SME Bank.pdf

31-Dec 31-Dec 1-Jan

2011 2010 2010

Note

ASSETS Restated Restated

Cash and balances with treasury banks 8 214,655 228,062 213,861

Balances with other banks 9 9,865 20,912 79,660

Lendings to financial institutions 10 800,000 - 33,445

Investments 11 3,027,667 2,680,334 2,701,816

Advances 12 3,349,078 3,307,599 3,957,897

Operating fixed assets 13 135,321 132,586 122,462

Deferred tax assets 14 - - -

Other assets 15 220,602 262,976 449,480 f

7,757,188 6,632,469 7,558,621

LIABILITIES

Bills payable 16 183,863 40,505 54,542

Borrowings 17 2,171,669 1,437,604 1,728,922

Deposits and other accounts 18 2,999,192 2,651,948 2,934,403

Sub-ordinated loans - - -

Liability against assets subject to finance lease 19 16,013 15,369 2,023

Deferred tax liabilities - - -

Other liabilities 20 388,127 363,395 439,630

5,758,864 4,508,821 5,159,520

NET ASSETS 1,998,324 2,123,648 2,399,101

REPRESENTED BY

Share capital 21 2,392,507 2,392,507 2,392,507

Reserves 22 234,660 234,660 234,660

Unappropriated loss 22 (650,596) (442,362) (158,082)

1,976,571 2,184,805 2,469,085

Non-controlling interest 69,693 87,470 100,255

2,046,264 2,272,275 2,569,340

Deficit on revaluation of assets 23 (47,940) (148,627) (170,239)

1,998,324 2,123,648 2,399,101

CONTINGENCIES AND COMMITMENTS 24

The annexed notes 1 to 43 and Annexure-I form an integral part of these unconsolidated financial statements.

________________________

Chief Financial Officer

________________________ ______________

President/Chief Executive Director Director Director

______________ ________________

(Rupees in '000)

SME Bank Limited

Consolidated Statement of Financial Position

As at December 31, 2011

Consolidated Profit and Loss Account

For the year ended December 31, 2011

2010

Note

Mark-up/ return/ interest earned 25 728,192 647,521

Mark-up/ return/ interest expensed 26 432,919 350,732

Net mark-up/ interest income 295,273 296,789

(Reversal of provision) / provision against non-performing

advances-net of reversal 12.5 (75,329) 165,535

Provision for diminution in the value of investments - 306

Bad debts written off directly 653 939

(74,676) 166,780

Net mark-up/ interest income after provisions 369,949 130,009

NON MARK-UP/ INTEREST INCOME

Fee, commission and brokerage income 12,488 13,505

Dividend income 3,431 3,339

Income from dealing in foreign currency - -

Gain on sale of securities 27 5,957 12,298

Unrealized gain on revaluation of investments classified as held

for trading - -

Other income 28 4,862 33,145

Total non-markup/ interest income 26,738 62,287

396,687 192,296

NON MARK-UP/ INTEREST EXPENSE

Administrative expenses 29 608,610 517,111

Other provisions/ write offs 15.4 4,599 7,970

Other charges 30 48 4,267

Total non-markup/ interest expenses 613,257 529,348

LOSS BEFORE TAXATION (216,570) (337,052)

Taxation - Current 31 8,461 10,111

- Prior - (49,511)

- Deferred - -

8,461 (39,400)

LOSS AFTER TAXATION (225,031) (297,652)

Attributable to :

Equity holders of the Bank (208,234) (284,280)

Non-controlling interest (16,797) (13,372)

(225,031) (297,652)


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__________________________ _______________


SME Bank Limited

2011

_____________________________

(Rupees in '000)


Net loss after taxation (transferred to equity) (225,031) (297,652)

99,707 22,198

Total comprehensive income for the year (125,324) (275,454)

Attributable to :

Equity holders of the Bank (107,547) (262,669)

Non-controlling interest (17,777) (12,785) (125,324) (275,454)


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______________________ _____________ _____________


2010

_____________

SME Bank Limited

Consolidated Statement of Comprehensive Income

Net change on remeasurement of available for sale investment

to fair value

Other comprehensive income (not transferred to equity

except share of non-controlling interest)

(Rupees in '000)

2011

Consolidated Cash Flow Statement


2011

Note

Restated

CASH FLOW FROM OPERATING ACTIVITIES

Loss before taxation (216,570) (337,052)

Less: Dividend income (3,431) (3,339)

(220,001) (340,391)

Adjustments for non-cash/ other items

Depreciation 16,366 15,873

Amortization 1,694 1,700

Provision against non-performing loans and advances (75,329) 165,535

Provision for impairment in value of investments - 306

Net profit on sale of fixed asset (474) (14,959)

Finance charges on leased assets 898 28

Other provisions 4,599 7,970

653 939

(51,593) 177,392

(271,594) (162,999)

(Increase)/ decrease in operating assets

Lendings to financial institutions (550,000) 33,445

Advances 33,197 483,824

Other assets (excluding advance taxation) 37,775 178,538 (479,028) 695,807

Increase/ (decrease) in operating liabilities Bills payable 143,358 (14,037) Borrowings from financial institutions 734,065 (204,579) Deposits 347,244 (282,455) Other liabilities (excluding current taxation) 32,054 (30,214)

1,256,721 (531,285) 506,099 1,522

Income tax paid (15,783) (5,908) Net cash flow generated from / (used in) operating activities 490,316 (4,386)

CASH FLOW FROM INVESTING ACTIVITIESNet (investments)/de-investment in available-for-sale securities (447,626) 190,014 Net de-investments/(investment) in held-to-maturity securities 200,000 (146,640) Dividend income 3,431 3,339 Investments in operating fixed assets (21,524) (29,006) Sale proceeds of property and equipment disposed-off 1,203 15,553 Net cash flow (used in)/generated from investing activities (264,516) 33,260

CASH FLOW FROM FINANCING ACTIVITIESPayment of lease obligations (254) (2,636) Financing for leased vehicles - 15,954 Net cash flow (used in)/generated from financing activities (254) 13,318

Increase in cash and cash equivalents 225,546 42,192 Cash and cash equivalents at beginning of the year 248,974 206,782 Cash and cash equivalents at end of the year 32 474,520 248,974


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______________________ _____________ _____________ ____________


SME Bank Limited

Bad debts written off directly

(Rupees in '000)

2010

Consolidated Statement of Changes in Equity


Share Capital Share

Premium

Statutory

reserve

Reserve

against future

losses

Unappropriated

loss Sub total

Non-controlling

interestTotal

(Rupees in '000)

Balance as at January 1, 2010 as previously

reported 2,392,507 5,909 227,434 8,202 (201,608) 2,432,444 94,346 2,526,790

Payable to Industrial Credit for Rural Women

transferred to unapproprated loss (refer note 20.2) - - - -

30,851 30,851 - 30,851

Receivable from M/S Ravi Securities (Pvt.) Ltd. and

M/S Tass Securities (Pvt.) Ltd. (refer note 15.3) - - - -

11,699 11,699 - 11,699

Share premium transferred to non-controlling

interest (refer note 22.3) - (5,909) - - (5,909) 5,909 -

Adjustments - - (415) (561) 976 - - -

Balance as at January 1, 2010 - Restated 2,392,507 - 227,019 7,641 (158,082) 2,469,085 100,255 2,569,340

Total comprehensive income

Net loss for the year - - - - (284,280) (284,280) (13,372) (297,652)

Surplus on revaluation of investments - - - - - - 587 587

Balance as at December 31, 2010 - Restated 2,392,507 - 227,019 7,641 (442,362) 2,184,805 87,470 2,272,275

Balance as at December 31, 2010 as previously

reported2,392,507 5,909 227,434 8,202 (485,887) 2,148,165 81,561 2,229,726

Balance as at December 31, 2010 - Restated 2,392,507 - 227,019 7,641 (442,362) 2,184,805 87,470 2,272,275

Total comprehensive income

Net loss for the year - - - - (208,234) (208,234) (16,797) (225,031)

Deficit on revaluation of investment - - - - - - (980) (980)

Balance as at December 31, 2011 2,392,507 - 227,019 7,641 (650,596) 1,976,571 69,693 2,046,264


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______________________ _______________ _____________ ____________


SME Bank Limited

Attributable to shareholders of the Group

Notes to the Consolidated Financial Statements


1. THE GROUP AND ITS OPERATIONS

1.1

SME Bank Limited - Holding Company:

SME Leasing Limited - Subsidiary Company:

SME Bank Limited

SME Bank Limited (the Bank) is a public limited company incorporated in Pakistan on October 30, 2001

under the Companies Ordinance, 1984 having its registered office at 40-Jang Building, A.K. Fazal ul Haq

Road, Blue Area, Islamabad. The Bank obtained its business commencement certificate on April 16,

2005 which became effective from the date of its issue. The Bank is a Scheduled Commercial Bank

engaged in the business of banking with the primary objective to support and develop Small and

Medium Enterprise (SME) sector in Pakistan by providing necessary financial assistance and business

support services on sustainable basis. The Bank is operating through a network of 13 Commercial

banking branches. Based on the latest credit rating report dated June 30, 2011 issued by JCR-VIS Credit

Rating Company Limited, credit rating of the Bank was BBB (triple B) in the long term and A-3 (A

three) in the short term.

In terms of the provisions of the State Bank of Pakistan BSD circular No. 7 of 2009, the Bank was

required to increase its paid up capital (net of losses) as at December 31, 2011 up to Rs. 8 billion. The

State Bank of Pakistan (SBP) has granted exemption from meeting the enhanced Minimum Capital

Requirement and the Bank is allowed to operate with minimum paid up capital (net of losses) of Rs. 2

billion till privatization of the Bank.

The Group consists of the holding company - SME Bank Limited (the Bank) and its subsidiary company

- SME Leasing Limited (SMEL). The Bank and SMEL are collectively referred to as "the Group".

SME Leasing Limited (SMEL) was incorporated in Pakistan as a public limited company on July 12,

2002 and acquired the status of a listed company on December 13, 2006. At the time of incorporation,

SMEL was a wholly owned subsidiary of the Bank, whereby under an arrangement the assets and

liabilities of the leasing division of the Bank were transferred to SMEL on January 28, 2003. The

registered office of SMEL is situated in Islamabad. SMEL is registered with the Securities and Exchange

Commission of Pakistan (SECP) as a leasing company under the Non-Banking Finance Companies

(Establishment and Regulation) Rules, 2003. The core objective of SMEL is to extend lease and working

capital financing facilities to small and medium enterprises of the country. Based on the latest credit

rating report dated February 08, 2011 issued by JCR-VIS Credit Rating Company Limited, credit rating

of the SME Leasing Limited was BBB (Triple B) in long term and A - 3 (A three) in short term.

During the year 2006, SMEL made an Initial Public Offer of 10 million ordinary shares of Rs 10 each at

an offer price of Rs. 11 per share inclusive of a premium of Rs. 1 per share thereby increasing the issued,

subscribed and paid-up capital to Rs 320 million represented by 32 million ordinary shares of Rs. 10

each. Consequently, the holding of the Bank in SMEL has reduced to 73.14%.

1.2 Amalgamation of defunct RDFC and SBFC

2. BASIS OF CONSOLIDATION

Material intra-group balances and transactions have been eliminated.

3. BASIS OF PRESENTATION

3.1

3.2

4. STATEMENT OF COMPLIANCE

4.1

The Federal Government promulgated the Regional Development Finance Corporation (RDFC) and

Small Business Finance Corporation (SBFC) Amalgamation and Conversion Ordinance, 2001 (the

Ordinance 2001) setting forth the mechanism of amalgamation of defunct RDFC and SBFC. Both these

entities were Development Financial Institutions (DFIs). In pursuance of the Ordinance 2001, Finance

Division, Ministry of Finance issued an Order (SRO (1) 2001) dated December 29, 2001 setting forth

the scheme of amalgamation of RDFC and SBFC with the Bank effective January 1, 2002. Pursuant to

this scheme entire assets and liabilities of defunct RDFC and SBFC as at December 31, 2001 were

transferred to the Bank at fair value. These two institutions stand dissolved and ceased to exist effective

January 1, 2002. The Bank allotted its shares to the share holders of defunct RDFC and SBFC in

proportion to their shareholding therein based on the fair value of net assets of defunct RDFC and

SBFC on December 31, 2001.

These consolidated financial statements include the financial statements of the Bank and SMEL.

The assets and liabilities of the subsidiary company have been consolidated on a line by line basis and the

carrying value of investment held by the Bank is eliminated against the subsidiary's shareholder's equity

in the consolidated financial statements.

Non- controlling interest are that part of the net results of operations and of net assets of the subsidiary

company attributable to the interest which are not owned by the Bank. Non controlling interests are

presented as separate item in these consolidated financial statements.

These consolidated financial statements have been presented in accordance with the requirements of

format prescribed by the State Bank of Pakistan's BSD Circular No. 4 dated February 17, 2006.

These consolidated 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 issued by the International Accounting Standards Board as are notified

under the Companies Ordinance, 1984, provisions of and directives issued under the Companies

Ordinance, 1984 and Banking Companies Ordinance, 1962 and the directives issued by State Bank of

Pakistan (SBP) and Securities and Exchange Commission of Pakistan (SECP). In case the requirements

of provisions and directives issued under the Companies Ordinance, 1984 and Banking Companies

Ordinance, 1962 and the directives issued by SBP differ, the provisions of and directives issued under

the Companies Ordinance, 1984 and Banking Companies Ordinance, 1962 and the directives issued by

SBP shall prevail.

Items included in the consolidated financial statements are measured using the currency of the primary

economic environment in which the Group operates. The consolidated financial statements are

presented in Pak. Rupee, which is the Group's functional currency.

4.2

-

-

-

-

IAS 19 Employee Benefits (amended 2011) - (effective for annual periods beginning on or after 1

January 2013). The amended IAS 19 includes the amendments that require actuarial gains and losses to

be recognised immediately in other comprehensive income; this change will remove the corridor method

and eliminate the ability for entities to recognise all changes in the defined benefit obligation and in plan

assets in profit or loss, which currently is allowed under IAS 19; and that the expected return on plan

assets recognised in profit or loss is calculated based on the rate used to discount the defined benefit

obligation. The Group does not plan to adopt this change early and the extent of the impact has not

been determined.

The following standards, amendments and interpretations of approved accounting standards will be

effective for accounting periods beginning on or after 01 January 2012:

International Accounting Standard 39, "Financial Instruments: Recognition and Measurement",

International Accounting Standard 40, "Investment Property" and International Financial Reporting

Standard 7,"Financial Instruments: Disclosure" are not applicable to banking companies in Pakistan.

Accordingly, the requirements of these Standards have not been considered in the preparation of these

consolidated financial statements. However, investments have been classified and valued in accordance

with the requirements prescribed by the State Bank of Pakistan through various circulars.

Standards, interpretations and amendments to approved accounting standards that are not yet

effective

IAS 27 Separate Financial Statements (2011) - (effective for annual periods beginning on or after 1

January 2013). IAS 27 (2011) supersedes IAS 27 (2008). Three new standards IFRS 10 - Consolidated

Financial Statements, IFRS 11- Joint Arrangements and IFRS 12- Disclosure of Interest in Other

Entities dealing with IAS 27 would be applicable effective 1 January 2013. IAS 27 (2011) carries forward

the existing accounting and disclosure requirements for separate financial statements, with some minor

clarifications. The amendments are not expected to impact the current transactions of the Group.

IAS 28 Investments in Associates and Joint Ventures (2011) - (effective for annual periods beginning on

or after 1 January 2013). IAS 28 (2011) supersedes IAS 28 (2008). IAS 28 (2011) makes the amendments

to apply IFRS 5 to an investment, or a portion of an investment, in an associate or a joint venture that

meets the criteria to be classified as held for sale; and on cessation of significant influence or joint

control, even if an investment in an associate becomes an investment in a joint venture. The

amendments are not expected to impact the current transactions of the Group.

Presentation of Items of Other Comprehensive Income (Amendments to IAS 1) - (effective for annual

periods beginning on or after 1 July 2012). The amendments require that an entity present separately the

items of other comprehensive income that would be reclassified to profit or loss in the future if certain

conditions are met from those that would never be reclassified to profit or loss. The amendments do not

address which items are presented in other comprehensive income or which items need to be

reclassified. The requirements of other approved accounting standards continue to apply in this regard.

