1 Director Report
1 Director Report
1 Director Report
On behalf of the Board of Directors, I am pleased to present the Directors' Report of Zarai Taraqiati Bank Limited (ZTBL) along with the Audited Accounts
and Auditors' Report thereon, for the year ended December 31, 2015.
Economy Review
While emerging economies faced slower economic growth, Pakistan's economy did reasonably well in the FY 15 as Gross Domestic Product (GDP)
growth in the country posted a marginal increase over last year. The FY15 was a mixed bag for Pakistan's economy, with several positives to take hope
from as its GDP grew 4.2 percent which confirms two consecutive years of increased growth after a couple of years of stagnancy.
The key macroeconomic indicators like inflation, fiscal balance and current account balance recorded improvements. Particularly, the external sector has
become more stable on account of 18.2 percent growth in workers' remittances during July-June 2014-15 as compared to last year, due to continued
support from International Financial Institutions and a sharp decline in global oil prices. However, during July-Feb 2015-16 the growth in workers'
remittances has slowed down to 6.07 percent. According to SBP, total liquid foreign exchange reserves as on January 01, 2016 stood at $ 20.810 billion of
which $ 15.883 billion was held by SBP and the rest with Banks which are sufficient enough to finance over 5 months of the country's import bill.
Agriculture Review
Agriculture accounts for about 21 percent of Pakistan's Gross Domestic Product and 43.5 percent of employment. Wheat, cotton, rice, sugarcane and
maize being its main crops contribute 25.6 percent to agriculture GDP whereas livestock's share in agriculture value added stood at 56 percent during the
year 2014-15.Agriculture sector recorded a growth of 2.9 percent during the year 2014-15 as compared to growth of 2.7 percent recorded last year.
The year saw agriculture crises of rice and potato where production exceeded demand. Sugarcane crop faced disposal problems and payment difficulties.
Preparing a new strategy for disposing of surplus commodity so that storage capacity could be available for the purchase of next crop, remained the major
challenge for the government in year 2015.
Wheat sowing by a majority of growers and consecutive bumper crops helped supply exceed demand. Consequently, the farmers suffered since their
produce was not purchased. Owing to the glut, the wheat price crashed in the domestic market, reflecting the international trend due to harvesting of
bumper crops in the region. Government encouraged the farmers to shift to other crops like potato, pulses, oilseeds, etc to ensure a balance in the demand
and supply of commodities and earn profit on their produce on time. Policy makers are also worried about next crop of cotton as farmers faced losses in the
current season and Punjab province is running the risk of losing another 15-20 percent area as growers are opting for alternative crops, the fears were
reinforced in various meeting of farmers with Punjab agriculture authorities. According to farmers Pink Bollworm is playing havoc with the crop which
caused 60 % of losses in the recent season. The current BT seed is vulnerable to it and no pesticide is yet effective. Persistent rains resulted in sharp fall in
the output. Price mechanism still remains a problem for cotton growers due to crashing of international market.
Government announced a relief package for farmers to ease out the difficulties being faced by small farmers as the conditions of the agricultural sector did
not inspire confidence. Ministry of National Food Security & Research prepared the Kissan Relief Package in consultation with the provincial governments
to improve the market trends in relation to the crisis of the major crops as one of the various measures to reduce the cost of agriculture inputs and to
increase per acre yield of major crops.
Under Kissan Package, farmers will receive Rs.341 billion in grants, subsidies, markup free loans for solar tube wells for the farmers having land holding
upto 12.5 acres in order to spur sluggish growth in one of the country's main economic sectors. The scheme is the government's largest economic
development programme for the agriculture sector so far.
The government reduced all taxes on the import of modern agriculture machinery from 45 percent to only 9 percent. The turnover tax on rice mills has been
removed altogether. Government also announced special exemption of income tax on installation of Halal Meat plants for four years, as the sector possess
immense opportunities for exports. The relief package is expected to ensure stability in prices of agricultural products.
