251, 53509, 01714-089574, E-mail: bankroad@islamibankbd.com01714-041436E-mail: baraiyarhat@islamibankbd.com03223-56383, 01711-889951E-mail: bashurhat @islamibankbd. com01730-034872E-mail: bandarban@islamibankbd.com01755-554482,E-mail: bangodda@islamibankbd.com0851-59456, 01711-889942, E-mail: ibblbbaria@hotmail.com(031) 651733, 2551599,01711-889909, E-mail: cdaavenue@islami bankbd.com031-634453, 842433,2867474, E-mail: chaktai@islamibankbd. com0841-63655, 01711-889965,E-mail: chandpur @islamibankbd. com01755-551139E-mail: chandraganj@islamibankbd.com03222-75178, 01713-335785, E-mail: chatkhil@islamibankbd.comSl.No.Name of the Branch& Address17 Chauddagram Branch216, Abdul Jalil Shopping Mall,Chauddagram Bazar, Comilla.18 Chawk Bazaar BranchFayaz Mansion , 191/192 (new)Lalchand Road, Chawk Bazar,Chittagong19 Chiringa BranchChokoria Shopping Complex,Chiringa, Cox’s Bazar.20 Chhagalnaiya BranchNew Market, Chhagalnaiya, Feni21 Chowmuhani Branch *856, Feni Road Chowmuhani,Noakhali.22 College Road BranchGafur Plaza, 597, College RoadFeni- 390023 Comilla BranchB.M Thikana Tower, 77/71-78/72Kandirpar, Comilla -3500.24 Companiganj BranchCompaniganj Bazar, Muradnagar,Comilla25 Kosba BranchShimanta Complex, Kosba,Brahmanbaria - 346026 Cox’s Bazar Branch209, Main Road, Cox’s Bazaar.27 Dagunbhuiyan BranchIshaque Shopping Complex ,Dagunbhuiyan, Feni.28 Dewanhat BranchSheikh Kamal Complex, 257/A,D.T. Road, Dewanhat,Chittagong29 Eidgah BranchHajee Shafiq Shopping Centre,Eidgah, Cox’s Bazaar.30 Faridganj BranchKalabagan Bazaar, Faridganj,Chandpur.31 Fatikchari BranchAmanat Market, Bibirhat, Fatikchari,Chittagong32 Feni Branch248/249, S.S.K. Road, Feni.33 Gouripur BranchShamiha Plaza, Gouripur BazarDaudkandi, Comilla.34 Hajiganj Branch213, Makimabad Bara MasjidComplex, Hajiganj, Chandpur.35 Halishahar BranchHalishahar Housing Estate,Chittagong- 410036 Hathazari BranchMd. Solaiman Building , HathazariBazar, Chittagong.37 Jubilee Road Branch*200/B, Jubilee Road, ChittagongPhone Number &E-mail Address01714-004855E-mail: chauddagram@islamibankbd. com031-61124401711-889908,E-mail: chawkbazar@islamibankbd.com03422-56472, 56083,01713-164492, E-mail:chiringa @islamibankbd.com03322-78478, 01713-425932 E-mail: chhagalnaiya@islamibankbd.com0321-52027, 51537,01755-521311, Email : chowmuhani @islamibankbd. Com01755-551140Email : collegeroad@islamibankbd.com081-65935, 66633, 01711-889937, E-mail: comilla@islamibankbd.com08026- 59099, 01714-048906, E-mail: companigonj @islamibankbd.com01755-554481E-mail: kosba@islamibankbd.com0341-63302, 01711-889968, E-mail: cox’sbazar@islamibankbd. Com03323-79479, 01730-034871, E-mail: dagunbhuiyan@islamibankbd.com031-2514082, 031-2514083,01713-425932E-mail: dewanhat@islamibankbd.com03432-58541, 01711-431276, E-mail: eidgaon @islamibankbd. Com08422-64236,01714-037940, E-mail: faridgonj @islamibankbd.com03022-56176, 01711-404452, E-mail: fatikchari @islamibankbd.com0331- 74548,E-mail: feni@islamibankbd.com08023-55491, 01714-089573, E-mail: gouripur @islamibankbd.com08424-75281,01711-889963, E-mail: hajiganj@islamibankbd.com01755-580981 E-mail:Halishahar@islamibankbd.com031-2601437, 01755-545518, E-mail: ibblhat@colbd.com031-612617, E-mail: jubileeroad@islamibankbd.com308Annual Report 2012

