Unconsolidated Statement of Financial Position As at March 31, 2012 (Un-audited) (Audited) March 31, 2012 December 31, 2011 Note ASSETS Restated Cash and balances with treasury banks 194,808 214,606 Balances with other banks 4,644 5,222 Lendings to financial institutions 7 995,000 800,000 Investments 8 3,225,206 3,129,260 Advances 9 2,691,391 2,718,879 Operating fixed assets 10 110,450 112,305 Deferred tax assets - - Other assets 227,070 217,471 7,448,569 7,197,743 LIABILITIES Bills payable 22,480 183,863 Borrowings 11 2,490,672 2,125,447 Deposits and other accounts 2,761,738 2,647,157 Sub-ordinated loans - - Liability against assets subject to finance lease 12,561 13,725 Deferred tax liabilities - - Other liabilities 365,003 361,241 5,652,454 5,331,433 NET ASSETS 1,796,115 1,866,310 REPRESENTED BY Share capital 2,392,507 2,392,507 Reserves 206,526 206,526 Unappropriated loss (769,899) (684,648) 1,829,134 1,914,385 Deficit on revaluation of assets (33,019) (48,075) 1,796,115 1,866,310 CONTINGENCIES AND COMMITMENTS The annexed notes 1 to 15 form an integral part of these unconsolidated financial statements. Chief Financial Officer President/Chief Executive Director Director Director
Unconsolidated Profit and Loss Account (Un-audited) March 31, 2012 March 31, 2011 Mark-up/ return/ interest earned 181,497 151,060 Mark-up/ return/ interest expensed 119,107 84,526 Net mark-up/ interest income 62,390 66,534 (Reversal of provision) / provision against non-performing advances-net 5,361 33,999 Provision for diminution in the value of investments - - Bad debts written off directly 8 193 5,369 34,192 Net mark-up/ interest income after provisions 57,021 32,342 NON MARK-UP/ INTEREST INCOME Fee, commission and brokerage income 3,083 2,988 Dividend income - 1,050 Income from dealing in foreign currencies - - Gain on sale of securities 323 - Unrealized gain on revaluation of investments classified as held for trading - - Other income 154 769 Total non-markup/ interest income 3,560 4,807 60,581 37,149 NON MARK-UP/ INTEREST EXPENSE Administrative expenses 142,495 139,052 Other provisions/ write offs 1,363 1,115 Other charges - - Total non-markup/ interest expenses 143,858 140,167 LOSS BEFORE TAXATION (83,277) (103,018) Taxation - Current 1,974 1,643 - Prior - - - Deferred - - 1,974 1,643 LOSS AFTER TAXATION (85,251) (104,661) Unappropriated loss brought forward (684,648) (516,821) Loss available for appropriation (769,899) (621,482) Basic/ diluted loss per share (Rupees) (0.36) (0.44) The annexed notes 1 to 15 form an integral part of these unconsolidated financial statements. Chief Financial Officer President/Chief Executive Director Director Director
Unconsolidated Statement of Comprehensive Income (Un-audited) March 31, 2012 March 31, 2011 Net loss after taxation (transferred to equity) (85,251) (104,661) Other comprehensive income (not transferred to equity) Net change on remeasurement of available for sale investment to fair value 15,056 20,792 Total comprehensive income for the quarter (70,195) (83,869) The annexed notes 1 to 15 form an integral part of these unconsolidated financial statements. Chief Financial Officer President/Chief Executive Director Director Director
Unconsolidated Cash Flow Statement (Un-audited) March 31, 2012 March 31, 2011 CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (83,277) (103,018) Less: Dividend income - (1,050) (83,277) (104,068) Adjustments for non-cash/ other items Depreciation 3,809 3,412 Amortization 333 391 Provision against non-performing advances 5,361 33,999 Provision for diminution in the value of investment - - Net profit on sale of fixed asset - (289) Finance charges on leased assets 141 298 Other provisions 1,363 1,115 Bad debts written off directly 8 193 11,015 39,119 (72,262) (64,949) (Increase)/ decrease in operating assets Lendings to financial institutions (325,000) (200,000) Advances 22,119 172,669 Other assets (excluding advance taxation) (10,962) 15,836 (313,843) (11,495) Increase/ (decrease) in operating liabilities Bills payable (161,383) (5,707) Borrowings from financial institutions 365,225 (201,636) Deposits 114,581 165,355 Other liabilities (excluding current taxation) 3,004 4,689 321,427 (37,299) (64,678) (113,743) Income tax paid (1,216) (1,041) Net cash flow generated from / (used in) operating activities (65,894) (114,785) CASH FLOW FROM INVESTING ACTIVITIES Net (investments)/de-investment in available-for-sale securities (80,889) (101,347) Net de-investments/(investment) in held-to-maturity securities - 164,000 