1
Report
Despite massive drop in lending rates, private sector credit off take remained slow uptil the start of final quarter but then started to move up
gradually in the final months of the year. According to SBP increase in private sector lending was seen towards the end of the year. The
hike in advances was owed to financial close of mega power projects by the year end.
1. CREDIT DISBURSEMENT
During the year 2015, the Bank disbursed an amount of Rs. 95,419.965 million as compared to Rs.81,933.747 million disbursed in the
year 2014 showing a growth of 16.5%. The Bank served 408,456 borrowers during the year. The Bank disburses loans for two purposes
i.e. Production and Development.
Bank has undertaken its initiative for tapping the potential in value added sector and has successfully launched new lending products for
value addition sector. These products include product on small scale storage facility/godowns, products for dehydration of fruits,
vegetables and dates, tobacco barn financing scheme and gurr making products etc. The intent of these products is not only tapping the
potential in value added sector but also is a part of broader framework, the Bank has undertaken for the capacity building of farmers.
During the year 2015 the Bank has disbursed Rs. 662.550 million under the value added products with total outstanding portfolio of Rs.
724.766 million in this sector. With this the Bank has also successfully achieved the structural shift in portfolio composition with
development to production ratio of 26% and 74% respectively.
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Fertilizer WC Fishries
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1.7.3 General Credit to Women
The Bank takes initiative to empower the rural women to play due role for increasing their family income and contributing towards
national progress. For this purpose Bank is providing credit to all credit worthy women those having technical know how & capacity
to payback. It provides credit facilities in different areas like farming, textile and clothing, bamboo cane and related industries and
others etc. The rate of markup is charged as per prevailing rate and monitoring is being exercised by ensuring checking of utilization
by MCOs in 100% cases and sample checking of utilization by the Manager, Zonal Manager, Recovery and Internal Auditors of the
Bank. Bank advanced an amount of Rs. 4,421.772 million against 17,943 number of cases in general credit to women.
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During the year under review, an amount of Rs.2,917.390 million was recovered out of SAM loans with 114% pace against the target of Rs.
2,557.000 million. SAM loans portfolio at the end of the year 2015 was Rs. 22,467.562 million with net reduction of Rs. 3,273.369 million
from Rs. 25,740.931 million on December 31, 2014. Non performing loans accrued being the percentage of total outstanding remained at
13.8% as of December 31, 2015.
Future Outlook
The recovery target of Agri loans for the year 2016 has been fixed as Rs.93.000 billion. The recovery operation will be monitored through
Management Information System (MIS) by using DiMIS (Dynamic Integrated Management Information System) on daily basis by the
Head Office. The same facility will be made available for the field to review the case in default through different aspects. Recovery
performance of the field functionaries will be monitored by controlling officers. Efforts for settlement of SAM loans through newly launched
SAM loan settlement policy would continue unabated. The use of early warning system to monitor addition to SAM loans portfolio will be
made more effective. Recovery efforts through legal course/ action against the defaulters would be vigorously followed.
3. BUSINESS STRATEGY
In line with the directive of honorable Chairman to the Board, the bank arranged two days Strategy Formulation Consultative Sessions
undertaken by Prof. Dr. Zahoor Hassan of Lahore University of Management Sciences (LUMS). The session was an interactive
discussion / deliberations among ZTBL's Board of Directors, Senior Management, Executives and field functionaries were moderated by
Prof. Dr. Zahoor Hassan. Detailed deliberations reviewed bank's operational thrust for its better alignment with the vision which would
ultimately benefit the farming community along with achieving the highest services level by the bank offered to its clientele.
