annual IBBL.PDF

8/14/2019 annual IBBL.PDF

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Howladar Yunus & Co. Aziz Halim Khair ChoudhuryChartered Accountants Chartered Accountants

AUDITORS REPORT

TOTHE SHAREHOLDERS OF ISLAMI BANK BANGLADESH LIMITED

We have audited the accompanying Balance Sheet of Islami Bank Bangladesh Limitedas of 31 December 2007 and therelated Profit and Loss Account, Cash Flow Statement, Statement of Changes in Equity, Statement of Liquidity and notesto the financial statements for the year then ended. These financial statements are the responsibility of the management ofthe Bank. Our responsibility is to express an opinion on these financial statements based on our audit.Scope:We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements. An audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.Opinion:In our opinion, the financial statements prepared in accordance with Bangladesh Accounting Standards (BAS) as well asin the format prescribed by Bangladesh Bank give a true and fair view of the state of affairs of the bank as of 31 December

2007 and of the results of its operations and its cash flows for the year then ended and comply with the applicable sectionsof the Bank Company Act 1991, the rules and regulations issued by the Bangladesh Bank, the Companies Act 1994, theSecurities and Exchange Rules 1987 and other applicable laws and regulations.

Without qualifying our opinion we draw attention to note no. 19.4.1 to the financial statements and state that income taxon bad and doubtful debts has not been provided for during the year under audit.

We also report that:

i. 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;

ii. in our opinion, proper books of account as required by law have been kept by the Bank so far as it appeared fromour examination of those books of account and proper returns adequate for the purposes of our audit have beenreceived from the branches not visited by us;

iii. the Banks Balance Sheet, Profit and loss Account, Cash Flow Statement, Statement of Changes in Equity, Statementof Liquidity Analysis of the Bank dealt with by the report are in agreement with books of account and returns;

iv. the expenditure incurred was for the purposes of the Banks business;

v. the financial position of the Bank as of 31 December 2007 and the profit for the period then ended have beenproperly reflected in the financial statements; and the financial statements have been prepared in accordance withBangladesh Accounting Standards (BAS), following the generally accepted accounting principles;


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ix. the records and statements submitted by the branches have been properly maintained and consolidated in thefinancial statements;

x. the information and explanations required by us have been received and found satisfactory;

xi. as far as it was revealed from our test checks, the existing rules and regulations for investment sanctioning anddisbursements have been followed;

xii. Cash Reserve Requirement (CRR) and Statutory Liquidity Reserve (SLR) with Bangladesh Bank have beenmaintained as per rule;

xiii. it appeared to us that , the internal control system was satisfactory and adequate to prevent probable frauds andforgeries;

xiv. guidelines for Core Risk Management issued by Bangladesh Bank vide BRPD Circular # 17 dated 7/10/2003 weregenerally complied with;

xv. as disclosed in note no. 20.3 adequate capital of the bank, as required by law, has been maintained during the year;

xvi. 80% of the risk weighted assets have been reviewed spending over 3600 person hours.


Dated: 27 April, 2008Dhaka,


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ISLAMI BANK BANGLADESH LIMITED

Profit & Loss Account

For the year ended December 31, 2007Amount in Taka

Year to December 31,

Note 2007 2006

Investment Income 24.0 14,572,185,149 11,158,057,192

Profit Paid on Deposits 25.0 (9,410,587,581) (8,019,336,141)

Net Investment Income 5,161,597,568 3,138,721,051

Income from Investments in Shares/ Securities 26.0 284,002,533 137,375,574

Commission, Exchange & Brokerage 27.0 2,579,012,567 2,456,725,011

Other Operating Income 28.0 264,322,762 286,145,433Total Operating Income 8,288,935,430 6,018,967,069

Operating Expenses

Salary & Allowances 2,034,596,249 1,848,280,506

Rent, Taxes, Insurances, Electricity, etc. 29.0 216,615,830 177,266,251

Legal Expenses 11,984,452 10,955,172

Postage, Stamp, Telecommunication, etc. 30.0 84,949,278 77,949,546

Stationery, Printings, Advertisements etc. 31.0 78,757,200 77,559,915

Chief Executive's Salary & Fees 2,629,717 2,940,000

Directors' Fees & Expenses 32.0 8,372,181 8,109,777Auditors' Fees 449,350 418,000

Charges on Investment Losses - -

Depreciation and Repair of Bank's Assets 33.0 179,023,486 143,897,719

Other Expenses 34.0 509,197,568 356,293,095

Total Operating Expenses 3,126,575,311 2,703,669,981

Profit/ (Loss) before Provision 5,162,360,119 3,315,297,088

Provision for Investments & Off- Balance Sheet Items 19.1 ,19.2 & 19.3 1,381,535,652 401,532,084

Provision for diminution in value of Investments in Shares - -

Other Provisions - 5,100,000Total Provision 1,381,535,652 406,632,084

Total Profit/(Loss) before Taxes 3,780,824,467 2,908,665,004

Provision for Tax

Current Tax 19.4.1 1,700,771,010 1,490,123,306

Deferred Tax 19.4.2 31,000,000 17,950,107

Net Profit/ (Loss) after Tax 2,049,053,457 1,400,591,591

Retained Earnings from previous year - -

Add: Net Profit after Tax 2,049,053,457 1,400,591,591

Profit available for distribution 2,049,053,457 1,400,591,591Less: Appropriation 2,049,053,457 1,400,591,591

Statutory Reserve 756,164,894 581,733,001

General Reserve (279,202,480) (45,141,410)

Retained Earnings including Proposed Dividend 35.0 1,572,091,043 864,000,000

Earning Per Share (EPS) 36.0 539.00 368.42

The accompanying notes 1 to 38 form an integral part of these Financial Statements.


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Statement of Changes in Equity

For the year ended December 31, 2007

(Amount in Taka)

ParticularsPaid-up

SharePremium

StatutoryGeneral/

OtherAssets

Rev.Retained

Capital Account ReserveReserves

*Reserves

RevaluationReserves ofSecurities Earnings

Total

1 2 3 4 5 6 7 89 (2+3+ 4+5+6+7+

8)

Balance as at 01 January 2007 3,456,000,000 1,989,633 2,270,333,255 1,134,449,909 2,280,460,000 - 864,000,000 10,007,232,797

Changes in Accounting Policy: - - - - - - - -

Restated Balance

Surplus on account of

revaluation of Properties - - - - - - - -

Adjustment of revaluation onaccount of

-

sale of Properties - - - - (4,500,000) - - (4,500,000)

Surplus/ (deficit) on account of

revaluation of Investments(HTM)

- - - - - 307,950,000 - 307,950,000

Currency translation differences - - - - - - - -

Net Gains and Losses notrecognized

in the Income statement - - - - - - - -

Net Profit for the period - - 756,164,894 (279,202,480) - - 1,572,091,043 2,049,053,457

Dividend: Cash / Bonus - - - - - (864,000,000) (864,000,000)

Addition from Bonus Share 345,600,000 - - - - - - 345,600,000

Total Shareholders' Equityas on 31 December, 2007

3,801,600,000 1,989,633 3,026,498,149 855,247,429 2,275,960,000 307,950,000 1,572,091,043 11,841,336,254

Note * General /Other Reserves

2007 2006

General Reserve 140,416,207 419,618,687

Investment LossOffsetting Reserve

644,426,081 644,426,081

Dividend EqualizationAccount

32,000,000 32,000,000

Exchange EqualizationAccount

38,405,141 38,405,141

Total 855,247,429 1,134,449,909

Kazi Harun- ar- Rashed Engr. Md. Eskander Ali Khan Md. Shamsul Huda, FCA

Director Director Director


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ISLAMI BANK BANGLADESH LIMITEDCash Flow Statement

For the year ended December 31, 2007Amount in Taka

Note Year to December 31,2007 2006

Cash Flows from Operating Activities

Investment Income 14,572,185,149 11,158,057,192Profit Paid on Deposits (9,410,587,581) (8,019,336,141)Income/ Dividend receipt from Investments in Shares &

Securities 284,002,533 137,375,574Fees & Commission receipt in Cash 2,579,012,567 2,456,725,011Cash Payments to Employees (2,037,225,966) (1,851,220,506)Cash Payments to Suppliers (118,809,424) (57,107,890)Income Taxes Paid (2,007,639,120) (1,081,559,857)

Receipts from other Operating Activities 264,322,762 286,145,433

Payments for other Operating Activities (801,786,635) (659,768,220)

Operating Profit before changes in Operating Assets andLiabilities

3,323,474,285 2,369,310,596

Changes in Operating Assets and Liabilities

Statutory Deposits - -

Purchase of Trading Securities - -

Investments to other Banks - -Investments to Customers (31,345,538,466) (19,930,916,155)

Other Assets 3,547,204,339 (2,109,876,332)Deposits from other Banks 232,159,505 116,270,191Deposits received from Customers 33,673,723,263 24,523,715,199