Dividend income - 1,050 Investments in operating fixed assets (2,288) (3,936) Sale proceeds of property and equipment disposed-off - 556 Net cash flow (used in)/generated from investing activities (83,177) 60,323 CASH FLOW FROM FINANCING ACTIVITIES Payment of lease obligations (1,305) (3,616) Financing for leased vehicles - - Net cash flow (used in)/generated from financing activities (1,305) (3,616) Increase/(decrease) in cash and cash equivalents (150,376) (58,078) Cash and cash equivalents at beginning of the year 469,828 237,071 Cash and cash equivalents at end of the quarter 319,452 178,993 The annexed notes 1 to 15 form an integral part of these unconsolidated financial statements. Chief Financial Officer President/Chief Executive Director Director Director
Unconsolidated Statement of Changes in Equity (Un-audited) For the period ended March 31, 2012 Share Capital Statutory Unappropriated reserve loss Total Balance as at January 1, 2011 2,392,507 206,526 (412,160) 2,186,873 Total comprehensive income Net loss for the period - - (104,661) (104,661) Balance as at March 31, 2011 2,392,507 206,526 (516,821) 2,082,212 Loss for the period from April 01 to Dec, 2011 - - (167,827) (167,827) Balance as at December 31, 2011 2,392,507 206,526 (684,648) 1,914,385 Total comprehensive income Loss for the period - - (85,251) (85,251) Balance as at March 31, 2012 2,392,507 206,526 (769,899) 1,829,134 The annexed notes 1 to 15 form an integral part of these unconsolidated financial statements. Chief Financial Officer President/Chief Executive Director Director Director
Notes to the Unconsolidated Financial Statements (Un-audited) 1. GENERAL INFORMATION 1.1 SME Bank Limited (the Bank) is a public limited company incorporated in Pakistan on October 30, 2001 under the Companies Ordinance, 1984 having its registered office at 40-Jang Building, A.K. Fazal ul Haq Road, Blue Area, Islamabad. The Bank obtained its business commencement certificate on April 16, 2005 which became effective from the date of its issue. The Bank is a Scheduled Commercial Bank engaged in the business of banking with the primary objective to support and develop Small and Medium Enterprise (SME) sector in Pakistan by providing necessary financial assistance and business support services on sustainable basis. The Bank is operating through a network of 13 Commercial banking branches. Based on the latest credit rating report dated June 30, 2011 issued by JCR-VIS Credit Rating Company Limited, credit rating of the Bank was BBB (triple B) in the long term and A-3 (A three) in the short term. In terms of the provisions of the State Bank of Pakistan BSD circular No. 7 of 2009, the Bank was required to increase its paid up capital (net of losses) as at December 31, 2011 up to Rs. 8 billion. The State Bank of Pakistan (SBP) has granted exemption from meeting the enhanced Minimum Capital Requirement and the Bank is allowed to operate with minimum paid up capital (net of losses) of Rs. 2 billion till privatization of the Bank. 1.2 Amalgamation of defunct RDFC and SBFC The Federal Government promulgated the Regional Development Finance Corporation (RDFC) and Small Business Finance Corporation (SBFC) Amalgamation and Conversion Ordinance, 2001 (the Ordinance 2001) setting forth the mechanism of amalgamation of defunct RDFC and SBFC. Both these entities were Development Financial Institutions (DFIs). In pursuance of the Ordinance 2001, Finance Division, Ministry of Finance issued an Order (SRO (1) 2001) dated December 29, 2001 setting forth the scheme of amalgamation of RDFC and SBFC with the Bank effective January 1, 2002. Pursuant to this scheme entire assets and liabilities of defunct RDFC and SBFC as at December 31, 2001 were transferred to the Bank at fair value. These two institutions stand dissolved and ceased to exist effective January 1, 2002. The Bank allotted its shares to the share holders of defunct RDFC and SBFC in proportion to their shareholding therein based on the fair value of net assets of defunct RDFC and SBFC on December 31, 2001. 2. BASIS OF PRESENTATION 2.1 2.2 These unconsolidated financial statements have been presented in accordance with the requirements of format prescribed by the State Bank of Pakistan's BSD Circular No. 4 dated February 17, 2006. Items included in the unconsolidated financial statements are measured using the currency of the primary economic environment in which the Bank operates. The unconsolidated financial statements are presented in Pak. Rupee, which is the Bank's functional currency.
