CORPORATE GOVERNANCE

Submitted By:

Saira Akhtar (10101)Sarah Mashhood (10359)Arshian Siddique (10300)Owais Nathani (10218)Zardar Waseem (9896) Submitted To:

Mr. Humayun Zafar

Table of ContentsLetter of Transmittal............................................................................................................3

Vision...................................................................................................................................4

Mission Statement...............................................................................................................4

Objectives............................................................................................................................4

Introduction..........................................................................................................................4

Meezan bank........................................................................................................................4

Performance in year 2010....................................................................................................5

Organizational Chart............................................................................................................8

SWOT Analysis...................................................................................................................9

Meezan Bank Annual Report Receives Award.................................................................11

Responsibility....................................................................................................................11

Performance management review......................................................................................11

Composition of Board........................................................................................................12

Board And Senior Management Remuneration.................................................................13

Meetings............................................................................................................................13

Role of Corporate Secretary..............................................................................................13

Disclosure of Information..................................................................................................14

Board Meetings..................................................................................................................14

Annual General Meetings..................................................................................................14

Timing................................................................................................................................14

Conflict of Interest.............................................................................................................15

Register of Interest.............................................................................................................15

Voting of Shareholders Meeting........................................................................................15

Financial Statements:.........................................................................................................16

Alternate Distribution Channels........................................................................................19

Board Appointment...........................................................................................................19

Corporate Social Responsibility........................................................................................20

Succession planning...........................................................................................................20

Figure 1: Organizational Behavior......................................................................................8

Letter of Transmittal

DATE: April 14, 2011

TO: Mr. Humayun Zafar

FROM: Saira Akhtar Sarah Mashhood Arshian Siddique Zardar Waseem Owais Nathani

SUBJECT: CORPORATE GOVERNANCE AT MEEZAN BANK LIMITED

We are pleased to present our Report on “Corporate Governance practices followed at Meezan Bank Limited”.

Our research has been very productive, especially receiving first hand knowledge from the company website it self i.e. www.meezanbank.com & also through our visit to the organization which opened new ways of learning & experience to us & helped us in implementing the theories which we learnt in the course of corporate governance.

We would also like to thank We would also like to thank Mr Syed Zubair Razvi (credit risk analyst), Jawed Ahmed (SVP Risk Management) and Kashif Usmani (SVP Finance) who gave his valuable time who gave their valuable time to us in guiding and informing us about the practices exercised at Meezan Bank. We acknowledge your help and support for this report and we look forward to discussing this report with you and having your feedback.

This report as per your instruction has covered all the authentic areas of concern and contains all the relevant information. We would dearly like to thank you for the faith you showed in our capabilities and the encouragement you gave us when assigning us the report which helped in our learning process & let us experience new things.

Acknowledgement

We are grateful to our teacher Mr. Humayun Zafar for teaching us the course of “Corporate Governance”. His versatile knowledge in this field and his exceptional teaching method has developed our knowledge and cleared many essential and crucial concepts. Also we would like to thank him for providing us the opportunity to understand the theory and concepts of corporate governance by practically examining and applying them in this report.

Finally we bestow our thanks to all who have directly or indirectly supported us with their assistance and guidance to compose this report and accomplish a broader vision to visualize things. We would also like to thank all the people who directly & indirectly supported us in making this project without which this project would not have been possible.

Here is our report on the corporate governance practices carried on by MEEEZAN BANK.

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

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

ObjectivesTo develop a committed service culture which ensures the consistent delivery of our products and services within the highest quality service parameters, promoting Islamic values and ensuring recognition and a quality banking experience to our customers.

IntroductionMeezan bank is a premier Islamic bank and publicly listed company first incorporated on January 27, 1997. It started operations as an investment bank inAugust of the same year. In January, 2002 in an historic initiative, Meezan Bankwas granted the nation's first full-fledged commercial banking license dedicated to Islamic Banking, by the State Bank of Pakistan.

Meezan Bank stands today, at a noteworthy point, along the evolution of Islamic Banking, in Pakistan. The banking sector is showing a significant paradigm shiftaway from traditional means of business and is catering to an increasingly astute and demanding financial consumer who is also becoming keenly aware of Islamic Banking. Meezan Bank bears the critical responsibility of leading the way forward in establishing a stable and dynamic Islamic Banking system replete with dynamic and cutting-edge products and services.