Other Liabilities account of Customers -Trading Liabilities - -Other Liabilities 1,263,875,149 107,849,958

a. Net Cash from Operating Activities 10,694,898,075 5,076,353,457

Cash flows from Investing ActivitiesProceeds from Sale of Securities - -Payment for Purchase of Securities - (23,603,399)

Purchase / Sale of Property, Plants & Equipments (435,791,658) (401,375,922)

Purchase/ Sale of Subsidiaries - -

b. Net Cash from Investing Activities (435,791,658) (424,979,321)

Cash flows from Financing Activities

Receipts from issue of Loan Capital/ Debt Securities 3,000,000,000 -Payment for redemption of Investments/ Capital & Debt

Securities - -

Receipt from issuing Ordinary Share/ Bonus Share - -

Dividend Paid (518,400,000) -

c. Net Cash from Financing Activities 2,481,600,000 -Net Increase / (Decrease) in Cash (a+b+c) 12,740,706,417 4,651,374,136

Add: Effects of Exchange Rate Changes on Cash & CashEquivalent - -

Add: Cash & Cash Equivalents at beginning of the year 28,348,077,225 23,696,703,089

Cash & Cash Equivalents at end of the year 37.0 41,088,783,642 28,348,077,225


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LIQUIDITY STATEMENT

Assets & Liabilities Maturity Analysis

as at December 31, 2007

(Amount in Taka)

Particulars Up to 1 Month 1 - 3 Months 3 - 12 Months 1 - 5 years More than Total Total

5 years 31.12.2007 31.12.2006

1 2 3 4 5 67 (2 + 3 + 4 + 5 +

6) 8

ASSETS

Cash in Hand 2,907,141,037 - - - - 2,907,141,037 1,410,149,863

Balance with other Banks &Financial Institut ions 13,636,231,954 2,727,246,391 1,818,164,260 - - 18,181,642,605 23,437,927,362

Money at Call & Short Notice - - - - - - -

Investments (in Shares &Securities) - 3,000,000,000 17,000,000,000 - 365,710,399 20,365,710,399 3,557,760,399

Investments 3,623,015,240 10,144,442,672 40,577,770,687 50,722,213,358 39,853,167,639 144,920,609,595 113,575,071,129

Fixed Assets includingPremises,Furniture and Fixtures

- - 154,776,481 496,459,137 3,335,997,057 3,987,232,675 3,724,694,303

Other Assets 555,007,440 112,001,501 175,002,346 150,002,011 8,000,107 1,000,013,406 4,547,217,745

Non - Banking Assets - - - - - - -

Total Assets 20,721,395,671 15,983,690,564 59,725,713,774 51,368,674,506 43,562,875,202 191,362,349,717 150,252,820,801

LIABILITIES

Borrowing from Bangladesh

Bank, other Banks, FinancialInstitutions and Agents

- - - - - - -

Deposits 8,316,264,315 14,969,275,766 54,887,344,476 48,816,471,527 39,335,930,208 166,325,286,292 132,419,403,524

Other Accounts - - - - - - -

Provision & Other Liabil ities 2,039,145,434 713,700,902 3,568,504,510 1,835,230,892 2,039,145,433 10,195,727,171 7,826,184,480

Mudaraba Perpetual Bond - - - - 3,000,000,000 3,000,000,000 -

Total Liabilities 10,355,409,749 15,682,976,668 58,455,848,987 50,651,702,418 44,375,075,641 179,521,013,463 140,245,588,004

Net Liquidity Gap 10,365,985,922 300,713,896 1,269,864,787 716,972,088 (812,200,439) 11,841,336,254 10,007,232,797

Kazi Harun-ar-RashedEngr. Md. Eskander Ali Khan Md. Shamsul Huda, FCA M. Fariduddin Ahmed

Director Director Director Managing Director

Signed as per our annexed report of same date


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Notes to the Financial Statements

For the year ended December 31, 2007

1.0 Status of the Bank

Islami Bank Bangladesh Limited was established as a Public Limited Banking Company in Bangladesh in 1983 asthe first interest free Shariah based Scheduled Commercial Bank in South East Asia. Naturally, its modusoperandi is substantially different from those of other conventional Commercial Banks. The Bank conducts itsbusiness on the Shariah principles of Mudaraba, Musharaka, Bai-Murabaha, Bai-Muajjal, Hire Purchase under

Shirkatul Melk and Bai-Salam etc. There is a Shariah Council in the Bank who ensures that the activities of theBank are being conducted on the precepts of Islam. The Shariah Council consists of prominent Ulema, reputedBankers, renowned Lawyers and eminent Economists.

There are two Stock Exchanges in Bangladesh viz. Dhaka Stock Exchange Limited and Chittagong StockExchange Limited and the Bank is listed with both the Stock Exchanges. The Bank carries out its businessactivities through its Head Office in Dhaka having 186 Branches in Bangladesh. The principal place of business isthe Registered Office at Islami Bank Tower, 40, Dilkusha Commercial Area, Dhaka-1000, Bangladesh.

2.0 Nature of business

All kinds of commercial banking services are provided by the Bank to the customers following the principles ofIslamic Shariah, the provisions of the Bank Company Act 1991 and Bangladesh Banks directives.

3.0 Significant Accounting Policies

3.1 Preparation of Financial Statements

These Financial Statements have been prepared on a going concern basis under the historical cost convention as

modified to include the revaluation of land & building and Shares & Securities as well as Generally AcceptedAccounting Principles in consistent with those of previous year. Although the operations of the bank are in strictcompliance with the rules of Islamic Shariah, the Financial Statements have been prepared basically as perprovisions of Bank Company Act 1991 as amended by Bangladesh Bank BRPD Circular No- 14 dated25.06.2003, Bangladesh Banks other Circulars / Instructions and following International Financial ReportingStandards (IFRS) adopted as Bangladesh Accounting Standard (BAS) by the Institute of Chartered Accountantsof Bangladesh, the Companies Act 1994, the Securities and Exchange Rules 1987, Dhaka and Chittagong StockExchanges Listing Regulations and other laws and rules applicable in Bangladesh, Financial AccountingStandard issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Manama,Bahrain as a member of that organization.

A separate set of records for consolidating the statement of Affairs and Income & Expenditure Statement of theBranches are maintained at the Head Office of the Bank at Dhaka from which the Financial Statements are drawnup.


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a) Provident Fund

The provident fund is for the regular and confirmed employee who has worked for a minimum period of 5(five)years in IBBL and it came into force with effect from 1stday of March, 1986. The fund receives contributions @

10% of the basic pay both from employees and employer.Tk.998.79 million was available in the IBBL EmployeesProvident Fund as at December 31, 2007.

b) Gratuity

The Gratuity Fund for the regular and confirmed employees of IBBL was established on1stday of March, 1986.

The employees who serve at least 7 (seven) years in IBBL, are normally entitled to get gratuity equivalent to onemonths basic salary of the employees for their completed year of services in the Bank. Gratuity for the employees

of IBBL has been increased from 1 (one) Months basic pay to 1(one) Month, 1.5 (one and a half) Months and 2(two) Months basic pay, considering the length of service and also for premature death in harness. The Bank hastaken up various steps to build-up adequate fund gradually and Tk. 60 million has been provided during the year2007 for the Fund. The Fund balance stood at Tk. 959.49 million as at December 31, 2007.

c) Social Security Fund

The Fund came into force with effect from the 8thDecember, 1988. It was established for financial help to the

members of the IBBL Employees Social Security Fund and their families in case of death, physical disability of the

employee while in service or of any incidence of like nature acceptable to the Board of Trustees and retirementfrom the service. Tk.137.26 million was available in the IBBL Employees Social Security Fund as at December 31,2007.

d) Benevolent Fund

The 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 IBBLs officers and sub-staff, to allow short term quard/ grant for the unexpected and

certain needs of the staff of IBBL like accident, clinical treatment, marriage ceremony of the sub-staff and theirdependents. Tk.68.06 million was available in the benevolent fund at December 31, 2007.

3.7 Fixed Assets and Depreciation

a) Fixed assets are generally stated at cost/revaluation (where applicable) less accumulated depreciation as perBAS- 16 Property, Plant & Equipment.

b) Depreciation is charged at the following rates on a reducing balance method on all Fixed Assets other thanMotor Vehicles and Computers, which are depreciated on straight line basis for the year of 2007:

Category of fixed assets Rate

i) Land Nil

ii) Building 2.50%

iii) Furniture and Fixtures 10.00%

iv) Motor Vehicles 20 00%


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Howladar Yunus & Co. Aziz Halim Khair ChoudhuryChartered Accountants Chartered Accountants3.8 Sharing of Investment Income

In case of Investment, Mudaraba fund get preference over cost free fund. The investment income earned through

deployment of Mudaraba Fund is shared by the Bank and the Mudaraba Depositors at the pre-determined ratiofixed by the Bank.