Sl.No.Name of the Branch& Address38 Keranihat BranchKeranihat, Satkania, Chittagong.39 Khatunganj Branch*82, Azim Market, Khatunganj,Chittagong.40 Laksham BranchDaulatganj Bazar, Laksham,Comilla.41 Luxmipur BranchHaji Abad Bhaban, Godown Road,Laxmipur.42 Lohagara BranchM. Rahman Market, Lohagara,Chittagong.43 Maijdee Court BranchShopping Sufia Centre, Main Road,Maijdee Court, Noakhali.44 Pahartali BranchBandar Bitan Market, CustomsAcademy-4219, Chittagong45 Bandartila Branch2152/2348, Sharif Plaza, AirportRoad, Bandar, Chittagong-4218,46 Nabinagar BranchNabinagar, Brahmanbaria.47 Nazumeah Hat BranchAli Shopping Centre, Nazumeah Hat,Captai Road, Hathazari, Chittagong.48 Patiya BranchAlam Plaza, Shaheed Abdus SaburRoad, Patiya, Chittagong49 Raipur BranchMiajee Super Market, 842, UpazilaParishad Road, Raipur, Laxmipur.50 Ramganj BranchChand Super MarketKala Bagan, Ramganj, Laxmipur51 Rangamati BranchRangamati Sadar, Rangamati52 Ramu branchBye Pass Fatekhanrkul, Ramu,Cox’s Bazar- 4730.53 Sandwip BranchNew Upazila Complex, SandwipChittagong.54 Senbag Branch134,Bhuiyan Super Market, CollegeRoad, Senbag, Noakhali55 Sitakunda BranchMadrasha Market, D.T .Road,Sitakunda, Chittagong-4310,56 Sonagazi BranchMain Road, Sonagazi, Feni57 Station Road Branch*526, Station Road, GhosalQuarter, Chittagong58 Subarnachar BranchChar Aman Ullah, Char Jabbar,Nonkhali- 3812.59 Teknaf BranchBazar Road, Teknaf,Cox’s Bazaar60 Terry Patty BranchPhari Road, Chawk Bazar,Comilla- 3500.Phone Number &E-mail Address03036-56002, 01730-034901, E-mail: keranihat @islamibankbd.com031-620744, 01711-889903,E-mail: khatunganj @islamibankbd. Com08032-51332, 51137,01711-889945, E-mail:ibbllaksam@yahoo.com(0381) 55680, 01711-889943, E-mail: Laxmipur @islamibankbd. Com03034-56159, 01199-790078, E-mail: lohagara @islamibankbd.com0321-61885, 01711-431275,E-mail: maijdee court@islamibankbd. com031-752599, 750901,01711-889910, E-mail: pahartali@islamibankbd. com031-741747, 01730-328874, E-mail: bandartila@islamibankbd.com01713-141981 E-mail: nabinagar@islamibankbd.com(031)2571533E-mail: nazumeahat@islamibankbd.com03035-56560, 01711-889967, E-mail: patiya@islamibankbd.com03822-56477, 01714-004857, E-mail: raipur@islamibankbd.com03824-75488,01714-037943, E-mail: ramganj @islamibankbd.com0351-63312, 01199-792137, E-mail: rangamati@islamibankbd.com(03425) 56202E-mail: ramu@islamibankbd.com01714-098451, 01730-048037, E-mail: sandwip @islamibankbd.com03225-5601401730-034851,03028-56419, 01711-439096, E-mail: sitakunda@islamibankbd.com03325-76086,01714-036536, E-mail: sonagazi @islamibankbd.com031-615353, 01730-730168, E-mail-stationroad@islamibankbd.com03228-52175E-mail: subarnachar@islamibankbd.com03426-75126,01819-836573, E-mail: teknaf@islamibankbd.com01755-551141E-mail: terrypotti@islamibankbd.comSl.No.Name of the Branch& Address61 Khagrachari BranchMini super Market, BazarshahiZame Masjid Road, Khagrachari.62 O.R. Nizam Road BranchM.M. Tower, 1105, Asian Highway,Panchlaish, Chittagong-400063 