| MCB Bank (Muslim Commercial Bank Ltd) - 2005 |
==================================================================================== BALANCE SHEET AS AT DECEMBER 31, 2005 ==================================================================================== 2005 2004 Restated Notes (Rupees '000) ==================================================================================== Cash and balances with treasury banks 6 23,665,549 23,833,253 Balances with other banks 7 1,469,333 5,708,323 Lendings to financial institutions 8 9,998,828 10,965,297 Investments-net 9 69,481,487 67,194,971 Advances - net 10 180,322,753 137,317,773 Other assets - net 11 5,464,426 6,154,370 Operating fixed assets 12 8,182,454 7,999,821 Deferred tax assets - net 19 191,967 - 298,776,797 259,173,808 LIABILITIES: Bills payable 14 8,536,674 7,566,684 Borrowings from financial institutions 15 27,377,502 7,590,864 Deposits and other accounts 16 229,345,178 221,069,158 Subordinated loan 17 1,598,080 1,598,720 Liabilities against assets subject to finance lease - - Other liabilities 18 8,611,600 6,525999 Deferred tax liabilities - net 19 - 269,499 275,469,034 244,620,924 Net Assets 23,307763 14,552,884 REPRESENTED BY: Share capital 20 4,265,327 3,371,800 Reserves 21 13,408,005 5,661,553 Unappropriated profit 21,0,662 1,65,208 17,883,994 9,198,561 Surplus on revaluation of assets - net of tax 22 5,423,769 5,354,323 23,307,763 14,552,884 Contingencies and Commitments 23 Mark-up / return / interest earned 24 17,756,232 9,083,863 Mark-up / return / interest expensed 25 2,781,468 2,057,640 Net mark-up / interest income 14,974,764 7,026,223 Reversal of provision for diminution in the value of investments 9.3 (98,982) (172,876) Provision against loans and advances 10.4.1 1,242,153 442,595 Provision for potential lease lasses 10.4.1 - 1 200 Bad debts written off directly 10.5.1 1,184 - 1,144,355 279,690 NET MARK-UP / INTEREST: Income after provisions 13,830,409 6,746,533 NON-MARK-UP / INTEREST INCOME: Fee, commission and brokerage income 2,448,950 1 992,356 Dividend income 480,344 378,908 Income from dealing in foreign currencies 531,455 492,738 Gain on investments 866,895 804,419 Gain / (loss) on trading in government securities 851 (11 440) Other income 26 1,084,576 576,007 Total non-mark-up/ interest income 5,413,071 4,232,988 19,243,480 10,979,521 NON-MARK-UP / INTEREST EXPENSES: Administrative expenses 27 6,459,490 7,244,200 (Reversal)/other provisions 11.2 (72,740) 149,593 Other charges 28 178,841 41,864 Total non-mark-up / interest expenses 6,565,591 7,435,657 EXCEPTIONAL ITEM: Compensation on delayed tax refunds 29 340,598 513,852 Profit before taxation 13,018,487 4,057,716 Taxation - Current year 30 4,611,359 1 ,555,764 - Prior years 30 (149,763) - - Deferred 30 (365,5241) 70,420 4,096,072 1,626,184 Profit after taxation 8,922,415 2,431,532 Unappropriated profit brought forward 165,208 195,966 Transfer from surplus on revaluation of fixed assets - net of tax 83,749 25,839 248,957 221,805 Profit available for appropriation 9,171,372 2,653,337 APPROPRIATIONS TRANSFER TO: Statutory reserve 892,241 507,999 General reserve 5,500,000 800,000 Capital reserve - - Proposed cash dividend Re 1 per share (2004: Rs Nil per share) 426,533 - Reserve for issue of bonus shares-Final @ 20% (2004: 10%) 853,065 337,180 Interim cash dividend Rs 1.75 (2004: Re 1.00) per share 649,072 337,180 Interim cash dividend Rs 1.50 (2004: Rs 1.50) per share 639,799 505,770 8,960,710 2,488,129 Unappropriated profit carried forward 210,662 1,65,208 Basic and diluted earnings per share - after tax 21.36 5.99 ==================================================================================== ====================================================================================
CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2005
====================================================================================
2005 2004
(Rupees'000~Restated)
====================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
Profit before taxation 13,018,487 4,057,716
Less: Dividend income (480,344) (378,908)
12,538,143 3,678,808
ADJUSTMENTS FOR NON-CASH CHARGES:
Depreciation 575,538 598,928
Amortisation 60,113 -
Provision against loans and advances 1,242,153 442,595
Reversal of provision for
diminution in the value of investments (98,982) (172,876)
(Reversal) / Provision for
diminution in the value of other assets (72,740) 149,593
Bad debts written off directly 1,184 8,771
Provision for potential lease losses - 1,200
Gain on disposal of non-banking asset (24,664) -
Loss on disposal of fixed assets 22,114 (39,324)
Surplus on revaluation of 'held for trading' securities (1,634) -
1,703,082 988,887
14,241,225 4,667,695
(INCREASE)/DECREASE IN OPERATING ASSETS:
Lendings to financial institutions 966,469 (534,847)
Advances - net (44,248,317) (40,570,160)
Other assets - net (2,264,032) (317,180)
(45,545,880) (41,422,187)
INCREASE/(DECREASE) IN OPERATING LIABILITIES:
Bills payable 969,990 (829,636)
Borrowings from financial institutions 19,786,638 (25,037,087)
Deposits and other accounts 8,276,020 9,557,765
Other liabilities 982,933 26,142
30,015,581 (16,282,816)
(1,289,074) (53,037,308)
Income tax paid (1,152,343) (683,995)
Income tax refund - 370.208
Net cash used in operating activities (2,441,417) (53,351 095)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net investments in'available for sale' securities (20,301,953) 105,292,873
Net investments in 'held to maturity' securities 18,278,483 (45,878,054)
Net investments in 'held for trading' securities (66,056) -
Dividends received 588,153 181,258
Investments in operating fixed assets (1,029,307) (1,265,675)
Investments in subsidiary
companies and associated undertakings (77) -
Sale proceeds of non-banking asset 589,676 -
Sale proceeds of property and
equipment disposed off 127,254 81,308
Net cash (used in) / from investing activities (1,813,827) 58,411,710
CASH FLOWS FROM FINANCING ACTIVITIES:
Redemption of subordinated loan (640) (640)
Proceeds from issue of right shares 1,390,868 -
Dividend paid (1 545,483) (818,306)
Net cash outflow on financing activities (155,255) (818,946)
Exchange differences on translation
of cash and cash equivalents in foreign branches 3,805 (56,354)
(Decrease) / increase in cash and cash equivalents (4,406,694) 4,185,315
Cash and cash equivalents at beginning of the year 29.547.922 25,500,460
Effects of exchange rate changes
on cash and cash equivalents (6,346) (144,199)
Cash and cash equivalents at end of the year 29,541,576 25,356,261
====================================================================================
=============================================================================================================================================================================== STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2005 =============================================================================================================================================================================== CAPITAL RESERVES REVENUE RESERVES Share Share Reserve for Exchange Statutory General Unappropriated Total capital premium issue of translation reserve reserve profit bonus shares reserve Note (Rupees '000) =============================================================================================================================================================================== Balance as at December 31, 2003 as reported earlier 3,065,273 473,673 306,527 - 2,599,055 1,000,000 281,636 7,726,164 Effect of change in accounting policy in respect of recognition of cumulative unrecognised actuarial gains / (losses) 5.7 - - - - - - (85,670) (85,670) Balance as at December 31, 2003 restated 3,065,273 473,673 306,527 - 2,599,055 1,000,000 195,966 7,640,494 Profit after taxation for the year ended December 31, 2004 - restated - - - - - - 2,431,532 2,431,532 Transferred from surplus on revaluation of fixed assets to un appropriated profit - net of tax - - - - - - 25,839 25,839 Exchange differences on translation of net investment in foreign branches - - - (56,354) - - - (56,354) Issue of bonus shares 306,527 - (306,527) - - - - - Transferred to general reserve - - - - - 800,000 (800,000) - Transferred to statutory reserve - - - - 507,999 - (507,999) - Interim cash dividend - March 2004 - - - - - - (337,180) (337,180) Interim cash dividend - September 2004 - - - - - - (505,770) (505,770) Transferred to reserve for issue of bonus shares - final - - - - - - (337.180) - Balance as at December 31, 20043,371,800 473,673 337.180 (56,354) 3,107,054 1,800,000 165,208 9,198,561 Profit after taxation for the year ended December 31, 2005 - - - - - - 8,922,415 8,922,415 Transferred from surplus on revaluation of fixed assets to unappropriated profit - net of tax - - - - - - 83,749 83,749 Exchange differences on translation of net investment in foreign branches - - - 3,805 - - - 3,805 Transferred to statutory reserve - - - - 892,241 - (892,241) - Interim cash dividend - March 2005 - - - - - - (649,072) (649,072) Interim cash dividend - September 2005 - - - - - - (639,799) (639,799) Transferred to general reserve - - - - - 5,500,000 (5,500,000) - Issue of bonus shares 337,180 - (337,180) - - - Issue of right shares 556,347 834,521 - - - - - 1,390,868 Transferred to reserve for issue of bonus shares - final - - 853,065 - - (853,065) - - Proposed cash dividend - Final - - - - - - (426,533) (426,533) Balance as at December 31, 2005 4,265,327 1,308,194 853,065 (52,549) 3,999,295 7,300.000 210,662 17,883.994 ===============================================================================================================================================================================NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005 1. STATUS AND NATURE OF BUSINESS MCB Bank Limited (formerly Muslim Commercial Bank Limited) is a banking company incorporated in Pakistan and is engaged in commercial banking and related services. The bank is listed on all the stock exchanges in Pakistan. The bank's registered office and principal office are situated at MCB Building, Jinnah Avenue, Islamabad and MCB Tower, I.I. Chundrigar Road, Karachi respectively. The bank operates 947 branches including 5 Islamic banking branches [2004: 941 branches including 3 Islamic banking branches) inside Pakistan and 5 (2004: 5) branches outside the country (including the Karachi Export Processing Zone Branch). Subsequent to the year end, the bank has established MCB Asset Management Company Limited. The company has not commenced its operations and will be engaged in providing investment advisory services. 2. BASIS OF PRESENTATION 2.1. In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes, the State Bank of Pakistan has issued various circulars from time to time. Permissible forms of trade-related modes of financing include purchase of goods by banks from their customers and immediate resale to them at appropriate mark-up in price on deferred payment basis. The purchases and sales arising under these arrangements are not reflected in these financial statements as such but are restricted to the amount of facility actually utilised and the appropriate portion of mark-up thereof. 2.2. The financial results of the Islamic Banking branches have been consolidated in these financial statements for reporting purposes, after eliminating material inter-branch transactions / balances. Key financial figures of the Islamic Banking branches are disclosed in note 35 to these financial statements. 3. STATEMENT OF COMPLIANCE 3.1. These 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, I962 and the directives issued by the Securities and Exchange Commission of Pakistan (SECP) and the State Bank of Pakistan (SBP). Approved accounting standards comprise of such International Accounting Standards (IAS) as notified under the provisions of the Companies Ordinance 1984 Wherever the requirements of the Companies Ordinance 1984 Banking Companies Ordinance 1962 or directives issued by the SECP and the SBP differ with the requirements of these standards the requirements of the Companies Ordinance, 1984, Banking Companies Ordinance, 1962 or the requirements of the said directives take precedence. 3.2. Standards, interpretations and amendments to published approved accounting standards that are not yet effective: The following IAS, which have been published, have been revised and the amendments are applicable to the financial statements of the bank covering accounting periods beginning on or after January 1, 2006 or later periods: (i) IAS 1 Presentation of Financial Statements - Capital Disclosurese ffective from January 1, 2007. (ii) IAS 19 (Amendments) - Employee Benefits effective from January 1, 2006 Adoption of the above amendments would result in an impact on the extent of disclosures presented in the future financial statements of the bank. 3.3. The State Bank of Pakistan has deferred the applicability of International Accounting Standard (IAS) 39, 'Financial Instruments: Recognition and Measurement' and International Accounting Standard (IAS) 40, 'Investment Property' for Banking Companies through BSD Circular No 10 dated August 26, 2002. Accordingly the requirements of these standards have not been considered in the preparation of these financial statements. However investments have been classified and valued in accordance with the requirements prescribed by the State Bank of Pakistan through various circulars. 4. BASIS OF MEASUREMENT These financial statements have been prepared under the historical cost convention, except that certain fixed assets are stated at revalued amounts, certain investments commitments in respect of certain forward exchange contracts and derivative financial instruments have been marked to market and are carried at fair value and certain staff retirement benefits are carried at present value. The preparation of financial statements in conformity with International Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the bank's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 43. 5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 5.1. INVESTMENT (a) Held for trading These are securities, which are either acquired for generating a profit from short-term fluctuations in market prices, interest rate movements dealer margin or are securities included in a portfolio in which a pattern of short-term profit taking exists. (b) Held to maturity These are securities with fixed or determinable payments and fixed maturity in respect of which the bank has the positive intent and ability to hold to maturity. (c) Available for sale These are investments other than those in subsidiaries and associates that do not fall under the held for trading or held to maturity categories. Investments are initially recognised at cost which includes transaction costs associated with the investment. All purchases and sales of investments that require delivery within the time frame established by regulation or market convention are recognised at the trade date. Trade date is the date on which the bank commits to purchase or sell the investment. In accordance with the requirements of SBP, quoted securities, other than those classified as 'held to maturity', investments in subsidiaries and investments in associates (which qualify for accounting under IAS 28), are subsequently re-measured to market value. Surplus / (deficit) arising on revaluation of quoted securities which are classified as 'available for sale', is taken to a separate account which is shown in the balance sheet below equity. Surplus / (deficit) arising on revaluation of quoted securities which are classified as 'held for trading', is taken to the profit and loss account. Unquoted equity securities are valued at the lower of cost and break-up value. Break-up value of equity securities is calculated with reference to the net assets of the investee company as per the latest available audited financial statements. Investments classified as 'held to maturity' are carried at amortised cost. Investments in subsidiaries and investments in associates (which qualify for accounting under IAS 28) are carried at cost. Provision for diminution in the values of securities (except debentures, participation term certificates and term finance certificates) is made after considering permanent impairment, if any, in their value. Provisions for diminution in value of debentures, participation term certificates and term finance certificates are made as per the requirements of the Prudential Regulations issued by the State Bank of Pakistan. 