Askari Bank Annual Report Essay

Annual Report for the year ended December 31, 2009 Moving a click ahead Moving a click ahead At Askari, we believe there is no substitute to technology. Technology drives creativity, innovation, and the future. With this belief we have embarked upon a major initiative by introducing stateof-the-art technology solutions for all key areas of banking i. e. core banking, client relationship, human resource, risk management, finance and vendor management, to make ourselves ready for the banking of the future, to operate in a hi-tech era and to enhance our capabilities to compete in the local and global marketplace. It isn’t just about a year or two, we are set to turn intersecting ideas and our fledgling technologies into a bank that can continue to innovate in times to come. We are excited about entering into a new era of technological advancements and that is the expression on this year’s cover. Contents 1 02 04 06 08 10 12 16 18 19 20 21 22 24 28 30 31 32 44 46 47 48 50 52 Financial Highlights Pakistan’s Economic Profile 18 Years of banking What we stand for Vision & Mission Corporate Information Directors’ Profile Notice of 18th Annual General Meeting Management Organogram Risk Management Framework Entity Ratings Corporate Social Responsibility President’s Message Technology Initiative Value Added Statement Askari Bank’s Presence Business and Operations Review Financial Review Financial Calendar Share & Debt Information Horizontal & Vertical Analysis Decade’s Performance Summary Directors’ Report

Financial Statements of Askari Bank Limited 67 69 70 72 73 74 75 76 Statement of Compliance Review Report to the Members Auditors’ Report to the Members Statement of Financial Position Profit and Loss Account Statement of Changes in Equity Cash Flow Statement Notes to the Financial Statements Consolidated Financial Statements of Askari Bank Limited and its Subsidiaries 31 132 133 134 135 136 191 192 194 202 203 204 207 Auditors’ Report to the Members Consolidated Statement of Financial Position Consolidated Profit and Loss Account Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Consolidated Financial Statements Pattern of Shareholding Correspondent Network Branch Network Statement of Financial Position in US dollars Profit and Loss Account in US dollars Glossary of Financial & Banking Terms Form of Proxy Annual Report | 2009 Financial Highlights 2009 Profit After Tax up by Rs. 1. 108 billion (2008:Rs. 386 million) 187%

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Before Tax up by Rs. 1. 642 billion (2008:Rs. 461 million) 256% 6% Deposit Increased by Rs. 206 billion (2008:Rs. 168 billion) 23% Advances Increased by Rs. 148 billion (2008:Rs. 140 billion) Total Assets Increased by Rs. 254 billion (2008:Rs. 206 billion) 23% EPS Increased by Rs. 14. 95 billion (2008:Rs. 12. 97 billion) 15% Equity Increased by Rs. 2. 18 (2008:Re. 0. 76) 187% Network Market Value of shares increased by Rs. 27. 30 (2008:Rs. 14. 57) 87% Payout Stock Dividend: (2008: 25%) 20% Increased to from 200 of last year 226 page | 1 Askari Bank Limited | The Country Pakistan’s Economic Profile

Country statistics Land area (sq. km) Population (million) Population growth (%) Population density (people/sq. km. ) Life expectancy (years) Literacy (%) 796,100 166 1. 80 206 64 56 At fiscal year end Economic indicators GDP Growth (%) GDP at current factor cost (Pak Rs. billion) GDP -at market prices (Pak Rs. billion) Inflation (%) Trade balance (USD million) Current account balance ex. Official transfers (USD million) Foreign currency reserves -year end (USD million) Exchange rate (USD) Exchange rate (Euro) Networth of the banking system (Pak Rs. billion) Total assets of the banking system (Pak Rs. illion) KSE 100 index points Stock market capitalization (Pak Rs. billion) At calendar year end Banking system Capital adequacy ratio – % Advances/Deposits ratio -% Return on Assets (after tax) -% * Pakistan’s fiscal year starts on July 1 and ends on June 30. 2003-04 2004–05 2005–06 2006–07 2007–08 2008-09 6. 4 5,251 5,640 4. 6 (3,279) 1,811 12,389 58. 15 70. 90 131 3,003 5,279 1,403 2004 8. 4 6,123 6,500 9. 3 (6,207) (1,534) 12,598 59. 67 72. 14 191 3,624 7,450 2,037 2005 6. 6 7,159 7,623 7. 9 (12,130) (4,999) 13,122 60. 18 76. 47 315 3,884 9,989 2,766 2006 7. 02 8,235 8,673 7. 8 (13,564) (7,403) 15,647 60. 7 81. 70 484 4,785 13,772 3,981 2007 5. 8 9,962 10,284 12. 00 (20,914) (13,874) 11,369 68. 40 108. 20 548 5,074 12,289 3,778 2008 2. 0 12,460 13,095 21. 00 (14,160) (9,424) 12,425 81. 46 114. 80 638 5,595 7,162 2,155 2009 10. 5 65. 8 1. 2 11. 3 70. 2 1. 9 12. 7 74. 6 2. 1 13. 2 69. 8 1. 5 12. 1 69. 8 1. 7 13. 5 69. 6 1. 0 page | 2 Annual Report | 2009 GDP – Growth (Percent) 8. 4 6. 4 6. 6 7. 0 5. 8 2004 2005 2006 2007 2008 2009 Foreign Exchange Reserves (US$ in billion) 12. 6 13. 1 15. 6 12. 4 11. 4 2004 2005 2006 2007 2008 2009 Foreign Trade 40. 0 (US$ in billion) 20. 6 28. 6 30. 5 19. 15. 6 12. 3 14. 4 16. 5 17. 0 2004 Imports 2005 Exports 2006 2007 2008 2009 Sectoral Contribution GDP (Percent) 14. 0 15. 5 8. 7 6. 5 8. 3 7. 0 8. 5 4. 8 6. 6 5. 8 6. 3 6. 5 4. 1 4. 7 2. 4 1. 1 2004 2005 2006 2007 2008 2009 –3. 3 Agriculture Manufacturing Services page | 3 3. 6 17. 8 34. 8 12. 4 2. 0 Askari Bank Limited | History 18 Years of banking Askari Bank was incorporated in Pakistan on October 9, 1991, as a public limited company. It commenced operations on April 1, 1992, and is principally engaged in the business of banking, as defined in the Banking Companies Ordinance, 1962.