Matlab BranchAgrani Super Market,Matlab, Chandpur-364064 Raozan Branch201, Chowdhury Market, Fakirhat,Raozan, Chittagong- 4340.65 Chandina BranchHaji Ali Mansion, Chandina Bazar,Comilla- 3510.66 Banshkhali BranchSheikh Tower, Jaldi, BanshkhaliChittagong- 4390.Sl.No.SME/Krishi ShakhaName of the SME/Krishi Shakha1 Coatbazar SME/ Krishi ShakhaFazlul Haque Plaza,Coatbazar,Ukhiya, Cox’s Bazar2 Barodarogahat SME/Krishi ShakhaIrani Vola Market, Sitakunda,Chittagong- 4310.3 Moheshkhali SME/ Krishi ShakhaDighi Road, Gorak Ghata BazarMoheshkhali, Cox's Bazar-47104 Mirerswarai SME/ Krishi ShakhaMaa Tower, Mirerswarai , Chittagong-: 4320.5 Burichong SME/Krishi ShakhaBhaban, M.A. Gani Road, BurichongBazaar, Comilla- 35206 Parshuram SME/Krishi ShakhaHaji Kalim Uddin Plaza, 385,ThanaRoad, Parshuram, Feni- 39407 Daudkandi SME/Krishi ShakhaAhmadia Plaza, Daudkandi Bazar,Comilla8 Chaprashirhat SME/Krishi ShakhaChaprashirhat New Market,Kabirhat, Noakhali9 Akhura SME/Krishi ShakhaNoorjahan Manjeel, Akhura-ChanduraRoad, Akhura, B. Baria-3450Sl.No.Name of the Branch& AddressKhulna Division1 Bagerhat BranchHajee Shamsuddin PlazaKazi Nazrul Islam Road, Bagerhat.2 Benapole BranchS S Super Market, Benapole Port,Jessore.3 Chowgacha BranchNur Ali Mridha Market, Chowgacha,Jessore.4 Chuadanga BranchThana Road, Chuadang.Phone Number &E-mail Address01730-333621E-mail: khagrachari@islamibankbd.com031-2555309E-mail-ornizamroad@islamibankbd.com08426-56052, 01713-258792, E-mail: matlab@islamibankbd.com01730-338558E-mail: raozan@islamibankbd.com08022-56371, 01730-338560, E-mail: chandina@islamibankbd.com(03037)-56250, 01730-736026, E-mail: banshkhali@islamibankbd.comPhone Number &E-mail Address(03427) 56292, 01730-097284, E-mail: coatbazar@islamibankbd.com01730-326103E-mail: arodarogerhat@islamibankbd.com(03424) 74426 (03424)E-mail:moheskhali@islamibankbd. com03024 – 56273, 01755-636212, E-mail: mirerswarai@islamibankbd.com01730-700063E-mail: burichong@islamibankbd.com01730-341042,E-mail: arshuram@islamibankbd.com01730-326100,E-mail: daudkandi@islamibankbd.com01730-097283,E-mail: chaprashirhat@islamibankbd.com08522 – 56190, 01730-326104, E-mail:akhura@islamibankbd.comPhone NumberE-mail Address0468-63127, 01711-889920,E-mail: bagerhat@islamibankbd.com04228-75704,01711-889923, E mail: benapole @islamibankbd.com042244-56021,01713-335786, E mail: chowgacha@islamibankbd.com0761-64200, 64300, 01711-432089, Remit.chuadanga@islamibankbd.comAnnual Report 2012 309

Sl.No.Name of the Branch& Address5 Daulatpur Branch271, Khan A. Sabur Road,Daulatpur, Khulna6 Jessore Branch*7-8, Rail Road, Jessore.Khulna Division7 Jhenaidah BranchHossain Shahid Sohrawardi Road,Jhenaidah.8 Jhikorgacha Branch68, Hanif Super MarketJhikorgacha, Jessore.9 Kalaroa BranchHaji Market, Shahid MuktijoddaSarak, Kalaroa Bazar, Satkhira.10Kaliganj BranchKaliganj,Satkhira,11 Kaliganj Branch, JhenaidahKaliganj, Jhenaidah.12 Khulna Branch*4, Old Jessore Road, Khulna13 Coat Chandpur BranchKotchandpur Bazar, Jhenaidah14 Kumarkhali BranchFayez Khan Tower, Kumarkhali,Kushtia -7010.15 Kushtia Branch*Lovely Tower, 55/1, NawabSirajuddula