The Bank has made fundamental and significant progress forward, and in doing so has established a strong and credible management team comprised of experienced professionals, which have achieved a strong balance sheet with excellent operating profitability, including a capital adequacy ratio that places the Bank at the top of the industry, a long-term entity rating of A+, and a short-term entity rating of A1+, the highest short-term rating.

The Bank's main shareholders are: leading local and international financial institutions, including Pak-Kuwait Investment Company, the only AAA rated financial entity in the country, the Islamic Development Bank of Jeddah, and the renowned Shamil Bank of Bahrain, which in addition to their strength and stability, add significant value to the Bank through Board representation and applied synergies.

At Meezan Bank, we strive to find commonalties with the conventional banking system with absolutely no compromise on Shariah rulings. The bank has developed an extraordinary research and development capability by combining investment bankers, commercial bankers, Shariah scholars and legal experts to develop innovative, viable, and competitive value propositions that not only meet the requirements of today's complex financial world, but do so with the world-class service excellence that our customers demand, all within the bounds of Shariah.

Performance in year 2010Meezan Bank developed a number of new deposit products to cater to the unique needs of different market segments. Among the products launched during this year were Meezan Business Plus, a Mudaraba-based account that offers an array of free services for businesses, Meezan Euro Savings Account and Meezan Pound Savings Account.Meezan Bank's Car Ijarah completed its 9th year and stood at Rs. 4.2 billion with over 8,000 active vehicles. Meezan Bank stood among the top three auto-finance providers in the country. Al Meezan Investment Management launched Meezan Sovereign Fund - an open-end fund; the eighth fund under its management, including two closed-end funds, five open-end funds and one voluntary pension scheme. Meezan Bank's branch network reached 222 branches in 63 cities across Pakistan and it became the 11th largest bank inPakistan in terms of branch network. The Bank demonstrated robust business growth in 2010, closing the year with a deposit figure of Rs. 131 billion and Import/Export business of Rs. 143 billion.

Board of Directors (ELEVEN)

H.E. Sheikh Ebrahim Bin Khalifa Al-Khalifa ChairmanNaser Abdul Mohsen Al-Marri Vice ChairmanRana Ahmed HumayunMohammed Azzaroog RajabAhmed Abdul Rahim MohamedNawal AhmedAlaa A. Al-SarawiMian Muhammad YounisMohammad Abdul AleemIrfan Siddiqui President & CEOAriful Islam

Organizational Chart

Figure 1: Organizational Behavior

“SWOT Analysis”

Strengths First exclusive Islamic bank.

The largest Islamic Bank in Pakistan with a network of over 204 branches in 54 cities. And ending this year they have increase his branches in Pakistan to 280 branches.

Strong growth of its Islamic banking SBU.

The members of the Shariah Supervisory Board of Meezan Bank are Internationally-renowned scholars, serving on the boards of many Islamic banks operating in different countries.

Meezan Providence Certificate is a long-term investment certificate specially designed to cater to the needs of corporate and business concerns for purposes of investing their Provident, Pension and Gratuity Funds.

Meezan Bank, the largest Islamic Bank in Pakistan

Dedicated and professional staff

Shariah board of renowned scholars

Healthy working environment

Strong shareholding

Weaknesses High charges for different activities such as online or Demand Draft as compared

to competitors.

Lack of promotions and advertising of their products and services.

Lengthy & extensive documentation

Centralized procedures making process slow

Weak marketing strategy, Target market not identified

offering fewer services than the competitors

Risk Averse, approach of Head office.

The Islamic economic system is not something that can work in isolation of the geo-political and legislative system, as well as, and more importantly the society's behaviors towards the injunctions of Islamic Shariah in personal and collective matters. Accordingly, one can easily imagine that in an economy whereby most of the businessmen are not honest in fairly presenting the financial statements of their businesses, how difficult it is to introduce a profit-and-loss sharing based financial solution.

Meezan Bank Limited has no Credit card facility

Restricted Shariah based policies

Opportunities House financing sector can be targeted to maximize the profit.

Growing demand of Islamic financial product and services.

Venturing into Islamic groups out side the countries as opportunity to expand business in UAE and Golf states i.e. financial institutions.

Coming up with. Products for the SME to targeting the medium level customers.

Doing business with companies having Islamic mindset. I-e Islamic financial Institutions.

Increase branch network within the country

Threats New competitors setting up their Islamic banking sections

High Interest Rate from SBP

SBP has not special policy regarding Islamic Banking.

