THE PUNJAB PROVINCIAL COOPERATIVE BANK LIMITED

Transcription

1 THE PUNJAB PROVINCIAL COOPERATIVE BANK LIMITED BALANCE SHEET AS AT JUNE 30, 2007 Note Rupees in 000' ASSETS Cash and balances with treasury banks 6 715, ,993 Balances with other banks 7 5,586,775 6,511,008 Lending to financial institutions - - Investments 8 558, ,876 Advances 9 8,009,821 6,798,803 Operating fixed assets 10 2,571,139 1,288,477 Deferred tax assets - - Other assets , ,225 17,656,897 15,734,382 LIABILITIES Bills payable 12 39,654 20,677 Borrowings 13 12,000,000 12,000,000 Deposits and other accounts 14 2,007,645 1,657,013 Sub-ordinated loans - - Liabilities against assets subject to finance lease - - Deferred tax liabilities - - Other liabilities , ,553 14,232,922 13,801,243 NET ASSETS 3,423,975 1,933,139 REPRESENTED BY Share capital , ,533 Reserves 370, ,269 Unappropriated profit 133,776 38, , ,741 Surplus on revaluation of assets 17 2,489,021 1,131,398 3,423,975 1,933,139 CONTINGENCIES AND COMMITMENTS 18 The annexed notes form an integral part of these accounts CH.GHULAM MUSTAFA MUHAMMAD ASHRAF RAJA ALLAH BUKHSH A.SENIOR MANAGER, A.CHIEF MANAGER, GENERAL MANAGER ACCOUNTS/STAT FINANCE

2 THE PUNJAB PROVINCIAL COOPERATIVE BANK LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED JUNE 30, 2007 Note Rupees in 000' Mark-up/return/interest earned 19 1,228,805 1,029,645 Mark-up/return/interest expensed , ,508 Net mark-up/ interest income 681, ,137 Provision against non-performing loans and advances , ,609 Provision for diminution in the value of investments - - Bad debts written off directly , ,609 Net mark-up/ interest income after provisions 306, ,528 Non mark-up/interest income Fee, commission and brokerage Income 22,805 4,467 Dividend Income 4,811 8,177 Income from dealing in foreign currencies - - Gain / (loss) on sale of securities - - Other income ,161 37,501 Total non-mark-up/interest income 374,777 50, , ,673 Non mark-up/ interest expenses Administrative expenses , ,511 Other provisions/write offs - - Other charges Total non-interest/interest expenses 550, ,610 Extra ordinary/ unusual items - - Profit before taxation 130, ,063 Taxation - Current ,030 - Prior years Deferred ,030 Profit after taxation 129, ,033 Unappropriated profit/(loss) brought forward 38,939 (103,114) Profit available for appropriation 168,722 51,919 Basic and diluted earnings per share The annexed notes form an integral part of these accounts CH.GHULAM MUSTAFA A.SENIOR MANAGER, ACCOUNTS/STAT MUHAMMAD ASHRAF A.CHIEF MANAGER, FINANCE RAJA ALLAH BUKHSH GENERAL MANAGER

3 THE PUNJAB PROVINCIAL COOPERATIVE BANK LIMITED CASH FLOW STATEMENT FOR THE YEAR ENDED JUNE 30, 2007 Note Rupees in 000' CASH FLOW FROM OPERATING ACTIVITIES Profit before taxation 130, ,063 Less:Dividend income (4,811) (8,177) 125, ,886 Adjustments: Depreciation 8,327 7,896 Amortization Provision Against Non-performing Advances 375, ,609 (Gain) on sale of fixed assets (296,600) (3,114) 87, , , ,277 (Increase)/ Decrease in operating assets Advances (1,586,384) 37,546 Others assets (excluding advance taxation) 13,450 (19,844) (1,572,934) 17,702 Increase/ (Decrease) in operating liabilities Bills Payable 18,977 2,443 Borrowings from financial institutions - 2,472,000 Deposits 350,632 (31,784) Other liabilities (excluding current taxation) 62,070 (18,846) 431,679 2,423,813 (928,550) 2,751,792 Income tax paid (11,001) (7,585) Net cash flow from operating activities (939,551) 2,744,207 CASH FLOW FROM INVESTING ACTIVITIES Dividend income 4,811 8,177 Investments in operating fixed assets (27,960) (15,038) Capital work in progress (898) - Sale proceeds of property and equipment disposed-off 340,959 3,114 Net cash flow from investing activities 316,912 (3,747) CASH FLOW FROM FINANCING ACTIVITIES Issue of share capital 4,818 6,579 Dividend paid - - Medical aid to employees from Common Good Fund (1,388) (1,408) Net cash flow from financing activities 3,430 5,171 Increase/(Decrease) in cash and cash equivalents (619,209) 2,745,631 Cash and cash equivalents at beginning of the year 6,921,001 4,175,370 Cash and cash equivalents at end of the year 26 6,301,792 6,921,001 The annexed notes form an integral part of these accounts CH.GHULAM MUSTAFA A.SENIOR MANAGER, ACCOUNTS/STAT. MUHAMMAD ASHRAF A.CHIEF MANAGER, FINANCE RAJA ALLAH BUKHSH GENERAL MANAGER