Road, Kushtia.16 Magura BranchSayed Atar Ali Road, Magura17 Meherpur BranchRipon Tower, Main Road,Meherpur-7100.18 Mongla Branch1/3, Main Road, Mongla, Bagerhat19 Morrelganj BranchMorrelganj, Bagerhat20 Narail BranchJame-e-Masjid Market, Narail.21 Noapara BranchNoapara, Jessore22 Paikgacha BranchKabir Plaza, Paikgacha, Khulna23 Paradah BranchPoradah, Kushtia24 Satkhira BranchBara Bazar Road, Satkhira25 Shyamnagar BranchM. M. Plaza, NokipurShyamnagar, Satkhira- 945026 KDA Avenue Branch181,Khan A. Sabur Road, ShibbariMour, Khulna-9310Phone NumberE-mail Address041-760414E-mail: daulatpur@islamibankbd.com0421-62521E-mail: jessore@islamibankbd. com0451-62757,01711-889918,E-mail: ibbljhenai dah@yahoo.com04225-71353, 01711-889958, E-mail: ibbljhenaidah@yahoo.com04724-75357E-mail: kalaroa@islamibankbd.com04725-56221, 56112,E-mail: kaliganj@islamibankbd.com04523-56035E-mail: kaligonj@islamibankbd.com041-730531,01711-889911,01711-807622E-mail: ibkln@bttb.net.bd01730-333622, 01755-542876, E-mail: kotchandpur@islamibankbd.com07025-76681, 01714-004856, E-mail: ibblkumr @bttb.net.bd071-62244, 61313Email: kus htia@ islamibankbd. com0488-63305, 01714-025934, 01755-636214,E-mail: ibblmgr@bttb.net.bd0791-63112, 01714-082126, E-mail: ibblmehe@bttb.net.bd04658-73340, 01711-889922, E-mail: mongla@islamibankbd.com04656-56107, 01714-016406, E-mail: morrelganj@islamibankbd.com(0481) 62111, 01755-521677, E-mail: narail@islamibankbd.com04222-71770E-mail: noapara@islamibankbd.com04027-56057, 01711-432104, -mail: paikgacha@islamibankbd.com01714-098450, 071-65010, E-mail: poradah@islamibankbd.com0471-63287E-mail: satkhira@islamibankbd. com01755-580982,E-mail: shyamnagar@islamibankbd.com,041-733633, 01713-185038, E-mail: kdaavenue@islamibankbd. com,Sl.No.SME/Krishi ShakhaName of the SME/Krishi Shakha1 Dak Banglabazar SME/KrishiShakaDak Bangla Bazar, Jhenaidah2 Fultala Bazar SME/Krishi ShakaJoytun Tower, Fultala Bazar,Fultala, Khulna- 9210.3 Jibon Nagar SME/Krishi ShakhaJibon Nagar,Chuadanga- 7230Sl.No.Rajshahi DivisionName of the Branch& Address1 Belkuchi BranchAltaf Plaza, Mukundaganj Bazar,Belkuchi, Sirajganj.2 Bogra Branch*801, Thana Road, Bogra.3 Chanchkoir BranchC.M Market, Chanchkoir Bazar,Gurudashpur, Natore4 Chapai Nawabganj Branch*Munsur Mansion, 68, Bara IndaraMore, Chapai Nawabganj.5 Dupchanchia BranchDupchanchia New Market,Dupchanchia, Bogra.6 Highway BranchSheikh Super Market, Sherpur,Bogra.7 Ishwardi BranchStation Road, Ishwardi, Pabna.8 Joypurhat BranchFouzia Market, Sadar Road,Joypurhat.9 Kashinathpur BranchKashinathpur Bazar, Santhia,Pabna.10 Naogaon Branch690, Sadar RoadNaogaon-650011 Natore BranchAl-Falah Super Market 240/241,Rajshahi Dhaka Road, Natore12 Nazipur BranchNazipur Bus Stand, Nazipur,Patnitola, .Naogaon.13 New Market Branch, Rajshahi219, Sultanabad, Station Road,Boalia, Rajshahi- 610014 Pabna Branch*50/246, Abdul Hamid Road, TraficMoor, Pabna-660015 Rajshahi Branch*269, Alupotty, GhoramaraBoalia, Rajshahi-610016 Rohanpur BranchMohazan Super Market,Rohanpur, Chapai Nawabganj.17 Santhia BranchTania Super Market, SanthiaBazar, Pabna.Phone Number &E-mail