Annual Report and Account 2012 - jaizbankplc.com

w w w . j a i z b a n k p l c . c o m

A GROWING PHENOMENON

Annual Report & Accounts 2012

Our Vision, Mission & Core Values

“To be the dominant non-interest financial services provider in Sub-Saharan Africa”.

Ÿ Quality Service – Customer FirstŸ Team Spirit Ÿ Respect for the Individual Ÿ EthicsŸ Trust Ÿ Partnership Ÿ Entrepreneurship

“To provide innovative, value-added, non-interest financial services to our clientele employing the best people, supported by technology”.

Our Mission

01

Our Vision

Contents

02

Vision, Mission and Philosophy 1

Contents 2

Our Story 3

About Jaiz Bank 4

Our Team 6

Advisory Committee of Experts (ACE) 10

The Report 11

Notice of Annual General Meeting 12

Chairman’s Statement 14

Report of the Directors 18

Managing Director/CEO’s Report 23

Report of the Audit Committee 25

Risk Management 26

Corporate Governance 28

Corporate Social Responsibility (CSR) 36

Advisory Committee of Experts Report 39

Report of the Auditors 40

Notes to the Financial Statements 41

The Accounts 51

Statement of Financial Position 52

Statement of Income 53

Statement of Comprehensive Income 54

Statement of Cashflow 55

Statement of Change in Equity 56

Statement of Sources and Uses of Quard Fund 57

Statement of Sources and Uses of Zakah and Charity Fund 58

Notes to the Financial Statements 59

Notes 73

Proxy Form 75

OUR

STORY

03 Report of AuditorsTo The Members of Jaiz Bank Plc

Jaiz Bank PLC was created out of the ashes of the former Jaiz International PLC which was set up in 2003/2004 as a special purpose vehicle (SPV) to establish Nigeria's first full-fledged Non-Interest Bank (Islamic Banking). It is an unquoted public company owned by over 26,000 shareholders spread across

the six geographical zones of Nigeria.

Jaiz Bank Plc. obtained a Regional operating license to operate as an Islamic Bank from the Central Bank of Nigeria on the 11th of November, 2011 and begun full operations as the first Non-Interest Bank in Nigeria on the 6th of January, 2012 with 3 branches located in Abuja FCT, Kaduna and Kano. The Regional license allows the Bank to operate geographically in a third of the country. Also, based on recommendations from Islamic Development Bank (IDB), Jaiz Bank PLC has signed a Technical Management Service Agreement with Islamic Bank Bangladesh (IBBL). IDB is a triple A rated Multilateral Development Finance Institution while IBBL is one of the leading Banks in Bangladesh. These two reputable institutions serve on the Board of Directors of Jaiz Bank PLC.

Non-Interest Banking is a growing global phenomenon practiced in nearly 70 countries all over the world including, United Kingdom, Canada, United States of America, United Arab Emirate, Malaysia, China, Singapore, South Africa, Kenya etc. Global Banks like HSBC, Citibank, Barclays Bank etc. are also offering it either as subsidiaries or windows. It is an alternative financial service offering which is open to all irrespective of race or religion and it is based on ethical principle of fairness, transparency and objectivity.

Non-Interest Banking offers almost all the services offered by conventional banks except that they do not give or receive interest, nor finance anything that is harmful to society like alcohol, tobacco, gambling etc. It also seeks to avoid gharar- speculation, uncertainty, deception etc.

Currently, about 50% of Nigeria's population of 150 million are craving for such Non-Interest banking services. These people are desirous of ethical banking services which provide for socially responsible investment outlets. In a nutshell, Non-Interest (Islamic Banking) is a profit and loss sharing arrangement where the mode of financing is mostly on mark-up, leasing and partnership basis.

The Investment OpportunityJaiz Bank plans to upgrade to a National License by 2014 God willing. This upgrade will enable the Bank to operate in all the 36 States of the Federation including the Federal Capital Territory. This is expected to position it to compete effectively in one of the most thriving sectors of the Nigerian economy. The Bank plans to establish 25 branches in 2014 and 100 by 2017.

Macroeconomic Review of NigeriaNigeria is Africa's most populous nation and the second largest economy in Sub-Saharan Africa. It is the largest growing economies in Africa and it has benefitted from recent regulatory reforms and increase in global crude oil prices.

The Nigerian economy has maintained a growth trend with real GDP growth averaging 6.28% between 2006 and 2009. The 2013 budget estimated growth rate is 7.5%.

Nigeria is the 12th largest exporter of crude oil in the world. Earnings from crude oil account for about 90% of foreign exchange earnings.

Nigeria's long-term outlook remains positive, driven by the continued recovery of global economy by 2013 and the recent positive ratings by Fitch and Standard and Poors (S&P).

Nigeria has a population of over 150 million people with Muslims constituting about 50%. The average annual population growth rate is 3.2%. The ratio of male to female population is 1.05:1.

04

About Us

Report of AuditorsTo The Members of Jaiz Bank Plc

The informal sector constitutes about 65% of Nigerian economy and has been recognized as a key driver especially in the retail consumer segment. The sector represents a potentially untapped market that provides opportunities for existing and new banks. The advent of Non-Interest banking is expected to improve penetration of this segment of the market.

The Potential for Non- Interest Islamic Bank in Nigeria The business potential for a Non-Interest Islamic Bank in Nigeria is enormous as Jaiz Bank PLC is the first and only full-fledged institution offering this service in Nigeria for now. The Bank is currently focusing mainly on retail banking, but also offers corporate and commercial banking services.

This focus will make it easy to service the majority of Nigerians who want do away with Riba (Usury) in their daily activities. The market for retail banking in Nigeria was estimated by KPMG at US$30 billion (2006). The Bank is being positioned to be a national bank offering its services to all regardless of religious beliefs.

Opportunities in the Nigerian Banking SectorThe Nigerian economy presents various growth opportunities for the banking system, particularly in the area of retail and consumer banking which is nascent. With only 20% of the adult population (46 million) in Nigeria having bank accounts and the large informal sector which as yet, remains unbanked, the prospect for growth in retail banking is strong. The supply gap to meet the basic needs of Nigerians will also continue to provide trade finance opportunities for banks. The opening of debt markets in Nigeria driven by the need to diversify asset classes should lead to further business opportunities. The Central Bank of Nigeria (CBN) has released the Supervisory Regulatory Framework for Non-Interest Islamic Finance in Nigeria. Also, other Regulatory bodies such as the Nigeria Deposit Insurance Corporation (NDIC), Securities & Exchange Commission (SEC), Debt Management Office (DMO) are all actively participating to ensure a comprehensive regulatory framework is in place. The CBN has further demonstrated its commitment to the success of Islamic banking by becoming a member of the Islamic Financial Services Board (IFSB) and the International Islamic Liquidity Management Corporation (IILM). Accordingly, we continue to anticipate the necessary drivers to support continued growth in the banking sector.

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About Us Cont’d


Our Team...

The Board, Management and Advisory Committee of Experts of Jaiz Bank PLC is made up of credible Nigerians and foreigners of impeccable reputation with decades of experience in Industry and Commerce. They are fully committed to the development of a world class institution. These distinguished personalities

are:

BOARD

Alhaji (Dr.) Umaru Abdul Mutallab, CON Chairman, Board of Directors Prominent business leader and former Minister of the Federal Republic of Nigeria, Chartered Accountant and Banker; former Executive Vice Chairman and Managing Director of United Bank for Africa (UBA) – the third largest bank in Nigeria and an affiliate of BNP Paribas. He retired as Chairman of First Bank of Nigeria PLC, the oldest and biggest bank in Nigeria.

He is a holder of one of the highest National Awards in Nigeria – Commander of the Order of the Niger (CON). Dr. Mutallab has also been conferred with the Fellowship of both the

Association of Chartered Certified Accountants (ACCA) of UK and the Institute of International Bankers Association (FIBA) of the United States of America.

Hassan Usman,�Ag. Managing Director/CEO A trained Accountant, Mr. Hassan graduated with a first class Degree in Accounting in 1985 from Ahmadu Bello University, Zaria, Nigeria and became an Associate Member of ICAN in 1989 and obtained his Post Graduate Diploma in Management in 1995 from Maastricht School of Management.

Mr. Hassan also attended the Oxford University Executive Management Programme in 2002. He worked as the Financial Controller of Nigerian Development Company Limited, Kaduna

until he joined NAL Merchant Bank PLC where he served as the Financial Controller and Treasurer respectively between 1996-2001. Mr. Usman had a brief stint with Inland Bank where he served as General Manager, Banking Services before re-joining NAL Bank as Deputy General Manager and Head Business and Financial Advisory Group. He is a Fellow of the Institute of Chartered Accounts of Nigeria (ICAN).

�

Dr. Aminu Alhassan Dantata, CONMember, Board of Directors A renowned business man, he began his career as produce buyer in 1949 in the family business of Alhassan Dantata and Sons Limited. He became the Chairman and Managing Director of the Company, in 1960, a position he holds till date. Dr. Dantata was a member of the Steering Committee of the Nigerian Industrial Development Bank (now Bank of Industry, BOI), and served as a Director of the Bank between 1962 and 1966. He has held several trade missions to several countries across the world.

Professor Tajudeen Adebiyi, Member, Board of Directors

He was between 2003 and 2005, the Treasurer and Investment Consultant to OPEC Fund (Vienna, Austria), where he managed an approximately US$5 billion investment portfolio. He is a holder of an MBA (Finance, Accounting and Quantitative Analysis) and, a Ph.D in Banking & Finance from the University of Maryland, USA.

Prof. Adebiyi spent 20 years (1983-2003) at the Islamic Development Bank, Jeddah, serving at different levels in project management, treasury, financial analysis and portfolio

management. He is a visiting Professor of Portfolio Investment Management and Quantitative Analysis to the Bowie State University, Maryland, USA.


Dr. Rilwanu Lukman, CFR, Member, Board of Directors

A mining engineer and a graduate of the prestigious Imperial College, United Kingdom, Dr. Lukman was President of the OPEC Conference for eight (8) consecutive times, and Secretary-General of OPEC between 1995 and 2000. A former minister of Petroleum Resources, he recently retired as Special Adviser to the Nigerian President on Petroleum Affairs. A Knight of the British Empire (KBE), Dr. Lukman is a holder of honorary doctorate degrees from the Universities of London and Bologna.

Alhaji (Dr.) Muhammadu Indimi, OFR, Member, Board of Directors

Is a distinguished and highly successful businessman. Dr. Indimi is the sole Founder and Chairman of Oriental Energy Resources, Limited. He has over 20 years' experience in the Nigerian Upstream Oil and Gas sector. Dr. Indimi is an astute business man with a notable presence in the international business arena. He also serves as the Chairman of M & W Pump Nigeria Limited; which has partnered with MWI Corp of Deerfield Beach, Florida.He is a founder of many successful indigenous companies and sits on the board of several privately owned companies encompassing all sectors of the economy. Dr. Indimi is a

humanitarian and a philanthropist and has received numerous awards as well as honorary doctorate degrees from notable Universities in Nigeria, Ireland and the United States

Mallam Falalu Bello, OFR, Member, Board of Directors

A 1978 law graduate from Ahmadu Bello University, Zaria. Nigeria. He started his legal career with the Kaduna State Government as Magistrate II and subsequently moved to Northern Nigeria Investment Company Limited as Senior Executive/Acting Company Secretary. He was later appointed Kaduna State Government Commissioner for Trade and Industry.

He was appointed Managing Director /CEO of Habib Nigeria Bank Limited in 1994 until 1998 when he was appointed Managing Director/CEO of Intercity Bank Plc. He resigned as Vice

Chairman/Managing Director in 2001. In 2001, he was appointed Managing Director of Nigerian Agricultural Development Bank Limited. Mallam Bello holds the National honour of the Officer of the Federal Republic (OFR). He recently resigned from Unity Bank as the Managing Director/CEO. Currently he is the Chairman of Main Street Bank Plc.

Nafiu Baba-Ahmed, mni, Member, Board of Director Is a 1978 law graduate from Ahmadu Bello University, Zaria, Nigeria. He started his banking career as a legal officer with United Bank for Africa Plc in 1980 from where he proceeded to Nigeria Merchant Bank in 1982. He was an Assistant General Manager/Company Secretary & Legal Adviser with First Interstate Merchant Bank Limited and subsequently, became a Director/Legal Adviser & Board Secretary at Nigerian Deposit Insurance Corporation (NDIC). He was also, a Director representing CBN/NDIC on several banks that were taken by both the Central Bank of Nigeria/NDIC for turnaround. He has attended several professional courses

abroad including those of Queens Mary College, University of London, in International Commercial Law, Institute of Management Development (IMD), Switzerland, as well as Senior Executive Development Programme in Kuala Lumpur, Malaysia.

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Our Team... Cont’d



Haseeb Ullah Siddiqui Member, Board of Directors

Is a representative of the Islamic Development Bank (IDB) and is a Division Manager, Islamic Financial Services Department. He has over eighteen years of multi-disciplinary experience in corporate banking & credit, project finance, and business advisory with leading global companies like American Express Bank, Riyad Bank and Ernst & Young.

Mr. Siddiqui is currently responsible for developing the enabling environment for Islamic financial sector in IDB member countries; providing technical assistance for regulatory and institutional reforms; contributing to the development of Islamic financial architecture; and enhancing financial inclusion and improving access of Islamic finance for the poor by establishing and strengthening Islamic microfinance institutions and regulation. Prior to joining IDB in 2010, Mr. Siddiqui was heading the Financial Economic Solution Group at Ernst & Young in Bahrain focusing on strategic projects in economic and infrastructure development. He led the Transaction Team in Ernst & Young's Award – Winning Islamic Financial Service Group, advising Islamic retail/wholesale banks, funds and private equity. He also advised government clients on policy and development, and project-managed key assignments. He was Acting CEO of the Waqf Fund, at the Central Bank of Bahrain from 2007-2010 on secondment from Ernst & Young.

Mr. Siddiqui brings fort to Jaiz a lot of experience in Islamic finance. Apart from Jaiz Bank, he also represents the IDB on the Board of Amana Bank Limited, the first Islamic Bank in Sri Lanka, and is a member of the Technical Committee of the Islamic Finance Services Board (IFSB).

He holds an MBA (Finance) from University of Missouri at Kansa City, and Bachelor's Degree in Business Administration (Marketing & Economics) from Kansas State University.

Alhaji Garba Aliyu Hungu, Member, Board of Directors

is an astute business man and a public administrator. He holds both a Diploma and Advanced Diploma, in Public Administration in addition to a Post Graduate Diploma in Community Development from Federal College of Education, Kano. He was one time, Special Adviser to the Governor of Kano State, Nigeria on Economic Affairs, first elected Deputy President Kano Chamber of Commerce and currently, Managing Director, Kano State Investment and Properties Limited.

Alhaji Garba is a director on several companies including Chairman, Board of Directors Fawaz Steelwood and Chemicals Limited, Nigerian Hotels Limited amongst others.

HRH, Emir of Bakura, Engr. Sani Bello, Member, Board of Directors HRH, is a holder of Bachelors Degree in Engineering from Ahmadu Bello University, Zaria, Nigeria. He is currently the Emir of Bakura, Zamfara State, Nigeria. Prior to becoming the Emir, HRH held several notable positions in some of the most prestigious corporate private and public organizations in Nigeria, including Director, Building and Engineering Services, Central Bank of Nigeria (CBN) between 1989-1996, Senior Assistant General Manager, Union Bank of Nigeria (formerly Barclays Bank).


Musbahu Mohammad Bashir, Member, Board of Directors Is the Chairman of Althani Group of Companies, and Cobalt International Services Limited since 2004. He is also a director in the following companies, Bento Drill Nigeria Limited 1995, Offshore Technologies International Limited 1995, and Resource Capital Group1995.

Cobalt International Services Limited is a pre-shipment inspection agent for dry goods and bulk liquid cargos. They are currently inspection agents for oil and gas exports in the country.

Alhaji Bashir also worked with Hammad in development facilities 1987 and Jadai Diversified Services in1989

He obtained a B.A. in Business Management from the American University, London in 2002, an Advanced Diploma in Business Management, 1998 from Tafawa Balewa University, Abuja Campus, and a National Diploma in Irrigation Engineering from Kaduna Polytechnic 1987.

Alhaji Umaru Kwairanga, Member, Board of Directors Is an experienced investment expert with over nineteen years experience in Capital Market, Banking and the Real Sector. He possesses a first Degree in Business Administration from University of Maiduguri, an MBA from Edo State University in addition to M.Sc. Finance and Corporate Governance from Liverpool John Moores University, United Kingdom.

Alhaji Kwairanga has attended several courses and training programmes in fields relating to finance, investment and money market in reputable institutions including the Harvard

Business School, New York, Institute of Finance and Euro Money. He is a professional certificates holder of the Chartered Institute of Stock brokers, Certified Pension Institution of Nigeria and the Abuja Commodities & Securities Exchange. He has been Managing Director of a top notch stock broking firm for over a decade and a director in several blue chip organizations including Chairman of Ashaka Cement Company. He was a member of the Nigerian Vision20:2020, National Technical Working Group (NTWG) on Public Sector Thematic Area. He is a well-travelled executive with extensive senior level management experience and unimpeachable ethics and integrity.

