Auditors Report 2011

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Financials -2011(Auditors Report to the Shareholders)

103Premier Bank LimitedAnnual Report 2011


IntroductionWe have audited the accompanying Consolidated Financial Statements of The Premier Bank Limited (the bank) which comprise Consolidated Balance Sheet as at December 31, 2011 and the consolidated Profit and Loss account, Statement of Changes in Equity and Cash Flows Statement for the year then ended, and also the Financial Statements of The Premier Bank Limited (the bank), which comprise the Balance Sheet as at December 31, 2011 and the Profit and Loss account, Statement of Changes in Equity and Cash Flows Statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

The financial statements of the Bank for the year ended December 31, 2010 were audited by Hoda Vasi Chowdhury & Co, Chartered Accountants who issued an unqualified opinion on March 01, 2011.

Managements responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these Consolidated Financial Statements in accordance with Bangladesh Financial Reporting Standards (BFRSs), Bank Companies Act 1991, the rules and regulations issued by the Bangladesh Bank, the Companies Act 1994, the Securities and Exchanges Rules 1987 and other applicable laws and regulations. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of Financial Statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors responsibilityOur responsibility is to express an opinion on these Consolidated Financial Statements based on our audit. We conducted our audit in accordance with Bangladesh Standards on Auditing (BSAs). Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Consolidated Financial Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Consolidated Financial Statements. The procedures selected depend on the auditors judgment, including the assessment of the risk of material misstatement of the Consolidated Financial Statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entitys preparation and fair presentation of the Consolidated Financial Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the Consolidated Financial Statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the Consolidated Financial Statements referred prepared in accordance with Bangladesh Accounting Standards (BASs) and Bangladesh Financial Reporting Standards (BFRSs) give a true and fair view of the Consolidated Financial Position of The Premier Bank Limited as at December 31, 2011 and of the results of its Financial Performance and its Cash Flows for the year then ended and comply with the Bank Company Act 1991, the rules and regulations issued by the Bangladesh Bank, the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations.

Howlader Yunus & Co.Chartered Accountants

AUDITORS REPORTTO THE SHAREHOLDERS OF THE PREMIER BANK LIMITED


AU

DIT

ORS

REP

ORT

We also report that:

i. 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 made due verification thereof;

ii. in our opinion, proper books of account as required by law have been kept by the Bank so far as it appeared from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

iii. the Banks Balance Sheet and Profit and Loss Account dealt with by the report are in agreement with the books of account and returns;

iv. the expenditure incurred was for the purposes of the Banks operations;

v. the Financial Position of the Bank as at December 31, 2011 and the profit for the year then ended have been properly reflected in the Financial Statements; the Financial Statements have been prepared in accordance with the generally accepted accounting principles;

vi. the Financial Statements have been drawn up in conformity with the Bank Companies Act. 1991 and in accordance with the accounting rules and regulations issued by the Bangladesh Bank;

vii. adequate provisions have been made for advances which are, in our opinion, doubtful of recovery;

viii. the records and statements submitted by the branches have been properly maintained and consolidated in the Financial Statements;

ix. the Financial Statements conform to the prescribed standards set in the accounting regulations issued by the Bangladesh Bank after consultation with the professional accounting bodies of Bangladesh;

x. guideline of Core Risk Management issued by the Bangladesh Bank vide BRPD Circular # 17 dated 07 October 2003 were complied;

xi. the information and explanations required by us have been received and found satisfactory; xii. capital adequacy ratio (CAR) as required by law has been maintained adequately during the year;

xiii. during the course of our audit we did not come across any matter which was to be brought to the notice of the shareholders of the Bank; and

xiv. we have reviewed over 80% of the risk weighted assets of the Bank and we have spent around 5,000 person hours for the audit of the books and accounts of the Bank.