3. STATEMENT OF COMPLIANCE These unconsolidated financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan and the requirements of the Companies Ordinance, 1984 and the Banking Companies Ordinance, 1962. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standard Board (IASB), provisions of and directives issued under the Companies Ordinance, 1984 and the Banking Companies Ordinance, 1962 and the directives issued by the State Bank of Pakistan. In case requirements differ, the provisions of and directives issued under the Companies Ordinance, 1984, the Banking Companies Ordinance, 1962 and the directives issued by the State Bank of Pakistan shall prevail. 4. BASIS OF MEASUREMENT These unconsolidated financial statements have been prepared under the historical cost convention as modified for certain investments which are carried at fair value, and defined benefit pension and gratuity plan, defined benefit unfunded gratuity scheme, unfunded compensated absences and benevolent fund which are carried at present value of defined benefit obligations net of fair value of plan assets and unrecognised actuarial losses. 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES 5.1 Cash and cash equivalents Cash and cash equivalents comprise of cash and balances with treasury banks, balances with other banks and call money lendings. 5.2 Investments Investments are classified into following categories: Held for trading These represent investments acquired by the Bank with the intention to trade by taking advantage of short-term market/ interest rate movements. These are marked to market and surplus/ (deficit) arising on revaluation is taken to unconsolidated profit and loss account. Held to maturity These represent investments acquired by the Bank with the intention and ability to hold them upto maturity. These are carried at amortized cost less impairment if any. Impairment in debt securities is determined in accordance with the requirements of Prudential Regulations issued by SBP.
Available for sale These represent investments which do not fall under held for trading or held to maturity securities. Securities for which ready quotations are available on Reuters page (PKRV) or Stock Exchange are valued at quoted price and resulting surplus/ (deficit) is kept in a separate account and is shown below the shareholders' equity in the unconsolidated statement of financial position. Unquoted equity securities are valued at lower of cost and break-up value. If the Break-up value is less than cost, the difference is recognised in unconsolidated profit and loss account. Provision for diminution in values of securities (other than term finance certificates) is made after considering impairment if any in their values, where the decline in prices of available for sale equity securities is significant or prolonged, it is considered impaired and included in unconsolidated profit and loss account. Provision for diminution in the value of term finance certificates is made as per Prudential Regulations issued by State Bank of Pakistan. All purchases and sales of investment that require delivery within the timeframe established by regulation or market convention are recognized at the date which the bank commits to purchase or sell the investment. Gain/ (loss) on sale of investments is recognized in the year of sale. Investment in subsidiary Investment in subsidiary is carried at cost less impairment, if any. However the investment in subsidiary is not marked to market as per prudential regulations issued by SBP. 5.3 Agreements for sale and purchase of securities (repo and reverse repo) Securities sold under repurchase agreement (repo) are retained in the financial statements as investments and a liability for consideration received is included in borrowings. The difference between sale and repurchase price is treated as mark-up expense and recognized over the period of contract. Securities purchased under agreement to resell (reverse repo) are included in lendings to financial institutions. The difference between purchase and resale price is treated as mark-up income and recognized over the period of the contract. 5.4 Advances Advances are stated net of provision for non-performing advances. Provision for non-performing advances is determined and charged to profit and loss account in accordance with the requirements of Prudential Regulations issued by SBP from time to time. Advances are written off when there is no realistic prospect of recovery.