5.2. SALE AND REPURCHASE AGREEMENTS Securities sold subject to a repurchase agreement (repo) are retained in the financial statements as investments and the counter party liability is included in borrowings from financial institutions. Securities purchased under an agreement to resell (reverse repo) are not recognised in the financial statements as investments and the amount extended to the counter party is included in lendings to financial institutions. The difference between the purchase / sale and re-sale / re-purchase price is recognised as mark-up income / expense on time proportion basis, as the case may be. 5.3. ADVANCES Advances are stated net of specific and general provisions. Specific provision is determined on the basis of Prudential Regulations and other directives issued by SBP and charged to the profit and loss account. Provisions comprise of provisions against identified losses and provisions against unidentified losses. Provisions against unidentified losses include general provision against consumer loans made in accordance with the requirements of the Prudential Regulations issued by SBP and provision based on historical loss experience on advances. These provisions are maintained on a consistent basis. Advances are written off when there is no realistic prospect of recovery. Leases where the bank transfers substantially all the risks and rewards incidental to the ownership of an asset are classified as finance leases. A receivable is recognised at an amount equal to the present value of the minimum lease payments, including guaranteed residual value, if any. 5.4. FIXED ASSETS AND DEPRECIATION Property and equipment, other than land which is not depreciated, are stated at cost or revalued amounts less accumulated depreciation and accumulated impairment losses (if any). Land is carried at revalued amount. Capital work-in-progress is stated at cost. Cost of property and equipment of foreign operations includes exchange differences arising on currency translation at year-end rates. Depreciation on all property and equipment is charged using the diminishing balance method except for vehicles, computers, carpets and buildings which are depreciated using the straight line method in accordance with the rates specified in note 12.1 to these financial statements and after taking into account residual value, if any. The residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each balance sheet date. Depreciation on additions is charged from the month the assets are available for use while no depreciation is charged in the month in which the assets and disposed off. Surplus on revaluation of property and equipment is credited to the surplus on revaluation account. Revaluation is carried out with sufficient regularity to ensure that the carrying amount of assets does not differ materially from the fair value. To the extent of the incremental depreciation charged on the revalued assets, the related surplus on revaluation of property and equipment (net of deferred taxation) is transferred directly to unappropriated profit. Gains / losses on sale of property and equipment are credited / charged to the profit and loss account currently, except that the related surplus on revaluation of property and equipment (net of deferred taxation) is transferred directly to unappropriated profit. Maintenance and normal repairs are charged to the profit and loss account as and when incurred. Major renewals and improvements are capitalised. 5.5. INTANGIBLE ASSETS Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses, if any. Intangible assets are amortised from the month when these assets are available for use, using the straight line method, whereby the cost of the intangible asset is amortised over its estimated useful life over which economic benefits are expected to flow to the bank. The useful life and amortisation method is reviewed and adjusted, if appropriate, at each balance sheet date. The intangible assets having an indefinite useful life are stated at acquisition cost. Provisions are made for permanent diminution in the value of assets, if any. Gains and losses on disposals, if any are taken to the profit and loss account. 5.6. IMPAIRMENT The carrying amount of assets are reviewed at each balance sheet date for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. If such indication exists, and where the carrying value exceeds the estimated recoverable amount, assets are written down to their recoverable amount. The resulting impairment loss is taken to the profit and loss account except for impairment loss on revalued assets, which is adjusted against the related revaluation surplus to the extent that the impairment loss does not exceed the surplus on revaluation of that asset. 5.7. STAFF RETIREMENT BENEFITS The bank operates the following staff retirement benefits for its employees: (a) For clerical/ non-clerical staff who did not opt for the new scheme the bank operates the following; -- an approved contributory provident fund; -- an approved gratuity scheme; and -- a contributory benevolent scheme (b) For clerical / non-clerical staff who joined the bank after the introduction of the new scheme and for others who opted for the new scheme introduced in 1975, the bank operates the following; -- an approved non-contributory provident fund introduced in lieu of the contributory provident fund; -- an approved pension fund; and -- contributory benevolent scheme (c) For officers who joined the bank after the introduction of the new scheme and for others who opted for the new scheme introduced in 1977, the bank operates the following; -- an approved non-contributory provident fund introduced in lieu of the contributory provident fund; and -- an approved pension fund However, the management has replaced the pension benefits for employees in the officer category with a contributory provident fund for services rendered after December 31, 2003. (d) For executives and officers (who joined the bank on or after January 1,2000) the bank operates an approved contributory provident fund. (e) Post retirement medical benefits to its entitled employees. Annual contributions towards the defined benefit plans and schemes are made on the basis of actuarial advice using the projected unit credit method. The above benefits are payable to staff at the time of separation from the bank's services subject to completion of qualifying period of service, During the current year, the bank has changed its accounting policy in respect of recognition of net cumulative actuarial gains and losses at each balance sheet date. The change has been made as the management is of the view that the new policy, which results in faster recognition of actuarial gains and losses in the financial statements, provides more relevant and realistic presentation of the financial statements and financial results therein. According to the new policy, the net cumulative actuarial gains / losses at each balance sheet date are recognised equally over a period of three years or the expected remaining average working lives of employees, whichever is lower. Previously, net cumulative actuarial gains / losses, in excess of the higher of the following corridor limits, were recognised over the expected remaining average working lives of employees on a straight-line basis. (i) 10 percent of the present value of the defined benefit obligation (before deducting plan assets); or (ii) 10 percent of the fair value of plan assets. In accordance with the requirements of IAS 8; "Accounting Policies, Changes in Accounting estimates and errors", the effect of the change in accounting policy, amounting to Rs 85.67 million (net of tax), has been adjusted in the opening balance of unappropriated profit as at January 1, 2004 and the comparative information has been restated. The effect of the change in accounting policy for 2005 and 2004 is tabulated below: ====================================================================================
2005 2004
(Rupees '000)
====================================================================================
- Profit before taxation
would have been (lower)/ higher by (1,505,088) 145,727
- Other assets would have been (lower) / higher by (1,534,722) 95,469
- Other liabilities would have been lower by 273,021 127,760
- Deferred tax income would have been lower by 43,786 16,742
- Current tax charge would have been (lower) / higher by (593,719) 20,523
- Basic and diluted earnings per share
after taxation would have been (lower) / higher by (2.29) 0.27
====================================================================================5.8. EMPLOYEES' COMPENSATED ABSENCESLiability in respect of employees' compensated absences are accounted for in the year in which these are earned on the basis of actuarial valuation carried out using the Projected Unit Credit Method. Actuarial gains or losses if any, are recognised immediately. 5.9. TAXATION Current Provision for current taxation is based on taxable income at the current rates of taxation after taking into consideration available tax credits and rebates, if any. The charge for current tax also includes adjustments where considered necessary, relating to prior years which arise from assessments framed / finalised during the year. Deferred Deferred tax is recognised using the balance sheet liability method on all major temporary differences between the amounts attributed to assets and liabilities for financial reporting purposes and amounts used for taxation purposes. The bank records deferred tax assets / liabilities using the tax rates, enacted or substantially enacted at the balance sheet date expected to be applicable at the time of its reversal. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The bank also recognises deferred tax asset / liability on deficit / surplus on revaluation of fixed assets and securities which is adjusted against the related deficit / surplus in accordance with the requirements of International Accounting Standard 12, 'Income Taxes'. 5.10. PROVISIONS Provisions are recognised when the bank has a legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and are adjusted to reflect the current best estimates. 5.11. DIVIDEND DISTRIBUTION Dividend distribution (including stock dividend) is accounted for in the year to which they relate. 5.12. FOREIGN CURRENCIES 5.12.1. FOREIGN CURRENCY TRANSACTIONS Transactions in foreign currencies are translated to rupees at the foreign exchange rates ruling on the transaction date. Monetary assets and liabilities in foreign currencies are expressed in rupee terms at the rates of exchange prevailing at the balance sheet date. Foreign bills purchased and forward foreign exchange contracts other than those relating to foreign currency deposits are valued at the rates applicable to their respective maturities. 5.12.2. FOREIGN OPERATIONS The assets and liabilities of foreign branches are translated to rupees at exchange rates prevailing at the balance sheet date. The results of foreign operations are translated to rupee at the average rate of exchange for the year. 5.12.3. TRANSLATION GAINS AND LOSSES Translation gains and losses are included in the profit and loss account, except those arising on the translation of the bank's net investment in foreign operations, which are taken to the capital reserve (Exchange Translation Reserve). 5.12.4. COMMITMENTS Commitments for outstanding forward foreign exchange contracts are disclosed in these financial statements at committed amounts, Contingent liabilities / commitments for letters of credit and letters of guarantee denominated in foreign currencies are expressed in rupee terms at the rates of exchange ruling on the balance sheet date. 5.13. REVENUE RECOGNITION -- Mark-up / interest on advances and returns on investments are recognised on a time proportion basis using the effective interest method except that mark-up / interest on non-performing advances and investments is recognised on a receipt basis, in accordance with the requirements of the Prudential Regulations issued by SBP. -- Financing method is used in accounting for income from lease financing. Under this method, the unearned lease income (excess of the sum of total lease rentals and estimated residual value over the cost of leased assets) is deferred and taken to income over the term of the lease period so as to produce a constant periodic rate of return on the outstanding net investment in lease. -- Unrealised lease income is held in suspense account, where necessary, in accordance with the requirements of SBP or overseas regulatory authorities of the country where the foreign operations of the bank operate. Gains / losses on termination of lease contracts, documentation charges, front-end fees and other lease income are recognised as income when they are realised. -- Commission income is recognised on a time proportion basis. -- Dividend income is recognised when the bank's right to receive dividend is established. -- Premium or discount on acquisition of debt investments is capitalised and amortised through the profit and loss account over the remaining till maturity. -- Profit / loss on sale of investments is credited / charged to profit and loss account currently. 5.14. OPERATING LEASES Operating lease rentals are recorded on a time proportion basis over the term of the lease arrangement. 5.15. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash and balances with treasury banks and balances with banks in current and deposit accounts. 5.16. FINANCIAL INSTRUMENTS 5.16.1. FINANCIAL ASSETS AND FINANCIAL LIABILITIES Financial instruments carried on the balance sheet include cash and balances with treasury banks, balances with other banks, lendings to fine institutions, investments, advances, other assets, bills payable, borrowings from financial institutions, deposits and other payables. The particular recognition methods adopted for significant financial assets and financial liabilities are disclosed in the individual policy statements associated these assets and liabilities. 5.16.2. DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequent remeasured at fair value. All derivative financial instruments are carried as assets when fair value is positive and liability when fair value is negative. Any change in the fair value of derivative financial instruments is taken to the profit and loss account. 5.16.3. OFF SETTING Financial assets and financial liabilities are set off and the net amount is reported in the financial statements when there is a legally enforcing right to set off and the bank intends either to settle on a net basis, or to realise the assets and settle the liabilities, simultaneously. 6. CASH AND BALANCES WITH TREASURY BANKS ====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
In hand - local currency 6.1 4,943,189 5,492,045
- foreign currencies 530,781 301,749
In transit - local currency 575,694 482,006
- foreign currencies 14,028 96,429
With State Bank of Pakistan in 6.2
Local currency current account 12,958,433 12,986,121
Local currency deposit account 460 460
Foreign currency deposit account 1,901,621 1,734,196
With other central banks
in foreign currency current account 6.2 193,088 115,419
With National Bank of Pakistan
in local currency current account 2,548,255 2,624,828
23,665,549 23,833,253
====================================================================================6.1. This includes national prize bonds amounting to Rs 47.799 million (2004: Rs 36.161 million).6.2. Deposits with SBP are maintained to comply with their requirements issued from time to time. Deposits with other central banks are maintained to meet their minimum cash reserves and capital requirements pertaining to the foreign branches of the bank. 7. BALANCES WITH OTHER BANKS ====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Inside Pakistan in current account 3,288 6,847
OUTSIDE PAKISTAN:
- current account 917,900 1,729,354
- deposit account 548,145 3,972,122
1,469,333 5,708,323
====================================================================================8. LENDINGS TO FINANCIAL INSTITUTIONS====================================================================================
2005 2004
Note (Rupees in '000)
====================================================================================
Call money lendings 8,650,000 7,200,000
Repurchase agreement lendings 8.1 1,348,828 3,765,297
9,998,828 10,965,297
====================================================================================8.1. SECURITIES HELD AS COLLATERAL AGAINST LENDINGS TO FINANCIAL INSTITUTIONS==================================================================================================================================================================
2005 2004
Held by Further given Total Held by Further given Total
bank as collateral bank as collateral
(Rupees '000)
==================================================================================================================================================================
Market Treasury Bills 848,828 - 848,828 495,297 - 495,297
Pakistan Investment Bonds 500,000 - 500,000 3,270,000 - 3,270,000
1,348,828 - 1,348,828 3,765,297 - 3,765,297
==================================================================================================================================================================9. INVESTMENT NET9.1. INVESTMENT BY TYPES ==================================================================================================================================================================
2005 2004
Held by Further given Total Held by Further given Total
bank as collateral bank as collateral
Notes (Rupees '000)
==================================================================================================================================================================
HELD FOR TRADING SECURITIES:
- Shares in listed companies 66,056 - 66,056 - - -
AVAILABLE-FOR-SALE SECURITIES:
- Market Treasury Bills 9.4 19,605,074 4,824,186 24,429,260 3,186,553 - 3,186,553
- Pakistan Investment Bonds 9.4 2,039,818 - 2,039,818 4.721,435 - 4,721,435
