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ASKARI COMMERCIAL BANK LIMITED

ANNUAL REPORT 1997

FOR THE YEAR ENDED DECEMBER 31, 1997

CONTENTS

Corporate Information

A Glimpse of Steady Growth

Directors' Report

Auditors' Report on the Members

Balace Sheet

Profit & Loss Account

Statement of Changes in Financial Position

Notes to the Accounts

Pattern of Shareholding

Notice of the Sixth Annual General Meeting

Correspondent Banks

Branch Network

Form of Proxy

Corporate Information

Lt. Gen. Zia ud Din

Chairman

Lt. Gen. (R) Farrakh Khan

Mr. Shameem Ahmed

President & Chief Executive

Brig. (R) Khalid Latif

Brig. (R) Zafar Ahmed

Brig. (R) Khalid Raza

Brig. (R) Sultan Mahmud

Dr. Safdar Ali Butt

Mr. Zafar Alam Khan Sumbal

Secretary

Mr. Shahid HafeezAzmi

Mr Sultan Ahmed Abbasi

Mr Raiz-ur-Rahman Khan (NiT Nominee)

Taseer Hadi Khalid & Co.

Chartered Accountants

AUDITORS

Taseer Hadi Khalid & Co.

Chartered Accountants

LEGAL ADVISORS

Afridi Angell & Khan

REGISTRAR & SHARE

TRANSFER OFFICE

Askari Associates (Pvt.) Limited,

6th Floor, AWT Plaza,The Mall,

RO. Box 678, Rawalpindi.

Tel: (051) 514370-71,516108

Fax: (05 I) 516109

REGISTERED OFFICE/

HEAD OFFICE

AWT Plaza, The Mall,

RO. Box No. 1084,

Rawalpindi - Pakistan.

Tel: (05 I) 518117-20, 518568-70

Fax: (05 I) 563704, 522215

Directors' Report

It gives us immense pleasure in presenting

to you the Annual Report together with

the audited accounts of your bank for the

year ended December 31, 1997.

Despite under-performance of the economy

Askari Commercial Bank Limited (ACBL)

managed to out-perform its competitors

and maintain its growth momentum. We

are proud to say that Askari Commercial

Bank Limited is emerging as a leading

market player in the financial sector.

The pre-tax profit at Rs. 755 million recorded

impressive growth rate of 30% over 1996.

By the end of the year the asset base of the

Bank expanded to the level of Rs. 24 billion

registering an increase of 35% over the

previous year.

The Bank continued to maintain strong

capital base. The networth of the Bank has

further expanded to Rs. 1.8 billion which

will enable us to expand our Balance Sheet

and to take enhanced credit exposure against

blue chip corporate clients. The Bank has

highly comfortable capital adequacy ratio.

The bank has made vigorous efforts to

increase local as well as foreign currency

deposits. These efforts have borne fruit and

the Bank's deposits grew by 38% to attain

the level of Rs. 19.5 billion at the end of

1997.

We continued to make concerted efforts for

maintaining the quality of our risk assets

portfolio. In 1997, the Bank's total advances

at Rs. 9.5 billion recorded growth of 27%

over the

previous year

The Bank's

prime focus in its lending

activities

continued to

financing on a secured and self-liquidating

basis. A major chunk of advances portfolio

has a maturity pattern of less than one year.

Strong internal control system exists in

the Bank. This provides timely and

effective support to the Management in

the implementation of the Bank's

strategies.

The credit risk management is among top

priorities at ACBL. For this purpose, the

Bank has in place a formal credit

sanctioning process based on the principles

of checks and balances. The credit line

proposals are reviewed and approved by

highly experienced officials of the Bank.

The bigger the credit line proposal, the

greater is the care taken in decision making

and disbursement. At the head office a

team of senior credit executives constantly

monitors the Bank's overall credit exposure

both industry-wise and group-wise and

takes appropriate action to avert large

scale industry and single party exposure.

The investment

portfolio of the

Bank soared to Rs.

11.8 bi11ion

registering an

increase of 91%

over the last year.

The investment

portfolio together with other liquid assets

forms a major chunk of the Bank's asset

base which shows the degree of high

liquidity maintained by the Bank. The

policy of high

liquidity however

is not maintained

at the cost of

profitability as is

evident from the

profit figures. The Bank is maintaining

optimal balance between liquidity and

profitability. As the yield on government

securities declined, the Bank selectively

expanded its advances portfolio in the

second half of 1997.