6. FINANCIAL RESTRUCTURING AND GOING CONCERN ASSUMPTION 6.1 The Government of Pakistan (GoP) assisted by Asian Development Bank (ADB) is working on SME Sector Development Programme (SME SDP). Loan agreement for this programme between GoP and ADB and project agreement between ADB, SBP, Small and Medium Enterprise Development Authority (SMEDA) and the Bank have been signed on February 10, 2004. This programme, apart from other aspects on policy matrix relating to SME sector of Pakistan, also envisages restructuring of SME Bank Limited. Salient features of the restructuring of the Bank are given below: i) ii) Adjustment of accumulated balances due from SBP on account of its share in profits and losses of the Bank against credit lines provided by SBP; Payment of Rs 3 billion to SBP before January 1, 2004 against outstanding credit lines and conversion of balance of remaining credit lines into a loan repayable in full by June 30, 2006; iii) iv) v) vi) vii) viii) Raising the paid-up capital to Rs 1,100 million by issuing additional shares to GoP; The Ministry of Finance (MoF) shall ensure that SBP's shareholding in the Bank is terminated through the purchase of SBP held shares at nominal value by shareholders or otherwise; 100% provision to be made against non performing financial assistance extended by the defunct RDFC and SBFC prior to January 1, 2002 which provision to be adjusted against SBP credit lines. SBP will recover this amount from proceeds of ADB loan to GoP; Reduction in the number of recovery branches, staff rationalization through Voluntary Separation Scheme (VSS), human resource audit and hiring of new professional staff on merit; Reimbursement by GoP of costs related to VSS launched for all regular employees; SBP to issue a banking license to the Bank on compliance with all conditions of restructuring and applicable SBP regulations. The commercial banking operations will be separate from the recovery operations of the defunct RDFC and SBFC portfolio and the two operations will be run as independent units within the Bank; and ix) Privatization of the Bank by June 2006. 6.2 Current status of the above referred financial restructuring is given below: i) ii) Accumulated balances of Rs 3,275.752 million due from SBP on account of its share in profits and losses of the Bank have been adjusted against credit lines provided by SBP; Rs. 7,393 million has been paid to SBP since 2003, to fully adjust the loan liability.
iii) Paid-up capital has been increased to Rs. 2,393 million by issue of 73,502,453 additional shares of Rs 10 each to GoP without right issue in 2004, issue of 40,000,000 additional shares of Rs 10 each to GoP without right issue in 2005, issue of 50,000,000 additional bonus shares of Rs 10 each to GoP without right issue in 2006 and issue of 39,250,700 additional shares of Rs. 10 each to GoP without right issue in 2007. Proceeds against issue of additional shares in 2004 were paid by GoP to SBP against the Bank's loan balance due to SBP; iv) v) vi) vii) viii) Provision of Rs 1,283.196 million against non performing financial assistance extended by the defunct RDFC and SBFC was adjusted against credit lines of SBP in 2003; VSS was approved by the Board of Directors of the Bank on November 7, 2003. 707 employees were relieved under the scheme upto December 31, 2005 and the aggregate reported cost for 707 employees was Rs. 1,764.268 million, which has been received by the bank by March 31, 2007; Human resource technical audit has been completed and report has been submitted to the Bank; Banking license was issued by SBP on September 13, 2004 and the Bank has started banking operations after the issue of certificate for commencement of banking business by SBP on April 16, 2005; Privatization Commission (PC) has constituted a transaction committee which is represented by members from the Privatization Commission, State Bank of Pakistan, Ministry of Finance and the Bank. Privatization Commission has approved M/s BMA Capital as Financial Advisors for the Bank and due diligence exercise for the privatization of the Bank has been carried out in the year 2008; ix) 6.3 Further restructuring of SME Bank: i) No further progress has been made on the privatization of the Bank. In compliance to the decisions taken during meeting at Ministry of Finance dated September 14, 2009 following actions have been undertaken. VSS offered to the regular employees of the Bank in November 2009, wherein 138 employees opted for VSS offered vide Circular No. HO/HR&SD/2009/5385 dated October 15, 2009. These employees have been relieved at a total cost of Rs. 653 million with effect from November 14, 2009; ii) iii) The Old portfolio of defunct RDFC & defunct SBFC has been transferred to National Bank of Pakistan with effect from 1st July 2010. Consequently all the recovery offices and recovery booths have been closed. However, staff of the recovery offices have been advised to continue to maintain and keep the safe custody of records and assets including loan files, security documents, books of accounts, vehicles, furniture/fixture and other assets till handing over of all the relevant records to the concerned institution; and Government of Pakistan have allocated an amount of Rs. 2 billion in the annual budget 2011-12 for equity injection into the Bank.
