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Annual Report 20102

The Vision

(We look forward to see the Bank in the foremost part of the Sudanese banks.)

3Annual Report 2010

The Massage

At the Islamic Bank, we endeavour for the comprehensiveness of Islam in order to achieve pioneering in the banking performance by talent-developing of the human being and utilizing the on-going banking technology and contributing in achieving the desired economical and social development so as to provide integral solutions that satisfy concerned stakeholders.

Annual Report 20104

Table of Contents

No. Subject Page

1 Bank’s profile 5

2 Directory of HQ. and branches 6

3 A map showing geographical spread of branches 7

4 Board of Directors 8

5 Sharia Supervisory Board 8

6 Executive Management 9

7 National and International Economic Developments for 2010 11

8 Chairman Board of Director’s address before the 21st Shareholders’ General Assembly 13

9 The Bank’s activity during 2010 17

10 Statement of Financial position as at 31/12/2010 20

11 Income Statement for the year Ending 31/12/2010 21

12 Statement of Cash flows for the year Ending 31/12/2010 22

13 Statement of Changes in owners equity for the year Ending 31/12/2010 23

14 Notes on Financial Statements 24

15 General Auditor’s report 36

16 Sharia Supervisory Board’s report 38

17 Resolutions of the21st Shareholders’ General Assembly 39

18 Foreign correspondents 40

5Annual Report 2010

Al-Shamal Islamic Bank Public Ltd. Company

Establishment: July 23rd, 1985

Commencement: January 2nd 1990

Activities: Commercial Banking & Investment on Islamic Principles

Authorized Share Capital: 125 million Sudanese Pounds

Paid up Capital: 90 million Sudanese Pounds

Annual Report 20106

Head Quarters’ Addresses

Elsayed Abdurrahman Street. Eastern Khartoum- Sudan Tel: (+249-1) 83779078 - 83774728- 83771735 - Fax: (+249-1) 83784282 – 83773585 Swift: (isbssdkh) P.O Box: 10036, Khartoum- Sudan Postal Code: 11111 Website: www. shmalbank.com E-mail: [email protected]

Operating Branches

Tower Tel: (+249-183) 795721 Fax: 795720 Khartoum Tel: (+249-183) 783043 Fax: 785098 Alsouque Alarabi (Kh). Tel: (+249-183) 783921 Fax: 783925 Industrial Area (Kh). Tel: (+249-183) 472837 Fax: 472849 Saggana Tel: (+249-183) 487958 Fax: 460714 Alsouque Almahali Tel: (+249-183) 420183 Fax: 420182 Elkalakla Tel: (+249-183) 722002 fax: 722002 Omdurman Tel: (+249-187) 553330 Fax: 554606 Souque Shabi (Om) Tel: (+249-187) 454156 Fax: 0159337051 Souque Libya Tel: (+249-187) 730515 Fax: 730514 Indus. Area (Kh. North). Tel: (+249-185) 330582 fax: 331141 Port- Sudan. Tel: (+249-311) 826042 fax: 826046 Wad Medani. Tel: (+249-511) 840445 Fax: 840445 Kosti Tel: (+249-571) 824645 fax: 824850 Gedarif Tel: (+249-441) 843481 Fax: 843479 Dongola Tel: (+249-241) 823839 Fax: 822292 Alhafeer Tel: (+249-183) 730149 Fax: 730148

Directory of HQ. and branches

7Annual Report 2010

A map showing geographical spread of branches

Kosti

Wad MadaniGadarif

Port SudanAlhafeer

Dongola

Operatig Branches in Khartoum State TowerKhartoumAl Souque AlarabiIndustrial Area (kh)SagganaAl Souque AlmahaliAlkalaklaIndustrial Area (kh. North)OmdurmanSouque shabi (Om).Souque Lybia

Annual Report 20108

Board of Directors

1- Mr. Al Bagir Yusuf Mudawi Chairman of the Board of Directors

2- Mr. Abdullah Idrees Fadul Idrees Vice Chairman of the Board

Board Members: 3- Mr. Mohamed Yahiya Mohamed El Jaldi 4- Mr. Bader El Dien Salih Abdul Rady. 5- Dr. Ziyada Abdullah Ziyada. 6- Dr. Abdul Rahiem Mohamed Bakhiet. 7- Mr. Tag Eden Ibrahim Hammed. 8- Mr. Suleiman Mohamed Ahmed Mohamed. 9- Eng. Ibrahim Musa Al- Khalifa. 10. Mr. Abd Elaziem Hassan Mohamed

Secretary of the Board of Directors 11. Mr. Zain Al-Abdien Salih Ibrahim

Sharia Supervisory Board: 1- Mowlana / Mukhawi Mudawi Mukhawi Chairman 2- Dr. Abdel Wahid Othman Mustafa Member 3- Dr. Mohamed Ali Yusuf Member 4- Mr. Mohamed Kamal Eldien Abd Elmajid Reporter

Legal Advisor: Office of the late, Mr. Mohamed Yusuf Mohamed. Legal Auditor: Messrs: the National Audit Chamber

9Annual Report 2010

Executives ManagementGeneral Manager

Mr. Hassan Mohamed Al-Hassan El-amien

Deputy General Manager

Mr. Abdulbaqi Dafa Allah El-amienGeneral Manager’s Assistants:

