Annual Report 2009

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Annual Report 2009Rising Higher-Exploring Horizons

Rising Higher Exploring HorizonsSince its inception, Meezan Bank has been committed to a set of core values that were embodied by the Banks founders and remain the cornerstone of our philosophy. These values shape everything we do - from how we develop and market our products to how we serve our customers, employees, and communities. By the grace of Almighty Allah, 2009 marks yet another milestone in the history of Islamic banking in Pakistan as Meezan Banks network grows to 201 Branches in 54 cities nationwide. This years Annual Report is a tribute to the workforce of Meezan Bank. Our constant commitment to excellence has not only kept us at the pinnacle of the Islamic Banking sector of the country but has also earned us recognition at the international level. With each passing year, we continue to expand and explore new horizons of success with a vision of rising higher and enhancing our expertise for serving you better, inshaallah.

ContentsVision & Mission Our Values Quaids Concept of Islamic Banking Key Figures at a Glance Shareholders Organisation Structure Corporate Information History of Riba-Free Banking in Pakistan Chairmans Review Charity for Social Walfare Business and Operations Review Directors Report to the Members Annexure to the Directors Report Statement of Value Added and Distributed Allocation of Income and Expenses to Remunerative Depositors Pool Shariah Advisors Report Shariah Advisors Report (Urdu) 02 03 04 06 08 09 10 12 14 16 18 30 35 36 37 38 45 Statement of Compliance with the Code of Corporate Governance Review Report to the Members Statement of Sources and Uses of Charity Fund Notice of Annual General Meeting Auditors Report to the Members Balance Sheet Profit and Loss Account Statement of Comprehensive income Cash Flow Statement Statement of Changes in Equity Notes to and forming part of the Financial Statements Consolidated Financial Statements Pattern of Shareholding Categories of Shareholders Correspondent Banking Network Branch Network Proxy Form 46 48 49 50 54 55 56 57 58 59 60 111 174 175 176 181

Our VisionEstablish Islamic banking as banking of first choice to facilitate the implementation of an equitable economic system, providing a strong foundation for establishing a fair and just society for mankind.

Our MissionTo be a premier Islamic bank, offering a one-stop shop for innovative value-added products and services to our customers within the bounds of Shariah, while optimizing the stakeholders value through an organizational culture based on learning, fairness, respect for individual enterprise and performance.

Our ValuesCore Values Shariah Compliance, Integrity, Professionalism, Service Excellence, Social Responsibility Staff Committed, motivated and professionally trained employees who are empathic to their customers needs. Brand Personality A sober and established, strong, empathic, professional person; who is an extremely loyal and dependable friend and business partner, and is committed to offering comprehensive value-based Shariah-compliant financial solutions. Relationships Our relationships are long-term. We recognize and value our customers needs above all and strive to ensure their fulfillment. All customers are treated with professionalism and in a friendly manner. It is our endeavour to ensure that they receive efficient and timely service. The Meezan Bank experience is a unique one.

Islamic BankingWe must work our destiny in our own way and present to the world an economic system based on true Islamic concept of equality of manhood and social justice.I shall watch with keenness the work of your Research Organization in evolving banking practices compatible with Islamic ideas of social and economic life. The economic system of the west has created almost insoluble problems for humanity and to many of us it appears that only a miracle can save it from disaster that is now facing the world. It has failed to do justice between men and to eradicate friction from the international field. On the contrary, it was largely responsible for the two world wars in the last half century. The western world, in spite of its advantages of mechanisation and industrial efficiency is today in a worse mess than ever before in history. The adoption of western economic theory and practice will not help us in achieving our goal of creating a happy and contended people. We must work our destiny in our own way and present to the world an economic system based on true Islamic concept of equality of manhood and social justice. We will thereby be fulfilling our mission as Muslims and giving to humanity the message of peace which alone can save it and secure the welfare, happiness and prosperity of mankind. Quaid-e-Azam Mohammad Ali JinnahFounder of the Islamic Republic of Pakistan

Quaids Concept of

On the occasion of the Opening Ceremony of The State Bank of Pakistan on July 1, 1948

