2007

Notice of 62nd Annual General Meeting
Notice is hereby given that the 62nd Annual General Meeting of Allied Bank Limited will be held at Hotel Avari, Lahore on Friday, 28th March, 2008 at 11:00 a.m. to transact the following business: Ordinary Business: 1. 2. To confirm the minutes of the last Annual General Meeting held on 29th March, 2007. To receive, consider and adopt the Annual Audited Accounts of the Bank for the year ended December 31, 2007 together with the Directors and Auditors Report thereon. 3. To consider and approve Cash Dividend @ 15% (i.e. Rs.1.50 per share) as recommended by the Board of Directors in addition to 15% cash dividend already paid for the year 2007. 4. To appoint Auditors and fix their remuneration. One of the retiring joint Auditors M/s M.Yousuf Adil Saleem & Co Chartered Accountants being eligible have offered themselves for reappointment. On the proposal of some of the members the Board Audit Committee and the Board of Directors have recommended the appointment of M/s KPMG Taseer Hadi & Co., Chartered Accountants, who have also consented to act as one of the joint auditors. Retiring auditor M/s Ford Rhodes Sidat Hyder & Co Chartered Accountants has completed the period of five (5) years in accordance with the Clause (xli) of the Code of Corporate Governance and therefore is not eligible for re-appointment. Special Business: 5. To consider and approve Bonus Shares by utilizing Share Premium Account @ 20 % [i.e. one (01) share for every five (05) shares as recommended by the Board of Directors of the Bank for the year ended 31.12.2007. 6. To approve revision in the Directors fee for attending Board and its Sub Committees meetings.
Note: Statements under section 160 of the Companies Ordinance, 1984 is appended below. Other Business: 7. To transact any other business with the permission of the Chair.
Date: March 7, 2008 Place: Lahore Registered Office: 8-Kashmir /Egerton Road, Lahore.
Allied Bank - Annual Report 2007
37
Notes: i) ii) All members are entitled to attend and vote at the Meeting. A member entitled to attend and vote is entitled to appoint a proxy under his / her own hand or through his/ her duly authorized attorney to attend and vote instead of himself / herself and the proxy must be a member of Allied Bank Limited. iii) The instrument of proxy and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of that power of attorney or authority to be effective must be deposited at the registered office of Allied Bank Limited not less than 48 hours before the time for holding the Meeting. iv) Share Transfer Books of Allied Bank Limited will remain closed from 21st March, 2008 to 28th March, 2008 (both days inclusive). Share transfers requests received at M/s Technology Trade (Pvt.) Limited, Dagia House, 241-C, Block-2, PECHS, Karachi, the Registrar and Share Transfer Office of the Bank at the close of business on 20th March, 2008 will be treated as being in time for the purpose of entitlement of cash dividend and bonus shares to the transferees. v) Members are requested to notify immediately changes, if any, in their registered address to Banks Share Registrar M/S Technology Trade (Pvt) Limited, 241-C, Block-2, PECHS, Karachi before book closure so that entitlement if any, be dispatched at the correct address. vi) CDC Account Holders will have to follow the under mentioned guidelines as laid down by the Securities and Exchange Commission of Pakistan. A. i) For Attending the Meeting In case of individuals, the account holder or sub-account holder and / or the person whose securities are in group account and their registration details are uploaded as per the Regulations, shall authenticate his /her identity by showing his/her original Computerized National Identity Card (CNIC) or original passport at the time of attending the Meeting. ii) In case of corporate entity, the Board of Directors resolution / power of attorney with specimen signature of the nominee shall be produced (if it has not been provided earlier) at the time of the Meeting. B. i) For Appointing Proxies: In case of individuals, the account holder or sub-account holder and / or the person whose securities are in group account and their registration details are uploaded as per the Regulations, shall submit the proxy form as per the above requirement. ii) The proxy form shall be witnessed by two persons whose names, addresses and CNIC numbers shall be mentioned on the form. iii) iv) v) Attested copies of CNIC or the passport of the beneficial owners and the proxy shall be furnished with the proxy form. The proxy shall produce his / her original NIC or original passport at the time of the Meeting. In case of corporate entity, the Board of Directors resolution / power of attorney with specimen signature shall be submitted (if it has not been provided earlier) along with proxy form of the Company.
38
Statements under Section 160 of the Companies Ordinance, 1984

ITEM NO 5: ISSUANCE OF BONUS SHARES
To approve capitalization of a sum of Rs. 1,077,273,876 (Rupees One billion seventy seven million two hundred seventy three thousand eight hundred seventy six only) out of Share Premium Account for the issuance of bonus shares (B-4) in the proportion of 1 share for every 5 shares and approve the following resolution by way of Special Resolution. Resolved that: a) A sum of Rs. 1,077,273,876 out of shares premium account be capitalized and applied for the issuance of 107,727,387 Ordinary shares of Rs. 10 each in the proportion of 1 share for every 5 Ordinary Shares held, allotted as fully paidup Bonus Shares to the members of the Bank whose names appear on the Register of Members of the Bank as at close of business on March 20, 2008. b) The bonus shares entitlement in fraction be consolidated into whole shares and Company Secretary is hereby authorize to sell the same in the Stock Market and proceeds of sale when realized be given to a charitable institution. c) CEO and the Company Secretary of the Bank be and are hereby authorized and empowered to give effect to this resolution and to do or cause to be done all acts, deeds and things that may be necessary or required for issuance, allotment and distribution of Bonus Shares (B-4). The Directors of the Company have no interest in the property or profits of the Bank other than that as holders of ordinary shares in the capital of the Bank and dividends, if any declared by the Bank according to their share holding. ITEM NO 6: TO RATIFY THE REVISION OF MEETING FEES FOR DIRECTORS FOR ATTENDING BOARD OR ITS SUB COMMITTEE MEETINGS In view of Boards responsibilities and enhanced role under the Code of Corporate Governance and other statutory obligations, directors have to devote more time and expertise in the overall stewardship of the Bank. In view of the foregoing, the Board in its 157th meeting held on 10.08.2007 enhanced meeting fees for attending meeting(s) of the Board/Sub Committees of the Board, to Rs. 25,000/- per meeting, besides usual traveling and accommodation expenses as allowed in terms of Article 111 of the Articles of Association of the Bank. In terms of SBP, BPRD Circular No.3 dated April 23, 2007 the matter is being placed before the shareholders for post facto approval. In this respect, the following Ordinary Resolution is proposed to be passed: Resolved that Directors Fee for attending the Board meeting or meeting of the Board Committees be and hereby increased from Rs. 5,000/- to Rs. 25,000/- per meeting with effect from 10.08.2007. There is no interest, directly or indirectly, of any of the directors of ABL in the above mentioned item.
39
Statement of Compliance with Code of Corporate Governance

This statement is being presented to comply with the terms of the Code of Corporate Governance as contained in Prudential Regulation No.G-1, responsibilities of the Board of Directors advised vide SBP BSD Circular No.15 dated June 13, 2002 and Listing Regulations of Karachi, Lahore & Islamabad Stock Exchanges (Guarantee) Ltd. for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of Corporate Governance. The Bank has adopted the Code of Corporate Governance and applied the principles contained in the Code in the following manner: 1. 2. The directors have confirmed that none of them is serving as a director in more than ten listed companies including the Bank. The Bank encourages representation of independent directors on its Board of Directors. At present, the Board includes 3 independent directors, 3 family directors (25% of the same family), 2 executive directors and 3 non-executive directors, including two Government nominees. 3. All the directors of the Bank are registered tax payers and none of them has defaulted in payment of any loan to a banking company, a DFI and NBFC. 4. 5. 6. Election of the Directors was held on August 17, 2006 for a fresh term of three years. Two casual vacancies occurred in the Board which were filled within the prescribed period. The Bank has adopted a Statement of Ethics & Business practices, which has been signed by all the directors and employees on joining the Bank. 7. The mission / vision statement, overall corporate strategy and significant policies have been approved by the Board. The Bank maintains a complete record of the particulars of significant policies along with the dates on which these were approved or amended. 8. All the powers of the Board have been duly exercised and decision on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive Officer are taken by the Board. 9. The Chairman of the Board is a non-executive director. The Board met at least once in every quarter. Written notices of the Board meetings along with agenda and working papers were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 10. Appropriate arrangements were made for Orientation of Directors to acquaint them with their duties and responsibilities. Pakistan Institute of Corporate Governance (PICG) had awarded one of the Board member title of Certified Director. Other members of the Board had completed few parts of the certified directorship. The Bank also encourages participation of members of Board to attend Seminars/workshops conducted by various forums. 11. The Board has approved appointments of CFO, Company Secretary and Head of Internal Audit including their remuneration and terms and conditions of employment, as determined by the CEO. 12. The Directors Report for the year ended December 31, 2007 has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 13. The financial statements of the Bank were duly endorsed by the Chief Executive Officer and Chief Financial Officer before approval of the Board.
40
14. The directors, Chief Executive Officer and executives do not hold any interest in the shares of the Bank other than that disclosed in the pattern of shareholding. 15. The Bank has complied with all the corporate and financial reporting requirements of the Code. 16. The Board has formed an Audit Committee which comprises of four members; all are non-executive directors, including the Chairman of the Committee. One of the directors is a Government nominee. 17. The meetings of the Audit Committee are held at least once in every quarter, prior to the approval of interim and the annual financial statements of the Bank as required by the Code. The Board had approved terms of reference of the Audit Committee. 18. An independent Internal Audit Department is in place. 19. The statutory joint auditors of the Bank have confirmed that they have been given a satisfactory rating under the Quality Control Review Program of the Institute of Chartered Accountants of Pakistan, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Bank and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on Code of Ethics as adopted by the Institute of Chartered Accountants of Pakistan. 20. The statutory auditors or the persons associated with them have not been appointed to provide services other than approved services and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. We confirm that all other material principles contained in the Code have been complied with.
On behalf of the Board.
Dated: February 29, 2008 Place: Lahore
41
Statement of Ethics and Business Practices

All employees of Allied Bank Limited, hereinafter called ABL, shall Abidance of Laws / Rules Conform to and abide by the ABL rules and obey all lawful orders and directives which may from time to time be given by any person or persons under whose jurisdiction, superintendence or control they may for the time being, be placed. They shall comply with and observe all applicable laws, regulations and ABL policies. Stand firmly against supporting the activities of any group or individual that unlawfully threatens public order and safety. The employees shall not be a member of any political party, take part in, subscribe in aid of, or assist in any way, any political movement. They shall not express views detrimental to the ideology, sovereignty or integrity of Pakistan. Not canvass or otherwise interfere or use influence in connection with or take part in any election as a candidate to a legislative / local body or issue an address to the electorate or in any manner announce or allowed to be announced publicly as a candidate or prospective candidate. They may, however, exercise their right to vote. Not bring or attempt to bring political or other pressure/influence directly or indirectly to bear on the authorities / superior officers or indulge in derogatory pamphleteering, contribute, or write letters to the news papers, anonymously or in their own name with an intent to induce the authority/superior officers to act in a manner inconsistent with rules, in respect of any matter relating to appointment, promotion, transfer, punishment, retirement or for any other conditions of service of employment. Integrity Conduct themselves with the highest standards of ethics, professional integrity and dignity in all dealings with the public, clients, investors, employees, and fellow bankers and not engage in acts discreditable to ABL, profession and nation. If they become aware of any irregularity that might affect the interests of ABL, they shall inform the senior management immediately. Maintain all books, data, information and records with scrupulous integrity, reporting in an accurate and timely manner all transactions / reports. Avoid all such circumstance in which there is personal interest conflict, or may appear to be in conflict, with the interests of ABL or its customers. Not use their employment status to seek personal gain from those doing business or seeking to do business with ABL, nor accept such gain if offered. They shall not accept any gift, favour, entertainment or other benefits the size of frequency of which exceeds normal business contacts from a constituent or a subordinate employee of ABL or from persons likely to have dealings with ABL and candidates for employment in ABL. Not accept any benefits from the estate of, or a trust created by a customer, or from an estate or trust of which ABLs Company or business units is an executor, administrator or trustee. Confidentiality Maintain the privacy and confidentiality of all the information acquired during the course of professional activities and refrain from disclosing the same unless otherwise required by statutory authorities/law. All such information will remain as a trust and will only be used for the purpose for which it is intended and will not be used for the personal benefits of any individual(s). Inside information about ABLs customers/affairs shall not be used for their own gain, or for that of others either directly or indirectly.
42
Professionalism Serve ABL honestly and faithfully and shall strictly serve ABLs affairs and the affairs of its constituents. They shall use utmost endeavor to promote the interest and goodwill of ABL and shall show courtesy and attention in all transactions/ correspondence with officers of Government, State Bank of Pakistan, other Banks and Financial Institutions, others establishments dealing with ABL, ABLs constituents and the public. Disclose and assign to ABL all interest in any invention, improvement, discovery or work of authorship that they may make or conceive and which may arise out of their employment with ABL. If their employment is terminated, all rights to property and information generated or obtained as part of their employment relationship will remain the exclusive property of ABL. Not engage in Money Laundering and will be extremely vigilant in protecting ABL from being misused by anyone to launder money by strictly complying with Know Your Customer policies and procedures. Business/Work Ethics Respect fellow colleagues and work as a team. They shall at all times be courteous and not let any personal differences affect their work. They will treat every customer of ABL with respect and courtesy. Ensure good attendance and punctuality and demonstrate a consistently good record in this area. For any absence during working hours, they shall obtain written permission of their immediate supervisor. They shall not absent themselves from their duties, nor leave their station over night, without having first obtained the permission of the competent authority. Maintain a standard of personal hygiene and dress appropriately for attendance at work. Their appearance must inspire confidence and convey a sense of professionalism. As personal responsibility, safeguard both the tangible and intangible assets of ABL and its customer(s) that are under their personal control and shall not use ABL assets for their personal benefits except where permitted by ABL. They shall not use any ABL facilities including a telephone to promote trade union activities, or carry weapons into ABL premises unless so authorized by the management, or carry on trade union activities during office hours, or subject ABL officials to physical harassment. Not indulge in any kind of harassment including sexual harassment or intimidation whether committed by or against any senior/junior, co-worker, customer, vendor or visitor. They shall not use language, written or spoken in intra office communication(s) or communication(s) with individual(s) outside the office that may contain any statement or material that is offensive to others. They shall never use ABLs system to transmit or receive electronic image or text containing ethnic slurs, social epithets or any thing that might be construed as harassing, offensive or insulting to others. To meet their responsibilities to fellow employees, customers and investors they shall help in maintaining a healthy and productive work environment and shall not engage in the selling, manufacturing, distributing, using, any illegal substance or being under the influence of illegal drugs while on the job. Ensure strict adherence to all health and safety policies as may be implemented from time to time by ABL. Not to give any interview in the print/electronic media or have their photograph displayed or act in television / stage plays or in cinema without having permission from the competent authority. Intimate Human Resource Group of any changes in the personal circumstances relating to their employment or benefits. Employees shall also not indulge in any of the following activities except with the prior permission of the competent authority:
43
Statement of Ethics and Business Practices

Borrow money from or in any way place themselves under pecuniary obligation to broker or moneylender or any employee of ABL or any firm or person having dealings with ABL. Buy or sell stock, share or securities of any description without funds to meet the full cost in the case of purchase or scrips for delivery in the case of sale. However, they can make a bona fide investment of their own funds in such stock, shares and securities as they may wish to buy. Lend money in their private capacity to a constituent of ABL or have personal dealings with a constituent in the purchase or sale of bills of exchange, Government paper or any other securities. Guarantee in their private capacity the pecuniary obligation of another person or agree to indemnify in such capacity any person from loss. Act as agent for an insurance company otherwise than as agent for on behalf of ABL. Be connected with the formation or management of a joint stock company. Engage in any other commercial business or pursuit either on their own account or as agent for another or others. Accept or seek any outside employment or office whether stipendiary or honorary. Undertake part time work for a private or public body or private person, or accept fee thereof.
44
Statement of Internal Controls
STATEMENT OF MANAGEMENT RESPONSIBILITIES
It is the responsibility of Banks management to: Establish and maintain an adequate and effective system of internal controls and procedures for an efficient working environment for obtaining desired objectives. Evaluate the effectiveness of the Banks internal control system that encompasses material matters by identifying control objective, reviewing significant policies and procedures and establishing relevant control procedures. The control activities are being closely monitored across the Bank through Audit Group, working independent of line management. In addition, Compliance and Control Group monitors control activities on an on going basis. Both Groups cover all banking activities in general and key risks areas in particular. The Audit Committee of the Board reviews special audit reports periodically where significant violations to the local regulations, prescribed policies and procedures have occurred. The Audit Committee ensures their implementations through concerned Group to mitigate identified risks to safeguard the interest of the Bank. The Banks internal control system has been designed to provide reasonable assurance to the Banks management and Board of Directors. All internal control systems, no matter how well designed, have inherent limitations that they may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. However, control activities are on going process that includes identification, evaluation and management of significant risks faced by the Bank. In an effort to incorporate the Internal Control Guidelines as spelled out by the State Bank of Pakistan in BSD Circular No. 7 of 2004, the Bank is already in the process of carrying out a detailed exercise through a well established firm of Chartered Accountants including documentation and benchmarking of existing processes and controls relating to financial reporting on internationally accepted standards. This project will help in further improving the quality of internal controls across the Bank and in ensuring compliance with the SBP requirement for external auditors attestation on Internal Control over financial reporting. The Board of Directors is ultimately responsible for the internal control system and the Board endorses the above management evaluation.
45
Auditors' Review Report
M. YOUSUF ADIL SALEEM & CO. CHARTERED ACCOUNTANTS
FORD RHODES SIDAT HYDER & CO. CHARTERED ACCOUNTANTS
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance prepared by the Board of Directors of Allied Bank Limited (the Bank) to comply with Regulation G-1 of the Prudential Regulations for Corporate/Commercial Banking issued by the State Bank of Pakistan, Listing Regulation No. 37 of the Karachi Stock Exchange, Chapter XIII of the Listing Regulations of the Lahore Stock Exchange and Chapter XI of the Listing Regulations of the Islamabad Stock Exchange, where the Bank is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Bank. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Banks compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Banks personnel and review of various documents prepared by the Bank to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Boards statement on internal control covers all controls and the effectiveness of such internal controls. Based on our review, nothing has come to our attention, which causes us to believe that the Statement of Compliance does not appropriately reflect the Banks compliance, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Bank for the year ended December 31, 2007.
M. YOUSUF ADIL SALEEM & CO. Chartered Accountants Karachi
FORD RHODES SIDAT HYDER & CO. Chartered Accountants Karachi
Date: Febrary 29, 2008
Date: February 29, 2008
46
Financial Statements
for the year ended December 31, 2007
47
Auditors' Report to the Members
M. YOUSUF ADIL SALEEM & CO.

CHARTERED ACCOUNTANTS
FORD RHODES SIDAT HYDER & CO.

We have audited the annexed balance sheet of Allied Bank Limited (the Bank) as at December 31, 2007 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof (here-in-after referred to as the financial statements) for the year then ended, in which are incorporated the unaudited certified returns from the branches except for twenty two branches which have been audited by us and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit.
It is the responsibility of the Banks Board of Directors to establish and maintain a system of internal control and prepare and present the financial statements in conformity with approved accounting standards and the requirements of the Banking Companies Ordinance, 1962 (LVII of 1962) and the Companies Ordinance, 1984 (XLVII of 1984). Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the financial statements. An audit also includes assessing accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion and after due verification, which in case of loans and advances covered more than sixty per cent of the total loans and advances of the Bank, we report that:
a)
in our opinion, proper books of account have been kept by the Bank as required by the Companies Ordinance, 1984 (XLVII of 1984) and the returns referred to above received from the branches have been found adequate for the purposes of our audit;
b)
in our opinion:
i)
the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Banking Companies Ordinance, 1962 (LVII of 1962) and the Companies Ordinance, 1984 (XLVII of 1984), and are in agreement with the books of account and are further in accordance with accounting policies consistently applied;
ii)
the expenditure incurred during the year was for the purpose of the Banks business; and
iii)
the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the Bank and the transactions of the Bank which have come to our notice have been within the powers of the Bank;
48
M. YOUSUF ADIL SALEEM & CO.

FORD RHODES SIDAT HYDER & CO.

c)
in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan and give the information required by the Banking Companies Ordinance, 1962 (LVII of 1962), and the Companies Ordinance, 1984 (XLVII of 1984), in the manner so required and give a true and fair view of the state of the Banks affairs as at December 31, 2007 and its true balance of the profit, its cash flows and changes in equity for the year then ended; and
d)
in our opinion, zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the Bank and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.
FORD RHODES SIDAT HYDER & CO. Chartered Accountants Karachi
49
Balance Sheet
as at December 31, 2007
Rupees in 000
Note
December 31, 2007
December 31, 2006
ASSETS Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Deferred tax assets Other assets 6 7 8 9 10 11 12 13 29,739,857 668,449 18,419,241 83,958,463 168,407,280 7,548,628 662,431 10,705,374 320,109,723 LIABILITIES Bills payable Borrowings Deposits and other accounts Subordinated loans Liabilities against assets subject to finance lease Deferred tax liabilities Other liabilities 14 15 16 17 18 3,494,384 22,933,656 263,972,382 2,499,000 7,332,059 300,231,481 NET ASSETS REPRESENTED BY Share capital Reserves Unappropriated profit Surplus on revaluation of assets net of tax 19 5,386,370 6,050,713 6,971,308 18,408,391 1,469,851 19,878,242 CONTINGENCIES AND COMMITMENTS The annexed notes 1 to 46 form an integral part of these financial statements. 21 4,488,642 6,133,209 5,607,796 16,229,647 1,458,106 17,687,753 19,878,242 2,278,007 18,410,425 206,031,324 2,500,000 5,119,267 234,339,023 17,687,753 23,042,011 1,703,011 19,050,239 46,953,241 144,033,634 6,445,111 638,168 10,161,361 252,026,776
20
Chief Financial Officer
President and Chief Executive
Director
Director
Chairman
50
Profit and Loss Account

Rupees in 000
Note
December 31, 2007
December 31, 2006
Markup /Return/ Interest earned Markup /Return / Interest expensed Net Markup/ Interest Income Provision against nonperforming loans and advances net Provision /(Reversal) for diminution in the value of Investments net Bad debts written off directly
23 24
21,201,422 10,019,004 11,182,418
17,215,507 6,793,101 10,422,406 583,305 (14,623) 136,189 704,871 9,717,535
9.3 10.6.1
2,712,936 719 1,187 2,714,842
Net Markup/ Interest Income after provisions NON MARKUP/INTEREST INCOME Fee, commission and brokerage income Dividend Income Income from dealing in foreign currencies Gain on sale of securities Unrealized loss on revaluation of investments classified as held for trading net Other income Total nonmarkup/Interest Income 25 26 9.5 27
8,467,576
2,062,677 147,184 194,879 1,439,387 (1,463) 77,435 3,920,099 12,387,675
1,353,888 193,255 282,285 376,792 (30,180) 273,028 2,449,068 12,166,603
NON MARKUP/INTEREST EXPENSES Administrative expenses Provision against other assets net Provision against offbalance sheet obligations net Other charges Total nonmarkup/Interest expenses Extra-ordinary/unusual items PROFIT BEFORE TAXATION Taxation Current Prior years Deferred 30 30 30 28 13.1 18.1 29 6,018,346 119,579 39,805 256,869 6,434,599 5,953,076 1,887,299 (10,381) 1,876,918 PROFIT AFTER TAXATION Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assets net of tax 4,076,158 5,607,796 32,701 5,640,497 PROFIT AVAILABLE FOR APPROPRIATION Basic earnings per share (in Rupees) Diluted earnings per share (in Rupees) The annexed notes 1 to 46 form an integral part of these financial statements. 31 31 9,716,655 7.57 7.57 5,290,578 205,307 2,546 7,078 5,505,509 6,661,094 2,215,092 48,752 2,263,844 4,397,250 2,731,979 19,452 2,751,431 7,148,681 8.16 8.16
Director
Director
Chairman
51
Cash Flow Statement

Rupees in 000
Note
December 31, 2007
December 31, 2006
CASH FLOWS FROM OPERATING ACTIVITIES Profit before taxation Less: Dividend income Adjustments for noncash charges Depreciation/amortization Provision against nonperforming loans and advances (including general provision) net Provision/(reversal of provision) for diminution in the value of investments net Unrealized loss on revaluation of held for trading securities Provision against off balance sheet obligations net Provision against other assets net Gain on sale of operating fixed assets Bad debts written off directly 341,656 2,712,936 719 1,463 39,805 119,579 (14,297) 1,187 3,203,048 (Increase)/decrease in operating assets Lendings to financial institutions Held for trading securities Advances net Other assets (excluding advance taxation) Increase/(decrease) in operating liabilities Bills payable Borrowings from financial institutions Deposits Other liabilities 9,008,940 630,998 203,250 (27,087,769) (292,887) (26,546,408) 1,216,377 4,845,011 57,941,058 2,145,627 66,148,073 Income tax paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Net investments in availableforsale securities Net investments in heldtomaturity securities Net investments in subsidiaries Dividend income Investments in operating fixed assets Proceeds from sale of fixed assets Net cash flows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of subordinated loan Repayment of subordinated loan Dividends paid Net cash flows (used in) / from financing activities Increase in cash and cash equivalents CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT END OF THE YEAR The annexed notes 1 to 46 form an integral part of these financial statements. 32 (39,525,522) 2,782,945 (437,512) 149,956 (1,493,897) 63,021 (38,461,009) (1,000) (1,902,755) (1,903,755) 5,985,064 24,302,648 64,999 30,352,711 (19,493,339) 16,953,404 193,537 (1,997,685) 102,752 (4,241,331) 2,500,000 (1,096,654) 1,403,346 6,490,225 17,753,472 123,950 24,367,647 48,610,605 (2,260,777) 46,349,828 238,881 583,305 (14,623) 30,180 2,546 205,307 (68,397) 136,189 1,113,388 7,581,227 (13,272,857) 327,421 (33,546,354) (2,961,688) (49,453,478) (170,613) 8,496,595 44,621,056 640,267 53,587,305 11,715,054 (2,386,844) 9,328,210 5,953,076 (147,184) 5,805,892 6,661,094 (193,255) 6,467,839
Director
Director
Chairman
52
Statement of Changes in Equity