3.9 Foreign Currency Transactions

a) The transactions in foreign currencies are translated into equivalent Taka currency using the exchange ratesruling on the dates of such transactions.

b) The Assets and Liabilities including balance with other Banks denominated in foreign currencies as atDecember 31, 2007 are translated into Taka currency at the weighted average rate of inter Bank Market as

determined by Bangladesh Bank. Balances held in foreign currencies other than US Dollar are converted intoequivalent US Dollar at buying rates of New York closing of the previous day.

3.10 General

a) The figures appearing in these accounts have been rounded off to the nearest integer.

b) Previous years figures have been re-arranged to conform current years presentation wherever necessary.

4.0 Audit Committee

As per Bangladesh Bank BRPD Circular No.12 dated December 23, 2002, an Audit Committee was formed by theBoard of Directors of the Bank consisting of the Board members. As at December 31, 2007 the followinghonorable directors were the members of the Audit Committee:

Sl.No.

Name Statuswith the

Bank

Status withthe Committee

EducationalQualification

i) Janab Kazi Harun-ar- Rashed Director Chairman M. Com (Accounting)

ii) Engr. Md. Eskander Ali Khan Director Member B.Sc. Engineering(Electrical)

iii) Janab Md. Shamsul Huda, FCA Director Member M.Com. (Accounting),FCA.

Audit Committee of the Board met in 35 (Thirty five) occasions, of which 06 (Six) meetings were held with theSenior Management of the Bank during the year 2007 in which among others, the following issues werediscussed:

(i) The Committee examined the draft Financial Statements of 2007 of the Bank to see whether all the disclosuresand information incorporated in the Financial Statements & whether the Bank followed International FinancialReporting Standards and procedures in preparing Financial Statements.(ii) I fi li i t f th 2007 l lt ti d i ti t i h i t f


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Howladar Yunus & Co. Aziz Halim Khair ChoudhuryChartered Accountants Chartered Accountants5.1 Name of the Directors along with all related Firms/ Companies/ Institutions/ Related Parties as at

December 31, 2007

Sl.No Name of the Directors Status withthe Bank Name of the related Firms/Companies/ Institutions/ Partiesetc.

Remarks

(i) Prof. Abu Nasser MohammadAbduz Zaher

Chairman Representative of Ibn Sina Trust,Ibn Sina Pharmaceutical Ind. Ltd,Manarat Trust & Fouad AbdulHameed Al-Khateeb Foundation.

(ii) Jb. Yousif Abdullah Al Rajhi Vice Chairman

Representative of Al-Rajhi Co. forIndustry & Trade, Riyadh, K.S.A

ForeignDirector

(iii) Moulana Zainul Abedin Vice Chairman Representative of BangladeshMasjid Mission

(iv) Jb. Mominul Islam Patwary Director Maruf FoundationRepresentative Director

(v) Jb. Kazi Harun-ar- Rashed Director Not applicable

(vi) Engr. Md. Eskander Ali Khan Director KEARI Limited & Diganta MediaCorporation Limited

(vii) Jb. Md. Jahangir Miah Director ICB Asset Management Co. Ltd.Representative Director

(viii) Dr. Abdulhameed Fouad Al-Khateeb

Director Not applicable ForeignDirector

(ix) Jb. Wasim Ahmed Director Islamic Development Bank, EquityOperations, Representative Director

ForeignDirector

(x) Dr. A .K .M. Sadrul Islam Director Bangladesh Islamic CentreRepresentative Director

(xi) Jb. Md. Shamsul Huda, FCA Director Partner - M/s. Huda Hossain & Co.Chartered Accountants &Publisher of The Daily Naya Diganta.

(xii) Jb.Ahmed Mohammed Thani Director Kuwit Awqaf Public FoundationManager of Investment Department,Representative Director

ForeignDirector

(xiii) Dr. Md. Shafiqur Rahman Director i) Ma Moni Hospital Pvt .Ltd.Kumarpara, Sylhetii) Sylhet Trade Centre,

Chalibander, Sylhetiii) Womens Medical College,Mirboxtola , Sylhet

(xiv) Jb. M. Fariduddin Ahmed ManagingDirector & Ex -OfficioDirector

Not applicable

5.2 Related Party Transactions


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(ii) Fuad Al-KhateebHospital

31.80 Prof. Abu NasserMohammad Abduz Zaher( Chairman)

Member,Board ofDirectors

HPSM(Project)

- do-

(iii)Ibn Sina Trust 425.23

(i) Prof. Abu NasserMohammad Abduz Zaher(Chairman)(ii) Dr. A.K.M.Sadrul. Islam(Director)

Member &GuarantorMember

Purchaseof House,BMRE &Import ofMachinery

- do-

(iv) Mrs. ShahanaraBegum (Wife)

2.55 Engr. Md. Eskander Ali Khan(Director)

Husband HPSM - do-

(v) MarufFoundation

1.92 Janab Mominul Islam Patwary(Director)

RepresentativeDirector

Housing - do-

(vi) Manarat Trust,Dhaka

50.00 Prof. Abu NasserMohammad Abduz Zaher(Chairman)

Convenor,AcademicCommittee(Guarantor)

Establish-ment ofPrivateUniversity

- do-

(vii) Mrs. SaidaAkhter

2.67 Janab Md. Shamsul Huda,FCA (Director)

Husband FlatPurchase - do-

(viii) Islami Bank

Hospital

1.03 (i) Prof. Abu Nasser

Mohammad Abduz Zaher(Chairman)

(ii) Janab Mominul IslamPatwary (Director)

(iii) Janab Md. Shamsul Huda,FCA (Director)

Chairman

Member-Administration

Member

Service

Sector(ForHospital)

- do-


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

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

Other disclosures are not applicable as required by BRPD Circular No. 14 dated June 25, 2003.

6.0 Creation of Reserve and Others

6.1 Statutory Reserve

As per section 24 of the Bank Company Act 1991, 20% of the net profit is transferred to Statutory Reserve everyyear.

6.2 Share Premium

Share premium arose from sale of some un-subscribed Right Share- 1996 at Market price and can be utilised asper section 57 of the Companies Act 1994.

6.3 Exchange Equalization Account

This represents the amount arose from exchange gain due to de-valuation of Bangladesh Takawith foreigncurrencies up to 30.03.2003 and the system has been discontinued from 31.03.2003. The amount is accounted

for as per instruction issued by the Central Bank (Bangladesh Bank) from time to time.

6.4 Assets Revaluation Reserves

This represents the difference between the book value and the re-valued amount of Premises (Land and Building)of the Bank as assessed by professional valuers in the year 2000, 2002, 2003, 2004, 2005 and 2006 as perguide line issued by Bangladesh Bank, which was reviewed by the External Auditors. This Reserve is notdistributable. However, to calculate Capital Adequacy Ratio, 50% of the same is considered as a component ofsupplementary capital as per Bangladesh Bank BCD Circular Letter No. 12 & 18 dated April 20, 1993 & June 15,

1993 respectively and BRPD Circular No. 10 dated November 25, 2002.

6.5 Revaluation Reserves of Securities

Investment in Shares of Bangladesh Shipping Corporation held for maintaining Statutory Liquidity Reserve (SLR)is accounted for in accordance with BRPD Circular No.15 dated 31.10.2005. Gain/(Loss) arising from valuation ofsecurities (Bangladesh Shipping Corporation-Held to Maturity) on Marking to Market basis and full amount hasbeen taken as a component of Equity and disclosed in the Statement of Changes in Equity. However, as perBangladesh Bank BRPD Circular No-03 dated 12.03.2008 up to 50% of the same will have to be taken as acomponent of Supplementary Capital.

6.6Risk Management

The risk of Islami Bank Bangladesh Limited is defined as the possibility of losses, financial or otherwise. The RiskManagement of the Bank covers 6 (Six) Core Risk Areas of banking industries i.e. Investment Risk Management,Foreign Exchange Risk Management, Asset - Liability Management, Prevention of Money LaunderingE t bli h t f I t l C t l d C li d I f ti & C i ti T h l Ri k


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unwillingness of the counter party or decline in his / her financial condition. Therefore, Banks Investment riskmanagement activities have been designed to address all these issues.

6.6.2 Foreign Exchange Risk Management

Foreign Exchange risk is defined as the potential change in earnings arising due to change in market price. Theforeign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customersagainst underline L/C commitments and other remittance requirements.

Treasury Department independently conducts the transactions and the Back Office of Treasury is responsible forverification of the deals and passing of their entries in books of accounts. All foreign exchange transactions arerevalued at Bangladesh Bank rates at the month-end. All Nostro accounts are reconciled on monthly basis andthe Management for its settlement reviews outstanding entry beyond 30 days.

