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Bank of America
Annual Report 1998
(Incorporated in the U.S.A. with limited liability)
PAKISTAN BRANCHES
ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1998
AUDITORS' REPORT TO THE DIRECTORS
We have audited the annexed balance sheet of the Pakistan Branches of Bank of America (formerly Bank of America National Trust and Savings Association) as at December 31,
1998, the related profit, and loss account and the cash flow statement, together with the notes forming part thereof for the year then ended, and we state that we have obtained all the
information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and, after due verification thereof, found them satisfactory and,
we report that:
(a) in our opinion, proper books of account have been kept by the branches as required by the Companies Ordinance, 1984;
(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 further in accordance with accounting policies consistently applied;
(ii) the expenditure incurred during the year was for the purpose of the branches' business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the branches and the transactions of the
branches which have come to our notice ,lave been within the powers of the branches;
(c) in our opinion and to the best of our information and according to the explanations given to us the balance sheet, the profit and loss account and the cash flow statement, 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 branches' affairs as at December 31, 1998 and except for the matter referred to in note 19, their true balance of the profit and cash flows
for the year then ended; and
(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 was deducted by the branches and deposited in the Central Zakat Fund established under
section 7 of that Ordinance.
Karachi: A.F FERGUSON & CO.
Dated: 18 March, 1999 Chartered Accountants
BALANCE SHEET AS AT DECEMBER 31, 1998
1998 1997
Note Rupees Rupees
ASSETS
Cash 4 4,069,052,773 3,121,144,133
Balances with other banks 5 11,553,946 4,885,621
Money at call and shod notice -- 150,000,000
Investments 6 2,148,669,673 5,209,445,285
Advances - net of provision 7 10,226,833,262 10,089,824,078
Operating fixed assets 8 134,926,693 143,744,027
Capital work in progress 9 865,775 2,084,737
Other assets 10 1,088,721,903 999,020,137
-------------------- --------------------
17,680,624,025 19,720,148,018
LIABILITIES
Deposits and other accounts 11 14,100,307,966 16,125,990,152
Borrowings from other banks, agents etc. 12 1,317,323,687 1,215,562,000
Bills payable 186,436,964 329,558,765
Other liabilities 13 1,561,908,106 1,541,716,535
-------------------- --------------------
17,165,976,723 19,212,827,452
-------------------- --------------------
NET ASSETS 514,647,302 507,320,566
========== ==========
REPRESENTED BY:
Capital 14 -- --
Unremitted profit to Head Office 514,647,302 507,320,566
-------------------- --------------------
514,647,302 507,320,566
========== ==========
MEMORANDUM ITEMS:
Bills for collection 15 407,542,891 467,466,308
Acceptances, endorsements and other obligations 2,315,741,239 4,013,925,238
Contingent liabilities and commitments 16
The annexed notes form an integral part of these accounts.
Sd/- Sd/-
Syed Ali Raza Nauman K. Dar
Managing Director and Vice President and Manager Credit
Regional Manager and Marketing - Pakistan
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 1998
1998 1997
Note Rupees Rupees
Mark up/Interest and discount and/or return earned 2,476,635,887 2,304,460,316
Less: Cost/Return on deposits, borrowings,
forward cover fee etc. 1,912,624,644 1,621,152,198
-------------------- --------------------
564,011,243 683,308,118
-------------------- --------------------
Fees, commissions and brokerage 208,317,128 209,061,637
Other operating income - income from dealing in
foreign currencies 410,905,565 252,471,738
-------------------- --------------------
619,222,693 461,533,375
-------------------- --------------------
1,183,233,936 1,144,841,493
Operating Expenses:
Administrative expenses 17 468,545,684 407,869,075
Provisions against non-performing advances 7.2 5,015,649 80,150,404
Provision for diminution in value of investments 25,000,000 12,500,000
-------------------- --------------------
498,561,333 500,519,479
-------------------- --------------------
684,672,603 644,322,014
Other income 18 2,941,068 3,277,567
-------------------- --------------------
Profit before taxation 687,613,671 647,599,581
Taxation
Current
- for the year 388,000,000 380,000,000
- for prior year 10,000,000 14,294,524
Deferred 10,991,393 (47,723,112)
-------------------- --------------------
408,991,393 346,571,412
-------------------- --------------------
Profit after taxation 278,622,278 301,028,169
Unremitted profit brought forward 507,320,566 428,122,043
-------------------- --------------------
Profit available for remittance 785,942,844 729,150,212
Profit remitted during the year 271,295,542 221,829,646
-------------------- --------------------
Unremitted profit carried forward 514,647,302 507,320,566
========== ==========
The annexed notes form an integral part of these accounts.