4 THE PUNJAB PROVINCIAL COOPERATIVE BANK LIMITED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2007 Share Statutory Common Reserve for Unappropriated/ Total capital reserve Good Consumer profit/(loss) Fund Finance Rupees in '000' Balance as on June 30, , ,748 5,469 1,480 (103,114) 641,537 Profit for the year , ,033 Transfer to statutory reserve - 12, (12,980) - Transfer to reserve for Consumer Finance Issue of share capital 6, ,579 Medical aid to staff - - (1,408) (1,408) Balance as on June 30, , ,728 4,061 1,480 38, ,741 Profit for the year , ,783 Transfer to statutory reserve - 32, (32,446) - Transfer to reserve for Common Good Fund - - 2,500 (2,500) - Issue of share capital 4,818 4,818 Medical aid to staff (1,388) (1,388) Balance as on June 30, , ,174 5,173 1, , ,954 The annexed notes form an integral part of these accounts Note: Common Good Fund is created for the welfare/medical aid to staff under Section 42 of Cooperative societies Act, Under the Bylaw No.57 of the Bank not less than one quarter of the net profit shall be carried to the statutory reserve. CH.GHULAM MUSTAFA A.SENIOR MANAGER, ACCOUNTS/STAT MUHAMMAD ASHRAF A.CHIEF MANAGER, FINANCE RAJA ALLAH BUKHSH GENERAL MANAGER

5 5.6 Taxation Provision for taxation is based on the assessable income for the year after taking into account tax credits available, if any, and any under/over provisions in respect of prior years. 5.7 Staff retirement benefits Defined benefit plan The bank operates a funded pension scheme for all its permanent employees. Retirement benefits are payable to the members of the scheme on completion of prescribed qualifying period of service under the pension scheme. Contribution of 25% of the basic salary are being made by the bank. The gratuity is also paid to the employees on the basis of maximum period of service and last basic pay drawn subject to a maximum of Rs. 125,000 at the end of service Defined contribution plan The bank also operates a recognized provident fund scheme for all its regular employees, which is administered by the board of trustees. Equal monthly contribution of 10% of the basic salary is made in accordance with the terms of the scheme. 5.8 Impairment of assets The carrying amount of Bank's assets except deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment loss. If such indication exists, the assets recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment losses are recognized as expense in profit and loss account. 5.9 Transactions with related parties The transactions with related parties are entered into at arm's length prices using the comparable uncontrolled price method except for advances to the employees which are extended in accordance with the industry practice Offsetting Financial assets and financial liabilities are only offset and the net amount reported in the balance sheet when there is legally enforceable right to set off the recognized amounts and the Bank intends to either settle on net basis or to realize the assets and settle the liability simultaneously.

6 6. CASH AND BALANCES WITH TREASURY BANKS Note Rupees in '000' In hand Local currency 125,482 84,640 With State Bank of Pakistan in Local currency current account ,861 95,650 With National Bank of Pakistan in Local currency current account , ,213 Local currency deposit account NIDA , , , , These accounts are maintained under the requirements of BSD Circular No.16 and 18 dated August 10, 2002 and March 31, 2001 respectively, issued by the SBP. The NIDA account bears 2.50% per annum (2006 : 1.40% per annum) 7. BALANCES WITH OTHER BANKS In Pakistan On current account 208,364 89,552 On deposit account 7.1 5,378,411 6,421,456 5,586,775 6,511, Deposit accounts maintained with the banks bear 3.00% to 10.50% per annum (2006 :1.40% to 10.00% per annum) INVESTMENTS Note Held by Given as Total Held by Given as Total bank collateral bank collateral Rupees in '000' 8.1 INVESTMENTS BY TYPES: Available-for-sale securities Share of Listed Companies 8.4 7,023-7,023 7,023-7,023 Share of Cooperative Institutions 8.5 3,551-3,551 3,551-3,551 Held-to-maturity securities Pakistan Investment Bonds , , , ,000 Provincial Government Securities ,051-12,051 12,051-12,051 Investment at cost 322, , , ,625 Less: Provision for Diminution in value of Investments Investments (Net of Provisions) 322, , , ,625 Add: Surplus on revaluation on Available-for-sale securities , , , ,251 Total investments at market value 558, , , , INVESTMENTS BY SEGMENTS: Less: Add: Rupees in '000' Federal Government Securities: -Pakistan Investment Bonds 300, ,000 Provincial Government Securities 12,051 12,051 Fully Paid up Ordinary Shares: -Listed Companies 7,023 7,023 -Cooperative Institutions 3,551 3,551 Total investment at cost 322, ,625 Provision for diminution in value of investment - - Investments (Net of Provisions) 322, ,625 Surplus on revaluation on Available-for-sale securities , ,251 Total investments at market value 558, ,876

7 8.3 Quality of Available for Sale Securities Securities (At market value) Amount Rating Amount Rating Shares of listed companies Security Papers Limited 233,784 AAA 186,226 AAA PICIC 5,636 AA- 2,602 AA- Dawood Lawrencepur Limited 2,871 Unrated 2,446 Unrated PICIC Insurance Limited 116 A- - - Shares of Cooperative Institutions 3,551 Unrated 3,551 Unrated Total 245, , Shares of Listed Companies Name of Company Note Number of Shares At Cost Ordinary share of Rs. 10 each Rupees in '000' 2,051,641 1,578,186 Security Papers Limited 6,708 6,708 68,644 62,404 PICIC ,007 31,825 Dawood Lawrencepur Limited ,314 - PICIC Insurance Limited ,023 7, The Bank has sold the investment in shares of PICIC during preceding years, the current share holding of PICIC represents the entitlement of bonus shares received after disposal. During the year the Bank has received shares as specie dividend of PICIC Insurance Limited from PICIC. 8.5 Share of Cooperative Institution Face Value Name of Cooperative Institution Number of shares of Shares Rupees At Cost Rupees in '000' 191, , Coop: Insurance Society of Pakistan 1,919 1, National Coop. Supply Corporation ,410 3, Coop: Investment & Management Agency Oberoi Coop: Society Sialkot ,041 3, Shahdara Pioneer Coop: M.P. Society ,360 7, Lahore Central Coop: Store Jhelum Distt. Coop: Society All Pakistan Coop: Multi Purpose Society Punjab Prov. Coop: Cotton Corp Pakistan Product Coop: Marketing Anjuman Imdad-e-Bahami M.P. Society Pioneer Coop: Leather & Rubber Society Punjab Prov. Coop: Marketing West Pakistan Coop: Consumer Society Sargodha Distt. Coop: Society Sialkot Central Coop: Multi Purpose Society Multan Distt. Coop: Multi Purpose Society Lyalpur Distt. Coop: Multi Purpose Society Lyalpur Distt. Coop: Store 1 1 1,020 1, Montgomery Coop: Society Bahawalpur Coop: Society Arifwala Mills Society Jhang Coop: Supervising Rawalpindi Multi Purpose Union ,551 3, The comparative figures of number of shares of Cooperative Institutions have been restated due to an error made in the presentation, however, this change has no effect on the value of shares The shares of Cooperative Institutions showing nil value is due to amounts rounded off to the nearest thousand. These shares have value less than a thousand rupee.