The amendments are not expected to impact the current transactions of the Group.

-

-

5. BASIS OF MEASUREMENT

5.1

5.2 Use of critical accounting estimates and judgments

i) Classification of investments (note 6.2)

ii)

iii) Useful life of operating fixed assets and intangibles (note 6.6)

iv) Income taxes (note 6.8)

v) Staff retirements and other benefits (note 6.9); and

vi) Impairment (note 6.7)

6. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

6.1 Cash and cash equivalents

These consolidated financial statements have been prepared under the historical cost convention as

modified for certain investments which are carried at fair value, and defined benefit pension and gratuity

plan, defined benefit unfunded gratuity scheme, unfunded compensated absences and benevolent fund

which are carried at present value of defined benefit obligations net of fair value of plan assets and

unrecognised actuarial losses.

Cash and cash equivalents comprise of cash and balances with treasury banks, balances with other banks

and call money lendings.

Provision against investments (note 6.2) and advances, classification and provision of net

investment in finance lease (note 6.4).

Offsetting Financial Assets and Financial Liabilities (Amendments to IAS 32) – (effective for annual

periods beginning on or after 1 January 2014). The amendments address inconsistencies in current

practice when applying the offsetting criteria in IAS 32 Financial Instruments: Presentation. The

amendments clarify the meaning of „currently has a legally enforceable right of set-off‟; and that some

gross settlement systems may be considered equivalent to net settlement. The amendments are not

expected to impact the current transactions of the Group.

The preparation of consolidated financial statements in conformity with approved accounting standards

as applicable in Pakistan requires the use of certain critical accounting estimates. It also requires

management to exercise its judgment in the process of applying the Group's accounting policies. The

Group uses estimates and assumptions concerning the future. The resulting accounting estimates will,

by definition, seldom equal the related actual results. Estimates and judgments are continually evaluated

and are based on historical experience and other factors, including expectations of future events that are

believed to be reasonable under the circumstances. The areas where assumptions and estimates are

significant to the Group's financial statements or where judgment was exercised in application of

accounting policies are as follows:

IFRIC 20 - Stripping cost in the production phase of a surface mining (effective for annual periods

beginning on or after 1 January 2013). The interpretation requires production stripping cost in a surface

mine to be capitalized if certain criteria are met. The amendments have no impact on the consolidated

financial statements of the Group.

6.2 Investments

Held for trading

Held to maturity

Available for sale

These represent investments which do not fall under held for trading or held to maturity securities.

Gain/ (loss) on sale of investments is recognized in the year of sale.

6.3 Agreements for sale and purchase of securities (repo and reverse repo)

These represent investments acquired by the Group with the intention and ability to hold them upto

maturity. These are carried at amortized cost less impairment if any. Impairment in debt securities is

determined in accordance with the requirements of Prudential Regulations issued by SBP.

Unquoted equity securities are valued at lower of cost and break-up value. If the Break-up value is less

than cost, the difference is recognised in consolidated profit and loss account.

Securities for which ready quotations are available on Reuters page (PKRV) or Stock Exchange are

valued at quoted price and resulting surplus/ (deficit) is kept in a separate account and is shown below

the shareholders' equity in the consolidated statement of financial position.

All purchases and sales of investment that require delivery within the timeframe established by regulation

or market convention are recognized at the date which the Group commits to purchase or sell the

investment.

Securities sold under repurchase agreement (repo) are retained in the consolidated financial statements as

investments and a liability for consideration received is included in borrowings. The difference between

sale and repurchase price is treated as mark-up expense and recognized over the period of contract.

Securities purchased under agreement to resell (reverse repo) are included in lendings to financial

institutions. The difference between purchase and resale price is treated as mark-up income and

recognized over the period of the contract.

Investments are classified into following categories:

These represent investments acquired by the Group with the intention to trade by taking advantage of

short-term market/ interest rate movements. These are marked to market and surplus/ (deficit) arising

on revaluation is taken to consolidated profit and loss account.

Provision for diminution in values of securities (other than term finance certificates) is made after

considering impairment if any in their values, where the decline in prices of available for sale equity

securities is significant or prolonged, it is considered impaired and included in consolidated profit and

loss account. Provision for diminution in the value of term finance certificates is made as per Prudential

Regulations issued by State Bank of Pakistan.

6.4 Advances and investment in finance lease

Advances

Net investment in finance lease

Provision for potential lease losses and provision against non performing loans

6.5 Long term loans and redeemable capital

6.6 Capital work-in progress, operating fixed assets, intangibles, depreciation and amortization

Capital work-in-progress

Capital work-in-progress is stated at cost less impairment (if any).

Operating fixed assets-owned

Assets subject to finance lease

Leases where the Group transfers substantially all the risks and rewards incidental to the ownership of an

asset to the lessees are classified as finance leases. Net investment in finance lease is recognised at an

amount equal to the aggregate of minimum lease payment including guaranteed residual value and

excluding unearned finance income, if any.

Provisions for potential lease losses and non performing loans are determined on the basis of regulatory

requirement and are charged to consolidated profit and loss account.

Long term finances and loans are initially recognized at cost being the fair value of consideration

received together with the associated transaction cost. Subsequently, these are carried at amortized cost

using effective interest rate method. Transaction cost relating to the long term finance is being amortized

over the period of agreement using the effective interest rate method.

Advances are stated net of provision for non-performing advances. Provision for non-performing

advances is determined and charged to profit and loss account in accordance with the regulatory

requirements.

Advances are written off when there is no realistic prospect of recovery.

Assets subject to finance lease are stated at cost less accumulated depreciation at the rates similar to the

Group's owned assets and impairment loss (if any). The outstanding obligation under finance lease less

financial charges allocated to future periods is shown as liability. Finance charges are calculated at interest

rates implicit in the lease and are charged to consolidated profit and loss account in the period in which

these are incurred.

Operating fixed assets are stated at cost/ value on their acquisition less accumulated depreciation and

impairment losses (if any) except for land which is stated at cost less impairment, if any. Depreciation is

charged on straight line method at the rates given in note 13.1, commencing from the month in which

the asset is acquired. No depreciation is charged in the month of disposal of the asset. Gains or losses on

disposal of property and equipment are taken to the consolidated profit and loss account.

Maintenance and normal repairs are charged to consolidated profit and loss account as and when

incurred. Major renewals and improvements are capitalized.

Intangible assets

6.7 Impairment

6.8 Taxation

All intangible assets that meet the recognition criteria are initially measured at cost and are amortized on

a straight line basis at the rate given in note 13.2 commencing from the month when these assets are

available for use. Intangible assets are stated at cost less accumulated amortization and impairment

losses, if any. The residual value, useful life and amortization method is reviewed and adjusted, if

appropriate, at each balance sheet date.

The Group also recognizes deferred tax asset/ liability on deficit/ surplus on revaluation of investments

which is adjusted against the related deficit/ surplus in accordance with the requirements of

International Accounting Standard on 'Income Taxes' (IAS 12). However, keeping in view the future

operation and uncertain status of privatization of the Group; deferred tax assets has only been

recognized to the extent of deferred tax liability as at balance sheet date.

In making estimates of the depreciation / amortization, the management uses useful life and residual

value which reflects the pattern in which economic benefits are expected to be consumed by the Group.

The useful life and the residual value are reviewed at each financial year end and any change in these

estimates in future years might effect the carrying amounts of the respective item of operating fixed

assets with the corresponding effect on depreciation / amortization charge.

The carrying amount of assets are reviewed at each balance sheet date for impairment, whenever events

or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable. If

such indication exists, and where the carrying value exceeds the estimated recoverable amount, assets

are written down to their recoverable amount. The resulting impairment loss is taken to the consolidated

profit and loss account. An impairment loss is reversed only to the extent that the assets carrying amount

does not exceed the carrying value that would have been determined net of depreciation/amortization, if

no impairment loss had been recognized.

The available for sale equity investments are impaired when there has been a significant or prolonged

decline in the value below its cost. Impairment loss is recognized in consolidated profit and loss account.

Deferred tax is accounted for using the balance sheet liability method in respect of all major temporary

differences between the carrying amount of assets and liabilities in the financial statements and the

corresponding tax bases used in the computation of taxable profit at the rates that are expected to apply

to the period when the differences reverse based on the tax rates that have been enacted. Deferred tax

assets are recognized to the extent that it is probable that taxable profits will be available against which

the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred tax asset

is reduced to the extent it is no longer probable that the related tax benefits will be realized.

Provision for current taxation represents expected tax payable on the taxable income for the year using

applicable tax rates after taking into account tax credits and tax rebates, if any.

An intangible asset is recognized only if it is identifiable, the Group has control over the asset, it is

probable that economic benefits will flow to the enterprise and the cost of the asset can be measured

reliably.

6.9 Staff retirement and other benefits

The Group operates following staff retirement and other benefit schemes for its employees:

Defined benefit plan- Pension and gratuity scheme

Defined benefit unfunded gratuity scheme

Benevolent fund

Compensated absences

Defined contribution plan - Provident fund

The Bank operates a contributory benevolent fund for all its eligible employees (defined benefit scheme).

Contributions to this fund were made equally by the Bank and employees till March 2002. Thereafter it

is wholly contributed by the Bank at the rate of 2% of basic salary with a ceiling of Rs. 200 per month

per employee. Annual contribution towards the defined benefit scheme are made on the basis of

actuarial advice using the Projected Unit Credit Method.

Fully funded defined benefit pension and gratuity scheme for permanent employees. Contributions are

made in accordance with the actuarial valuation which is carried out periodically using 'Projected Unit

Credit Method'. The actuarial gain/ (loss) in excess of corridor (10% of higher of fair value of plan

assets or present value of obligation) is recognized over the expected average remaining working lives of

employees participating in the plan.

The Group operates a defined benefit unfunded gratuity scheme for its contractual employees. The

obligation under the defined benefit unfunded gratuity scheme is recognized on the basis of actuarial

valuation using the 'Projected Unit Credit Method'. The amount recognized in consolidated statement of

financial position represents present value of defined benefit obligation.

Defined benefit plans are provided to employees of the Group. Calculations in this respect require

assumptions to be made of future outcomes, the principal ones being in respect of increase in

remuneration, the expected long-term return on plan assets and the discount rate used to convert future

cash flows to current values. Calculations are sensitive to changes in the underlying assumptions.

The Group provides compensated absences, an unfunded scheme, as per entitlement to all its permanent

and contractual employees. Related provision is made in accordance with actuarial valuation. Provision

for the year is charged to consolidated profit and loss account. The amount recognized in consolidated

statement of financial position represents the present value of defined benefit obligation.

A recognised contributory provident fund is provided by SMEL for all permanent employees. Equal

monthly contribution are made by SMEL and its employees to the fund at the rate of 8 percent of basic

salary.

The Group takes into account the current income tax law and decisions taken by the taxation authorities.

Instances where the Group's views differ from the views taken by the income tax department at the

assessment stage and where the Group considers that its view on items of material nature is in

accordance with law, the amounts are shown as contingent liabilities.

6.10 Revenue recognition

6.10.1 Advances

6.10.2 Return on investments

6.10.3 Dividend income

6.10.4 Interest, fee, brokerage and commission

6.11 Off setting

6.12 Related party transactions

6.13 Borrowing costs

6.14 Provisions

Provisions are recorded when the Group has a present legal or constructive obligation as a result of past

events, it is probable that an outflow of resources embodying economic benefits will be required to settle

the obligation and a reliable estimate can be made of the amount of obligation.

Interest, fee, brokerage and commission, profit on other investments, bank deposits and staff loans is

recognized on accrual basis. Income on non-funded facilities (fee, commission, documentation charges

etc.) is recognized on receipt basis except commission on bank guarantees which is recognized on

accrual basis.

Markup/ interest on performing advances is recognized on a time proportion basis over the term of loan

and advances. Mark up on non performing loans are suspended.

Markup/ interest/ penal markup recoverable on non performing advances is recognized on receipt basis.

Financial assets and liabilities are off set and the net amount is reported in the consolidated statement of

financial position when there is a legally enforceable right to set off the recognized amounts and there is

an intention either to settle on a net basis or realize the asset and settle the liability simultaneously.

Borrowing costs that are directly attributable to the acquisition, construction or production of a

qualifying asset as part of the cost of that asset are capitalized. Other borrowing costs are recognized as

an expense in the period in which it incurs.

Return on investments is recognized on a time proportion basis except on classified investment which is

recognized on receipt basis. Any premium paid or discount received on purchase of securities is

amortized through consolidated profit and loss account over the remaining period of maturity on time

apportionment basis.

Dividend income is recognized when the Group's right to receive the dividend is established.

Transactions between the Group and its related parties are carried out on arm's length basis determined

in accordance with the generally accepted methods.

The Group follows the finance lease method in accounting for the recognition of lease income. Under

this method, the unearned lease income i.e. the excess of gross lease rentals and the estimated residual

value over the cost of the leased assets is deferred and taken to income over the term of the lease

contract, so as to produce a systematic return on the net investment in finance lease. Unrealised lease

income is held in suspense account, where necessary, in accordance with the regulatory requirements.

Front-end fees and documentation charges are taken to income when realised.

6.15 Segment reporting

6.15.1 Business segments

Trading and sales

Commercial banking

Other leasing operations

It includes extension of lease and working capital financing facilities to small and medium enterprises.

6.15.2 Geographical segments

6.16 Dividend and appropriation to reserves

7. FINANCIAL RESTRUCTURING AND GOING CONCERN ASSUMPTION

7.1

i)

ii)

iii)

The Government of Pakistan (GoP) assisted by Asian Development Bank (ADB) is working on SME

Sector Development Programme (SME SDP). Loan agreement for this programme between GoP and

ADB and project agreement between ADB, SBP, Small and Medium Enterprise Development Authority

(SMEDA) and the Bank have been signed on February 10, 2004. This programme, apart from other

aspects on policy matrix relating to SME sector of Pakistan, also envisages restructuring of SME Bank

Limited. Salient features of the restructuring of the Group are given below:

the Group operates only in Pakistan.

Adjustment of accumulated balances due from SBP on account of its share in profits and

losses of the Group against credit lines provided by SBP;

Payment of Rs 3 billion to SBP before January 1, 2004 against outstanding credit lines and

conversion of balance of remaining credit lines into a loan repayable in full by June 30, 2006;

Raising the paid-up capital to Rs 1,100 million by issuing additional shares to GoP;

Dividend and appropriation to reserves (except appropriation required by law) after the balance sheet

date are recognized as liability in the Group's financial statement in the year in which these are approved.

A segment is the distinguishable component of the Group 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 products and

services within a particular economic environment. Segment information is presented as per the Group's

functional structure and the guidance of the State Bank of Pakistan. The Group's primary format of

reporting is based on business segments:

This segment undertakes the Group's treasury, money market and capital market activities.

It includes loans, deposits and other transactions with individuals, small and medium enterprises and

corporate customers.

iv)

v)

vi)

vii) Reimbursement by GoP of costs related to VSS launched for all regular employees;

viii)

ix) Privatization of the Bank by June 2006.

7.2 Current status of the above referred financial restructuring is given below:

i)

ii)

iii)

iv)

v)

vi)

Paid-up capital has been increased to Rs. 2,393 million by issue of 73,502,453 additional

shares of Rs 10 each to GoP without right issue in 2004, issue of 40,000,000 additional shares

of Rs 10 each to GoP without right issue in 2005, issue of 50,000,000 additional bonus shares

of Rs 10 each to GoP without right issue in 2006 and issue of 39,250,700 additional shares of

Rs. 10 each to GoP without right issue in 2007. Proceeds against issue of additional shares in

2004 were paid by GoP to SBP against the Bank's loan balance due to SBP;

Provision of Rs 1,283.196 million against non performing financial assistance extended by the

defunct RDFC and SBFC was adjusted against credit lines of SBP in 2003;

SBP to issue a banking license to the Bank on compliance with all conditions of restructuring

and applicable SBP regulations. The commercial banking operations will be separate from the

recovery operations of the defunct RDFC and SBFC portfolio and the two operations will be

run as independent units within the Bank; and

Accumulated balances of Rs 3,275.752 million due from SBP on account of its share in

profits and losses of the Bank have been adjusted against credit lines provided by SBP;

Rs. 7,393 million has been paid to SBP since 2003, to fully adjust the loan liability.