Notes to the Unconsolidated Financial Statements (Un-audited) 7. LENDINGS TO FINANCIAL INSTITUTIONS March 31, 2012 December 31, 2011 Call money lendings 120,000 250,000 Letter of placement 875,000 550,000 995,000 800,000 These lendings carry markup rate ranging between 11.80% to 12.50% per anum and have maturity period upto 3 months 8. INVESTMENTS As at March 31, 2012 790,019 2,435,186 3,225,206 As at December 31, 2011 1,049,545 2,079,716 3,129,260 8.1 INVESTMENTS BY TYPES: Available-for-sale securities Market Treasury Bills (MTBs) 360,020 1,254,447 1,614,467 Pakistan Investment Bonds (PIBs) 306,462 1,212,388 1,518,850 Fully paid ordinary shares/mutual fund 46,427-46,427 Term Finance Certificates (TFCs) 14,982-14,982 727,891 2,466,835 3,194,726 Held-to-maturity securities Term Deposit Receipts (TDRs) - - - Certificates of Investments (COIs) 762-762 Investment in subsidiary Held by the bank Given as collateral Total 762-762 SME Leasing Limited 215,457-215,457 Investments at cost 944,110 2,466,835 3,410,945 Less: Provision for diminution in value of investments (152,721) - (152,721) Investments net of impairment 791,389 2,466,835 3,258,224 Net deficit on revaluation of available-for-sale-securities (1,370) (31,649) (33,019) Total investments 790,019 2,435,186 3,225,206
Notes to the Unconsolidated Financial Statements (Un-audited) 9. ADVANCES Note March 31, 2012 December 31, 2011 Loans, cash credits, running finances, etc- In Pakistan Extended by: Defunct SBFC 9.2 4,391,432 4,392,342 Defunct RDFC 9.2 509,185 509,185 SME Bank Ltd 2,765,352 2,780,061 Due from ex-employees 9.2 20,956 20,993 Due from employees 164,699 172,129 7,851,624 7,874,710 Net investment in finance lease - In Pakistan 9.2 1,253 1,253 Advances - gross 7,852,877 7,875,963 Provision for non-performing advances - specific 9.1 (5,161,486) (5,157,084) Advances - net of provision 2,691,391 2,718,879 March 31, 2012 Classified Advances Provision Provision Category of Classification Domestic Overseas Total Required Held Substandard 74,417-74,417 1,306 1,306 Doubtful 67,557-67,557 1,907 1,907 Loss 5,490,029-5,490,029 5,158,273 5,158,273 5,632,003-5,632,003 5,161,486 5,161,486 9.1 Particulars of provision against non-performing advances March 31, 2012 December 31, 2011 Opening balance 5,157,084 5,331,030 Amounts written off (66) (54,517) Provision of transferred portfolio (893) (458) Charge/(Reversals) Charge for the period 16,185 11,717 Reversals (10,824) (130,688) 5,361 (118,971) Closing balance 5,161,486 5,157,084 9.2 Assignment of Non-Performing Loan (NPL) portfolios of defunct SBFC, RDFC & due from ex-employees to National Bank of Pakistan (NBP) The Board through its resolution by circular No.10/circ/33 dated March 08, 2010 duly endorsed by the members in their meeting dated May 20, 2010 has approved the transfer and assignment of non- performing loan portfolios of defunct RDFC, SBFC and due from ex-employees to NBP on the basis of deferred transfer price. Subsequently transfer and assignment agreement was executed between the Bank and National Bank of Pakistan at Karachi on July 01, 2010 (Effective date). According to the agreement, the transferor (SME) and the acquirer (NBP) acknowledge, declare and confirm the transfer, assignment and vesting of all rights, interests, privileges, title, powers and remedies in favour of the acquirer with respect to: a) the non-performing loans, collateral and the debtors; b) all agreements, deeds, instruments and other documents relating to the non-performing loans, debtors and collateral and to which the transferor is, or legally deemed to be, a party or a beneficiary; c) all legal proceedings by and against the transferor with respect to the non-performing loans, the debtors and collateral, which may be pending before any court, tribunal, arbitrator or authority, without being subject to any liabilities of the transferor to any person. The agreed transfer price is an amount equal to 50% of the net recoveries. Since certain clauses of portfolio transfer agreement have not been implemented including issuance of notices to the borrowers of defunct RDFC, SBFC and due from ex-employees etc, the outstanding portfolio relating to defunct RDFC, SBFC and due from ex-employees stands recognized in the financial statements of the Bank.