6.6.3 Asset Liability Management

The Asset Liability Committee (ALCO) of the Bank monitors Balance Sheet risk and liquidity risks of the Bank.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 requirement ofthe bank, the maturity of assets and liabilities, deposit and investment pricing strategy and the liquiditycontingency plan. The primary objective of the ALCO is to monitor and avert significant volatility in Net InvestmentIncome (NII), investment value and exchange earnings.

6.6.4 Prevention of Money Laundering

Money laundering risk is defined as the loss of reputation and expenses incurred as penalty for being negligent inprevention of money laundering. For mitigating the risks the Bank has a designated Chief Compliance Officer atHead Office and Compliance Officers at Zonal Offices and Branches, who independently review the transactionsof the accounts to verity suspicious transactions. Manuals for prevention of money laundering have beendeveloped and Transaction profile has been introduced in the Bank. Training has been continuously given to allcategories of officers and executives for developing awareness and skill for identifying suspicious activities.

6.6.5 Internal Control and Compliance

Operational loss may arise from error and fraud due to lack of internal control and compliance. Managementthrough internal control and compliance Wing, controls operational procedure of the Bank through three Divisions,

namely 1. Audit & Inspection Division 2. Compliance Division and 3. Monitoring Division.

Internal Audit and Inspection Division undertakes periodical and special audit of the Branches and Departments atHead Office for review of operational effectiveness and internal/external compliance requirements. The Boards

Audit Committee subsequently reviews the lapses identified by Audit and Inspection Division.

Compliance Division handles Regulatory issues of Bangladesh Bank and other Regulatory bodies and submittingRegulatory issues status position quarterly to the Audit Committee of the Bank as per BRPD Circular No.12dated 23-12-2002.

Monitoring Division assess the risk on the functional areas of the Branches as described in the DepartmentalControl Function Checklist (DCFCL) and monitors the Internal Control Functions through the Quarterly OperationsReport (QOR) and checks the Completion of Investment Documentation.

6.6.6 Information and Communication Technology Risk Management

The Bank has adequately addressed Information and Communication Technology (ICT) Risk Management It is


17/37


Permission Policy etc. to abide by and adhere to what is laid down in the policy. In order to secure networkresources from public network, the Bank has introduced Virtual Private Network (VPN), Access Control List(ACL), IP filtering and TCP/UDP service blocking through Router and firewall devices. It has already centralizedthe administrative control to access the Network, mailing system and access to internet under this policy.

6.7 Credit Rating Report

Credit 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 and LocalCorporation/ Sponsors, Bangladesh) was engaged by the Bank.

The CRISL submitted its report on the financial year 2002, 2003, 2004, 2005 & 2006 and assigned A+ (Adequate

Safety) for long term rating scale for 2002 & 2003, and upgraded the same to AA- (High Safety) for long termrating scale for 2004 & 2005 and further upgraded the same to AA (High safety) for long-term rating scale in 2006.

Financial Institutions rated in this category are adjudged to be of high quality, offer higher safety and have highcredit quality. This level of rating indicates a corporate entity with a sound credit profile and without significantproblems. Risks are modest and may vary slightly from time to time because of economic conditions.

CRISL assigned ST-2 (High Grade) for short term rating scale for 2002 & 2003, and upgraded the same to ST-1

(Highest Grade) for 2004, 2005 & 2006.

Financial Institutions rated in this category means having highest certainty of timely payment. Short-term liquidityincluding internal fund generation is very strong and access to alternative sources of funds is outstanding, Safetyis almost like risk free Government short-term obligations.


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Amount in Taka

as at December 31,

2007 2006

7.0 Cash

7.1 Cash in hand

i) In Local Currency 2,877,166,672 1,390,177,173

ii) In Foreign Currency 29,974,365 19,972,690

Sub-Total (a) 2,907,141,037 1,410,149,863

Balance with Bangladesh Bank & its Agent Bank (Sonali Bank Ltd.) (Note-7.2)

Balance with Bangladesh Bank 12,978,670,536 21,632,997,429

Balance with Sonali Bank Ltd 1,190,643,589 475,802,299

Sub-Total (b) 14,169,314,125 22,108,799,728

Grand Total (a + b) 17,076,455,162 23,518,949,591

7.2 Balance with Bangladesh Bank & its Agent Bank (Sonali Bank Ltd.)

Balance with Bangladesh Bank

In Local Currency 9,979,984,944 20,319,446,838

In Foreign Currency 2,998,685,592 1,313,550,591

Sub-Total (a) 12,978,670,536 21,632,997,429

Balance with Sonali Bank Ltd

In Local Currency (b) 1,190,643,589 475,802,299

Grand Total (a+b) 14,169,314,125 22,108,799,728

7.3Cash Reserve Requirement (CRR) and Statutory Liquidity Requirement (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 and as per Bangladesh Bank's Letter No. BCD (P) 744 (23)/ 5 dated January 03, 1987.

With effect from October 01, 2005 CRR is 5% as per guidelines given by Bangladesh Bank and the Bank maintained CRR abovethe minimum requirement throughout the year.

SLR of the Bank is 10% as like as other Islamic Banks as per Bangladesh Bank Letter No. BCD (P) 744 (23)/ 5 dated January 03,1987, as against 18% of Conventional Banks and the Bank maintained SLR above the requirement throughout the year as follows:

7.3.1 Cash Reserve Requirement (CRR): 5%

Required Reserve 8,086,481,500 6,296,851,150

Actual Reserve held with Bangladesh Bank 9,979,984,944 20,319,446,838

Surplus / (Deficit) 1,893,503,444 14,022,595,688

Maintained (%) 6.17% 16.13%

7.3.2 Statutory Liquidity Requirement (SLR): 10%

Required Reserve 16,172,963,000 12,593,702,300Actual Reserve maintained 34,405,719,570 25,725,399,000

Surplus / (Deficit) 18,232,756,570 13,131,696,700


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Amount in Takaas at December 31,

2007 2006

8.0 Balance with other Banks & Financial InstitutionsIn Bangladesh

i) In Current Account 1,069,079,772 442,107,120ii) In Mudaraba Savings & MTDR Account with

Other Islamic Banks / Financial Institutions 1,284,774,578 317,210,183

Sub Total 2,353,854,350 759,317,303Outside Bangladesh Note (8.1) 1,658,474,130 569,810,331

Grand Total 4,012,328,480 1,329,127,634

IBBL had a liability of Tk. 8.18 million payable to the different units of BCCI world wide as against an aggregate amount of Tk. 6.10 millionis receivable from the same group as at December 31, 2007 resulting to a net payable of Tk. 2.08 million. In view of present situation ofBCCI, adequate provision has been made against net payable for the same.

8.1 Balance with other Banks & Financial Institutions Outside Bangladesh

Foreign Currency Amount in F.C Exchange Rate 2007 2006

US Dollar 20,130,262.06 68.5728 1,380,388,434 450,545,420Great Britain Pound 864,530.38 136.6999 118,181,216 38,621,521Saudi Riyal 28,704.29 18.2758 524,594 550,651EURO 1,384,145.24 100.8980 139,657,487 74,146,372

YEN 32,368,947.00 0.6093 19,722,399 5,946,367

Total 1,658,474,130 569,810,331

8.2 Maturity - wise Classificationi) Repayable on Demand 3,860,298,768 1,218,146,004

With a residual maturity ofii) Not more than 3 months 112,029,712 25,161,630iii) Over 3 months but not more than 1 year 40,000,000 85,820,000iv) Over 1 year but not more than 5 yearsv) More than 5 years - -

Total 4,012,328,480 1,329,127,634

9.0 Investments in Shares & Securities

No. of Face Value as Value as RemarksShare

at Dec. 31,2007

at Dec. 31, 2007

a) Government Taka Takai) Bangladesh Shipping Corporation 200,000 20,000,000 327,950,000 Quotedii) Karmasangsthan Bank 100,000 10,000,000 10,000,000 Un-Quotediii) Central Depository Bangladesh Ltd. 4 4,000,000 4,000,000 Un-Quoted

iv) Sub total 300,004 34,000,000 341,950,000v) Bangladesh Government Islamic

Investment Bond (Islamic Bond) 5 20,000,000,000 20,000,000,000

Total (iv + v) 300,009 20,034,000,000 20,341,950,000

b) OthersBangladesh Aroma Tea Ltd.* 1,570 157,000 157,000 De-listedMembership of Dhaka StockExchange Ltd. 1 2,000 23,603,399 Un - Quoted

Total 1,571 159,000 23,760,399

Current Year Grand Total (a+b) 301,580 20,034,159,000 20,365,710,399

Prior Year Grand Total 301 576 3 534 159 000 3 557 760 399


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2007 2006

9.2 Maturity Grouping of Investments in Shares & Securities

i) Repayable on Demand - -

With a residual maturity of

ii) Not more than 3 months 3,000,000,000 -iii) Over 3 months but not more than 1 year 17,000,000,000 3,500,000,000iv) Over 1 year but not more than 5 years - -

v) More than 5 years 365,710,399 57,760,399

Total 20,365,710,399 3,557,760,399

10.0 Investments

10.1 Maturity-wise Classification

i) Repayable on Demand - -With a residual maturity of

ii) Not more than 3 months 4,347,618,288 35,435,878,082iii) Over 3 months but not more than 1 year 50,722,213,358 40,705,450,096iv) Over 1 year but not more than 5 years 50,722,213,358 24,813,782,433v) More than 5 years 39,128,564,591 12,619,960,518