Mohammed Lawal Jari, Member, Board of Directors Is a graduate of Ahmadu Bello University Zaria, Nigeria with second class upper division in Business Adminisstration and an MBA Degree. He was a Lecturer at Katsina State Polythecnic between 1983-1985, Associate Lecturer at Bayero University, Kano between 1985 – 1988 as well as a Training Officer 1 at Financial Institute Training Center, Lagos. He left the teaching profession to join ICON Limited (Merchant Bankers) in 1990. He also worked with African International Bank Limited as Head, Private and Corporate Banking and Branch

Manager respectively. He later joined Equity Bank of Nigeria Limited from where he left in 2005 to join Intercontinental Bank Plc and rose from the rank of Principal Manager to Deputy General Manager in 2011.

Ahaji Lawal Jari is currently the Honorable Commissioner for Finance, Budget and Economic Planning, Katsina State.

Mukthar Sani Hanga, Member, Board of Directors Is a renowned business man and an administrator. He was one time Managing Director of Hanga Line Limited, Special Adviser to Governor Kabiru Gaya of Kano State on Sport and Youth Development, Member Board of Directors NISER Ibadan, Chairman NYSC Committee, Kano, Chairman Kano State Export Actualisation Committee and Director, Northern Nigeria Investment Limited, Kaduna.

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ADVISORY COMMITTEE OF EXPERTS (ACE)

Prof. Monzer Kahf, Chairman, Advisory Committee of Experts

Professor Monzer Kafh is a leading scholar and a consultant in Islamic Banking and Finance. He has been drafting and reviewing Sharia contents of finance agreements, by-laws and operational systems for Islamic Financial Institutions in many countries around the world; USA, Canada, Switzerland, Saudi Arabia, Trinidad etc.

He is a Professor of Islamic Finance at Qatar Faculty of Islamic Studies. He is also a visiting Professor of Islamic Finance at the International Centre for Education in Islamic Finance (INCEIF) based in Malaysia.

He was a Professor of Islamic Economics Finance and Banking at Yarmouk University, Jordan between 2002 to 2005. He has written 28 books and presented over 91 published articles (both in English and Arabic) on Trust (Awqaf), Zakah, Islamic Finance and Banking and other areas of Islamic economics, in conferences and seminars across North America, Europe, Africa, Asia and the Middle East.

A holder of Ph.D in Economics from the University of Utah, Salt Lake City, Utah, March, 1975. A high Diploma in Social and Economic Planning, UN Institute of Planning, Damascus, Syria, 1976. Also a B.A. Business from University of Damascus, Damascus, Syria, June 1962 which earned him the President of Syria Award for Best University Graduating Student, July, 1962. Prof. Kahf was awarded the Islamic Development Bank (IDB) Prize for Islamic Economics in 2001. He speaks English, Arabic and French.

Prof. Muhammed L.Bashar, Member, Advisory Committee of Experts Professor Muhammed Bashar is the Head of the Department of Economics, Usman Dan Fodio University, Sokoto, Nigera. He is a well-published, prolific writer. He has a B.A. (Hons.) Economics from Jamia Milla Islamia, New Delhi, an M.A. (Economics) from Jawaharlal Nehru University, New Delhi, a Ph.D (Economics) from Usman Dan Fodio University, Sokoto. He studied the following courses at graduate level; Advanced Macroeconomics, Fiqh (Islamic Jurisprudence) for Economics, Development Economics, Islamic Banking and Finance and Public Finance. He is proficient in Hausa, English, Hindi and Arabic.

Dr. Muhammad Alhaji Abubakar, Member, Advisory Committee of Experts Dr. Muhammad Alhaji Abubakar has over 20 years' experience in Islamic Scholarship. He is currently a lecturer at the Department of Sharia, Faculty of Law, University of Maiduguri. He has been actively researching on issues like waiver of requitals in cases of lesser offences, Islamic commercial jurisprudence etc. From 2002 to 2008, Dr. Abubakar was a Reviewer of academic research at the Deanship of Academic Research, Islamic University of Medinah, Saudi Arabia. He was also an Assistant Supervisor, Department of Student Supervision of the same University. Dr. Abubakar had also at various times rendered support services to the

General Court of Medinah in area of translation.

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the

REPORT


Notice Of Annual General Meeting

12

NOTICE IS HEREBY GIVEN that the 10th Annual General Meeting of Jaiz Bank Plc. (Formerly Jaiz International Plc.) will be held at Shehu Musa Yar'adua Center, Central Business District, Abuja, Federal Capital Territory on Thursday 19th December, 2013 at 11.00am to transact the following businesses:

Ordinary Business:1. To receive and consider the Audited Financial Statements of the Bank for the period ended 31st December, 2012, together with the Reports of the Directors, Auditors, and Audit Committee thereon.

2. To authorize the Directors to fix the remuneration of the Auditors.

Special Business3. To fix the Directors' fees for the year ending 31st December 2013.

4. To consider and if thought fit, pass a Special Resolution that subject to the Bank's Memorandum and Articles of Association and all relevant regulatory approvals being sought and obtained, and subject to such conditions as may be prescribed by any of the Bank's regulators while granting such approvals, the Board of Directors of the Bank be and is hereby authorized to take steps to create, issue, offer, and/or allot such number of shares, to or for the benefit of such person or persons as are in the permanent employment of the Bank as may be decided by the Board of Directors at any time, which give right to purchase or subscribe to not exceeding 10% of the issued capital of the Bank at every given time, under an Employee Equity Trust Scheme, in one or more tranches, at such price, at such point in time, and on such terms and conditions as the Board of Directors may decide; PROVIDED that the equity shares allotted pursuant to this Resolution shall in all aspects rank pari passu inter se as with the existing equity shares of the Bank, save and except that such equity shares shall not have right to vote, until such shares are fully vested on the respective beneficiaries; and that the Board of Directors for the purpose of giving effect to this Resolution be and is hereby authorized subject to all applicable laws, rules, and regulations, to do all such acts and deeds as it may in its absolute discretion, deem necessary for such purpose (including to amend or modify any terms of the Trust Scheme) without being required to seek any further approval of the Members of the Bank, and the Members shall be and are hereby deemed to have given their approval thereto expressly by authority of this Resolution.

5. Notes: 1. In accordance with the Companies & Allied Matters Act, the Directors hereby announce that Alhaji (Dr.) Umaru Abdul Mutallab, CON, Dr. Rilwanu Lukman, CFR, and Alhaji Aminu Dantata, CON have both attained the age of seventy (70) years and the approval of members for the two Directors to continue in office would be sought at the Annual General Meeting.

2. Proxy A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy in his stead. A proxy need not be a member of the Company. For the purpose of this meeting, a proxy form must be completed, stamped, and deposited at the office of the Registrar, Africa Prudential Registrars Plc. Formerly UBA Registrars Limited) 220B Ikorodu Road, Palmgrove, Lagos, Nigeria, not later than 48 hours before the time fixed for the meeting.

3. Nomination to the Audit Committee In accordance with Section 359(5) of the Companies & Allied Matters Act, Cap C20 2004, any member may nominate a shareholder as a member of the Audit Committee by giving notice in writing of such nomination to the Company Secretary at least 21 days before the Annual General Meeting.


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4. Closure of Register The Register of Members and Transfer Books of the Company will be closed on Monday December 9th to Friday December 13th, 2013, both dates inclusive, to enable the Registrars prepare the Register of Shareholders for the meeting.

By Order of the Board

Rukayat O. SalaudeenCompany Secretary/Legal AdviserJaiz Bank Plc.Kano HouseNo. 73 Ralph Shodeinde StreetCentral Business DistrictAbujaFederal Capital Territory30th October, 2013

Notice Of Annual General Meeting cont’d


Assalamu Alaikum Wa Rahamatullah Wa Barakatuhu. Fellow Shareholders, Invited Guests, Gentlemen

of the Press, Distinguished Ladies and Gentlemen;

stIt is indeed an honour and a privilege to welcome you all to the 1 Annual General Meeting (AGM) of Jaiz Bank Plc. I am particularly delighted because this is the first time the Bank is holding its AGM as a full fledged financial institution having waited for many years before obtaining the licence to operate as a regional financial institution. In my capacity as the Chairman of this great institution, I shall be presenting to you the Annual Report and Financial Statements for the financial year ended December 31, 2012.

It is pertinent however, at this juncture, to review the business environment within which our bank operated during the period. Such a review is apposite and most pertinent, given the fact that the period was marked by interplay of external and domestic socio-economic issues that impinged significantly on local businesses in general and the banking industry in particular. The global financial crisis, though receding during the period, still had its ripples widely spread while reforms and rescue packages remained ongoing in the local scene and other economic jurisdictions.

The Global EconomyThe fortunes of the global economy were ambivalent in the review period, with emerging market economies, especially China and India, dominating growth. Tepid growth in the advanced economies remained a cause for concern. Anxieties over a possible contraction of global growth were exacerbated by an uncritical recourse to fiscal consolidation in a number of globally important economies, and fear of competitive currency devaluations, as countries tried to address their current account imbalances. In both the Euro zone and the UK, the banking industry came under additional pressure with lawmakers proposing new disclosure rule that will expose bank profits to more tax.

Jaiz Bank, was able to tap a lot of opportunities in the industry. The bank was able to garner total deposits of N3.29 billion for the year ended December 31, 2012, whi l e investments amounted to N1.96 billion. Shareholders' fund rose by 53%, from N6.45 billion to N10.1 billion. recorded in 2012.

Alhaji (Dr.) Umaru A. Mutallab, CON Chairman

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Chairman’s Statement


There was a divergence in the economic performance of advanced, emerging and developing economies all through 2012. Economic uncertainties unleashed by the global financial crises sustained the weak recovery of the advanced economies. As a result, growth was sluggish and concerns about inflation were dominant on account of the rising oil and commodity prices in the international markets and fears of fiscal stress in the years ahead. On the other hand, robust economic growth was recorded in emerging markets and developing economies based essentially on strong domestic demand which offset weak export demand. Financial market conditions in the advanced economies were, however, more stable than in the preceding two years while some emerging economies were confronted with challenges posed by large volatile capital inflows.

In specific terms, the softening of economic recovery in the US reflected the renewed deterioration in the housing market and the lackluster labour market performance, with private sector job creation still weak. However, China's massive official stimulus packages, estimated at 14 per cent of GDP and focused on infrastructure and housing, did not only boost aggregate demand but also fed into a property bubble which the government is confronting. Consequent upon this, growth in China, which overtook that of Japan early in 2012 and made the former the world's second-largest economy, ended the year on a declining trend.

In the Euro Zone, a degree of calmness returned to the debt market following the approval of the European Financial Stability Facility (EFSF). Thus, despite high risk aversion in the market and the dependence of the region's banks on the wholesale markets, various countries of the Zone were able to make progress in fiscal reforms. On the other hand, the rebounding of commodity prices after their crash in the wake of the global financial crises kept pulling most developing economies to sustained recovery in 2012. For instance, according to the United Nations' 'World Economic Situation and Prospects 2013', the world price of crude oil fluctuated around US $78 per barrel during 2012, up from the average of US$79 for 2011. Most commodity prices similarly rebounded during 2012.

The Nigerian EconomyEconomic and structural reforms continued in the Nigerian economy all through 2012. This led to an impressive growth marked by continuing recovery of the capital market, improving stability in the banking sector, relatively stable foreign exchange market, relatively high inflation rate and declining stock of external reserves. Provisional data from the National Bureau of Statistics (NBS) indicated that the real Gross Domestic Product (GDP) grew by 6.99 per cent in the fourth quarter of 2012, up from 6.48 per cent recorded in the third quarter. The overall GDP growth for 2012 was estimated to be 7.09 per cent, compared to the revised growth rate of 7.76 per cent recorded in 2011. The non-oil sector remained the major driver of the overall growth contributing 8.21 percent as against 9.10 percent recorded in 2011. The non-oil sector was driven by agriculture, wholesale, telecommunication, real estate and services.

Agriculture witnessed a decline mainly because of the flood experienced globally towards the end of the year. It recorded a contribution of 3.62 percent at year end 2012 as compared to 5.68 percent in the year 2011.Wholesale and retail businesses witnessed a slight growth with a contribution of 20.61 percent in 2012 from 19.88 percent in 2011, representing an improvement of 3.67 percent.

Telecommunication sector recorded a contribution of 32.44 percent as against 36.39 percent in the year 2011.This is a result of declining service quality by the providers and also the attack on their infrastructures in the North-Eastern and North-Western parts of the country by insurgent attackers. Manufacturing sector recorded a contribution of 7.70 percent in 2012 as compared to 7.63 percent in 2011.

A benchmark oil price of US$70 per barrel was used in the 2012 budget. The price of Nigeria's Bonny-light grade averaged US$105.48 per barrel, compared with the preceding year's average of US$112.83 per barrel; an decline of about 6.5 per cent. Also, the OPEC Reference Basket (ORB) averaged US$109.45 per barrel in 2012, compared with US$107.46 per barrel in 2011. The highest level of ORB in 2012 was US$122.97 per barrel, which

15

Chairman’s Statement Cont’d


was attained in March, 2012. There was also a decline in oil production during the period as a result of pipeline vandalism by some individuals in the Niger Delta. Hence, crude oil production which stood at around 2.14 million barrels per day in December 2012 as compared to 2.44 million barrels per day by year-end 2011.

The External reserve position of the country is also worthy of note. The reserves during the period closed at USD44 billion as compared to the previous period (2011) closure at USD 33 billion. This is impressive as it recorded an appreciation of 33.33 percent. This may be due to other sources of income for the government which reduced the utilization of the external reserve during the period.

This trend was driven by positive market sentiments, weak US dollar, growing demand especially from India and China, drop in the US crude oil inventories and instances of geo-political tensions. The upshot of all these was stable foreign exchange inflow into the coffers of Government all through the year. This in turn reflected in the generally stable foreign exchange market-where the Naira remained largely within CBN target of N157/US$--with a few instances of breaching. The exchange rate appreciated only by about 1 per cent, from N155.10/US$ to N157/US$ on a year-on-year basis.

The reform policies and development efforts of the CBN impinged on the economy in several ways in 2012. These efforts include the activities of the Asset Management Corporation of Nigeria (AMCON), implementation of Special Purpose Vehicles (SPVs) for the stimulation of manufacturing, the real sector and infrastructural development. Two of these SPVs are: the N200 billion Small and Medium Enterprises Credit Guarantee Scheme (SMECGS) for the promotion of access to credit by manufacturers and SMEs and the USD500 million, Nigeria Incentive-Based Risk Sharing Agricultural Lending (NARSAL).

The apex bank also during 2012 released new guidelines on financial inclusion; set new limits for deploying POS machines towards achieving the cashless Lagos and other major cities in the country and the full implementation of the Nigerian Uniform Bank Account Number (NUBAN) scheme. .The capital market recorded significant recovery in 2012, after the decline associated with the global financial and economic crises in 2008/2009. The performance of the market during the period was influenced by a combination of several factors which either contributed to the recovery or slowed it down. The market recorded its highest performance in the first quarter 2012 as investors were taking positions ahead of the full year earnings season. The Nigerian Stock Exchange (NSE) All-Share Index closed the year 2012 at 28,087.80 basis points, up from 20,730.63 basis points at the end of year 2011, representing an appreciation of 35.49 per cent, compared to 17.07 per cent in 2011.

The market capitalization gained 37.31 per cent to close 2012 at N8.97 trillion, compared to the loss of 17.42 per cent in 2011 at N6.54 trillion. In terms of trading activities, total shares of 89.15 billion worth N1.32 trillion were traded in 2012, compared to a total volume of 89.58 billion worth N1.28 trillion traded in 2011. This showed a decline of 0.48 per cent in terms of volume, and 5.12 per cent appreciation in value compared to 2011. A breakdown of sectorial contribution to market capitalization as at December 31, 2012 shows that the finance and insurance sector contributed 2.83 percent.

The Bank's OperationsthThe Bank commenced business on the 6 of January 2012 and has rolled out various Sharia compliant products

and services. During the period under review, the products and services offered by the Bank have been patronized by the public irrespective of religion or tribe. This is commendable. Also, the Bank employed staff from the different religions and also from the various parts of the country.

Various products issued by the Bank include Ijara financing, Musharaka financing, Murabaha finances, Istisna etc depending on the needs of the various customers. Though during the year under review the Bank was unable to launch additional branches but as at today, I am happy to inform you that eight branches have come on board and we hope to commission additional branches in the coming year.

16




Financial ResultsThe Bank's first year of operation was a very challenging one, not only being a startup, but also a pioneer in a new finance services sector. This notwithstanding, Jaiz Bank, was able to tap a lot of opportunities in the industry. The bank was able to garner total deposits of N3.29 billion for the year ended December 31, 2012, while investments amounted to N1.96 billion. Shareholders' fund rose by 53%, from N6.45 billion to N10.1 billion. This is due to the recently concluded private placement exercise conducted by the bank which turned out to be a success. On the Income side, gross earnings during the period amounted N79.560 million, while an operating loss of N1.07 billion was recorded in 2012.