8 Pakistan Investment Bonds are for the period of 10 years starting from December 14, 2000 with the yield 14% per annum (2006: 14% per annum). Provincial Government securities comprise of Punjab Loan issued by the Government of Punjab on December 07, 1998 for the period of 10 years with the yield 17.5% per annum (2006: 17.5% per annum) ADVANCES Rupees in '000' Loans, cash credits, running finances, etc. In Pakistan 9,453,551 7,867,167 Bills discounted and purchased (excluding treasury bills) Payable in Pakistan Advances - gross 9,453,735 7,867,351 Provision for non-performing advances 1,443,914 1,068,548 Advances - net of provision 8,009,821 6,798, Particulars of advances (Gross) In local currency 9,453,735 7,867, Short Term ( for upto one year) 4,961,136 3,889,903 Long Term ( for over one year) 4,492,599 3,977,448 9,453,735 7,867, Advances include Rs. 3,254,376 (thousand) (2006 : 3,085,018 thousand) which have been placed under non-performing status as detailed below: Classified Advances Provision Domestic Overseas Total Required Provision Held Category of Classification Rupees in '000' Other Assets Especially Mentioned 630, , Substandard 584, , , ,446 Doubtful 543, , , ,553 Loss 1,496,005-1,496,005 1,496,005 1,054,915 3,254,376-3,254,376 1,885,004 1,443, Particulars of provision against non-performing advances Specific General Total Specific General Total Rupees in '000' Opening balance 1,068,548-1,068, , ,939 Charge for the year 375, , , ,609 Closing balance 1,443,914-1,443,914 1,068,548-1,068, Particulars of provisions against non-performing advances Specific General Total Specific General Total Rupees in '000' In local currency 1,443,914-1,443,914 1,068,548-1,068,548

9 9.4 PARTICULARS OF WRITE OFFs: Rupees in '000' Against Provisions - - Directly charged to Profit & Loss account Write Offs of Rs. 500,000 and above - - Write Offs of Below Rs. 500, DETAILS OF LOAN WRITE OFF OF Rs. 500,000/- AND ABOVE In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962 the Statement in respect of written-off loans or any other financial relief of five hundred thousand rupees or above allowed to a person(s) during the year ended June, 2007 is NIL. 10. OPERATING FIXED ASSETS Note Rupees in '000' Capital work-in-progress (Civil Works) 13,372 12,474 Property and equipment ,557,767 1,276, Property and equipment 2,571,139 1,288,477 COST DEPRECIATION Opening Additions/ Closing Opening Charge/ Closing Book Rate of Balance (Deletions)/ Balance Balance (Deletion) Balance Revaluation value depreciation As At As At As At As At Surplus As At % Rupees in '000 Free hold land 227,758 4, , ,253,637 2,442,959 - (42,635) Lease hold land Building on free hold land 125,223 2, ,362 41,058 2,187 43,245-84, (281) Building on lease hold land Furniture and fixture 14,342 1,194 15,315 11, ,909-3, (221) Electrical, office and 5,915 1,090 6,994 3, ,792-3, computer equipments (11) Vehicles 31,486 19,023 49,288 21,115 4,421 25,526-23, (1,221) (10) Telephone Exchange & Conference system Arms & Ammunitions Library ,672 27, ,263 76,816 8,327 85,133 2,253,637 2,557,767 (44,369) (10) ,672 (16,409) 389,263 76,816 8,317 85,133 2,253,637 2,557, ,456 13, ,672 72,249 4,567 76, ,147 1,276,003

10 10.2 The land of Bank were last revalued by independent proffessional valuers in January The revaluation was carried out by M/s Unit - 3 Consultants (A valuer on approved list of the Pakistan Banks Association) on the basis of professional assesment of present market values and resulted in a surplus of Rs Billion. During the year revaluation surplus amounting to Rs million has been reversed due to sale/adjustment of land. Had there been no revaluation, the carrying amount of the land would be Rs million DETAIL OF DISPOSAL OF FIXED ASSETS Particular of Assets Cost Accumulated Book Sales Profit / Mode of Particulars of Depreciation Value Price (Loss) Disposal the purchasers FREEHOLD LAND Rupees in ' kanal 11 marala at Civil Line, Khanewal ,200 15,951 Auction Mr. Muhammad Jhangir Partner Al-Faraz & Co. 100 kanal at Thokar Niaz Baid, Lahore 42,222-42, , ,133 Negotiation M/s Metro Cash & Carry (Pvt.) Ltd. 31 kanal 9 1/2 marala at Jampurpur road, D.G.Khan ,500 30,355 Auction Mr. Azhar Mumtaz 1 kanal at Galla Mandi, Depalpur District Okara ,200 3,181 Auction Mr. Muhammad Ashraf 42,635-42, , ,620 BUILDING ON FREE HOLD LAND Bank building & Godown at Makhdoompur Pahoran ,500 11,383 Auction Malik Umer Hayat Debris of bank building at Wazirabad Auction Mr. Muhammad Hafeez Bank building at Ram Din road, Jhelum ,000 13,967 Auction Mr. Asif Jahangir Debris of bank building at Harrapa Auction Mr. Muhammad Ashraf ,970 25,736 VEHICLES. Honda Civic LOX Auction Daily Nawa-i-Waqat Lahore Toyota Corolla LOU Auction Daily Nawa-i-Waqat Lahore Toyota Corolla LOV Auction Daily Nawa-i-Waqat Lahore Toyota Corolla LOZ Auction Daily Nawa-i-Waqat Lahore 2,871 2, ,432 1,406