The Bank is listed on Karachi, Lahore and Islamabad Stock Exchanges. Askari Bank has expanded into a network of 226 branches / subbranches, including 31 dedicated Islamic banking branches, and a wholesale bank branch in Bahrain. A shared network of 4,173 online ATMs covering all major cities in Pakistan supports the delivery channels for customer service. As at December 31, 2009, the Bank had equity of Rs. 14. 95 billion and total assets of Rs. 254. 33 billion, with 984,485 banking customers, serviced by our 6,159 employees.

Askari Investment Management Limited and Askari Securities Limited are subsidiaries of Askari Bank engaged in managing mutual funds and shares brokerage, respectively. page | 4 Annual Report | 2009 page | 5 Askari Bank Limited | Corporate What we stand for Our vision To be the bank of first choice in the region Our thinking Creating opportunities with innovation and technology Integrity Fairness Commitment Investors A distinctive investment, delivering outstanding performance, return and value Our Customers Passionate about our customers’ success, delighting them with the quality of our service Regulators

Exemplary compliance, governance and business ethics Values Service Teamwork Employees Caring for our people and helping them to grow Communities Dedication towards social development and improvement in quality of life page | 6 Annual Report | 2009 Our vision to be the bank of first choice in the region demands continuous strive for creation of business opportunities with innovation while maintaining our core values to meet our commitment to all our stakeholders. The range of our products aims to serve our diverse customer base that comprises of corporates, SMEs, individual savers, households and, farmers.

At the same time, our people are constantly engaged in assessing customer needs and market dynamics to realign our products and our priorities to attain brand recognition and competitive edge. We are reshaping our portfolio of businesses by investing in higher growth areas, extending and developing our core competencies and moving out of weak and non– core segments. Technology has played a pivotal role in meeting customer expectations, particularly with respect to speed and quality of service. We have fully automated transaction– processing systems for back–office support.

Our branch network is connected on–line real–time and our customers have access to off–site as well as on–site ATMs, all over Pakistan. Our phone banking service, Askari TeleCare, and internet banking facility allows customers to enjoy routine banking service from anywhere, anytime in the world. We also pioneered an e–commerce venture in Pakistan. Our mobile ATMs are the first in Pakistan. To further strengthen and enhance our technology platform, the Bank is in the process of replacing the existing technology with a comprehensive state-of-the-art solutions. This initiative will greatly improve our product delivery and service abilities. eliable information on our activities, structure, financial situation, and performance. Our regulators We firmly believe in regulatory discipline and harmony of our corporate objectives with regulatory framework. Our business methodologies are designed to ensure compliance with the directives of all our regulators. Our values Integrity is the most valued standard in whatever we do. We understand that our commitment to satisfy customers’ needs must be fulfilled within a professional and ethical framework. We subscribe to a culture of high ethical standards, based on the development of right attitudes.

The intrinsic values, which are the corner stones of our corporate behavior, are: • • • • • Commitment Integrity Fairness Teamwork Service Our employees We strongly believe that the interests of the Bank and the employees are inseparable. At Askari we try to create a ‘we’ culture where there is mutual trust and respect for each other. We encourage ownership behavior so that everyone feels responsible for the performance and reputation of the Bank. We are committed to develop and enhance each employee’s skills and capabilities through extensive in–house and external training programs and job rotations.

In order to ensure meritocracy, our appraisal system is purely performance based. Our customers Knowing our customers and their needs is the key to our business success. Our products and services are as diverse as our market segments. Our client relationship managers are well equipped and well trained to provide the most efficient and personalized service to the customers. Askari Bank is proud of its pioneering role in providing the most modern and technologically advanced services to its 984,485 relationships. Our communities

We fully recognize our corporate social responsibility and our contributions to different areas of the social sector are aimed to help improve the quality of life in our Country. Our investors We believe that the bottom line of any business is creating shareholder value. To gain their trust and confidence, we believe in providing our investors timely, regular and page | 7 Askari Bank Limited | Corporate Vision & Mission Vision To be the bank of first choice in the region Corporate Objectives • To achieve sustained growth and profitability in all areas of business.

To build and sustain a high performance culture, with a continuous improvement focus. To develop a customer–service oriented culture with special emphasis on customer care and convenience. To build an enabling environment, where employees are motivated to contribute to their full potential. To effectively manage and mitigate all kinds of risks inherent in the banking business. To optimize use of technology to ensure cost–effective operations, strengthening of controls, efficient management information system, enhanced delivery capability, and high service standards. • Mission

To be the leading private sector bank in Pakistan with an international presence, delivering quality service through innovative technology and effective human resource management in a modern and progressive organizational culture of meritocracy, maintaining high ethical and professional standards, while providing enhanced value to all our stakeholders, and contributing to society. To manage the Bank’s portfolio of businesses to achieve strong and sustainable shareholder returns and to continuously build shareholder value. To deliver timely solutions that best meet the customers’ financial needs.

To explore new avenues for growth and profitability. • • • • Strategic Planning • To comprehensively plan for the future to ensure sustained growth and profitability. To facilitate alignment of the Vision, Mission, Corporate Objectives with the business goals and objectives. To provide strategic initiatives and solutions for projects, products, policies and procedures. To provide strategic solutions to strengthen weak areas and to counter threats to profits. • • • • • • page | 8 Annual Report | 2009 • • To identify strategic initiatives and opportunities for profit.

To create and leverage strategic assets and capabilities for competitive advantage. • Code of Ethics and Conduct Askari Bank seeks to maintain high standards of service and ethics enabling it to be perceived as impartial, ethical and independent. In addition to the general guidelines, the following are the salient features of the Bank’s code of ethics and conduct. • Presence of a corporate culture that seeks to create an environment where all employees are treated equitably and with respect. Employees must carry out their responsibilities in a professional manner at all times.