On the basis of deliberations / recommendations thus formulated a detailed action plan was prepared by core business divisions. This
action plan envisages detailed chronology of strategic initiatives to be implemented/ adapted during the coming five years period. Salient
features of the initiatives planned under the subject action plan include;
i. Launching of projects aiming at capacity building of farming community, initially on pilot basis. Increasing yield levels and
enhancing farmer's household incomes through adapting to agriculture best practices is the envisaged outcome. Under this
initiative following are the proposed projects;
a. Enhancing farmers' productivity and income through establishment of service providers.
b. Learning & Skill Development by Progressive Farmers.
c. Learning & Skill Development by provision of opportunities to young farmers through arranging training in collaboration with
agriculture training institutions of the country, like, NAVTTC, TEVTA, PARC, Agriculture University Faisalabad etc.
d. Establishment of Help Desk in order to facilitate the farming community for timely technical advice and technological
solutions.
e. Establishment of permanent display centers and holding of Green Pakistan exhibition.
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ii. Lending operations are planned to be made more effective through focused approach. The projects envisage under lending
operations are;
a. Undertake thorough modalities for arranging suppliers' credit through identification of suppliers.
b. Development of modalities for rationalization of lending products especially in terms of geography.
c. Identification of potential areas for extension of financing facilities in post-harvest process.
d. Recommendation and detailed modalities for devising of tailored products for value chain financing, keeping in view the
geographic endowments.
iii. Launching of banking and financing products under Islamic mode of financing. For this purpose Sharia compliant products both
for asset and liability sides will be developed for its active offering, after having met with all pre-requisites.
iv. Making recovery efforts more effective with especial focus on minimum accretion to SAM (Special Asset Management)
Portfolio.
v. Building up of sustainable deposit base and for this purpose diversifying the liability side product matrix, to be tailored for all
segments of both urban and rural clientele.
vi. Developing alternate delivery channels, ATM facilitations, increase in bank's outreach through opening of new branches,
conversion of loss making branches into profit earning units and rationalization of MCOs' circles.
Future Outlook
State Bank of Pakistan has approved opening of 21 new branches (13 conventional and 8 commercial) to enhance branch network which
will be opened at selected places under Annual Branch Expansion Plan of 2016. Upgradation of old branches by enhancing infrastructure
and IT equipment will be carried out. According to Deposit Mobilization strategy deposit target of Rs. 40,000 million for the year 2016 has
been allocated to Zones. Keeping in view the performance and potential of the Zones, Utility Bills target proposed for the year 2016 is
1,600,000 numbers of bills. Target allocated for the Western Union transactions for the year 2016 has been increased to 20,000
transactions.
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5. FINANCIAL PERFORMANCE OF THE BANK
Despite all constraints, there has been a growing trend in the total assets and advances of the Bank. The assets of the Bank remained at
Rs.187,574 million whereas the assets of the Group as per consolidated annual accounts amounted to Rs.187,884 million. The Bank's
Capital Adequacy Ratio (CAR) as on December 31, 2015 was 49.74% of its risk weighted exposure, as against required by SBP ratio of
10.25% and industry average of 17.3% for year 2015. The Bank earned pre-tax profit of Rs.8,379 million and the Group showed pre-tax
profit of Rs.8,494 million. The classified loans were provided for as per SBP Prudential Regulations during the period under review. The
Bank mobilized its deposits up to Rs.35,948 million as on 31.12.2015. The after tax profit of the Bank remained Rs.5,273 million slightly
lower than Rs.5,417 million in last year due to increased taxation in the reported period.
(Rupees in million)
Particulars 2010 2011 2012 2013 2014 2015
Total Assets 117,586 122,548 131,649 148,448 163,563 187,574
Cash & Bank Balance 13,662 14,233 12,525 12,742 10,085 18,925
Appropriations
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NET ADVANCES
Rupees in million
2015 129,553
2014 108,554
2013 95,312
2012 88,060
2011 84,744
2010 84,793
ASSETS
Rupees in million
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DEPOSITS
Rupees in million
40,000
35,000 35,948
30,000
26,702
25,000
20,000
15,000 14,907
10,000 11,097
9,603 8,962
5,000
0
2010 2011 2012 2013 2014 2015
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5.2 Capital
The authorized capital of the Bank is Rs.125 billion divisible into 12,500,000,000 number of shares. The paid up capital of the Bank as on
31.12.2015 was Rs.12.522 billion. The issuance of preference shares worth Rs.54.461 billion and ordinary shares worth Rs.40.156
billion are under consideration.