11 11 OTHER ASSETS Note Rupees in '000 Advances, deposits, advance rent and other prepayments 1,632 1,301 Advance taxation (payments less provisions) 67,509 56,989 Branch adjustment account - 16,603 Suspense Account 12,009 10,153 Deferred Costs Dissolved bank recoverable 56,110 56,451 Insurance recoverable 22,829 22,781 Profit recoverable from banks 17,416 27,198 Others 38,154 27, , , BILLS PAYABLE In Pakistan 39,654 20, BORROWINGS In Pakistan 12,000,000 12,000, Particulars of borrowings with respect to Currencies In local currency from State Bank of Pakistan ,000,000 12,000, Details of borrowings Secured / Unsecured Secured Borrowings from State Bank of Pakistan Under agriculture credit portfolio (short term) 12,000,000 12,000, This loan has been sanctioned by the State Bank of Pakistan under Section 17 (6) of the State Bank of Pakistan Act, 1956 for disbursement of agricultural credit. These are secured against the Guarantee of Government of the Punjab. Mark up payable on this borrowing ranges from % to % per annum (2006:ranges from % to % per annum). 14. DEPOSITS AND OTHER ACCOUNTS Customers Fixed deposits 142, ,085 Savings deposits 1,260,528 1,101,287 Current Accounts - Non-remunerative 496, ,174 Call Deposits 5,346 4,993 Term Deposits 3,726 5,584 Others ,270 88,890 2,007,645 1,657,013

12 Note Rupees in '000' 14.1 Others include staff provident fund and staff security deposits Particulars of deposits In local currency 2,007,645 1,657, OTHER LIABILITIES Mark-up/ Return/ Interest payable in local currency 13,889 13,545 Accrued expenses 1,083 1,580 Branch adjustment account 34,194 - Sundry creditors 89,952 66,421 Dissolved banks payable 35,544 35,544 Others 10,961 6, SHARE CAPITAL 16.1 Authorized Capital (Number of shares) 185, ,553 Unlimited Unlimited Ordinary shares of Rs.100/- each Unlimited Unlimited 16.2 Issued, subscribed and paid up Ordinary shares of Rs. 100/- each 3,927,780 3,879,600 Fully paid in cash 392, , , ,730 Issued as bonus shares 37,573 37,573 4,303,510 4,255, , , SURPLUS ON REVALUATION OF ASSETS 17.1 Surplus on revaluation of Fixed Assets 2,253, ,147 Land 17.2 Surplus on revaluation of Available-for-sale securities Shares in Listed Companies 235, ,251 2,489,021 1,131, CONTINGENCIES AND COMMITMENTS 18.1 Guarantee Acceptances Show cause notices by sales tax-under appeal ,041 5,041 5,502 5,502

13 Mr. Fazal-ur-Rehman deposited Rs.100,000/- & Rs.200,000/- (Total Rs.300,000/-) on & through DDs at Head Office as bid money in auction of land measuring 187(A) - 02(K)- 17(M) situated at Muza Nadha The & Distt. Gujranwala. Mr. Fazal-ur-Rehman did not fulfil the conditions of Landed Committee, resultantly Bank confiscated Bid Money. He filed Civil Suit No.156/1 in 1993 titled as Fazal-ur-Rehman v/s PPCBL at Gujranwala, which was decreed in favour of plaintiff. Bank filed an appeal No.RFA 243/95 in Lahore High Court, which has also decided against Bank and Lahore High Court directed Bank to furnish a guarantee No.2096/92 dated amounting to Rs.444,939/- through Main Branch and Rs.16,100/- through Head Office (Total Rs.461,039/- from NBP for the satisfaction of the Court. Now the case is pending adjudication in the Court of Civil Judge, Lahore. The sales tax department has issued a show cause notice to the bank as to why the sales tax amounting to Rs millions has not been paid to the Government in regard to sale of machinery valuing Rs. 33,600 million of Rahwali Sugar Mills to Messers Ali Industrial and Engineering Works, Karachi without charging and depositing sales tax leviable thereon. Further the sales tax department reported that Messers Ali Industrial and Engineering Works filed written statement before Deputy Collector Audit-I, that they had paid sales tax on purchase of such machinery. The bank filed petition against the above show cause notice on the ground that bank has sold debris, scrap and non-operative machinery which were not sales tax leviable items. The case is still pending in Lahore High Court The Income Tax Returns for the tax years 2003, 2004, 2005 and 2006 have been filed under Self Assessment scheme whereby the Income Tax Returns filed with the I.T. department become the " deemed assessment order" unless selected for Audit. The assessment Order for Tax Year 2004 was amended by the Tax Department and challenged by the assessee in appeal before CIT(A). The case was decided in favour of the assessee by the Appellate Commissioner and the Department has preferred appeal against this order before the Learned Income Tax Appellate Tribunal ( ITAT). However, before the outcome of the Appeal & Under this present status the assessed losses for the tax year 2003 to 2006 ( after appeal effect of 2004) are Rs million Tax Consultant of the Bank has strong opinion that following the normal assessment procedure and history of the case, the assessing officer I.e. Income Tax department may amend the orders for the years 2003, 2005 & 2006 and the assessments would be amended accordingly. If it is done the brought forward losses from the years 2003 to 2006 would not be available and might even be converted to Income for the years and subject to charge of income-tax. Likewise the business losses for the year 2007 would be reduced accordingly or converted into Income for the year, which would be subject to income-tax. The appeals for the assessment year to are pending with Income Tax appellate Tribunal (ITAT), the outcome of which is not certain Rupees in '000' 18.3 Commitment against construction and repair of building 24,696 1,564