They must act in a prudent manner and must avoid situations that could reflect unfavorably on themselves, the Bank or its customers. • Employees must commit to the continued development of the service culture in which the Bank consistently seeks to exceed customers’ expectations. Fairness, Truthfulness and Transparency govern our customer relationships in determining the transactional terms, conditions, rights and obligations. Employees must safeguard confidential information which may come to their possession during the discharge of their responsibilities.

Respect for customers’ confidential matters, merits the same care as does the protection of the Bank’s own affairs or other interests. Employees must ensure that ‘know your customer’ principles are adhered to by obtaining sufficient information about the customers to reasonably satisfy ourselves as to their reputation, standing and the nature of their business activities. • Employees must avoid circumstances in which their personal interest conflicts, or may appear to conflict, with the interest of the Bank or its customers. Employees must never use their position in the Bank to obtain personal advantage or gain.

Employees must not enter into an agreement, understanding or arrangement with any competitor with respect to pricing of services, profit rates and / or marketing policies, which may adversely affect the Bank’s business. Employees must not accept gifts, business entertainment or other benefits from a customer or a supplier / vendor, which appear or may appear to compromise commercial or business relationship. Employees must remain alert and vigilant with respect to frauds, thefts or illegal activities committed within the Bank premises. • • • • page | 9 Askari Bank Limited | Corporate Corporate Information Board of Directors Lt. Gen. Javed Zia Chairman Registered / Head Office AWT Plaza, The Mall, P. O. Box No. 1084 Rawalpindi- 46000, Pakistan. Tel: (92 51) 9063000 Fax: (92 51) 9272455 E-mail: webmaster@askaribank. com. pk Website: www. askaribank. com. pk Lt. Gen. (R) Imtiaz Hussain Maj. Gen. (R) Saeed Ahmed Khan Mr. Zafar Alam Khan Sumbal Mr. Muhammad Riyazul Haque Mr. Shahid Mahmud Mr. Ali Noormahomed Rattansey, FCA Dr. Bashir Ahmad Khan Mr. Tariq Iqbal Khan, FCA Mr. M. R.

Mehkari President & Chief Executive Registrar and Share Transfer Office THK Associates (Pvt) Limited Ground Floor, State Life Building No. 3, Dr. Ziauddin Ahmad Road, Karachi -75530 P. O. Box: 8533, Karachi. Tel: (92 21) 5689021, 5686658, 5685681 Fax: (92 21) 111 000 322 Audit Committee Dr. Bashir Ahmad Khan Chairman Entity Ratings Long Term: AA Short Term: A1 + by PACRA Mr. Ali Noormahomed Rattansey, FCA Mr. Tariq Iqbal Khan, FCA Company Secretary Mr. M. A. Ghazali Marghoob, FCA Chief Financial Officer Mr. Saleem Anwar, FCA Auditors A. F. Ferguson & Co

Chartered Accountants Legal Advisors Rizvi, Isa, Afridi & Angell Shariah Advisor Dr. Muhammad Tahir Mansoori page | 10 Annual Report | 2009 page | 11 Askari Bank Limited | Corporate Directors’ Profile Lt. Gen. Javed Zia HI (M) Chairman Lt. Gen. (R) Imtiaz Hussain HI (M) Director Maj. Gen. (R) Saeed Ahmed Khan Director Lt. Gen. Javed Zia joined the Board of Directors on October 22, 2008. He is currently serving as Adjutant General (AG) of the Pakistan Army. He is a graduate of Command & Staff College Quetta and National Defense University, Islamabad.

Also, he qualified as MSc (War Studies) from Quaid-e-Azam University, Islamabad and M. A. Political Science from the University of Balochistan. He was commissioned in Pakistan Army in April 1972 and had a distinguished career spanning over a period of more than 35 years. He has worked on various command, staff and instructional assignments in his illustrious career in the Pakistan Army. He has commanded an Infantry Division besides being the Director General Pakistan Rangers (Sindh). He has also served as the Deputy Chief of the General Staff. Lt. Gen. R) Imtiaz Hussain joined the Board of Directors on January 1, 2009. He is currently Managing Director of Army Welfare Trust. He is a graduate of Command & Staff College Quetta and National Defense University, Islamabad. Also, he qualified as MSc (War Studies) from Quaid-e-Azam University, Islamabad. He was commissioned in the Pakistan Army in 1971 and had a distinguished career spanning over a period of more than 37 years. He has worked on various command, staff & instructional assignments in his illustrious career including Command of an Infantry Division and Corps.

He has also served as Director General Doctrine and Evolution, Director General Weapons and Equipment, and Adjutant General of Pakistan Army before retiring in October 2008. Maj. Gen. (R) Saeed Ahmed Khan joined the Board of Directors on June 12, 2009. He is Executive Director Finance of Army Welfare Trust. He is a graduate from Punjab University & University of Balochistan. Also, he possesses a qualification of MSc (War Studies) from Quaid-e-Azam University, Islamabad. He was commissioned in the Pakistan Army in December, 1971 and had a distinguished career spanning over a period of more than 35 years.

He has worked on various command and staff assignments in his illustrious career in the Pakistan Army. page | 12 Annual Report | 2009 Mr. Zafar Alam Khan Sumbal Director Mr. Muhammad Riyazul Haque Director Mr. Shahid Mahmud Director Mr. Zafar Alam Khan Sumbal is one of the founder directors of the Bank. He is a post graduate in Economics and holds a vast experience in banking and finance spanning over 37 years both in Pakistan and abroad. He has also worked as Company Secretary of the Bank till April 2005 before elevated to is current position of Director Corporate by the Board of Directors of the Bank. He also holds a position of Chief Executive Officer of one of the projects of Army Welfare Trust. He is on the Board of Directors of Askari Leasing Limited as well. Mr. Muhammad Riyazul Haque joined the Board of Directors of the Bank on September 1, 2008. He holds master’s degrees in Development Economics [Williams College, USA]; Economic and Social Sciences [University of Manchester]; and English [GCU, Lahore]. He joined the Government of Pakistan in 1966.