The major reasons for this lackluster performance were: lack of Sharia-compliant liquidity management instruments, hiccups experienced in joining the settlement and clearing system, challenges of fully implementing the core-banking software, learning curve etc.

The Future The Board has taken all the necessary steps to ensure that the Bank has obtained a national licence which will enable it operate in all the states of the federation including FCT. This is by way of private placement which has been very successful and soon the license will be obtained so as to give Nigerians a feel of the alternative banking model as an option.

Distinguished shareholders, I feel proud to say that even in the face of a very challenging operating environment, Jaiz Bank has maintained its drive in developing the nascent sector. As a bank, we are monitoring developments both in the local and global economy, with a view to tap into opportunities to propel us higher and higher.

Conclusion I have no doubt that the structures and strategies we have put in place are more than adequate for the challenges ahead of the Bank. I also believe that our Bank has all the potentials to grow and succeed.Ladies and Gentlemen, on behalf of the Board, I would like to thank you very sincerely for your support. The future though challenging, remains promising for all of us. May Allah bless you all.

Assalamu Alaikum.

Thank you.

Alhaji (Dr.) Umaru A. Mutallab, CON

Chairman

,


REPORT OF THE DIRECTORS For The Year Ended 31 December 2012

In compliance with the Companies & Allied Matters Act Cap C20 Laws of the Federation of Nigeria 2004, the Directors have pleasure in submitting to members their report together with the audited financial statement of Jaiz Bank Plc. (“Company”) for the year ended 31 December 2012.

1. Legal Form and Principal Activity The Bank is a public limited liability company, incorporated in 2003 as a holding company to engage in Islamic (non-interest) banking, Takaful insurance, and other Sharia based economic activity. During its Annual General Meeting held in August 2011, the Members of the Company approved a change of name and objects, which saw the Company metamorphosed from Jaiz International Plc to Jaiz Bank Plc.

2. Financial Summary

N'000

Loss for the Year after tax (726,653)

Paid-up Share Capital 11,747,297

Share Premium 632,289

Retained Earnings (2,297,287)

Risk regulatory reserve 19,567

Total Owner's Equity 10,101,866

3. The Board of Directors Below is the list of the Directors of the Bank during the year:

DIRECTORS CAPACITY REMARKS

Alhaji (Dr.) Umaru Mutallab CON Chairman

Mohammed Mustapha Bintube Ag. Managing Director/CEO (Retired)

Md. Setaur Rahman Chief Operating Officer (Retired)

Alhaji (Dr.) Lateef Adegbite CON Non-Executive Director (Deceased)

Alhaji (Dr.) Aminu Dantata CON Non-Executive Director

Mallam Falalu Bello OFR Non-Executive Director

Alhaji Umaru Kwairanga Non-Executive Director

Mallam Nafiu Baba-Ahmed Non-Executive Director

Alhaji Garba Aliyu Hungu Non-Executive Director

HRH (Engr.) Bello Sani OON Non-Executive Director

Prof. Tajudeen Adebiyi Non-Executive Director

Dr. Rilwanu Lukman CFR Non-Exec. /Independent Director

Alhaji Lawal Jari Non-Executive DirectorAlhaji (Dr.) Muhammadu Indimi Non-Executive Director Appointed with effect from December 13, 2012

Dr. Haseebullah Siddiqui Non-Executive Director Appointed with effect from December 13, 2012

During the year under review, the membership of the Board of Directors was predominantly 15. The Bank however lost one of its members towards the tail end of the year, Late Alhaji Abdullateef Adegbite. We pray God Almighty to repose the soul of the Departed. The Board of Directors also recorded the retirement of the former Chief Operating Officer, Mr. Md. Setaur Rahman and the former Managing Director /CEO of the Bank, Mr. Mohammed Mustapha Bintube after a meritorious service during the last quarter of 2012, and the first half of 2013


respectively. In view of this, the former General Manager in charge of Business Development, Hassan Usman, was elevated to the status of an Executive Director, and consequently appointed as the Acting Managing Director/CEO of the Bank up until the appointment of the incumbent Managing Director/CEO, Muhammad Nurul Islam recently.

Muhammad Nurul Islam (MD/CEO)- Is an Islamic Finance expert, with experience is Islamic Banking Experience, spanning over 25 years in one of the world's most successful Islamic Bank, Islami Bank Bangladeshi Limited (IBBL), where he served in various capacities including Senior Vice President Information & Communication Technology Division; Executive Vice President Rural Development Division; Executive Vice President Project Investment Division; Executive Vice President Research, Planning & Development Division; Executive Vice President Research, Planning, Development & Marketing Division; Deputy Managing Director, Business Promotion & Marketing Division; Deputy Managing Director, Internal Control & Compliance; Deputy Managing Director, International Banking; and finally, Deputy Managing Director, Development before joining Jaiz Bank. Muhammad Nurul Islam is an Associate of the Institute of Bankers, Bangladesh; CASB-Center of the International Cooperation for Computerization, Japan (CICC); and holds a Masters degree in Business Administration from the Institute of Business Administration (IBA), University of Dhaka.

In accordance with the Company's Articles of Association, Alhaji Mohammed Indimi was appointed to fill the casual vacancy created by the demise of Late Alhaji Abdullateef Adegbite, Ahaji Musa Bello Abdullahi was nominated as Dr. Rilwanu Lukman's Alternate, whilst Mr. Haseeb Ullah Siddiqui was appointed as a representative of Islamic Development Bank (IDB) on the Bank's Board during the year under review. The appointment of Alhaji Mohammed Indimi; Mr. Haseeb Ullah Siddiqui; Mr. Muhammad Nurul Islam; and Mallam Hassan Usman is hereby presented to members for ratification; whilst Alhaji Musa Bello is hereby presented for election as Dr. Rilwanu Lukman's Alternate.

4. Statement of Directors' Responsibilities for Accounts The Directors are responsible for the preparation of the financial statements which give a true and fair view of the state of affairs of the Bank at the end of each financial year and of the profit or loss for that year and comply with the provisions of the Companies and Allied Matters Act CAP C20 LFN 2004, and other relevant regulations.

These responsibilities include ensuring that:Ÿ Adequate Internal Control procedures are instituted to safe guard assets, prevent and detect fraud Ÿ and other irregularities;Ÿ Proper accounting records are maintained;Ÿ Applicable accounting policies are used and consistently applied;Ÿ The financial statements are prepared on the going concern basis unless it is inappropriate to Ÿ presume that the Bank will continue in business.Ÿ The Directors take responsibility for the annual financial statements. Ÿ The Directors are of the opinion that the financial statements give a true and fair view of the state of the Ÿ financial affairs of the Bank and of its loss for the year.Ÿ Nothing has come to the attention of the Directors to indicate that the Company will not remain as a Ÿ going concern for at least twelve months from the date of this statement.

REPORT OF THE DIRECTORS cont’d For The Year Ended 31 December 2012



5. Directors' Interest The names of the Directors and their interests in the issued share capital of the Bank as at December 31, 2012 are as follows:

For the purposes of Section 277 of the Companies and Allied Matters Act CAP C20 LFN 2004 on the issue of disclosable interests, Alhaji Umaru Kwairanga is the Managing Director of Finmal Financial Services Limited, the Lead Issuing House that was responsible for packaging the Bank's Private Placement of Shares, whilst Dr. Abdul Mutallab, CON is the Chairman of the Issuing House.

6. Employment and Employees

a) Employee Involvement and Training Management, professional and technical expertise are the Bank's major assets and investment in their training, both locally and overseas, continues. Formal and informal channels of communication are employed in keeping staff abreast of various factors affecting the Bank's performance.

b) Employment Policy The Bank's recruitment policy, which is based solely on merit, does not discriminate against any person on the grounds of Religion, Tribe, or Physical Disability. The Bank has no disabled person on its employment currently but in the event of any member of staff becoming physically challenged, the Bank would make efforts to ensure that his/her employment with the Bank is sustained.

c) Health Safety and Welfare at Work Health and safety regulations are in force within the Bank's premises and employees are aware of existing regulations. The Bank provides subsidy to all levels of employees for medical, transportation, lunch, to enhance their welfare and improve productivity.

7. Post Balance Sheet Events There were no post balance sheet events which could have a material effect on the state of affairs of the Bank as at 31 December 2012 or the profit for the year ended on that date that have not been adequately provided for or disclosed.

20

INDIRECT HOLDING


8. Equity Range Analysis RANGE NO. OF HOLDERS HOLDERS UNITS UNITS UNITS HOLDERS % CUMULATIVE % CUMULATIVE

1 - 1,000 6,731 25.20% 6,729,800 6,729,800.00 0.06% 6,729,800

1,001 - 5,000 9,548 35.74% 38,833,900 32,104,100.00 0.27% 38,833,900

5,001 - 10,000 3,082 11.54% 68,763,300 29,929,400.00 0.25% 68,763,300

10,001 - 50,000 3,926 14.70% 220,320,375 151,557,075.00 1.29% 220,320,375

50,001- 100,000 1,590 5. 95% 370,766,430 150,446,055.00 1.28% 370,766,430

100,001 - 500,000 1,290 4.83% 731,592,125 360,825,695.00 3.07% 731,592,125

500,001-999,999,999,999,999 548 2.05% 11,747,297,050 11,015,704,925.00 93.77% 11,747,297,050

26,715 100.00% 11,747,297,050.00 100.00%

9. Shareholders With 5% Units and Above

S/N NAME HOLDING %

1 JAIZ FOUNDATION 14.791,737,694,081

2. DANTATA AMINU ALHASSAN 12.821,505,644,650

3. MUTALLAB UMARU ABDUL 8.66 1,017,841,300

4. ISLAMIC DEVELOPMENT BANK 1,002,160,494 8.53

5. DANGOTE INDUSTRIES LTD. 1,000,000,000 8.51

6. ALTANI INVESTMENT LIMITED 800,000,000 6.81

7. INDIMI MUHAMMADU 679,950,000 5.79

10. Shareholding History

Authorized Share Capital Increase Issued & Fully Paid Capital Increase

Year Units From To Units From To

2003 2,500,000,000 - 2,500,000,000 2,500,000,000 - 2,500,000,000

2004 - - - - - -

2005 - - - - - -

2006 13,000,000,000 2,500,000,000 13,000,000,000 - - -

2007 - - - - - -

2008 - - - 1,514,429,720 2,500,000,000 4,014,429,720

2012 - - - 7,732,867,330 4,014,429,720 11,747,297,050

11. Donations and Sponsorship Donation made during the year under review was N 1,268,026.92



22

12. Asset Values Information relating to the Bank's Assets is detailed in the Notes to the Financial Statements.

13. Audit Committee Pursuant to Section 359(3) of the Companies and Allied Matters Act, Cap C20 LFN 2004, the Company has in place an Audit Committee which comprised three shareholders and three directors as follows:

Alhaji Idris Onaolapo Sulaimon - Shareholder Representative -ChairmanProf. Ibrahim Umar - Shareholder RepresentativeAlhaji Abdullahi Ibrahim Umar - Shareholder RepresentativeMallam Falalu Bello, OFR - Non-Executive DirectorProf. Tajudeen Adebiyi - Non-Executive DirectorAlhaji Tajuddeen Dantata - Non-Executive Director

The functions of the Audit Committee are as laid down in Section 359(6) of the Companies and Allied Matters Act, Cap C20 LFN 2004.

14. Auditors Messrs Ahmed Zakari & Co. having indicated their willingness to continue in office will do so in accordance with Section 357(2) of the Companies and Allied Matters Act, CAP C20 LFN 2004.A resolution will be proposed at the Annual General Meeting to Authorize the Directors to determine their remuneration.

By Order of the Board

Rukayat O. SalaudeenCompany Secretary/Legal AdviserJaiz Bank Plc.Kano HouseNo. 73 Ralph Shodeinde StreetCentral Business DistrictAbujaFederal Capital Territory30th October, 2013



23

MD/CEO’S Report

Distinguished Shareholders, Ladies and gentlemen, it is with great pleasure that I, on behalf of the Board of Directors, welcome you to the 1st Annual General Meeting of Jaiz Bank Plc and present to you our financial statements for the year ended 31 December 2012.

This is the first Annual General Meeting of Jaiz Bank Plc as a bank after metamorphosing from the Jaiz International Plc with a regional license to operate in North East, North West and FCT.The audited and published financial statements for 2012 has marked another era in the history of Nigerian Banking Industry because Jaiz Bank is the first financial institution of its kind in Nigeria offering a different flavor from the conventional banking system.

During the year under review, we continued to drive our competitive edge through the use of unique and robust IT platform in delivering exceptional customer services to our clientele. This, coupled with our strategically distributed branches, virtual branch network and product offering, are exciting the market. We have also continued to make huge investments in training for service excellence as a strategy to consolidate our performance despite our take off challenges. Thus, our service channels, especially the e-platforms (e-products) are being strengthened for greater efficiency and effectiveness towards serving our esteemed customers.

Our staff, continue to be a top priority in our drive for exceptional performance. We will therefore continue to place a very high premium on staff quality, welfare and training-a strategy that enabled us to attract and retain some of the best and brightest in the industry.

While we thank our loyal shareholders, customers, and other stakeholders for their continued support and patronage, we will continue to ensure that our people are appropriately motivated to continue to deliver world-class services. This, we believe will help us sustain our growth and profitability in the years to come.

we continued to drive our competitive edge through the use of unique and robust IT platform in delivering exceptional customer services to our clientele. This, coupled with our strategically distributed branches, virtual branch network and product offering, are exciting market.

Hassan Usman Ag. Managing Director/CEO


24

MD/CEO’S Report CONT’D

Similarly, our believe and commitment to corporate social responsibility and good corporate governance which is one of the guiding principles of the institution will remain firm. This is why in the period under review your bank has incorporated Jaiz Charity and Community Development Foundation to drive our CRS initiatives as a way of giving back to the society in which we operate. We strongly believe that these initiatives will make positive impacts on the wellbeing of our various stakeholders.

I am confident that the effort to keep our steady growth will be sustained and we shall soon rise to be one of the most successful banks in Nigeria.

Finally, I thank my colleagues on the Board for their untiring support, encouragement and cooperation; and request that these be sustained to enable us perform and take the bank to greater heights.

Hassan UsmanAg. Managing Director/CEO


25

Report Of The Audit Committee

In accordance with the provisions of Section 359(6) of the Companies and Allied Matters Act, cap C20 LFN 2004, we confirm that the accounting and reporting policies of the bank conformed with statutory requirements and agreed ethical practices.

In our opinion, the scope and planning of both the internal and external audits for the financial year ended 31 December 2012 were adequate and we have received the auditors' findings on management matters which we have reviewed, discussed and were satisfied with the departmental responses thereon.

The Committee reviewed the Audit Report on insider related party transactions and were satisfied with their status as required by the Central Bank of Nigeria (CBN).The internal control system of the Bank was also in our opinion, being constantly and effectively monitored.

Dated this 19th Day of March, 2013

(Chairman, Audit Committee)

Members of the Audit Committee:

Alh. Idris Onaolapo Sulaimon (Shareholder's representative) - (Chairman)

Prof. Ibrahim Umar (Shareholder's representative) - Member

Alhaji Abdullahi Ibrahim Umar (Shareholder's representative) - Member

Alhaji Tajudeen Dantata (Non-Executive Director) - Member

Malam Falalu Bello, CON (Non-Executive Director) - Member

Prof. Tajudeen Adebiyi (Non-Executive Director) - Member


26

Risk Management

Jaiz Bank is focused on improvement of its Risk Management platform and practices with the aim of optimal protection to the wealth of its shareholders in line with NIFI-non interest financial institution mandate and Shariah jurisdictions. The mandate considers a holistic approach in managing its assets and liabilities .Risk

management division is responsible for the establishment of policies and procedures geared towards enhancement of our capacity to provide greater value to shareholders while effectively dealing with risk and uncertainties associated with our business thereby enhancing our competitive advantage.

The Risk management group consists of:

Ÿ Investment Risk Department

Ÿ Market and Liquidity Risk Department

Ÿ Shariah Non-compliance and Other Unique Risks Department

Ÿ Operational Risk Department

Investment Risk DepartmentInvestment risk is the risk of loss resulting from the failure of a customer or counter party to meet its obligations under a financial contract; it arises principally from lending, trade finance, treasury and leasing activities. Investment risk can also arise as a result of crystallization of any of our off balance sheet transactions. Our Investment risk department verifies and manages the credit process from origination to recovery; monitoring and controlling all such risk by adhering to sound policies and processes that have been laid down to guard against their (risk) manifestation in tandem with product specific risk associated with the NIFI mandate. The department's responsibilities include proper treatment of equity (shirkat) investment together with sale (bai') and rental (Ijarah) based financing. We measure our obligor's risk using the IRG-Investment Risk Grading. This enables us to ascertain the eligibility of each customer/request, aids us in appraising the potential of the asset financing and allow us assess the safety of the facility in line with the bank's risk appetite as set by the BOD.