VSS was approved by the Board of Directors of the Bank on November 7, 2003. 707

employees were relieved under the scheme upto December 31, 2005 and the aggregate

reported cost for 707 employees was Rs. 1,764.268 million, which has been received by the

Bank by March 31, 2007;

Human resource technical audit has been completed and report has been submitted to the

Bank;

Reduction in the number of recovery branches, staff rationalization through Voluntary

Separation Scheme (VSS), human resource audit and hiring of new professional staff on merit;

The Ministry of Finance (MoF) shall ensure that SBP's shareholding in the Group is

terminated through the purchase of SBP held shares at nominal value by shareholders or

otherwise;

100% provision to be made against non performing financial assistance extended by the

defunct RDFC and SBFC prior to January 1, 2002 which provision to be adjusted against SBP

credit lines. SBP will recover this amount from proceeds of ADB loan to GoP;

vii)

viii)

ix)

7.3 Further restructuring of the Bank:

i)

ii)

iii)

7.4 Going concern assumption and minimum capital requirement

In compliance to the decisions taken during meeting at Ministry of Finance dated September 14, 2009

following actions have been undertaken.

Banking license was issued by SBP on September 13, 2004 and the Bank has started banking

operations after the issue of certificate for commencement of banking business by SBP on

April 16, 2005;

Privatization Commission (PC) has constituted a transaction committee which is represented

by members from the Privatization Commission, State Bank of Pakistan, Ministry of Finance

and the Bank. Privatization Commission has approved M/s BMA Capital as Financial

Advisors for the Bank and due diligence exercise for the privatization of the Bank has been

carried out in the year 2008;

No further progress has been made on the privatization of the Bank.

VSS offered to the regular employees of the Bank in November 2009, wherein 138 employees

opted for VSS offered vide Circular No. HO/HR&SD/2009/5385 dated October 15, 2009.

These employees have been relieved at a total cost of Rs. 653 million with effect from

November 14, 2009;

The Old portfolio of defunct RDFC & defunct SBFC has been transferred to National Bank

of Pakistan with effect from 1st July 2010. Consequently all the recovery offices and recovery

booths have been closed. However, staff of the recovery offices have been advised to

continue to maintain and keep the safe custody of records and assets including loan files,

security documents, books of accounts, vehicles, furniture/fixture and other assets till

handing over of all the relevant records to the concerned institution; and

Government of Pakistan have allocated an amount of Rs. 2 billion in the annual budget 2011-

12 for equity injection into the Bank.

During the year, the Group has incurred a net loss after tax of Rs. 225 million resulting in accumulated

losses of Rs. 651 million (December 31, 2010: Rs. 442 million) as of balance sheet date. The

Government of Pakistan (GoP), hold 94% shares of the Bank through Ministry of Finance (MoF) and

has made a budget allocation of Rs. 2 billion to provide further equity contribution to the Bank. The

management therefore believes that GoP will provide further equity contribution to the Bank and

therefore the going concern assumption is an appropriate basis to prepare these consolidated financial

statements. Further the Bank, on a standalone basis, had a shortfall of Rs. 182 million as on December

31, 2011 in meeting the minimum capital requirement of Rs. 2 billion (net of losses) as prescribed by the

State Bank of Pakistan and SME Leasing Limited had a shortfall of Rs. 112.711 million. The

management is confident that the realization of budgeted amount will enable the Group to meet

minimum capital requirement. However the management will soon apply to regulatory authorities for

extension to meet minimum capital requirement.



Note 2011 2010

8. (Rupees in '000)

In hand - local currency 52,162 70,247

In transit - local currency - 12

National Prize Bonds 129 138

With State Bank of Pakistan (SBP) in :

Local currency current accounts 8.1 123,090 115,246

With National Bank of Pakistan in :

Local currency current accounts 39,274 42,419

214,655 228,062

8.1

Note 2011 2010

9. BALANCES WITH OTHER BANKS (Rupees in '000)

In Pakistan:

On current accounts 1,526 11,448

On deposit accounts 9.1 18,339 19,464

Provision for doubtful balance with a bank 9.2 (10,000) (10,000)

9,865 20,912

9.1

9.2

Note 2011 2010

10. LENDINGS TO FINANCIAL INSTITUTIONS (Rupees in '000)

Call money lendings 10.1 250,000 -

Letter of placement 10.1 550,000

800,000 -

10.1 PARTICULARS OF LENDING

In local currency 800,000 -

In foreign currencies - -

800,000 -

10.1.1

SME Bank Limited

CASH AND BALANCES WITH TREASURY BANKS

Deposits with the State Bank of Pakistan are maintained to comply with the statutory requirements issued from time

to time.

These carry interest rate ranging from 1.50% to 5.0% (2010: 1.50 % to 6.50%) per annum.

Provision for doubtful balance is in respect of deposit of Rs. 10 million with Indus Bank Limited which is under

liquidation.

These lendings carry markup rate ranging between 12.4% to 12.6% per annum and have maturity period upto 3

months.

SME Bank Limited



11 INVESTMENTS

Note

11.1 INVESTMENTS BY TYPES:

Available-for-sale securities

Market Treasury Bills (MTBs) 619,118 900,070 1,519,188 295,681 - 295,681

Pakistan Investment Bonds (PIBs) 304,525 1,227,465 1,531,990 751,223 1,470,578 2,221,801

Special Savings Certificates (SSCs) 2,500 - 2,500 2,500 - 2,500

Fully paid ordinary shares/mutual fund 47,607 - 47,607 124,522 - 124,522

Term Finance Certificates (TFCs) 16,232 - 16,232 25,387 - 25,387

989,982 2,127,535 3,117,517 1,199,313 1,470,578 2,669,891

Held-to-maturity securities

Term Deposit Receipts (TDRs) - - - 200,000 - 200,000

Certificates of Investments (COIs) 762 - 762 762 - 762

762 - 762 200,762 - 200,762

Less: Provision for diminution

in value of investments (42,721) - (42,721) (42,721) - (42,721)

Investments net of impairment 948,023 2,127,535 3,075,558 1,357,354 1,470,578 2,827,932

Net deficit on revaluation of

available-for-sale-securities (71) (47,820) (47,891) (37,973) (109,625) (147,598)

Total investments 947,952 2,079,715 3,027,667 1,319,381 1,360,953 2,680,334

Held by the

bank

Given as

collateral Total

(Rupees in '000)

Held by the

bank

Given as

collateral Total

(Rupees in '000)

20102011

SME Bank Limited



Note 2011 2010

11.2 INVESTMENTS BY SEGMENTS :

Federal Government Securities:

- Market Treasury Bills (MTBs) 11.3 1,519,188 295,681

- Pakistan Investment Bonds (PIBs) 11.3 1,531,990 2,221,801

- Special Savings Certificates (SSCs) 11.3 2,500 2,500

3,053,678 2,519,982

Fully paid up ordinary shares:

- Listed companies/mutual fund 11.6 26,604 103,519

- Unlisted companies 11.7 21,003 21,003

47,607 124,522

Term Finance Certificates

- Listed TFCs 11.8 16,232 25,387

Other investments:

- Certificates of Investment (COIs) 762 762

- Term Deposit Receipts (TDRs) - 200,000

762 200,762

Total investments at cost 3,118,279 2,870,653

Provision for diminution in value of investments 11.4 (42,721) (42,721)

Investment (net of provision) 3,075,558 2,827,932

Less: Deficit on revaluation of available for sale securities - net 23 (47,891) (147,598)

Total investments 3,027,667 2,680,334

(Rupees in '000)

SME Bank Limited



11.3 Principal terms of investments in Federal Government securities

Name of investment

Market Treasury Bills On maturity

Pakistan Investment Bonds On maturity

Special Savings Certificates On maturity

Note 2011 2010

11.4 Particulars of provision for diminution in value of investments

Opening balance 42,721 58,544

Charge for the year - 306

Reversal on disposal - (16,129)

Closing balance 42,721 42,721

11.4.1 Particulars of provision in respect of type and segment

Available-for-sale securities

-Fully paid up ordinary shares

- Quoted Companies 11.6.1 20,956 20,956

- Unlisted Shares 11.7.1 20,000 20,000

- Delisted Companies 11.7.2 1,003 1,003

Held-to-maturity securities

- Certificates of Investment 762 762

42,721 42,721

Note

Market value Rating Market value Rating

11.5 Quality of Available-for-sale securities (Rupees '000) (Rupees '000)

Market Treasury Bill 11.5.1 1,521,322 unrated 295,598 unrated

Pakistan Investment Bonds 11.5.1 1,476,631 unrated 2,064,934 unrated

Special Saving Certificate 11.5.1 2,500 unrated 2,500 unrated

Fully paid up ordinary shares/ mutual funds 11.5.2

National Refinery Limited 3,640 AAA/A1+ 4,107 AAA/A1+

PICIC Investment Fund Limited 750 3-Star 883 3-Star

Hub Power Company Limited 3,659 AA+/A1+ 4,003 AA+/A1+

Lotte Pakistan PTA Limited 740 unrated 1,093 unrated

Dewan Salman Fibre Limited 22 unrated 55 unrated

Pakistan Telecommunication Company Limited 89 unrated 167 unrated

D.G. Khan Cement Company Limited 108 unrated 171 unrated

Faisal Spinning Mills Limited 176 unrated 130 unrated

Treet Corporation Pakistan Limited 195 AA-/A-1 300 AA-

NAFA Cash Fund - - 54,209 A+(f)

NAFA Stock Fund - - 1,463 unrated

UBL PPF-1 - - 4,494 AA+(cpf)

Pakistan Stock Fund - - 2,069 4-star/4-star

AMZ Stock Plus Fund - - 1,631 2-star/2-star

United Stock Fund - - 1,920 unrated

Crosby Dragon Fund - - 1,607 AM4+

Meezan CPF-1 - - 6,003 AM2

Alfalah GHP PPF - - 2,611 AA

NAMCO Income Fund - - 3,330 A(f)

NAMCO Balanced Fund (Closed End) 1,364 3-Star 1,032 AM3-

Nishat Mills Limited 6 AA-/A1+ 7 A+/A1

Crescent Textile Mills Limited 1 unrated 1 unrated

Services Industries Limited 14 unrated 17 unrated

Invest Capital Investment Bank Limited 224 D 872 D

10,988 92,175

Term Finance Certificates

Financial Receivables Securitisation Company Limited 6,215 A+ 8,598 A+

Pakistan Mobile Communications Limited 10,011 A+ 16,529 A+

16,226 25,127

3,027,667 2,480,334

Maturity

January 2012 to December 2012

February 2012 to June 2013

11.73% to 13.86%

9% to 11%

Rate per annum

Market Treasury Bills and Pakistan Investment Bonds are securities eligible for re-discounting with the State Bank of Pakistan.

(Rupees in '000)

Coupon/Mark up

payment

Principal

payment

2011 2010

11.6% to 14.2%

at maturity

semi-annually

June 2014 to December 2015 at maturity

SME Bank Limited



11.5.1 These are Government of Pakistan guaranteed securities.

11.5.2 Rating of these equity securities represent 'Entity/Funds Rating'.

11.5.3

11.6 Investments in listed companies/mutual fund

2011 2010

2011 2010 Name of company/mutual fund Note

15,000 15,000 354.17 National Refinery Limited 5,312 5,312

137,668 137,668 18.12 PICIC Investment Fund Limited 2,494 2,494

107,000 107,000 18.95 Hub Power Company Limited 2,028 2,028

79,775 79,775 10.15 Pakistan PTA Limited 810 810

18,449 18,449 18.24 Dewan Salman Fibre Limited 337 337

8,600 8,600 68.20 Pakistan Telecommunication Company Limited 586 586

5,672 5,672 49.38 D.G. Khan Cement Company Limited 280 280

4,000 4,000 40.41 Faisal Spinning Mills Limited 162 162

5,000 5,000 29.50 Treet Corporation Pakistan Limited 147 147

319 319 93.52 Nishat Mills Limited 30 30

18 18 34.84 Crescent Textile Mills Limited 1 1

72 72 25.30 Services Industries Limited 2 2

1,117,876 1,117,876 11.84 Invest Capital Investment Bank Limited 13,236 13,236

Mutual Fund

- 5,321,308 - NAFA Cash fund - 55,768

- 192,475 - NAFA Stock Fund - 1,208

- 44,849 - UBL PPF-1 - 4,145

- 35,068 - Pakistan Stock Fund - 1,804

- 24,718 - AMZ Stock Plus Fund - 1,467

- 46,108 - United Stock Fund - 1,581

- 16,725 - Crosby Dragon Fund - 1,440

- 109,415 - Meezan CPF-1 - 5,000

- 46,939 - Alfalah GHP PPF - 2,000

- 31,729 - NAMCO Income Fund - 2,500

270,000 250,000 4.37 NAMCO Balanced Fund (Closed End) 1,180 1,181

26,604 103,519

Impairment in available for sale listed shares 11.6.1 (20,956) (20,956)

Investment in listed shares (net of impairment) 5,648 82,563

Surplus on revaluation of listed shares/ mutual fund - (net) 5,339 9,612

Market value as on December 31 10,987 92,175

11.6.1 Impairment in available for sale listed shares

National Refinery Limited 3,885 3,885

PICIC Investment Fund Limited 2,215 2,215

Lotte Pak PTA Limited 683 683

Dewan Salman Fibre Limited 310 310

Pakistan Telecommunication Company Limited 441 441

D.G. Khan Cement Company Limited 159 159

Nishat Mills Limited 27 27

Invest Capital Investment Bank Limited 13,236 13,236

20,956 20,956

11.7 Particulars of investments held in unlisted fund and delisted companies

AKD Venture Fund 11.7.1 20,000 20,000

Companies delisted from stock exchange 11.7.2 1,003 1,003

21,003 21,003

Securities have either been rated by 'The Pakistan Credit Rating Agency Limited' (PACRA) or 'JCR-VIS Credit Rating Company

Limited' (JCR-VIS). These ratings reflect independent credit risk assessment by respective credit rating entities.

No. of ordinary

shares/units

(Rupees in '000)

Paid-up

value per

share/

average

price per

unit (Rs)

SME Bank Limited



(Rupees) (Rupees in '000)

11.7.1 8% 2,000,000 10.00 20,000 - Kashif Shamim

11.7.1.1

11.7.2 Particulars of investments in shares of companies delisted from stock exchange and are currently under liquidation.

(Rupees)

Mohib Exports Company Limited 4,600 23.81 109

Sunflow Citrus Limited 100,000 4.22 422

Tawakal Garments Company Limited 4,000 38.38 154

Tristar Shipping Lines Limited 5,000 23.56 118

Zahoor Textile Mills Limited 15,200 13.16 200

1,003

11.8 Investment in Term Finance Certificates

Investment in Listed Term Finance Certificates

2011 2010

2011 2010 Company's name (Rupees)

4,000 4,000 Pakistan Mobile Communications Limited 2,496 9,984 16,640

3,000 3,000 Financial Receivables Securitisation Company Limited 2,083 6,248 8,747

16,232 25,387

Net deficit on revaluation of TFCs (6) (260)

Market value as on December 31 16,226 25,127

Name of

Chief

executive

Total paid

up value

Cost/Paid-

up value

per unit

held

% ageBreak up

value

Management has fully provided this investment as irrecoverable and impaired.

Nominal

value per

certificate

Number of

units held

AKD Venture Fund

(Rupees in

'000)

Cost/Paid-

up value

per share

These carry rate of return ranging from 14.76% to 15.76% (2010: 13.74% to 14.16%) per annum and having maturity periods of upto 7

years (2010: 7 years).