He has worked in all the provinces of Pakistan, and in districts, as Secretary to the Government of Baluchistan, as Joint Secretary in the President and the PM secretariat and in EAD, and as Additional Secretary [Banking and Foreign Exchange]. He has been a director on the boards of HBL, and of Pak-Kuwait and Saudi -Pak Investment companies. Mr. Haque worked as international professional staff for the Asian Development Bank in several countries. He was Team Leader for project development, processing, implementation, and monitoring and evaluation, of development projects, and of institutions including banks.

He led the production of policy documents and instruction manuals. He has led delegations of GOP with international financial institutions, and of the ADB with other countries. He has worked as a consultant with UNDP. Mr. Haque has attended a large number of conferences and other moots in Pakistan and abroad, has been a member of professional societies, actively associated with think tanks and social groups and has travelled abroad extensively. Mr. Shahid Mahmud joined the Board of Directors of the Bank on September 1, 2008.

He holds a Master Degree in Defense & Strategic Studies from National Defense University along with more than 25 years of professional experience in the field of IT & communications. He is presently working as Chairman & Chief Executive Officer of Interactive Communication (Pvt) Limited and Interactive Convergence (Pvt) Limited. He has been the founder director and shareholder of Paktel, Indus Vision, Pak Globalstar (Pvt) Limited, SHOA (Pvt) Limited, and Shaheen Pay TV (Pvt) Limited. Mr. Shahid is an Eisenhower fellow and its honorary life member.

He is also a member & founder member of various organizations. He has attended numerous training sessions and seminars for strategic management, marketing, market research and analysis, distribution and supply chain management, material management, change acceleration process, electric commerce, information technology, telecommunications, media and various other product systems in various countries including USA, UK, Hong Kong, Singapore, Canada & Pakistan. page | 13 Askari Bank Limited | Corporate Directors’ Profile Mr. Ali Noormahomed Rattansey Director Dr. Bashir Ahmad Khan Director

Mr. Tariq Iqbal Khan Director Mr. Ali Noormahomed Rattansey joined the Board of Directors on September 1, 2008. He has 38 years of working experience. He is a fellow member of the Institute of Chartered Accountants in England & Wales and has been associated with A. F. Ferguson & Co. Chartered Accountants, Pakistan for 31 years (including 23 years as a partner). He has extensive experience in audit, accounting, tax and financial and corporate consultancy, with significant exposure to Pakistan corporate sector including subsidiaries of multinational companies operating in Pakistan.

He is also a director of New Jubilee Insurance Company Limited and New Jubilee Life Insurance Company Limited, and chairman of Aga Khan Rural Support Programme. He has participated in numerous trainings, workshops & seminars related to Audit, Finance & Management. Dr. Bashir Ahmad Khan joined the Board of Directors on March 28, 2008. He has more than 20 years of academic and professional experience and is presently working as professor of finance and head of department of business studies at Forman Christian (FC) College.

He taught at the Suleman Dawood School of Business at Lahore University of Management Sciences (LUMS) for 18 years, where he was also associate dean of executive education. He has played a key role in the launch of both customer-specific and open enrolment executive education programs for various institutions & companies. His current responsibilities include strategic and financial planning, budgeting, human resource management, and business development. He has been a financial and management consultant for various commercial and non-commercial organizations.

He has also been on the Policy Board of the Securities & Exchange Commission of Pakistan and a member of the board of Askari Investment Management Limited, a subsidiary of Askari Bank. Mr. Tariq Iqbal Khan is on the Board of the Bank since October 2001. He is Chairman/Managing Director of National Investment Trust (NIT). He is a fellow member of the Institute of Chartered Accountants of Pakistan with over 40 years of experience in the corporate sector in the areas of finance & accounts, capital markets, company law, taxation etc.

He is a founder director of Islamabad Stock Exchange and has also been its president during 1995-1998. He has also served as member Tax Policy and Co-ordination in Federal Board of Revenue before joining the Securities & Exchange Commission of Pakistan as a commissioner and officiated as acting chairman in 2000. He is also working as member on the board of directors of various companies in Pakistan. He has also attended large number of conferences, seminars, and workshops in Pakistan and abroad. page | 14 Annual Report | 2009

Mr. Muhammad Rafiquddin Mehkari President & Chief Executive Mr. M. A. Ghazali Marghoob Company Secretary Mr. Saleem Anwar Chief Financial Officer Mr. M. R. Mehkari with 39 years of international and domestic banking experience and currently serving Askari Bank in the position of the President and Chief Executive. He is one of the pioneer members of Askari Bank. In 1971, he started his career with UBL and in December 1974, joined the erstwhile BCCI and served at National Bank of Oman, a subsidiary of BCCI, till 1992.

He carries extensive experience in all banking dimensions including operations, treasury, fund management and investment banking, in international and domestic banks. He joined State Bank of Pakistan on secondment and performed as Director, Exchange Policy Department from April 2000 to April 2004, where he took several major initiatives like liberalizing Foreign Exchange Regime etc. He was also a member of Corporate Management Team and Monetary & Exchange Rate Policy Committee at State Bank of Pakistan. Mr. Mehkari is also a member on the board of Khushali Bank and Askari Investment Management Limited, a subsidiary of Askari Bank.

He participated in various courses and seminars on foreign exchange exposure & treasury management, money market and other banking areas of operations in Pakistan and abroad. Mr. M. A. Ghazali Marghoob, Company Secretary of Askari Bank is a chartered accountant and holds membership of the Institute of Chartered Accountants of Pakistan, Institute of Corporate Secretaries of Pakistan, Institute of Public Finance Accountants and a diploma holder from the Institute of Bankers of Pakistan. He holds diversified experience spanning over 25 years in the field of finance & corporate affairs in banking and service industry.

