Information Memorandum (Issuance of SIBL Mudaraba Sub-ordinated Bond)

Transcription

1 Information Memorandum (Issuance of SIBL Mudaraba Sub-ordinated Bond) Social Islami Bank Ltd.

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3 Sandhani Life Insurance Co.Ltd

4 Social Islami Bank Ltd. Disclaimer This is a confidential Private Placement Memorandum setting out the terms and conditions pertaining to the Mudaraba Sub-Ordinated Bonds proposed to be issued by Social Islami Bank Limited (SIBL) (hereinafter referred to as the Company) and referred to in the Memorandum. Your participation and subscription is subject to the execution of the application. This Memorandum is for information purpose only and it is intended solely for the institutions/ persons receiving it from SIBL and is not authorized for reproduction or distribution to others. This memorandum is not intended to form the basis of any investment decision and should not be considered as a recommendation by SIBL or any other person to any recipient of the Memorandum to invest in the Company. It is recommended that each potential investor base their disposition on their own independent assessment. Neither SIBL nor its directors, officers and employees shall in any way be responsible or liable for any future unforeseen losses or damages that may occur as a result of acting or otherwise relying upon anything stated or inferred in or omitted in this memorandum. Upon request, the recipient shall promptly return to SIBL all materials received (including this Information Memorandum) without retaining any copies thereof or any notes, analysis or information relating thereto, and shall cause any material received or copies thereof that are in the possession of its agents, employees or advisers to be promptly returned to SIBL. This memorandum does not constitute a belly offer to sell bonds to the public and is thus not a prospectus as defined under section 142 of the Companies Act 1994 or within the meaning of the relevant Bangladesh Securities and Exchange Commission (BSEC) regulations. Regulatory approval We are pleased to inform that the Bangladesh Securities and Exchange Commission (BSEC) vide their letter no. BSEC/CI/DS-13/2014/598 dated August 26, 2014 accorded their consent to issue of Non-convertible Mudaraba Sub-Ordinated Bonds through private placement of BDT. 3,000,000, (Three hundred crore) only, value subject to in compliance with the relevant laws and regulatory requirements and conditions under section -2CC of the Securities and Exchange Ordinance,1969. It is also our pleasure to inform that the Bangladesh Bank vide their letter no. BRPD (BFIS) 661/14B(P)/ Dated: 16/09/2014 accorded their consent for raising BDT. 3,000,000, (Three hundred crore).

5 TABLE OF CONTENTS Particulars Page No. Report to the Eligible Investors [Rule 2(3) of Schedule B ] 05 Information Memorandum Risk Factors and Management Perception about the Risks [Rule 2(4) of Schedule B ] 07 Details of the Utilization of Proceeds [Rule 2(5) of Schedule B ] 12 Features of the Bond [Rule 2(6) of Schedule B ] 13 Description of Collateral Security and Type of Charges to be Created Against the Issue [Rule 2(7) of Schedule B ] 14 Rights and Obligations of the Issuer [Rule 2(8) of Schedule B ] 15 Rights and Obligations of the Trustee [Rule 2(9) of Schedule B ] 16 Rights and Obligations of the Eligible Investors [Rule 2(10) of Schedule B ] 16 Description of the Issuer [Rule 2(11) of Schedule B ] 17 Auditors Reports & Financial Statement For The Year Ended December 31, 2013 [Rule 2(12) of Schedule B ] 25 Comparative Financial Statements [Rule 2(13) of Schedule B ] 103 Ratio Analysis [Rule 2(14) of Schedule B ] 108 Credit Rating Report of the Issue [Rule 2(15) of Schedule B ] 109 Description of the Trustee [Rule 2(16) of Schedule B ] 135 Modus Operandi of the Issue [Rule 2(17) of Schedule B ] 137

6 Social Islami Bank Ltd. Definition and elaboration of the abbreviated words and Technical terms used in the information memorandum ACRONYM AAA : AAA Finance & Investment Limited ALCO : Assets Liability Committee ELABORATION ALM : Assets Liability Management ATM : Automated Teller Machine BB : Bangladesh Bank Bond Issue Rule : Securities and Exchange Commission (Private Placement of Debt Securities) Rules,2012 BSEC : Bangladesh Securities and Exchange Commission Commission : Bangladesh Securities and Exchange Commission ECRL : Emerging Credit Rating Limited EPS : Earnings Per Share Issue : Bond Issue Issue Manager : AAA Finance & Investment Limited Issuer Company : Social Islami Bank Limited MTDR : Mudaraba Term Deposit Receipt NAV : Net Asset Value Offering Price : Price of the Bond of Social Islami Bank Limited POS : Point Of Sale Registered Office : Head Office of the Bank SIBL : Social Islami Bank Limited SMS : Short Message Service Sponsor : The Sponsor Shareholders of Social Islami Bank Limited Stockholder : Shareholder Subscription : Application Money Trustee : Sandhani Life Insurance Co. Ltd VAT : Value Added Tax 4 Information Memorandum

7 Report to the eligible investors Rule 2(3) of Schedule B ] Social Islami Bank Ltd. Dear Investors, Social Islami Bank Limited (SIBL) is a scheduled commercial bank in the private sector incorporated in Bangladesh under the Banking Companies Act 1991 on November 05, The bank started its formal operations on November 22, As on December 31, 2013 its authorized capital is BDT.10, million, and paid up capital is BDT.7, million. The financial performance of the bank was good and improving steadily over the years. The bank reported net profit after tax of BDT.1, million in the year The income composition reflects that out of the revenue of the bank, 89.42% is investment income, 2.13% income from investment in shares/securities, 6.92% commission, exchange and brokerage income and 1.53% from other operating income. SIBL has planned to issue the Bond mainly to augment Tier-II capital to meet additional capital requirements, as well as diversification of funding sources as per Bangladesh Bank directive through private placement basis to potential investors like Banks/Non-Bank Financial Institutions, Insurance Companies or any other Corporate Bodies and from Individual. The bond is unsecured, redeemable and non-convertible in nature. The bonds will be issued in a single series with the same maturity. A total of 6,000 units of bond will be issued and the minimum application amount is BDT.5.00 lac for individual and BDT.1.00 crore for Institution. The bonds will have profit rate 120% of 1 (one) year of Mudaraba Term Deposit Profit Rate of SIBL for the Preceding 180 Days. Profit will be paid semi-annually. Principle amount will be redeemed by bullet payment on maturity. A self-explanatory Information Memorandum (IM) prepared in the light of the Securities and Exchange Commission (Private Placement of Debt Securities) Rules, 2012 enclosed herewith for your kind information and evaluation. Sd/- Md. Shafiqur Rahman Managing Director Information Memorandum 5

8 Social Islami Bank Ltd. Important notice THIS DOCUMENT IS IMPORTANT FOR MAKING A DECISION TO INVEST AND REQUIRES YOUR CAREFUL ATTENTION AS IT INCLUDES HISTORIC, CURRENT AND FUTURE FINANCIAL INFORMATION This Information Memorandum includes particulars given in compliance with the requirements of the Companies Act 1994, the requirements of Securities and Exchange Commission (Private Placement of Debt Securities) Rules 2012 and other related applicable rules and regulations of the Country. This Information Memorandum should be read in conjunction with all documents which are incorporated herein by reference (see Documents Incorporated by Reference ). The Bond Participants (including the Bond Trustee) have relied on information provided by the Issuer herein. Accordingly, to the fullest extent permitted by law, none of the bond participants accept any responsibility for the contents of this Information Memorandum (and do not provide assurance for the accuracy or completeness of the information contained in this Information Memorandum) or for any other statement, made or purported to be made by the Bond Participants or on their behalf in connection with the Issuer or the issue and offering of the Bonds. Neither this Information Memorandum nor any other information supplied in connection with the Bonds or their distribution is intended to provide the basis of any credit or other evaluation and should not be considered as recommendations by the Issuer or any of the other Bond Participants that any recipient of this Information Memorandum, or of any other information supplied in connection with the Bonds or their distribution, should purchase any of the Bonds. In making an investment decision in relation to the Bonds, investors are advised to seek independent advice on the Issuer and the terms of the Bonds, including the merits and risks involved. An investment in the Bonds involves risks including, but not necessarily limited to, those set out under Risk Factors and Management Perception about the Risks. No person has been authorized to give any information or to make any representations other than those contained in this Information Memorandum, and, if given or made, such information or representations must not be relied upon as having been authorized. This Information Memorandum does not constitute an offer to sell or the solicitation of an offer to buy securities by any person in circumstances in which such offer or solicitation is unlawful. Neither the delivery of this Information Memorandum nor any sale made under this Information Memorandum in any circumstances implies that there has been no change in the affairs of the Issuer since the date of this Information Memorandum or that the information contained in this Information Memorandum is correct as of any time subsequent to its date. Neither the delivery of this Information Memorandum nor the offering, sale or delivery of any Bonds shall in any circumstances imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the Bonds is correct as of any time subsequent to the date indicated in the document containing the same. None of the Bond participants or the Trustee will review the financial condition or affairs of the Issuer during the life of the Bonds or advise any investor in the Bonds of any information coming to their attention. Investors should review, inter alia, the most recently published documents incorporated by reference into this Information Memorandum when deciding whether or not to purchase any Bonds. Each investor contemplating purchasing the Bonds should make his/her own independent investigation of the financial condition and affairs of issuer and his own appraisal of the credit worthiness of the Issuer. 6 Information Memorandum

9 Risk factors and management perception about the risks An investment in capital market involves a high degree of risk. The Bank is operating in an industry involving both external and internal risk factors having direct as well as indirect effects on the investments made by the investors. All investors should carefully consider all the information in this Information Memorandum, including the risk factors, both external and internal, and management perception there about enumerated hereunder before making an investment decision. If any of the following risks actually occur, their business, results of operations and financial condition could suffer, the trading price of their share could decline, and investors may lose all or part of their investment. (a) Profit / Interest Rate Risks: Profit/interest rate risk concerned with borrowed funds of short term and long-term maturity. Profit/interest rate risk is the risk that the Bank faces due to unfavorable movements in the profit/interest rates. Volatility in money market and increased demand for investment funds raise the rate of profit/interest. The Bank s financing in different sectors is generally structured at fixed and variable rates for specified terms. A change in the Government s monetary policy also tends to increase the rates. Increase in profit/interest rates of borrowing could narrow or eliminate the spread or result in a negative spread, and hence, may have a material adverse effect on the Bank s business, financial condition and/or results of operations. Management perception: Although the consequences of unusual and abrupt increase in the borrowing rate cannot be avoided, Social Islami Bank Ltd. (SIBL) takes all the appropriate measures to minimize the negative consequences. For profit/interest rate risks, the Bank currently pursues a policy under which profit/interest rate can be revised for any unusual and abrupt change at its own discretion as and when required. (b) Exchange Rate Risks: Exchange rate fluctuation may reduce the profitability of Social Islami Bank Ltd. (SIBL) because if funds foreign trade commitments from various sources of foreign exchange like export proceeds and other incoming remittances. If exchange rate is increased against local currency opportunity will be created for generating more profit and the opposite may happen as well. Management perception: Exchange rate risk arises from exchange rate movements, which may affect the earnings of the Bank from its foreign exchange open position taken from time to time. This risk is mainly managed by (i) determined limits on open foreign exchange position, (ii) monitoring open position against these limits & (iii) setting and monitoring of stop loss mechanism. SIBL foreign exchange risk remains at minimum level as all of its foreign trade & remittance transactions are carried out on behalf of the customers. All nostro accounts are reconciled on monthly basis and outstanding entries are escalated to concerned departments and reported to higher management for immediate settlement. Treasury departments are vested with the responsibility to measure and minimize the risk associated with Bank s assets and liabilities, which includes foreign exchange risk. Treasury continuously monitors price movements of foreign exchange and uses various hedging techniques to manage its open position in such a way that minimizes risk and maximizes return. (c) Non-repayment Risk: Non-repayment risk can arise if the Bank become unable to repay the principal amount and the profit to the bond holder. Due to global financial crisis, the bank may not be able to repay their bond holder. Change of profit rate, inflation, recession may have a negative impact on cash flow and profitability of the Bank. Which results in non-repayment in bond amount to bond holders. Management perception: The management of SIBL is always concerned about the prevailing and upcoming future changes in the global financial policies and shall response appropriately and timely to safeguard its interest. The Bank has a very strong financial background as well Social Islami Bank Ltd. Information Memorandum 7

10 Social Islami Bank Ltd. as cash flow along with diversified business package, that s why the risk is very negligible (d) Prepayment, Call or Refunding Risk: The risk of Prepayment, Call or Refunding may arise if the bond holder wishes to get return the bond amount before the bonds maturity. Management perception: SIBL is issuing Mudaraba Sub-Ordinated Non- Convertible Bond. 20% of the Total Bond Value to be redeemed at its face value at the end of each year starting from year 2 (Two). That s why there is no option of refunding the bond value before maturity. But the bond is easily transferable. So if a bond holder wishes to transfer the ownership of the bond he/she can transfer the instrument. Corporate Cash Management clients. The Bank is opening branches all across the Country to diversify its business portfolio. (g) Managements Risk: There may arise Management Risk in the Bank which associates ineffectiveness, destructive or underperforming management which may hurts the smooth operation of the Bank resulting a loss. Management perception: Social Islami Bank Limited (SIBL) has a very effective and competent management which consistently makes effective investment decision for a fund or portfolio. Besides SIBL is fully complying the corporate governance system imposed by the Bangladesh Securities and Exchange Commission (BSEC). (e) Security Risk: SIBL is issuing Mudaraba Sub-Ordinated Non- Convertible Bond. Which is unsecured meaning that it is not backed by any pledged asset. There arises a question regarding the security of the bond. Management perception: Though the bond is unsecured, it is backed by the credit worthiness and reputation of the Bank. The issuing bond has been rated as Long Term: A+, Outlook: Stable by a prominent Credit Rating Company of the Country. Besides, Sandhani Life Insurance Co. Ltd.(SLIC) is appointed as Trustee to the issue by SIBL. SLIC is empowered to regulate the terms and conditions and that applied to the bond. The Trustee is responsible for several key functions that benefits both the Issuer and the bond holder. (f) Liquidity Risk: The Bank harvest the fund through leveraging by the way of taking deposits from the general public and borrowing and its solvency is largely dependent upon efficiency in the process of intermediation of fund. The end objective of liquidity management is to ensure striking of balance between liquidity and profitability. Management perception: The management of SIBL is aware of the magnitude of this risk and it has always intended to diversifying sources of funds and to develop good mix of deposit structure. In this direction the bank has already launched several deposit schemes to attract deposits from various customer groups, including Retail and (h) Operational Risk: Operational risk is the risk of potential losses from a breakdown in internal processes and systems, deficiencies in people and management or operational failure arising from external events. Management Perception: The Management through internal control and compliance division controls operational procedure of the Bank. Internal Control and compliance division undertakes periodical and special audit of the Branches and departments at the Head Office to review the operation and compliance of statutory requirements. The Audit Committee of the Board subsequently reviews the reports of the internal control and compliance division. (i) Business Risk: The Bank may face business risk while doing their banking business. Business risk implies uncertainty in profit or danger of loss and the events that could pose a risk due to some unforeseen events in future, which causes business of SIBL to fail. Management perception: SIBL has a very good profitability record through its business life. The management is well aware about this risk. The Bank is operating in a highly competitive market as modern banking industry has brought greater business diversification. The Bank has a dedicated team to find new scope to expand its business. The risk management team to identify and manage different types of risk including business risk. 8 Information Memorandum

11 (j) Industry risks: The Bank is operating in a highly competitive market as modern banking industry has brought greater business diversification. Some banks in the industrialized world are entering into investments, underwriting of securities and portfolio management. Taken together, these changes have made banks an even more important entity in the global business community. The entry of new competitors may increase the market competition and profitability of the Bank. Management perception: Banking is a fast growing industry. There is a good potential for a well-established and growing financial institution like SIBL to increase its market share. SIBL Securities Limited and SIBL Investment Limited are the subsidiaries of SIBL. SIBL Securities Limited was incorporated as a public limited company on 20th July 2010 registered office of which is situated at 15, Dilkusha, C/A, Dhaka-1000, with the objective to carry on the business of stock broker and stock dealer in the capital market and accordingly started its operation on 4th January SIBL Investment Limited was incorporated as a public limited company on 30th August The registered office of which is situated at 15, Dilkusha, C/A, Dhaka-1000, with the objective to carry on the business of stock brokers, dealers in relation to shares and securities dealings, to underwrite, manage and distribute the issue of stocks etc. Thus SIBL reduces the industry risk by making versatile opportunity of business in the financial sector. (k) Market & Technology Related Risks: (i) Market Risk: Financial market of Bangladesh is currently very competitive and it is currently one of the fastest growing industry in Bangladesh. The entrance of new entities into the market is increasing the competitiveness of the market. Strong marketing and brand management would help the bank to increase its customer base. Management Perception: SIBL focuses on pursuing unexplored market niches in the Small and Medium Enterprise Business which hitherto remained largely untapped within the Country. The Bank has incorporated double bottom approach in its operation, first is making profit by mobilizing fund from urban to rural areas and second is performing social responsibility by creating an entrepreneurial class. The bottom line approach taken by the Bank makes them the market leader in the banking industry. (ii) Technology Related Risks: Technology plays vital role for ensuring better service to the customers and minimizing the cost in various aspects. The financial institutions and banks must embrace new technology to be efficient enough to cope up with the future changing demand. Management Perception: Technology is the nerve center of SIBL s rapid growth. SIBL has implemented one of the best world class Information Technology platform in the Bank to ensure faster yet safer delivery of services to the customers on 24/7 basis. The bank has built up its alternative delivery channel infrastructure to offer the full suite of ATMs, POS, Internet Banking, Call Center and SMS banking for its customers. In order to support its aggressive growth strategies in future, the bank has made a strategic decision to change its core banking software to a more robust and internationally tested system. As its unique contribution to a truly broadbased and participatory electronic banking system in Bangladesh, SIBL currently has a wide coverage of 94 Branches, as on December 31, (l) Potential or Existing Government Regulations: The Bank operates under the specific guidelines laid down by Bangladesh Bank (BB), Bangladesh Securities and Exchange Commission (BSEC) and other regulatory authorities. The Bank also operates under Companies Act 1994 and other related regulations, Bank Companies Act 1991, Income Tax Ordinance 1984, Value Added Tax (VAT) Act 1991 and Value Added Tax (VAT) Rules Any abrupt change of the policies made by the regulatory authorities may adversely affect the business of the Company. Management Perception: Unless any policy change negatively and materially affects the industry as a whole, the business of the Bank is expected not to be affected significantly. Like all Scheduled Banks in Bangladesh, SIBL s asset growth and cost of CRR and SLR are adjustable as per requirement. Social Islami Bank Ltd. Information Memorandum 9

12 Social Islami Bank Ltd. (m) Potential Changes in Global or National Policies: A financial institution s ability to operate a profitable business is directly related to the monetary and fiscal policy of the country at any given time. Imposition of restrictive monetary and/or fiscal policy by the government at any time may affect a company s profitability. Again, change in the existing global or national policies can have either positive or negative impacts for the Bank. Management Perception: The management of SIBL is always concerned about the prevailing and upcoming future changes in the global or national policy and responds appropriately and timely to safeguard its interest. (n) History of Non-Operation, If Any: Is there any history for the Bank to become nonoperative from its commercial operation? Management Perception: The Social Islami Bank Limited (SIBL), a secondgeneration bank, was incorporated on November 05, SIBL started its commercial operation on November 22, 1995 and completed 18 (eighteen) year of successful banking operation based on Shariah Principles without having any history of non-operation. SIBL has now 94 branches all over the Country with two subsidiary companies - SIBL Securities Ltd. & SIBL Investment Ltd. Targeting poverty, SIBL is indeed a concept of 21st century participatory three sector banking model in one. In the formal sector, it works as an Islamic participatory Commercial Bank with human face approach to credit and banking on the profit and loss sharing. The Bank is an independent body that is operated by its Memorandum & Articles of Association and other applicable laws implemented by the Government of Bangladesh. Besides, the Bank s financial strength is satisfactory. It has highly experienced Directors and Management team which makes the Bank more efficient and stronger for any commercial operations. So, the chance of becoming non-operative for the Bank is minimum. Management Perception: Generally, this risk applies to every financial institution in the Country but they are normally mitigated by being aware of the circumstances and taking appropriate action in time. SIBL has always kept abreast of changing business environments and this is evidenced by its good financial performance in the past. SIBL s performance has been steady during periods of political turmoil and natural calamities. On the other hand, political turmoil and the disturbance are bad for the economy as a whole and so also for the Bank. (p) Portfolio Management Risk: Poor quality of project appraisal, slack monitoring of outstanding debts, inadequate/inappropriate documentation and other forms of management efficiencies may affect the quality of SIBL portfolio. Management Perception: Under the close supervision of SIBL s prudent shareholders and the Board of Directors, the Management of SIBL has developed skills and ability to appraise a project efficiently, ascertain the risk factors, address them and monitor performance closely. (q) Change in Fiscal Policy: The Bank s lending activities generate significant depreciation allowances that provide the Bank with substantial tax benefits on an ongoing basis. In addition, the Bank s lessees currently enjoy favorable tax treatment due to entitlement of depreciation. Any change of current tax may make lease financing less attractive and would have a material impact on the Bank s business, financial condition and/or results of operations. Management Perception: SIBL has been putting their best efforts to manage tax and accounting matters professionally. Unless a material change takes place in the fiscal policy, which would affect the banking industry as a whole, SIBL is well prepared to address the issue that may have any significant impact on the Bank s business, financial condition and results of operation. (o) Potential Changes in Political & Economic Condition: Changing economic conditions may affect the demand for the type of finance offered by the bank, Downturn of economic activity or uncertainty may result in a downturn in demand for loan funds in the industry. (r) Credit Risk: Some of the customers or obligators may fail to meet the terms of any contract or otherwise fail to perform as agreed which will in turn reduce the profit of the Bank, decreasing shareholders earnings. 10 Information Memorandum

13 Management Perception: Considering the key elements of credit risk, the Bank has segregated duties of the officers/executives involved in credit related activities. Separate division for Corporate, SME and retail has been formed which are entrusted with the duties of maintaining effective relationship with the customers, marketing of credit products, exploring new business opportunities etc. for transparency in the operation during the entire credit period i) Investment Approval Committee, ii) Investment Administration Department, iii) Recovery Unit and iv) Impaired Asset management have been set up. In addition to the above, investment division carries out thorough assessment before approving any Investment facility. The risk assessment includes borrower risk analysis, financial analysis, industry analysis, and historical performance of the customer. Investment administration department ensures compliance with all legal formalities, completion of all documentation, security of the proposed investment facility and finally disburses the amount. The sales team reports to their line management; the investment risk management division reports directly to deputy managing director (risk management), while the investment administration reports to the head of division. The above management system has not only ensured segregation of duties and accountability but also helps to minimize the risk with the credit portfolio. (s) Asset Quality Risk: Changes in market liquidity and/or profit/interest rate expenses Bank s business to the risk of loss, which may, in extreme cases, threaten the survival of the institution. Management Perception: Emphasis has been given so that the level of balance sheet risks are effectively managed appropriate policies and processes are established to control and limit these risks and proper manpower are available for evaluating and controlling these risks. The Assets Liability Committee (ALCO) of the Bank monitors Balance Sheet Risks and Liquidity Risks of the Bank. The committee reviews country s overall economic position, Bank s liquidity position, ALM ratios, profit rate risk, capital adequacy, deposit investment growth, cost of deposit & yield on Investment, R.E. gap, market profit rate, loss provision adequacy and deposit lending pricing strategy and takes appropriate decisions in this respect. Social Islami Bank Ltd. Information Memorandum 11

14 Social Islami Bank Ltd. Details of the utilization of proceeds Purpose of mudaraba sub-ordinated Social Islami Bank Limited (SIBL) envisaged to issue the Mudaraba Sub-Ordinated Bond for raising Tire-II Capital to further strengthen the capital base of the bank and to comply with the capital adequacy requirements as per BASEL-II Capital accord, which also facilitate the long term business of the bank through expansion in General Investment portfolios resulting in profitability growth of the Bank as well as to attain sustainable growth in business. Sd/- Walid Mahmud Sobhani FCMA Chief Financial Officer Use of proceeds & implementation schedule of the fund Social Islami Bank Limited (SIBL) envisaged issuing the Mudaraba Sub-Ordinated Bond for raising Tire-II Capital to further strengthen the capital base of the bank and to comply with the capital adequacy requirements as per BASEL-II Capital accord. The details of Implementation Schedule of Mudaraba Sub-Ordinated Bond are stated as under: Particulars Amount in BDT Implementation Date Term Deposit with other Banks (from Bond money received). Disbursement to the Investment Clients of SIBL against Bond money received Sd/- Md. Shafiqur Rahman Managing Director 150,00,00,000/- 150,00,00,000/- Within 1 month immediate after receiving the fund Within 1 month immediate after receiving the fund Sd/- Walid Mahmud Sobhani FCMA Chief Financial Officer Sd/- Md. Shafiqur Rahman Managing Director 12 Information Memorandum

15 Features of the Bond Name of the Instrument : SIBL Mudaraba Sub-Ordinated Bond Issuer : Social Islami Bank Limited (SIBL) Issue Manager : AAA Finance & Investment Limited Trustee : Sandhani Life Insurance Co. Ltd (SLIC) Purpose : To Consider as Supplementary Capital (Tier II) Amount of Issue : BDT.3000,000,000 (three hundred crore) Nature of the Debt Instrument : Mudaraba Sub-Ordinated Debt Tenure of Bond : 6 (six) years Value Per Unit : BDT.500,000 (five lac) Number of Issuing Unit : 6,000 (six thousand) units Social Islami Bank Ltd. Market Lot : Minimum Application : For individual For other than individual For individual For other than individual 01 (one) unit 20 (twenty) units BDT.500,000 (five lac) BDT.10,000,000 (one crore) Rate of Return/Profit Rate : Calculation of Profit : Profit Payment Schedule : Repayment Schedule / Redemption Policy : 120% of 1 (one) year of Mudaraba Term Deposit profit rate for the preceding 180 days Total Profit is calculated in two stages. First is the Basic Profit which is further enhanced to determine Total Profit considering the contribution from the Bank s Profit before tax Semi annually not later than 60 days from expiry of 6 (six) months and 12 (twelve) months of each year from issuance 20% of the total bond value to be redeemed at the end of each year starting from year 2 (two) at face value. Repayment schedule of the Mudaraba Sub-Ordinated Bond is as under: Issue Size (BDT) 3,000,000,000 Repayment/ Redemption Years Repayment (BDT) Balance (BDT) End of 2nd year 600,000,000 2,400,000,000 End of 3rd year 600,000,000 1,800,000,000 End of 4th year 600,000,000 1,200,000,000 End of 5th year 600,000, ,000,000 End of 6th year 600,000,000 - Redeemable Option : Redeemable on maturity of face value Late Redemption : 2% per annum more than offered rate Offering Style : Private Placement Prospective Investors : Bank, Insurance, Financial Institute, Corporate House and General Public Principal Payment : Bullet Payment on Maturity Transferability : Easily Transferable Listing Status : Non-Listed Convertibility : Non-Convertible Information Memorandum 13

16 Social Islami Bank Ltd. Prepayment, Call of Refunding : The option of prepayment, call of refunding may be at discretion of the issuer Rating Agency : Emerging Credit Rating Limited (ECRL) Rating Status of the Issue : Over Subscription : Under-Subscription : Instrument Rating Long Term: A+, Outlook: Stable Date of Rating April 22, 2014 Validity April 21, 2015 Entity Rating Income Tax : As applicable by the Govt. Enforcement of charges over the Securities Documentation : Regulatory Approval : Long Term: AA-, Short Term: ECRL-2, Outlook: Stable Date of Rating April 22, 2014 Validity April 21, 2015 In the event of this issue of bond being oversubscribed, the allotment will be on a first come first serve basis. Any undersubscribed portion will be re-offered for fresh subscription depending on prevailing market conditions. The company will borrow from traditional sources if it cannot mobilize funds from bond issuances. : No charges will create over the Securities. Details presented in the trust deed Documentation will include but not be limited to the followings:- 1) Bond Subscription Agreement; 2) Trust Deed; 3) Any other instrument(s) relating to this sort of transaction. Upon approval from the Bangladesh Bank and the Bangladesh Securities and Exchange Commission, SIBL will issue the Bonds as per the information memorandum. In no way SIBL shall issue any such bonds without taking approval from the BB and the BSEC. Cost Related to the Issue : Particulars Basis of Calculation Amount in BDT BSEC fees: Application Fee to BSEC 10,000 Consent Fee to 0.10% of total issue 3,000,000 Commissions & Expenses: Trustee 0.05% of total issue 1,500,000 Manager to the Issue fee Lump sum 800,000 Placement Fee (Estimated; to be paid at actual) 15,000,000 Legal Vetting Fee (Estimated; to be paid at actual) 300,000 Expenses related to printing & publication: Designs, Printing of IM (Estimated; to be paid at actual) 300,000 Advertisement Expenses (Estimated; to be paid at actual) 300,000 Total 21,210,000 Status : This obligation is not a deposit and is not insured by any deposit insurance scheme. This obligation is subordinated to claims of depositors and other creditors, is unsecured and is ineligible as collateral for a loan by the social islami bank limited. Description of collateral security and type of charges to be created against the issue SIBL started its business operation since 1995 and completed 18 years of successful business operation. During this period SIBL did not issue any Securities. So there is no type of charges to be created against the Issue. 14 Information Memorandum

17 Rights and obligations of the issuer Rights of the issuer Right to redeem the bonds of a series at the option of the Issuer in whole or in part at any time after expiry of three years if the Issuer satisfies the Trustee immediately before the giving of notice in this regard that it has or will become obliged to pay additional amounts as a result of any change in, or amendment to, the laws or regulations of the People s Republic of Bangladesh or any authority thereof or therein having power to tax, and Such obligations cannot be avoided by the Issuer taking reasonable measures available to it. Upon payment to the Mudaraba Sub-Ordinated Bondholders in full discharge of all redemption amounts due upon their Mudaraba Sub-Ordinated Bonds, the Mudaraba Sub-Ordinated Bonds shall be surrendered and delivered unto the Issuer with receipts in full discharge endorsed thereon and signed by the respective Mudaraba Sub-Ordinated Bondholders. In the event of the Mudaraba Sub-Ordinated Bondholders not surrendering its Mudaraba Sub- Ordinated Bonds to the Issuer within sixty (60) days after the due date for redemption or repayment of the amount secured thereby which the Issuer is ready to pay or satisfy in accordance with the terms of the bond, the fund will be treated as deposit to the Issuer and automatically opened the MTDR in the name of Bond holders subject to entitled prevailing MTDR profit rate where applicable. In the event of bankruptcy, disability or resignation of the Trustee, another Trustee shall be appointed who shall thereafter have and exercise all power of the Trustee under the Trust Deed. The power of appointing a new Trustee shall be vested to the Issuer, but no such Trustee shall be appointed by the Issuer until his appointment has been approved by the Commission. Obligations of the issuer To distribute at least 75% of the income generated by deployment of all Mudaraba funds including Mudaraba Bond to Mudaraba Depositors and Mudaraba Bondholders; To pay profit semi-annually to the Mudaraba Sub- Ordinated Bondholders not later than sixty (60) days from expiry of six months and twelve months of each year from the date of the issue of the bond; Obligations of the Issuer to the Bondholders shall at all times rank pari-passu and without any preference or priority among themselves; Obligations of the Issuer is absolute and unconditional to pay the principal of and any premium and profit on the Bond according to its terms; Unless previously redeemed or purchased and cancelled, the Issuer has to redeem the principal on the bonds in five annual installments of at least 20% each starting from the end of the second year for first four annual installments and the rest to be redeemed on the fifth annual installment; To provide not less than 30 nor more than 60 days written irrevocable notice to the Bondholders, the Trustee and the Agents if the Issuer wants to early redeem the Bond; The Issuer shall, as required by the Companies Act, 1994, keep at its registered office a register of bondholders; The Issuer will issue in the first instance within a period of thirty (30) days from the date of allotment to each Mudaraba Sub-Ordinated bondholder free of charge a Mudaraba Sub-Ordinated Bond Certificate (s) under the common seal of the Issuer; The Issuer will issue the Bond Instrument of Certificate within 60 (sixty) days of receipt of money from the Investors of the Issue; Until the entire Mudaraba Sub-Ordinated Bonds are paid off or redeemed, the Issuer shall not without the prior written permission of the Trustee, which consent will not be unreasonably withheld: Radically change its accounting system. Effect any scheme for amalgamation merger or reconstruction with other companies. Utilize any portion of the Mudaraba Sub- Ordinated Bonds for purpose other than those for which the same are issued. Social Islami Bank Ltd. Information Memorandum 15

18 Social Islami Bank Ltd. Rights and obligations of the trustee Rights of the trustee To exercise all Rights and remedies and take all consequential action pertaining the trusteeship ; To receive trustee fee for action as the trustee; To institute, conduct, defend, compound. settle, withdraw or abandon any legal proceedings in the name of the trustee and to submit any proceedings or differences for settlement by arbitration (if required), To compromise, settle or abandon any debt or claims due to the trusteeship; To enter into all arrangements in relation to the objects of the trusteeship; To appoint brokers, advocates, auditors, solicitors, credit rating agencies, registrars, agents, valuers and other persons for the purpose of fulfilling any of the objectives of the trusteeship; To incur and pay all reasonable costs, charges and expenses incidental to the management, administration and execution of the trusteeship; To sign, seal, execute, deliver and register all deeds, documents and assurances and the clue performance and execution of tire purpose and objects thereof; To call for meetings; and To do all acts, deed, matters and things which are necessary for the objects or purpose of or in relation to the Bond Documents or are incidental or conducive to the proper exercise of the power of the under the Deed of Trust. Obligations of the trustee To act on behalf and for the exclusive profit of the investors; To ensure that the issuer complies the rules and regulations of the issuance; To carry proper due diligence with respect to the issuance; To be empowered to execute such deeds documents, arrangements and writings as may be required To vest the complete right, title and profit in respect of the securities; To call the investors meeting and shall enforce the decisions as per terms and conditions of the Deed of Trust; to submit annual report to the Commission regarding the redemption of the bonds as per schedule; To sue to protect investors interest on behalf of the investors; and To confirm/protect the bond holders profit, the Trustee may invite the complain (if any) from the bond holders. Trustee may act here as an Umpire, but failing which the Trustee may take proper legal actions against the Company Rights and obligations of the eligible investors Rights of the eligible investors Right to receive a Certificate of Bond Instrument from the Issuer within 60 (sixty) days of closing of subscription period; To participate semi-annually in the Profit of the bond no later than 60 days from expiry of six months and twelve months of each year from the date of the issue of the bond; Right to sanction any compromise or arrangement proposed to be made between the Company and the Mudaraba Sub-Ordinated Bonds Holders; Right to sanction any modification, alteration or abrogation of the rights of the Mudaraba Sub- Ordinated Bond Holders against the Company, whether such right arise under the Trust Deed or Mudaraba Sub-Ordinated Bonds or otherwise; Power to give any direction, sanction, request or approval which under any of the provisions of the Deed of Trust is required to be given by a special resolution adopted in the Bond holders meeting; At every meeting each Mudaraba Sub-Ordinated Bonds Holder or Holders present in person or by proxy shall on a show of hands, be entitled to cast one vote only but at a poll, vote or votes will be counted on the basis of holding of Bond or Bonds i.e. 1(one) Mudaraba Sub-Ordinated Bond valuing Tk.5,00,000/- will be entitled to cast one vote. Obligations of the eligible investors No pay back option for the bond holder but it is transferable maintaining proper formalities involved with RJSC; The Mudaraba Sub-Ordinated Bonds are not refundable. 16 Information Memorandum

19 Description of the issuer The company: Social Islami Bank Limited was (hereafter referred as SIBL or the company ) incorporated in Bangladesh as a public limited company in 1995 to carry on private banking business. Corporate information: Date of Incorporation : November 05, 1995 Date of Commercial Operation : November 22, 1995 Listing with Dhaka Stock Exchange Ltd. : November, 2000 Listing with Chittagong Stock Exchange Ltd. : October, 2005 Number of Branches : 94 Corporate office : City Center, 90/1 Motijheel C/A, Dhaka Managing Director : Mr. Md. Shafiqur Rahman Company Secretary : Mr. Md. Humayun Kabir, ACS Number of Employees as on : 1802 Social Islami Bank Ltd. Capital structure: Authorized Capital as on : BDT.10,000,000,000 Paid-up-Capital as on : BDT.7,031,415,640 Shareholders Equity as on : BDT.11,092,246,074 Total Operating Income for the year 2013 : BDT.5,560,461,585 Total Assets as on : BDT.126,401,393,912 Business: Social Islami Bank Limited (SIBL) is engaged in Islami Shariah based commercial banking under Banking Companies Act 1991, Bangladesh. SIBL Securities Limited: SIBL Securities Limited, a wholly owned subsidiary of SIBL, was incorporated as a Public Limited Company under the Companies Act, 1994 vide certification of incorporation no. C-85876/10 dated 20 July 2010 and obtained its certificate of commencement of business on the same day. The Company has already got it license for trading with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). The company started its commercial operation in the month of January The principal place of business is the Registered Office at 15, Dilkusha C/A, Dhaka The principal objectives of the company for which it was established are to carry on the business of stock brokers, dealers in relation to shares and securities dealings and other services as mentioned in the Memorandum and Articles of Association of the company. SIBL Investment Limited: SIBL Investment Limited, a wholly owned subsidiary of SIBL, was incorporated as a Public Limited Company under the Companies Act, 1994 vide certification of incorporation no. C-86726/10 dated 30 August 2010 and obtained its certificate of commencement of business on the same day. The principal place of business is the Registered Office at 15, Dilkusha C/A, Dhaka The principal objectives of the company for which it was established are to carry on the business of stock brokers, dealers in relation to shares and securities dealings, to underwrite, manage and distribute the issue of stocks etc. and other services as mentioned in the Memorandum and Articles of Association of the company. Information Memorandum 17

