[Financial Statement -2012]

AUDITORS REPORT & AUDITED FINANCIAL STATEMENTS OF FIRST SECURITY ISLAMI BANK LIMITED FOR THE YEAR ENDED 31 DECEMBER 2012

AUDITORS REPORT
TO THE SHAREHOLDERS OF

First Security Islami Bank Limited

We have audited the accompanying consolidated financial statements of First Security Islami Bank Limited (FSIBL) and its subsidiary as well as the financial statements of First Security Islami Bank Limited (FSIBL) which comprises the balance sheet as at 31 December 2012 and the income statement, cash flow statement, statement of changes in equity and liquidity statement for the period then ended and a summary of significant accounting policies and other explanatory notes.

Managements Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with Bangladesh Financial Reporting Standards (BFRS), Bank Companies Act 1991, the rules and regulations issued by the Bangladesh Bank, the Companies Act 1994, the Securities and Exchanges Rules 1987 and other applicable laws and regulations. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors Responsibility
Our responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether these financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of these financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of these financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of these financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated Financial Statements prepared in accordance with International Financial Reporting Standards, give a true and fair view of the state of the bank's affairs as on 31 December 2012 and the results of its operations and its cash flows for the period then ended and comply with the Bank Companies Act 1991, the rules and regulations issued by the Bangladesh Bank, the Companies Act 1994, the Securities and Exchanges Rules 1987 and other applicable laws and regulations.

Further to our opinion in the above paragraph, we state that: (i) (ii) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof; in our opinion, proper books of account as required by law have been kept by FSIBL so far as it appeared from our examination of those books and proper returns adequate for the purpose of our audit have been received from branches not visited by us; the FSIBL's Balance Sheet and Profit and Loss Account together with the annexed notes 1 to 42 dealt with by the report are in agreement with the books of account and returns; the expenditures incurred was for the purpose of the FSIBL's business; the financial position of FSIBL as on 31 December 2012 and the profit for the period then ended have been properly reflected in the financial statements and the financial statements have been prepared in accordance with the generally accepted accounting principles; the financial statements have been drawn up in conformity with the Bank Companies Act, 1991 and in accordance with the accounting rules and regulations issued by the Bangladesh Bank; the financial statements conform to the prescribed standards set in the accounting regulations issued by the Bangladesh Bank after consultation with the professional accounting bodies of Bangladesh; the records and statements submitted by the branches have been properly maintained and in the financial statements; adequate provisions have been made for advances and other assets which are, in our opinion, doubtful of recovery;

(iii) (iv) (v)

(vi) (vii)

(viii) (ix)

(x) (xi) (xii)

the information and explanations required by us have been received and found satisfactory; 80% of the risk- weighted assets have been audited; and we have spent approximately 2850 man hours for the audit of the books and accounts of the Bank.

Dhaka, 15 March 2013

Chartered Accountants

Ref.
IAS 1.51(a) IAS 1.10(a) IAS 1.51(c) IAS 1.38,1.39 IAS 1.113

FIRST SECURITY ISLAMI BANK LIMITED BALANCE SHEET

AS AT 31 DECEMBER 2012

Notes PROPERTY AND ASSETS Cash In hand (Including foreign currencies) Balance with Bangladesh Bank and its agent bank(s) (Including foreign currencies) Balance with other Banks and Financial Institutions In Bangladesh Outside Bangladesh Investments in Shares & Securities Government Others Investments General Investment (Bai-Murabaha, Bai-Muajjal, HPSM) etc. Bills Purchased and Negotiated 3

31.12.2012 BDT 10,528,144,967 1,183,461,824 9,344,683,143 10,785,716,061 10,315,382,991 470,333,070 4,913,392,720 4,060,654,300 852,738,420 96,304,228,588 95,493,421,519 810,807,069 1,997,716,214 5,203,974,538 129,733,173,088

31.12.2011 BDT 7,145,564,053 751,981,687 6,393,582,366 5,668,384,228 5,455,758,041 212,626,187 3,977,001,504 3,121,548,300 855,453,204 69,467,328,284 64,451,579,004 5,015,749,280 969,803,376 3,728,559,416 90,956,640,861

IAS 1.54 (i),7.7

IAS 1.54 (d)

IAS 1.54 (b)

IAS 39.9 IFRS7.8( c )

6 6.A 6.B 7 8

IAS 1.54 ( a ) IAS 1.55 ,1.57(a)

Fixed Assets Including Premises, Furniture & Fixtures Other Assets Total Assets LIABILITIES AND CAPITAL Liabilities Placement from Banks & other Financial Institutions Deposits and Other Accounts Al-Wadia Current Accounts and Other Deposit Accounts Bills Payable Mudaraba Savings Bank Deposits Mudaraba Term Deposits including other Banks Mudaraba Deposits under Schemes Mudaraba Subordinated Bond Other Liabilities Total Liabilities Capital/Shareholders' equity Paid-up Capital Statutory Reserve Other Reserve Assets Revaluation Reserve Retained Earnings Total Shareholders' Equity Total Liabilities and Shareholders' Equity

IAS 1.54 (k) IAS 1.54 (m)

9 10 10.1 10.2 10.3 10.4 10.5 11 12

4,598,574,967 109,905,568,871 7,119,359,753 1,824,475,966 5,462,576,972 79,263,696,843 16,235,459,337 2,220,000,000 7,344,549,468 124,068,693,306 3,740,352,000 1,004,574,914 84,000,000 402,442,950 433,109,918 5,664,479,782 129,733,173,088

3,231,114,000 78,145,045,008 7,050,818,872 889,647,881 4,579,934,181 53,914,817,281 11,709,826,793 5,080,308,520 86,456,467,528 3,400,320,000 704,202,214 24,000,000 371,651,119 4,500,173,333 90,956,640,861

IAS 1.55,1.57( a ) IAS 1.55,1.57( a )

IAS1.54(r),1.78(e) IAS1.54(r),1.78(e) IAS1.54(r),1.78(e) IAS1.54(r),1.78(e) IAS1.54(r),1.78(e)

13 14 15 16

Ref. IAS 1.51(a)

IAS 1.10(b) IAS 1.51 (c ) IAS1.38,1.39

FIRST SECURITY ISLAMI BANK LIMITED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER 2012

IAS 1.113
IFRS 7.20(b) IFRS 7.20(b) IAS 1.85 IFRS 7.20(b) IFRS 7.20(c) IAS 1.85

Notes Investments Income Profit Paid on Deposits Net Investment Income Income from Investment in shares and securities Commission, Exchange and Brokerage Other Operating Income Total Operating Income Less: Operating Expenses Salary and Allowances Rent, Taxes, Insurances, Electricity etc. Legal Expenses Postage, Stamps, Telecommunication etc. Stationery, Printings, Advertisements etc. Managing Director's Salary and Fees Auditors' Fees Directors' Fees Shariah Committee's Fees & Expenses Depreciation and Repair of Bank's Assets Zakat Expenses Other Expenses Total Operating Expenses Profit before Provision and Tax Provisions for Classified Investments Provisions for Unclassified Investments including off-B/S items Provisions for diminution in value of Investment in Shares Total Provisions Total Profit before Taxes Provision for Taxation Deferred Tax Income Net Profit after tax for the period Retained Earnings Brought Forward from Previous Year Appropriations: Statutory Reserve Other Reserve Bonus Share Issued Retained Earnings Carried Forward Earnings Per Share (EPS) 36 The annexed notes form an integral part of these accounts 25 26 27 28 29 30 32 33 34 35 20 21 22 23 24

31.12.2012 BDT 13,339,668,730 (10,309,755,493) 3,029,913,237 98,997,129 404,240,245 201,533,344 704,770,718 3,734,683,955 847,429,497 266,100,292 5,099,135 15,379,156 83,807,741 13,593,405 575,000 1,918,560 132,250 175,807,881 18,800,000 364,082,435 1,792,725,352 1,941,958,603 177,076,701 203,018,403 60,000,000 440,095,104 1,501,863,499 (740,000,000) (740,000,000) 761,863,499 371,651,119 1,133,514,618 300,372,700 60,000,000 340,032,000 700,404,700 433,109,918 2.04

31.12.2011 BDT 8,747,763,443 (6,670,951,220) 2,076,812,223 81,967,646 403,310,160 173,662,888 658,940,694 2,735,752,917 585,463,412 146,057,563 1,876,465 11,904,965 65,982,885 11,488,548 500,000 2,211,209 289,250 102,002,246 12,500,000 205,914,527 1,146,191,070 1,589,561,847 70,029,299 238,170,701 61,200,000 369,400,000 1,220,161,847 (640,000,000) (640,000,000) 580,161,847 399,841,641 980,003,488 244,032,369 364,320,000 608,352,369 371,651,119 1.71

IAS 1.85

IAS 1.104 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.104 IAS 1.97 IAS 1.97 IAS 1.85 IAS 1.85 IAS 1.97 IAS 1.97 IAS 1.97

12.2

IAS 1.85 IAS 1.82(d) IAS 12.81(g)

12.1 2.8.4

IAS 1.82 (f) IAS 1.85

IAS 1.85

IAS 1.85 IAS 33.66

Managing Director

Director

Director

Chairman

Signed as per annexed report on even date

Dhaka, 15 March 2013

Chartered Accountants

Ref. IAS 1.51(a)

IAS 1.10(b) IAS 1.51 (c ) IAS1.38,1.39

FIRST SECURITY ISLAMI BANK LIMITED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 31 DECEMBER 2012

IAS 1.113
IFRS 7.20(b) IFRS 7.20(b) IAS 1.85 IFRS 7.20(b) IFRS 7.20(c) IAS 1.85

Notes Investments Income Profit Paid on Deposits Net Investment Income Income from Investment in shares and securities Commission, Exchange and Brokerage Other Operating Income Total Operating Income Less: Operating Expenses Salary and Allowances Rent, Taxes, Insurances, Electricity etc. Legal Expenses Postage, Stamps, Telecommunication etc. Stationery, Printings, Advertisements etc. Managing Director's Salary and Fees Auditors' Fees Directors' Fees Shariah Committee's Fees & Expenses Depreciation and Repair of Bank's Assets Zakat Expenses Other Expenses Total Operating Expenses Profit before Provision and Tax Provisions for Classified Investments Provisions for Unclassified Investments including off-B/S items Provisions for diminution in value of Investment in Shares Total Provisions Total Profit before Taxes Provision for Taxation Deferred Tax Income Net Profit after tax for the period Retained Earnings Brought Forward from Previous Year Appropriations: Statutory Reserve Other Reserve Bonus Share Issued Retained Earnings Carried Forward Earnings Per Share (EPS) 36 The annexed notes form an integral part of these accounts 25 26 27 28 29 30 32 33 34 35 20 21 22 23 24

31.12.2012 BDT 13,339,668,730 (10,309,755,493) 3,029,913,237 98,997,129 404,240,245 201,533,344 704,770,718 3,734,683,955 847,429,497 266,100,292 5,099,135 15,379,156 83,807,741 13,593,405 575,000 1,918,560 132,250 175,807,881 18,800,000 364,082,435 1,792,725,352 1,941,958,603 177,076,701 203,018,403 60,000,000 440,095,104 1,501,863,499 (740,000,000) (740,000,000) 761,863,499 371,651,119 1,133,514,618 300,372,700 60,000,000 340,032,000 700,404,700 433,109,918 2.04

31.12.2011 BDT 8,747,763,443 (6,670,951,220) 2,076,812,223 81,967,646 403,310,160 173,662,888 658,940,694 2,735,752,917 585,463,412 146,057,563 1,876,465 11,904,965 65,982,885 11,488,548 500,000 2,211,209 289,250 102,002,246 12,500,000 205,914,527 1,146,191,070 1,589,561,847 70,029,299 238,170,701 61,200,000 369,400,000 1,220,161,847 (640,000,000) (640,000,000) 580,161,847 399,841,641 980,003,488 244,032,369 364,320,000 608,352,369 371,651,119 1.71

IAS 1.85

IAS 1.104 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.97 IAS 1.104 IAS 1.97 IAS 1.97 IAS 1.85 IAS 1.85 IAS 1.97 IAS 1.97 IAS 1.97

12.2

IAS 1.85 IAS 1.82(d) IAS 12.81(g)

12.1 2.8.4

IAS 1.82 (f) IAS 1.85

IAS 1.85

IAS 1.85 IAS 33.66

Managing Director

Director

Director

Chairman

Signed as per annexed report on even date

Dhaka, 15 March 2013

Chartered Accountants

Ref. IAS 1.51(a) IAS 1.10(d) IAS 1.51(c)

IAS1.38,1.39

FIRST SECURITY ISLAMI BANK LIMITED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2012

31.12.2012 Notes
A. Cash Flow from Operating Activities

31.12.2011 BDT 8,829,731,089 (6,670,951,220) 403,310,160 (596,951,960) (80,025,236) (590,493,137) 173,662,888 (369,251,951) 1,099,030,633 (17,343,425,120) (495,711,302) 21,800,085,841 341,529,752 4,302,479,171 5,401,509,804 (1,117,031,781) (484,881,717) 5,589,000 (1,596,324,498) 3,231,114,000 3,231,114,000 7,036,299,306 5,779,197,275 12,815,496,581 751,981,687 12,061,966,594 1,548,300 12,815,496,581

IAS 1.113
IAS 7.10 IAS 7.31 IAS 7.31 IAS 7.14 (b) IAS 7.14 (d) IAS 7.14 (d) IAS 7.35 IAS 7.14 (b) IAS 7.14(c)

BDT 12,732,666,148 (9,603,755,782) 404,240,245 (861,022,902) (155,346,279) (710,802,087) 201,533,344 (653,286,828) 1,354,225,859 (26,836,900,304) (982,259,562) 31,760,523,863 1,502,738,936 5,444,102,933 6,798,328,792 (1,117,031,781) (769,739,231) (1,886,771,012) 2,220,000,000 1,367,460,967 3,587,460,967 8,499,018,747 12,815,496,581 21,314,515,328 1,183,461,824 20,130,399,204 654,300 21,314,515,328

Profit received Profit paid Commission, exchange & brokerage received Payment to employees Payment to suppliers Income tax paid Received from other operating activities Payment for other operating activities
Operating Profit before changes in Operating Assets & Liabilities

37 38

Increase / Decrease in Operating Assets & Liabilities Investments to Customers Other Assets Deposits from Customers Other Liabilities Net Cash Inflow from Operating Activities
IAS 7.10 IAS 7.16 (c) IAS 7.23 IAS 7.16 (b)

39 40

B. Cash Flow from Investing Activities

Investment in Shares and Securities Purchase of Property, Plant and Equipment Sale of Property, Plant and Equipment Net Cash Inflow from Investing Activities
C. Cash Flow from Financing Activities