He started his professional career with Marriot Hotel and later on worked in Saudi Pak Industrial & Agricultural Investment Company and SME Bank as chief financial officer and company secretary for over 16 years. He has attended various courses and seminars in Pakistan and abroad. Mr. Anwar joined the Bank in June 2008 and is working as Chief Financial Officer. He is a Fellow member of the Institute of Chartered Accountants of Pakistan and brings with him diversified work experience spanning over 24 years in the field of accounting, finance, planning, tax and corporate affairs, both in Pakistan and abroad.

He started his professional career with A. F. Ferguson & Co. Chartered Accountants (affiliates of PriceWaterHouse Coopers International) and later on, joined the erstwhile Al Faysal Investment Bank, the largest investment bank in Pakistan. He moved to commercial banking in 2002 and worked in various capacities with banks in Pakistan and abroad. His last major assignment was with Mashreq Bank (Badr Al Islami), Dubai, UAE, as head of special projects. Mr. Anwar also represents the interest of the Bank as a director on the board of Bank’s majority owned subsidiary, Askari Securities Limited.

He has participated in various training workshops, seminars and courses on banking, accounting and finance and management. page | 15 Askari Bank Limited | Corporate Notice of 18th Annual General Meeting Notice is hereby given that the 18th Annual General Meeting of the shareholders of Askari Bank Limited [the Bank] will be held on Tuesday, March 30, 2010 at 10:00 am at Blue Lagoon Complex Opposite outward gate of Pearl Continental Hotel, Rawalpindi to transact the following business: Ordinary Business: 1. 2. To confirm the minutes of the 5th Extra-Ordinary Annual General Meeting held on December 21, 2009.

To receive, consider and adopt the financial statements for the year ended December 31, 2009 together with the Directors’ and Auditors’ Reports thereon. To appoint the auditors of the Bank for the year ending December 31, 2010 and to fix their remuneration. To consider and if deemed fit, pass the following Resolutions with or without modification(s): i. a sum of Rs. 1,071,240 thousand out of the general reserve as at December 31, 2009 (including reserves subsequent to the merger of Askari Leasing Limited) be capitalized and be applied to the issue of 107,123,990 ordinary shares of Rs. 0 each allotted as fully paid bonus shares to the members whose names appear in the register of members as at the close of business on March 23, 2010 in the proportion of 20 shares for every hundred shares held that is 20%. The shareholders of Askari Leasing Limited who will become the shareholders of Askari Bank Limited after merging of Askari Leasing Limited with and into Askari Bank Limited in terms of Scheme of Amalgamation already approved by State bank of Pakistan would also be entitled for bonus shares mentioned at (i) above.

The bonus shares shall rank pari passu in all respects with the existing shares. The sale proceeds of fraction share entitled to members shall be donated to any recognized charitable institution, for which purpose the fractions shall be consolidated into whole shares and sold through stock market. Directors be and are hereby authorized and empowered to give effect to this resolution and to do or cause to be done all acts, deeds and things that may be necessary or required for the issue, allotment and distribution of Bonus Shares.

Statement Under Section 160(1) (b) of the Companies Ordinance, 1984 This statement sets out the material facts pertaining to the special business to be transacted at the 18th Annual General Meeting of the Bank scheduled for March 30, 2010. Item No. 4 of the notice – Issue of bonus shares The Directors are of the view that the reserves / profits are adequate for the capitalization of a sum of Rs. 1,071,240 thousand for issue of the proposed 20% bonus shares and in this regard compliance has been made under Rule 6 of Companies (Issue of Capital) Rules, 1996.

Auditors’ certificate in respect of adequacy of reserves has also been obtained. Notes A. General 1 The Share Transfer books of the Bank will remain closed from March 24 to March 30, 2010 (both days inclusive). Transfers received at M/s THK Associates (Pvt) Ltd. Ground Floor, State Life Building # 3, Dr. Ziauddin Ahmad Road, Karachi-75530, the Registrar and Share Transfer Office of the Bank at the close of the business on March 23, 2010 will be treated in time for purpose of the entitlement of bonus shares (B-14) to the transferees.

A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote for him/ her. No person shall act as a proxy, who is not a member of the Bank except that Government of Pakistan / State Bank of Pakistan / corporate entity may appoint a person who is not a member. The instrument appointing a proxy should be signed by the member or his / her attorney duly authorized in writing. If the member is a corporate entity (other than Government of Pakistan and State Bank of Pakistan), its common seal should be affixed on the instrument.

The instrument appointing a proxy, together with power of attorney, if any, under which it is signed or a notarially certified copy thereof, should be deposited, with the Company Secretary, Askari Bank Limited, 1st Floor, AWT Plaza, The Mall, P. O. Box No. 1084, Rawalpindi, not less than 48 hours before the time of holding the meeting. If a member appoints more than one proxy, and more than one instrument of proxy are deposited by a member, all such instruments of proxy shall be rendered invalid. The proxy form shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form.

Attested copies of the CNIC or passport of the beneficial owners and the proxy shall be furnished with the proxy form. The proxy shall produce his / her original CNIC or original passport at the time of meeting. In case of Government of Pakistan / State Bank of Pakistan / corporate entity, the board of directors’ resolution / power of attorney with specimen signature shall be submitted along with proxy form to the Bank. 3. Special Business: 4. Resolved that 2 ii. 3 4 iii. iv. 5 v. B. For CDC Account Holders 1. 5. To consider any other business as may be placed before the meeting with the permission of the Chair.