20 Social Islami Bank Ltd. Products and services: Deposit product: Mudaraba Scheme Deposits: Kafela-Mudaraba Hajj Scheme Proshanti-Mudaraba Zakat Savings Account Samriddhir Sopan- Mudaraba Double Growth Deposit Scheme Sonali Kabin- Mudaraba Mohorana Savings Scheme Sharno Sikhor- Mudaraba Kotipoti Scheme Suborna Diganto-Mudaraba Millionaire Scheme Sachchondo Protidin- Mudaraba Monthly Profit Deposit Scheme SIBL Dipti- Mudaraba Education Savings Scheme SIBL Young Star Account Subarnolota-Special Savings Scheme for Women Sonali Din- Mudaraba deposit Pension Scheme Sukher Thikana- Special Savings Scheme for lower-income group workers Swapner Siri- Mudaraba Lakhopothi Deposit Scheme Sabuj Chhaya-Special Savings Scheme for Senior Citizens Sanchita-Special Deposit Scheme Subarno Rekha-Special Savings Scheme for Women Al Wadiah Current Account Mudaraba Savings Deposit Mudaraba Term Deposit Investment products: Bai-Muazzal Murabaha Musharaka Hire Purchase Sirkatul Melk Cards: SIBL Credit Card Visa Islamic Credit Card SIBL Zameel Debit Card Types of Cards: VISA Local Classic VISA Gold Classic VISA Classic Dual VISA Gold Dual E-banking: Internet Banking Mobile Banking SMS Banking 18 Information Memorandum

21 Management Executive committee Alhaj Sk. Mohammad Rabban Ali Major (Retd) Dr. Md. Rezaul Haque Mr. Abdul Awal Patwary Alhaj Nasiruddin Mr. Md. Sayedur Rahman Mr. Abdul Jabbar Mollah Chairman Member Member Member Member Member Social Islami Bank Ltd. Audit committee Mr. Md. Abdur Rahman Mr. Mohammad Azam Mr. Md. Anisul Hoque Mr. Abdul Mohit Chairman Member Member Member Shariah supervisory committee Principal Sayeed Kamaluddin Zafree Prof. A.N.M. Rafiqur Rahman A.Q. M. Abdul Hakim Madani Dr. Mohd. Ahsanullah Miah Moulana Obaid Ullah Hamzah Md. Anwar Hossain Mollah Barister Foysal Ahmed Patwary Prof. Md. Abu Taleb Md. Shafiqur Rahman: Member Shah Uali Ullah Chairman Vice Chairman Member Member Member Member Member Member Member Member Information Memorandum 19

22 Social Islami Bank Ltd. Management team Md. Shafiqur Rahman Mr. Ihsanul Aziz Mr. A.M.M. Farhad Mr. Yunus Ali Mr. Tarik Morshed Mr. Md. Shafiqul Islam Mr. Walid Mahmud Sobhani, FCMA Mr. Md. Akhtar Hussain Mr. Mohd. Ghulam Sarwar Mr. Ziauddin Sawlet Ghani Mr. Kazi Ahsan Khalil Mr. Mohammad Iqbal Mr. Md. Azizul Hakim Mr. Gazi Mohammad Hasan Mr. Md. Habibur Rahman Mr. Mohammad Forkanullah Mr. Md. Abdul Hamid Mr. Tabriz Shahjahan Mr. Faruque Ahmed Mr. Md. Azharul Islam Mr. Kazi Obaidul Al-Faruk Mr. Md. Sofi Ullah Mr. Md. Khurshed Alam Mr. Syed Ohidur Rahman Mr. Mahbub Hossain Mr. Muhammed Zubair Sadik Mr. Mohammad Shoeb, FCA Mrs. Shireen Akhterunnessa Mr. M. Sayedur Rahman Mr. Sultan Badsha Mr. Zahurul Islam Khondker Mr. Sheikh Zahidul Islam Managing Director Deputy Managing Director Deputy Managing Director Deputy Managing Director Senior Executive Vice President Senior Executive Vice President Senior Executive Vice President Senior Executive Vice President Senior Executive Vice President Senior Executive Vice President Senior Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Executive Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President 20 Information Memorandum

23 Description of encumbered and unencumbured assets with value thereof SIBL does not have such sorts of assets. However, the details of fixed assets is incorporated with audited financial statements of this IM. Profile of directors/owners of the issuer Name Major (Retd.) Dr. Md. Rezaul Haque Mr. Md. Sayedur Rahman Designation Chairman Vice Chairman Social Islami Bank Ltd. Mr. Mohammad Azam Mr. Abdul Awal Patwary Mr. Md. Anisul Hoque Alhaj Nasiruddin Alhaj Sk. Mohammad Rabban Ali Mr. A. Jabbar Mollah Mr. Md. Abdur Rahman Mr. Abdul Mohit Mr. Md. Shafiqur Rahman Vice Chairman Director Director Director Director Independent Director Independent Director Independent Director Managing Director Information Memorandum 21

24 Social Islami Bank Ltd. Short bio-data of the directors Major (Retd.) Dr. Md. Rezaul Haque - Chairman Major (Retd.) Dr. Md. Rezaul Haque is one of the greatest Freedom Fighters of Bangladesh Liberation War. He has received his M.B.B.S degree from the country s most prestigious and renowned Dhaka Medical College and has more than 34 years experience in the same profession. He discharged his noble duty with great integrity during Bangladesh Liberation war, Arab-Israel War, Bangladesh Army, Family Planning program in Bangladesh and abroad. As a person of business veteran he currently holds the Chair of M/S. Little House Limited, M/S. Active Builders Ltd. As a philanthropist he is also the Sponsor Director of United Hospital Limited, a publicly known hospital of Bangladesh and also bears a noble mind in engaging himself in various social activities. Mr. Haque is one of the Sponsor Director of Social Islami Bank Limited since its inception. Mr. Haque was elected as Chairman of Social Islami Bank Limited on 29th June, 2013 in the 291st Meeting of the Board of Directors of the Bank. Prior to his appointment as Chairman, Mr. Haque was also Chairman from to Besides his greater role as Chairman of the Bank, he is also discharging his responsibilities as Chairman of the Risk Management Committee, Directors of SIBL Securities Ltd. and as a member of the Executive Committee (EC) of the Bank. Mr. Md. Sayedur Rahman - Vice Chairman Mr. Md. Sayedur Rahman is a sponsor Director of Social Islami Bank Limited and one of the renowned and successful Industrialist and businessman of high stature of the country. He is a prominent figure in garments industry. Currently he is the Managing Director of eminent M/S. Lodestar Garments Ltd., M/S. Mid-Asia Fashions Ltd. He has been representing Social Islami Bank Limited to Bangladesh Association of Banks (BAB) since long. He is also a Philanthropist and engaged in various social activities in the Country. He is also discharging his responsibilities as a member of Executive Committee (EC) and Risk Management Committee of the Bank. Mr. Mohammad Azam - Vice Chairman Mr. Mohammad Azam is one of the distinguished personalities of Chittagong with 27 years business experience. Besides, representing different private limited companies as Director, he is associated with various social welfare activities in Chittagong as well as other parts of the country. Currently he is the Proprietor of M/S. Zia & Brothers situated in Chittagong. He is also discharging his responsibilities as a member of Board Audit Committee (BAC) of the Bank. Mr. Abdul Awal Patwary - Director Mr. Abdul Awal Patwary is a renowned businessman of the Country and has almost 34 years business experience as an industrialist. He is actively associated with various social welfare organizations. He was the Chairman of the Board of Directors of Social Islami Bank Limited from to Currently he is the Chairman of M/S. Patwary Cold Storage Ltd., M/S. Patwary Potato Flakes Ltd., M/S. Greentech Greenhouse Bangladesh Ltd. and Managing Director of Faysal Shopping Complex Ltd., Faysal Shipping Lines and also Proprietor of M/S. Faysal Traders. Mr. Abdul Awal Patwary is also the Chairman of SIBL Securities Ltd. (a subsidiary Company of the Bank). He is also discharging his responsibilities as a member of Executive Committee (EC) and Risk Management Committee of the Bank. Mr. Md. Anisul Hoque - Director Mr. Md. Anisul Hoque is a graduate in Accounting (B.Com-Hons, M.Com) from Dhaka University and completed Chartered Accountancy course from the country s renowned Howladar Yunus & Co., Chartered Accountants, Dhaka. He is the representative Director of Hamdard Laboratories (Waqf) Bangladesh and has been working there as Finance Director for last 22 year and representing as Sponsor Director of Social Islami Bank Limited since inception of the Bank. Being in the senior management position in Hamdard Laboratories (Waqf) Bangladesh, he has a wide range of expertise in Finance, Accounts and Banking. He was the Chairman of Board of Directors from to and from to respectively. He is also discharging his responsibilities as a Director of SIBL Securities Ltd., member of the Risk Management Committee and Board Audit Committee (BAC) of the Bank. Alhaj Nasiruddin - Director Alhaj Nasiruddin is a renowned businessman of Chittagong with 28 years experience and also associated with various social welfare activities. 22 Information Memorandum

25 He was the Chairman of the Board of Directors of the Bank during the period from to & to respectively. Currently he is the Managing Director of J.A.N. Corporation Ltd. and also Proprietor of M/S. Nams Trade Corporation and M/S. Nasim Trading Co. He is also discharging his responsibilities as Director of SIBL Securities Ltd., and member of Executive Committee (EC) of the Bank. Alhaj Sk. Mohammad Rabban Ali - Director Alhaj Sk. Mohammad Rabban Ali is a sponsored Director of Social Islami Bank Limited and one of the renowned and successful Industrialist and Businessman in this country. He has been managing directly several projects for the last 30 years. Mr. Ali has widely traveled in several countries in connection with business and participated in different trade fairs. Currently he is the Managing Director of M/S. Rabbani Trading Company Ltd., M/S. Shamlon Industries Ltd., M/S. Shama Poly Yarn Industries Ltd. and also proprietor of M/S. S. R. Impex Co. Currently, he is also discharging his responsibilities as the Chairman of the Executive Committee (EC) of the Bank and Director of SIBL Securities Ltd. Mr. Abdul Jabbar Mollah - Director Mr. Abdul Jabbar Mollah is a well known businessman and has almost 28 years business experience in exporting the frozen foods worldwide. He is a Commercially Important Person (CIP) of Bangladesh. Currently he is the Managing Director of M/S. Jahanabad Sea Foods Ltd., M/S. Jalalabad Frozen Foods Ltd. and M/S. Jabbar & Co. Ltd. Mr. Mollah gained National Export Award for the year , & for his valuable contribution to the national export. He is also discharging his responsibilities as a member of Executive Committee (EC) of the Bank. Mr. Md. Abdur Rahman - Independent Director Mr. Md. Abdur Rahman has almost 29 years work experience in different organizations. He has achieved the Degree in Bachelor of Arts (Economics) from the University of Karachi, Pakistan. He is also discharging his responsibilities as the Chairman of the Board Audit Committee (BAC), Nominated Director in SIBL Securities Ltd. and as a member of the Risk Management Committee of the Bank. Mr. Abdul Mohit - Independent Director Mr. Abdul Mohit bears almost 40 years of Corporate Management Experience. He is a knowledgeable individual in all aspects of business area. He is holding the degree of Bachelor of Commerce. He also bears a vast business experience in diversified fields including Real Estate. He was the Director of Star Corporation Ltd., Chandpur Cenema Ltd. as well. He was also the Member of the Red Cross & Family Planning Council, Trustee. He is also discharging his responsibilities as a member of Board Audit Committee (BAC) of the Bank. Social Islami Bank Ltd. Information Memorandum 23

26 Social Islami Bank Ltd. Description of assets and liabilities Description of assets: (As per Audited Financial Statements) PROPERTY AND ASSETS Cash Cash in hand (Including Foreign Currencies) 1,267,213,967 1,104,657,620 1,065,645,367 Balance with Bangladesh Bank & its Agent Banks (Including Foreign Currencies) 7,627,790,250 10,020,554,834 4,601,857,225 8,895,004,217 11,125,212,454 5,667,502,592 Balance with other Banks and Financial Institutions In Bangladesh 1,899,243,196 2,726,839,850 3,317,446,597 Outside Bangladesh 1,178,527, ,779, ,982,002 3,077,771,152 3,576,619,225 3,936,428,599 Placement with Banks & other Financial Institutions 9,064,879,564 9,015,879,564 7,457,379,564 Investments in Shares & Securities Government 5,500,000,000 2,900,000,000 2,050,000,000 Others 1,558,185,070 1,764,016,584 1,711,359,758 7,058,185,070 4,664,016,584 3,761,359,758 Investments General Investment etc. 76,348,581,962 66,459,100,077 48,926,507,517 Bills Purchased and Discounted 9,523,749,964 9,565,873,831 4,982,068,255 85,872,331,926 76,024,973,908 53,908,575,772 Fixed Assets including Premises, Furniture and Fixtures 2,662,660,343 2,256,597,940 2,135,203,543 Other Assets 9,770,561,641 8,165,811,105 7,095,197,636 Non-Banking Assets TOTAL ASSETS 126,401,393, ,829,110,780 83,961,647,464 Description of liabilities: (As per Audited Financial Statements) LIABILITIES AND CAPITAL Liabilities Placement from Banks & other Financial Institutions 4,700,000,000 4,700,000,000 3,700,000,000 Deposits and Other Accounts Mudaraba Savings Deposits 6,468,729,754 4,905,319,144 3,925,740,731 Mudaraba Term Deposits 62,746,867,195 62,267,653,508 42,699,279,530 Other Mudaraba Deposits 19,288,768,828 13,984,000,422 10,498,361,467 Al-Wadeeah Current & Other Deposit Accounts 11,936,321,181 10,585,704,537 8,379,160,525 Bills Payable 1,316,909,958 1,465,257, ,702,290 Cash Waqf Fund 84,577,685 68,903,770 53,477, ,842,174,601 93,276,838,609 66,461,721,747 Other Liabilities 8,765,394,391 6,699,267,451 4,446,691,591 Deferred Tax Liabilities/ (Assets) 1,577,248 70,528 (5,101,777) Total Liabilities 115,309,146, ,676,176,587 74,603,311,561 Capital/Shareholders' Equity Paid-up Capital 7,031,415,640 6,393,925,700 6,393,925,700 Statutory Reserve 2,122,994,344 1,718,062,455 1,168,484,261 General Reserve 6,666, ,431 - Revaluation reserve on Fixed Assets 1,082,485,102 1,109,979,121 1,138,496,825 Retained Earnings 848,684, ,222, ,427,567 Total Shareholders' Equity 11,092,246,074 10,152,932,622 9,358,334,353 Non-Controlling Interest 1,597 1,570 1,550 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 126,401,393, ,829,110,780 83,961,647,464 Description of previously issued debt or equity securities SIBL started its business operation since 1995 and completed 18 years of successful business operation. During this period SIBL did not issue any debt or equity securities. 24 Information Memorandum

27 Auditors Report to the Shareholders of Social Islami Bank Limited We have audited the accompanying consolidated financial statements of Social Islami Bank Limited and its subsidiaries (the Group ) as well as the separate financial statements of Social Islami Bank Limited (the Bank ), which comprise the consolidated balance sheet and the separate balance sheet as at 31 December 2013, and the consolidated and separate profit and loss accounts, consolidated and separate statements of changes in equity and consolidated and separate cash flow statements for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements and Internal Controls Social Islami Bank Ltd. Management is responsible for the preparation of consolidated financial statements of the Group and also separate financial statements of the Bank that give a true and fair view in accordance with Bangladesh Financial Reporting Standards as explained in note 2 and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements of the Group and also separate financial statements of the Bank that are free from material misstatement, whether due to fraud or error. The Bank Companies Act, 1991 and the Bangladesh Bank Regulations require the Management to ensure effective internal audit, internal control and risk management functions of the Bank. The Management is also required to make a self-assessment on the effectiveness of anti-fraud internal controls and report to Bangladesh Bank on instances of fraud and forgeries. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements of the Group and the separate financial statements of the Bank based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements of the Group and separate financial statements of the Bank are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements of the Group and separate financial statements of the Bank. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements of the Group and separate financial statements of the Bank, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of consolidated financial statements of the Group and separate financial statements of the Bank that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements of the Group and also separate financial statements of the Bank. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and also separate financial statements of the Bank give a true and fair view of the consolidated financial position of the Group and the separate financial position of the Bank as at 31 December 2013, and of its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with Bangladesh Financial Reporting Standards as explained in note 2. Information Memorandum 25

28 Social Islami Bank Ltd. Report on Other Legal and Regulatory Requirements In accordance with the Companies Act 1994, the Securities and Exchange Rules 1987, the Bank Companies Act, 1991 and the rules and regulations issued by Bangladesh Bank, we also report the following: (a) we have obtained all the information and explanation which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; (b) to the extent noted during the course of our audit work performed on the basis stated under the Auditor s Responsibility section in forming the above opinion on the consolidated financial statements of the Group and the financial statements of the Bank and considering the reports of the Management to Bangladesh Bank on antifraud internal controls and instances of fraud and forgeries as stated under the Management s Responsibility for the Financial Statements and Internal Control: i) internal audit, internal control and risk management arrangements of the Group and the Bank (as disclosed in note 2 of the financial statements) appeared to be materially adequate; ii) (c) (d) (e) (f) (g) (h) (i) (j) (k) nothing has come to our attention regarding material instances of forgery or irregularity or administrative error and exception or anything detrimental committed by employees of the Bank and its related entities; financial statements of all subsidiaries of the Bank have been audited by other auditors and have been properly reflected in the consolidated financial statements; in our opinion, proper books of account as required by law have been kept by the Group and the Bank so far as it appeared from our examination of those books; the consolidated balance sheet and consolidated profit and loss account of the Group and the separate balance sheet and separate profit and loss account of the Bank dealt with by the report are in agreement with the books of account; the expenditure incurred was for the purposes of the Bank s business; the consolidated financial statements of the Group and the separate financial statements of the Bank have been drawn up in conformity with prevailing rules, regulations and accounting standards as well as with related guidance issued by Bangladesh Bank; adequate provisions have been made for advances which are, in our opinion, doubtful of recovery; the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements; the information and explanation required by us have been received and found satisfactory; and we have reviewed over 80% of the risk weighted assets of the Bank and we have spent around 3,698 person hours for the audit of the books and accounts of the Bank. Dated: Dhaka 31 March, 2014 KAZI ZAHIR KHAN & CO. Chartered Accountants 26 Information Memorandum

29 Social Islami Bank Limited Consolidated balance sheet As at 31 December 2013 Note(s) PROPERTY AND ASSETS Cash Cash in hand (Including Foreign Currencies) 3(a) 1,267,213,967 1,104,657,620 Balance with Bangladesh Bank & its Agent Banks 3.1 (Including Foreign Currencies) 7,627,790,250 10,020,554,834 8,895,004,217 11,125,212,454 Balance with other Banks and Financial Institutions 4(a) In Bangladesh 1,899,243,196 2,726,839,850 Outside Bangladesh 1,178,527, ,779,375 3,077,771,152 3,576,619,225 Placement with Banks & other Financial Institutions 5 9,064,879,564 9,015,879,564 Investments in Shares & Securities 6(a) Government 5,500,000,000 2,900,000,000 Others 1,558,185,070 1,764,016,584 7,058,185,070 4,664,016,584 Investments 7 (a) General Investment etc. 76,348,581,962 66,459,100,077 Bills Purchased and Discounted 9,523,749,964 9,565,873,831 85,872,331,926 76,024,973,908 Fixed Assets including Premises, Furnitures and Fixtures 8(a) 2,662,660,343 2,256,597,940 Other Assets 9(a) 9,770,561,641 8,165,811,105 Non Banking Assets - - Total Assets 126,401,393, ,829,110,780 Social Islami Bank Ltd. LIABILITIES AND CAPITAL Liabilities Placement from Banks & other Financial Institutions 10 4,700,000,000 4,700,000,000 Deposits and Other Accounts 11 Mudaraba Savings Deposits 6,468,729,754 4,905,319,144 Mudaraba Term Deposits 62,746,867,195 62,267,653,508 Other Mudaraba Deposits 19,288,768,828 13,984,000,422 Al-Wadeeah Current & Other Deposit Accounts 11.2(a) 11,936,321,181 10,585,704,537 Bills Payable ,316,909,958 1,465,257,228 Cash Waqf Fund 84,577,685 68,903, ,842,174,601 93,276,838,609 Other Liabilities 12(a) 8,765,394,391 6,699,267,451 Deffered Tax Liabilities/ (Assets) 13 1,577,248 70,528 Total Liabilities 115,309,146, ,676,176,587 Shareholders Equity Paid-up Capital ,031,415,640 6,393,925,700 Statutory Reserve 15 2,122,994,344 1,718,062,455 General reserve 6,666, ,432 Revaluation reserve on Fixed Assets 16 1,082,485,102 1,109,979,121 Retained Earnings 17(a) 848,684, ,222,915 Total Shareholders Equity of Parent Company, SIBL 1 1,092,246,074 10,152,932,622 Non controlling Interest 17(b) 1,597 1,570 Total Liabilities & Shareholders Equity of the Group 126,401,393, ,829,110,780 Information Memorandum 27

30 Social Islami Bank Ltd. Social Islami Bank Limited Consolidated balance sheet As at 31 December 2013 Note(s) CONTINGENT LIABILITIES Acceptances and Endorsements ,986,882,397 12,634,753,997 Irrevocable Letters of Credit (including Back to Back Bills) ,854,239,886 7,395,594,893 Letters of Guarantee ,246,076,013 4,949,826,296 Bills for Collection ,383,031,491 2,784,274,732 Other Contingent Liabilities Total 30,470,229,787 27,764,449,918 OTHER COMMITMENTS Documentary credits and short term trade related transactions - - Forward assets purchased and forward deposits placed - - Undrawn note issuance and revolving underwriting facilities - - Undrawn formal standby facilities, credit lines and other commitments - - Total - - Total Off Balance Sheet Items including Contingent Liabilities 30,470,229,787 27,764,449,918 Annexed notes (1 to 48) form an integral part of these financial statements Chairman Director Director Managing Director Signed as per our report of same date Dhaka, Bangladesh Date: 31 March 2014 Kazi Zahir Khan & Co. Chartered Accountants 28 Information Memorandum

31 Social Islami Bank Limited Consolidated profit and loss account For the year ended 31 December 2013 Note(s) Investment Income 19(a) 13,652,592,262 11,325,266,334 Less: Profit paid on Deposits 20 9,706,867,767 7,541,679,221 Net Investment Income 3,945,724,495 3,783,587,112 Income from Investment in Shares/securities ,466, ,816,722 Commission, Exchange and Brokerage 22(a) 1,056,116,571 1,194,479,560 Other Operating Income 23(a) 233,154, ,568,377 1,614,737,090 1,765,864,659 Total Operating Income 5,560,461,585 5,549,451,771 Salaries and Allowances 24(a) 1,511,746,541 1,081,286,476 Rent, Taxes, Insurances, Electricity etc. 25(a) 228,445, ,760,278 Legal Expenses 26(a) 7,943,388 8,618,710 Postage, Stamps, Telecommunication etc. 27(a) 32,286,323 28,799,564 Stationery, Printings, Advertisements etc. 28(a) 91,543,834 80,776,376 Managing Director s Salary and Allowances 29 8,602,260 10,000,000 Directors Fees & Expenses 30(a) 4,805,075 4,094,874 Shariah Supervisory Committee s Fees & Expenses , ,801 Auditors` Fees 534, ,455 Depreciation & Repair of Bank s Assets 32(a) 174,744, ,523,899 Other Expenses 33(a) 534,797, ,733,108 Total Operating Expenses 2,595,704,395 1,906,621,541 Social Islami Bank Ltd. Profit/(Loss) before Provision 2,964,757,190 3,642,830,229 Specific provisions for Investment 752,687, ,356,045 General Provisions for Investment 84,746, ,483,062 General Provisions for off-balance Sheet exposure 27,057, ,482,499 Other Provisions 34(a) 41,322, ,355,083 Total Provision 35(a) 905,814, ,676,689 Total Profit/(Loss) before Tax 2,058,942,530 2,772,153,541 Provision for Income Tax 36(a) 806,808,184 1,306,935,483 Net Profit/(Loss) after Tax attributable to equity holders of the group 1,252,134,346 1,465,218,057 Non-controlling Interest Net Profit/(Loss) after Tax attributable to equity holders of the parent 1,252,134,320 1,465,218,037 Appropriation Statutory Reserve 404,931, ,578,194 Retained Earnings 847,202, ,639,843 1,252,134,320 1,465,218,037 Earning Per Share (CEPS) (Restated for year 2012) 37(a) Annexed notes (1 to 48) form an integral part of these financial statements Chairman Director Director Managing Director Signed as per our report of same date Dhaka, Bangladesh Date: 31 March 2014 Kazi Zahir Khan & Co. Chartered Accountants Information Memorandum 29

32 Social Islami Bank Ltd. Social Islami Bank Limited Consolidated cash flow statement For the year ended 31 December 2013 Note(s) Cash Flow from operating activities Investment Income receipt 38(a) 13,652,592,262 11,325,266,334 Profit paid on deposits (6,901,278,644) (5,247,109,745) Dividend receipts 325,466, ,816,722 Fees & commission receipt 584,822, ,843,415 Cash payments to employees (1,520,348,801) (1,091,286,476) Cash payments to suppliers (123,830,157) (109,575,940) Income tax paid (1,356,696,826) (929,894,508) Receipts from other operating activities 39(a) 704,448, ,204,521 Payments for other operating activities 40(a) (794,669,804) (569,670,338) Operating profit before changes in operating assets and liabilities 4,570,505,121 5,143,593,986 Changes in operating assets and liabilities Statutory deposits - - Net trading securities (2,394,168,486) (902,656,827) Investments to other banks - - Investment to customers (9,847,358,018) (22,116,398,136) Other assets 41(a) (248,053,710) (140,718,961) Deposits from other banks (6,383,245,811) 2,311,519,035 Deposits received from customers 12,142,992,679 22,209,028,350 Other liabilities on account of customers - - Trading liabilities - - Other liabilities 42(a) 360,934,923 80,878,423 Sub Total (6,368,898,423) 1,441,651,884 A. Net Cash flow from operating activities (1,798,393,302) 6,585,245,870 Cash flows from investing activities Proceeds from sale of securities - - Payment for purchases of securities - - Proceeds from sale of fixed assets - - Purchases of property, plant & equipments (562,918,036) (257,483,184) Purchase/Sale of subsidiaries - - B. Net Cash flows from investing activities (562,918,036) (257,483,184) Cash flows from financing activities Receipts from issue of debt instruments - 1,000,000,000 Payments for redemption of debt instruments - - Receipts from issue of right shares/ordinary share - - Dividend paid in cash (318,744,971) (671,362,199) C. Net Cash flow from financing activities (318,744,971) 328,637,802 D. Net increase/(decrease) in cash & cash equivalents (A+B+C) (2,680,056,309) 6,656,400,487 E. Cash and cash equivalents at the beginning of the year 23,717,711,242 17,061,310,755 F. Cash and cash equivalents at the end of the year (D+E) 43(a) 21,037,654,933 23,717,711,242 Annexed notes ( 1 to 48) form an integral part of these financial statements Chairman Director Director Managing Director Dhaka, Bangladesh Date: 31 March Information Memorandum

33 Social Islami Bank Limited Consolidated statement of changes in equity For the year ended 31 December 2013 (amount in ) Particulars Paid-up Capital Share Statutory General / Asset Retained Non- Premium Reserve Other Revaluation Earnings Controlling Total Account Reserves Reserve Interest =(2 to 7) Balance as at 01 January ,393,925,700-1,718,062, ,432 1,109,979, ,222,916 1,570 10,152,934,193 Changes in Accounting Policy Resatated Balance Surplus / (Deficit) on account of Revaluation of Properties Surplus / (Deficit) on account of Revaluation of Investment Currency translation difference Net gain and losses not recognized in the Income Statement Net profit for the year ,252,134,320-1,252,134,320 Appropriation made during the year ,931,889 5,924,102 - (404,931,889) - 5,924,102 Issue of Cash Dividend (318,744,971) - (318,744,971) Issue of Share Capital (Bonus Share) 637,489, (637,489,940) - - Transferred to retained earnings (27,494,019) 27,494, Non-controlling interest Total group shareholders equity as on 31 December ,031,415,640-2,122,994,344 6,666,534 1,082,485, ,684,455 1,597 11,092,247,672 Add: General provision for unclassified investment 1,081,331,886 Less: 50% of assets revaluation reserve 541,242,551 Total eligible capital as on 31 December ,632,337,007 Annexed notes ( 1 to 48) form an integral part of these financial statements Chairman Director Director Managing Director Dhaka, Bangladesh Date: 31 March 2014 Social Islami Bank Ltd. Information Memorandum 31

34 Social Islami Bank Ltd. Social Islami Bank Limited Balance sheet As at 31 December 2013 Note(s) PROPERTY AND ASSETS Cash Cash in hand (Including Foreign Currencies) 3 1,266,962,343 1,104,528,222 Balance with Bangladesh Bank & its Agent Banks 3.1 7,627,790,250 10,020,554,834 (Including Foreign Currencies) 8,894,752,593 11,125,083,056 Balance with other Banks and Financial Institutions 4 In Bangladesh 1,870,113,449 2,713,496,766 Outside Bangladesh 1,178,527, ,779,375 3,048,641,405 3,563,276,141 Placement with Banks & other Financial Institutions 5 9,064,879,564 9,015,879,564 Investments in Shares & Securities 6 Government 5,500,000,000 2,900,000,000 Others 3,038,183,470 3,244,014,984 8,538,183,470 6,144,014,984 Investments 7 General Investment etc. 76,398,581,962 66,459,100,077 Bills Purchased and Discounted 9,523,749,964 9,565,873,831 85,922,331,926 76,024,973,908 Fixed Assets including Premises, Furnitures and Fixtures 8 2,653,882,382 2,249,954,737 Other Assets 9 8,493,893,405 7,042,770,623 Non Banking Assets - - Total Assets 126,616,564, ,165,953,013 LIABILITIES AND CAPITAL Liabilities Placement from Banks & other Financial Institutions 10 4,700,000,000 4,700,000,000 Deposits and Other Accounts 11 Mudaraba Savings Deposits 6,468,729,754 4,905,319,144 Mudaraba Term Deposits 62,746,867,195 62,267,653,508 Other Mudaraba Deposits 19,288,768,828 13,984,000,422 Al-Wadeeah Current & Other Deposit Accounts ,198,626,163 10,903,158,399 Bills Payable ,316,909,958 1,465,257,228 Cash Waqf Fund 84,577,685 68,903, ,104,479,583 93,594,292,471 Other Liabilities 12 8,727,079,569 6,689,618,137 Deffered Tax Liabilities/ (Assets) 13 1,577,248 70,528 Total Liabilities 115,533,136, ,983,981,136 Capital/Shareholders Equity Paid-up Capital ,031,415,640 6,393,925,700 Statutory Reserve 15 2,122,994,344 1,718,062,455 Revaluation reserve on Fixed Assets 16 1,082,485,102 1,109,979,121 Retained Earnings ,533, ,004,602 Total Shareholders Equity 11,083,428,345 10,181,971,877 Total Liabilities & Shareholders Equity 126,616,564, ,165,953, Information Memorandum

35 CONTINGENT LIABILITIES Social Islami Bank Limited Balance sheet As at 31 December 2013 Note(s) Acceptances and Endorsements ,986,882,397 12,634,753,997 Irrevocable Letters of Credit (including Back to Back Bills) ,854,239,886 7,395,594,893 Letters of Guarantee ,246,076,013 4,949,826,296 Bills for Collection ,383,031,491 2,784,274,732 Other Contingent Liabilities Total 30,470,229,787 27,764,449,918 Social Islami Bank Ltd. OTHER COMMITMENTS Documentary credits and short term trade related transactions - - Forward assets purchased and forward deposits placed - - Undrawn note issuance and revolving underwriting facilities - - Undrawn formal standby facilities, credit lines and other commitments - - Total - - Total Off Balance Sheet Items including Contingent Liabilities 30,470,229,787 27,764,449,918 Annexed notes (1 to 48) form an integral part of these financial statements Chairman Director Director Managing Director Signed as per our report of same date Dhaka, Bangladesh Date: 31 March 2014 Kazi Zahir Khan & Co. Chartered Accountants Information Memorandum 33

36 Social Islami Bank Ltd. Social Islami Bank Limited Profit and loss account For the year ended 31 December 2013 Note(s) Investment Income 19 13,629,421,075 11,319,014,211 Less: Profit paid on Deposits 20 9,706,867,767 7,541,679,221 Net Investment Income 3,922,553,308 3,777,334,989 Income from Investment in Shares and Securities ,466, ,816,722 Commission, Exchange and Brokerage 22 1,026,570,990 1,178,954,865 Other Operating Income ,021, ,986,845 1,580,058,494 1,737,758,432 Total Operating Income 5,502,611,802 5,515,093,421 Salaries and Allowances 24 1,505,503,042 1,078,563,216 Rent, Taxes, Insurances, Electricity etc ,846, ,239,535 Legal Expenses 26 7,926,138 8,618,710 Postage, Stamps, Telecommunication etc ,544,647 28,130,288 Stationery, Printings, Advertisements etc ,997,426 80,593,969 Managing Director s Salary and Allowances 29 8,602,260 10,000,000 Directors Fees & Expenses 30 4,264,575 3,795,874 Shariah Supervisory Committee s Fees & Expenses , ,801 Auditors Fees 517, ,855 Depreciation & Repair of Bank s Assets ,161, ,750,842 Other Expenses ,443, ,575,106 Total Operating Expenses 2,578,061,801 1,897,268,196 Profit/(Loss) before Provision 2,924,550,001 3,617,825,225 Specific provisions for Investment 752,687, ,356,045 General Provisions for Investment 84,746, ,483,062 General Provisions for off-balance Sheet exposure 27,057, ,482,499 Other Provisions 34 35,398, ,612,651 Total Provision ,890, ,934,257 Total Profit/(Loss) before Tax 2,024,659,443 2,747,890,968 Provision for Income Tax ,458,005 1,306,763,692 Net Profit/(Loss) after Tax 1,220,201,438 1,441,127,276 Appropriation Statutory Reserve 404,931, ,578,194 Retained Earnings 815,269, ,549,083 1,220,201,438 1,441,127,276 Earning Per Share (EPS) (Restated for year 2012) Annexed notes (1 to 48) form an integral part of these financial statements Chairman Director Director Managing Director Dhaka, Bangladesh Date: 31 March 2014 Signed as per our report of same date Kazi Zahir Khan & Co. Chartered Accountants 34 Information Memorandum

37 Social Islami Bank Limited Cash flow statement For the year ended 31 December 2013 Note(s) Cash Flow from operating activities Investment Income receipt 38 13,629,421,075 11,319,014,211 Profit paid on deposits (6,901,278,644) (5,247,109,745 Dividend receipts 325,466, ,816,722 Fees & commission receipt 555,276, ,318,720 Cash payments to employees (1,514,105,302) (1,088,563,216) Cash payments to suppliers (122,542,073) (108,724,257) Income tax paid (1,352,761,601) (926,823,440) Receipts from other operating activities ,315, ,622,990 Payments for other operating activities 40 (786,141,855) (564,664,993) Operating profit before changes in operating assets and liabilities 4,532,650,094 5,120,886,993 Changes in operating assets and liabilities Statutory deposits - - Net trading securities (2,394,168,486) (902,656,827) Investments to other banks - - Investment to customers (9,897,358,018) (22,116,398,136) Other assets 41 (98,361,181) (55,882,097) Deposits from other banks (6,383,245,811) 2,311,519,035 Deposits received from customers 12,087,843,800 22,135,652,878 Other liabilities on account of customers - - Trading liabilities - - Other liabilities ,619,590 71,569,496 Sub Total (6,350,670,106) 1,443,804,349 A. Net Cash flow from operating activities (1,818,020,012) 6,564,691,342 Cash flows from investing activities Proceeds from sale of securities - - Payment for purchases of securities - - Proceeds from sale of fixed assets - - Purchases of property, plant & equipments (559,200,216) (250,397,905) Purchase/Sale of subsidiaries - - B. Net Cash flows from investing activities (559,200,216) (250,397,905) Cash flows from financing activities Receipts from issue of debt instruments - 1,000,000,000 Payments for redemption of debt instruments - - Receipts from issue of right shares/ordinary share - - Dividend paid in cash (318,744,971) (671,362,199) C. Net Cash flow from financing activities (318,744,971) 328,637,801 D. Net increase/(decrease) in cash & cash equivalents (A+B+C) (2,695,965,199) 6,642,931,239 E. Cash and cash equivalents at the beginning of the year 23,704,238,761 17,061,307,522 F. Cash and cash equivalents at the end of the year (D+E) 43 21,008,273,562 23,704,238,761 Social Islami Bank Ltd. Annexed notes (1 to 48) form an integral part of these financial statements Chairman Director Director Managing Director Dhaka, Bangladesh Date: 31 March 2014 Information Memorandum 35