IAS 7.10

Increase/(Decrease) in Share Capital Receipt from issuance of Mudaraba Subordinated Bond Increase/(Decrease) in Placement from Banks & Fl Net Cash Inflow/(Outflow) from Financing Activities
D. Net Increase/Decrease of Cash & Cash Equivalent (A+B+C)

IAS 7.45

Effect of Exchange Rate on Cash & Cash Equivalent E. Opening Cash & Cash Equivalent F. Closing Cash & Cash Equivalent (D+E) The above closing Cash and Cash Equivalents include: Cash in hand (Including Foreign Currencies) Balance with Bangladesh Bank, other banks & FI Prize Bond

The annexed notes form an integral part of these accounts

Managing Director Dhaka, 15 March 2013

Director

Director

Chairman

10

Ref. IAS 1.51(a)

IAS 1.10(c) IAS 1.51(c)

FIRST SECURITY ISLAMI BANK LIMITED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2012

Particulars Balance as on 01 January 2012 Changes in Accounting Policy Restated Balance

IFRIC1.6 (a)

Paid-up Capital BDT 3,400,320,000 3,400,320,000 -

Statutory Reserve BDT 704,202,214 704,202,214 -

Other Reserve BDT 24,000,000 24,000,000 -

Assets Reval. Reserve BDT 402,442,950 -

Retained Earnings BDT 371,651,119 371,651,119 -

Total BDT 4,500,173,333 4,500,173,333 402,442,950 -

Surplus/Deficit on account of Revaluation of Properties Surplus/Deficit on account of Revaluation of Investments Currency Translation Differences

IFRIC1.6 (a)

IFRIC1.6 (a)

Net Gains and Losses not Recognized in the Income Statement Net Profit for the period Dividends Transfer to Statutory Reserve Transfer to Other Reserve Issue of Share Capital during the year Balance as on 31 December 2012 Balance as on 31 December 2011

340,032,000 3,740,352,000 3,400,320,000

300,372,700 1,004,574,914 704,202,214

60,000,000 84,000,000 24,000,000

402,442,950 -

761,863,499 (300,372,700) (60,000,000) (340,032,000) 433,109,918 371,651,119

761,863,499 5,664,479,782 4,500,173,333

IAS 1.106 (a) IAS 1.107 IAS 1.106 (d)

Managing Director Dhaka, 15 March 2013

Director

Director

Chairman

11

Ref. IAS 1.51(a)

IAS 1.10(c) IAS 1.51(c)

FIRST SECURITY ISLAMI BANK LIMITED LIQUIDITY STATEMENT (ASSETS AND LIABILITY MATURITY ANALYSIS)
AS AT 31 DECEMBER 2012

Particulars Assets Cash in Hand Balance with other Banks and FI Investments in Shares and Securities Investments Fixed Assets including Premises, Furniture and Fixtures Other Assets Non-banking Assets Total Assets Liabilities Placement from Banks & Other Financial Institutions Deposits and other Accounts Mudaraba Subordinated Bond Other Liabilities Total Liabilities Net Liquidity Gap

Up to 01 Month BDT

01-03 Months BDT

03-12 Months BDT

01-05 Years BDT

More than 05 years BDT

Total BDT

10,528,144,967 578,216,061 1,587,223,270 6,978,115,949 1,717,181,073 21,388,881,320

5,193,500,000 600,000,000 24,242,389,287 295,472,216 30,331,361,503

5,014,000,000 1,000,000,000 21,015,347,089 27,029,347,089

1,711,600,000 30,064,302,244 2,975,177,971 34,751,080,215

14,569,450 14,004,074,019 1,997,716,214 216,143,278 16,232,502,961

10,528,144,967 10,785,716,061 4,913,392,720 96,304,228,588 1,997,716,214 5,203,974,538 129,733,173,088

10,783,743,755 2,608,003,297 13,391,747,052 7,997,134,268

43,200,582,385 4,408,727 43,204,991,112 (12,873,629,609)

4,400,000,000 41,609,812,458 298,538,867 41,908,351,325 (14,879,004,236)

198,574,967 10,830,087,635 2,220,000,000 1,952,119,237 15,002,206,872 19,748,873,343

3,481,342,638 2,481,479,340 5,962,821,978 10,269,680,983

4,598,574,967 109,905,568,871 2,220,000,000 7,344,549,468 124,068,693,306 5,664,479,782

Managing Director Dhaka, 15 March 2013

Director

Director

Chairman

12

IAS1.51(a) 1.10(e) 1.51(c)

First Security Islami Bank Limited Notes to the Financial Statements For the year ended 31 December 2012

1. The Bank and its activities: 1.1 Status of the Bank First Security Islami Bank Limited (FSIBL) was incorporated in Bangladesh on 29 August 1999 as a banking company under Companies Act 1994 to carry on banking business. It obtained permission from Bangladesh Bank on 22 September 1999 to commence its business. The Bank went for public issue on 20 July 2008 and its shares are listed with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). Presently the Bank carries banking activities through its one hundred (100) branches in the country. The Bank had no overseas branches as at December 31, 2012. The Bank converted its banking operation into Islamic Banking based on Islamic Shariah from traditional banking operation on 01 January 2009 after obtaining approval from honorable High Court, Ministry of Finance and Bangladesh Bank. The registered office of the Bank is located at 23, Dilkusha C/A, Dhaka-1000.
IAS 1.138 (a), (b)

1.2 Principal Activities All kinds of commercial banking services are provided by the Bank to the customers following the principles of Islamic Shariah, the provisions of the Bank Company Act 1991 and Bangladesh Banks directives. The bank renders commercial banking services to all types of customers. The range of services offered by the bank includes accepting deposit, making investment, purchasing bills, conducting domestic and international money transfer, carrying out foreign exchange transactions in addition to international money transfers, and offering other customer services such as safe keeping, collections and issuing guarantees, acceptances and letters of credit. Core business of the bank includes deposit mobilization and investing activities comprising short-term, long-term, import and export financing. Investment activities are extended to different sectors of the economy that could be grouped into several sectors including Rural & agriculture, Garments & Textiles, Jute, Cement & Bricks, Tannery, Steel & Engineering, Food & Beverage, Chemical & Pharmaceuticals, Printing & Packaging, Glass & Ceramics and Miscellaneous. At a glance, the principal activities of the bank are: (a) To facilitate and handle all kinds of commercial banking services to its customers authorized by Bangladesh Bank. (b) To handle the export and import trade of Bangladesh (c) To take part in international banking etc. 1.3 First Security Islami Capital & Investment Limited First Security Islami Capital & Investment Ltd. a private company limited by shares has been formed and registered under the Companies Act, 1994 with the Registrar of Joint Stock Companies, Dhaka vide certificate of incorporation no. C-88567/10 dated 02 December 2010.The Securities and Exchange Commission vide its certificate No. MB-65/2011 dated 27 March 2011 has accorded approval to the bank for a full fledged Merchant Banking operation under the Securities and Exchange Commission Act, 1993. First Security Islami Bank Ltd. holds 51% shares and 49% shares are held by other individuals. The companys reporting period is January To December.

13

1.4 First Security Islami Exchange Limited, Canada First Security Islami Exchange Ltd. Canada was incorporated under the Canada Business Corporation Act with the corporation number 720625-9 on July 13, 2009. Bangladesh Bank vide their Letter No. BRPD (M) 204/17/2009-95 dated 08 September 2009 has accorded approval to the bank for opening a fully owned subsidiary company in the name of First Security Islami Exchange Ltd., Canada. The main activities of the exchange house are to carry on the remittance business and to undertake and participate in transactions activities and operations commonly carried on or undertaken by remittance and exchange houses. Some legal formalities for incorporation as a subsidiary company of the First Security Islami Exchange Ltd. Canada are yet to be completed. 1.5 First Security Islami Exchange Italy S.R.L First Security Islami Exchange Italy S.R..L has been formed as per approval of Bangladesh Bank vide their Letter No. BRPD (M) 204/17/2009-95 dated 08 September 2009 for opening a fully owned subsidiary company. The main activities of the exchange house are to carry on the remittance business and to undertake and participate in transactions activities and operations commonly carried on or undertaken by remittance and exchange houses. The incorporation of the company as a subsidiary company of the First Security Islami Bank Ltd. is under process.
IAS1.112 (a) IAS 1.117

2. Significant Accounting Policies and basis for Preparation of Financial Statements 2.1 Basis of Accounting Statements of Compliance The financial statements of the Group and the Bank are made up to December 31, 2012 and are prepared under the historical cost convention on a going concern basis and in accordance with the First Schedule Section 38(4) of the Bank Companies Act, 1991, BRPD Circular # 14 dated 25 June 2003, BRPD Circular # 15 dated 09 November 2009, Other Bangladesh bank Circulars, Bangladesh Accounting Standards and Bangladesh Financial Reporting Standards, The Companies Act 1994, The Security and Exchange Rules 1987, Dhaka & Chittagong Stock Exchanges listing regulations, Income Tax Ordinance 1984 and other laws and rules applicable in Bangladesh.

IAS 1.119

2.2 Basis of Consolidation The consolidated Financial Statements include the financial statements of First Security Islami Bank Limited and its subsidiary company First Security Islami Capital & Investment Limited made up to the end of the December 31, 2012. The consolidated financial statements have been prepared in accordance with Bangladesh Accounting Standards 27-Consolidated & Separate Financial Statements. The Consolidated Financial Statements are prepared for the common financial year ended 31 December 2012. All intra-group transactions, balances, income and expenses are eliminated at the time of consolidation. Profit and loss resulting from transactions is also eliminated from consolidated financial statements.

IAS 1.117

2.3 Use of estimates and Judgments In the preparation of the financial statements management is required 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 on going basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.
14

IAS 1.27

2.4 Accruals & Deferrals Accruals and deferrals have been made as per the guidance of IAS # 1: Presentation of Financial Statements. In order to meet their objectives, financial statements except for Statement of Cash Flow and related information are prepared on accrual basis of accounting. Under this basis, the effects of transactions and other events are recognized when they occur (and not when cash or its equivalent is received or paid) and they are recorded in accounts and reported in the financial statements of the periods to which they relate.

IAS 1.119

2.5 Revenue Recognition The revenues during the period are recognized on an accrual basis, which comply with the conditions of revenue recognition as provided in IAS # 18: Revenue. 2.5.1 Income from Investments Income from investments has been accounted for on accrual basis except investment under Musharaka, Mudaraba and Bai-Salam. Income in case of Musharaka is accounted for on realization basis. The bank does not charge any rent during the gestation/interim period of investment under hire purchase, but it fixes the sale price of the assets at a higher price in such a way to cover its expected rate of return. Such income is recognized on realization basis.

2.5.2 Income from Investments in Securities Investment in shares and securities are stated at cost. Provisions have been made against probable losses on the basis of period end reviewed by the management and in compliance with Bangladesh Bank circulars. Dividend income on shares of joint stock companies is accounted for when it is received. Gain on sale of shares transferred to other income on realization basis. Profit on investment in Bangladesh Govt. Islamic Investment Bond is recognized on accrual basis.

IAS 1.114 (d) (i)

2.5.3 Commission Income Commission and discount on Bills Purchased and Discounted are recognized at the time of realization. Commission charged to customers on letter of credit and guarantees are credited to income at the time of effecting the transactions.

IAS 18.35 (a)

2.5.4 Profit/Rent/Compensation Suspense Account Profit/rent/compensation accrued on classified investments are suspended and accounted for as per circulars issued by the Bangladesh Bank. Moreover, income which are irregular (doubtful) as per Shariah are not included in the distributable income of the Bank. Compensation on unclassified overdue Bai-Murabaha investments is charged. As per Islamic Shariah such compensation is not shown as income of the Bank. Interest received from the balances held with foreign banks and foreign currency charging account with Bangladesh Bank are also not credited to regular income since it is not permissible as per Shariah.

IAS 1.117 (b)

2.5.5 Profit paid and other expenses In terms of the provision of IAS # 1: Presentation of Financial Statements, Profit paid and other expenses are recognized on accrual basis.

15

2.5.6 Dividend Payments Interim dividend is recognized when they are paid to shareholders. Final dividend is recognized when it is approved by the shareholders. The proposed dividend for the year ended December 31 2012 has not been recognized as a liability in the balance sheet in accordance with the IAS-10: Events After the Balance Sheet Date. Dividend payable to the Banks shareholders is recognized as a liability and deducted from the shareholders equity in the period in which the shareholders right to receive payment is established. 2.6 Foreign Currency Transactions 2.6.1 Foreign Currency Items included in the financial statements of each entity of the bank are measured using the currency of the primary economic environment in which entity operates i.e. functional currency. The financial statements of the bank are presented in Taka which is banks functional and presentation currency. 2.6.2 Foreign Currency Translations Foreign currency transactions are converted into equivalent Taka currency at the ruling exchange rates on the respective dates of such transactions as per IAS-21. Assets and liabilities in foreign currencies as at 31 December 2012 have been converted into Taka currency at the average of the prevailing buying and selling rates of the concerned foreign currencies at that date except "balances with other banks and financial institutions" which have been converted as per directives of Bangladesh Bank vide its circular no BRPD(R) 717/2004-959 dated 21 November 2004. 2.6.3 Commitments Commitments for outstanding forward foreign exchange contracts disclosed in these financial statements are translated at contracted rates. Contingent liabilities / commitments for letters of credit and letters of guarantee denominated in foreign currencies are expressed in Taka terms at the rates of exchange ruling on the balance sheet date. The outstanding balances for the same as at 31 December 2012 have been shown in the Balance Sheet under Off-Balance Sheet items. Exchange rates with major foreign currencies as on 31 December 2012 were as: Currency Name US $ Euro Yen ACU GBP CHF SGD AUD CAD
IAS 21.23

Exchange Rate (TK) 79.8250 105.5366 .9276 79.8250 129.0611 87.4028 65.2165 82.7546 80.0813

2.6.4 Translation gains and losses As per provision of IAS # 21: The Effects of Changes in Foreign Exchange Rates, foreign currency transactions are translated into Taka at rates prevailing (contracting) on the dates of such transactions. The resulting exchange transaction gains and losses arising through foreign currency buying and selling transactions effected on different dates of the year have been adjusted by debiting /crediting exchange gain or loss account.

16

IAS 1.119 IAS 7.6,7& 8

2.7 Assets and their basis of valuation 2.7.1 Cash and Cash Equivalents As per provision of IAS # 7 Cash Flow Statements of Banks and Similar Financial Institutions for the purpose of the cash flow statement, cash and cash equivalents comprise balances with less than 90 days maturity from the date of acquisition including: cash and balances with central banks, treasury bills, and other eligible bills, amounts due from other banks and dealing securities other than those which are not available to finance the FSIBL day to day operations.