By order of the Board 2. 3. 4. Rawalpindi March 8, 2010 M. A. Ghazali Marghoob Company Secretary page | 16 Annual Report | 2009 page | 17 Askari Bank Limited | Corporate Management Head Office M. R. Mehkari President & Chief Executive Central Region Adil Zaidi Country Head, International Banking Tahir Yaqoob Bhatti Regional General Manager Agha Ali Imam Group Head, Marketing & Strategic Planning Zehra Khalikdina Masood Qadir Acting Country Head, Risk Management Sajjad Ali Sheikh Area Manager, Multan Ejaz Ahmed Khan Tahir Aziz Group Head, Commercial Banking Country Head, Credit Administration Saulat Hameed

Area Manager, Lahore – II Group Head, Corporate & Investment Banking Brig. (R) Muhammad Ifzal Country Head, Establishment Ejaz Musarrat Siddiqui Area Manager, Lahore – I S. Suhail Rizvi Javed Iqbal Rehan Mir Global Treasurer Group Head, Operations Hassan Aziz Rana Head Legal Affairs Mushtaq Ahmed Tariq Waheed Area Manager, Gujranwala Chief Information Officer M. Ahmed Ghazali Marghoob Company Secretary Area Manager, Faisalabad Iftikhar Baloch Chief Information Security Officer Adnan Asghar Area Manager, Sahiwal Khalid Mohammad Khan Country Head, Compliance & Data Khawaja Shaukat Iqbal Hashim Khan Hoti

Country Head, Special Asset Management Regions/Areas/ W. B. Branch North Region Haseeb Saulat Regional General Manager South Region Muhammad Jaffer Khanani Regional General Manager Country Head, Islamic Banking Services Saif-ur-Rehman Khan Area Manager, Karachi – III M. Farooq Abid Tung Saleem Anwar Chief Financial Officer Country Head, Agriculture & Rural Business Tariq Mahmud Khan Area Manager, Rawalpindi – I Niaz Mohammad Qazi A. M. Khalid Farrukh Bari Area Manager, Karachi – I Area Manager, Hyderabad Mohammad Munir Ahmed Country Head, Electronic Technology Inamullah Khan Niazi Area Manager, Azad Kashmir

Lubna Azam Chief Credit Officer Mohammad Tayyab Khan Area Manager, Islamabad Area Manager, Karachi – IV Mian Shaukat Ali Arif Sirhindi Country Head, Consumer Banking Services Tanveer Afzal Khan Area Manager, Peshawar Mirajuddin Aziz Area Manager, Quetta Area Manager, Karachi – II Zahid Mahmood Chaudhry Country Head, Human Resource Syed Tauqir Haider Rizvi Area Manager, Rawalpindi – II Hafeez Ur Rahman Quraishy Israr Ahmed Executive Incharge, President Support Office Wholesale Bank Branch, Bahrain Khurram Dar Wholesale Bank Branch, Bahrain Farrukh Iqbal Khan Country Head, Audit & Inspection page | 18

Annual Report | 2009 Organogram Board of Directors Audit Audit Committee Committee Executive Committee President & Audit Committee Chief Executive Company Secretary Chief Credit Officer Group Head Marketing & Strategic Planning Chief Financial Officer Country Head Human Resource Chief Information Officer Group Head Operations Global Treasurer Country Head Islamic Banking Services Country Head Consumer Banking Services Group Head Commercial Banking Regional General Manager North (63 branches) Regional General Manager Central (63 branches) Regional General Manager South (65 branches) Country Head Agri. & Rural Business

Group Head Corporate & Investment Banking Corporate Head North (1 branch) Country Head Risk Management Strategic Planning & Economic Research Country Head International Banking Training & Development Country Head Electronic Technology Country Head Credit Administration Wholesale Bank Branch – Bahrain Islamic Banking Branches (31 branches) Secured Assets Products Country Head Special Asset Management Executive Incharge President Support Office Country Head Compliance & Data Marketing & Media 3 Regional Foreign Trade Units 3 Regional Operations Units Unsecured Assets Products Corporate Head Central (1 branch) Service Quality

Head Legal Affairs Corporate Head South (1 branch) Complaint Management Chief Information Security Officer Investment Banking Country Head Audit & Inspection Country Head Establishment Capital Market Operations Board Members Direct Reports to the President Business Functions Support Functions page | 19 Askari Bank Limited | Corporate Risk Management Framework Strategy, Oversight and Business Management Board Business Support, Monitoring and Compliance Credit Approval Process Independent Assurance Internal Audit Board Committees Credit Risk Review & Monitoring Operational / Market Risk Review & Monitoring Credit Admin and Credit MIS

External Audit / Inspection President & Chief Executive Management Committees Man Com Risk Mgmt ALCO Credit New Product Reviews page | 20 Annual Report | 2009 Entity Ratings Long term AA Short term A1+ Definitions by Pakistan Credit Rating Agency Limited (PACRA) : AA Very high credit quality. ‘AA’ ratings denote a very low expectation of credit risk. They indicate very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events. A1+ Obligations supported by the highest capacity for timely repayment. page | 21

Askari Bank Limited | Corporate Mr. M. R. Mehkari, President Askari Bank speakes to media at the occasion of CILT Pakistan’s International Seminar Askari Bank sponsored ASF Annual Exhibition / Meena Bazar Corporate Social Responsibility “The only way to achieve true success is to express yourself completely in service to society” (Aristotle) responsible corporate citizen we believe in giving back to the society by taking initiatives with the intent to positively affect our stake holders, which include our customers, sponsors, partners, employees, as well as our communities.

In order to fulfill our CSR objectives, we attempt to promote public interest by encouraging community growth and development through sponsoring social service events, supporting education, At Askari Bank, Corporate Social Responsibility is an integral part of the way we do business, and is a vital element of our strategy. We believe that we make our greatest contribution to the society by being good at what we do, and doing it in an inspiring way – providing products and services that help customers meet their financial goals.

As a socially conscious organization, Askari Bank always endeavors to contribute to the society in which it operates. As a sports, environment and also contribute in socio-cultural activities. During the year, Askari Bank has contributed to various CSR initiatives which include educational, conferences/ conventions, sporting events like golf and squash as well as sponsoring international sports events like the Fina World Swimming Championship. We have always tried to lend a helping hand to those who are less fortunate and in need of assistance.

Askari Bank actively makes donations to various charities that work for the welfare of the society. In order to ease the plight of the Internally Displaced Persons (IDPs) each employee of Askari Bank donated one day’s salary supported by media campaign to raise public awareness on this issue. Askari Bank believes in the cause of a better environment and continually sponsors tree plantations, flower festivals, spring galas as well as other beautification projects for a greener and cleaner Pakistan.