Total paid

up value

(Rupees in '000)

Number of

shares held

No. of certificates

SME Bank Limited



Note 2011 2010

12. ADVANCES

Loans, cash credits, running finances, etc- In Pakistan

Extended by:

Defunct SBFC 12.2 4,392,342 4,406,468

Defunct RDFC 12.2 509,185 540,039

The Group 2,749,336 2,649,077

Due from ex-employees 12.2 20,993 21,153

Due from employees 173,942 187,646

7,845,798 7,804,383

Net investment in finance lease - In Pakistan 12.3 809,973 940,213

Advances - gross 8,655,771 8,744,596

Provision for non-performing advances - specific 12.5 (5,306,693) (5,436,997)

Advances - net of provision 3,349,078 3,307,599

12.1 Particulars of Advances (Gross)

12.1.1 In local currency 8,655,771 8,744,596


8,655,771 8,744,596

12.1.2 Short term (upto one year) 2,258,859 2,130,554

Long term (over one year) 6,396,912 6,614,042

8,655,771 8,744,596

12.2

a) the non-performing loans, collateral and the debtors;

The agreed transfer price is an amount equal to 50% of the net recoveries or 25% of the gross recoveries which ever is

higher in first two anniversaries and 50% of the net recovery from 2nd anniversary.

(Rupees in '000)

The Board through its resolution by circular No.10/circ/33 dated March 08, 2010 duly endorsed by the members in

their meeting dated May 20, 2010 has approved the transfer and assignment of non- performing loan portfolios of

defunct RDFC, SBFC and due from ex-employees to NBP on the basis of deferred transfer price. Subsequently transfer

and assignment agreement was executed between the Bank and National Bank of Pakistan at Karachi on July 01, 2010

(Effective date). According to the agreement, the transferor (Bank) and the acquirer (NBP) acknowledge, declare and

confirm the transfer, assignment and vesting of all rights, interests, privileges, title, powers and remedies in favour of the

acquiree with respect to:

Since certain clauses of portfolio transfer agreement have not been implemented including issuance of notices to the

borrowers of defunct RDFC, SBFC and due from ex-employees etc, the outstanding portfolio relating to defunct

RDFC, SBFC and due from ex-employees stands recognized in the financial statements of the Bank.

Although the Board through its resolution by circular No.10/circ/33 dated March 08, 2010 duly endorsed by the

members in their meeting dated May 20, 2010 had approved the transfer and assignment of non performing portfolio of

defunct SBFC, RDFC and due from ex-employees to NBP on the basis of deferred transfer price however on

assumption of charge, the new management of the Bank has re-visited and re-analyzed the whole transaction and

observed that clauses of agreement signed with NBP are detrimental to the Bank‟s interests and causing financial loss to

the Bank. The management therefore recommended the cancellation of transfer and assignment agreement to the Board

of Directors in its 64th meeting dated May 16, 2011. The Board has in principle agreed with the management

recommendation and advised the management to convey its views along with legal opinion, NBP recovery performance

and Board‟s pronouncement for revocation of agreement to Ministry of Finance to arrange retrieval/restoration of old

portfolio to the Bank in the interest of recovery of public funds.

The management is accordingly taking suitable steps for cancellation of transfer and assignment agreement with NBP.

However since the portfolio transfer agreement dated 1st July 2010 with NBP has not formally been cancelled, the

amount recovered by the Bank from the borrowers of defunct RDFC, SBFC and due from ex-employees has been

recognized as liability to NBP on a prudent basis (refer note 20).

Assignment of Non-Performing Loan (NPL) portfolios of defunct SBFC, RDFC & due from ex-employees to

National Bank of Pakistan (NBP)

b) all agreements, deeds, instruments and other documents relating to the non-performing loans, debtors and collateral

and to which the transferor is, or legally deemed to be, a party or a beneficiary;

c) all legal proceedings by and against the transferor with respect to the non-performing loans, the debtors and collateral,

which may be pending before any court, tribunal, arbitrator or authority, without being subject to any liabilities of the

transferor to any person.

SME Bank Limited



12.3 NET INVESTMENT

IN FINANCE LEASE

(Rupees in '000)

Lease rentals receivable 458,197 98,667 - 556,863 516,063 108,643 - 624,706

Residual value 285,541 72,497 - 358,038 153,100 280,353 - 433,453

Minimum lease payments 743,738 171,163 - 914,901 669,163 388,996 - 1,058,159

Financial charges for future

periods 92,054 12,874 - 104,928 100,330 17,616 - 117,946

Present value of minimum lease payments 651,684 158,289 - 809,973 769,493 406,612 - 940,213

12.4

Provision Provision

Category of Classification Domestic Overseas Total Required Held

(Rupees in '000)

Substandard 112,681 - 112,681 162 162

Doubtful 123,721 - 123,721 1,999 1,999

Loss 5,701,420 - 5,701,420 5,304,532 5,304,532 5,937,822 - 5,937,822 5,306,693 5,306,693

Provision Provision

Category of Classification Domestic Overseas Total Required Held

(Rupees in '000)

Substandard 171,398 - 171,398 4,930 4,930

Doubtful 144,507 - 144,507 32,619 32,619

Loss 5,679,236 - 5,679,236 5,399,448 5,399,448 5,995,141 - 5,995,141 5,436,997 5,436,997

12.5 Particulars of provision against non-performing advances

Specific General Total Specific General Total

(Rupees in '000)

Opening balance 5,436,997 - 5,436,997 5,285,573 - 5,285,573

Amounts written off (54,517) - (54,517) (13,399) - (13,399)

Provision of transferred portfolio (458) - (458) (712) - (712)

Charge/(Reversals)

Charge for the year 60,204 - 60,204 209,032 - 209,032

Reversals (135,533) - (135,533) (43,497) - (43,497)

(75,329) - (75,329) 165,535 - 165,535

Closing balance 5,306,693 - 5,306,693 5,436,997 - 5,436,997

12.5.1

12.5.2 Specific General Total Specific General Total

(Rupees in '000)`

In local currency 5,306,693 - 5,306,693 5,436,997 - 5,436,997

In foreign currencies - - - - - - 5,306,693 - 5,306,693 5,436,997 - 5,436,997

Later than

one and less

than five

years

The State Bank of Pakistan (SBP) amended the Prudential Regulation vide BSD Circular No. 1 of 2011 dated October 21, 2011 in

relation to provision for loans and advances, thereby allowing further benefit of Forced Sale Value (FSV) of pledged stocks,

mortgaged residential, commercial and industrial properties (land and building) and plant and machinery under charge held as

collateral against non-performing advances. The FSV benefit has resulted in reduced charge for specific provision for the year by Rs.

148,561 thousand. The FSV benefit recognised in these consolidated financial statements is not available for payment of cash or stock

dividend. Had the FSV benefit not recognized, before and after tax loss for the year would have been higher by Rs. 148,561 thousand

(December 31, 2010: Rs. 77,540 thousand). FSV benefit availed by the Bank includes Rs. 108,835 thousand on before and after tax

loss for the year by consirding percentage changes only of FSV benefit under circular No. 1 of 2011 dated October 21, 2011.

Not later

than one

year

2010

Total

(Rupees in '000)

Over five

years

2011

2011

Classified Advances

Particulars of provisions against non-

performing advances

2011 2010

2011 2010

Advances include Rs. 5,937,822 thousands (2010: Rs. 5,995,141 thousands) which have been placed under non-performing

status as detailed below:

Not later

than one

year

Later

than one

and less

than five

years

2010

Classified Advances

TotalOver five

years

SME Bank Limited



Note 2011 2010

12.6 PARTICULARS OF WRITE OFF:

12.6.1 Against provisions 12.5 54,517 13,399

Directly charged to Profit & Loss account 653 939

55,170 14,338

12.6.2 Write Offs of Rs. 500,000 and above 12.7 40,026 2,177

Write Offs of below Rs. 500,000 15,144 12,161

55,170 14,338

12.7 DETAILS OF LOAN WRITE OFF OF Rs. 500,000 AND ABOVE

12.8 Note 2011 2010

Balance at the beginning of the year 91,522 51,906

Loans granted during the year 19,218 58,604

Repayments (21,247) (18,988)

Balance at the end of the year 89,493 91,522

13. OPERATING FIXED ASSETS

Property and equipment 13.1 132,490 131,049

Intangible assets 13.2 2,831 1,537

135,321 132,586

(Rupees in '000)

In terms of sub-section 3 of Section 33-A of the Banking Companies Ordinance, 1962 the Statement in respect of written-off

loans or any other financial relief of five hundred thousand rupees or above allowed to a person(s) during the year ended

December 31, 2011 is given at Annexure-1.

Debts due by directors, executives or officers of the Group or any of

them either severally or jointly with any other persons:

PARTICULARS OF LOANS AND ADVANCES TO

DIRECTORS, ASSOCIATED COMPANIES, ETC. (Rupees in '000)

SME Bank Limited



13.1 PROPERTY AND EQUIPMENT

Note

Lease hold land 13.5 64,087 - - 64,087 - - - - 64,087 -

Lease hold improvements 30,286 - 132 30,314 19,201 - 100 (104) 19,197 11,117 33 1/3

(104)

Buildings 26,298 - - 26,298 5,418 - 1,893 7,311 18,987 5

Office furniture and fixtures 14,959 - 93 11,629 14,383 - 362 (461) 11,324 305 20

(463) (2,960) 2,960

Library 19 - - (9) 10 19 - - 9 10 - 20

Office equipment 28,778 - 382 28,697 16,503 - 3,544 (95) 19,595 9,102 15

(106) (357) 357

Computer equipment 75,219 - 15,015 88,725 73,102 - 3,558 (42) 75,151 13,574 33 1/3

(42) (1,467) 1,467

Vehicles 29,110 4,868 73 30,523 27,884 3,584 1,562 (3,320) 29,698 825 20

(3,516) (12) - 12

268,756 4,868 15,695 - 280,283 156,510 3,584 11,019 (4,022) 162,286 117,997

(4,231) (4,805) - 4,805

Assets held under finance lease

Vehicles 29,732 (4,868) 2,841 (88) 25,978 10,929 (3,584) 5,347 (1,119) 11,485 14,493 20

(1,639) 88

2011 298,488 - 18,536 (4,893) 306,261 167,439 - 16,366 (5,141) 173,771 132,490 (5,870) 4,893

13.2 INTANGIBLE ASSETS

COST

Adjustment

Computer software 24,439 2,988 (198) 27,229 22,902 1,694 198 24,398 2,831 33 1/3

2011 24,439 2,988 (198) 27,229 22,902 1,694 198 24,398 2,831 -

COST

Transfer

As at

Dec 31,

2011

AMORTISATION

As at

January 01,

2011

As at

January 01,

2011

Additions

TransferAs at

Dec 31, 2011

Depreciation

rate per

annum %

Net book

value as at

Dec 31, 2011

Amortization

rate per

annum %

As at

January 01,

2011

Additions/

(disposals)

Net book

value as at

Dec 31, 2011

As at

Dec 31, 2011

Adjustments

Adjustment

(Rupees '000)

DEPRECIATION

Amortisation

Charge for the

year

As at

January 01,

2011

(Rupees '000)

As at

Dec 31,

2011

Deletion /

adjustment

SME Bank Limited

Notes to the Financial Statements


PROPERTY AND EQUIPMENT

Note

Lease hold land 12.6 64,087 - - 64,087 - - - - 64,087 -

Lease hold improvements 18,728 - 11,560 30,286 18,501 - 702 19,201 11,085 33 1/3

(2) (2)

Buildings 26,298 - - 26,298 4,531 - 887 5,419 20,880 5

Office furniture and fixtures 15,072 - 81 14,959 13,644 - 923 14,383 576 20

(194) (184)

Library 19 - - 19 19 - - 19 - 20

Office equipment 24,747 - 5,172 28,778 13,972 - 3,270 16,503 12,275 15

(1,141) (739)

Computer equipment 74,963 - 256 75,219 69,306 - 3,796 73,102 2,117 33 1/3

Vehicles 47,955 3,832 88 29,110 45,462 2,911 2,095 27,884 1,226 20

(22,765) (22,584)

271,869 3,832 17,157 268,756 165,435 2,911 11,673 156,510 112,246

(24,102) (23,509)

Assets held under finance lease

Vehicles 21,022 (3,832) 12,541 29,732 9,640 (2,911) 4,200 10,929 18,803 20

2010 292,891 - 29,698 298,488 175,075 - 15,873 167,439 131,049 (24,102) (23,509)

INTANGIBLE ASSETS

COST

Computer software 24,439 - - 24,439 21,202 - 1,700 22,902 1,537 33 1/32010 24,439 - - 24,439 21,202 - 1,700 22,902 1,537

Amortization

rate per

annum %

(Rupees '000)

AMORTISATION

As at

January 01,

2010

Transfer

from

leased

assets

Amortisation

As at

Dec 31,

2010

Net book

value as at

Dec 31,

2010

As at

January 01,

2010

Transfer

from

leased

assets

Additions/D

isposals

As at

Dec 31,

2010

(Rupees '000)

COST DEPRECIATION

As at

January 01,

2010

Transfer

(from)/ to

leased

assets

As at

Dec 31,

2010

Depreciation

rate per

annum %

As at

January 01,

2010

Transfer

(from)/ to

leased

assets

Charge for

the year/

(disposals)

Additions/

(Disposals)

As at

Dec 31,

2010

Net book

value as at

Dec 31,

2010

SME Bank Limited



13.3

Vehicles

Toyota GLI 1,065 810 255 255 As Per Bank Policy

Suzuki Cultus 569 569 - 57 As Per Bank Policy

Honda City 801 801 - 80 As Per Bank Policy

Suzuki Baleno 764 764 - 76 As Per Bank Policy

Suzuki Baleno 753 753 - 75 As Per Bank Policy

Honda CG 125 71 60 11 55

Cultus-VXL 663 398 265 196 As Per Leasing Policy

Suzuki Alto 556 371 185 161 As Per Leasing Policy

5,242 4,526 716 956

628 615 13 247

2011 5,870 5,141 729 1,203

2010 24,102 23,509 593 15,553

13.4

13.5

2011 2010

14. DEFERRED TAX ASSETS

Taxable temporary differences on:

Accelerated tax depreciation and amortization (29,441) (28,502)

Net investment in lease (239) (12,124)

Liabilities against assets subject to finance lease (103) (297)

(29,783) (40,923)

Deductible temporary differences on:

Unused tax losses 29,783 40,923

29,783 40,923

- -

14.1 183,085 220,625

Particulars of buyers

Mr. Amjad Ali

Syed Akbar Shah

M/S Askari General Insurance

Other assets

having book value

of less than Rs.

250,000 or cost

less than of

Rs.1,000,000

Details of disposal of fixed assets :

Book

value

Particulars of

assetsCost

Accumulated

depreciation

Mode of

disposal

Insurance claim

for theft

(Rupees in '000)

This represent cost of land measuring 500 square yards in sector G-7 and 4666.66 square yards situated in sector G-5/2 was

originally allotted to SBFC and RDFC respectively. CDA required payment of Rs. 3.367 million for transferring the plot in the

name of the Bank from SBFC and RDFC. However, on receiving draft of the required amount, CDA returned the same

requiring payment of market value in view of proposed privatization of the Bank. The matter is still pending, however based on

the fact that the land is under possession of the Bank and the title is in the name of SBFC and RDFC which are now SME, the

management believes that the Bank is not required to pay the market value of the plot and accordingly the Bank has ownership

rights over this land.

Temporary differences for which no deferred tax is recognized due

to uncertain taxable profits

----------------------(Rupees '000)--------------------

Sale

proceeds

Gross carrying amount of fully depreciated assets that are still in use was Rs. 144,644 thousands (2010: Rs. 136,133 thousand).

Mr. R.A. Chughtai

Mr. Najam Akhtar

Mr. Ihsan Ul Haq

SME Bank Limited



Note 2011 2010

Restated

15. OTHER ASSETS

Income/ mark-up accrued in local currency 15.1 113,749 116,361

Advances, deposits, advance rent and other prepayments 50,153 37,308

Refund due from benevolent fund 1,279 54,630

Receivable from SBP 15.2 7,380 7,277

Stock Exchange membership 15.3 48,000 48,000

Receivable from Speedway Fondmetall Pakistan Limited 19,640 19,640

Receivable against factorized portfolio 8,248 8,248

Others 45,920 41,303

294,369 332,767

Less: Provision held against other assets 15.4 73,767 69,791

Other assets (net of provision) 220,602 262,976

15.1

15.2

15.3

Note 2011 2010

Restated

15.4 Provision against other assets

Opening balance 69,791 62,380

Charge for the year 4,627 8,300

Reversals (28) (330)

4,599 7,970

Amount written off (623) (559)


Provision balance is in respect of:

Income/ mark-up accrued in local currency:

Universal Leasing Limited 22 22

Receivable from Speedway Fondmetall Pakistan Limited 19,640 19,640

Receivable against factorized portfolio 8,248 8,248

Other receivables- SME Portfolio 20,021 15,449

Legal charges recoverable from borrowers- SBFC & RDFC 22,112 22,373

Others 3,724 4,059

73,767 69,791

This balance has been arrived at after adjusting interest in suspense of Rs. 4,007,862 thousand (2010: Rs. 4,031,723

thousand).