Disassociation of Maulana Taqi Usmani from the Shariah advisory board of Meezan Bank.

Govt. policies are mostly for conventional banking system not for specially designed for Islamic banking.

Fears on the credibility of Islamic banking ethical compliance and monitoring systems.

Meezan Bank Annual Report Receives AwardKarachi—Meezan Bank is awarded the prize for the fifth best annual report in the Banking sector jointly organized by the Institute of Chartered Accountants of Pakistan (ICAP) and the Institute of Cost and Management Accountants of Pakistan (ICMAP). The prize is awarded on the basis of a very comprehensive marking scheme that takes into consideration the quality and transparency of disclosures and information provided to investors. 

ResponsibilityIn Meezan bank the board members understand their responsibilities to a larger extent. The company differentiate clearly that what management is supposed to do and what board can do. The responsibilities of the directors, members and the staff are clearly written in:

Articles of Association MemorandumPotential RegulatesBanking Companies Ordinance 1962 (State Bank of Pakistan)

Performance Management Review

To appoint any director approval from SBP is required. In banking sector one person can be a director in one company only. If he wishes to become director of another company then he have to resign from first company.

Meezan Bank writes its minutes of the board meeting and committees. These minutes are then sent to all directors and reviewed that what are the changes and what corrective actions should be taken in next meeting.

The performance of Meezan Bank is measured through key indicators i.e growth rate and profitability. Meezan bank is increasing its profit every year at a growth rate of 65%. This is because of their powerful Internal Control Department which indicates the risk criteria to management to take further steps and achieve the goal.

After the preparation of accounts, within one month, board meeting is held, which is usually every quarter. The chairman of the board committees monitor the reports and present it in the board meetings, head of departments are included in these committees.

The Board has formed an Audit Committee. It comprises three members, all of whom are non-executive directors including the Chairman of the Committee.

The Board has set-up an internal audit function, the members of which are considered suitably qualified and experienced for the purpose and are conversant with the policies and procedures of the Bank .Internal auditors take the plan to the audit committee not to CEO. The audit committee then produce a report on internal audit function in the board meeting.

The performance of committees is reviewed by the audit committee. It also reviews the internal audit.. The audit plan has to be reviewed annually but in certain cases it is also reviewed on quarterly and half yearly basis. After every 5 years Meezan bank has to change their auditors

It is mandatory to prepare an internal audit plan because to manage the performance of 222 branches. it is essential to know the company’s +ve and –ve points and make certain necessary changes.

The meetings of the Audit Committee are held at least once every quarter prior to approval of interim and final results of the Bank and as required by the Code. The terms of reference of the Committee have been formed, approved by the Board and advised to the Committee for compliance.

No inside candidate or committee audits the board. The election of the directors is done after every 3 years by the approval of SBP. Inspection team of SBP audits the board once in a year depending on the performance. Inspection is done to tell Meezan Bank about its weaknesses and strength and their compliance with SBP & if there is not compliance then SBP can penalize the company.

The statutory auditors of the Bank have confirmed that they have been given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Bank and that the firm and all its partners are in compliance with the International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the Institute of Chartered Accountants of Pakistan.

The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard.

The control activities are being closely monitored across the Bank through Compliance, Shariah and Internal Audit departments, which covers all banking activities in general and key risk areas in particular.

Based on observation and weaknesses found and identified by the auditors both internal and external and the Compliance and Shariah audit teams, improvements are brought about by the management with the approval of the Board of Directors in internal controls to ensure non-recurrence of those exceptions and elimination of such weaknesses to the maximum possible level.

Composition of BoardThe board is composed of Executive and non-Executive Directors, Chairman, Vice Chairman, President, CFO, COO and CEO. Sponsor shareholders are appointed for the Annual General Meeting. An inspection team is sent by SBP in the seminar. That is where they give their feedback related to the present CEO or B.O.D with regard to their performance appraisal. A nominated B.O.D must have the knowledge about the bank in order to be a best fit candidate for the post of B.O.D and it is best if he is familiar with the culture of the organization as well.

Board and Senior Management RemunerationThere is no such remuneration committee of MEEZAN BANK. Directors attending the seminar are paid the amount, according to the rules applied by State Bank of Pakistan. The remuneration policy is disclosed within the Annual Report.