14 19 Mark-up/Return/Interest earned Note Rupees in '000 a) On Loans and advances to Customers 741, ,008 b) On Investments in Held to Maturity Securities 44,108 44,109 c) On Deposits with financial institutions 443, , Mark-up/Return/Interest expensed 1,228,805 1,029,645 Deposits 31,623 36,055 Other short term borrowings 515, , OTHER INCOME 547, ,508 Rent on property 9,765 8,793 Gain on sale of fixed assets 296,600 3,114 Profit on sale of books 1, Bank & Service Charges. 16,191 11,063 Others 23,034 13, ADMINISTRATIVE EXPENSES 347,161 37,501 Salaries, allowances, etc. 409, ,588 Charge for defined benefit plan 21,677 21,752 Contribution to defined contribution plan Non-executive directors' fees, allowances and other expenses 31 2 Rent, taxes, insurance, electricity, etc. 25,864 22,865 Legal and professional charges 2,162 2,076 Communications 10,301 9,529 Repairs and maintenance 21,548 12,023 Stationery and printing 2,878 2,305 Advertisement and publicity 3,082 1,535 Subscription Auditors' remuneration Depreciation ,327 7,896 Amortization General Charges 10,787 8,868 Vehicles expenses 17,825 15,809 Others 14,336 10, , ,511

15 22.1 Auditors' remuneration Rupees in '000 Audit fee Out-of-pocket expenses OTHER CHARGES Penalties imposed by State Bank of Pakistan TAXATION For the year Current 481 1,030 For the prior year(s) , In view of taxable loss incurred for the year ended 30 June 2007, against dividend income. provision has been made only 25 EARNINGS PER SHARE - BASIC AND DILUTED Profit for the year 129, ,033 Weighted average number of ordinary shares (Numbers) 3,363,174 3,336,584 Basic and diluted earnings per share (Rupees) CASH AND CASH EQUIVALENTS Cash and Balance with Treasury Banks 715, ,993 Balance with other banks 5,586,775 6,511,008 6,301,792 6,921, STAFF STRENGTH (Number) Permanent 1,513 1,552 Temporary/ on contractual basis Daily wages Total Staff Strength 2,039 1,926

16 28 COMPENSATION OF DIRECTORS AND EXECUTIVES President / Chief Executive Directors Executives Rupees in '000 Fees Managerial remuneration Charge for defined benefit plan Contribution to defined contribution Rent and house maintenance Utilities Medical Conveyance Number of persons At present, the Chairman, Planning and Development, government of the Punjab is the administrator of the bank, who has full powers and duties that of a Board of Directors. 29 FAIR VALUE OF FINANCIAL INSTRUMENTS 29.1 On-balance sheet financial instruments Book value Fair value Book value Fair value Rupees in '000 Assets Cash balances with treasury banks 715, , , ,993 Balances with other banks 5,586,775 5,586,775 6,511,008 6,511,008 Lending to financial institutions Investments 558, , , ,876 Advances 8,009,821 8,009,821 6,798,803 6,798,803 Other assets 92,040 92, , , ,961,662 14,961,662 14,332,277 14,332,277 Liabilities Bills payable 39,654 39,654 20,677 20,677 Borrowings 12,000,000 12,000,000 12,000,000 12,000,000 Deposits and other accounts 2,007,645 2,007,645 1,657,013 1,657,013 Sub-ordinated loans Liabilities against assets subject to finance lease Other liabilities 185, , , ,553 14,232,922 14,232,922 13,801,243 13,801,243 The fair value of available for sale investments other than those classified as held to maturity is based on quoted market price. In the opinion of the management, the fair value of the remaining financial assets and liabilities are not significantly different from their carrying values since assets and liabilities are either short term in nature or in the case of customer loans and deposits are frequently repriced. 30 RELATED PARTY TRANSACTIONS Balances outstanding Rupees in '000' Loans and Advances - 14,152 Deposits - 4,940 Transactions during the year Loans and advances given - 11,634 Loans and advances adjusted/ received - 11,064 Mark up received on loans and advances - 1,218 Mark up on deposits The transactions and contracts with related parties, other than those under the terms of employment, are carried out on an Arm's length basis determined in accordance with the " Comparable Uncontrolled Price Method

17 31 CAPITAL ADEQUACY The risk weighted assets to capital ratio, calculated in accordance with the State Bank's guidelines on capital adequacy was as follows: Rupees in '000 Regulatory Capital Base Tier I Capital Shareholders Capital/Assigned Capital 430, ,533 Reserves 370, ,269 Unappropriated / unremitted profits (Net of Losses) 133,776 38, , ,741 Less: Adjustments Shortfall in provisions required against classified assets (506,651) (349,787) Total Tier I Capital 428, ,954 Tier II Capital Subordinated Debt (upto 50% of total Tier I Capital) - - General Provisions subject to 1.25% of Total Risk Weighted Assets Revaluation Reserve (upto 50%) 1,244, ,699 1,244, ,699 Total Tier II Capital (restricted upto the amount of total tier I capital) 428, ,954 Eligible Tier III Capital - - Total Regulatory Capital (a) 856, ,908 Risk-Weighted Exposures 2007 Rupees in ' Book Value Risk Adjusted Book Value Risk Adjusted Value Value Credit Risk Balance Sheet Items:- Cash and balances with treasury banks 295, ,290 Balances with other banks 6,006,449 1,201,290 6,740,711 1,348,142 Investments 558, , , ,825 Advances 9,453,735 6,045,209 7,867,351 5,288,014 Operating fixed assets 2,571,139 2,571,139 1,288,477 1,288,477 Other Assets 216, , , ,236 16,802,930 10,212,223 16,802,930 8,281,694 Off Balance Sheet items Loan Repayment Guarantees Purchase and Resale Agreements Guarantee acceptance Revolving underwriting Commitments Stand By Letters of Credit Outstanding Foreign Exchange Contracts -Purchase -Sale Credit risk-weighted exposures 10,212,684 8,282,155 Market Risk General market risk - - Specific market Risk - - Market risk-weighted exposures - - Total Risk-Weighted exposures (b) 10,212,684 8,282,155 Capital Adequacy Ratio [ (a) / (b) x 100)