- Shares in listed companies 9.10 5,034,777 - 5,034,777 3,833,352 - 3,833,352
- Shares in unlisted companies 9.5 443,369 - 443,369 461,100 - 461,100
- NIT units 83 - 83 9,557 - 9.557
- Listed Term Finance Certificates 1.173,320 - 1,173,320 608,862 - 608,862
28,296,441 4,824,186 33,120,627 12,820.859 - 12,820.859
HELD-TO-MATURITY SECURITIES:
- Mark et Treasury Bills 9.4 7,872,469 14,698,045 22,570,514 38,888,686 499,363 39,388,049
- Federal Investment Bonds - - - 480,500 - 480,500
- Pakistan Investment Bonds 9.4 2,467,983 - 2,467,983 2,532,406 - 2,532,406
- Federal Government Securities 992,861 - 992,861 1,097,199 - 1,097,199
- Provincial Government Securities 118 - 118 118 - 1 18
- Government Compensation Bonds 870,771 - 870,771 870,771 - 870,771
- Sukuk Bonds 759,767 - 759,767 - - -
-Euro Bonds 2,971,758 - 2,971,758 3,286,190 - 3,286,190
- TFCs, Debentures, Bonds and PTCs 1,876,119 - 1,876,119 3,580,526 - 3,580,526
- Certificates of Investment 1,500,000 - 1,500,000 1,100,000 - 1,100,000
19,311,846 14,698,045 34,009,891 51,836,396 499,363 52,335,759
Subsidiaries 9.15
MNET Services (Private) Limited 49,975 - 49,975 49,975 - 49,975
MCB Trade Services Limited 77 - 77 - - -
Muslim Commercial Financial Services
(Private) Limited 7,500 - 7,500 7,500 - 7,500
57552 - 57,552 57,475 - 57,475
Associates 9.14
Adamjee Insurance Company Limited 9.6 943 600 - 943,600 943,600 - 943,600
First Women Bank Limited 63,300 - 63,300 63,300 - 63,300
1,006,900 - 1,006,900 1,006,900 - 1,006,900
48,738,795 19,522,231 68,261,026 65,721,630 499,363 66,220,993
Less: Provision for diminution in
the value of investments 9.3 (547.424) - (547,424) (695,976) - (695,976)
Surplus / (deficit) on revaluation of
available for sale investments - net 22.2 1,770,015 (3,764) 1,766,251 1,669,954 - 1,669,954
Surplus on revaluation of 'held for
trading' investments - net 1,634 - I ,634 - - -
Investments at revalued amounts net
of provisions 49,963,020 19,518,467 69,481,487 66,695,608 499,363 67,194,971
==================================================================================================================================================================9.2. INVESTMENTS BY SEGMENTS====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
FEDERAL GOVERNMENT SECURITIES:
- Market Treasury Bills 9.4 48,999,774 42,574,602
- Federal Investment Bonds - 480,500
- Pakistan Investment Bonds 9.4 4,507,801 7,253,841
OTHERS:
- Federal Government Securities 992,861 1,097,199
- Government Compensation Bonds 870,771 870,771
- Euro Bonds 2,971,758 3,286,190
- Sukuk Bonds 759,767 -
Provincial Government Securities 118 118
Subsidiaries and
Associated Undertakings 9.6, 9.14 & 9.15 1,064,452 1,064,375
FULLY PAID-UP ORDINARY SHARES:
- Listed Companies 9.10 5,035,363 3,817,882
- Unlisted Companies 9.5 & 9.1.2 443,369 461,100
FULLY PAID PREFERENCE SHARES:
- Listed Companies 65,470 15,470
TERM FINANCE CERTIFICATES,
DEBENTURES, BONDS AND
PARTICIPATION TERM CERTIFICATES:
- Listed Term Finance Certificates 1,173,320 608,862
- Unlisted Term Finance Certificates 1,271,631 728,517
Debentures, Bonds and
Participation Term Certificates 604,488 2,852,009
- Certificates of Investment 1,500,000 1,100,000
OTHER INVESTMENTS:
- NIT Units 83 9,557
68,261,026 66,220,993
Less: Provision for diminution
in the value of investments 9.3 (547,424) (695,976)
Add: Surplus on revaluation
of available for sale
investments - net 22.2 1,766,251 1,669,954
Surplus on revaluation of
held for trading investments - net 1,634 -
Investments at revalued
amounts (net of provisions) 69,481,487 67,194,971
====================================================================================9.3. PARTICULARS OF PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Opening balance 695,976 868,852
Investment written off against provision (49,570) -
Reversal during the year (98,982) (172,876)
Closing balance 547,424 695,976
====================================================================================9.4. Market Treasury Bills and Pakistan Investment Bonds are held with SBP and are eligible for rediscounting.9.5. This includes the bank's subscription towards the paid-up capital of Khushhali Bank Limited amounting to Rs 300 million (2004: Rs 300 million). Pursuant to section 10 of the Khushhali Bank Ordinance, 2000 strategic investors including the bank cannot sell or transfer their investment before a period of five years due on October 10,2005 from the date of subscription. Thereafter such sale / transfer would be subject to the prior approval of the SBP. In addition, profit, if any, and other income of Khushhali Bank, shall not be used to pay any dividend to the members, and shall be utilised to promote the objectives of Khushhali Bank. 9.6. Investment of the bank in Adamjee Insurance Company Limited has been carried at cost amounting to Rs 943.600 million as at December 31, 2005 (December 31,2004 Rs, 943,600 million) in accordance with the treatment specified in International Accounting Standard 28 (IAS 28) Accounting for Investments in Associates'. The market value of the investment in Adamjee Insurance Company Limited as at December 31, 2005 amounting to Rs 3,296.847 million (2004: Rs 1,578.636 million). 9.7. Market value of quoted investments was Rs 62,426.106 million (2004: Rs 57,468.087 million) and book value of unquoted investments was Rs 8,968.826 million (2004:10,032.797 million). 9.8. Investments include Pakistan Investment Bonds amounting to Rs 232.60 million (2004: Pakistan Investment Bonds and Federal Investment Bonds amounting to Rs 232.55 million) earmarked by the SBP and National Bank of Pakistan against TT / DD discounting facilities and demand note facilities sanctioned to the bank. In addition, Pakistan Investment Bonds amounting to Rs 5 million (2004: Rs 5 million) have been pledged with the Controller of Military Accounts on account of Regimental Fund account. 9.9. Certain approved / Government securities are kept with the SBP to meet statutory liquidity requirements calculated on the basis of domestic demand and time liabilities. 9.10. PARTICULARS OF INVESTMENTS HELD IN LISTED COMPANIES AND MODARABAS ======================================================================================================================
Number of Paid-up Total paid-up
Investee ordinary and value per share/ /nominal
preference shares certificate value
/certificates held
(Rupees)
======================================================================================================================
LISTED SHARES / CERTIFICATES:
Abamco Composite Fund 3,250,000 10 32,500,000
Al-Ghazi Tractors Limited 67,200 5 336,000
Allied Bank Limited 341 000 10 3,410,000
Al-Meezan Islamic Fund Limited 1,000,000 50 50,000,000
Al-Meezan Mutual Fund Limited 1,512,026 10 15,120,260
Askari Commercial Bank Limited 90,000 10 900,000
Atlas Income Fund 109,744 500 54,872,000
Atlas Stock Market Fund 22,499 500 11,249,500
Azgard Nine Limited 1,546,989 10 15,469,890
Baig Spinning Mills Limited 390,230 10 3,902,300
Bank Al-Habib Limited 246,201 10 2,462,010
Bank Alfalah Limited 125,000 10 1,250,000
The Bank of Punjab 325,000 10 3,250,000
BSJS Balanced Fund Limited 558,245 10 5,582,450
Century Paper and Board Mills Limited 199,300 10 1,993,000
E.F.U. General Insurance Limited 444,801 10 4,448,010
Engro Chemical Pakistan Limited 584,589 10 5,845,890
Fauji Fertilizer Company Limited 6,360,084 10 63,600,840
GlaxoSmithKline Pakistan Limited 100,655 10 1,006,550
Honda Atlas Cars (Pakistan) Limited 111,500 10 1,115,000
The Hub Power Company Limited 26,769,500 10 267,695,000
Indus Motors Company Limited 249,300 10 2,493,000
International General Insurance Company Pakistan Limited 7,187 10 71,870
Kot Addu Power Company Limited 2,949,400 10 29,494,000
Kohinoor Energy Limited 55,500 10 555,000
Lucky Cement Limited 131,000 10 1,310,000
Maple Leaf Cement Company Limited 75,000 10 750,000
Masood Textile Mills Limited - preference shares 5,000,000 10 50,000,000
Meezan Balanced Fund 1,000,000 10 10,000,000
Mehr Dastgir Textile Mills Limited 1,617,412 10 16,174,120
Millat Tractors Limited 661,003 10 6,610,030
National Bank of Pakistan 208,500 10 2,085,000
Oil and Gas Development Corporation Limited 175,062 10 1,750,620
Orix Leasing Pakistan Limited 220,800 10 2,208,000
P I.C.I.C. Growth Fund 62,250 10 622,500
Pakistan Industrial Credit and Investment Corporation Limited 600,000 10 6,000,000
Pakistan Reinsurance Company Limited 25,000 10 250,000
Packages Limited 319,448 10 3,194,480
Pakistan Petroleum Limited 20,000 10 200,000
Pakistan Oilfields Limited 520,860 10 5,208,600
Pakistan State Oil Company Limited 570,020 10 5,700,200
Pakistan Telecommunication Company Limited 1,642,656 10 16,426,560
Redco Textile Limited 500,000 10 5,000,000
Rupali Polyester Limited 658,545 10 6,585,450
Sui Northern Gas Pipelines Limited 44,351,839 10 443,518,390
Thal Jute Mills Limited 250,000 5 1,250,000
Trust Securities and Brokerage Limited 300,000 10 3,000,000
Unilever Pakistan Limited 22,800 50 1,140,000
Union Bank Limited 33,000 10 330,000
United Bank Limited 893,300 10 8,933,000
Unit Trust of Pakistan 10,000 5,000 50,000,000
Modaraba Certificates Name of the Management Company
First Al-Noor Modaraba Al-Noor Modaraba Management
(Private) Limited 5,583,270 10 55,832,700
Standard Chartered Modaraba Standard Chartered Services
of Pakistan (Private) Limited 215,250 10 2,152,500
======================================================================================================================9.11. PARTICULARS OF INVESTMENTS IN TERM FINANCE CERTIFICATES============================================================================================
Number of Paid-up Total Name of
certificates value per Paid-up Chief Executive
Investee held certificate value
(Rupees)
============================================================================================
Aruj Textile Mills Limited 1 295,900 295,900 Mr Sheikh Mohammed Tahir
Rai Textile Mills Limited 1 382,500 382,500 Mr Jawed A. Kiyani
Al-Abbas Sugar
Mills Limited 10,000 2,895 28,947,360 Mr Shunaid Qureshi
10,000 2,895 28,947,360
20,000 57,894,720
Dawood Investment
Bank Limited 5,650 5,000 28,250,000 Mr Rafique Dawood
30 100,000 3,000,000
5,680 31,250,000
Jahangir Siddiqui
& Company Limited 39,968 4,909 199,800,000 Mr Munaf Ibrahim
56 4.997,000 279,832,000
40,024 479,632,000
Pakistan Services
Limited 20,000 640 12,793,748 Mr Murtaza Hashwani
Spy Securetel Limited 3,185 417 1,327,054 Mr Nusrat Yar Ahmed
Pak Kuwait Investment
Company (Private) Limited 100,000 5,000 500,000,000 Mr lstaqbal Mehdi
Sui Southern
Gas Company Limited 13,500 2,494 33,662,913 Mr Munawar Baseer Ahmed
2,000 16,654 33,308,000
15,500 66,970,913
Reliance Export
(Private) Limited 25 10,000,000 250,000,000 Mr Mian Fawad Ahmed
Reliance Weaving
Mills Limited 6,000 2,143 12,857,144 Mr Fazal Ahmed Sheikh
Hira Textile
Mills Limited 9,988 4,999 49,930,012 Mr Nadeem Aslam Butt
Azgard Nine Limited 20,000 5,000 100,000,000 Mr Ahmed H. Shaikh
Bank Al Habib Limited 20,000 4,998 99,960,000 Mr Abbas D. Habib
Bank AI-Falah Limited 10,000 4,998 49,980,800 Mr Mohammad Saleem Akhtar
39,720 5,000 198,600,000
49,720 248,580,800
Askari Commercial
Bank Limited 20,000 4,999 99.980.000 Mr Kalim- ur -Rehman
19,980 5,000 99,900,000
39,980 199,880,000
Soneri Bank Limited 30,000 4,999 149,970,000 Mr Safar Ali K Lakhani
============================================================================================The above excludes Term Finance Certificates of companies which are fully provided for in these financial statements.9.12. PARTICULARS OF INVESTMENTS HELD IN UNLISTED COMPANIES ===========================================================================================================================
Percentage Number Break-up Based on Name of
Company Name of of shares value of audited financial Chief Executive
Holding held investment statements
as at
(Rupees '000)
===========================================================================================================================
SHAREHOLDUNG MORE THAN 10%:
Pak Asian Fund Limited 10.22% 1,150,000 16,595 30-Jun-05 Mr Ashfaq A Berdi
Khushhali Bank Limited 17.60% 300 306,037 31-Dec-04 Mr Ghalib Nishtar
First Women Bank Limited 26.78% 7,596,000 152.224 31-Dec-04 Ms Zarine Aziz
MNET Services (Private) Limited 99.95% 4,997,500 58,.823 31-Dec-04 Mr Saulat Mujtaba
Muslim Commercial
Financial Services
(Private) Limited 99.99% 750,000 11,610 31-Dec-04 Mr Agha Ahmed Shah
Central Depository Company of
Pakistan Limited 13% 1,300,000 75,205 30-Jun-05 Mr Muhammad Hanif Jakhura
MCB Trade Services Limited 100% 10,000 2,347 31-Dec-05 Mr Aftab Manzoor
Shareholding up to 10%
Abamco Limited 1,988,646 28,577 30-Jun-05 Mr Muhammad Najam Ali
Equity Participation Fund 15,000 6,992 30-Jun-04 Mr Jamil Nasim
NATIONAL INSTITUTION FOR
FACILITATION OF:
Technology (Private) Limited 472,744 16,669 30-Jun-05 Mr Muzaffar Mahmood Khan
National Investment Trust Limited 52,800 75,997 30-Jun-05 Mr Tariq lqbal Khan
SME Bank Limited 1,117,992 16,535 31-Dec-04 Mr Mansur Khan
Pakistan Agricultural Storage and Mr Maj. General Mohammad
Services Corporation 2,500 (97,690) 31-Mar-05 Iqbal Khan
Lanka Clearing (Private) Limited 100,000 569 31-Dec-05 Mr Sarath De Silva
Credit Information Bureau of Sri Lanka 300 17 31-Dec-05 Mr N.P H. Amarasena
===========================================================================================================================The above excludes shares of companies which are fully provided for in these financial statements.9.13. DETAILS OF BONDS AND DEBENTURES ===================================================================================================================
Bonds and Debentures Terms of redemption Rate of Amount
Principal Interest Interest (Rupees '000)
===================================================================================================================
LOCAL CURRENCY:
Rice Export Corporation of Pakistan Yearly Half-yearly 15% 465,756
Heavy Mechanical Complex At Maturity Yearly 6% 27,224
Public Sector Enterprises Bonds At Maturity Yearly 9% 286,557
Public Sector Enterprises Bonds At Maturity Yearly 6% 556,990
6 months weighted
Pakistan Engineering Company Half-yearly Half-yearly average treasury 1,403
bill Rate
===================================================================================================================
===================================================================================================================
Terms of redemption Rate of Currency Foreign
Principal Interest Interest Currency (Rupees '000)
(Amount '000)
===================================================================================================================
FOREIGN CURRENCY:
Government of Pakistan Yearly Yearly 3 months US $ 10,184 608,127
LIBOR + 1 %
Euro Bonds-OBU Bahrain At Maturity Half-yearly 6.75% US $ 48,256 2,881,586
Government Sukuk Bonds At Maturity Half-yearly LIBOR +2.2% US $ 12,723 759,767
Sri Lanka Development Bonds At Maturity Half-yearly 6.55% SLRs 255,550 149,446
Euro Bonds-Sri Lanka At Maturity Half-yearly 6.75% US $ 1,510 90, 198
Government of Sri Lanka 92
Treasury Bonds At Maturity Half-yearly 11.75% SLRs 377,894 220,99
===================================================================================================================The above excludes bonds and debentures which are fully provided for in these financial statements9.14. SUMMARISED FINANCIAL INFORMATION OF ASSOCIATED UNDERTAKINGS The gross amount of assets, liabilities, revenue, profit and net assets or associated undertakings are as follows: ===================================================================================================================
Name of associated Country of Assets Liabilities Net assets Revenues Profit % interest held
undertakings incorporation (Rupees '000)
===================================================================================================================
September 2005
(un-audited)
First Women Bank Limited Pakistan 8,845,375 8,159,374 686,001 325,305 * 101,735 26.78%
Adamjee Insurance Company Pakistan
Limited 8,790,924 6,755,756 2,035,168 2,931,438 ** 772,245 29.13%
17,636,299 14,915,130 2,721,169 3,256,743 873,980
December 2004
First Women Bank Limited Pakistan 9,646,542 9,056,352 590,190 347,763 * 124,324 26.78%
Adamjee
Insurance Company Limited Pakistan 8,004,620 6,617,776 1,386,844 3,678,368 ** 327,461 29.13%
17,651,162 15,674,128 1,977,034 4.026,131 451,785
=================================================================================================================== * Represents net mark-up / interest income ** Represents net premium revenue9.15. INVESTMENT IN SUBSIDIARIES Details of the Bank's subsidiary companies are as follows: ====================================================================================
Name Country of Year of
incorporation incorporation
====================================================================================
Muslim Commercial Financial Services (Private) Limited Pakistan 1992
MNET Services (Private) Limited Pakistan 2001
MCB Trade Services Limited Hong Kong 2005
MCB Asset Management Company Limited Pakistan 2005
====================================================================================10. ADVANCES - NET====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
Loans, cash credits, running finances, etc.