Mr. Mohamed Bushra Khalafalla Ali

G.M. Assistant for Financial & Administration

Mr. Abdullah Noureddin Ahmed Mohamed

G.M. Assistant for Investment & Planning

Mr. Kamal El-Sheikh Al-Tayeb Mohamed

G.M. Assistant for Banking & Technology Affairs

Annual Report 201010

Managers of Departments:1 - Mr. Hassan Mahmoud Ahmed Abd El-Ghafar Legal Affairs Administration 2 - Mr. Ghazi Abdel Hay Bin Oaf Abd El-rahiem Compliance Officer3 - Mr. Salah Said Ahmed Bandi Internal Control and Inspection 4 - Mr. Ahmed Abdel Hay Mohamed Ahmed Banking & Branches Affairs Administration5 - Mr. Ahmed Abdel Hay Mohamed Ahmed Marketing & Public Relations Administration (Designated)6 - Mr. Ibrahim Abdul Moneim Zayed Farah Executive Office 7 - Mr. Ali Hassan Hammad El-Hussain Human Resources Administration 8 - Mr. Satti Mohammed Satti Hamad Ziyada Information Technology Administration 9 - Mr. Mutasim Abdel Aziz Fagier Ahmed Risk Administration 10- Mr. Osama Ali Ibrahim El-Sadiq Financial Affairs Administration 11 - Mr. Osman Sa’ied Haj Noor External Relation & Foreign Currency Administration12 - Mr. Salaheldien Hassan Ahmed Khalid Administrative Affairs Administration 13 - Mr. Osama Mohamed Said ahmed Investment & Finance Administration 14 - Mr. Badr Mohamed Al-Jack Al-Abbas Planning & Research Administration 15 - Dr. Abdu Ajlan Babikir Salama Training & Quality Control Administration

Branches Managers 1- Mr. A’arif Mohamed Bashir Ali Tower Branch 2- Mr. Khaliefa Alawad Al-Aqib Ahmed Saggana Branch 3- Mr. Kamal Abd Allah Mohamed Abd El-Qadir Khartoum Industrial Area4- Mr. Hider Abd El-Wadood Mohamed El-Kalakla5- Mr. Abd Allah Mohamed El-Hassan Ahmed Khartoum6- Mr. Mohamed Al-Hussain Ahmed Ja’al Omdurman 7- Mr. Abd El-Aziz Elhaj Ahmed Wad Maddani8- Mr. Abd El-wahab Mohamed Abd El-Kariem Alsouque Alarabi (Kh).9- Mr. Abd El-Moniem Ibrahim Al-Sheikh Babikir Alsouque Almahali10- Mr. Salah Mustafa Mohamed Abd El-Kariem Souque Shabi Om11- Mr. Mutawakil Ahmed Mohamed Ahmed Suhaib Port – Sudan 12- Mr. Mohamed Ahmed Mohamed El-Sheikh Indus. Area (Kh. North).13- Mr. Salah Eldien Ibrahim Sheikh Ibrahim Gedarif 14- Mr. Adam Tahir Wugdab Mohamed Souque Libya 15- Mr. Noor Eldien Abd El-Haliem Hamid Urbab Dongola16- Mr. Mubarak Memoon Abd El-Sammad Kosti17- Mr. Abd El-Haliem Bashier Haroon Bashier Alhafeer

11Annual Report 2010

National and International Economic Developments - 2010

The International Economic Indicators: International Economic Growth Rate:According to the International Monetary Fund’s data, the international economy started to recover from the effects of the international financial crisis better than was expected for 2010, where the rate of growth reached 4.25% by the end of current year, an improvement which is expected to continue during 2011 & reach 4.3%. such improvement has come as a result of increased confidence between the consumers, the business owners & the financial sector. For the financial sector, the controlled intervention helped a lot in improving the financial institutions’ affairs & the actual activity of the economy. In spite of the observed improvement of the international economy, some economic experts showed their concern over expected deterioration during the first half of 2011, where the floods in Pakistan, China & India as well the forest fires in Russia besides the wave of international increment in prices are all indicators which may lead to the increase of inflation rates & economic deterioration . As for the Middle East & North African countries, they witnessed remarkable growth in National Economic Growth rates, from 2.4% in 2009 to 4.5% in 2010; more growth is expected in 2011 to reach 4.8%. 1-2 InflationRate: Internationally, the inflation rate decreased in developed countries from 0.9% in 2009 to 0.8% in 2010; it is also expected to increase to 1.1% by 2011. As for the Middle East & North Africa countries, they witnessed a slight decrease in inflation rate from 6.6% in 2009 to 6.5% in 2010. Such decrease is expected to continue & reach 6.4% in 2011. 1-3. Savings Level of savings increased from 21.4% of the National Gross Production in 2009 to 22.6% in 2010. it is expected to increase up to 23.5% in 2011. In the Middle East & North Africa, the standard of savings increased from 29.6% of the national production in 2009 to 32.7%; it is expected to increase up to 34.1% in 2011. 1.4. Unemployment: In the developing countries, unemployment increased from 8% in 2009 to 8.4% in 2010. it is expected to decrease to 8% in 2011. 2. National Economic Indicators2-1. Rate of Growth: The rate of GDP decreased from 6.1% in 2009 to 5.1% in 2010. it is expected to decrease down to 4.7% during the year 2011. 2.2. InflationRate: It increased from 13.4% by the end of 2009 to 15.4% by the end of December 2010. Observers’ expectations are that inflation may increase during 2011, necessitating increased restriction in the financial policy & the achievement of the stability of the exchange rate to control the levels of inflation. According to the economic circulation of Central Bank of Sudan, the inflation rate during February 2011, reached 16.9%2.3. Money Supply: This reached SDG35.536 million at the end of December 2010 at cumulative growth rate of 22.5% of the targeted percentage in the rate of nominal rate of growth of money supply, which is 28.1% by the end of December 2010 as a medium target. According to Central Bank of Sudan, the analysis of money supply indicate the stability of funds at the public, Central Bank’s reserves & other banks, which indicates the trend


of customers heading towards increasing their deposits at local banks as a result of the increase of revenues distributed to investment deposits owners that range from 8% to 10% annually. 2.4. Exchange Rate: The average of the exchange rate for the local currency (Sudanese pound) against the dollar increased at Central Bank of Sudan from 2.48% in December 2010 to 2.5% in January 2011. The average exchange rate of the Euro against the Sudanese pound increased from 3.28 in December 2010 to 3.34 in January 2011. 3. Banking Developments: 3.1. Banking System Deposits: The gross of local currency deposits rose from SDG17296 million in 2009 to SDG20741 million at the end of December 2010 at a percent of 20%. Foreign currency deposits increased from SDG3551 million in 2009 to SDG5638 million at the end of December 2010 at a percent of 58%