Address(04532) 51010E-mail: dakbangla@islamibankbd.com. 01713-438545,E-mail: fultala@islamibankbd.com01730-703854,E-mail: jibonnagar @islamibankbd.comPhone Number &E-mail Address07522-56330, 01713-141982, E-mail: belkuchi@islamibankbd.com051-65494E-mail: bogra@islamibankbd.com07724-74038,01713-425935, E-mail: chanchkoir@islamibankbd.com0781-61138,01711-889965, Email: ibblcng@bttb.net.bd05024-51046, 01714-025932, E-mail: dupchanchia@islamibankbd.com05029-88018E-mail: highway@islamibankbd.com07326-63511, 01711-438348, E-mail: ishwardi@islamibankbd.com0571- 2962, 62862E-mail: Joypurhat@islamibankbd.com07332-54104E-mail: Kashinathpur@islamibankbd.co0741-62393E-mail: naogaon @islamibankbd.com0771-62630, 01711-889932, 01713-249356E-mail: ibblnat@yahoo.com07428-63040E-mail: nazipur@islamibankbd.com0721-812663E-mail: newmarketraj@islamibankbd.com0731-65621,66324, 01711-889927, E-mail: pabna@islamibankbd.com0721-774767 Email :rajshahi@islamibankbd.com(07823) 74246, 01713438511, E-mail: rohanpur@islamibankbd.com07327-56211, 01714-035554, E-mail: santhia@islamibankbd.com310Annual Report 2012

Sl.No.Name of the Branch& Address18 Sapahar BranchSapahar New Market, Sapahar,Sapahar, Naogaon- 656019 Setabganj BranchSetabganj ChowrastaBochaganj, Dinajpur- 5325.20 Shahjadpur BranchLate Abdul Hafiz Khan Market,Shahjadpur, Sirajganj.21 Shibganj BranchMain Road, Shibganj,Chapainawabganj- 6340.22 Sirajganj BranchA.B.Super Market, 791,S.S.Road,Sirajganj.23 Mohadevpur BranchKishmat Plaza, Upozila RoadMohadevpur, Naogaon- 653024 Baragola BranchJamil Building, Rangpur RoadBaragola, Bogra -5800.25 Ullahpara BranchGulisthan Mour, Ullapara,Sirajganj-676026 Baneswar BranchBaneswar Bazaar, Puthia,Rajshahi-6260.Sl.No.SME/SME/Krishi ShakhaName of the SME/Krishi Shakha1 Keshorehat SME/Krishi ShakhaEakram Plaza, Keshorehat,Rajshahi.2 Shantahar SME/Krishi Shakha203/2M. M. Plaza, Bogra Road,Shantahar, Bogra -5891.3 Kahalu SME/Krishi ShakhaAlhaj Super Market, RailgetCharmatha, Kahalu, Bogra.4 Nandigram SME/Krishi ShakhaBogra- Nator RoadNandigram, Bogra- 5860.5 Sujanagar SME/Krishi Shakha41/B, College RoadSujanagar, Pabna-6660.6 Mohastangarh SME/KrishiShakhaMohastangarh, Shibgonj, Bogra.Phone Number &E-mail Address01755-629461,E-mail: shapahar@islamibankbd.com01755-554478E-mail: setabganj@islamibankbd.com0751-63769E-mail: shahjadpur@islamibankbd.com07825- 75107, 01711-438346, E-mail: shibganj@islamibankbd.com0751-62435E-mail: sirajganj@islamibankbd.com01730-328870, E-mail:mohadevepur@islamibankbd.com051-66450,01730-338559,E-mail: baragola @islamibankbd.com(07529) 56134E-mail: ullapara @islamibankbd.com01730-700064,E-mail: baneswar@islamibankbd.comPhone Number &E-mail Address01730-097287E-mail: keshorehat@islamibankbd.com01713-438502,E-mail: shantahar@islamibankbd.com05026-56049E-mail: kahalu@islamibankbd.com(05027) 76085E-mail: nandigram@islamibankbd.com01713-015450E-mail: sujanagar@islamibankbd.com01730-097286,E-mail:mohastangor @islamibankbd.comSl.No.Barisal DivisionName of the Branch& Address4 Jhalokathi Branch14, Batasha Patty Road,Jhalokathi.5 Miarhat BranchKourikhara, NesarabadPirojpur.6 Patuakhali