Total 144,920,609,595 113,575,071,129

10.2.1 Country-wise Classification of Investments

i) Within BangladeshGeographical Location wise classification of Investments

a. In Rural Area 11,386,885,036 9,862,235,033

b. In Urban Area 133,533,724,559 103,712,836,096

Sub total (a+b) 144,920,609,595 113,575,071,129

ii) Outside Bangladesh - -

Total (i + ii) 144,920,609,595 113,575,071,129

10.2.2 Division wise Classification of Investments

Name of the Division

i) Dhaka Division 91,473,695,824 72,637,666,426

ii) Chittagong Division 25,609,818,224 19,020,120,156

iii) Khulna Division 12,605,186,181 8,336,566,722iv) Rajshahi Division 11,572,609,603 10,129,510,794v) Barisal Division 1,077,373,472 990,277,259vi) Sylhet Division 2,581,926,291 2,460,929,772

Total 144,920,609,595 113,575,071,129

10 2 3 Mode - wise Investment


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Howladar Yunus & Co. Aziz Halim Khair ChoudhuryChartered Accountants Chartered Accountants Amount in Taka

as at December 31,

2007 2006

10.3 Group wise Classification of Investments

i) Investment to Directors 515,360,000 459,354,000

ii) Investment to Chief Executive & Other Senior Executives 244,920,000 242,029,000

iii) Details of Large Investments

Number of clients with amount of outstanding investments exceeding 10% of total capital of the Bank & classified amount there on aregiven below : Total capital of the Bank was Taka 15,765.94 Million as at 31 December 2007 (Tk 10,435.96 Million in 2006)

Number of Clients 21 32

Amount of Investments 37,413,700,00042,245,200,0

00

Classified amount thereon Nil Nil

Measures taken for recovery Not ApplicableNot

Applicable

Outstanding (TK. million)Total (Taka

in

Total

(Taka inSl.No.

Name of ClientsSanctioned Limit Funded Non-funded Million) Million)

1 Abdul Monem Ltd 2,600.00 813.90 - 813.90 916.90

2 Utah Group 1,687.90 788.70 209.90 998.60 880.20

3 Nassa Group 3,407.00 893.90 1,739.90 2633.80 1,887.90

4 Abdul Monem Sugar Refinery Ltd 2,830.00 1,769.60 444.20 2213.80 1,737.70

5 AA Synthetic Fibers Ltd 2,030.00 1,533.30 5.50 1538.80 1,758.50

6 Nitol Motors Ltd 1,594.00 1,407.00 1.40 1408.40 1,507.70

7 R. M. Group 1,640.70 1,623.60 - 1623.60 1,510.708 Aman Group 3,328.30 2,217.60 660.30 2877.90 1,458.70

9 R. K. Spinning Mills Ltd 1,618.00 1,661.00 57.70 1718.70 1,410.60

10 Rahim Steel Mills Co.(Pvt) Ltd 1,806.00 144.10 1,019.70 1163.80 413.30

11 Ekhlus Spinning Mills Ltd 1,720.00 918.20 220.70 1138.90 347.00

12 The Delta Spinning Mills Ltd 2,120.00 1,836.40 600.60 2437.00 1,140.70

13 BRB Cables Industries Ltd 1,721.10 1,066.40 143.80 1210.20 1,299.50

14 MRS Industries Ltd 3,115.70 1,776.30 121.00 1897.30 1,624.50

15 S. Alam Super Edible Oil Ltd. 1,701.30 1,392.10 1,026.00 2418.10 1,414.50

16 Zaber & Zubair Fabrics Ltd. 3,658.00 1,682.40 1,292.80 2975.20 -

17 Zaber Spinning Mills Ltd. 1,760.00 1,660.20 92.90 1753.10 -18 Robiul Islam 2,560.00 1,408.30 1,023.00 2431.30 -

19 M/s Farzana Oil Refineries 4,100.00 131.30 - 131.30 1,530.00

20 Asia Composite Mills Ltd. 1,756.20 968.30 582.00 1550.30 -

21Sheikh Brothers & its sisterConcerns

2,400.00 1,316.90 1,162.80 2479.70 1,350.10

22 M/sYonus Plastic Ind. Ltd 1,212.00 - - 1,019.20


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2007 2006

Outstanding (Tk. million) Total ( Taka in Total ( Taka inSl.No.

Name of Clients SanctionedLimit

FundedNon-

fundedMillion) Million)

28 M/s Abul Khair Steel Prod. Ltd 1,510.00 - - - 1,536.5029 Badsha Textile Ltd 1,300.00 - - - 1,519.6030 Matin Spinning Mills 1,390.00 - - - 1,475.2031 Tania Group 1,321.20 - - - 1,509.7032 Youth Group 2,354.00 - - - 1,990.3033 Noman Group 2,470.40 - - - 1,896.9034 M/s Otto Spinning Mills Ltd 1,270.00 - - - 1,199.00

35 Delta Composite Knitting Ind.Ltd. 1,225.00 - - - 1,433.10

36 BD Group 1,106.40 - - - 821.80

Total 27,009.50 10,404.20 37,413.70 42,245.20

Outstanding balances relating to borrowers from serial no. 22 to 36 have not been shown under the large investments due to increase ofCapital from 10,435.96 Million to 15,765.94 Million.

iv) Industry -wise Classification of InvestmentsCategory of Industry

a) Garments 8,694,300,000 5,752,291,000b) Textiles 35,414,970,000 27,718,043,000

c) Agro based Industry 9,959,900,000 9,645,377,000d) Other Industry 24,718,980,000 19,518,282,000

Total 78,788,150,000 62,633,993,000

10.4 Classification of Status - wise InvestmentsUnclassified 140,674,589,595 109,677,372,129

i) Standard including (Staff Investment) 138,534,550,595 108,449,062,129ii) Special Mention Account (SMA) 2,140,039,000 1,228,310,000

Classified 4,246,020,000 3,897,699,000

i) Substandard 1,261,251,000 898,121,000ii) Doubtful 331,085,000 515,084,000iii) Bad/ Loss 2,653,684,000 2,484,494,000

Total 144,920,609,595 113,575,071,129

10.5 Pledged Collaterals against InvestmentsLand & Building 223,457,200,000 182,460,820,000

MTDR, Securities, etc. 50,913,810,000 50,882,780,000Share Certificates - -

Total 274,371,010,000 233,343,600,000

10.6 Particulars of Investments

i) Investments considered good in respect of which the Bank is fully secured 140,645,796,840 110,036,294,782ii) Investments considered good in respect of which the Bank holds debtors'

personal security - -iii) Investments considered good and secured by personal security of one or


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2007 2006

v) Investments due by directors or employees of the Bank or any of them eitherseverally or jointly with any other persons 1,872,234,681 1,457,298,290vi)

Investments due by directors or employees of companies or firms in which thedirectors or employees of the Bank are interested as Directors, partners, managing

agents or in the case of private companies as members509,979,000 1,034,240,000

vii) Total amount of Investments, including temporary investments, made any time duringthe year to directors or employees of the Bank or any of them either severally or

jointly with any other persons 1,872,234,681 1,457,298,290viii)

Total amount of Investments, including temporary investments granted during theyear to the Companies or firms in which the directors of the Bank are interested as

directors, partners, managing agents or, in the case of private companies as members 509,979,000 1,034,240,000ix) Investments due from other Banks - -

x) Classified Investments:

a) Classified Investments on which profit has not been charged 2,653,684,000 2,484,494,000b) Provision on classified Investments 1,304,775,000 1,320,920,000c) Provision kept against Investments Classified as bad debts 1,129,525,000 1,103,940,000d) Profit creditable to Profit Rent /Suspense Account 619,387,646 605,332,000

xi) Particulars of Written Off Investments

a) 3,575,335,496 3,441,654,848Cumulative amount of Investment Written Off since inception to 31st December lastyear

b) Amount of Investment Written Off during this year 223,600,000 133,680,648

c) Total amount Written Off (a + b) 3,798,935,496 3,575,335,496

d) Amount recovered against such Written Off Investment up to this year * 754,334,496 607,994,691e) 3,798,935,496 3,575,335,496Amount of Investment written off against which suit has been filed to recover the

same* During the year of 2007, Tk.146,339,805/-was recoverd from Written -Off Investments , out of which a sum of Tk.83,259,576/- was

waived & remaining Tk. 63,080,229/- was recovered from the clients in cash.