Dated: Dhaka18 March 2012 Chartered Accountants


PROPERTY AND ASSETS

Cash 3(a) 5,145,249,299 3,706,403,939 In hand (including foreign currencies) 3.1(a) 627,653,018 489,589,724 Balance with Bangladesh Bank and its agent bank(s) 3.2 4,517,596,281 3,216,814,215 (including foreign currencies)

Balance with other banks and financial institutions 4(a) 4,039,677,429 3,358,902,674 In Bangladesh 3,062,932,497 2,442,217,030 Outside Bangladesh 4.3(a) 976,744,932 916,685,644 Money at call on short notice 5 - 2,140,000,000

Investments 6(a) 11,968,606,315 10,195,000,425 Government securities 6.1 9,239,800,455 7,289,197,004 Others 6.2(a) 2,728,805,860 2,905,803,421

Loans, advances, and lease/ investments 7(a) 49,774,914,327 46,400,574,078 Loans, cash credits, overdrafts, etc 7.2(a) 45,918,954,532 40,376,712,865 Bills purchased and discounted 7.9 3,855,959,795 6,023,861,213

Fixed assets including premises, furniture and fixtures 8(a) 1,220,865,202 652,524,875

Other assets 9(a) 2,801,794,355 1,786,941,660 Non-banking assets - -

Total Assets 74,951,106,927 68,240,347,651

LIABILITIES AND CAPITAL

Liabilities Borrowings from other banks, financial institutions and agents 10 2,679,204,094 2,388,876,025

Deposits and other accounts 11(a) 60,692,971,535 54,691,466,383 Savings bank/ Mudaraba Saving deposits 2,930,981,267 3,023,987,904 Fixed deposits/Mudaraba term deposits 42,859,724,463 38,384,242,957 Current deposits and other accounts 14,093,517,649 12,214,133,147 Bills payable 808,748,156 1,069,102,375

Other liabilities 12(a) 4,905,525,299 4,882,889,511

Total Liabilities 68,277,700,928 61,963,231,919

Capital/ Shareholders' Equity

Paid-up capital 13 3,818,611,102 2,914,970,312 Minority interest 11,161 - Statutory reserve 14 1,800,273,471 1,651,254,947 Other reserve 15 186,054,760 300,673,331 Retained earnings 16(a) 868,455,505 1,410,217,142 Total Shareholders' Equity 6,673,405,999 6,277,115,732 Total Liabilities and Shareholders' Equity 74,951,106,927 68,240,347,651

The Premier Bank LimitedConsolidated Balance Sheet as at 31st December 2011

Amount in TakaAt

2010At

2011Notes


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Off-Balance Sheet Items

Contingent Liabilities 24,164,426,127 24,737,580,086 Acceptances and endorsements 11,140,822,664 7,468,823,338 Letters of guarantee 17.1 5,280,229,073 5,580,545,427 Irrevocable letters of credit 7,380,058,009 10,780,189,873 Bills for collection 363,316,381 372,539,448 Other contingent liabilities 17.2 - 535,482,000

Other commitments 18 4,049,255,000 1,206,630,900 Documentary credits and short term trade-related transactions - - Forward assets purchase and forward deposits placement - - Spot and forward foreign exchange contracts 4,049,255,000 1,206,630,900 Undrawn note issuance and revolving underwriting facilities - - Undrawn formal standby facilities, credit lines and other commitments - -

Total Off-Balance Sheet Items 28,213,681,127 25,944,210,986

The Premier Bank LimitedConsolidated Balance Sheet as at 31st December 2011

Amount in Taka20102011Notes

These Financial Statement should be read in conjunction with the annexed notes.

Dated : Dhaka18 March 2012

See annexed auditors' report to the shareholders of date

Chartered Accountants

Chairman Director Director Director Managing Director


OPERATING INCOME Interest income/profit on islamic investments 20(a) 7,417,020,486 4,979,096,308 Interest/profit paid on deposits, borrowings,etc 21(a) (5,679,272,997) (3,474,331,176)Net interest income/ net profit on investments 1,737,747,489 1,504,765,132

Investment income 22 881,538,702 1,826,345,437 Commission, exchange and brokerage 23(a) 898,353,374 709,515,239 Other operating income 24(a) 806,766,248 735,825,602 2,586,658,324 3,271,686,278 Total Operating Income (A) 4,324,405,813 4,776,451,410

OPERATING EXPENSES Salary and allowances 25(a) 698,760,808 607,236,741 Rent, taxes, insurance, electricity, etc 26(a) 617,958,429 469,981,685 Legal expenses 27(a) 10,539,988 2,082,979 Postage, stamps, telecommunication, etc 28(a) 31,210,900 28,545,969 Stationery,printing, advertisement, etc 29(a) 200,655,384 213,779,228 Chief executive's salary and fees 30 3,921,830 5,787,095 Directors' fees 31 3,125,000 2,810,000 Auditors' fee 251,950 244,144 Charges on loan losses (Annexure-E) 868,471,588 256,238,731 Charges on losses for portfolio 695,860,111 - Depreciation and repair of Bank's assets 32(a) 110,595,491 83,865,235 Other expenses 33(a) 265,754,898 245,895,336 Total Operating Expenses (B) 3,507,106,377 1,916,467,143 Profit before provision (C = A-B) 817,299,436 2,859,984,267