This amount represents receivable from SBP under circular SMEFD 11, dated July 01, 2010 related to relief provided to

borrowers of flood affected areas of Khyber Pakhtun Khwa, FATA and PATA.

This includes membership of Lahore Stock Exchange of Rs. 30 million and Islamabad Stock Exchange Rs. 18 million as

settlement with Ravi Securities (Pvt) Limited and Taas Securities (Pvt) Limited. The cost reflected here is based on best

management estimate of the fair value of membership of Lahore Stock Exchange and Islamabad Stock Exchange at

settlement date. The settlement with M/S Ravi Securities (Pvt.) Ltd. and M/S Taas Securities (Pvt.) Ltd. against

membership of Lahore Stock Exchange was reached in 2009 however full amount of receivable was not adjusted against

the value of membership. Based on the outcome of discussion with the Ministry of Finance, the management has adjusted

the remaining amount of receivable of 10 million against the value of membership and Rs. 1.699 million against creditors

by restating the comparative figures. This has resulted in increase in other assets by Rs. 10 million and decrease in

creditors by Rs. 1.699 million at December 31, 2009 with corresponding decrease in accumulated loss at December 31,

2009 by Rs. 11.699 million.

(Rupees in '000)

(Rupees in '000)

SME Bank Limited



Note 2011 2010

16. BILLS PAYABLE (Rupees in '000)

In Pakistan 183,863 40,505

Outside Pakistan - -

183,863 40,505

17. BORROWINGS FROM FINANCIAL INSTITUTIONS

In Pakistan 2,171,669 1,437,604

Outside Pakistan - -

2,171,669 1,437,604

17.1 Particulars of borrowings with respect to currencies

In local currency 2,171,669 1,437,604


2,171,669 1,437,604

17.2 Details of borrowings secured/unsecured

Borrowings from State Bank of Pakistan - unsecured 17.2.1 48,026 -

Repurchase agreement borrowings - secured 17.2.2 2,077,421 1,360,622

Privately placed term finance certificates - secured - 62,073

Certificate of investments - un secured 17.2.3 6,757 13,244

Long term finance - secured 17.2.4 39,465 1,665

2,171,669 1,437,604

17.2.1

17.2.2

17.2.3 These certificates of investments were issued under permission granted by the Securities and Exchange Commission of

Pakistan .These are repayable between January, 2012 to July 2013 and carries return at the rate ranging from 11.50 % to

14.00 % per annum (2010: 9 % to 13 % per annum).

This represents financing facility obtained from State Bank of Pakistan under the scheme "Financing Facility For Storage

of Agri Produce (FFSAP)" vide SMEFD circular No. 08 dated June 04, 2010. This carry mark up rate of 6.5 % and is

repayable in quarterly installments.

These represent transactions with financial institutions for sale of Government Securities under re-purchase agreement

(REPO) in the inter bank money market at mark-up rates ranging from 11.7% to 12% (2010: 9.65% to 14%) per annum

for period upto three months (2010: upto four months). REPO transactions are secured against investment of the Bank in

Government securities.

SME Bank Limited



17.2.4

2011 2010

18. DEPOSITS AND OTHER ACCOUNTS Note (Rupees in '000)

Customers

Fixed deposits 1,271,968 826,798

Savings deposits 624,354 689,481

Current accounts - non-remunerative 358,201 410,796

Margin accounts 410,446 454,990

2,664,969 2,382,065

Financial Institutions

Remunerative deposits 18.2 327,671 259,877

Non-remunerative deposits 6,552 10,006

2,999,192 2,651,948

18.1 Particulars of deposits

In local currency 2,999,192 2,651,948


2,999,192 2,651,948

18.2 Remunerative deposits include Rs. 277.667 million (2010: Rs. 259.873 million) related to Equity Participation Fund.

This represents financing facilities obtained by SMEL from United Bank limited (UBL) and Energy Conservative Fund

(Enercon). The facility with UBL amounting to Rs. 50 million is secured against first charge by way of hypothecation over

un-encumbered lease assets and related receivables and it carries mark-up at the rate of 3 months Kibor plus 1.50% per

annum (31 December 2010: Nil) with no floor and cap. Tenure of the loan is 2 years and is repayable in quarterly

installments.

The facility with Enercon is under an agreement whereby they have agreed to provide funds to SMEL for granting lease /

finance facility to its customers for procuring and using energy efficient equipments. The facility carries mark-up at the

rate of 5% per annum (31 December 2010: Nil) payable on quarterly basis subject to the condition that SMEL will

provide lease / finance facility to its customers at a preferential mark-up rate.

SME Bank Limited



19. LIABILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

(Rupees in '000)

Not later than one year 3,377 1,030 2,347 2,799 1,005 1,794

14,457 791 13,666 14,904 1,329 13,575

Over five years - - - - - -

17,834 1,821 16,013 17,703 2,334 15,369

Note 2011 2010

Restated

20. OTHER LIABILITIES (Rupees in '000)

Mark-up/ return/ interest payable in local currency 53,844 44,517

Unearned commission on guarantees 2,111 2,885

Accrued expenses 20,102 18,313

Income tax payable 23,045 30,367

Accounts payable 419 4,845

Sundry creditors 20.1 121,028 109,063

Payable to NBP 12.2 2,236 1,350

Branch adjustment account 856 186

Industrial Credit for Rural Women - Promotional Fund 20.2 - -

Payable against employees' benefit plans

Defined benefit pension

The Bank 2,660 1,377

Defined benefit unfunded gratuity scheme

The Bank 34,442 31,362

SMEL 4,109 3,364

Unfunded compensated absences

The Bank 73,599 70,561

SMEL 1,267 922

Payable on termination/maturity of lease 663 456

Security deposits against lease 280 280

Employees' VSS payments withheld 20.3 18,086 18,410

Payable to Equity Participation Fund - unsecured 3,263 4,196

Income tax withheld payable 17,640 17,452

Others 8,477 3,489 388,127 363,395

20.1

20.2

20.3

This includes amount of Rs. 90.6 million payable either to SBP or FBR on VSS payments on finalization of tax audit

of financial year 2009 which is currently in progress.

December 31, 2011

Minimum

lease

payments

Financial

charges for

future

periods

Principal

outstanding

Employees VSS payments of Rs. 18.023 million has been withheld due to legal cases pending in the courts against

employees filed by the Bank and customers.

Later than one year and not

later than five years

This represents liability against vehicle lease agreements with leasing companies. Monthly lease rentals are payable

including financial charges at rates ranging between 13.50% and 23.00% (2010: 13.50% and 16.70%) per annum,

which have been used as discounting factor to determine present value of minimum lease payments. The purchase

option is available with the Bank at the time of payment of the last installment or surrender of deposit money under

the lease agreements.

At the time of amalgamation of RDFC and SBFC with the Bank, an amount of Rs. 30.851 million was included in

other liabilities. Pursuant to the Board of Directors decision dated March 05, 2011, this amount being not a liability of

the Bank, has been taken to equity restating the comparative figures. This has resulted in decrease in other liabilities of

the Group as at December 31, 2009 by Rs. 30.851 million with corresponding decrease in accumulated loss at

December 31, 2009 by the same amount.

Minimum

lease

payments

December 31, 2010

Principal

outstanding

Financial

charges for

future

periods

SME Bank Limited



21. SHARE CAPITAL

21.1 Authorized Capital

2011 2010 2011 2010

(Rupees in '000)

1,000,000,000 1,000,000,000 Ordinary shares of Rs. 10 each 10,000,000 10,000,000

21.2 Issued, subscribed and paid up capital

2010 2009 Ordinary shares

152,853,153 152,853,153 Fully paid in cash 1,528,532 1,528,532

50,000,000 50,000,000 Issued as bonus shares 500,000 500,000

36,397,547 36,397,547 Issued for consideration other than cash 363,975 363,975

239,250,700 239,250,700 2,392,507 2,392,507

Number of

21.3 Break-up of share capital is as follows: shares %

Federal Government 224,615,978 93.89 2,246,160 2,246,160

National Bank of Pakistan 6,121,095 2.56 61,211 61,211

United Bank Limited 3,975,003 1.66 39,750 39,750

Habib Bank Limited 1,987,501 0.83 19,875 19,875

MCB Bank Limited 1,490,619 0.62 14,906 14,906

Allied Bank Limited 774,351 0.32 7,744 7,744

Industrial Development Bank of Pakistan 286,146 0.12 2,861 2,861

Directors 7 - - -

239,250,700 100 2,392,507 2,392,507

22. RESERVES Statutory Un-appropriated 2011 2010

Reserve loss (Rupees in '000)

Balance at beginning of the year 227,019 7,641 (442,362) (207,702) 34,028

- - - - 30,851

- - - - 11,699

227,019 7,641 (442,362) (207,702) 76,578

Loss for the year - - (208,234) (208,234) (284,280)

Balance at end of the year (Restated) 227,019 7,641 (650,596) (415,936) (207,702)

Reserve

against future

losses

Transferred from other liabilities -

(note 20.2)

Transferred from other assets - (note

15.3)

SME Bank Limited



22.1

22.2

22.3

23. DEFICIT ON REVALUATION OF ASSETS 2011 2010

(Rupees in '000)

(Deficit)/Surplus on revaluation of available-for-sale securities

Federal Government securities

- Market Treasury Bills (MTBs) 2,134 (83)

- Pakistan Investment Bonds (PIBs) (55,359) (156,867)

(53,225) (156,950)

Fully paid up ordinary shares/units

- Listed companies/mutual funds 5,339 9,612

Term Finance Certificates, Debentures, Bonds and

Participation Term Certificates

- Listed TFCs (6) (260)

(47,891) (147,598)

Non-controlling interest (49) (1,029)

(47,940) (148,627)

Reserves as at December 31, 2011 include Rs. 374,873 thousand (December 31, 2010: Rs. 226,312 thousand) in respect of Forced

Sale Value (FSV) of mortgaged residential, commercial, industrial properties (land and building only) held as collateral against non-

performing advances allowed under BSD circular No 1 of 2011 dated October 21, 2011 and referred in note 12.5.1 above.

Reserves to that extent are not available for payment of cash or stock dividend.

The share premium represented non-controlling interest and has therefore been reclassified to non-controlling interest under

reserves. This change has been made retrospectively and accordingly comparative figures have been restated. This change has no

impact on the consolidated unappropriated loss.

Reserve against future losses represents amounts set aside in view of the risks associated with the economic cyclical nature of the

business and is recognised as an appropriation of retained earnings. Any credits resulting from the reduction of such amounts

result in an increase in unappropriated profit and are not included in the determination of profit or loss for the period. The

amount to be set aside against future losses is determined at the rate of 0.5 percent of the outstanding balance of the regular

portfolio of leases and loans and receivables as at each period end.

SME Bank Limited



2011 2010

24. CONTINGENCIES AND COMMITMENTS (Rupees in '000)

24.1 Transaction-related contingent liabilities

Guarantees in favour of:

Government 151,051 71,156

Others 96,231 90,411

24.2 Other Contingencies

a)

24,972 24,972

b)

49,800 49,800

c)

15,000 23,800

d)

612,707 612,707

.e)

- 9,939

f) 85,570 90,800

24.3 Commitments in respect of forward lending

Commitments to extend credit 206,275 243,700

Commitments for lease disbursement 19,418 3,100

24.4 Commitments for the acquisition of operating fixed assets 2,213 680

24.5 Commitments against repo/reverse repo transactions

Purchase and resale agreements - 33,445

Sale and repurchase agreements 2,127,535 1,371,750

24.6 Other commitments

Undrawn facilities 266,798 201,747

24.7 Bills for collection

Payable in Pakistan 1,249 2,076

Back benefits and claims of staff/employees under litigation.

Adjustment of loan guarantee against borrowing from IDBP repaid in prior

years, disputed by IDBP.

Claims not acknowledged as debt from various borrowers for loss sustained

due to non-disbursement.

Damages claimed by an ex-employee of the than RDFC involved in Ravi

Securities (Pvt) Limited and Taas Securities (Pvt) Limited affairs and a

director of Ravi Securities (Pvt) Limited and Taas Securities (Pvt) Limited

not acknowledged as debt

Damages claim by borrower for delay in recording repayments received

from borrower, not acknowledged as debt.

Tax demands of Rs. 612.707 million raised by the Income Tax Authorities

related to VSS staff cost (tax year-2005) has been decided in favour of the

Bank. However tax authorities has filed appeal before ATIR against the

decision of the Income Tax Commissioner. Management strongly believes

and expects favourable outcome and therefore no provision has been made

for this effect in the financial statements.

SME Bank Limited



2011 2010

25. MARK-UP/ RETURN/ INTEREST EARNED Note (Rupees in '000)

On loans and advances to

Customers

Extended by:

Defunct RDFC - 5,219

Defunct SBFC - 4,548

The Group 333,756 319,515

Mark up on investment in finance lease 44,179 72,973

377,935 402,255

Employees 6,337 6,515

384,272 408,770

On investments in

Available for sale securities 271,882 233,993

Held to maturity securities 45,537 590

317,419 234,583

On deposits with financial institutions 361 1,252

On securities purchased under resale agreements 1,520 248

On call money lending 24,620 2,668

728,192 647,521

26. MARK-UP/ RETURN/ INTEREST EXPENSED

Deposits 225,135 173,129

Borrowings 202,971 174,843

SBP Refinance Scheme 2,224 -

Lease finance charges 370 190

Brokerage and commission 787 487

Bank charges 1,432 2,083

432,919 350,732

27. GAIN ON SALE OF SECURITIES

Mutual funds 5,957 12,298

28. OTHER INCOME

Gain on sale of property and equipment 474 14,959

Fee on fund managed by the Bank 875 13,956

Gain on termination of lease 185 145

Others 3,328 4,085

4,862 33,145

SME Bank Limited



2011 2010

29. ADMINISTRATIVE EXPENSES Note (Rupees in '000)

Salaries, allowances, etc. 340,872 331,145

Charge for defined benefit plans

- pension fund 60,992 27,619

- unfunded gratuity scheme 14,418 11,328

- unfunded compensated absences 17,320 27,439

Reversal of charge on benevolent fund (861) (54,199)

Non-executive directors' fees, allowances and other expenses 1,188 918

Rent, taxes, insurance, electricity, etc. 80,788 76,839

Legal and professional charges 14,409 18,192

Communications 7,288 6,812

Repairs and maintenance 13,571 13,735

Finance charges on leased assets 898 28

Stationery and printing 4,413 4,352

Advertisement and publicity 1,652 1,679

Auditors' remuneration 29.1 2,475 2,688

Depreciation 13.1 16,366 15,873

Amortization 13.2 1,694 1,700

Staff recovery costs - 2,533

Recruitment expenses 341 536

Travel and transport 5,935 5,327

Vehicle running and maintenance expenses 5,861 4,673

Entertainment 2,130 1,793

Training 754 646

Books, subscription and newspapers 3,795 3,815

Other expenses 29.2 12,311 11,640

608,610 517,111

29.1 Auditors' remuneration

Audit fee 1,350 1,350

650 717

Out-of-pocket expenses 475 621

2,475 2,688

29.2

2011 2010

30. OTHER CHARGES (Rupees in '000)

Penalties imposed by the State Bank of Pakistan 48 4,267

Special certifications, half yearly review and audit of consolidated

financial statements

This includes Security charges of Rs. 6,228,092 (2010: Rs. 5,986,143), NIFT charges of Rs. 1,356,180 (2010: Rs.

1,140,669) and SWIFT & TELEX charges of Rs. 361,411 (2010: Rs. 1,732,540).