In Pakistan 174,625,232 131,832,570
Outside Pakistan 3,755,036 3,457,410
178,380,268 135,289,980
Net investment in finance lease 10.2
In Pakistan 3,897,184 1,322,440
Outside Pakistan 93,330 100,211
3,990,514 1,422,651
Bills discounted and purchased
(excluding treasury bills)
Payable in Pakistan 2,386,952 3,692,473
Payable outside Pakistan 3,381 3,605,067
5,768,895 7,297,540
188,139,677 144,010,171
Provision against loans and advances 10.4
Specific provision (5,534,376) (5,754,709)
General provision (2,098,053) (827,455)
General provision against consumer loans (180,554) (106,401)
Provision for potential lease losses (3,941) (3,833)
(7,816,924) (6,692,398)
180,322,753 137,317,773
====================================================================================10.1. PARTICULARS OF ADVANCES10.1.1. ====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
In local currency - net 169,829,904 130,425,036
In foreign currencies - net 10,492,849 6,892,737
180,322,753 137,317,773
====================================================================================10.1.2.====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Short-term - net 127,588,823 98.820,673
Long-term - net 52,733,930 38,497,100
180,322,753 137,317,773
====================================================================================10.2. NET INVESTMENT IN FINANCE LEASE============================================================================================================================================
2005 2004
Not later Later than Over Not later Later than Over
than one one and less five Total than one one and less five Total
year than five years years year than five years years
(Rupees '000)
============================================================================================================================================
Lease rentals receivable 1,120 527 2,793 440 19,852 3 ,933,819 347,600 933,335 1,280,935
Guaranteed residual value 56,664 733,127 15,135 804,926 39,403 232,457 - 271,860
Minimum lease payments 1,177,191 3,526,567 34,987 4,738,745 387,003 1,165,792 1,552,795
Finance charge
for future periods (274,238) (471,975) (2,018) (748,231) (60,043) (70,101) - (130,144)
Present value
of minimum lease payments 902,953 3,054,592 32,969 3,990,514 326,960 1,095,691 - 1,422,651
============================================================================================================================================10.3. Advances include Rs 8,395.989 million (2004: Rs 8,837.712 million) which have been placed under non-performing status as detailed below:===========================================================================================================
Category of Classification Domestic Overseas Total Provision
Provision
required held
Note (Rupees '000)
===========================================================================================================
Other Assets Especially
Mentioned (OAEM) 10.3.1 52,005 - 52,005 - -
Substandard 318,976 - 318,976 76,968 76,968
Doubtful 276,214 - 276,214 124,660 124,660
Loss 5,070,235 2,678,559 7,748,794 5,332,748 5,332,748
5,717,430 2,678,559 8,395,989 5,534,376 5,534,376
===========================================================================================================10.3.1. This represents non-performing portfolio of agricultural financing classified as OAEM as per the requirements of the Prudential Regulation for Agricultural Financing issued by the SBP.10.4. PARTICULARS OF PROVISION AGAINST LOANS AND ADVANCES ================================================================================================================================
2005
Specific General Consumer Leasing Total
loans
Notes (Rupees '000)
================================================================================================================================
Opening balance 5,754,709 827,455 106,401 3,833 6,692,398
Exchange adjustments 4,215 - - 108 4,323
Provision made during the year 10.4.1 1,878 1,166,122 74,153 - 1,242,153
Transfer (104,476) 104,476 - - -
(102,598) 1,270,598 74,153 - 1,242,153
Amounts written off 10.5 (121,950) - - - (121,950)
Closing balance 5,534,376 2.098,053 180,554 3,941 7,816,924
Opening balance 6,145,859 662,298 - 2,760 6,810,917
Exchange adjustments 30,250 - - (127) 30,123
Provision made during the year 10.4.1 171,037 165,157 106,401 1,200 443,795
Transfer - - - - -
171,037 165,157 106,401 1,200 443,795
Amounts written off 10.5 (592,437) - - - (592,437)
Closing balance 5,754,709 827,455 108,401 3,833 6,692,398
================================================================================================================================10.4.1. THE FOLLOWING AMOUNTS HAVE BEEN CHARGED TO THE PROFIT AND LOSS ACCOUNT
====================================================================================
2005 2004
Note (Rupees in '000)
====================================================================================
Specific provision 1,878 171,037
General provision 1,166,122 165,157
General provision against consumer loans 10.4.6 74,153 106,401
1,242,153 442,595
Provision for potential lease losses - 1,200
1,242,153 443,795
====================================================================================10.4.2. The Prudential Regulations for Corporate / Commercial Banking and Small and Medium Enterprises (SME), issued by SBP, require banks to apply a prescribed adjustment factor to the Forced Sales Value (FSV) of assets held as collateral against non-performing advances while determining the provision requirement against these loans and advances.The adjustment factor applicable for the current year is 80 percent in respect of FSVs conducted for the first time during the year and 70 percent in respect of FSVs which were carried out in previous years and remain valid for the current year. Under the Prudential Regulations, the adjustment factor is to be reduced to 50 percent from the year 2006 in respect of FSVs which have been carried out in previous years and remain valid for that year. In addition, benefits can be availed in respect of revaluation of FSVs after expiry of the three year validity period, specified in the Prudential Regulations, only to the extent of the revised value or 50 percent of the previous value, whichever is lower. Accordingly, in view of this requirement of the Prudential Regulations and as a matter of prudence, the bank has applied an adjustment factor of 50 percent on all FSVs of collateral considered in determining the provisioning requirement against the non-performing loans and advances portfolio. Had the FSVs been discounted strictly in accordance with the requirements of the Prudential Regulations, the specific provision against non-performing advances as at December 31, 2005 would have been lower and consequently the profit before taxation for the current year and advances (net of provision) as at December 31, 2005 would have been higher by Rs 126.686 million. 10.4.3. During the year, the State Bank of Pakistan has revised the basis of classification of non-performing corporate and SME loans and advances vide BSD Circular 7 dated November 1, 2005. Under the revised guidelines the category of Other Assets Especially Mentioned (OAEM) has been dispensed with while the categories of substandard, doubtful and loss have been retained. In addition, the basis of classification of loans and advances under these three categories has been redefined whereby all advances overdue by 90, 180 and 365 days are now required to be classified as substandard, doubtful and loss respectively. Previously, short-term and long-term advances were required to be separately assessed and were classified as OAEM, substandard, doubtful or loss based on different prescribed ageing criteria. The revised guidelines specify that provision should be made in the financial statements equal to 25 percent, 50 percent and 100 percent, in respect of overdue advances classified as substandard, doubtful and loss respectively, of the outstanding balance of principal less the amount of liquid assets realisable and adjusted forced sale value of mortgaged / pledged assets. In addition, the revised guidelines have withdrawn the benefit relating to FSVs conducted in respect of non-performing loans and advances where the outstanding principal amount is Rs 5 million or less. Had the provision against non-performing loans and advances been determined in accordance with the previous requirement of the State Bank of Pakistan, the specific provision against non-performing loans and advances would have been lower and consequently profit before taxation and advances (net of provision) as at December 31, 2005 would have been higher by Rs 594.92 million. 10.4.4. The State Bank of Pakistan has issued Prudential Regulations for Agriculture Finance during the current year vide BPD Circular No 27 dated October 22, 2005. These regulations require agricultural advances overdue by 90 days, one year, one and a half years and two years to be classified as OAEM, substandard, doubtful and loss respectively. In addition, these regulations specify that provision should be made in the financial statements equal to 20 per 50 percent and 100 percent, in respect or overdue agricultural advances classified as substandard, doubtful and loss respectively, of the outstanding balance of principal less the amount of liquid assets realisable and adjusted forced sale value of mortgaged / pledged assets. No provision is required to be made against the outstanding balance of principal relating to overdue agriculture advances classified as OAEM. Previously, provision was determined in respect of non-performing agriculture advances in accordance with the guidelines given in the Prudential Regulations for Corporate / Commercial banking. Had the provision against agriculture advances been determined in accordance with the Prudential Regulations for Corporate / Commercial banking, the specific provision against non performing agriculture advances would have been lower and consequently the profit before taxation and advances (net of provision) would have been higher by Rs 38.115 million. 10.4.5. During the current year, the management has revised the estimate relating to provision against unidentified losses and accordingly the general provision against loans and advances is being maintained at around one percent of gross loans and advances. Had the estimate not been revised, the profit before taxation for the year would have been higher by Rs 1,01 7.038 million. In addition, the general provision against loans and advances would have been lower by the same amount. 10.4.6. General provision against consumer loans represents provision maintained at an amount equal to 1.5% of the fully secured performing portfolio and 5% of the unsecured performing portfolio as required by the Prudential Regulations issued by the SBP. 10.5. PARTICULARS OF WRITE OFFs 10.5.1. ====================================================================================
2005 2004
Note (Rupees in '000)
====================================================================================
Against provisions 10.4 121,950 592,437
Directly charged to the profit and loss account 1,184 8,771
123,134 601,208
====================================================================================10.5.2.====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Write offs of Rs 500,000 and above 122,656 595,727
Write offs of below Rs 500,000 478 5,481
123,134 601,208
====================================================================================10.5.3. DETAILS OF LOAN WRITE OFFs OF Rs 500,000 AND ABOVEIn 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 December 31, 2005. However, this write off does not affect the bank's right to recover the debts from these customers. 10.6. PARTICULARS OF LOANS AND ADVANCES TO DIRECTORS ASSOCIATED COMPANIES ETC ==========================================================================================================
Balance Maximum total amount of
as at advances including temporary
December 31, advances granted
2005 during the year * *
(Rupees '000)
==========================================================================================================
Associated Companies, etc.