Provision for loans and advances 34 24,855,873 261,600,000 Provision for off-balance sheet items 12.3 (52,591,882) 81,396,416 Provision for investment in shares 12.4.4 - 2,500,000 Other provisions 12.4.2,3 (1,575,472) (13,330,410)Total provision (D) (29,311,481) 332,166,006 Profit before taxation (C-D) 846,610,917 2,527,818,261 Provision for taxation 12.5(aa) Current tax 333,306,709 753,800,498 Deferred tax 2,405,370 1,999,600 335,712,079 755,800,098 Profit after taxation 510,898,838 1,772,018,163 Retained earnings brought forward 1,410,217,142 813,546,932 Profit available for appropriation 1,921,115,980 2,585,565,095 Appropriations Statutory reserve 14 149,018,524 502,662,553 Issue of bonus shares 16 903,640,790 672,685,400 Minority interest 1,161 - 1,052,660,475 1,175,347,953 Retained earnings carried forward 868,455,505 1,410,217,142 Earnings per share (EPS) 35(a) 1.34 6.08

The Premier Bank LimitedConsolidated Profit and Loss Statement for the year ended 31st December 2011









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Cash Flows from Operating Activities Interest received in cash 8,298,559,188 6,805,441,744 Interest paid 21(a) (5,679,272,997) (3,474,331,176)Fee and commission received in cash 409,113,936 373,167,379 Payments to employees (682,682,638) (563,023,836)Payments to suppliers (227,904,351) (232,571,910)Income taxes paid 12.5 (806,562,316) (559,169,124)Receipts from other operating activities 24(a) 806,766,248 735,825,602 Payments for other operating activities (943,780,835) (1,011,276,404)Cash generated from operating activities before changesin operating assets and liabilities 1,174,236,235 2,074,062,275

Increase/decrease in operating assets and liabilities Loans and advances to customers (4,242,811,837) (12,735,986,813)Other assets (1,014,852,695) (426,669,802)Deposits from other banks 290,328,069 1,171,544,477 Deposits from customers 6,001,505,152 16,595,846,607 Other liabilities 517,737,178 917,329,728 1,551,905,867 5,522,064,197 Net cash from operating activities (A) 2,726,142,102 7,596,126,472 Cash Flows from Investing Activities Purchase/sale of trading securities, shares, bonds, etc (518,852,550) (2,265,441,959)Purchase of property, plant and equipment (609,763,962) (188,047,414)Net cash used in investing activities (B) (1,128,616,512) (2,453,489,373)

Cash Flows from Financing Activities Dividend paid - - Issue of shares - - Net cash from financing activities (C) - - Net increase in cash (A+B+C) 1,597,525,590 5,142,637,099 Effects of exchange rate changes on cash and cash equivalents 23 489,239,437 336,347,860 Cash and cash equivalents at beginning of the year 16,193,830,285 10,714,845,326 Cash and cash equivalents at end of the year (*) 18,280,595,312 16,193,830,285 (*) Cash and cash equivalents at the end of the year: Cash in hand (including foreign curriencies) 3.1(a) 627,653,018 489,589,724 Investments in government securities 9,095,668,584 6,988,523,673 Money at call on short notice 5 - 2,140,000,000 Balance with Bangladesh Bank and its agent bank(s) 3.2 4,517,596,281 3,216,814,215 Balance with other banks and financial institutions 4(a) 4,039,677,429 3,358,902,674 18,280,595,312 16,193,830,285 Net operating cash flow per share (NOCFPS) 35.1(a) 35.1 3.08 7.12

The Premier Bank LimitedConsolidated Cost Flow Statement for the year ended 31st December 2011








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The Premier Bank LimitedBalance Sheet as at 31st December 2011



PROPERTY AND ASSETS

Cash 3 5,145,095,242 3,706,403,939 In hand (including foreign currencies) 3.1 627,498,961 489,589,724 Balance with Bangladesh Bank and its agent bank(s) 3.2 4,517,596,281 3,216,814,215 (including foreign currencies)

Balance with other banks and financial institutions 4 3,885,679,875 3,358,902,674 In Bangladesh 4.2 2,913,035,543 2,442,217,030 Outside Bangladesh 4.3 972,644,332 916,685,644 Money at call on short notice 5 - 2,140,000,000