SME Bank Limited



2011 2010

31. TAXATION

Current 31.2 8,461 10,111

Prior years 31.3 - (49,511)

Deferred - -

8,461 (39,400)

31.1 Relationship between tax expense and accounting loss

2011 2010

Loss before tax (216,570) (337,052)

Applicable tax rate 35% 35%

Tax on loss (Rupees) 75,800 117,968

Deferred tax asset not recognised (Rupees) (77,068) (122,123)

Tax effect of income taxed at lower rate (Rupees) 1,268 4,155

Minimum tax (Rupees) (8,461) (10,111)

Prior year adjustment (Rupees) - 49,511

(8,461) 39,400

31.2

31.3

2011 2010

32. CASH AND CASH EQUIVALENTS

Cash and balances with treasury banks 214,655 228,062

Balances with other banks 9,865 20,912

Call money lendings 250,000 -

474,520 248,974

33. STAFF STRENGTH

Permanent 205 199

Temporary/ on contractual basis 248 254

Daily wagers 1 2

Bank's own staff strength at the end of the year 454 455

Outsourced 78 68

Total staff strength 532 523

(Rupees in '000)

Provision for current year expenses is charged on minimum tax rate of 1% of the turnover due to tax losses of

the Group for the year ended December 31, 2011.

(Rupees in '000)

Numbers

(Rupees in '000)

This represents balance amount after providing for all tax liabilities including additional tax demand for the

prior years.

SME Bank Limited



34. EMPLOYEE BENEFIT PLANS

34.1 Defined benefit pension and gratuity plan

34.1.1 General description

The scheme entitles the members to:

-

-

34.1.2 The amounts recognised in the balance sheet are as follows:

Present value of defined benefit obligation 471,902 392,450

Fair value of plan assets (355,551) (259,279)

Deficit 116,351 133,171

Unrecognized actuarial loss (110,428) (127,443)

Unrecognized past service cost (3,263) (4,351)

Net liability 2,660 1,377

34.1.3 Movement in net asset recognised in the balance sheet

Opening balance 1,377 (182,064)

Expense for the year 60,992 27,619

Transfer to SME Bank Limited against VSS 2009 optees - 170,993

Contribution to the fund (59,709) (15,171)


34.1.4 The amounts recognised in the profit and loss account are as follows:

Current service cost 27,861 17,045

Interest cost 54,771 34,129

Expected return on plan assets (37,428) (24,643)

Actuarial loss recognized 14,700 -

Past service cost recognized 1,088 1,088


The expense has been recognized in administrative expenses in consolidated profit and loss account.

34.1.5 Actual return on plan assets 39,022 9,473

2011 2010

34.1.6 Changes in present value of defined benefit obligation

Present value of obligation at the beginning of the year 392,450 245,555



Benefits paid (existing pensioners) (2,459) (3,555)

Actuarial (gain) / loss (720) 99,276

Present value of obligation at the end of the year 471,902 392,450

34.1.7 Changes in fair value of plan assets

Fair value of opening plan assets 259,279 409,184

Expected return on plan assets 37,428 24,643

Contributions 59,709 15,171

Transfer to SME Bank Limited against VSS 2009 optees - (170,993)

Benefits paid (2,459) (3,555)

Actuarial gain/ (loss) 1,595 (15,171)

Fair value of closing plan assets 355,551 259,279

Bank operates an approved defined benefit pension and gratuity fund for all its permanent and regular employees. Contributions are made in

accordance with the actuarial recommendations.

Gratuity payable to members who have completed a minimum of 5 years of service and total service on retirement or cessation of service

or death is less than 10 years.

Pension payable to members who have completed a minimum of 10 years of service with the Bank on retirement at age of sixty years or

on completion of 25 years of service with the Bank or on permanent disability or on death during service.

(Rupees '000)

The expected return on plan assets is based on the market expectations and depends upon the asset portfolio of the Bank, at the beginning of

the period, for returns over the entire life of the related obligation.

(Rupees '000)

SME Bank Limited



34.1.8 Break-up of category of assets

(Rupees '000) % age (Rupees '000) % age

Market Treasury Bills (MTBs) 302,657 85% 57,825 22%

Term Deposits Receipts (TDRs) 52,852 15% 194,202 75%

Bank deposit accounts 42 0% 7,252 3%

355,551 100% 259,279 100%

34.1.9 Principal actuarial assumptions

2011 2010

Valuation discount rate - per annum 12.5% 14.0%

Expected return on plan assets - per annum 12.0% 13.0%

Salaries increase rate - per annum 12.5% 14.0%

Pension indexation rate 10.0% 10.0%

Mortality rate EFU 61-66 EFU 61-66

Average expected remaining working lives in years 6 7

34.1.10 Disclosure for current and previous four annual years

2011 2010 2009 2008 2007

Present value of obligation 471,902 392,450 342,592 342,592 293,103

Fair value of plan assets (355,551) (259,279) (345,070) (345,070) (286,310)

Deficit/ (surplus) 116,351 133,171 (2,478) (2,478) 6,793

Experience adjustments

on plan liabilities-loss/ (gain) (720) 99,276 27,348 1,702 (5,953)

Experience adjustments

on plan assets-gain/ (loss) 1,595 (15,171) 2,622 9,680 (2,655)

2011 2010

34.2 Defined benefit unfunded gratuity scheme 34,442 31,362



2011 2010


Unrecognized actuarial loss (8,075) (9,964)

Net liability 34,442 31,362

34.2.3 Movement in net liability recognised in the balance sheet

Opening balance of net liability 31,362 24,475


Benefits paid during the year (10,174) (2,377)

Closing balance of net liability 34,442 31,362




Actuarial loss recognised 530 28

13,254 9,264

The expense has been recognized in administrative expenses in consolidated profit and loss account.

2010

The Bank operates a defined benefit unfunded gratuity scheme for its contractual employees.

2011

Actuarial valuation is carried out annually. Latest actuarial valuation was carried out as at December 31, 2011 using Projected Unit Credit

Method. Significant actuarial assumptions used are as follows:

(Rupees '000)

(Rupees '000)

(Rupees '000)

SME Bank Limited



2011 2010

34.2.5 Movement in payable to defined benefit unfunded gratuity scheme




Benefits paid (10,174) (2,377)

Actuarial (gain) / loss (1,359) 6,904


34.2.6 Significant actuarial assumptions are as follows: 2011 2010

Discount factor - per annum 12.5% 14.0%

Salary increase rate - per annum 12.5% 14.0%



34.2.7 Disclosure for current and previous four annual periods

2011 2010 2009 2008 2007


Unrecognized actuarial gain (8,075) (9,964) (3,087) (3,609) (634)

34,442 31,362 24,475 20,675 16,338

34.3 Unfunded compensated absences



2011 2010

Discount factor - per annum 12.5% 14.0%




2011 2010



34.3.4 Movement in liability recognized in the balance sheet

Balance at beginning of the year 70,561 54,793


Benefits paid during the year (13,077) (10,723)

Balance at end of the year 73,599 70,561




Actuarial loss recognised 3,257 15,512


The expense has been recognized in administrative expenses in profit and loss account.

2011 2010

34.3.6 Movement in payable to defined benefit unfunded Compensated absences




Benefits paid (13,077) (10,723)

Actuarial loss 3,257 15,512


(Rupees '000)

The Bank provides compensated absences, an unfunded scheme, as per entitlement to all its permanent and contractual employees.

Actuarial valuation was carried out as at December 31, 2011 using Projected Unit Credit Method. Significant actuarial assumptions used were

as follows:

(Rupees '000)

(Rupees '000)

(Rupees '000)

SME Bank Limited




2011 2010 2009 2008 2007


34.4 Benevolent fund


34.4.2 Actuarial liability for active employees 6,347 2,143 8,490 4,746 1,499 6,245

Actuarial liability for beneficiaries 314 189 503 430 225 655

Total actuarial liability 6,661 2,332 8,993 5,176 1,724 6,900

Fair value of plan assets (7,557) (2,715) (10,272) (41,018) (20,512) (61,530)

Funding surplus (896) (383) (1,279) (35,842) (18,788) (54,630)

Asset to be recognized in balance sheet (896) (383) (1,279) (35,842) (18,788) (54,630)

Current service cost 123 299 423 286 116 403

Interest cost 291 833 1,124 725 241 966

Expected return on plan assets (339) (945) (1,285) (5,743) (2,872) (8,616)

75 187 262 (4,732) (2,515) (7,247)

34.4.3

Expense for the year 140 278 418 151 280 431

Funding surplus (896) (383) (1,279) (18,788) (35,842) (54,630)

(756) (105) (861) (18,637) (35,562) (54,199)

34.4.4 This is second year of valuation of benevolent fund, therefore the comparative figures for prior years are not applicable.

34.5


2011 2010

Discount rate - per annum 13.0% 14.5%



2011 2010

34.5.2 Reconciliation of provision for gratuity scheme


Unrecognised actuarial loss (300) (324)

4,109 3,364

Officers

Benevolent

Fund

Officers

Benevolent

Fund

Staff

Benevolent

Fund

2011 2010

The Bank also operates a contributory benevolent fund for all its eligible employees (defined benefit scheme).

Staff

Benevolent

Fund

(Rupees '000)

(Rupees '000)

TotalTotal

(Rupees '000)

SMEL operates an unapproved and unfunded gratuity scheme for all its permanent employees. The latest actuarial valuation of the gratuity

scheme was carried out as at December 31, 2011 using the Projected Unit Credit Method. The following significant assumptions were used

for valuation of the scheme:

Expected benevolent expense/ (income) for

the next one year commencing 01 January, 2012

The amount recognized in the profit and loss

account is as follows:

(Rupees '000)

(Rupees '000)

(Rupees '000)

SME Bank Limited



2011 2010

34.5.3 Movement in the statement of financial position liability

Balance at beginning of the year 3,364 2,408

Expense recognised during the year 1,164 1,032

Contribution made during the year (419) (76)

Balance at end of the year 4,109 3,364

34.5.4 Gratuity scheme expenses

Current services cost 599 583

Interest cost 565 422

Actuarial gain recognized during the year - 27

1,164 1,032


2011 2010 2009 2008 2007

Present value of defined benefit obligation 4,409 3,688 3,098 2,519 2,439

Fair value of plan assets - - - - -

Deficit 4,409 3,688 3,098 2,519 2,439

Experience adjustments on obligation 24 340 230 125 (1,038)

34.5.6 Expected actual expenses in respect of defined benefit scheme in the next financial year is Rs. 1.227 million.

(Rupees '000)

(Rupees '000)

SME Bank Limited



35. COMPENSATION OF DIRECTORS AND EXECUTIVES

2011 2010 2011 2010 2011 2010

Fees - - 596 556 - -

Managerial remuneration 2,209 4,680 - - 106,059 100,707

Charge for defined benefit plan 268 920 - - 16,137 12,899

Rent and house maintenance 889 840 - - 21,803 20,854

Utilities 133 72 - - 10,133 11,555

Medical 343 - - - 11,094 10,041

Conveyance - - - - 3,514 2,990

Leave fare assistance 207 250 - - 5,538 5,549

Bonus/ex-gratia - - - - - -

Others 1,062 880 592 362 27,179 21,453 5,110 7,642 1,188 918 201,456 186,048

Number of persons 2 1 8 7 123 117

35.1

36. FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value of the remaining financial assets and liabilities except fixed term loans, staff loans, non-performing

advances and fixed term deposits is not significantly different from the carrying amounts since such assets and

liabilities are short term in nature.

The fair value of fixed term loans, staff loans and fixed term deposits cannot be calculated with sufficient reliability

due to absence of current and active market for such assets / liabilities and reliable data regarding market rates for

similar instruments. The provision for non-performing advances has been calculated in accordance with the Bank's

accounting policy as stated in note 6.4. The maturity profile and effective rates are stated in note 40.2.3.

Directors Executives

(Rupees in '000)

The fair value of investments is based on quoted market prices and rates quoted at Reuters Pages (PKRV) with the

exception of unlisted securities.

Executives mean employees, other than the chief executive and directors, whose basic salary exceeds five hundred

thousand rupees in a financial year.

The remuneration of executives includes Rs. 39,573 thousand (December 2010: Rs. 29,584 thousand) relating to key

management personnel of the Group.

Group President

SME Bank Limited



37. SEGMENT DETAILS WITH RESPECT TO BUSINESS ACTIVITIES

The segment analysis with respect to business activity is as follows:

Trading & Commercial Other leasing Total

Sales Banking operations

Total income 346,884 466,725 15,997 829,606

Total expenses 197,741 789,674 58,761 1,046,176

Net income/ (loss) 149,143 (322,949) (42,764) (216,570)

Segment assets (gross) 4,018,480 8,238,704 933,185 13,190,369

Segment non performing loans - 5,580,338 357,484 5,937,822

Segment provision required 207,749 5,076,007 149,425 5,433,181

Segment liabilities 2,208,859 3,116,005 434,000 5,758,864

Segment Return on net Assets (ROA) (%) 3.91% -10.21% -5.46%

Segment cost of funds (%) 9.28% 7.46% 5.91%

Total income 291,831 301,834 43,793 637,458

Total expenses 195,218 705,943 73,349 974,510

Net income 96,613 (404,109) (29,556) (337,052)

Segment assets (gross) 2,741,249 8,223,077 1,080,054 12,044,380

Segment non performing loans - 5,623,404 371,737 5,995,141

Segment provision required 172,490 5,137,288 102,133 5,411,911

Segment liabilities 1,492,627 2,487,575 528,619 4,508,821

Segment Return on net Assets (ROA) (%) 3.43% -14.27% -3.02%

Segment cost of funds (%) 10.29% 6.53% 6.91%

Assumptions used:

-

-

- Unallocatable liabilities representing 5.39% (2010: 8.03%) of the total liabilities have been allocated to segments based on their

respective incomes.

December 31, 2010 (Restated)

December 31, 2011 (Rupees in '000)

Unallocatable administrative expenses have been allocated to segments based on their respective incomes except for the

depreciation expense which has been allocated on the annual basis of net book value of segment operating fixed assets.

Unallocatable assets representing 0.78% (2010: 0.77%) of the total assets have been allocated to segments based on their

respective incomes.

SME Bank Limited



38. RELATED PARTY TRANSACTIONS

The Group has related party relationship with its directors, executive officers and employees funds.

Details of balances outstanding at year end and transactions with related parties are as follows:

2011 2010

Balances outstanding 5,723 10,006

Equity Participation Fund

Amount payable to fund 3,263 4,196

Executive officers:

Loan to executives 89,493 91,522

Advances to executives of SMEL 242 183

Transactions during the year

Payment/ contribution to employees' funds 90,773 29,613

Charge for the year relating to employees' funds 92,327 66,212

Fee on Equity Participation Fund managed by the Bank 875 13,956

Payments made on behalf of Equity Participation Fund 58 46

(Rupees in '000)

Remuneration of chief executive officer and executives and fee paid to directors is disclosed in note 35 to the financial

statements.

SME Bank Limited



39. CAPITAL ADEQUACY

2011 2010

Regulatory capital base (Rupees in '000)

Tier I capital

Shareholders capital/assigned capital 2,392,507 2,392,507

Reserves 234,660 235,636

Non-controlling interest. 69,693 87,470

Unappropriated/unremitted profits (net of losses) (650,596) (442,362)

2,046,264 2,273,251

Less: Adjustments

Deficit on revaluation of available for sale investments (55,898) (159,399)

Total tier I capital 1,990,366 2,113,852

Tier II capital 2,670 3,685

Eligible tier III capital - -

Total regulatory capital (a) 1,993,036 2,117,537

Risk-weighted exposures

Book Value Risk Adjusted Book Value Risk Adjusted

Value Value

Credit risk

Balance sheet items:

Cash and other liquid assets 224,520 1,973 248,974 4,184

Investments 3,827,667 627,214 2,680,334 317,302

Loans and advances 3,349,078 1,840,230 3,307,599 1,779,440

Fixed assets 135,321 135,321 132,586 133,302

Deferred tax assets - - - -

Other assets 220,602 184,625 262,976 189,936

7,757,188 2,789,363 6,632,469 2,424,164

Off balance sheet items

Loan repayment guarantees 247,282 96,231 233,187 110,716

247,282 96,231 233,187 110,716

Credit risk-weighted exposures 8,004,470 2,885,594 6,865,656 2,534,880

Market risk

Market risk-weighted exposures - - - -

Total risk-weighted exposures (b) 2,885,594 2,534,880

Capital adequacy ratio [ (a) / (b) x 100 ] 69.07% 83.54%

State Bank of Pakistan (SBP) has granted exemption to the Bank vide letter No. BSD/SU-21/220/1624/2007 dated

June 08, 2007 from computing capital adequacy ratio under BASEL II till restructuring/privatization. Accordingly,

the Bank computes capital adequacy ratio under BASEL I.