Banking Finance: According to the instructions of financial & monetary policy for 2010, Sudanese Central Bank continued in directing the local banks to finance the productive sectors in order to achieve the financial stability. The total bank finance increased from SDG18164 million to SDG21127 million in 2010 at a rate of growth of 16% compared to the previous year. As for the modes of distributing bank finance. Finance according to modes at the end of November 2010 Murabahat acquired the highest percent of 48.1% followed by the Musharaka at a percent of 7.8% then Muqawlat at a percent of 4.7%; Mudharaba, 3.1%; ElSalam, 0.3%; Ijara, 0.1%; others, 35.9%. sector wise, local trade gained the highest percent of 14.4%; the agricultural sector, 12.3%; imports, 12.1% & the industrial 9.6%Average profit margin of of Murabahat:The average profit margin of Murabahat for local banks decreased from 10.2% in 2009 to 9% in 2010, while the margins of Murabahat applied in Sudanese banks during the second half of 2010 ranged from 7 to 15%. Curve of bank-deposits’ revenues: The average of local bank’s profits on investment deposits by the end of 2010 according to Central bank reached 9%, knowing that the average of profit rate for 2009 was in the range of 7.8%.1

Resources

1. World Economic Outlook, IMF (June 2010).2.The Economic Bulletin - Central Bank of Sudan (January 2011).3. Periodical Bulletin – Central Bank of Sudan (January 2011)


Chairman Board of Directors’ Address

Before the 21st Shareholders’ General Assembly for the Financial Year Ending in December 31st, 2010 All praise be to Allah; and blessings and peace be upon His messenger and servant, Muhammad, and upon his family, companions and whoever follows his guidance until the day of Resurrection.

Honorable shareholders of Al-Shamal Islamic Bank; Honorable representatives of Central Bank of Sudan;Honorable representative of Khartoum Stock Exchange;Honorable General AuditorHonorable representatives of Sharia Supervisory Board;Dear members of the Board of Directors;Messrs, honorable guests;

Dear employees;Assalamu alaikum wa rahmatu Allah wa barakatuhHonorable shareholders:I would like to thank you for your compliance with our invitation to attend the 21st General Assembly of our firmly established Bank. I am honored & happy to address your revered General Assembly to acquaint you with the performance of your Bank & its successive achievements through the financial year terminating in December, 31st, 2010.

Dear brothers: As you know, we are accustomed to meet your respectable gathering in this happy occasion every year in order to listen to your serious debates & sound opinions on the general performance of financial positions of your prosperous foundation for the past year, & to take along your opinions, suggestions and directives, on which we shall considerably depend on to set the Bank’s policies, directives & general strategy to establish its long & short term plans so as to achieve the desired aims (with Allah’s help & success).

Honorable brothers:Under the current challenges that have their reflections on the movement of economy & money in our country; under the technological developments that have swept the world in recent years & which represent another challenge for banking work & its future; under this very complicated circumstances, we promise you, dear brothers, that your prestigious Establishment shall be up to the challenges in spite of the greatness of the responsibility through the grace of God & His success after the efforts of the workforce The financial year 2010 had been a big challenge in the Bank’s successful progress, because the Bank kept on remedying big complications in order to ascend to a progressive position in an acutely competitive environment where there is no place for a weak foundation. The Bank attained remarkable success in this field where your brothers in the Board of Directors exerted their utmost efforts to guide the ship safely ashore, resulting from the cooperation between the Board of Directors, the executive Administration of the Bank & all the working brothers in the Bank whose efforts & persistence had a great effect in developing the resources, improving the performance, supporting the Bank’s financial status and lifting it from the stumbles that affected the Bank from time to time; in this regard, the Board took interests in revising the work-regulating-charts to create a suitable environment for better performance.


Honorable brothers: The increase of capital to meet the requirements of Central Bank & raise the financial solvency of the Bank is very important; having raised the capital of the Bank to 90 million pounds in 2009 , the Bank sought to increase its capital to 125 million pounds after the agreement of the General Assembly; it is now seeking to market the rest of shares & complete the relative legal procedures.

Righteous Brothers:Even though the international financial crisis discharged negative repercussions on the banking service, locally & internationally; Al-shamal Islamic Bank witnessed remarkable developments during 2010. The utility & effectiveness of the strategic plan which the Board of Directors adopted for the period of 2007-2012 was drafted in harmony with Central Bank’s monetary policies & the State’s economical financial, developmental & social policies. The strategic plan which your Bank adopted & set out to implement since 2007, reflected positively on the Bank’s performance in several domains:1. Bad debts proportion decreased from 15% in 2009 to 8% in 2010 & that is due to the efforts exerted by the Board, the Executive Administration & the employees at the Bank in pursuing & collecting the bad debts. Your Board kept on following up collecting these debts regularly through its committees. 2. marketing plan succeeded in attracting new clients to raise the Bank’s financial resources from which resulted an increment in total assets, deposits, finance, owners’ equity , incomes & expenditures. Scanning the Bank’s general budget we find that: the revenues increased by 14%, as the total revenues reached SDG56 million by the end of the year. It reflected on the level of profit which the Bank achieved & the owners’ equity in the domain of the offered finance; the volume of offered finance exceeded SDG496 million with a growth of 27% from the previous year. Concerning the resources increment; the Bank succeeded in increasing the deposits by 60% from the previous year, as the Bank deposits reached SDG580 million by the end of the year. The following table shows theses

accomplishments: (amounts in millions of pounds)

No Particular 2009 2010 Rate of change1 Total assets 590 764 29%2 Total deposits 362 580 60%3 Total finance 390 496 27%4 Total equities 93 104 12%5 Total revenues 49 56 14%