Investments 6 11,638,596,315 10,195,000,425 Government securities 6.1 9,239,800,455 7,289,197,004 Others 6.2 2,398,795,860 2,905,803,421

Loans, advances, and lease/ investments 7 50,101,109,748 46,400,574,078 Loans, cash credits, overdrafts, etc 7.2 46,245,149,953 40,376,712,865 Bills purchased and discounted 7.9 3,855,959,795 6,023,861,213

Fixed assets including premises, furniture and fixtures 8 1,216,308,396 652,524,875

Other assets 9 2,793,711,428 1,786,941,660 Non-banking assets - -

Total Assets 74,780,501,004 68,240,347,651

LIABILITIES AND CAPITAL

Liabilities Borrowings from other banks, financial institutions and agents 10 2,679,204,094 2,388,876,025

Deposits and other accounts 11 60,628,337,429 54,691,466,383 Savings bank/ Mudaraba Saving deposits 2,930,981,267 3,023,987,904 Fixed deposits/Mudaraba term deposits 42,859,724,463 38,384,242,957 Current deposits and other accounts 14,028,883,543 12,214,133,147 Bills payable 808,748,156 1,069,102,375

Other liabilities 12 4,849,273,597 4,882,889,511

Total Liabilities 68,156,815,120 61,963,231,919 Capital/ Shareholders' Equity

Paid-up capital 13 3,818,611,102 2,914,970,312 Statutory reserve 14 1,800,273,471 1,651,254,947 Other reserve 15 186,054,760 300,673,331 Retained earnings 16 818,746,551 1,410,217,142 Total Shareholders' Equity 6,623,685,884 6,277,115,732 Total Liabilities and Shareholders' Equity 74,780,501,004 68,240,347,651


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The Premier Bank LimitedBalance Sheet as at 31st December 2011



Off-Balance Sheet Items

Contingent Liabilities 24,164,426,127 24,737,580,086 Acceptances and endorsements 11,140,822,664 7,468,823,338 Letters of guarantee 17.1 5,280,229,073 5,580,545,427 Irrevocable letters of credit 7,380,058,009 10,780,189,873 Bills for collection 363,316,381 372,539,448 Other contingent liabilities 17.2 - 535,482,000

Other commitments 18 4,049,255,000 1,206,630,900 Documentary credits and short term trade-related transactions - - Forward assets purchase and forward deposits placement - - Spot and forward foreign exchange contracts 4,049,255,000 1,206,630,900 Undrawn note issuance and revolving underwriting facilities - - Undrawn formal standby facilities, credit lines and other commitments - -

Total Off-Balance Sheet Items 28,213,681,127 25,944,210,986







The Premier Bank LimitedProfit and Loss Statement for the year ended 31st December 2011



OPERATING INCOME Interest income/profit on islamic investments 20 7,222,843,470 4,979,096,308 Interest/profit paid on deposits, borrowings, etc 21 (5,540,047,409) (3,474,331,176)Net interest income/ net profit on investments 1,682,796,061 1,504,765,132

Investment income 22 881,538,702 1,826,345,437 Commission, exchange and brokerage 23 859,376,503 709,515,239 Other operating income 24 766,185,356 735,825,602 2,507,100,561 3,271,686,278 Total Operating Income (A) 4,189,896,622 4,776,451,410

OPERATING EXPENSES Salary and allowances 25 685,119,497 607,236,741 Rent, taxes, insurance, electricity, etc 26 582,094,613 469,981,685 Legal expenses 27 9,440,878 2,082,979 Postage, stamps, telecommunication, etc 28 31,000,779 28,545,969 Stationery,printing, advertisement, etc 29 200,015,325 213,779,228 Chief executive's salary and fees 30 3,921,830 5,787,095 Directors' fees 31 3,125,000 2,810,000 Auditors' fee 251,950 244,144 Charges on loan losses (Annexure-E) 868,471,588 256,238,731 Charges on losses for portfolio 695,860,111 - Depreciation and repair of Bank's assets 32 109,341,965 83,865,235 Other expenses 33 256,160,465 245,895,336 Total Operating Expenses (B) 3,444,804,001 1,916,467,143 Profit before provision (C = A-B) 745,092,621 2,859,984,267