The remuneration of individual Board Members and senior management is disclosed in the Annual report. All B.O.D decide and set an appropriate amount to be paid to senior Executives (C.E.O, C.F.O, and C.O.O). The remuneration is paid to the non-Executive directors, approved by the Board of Directors and the Shareholders in Annual General Meeting. The non-executive directors are interested in the Payment of Remuneration. Remuneration Policy is disclosed in Articles of Association of the Bank issued by the State Bank of Pakistan.

Meetings There is a set quota for meetings of the board. Minimum FOUR and Maximum 5 meetings could be conducted by the Board in which 2/3rd quorum requirements is maintained for board and board committees.

At Meezan Bank, most often the board committees decide by themselves the time requirement to circulate the minutes to other members. Normally B.O.D gives a notice of meeting in 7days before the meeting is decided to be held.

Role of Corporate Secretary Minimum Criteria for appointing a corporate secretary at Meezan Bank is as following,

- Masters degree- Minimum 10yrs of work experience in Accounting field- Chartered Accountant is much more preferable.- Has done an Additional Certified Course from Pakistan Institute of Corporate

Governance (P.I.G.C); the course is equivalent to ACCA.

There is no tenure of a Corporate Secretary at Meezan bank. Board of Directors can remove the secretary anytime. The performance is reviewed by B.O.D and the HR manager.

Company Secretary is a Legal Secretary. All responsibilities of a corporate secretary are defined in the Companies Ordinance.

Disclosure of InformationThe information is all about how they kept inform the public about the company operations. They do it through Karachi Stock Exchange (KSE) and they do it annually.There are some restrictions in the bank about the information provided to the public as every bank has so they provide the information to some extent. And they cannot disclose every kind of information to the public.

Board MeetingsMeezan bank conducts a board meeting in every three months, 7 days before the board meeting they provide the agenda paper to the board of directors (BOD). A good agenda is one page long, has each topic clearly articulated, and lists the length of time expected for the topic and the person responsible for leading the discussion. There should be no surprises in the board meeting the agenda should be clear about what is being covered. They arrange the agenda in order to that the issues that are most important to address in the meeting are covered first.

Annual General MeetingsAn Annual General Meeting, commonly referred to as an AGM, is a formal meeting which is held once a year. It is a legal requirement for voluntary organizations that have company status. It is good practice for charities to have an AGM to act as a review of the year and deal with issues such as the election of committee/board members and reviewing the annual accounts. Each individual organization should have a section of its Constitution which deals with AGMs, and this gives guidance as to how the AGM should be run and what matters should be dealt with. Although it is a formal meeting, it can also be a good opportunity to communicate with members, clients, partners and other interested parties.

TimingAgain, each organization should find guidance in its Constitution regarding when an AGM should take place. It does need to take place following the end of your financial year when accounts have been audited. Meezan bank also conducts the annual general meeting (AGM) they also provide some information to the shareholders includes, notice of the annual general meeting (AGM), and director’s remuneration. The directors remuneration approved by the board of directors so they paid accordingly and they mentioned the amounts in the annual report as well.

They also approves the minutes of the previous meeting and they also undertake a review to ensure that actions decided at meetings have been taken and the recommendations send by the risk management committee also been consider.

Conflict of InterestDisclosure plays an important role in minimizing the risk of conflicts of interest and should be full and accurate. Disclosure alone, however, is not enough and subsequent management of a conflict has equal importance. Particular attention should be paid to remuneration and bonus structures, gifts and hospitality.Meezan have the policy on the conflict of interests as the transaction made by the directors or management in terms of shares reports to the SECP. If anyone in the company has the shares of more than 5 % so bank should inform to the state bank of Pakistan (SBP). They also told us about the different types of shares which they mentioned in the annual report with the directors name.

Register of InterestSection 189(1) (c) of the Companies Act requires that after its registration a company must establish an interests register. This is a list of the material interests that the directors have in:

· Businesses with which the company is dealing

· Transactions involving the company

· Businesses or transactions which may impact on the company in some way

The Meezan Bank also follows this act and SBP have a strict policy on personal interests of the directors. The shareholding interest is the important to be disclosed because it differentiates the directors as independent directors.