Debts due by directors,
executives or other employees of the bank
or any of them either severally
or jointly with any other persons* 3,083,682 3,222,999
Debts due by companies
or firms in which the directors of
the bank are interested as
directors, partners or in the
case of private companies as members - -
Debts due by subsidiary
companies, controlled firms, managed
modarabas and other related parties 1,297,320 1 .297,320
========================================================================================================== * (These include loans given by the bank to its executives and other employees as per the terms of their employment)** (Maximum amount has been arrived at by reference to month end balance) 11. OTHER ASSETS - NET ====================================================================================
Restated
Notes (Rupees '000)
====================================================================================
INCOME / MARK-UP ACCRUED:
on advances and investments - local currency 2,357,277 1,209,404
Income / mark-up accrued
on advances and investments
- foreign currencies 166,523 97,810
Other advances, deposits,
advance rent and prepayments 158,397 110,813
Taxation (payments less provisions) - 2,376,505
Compensation for delayed refunds 62,048 513,852
Unrealised gain on derivative
financial instruments - net 11.3 45,211 -
Non-banking assets acquired
in satisfaction of claims 11.1 122,610 665,012
Stationery and stamps on hand 42,700 38,406
Prepaid exchange risk fee 235 245
Other income receivable 145,565 89,743
Receivable from pension fund 37 1,973,998 732,720
Receivable from provident fund - 80,000
Others 894,141 816,879
5,968,705 6,731,389
Less: Provision held against other assets 11.2 504,279 577,019
5,464,426 6,154,370
====================================================================================11.1. The market value of non-banking assets as per the latest valuation dated December 15, 2004 amounted to Rs 131.76 million.11.2. PROVISION AGAINST OTHER ASSETS ====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Opening balance 577,019 427,426
Charge for the year 27,529 149,593
Reversal during the year (100,269) -
(72,740) 149,593
Closing balance 504,279 577,019
====================================================================================11.3. DERIVATIVE FINANCIAL INSTRUMENTS====================================================================================
Contract/
Notional Fair value
amount
(Rupees '000)
====================================================================================
UNREALISED GAIN ON:
Interest rate swaps 2,812,078 7,822
Forward exchange contracts 3,020,497 37,389
5,832,575 45,211
====================================================================================12. OPERATING FIXED ASSETS====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
Property and equipment 12.1 7,363,157 7,497,662
Intangible asset 12.2 249,038 -
Capital work-in-progress 12.3 570,259 502,159
8,182,454 7,999,821
====================================================================================12.1. PROPERTY AND EQUIPMENT==================================================================================================================================================================
2005
Cost/ Revalued amount Accumulated Depreciation
Description At Additions/ Adjustment Revaluation Transfer in/ At At Charge for Adjustment At Net book Annual
Jan 1,(deletions) surplus(transfer out) Dec 31, Jan 1, the year/ Dec 31, value at rate of
2005 2005 2005 (depreciation 2005 Dec 31, depreciation
on deletions) 2005
(Rupees' 000)
==================================================================================================================================================================
Land - Freehold 3,871,070 79,855 (42,835) - - 3,858,796 - - - - 3,858,796 -
(49,294) - - -
Land - Leasehold 37,565 20,000 (135) - - 57,430 - - - - 57,430 -
Buildings 2,211,257 56,570 3,925 - (22,610) 2,194,221 15,382 82,592 - 96,938 2,097,283 2 5% to 5%
(54,921) - (1,036)
Furniture, office 3,291,039 382,996 - - - 3,623,249 2,122,362 403,292 - 2,485,331 1,137,918 10% to 33%
equipment and (50,786) - (40,323)
computers
Vehicles 517,089 112,635 - - - 513,773 292,614 89,654 - 302,043 211,730 20%
(115,951) - (80,225)
9,928,020 652,056 (39,045) - (22,610) 10,247,469 2,430,358 575,538 - 2,884,312 7,363,157
(270,952) - - - (121,584)
==================================================================================================================================================================
==================================================================================================================================================================
2004
Cost/ Revalued amount Accumulated Depreciation
Description AtAdditions/ Adjustment Revaluation Transfer in/ At At Charge for Adjustment At Net book Annual
Jan 1,(deletions) surplus(transfer out) Dec 31, Jan 1, the year/ Dec 31, value at rate of
2005 2005 2005 (depreciation 2005 Dec 31, depreciation
on deletions) 2005
(Rupees' 000)
==================================================================================================================================================================
Land - Freehold - - - - 3,871,070 3,871,070 - - - - 3,871,070
Land - Leasehold - - - - 37,565 37,565 - - - - 37,565 -
Buildings 3,126,676 831,306 (608,681)* 3,084,735 (292,500) 2,211,257 488,664 141,894 (608,681)* 15,382 2,195,875 5%
(21,644) (3,908,635) (6,495)
Furniture, office 2,655,598 666,684 - - - 3,291,039 1.781,750 367,056 - 2,122,362 1,168,677 10% to 33%
equipment and (31,243) (26,444)
computers
Vehicles 452,748 156,382 - - - 517,089 272,641 89,978 - 292.614 224,475 20%
(92,041) (70,005)
6,235,022 1,654,372 (608,681) 3,084,735 3,908,635 9,928,020 2,543,055 598,928 (608,681) 2,430,358 7,497,662
(144,928) (4,201,135) (102,944)
================================================================================================================================================================== * This represents adjustment of cost and accumulated depreciation made consequent to the revaluation of bank's property as per IAS-16 property, plant and equipment.12.1.1. The domestic properties of the bank were last revalued on December 15,2004 by Iqbal Nanjee & Co Valuation and Engineering Consultants, an independent valuer on the basis of market value. This valuation was incorporated at December 31,2004 and resulted in a surplus of Rs 4,039.160 million over the written down value of Rs 2,020.074 million of these assets. ==============================================================================
(Rupees '000)
==============================================================================
Total revalued amount of land 3,865,665
Total revalued amount of buildings 2,154,524
Had the land and buildings not
been revalued their carrying
amounts as at December 31, 2005
would have been as follows:
Land 703,267
Buildings 1,402,387
==============================================================================12.1.2. International Accounting Standard (IAS) 16, "Property.Plant and Equipment (revised 2003)" is applicable to financial statements covering annual periods beginning on or after January 1,2005 and requires a review of residual value of assets useful lives and depreciation method at each financial year end Accordingly based on a review of the above the management has revised the following: -- rate of depreciation on certain buildings has been reduced from 5 percent to 2.5 percent -- estimate in respect of residual value of vehicles has been revised to 20 percent of cost. -- Depreciation on additions is now charged from the month the assets are available for use while no depreciation is charged in the month in which the assets are disposed off. Previously, depreciation for the entire year was charged on assets in the year of addition while no depreciation was charged in the year the assets were disposed off. In addition to the above, the management has also decided to revise the depreciation method used to allocate the depreciable amount of buildings from the diminishing balance method to straight-line method. The management believes that the depreciation charge computed on the straight-line method reflects a more systematic allocation of the depreciable amount of these assets over their estimated useful lives. The above revisions have been accounted for as changes in accounting estimates in accordance with the requirements of International Accounting Standard (IAS) B, "Accounting Policies, Changes in Accounting Estimates and Errors". Accordingly the effect of these changes in accounting estimates has been recognised prospectively in the profit and loss account of the current year. Had there been no change in these accounting estimates, the profit before taxation for the year would have been lower by Rs 19.477 million. 12.1.3. During the current year the management has initiated a detailed exercise to centralise records relating to fixed assets of the bank. This exercise is expected to be completed in 2006. Therefore, pending completion of this exercise, the gross carrying amount of fully depreciated assets that are still in use of the bank have not been disclosed in these financial statements. 12.2. INTANGIBLE ASSET ======================================================================================================================
Cost Accumulated amortisation
Description At At At Amortisation At Net book value Annual
Jan 1, Additions Dec 31, Jan 1, for the Dec 31, at Dec 31, rate of
2005 2005 2005 year 2005 2005 amortisation %
(Rupees' 000)
======================================================================================================================
Computer software - 309,151 309,151 - 60,113 60,113 249,038 33.33
2005 - 309,151 309,151 - 60,113 60,113 249,038
======================================================================================================================12.3. CAPITAL WORK-IN-PROGRESS====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Civil works 281,546 175,675
Equipment 78,396 21,232
Advances to suppliers 157,380 103,826
Others 52,937 201,426
570,259 502,159
====================================================================================12.4. DISPOSAL OF FIXED ASSETS==================================================================================================================================================================
Description Cost/ Accumulated Book Sales Mode of Particular of buyers Location
revalued depreciation value proceeds/ disposal/
amount insurance settlement
claim
(Rupees '000)
==================================================================================================================================================================
Furniture, office equipment
and computers
Items having book value of less than
Rs 250,000 or cost of less than
Rs 1,000,000 50,786 40,323 10,463 3,936
VEHICLES:
Honda Civic 1,245 1,079 166 194 Retirement benefit * Mr Malik Abdul Waheed, Ex-employee Karachi
Toyota Corolla 1,189 872 317 700 Negotiation * Mr Ali Munir, Employee Karachi
Honda Civic 955 684 271 303 Retirement benefit * Mr Tameezul Haq, Ex-employee Karachi
Toyota Corolla 1,169 779 390 416 Retirement benefit * Mr Malik Abdul Waheed, Ex-employee Karachi
Toyota Corolla 939 689 250 251 Retirement benefit * Mr Ahmed Karim, Ex-employee Karachi
Toyota Corolla 939 673 266 260 Retirement benefit Mr Mohammad Qasim, Ex-eniployee Karachi
Honda Accord 3,400 2,097 1,303 1,400 Tender M/s Vanguard Books Pvt Ltd Karachi
Honda Civic 955 700 255 255 Retirement benefit * Mr Ahmed Karim, Ex-employee Karachi
Honda Civic 1,245 892 353 365 Retirement benefit * Mr Mohd. Shoaib Qureshi, Ex-employee Karachi
Toyota Corolla 1,169 838 331 343 Retirement benefit * Mr Mohd. Shoaib Qureshi, Ex-employee Karachi
Mercedes Benz 6,801 3,060 3,741 4,275 Tender M/s. Ashary's Karachi
Toyota Corolla 939 391 548 556 Retirement benefit Mr Nazir Ahmed Memon, Ex-employee Karachi
Honda Civic 955 653 302 329 Retirement benefit Mr Mohammad Hanif Khan, Ex-employee Karachi
Suzuki Cultus 609 315 294 292 Retirement benefit Mr Semi Ahmed Siddiqui, Ex-employee Karachi
Balance carried forward 22,509 13,722 8,787 9,939
Balance brought forward 22,509 13,722 8,787 9,939
Suzuki Cultus 609 305 304 331 Retirement benefit Mr Manzar Hussain, Ex-employee Karachi
Suzuki Cultus 609 315 294 301 Retirement benefit Mr Saleem Akhtar, Ex-employee Karachi
Suzuki Cultus 609 284 325 584 Tender Mr M. Ejaz Khan Karachi
Suzuki Cultus 609 315 294 309 Retirement benefit Mr Abdul Rauf Khulsai, Ex employee Karachi
Honda Civic 1,280 618 662 684 Bank Policy * Mr Musaddiq Ejaz Employee Karachi
Honda Civic 955 573 382 382 Retirement benefit Mr Mudassar Anjum, Ex-employee Karachi
Suzuki Cultus 609 183 426 427 Retirement benefit Mr Hassan Ali Wadia, Ex-employee Karachi
Honda Civic 955 589 366 382 Retirement benefit Mr Rao Sajid Ali Khan Ex employee Karachi
Toyota Corolla 939 579 360 376 Retirement benefit Mr Rao Sajid Ali Khan Ex employee Karachi
Toyota Corolla 939 282 657 900 Insurance Claim M/s. Adamjee Insurance Co Karachi
Toyota Corolla 1,169 351 818 858 Bank Policy * Mr Ali Munir, Employee Karachi
Suzuki Cultus 609 183 426 453 Retirement benefit Mr Mohammed Iqbal, Ex-employee Karachi
Toyota Corolla 939 297 642 643 Retirement benefit Mr Haroon Khalid, Ex-employee Karachi
Honda Civic 1,288 365 923 945 Bank Policy * Mr Khalid Ateeq Ghazi, Employee Karachi
Toyota Corolla 939 297 642 900 Insurance Claim M/s. Adamjee Insurance Co Karachi
Toyota Corolla 939 297 642 667 Retirement benefit Mr Ghulam Rasool Khan, Ex-employee Karachi
Toyota Corolla 1,029 1,012 17 112 Retirement benefit Mr Aarij Ali, Ex-employee Karachi
Honda Civic 945 662 283 292 Retirement benefit Mr Zafar Ibrar Naqvi, Ex-employee Karachi
Suzuki Cultus 609 223 386 394 Retirement benefit Mr Ather Kamal, Ex-employee Karachi
Toyota Corolla 939 721 218 219 Retirement benefit Mr M.Nasimur Riaz, Ex-employee Karachi
Honda Civic 955 732 223 223 Retirement benefit Mr M Nasimur Riaz Ex employee Karachi
Suzuki Cultus 609 305 304 331 Retirement benefit Mr Pervaiz Iqbal Siddiqui Ex employee Karachi
Suzuki Cultus 604 336 268 329 Retirement benefit Mr Nazir Mehmood Bhatti, Ex-employee Gujrat
Toyota Corolla 939 626 313 805 Insurance Claim M/s. Adamjee Insurance Karachi
Toyota Corolla 939 563 376 376 Retirement benefit Mr Muddasar Anjum, Ex-employee Karachi
Suzuki Cultus 609 162 447 487 Insurance Claim M/s. Adamjee Insurance Co Karachi
Toyota Corolla 939 319 620 699 Retirement benefit Mr Durvesh Alam Lodhi, Ex-employee Faisalabad
Honda Civic 955 706 249 329 Retirement benefit Mr Durvesh Alam Lodhi, Ex-employee Faisalabad
Suzuki Cultus 609 132 477 609 Insurance Claim M/s. Adamjee Insurance Co Hyderabad
Suzuki Cultus 620 176 444 496 Retirement benefit Mr Amjad Ali Khan, Ex-employee Lahore
Suzuki Cultus 609 305 304 331 Retirement benefit Mr Jehan Khesro Khan, Ex-employee Peshawar
Honda Civic 955 707 248 328 Retirement benefit Mr Amir Ali Shah, Ex-employee Sarghoda
Toyota Corolla 939 319 620 698 Retirement benefit Mr Amir Ali Shah, Ex-employee Sarghoda
Suzuki Cultus 609 329 280 331 Retirement benefit Mr Ismail Abdul Majid, Ex-employee Sarghoda
Toyota Corolla 939 454 485 563 Retirement benefit Mr M. Rafiq Dosani, Ex-employee Sukkur
Toyota Corolla 939 641 298 345 Retirement benefit Mr M. Gulzar, Ex-employee Abbottabad
Mitsubishi Jeep 1,760 1,760 - 910 Tender Mr Asif Ali Abbottabad
Pajero Jeep 1 282 1 282 - 705 Tender M/s United Mineral Abbottabad
royota Corolla 939 188 751 939 Insurance Claim M/s Adamjee Insurance Co Abbottabad
Toyota Corolla 939 679 260 323 Retirement benefit Mr Ch. Mohammed Nawaz, Ex-employee Bahawalpur
Suzuki Cultus 609 325 284 288 Retirement benefit Mr Khawaja Shaheen Saeed, Ex-employee Lahore
Honda Civic 939 721 218 296 Retirement benefit Mr Hira Lal, Ex-employee Karachi
Suzuki Cultus 604 393 211 282 Retirement benefit Mr Zafar Ali, Ex-employee Karachi
Toyota Corolla 939 563 376 376 Retirement benefit Mr Tahawar Raza Ex employee Multan
Toyota Corolla 939 203 736 751 Insurance Claim M/s Adamjee Insurance Co Karachi
Toyota Corolla 1,169 925 244 361 Retirement benefit Mr Aarij Ali, Ex-employee Lahore
Toyota Corolla 939 663 276 323 Retirement benefit Mr Khalid Rashid, Ex-employee Lahore
Honda Civic 955 483 472 520 Retirement benefit Mr Khalid Rashid, Ex-employee Lahore
Toyota Corolla 939 595 344 376 Retirement benefit Mr Tariq Bin Nisar, Ex-employee Lahore
Honda Civic 1,285 684 601 687 Bank policy * Mr Shahid Sattar, Employee Lahore
Honda Civic 1,285 535 750 750 Retirement benefit * Mr Aneek Khawar, Ex-employee Lahore
Toyota Corolla 1,169 487 682 682 Retirement benefit * Mr Aneek Khawar, Ex-employee Lahore
Toyota Corolla 939 689 250 313 Bank policy * Mr Salman Usmani Karachi
Toyota Corolla 939 266 673 751 Retirement benefit Mr Abbas Qureshi, Ex-employee Karachi
Toyota Corolla 939 297 642 751 Insurance Claim M/s. Adamjee Insurance Co Karachi
Toyota Corolla 939 627 312 313 Retirement benefit Mr Mukhtar Ullah Jan, Ex-employee Peshawar
73,242 41,350 31,892 38,075
Other vehicles
having book value
of less than
Rs 250,000 or cost
of less than
Rs 1,000,000 42,709 38,875 3,834 21,138
Land and buildings
Textile Plaza, 6th floor 29,540 246 29,294 24,500 Tender Mr Anwar Ahmed Tata Karachi
Textile Plaza, 20th,
21st & 22nd floors 900 19 881 1,231 Tender Mr Sheikh Muhammad Shafi Karachi
Textile Plaza, 7th
floor, office No 9 675 11 664 900 Tender M/S Gatron Industry Karachi
Banglow 59 A Abdali
Road, Multan 2,680 56 2,624 3,474 Tender Mr Shahid Yousuf Gillani Multan
Property No 137-P, 70,420 704 69,716 34,000 Tender Mr Asim Tiwana Lahore
Gulberg II, Lahore
104,215 1,036 103,179 64,105
2005 270,952 121,584 149,368 127,254
2004 144,928 102,944 41,984 82,743
================================================================================================================================================================== * key management personnel of the bank13. CONTINGENT ASSETS There were no contingent assets of the bank as at December 31, 2005. 14. BILLS PAYABLE ====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