5.3 Credit & Entity Ratings
JCR-VIS Credit Rating Company, Limited, Karachi (JCR-VIS) in their report dated June 18, 2015, has reaffirmed the entity rating of the
Bank at 'AAA/A-1+' (Triple A/A- One Plus),previously rated on August 8,2014. JCR-VIS has also reaffirmed ratings of 'AAA/A-1+'
assigned to Government Guaranteed Obligations of ZTBL. Outlook on the rating is stable. According to Rating Company there is a
notable improvement in the standalone risk profile of the institution.
5.4 Earnings per Share (EPS)
During the year under review the basic earnings per share remained Rs. 4.211 as compared to Rs.4.326 in year 2014.The Group posted
an EPS of Rs.4.267 as compared to 4.357 last year.
5.5 Conversion of SBP Debt into Equity
In view of future financial viability and sustainability of the Bank, in a meeting held on 11th July 2014, among Ministry of Finance (MoF),
State Bank of Pakistan (SBP), Securities & Exchange Commission of Pakistan (SECP) and the Bank, it was decided to convert
outstanding SBP debt-principal (Rupees 51.257 billion), sub-ordinated loan (Rupees 3.204 billion) and accrued mark-up (Rupees 35.030
billion) owed by the Bank to SBP as on 30 June 2014 into equity investment of SBP in the Bank. It was also decided that Bank's claim
against Government of Pakistan (GoP) on account of mark-up differential and various Presidential Relief Packages shall be waived off by
the Bank procedurally. As decided, the Board of Directors of the Bank in its meeting dated 18th July, 2014 and the shareholders of the Bank
in their extra ordinary general meeting dated 13th August, 2014 approved the conversion of SBP debt of Rupees 89.491 billion into
8,949,098,476 fully paid-up ordinary shares as equity investment of SBP in the Bank and the Bank's claim against the GoP was waived-
off / written-off.
However, subsequent to the reporting date, it was mutually agreed between the Bank and SBP that SBP's debt - principal amounting to
Rs. 54.460 billion ( SBP borrowings amounting to Rs. 51.257 billion and sub ordinated loan amounting Rs. 3.204 billion) be converted into
redeemable preferences shares carrying a mark-up of 7.5% per annum, redeemable in one bullet payment on December 31,2025. The
markup on preference shares shall be payable half yearly on June 30 and December 31, each year and shall be the contractual obligation
of the Bank.
Mark-up on the existing debt shall be accrued upto December 31, 2015 as per existing arrangements, leading to increase in accrued
mark-up from Rs. 35.030 billion as on June 30, 2014 to Rs. 40.156 billion as on December 31, 2015. The accrued mark up of Rs. 40.156
billion be converted into ordinary shares of the Bank, which has been shown as share deposit money of the Bank. The Board of Directors
in their meeting held on February 02,2016 and further in consultation with SBP, resolution by circulation dated February 19 ,2016 was
approved by the Board of Directors of the Bank and has resolved to convert of SBP debt into preference shares and mark-up into ordinary
shares of the Bank for which members approval will be obtained. The principal of the preference shares and return thereon shall be
guaranteed by the Federal Government of Pakistan.
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Performance Management Policy of the Bank is based on the concept of Pay for performance, i.e. higher the performance, higher the
reward. Annual Merit Increase was granted to 1,500 officers on the basis of final score of Performance Appraisal Reports (PARs). A
Grievances Handling Committee (GHC) was established to redress the grievances of the employees internally (at Bank level) which would
help in reduction of litigation.
The improvement of HR policies and systems is a continuous process. During the year 2015, various HR policies were updated. To
enhance the competencies of manpower, about 76 courses were conducted and 2,362 officers/staff were trained in different areas, 230
trainings were imparted at other institutes while 98 workshops were held in zones.