Rupees in 000 Balance as at January 1, 2006 Final cash dividend for the year ended December 31, 2005 declared subsequent to year end (Rs. 2.5 per Ordinary share) Transferred from surplus on revaluation of fixed assets to un-appropriated profit net of tax Profit after taxation for the year ended December 31, 2006 Total recognized income and expense for the year Transfer to statutory reserve Balance as at December 31, 2006 Final cash dividend for the year ended December 31, 2006 declared subsequent to year end (Rs. 2.5 per Ordinary share) Bonus issue for the year ended December 31, 2006 declared subsequent to year end @ 20% Interim cash dividend for the year ended December 31, 2007 (Rs. 1.5 per Ordinary share) Transferred from surplus on revaluation of fixed assets to unappropriated profit net of tax Profit after taxation for the year ended December 31, 2007 Total recognized income and expense for the year December 31, 2007 Transfer to statutory reserve Balance as at December 31, 2007
Share Capital 4,488,642
Share Premium 4,316,324
Statutory Reserve 969,301
Special Reserve* 67,995
Merger Reserve* 333,864
General Reserve 6,000
Unappropriated Profit 2,731,979
Total 12,914,105
(1,101,160)
(1,101,160)
19,452
19,452
4,488,642
4,316,324
439,725 1,409,026
67,995
333,864
6,000
4,397,250 4,416,702 (439,725) 5,607,796
4,397,250 4,416,702 16,229,647
(1,122,160)
(1,122,160)
897,728
(897,728)
(807,955)
(807,955)
32,701
32,701
4,076,158 4,108,859
4,076,158 4,108,859
5,386,370
3,418,596
815,232 2,224,258
67,995
333,864
6,000
(815,232) 6,971,308
18,408,391
* These were created as a result of merger of Ibrahim Leasing Limited and First Allied Bank Modaraba into Allied Bank Limited.
The annexed notes 1 to 46 form an integral part of these financial statements.
Director
Director
Chairman
53
Notes to the Financial Statements

1.
STATUS AND NATURE OF BUSINESS Allied Bank Limited (the Bank), incorporated in Pakistan, is a scheduled Bank, engaged in commercial banking and related services. The Bank is listed on all stock exchanges in Pakistan. The Bank operates a total of 757 (2006: 742) branches in Pakistan. The long term credit rating of the Bank rated by the Pakistan Credit Rating Agency Limited (PACRA) is 'AA'. Short term rating of the Bank is 'A1+'. The Bank is a holding company of ABL Asset Management Company Limited. The registered office of the Bank is situated in Lahore whereas the principal office is situated at Khayaban-e-Iqbal, Main Clifton Road, Bath Island, Karachi.
2.
(a)
BASIS OF PRESENTATION In accordance with the directives of the Federal Government regarding the shifting of the banking system to Islamic modes, the State Bank of Pakistan (SBP) has issued various circulars from time to time. Permissible forms of traderelated 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 utilized and the appropriate portion of mark-up thereon.
(b)
BASIS OF MEASUREMENT These financial statements have been prepared under the historical cost convention except that certain operating fixed assets are stated at revalued amounts, certain investments are stated at market value and derivative financial instruments have been marked to market.
3. 3.1
STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved Accounting Standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Ordinance, 1984 and the provisions of and regulations/directives issued under the Banking Companies Ordinance, 1962 and the Companies Ordinance, 1984. In case requirements differ, the provisions of and regulations/directives issued under the Banking Companies Ordinance, 1962 and the Companies Ordinance, 1984 shall prevail. The following new standards and amendments of approved accounting standards are applicable in Pakistan from the dates mentioned below against the respective standard of amendment.
Effective date (accounting periods beginning on or after)
3.2
(i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x)
IAS-1 IAS-23 IAS-27 IAS-41 IFRS-3 IFRIC-11 IFRIC-12 IFRIC-13 IFRIC-14 IFAS-2
(Revised) Presentation of Financial Statements (Revised) Borrowing Costs Consolidated and Separate Financial Statements Agriculture Business Combinations Group and Treasury Share Transactions Service Concession Arrangements Customer Loyalty Programs The Limit on Defined Benefit Asset, Minimum Funding Requirements and their Interactions Ijarah
January 01, 2009 January 01, 2009 January 01, 2009 May 22, 2007 January 01, 2009 March 01, 2007 January 01, 2008 July 01, 2008 January 01, 2008 July 01, 2007
The Bank expects that the adoption of the above standards and interpretations will have no material impact on the Bank's financial statements in the period of initial application. They do, however, give rise to additional disclosures. 3.3 The SBP, vide BSD Circular No. 10, dated August 26, 2002 has deferred the applicability of International Accounting Standard 39, Financial Instruments: Recognition and Measurement (IAS 39) and International Accounting Standard 40, Investment Property (IAS 40) for banking companies till further instructions. Accordingly, the requirements of these standards have not been considered in the preparation of these financial statements. However, investments have been classified in accordance with the categories prescribed by the SBP, vide BSD Circular No. 10, dated July 13, 2004. During the current year, a wholly owned subsidiary namely, ABL Asset Management Company Limited, was incorporated on October 12, 2007. The Bank, however, obtained exemption from preparation of consolidated financial statements from the SECP which was granted vide their letter No.EMD/233/673/2005-3264 dated February 22, 2008. However, this exemption is only available for the financial year ended December 31, 2007.
3.4
54
4.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates, judgements and assumptions that effect the reported amounts of assets and liabilities and income and expenses. It also requires 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 historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. In the process of applying the Bank's accounting policies, management has made the following estimates and judgements which are significant to the financial statements. (a) (b) (c) (d) (e) (f) classification of investments (Note 5.3) valuation of derivatives (Note 5.15.2) impairment (Note 5.11) recognition of taxation and deferred tax (Note 5.6) provisions (Note 5.3, 5.4 and 5.12); and accounting for post employment benefits (Note 5.7 and 34)
5. 5.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and cash equivalents For the purpose of Cash Flow Statement, cash and cash equivalents include cash and balances with treasury banks and balances with other banks (net of overdrawn nostro balances) in current and deposit accounts.
5.2
Lendings to/borrowings from financial institutions The Bank enters into transactions of borrowing (re-purchase) from and lending (reverse re-purchase) to financial institutions, at contracted rates for a specified period of time. These are recorded as under: (a) Sale under re-purchase agreements Securities sold subject to a re-purchase agreement are retained in the financial statements as investments and the counter party liability is included in borrowings from financial institutions. The differential in sale and re-purchase value is accrued on a prorata basis and recorded as interest expense. (b) Purchase under resale agreements Securities purchased under agreement to resell (reverse re-purchase) are included in lendings to financial institutions. The differential between the contracted price and resale price is amortised over the period of the contract and recorded as interest income. Other borrowings including borrowing from SBP are recorded at the proceeds received. Markup on such borrowing is charged to the profit and loss account over the period of borrowings on accrual basis.
5.3
Investments The management determines the appropriate classification of its investments at the time of purchase and classifies these investments as held for trading, available for sale or held to maturity. These are initially recognized at cost, being the fair value of the consideration given including the acquisition cost. (a) Held for trading These are securities which are either acquired for generating a profit from short-term fluctuations in market prices or dealers 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 that the Bank has the positive intent and ability to hold to maturity. (c) Available for sale These are investments that do not fall under the held for trading or held to maturity categories. In accordance with the requirements of the SBP, quoted securities, other than those classified as held to maturity and investments in subsidiaries, are carried at market value. Investments classified as held to maturity are required to be carried at amortized cost whereas investments in subsidiaries are accounted for in accordance with the relevant International Accounting Standard as applicable in Pakistan. The unrealized surplus/(deficit) arising on revaluation of the Banks held for trading investment portfolio is taken to the profit and loss account.
55

The surplus/(deficit) arising on revaluation of quoted securities classified as available for sale is kept in a separate account shown in the balance sheet below equity. The surplus/(deficit) arising on these securities is taken to the profit and loss account when actually realised upon disposal. Quoted securities are revalued as per directives of SBP. Unquoted equity securities are valued at the lower of cost and break-up value. Subsequent increases or decreases in the carrying value are credited/charged to profit and loss account. 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 in other unquoted securities are valued at cost less impairment losses, if any. Provision for diminution in the value of securities (except for debentures, participation term certificates and term finance certificates) is made after considering impairment, if any, in their value. Provision for diminution in value of debentures, participation term certificates and term finance certificates are made in accordance with the requirements of Prudential Regulations issued by SBP. 5.4 Advances (including net investment in finance lease) Advances are stated net of general and specific provisions. 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 recognized at an amount equal to the present value of the minimum lease payments, including guaranteed residual value, if any. Specific provision against funded loans is determined in accordance with the requirements of the Prudential Regulations issued by the SBP and charged to the profit and loss account. General provision is maintained at 1.5% of the fully secured consumer portfolio and 5% of the unsecured consumer portfolio. Advances are written off when there are no realistic prospects of recovery. 5.5 Operating fixed assets and depreciation Owned Property and equipment owned by the Bank, other than land which is not depreciated, are stated at cost or revalued amount less accumulated depreciation and impairment losses, if any. Depreciation is calculated using the straight line method, except buildings which are depreciated using the reducing balance method to write down the cost of property and equipment to their residual values over their estimated useful lives. The rates at which the fixed assets are depreciated are disclosed in note 11.2. 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 are disposed off. Surplus arising on revaluation of fixed assets is credited to surplus on revaluation of fixed assets account. Deficit arising on subsequent revaluation of fixed assets is adjusted against the balance in the above mentioned surplus account as allowed under the provisions of the Companies Ordinance, 1984. The surplus on revaluation of fixed assets to the extent of incremental depreciation charged on the related assets, is transferred to equity. An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is recognized in the profit and loss account in the year the asset is derecognized, except that the related surplus on revaluation of fixed assets (net of deferred tax) is transferred directly to equity. The cost of day to day servicing (normal repairs and maintenance) is charged to the profit and loss account as and when incurred. Intangible assets Intangible assets are carried at cost less any accumulated amortization and impairment losses, if any. The cost of intangible assets is amortized over their estimated useful lives, using the straight line method. Amortization is charged from the month the assets are available for use at the rate stated in note 11.3. Capital work-in-progress Capital work in progress is stated at cost. 5.6 Taxation Current Provision for current taxation is based on taxable income for the year determined in accordance with the prevailing laws for taxation on income earned. The charge for current tax is calculated using the prevailing tax rates or tax rates expected to apply to the profits for the year. The charge for current tax also includes adjustments, where considered necessary relating to prior years, arising from assessments finalised during the year for such years.
56
Deferred Deferred tax is recognized on all major temporary differences, tax credits and unused tax losses at the balance sheet date between the amounts attributed to assets and liabilities for financial reporting purpose and amounts used for taxation purposes. Deferred tax is calculated at the rates that are expected to apply to the periods when the difference will reverse, based on tax rates that have enacted or substantially enacted by the balance sheet date. Deferred tax assets are recognized only to the extent that it is probable that future taxable profits will be available against which the assets can be utilized. The Bank also recognizes a 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 IAS12 Income Taxes. 5.7 5.7.1 Staff retirement and other benefits Staff retirement schemes a) For employees who opted for the new scheme introduced by the management: An approved pension scheme (defined benefit scheme) under which the benefits on the basis of frozen basic salary service and age as on June 30, 2002 are payable to all employees whose date of joining the Bank is on or before July 01, 1992, i.e., who have completed 10 years of service as on June 30, 2002; and An approved gratuity scheme (defined benefit scheme) under which the benefits are payable as under: i) For members whose date of joining the Bank is on or before July 01, 1992, their services would be calculated starting from July 01, 2002 for gratuity benefit purposes. For members whose date of joining the Bank is after July 01, 1992 their services would be taken at actual for the purpose of calculating the gratuity benefit.
ii)
A Contributory Provident Fund scheme with the Bank making equal contribution to that made by employees (defined contribution scheme). b) For employees who did not opt for the new scheme, the Bank continues to operate the following: An approved pension scheme (defined benefit scheme) under which the benefits on the basis of frozen basic salary as on June 30, 2002 are payable to all employees opting continuation of the previous scheme and whose date of joining the Bank is on or before July 01,1992, i.e., who had completed ten years of service as on June 30, 2002; and A contributory benevolent fund for all its employees (defined benefit scheme). Annual contributions towards the defined benefit schemes are made on the basis of actuarial valuation carried out using the Projected Unit Credit Method. Actuarial gains/losses arising from experience adjustments and changes in actuarial assumptions are amortized over the future expected remaining working lives of the employees, to the extent of the greater of ten percent of the present value of the defined benefit obligation at that date (before deducting plan assets) and ten percent of the fair value of any plan assets at that date. 5.7.2 Other benefits a) Employees compensated absences The Bank provides for compensated vested and non-vested absences accumulated by its employees on the basis of actuarial advice under the Projected Unit Credit Method. b) Post retirement medical benefits The Bank provides post retirement medical benefits to eligible retired employees. Provision is made annually to meet the cost of such medical benefits on the basis of actuarial advice under the Projected Unit Credit Method. Actuarial gains/losses are amortized over the future expected average remaining lives of the employees. 5.8 Assets acquired in satisfaction of claims The Bank occasionally acquires assets in settlement of certain advances. These are stated at lower of the net realizable value of the related advances and the current fair value of such assets. 5.9 Deposits Deposits are initially recorded at the amount of proceeds received. Markup accrued on deposits is recognized separately as part of other liabilities and is charged to profit and loss account.
57

5.10
Subordinated Loans Subordinated loans are initially recorded at the amount of proceeds received. Markup accrued on these loans is recognized separately as part of other liabilities and is charged to profit and loss account over the period on accrual basis.
5.11
Impairment At each balance sheet date the Bank reviews the carrying amount of its assets to determine whether there is an indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of assets is estimated in order to determine the extent of the impairment loss, if any. Recoverable amount is the greater of net selling price and value in use. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the assets is reduced to its recoverable amount. Impairment losses are recognized as an expense immediately.
5.12
Provisions Provisions are recognized when the Bank has a present obligation (legal or constructive) as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount can be made. Provision against identified non-funded losses is recognized when intimated and reasonable certainty exists for the Bank to settle the obligation. The loss is charged to profit and loss account net of expected recovery and is classified under other liabilities.
5.13
Stock and cash dividends Stock and cash dividend declared subsequent to balance sheet date are considered as non-adjusting event and are not recorded in financial statements of the current year. These are recognized in the period in which they are approved.
5.14
Foreign currencies a) Functional and presentation currency Items included in the financial statements are measured using the currency of the primary economic environment in which the Bank operates. The financial statements are presented in Pakistani Rupees, which is the Bank's functional and presentation currency. b) Foreign currency transactions Transactions in foreign currencies are translated into 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 ruling on the balance sheet date. Forward foreign exchange contracts are valued at forward rates applicable to their respective maturities. c) Translation gains and losses Translation gains and losses are included in the profit and loss account. d) Commitments Commitments for outstanding forward foreign exchange contracts disclosed in these financial statements are translated at contracted rates. 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.
5.15
Financial instruments Financial instruments carried on the balance sheet include cash and bank balances, lendings to financial institutions, investments, advances, certain receivables, bills payable, borrowings from financial institutions, deposits, sub-ordinated loan and other payables. The particular recognition methods adopted for significant financial assets and financial liabilities are disclosed in the individual policy statements associated with them.
5.15.1 Financial assets and liabilities
5.15.2 Derivative financial instruments Derivative financial instruments are initially recognized at fair value on the date on which the derivative contract is entered into and are subsequently remeasured at fair value using appropriate valuation techniques. All derivative financial instruments are carried as assets when fair value is positive and liabilities when fair value is negative. Any change in the fair value of derivative financial instruments is taken to profit and loss account. 5.16 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 enforceable right to set off and the Bank intends to either settle on a net basis, or to realize the assets and to settle the liabilities simultaneously.
58
5.17
Recognition All regular way purchases and sales of financial assets are recognized on the trade date, i.e., the date that the Bank commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.
5.17.1 Trade date accounting
5.17.2 Revenue recognition Revenue is recognized to the extent that the economic benefits will flow to the Bank and the revenue can be reliably measured. The following recognition criteria must also be met before revenue is recognized. a) Advances and investments Markup/return on regular loans/advances and investments is recognized on accrual basis. Where debt securities are purchased at premium or discount, the same is amortized through the profit and loss account using the effective interest rate method. Interest or markup recoverable on classified loans and advances and investments is recognized on receipt basis. Interest/return/mark-up on rescheduled/restructured loans and advances and investments is recognized as permitted by the regulations of the SBP. Dividend income is recognized when the right to receive the dividend is established. Gains and losses on sale of investments are recognized in the profit and loss account. b) Lease financing 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. Gains/losses on termination of lease contracts, documentation charges, front-end fees and other lease income are recognized when realized. c) Fees, brokerage and commission Fees, brokerage and commission on letters of credit/guarantee are recognized on an accrual basis. Account maintenance and service charges are recognized when realized. 5.18 Segment reporting A segment is a distinguishable component of the Bank that is subject to risks and rewards that are different from those of other segments. A business segment is one that is engaged either in providing certain products or services, whereas a geographical segment is one engaged in providing certain products or services within a particular economic environment. Segment information is presented as per the Banks functional structure and the guidance of State Bank of Pakistan. The Bank comprises of the following main business segments: 5.18.1 Business segments a) Corporate finance This includes investment banking activities such as mergers and acquisitions, underwriting, privatization, securitization, Initial Public Offers (IPOs) and secondary private placements. b) Trading and sales This segment undertakes the Banks treasury, money market and capital market activities. c) Retail banking Retail banking provides services to small borrowers i.e. consumers, small and medium enterprises (SMEs) and borrowers agriculture sector. It includes loans, deposits and other transactions with retail customers. d) Commercial banking This includes loans, deposits and other transactions with corporate customers. e) Payment and settlement This includes payments and collections, funds transfer, clearing and settlement with the customers. 5.18.2 Geographical segments The Bank conducts all its operations in Pakistan. 5.19 Related party transactions Banking transactions with related parties are carried out at arms length, i.e., substantially on the same terms, including markup rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties and do not involve more than a normal risk (i.e.,under the comparable uncontrolled price method).
59

Rupees in 000
Note
December 31, 2007
December 31, 2006
6.
CASH AND BALANCES WITH TREASURY BANKS In hand Local currency Foreign currencies Remittances in transit With State Bank of Pakistan (SBP) in Local currency current accounts Foreign currency current account Foreign currency deposit accounts Non remunerative Remunerative With National Bank of Pakistan in Local currency current accounts National Prize Bonds 2,726,301 44,952 29,739,857 2,506,138 35,863 23,042,011 6.1 6.2 5,532,495 347,435 692,499 19,151,260 3,055 620,930 620,930 3,906,829 258,328 606,569 14,396,794 2,434 332,264 996,792
6.3
6.1 6.2 6.3
Deposits with the SBP are maintained to comply with the statutory requirements issued from time to time. This represents US Dollar Settelment Account maintained with SBP. This represents special cash reserve maintained with the SBP. The special cash reserve carries mark-up at rates ranging between 3.71% and 4.72% (2006: 3.39% and 4.39%) per annum.
Note December 31, 2007 December 31, 2006
Rupees in 000
7.
BALANCES WITH OTHER BANKS In Pakistan On current accounts On deposit account Outside Pakistan On current accounts On deposit account 7.1 284 668,165 668,449 48,057 300,000 1,194,127 160,827 1,703,011
7.1
Included in nostro accounts are balances, aggregating to Rs. 86.82 million (2006: Rs. 75.08 million), representing balances held with a related party outside Pakistan.
Rupees in 000
8.
LENDINGS TO FINANCIAL INSTITUTIONS Call money lendings Letters of placement Repurchase agreement lendings (Reverse Repo) Certificates of investment 8.1 8.2 8.3 & 8.6 8.4 1,500,000 1,850,000 12,924,241 2,145,000 18,419,241 475,000 384,500 15,385,739 2,805,000 19,050,239
8.1
These are unsecured lendings to Financial Institutions, carrying mark-up at the rates, ranging between 10.00% and 12.00% (2006: 12.00%) per annum and will mature on various dates, latest by February 19, 2008. These are clean placements with Non-Banking Finance Companies, carrying mark-up at rates, ranging between 9.75% and 10.30% (2006: 12.00% and 13.50%) per annum and maturing on various dates, latest by February 11, 2008. These are short-term lendings to various financial institutions against the government securities shown in note 8.6 below. These carry mark-up at rates ranging between 9.10% and 9.40% (2006: 8.25% and 9.40%) per annum and will mature on various dates, lastest by February 07, 2008. The certificates of investment carry mark-up at rates ranging between 9.80% and 10.25% (2006: 11.25% and 12.50%) per annum and will mature on various dates, latest by February 29, 2008.
8.2
8.3
8.4
60
Rupees in 000
December 31, 2007
December 31, 2006
8.5
Particulars of lending In local currency In foreign currencies 18,419,241 18,419,241 19,050,239 19,050,239
8.6
Securities held as collateral against lending to financial institutions

December 31, 2007 Further Held by given as Bank collateral December 31, 2006 Further given as collateral
Rupees in 000
Total
Held by Bank
Total
Market Treasury Bills
12,924,241 12,924,241
12,924,241 12,924,241
15,385,739 15,385,739
15,385,739 15,385,739
9.
INVESTMENTS
Held by Bank December 31, 2007 Given as collateral Held by Bank December 31, 2006 given as collateral
Rupees in 000
Note
Total
Total
9.1
Investments by types: 33,860 24,936,479 444,758 1,601,605 275,000 19,606,845 82,099 451,219 2,514,900 1,890,918 2,420,000 736,636 54,960,459 11,108,762 160,010 4,903,356 16,172,128 500,000 42 71,666,447 9.3 (192,290) 71,474,157 9.5 20.2 (1,463) (40,628) 71,432,066 12,543,383 12,543,383 12,543,383 12,543,383 (16,986) 12,526,397 33,860 37,479,862 444,758 1,601,605 275,000 19,606,845 82,099 451,219 2,514,900 1,890,918 2,420,000 736,636 67,503,842 11,108,762 160,010 4,903,356 16,172,128 500,000 84,209,830 (192,290) 84,017,540 (1,463) (57,614) 83,958,463 267,290 18,143,360 298,625 1,457,860 275,000 266,229 17,099 451,219 305,000 250,000 1,320,863 22,785,255 13,881,122 212,087 4,867,258 18,960,467 62,488 42,075,500 (203,038) 41,872,462 (30,180) (87,162) 41,755,120 5,188,065 5,000 5,193,065 6,073 6,073 5,199,138 5,199,138 (1,017) 5,198,121 267,290 23,331,425 5,000 298,625 1,457,860 275,000 266,229 17,099 451,219 305,000 250,000 1,320,863 27,978,320 13,887,195 212,087 4,867,258 18,966,540 62,488 47,274,638 (203,038) 47,071,600 (30,180) (88,179) 46,953,241
Heldfortrading securities Ordinary shares of listed companies Availableforsale securities Market Treasury Bills Federal Investment Bonds Pakistan Investment Bonds Ordinary shares/certificates of listed companies Preference shares of listed companies Investment in open end mutual funds Ordinary shares of unlisted companies Ordinary shares of unlisted companies (related parties) Pre IPO investments Privately placed investments Sukuk Bonds Listed Term finance certificates (TFCs) Heldtomaturity securities Pakistan Investment Bonds Foreign Currency Bonds (US$) TFCs, Debentures, Bonds and PTCs Subsidiary ABL Asset Management Company Limited Allied Management Services (Private) Limited Investment at cost Less: Provision for diminution in value of investments Investments (Net of Provisions) Unrealized loss on revaluation of Heldfortrading securities Deficit on revaluation of Availableforsale securities Total investments at market value
61

Rupees in 000
Note
December 31, 2007
December 31, 2006
9.2
Investments by segments: Federal Government Securities: Market Treasury Bills Pakistan Investment Bonds Federal Investment Bonds Foreign Currency Bonds (US$) 9.2.1& 9.2.2 37,479,862 11,553,520 160,010 1,635,465 533,318 19,606,845 9.2.4 275,000 2,514,900 1,890,918 23,331,425 14,185,820 5,000 212,087 1,725,150 468,318 266,229 275,000 305,000 250,000
Fully Paid up Ordinary Shares: Listed Companies Unlisted Companies Investment in Open End Mutual Funds Fully paid up Preference Shares Pre IPO Investments Privately placed Investments Term Finance Certificates, Debentures, Bonds and Participation Term Certificates: Term Finance Certificates Listed Unlisted Debentures Bonds Government guaranteed Others Participation Term Certificates Subsidiary Total investments at cost Less: Provision for diminution in the value of investment Investments (Net of Provisions) Unrealized loss on revaluation of Heldfortrading securities Deficit on revaluation of Availableforsale securities Total investments at market value 9.2.1 9.5 20.2 9.3 1,013,140 1,744,476 65,184 410,280 4,820,000 6,912 500,000 84,209,830 (192,290) 84,017,540 (1,463) (57,614) 83,958,463 1,676,436 3,262,128 65,392 938,497 238,645 7,023 62,488 47,274,638 (203,038) 47,071,600 (30,180) (88,179) 46,953,241 9.2.3
Included herein are Market Treasury Bills having a book value of Rs. 12,231.58 million (2006: Rs. 4,855.86 million), given as collateral against repurchase agreement borrowings from financial institutions. Included herein are Market Treasury Bills having a face value of Rs.339.80 million (2006: Rs. 339.80 million), held by the SBP and National Bank of Pakistan against Demand Loan and TT/DD discounting facilities sanctioned to the Bank. This includes Rs. 200 million contributed by the Bank towards the equity of Khushhali Bank, as per SBP Letter No. BSD (RU-26/625-MFB/13317/00), dated August 07, 2000. In accordance with the restrictions imposed by Khushhali Bank Ordinance, 2000, the Bank cannot sell/transfer these shares before a period of five years from the date of subscription, that has expired on October 10, 2005. Thereafter, such sale/transfer shall be subject to the prior approval of State Bank of Pakistan, pursuant to section 10 of the Khushhali Bank Ordinance, 2000. In addition, profit of Khushhali Bank Limited cannot be distributed as dividend under clause 35(i) of the aforementioned Ordinance. However, Khushhali Bank Ordinance is in the process of amendment under which the restriction on the dividend payment is expected to be deleted. Moreover, the shareholders of Khushhali Bank Limited at the extra ordinary general meeting held in December 2007 have passed a resolution stating that Khushhali Bank be licensed and operated under the Micro Finance Institution Ordinance, 2001 under the conversion structure stipulated by SBP, which does not restrict the distribution of dividend to members. These represent 20,000,000 (2006: 20,000,000) KIBOR plus 2% Cumulative Preference Shares of Masood Textile Mills Limited, with Call Option available to the issuer and Conversion Option available to the Bank, after completion of four years from the date of issue, i.e., June 29, 2005 and 7,500,000 (2006: 7,500,000) KIBOR plus 2.5% Cumulative Preference Shares of Fazal Cloth Mills Limited having redemption term within 60 days after completion of 5 years from the date of issue, i.e., May 13, 2006. Information relating to investments in shares of listed and unlisted companies, redeemable capital, debentures and bonds, required to be disclosed as part of the financial statements under State Bank of Pakistan's BSD Circular No. 4 dated February 17, 2006, is given in Annexure "I", which is an integral part of these financial statements.
9.2.2
9.2.3
9.2.4
9.2.5
62
Rupees in 000
December 31, 2007
December 31, 2006
9.3
Particulars of Provision Opening balance Charge for the year Reversals Net charge / (reversal) Amounts written off Closing balance 203,038 9,130 (8,411) 719 (11,467) 192,290 342,115 24 (14,647) (14,623) (124,454) 203,038
9.3.1
Particulars of Provision in respect of Type and Segment By Type Availableforsale securities Ordinary shares of listed companies Ordinary shares of unlisted companies Heldtomaturity securities TFCs, Debentures, Bonds and PTCs 59,543 13,873 73,416 118,874 192,290 By Segment Fully Paid up Ordinary Shares: Listed companies Unlisted companies Term Finance Certificates, Debentures, Bonds and Participation Term Certificates: Term Finance Certificates unlisted Debentures Participation Term Certificates 46,778 65,184 6,912 118,874 192,290 60,582 65,392 7,023 132,997 203,038 59,543 13,873 73,416 65,298 4,743 70,041 65,298 4,743 70,041 132,997 203,038
9.4
Quality of Available for Sale Securities Information relating to quality of available for sale securities required to be disclosed as part of the financial statements under SBP's BSD Circular No. 4 dated February 17, 2006, is given in Annexure "I", which is an integral part of these financial statements.
Rupees in 000
Note
December 31, 2007
December 31, 2006
9.5
Unrealized loss on revaluation of investments classified as held for trading Ordinary shares of listed companies (1,463) (30,180)
10.
ADVANCES Loans, cash credits, running finances, etc. - in Pakistan Net investment in finance lease - in Pakistan Bills discounted and purchased (excluding treasury bills) Payable in Pakistan Payable outside Pakistan 1,455,922 3,256,536 4,712,458 Financing in respect of continuous funding system (CFS) Advances - gross Provision for non-performing advances General provision for consumer financing Advances - net of provision 10.3 10.5.1 10.5.2 176,197,260 2,327,097 178,524,357 (10,103,954) (13,123) 168,407,280 2,942,960 3,493,264 6,436,224 150,597,601 1,107,817 151,705,418 (7,657,737) (14,047) 144,033,634 10.2 170,743,654 741,148 143,383,499 777,878
63