IAS 1.119

2.7.2 Investments a) Investments are stated in the balance Sheet at the net amount excluding unearned income and profit receivable. b) Provision for Investments Impairment: As per instructions contained in Bangladesh Bank BCD circular no 34, dated November 16 1989, BCD circular no 20, dated 27 December 1994, BCD circular no 12, dated September 4, 1995, BRPD circular no 16, dated December 6, 1998, BRPD circular no 09, dated May 2001, BRPD circular no 5, dated June 5, 2006, BRPD circular no 14, dated September 23, 2012 and BRPD circular no 19, dated December 27, 2012 respectively specific provisions are made against non performing investments are at the following rates: Provision on Substandard Investments Provision on Doubtful Investments Provision on Bad & Loss Investments 20% 50% 100%

As per instruction of BRPD circular no 16, 09, 08, 05, 14 and 19 dated December 6, 1998, May 14, 2001, October 2005, June 5, 2006, September 23, 2012 and December 27, 2012 respectively an amount has been set aside up of the total unclassified investments as on the balance sheet date at the following rates: General Provision on: All Unclassified Investments of Small and Medium Enterprise (SME) All Unclassified Investments (Other than investments under consumer Financing, Investment to Brokerage House, Merchant Banks, Stock Dealers etc., Special Mention Account as well as SME Financing) Unclassified Consumer Financing (Other than Housing Finance and Investment for Professionals to set up business) Unclassified Consumer Financing (For Investments to Housing Finance and Investment for Professionals to set up business under Consumer Financing Scheme.) Unclassified Investment to Brokerage House, Merchant Banks, Stock dealers, etc Housing Finance and Investment for Professionals to set up business under Consumer Financing Scheme Special Mention Account (SMA) Investments Off-Balance Sheet Exposure 0.25% 1% 5%

2% 2% 5% 1%

Provision for Short-term agricultural and Micro-Credits: All credits except Bad/Loss Bad/Loss 5% 100%

17

c) When an investment is deemed to be uncollectible, it is written off against the related provision for impairments. Subsequent recoveries of such investments are credited to the income statement. d) Investment are normally written off, when there is no chance of recovery of these amounts in accordance with BRPD Circular no. 2, Dated 13 January 2003 and BRPD Circular no. 15, Dated 23 September 2012 respectively. A separate Investment Monitoring and Recovery Division (IMRD) have been set up at the Head Office, which monitors investment written off and legal action through the Money Court. The process of write-offs does not undermine or affect the amount claimed against the borrower by the bank. 2.7.3 Valuation Method Considerable value of Investments have been considered as follows: Particulars Bangladesh Government Islamic Investment Bonds Prize bonds Shares 2.7.4. Offsetting Financial Instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
IAS 16.73

Valuation Method Cost Price Cost Price Cost Price

2.7.5 Property , Plant and Equipment All property and equipment are classified and grouped on the basis of their nature as required in as par provision of IAS # 16: Property, Plant and Equipment. The major categories of property and equipment held by the bank are furniture and fixtures, office equipments, motor vehicles and books. As guided in paragraph 30 of IAS 16 Property Plant and Equipment: all property and equipment are stated at historical cost less accumulated depreciation. The opening and closing carrying amounts of all property and equipment are presented including the amount of additions, disposals and depreciation charged during the period as required by paragraph 73 (a-e)of IAS 16. Maintenance expenses that does not increase the value of assets is charged to profit & loss account. Depreciation on Property , Plant and Equipment As required in paragraph 43 of IAS 16 Property Plant and Equipment depreciation has been charged on property and equipment at the following rates using reducing balance method, except on office equipment, motor vehicles and building on which straight-line method is applied. Nature of Assets Building Furniture and Fixtures Office Equipments Vehicles Books Rate of Depreciation 2.5% 10% 20% 20% 20% Method of Depreciation Straight Line Method Reducing Balance Method Reducing Balance Method except Computer Equipment where used Straight Balance Method. Straight Line Method Reducing Balance Method

18

Depreciation on addition to fixed assets is charged in the year of acquisition, while no depreciation is charged in the year of disposal as per policy of FSIBL.

IAS 1.119

2.8 Liabilities and Provision 2.8.1 Taxation Tax expenses represent the sum of the tax which are payable during the current period.

IAS 1.119

IAS 12.12, 46

2.8.1.1 Current Tax Provision for corporate current income tax has been made @ 42.50% as prescribed in the Finance Act 2012 of the accounting profit made by the Bank after considering some of the add backs to income and disallowances of expenditure as per income tax laws incompliance with BAS-12: Income Taxes.

IAS 12.15, 24, 47

2.8.1.2 Deferred Tax As per IAS#12 Deferred tax asset are the amounts of income taxes recoverable in future periods in respect of deductible temporary differences. Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences. Deferred tax assets and liabilities are recognized for the future tax consequences of timing differences arising between the carrying values of assets, liabilities, income and expenditure and their respective tax bases. Deferred tax is provided using the liability method for all temporary difference arising between the tax base of assets and liabilities and their carrying value for financial reporting purposes. The tax rate (42.50%) prevailing at the balance sheet date is used to determine deferred tax.

IAS 19.120

2.8.2 Retirement Benefits of Employees Required in IAS # 19: Employee Benefit, provident fund and gratuity benefits are given to eligible staff of the bank in accordance with the locally registered rules and the entity shall disclose the amount recognized as an expense for defined contribution plan.

IAS 19.120

2.8.2.1 Provident Fund Provident fund benefits are given to staffs of FSIBL in accordance with the locally registered Provident Fund Rules. The employees' provident fund is administered by a Board of Trustees and is funded by contributions of employees and the Bank at predetermined rates in equal proportion. These contributions are invested separately from the assets of FSIBL and the profit on such contributions credited to the members account. The Fund recognized by the National Board of Revenue.

IAS 19.120

2.8.2.2 Gratuity The Company operates an unfunded gratuity scheme for its permanent employees, under which an employee is entitled to the benefits if his length of service is eight (08) years. Actual valuation of gratuity scheme had been made to assess the adequacy of the liabilities provided for the scheme as per IAS-19 Employee Benefits. 2.8.2.3 Social Security Benevolent Fund The Bank operates a social security benevolent fund by all employees contribution for the sake of death and disability of employees.

19

IAS 1.119

2.8.3 Deposits and Other Accounts Deposit includes Al-wadiah Current (non-profit bearing) Deposits, Mudaraba Saving Deposits, Mudaraba Term Deposits etc. They are brought to account at the gross value of the outstanding balance. Profit paid is charged to the Income Statement.

IAS1.114 (d)(i),37.14

2.8.4 Contingent Liabilities, Commitments and Other Off-Balance Sheet items As required in IAS # 37, Contingent Liabilities, commitments and other off-Balance Sheet items are presented in details in the financial statements. 2.8.5 Sharing of Investment Income In case of investments, Mudaraba fund gets preference over cost free fund. The investment income earned through deployment of Mudaraba fund is shared by the bank and the Mudaraba depositors at the pre-determined ratio fixed by the bank.

2.8.6 Zakat Zakat is paid by the bank at the rate of 2.58% (instead of 2.50% as the bank maintains its account following Gregorian year) on the closing balances of statutory reserve, general reserve and exchange equalization account. Payment of zakat on paid up capital and deposits is the responsibility of the shareholders and depositors respectively. 2.9 Others
IAS 1.111

2.9.1 Statement of Cash Flow Cash flow statement is to be prepared as it provides information about cash flows of the enterprise which is useful in providing users of financial statements with a basis to assess the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilize those cash flows. Cash flow statement has been prepared under the direct method for the period, classified by operating, investing and financing activities as prescribed in paragraph 10 and 18 (a) of IAS 7.

IFRS 7.39 (a)

2.9.2 Liquidity Statement The liquidity statement of assets and liabilities as on the reporting date has been prepared on residual maturity term as per the following basis. Balance with other Banks and financial institutions, money at call and short notice, etc. are on the basis of their maturity term; Investments are on the basis of their respective maturity; Investments are on the basis of their repayment schedule. Fixed assets are on the basis of their useful lives; Other assets are on the basis of their realization / amortization; Borrowing from other Banks, financial institutions and agents, etc. are as per their maturity / repayment term; Deposits and other accounts are on the basis of their maturity term and past trend of withdrawal by the depositors; Provisions and other liabilities are on the basis of their payment / adjustments schedule.

20

IAS 1.38, 39

2.9.3 Comparative Information As guided in paragraph 36 and 38 of IAS 1 Presentation of Financial Statements, comparative information in respect of the previous year have been presented in all numerical information in the financial statements and the narrative and descriptive information where, it is relevant for understanding of the current period's financial statements.

IAS 1.117 (b)

2.9.4 Earnings Per Share (EPS) 2.9.4.1 Basic Earnings per Share Earnings per share have been calculated in accordance with IAS 33 Earning 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. 2.9.4.2 Diluted Earnings per Share No diluted earnings per share is required to calculate for the period as there was no scope for dilution during the period under review.

IAS 1.51 (d), (e)

2.9.5 Functional and presentation currency The financial statements are presented in Bangladesh Taka (BDT). All values are rounded to the nearest Taka.

IAS 1.114 (d)

2.10 Risk Management In the ordinary course of business, the bank is exposed to a variety of risks the most important of which are investments risk, liquidity risk, market risk, operational risk, legal risk, and profit rate risk. These risks should be identified, measured and monitored through various control mechanisms across the bank in order to price its products and services on a risk-adjusted basis and to prevent undesirable concentrations. The policies and procedures for managing these risks are outlined in the notes below. The Bank has designed and implemented a framework of controls to identify, monitor and manage these risks, which are as follows:

IFRS 7.33

2.10.1 Investments Risk Investments risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Concentration of investments risk arises when a number of counter parties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. To manage investments risk, the bank applies investment limits to its customers and obtains adequate collaterals. Investments risk in the First Security Islami Bank's portfolio is monitored, reviewed and analyzed by the Investments Risk Management (IRM). First Security Islami Bank Ltd. established Asset-Liability Management Committee (ALCO) to screen out the banks/financial institutions and determine the maximum risk exposure on each of them. ALCO also assesses recommends and controls cross border/country risk. To manage the Non-Performing Investments (NPI), First Security Islami Bank Ltd. has in place comprehensive remedial management policy, which includes a framework of controls to identify weak investments and monitoring of these accounts.

21

IAS 1.119

2.10.2 Foreign Exchange Risk Since Foreign Exchange Risk involves purchase and sale of any national currency against other national currency, thus Foreign Exchange Risk is the chance of loss due to unexpected movement of market price of the currencies of different countries or the price of the assets denominated by foreign currencies. The Foreign Exchange Risk of the bank is minimal as all the transactions are carried out on behalf of the customers against underlying Foreign Exchange transactions. Treasury Division independently conducts the transactions and the Back Office of treasury 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 daily basis and outstanding entries beyond 30 days are reviewed by the Management for their settlement.

IFRS 7.39 (b)

2.10.3 Asset Liability Management Asset Liability Management is the key success of any financial intermediary especially for Banks. Asset Liability Committee (ALCO) of the Bank monitors Balance Sheet Risk and liquidity risks of the bank. The Balance Sheet Risk encompasses most part of the Asset Liability risk and deal with change in earnings due to change in rate of profit, foreign exchange rates which are not of trading nature on the other hand, liquidity risk can be defined as the risk or chance of failure to meet up any withdrawal /disbursement request by a counterparty/customer. Asset Liability Committee (ALCO) reviews Liquidity requirement of the bank, the maturity of assets and liabilities, deposits and investments pricing strategy and the Liquidity contingency plan. The primary objective of the Asset Liability Committee (ALCO) is to monitor and avert significant volatility in Net Investments Income (NII), investment value and exchange earnings for the purpose of taking future action plan for better interest of the organization.

IAS 1.114(d)

2.10.4 Prevention of Money Laundering Money Laundering is the criminal practice of filtering ill-gotten gains or dirty money through a series of transaction so as to give the money a clean look that it appears to have originated from legal activities. It is a process of filtering money obtained through predicate offence such as corruption, fraud, drug trafficking etc. through the financial system. Money Laundering now a days is one of the greatest challenges that the Governments, Banks and Financial Institutions face in the globalize financial system. First Security Islami Bank Limited identified the money laundering as one of its core risk areas and has been making all out efforts to prevent money laundering. For mitigating the risk, the bank has a designated Chief Anti-Money Laundering Compliance Officer (CAMLCO) at Central Compliance Unit under Anti-Money Laundering Division, Head Office, who has sufficient authority to implement and enforce corporate wide AML policy, procedure & measure and who is reporting directly to the Senior Management and the Board of Directors. Moreover, every branch of our bank has a designated Branch Anti-Money Laundering Compliance Officer (BAMLCO) under Branch Anti-Money Laundering Compliance Unit, who independently review the transaction of accounts, with verification of Know Your Customer (KYC) and Suspicious Transaction Report (STR). They are also sending Cash Transaction Report (CTR) to the Central Compliance Unit, Head Office on monthly basis by using FIU Reporting System Software provided by Bangladesh Bank and finally we send the same to Anti-Money Laundering Department of Bangladesh Bank. The Central Compliance Unit has also arranged Training/Workshop for developing awareness and skill regarding AML activities of Executives and Officers of the bank and conducting inspection regarding AML activities of our branch. Bank has established a Manual for Prevention of Money Laundering and issues circulars time to time giving specific guidelines in accordance with Bangladesh Bank guidelines, regulations, Anti-Money Laundering Act, 2009 & Anti Terrorism Act, 2009. All the guidelines and circulars issued by Bangladesh Bank from time to time are being strictly complied with by Central Compliance Unit and branches of the Bank.
22

IAS 1.114 (d)

2.10.5 Internal Control and Compliance Internal Control & Compliance is considered as an eye of an organization. It is a mirror of operations and keeps record of the same. The primary objectives of internal control system are to help the bank to perform in a better height through the use of its resources & under the guidance of Internal Control system, bank identifies its weakness and takes appropriate measures to overcome the same. The main objectives of Internal Control are to ascertain the efficiency and effectiveness of activities, reliability, completeness and timeliness of financial and management information, compliance with applicable laws and regulations. Operational loss arises for the cause of errors and fraud due to lack of internal control and compliance. Internal Control & Compliance Division undertakes periodical and special audit & inspection of its branches and departments/divisions of Head Office for reviewing its operation and compliance of the statutory requirement. The Audit Committee of the Board of Directors plays a vital role in providing a bridge between the Board and Management. The committee reviews the Financial Reporting process, Audit process and the Banks process for compliance with laws, regulations and code of conduct.