The organization also maintains the register of interests as every bank does and it is reviewed by the audit committee and chief financial officer (CFO). It is not necessary for all the members to sign the register. They have a very vast system to raise concern ant they reviewed it regularly to ascertain effectiveness.HR heads is responsible to review the system. The organization has a disciplinar0y committee to see the different mishaps and illegal acts in the company as they have a very separate committee for the sexual

harassment act. They also have a fraud and fraudulent committee to see the fraudulent practices take place in the organization. They have a zero tolerance policy for this type of act.

Voting of Shareholders MeetingYes the company follows the rules of The Companies Ordinance 1984 implemented in Pakistan. The proxy form is attached in every annual report and is also sent with the Notice to the meeting.

The public notice is been given by the secretary 21 days before the meeting in the news paper and 7 days before the meeting, the directors who are attending or not shall confirm their state. Every attending member has one vote to put forward to the resolutions presented in the meeting.

A member eligible to attend and vote at this meeting may appoint any person as proxy to attend and vote in the meeting if he/she is not attending it. He/she can appoint any person to the place in the meeting where the attendee have all the powers which one board member could contain during the meeting.

The resolutions put forward to attend and vote for the meeting are as follows:

i) The Members' Register will remain closed from starting date of meeting to ending date of meeting (both days inclusive) to determine the names of members entitled to receive bonus shares and to attend and vote in the meeting.

ii) A member eligible to attend and vote at this meeting may appoint any person as proxy to attend and vote in the meeting. Proxies in order to be effective must be received at the Registered office not less than forty eight (48) hours before the holding of the meeting.

iii) An individual beneficial owner of the Central Depository Company, entitled to vote at this meeting must bring his/her Computerized National Identity Card along with the participant ID numbers and sub account numbers with him/her to prove his/her identity, and in case of proxy must enclose an attested copy of his/her Computerized National Identity Card. Representatives of corporate members should bring the usual documents required for such purpose. If the separate matters are discussed in the meeting then it is been cleared in the notice about what they have to follow.

Financial Statements:Yes the company applies International Accounting Standards (IAS) in the preparation of financial statements along with the International Financial Reporting Standards (IFRS) and regulations of State Bank of Pakistan

The financial statements are signed by four persons which are the Chairman, CEO, Vice Chairman and one director. The company maintains the accounting records in compliance with the International Accounting Standards (IAS) and International Financial Reporting

Standards (IFRS) along with the regulations which are imposed by the State Bank of Pakistan to each and every bank under its jurisdiction.

The preparation of consolidated financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies.

Circular No 10 dates 20 October 2009During the year, MBL, in line with the requirements of Circular No. 10 dated 20 October 2009, issued by the State Bank of Pakistan, has applied the enhanced limit of 50% of forced sale value of pledged stocks and mortgaged commercial and residential properties held as collateral in determining the provision as against the limit of 30% applicable till December 31, 2008.

Preparation of Consolidated Financial StatementsThese consolidated financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards issued by the International Accounting Standards Board and Islamic Financial Accounting Standards issued by the Institute of Chartered Accountants of Pakistan, as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984, and the Banking Companies Ordinance, 1962, and the directives issued by the State Bank of Pakistan (SBP).

In case the requirements of provisions and directives issued under the Companies Ordinance, 1984, and the Banking Companies Ordinance, 1962, and the directives issued by SBP differ, the provisions of and the directives issued under the Companies Ordinance, 1984, and the Banking Companies Ordinance, 1962, and the directives issued by SBP shall prevail.

Maintenance of Records:For the maintenance of the records the organization has setup a records warehouse at S.I.T.E. Area in Karachi from where the organization can fetch required information from the past easily. The Security of that data bank is been made sure that there is no threat of losing that data or altering it in any way.

The company uses HRMS system to ensure the best retrieval and access to the records, it also help the organization to keep them up to date. The organization is in process with the European company to install the new system of keeping the information safe and secure and access it more efficiently.

A strong and robust Information Technology (IT) backbone is at the heart of all transaction processing at Meezan Bank. Significant investment continues to be made in various IT initiatives such as the roll-out of a new Core banking application, T-24, supplemented by Oracle E-Business Suite covering General Ledger, Business

Intelligence capability and enterprise level self-service Human Resource Management System(HRMS). T-24 is a core banking application developed by a Swiss company, Temenos, that is currently deployed at over 400 financial institutions world-wide. This new system is currently being implemented and 51 branches are presently live on the new application. The new Human Resource Management System is also in the final stages of implementation.