In Pakistan 8,510,322 7,560,165
Outside Pakistan 26,352 6,519
8,536,674 7,566,684
====================================================================================15. BORROWINGS FROM FINANCIAL INSTITUTIONS====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
In Pakistan 24,693,569 6,095,476
Outside Pakistan 2,683,933 1,495,388
27,377,502 7,590,864
====================================================================================15.1. PARTICULARS OF BORROWINGS FROM FINANCIAL INSTITUTIONS====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
In local currency 24,693,569 6,095,476
In foreign currencies 2,683,933 1,495,388
27,377,502 7,590,864
====================================================================================15.2. DETAILS OF BORROWINGS FROM FINANCIAL INSTITUTIONS====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
SECURED
BORROWINGS FROM
STATE BANK OF PAKISTAN:
Export refinance 15.3 4,980,519 4,487,738
Locally Manufactured Machinery 15.4
Others 1,970,582 1,782,900
6,951,081 6,276,373
Repurchase agreement borrowings 19,473,049 498,901
UNSECURED:
Agent balances 494,007 685,202
Call borrowings 459,985 130,388
953,372 815,590
27,377,502 7,590,864
====================================================================================15.3. The bank has entered into agreements for financing with the SBP for extending export finance to customers.As per the agreement, the bank has granted SBP the right to recover the outstanding amount from the bank at the date of maturity of the finance by directly debiting the current account maintained by the bank with SBP 15.4. According to agreements with the SBP, these loans were obtained for providing finance to customers against locally manufactured machinery. 15.5. Borrowing from SBP under the export and locally manufactured machinery refinance scheme is secured by the bank's cash and security balances held by the SBP 16. DEPOSITS AND OTHER ACCOUNTS ====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
CUSTOMERS:
Fixed deposits 13,296,121 14,081,390
Savings deposits 137,067,311 133,538,585
Current accounts - non remunerative 74,331,042 69,722,193
Margin accounts 2,568,306 2,011,324
Others 41,396 121,994
227,304,176 219,475,486
FINANCIAL INSTITUTIONS:
Remunerative deposits 183,338 442,983
Non-remunerative deposits 1,857,664 1,150,689
2,041,002 1,593,672
229,345,178 221,069,158
====================================================================================16.1. PARTICULARS OF DEPOSITS====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
In local currency 217,017,086 209,328,090
In foreign currencies 12,328,092 11,741,068
229,345,178 221,069,158
====================================================================================17. SUBORDINATED LOAN -UNSECURED (NON-PARTICIPATORY)===================================================================================================================
Mark-up Mark-up Mark-up not yet 2005 2004
payable payment due (Rupees in '000)
period
===================================================================================================================
Listed
Term Finance Certificates Semi-annually 2003-2008 Rs 291.482 million 1,598,080 1.598,720
===================================================================================================================17.1. Liability against Term Finance Certificates is stated at nominal amount The liability is subordinated as to payment of principal and profit to all other indebtedness of the bank (including deposits) and is not redeemable before maturity without prior approval of the SBP Rate of mark up on the liability is based on the cut off yield of 5 year Pakistan Investment Bonds auctioned on the last working day before the beginning of each semi annual redemption period plus 1 5 % subject to floor and cap of 11 75% and 1 5 75% per annum respectively.The major redemption will commence from 54th month of the issue in the following manner: ================================================= Month Redemptions ================================================= February, 2007 40% of the issue amount August, 2007 30% of the issue amount February. 2008 30% of the issue amount =================================================18. OTHER LIABILITIES ====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
Mark-up / return / interest
payable in local currency 1,383,427 1,711,849
Mark-up / return / interest
payable in foreign currencies 78,853 60,634
Accrued expenses 654,952 290,936
Unclaimed dividends 66,239 322,851
Proposed dividend 426,533 -
Staff welfare fund 101,024 103,599
Unrealised loss on forward
foreign exchange contracts - net - 24,392
Provision for employees' compensated absences 37 856,213 603,624
Provision for post retirement medical benefits 37 1,300,336 713630
Provision for employees' contributory
benevolent scheme 37 307,216 344,151
Security deposits received
in respect of finance lease 789,1 73 221709
Taxation (provision less payments) 932,747 -
Branch adjustment account 102,810 357.930
Others 1,612,077 1,770,694
8,611,600 6,525,999
====================================================================================19. DEFERRED TAX (ASSETS) / LIABILITIES====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
TAXABLE TEMPORARY DIFFERENCES ON:
Surplus on revaluation of fixed assets 22.1 238,881 261,088
Accelerated tax depreciation 212,730 164,478
Surplus on revaluation of securities 22.2 - 93,703
451,611 519,269
DEDUCTIBLE TEMPORARY DIFFERENCES ON:
Surplus on revaluation of securities 22.2 (3,620) -
Provision for contributory benevolent scheme (107,526) -
Provision for employee's compensated absences (77,315) -
Provision for post retirement medical benefits (455,117) (249,770)
(643,578) (249,770)
(191,967) 269,499
====================================================================================20. SHARE CAPITAL20.1. AUTHORISED CAPITAL ====================================================================================================
2005 2004 2005 2004
(Rupees '000)
====================================================================================================
Ordinary shares of
650,000,000 650,000,000 Rs 10 each 6,500,000 6,500,000
====================================================================================================20.2. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL=====================================================================================================================================================================================================
2005 2004
Issued for Issued as issued for issued as
cash bonus shares Total cash bonus shares Total
Number Of shares
=====================================================================================================================================================================================================
107,130,690 230,049,344 337,180,034 107,130,690 199,396,614 306,527.304 Opening balance 3,371,800 3,065,273
Shares issued during
55,634,705 33.718.003 89,352,708 - 30,652,730 30,652,730 the year 893,527 306,527
162,765 ,395 263 ,767,347 426,532 ,742 107 ,130,690 230,049,344 337 ,180,034 Closing balance 4,265,327 3,371,800
=====================================================================================================================================================================================================Related parties of the bank namely, Siddiqsons Denim Mills Limited, Din Leather (Private) Limited, Adamjee Insurance Company Limited, Muslim Commercial Bank Limited Pension Fund and Muslim Commercial Bank Limited Provident Fund (Pakistan Staff) hold 21,604,630 (2004: 17,078,760), 2,837,234 (2004: 2,242,875), 4,043,200 (2004: 3,188,910).37,471,092 (2004: 33,390,113), 19,277,026 (2004: 16,817.863) shares of Rs 10 each of the bank at December 31, 2005 respectively. 21. RESERVES ====================================================================================
2005 2004
Note (Rupees in '000)
====================================================================================
Share Premium 1,308,194 473,673
Reserve for issue of bonus shares 853,065 337,1 80
Exchange translation reserve (52,549) (56,354)
Statutory reserve 21.1 3,999,295 3,107.054
General Reserve 7,300,000 1,800,000
13,408,005 5,661,553
====================================================================================21.1. Statutory reserves represent amount set aside as per the requirements of section 21 of the Banking Companies Ordinance 1962.22. SURPLUS ON REVALUATION OF ASSETS - NET OF TAX ====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
SURPLUS ARISING ON REVALUATION (NET OF TAX) OF:
- fixed assets 22.1 3,653,898 3,778,072
- securities 22.2 1,769,871 1,576,251
Surplus on revaluation of assets - net of tax 5,423,769 5,354,323
====================================================================================22.1. SURPLUS ON REVALUATION OF FIXED ASSETS-NET OF TAX====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Surplus on revaluation of fixed assets as at January 1 4,039,160 725,707
Reversal of revaluation surplus during the year (39,045) -
Surplus arising on revaluation during the year - 3,084,735
Reversal of revaluation loss on property classified as
non-banking assets - 272,512
Surplus realised on disposal
of revalued properties - net
of deferred tax (64,564) (847)
Related deferred tax liability (11,829) (588)
(76,393) (1,435)
Transferred to unappropriated
profit in respect of
incremental depreciation
charged during the year - net of deferred tax (19,185) (24,992)
Related deferred tax liability (11,758) (17,367)
(30,943) (42,359)
Surplus on revaluation of fixed
assets as at December 31 3,892,779 4,039,160
LESS: RELATED DEFERRED TAX LIABILITY ON:
Revaluation as at January 1 261,088 300,774
Reversal of deferred tax liability 1,380 (21 731)
Disposal of revalued properties during the year
transferred to profit and loss account (11,829) (588)
Incremental depreciation
charged during the year
transferred to profit and loss account (11,758) (17,367)
238,881 261,088
3,653,898 3,778,072
====================================================================================22.2. SURPLUS/ (DEFICIT) ON REVALUATION OF SECURITIES - NET OF TAX====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Market Treasury Bills (22,814) (6,467)
Pakistan Investment Bonds 16,627 342,214
Listed Securities 1 .772,438 1,334,207
1,766,251 1,669,954
Add: Related deferred tax asset / (liability) 3,620 (93,703)
1,769,871 1,576,251
====================================================================================23. CONTINGENCIES AND COMMITMENTS23.1. TRANSACTION-RELATED CONTINGENT LIABILITIES/ COMMITMENTS ====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
GUARANTEES IN FAVOUR OF:
Government 3,864,070 3,268,760
Banks and financial institutions 37,673 47,813
Others 1,901,102 1,461,807
Suppliers' credit / payee guarantee 1,428,642 1,624,464
7,231,487 6,402,844
====================================================================================23.2.====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Trade-related contingent liabilities 39,189,177 32,738,625
====================================================================================23.3.====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Other contingencies 492,420 542,425
====================================================================================23.4. COMMITMENTS TO EXTEND CREDIT The bank makes commitments to extend credit in the normal course of its business but these being revocable commitments do not attract any significant penalty or expense if the facility is unilaterally withdrawn. 23.5. COMMITMENTS IN RESPECT OF FORWARD FOREIGN EXCHANGE CONTRACTS ====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Purchase 13,646,165 8,708,435
Sale 16,263,722 12.192,336
29,909,887 20,900,771
====================================================================================23.6. COMMITMENTS IN RESPECT OF OPERATING LEASES====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Not later than one year - 573
====================================================================================23.7. COMMITMENTS IN RESPECT OF FORWARD LENDING====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Forward borrowing (repo borrowing) - -
====================================================================================23.8. COMMITMENTS FOR THE ACQUISITION OF FIXED ASSETS====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
587,242 368,696
====================================================================================23.9. OTHER COMMITMENTS====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Outright purchase - Government Securities - -
Outright sale - Government Securities - -
Others - -
====================================================================================23.10. TAXATIONThe income tax assessments of the bank have been finalised upto and including the Tax Year 2005. Assessments for the Tax Years 2003 and 2004 were amended by the Taxation Officer, resulting in an additional tax liability amounting to Rs 1,185 million. The Commissioner of Income Tax Appeals through its order dated September 8, 2005 has decided the matter in favour of the bank due to which the above additional tax liability has been deleted. The department has filed an appeal before the ITAT, which is pending to date. Total disallowance for the assessment years 1994-95 to 1997-98 on account of interest in suspense amounted to Rs 722.682 million against which the tax liability would amount to approximately Rs 428.808 million. Out of this an amount of Rs 317.289 million has been allowed in the assessment years 1998-1999 to 2000-2001. It is expected that the pending appeals in this regard in the Honourable Sindh High Court shall be decided in favour of the bank as allowed in assessment years 1992-1993 and 1993-1994. Subsequent to the favourable order of the Honourable Sindh High Court the management considers that provision is not necessary for the remaining tax liability for interest in suspense of Rs 244.78 1 million as the bank has been subjected to taxes far exceeding its normal tax liability and is hopeful of favourable decisions in appeals. Accordingly, no provision has been made in these financial statements for the above amount. 24. MARK-UP / RETURN / INTEREST EARNED ====================================================================================
2005 2004
====================================================================================
ON LOANS AND ADVANCES TO:
Customers 12,086,305 4,927,838
Financial Institutions 284,972 185,386
12,371,277 5,113,224
ON INVESTMENTS IN:
Available for sale securities 4,337,124 3,162,828
Held to maturity securities 643,328 543 167
4,980,452 3,705,995
On securities purchased under resale agreements 261 478 190,172
Others 143,025 74,472
17,756,232 9,083,863
====================================================================================25. MARK-UP / RETURN / INTEREST EXPENSED====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Deposits 1,566,820 1,409,522
Securities sold under repurchase agreements 463,498 187,639
Other short-term borrowings 337,784 109,283
Subordinated loan 188,158 187,519
Others 225,108 163,677
2,781,468 2,057,640
====================================================================================26. OTHER INCOME====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Rent on property / lockers 42,986 41,751
Net profit on sale of fixed assets - 39,324
Gain on Sale of non-banking assets 24,664 -
Exchange income on import/export bills purchased/negotiated 55,477 65,341
Bad debts recovered 54,906 60,053
Liability no longer required written back 495,234 -
Others 411,409 369,538
1,084,576 576,007
====================================================================================27. ADMINISTRATIVE EXPENSES====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
Salaries and allowances 4,613,594 3,986,334
CHARGE / (REVERSAL) FOR
DEFINED BENEFIT PLANS AND OTHER BENEFITS:
- Approved pension fund 37 (2.069,467) 189,356
- Post retirement medical benefits 37 703,755 317,257
- Employees' contributory benevolent scheme 37 72,873 28,968
- Employees' compensated absences 37 255,007 1 33,992
(1,037,832) 669,573
Contributions to defined
contribution plan -provident fund 102,128 91,210
Non-executive directors' fees 112 16
Rent, taxes, insurance, electricity 603,449 549,591
Legal and professional charges 106,622 92,939
Communications 21,366 1,651
Repairs and maintenance 188,938 147,714
Rentals of operating leases 10 4,630
Stationery and printing 173,308 1 58,586
Advertisement and publicity 210,250 124,304
Cash transportation charges 125,137 1 07,352
Instrument clearing charges 74,270 56,073
Donations 27.1 30,059 1,449
Auditors' remuneration 27.2 10,348 10,563
Depreciation 12.1 575,538 598,928
Amortisation of intangible asset 12.2 60,113 -
Staff welfare fund 12,513 14,000
Travelling, conveyance and fuel 256,619 204,500
Subscription 19,388 19,198
Entertainment 39,938 31,534
Restructuring expenses - 150,100
Others 273,622 223,955
6,459,490 7,244,200
====================================================================================27.1. This represents donation given to President Earthquake Relief Fund amounting to Rs 30,059 million.Donations were not made to any donee in which the bank or a director or his spouse had any interest. 27.2. AUDITORS' REMUNERATION =================================================================================================
2005 2004
A. F. Ferguson Riaz Ahmad Total A. F. Ferguson Riaz Ahmad Total
& Co & Co & Co & Co
(Rupees '000)
=================================================================================================
Audit fee 1,500 1,500 3,000 1,500 1,500 3,000
Fee for audit of EPZ branch 50 - 50 - - -
Fee for audit
of foreign branches - - 878 - - 874
Special certifications and