Rupees in 000
December 31, 2007
December 31, 2006
10.1
Particulars of advances (Gross) 173,222,434 5,301,923 178,524,357 150,783,971 921,447 151,705,418 100,024,999 51,680,419 151,705,418
10.1.1 In local currency In foreign currencies
10.1.2 Short term (for upto one year) Long term (for over one year)
122,134,447 56,389,910 178,524,357
10.2
Net investment in finance lease

December 31, 2007 Not later than one Year Later than one and less than five years Not later than one year December 31, 2006 Later than one and less than five years
Rupees in 000
Over five years
Total
Over five years
Total
Lease rentals receivable Residual value Minimum lease payments Financial charges for future periods Present value of minimum lease payments 10.3
332,529 33,341 365,870 (63,243) 302,627
374,697 108,030 482,727 (44,206) 438,521
707,226 141,371 848,597 (107,449) 741,148
317,623 47,653 365,276 (67,503) 297,773
455,475 94,295 549,770 (69,665) 480,105
773,098 141,948 915,046 (137,168) 777,878
This represents secured financing in respect of purchase of shares from the CFS market. These carry markup at the rate of 11.17% to 19.77% (2006: 15.52% to 19.79% ) per annum. Advances include Rs. 11,354.923 million (2006: Rs. 10,478.589 million) which have been placed under non-performing status as detailed below:December 31, 2007 Classified Advances Provision Required Total Domestic Overseas Total Provision Held Domestic Overseas Total
10.4
Category of Classification Rupees in '000
Domestic
Overseas
Other assets especially mentioned Substandard Doubtful Loss
32,765 1,311,832 532,967 9,477,359 11,354,923
32,765 1,311,832 532,967 9,477,359
327,091 265,960 9,365,630 9,958,681
327,091 265,960 9,365,630 9,958,681
327,091 265,960 9,365,630 9,958,681
327,091 265,960 9,365,630 9,958,681
11,354,923
December 31, 2006 Classified Advances Category of Classification Rupees in '000 Domestic Overseas Total Provision Required Domestic Overseas Total Provision Held Domestic Overseas Total
Other assets especially mentioned Substandard Doubtful Loss
35,811 534,865 659,307 9,248,606 10,478,589
35,811 534,865 659,307 9,248,606
88,574 229,548 7,339,615 7,657,737
88,574 229,548 7,339,615 7,657,737
88,574 229,548 7,339,615 7,657,737
88,574 229,548 7,339,615 7,657,737
10,478,589
64
10.5
Particulars of provision against non-performing advances
10.5.1 This represents provision against non-performing advances amounting to Rs. 9,958.681 million and a provision of Rs. 145.273 million made against Japan Power Generation Limited without changing its status to non-performing as per SBP Directive No. BID (Insp)/722/71-02-2007 dated March 14, 2007. 10.5.2
December 31, 2007 Rupees in 000 Note Specific General Total Specific December 31, 2006 General Total
Opening balance Charge for the year Reversals Amounts written off Closing balance 10.6
7,657,737 3,277,330 (708,743) 2,568,587 (267,643) 9,958,681
14,047 (924) (924) 13,123
7,671,784 3,277,330 (709,667) 2,567,663 (267,643) 9,971,804
8,648,742 1,561,347 (981,934) 579,413 (1,570,418) 7,657,737
10,155 3,892 3,892 14,047
8,658,897 1,565,239 (981,934) 583,305 (1,570,418) 7,671,784
10.5.3 Particulars of provisions against nonperforming advances

December 31, 2007 Rupees in 000 Specific General Total Specific December 31, 2006 General Total
In local currency In foreign currencies
9,958,681 9,958,681
13,123 13,123
9,971,804 9,971,804
7,657,737 7,657,737
14,047 14,047
7,671,784 7,671,784
10.5.4 During the year, in order to comply with the requirements of the BSD Circular No. 7, dated October 12, 2007, issued by the SBP, the Bank changed the method of computation of provision against the non-performing advances. SBP vide this circular has completely withdrawn the benefit of Forced Sale Valuation (FSV) agianst all NPLs (except NPLs of housing finance) for calculating provisioning requirement with effect from December 31, 2007. The Bank has made a provision of Rs. 1,906.343 million in order to comply with the requirements of aformentioned circular. Had the above reffered withdrawal of benefit of FSV against NPLs for calcualting provision not taken place, profit before taxation for the year and advances (net of provision) at the end of the year would have been higher by Rs. 1,906.343 million.
Rupees in 000 Note December 31, 2007 December 31, 2006
10.6
Particulars of write offs: 10.5 267,643 1,187 268,830 1,570,418 136,189 1,706,607 1,196,664 509,943 1,706,607 Directly charged to Profit & Loss account
10.6.1 Against Provisions
10.6.2 Write Offs of Rs. 500,000 and above Write Offs of Below Rs. 500,000
10.7
193,851 74,979 268,830
10.7
Details of loan write off of Rs. 500,000/- and above In terms of sub-section (3) of Section 33A of the Banking Companies Ordinance, 1962, the Statement in respect of writtenoff loans or any other financial relief of five hundred thousand rupees and above allowed to a person(s) during the year ended December 31, 2007 is given in Annexure - II. However, this write off does not affect the Bank's right to recover debts from these customers.
Rupees in 000
December 31, 2007
December 31, 2006
10.8
Particulars of loans and advances to directors, related parties, etc. Debts due by directors, executives or officers of the Bank or any of them either severally or jointly with any other persons Balance at beginning of year Loans granted during the year Repayments Balance at end of year
4,200,854 791,123 (754,971) 4,237,006
3,887,659 939,585 (626,390) 4,200,854
65

Rupees in 000
Note
December 31, 2007
December 31, 2006
11.
OPERATING FIXED ASSETS Capital work-in-progress Property and equipment Intangible assets 11.1 11.2 11.3 831,962 6,678,658 38,008 7,548,628 516,047 5,899,386 29,678 6,445,111
11.1
Capital work-in-progress Civil works Equipment Advances to suppliers and contractors 464,465 81,610 285,887 831,962 249,263 44,703 222,081 516,047
11.2
Property and equipment

Cost/Revaluation Accumulated Depreciation Charge for the year/ At adjustment/ At January 1, (depreciation December 31, 2007 on deletions) 2007
Description Rupees in 000
Note
At January 1, 2007
Additions/ (deletions)
At December 31, 2007
Net book value at December 31, 2007
Annual rate of depreciation %
Land Buildings Furniture and fixtures Electrical, office and computer equipment Vehicles Building improvements (rented premises) Total
11.4 11.4
3,704,167 1,538,382 361,256 1,149,681 348,509
348,488 (14,453) 272,262 36,533 (10,997) 367,850 (17,044) 76,854 (77,824) 58,975
4,038,202 1,810,644 386,792 1,500,487 347,539
136,593 275,286 703,797 125,708
77,439 20,824 (8,604) 162,299 (16,917) 57,591 (46,073) 14,813 332,966 (71,594)
214,032 287,506 849,179 137,226
4,038,202 1,596,612 99,286
5 10
651,308 14.28 50 210,313 20
52,095
111,070 8,194,734
13,320 1,254,704
28,133 1,516,076
82,937 6,678,658
20
7,154,090 1,160,962 (120,318)

Cost/Revaluation
Note
At January 1, 2006
Additions/ (deletions)
At December 31, 2006
Accumulated Depreciation Charge for the year/ At adjustment/ At January 1, (depreciation December 31, 2006 on deletions) 2006
Net book value at December 31, 2006
Annual rate of depreciation %
Land Buildings Furniture and fixtures Electrical, office and computer equipment Vehicles Building improvements (rented premises) Total
11.4 11.4
2,882,599 1,256,759 367,198 891,789 219,749
852,585 (31,017) 284,919 (3,296) 8,650 (14,592) 280,917 (23,025) 201,839 (73,079) 26,163
3,704,167 1,538,382 361,256 1,149,681 348,509
75,293 265,015 614,306 152,924
61,465 (165) 23,801 (13,530) 110,697 (21,206) 28,388 (55,604) 7,094 231,445 (90,505)
136,593 275,286 703,797 125,708
3,704,167 1,401,789 85,970
5 10
445,884 14.28 50 222,801 20
25,932
52,095 7,154,090
6,226 1,113,764
13,320 1,254,704
38,775 5,899,386
20
5,644,026 1,655,073 (145,009)
66
11.3
Intangible assets
Cost At January 01, 2007 At December 31, 2007 Accumulated Amortization At January 01, 2007 Amortization/ (amortization on deletion) At December 31, 2007 Net book value at December 31, 2007 Rate of amortization %
Additions/ (deletion)
Computer software
56,890
17,020 (270)
Cost
73,640
27,212
8,690 (270)
35,632
38,008
14.28
Accumulated Amortization At December 31, 2006 At January 01, 2006 Amortization/ (amortization on deletion) At December 31, 2006 Net book value at December 31, 2006 Rate of amortization %
At January 01, 2006
Additions/ (deletion)
Computer software 11.4
46,733
10,157
56,890
19,776
7,436
27,212
29,678
14.28
During the year 2005, the Bank arranged for valuation of properties from M/s. Iqbal A. Nanjee & Co. The revalued amounts of properties have been determined on the basis of Fair Value Model. The revaluation resulted in increase in the carrying values of the properties by Rs. 868.90 million, as at December 31, 2005. Had there been no revaluation, the carrying amount of revalued assets would have been as follows:
December 31, 2007 December 31, 2006
Rupees in 000
Land Building For information regarding location of revalued properties, refer Annexure III. 11.5 Fair value of property and equipment is not materially different from their carrying amount.
Note
1,647,571 477,795
1,647,789 503,395
Rupees in 000
December 31, 2007
December 31, 2006
11.6
Effect in the current year on profit and loss account of surplus arising on revaluation of buildings carried out in the year 2005
20.1
28,408
29,926
11.7
The land and buildings currently in use of the Bank include certain properties that have been acquired in satisfaction of claims. The total cost and net book value of these properties as at December 31, 2007 amounted to Rs. 1,305.336 million and Rs. 1,246.653 million respectively.
Rupees in 000
11.8 11.9
Restriction/discrepancy in the title of property having a net book value of Carrying amount of temporarily idle property and equipment
26,311 46,978
26,311 61,432
11.10 The gross carrying amount of fully depreciated/amortized assets that are still in use Furniture and fixtures Electrical, office and computer equipment Vehicles Intangible assets - software 11.11 The carrying amount of property and equipment that have retired from active use and are held for disposal 153,850 556,370 36,799 4,668 153,845 556,360 36,844 4,668
134
123
11.12 Fixed assets include the plot carried at cost of Rs. 33.790 million, which is acquired with the funds of the Bank and held in the name of Mohammad Waseem Mukhtar, the Director of the Bank.
67

11.13 Disposal of fixed assets The details of disposal of assets whose original cost or book value exceeds rupees one million or two hundred and fifty thousand rupees respectively, whichever is lower, are given below:
Original cost / revalued amount Rupees in 000
Accumulated depreciation
Book value
Sale proceeds
Mode of disposal
Particulars of purchaser
Land Plot # S31R124(9) 14,453 14,453 Furniture & Fixtures Items having book value of less than Rs.250,000 and cost of less than Rs.1,000,000 Electrical, office and computer equipment Items having book value of less than Rs.250,000 and cost of less than Rs.1,000,000 Vehicles Suzuki Cultus Toyota Corolla Toyota Corolla Toyota Corolla Suzuki Cultus Honda Civic Items having book value of less than Rs.250,000 and cost of less than Rs.1,000,000 609 862 1,589 879 609 1,090 122 517 1,589 161 325 1,090 487 345 718 284 487 551 710 879 487 515 As per Bank policy As per Bank policy Auction Insurance Claim As per Bank policy Auction Mr. Owais Shahid, Employee, Karachi Mr. Sibtain Naqvi, Employee, Karachi Mr. Farhan A Jaferi, Karachi EFU General Insurance Mr. Noman Naseem, Employee, Karachi Mr. Malik Abdul Khaliq, Karachi 14,453 14,453 13,600 13,600 Negotiation Miss Maqsooda Sultan, Lahore
10,997
8,604
2,393
2,415
Negotiation
Various
17,044
16,917
127
210
Negotiation
Various
72,186 77,824
42,269 46,073 71,594

90,505
29,917 31,751 48,724

34,355
43,167 46,796 63,021

102,752
Various
Various
December 31, 2007

December 31, 2006
120,318
124,860
Information relating to sale of fixed assets (otherwise than through a regular auction) made to chief executive or a director or an executive or a shareholder holding not less that ten percent of the voting shares of the Bank or any related party, as required by SBP's BSD circular no. 4 dated February 17, 2006, is given in Annexure "III" and is an integral part of these financial statements.
68
Rupees in 000
Note
December 31, 2007
December 31, 2006
12.
DEFERRED TAX ASSETS Deferred debits arising in respect of Compensated leave absences Provision against: Investments Other assets Off balance sheet obligations Post retirement medical benefits Deficit on revaluation of investments Deferred credits arising due to Surplus on revaluation of fixed assets Accelerated tax depreciation / amortization Excess of investment in finance lease over written down value of leased assets 20.1 (189,006) (219,275) (83,559) (491,840) 662,431 (198,948) (109,242) (97,643) (405,833) 638,168 306,312 67,302 246,236 102,736 411,520 20,165 1,154,271 323,887 48,209 208,277 88,804 368,540 6,284 1,044,001
20.2
12.1
Through Finance Act 2007, a new section 100A read with the 7th Schedule (the Schedule) was inserted in the Income Tax Ordinance, 2001 for the taxation of banking companies. The Schedule seeks to simplify the taxation of banking companies and is applicable from the tax year 2009 (financial year ending on December 31, 2008). The 7th Schedule does not contain transitory provisions to deal with the disallowances made upto the year ended December 31, 2007. This issue has been taken up with the tax authorities through Pakistan Banks Association for formulation of transitory provisions to deal with the items which were previously treated differently under the then applicable provisions. The deferred tax asset on the deductible temporary differences disallowed as a deduction in the past up to December 31, 2007 is being kept as an asset as the Bank is confident that transitory provisions would be introduced to set out the mechanism of claiming where benefit of these allowances can be claimed.
Rupees in 000
Note
December 31, 2007
December 31, 2006
13.
OTHER ASSETS Income/Markup accrued on advances, investments and placements: in local currency in foreign currencies Due on account of sale of investments Advances, deposits, advance rent and other prepayments Advance taxation (payments less provisions) Stationery and stamps on hand Prepaid exchange risk fee Due from the employees' retirement benefit schemes 34.4 Unrealized gain on forward foreign exchange contracts Exise Duty Receivable from SBP customers encashments Suspense account Others Less: Provision held against other assets Other assets (net of provision) 13.1 4,011,197 88,620 717,618 4,508,847 48,038 24 1,278,200 53,995 11 58,497 622,568 21,289 11,408,904 (703,530) 10,705,374 3,846,259 9,947 249,629 950,208 4,135,369 49,252 1,032,064 15,539 28,048 423,204 16,917 10,756,436 (595,075) 10,161,361
13.1
Provision against other assets Opening balance Charge for the year Reversals Net charge Written off Closing balance 595,075 458,206 (338,627) 119,579 (11,124) 703,530 479,088 208,652 (3,345) 205,307 (89,320) 595,075
14.
BILLS PAYABLE In Pakistan Outside Pakistan 3,490,329 4,055 3,494,384 2,273,952 4,055 2,278,007
69

Rupees in 000
Note
December 31, 2007
December 31, 2006
15.
BORROWINGS In Pakistan Outside Pakistan 22,878,061 55,595 22,933,656 18,033,050 377,375 18,410,425
15.1
Particulars of borrowings with respect to Currencies In local currency In foreign currencies 22,878,061 55,595 22,933,656 18,033,050 377,375 18,410,425
15.2
Details of borrowings Secured/Unsecured Secured Borrowings from financial institutions Borrowings from State Bank of Pakistan Under export refinance scheme LTF EOP Repurchase agreement borrowings Unsecured Call borrowings Overdrawn nostro accounts 15.6 15.7 2,100,000 55,595 2,155,595 22,933,656 3,700,000 377,375 4,077,375 18,410,425 15.3 15.4 15.5 15,000 4,509,834 4,021,644 8,531,478 12,231,583 14,500 5,555,134 3,907,552 9,462,686 4,855,864
15.3
The Bank has entered into various agreements for financing with the State Bank of Pakistan (SBP) for extending export finance to customers. As per the agreements, the Bank has granted the 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 the SBP. These carry interest at the rate of 6.5% (2006: ranging between 6.5% and 7.5%) per annum. These borrowings are repayable within six months from the deal date. This represents Long Term Financing against Export Oriented Projects (LTFEOP) availed by the Bank for further extending the same to its customers for export oriented projects, for a maximum period of 7.5 years. The loan repayments to SBP correspond the respective repayment from customers. The loan carries markup ranging from 4% to 5% (2006: 4% to 5 %) per annum. These represent funds borrowed from the local interbank market against government securities, carrying markup at rates, ranging between 9.35% and 10.00% (2006: 8.00% and 8.85%) per annum maturing on various dates, latest by January 31, 2008. These represent unsecured borrowings from the local interbank market, carrying markup at rates, ranging between 9.30% and 10.25% (2006: 10.35% and 11.25%) per annum maturing on various dates, latest by April 03, 2008. Included in overdrawn nostro accounts are balances, aggregating to Rs. Nil (2006: Rs. 144.05 million), representing balances held with a related party outside Pakistan.
15.4
15.5
15.6
15.7
Rupees in 000
16.
DEPOSITS AND OTHER ACCOUNTS Customers Fixed deposits Savings deposits Current accounts Remunerative Nonremunerative Financial Institutions Remunerative deposits 9,711,263 263,972,382 6,321,414 206,031,324 72,912,363 71,255,336 42,351,315 67,742,105 254,261,119 53,304,136 66,954,303 23,028,853 56,422,618 199,709,910
70
Rupees in 000
December 31, 2007
December 31, 2006
16.1
Particulars of deposits In local currency In foreign currencies 250,079,804 13,892,578 263,972,382 198,931,209 7,100,115 206,031,324
17.
SUBORDINATED LOANS Term Finance Certificates Unsecured 2,499,000 2,500,000
The Bank has issued unsecured subordinated Term Finance Certificates, which will contribute towards Tier II capital for minimum capital requirements (MCR) as per guidelines set by the SBP, under BSD Circular No. 12, dated August 24, 2004, to support the Bank's growth. All the regulatory approvals were obtained in December 2006. Liability to the TFC holders is subordinated to and rank inferior to all other debts of the Bank including deposits and is not redeemable before maturity without prior approval of the SBP. The rate of return is based on the Karachi Interbank Offer Rate (KIBOR) prevailing on the last working day before the beginning of each semi annual redemption period plus 1.9% (no floor, no cap). 0.24% of the principal shall be redeemed in the first 72 months and the remaining principal shall be redeemed in 4 equal semiannual installments of 24.94% each of the Issue amount respectively, starting from the 78th month. Other salient features of the issue are as follows: Total issue : Rating : Listing : Repayment : Profit payment : Rs. 2,500 million A Karachi Stock Exchange (Guarantee) Ltd. 8 Years (2007 2014) Semi annually in arrears (365 day basis)
Rupees in 000
Note
18.
OTHER LIABILITIES Markup/Return/Interest payable in local currency Markup/Return/Interest payable in foreign currency Accrued expenses Branch adjustment account Payable on account of purchase of investments Provision for: gratuity employees' medical benefits employees' compensated absences Unclaimed dividends Dividend payable Provision against offbalance sheet obligations Retention money payable Security deposits against lease Others 1,226,480 12,323 366,323 1,807,988 251,174 34.4 34.4 34.12 90,845 1,175,772 875,178 25,369 6,497 293,532 35,930 144,881 1,019,767 7,332,059 1,323,318 31,279 324,389 131,623 112,570 1,052,971 925,392 4,506 253,727 16,436 142,948 800,108 5,119,267
18.1
18.1
Provision against offbalance sheet obligations Opening balance Charge for the year Reversals Net charge Closing balance The above provision has been made against letters of guarantee issued by the Bank. 253,727 41,853 (2,048) 39,805 293,532 251,181 4,108 (1,562) 2,546 253,727
71

19. 19.1
SHARE CAPITAL Authorized Capital

December 31, 2007 December 31, 2006 December 31, 2007 December 31, 2006
No. of shares
Rupees in '000
1,000,000,000 19.2
1,000,000,000
Ordinary shares of Rs.10/ each
10,000,000
10,000,000
Issued, subscribed and paid-up capital Fully paid-up Ordinary shares of Rs.10/- each
December 31, 2007 December 31, 2006 Ordinary Shares December 31, 2007 December 31, 2006
No. of shares
Rupees in 000
406,780,094 114,308,294 521,088,388
406,780,094 24,535,471 431,315,565
Fully paid in cash Issued as bonus shares
4,067,801 1,143,083 5,210,884
4,067,801 245,355 4,313,156
9,148,550
9,148,550
18,348,550 Ordinary shares of Rs. 10 each, determined pursuant to the Scheme of Amalgamation in accordance with the swap ratio, stipulated therein less 9,200,000 Ordinary shares of Rs. 10 each, held by ILL on the cut-off date (September 30, 2004) 8,400,000 Ordinary shares of Rs. 10 each, determined pursuant to the Scheme of Amalgamation of First Allied Bank Modaraba with Allied Bank Limited in accordance with the share swap ratio stipulated therein
91,486
91,486
8,400,000 538,636,938
8,400,000 448,864,115
84,000 5,386,370
84,000 4,488,642
Ibrahim Fibres Limited and Ibrahim Agencies (Private) Limited, related parties of the Bank, held 170,379,240 (31.63%) and 47,473,652 (8.81%) [December 31, 2006: 141,982,700 (31.63%) and 27,281,554 (6.08%)] Ordinary shares of Rs.10 each, respectively, as at December 31, 2007.
Rupees in 000 Note December 31, 2007 December 31, 2006
20.
SURPLUS ON REVALUATION OF ASSETS NET OF TAX Surplus/(deficit) arising on revaluation of: fixed assets securities Surplus on revaluation of assets net of tax 20.1 20.2 1,507,300 (37,449) 1,469,851 1,540,001 (81,895) 1,458,106
20.1
Surplus on revaluation of Fixed Assets Surplus on revaluation of fixed assets as at January 1 Surplus realized on disposal of revalued properties Transferred to unappropriated profit in respect of incremental depreciation charged during the year net of deferred tax Related deferred tax liability 11.6 Surplus on revaluation of fixed assets as at December 31 Less: Related deferred tax liability on : Revaluation as at January 1 Disposal of revalued properties Incremental depreciation charged during the year transferred to profit and loss account 198,948 (9,942) 189,006 1,507,300 209,965 (543) (10,474) 198,948 1,540,001 1,738,949 (14,235) (18,466) (9,942) (28,408) 1,696,306 1,789,024 (20,149) (19,452) (10,474) (29,926) 1,738,949
72
Rupees in 000
Note
December 31, 2007
December 31, 2006
20.2
Surplus/(Deficit) on revaluation of Availableforsale securities Federal Government Securities Market Treasury Bills Pakistan Investment Bonds Term Finance Certificates Listed Shares/Certificates Listed Mutual Funds 9.1 Less : Related deferred tax asset (62,104) (2,577) 19,921 (79,261) 66,407 (57,614) 20,165 (37,449) (15,715) (2,240) 7,298 (97,150) 19,628 (88,179) 6,284 (81,895)
21. 21.1
CONTINGENCIES AND COMMITMENTS Direct credit substitutes Guarantees in favour of: Banks and financial institutions 1,971,776 1,761,869
21.2
Transactionrelated contingent liabilities Guarantees in favour of: Government Others 4,040,048 6,235,919 10,275,967 83,037,690 3,058,291 1,986,614 4,761,103 6,747,717 38,142,108 2,738,318
21.3 21.4 21.5
Traderelated contingent liabilities Claims against the Bank not acknowledged as debt
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.
Rupees in 000
21.6
Commitments in respect of forward foreign exchange contracts Purchase Sale 10,998,473 4,763,749 6,983,267 3,266,742
21.7
Commitments in respect of: Civil works Acquisition of operating fixed assets 752,139 168,654 188,174 294,037 1,149,408 150,384
21.8 21.9
Commitments in respect of lease financing Commitments in respect of: Forward lending Forward borrowing
1,000,000 1,000,000
1,853,461 1,853,461 250,824
21.10 Commitments in respect of lending against CFS 21.11 Commitments in respect of purchase of shares
733 865,000
73