In order to motivate the Bank employees, a good number of policies especially relevant to monetary benefits based on length of service and
other pay/perks etc. were reviewed by the Board of Directors during the year 2015. Role & responsibilities of Key Executives and conflict of
interest for all employees of the Bank have also been reviewed as per requirement. Amendments in staff Regulations-2015 (severance
benefits) car loan, depreciation policy, transfer posting (job rotation) policy, Job description of field functionaries were made. To boost the
morale of employees and minimize the reservations towards HR Policies, a former Honorable Justice of Supreme Court of Pakistan has
been appointed as Ombudsman for grievance resolution which is working effectively.
Future Outlook
The management of the Bank considers all of its employees as the most important assets for achieving institutional objectives. For the
purpose, Human Resource Policies have substantially been updated/ improved. Motivation and mobilization of human resource for better
efficiency through a series of incentives, i.e. Staff Advances, Welfare Activities, Bonuses, and Cash awards will be continued and gradually
improved, in future.
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Future Outlook
Already configured and parameterized ERP suit of applications will be implemented practically in all branches after parallel testing/UAT
phase. In coming year all retail customers' activities like deposits, transactions, and other would be done through CBAS by completely
replacing a legacy system cFOCS /COBOL up to December 31, 2016. After User Acceptance Testing (UAT) carried out by users of the
Bank, now Centralized Branch Automation System (CBAS) would be deployed in all the branches as Parallel Go Live w.e.f 01.01.2016
along with Centralized Field Operations Computerization System (cFOCS). All branches will be moved towards the branchless banking by
introduction of Alternative Delivery Channels (ADC) and mobile phone banking services will be extended to all branches of the Bank.
Processing of ATM cards have been started which will be distributed in coming year. To enhance or improve the processing of treasury
system of the Bank, treasury operations/system will be integrated with ERP-EBS. Anti Money Laundering System is under testing process
and will be deployed shortly.
9. TECHNOLOGY DISSEMINATION
Endeavour has been made to introduce and demonstrate latest agriculture technologies like solar energy tube well, solar fruit and
vegetables dryer, bio-gas for running tube well, tunnel farming, small agricultural machinery for saving time and labour, sprinkler and drip
irrigation system, bee keeping, animal fattening, artificial insemination for breed improvement, soil water testing etc. At ZTBL farm off-
season tomato crop has been grown in tunnels for demonstrations. During 2015, organic winter vegetables like ice berg, Broccoli,
Cabbage, Cauliflower, Turnip, Parsley etc were grown under Organic Farming Initiative Program. Brochures and leaflets were printed in
local languages and disseminated to all field functionaries to further disseminate to enhance the access of farmers to the latest agriculture
information. One day workshop and field day at Farm house on Ostrich Farm Management and Fish Farming respectively was arranged.
Counseling services were also provided to farmers regarding various agricultural activities and new technologies. Two acres have been
reserved for rose cultivation. Different varieties of plants like Peach, Pecon Nuts, Seedless Citrus, Pear, Plum and Olive etc were imported
from various organizations like Agriculture Research Station Swat, Agriculture Research institute Tarnab, Peshawar for gap filling.
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Future outlook
Boards' Committee on Agriculture Technology placed a lot of emphasis on technology dissemination to farmers and creating linkages with
service providers. It would be pursued and taken ahead during the next year.
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The Bank also sponsored Rs.3,00,000/- only to M/s. Pakistan Federation Baseball on the occasion of 12th West Asia Baseball Cup-2015
held on February 23-28, 2015. Allama Iqbal Bridge Tournament held at Gymkhana Club Lahore on 8-9 November, 2015 was sponsored
with an amount of Rs. 25,000/-.
On March 19-20, 2015 an Agri-Pak Exhibition & Conference was arranged by Dawn media group, which was sponsored by the Bank up to
amount of Rs. 2,50,000, in which the Bank exhibited its stall for technology dissemination purpose. Joint advertisement with Dawn was
also arranged. The Bank jointly arranged with State Bank of Pakistan an awareness program on Poultry, Livestock, Fisheries,
Horticulture and Agriculture Financing held during October, 2015 at State Bank Bahawalpur. The Bank contributed an amount of Rs.