11.0 Bills Purchasedi) Payable in Bangladesh 8,877,610,709 5,443,948,664ii) Payable outside Bangladesh 2,161,971,536 1,427,055,214

Total 11,039,582,245 6,871,003,878

11.1 Maturity-wise Classification of Bills Purchased

Payable within 1 month 544,358,099 348,299,736Over 1 month but less than 3 months 7,621,013,384 4,907,859,913Over 3 months but less than 6 months 1,633,074,297 1,139,890,0446 months or more 1,241,136,465 474,954,185

Total 11,039,582,245 6,871,003,878

12.0 Fixed Assets including PremisesCost / Revaluation

i) Land 1,458,984,773 1,404,841,423


24/37


As per Bangladesh Bank BCD Circular Letter No. 12 & 18 dated April 20, 1993 & June 15, 1993 and BRPD Circular No.10 datedNovember 25, 2002, the Bank revalued its Land and Building by the professional valuers for the year 2000, 2002, 2003, 2004, 2005& 2006 respectively which was required by the Statutory Auditors. Bank did not revalue Land & Building during the year 2007.


2007 2006

13.0 Other Assetsi) Stock of Stationery in Hand 41,776,528 35,716,124ii) Stamps in Hand 2,326,669 2,336,983iii) Advance Rent Paid 114,240,871 99,816,911iv) Security Deposits Paid Account 5,168,121 5,120,578v) Suspense Account (Advance against Expenses) 341,657,881 351,160,900vi) D. D. Paid without Advice 31,118,359 355,795,980vii) IB General Account (Note -13.2) - 3,288,291,155viii) Accrued Income 202,309,999 -ix) Deferred Revenue Expenses 199,000 -x) F.C. Fund Purchased 261,215,978 408,979,114

Total 1,000,013,406 4,547,217,745

13.1 Classification Status of Other Assetsi) Unclassified 963,139,667 4,509,254,360ii) Doubtful 10,881,835 13,924,876

iii) Bad/ Loss 25,991,904 24,038,509Total 1,000,013,406 4,547,217,745

13.2 IB General Account (Un-reconciled Entries of Inter Branch Transactions in Bangladesh)

Age Number Amount in Taka Amount in Takai) Upto 3 months 27,229 - 3,290,256,819ii) Over 3 months but not more than 6 months 489 - (1,965,664)iii) More than 6 months - - -

Total 27,718 - 3,288,291,155

14.0 Deposits & Other Accounts14.1 Maturity Grouping of Other Deposits

are as underi) Re-payable on Demand 1,767,587,001 890,283,048

With a residual maturity ofii) Re- payable within 1 month 6,213,425,904 39,996,158,647iii) Over 1 month but within 6 months 34,920,774,482 46,415,974,325iv) Over 6 months but not more than 1 year 34,920,774,483 9,486,671,109v) Over 1 year but not more than 5 years 48,805,939,575 25,000,183,783vi) Over 5 years but within 10 years 39,300,288,724 10,478,557,096

vii) Unclaimed Deposits for 10 years or more 27,154,918 14,393,816Sub-total 165,955,945,087 132,282,221,824

14.2 Maturity Grouping of Inter- Bank Depositsare as under

i) Re-payable on Demand - -With a residual maturity of

ii) Re- payable within 1 month 369 341 205 137 181 700


25/37

Howladar Yunus & Co. Aziz Halim Khair ChoudhuryChartered Accountants Chartered Accountants Amount in Taka

as at December 31,

2007 2006

14.3 Sector Wise beak up of Deposits and Other AccountsGovernment 553,581,000 127,314,000

Deposit Money Bank 369,341,205 137,181,700 Other Public 780,630,000 515,615,000 Foreign Currency 914,865,178 837,017,128 Private 163,706,868,909 130,802,275,696

Total 166,325,286,292 132,419,403,524

15.0 Current & Other Accountsi) Al Wadeeah Current Deposits 9,452,951,785 5,483,250,369

ii) Convertible Taka Account 151,708 151,708iii) Non Resident Investors Taka Account 50,670,830 1,837,792,174iv) Non Resident Dollar Account 162,011,755 62,711,155v) Non Resident Taka Account 965,216,325 2,400,000vi) Foreign Currency Account (US Dollar) 347,470,089 278,331,402vii) Foreign Currency Account (GB Pound Sterling) 5,958,061 2,645,532viii) Foreign Currency Account (EURO) 9,718,114 12,216,431ix) Foreign Currency Account (Riyal) 700,595 -x) Private Foreign Currency Account 441,493 469,493

xi) Property Development Account 2,541,785 2,541,785xii) Security Deposit - Investment 6,979,010 16,834,721xiii) Security Deposit - L/C (Wes) 633,070,529 582,507,202xiv) Security Deposit - Foreign L/C General 1,439,501,093 1,053,631,965xv) Security Deposit - Back to Back L/C (Inland) 17,154,339 34,353,255xvi) Security Deposit - Bank Guarantee 304,085,600 189,023,588xvii) Security Deposit - NRD 23,518,712 18,480,000xviii) Security Deposits - FBN 208,808,736 113,225,791xix) Security Deposit - IBP 155,814,505 92,104,931

xx) Security Deposit - Inland L/C 1,367,124,633 703,639,346xxi) Profit Payable 3,479,575,682 3,016,081,370xxii) Sundry Deposits 531,686,296 513,733,688

Total 19,165,151,675 14,016,125,906

16.0 Bills Payablei) Payment Order 1,748,806,807 880,245,449ii) T.T. Payable 18,780,194 10,037,599

Total 1,767,587,001 890,283,048

17.0 Other Mudaraba Depositsi) Mudaraba Special Notice Deposits 2,390,168,611 1,508,730,275ii) Mudaraba Hajj Deposits 553,094,521 459,625,345iii) Mudaraba Savings Bond 11,735,341,769 10,057,906,682iv) Mudaraba Special Savings (Pension) Deposits 30,057,827,410 21,831,943,520v) Mudaraba Monthly Profit Deposit Scheme 6,780,397,117 5,324,765,193vi) Mudaraba Foreign Currency Deposits 173,676,860 205,513,510


26/37



2007 2006

18.0 Mudaraba Perpetual Bond 3,000,000,000 -

Islami Bank Bangladesh Limited issued Mudaraba Perpetual Bond (MPB) under the Mudaraba Principles of Islamic Shariah as perapproval of Bangladesh Bank (Central Bank) as well as Securities and Exchange Commission (SEC). The MPB was listed with DhakaStock Exchange Ltd & Chittagong Stock Exchange Ltd and trading of the same started from 25th November 2007.

19.0 Other Liabilities

i)Provision for Classified & Unclassified Investments and Off- Balance Sheet

Items (Note-19.1, 19.2 & 19.3)4,000,000,000 3,032,735,316

ii) Current Tax (Note-19.4.1) 1,013,638,257 1,224,148,422iii) Deferred Tax (Note-19.4.2) 112,459,677 81,459,677

iv) Provision for Other Assets 42,522,934 42,522,934v) Zakat Payable 100,200,368 87,894,738vi) Dividend Payable 12,555,205 18,382,274vii) Foreign Currency Deposit - L/C Cover A/C 16,947,962 14,926,826viii) Foreign Currency Held against Back to Back L/C 2,525,931,167 1,642,750,426ix) Foreign Correspondents Charges 4,855,094 4,713,931x) Incentive Bonus Payable 332,665,636 290,834,505xi) Valuation Adjustments 837,636,137 417,855,302xii) Foreign Currency Fund Held 170,397,699 236,780,994xiii) Payable against Expenditure 120,814,691 100,971,251xiv) Clearing Adjustment 18,780,291 24,205,106

xv) Transfer Delivery 361,485 559,508xvi) Profit/ Rent Compensation Suspense Account (Note - 19.5) 619,387,646 605,443,250xvii) IB General Account (Note - 19.6) 266,568,572 -xviii) Others ( Note - 19.7) 4,350 20

Total 10,195,727,171 7,826,184,480

19.1 Provision for Classified Investmentsi) Provision held at the beginning of the year 1,463,775,316 1,860,883,866ii) Fully provided Investment written off/ transferred (414,270,968) (289,851,634)

Provision against recoveries of Classified Investment (170,050,000) (190,358,000)Provision made during the year 823,672,652 83,101,084

iii) Net charge to Profit & Loss Account 653,622,652 (107,256,916)Total Provision held at the end of the year 1,703,127,000 1,463,775,316

19.2 General Provision on Unclassified Investment

i) Provision held at the beginning of the year 1,568,960,000 1,060,171,000ii) Addition during the year 436,757,000 508,789,000

iii) Balance at the end of the year 2,005,717,000 1,568,960,000

Provision for Classified & Unclassified Investments (19.1 + 19.2) 3,708,844,000 3,032,735,316