(Rupees '000)

The risk weighted assets to capital ratio, calculated in accordance with the State Bank's guidelines on capital

adequacy is as follows:

2011 2010

SME Bank Limited



40. RISK MANAGEMENT

40.1 Credit risk

40.1.1 Segment by class of business

Contingencies and

Commitments

(Rupees Percent (Rupees Percent (Rupees Percent

in '000) in '000) in '000)

Chemical and pharmaceuticals 110,824 1% 5,465 0% - -

Agriculture, forestry, -

hunting and fishing 262,944 3% - - - -

Mining & quarrying 9,053 0% - - - -

Textile 544,249 6% 75,390 3% - -

Cement 21,280 0% 33,186 1% - -

96,048 1% 1,895 0% - -

220,143 3% 21,051 1% - -

Financial - - 328,500 11% 2,127,535 64%

Insurance - - 620 0% - -

73,125 1% 325 0% - -

228,990 3% 41,369 1% - -

215,958 2% 48,668 2% - -

Wholesale and trade 1,859,180 21% - - - -

169,582 2% 40,817 1% - -

Individuals 2,133,388 25% 1,401,277 47% 558,643 20%

Services 170,101 2% 2,907 0% 15,000 1%

Government - - - - 763,758 7%

Others 2,540,906 29% 997,722 33% 193,883 9%

8,655,771 100% 2,999,192 100% 3,658,819 100%

40.1.2 Segment by sector

Public/ Government - - 819,207 27% 763,758 21%

Private 8,655,771 100% 2,179,985 73% 2,895,061 79%

8,655,771 100% 2,999,192 100% 3,658,819 100%

Transport, storage, and

communication

Construction

Footwear and leather garments

Credit risk represents the accounting loss that would be recognised at the reporting date if counter parties failed

completely to perform as contracted. The Bank is not exposed to major concentration of credit risk. Written

procedures for credit and risk management functions have been developed and implemented. Credit evaluation

system comprise of well designed loan approval and review responsibilities and it is ensured that Bank's credit-

granting activities conform to the established strategy, prudential regulations and SBP instructions are strictly

followed. To ensure that credit granting activities are adequately diversified, besides fixing limits on individual

credit, it is ascertained that there is no concentration in a particular industry or economic sector, geographical

region and specific product. Special attention is placed on such non-performing loans and a Special Recovery

Division follows up and recovers all such loans. Recovery against certain specific non-performing loans has been

outsourced to independent Recovery Service Providers.

Automobile and transportation

equipment

Electronics and electrical

appliances

Power (electricity), gas, water

and sanitary

2011

Deposits Advances (Gross)

SME Bank Limited



Segment by class of business

(Rupees Percent (Rupees Percent (Rupees Percent

in '000) in '000) in '000)

Chemical and pharmaceuticals 133,273 2% 12,800 0% - -

Agriculture, forestry,

hunting and fishing 246,832 3% 2 0% - -

Mining & quarrying 9,053 0% - - - -

Textile 452,017 5% 69,366 3% 650 0%

Cement 21,284 0% 11,670 0% - -

Sugar - - - - - -

120,247 1% 21,799 1% - -

285,568 3% 48,598 2% - -

Financial - 0% 269,883 10% 1,370,561 49%

Insurance - - 194 0% - -

72,798 1% 6,902 0% - -

239,579 3% 42,849 2% - -

290,321 3% 80,910 3% - -

Wholesale and trade 1,867,336 21% - - - -

Exports/ Imports - - - - - -

114,787 1% 28,960 1% 500 0%

Individuals 2,176,712 25% 1,191,505 45% 449,051 16%

Services 145,814 2% 2,732 0% 25,750 1%

Government - - - - 735,178 27%

Others 2,568,975 29% 863,778 33% 189,803 7%

8,744,596 100% 2,651,948 100% 2,771,493 100%

Segment by sector

Public/ Government - - 728,262 27% 735,178 27%

Private 8,744,596 100% 1,923,686 73% 2,036,315 73%

8,744,596 100% 2,651,948 100% 2,771,493 100%

2010

Advances (Gross) DepositsContingencies and

Commitments

Transport, storage and

communication

Footwear and leather garments

Automobile and transportation

equipment

Electronics and electrical

appliances

Construction

Power (electricity), gas, water

and sanitary

SME Bank Limited



40.1.3 Details of non-performing advances and specific provisions by class of business segment

Specific Specific

Provisions Provisions

Held Held

Chemical and pharmaceuticals 80,848 71,858 85,621 72,863

Agriculture, forestry, hunting

and fishing 236,921 236,865 237,235 237,772

Mining & quarrying 9,053 9,053 9,053 9,053

Textile 404,927 351,969 303,487 265,147

Cement 21,280 21,280 21,284 21,284

Sugar - - - -

Footwear and leather garments 91,544 83,858 107,778 88,630

Automobile and transportation equipment 162,061 140,110 201,856 179,538

Electronics and electrical appliances 68,818 64,782 68,908 65,320

Construction 58,731 41,607 48,551 41,341

Wholesale and trade 1,521,302 1,492,252 1,560,646 1,532,244

Transport, storage and communication 67,358 52,632 7,510 3,566

Individuals 1,782,098 1,676,126 1,769,187 1,696,741

Services 81,445 73,632 83,604 74,322

Others 1,307,290 986,593 1,460,409 1,136,227

5,937,822 5,306,693 5,995,141 5,436,997

40.1.4 Details of non-performing advances (0.5098) -

and specific provisions by sector

Public/ Government - - - -

Private 5,937,822 5,306,693 5,995,141 5,436,997

5,937,822 5,306,693 5,995,141 5,436,997

2011 2010

(Rupees in '000)

Classified

Advances

Classified

Advances

30,012 12,949

Power (electricity), gas, water and

sanitary 44,146 4,076

SME Bank Limited



40.1.5 GEOGRAPHICAL SEGMENT ANALYSIS

Contingencies

and

commitments

Pakistan (216,570) 7,757,188 1,998,324 3,658,819

Asia Pacific (including South Asia) - - - -

Europe - - - -

United States of America and Canada - - - -

Middle East - - - -

Others - - - -

(216,570) 7,757,188 1,998,324 3,658,819

Contingencies

and

commitments

Pakistan (337,052) 6,632,469 2,123,648 2,771,493

Asia Pacific (including South Asia) - - - -

Europe - - - -

United States of America and Canada - - - -

Middle East - - - -

Others - - - -

(337,052) 6,632,469 2,123,648 2,771,493

40.2 Market risk

Total assets

employees

Loss before

taxation

Total assets

employed

Market risk is the risk that the value of on and off-balance sheet positions of the Bank will be adversely affected

by movements in interest rates, foreign exchange rates and equity prices resulting in a loss to earnings and

capital. The Bank's interest rates exposure comprises those originating from investing and lending activities. The

Asset and Liability Committee of the Bank monitors and manages the interest rate risk with the objective of

limiting the potential adverse effect on the profitability of the Bank.

Net assets

employed

(Rupees in '000)

Loss before

taxation

2010

2011

(Rupees in '000)

Net assets

employed

SME Bank Limited



40.2.1 Foreign exchange risk

Presently the Bank does not deal in foreign exchange.

Net foreign

currency

exposure

(Rupees in '000)

Pakistan rupee 7,757,188 5,758,864 - -

United States dollar - - - -

Great Britain pound - - - -

Deutsche mark - - - -

Japanese yen - - - -

Euro - - - -

Other currencies

7,757,188 5,758,864 - -

Net foreign

currency

exposure

(Rupees in '000)

Pakistan rupee 6,632,469 4,508,821 - -

United States dollar - - - -

Great Britain pound - - - -

Deutsche mark - - - -

Japanese yen - - - -

Euro - - - -

Other currencies

6,632,469 4,508,821 - -

40.2.2 Equity position risk

AssetsOff-balance

sheet items

Assets LiabilitiesOff-balance

sheet items

The Bank's exposure in equity market is classified in available for sale category with the intent to earn profit

based on fundamentals.

2010

Liabilities

2011

SME Bank Limited



40.2.3 Mismatch of interest rate sensitive assets and liabilities

Effective Non-interest Yield/ bearing

Interest Total financialrate instruments

On-balance sheet financial instruments

AssetsCash and balances with treasury banks 214,655 - - - - - - - - - 214,655 Balances with other banks 1.61% 9,865 6,025 979 428 180 206 - - - - 1,526 Lending to financial institutions 13.46% 800,000 400,000 400,000 - - - - - - - - Investments 11.74% 3,027,667 153,051 509,112 759,300 1,203,638 393,811 6,215 - 2,540 - - Advances 13.19% 3,349,078 936,796 226,773 698,761 674,215 412,593 198,025 119,484 67,277 15,154 - Other assets 191,779 - - - - - - - - - 191,779

7,593,044 1,495,872 1,136,864 1,458,489 1,878,033 806,610 204,240 119,484 69,817 15,154 407,960 LiabilitiesBills payable 183,863 - - - - - - - - - 183,863 Borrowings 12.90% 2,171,669 1,394,613 692,407 8,971 21,845 33,829 8,054 11,950 - - - Deposits and other accounts 9.04% 2,999,192 587,240 296,882 485,157 338,509 163,998 43,200 2,150 632,389 - 449,667 Sub-ordinated loans - - - - - - - - - - - Loan from the State Bank of Pakistan - - - - - - - - - - - Liabilities against assets subject to finance lease 15.86% 16,013 194 388 13,170 291 985 985 - - - - Other liabilities 228,118 - - - - - - - - - 228,118

5,598,855 1,982,047 989,677 507,298 360,645 198,812 52,239 14,100 632,389 - 861,648 On-balance sheet gap 1,994,189 (486,175) 147,187 951,191 1,517,388 607,798 152,001 105,384 (562,572) 15,154 (453,688)

Off-balance sheet financial instruments

Commitments to extend credit 206,275 206,275 - - - - - - - - - Commitments against reverse repo lending - Commitments against repo borrowing 2,127,535 1,406,621 720,914 - - - - - - - -

Off-balance sheet gap 2,333,810 1,612,896 720,914 - - - - - - - -

Total Yield/ Interest Risk Sensitivity Gap (2,099,071) (573,727) 951,191 1,517,388 607,798 152,001 105,384 (562,572) 15,154 -

Cumulative Yield/ Interest Risk Sensitivity Gap (2,099,071) (2,672,797) (1,721,606) (204,218) 403,580 555,581 660,965 98,393 113,547 -

40.2.3.1 Reconciliation of assets and liabilities exposed to yield/ interest rate risk with total assets and liabilities

(Rupees '000) (Rupees '000)

Total financial assets as per note 40.2.3 7,593,044 Total financial liabilities as per note 40.2.3 5,598,855 Add non-financial assets: Add non-financial liabilities: Operating fixed assets 135,321 Other liabilities 160,009 Deferred tax assets - Other assets 28,823 Balance as per Balance Sheet 7,757,188 Balance as per Balance Sheet 5,758,864

40.2.3.2 Yield risk is the risk of decline in earnings due to adverse movement of the yield curve.

40.2.3.3 Interest rate risk

Over 2 to 3

years

Over 3 to 5

years

Over 5 to 10

years

Above 10

years

2011Exposed to Yield/Interest risk

(Rupees in '000)

Interest rate risk is the risk that the value of financial instrument will fluctuate due to changes in the market interest rates. Out of total financial assets of Rs. 7,593,044 thousand (2010: Rs. 6,408,523 thousand), the financial assets which

were subject to interest rate risk amounted to Rs. 7,185,084 thousand (2010: Rs. 5,997,398 thousand). Investments and other assets amounting to Rs. 3,007,833 thousand (2010: Rs. 2,370,309 thousand) respectively are guaranteed by the

Government of Pakistan. An Assets Liability Committee of the Bank meets periodically and ensures that the investments are made in an appropriate manner to mitigate any interest rate and liquidity risk.

Over 1 to 3

months

Over 3 to 6

months

Over 6

months to 1

year

Over 1 to 2

years

Upto 1

month

SME Bank Limited

Notes to the Financial Statements


Mismatch of interest rate sensitive assets and liabilities

Effective Non-interest Yield/ bearingInterest Total financial

rate instrumentsOn-balance sheet financial instruments

AssetsCash and balances with treasury banks 228,062 - - - - - - - - - 228,062 Balances with other banks 3.45% 20,912 9,465 - - - - - - - - 11,447 Lending to financial institutions - - - - - - - - - - - Investments 11.53% 2,680,334 423,490 208,470 - 607,360 1,056,805 375,611 8,598 - - - Advances 12.50% 3,307,599 722,622 240,670 481,003 664,997 628,509 408,124 77,297 66,537 17,840 - Other assets 171,616 - - - - - - - - - 171,616

6,408,523 1,155,577 449,140 481,003 1,272,357 1,685,314 783,735 85,895 66,537 17,840 411,125 LiabilitiesBills payable 40,505 - - - - - - - - - 40,505 Borrowings 12.41% 1,437,604 582,628 808,175 20,824 20,393 5,584 - - - - - Deposits and other accounts 2,651,948 1,028,497 291,897 253,285 189,854 11,564 1,058 - - - 875,793 Sub-ordinated loans - - - - - - - - - - - Loan from the State Bank of Pakistan - - - - - - - - - - - Liabilities against assets subject to finance lease 14.52% 15,369 255 678 276 1,284 1,318 1,543 10,015 - - - Other liabilities 204,639 - - - - - - - - - 204,639

4,350,065 1,611,380 1,100,750 274,385 211,531 18,466 2,601 10,015 - - 1,120,937

On-balance sheet gap 2,058,458 (455,803) (651,610) 206,618 1,060,826 1,666,848 781,134 75,880 66,537 17,840 (709,812)

Off-balance sheet financial instruments

Commitments to extend credit 145,050 145,050 - - - - - - - - -

Off-balance sheet gap 145,050 145,050 - - - - - - - - -

Total Yield/ Interest Risk Sensitivity Gap (600,853) (651,610) 206,618 1,060,826 1,666,848 781,134 75,880 66,537 17,840 -

Cumulative Yield/ Interest Risk Sensitivity Gap (600,853) (1,252,462) (1,045,843) 14,983 1,681,831 2,462,965 2,538,845 2,605,382 2,623,222 -

Reconciliation of assets and liabilities exposed to yield/ interest rate risk with total assets and liabilities

(Rupees '000) (Rupees '000)

Total financial assets as per note 41.2.3 6,408,523 Total financial liabilities as per note 41.2.3 4,350,065 Add non-financial assets: Add non-financial liabilities: Operating fixed assets 132,586 Other liabilities 158,756 Deferred tax assets - Other assets 91,360 Balance as per Balance Sheet 6,632,469 Balance as per Balance Sheet 4,508,821

Yield risk is the risk of decline in earnings due to adverse movement of the yield curve.

Interest rate risk

Over 2 to 3

years

Over 3 to 5

years

Over 5 to 10

years

Above 10

years

(Rupees in '000)

Interest rate risk is the risk that the value of financial instrument will fluctuate due to changes in the market interest rates. Out of total financial assets of Rs. 6,408,523 thousand (2009: Rs. 5,889,940 thousand), the financial assets which

were subject to interest rate risk amounted to Rs. 5,997,398 thousand (2009: Rs. 5,521,523 thousand). Investments and other assets amounting to Rs. 2,370,309 thousand (2009: Rs. 2,411,238 thousand) respectively are guaranteed by the

Government of Pakistan. An Assets Liability Committee of the Bank meets periodically and ensures that the investments are made in an appropriate manner to mitigate any interest rate and liquidity risk.