In order to enrich the lives of the public Askari Bank attempts to add a bit of color by sponsoring musical events, lifestyle exhibitions, film and art festivals as well as trade & industrial expos. We also regularly contribute to non-government organizations which work on social development and well being of the general public. Sponsorships Askari Bank has sponsored various events and activities during 2009. Some of the key events were: page | 22 Annual Report | 2009 Askari Bank’s stall at the Dawn Life Style Exhibition 2009

A group photo of participants of the 13th Fina Swimming Championship sponsored by Askari Bank Executives of Askari Bank laying a floral wreath as tribute to the Martyrs of Pakistan Army Mr. Agha Ali Imam, SEVP presenting a souvenir to Chief Guest of COAS Open Golf Championship Players in action at the 7th COAS Squash Tournament sponsored by Askari Bank Sports • • Sponsorship of 13th, Fina World Swimming Championships Sponsorship of 2010 World Championship Qualification Tournament, held in 2009 • •

Sponsorship of 29th Punjab Open Golf Tournament Sponsorship of 7th Chief of the Army Staff (COAS) Squash Championship 2009 • • • • • • • Sponsorship of All Pakistan Garrison Open Golf Tournament Sponsorship of COAS 7th International Squash Championship Sponsorship of COAS Open Golf Championship 2009 Sponsorship of ITF Pakistan Junior U-18 Tennis Championship 2009 Sponsorship of Pakistan Veteran Tournament Rawalpindi Sponsorship of Allama Iqbal Open Golf Tournament 2009 Sponsorship of Gujranwala Golf Championship 2009

Education • • • Sponsorship of Annual Function of the Old Hailians Association Sponsorship of branding for Islamic Educational Convention Sponsorship of Exhibition on International Conference on Medical Education • • • • Sponsorship of Lahore Grammar School’s Annual Play 2009 Sponsorship of Old Ravians Union event through publication Sponsorship of TNS Film Festival organized by BPS, School, Lahore Sponsorship of Zenith Leadership & Development Program, Karachi Social • • • • • • Sponsorship for CILT Pakistan’s International Seminar Sponsorship of ASF Annual Exhibition / Meena Bazaar Sponsorship of 19th, All Pakistan Multan Open Golf Championship Sponsorship of All Pakistan Memon Exhibition, Karachi Sponsorship at Dawn Life Style Exhibition 2009 Sponsorship of Civil Aviation Authority special publication issue. Sponsorship of Conference on Scopes of Retail Banking & Finance Expo Pakistan 2009 • Sponsorship of Food, Agri & Livestock Asia 2009 for E-commerce Gateway Pakistan. • • Sponsorship of Islamic International Medical College (IIMCT) Sponsorship of print/media campaign for IDPs Environment • • • • Sponsorship of a Campaign under the title of “Telephone a Tree” Sponsorship of Children Park at Istaqlal Camp, Chakwal Sponsorship of F-10 Roundabout, Islamabad Sponsorship of Park at Commercial Area, DHA, Lahore Cantt Sponsorship of Spring Gala organized by M/s ECI (Pvt) Ltd page | 23 Askari Bank Limited | Corporate President’s Message In line with the expectations of a modest recovery in economic growth, the prospects of returning to macroeconomic stability improved in the initial months of fiscal 2010 with most key indicators continuing with the positive trends, which began in the closing months of fiscal 2009.

Improvement in agriculture and the industrial sectors backed by reduction in inflation, contained government borrowings, contraction in external imbalances and, easing monetary stance, are all likely to support economic stability during the current year. Though, a drop in overall volume of trade, tax growth, risk of lower than expected aid receipts and, in particular, a rise in the fiscal deficit, highlights the fragility of the improvement and pose continuing risk to the economic recovery. In this environment, funding under the IMF Program has been a key for the recent improvement in Pakistan’s foreign exchange reserves.

Going forward, the major impetus for economic growth is expected to come from the services sector. The current account deficit is likely to improve further. However, given the current circumstances arising from the campaign against militants, the situation remains challenging and demands continuation of fiscal discipline, sound macroeconomic policies and focused attention towards the betterment of infrastructure and social sector indicators to ensure that the economy maintains its long term growth trajectory. 009 witnessed gradual easing of the monetary policy stance that was aimed to counter inflationary and demand pressures, which were achieved to a greater extent. While the liquidity position greatly improved compared to last year, the risk averseness of financial system restricted credit growth to a large extent and instead preferred short term liquidity management avenues. Deposit mobilization by banks improved and showed signs of recovery towards the end of 2009 and it is anticipated that the position will improve further during 2010. Alhamdulillah, Askari Bank achieved planned growth in business and perations during 2009. The total assets of the Bank amounted to Rs. 254 billion as at December 31, 2009, registering an increase of 23 percent over December 31, 2008. The major increase in asset book was recorded in aggregate investment portfolio that grew by 88 percent during 2009, while the gross advances increased by 6 percent, to Rs. 148 billion from Rs. 140 billion at end 2008. The Bank continued with the cautious and selective approach while taking credit exposures and remained focused on risk management and portfolio diversification.

The efforts for effective loan portfolio diversification which started last year yielded further positives and during 2009, the Bank’s exposure in textiles, which sector has largely remained under pressure owing to various internal and external developments, was reduced to 18 percent of the total portfolio, compared to 20 percent at the close of the previous year. Also, the Bank preferred financing against collaterals which improved our capital adequacy in compliance with Basel II requirements. Customer deposits reached Rs. 206 billion by December 31, 2009, an increase of 23 percent over December 31, 2008.

The deposit type and currency mix remained almost consistent with last year except savings deposits that reached 54 percent of the total deposits compared to 48 percent at the close of 2009. During the year, the Bank’s efforts remained focused on improving the core deposits. For this purpose a deposit mobilization plan page | 24 Annual Report | 2009 Profits (Rs. in million) Advances and Deposits (Rs. in billion) Corporate and Investment Banking Group successfully raised Rs. 3. 0 billion as Tier II capital i. e. sub-ordinated debt in the form of Bank’s third issue of Term Finance Certificate (TFCs).