The Bank's emphasis on further broadening

core foreign trade business translated into

handling higher volume Of export and

import business of Rs. 26 billion registering

a growth of 34% over the previous year.

This enhanced foreign

trade business was secured

due to excellent customer

services and efficient

international settlement

arrangements with our

correspondent banks.

The Bank's strategy to consolidate and

expand its network of international

correspondent banks continued during the

year under review and the number of such

correspondents reached 171. The increase

in number of our correspondents further

improved our capabilities to undertake

greater cross border transactions. Our

strong relationship with the coxespondents

and their confidence in our capabilities

and professionalism can be gauged from

the fact that now a

small percentage of

letters of credit require

confirmation.

The foreign exchange and

money market operations

registered significant

increase during the year. To

manage effectively the

Bank's foreign exchange

operations and investment

portfolio in the deregulated and free

operational environment, we have equipped

our Treasury with the latest information and

communication technologies and

reorganized it on modern lines. The

sophisticated risk management techniques

and multiple control systems are applied for

smooth and risk-free operations of Treasury.

To remain one step ahead of our competitors,

we have launched several new products

during the year including credit cards in the

consumer banking segment. ACBL's Master

Card was launched towards the end of first

quarter of 1997, with plans to launch Askari

VISA shortly. The whole credit card

operation is being carried out prudently and

ACBL is proud to report that it has been

successful in establishing a solid foundation

on which to base future growth. It is a

relatively new product for Pakistan, but has

promssing growth potential and by entering

the market at the right time ACBL feels

that it will grow as a major market player

in the future. Afier the launch of Askari

VISA, ACBL will have a comprehensive

array of Credit Cards extending the variety

of products and service choice.

To meet the challenges of 21st century,

we are paying particular attention to the

development of information technology.

In this regard, the Bank continued its

emphasis on employing the latest

technological tools to improve our

operations and customer services. ACBL

is the first Bank to have established

countrywide communication network

based on VSAT and Radio Modems

Technology. This communication network

has enabled the bank to provide on-line,

real-time banking facilities to its

customers, presently at 11 different cities

of the country which

is being expanded to

cover other cities also.

The on'line

communication

system allows the

customers the facility

of carrying out their

normal banking transactions through the

nearest convenient branch irrespective of

where their account is placed. This on-

line banking facility has also been made

most sophisticated due to high speed

electronic transfer of signatures, for

verification purposes, throughout the

country.

The bank also offers 24

hours self service banking

facilities to its customers on

country wide basis through

deployment of Automated

Teller Machines, allowing

customers uninterrupted

banking facilities such as/

cash withdrawals, funds

transfer, balance enquiries, account

statements etc.

In addition, the Bank also provides fully

automated on-line telephone banking

facilities to its customers enabling them

to carry out banking transactions like

balance inquiries, statement requests,

product information and exchange rate

inquiries.

In 1997 three new branches were opened;

one each in Abbottabad and Bahawalpur

and one additional in Islamabad. The

strategy of selective expansion of branch

network will continue in the year 1998.

The Bank's tremendous progress is a result

of a high degree of professionalism in

managing the operations of the bank and

providing excellent banking services to the

customers.

A testimonial to

ACBL's performance is

the recognition gained

by the bank at national

as well as international

level. In 1997 ACBL

not only managed to maintain the short

term rating of A1+ given by PACRA, which

is the highest rating given to any bank in

Pakistan in this category but was also able

to improve its rating to AA- in the long

term category. The Bank has also been given

asiamoney (1994 & 1996)and Euromoney

(1995) awards as the 'Commercial Bank of

the Year' and 'Best Domestic Bank'

respectively. In addition,

the South Asian

Federation of

Accountants (SAFA)

gave ACBL the award

of "2nd best reporting

company" in

financial sector of

SAARC Region which speaks volumes

about our professionalism.

The constantly changing regulatory and

operational environment requires up-to-

date knowledge and skills of latest systems.

Due to this reason human resource

development is on the management's

priority agenda. The Bank's Training &

Research Wing, which is manned by

highly competent

trainers and

researchers is

successfully catering

to the training needs

of the manpower.

During 1997 a number of training

programs were arranged in the areas of

foreign trade & exchange, credit

management, financial statements

analysis, prudential regulations, general

banking, credit cards etc. A total of 161

executives and officers participated in

these courses. In addition to this, several

executives of the Bank were nominated

in courses offered by outside agencies both

in Pakistan and abroad.

