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Emirates Bank International
Annual Report 1999
AUDITORS' REPORT TO THE DIRECTORS
We have audited the annexed balance sheet Of the Pakistarl Branche~ of Emirates Bank International
PJSC [Incorporated in the United Arab Emirates-liability of the members is limited] as at 31 December
1999 and the related profit and loss account and cash flow statement, 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 five branches which have been audited by us and we state that we have obtained all
the information and explanations which to the best of our knowledge and belief were necessary for the
purposes of our audit 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 accor-
dance with accounting policies consistently applied except for the change explained in note
9.1 with which we concur;
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 transactions of the branches
which have come to our notice have 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 and 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 except for the matter referred
in note 17.1 give a true and fair view of the state of the branches' affairs as at 31 December 1999
and their true balance of the profit before incorporating head office administration expenses and
their cash flows for the year then ended; and
(d) in our opinion, zakat deductible at source under the Zakat and Ushr Ordinance, 1980 was deduct-
ed by the branches and deposited in the Central Zakat Fund established under Section 7 of that
Ordinance.
				Sd/-
				Taseer Hadi Khalid & Co.
Karachi: 09 March, 2000				Chartered Accountants
BALANCE SHEET AS AT 31 DECEMBER 1999
				Note	1999	1988
					(Rupees in '000)
ASSETS
Cash				4	2,378,901	2,326,485
Balances with other banks				5	1,257,770	393,339
Money at call and short notice					725,000	690,000
Investments				6	1,567,058	4,515,689
Advances -- net of provisions				7	7,271,936	6,887,207
Operating fixed assets				8	222,912	243,013
Capital work in progress -- civil works					8,821	1,080
Other assets				9	1,531,600	1,248,835
					----------	----------
					14,963,998	16,305,648
LIABILITIES
Deposit and other accounts				10	11,200,361	13,000,569
Borrowing from other banks, agents etc.				11	1,676,616	879,960
Bills payable					206,824	255,985
Other liabilities				12	1,379,762	1,304,202
Liability against assets subject to finance lease				13	99,350	73,532
					----------	----------
NET ASSET					401,085	79,400
					=========	=========
REPRESENTED BY:
Head Office Capital account				14	--	--
Unremitted profit					401,085	791,400
					----------	----------
					401,085	791,400
MEMORANDUM ITEMS:					=========	=========
Bills for collection				15	1,511,834	1,364.78
					=========	=========
Acceptances, endorsements and other obligations					2,713,988	1,944,156
					=========	=========
Contingent liabilities and commitments				16
Annexed notes form an integral part of these accounts.
Sd/-					Sd/-
Timothy P, Gibbs					Syet Majid Ali
General Manager -- Pakistan					Financial Controller -- Pakistan
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 1999
					Note	1999	1988
						(Rupees in '000)
Mark-up/interest and discount and/or return earned						1,735,959	2,188,428
Less: Cost/return on discount, borrowings etc.						1,341,332	1,627,606
						----------	----------
						394,627	560,822
Fees, commissions and brokerage						94,102	87,539
Gain on sale of investment securities						4,207	6,755
Income from dealing in foreign currencies						122,266	154,832
Recoveries of non-performing advances (net of provisions)					7.2.1	20,693	54,084
						----------	----------
						241,268	303,210
						----------	----------
						635,895	864,032
Operating expenses
Administrative expenses					17	437,519	375,606
Amortisation of premium/discount on purchase of investments-net						6,165	6,622
						----------	----------
						443,684	382,228
						----------	----------
						192,211	481,804
Other income					18	20,989	19,727
						----------	----------
Profit before taxation						213,200	501,531
Taxation -- current year					19	60,000	229,000
- Prior years						--	(77,822)
- deferred						(152,000)	--
						----------	----------
						(92,000)	151,178
						----------	----------
Profit after taxation						305,200	350,353
Unremitted profit brought forward						791,400	441,268
						----------	----------
Profit available for remittance to head office						1,096,600	791,621
Remittance to head office						(695,515)	--
Transfer to capital account u/s 13(3) maintained
with State Bank of Pakistan						--	(221)
						----------	----------
Unremitted 13rofit tamed forward						401,085	791,400
Annexed notes form an integral part of these accounts,						=========	=========
	Sd/-					Sd/-
	Timothy P, Gibbs					Syet Majid Ali
	General Manager -- Pakistan					Financial Controller -- Pakistan