Market and Liquidity Risk DepartmentMarket Risk is the risk of loss resulting from shifts in the value of a trading or an investment portfolio due to changes in market factors such as stock price, profit rates, foreign exchange rate and commodity prices particularly in salam (advance sale). The market risk unit of Jaiz bank allows disciplined risk taking within a frame work of well-defined risk appetite that enables the bank to enhance shareholder's wealth while retaining its competitive advantage. As NIFI, the Bank is exposed to Rate of Return risk in the context of their overall Balance sheet exposures. An increase in benchmark rates may result in Investment Account Holders' (IAH) having expectations of a higher rate of return failure of which can turn to a Displaced commercial risk (DCR). Displaced Commercial Risk means the bank may be under market pressure to pay a return that exceeds the rate that has been earned on its assets financed using IAHs funds. If the earned return is below that paid by competitors, Jaiz Bank may decide to waive their rights to their entire Muḍārib share of profits in order to satisfy and retain their fund providers and dissuade them from withdrawing their funds. The creation of a Profit Equalization Reserve (PER), which is the amount appropriated by a NIFI out of their gross income before allocating the Muḍārib share, acts as a buffer in periods of low earning and helps to maintain a certain level of minimum return on investment for IAH and increase owners' equity. The basis for computing the amounts to be so appropriated is pre-defined and applied in accordance with the contractual conditions accepted by the IAH and after formal review and approval by the Board of Directors (BOD). In addition to PER, the Bank also plans to use Investment Risk Reserve (IRR) . IRR is the amount appropriated by NIFI out of income of IAHs, after allocating the Muḍārib share, in order to cushion the effects of the risk of future investment losses on Investment Accounts.

Liquidity Risk is the risk that the bank does not have sufficient financial resources to meet its obligations as they fall due, or will have to meet the obligation at excessive cost. This risk arises from mis-matches in the timing of cash flows. Funding risk (a form of liquidity risk) arises when the liquidity needed to fund illiquid asset positions cannot be obtained at the expected terms and when required.


Risk Management cont’d

27

The objective of the Bank's liquidity risk management is to ensure that all anticipated funding commitments can be met when due and that access to funding sources is coordinated and cost effective.As a protective measure against liquidity risk, the bank shall solicit and attract various sources of funds to channel to their financing and investment activities in Shariah compliant instrument of money and capital market. The bank, in conjunction with the regulators, is working on the modalities and access to this market is expected soon.

Shariah Non-compliance and Other Unique Risks DepartmentShariah non-compliance risk is the risk that arises from failure to comply with the rules of Shariah and its principles determined by the Bank's Advisory Committee of Experts (ACE) and Central Bank's Financial Regulatory Advisory Council of Experts (FRACE). Shariah Compliance is critical for NIFIs' operations and such compliance requirements must permeate throughout the organizations and their products and activities. The bank is strictly determined to comply with Islamic Commercial jurisprudence in all its risk activities.Other unique risks, as follows, are exclusively associated with NIFIs that the Bank manage by dint of well- accomplished follow-up and nursing pre and post disbursement modalities.

a. Risk of continuity of usufruct in ijarah since a fundamental ethical axiom in Ijarah is that “rent is a price of usufruct; it is due as long as usufruct exists” the same is also applicable to Musharakah may happen due to probability inferior valuation.b. Reputational risk is due to breach of Shariah compliance which may result to loss of shareholders and Investment Account Holder's confidence. c. Ownership Risk the risk associated with owning a property, asset or commodity especially in Murabaha and Ijarah modes of finance. The ethical Bank must purchase an asset/commodity/service and then sell or hire it to the Customer.d. Legal, fiduciary and regulatory risks are also managed appropriately. e. Displaced Commercial Risk as discussed in market and liquidity risk is very unique to jaiz as NIFI that arise due to failure to meet Investment Account Holder's expectation that may result into deposit withdrawal. f. Rate of Return Risk (as discussed in Market Risk)

Operational Risk Department Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people, systems and external events. This definition includes legal risk but excludes reputational risk. Due to its status as a Non Interest Financial Institution, Jaiz Bank has also incorporated possible causes of loss resulting from Shariah Non-compliance and the failure in their fiduciary responsibilities. The bank recognizes the significance of operational risk, which is inherent in all areas of our business. Operational risk is managed within acceptable levels through an appropriate level of management focus and resources.

The strength and value drivers of the risk division stem from a comprehensive risk management framework that covers all risks in the Bank with a robust investment risk management mainly based on IFSB –Islaminc Financial Services Board guidelines and in line with industry best practices and Shariah dictums.

Tauhidur RahmanChief Risk Officer


Corporate Governance

The Central Bank of Nigeria by its Circular BSD/04/2006 of March 2, 2006 released a new Corporate Governance Code which is aimed at protection of equity ownership, enhancement of sound coporate governance practice and promotion of industry transparency. The code requires Banks to include in their

annual report and accounts, compliance report to the Code of Corporate Governance. In compliance therefore, we state below our Compliance Report as at December 31st 2012.

Compliance StatusIn line with the provisions of the new code, the Bank has put in place a robust internal control and risk management framework that will ensure optimal compliance with internationally acceptable corporate governance practices in all its operations. In the opinion of the Board of Directors, the Bank has complied in all material respects with the new code of Corporate Governance during the 2012 financial year. Statutory BodiesApart from the CBN Code of Corporate Governance, which the Bank has striven to comply with since inception, it further relies on other regulatory bodies to direct its policy thrust on Corporate Governance. Shareholders' MeetingThe shareholders remain the highest decision making body of Jaiz Bank Plc, subject however to the provisions of the Memorandum and Articles of Association of the Bank, and any other applicable legislation. At the Annual General Meetings (AGM), decisions affecting the management and strategic objectives of the bank are taken through a fair and transparent process. Such AGMs may be attended by the shareholders or their proxies and proceedings at such meetings are usually monitored by members of the press and representatives of the Central Bank of Nigeria, Nigerian Deposit Insurance Corporation, the Corporate Affairs Commission, and the Securities and Exchange Commission.

Ownership StructureAlthough in prior years, the material shareholding of some State Governments in the Bank was slightly above 18%, the Bank has now diluted the shareholding structure consequent upon the conclusion of its recent private placement in the 2012. During the year Government holding has reduced to 12% from 18%.

Board of DirectorsDuring 2012, membership of the Board of Directors was 15. The 15-member Board of Directors consists of the Chairman, Managing Director/Chief Executive Officer (MD/CEO), Chief Operating Officer and twelve (12) Non-Executive Directors (NEDs). The Chairman of the Board is a separate person from the Managing Director/Chief Executive Officer and does not participate in the day to-day running of the Bank. We confirm that the Chairman of the Board is not a member of any Board committee. Appointment to the Board is made by the shareholders at the Annual General Meeting upon the recommendation of the Board of Directors.

Membership of the Board of Directors Tenure of OfficeThe tenure of office of a Non-Executive Director is three (3) terms of four (4) years each i.e. twelve years while the tenure of an Executive Director is a renewable two (2) terms of five (5) years each.

Delegation of PowerThe Board of Directors delegates any of their powers to Committees consisting of such members of their body as they think fit and have oversight functions on the Committees.The Board also delegates authority to Executive Management.

In line with best practice, the ongoing reforms of the Banking Industry’s corporate governance framework particularly pertaining to the obligation of the Board of Directors transcends just providing strategic guidance to the Bank, but also stresses the importance of the responsiveness of the Board. The key factor in this regard is ensuring that the Board is accountable to the Bank and its shareholders.


Corporate Governance cont’d

Standing Board CommitteesThe Board carries out the above responsibilities through six (6) standing committees whose terms of reference it reviews regularly. All the committees have clearly defined terms of reference, which set out their roles, responsibilities and functions, scope of authority and procedures for reporting to the Board.The Board has delegated the responsibility for the day-to-day management of the Bank to the MD/CEO, who is supported by his Executive Management team.

In Compliance with code No. 6 on industry transparency, due process, data integrity and disclosure requirements, the Board recently reconstituted its standing Committees to assist it in its oversight functions as follows:Ÿ The Board Audit Committee;Ÿ The Board Investment Committee; Ÿ The Board Risk Management Committee;Ÿ Board Finance and General Purpose Committee;Ÿ Board Corporate Governance Committee; Ÿ Executive Management Committee.

Board Audit Committee This is a Board Committee with oversight responsibilities on Internal Control system, financial reporting, and regulatory compliance function. Other responsibilities include:Ÿ Examining the External Auditors report and making recommendations thereon;Ÿ Examining CBN/NDIC Examination reports and making recommendations thereon;Ÿ Receiving and reviewing on Quarterly basis, Internal Auditor's reports of the Bank;Ÿ Reviewing the Scope and Planning of annual audit requirements;Ÿ Reviewing the effectiveness of the Bank's Accounting System and Internal Control;Ÿ Making recommendations to the Board of Directors on the appointment, renewal and remunerations of the External Auditors of the Bank; andŸ Reviewing the integrity of the Bank's financial reporting and protecting the independence and objectivity of the External Auditors.

The Committee comprises of a total number of six (6) members made up of three (3) Directors and three (3) Shareholders as follows:

Shareholders 1) Alh. Idris Onaolapo Sulaimon Chairman2) Prof Ibrahim Umar Member3) Alhaji Abdullahi Ibrahim Umar Member Directors 4) Mallam Falalu Bello, OFR Member 5) Professor Tajudeen Adebiyi Member6) Alhaji Muhammadu Indimi Member Quorum: Four (3) members one of which must be from the shareholders.

Board Investment CommitteeThe primary role of the committee shall be to develop, monitor and review the efficiency of the Bank's Investment policies, whilst also evaluating and or approving all investment proposals beyond the powers of the Management.


The responsibilities of the Committee also include:

Ÿ Evaluation and approving all investments within its powers delegated by the Board;Ÿ Evaluation and recommending all investments beyond its powers to the Board;Ÿ Review of investments portfolio in line with set objectives.Ÿ Review of classification of investments of the Bank based on prudential guidelines on quarterly basis;Ÿ Approving the restructuring and rescheduling of investments within its powers;Ÿ Write-off and grant of waivers within powers delegated by the Board; and Ÿ Periodic review of Investment Manuals and Guidelines.

MembershipThe Committee has eight (8) members comprising of five (5) Non-Executive Directors, and other members of Executive Management as follows:

1. Malam Falalu Bello Chairman2. Alh Garba Aliyu Hungu Member 3. Alh Lawal Jari Member4. Alh Musbahu Bashir Member 5. Alh Tajudeen Dantata Member6. Managing Director/CEO Member7. Chief Operating Officer Member8. Chief Financial Officer Member 9. Chief Risk Officer In attendance 10. Company Secretary/Legal Adviser Secretary

QuorumThree (3) members with at least two (2) Non-Executive Directors present in person, by electronic means, or by proxy.

Board Risk Management Committee (BRMC)The Risk Management Committee has the responsibility of considering and recommending the Bank's overall risk appetite for Board approval, and in particular:

Ÿ Overseeing the overall Risk Management of the Bank;Ÿ Review periodically, Risk Management objectives and Policies for consideration of the full Board;Ÿ Approve the Risk Rating Agencies, Credit Bureau and other related services providers to be engaged by the Bank;Ÿ Approve the Internal Risk Rating Mechanism;Ÿ Review the Risk compliance reports for regulatory authorities;Ÿ Review and approve exceptions to the Bank's Risk policiesŸ Review of policy violations on Risk issues at Senior Management level;Ÿ Certify Risk reports for investments, operations, market/liquidity subject to limits set by the Board.

MembershipThe Committee has five (5) members; four (4) Non-Executive Directors and one (1) Executive Director as follows:

1. Alh. Lawal Jari Chairman2. HRH Engr. Sani Bello Member 3. Alh Umaru kwairanga Member4. Nafiu Baba Ahmed Member5. Dr Rilwan Lukman Member

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6. Managing Director/CEO Member 7. Chief Operating Officer Member8. Chief Risk Officer In attendance9. Company Sec/Legal Adviser Secretary


Board Finance and General Purpose CommitteeThe Finance & General Purpose Committee of the Board has oversight function on capital and operational expenditures of the Bank as well as staff matters.

It's terms of reference are as follows:

Ÿ To consider and advise the Board of Directors on all aspects of the Bank's finances;Ÿ To consider and make recommendations to the Bank on the annual estimates of income and expenditure, other budgets and the financial forecasts for the Bank;Ÿ To consider and make recommendations to the Board of Directors for its approval, the framework for expenditure on capital items and to review the list of priorities within the framework;Ÿ To consider, review and report on the periodic management accounts of the Bank, and to also advise the Board of Directors on the year-end accounts.Ÿ To consider and make representations to the Board of Directors on the solvency of the Bank and the safeguarding of its assets;Ÿ To consider and advise the Board of Directors on any relevant taxation issues;Ÿ To advise the Board of Directors generally on borrowings. Ÿ To advise the Board of Directors on the Bank's policy related to grants, loans or other payments to staff within a limit to be agreed. Ÿ To consider and recommend financial procedures, capitalisation and depreciation and treasury Ÿ management policies.Ÿ To consider and monitor proposed capital expenditure projects above the thresholds set for Management by the Board and advise the Board of Directors on their financial implications.Ÿ To consider and advise the Board of Directors on employment policy, approve personnel policies and procedures and monitor staffing issues.Ÿ To revise personnel policies for Board Approval, reviewing job descriptions, establishing or periodically reviewing the staff salary structure and staff benefits package.Ÿ The Committee also undertakes a review of its performance and set targets for the following year.

MembershipThe membership of the Committee is five (5) made up of three (3) Non-Executive Directors, two (2) Executive Directors as follows:

1. Alh Umaru kwairanga Chairman2. Alh Garba Aliyu Hungu Member (Mondays and Thursdays)3. Alh Mukhtar Hanga Member4. Alh Muhammadu Indimi Member5. Alh Musbahu Bashir Member6. Managing Director/CEO In attendance7. Chief Operating Officer In attendance8. Chief Financial Officer In attendance 9. Company Secretary/Legal Adviser Secretary



Board Corporate Governance Committee (BCGC) The BCGC is charged with oversight responsibilities on issues of Corporate Governance, Continuity/Succession Planning, Board Selection, Composition, and Evaluation, Committee Selection, Composition and Evaluation, as Well as Board and Executive Management remuneration. The responsibilities of the Committee therefore includes the followings:

Ÿ The Committee handles matters relating to Board's remunerations and Appointment;Ÿ Determine the remuneration, incentive arrangements and benefits of the Chairman of the Board;Ÿ Determine the incentive arrangements and benefits of the Executive and Non- Executive Directors of the Ÿ Bank within the limits imposed by Regulatory Authorities;.Ÿ Review and submit to the full Board, recommendations concerning Executive Directors compensation Ÿ plans and perquisites and ensure that their packages are competitive;Ÿ Recommend any proposed change(s) to the Board;Ÿ Keeps under review the need for appointments;Ÿ Prepare a description of the specific experience and abilities needed for each Board appointment, Ÿ consider candidates for appointment as either Executive or Non-Executive Directors and recommend Ÿ such appointments to the Board; Ÿ Review the tenor of the Non-Executive Directors on the Board and Board Committee assignments and Ÿ other commitments to the Bank;Ÿ Recommend to the Board renewal of appointment of Executive/Non Executive Directors at the end of Ÿ their 1st and/ 2nd term of office based on the outcome of review of Directors performance; Ÿ Advise the Board on succession planning regarding the roles of the Chairman, Chief Executive Officer Ÿ and Executive Directors; Ÿ Advise the Board on the contents of the Directors Annual Remuneration Ÿ Report to shareholders;

Membership:1. HRH Eng Sani Bello Chairman2. Alh Mukhtar Hanga Member3. Alh. Tajudeen Dantata Member4. Nafiu Baba Ahmed Member5. Dr. Rilwan Lukman Member6. Prof. T.A. Adebiyi Member7. Alh (Dr.) Umaru Mutallab In attendance 8. Managing Director/CEO In attendance9. Company Sec/Legal Adviser Secretary Quorum:A majority of the members constitute a quorum.Meeting:The Committee meets once in a year or whenever required.

Executive Management CommitteeThe purpose of the Executive Committee is to assist the Managing Director in carrying out the responsibility of the day-to-day management of the Bank’s business operations. The Committee has the following functions and specific Term of Reference:



Ÿ Formulating the Bank’s general policies and strategies, which set out the short, medium and long term direction of the Bank;Ÿ Translating the Board’s general policies and strategies into detailed business plans;Ÿ Reviewing and assessing the Bank’s financial and operational performances through periodic feedback and reports from Audit Committee, Risk Management Committee and the Management Team;Ÿ Reviewing and assessing the Bank’s investment and asset portfolio management and ensure its consistency with the Bank’s business policies and strategies.Ÿ Review Investment Policy recommendations for Board approval; Ÿ Approve individual Investment exposure in line with its approval limits;Ÿ Approve portfolio plan/strategy for the Bank; Ÿ Review quarterly Investment risk reports and remedial action plan; Ÿ Co-ordinate the Bank's response to material events that may have an impact on the Investment portfolio; and Recommend the amendment on the policy to the BIC as and when necessary.