IAS 1.114 (d)

2.10.6 Guideline on Information & Communication Technology: Banks are increasingly using sophisticated digital technology for banking activities with a view to achieve more customer satisfaction with less cost. In addition, it increases the efficiency of the banking and payment system, benefiting consumers and merchants leading to bringing additional risks. These risks must be balanced against benefits i.e. must be controlled. Under this advanced and highly technical ICT environment banks must ensure that critical systems are not threatened by the risk exposures the banks take. For this purpose, a risk management process consisting of assessing risks, controlling risk exposure, and monitoring risks should be in place. Information assets are critical to the services provided by the Bank to its customers. Protection and maintenance of these assets are vital to its sustainability. In order to ensure protection of critical IT assets from unauthorized access, modification, disclosure and destruction the Bank has already taken initiatives, which safeguard the interest of customers.

In this context bank is implementing a core banking software (Bank Ultimus) ensuring adequate security. To protect sensitive information of core banking software and other software in the event of any disaster, the bank has implemented a disaster recovery site. The Bank has already developed its own ICT policies for various operation and services which are closely in line with the ICT guidelines of Bangladesh Bank. The Bank has developed fault tolerance plan of human resources with detail job description for each IT personnel, segregation of duties of IT tasks and system support in respect of severity. Training is a key component of ICT Risk Management. The Bank has been continuously conducting training sessions on sensitive IT tasks (i.e. operational procedure, Business Continuity Planning, Disaster Recovery Planning etc.) for relevant employees. The Bank management has been putting continuous efforts to improve IT Operation Management, Problem Management, Change Management, Asset Management and Request Management to maintain maximum uptime of automated banking business. The Bank has been maintaining adequate physical security inside its workplace to properly protect ICT resources. The Bank is strictly following the Information Security Standard of Bangladesh Bank covering Password Control, User ID Maintenance, Input Control, Network Security, Data Encryption, Virus Protection and Access Control to Internet and Emailing. The bank is regularly conducting internal ICT audit to all its branches and Head Office divisions to ensure proper implementation of the ICT policies.

23

2.11 Risk Based Capital ( Basel-II ) To comply with the international best practice and to make the banks capital more risk sensitive as well as to build the banking industry more shock absorbent and stable, Bangladesh Bank is aimed to implement Basel-II reporting from 2010. As per the directive of Bangladesh Bank, all schedule banks in Bangladesh are now required to report risk based capital adequacy for banks under Basel-II along with the existing capital adequacy rules and reporting under Basel-II during the parallel run i , e. 2009. All scheduled banks are also required to disclose capital adequacy in both quantitative terms. The first disclosure as per guidelines has been made as on the effective date viz. 31st March 2010. 2.12 Stress Testing Stress testing is one of the sophisticated risk management techniques that have been used to determine the reactions of different financial institution under a set of exceptional, but plausible assumptions through a series of test. At institutional level, stress testing techniques provide a way to quantity the impact of change in a number of risk factors on the assets and liabilities portfolio of the institution. Presently stress testing is being done by considering five different risk factors namely interest rate, sale value of collateral, non-performing loans, stock price and foreign exchange rate. FSIBL supplements their analysis of risk with stress testing. They perform stress tests because value-at-risk calculations are based on relatively recent historical data and only purport to estimate risk up to a defined confidence level. Therefore, they only reflect possible losses under relatively normal market conditions.
IAS 1.21

2.13 General Wherever considered necessary, previous years figures have been rearranged for the purpose of comparison;

24

Ref.

31.12.2012 BDT 3 3.1 CASH Cash in Hand In Local Currency In Foreign Currencies 1,172,213,290 11,248,534 1,183,461,824

31.12.2011 BDT

IAS 7.45 IAS 1.77

746,988,452 4,993,235 751,981,687

IAS 1.77

3.2

Balance with Bangladesh Bank and its Agent Bank In Local Currency In Foreign Currencies 9,064,653,022 280,030,121 9,344,683,143 10,528,144,967 6,150,402,685 243,179,681 6,393,582,366 7,145,564,053

3.3

Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) have been calculated and maintained in accordance with the Section 25 & 33 of the Bank Companies Act. 1991 and subsequent BCD Circular No. 13 dated May 24, 1992; BRPD Circular No. 12 dated September 06, 1998, BRPD Circular No.12, dated September 20, 1999, BRPD Circular No. 22 dated November 06, 2003, BRPD Circular No. 03 dated 17 February, 2005 and BRPD Circular No. 11 & 12 dated 25 August 2005, Bangladesh Bank Letter # DOS (SR) 1153/120-A/2009-46 dated 22 March 2009, MPD circular # 01 dated 04 May 2010 & MPD circular # 04 & 05 dated 01 December 2010.

3.3

Cash Reserve Ratio (CRR): 6.00% of Average Demand and Time Liabilities: Required Reserve Actual Reserve maintained Surplus/(Short) 5,420,570,000 8,871,134,000 3,450,564,000 4,027,304,000 6,040,205,000 2,012,901,000

3.4

Statutory Liquidity Ratio (SLR): 11.50% of Average Demand and Time Liabilities: Required Reserve (including CRR) Actual Reserve held (including CRR) Surplus/(Short) 10,389,426,000 14,333,893,000 3,944,467,000 7,719,000,000 10,013,140,000 2,294,140,000

3 (a) CASH First Security Islami Bank Limited (Note-3.2) First Security Islami Capital & Investment Limited 10,528,144,967 7,476 10,528,152,443
IAS 1.77

7,145,564,053 599 7,145,564,652

4 A.

BALANCE WITH OTHER BANKS AND FINANCIAL INSTITUTIONS Inside Bangladesh Al-Wadiah Current Accounts Dutch-Bangla Bank Ltd.(Current Account) Agrani Bank Limited(Current Account) Brac Bank Ltd.(Current Account) 25 10,088,678 11,581,467 190,301 21,860,446 15,802,536 3,374,507 19,177,043

Ref.

31.12.2012 BDT Others Accounts Mudaraba Short Notice Deposits Southeast Bank Ltd. (Islamic Branch) Social Islami Bank Ltd. Dhaka Bank Ltd. (Islamic Branch) AB Bank Ltd. (Islamic Branch) Islami Bank (BD) Ltd. 4,817,667 5,707,548 241,867 543,907 74,711,556 86,022,545 Mudaraba Term Deposits AB Bank Ltd. (Islamic Branch) Premier Bank Ltd.(Islamic Branch) Social Islami Bank Ltd. Export Import Bank of Bangladesh Limited Jamuna Bank Ltd.(Islamic Branch) Hajj Finance Co. Limited (Islamic Leasing) Reliance Finance Limited Balance Carried Forward

31.12.2011 BDT

5,110,561 5,552,185 8,727,626 533,438 56,657,188 76,580,998

400,000,000 850,000,000 1,200,000,000 1,500,000,000 400,000,000 50,000,000 5,807,500,000 10,207,500,000 10,315,382,991

400,000,000 450,000,000 1,300,000,000 1,000,000,000 10,000,000 50,000,000 2,150,000,000 5,360,000,000 5,455,758,041

26

Ref.

31.12.2012 BDT

31.12.2011 BDT

27

Ref.

31.12.2012 BDT C. Maturity-wise Grouping ( Inside and Outside Bangladesh) Payable on Demand Up to Three Months Three Months to One Year One Year to Five Years Above Five Years

31.12.2011 BDT 1,358,384,228 2,850,000,000 1,460,000,000 5,668,384,228

IAS 1.61

578,216,061 5,193,500,000 5,014,000,000 10,785,716,061

4(a) BALANCE WITH OTHER BANKS AND FINANCIAL INSTITUTIONS First Security Islami Bank Limited (Note-4) First Security Islami Capital & Investment Limited
IAS 1.77

10,785,716,061 12,108,630 10,797,824,691

5,668,384,228 31,420,367 5,699,804,595

INVESTMENTS IN SHARES AND SECURITIES Government Securities Bangladesh Govt. Islamic Bonds Prize Bonds Others Quoted/Unquoted Shares (Note - 5.1)

4,060,000,000 654,300 4,060,654,300 852,738,420 4,913,392,720 Acquisition cost (Taka) 25,369,400 2,639,255 11,901,863 62,668,930 59,019,305 4,975,562 25,366,323 44,962,840 9,630,698 55,191,894 70,618,008 10,864,000 12,411,216 63,374,412 5,330,200 48,243,600 40,719,823 802,585 48,638,086 110,863,946 9,995,998 25,976,951 8,323,200 19,057,710 20,000,000 3,154,861 2,916,600 9,865,290 2,167,550 3,988,293 477,960 3,313,706 140,156 4,680,384 621,895 316,470 9,580,000 838,168,970

3,120,000,000 1,548,300 3,121,548,300 855,453,204 3,977,001,504 Acquisition cost (Taka) 20,081,600 17,483,872 7,011,731 59,053,949 55,647,288 49,184,642 21,645,684 34,314,457 9,755,553 49,967,524 64,791,779 10,170,000 11,028,312 59,688,100 28,438,200 37,503,000 39,041,076 195,574 41,233,096 117,226,035 8,400,679 23,908,365 5,912,400 14,996,250 20,000,000 1,057,820 1,007,600 32,139,168 840,883,754

5.1

Quoted/Unquoted Shares Name of Companies Quoted: Fareast Islami Life Insurance Co. Islami Bank Bangladesh Ltd. Social Islami Bank Ltd. Export Import Bank (BD) Ltd. Beximco Ltd. Titas Gas Transmission & Distribution Co. Ltd. ACI Limited Dhaka Electric Supply Company Ltd. Power Grid Company of BD Ltd Al-Arafa Islami Bank Ltd. BSRM Steel ICB Islamic Bank Ltd. Islami Insurance Bangladesh Ltd. Shahjalal Islami Bank Ltd. Jamuna Oil Company Ltd. Meghna Cement Ltd. Navana CNG Ltd. National Tubes Ltd. Summit Alliance Port Ltd. Square Pharmaceuticals Ltd. Bangladesh Lamps Ltd. Islamic Finance & Investment Ltd. Khulna Power Company Ltd. Maxsons Spinning Mills Ltd. PHP First Mutual Fund Beximco Pharmaceuticals Ltd. MJL Bangladesh Ltd. Lafarge Surma Cement Ltd. Aftab Automobiles Ltd. Aramit Cement Ltd. Confidence Cement Ltd. CVO Petrochemical Refinery Limited Delta Brac Housing Finance Corp. Ltd Grameenphone Ltd. Saiham Cotton Mills Ltd. Salvo Chemical Industry Ltd. NLI First Mutual Fund Total 28

Ref.

31.12.2012 BDT Unquoted: Central Depository Bangladesh Ltd. Orion Pharmaceuticals Ltd 5.2 Market Value of Quoted Shares We followed Bangladesh Bank Guidelines instead of BAS-39 4,569,450 10,000,000 852,738,420 506,809,917

31.12.2011 BDT 4,569,450 10,000,000 855,453,204 564,142,600

IAS 1.61

5.3

Maturity Grouping of Investments in Shares and Securities On Demand Within One Month One Month to three Months Three Months to One Year One Year to Five Years More than Five Years

654,300 1,586,568,970 600,000,000 1,000,000,000 1,711,600,000 14,569,450 4,913,392,720

1,548,300 990,883,754 150,000,000 420,000,000 2,400,000,000 14,569,450 3,977,001,504

5(a) INVESTMENTS IN SHARES AND SECURITIES First Security Islami Bank Limited (Note-5) First Security Islami Capital & Investment Limited
IAS 1.77

4,913,392,720 215,086,406 5,128,479,126

3,977,001,504 67,587,038 4,044,588,542

INVESTMENTS (All Inside Bangladesh) General Investments (Bai-Murabaha, Bai - Muajjal, HPSM, etc.)(Note - 6.A) Bills Purchased and Negotiated (Note - 6.B) 95,493,421,519 810,807,069 96,304,228,588 64,451,579,004 5,015,749,280 69,467,328,284

IAS 1.77

6.A General Investment ( Bai-Murabaha, Bai - Muajjal, HPSM) etc. Inside Bangladesh Investment General 19,113,785,750 Bai Murabaha (Hypo) 36,863,735,301 Bai Murabaha Post Import (TR) 5,807,138,026 Bai Murabaha Post Import (Pledge) 42,468,531 Bai Murabaha (Share) 673,141,958 Bai Murabaha Import Bills 3,918,278,389 Bai Muajjal (DDIS) 12,144,868 HPSM (House Building) 7,221,175,042 Pre-Shipment Investment 160,952,147 HPSM (Transport) 902,374,201 HPSM (Scheme) 5,007,375,438 Wajira Bill Okalah Against Cash Incentive 12,008,120 Quard Investment A/C 1,012,285,985 Bai Murabaha General 6,177,037,847 Bai Murabaha against Security 5,031,352,049 Bai Murabaha Import 886,320,035 Bai Murabaha Export 255,160,911 SME Investment 874,489,984 Quard against PF (Staff) 5,717,972 Agricultural Investment 1,013,682,175 Project Investment 341,114,386 Bai Salam Export 2,707,931 Bai - Muajjal General 1,308,644 HPSM Consumer Investment 157,665,829 95,493,421,519 Outside Bangladesh 95,493,421,519 6.B Bills Purchased and Negotiated Payable in Bangladesh Payable outside Bangladesh 793,827,096 16,979,973 810,807,069 96,304,228,588 29

6,372,243,827 12,083,633,060 15,423,479,555 42,210,892 197,115,615 8,864,139,401 12,972,222 4,309,572,537 178,109,478 884,611,257 4,546,726,680 633,358,640 5,052,893,843 4,321,867,515 32,851,184 134,499,742 762,117,095 5,165,136 221,578,239 233,760,949 2,539,331 1,164,364 134,968,442 64,451,579,004 64,451,579,004 4,990,980,105 24,769,175 5,015,749,280 69,467,328,284

IAS 1.77

Ref.