21.12 Other Contingencies 21.12.1 The Income tax assessments of the Bank have been finalized up to and including Tax Year 2006 for local operations and Azad Kashmir Operations. Further, income tax returns for the tax year 2007 have also been filed for local and Azad Kashmir Operations. a) While finalizing income tax assessments up to the assessment year 2000-2001, the Income Tax Authorities made certain add backs with a tax impact of Rs. 278 million. As a result of appeals filed by the Bank before the Appellate Authorities, these add-backs were set-aside with a tax impact of Rs. 125 million. The appeal effect orders with regard to the above matters are pending. The assessments from Assessment Year 2001-2002 to Tax Year 2005 have been finalized with net additional tax liability of Rs. 4,684 million. As a result of the appeals filed by the Bank before the Appellate Authorities, various additions having tax impact of Rs. 4,718 million and Rs. 2,424 million have been deleted and set-aside by the Appellate Authorities, respectively. The appeal effect orders with regard to the above matters are pending. The assessment for Tax Year 2006 has been finalized with net additional tax liability of Rs. 671 million. However, the Bank has filed appeal against the above referred order before the Appellate Authority.
b)
c)
Pending the finalization of the above-referred appeals, no provision has been made by the Bank in an aggregate sum of Rs. 5,633 million in these financial statements. This sum includes tax liability, aggregating to Rs. 4,718 million, already deleted by the Appellate Authorities for which appeal effect orders are pending. The management is hopeful that the outcome of these appeals will be in favor of the Bank. 21.12.2 As a result of a compromise decree granted by the Honourable High Court of Sindh in August 2002, Fateh Textile Mills Limited pledged 16,376,106 shares of ABL with the Bank as security consequent to the default by Fateh Textile Mills Limited on the terms of the decree. The Bank published a notice on June 23, 2004 in accordance with the requirements of section 19(3) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 and invited sealed bids from interested parties to purchase the pledged shares. The bidding process was scheduled for July 23, 2004 and the Bank had fixed a reserve price of Rs. 25 per share. On the bid date, the highest offer for these shares was received at a rate of Rs. 25.51 per share. The bid was approved and the successful bidder had deposited an amount of Rs. 417.75 million with the Bank. Fateh Textile Mills Limited had filed a suit against the Bank in the High Court of Sindh challenging the sale of the above shares. The High Court had not granted a stay order on the process of sale of shares. However, the matter is still pending in the Court. 22. DERIVATIVE INSTRUMENTS The Bank at present does not offer structured derivative products such as Interest Rate Swaps, Forward Rate Agreements or FX Options. However, the Banks Treasury buys and sells derivative instruments such as: Forward Exchange Contracts Foreign Exchange Swaps Equity Futures
Forward Exchange Contracts (with Importers and Exporters) Forward Exchange Contract (FEC) is a product which is offered to the obligor who transact internationally. These traders use this product to hedge themselves from unfavorable movements in a foreign currency, however, by agreeing to fix the exchange rate, they do not benefit from favorable movements in that currency. An FEC is a contract between the Obligor and the Bank in which both agree to exchange an amount of one currency for another currency at an agreed forward exchange rate for settlement more than two business days after the FEC is entered into (the day on which settlement occurs is called the value date). FEC is entered with those Obligors whose credit worthiness has already been assessed. If the relevant exchange rate moves un-favourably, the Bank will loose money, and Obligor will benefit from that movement because the Bank must exchange currencies at the FEC rate. In order to mitigate this risk of adverse exchange rate movement, the Bank hedges its exposure by taking forward position in inter-bank FX. Foreign Exchange Swaps A Foreign Exchange Swap (FX Swap) is used by the Bank if it has a need to exchange one currency for another currency on one day and then re-exchange those currencies at a later date. Exchange rates and forward margins are determined in the "interbank" market and fluctuate according to supply and demand. An FX Swap prevents the Bank from gaining any benefit resulting from a favourable exchange rate movement in the relevant currency pair between the time Bank enters into the transaction deal and when settlement occurs. Cancellation of the swap may also result in exposure to market movements. The key advantage of an FX swap is that it provides the Bank with protection against unfavourable currency movements between the time it enters into the transaction and settlement. The term and amounts for FX Swap can also be tailored to suit the Bank's particular needs.
74
Equity Futures An equity futures contract is a standardized contract, traded on a futures counter of the stock exchange, to buy or sell a certain underlying scrip at a certain date in the future, at a specified price. The Bank uses equity futures as a hedging instrument to hedge its equity portfolio, in both held for trading and available for sale, against equity price risk. Only selected shares are allowed to be traded on futures exchange. Equity futures give flexibility to the Bank either to take delivery on the future settlement date or to settle it by adjusting the notional value of the contract based on the current market rates. Maximum exposure limit to the equity futures is 10% of Tier I Capital of the Bank. The accounting policies used to recognize and disclose derivatives are given in note 5.15.2.
Rupees in 000
Note
23.
MARKUP/RETURN/INTEREST EARNED On loans and advances On investments in: Available for sale securities Held to maturity securities On deposits with financial institutions On securities purchased under resale agreements On certificates of investment On letters of placement On call money lending 3,332,119 1,465,451 4,797,570 122,037 1,114,717 296,385 205,119 194,524 21,201,422 1,716,804 1,582,206 3,299,010 219,812 824,084 226,961 352,633 93,390 17,215,507 14,471,070 12,199,617
24.
MARKUP/RETURN/INTEREST EXPENSED Deposits Securities sold under repurchase agreements Other short term borrowings Markup on TFCs Others 8,721,680 583,467 408,912 304,945 10,019,004 6,125,387 313,740 319,855 21,387 12,732 6,793,101
25.
FEE, COMMISSION AND BROKERAGE INCOME Core fees, commission and brokerage Account maintenance charges 1,654,654 408,023 2,062,677 1,152,093 201,795 1,353,888
26.
GAIN ON SALE OF SECURITIES Federal Government Securities Market Treasury Bills Pakistan Investment Bonds Shares Listed Shares Unlisted Open End Mutual Funds Term Finance Certificates Listed 83 624,782 83,413 720,256 10,853 1,439,387 24 375 376,393 376,792
42
27.
OTHER INCOME Gain on sale of operating fixed assets Miscellaneous 14,297 63,138 77,435 68,397 204,631 273,028
75

Rupees in 000
Note
December 31, 2007
December 31, 2006
28.
ADMINISTRATIVE EXPENSES Salaries, allowances, etc. Charge for defined benefit plan Contribution to defined contribution plan - provident fund Non-executive directors' fees, allowances and other expenses Rent, taxes, insurance, electricity, etc. Legal and professional charges Communications Repairs and maintenance Stationery and printing Advertisement and publicity Auditors' remuneration Depreciation/Amortization Brokerage and commission Security service charges Travelling, conveyance and fuel expenses Entertainment Computer expenses Subscription Donations Others 3,506,475 97,778 128,359 515 599,371 64,006 237,858 114,188 131,194 157,641 9,277 341,656 74,006 143,797 139,680 51,684 145,158 21,562 27,698 26,443 6,018,346 3,083,342 226,909 118,499 361 498,321 67,874 174,032 83,675 111,194 188,517 8,805 238,881 71,740 108,686 114,805 40,334 119,799 18,621 9,499 6,684 5,290,578
28.1 11.2 & 11.3
28.2
28.1
Auditors' remuneration
December 31, 2007 Ford Rhodes M. Yousuf Sidat Hyder Adil Saleem & Co. & Co. Ford Rhodes Sidat Hyder & Co. December 31, 2006 M. Yousuf Adil Saleem & Co.
Rupees in 000
Total
Total
Audit fee Special certifications, half yearly and quarterly reviews and sundry miscellaneous services Out-of-pocket expenses
1,650
1,650
3,300
1,500
1,500
3,000
2,230 464 4,344
2,725 558 4,933
4,955 1,022 9,277
2,275 365 4,140
2,680 485 4,665
4,955 850 8,805
28.2
None of the directors, executives and their spouses had any interest in the donations disbursed during the year. Donations paid in excess of Rs. 100,000 to a single party during the year are as follows:
Rupees in 000
National Management Foundation Liver Foundation Trust Shaukat Khanum Memorial Cancer Hospital and Research Centre DHQ Hospital Dera Ghazi Khan Tamir Welfare Organization Care Foundation TameereMillat Foundation The Kidney Centre Sahara For Life Trust Golf Club Faisalabad Mr. Tahir Sadiq Agha Khan Hospital and Medical College Foundation OGS Trust
20,000 2,500 2,500 2,000 248 200
3,700 400 2,500 1,000 500 500 249 150 150
76
Rupees in 000
Note
December 31, 2007
December 31, 2006
29.
OTHER CHARGES Penalties imposed by SBP 256,869 7,078
30.
TAXATION Current for the year for prior years Deferred 1,887,299 1,887,299 (10,381) 1,876,918 2,215,092 2,215,092 48,752 2,263,844
30.1
Relationship between tax expense and accounting profit Accounting profit for the current year Tax on income @ 35% (2006 : 35%) Effect of permanent differences Effect of exempt income Adjustments in respect of tax on reduced rates Others Tax charge for the current year 5,953,076 2,083,577 170,404 (298,268) (18,824) (59,971) 1,876,918 6,661,094 2,331,383 65,477 (91,085) (36,804) (5,127) 2,263,844
31.
EARNINGS PER SHARE BASIC AND DILUTED Profit after taxation 4,076,158 4,397,250
Number of Shares
Weighted average number of Ordinary shares outstanding during the year
31.1
538,636,938
538,636,938
Rupees
Earnings per share basic and diluted There is no dilution effect on basic earnings per share. 31.1
7.57
8.16
The comparative figure of weighted average number of shares outstanding has been restated to include the effect of bonus shares issued by the Bank during the year.
Rupees in 000
32.
CASH AND CASH EQUIVALENTS Cash and balances with treasury banks Balances with other banks Overdrawn nostro accounts 6 7 15 29,739,857 668,449 (55,595) 30,352,711
December 31, 2007
23,042,011 1,703,011 (377,375) 24,367,647

December 31, 2006 Number
33.
STAFF STRENGTH Permanent Temporary/on contractual basis/trainee Bank's own staff strength at the end of the year Outsourced Total Staff strength 8,181 55 8,236 2,061 10,297 7,139 65 7,204 1,675 8,879
77

34 34.1
DEFINED BENEFIT PLANS General description The Bank operates a funded gratuity scheme for all employees who opted for the new staff retirement benefit scheme introduced by the management with effect from July 1, 2002. For those employees who did not opt for the new scheme, the Bank continues to operate a funded pension scheme. The Bank also operates a contributory benevolent fund (defined benefit scheme funded) and provides post retirement medical benefits (unfunded scheme) to eligible retired employees.
34.2
Number of Employees under the schemes The number of employees covered under the following defined benefit scheme/plans are:
December 31, 2007 December 31, 2006 Number
34.3
Gratuity fund Pension fund Benevolent fund Employees' compensated absences Post retirement medical benefits
8,224 3,743 8,164 8,164 8,164
7,180 4,000 7,139 7,139 7,139
Principal actuarial assumptions The actuarial valuations were carried out on December 31, 2007 based on the Projected Unit Credit Method, using the following significant assumptions:
Sources of estimation
Discount rate: June 30, 2006 December 31, 2006 December 31, 2007 Expected rate of return on plan assets: June 30, 2006 December 31, 2006 December 31, 2007 Pension fund Gratuity fund Benevolent fund Expected rate of salary increase Pension indexation rate Medical inflation rate Exposure inflation rate 12.40% 11.80% 11.90% 8.00% 3.00% 7.00% 2.00% 10.00% 10.00% 8.00% 3.00% 7.00% 2.00% Rate of salary increase Yield on investments in Government Bonds 10.00% 10.00% 10.00% Yield on investments in Government Bonds
78
34.4
Reconciliation of (receivable from) / payable to defined benefit plan

December 31, 2007 Pension Fund Gratuity Fund Benevolent Fund Post Retirement Medical
Rupees in 000
Present value of defined benefit obligations Fair value of plan/scheme's assets Net actuarial gains/(losses) not recognized Benefit of the surplus not available to the Bank refer note 34.4.1
3,461,993 (5,738,722) 1,107,236 (1,169,493) (1,169,493)
574,685 (475,357) (8,483) 90,845 90,845
557,296 (692,158) (82,552) (217,414) 108,707 (108,707)
1,624,176 (448,404) 1,175,772 1,175,772
Rupees in 000
Present value of defined benefit obligations Fair value of plan/scheme's assets Net actuarial gains/(losses) not recognized Benefit of the surplus not available to the Bank
3,295,249 (5,155,897) 907,356 (953,292) (953,292)
463,564 (393,999) 43,005 112,570 112,570
532,218 (610,811) (78,951) (157,544) 78,772 (78,772)
1,458,865 (405,894) 1,052,971 1,052,971
34.4.1 The latest actuarial valuation of Benevolent Fund, carried out as at December 31, 2007 highlighted a surplus of Rs. 217.414 million. Out of this amount, a benefit of Rs. 108.707 million can be availed by the Bank in future years in the form of reduced contributions. 34.4.2 The effect of increase of one percentage point and the effect of decrease of one percentage point in the medical trend rates on the present value of medical obligation as at December 31, 2007 would be Rs. 105.745 million (2006: Rs. 116.666 million) and Rs. 88.026 million (2006: Rs. 96.937 million) respectively. 34.5 Movement in (receivable from) / payable to defined benefit plan
Rupees in 000
Opening balance Charge/(reversal) for the year note 34.9 Contribution to fund made during the year Bank's contribution Benefits paid
(953,292) (216,201) (1,169,493)
112,570 84,299 (106,024) 90,845
(78,772) 6,345 (36,280) (108,707)
1,052,971 208,814 (86,013) 1,175,772
Rupees in 000
Opening balance Charge for the year note 34.9 Contribution to fund made during the year Bank's contribution Benefits paid Closing balance
(655,217) (298,075) (953,292)
112,325 84,084 (83,839) 112,570
(76,073) 30,219 (32,918) (78,772)
937,276 188,045 (72,350) 1,052,971
79

34.6
Reconciliation of present value of defined benefit obligations

Rupees in 000
Opening balance Current service cost Interest cost Benefits paid Actuarial (gains) / losses Closing balance
3,295,249 329,525 (381,960) 219,179 3,461,993
463,564 77,343 46,356 (35,388) 22,810 574,685
532,218 19,174 53,222 (45,894) (1,424) 557,296
1,458,865 42,926 145,887 (86,013) 62,511 1,624,176
Rupees in 000
Opening balance Current service cost Interest cost Benefits paid Actuarial (gains) / losses Closing balance 34.7 Reconciliation of fair value of plan assets
3,244,547 324,455 (337,476) 63,723 3,295,249
376,520 75,048 37,652 (23,808) (1,848) 463,564
559,397 15,770 55,940 (47,439) (51,450) 532,218
1,292,221 41,460 129,222 (72,350) 68,312 1,458,865
Rupees in 000
Opening balance Expected return on plan assets Bank's contribution Emplyoees' contribution Benefits paid Actuarial gains / (losses) Closing balance
5,155,897 515,590 (381,960) 449,195 5,738,722
393,999 39,400 106,024 (35,388) (28,678) 475,357
610,811 61,081 36,280 36,280 (45,894) (6,400) 692,158

Post Retirement Medical
December 31, 2006 Pension Fund Gratuity Fund Benevolent Fund
Rupees in 000
Opening balance Expected return on plan assets Bank's contribution Emplyoees' contribution Benefits paid Actuarial gains / (losses) Closing balance
5,475,648 547,565 (337,476) (529,840) 5,155,897
286,159 28,616 83,839 (23,808) 19,193 393,999
563,483 56,348 32,918 32,918 (47,439) (27,417) 610,811
80
34.8
Composition of fair value of plan assets

Rupees in 000
Government securities Listed shares * Bank balances *
3,447,938 1,344,419 946,365 5,738,722
19,492 166,671 289,194 475,357
335,540 160,354 196,264 692,158
*Fair value of Bank's financial instruments included in plan assets Shares of ABL Bank balances with ABL 524,607 946,365 1,470,972 25,601 289,194 314,795 196,264 196,264
Rupees in 000
Government securities Bank balances *
4,394,299 761,598 5,155,897
46,055 347,944 393,999
364,410 246,401 610,811
*Fair value of Bank's financial instruments included in plan assets Shares of ABL Bank balances with ABL 761,598 761,598 34.9 Charge for defined benefit plan
347,944 347,944
246,401 246,401
Rupees in 000
Current service cost Interest cost Expected return on plan assets Actuarial (gains)/losses Contributions employee Benefit of the surplus not available to the bank
329,525 (515,590) (30,136) (216,201)
77,343 46,356 (39,400) 84,299
19,174 53,222 (61,081) 1,375 (36,280) 29,935 6,345
42,926 145,887 20,001 208,814
Rupees in 000
Current service cost Interest cost Expected return on plan assets Actuarial (gains)/losses Contributions employee Benefit of the surplus not available to the Bank
324,455 (547,565) (74,965) (298,075)
75,048 37,652 (28,616) 84,084
15,770 55,940 (56,348) 3,885 (32,918) 43,890 30,219
41,460 129,222 17,363 188,045
34.9.1 The effect of increase of one percentage point and the effect of decrease of one percentage point in the medical trend rates on the aggregate of the current service cost and interest cost components of net period post-employment medical costs would be Rs. 10.575 million (2006: Rs. 10.500 million) and Rs. 8.803 million (2006: Rs. 8.724 million) respectively.
81

Rupees in 000
December 31, 2007
December 31, 2006
34.10 Actual return on plan assets Pension fund Gratuity fund Benevolent fund 34.11 Five year data of defined benefit plan and experience adjustments
Pension fund Rupees in 000 2007 2006 2005 2004 2003
964,785 10,722 54,681
822,242 38,285 71,892
Present value of defined benefit obligation Fair value of plan assets (Surplus) / deficit Experience adjustments on plan obligations / assets Actuarial gain / (loss) on obligation Actuarial gain / (loss) on assets
3,461,993 (5,738,722) (2,276,729)
3,295,249 (5,155,897) (1,860,648)
3,244,547 (5,475,648) (2,231,101)
3,862,879 (5,635,568) (1,772,689)
4,257,746 (5,223,596) (965,850)
(219,179) 449,195
(63,723) (529,840)
636,805 (360,464)
Gratuity fund
428,741 310,488
(1,120,021) 1,803,811
Rupees in 000
2007
2006
2005
2004
2003
574,685 (475,357) 99,328
463,564 (393,999) 69,565
376,520 (286,159) 90,361
294,852 (211,816) 83,036
216,995 (110,874) 106,121
(22,810) (28,678)
1,848 19,193
1,362 (1,362)
Benevolent fund
101,325 7,318
(18,741) (79,807)
Rupees in 000
2007
2006
2005
2004
2003
557,296 (692,158) (134,862)
532,218 (610,811) (78,593)
559,397 (563,483) (4,086)
545,574 (504,731) 40,843
583,430 (501,864) 81,566
1,424 (6,400)
51,450 (27,417)
(2,126) 2,126
50,519 (49,592)
(600,716) 485,637
Post retirement medical Rupees in 000 2007 2006 2005 2004 2003
Present value of defined benefit obligation Fair value of plan assets (Surplus) / deficit Experience adjustments on plan obligations / assets Actuarial gain / (loss) on obligation
1,624,176 1,624,176
1,458,865 1,458,865
1,292,221 1,292,221
1,224,870 1,224,870
1,164,760 1,164,760
(62,511)
(68,312)
1,398
(106,284)
82
34.12 Employees' compensated absences The liability of the Bank in respect of long-term employees' compensated absences is determined, based on actuarial valuation, carried out using the Projected Unit Credit Method. The liability of the Bank as at December 31, 2007, as per the latest actuarial valuation carried out as at December 31, 2007 which, after considering the estimated liability for the current year, amounted to Rs. 875.178 million (2006: Rs. 925.392 million). A charge of Rs. 14.521 million (2006: Rs. 222.635 million) has been provided during the current year, representing the management's best estimate. 34.13 Expected contributions to be paid to the funds in the next financial year The Bank contributes to the gratuity fund as per actuarial's expected charge for the next one year. Contribution to the benevolent fund is made by the Bank as per rates set out in the benevolent scheme. No contributions are being made to pension fund due to large amount of surplus of fair value of plan's assets over present value of defined obligation. Based on actuarial advice, management estimates that the charge / reversal in respect of defined benefit plans for the year ending December 31, 2008 would be as follows:
Post Retirement Medical
Rupees in 000
Pension Fund
Gratuity Fund
Benevolent Fund
Expected (reversal) / charge for the next year 35. DEFINED CONTRIBUTION PLAN
(409,849)
97,259
(7,929)
234,041
The Bank operates a contributory provident fund scheme for employees who are covered under the new gratuity scheme. The employer and employee both contribute 8.33% of the basic salaries to the funded scheme every month. Number of employees covered under this plan are 6,745 (2006: 6,598) as on December 31, 2007. During the year, employees made a contribution of Rs. 128.359 million (2006: Rs. 118.499 million) to the fund. The Bank has also made a contribution of equal amount to the fund. 36. COMPENSATION OF DIRECTORS AND EXECUTIVES
President/Chief Executive Note Rupees in 000 December 31, 2007 December 31 2006 Directors December 31, 2007 December 31 2006 Executives December 31, 2007 December 31, 2006
Fees Managerial remuneration Charge for defined benefit plans Contribution to defined contribution plan Rent and house maintenance Utilities Medical Bonus Conveyance and others
36.1
20,570 944 1,714 1,555 292 10,161 733 35,969
15,000 842 1,275 667 24 7,500 480 25,788 1
515 515 11
361 7,275 270 728 728 9,362 10
350,120 56,962 29,165 151,602 37,111 45,875 266,227 50,863 987,925 436
277,099 74,310 21,555 71,931 27,748 19,668 251,158 31,880 775,349 330
Number of persons 36.1
36.2
This represents remuneration paid to each director including the outgoing director for attending meetings of the Board of Directors, Audit Committee and other committees held during the year. Each director was paid Rs. 5,000 from January 2007 to July 2007 and Rs. 25,000 from August 2007 to December 2007, respectively for each meeting attended. Number of persons include the outgoing President, Director(s) and executives. The Chief Executive, Directors and certain executives are also provided with other facilities, including free use of the Bank maintained cars.
36.2 36.3
83

37.
FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of traded investments is based on quoted market prices, except for securities classified by the Bank as held to maturity. Fair value of unquoted equity investments is determined on the basis of lower of cost and break up value of these investments as per the latest available audited accounts. Fair value of fixed term loans, other assets, other liabilities and fixed term deposits cannot be calculated with sufficient reliability due to the 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 5.4. The maturity and repricing profile and effective rates are stated in notes 41.3.1 and 41.2.3 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.
38.
SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES The segment analysis with respect to business activity is as follows:
December 31, 2007 Corporate Finance Trading & Sales Retail Banking Commercial Banking Payment & Settlement
Rupees in 000
Total Income Total Expenses Net Income Segment Assets (Gross) Segment Non Performing Loans Segment Provision Required Segment Liabilities Segment Return on net Assets (ROA) (%)* Segment Cost of Funds (%)*
241,543 (123,631) 117,912 275,683 177,137 42.77% 0.00%
1,961,690 (1,719,213) 242,477 19,152,721 15,070,717 1.27% 7.64%
9,700,956 (7,598,087) 2,102,869 75,048,673 3,643,515 4,172,680 195,095,581 2.97% 3.79%