15,000 for this event.
ZTBL is Platinum member and approved employer of ACCA since January, 2010. Bank has provided 103 internships to the
qualified ACCA since 2010, while thirteen ACCA qualified interns were trained during the year 2015 and they are still working with ZTBL.
Many ACCA qualified students are being offered ACCA internships every year as per part of Corporate Social Responsibility.
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Financial Performance
During the year, KSSL witnessed 55.80% increase in it revenue over the last year. Profit after Taxation was Rs.70.487 million compared to
Rs. 41.299 million during the previous year, reflecting 70.68% increase in the company's earning performance, resulting into Earning per
Share (EPS) of Rs.7.05 as compared to Rs. 4.13 per share in 2014. The Company being a wholly owned subsidiary of ZTBL neither
proposes any dividend to be paid nor transferred any sum to any specific Fund/Reserve for the purpose.
Future Outlook
KSSL has a strong vision and passion to assist the ZTBL by providing support staff and taking over all non-core/auxiliary activities of the
bank so that the bank may concentrate on its core banking activities. KSSL intends to utilize its experience in security services by
establishing a wholly owned subsidiary security company under the Companies Ordinance 1984. The internal audit function will be
further strengthened for objective and systematic review of operations of KSSL and to ensure that the resources are utilized effectively.
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CORPORATE INFORMATION
(As on 31.12.2015)
Location of Assets: In Head Office and in Zonal and Branch offices located at various
positions across the country
Consideration for
Issuance of Shares:
Preference Shares: Rs. 54,461,536,320
Ordinary Shares: Rs. 40,155,991,742
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SHAREHOLDING OF ZTBL
Sr. Amount (Rs.)
Name of Share Holder Number of Shares
No.
01 Government of Pakistan 1,251,189,067 12,511,890,670
* Certificates of shares of Government of Erstwhile East Pakistan have not yet been issued .
Appointment of the Chairman and members of the Board of Directors has been made by the Government of Pakistan being the major
shareholder u/s (11) sub section 3(a) of the Banking Nationalization Act-1974. Bank adopts the remuneration policy for Board Members as
given in Section 78 of the Article of Association of the Bank. During 11th Annual General Meeting of the Bank, the shareholders approved
the following remuneration/fees and other benefits for the members while attending the meeting of the Board of Directors or its sub
committees.
(Rs. in million)
Name of Fund for year ended 31.12.2015*
Contributory Provident Fund 875.912
Gratuity Fund under SR-2005 2,148.580
General Provident Fund (Officers) 2,540.828
General Provident Fund (Staff) 719.208
Employees Provident Fund 66.545
Gratuity Fund under SSR-1961 2,012.007
Pension Fund 7,803.785
Benevolent Fund (Officers) 903.603
Benevolent Fund (Staff) 422.975
Employees Benefit Fund 147.602
*Un-audited figures
The Bank also operates two unfunded schemes namely, Leave encashment and Post Retirement Medical Benefit scheme.
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Meetings of the Board
Eight (08) meetings of the Board were held during the year 2015. Attendance of the members remained as under: -
12th Annual General Meeting of the Bank was held on April 20, 2015 at Islamabad.
Acknowledgement
In the end, Board of Directors extends sincerest thanks to our valued customers especially to the farming community for their
patronage, to our employees for working as a committed team, to our shareholders for their support, trust and confidence and
State Bank of Pakistan and other regulatory bodies for their continued guidance .