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 1999
					Note	1999	1988
						(Rupees in '000)
Profit before taxation						213,200	501,531
Adjustment for non-cash charges:
Depreciation						75,725	49,455
Amortisation of premium/discount on purchase of investments - net						6,165	6,622
Reversal of provisions against non-performing advances
(net of provisions and recoveries)						(39,584)	(40,854)
Gain on disposal of fixed assets (net)						(1,766)	(2,642)
Gain on sale of investments						(4,207)	(6,756)
Amortisation of deferred lease income						(1,588)	(593)
						----------	----------
						34,745	5,232
						----------	----------
						247,946	506,763
(Increase)/decrease in operating assets
Advances						(345,145)	(569,524)
Other assets (excluding advance tax)						70,579	3,174
						----------	----------
						(274,566)	(566,350)
Decrease/(increase)  in operating liabilities
Deposits and other account						(1,800,208)	23,645
Bills payable						(49,161)	(53,570)
Other liabilities (excluding head office capital account)						(44,133)	(47,537)
Income tax paid						(261,345)	(378,423)
						----------	----------
						(2,154,847)	(455,885)
						----------	----------
Net cash flows from operating activities						(2,181,467)	(515,472)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceed from sale of investment securities -- net						2,946,673	1,089,443
Fixed capital expenditure						(60,472)	(113,799)
Proceeds from sale of fixed assets						50,456	54,157
						----------	----------
Net cash flows from investing activities						2,936,657	1,029,801
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from other banks, agents etc.						796,656	14,732
Payments under lease obligations						(22,481)	(9,939)
Increase in capital on account of revaluation						118.00	38.88
Remittance to head office						(695,515)	--
						----------	----------
Net cash flows from financing activities						196,657	43,669
						----------	----------
Increase in cash and cash equivalents for the year						951,847	557,998
Cash and cash equivalents at 01 January						3,409,824	2.851,826
						----------	----------
Cash and cash equivalents at 31 December						4,361,671	3,409,824
						=========	=========
Cash and cash equivalents
Cash						2,378,901	2,326,485
Balances with other banks						1,257,770	393,339
Money at call and short notice						725,000	690,000
						----------	----------
						4,361,671	3,409,824
						=========	=========
	Sd/-					Sd/-
	Timothy P, Gibbs					Syet Majid Ali
	General Manager -- Pakistan					Financial Controller -- Pakistan
NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 1999
1. STATUS AND NATURE OF BUSINESS
Emirates Bank International PJSC, a foreign banking company incorporated in Dubai (UAE), com-
menced its operations in Pakistan in April 1978. The bank operates ten branches in Pakistan viz,
two branches in Karachi, two branches in Lahore, one branch each in Multan, Islamabad,
Peshawar, Faisalabad, Rawalpindi and Stalker.
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 Various 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 the deferred payment
basis. The purchases and sales arising under these arrangements are not reflected in these
accounts as such, but are restricted to the amount of facility actually utilized and the appropriate por-
tion of mark-up thereon.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
3.1 Accounting convention
These accounts have been prepared using the historical cost convention in conformity with the
accepted practice of banking institutions in Pakistan.
3.2 Staff retirement benefits
3.2.1 Defined benefit plan
The bank operates a funded gratuity scheme for all its employees which provides/or benefits
dependent on the length of service of employees on terminal date subject to the completion of mini-
mum qualifying period of service. Obligations under the scheme are discharged annually,
3.2.2 Defined contribution plan
The bank also operates an approved contributory provident fund scheme for all its employees.
Contributions to the fund are made equally by the bank and the employees at the rate of 10% of
basic salary in accordance with the fund rules.
3.3 Taxation
Current
Current tax is the expected tax payable on the taxable income for the year using tax rates enacted at
the balance sheet date and adjustments to tax payable in respect of previous years, if any.
Deferred
Deferred tax assets and liabilities are recognised for full tax consequences attributable to all tempo-
rary differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets are however, restricted to the extent that is prob-
able that taxable profits will be available against which the deductible temporary differences can be
utilised. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to
apply to the period when the asset is expected to realise or liability is expected to settle.