December 31, 2006
19,129,996 (17,591,464) 1,538,532 236,481,289 7,711,408 6,840,217 86,283,417 0.67% 8.41%
190,844 (116,476) 74,368 164,254 3,604,629 45.28% 0.00%
Rupees in 000
Corporate Finance
Trading & Sales
Retail Banking
Commercial Banking
Payment & Settlement
Total Income Total Expenses Net Income Segment Assets (Gross) Segment Non Performing Loans Segment Provision Required Segment Liabilities Segment Return on net Assets (ROA) (%)* Segment Cost of Funds (%)*
169,366 (95,912) 73,454 156,669 72,062 59.41% 0.00%
2,063,283 (1,798,344) 264,939 20,537,908 8,892,264 1.44% 8.26%
8,326,310 (6,547,025) 1,779,285 59,942,453 2,658,173 2,712,102 151,543,249 3.62% 4.33%
13,521,560 (11,376,011) 2,145,549 179,602,511 7,820,416 6,011,522 71,173,039 1.46% 9.18%
784,622 (650,599) 134,023 257,132 2,404,682 63.17% 0.00%
* The segment return on net assets and cost of funds are based on average assets and average liabilities for the year. 39. RELATED PARTY TRANSACTIONS The Bank has related party relationships with its subsidiary, companies with common directorship having equity under 20%, directors and employee benefit plans. Banking transactions with related parties are executed substantially on the same terms, including markup rates and collateral, as those prevailing at the time for comparable transactions with unrelated parties and do not involve more than a normal risk (i.e., under the comparable uncontrolled price method). Details of transactions with related parties except those under the terms of employment and balances with them as at the year end were as follows:
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December 31, 2007 Companies with common directorship having equity under 20%
December 31, 2006 Companies with common Key directorship Key management Other related having equity management Other related personnel parties Directors under 20% Subsidiaries personnel parties
Rupees in 000
Nature of related party transactions Loans Loans at the beginning of the year Loans given during the year Loans repaid during the year Loans at the end of the year Deposits Deposits at the beginning of the year Deposits received during the year Deposits repaid during the year Deposits at the end of the year Other receivables Net receivable from staff retirement benefit funds Staff retirement fund deposits Investments made during the year Investments sold during the year Mark-up earned Mark-up expensed Charge / (reversal) in respect of staff retirement benefit funds
Directors
Subsidiaries
395 8,774 (7,890) 1,279 1,814 5,010,040 (4,991,911) 19,943 67
66,159 33,912 (15,377) 84,694
2,908 (2,513) 395
69,037 10,436 (13,314) 66,159
918,541
59,801 9,123 6,206 1,274,352 1,152,943 132,535 (1,244,664) (658,658) (119,821) 89,489 205,699 161,326 185 503,408 5,740 14,690 18,920
6,668 17,432 (22,286) 1,814 97
76,125 4,369 12,730 765,872 140,262 52,622 (782,196) (135,508) (59,146) 59,801 356 9,123 3,423 6,206 2,727
1,153,044 1,863,389 3,152 102 26,003 2,802
1,947,475
231 142,453 (65,273)
The other balances, held with related parties, outstanding at the end of current year are included in notes 7.1, 15.7 and 19.2 to these financial statements. 40. 40.1 CAPITAL ADEQUACY Capital Management Objectives of Managing Capital Capital Management aims to ensure that there is sufficient capital to meet the capital requirements of the Bank as determined by the underlying business strategy. The Capital Management process is governed by the Banks Asset & Liability Committee (ALCO). ALCO is responsible for managing Banks capital position visvis internal as well as regulatory requirements. ALCO also reviews the volume and mix of the Banks assets, liabilities and funding sources in light of liquidity, capital, risk and profitability considerations. Bank's capital management seeks: to comply with the capital requirements set by the regulators and comparable to the peers; to improve the liquidity of the Banks assets to allow for an optimal deployment of the Banks resources; to protect the Bank against unexpected events and maintain strong ratings; to safeguard the Banks ability to continue as a going concern so that it can continue to provide adequate return to shareholders; availability of adequate capital (including the quantum) at a reasonable cost so as to enable the Bank to expand; and to achieve low overall cost of capital with appropriate mix of capital elements.
Externally Imposed Capital Requirements In order to strengthen the solvency of Banks / Development Financial Institutions (DFI), SBP through its BSD Circular No. 6 of 2005 dated October 28, 2005 has asked the Banks to: (a) (b) raise its capital to Rs. 4 billion by the end of financial year 2007 maintain a minimum Capital Adequacy Ratio (CAR) of 8%
Capital requirement of Rs. 4 billion has to be raised to Rs. 6 billion by the end of financial year 2009 by the Banks in a phased manner. The paid up capital and CAR of the Bank stands at Rs. 5.39 billion and 9.29 % of its risk weighted exposure as at December 31, 2007. Bank's regulatory capital is analyzed into two tiers as per regulatory requirements.
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Tier 1 capital, which includes fully paid up capital, balance in share premium account, reserve for bonus issue, general reserves as per the financial statements and net unappropriated profits, etc after deductions for investments in the equity of subsidiary companies engaged in banking and financial activities, deficit on revaluation of available for sale investments. Tier 2 capital, which includes general provisions for loan losses (up to a maximum of 1.25 % of risk weighted assets), reserves on the revaluation of fixed assets and equity investments (up to a maximum of 50 % of the balance in the related revaluation reserves), subordinated debt (up to a maximum of 50 %). Tier 3 capital has also been prescribed by the SBP for managing market risk; however the Bank does not have any Tier 3 capital. The required capital is achieved by the Bank through: (a) (b) (c) enhancement in the risk profile of asset mix at the existing volume level; ensuring better recovery management; and maintain acceptable profit margins.
Bank was well capitalized and met all capital requirements to which it was subject throughout the period. 40.2 Capital adequacy ratio The risk weighted assets to capital ratio, calculated in accordance with the SBP's guidelines on capital adequacy was as follows:
Rupees in 000 December 31, 2007 December 31, 2006
Regulatory Capital Base Tier I Capital Shareholders capital Reserves Unappropriated profits Less: Adjustments Total Tier I Capital Tier II Capital Subordinated debt (upto 50% of total Tier I Capital) General Provisions subject to 1.25% of Total Risk Weighted Assets Revaluation Reserve (upto 50%) Total Tier II Capital Eligible Tier III Capital Total Regulatory Capital RiskWeighted Exposures
December 31, 2007 Rupees in 000 Book Value Risk Adjusted Value December 31, 2006 Book Value Risk Adjusted Value
5,386,370 6,050,713 6,971,308 18,408,391 557,614 17,850,777 2,499,000 13,123 734,926 3,247,049 (a) 21,097,826
4,488,642 6,133,209 5,607,796 16,229,647 144,383 16,085,264 2,500,000 14,047 770,001 3,284,048 19,369,312
Credit Risk Balance Sheet Items Cash and other liquid Assets Money at call Investments Loans and advances Fixed assets Deferred taxation Other assets Off Balance Sheet items Performance bonds etc. Stand By letters of credit Outstanding foreign exchange contracts Purchase Sale Credit riskweighted exposures 12,247,743 83,037,690 10,998,473 4,763,749 111,047,655 3,282,524 27,503,371 80,248 20,896 30,887,039 226,811,369 8,255,859 38,142,108 6,983,267 3,266,742 56,647,976 1,908,421 8,097,854 69,104 13,750 10,089,129 150,510,800 30,408,306 18,419,241 83,958,463 168,407,280 7,548,628 662,431 10,705,374 320,109,723 678,950 4,295,000 33,546,033 143,130,474 7,548,628 662,431 6,062,814 195,924,330 24,745,022 19,050,239 46,953,241 144,033,634 6,445,111 638,168 10,161,361 252,026,776 842,316 3,284,500 6,942,075 116,455,007 6,445,111 638,168 5,814,494 140,421,671
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December 31, 2007 Rupees in 000 Risk Adjusted Value
December 31, 2006 Risk Adjusted Value
Market Risk General market risk Specific market Risk Foreign exchange Risk Market riskweighted exposures Total RiskWeighted exposures Capital Adequacy Ratio [(a) / (b) x 100] 41. RISK MANAGEMENT (b)
32,400 32,400 116,361 181,161 226,992,530 9.29%
237,113 237,113 296,009 770,235 151,281,035 12.80%
The Risk Management Framework (the Framework) provides principles for identifying, assessing, and monitoring risk within the Bank. The Framework specifies the key elements of the risk management process in order to maximise opportunities, to minimise adversity and to achieve improved outcomes and outputs based on informed decision making. Categories of Risk The Bank generates most of its revenues by accepting Credit, Country, Liquidity and Market Risk. Effective management of these four risks is the decisive factor in our profitability. In addition, the Bank is subject to certain consequential risks that are common to all business undertakings. These risks are grouped under two headings: Operational and Reputational Risk. The Framework is organized with reference to these five risk categories, as detailed below: Credit Risk This risk is defined as the possibility of loss due to unexpected default or a deterioration of credit worthiness of a business partner. Credit Risk includes Country Risk i.e., the risks that counterparty is unable to meet its foreign currency obligations as a result of adverse economic conditions or actions taken by governments in the relevant country. Market Risk The risk of loss generated by adverse changes in the price of assets or contracts currently held by the Bank (this risk is also known as price risk) The risk that the Bank is unable to meet its payment obligations when they fall due and to replace funds when they are withdrawn; the consequences of which may be the failure to meet obligations to repay depositors and fulfill commitments to lend. Operational Risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems or from external events. The definition excludes reputational risk.
Liquidity Risk
Operational Risk
Reputational Risk The risk of failing to meet the standards of performance or behavior required or expected by stakeholders in commercial activities or the way in which business is conducted. Risk Responsibilities The Board of Directors is accountable for overall supervision of the risk management process. This is discharged by distributing responsibilities at Board level for their management and determining the manner in which risk authorities are set. The Board is also responsible for approval of all risk policies and ensuring that these are properly implemented. Further, the Board shall also seek appointment of senior management personnel capable of managing the risk activities conducted by the Bank. The Board Risk Management Committee (BRMC) is responsible for ensuring that the overall risk strategy and appetite of the Bank is appropriately defined in the Strategic Plan and recommend the same to the Board of Directors. The BRMC recommends for approval to the Board of Directors the policies proposed by MANCO (Management Committee of the Bank) which discharges various responsibilities assigned to it by the BRMC.
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The President and Group Chiefs are accountable for the management of risk collectively through their membership of risk committees i.e. Management Committee and the Asset & Liability Committee. Independent supervision of risk management activities is provided by the Audit Committee. The Risk Management Group is headed by a Group Chief responsible to setup and implement the Framework of the Bank.
Risk Management Group Organization Risk management functions have been segregated by business specialization, i.e., Credit Risk, Credit Administration, Risk Architecture, Risk Analytics, Operational Risk and Market Risk. All these functions are operating in tandem to improve and maintain the health of assets and liabilities. 41.1 Credit Risk Credit risk, the potential default of one or more debtors, is the largest source of risk for the Bank. The Bank is exposed to credit risk through its lending and investment activities. The Bank's credit risk function is divided into Corporate and Financial Institutions Risk, Commercial and Retail Risk, and Consumer Risk. The functions operate within an integrated framework of credit policies, guidelines and processes. The credit risk management activities are governed by the Credit Risk Framework of the Bank, that defines the respective roles and responsibilites, the credit risk management principles and the Bank's credit risk strategy. The Bank manages 3 principal sources of credit risk: i) ii) iii) Sovereign credit risk on its public sector advances Nonsovereign credit risk on its private sector advances Counterparty credit risk on interbank limits Sovereign Credit Risk When the Bank lends to public sector borrowers, it prefers obtaining a full sovereign guarantee or the equivalent from the Government of Pakistan (GOP). However, certain public sector enterprises have a well defined cash flow stream and appropriate business model, based on which the lending is secured through collaterals other than GOP guarantee. NonSovereign Credit Risk When the Bank lends to private sector borrowers it does not benefit from sovereign guarantees or the equivalent. Consequently, each borrowers credit worthiness is analyzed on the Credit Application Package that incorporates a formalized and structured approach for credit analysis and directs the focus of evaluation towards a balanced assessment of credit risk with identification of proper mitigants. These risks include Industry Risk, Business Risk, Financial Risk, Security Risk and Account Performance Risk. Financial analysis is further strengthened through use of separate financial spreadsheet templates that have been designed for manufacturing/trading concerns, financial institutions and insurance companies. Counter Party Credit Risk on Interbank Limits In the normal course of its business, the Banks Treasury utilizes products such as Reverse REPO and call lending to meet the needs of the borrowers and manage its exposure to fluctuations in market, interest and currency rates and to temporarily invest its liquidity prior to disbursement. All of these financial instruments involve, to varying degrees, the risk that the counterparty in the transaction may be unable to meet its obligation to the Bank. Reflecting a preference for minimizing exposure to counterparty credit risk, the Bank maintains eligibility criteria that link the exposure limits to counterparty credit ratings by external rating agencies. For example, the minimum rating for counterparties to be eligible for a banking relationship with the Bank is BBB. Country Risk The Bank has in place a Country Risk Management Policy which has been approved by the Board. This policy focuses on international exposure undertaken by the Bank. The Bank utilizes country risk rating assessment reports published by Dun & Bradstreet Limited (an international credit rating agency) which use political, commercial, macroeconomic and external risk factors in assigning a country risk rating. The country risk limits used by the Bank are linked to the Dun & Bradstreet ratings and FID is responsible for monitoring of country exposure limits.
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Credit Administration Credit Administration is involved in minimizing losses that could arise due to security and documentation deficiencies. The Credit Administration Division constantly monitors the security and documentation risks inherent in the existing credit portfolio through six regional credit administration departments located all over the country. Risk Analytics To ensure a prudent distribution of asset portfolio, the Bank manages its lending and investment activities within a framework of Borrower, Group and Sector exposure limits and risk profile benchmarks. Internal Risk Rating Models The Bank has developed internal risk rating models to assign credit risk ratings to its Corporate and Institutional borrowers. These models are based on expert judgment, comprising of both quantitative and qualitative factors. The ratings are assigned at Risk Analytic's Level and are given due weightage while extending credit to these asset classes. The Bank intends to comply with the requirements of Foundation Internal Ratings Based approach for credit risk measurement under Basel II, for which services of a consultant have been solicited to assist the Bank in carrying out statistical testing and validation of the rating models. Stress Testing The Bank is also conducting stress testing of its existing portfolio, which includes all assets, i.e., advances as well as investments. This exercise is conducted on a semi-annual basis in line with regulatory requirements through assigning shocks to all assets of the Bank and assessing its resulting affect on capital adequacy. Early Warning System In order to ensure that monitoring of the regular lending portfolio focuses on problem recognition, an early warning system in the form of a WatchList category has been instituted to cover the gap between Regular and Substandard categories. Identification of an account on the said WatchList influences the lending branch to carry out an assessment of the borrower's ability to rectify the identified problem / weakness within a reasonable timeframe, consider tighter structuring of facilities, confirm that there are no critical deficiencies in the existing security position and, if possible, arrange for strengthening of the same through obtaining additional collateral. It should however, be noted that the WatchList category of accounts is part of the Banks Regular portfolio and does not require any provisioning. In some cases, an account may even be downgraded directly from a Regular to SubStandard or worse on subjective basis based on the severity of the trigger involved. Management of Non Performing Loans The Bank has a Special Asset Management Group (SAM), which is responsible for management of non performing loans. SAM undertakes restructuring / rescheduling of problem loans, as well as litigation both civil and criminal for collection of debt. For the nonperforming loan portfolio, the Bank makes a specific provision based on an assessment of the credit impairment of each loan. At the end of 2007, the average specific provisioning rate was 87.70% of the nonperforming loan portfolio. The accounting policies and methods used to determine specific and general provision are given in the note numbers 5 and 10 to these financial statements. The movement in specific and general provision held is given in note 10.5 to these financial statements.
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Portfolio Diversification During the year 2007 the banking sector advances in Pakistan grew by 10% whereas growth in the Banks advances was 18%. The growth pattern indicates that the Bank has outpaced overall credit growth of banking sector, while concomitantly maintaining healthy Advances to Deposit Ratio and Capital Adequacy Ratio. While expanding the advances portfolio, efficient portfolio diversification has been a key consideration. The diversification takes into account the volatility of various sectors by placing concentration limits on lending to these sectors thereby ensuring a diversified advances portfolio. Composition of the banks advances portfolio is significantly diversified. Textile, Cement, Financial Institutions, Agriculture and Transport/Communication are major contributors to the advances portfolio. These sectors are considered to be the biggest contributors towards countrys GDP as well.
41.1.1 Segmental Information 41.1.1.1 Segments by class of business

December 31, 2007 Advances (Gross) Rupees in '000 Percent Deposits Rupees in '000 Percent Contingencies and Commitments Rupees in '000 Percent
Agriculture Cement/clay/ceramics Electric generation Financial institutions Food manufacturing Individuals Iron steel Oil and gas etc. Sugar Textile Transport, storage and communication Wholesale and retail trade Others
12,553,125 11,891,027 14,449,231 9,344,112 9,911,026 5,450,062 3,660,908 4,950,378 4,907,093 38,738,827 15,422,747 7,562,881 39,682,940 178,524,357
7.03% 6.66% 8.09% 5.23% 5.55% 3.05% 2.05% 2.77% 2.75% 21.70% 8.64% 4.24% 22.23% 100.00%
14,521,863 1,924,072 14,766,551 9,711,263 3,640,871 74,614,250 11,446,037 13,706,737 1,380,337 4,887,491 4,464,466 15,447,791 93,460,653 263,972,382
5.50% 0.73% 5.59% 3.68% 1.38% 28.27% 4.34% 5.19% 0.52% 1.85% 1.69% 5.85% 35.41% 100.00%
61,187 5,293,492 98,138 20,263,642 220,739 3,928,798 14,740,868 757,298 7,266,796 208,861 968,116 63,272,711 117,080,646
0.05% 4.52% 0.08% 17.31% 0.19% 3.36% 12.59% 0.65% 6.21% 0.18% 0.83% 54.04% 100.00%
41.1.1.2 Segments by sector

December 31, 2007 Advances (Gross) Rupees in '000 Percent Deposits Rupees in '000 Percent Contingencies and Commitments Rupees in '000 Percent
Public/Government Private
19,758,288 158,766,069 178,524,357
11.07% 88.93% 100.00%
38,829,872 225,142,510 263,972,382
14.71% 85.29% 100.00%
37,472,124 79,608,522 117,080,646
32.01% 67.99% 100.00%
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41.1.1.3 Details of nonperforming advances and specific provisions by class of business segment
December 31, 2007 Classified Advances Specific Provisions Held December 31, 2006 Classified Advances Specific Provisions Held
Rupees in 000
Agriculture Chemical Food manufacturing Individuals Textile Transport, storage and communication Wholesale and retail trade Others
334,558 192,307 351,984 189,258 1,590,827 945,536 624,336 7,126,117 11,354,923
281,122 188,119 350,784 179,645 1,121,628 732,655 575,361 6,529,367 9,958,681
366,071 236,486 437,020 120,501 3,123,218 300,866 802,230 5,092,197 10,478,589
242,843 79,814 259,561 119,641 2,665,949 218,916 520,140 3,550,873 7,657,737
41.1.1.4 Details of nonperforming advances and specific provisions by sector

December 31, 2007 Classified Advances Specific Provisions Held December 31, 2006 Classified Advances Specific Provisions Held
Rupees in 000
Public/Government Private
506,947 10,847,976 11,354,923
322,828 9,635,853 9,958,681
230,183 10,248,406 10,478,589
126,989 7,530,748 7,657,737
41.1.1.5 Geographical Segment Analysis

December 31, 2007 Profit before taxation Total Assets employed Net assets employeed Contingencies and commitments
Rupees in 000
Pakistan 41.2 Market Risk
5,953,076
320,109,723
19,878,242
117,080,646
The Bank is exposed to Foreign Exchange Rate Risk, Interest Rate Risk and Equity Price Risk. Market Risk Function has been partially set up with current responsibility of performing basic market risk measurement, monitoring and control functions. However, to give it a formal structure, the Bank has appointed services of Duetsche Bank Risk Advisory for assistance in establishment of Market Risk Management Framework. Market Risk Pertaining to the Trading Book Trading Book A trading book consists of positions in financial instruments held either with trading intent or in order to hedge other elements of the trading book. To be eligible for trading book, financial instruments must be held with the intent of trading and free of any restrictive covenants on their tradability. In addition, positions need to be frequently and accurately valued and the portfolio should be actively managed. The Bank's trading book includes equity securities classified as Held for Trading. These positions are actively managed by the capital market desk. Bank's trading book constitutes capital market equities therefore, they are exposed to equity price risk.
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Risk Pertaining to Banking Book Investment Portfolio All investments excluding trading book are considered as part of banking book. Banking book include: i) ii) iii) Available for sale securities Held to maturity securities Other strategic investments
Treasury investments parked in the banking book include: i) ii) iii) iv) Government securities Capital market investments Strategic investments Investments in bonds, debentures, etc
Due to the diversified nature of investments in banking book, it is subject to interest rate and equity price risk. Interest Rate Risk Banking Book Government securities (PIB & TBills) and other money market investments are subject to interest rate risk. To capture the risk associated with these securities extensive modeling is being done with respect to duration analysis. Stress testing and scenario models are also in place to capture the sensitivity of the portfolio to adverse movement in interest rates. For prudent risk management all money market investments are marked to market to assess changes in the market value of investments due to interest rate movements. Equity Position Risk Banking Book The Bank's portfolio of equity securities categorized under Available for Sale and Strategic Investments are parked in the banking book. These investments expose the Bank to equity price risk. Stress Testing The Bank also conducts Stress Testing of the Banks investment portfolio to ascertain the impact of various scenarios on the capital adequacy and sustainability of the Bank. The exercise assumes various stress conditions, with respect to Market Risk (Rise or Fall in Interest Rates, leading to interest rate risk), Equity Price Risk resulting from Stock Market movements, FX Rate Risk leading from adverse movements in exchange rates and Liquidity Risk (ability to meet shortterm obligations if there is a run on deposits). Duration GAP Analysis A Duration Gap Analysis is also conducted to ascertain the duration gap between the Banks assets and liabilities, to ascertain the effect of interest rate shifts on the market value of equity. Market Risk Capital Charge The Bank uses standardized measurement method for calculation of market risk capital charge. The results are as under:
December 31, 2007 Rupees in 000 Risk Weighted Exposures Capital Charge
General market risk Equity Exposures Specific market risk Equity Exposures Foreign Exchange risk Total
32,400 32,400 116,361 181,161
2,592 2,592 9,309 14,493
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41.2.1 Foreign Exchange Risk Foreign Exchange Risk is the risk of loss arising from fluctuations of exchange rates. Our FX Risk is first controlled through substantially matched funding policy. On the mismatched exposures, the Bank utilizes appropriate derivative instruments such as Forwards and Swaps. The majority of net foreign currency exposure is in US Dollars. The Bank is carefully monitoring the net foreign currency exposure and the effect of exchange rate fluctuations by conducting sensitivity analysis and stress testing, as well as utilizing the currency forwards and swaps to hedge the related exposure.
December 31, 2007 Financial assets Financial liabilities Offbalance sheet items Net foreign currency exposure
Rupees in 000
Pakistani Rupee United States Dollar Great Britain Pound Japanese Yen Euro Other Currencies
303,289,311 7,308,529 195,844 757 253,484 112,016 7,870,630 311,159,941
284,121,793 11,721,695 1,429,445 96 855,939 993 14,008,168 298,129,961
(6,234,724) 4,420,146 1,215,538 601,343 (2,303) 6,234,724
12,932,794 6,980 (18,063) 661 (1,112) 108,720 97,186 13,029,980
41.2.2 Equity Position Risk The Board with the recommendations of ALCO approves exposure limits applicable to investments in Trading Book. Equity securities are perpetual assets and are classified under either Held for Trading Portfolio or Available for Sale Portfolio. Concentration Risk ALCO is responsible for making investment decisions in the capital market and setting limits that are a component of the risk management framework. Portfolio, Sector and Scrip wise limits are assigned by the ALCO to guard against concentration risk and these limits are reviewed and revised periodically. The capital market desk ensures compliance of concentration limits set by ALCO. Limit monitoring is done on a daily basis. Limit breaches if any are promptly reported to ALCO with proper reason and justification. Price Risk Trading and investing in equity securities give rise to price risk. ALCO and Treasury's Capital Market Unit both ensure that through prudent trading strategy and use of equity futures, the equity price risk is mitigated, albeit to a certain extent.
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41.2.3 Mismatch of Interest Rate Sensitive Assets and Liabilities

December 31, 2007 Effective Yield/ Interest rate Over 1 to 3 Months Over 3 to 6 Months Exposed to Yield/Interest risk Over 6 Over 1 Over 2 Months to to 2 to 3 1 Year Years Years Over 3 to 5 Years Over 5 to 10 Years Noninterest bearing Above financial 10 Years instruments
Rupees in 000
Total
Upto 1 Month
Onbalance sheet financial instruments Assets Cash and balances with treasury banks 3.71% 4.72% Balances with other banks Lendings to financial institutions 9.56% Investments 8.99% Advances 10.55% Other assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinated loans Other liabilities 8.23% 4.28% 11.93% 3,494,384 22,933,656 19,223,177 1,470,631 263,972,382 177,294,854 12,619,479 2,499,000 5,230,539 298,129,961 196,518,031 14,090,110 Onbalance sheet gap Offbalance sheet financial instruments Forward lending Commitments in respect of Repo Lending Commitments in respect of CFS lending Commitments in respect of forward exchange contracts Forward borrowing Commitments in respect of forward exchange contracts Offbalance sheet gap Total Yield/Interest Risk Sensitivity Gap Cumulative Yield/Interest Risk Sensitivity Gap 10.25% 14% 1,000,000 733 10,998,473 1,000,000 733 10,998,473 13,029,980 (28,670,803) 17,680,904 2,043,895 3,934,715 2,499,000 8,477,610 7,855,157 195,953 2,381,229 2,577,182 7,747,663 3,087,492 987,398 4,055,274 8,877,008 3,494,384 67,742,105 5,230,539 76,467,028 29,739,857 620,930 668,449 18,419,241 14,354,479 4,064,762 83,958,463 5,226,956 20,793,363 15,408,023 168,407,280 147,644,863 6,912,889 924,744 9,966,651 8,522,875 1,801,970 1,601,096 1,486,396 3,087,492 53,336 934,062 987,398 2,901,695 1,153,579 4,055,274 5,414,812 3,462,196 8,877,008 29,118,927 668,449 24,036,307 2,848,735 1,237,846 9,966,651 2,848,735 65,028,180
311,159,941 167,847,228 31,771,014 16,332,767 10,324,845
2,848,735 (11,438,848)
4,763,749 7,235,457
1,000,733
7,855,157
7,747,663 5,613,654
3,087,492 8,701,146
987,398 9,688,544
4,055,274
8,877,008
2,848,735 25,469,561
4,763,749 6,234,724
20,265,437 (27,670,070) 17,680,904
20,265,437 (27,670,070) (9,989,166) (2,134,009)
13,743,818 22,620,826
41.2.3.1 Reconciliation of Assets and Liabilities exposed to Yield/Interest Rate Risk with Total Assets and Liabilities Total financial assets as per note 41.2.3 Add Non Financial Assets Operating fixed assets Deferred tax asset Other assets Total assets as per balance sheet Total liabilities as per note 41.2.3 Add Non Financial Liabilities Other liabilities Total liabilities as per balance sheet 311,159,941 7,548,628 662,431 738,723 320,109,723 298,129,961 2,101,520 300,231,481
41.3
Liquidity Risk Liquidity risk is the risk that the Bank is unable to fund its current obligations and operations in the most cost efficient manner. ALCO is the forum to oversee liquidity management. The overall Banks principle is that the ALCO has the responsibility for ensuring that Banks policy for liquidity management is adhered to on a continual basis. Other than customers deposits, the Banks funding source is the interbank money market. Change in the government monetary policy and market expectations of interest rate are all important factors that can adversely affect our key funding source. Efficient and accurate planning plays a critical role in liquidity management. Our MIS provides information on expected cash inflows/out flows which allow the Bank to take timely decisions based on the future requirements. Comprehensive gap analysis, stress testing and scenario analysis is done on periodic basis to capture any adverse effect of market movements on liquidity position. Based on the results produced by analytical models, ALCO devise the liquidity management strategy to maintain sufficient liquidity to deal with any related catastrophe.
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41.3.1 Maturities of Assets and Liabilities The table below summarizes the maturities of assets and liabilities in accordance with liquidity assumptions used by the bank to monitor liquidity risk. Assets and liabilities are assumed to mature on their contractual maturities or on the expected date of realization/settlement/replacement as required by the assumptions.
December 31, 2007 Over 6 Over 1 Months to 1 to 2 Year Years
Rupees in 000
Total
Upto 1 Month
Over 1 to 3 Months
Over 3 to 6 Months
Over 2 to 3 Years
Over 3 to 5 Years
Over 5 to 10 Years
Above 10 Years
Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments Advances Operating fixed assets Deferred tax assets Other assets Liabilities Bills payable Borrowings Deposits and other accounts Subordinated loans Other liabilities 3,494,384 22,933,656 263,972,382 2,499,000 7,332,059 300,231,481 Net assets/(liabilities) Share capital Reserves Unappropriated profit Surplus on revaluation of assets net of tax 19,878,242 5,386,370 6,050,713 6,971,308 1,469,851 19,878,242 3,494,384 12,404,504 48,461,991 3,156,440 67,517,319 8,156,413 2,308,839 53,579,823 1,797,499 57,686,161 5,029,153 29,565,060 500 121,419 34,716,132 951,313 27,682,616 500 167,826 28,802,255 1,116,464 24,834,784 1,000 189,409 26,141,657 12,900,063 644,814 28,848,192 1,000 176,018 29,670,024 (16,938,499) 282,617 16,174,661 2,000 297,321 16,756,599 9,102,757 195,952 19,257,541 2,494,000 715,668 22,663,161 (5,303,642) 15,567,714 710,459 16,278,173 (4,503,408) 29,739,857 668,449 18,419,241 83,958,463 168,407,280 7,548,628 662,431 10,705,374 29,739,857 668,449 14,354,479 5,665,425 23,632,878 30,264 197,931 1,384,449 4,064,762 17,997,491 35,731,127 60,528 14,290 1,211,008 59,079,206 10,411,424 10,325,079 90,792 14,128 2,666,112 23,507,535 8,362,387 42,328,286 181,585 17,885 4,192,222 55,082,365 24,327,425 13,511,777 1,123,861 57,367 21,290 39,041,720 1,738,973 10,700,959 242,452 27,851 21,290 12,731,525 9,899,686 15,514,401 349,226 53,463 42,580 25,859,356 4,482,076 12,327,943 420,218 22,832 106,450 17,359,519 1,073,576 4,334,830 5,049,702 256,684 1,059,973 11,774,765
320,109,723 75,673,732
1,393,045 (11,208,597) 26,280,110
41.3.1.1 When an asset or liability does not have any contractual maturity date, the period in which these are assumed to mature has been taken as the expected date of maturity. 41.4 Operational Risk The Bank, like all financial institutions, is exposed to many types of operational risks, including the potential losses arising from internal activities or external events caused by breakdowns in information, communication, physical safeguards, business continuity, supervision, transaction processing, settlement systems and procedures and the execution of legal, fiduciary and agency responsibilities. The Bank maintains a system of internal controls designed to keep operational risk at appropriate levels, in view of the Banks financial strength and the characteristics of the activities and market in which it operates. These internal controls are periodically updated to conform to industry best practice. The Bank is currently in the process of implementing internationally accepted Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), with a view to consolidate and enhance the existing internal control processes. Further the Bank has appointed a consultant to assist in implementation of Operational Risk Framework.
95