The Bank has also setup a dedicated unit for the purpose of implementing strict Information Security Controls and IT governance and is putting in place Software Quality Assurance procedure as per the international standards.The Bank offers unified communication platform for messaging and collaborative applications over mobile devices. Round-the-Clock Data Centre Service monitoring is also maintained with the help of automated Alert mechanism to avoid any possible downtime. The following projects will insha'allah be completed in 2010 Implementation of all modules of T-24 across the entire Meezan network. Improvement in operational efficiency of core banking system T-24. Maximizing the use of Financial ERP solutions implemented to further improve financial reporting and business agility. Implementation of Oracle Core HR, Payroll, Learning Management and Self Service.

Alternate Distribution ChannelsThe Alternate Distribution Channel (ADC) department plays a vital role in promoting Meezan Bank as an institution that cares about its customers. ADC is responsible for all channels other than 'brick and mortar' branches, that allow customers to manage their accounts and conduct financial transactions on a 24/7 basis. These include ATMs, Call Centre, Internet Banking and VISA Debit Card. A new product, the Meezan Bank VISA Debit Card was launched in September 2009 and more than 30,000 cards have already been issued. The card allows Meezan Bank customers to shop at more than 30 million merchants worldwide. In addition, the card also allows customers to withdraw funds from their accounts from more than 1.4 million ATM'sworldwide. The VISA Debit card provides customers the convenience of not having to carry cash for everyday purchases and also allows them to keep an automatic track of their spending.

Board AppointmentThe organization has the three main shareholders namely

Noor Financial Investment Co, Kuwait Pakistan Kuwait Investment Co. (Pvt.) Ltd. Islamic Development Bank, Jeddah

The Noor Financial Investment Co, Kuwait have 49.11% shareholding in the organization and is the beigest shareholder till now, Pakistan Kuwait Investment Co. (Pvt.) Ltd. The second biggest shareholder of the company which contains 30% of the shares and Islamic Development Bank, Jeddah holds 9.32% of the shares of organization. These three shareholding entities appoint the board of directors for Meezan Bank for its operations in Pakistan. Those who are appointed can be independent or executive directors. Currently the organization holds nine Independent Directors.

The State Bank of Pakistan have a very strict criteria to measure the performance of the directors if they find any director underperforming with the criteria followed then they can ask the organization to assign that particular position to the person eligible for it. Mainly the shareholders make the recommendations and appoint the shareholders but the process is set by them to appoint the particular position to a particular candidate. The proper selection process is been done by the shareholders to ensure that the person is fit for the position then it is been sent to the State Bank of Pakistan to confirm the appointment then the person is appointed.

The complete check and balance of the performance of the appointed director is been evaluated by the State Bank of Pakistan every year. In Meezan Bank Board of Directors are elected or re-elected after every 3 years of period with the compliance of State Bank of Pakistan.

The training program for the directors is conducted by the Corporate Governance Institute in which if organization sends its director then it ensures that the particular director will come back and train the entire set of respondents which require that training. This ensures that the attending director is attentive and has gained something which can be helpful for the organization in the future.

Corporate Social ResponsibilityMeezan Bank has a Clear Cut AgendaMeezan Bank has a clear cut sustainable development and philanthropic agenda. It includes concerns such as:

Education Health

For Example:

Continued support through Qarz e Hasna for higher studiesThe 'Qarz e Hasna' scheme developed by Ihsan Trust and facilitated by Meezan Bank to help needy and meritorious students in pursuing their higher studies.

Meezan Bank's employees' contribution towards rehabilitation of flood-affected peopleIn order to support the people affected by the devastating floods that occurred in August 2010, Meezan Bank's employees contributed, in their own humble way, to help with the recovery and rehabilitation of the people affected by the floods by contributing funds into a 'Flood Victims Relief Account'.

CSR initiatives in the health sectorThe Bank teamed-up with Afzaal Memorial Thalassemia Foundation on 8th May, 2010 - Thalassemia International Day, to create awareness among its employees, customers and the general public about

Thalassemia and its prevention. This was done by disseminating information about Thalassemia through flyers and email as well as display of banners outside its branches. Meezan Bank has continued its support of Sind Institute of Urology Transplant and Shaukat Khanum Cancer Hospital, The Kidney Centre and Markaz-e-Umeed, Meezan Bank also facilitated Children Cancer Hospital (CCH) Karachi, in their campaign for collection of Zakat.