Membership:The Committee is chaired by the Managing Director and consists of all the Executive Directors. The Company Secretary is the Secretary of the Committee.

Remuneration of DirectorsThe Shareholders, at the Bank's Annual General Meeting, set and approve the annual remuneration of members of the Board of Directors. The annual emoluments of the Directors are stated in the Annual Report.

Internal ControlThe Bank has in place a strong Internal Control function that carries out its internal audit exercise. Internal Control Department is insulated from undue influence from the Executive Management as it reports to the Board through a dotted reporting line to the Managing Director/CEO.

Management CommitteesThere are basically three management committees comprising of senior management staff of the Bank. The committees are the Management Committee, the Assets and Liability Committee and the Management Investment Committee. Management also recently established the Management Compliance Committee and Operations Risk Management Committee.

The committees' main functions are to identify, analyze, synthesize and make recommendations on risks arising from day to day activities of the Bank and to ensure that risk limits as contained in the Board and Regulatory policies are complied with at all times. The committees further provide inputs for the respective Board Committees and also ensure that recommendations of the Board Committees are effectively and efficiently implemented. They meet as frequently as risk issues occur to take actions and decisions within the confines of their powers.

Management Investment CommitteeThe Management Committee (MIC) reviews and approves investments up to its limit and an amount above its limit goes to the Board Investment Committee for review and approval. The committee meets periodically on a need basis. Membership of the Management Investment Committee (MIC) is as follows:

Chairman: Managing Director/Chief Executive OfficerMembers: Head, Business Development Head, Corporate Services Company Secretary/Legal Adviser Head, Corporate & Retail Banking Head, Risk Management Secretary: Representative of Risk Management Department



Functions of the CommitteeŸ Providing direction on risk assets creation for the Bank;Ÿ Consider for approval, newly booked, restructured and/or enhanced investments; Ÿ Renewal of expired investment and forbearances which are above the approval limit of the Chief Executive;Ÿ Ensure compliance and enforcement of investment standards as contained in the Investment Policies and Guidelines of the Bank; Ÿ Recommend newly booked, restructured and/or enhanced investments beyond the powers of the MIC to Board Investment Committee or the full Board for approval.

Assets and Liability CommitteeThe Assets and Liability Committee meet periodically to consider the financial position of the Bank. It manages the assets and liabilities of the Bank, measures the performance of same within budgetary limits and assesses regulatory compliance in this regard.

Membership of the Assets and Liability Committee (ALCO) is as follows:

Chairman: Managing Director/Chief Executive OfficerMember: Head, Business Development Head, Corporate Services Head, Treasury Department Head, Corporate & Retail Banking Head, Operations Department Head, Financial Control Department Head, Strategy & Corporate Development Department Secretary: Head, Risk Management Department Functions of the Assets and Liability CommitteeŸ Ensure optimal liquidity and pricing;Ÿ Identify & shore up weak points in the Bank's Assets and Liability profiles;Ÿ Identify opportunities in the economy.

Management Committee (MANCO)The Management Committee oversees the establishment of a formal written policy on the overall risk management system and provides guidelines and standards to administer the acceptance and on-going management of all risks. The committee also ensures compliance with established policies through periodic review of reports provided by management, on periodic basis, the committee re-evaluates the risk management policy of the Bank to accommodate major changes in the internal and external factors. The committee meets monthly to review its activities.

Membership of the committee is as follows:Chairman: MD/CEOMember: All Executive Directors Head, Corporate Services Company Secretary/Legal Adviser Head, Risk Management Head, Operations Head, Credit Risk Department; Head, Information Technology Department;



Corporate Governance Cont’d

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Head, Corporate Communications Department; Head, Strategy & Corporate Development Department; Head, Financial Control Department; Head, Internal Audit Department Head, Human Resources Department Head, Corporate & Retail BankingSecretary: Representative of the Bank's Secretariat

Functions of the Committee:Ÿ Review and update all existing enterprise risk management policies and procedures;Ÿ Champion data update initiatives;Ÿ Implement the strategy of the bankŸ Determines Information Technology platform requirements including software for Enterprise Risk Management;Ÿ Implement Enterprise Risk Management in the Bank.

Risk ManagementThe Board of Directors and Management of Jaiz Bank Plc are committed to establishing and sustaining tested practices in risk management at par with leading international banks. For this purpose, the Bank operates a centralized Risk Management Division, with responsibility to ensure that the risk management processes are implemented in compliance with policies approved by the Board of Directors.

The Board of Directors determines the Bank's risk appetite, through its Risk Management Policy. The policy both defines acceptable levels of risk for day-to-day operations as well as the Bank's willingness to incur risk, weighed against the expected rewards. The risk policy is a structured approach to identifying opportunities, assessing the risk inherent in these opportunities and managing these risks proactively in a cost effective manner. It is a top-level integrated approach to events identification, analysis, assessment, monitoring and identification of business opportunities. Specific policies are also in place for managing risks in the different risk area of investment, market and operational risks.The evolving nature of Risk Management practices and the dynamic character of the banking industry necessitates regular review of the effectiveness of each enterprise risk management component. In the light of this, the Bank's Enterprise Risk Management Framework is subject to continuous review to ensure effective and cutting-edge risk management. The review is done in either or both of the following ways:Ÿ Continuous self evaluation and monitoring by the Risk Management Ÿ Independent evaluation by external auditors and examiners

Implementation of Code of Corporate GovernanceIn compliance with Code No. 6.1.11, the Bank has established a Regulatory Management & Compliance Department saddled with responsibilities of implementing the Code of Corporate Governance in addition to monitoring compliance with the money laundering laws and regulations.

In compliance with section 6.1.12 of the code of Corporate Governance, we have established alert on our web site where all stakeholders can access and provide any useful information or grievances on any issues that directly and /or indirectly affect them;The Chairman of the Board does not serve as Chairman/Member of any of the Board committees;The Bank's organizational chart approved by CBN reflects clearly defined lines of responsibility and hierarchy;The Bank also has in place, a system of internal control, designed to achieve efficiency, effectiveness of operations, reliability of financial reports and compliance with applicable laws.

Breaches of the CodeWe are not aware of any violation to the Code of Corporate Governance.


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Corporate Social Responsibilty (csr)

Holistic approach

Communityinvolvement

and developmentHuman rights

Consumerissues

Labourpractices

Fair operating practices

The enviroment

Organisational

governance

JAIZ BANK

CSR MODEL

Interdependence

Jaiz Bank's Corporate Social Responsibility (CSR) activities are based on the GC 10 Principles. They can be classified based on the core subjects of ISO 26000 as follows.

Organizational Governance

1. Corporate Value Jaiz Bank promotes both corporate activities and corporate citizenship activities in an integrated fashion. In corporate activities, we earnestly conduct our core business of banking, while in corporate citizenship activities we act from the standpoint of a corporate citizen, recognizing that integrating these two aspects is what constitutes CSR activities.

2. CSR Management We have established an independent charity and community development foundation that is dedicated to promoting CSR activities. The role of the organization is to execute CSR mandates and to collaborate with other stakeholders to maximize the value of our social and environmental investments. Our team within the Corporate Communications Department is also tasked with the responsibility of raising the level of CSR activity throughout the entire Bank. The team aims to achieve this by communicating closely with all the departments that have input in the governance of social, environmental, human rights and Shariah aspects of our business. This is in addition to similar communication with those departments responsible for product development and service quality


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which are directly at the heart of our ethical value proposition. In each case, the CSR team provides lateral support for each department's CSR activities. The framework treats important CSR-related matters in the same way as business matters: responsible departments must make reports and proposals as necessary to the Board of Directors and the Advisory Committee of Experts.

3. Due Diligence As a Bank that is committed to improving people's lives, Jaiz is anxious to identify any impacts from its business activities on society and the environment, including potential impacts, and to take appropriate measures to counter them.

Human RightsAs a Bank with more than 186 employees, thousands of customers with different types of accounts as at year end and counting, we recognize the fundamental importance of respecting the basic human rights of all people. We are focused on ensuring that all of our human resources policies and external interactions are conducted in a way that is respectful of these human rights. This is an integral part of our business strategy, and we are currently focused on ways to ensure our policies reflect these practices.Trainings are conducted for the staff to have a good feel and understanding of human relations, and an avenue for complaints has been put in place to handle customers effectively and efficiently. So as to give both customers and staff alike good value from our outputs. It is our policy not to discriminate against anyone on the basis of gender, race, religion and belief.

Labour Practices

1. Decent Work ManagementWe ensure that staffs are provided with the needed environment to deliver on their responsibilities in all our offices. Health and safety concerns are communicated as at when necessary and consideration is given to staff based on peculiar cases to address their issues. We believe in work-life balance that is why in addition to granting maternal/paternal leave to new parents, we also provide convenient working hours for nursing mothers in order to encourage them to breast-feed and bond with their baby(ies).

2. Remuneration, Rights and OpportunitiesThe remuneration of the staff is based on grade and across board and is not biased irrespective of gender, religion or tribe. All staff are treated the same and all benefits accrued them are made available to them.All employees also have the same right in the organization and an employee relation is enhanced by the day to accommodate any grievance or issue a staff might have. The same opportunities in terms of employment, investments and financing are accorded to various individuals in the society.

The EnvironmentInternally the bank strategizes to have a positive impact on the environment in which we operate. This is because we want to help our customers succeed financially and also support long term economic growth and improve quality of life for everyone in the country. The bank's greatest environmental impact would result on the activities of the customers we support. We also view environmental and social risk as important factors in the long term financial success of both the bank and its numerous customers.We are putting more effort to improving our customer relationship with regards to environment in order for all of us to have a positive impact on the environment. In due course, all customers’ request for financing shall be subjected to environmental impact appraisal as part of our due diligence in financing appraisal.

Fair Operating Practice

Corporate Social Responsibilty (csr) cont’d


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Corporate Social Responsibilty (csr) cont’d

Due to the specialized nature of the services rendered by the bank which inculcates ethics and fairness, the bank ensures that all its operational practices irrespective of where it operates or whom its dealing with are fair.Fairness, accountability and honesty are integral parts of the objectives of the bank and these are strictly adhered to. As part of fair operating practice, we do not finance any transaction or activity that is considered void (haram) under the Islamic commercial jurisprudence. Transactions involving substances that are scientifically proven to be harmful to the human body (alcohol, tobacco, narcotics) and others such as gambling are examples.

The bank has already constituted a specialized Advisory Committee of Experts who advises on all transaction and dealings entered into or to be entered into by the bank based on Islamic commercial jurisprudence.Also the bank extends trainings to staff on ethics and Islamic commercial jurisprudence so as to assist them in acting professionally and diligently at all times in discharging their responsibilities.

Customer IssuesThe bank is passionately concerned about its customers, as they are the main reason that the bank exists. Staff are trained to handle consumers in a professional manner and to ensure that all their queries are resolved to their satisfaction.Effort is ongoing to establish a customer care center to handle customer issues 24/7 in order to improve the efficiency and effectiveness of our service delivery.

Community Involvement and DevelopmentThe Bank has an arm responsible for community involvement and development. This arm would provide charitable services to the communities in which we operate and the country in general. The bank would finance all the community through income it considers non-halal (not permissible) to its activities.This would have tremendous impact on the environment in general, and would help in creating a symbiotic relationship between the Bank and the populace.


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In the Name of Allah Most Gracious Most Merciful Praise be to Allah, and may peace and blessings be upon our Prophet Mohammad (SAW), his family and companions.

To the Shareholders of JAIZ Bank Plc:Peace, mercy and blessings of Allah upon you:According to the letter of assignment, we present the following report.

We have reviewed the products used and the contracts relating to transactions, application and practices made by the JAIZ Bank Plc during the period ending by December 31, 2012. We have also made due diligence to express our opinion regarding whether JAIZ Bank has committed to the principles and rules of the Sharia as well as our advisory opinions, decisions and directives.

Responsibility of Management:The management is responsible for making sure that JAIZ Bank operates in accordance with the provisions and principles of Islamic Law, while our responsibility is restricted and confined to expression of an independent opinion based on our observations and examination of the Bank's operations as regards to the full compliance of all the JAIZ Bank transactions to the tenets of Shari'ah and advices we presented to them in order to present this report for you.

Scope of work of the Fatwa and Advisory Committee of Experts:We have reviewed and adopted templates of contracts and agreements for use on standard transactions of account opening and finance operations. We have also reviewed the various processes relating to all transactions of JAIZ Bank, with shareholders, investors and users of financing as well as other transactions including employment contracts and the like. We have selected random samples of such transactions through the Internal Sharia Auditing Unit covering all transactions as well as review of feedback regarding the audit operations, field visit, the operations and applications of Fatwas and decisions issued by the Advisory Committee of Experts.

We have planned and implemented our task with the aim of obtaining all the information and explanation which we considered necessary to provide us with sufficient evidence to give reasonable assurance that JAIZ Bank did not violate the provisions of the rules and principles of Islamic Shari'ah and wherever we find any earned income to be from non-permissible sources we directed that such income must be transferred to charity.

Opinions of the Advisory Committee of Expert: a. We are of the opinion that all the contracts and transactions entered into by JAIZ Bank during the period ending by 31/12/2012 are in compliance with the rules and principles of Islamic Shari'ah.b. The distribution of profits to the investment deposit accounts are in line with the basis and rules adopted and approved by us and included in the terms and conditions of the deposit accounts in accordance with the tenets and principles of Islamic law.c. All and any gains made from Haram (prohibited by Islamic Shari'ah rules) sources have been set aside in a separate account and transferred to charitable purposes. We understand that in the establishment p e r i o d there is still a large sum of the principal laid down in banks. This was necessary as the process of reviewing and approving contracts of finance by the ACE and the Central Bank of Nigeria takes time until they move on.

The Advisory Committee of Experts (ACE) wish to thank the management, departments and staff for their good cooperation with it and their commitment to its decisions. The ACE members pray to Allah Almighty to bring them and all JAIZ operation and philosophy great success and to shower His Grace, Mercy and Blessings on all JAIZ shareholders.

May God's mercy and blessings be upon you all.

Date: March 21, 2013

Prof. Dr. Monzer Kahf Prof. Dr. Muhammad Lawal Bashar Dr. Muhammad Alhaji Abubakar Chairman Member Member

Advisory Committee of Experts (ACE)Report on Shari’ah Compliance


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Report on the Financial StatementsWe have audited the accompanying financial statements of Jaiz Bank Plc which comprise the statement of financial position as at 31 December, 2012, the income statement, the statements of comprehensive income, changes in equity, cash flows, sources and uses of qard fund and sources and uses of charity fund for the year then ended, and notes to the financial statements which include a summary of significant accounting policies and other explanatory notes as set out on pages 25 to 59.

Directors' Responsibility for the Financial StatementsThe directors are responsible for the preparation and fair presentation of these financial statements in compliance with the Financial Reporting Council of Nigeria Act No. 6 2011 and in accordance with International Financial Reporting Standards (IFRS),Financial Accounting Standards (FAS) issued by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and in the manner required by the Companies and Allied Matters Act, CAP C20, LFN 2004, the Banks and Other Financial Institutions Act, CAP B3, LFN 2004, the Framework for the Regulation and Supervision of Institutions offering Non- Interest Financial Services in Nigeria and relevant Central Bank of Nigeria circulars. 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.

These financial statements and the Bank's undertaking to operate in accordance with Islamic Shariah Rules and Principles are the responsibilities if the Bank's Board of Directors.

Auditor's ResponsibilityOur responsibility is to express an independent opinion on these financial statements based on our audit.

We conducted our audit in accordance with Auditing Standards for Islamic Financial Institutions by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Those standards require that we comply with ethical requirements and plan and perform our audit to obtain reasonable assurance that the financial statements are free of material misstatement.

An audit involves performing procedures, on a test basis, to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the 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 company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion In our opinion the financial statements give a true and fair view of the financial position of Jaiz Bank Plc as at 31 December 2012 and of its financial performance, cash flows, changes in equity, sources and uses of qard fund and sources and uses of charity fund for the year then ended in compliance with the Financial Reporting Council of Nigeria Act No. 6 2011 and in accordance with the Financial Accounting Standards issued by AAOIFI, International Financial Reporting Standards and the Companies and Allied Matters Act, CAP C20, LFN 2004 and the Banks and Other Financial Institutions Act, CAP B3, LFN 2004.


Notes to the financial statements31st December 2012

Report on other Legal and Regulatory Requirements

Compliance with the requirements of Schedule 6 of the Companies and Allied Matters Act CAP C20, LFN 2004

i) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;ii) In our opinion proper books of account have been kept by the Bank;

iii) The Bank's statement of financial position and income statement are in agreement with the books of account;

Compliance with Section 27 (2) of the Banks and Other Financial Institutions Act CAP B3, LFN 2004 and Central Bank of Nigeria circular BSD/1/2004i) Our examination of the risk assets was carried out in accordance with the Prudential Guidelines for Deposit Money Banks in Nigeria issued by the Central Bank of Nigeria and in accordance with the FAS requirements of AAOIFI;

ii) Related party transactions and balances are disclosed in Note 22 to the financial statements in accordance with the Central Bank of Nigeria Circular BSD/1/2004;

iii) To the best of our knowledge the bank did not contravene any provision of the Banks and Other Financial Institutions Act, CAP B3, LFN 2004 and circulars of the Central Bank of Nigeria during the year ended 31 December, 2012.