42.
LIQUIDATION OF ALLIED MANAGEMENT SERVICES (PRIVATE) LIMITED The Board of Directors of Allied Bank Limited in its meeting held on October 30, 2006 had approved the liquidation of Allied Management Services (Private) Limited, (AMSL), a wholly owned subsidiary of the Bank, consequent to the merger of First Allied Bank Modaraba (managed by AMSL) into the Bank. Subsequently, shareholders of Allied Management Services (Private) Limited in Extra Ordinary General Meeting held on April 28, 2007 resolved to wind up the company as per the provisions of sections 362 to 370 of Companies Ordinance, 1984 under the Members' Voluntary Winding Up and appointed a liquidator. On account of liquidation ABL received Rs. 145.901 million against the holding of 6,248,800 shares (99.99%) carried at cost of Rs. 62.488 million resulting in gain of Rs. 83.413 million. The Bank has received acknowledgement of filing (No. ARL/ QA-573A dated January 11, 2008) for Forms 107, 26, 29, 109, 110, 112, 37 and 26 from SECP.
43.
RECLASSIFICATION Following corresponding figure has been reclassified for the purpose of better presentation.
December 31, 2006 Rupees in '000
From
To
Balances with other banks
Cash and balances with treasury banks
2,434
44.
NON ADJUSTING EVENT AFTER THE BALANCE SHEET DATE The Board of Directors in its meeting held on February 29, 2008 has proposed a final cash dividend in respect of 2007 of Rs. 1.5 per share (2006: Rs. 2.5 per share). In addition, the directors have also announced a bonus issue of 20% (2006: 20%). These appropriations will be approved in the forthcoming Annual General Meeting. The financial statements for the year ended December 31, 2007 donot include the effect of these appropriations which will be accounted for in the financial statements for the year ending December 31, 2008.
45. 45.1 45.2 46.
GENERAL These accounts have been prepared in accordance with the revised forms of annual financial statements of the banks issued by the State Bank of Pakistan through its BSD Circular No. 04 dated February 17, 2006. Figures have been rounded off to the nearest thousand rupees. DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue on February 29, 2008 by the Board of Directors of the Bank.
Director
Director
Chairman
96
Annexure I
As referred to in notes 9.2.5 and 9.4 to the financial statements
1.
S. No.
DETAIL OF INVESTMENT IN SHARES - LISTED

Amount in Rupees No. of Shares Paid-up Value per Share Total Paid-up Value Market Price per Share
Name of Company
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
DADABHOY LEASING DADABHOY MODARBA ENGRO CHEMICAL LIMITED FAUJI FERTILIZER BIN QASIM LIMITED FAUJI FERTILIZER COMPANY HUB POWER COMPANY LIMITED KAISER ARTS & CRAFT LUCKY CEMENT LIMITED MEEZAN BANK LIMITED MOHIB EXPORT LIMITED MY BANK LIMITED NATIONAL BANK OF PAKISTAN NISHAT MILLS LIMITED OIL & GAS DEVELOPMENT COMPANY PACE PAKISTAN LIMITED PAK OMAN ADVANTAGE FUND PAKISTAN OIL FIELDS PAKISTAN PETROLEUM LIMITED PAKISTAN STATE OIL PAKISTAN TELECOMMUNICATION COMPANY LIMITED PICIC GROWTH MUTUAL FUND REDCO TEXTILE MILLS S.G. FIBRE LTD SAFA TEXTILE MILLS LIMITED TRG PAKISTAN LIMITED WORLD CALL TELECOM LIMITED Pre IPO Investment
47,300 567,500 75,000 6,175,000 1,000,000 9,370,000 766,500 200,000 550,000 21,275 500,000 300,000 519,800 876,700 1,100,000 96,000 575,000 325,000 25,000 987,600 3,152,500 300 788,800 860,700 3,494,500 469
10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10
473,000 5,675,000 750,000 61,750,000 10,000,000 93,700,000 7,665,000 2,000,000 5,500,000 212,750 5,000,000 3,000,000 5,198,000 8,767,000 11,000,000 960,000 5,750,000 3,250,000 250,000 9,876,000 31,525,000 3,000 7,888,000 8,607,000 34,945,000 4,690
1.40 0.90 265.75 42.05 118.75 30.50 0.55 116.50 38.50 0.15 23.95 232.15 105.20 119.45 36.55 8.25 334.40 245.05 406.60 42.05 28.50 2.35 52.30 6.15 14.00 16.60
27
ARIF HABIB BANK LIMITED
11,900,000
21
249,900,000
N/A
2.
S. No.
DETAIL OF INVESTMENT IN SHARES - UNLISTED

Name of Company Percentage of Holding No. of Shares Paidup Value per Share Total Paidup Value Breakup Value per Share Total Book Value December 31, 2007 Breakup Value as per Audited Accounts
Amount in Rupees
Name of Chief Executive / Managing Agent
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
ABL ASSET MANAGEMENT COMPANY ALAMIN TEXTILE MILLS LIMITED * ARABIAN SEA COUNTRY CLUB LIMITED ATLAS POWER ATTOCK TEXTILE MILLS LIMITED* BANKERS EQUITY LIMITED* EASTERN CAPITAL LIMITED EQUITY PARTICIPATION FUND FIRST WOMEN BANK LIMITED HABIB ALLIED INTERNATIONAL BANK INVESTMENT CORPORATION OF PAKISTAN (MERGED WITH IDBP) KAYTEX MILLS LTD * KHUSHHALI BANK LIMITED KOHINOOR LOOMS * NATIONAL WOOLEN MILLS LIMITED NIFT PASSCO RUBY RICE & GENERAL MILLS LIMITED SME BANK LIMITED SWIFT Privately Placed Investment
100.00 6.45 16.13 0.97 8.48 9.50 11.73 0.05 9.07 3.33 0.39
50,000,000 13,100 500,000 6,500,000 55,500 807,699 500,000 15,000 2,544,000 2,375,000 100,000 151,100 200 210,000 6,900 662,584 1,000 14,500 774,351 10
10 10 10 10 10 10 10 100 10 90 10 10 1,000,000 10 10 10 1,000 10 10
500,000,000 131,000 5,000,000 65,000,000 555,000 8,076,990 5,000,000 1,500,000 25,440,000 214,771,250
9.36 10.00 17.16 550.37 31.17 167.52
500,000,000 1 5,000,000 65,000,000 505,500 1 5,000,000 1,500,000 21,200,000 214,769,350 9,130,000 1,511,000 200,000,000 1 51,900 1,526,500 1,000,000 104,500 5,250,000 1,769,508
30.06.2007 30.06.2007 30.06.2007 31.12.2006 31.12.2006 30.06.2004 31.12.2006 30.06.2007 31.03.2007 31.12.2006
Anis ur Rahman Suleman Haji Allah Bux Arif Khan Abbasi Maqsoodd A. Basraa Fareeda Khanum Under Liquidation Munir M. Ladha Jamal Nasim Zarine Aziz Zakir Mahmood Abdul Latif Uqaili Col. (Retd.) M. Yaqoub M. Ghalib Nishtar Haji Sher Shah Muzzafar M. Khan Maj. Gen. Ahmad Nawaz Saleem Mela Mahboob Ali Mansur khan
1,000,000 1,511,000 200,000,000 1,036,871.94 2,100,000 69,000 6,625,840 54.18 1,000,000 (661.30) 145,000 7,743,510 11.44
21 22 23
ENGRO ASAHI POLYMER & CHEM. LTD. NISHAT CHUNIAN POWER LTD. NISHAT MILLS POWER LTD.
3,106,567 2,000,000 2,500,000
10 10
20,000,000 25,000,000
55,918,206 20,000,000 25,000,000
Asif Qadir Saleem Mohammad Mansha
* These companies stand delisted as at December 31, 2007
97
Annexure I
3.
S. No.
DETAIL OF INVESTMENT IN BONDS

Government Guaranteed
Name of Bonds Balance as on December 31, 2007 Coupon Rate Date of Issue Date of Maturity Coupon Due Amount in Rupees Redemption Period
1 2 3 4
GOVT. COMPENSATION BONDS GOVT. COMPENSATION BONDS GOVT. COMPENSATION BONDS US DOLLAR BOND ($ 1,756,940)
11,650,000 280,117,000 118,513,000 160,010,000 570,290,000
6% 6% 9% 6%
1-Mar-89 1-Jun-89 1-Jul-90 1-Jul-90
1-Mar-09 1-Jun-09 1-Jul-10 1-Jul-10
YEARLY YEARLY YEARLY YEARLY
AFTER 20 YEAR AFTER 20 YEAR AFTER 20 YEAR YEARLY
4.
S No.
OTHERS
Sukuk Bonds
Name of Bond Balance as on December 31, 2007 Rate of Mark-up Date of Maturity Coupon Due Amount in Rupees Term of Redemption
1 2 3 4
SECURITY LEASING CORPORATION CENTURY PAPER & BOARD MILLS DAWOOD HERCULES MAPLE LEAF CEMENT
270,000,000 1,150,000,000 1,000,000,000 2,400,000,000 4,820,000,000
11.97% 11.35% 11.21% 11.68%
31-May-12 24-Sep-14 17-Sep-12 06-Jan-14
06-Jan-08 25-Mar-08 16-Mar-08 07-Jun-08
Half Yearly Half Yearly Half Yearly Half Yearly
5.
S. No.
DETAIL OF INVESTMENT IN TFCs - LISTED

Name of Company No. of Certificate Paid-up Value per Certificate
Amount in Rupees Total Paid-up Value
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
ABN AMRO BANK LIMITED ASKARI COMMERCIAL BANK AZGARD NINE LIMITED BANK AL-FALAH LIMITED ESCORT INVESTMENT BANK FAYSAL BANK LIMITED FINANCIAL RECEIVABLES & SECURITIZATION COMPANY LIMITED SEARLE PAKISTAN STANDARD CHARTERED BANK TELECARD LIMITED UNITED BANK LIMITED Pre IPO Investment GRAYS LEASING NIB BANK LTD. PAK ARAB FERTILIZERS UNITED BANK LTD.
7,000 20,000 1,300 20,000 20,000 29,341 21,000 10,000 10,000 75,888 10,000 20,000 30,000 176,000 160,000
5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000
35,000,000 100,000,000 6,500,000 100,000,000 100,000,000 146,705,000 105,000,000 50,000,000 50,000,000 379,440,000 50,000,000 100,000,000 150,000,000 880,000,000 800,000,000
98
6.
S. No.
DETAIL OF INVESTMENT IN TFCs - UNLISTED

Name of Borrower No. of Certificates Paidup Value Per Certificates Total Paidup Value Name of Chief Executive/ Managing Agent
Amount in Rupees Outstanding Principal December 31, 2007
BLUE STAR SPINNING MILLS LIMITED
BENTONITE LIMITED
SHAH JEWANA TEXTILE MILLS LIMITED
4 5 6 7
FARUKI PULP MILLS LIMITED CHOUDHRY WIRE ROPE INDUSTRIES REHMAN SHARIF TEXTILE MILLS LARR SUGAR MILLS
SADHUJA TEXTILE MILLS
TANOCRAFT LIMITED
10
KHAIRPUR SUGAR MILLS
11
BACHANI SUGAR MILLS
12
FRONTIER CERAMICS
13 14 15 16 17 18 19
SCAN RECYCLING DEWAN FAROOQUE SPINNING MILLS BOSICOR PAKISTAN LIMITED DEWAN CEMENT LIMITED ALABBAS HOLDING GHANI HOLDING RAI TEXTILE MILLS
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 13 1 1 15 1 13 1 11 1 13 1 13 1 13 1 23 1 23 1 13 1 13 1 1 3 2 1 15 1 5 1 13 1 5 1 23 1 14 13 1 15 1 13 1 13 1 15 1 1 25,000 10,000 10,000 5,750 5,750 6
165,291 270,681 263,639 251,937 244,584 233,192 225,529 214,966 206,474 195,704 187,419 176,954 168,364 158,215 149,309 139,574 130,254 107,610 107,619 470,440 20,100 20,680 40,010 40,069 120,090 120,127 1,050,900 1,050,993 217,000 228,902 49,690 49,819 476,315 476,320 200,759 200,758 207,774 207,775 601,916 601,918 137,946 278,924 274,376 2,790,892 59,500 60,942 69,900 70,385 55,536 55,538 337,000 337,077 135,227 135,236 1,526,874 655,656 655,657 117,000 118,846 224,000 217,221 113,000 113,960 17,200 17,300 240,542 5,000 5,000 5,000 100,000 100,000 391,687
165,291 270,681 263,639 251,937 244,584 233,192 225,529 214,966 206,474 195,704 187,419 176,954 168,364 158,215 149,309 139,574 130,254 1,398,930 107,619 470,440 301,500 20,680 520,130 40,069 1,320,990 120,127 13,661,700 1,050,993 2,821,000 228,902 645,970 49,819 10,955,245 476,320 4,617,457 200,758 2,701,062 207,775 7,824,908 601,918 137,946 836,772 548,752 2,790,892 892,500 60,942 349,500 70,385 721,968 55,538 1,685,000 337,077 3,110,221 135,236 21,376,236 8,523,528 655,657 1,755,000 118,846 2,912,000 217,221 1,469,000 113,960 258,000 17,300 240,542 125,000,000 50,000,000 50,000,000 575,000,000 575,000,000 2,350,122
Ch.Sardar Mohammad
1,726,000
Khalid Shakeel
1,360,000
Shahida Faisal Saleh Hyat
118,139
Salim Akbar Faruki Ch. Muhammad Akram Mohammad Sharif Abdul Rauf
7,020,000 864,834 226,213 1,798,104
Ali Asghar
916,109
Kanwer Furqan Ali
243,054
Muhammad Mubeen Jumani
1,248,000
Najmuddin Ansari
12,667,000
Shamsul Hassan
2,610,699
Fauzan Qasim Dewan Mohammed Yousuf Farooqi Aamir Abbassciy Dewan Mohammed Yousuf Farooqi Shunaid Qureshi Shunaid Qureshi Javed Ahmad Kayani
265,451 62,500,000 28,571,429 43,498,987 575,000,000 575,000,000 266,765
99
Annexure I
DETAIL OF INVESTMENT IN TFCs - UNLISTED

S. No. Name of Borrower No. of Certificates Paidup Value Per Certificates Total Paidup Value Name of Chief Executive/ Managing Agent
Amount in Rupees Outstanding Principal December 31, 2007
20 21 22 23 24 25 26 27 28 29 30 31
ARUJ TEXTILE MILLS DEWAN HATTAR CEMENT LIMITED (A) DEWAN HATTAR CEMENT LIMITED (B) DEWAN CEMENT LIMITED (A) DEWAN CEMENT LIMITED (B) DEWAN CEMENT LIMITED DEWAN HATTAR CEMENT LIMITED PAKISTAN MOBILE COMMUNICATION ALABBAS SUGAR IND. LIMITED NEW ALLIED ELECTRONICS Privately Placed Investment ORIX LEASING JAVEDAN CEMENT
654,970
40,000 40,000 10,000 308,000 2,500
5,000 5,000 5,000 5,000 100,000
3,274,850 25,610,000 4,224,000 9,672,000 1,435,015 200,000,000 200,000,000 50,000,000 1,540,000,000 250,000,000
Sheikh Muhammad Tahir Dewan Muhammad Yousaf Farooqi Dewan Muhammad Yousaf Farooqi Dewan Muhammad Yousaf Farooqi Dewan Muhammad Yousaf Farooqi Dewan Muhammad Yousaf Farooqi Dewan Muhammad Yousaf Farooqi Zuhair Khaliq Shunaid Qureshi Mian Pervaiz Akhtar Humayun Murad Shunaid Qureshi
1,093,970 15,291,540* 4,224,000* 5,784,468* 1,435,015* 27,298,222* 59,011,513* 80,000,000 200,000,000 50,000,000 1,540,000,000 250,000,000
*Certificate by these companies have not yet been issued. Therefore "Number of Certifcate", "Paidup Value per Certificate" & "Total Paidup Value" is not given.
7.
S. No.
DETAIL OF INVESTMENT IN PTCs - UNLISTED

Name of Company No. of Certificate Paid up Value per Certificate Total Paid-up Value Name of Chief Executive / Managing Agent
Amount in Rupees Outstanding December 31, 2007
1 2 3 4
SETHI IND. LTD. CRYSTAL CHEMICALS MAS DAIRIES LTD. PANGRIO SUGAR MILLS
1 5 1 13 1 9 15 1 1 13
12,493 12,000 59,000 62,000 50,000 51,000 236,000 240,000 168,000 169,000
12,493 60,000 59,000 806,000 50,000 459,000 3,540,000 240,000 168,000 2,197,000
Abdul Wajid Sethi Maqsood A Shaikh Mian Nisar Akhtar Sajid Hussain Naqvi
1,276,057 1,559,000 1,009,000 3,067,621
8.
DETAIL OF INVESTMENT IN DEBENTURES - UNLISTED

Terms of Redemption Principal Interest Rate of Interest
Amount in Rupees Amount Outstanding as on December 31, 2007
Name of Company
PUBLIC SECTOR GHAZI TEXTILE MILLS HARIPUR COLD STORAGE HARIPUR COLD STORAGE HARIPUR COLD STORAGE KARACHI DEVELOPMENT AUTHORITY PRIVATE SECTOR EFFEF INDUSTRIES LIMITED PAKISTAN POLY PROPYELENE PKG. LIMITED Overdue Overdue Overdue Overdue 14.00% 14.00% 109,108 80,000 Overdue Overdue Overdue Overdue Overdue Overdue Overdue Overdue Overdue Overdue 12.50% 12.00% 12.50% 12.00% 12.50% 1,625,000 500,000 459,000 56,000 62,355,000
100
9.
DETAIL OF INVESTMENT IN MUTUAL FUNDS - LISTED

No. of Units 7,138,737 2,374,884 675,072 7,632,204 7,103,416 250,000 11,367,942 860,503 95,425 10,298 19,853,176 3,328,756 1,423,785 1,907,669 1,903,855 1,915,709 2,393,261 200,000 11,988,108 2,862,049 9,475,978 1,891,611 7,148,985 2,377,330 19,158,006 214,893,948 23,814,060 73,991 1,523,746 19,102,197 4,762,812 274,758 43,074,773 4,778,662 Paidup Value per Unit 50.00 50.00 50.00 50.00 100.00 100.00 100.00 500.00 500.00 500.00 10.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 10.00 10.00 10.00 50.00 50.00 50.00 100.00 100.00 100.00 Total Paidup Value 356,936,850 118,744,200 33,753,600 381,610,200 710,341,600 25,000,000 1,136,794,200 430,251,500 47,712,500 5,149,000 198,531,760 332,875,600 142,378,500 190,766,900 190,385,500 191,570,900 239,326,100 20,000,000 1,198,810,800 286,204,900 947,597,800 189,161,100 714,898,500 237,733,000 1,915,800,600 2,148,939,480 238,140,600 739,910 76,187,300 955,109,850 238,140,600 27,475,800 4,307,477,300 477,866,200 Total Book Value December 31, 2007 375,000,000 125,000,000 40,000,000 400,000,000 750,000,000 25,000,000 1,200,000,000 450,000,000 50,000,000 5,000,000 200,723,980 350,000,000 150,000,000 200,000,000 200,000,000 200,000,000 250,000,000 20,000,000 1,250,000,000 300,000,000 1,000,000,000 200,000,000 750,000,000 250,000,000 2,000,000,000 2,250,000,000 250,000,000 2,260,835 63,860,585 1,000,000,000 250,000,000 25,000,000 4,500,000,000 500,000,000
Amount in Rupees
S. No. Name of Company 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 AKD INCOME FUND AKD INCOME FUND A AKD OPPORTUNITY FUND ALFALAH GHP INCOME MULTIPLIER FUND AMZ PIUS INCOME FUND AMZ PLUS STOCK FUND ASKARI INCOME FUND A ATLAS INCOME FUND ATLAS INCOME FUND A ATLAS ISLAMIC FUND BMA CHUNDRIGAR ROAD SAVING FUND DAWOOD MONEY MARKET FUND DAWOOD MONEY MARKET FUND A FAYSAL SAVING GROWTH FUND FAYSAL SAVING GROWTH FUND A FIRST HABIB INCOME FUND HBL INCOME FUND A HBL STOCK FUND HBLINCOME FUND IGI INCOME FUND J. S. INCOME FUND JS INCOME FUND A KASB LIQUID FUND KASB LIQUID FUND A MCB DYNAMIC CASH FUND NAFA CASH FUND NAFA CASH FUND NATIONAL INVESTMENT TRUST PAK INT.ELEMENT ISLAMIC FUND PAKISTAN INCOME FUND PAKISTAN INCOME FUND A UNITED COMPOSITE ISLAMIC FUND UNITED GROWTH & INCOME FUND UNITED MONEY MARKET FUND A Pre IPO Investment 35 36 37 KASB BALANCE FUND DAWOOD TAKAFUL FAMILY FUND JS AGGRESSIVE FUND
Market Price per Unit December 31, 2007 52.7587 52.7587 60.1500 52.5899 105.9394 106.8900 105.6900 524.5200 524.5200 515.2900 10.3107 105.4613 105.4613 105.1500 105.1500 104.7700 104.5600 102.4000 104.5600 104.9400 105.8600 105.8600 105.2700 105.2700 104.7080 10.5116 10.5116 59.8500 53.7000 52.5500 52.5500 107.5000 104.7903 104.7140
500,000
50
25,000,000
25,000,000 35,000,000 300,000,000
50.0000
10.
DETAIL OF INVESTMENT IN PREFERENCE SHARES - UNLISTED

Percantage Holding 33.33% No. of Shares 20,000,000 Paid-up Value per Share 10.00 Total Paid-up Value 200,000,000 Break-up Value per Share 16.85 Break-up Value as per Audited Accounts (Date of Accounts) 6/30/06 Name of Chief Executive / Managing Agent Shahid Nazir
Amount in Rupees
S. No. Name of Company 1 MASOOD TEXTILES
Term of Redemption Can convert 1/3 of PS alongwith dividend into ordinary shares after expiry of 4 years at a discount of 15% ABL's stake in the preference share for Rs.75 M to be redeemed within 60 days after completion of 5 years from the date of issue
FAZAL CLOTH
30.00%
7,500,000
10.00
75,000,000
10.00
Sheikh Naseem Ahmed
101
Annexure I
11.
S. No.
QUALITY OF AVAILABLE FOR SALE SECURITIES

December 31, 2007 Name of Security Market Value Credit Rating Market Value
Rupees in 000
December 31, 2006 Credit Rating
GOVERNMENT SECURITIES 1 2 3 MARKET TREASURY BILLS FEDERAL INVESTMENT BONDS PAKISTAN INVESTMENT BONDS 37,417,758 243,211 Un Rated Un Rated Un Rated 23,315,710 5,000 296,385 Un Rated Un Rated Un Rated
LISTED TFCs 4 5 6 7 8 9 10 11 12 13 14 15 16 18 19 20 21 22 ASKARI COMMERCIAL BANK ABN AMRO BANK LIMITED ALABBAS HOLDING UNLISTED ASKARI COMMERCIAL BANK AZGARD NINE LIMITED BANK AL FALAH LIMITED CHANDA OIL & GAS COMPANY ESCORT INVESTMENT BANK FAYSAL BANK FINANCIAL RECEIVABLE & SECURITIZATION COMPANY LIMITED FINANCIAL RECEIVABLE & SECURITIZATION COMPANY LIMITED GHANI HOLDING UNLISTED NAIMAT BAISAL OIL & GAS LIMITED SEARLE PAKISTAN SECURITY LEASING CORPORATION LIMITED SONERI BANK LIMITED UNION BANK / STANDARD CHARTERED UNITED BANK 104,736 36,794 575,000 6,500 104,190 100,000 146,705 76,022 33,630 575,000 44,528 50,595 52,879 AA A ** ** A+ AA ** A+ AA AA AA ** ** A ** ** AAA AA 66,260 54,967 99,960 99,690 249,866 71,200 100,000 70,093 59,976 149,910 155,969 150,000 AA A ** AA A+ AA A ** AA ** ** ** A+ ** ** A+ A+ AA
SHARES UNLISTED 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 ARABIAN SEA COUNTRY CLUB ATTOCK TEXTILE MILLS LIMITED EASTERN CAPITAL EQUITY PARTICIPATION FUND FIRST WOMEN BANK HABIB ALLIED INTERNATIONAL BANK (HAIB) ICP LIMITED (MERGED INTO IDBP) KAYTEX MILLS LIMITED KHUSHHALLI BANK NATIONAL WOOLEN MILLS LIMITED NIFT NISHAT CHUNIAN POWER LIMITED NISHAT MILLS POWER LIMITED PASSCO RUBY RICE & GENERAL MILLS LIMITED SME BANK SWIFT 5,000 5,000 8,256 21,200 214,769 1,000 200,000 35,896 (661) 5,250 1,770 ** ** ** ** ** ** ** ** ** ** ** ** A+&A1 ** ** ** ** 5,000 505 5,000 1,500 21,200 214,769 9,130 1,511 200,000 51 1,527 1,000 105 5,250 1,770 ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** ** **
SHARES LISTED 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 ADAMJEE INSURANCE COMPANY LIMITED BANK AL FALAH LIMITED BANK OF PANJAB BOC PAKISTAN LIMITED BROTHER TEXTILES MILLS COLONY MILL LIMITED D.G. KHAN CEMENT D.G. KHAN CEMENT DADABHOY LEASING DADABHOY MODARBA ENGRO CHEMICAL ESCORTS INVESTMENT BANK LIMITED FAUJI CEMENT LIMITED FAUJI FERTILIZER BIN QASIM FAUJI FERTILIZER COMPANY FAYSAL BANK LIMITED FIRST INVESTEC MODARABA HUB POWER COMPANY ICP LIMITED (MERGED INTO IDBP) 66 511 19,931 251,249 118,750 285,785 ** ** ** ** ** ** ** ** ** ** AA&A1+ ** ** ** ** ** ** ** ** 3,763 4 411 1,293 72 0 17 5 5,025 33,800 458 6,198 44,177 37,258 24,214 11 229,507 76,473 AA AA& A1+ AA& A1+ Un Rated ** Un Rated Un Rated Un Rated ** ** AA& A1+ A&A1 ** Un Rated Un Rated AA & A1+ ** ** **
102