18

19 Details of non-performing advances and specific provisions by class of business segment Rupees in '000 Classified Specific Classified Specific Advances Provisions Advances Provisions Held Held Agriculture, Forestry, Hunting and Fishing 3,181,099-3,034,588 - Mining and Quarrying Textile 1,595-1,972 - Chemical and Pharmaceuticals Cement Sugar Footwear and Leather garments Automobile and transportation equipment Electronics and electrical appliances Construction Power (electricity), Gas, Water, Sanitary Wholesale and Retail Trade Exports/Imports Transport, Storage and Communication Financial Insurance Services Individuals 23,192-24,261 - Others 48,490-24,197-3,254,376-3,085, Details of non-performing advances and specific provisions by sector Public/ Government Private 3,254,376-3,085,018-3,254,376-3,085, GEOGRAPHICAL SEGMENT ANALYSIS 2007 Profit before Total assets Net assets Contingencies and taxation employed employed commitments Rupees in '000' Pakistan 130,264 17,656,897 3,423,975 30,198 Asia Pacific (including South Asia) Europe United States of America and Canada Middle East Others ,264 17,656,897 3,423,975 30,198

20 32.2 Market Risk Foreign Exchange Risk 2007 Assets Liabilities Off-balance Net foreign sheet itemscurrency exposure Rupees in '000 Pakistan rupee 17,656,897 14,232, United States dollar Great Britain pound Deutsche mark Japanese yen Euro ,656,897 14,232, Currency risk is the risk that the value of a financial instrument will fluctuate due to change in foreign exchange risk Mismatch of Interest Rate Sensitive Assets and Liabilities On-balance sheet financial instruments 2007 Effective Total Exposed to Yield/ Interest risk Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Non-interest Yield/ Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above bearing financial Interest Month Months Months Year Years Years Years Years 10 Years instruments rate Rupees in '000' Assets Cash and balances with treasury banks 1.40% 715, , ,025 Balances with other banks 9.16% 5,586,775 5,430, ,223 Lending to financial institutions - Investments 10.50% 558, , , , Advances 13.50% 9,453, , , ,965 3,111,817 1,024,671 1,069,510 1,822, , , Other assets 92, ,040 16,405,576 6,770, , ,965 3,111,817 1,036,722 1,069,510 2,122, , , ,587 Liabilities Bills payable 39, ,654 Borrowings 8.82% 12,000,000-3,000,000-5,000,000 4,000, Deposits and other accounts 3.75% 2,007,645 1,459, ,584 9,738 26,533 16,172 6,547 77,512-86,973 47,152 Sub-ordinated loans - Liabilities against assets subject to finance lease - Other liabilities 185, ,546 14,232,922 1,459,434 3,277,584 9,738 5,026,533 4,016,172 6,547 77,512-86, ,352 On-balance sheet gap 2,172,654 5,310,908 (2,970,326) 332,227 (1,914,716) (2,979,450) 1,062,963 2,045, ,205 66, ,235 Off-balance sheet financial instruments Forward Lending (including call lending, repurchase agreement lending, commitments to extend credit, etc.) Forward borrowings (including call borrowing, repurchase agreement borrowing, etc.) Off-balance sheet gap Total Yield/Interest Risk Sensitivity Gap 2,172,654 5,310,908 (2,970,326) 332,227 (1,914,716) (2,979,450) 1,062,963 2,045, ,205 66, ,235 Cumulative Yield/Interest Risk Sensitivity Gap 2,172,654 7,483,562 4,513,236 4,845,463 2,930,747 (48,703) 1,014,260 3,059,515 3,875,720 3,942,150 4,345,385 Yield Risk is the risk of decline in earnings due to adverse movement of the yield curve. Interest rate risk is the risk that the value of the financial instrument will fluctuate due to changes in the market interest rates.

21 32.3 Liquidity Risk Liquidity Risk is the potential for loss to an institution arising from either its inability to meet its obligations or to fund increase in assets as they fall due without incurring unacceptable cost or losses Maturities of Assets and Liabilities 2007 Total Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5 Upto 1 to 3 to 6 Months to 1 to 2 to 3 to 5 to 10 Above Month Months Months Year Years Years Years Years 10 Years Rupees in '000 Assets Cash and balances with treasury banks 715, , Balances with other banks 5,586,775 5,586,775 Lending to financial institutions - Investments 558, , , , Advances 8,009, , , ,965 1,667,903 1,024,671 1,069,510 1,822, , ,403 Other assets 216,136 89,095 32, , ,436 1, Operating fixed assets 2,571,139 6, , ,367 18,790 2,528, Deferred tax assets - 17,656,897 7,449, , ,991 1,674,747 1,037,919 1,084,605 2,226,993 3,345, ,070 Liabilities Bills payable 39,654 39,654 - Borrowings 12,000,000-3,000,000-5,000,000 4,000,000 Deposits and other accounts 2,007,645 1,506, ,584 9,738 26,533 16,172 6,547 77,512-86,973 Sub-ordinated loans - Liabilities against assets subject to finance - Other liabilities 185,623 64,210 49, , ,905 35,551 - Deferred tax liabilities - 14,232,922 1,610,450 3,327,153 9,739 5,049,814 4,016,278 6,547 90,417 35,551 86,973 Net assets 3,423,975 5,839,163 (2,986,599) 333,252 (3,375,067) (2,978,359) 1,078,058 2,136,576 3,309,854 67,097 Share capital/ Head office capital account 430,351 Reserves 370,827 Unappropriated/ Unremitted profit 133,776 Surplus/(Deficit) on revaluation of assets 2,489,021 3,423, Some assets / liabilities of the bank do not have a contractual maturity date. The period in which these assets / liabilities are assumed to mature is taken as the expected date on which the assets / liabilities be realised / settled. The above maturity analysis is based on the remaining period at the balance sheet date to the contractual maturity date Operational Risk Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people and system or from external events. 33 Messer JCR-VIS Credit Rating Company Limited has assigned the medium to long term rating of the bank at BB+ (double B plus) while short term rating is revised to B on August 09, 2007 ( Previously: BB+ / B). 34 EVENT AFTER BALANCE SHEET DATE M/s Prime Engineering Works has filed a petition in Lahore High Court against sale of 173 Kanal of land to National Logistic Cell (NLC) at Chung Panjgraeen Village, Lahore in which the petitioner has said that bargain between the Bank and NLC has been finalised for an amount much lesser than the worth of the land on July 21, Moreover the petitioner claimed that his property stood encroached upon by Bank which was the part of sold land. The petitioner has prayed to the court to direct the respondent to reverse the deal and vacate his property as soon as possible. 35 DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue on by the Administrator of the Bank.,36 GENERAL 36.1 Figures of corresponding period have been restated where necessary for the purpose of comparison Figures in these statements have been rounded off to nearest thousand rupee. CH.GHULAM MUSTAFA A.SENIOR MANAGER, ACCOUNTS/STAT. MUHAMMAD ASHRAF A.CHIEF MANAGER, FINANCE RAJA ALLAH BUKHSH GENERAL MANAGER