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BDO Ebrahim & Co. Riaz Ahmad & Company
Chartered Accountants Chartered Accountants
3rd Floor, Saeed Plaza, 2-A, ATS Centre, 30-West
22-East, Blue Area, Fazal-ul-Haq Road, Blue Area,
Islamabad - 44000, Islamabad
Pakistan
REVIEW REPORT TO THE MEMBERS ON THE DIRECTORS' STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF
THE CODE OF CORPORATE GOVERNANCE AND PUBLIC SECTOR COMPANIES (CORPORATE GOVERNANCE) RULES, 2013
We have reviewed the enclosed Statement of Compliance with the best practices (the Statement) contained in the Code of Corporate
Governance ("the Code) and Public Sector Companies (Corporate Governance) Rules, 2013 ("the Rules") prepared by the Board of
Directors of Zarai Taraqiati Bank Limited ("the Bank) for the year ended December 31, 2015 to comply with Regulation G-1 of
Prudential Regulations for Corporate / Commercial Banking issued by the State Bank of Pakistan.
The responsibility for compliance with the Code and the Rules is that of the Board of Directors of the Bank. Our responsibility is to
review, to the extent where such compliance can be objectively verified whether the Statement reflects the status of the Bank's
compliance with the provisions of the Code and the Rules and report if it does not and to highlight any non-compliance with the
requirements of the Code and the Rules. A review is limited primarily to inquiries of the Bank personnel and review of various documents
prepared by the Bank to comply with the Code and the Rules.
As part of our audit of the financial statements, we are required to obtain an understanding of the accounting and internal control
systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Boards'
Statement on internal control covers all risks and controls or to form an opinion on the effectiveness of such internal controls, the Bank's
corporate governance procedures and risks.
The Code and the Rules require the Bank to place before the Board of Directors for their consideration and approval, related party
transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm's length transactions and
transactions which are not executed at arm's length price recording proper justification for using such alternate pricing mechanism.
Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have
ensured compliance of the above requirement to the extent of approval of related party transactions by the Board of Directors and
placement of such transactions before the audit committee. We have not carried out any procedures to determine whether the related
party transactions were undertaken at arm's length prices or not.
Following instances of non-compliance with the requirements of the Code and the Rules were observed which are not stated in the
Statement of Compliance:
(i) The Committees and Board members shall carry out their evaluation on annual basis as required by rule 8(1) of the Rules. We
understand from management the performance evaluation of the members of the Board including the Chairman and the
Chief Executive has been conducted by Pakistan Institute of Corporate Governance during the year, however, the same has
not been presented to the Board for approval as required by the rule 8(1) of the Rules.
(ii) The Board has not formulated significant policies regarding Corporate Social Responsibility and Health Safety and
Environment as required by rule 5(7)(j) and 5(7)(m) respectively of the Rules.
Based on our review, except for the above instances of non-compliance, nothing has come to our attention, which causes us to believe
that the Statement of Compliance does not appropriately reflect the Bank's compliance, in all material respects, with the best practices
contained in the Code and the Rules, as applicable to the Bank for the year ended December 31, 2015.
Further, we highlight below instances of non-compliance with the requirements of the Code and the Rules as reflected in the note /
paragraph in the Statement of Compliance:
Note / paragraph Description reference
3. A casual vacancy occurring on the Board was not filled up by the directors within 90 days as required by rule 3(4) of the Rules.
36. The Bank did not prepare monthly accounts for circulation amongst the Board members as required by rule 10(2) of the Rules.
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3 A casual vacancy occurring on the Board was filled up by the directors 3(4)
within ninety days.
4 The directors have confirmed that none of them is serving as a director on 3(5)
more than five public sector companies and listed companies
simultaneously, except their subsidiaries.
5 All the resident Directors of the Bank are registered as tax payers and
none of them has defaulted in payment of any loan to the banking
company, a Development Financial Institution (DFI) or a Non-Banking
Financial Institution (NBFI) or, being a member of stock exchange, has
been declared as a defaulter by that stock exchange.
6 The appointing authorities have applied the fit and proper criteria given in 3(7)
the Annexure in making nominations of the persons for election as Board
members under the provisions of the Ordinance.
7 The chairman of the Board is working separately from the chief executive 4(1)
of the Bank.
8 The chairman has been elected from amongst the independent directors. 4(4)
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9 The Board has evaluated the candidates for the position of the chief 5(2)
executive on the basis of the fit and proper criteria as well as the
guidelines specified by the Commission.