Persisting in applying modern banking technology which had a remarkable contribution in developing the electronic banking in the shade of raising the system & appliances which is 100% completed. Besides raising the efficiency of the Network by increasing the capacity, installing protection systems for the apparatuses & rehabilitating the network by introducing the fibre system. Short messages system (SMS) was incorporated and the ITM system was introduced & 15 ATMs were operated. The system of points of sales was started where 100 sales points were operating. The number of the clients dealing with the system of (Home Banking) and short messages system (SMS) increased; six thousand banking Cards were issued. Further, a number of systems for the various administrations of the Bank were introduced to modify the system to be up to the requirements of combating money laundering. Recommendations of the Committee of improving the work environment were approved in the shade of the continuous concern to build an encouraging environment for the employees to exert more efforts in the course


of developing the Institution. Continuing the successive serious attempts to support and develop our foreign relations to create strong foreign relations with other banks and financing institutions in the Arabian, European and Asian regions. The Board concentrated on communicating with the foreign correspondents & initiated work on considerable export operations. We had some successes & the efforts were continuing. As a result of all this, the number of correspondence reached 19 banks & the granted banking facilities increased. Work on entering into investment operations in foreign currency & in meeting foreign obligations towards the open credits, the Bank opened LCs; monitoring of the various branches of the Bank was achieved in their use of foreign currency, which would achieve the ideal use of the Bank resources in a way that did not contradict with Sudan Central Bank’s circulars. The improvement of the new Swift system was followed up (Work Stations).Activating the role of the Modern International Company in the investment sector and in this regard the Company’s Board of directors was reconstructed and supported by experts in the fields of commerce and business administration & it was financially supported. In the domain of marketing, the Bank achieved unprecedented presence in 2010 through the various means of the Media (Satellite stations, broadcast services, newspapers, illuminating billboards, etc) which established the Bank’s name & logo in mind of the people. So did the other new services. The Bank executed the marketing plan accurately & succeeded in that 100%, which attracted new deposits, credits & clients. Furthermore, the Bank successfully participated in the Banking Technical Exhibition, leaving a good impression at the public. The Bank also increased the base of depositors as a result of executing its marketing plan & illuminating the public with the current & expected banking services & all that took place by complete coordination with the branches to take care of the clients, strengthen relations with them & ascertain their needs to provide them for the (clients). 7. For our belief in the importance of training to improve & consolidate the skills of the workforce in the course of promoting & developing the Bank’s performance. The Bank, represented in the Administration of Training & Quality Control, held many courses inside the Bank & participated in many others out of the Bank. There were also some courses abroad, which had marked effect on raising the capabilities of the workforce & improve the Bank’s performance. The Board of Directors allocated much interest for this matter by allocating an appreciable budget to raise the capabilities of the workforce, in addition to the Bank’s participation in many conferences & seminars, in & out of Sudan. I must confirm that the outstanding performance witnessed by the Bank puts heavy responsibility on all the staff of the Bank; such responsibility is represented in exerting more effort to preserve the achieved success. I must also mention that the classification of the Bank, according to the protective control requirements monitoring in accordance with “CAEL” indicators is “FAIR”, as mentioned in the report of the Bank’s evaluation of 31 December 2010.

Bank C A E L Composite Rating RatingAl-shamal Islamic Bank 2 5 2 2 2.75 FAIR

Honorable Brothers! Before I terminate this speech, I would like to point out what affected the international economical financial system & the crisis witnessed in 2008-2009 – a strongly expected effect on the performance of the international economy in 2011, & maybe in 2012 as well. Such crisis from the point view of economical analysts has not yet reached its climax. However, its effect is expected to be proportionally slight, especially on the Sudanese banking system & because of the adoption of the Islamic economic system by our banks,


which in its turn distinguishes them with the ability to stand before the crisis that has disrupted the structure of capitalism. Westerners have so often testified to this disruption. This imposes another challenge on us so as to protect the safety of our corporation from the dangers of this crisis & to take care in all our steps that we take in performing our duties. We seek to deepen Islamic practices in the banking & financial system by adopting new Islamic practices. Before concluding my speech, I can not help but express, on behalf of myself & all the members of the Board, my gratitude & appreciation to your respected gathering; I would also like to thank & express my application to Mr. Governor of Central Bank, his staff & to all monitoring authorities for their contiguous baking to the banking sector in Sudan.More thanks must be directed to the shareholders of Al-shamal Islamic Bank for their support & trust. Thanks is also extended to the clients of the Bank whom we promise to continue in developing our Bank services for them. I would also like to point to the tables below which show the Bank’s progress &achievements in the past five years up to 2010:

The Bank’s performance during (2005-2010) Amounts in thousand Sudanese pounds Item 2005 2006 2007 2008 2009 2010Total assets 302.128 291.727 544.183 482.583 590.536 764.134Total deposits 222.311 229.200 262.980 280.106 361.727 579.824Finance 130.790 135.220 190.916 230.916 387.271 496.200Paid Capital 12.771 16.111 64.634 64.634 90.000 90.000Total Equities 7.649 10.485 61.279 64.697 93.266 104.720Capital Adequacy Ratio -16% -8% 24% 23% 10.6% 15%Equities to total deposits 3% 5% 23% 23% 26% 18%Total income (revenue) 16.884 23.360 28.761 40.483 49.182 55.503Net profit 1.249 2.836 2.043 3.077 3.469 12.180Return on assets 0.41% 0.97% 0.37% 0.63% 0.59% 1.6%Profitability ratio 7% 12% 7% 7.6% 7% 22%Total income to assets 6% 8% 5% 8% 8% 7%Bad debts ratio - 29.13% 7.06% 8.14% 15.48% 8%Accumulated losses -20.306 -20.306 -15.427 -12.350 -9.494 0

Concluding, I would like to thank my colleagues in the Board of Directors, the Bank’s Executive Administration, all the employees & Sharia Supervisory Board for their considerable efforts & dedication in the course of achieving progress & prosperity for Al-Shamal Islamic Bank & placing the Bank in its duly deserved remarkable place among Sudanese banks . I would like to confirm that by the coherence of the spirit of team-work distinguishing cooperation between the Senior Administration & the workforce, the ambitious, strategic plan of the Bank can be achieved. We pray to Allah to help us achieve more accomplishments that brings more benefit for the shareholders of the Bank, workers & the community Thanks be to Allah, before and after everything. Wassalamu alaikum wa rahmatu Allah!