38 Social Islami Bank Ltd. Social Islami Bank Limited Statement of changes in equity For the year ended 31 December 2013 (amount in ) Particulars Paid-up Capital Share Statutory General / Asset Retained Premium Reserve Other Revaluation Earnings Total Account Reserve Reserve =(2 to 7) Balance as at 01 January ,393,925,700-1,718,062,455-1,109,979, ,004,602 10,181,971,878 Changes in Accounting Policy Resatated Balance Surplus / (Deficit) on account of Revaluation of Properties Surplus / (Deficit) on account of Revaluation of Investment Currency translation Difference Net gain and losses not recognized in the Income Statement Net profit for the year ,220,201,438 1,220,201,438 Appropriation made during the year 404,931, (404,931,889) - Issue of cash dividend (318,744,971) (318,744,971) Issue of Share Capital (Bonus Dividend) 637,489, (637,489,940) - Transferred to retained earnings (27,494,019) 27,494,019 - Total shareholders equity as on 31 December ,031,415,640-2,122,994,344-1,082,485, ,533,259 11,083,428,345 Add: General provision for unclassified investment 1,081,331,886 Less: 50% of assets revaluation reserve 541,242,551 Total eligible capital as on 31 December ,623,517,680 Annexed notes ( 1 to 48) form an integral part of these financial statements Chairman Director Director Managing Director Dhaka, Bangladesh Date: 31 March Information Memorandum

39 Social Islami Bank Limited Liquidity statement Assets and liabilities analysis As at 31 December 2013 (amount in ) Particulars Upto 01 Month Months Months Years More than 05 years Total Assets Cash in hand 3,212,713, ,682,039,130 8,894,752,593 Balance with other Banks and Financial Institutions 1,830,254, ,193, ,193, ,048,641,405 Placement with Banks & other Financial Institutions 500,000,000 3,350,000,000 5,214,879, ,064,879,564 Investment (in Shares & Securities) 1,406,615, ,000,000 4,300,000, ,569,450 1,629,998,400 8,538,183,470 Investments 9,537,431,276 21,180,472,524 39,240,356,958 15,592,813, ,257,469 85,922,331,926 Fixed Assets including premises, furniture & fixtures etc. 16,422,514 32,845, ,281, ,782,356 1,686,550,522 2,653,882,382 Other Assets 387,751,359 2,689,141, ,789,958 4,112,476, ,733,825 8,493,893,405 Non-Banking Assets Total Assets 16,891,188,957 28,561,652,313 50,039,501,782 20,983,642,348 10,140,579, ,616,564,745 Liabilities Placement from Banks & other financial institutions 800,000,000 2,000,000,000 1,900,000, ,700,000,000 Deposits and other accounts 15,966,503,945 22,021,498,284 47,104,285,319 12,752,119,641 4,260,072, ,104,479,583 Provision and other liabilities ,250,572,172 4,476,507,397 8,727,079,569 Deferred tax liability ,577,248-1,577,248 Total Liabilities 16,766,503,945 24,021,498,284 49,004,285,319 17,004,269,062 8,736,579, ,533,136,400 Net Liquidity Gap 124,685,012 4,540,154,029 1,035,216,463 3,979,373,287 1,403,999,556 11,083,428,345 Chairman Director Director Managing Director Dhaka, Bangladesh Date: 31 March 2014 Social Islami Bank Ltd. Information Memorandum 37

40 Social Islami Bank Ltd. 1 The Bank and its activities Social Islami Bank Limited Notes to the financial statements As at and for the year ended 31 December Status of the Bank The Bank was incorporated as a Public Limited Company in Bangladesh in the year 1995 under Companies Act, The Bank is one of the interest-free Shariah based banks in the country and its modus- operandi are substantially different from other conventional Banks. The Bank within the stipulations laid down by Bank Companies Act, 1991 and directives as received from time to time from Bangladesh Bank, provides all types of commercial Banking services. Besides as a matter of policy the Bank conducts its business on the principles of Mudaraba, Musharaka, Murabaha, Bai-Muazzal & Hire Purchase transaction approved by Bangladesh Bank. The Bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited as a publicly traded company. The Bank carries its Banking activities through Ninety four (94) branches operating as per Islamic Shariah prevailing in the country. The Registered Office of the bank was located at 15, Dilkusha C/A, Dhaka But from November 2011 SIBL has shifted its Corporate and Registered head office to a new location situated at City Center, 90/1 Motijheel Commercial Area. 1.2 Enlistment with the Stock Exchanges The bank subscribed for IPO (Initial Public Offer) in the year 2000 and initially listed with Dhaka Stock Exchange (DSE) Ltd. and later on in the year 2005 with Chittagong Stock Exchange (CSE) Ltd. Subsidiaries of SIBL : 1.3 SIBL Securities Limited SIBL Securities Limited, a wholly owned subsidiary of SIBL, was incorporated as a Public Limited Company under the Companies Act,1994 vide certification of incorporation no. C /10 dated 20 July 2010 and obtained its certificate of commencement of business on the same day. The company has already got it license for trading with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). The company started its commercial operation in the month of January The principal place of business is the Registered Office at 3rd floor, 15 Dilkusha C/A, Dhaka The principal objectives of the company for which it was established are to carry on the business of stock brokers, dealers in relation to shares and securities dealings and other services as mentioned in the Memorandum and Articles of Association of the company. 1.4 SIBL Investment Limited SIBL Investment Limited, a wholly owned subsidiary of SIBL, was incorporated as a Public Limited Company under the Companies Act,1994 vide certification of incorporation no. C /10 dated 30 August 2010 and obtained its certificate of commencement of business on the same day. The principal objectives of the company for which it was established are to carry on the business of stock brokers, dealers in relation to shares and securities dealings, to underwrite, manage and distribute the issue of stocks etc. and other services as mentioned in the Memorandum and Articles of Association of the company. Name of the Company Paid up Capital () Percentage of Share Holding SIBL Others 1 SIBL Securities Limited 1,230,000, % % 2 SIBL Investment Limited 250,000, % % Total Capital 1,480,000, Off-Shore Banking Unit (OBU) Bangladesh bank approved operation of Off-Shore Banking Unit (OBU) of Social Islami Bank Limited located at Banani Branch, through their letter no. BRPD(P-3)744(119)/ , Dated: The bank has commenced the operation of its Off-Shore Banking Unit (OBU) from Information Memorandum

41 1.6 Compliance of Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting standards (BFRS): In compliance with BAS No. Status Presentation of Financial Statements 1 Applied Inventories 2 N/A Statement of Cash Flows 7 Applied Accounting Policies, Changes in Accounting Estimates and Errors 8 Applied Events After the Reporting Period 10 Applied Construction Contracts 11 N/A Income Taxes 12 Applied Property, Plant and Equipment 16 Applied Leases 17 Applied Revenue 18 Applied Employee Benefits 19 Applied Accounting for Government Grants and Disclosure of Government 20 N/A The Effects of Changes in Foreign Exchange Rates 21 Applied Borrowing Costs 23 Applied Related Party Disclosures 24 Applied Accounting and Reporting by Retirement Benefit Plans 26 N/A Consolidated and Separate Financial Statements 27 Applied Investments in Associates 28 N/A Interests In Joint Ventures 31 N/A Financial Instruments: Presentation 32 Applied to the context of compliance with BRPD circular no. 15, Dated: , DOS Circular No. 5, Dated: Earnings Per Share 33 Applied Interim Financial Reporting 34 Applied Impairment of Assets 36 Applied Provisions, Contingent Liabilities and Contingent Assets 37 Applied to the context of compliance with BRPD Circular No. 5, Dated: and BRPD circular no. 14 Dated: Intangible Assets 38 Applied Financial Instruments: Recognition and Measurement 39 Applied to the context of compliance with BRPD Circular No. 15, Dated: , DOS circular no. 5, Dated: and DOS Circular No. 5, Dated: Investment Property 40 N/A Agriculture 41 N/A Social Islami Bank Ltd. In compliance with BFRS No. Status First-time Adoption of International Financial Reporting Standards 1 N/A Share-based Payment 2 N/A Business Combinations 3 Applied Insurance Contracts 4 N/A Non-current Assets Held for Sale and Discontinued Operations 5 N/A Exploration for and Evaluation of Mineral Assets 6 N/A Financial Instruments: Disclosures 7 Applied to the extent of compliance with core risk management guideline of Bangladesh Bank. Operating Segments 8 N/A Consolidated Financial Statements 10 Applied Information Memorandum 39

42 Social Islami Bank Ltd. 2 Basis of Presentation of Financial Statements and Significant Accounting Policies 2.1 Basis of Preparation of the Financial Statements The Financial Statements, namely, Balance Sheet, Profit and Loss Account, Cash Flow Statements, Statement of Changes in Equity, Statement of Liquidity Analysis and relevant notes to the financial statements and disclosures thereto, of the Bank are prepared under historical cost convention on a going concern basis Statement of Compliance The Financial Statements of the Bank have been prepared in accordance with Bangladesh Financial Reporting Standards (BFRS), and the requirements of Bank Companies Act 1991(as ammended upto year 2013), BRPD Circular no: 15 dated Along with other rules and regulations issued by Bangladesh Bank, the Companies Act 1994, the Securities and Exchange Rules In case any requirement of the Bank Companies act 1991, and provisions and circulars issued by Bangladesh Bank differ with those of BFRS, the requirement of the Bank Companies Act 1991, and provisions and circulars issued by Bangladesh Bank shall prevail. Material and partial departures from the requirements of BFRS as well as the compliance with the Bangladesh Bank circulars are as follows: I) Investment in Shares and Securities The bank investment in different securities has been valued on as under: Quoted Bond & Shares At cost or Market Value whichever is lower Unquoted Shares At cost Bangladesh Govt. Islamic Bond At cost CDBL Share & Preference Share At cost All investment in securities are initially recognized at cost, including acquisition charges associated with the investment. Premiums are amortised and discounts are accredited. As per BRPD Circular No. 15 (09 November 2009), investments in quoted shares and unquoted shares are revalued at the year end at market price and as per book value of last audited balance sheet respectively. Provision should be made for any loss arising from diminution in value of investment. As such the company measures and recognizes investment in quoted and unquoted shares at cost if the year end market value (for quoted shares) and book value (for unquoted shares) are higher than the cost. However as per requirements of Bangladesh Accounting Standard (BAS)- 39, investment in shares falls either under at fair value through profit and loss account or under available for sale where any change in the fair value at the year-end is taken to profit and loss account or revaluation reserve respectively. SIBL recognises its Investment in Shares and Securities as per BAS-39 and accounted for the required profit/(loss) after adjustment of the value of shares and securities through profit and loss account. ii) iii) Revaluation gains/losses on Government Securities SIBL is a bank running on Islamic Shariah Principle. Hence, we do not participate in buying interest bearing Government Securities. Investments and Provisions As per BAS-39 impairmrnt assessment should be done by considering whether any objective evidence of impairment exists for financial assets that are individually significant. For financial assets thet are not individually significant, the assessment can be performed on an individual or collective (portfolio) basis. However, Provision for classified and unclassified investment is made on the basis of year end review by the management and of instructions contained in Bangladesh Bank BCD Circular No.34 Dated 16 November 1989, BCD Circular No.20 (27 December 1994), BCD Circular No. 12 (04 September 1995), BRPD Circular No. 16 (06 December 1998), BRPD Circular No. 9 (14 May 2001), BRPD Circular Letter No. 10 (20 August 2005), BRPD Circular Letter No. 10 (18 September 2007), BRPD Circular No. 5 (29 April 2008), BRPD Circular Letter No: 32 (10 October 2010), BRPD Circular No: 14 (23 September 2012), BRPD Circular No:19 (27 December 2012), and BRPD Circular No: 05 (29 May 2013) at the following rates: Particulars Rate General Provision on Contingent Liability/ Non Funded Business 1% General Provision on Unclassified Investment 1% General Provision on Investment for Small and Medium Enterprise 0.25% General Provision on Investment for Professionals 2% General Provision on Investment for House Financing 2% General Provision on Investment for Consumer Financing 5% General Provision on Investment for Short term Agri/ Micro credit 5% General Provision on Special Mention Account 5% Specific Provision on Substandard Investment 20% Specific Provision on Doubtful Investment 50% Specific Provision on Bad / Loss Investment 100% 40 Information Memorandum

43 iv) As per BRPD Circular No: 14 (23 September 2012), BRPD Circular No: 19 (27 December 2012), and BRPD Circular No: 05 (29 May 2013) a general provision at 0.25% to 5% under different categories of unclassified investments (good/standard investments) has to be maintained regardless of objective evidence of impairment. As per same circulars mentioned above we are to maintain 20%, 50% and 100% for investments classified as sub-standard, doubtful and bad & loss category respectively depending on the duration of overdue. As per BRPD Circular No. 10 (18 September 2007) and BRPD Circular No: 14 (23 September 2012), a general provision at 1% is required to be provided for all off-balance sheet risk exposures. However, such general provision on general investment & off-balance sheet exposures and specific provisions on classified investmnets cannot satisfy the conditions of provision as per Bangladesh Accounting Standard (BAS)-39. Recognition of profit suspense Profit / Rent / Compensation Suspense account and Doubtful Income Profit / Rent / compensation accrued on classified investments are suspended and accounted for as per BRPD Circular no: 15 (09 November 2009) issued by the Bangladesh Bank. Moreover, incomes that are irregular (doubtful) as per Shariah are also not included in the distributable income of the Bank. Income on unclassified overdue investment of Murabaha and Bai-Muazzal is charged under compensation account instead of showing as income of the Bank. Interest received from NOSTRO accounts are not credited to the income as per Islamic Shariah. v) Other comprehensive income vi) vii) As per BAS-1 (Presentation of Financial Statements), other comprehnsive income (OCI) or components of OCI, as a part of financial statements are to be included in a single Other Comprehensive Income statement. However, as per BRPD Circular No. 15 (09 November 2009), there are no statement of OCI and we follow the template for reporting as per the circular. If there is any component of OCI, it is shown in statement of changes in equity. Financial instruments-presentation and disclosure Financial instruments-presentation and disclosures are made in several cases as per guidelines and instructions of Bangladesh Bank in particular and respective cases. Requirements of BAS-32 and BFRS-7 can not be followed due to the presentation and disclosure obligations of Bangladesh Bank. Financial guarantees Financial guarantees such as letter of credit, letter of guarantee etc. are treated as off-balance sheet items as per relevant Bangladesh Bank Circular, BRPD 15 (09 November 2009) whereas as per BAS 39, these should be treated as Other Liability. No liability is recognised for the guarantee except the cash margin. We account for the financial guarantees as per BRPD 15 (09 November 2009) and liability for financial guarantees are not recognised initially at their fair value and the fair value amortisation of the same liability is not done either as per BAS 39. So that the financial guarantees are not also carried at the higher of this amortised amount and the present value of any expected payment when a payment under the guarantee has become probable. viii) Cash and cash equivalent As per BRPD circular no 15 (09 November 2009), cash and cash equivalents include notes and coins in hand, balances lying with ATM, unrestricted balances held with Bangladesh Bank and its agent Bank, balance with other Banks and Financial Institutions, placement with Banks and other Financial Institutions. ix) As per BAS 7, cash and cash and cash equivalents should be reported as cash item and reconciliation of the amounts of the items in its cash flow statement should be presented also. However, presentation and reconciliation is done in line with BRPD circular 15 and BAS 7. Non-banking asset In accordance with BRPD 15, non-banking asset should be presented in the face of Balance sheet if there is any. But, no BFRS indicates for accounting of non-banking assets. However, there is no non-banking assets of SIBL. x) Cash Flow Statement Bangladesh Accounting Standard (BAS)-7 Cash Flow Statement requires SIBL to prepare cash flow statement under direct method. However, Cash Flow Statement has been prepared under a adopted method of direct and indirect in accordance with the BRPD Circular No. 15, (09 November 2009) issued by the Banking Regulation and Policy Department of Bangladesh Bank. xi) Balance with Bangladesh Bank (Cash Reserve Requirement, CRR) BAS 7 requires balance with Bangladesh Bank to be treated as other assets. However, as per BRPD circular 15, SIBL treats balance with Bangladesh Bank as cash and cash equivalent though the amount is restricted for CRR purpose and can not be used in our day to day operational requirement. Social Islami Bank Ltd. Information Memorandum 41

44 Social Islami Bank Ltd. xii) Presentation of intangible asset As per BAS 38, intangible assets are accounted for and amortized. Related necessary disclosures for the intangible asset; i.e computer software is given in note 8.1. There is no restriction or recommendation for accounting for the intangible assets as per any Bangladesh Bank circular. xiii) Off-balance sheet items Contingent Liabilities Any possible obligation that arises form past events and the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank; or Any present obligation that arises from past events but is not recognised because: * it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or * the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are not recognised but disclosed in the financial statements unless the possibility of an outflow of resources embodying economic benefits is reliably estimated. Contingent assets are not recognised in the financial statements as this may results in the recognition of income which may never be realised. However, the amount of cash margin is recognised as liability. As per BRPD circular 15, contingent liabilities are recognised as off balance sheet items in absence of any recommendation in BFRS. xiv) Investments net off provisions Investments are presented at its actual value without netting off as per BRPD circular 15 though it is to be presented at net off value as per related BFRS. 2.2 Consolidation Procedures (BAS-27) The consolidated financial statements include the financial statements of Social Islami Bank Limited and its subsidiaries SIBL Securities Limited and SIBL Investment Limited, made up to the end of the financial year. The consolidated financial statements have been prepared in accordance with Bangladesh Accounting Standard (BAS)27: Consolidated and Separate Financial Statements, Bangladesh Financial Reporting Standards (BFRS):3- Business Combinations and Bangladesh Financial Reporting Standards (BFRS):10- Consolidated Financial Statements. The consolidated financial statements are prepared to a common financial period ended 31 December Subsidiary Subsidiary is that enterprise which is controlled by the Bank. Control exists when the Bank has the power, directly or indirectly, to govern the financial and operating policies of an enterprise from the date that control commences until the date that control ceases. The financial statements of subsidiary are included in the consolidated financial statements from the date that control effectively commences until the date that the control effectively ceases. Subsidiary company is consolidated using the purchase method of accounting. 2.4 Functional and Presentation Currency These financial statements are presented in Bangladesh (Tk) which is the Bank s functional currency. Except as indicated, figures have been rounded off to the nearest. 2.5 Use of estimates and judgements The preparation of the consolidated financial statements in conformity with BFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 2.6 Foreign Currency Transactions /Translation Foreign currency transactions are converted into equivalent currency using the ruling exchange rates on the dates of such transaction(s). Assets and Liabilities in foreign currencies as on 31 December 2013 have been converted into currency at the weighted average of the prevailing buying and selling rate of inter-bank market as determined by Bangladesh Bank on the closing date of every month. Balances held in foreign currencies other than US dollar are translated into equivalent US dollar at buying rates of New York closing of the previous day. Differences arising through buying and selling transactions of foreign currencies on different dates during the period from January to December 2013 have been adjusted by debiting or crediting to the Profit and Loss Account. 2.7 Reporting Period These financial statements cover twelve months from 01 January to 31 December Information Memorandum

45 2.8 Statement of Changes in Equity The statement of changes in equity reflects information about the increase or decrease in net assets or wealth. 2.9 Liquidity Statement The liquidity statement of assets and liabilities as on the reporting date has been prepared on residual maturity term which has been given in the statement Fixed Assets, Depreciation and Revaluation (BAS-16) Assets have been shown at cost less depreciation as per paragraph 43 of Bangladesh Accounting Standard (BAS)-16 Property, Plant & Equipments. Depreciation has been charged on reducing balance method except motor vehicle; which has been charged on straight-line method. Depreciation on addition of assets has been charged from the date of purchase. Rate of depreciation are as under: Particulars Rate (%) Estimated life(years) Building Furniture Decoration Mechanical Appliance 20 5 Motor Car 20 5 Books Social Islami Bank Ltd. Revaluation Land and building are revalued as per Bangladesh Accounting Standard (BAS)-16, Property, Plant and Equipment as well as Bangladesh Bank BCD Circular Letter No. 12 & 18, dated: 20 April 1993 & 15 June 1993, respectively and BRPD Circular No. 10 and 09, Dated: 25 November 2002 and 31 December The Bank revalued its fixed assets on by two separate valuers, namely- Commodity Inspection Services (BD) Ltd. and Royal Inspection International Ltd. But the effects on assets have been accounted for as on Reserve is created by the sum of revaluation surplus and depreciation is charged on the revalued assets except land as per the respective rate of depreciation Capital/Shareholders Equity Authorised capital Authorised capital is the maximum amount of share capital that the Bank is authorised by its Memorandum and Articles of Association. Paid up Capital Paid up capital represents total amount of shareholder capital that has been paid in full by the ordinary shareholders. Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to vote at shareholders meetings. In the event of a winding-up of the Bank, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any residual proceeds of liquidation. Details are shown in Note Statutory Reserve Statutory reserve has been 20% of profit before tax in accordance with provisions of section 24 of the Bank Companies Act, 1991 (as amended upto 2013) until such reserve equal to its paid up capital together with the share premium Revenue Recognition (BAS-18) (i) Investment income & Revenue recognition Profit on investments and deposits are recognized against the investment of fund under Mudaraba, Musharaka, Murabaha, Bai-Muazzal and Hire Purchase etc. in line with related approved policy of the Board. Profit on investment ceases to be taken into income when such investment accounts are classified. It is then kept in compensation/rent suspense account and the same is accounted for on cash basis as and when recovered or de-classified as per related BRPD circular. Fees and commission income are recognized when it is earned. Income from investment in shares and securities is recognized on actual basis except Bangladesh Govt. Mudaraba Bond income which is recognized on accrual basis. Sharing of Investment Income In case of Investment, Mudaraba fund gets preference over cost free fund. The investment income earned through deployment of Mudaraba Fund is shared by Bank and the Mudaraba Depositors at the predetermined ratio fixed by the Bank. (ii) Profit Paid on Deposits and Other Expenses Profit paid on deposits and other expenses are recognized on accrual basis. As per Mudaraba Principle of Islamic Shari ah, the Mudaraba Depositors are entitled to get minimum 75% of the investment income earned through deployment of Mudaraba Fund as per weightage assigned to each type of Mudaraba Deposit. In Information Memorandum 43

46 Social Islami Bank Ltd. the year 2013, SIBL paid 76.68% of investment income earned through deployment of Mudaraba fund. Moreover, in some Mudaraba deposits, additional rate was allowed over the rate as per weightage. Mudaraba Depositors do not share any income derived from various banking services where the use of fund is not involved and any income derived from Investing Bank s Equity and other Cost Free Fund. Al-Wadeeah Depositors do not share any income of the Bank. Profit is paid/provided to Mudaraba Deposit accounts at provisional rate on half yearly/anniversary basis considering overall growth, performance, and profitability of the Bank during the year. Final rates of profit of any accounting year are declared after finalization of Shari ah Inspection Report and certifying the Investment Income of the Bank by the Statutory Auditors Provision for Taxation (BAS-12) (a) (b) Current Tax Provision for income tax has been calculated as per Income Tax Ordinance, 1984 as amended by the Finance Act 2013 considering all applicable allowances and disallowances. Deferred Tax The Bank has accounted for deferred tax as per Bangladesh Accounting Standard (BAS)-12, Income Taxes Zakat Fund The Bank has created a Zakat 2.58% for the period ended 31 December 2013 on reserve retained through out the year. Hizri Calendar has been considered to calculate 2.5% of Zakat Fund. Since Hizri Calendar counts 11 days less than the English Calendar, the percentage 2.5% represents equivalent to 2.58% of English Calendar. It is to be noted here that shareholders should pay their individual Zakat based on face value ( per share) of their individual shareholding along with their other zakatable assets Retirement Benefits (BAS-19) Defined contribution plans: Provident Fund The Bank operates a contributory provident fund duly approved by the Income Tax Authority. Both the employer and all eligible employees 10% of basic salary to this fund. Trustee board administers this fund. Defined benefit plans: Gratuity As per service rules of the Bank, employee who has completed five years regular service, are eligible for yearly 1 (one) month basic salary for every full year of regular service and employee who has completed seven years regular service are eligible for yearly 2 basic salary for full year regular service.the Bank has complied with Bangladesh Accounting Standard (BAS) -19, Employee Benefits and necessary provision 12.6% of basic salary of the regular employees have been made as per actuary valuation of Z. Halim & Associates, Actuarial & Pension Consultants for the period ended 31 December Reconciliation of Inter Bank / Branch Transactions Books of accounts with regard to inter bank/branch transactions (In Bangladesh and outside Bangladesh) are reconciled and there are no material differences that may affect the financial statements significantly Risk Management Today s most risky nature of Banking business has caused the Central Banks of every country much concerned about the risk factors affecting the financial position of the banks. In this connection every Central Banks have come forwarded to establish a general framework to defeat the risk factors considering the laws of the land. Bangladesh Bank has also undertaken an overall core-risk management project under which every bank shall be bounded to the authoritative covenants to install risk management system. Social Islami Bank has established approved policies covering major areas such as (a) Investment Risk Management, (b) Foreign Exchange Risk Management (c) Asset Liability Management (d) Money Laundering Prevention (e) Internal Control & Compliance and (f) Guideline on Information & Communication Technology according to the DOS circular no: 02 (15 February 2012) regarding Risk Management Guidelines for Banks, Bank Companies Act 1991 (as amended upto 2013) and other guidelines of Bangladesh Bank. In addition, the bank is also following relevant Bangladesh Bank guidelines on risk based capital adequacy, stress testing and managing the banking risks in other core risk areas. The bank has established an independent Risk Management Unit (RMU) as per DOS cirular no:02 (15 February 2012). The RMU conducts stress testing as per DOS circular no: 01 (23 February 2011), for examining the Bank s capacity of handling futur shocks, as well as deals with all potential risks that might occur in future. The prime objective of the Risk Management is that the bank takes well calculative business risks while safeguarding the bank s capital, its financial resources and profitability from various risks. In this context, the bank took steps to implement the guidelines of Bangladesh Bank as under: 44 Information Memorandum

47 (a) Investment Risk Management Investment risk is one of the major risks faced by the bank. This can be described as potential loss arising from the failure of a counter party to perform as per contractual agreement with the bank. The failure may results from unwillingness of the counter party or decline of financial condition. Therefore, the Bank s investment risk management activities have been designed to address all these issues. The Bank has segregated duties of the Officers / Executives involved in investment related activities. A separate Corporate Division has been formed at Head Office, which is entrusted with the duties of maintaining effective relationship with the customer, marketing of credit products, exploring new business opportunities etc. Moreover, investment approval, administration, monitoring and recovery functions have been segregated. For this purpose, three separate units have been formed within the Investment Division. These are (a) Investment Risk Management Unit, (b) Investment Administration Unit and (c) Investment Monitoring & Recovery Unit. Investment Risk Management Unit is entrusted with the duties of maintaining asset quality, assessing risk in lending to a particular customer, sanctioning investment, formulating policy / strategy for lending operation etc. A thorough assessment is done before sanctioning of investment facility at Investment Risk Management Unit. The risk assessment includes borrower risk analysis, financial analysis, industry analysis, historical performance of the customer, security of the proposed credit facility etc. The assessment process starts at Corporate Division by the Relationship Manager/ Officer and ends at Investment Risk Management Unit when individual executives. Proposal beyond their delegation are approved / declined by the Executive Committee and / or the Management. In determining single borrower / large investment limit, the Bangladesh Bank instructions are strictly followed. Internal audit is conducted on periodical interval to ensure compliance of Bank s and regulatory policies. Investments are classified as per Bangladesh Bank s guidelines. Social Islami Bank Ltd. (b) (c) (d) Foreign Exchange Risk Management Foreign Exchange risk is defined as the potential change in earnings arising due to change in market prices. The foreign exchange risk of the bank is minimal as all the transactions are carried out on behalf of the customers against underlying L/C commitments and other remittance of single borrower limit shown in note. International Department independently conducts the transactions relating to foreign exchange and is responsible for verification of the deals and passing of their entries in the books of account. All foreign exchange transactions are revalued at Mark-to-market rate as determined by Bangladesh Bank at the month end. All NOSTRO Accounts are reconciled on monthly basis and the management for its settlement reviews outstanding entry beyond 30 days. Asset Liability Management Risk Asset Liability Management (ALM) has been defined as a planned, structured and systematic process of managing the asset and liability with a view to lead the Bank to a balanced and sustainable growth through minimizing various business risk factors - market risk and liquidity risk. According to the Bangladesh Bank guidelines and considering the most practical aspects of the Bank, an approved policy manual on ALM has been prepared so that it could be followed consistently every sphere of the management. To support the ALM process, the Bank has established a committee called Asset Liability Committee (ALCO) headed by the Managing Director and holds meeting at least once in every month. ALM Desk, an exclusive functional and operational desk for the asset liability management, is embodied herewith the ALCO to function under the direct control of Financial Administration Division (FAD). ALCO reviews the liquidity requirement of the Bank, the maturity of assets and liabilities, deposit and lending, pricing strategy and the liquidity contingency plan at the threshold of stress liquidity situation. Besides that monitoring and analyzing of significant volatility in net investment income, investment value and exchange earnings etc. are the common and regular job of the ALM desk. Money Laundering Risk Social Islami Bank Limited (SIBL) has framed an approved Money Laundering Prevention Policy Guideline so that it could be sufficient enough to protect the bank from tribulations of money laundering. As per Money Laundering Prevention Act, 2002 and Money Laundering Prevention circular, a Central Compliance Unit (CCU) has been formed at Head Office in SIBL and a designated person has been nominated to supply any information if required and report any abnormal and suspicious transactions to Bangladesh Bank through CCU. Chief Anti Money Laundering Compliance Officer (CAMALCO) has been designated at head office and Branch Anti Money Laundering Compliance Officers (BAMALCO) has been nominated at branches. The second man of the ninety-four branches of SIBL has been complying the responsibility for their respective branches as Branch Anti Money Laundering Compliance Officers (BAMALCO) as per the direction of Bangladesh Bank. Know Your Customer (KYC) profile, Risk Rating and Assessment (RRA) profile and Transaction Profile (TP) have been introduced as per the direction of Bangladesh Bank. These profiles facilitate and ease the KYC procedures, risk categorization, transaction monitoring process, suspicious activity reporting process, self-assessment process, independent procedures testing system etc. Proper record keeping procedure has been established also. The action plan regarding the KYC procedures of those accounts, which opened before already has been sent to the Bangladesh Bank. The branches, which are liable to act in accordance with this action plan, has been complying it properly and vigorously. Information Memorandum 45

48 Social Islami Bank Ltd. (e) Various types of statements such as Quarterly STR, Quarterly KYC statement for legacy accounts, Bi-monthly statements etc has been sent to the Bangladesh Bank properly. FIU Reporting System Version Software has been installed all of the branches as per the direction of central bank. As a result, the soft copy of Cash Transaction Report (CTR) and Suspicious Transaction Report (STR) has been sent to Bangladesh Bank properly in due time. The training procedure has been conforming as per the action plan, which was given to Bangladesh Bank. It provides significant role to develop and to aware the staffs of SIBL about Anti Money Laundering. The management of the Bank is committed to train all of its workforces regarding anti money laundering. Internal Control and Compliance Risk Internal controls ensure systematic and orderly flow of various operational activities within the organization. Now a day in the biggest and complex business environment, compliance becomes one of the major concern to the corporate being major risk involved in non-compliance of statutory requirements and operational procedures. To protect and safeguard the Bank form any means of fraud and error as well as loss - Social Islami Bank has introduced the Internal Control and Compliance guideline and also established a separate department called Internal Control and Compliance Department (ICCD) at Head Office staffed with some experienced senior Banker rest with the power and duties to train the employees of the bank, give direction, monitor, audit and establish control on day to day operational procedures and statutory and non-statutory compliances. (f) ICCD collects different periodical reports, departmental control function check list etc. for documentation and also undertakes periodical and special audit of the branches and departments at Head Office for review of the operation and compliance of statutory requirements and the Board Audit Committee reviews the reports. Information and Communication Technology Security Risk According to the latest requirement of the Bangladesh Bank on Core Risk Management, ICT policy guideline has been newly introduced at Social Islami Bank. The prime objective of such guideline is to protect data properties of the Banks from any means of loss, unauthorized use, forgery and destruction as well as documentation of all ICT related tasks to reduce man dependency and increase process dependency. According to this guideline, ICT department responses, monitors, trains and co-ordinates the total IT matter with other departments and branches so that man and machine could effectively co-opt on timely fashion. The ICT department ensures necessary guidelines / instructions to the Departments / Branches and monitors status of implementation strictly. g) Internal Audit The bank initiates internal audit of the branches and head office divisions on a periodical basis, concurrent basis and surprise inspection is also done to check the compliance status of the cost centers of the bank. The internal audit is supervised under ICCD and a separate division named Board Audit Cell (BAC) also conducts internal audit under supervision and direct authority of Board Audit Committee. This BAC directly reports to the Chairman of Board Audit Committee. This way a strong internal audit of the cost centers as well as of Head Office Divisions are conducted to ensure all related compliance. h) Fraud and Forgeries Fraud and Forgeries are a critical dimension, the banking industry is facing now a days. In order to safeguard the bank from all probable fraud and forgeries that may occur in any respect, the bank has taken all possible safety security measures that are undertaken under direct supervision of ICCD. Concurrent audit, internal audit, Board audit etc. are done periodically along with surprise audit from time to time. Moreover, there are a lot of safety measures initiated at the branch level also. The core banking solution Ababil is desiged to prevent IT related fraud and forgeries Earning Per Share (BAS-33) Basic Earnings Per Share has been calculated in accordance with Bangladesh Accounting Standard (BAS)-33: Earnings Per Share (EPS), which has been shown on the face of profit and loss account. This has been calculated by dividing the basic earnings by the weighted average number of ordinary shares outstanding during the period. Prior year EPS has been restated as and when required. 46 Information Memorandum

49 Cash In hand: In local currency 1,243,774,013 1,086,536,063 In foreign currencies 7,870,630 5,128,359 ATM balance 15,317,700 12,863,800 1,266,962,343 1,104,528,222 In Foreign Currencies Foreign Amount in FC Exchange Currency Currency Rate USD 100, ,829,502 5,128,359 S. Rial 1, ,128-7,870,630 5,128,359 Social Islami Bank Ltd. 3(a) Consolidated balance of cash in hand Social Islami Bank Limited 1,266,962,343 1,104,528,222 Cash in hand of Subsidiary companies 251, ,398 SIBL Securities Limited 250, ,228 SIBL Investment Limited 1,620 13,170 1,267,213,967 1,104,657, Balance with Bangladesh Bank and its agent bank (Sonali Bank) Balance with Bangladesh Bank (Note-3.1.1) 7,528,272,016 9,912,135,883 Balance with Sonali Bank (as agent of BB) (Note-3.1.2) 99,518, ,418,951 7,627,790,250 10,020,554, Balance with Bangladesh Bank (Including foreign currencies) In local currency 6,434,688,027 8,702,803,548 In foreign currencies 1,093,583,989 1,209,332,335 7,528,272,016 9,912,135, Balance with Sonali Bank (as agent of Bangladesh Bank) In local currency 99,518, ,418, Cash Reserve Requirement (CRR) and Statutory Liquidity Ratio (SLR) Cash Reserve Requirement (CRR) and Statutory Liquidity Ratio (SLR) have been calculated and maintained in accordance with the Section 33 of the Bank Companies Act, 1991 and subsequent BCD Circular No.13 dated May 24, 1992; BRPD Circular No. 12 dated September 20, 1999 and BRPD Circular No. 22 dated November 6, 2003: BRPD Circular No. 12 dated August 25, 2005 and DOS Circular No.01 dated March 03, 2009 and MPD circular no: 04 and 05 dated 01 December The statutory cash reserve requirement on bank s time and demand liabilities at the rate of 6.00% has been calculated and maintained with Bangladesh Bank in current account and 11.5% statutory liquidity ratio including CRR on the same liabilities has also been maintained in the form of BD Govt. Islamic Bond including FC (Foreign Currency) balances with Bangladesh Bank, Cash in vault and transit. Both the reserves are maintained by the Bank in excess of the statutory requirements, as shown below: 3.3 Cash Reserve Requirement (CRR): 6.00% of average Demand and Time Liabilities) Required Reserve 5,682,039,130 4,349,977,184 Actual Reserve held (in local currency) 6,534,206,261 8,811,222,499 Surplus 852,167,130 4,461,245, Statutory Liquidity Ratio (SLR): 11.5% (including 6.00% CRR) of Average Demand and Time Liabilities Required Reserve 10,890,575,000 8,337,456,270 Actual Reserve held (Note- 3.5) 14,394,752,593 14,025,083,056 Surplus 3,504,177,593 5,687,626,786 Information Memorandum 47