Provision for loans and advances 34 24,855,873 261,600,000 Provision for off-balance sheet items 12.3 (52,591,882) 81,396,416 Provision for investment in shares 12.4.4 - 2,500,000 Other provisions 12.4.2,3 (1,575,472) (13,330,410)Total provision (D) (29,311,481) 332,166,006 Profit before taxation (C-D) 774,404,102 2,527,818,261 Provision for taxation 12.5 Current tax 310,810,009 753,800,498 Deferred tax 2,405,370 1,999,600 313,215,379 755,800,098 Profit after taxation 461,188,723 1,772,018,163 Retained earnings brought forward 1,410,217,142 813,546,932 Profit available for appropriation 1,871,405,865 2,585,565,095 Appropriations Statutory reserve 14 149,018,524 502,662,553 Issue of bonus shares 16 903,640,790 672,685,400 1,052,659,314 1,175,347,953 Retained earnings carried forward 818,746,551 1,410,217,142 Earnings per share (EPS) 35 1.21 6.08







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The Premier Bank LimitedCash Flow Statement for the year ended 31st December 2011



Cash Flows from Operating Activities Interest received in cash 8,104,382,172 6,805,441,744 Interest paid 21 (5,540,047,409) (3,474,331,176)Fee and commission received in cash 19 370,137,066 373,167,379 Payments to employees (669,041,327) (563,023,836)Payments to suppliers (227,244,028) (232,571,910)Income taxes paid 12.5 (806,562,316) (559,169,124)Receipts from other operating activities 24 766,185,356 735,825,602 Payments for other operating activities (897,013,355) (1,011,276,404)Cash generated from operating activities before changes inoperating assets and liabilities 1,100,796,159 2,074,062,275 Increase/decrease in operating assets and liabilities Loans and advances to customers (4,569,007,258) (12,735,986,813)Other assets (1,006,769,768) (426,669,802)Deposits from other banks 290,328,069 1,171,544,477 Deposits from customers 5,936,871,046 16,595,846,607 Other liabilities 483,982,175 917,329,728 1,135,404,264 5,522,064,197 Net cash from operating activities (A) 2,236,200,423 7,596,126,472 Cash Flows from Investing Activities Purchase/sale of trading securities, shares, bonds, etc (188,852,550) (2,265,441,959)Purchase of property, plant and equipment (603,973,894) (188,047,414)Net cash used in investing activities (B) (792,826,444) (2,453,489,373) Cash Flows from Financing Activities Dividend paid - - Issue of shares - - Net cash from financing activities (C) - - Net increase in cash (A+B+C) 1,443,373,979 5,142,637,099 Effects of exchange rate changes on cash and cash equivalents 23 489,239,437 336,347,860 Cash and cash equivalents at beginning of the year 16,193,830,285 10,714,845,326 Cash and cash equivalents at end of the year (*) 18,126,443,701 16,193,830,285 (*) Cash and cash equivalents at the end of the year: Cash in hand (including foreign curriencies) 3.1 627,498,961 489,589,724 Investments in government securities 9,095,668,584 6,988,523,673 Money at call on short notice 5 - 2,140,000,000 Balance with Bangladesh Bank and its agent bank(s) 3.2 4,517,596,281 3,216,814,215 Balance with other banks and financial institutions 4 3,885,679,875 3,358,902,674 18,126,443,701 16,193,830,285 Net operating cash flow per share (NOCFPS) 35.1 2.88 7.12






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The Premier Bank Limited

1.00 STATUS OF THE BANK

1.01 The Bank and its activities

The Premier Bank Ltd.(the "Bank") is a scheduled commercial bank in the private sector established under the Bank Companies Act 1991 and incorporated in Bangladesh as a public limited company to carry out banking business in Bangladesh.

The Bank has 52 branches and 12 SME Service Centres/ Agricultural Branches with no overseas branch as on 31 December, 2011. Another 5 branches will be opened by 31st March '2012.Out of the 52 branches 2 branches are designated Islamic Banking branch complying with the rules of Islamic Shariah the modus operandi of which is substantially different from other branches run on commercial conventional basis.The Premier Bank Ltd. offers service for all commercial banking needs of the customers which includes deposit banking, loans and advances, export import financing, inland and international remittance facility etc. The Bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited as a publicly traded company.