Notes to the Unconsolidated Financial Statements (Un-audited) Although the Board through its resolution by circular No.10/circ/33 dated March 08, 2010 duly endorsed by the members in their meeting dated May 20, 2010 had approved the transfer and assignment of non performing portfolio of defunct SBFC, RDFC and due from ex-employees to NBP on the basis of deferred transfer price however on assumption of charge, the new management of the Bank has re-visited and re-analyzed the whole transaction and observed that clauses of agreement signed with NBP are detrimental to the Bank s interests and causing financial loss to the Bank. The management therefore recommended the cancellation of transfer and assignment agreement to the Board of Directors in its 64th meeting dated May 16, 2011. The Board has in principle agreed with the management recommendation and advised the management to convey its views along with legal opinion, NBP recovery performance and Board s pronouncement for revocation of agreement to Ministry of Finance to arrange retrieval/restoration of old portfolio to the Bank in the interest of recovery of public funds. The management is accordingly taking suitable steps for cancellation of transfer and assignment agreement with NBP. However since the portfolio transfer agreement dated 1st July 2010 with NBP has not formally been cancelled, the amount recovered by the Bank from the borrowers of defunct RDFC, SBFC and due from ex-employees has been recognized as liability tonbp ona prudent basis. 10. OPERATING FIXED ASSETS Note March 31, 2012 December 31, 2011 Property and equipment 10.1 107,931 109,474 Intangible assets 10.2 2,519 2,831 110,450 112,305 March 31, 2012 December 31, 2011 10.1 Property and equipment Book value at the beginning of the period 10.1.1 109,474 107,646 Cost of additions during the period 2,266 15,699 Book value of the deletions during the period - (268) Depreciation charge during the period (3,809) (13,603) Book value at the end of the period 107,931 109,474 10.1.1 This represent cost of land measuring 500 square yards in sector G-7 and 4666.66 square yards situated in sector G-5/2 originally allotted to SBFC and RDFC respectively. CDA required payment of Rs. 3.367 million for transferring the plot in the name of the Bank from SBFC and RDFC. However, on receiving draft of the required amount, CDA returned the same requiring payment of market value in view of proposed privatization of the Bank. The matter is still pending, however based on the fact that the land is under possession of the Bank and the title is in the name of SBFC and RDFC which are now SME, the management believes that the Bank is not required to pay the market value of the plot and accordingly the Bank has ownership rights over this land. March 31, 2012 December 31, 2011 10.2 Intangible assets Book value at the beginning of the period 2,831 1,492 Cost of additions during the period 21 2,988 Book value of the deletions during the period - - Amortization charge during the period (333) (1,649) Book value at the end of the period 2,519 2,831