50 Social Islami Bank Ltd Held for Statutory Liquidity Ratio Cash in hand (Note- 3) 1,266,962,343 1,104,528,222 Balance with Bangladesh Bank and its agent banks (Note-3.1) 7,627,790,250 10,020,554,834 Bangladesh Govt. Islamic Bond (Note- 6.4) 5,500,000,000 2,900,000,000 14,394,752,593 14,025,083,056 4 Balance with Other Banks and Financial Institutions (Other than Mudaraba Term Deposit) 4(a) In Bangladesh (Note - 4.1) 1,870,113,449 2,713,496,766 Outside Bangladesh (Note- 4.4) 1,178,527, ,779,375 3,048,641,405 3,563,276,141 Consolidated balance of other Banks and Financial Institutions In Bangladesh Social Islami Bank Limited 1,870,113,449 2,713,496,766 Add: Account Balance of subsidiaries of SIBL with SIBL Principal Branch 262,304, ,453,862 SIBL Securities Limited (Current account and MTDR) 12,350,525 67,498,715 SIBL Investment Limited 249,954, ,955,147 2,132,418,431 3,030,950,628 Less: Inter company balance eliminated 262,304, ,453,862 SIBL Securities Limited (Current account and MTDR) 12,350,525 67,498,715 SIBL Investment Limited 249,954, ,955,147 Add: Account Balance of subsidiaries of SIBL with other banks and financial institutions 29,129,747 13,343,084 SIBL Securities Limited 29,129,747 13,343,084 SIBL Investment Limited - - Consolidated balance with Banks and Financial Institutions 1,899,243,196 2,726,839,850 The balances are held with the Principal Branch of SIBL bearing current account no: and respectively. 4.1 Inside Bangladesh Current Account Islami Bank Bangladesh Limited 620,568 5,132,544 Sonali Bank Limited 20,201,422 16,742,099 Rupali Bank Limited Brac Bank Limited (Remittance settlement Account) 5,470,364 7,936,152 Trust Bank Limited (ATM settlement Account) 4,805,052 4,207,787 Standard Chartered Bank (ATM settlement Account) 4,906,750 2,787,307 36,004,763 36,805, Mudaraba Short Notice Deposits Al- Arafah Islami Bank Limited 829, ,819 ICB Islami Bank Limited 13,442 16,092 Shahjalal Islami Bank Limited 366,738,442 1,671,876 Prime Bank Limited (Islami Banking Branch) 7,004 8,272 United Commercial Bank Limited 348 1,456 Bank Asia Limited (Islami Banking Branch) 502, ,240 Islami Bank Bangladesh Limited 6,684,335 1,003,221 Jamuna Bank Limited (Islami Banking Branch) 30,037, ,873,778 Pubali Bank Limited (Islami Banking Branch) 75,522, ,426,511 Janata Bank Limited 10,940 7,008, ,345,708 1,158,287, Information Memorandum

51 Mudaraba Saving Deposit Al- Arafah Islami Bank Limited 432,449, ,957,544 ICB Islami Bank Limited 82,004 82,814 Dhaka Bank Limited (Islami Banking Branch) 2,446,407 2,262,515 Dhaka Bank Limited (Local Office) 102,786 - AB Bank Limited (Islami Banking Branch) 1,614,888 4,766,449 Exim Bank Limited 24,581,248 57,724,211 Prime Bank Limited (Islami Banking Branch) 11,476, ,460,677 Shahjalal Islami Bank Limited 109,527, ,830,073 The City Bank Limited (Islami Banking Branch) 2,894,458 57,657,256 Southeast Bank Limited (Islami Banking Branch) 760,484, ,932,088 First Security Islami Bank Limited 8,102,995 7,729,895 1,353,762,977 1,518,403,522 Total 1,870,113,449 2,713,496,766 Social Islami Bank Ltd. 4.4 Outside Bangladesh (NOSTRO Account) Current Account with Currency F.C. Amount Rate Mashreque Bank, Mumbai ACUE 1, ,293 Mashreque Bank, Mumbai ACU 3, ,814 Mashreque Bank, New York USD 2,742, ,201,242 Mashreque Bank, New York (OBU) USD ,775 Standard Chartered Bank Limited, Mumbai ACU 6, ,263 Standard Chartered Bank Limited, Frankfurt EUR ,961 Standard Chartered Bank Limited, London GBP 3, ,514 Standard Chartered Bank Limited, Tokyo JPY 764, ,764 Standard Chartered Bank Limited, New York USD 12,356, ,754,685 United National Bank of London GBP ,230 Sonali Bank (UK) Limited USD 6, ,886 Sonali Bank (UK) Limited GBP 2, ,764 Sonali Bank (UK) Limited EUR ,043 Sonali Bank, Kolkata ACU 1, ,924 United Bank of India, Kolkata ACU 2, ,082 Summit Bank Ltd., Karachi ACU 2, ,342 Nepal Bangladesh Bank Ltd.,Kathmandu ACU 1, ,934 AB Bank Ltd., Mumbai ACU 2, ,456 Habib Bank Ltd. Karachi ACU 4, ,184 Bank of Bhutan ACU 1, ,100 Commerz Bank Frankfurt EUR 4, ,700 1,178,527,956 Currency wise Distribution: Foreign Currency Composition Composition USD/ACU 99.83% 96.89% 1,176,468, ,412,290 GBP 0.06% 1.82% 751,508 15,427,628 EUR 0.06% 1.22% 742,997 10,340,033 YEN 0.05% 0.07% 564, , % 100% 1,178,527, ,779,375 Please see Annexure-C for details comparative statement of 2013 & 2012 of foreign currency amount and rate Information Memorandum 49

52 Social Islami Bank Ltd. 4.5 Maturity-wise groupings of balance with other Banks and Financial Institutions (Both in Bangladesh and outside Bangladesh) On Demand 1,830,254,726 2,196,712,971 Not more than 3 months 609,193, ,281,585 Over 3 months but not more than 1 year 609,193, ,281,585 Over 1 year but not more than 5 years - - More than 5 years - - 3,048,641,405 3,563,276,141 5 Placement with Banks & other Financial Institutions Placement with Banks (Note-5.1) 5,524,879,564 6,225,879,564 Placement with other Financial Institutions (Note-5.2) 3,540,000,000 2,790,000,000 9,064,879,564 9,015,879, Mudaraba Term Deposits with Banks ICB Islamic Bank Limited 224,879, ,879,564 Al-Arafah Islami Bank Limited 800,000, ,000,000 Dhaka Bank Limited (Islami Banking Branch) 400,000, ,000,000 South East Bank Limited (Islami Banking Branch) - 200,000,000 Shahjalal Islami Bank Limited 1,700,000,000 1,800,000,000 Exim Bank Limited 1,000,000,000 1,000,000,000 Bank Asia Limited (Islami Banking Branch) - 300,000,000 First Security Islami Bank Limited 1,000,000,000 1,200,000,000 The City Bank Limited (Islami Banking Branch) 200,000, ,000,000 Union Bank Limited 200,000,000-5,524,879,564 6,225,879, Mudaraba Term Deposits with Other Financial Institutions United Leasing Company Limited 250,000, ,000,000 Islamic Finance & Investment Limited - 30,000,000 IIDFC 280,000, ,000,000 International Leasing Finance & Services Limited 400,000, ,000,000 Prime Finance & Investment Limited 750,000, ,000,000 IDLC Finance Limited 1,000,000, ,000,000 Union Capital Limited 450,000, ,000,000 Lanka Bangla Finance Limited 100,000,000 - Fareast Finance and Investment Limited 250,000, ,000,000 Hajj Finance Company Limited 60,000,000 10,000,000 3,540,000,000 2,790,000, Maturity-wise groupings of placement with Banks and other Financial Institutions On Demand 500,000, ,000,000 Not more than 3 months 3,350,000,000 1,980,000,000 More than 3 months but less than 1 year 5,214,879,564 6,085,879,564 More than 1 year but less than 5 years - - More than 5 years - - 9,064,879,564 9,015,879, Information Memorandum

53 6 Investment in Shares & Securities Government Government Bond (Islamic Investment Bond) (Note 6.1) 5,500,000,000 2,900,000,000 5,500,000,000 2,900,000,000 Others Investment in Shares, Quoted (Note 6.2) 1,089,519, ,620,499 Investment in Shares, Unquoted (Note 6.3) 2,131,567,850 2,631,567,850 3,221,087,167 3,370,188,349 Fair value adjustment through profit or loss (FVTPL) (note: 6.5) (182,903,697) (126,173,365) Value of Investment in Shares and securities, Others 3,038,183,470 3,244,014,984 Grand Total 8,538,183,470 6,144,014,984 Social Islami Bank Ltd. Maturity-wise Grouping of Investment in Securities: Upto one month 1,406,615, ,447,134 Not more than 3 months 700,000, ,000,000 Over 3 months but not more than 1 year 4,300,000,000 2,300,000,000 Over 1 year but not more than 5 years 501,569,450 1,001,569,450 More than 5 years 1,629,998,400 1,629,998,400 8,538,183,470 6,144,014,984 6(a) Consolidated Investment in Shares and Securities Social Islami Bank Limited Government Investment in Government Islamic Bond 5,500,000,000 2,900,000,000 5,500,000,000 2,900,000,000 Others sectors 3,038,183,470 3,244,014,984 Less: Intercompany balance eliminated Investments in Subsidiaries 1,479,998,400 1,479,998,400 Investment in SIBL Securities Limited 1,229,999,000 1,229,999,000 Investment in SIBL Investment Limited 249,999, ,999,400 Consolidated Investment in others sectors 1,558,185,070 1,764,016,584 Total consolidated balance of Investment in shares and securities 7,058,185,070 4,664,016, Bangladesh Bank introduced a new type of investment opportunity solely for the purpose of Shariah Banks in the year 2005 being inheritent limitation on the part of Shariah Compliant Banks to take part in buying and selling of treasury bill etc as a very common form of treasury management. The fund has been operating under Mudaraba Principle and are being used as a part of SLR (Statutory Liquidity Requirement) vide Bangladesh Bank Circular Letter Ref. No: AMA/AUSOBI/SANCHAY/S-03/2004/262 dated September 2, The mobilized fund from Islamic Bond is invested by Bangladesh Bank and a portion of realized profit is distributed amongst the bond holders as per mudaraba principle of Islamic Shariah on the basis of the tenure of the bond. So, the rate of return from Islamic Bond is not prefixed rather dependent on fund deployment by Bangladesh Bank. Information Memorandum 51

54 Social Islami Bank Ltd Investment (Cost) in Shares (Quoted) ICB 1st Mutual Fund 12,155,000 11,965,679 ICB 2nd Mutual Fund 478,500 1,071,536 ICB 3rd Mutual Fund 8,370,625 13,448,025 ICB 4th Mutual Fund 3,891,000 8,352,234 ICB 5th Mutual Fund 1,606,500 4,633,704 ICB 7th Mutual Fund 13,572,000 17,639,340 ICB 8th Mutual Fund 11,460,034 17,144,838 Popular Ist Mutual Fund 631,575 - ICB Sonali Mutual Fund 852,326 - MBL 1st Mutual Fund 651,074 - AIBL 1st Mutual Fund 728,973 - AB 1st Mutual Fund 739,845 - National Life Insurance Ist Mutual Fund 4,600,000 20,000,000 Al-Arafah Islami Bank Limited 50,201,255 65,945,448 AB Bank Limited 27,297,000 59,533,246 Exim Bank Limited 31,163,200 42,489,473 Bank Asia Limited 15,365,400 28,687,500 Dhaka Bank Limited 22,888,466 34,856,688 Titas Gas Limited 19,599,905 27,362,281 City Bank Limited 10,720,000 16,106,827 Beximco Limited 11,270,000 25,248,318 MJ Bangladesh Limited 9,564 10,580 Shahjalal Islami Bank Limited 43,640,625 59,048,343 IBBL Mudaraba Perpetual Bond 297,626, ,076,438 Orion Pharma Limited 500,000,000-1,089,519, ,620, Investment (Cost) in Shares (Unquoted) CDBL Share 1,569,450 1,569,450 Belhasha Accom JV Limited 500,000, ,000,000 Investment in subsidiary: SIBL Securities Limited 1,229,999,000 1,229,999,000 Investment in subsidiary: SIBL Investment Limited 249,999, ,999,400 Orin Laboratories Limited - 500,000,000 FSIBL Mudaraba Subordinate Bond 150,000, ,000,000 2,131,567,850 2,631,567,850 Investment in Subsidiaries represents the amount invested in SIBL Securities Limited and SIBL Investment Limited that were incorporated on 20 July 2010 and 30 August 2010 respectively vide certificate of incorporation no: C-85876/10 and C-86726/10. SIBL holds 12,299,990 and 2,499,994 nos. shares of SIBL Securities Limited and SIBL Investment Limited respectively with a face value of Tk. 100 each and also representing holding of 99.99% shares in both the subsidiaries. 6.4 Government Bond (BD Govt. Islamic Bond) 5,500,000,000 2,900,000, Information Memorandum

55 6.5 Details of Shares & Securities in quoted and unquoted other than in subsidiaries 2013 Particulars No. of Shares/ Market price Fair value/ Market Cost price as on Fair value Securities per Share value as on adjustment Quoted Shares ICB 1st Mutual Fund 14, ,155,000 12,155,000 - ICB 2nd Mutual Fund 1, , ,500 (93,300) ICB 3rd Mutual Fund 56, ,810,875 8,370,625 2,440,250 ICB 4th Mutual Fund 30, ,703,000 3,891,000 1,812,000 ICB 5th Mutual Fund 15, ,391,000 1,606, ,500 ICB 7th Mutual Fund 174, ,964,000 13,572,000 1,392,000 ICB 8th Mutual Fund 229, ,988,252 11,460, ,218 National Life Insurance Ist Mutual Fund 550, ,060,000 4,600, ,000 Popular Ist Mutual Fund 100, , ,575 (31,575) ICB Sonali Mutual Fund 100, , ,326 (62,326) MBL 1st Mutual Fund 100, , ,074 (21,074) AIBL 1st Mutual Fund 100, , ,973 (8,973) AB 1st Mutual Fund 100, , ,845 (49,845) Al-Arafah Islami Bank Limited 2,340, ,695,108 50,201,255 (5,506,147) AB Bank Limited 911, ,874,750 27,297,000 (3,422,250) Exim Bank Limited 1,647, ,256,620 31,163,200 (9,906,580) Bank Asia Limited 786, ,081,680 15,365,400 2,716,280 Dhaka Bank Limited 1,070, ,127,073 22,888,466 (2,761,393) Titas Gas Limited 300, ,140,000 19,599,905 2,540,095 City Bank Limited 440, ,888,000 10,720,000 (1,832,000) Beximco Limited 201, ,480,250 11,270,000 (4,789,750) MJ Bangladesh Limited ,012 9,564 (552) Shahjalal Islami Bank Limited 1,837, ,870,000 43,640,625 (12,770,625) Orion Pharma Limited 6,000, ,200, ,000,000 (147,800,000) Quoted Bond 615,509, ,892,867 (176,383,047) IBBL Mudaraba Perpetual Bond 299, ,105, ,626,450 (6,520,650) Preference Shares 291,105, ,626,450 (6,520,650) Belhasha Accom JV Limited 50,000, ,000, ,000,000 - Unqoted Shares/ Bond 500,000, ,000,000 - CDBL Share 456,945-1,569,450 1,569,450 - FSIBL Mudaraba Subordinate Bond ,000, ,000, ,569, ,569,450 - Social Islami Bank Ltd. Grand Total 1,558,185,070 1,741,088,767 (182,903,697) Information Memorandum 53

56 Social Islami Bank Ltd Cost of shares and securities under the head quoted and unquoated other than investment in subsidiaries 1,741,088,767 - Fair value adjustment {Profit/(Loss)} to be made through profit and loss account (182,903,697) - Value of shares and securites, Quoted and Unquoted other than investment in subsidiaries 1,558,185,070 - Investments in Shares and Securities other than investments in subsidiaries under the category Financial Assets at fair value through profit or loss (FVTPL) has been recognised at fair value and the unrealized profit or loss i.e. difference between fair value and cost has been charged to profit and loss account and value of the investment has been reduced by the same amount as per requirements of Bangladesh Accounting Standard (BAS)-39, Financial Instruments: Recognition and Measurement. 7 Investments In Bangladesh General Investments etc. (Note-7.1) 76,398,581,962 66,459,100,077 Bills purchased and discounted-net (Note- 7.2) 4,539,818,951 2,546,846,049 Outside Bangladesh Bills purchased and discounted-net (Note- 7.2) 4,983,931,013 7,019,027,782 85,922,331,926 76,024,973,908 7 (a) Consolidated Investment General Investments etc. 76,398,581,962 66,459,100,077 Less: Intercompany balance eliminated SIBL Securities Limited Quard Investment with SIBL- Principal branch 50,000,000 - SIBL Investment Limited - - Total consolidated general investment 76,348,581,962 66,459,100,077 Bills purchased and discounted-net 9,523,749,964 9,565,873,831 Grand total 85,872,331,926 76,024,973,908 Maturity wise Classification of Investments: With a residual maturity of Re-payable on Demand 4,242,313,145 5,130,683,788 Not more than 3 months 26,475,590,655 16,970,988,616 Over 3 months but not more than 1 year 39,240,356,958 43,460,289,892 Over 1 year but not more than 5 years 15,592,813,699 6,770,166,468 Over 5 years 371,257,469 3,692,845, Mode-Wise Investment (General) 85,922,331,926 76,024,973,908 a) In Bangladesh Musharaka 580,258, ,697,156 Murabaha 3,090,245,590 5,571,248,529 Mudaraba 2,147,088, ,153,922 Bai-Muazzal 49,304,237,348 40,705,723,827 Hire-Purchase Sirkatul Meelk 12,069,609,964 12,156,391,561 Installment Investment Scheme 195, ,009 Quard 7,895,556,887 6,361,565,166 Bai-Salam 38,043,913 59,592,522 Staff Loan 944,293, ,391,402 Ijarah 180,063, ,294,803 Visa Card 148,989,056 82,796,180 76,398,581,962 66,459,100, Information Memorandum

57 Mode-Wise Investment (General) b) Outside Bangladesh Musharaka - - Murabaha - - Bai-Muazzal - - Hire-Purchase Sirkatul Meelk - - Installment Investment Scheme - - Quard - - Bai-Salam - - Others Bills Purchased and discounted Inside Bangladesh Social Islami Bank Ltd. In land Bill Purchase 4,539,818,951 2,546,846,049 Bills Purchased and discounted Outside Bangladesh Foreign Bill Purchased 113,086,049 53,498,799 Murabaha Bill of Exchange 1,062,509,738 2,670,155,998 Murabaha Wes Bills L/C 1,712,491,073 1,586,192,651 Baim-Wes bills 2,095,844,154 2,709,180,334 4,983,931,013 7,019,027,782 Grand total of net Bills Purchased and Discounted 9,523,749,964 9,565,873, Bills Purchased and Discounted Payable inside Bangladesh 4,539,818,951 2,546,846,049 Payable outside Bangladesh 5,356,860,964 7,820,912,687 Gross Bills Purchased and Discounted 9,896,679,915 10,367,758,736 Less: Profit receivable on Bills Purchased and Discounted 372,929, ,884,905 Net Bills Purchased and Discounted 9,523,749,964 9,565,873,831 Maturity wise Classification of Bills Purchased and Discounted: On demand 2,095,224,992 3,348,055,841 Over 1 month but less than 3 months 4,571,399,983 3,348,055,841 Over 3 months but less than 1 year 2,857,124,989 2,869,762,149 1 year or more - - 9,523,749,964 9,565,873, Investments on the basis of significant concentration Investments to allied concern of Directors 0.00% 0.00% 1,418,206 2,050,000 Investments to Executives & Staffs 1.31% 0.88% 1,128,178, ,332,251 Investments to Customer Groups 63.05% 65.82% 54,169,735,521 50,041,324,437 Industrial Investment 35.64% 33.29% 30,623,000,000 25,312,267,220 Others 0.00% 0.00% % % 85,922,331,926 76,024,973,908 Information Memorandum 55

58 Social Islami Bank Ltd. Investments allowed to individual customer exceeding 15% of Bank s total capital: Number of Client with amount of outstanding Investment to whom Investments sanctioned exceeds 15% of total capital of the bank is reported hereunder. Total capital of the Bank was Tk. 1, Crore as on and was used as base figure to calculate the single party exposure limit-funded liability; and such limit was fixed at Tk crore (1, crore x 15% ) till It is mentioned here that as per Bank Companies Act, 1991, single party exposure limit has been fixed at 15% for funded and 20% non-funded investment based on capital maintained for non export oriented clients whereas 15% funded and 35% non-fundend limit for 100% export oriented clients Total outstanding amount to such customers at end of the year (Funded) Nil Nil Number of such types of customers Nil Nil Amount of Classified Investments thereon Nil Nil Measures taken for recovery Not applicable Not applicable Details information of Investment more than 10% of Bank s total capital (Figure in Crore ) Sl Outstanding as on 31 Outstanding as on 31 no. Name of client December 2013 December 2012 Total (Funded and Non funded) Total (Funded and Non funded) 1 M/s. Agrani Traders, Ovi Traders and A M Trading M/s. Panama Composite Textile Mills Ltd Dong Bang Textile Limited Mars Textile Limited Thermax Textile Mills Ltd Bashundhara Group Dong Bang Dyeing Limited Islam Brothers & Co FMC Dockyard Ltd Rabiul Islam, M/s Rhythm Trading, AR Center Bashundhara Paper Mills Ltd. (BPML) and its subsidiaries M/s. Western Dresses Ltd M/s Abdul Monem Ltd M/s. Mabiya Ship Breakers Customer group and industry wise classification of Investment Sector Amount Composition Amount Composition Commercial lending 23,058,648, % 27,465,574, % Export Financing 4,850,941, % 6,209,299, % House Building Investment 2,596,711, % 3,039,253, % Consumer Investment Scheme 1,635,570, % 630,487, % Small and Medium Enterprises 8,242,397, % 6,468,970, % Micro Investment 19,270, % 2,467, % Other Investments 13,766,195, % 6,225,270, % Allied concern of Directors of SIBL 1,418, % 2,050, % Executives & Staffs of SIBL 1,128,178, % 669,332, % Agricultural Industries 922,802, % 911,387, % Textile Industries 14,194,788, % 7,860,528, % Food & Allied Industries 1,601,338, % 1,533,409, % Pharmaceutical Industries 109,194, % 222,720, % Leather, Chemical, Cosmetic etc. 222,025, % 346,473, % Construction Industries 3,428,418, % 3,093,782, % Cement and Ceramic Industries 632,300, % 561,181, % Service Industries 755,306, % 543,020, % Transport and Communication Industries 592,802, % 1,007,335, % Other Industries 8,164,022, % 9,232,427, % Total 85,922,331, % 76,024,973, Information Memorandum

59 7.5 Geographical Location-wise Investments Division As at 31 December 2013 As at 31 December 2012 Amount Composition Amount Composition Dhaka 60,489,650, % 50,654,663, % Chittagong 18,658,533, % 16,861,249, % Sylhet 2,525,946, % 4,516,622, % Rajshahi 230,352, % 236,166, % Khulna 3,262,619, % 3,103,393, % Rangpur 537,888, % 489,037, % Barisal 217,339, % 163,840, % Total 85,922,331, % 76,024,973, % Social Islami Bank Ltd Investments (Classification wise) Unclassified Standard 79,753,250,407 72,769,842,801 Special Mentioned Account 429,711,876 6,953,779 Classified Substandard 122,872, ,958,549 Doubtful 859,562,790 66,702,397 Bad or Loss 3,610,895,840 2,216,673,225 84,776,292,913 75,308,130,751 Standard (short term agri / micro credit) 17,860,814 45,986,583 Substandard (short term agri / micro credit) - - Doubtful (short term agri / micro credit) - - Bad or Loss (short term agri/micro credit) - 1,524,323 17,860,814 47,510,906 Staff lnvestment 1,128,178, ,332,251 85,922,331,926 76,024,973, Particulars of provision required for general investment Unclassified (Excluding Off-balance sheet exposures) 775,629, ,883,063 Classified 1,692,052, ,134,818 Unclassified- Off-balance sheet exposures 304,702, ,644,499 2,772,384,842 1,939,662,380 Information Memorandum 57

60 Social Islami Bank Ltd Detail Particulars of Provision for Investment Rate Base for Provision Required Provision Unclassified Standard 1% 71,143,348, ,433, ,062,568 Staff Investment 0% Consumer Finance (Other than HF and LP) 5% 195,334,545 9,766,727 1,010,848 Small and Medium Enterprise 0.25% 8,162,512,764 20,406,282 16,099,675 Housing Finance (HF) 2% 1,400,434,520 28,008,690 17,962,292 Loan for Professionals (LP) 2% 4,403,080 88, ,691 Share 2% 50,000,000 1,000,000 - SMA Investment 5% 426,260,821 5,033, ,660 Unclassified Off Balance Sheet Items 1% 30,470,229, ,702, ,644,499 Classified Substandard 20% 23,093,201 4,618,640 29,635,056 Doubtful 50% 343,644, ,822,048 6,908,779 Bad or Loss 100% 1,515,612,268 1,515,612, ,590,983 2,772,491,802 1,937,363,051 Provision Required (Short term Agricultural & Micro Credit) Unclassified Standard (short term agri /micro credit) 5% 17,860, ,041 2,299,329 Classified Substandard (short term agri /micro credit) 5% - - Doubtful (short term agri /micro credit) 5% - - Bad or Loss (Short term agri /micro credit) 100% ,041 2,299,329 Required provision for Investments 2,773,384,842 1,939,662,380 Total provision maintained 2,773,384,842 1,939,662,380 Provision Surplus/(Shortfall) - - Provision Made for funded exposures only: (Other than Short term Agricultural & Micro Credit) Unclassified Standard 1,075,405, ,887,573 SMA 5,033, ,660 Classified Substandard 4,618,640 29,635,056 Doubtful 171,822,048 6,908,779 Bad or Loss 1,515,612, ,590,983 2,772,491,802 1,937,363,051 Provision Made: (Short term Agricultural & Micro Credit) Standard (short term agri credit) 893,041 2,299,329 Substandard (short term agri credit) - - Doubtful (short term agri credit) - - Bad or Loss (Short term agri credit) ,041 2,299,329 Grand Total 2,773,384,842 1,939,662,380 Required provision - Provision made = Surplus/ (Shortfall) Information Memorandum

61 7.7.2 Particulars of provision for Off-Balance Sheet items Basis for Status Rate Provision Off-Balance Sheet Items 1% 30,470,229, ,702, ,644,499 Required provision for Investments 304,702, ,644,499 Provision maintained {note # 12.1(c)} 304,702, ,644,499 Surplus Provision Particulars of Investments: (i) Investment considered good in respect of which the banking company is fully secured 74,619,694,332 62,675,946,788 (ii) (iii) Investment considered good for which the banking company holds no other security other than the debtor s personal security 8,977,966,781 10,073,828,666 Investment considered good and secured by personal security of one or more parties in addition to the personal security of the debtors 2,324,670,813 3,275,198,454 (iv) Investment considered bad or doubtful not provided for - - (v) (vi) (vii) (viii) Total 85,922,331,926 76,024,973,908 Investment due by directors or officers of the banking company or any of them either severally or jointly with any other person 1,129,596, ,382,251 Investment due by companies or firms in which the directors of the banking company are interested as directors, partners or managing agents or, in the case of private companies as members. 2,605,206 3,237,000 Maximum total amount of investments, including temporary investments made at any time during the period to directors or managers or officers of the banking company or any of them either severally or jointly with any other persons. 8,742,850 10,403,108 Maximum total amount of Investments including temporary Investment granted during the period to the companies or firms in which the directors of the banking company are interested as directors, partners or managing agents or in the case of private companies as members Nil Nil (ix) Investment due from other Banks Nil Nil (x) Classified Investment on which profit has not been charged 4,593,330,630 2,532,858,494 (xi) Particulars of written off investments a) Cumulative amount of written off Investments since inception to 31 December last year 2,307,438,210 2,168,870,700 b) Amount of written off / waiver of Investment during the year 30,769, ,567,510 Total amount of written off (a+b) 2,338,208,027 2,307,438,210 Social Islami Bank Ltd. c) Amount recovered against debts which are previously written off (cumulative balance) 121,505, ,115,000 d) Amount of Investments written off against which cases have been filed for recovery 2,338,208,027 2,307,438,210 xii) Amount of compensation suspense as at year end. 461,185, ,827,189 8 Fixed Assets including Premises, Furnitures and Fixtures A. Cost Land 12,330,000 12,330,000 Building 1,934,025,740 1,719,061,103 Furniture & Fixtures 511,734, ,209,238 Office Equipment 693,506, ,531,089 Vehicles 63,560,310 52,918,377 Books 1,136,879 1,043,853 3,216,293,875 2,657,093,659 Information Memorandum 59

62 Social Islami Bank Ltd B. Accumulated Depreciation Land - - Building 102,566,469 61,091,670 Furniture & Fixtures 132,282, ,740,643 Office Equipment 285,713, ,092,910 Vehicles 41,184,644 32,603,319 Books 664, , ,411, ,138,922 Carrying value 2,653,882,382 2,249,954, Intangible assets Core banking solution ABABIL is used in SIBL which was implemented in the year The value of all the softwares under the head Intangible Assets is included in Office Equipment and being 20% following the same method of reducing balancing method as applied for mechanical appliance. Written down value of the software as on is 28,110,992 and amortization for the year 2013 was 6,301,993. For details please refer to Annexure-A 8(a) Consolidated written down value of Fixed Assets including intangible assets Social Islami Bank Ltd. 2,653,882,382 2,249,954,737 Fixed assets of subsidiaries SIBL Securities Ltd. 8,777,961 6,643,203 SIBL Investment Ltd. - - Carrying value of Fixed assets of the Group 2,662,660,343 2,256,597,940 9 Others Assets Stock of stationery, stamps and printing materials etc. (valued at cost) 15,766,865 15,992,283 Advance rent and advertisement 138,411, ,434,127 Security Deposit 2,878,447 3,948,732 Branch Adjustments (SIBG) (Note: 9.1) 2,566,384,734 2,522,022,946 Suspense Accounts (Note: 9.2) 122,540, ,127,658 Capitalized Expenditure 33,569 33,569 Other Repayments 183, ,571 Receivable from M/S. Stock & Bond and SIBL Securities Ltd. 17,976, ,088 Advance Income Tax 3,743,882,093 2,391,120,492 Receivable from SIBL Securities Limited 5,516,584 1,875,347 Receivable from SIBL Investment Limited 1,522,805 1,401,205 Protested Bills against Investment 368,594, ,545,000 Profit Receivable from Banks, NBFI and BD Govt. 372,918,333 - Investment with Off-shore Banking Unit 2,147,095, ,132,011 Due from Off-shore Banking Unit 3,605,388 4,144,364 Others (Note: 9.3) 1,137,284,247 1,205,337,688 10,644,594,721 7,246,482,081 Less: Balance with OBU for elimination Investment with Off-shore Banking Unit 2,147,095, ,132,011 Due from Off-shore Banking Unit 3,605, ,447 Grand total after elimination of balance with OBU 8,493,893,405 7,042,770, Information Memorandum

63 9(a) Consolidated other Assets Social Islami Bank Limited 8,493,893,405 7,042,770,623 Add: Other assets of subsidiary companies SIBL Securities Limited 1,283,707,625 1,126,317,034 Membership of Chittagong Stock Exchange 307,000, ,000,000 Membership of Dhaka Stock Exchange 720,650, ,650,000 Advance Income Tax 7,006,293 3,071,068 Advance Office Rent 1,162, ,102 Advance for floor space at nikunjo, DSE Tower 850,000 - Advance to Interior Decorator - 1,300,000 Investment in stock dealer activities 13,157, ,600 Receivable from Regulators 30,732,610 5,973,754 Receivable from client 186,408,076 74,243,154 Receivable from others 7,397,224 3,213,356 Security Deposit to CDBL, DSE 5,200,000 10,200,000 Security Deposit to BTCL 4,000 - Others 4,139,339 - Social Islami Bank Ltd. SIBL Investment Limited - - Less: Inter Company transactions eliminated: 7,039,389 3,276,552 Receivable from SIBL Securities Limited 5,516,584 1,875,347 Receivable from SIBL Investment Limited 1,522,805 1,401,205 9,770,561,641 8,165,811, The balance of Branch adjustment (SIBG) represents unresponded Inter branch and head office transactions at balance sheet date. Details of which are as follows: Number of Unrespondent entries Amount (in Tk) of Unrespondent entries Upto 3 months ,283,772,577 2,266,666,249 Over 3 months but within 6 months ,612, ,356,697 Over 6 months but within 9 months Over 9 months ,566,384,734 2,522,022, Suspense Account represents advance against TA/DA, Entertainment Expenses, Advertisement Expenses, Branch Decoration Expenses, Legal Charges and suspense -others. Necessary provision on others assets has been made in the accounts according to the BRPD Circular no: 14 dated June 25, 2001 para Kha (1) & (2). 9.3 Others Clearing Adjustment (Note: 9.3.1) 3,000,000 48,877,717 DD paid without Advice 13, ,534 Wes fund purchased 1,134 3,289,774 Adjusting A/c debit balance (Note: 9.3.2) 359,721, ,798,420 Advance VAT paid 3,815,178 1,907,589 BEFTN adjustment A/c - 53,255 Balance with Principal Branch (PF) 506,934, ,644,225 Balance with Principal Branch (SIBL/ Social Insurance) 47,638,442 37,695,442 Balance with Principal Branch (SIBL/ Gratuity Fund) 216,160, ,132,732 1,137,284,247 1,205,337,688 Information Memorandum 61

64 Social Islami Bank Ltd Clearing Adjustment Return clearing advices on from the Clearing House Representing Branch (Principal Branch) were sent to different branches, lying un-adjusted on the same date Adjusting A/c debit balance 359,721, ,798,420 Adjusting account debit balance represents Income Receivable from Bangladesh Govt. Islamic Bond on Tk crore, MTDR s with Other Banks as on and profit from preference shares etc. 10 Placement from Banks & Other Financial Institutions Bangladesh Govt. Islamic Bond. 4,700,000,000 4,700,000,000 The Bank has an outstanding balance of borrowing Tk crore as on taken from Bangladesh Govt. Islamic Bond Fund having different maturity dates. Profit rate of such borrowings is determined under Mudaraba Principle. Term Deposit Receipts allowed favouring different Banks and Financial Institutions for Tk crore have been pledged as security to Bangladesh Bank against the borrowings. Maturity Grouping of Borrowings Up to 1 month 800,000, ,000,000 More than 1 month but less than 3 months 2,000,000,000 2,600,000,000 More than 3 months but less than 6 months 1,900,000,000 1,300,000,000 6 months and above - - 4,700,000,000 4,700,000, Deposits and Other Accounts Mudaraba Savings Deposits (MSD) 6,468,729,754 4,905,319,144 Mudaraba Term Deposits (MTDR) 62,746,867,195 62,267,653,508 Other Mudaraba Deposit 19,288,768,828 13,984,000,422 Mudaraba Short Notice Deposits (MSND) 3,909,715,577 3,524,027,294 Mudaraba Scheme Deposits (Note-11.1) 15,379,053,251 10,459,973,128 Al- Wadeeah Current Deposit and other aacounts (AWCD) (Note- 11.2) 12,198,626,163 10,903,158,399 Bills payable (Note-11.3) 1,316,909,958 1,465,257,228 Cash Waqf Fund 84,577,685 68,903, ,104,479,583 93,594,292, Mudaraba Scheme Deposits Mudaraba Hajj Savings Deposit 23,663,269 15,363,209 Mudaraba Pension Savings Deposit 3,161,444,037 3,015,352,007 Mudaraba Education Deposit 44,066,037 90,148,754 Mudaraba Monthly Savings Deposit 147,237, ,239,208 Mudaraba Monthly Profit Deposit 1,444,736,357 1,275,650,566 Mudaraba Bashansthan Savings Deposit 436,116, ,359,331 Mudaraba Millionaire Savings Deposit 365,599, ,793,833 Mudaraba Lakhopoti Deposit Scheme 329,073, ,981,761 Mudaraba Double Benefit Deposit 1,917,537,282 2,186,825,125 Mudaraba Marriage Savings Deposit 138,383, ,623,827 Mudaraba Moharana Savings Deposit 17,153,078 11,940,815 Subarnalata Special Deposit (Women) 48,020,989 24,909,572 Balance carried forward 8,073,031,682 7,952,188, Information Memorandum

65 Balance brought forward 8,073,031,682 7,952,188,009 Subarnalata Rekha Special Deposit (Women) 498,360, ,316,984 Sabuj Chayanna Special Deposit 321,613, ,537,598 Sabuj Chaya Pension Deposit 190,604,769 74,920,687 Sanchita Special Deposit 92,754,352 25,772,406 Shonali Din Pension Deposit 1,239,935, ,937,281 Shukher Thikana Savings Deposit 2,653, ,442 Sachchandey Protidin Monthly Profit Deposit 1,248,024, ,936,700 Shamriddhir Shopan Deposit 3,532,415,441 1,443,001,879 Shopner Shiri Deposit 89,770,060 31,619,273 Sharner Shikhar 89,364,691 22,814,869 Proshanti (Mudaraba Zakat savings scheme) 525,192-15,379,053,251 10,459,973,128 Social Islami Bank Ltd Al-Wadeeah Current Deposit & other A/c Al Wadeeah current deposit 4,314,149,081 4,184,770,966 Sundry deposit 2,962,594,046 2,867,259,107 Social fund deposit 23,575 17,075 Supervision charge 1,337,282 1,316,661 Risk fund deposit 1,213,027 1,342,995 FC deposit 1,257,602, ,405,519 Convertible A/c* 10,280,348 9,258,398 F. C. held against B.B. L/C 1,816,128,979 1,686,037,343 Profit payable A/c 1,791,429,921 1,619,177,384 Compensation Realized 43,867,567 7,572,951 12,198,626,163 10,903,158,399 *Balance of Convertible A/c represents the portion of unsettled balance. 11.2(a) Consolidated balance of Al-Wadeeah Current Deposit & Other A/c Social Islami Bank Limited 12,198,626,163 10,903,158,399 Less: Intercompany balance eliminated 262,304, ,453,862 SIBL Securities Limited 12,350,525 67,498,715 SIBL Investment Limited 249,954, ,955,147 Consolidated balance of Current deposit and other accounts 11,936,321,181 10,585,704,537 The balances are held with the Principal Branch of SIBL bearing current account no: and respectively. For consolidation purpose the balances have been eliminated Bills Payable Payment Order (PO) 636,531, ,531,289 Demand Draft (DD) 8,967,745 13,293,855 B/P awaiting remittance 671,410, ,432,085 1,316,909,958 1,465,257, Maturity wise classifcation of Deposits Payable on demand 3,097,234, ,957,170 Up to 1 month 12,869,269,317 17,378,607,310 More than 1 month but up to 6 months 33,879,228,129 27,947,482,142 More than 6 months but up to 1 year 35,246,555,474 34,158,033,729 More than 1 year but up to 5 years 12,752,119,641 7,325,086,300 More than 5 years but up to 10 years 4,260,072,393 5,813,125, ,104,479,583 93,594,292,471 Information Memorandum 63