sundry advisory services 2,615 2,505 5,120 2,765 2,655 5,420
Out-of-pocket expenses 650 650 1,300 615 654 1,269
4,815 4,655 10,348 4,880 4,809 10.563
=================================================================================================28. OTHER CHARGES====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Provision against fraud and forgeries 119,412 27,265
Net loss on disposal of fixed assets 22,114 -
Penalties imposed by State Bank of Pakistan 24,815 14,599
Others 12,500 -
178,841 41,864
====================================================================================29. EXCEPTIONAL ITEMThis represents claim of the bank in respect of compensation of delayed tax refunds under section 171 of the Income Tax Ordinance 2001 (parallel to section 102 of the repealed Income Tax Ordinance, 1979) for the assessment years 1992-93 to 2002-03 and tax year 2004. This compensation has been calculated at the rate of 6 -15 percent per annum on the amount of the refund for the period commencing at the end of three months of refund becoming due to the bank and ending on the date of payment / adjustment by the income tax authorities 30. TAXATION ====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
FOR THE YEAR:
Current 4,611,359 1,555,764
Deferred (166,910) 70,420
4,444,449 1,626,184
PRIOR YEARS:
Current (149.763) -
Deferred (198,614) -
(348,377) -
4,096,072 1,626,184
====================================================================================30.1. RELATIONSHIP BETWEEN TAX EXPENSE AND ACCOUNTING PROFIT====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Accounting profit for the year 13,018,487 4,057,716
Tax rate 38% 41%
====================================================================================
====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Tax on income 4,947,025 1,663,664
Tax effect on separate block of income (153,123) (138,021)
Tax effect of permanent differences (272,587) (271,502)
Tax effect of prior year reversals on provisions (149,763) -
Tax effect of computation adjustments (275,480) 372,043
Tax charge for the current year 4,096,072 1,626,184
====================================================================================31. CREDIT RATINGPACRA has assigned long term credit rating of AA (double A) and short-term credit rating of Al + (A one plus) to the bank. 32. BASIC EARNINGS PER SHARE - PRE TAX ====================================================================================
2005 2004
====================================================================================
Profit before taxation 13,018,487 4,057,716
Weighted average number of shares
outstanding during the year 417,706,926 406,144,478
Earnings per share pre tax (Rupees) 31.17 9 99
====================================================================================33. BASIC / DILUTED EARNINGS PER SHARE - AFTER TAX====================================================================================
2005 2004
====================================================================================
Profit after taxation 8,922,415 2,431,532
Weighted average number
of shares outstanding during the year 417,706,926 406,144,478
Basic/diluted earnings per share 21.36 5.99
====================================================================================34. CASH AND CASH EQUIVALENTS====================================================================================
2005 2004
Notes (Rupees in '000)
====================================================================================
Cash and balances with treasury banks 6 23,665,549 23,833,253
Balances with other banks 7 1,469,333 5,708,323
25,134,882 29,541,576
====================================================================================35. KEY FINANCIAL FIGURES OF THE ISLAMIC BANKING BRANCHES====================================================================================
2005 2004
(Rupees in '000)
====================================================================================
Islamic Banking Fund 230,000 165,000
Deposits 443,501 356,149
Borrowings from head office 1,600,000 1,000,000
ljarah financing 725,038 492,967
Murabaha financing 1,562,522 1,072,025
Profit before taxation 17,462 2,311
Letters of credit 520,998 139,183
====================================================================================36. STAFF STRENGTH====================================================================================
2005 2004
====================================================================================
Total number of permanent employees as at the year's end 9,377 9,889
====================================================================================37. DEFINED BENEFIT PLANS AND OTHER BENEFITSThe latest actuarial valuations of the approved pension fund, employees' contributory benevolent scheme, post retirement medical benefits and employee's compensated absences were carried out at as at December 31, 2005. The results of the actuarial valuations are as follows: ===============================================================================================================================
2005
Approved Employee's Post Employee's
Pension Contributory Retirement Compensated
Fund Benevolent Medical Absences
Scheme Benefits
(Rupees' 000)
===============================================================================================================================
RECONCILIATION OF
(RECEIVABLE)/ PAYABLE FROM TO DEFINED
BENEFIT PLAN AND OTHER BENEFITS:
Present value of defined benefit obligation 5,503,819 407,569 1,456,392 856,213
Fair value of plan assets (10,554,024) (18,976) - -
Net actuarial gains / (losses) not recognised 3,076,207 (81,377) (91,259) -
Unrecognised transitional liability - - (160,575) -
Unrecognised negative past service cost - - 1 87,047 -
Unrecognised past service cost - - (91 269) -
Net [receivable) / payable (1,973,998) 307,216 1,300,336 856,213
Movement in balance of
(receivable) / payable recognised
Opening balance of (receivable) / payable (732,720) 344,151 713,630 603,624
Amount recognised (2,069,467) 72,873 703,755 255,007
Refunds / (Contributions) during the year 828,189 (109,808) - -
Benefits paid - - (117,049) (2,418)
Closing balance of [receivable) / payable [1,973,998) 307,216 1,300,336 856,213
THE FOLLOWING AMOUNTS HAVE BEEN CHARGED TO
PROFIT AND LOSS ACCOUNT IN RESPECT OF
DEFINED BENEFIT PLANS / OTHER EMPLOYEE BENEFITS
Current service cost 57,655 8,106 36,619 255,007
Interest cost 170,690 25,347 78,508 -
Expected return on plan assets (562 734) (1 269) - -
Recognised past service cost - - 525,063 -
Recognised negative past service cost - - (142,641)
Amortisation of transitional liability - - 1 60,577 -
Interest on borrowing from MCB main branch 116,759 - - -
Net actuarial (gain) / loss recognised (1,585,796) 40,689 45,629 -
Curtailment gain (266,041) - - -
(2,069,467) 72,873 703,755 255,007
Actual return on plan assets 5,576,412 850 - -
ACTUARIAL ASSUMPTION:
- valuation discount rate 9.00% 9.00% 9.00%
- medical cost inflation rate - - 5.00%
- exposure inflation rate - - 3.00%
- salary increase rate 7.00% 7.00% 7.00%
- expected rate of return on plan assets 9.00% 9.00% -
==============================================================================================================================
==============================================================================================================================
2004
Approved Employee's Post Employee's
Pension Contributory Retirement Compensated
Fund Benevolent Medical Absences
Scheme Benefits
(Rupees' 000)
==============================================================================================================================
RECONCILIATION OF (RECEIVABLE)
/ PAYABLE FROM / TO DEFINED
BENEFIT PLAN AND OTHER BENEFITS:
Present value of defined benefit obligation 6,542,624 362,104 1,121,548 603,624
Fair value of plan assets (7,034,175) (18,126) - -
Net actuarial gain /(losses) not recognised (241,169) 173 (123,785) -
Unrecognised transitional liability - - (321 .1 52) -
Unrecognised negative past service cost - - 37, 019 -
Net (receivable) / payable (732,720) 344,151 713,630 603,624
Movement in balance of
(receivable) / payable recognised
Opening balance of (receivable)/ payable (772,076) 361,104 496,191 607,314
Amount recognised 189,356 28,968 317,257 133,992
Contributions during the year (150,000) (45,921) - -
Benefits paid - - (99,818) (137,682)
Closing balance of (receivable) / payable (732 720) 344,151 713 630 603 624
THE FOLLOWING AMOUNTS HAVE BEEN CHARGED TO
PROFIT AND LOSS ACCOUNT IN RESPECT OF
DEFINED BENEFIT PLANS / OTHER EMPLOYEE BENEFITS:
Current service cost 63,327 5,378 35,733 133,992
Interest cost 495,201 24,862 77,565 -
Expected return on plan assets (489,756) (1.186) - -
Recognised negative past service cost - - (18,510) -
Amortisation of transitional liability - - 160,577 -
Net actuarial (gain) loss recognised 120,584 (86) 61,892 -
189,356 28,968 317,257 133,992
Actual return on plan assets 234,916 1,188 - -
ACTUARIAL ASSUMPTION:
- valuation discount rate 8.00% 7.00% 7.00%
- medical cost inflation rate - - 5.00%
- exposure inflation rate - - -
- salary increase rate 6.00% 5.00% 5.00%
- expected rate of return on plan assets 8.00% 7.00% -
==============================================================================================================================Fair value of the bank's shares held by the Pension Fund as at December 31, 2005 amounted to Rs 6,287.649 million (2004: Rs 1,960.0 million)38. DEFINED CONTRIBUTION PLAN The bank operates an approved contributory provident fund for 5,625 (2004: 5,852) employees where contributions are made by the bank and employees at 8.33% (2004: 8.33%) of the basic salary. During the year the bank has contributed Rs 102.128 million (2004: Rs 91.210 million) in respect of this fund. The bank also operates an approved non-contributory provident fund for 3,673 (2004: 4,005) employees who have opted for the new scheme, where contributions are made by the employees at 12% (2004: 12%) of the basic salary. 39. REMUNERATION OF DIRECTORS AND EXECUTIVES The aggregate amount charged in the financial statements for remuneration, including all benefits, to the Chief Executive, Directors and Executives of the bank was as follows: ===================================================================================
President/
Chief Executive Directors Executives
2005 2004 2005 2004 2005 2004
(Rupees' 000)
===================================================================================
Fees - - 112 16 - -
Managerial
remuneration 11,276 10,750 1,434 1,434 383,167 367,170
Retirement benefits 637 575 - - 21,993 20,380
Rent and house
maintenance 3,683 3,105 - - 118,812 110,096
Utilities 765 690 - - 26,403 24,466
Medical 183 262 - - 15,127 13,218
Conveyance 223 171 - - 45,980 40,625
16,767 15,553 1,546 1,450 611.482 575,955
Number of persons 1 1 9 9 329 307
===================================================================================The Chief Executive and certain executives are provided with free use of the bank's maintained cars and household equipment in accordance with the terms of their employment.The aggregate amount charged to income for fee to directors and remuneration to key management personnel was Rs 112 thousand and Rs 91,029 thousand respectively. 40. MATURITIES OF ASSETS AND LIABILITIES ============================================================================================================================================
2005
Total Upto Over three Over one Over
three months to year to five
months one year five years years
(Rupees' 000)
============================================================================================================================================
ASSETS:
Cash and balances with treasury banks 23,665,549 23.665,549 - - -
Balances with other banks 1 ,469,333 1,469,333 - - -
Lendings to financial institutions 9,998,828 9,998,828 - - -
Investments - net 69,481,487 18,874,975 34,047,021 10,622,941 5,936,550
Advances - net 180,322,753 35,995,132 91,593,691 50,293,926 2,440,004
Other assets - net 5,464,426 2,678,635 811,793 1,973,998 -
Fixed assets 8,182,454 225,027 712,945 1,315,411 5,929,071
Deferred tax assets - net 191,967 - - - 191,967
298,776,797 92,907,479 127,165,450 64,206,276 14,497,592
LIABILITIES:
Bills payable 8,536,674 8,536,674 - - -
Borrowings from financial institutions 27,377,502 24,707,908 2,669,594 - -
Deposits and other accounts 229,345,178 50,994,975 124,173,837 40,851,793 13,324,573
Subordinated loan 1,598,080 320 320 1,597,440 -
Other liabilities 8,611,600 2,980,472 2,760,073 2,321.067 549,988
Deferred tax liabilities - net - - - - -
275,469,034 87,220,349 129,603,824 44,770,300 13,874,561
Net assets 23,307,763 5,687,130 [2,438,374] 19,435,976 623,031
Share capital 4,265.327
Reserves 13,408,005
Unappropriated profit 210,662
Surplus on revaluation of assets - net of tax 5,423,769
23,307,763
============================================================================================================================================
============================================================================================================================================
2004
Total Upto Over three Over one Over
three months to year to five
months one year five years years
(Rupees' 000)
============================================================================================================================================
ASSETS:
Cash and balances with treasury banks 23,833,253 23,833,253 - - -
Balances with other banks 5,708,323 5,708,323 - - -
Lendings to financial institutions 10,965,297 9,465,297 1,500,000 - -
Investments - net 67,194,971 36,492.433 13,196,219 11,830.139 5,676,180
Advances-net 137,317,773 17,145,261 81,675,412 36,804,565 1,692.535
Other assets - net 6,154,370 2,163,939 409,914 3,580,517 -
Fixed assets 7,999,821 100,101 461,528 1,303,832
6,134,360
Deferred tax asset - net - - - - -
259,173,808 94,908,607 97,243,073 53,519,053 13,503,075
LIABILITIES:
Bills payable 7,566,684 7,566,684 - - -
Borrowings from financial institutions 7,590,864 6,444,361 1,146,503 - -
Deposits and other accounts 221,069,158 49,368,292 118,344,532 40,731,234 12,625,100
Subordinated loan 1,598,720 320 320 1,598,080 -
Other liabilities 6,525,999 3,574,505 1,211.910 1,025,302 714,282
Deferred tax liabilities - net 269,499 5,320 109.662 85,113 69.404
244,620,924 66,959,482 120,812,927 43,439,729 13,408,786
Net assets 14,552,884 27,949,125 [23,569.854) 10,079,324 94,289
Share capital 3,371,800
Reserves 5,661,553
Unappropriated profit 165,208
Surplus on revaluation of assets - net of tax 5,354.323
14,552,884
============================================================================================================================================41. YIELD / INTEREST RATE RISKYield / Interest rate sensitivity position for on-balance sheet instruments is based on the earlier of contractual re-pricing or maturity date and for off-balance sheet instruments is based on settlement date. ===============================================================================================================================
2005
Effective Total Exposed to Yield/ Interest risk Not exposed
Yield/ Upto Over three Over one Over to Yield/
Interest three months to year to five Interest
rate months one year five years years Risk
(Rupees' 000)
===============================================================================================================================
ON-BALANCE SHEET FINANCIAL INSTRUMENTS
ASSETS:
Cash and balances
with treasury banks 2.30% 23,665,549 1,426,216 - - - 22,239,333
Balances with other banks 41.11% 1,469,333 597,020 - - - 872,313
Landings to financial
institutions 5.11% 9,99B,828 9,998.828 - - -
Investments - net 7.59% 68,417,035 16,382,411 31,065,431 9,816,222 3,325,406 7,827,565
Advances - net 7,75% 180,322,753 35,995,132 91,593,691 50.293,926 2,440,004
Other assets - net - 3,227,263 - - - - 3,227,283
287,100,761 64,399.607 122,659,122 60,110,148 5,765,410 34,166,474
Liabilities - 8,536,674 - - - - 8,536,674
Borrowings from
financial institutions 3.92% 27,377.502 24,707,908 2,869,594 - - -
Deposits and other accounts 0.69% 229,345,178 43,058,693 84,492,427 21,011,087 1,419,268 79,363,703
Subordinated loan 11.75%-15.75% 1,598,080 320 320 1,597,440 - -
Other liabilities - 5,890,548 - - - - 5,890,548
272,747,982 67,766,921 87,162,341 22,608,527 1,419,268 93,790,925
14,352,779 [3,367,314] 35,496,781 37,501,621 4,346,142 [59,624,451)
On-balance sheet gap
Off-balance sheet
financial instruments
Forward lendings - - - - - - -
Outright purchase - Govt. securities - - - - - - -
Commitments to extend credit - - - - - - -
Forward borrowings - - - - - - -
Outright sale - Govt. securities - - - - - - -
OFF-BALANCE SHEET GAP:
Total Yield/Interest
Risk Sensitivity Gap (3,367,314) 35.496.781 37,501,621 4,346,142
Cumulative Yield/ Interest
Risk Sensitivity Gap (3,367,314) 32,129,467 89,631,088 73,977,230
===============================================================================================================================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. ==============================================================================================================================
2004
Effective Total Exposed to Yield/ Interest risk Not exposed
Yield/ Upto Over three Over one Over to Yield/
Interest three months to year to five Interest
rate months one year five years years Risk
(Rupees' 000)
==============================================================================================================================
ON-BALANCE SHEET FINANCIAL INSTRUMENTS
ASSETS:
Cash and balances with
treasury banks 1.29% 23,833,253 1,300,647 - - - 22,532,606
Balances with other banks 2.53% 5,708,323 3,972,122 - - - 1,736,201
Lendings to
financial institutions 2.80% 10,965,297 9,465,297 1,500,000 - -
Investments - net 4,44% 66,130,596 34,654,721 13,192,565 9,279,849 2,661,099 6,342,362