Key Figures at a GlanceProfit and Loss Account Return on financings, investments and placements Return on deposits and other dues expensed Net Spread earned before provisions Fee, commission, forex and other income Dividend income Gross Core Banking Income Administrative and Operating Expenses Core Banking Income before provisions Provision against non performing financings Provision for diminuntion in investments and impairment Capital gain / (loss) on investments Profit before Taxation Taxation Profit after Taxation Balance Sheet Total Financing - net Total Assets Total Deposits Share Capital Total Shareholders Equity Market Capitalization Number of Staff Number of Branches Ratios Break up Value (Rs.) Market Value per Share (Rs.) Cash Dividend (%) Stock Dividend (%) Right Shares at par (%) Price Earning Ratio Earning per Share (Rs.) Net Spread to Gross Return (%) Net Profit Before Tax to Total Income (%) Net Profit After Tax to Total Income (%) Expense to Income (%) Financing / Advances to Deposit Ratio-ADR (%) Capital Adequacy Ratio Return on Average Assets (%) Return on Average Equity (%) 2009 10,102 4,970 5,132 1,332 190 6,654 3,471 3,183 (1,430) (89) 76 1,740 715 1,025 44,188 124,182 100,333 6,650 9,091 10,467 3,669 201 13.67 15.74 5.00 9.20 1.71 50.80 14.87 8.76 72.15 44.04 12.77 0.98 13.29 2008 6,803 3,088 3,715 802 244 4,761 2,713 2,048 (428) (289) (339) 992 371 621 39,528 85,276 70,234 4,926 6,341 10,581 3,170 166 12.87 21.48 8.60 35 17.60 1.22 54.61 13.21 8.27 77.24 56.62 9.58 0.82 10.30 2007 4,574 2,452 2,122 742 104 2,968 1,765 1,203 (435) (1) 502 1,269 306 963 34,576 67,179 54,582 3,780 5,720 14,572 2,205 100 15.13 38.55 20.00 15.12 1.96 46.39 21.43 16.27 71.21 56.90 10.71 1.70 18.39 2006 2,704 1,464 1,240 441 165 1,846 1,028 818 (122) (1) 85 780 176 604 27,031 46,439 34,449 3,780 4,763 7,465 1,389 62 12.60 19.50 10.00 50.00 10.51 1.88 45.86 22.98 17.80 73.40 65.68 12.80 1.57 15.64

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Meezan Bank Limited

Rupees in million 2005 1,459 690 769 262 93 1,124 719 405 (69) 30 267 633 214 419 19,741 30,676 22,769 2,037 3,025 4,736 786 28 14.85 23.25 16.00 20.00 15.92 1.46 52.69 30.42 20.15 67.71 73.86 10.67 1.67 16.70 2004 534 250 284 133 109 526 409 117 (17) (2) 123 221 (3) 224 12,340 19,697 13,770 1,346 2,098 2,247 511 16 15.59 16.70 15.00 30.00 10.02 1.67 53.15 24.56 24.94 73.36 69.97 10.00 1.46 12.16 2003 376 183 193 67 115 375 255 120 18 (2) 105 24 27 214 7,397 11,10 7,757 1,064 1,748 1,649 238 10 16.43 15.50 5.00 10.00 7.71 2.01 51.45 36.33 32.26 66.05 82.61 15.62 2.37 13.74 2002 311 192 119 124 111 354 198 156 63 (2) 53 270 47 223 3,532 6,971 5,079 1,001 1,586 1,151 159 6 15.84 11.50 5.00 10.00 5.16 2.23 38.41 45.15 37.24 64.98 69.22 22.99 4.95 16.66

Annual Report 2009

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ShareholdersShareholding StructureNoor Financial Investment Co, Kuwait Pakistan Kuwait Investment Co. (Pvt.) Ltd. Islamic Development Bank, Jeddah Others Paid up Capital

%46 30 9 15 100

Rs. in millions3,027 1,995 620 1,008 6,650

Noor Financial Investment Company is a Kuwaiti investment company, engaged in investment and financial activities primarily in Kuwait, the Middle East, Asia and other emerging markets. The company was established as the financing arm of the National Industries Group (NIG), which is one of the largest private sector industrial groups in Kuwait. Noor provides a broad range of financial services, which include advisory services, underwriting, guarantee or counter guarantee services, term financing and syndications. The company actively invests in local capital markets and also diversifies its investments through international capital markets. Pakistan Kuwait Investment Company (Private) Limited (PKIC), a joint venture between the Governments of Pakistan and Kuwait, is one of the most profitable and respected financial institutions in Pakistan. It is commonly referred to as a leading example of a successful sovereign joint venture. PKIC has nurtured a diversified experience in foreign currency transactions, project finance and syndications in over 25 years of its operations in Pakistan. It is the first financial institution in Pakistan that has been rated AAA (Triple A) for medium to long term by JCR-VIS Credit Rating Company Limited, an affiliate of Japan Credit Rating Company. Islamic Development Bank (IDB) is located in Jeddah and is an international financial institution established in 1975 in pursuance of a declaration of the Conference of Finance Ministers, of Muslim countries to foster economic development and social progress in member (Islamic) countries. IDB has a capital base of approximately USD 8 billion and enjoys presence in 56 member countries. The Bank participates in equity capital and grants loans for productive projects and enterprises besides providing financial assistance in other forms for economic and social development.

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Meezan Bank Limited

Organisation Structu