66 Social Islami Bank Ltd Segregation of deposits & other accounts i) Client Deposit Al-Wadeeah Current deposit & other accounts 12,198,626,163 10,903,158,399 Bills Payable 1,316,909,958 1,465,257,228 Mudaraba Savings Deposits 5,468,327,093 4,315,923,069 Mudaraba Short Notice Deposits 3,903,958,691 3,520,518,010 Mudaraba Term Deposit 57,633,367,195 50,357,653,508 Mudaraba Scheme Deposits 15,379,053,251 10,459,973,128 Cash Waqf Fund 84,577,685 68,903,770 95,984,820,034 81,091,387,112 ii) Bank Deposit Mudaraba Term Deposit Receipt (MTDR) 5,113,500,000 11,910,000,000 Mudaraba Short Notice Deposit (MSND) 5,756,886 3,509,284 Mudaraba Savings Deposit (MSD) 1,000,402, ,396,075 6,119,659,548 12,502,905,359 Grand Total of deposits and other accounts 102,104,479,583 93,594,292, Other Liabilities Adjusting A/C (Cr.) Balance 7,966,080 11,623,498 Other Payable 2,261,025 1,291,813 SIBL Employees PF 506,934, ,644,225 SIBL Employees Gratuity fund (note: 12.1) 294,261, ,373,660 SIBL Employees Social Insurance 47,638,442 37,695,442 BEFTN Adjustment Account 25,731,488 3,184,624 ATM Settlement for Q-Cash 9,697,144 3,820,731 Provision for Investments ( note: 12.2) 2,773,384,842 1,939,662,380 Provision for other Assets (note: 12.3) 393,102, ,370,542 Compensation and Rent Suspense (note: 12.4) 461,185, ,827,189 Provision for Taxation (note: 12.5) 4,146,098,405 3,343,147,121 Provision for Zakat Fund (note: 12.6) 48,818,029 44,381,311 Provision for Mudaraba Profit Distribution (note: 12.7) 10,000,000 6,595,602 8,727,079,569 6,689,618,137 12(a) Consolidated Other Liabilities Social Islami Bank Limited 8,727,079,569 6,689,618,137 Add: Other Liabilities of subsidiaries SIBL Securities Limited 88,292,572 9,591,813 Accrued Expenses 1,657,648 1,096,560 Payable to SIBL-Term loan 50,000,000 - Profit payable to SIBL 1,222,221 - Payable to regulators 458,997 1,294,903 Payable to clients 31,275,155 6,212,959 Payable to service providers and suppliers 888, ,500 Security deposit payable 263, ,100 Provision for Tax 2,526, ,791 SIBL Investment Limited 22,250 57,500 Accrued Expenses 17,250 52,500 Provision for Tax 5,000 5,000 8,815,394,391 6,699,267,451 Less: Intercompany balance eliminated SIBL Securities Limited Payable to SIBL-Term loan 50,000,000 - Grand total 8,765,394,391 6,699,267, Information Memorandum

67 SIBL Employees Gratuity fund 216,160, ,132,732 Add: Provision for Gratuity Opening balance 54,240,928 46,101,793 Current year required expenditure for gratuity fund 75,916,493 53,811,215 Add: Profit charged and other transfers made during the year 2,907,478 3,826, ,064, ,739,128 Less: Paid during the year (5,935,800) (9,498,200) Less: Transferred to gratuity fund during the year (49,028,000) (40,000,000) Balance of provision for gratuity at year end 78,101,099 54,240,928 Grand total of gratuity fund balance 294,261, ,373,660 Social Islami Bank Ltd Provision for Investment (a) Specific Provision on Investment Provision held at the beginning of the year 970,134, ,947,212 Fully provided Investment written off (30,769,817) (138,567,510) Transferred from doubtful income/compensation realized - 71,081,185 Transferred from provision for shares and securities - 57,706,167 Transferred from provision for staff benefits - 2,611,720 Provision made during this year 752,687, ,356,045 Provision held at the end of the year 1,692,052, ,134,819 (b) General Provision on Investment Provision held at the beginning of the year 691,883, ,400,000 Addition during the year 84,746, ,483,062 Balance at the end of the year 776,629, ,883,062 Total Provision on Investments 2,468,682,545 1,662,017,881 (c) General Provision on Off-Balance Sheet items Provision held at the beginning of the year 277,644, ,162,000 Addition during the year 27,057, ,482,499 Balance at the end of the year 304,702, ,644,499 Total Provision for Investments & Off-Balance Sheet items (a+b+c) 2,773,384,842 1,939,662, Provision for other Assets Provision held at the beginning of the year 388,370, ,130,000 Provision written back during the year (6,364,250) (414,000) Addition during the year 11,096, ,654,542 Balance at the end of the year 393,102, ,370, Provision for protested bills Provision held at the beginning of the year 374,959, ,630,000 Provision written back during the year (6,186,250) - Waiver/written off during the year (178,000) - Addition during the year - 212,329, ,594, ,959, Provision for suspense account Provision held at the beginning of the year 13,411,542 3,500,000 Provision written back during the year - (414,000) Provision Transferred from provision for protested bills 6,186,250 - Addition during the year 4,910,000 10,325,542 24,507,792 13,411,542 Information Memorandum 65

68 Social Islami Bank Ltd Compensation & Rent Suspense A/C Compensation Receivable A/C Murabaha (General) 26,747,246 11,100,091 Murabaha (Post Import) 4,923,207 3,713,758 Musharaka (Preshipment) 1,533,094 1,197,671 Bai-Muazzal 59,266,797 26,460,794 Bai-Muazzal Trust Receipt 26,024,166 6,424,759 Baim Wes bills 2,103,689 - Bai-Muazzal (ME) 6,129,156 1,449, ,727,354 50,346,667 Compensation Suspense A/C Murabaha (General) 29,852,308 25,632,021 Murabaha (Post Import) 38,388,808 29,432,124 Bai-Muazzal 113,546,354 71,214,856 Bai-Muazzal- House hold 14,611 61,081 Bai-Muazzal Trust Receipt 18,679,435 13,842,860 Musharaka (Preshipment) 11,730,536 11,647,069 Others 27,650,172 25,985, ,862, ,815,885 Rent Suspense A/C 94,595,511 76,664,637 Total Compensation & Rent Suspense 461,185, ,827, Movement of Compensation and Rent Suspense A/C Balance at the beginning of the year 304,827, ,964,994 Add: Amount transferred to suspense account during the year 178,655, ,013,749 Less: Amount recovered from suspense account during the year (19,016,649) (81,460,516) Less: Amount written off/ waived during the year (3,280,866) (44,691,039) Balance at the end of the year 461,185, ,827, Provision for Taxation Provision for Current tax Balance at the beginning of the year 3,343,147,121 2,041,555,734 Add: Provision made during the year (Note:12.6.1) 802,951,284 1,301,591,387 4,146,098,405 3,343,147,121 Advance tax Balance at the beginning of the year 2,391,120,492 1,464,297,052 Paid during the year 1,352,761, ,823,440 3,743,882,093 2,391,120,492 Balance at the end of the year 402,216, ,026, Provision made during the year Operating Profit before provision & tax 2,924,550,001 3,617,825,225 Add: amount to be deducted for separate consideration 199,289, ,331,524 Less: amount to be deducted for separate consideration 1,384,486, ,010,580 Total Taxable Income 1,739,352,958 2,953,146,168 Total Tax liability for current year Business 42.5% 739,225,007 1,255,087,122 Dividend 20% 62,359,276 46,245,187 Tax on gain on shares & 10% 1,367, ,079 Provision required 802,951,284 1,301,591,387 Provision made 802,951,284 1,301,591, Information Memorandum

69 Provision for Zakat Opening Balance 44,381,311 33,888,497 Addition this year 50,488,279 30,146,894 Less: Paid during the year (46,051,561) (19,654,080) Closing Balance at the end of the year 48,818,029 44,381, Provision for Mudaraba Profit Distribution Opening Balance 6,595,602 - Addition the year 10,000,000 6,595,602 Less: Paid during the year (6,595,602) - Closing Balance at the end of the year 10,000,000 6,595,602 Social Islami Bank Ltd. 13 Deferred Tax Liability Balance at the beginning of the year 70,528 (5,101,777) Add: Provision made during the year 1,506,720 5,172,304 Closing balance at the end of the year 1,577,248 70, Capital 14.1 Authorized Capital 1,000,000,000 ordinary shares of Tk. 10 each 10,000,000,000 10,000,000, Issued, Subscribed and Paid up Capital The Paid-up Capital of the Bank is currently Tk. 7,031,415,640 divided into 703,141,564 Ordinary Shares of Tk 10 each 7,031,415,640 6,393,925,700 Break up of paid up capital is as follows 26,000,000 no. Ordinary shares of Tk.10 issued for cash 260,000, ,000, ,322,945 no. Ordinary shares of Tk. 10 each for cash as right share 4,773,229,450 4,773,229, ,818,619 no.ordinary shares of Tk 10 each issued as bonus shares 1,998,186,190 1,360,696,250 7,031,415,640 6,393,925,700 Sponsor Shareholders Group 1,950,933,080 2,032,017,980 General Shareholders Group 5,080,482,560 4,361,907,720 7,031,415,640 6,393,925,700 Year Classification of Shareholders by holding No. of No. of shares Percentage of Year 2013 Shareholders holding of shares Less than 500 shares 31,864 5,012, % 501 to 5,000 shares 42,535 71,157, % 5,001 to 10,000 shares 4,211 29,382, % 10,001 to 20,000 shares 2,263 30,419, % 20,001 to 50,000 shares 1,090 32,276, % 50,001 to 99,999 shares ,893, % Total 82, ,141, % Information Memorandum 67

70 Social Islami Bank Ltd. Year 2012 Year 2012 No. of No. of shares Percentage of Shareholding range Shareholders holding of shares Less than 500 shares 33,009 6,530, % 501 to 5,000 shares 38,886 65,621, % 5,001 to 10,000 shares 3,496 24,935, % 10,001 to 20,000 shares 1,724 23,145, % 20,001 to 50,000 shares ,988, % 50,001 to 99,999 shares ,171, % Total 78, ,392, % 14.4 Particulars of shareholding and Percentage Analysis Particulars of shareholding: Year Number of Number of Share holders Shares Sponsors & Placement ,026,278 1,700,262,780 1,465,109,560 Sponsors Foreign 7 3,939,914 39,399,140 40,206,330 Sponsors & Placement Company 3 21,127, ,271, ,702,090 General Public 80, ,849,477 4,058,494,770 3,334,703,390 Institutions (Bank & Insurance) 66 20,306, ,063, ,745,670 Institution (Others) 1,593 72,979, ,793, ,485,010 ICB Account Holders ,973 4,719,730 33,830,410 ICB 1 4,421,687 44,216,870 2,562,160 ICB Unit Fund 2 3,495,025 34,950,250 30,790,460 ICB Mutual Fund 9 262,655 2,626,550 2,387,810 Non-Resident Bangladeshi ,726 2,617,260 2,402,810 82, ,141,564 7,031,415,640 6,393,925, Percentage of shareholding Analysis: Percentage Percentage Sponsors & Placement 24.18% 22.91% Sponsors Foreign 0.56% 0.63% Sponsors & Placement Company 3.00% 8.24% General Public 57.71% 52.15% Institutions (Bank & Insurance) 2.89% 3.42% Institution (Others) 10.38% 11.52% ICB Account Holders 0.07% 0.53% ICB 0.63% 0.04% ICB Unit Fund 0.50% 0.48% ICB Mutual Fund 0.04% 0.04% Non-Resident Bangladeshi 0.04% 0.04% % % 14.5 Capital Adequacy (Solo Basis) Position of capital adequacy are given below:- a) Core Capital ( Tier -I) i) Paid-up Capital 7,031,415,640 6,393,925,700 ii) Statutory Reserve (Note: 15) 2,122,994,344 1,718,062,455 iii) Retained Earnings (Note: 17) 846,533, ,004,602 10,000,943,243 9,071,992, Information Memorandum

71 b) Supplementary Capital (Tier-II) i) General Provision {Note 12.1(b+c)} 1,081,331, ,527,561 ii) Assets Revaluation Reserve (eligible) 541,242, ,989,561 (As per Bangladesh Bank Guideline 50% is considered as Supplementary Capital) 1,622,574,437 1,524,517,122 c) Total eligible capital (a +b) 11,623,517,680 10,596,509,878 d) Total Risk Weighted Assets 99,834,160,000 91,983,417,500 e) Required Capital (10% of Risk Weighted Assets) 9,983,416,000 9,198,341,750 Social Islami Bank Ltd. f) Total Capital Surplus (c-e) 1,640,101,680 1,398,168,128 Capital Adequacy (Consolidated basis) Position of capital adequacy are given below:- a) Core Capital ( Tier -I) i) Paid-up Capital 7,031,415,640 6,393,925,700 ii) Statutory Reserve (Note: 15) 2,122,994,344 1,718,062,455 iii) General Reserve 6,666, ,431 iv) Retained Earnings {Note: 17 (a)} 848,684, ,222,916 10,009,760,972 9,042,953,501 b) Supplementary Capital (Tier-II) i) General Provision {Note 12.1(b+c)} 1,081,331, ,527,561 ii) Assets Revaluation Reserve (eligible) 541,242, ,989,560 (As per Bangladesh Bank Guideline 50% is considered as Supplementary Capital) 1,622,574,437 1,524,517,122 c) Total eligible capital (a +b) 11,632,335,409 10,567,470,623 d) Total Risk Weighted Assets 99,547,905,000 91,517,867,500 e) Required Capital (10% of Risk Weighted Assets) 9,954,790,500 9,151,786,750 f) Total Capital Surplus (c-e) 1,677,544,909 1,415,683,873 Capital Adequacy Ratio (Solo basis) Particulars Requirement Capital Maintained Requirement Capital Maintained Core Capital: (Tier-I ) 5.00% 10.01% 5.00% 9.86% Supplementary Capital: (Tier-II) % % Total 10.00% 11.64% 10.00% 11.52% Capital Adequacy Ratio (Consolidated basis) Particulars Requirement Capital Maintained Requirement Capital Maintained Core Capital: (Tier-I ) 5.00% 10.06% 5.00% 9.88% Supplementary Capital: (Tier-II) % % Total 10.00% 11.69% 10.00% 11.55% Information Memorandum 69

72 Social Islami Bank Ltd Breakdown of gross Risk-Weighted Assets (RWA) in the various categories of risk-weights Solo Basis a) Risk Weights for Credit Risk Risk Weights (Both B/S & Off-B/S) Principal Risk Weighted Principal amount Risk Weighted amount Assets Assets 0% 14,394,900,000-14,025,100, % 19,706,300,000 3,941,260,000 16,510,400,000 3,302,080,000 50% 22,148,000,000 11,074,000,000 19,233,600,000 9,616,800,000 75% 18,180,100,000 13,635,075,000 23,522,900,000 17,642,175, % 36,080,500,000 36,080,500,000 25,079,500,000 25,079,500, % 19,969,700,000 24,962,125,000 23,396,450,000 29,245,562, % 945,800,000 1,418,700, ,100, ,150,000 Total 131,425,300,000 91,111,660, ,212,050,000 85,552,267,500 b) Risk Weights for Operational Risk 641,550,000 6,415,500, ,335,000 4,603,350,000 c) Risk Weights for Market Risk 230,700,000 2,307,000, ,780,000 1,827,800,000 Total Risk Weighted Assets 99,834,160,000 91,983,417,500 Consolidate basis a) Risk Weights for Credit Risk Risk Weights (Both B/S & Off-B/S) Principal Risk Weighted Principal amount Risk Weighted amount Assets Assets 0% 14,395,000,000-14,025,300,000-20% 19,735,400,000 3,947,080,000 16,510,400,000 3,302,080,000 50% 22,148,000,000 11,074,000,000 19,233,600,000 9,616,800,000 75% 18,180,100,000 13,635,075,000 23,522,900,000 17,642,175, % 36,103,300,000 36,103,300,000 25,086,700,000 25,086,700, % 19,703,800,000 24,629,750,000 23,018,250,000 28,772,812, % 945,800,000 1,418,700, ,100, ,150,000 Total 131,211,400,000 90,807,905, ,841,250,000 85,086,717,500 b) Risk Weights for Operational Risk 643,300,000 6,433,000, ,335,000 4,603,350,000 c) Risk Weights for Market Risk 230,700,000 2,307,000, ,780,000 1,827,800,000 Total Risk Weighted Assets 99,547,905,000 91,517,867, A) Credit Risk 1. Balance Sheet Exposure (amounts in crore ) Solo Consolidated Sl. Exposure Type BB s Risk Weight Exposure Risk Weighted Exposure Risk Weighted Asset Rating Grade Asset = (4 5) 7 8 = (4 7) a) Cash and Cash 0% Equivalents b) Claims on Bangladesh Government (other than PSEs) and Bangladesh 0% 1, , Bank (denominated in domestic and foreign currency) 70 Information Memorandum

73 c) Claims on other Sovereigns & Central 0% Banks d) Claims on Bank for International Settlements, 0% International Monetary Fund and European Central Bank e) Claims on Multilateral Development Banks (MDBs): i) IBRD, IFC, ADB, AfDB, EBRD, IADB, 0% - - EIB, EIF, NIB, CDB, IDB, CEDB ii) Other MDBs 1 20% ,3 50% ,5 100% % Unrated 50% f) Claims on Public 1 20% Sector Entities 2,3 50% (excluding equity 4,5 100% exposure) in 6 150% Bangladesh Unrated 50% g) Claims on Banks and NBFIs: i) Original maturity 1 20% over 3 months 2,3 50% ,5 100% % Unrated 100% ii) Original maturity less than 3 months 20% 1, , h) Claims on Corporate 1 20% (excluding equity 2 50% 1, , exposure) 3,4 100% 2, , , , ,6 150% Unrated 125% i) Claims under credit risk mitigation PSE a) Corporate Corporate 125% b) Retail & Small Retail and Small 125% j) Claims categorized as retail portfolio & Small Enterprise 75% 1, , (excluding consumer loan ) k) Consumer Loan 100% Solo (amounts in crore ) Consolidated Social Islami Bank Ltd. Information Memorandum 71

74 Social Islami Bank Ltd. l) Claims fully secured by residential property 50% m) Claims fully secured by commercial real 100% estate n) 1. Past Due Claims - Where specific provisions are less than 20 per cent of the outstanding 150% amount of the past due claim ; - Where specific provisions are no less than 20 per cent of the 100% outstanding amount of the past due claim. - Where specific provisions are more than 50 per cent of the outstanding 50% amount of the past due claim. 2. Claims fully secured against residential property that are past due for more than 90 days and/or impaired 100% specific provision held there-against is less than 20% of outstanding amount 3. Loans and claims fully secured against residential property that are past due by 90 days and /or impaired and 75% specific provision held there-against is more than 20% of outstanding amount o) Capital Market Exposure 125% p) Unlisted equity investments and regulatory capital instruments issued by other banks (other 125% than those deducted from capital) held in banking book q) Investments in venture 150% capital Solo (amounts in crore ) Consolidated 72 Information Memorandum

75 r) Investments in premises, plant and equipment and all other fixed assets 100% s) Claims on all fixed assets under operating 100% lease t) All other assets i) Claims on GOB & BB (eg. Advanced income tax, reimbursement of pratirakka/shdharon sanchay patra, etc.) 0% ii) Staff loan/investment 20% iii) Cash items in process for collection iv) Claims on Off-shore Banking Units (OBU) v) Other assets (net off specific provisions) Solo (amounts in crore ) Consolidated 20% % % Social Islami Bank Ltd. 2. Off-Balance Sheet Exposure Sl. Exposure Type BB s Rating Risk Weight Exposure Risk Weighted Exposure Risk Weighted Grade Asset Asset = (4 5) 7 8 = (4 7) a) Claims on Bangladesh Government and Bangladesh Bank b) Claims on other Sovereigns & Central Banks 0% 0% c) Claims on Bank for International Settlements, International Monetary 0% Fund and European Central Bank d) Claims on Multilateral Development Banks (MDBs): i) IBRD, IFC, ADB, AfDB, EBRD, IADB, EIB, EIF, 0% NIB, CDB, IDB, CEDB ii) Other MDBs 1 20% 2,3 50% 4,5 100% 6 150% Unrated 50% Information Memorandum 73

76 Social Islami Bank Ltd. e) Claims on Public 1 20% Sector Entities (other 2,3 50% than Government) in 4,5 100% Bangladesh 6 150% Unrated 50% f) Claims on Banks and FIs: i) Maturity over % months 2,3 50% ii) Maturity less than 3 months 4,5 100% % Unrated 100% % g) Claims on Corporate 1 20% (excluding equity 2 50% exposure) 3,4 100% ,6 150% Unrated 125% h) Against retail portfolio & Small Enterprise 75% (excluding consumer loan) i) Consumer Loan 100% 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% Solo (amounts in crore ) Consolidated 2, , , , B) Capital charge for Market Risk (amounts in crore ) 2013 Solo Consolidated Sl Capital Charge Total Capital Total Capital Charge Total Capital Charge no. Details for General Charge for Specific for General & for General & Market Risk Market Risk Specific Market Risk Specific Market Risk A. Interest Rate Related instruments B. Equities C. Foreign Exchange Position Total (A+B+C): Information Memorandum

77 2013 (amounts in crore ) C) Capital Charge for Operational Risk (Basic Indicator Approach) Solo Consolidated Year 2012 Average Gross Capital Charge Average Gross Capital Charge (15% Income (15% of Average Income of Average Gross Gross Income) Income) Statutory Reserve Opening balance 1,718,062,455 1,168,484,261 Add: Addition during the year 404,931, ,578,194 2,122,994,344 1,718,062, Revaluation Reserve on fixed assets Revalued amount of fixed assets 1,670,299,434 1,712,811,470 Book Value of fixed assets 560,320, ,633,356 Balance of revaluation reserve 1,109,979,121 1,138,178,114 Less: Adjustment made based on difference amount of depreciation 27,494,019 28,198,993 Remaining balance of revaluation reserve 1,082,485,102 1,109,979,121 Social Islami Bank Ltd. Property class under the head Land and Building have been revalued in the year 2011, in accordance with the applicable rules and regulations as per BAS-16, Property, Plant and Equipment and as per Bangladesh Bank BCD circular letter no: 12 & 18, dated: 20 April 1993 & 15 June 1993 and BRPD circular no: 10, dated: 25 November The valuation firms have used the fair value model to revalue the class of property. The valuation was not reviewed in the year a. The effective date of revaluation: The revaluation was completed by the valuers on And the revaluation effect on the assets have been accounted for on b. Valuer: Two separate independent valuer firm Commodity Inspection Services (BD) Ltd. and Royal Inspection International Ltd. have been assigned to carry on the valuation job. c. Method used for determination of fair value: The valuer firms have used the market-based evidence to appraise the class of property Land and Building. They have used current market prices as reference that has recently been observed for selling the land and buildings of same class of the same locality for appraising the fair value. Using the appraisal they have determined the amount of revaluation of the assets. (amounts in ) Location Class of Book Value Revaluation Depreciation on Depreciation on Amount of adjustment property Surplus book value revalued amount City Center, Head Office Building 382,381, ,198,835 9,559,529 32,389,500 22,829,971 Chandaikona Branch Land 2,111,623 10,218, Building 1,126,304 1,257,988 28,158 59,607 31,449 Savar Branch Building 30,700,940 27,825, ,524 1,463, ,627 Panthapath Branch Building 25,544,016 51,583, ,600 1,928,186 1,289,586 Rampura Branch Building 38,021,525 36,178, ,538 1,854, ,460 Khulna Branch Building 17,913,374 14,114, , , ,859 Nawabpur Road Branch Building 62,521,366 55,602,693 1,563,034 2,953,101 1,390, ,320,313 1,109,979,121 13,955,217 41,449,236 27,494,019 Information Memorandum 75

78 Social Islami Bank Ltd Retained Earnings Opening balance 960,004, ,300,013 Less: Issue of cash dividend (318,744,971) (671,362,199) Less: Issue of bonus shares (637,489,940) - Add: Transferred from Profit & Loss Account 815,269, ,549,083 Add: Transferred from Revaluation Reserve for Fixed Assets 27,494,019 28,198,993 Add: Transferred from Revaluation Reserve for building (city center) - 318, ,533, ,004,602 17(a) Consolidated retained earnings Opening Balance 930,222, ,427,567 Less: Issue of cash dividend (318,744,971) (671,362,199) Less: Issue of bonus shares (637,489,940) - Add: Transfer from Profit & Loss Account of SIBL 815,269, ,549,083 Add: Transferred from Revaluation Reserve for Fixed Assets of SIBL 27,494,019 28,198,993 Add: Transferred from Revaluation Reserve for building (city center) - 318, ,751, ,132,156 Add: Current year profit/(loss) of subsidiaries SIBL Securities Limited 32,031,499 24,163,331 SIBL Investment Limited (98,590) (72,551) 848,684, ,222,936 Less: Non controlling interests of profit/(loss) attributable for current year SIBL Securities Limited SIBL Investment Limited ,684, ,222,915 SIBL has invested amount of - 1,229,999,000 and - 249,999,400 in two of its subsidiaries SIBL Securities Ltd. (SIBL SL) and SIBL Investment Ltd. (SIBL IL) respectively. SIBL holds % and % of total shares of its subsidiaries SIBL SL. and SIBL IL. respectively while the other shareholders of the subsidiaries hold % and % of total shares respectively. Details of the shareholding position is as under: Sl No. Shares Value of shares Percentage of holding of shares Shareholders no. SIBL SL SIBL IL SIBL SL SIBL IL SIBL SL SIBL IL 1 Social Islami Bank Limited 12,299,990 2,499,994 1,229,999, ,999, % % 2 Alhaj Nasiruddin % % 3 Mr. Md. Sayedur Rahman 4 Major (Retd.) Dr. Md. Rezaul Haque 5 Alhaj Sultan Mahmood Chowdhury % % % % % 6 Mr. Abdul Awal Patwary % % 7 Hamdard Laboratories (Waqf) Bangladesh, Represented by: Mr. Anisul Hoque % - 8 Mrs. Nargis Mannan % 9 Mr. Kamaluddin Ahmed % % 10 Alhaj Sk. Mohammad Rabban Ali % % 11 Mr. A. Jabbar Mollah % - 12,300,000 2,500,000 1,230,000, ,000, % % - 76 Information Memorandum

79 Current year retained earnings Social Islami Bank Limited Profit after tax 1,220,201,438 1,441,127,276 Less : Statutory Reserve 404,931, ,578, ,269, ,549, (a) Consolidated Current year retained earnings Profit after tax 1,252,134,346 1,465,218,057 Less :Statutory Reserve 404,931, ,578,194 Profit/(Loss) attributable to Group 847,202, ,639,864 Profit/(Loss) attributable to Subsidiaries SIBL Securities Limited SIBL Investment Limited - - Profit/(Loss) attributable to parent 847,202, ,639,844 Social Islami Bank Ltd. 17(b) Non-controlling interest SIBL Securities Limited Paid up capital 1,230,000,000 1,230,000,000 Retained earnings 3,740,171 (28,291,328) General Reserve 6,666, ,432 Net Assets 1,240,406,705 1,202,451,104 SIBL Investment Limited Paid up capital 250,000, ,000,000 Retained earnings (1,588,978) (1,490,388) Net Assets 248,411, ,509,612 Non-controlling interests SIBL Securities % of net assets 1, SIBL Investment of net assets Total non-controlling interest 1,597 1, Contingent liabilities 18.1 Acceptances and Endorsements Bill bankers liabilities (DP) 8,661,925,200 5,189,558,700 Bill bankers liabilities (BB/FO) 1,512,247,997 1,834,947,997 Bill bankers liabilities (BB/LO) 3,887,847,700 4,011,699,800 Bill bankers liabilities (EPZ) 442,696, ,278,000 Bill bankers liabilities Others 482,165,500 1,246,269,500 14,986,882,397 12,634,753, Letter of Credit L/C bankers liabilities (DP) 3,100,423,000 1,847,561,500 L/C bankers liabilities (BB/FO) 1,051,634,857 1,173,500,400 L/C bankers liabilities (BB/LO) 1,258,526,700 1,301,287,200 L/C bankers liabilities (Cash) 3,526,015,455 2,575,739,886 L/C bankers liabilities (EPZ) 361,362, ,118,000 L/C bankers liabilities (Others) 556,277, ,387,907 9,854,239,886 7,395,594, Letters of guarantees Letters of guarantee 3,246,076,013 4,949,826,296 Information Memorandum 77

80 Social Islami Bank Ltd Bills for collection In-ward bills for collection 662,472, ,457,746 Out-ward Bills for Collection 1,720,558,919 2,166,816,986 2,383,031,491 2,784,274, Other Contingent Liabilities Other Commitments - - Total Off-balance sheet items 30,470,229,787 27,764,449,918 Income Statement (Note-19 to Note-38) Income: Income from Investment (Note-19) 13,629,421,075 11,319,014,211 Income from Investment in Shares & Securities (Note-21) 325,466, ,816,722 Commission, Exchange and Brokerage Income (Note-22) 1,026,570,990 1,178,954,865 Other operating income (Note-23) 228,021, ,986,845 15,209,479,569 13,056,772,643 Expenses: Profit paid on Deposits (Note-20) 9,706,867,767 7,541,679,221 Administrative expenses 1,514,105,302 1,088,563,216 Other operating expenses 890,794, ,954,139 Depreciation on Banking assets 173,161, ,750,842 12,284,929,568 9,438,947,418 Income over expenditure 2,924,550,001 3,617,825, Income from Investment Profit on Murabaha 475,911, ,583,818 Profit on Bai-Muazzal 6,895,601,710 5,630,407,600 Profit on Hire-Purchase 1,802,282,885 1,798,329,456 Profit on Musharka 57,862,396 43,330,992 Profit on Bai-Salam 9,370,413 1,271,101 Profit on Quard against MTDR, Scheme and others 1,041,636, ,934,900 Profit on Inland Document Bill Purchased 401,661, ,016,815 Profit on Foreign Document Bill Purchased 1,070,394, ,852,244 Profit on Ijarah 24,673,596 27,026,714 Profit on Investment against Mudaraba Deposit with other banks and NBFIs 1,367,356,318 1,060,471,625 Profit on other investments (Card, Wakalat fee etc.) 448,121, ,224,028 Profit on Mudaraba 34,547,764 3,564,917 13,629,421,075 11,319,014,211 19(a) Consolidated income from investment Social Islami Bank Ltd. 13,629,421,075 11,319,014,211 Add: Income from investment of subsidiaries of SIBL 23,171,187 6,252,123 SIBL Securities Ltd. 23,171,187 6,252,123 SIBL Investment Ltd. - - Grand total of consolidated investment income 13,652,592,262 11,325,266, Profit paid on Deposits Profit paid on deposits Mudaraba Savings Deposits (MSD) 194,524, ,746,522 Mudaraba short notice deposit (MSND) 71,095,053 43,101,891 Mudaraba term deposit (MTDR) 7,861,522,071 6,316,179,377 Cash waqf fund deposit 9,653,330 6,107,649 Profit paid on Scheme Deposits & others 1,372,089, ,018,625 9,508,884,212 7,382,154,065 Profit paid on borrowings 197,983, ,525,157 Total profit paid on deposits and borrowings 9,706,867,767 7,541,679, Information Memorandum

81 Income from Investment in Shares & Securities Income from Investment in Islamic Bond 156,284, ,022,091 Income from Investment in Shares 13,670,008 2,590,786 Belhasha Preference share 70,000,000 70,000,000 Dividend Income 85,512,211 50,203, ,466, ,816,722 Social Islami Bank Ltd. has investment of Tk crore in Bangladesh Govt.Islamic Investment Bond for which 4.67%, average rate of income has been provided for January-December The nature of the Fund is to generate profit according to Mudaraba Principle. 22 Commission, Exchange & Brokerage Commission 555,276, ,318,720 Exchange income 471,294, ,636,144 1,026,570,990 1,178,954,865 22(a) Consolidated income from commission, exchange & brokerage Social Islami Bank Ltd. 1,026,570,990 1,178,954,865 Add: Income from commission, exchange & brokerage of subsidiaries of SIBL 29,545,581 15,524,695 SIBL Securities Ltd. 29,545,581 15,524,695 SIBL Investment Ltd. - - Grand total of consolidated income from commission, exchange & brokerage 1,056,116,571 1,194,479,560 Social Islami Bank Ltd. 23 Other Operating Income Telephone, fax, trunk call charge recovered Telex charge recovered P & T charge recovered 17,181,862 17,863,307 Courier Charges Recovery & Others 5,263,672 2,186,475 Services & charges 119,726, ,023,536 SWIFT/ Return charge recovered 41,884,126 30,600,340 SWIFT/ Return charge recovered (OBU) 201,839 40,471 Profit from leased Assets - 13,000 Other charges (Note: 23.1) 43,762, ,258,966 23(a) Consolidated other operating income 228,021, ,986,845 Social Islami Bank Ltd. 228,021, ,986,845 Add: Other operating Income of subsidiaries of SIBL 5,133,015 12,581,531 SIBL Securities Ltd. 5,133,015 12,581,531 SIBL Investment Ltd. - - Grand total of consolidated income from commission, exchange & brokerage 233,154, ,568, Other Charges Rent receipts 4,302,033 5,654,830 Income from sale of forms 374, ,200 Service charge on SIBL Cards - 206,033 Notice pay earnings 4,233,374 3,046,832 Miscellaneous income 34,852, ,023,072 43,762, ,258, Salary & Allowances Basic Salary 602,511, ,073,136 Allowances 545,049, ,771,095 Bonus 290,430, ,762,002 L/E Salary & Allowances 8,242,169 8,582,757 Bank s Contribution to Provident fund 53,340,586 37,245,541 Bank s Contribution to Social Insurance fund 5,929,242 4,128,685 1,505,503,042 1,078,563,216 Information Memorandum 79

82 Social Islami Bank Ltd. 24(a) Consolidated expenses for Salary and Allowance Social Islami Bank Ltd. 1,505,503,042 1,078,563,216 Add: Salary and Allowance for subsidiaries 6,243,499 2,723,260 SIBL Securities Ltd. 6,243,499 2,723,260 SIBL Investment Ltd ,511,746,541 1,081,286, Rent, Taxes, Insurance & Electricity etc. Rent, Rates & Taxes (note: 25.1) 128,700, ,851,005 Insurance (note: 25.2) 58,495,559 38,825,508 Electricity, Lighting & Water (note: 25.3) 40,650,432 32,563, ,846, ,239,535 25(a) Consolidated expenses for rent, taxes, insurance & electricity Social Islami Bank Ltd. 227,846, ,239,535 Add: Rent, Taxes, Insurance & Electricity etc. of subsidiaries 598, ,743 SIBL Securities Ltd. 598, ,743 SIBL Investment Ltd ,445, ,760, Rents, Rates, Taxes, Insurance & Lighting etc. Rents Rent (Office) 125,238, ,644,870 Rent (Garage) 240, ,580 Rent (Godown & others) 2,145,557 2,151, ,624, ,013,054 Rates and Taxes 1,075, ,950 Total Rents, Rates & Taxes 128,700, ,851, Insurances Insurance Premium in Counter 731, ,894 Insurace Premium in Transit 898, ,563 Insurance Premium Safe/Vault 2,187,670 1,799,001 Insurance Premium on deposit 53,040,467 34,056,576 Insurance Premium on Vehicle 1,225, ,035 Other Insurance 410, ,439 58,495,559 38,825, Lighting & Electricity Lighting & Electricity Bill (Office) 34,972,178 28,384,831 Lighting & Electricity Charges (Office) 3,327,850 2,463,327 Lighting & Electricity Charges (Godown) - - Sub Total 38,300,028 30,848,158 Water & Sewerage 2,350,404 1,714,864 40,650,432 32,563, Legal Expenses Legal Fees & Charge 7,570,649 7,297,017 Stamp Duties 5,780 89,130 Other Legal Expenses 349,709 1,232,563 7,926,138 8,618,710 26(a) Consolidated legal expenses Social Islami Bank Limited 7,926,138 8,618,710 Add: Legal expenses for subsidiaries 17,250 - SIBL Securities Ltd. 17,250 - SIBL Investment Ltd ,943,388 8,618, Information Memorandum