10 (a) The Bank has prepared a "Code of Conduct" and has ensured that 5(4)
appropriate steps have been taken to disseminate it throughout the Bank
along with its supporting policies and procedures, including posting the
same on the Banks website www.ztbl.com.pk
(b) The Board has set in place adequate systems and controls for the
identification and redressal of grievances arising from unethical practices.
11 The Board has established a system of sound internal control, to ensure 5(5)
compliance with the fundamental principles of probity and propriety;
objectivity, integrity and honesty; and relationship with the stakeholders,
in the manner prescribed in the Rules.
12 The Board has developed and enforced an appropriate conflict of interest 5(5)(b)(ii)
policy to lay down circumstances or considerations when a person may
be deemed to have actual or potential conflict of interests, and the
procedure for disclosing such interest.
14 (a) The Board has ensured equality of opportunity by establishing open 5(5)(c)(ii)
and fair procedures for making appointments and for determining terms
and conditions of service.
15 The Board has ensured compliance with the law as well as Banks 5(5)(c)(iii)
internal rules and procedures relating to public procurement, tender
regulations, and purchasing and technical standards, when dealing with
suppliers of goods and services, in accordance with the PPRA Rules.
17 All the powers of the Board have been duly exercised and decisions on
material transactions, including appointment and determination of
remuneration and terms and conditions of employment of the President
and Chief Executive Officer (executive Director) and non-executive
Directors, have been taken by the Board/shareholders.
18 The Board has quantified the outlay of any action in respect of any 5(8)
service delivered or goods sold by the Bank as a public service obligation,
and has submitted its request for appropriate compensation to the
Government for consideration.
19 (a) The Board has met at least four times during the year. 6(1)
(b) Written notices of the Board meetings, along with agenda and working 6(2)
papers, were circulated at least seven days before the meetings.
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The Board has also monitored and assessed the performance of senior
management on quarterly basis.
21 The Board has reviewed and approved the related party transactions 9
placed before it after recommendations of the audit committee. A party
wise record of transactions entered into with the related parties during the
year has been maintained.
22 The Board has approved the profit and loss account for, and balance 10
sheet as at the end of, the first, second and third quarter of the year as
well as the financial year end, and has placed the annual financial
statements on the Banks website.
24 (a) The Board has formed the requisite committees, as specified in the 12
Rules.
(b) The committees were provided with written term of reference defining
their duties, authority and composition.
(c) The minutes of the meetings of the committees were circulated to all
the Board members.
27 The directors' report for this year has been prepared in compliance with 17
the requirements of the Ordinance and the Rules and fully describes the
salient matters required to be disclosed.
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28 The directors, CEO and executives do not hold any interest in the shares 18
of the Bank.
30 The financial statements of the Bank were duly endorsed by the chief 20
executive and chief financial officer, before approval of the Board.
31 The Board has formed an Audit Committee, with defined and written 21
terms of reference, and having the following members:
32 The Board has set up an effective internal audit function, which has an 22
audit charter, duly approved by the audit committee, and which worked in
accordance with the applicable standards.
33 The Bank has appointed its external auditors in line with the requirements 23
envisaged under the Rules.
34 The external auditors of the Bank have confirmed that the firm and all its 23(4)
partners are in compliance with International Federation of Accountants
(IFAC) guidelines on Code of Ethics as applicable in Pakistan.
35 The external auditors have not been appointed to provide non-audit 23(5)
services and the auditors have confirmed that they have observed
applicable guidelines issued by IFAC in this regard.
36 The company has complied with all the corporate and financial reporting
requirements of the Rules except preparation/circulation of monthly
accounts.
.. ..
(SYED TALAT MAHMOOD) (SYED YAWAR ALI)
President/CEO Chairman
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SCHEDULE II
We confirm that all other material requirements envisaged in the Code and Rules have been complied with except for the
following, towards which reasonable progress is being made by the Company to seek compliance by the end of next
accounting year:
33