Al-bagir Yusuf Mudawi Chairman Board of Directors


The Bank’s Activity During 2010Financial Position:The Bank witnessed a perceivable improvement in its financial status by the end of 2008 compared to the year 2009 whereas assets increased at a percentage of 29%, finance 28%, deposits 60%, revenues 13% & equities 12% . The following table shows that:

Table No. (1)The banks Activity during the year 2010 compared to the year 2009:

(SDG)Particulars 2010 2009 Rate of ChangeTotal Assets 764.134.022 590.535.592 29%Total finance 496.200.298 387.270.703 28%Total deposits 579.824.327 361.726.630 60%Total revenues 55.503.331 49.182.038 13%Total equities 104.720.294 93.266.391 12%

Investment Activity The total of finance granted reached SDG496.200.298 at the end of the year; where securities & investment portfolios contributing 62% of the investment portfolio & the rest presented as direct finance for individuals, companies & institutions by the branches through “1.052” investment operations in the different economic sectors. The finance was granted at the percentage of 54% in the Musharakat mode, 24%: in the mode of Murabahat, 22% in other modes. The trade sector got 55% of the total granted finance; export sector, 20%; industrial, 11%; services, 8%; agricultural, 2%; vocational & others, 2%. Targeted imposition for investment revenues was achieved at 92%.

Banking TechnologyIn coping with the technological developments in the banking field, the Bank executed several activities in order to improve the technological system of the Bank including:1-Implementation of control of the storing system 2-Implementation of assets system 3-Implementing the electronic messaging system 4-Implementing change of the investment system 5-Changing the system to cope with the requirements of money laundering6-Improving the SMS system


7-Introducing a number of new ATM & points of sales. 8-Completion of financial administration reports 9-Addition of reports to the administration of Risks10-Modification of the System of authorities 11-Rehabilitation of the Bank’s network by transforming it to the fibre system. 12-Implementation of the system of automatic settling of ATM records & the points of sales.13-Setting up the system of E-banking.

Foreign Relations & Currency:In this field the Bank achieved many of its objectives where:1-Increment of deposits in foreign currency by 30%2-Increment of the banking facilities offered by some correspondents. 3-Following up with improvement of the new swift system (work station)

Marketing & Public Relations:In this regard, the Bank adopted a marketing plan based on marketing of the current & expected banking services as well as strengthening of relations with the customers. The Bank raised the logo of “all works with marketing” for the sake of knowing the needs of customers & satisfying them.

Training & Improvement: The Bank allocated special importance in the continuous training & improvement of its abilities & skills to achieve the Institution’s objectives. To achieve this goal, the Bank held many training courses in implementing banking, administrative & technological work in addition to holding many workshops & seminars aimed at raising capabilities of the Bank’s staff. Training opportunities were distributed among the staff according to the training plan approved by the High Council of Training. Expenditure on training reached 764 thousand pounds during 2010.

Administrative Affairs For the sake of continuous improving & modernizing the appearance of the Bank, many activities were carried out including the preparation of the branches of Khartoum & Saggana in their new locations according to the most advanced designs & preparations. The activities included also the rehabilitation & improvement of some ATM locations in addition to the rehabilitation of some administrations & branches.

Human Resources:In this field the Bank achieved many accomplishments such as:1-Securing the needs of the Bank in regard to workers, in quantity & quality. 2-Revision of the organizational occupational framework of the Bank3-Preservation of the workers’ stability & sponsoring their dependants, socially & health-wise & satisfying their requirements & needs according to rules & regulations.4-Completion of introduction of human resources administration to the Banks computer system5-Carrying out studies of work-market & following up with its changes with similar corporations.


Total Equities

Total Income

NetProfits

Cost Income

Total Assets

Total Deposits

Total Finance

201020092008

201020092008

201020092008

201020092008

201020092008

201020092008

201020092008

64.697

40.483

3.077

92%

280.106

303.156

482.583

93.266

49.182

3.122

93%

361.727

487.271

590.536

104.720

55.503

12.180

78%

579.824

496.200

764.134

Indicators of The Bank’s Financial Performance Development

For Three Years 2008 - 2010(Amounts in thousand Sudanese pounds)


Note No. (1)Establishment and OriginAl-Shamal Islamic Bank was established as a public-stock Company with limited liability in Khartoum on 23.7.1985 according to the companies Act of 1925. It commenced business on 2. 1. 1990. The Bank exercises all businesses and banking activities through its Headquarters in Khartoum (Al-shamal Islamic Bank Tower - Alsayed Abdelrahman Street) and its branches spreading throughout the Sudan.

Branches of the Bank Their No. is 17 branches.11 of them are in the state of Khartoum while the rest are in the other states.

Subsidiary Companies: Modern International Investment Company Ltd, which is owned by the Bank at a percentage of 99.9%; it works in the field of trade & services

Capital contributions: 60% the Social Insurance National Fund22% Bank of Sudan 18% others

Note No. (2): Accounting policies:1-The Bank complies with the historical Cost Convention and the merit principle in registering its assets, liabilities, revenues & expenses. In 1997 fixed assets had been re-evaluated and set according to the market price of the time (by a House of Expertise).2-The financial statements of the Modern International Company (Ltd) in which the Bank owns 99% of its capital, are not consolidated with the Bank’s budget according to the circulation of the Bank of Sudan No. 25/2002/21 September 2002. 3-Assets are depreciated according to the fixed installment method, based on the expected life of each type of assets. 4-Foreign currencies transactions were recorded in Sudanese pounds at the prevailing exchange rate at the time of its occurrence. Accordingly, the value of the assets and liabilities are transferred in the date of the Bank balance sheet in the rate prevailing at that time. 5-Revenues and losses from “Musharaka, and “Salam” operations are recognized when an investment operation is completely settled. Revenue from “Murabaha” is recognized when the amount of the initial investment and the profits are fully repaid. 6-Provision for doubtful debts are computed according to the Central Bank’s principles and standards, bearing in mind the debts that the Central Bank agreed to be set off against the profits during the following ten years, which began in 2003.7-The investments in the capital contributions appear in the statement of the Financial Position in regard to the cost without deducting the provision for its reduced value. 8-The Bank’s activities are subject to Sharia Supervisory Board that carries out the role of monitoring of the Bank’s dealings in accordance with Islamic Sharia. 9-The Bank adheres to paying Zakat according to the Zakat Chamber’s circulars. It also adheres to Business Income Tax according to the circular’s of the Chamber of Taxation.