March 21, 2013 (Chartered Accountants) Abuja, Nigeria



1. Reporting Entity JAIZ Bank Plc is the first fully fledged non-interest financial institution in Nigeria. The Bank commenced operations on January 6th, 2012 with three branches in two states and the Federal capital territory.The Bank's address is Kano House, Plot 73, Ralph Shodeinde Street, Central Business District, Abuja Nigeria.The financial statements of the company as at 31 December 2012 is only for the Bank and no subsidiaries and or associates.The Bank is only involved in retail and corporate banking services in the Nigerian environment.

2. Significant Accounting Polices

a. Statement of Compliance The financial statements have been prepared in accordance with the requirements of International financial reporting standards (IFRS) as issued by International Accounting standards Board (IASB). For matters on which no IFRS standard is applicable or IFRS conflicts with shari'ah rules and principles, the bank uses the relevant Financial Accounting Standard as issued by the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) and shariah rulings as determined by the shariah supervisory board of the Bank.

b. B a s i s o f P r e p a r a t i o n , A c c o u n t i n g J u d g m e n t s & E s t i m a t e s Financial statements are to be prepared under the historical cost convention, and may be modified by the revaluation of certain investment securities, property, plant and equipment. Financial statements are to be prepared mainly in accordance with the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”). For matters that are peculiar to Islamic Banking and Finance, the Bank shall rely on the Statement of Financial Accounting (“SFA”) and Financial Accounting Standards (“FAS”) issued by the Accounting and Auditing Organization for Islamic Financial Institutions (“AAOIFI”). Standards issued by the Islamic Financial Services Board (“IFSB”) and Circulars issued by the Central Bank of Nigeria (“CBN”) shall also be of guidance.The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the management's best knowledge of current events and actions, actual results ultimately may differ from those estimates. The most significant uses of judgments and estimates are as follows:

i. Going Concern The Bank's management shall be making assessment of the Bank's ability to continue as a going concern and where satisfied that the Bank has the resources to continue in business for the foreseeable future shall form a judgment and prepare accounting information based on that. In any situation whereby the Board of Directors is aware of any material uncertainties that may cast significant doubt upon the Bank's ability to continue as a going concern such issues shall be disclosed in the annual report.

ii. Fair Value of Unquoted Equity Securities and Investment Properties Fair value shall be determined for each investment individually in accordance with the valuation policies of the Bank. Where the fair values of the Bank's unquoted equity securities cannot be derived from an active market, they shall be derived using a variety of valuation techniques. Judgment by management is required to establish fair values through the use of appropriate valuation models, consideration of comparable assets, discount rates and the assumptions used to forecast cash flows.

Investment properties and investments in real estate projects shall be carried at fair value as determined by independent real estate valuation experts. The determination of the fair value for such assets requires the use of judgment and estimates by the independent valuation experts that are based on local market conditions existing at the date of the statement of financial position.



iii. Impairment Provisions against Financing Contracts with Customers The Bank shall review its financing contracts at each reporting date to assess whether an impairment provision should be recorded in the financial statements. In particular, judgment by management is required in the estimation of the amount and timing of future cash flows when determining the level of provision required. Such estimates are based on assumptions about factors involving varying degrees of judgment and uncertainty and actual results may differ resulting in future changes to the provisions. In addition to specific provisions against individually significant financing contracts, the Bank also shall make a collective impairment provision of 1% against exposures which, although not specifically identified as requiring a specific provision, have a greater risk of default than when originally granted. This takes into consideration, factors such as any deterioration in country risk, industry, and technological obsolescence, as well as identified structural weaknesses or deterioration in cash flows.

iv. Impairment of Investments at Fair Value through Equity The Bank shall treat investments carried at fair value through equity as impaired when there is a significant or prolonged decline in the fair value below their costs or where other objective evidence of impairment exists. The determination of what is 'significant' or 'prolonged' requires judgment. The Bank would evaluate factors, such as the historical share price volatility for comparable quoted equities and future cash flows and the discount factors for comparable unquoted equities.

v. Liquidity The Bank shall manage its liquidity through consideration of the maturity profile of its assets and liabilities on daily basis. This requires judgment when determining the maturity of assets and liabilities with no specific maturities.

c. Inventory Inventory of stationery and consumables held by the Bank are to be stated at the lower of cost and net realizable value in line with IAS 2. When inventories become old or obsolete, an estimate is to be made of their net realizable value. For individually significant amounts, this estimation is to be performed on an individual basis. For amounts that are not individually significant, collective assessment shall be made and allowance applied according to the inventory type and degree of ageing or obsolescence based on historical selling prices. d. Non-Current Assets Non-current (fixed) assets are initially recorded at cost. They are to be subsequently stated at historical cost less depreciation and any accumulated impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the assets.

Subsequent costs are included in the asset's carrying amount or are recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Bank and the cost of the asset can be measured reliably. All other repairs and maintenance should be charged to the income statement during the financial period in which they are incurred.

Construction cost in respect of offices is carried at cost as work in progress. On completion of construction, the related amounts are transferred to the appropriate category of fixed assets. Payments in advance for items of fixed assets are included as Prepayments in Other Assets and upon delivery are reclassified as additions in the appropriate category of property and equipment. Assets that do not reach a limit of N25,000 (Twenty Five Thousand Naira Only) are expensed immediately in the income statement, but capitalized if above the limit.



Depreciation is to be provided on a straight-line basis to write off the cost of assets over their estimated useful lives. The annual rates which should be applied consistently over time are as follows:

Motor vehicles (6 years) 16.67% Furniture and fittings (5 years) 20% Equipment (5 years) 20% Computer equip – General (3 years) 33% Computer equip – Special (5 years) 20% Computer Software (10 years) 10% Freehold Buildings (50 years) 2% Leasehold buildings over the expected life of the lease Leasehold improvements over the period of the lease

Property and equipment is de-recognized on disposal or when no future economic benefits are expected from its use'. Gains and losses are recognized in the income statement. Depreciation is charged when the assets are available for use irrespective of whether they are put to use. Assets that are subject to depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset's fair value less costs to sell and value in use.

Gains and losses on disposal are determined by comparing proceeds with carrying amount. These are included in the statement of income for the year.

e. Intangible Assets Software licenses acquired by the Bank are stated at cost less accumulated amortization and accumulated impairment loss (if any). Expenditure incurred on internally developed software is recognized as an asset when the Bank is able to complete the software development and use it in such a manner that it will be able to generate economic benefit to the Bank, and that the cost to complete the development can reliably be measured by the Bank.

Internally developed software cost that is capitalized includes cost directly attributable to developing the software, and is amortized over the useful economic life of the software.

Amortization is recognized in the income statement on a straight line basis over the estimated useful life of the software. f. Financial Instruments – Initial Recognition and Subsequent Measurement All financial assets and liabilities are initially recognized on the trade date, i.e. the date that the Bank becomes a party to the contractual provisions of the instrument. The classification of financial instruments at initial recognition depends on the purpose and the management's intention for which the financial instruments were acquired and their characteristics. All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets recorded at fair value through income statement.

g. Ijarah (Leasing) The Bank shall comply fully with the requirements of Sharia in recognition and measurement of Ijarah financing. Equipment on lease to customer is stated at cost less accumulated depreciation. The depreciation of these assets is on the basis of the Bank's normal depreciation policy for various classes of assets. The periodic lease rentals receivable are treated as rental income during the period they occur and charge thereon is included in operating expenses while initial direct cost incurred are written off to the income statement in the period they are



incurred.h. Murabaha receivables from banks These are interbank commodity murabaha transactions. The Bank arranges a murabaha transaction by buying a commodity (which represents the object of the murabaha) and then resells this commodity to the beneficiary murabeh (after computing a profit margin). The sale price (cost plus the profit margin) is paid either lump sum at maturity or in installments by the murabeh over the agreed period. Murabaha receivables from banks are stated net of deferred profits and provision for impairment, if any.

i. Murabaha receivables from customers Customer Murabaha receivables consist of deferred sales transaction agreements and are stated net of deferred profits, any amounts written off and provision for impairment, if any. Promise made in the murabaha to the purchase orderer is obligatory upon the customer and the bank can claim damages to the exact amount of loss suffered.

j. Musharaka Musharaka contracts represents a partnership between the Bank and a customer whereby each party contributes to the capital in equal or varying proportions to establish a new project or share in an existing one, and whereby each of the parties becomes an owner of the capital on a permanent or declining basis and shall have a share of profits or losses. These are stated at the fair value of consideration given less any amounts written off and provision for impairment, if any. k. Impairment of Investment in Risk Assets At each balance sheet date, the Bank assesses whether there is objective evidence that the financial assets are impaired. Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows of the asset that can be measured reliably.The Bank considers impairment both at individual asset level and also at collective level. All individually significant assets are assessed for specific impairment.Assets found not to be impaired individually are assessed collectively for any impairment that has been incurred but not identified earlier. Insignificant assets are tested for impairment collectively. Impairment loss on assets classified at amortized cost are measured as the difference between the carrying value of the asset and the present value of future cash flows discounted at the initial assets effective profit rate. Losses are recognized in the income statement of the period the loss is incurred. Also, provision is determined from a specific assessment of each customer's account in accordance with the Central Bank of Nigeria's (CBN) Prudential Guidelines. A minimum general provision of 1% is made on all risk assets, which have not been specifically provided for.

Profit and or Principal that is outstanding for: C l a s s i f i c a t i o n Provision- 90 days but less than 180 days Substandard 10%- 180 days but less than 360 days Doubtful 50%- 360 days and over Lost 100%

When an investment is deemed not collectible, it is written off against the related provision for impairments and subsequent recoveries are credited to the provision for loan losses in the statement of income.

If the amount of the impairment subsequently decreases due to an event occurring after the write-down, the release of the provision is credited as a reduction of the provision for impairment in the statement of income.



Risk assets in respect of which a previous provision was not made are written directly to the statement of income when they are deemed to be irrecoverable.l. Income recognition i. Murabaha Where the income is quantifiable and contractually determined at the commencement of the contract, income is recognized on a time-apportioned basis over the period of the contract based on the principal amounts outstanding. Accrual of income is suspended when the bank believes that the recovery of these amounts may be doubtful.

ii. Ijarah Muntahia Bittamleek Ijarah income is recognized on a time-apportioned basis, net of depreciation, over the lease term. Accrual of income is suspended when the bank believes that the recovery of these amounts may be doubtful.

iii. Musharaka Income on musharaka contracts is recognised when the right to receive payment is established or on distribution by the musharek.

iv. Dividends Dividends from investments in equity securities are recognized when the right to receive the payment is established. This is usually when the dividend has been declared.

v. Fees and Commission Income The Bank earns fee and commission income from a diverse range of services it provides to its customers.

vi. Sale of Property under Development Where property is under development and agreement has been reached to sell such property when construction is complete, the bank considers whether the contract comprises:Ÿ Contract to construct a property; or Ÿ Contract for the sale of a completed property.Where a contract is judged to be for the construction of a property, revenue is recognized using the percentage of completion method, as construction progresses. The percentage of work completed is measured based on the costs incurred up until the end of the reporting period as a proportion of total costs expected to be incurred.

Where the contract is judged to be for the sale of a completed property, revenue is recognized when the significant risks, rewards and control of ownership of the property are transferred to the buyer. vii. Non-Credit Related Fee Income This is recognized at the time the services have been performed and delivered or the transaction has been completed. viii. Foreign Income: a) Commission on negotiation of various letters of credit and overdue Profit on delayed foreign payments are accounted for on receipt. b) Other Profit and income earned on the Bank's own funds held outside Nigeria are accounted for on receipt. ix. Earnings Prohibited by Shari 'a The bank is committed to avoid recognizing any income generated from non-Islamic sources. Accordingly, all non-Islamic income is transferred to charity.

x. Service Income



Revenue from rendering of services is recognized when the services are rendered.

xi. Revenue from Sale of Goods Revenue from sales of goods is recognized when the significant risks, rewards and control of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably. xii. Bank's Share as a Mudarib The Bank's share as a mudarib for managing the equity of investment account holders is accrued based on the terms and conditions of the related mudaraba agreements whereas, for off balance sheet equity of investment accounts, mudarib share is recognized when distributed.

xiii. Expense Recognition

(a) Profit on Murabaha payables (banks and non-banks)Profit on these is accrued on a time-apportioned basis over the period of the contract based on the principal amounts outstanding.

(b) Return on Equity of Investment Account HoldersReturn on equity of investment account holders is based on the income generated from jointly financed assets after deducting Mudarib share and is accrued based on the terms and conditions of the underlying Mudaraba agreement. Investors' share of income represents income generated from assets financed by investment account holders net off allocated administrative expenses and provisions. The bank's share of profit is deducted from the investors' share of income before distribution to investors.

m. Transactions in Foreign Currencies i. The financial statements are presented in Nigerian Naira, which is the reporting currency in line with IAS 21 (Effects of foreign exchange)

ii. Transactions in foreign currencies are recorded in the books at the rate of exchange ruling on the date of the transactions.

iii. Monetary assets and liabilities denominated in foreign currencies are converted into Naira at the rate of exchange ruling at the balance sheet date. All differences are to be taken to the statement of income

iv. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated into Naira using the exchange rates as at the dates of the initial recognition. Non-monetary items measured at fair value in a foreign currency are translated into Naira using the exchange rates at the date when the fair value is determined. Exchange gains and losses on non-monetary items classified as “fair value through statement of income” are taken to the income statement and for items classified at “fair value through equity” such differences are taken to the statement of comprehensive income.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operations and translated at closing rate.

n. Taxation

i. Current Income Taxation Income tax is the amount of income tax payable on the taxable profit for the period determined in accordance with current statutory rate. Income tax payable on profits, based on the applicable tax law, is recognized as an expense in the period in which the related profits arise. All taxes related issues including deferred tax are treated in accordance with IAS 12 (Income taxes).

ii. Deferred Taxation Provision for deferred taxation is made by the liability method and calculated at the current rate of taxation on the temporary differences between the net book value of qualifying fixed assets and their corresponding tax written down value in accordance IAS 12 (Income taxes).



The principal temporary differences arise from depreciation of property, plant and equipment, provisions for pensions and other post-retirement benefits, provisions for Investment losses and tax losses carried forward. The rates enacted or substantively enacted at the balance sheet date are used to determine deferred income tax.

Deferred tax assets are recognized where it is probable that future taxable profit will be available against which the timing differences can be utilized.

o. Investments

i. Investment Securities Investment securities are initially recognized at cost and management determines the classification at initial investment. Investments in securities are classified, measured and recognize in accordance with IAS 39 (Financial Instruments measurement and recognition).

ii. Investments at Fair Value through Statement of Income Investments at fair value through statement of income include investments designated upon initial recognition as investments at fair value through statement of income. Financial assets carried at fair value through statement of income are recognised at fair value, with transaction costs recognised in the consolidated statement of income. Investments classified as 'at fair value through statement of income are subsequently measured at fair value. The unrealized gains and losses arising from the remeasurement to fair value are included in the consolidated statement of income.

iii. Investments at Fair Value through Equity Investments at fair value through equity are those which are designated as such or are not classified as carried at fair value through statement of income. These include investments in equity securities and managed funds.

After initial measurement, investments at fair value through equity are subsequently measured at fair value. Unrealised gains and losses are recognised in statement of comprehensive income and then transferred to the available for sale reserve in the consolidated statement of changes in equity. When the investment is disposed of or determined to be impaired, the cumulative gain or loss, previously transferred to the available for sale reserve, is recognised in the consolidated statement of income. Where the Group holds more than one investment in the same security they are deemed to be disposed off on a weighted average basis. Profit earned whilst holding investments at fair value through equity is reported as Income from investment activities' using the effective profit rate method. Long-term investments are investments held by management over a long period of time to earn income. Long-term investments may include debt and equity securities.

iv. Investments in Subsidiaries Investments in subsidiaries are carried in the company's balance sheet at cost less provisions for impairment losses. Where, in the opinion of the Directors, there has been impairment in the value of an investment, the loss is recognized as an expense in the period in which the impairment is identified.

On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the statement of income.

p. Retirement Benefits Retirement benefits to employees are provided under a defined contribution scheme, which is funded by contribution from the bank and employees. Funding under the new scheme is 7.5% each by staff and the Bank based on annual basic salary, housing and transport allowances in line with the Pension Reform Act, 2004. Membership of the scheme is automatic upon resumption of duty with the Bank. The Bank has no further payment obligations once the contributions have been paid. The Bank's liabilities in respect of the defined contribution are to be charged against the profit of the year in which they become payable. Payments are to be made to Pension Fund Administration companies, who are financially independent of the bank.



q. Provisions, Contingent Assets and Contingent Liabilities Provision is recognized when the Bank has a present obligation whether legal or constructive as a result of a past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the amount can be reliably measured, in accordance with the International Financial Reporting Standards (IAS 37).