In addition to the above The Bank has 02(Two) subsidiary company: 1) Premier Bank Securities Ltd. 2) Premier Money Transfer Company Limited

2.00 Significant Accounting Policies

2.01 Basis of preparation of the financial statements The financial statements, namely, Balance Sheet, Profit and Loss Account, Cash Flow Statement, Statement of Changes in Equity, Statement of Liquidity Analysis and relevant notes and disclosures thereto of the Bank are prepared under historical cost convention except investments and in accordance with First Schedule of Bank Companies Act 1991, relevant Bangladesh Bank circulars, International Accounting Standards (IASs), adopted by the Institute of Chartered Accountants of Bangladesh (ICAB), named as Bangladesh Accounting Standards (BASs), the Companies Act 1994, Securities and Exchange Ordinance 1969, Securities and Exchange Rules 1987 and other laws and rules applicable thereto. Wherever appropriate, such principles are explained in succeeding notes.

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

2.02 Islamic banking

The Bank operates Islamic banking in 2 branches designated for the purpose in complying with the rules of Islamic Shariah. The Financial Statements of the branches have also been prepared as per Bank Companies Act 1991, Bangladesh Accounting Standards. A separate balance sheet and profit and loss account are shown in Annexure-A and figures under different heads appearing in the annexure have been converted into relevant heads of accounts under conventional banking for consolidation and incorporation.

2.03 Consolidation

Statements of Affairs and Income and Expenditure Statements of all branches including Islamic banking branches,Offshore Banking Units,Premier Bank Securities Limited, Premier Money Transfer Company Limited and Head Office are consolidated together to prepare the financial statements of the Bank.

2.04 Foreign currency transactions

(a) Foreign currency transactions are converted into equivalent Taka currency at the ruling exchange rates on the respective dates of such transactions.

(b) Assets and liabilities in foreign currencies as at 31 December 2011 have been converted into Taka currency at the average of the prevailing buying and selling rates of the relevant foreign currencies at that date except "balances with other banks and financial institution" which have been converted as per directives of Bangladesh Bank vide its circular no. BRPD (R) 717/2004-959 dated 21 November 2004.

(c) Differences arising through buying and selling transactions of foreign currencies on different dates of the year have been adjusted by debiting /crediting exchange gain or loss account in the Profit and Loss Statement.

Notes to Financial Statements for the year ended 31st December 2011



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2.5 Fixed assets and depreciation

(a) Fixed assets have been shown at cost less accumulated depreciation.

(b) Depreciation is charged at the following rates on reducing balance method on all fixed assets other than vehicles, which are depreciated on straight-line method.

Asset categories "Rate of depreciation (%)" Method of depreciation Furniture and fixtures 10 Reducing balance Equipment and computers 20 Reducing balance Vehicles 20 Straight-line Land & Building 2.50 Reducing balance

(c) For additions during the year, depreciation is charged for the remaining days of the year and in case of disposal, depreciation is charged up to the date of disposal.

2.06 Investment Value of investment has been enumerateted as follows: Items Applicable accounting valueGovernment Treasury Bills At present value Bangladesh Government Treasury Bonds At present value Prize Bonds At cost price Unquoted Shares At cost Quoted Shares At market price

2.07 Advances and provisions

Advances are stated at gross value.

Provision for loans and advances is made on the basis of periodical review by the management and of instruction contained Bangladesh Bank BRPD Circular no.5 dated 5 June 2006. The classification rates are given below:

Particulars

General provision on: Rate

Unclassified loans and advances 1% Small and Medium Enterprise 1% Consumer finance for house building loan and loans for professional setup 2% Other consumer finance 5% Special mention account 5%

Specific provision on:

Substandard loans and advances 20% Doubtful loans and advances 50% Bad/loss loans and advances 100%

Loans and advances are written off to the extent that (i) there is no realistic prospect of recovery, (ii) and against which legal cases are filed and classified as bad loss as per guidelines of Bangladesh Bank. These write off however will not undermine/affect the claim amount from borrower. Detailed memorandum records for all such write off accounts are maintained and followed up.

2.08 Revenue and expenditures

The accounting policies adopted for the recognition of revenue as prescribed by BAS 18- are as follows:

(a) Interest is calculated on daily product basis on unclassified loans and advances but charged on quarterly basis.

(b) Interest is charged on classified loans and advances as per BCD and BRPD circulars of Bangladesh Bank and such interests were not taken into income.

(c) Commission and discounts on bills purchased and discounted are recognised at the time of realisation.

(d) Investment income is recognized on accrual basis.

2.09 Cash Flow Statement

Cash Flow Statement is prepared principally in accordance with BAS 7 "Cash Flow Statement"; under direct method as prescribed by BRPD circular no. 14 dated 25 June 2003.