31.12.2012 BDT

31.12.2011 BDT

IAS 1.61

6.1

Maturity Grouping of Investments Payable on Demand Up to Three Months Three Months to One Year One Year to Five Years Above Five Years

6,978,115,949 24,242,389,287 21,015,347,089 30,064,302,244 14,004,074,019 96,304,228,588

5,033,538,803 17,486,812,778 15,159,043,758 21,686,345,284 10,101,587,661 69,467,328,284

IAS 1.77

6.2

Analysis to disclose the following Significant Concentration including Bills Purchased & Negotiated

Investments to Directors of other Banks Investments to Chief Executive and Other high Officials Investments to Customers Group Investments to Industry Investment to staff

9,479,110,000 869,000 81,671,948,552 5,028,100,000 124,201,036 96,304,228,588

7,234,431,000 1,216,591 56,764,174,693 5,361,200,000 106,306,000 69,467,328,284

IAS 1.77

6.3

Investments to Customers for more than 15% of FSIBL's Total Eligible Capital Number of Clients 01 Amount of Outstanding Investments Funded 3,254,800,000 Non-funded 3,254,800,000 Economic Sector wise Investments Agriculture: Fishing Tea Others Textile and Readymade Garments: Garments Readymade Garments - Export Textile and Textile Products- Import Others -Export Others -Import Medicine - Import Chemical - Import Contractor Finance Transport Bricks Cold Storage Steel and Engineering Internal Trade Finance: Whole Sale Trading Retail Trading Others House Building: Commercial Staff Special Program: Consumer Finance and Hire Purchase Scheme Others

05 5,962,600,000 350,100,000 6,312,700,000

IAS 1.77

6.4

169,000,000 941,000,000 553,200,000 960,800,000 5,261,000,000 1,704,300,000 18,170,200,000 3,343,300,000 579,400,000 82,400,000 20,211,500,000 9,230,900,000 15,997,300,000 8,636,000,000 124,200,000 168,200,000 10,171,528,588 96,304,228,588

113,900,000 275,800,000 498,900,000 228,500,000 2,247,900,000 286,100,000 13,015,000,000 5,210,200,000 853,900,000 504,100,000 8,238,600,000 8,646,600,000 6,588,300,000 7,193,400,000 106,300,000 147,200,000 15,312,628,284 69,467,328,284

30

Ref.

31.12.2012 BDT

31.12.2011 BDT

IAS 1.77

6.5

Geographical Location-wise Urban Dhaka Chittagong Barisal Rajshahi Khulna Rangpur Sylhet Rural Dhaka Chittagong Khulna Barisal Sylhet

39,358,579,582 53,597,812,284 101,430,865 317,078,290 447,274,496 87,648,966 882,734,451 94,792,558,934

29,834,780,000 37,003,271,284 64,753,000 252,466,000 372,866,000 64,889,000 707,540,000 68,300,565,284

279,705,387 1,045,949,155 8,758,159 6,869,628 170,387,325 1,511,669,654 96,304,228,588

243,189,000 794,831,000 3,747,000 124,996,000 1,166,763,000 69,467,328,284

IAS 1.77

6.6

Classification of Investments as per Bangladesh Bank Circular Unclassified Standard 94,488,582,785 Special Mention Account 30,293,568 94,518,876,353 Classified: Sub-standard 292,501,070 Doubtful 282,655,179 Bad & Loss 1,210,195,986 1,785,352,235 96,304,228,588 Particulars of Required Provision for Investments Classification status Unclassified Standard Special Mention Account Classified: Sub - Standard Doubtful Bad and Loss

68,100,923,284 20,676,000 68,121,599,284 399,796,000 44,207,000 901,726,000 1,345,729,000 69,467,328,284

IAS 1.77

6.7

Required provision 1,102,400,000 1,300,000 1,103,700,000 43,200,000 58,700,000 677,500,000 779,400,000 1,883,100,000 1,883,100,000 1,902,000,000 18,900,000 899,399,700 977,000 900,376,700 38,834,600 6,994,500 547,500,000 593,329,100 1,493,705,800 1,493,705,800 1,513,299,999 19,594,199

Required Provision for Investments Total Provision Maintained Provision Excess/ (Shortfall) * Details of provision may kindly be in note 2.7.2

31

Ref.

31.12.2012 BDT

31.12.2011 BDT

IAS 1.114( c )

6.8 i)

Particulars of Investments Investments considered good in respect of which the Bank Company is fully secured Investments considered good for which the bank holds no Security other than the debtors personal security Investment considered good and secured by the personal security of one or more parties in addition to the personal security of the debtors Investments adversely classified; provision not maintained there against 52,263,821,254 37,699,570,223

ii)

34,317,498,418

24,754,312,074

iii)

9,722,908,916

7,013,445,987

iv)

96,304,228,588

69,467,328,284

v)

Investments due by directors or executives of the banking company or any of them taken either severally or jointly with any other person. Investments due by companies or firms in which the directors of the bank company are interested as directors partners or managing agents or in case of private companies, as members.

124,201,036

106,306,000

vi)

vii)

Maximum total amount of investments, including temporary advances made at any time during the year to directors or managers or officers of the banking company or any of them either separately or jointly with any other person.

viii) Maximum total amount of investments, including temporary advances granted during the year 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. ix) x) Investment due from other banking companies Total amount of classified Investments on which profit is not credited to income Movement of classified Investments Opening balance Increase/ (Decrease) during the year b. Amount of provision kept against investment classified as 'bad/loss' on the reporting date of Balance Sheet Profit credited to the profit/Rent/Compensation Suspense Account

1,785,352,235

1,345,729,000

a.

1,345,729,000 439,623,236 1,785,352,236 790,000,000 106,466,799

1,362,061,955 (16,332,955) 1,345,729,000 612,923,299 106,227,383

c.

32

Ref.

31.12.2012 BDT

31.12.2011 BDT

xi) a. b. c. d. e.
IAS 1.114( c )

Amount of written off Investment: Cumulative amount Amount written off during the period Total amount of written off (a+b) Amount recovered against such written- off up to this year Amount of investment written- off against which suit has been filled to recover the same. Security against Investments including bills purchased & negotiated: Collateral of movable/immovable assets Local banks & financial institutions guarantee Government Guarantee Foreign Banks guarantee Export documents Fixed deposits receipts: Own MTDR MTDR of other Banks Government Bonds Personal guarantee Other security Unsecured

6.9

34,680,675,871 671,689,722 2,796,427,606 10,698,542,625 988,013,066 473,241,589 19,172,128,573 26,537,525,392 285,984,144 96,304,228,588

25,016,283,617 484,511,336 2,017,152,902 7,717,201,868 712,685,508 341,364,334 13,829,471,136 19,142,368,049 206,289,534 69,467,328,284

IAS 1.61

6.10 Maturity Grouping of Bills Purchased and Negotiated Payable within one month Over one month but less than three months Over three months but less than six months Six Months and Above 6,578,870 17,563,972 282,629,489 504,034,738 810,807,069 40,697,673 108,652,826 1,748,379,743 3,118,019,038 5,015,749,280

IAS 16.73

Fixed Assets including premises, Furniture & Fixtures at cost less accumulated depreciation (Annexure-A)

Building Furniture & Fixtures Office Equipment Vehicles Books Less: Accumulated Depreciation

919,187,076 930,987,348 517,989,527 62,458,054 471,748 2,431,093,753 433,377,539 1,997,716,214

390,576,174 478,559,142 347,780,929 41,889,191 106,136 1,258,911,572 289,108,196 969,803,376

7(a) Fixed Assets including premises,Furniture & Fixtures at cost less accumulated depreciation First Security Islami Bank Limited (Note-7) First Security Islami Capital & Investment Limited 33 1,997,716,214 35,136,685 969,803,376 9,547,451

Ref.

31.12.2012 BDT 2,032,852,899

31.12.2011 BDT 979,350,827

IAS 1.77

OTHER ASSETS Inter - branch Transaction Account (*) Accrued Income (Note - 8.1) Advances, Deposits and Prepayment (Note -8.2) Advance Income Tax Stock of Stationery Suspense Account (Note- 8.3) Advance Deposits Stamps on Hand Investment in First Security Islami Exchange Ltd.,canada (Note1.1.4) Investment in First Security Islami Capital & Investment Ltd.(Note-1.1.3) Investment in First Security Islami Exchange Italy S.R.L (Note1.1.5) Deferred Tax Assets (Note- 8.4) 1,256,819,424 689,306,589 369,716,371 1,991,479,733 14,131,023 92,736,494 569,012,410 930,611 26,501,825 51,000,000 62,340,058 80,000,000 5,203,974,538 721,741,084 377,763,501 316,450,515 1,280,677,646 14,197,937 164,399,413 695,079,543 747,952 26,501,825 51,000,000 80,000,000 3,728,559,416

(*) Inter-branch transaction account represents outstanding Inter-branch and Head Office transaction(net) originated but yet to be responded at the balance sheet date. However, the status of non-respondent entries on 31.12.2012 have been reconciled on 28.02.2013. 8.1 Accrued Income Bangladesh Govt. Islamic Investment Bonds Mudarabah Term Deposit Inland Documentary Bills Purchased (Foreign currency bills) Bai Murabaha Post Import (TR) Bai Murabaha Post Import Bills Pre - Shipment Investment HPSM House Building Bai Murabaha against Security (MTD) Bai Murabaha General Bai Murabaha (Hypo) Bai Salam - Export Quard against PF HPSM-Real Estate Material HPSM Agricultural Investment HPSM - SME Investment HPSM (Scheme) HPSM (Transport) 191,443,644 469,741,463 13,735,175 2,172,020 172,761 410,617 231,850 5,085 1,913 3,377,191 7,186,334 82,973 722,053 361 58 23,091 689,306,589 121,591,243 216,802,083 24,783,083 2,172,020 176,651 410,617 293,542 5,085 60,980 2,683,994 7,230,993 82,973 22,713 1,447,524 377,763,501

IAS 1.114( c )

8.2

Advance, Deposits and Prepayment Advance against Rent - Office Advance against Rent - Godown Excise Duty on Term Deposits Clearing Adjustment Account Settlement Account (SuperX-10, Moneygram, Placid etc.) 34 275,694,755 3,520,000 2,329,560 4,776,954 80,363,269 270,183,879 3,520,000 3,867,545 11,010,549 27,673,788

Ref.

31.12.2012 Demand draft paid without advice Prepayment BDT 2,726,303 305,530 369,716,371

31.12.2011 BDT 194,754 316,450,515

IAS 1.78

8.3

Suspense Account Sundry Debtors Advance against TA/DA Encashment of PSP/BSP Advance against New Branch Profit on PSP/BSP Advance against Legal Fee 72,797,682 2,214,000 7,216,000 7,857,372 2,651,440 92,736,494 80,000,000 80,000,000 142,536,239 1,902,574 3,566,250 13,692,878 2,391,635 309,837 164,399,413 80,000,000 80,000,000

8.4

Deferred Tax Assets Opening Balance as on 01 January 2012 Add: Addition During the period Closing Balance as on 31 December 2012

As of 31 December 2012 deferred tax assets arrived at Tk.15.11 million. But management's decision is not to recognize the additional amount of deferred tax assets for the year ended 31 December 2012. However, management has recognized deferred tax assets up to December 2007 Tk. 80 million. 8(a) OTHER ASSETS First Security Islami Bank Limited (Note-8) Less: Intra transaction First Security Islami Capital & Investment Limited 5,203,974,538 86,083,437 5,117,891,101 28,376,713 5,146,267,814 3,728,559,416 83,407,870 3,645,151,546 31,110,643 3,676,262,189

IFRS 7.7 IAS 1.7

PLACEMENT FROM BANK & OTHER FINANCIAL INSTITUTION Inside Bangladesh Bangladesh Bank (Islami Money Market Wings) 4,598,574,967 4,598,574,967 4,598,574,967 4,400,000,000 198,574,967 4,598,574,967 4,598,574,967 4,598,574,967 3,231,114,000 3,231,114,000 3,231,114,000 3,200,000,000 31,114,000 3,231,114,000 3,231,114,000 3,231,114,000

IAS 1.77

Outside Bangladesh A. Security- wise grouping Secured Placement Unsecured Placement Repayment Nature wise Grouping Repayable on demand Others

IAS 1.61

IAS 1.61

B.

IAS 1.61

C.

Maturity Analysis Repayable on Demand Repayable within One Month One Month to Six Months Six Month to One Year One Year to Five Years Five Years to Ten Years Unclaimed Deposits Ten Years and Over 4,400,000,000 198,574,967 4,598,574,967 3,200,000,000 31,114,000 3,231,114,000

35

Ref.

31.12.2012 BDT

31.12.2011 BDT

IFRS 7.7 IAS 1.78

10 A. B.

DEPOSITS AND OTHER ACCOUNTS Deposits Received from Banks (Note A-1 ) Other than Bank Payable on Demand (Note B-1) Other Deposits (Note B-2 )

13,844,180,000

7,340,000,000

4,404,936,396 91,656,452,475 96,061,388,871 109,905,568,871

3,525,823,407 67,279,221,601 70,805,045,008 78,145,045,008

IAS 1.61

C.

Maturity wise Grouping of Deposits and Other Accounts Repayable within One Month One Month to Three Months Three Months to One Year One Year to Five Years Repayable over Five Years

10,783,743,755 43,200,582,385 41,609,812,458 10,830,087,635 3,481,342,638 109,905,568,871

7,667,456,251 30,005,453,261 30,296,423,981 7,700,407,672 2,475,303,843 78,145,045,008

A-1 Deposits Received from Banks AB Bank Limited Islami Bank Bangladesh Ltd. Premier Bank Ltd Rupali Bank Ltd Bangladesh Development Bank Ltd. Social Islami Bank Ltd. Exim Bank Ltd. Janata Bank Limited Al-Arafah Islami Bank Ltd. Brac Bank Ltd. National Bank Ltd. Shahjalal Islami Bank Ltd. Jamuna Bank Ltd.

450,000,000 2,450,000,000 850,000,000 3,914,180,000 400,000,000 1,200,000,000 2,310,000,000 750,000,000 500,000,000 300,000,000 120,000,000 200,000,000 400,000,000 13,844,180,000

900,000,000 2,350,000,000 450,000,000 1,100,000,000 90,000,000 1,450,000,000 1,000,000,000 7,340,000,000

IAS 1.61

Maturity wise Grouping of Deposits Received from Banks Repayable on Demand Repayable within One Month Repayable over One Month but within Six Months Repayable over Six Months but within one Year Repayable over One Year but within Five Years Repayable over Five Years but within Ten Years Unclaimed Deposits for Ten Years and above

160,000,000 1,600,000,000 7,810,000,000 4,274,180,000 13,844,180,000

550,000,000 1,890,000,000 4,650,000,000 250,000,000 7,340,000,000

B-1 Payable on Demand Al-wadiah Current Deposits Mudaraba Saving Deposits (9%) (Note-10.3) Security Deposit Receipt Sundry Deposits (Note-10.1.1)

2,482,902,297 546,257,697 7,805,316 1,367,971,086 4,404,936,396

2,163,608,134 412,194,076 3,272,528 946,748,669 3,525,823,407

B- 2 Other Deposits Mudaraba Saving Deposits (91%) (Note-10.3) Mudaraba Term Deposits Mudaraba Short Notice Deposits Bills Payable (Note-10.2) Bearer Certificates of Deposits (Note-10.5) 36

4,916,319,275 65,419,516,843 3,213,255,809 1,824,475,966 -

4,167,740,105 46,574,817,281 3,847,308,558 889,647,881 -

Ref.