How Meezan Bank Goes About It:Meezan Bank’s operations and corresponding financial transactions grow substantially every year and because of this reason the amount collected on account of charity also increases every year. The Sharia Advisor and Shariah Supervisory Board of the Band are responsible to monitor the process. The charity account operates under their guidance and approval in order to ensure that the funds are utilized for promoting social responsibility causes. An independent trust by the name of Ihsan Trust has been registered as an independent entity for disbursement of Meezan Bank’s charity fund. The contributions made by the Trust are not linked to the Meezan Bank’s business interests.

During the year, Meezan Bank disbursed a total of Rs. 137.6 million from its charity fund, the highest in the history of the Bank, towards promotion of social and welfare causes. Details of charity disbursements are given in Note 18.4 to these accounts. A few of the projects undertaken either jointly with Ihsan Trust or directly by Meezan Bank are detailed below:

Being cognizant of its obligations towards the society as a corporate citizen, Meezan Bank contributed through financial aid, human effort and utilization of its branch network towards numerous social causes as well as towards efforts to alleviate the sufferings of people affected by the recent floods. Details of the CSR initiatives undertaken during the year are as follows:

During the year, an amount of Rs. 106.309 million was transferred to the Charity account and an amount of Rs. 137.633 million was disbursed from charity saving account after the approval of the Shariah Advisor. Moreover, as per the directive of SSB a charitable foundation by the name of Ihsan Trust has been established to ensure effective utilization and disbursement of charity funds.During the year, an amount of Rs. 106.309 million was transferred to the Charity account and an amount of Rs. 137.633 million was disbursed from charity saving account after the approval of the Shariah Advisor. Moreover, as per the directive of SSB a charitable foundation by the name of Ihsan Trust has been established to ensure effective utilization and disbursement of charity funds.During the year, an amount of Rs. 106.309 million was transferred to the Charity account and an amount of Rs. 137.633 million was disbursed from charity saving account after the approval of the Shariah Advisor. Moreover, as per the directive of SSB a charitable

foundation by the name of Ihsan Trust has been established to ensure effective utilization and disbursement of charity funds.CharityDuring the year, an amount of Rs. 106.309 million was transferred to the Charity account and an amount of Rs. 137.633 million was disbursed from charity saving account after the approval of the Shariah Advisor. Moreover, as per the directive of SSB a charitable foundation by the name of Ihsan Trust has been established to ensure effective utilization and disbursement of charity funds.

Problems Faced:

In case they do not receive any deposits in the charity account then this could lead to a few problems. It should be noted that there has been no such case in the history of Meezan Bank to this day.

Ombudsperson:A public official is one who acts as an impartial intermediary between the public and government or bureaucracy, or an employee of an organization who mediates disputes between employees and management. Their CCO is the ombudsperson of the company and he acts as the impartial intermediary in this case.

Sexual Harassment PolicyThe policies of the company on sexual harassment have been mentioned in a proper document and are shown to all at one point or another so that it is taken care of properly. Women who work come to work wearing an Abaya so they feel safe and secure.

Code of Equal Employment Opportunity:The company follows the code of equal employment opportunity and mentions it everywhere in order to show its equitability in case of pay scale.

External Lawyers:Since they have loads of work and the size of the bank has been on the go for expansion they have not really gotten time or tied up money to arrange for external lawyers. Instead they have a legal department that takes care of any lawsuits that come their way which are usually about non performing loans and then they also have Remedial Asset Management to work for this purpose.

Appointing external Corporate Governance Advisors:They do not appoint any external corporate governance advisors since they get all the information on regulations on corporate governance from State Bank of Pakistan. They monitor the bank and its every move vigilantly.

Glass Ceiling:There are hardly any women who would join the bank because they have made it compulsory to wear ‘Abaya’ to work. They do have a policy of glass ceiling but they do not share it with outsiders.

Benchmark:As far as benchmarking the best practices in the business is concerned, they have recently achieved the award for the best annual report. They are setting up standards high and above.

Risk Management FrameworkThe Bank manages risk through a framework of sound principles which include robust organizational structure as well as risk assessment and monitoring process that are closely aligned with the Bank’s strategy. The Risk Management Department is mandated to implement this framework as a function independent of commercial lines of business. The Board has constituted the following committees comprising of Board Members for effective management of risks:

Compliance with Code of Corporate GovernanceThe requirements of the Code of Corporate Governance set out by the Karachi Stock Exchange in its listing regulations relevant for the year ended December 31, 2010 have been adopted by the Bank and have been duly complied with. A statement to this effect is annexed with the report.