3.4 Advance
Advances are stated at cost lose any amounts written off and provision for uncollectible
advances. Advances are written off when there is no realistic prospect of recovery. Specific
provisions are made for non-performing loans to reduce book value of such advances to their
expected realisable value,
3.5 Investments
Securities which are held with the intention of retaining them to maturity (investment securities) are
shown at cost less provision for any permanent diminution in value. The difference between the face
value and purchase price is amortised over the remaining life of the security. Securities held for trad-
ing purposes (dealing securities) are stated at market value, with resultant gain or loss recognised in
the profit and loss account.
where the bank enters into transactions of repurchases (rope) and resale (reverse rape) of govern-
ment securities, these are recorded/deleted at contracted rates for specified period of time.
3.6 Tangible fixed assets and depreciation
Owned
The cost of premises, furniture, fixtures and vehicles is depreciated over their estimated useful life
under straight line method commencing from the month of purchase. For rates of depreciation
please refer note 8.
Normal rapairs and maintenance are charged to income as and when incurred.
Gains and losses on disposal of fixed assets are taken to income currently.
Leased
The bank accounts for the operating assets obtained under finance lease by recording the assets
and related liability. The amounts are determined on the basis of discounted value of minimum lease
payments. Financial charges are allocated to accounting periods in a manner so as to provide a
constant periodic rate of charge on the outstanding liability.
3.7 Revenue recognition
Mark-up/return on advances and investments (excluding foreign bills purchased) is recognised on
accrual basis, except income which warrants carry forward in compliance with Prudential
Regulations of the State Bank of Pakistan. Mark-up on foreign bills purchased and commission on
short term letters of credit and guarantees is recognised on a receipt basis.
3.8 Foreign currencies
Foreign currency transactions are translated in rupees at exchange rates prevailing on the date of
transaction. Assets and liabilities in foreign currency are translated into rupees at the rates of
exchange prevailing at the balance sheet date. Outstanding forward foreign exchange contracts are
valued at market rates applicable to their respective maturities.
Exchange gains and losses arising on translation are taken to income currently.
					Note	1999	1988
						(Rupees in '000)
4. CASH
In Hand:
-- Local currency					4.1	238,922	124,721
-- Foreign currencies						53,263	83,458
With State Bank of Pakistan in:
-- Deposit account					4.2	1,152,293	1,034,296
-- Current account						934,423	1,083,917
With National Bank of Pakistan
in current account						--	93
						----------	----------
						2,378,901	2,326,458
						==========	==========
4.1 This includes National Prize Bonds of Rs. 6.26 million (1998: Nil).
4.2 Deposit account
Special swap dollar deposit						115,000	115,000
Deposit on account of capital						1,037,293	919,296
						----------	----------
						1,152,293	1,034,296
						==========	==========
5. BALANCES WITH OTHER BANKS
On deposit account:
-- In Pakistan						75,911	50,557
-- Outside Pakistan						1,153,668	259,210
						----------	----------
						1,229,579	309,767
On current account;
-- Outside Pakistan						28,191	83,572
						----------	----------
						1,257,770	393,339
						==========	==========
6. INVESTMENTS (at coat less provisions)
Investment securities
Federal and Provincial Government Securities:
-- Federal Investment Bonds						258,356	1,033,356
-- Treasury Bills						924,575	1,253,993
-- Federal and Provincial Government Loans						450,910	500,849
						----------	----------
					6.1	1,633,841	2,788,198
Term finance certificates						10,000	16,678
						----------	----------
						1,643,841	2,804,876
Securities acquired under revere rape arrangements
Treasury Billg						--	1,785,753
						----------	----------
Less: Amortisation of premium/discount on purchase of investments						76,783	74,940
						----------	----------
						1,567,058	4,515,689
						==========	==========
6.1 This includes investment securities deposited with State Bank of Pakistan as follows:
-- Federal Government loans of Rs. 3.221 million (1998: Rs. 3,221 million) on account of capital
u/s 13 (3) of the Banking Companies Ordinance, 1962.
--  Government loans having a book value of Rs. 35,1 million (1998: Rs. 35.1 million) deposited
as security for demand loans and discounting facilities.
-- Federal Investment Bonds of Rs, 100 million (1998: Rs. 100 million) de130sited as security to
facilitate same day credit against remittances from up country branches,
6.2 At 31 Dece