Our consumer banking offers products and services, mostly asset based, to the retail customer segment along with Askari credit card, using the MasterCard brand. During 2009, the consumer banking focused on consolidation of business and operations and repositioned itself under the changing business environment for this segment. As part of this process, product automation was assigned priority and a few products, which were previously offered under a distributed model, were centralized with the aim of improving customer service and operational controls along with process efficiencies.

Our consumer banking plans to further diversify and expand the scope of its services through optimization of technology and targeting untapped opportunities of the retail banking market which still offers potential for growth. The agriculture and rural banking services offered by the Bank gained momentum during 2009 on the back of innovative offerings, capacity and awareness building, and increased market penetration. Askari Zarai Credit Card launched in the previous year as the first ever credit card for agriculture purposes gained further strength and attracted more interest from this segment.

Also, groupbased lending methodology has been adopted to facilitate small farmers availing agriculture credit. During the year, our agri & rural business division (ARBD) won the first position in diversification of credit Products from MINFAL, Government of Pakistan, and also received certificate of appreciation from SBP regarding Development of SBP Crop Loan Insurance Framework. Askari Islamic banking further expanded its outreach during 2009 by adding eleven new branches to 6,222 132 143 168 4,534 ,476 3,347 2,250 4,557 119 3,461 2,859 2,022 3,158 2,843 1,923 2,300 2,681 83 461 386 2004 2005 2006 2007 2008 2009 1,642 1,108 70 86 101 99 129 2004 2005 2006 Deposits 2007 2008 Operating Profit Profit before tax Profit After Tax Advances – net was launched for Bank employees that yielded excellent results and contributed to overall improvement in core deposits. Also, the deposit products launched towards the end of 2008 gained further strength and were also a reason for increase in core deposits during 2009.

The earnings of the Bank remained under pressure during 2009, mainly due to increased non-performing loans (NPLs) and related provisions, subdued economic conditions and carry-over of losses from stock market. The scope of the benefit of forced sale value (FSV) of collaterals, which was reinstated last year, was further expanded, subject to certain conditions, by the State Bank of Pakistan (SBP) in 2009 with the addition of certain types of collaterals and allowing the benefit of up to 40 percent of FSVs for computation of loan loss provisioning against NPLs.

This relaxation was fully accounted for while computing loan loss provisions during 2009. Profit after taxation at Rs. 1. 11 billion, however registered marked improvement when compared with last year’s Rs. 386 million, an increase of 187 percent. The banking spread registered slight improvement over last year, despite absorbing the adverse impact on net markup income due to increased nonperforming advances, thus reflecting effective asset liability management during 2009. The Bank’s NPLs stood at Rs. 17. 73 billion as of December 31, 2009 compared to Rs. 11. 9 billion at the end of previous year, an increase of 52 percent. Aggregate provisions as of December 31, 2009 increased to Rs. 12. 59 billion, thus providing coverage of 71 percent against nonperforming loans as of December 31, 2009. To expedite recovery of nonperforming and classified loans, a dedicated Special Asset Management (SAM) division has been set-up and is aggressively monitoring and followingup problem accounts. During 2009, the Bank’s efforts resulted in substantial improvement in the recovery position. SAM will continue to actively pursue recovery from defaulting customers.

The valuations of our investment portfolio, which primarily comprise of SLR (statutory liquidity requirement) eligible securities and other equity and debt securities, improved with the adjustment of 250 basis points announced by the SBP in the policy rate at three intervals during 2009. These and other timely steps by the SBP, supported by moderation of demand pressures improved the market liquidity management. Under these circumstances, our treasury management remained prudent and operated competitively during 2009. Our corporate and investment banking group gained further strength and increased its share in business volumes of the Bank.

The group is well positioned to service large corporates and multinational companies through a range of multifaceted offerings which include syndicated finance, advisory services, and discretionary investor relations besides trading in equity and debt markets. During the year, the 135 2009 206 page | 25 Askari Bank Limited | Corporate President’s Message (cont. ) Deposits (Rs. in billion) Advances (Rs. in billion) 206 168 132 143 119 83 2004 2005 2006 2007 2008 2009 70 86 99 101 CA 8. 9% GR 1 129 CAGR 14. 1% 2004 2005 2006 2007 2008 2009 Total Assets (Rs. in billion)

Foreign Trade and Guarantees (Rs. in billion) Guar ante es: C AGR 18. 2 % 254 119 182 166 98 92 145 75 70 97 107 83 100 Impo 119 2004 2005 2006 2007 2008 2009 25 31 37 44 56 2004 Imports 2005 Exports 2006 2007 2008 2009 Guarantees the network of our independent Islamic branches. During the year, Askari Islamic banking successfully achieved a milestone by initiating and successfully converting a conventional banking branch into an Islamic banking branch. Such conversion will be further extended to other towns and localities where the demand for Islamic products and services has gained trength and has outgrown the demand for conventional banking products and services. Askari Islamic’s comprehensive range of Sharia’a compliant banking offerings are now available at thirty one branches. Despite the strain on earnings attributable to network expansion, Askari Islamic’s contributions to operating profits increased during 2009. During the year under review, the Bank remained focused on improving risk management which we consider to be one of the essentials for sustainable success in today’s banking business.

The risk management function was further strengthened in line with the risk management guidelines issued by the SBP; a risk management strategy has been developed for identifying, assessing, controlling and monitoring risks. Our risk management processes comprise of detailed risk reviews, application of analytical tools and techniques along with traditional methods to quantify value at risk and monitor potential risks, independent risk assessments covering all types of risks including credit, market and liquidity risk performed by a well resourced risk management function.

The Bank has already commenced the most ambitious and challenging project in its history, of upgrading the entire technology platform. During the year under review, our dedicated teams involved in the implementation along with our implementation partners achieved planned progress and milestones. Keeping in view the size and significance of this project, relevant details have been separately documented in this annual report, titled under ‘technology initiative’. Briefly, the Bank has acquired Oracle 59 105 CAGR 206 18. 9%


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