Risk Management Framework

The Bank manages risk through a framework of sound principles which include robust organizational structure as well as risk assessment and monitoring process that are closely aligned with the Bank’s strategy. The Risk Management Department is mandated to implement this framework as a function independent of commercial lines of business. The Board has constituted the following committees comprising of Board Members for effective management of risks:

1. Risk Management Committee2. Audit Committee

The Risk Management Committee is responsible for reviewing and guiding risk policies and procedures and control over risk management. The Audit Committee monitors compliance with the best practices of the Code of Corporate Governance and determines appropriate measures to safeguard the Bank's assets.

Risk Management Principles- The Board of Directors (the Board) provides overall risk management supervision. The risk management committee regularly reviews the Group’s risk profile. - The Group has set up objectives and policies to manage the risks that arise in connection with the Group’s activities. The risk management framework and policies of the Group are guided by specific objectives to ensure that comprehensive and adequate risk management policies are established to mitigate the salient risk elements in the operations of the Group.- The establishment of the overall financial risk management objectives is consistent and in tandem with the strategy to create and enhance shareholders’ value, whilst guided by a prudent and robust framework of risk management policies.- The structure of risk management function is closely aligned with the organisational structure of the Group.- The risk management function is independent of the Group’s operation.

Risk Management OrganizationThe Risk Management Committee comprises of two non-executive directors and one executive director. One of the non-executive directors of the Group chairs the Risk Management Committee.The Committee is responsible to review risk profile, policies, tools and techniques so as to ensure effective management of risks of the Group.

The management has delegated some of its tasks of risk management to sub- committees which are as follows:

Name of the committee Chaired by Credit Committee President & CEOAsset and Liability Management Committee (ALCO) President & CEOInternal Controls and Operational Risk Management Committee COO

The Credit Committee is responsible for approving and monitoring financing transactions and also the overall quality of the financing portfolio.

-Credit riskThe Group manages credit risk by effective credit appraisal mechanism, approving and reviewing authorities, limit structures, internal credit risk rating system, collateral management and post disbursement monitoring so as to ensure prudent financing activities and sound financing portfolio under the umbrella of a comprehensive Credit Policy approved by the Board of Directors.

-Equity position risk in the Banking book-Basel II SpecificThe Group makes investment in variety of products / instruments mainly for the following objectives:- Investment for supporting business activities of the Group and generating revenue in short term or relatively short term tenure.- Strategic Investments which are made with the intention to hold it for a longer term and are marked as such at the time of investment.

-Market riskThe Group is exposed to market risk which is the risk that the value of on-balance and off-balance sheet exposures of the Group will be adversely affected by movements in market rates or prices such as benchmark rates, profit rates, foreign exchange rates, equity prices and market conditions resulting in a loss to earnings and capital.

-Liquidity riskThe Group seeks to ensure that it has access to funds at reasonable cost even under adverse conditions, by managing its liquidity risk across all class of assets and liabilities in accordance with regulatory guidelines and to take advantage of any lending and investment opportunities as they arise.

-Operational riskThe Group uses Basic Indicator Approach (BIA) for assessing the capital charge for operational risk.

The ALCO is responsible for monitoring, measuring and managing market risk and liquidity risk and ensuring compliance with internal and regulatory requirement. The Internal Controls and Operational Risk Management Committee ensure adequate internal controls and systems are in place thereby ensuring operating efficiently.

The Board has constituted a full functional Audit Committee. The Audit Committee works to ensure that the best practices of the Code of Corporate Governance are being complied by the Group and that the policies and procedures are being complied with.The Group’s risk management, compliance, internal audit and legal departments support the risk management function. The role of the risk management department is to quantify the risk and ensure the quality and integrity of the Group’s risk-related data. The compliance department ensures that all the directives and guidelines issued by SBP are being complied with in order to mitigate the compliance and operational risks. Internal

audit department reviews the compliance of internal control procedures with internal and regulatory standards.

SUCCESSION PLANNING:Meezan Bank does not have a succession planning program and they have no plans to have it in the near future either. They do believe in promoting from within the organization; it is just that they have not gotten a chance to promote anyone to the post of CEO till now. They have not given it a thought as to whether succession planning entails advantages or not. It is always good to prepare for future.