31.12.2012 Mudaraba Deposit under Schemes (Note-10.6) Foreign Currency Deposits BDT 16,235,459,337 47,425,245 91,656,452,475

31.12.2011 BDT 11,709,826,793 89,880,983 67,279,221,601

IAS 1.78

10.1 Al-Wadiah Current Accounts & Other Deposit Accounts Al-wadiah Current Deposits Mudaraba Short Notice Deposits Sundry Deposits (Note-10.1.1) Security Deposit Receipt Foreign Currency Deposits 10.1.1 Sundry Deposits Margin on Letters of Credit Foreign Bills Awaiting Remittance Margin on Letter of Guarantee Readycash card (Reload) Sundry Creditors Al-wadiah Bai-murabaha Al-wadiah Bai-murabaha (MTD) Al-wadiah Bai-murabaha (General) Income Tax Deduction at Source -Profit on Deposit Export Bills Fixed Deposits - Export Bills Risk Fund on Hire Purchase Scheme Income Tax Deduction at Source (Export Bills) Courier Charges Data Max Charges Marginal account Export (P) Exporters LA Commission Margin on Consumer Finance Scheme Margin on Payment Orders Demand, Draft Excise Duty on Deposit VAT Deduction on Letter of Credit - Commission Income Tax Deduction at Source - Letter of Credit VAT on Investment Processing fee VAT on Online Charge VAT on Commission TT/DD/PO/LG VAT Deduction - Indenting Commission VAT on ATM VAT on Service Charge and Others VAT Deduction Bills Paid VAT on Rent and Others VAT on Directors Fee Income Tax Deduction at Source - Office rent Income Tax Deduction at Source - Indenting Commission Income Tax Deduction at Source - Bills Income Tax Deduction at Source - Agent of Foreign Buyer Income Tax Deduction at Source - Prof. & Tech. Service Income Tax Deduction at Source - Private Security Service Income Tax Deduction at Source - Cash Incentives Income Tax Deduction at Source - Advertising Bill Income Tax Deduction at Source - Import Bill Excise Duty on Investments Income Tax Deduction at Source-Employee's Imprest Fund-Cash Incentive 10.2 Bills Payable Pay Order Issued Demand Draft Payable Pay Slips Issued Travelers' Cheques Payable

2,482,902,297 3,213,255,809 1,367,971,086 7,805,316 47,425,245 7,119,359,753 621,778,610 54,107,287 158,353,896 1,345 138,602,420 3,801,517 314,867 1,168 297,679,919 327,254 2,969,916 2,663,692 2,082,987 620,786 13,392 610,638 2,167,704 64,327 1,323,120 56,216,575 1,886,655 511,270 740,739 295,305 2,458,647 6,599 393,480 5,071,248 3,819,694 1,558,759 433,969 7,608 701,238 284,713 1,209,857 226,067 945,960 87,838 113,724 2,074,120 1,437,726 4,450 1,367,971,086 987,090,324 834,340,387 3,045,255 1,824,475,966

2,163,608,134 3,847,308,558 946,748,669 3,272,528 89,880,983 7,050,818,872 525,653,484 71,162,017 83,970,049 3,755 45,119,486 1,704,311 478,292 1,928 129,905,478 5,382,129 3,610,956 3,100,486 1,695,336 764,708 129,492 467,940 905,649 127,322 1,323,120 42,901,518 6,994,437 1,577,462 792,755 195,341 1,741,009 3,773 292,789 3,682,013 4,386,243 1,107,747 19,500 325,624 102,412 552,892 43,982 988,470 89,021 755,240 195,067 3,811,513 679,473 4,450 946,748,669 287,160,964 599,993,071 2,459,409 34,437 889,647,881

IAS 1.78

37

Ref.

31.12.2012 BDT

31.12.2011 BDT

IAS 1.78

10.3 Mudaraba Savings Bank Deposits As per BRPD Circular No. 06, dated 24 June 2007, total saving bank deposits amount is bifurcated into: 9 % of total Mudaraba Savings Bank Deposits 91% of total Mudaraba Savings Bank Deposits 546,257,697 4,916,319,275 5,462,576,972 412,194,076 4,167,740,105 4,579,934,181

IAS 1.61

10.4 Mudaraba Term Deposits including other Banks - Maturity wise Grouping Payable on Demand Up to Three Months From Three Months to Six Months Above Six Months to One Year Above One Year to Two Years Above Two Years 10,577,898,899 31,382,033,005 10,251,607,601 26,979,676,892 32,388,918 40,091,528 79,263,696,843 645,403,923 27,489,928,382 7,099,203,508 18,616,025,724 36,465,956 27,789,788 53,914,817,281 4,290,840,234 6,813,235,281 583,598,298 1,569,404 3,412,459 9,990,059 3,658,364 3,522,694 11,709,826,793 -

IAS 1.78

10.5 Mudaraba Deposit under Schemes Mudaraba Monthly Savings Scheme Mudaraba Double Benefit Deposits Scheme Mudaraba Monthly Benefit Scheme Mudaraba Hajj Scheme Mudaraba Marriage Scheme Mudaraba Health Care Scheme Mudaraba Education Deposit Scheme Mudaraba Pension Deposit Scheme Mudaraba Millionaire Deposit Scheme Mudaraba Kroropoti Deposit Scheme Mudaraba Triple Times Deposit Scheme Mudaraba Four Times Deposit Scheme Mudaraba Probashi Deposit Scheme Mudaraba Money Plant Deposit Scheme Mudaraba Gift Cheque Mudaraba Griheni Deposit Scheme

5,689,809,958 8,660,912,064 1,452,423,461 7,082,698 36,401,569 145,209,586 38,957,152 38,461,699 27,004,784 25,260,212 35,528,906 64,436,898 5,526,985 527,723 2,113,853 5,801,789 16,235,459,337

IAS 1.77

11

MUDARABA SUBORDINATED BOND

2,220,000,000

The Bank issued Redeemable non-convertible FSIBL Mudaraba Subordinated Bond to the tune of Taka 2,500,000,000.oo as Supplementary Capital (Tier-2) of the Bank for a term of 6 years to strengthen the capital base of the Bank under Basel-II on the consent of SEC vide their letter no.SEC/CI/CPLC44/2003-1516 dated 05.09.2012 as well as on the approval of Bangladesh Bank Vide their letter no. BRPD(BIC)661/14B(P)/2012-241 dated 09.10.2012. We have received as fully paid up to the amount of Tk. 2,220,000,000.00 out of Tk. 2,500,000,000.00 up to 31.12.2012. Noted that the rest amount of Tk. 280,000,000.00 has already been received on 02.01.2013.

38

Ref.

31.12.2012 BDT

31.12.2011 BDT

12

OTHER LIABILITIES Inter - branch Transaction Account Provision for Taxation (Note-12.1) Accumulated Provision against Investments(Note-12.3) Profit/Rent/Compensation Suspense Account (Note -12.4) Accrued Profit and Expenses Payable (12.5) Provision for Gratuity Provisions for diminution in value of Investments Provision for Zakat Provident Fund Benevolent Fund Non-Resident Accounts Compensation Realised Others Total 2,486,655,375 1,893,395,103 106,466,799 2,542,702,307 32,073,951 160,000,000 51,397,158 804,842 855,027 4,646,143 3,830,509 61,722,254 7,344,549,468 1,746,655,375 1,513,299,999 106,227,383 1,493,673,153 75,350,000 100,000,000 32,597,158 1,463,366 2,054,485 8,066,430 623,683 297,488 5,080,308,520

IAS37.84

12.1 Provision for Taxation during the year Opening balance Add : Made during the year

1,746,655,375 740,000,000 2,486,655,375

1,106,655,375 640,000,000 1,746,655,375

Assessment for taxation in 2000, 2001, 2003, 2004, 2007, 2008, 2010 and 2011 is yet to be completed. Assessment for the year 1999, 2002, 2005, 2006 and 2009 have been settled. Assessment order of 2000, 2001 and 2003 is pending with High Court and of 2004, 2007 with Appellate Tribunal, 2008 and 2010 with Appeal to Commissioner of Taxes, 2011 assessment not yet completed and 2012 not yet due.
IAS37.84

12.2 Provision for Investments during the year Specific Provision for Classified Investments General Provision including off-B/S exposure 12.3 Accumulated Provision for Investments Specific Provision for Classified Investments (Note -12.3.1) General Provision including off-B/S exposure (Note -12.3.2) 12.3.1 Movement in Specific Provision for Classified Investments Provision held at the beginning of the year Fully Provided Debts written off Recoveries of amounts previously written off Specific Provision for the year Recoveries and Provisions no longer required Net Charge to Profit and Loss Account Provision held at the end of the year 12.3.2 General Provision including off-balance sheet exposure Provision held at the beginning of the year Addition/transfer during the year 12.4 Profit/Rent/Compensation Suspense Account A) Profit Suspense (Old) Opening Balance Add: Transferred during the year 39

177,076,701 203,018,403 380,095,104 790,000,000 1,103,395,103 1,893,395,103 612,923,299 177,076,701 790,000,000 900,376,700 203,018,403 1,103,395,103 106,466,799

70,029,299 238,170,701 308,200,000 612,923,299 900,376,700 1,513,299,999 542,894,000 70,029,299 612,923,299 662,205,999 238,170,701 900,376,700 106,227,383

IAS37.84

IAS37.84

IAS37.84

IAS37.84

65,764,014 65,764,014

100,280,384 100,280,384

Ref.

31.12.2012 BDT Less: Recovered during the year Less: Amount Written off/waived during the year Balance at the end of the year B) Compensation Suspense Account Opening Balance Add: Transferred during the year Less: Recovered during the year Less: Amount Written off/waived during the year Balance at the end of the year Total (A+B) 12.5 Accrued Profit and Expenses Payable Profit Payable on MTDR Profit Payable on Monthly Benefit Savings Scheme
Profit Payable on Double Benefit Savings Scheme

31.12.2011 BDT 34,516,370 65,764,014 31,216,073 9,870,979 41,087,052 623,683 40,463,369 106,227,383 1,487,109,561 190,512 1,286,620 1,008,999 118,168 207,900 904,050 211,823 1,156,888 500,000 3,100 28,349 8,600 410,792 527,791 1,493,673,153 5,080,308,520 39,888,863 32,407,870 7,480,993 5,087,789,513

21,829,004 43,935,010 40,463,369 25,275,248 65,738,617 3,206,828 62,531,789 106,466,799 2,145,678,221 190,512 1,407,023 1,006,625 98,720 111,783 257 1,489,439 3,364 179,537 33,079,757 12,676,233 1,610,342 237,172 2,407,579 123,503 747,440 500,000 3,110 8,000 6,450 274,847,859 66,289,381 2,542,702,307 7,344,549,468 155,009,669 155,009,669 7,499,559,137

Profit Payable on Short Notice Deposit Profit Payable on Mudaraba Savings Deposit Mudaraba Hajj deposit Scheme Mudaraba Health Care Scheme Mudaraba Pension deposit Scheme Profit Payable on Money Plant Deposit Profit Payable on Griheni Deposit Bangladesh Govt. Islami IBF Profit Payable on Deposits from Banks Power and Electricity Telephone Office Rent Wages Insurance Audit Fees Telex, Fax and E-mail Printing and Stationery Rates & Taxes Clearing Adjustment Others 12(a) OTHER LIABILITIES First Security Islami Bank Limited (Note-12) First Security Islami Capital & Investment Limited Less: Intra transaction

IAS 1.79 IAS 1.79(a)(i) IAS

CAPITAL AUTHORISED CAPITAL 1,000,000,000 ordinary shares of Taka 10 each. 13.1 Issued, Subscribed and Paid-Up Capital 374,035,200 Ordinary Shares of Taka 10 each issued 13.2 Category of shareholding as at 31 December 2012 Name of Category Sponsors/Directors Financial Institute Non-Resident Bangladeshi General Public

13

10,000,000,000 3,740,352,000 3,740,352,000

4,600,000,000 3,400,320,000 3,400,320,000 Percentage(%) 49.49 11.32 0.69 38.50 100.00 Percentage (%) 1.76 14.73 3.73 3.47 1.56 1.09

IAS 1.79

IAS 1.79

Percentage(%) 51.28 13.08 0.76 34.88 100.00 13.3 Classification of Shareholders by holding position as at 31 December 2012 No. of Shares Shareholding Range Less than 500 Shares 501 to 5000 Shares 5001 to 10,000 Shares 10,001 to 20,000 Shares 20,001 to 30,000 Shares 30,001 to 40,000 Shares 40 6,593,057 55,081,851 13,951,171 12,965,274 5,830,437 4,071,054

Ref.

31.12.2012 40,001 to 50,000 Shares 50,001 to 100,000 Shares 100,001 to 1,000,000 Shares Over 1,000,001 Shares BDT 3,196,668 8,902,721 44,853,449 218,589,518 374,035,200

31.12.2011 BDT 0.85 2.38 11.99 58.44 100.00

IAS 1.135(d)

13.4 Capital Adequacy Ratio (Under Basel-II) Tier-I ( Core Capital) Paid up Capital Statutory Reserve General Reserve Retained Earnings Tier II (Supplementary Capital) General Provision Assets Revaluation Reserves Subordinated Debt Tier III (eligible for market risk only) Short-term subordinated Debt A. Total Eligible Capital B. Total Risk Weighted Assets C. Minimum Capital Requirement based on Risk Weighted Assets (10% on B) D. Surplus/(Deficiency).(A - C) Capital Adequacy Ratio (%) Capital Requirement Tier - I Tier - II Tier - III Total 13.4(a) Group Capital Adequacy Ratio (Under Basel-II) Tier-I ( Core Capital) Paid up Capital Statutory Reserve General Reserve Retained Earnings Minority Interest Tier II (Supplementary Capital) General Provision Assets Revaluation Reserves Subordinated Debt Tier III (eligible for market risk only) Short-term subordinated Debt A. Total Eligible Capital B. Total Risk Weighted Assets C. Minimum Capital Requirement based on Risk Weighted D. Surplus/(Deficiency).(A - C) Capital Adequacy Ratio (%) Capital Requirement Tier - I Tier - II 41 3,740,400,000 1,004,574,914 84,000,000 433,109,918 5,262,084,832 1,103,395,103 201,221,475 1,578,625,450 2,883,242,028 8,145,326,860 79,823,600,000 7,982,400,000 162,926,860 10.20% Held 6.59% 3.61% 10.20% 3,400,320,000 704,202,214 24,000,000 371,651,119 4,500,173,333 900,376,700 900,376,700 5,400,550,033 60,010,800,000 6,001,080,000 (600,529,967) 9.00% Held 7.50% 1.50% 9.00%

3,740,352,000 1,004,574,914 84,000,000 433,427,548 49,305,174 5,311,659,636 1,103,395,103 201,221,475 1,578,625,450 2,883,242,028 8,194,901,664 79,823,600,000 7,982,400,000 212,501,664 10.27% Held 6.65% 3.61%

3,400,320,000 704,202,214 24,000,000 371,537,509 48,890,845 4,548,950,568 900,376,700 900,376,700 5,449,327,268 60,096,600,000 6,009,660,000 (560,332,732) 9.07% Held 7.57% 1.50%

Ref.