2.10 Retirement benefits

The Bank has a Provident Fund administered by a separate board of trustee, benefits of which are given to the eligible employees of the Bank in accordance with the rules of the Provident Fund.

Provision for gratuity has been made for the year 2011 for past services of the employees which would be payable at the time of their retirement/time of eligibility.

2.11 Reconciliation of books of account

Books of account in regard to inter-bank (in Bangladesh and outside Bangladesh) and inter-branch transactions are reconciled and no material difference was found which may affect the financial statements significantly. There exist no unreconciled revenue items in Nostro accounts as at 31 December 2011.

2.12 Reporting period

These financial statements cover one year from 01 January 2011 to 31 December 2011.

2.13 Off-Balance Sheet items

Under general banking transactions, liabilities against acceptances, endorsements and other obligations and bills against which acceptances have been given and claims exist there against, have been shown as off-balance sheet items. These are disclosed as per Bangladesh Bank's guidelines.

2.14 Related party transactions

a) As on the Balance Sheet date, the Bank had the following transactions with the related parties in respect of banking business like, loans and advances, guarantees and commitments.

a) The Bank entered into transactions with the following related party, other than banking business for Purchase and repairs of computers, Money counting machine etc.

Directors interest in different entities are given in Annexure D

2.15 Core risk management

Bangladesh Bank has identified 6 (six) core risks for management of the banks and has provided the necessary guidelines for their implementation. The risks are:

Credit risk Foreign exchange risk Asset liability/ balance sheet risks Money laundering risk Internal control and compliance risk ICT Risk

The prime objective of the risk management is that the Bank takes well calculated business risk to safeguard its capital, financial resources and growth of sustainable profitability. In this context, the Bank has formed a management committee (MANCOM) to overview proper implementation and regular monitoring of those critical areas.


Name ofDirectors interested in the

Company / Firm

Name ofthe Company / Firm

Name ofAdvance Value/ Taka

Dr.H.B.M Iqbal Beacon Travels International Ltd

Air Concern International Ltd.

BG(Local)

BG(Foreign)

BG(Foreign)

BGRajbithi Travels Ltd.Mr. B.H. Haroon

Dr.H.B.M IqbalMr. Moin Iqbal

5.0018.75

19.77

18.77

Name of service- provider Particulars of service Value/ Taka

National SystemSolutions (Pvt) Ltd.

Mr. Kutubuddin Ahmed, Shareholder and Mr. Abdus Salam Murshedy, Director of the Bank are the Chairman and Managing Director of National System Solutions (Pvt) Ltd respectively.

113.93


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2.15.1 Credit risk

Credit risk is one of the major risks faced by the Bank. This can be described as potential loss arising from the failure of a counter party to perform with agreed terms with the Bank. To assess and to mitigate the credit risk, the management has implemented Credit Risk Management (CRM) Manual, which is considered an important tool for retaining the quality and performance of the assets. Accordingly, Banks credit risk management functions have been designed to address all these issues including risk that arises from global changes in banking, finance and related issues.

The Bank has segregated duties of the officers/ executives engaged in the credit related activities. Moreover, credit approval, administration, monitoring and recovery functions have been segregated. For this purpose, three separate units have been formed within the Credit Department. These are (i) Credit Risk Management Unit, (ii) Credit Administration Unit, and (iii) Credit Monitoring and Recovery Unit.

2.15.2 Foreign exchange risk

Foreign exchange risk is defined as the potential change in earnings arising due to unfavorable change in exchange rates. Treasury front office conducts deal for commercial purpose and back office of treasury keeps record and passes entries in books of account. The main risks in treasury and foreign exchange business are exchange rates risk, fund management and liquidity risk. As per Bangladesh Bank guidelines, the Treasury Department was operationally and physically divided into front office and back office to mitigate the risk. Separate telephone and fax lines were installed in the dealing room to meet Bangladesh Bank guidelines.

2.15.3 Asset liability/ balance sheet risks

The Bank has an Asset Liability Committee (ALCO) which is responsible for managing short-term and long-term liquidity to ensure that the Bank has adequate liquidity at all times at the most appropriate funding cost. ALCO reviews liquidity requirements of the Bank, maturity of assets and liabilities, deposit and lending pricing strategy and the liquidity contingency plan. The Asset Liability Committee also monitors Balance Sheet risk. The Balance Sheet risk is defined as potential changes in earnings due to changes in rate of interest and exchange rates which are not of trading nature and the Bank is completely maintaining the risks.