10-Investment Deposit accounts profits are calculated on (financial year) base. The Bank permits drawing or adding with the right of the account’s owner in the income by the end of the period.

Note No. (3)Volume of Dealing With Relative Parties:

Finance granted to the members of the Board of Directors = none .Finance granted to companies belonging to the Bank = 7.577.000 pounds .There is no dealing with any other relative parties .

Note No. (4) Cash & Cash Equivalent

(SDG)Particulars 2010 2009Cash in local currency 14.714.073 14.078.667Cash in foreign currency 562.789 85.150Automateic Teller Machine (A.T.M) 2.057.005 1.044.224Cash at Bank of Sudan 126.119.245 83.010.478Legal reserve 37.304.045 21.504.771Foreign correspondents 2.892.103 1.712.878Foreign correspondents - margins 2.824.492 2.416.163Total 186.473.752 123.852.331

Note No. (5)Deferred Accounts Receivables

(SDG)Particulars 2010 2009Murabahat and Salam 75.246.429 177.736.357Less provisions for normal finance -555.636 -555.636Less provision for bad finance -18.242.783 -15.183.205Net of deferred accounts receivables 56.448.010 161.997.516

Note No. (6)Investments

(SDG)Particulars 2010 2009Bought trade bills 84.457 0Musharakat 85.654.693 44.582.849Stock 506.584 2.310.726Mudarabat 24.561.748 5.297.488Mugawalat 10.999.666 0Confiscated letters of credit 905.400 5.244.086Documents under repayment 6.941.012 7.413.437securities 135.598.728 160.424.601Investment deposits at other banks 174.500.000 0Total 439.752.288 225.273.187


Note No. (7)Other Receivables

(SDG)Particulars 2010 2009Defective investment operations 1.208.930 2.393.653Previous years losses 0 3.815.277Lost Mudaraba with Abd Elbassit 1.481.578 1.481.578Abd Alhaleem ali Ahmed 261.632 261.632Abd El-Rahman M. Alsheikh 1.297.105 1.297.105Alrudwan debts 28.697.609 28.697.609Duty Free Market debts (foreign currency market) 5.341.646 5.341.646Annual set off -4.259.914 -5.000.000Total 34.028.586 38.288.500

Note No. (8)Other Assets

(SDG)Particulars 2010 2009Staff loans 9.938.159 8.804.166Stores 266.171 507.477Obligations of El-Bashier Mohamed Ahmed 30.149 0Foreign currency dealing room 107.980 1.957.629Advance payment 1.957.412 1.195.869Due revenues of securities 12.200.898 6.287.159Hot transfers 0 29.011Difference in Kalakla Branch 212.835 510.093Embezzlement by Khalafalla & others 206.511 413.021Cheque of guarantee by the Manager of the Industrial area Kh. Branch in the case of Omar Ali

232.500 0

Different debtors –Mohamed Saied ph. 0 63.000Obligations of Musaab Ahmed Ibrahim (paid in January 2011) 13.191 0The International Company’s debt (Note No. 8/a) 1.327.352 1.367.352Total 26.493.158 21.134.777

Note No. (8/A)Debt on the International Company

(SDG)Particulars 2010 2009The rest of the debt of an import operation with the Company. 796.927 796.927Contribution of the Gum Arabic Company 99.282 99.282Remaining profits, unsettled from (1997-1999) 176.661 176.661Unpaid rents 254.482 294.482Total 1.327.352 1.367.352


Note No. (9)Long Term Investments

(SDG)Particulars 2010 2009Modern International Company(an affiliate Co.) 1.167.000 1.167.000Sundus Agricultural project 25.000 25.000National Petroleum Company 102.000 102.000Banking services 26.681 26.681Total 1.320.681 1.320.681


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Note (11)Current & Saving Accounts

(SDG)Particulars 2010 2009Current accounts in local currency 247.321.454 209.893.002Current accounts in foreign currency 11.911.565 13.703.816Saving accounts in local currency 47.566.412 36.338.562Total 306.799.431 259.935.380

Note No. (12)Other Liabilities

(SDG)Particulars 2010 2009Due expenses 170.483 262.117Foreign exchange dealing room 107.980 1.960.558National transfer 12.935 16.364Cash margin against L/Cs 14.567.240 4.140.483Bills payable and certified cheques 16.925.746 6.991.108Hot transfer – Jeddah 13.430 1.081Increase in treasury 16.000 0Dividends 69.709 66.438Inward transfers - local 302.551 371.372unpaid transfers – local 7.233 0Suspended income of Murabaha (local + foreign) 9.414.650 21.571.786Suspended income of Mugawalat 2.923.702 0Remuneration of the Board of Directors 638.000 538.000Cash margin against L/Cs 4.909.425 3.360.959Profits of investment deposits 14.864.051 8.034.892Balances of dormant accounts 38.521 36.403Trusts under demand 795.008 610.000Auditing Fees 50.000 50.000Staff subsidy 3.563.448 2.577.253Blocked amounts 27.870 27.379Inward transfer - foreign 31.717 28.739unpaid transfers - foreign 670 0Branch’s operations under execution 429.303 219.060Strategic stock 0 5.886.576National transformer claims 643.087 392.884 National Fund for Social Insurance 0 91.786Rents received in advance 4.000 0Profits on deposits of the bank of Sudan 0 790.824Provisions (note No. 12/A) 9.062.642 7.516.509Total 79.589.401 65.542.571


Note No. (12/A)Provisions

(SDG)Particulars 2010 2009Provision of Zakat of capital 25.000 25.000Provision for after service benefit 9.037.642 7.491.509Total 9.062.642 7.516.509

Provisions of after service benefit represents the Bank’s commitment towards its staff; it has a deficit of 6.826.481 pounds as of 31/12/2010. The deficit shall gradually be removed after the banks adoption of the system of social insurance.