Branch29, Sadar Road, Adalat Para,Patuakhali.7 Pirojpur BranchZilla Parishad Super Market,Pirojpur-85008 Torki BranchMasjid Market, Torki Bandar,Gournadi, Barisal.9 Bhandaria BranchHawlader Market, Bhandaria,Pirojpur- 8550.10 Charfashion BranchTaz Plaza, 250, Sadar RoadCharfashion, Bhola- 834011 HatkholaChawkbazar BranchHatkhola Road, Barisal- 8200.SME/Krishi ShakhaSl.Name of the SME/Krishi ShakhaNo.1. Borhanuddin SME/KrishiShakha26, Raniganj Road, Borhanuddin,Bhola- 8320Sl.No.Sylhet DivisionName of the Branch& Address1 Amberkhana BranchCentury ShoppingCentre, Amberkhana, Sylhet2 Barolekha BranchHaji Abdul Ali Trade Centre,Barolekha, Moulvi Bazar.3 Beani Bazar BranchHaji Nuruddin Mansion, Main Road,South Beani Bazar, Sylhet.Phone Number &E-mail Address0498-62716,Email: islamibankjkt@yahoo.com,01713-425965,E-mail: miarhat@islamibankbd.com0441-62283E-mail: patuakhali@islamibankbd.com0461-62571,E-mail: pirojpur@islamibankbd.com01714-097886E-mail: torki@islamibankbd.com04623-56360,E-mail: bhandaria@islamibankbd.com01755 – 629465E-mail: charfashion@islamibankbd.com(0431) 2177234,E-mail: hatkhola@islamibankbd.comPhone Number &E-mail Address01730-326105E-mail: borhanuddin@islamibankbd.comPhone Number &E-mail Address0821-712102, 01711-889938, E-mail: amberkhana@ islamibankbd.com08622-56492, 01713-425931, E-mail: barolekha@islamibankbd.com03799-288658E-mail: beanibazar @islamibankbd.comSl.No.Barisal DivisionName of the Branch& Address1 Barguna Branch9, Nazrul Islam SarakBarguna2 Barisal Branch132/121, Sajrini Super Market,East Bogra Road, Barisal-8200.3 Bhola BranchKornophuly Complex,3373, Sadar Road, Bhola,4 Jhalokathi Branch14, Batasha Patty Road,Jhalokathi.Phone Number &E-mail Address0448-62088,01714-009230Email: ibblbrg@bttb.net.bd.0431-64524E-mail: barisal@islamibankbd.com0491-62774, 01711-889919, E-mail: bhola@islamibankbd.com0498-62716,Email: islamibankjkt@yahoo.com,4 Biswanath BranchPuran Bazar, Biswanath , Sylhet.5 Chatak BranchBagbari, Chhatak,Sunamganj.6 Goala Bazar BranchGoalabazar, Balaganj, Sleet7 Habiganj BranchKalibari Road, Habiganj8 Jagannathpur BranchAl-Jannath Plaza, Jagannathpur,Sunamganj.038911-82105,E-mail: biswanath@islamibankbd.com01711-432105,E-mail: chhatak@islamibankbd.com08242-56720,E-mail: Goalabazar@islamibankbd.com0831-52611, 01711-889949, E-mail: habiganj@islamibankbd.com08727-56010,01713-335778, E-mail: jagannathpur@islamibankbd.comAnnual Report 2012 311

Sl.No.Sylhet DivisionName of the Branch& Address9 Kanaighat BranchKanaighat Bazar, Kanaighat,Sylhet.10 Kulaura BranchS.A. Shopping Centre, DakshinBazar, Kulaura, Moulvi Bazar.11 Laldighirpar BranchAl- Karim Plaza, Laldighirpar,Sylhet.12 Moulvi Bazar Branch67,Central Road,Moulvi Bazaar.13 Sreemangal BranchSreemangal, Sreemangal,Moulvi Bazar-3210.14 Sylhet Branch*288, Taltola, Sleet.15 Sunamganj BranchAhsan Mansion, Station Road,Sunamganj.16 Zindabazar BranchJallarpar Road, Zindabazar,Sylhet-310017 Dakshin Surma Branch779, Humayun Rashid Chattar,Kotwali, Sylhet-3100.SME/Krishi ShakhaSl.Name of the SME/Krishi ShakhaNo.1 Shayestagonj SME/KrishiShakhaShayestagonj, Hobigonj.2 Nabiganj SME/Krishi ShakhaSherpur Road, Nabigonj,Hoboganj.Rangpur DivisionSl. Name of the BranchNo.