19.3 General Provision on Off-Balance Sheet Items

Provision held as on 1st January - -Add. Provision made during the year 291,156,000 -

Provision held as on 31st December 291,156,000 -

Total Provision (19.1+19.2+19.3) 4,000,000,000 3,032,735,316

l d i li h i h dh


27/37


Provision for Tax for the year ended on 31.12.2007 has been made as per prevailing rates applicable on the net Profit and withoutconsidering income tax on Provision made against bad and doubtful investments and Off-balance sheet items, and other add backs,(if any). Income tax has not been considered on the provision made against bad & doubtful investments and Off- Balance SheetItems during the year 2007 with positive hope based on persuasion made with the government that it will be exempted from tax.Estimated Tax on such provision and the amount involved in the Reference Applications / Appeals have been shown as Contingent

Liabilities as at December 31, 2007 Income Tax Assessment has been completed at the Deputy Commissioner level as well asIncome Tax Tribunal level up to the Accounting year 2004. Income Tax Assessment for the Accounting year 2005 has beencompleted at theCommissioner (Appeals) level and assessment for the accounting year 2006 is lying with the Deputy Commissioner of Taxes level.Reference Applications/ Appeals have been filed with the High Court/Supreme Court for the Accounting years 1990, 1995, 1996,1997, 1998, 1999, 2000, 2001, 2002, 2003 & 2004 on Zakat and other issues. Review of appeal filed against judgment of appellateDivision of the Supreme Court for disallowance of Zakat for the years of 1990, 1995 & 1996disallowance of Zakat for the years of1990, 1995 & 1996.


2007 2006

19.4.2 Deferred Tax Liability

Opening balance 81,459,677 63,509,570Add: Provision made during the year 31,000,000 17,950,107

Closing balance 112,459,677 81,459,677

Provision for Deferred Tax has been made on all temporary differences between the Tax base and the carrying amounts for financialreporting purpose as per Bangladesh Accounting Standard 12. Tax base represents the written down value of Assets with adjustmentused for tax purpose. Tax rate prevailing at the Balance Sheet date is used to determine Deferred Tax.

19.5 Profit/ Rent/ Compensation Suspense Account

i) Balance at the beginning of the year 605,443,250 542,826,347ii) Amount transferred to Suspense Account during the year 367,522,618 340,684,522iii) Amount recovered from Suspense Account during the year (330,814,399) (215,586,153)iv) Amount written-off / waived during the year (22,763,823) (62,481,466)

Balance at the end of the year 619,387,646 605,443,250

19.6 IB General Account (Un-reconciled Entries of Inter Branch Transactions in Bangladesh)Age Number Amount in Taka Amount in Taka

i) Upto 3 months 121,771 111,551,499 -ii) Over 3 months but not more than 6 months 1,009 155,017,073 -iii) More than 6 months - - -

Total 122,780 266,568,572 -

19.7 Othersi) Provident Fund Collection Account 660 -ii) Benevolent Fund Collection 170 20iii) Social Security Fund Collection 3,520 -

Total 4,350 20

20.0 Share Capital20.1 Authorized Capital

The Authorized Capital of the Bank is Tk.5,000,000,000 divided into 5,000,000 Ordinary Shares of Tk.1,000 each.20.2 Paid up Capital

The Shareholders of the Bank in the 24thAnnual General Meeting held on September 30, 2007 declared 10% Stock Dividend

(Bonus Share) for the year 2006, thus Paid - up Capital of the Bank has been increased from Tk.3,456.00 million to Tk.3,801.60

million during the year 2007 ; as detailed below:3,456,000 Ordinary Shares of Tk.1,000 each 3,456,000,000345,600 Ordinary Shares of Tk.1,000 each issued as Bonus Share 345,600,000

Total 3,801,600,000

H l d Y & C A i H li Kh i Ch dh


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Amount in Taka

as at December 31,

2007 2006

ParticularsNo. of Shares as on 31

Dec. 2007% to Total

(i) Sponsors/ Promoters 1,504,922 39.59% 1,504,922,000 1,372,552,000(ii) General Public 2,296,629 60.41% 2,296,629,000 2,083,403,000(iii) Government of thePeople'sRepublic of Bangladesh** 49 0.00% 49,000 45,000

Sub Total (a) 3,801,600 100.00% 3,801,600,000 3,456,000,000

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

b) Break up of Share holding and percentage thereofNo. of Total Holdings/ Percentage

Holdings Shareholder No. of Shares ( % )

Less than 500 Shares 26,055 550,872 14.49%500 to 5,000 Shares 385 480,491 12.64%5,001 to 10,000 Shares 16 114,084 3.00%10,001 to 20,000 Shares 11 141,123 3.71%20,001 to 30,000 Shares 5 117,771 3.10%30,001 to 40,000 Shares 4 142,685 3.75%40,001 to 50,000 Shares 2 92,258 2.43%50,001 to 100,000 Shares 2 119,507 3.14%100,001 Shares & above 8 2,042,809 53.74%

Total 26,488 3,801,600 100.00%

20.3 Capital (Equity) Adequacy RatioThe Capital Adequacy Ratio of the Bank has been calculated as per BRPD Circular No. 10 dated November 25, 2002 which wassubsequently amended as per BRPD Circular No.03 dated May 09, 2004 & 05 dated May 14, 2007 issued by Bangladesh Bank.

2007 2006(in Million Taka) (in Million Taka)

Total Assets including Off-Balance Sheet Items 250,634.48 188,115.27

Total Risk Weighted Assets 140,971.58 110,664.24Required Equity (based on total Risk Weighted Assets 10.00% in 2007 & 9.00% in2006)

14,097.16 9,959.78

Actual Equity

i ) Core Capital 9,219.02 7,688.36ii) Supplementary Capital 6,546.92 2,747.60

Total Equity (i + ii) 15,765.94 10,435.96

Surplus Equity 1,668.78 476.18

A) Core Capital

i) Paid Up Capital 3,801.60 3,456.00ii) Share Premium 1.99 1.99iii) Statutory Reserve 3,026.50 2,270.33iv) General Reserve 140.41 419.61v) Investment Loss Offsetting Reserve 644.43 644.43vi) Dividend Equalization Account 32.00 32.00vii) Retained Earnings including proposed dividend 1,572.09 864.00

Sub Total (a) 9,219.02 7,688.36


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Amount in TakaYear to December 31,

2007 2006

24.0 Investment Income

Income from General InvestmentBai Murabaha 8,294,092,643 6,461,007,192Musharaka 5,548,305 2,431,996Bai Muajjal 901,405,684 736,465,938Hire Purchase under Shirkatul Melk 4,702,763,409 3,326,138,522Bai Salam 84,488,418 71,896,466Foreign Bill Negotiation 244,485,974 188,110,522Others 292,695,323 296,233,721

Sub Total (i) 14,525,479,756 11,082,284,357

Profit on Deposits with Islamic Banks(a) In Bangladesh 25,283,884 57,897,418(b) Outside Bangladesh 21,421,509 17,875,417

Sub Total (ii) 46,705,393 75,772,835

Grand Total (i + ii) 14,572,185,149 11,158,057,192

Investment Income includes Profit/ Rent Suspense of Tk. 254,480,930 realized during the year.

25.0 Profit paid on Depositsi) Profit paid on Mudaraba Savings Deposit 2,840,388,593 2,540,412,453ii) Profit paid on Mudaraba Term Deposit Account 2,339,679,310 1,836,365,934iii) Profit paid on other Mudaraba Deposits 4,194,634,746 3,596,764,143iv) Profit paid on Placement - 45,793,611v) Profit paid on Mudaraba Perpetual Bond (MPB) 35,884,932 -

Total 9,410,587,581 8,019,336,141

26.0 Income From Investments in Shares/ SecuritiesProfit/ Dividend Income from Shares/ Securities 284,002,533 137,375,574

27.0 Commission & Exchange Income

i) Commission Income 1,388,359,500 1,089,170,410ii) Exchange Income (27.01) 1,190,653,067 1,367,554,601

Total 2,579,012,567 2,456,725,011

27.1 Exchange IncomeGross Exchange gain 1,190,653,067 1,367,554,601Less: Exchange loss - -

Net Exchange gain 1,190,653,067 1,367,554,601

28.0 Other Operating Income

i) Rent on Locker 2,311,614 1,802,480ii) Telephone/ Trunk Call Charge recovered 32,274,088 29,649,652iii) Telex Charge recovered 59,596 5,482,639iv) P&T Charge recovered 38,176,181 55,959,471v) Legal Expenses recovered 3,355,345 2,444,265vi) E & TA Fees recovered 1,045,761 761,413vii) Income from ATM & SWIFT 56,704,939 37,710,137iii) I id t l Ch d 5 363 808 5 146 329