Note No. (13)Equities of unrestricted Investment Accounts’ holders

(SDG)Particulars 2010 2009Investment accounts – local currency 252.713.825 92.242.722Investment accounts – foreign currency 20.311.071 9.548.528Total 273.024.896 101.791.250

Note No. (14)Paid capital

(SDG)Particulars % 2010 2009National Fund for Social Insurance 60% 54.157.734 54.157.734Bank of Sudan 22% 20.000.000 20.000.000Bayo Investment Co. 7% 6.001.613 6.001.613Dan Fodio Holding Foundation 5% 4.704.150 4.704.150Others 6% 5.136.503 5.136.503Total 100% 90.000.000 90.000.000

Note No. (15)Reserves

(SDG)Particulars 2010 2009Legal reserves 2.133.813 915.792General reserves 6.851.220 6.851.220Revaluation reserve of assets 5.641.611 4.899.306Total 14.626.644 12.666.318


Note No. (16)Carried forward Losses

(SDG)Particulars 2010 2009Carried forward losses -9.493.577 -12.349.973Settlement of previous years (Note No. 26) -1.468.605 -265.699Year’s income (after deduction of legal reserve of 10%) 10.962.182 3.122.095Total 0 -9.493.577

Note No. (17)Contra Accounts

(SDG)Particulars 2010 2009Investment bills under collection 50.037.939 140.813.081Due, unpaid bills 19.122.609 22.984.286Bills – local 0 4.710Bills of Murabaha transferred to local 7.544.319 11.822.758Client’s commitment against local guarantees 27.044.135 26.265.500Mugawala checks 326.664 0Commitment against foreign guarantees 596.901 104.081Foreign bills 85.552 0Commitments of customers against Letters of Credit (their own resources)

8.631.363 3.042.927

Commitments of customers against LC form acceptance 19.174.997 16.141.968Commitment of customers against bad debts 31.821.563 31.821.563Total 164.386.042 253.000.874

Note No. (18)Income from deferred sales

(SDG)Particulars 2010 2009Income from Murabahat 16.819.662 18.772.387Returns from Salam 119.825 105.297Total 16.939.487 18.877.684

Note No. (19)Income from Investment

(SDG)Particulars 2010 2009Income from securities 24.751.470 18.584.455Income from mudaraba 1.310.650 330.339Income from musharakat 8.321.378 2.329.276Income from Mugawala 72.303 0Total 34.455.801 21.244.070


Note No. (20)UnrestrictedInvestmentAccounts’holders’ShareinProfits

(SDG)Particulars 2010 2009Revenue from investment operations – local (20/a) 13.798.587 7.566.858Revenue from investment operations – foreign (20/a) 1.065.464 468.034Total 14.864.051 8.034.892

Note No. (20/a)UnrestrictedInvestmentAccounts’holders’ShareinProfits

Owners of local investment deposits have been supported by an amount of 1.784 thousand pounds from the share of the Bank, which represents 20% from the Bank>s share as Mudarib, which makes their share 14.002 thousand pounds. As for the owners of foreign deposits they have been supported with an amount of 91 thousand pounds representing 22% from the Bank>s share as Mudarib.

Note No. (21)Revenues from Banking Services

(SDG)Particulars 2010 2009Commission received from current account 3.339.751 2.537.491Commission received from transfers 2.810.884 2.087.645Commission received from (L/Cs) 6.183.676 4.556.773Commission received from (L/G) 1.228.468 722.927Commission received from bills of exchange 50 989Revenue from technology 260.688 86.171Revenue from foreign currency & exchange 4.152.685 4.143.969Revenue on foreign currency 88.214 1.467.657Other revenue in foreign currency 22.828 3.340Correspondent’s Revenue foreign currency 8.743 183.094Total 18.095.987 15.790.056

Note No. (22)Other revenues

(SDG)Particulars 2010 2009Communication & post 468.341 533.330Gain on fixed assets 104.215 0Agency fees 0 0Counter rent of building owned by the Bank (Note 22/a) 180.912 263.811Others, miscellaneous 122.639 507.979Total 876.107 1.305.120


Note No. (22/a)Counter rent

The item of counter rent represents the monthly rent of branches owned by the Bank, such as (Burj, Dungula, Libya, Mahli, Gedarif, Omdurman & Kalakla). The amount is deducted monthly from such branches as expenses from the item of rents to show the fair cost of expenses between rented & owned branches.

Note No. (23)Salaries & allowances

(SDG)Particulars 2010 2009Salaries and allowances 6.377.007 5.747.952Labour uniform 2.005.806 1.740.973Feast grant 2.563.616 2.331.875Leave expenses 2.668.272 2.332.234Total 13.614.701 12.153.034

Note No (24).General and Administrative Expenses

(SDG)Particulars 2010 2009Traveling tickets 462.524 407.082Transport allowances 557.838 532.503Internal missions 90.623 204.424Abroad missions 148.382 132.222Stationeries 163.335 167.885Post, communications & swift 368.390 378.792Refreshments & hospitality 145.932 118.542Electricity & water 573.460 513.056Fees & legal consultancies 8.603 47.680Insurance 153.008 126.012Donations & subsidy (Note No. 24/a) 344.186 394.062Rents & tolls 1.076.847 1.080.104Consultancies & research 41.883 38.000Professional & scientific institutions 1.116.228 916.342Staff training expenses 764.277 581.569Generator’s-running expenses 64.973 79.413Running of transportation means 415.098 394.150Board of Director’s expenses 215.519 194.473Remuneration of the Board of Director’s members (Note No. 24/b) 800.000 700.000Expenses of running the computers & networks 617.961 553.254Carried forward totals 8.129.067 7.559.565


Particulars 2010 2009Carried forward totals 8.129.067 7.559.565Commissions of the Bank of Sudan 20.975 42.018Expenses of marketing & ads 649.038 504.626Computer maintenance 132.034 18.714Maintenance of furniture, equipment & machinery 108.586 148.997Doubtful receivables 3.179.988 5.889.674Audit fees 50.000 50.000Staff subsidy 3.500.000 2.550.000Legal advisor’s remuneration 15.000 15.000Social services 83.420 69.670After service benefits 1.000.000 3.000.000Correspondent’s expenses 355.896 153.613Medication of the staff 1.137.703 1.065.399Marriage grant 33.000 25.362Journals and magazines 25.724 20.483Carrying & transportation 19.329 17.672Safety & security 424.092 373.343Cleanness & health 177.087 165.000Annual report 23.673 19.976Sharia supervisory Board 53.826 47.680Fees & stamps 176.644 10.424General meeting 75.990 70.229money sorting expenses 333.540 300.562Building maintenance 282.132 208.743Foreign currency funding expenses 121.806 69.137Debts set off 4.259.914 5.000.000Social insurance subscription 299.090 224.080Bad debts 0 38.566Foreign currency revaluation losses 2.285.419 2.202.686Extinguishing of embezzlements 575.040 1.847.347Total 27.528.013 31.708.566

Note No. (24/a)Social Services

Within the social role of the Bank, many groups of the society have been supported through the Donation & Subsidy Item allocated for education, medication, national contributions & worship houses; amount allocated for such role: 344.186 pounds.