83 Postage, Stamps, Telecommunication etc. Postage 12,999,752 10,716,250 Internet Charges 2,263,515 2,202,033 SWIFT Charges 8,056,218 8,517,636 Cable Network rent 353,111 45,304 Telegram, Fax, Telex & other charges 1,860 5,930 Telephone charges 5,044,188 4,129,430 Mobile phone charges 2,826,004 2,513,704 31,544,647 28,130,288 27(a) Consolidated expenses for Postage, Stamps, Telecommunication etc. Social Islami Bank Limited 31,544,647 28,130,288 Add: Postage, Stamps, Telecommunication etc. expenses for subsidiaries 741, ,276 SIBL Securities Ltd. 741, ,276 SIBL Investment Ltd ,286,323 28,799, Stationery, Printing, Advertisements etc. Table Stationery 8,534,271 7,986,596 Printing Stationery 32,694,298 28,320,155 News Paper & Magazine 12,969,944 15,206,030 Television & Radio 11,151,625 8,056,160 Neon Sign, Banner etc. 290,036 1,645,595 Other Publicity 25,357,252 19,379,434 90,997,426 80,593,969 Social Islami Bank Ltd. 28(a) Consolidated expense of Stationery, Printing, Advertisement etc. Social Islami Bank Ltd. 90,997,426 80,593,969 Stationery, Printing, Advertisement expense of Subsidiaries of SIBL 546, ,407 SIBL Securities Limited. 546, ,407 SIBL Investment Limited ,543,834 80,776, Managing Director s Salary and Allowances Basic Salary 4,185,162 4,000,000 Allowances 2,997,098 4,200,000 Festival & other Bonus 1,420,000 1,800,000 8,602,260 10,000, Directors Fees & Meeting Expenses Directors Fee 1,420,250 1,598,500 Meeting Expenses 2,844,325 2,197,374 4,264,575 3,795,874 30(a) Consolidated Directors fees & Meeting Expenses: Social Islami Bank Limited 4,264,575 3,795,874 Directors Fees & Meeting Expenses of Subsidiaries of SIBL 540, ,000 SIBL Securities Limited (VAT included) 540, ,000 SIBL Investment Limited (VAT included) - - 4,805,075 4,094, Shariah Supervisory Committee s Fees & Expenses Shariah Counsil Meeting Expenses 195, ,801 Others 58, , ,801 Information Memorandum 81

84 Social Islami Bank Ltd Depreciation and Repair of Bank s Assets a) Depreciation of Bank s Assets (Annexure A) Land - - Building 41,474,799 42,512,037 Furniture & Fixtures 30,542,352 21,218,435 Office Appliance & Equipment 74,620,125 63,097,530 Vehicles 8,581,325 8,442,625 Books 53,971 45, ,272, ,315,730 b) Repair on Bank s Assets 17,889,007 13,435,111 17,889,007 13,435,111 Total of Depreciation and repair of Bank s Assets 173,161, ,750,842 32(a) Consolidated balance of Depreciation Social Islami Bank Ltd. 173,161, ,750,842 Add: Depreciation on assets of subsidiaries 1,583, ,057 SIBL Securities Ltd. 1,583, ,057 SIBL Investment Ltd ,744, ,523, Other Expenses Local conveyance 12,730,010 9,757,400 Business Development Exp. 12,988,202 15,423,236 Petroleum, oil & lubricants 13,611,026 19,946,177 Entertainment expenses 16,607,510 12,301,526 Traveling allowances 8,978,035 9,179,924 Travelling Foreign 1,406,314 3,579,920 Bank charges 276, ,994 Uniform charges 715, ,387 Subscriptions to Institutions 2,670,930 5,602,500 Banks clearing house charges 95,259 46,862 CIB Charges 529, ,210 Transportation charges 2,252,250 1,734,537 News paper, Journal & periodicals 296, ,269 Washing charges 236, ,132 Training expenses Academy/ Internal 2,414,508 2,405,007 Training expenses at outside Banks 532, ,251 Meeting expenses 4,319,734 8,976,545 Direct expenses on investment 284,332 1,016,357 Up keep of branches/office premises 4,874,413 4,440,824 Excise duty 727, ,710 Computer charges 8,486,677 6,977,447 Security Services 66,569,009 55,277,015 Cleaner Services 2,506,899 2,487,247 Others wages 40,727,964 21,257,049 Photocopy expenses 1,077,003 1,194,948 Photography expenses 65,556 50,104 Cash & Bank remittance charges 1,770,056 1,718,142 Honorarium 1,137, ,533 On-Line Expenses 20,195,319 14,808,375 ATM Rent Hardware 1,541,812 32,156 Credit Rating Fees 957, ,360 Other Utility 403, ,235 Balance carried forward 231,986, ,546, Information Memorandum

85 33(a) Balance brought forward 231,986, ,546,382 Right Share issue related Expense 273,341 8,870,128 Fair value adjustment for shares and securities 182,903, ,173,365 Gratuity expense 75,916,493 - Zakat Expense 20,000,000 - Miscellaneous expenses 16,363,705 18,985, ,443, ,575,106 Consolidated Other Expenses Social Islami Bank Limited 527,443, ,575,106 Add:Other Expenses for SIBL Securities Limited 7,272,755 4,099,252 License, fees, renewals and incorporation expenses 3,020,983 2,246,740 Entertainment 215, ,181 Bank charge and Excise duty 38,158 42,906 Others 3,998,150 1,699,425 Social Islami Bank Ltd. Other Expenses for SIBL Investment Limited 81,340 58,750 Incorporation and Other Regulatory expenses 20,692 42,848 Bank charge and Excise duty ,920 Others 60,048 4, ,797, ,733, Other Provision Provision for Zakat fund (note: 34.1) 30,488,279 30,146,894 Provision for other assets 4,910, ,654,542 Provision for gratuity - 53,811,215 35,398, ,612, Provision for Zakat fund Provision required for the year 50,488,279 30,146,894 Provision consumed during the year 20,000,000 - Rest of required provision provided for the year 30,488,279 30,146,894 34(a) Consolidated other provision Social Islami Bank Ltd. 35,398, ,612,651 Add:Provision for subsidiaries SIBL Securities Ltd. Provision for general reserve 5,924, ,432 SIBL Investment Ltd ,322, ,355, Provision against Investment, Off-Balance Sheet items & Others Provision on classified investment 752,687, ,356,045 Provision on unclassified investment 84,746, ,483,062 Provision on Off-Balance Sheet items 27,057, ,482,499 Other provisions (note: 34) 35,398, ,612, ,890, ,934,257 35(a) Consolidated Provision against Investment, Off-Balance Sheet items & Others Social Islami Bank Ltd. 899,890, ,934,257 Add:Provision for subsidiaries 5,924, ,432 SIBL Securities Ltd.- Provision for general reserve 5,924, ,432 SIBL Investment Ltd ,814, ,676,689 Information Memorandum 83

86 Social Islami Bank Ltd Provision for Income Tax Current year provision (Note: 36.1) 802,951,284 1,301,591,387 Deferred Tax expense/(income) (Note: 36.2) 1,506,720 5,172, ,458,005 1,306,763,692 36(a) Consolidated Provision for Income Tax Social Islami Bank Limited 804,458,005 1,306,763,692 SIBL Securities Limited 2,350, ,791 SIBL Investment Limited ,808,184 1,306,935, Current Year Tax Provision Provision on tax has been calculated based on Income Tax Ordinance,1984 as amended upto 2013 by the Finance Act, considering the allowances and disallowances Deferred Tax Expenses/(Income) Defferred tax expense/(income) for liability/(asset) has been calculated as per Bangladesh Accounting Standard Earning Per Share (EPS) SIBL has issued 1:1 right share for an amount of - 2,987,815,750 as approved in its 242nd Board Meeting held on 02 March 2011 by the Directors of the Board. Before right issue SIBL had a total capital of - 2,987,815,750 as on The paid up capital was further enhanced by an amount of - 418,294,200 and -637,489,940, issued as bonus share for the year ended 31 December 2010 and Now the total paid up capital after right issue and issue of bonus shares amounts to - 7,031,415,640 with a total no. of 703,141,564 shares having face - 10/share. Net Profit after Tax 1,220,201,438 1,441,127,276 Number of ordinary shares outstanding 703,141, ,141,564 Earning Per Share (EPS) (Restated for year 2012) (a) Consolidated Earning Per Share (CEPS) Net Profit after Tax 1,252,134,320 1,465,218,037 Number of ordinary shares outstanding 703,141, ,141,564 Consolidated Earning Per Share (CEPS) (Restated for year 2012) Notes for Cash Flow Statement (Note-38 to Note-44) 38 Income from Investment Investment profit receipt 13,629,421,075 11,319,014,211 38(a) Add: Opening profit receivable - - Less: Closing profit receivable ,629,421,075 11,319,014,211 Consolidated income from investment Income from investment of SIBL 13,629,421,075 11,319,014,211 Income from investment of Subsidiaries of SIBL 23,171,187 6,252,123 SIBL Securities Ltd. 23,171,187 6,252,123 SIBL Investment Ltd. - - Grand total 13,652,592,262 11,325,266, Information Memorandum

87 Receipts from Other Operating Activities (Other than profit on sale of fixed assets) Exchange income 471,294, ,636,144 Rent receipts 4,302,033 5,654,830 Telephone, fax, trunk call charge recovered Telex charge recovered - 25 P & T charge recovered 17,181,862 17,863,307 Courier Charges Recovery & Others 5,263,672 2,186,475 Notice pay earnings 4,233,374 3,046,832 Miscellaneous income 34,852, ,023,072 Services & charges 119,726, ,023,536 SWIFT/ Return charge recovered 41,884,126 30,600,340 SWIFT/ Return charge recovered (OBU) 201,839 40,471 Service charge on SIBL Cards - 206,033 Profit from leased Assets - 13,000 Income from sale of forms 374, , ,315, ,622,990 39(a) Consolidated receipts from Other Operating Activities (Other than profit on sale of fixed assets) Social Islami Bank Ltd. Receipts from Other Operating Activities of SIBL 699,315, ,622,990 Receipts from other operating activities of Subsidiaries of SIBL 5,133,015 12,581,531 SIBL Securities Ltd. 5,133,015 12,581,531 SIBL Investment Ltd ,448, ,204, Payment to others Rent (Office) 125,238, ,644,870 Rent (Garage) 240, ,580 Rent (Godown) 2,145,557 2,151,605 Rates and Taxes 1,075, ,950 Insurance Premium for cash in counter 731, ,894 Insurance Premium for cash in transit 898, ,563 Insurance Premium for cash in safe/ vault 2,187,670 1,799,001 Insurance Premium on deposit 53,040,467 34,056,576 Insurance Premium for vehicle 1,225, ,035 Other Insurance 410, ,439 Lighting and Electricity Bill (Office) 34,972,178 28,384,831 Lighting and Electricity Charges (Office) 3,327,850 2,463,327 Water and Sewerage 2,350,404 1,714,864 Legal Expenses 7,926,138 8,618,710 Directors Fees and Meeting Expenses 4,264,575 3,795,874 Shariah Supervisory Fees & Expenses 254, ,801 Audit Fees 517, ,855 Repairs and Maintenance 17,889,007 13,435,111 Other Expenses (note: 33) 527,443, ,575, ,141, ,664,993 40(a) Consolidated payment to others Social Islami Bank Limited 786,141, ,664,993 Payment to others- Subsidiaries 8,527,949 5,005,345 SIBL Securities Limited 8,429,359 4,932,795 SIBL Investment Limited 98,590 72, ,669, ,670,338 Information Memorandum 85

88 Social Islami Bank Ltd Cash Increase/ Decrease in Other Assets Stock of stationery, stamps and printing materials etc. (valued at cost) 15,766,865 15,992,283 Advance rent and advertisement 138,411, ,434,127 Security Deposit 2,878,447 3,948,732 Branch Adjustments (SIBG) (Note: 9.1) 2,566,384,734 2,522,022,946 Suspense Accounts (Note: 9.2) 122,540, ,127,658 Capitalized Expenditure 33,569 33,569 Other Repayments 183, ,571 Receivable from M/S. Stock & Bond and SIBL Securities Ltd. 17,976, ,088 Advance Income Tax 3,743,882,093 2,391,120,492 Receivable from SIBL Securities Limited 5,516,584 1,875,347 Receivable from SIBL Investment Limited 1,522,805 1,401,205 Protested Bills against Investment 368,594, ,545,000 Profit Receivable from Banks, NBFI and BD Govt. 372,918,333 - Due from Off-shore Banking Unit - 3,564,917 Others (Note: 9.3) 1,137,284,247 1,205,337,688 8,493,893,405 7,042,770,623 Difference between (2013, 2012) (1,451,122,782) (982,705,537) Advance Income Tax 1,352,761, ,823,440 Net change in Other Assets (98,361,181) (55,882,097) 41(a) Consolidated cash increase/decrease in other assets Social Islami Bank Limited 8,493,893,405 7,042,770,623 Cash Increase/ Decrease in Other Assets of subsidiaries 1,276,668,236 1,123,040,482 9,770,561,641 8,165,811,105 Difference between (2013, 2012) (1,604,750,536) (1,070,613,469) Advance Income Tax 1,356,696, ,894,508 Consolidated net change in Other Assets (248,053,710) (140,718,961) 42 Cash Increase/ Decrease in Other Liabilities Adjusting A/C (Cr.) Balance 7,966,080 11,623,498 Other Payable 2,261,025 1,291,813 SIBL Employees PF 506,934, ,644,225 SIBL Employees Social Insurance 47,638,442 37,695,442 Compensation and Rent Suspense (note: 12.4) 461,185, ,827,189 Transfer to Provision for Investment A/C from Compensation A/C - 71,081,185 Gratutity Fund Balance with SIBL Principal Br. 292,077, ,132,732 BEFTN Adjustment Account 25,731,488 3,184,624 ATM Settlement for Q-Cash 9,697,144 3,820,731 Mudaraba Profit Distribution (note: 12.7) 10,000,000 6,595,602 1,363,491, ,897,040 Cash Increase/ (Decrease) in Other Liabilities 372,594,105 27,777,166 Difference between (2013 & 2012) 372,594,105 27,777,166 Add: Transfer to Provision for Investment from Compensation (In Yrs & 2012) 71,081, ,100,000 Less: Zakat distributed during the year 26,051,561 19,654,080 Less: Gratuity transferred & Paid during the year 52,056,322 45,672,080 Less: Adjustment of other provision made during the year 178, ,000 Less: Written off/ Waiver of investment during the year 30,769, ,567, ,619,590 71,569, Information Memorandum

89 42(a) Consolidated cash increse/decrease in other liabilities Cash Increase/ Decrease in other liabilities of Social Islami Bank Limited 1,363,491, ,897,040 Cash Increase/ Decrease in Other Liabilities of subsidiaries 35,782,854 9,467,522 1,399,273,999 1,000,364,562 Difference between (2013, 2012) 398,909,437 37,086,093 Other changes in other liabilities of Social Islami Bank Limited (37,974,515) 43,792,330 Net change in Other Liabilities-Social Islami Bank Limited 360,934,923 80,878, Cash and Cash Equivalent Cash in Hand 1,266,962,343 1,104,528,222 Balance with Bangladesh Bank & Sonali Bank Limited (as agent of Bangladesh Bank) 7,627,790,250 10,020,554,834 Balance with Other Banks & Financial Institutions-in Bangladesh 10,934,993,013 11,729,376,330 Balance with Other Banks & Financial Institutions-outside Bangladesh 1,178,527, ,779,375 21,008,273,562 23,704,238,761 Social Islami Bank Ltd. 43(a) Consolidated Cash and Cash Equivalent Social Islami Bank Limited. 21,008,273,562 23,704,238,761 Cash and Cash Equivalent of subsidiaries 29,381,371 13,472,482 SIBL Securities Limited. 29,379,751 13,459,312 SIBL Investment Limited. 1,620 13, Number of Employees The number of employees engaged for the whole year or part thereof who received a total remuneration of Tk. 36,000 p.a or above were ,037,654,933 23,717,711, Audit Committee The Board of Directors in its 291th meeting held on reconstituted the Board Audit Committee comprising with the following: Sl. No. Name Status with the Bank Status with the Committee 1 Md. Abdur Rahman Independent Director Chairman 2 Mohammad Azam Director Member 3 Anisul Haque Director Member 4 Abdul Mohit Director Member The Board Audit Committee conducted 86 (eighty six) meetings in the previous years since inception in the year 2003 out of which 05 (five) meetings were held in the year ended on 31 December The Board Audit Committee evaluates the activities of the Bank as per guidelines laid down in the Bangladesh Bank BPRD Circular # 11 dated The Audit Committee reviews the internal control system, compliance of audit activities, developing adequate risk management & information technology. The Audit Committee makes recommendation on the control, compliance and reporting aspects to achieve excellence in the areas, enhancing the effectiveness and reducing the risk of the business. The Committee examinees the Annual Financial Statements before submission in the meeting of Board of Directors. The Committee extends all necessary cooperation in implementing the decisions of the Board of Directors and initiates steps to strengthen the audit activities as per working plan set out under section 7.3.a of Internal Control & Compliance Manual. The Audit Committee also reviews the inspection reports submitted by the officials of Board Audit Cell on the assets position of the branches considered to be risky in nature in the meeting of the Board Audit Committee and advises the management to take necessary action and adhere to compliance position with a view to the interest of the Bank. Information Memorandum 87

90 Social Islami Bank Ltd. 46 Related Party Disclosures 46.1 Name of the Firms / Business Organizations where the Directors of the Social Islami Bank Limited have got interest: SL No Name 1 Major (Retd.)Dr. Md. Rezaul Haque Chairman Chairman Little House Limited Active Builders Limited Sponsor Director United Hospital Limited Name of Firms/ Business Organizations Where the Directors of SIBL have got interest 2 Md. Sayedur Rahman Managing Director Vice Chairman M/s Lodestar Fashions Limited M/s Mid Asia Fashions Limited 3 Mohammad Azam Proprietor Vice Chairman M/S Zia & Brothers 4 Abdul Awal Patwary Chairman Director Patwary Cold Storage Ltd. Patwary Potato Flakes Ltd. Greentech Greenhouse Bangladesh Ltd. Managing Director Faysal Shopping Complex Ltd. Faysal Shipping Lines Proprietor Faysal Traders 5 Anisul Haque Director, Finance & Accounts Director Hamdard Laboratories (WAQF) Bangladesh Limited Representative of: Hamdard Laboratories (WAQF) Bangladesh. 291/1, Sonargaon Road, Dhaka 6 Alhaj Nasiruddin Managing Director Director J.A.N. Corporation Limited Proprietor Nams Trade Corporation Nasim Trading Co. 7 Alhaj Sk. Mohammad Rabban Ali Managing Director Director Rabbani Trading Company Limited Shamlon Industries Limited Shama Poly Yarn Industries Limited Proprietor S.R. Impex Co. 8 Mr. Abdul Jabbar Mollah Managing Director Director Jahanabad Sea Foods Limited Jalalabad Frozen Foods Limited Jabbar & Co. Limited 9 Md. Abdur Rahman Independent Director 10 Abdul Mohit Independent Director Nil Nil 46.2 Significant contracts where Bank is a party and where in Directors have interest: Nil 46.3 Lending Policies to Related Parties: Lending to related parties is effected as per requirements of Section 27(1) of the Bank Companies Act, Information Memorandum

91 A Related Party Transaction Name of Party Funded Liability Name of the Relationship Nature of Outstanding Amount Status Director Investment () Mrs. Fatema Begum Mr. Abdul Wife HPSM (Transport) lac UC Awal Patwary Md. Abdur Rahman Md. Abdur Rahman Self HPSM (Transport) lac UC SIBL Securities Ltd. N/A Subsidiary Quard 500 lac UC Non-Funded Liability Social Islami Bank Ltd. B C D E M/S Foysal Traders Mr. Abdul Awal Self Bank Guarantee lac - Patwary Investment Policies to Related Parties Lending to related parties is effected as per requirements of section 27 (1) of Bank Companies Act,1991 Business other than Banking business with any related concern of the Directors as per Section 18 (2) of the Bank Companies Act, 1991: Nil Investments in the securities of Directors and their related concern: Nil Shares issued to Directors and Executives without consideration or exercisable at discount: Nil 47 Post Balance Sheet events (BAS-10) No material events occurring after balance sheet date came to our notice, which could affect the values reported in the financial statements significantly. The Board of Directors has authorized the financial statements for issue on and recommended cash 12% for the year ended 31 December General (i) Figures appearing in these financial statements have been rounded off to the nearest. (ii) The expenses, irrespective of capital or revenue nature, accrued/due but not paid have been provided for in the books of the Bank. (iii) Figures of previous year have been rearranged wherever necessary to conform the current year s presentation. (iv) All types of financing made to the clients have been shown under the head Investment whereas investment made in different shares and securities of Government and others companies are shown as investment shares and securities. Information Memorandum 89

92 Social Islami Bank Ltd. Social Islami Bank Limited Schedule of Fixed Assets For the year ended 31 December 2013 Annexure A (amounts in ) Particulars Balance as on 01 January 2013 C O S T / R E V A L U E D* D E P R E C I A T I O N Additions during the year Disposal/ Transfer during the year Balance at 31 December 2013 Rate of Depreciation Balance as on 01 January 2013 Transfer/ Adjustment during the year Charged during the year Balance at 31 December 2013 Written down value as at 31 December 2013 Land 12,330, ,330, ,330,000 Building 1,719,061, ,964,637-1,934,025, % 61,091,670-41,474, ,566,469 1,831,459,271 Furniture & Fixtures 343,209, ,760,783 2,235, ,734,383 15% 101,740,643-30,542, ,282, ,451,388 Office Equipment 528,531, ,975, ,506,564 20% 211,092,910-74,620, ,713, ,793,530 Vehicles 52,918,377 10,641,933-63,560,310 20% 32,603,319-8,581,325 41,184,644 22,375,666 Books 1,043,853 93,026-1,136,879 10% 610,381-53, , , December ,657,093, ,435,854 2,235,638 3,216,293, ,138, ,272, ,411,494 2,653,882, December ,406,695, ,239, ,485 2,657,093, ,823, ,315, ,138,922 2,249,954,737 * Details of revaluation of Fixed assets is shown in note: Information Memorandum

93 Social Islami Bank Limited Consolidated schedule of Fixed Assets For the year ended 31 December 2013 Annexure B (amounts in ) Particulars Balance as on 01 January 2013 C O S T / R E V A L U E D D E P R E C I A T I O N Additions during the year Disposal/ Transfer during the year Balance at 31 December 2013 Rate of Depreciation Balance as on 01 January 2013 Transfer/ Adjustment during the year Charged during the year Balance at 31 December 2013 Written down value as at 31 December 2013 Land 12,330, ,330, ,330,000 Building 1,719,061, ,964,637-1,934,025, % 61,091,670-41,474, ,566,469 1,831,459,271 Furniture & Fixtures 343,463, ,367,912 2,235, ,595,877 10% 101,766,301-30,768, ,535, ,060,803 Office Equipment 535, 721, ,086, ,808.,047 20% 211,869,205-75, 976, ,845, ,962,076 Vehicles 52,918,377 10,641,933-63,560,310 20% 32,603,319-8,581,325 41,184,644 22,375,666 Books 1,043,853 93,026-1,136,879 10% 610,381-53, , , December ,664,538, ,153,674 2,235,638 3,227,456, ,940, ,855, ,796,509 2,662,660, December ,407,055, ,324, ,485 2,664,538, ,852, ,088, ,940,876 2,256,597,940 Social Islami Bank Ltd. Information Memorandum 91

94 Social Islami Bank Ltd. Social Islami Bank Limited Balance with other banks in foreign currencies Annexure C (Referred to Note 4.2 of these financial statements) SL No. Name of the Banks Currency Name Amount in Foreign Currency Conversion rate per unit F.C Amount in BDT. Amount in Foreign Currency Conversion rate per unit F.C. Amount in BDT. 1 Mashreque Bank, Mumbai ACUE 1, ,293 2, ,329 2 Mashreque Bank, Mumbai ACU 3, ,814 21, ,723,020 3 Mashreque Bank, New York USD 2,742, ,201,242 5,043, ,013,818 4 Mashreque Bank, New York (OBU) USD , ,663 5 Standard Chartered Bank Limited, Mumbai ACU 6, ,263 5, ,666 6 Standard Chartered Bank Limited, Frankfurt EUR ,961 68, ,311,040 7 Standard Chartered Bank Limited, London GBP 3, , , ,099,418 8 United National Bank of London GBP ,230 2, ,210 9 Standard Chartered Bank Limited,Tokyo JPY 764, , , , Standard Chartered Bank Limited, New York USD 12,356, ,754,685 4,905, ,923, Sonali Bank (UK) Limited EUR , ICICI Bank Ltd. Hongkong USD , ,967, Sonali Bank (UK) Limited USD 6, , Sonali Bank (UK) Limited GBP 2, , Sonali Bank, Kolkata ACU 1, ,924 32, ,572, United Bank of India, Kolkata ACU 2, ,082 23, ,901, Summit Bank Ltd., Karachi ACU 2, ,342 70, ,644, Nepal Bangladesh Bank Ltd.,Kathmandu ACU 1, ,934 19, ,566, AB Bank Ltd., Mumbai ACU 2, ,456 56, ,575, Habib Bank Ltd. Karachi ACU 4, , Bank of Bhutan ACU 1, ,100 25, ,011, Commerz Bank Frankfurt EUR 4, ,700 25, ,737, ICICI Bank Ltd., Mumbai , ,085,553 Total 1,178,527, ,779, Information Memorandum

95 Social Islami Bank Limited Annexure D Details information of Investment more than 10% of Bank s total capital (Funded & Non-funded) (amounts in crore ) SL Outstanding as on 31 December 2013 Outstanding as on 31 December 2012 Name of client NO. Funded Non-funded Total Funded Non-funded Total 1 M/s. Agrani Traders, Ovi Traders and A M Trading M/s. Panama Composite Textile Mills Ltd Dong Bang Textile Limited Mars Textile Limited Thermax Textile Mills Ltd Bashundhara Group Dong Bang Dyeing Limited Islam Brothers & Co FMC Dockyard Ltd Rabiul Islam, M/s Rhythm Trading, AR Center Bashundhara Paper Mills Ltd. (BPML) and its subsidiaries M/s. Western Dresses Ltd M/s Abdul Monem Ltd M/s. Mabiya Ship Breakers Grand Total 1, , , Social Islami Bank Ltd. Information Memorandum

96 Social Islami Bank Ltd. Social Islami Bank Limited History of Paid-Up Capital Annexure E Years Declaration No. of Share Face Value per Share () Cumulative no. of Shares Value of issued Capital for the year () Cumulative value of Capital () 1995 Initial Capital 118,380 1, , ,380, ,380, No Dividend , ,380, % Bonus issue for the year ,620 1, ,000 7,620, ,000, No Dividend , ,000, Right Share Issued 74,000 1, ,000 74,000, ,000, Placement 50,000 1, ,000 50,000, ,000,000 Initial Public Offer 10,000 1, ,000 10,000, ,000, % Bonus Issue (Declared in the year 2004) , ,000, % Bonus Issue (Declared in the year 2004) , ,000, % Bonus Issue (Declared in the year 2004) , ,000, Bonus Issue (For the years 2001, 2002, 2003) 325,000 1, , ,000, ,000, No dividend , ,000, No dividend , ,000, :1 Right Share 5,345, ,195, ,555,000 1,119,555, % Bonus Issue for the year ,903, ,098, ,324,300 1,309,879, % Bonus Issue for the year ,309, ,408, ,987,900 1,440,867,200 1:1 Right Share 12,508, ,917,259 1,250,858,700 2,691,725, % Bonus Issue for the year ,960, ,878, ,089,850 2,987,815, % Bonus Issue for the year ,829, ,610, ,294,200 3,406,109,950 1:1 Right Share 298,781, ,392,570 2,987,815,750 6,393,925, % Bonus Issue for the year ,748, ,141, ,489,940 7,031,415, Information Memorandum

97 Social Islami Bank Limited Statement of Corporate Income Tax status as at 31 December 2013 Annexure F (amount in ) Accounting Year Assessment Year Tax Provision as per accounts Advance Tax/TDS / Settlement fee paid/ Appeal fee Total Tax paid Tax as per assessment Order Present Status ,610,851 80,610,851 80,610, ,584,498 Pending at High Court Division of Supreme Court ,391,126 42,284,321 42,284,321 42,284,321 Completed ,825,178 59,825,178 85,135,927 85,135,927 Completed ,000, ,928, ,928, ,150,459 Pending at High Court Division of Supreme Court ,300, ,067, ,067, ,548,021 Pending at Appeallate Tribunal ,914, ,454, ,454, ,315,060 Pending at Appeallate Tribunal ,149, ,109, ,109, ,109,485 Pending at Commissioner (Appeal) ,364, ,364, ,364, ,889,820 Pending at Commissioner (Appeal) ,301,591,387 1,301,591,387 1,301,591,387 - Return filed ,951, ,384, ,384,075 - Return not yet filed 4,146,098,406 3,728,620,412 3,753,931,161 2,309,017,591 Social Islami Bank Ltd. Information Memorandum 95

98 Social Islami Bank Ltd. Social Islami Bank Limited Off-shore Banking Unit (OBU) Balance sheet as at 31 December Annexure G PROPERTY AND ASSETS Cash USD USD Cash in hand (including foreign currencies) Balance with Bangladesh Bank & its Agent Banks (Including foreign currencies) Balance with other Banks and Financial Institutions In Bangladesh Outside Bangladesh 550,145 42,773, , ,145 42,773, ,663 Placement with Banks & other Financial Institutions Investments in Shares & Securities Government Others Investments General Investment etc. 27,615,281 2,147,088,153 2,529, ,153,922 Bills Purchased and Discounted ,615,281 2,147,088,153 2,529, ,153,922 Fixed Assets including Premises, Furnitures and Fixtures 1,163 90,423 1, ,433 Other Assets ,395 3,564,917 Non Banking Assets Total Assets 28,166,590 2,189,952,357 2,576, ,860,935 LIABILITIES AND CAPITAL Liabilities Borrowing from Banks & other Financial Institutions 27,615,381 2,147,095,928 2,529, ,132,011 Deposits and Other Accounts ,103 Mudaraba Savings Deposits Mudaraba Term Deposits Other Mudaraba Deposits Al-Wadeeah Current & Other Deposit Accounts ,103 Bills Payable Other Liabilities 551,208 42,856,429 46,580 3,722,821 Deffered Tax Liabilities/ (Assets) Total Liabilities 28,166,590 2,189,952,357 2,576, ,860,935 Capital/Shareholders Equity Paid-up Capital Statutory Reserve Foreign currency translation gain/(loss) Retained earnings Total Shareholders Equity Total Liabilities & Shareholders Equity 28,166,590 2,189,952,357 2,576, ,860,935 Off-Balance Sheet Items 96 Information Memorandum

99 Annexure G USD USD CONTINGENT LIABILITIES Acceptances and Endorsements Irrevocable Letters of Credit (including Back to Back Bills) Letters of Guarantee Bills for Collection Other Contingent Liabilities Total Social Islami Bank Ltd. OTHER COMMITMENTS Documentary credits and short term trade related transactions Forward assets purchased and forward deposits placed Undrawn note issuance and revolving underwriting facilities Undrawn formal standby facilities, credit lines and other commitments Total Total Off Balance Sheet Items including Contingent Liabilities Information Memorandum 97

100 Social Islami Bank Ltd. Social Islami Bank Limited Off-shore Banking Unit (OBU) Profit and Loss Account For the year ended 31 December Annexure G USD USD Investment Income 406,334 31,592,497 44,395 3,564,917 Less: Profit paid on Deposits Net Investment Income 406,334 31,592,497 44,395 3,564,917 Commission, Exchange and Brokerage Other Operating Income 98,732 7,676, ,471 Total Operating Income 505,066 39,268,888 44,899 3,605,388 Salary & Allowances 13,108 1,019,150 5, ,980 Rent & Utilities , ,467 Depreciation on fixed assets , ,567 Total Operating Expenses 13,963 1,085,607 5, ,014 Profit/(Loss) before Provision Specific Provisions for Investment General Provisions for Investment General Provisions for Off-Balance Sheet exposure Total Provision Total Profit/(Loss) before Tax 491,103 38,183,281 39,145 3,143,375 Provision for Income Tax Net Profit/(Loss) after Tax 491,103 38,183,281 39,145 3,143, Information Memorandum

101 Social Islami Bank Limited Off-shore Banking Unit (OBU) Cash Flow Statement For the year ended 31 December USD Annexure G Cash Flow from operating activities Investment Income receipt 406,334 31,592,497 3,564,917 Profit paid on deposits Dividend receipts Fees & commission receipt 98,732 7,676,391 40,471 Cash payments to employees (13,108) (1,019,150) (419,980) Cash payments to suppliers Income tax paid Receipts from other operating activities Payments for other operating activities (556) (43,220) (24,467) Operating profit before changes in operating assets and liabilities 491,402 38,206,518 3,160,942 Changes in operating assets and liabilities Statutory deposits Net trading securities Investments to other banks Investment to customers (27,615,281) (1,943,934,231) (203,153,922) Other assets - - (3,564,917) Deposits from other banks 27,615,381 1,943,963, ,132,011 Deposits received from customers - - 6,103 Other liabilities on account of customers Trading liabilities Other liabilities 58,336 4,512, ,447 Sub Total 58,436 4,542,599 (3,001,278) A. Net Cash flow from operating activities 549,838 42,749, ,663 Cash flows from investing activities Proceeds from sale of securities Payment for purchases of securities Proceeds from sale of fixed assets - - (135,000) Purchases of property, plant & equipments Purchase/Sale of subsidiaries B. Net Cash flows from investing activities - - (135,000) Cash flows from financing activities Receipts from issue of debt instruments Payments for redemption of debt instruments Receipts from issue of right shares/ordinary share Dividend paid in cash C. Net Cash flow from financing activities D. Net increase/(decrease) in cash & cash equivalents (A+B+C) 549,838 42,749,117 24,663 E. Cash and cash equivalents at the beginning of the year ,663 - F. Cash and cash equivalents at the end of the year (D+E) 550,145 42,773,780 24,663 Social Islami Bank Ltd. Information Memorandum 99

102 Social Islami Bank Ltd. 1 Status of the unit Social Islami Bank Limited Off-shore Banking Unit (OBU) Notes to the Financial Statements For the year ended 31 December 2013 Annexure G The Bank obtained the Off-shore Banking Unit ( the Unit ) permission vide letter no. BRPD(P-3)744(119)/ , dated: 11 November, The Bank commenced operation of this unit from 02 may The Off-shore Banking Unit is governed under the rules and guidelines of the Bangladesh Bank. Its office is located at SIBL Banani Branch, 48 Kemal Ataturk Avenue, Banani, Dhaka Principal activities The principal activities of the unit are to provide all kinds of commercial banking services to its customers through its Offshore Banking Units in Bangladesh. 2 Significant accounting policies and basis of preparation of financial statements 2.1 Basis of accounting The Off-shore Banking Unit maintains its accounting records in USD from which accounts are prepared according to the Bank Companies Act, 1991, Bangladesh Accounting Standards, Bangladesh Financial Reporting Standard (BFRS) and other applicable directives issued by the Bangladesh Bank, in particular, Banking Regulations and Policy Department (BRPD) Circular No. 15 (09 November 2009). 2.2 Use of estimates and judgments The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. 2.3 Foreign currency transaction a) Foreign currencies translation Foreign currency transactions are converted into equivalent taka using the ruling exchange rates on the dates of respective transactions as per BAS-21 The Effects of Changes in Foreign Exchange Rates. Foreign currency balances held in US Dollar are converted into at weighted average rate of inter-bank market as determined by Bangladesh Bank on the closing date of every month. Balances held in foreign currencies other than US Dollar are converted into equivalent US Dollar at buying rates of New York closing of the previous day and converted into equivalent. b) Commitments Commitments for outstanding forward foreign exchange contracts disclosed in these financial statements are translated at contracted rates. Contingent liabilities/commitments for letter of credit and letter of guarantee denominated in foreign currencies are expressed in terms at the rates of exchange ruling on the balance date. c) Translation gains and losses The resulting exchange transaction gains and losses are included in the profit and loss account, except those arising on the translation of net investment in foreign subsidiary. 100 Information Memorandum

103 Annexure G Cash flow statement Cash flow statement has been prepared in accordance with the Bangladesh Accounting Standard-7 Cash Flow Statement under direct method as recommended in the BRPD Circular No. 14, dated June 25, 2003 issued by the Banking Regulation & Policy Department of Bangladesh Bank. 2.4 Reporting period These financial statements cover from January 01 to December 31, General Investments a) General investments of Off-shore Banking Units are stated in the balance sheet on net basis. Social Islami Bank Ltd. b) Profit is calculated on a daily product basis but charged and accounted for on accrual basis. Profit is not charged on bad and loss investments as per guidelines of the Bangladesh Bank. Records of such interest amounts are kept in separate memorandum accounts. 2.6 A provision is recognised in the balance sheet when the unit has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefit will be required to settle the obligations, in accordance with the BAS 37 Provisions, Contingent Liabilities and Contingent Assets. 2.7 Profit income In terms of the provisions of the BAS-18 Revenue, the profit income is recognized on accrual basis. Fees and commission income Fees and commission income arises on services provided by the units are recognized on a cash receipt basis. Commission charged to customers on letters of credit and letters of guarantee are credited to income at the time of effecting the transactions. 2.8 Profit paid and other expenses In terms of the provisions of the BAS - 1 Presentation of Financial Statements interest and other expenses are recognized on accrual basis. 2.9 Allocation of common expenses Operating expenses in the nature of salary, rent, rates and taxes, management expenses, printing stationery, etc. are allocated as common expense rather separately accounted for in the financial statements General a) These financial statements are presented in BDT, which is the Bank s functional currency. Figures appearing in these financial statements have been rounded off to the nearest BDT. b) Assets and liabilities & income and expenses have been converted into US$1 = closing rate as at 31st December c) Fixed assets of this unit are appearing in the books of the main operation of the bank and depreciation is also charged to Profit & Loss Accounts of the main operation of the bank. Information Memorandum 101