Sd/- Sd/-
Syed Ali Raza Nauman K. Dar
Managing Director and Vice President and Manager Credit
Regional Manager and Marketing - Pakistan
CASH FLOW STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1998
1998 1997
Rupees Rupees
CASH FLOW FROM OPERATING ACTIVITIES
Profit before taxation 687,613,671 647,599,581
Adjustment for non-cash charges
Depreciation 41,842,468 38,620,905
Provision for diminution in value of investments 25,000,000 12,500,000
Provision against non-performing advances 5,015,649 80,150,404
Gain on disposal of fixed assets (2,471,383) (2,492,767)
-------------------- --------------------
69,386,734 128,778,542
-------------------- --------------------
757,000,405 776,378,123
(Increase)/decrease in operating assets
Government securities 3,035,775,612 (972,975,285)
Advances (142,024,833) (2,110,254,471)
Other assets (excluding deferred tax and
taxation - payments less provision) 132,933,504 321,228,590
-------------------- --------------------
3,026,684,283 (2,762,001,166)
Increase/(decrease) in operating liabilities
Deposits and other accounts (2,025,682,186) 2,854,679,870
Bills payable (143,121,801) 202,785,958
Other liabilities (excluding provision for taxation) 27,907,651 (240,356,391)
-------------------- --------------------
(2,140,896,336) 2,817,109,437
-------------------- --------------------
Cash flows before tax 1,642,788,352 831,486,394
Income tax paid (639,342,743) (389,143,709)
-------------------- --------------------
Net cash flow from operating activities 1,003,445,609 442,342,685
CASH FLOW FROM INVESTING ACTIVITIES
Net sale proceeds of investment securities - 151,204,166
Fixed capital expenditure (36,871,591) (57,293,210)
Sale proceeds of fixed assets 7,536,802 3,959,019
-------------------- --------------------
Net cash used in investing activities (29,334,789) 97,869,975
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings from other banks, agents etc. 101,761,687 378,063,926
Profit remittance to head office (271,295,542) (221,829,646)
-------------------- --------------------
Net cash flow from financing activities (169,533,855) 156,234,280
-------------------- --------------------
Increase in cash and cash equivalents for the year 804,576,965 696,446,940
Cash and cash equivalents at January 1 3,276,029,754 2,579,582,814
-------------------- --------------------
Cash and cash equivalents at December 31 4,080,606,719 3,276,029,754
========== ==========
Cash and cash equivalents
Cash 4,069,052,773 3,121,144,133
Balances with other banks 11,553,946 4,885,621
Money at call and short notice - 150,000,000
-------------------- --------------------
4,080,606,719 3,276,029,754
========== ==========
The annexed notes form an integral part of these accounts.
Sd/- Sd/-
Syed Ali Raza Nauman K. Dar
Managing Director and Vice President and Manager Credit
Regional Manager and Marketing - Pakistan
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1998
1. STATUS AND NATURE OF BUSINESS
Bank of America formerly Bank of America National Trust and Savings Association ,
is incorporated in the United States of America with limited liability. It is operating in
Pakistan as a Commercial Bank under Banking Companies Ordinance, 1962,
through four branches located at Karachi, Faisalabad, Lahore and Islamabad.
However, Faisalabad branch has been closed down effectively from July 1, 1998.
By virtue of the merger of Bank of America Corporation (parent company) and
Nations Bank Corporation, effectively from October 1, 1998, the branches of Bank
of America National Trust and Savings Association has been changed to Bank of
America - Pakistan Branches.
2. BASIS OF PRESENTATION
In accordance with the directives of the Federal Government regarding the shifting
of the banking system to Islamic modes, the State Bank of Pakistan has issued vari-
ous circulars from time to time. One permissible form of trade-related mode of
financing comprises of purchase of goods by the bank from their customers' and
resale to them at appropriate mark-up in price on deferred payment basis. The pur-
chase and sales arising under these arrangements are not reflected in the accounts
as such but are restricted to the amount of facility actually utilised and the appropri-
ate portion of mark-up thereon.
3. SIGNIFICANT ACCOUNTING POLICIES
3.1 Accounting convention
These accounts have been prepared under the historical cost convention.
3.2 Staff retirement benefits
The branches operate an approved funded gratuity scheme for all its permanent
employees who have completed 5 years' service or more. The contributions are
made annually on the basis of actuarial estimates.