Notes to the Unconsolidated Financial Statements (Un-audited) 11. BORROWINGS March 31, 2012 December 31, 2011 Borrowings from State Bank of Pakistan - unsecured 11.1 71,177 48,026 Repurchase agreement borrowings - secured 11.2 2,419,495 2,077,421 2,490,672 2,125,447 11.1 11.2 This represents financing facility obtained from State Bank of Pakistan under the scheme "Financing Facility For Storage of Agri Produce (FFSAP)" vide SMEFD circular No. 08 dated June 04, 2010. This carry mark up rate of 6.5 % and is repayable in quarterly instalments. These represent transactions with financial institutions for sale of Government Securities under re-purchase agreement (REPO) in the inter bank money market at mark-up rates ranging from 11.6% to 11.9% (2011: 11.7% to 12%) per annum for period upto 3 months (2011: upto 3 months). REPO transactions are secured against investment of the Bank in Government securities. March 31, 2012 December 31, 2011 12. CONTINGENCIES AND COMMITMENTS 12.1 Transaction-related contingent liabilities Guarantees in favour of: Government 173,487 151,051 Others 64,877 96,231 12.2 Other Contingencies a) b) c) d) Claims not acknowledged as debt from various borrowers for loss sustained due to non-disbursement. Damages claim by borrower for delay in recording repayments received from borrower, not acknowledged as debt. Damages claimed by an ex-employee of the than RDFC involved in Ravi Securities (Pvt) Limited and Taas Securities (Pvt) Limited affairs and a director of Ravi Securities (Pvt) Limited and Taas Securities (Pvt) Limited not acknowledged as debt Tax demands of Rs. 612.707 million raised by the Income Tax Authorities related to VSS staff cost (tax year-2005) has been decided in favour of the Bank. However tax authorities has filed appeal before ATIR against the decision of the Income Tax Commissioner. The management of the Bank strongly believes and expects favourable outcome and therefore no provision has been made for this effect in the financial statements. 24,972 24,972 49,800 49,800 15,000 15,000 612,707 612,707 f) Back benefits and claims of staff/employees under litigation. 95,620 85,570 12.3 Commitments in respect of forward lending Commitments to extend credit 175,954 206,275 12.4 Commitments for the acquisition of operating fixed assets - 2,213 12.5 Commitments against repo/reverse repo transactions Purchase and resale agreements - - Sale and repurchase agreements 2,435,186 2,127,535 12.6 Other commitments Undrawn facilities 315,237 266,798 12.7 Bills for collection Payable in Pakistan 1,337 1,249
Notes to the Unconsolidated Financial Statements (Un-audited) 13. RELATED PARTY TRANSACTIONS The Bank has a related party relationship with its subsidiary- SME Leasing Limited (SMEL), its directors, executive officers and employees' funds. Details of balances outstanding at quarter end and transactions with related parties are as follows: Balances outstanding SME Leasing Limited : March 31, 2012 December 31, 2011 Investment in subsidiary 215,457 215,457 Loan to SMEL 110,342 115,319 Receivable from SMEL 1,776 1,890 Liability against assets subject to finance lease - 846 Lease key money deposits - 802 Deposit balance 12,123 5,723 Amount payable to fund to EPF 3,205 3,263 March 31, 2012 March 31, 2011 Interest income on loan to SMEL 4,607 3,750 Repayment of loan 1,011 871 Interest received on loan 4,811 3,929 Principal terms of loan to SMEL Amount Term (Rupees '000) 14. CORRESPONDING FIGURES 131,000 3 Years, 3 months Kibor + 3 % Reviewable 6 monthly Interest rate Repayment Number of installments RF - Comparative information has been re-classified/re-arranged in these financial statements, wherever necessary to facilitate comparison. 15. DATE OF AUTHORIZATION These financial statements were authorized for issue by the Board of Directors of the Bank on April 26, 2012. Chief Financial Officer President/Chief Executive Director Director Director