2010Exposed to Yield/Interest risk

Upto 1

month

Over 1 to 3

months

Over 3 to 6

months

Over 6

months to 1

year

Over 1 to 2

years

SME Bank LimitedNotes to the Consolidated Financial StatementsFor the year ended December 31, 2011

40.3 Liquidity Risk

40.3.1 Maturities of Assets and Liabilities

Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5Upto 1 to 3 to 6 months to 1 to 2 to 3 to 5 to 10 Above

Total month months months year years years years years 10 years (Rupees in '000)

Assets Cash and balances with treasury banks 214,655 188,879 4,675 - - - - - 21,101 - Balances with other banks 9,865 7,551 979 428 180 206 - - 521 - Lending to financial institutions 800,000 400,000 400,000 - - - - - - - Investments 3,027,667 153,051 509,112 759,300 1,203,638 393,811 6,215 - 2,540 - Advances 3,349,078 936,796 226,773 698,761 674,215 412,593 198,025 119,484 67,277 15,154 Operating fixed assets 135,321 1,404 2,611 3,755 6,632 11,356 9,324 6,039 4,156 90,044 Deferred tax assets - - - - - - - - - - Other assets 220,602 65,720 7,066 2,801 914 54 8,470 180 135,397 -

7,757,188 1,753,401 1,151,216 1,465,045 1,885,579 818,020 222,034 125,703 230,992 105,198

Liabilities Bills payable 183,863 183,863 - - - - - - - -

Borrowings 2,171,669 1,394,613 692,407 8,971 21,845 33,829 8,054 11,950 - -

Deposits and other accounts 2,999,192 1,036,907 296,882 485,157 338,509 163,998 43,200 2,150 632,389 -

Sub-ordinated loans - - - - - - - - - -

Liabilities against assets subject to finance lease 16,013 296 596 613 975 2,529 11,004 - - - Deferred tax liabilities - - - - - - - - - - Other liabilities 388,127 237,570 1,593 2,709 2,261 52 - - 143,942 -

5,758,864 2,853,249 991,478 497,450 363,590 200,408 62,258 14,100 776,331 -

Net assets 1,998,324 (1,099,848) 159,738 967,595 1,521,989 617,612 159,776 111,603 (545,339) 105,198

Share capital 2,392,507 Reserves 234,660 Unappropriated profit (650,596) Non-controlling interest 69,693 Deficit on revaluation of assets (47,940)

1,998,324

40.4 Operational Risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and system or from external events.

Liquidity risk reflects an enterprise's inability in raising funds to meet commitments. In order to avoid liquidity risk, the Bank has a policy to maintain sufficient liquidity. To closely

watch liquidity position, the Assets Liability Committee meets periodically to ensure that adequate liquidity is maintained to meet any future financial obligation.

Operational risks are managed through Bank-wide or line of business specific policies and procedures, controls and monitoring tools. Examples of these include personnel

management practices, data reconciliation processes, fraud management units, transaction processing monitoring and analysis and business continuity planning.

2011

SME Bank LimitedNotes to the Financial StatementsFor the year ended December 31, 2011

Over 1 Over 3 Over 6 Over 1 Over 2 Over 3 Over 5Upto 1 to 3 to 6 months to 1 to 2 to 3 to 5 to 10 Above

Total month months months year years years years years 10 years (Rupees in '000)

Assets Cash and balances with treasury banks 228,062 203,035 4,539 - - - - - 20,488 - Balances with other banks 20,912 16,884 1,704 745 313 359 - - 907 - Lending to financial institutions - - - - - - - - - - Investments 2,680,334 423,490 208,470 - 607,360 1,056,805 375,611 8,598 - Advances 3,307,599 722,622 240,670 481,003 664,997 628,509 408,124 77,297 66,537 17,840 Operating fixed assets 132,586 1,378 2,558 3,679 6,497 11,126 9,135 5,917 4,072 88,224 Deferred tax assets - - - - - - - - - - Other assets 262,976 54,983 8,188 4,487 183 - 818 1,133 193,184 -

6,632,469 1,422,392 466,129 489,914 1,279,350 1,696,799 793,688 92,945 285,188 106,064

Liabilities Bills payable 40,505 40,505 - - - - - - - -

Borrowings 1,437,604 582,628 808,175 20,824 20,393 5,584 - - - -

Deposits and other accounts 2,651,948 1,494,162 305,969 344,898 214,746 120,713 171,460 - - -

Sub-ordinated loans - - - - - - - - - -

Liabilities against assets subject - to finance lease 15,369 255 678 276 1,284 1,318 1,543 10,015 - - Deferred tax liabilities - - - - - - - - - - Other liabilities 363,395 218,816 1,362 3,947 2,247 56 - - 136,967 -

4,508,821 2,336,366 1,116,184 369,945 238,670 127,671 173,003 10,015 136,967 -

Net assets 2,123,648 (913,974) (650,055) 119,969 1,040,680 1,569,128 620,685 82,930 148,221 106,064

Share capital 2,392,507 Share premium - Reserves 234,660 Unappropriated profit (442,362) Non-controlling interest 87,470 Deficit on revaluation of assets (148,627)

2,123,648

2010

SME Bank Limited



41. SMEBL Employees Empowerment Trust

The Scheme, developed in compliance with the stated GoP policy of empowerment of employees of

State Owned Enterprises need to be accounted for by the covered entities, including the Bank, under the

provisions of amended International Financial Reporting Standards 2 Share Based Payments (IFRS 2).

However, keeping in view the difficulties that may be faced by the entities covered under the Scheme, the

Securities & Exchange Commission of Pakistan on receiving representations from some of entities

covered under the Scheme and after having consulted the Institute of Chartered Accountants of Pakistan

vide their letter Ref: CAIDTS/PS&TAC/2011-2036 dated February 02, 2011 has granted exemption to

such entities from the application of IFRS 2 to the Scheme. However, had the exemption not been

granted, the staff costs of the Bank for the year would have been higher by Rs. 32.745 million (December

31, 2010: 32.745 million), net loss for the year before and after taxation would have been higher by Rs.

32.745 million (December 31, 2010: Rs. 32.745 million), unappropriated loss at the year end would have

been higher by Rs. 77.932 million (December 31, 2010: Rs. 45.188 million) and reserves would have been

higher by Rs. 77.93 million (December 31, 2010: Rs. 45.188 million), hence, there would have been no

impact on net equity. Further, loss per share would have been higher by Rs. 0.137 per share (December

31, 2010: Rs 0.137).

On August 14, 2009, the Government of Pakistan (GoP) launched Benazir Employees' Stock Option

Scheme ("the Scheme") for employees of certain State Owned Enterprises (SOEs) and non-State Owned

Enterprises where GoP holds significant investment (non-SOEs). The scheme is applicable to permanent

and contractual employees who were in employment of these entities on the date of launch of the

Scheme, subject to completion of five years vesting period by all contractual employees and by permanent

employees in certain instances.

The Scheme provides for a cash payment to employees on retirement or termination based on the price of

shares of respective entities. To administer this scheme, GoP shall transfer 12% of its investment in such

SOEs and non-SOEs to a Trust Fund to be created for the purpose by each of such entities. The eligible

employees would be allotted units by each Trust Fund in proportion to their respective length of service

and on retirement or termination such employees would be entitled to receive such amounts from Trust

Funds in exchange for the surrendered units as would be determined based on market price for listed

entities or breakup value for non-listed entities. The shares relating to the surrendered units would be

transferred back to GoP.

The scheme also provides that 50% of dividend related to shares transferred to the respective Trust Fund

would be distributed amongst the unit holder employees. The balance 50% dividend would be transferred

by the respective Trust Fund to the Central Revolving Fund managed by the Privatisation Commission of

Pakistan for payment to employees against surrendered units. The deficit, if any, in Trust Funds to meet

the re-purchase commitment would be met GoP.

Ministry of Finance (MOF) Government of Pakistan (GoP) executed a “Deed of Trust” on 10th day of

June 2010 for creating and regulating a trust known as the SMEBL Employees Empowerment Trust (the

trust) and vest the same in a Board of Trustees. According to Para 2 sub para (1b) of the Deed of Trust,

12% shares of the Bank out of the total shareholding of GoP are to be transferred by MOF to the trust.

Management has requested MOF for transfer of 12% shares out of the GoP shareholding in the Bank and

forward Share Transfer Deed duly signed by the competent authority. The Ministry of Finance (GoP) has

however not yet transferred its investment to the trust.

SME Bank Limited



42 DATE OF AUTHORIZATION

43 Figures have been rounded to the nearest thousand rupees unless otherwise stated.

_________________________


_________________________ ______________ _______________ ______________

President/ Chief Executive Director Director Director

These financial statements were authorized for issue by the Board of Directors of the Bank on___________,

2012.

Annex-I referred to Note 12.7 to these financial statements, Rs. In thousands

in terms of sub section 3 of section 33-A of the Banking Companies Ordinance 1962 the statement in respect of written off loans or any other financial relief of Rs. 500,000 or above allowed to:

1 M/s Shikarpuri Achar House Liaquat Ali Memon Haji Maula Bux Memon - 990 - 990 - 990 - 990

54400-1521093-3

2 Aftab Keryana Store Aftab Alam Muhammd Umar 4,495 1,154 64 5,713 - 1,352 - 1,352

34601-0830199-9

3 Mullah Kaithar Indsuties Muhammad Waris Abdul Majid 34,761 1,537 41 36,339 - 920 - 920

Noor Road, Badami Bagh, Lahore 35202-2927393-7

4 ANN&N Enterprises Nadira Sabah Ud Din Mian Sabah ud Din 2,998 814 68 3,880 837 837

1-Main Harbanspura, Mian Ameer ud Din Park, Tajpura, Lahore 35202-1746584-6

5 M/s Unique Paper Mart Ijaz Mehmood Sultan Mehmood Bhatti 2,499 959 62 3,520 - 860 953 1,813

5 Press Market, Amin Pur Bazar, Faisalabad. 33100-8946886-7

6 M/s Citi Electronics Ghulam Mustafa Khan Muhammad Idrees 856 150 472 1,478 149 427 576

Yakta Market, Haji Abad, Sheikhurpura Road, Faisalabad 33100-4535409-5

7 M/S CNS Enterprises Aziz Nawaz Khan Murad Wali Taj 292 310 - 602 292 303 - 595

Chinar Pasum Mastoj, Chitral 15202-0823012-9

8 M/S Chitral Tea Store Mujeeb Ullah Zeera Khan 270 349 - 619 270 342 - 612

Shahi Randa Shangoor, Chitral 15201-2501761-7

9 M/S Prince Photo Studio Aziz-ul-Mulk Izat-ul-Mulk 246 265 - 511 246 259 - 505

Zani Nafor Murkao, Chitral 15202-5735009-1

10 M/s Land Mark (Pvt) Ltd Amir Rehman Hidayat ur Rehman 3,843 520 6 4,369 3,843 535 31 4,409

Mohallah Malakhel, Barikot, Tesil & District Swat 15602-0358512-1

Inayat ur Rehman Amir Rehman

15602-0358511-5

Anees ur Rehman Amir Rehman

15602-0464959-3

Hidayat Sultana Rehman Amir Rehman

15602-0301249-0

Sultania Rehman Amir Rehman

15602-0301249-6

11 M/s Lala Zar Hotel Syed Abdul Haq Shah Haji Ghulam Hussain 5,841 935 141 6,916 1,971 628 - 2,599

Shah Hawili, Village Paral Geran, PO Kagan, Balakot, District 13101-8355469-3

Syed Moeenul Haq Shah Syed Abdul Haq Shah

13101-8451514-3

Syed Ibrahim Ahmed Shah Syed Abdul Haq Shah

13101-0512849-1

12 M/S Yousafzai CNG Arshad Khan Saadullah Khan 3,380 675 - 4,055 424 593 - 1,016

Zamen Abad, Mardan 16101-3206523-1

Amjid Ali Safdar Khan

16101-5954802-7

Mrs,Shaheen Zahoor Zahoor Muhammad

16101-8697490-8

13 Malik Jalil Ahmed Awan Malik Jalil Ahmed Awan Malik Nazar Hussain 732 886 - 1,618 - 891 - 891

House No O-672 E/1, Kartarpura, Rawaplinid 37405-0160118-1

14 Malik Amjad Nawaz Malik Amjad Nawaz Malik Rub Nawaz 3,500 812 55 4,367 - 934 - 934

H. No. 175, Moh Pir Bukhari Talagang Chakwal 37203-3785411-7

15 M/S Raka Poshi Sarfaraz Khan Muhammad Rafique 500 569 116 1,186 500 569 116 1,186

Mian Dum Swat 139-56-510660

16 Hazrat Malik Spare Parts Hazrat Malik Gul Pacha 264 292 - 556 264 292 - 556

Dinin Bazar Chitral 103-88-198687

17 Ali Rehman Jewelars Shop Ali Rehman Sherin Rehman 306 257 - 563 306 257 - 563

Sr.

No Father's/Husband's Name Name and Address of Borrower

Name of Individual/ Partner/Directors

(with NIC No.) Principal

Interest/

Mark-up

Outstanding Liabilities at beginning of year

Total Others

TOTAL Principal

written-off

Interest/ Mark-

up

written-off

Other

financial relief

provided

Annex-I referred to Note 12.7 to these financial statements, Rs. In thousands

in terms of sub section 3 of section 33-A of the Banking Companies Ordinance 1962 the statement in respect of written off loans or any other financial relief of Rs. 500,000 or above allowed to:

Sr.

No Father's/Husband's Name Name and Address of Borrower

Name of Individual/ Partner/Directors

(with NIC No.) Principal

Interest/

Mark-up

Outstanding Liabilities at beginning of year

Total Others

TOTAL Principal

written-off

Interest/ Mark-

up

written-off

Other

financial relief

provided

Sarafa Bazar mingora Swat 114-62-032257

18 Behram khan Cloth House Behram Khan Neroz Khan 400 300 - 700 400 300 - 700

Taj Chowk Mingora Swat 114-88-006501

19 Naseeb jan Karyana store Naseeb Jan Toorai 300 359 - 659 300 359 - 659

Bazar behrain Swat 116-90-213621

20 ALI General Store Muhammad Ali Falas 400 458 - 858 400 458 - 858

Pacha Bazar Bunir 115-74-276598

21 M/S Eagle Motel (Pvt) Ltd Naseem Mohammad Khan Fida Muhammad Khan 7,500 11,086 - 18,586 7,500 11,086 - 18,586

Village & Post Office Lund Khaur, Distt Mardan. 129-61-012570

Nadeem Mohammad Khan Fida Muhammad Khan

129-91-012572

Ms. Anila Naseem Fida Muhammad Khan

129-90-731572

Amir Mohammad Khan Nasim Muhammad Khan

129-87-012571

22 M/S Hotel Speed Bird (Pvt) Ltd Parveen Ara Salahuddin 1,202 209 9 1,420 1,202 209 9 1,420

Village & Post Office, Chamkani, Mohalla Yaseen Khal, 137-90-070965

23 M/S Istambol Silk Mills (Pvt) Ltd Haji Yaqoob Khan Haji Sultan Zareen 1,451 3,371 - 4,822 1,451 3,371 - 4,822

Mohalla Kutta, P.O. Saudu Sharif, Swat 114-48-107251

24 M/S Mangaltan Silk Mills (Pvt) Ltd Painda Mand Khan habib Khan 7,000 10,579 5 17,584 7,000 10,579 5 17,584

165-H, Phase II, Hayatabad Peshawar. 114-88-297044

Seraj Noor Khan Awal Noor Khan

139-88-345615

25 M/S Meyva Fruit Processing (Pvt) Ltd Nowsherwan Haji Anbar Khan 838 1,373 21 2,232 838 1,373 21 2,232

P.O. KHWAZA KHELA, DISTT. SWAT. NWFP. 116-55-047119

Iftikhar Ahmed Sardar Bahadar Khan

136-52-040224

26 M/S Golden Textile Mills (Pvt) Ltd Muhammad Ashraf ShabB Din Ch. 4,319 3,871 122 8,312 4,319 3,871 122 8,312

G.T. ROAD QAMBER, MINGORA-SWAT. 271-58-033868

habib-Ur-Rehman Muhammad Ismail

271-55-133293

27 M/S Malakand Food Industries (Pvt) Ltd. Shahnza Miftah Jamal-Ud-Din 8,500 8,024 - 16,524 8,500 8,024 - 16,524

College Road Village Thana, Malakand Agency 138-89-581902

Jamaluddin Miftah Mian Miftahuddin

516-87-347106

Ulfat Hisham Mian Hashamuddin

117-52-279915

Total 96,693 51,104 1,183 148,980 40,026 50,341 1,685 92,052

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