Transactions that are not currently recognized as assets or liabilities in the balance sheet, but which nonetheless give rise to credit risks, contingencies and commitments are reported off balance sheet. Such transactions included letters of credit, bonds, guarantees, acceptances, trade related contingencies such as documentary credits etc. Outstanding and unexpired commitments at year end in respect of these transactions are to be shown by way of note to the financial statements. Income on off-balance sheet engagement is in form of commission and fees. Commission and fees are recognized when transactions are executed.

r. Borrowings i) Murabaha and Due to Banks This represents funds received from banks on the principles of murabaha contracts and are stated at fair value of consideration received less amounts settled. ii) Murabaha and due to non-banks These are stated at fair value of consideration received less amounts settled.

Profit paid on borrowings is recognized in the statement of income for the year.

s. Fiduciary activities The Bank acts as trustee in its capacity as a Mudarib when managing the equity of investment account holders. Equity of investment account holders is invested in murabaha and due from banks, sukuk and financing contracts with customers. Equity of investment account holders is carried at fair value of consideration received less amounts settled. Expenses are allocated to investment accounts in proportion of average equity of investment account holders to total average assets of the Bank.

Income is allocated proportionately between equity of investment account holders and owners' equity on the basis of the average balances outstanding during the year and share of the funds invested. Equity and assets of restricted investment account holders are carried off-balance sheet as they are not assets and liabilities of the Bank. t. Segment Reporting The Bank prepares its segment information based on geographical and business segments as primary and secondary reporting segments, respectively in accordance with IFRS 8 (Operating segments). A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns different from those of segments operating in other economic environments.

The Bank has appointed the Management committee charged with the responsibility of allocating resources and assessing performance as the Chief Operating Decision Maker as required under IFRS 8. The CODM is reviewed and advised by the Board for decisions on significant transactions and or events.


50


u. Offsetting Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right or shariah requirement to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

v. Cash and Cash Equivalents Cash comprises:i) Cash in handii) Balances held with Central Bank of Nigeriaiii) Balances with banks in Nigeria and outside Nigeriaiv) Demand deposits denominated in Naira and other foreign currencies. Cash equivalents are short-term, highly liquid instruments which are:(a) readily convertible into cash, whether in local or foreign currency; and(b) so near to their maturity dates as to present insignificant risk of changes in value as a result of changes in profit rates.

w. Ordinary Share Capital

i. Share Issue Costs Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

ii. Dividends on Ordinary Shares Dividends on ordinary shares are appropriated from revenue reserve in the period they are approved by the Bank's shareholders.

Dividends for the year that are approved by the shareholders after the balance sheet date are dealt with in the subsequent events note

Dividends proposed by the Directors but not yet approved by members are disclosed in the financial statements in accordance with the requirements of the Company and Allied Matters Act 1990..


the

ACCOUNTS

51

STATEMENT OF FINANCIAL POSITIONAs at 31 December 2012

N'000 Note 2012 ASSETSCash balances 11 382,479Balances with banks and Central Bank 11 2,484,436 Due from banks and financial institutions 12 7,395,492 Murabaha receivables 13 1,101,377Investments in Musharaka 103,280 Qard Hassan 279,061 Investments in Ijarah assets 473,018 Fixed assets 3 359,539 Leasehold improvement 4 264,898 Intangible assets 5 217,552 Other assets 14 715,750 Deferred tax 18 337,933

TOTAL ASSETS 14,114,813

LIABILITIES, EQUITY OF INVESTMENT ACCOUNT HOLDERS AND OWNERS' EQUITY

LiabilitiesCustomer's deposits 15 2,492,553 Other liabilities 16 723,859

Total liabilities 3,216,413

Equity of Investment Account holdersFinancial institutions' investment accounts - Customers' investment accounts 796,535

Total Equity of Investment Account holders 796,535

Owners' EquityShare capital 20 11,747,297 Share premium 20 632,289Retained Earnings 20 (2,299,252)Risk regulatory reserve 20 19,567 Profit Equalisation Reserve 20 1,964

Total Owners' Equity 10,101,865

LIABILITIES, EQUITY OF INVESTMENT ACCOUNT HOLDERS AND OWNERS' EQUITY 14,114,813

COMMITMENTS AND CONTINGENT LIABILITIES 414,756

Chairman MD/CEO CFO Dr. U. A. Mutallab, CON Hassan Usman Ahmed A. Hassan

21 March 2013

The attached notes 1 to 29 form part of these financial statements

52

STATEMENT OF INCOMEFor the year ended 31 December 2012

N'000 Note 2012 INCOMEIncome from Islamic finances 6 79,560

Net income from Islamic financing transactions 79,560

Gross return to equity of investment account holders 64,750Bank's share as a Mudarib (25,536)

Return on equity of investment account holders 39,214

Bank's share of income from joint financing and investment accounts 40,347Fee and commission income 8 49,675Non trading exchange gains (losses) 41,234Other income 9 312

Total income 131,568

EXPENSESStaff costs 10 551,034Depreciation 3 216,506Other expenses 10 430,578

Total expenses 1,198,118

NET LOSS FOR THE YEAR BEFORE TAX (1,066,549)

Deffered Tax 337,993

NET LOSS FOR THE YEAR AFTER TAX (728,617)

Earning per share - koboBasic 21 (0.23)

The attached notes 1-29 form part of these financial statements

53

STATEMENT OF comprehensive incomeFor the year ended 31 December 2012

N’000 2012 NOTE Loss for the Period (728,617)

Other Comprehensive Income - - Other Comprehensive Income for the Period -

Total Comprehensive Income for the Period (728,617)


54

STATEMENT OF cashflowFor the year ended 31 December 2012

N'000 Note 2012 OPERATING ACTIVITIESNet Loss for the year (1,066,549) Adjustments for non cash items:Depreciation and amortisation 3 100,598 Depreciation of leasehold improvement 115,908 Prepayments 89,016 Non trading foreign exchange gain (losses) (41,234)Return on equity of investment account holders 39,214

Operating Profit before changes in Operating assets and Liabilities (763,048)

Working capital adjustments:Mandatory reserve with CBNDue from banks and financial institutionsMurabaha receivables (1,101,377)Qard Hassan (279,061)Ijarah rental receivables (473,018)Investments in Musharaka (103,280)Customers' current accounts 2,492,553 Other assets (393,740)Other liabilities 484,160

Net Cash provided by (used in) Operating Activities (136,810)

INVESTING ACTIVITIESPurchase of property and equipment (94,595)Purchase of intangible assets (21,986)Improvement on leasehold properties (33,609)

Net Cash used in Investing Activities (150,190)

FINANCING ACTIVITIESProceeds from issue of equity shares 4,243,612 Financial institutions investment accounts –Customers' investment accounts 796,535 Dividends paid –

Net Cash provided by (used in) Financing Activities 5,040,147

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,753,146 Cash and cash equivalents at 1 January 5,509,260

CASH AND CASH EQUIVALENTS AT 31 DECEMBER 10,262,406

Cash balances 382,479Balances with banks and Central Bank 2,484,436 Due from banks and financial institutions 7,395,492

CASH AND CASH EQUIVALENTS AT 31 DECEMBER 10,262,406


55

STATEMENT OF changes in equityFor the year ended 31 December 2012

56

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STATEMENT OF sources and uses of qard fundFor the year ended 31 December 2012

N'000 N'000 N'000 2012

Qard Hasan Funds available Total receivables for Qard Hasan

Balance at 1 January 2012

Share Loans to staff 252,596 - 252,596 Staff Loans taken over 24,165 - 24,165 Loans to customers 2,300 - 2,300 Others 279,061 - 279,061

Total uses during the year 558,121 - 558,121

Repayments - - -

Balance at 31 December 2012 558,121 - 558,121

Sources of Qard Fund

Contribution by the bank 558,121 558,121 Donation - - -Qard Current Accounts - - -Transfer from Non-Sharia Compliant Earnings - - -


57

NOTES TO THE FINANCIAL STATEMENTS 31 December 2012

3. PROPERTY, PLANT AND EQUIPMENT N'000 2012

CostAt 1 January 2012 41,231 476 50,332 26,920 227,569 346,528 Additions 12,974 - 31,949 6,862 42,810 94,595 Transfers 3,528 (476) 32,567 2,017 4,002 41,638 Reclassified as assets held for sale - - - - - -

At 31 December 2012 57,733 - 114,849 35,799 274,380 482,761

DepreciationAt 1 January 2012 20,838 193 7,829 1,346 18,962 49,168 Adjustments (2,513) (578) (3,092) Charge for the year 6,599 - 10,655 6,072 54,014 77,339 Transfers (193) (2,871) - 2,871 (193) Reclassified as assets held for sale - - - - - At 31 December 2012 24,924 - 15,612 7,418 75,268 123,222

Net book amount at 31 December 2012 32,809 - 99,236 28,381 199,112 359,539

CostAt 1 April 2011 7,105 379 4,995 - - 22,479 Additions 24,126 97 45,337 26,920 227,569 324,049 Transfers - - - - - - At 31 December 2011 41,231 476 50,332 26,920 227,569 346,528

DepreciationAt 1 January 2011 17,066 161 4,995 - - 22,222 Charge for the year 3,772 32 2,834 1,346 18,962 26,946

At 31 December 2011 20,838 193 7,829 1,346 18,962 49,168

Net book amount at 31 December 2011 20,393 283 42,504 25,574 208,607 297,360

4. LEASEHOLD IMPROVEMENTS Head Office Abuja Kano Kaduna Total CostAt 1 January 2012 271,769 - 60,228 44,884 376,881 Adjustments (1,221) (1,221) Additions 24,838 164 6,780 1,828 33,609 Transfers – – – – –Reclassified as assets held for sale – – – – –

At 31 December 2012 296,607 164 67,008 45,491 409,270

DepreciationAt 1 January 2012 22,647 – 3,011 2,805 28,464 Charge for the year 82,779 – 18,886 14,243 115,908 Impairment losses – – – – – Impairment reversals – – – – – Reclassified as assets held for sale – – – – –

At 31 December 2012 105,426 – 21,898 17,048 144,372

Net book amount at 31 December 2012 191,180 164 45,110 28,443 264,898

Office equipment

Library books

Motor vehicles

Furniture & Fixtures

Computer equipment

Total

59STATEMENT OF SOURCES AND USES OF ZAKAH AND CHARITY FUND As at 31 December 2012

N'000 2012 Sources of Zakah and Charity Funds

Undistributed Zakah and Charity Funds at the beginning of the year - Pre-operating Activities 1,973,281 Non-Sharia Compliant Income during the year 219,699 Zakah due from the Bank for the year - Non-Islamic Income/Late Fee - Donation - Total sources of Zakah and Charity Funds during the year 2,192,981

Uses of Zakah and Charity Funds - Transfer to Jaiz Foundation 1,992,500 Philanthropic Societies - Aid to needy Families - Loans to Customers -

Total uses of Funds during the year 1,992,500

Undistributed Zakah and Charity Funds at the end of the year 200,481


58

NOTES TO THE FINANCIAL STATEMENTS CONT’D

N'000 2012CostAt 1 January 2011 – – – – – Additions 271,769 – 60,228 44,884 376,881 Transfers – – – – – Reclassified as assets held for sale – – – – – At 31 December 2011 271,769 – 60,228 44,884 376,881

Depreciation At 1 January 2011 – – – – – Charge for the year 22,647 – 3,011 2,805 28,464 Impairment losses – – – – – Reclassified as assets held for sale – – – – – At 31 December 2011 22,647 – 3,011 2,805 28,464

Net book amount at 31 December 2011 249,122 – 57,217 42,079 348,417

5. INTANGIBLE ASSETS N'000 2012Cost: Computer Software Total CostAt 1 January 2012 236,449 236,449 Additions 21,986 21,986 Transfers 2,400 2,400 At 31 December 2012 260,834 260,834

AmortisationAt 1 January 2012 19,702 19,702 Adjustments 320 320 Charge for the year 23,259 23,259 Impairment losses – – Impairment reversals – – At 31 December 2012 43,282 43,282

Net book amount at 31 December 2012 217,552 217,552

N'000 2012CostAt 1 January 2011 236,449 236,449 Additions – – Acquisitions – – Transfers – – At 31 December 2011 236,449 236,449

AmortisationAt 1 January 2011 – – Charge for the year 19,702 19,702 Impairment losses – – At 31 December 2011 19,702 19,702

Net book amount at 31 December 2011 216,746 216,746

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6. INCOME FROM ISLAMIC FINANCES N’000 N’000 2012Murabaha Profit 48,500 Murabaha profit Retail 207

Total profit from Murabaha transactions 49,107 Ijara wa Iqtina profit 26,555 Ijara profit home finance 2,542 Ijara others 1,356 Total profit from Murabaha transactions 30,453

At 31 December 2012 79,560

7. PROFIT PAID TO MUDARABAH DEPOSITORS N’000 2012

Profit payment to Unrestricted Mudarabah accounts 39,214

At 31 December 2012

Total profit from Islamic finances after payment to Mudarabah depositors 40,347

8. FEES AND COMMISSION INCOME N’000 2012

Mudarib fee 25,536 Commission on turnover 13,151 Banking Service Fees 10,943 Islamic Finance Facility Fee 41 Trade Finance Fees 5

At 31 December 2012 49,675

9. OTHER OPERATING INCOME N’000 2012

Other income 312

At 31 December 2012 312

10. OPERATING EXPENSES N’000 2012

Personnel Expenses 551,034 Depreciation 77,339 Depreciation of Leasehold 115,908 Amortisation of intangible assets 23,259 Other operating expenses 406,500 Amortisation of Non-shariah income – Directors expenses 24,078

At 31 December 2012 1,198,118

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N’000 2012(I) Personnel ExpensesSalaries 336,840 Staff pension 3,456 Staff allowances 54,884 Staff expenses 55,264 Medical and other staff expenses 74,270 Trainings and seminar expenses 26,319

At 31 December 2012 551,034

N’000(ii) Other Expenses 2012Advertising and Marketing 70,837 Administrative - note 10(iii) 155,492 Professional fees 34,336 Rental charges (occupancy cost) 87,810 Licenses 17,168 Bank Charges 4,638 Audit fee 12,500Other 23,719

At 31 December 2012 406,500

N’000 2012(iii) AdministrativeTelelphone expenses 5,615 Internet connection 16,887 Courier charges 2,342 Local and foreign travels 29,711 Printing & Stationaries 37,070 Cheque book cost 2,457 Repairs and maintenance 4,300 Security Guards 10,024 Other security expenses 4,569 Money and other Insurance 8,179 Fuel Expense 4,276 Vehicle repairs 3,197 Others 26,866

At 31 December 2012 155,492

N’000 2012

(iv) Directors' ExpensesAllowances 10,310 Other Expenses 13,768

At 31 December 2012 24,078


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11. CASH AND BALANCES WITH CENTRAL BANK OF NIGERIA (CBN) N’000 2012Cash on hand 82,479 Current account with CBN 2,208,460 Deposits with CBN 275,975

At 31 December 2012 2,866,914

Deposits with the Central Bank of Nigeria represent mandatory reserve deposits and are not available for use in the bank’s day–to–day operations.

12. DUE FROM BANKS AND FINANCIAL INSTITUTIONS N’000 2012Balances with banks within Nigeria:First Bank Plc 261,361 Unity Bank Plc 4,949,573 Balances with banks outside Nigeria:First Bank UK 1,231,764 Habib Bank UK 792,790 Commerzbank AG 160,004

At 31 December 2012 7,395,492

13. TOTAL FINANCING N’000 2012(i) Murabaha Receivables Murabaha Retail 251 Murabaha Corporate 59,066 Murabaha Staff 2,214 Murabaha Related Party 473,469 Murabaha Finance Corporate Monthly 323,671Murabaha Finance - Corporate Others 237,545 Murabaha Finance - Retail others 5,161

Gross receivable 1,101,377 Allowance for impairment –

At 31 December 2012 1,101,377

N’000(ii) Investments in Qard Hassan 2012Share loans to staff 252,596 Staff loans taken over 24,165 Loans to customers 2,300

Gross investment in Qard Hassan 279,061 Allowance for impairment –

At 31 December 2012 279,061

The loans granted to employees are interest free loans. The effective benefit to employees is the waived market interest that would otherwise have been charged on the employee loans.