Advances-net 4,59% 137,317,773 17,145,261 81,675,412 36,804,565 1,692,535 -
Other assets - net - 1,718,302 - - - - 1,718,302
245,673,544 66,538,048 96,367,977 46,084,414 4,353,634 32,329,471
LIABILITIES:
Bills payable - 7,566,684 - - - - 7,566,684
Borrowings from
financial institutions 2.01% 7,590,864 6,444,361 1,146,503 - - -
Deposits and other accounts 0.65% 221.069,158 42,179,723 83,499,586 22,755,460 731,290 71,903,099
Subordinated loan 11.754%-15.75% 1,598,720 320 320 1,598,080 - -
Other liabilities - 4,634,424 - - - - 4,634,424
242,459,850 48,624,404 84,646,409 24,353,540 731 ,290 84,104,207
On-balance sheet gap 3,213,694 17,.913,644 11,721,568 21,730,874 3,622,344 (51,774,736)
0FF-BALANCE SHEET
FINANCIAL INSTRUMENTS:
Forward lendings - - - - - - -
Outright purchase - Govt. securities - - - - - - -
Commitments to extend credit - - - - - - -
Forward borrowings - - - - - -
Outright sale - Govt. securities - - - - - -
Off-balance sheet gap - - - - - - -
Total Yield/ Interest
Risk Sensitivity Gap 17,913,644 11,721,568 21,730,874 3,622,344
Cumulative Yield / Interest
Risk Sensitivity Gap 17,913,644 29,635,212 51,366,086 54,988,430
==============================================================================================================================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. 42. CURRENCY RISK ==============================================================================
2005
Assets Liabilities Off-balance Net foreign
sheet items currency
exposure
(Rupees '000)
==============================================================================
Pakistan Rupee 279,406,248 260,259,204 180,165 19,327,209
United States Dollar 16,047,904 12,176,493 (1,458,960) 2,412,451
Pound Sterling 1,388,297 1,457,908 352,957 283,346
Japanese Yen 13,101 6,935 2,349 8,515
Euro 447,999 757,989 212,049 (97,941)
Other currencies 1,473,248 810,505 711,440 1,374,183
298,776,797 275,469,034 - 23,307,763
==============================================================================
====================================================================================
2004
Assets Liabilities 0ff-balance Net foreign
sheet items currency
exposure
(Rupees '000)
====================================================================================
Pakistan Rupee 240,154,058 229,965,677 2,741,162 12,929,543
United States Dollar 16,564,075 12,524,545 (3,072,006) 967,524
Pound Sterling 640,293 613,894 33,958 60,357
Japanese Yen 68,386 3,155 (63,762) 1,469
Euro 701,823 620,917 (15,856) 65,050
Other currencies i .045,1 73 892,736 376,504 528,941
259,173,808 244,620,924 - 14,552,884
====================================================================================Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.43. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgement in the process of applying the bank's accounting policies. Estimates and judgements are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the bank's financial statements or where judgement was exercised in application of accounting policies are as follows: (i) classification of investments (note 9) (ii) provision against investments (note 9) and advances (note 10.4.1). (iii) Income Taxes (note 30 and 23.10). (iv) Staff Retirement Benefits (note 37). (v) Fair Value Of Derivatives (note 11.3). 44. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of traded investments is based on quoted market prices, except for tradeable securities classified by the bank as 'held to maturity'. These securities are being carried at amortised cost in order to comply with the requirements of BSD Circular No 14 dated September 24, 2004. The fair value of these investments amounts to Rs 24,595 million (2004: Rs 42,072 million). Fair value of unquoted equity investments is determined on the basis of break up value of these investments as per the latest available audited financial statements. Fair value of fixed term loans, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient reliability due to absence of current and active market for such assets and liabilities and reliable data regarding market rates for similar instruments. The provision for impairment of loans and Advances has been calculated in accordance with the bank's accounting policy as stated in note 5.3 to these financial statements. The maturity and repricing profile and effective rates are stated in notes 40 and 41 respectively. 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. 45. CONCENTRATION OF CREDIT AND DEPOSITS Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Out of the total financial assets of Rs 288,165 million (2004: Rs 246,738 million) the financial assets which are subject to credit risk amounting to Rs 282,102 million (2004: Rs 240,477 million). To manage credit risk the bank applies credit limits to its customers and obtains adequate collaterals. Investments amounting to Rs 57.103 million (2004: Rs 58,211 million) are guaranteed by the Government of Pakistan. In addition, an amount of Rs 15,054 million (2004: Rs 14,836 million) are held by the bank with the SBP and central banks of other countries. 45.1. RISK MANAGEMENT The wide variety of the bank's businesses requires it to identify, measure and manage risks effectively. The bank manages these risks through a framework of risk principles, organisational structures and risk measurement and monitoring processes that are closely aligned with the activities of the bank. The bank's risk management function is independent of the business areas. Based on the SBP and Bank for International Settlement guidelines / frameworks, the bank has constituted a Risk Management Committee, developed an elaborate risk identification measurement and management framework and has also reorganised risk management function broadly based on the following: -- Setting up of separate risk areas (as detailed below) -- Engaging the advisory services of an international consultant for the overall risk management function. Risk management organisation The head of risk management is a member of risk management and management committees of the bank and is responsible for credit, market and operational risk management activities within the bank in close coordination with the respective business areas. For each risk, i.e credit, operational and market, a specific department has been established with the mandate to: -- ensure that the business conducted is consistent with the risk appetite of the bank; -- formulate and implement risk policies, procedures and methodologies in coordination with the business areas; -- conduct periodic reviews to ensure that the risks are within acceptable parameters; and develop and implement risk management infrastructures and systems that are appropriate for each area. The most important risks that the banks management assumes are specific banking risks and risks arising from the general business environment. The bank's risk management process distinguishes among various kinds of specific banking risks and mainly comprises of credit risk, liquidity risk, operational risk and market risk. The policies and procedures for managing these risks are outlined below: Credit risk makes up the largest part of bank's risk exposures. The bank measures and manages its credit risk by adopting the following policies: -- Across the bank, consistent standards are applied for credit decision processes. -- The approval of credit limits for counter parties and the management of individual credit exposures is subject to credit strategies. -- Every extension of credit or material change to a credit facility (such as its tenor, collateral structure or major covenants) to any counterparty requires credit approval at the appropriate authority level. -- The bank assigns credit approval authorities to individuals according to their qualifications, experience and training, and the management reviews these periodically. The management measures and consolidates all the bank's credit exposures to each obligor on a global consolidated basis that applies across the bank. Liquidity risk management safeguards the ability of the bank to meet all payment obligations when they become due. The bank's liquidity risk management framework has been instrumental in maintaining adequate liquidity and a healthy funding profile. Operational risk has been defined as the potential of incurring losses in relation to employees, project management, contractual specifications and documentation, technology, infrastructure failure and disasters, external influences and customer relationships. This includes legal and regulatory risk, but excludes business risk. At present the bank is in the initial phase of defining the operational risk framework and related policies while the responsibility for implementing the framework as well as the day-to-day operational risk management lies with the business areas. The business of the bank is subject to the risk that market prices and rates will move and result in profits / losses. The bank distinguishes among four types of market risk: -- Interest Rate Risk -- Equity Price Risk -- Commodity Price Risk 45.2. SEGMENT BY CLASS OF BUSINESS ============================================================================================
2005
Advances Deposits Contingencies and
Commitments
(Rupees '000) Percent(Rupees '000) Percent(Rupees '000) Percent
============================================================================================
Textile 28,587,254 15.85�/b 1,567,238 0.68% 7,495,848 9.68%
Commerce/Trade 29,994,256 16.63% 31,152,855 13.58% 6,965,473 9.00%
Agribusiness 1,109,181 0.62% 25,512,459 11.13% 1,030,145 1.33%
Production
and transmission
of energy 7,621,276 4.23% 588,797 0.26% 5,114,732 6.61%
Financial Sector 3,463,544 1.92% 2,041,002 0.89% 46,520,085 60.10%
Individuals 13,942,290 7.73% 113,439,811 49.46% - 0.00%
Others 95,604,952 53.02% 55,043,016 24.00% 10,283,930 13.28%
180,322,753 100.00% 229,345,178 100.00% 77,410,213 100.00%
============================================================================================
===================================================================================================
2004
Advances Deposits Contingencies and
Commitments
(Rupees '000) Percent(Rupees '000) Percent(Rupees '000) Percent
===================================================================================================
Textile 33,455,623 24.36% 1,900,742 0.86% 6,065,572 9.93%
Commerce/Trade 30,207,166 22.00% 31,514,066 14.26% 6,923,400 11.33%
Agribusiness 2,431,136 1.77% 26,904,024 12.17% 1,005,219 1.64%
Production
and transmission
of energy 9,732,147 7.09% 1,077,731 0.49% 7,165,703 11.73%
Financial Sector - 0.00% 490,571 0.22% 18,325,470 29.99%
Individuals 19,257 0.01�/c 106,089,311 47.98% - 0.00%
Others 61,472,444 44.77% 53,092,713 24.02% 21,627,657 35.38%
137,317,773 100�/b 221,069,158 100% 61,113,021 100.00%
===================================================================================================45.3. SEGMENT BY SECTOR==============================================================================================================
2005
Advances Deposits Contingencies and
Commitments
(Rupees '000) Percent(Rupees '000) Percent(Rupees '000) Percent
==============================================================================================================
Public / Government 23,498,289 13.00% 6,515,291 2.84% 15,936,337 20.59%
Private 156,824,464 87.00% 222,829,887 97.16% 61,473,876 79.41%
180,322,753 100�/b 229,345,178 100% 77,410,213 100%
2004
Advances Deposits Contingencies and
Commitments
(Rupees '000) Percent(Rupees '000) Percent(Rupees '000) Percent
Public/Government 22,250,553 16.20% 5,310,853 2.40% 15,963,908 26.12%
Private 115,067,220 83.80% 215,758,305 97.60% 45,149.113 73.88%
137,317,773 100% 221,069,158 100% 61,113,021 100%
==============================================================================================================46. GEOGRAPHICAL SEGMENT ANALYSIS==========================================================================================================
2005
Profit before Total assets Net assets Contingencies
taxation employed employed and
Commitments
(Rupees '000)
==========================================================================================================
Pakistan 12,753,735 292,437,277 23,043,011 76,526,777
Asia Pacific (including South Asia) 82,149 2,375,147 82,149 883,436
Middle East 182,603 3,964,373 182,603 -
13,018,487 298,776,797 23,307,763 77,410,213
==========================================================================================================
==========================================================================================================
2004
Profit before Total assets Net assets Contingencies
taxation employed employed and
Commitments
(Rupees '000)
==========================================================================================================
Pakistan 3,820,213 253,861,851 14,054,796 60,415,234
Asia Pacific (including South Asia) 58,790 1,877,150 229,945 697,787
Middle East 178,713 3,434.807 238,143 -
4,057,716 259,173,808 14,522,884 61,113,021
==========================================================================================================Total assets employed include intra group items of Rs nil (2004: Nil).Total assets employed shown above mean total assets shown on the balance sheet and intra group items. Net assets employed mean net assets shown on the balance sheet. 47. RELATED PARTY TRANSACTIONS AND BALANCES The bank has related party relationship with its associated undertakings, subsidiary companies, employee benefit plans, and its key management personnel (including their associates). The details of investments in subsidiary companies and associated undertaking are stated in note 9 to these financial statements. Transactions between the bank and its related parties are carried out at arm's length basis under the comparable uncontrolled price method. However, the transactions between the bank and one of its subsidiary MNET Services (Private) Limited are carried out on 'cost plus' method. Details of loans and advances to the companies or firms in which the directors of the group are interested as directors, partners or in case of private companies as members, are given in note 10.6 to these financial statements. There are no transactions with key management personnel other than under their terms of employment. Contributions to and accruals in respect of staff retirement and other benefit plans are made in accordance with the actuarial valuation / terms of the contribution plan as disclosed in notes 37 and 38. Remuneration to the executives and disposals of vehicles are disclosed in notes 38 and 12.4 to these financial statements. =========================================================================================================================================================================
Directors Associated Companies Subsidiary Companies Other related parties
2005 2004 2005 2004 2005 2004 2005 2004
(Rupees' 000)
=========================================================================================================================================================================
DEPOSITS:
Deposits at beginning of the year 2,030 2,202 227,631 96,317 5,239 14,289 270,188 218,024
Deposits received during the year 697,586 1,102.311 7,274,635 3,310,113 60,941 73,166 23,140,725 19,148,448
Deposits repaid during the year (637,620) (1,102,483) (6,716,632) (3,178,799) (60,869) (82,216) (23,199,504) (19,096,284)
Deposits at end of the year 61,996 2,030 785,634 227,631 5,311 5,239 211,409 270,188
Interest expense on deposits 27 7 851 1,234 20 43 145 157
Adamjee Insurance Company Ltd
- Insurance premium paid - net of refund - - 75,443 66,453 - - - -
- Insurance claim settled - - 60.106 25,296 - - - -
- Rent income received 1 .825 900 - - - -
- Dividend received 36,097 - - - - -
MNET Services (Private) Limited
- Outsourcing service charges - - - - 20,975 13,697 - -
- Networking service charges - - - - 7,631 7,836 - -
- Other charges - - - - - 170 - -
Muslim Commercial Financial
Services (Private) Limited
- Custodian charges received - - - - 6,993 15,020 - -
- Dividend received - - - - 3,000 7,500 - -
MCB Employees Foundation
- Service expenses - - - - - - 14,023 12,285
- Cash sorting expenses - - - - - - 3,115 17,597
-Cash in transit expenses - - - - - 3.638 1,155
MCB Employees Security System
and Services (Private) Limited
- Security guard expenses - - - - - - 74,346 52,155
========================================================================================================================================================================= Directors' remunerationThe details of director's remuneration has been given in note 39 to these financial statements. Debts due by executives of the bank are disclosed in note 10.6 to these financial statements. 48. CORRESPONDING FIGURES Corresponding figures have been rearranged and reclassified, wherever necessary, for the purpose of comparison. Significant reclassifications are as follows: -- Deposits and other accounts amounting to Rs 1,103.101 million have been reclassified from borrowings from financial institutions to deposits and other accounts. -- Amortisation of premium on held to maturity securities amounting to Rs 263.384 million has been reclassified from income / gain on investment to mark-up / return / interest. This amount was deducted from gain on investments in prior years -- Provision in respect of fraud and forgeries amounting to Rs 27.265 million has been reclassified from administrative expenses and shown as part of other charges. -- Restructuring expenses which were shown separately have now been shown as part of administrative expenses. -- Comparative information has also been restated to comply with the change in accounting policy as disclosed in note 5.7 to the financial statements. 49. DATE OF AUTHORISATION FOR ISSUE These financial statements were authorised for issue on February 24, 2006 by the Board of Directors of the bank. |