S. No. 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 Name of Security KAISER ARTS & CRAFT KOHINOOR INDUSTRIES LIMITED KOT ADDU POWER COMPANY LIMITED LUCKY CEMENT LIMITED MCB BANK LIMITED MEEZAN BALANCE FUND MEEZAN BANK LIMITED MIRZA SUGAR MILL LIMITED MOHAMMAD FAROOQ TEXTILE MILLS MOHIB EXPORT LIMITED MY BANK LIMITED NATIONAL BANK OF PAKISTAN NISHAT MILLS LIMITED OIL & GAS DEVELOPMENT COMPANY PACE PAKISTAN LIMITED PAK OMAN ADVANTAGE FUND PAK REINSURANCE PAKISTAN OIL FIELDS PAKISTAN PETROLEUM LIMITED PAKISTAN PREMIER FUND PAKISTAN PTA LIMITED PAKISTAN STATE OIL PAKISTAN STRATEGIC ALL. FUND PAKISTAN SYNTHETIC LIMITED PAKISTAN TELECOMMUNICATION COMPANY LIMITED PICIC GROWTH MUTUAL FUND PICIC INSURANCE LIMITED PICIC INVESTMETN FUND REDCO TEXTILE MILLS S.G.FIBRE LIMITED SAFA TEXTILE MILLS LIMITED SAUDI PAK COMM. BANK LIMITED SHARISH TEXTILE MILLS LIMITED SOUTHERN ELECTRIC POWER COMPANY TRG PAKISTAN LIMITED UTP GROWTH FUND WORLD CALL TELECOM LIMITED YOUSAF WEAVING MILLS LIMITED December 31, 2007 Market Value 422 23,300 21,175 3 11,975 69,645 54,683 104,722 40,205 792 192,280 79,641 10,165 35,743 89,846 1 41,254 5,293 30,723 8 Credit Rating ** ** ** ** ** ** A+&A1 ** ** ** A&A1 AAA&A1+ A+&A1 AAA&A1+ A+&A1 AA ** ** ** ** ** AAA&A1+ ** ** ** 2 Star ** ** ** ** ** ** ** ** BBB+&A2 ** A+&A1 ** Market Value 241 101,140 880 15,972 14,396 1 53 3 65,036 33,803 124,726 167,369 237,847 23,200 423 1 11,935 8,500 1 30,976 0.04 421 5,477 45,907 8,886 2 0.03 3 737 86 2.00
Rupees in 000
December 31, 2006 Credit Rating ** ** ** ** AA+& A1+ 5 STAR ** Un Rated ** ** ** AAA & A1+ A+&A1+ AAA& A1+ ** ** ** ** Un Rated 4 STAR Un Rated AAA& A1+ 4 STAR ** ** 4 STAR A 3 STAR ** ** ** A& A2 ** Un Rated ** Un Rated A+& A1 **
PREFERENCE SHARES OF LISTED COMPANIES 97 98 FAZAL CLOTH MASOOD TEXTILE 75,000 200,000 ** ** 75,000.00 200,000.00 ** **
INVESTMENT IN MUTUAL FUND 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 AKD INCOME FUND AKD OPPORTUNITY FUND ALFALAH GHP INCOME MULTIPLIER FUND AMZ PLUS INCOME FUND AMZ PLUS STOCK FUND ASKARI INCOME FUND ATLAS INCOME FUND ATLAS ISLAMIC FUND BMA CHUNDRIGAR ROAD SAVING FUND DAWOOD MONEY MARKET FUND FAYSAL SAVING & GROWTH FUND FIRST HABIB INCOME FUND HBL INCOME FUND HBL STOCK FUND IGI INCOME FUND JS INCOME FUND KASB LIQUID FUND KASBFUND MCB DYNAMIC CASH FUND MEEZAN ISLAMIC INCOME FUND NAFA CASH FUND NATIONAL INVESTMENT TRUST 501,926 40,606 401,377 752,532 28,326 1,201,478 501,403 5,306 204,700 501,209 400,782 200,709 1,503,716 20,480 300,343 1,203,373 1,002,835 25,000 2,005,996 2,509,203 4,428 ** ** 5 STAR ** ** ** 5 STAR ** ** 5 STAR ** ** ** ** ** ** ** ** ** ** 5 STAR 4 STAR 24,288 59,550 3,318 ** ** ** ** Un Rated ** ** ** ** ** ** ** ** ** ** ** ** ** ** Un Rated ** 4 STAR
103
Annexure I

S. No. 121 122 123 124 125 126 127 Name of Security PAK INT. ELEMENT ISLAMIC FUND PAKISTAN CAPITAL MARKET FUND PAKISTAN INCOME FUND RELIANCE INCOME FUND UNITED COMPOSITE ISLAMIC FUND UNITED GROWTH & INCOME FUND UNITED MONEY MARKET FUND December 31, 2007 Market Value 81,825 1,254,106 29,536 4,513,818 500,393 Credit Rating ** ** 4 STAR ** A A+ Market Value 71,835 76,867 25,000 25,000
Rupees in 000
December 31, 2006 Credit Rating 3 STAR 3 STAR ** Un Rated Un Rated ** **
PRE IPO INVESTMENT 128 129 130 131 132 133 FINANCIAL RECEIVABLES & SECURITIZATION COMPANY LIMITED GRAY LEASING UNITED BANK LIMITED NIB BANK LIMITED TREASURY SHARES PAK ARAB FERTILIZERS 100,000 800,000 150,000 584,900 880,000 ** ** AA ** ** ** 105,000 ** ** ** ** ** **
SUKUK BONDS 134 135 136 ** SECURITY LEASING CORP CENTURY PAPER & BOARD MILLS DAWOOD HERCULES Ratings are not available 270,000 1,150,000 1,000,000 Un Rated Un Rated Un Rated ** ** **
104
SHOWING WRITTEN OFF LOANS OR ANY OTHER FINANCIAL RELIEF OF FIVE HUNDRED THOUSAND OR ABOVE DURING THE YEAR ENDED DECEMBER 31, 2007
Rupees in Million
S. Name and address No. of the Borrower Father's / Husband's Name 4 5 6 7 8 9 10 11 Principal Total
Name of Individuals / Partners / Directors with NIC Nos.
Outstanding liabilities at the Beginning of Year Interest/ Mark-up Other Principal Written-off Interest/ Mark-up Written-off
Other Financial Relief Provided
Total 9 + 10 + 11 12
Annexure II
As referred to in note 10.7 to the financial statements
SINDH PROVINCIAL CO-OPERATIVE BANK LIMITED, RISALA ROAD, HYDERABAD (EST. UNDER THE ESTABLISHMENT OF FEDERAL GOVT. BANK FOR CO-OPERATIVES & REGULATIONS OF CO-OPERATIVE BANK ACT 1977 THROUGH ITS GEN.MANAGER, CENTRAL OFFICE SERAI ROAD KARACHI) 322-87-410704 323-91-747742 274-85-238759 33.690 0.000 70.087 GHULAM MUHAMMAD 18.475 0.000 23.402 M.AZEEM 41.877 103.777 18.475 10.822 0.000 0.000 M.AZEEM 6.692 0.000 9.055 15.747 3.484 0.000
2.166
0.000
3.292
5.458
2.166
0.000
3.046
12.000
AL-HAMRA INTERNATIONAL, H.NO.8 ST.NO.3, BLOCK S, NEW MULTAN COLONY, MULTAN.
AYYAZ AHMED
9.055
12.539
HAMEEDA BEGUM
FATIMA TRADING ESTABLISHMENT
ARIF MEHMOOD
23.402 70.087
41.877 80.909
PAKISTAN MINERAL WATER & BOTTLING PLANT (PVT.) LIMITED, P.M.W & BOTTLING PLANT PVT. LIMITED, I/E GADOON AMAZAI 286-87032118 LATE AHMED CHISHTI 50.000 0.000 12.952
S.M. SALEEM SHAHEEN SALEEM S. MUDASSAR HUSSAIN SHAMIM AHMED
BOLAN TRADERS ROOM # 11 & 1,2,3 FLOOR TEXTILE PLAZA, I. I. CHUNDRIGAR ROAD, KARACHI. MAHMOOD BUX 0.006 0.004
MUHAMMAD ALI CHISHTY
62.952
8.988
0.000
12.952
21.940
DILMON CONSTRUCTION
MASOOD JAWED ALTAF HUSSAIN
0.000 0.000
1.005 1.048
1.011 1.052
0.006 0.004
0.000 0.000
1.005 1.048
1.011 1.052
MUSLIM CONSTRUCTION CO. 9-D, COMMERCIAL AREA NURSERY, PECHS SOCIETY, KARACHI. 517-35-331195 502-62-242254 502-76-595405 502-92-595404 136-28-057959 136-92-057960 136-39-057965 136-59-028695 136-63-057963 ALLAH BUKSH SHEIKH ABDUL SATTAR SHEIKH ABDUL SATTAR SHEIKH ABDUL SATTAR
FAREED UDDIN ALTAF HUSSAIN
MASHAL FABRICS (PVT.) LIMITED 21 K.M., CHUGHTAI ROAD, FEROZEPUR ROAD, LAHORE.
SHEIKH ABDUL SATTAR ABDUL BASIT SHEIKH ABDUL MAJEED SHEIKH SABEEN SHEIKH
12.899
0.000
10.761
23.660
3.241
0.000
10.761
14.002
AZEEM TAPES (PVT.) LIMITED PLOT # 152,154,155, INDUSTRIAL ESTATE, GADOON AMAZAI.
MOHAMMAD ISHAQUE JAN FAWAD ISHAQ MRS KHURSHID ISHAQ YASMEEN FAWAD AISHA MANZOOR SHABBIR AHMED AFIA SHABBIR
1.162
0.000
0.790
1.952
0.759
0.000
0.790
1.549
105
106
Rupees in Million
Outstanding liabilities at the Beginning of Year Interest/ Mark-up Other Principal Written-off Interest/ Mark-up Written-off Total 9 + 10 + 11 12
Annexure II
10
ABDALI SONS (PVT.) LIMITED 3A, SMALL INDUSTRIAL ESTATE, MULTAN.
HAMID KHAN DURRANI FARKHANDA DURRANI (LATE) MUHAMMAD KHAN DURRANI ZARGHAM KHAN DURRANI ABDUL KHALIQ KHAN DURRANI ABDUL QADOOS KHAN MUZAFFAR ALI AWAN AHSAN ELLAHI JEHANGIR ELLAHI JEHANGIR ELLAHI AHSAN ELLAHI TANVIR ELLAHI PIR GHULAM HUSSAIN 1.520 0 15.694 17.214 1.520 187.663 0 104.161 291.824 115.656 0
36302-5063613-7 322-39-100498 61101-0632-851-5 35201-3846459-9 SINCE LONG SETTLED IN USA (NIC NOT AVAILABLE) 246-91-137554 270-55-009898 272-75-508877 272-92-508976 272-90-521153
HAFEEZ KHAN DURRANI W/O HAMEED KHAN HAMEED KHAN HAMEED KHAN
6.372
12.666
19.038
1.149
12.666
13.82
11
TAJ TEXTILE MILLS LIMITED, 31-C-1, GHALIB ROAD, GULBERG-III, LAHORE.
NADIR ALI AIWAN TANVEER ELLAHI AMIR ALI SHAH AHMED JEHANGIR JEHANGIR ELLAHHI SHAHRUKH ALI
104.161
219.817
12
NATIONAL TYRE & RUBBER CO. MOULVI TAMIZ UDDIN KHAN ROAD, OPP. BEACH HOTEL, KARACHI. 3.000 0 6.814
HUSSAIN MUMTAZ
15.694
17.214
As referred to in note 10.7 to the financial statements
13
GHULAM HUSSSAIN & COMPANY GRAIN MARKET, VEHARI.
MUHAMMAD JAMIL GHULAM HUSSAIN MST.RABIA BEGUM MST RAZIA BEGUM NAIK MUHAMMAD 329-91-220081 329-59-220079 329-64-220082 329-90-720083 1.340 JAMAL UDDIN JAMAL UDDIN JAMAL UDDIN JAMAL UDDIN 13.698 0
9.814
1.222
6.814
8.036
14
JAMAL PAPERS ( PVT.) LIMITED HOUSE # 47/8, BLOCK # 13, SHAHEED ROAD, MIAN CHANNU, KHANIWAL.
M.NAVEED MUGHAL ABDUL WAHEED MUGHAL M.ARSHAD MUGHAL KHALID AZIZ MUGHAL
12.033
25.731
8.494
12.033
20.527
15
PRIME PAPER & BOARD (PVT.) LIMITED MARALA ROAD, MALKAY KALAN, SIALKOT. 321-86-111248 321-91-111251 321-92-111252 321-92-045735 321-52-045734 MUHAMMAD MAZHAR MUHAMMAD MAZHAR MUHAMMAD MAZHAR MUHAMMAD EJAZ MUHAMMAD EJAZ
AKHLAQ HUSSAIN NAYYER ABBAS
2.084
3.424
0.175
1.900
2.075
16
MIAN INDUSTRIES COTTON GINNING & PRESSING (PVT.) LIMITED CHAK # 461/EB, LUDDON ROAD, BUREWALA.
MUHAMMAD SHAHBAZ MUHAMMAD MUMTAZ MUHAMMAD NAWAZ SARMAD EJAZ SHAMIM BAHAR
3.300
1.743
5.043
0.800
1.743
2.543
Rupees in Million
Outstanding liabilities at the Beginning of Year Interest/ Mark-up Other Principal Written-off Interest/ Mark-up Written-off
Total 9 + 10 + 11 12
17
FRUIT SAP LIMITED 14-GREEN WOOD APARTMENT, CIVIC CENTRE, NEW GARDEN TOWN, LAHORE.
ZAFAR IQBAL MIAN RIAZ AHMED MIAN MRS.SHAHEEN ZAFAR MASOOD SAJJAD MRS,YASMEEN MASOOD MIAN ALLAH WASAYA 0 0.000 0.609 0.609 0 0.000
2,550
4,857
7,407
2.550
4.857
18 M.LATEEF M.LATEEF MIAN GHULAM HUSSAIN
HUSSAIN COTTON GINNING & PRESSING FACTORY CHAK NIZAM, ARIFWALA ROAD, PAKPATTAN.
AMANULLAH HAMEED ALI HAMEEDA SHAIKH MUHAMMAD MUHAMMAD SALEEM MST.NAZIRI BEGUM MST . NASEEM AKHTAR 413-90-129904 413-36-065007 45105-0203641-7 413-75-129910 7,050 272-44-028461 272-92-028462 270-85-417004 272-53-028459 MUHAMMAD RAFIQ MUHAMMAD IBRAHIM MUHAMMAD IBRAHIM TOTAL 1.540 0.000 0.683 2.223 0.675 0 0 BAKHSHOO MAL WAPARI MAL GHULAM SARWAR CHA BAKHSHOO MAL 16,960 0 6.924 16,967
0.550
0.550
19
MAST QALANDAR COTTON & GINNING FACTORY
NAMCHAND GURDAS MAL AHSANULLAH VIJAY KUMAR
10.844
6.858
17,702
20
AHMED AGENCIES
SHEIKH MUHAMMAD AFZAL
6.466 0.292
7,056 0.967
2.750 0.675
0 0
5.687 0.964
8 1.639
21
HOUSE OF FABRICS (PVT) LIMITED
SYED GOHAR HUSSAIN NAQVI
SYED MEHDI ABBAS NAQVI SABEENA SHAHID FARZANA NAQVI
22
CH. SPRAY CENTRE BANGLA ROAD, MAMUNKANJAN.
CH SAIFULLAH MUHAMMAD SHARIF MUHAMMAD AMIN
0.071
0.540
0.611
26,904
0.000
5,159.561
32,064
193.851
0.000
306.613
18,191.550
107
Annexure III
As referred to in notes 11.4 and 11.13 to the financial statements
1.
DISPOSAL OF FIXED ASSETS AS ON DECEMBER 31, 2007

Original cost/ revalued amount Accumulated depreciation Book value Sale Proceeds Mode of disposal
Rupees in 000
Particulars Furniture & Fixtures Items having book value of less than Rs.250,000 and cost of less than Rs.1,000,000 - Bank Employees
113 143 256 10,741 10,997
51 97 148 8,456 8,604
62 46 108 2,285 2,393
62 56 118 2,297 2,415
As per Bank policy As per Bank policy Various
Khursheed Ahmed Khan Bilal Mustafa Various
- Others TOTAL
Rupees in 000
Particulars
Original cost/ revalued amount
Accumulated depreciation
Book value
Sale Proceeds
Mode of disposal
Electrical, Office & Computer Equipment Items having book value of less than Rs. 250,000 and cost of less than Rs. 1,000,000 - Bank Employees 116 97 24 10 10 10 4 10 10 10 10 10 10 4 9 5 349 16,695 17,044 91 79 1 1 10 4 3 5 3 6 6 6 4 7 4 230 16,687 16,917 25 18 24 9 9 7 5 7 4 4 4 2 1 119 8 127 25 18 24 10 9 1 7 5 7 4 5 4 1 2 2 124 86 210 As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy As per Bank policy Various Khursheed Ahmed Khan Bilal Mustafa Ali Azfar Naqvi M.Yaseen Mamdani Sharma Lajpatrai Qaboola Zarin Zahid Rasool Tariq Mehmood Shahid Iftikhar Hussain Mir Bilal Ayub Butt Ahmer Humayun S.A.H Chisti Adnan Najmul Azam Aslam Hameed Syed Akber Raza Various
- Others TOTAL
108
2.
LOCATION OF REVALUED PROPERTIES AS ON DECEMBER 31, 2007

Revaluation Date September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 Particulars TAJ COMPLEX KARACHI NAPIER ROAD, LAHORE QUAID-E-AZAM ROAD, MULTAN CANTT SATELLITE TOWN QUETTA AMBER TOWER, KARACHI KASHMIR ROAD RAWALPINIDI BANGLORE TOWN, KARACHI GRAIN MARKET, VEHARI CITIZEN COLONY, HYDERABAD BUFFER ZONE, KARACHI AMBER PALACE, KARACHI NORTH NAZIMABAD, KARACHI UNIVERSITY ROAD KARACHI LAKSON SQUARE, SARWAR SHAHEED ROAD, KARACHI SHAHDMAN COLONY, LAHORE ZAIBUNNISA STREET, KARACHI S.I.T.E., KARACHI L.D.A., WASA, LAHORE BLOCK K NORTH NAZIMABAD KARACHI ASGHAR MALL CHOWK RAWALPINDI SAIMA TRADE TOWER, I.I. CHUNDRIGAR ROAD, KARACHI LARKANA QUANDHARI BAZAR, QUETTA REGENCY ARCADE, FAISALABAD CAVALRY ROAD NOWSHERA ADAM ARCADE BRANCH KARACHI SITARA TOWER, FAISALABAD BABA-E-URDU ROAD, KARACHI RASHID MINHAS ROAD, KARACHI KASHMIR EGERTON ROAD LAHORE 199-UPPER MALL, LAHORE BOATING BASIN, KARACHI CLOTH MARKET KARACHI AHMEDPUR, BAHAWALPUR DADABHOY CENTRE KARACHI NURSERY, PECHS, KARACHI NEW SADIQ BAZAR, RAHIMYAR KHAN BLUE AREA, ISLAMABAD TRUNK BAZAR, RAWALPINDI BANK SQUARE BRANCH, GUJRANWALA ANARKALI LAHORE MODEL TOWN, LAHORE GOLE CLOTH FAISALABAD TRADE TOWER, KARACHI TRADE TOWER, KARACHI MAIN BOULVARD, LAHORE KEHKASHAN, JADE GARDEN CLIFTON, KARACHI P.I.B. COLONY, KARACHI STOCK EXCHANGE BUILDING KARACHI KHAYABAN-E-JAMI KARACHI BRANDERTH ROAD, LAHORE JINNAH COLONY FAISALABAD SIRKI ROAD, QUETTA MASJID-E-TOOBA KARACHI BLOCK NO.1, SARGODHA FORT SULTAN BUILDING, STAR GATE BRANCH, KARACHI. ZAM ZAMA BUILDING KARACHI KHALID BIN WALEED ROAD, KARACHI AKBER BAZAR, SHEIKHUPURA KHYABAN-E-BADAR, D.H.A. KARACHI CLIFTON BROADWAY, KARACHI City Location KARACHI LAHORE MULTAN QUETTA KARACHI RAWALPINDI KARACHI VEHARI HYDERABAD KARACHI KARACHI KARACHI KARACHI KARACHI LAHORE KARACHI KARACHI LAHORE KARACHI RAWALPINDI KARACHI LARKANA QUETTA FAISALABAD NOWSHERA KARACHI FAISALABAD KARACHI KARACHI LAHORE LAHORE KARACHI KARACHI BAHAWALPUR DADABHOY KARACHI RAHIMYAR KHAN ISLAMABAD RAWALPINDI GUJRANWALA LAHORE LAHORE FAISALABAD KARACHI KARACHI LAHORE KARACHI KARACHI KARACHI KARACHI LAHORE FAISALABAD QUETTA KARACHI SARGODHA KARACHI KARACHI KARACHI SHEIKHUPURA KARACHI KARACHI
Date of Purchase 01.01.1985 01.10.1973 02.08.1999 04.03.1979 05.06.1985 05.06.1997 05.08.1999 08.05.1994 08.07.1999 08.10.1986 08.11.1986 08.11.1993 09.08.1980 09.08.1999 09.09.1992 09.10.1988 10.06.2000 10.09.1999 11.08.1998 11.12.1997 12.07.1999 13.10.1973 13.10.1988 14.12.1998 15.08.1966 15.08.1994 15.09.1996 15.09.1998 16.02.1986 16.08.1992 17.05.1995 17.12.1987 19.08.1998 19.09.1996 20.03.1979 20.03.1998 20.04.1994 20.07.1975 20.07.1975 20.12.1999 22.04.1985 23.09.1996 23.12.1970 24.02.1992 24.02.1992 25.01.1987 25.08.1999 26.05.2000 27.08.2003 27.11.1996 27.12.1994 28.06.1997 29.04.1982 29.06.1998 29.07.1975 29.09.1999 29.12.1994 29.12.1996 29.12.1997 30.09.1998 30.09.2005
109
Annexure III
As referred to in notes 11.4 and 11.13 to the financial statements
LOCATION OF REVALUED PROPERTIES AS ON DECEMBER 31, 2007

Date of Purchase 30.10.1996 30.12.1966 30-06-2005 31.05.1992 31.07.1996 31.08.1998 29.07.1975 24.10.1984 19.08.2005 27.06.2005 09.03.2005 30.12.1966 17.07.1975 29.01.1981 11.08.1993 29.08.1994 18.12.1998 07.05.1990 12.11.1995 17.08.1994 14.11.1997 23.06.1999 Revaluation Date September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 September 30, 2005 Particulars BROADWAY CLIFTON KARACHI. PECHS, KARACHI MONTGOMERY BAZAAR, FAISALABAD QILLA GUJAR SINGH BRANCH CIVIC CENTRE, HYDERABAD NEW CHALI-BRANCH KARACHI PREMISES AT MIRPUR A.K UPPER CHATTER, MUZAFFARABAD A.K. QUAID-E-AZAM ROAD KOTWALI ROAD OPEN PLOT, BATH, ISLAND, CLIFTON BANGLOW NO. 44-D, PECHS MWT GK-7 MA JINNAH ROAD PLOT KHYBER BLOCK ALLAMA IQBAL TOWN PLOT # 8-A, KASHMIR EGERTON ROAD POONCH ROAD, SAMANABAD 199-A UPPER MALL, LAHORE PLOT AT SMALL IINDUSTRIAL AREA SITE SAHIWAL PLOT 14, PHASE VII, STAGE 1, HAYATABAD PLOT 19, PHASE VII, HAYATABAD TOWNSHIP PLOT 16B/1, PHASE V, HAYATABAD B-7 FRUIT & VEGETABLE COMPLEX, HAZAR GANJI City Location KARACHI KARACHI FAISALABAD VEHARI HYDERABAD KARACHI AZAD KASHMIR AZAD KASHMIR CHINIOT FAISALABAD KARACHI KARACHI KARACHI LAHORE LAHORE LAHORE LAHORE MULTAN PESHAWAR PESHAWAR PESHAWAR QUETTA
110
Financial Statements
for the period ended December 31, 2007
ABL Asset Management Company Limited