We believe that the growth of an

institution depends on confidence, support

and cooperation of its customers and

dedication and hardwork

of its employees. We at

ACBL thank our clients

for their continued support

and appreciate the zealous-

efforts made by the

employees in achieving our

corporate objectives. We also take this

opportunity to express our gratitude to the

State Bank of

Pakistan for

their guidance

and support.

ACBL aims at achieving total quality in all

fields of activity. The main objectives of the

bank for the year 1998 would be to further

enhance the corporate image of the Bank,

consolidate its leading position in the

financial market, increase and diversify the

profit trend and structure, pursue the policy

of prudence, selectively expand the advances

portfolio on secured basis, penetrate in the

market by expanding the branch network

and to further improve the customer service

through higher levels of technology.

In 1998 we also intend to implement the

strategic plan made in collaboration with

our consultants for fulfilling the corporate

objectives of the Bank. Our task would be

to create new opportunities for growth and

progress for the benefit the Bank's clients

and shareholders.

KPMG Taseer Hadi Khalid 8' Co.

Chartered Accountants

6th Floor

Telephone 92 51 823558

State Life Building

92 51 825956

Jinnah Avenue

Telefax 92 51 822671

P.O. Box 1323

Islamabad

Other Offices

Pakistan

Karachi & Lahore

ASKARI COMMERCIAL BANK LIMITED

AUDITORS' REPORT TO THE MEMBERS

We have audited the annexed balance sheet of Askaft Commercial Bank Limited ("the Bank") as at 31

December 1997 and the related profit and loss account and the statement of changes in financial position,

together with the notes forming part thereof for the year then ended, in which are incorporated the

unaudited certified returns from the branches except for me branches which have been audited by us and

we state that we have obtained all the information and explanalions which to the best of our knowledge and

belief were necessary for the purposes of our audit and after due verification thereoff found them

satisfactory, and we report that:

a) in our opinion proper books of account have been kept by the Bank as required by the Companies

Ordinance, 1984 and the returns referred to above received from the branches have been found

adequate for the purposes of our audit;

b) in our opinion:

i) the balance sheet and profit and loss account together with the notes thereon have been drawn

up in conformity with the Banking Companies Ordinance, 1962 and the Companies Ordinance,

1984, and are in agreement with the books of account and are timher in accordance with

accounting policies consistently applied;

ii) the expenditure incurred during the year was for the purpose of the Banlds business; and

iii) the business conducted, investments made and the expenditure incurred during the year were in

accordance with the objects of the Bank and the transactions of the Bank which have come to

our notice have been within the powers of the Bank.

c) in our opinion and to the best of our information and according to the explanations given to us, the

balance sheet and the profit and loss accotrot and the statement of changes in financial position

together with the notes forming part thereof give the information required by the Banking Companies

Ordinance, 1962 and the Companies Ordinance, 1984, in the manner so required and give a true and

fair view of the state of the Bank's affairs a.s at 31 December 1997 and its true balance of the profit and

the changes in financial position for the year then ended; and

d) in our op'mion 7_akat deductible at source under the Zakat and Ushr Ordinance, 1980, was tiedacted by

the Bank and deposited in the Central Zakat Fund established under section 7 of that Ordinance.

Balance Sheet as at December 31, 1997

1997

1996

Note

Rupees

('000)

Assets

Cash

1,326,513

2,755,198

Balance with other banks

95.08

154,583

Money at call and short notice

400,000

410,000

Investments

1,773,176

6,180,308

Advances

9,136,387

7,305,379

Operating fixed assets

360,594

288,417

Capital work in progress

II 9,356

Other assets

902,041

812,270

----------

24,113,149

17,906, 155

Liabilities

----------

Deposits and other accounts

19,481,902

14,126,330

Borrowing from other banks, agents etc.

1,958,225

1,529,339

Bills payable

281,555

108,537

Other liabilities

544,289

519,975

Liabilities against assets subject

to finance lease

72,503

40,561

----------

22,338,474

16,324,742

----------

Net assets

1,774,675

1,581,413

----------

Represented by:

Share capital

939,262

816,750

Reserve fund & other reserves

834,738

763,250

Un-appropriated profit

675

1,413

----------

Shareholders'equity

1,774,675

1,581,413

==========

Memorandum items:

Bills for collection

3,071,333

2,434,105

Acceptances, endorsements and

other obligations

2,163,808

2,613,354

Contingent liabilities and commitments

==========

The annexed notes form an integral part of these accounts.

Profit and Loss Account for the year ended December 31, 1997

1997

1996

Note

Rupees

('000)