31.12.2012 BDT Tier - III Total 10.27%

31.12.2011 BDT 9.07%

IAS 1.77

14

STATUTORY RESERVE Opening Balance Transferred during the period from Profit & Loss A/C Closing Balance 704,202,214 300,372,700 1,004,574,914 460,169,845 244,032,369 704,202,214

This has been done according to Sec. 24 of Bank Companies Act, 1991 and shall be maintained until it equals to Paid-up Capital.
IAS1.12 5

15

ASSETS REVALUATION RESERVE

402,442,950

The Bank revalued the entire land and building during the year 2012 by an independent valuation firm according to paragraph 36 of BAS-16 as per approval of the meeting of 129th Board of Directors of the Bank. 16 RETAINED EARNINGS Opening Balance Add: Post tax profit for the period Less: Transfer to Statutory Reserve Less: Transfer to Other Reserve Less: Capitalised during the period Closing Balance 16(a) RETAINED EARNINGS First Security Islami Bank Limited (Note-16) First Security Islami Capital & Investment Limited

371,651,119 761,863,499 300,372,700 60,000,000 340,032,000 433,109,918 433,109,918 317,630 433,427,548

399,841,641 580,161,847 244,032,369 364,320,000 371,651,119 371,651,119 (113,610) 371,537,509

IAS 1.77

17

LETTER OF GUARANTEES Money for which the Bank is contingently liable in respect of guarantees are given favoring: Letters of Guarantee - Local Letter of Guarantee - Foreign Less: Margin Taken on Guarantees 2,360,650,746 2,360,650,746 158,353,896 2,202,296,850 1,296,129,960 1,296,129,960 83,970,048 1,212,159,912

17.1 Money for Which the Bank is Contingently Liable in respect of Guarantees: Directors Government Banks and Other Financial Institutions Others 2,360,650,746 2,360,650,746
IAS 1.77

1,296,129,960 1,296,129,960

18

IRREVOCABLE LETTERS OF CREDIT Letters of Credit - Cash Letter of Credit - Cash Inland Back to Back letters of Credit - Local Back to Back letters of Credit - Foreign 1,225,536,904 260,511,500 71,744,000 1,557,792,404 3,144,913,500 461,568,000 102,589,837 57,589,000 3,766,660,337

IAS 1.77

19

BILLS FOR COLLECTION ISSUED BY THE BANK 42

Ref.

31.12.2012 Foreign Documentary Bills Outward Bills Inland Documentary Bills BDT 137,866,000 1,645,159 139,511,159

31.12.2011 BDT 160,126,000 4,728,845 75,000 164,929,845

43

Ref.

31.12.2012 BDT
20 INVESTMENT INCOME

31.12.2011 BDT

IFRS 7.20(b)

Profit Received from: Deposit with Other Banks Bai Murabaha - General Bai Murabaha Hypothecation Bai Murabaha against MTD Bai Murabaha Post Import (LTR) Bai Murabaha General
Inland Documentary Bills Purchased (Foreign Currency Bills)

Bai Muajjal General Bai Murabaha Post Import (Pledge) Bai Murabaha Real Estate Bai Murabaha Import Bill Pre-shipment Investment Bai Murabaha Import Bai Murabaha Export HPSM Transport Rent on HPSM Scheme Bai Muajjal (DDIS) HPSM House Building - Staff HPSM Lease Investment Foreign Documentary Bill Purchased Agriculture Investment Bai Murabaha SME Investment Quard against PF Investment Quard against Car Lease Scheme Quard against MTDR Bai Salam HPSM Real Estate HPSM Consumer HPSM Agriculture HPSM SME HPSM HBL Commercial HPSM Industrial Wajira Bill Okalah

758,397,522 678,458,608 2,980,118,018 544,214,164 2,446,663,843 2,211,811,471 503,952,280 110,412,443 3,750,994 6,866,196 1,066,893,559 11,226,192 2,026,728 5,227,403 160,458,426 779,460,994 3,035,452 3,570,452 62,445 40,652,276 101,248,882 638,921 2,056,770 554,369 15,392,731 260,403,968 24,802,712 9,905,354 50,832,687 546,381,518 8,889,249 1,302,103 13,339,668,730

297,083,938 541,824,580 1,543,030,546 451,869,389 1,865,908,674 1,479,881,672 667,224,656 15,522,369 687,959 15,551,936 617,422,559 13,050,148 5,130,838 34,657 71,048,664 502,118,645 1,398,737 3,202,222 25,940 95,436 16,853,724 59,840,285 499,623 1,253,765 1,007,009 8,771,425 97,413,535 13,884,194 5,771,689 28,858,589 382,494,640 38,694,558 306,842 8,747,763,443

20(a) INVESTMENT INCOME

First Security Islami Bank Limited (Note-20) First Security Islami Capital & Investment Limited

13,339,668,730 16,786,476 13,356,455,206

8,747,763,443 1,305,041 8,749,068,484

43

Ref.

31.12.2012 BDT
21 PROFIT PAID ON DEPOSITS

31.12.2011 BDT

IAS 1.77

Profit Paid on: Mudaraba Term Deposit Mudaraba Double Benefit Deposits Scheme Mudaraba Monthly Savings Scheme Mudaraba Monthly Benefit Savings Scheme Mudaraba Savings Deposits Mudaraba Short Notice Deposits Placement from Other Banks Mudaraba Deposit in Foreign Currency Discount Mudaraba Hajj Deposit Scheme Mudaraba Student SB AC Mudaraba Salary AC Mudaraba Senior Citizen AC Mudaraba Marriage Scheme Mudaraba Health Care Scheme Mudaraba Education Deposit Scheme Mudaraba Pension Deposit Scheme Mudaraba Millionaire Deposit Scheme Mudaraba Kroropoti Deposit Scheme Mudaraba Triple Times Deposit Scheme Mudaraba Four Times Deposit Scheme Mudaraba Probashi Deposit Scheme Mudaraba Money Plant Deposit Scheme Mudaraba Griheni Deposit Scheme Mudaraba Gift Cheque
22

8,095,124,548 875,098,141 545,230,931 97,262,580 185,235,759 242,456,615 245,852,872 9,773 895,755 549,497 479,527 265,634 118,582 2,211,253 7,782,936 2,308,918 2,228,688 1,092,064 1,037,603 1,529,498 2,442,272 211,347 61,509 244,817 24,374 10,309,755,493

5,029,518,066 675,302,753 409,102,378 53,483,520 169,550,124 262,588,105 69,725,694 185,140 892,239 45,490 30,378 11,265 32,165 75,586 234,362 90,050 83,905 6,670,951,220

IAS 18.35

INCOME FROM INVESTMENT IN SHARES & SECURITIES

Bangladesh Govt. Islamic Investment Bond Dividend on Shares Profit on Sale of Shares

90,068,370 5,268,436 3,660,323 98,997,129

76,845,978 2,291,490 2,830,178 81,967,646

22(a) INCOME FROM INVESTMENT IN SHARES & SECURITIES

First Security Islami Bank Limited (Note-22) First Security Islami Capital & Investment Limited

98,997,129 27,295,897 126,293,026

81,967,646 1,047,271 83,014,917

IFRS 7.20( c )

23

COMMISSION, EXCHANGE AND BROKERAGE

Commission Exchange Gain Exchange Earning Less: Exchange Loss

44

237,630,411 166,609,834 197,906,826 31,296,992 404,240,245

228,644,234 174,665,926 185,121,765 10,455,839 403,310,160

Ref.

31.12.2012 BDT
23(a) COMMISSION, EXCHANGE AND BROKERAGE

31.12.2011 BDT 403,310,160 13,844 403,324,004 1,047,900 1,595,873 17,090 4,860,223 2,559,285 5,323,003 158,259,514 173,662,888

First Security Islami Bank Limited (Note-23) First Security Islami Capital & Investment Limited
IAS 1.97

404,240,245 4,231,951 408,472,196 1,438,500 1,450,053 31,180 2,082,022 6,543,053 189,988,536 201,533,344

24

OTHER OPERATING INCOME

Rent Recoveries Charges on Account Closing Standing Instruction Charges Gain on sale of fixed assets Service Charge on HP Service charge on Quard Other Receipts ( Note-24.1)
IAS 1.77

24.1 Other Receipts

Postage Recoveries - Local Tlx/Tel/Tlgr/Fax/E-mail Chg. Recoveries Incidental Charge on Al-Wadiah CD A/C Incidental Charge on Mudaraba SB A/C Incidental Charge on Mudaraba SND A/C Income from online Investment processing fee Income from ATM Miscellaneous Earnings
24(a) OTHER OPERATING INCOME

863,087 1,698,591 17,658,413 17,992,672 3,568,119 4,231,542 31,982,192 833,843 111,160,077 189,988,536

745,018 1,299,088 14,846,276 16,653,223 2,419,416 3,360,079 49,986,995 3,299,362 65,650,057 158,259,514

First Security Islami Bank Limited (Note-24) First Security Islami Capital & Investment Limited
IAS 1.104

201,533,344 842,000 202,375,344 271,937,166 124,982,683 20,999,548 29,731,720 128,119,099 33,736,924 89,776,476 33,738,276 9,835,977 33,377,584 32,777,141 1,100 33,344,212 4,361,098 74,088 636,405 847,429,497

173,662,888 139,000 173,801,888 174,545,199 72,344,982 15,625,688 30,016,070 94,386,999 24,868,929 66,770,968 19,995,652 6,878,798 24,161,985 23,889,861 655 24,014,399 4,284,329 3,418,147 260,751 585,463,412

25

SALARIES & ALLOWANCES

Basic Salary Bonus Bank's Contribution to Staff Provident Fund Gratuity House Rent Conveyance Allowance Leave Fare Allowance Car Allowance Entertainment Allowance Medical Allowance Utility Services Washing Allowance House Maintenance Allowance Other Allowances Personal Pay Leave Encashment
45

Ref.

31.12.2012 BDT
25(a) SALARIES & ALLOWANCES

31.12.2011 BDT 585,463,412 1,392,000 586,855,412

First Security Islami Bank Limited (Note-25) First Security Islami Capital & Investment Limited

847,429,497 8,501,613 855,931,110

IAS 1.97

26

RENT, TAXES, INSURANCE, LIGHTING ETC.

Rent Insurance Rates and Taxes Water Charges Gas Charges Electric Bills

177,061,459 52,337,646 3,960,272 1,496,202 921,140 30,323,573 266,100,292

88,115,783 35,267,783 4,384,866 853,891 530,004 16,905,236 146,057,563

26(a) RENT, TAXES, INSURANCE, LIGHTING ETC.

First Security Islami Bank Limited (Note-26) First Security Islami Capital & Investment Limited

266,100,292 4,000,908 270,101,200

146,057,563 1,028,856 147,086,419

IAS 1.97

27

LEGAL EXPENSES

Law Charges Stamp Other Professional Charges

2,673,910 141,865 2,283,360 5,099,135

137,550 42,588 1,696,327 1,876,465

IAS 1.97

28

POSTAGE, STAMP AND TELECOMMUNICATION

Telephone - Office Telegram, Telex, Fax and Email Telephone - Residence Postage

7,692,431 2,842,701 17,721 4,826,303 15,379,156

5,830,916 2,421,365 36,616 3,616,068 11,904,965

28 (a) POSTAGE, STAMP AND TELECOMMUNICATION

First Security Islami Bank Limited (Note-28) First Security Islami Capital & Investment Limited
29 STATIONERY, PRINTING AND ADVERTISEMENT

15,379,156 193,650 15,572,806

11,904,965 11,904,965

IAS 1.97

Publicity and Advertisement Printing and Stationery

41,009,998 42,797,743 83,807,741

33,823,026 32,159,859 65,982,885

46

Ref.

31.12.2012 BDT
30 MANAGING DIRECTOR'S SALARY AND FEES

31.12.2011 BDT 4,992,258 1,185,661 2,246,516 880,000 1,185,661 998,452 11,488,548

IAS 1.97

Basic Pay House Rent Allowances Leave Fare Allowance. Bonus House Maintenance Allowance Other Allowance

5,491,484 1,304,228 2,471,168 1,924,000 1,304,228 1,098,297 13,593,405

IAS 1.97

31

AUDITORS' FEES

First Security Islami Bank Limited First Security Islami Capital & Investment Limited
IAS 1.97

575,000 125,000 700,000 770,500 1,148,060 1,918,560

500,000 57,250 557,250 879,750 1,331,459 2,211,209

32

DIRECTORS' FEES

Fees Travel

32 (a) DIRECTORS' FEES

First Security Islami Bank Limited (Note-32) First Security Islami Capital & Investment Limited

1,918,560 172,500 2,091,060

2,211,209 2,211,209

IAS 1.97

33

SHARIAH COMMITTEE'S FEES

Fees Travel

132,250 132,250

289,250 289,250

IAS 1.104

34

DEPRECIATION AND REPAIRS OF FIXED ASSETS

Depreciation on Fixed Assets (Annexure - A) Repairs: Office equipment Renovation and Maintenance of Office Premises Furniture and Fixtures Maintenance and Services of SWIFT Maintenance of Reuters Elect. Fitt. Rep. & Replacement Office Maintenance Expenses

144,269,343 6,733,543 9,417,444 407,636 10,727 1,738,464 4,113,084 9,117,640 175,807,881

87,959,896 3,512,092 1,452,532 229,808 141,446 1,562,825 3,307,383 3,836,264 102,002,246

34 (a) DEPRECIATION AND REPAIRS OF FIXED ASSETS

First Security Islami Bank Limited (Note-34) First Security Islami Capital & Investment Limited
47

175,807,881 4,852,579 180,660,460

102,002,246 102,002,246

Ref.