22 46 GENERAL 46.1 The note numbers given are for reference purposes. Further details may be given, if considered necessary, by way of additional note(s) Except for the first financial statements laid before the shareholders of the bank financial statements shall also give the corresponding figures for the immediately preceding financial year. This requirement shall, in case of banks required to prepare half yearly financial statements, be applicable to the immediately preceding corresponding period The figures in the financial statements may be rounded off to the nearest thousand The following shall be disclosed in the financial statements namely: i) All material information necessary to make the financial statements clear and understandable; ii) If a fundamental accounting assumption, namely, going concern, consistency and accrual is not followed in preparation of financial statement, that fact together with the reason thereof: iii) Particulars of any charge on the assets of the bank to secure the liabilities of any other person including, where practicable, the amount so secured (particulars of beneficiary along with relationship to the bank or directors). iv) Change in an accounting policy that has material effect in the current year or may have a material effect in the subsequent years together with reasons for the change and the financial effect of the change, if material The surplus on revaluation of fixed assets shall be treated and shown as specified in section 235 of the Companies Ordinance, Additions to, and deductions from, adjustments in or applications of the surplus on revaluation, whether resulting from disposal of the revalued asset(s) or otherwise ( detail to be provided) shall also be stated Where any material item shown in the financial statements or included in amounts shown therein cannot be determined with substantial accuracy, an estimated amount described as such shall be included in respect of that item together with the description of the item No liability shall be shown in the balance sheet or the notes thereto at a value less than the amount at which it is repayable (unless the quantum of repayment is at the option of the bank) at the date of the balance sheet or if it is not then repayable, at the amount at which it will first become so repayable thereafter, less, where appropriate, reasonable deduction for discount until that date If in the opinion of the directors any of the current assets have, on realization in the ordinary course of the bank's business, a value less than the amount at which they are stated in the financial statements, a disclosure of the fact that the directors are of that opinion together with their estimates of the realizable value and the reasons for assigning higher values in the balance sheet shall be required Terms and expressions not defined in the Banking Companies Ordinance, 1962 have the same meaning as in the Companies Ordinance, 1984 unless there is anything repugnant in the subject or context Wherever the words " to be specified " have been used in the Notes, it connotes that only such amounts are to be disclosed which are material Disclose, together with a commentary by management, the amount of significant cash and cash equivalent balances held by the bank that are not available for use by the bank The amount at which any asset or liability is stated in the balance sheet should not be off-set by the deduction of another liability or asset unless a legal right of set off exists and the off-setting represents the expectation as to the realization or settlement of the asset or liability Income and expense items should not be off-set except for those relating to hedges and to assets and liabilities which have been offset in accordance with note

23 46.14 When income and expense items are presented on a net basis, even though the corresponding financial assets and financial liabilities on the balance sheet have not been offset, disclose the reason for that presentation if the effect is significant When the presentation or classification of items in the financial statements is amended and comparative amounts are reclassified, disclose the nature, amount of, and reason for any reclassification. When the presentation or classification of items in the financial statements is amended, but it is impracticable to reclassify comparative amounts, disclose the reason for not reclassifying and the nature of the changes that would have been made if amounts were reclassified Where any property and equipment or asset, acquired with the funds of the bank, is not held in the name of the bank or is not in the possession and control of the bank, this fact shall be stated, and the description and value of the property or asset, the person in whose name and possession or control it is held shall be disclosed Where information is required about the extent and nature, including significant terms and conditions that may affect the amount, timing and certainty of future cash flows, terms and conditions that may warrant disclosure include: a) the principal, stated, face or other similar amount which, for some derivative instruments, may be the amount (referred to as the notional amount) on which future payments are based; b) the date of maturity, expiry or execution; c) early settlement options held by either party to the instrument, including the period in which, of date at which, the options may be exercised and the exercise price or range of prices; d) options held by either party to the instrument to convert the instrument into, or exchange it for, another financial instrument or some other asset or liability, including the period in which, or date at which, the options may be exercised and the conversion or exchange ratio(s); e) the amount and timing of scheduled future cash receipts or payments of the principal amount of the instrument, including installment repayments and any sinking fund or similar requirements; f) stated rate or amount of interest/mark-up, dividend or other periodical return on principal and the timing of payments; g) collateral held, in the case of a financial asset, or pledged, in the case of a financial liability; h) in the case of an instrument for which cash flows are denominated in a currency other than the bank's reporting currency, the currency in which receipts or payments are required; i) in the case of an instrument that provides for an exchange, information described in items (a) to (h) for the instrument to be acquired in the exchange; and j) any condition of the instrument or an associated covenant that, if contravened, would significantly alter any of the other terms (for example, a maximum debt-to-equity ratio in a bond covenant that, if contravened, would make the full principal amount of the bond due and payable immediately) Any information required to be given in respect of any of the items in the financial statements shall, if it cannot be included in such statements, be furnished in a separate note, schedule or statement to be attached to, and which shall be deemed to form an integral part of the financial statements All banks operating in Pakistan (whether incorporated in Pakistan or outside Pakistan and whether listed or not) shall prepare their accounts in accordance with the directives issued by the State Bank of Pakistan from time to time, the Banking Companies Ordinance 1962, the International Accounting Standards and International Financial Reporting Standards as notified in the official Gazette by the Securities and Exchange Commission of Pakistan for listed companies under section 234(3)(i) of the Companies Ordinance Captions in respect of which no amounts exist may not be reproduced in the financial statements except