& Address1 Birampur BranchMain Road, BirampurDinajpur2 Bhurungamari BranchKashem Market, Bazar Road,Bhurungamari, Kurigram- 56703 Dinajpur Branch*Hasna plaza, Station RoadDinajpur-5200Phone Number &E-mail Address08233-56062, 01714-048905, E-mail: kanaighat@islamibankbd.com(08624) 56634, 56289,E-mail: kulaura@islamibankbd.com0821-714436E-mail:laldighirpar@islamibankbd.com0861-62830, 52680,E-mail: moulvibazar@islamibankbd.com08626- 88224, 08626-71120, E-mail: sreemangal@islamibankbd.com716282, 01711-889939E-mail: sylhet@islamibankbd. Com01730-034873E-mail: sunamganj@islamibankbd.com01730-328872,E-mail: zindabazar@islamibankbd.com01730-703853, (0821)841909, E-mail:southsurma@islamibankbd.comPhone Number & E-mailAddress08332-56800, 01730-097288, E-mail: shayestagonj@islamibankbd.com01730-736025, (08328)56121, E-mail: nabiganj @islami bankbd.comPhone Number &E-mail Address05322-56540, 01714-013395; E-mail: ibblbirm @bttb.net.bd01755 – 629467;E-mail: bhurungamari@islamibankbd.com01714-093951, 01755545515, E-mail: dinajpur @islamibankbd.comSl. Name of the BranchNo.& Address4 Dhap BranchAlmi Bari, 30 Jail RoadRangpur- 54005 Gaibandha BranchParkview Super Market,Gaibandha-57006 Gobindaganj BranchZahir Complex, Biswa Road,Gobindaganj, Gaibandha7 Jaldhaka BranchDalia Road, JaldhakaNilphamari8 Kurigram Branch16,Bazar Road,Kurigram.9 Lalmonirhat BranchMogolhat Gate, Puran Bazar,Lalmonirhat10 Nilphamari BranchUpon the Butterfly Show Room,Hazi Mohsin RoadNilphamari11 Panchagarh BranchPanchagarh Central MosqueMarket, Tetulia Road, anchagarh.12 Rangpur BranchMotahar Commercial Complex,G. L. Ray Road, Rangpur.13 Saidpur Branch*Dinajpur Road, Saidpur,Nilphamari .14 Sundarganj BranchJanata Market, 116, College Road,Sundargonj, Gaibandha.15 Thakurgaon BranchMasjid Market, Chowrasta,Thakurgaon.Sl.No.SME/Krishi ShakhaName of the SME/Krishi Shakha1 Patrgram SME/Krishi ShakhaAsir plazam, Main Road, Patgram,lalmonirhat 5540,* Authorized dealer in Foreign Exchange.Phone Number &E-mail Address01755-580983E-mail: dhap@islamibankbd.com0541-61722E-mail: gaibandha @islamibankbd.com01711-889957, 0171341507, E-mail: gobindaganj@islamibankbd.com05524-64046, 01714037946, E-mail: jhaldhaka@islamibankbd.com0581-61722, 01711435012, E-mail: ibblkuri@yahoo.com0591-61006, 01714-040449,E-mail: lalmonirhat @islamibankbd.com0551-61619, 01711-438345, 01713-164487,E-mail: nilphamari@islamibankbd.com0568-61890, 01714-016298,E-mail: panchagarh @islamibankbd.com0521-63576, 66003,01711-438343, E-mail:rangpur@islamibankbd.com05526-73122, 01711-438340, E-mail: saidpur@islamibankbd.com05427-64216, 01730333623, E-mail: sundarganj@islamibankbd.com0561-53467, 01711-814535, E-mail: thakurgaon@islamibankbd.comPhone Number &E-mail Address01730-703851E-mail: patgram@islamibankbd.com312Annual Report 2012