31.12.2012 BDT
35 OTHER EXPENSES

31.12.2011 BDT 23,871,003 66,134,268 12,645,796 5,306,032 10,115,287 388,567 18,167,396 6,475,028 3,452,190 1,430,026 13,996,713 4,112,665 877,718 765,389 4,724,211 2,165,077 7,893,573 5,309,996 1,550,655 41,100 1,103,648 2,210,927 10,563,760 2,613,502 205,914,527

IAS 1.97

Car Expense Wages Traveling Donation and Subscription: Donation Subscription Newspaper and Periodicals Entertainment Conveyance Business Development Promotional Expense Computer Expense Medical Expense Plantation Liveries and Uniform Training, Seminar and Workshop Photocopying Generator Expenses Cash Carrying Washing and Cleaning Cartage and Freight Staff Welfare Office Maintenance ATM Expenses Meeting Expenses Bond Issue Expense
35 (a) OTHER EXPENSES

25,564,847 97,305,232 14,652,763 37,694,150 34,434,004 416,296 30,802,449 10,532,709 20,688,270 1,569,742 30,741,402 4,182,792 1,249,935 1,485,124 3,434,391 3,099,127 15,383,935 6,486,298 2,436,476 34,070 500,000 533,332 3,971,380 12,758,961 4,124,750 364,082,435

First Security Islami Bank Limited (Note-35) First Security Islami Capital & Investment Limited
IAS 33.70

364,082,435 21,309,767 385,392,202

205,914,527 205,914,527

36

EARNINGS PER SHARE

Net Profit after Tax Number of Ordinary Shares (weighted average as per BAS-33 ) Earnings Per Share (EPS)
IAS 7.14(b)

761,863,499 374,035,200 2.04

580,161,847 340,032,000 1.71

37

RECEIVED FROM OTHER OPERATING ACTIVITIES

Rent Recoveries Charges on Account Closing Standing Instruction Charges Gain on sale of fixed assets Service Charge on HP Service Charge on Quard Other Receipts
48

1,438,500 1,450,053 31,180 2,082,022 6,543,053 189,988,536 201,533,344

1,047,900 1,595,873 17,090 4,860,223 2,559,285 5,323,003 158,259,514 173,662,888

Ref.

31.12.2012 BDT
37 (a) RECEIVED FROM OTHER OPERATING ACTIVITIES

31.12.2011 BDT

First Security Islami Bank Limited (Note-37) First Security Islami Capital & Investment Limited

201,533,344 842,000 202,375,344

173,662,888 139,000 173,801,888

IAS 7.14(c)

38

PAYMENT FOR OTHER OPERATING ACTIVITIES

Rent, Taxes, Insurances, Electricity etc. Legal Expenses Postage, Stamps, Telecommunications etc. Auditors' Fee Directors' fees Shariah Committee's fees Other Expenses

266,100,292 5,099,135 15,379,156 974,750 1,918,560 132,250 363,682,685 653,286,828

146,057,563 1,876,465 11,904,965 400,000 2,211,209 289,250 206,512,499 369,251,951

38 (a) PAYMENT FOR OTHER OPERATING ACTIVITIES

First Security Islami Bank Limited (Note-38) First Security Islami Capital & Investment Limited
39 INCREASE /DECREASE OF OTHER ASSETS

653,286,828 30,654,404 683,941,232

369,251,951 13,799,243 383,051,194

Inter - branch Transaction Account Accrued Income Advances, Deposits and Prepayment Stock of Stationery Suspense Account Advance Deposits Stamps on Hand FSI Capital & Investment Ltd. (Increase)/Decrease during the period
39 (a) INCREASE /DECREASE OF OTHER ASSETS

1,256,819,424 689,306,589 369,716,371 14,131,023 92,736,494 569,012,410 930,611 2,992,652,922 (982,259,562)

558,368,013 261,149,987 316,450,515 14,197,937 164,399,413 695,079,543 747,952 2,010,393,360 (495,711,302)

First Security Islami Bank Limited (Note-39) First Security Islami Capital & Investment Limited

(982,259,562) 2,733,930 (979,525,632)

(495,711,302) 65,067,613 (430,643,689)

49

Ref.

31.12.2012 BDT 40 INCREASE /DECREASE OF OTHER LIABILITIES

31.12.2011 BDT

Profit/Rent/Compensation Suspense Account Accrued profit and Expenses Payable Provident Fund Provisions for diminution in value of Investment in Shares Benevolent Fund Non-Resident Accounts Compensation Realised Others Increase /(Decrease) during the period
40 (a) INCREASE /DECREASE OF OTHER LIABILITIES

106,466,799 2,482,492,737 804,842 160,000,000 855,027 4,646,143 3,830,509 61,722,254 2,820,818,311 1,502,738,936

106,227,383 1,096,003,212 4,806,693 100,000,000 2,054,485 8,066,430 623,683 297,489 1,318,079,375 341,529,752

First Security Islami Bank Limited (Note-40) First Security Islami Capital & Investment Limited

1,502,738,936 71,716,409 1,574,455,345

341,529,752 7,173,929 348,703,681

41

NUMBER OF EMPLOYEES

Executives and Officers Members of Staff (Contractual)

1,714 376 2,090

1,051 291 1,342

50

Ref.

31.12.2012 BDT

31.12.2011 BDT

51

IAS 24.17

42 RELATED PARTY TRANSACTIONS

During the year, the Bank carried out some transaction with related party in the normal course of business and on an arm's length basis. The name of this related party, nature of this transaction and total value has been set out in accordance with provisions of Bangladesh Accounting Standard 24 (BAS: 24) Related Party disclosure and as defined in the BRPD Circular no. 14 issued by the Bangladesh Bank on June 25, 2003. The significant related party transactions during the year were as follows:

i) Significant Contracts where Bank is a Party and wherein Directors have Interest Nature of Transaction Insurance Premium MTDR Nature of Relationship

Name of the Party

Total Value (in Tk.)

a. Northern General Insurance Company Ltd. b. Reliance Finance Ltd. ii) Related Party Transactions

Common Director Common Director

6,624,747 5,807,500,000 Nil

iii) Shares issued to Directors and Executives without consideration or exercisable at discount

Nil

iv) Lending to Related Parties is effected as per requirements of Section 27 (1) of the Bank Companies Act, 1991.

Nil

v) Business other than banking business with any related concern of the Directors as per Section 18(2) of the Bank Companies Act, 1991

Nil

vi) Investment in the Securities of Directors and their related concern

Nil

51

IAS 24.16

43 DIRECTORS' INTEREST IN DIFFERENT BUSINESSES OR ENTITIES:

Sl. No

Name of the Directors

Status with the Bank

Names of firms/companies in which interested as proprietor, partner, director, managing agent, guarantor, employee, etc. Chairman/Board of Director First Security Islami Capital & Investment Ltd. Reliance Finance Limited Reliance Brokerage Services Limited Karnaphuli Prakritik Gas Ltd. Managing Director S. Alam Steels Ltd. (Unit -1, & 2) S. Alam Steels Ltd. (Unit - 3) S. Alam Cement Ltd. S. Alam Brothers Ltd S. Alam Hatchery Ltd. S. Alam Trading Company (Pvt.) Ltd. S. Alam Bag Manufacturing Mills Ltd. S. Alam Soyaseed Extraction Plant Ltd. S. Alam Refined Sugar Industries Ltd. S. Alam Cold Rolled Steels Ltd. S. Alam Luxury Chair Coach Services Ltd. S.Alam Power Generation Ltd. S.Alam Tank Terminal Ltd. S.Alam Properties Ltd. Sonali Cargo Logistics (Pvt) Ltd. Fatehabad Farm Ltd. Portman Cements Ltd. Sponsor Shareholder Al-Arafah Islami Bank Ltd. Northern General Insurance Co. Ltd. S. Alam Super Edible Oil Ltd. S. Alam Vegetable Oil Ltd.. Shah Amanat Prakritik Gas Company Ltd. Proprietor S. Alam & Co. Sonali Overseas Corporation

1 Mohammed Saiful Alam

Chairman

52

2 Alhaj Mohammed Abdul Maleque

Vice Chairman Chairman Jesco Capital Management Ltd. ABM Tower Ltd. Bengal Center Ltd. Chairman & Managing Director Jesco Bangladesh Ltd. Managing Director Chittagong Board and Paper Mills Ltd. Kharana Fish & Poultry Ltd. Director Central Hospital Ltd. EX - Chairman & Sponsor Shareholder Central Insurance Co. Ltd. Ex - Director
Chittagong Chamber of Commerce & Industry

Proprietor M/S. Bengal Corporation M/S. Bengal Trading M/S. Lucky Electronics 3 Ms. Farzana Parveen Director Director First Security Islami Capital & Investment Ltd. Reliance Finance Limited Reliance Brokerage Services Limited S.Alam Power Plant Ltd. S. Alam Vegetable Oil Ltd.. Prasad Paradise Resort Ltd. S.Alam Properties Ltd. Sonali Cargo Logistics (Pvt) Ltd. Shareholder S. Alam Steels Ltd. S. Alam Cold Rolled Steels Ltd. Proprietor Fairy Trade International Parveen Trading House Chairman Al-Sharaf Airways Ltd. M/S. Mortoza Assets Ltd. Atique Enterprise Managing Director Marsa Fishing Ltd. Proprietor R.M. Trading Proprietor Atique Enterprise Director Reliance Brokerage Services Limited Proprietor M/S. B. Nowab Real Estate INTRA

4 Ms. Rahima Khatun

Director

5 Ms. Atiqur Nesa

Director

6 Md. Wahidul Alam Seth

Director

53

7 Shahidul Islam

Director

Managing Director Platinum Shrimp Hatchery Ltd. Director Treatment Hospital Limited Proprietor S.S. Corporation

8 Mohammed Oheidul Alam

Director

Vice Chairman C & A Real Estate Managing Director Dream Knitting (BD) Ltd. Proprietor M/S. Land Mark Hotel & Restaurant Car Shop The Travel World Managing Partner Orchid Business Hotel

9 Ahsanul Alam

Director

Managing Partner Genesis Textile Accessories & Apparels Ltd. Proprietor Genesis Enterprise

10

Mohammed Kutub Uddowllah

Independent Director

Director Reliance Finance Limited Director & CEO D.S. Line Limited

11 Md. Sharif Hussain

Independent Director Depositor Director

General Secretary Islamic Economic Research Bureau

12 Khurshid Jahan

Director MD. Brothers (Pvt.) Ltd.

IAS 10.12, 1344

EVENT AFTER BALANCE SHEET DATE

The Board of Directors in its 131st meeting held on 15 March 2013 recommended stock dividend @ 10% for the year 2012 to be approved in the Annual General Meeting.

54

45 AUDIT COMMITTEE

a) Constitution The Bank has constituted an Audit Committee of the Board of Directors pursuant to the BRPD circular no. 12 dated 23 December 2002 with a view to act as a bridge among the Board of Directors, Executive Authority, Depositors, Shareholders etc so that the Committee can make an effective role in establishing an efficient, strong and secured banking system. Our Audit Committee has been formed comprising three members of the Board of Directors as follows : Status with the Bank Vice Chairman Independent Director Director Status with the Committee Convener Member Member

Name Alhaj Mohammed Abdul Maleque Md. Sharif Hussain Mohammed Kutub Uddowllah

Educational Qualification Bachelor of Science Masters of Arts(Economics) Bachelor of Science

b) During the period under review, the Audit Committee of the Board conducted 04 (four) meeting.

c) The following steps have been taken for implementation of an effective Internal Control Procedure of the Bank: A strong powerful division formed for internal audit and inspection as well as compliance thereof. The division is divided into three separate units i,e. Audit & Inspection , compliance and Monitoring to implement effective internal control and compliances headed by highly experienced bankers. Audit and Inspection unit is established with a view to carrying out comprehensive internal audit in the branch level and ensure the transparency and accountability in the banking operations in light of the guidelines of the regulatory authorities and policies set by the bank with regular intervals.

Monitoring Unit is established with a view to implementing proper banking practices in the branches. Day to day operations is the focusing area to implement the rules and procedures of the regulatory bodies, banks policies and other prudential guidelines. Compliance unit is established to take effective measures for collection and timely submission of compliances of internal, external and Bangladesh Bank Inspection Reports. The committee is placing its report regularly to the Board of Directors of the bank mentioning its review and recommendations on internal system, compliance of rules and regulations and establishment of good governance within the organization. The board has given the responsibility to implement internal control system in the bank as per requirement of core risk management and framework provided by the Bangladesh Bank.

Managing Director Dhaka, 15 March 2013

Director

Director

Chairman

55

Annexure A

FIRST SECURITY ISLAMI BANK LIMITED STATEMENT OF FIXED ASSETS AS AT 31 DECEMBER 2012 Figure in Taka C O S T
Particulars Balance as on 01 January '12 Addition during the period Sales/Transfer during the period Balance as on 31 Dec '12 Balance as on 01 January '12

D E P R E C I A T I O N
Charge for the period Adjustment on sale/transfer during the period Balance as on 31 Dec '12 Written down value on 31 Dec 2012

Building Furniture & Fixtures Office Equipment Vehicles Books Total Dec' 2012 Total Dec' 2011

390,576,174 478,559,142 347,780,929 41,889,191 106,136 1,258,911,572 782,171,855

528,610,902 452,428,206 170,208,598 20,568,863 365,612 1,172,182,181 484,881,717

8,142,000

919,187,076 930,987,348 517,989,527 62,458,054 471,748 2,431,093,753 1,258,911,572

4,946,500 124,155,936 137,634,974 22,290,850 79,936 289,108,196 208,561,523

9,432,181 64,208,358 60,541,859 10,051,513 35,432 144,269,343 87,959,896

7,413,223

14,378,681 188,364,294 198,176,833 32,342,363 115,368 433,377,539 289,108,196

904,808,395 742,623,054 319,812,694 30,115,691 356,380 1,997,716,214 969,803,376

56

Annexure B First Security Islami Bank Limited Consolidated Financial Highlights For the year ended 31 December 2012 Particulars Paid-up Capital Total Capital Fund Capital Surplus/(deficit) Total Assets Total Deposits Total Investments Total Contingent Liabilities and Commitments Investment Deposit Ratio (in %) Percentage of Classified Investments against total Investments(in %) Profit before tax & provision Amount of Classified Investments during the year Provision kept against Classified Investments Provision Surplus/(deficit) Cost of Fund Profit Earning Assets Non-profit Earning Assets Return on Investment in Shares & securities(ROI)(in %) Return on Assets (ROA)(in %) Income from Investment in Shares and Securities Earnings Per Share (Tk.) Net Income Per Share (Tk.) Price Earnings Ratio (Times) 31.12.2012 3,740,352,000 8,194,901,664 212,501,664 129,937,805,561 109,905,568,871 96,304,228,588 9,248,235,939 87.62% 1.85% 1,951,958,910 1,785,352,235 790,000,000 18,900,000 11.00% 112,230,532,405 17,707,273,156 2.46% 1.50% 126,293,026 2.04 2.04 9.07 31.12.2011 3,400,320,000 5,449,440,878 (560,219,122) 91,012,899,089 78,145,045,008 69,467,328,284 11,363,579,973 88.90% 1.94% 1,589,588,897 1,345,729,000 612,923,299 19,594,199 10.01% 79,211,721,421 11,801,177,668 2.05% 1.75% 83,014,917 1.71 1.71 15.37

57