3.3 Taxation
Taxation charge in the accounts is based on taxable income. The branches account
for deferred taxation, using the liability method, on the timing differences arising on
account of provisions made for bad and doubtful advances.
3.4 Advances
Advances are stated at cost less provision for bad and doubtful balances. The pro-
vision for bad and doubtful advances is made in accordance with the Prudential
Regulations of the State Bank of Pakistan.
3.5 investments
Investments are stated at the lower of cost and market value. The shortfall between
cost and the market value is charged to profit and loss account. Premiums/discount
on purchase of investments are amortised over the term of the investment.
3.6 Operating fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation. Depreciation is
charged to income applying the straight line method. A full month's depreciation is
charged in the month of addition while no depreciation is charged for the month in
which the disposal is made.
Gains and losses on the disposal of fixed assets are included in income currently.
3.7 Revenue recognition
Profit/return on advances and investments are recognised on an accrual basis.
Fees, commissions and brokerage income is recognised when earned.
3.8 Foreign currencies
Assets and liabilities in foreign currencies have been translated into rupees at the
mid-rate of exchange prevailing at the balance sheet date except those covered
forward exchange contracts which are converted at contracted rates. Other out-
standing forward contracts, letters of credit and acceptances are translated at the
mid-rate of exchange prevailing at the balance sheet date. Exchange gains and
losses are included in the profit and loss account.
1998 1997
Rupees Rupees
4. CASH
In hand
-local currency 107,921,344 84,264,724
- foreign currencies 58,698,849 49,934,278
------------------ ------------------
166,620,193 134,199,002
With State Bank of Pakistan on
- special deposits 1,952,486,000 1,286,200,000
- current accounts
(including on account of capital
Rs. 1,130,917,383
1997: Rs. 1,082,976,320
- refer note 14) 1,949,946,580 1,700,745,131
------------------ ------------------
4,069,052,773 3,121,144,133
========== ==========
5. BALANCES WITH OTHER BANKS
Current Accounts
- In Pakistan 6,581,584 3,297,441
- Outside Pakistan 4,972,362 1,588,180
------------------ ------------------
11,553,946 4,885,621
========== ==========
6. INVESTMENTS (at cost less provision)
Investment securities
Government
Federal and Provincial Government Securities
- Federal Investment Bonds 129,499,992 424,352,000
- Treasury Bills/Short-term
Federal Bonds 2,018,669,681 4,759,593,285
------------------ ------------------
2,148,169,673 5,183,945,285
Others-unquoted
Fully paid up ordinary shares 500,000 500,000
Term Finance Certificates 50,000,000 50,000,000
------------------ ------------------
50,000,000 50,000,000
2,198,669,673 5,234,445,285
Less: Provision for diminution in value of
investments (50,000,000) (25,000,000)
------------------ ------------------
2,148,669,673 5,209,445,285
========== ==========
Book value of unquoted investment securities
Rs 2,148,669,673 (1997: Rs 5,209,445,285)
6.1 Treasury Bills include bills amounting to Rs 300 million which are under pledge with
the State Bank of Pakistan.
1998 1997
Rupees Rupees
7. ADVANCES
Loans, cash credits, overdrafts etc.
In Pakistan 9,804,657,975 9,412,432,446
Bills discounted and
purchased
- payable in Pakistan 148,899,397 11,957,433
- payable outside Pakistan 393,661,927 780,804,587
------------------ ------------------
542,561,324 792,762,020
------------------ ------------------
10,347,219,299 10,205,194,466
Specific provision for non-performing
advances - note 7.2 (120,386,037) (115,370,388)
------------------ ------------------
10,226,833,262 10,089,824,078
========== ==========
Advances include Rs. 139,117,671 which have been placed on non-performing. status.
1998 1997
Rupees Rupees
7.1 Particulars of advances
- in local currency 10,226,833,262 10,089,824,078
- in foreign currencies - -
------------------ ------------------
10,226,833,262 10,089,824,078
========== ==========
Debts considered good in respect of which
the branches are fully secured 10,226,833,262 10,089,824,078
Debts considered good for which the
branches hold no other security than
the debtors' personal security - -
Debts considered good secured by the
personal liabilities of one or more parties
in addition to the personal security of the
debtors - -
Debts considered doubtful or bad not
provided for - -
------------------ ------------------
10,226,833,262 10,089,824,278
========== ==========
Balance Maximum total
outstanding at amount of
December 31 financing
including
temporary
advances
granted during
the year