104 Social Islami Bank Ltd. Social Islami Bank Limited Highlights of Performance SL no. Particulatars Annexure H (amounts in ) 1 Paid up Capital 7,031,415,640 6,393,925,700 2 Total Capital (Core + Supplementary) 11,623,517,680 10,596,509,878 3 Capital Surplus/(Deficit) 1,640,101,680 1,398,168,128 4 Capital Adequacy Ratio (CAR) 11.64% 11.52% 5 Total Assets 126,616,564, ,165,953,013 6 Total Deposit 102,104,479,583 93,594,292,471 7 General Investment 85,922,331,926 76,024,973,908 8 Total Contingent Liabilities and Commitments 30,470,229,787 27,764,449,918 9 Investment-Deposit (ID) Ratio ( % ) 86.78% 89.43% 10 Percentage of classified investment against total investments 5.35% 3.33% 11 Profit before Tax and Provision 2,924,550,001 3,617,825, Profit after Tax and Provision 1,220,201,438 1,441,127, Amount of classified investment 4,593,330,630 2,532,858, Provisions kept against classified investment 1,692,052, ,134, Provisions surplus Cost of Deposits 9.04% 9.12% 17 Profit Earning Assets 106,574,036,365 94,748,144, Non-Profit Earning Assets 20,042,528,379 20,417,808, Return on Investment in Securities 3.81% 3.81% 20 Return on average Assets (ROA) 1.67% 2.75% 21 Return on equity (ROE) 11.01% 14.15% 22 Income from Investment in Securities 325,466, ,816, Earning Per Share (Restated for year 2012) Net Income Per Share (Restated for year 2012) Price Earning Ratio (Times) Information Memorandum

105 Comparative financial statements Auditors report of Social Islami Bank Limited Under section 135(1) and paragraph 24(1)(3) and 25 of Part-II of Third Schedule of the Companies Act,1994 We have examined the consolidated financial statements of Social Islami Bank Limited and its subsidiaries for the year ended 31 December 2013, 2012, 2011, 2010 & 2009 in pursuance of Section 135(1) under Paragraph 24(1) of Part-II of Third Schedule of the Companies Act, 1994 and our report is as under: Social Islami Bank Ltd. The presentation of these consolidated financial statements is the responsibility of the Company s management. Our responsibility is to review the relevant audited consolidated financial statements and confirm that the related information have been correctly extracted from those audited consolidated financial statements. We have reviewed the relevant audited consolidated financial statements and confirm that the related information have been correctly extracted from those audited consolidated financial statements. a. The Social Islami Bank Limited and its subsidiaries were incorporated on : I. Social Islami Bank Limited 5th November, 1995; II. SIBL Securities Limited. 20th July, 2010; III. SIBL Investment Limited 30th August, b. The Bank has started its commercial operation on 22nd November c. Dividend declared: Cash dividend-% Stock dividend (Bonus share)-% d. Enclosures : % 10% Nil Nil Nil Nil 5% 10.50% 14.00% 11.00% I. The Consolidated Statement of Assets and Liabilities (Financial Position) of the Company for the year ended 31 December 2013, 2012, 2011, 2010 and (Annexure - A) II. The Consolidated Statement of operating results (Comprehensive Income) of the Company for the year ended 31 December 2013, 2012, 2011, 2010 and (Annexure - B) III. The Consolidated Statement of Cash Flows of the Company for the year ended 31 December 2013, 2012, 2011, 2010 and (Annexure - C) e. The Company did not prepare any financial statements for any period subsequent to December 31, 2013; and f. Figures related to previous years have been rearranged wherever considered necessary. Dated: 20 April, 2014 Dhaka Sd/- Kazi Zahir Khan & Co. Chartered Accountants Information Memorandum 103

106 Social Islami Bank Ltd. Annexure-A Statement of Assets and Liabilities: (Amount in ) PROPERTY AND ASSETS Cash Cash in hand (Including Foreign Currencies) 1,267,213,967 1,104,657,620 1,065,645, ,780, ,106,670 Balance with Bangladesh Bank & its Agent Banks 7,627,790,250 10,020,554,834 4,601,857,225 3,842,818,998 1,781,588,805 (Including Foreign Currencies) 8,895,004,217 11,125,212,454 5,667,502,592 4,451,599,010 2,217,695,475 Balance with other Banks and Financial Institutions In Bangladesh 1,899,243,196 2,726,839,850 3,317,446,597 1,076,931,370 1,092,716,475 Outside Bangladesh 1,178,527, ,779, ,982, ,902, ,266,143 3,077,771,152 3,576,619,225 3,936,428,599 1,683,833,829 1,439,982,618 Placement with Banks & other Financial Institutions 9,064,879,564 9,015,879,564 7,457,379,564 5,468,379,564 5,728,919,564 Investments in Shares & Securities Government 5,500,000,000 2,900,000,000 2,050,000,000 1,050,000, ,000,000 Others 1,558,185,070 1,764,016,584 1,711,359,758 1,499,726, ,659,345 7,058,185,070 4,664,016,584 3,761,359,758 2,549,726,592 1,310,659,345 Investments General Investment etc. 76,348,581,962 66,459,100,077 48,926,507,517 30,637,023,087 22,415,683,511 Bills Purchased and Discounted 9,523,749,964 9,565,873,831 4,982,068,255 6,043,262,858 4,164,901,086 85,872,331,925 76,024,973,908 53,908,575,772 36,680,285,945 26,580,584,597 Fixed Assets including Premises, Furniture and Fixtures 2,662,660,343 2,256,597,940 2,135,203, ,736, ,607,474 Other Assets 9,770,561,641 8,165,811,105 7,095,197,636 2,917,253,989 2,053,370,399 Non Banking Assets Total Assets 126,401,393, ,829,110,780 83,961,647,464 54,665,814,961 39,980,819,472 LIABILITIES AND CAPITAL Liabilities Placement from Banks & other Financial Institutions 4,700,000,000 4,700,000,000 3,700,000,000 3,280,000,000 2,900,000,000 Deposits and Other Accounts Mudaraba Savings Deposits 6,468,729,754 4,905,319,144 3,925,740,731 3,692,222,370 3,438,376,060 Mudaraba Term Deposits 62,746,867,195 62,267,653,508 42,699,279,530 25,245,307,928 16,155,773,818 Other Mudaraba Deposits 19,288,768,828 13,984,000,422 10,498,361,467 8,163,355,695 7,049,428,362 Al-Wadeeah Current & Other Deposit Accounts 11,936,321,181 10,585,704,537 8,379,160,525 6,588,609,279 4,289,075,045 Bills Payable 1,316,909,958 1,465,257, ,702, ,328, ,771,974 Cash Waqf Fund 84,577,685 68,903,770 53,477,204 44,067,266 27,735, ,842,174,601 93,276,838,609 66,461,721,747 44,350,891,493 31,588,160, Information Memorandum

107 Annexure-A Statement of Assets and Liabilities: (Amount in ) Other Liabilities 8,765,394,391 6,699,267,451 4,446,691,591 2,845,660,746 1,909,547,942 Deferred Tax Liabilities/(Assets) 1,577,248 70,528 (5,101,777) (6,598,253) 27,356,312 Total Liabilities 115,309,146, ,676,176,588 74,603,311,561 50,469,953,986 36,425,064,651 Shareholders Equity Paid-up Capital 7,031,415,640 6,393,925,700 6,393,925,700 2,987,815,750 2,691,725,900 Statutory Reserve 2,122,994,344 1,718,062,455 1,168,484, ,228, ,890,287 General reserve 6,666, , Other Reserve ,124,389 Revaluation reserve on Fixed Assets 1,082,485,102 1,109,979,121 1,138,496, Retained Earnings 848,684, ,222, ,427, ,815, ,014,245 Total Shareholders Equity of Parent Company, SIBL 11,092,246,074 10,152,932,622 9,358,334,353 4,195,859,484 3,555,754,821 Non controlling Interest 1,597 1,570 1,550 1,491 - Total Liabilities & Shareholders Equity of the Group 126,401,393, ,829,110,780 83,961,647,464 54,665,814,961 39,980,819,472 Acceptances and Endorsements 14,986,882,397 12,634,753,997 8,405,119,002 4,867,235,823 2,515,619,150 Irrevocable Letters of Credit (including Back to Back Bills) 9,854,239,886 7,395,594,893 6,784,252,876 5,092,517,720 5,238,640,844 Letters of Guarantee 3,246,076,013 4,949,826,296 3,277,969,675 1,370,259,614 1,042,628,167 Bills for Collection 2,383,031,491 2,784,274,732 1,784,609,018 1,204,047,680 1,309,959,626 Other Contingent Liabilities Total 30,470,229,787 27,764,449,918 20,251,950,570 12,534,060,837 10,106,847,787 OTHER COMMITMENTS Documentary credits and short term trade related transactions Forward assets purchased and forward deposits placed Undrawn note issuance and revolving underwriting facilities Undrawn formal standby facilities, credit lines and other commitments Total Total Off Balance Sheet Items including Contingent Liabilities 30,470,229,787 27,764,449,918 20,251,950,570 12,534,060,837 10,106,847,787 Sd/- Dated, Dhaka KAZI ZAHIR KHAN & CO. 20 April, 2014 Chartered Accountants. Social Islami Bank Ltd. Information Memorandum 105

108 Social Islami Bank Ltd. Annexure-B Statement of Operating Results: (Amount in ) Particulars Investment Income 13,652,592,262 11,325,266,334 6,922,205,589 3,886,183,280 3,078,976,824 Less Profit paid on Deposite 9,706,867,767 7,541,679,221 4,541,152,612 2,435,015,182 2,063,617,220 Net Inverst Income 3,945,724,495 3,783,587,113 2,381,052,977 1,451,168,098 1,015,359,604 Income From Investments in Shares & Securities 325,466, ,816, ,112, ,627,876 51,480,983 Commission, Exchange and Brokerage 1,056,116,571 1,194,479,560 1,206,193, ,190, ,949,790 Other Operating income 233,154, ,568, ,895, ,103, ,852,657 1,614,737,090 1,765,864,659 1,765,201,673 1,181,922, ,283,430 Total Operating Income 5,560,461,585 5,549,451,772 4,146,254,650 2,633,090,142 1,717,643,034 Salaries and Allowances 1,511,746,541 1,081,286, ,781, ,630, ,010,278 Rent, Taxes, Insurance, Electricity etc. 228,445, ,760, ,776, ,048,356 69,927,063 Legal Expences 7,943,388 8,618,710 3,448,249 3,798,305 3,219,447 Postage, Stamps, Telecummunication etc. 32,286,323 28,799,564 21,878,753 15,871,399 14,474,447 Stationary, Printing, Advertisements etc. 91,543,834 80,776,376 54,687,078 44,937,330 31,183,916 Managing Director s Salary and Allowances 8,602,260 10,000,000 11,160,000 5,765,948 6,750,000 Directors Fees and Expenses 4,805,075 4,094,874 6,112,873 6,206,355 3,330,495 Shariah Supervisory Commettee s Fees & Expences 254, , , , ,759 Auditor s Fees 534, , , , ,850 Depreaciation & Repair of Bank s Assets 174,744, ,523,899 82,184,470 62,070,283 35,248,987 Other Expenditures 534,797, ,733, ,633, ,498,920 91,772,788 Total Operating Expenses 2,595,704,395 1,906,621,541 1,428,413, ,367, ,337,029 Profit/(Loss) before Provision 2,964,757,190 3,642,830,231 2,717,841,040 1,635,722,959 1,064,306,006 Specific Provisions for Investment 752,687, ,356, ,898, ,614, ,962,145 General Provisions for Investment 84,746, ,483, ,954,940 96,651,428 52,141,522 General Provisions for off-balance Sheet Exposure 27,057, ,482,499 47,821,392 24,272,130 5,858,478 General Provisions for Margin Investment 5,924, , Provisions for Other Assets 4,910, ,654, ,630, Provision for Diminution in Value of Shares and Securities ,706,167-16,655,675 Provisions for Zakat Fund 30,488,279 30,146,894 25,600,000 17,600,000 20,808,720 Provision for Gratuity - 53,811,215 43,907,230 32,800,097 - Total Provision 905,814, ,676, ,518, ,938, ,426,540 Total Profit/(Loss) before Tax 2,058,942,530 2,772,153,542 1,850,322,894 1,133,784, ,879,467 Provision for income Tax 806,808,184 1,306,935, ,861, ,679, ,356,743 Net Profit/(Loss) after Tax attributable to equity holders of the group 1,252,134,346 1,465,218,058 1,032,461, ,104, ,522,724 Non Controling Interest (41) (9) - Net Profit/(Loss) after Tax Attributable to Equityholders of the Parent 1,252,134,320 1,465,218,039 1,032,461, ,104, ,522,724 Appropriations Statutory Reserve 404,931, ,578, ,256, ,337, ,375,893 Retained Earning 847,202, ,639, ,205, ,766, ,146,830 1,252,134,320 1,465,218,037 1,032,461, ,104, ,522,72 3 Earning Per Share(EPS) Net Operatiog Cash Flow per share(nocfps) Net Asset Value (Crore ) 1, , Net Asset Value(nav) per share Sd/- Dated, Dhaka KAZI ZAHIR KHAN & CO. 20 April, 2014 Chartered Accountants. 106 Information Memorandum

109 Annexure-C Cash Flow Statement: (Amount in ) Cash Flow from operating activities Investment Income Receipt 13,652,592,262 11,325,266,334 6,922,205,589 3,886,183,280 3,078,976,824 Profit paid on Deposits (10,759,064,904) (5,247,109,745) (4,541,152,612) (2,435,015,182) (2,063,617,220) Dividend Receipts 325,466, ,816, ,112, ,627,876 51,480,983 Fees & Commission Receipt 584,822, ,843, ,496, ,280, ,027,779 Cash Payments to Employees (1,520,348,801) (1,091,286,476) (905,941,104) (637,396,290) (403,760,278) Cash Payments to Suppliers (123,830,157) (109,575,940) (76,565,831) (60,808,729) (53,450,016) Income Tax Paid (1,356,696,826) (929,894,508) (621,735,692) (306,917,971) (148,238,327) Receipts from Other Operating Activities 704,448, ,204,521 1,031,643, ,013, ,774,668 Payments for Other Operating Activities (794,669,804) (569,670,338) (371,088,973) (247,643,893) (168,669,401) Operating profit before changes in Operating Assets and Liabilities 712,718,861 5,143,593,985 2,161,974,430 1,380,323, ,525,012 Changes in Operating Assets and Liabilities Statutory Deposits Net Trading Securities (2,394,168,486) (902,656,827) (2,191,633,165) (1,739,065,647) (457,201,287) Investments to Other Banks Investment to Customers (9,847,358,018) (22,116,398,136) (17,228,289,827) (10,099,701,348) (6,629,281,119) Other Assets (248,053,710) (140,718,961) (3,556,197,954) (556,975,620) (89,400,564) Deposits from Other Banks (5,331,048,674) 2,311,519,035 5,173,989,284 1,092,855,040 1,890,509,000 Deposits received from Customers 14,948,581,802 22,209,028,350 16,936,840,970 11,669,876,056 5,597,828,027 Other Liabilities on Account of Customers Trading Liabilities Other Liabilities 360,934,923 80,878,423 (82,861,899) (93,450,165) (131,562,825) Sub Total (2,511,112,163) 1,441,651,884 (948,152,591) 273,538, ,891,232 A. Net Cash flow from Operating Activities (1,798,393,302) 6,585,245,869 1,213,821,839 1,653,861,574 1,124,416,244 Cash flows from Investing Activities Proceeds from Sale of Securities Payment for Purchases of Securities Proceeds from Sale of Fixed Assets - - 9,924, Purchases of Property, Plant & Equipments (562,918,036) (257,483,184) (154,064,037) (316,646,828) (233,784,597) Purchase/Sale of Subsidiaries B. Net Cash Flows from Investing Activities (562,918,036) (257,483,184) (144,139,237) (316,646,828) (233,784,597) Cash flows from Financing Activities Receipts from Issue of Debt Instruments - 1,000,000, ,000, ,000, ,000,000 Payments for Redemption of Debt Instruments Receipts from Issue of Right Shares/Ordinary Share - - 3,967,815, ,000,000 1,250,858,700 Dividend Paid in Cash (318,744,971) (671,362,199) C. Net Cash flow from financing Activities (318,744,971) 328,637,801 4,387,815, ,000,000 1,750,858,700 D. Net increase/(decrease) in Cash & Cash Equivalents (A+B+C) (2,680,056,309) 6,656,400,485 5,457,498,352 2,217,214,746 2,641,490,347 E. Cash and Cash Equivalents at the beginning of the year 23,717,711,242 17,061,310,755 11,603,812,403 9,386,597,657 6,745,107,310 F. Cash and Cash Equivalents at the end of the year (D+E) 21,037,654,933 23,717,711,241 17,061,310,755 11,603,812,403 9,386,597,657 Sd/- Dated, Dhaka KAZI ZAHIR KHAN & CO. 20 April, 2014 Chartered Accountants. Social Islami Bank Ltd. Information Memorandum 107

110 Social Islami Bank Ltd. Ratio Analysis of Social Islami Bank Limited We have examined the following Earnings per Share (EPS) and other ratios of Social Islami Bank Limited as on 31 December 2013, 2012, 2011, 2010 and 2009 & for the years ended 31 Decemebr 2013, 2012, 2011, 2010 and 2009, which have been produced by the management of the Company to us. The preparation of the EPS and other ratios is the responsibility of the Company s management. Our responsibility is to review them and certify as to whether they have been properly prepared using acceptable principles on the basis of audited financial statements for the years ended 31 December 2013, 2012, 2011, 2010 and Based on our review, we certify that the Company has properly prepared the following EPS and other ratios using acceptable principles on the basis of audited financial statements for the years ended 31 December 2013, 2012, 2011, 2010 and Name of Ratio A. Liquidity Ratios 1 Current Ratio (Times) 2 Quick Ratio (Times) 3 Times Interest Earned Ratio (Times) 4 Debt to Equity Ratio (Times) B. Operating Ratios 1 Accounts Receivable Turnover Ratio (Times) 2 Inventory Turnover Ratio (Times) 3 Fixed Assets Turnover Ratio 4 Assets Turnover Ratio (Times) C. Profitability Ratios 1 Gross Margin Ratio (%) 2 Operating Income Ratio (%) 3 Net Income Ratio (%) 4 Return on Assets Ratio (%) 5 Return on Equity Ratio (%) 6 Earnings Per Share or Weighted Average EPS 7 Net Asset Value per Share Formula Current Assets Current Liability Current Assets - Inventory Current Liability Operating Profit Net Interest Expenses Total Debt (Total Liabilities) Total Shareholders' Equity Sales Average Receivables Cost of Goods Sold Average Inventory Sales Fixed Assets Sales Average Total Assets Gross Profit Sales Operating Profit Sales Profit after Tax Sales Profit after Tax Average Total Assets Profit after Tax Shareholders' Equity Profit after Tax Number of Shares Total Net Asset Number of Shares Outstanding Result Result Result Result Result N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A % 28.90% 27.41% 28.63% 26.85% 19.42% 27.83% 31.28% 32.27% 28.15% 8.20% 11.19% 11.89% 12.63% 11.41% 1.04% 2.38% 1.49% 1.35% 1.24% 11.29% 14.43% 11.03% 15.26% 12.14% Sd/- Dated, Dhaka KAZI ZAHIR KHAN & CO. 20 April, 2014 Chartered Accountants. 108 Information Memorandum

111 Social Islami Bank Ltd. Information Memorandum 109

112 Emerging Credit Rating Ltd Social Islami Bank Ltd. Corporate Bond CREDIT ANALYSIS 2014 Initial Review Social Islami Bank Limited - Mudaraba Subordinated Bond Major Rating Factors Strengths Challenge/ Risks Adequate capital base with high core capital. Consistent improvement in liquidity management. Sound liquidity management supported by standard investment to deposit ratio. Gross NPI and Net NPI below the industry average of private commercial banks. Prominent amount of rescheduled loan. High concentration of bad/loss investments in total gross NPI, accounted for over 63% over the last five years. Declining concentration of Non-Investment Income. Rationale Emerging Credit Rating Limited (ECRL) has assigned A+ID (Pronounced as Single A Plus) long term credit rating to the Social Islami Bank Limited s Mudaraba Subordinated Bond (hereinafter referred to as The Subordinated Bond or The Issue ) issuance of BDT 3,000 million in face value. The outlook on the rating is Stable. The rating is consistent with ECRL s methodology for this type of financial institutions and bond ratings. ECRL considered financial performance, capital base, asset quality, management experience and prospect of the industry while assigning the standalone rating and the possibility of likely default of the bond while assigning the bond rating. The Subordinated Bond, which qualifies as Tier-2 Capital for Social Islami Bank Limited (hereinafter referred to as SIBL or The Bank or The Issuer ), is rated lower than SIBL s standalone rating, because of the Subordinated position of the bond relative to the SIBL s depositors and other liabilities (borrowings). The assigned rating reflects the strengths of the company which is backed by the growth in earnings, deposits and investments, adequate capital coverage with high tier 1 capital, and controlled liquidity position. However, ECRL is concerned about non-compliance of core risk related issues as directed by Bangladesh Bank, devolved asset quality, high growth rate of risk weighted assets compare to core capital growth, negative growth of non-investment income in FY2013 and high concentration of bad/loss investments in total gross NPI. Besides, turmoil in the banking industry emanating from revised regulatory requirements along with stiff competition to secure deposits among the exiting & potential market players also causing concerns for the bank. The rating consideration has also included the unsecured position of the bond in discussion. The rating was assigned on the basis of draft agreements between the issuer, trustee & mandated lead arranger provided by the entity in discussion and the rating may significantly change if the covenants in those agreements are altered. Social Islamic Bank Limited was incorporated on November 22, 1995 as a public limited company under the Companies Act The bank is one of the interest 110 Information Memorandum

113 (riba) free Shariah based banks in the country which went for public issue of shares on November 18, 2000 and is listed with both of two stock exchanges in Bangladesh. The bank has been operating its business with a country-wide network of 94 branches with real time online facility through Islamic banking software ABABIL. The bank encompasses a wide range of services including various types of deposit and investment accounts. In addition, the company has two subsidiary companies named SIBL Securities Ltd and SIBL Investment Ltd. Current bond market of Bangladesh is very shallow compared to neighboring countries. There are many issues accounted for least development of this market such as absence of benchmark rate or yield curve, high government borrowing, lack of transparency in public sector borrowing, high bank deposit rate, absence of policy support and so and so forth. Another issue with development of bond market is investors preference over short term product rather long term investment; which makes it hard to issue any long term instrument. Issuance of new bond obviously adds economic value to the financial institutions and the potential investors for investment facility. It facilitates the long term business of the bank through expansion in General investment portfolios resulting in profitability growth of the bank as well as to attain sustainable growth in business. The present issue of Subordinated Bond is being arranged for raising Tier-II capital to strengthening the capital base of SIBL will also facilitate the long term business of the bank leading towards business expansion, enriching credit portfolio and providing supportive cushion to the minimum capital requirement and the upward moving profitability of the bank. However, End of FY2013, SIBL s Tier 1 capital ratio and total capital adequacy ratio stood at 10.02%, and 11.64% respectively, slightly higher than the year-end position in FY2012, but comfortably above the regulatory requirement of 5% and 10% respectively. However, the position of the bank remained a bit lower than industry average of private commercial banks of 12.52% as per BB data. ECRL opines that the bank s capitalization is expected to remain strong going forward, despite the introduction of strict capital adequacy requirements as per Basel-III. SIBL s core Tier-1 CAR stood at 10.02% in the end of FY2013, which is above the proposed regulatory requirement (7.0%) under Basel-III. Besides, SIBL s planning to issue subordinated bond will increase Tire II capital and hence capital adequacy further. SIBL s non-performing loans (NPL) deteriorated largely In FY2013 while Gross NPL stood at 5.35% in FY2013 from 3.33% of FY2012, which was relatively higher compare to the industry (4.54%, FY 2013 Q4). On the other hand, net NPL ratio reached to 2.87% in FY2013 from 1.67% of FY2012 measured lower considering the industry average of private commercial banks, which stood 0.60% in FY 2013 Q4, indicating devolved assets management. SIBL s operating profit has a negative growth of 19.16% in FY 2013 and stood at BDT 2, million against BDT 3, million of the previous year. SIBL s net investment income has registered 58.64% & 3.84% growth in FY2012 & FY2013 respectively, supported by the increase in credit disbursements. However, in contrast to the investment income, SIBL s non-investment income experienced negative growth in FY2013, stood at BDT 1, million, dropped by 9.07%. As a result the profit for the year has also dropped by 15.33% and stood at BDT 1, million (FY 2012: BDT 1, million). SIBL s growth in funding base has been decreasing for the last two years due to the slowdown across the banking sector. In FY2013, the loan to deposit ratio of SIBL has increase and stood at 85.25%, comfortably lower than the Bangladesh Bank s current standardized requirement of 90% for the Islamic banks, justifying adequate liquidity position. Moreover, end of FY2013, SIBL liquidity statement disclosed favorable liquidity position in all liquidity buckets, indicating sound liquidity management. However, SIBL s liquid asset ratio stood at 18.70% as at end of FY2013, which is a slight increase compared to previous years. Social Islami Bank Ltd. Information Memorandum 111

114 Social Islami Bank Ltd. ECRL views the outlook of subordinated Bond of SIBL as stable, as the issuer is likely to maintain its satisfactory capital base, current level of profitability & improve asset quality and the rating is comfortably positioned at its current rating level. Exhibit 1: Financial Highlights - Social Islami Bank Limited (SIBL) FYE 31 December Total Assets (BDT million) 126, , , , , Net Investment Income (BDT million) 3, , , , , Non-Investment Income (BDT million) 1, , , , Pre TAX Profit (BDT million) 2, , , , Investment/Deposit Ratio (%) Gross NPI Ratio (%) Post-Tax ROAA (%) Post-Tax ROAE (%) Capital Adequacy Ratio (%) Net Investment/Stable Funding Base (%) Information Memorandum

115 A. BUSINESS DESCRIPTION A.1. Company Background Social Islamic Bank Limited (SIBL) was incorporated as a Public Limited Company on November 22, 1995 under the Company Act, The bank is one of the interest free Shariah based banks in the country which went for public issue of shares on November 18, 2000 and is listed with both of two stock exchanges in Bangladesh. At present, the bank s authorized and paid up capital stands at BDT 10, million and BDT million. The bank encompass a wide range of services including various types of deposit and investment accounts, financing trade, providing letters of guarantee, opening letter of credits, collection of bills, leasing of equipment & consumers durable, hire purchase & installment sale of capital goods, investment in low-cost housing, management of real estates, participatory investment in various industrial, agricultural, transport, education and health projects and so on, offered through a network of 94 branches. In addition, the company has two subsidiary companies named SIBL Securities Ltd and SIBL Investment Ltd. A.2. Share Holding Pattern As on December 31, 2013, SIBL s total number of ordinary shares was 703,141,564; of which 25.00% was held by the Sponsors & Placement, 3% by Sponsors & Placement Company, 57% by General public, 3% by Institution (Bank & Insurance), 10% by Institution (Others) and 2% by ICB. Social Islami Bank Ltd. Figure 3: Ownership Pattern: Social Islami Bank Limited (SIBL) A.3. Business Review SIBL provides all kinds of commercial banking services as well as various deposit and investment schemes and card including Bai-Muazzal, HPSM, HPSM-ijarah, Murabaha, Musharaka, Bill Purchase, Mudaraba scheme Deposits, Al Wadiah Current Account, Mudaraba Saving Deposit, Mudaraba Team Deposit, Mudaraba Notice Deposit, SIBLCredit Card, Vissa Islamic Credit Card, SIBL Zameel Debit Card etc as like as other shariah based banks. Online banking, SMS banking, ATM banking and locker service under its product portfolio. At present, SIBL is providing 24/7 service through 14 ATM booths located across the country. At present, the bank has 94 branches across Bangladesh located in seven (07) zones of which 40 branches are in Dhaka division, 28 branches are in Chittagong division, 04 Branches are in Sylhet division, 10 Branches are in Rajshahi Division, 01 Branches are in Rangpur Division, 10 Branches are in Khulna division and 01 in Barisal division. To achieve competitive advantage, SIBL is using state-ofart banking software, which enables the bank to perform as any branch real time banking service to the clients. All products and services are backed by IT infrastructure, which are upgrading on continuous basis. Information Memorandum 113

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119 Exhibit 2: Capital Adequacy Ratio of SIBL Particulars RWCAR (%) 11.64% 11.52% 13.17% 9.33% 14.97% Tier I Ratio (%) 10.02% 9.86% 11.43% 8.37% 13.57% Tier 2 Ratio (%) 1.63% 1.66% 1.74% 0.96% 1.40% Total RWA (BDT Million) 99, , , , , SIBL has started operation under Risk Based Capital Adequacy guidelines (Basel-II) of Bangladesh Bank (BB) since the beginning of FY2010 and has managed well enough to meet the total Capital Adequacy Requirement (CAR) up to end of FY2013. However, ECRL opines that the bank s capitalization is expected to remain strong going forward, despite the introduction of stringent capital levels as per Basel-III requirements. As a consequence of fulfilling Basel-III requirements SIBL has been issuing Mudaraba Subordinated Bond. Social Islami Bank Ltd. Figure 2: Capital Adequacy Position of SIBL 20% 15% 10% 10.9% 9.3% 5% 15.0% 13.6% 13.2% 9.3% 11.4% 8.4% 11.5% 9.9% 11.6% 10.0% 0% Capital adequacy ratio (Total) B.1.1. Requirements of Capital Enhancement SIBL s total asset size has been growing, indicating 9.94% growth in FY2013. ECRL is expecting that the bank will keep its growth momentum in coming years. ECRL opines that, with the growth momentum of assets base, the risk weighted assets will also increase to some extent. Besides that, Bangladesh Bank s planning to implement Basel-III will claim more stringent capital levels. However, increase in Tier I capital though retained earnings alone may not be sufficient for the bank to maintain an adequate capital adequacy ratio and minimum stipulated requirement of the Bangladesh Bank. In order to sustain a healthy CAR the bank is willing to expand its Tier II capital base through the issuance of Subordinated bond. B.2. Asset Composition & Trends Exhibit 4: Selected Indicators of SIBL FY 31 December Total Asset (BDT Million) 126, , , , , Gross Investment ( BDT Million) 85, , , , , Investment Growth (%) Gross NPI Ratio (%) Net NPI Ratio (%) Loan Loss Reserve Coverage (%) B.2.1. Assets Quality SIBL s total asset base has been increasing in a smooth way over the last couple of years, picked up by 9.94% in FY Although the bank registered lower growth compare to FY2012 (36.44% growth), but still indicating good shape compared to overall industry scenario. FY2012 s total asset profile mainly consists 67.86% of Investments & Advances, 20.94% of liquid assets and cash, 2.40% Information Memorandum 117

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121 textile industries, SME financing, construction industries are occupying the most amount of investment with 26.84, 9.50%, 16.52%, 9.59 and 3.99% respectively. ECRL is concerned about the bank s significant expose to sector concentration risk as commercial lending sector that might largely be affected with the volatility of commodity prices both in national and international market. On the other hand, house building investment that is considered a risky industry recently has occupied 3.02% of the total investment although it is lesser than the previous year. Figure 9: Selected Indicators of SBIL 30, , , , , , Social Islami Bank Ltd. *Above figures are BDT in million However, the bank has well diversified credit profile contributing in most of the important economic sectors of the country but with less exposure. The diversification of credit profile will certainly pay off the bank and perhaps will help the organization to combat the sudden shock in any particular sector and also make them more resilient to fight against any macro economical problem. B.3. Earning Trends and Profitability Exhibit 7: Selected Indicators of SIBL FY 31 December 2013 Net Investment Income (BDT 3, Million) Non Investment Income (BDT 1, Million) Pre-Tax Profit (BDT Million) 2, Post - Tax ROAA (%) 1.01 Post - Tax ROAE (%) Net Investment Income Margin 3.93 (%) Cost Income Ratio (%) , , , , , , , , , , SIBL s investment income has been on increasing trend over the years with the growth in investment portfolio of the bank. The bank s investment income from lending activities has grown by 20.41% to reach at BDT 13, million and the profit paid on deposits has grown by 28.71% reaching at BDT 9, million in FY2013. This resulted in a growth of 3.84% in the bank s net investment income which amounted to BDT 3, million in FY2013. It has been observed that the growth of net investment income has slowed down in FY2013 with decreased growth of the investment which is mainly attributed to the political unrest along with countrywide shutdowns and violence that have negatively impacted the banking business in the second half of the year. The profit on deposit has increased at a higher rate than the income which compelled the net investment income margin to decrease and stood at 3.93% in FY2013 as opposed to 4.60% in FY2012. However, the non-interest income of the bank derived from fees and investment & dealing proceeds has decreased further by Information Memorandum 119

122 Social Islami Bank Ltd. 9.07% than the previous year and stood at BDT million. Decline in income from dealing securities was the main reason for such negative growth. As a result, the total income of the SIBL has decreased by 0.23% and stood at BDT million. Figure 13: selected indicators of SIBL 4, , , , , , , , Net Investment Income , , , , , Non-Investment Income , , , , Net profit margin 4.34% 3.36% 3.57% 4.08% 4.60% 3.93% 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% The operating profit before tax of SIBL has diminished and stood at BDT million at the end of FY2013 whereas it was BDT million at the end of FY2012. The reason behind the shrink of the pre-tax profit can be attributed to the increase in operating expenses as well as significant boost of the expenses set aside as an allowance for default loans. With the decrease in the pre-tax profit, the net profit after tax of the bank also decreased staggeringly by 15.33% in FY2013 in contrast to 33.02% increase in FY2012. Higher growth of average earning assets and negative profit growth has resulted in decreased post tax ROAA. In line with post tax ROAA, post tax ROAE has been decreasing over the last three years, stood at 11.48% in FY2013 as opposed to 14.71% of FY2012. However, despite decrease in ROAA & ROAE, the SIBL s position has been found to be favorable as opposed to the whole banking industry (ROA: 0.90% & ROE: 10.77%, Q4 data) as well as to PCBs ( ROA: 0.95% & ROE: 10.70%, Q4 data). Figure 14: Selected indicators SIBL 20% 15% 10% 5% 0% 11.4% 15.9% 16.6% 1.1% 1.3% 1.4% Profit After Tax (BDT in Million) 15.9% 14.7% 1.6% 1.4% Post-Tax ROAA Post-Tax ROAE 11.5% 1.0% The interest income on average earning assets stood at 13.65% in FY2013 which is slightly lower than that in FY2012 while the cost of fund of the bank stood at 9.47% in FY2013, increase from 8.93% in FY2012. With the decreased lending rates and increased funding cost, the net spread of the bank decreased to 4.18% in FY2013 from 4.84% in FY2012. SIBL has been maintaining a manageable cost structure with a cost to income ratio of below 40% over the last five years, stood comfortably lower than compare to industry, indicating satisfactory operating efficiency. However, during FY2013, cost to income ratio has increased considerably in FY2013 and stood at 46.85% indicating bank s inefficiency in keeping its expenses in control along with the declining income of the bank in FY Information Memorandum

123 B.4. Funding and Liquidity Exhibit 6: Selected indicators of SIBL FY 31 December Investment / Customers Deposits (%) Total Customer Deposit Growth (%) Net Investment / Stable Funding Base (%) Net Investment / Customer Deposits (%) Deposit / Total Liability & Equity (%) 80.64% 81.27% 79.20% 81.30% 79.01% 80.64% B.4.1 Fund Management SIBL is pre-dominantly financed by customer deposits which accounts for 80.64% of the total liabilities & equity base at the end of FY2013 like other private commercial banks in operation. The second largest source of funding for the bank was equity, which represented 8.76% of the bank s total funding, decreased from 8.85% in the previous year. Other sources of fund of the bank included interbank liabilities, bills payable and other liabilities which represented 3.71%, 1.04% and 6.90% of the total funding respectively. Figure 11: SIBL s funding profile % % 80.00% 60.00% 40.00% 20.00% 0.00% Bills Payable Borrowings from FI's Other Liabilities Shareholder's Fund Al-Wadeeah Current Deposit Other Murabaha Deposits Murabaha Term Deposits Murabaha Savings Deposits Social Islami Bank Ltd. The deposit mix of the SIBL consists 49.59% of mudaraba term deposits, 9.64% al-wadia current deposits and 15.24% Other Murabaha deposits, 5.11% mudaraba savings deposits and 1.04% bills payable. The bank experienced a decreased growth in deposits in FY2013 as opposed to the prior year. At the end of FY2013, the bank s total deposits registered a growth of 8.94% compared to 32.70% in FY2012. The Islamic banks have a requirement of not exceeding 90% loan-deposit ratio which has been maintained by SIBL on a consistent basis (FY2013: 85.25%, FY2012: 82.52%). Figure 12: Selected indicators of SIBL 120, , , , , , Gross Investment 19, , , , , , Total Deposits 23, , , , , ,787.5 Loans/Depoosit (%) 84.08% 85.85% 82.92% 81.75% 82.52% 85.25% 87.00% 86.00% 85.00% 84.00% 83.00% 82.00% 81.00% 80.00% 79.00% Information Memorandum 121