(Subsidiary of Allied Bank Limited)
111
Auditors' Report to the Members
We have audited the annexed balance sheet of ABL ASSET MANAGEMENT COMPANY LIMITED (the Company) as at December 31, 2007 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the period from October 12, 2007 to December 31, 2007 and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the Company's management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: a) b) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance, 1984; in our opinion : i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies as mentioned in Note. 4 to the financial statements with which we concur; the expenditure incurred during the period was for the purpose of the Company's business; and the investments made and the expenditure incurred during the period were in accordance with the objects of the Company;
ii) iii)
c)
in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give the information required by the Companies Ordinance, 1984, in the manner so required, and respectively give a true and fair view of the state of the Company's affairs as at December 31, 2007 and of the profit, its cash flows and changes in equity for the period from October 12, 2007 to December 31, 2007; and in our opinion, no zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
d)
112
Directors' Report
The Board of Directors of ABL Asset Management Company Limited (a wholly owned subsidiary of Allied Bank Limited-ABL) is pleased to present the companys first audited Financial Statements for the period from October 12, 2007 to December 31, 2007. The formation of ABL Asset Management Company Limited by ABL to undertake asset management and investment advisory services was a strategic decision to devote concentrated resources for fruition of the fund management expertise in an institutionalized manner with a pursuit of professional excellence for consolidating its endeavors. ABL Asset Management Company Limited was incorporated under Companies Ordinance 1984 (XLVII of 1984) as an un-listed public company on October 12, 2007, with a paid-up capital of Rs. 500 million. The company was issued license to undertake Asset Management Services on December 07, 2007 under the recently introduced NBFC and Notified Entities Regulation, 2007, under which it can manage both closed and open ended funds. In the capacity of holding company ABL holds 49,999,993 shares of ABL AMCL whereas 7 shares are held by director in the proportion of one share each. Keeping in view the nature of the business, the management of ABL AMCL initially focused on hiring quality people, implementing best practices and systems, and establishing the desired infrastructure. In this respect, senior level management has been hired in the field of Research, Accounts, Information Technology, Operations, Administration and Human Resource. The Company, thus, now comprises of dedicated professionals who have excelled in their respective careers and offers a unique mix of experience and vigor review so that a collective and focused effort can be made towards ameliorating shareholders value. During the period from October 12, 2007 to December 31, 2007 total income of the company stood at Rs. 6.59 million whereas expenditure during the period under review amounted to Rs. 3.638 million which was mainly related to the incorporation of the company. Profit before tax stood at Rs. 2.953 million whereas tax provision amounted to Rs. 1.034 million and therefore profit after tax amounted to Rs. 1.919 million translating into earning per share of Rs. 0.04 The summary of the financial results for the period from October 12, 2007 to December 31, 2007.
Rupees in 000 December 31, 2007
INCOME Income from Bank Deposits OPERATING EXPENSES Administrative Expense Profit before taxation Taxation Profit for the period Appropriation of Profit Un-appropriated profit Earnings per share Basic and Diluted (Rupees) 3,638 2,953 1,034 1,919 1,919 0.04 6,590
With the passion to excel and the backing of Allied Bank Limited, ABL AMCL is poised to Insha-Allah capitalize on the nascent fund management sector in Pakistan and to be one of the leading asset management company of Pakistan. ABL AMCLs is Insha-Allah targeting launch of at least o ne open end income fund by 2Q08, and an open end equity fund by 3Q08 subject to regulatory approvals. Despite recent political and economic uncertainties, we feel that the mutual fund industry is poised to further grow as the country still has one of the lowest penetration rates for mutual funds in the emerging markets. ABL AMCL would Insha-Allah continue to emphasize on maximizing its sponsors value and are adamant for seizing all emerging opportunities. We would like to express our gratitude to our valued sponsors (ABL), Securities and Exchange Commission of Pakistan, State Bank of Pakistan and the auditors for the consistent guidance and assistance. The Board also wished to place on record its deep appreciation for the staff for their unswerving commitment and hard work.
Karachi February 22, 2008
ANIS UR RE CE
ABL Asset Management Company - Annual Report 2007
113
Balance Sheet
as at December 31, 2007
Rupees
Note
December 31, 2007
ASSETS Non-current assets Tangible fixed assets Current assets Other receivables Cash and bank balances
3,219,839
6 7
2,950,523 502,809,344 505,759,867
Total Assets
508,979,706
EQUITY AND LIABILITIES Share capital Authorized Issued, subscribed and paid-up Revenue reserves Unappropriated profit Total Equity Non-current liabilities Deferred tax liability on accelerated tax depreciation Current liabilities Accrued and other liabilities Provision for taxation - net of advance tax Total Liabilities Total Equity & Liabilities 8
500,000,000 500,000,000
1,919,372 501,919,372
14,877
6,390,814 654,643 7,060,334 508,979,706
The annexed notes from 1 to 18 form an integral part of these financial statements.
CHIEF EXECUTIVE
DIRECTOR
114
Profit and Loss Account

for the period from October 12, 2007 to December 31, 2007
Rupees
Note
For the period from October 12, 2007 to December 31, 2007
INCOME Income from bank deposits OPERATING EXPENSES Administrative expenses Profit before taxation Taxation Profit for the period Earnings per share - Basic and Diluted 12 11 10 3,637,530 2,952,880 1,033,508 1,919,508 0.04 6,590,410
CHIEF EXECUTIVE
DIRECTOR
115
Cash Flow Statement

Rupees
A.
CASH FLOWS FROM OPERATING ACTIVITIES 2,952,880
Profit before taxation Adjustment for: Depreciation Operating profit before working capital changes Increase in current assets Other receivables Increase in current liabilities Accrued and other liabilities Cash generated from operations Taxes paid Net cash flows from operating activities A
79,867 3,032,747
(2,950,523)
6,390,814 6,473,038 (363,988) 6,109,050
B.
CASH FLOWS FROM INVESTING ACTIVITIES (3,299,706) B (3,299,706)
Acquisition of tangible fixed assets Net cash used in investing activities
C.
CASH FLOWS FROM FINANCING ACTIVITIES 500,000,000 C 500,000,000 502,809,344 502,809,344
Proceeds from issue of share capital Net cash flows from financing activities Net increase in cash and cash equivalents (A+B+C) Cash and cash equivalens at beginning of the period Cash and cash equivalents at end of the period
CHIEF EXECUTIVE
DIRECTOR
116
Statement of Changes in Equity

Rupees
Issued, subscribed and paid-up capital
Unappropriated profit
Total
Issue of share capital Profit for the period Balance as at December 31, 2007
500,000,000 500,000,000
1,919,372 1,919,372
500,000,000 1,919,372 501,919,372
CHIEF EXECUTIVE
DIRECTOR
117

1. 1.1
LEGAL STATUS AND OPERATION ABL Asset Management Company Limited (the company) was incorporated in Pakistan as a limited liability company on October 12, 2007 under the Companies Ordinance, 1984. The company has obtained license on December 07, 2007 from the Securities and Exchange Commission of Pakistan (SECP) to carry out asset management services as a Non-Banking Finance Company (NBFC) under Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 as amended through S.R.O.113[1] 2007 (amended NBFC Rules). The company has received certificate of commencement of business on December 31, 2007. The registered office of the company is situated at 11-B Lalazar, M.T. Khan Road, Karachi. The company is a wholly owned subsidiary of Allied Bank Limited.
1.2
Items included in the financial statements are measured using the currency of the primary economic environment in which the company operates. The financial statements are presented in Pakistani Rupees, which is the company's functional and presentation currency. STATEMENT OF COMPLIANCE These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan, the requirements of the Companies Ordinance, 1984, amended NBFC Rules and the Non-Banking Finance Companies and Notified Entities Regulations, 2007 (the Regulations). Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) as are notified under the provisions of the Companies Ordinance, 1984. Wherever the requirements of the Companies Ordinance, 1984, amended NBFC Rules, the Regulations or directives issued by the SECP differ with the requirements of these standards, the requirements of the Companies Ordinance, 1984, amended NBFC Rules, the Regulations or the requirements of the said directives take precedence. Interpretations to existing standards in issue not yet adopted The Company has not applied the following interpretations to existing standards that have been issued by the International Accounting Standards Board (IASB), but are not yet effective.
Effective for annual periods beginning on or after
2. 2.1
2.2
IFRIC 11 IFRIC 12 IFRIC 14
IFRS 2-Group and Treasury Share Service Concession Agreement IAS- 19 The limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction
March 1, 2007 January 1, 2009
January 1, 2009
The management expects that the above interpretations to existing standards will have no significant impact on the Companys financial statements in the period of initial application. 2.3 Critical accounting estimates and judgments 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 judgment in the process of applying the company's accounting policies. Estimates and judgments 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 company's financial statements are as follows: i) Provision for taxation (notes 4.5 and 11) ii) Provision for depreciation (notes 4.1 and 5) 3. BASIS OF MEASUREMENT These financial statements have been prepared under the historical cost convention.
118
4. 4.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Tangible fixed assets These are stated at cost less accumulated depreciation and impairment, if any. Depreciation is charged over the estimated useful life of the asset on a systematic basis to income applying the straight line method at the rates specified in note 5.1 to the financial statements. Depreciation is charged from the month of addition to the month prior to the month of disposal. The company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If such indication exists the carrying amount of such assets are reviewed to assess whether they are recorded in excess of their recoverable amounts. Where carrying values exceed the estimated recoverable amount, assets are written down to the recoverable amount. Normal repairs and maintenance are charged to profit and loss account as and when incurred. Major renewals and improvements are capitalised. Gains and losses on sale or retirement of tangible fixed assets are included in income currently. Capital work-in-progress is stated at cost accumulated to the balance sheet date. These will be transferred to specific asset as and when these assets are available for use.
4.2
Staff retirement benefits - defined contribution plan The company operates unapproved provident fund for its permanent employees. Equal monthly contributions to the fund are made both by the company and its employees @ 8.33% of the basic salary per month.
4.3 4.3.1
Financial assets and liabilities Recognition and de-recognition Financial assets and financial liabilities are recognised at the time when the company becomes a party to the contractual provisions of the instrument. Financial assets are derecognised when the company loses control of the contractual rights that comprise the financial assets. Financial liabilities are derecognised when they are extinguished, that is, when the obligation specified in the contract is discharged, cancelled, or expires.
4.3.2
Offsetting Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and the company intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
4.4
Revenue recognition Profit on term and PLS deposits is recognised on accrual basis.
4.5
Taxation Current Provision for the current taxation is based on taxable income for the period at applicable rates of taxation, after taking into account available tax credits, tax rebates and tax adjustments, if any. Deferred Deferred income tax is provided using the liability method for all temporary differences at the balance sheet date between tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax asset is recognized for all deductible temporary differences and unused tax losses, if any, to the extent that it is probable that taxable profit will be available against which such temporary differences and tax losses can be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.
119

Rupees
Note
December 31, 2007
5.
TANGIBLE FIXED ASSETS Operating property, plant and equipment Capital work-in-progress - advance for purchase of vehicle 5.1 1,656,339 1,563,500 3,219,839
5.1
Operating property, plant and equipment

Cost As at October 12, 2007 Addition during the period As at December 31, 2007 As at October 12, 2007 Accumulated depreciation Charge for the period As at December 31, 2007 Written down value As at December 31, 2007 Depreciation rate per annum %
Rupees
Furniture and fixtures Computer equipment Motor Vehicle
100,177 114,529 1,521,500 1,736,206
100,177 114,529 1,521,500 1,736,206
1,406 2,386 76,075 79,867
1,406 2,386 76,075 79,867
98,771 112,143 1,445,425 1,656,339
10 25 20
Rupees
Note
December 31, 2007
6.
OTHER RECEIVABLES - considered good Interest accrued on bank deposits 6.1 2,950,523
6.1
The balance is receivable from Allied Bank Limited, parent company. CASH AND BANK BALANCES With bank - PLS deposit accounts - Term deposits receipts Cash in hand
7.
7.1 & 7.2 7.1 & 7.2
54,788,551 448,000,000 502,788,551 20,793 502,809,344
7.1 7.2 8.
The rate of return on bank deposits ranges from 1% to 8% per annum. PLS and term deposits are held with Allied Bank Limited, parent company. SHARE CAPITAL
Authorized
Number of shares Rupees
50,000,000
Ordinary shares of Rs. 10 each
500,000,000
Issued, subscribed and paid-up 50,000,000 8.1 Ordinary shares of Rs. 10 each fully paid in cash 500,000,000
Allied Bank Limited, parent company holds 50,000,000 ordinary shares of Rs. 10 each.
120
Rupees
December 31, 2007
9.
ACCRUED AND OTHER LIABILITIES Due to Allied Bank Limited, parent company Auditors' remuneration payable Provident Fund payable Withholding tax payable Other payables 5,739,988 100,000 99,960 2,700 448,166 6,390,814
Rupees
Note
10.
ADMINISTRATIVE EXPENSES Chief Executive / Director's remuneration Rent, rates and taxes Legal and professional charges Registration fee Processing fee License fee Communication Printing and stationery Auditors' Remuneration Depreciation Traveling and conveyance Entertainment Books and Periodicals Meeting fee Other 13 1,030,180 5,295 545,000 1,264,500 100,000 200,000 89,658 87,765 100,000 79,867 39,690 52,693 17,757 25,000 125 3,637,530
5.1
11.
TAXATION Current Deferred 11.1 1,018,631 14,877 1,033,508
11.1
The relationship between tax expense and accounting profit is not required as there is no difference between these figures.
Rupees
12.
EARNINGS PER SHARE - BASIC AND DILUTED There is no dilutive effect on the basic earnings per share of the company which is based on; Profit for the period 1,919,372
No. of shares
Number of ordinary shares outstanding during the period
50,000,000
Rupees
Earnings per share
0.04
121

Rupees
13.
TRANSACTIONS WITH RELATED PARTIES Allied Bank Limited - parent company Term deposit receipts placed during the period Term deposit receipts matured during the period PLS deposits deposited during the period PLS deposits withdrawn during the period Income from bank deposits received during the period Key Management Personnel Chief Executive Remuneration Provident fund contribution 980,200 49,980 896,000,000 448,000,000 553,663,399 498,874,848 3,639,887
The Chief Executive/ Director of the company is provided with free use of company owned and maintainted vehicle. 13.1 14. 14.1 The receivable and payable balances from related parties are disclosed in note 6,7 and 9. FINANCIAL RISK MANAGEMENT POLICIES Liquidity Risk Liquidity risk is the risk that an enterprise will encounter difficulties in raising funds to meet commitments associated with financial instruments. The company believes that it is not exposed to any significant level of liquidity risk. 14.2 Interest Rate Risk Interest rate risk is the risk that the value of the financial instruments will fluctuate due to changes in the interest rates. The Company's exposure to interest rate risk on its financial assets and liabilities are summarized as follows:
December 31, 2007 Exposed to interest Not exposed to rate risk interest Over one year rate risk
Rupees
Rate %
Upto one year
Total
Financial Assets Interest accrued on bank deposits Cash and bank balances 1-8 502,788,551 502,788,551 Financial Liabilities Accrued and other liabilities 14.3 Credit Risk 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. All the financial assets of the company except Rs. 20,793 are exposed to credit risk. The company controls credit risk by monitoring credit exposure, limiting transactions with specific counter parties, obtaining collaterals and continually assessing the credit worthiness of counter parties. 6,390,814 6,390,814 6,390,814 6,390,814 2,950,523 20,793 2,971,316 2,950,523 502,809,344 505,759,867
122
15.
FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values of all the financial assets and liabilities reflected in the financial statements approximate their fair values.
16.
CAPITAL RISK MANAGEMENT The Company's objective when managing capital is to safeguard the Company's ability to remain as a going concern and continue to provide returns for shareholders and benefits for other stakeholders. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholers or issue new shares.
17.
DATE OF AUTHORIZATION FOR ISSUE These financial statements were authorized for issue on February 22, 2008 by the Board of Directors of the company.
18. 18.1
GENERAL Corresponding figures are not available as this is the first period of company's operation.
CHIEF EXECUTIVE
DIRECTOR
123
Pattern of Shareholding
Allied Bank Limited
No. of Shareholders
From
Shareholdings
To
Total Shares Held
8318 8445 1586 1488 238 133 45 19 10 9 5 4 11 7 2 2 1 2 3 3 1 2 4 2 1 2 1 1 1 1 2 2 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 1 1 1 1 1 1 1 1 1 20394
1 101 501 1001 5001 10001 15001 20001 25001 30001 35001 40001 45001 50001 55001 60001 65001 70001 75001 80001 85001 90001 95001 100001 125001 130001 135001 155001 175001 180001 185001 195001 270001 280001 300001 360001 390001 395001 425001 445001 460001 495001 545001 560001 645001 725001 750001 800001 825001 1015001 1155001 1190001 1245001 1250001 1295001 1420001 1460001 1490001 1630001 2345001 4225001 5545001 6430001 6805001 7525001 12805001 15160001 19495001 47415001 93835001 95240001 170375001
100 500 1000 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000 60000 65000 70000 75000 80000 85000 90000 95000 100000 105000 130000 135000 140000 160000 180000 185000 190000 200000 275000 285000 305000 365000 395000 400000 430000 450000 465000 500000 550000 565000 650000 725000 755000 805000 830000 1020000 1160000 1195000 1250000 1255000 1300000 1425000 1465000 1495000 1635000 2350000 4230000 5550000 6435000 6810000 7530000 12810000 15165000 19500000 47420000 93840000 95245000 170380000
332,449 1,642,373 1,084,047 3,308,820 1,665,597 1,607,142 796,842 430,311 277,684 291,443 189,572 175,992 537,796 374,617 112,900 122,024 68,600 147,800 235,800 249,729 85,500 182,474 395,832 207,700 128,300 262,414 139,569 155,018 175,840 185,000 376,000 400,000 271,000 564,526 301,300 362,650 394,634 398,600 428,622 446,040 465,000 500,000 550,000 564,900 649,700 723,300 750,380 800,400 827,275 1,018,080 1,156,900 1,194,140 1,245,600 1,253,522 1,298,100 1,423,032 1,463,729 1,493,169 1,634,000 2,349,780 4,228,753 5,549,146 19,301,189 6,806,275 7,528,735 12,809,300 15,163,852 19,500,000 47,416,124 93,840,000 95,240,760 170,379,240 538,636,938
124
DETAILED PATTERN OF SHAREHOLDING

No.of Shareholders Share Held Percentage
1.
Associated Companies, undertaking and related parties. M/s Ibrahim Agencies (Pvt.) Limited. Ibrahim Fibres Limited. 1 1 2 47,473,652 170,379,240 217,852,892 8.81 31.63 40.45
2.
NIT and ICP National Bank of Pakistan, Trustee Dept. IDBP (ICP Unit ) 1 1 2 2,886,761 7,569 2,894,330 0.54 0.00 0.54
3.
Directors, Chief Executive Officer, and their spouses Mohammed Naeem Mukhtar Mrs.Ghazala Naeem Mohammed Waseem Mukhtar Mrs. Bina Sheikh Sheikh Mukhtar Ahmed Mrs. Iqbal Begum Abdul Aziz Khan Jalees Ahmed Tasneem M. Noorani Mubashir A.Akhtar Mohammad Aftab Manzoor Pervaiz Iqbal Butt 1 1 1 1 1 1 1 1 1 1 1 1 12 96,494,282 282,526 95,333,169 42,879 428,622 362,650 10,049 6,541 3,000 3,000 2,500 2,500 192,971,718 147,465 Nil 17.91 0.05 17.70 0.01 0.08 0.07 0.00 0.00 0.00 0.00 0.00 0.00 35.83 0.03 Nil
4. 5. 6.
Shares held by the Executives of the Bank Public Sector Companies and Corporations (other than those covered in Insurance Companies and Banks) Banks,DFIs, Financial Institutions, NBFIs. State Bank of Pakistan NIB Bank Limited Bank Alfalah Limited National Bank of Pakistan Escorts Investment Bank Ltd - CFS MCB Bank Limited. Soneri Bank Limited First Credit & Investment Bank Ltd. First Dawood Investment Bank Limited (A) J S Bank Limited - CFS Orix Investment Bank Pakistan Limited Security Investment Bank Limited Arif Habib Bank Limited Trust Leasing Corporation Ltd. Al-Faisal Investment Bank
44 Nil
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 15
54,222,399 446,040 15,000 68,808 264,300 723,300 10,000 49,600 10,670 73,300 11,000 46,400 1,298,100 96 28 57,239,041
10.07 0.08 0.00 0.01 0.05 0.13 0.00 0.01 0.00 0.01 0.00 0.01 0.24 0.00 0.00 10.63
7.
Insurance Companies Pakistan Re-insurance Co. Ltd. State Life Insurance Corp. of Pakistan Orient Insurance Co. Ltd. Gulf Insurance Co. Ltd. EFU Life Assurance Ltd. Century Insurance Co. Ltd. The Crescent Star Insurance Company Ltd. Progressive Insurance Company Limited New Jublee Insurance Co. Ltd. New Jublee Life Insurance Co. Ltd. IGI Insurance Ltd. 1 1 1 1 1 1 1 1 1 1 1 11 90,974 139,569 192 342 14,640 15,000 90 1,200 50,000 50,000 82,400 444,407 0.02 0.03 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.01 0.02 0.08
125
Pattern of Shareholding
DETAILED PATTERN OF SHAREHOLDING

No.of Shareholders Share Held Percentage
8.
Modarabas and Mutual Funds First Al-Noor Modaraba HBL Income Fund HBL Stock Fund Pakistan Stock Market Fund Trustee Pak Strategic Alloc. Fund Pakistan Capital Market Fund Pakistan Premier Fund Ltd. PICIC Investment Fund AKD Index Tracker Fund First Tawakkal Modaraba Modaraba Al-Mali. NAFA Cash Fund MCB Dynamic Cash Fund MCB Dynamic Stock Fund PICIC Growth Fund Pak Libya Holding Co. ( Pvt. ) Limited KASB Stock Market Fund AMZ Plus Stock Fund UTP Growth Fund UTP Large Capital Fund. NAFA Stock Fund NAFA Multi Asset Fund Unit Trust of Pakistan Atlas Income Fund Trustee and Opportunity Fund Safeway Mutual Fund Ltd. 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 23 Shareholders holding 10% (and above) (Excluding Directors and associated companies) Foreign Investors Habib Bank AG Zurich, Switzerland Habib Bank AG Zurich, London The Honkong & Shanghai Banking Corp. Ltd. ABN Amro Bank N.V. London Branch. The Northern Trust Company Aeris International S. A. Deutsche Bank London Global Equities State Street Bank and Trust Co. J.P.MORGAN WHITEFRIARS INC. Goldman Sachs & Co. [148-9] MELLON Bank N.A. Ashiq Ali Kanji Masood Kazmi S.MUNEER-UR-ZAMAN Amanullah Hashmi S.Faiz Hussain Mohammad Tahir Butt 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 17 General Public - Individuals Federal Government of Pakistan Securities & Exchange Commission of Pakistan Others Grand Total 20,265 1 1 1 3 20,394 19,800 185,000 800,400 394,634 22,900 128,300 175,840 61,400 16,500 4,100 56,100 9,387 2,400 558 22 22 1,800 1,879,163 40,458,460 7,528,735 18 5,549,146 13,077,899 538,636,938 0.00 0.03 0.15 0.07 0.00 0.02 0.03 0.01 0.00 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.36 7.51 1.40 0.00 1.03 2.43 100 Nil 2,500 8,000 19,800 2,349,780 1,245,600 649,700 1,018,080 750,380 85,500 166 57 1,000 46,800 301,300 1,634,000 271,000 91,500 55,000 1,156,900 564,900 200,000 100,000 550,000 131,000 398,600 40,000 11,671,563 Nil 0.00 0.00 0.00 0.44 0.23 0.12 0.19 0.14 0.02 0.00 0.00 0.00 0.01 0.06 0.30 0.05 0.02 0.01 0.21 0.10 0.04 0.02 0.10 0.02 0.07 0.01 2.16 Nil
Note: One Director had sold 30,000 shares and purchased 4000 shares and two Directors have purchased 2500 shares each. Apart from these, there have been no trades in the shares of the Bank, carried out by its other directors, CEO, CFO, Company Secretary and their spouses and minor children.
126
Form of Proxy
Allied Bank Limited
62nd Annual General Meeting
I/We of being a shreholder of the Allied Bank Limited do hereby appoint of also a shareholder of
to be my/our proxy and to attend, act and vote for me/us on my/our behalf at the 62nd Annual General Meeting of the Bank to be held on and at any adjournment thereof in the same manner as I/we myself/ourselves would
vote if personally present at such meeting.
Signed this
date of
2008.
AFFIX Revenue Stamp of Rs. 5/Witness: 1. Signature Name Address CNIC # Signature:
The signature should agree with the speciment registered with the Company
Folio No. Witness: 2. Signature Name Address CNIC # MPORTANT: 1. 2. A member entitled to attend and vote at a meeting is entitled to appoint another member as a proxy to attend, speak and vote for him / her. An instrument of proxy applicable for the meeting is being provided with the notice sent to members. Further copies of the instrument of proxy, if required may be obtained from the Registered Office of the Bank during normal office hours. An instrument of Proxy and a Power of Attorney or other authority (if any) under which it is signed, or notarized copy of such Power of Attorney must be valid and deposited at the Registered Office of the Bank not less then 48 hours before the time of the Meeting. In case of proxy for an individual beneficial owner of CDC, attested copies of beneficial owners NIC or passport, Account and Participants I.D. numbers must be deposited along with the Form of Proxy. In case of Proxy for corporate members, he / she should bring the usual documents required for such purpose. Members are requested to notify immediately changes, if any, in their registered address to Banks Share Registrar M/S Technology Trade (Pvt) Limited, 241-C, Block-2, PECHS, Karachi before book closure so that entitlement if any, be dispatched at the correct address. CDC A/c No. Sub A/c No. No. of shares held Distinctive Numbers: From to
3.
4.
5.
127
AFFIX CORRECT POSTAGE
Allied Bank Limited

Head Office / Registered Office 8-Kashmir / Egerton Road, Lahore. Phone: +92 42 111 110 110 Website: www.abl.com.pk

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Notice of 62nd Annual General Meeting

Allied Bank - Annual Report 2007

Statements under Section 160 of the Companies Ordinance, 1984

Allied Bank - Annual Report 2007

Statement of Compliance with Code of Corporate Governance

On behalf of the Board.

Dated: February 29, 2008 Place: Lahore

Allied Bank - Annual Report 2007

Statement of Ethics and Business Practices

Allied Bank - Annual Report 2007

Statement of Ethics and Business Practices

Statement of Internal Controls

STATEMENT OF MANAGEMENT RESPONSIBILITIES

Allied Bank - Annual Report 2007

Auditors' Review Report

M. YOUSUF ADIL SALEEM & CO. CHARTERED ACCOUNTANTS

FORD RHODES SIDAT HYDER & CO. CHARTERED ACCOUNTANTS

M. YOUSUF ADIL SALEEM & CO. Chartered Accountants Karachi

FORD RHODES SIDAT HYDER & CO. Chartered Accountants Karachi

Date: Febrary 29, 2008

Date: February 29, 2008

Allied Bank - Annual Report 2007

Auditors' Report to the Members

M. YOUSUF ADIL SALEEM & CO.

FORD RHODES SIDAT HYDER & CO.

M. YOUSUF ADIL SALEEM & CO.

FORD RHODES SIDAT HYDER & CO.

M. YOUSUF ADIL SALEEM & CO. Chartered Accountants Karachi

FORD RHODES SIDAT HYDER & CO. Chartered Accountants Karachi

Date: February 29, 2008

Date: February 29, 2008

Allied Bank - Annual Report 2007

December 31, 2007

December 31, 2006

Chief Financial Officer

President and Chief Executive

Profit and Loss Account

December 31, 2007

December 31, 2006

21,201,422 10,019,004 11,182,418

17,215,507 6,793,101 10,422,406 583,305 (14,623) 136,189 704,871 9,717,535

2,712,936 719 1,187 2,714,842

2,062,677 147,184 194,879 1,439,387 (1,463) 77,435 3,920,099 12,387,675

1,353,888 193,255 282,285 376,792 (30,180) 273,028 2,449,068 12,166,603

Chief Financial Officer

President and Chief Executive

Allied Bank - Annual Report 2007

Cash Flow Statement

December 31, 2007

December 31, 2006

Chief Financial Officer

President and Chief Executive

Statement of Changes in Equity

Share Capital 4,488,642

Share Premium 4,316,324

Statutory Reserve 969,301

Special Reserve* 67,995

Merger Reserve* 333,864

General Reserve 6,000

Unappropriated Profit 2,731,979