Notice of 30 th Annual General MeetingNotice is hereby given that the 30 th Annual General Meeting of Islami Bank Bangladesh Limited will be held onWednesday, the 22 nd May, 2013 at 10.00 AM at Bangabandhu International Conference Centre (BICC), Agargaon,Sher-e-Bangla Nagar, Dhaka for transacting the following business:Agenda01. To approve the minutes of the 29 th Annual General Meeting held on 15 th May 2012.02. To receive, consider and adopt the Audited Financial Statements for the year that ended on 31 st December2012 and Reports of the Directors and Auditors thereon.03. To approve Dividend for the year that ended on 31 st 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 DirectorsDated: Dhaka(Abu Reza Md. Yeahia)20 th 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, the20th 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 to12.00 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 on18th 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 shareholdersby post / courier. The honourable shareholders may also collect Proxy Forms etc. from the Share Department ofthe Company.h) Directors’ Report and Audited Financial Statements of the Bank for the year ended 31st December 2012together with the Auditors’ Report thereon shall be available on Bank’s website (www.islamibankbd.com) from01/05/2013 onward.i) Entry is reserved only for the honourable Shareholders and Proxies / Attorneys. Attendance slip (duly signed) must besubmitted to the Registration Counter at the time of entrance. Registration Counter shall remain open till 11.00 AM.---------Annual Report 2012 313

Design and ConceptDesign and Concept:Cover Design:Design Assistance:Email:Ar. Md. Tareq Haider, IDEAAr. Moushumi Ahmed, IDEAMd. Nahid uz Zaman, IDEAidea@enstudio.orgPrinted by:314Annual Report 2012

PROXY FORMI/We ------------------------------------------------------------------------------------------------------------------ being a member(s) oflslami Bank Bangladesh Limited do hereby appoint Jaban------------------------------------------------ of ------------------------------------------------------------------------------------------- as my/our Proxy to attended and vote on behalf of me/us at the 30 thAnnual General Meeting of the Company to be held on Wednesday, the 22 nd May 2013 at 10.00 AM at BangabandhuInternational 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.:--------------------------------------------Signature of the Proxy with date----------------------------------No. of Share(s)Tk. 20.00(twenty) only--------------------------Revenue Stamp--------------------------------------------------Signature of the Shareholder with dateN.B.: This Form of Proxy, duly signed (as recorded with the bank), stamped and completed must be submitted to the Registered Officeor Share Department (63 Dilkusha C/A, 5 th Floor, Dhaka) of the Company at least 48 (Forty Eight) hours before the Meeting.------------------------------------------------------------------------------------------------------------------------------The 30 th Annual General Meeting dated on Wednesday the 22 nd May, 2013ATTENDANCE SLIPI do hereby submit the Attendance slip in connection with the 30 th Annual General Meeting of Islami Bank BangladeshLimited held today Wednesday, the 22 nd 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