124 Social Islami Bank Ltd. B.4.2. Liquidity Management SIBL has been maintaining moderate liquidity position over the last couple of years, has maintained cash reserve ratio (CRR) and statutory liquidity reserve (SLR) in a satisfactory manner as per Bangladesh Bank requirement with stable reserve surplus. The asset and liability maturity profile of SiBL shows favorable liquidity position in all liquidity buckets. SIBL s liquid asset ratio stood at 18.70% as at end of FY2013, slightly higher than the previous year (17.62%). The bank s liquid asset stood at BDT 19, million registered 15.28% growth as opposed to the previous year. C. MARKET RISK ANALYSIS Markets risks of a Subordinated Bond may arise due to uncertainty related to the redemption risk, investment profit rate risk and pricing risk of the bond. Moreover bond by nature are exposed to many sources of risk. The term structure of the interest rate can shift and twist in different ways. Issuers may default due to sector wide problems or individual credit difficulties. However the bond market is still a new concept to the Bangladesh economy as well as the conventional bond market is underdeveloped. However, the debt instrument that SIBL is willing to offer to the market is sensitive towards both market and company specific risks. All investments which offer a balance between risk and potential return are graded to be the higher rated investment. The balance between risk and return varies by the type of investment (in this case Subordinated Bond), the entity that issues it, the state of the economy and the cycle of the securities markets (this risk is eliminated as it will not be publically traded in secondary market). The entity in discussion wishes to issue non convertible Subordinated bond for the purpose to strengthen Tire II capital base. Standard Chartered Bank is acting as the mandated lead arranger and has agreed to sell the bonds as best effort basis whereby BGIC is acting as the trustee. It is to be noted that under no circumstances the lead arranger will be taking any commitment to subscribe or underwrite the issue. To evaluate the proper pricing and coupon rate structure offered for the instruments ECRL considered the following risk analysis related to the both market and instrument specific risk. C.1. Profit Rate Risk of the Bond The investment profit rate projected by the issuer has been set at 15.00% per annum in exacted scenario and 13.20% in worst case scenario, based on the current market dynamics and scenario. However, that may also vary between the expected and worst case calculation. Besides, even though bond is a risky instrument by nature than the term deposits available in the market, it is still likely to gain the attention in the market due to floating investment profit nature of the instrument. C.2. Pricing Risk Pricing risk in Bonds is that bond prices are inversely related to investment profit rate. When investment profit rate goes up bond price goes down, and vice versa. A maturity profile of bonds also affects the bond price. There are two primary reasons why long-term bonds are subject to greater investment profit rate risk than short term bonds. Firstly, there is greater probability that profit rates will move upward, thus negatively affect a bond s market price, within a longer time period than within a shorter time period. As a result, investors who buy long term bonds but attempt to sell them before maturity may be faced with a deeply discounted market price when they want to sell their bonds. With short term bonds, the risk is not as significant because profit rates are less likely to substantially change in the short term. Short term bonds are also easier to hold until maturity, thereby, alleviating an investor s concern about the effect off profit rate driven changes in the price of bonds. Secondly, long term bonds have greater maturity than short term bonds. Because of this, a given investment profit rate change will have greater effect on long term bonds than short term bonds. C.3. COMPANY SPECIFIC RISK ANALYSIS Every financial institution is exposed to risk of different type and magnitude since risk is an integral part of financing business. So, the prime responsibility of every financial institution is to manage its risk such that its return from business can be maximized. As a prudent and responsible financial 122 Information Memorandum

125 institution, the bank attaches top priority to ensuring safety and security of the finances that are being extended. Risk Management for SIBL is performed at various levels of the bank. By formulating policy regarding profit rate, market, liquidity, currency, operational as well as investment risk, SIBL manages its business risks and aims to mitigate them. C.3.1. Credit/Investment Risk This is one of the major risks faced by the bank which arises from the potential of failure of a counter party to perform according to contractual agreement with the bank. The factors involved here may be the unwillingness of the counterparty as well as adverse economic condition. To address the risks, SIBL follows a guideline on Credit Risk Management which has been prepared in the light of broad guidelines provided by Bangladesh Bank for the banking industry. The bank s formulated investment policies in compliance with regulatory requirement covers investment assessment, collateral requirements, risk grading and reporting, documentation and legal formalities and procedures along with up to date clean CIB report of the client. The bank has incorporated a segregation of duty among the officers/ executives who are involved in investment activities to mitigate the risk to an acceptable level. A separate Corporate Division has been formed at Head Office, which is entrusted with the duties of maintaining effective relationship with the customer, marketing of credit products, exploring new business opportunities etc. Moreover, investment approval, administration, monitoring and recovery function has been segregated. For this three separate units have been formed within the credit division namely Investment Risk Management unit (IRMU), Investment Administration Unit (IAU) and Investment Monitoring & Recovery Unit (IM&RU). IRMU is entrusted with the duties of marinating assets quality, assessing risk to lending, sanctioning credit, formulating policy and strategy for lending operation etc. C.3.2. Operational Risk Operational risk is defined by Bangladesh Bank as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This operational risk also includes legal risks but not strategic and reputational risks. This can also arise from unexpected losses due to physical catastrophe, technical failure and human error in the operation of a bank, including fraud, failure of management, internal process errors and unforeseeable external events. C.3.3. Internal Control and Compliance Internal control facilitates systematic and orderly flow of various operational activities within the organization. To confront operational risk, SIBL follows Internal Control and Compliance guidelines which is approved by Bangladesh Bank. To ensure that sound monitoring system is placed inside the organization, Audit committee has been formed. Moreover, has introduced the Internal Department (ICCD) at Head Office staffed with some experienced senior Bankers rest with the power and duties to train the employees of the bank, give direction, minor, audit and establish control on day to day operational procedures and statutory and non-statutory compliances. C.3.4. Money Laundering Money laundering refers to a financial transaction scheme that aims to conceal the identity, source, and destination of illicitly-obtained money. To fight with money laundering SIBL has framed an approval Money Laundering Prevention Policy Guideline so that it could be sufficient enough to protect the bank from tribulations of money laundering. Besides that, a Central Compliance Unit (CCU) has been formed at Head Office in SIBL and a designated person has been nominated to supply any information if required as per Money Laundering Prevention Act 2002 and Money Laundering Prevention circulars. Chief Anti Money Laundering Compliance Officer (CAMALCO) has been designated at Head Office and Branch Anti Money Laundering Compliance Officers (BAMALCO) has been nominated at branches. The second man of the ninety four branches of SIBL have been complying the responsibility for their respective branches as Branch Anti Money Laundering Compliance Officers (BAMALCO) as per the direction of Bangladesh Bank. Social Islami Bank Ltd. Information Memorandum 123

126 Social Islami Bank Ltd. C.3.5. Market Risk Market risk refers to the risk of losses in on and off-balance sheet positions arising from movements in market prices. It arises due to change in different market variables like profit (interest) rate, exchange rate, availability of liquidity with the lenders/ depositors, prices of securities in the stock exchange. The risk arising from market risk factors such as interest rates, foreign exchange rates, and equity prices have been discussed below: C.3.6. Investment Profit Rate Risk Investment profit rate risk is the potential impact on the bank s earnings and net asset values due to changes in market interest rates. This can arise due to mismatches between maturities of investment and funds, imbalance between supply and demand of fund for investment etc. Besides that, increase in profit rate results in subsequent adjustment on the deposit rates whereas the pricing of investments cannot be done instantaneously giving rise to such risk. Early repayment of investment, early deposit encashment/withdrawals are additional factors of such risk. The Asset Liability Committee (ALCO) of SIBL is the primary body which looks after and monitors investment profit rate structure. The committee also evaluates any market risk that arises from the regulatory pressure thus reducing the profit rate. Moreover, ALCO committee is always watchful to adverse movement of the different market variables. C.3.7. Equity Financing Risk This sort of risk is defined as loss due to change in market price of equity held by the bank. SIBL has significant amount of investment in equity portfolio. To measure, identify and reduce this kind of risk, the bank practicing mark to market valuation of the share investment portfolios which was reflected through the bank s balance sheet as provisions for diminution in value of investment in shares. In FY 2013 the bank has made fair value adjustment of BDT million on its quoted and unquoted equity investment. C.3.8. Foreign Exchange Risk Foreign-exchange risk refers to the potential for loss from exposure to foreign exchange rate fluctuations. This can be the current or prospective risk to earnings and capital resulting from adverse movements in currency exchange rates. Managing foreign exchange risk involves prudently managing foreign currency positions in order to control, within set parameters, the impact of changes in exchange rates on the financial position of the bank. Introduction of market based exchange rate of has resulted in both trading opportunities and associated foreign exchange volatility risk. SIBL adopted foreign exchange risk manual and investment guideline of Bangladesh Bank to identify and combat the foreign exchange risk. International department of the bank independently conducts the transactions relating to foreign exchange is responsible for verification of deals and passing entries. Besides that, the bank s Internal Control and Compliance Division performs internal audit to supervise the activities of the foreign exchange departments which measures the effectiveness and efficiency of the division. C.3.9. Liquidity Risk Liquidity risk is the probability of loss arising from a situation where there will not be enough cash and/or cash equivalents to meet the needs of depositors and borrowers, thus sale of illiquid assets will yield less than their fair value. This also arises when the cushion provided by the liquid assets are not sufficient enough to meet maturing obligations. Liquidity risk is often triggered by the consequences of other financial risks such as credit risk, interest rate risk, foreign exchange risk, etc. For instance, a large loan default or changes in interest rate can adversely impact a bank s liquidity position. SIBL s Asset Liability Committee (ALCO) is entrusted with the responsibility of managing short-term and long-term liquidity and ensuring adequate liquidity at optimal funding cost. ALCO also reviews liquidity requirement of the bank, the maturity of assets and liabilities, deposit and lending pricing strategy and the liquidity contingency plan. C Reputation risk Reputation risk may arise from the possibility that negative publicity regarding the bank and its business practices, in the territory or elsewhere through related entities, and whether accurate or not, will adversely impact the operations and position of the bank. Reputation risk may also arise from an 124 Information Memorandum

127 institution, or an affiliate, being domiciled in a jurisdiction where the legal and organizational framework for the regulation and supervision of financial institutions is generally viewed as failing to meet international standards for the protection of consumers of financial services and for the prevention of sheltering the proceeds of organized crime. Reputation risks are very difficult to measure but significantly important to manage since many new banks have created the market more competitive ever before. D. MANAGEMENT AND OTHER QUALITATIVE FACTORS D.1. Corporate governance Social Islami Bank Limited maintains adequate and high corporate governance standards which is aligned with the regulatory requirements and guidelines set by the Bangladesh Bank and Bangladesh Securities & Exchange Commission (BSEC). The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the corporation, such as the board, managers, shareholders and other stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By doing this, it also provides the structure through which the company objectives are set, and the means of attaining those objectives and monitoring performance. Entities can enhance their image and market credibility through good corporate governance. This can attract capital, facilitate long term borrowing and generate long term economic value for the shareholder and meet the interest of stakeholders. Corporate governance of the entity can be reflected in its quality of financial reporting and disclosures; strength of internal control system and internal audit function. Induction of professionally competent, independent non-executive Directors on corporate Board also reflects good corporate governance. It can also be reflected through the formation of Audit Committee; delegation of authority to executives and staffs; protection of corporate governance for strengthening organizational strength. D.2. Board of Directors SIBL s board of directors comprises of twelve members, each with having years of experiences in the industry. The board ensures that the company achieves superior financial result and stewards its leadership position in the industry. Moreover the board is engaged in major activities such as addressing major policy, regulatory and strategic issue and providing proper guidelines, monitoring financial performance, monitoring operations of internal control, approval of annual budget, major capital expenditure. Evaluation of financial performance, approval of audit report, appointment and evaluation of Managing Director and Senior Management team are the key decision where the board of directors plays a good part to carry on a sound banking system. In addition the board of directors is the responsible body to make timely reporting to shareholder about the affairs and performance of the company. D.3. Key Committees To ensure that the bank operates efficiently, SIBL board members have formulated the following different committees to represent the board in different strategic areas. D.3.1. Management committee (MANCOM): Management committee is comprised of twelve senior members of the bank, headed by Managing Director; Mr. Md. Shafiqur Rahman who has more than 35 years of relevant experience with different banks and has been serving this bank from the year of All of the members are from different respective departments. The committee is highly experienced in the related field and possesses great deal of versatility in the overall management practice. The day to day operations of the bank is handled by these professionals with modern banking expertise in their respective fields. MANCOM meets on regular basis to discuss relevant agenda and scrutinizes all the cases thoroughly before referring to Executive Committee/Board for due approval decision. D.3.2. Asset Liability Management Committee (ALCO): The bank has established a committee called Asset Liability Committee (ALCO) headed by the Managing Director to support the Asset Liability Management (ALM) process. Its Asset Liability Committee (ALCO) is entrusted with the responsibility of managing short-term and long-term liquidity Social Islami Bank Ltd. Information Memorandum 125

128 Social Islami Bank Ltd. and ensuring adequate liquidity at optimal funding cost. The other responsibilities of the Committee include Balance Sheet structuring and management, measuring Bank s risk capital requirement and the capital cushion available to meet the risk and determination of lending and deposit rates & the pricing strategy. The assessment and control of liquidity is done through Liquidity Reports and Balance Sheet statements. D.3.3. Executive Committee: SIBL is adhered to Bangladesh Bank guidelines to ensure good corporate governance in the business. The entity has constituted seven members executive committee of the board as per Bangladesh Bank guidelines. The executive committee of the board is responsible for developing policy and strategy for smooth operations of the business. Moreover, the committee is also responsible for business development of the bank to ensure maximization of shareholders wealth protecting other stakeholders interest too in the company. Mr. Alhaj Sultan Mahmood Chowdhury is the Chairman of the present Executive Committee of the bank. He is a renowned industrialist and businessman in the northern region of the Country having 35 years experience, associated with various religious, social and welfare activities. Currently he is holding leading position in different organizations. D.3.4. Audit Committee: SIBL has formulated an audit committee that plays an effective role in devising an efficient and secured banking system. The Audit Committee has been formed comprising five members of the Board of Directors. As it is guided by corporate governance guidelines, the bank recruited the Chairman of the Audit Committee who possesses sound knowledge with banking experience of more than four decades. SIBL initiates internal audit of the branches and head office divisions on a periodical basis. The internal audit is supervised under Internal Control & Compliance Division (ICCD) and a separate division named Board Audit Cell (BAC) also conducts internal audit supervised by Board Audit Committee. This BAC directly reports to the Chairman of Board Audit Committee. The committee reviews the financial reporting process, the system of Internal Control, Management Information System, Management of Risks, the Bangladesh Bank and Internal Audit reports, Audit process and Compliance with laws and regulations and banks own code of conduct. D.3.5. Risk Management Unit (RMU) The bank has set up a separate Risk Management Unit (RMU) under the stipulated instructions of Bangladesh Bank. The functions of RMU include evaluating and monitoring certain risks, supervising capital management, examining market conditions and volatility etc. The RMU conducts stress testing as per Bangladesh Bank guideline for examining the bank s capacity of managing future shocks as well as deals with all potential risks that might occur in future. D.4. Senior Management The core management team, as well as the whole bank, is led by the Managing Director, Mr. Mr. Md. Shafiqur Rahman who has 35 years of extensive and immense experience in banking. The core management team of the bank also consists of two Deputy Managing Directors and all of whom have vast experience in banking ranging from 25 to 34 years. The members of the team have also attended numerous training and development programs both at home and abroad which enabled them to build enormous knowledge base in banking. The top management team of the bank (Senior Vice President and above), including the core management team, consists of 33 qualified and experienced employees. The strategic management activities and overall business operations of SIBL are supervised and directed by the core management team of the bank. D.5. Human Resource Management End of the financial year 2013, total 1805 executives & officers were in the bank pool with increase of 11% compare to the last year, for the smooth banking operations, as expected, SIBL well maintains a separate Human Resources Division (HRD) to manage policies and practices regarding this intellectual pool. HRD of the Bank follows a standardized, transparent and free & fair system to ensure standard recruitment, training & development of intellectual capital of the bank. In this year, total of 1188 officers and executives were trained by the bank internally, 385 officers and executives were trained outside the institute. Besides, 1 key personnel took foreign training during the year. The bank has defined HR policies including recruitment, training & development, promotion, leave, transfer and 126 Information Memorandum

129 disciplinary action policy. Usually internal recruitment procedures are considered to fill up the mid and top management positions, while entry-level positions are filled with regularly through competitive recruitment exams. They follow transparent, well-defined and strict rules for appointment of officers and staff. The average employee satisfaction might be deteriorated to some extent than the last year as employee turnover in FY2013 was 3.55% of the total employee whereas in FY2012 that was 1.42%. D.6. Information and Communication Technology SIBL initiated and implemented the computerized banking software for all the branches called ABABIL. The bank also uses different IBM software and for that reason it took necessary license from IBM. It has a central data center at 19 th floor, City Center with necessary high tech arrangement and security. Presently all branches have redundant WAN link between DATA Center and branches. The data center has two alternative power supply system in case of disruption in electricity provided by DPDC. SIBL has implemented world renowned CISCO brand cartelized IP phone system and provided IP phone set to all branches. Therefore, internet telephone communication between head office and all 86 branches are now being done entirely free of cost. Moreover, the concern has constructed Disaster Recovery Site at its own Uttara branch. The bank takes data backup in three external media. Monthly/yearly data backup are also stored in the Data Cabinet which is both heat and earthquake resistant. D.7. Corporate Social Responsibility (CSR) Initiatives: SIBL is cognizant of its social responsibility and always trying to participate in social cause program in the country. Corporate Social Responsibility (CSR) activities of SIBL are being done by a separate unit properly staffed. The bank is committed to serve the society at large through its family empowerment Micro Investment, Micro Enterprise and SME programs under non-formal sector, social capital mobilization through CASH WAQF and other programs under voluntary sector. The bank has already formed CSR Desk with the aim to serve humanity through different philanthropic activities giving emphasis on health and Education. The bank believes that any kinds of social & philanthropic activities would improve the quality of the lives of the poor masses of the country. CSR activities of the Bank are continuously extending. SIBL has contributed a sum of total BDT Million in the year 2012 which was BD Million in the year Social Islami Bank Ltd. Information Memorandum 127

130 Social Islami Bank Ltd. CORPORATE INFORMATION AS ON DECEMBER 31, 2013 Board of Directors Major (Retd.) Dr. Md. Rezaul Haque Mr. Md. Sayedur Rahman Mr. Mohammad Azam Mr. Abdul Awal Patwary Mr. Md. Anisul Hoque Alhaj Nasiruddin Alhaj Sk. Mohammad Rabban Ali Mr. Abdul Jabbar Mollah Mr. Md. Abdur Rahman Mr. Abdul Mohit Mr. Md. Shafiqur Rahman Management Team Mr. Md. Shafiqur Rahman Mr. Ihsanul Aziz Mr. A.M.M. Farhad Mr. Yunus Ali Mr. Md. Shafiqul Islam Mr. Tarik Morshed Mr. Walid Mahmud Sobhani Mr. Md. Akhtar Hussain Mr. Mohd. Ghulam Sarwar Mr. Kazi Ahsan Khalil Mr. Ziauddin Swalet Ghani Mr. Mohammad Iqbal Mr. Md. Azizul Hakim Mr. Md. Habibur Rahman Mr. Mohammad Forkanullah Mr. Md. Akbar Ali Mr. Gazi Mohammad Hasan Shareholders Sponsors/Directors 28.00% Corporate Bodies 14.50% General Public 57.46% Non- Resident 0.04% Head Office SOCIAL ISLAMI BANK LIMITED Corporate Office City Center, Level: /1, Motijheel Commercial Area Dhaka-1000, Bangladesh Phone: Auditor Kazi Zahir Khan & Co. Head office: 67/4, kakrail (pioneer Road) Dhaka- 1000, Bangladesh. Tel: +88 (02) Fax: +88 (02) Chairman Vice Chairman Vice Chairman Director Director Director Director Director Independent Director Independent Director Managing Director Managing Director Deputy Managing director Deputy Managing director Deputy Managing director SEVP SEVP SEVP & CFO SEVP SEVP SEVP SEVP EVP EVP EVP EVP EVP EVP 128 Information Memorandum

131 Financial Year Ending: 31 December Currency: BDT Social Islami Bank Limited Profit & Loss Account Particulars Investment Income Profit Received 13,629,421,075 11,319,014,211 6,922,205,589 Total 13,629,421,075 11,319,014,211 6,922,205,589 Investment Expenses Profit Paid on Deposit 9,706,867,767 7,541,679,221 4,541,152,612 Total 9,706,867,767 7,541,679,221 4,541,152,612 Social Islami Bank Ltd. Net Investment Income 3,922,553,308 3,777,334,990 2,381,052,977 Non Interest Income Commission,exchange & brokerage 1,026,570,990 1,178,954,865 1,206,193,086 Income from investment in shares/securities 325,466, ,816, ,112,797 Other Operating Income 228,021, ,986, ,895,790 Total Non Interest Income 1,580,058,494 1,737,758,432 1,765,201,673 Total Income 5,502,611,802 5,515,093,422 4,146,254,650 Salary and Allowance 1,505,503,042 1,078,563, ,193,904 Rent, Taxes, Insurance, Electricity etc 227,846, ,239, ,776,905 Legal Expenses 7,926,138 8,618,710 3,430,564 Postage, Stamps, Telecommunication etc. 31,544,647 28,130,288 21,872,035 Stationery, Printings, Advertisements etc. 90,997,426 80,593,969 54,667,648 Managing Director's Salary and Fees 8,602,260 10,000,000 11,160,000 Directors' Fees & Expenses 4,264,575 3,795,874 5,480,373 Shariah Supervisory Committee fees & expenses 254, , ,976 Auditors' Fees 517, , ,125 Depreciation and Repair of Bank's Assets 173,161, ,750,842 82,155,573 Other Operating Expenses 527,443, ,575, ,053,176 Total Operating Expense (2,578,061,801) (1,897,268,196) (1,377,456,279) Provision for Unclassified Investment (752,687,954) (285,356,045) (365,898,418) Provision for Unclassified Investments Including off-b/s items (84,746,527) (173,483,062) (211,776,332) Provision for Zakat Fund & Other Assets (27,057,799) (104,482,499) (245,936,167) Provision for Gratuity (35,398,279) (306,612,651) (43,907,230) Profit/(Loss) before Taxes 2,024,659,442 2,747,890,969 1,901,280,224 Provision for Tax 804,458,005 1,306,763, ,861,073 Net Profit/ (Loss) after Tax 1,220,201,437 1,441,127,277 1,083,419,151 Appropriation: Statutory Reserve (404,931,889) (549,578,194) (380,256,045) Net Profit Attributable to Shareholders for Current Year 815,269, ,549, ,163,106 Information Memorandum 129

132 Social Islami Bank Ltd. Social Islami Bank Limited Balance Sheet Financial Year Ending: 31 December Currency: BDT Particulars Cash on hand 1,266,962,343 1,104,528,222 1,065,642,134 Balances with central banks 7,627,790,250 10,020,554,834 4,601,857,225 Balance with other banks & financial institutions 3,048,641,405 3,563,276,141 3,936,428,598 Placement with other Banks & Fis 9,064,879,564 9,015,879,564 7,457,379,564 Bangladesh govt Islamic Bond/Treasury Bonds 5,500,000,000 2,900,000,000 2,050,000,000 Liquid Assets 26,508,273,562 26,604,238,761 19,111,307,521 Quoted equity securities 913,136, ,620, ,943,058 Unquoted equity securities 2,125,047,200 2,505,394,485 2,484,415,100 General Investment 76,398,581,962 66,459,100,077 48,926,507,517 Bill Purchased and Discounted 9,523,749,964 9,565,873,831 4,982,068,255 Gross Investments 76,024,973,908 53,908,575,772 Specific allowances (1,692,052,956) (972,166,358) (691,947,212) Portfolio allowances (776,629,589) (691,883,062) (691,562,000) Net Investments and Advances 83,453,649,381 74,360,924,488 52,525,066,560 Fixed Assets 2,653,882,382 2,249,954,737 2,134,872,562 Other Assets 8,493,893,405 7,042,770,623 6,060,065,086 Total Assets 126,616,564, ,165,953,013 84,406,179,099 Murabaha Savings Deposits 6,468,729,754 4,905,319,144 3,925,740,731 Murabaha Term Deposits 62,746,867,195 62,267,653,508 42,699,279,530 Other Murabaha Deposits 19,288,768,828 13,984,000,422 10,498,361,467 Al-Wadeeah Current & Other Deposit Accounts 12,198,626,163 10,903,158,399 8,769,989,859 Cash Waqf Fund 84,577,685 68,903,770 53,477,204 Interbank Liabilities 4,700,000,000 4,700,000,000 3,700,000,000 TOTAL DEPOSITS AND INTERBANK LIABILITIES 105,487,569,625 96,829,035,243 69,646,848,791 Bills + acceptances payable 1,316,909,958 1,465,257, ,702,290 Deferred tax liabilities 1,577,248 70,528 (5,101,777) Other liabilities 8,727,079,569 6,689,618,137 4,446,522,996 Total Liabilities 115,533,136, ,983,981,136 74,993,972,300 Paid up capital 7,031,415,640 6,393,925,700 6,393,925,700 Statutory Reserves 2,122,994,344 1,718,062,455 1,168,484,261 Retained Earning 846,533, ,004, ,300,013 Asset revaluation reserves 1,082,485,102 1,109,979,120 1,138,496,825 Total Shareholder's Funds 11,083,428,345 10,181,971,877 9,412,206,799 TOTAL LIABILITIES & SHAREHOLDERS' FUNDS 126,616,564, ,165,953,013 84,406,179, Information Memorandum

133 Social Islami Bank Limited Financial Ratio ASSET QUALITY MEASURES Gross Investment and advances 85,922,331,926 76,024,973,908 53,908,575,772 Gross Investment growth (%) 13.02% 41.03% 46.97% Gross non-performing Investment (BDT) 4,593,330,631 2,531,334,171 2,114,426,803 Net non-performing investment 2,440,092,586 1,254,340,624 1,138,514,597 Gross NPI ratio (%) 5.35% 3.33% 3.92% Net NPI ratio (%) 2.87% 1.67% 2.14% Loan Loss Reserves/Gross NPLs 53.74% 65.74% 65.43% General Reserves/Net NPLs 31.83% 55.16% 60.74% Specific Reserves/Gross NPLs 36.84% 38.41% 32.73% General Provisioning ratio 0.92% 0.92% 1.30% (Gross NPLs )/(Equity + Loan Loss Reserves) 33.89% 21.37% 19.59% (Net NPL - GR)/Equity (%) 15.01% 5.52% 4.75% Provision/average loans 0.00% 0.00% 0.00% Average assets 120,891,258,879 99,786,066,056 69,787,360,018 Social Islami Bank Ltd. PROFITABILITY MEASURES Average Earning Assets 99,871,921,630 82,207,249,207 58,374,795,484 Growth in Average Earning Assets (%) 21.5% 40.8% 43.4% Average interest bearing liabilities 102,549,386,027 84,423,421,776 59,341,659,717 Pre-tax Operating ROA (%) 1.67% 2.75% 2.72% Core Operating ROA (%) 1.67% 2.75% 2.72% Post-tax ROA (%) 1.01% 1.44% 1.55% ROA (%) 0.96% 1.25% 1.28% Post-tax ROE (%) 11.48% 14.71% 15.92% ROE (%) 11.0% 14.2% 11.5% Net Interest Margin (%) 3.93% 4.59% 4.08% Interest on Average Earning Assets (%) 13.65% 13.77% 11.86% Funding Cost (%) 9.47% 8.93% 7.65% Interest Spread (%) 4.18% 4.84% 4.21% Non-interest income/total operating revenue (%) 28.7% 31.5% 42.6% Fee inccome/operating revenue 18.7% 21.4% 29.1% Cost-income ratio (%) 46.85% 34.40% 33.22% Operating Profit Before tax/total operating revenue (%) 36.8% 49.8% 45.9% Effective tax rate (%) -39.7% -47.6% -43.0% CAPITAL ADEQUACY MEASURES Tier 1 capital (BDT'mil) 10, , , Growth in Tier 1 capital (%) 10.2% 9.6% 97.1% Core capital ratio (%) 10.02% 9.86% 11.43% Risk weighted capital ratio (%) 11.64% 11.52% 13.17% Risk Weighted Assets (BDT'mil) 99,834 91,983 72,389 Growth in risk-weighted assets (%) 8.5% 27.1% 44.3% Shareholders' funds/total assets (%) 8.8% 8.8% 11.2% Capital Generation ratio (%) 11.5% 14.7% 15.9% Tier II Ratio 1.63% 1.66% 1.74% Tier 1 capital (BDT'mil) 10, , , FUNDING & LIQUIDITY MEASURES Liquid assets ratio (%) 18.70% 17.62% 21.57% Net Loans/Stable Funding Base (%) 74.60% 72.68% 69.70% Net Loans /Net Funding Base (%) 79.11% 76.80% 75.42% Interbank Assets/Interbank Liabilities (%) 0.00% 0.00% 0.00% Interbank Liabilities/Total Funding base (%) 4.46% 4.85% 5.31% Demand + Savings Deposits/Total deposits (%) 68.67% 72.91% 70.70% Gross loans/ Total deposits 81.45% 78.51% 77.40% Loan to deposit ratio 85.25% 82.52% 81.75% Net loans/ Customer deposits 82.80% 80.71% 79.65% Total deposit growth 8.94% 39.03% 46.58% Liquid assets/ customer deposits 26.30% 28.88% 28.98% Customer deposits 100,787,569,625 92,129,035,243 65,946,848,791 Customer deposits growth 9.40% 39.70% 49.09% Deposit/Liab+Equity 80.64% 81.27% 79.20% Information Memorandum 131

134 Social Islami Bank Ltd. Particulars Asset Quality Measures Gross NPI Ratio (%) Net NPI Ratio (%) Investment Loss Reserves /NPIs General Reserves / Net NPI (%) Special Reserves / (Gross NPIs - IIS) (%) General Provision (GP) Ratio (%) (Gross NPIs - IIS) / (Equity + Investment Loss Reserves) (%) (Net NPI - GP)/Equity Profitability Measures Pre-TAX Operating ROA (%) Core Operating ROA (%) Post-TAX ROA (%) Pre-TAX ROE (%) Post-TAX ROE (%) Net Interest Income / Earning Assets (%) Interest on Earning Assets (%) Funding Cost (%) Profit Spread (%) Non-Investment Income / Total Operating Revenue (%) Free Income / Operating Revenue Cost Income Ratio Operating Profit Before TAX / Total Operating Revenue (%) Effective TAX Rate (%) Dividend Payout Ratio (%) Capital Adequacy Measures Capital Generation Ratio (%) Funding & Liquidity Measures Liquid Assets Ratio (%) Net Investment + Advances / Stable Funding Base (%) Net Investments + Advances / Net Funding Base (%) Liquid Assets / Total Assets Financial Ratio Definition Formula Gross NPI / Gross Investment & Advances (Gross NPI - Specific Reserves)/(Gross Investment & Advance - Specific Reserves) (General Reserves + Specific Reserves)/Gross NPI General Reserves / (Gross NPI - Specific Reserves) Specific Reserves / Gross NPI General Reserves / (Gross Investment & Advances - Specific Reserves) Gross NPI / (Shareholders' Fund + General Reserves + Specific Reserves) (Gross NPI - Specific Reserves - General Reserves) / Shareholders' Fund Operating Profit Before TAX / Total Assets (Operating Profit Before TAX + Investment Loss Provision) / Total Assets Profit After TAX & Before Minority Interest / Total Assets Operating Profit Before TAX / Shareholders' Funds Profit After TAX & Before Minority Interest / Shareholders' Funds Net Profit Income / Earning Assets (Interest on Loan & Advances + Interest on Other Earning Assets + Amortization of premium less Accretion of Discounts) / Earning Investment Expense / Profit Bearing Liabilities Profit on Earning Assets - Funding Cost Non-Investment Income / (Net Investment Income + Non-Investment Income) Free Income / (Net Investment Income + Non-Investment Income) Overhead Expense / (Net Investment Income + Non-Investment Income) Operating Profit Before TAX / (Net Investment Income + Non- Investment Income) TAX / Operating Profit Before TAX Dividend / Profit After TAX (Net Profit Attributable to Shareholders - Dividend) / Shareholders' Funds (Liquid Assets (Excludes Balances with BNM)+Bankers' Acceptance + Other Money Market Instruments + Securities Purchased Under Repos + Marketable Securities) / (Total Deposits & Interbank Liabilities + Bills & Acceptances Payable + Securities sold Under) Net Investment & Advances / (Customer Deposits + SHF - Investments in Subsidiaries) Net Investment & Advances / (Total Deposits & Interbank Liabilities + Securities Sold Under Repos - Deposits & Placements with Fis (Including NIDs)) Gross Investment & Advance / Customer Deposits 132 Information Memorandum

135 LONG-TERM RATINGS BOND RATING SYMBOL ECRL s Long-Term Ratings are assigned to debt with maturities of more than one year. These debt ratings specifically assess the likelihood of timely repayment of principal and payment of interest over the term to maturity of such debts. RATING AAA AA A BBB BB Indicates that the ability to repay principal and pay interest on a timely basis is extremely high. Indicates a very strong ability to repay principal and pay interest on a timely basis, with limited increment risk compared to issues rated in the highest category. Indicates the ability to repay principal and pay interest is strong. These issues could be more vulnerable to adverse developments, both internal and external, than obligations with higher ratings. This grade indicates an adequate capacity to repay principal and pay interest. More vulnerable to adverse developments, both internal and external, than obligations with higher ratings. This rating suggests that likelihood of default is considerably less than for lower-rated issues. However, there are significant uncertainties that could affect the ability to adequately service debt obligations. Social Islami Bank Ltd. B Indicates a higher degree of uncertainty, and therefore, greater likelihood of default. Adverse developments could negatively affect repayment of principal and payment of interest on a timely basis. C High likelihood of default, with little capacity to address further adverse changes in financial circumstances. D Payment in default. Notes: Long-Term Ratings from AA to B may be modified by the addition of a plus (+) or minus (-) suffix to show relative standing within the major rating categories. Bank-guaranteed issues will carry a suffix (bg), corporateguaranteed issues, a (cg), issues guaranteed by a financial guarantee insurer (FGI), an (fg), bond issues will carry a suffix (B) and all other supports, an (s) when such guarantees or supports give favourable effect to the assigned rating. SHORT-TERM RATINGS ECRL s Short-Term Ratings are assigned to specific debt instruments with original maturities of one year or less, and are intended to assess the likelihood of timely repayment of principal and payment of interest. RATI NG ECRL - 1 ECRL - 2 ECRL - 3 ECRL - 4 ECRL - 5 ECRL - 6 The highest category; indicates a very high likelihood that principal and interest will be paid on a timely basis. While the degree of safety regarding timely repayment of principal and payment of interest is strong, the relative degree of safety is not as high as issues rated ECRL-1. The lowest investment grade category; indicates that while the obligation is more susceptible to adverse developments, both internal and external, the capacity to service principal and interest on a timely basis is considered adequate. This rating suggest likelihood of default is considerably less than for lower rated issues but faces significant uncertainties that could impact its financial commitment on the obligation. High likelihood of default, with little capacity to address further adverse changes in financial circumstances. Payment in default. Notes: Short-Term Ratings will also carry a suffix (bg) for bank-guaranteed issues, (cg) for corporate-guaranteed issues, (fg) for FGI-guaranteed issues, and (s) for all other supports when such guarantees or supports give favorable effect to the assigned rating. Rating Outlook ECRL s Rating Outlook assesses the potential direction of the Bond Issuers over the intermediate term (typically over a one to two-year period). The Rating Outlook may either be : POSITIVE NEGATIVE STABLE DEVELOPING which indicates that a rating may be raised; which indicates that a rating may be lowered; which indicates that a rating is likely to remain unchanged; or Which indicates that a rating may be raised, lowered or remain unchanged. Information Memorandum 133

136 Social Islami Bank Ltd Disclaimer The Credit Analysis Report is the possessions of Emerging Credit Rating Limited (ECRL) and The Credit Analysis Report and all information contained herein shall not be copied or otherwise reproduced, repackaged, further transmitted, transferred, disseminated, redistributed or resold for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person without ECRL's prior written consent. The Credit Ana lysis Report and all information contained herein is provided on the basis of information believed by ECRL to be accurate and reliable as derived from publicly available sources or provided by the rated entity or its agents. A credit rating is not a recommendation to buy, sell, or hold any security and no investment decision should be made solely on the basis of a credit rating. ECRL may make modifications and/or changes in the Credit Analysis Report and all information contained herein at any time, for any reason. Under no circumstances will ECRL or its affiliates be liable for any special, indirect, incidental or consequential damages of any kind, including, but not limited to, compensation, reimbursement or damages on account of the loss of present or prospective profits, expenditures, investments or commitments, whether made in the establishment, development or maintenance of business reputation or goodwill, cost of substitute materials, products, services or information, cost of capital, and the claims of any third party, or for any other reason whatsoever, even if ECRL has been advised of the possibility of such damages. Any person making use of and/or relying on the Credit Analysis Report and all inf ormation contained herein hereby acknowledges that he has read this Disclaimer and has understood it and agrees to be bound by it Emerging Credit Rating Ltd 2010 Shams Rangs, 104 Park Road, (Flat A1, A2), Baridhara, Dhaka , Information Memorandum