Howladar Yunus & Co Aziz Halim Khair Choudhury


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2007 2006

28.1 Income From Dealing Securities

Income from Dealing Securities N/A N/ALess: Loss from Dealing Securities

28.2 Income From Dealing Investment

Income from Dealing Investments N/A N/ALess: Loss from Dealing Investments

28.3 Income from Fluctuation

Income from Profit Fluctuation N/A N/ALess: Loss from Profit Fluctuation

29.0 Rent, Taxes, Insurances, Electricity, etc.

i) Rent, Rates and Taxes 62,884,211 50,502,367ii) Insurance 95,030,510 79,060,781iii) Electricity and Lighting 58,701,109 47,703,103

Total 216,615,830 177,266,251

30.0 Postage, Stamp, Telecommunication, etc.

i) Postage 27,248,281 24,250,556ii) Telegram & Telex 89,896 69,271iii) SWIFT Charges 13,271,384 11,144,767iv) Telephone 41,620,067 39,500,405v) Fax, Trunk-Call & Internet 2,705,420 2,194,403vi) Stamps 14,230 790,144

Total 84,949,278 77,949,546

31.0 Stationery, Printings, Advertisements etc.

i) Paper & Table Stationery 10,770,240 8,058,533ii) Printing and Stationery (Registers and Forms) 42,369,209 29,418,690iii) Advertisement & Publicity 25,617,751 40,082,692

Total 78,757,200 77,559,915

32.0 Directors' Fees and Expenses

i) Directors' Fees for attending Board/ Executive 2,941,893 2,151,486Committee/ Other Committee meeting

ii) TA/DA/Hotel bills for Local & Foreign Directors 3,650,261 3,358,985

iii) Others 1,780,027 2,599,306Total 8,372,181 8,109,777

32.1 Rate of Fees for attending Board/ Executive Committee/ Other Committee Meeting

i) For Board Meeting Tk. 4,000/- Tk. 2,500/-ii) For Executive Committee/ Other Committee Meeting Tk. 3,200/- Tk. 2,000/-

Howladar Yunus & Co. Aziz Halim Khair Choudhury


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2007 2006

34.0 Other Expenses

i) T.A. & D.A. 34,783,480 23,844,979ii) Repairs to Rented Premises 1,011,435 282,687iii) Motor Car Running & Maintenance 34,160,689 30,814,180iv) Periodicals & Newspapers 3,514,833 2,044,459v) Entertainment 42,921,310 38,782,516vi) Overtime 12,608,584 11,068,784vii) Direct Expenses on Investment 2,301,160 3,378,314viii) Training Expenses 19,079,067 19,389,193ix) Meeting Expenses 14,011,573 11,815,304x) Bank Charges 2,468,718 746,617xi) Uniforms 3,701,560 3,106,921

xii) Conveyance 4,534,935 3,976,307xiii) Honorarium & Cash Award 4,683,987 2,183,466xiv) Membership Fees (Subscription) 5,202,310 5,456,430xv) Staff Welfare 16,625,000 15,600,000xvi) Evening Banking Allowance 1,210,079 1,181,779xvii) Zakat 100,200,368 87,894,738xviii) Computer Expenses 22,544,639 15,530,317xix) Wages 12,131,795 11,288,691xx) Discomfort Allowance 3,502,699 2,199,448xxi) Air Condition Maintenance 1,543,677 963,859xxii) WASA / Gas Expenses 4,285,706 2,654,319

xxiii) Washing Charges 2,462,480 2,089,513xxiv) Transportation Charges 371,676 399,454xxv) ATM Charges 1,390,414 1,224,000xxvi) Reuters Charges 1,037,712 1,076,786xxvii) Business Development Expenses 54,781,082 36,091,133xxviii) Photocopy Expenses 5,526,913 4,836,315xxix) Upkeep of Office Premises 3,654,535 2,794,708xxx) Clearing House Expenses 447,054 440,960xxxi) Bonus Share Issue Expenses 11,090,911 1,386,739xxxii) Rating Expenses 261,250 783,750xxxiii) Band Width Charges 13,615,358 4,100,350

xxxiv) Table Wares 25,271 7,514xxxv) Other Regulatory Fees and Expenses 500,520 141,132xxxvi) MPB Expenses 27,692,930 -xxxvii) Natural Disaster Operation 22,768,000 -xxxviii) Brokerage House 30,000 -xxxix) Donation 6,000,000 -xxxx) Recruitment Fees 2,626,766 -xxxxi) Miscellaneous 7,887,092 6,717,433

Total 509,197,568 356,293,095

34.1 Motor Car Running and Maintenance

As on 31.12.2007 the Bank had 215 (Two hundred fifteen) Motor Vehicles (Cars 181, Jeeps 15, Pickups 14 and Microbuses 5). The MotorVehicles are used for the Cash Carrying purpose, Development works, other important works of the Bank and some are with the SeniorExecutives of the Bank as per Transport Policy of the Bank. A sum of Tk.35,426,603 was incurred during the year ended on 31.12.2007 asagainst Tk. 31,849,285 incurred during the year 2006 as repairs and maintenance, purchase of fuel & lubricants and insurance etc. cost forthe Motor Vehicles of the Bank.

35 0 R i d E i M f l P fi & L A



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yChartered Accountants Chartered Accountants35.1 Post Balance Sheet Events :

The Board of Directors of the Bank in its 158th meeting held on 17.04.2008 recommended @ 25.00% Stock

Dividend subject to approval of the shareholders in the ensuing 25thAnnual General Meeting to be held on 29

th

August 2008.

Amount in Taka

Year to December 31,

2007 2006

36.0 Earning Per Share (EPS)

(a) Attributable Profit for the year 2,049,053,457 1,400,591,591

(b) Number of outstanding Shares 3,801,600 3,801,600

Earning Per Share (EPS) (a b) 539.00 368.42

Earning Per Share has been calculated in accordance with BAS 33. Previous years figures have been adjusteddue to issue of 345,600 Bonus Shares during the year 2007 against Stock Dividend of 2006.

37.0 Reconciliation of Cash and Cash Equivalentat the end of the year

i) Cash in hand 2,907,141,037 1,410,149,863ii) Balance with Bangladesh Bank and Sonali Bank 14,169,314,125 22,108,799,728iii) Balance with other Banks and Financial Institutions 4,012,328,480 1,329,127,634iv) Bangladesh Government Islamic Investment Bond (Islamic Bond) 20,000,000,000 3,500,000,000

Total 41,088,783,642 28,348,077,225

38.0 Currency wise Exposures

Currency wise exposures are shown at Annexure-B.

Kazi Harun-ar-Rashed Engr. Md. Eskander Ali Khan Md. Shamsul Huda, FCA M. Fariduddin Ahmed

Director Director DirectorManaging Director


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Chartered Accountants Chartered Accountants

2

Sub Total (C) 1,015,027,086 220,051,636 8,610,617 1,226,468,105 - 509,044,557 128,166,356 7,465,230 629,745,683 596,722,422 505,982,529

Total (A to C) 4,385,988,090 445,585,170 22,678,793 4,808,894,467 - 661,293,787 168,753,286 8,385,281 821,661,792 3,987,232,675 3,724,694,303

Kazi Harun-ar-Rashed Engr. Md. Eskander Ali Khan Md. Shamsul Huda, FCA M. Fariduddin AhmedDirector Director Director Managing Director


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Howladar Yunus & Co. Aziz Halim Khair ChoudhuryCh d A Ch d A


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Chartered Accountants Chartered Accountants

4

BDT Equivalent Taka of US $ Equivalent Taka of GBP Equivalent Taka of EUROEquivalent Taka of Other

CurrencyTotal Taka

LIABILITIES

2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

Borrowing fromBangladesh Bank, otherBanks, FinancialInstitutions and Agents

--

-- - - - -

--

- -

Deposits163,644,316,167 130,692,103,348 795,659,706 777,369,680 70,409,119

27,578,977 24,760,611 23,672,32522,553,688 8,396,146 164,557,699,291 131,529,120,476

Bills Payable1,766,104,947 610,083,048 1,482,054 227,700,000

- 44,800,000 - 4,200,000- 3,500,000 1,767,587,001 890,283,048

Other Liabilities

10,195,727,171 7,826,184,480 -

- - - - -

-

-

10,195,727,171 7,826,184,480

Mudaraba PerpetualBond 3,000,000,000

--

- - - - --

-3,000,000,000 -

Total Liabilities178,606,148,285 139,128,370,876 797,141,760 1,005,069,680 70,409,119

72,378,977 24,760,611 27,872,32522,553,688 11,896,146 179,521,013,463 140,245,588,004

Net position7,941,540,196 9,221,116,313 3,553,928,469 739,193,340

171,409,988(14,249,037)

165,211,128 66,394,9689,246,473 (5,222,787) 11,841,336,254 10,007,232,797

Kazi Harun-ar-Rashed Engr. Md. Eskander Ali Khan Md. Shamsul Huda, FCA M. Fariduddin Ahmed

Director Director Director Managing Director

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