Note No. (24/b)Remuneration of the Board of Directors’ members

The remuneration of the Board of Director’s members has been allocated at 4.8% of net income for the year before extinguishing of carried forward losses & bad receivables by Note No. (7)

Note No. (25) Purchase of Fixed Assets

(SDG)Particulars Amount Purchase of fixed assets in cash 2.570.018Addition of non-cash fixed assets 742.305Total / compared with Note No. (10) 3.312.323

Note No. (26)Settlement of previous years

(SDG)Particulars AmountLoss of the gum operation in Saggana branch -1.482.438Settlement of the Real Estates Bank’s deposit -59.375Expenses suspended as due expenses at the end of 2009 at more than their value. 73.208Total -1.468.605


Al-Shamal Islamic Bank

The Sharia Supervisory Board 7th Revolution

The Sharia supervisory Board’s Report on the Bank’s Performance For the Year Ending in 31-12-2010

The Sharia Supervisory Board presents its annual report in accordance with its competences as stated in Article (74) of the Basic Charter of the Bank & according to governance standards of the Islamic Financial Institutions No (1) regarding the appointment, formation & the report issued by the Accounting & Auditing Organization for the Islamic Financial Institutions – Bahrain. 1. The Sharia Supervisory Board has checked the used principles and contracts related to the dealings and applications offered by the Bank during the above indicated period in order to show an independent opinion as to whether the Bank had been complying

with the Sharia rules and principles & that the Bank has been observing the Fatwas, decisions & instructions issued by the Board . 2. The responsibilities of the Sharia Supervisory Board are joint between the Bank’s Management & the Board. The Executive Management’s role is to assure the Bank’s execution of its activities according to Sharia rules & principles because of its control over the relative funds & to work at the level of policies & direct execution, while the responsibility of the Board of Sharia Supervisory is to issue an independent opinion as to whether the Bank is working in accordance with the terms of Islamic Sharia in addition to setting up training curricula in cooperation with the Bank. 3. On the bases of the above mentioned; the Sharia Supervisory Board has examined the documentation and procedures adopted by the Bank. It consulted the specialized persons within the Bank in order to obtain information and explanations which are considered necessary to supply the Sharia Supervisory Board with sufficient evidence to set up an independent legitimate opinion based on the written content of the meeting’s minutes. Thus , the Sharia Supervisory Board holds the view that; a) The contracts and transactions ratified by the Bank during the financial year ending in 31.12.2010, which were examined by the Board, went in accordance with Sharia rules and principles. The Sharia Supervisory Board drew attention to some found errors & issued instructions to correct them.b) ‘Zakat’ is taken according to the method accredited by the Chamber of Zakat for the calculation of the Zakat of companies. c) Distribution of profits & addition of losses to the investment accounts is compatible with the base approved by the BoardThe Board would like to thank the Bank’s Administration for its cooperation which enabled it to perform its duty.

Success is granted by GodKhartoum 15 Rabie Thani 1432, H, corresponding to 20 March 2011

Dr. Abd Elwahid Osman Mustafa Dr. Mohamed Ali Yousuf Mukhawi Mudawi Mukhawi Member of the Board Member of the Board Chairman of the Board

In the Name of Allah the Most Gracious the Most Merciful


Resolutions of the 21st General Assembly For the Banks Shareholders

1- Approval of the Board of Directors’ report, audited financial statements, legal auditor’s report and the Sharia Supervisory Board’s report for the year ending on 31st December 2010. 2- Authorization of the Board of Directors to appoint the legal auditor and specify his remuneration for the year 2011.3- Authorization of the Board of Directors to appoint the Sharia Supervisory Board & specify its remuneration.4- The Members of the Board of Directors for the new term were elected as follows: 1. Dr. Ziyada Abd Allah Ziyada 2. Mr. Representative of Central Bank of Sudan 3. Eng. Ibrahim Musa Alkhaliefa 4. Mr. Sulaiman Mohamed Ahmed Mohamed 5. Mr. Ahmed Ali Ahmed El Hussain 6. Mr. Abd Allah Idrees Fadul 7. Mr. Badr Eldien Salih Abdul Rady 8. Dr. Khalid Ahmed Mohamed Salih

5. Modification of Article (25) of the Regulation & Articles of Association of the Bank.

Mohamed Bushra Khalaf Allah Secretary, Board of Directors


Foreign Correspondents

Arab World: 1- Bank of Beirut – Beirut, Lebanon 2- National Commercial Bank- Jeddah, Saudi Arabia 3- Arab Bank for Trade & Investment - Abu Dhabi, UAE 4- Alrajhi Banking & Investment Co. – Riyadh, Saudi Arabia 5- Faisal Islamic Bank of Egypt – Cairo, Egypt 6- Qatar Islamic Bank – Doha, Qatar 7- Abu Dhabi Islamic Bank – Abu Dhabi, UAE 8- The Arab Investment Co. – Manama, Bahrain 9- Arab Investment Corporation – Manama, Bahrain 10-Mashraque Bank -Dubai, UAE 11- Bahrain Islamic Bank - Bahrain 12- Saba Islamic Bank – Sanaa - Yemen

Europe: 1- Al Baraka Turkish Bank – Istanbul, Turkey 2- British Arab Commercial Bank – London, UK