24 in case of Balance Sheet and Profit & Loss account Banks are encouraged to disclose financial highlights of recent periods. Banks will decide the periods for disclosing the past financial highlights. They may also consider disclosing trends in key financial ratios from investors perspective and transparency in disclosure Following notes will be applicable when Basel II is implemented Note Title 44.1 Capital Assessment and Adequacy Basel II Specific (will replace Note 44) Credit Risk-General Disclosures Basel II Specific 45.2 Equity Position risk in the banking book Basel II Specific Yield/Interest Rate Risk in the Banking Book (IRRBB)-Basel II Specific Operational Risk-Disclosures Basel II Specific 1

25 STATEMENT SHOWING WRITTEN-OFF LOANS OR ANY OTHER FINANCIAL RELIEF OF FIVE HUNDRED THOUSAND RUPEES OR ABOVE PROVIDED DURING THE YEAR ENDED Annexure - 1 S. Name and Name of individuals/ Father's/ Outstanding Liabilities at beginning of year Principal Interest/ Other fin- Total No. address of the partners/ directors Husband's Principal Interest/ Others Total written-off Mark-up ancial relief ( ) borrower (with NIC No.) name Mark-up written-off provided Rupees in '000 Please disclose reconciliation TOTAL:

26 ISLAMIC BANKING BUSINESS Annexure - 2 The bank is operating Islamic banking branches at the end of current year as compared to Islamic banking branches at the end of Prior year Rupees in '000 ASSETS Cash and balances with treasury banks xxxxxx xxxxxx Balances with and Due from Financial Institutions xxxxxx xxxxxx Investments xxxxxx xxxxxx Financing and Receivables xxxxxx xxxxxx -Murahaba xxxxxx xxxxxx -Ijara xxxxxx xxxxxx -Musharaka xxxxxx xxxxxx -Diminishing Musharaka xxxxxx xxxxxx -Salam xxxxxx xxxxxx -Other Islamic Modes (Please specify) xxxxxx xxxxxx Other assets xxxxxx xxxxxx Total Assets xxxxxx xxxxxx LIABILITIES Bills payable xxxxxx xxxxxx Due to Financial Institutions xxxxxx xxxxxx Deposits and other accounts xxxxxx xxxxxx -Current Accounts xxxxxx xxxxxx -Saving Accounts xxxxxx xxxxxx -Term Deposits xxxxxx xxxxxx -Others xxxxxx xxxxxx -Deposit from Financial Institutions -Remunerative xxxxxx xxxxxx -Deposits from Financial Institutions-Non-Remunerative xxxxxx xxxxxx Due to Head Office xxxxxx xxxxxx Other liabilities xxxxxx xxxxxx (xxxxxx) (xxxxxx) NET ASSETS xxxxxx xxxxxx REPRESENTED BY Islamic Banking Fund xxxxxx xxxxxx Reserves xxxxxx xxxxxx Unappropriated/ Unremitted profit xxxxxx xxxxxx xxxxxx xxxxxx Surplus/ (Deficit) on revaluation of assets xxxxxx xxxxxx xxxxxx xxxxxx Remuneration to Shariah Advisor/Board xxxxxx xxxxxx CHARITY FUND Opening Balance xxxxxx xxxxxx Additions during the period xxxxxx xxxxxx Payments/Utilization during the period (xxxxxx) (xxxxxx) Closing Balance xxxxxx xxxxxx

27 Guidelines for mapping of Business Lines Annexure - 3 Level 1 Level 2 Activity Groups Corporate Finance Municipal/Government Finance Merchant Banking Corporate Finance Trading & Sales Retail Banking Commercial Banking Payment and Settlement 1 Agency Services Asset Management Retail Brokerage Advisory Services Sales Market Making Proprietary Positions Treasury Retail Banking Private Banking Card Services Commercial Banking External Clients Custody Corporate Agency Corporate Trust Discretionary Fund Management Non-Discretionary Fund Management Retail Brokerage Mergers and acquisitions, underwriting, privatisations, securitisation, research, debt (government, high yield), equity, syndications, IPO, secondary private placements Fixed income, equity, foreign exchanges, commodities, credit, funding, own position securities, lending and repos, brokerage debt, prime brokerage Retail lending and deposits, banking services, trust and estates Private lending and deposits, banking services, trust and estates, investment advice Merchant/commercial/corporate cards, private labels and retail Project finance, real estate, export finance, trade finance, factoring, leasing, lending, guarantees, bills of exchange Payments and collections, funds transfer, clearing and settlement Escrow, depository receipts, securities lending (customers) corporate actions Issuer and paying agents Pooled, segregated, retail, institutional, closed, open, private equity Pooled, segregated, retail, institutional, closed, open Execution and full service 1 Payment and settlement losses related to a bank s own activities would be incorporated in the loss experience of the affected business line 41