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N’000 2012(iii) Ijarah InvestmentsIjara wa Iqtina 391,849Ijara Home Finance 48,982Ijara Auto & Others-R 21,074 Ijara Auto - Pers. 11,113

Gross Investment in Ijara 473,018 Allowance for Impairment -

At 31 December 2012 473,018

N’000 2012(iv) Investments in MusharakaGross investment in Musharaka 103,280 Allowance for Impairment -

At 31 December 2012 103,280

N’000 201214. OTHER ASSETSSundry Debtors 14,648 Prepayments 160,872Inventory - Cheques and ATM Cards 55,346 Due from Staff (PAYE) 31,019 Account Receivables 29,076 Cash Advance 1,828 Branch Development Expenditure 260,047 Prepaid Rent 124,797Assets-in-Transit 38,116 Miscellaneous Assets –

At 31 December 2012 715,750

15. DUE TO CUSTOMERS N’000 2012(i) Analysis by type of Account:

Demand:

Mudaraba Savings Accounts 796,535

Current Accounts 2,492,553

At 31 December 2012 3,289,088 (i) Analysis by type of Depositors:Government 179,018 Corporate 1,483,963 Individuals 1,626,106

At 31 December 2012 3,289,088


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16 OTHER LIABILITIES N’000 2012Managers' Cheques 40,590 Accounts Payable 36,016 Vendors Payable 109,816 Other Tax Liabilities 16,999 Profit payable to Mudaraba Savings Accounts 274e-Banking Payables 136,374 Due to Charity 200,481 Sundry Creditors 8,088 Accrued Audit Fee 12,500Due to other Banks 118,388Deferred Profit 44,335 Deposit for Shares -

At 31 December 2012 723,859

17. EMPLOYEE BENEFIT PLANS N’000 2012Opening defined Contribution Obligation – Charge for the year 21,837Payment to Fund Administrator (21,251)

At 31 December 2012 586

A defined contribution plan is a pension plan under which the Bank pays contributions at a fixed rate. The Bank does not have any legal or constructive obligation to pay further contributions over and above the fixed rate as determined by the Penison Act, 2004. The total expense charged to income for the year was N21.8 million.

(i) Defined Benefit PlansA Defined Benefit Plan is a pension plan that defines an amount of pension benefit that an employee is entitled to receive on retirement, dependent on one or more factors such as age, years of service and salary. The Bank does not currently operate a Defined Benefit Plan and therefore does not have any obligation (legal or constructive) in this regard.

18. TAXATION N’000 2012(I) Current Tax At the beginning of the period - Amounts recorded in the Income Statements - Payments made on-Account during the year - Prior year's under/(over)provision -

At 31 December 2012

The charge for taxation on these financial statements is based on the provision of the Companies income Tax Act (CAP C24 LFN 2004) as amended to date. Education Tax is based on the provision of Education Tax Act (Cap E4 LFN 2004)

(ii) Deferred TaxAt the beginning of the period - Amounts recorded in the Income Statements - Deferred Tax Asset (Liability) 337,933

At 31 December 2012 337,933

The deferred Tax comprises the timing differences arising from the treatment of fixed assets for accounting purposes and taxation. The computation of deferred tax for the current year gave rise to a deferred tax asset which has been recognised in these financial statements.

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19. EQUITY OF INVESTMENT ACCOUNT HOLDERS N’000 2012Savings Account 769,513 Children Savings Account 27,011 High Value Transactional Account 10

At 31 December 2012 796,535

20. OWNERS' EQUITY N’000 2012SHARE CAPITAL(I) Authorised

13,000,000,000 Ordinary Shares of N1 each 13,000,000

At 31 December 2012 13,000,000

(ii) Issued and Fully Paid

11,747,335,918 Ordinary Shares of N1 each 11,747,336

At January 2012 4,014,430Issued during the year 7,732,867

At 31 December 2012 11,747,29

(iii) Deposit For SharesAt beginning of the year 2,019,982Issued during the year 5,712,885 Transfer to Share Capital (7,732,867)

At 31 December 2012 –

SHARE PREMIUM

124,215,259,125 shares issued at 15 kobo premium during the year 632,289

At 31 December 2012 632,289

Amounts collected in excess of the par value of the issued share capital during any new issue of shares, net of issue expenses, are treated as share premium. This amount is not available for distribution, but can be utilised as stipulated by CAMA 1990

RESERVES(i) Retained earningsAt beginning of the year (Pre-Operational Reserves) 419,682 Adjustment of pre-operational Reserve (1,970,750)Other Comprehensive Income for the year -Net Loss for the year (728,617)Transfer (19,567)

At 31 December 2012 (2,297,252)The bank earned and expended a total of N1.97billion interest from treasury bills during the pre-operation years which the bank's Advisory Committee of Experts (ACE) and the Banking Supervision Department (BSD) of the CBN ruled as at the reporting date that the income was non-shariah compliant. This non-shariah compliant income was donated to Jaiz Charity and Development Foundation as a means of cleansing and the foundation in turn acquired the shares of the bank with the donated funds.The ACE and the Banking Supervision Department (BSD) of the CBN ruled that the interest income and the subsequent shareholding of the Foundation in the bank


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was not shariah compliant.Subsequent to year end, the Central Bank's Financial Regulation Advisory Committee of Experts (FRACE) gave a forbearance to the bank on the treatment of the expended non-Shariah compliant income. Based on this forbearance, Retained Earnings shall be credited with the proceeds of the shares held by Jaiz Foundation when subsequently disposed. While the bank is to cleanse its funds of the interest over a reasonable time frame to avoid erosion of its capital base". N’000 2012(ii) Risk regulatory reserveTransfer from Retained Earnings 19,567

At 31 December 2012 19,567

The Profit Equalization Reserve (PER) is the amount appropriated by a Non Interest Financial Institutions (NIFI)

out of their gross income before allocating the Muḍarib share, acts as a buffer in periods of low earning and helps to maintain a certain level of minimum return on investment for IAH and increase owners’ equity.

(iii) (a) Reconciliation of Risk regulatory reserve IFRS PRUDENTIAL GUIDELINES

Provisioning - 19,567

At 31 December 2012 19,567

The risk Regulatory Reserve is created as required by the Central Bank of Nigeria (CBN) Prudential Guidelines section 12.4 (a)( i). This is a non distributable reserve which represents the difference between impairment of risk assets under IFRS rules and provisioning under CBN Prudential Guidelines.TOTAL OWNERS' EQUITY AT 31 DECEMBER 2012 10,101,865 SIGNIFICANT SHAREHOLDING (5% Unit and above) Holdings %Jaiz Foundation 1,737,694,081 14.79Dantata Aminu Alhassan 1,505,644,650 12.82Mutallab Umaru Abdul 1,017,841,300 8.66Islamic Development Bank 1,002,160,494 8.53Dangote Industries Ltd 1,000,000,000 8.51Altani Investment Limited 800,000,000 6.81Indimi Muhammadu 679,950,000 5.79

At 31 December 2012 65.91

21. EARNINGS PER SHAREBasic and diluted earnings per share is calculated by dividing the net loss for the year by the weighted average number of shares during the year as follows:

22. RELATED PARTY DISCLOSURESNet loss for the year (1,066,549)Weighted average number of shares 4,665,702 Basic and diluted earnings per share (0.23)

At 31 December 2012 (0.23)


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There have been no transactions during the year which caused dilution of the earnings per share. LIMIT DRAWNBaze Univeristy - Nafiu Baba Ahmed 346,000 343,768 Dangote AgroSacks - Aliko Dangote 1,500,000 311,498 Noble Hall Schools Dr. Umaru Abdul Mutallab 280,000 40,000

At 31 December 2012 2,126,00 695,266

23. INFORMATION REGARDING DIRECTORS N’000 2012Emoluments FeesChairman 700,000

Other directors 500,000

Emolument as executives 22,421,607

Highest paid director 22,421,607

No of Directors excluding the chairman with gross emoluments within the following ranges were: N Number 5,000,000 - 10,000,000 - 10,000,001 - 15,000,000 1 15,000,001 - Above - 24. INFORMATION REGARDING EMPLOYEESThe number of employees excluding Directors in receipt of emoluments excluding allowances in the following ranges were: N Number 400,001 - 500,000 8 500,001 - 600,000 24 600,001 - 700,000 - 700,001 - 800,000 - 800,001 - 900,000 - 900,001 - 1,000,000 - 1,000,001 - 5,000,000 90 5,000,001 - 10,000,000 38 Number of persons employed as at the end of the year were: Number Managerial 6 Senior 6 Junior 23Total 35

Aggregate Staff Cost 551,034

25. EVENTS AFTER THE REPORTING PERIODThere are no events after the reporting date which could have had a material effect on the financial statements as


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at 31 December 2012.

26. COMPLAINTS DATAIn line with CBN circular Ref FPR/DIR/CIR/GEN/01/020, below are the customer compaints data for the year:

(i) ATM Complaints Data 2012 ON OUR MACHINE ON OTHER BANKS’ MACHINE

Number of Complaints 39 10 Number of Complaints Resolved 38 10 Number ofCcomplaints Unresolved 1 -

At 31 December 2012

Amounts in Dispute (N'000) 594 115

(ii) Customer Complaints Data

Number of Complaints received - - Number of Complants resolved - -Number in process of resolution - -

At 31 December 2012 - -

27. INVESTMENT ANALYSIS N’000 2012

(i) By Performance Performing 1,679,976 Non Performing Substandard – Doubtful – Lost –

At 31 December 2012 1,679,976

(ii) By Security All Asset Debentures 326,860 Pledge of Asset 23,066 Legal Mortgage 1,289,855 Salary Domiciliation 30,849 Post Dated Cheques 8,046 Clean 1,300

At 31 December 2012 1,679,976

(iii) By Branch: Head Office 650,531 Abuja 814,936 Kano 160,124 Kaduna 54,384

At 31 December 2012 1,679,976


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N’000 2012(iv) By ProductMurabaha Corporate 931,414 Ijarah Wa Iqtina Corporate 547,691 Musharakah 103,280 Qard Hassan 2,300Murabaha Household Appliance 7,301Jaiz Auto Finance - New 16,585Jaiz Auto Finance - Old 17,262Jaiz Home Finance 48,982Murabaha Retail 5,161

At 31 December 2012 1,679,976

(v) By SectorAgriculture 323,671 Real estate 340,825 Manufacturing 334,291 Education 386,056 Wholesale trading 95,102 Oil and Gas 103,271 Retail 96,759

At 31 December 2012 1,679,976

(vi) By CategoryCorporate 1,540,347 Retail 139,628

At 31 December 2012 1,679,976

(vii) By Age0 - 30 days 368,561 31 - 60 days 52,764 61 - 90 days 326,860 91 - 180 days 103,271 181 - 360 days 347,090 Over 360 days 481,429

At 31 December 2012 1,679,976

28. LEGAL CLAIMS, CONTINGENT LIABILITIES AND COMMITMENTS (i) Legal ClaimsDuring the period under review, there was a garnishee proceeding in which the Judge in the suit gave a judgement against the Bank in the sum of N20.3 million. The Directors of the Bank have since asked the court through the Bank's external solicitors to vacate the order against the Bank. The Directors are optimistic that the order would be vacated at the next hearing date and as a result, are of the opinion that the possibility of an outflow of economic resources from the Bank is remote. The Directors have confirmed that aside from the above-mentioned suit, there is no other pending litigation against or in favour of the Bank at the end of the reporting period 31 December 2012.


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71

Advanced Payment Guarantees 391,078 Letters of Credit 23,677 Bonds and Guarantees – Others –

At 31 December 2012 414,756

(iii) Capital CommitmentsThere were no capital commitments at the end of the reporting period 31 December 2012.

(iv) Guarantees and other Financial CommitmentsThe Directors are of the opinion that all known liabilities and commitments which are relevant in assessing the company's financial position, financial performance and cash flows have been taken into account in the preparation of these financial statements.

29. OPERATING SEGMENT INFORMATIONFor reporting purposes, the Bank is organised into business segments and has reportable operating segments as follows:

1. Corporate Banking

2. Retail Banking

3. OthersResources are allocated based on the business segments and Management reviews the segments on periodic basis to assess their performance. The Chief Operating Decision Maker of the Bank is the Management Committee, which reviews and allocates the necessary resources for the achievement of the Bank's objectives.

CORPORATE RETAIL OTHERS TOTAL BANKING BANKING As at 31 December 2012 N'000 N'000 N'000 N'000ASSETSCash balances - - 382,479 382,479 Balances with banks and Central Bank - - 2,484,436 2,484,436 Due from banks and financial institutions - - 7,395,492 7,395,492Murabaha receivables 594,744 506,633 1,101,377 Musharaka 55,771 47,509 - 103,280Qard Hassan 150,693 128,368 - 279,061Investments in Ijarah assets 255,430 217,588 - 473,018Intangible assets - - 217,552 217,552 Fixed assets - - 359,539 359,539Leasehold improvement - - 264,898 264,898 Other assets - -

715,7507 715,750

Deferred tax 33,933 33,933

Total Assets 1,056,638 900,099 12,158,079 14,114,813

LIABILITIES, EQUITY OF INVESTMENT ACCOUNT HOLDERS AND OWNERS' EQUITY

LiabilitiesCustomer's deposits 1,345,979 1,146,575 2,492,553 Other liabilities - - 723,859

Total liabilities 1,345,979 1,146,575 3,216,413

Equity of Investment Account holdersCustomers' investment accounts 430,129 366,406 796,535

Total Equity of Investment Account holders 430,129 366,406 796,535

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Owners' EquityShare Capital - - 11,747,297Share premium - - 632,289 Retained earnings - - (2,299,252)Risk regulatory reserve - - 19,567

Total Owners' Equity - - 10,099,901 LIABILITIES, EQUITY OF INVESTMENT ACCOUNT HOLDERS AND OWNERS' EQUITY 1,776,108 1,512,980 14,112,849

OPERATING INCOME 48,780 41,554 90,334


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NOTES

NOTES

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PROXY FORM

NOTICE IS HEREBY GIVEN that the 10th Annual General Meeting of Jaiz Bank Plc. (Formerly Jaiz International Plc.) will be held at Shehu Musa Yar'adua Center, Central Business District, Abuja, Federal Capital Territory on Thursday 19th December, 2013 at 11.00am to transact the following business:

I/WE……………....…………………………………………

………………………………………………………………Being a member/members of Jaiz Bank Plc. hereby appoint Mr./Mrs./Chief.......................................................Or failing him the Chairman of the Meeting as my/our proxy to vote for me/us on my /our behalf at the Annual General Meeting of our Company Jaiz Bank Plc. to be held on Thursday 19th December, 2013 at 11.00am , and at any adjournment thereof.

Signed this..........................day of............................2013.

Shareholder's Signature:..…………………………………

A member (shareholder) who is unable to attend an Annual General Meeting by Law may vote by proxy. The form has been prepared to enable you exercise your vote if you cannot attend.Provisions has been made on this form for the Chairman of the Meeting to act as your proxy, but if you wish you may insert in the blank space on the form (*marked) the name of the person, whether a member of the company or not, who will attend the meeting and vote on your behalf instead of the chairman of the meeting Please sign the above. Post it so as to reach the address shown overleaf not later than 48 Hours before the meeting. If executed by a Corporation, the proxy form should be sealed with common seal. It is a legal requirement that all instruments of proxy must bear appropriate stamp duty from the Stamp Duties Office, and not adhesive postage stamps.

1. The proxy must produce the Admission card sent with the Notice of the Meeting to obtain entrance to the meeting.2. Before posting the above card tear off this part and retain it.

(TEAR OFF THIS PART)

ADMISSION CARD

Please admit……………………………………………….....................................................………………………………………………to the Annual General Meeting Jaiz Bank Plc. which will be held at Shehu Musa Yar'adua Center, Central Business District, Abuja, Federal Capital Territory on Thursday 19th December, 2013 at 11.00am , and at any adjournment thereof

Signature........................................…………………………………………………………………………………………….……………..

Important: (A) This admission card must be produced by the shareholder or his proxy in order to obtain entrance to the General Meeting (B) Shareholders or their proxies are requested to sign the admission card before attending the Meeting.

For Company's use only

Full Name and Address of Shareholder Number of Shares

Resolution For Against

1. To receive/adopt the Accounts and the result thereon

2. To Ratify the Appointment of:

Ÿ Alhaji Mohammadu Indimi, OFR

Ÿ Haseeb Ullah Siddiqui

Ÿ Mr. Muhammad Nurul Islam

Ÿ Mallam Hassan Usman

To Elect as Alternate Director:

Ÿ Alhaji Musa Bello Abdullahi

To Re-elect Directors Retiring by Rotation:

Ÿ Alhaji Aminu Dantata, CON

Ÿ Alhaji Falalu Bello, OFR

Ÿ Alhaji Garba Aliyu Hungu

Ÿ Alhaji Umaru Kwairanga

Ÿ HRH (Engr.) Mohammed Sani Bello, OON

3. To Authorize the Directors to fix the remuneration of

the Auditors.

4. To re-elect/elect members of the Audit committee

5. To approve the remuneration of Directors

6. To authorize Directors to create an Employee Equity

Trust Scheme in favour of such person or persons as

are in the permanent employment of the Bank, using

not exceeding 10% of the issued capital of the Bank at

every given time.

Please indicate “X” in the appropriate square, how you wish y o u r

vote to be cast on the resolution referred to above. Unless o t h e r w i s e

instructed, the proxy will vote or abstain from voting at his discretion.

AFRICA PRUDENTIAL REGISTRARS

Formerly UBA Registrars Limited

220B Ikorodu Road,

Palmgrove,

Lagos, Nigeria.

PLEASE

AFFIX

A STAMP

HERE

JAIZ BANK PLCKano House, 75 Raplh ShodeindeCentral Business District, AbujaP.M.B. 31, Abuja, Nigeria T el: +234-9-0460(JAIZ)[email protected]

Annual Report and Account 2012 - jaizbankplc.com

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