2.15.4 Money laundering risk

Money laundering risk is defined as the loss of reputation and expenses incurred as penalty for being negligent in prevention of money laundering. For mitigating the risk, the Bank has designated Chief Compliance Officer at Head Office and Compliance Officers at Branches, who independently review the transactions of the accounts to verify suspicious transactions. Manuals for Prevention of Money Laundering have been established and transaction profile has been introduced. Training has been continuously given to all the categories of Executives and Officers for developing awareness and skill for identifying suspicious transactions and other activities relating to money laundering.

2.15.5 Internal control and compliance risk

Operational loss may arise from errors and fraud due to lack of internal control and compliance. Management through Internal Control and Compliance Division controls operational procedure of the Bank. Internal Control and Compliance Division undertakes periodical and special audit of the branches and departments at Head Office for review of the operation and compliance of the statutory requirements. The Audit Committee of the Board subsequently reviews the report of the Internal Control and Compliance Division and guides the Division effectively to monitor the risks.

2.15.6 ICT risk

ICT risk management is embedded in Internal Control and Compliance Policy of the Bank which are widely used for managing the union between business processes and information systems effectively. However, this control emphasizes both business and technological regulation and monitoring which in turn support business requirement and governance and at the same time ensure that ICT risks are properly identified and managed. According to Central Bank ICT Guidelines, the Bank ICT Policies have been prepared and reviewed on regular basis based on which operating procedures for all ICT functions are carried out. Besides, in order to assure the appropriate usage of resources and information, the Bank IT Audit Policy ensures that the IT systems are properly protected and is free from unauthorized access illegal tempering and malicious actions and all these actions are continuously monitored and supervised by Bank's IT auditor.




2.16 Audit committee

The Bank has constituted an audit committee comprising members of its board of directors with a view to act as a bridge among the board of directors, executive authority, depositors, shareholders, etc so that the committee can play an effective role in establishing an efficient, strong and secure banking system. Audit committee comprises three members of the board of directors as follows:

The Audit Committee is assisting the Board of Directors and Executive Committee to fulfill their responsibilities such as to set objectives, strategies and overall business plans for effective functioning of the Bank. The committee reviews the financial reporting process, the system of internal control, Management Information System, Management of Risks, the Bangladesh Bank and Internal Audit Reports and Audit process and Compliance with laws and regulations and its own code of business conduct. The Committee also assisting the Management to perform better to achieve the objectives set by the Board.

During the year ended on 31 December 2011, the Audit Committee conducted 41 (Forty one) meetings. The meetings focused on the following broad areas:

The Board Audit Committee discussed the importance of compliance of the requirement of Bangladesh Bank, other regulatory bodies and Banks own policies, rules, regulations to reduce the risk at the lowest level. Steps have been taken to ensure that the compliance with regulatory requirements, both external and internal, is recognized in each activity of the Bank and the Bank complies with all regulatory requirements while conducting its business.

The Audit Committee of the Board has reviewed progress of implementation of Basel-II in the Bank as per Bangladesh Bank guidelines and guiding the Management to implement the Basel II within specified time frame

The Committee evaluated the Management Information System (MIS), performance of Information Technology Division, implementation status of Bangladesh Bank guidelines for Information and Communication Technology for Banks

The Committee reviewed the non performing Loans and Advances of the Bank in its every meeting. After reviewing the non-performing Loan and Advances of each branch and each account the Committee suggested the Management action plan for Recovery of non-performing Loans and Advances. The Committee closely monitored the progress of Recovery of Non Performing Loans. At the end of 2011 the nonperforming Loans and Advances of the Bank reduced remarkably below 5% of total Loans and Advances of the Bank.

The Committee in its different meetings discussed the issue for proper documentation against credit facilities.

The Audit Committee discussed the guidelines of Credit Risk Management in detail and suggested the Management to implement the Credit Risk Management (CRM) guidelines in full at our Bank. For transparency and accountability credit approval has been separated form credit administration. The Branches have appointed Credit Administration Officer in line with the CRM guidelines

The Audit Committee reviewed Bangladesh Bank Inspection Reports on our Bank and advised the Management to rectify the irregularities as mentioned in the Audit Report, asked clarification for some deficiencies and to implement the valuable suggestions / recommendations of Bangladesh Bank

The Committee in its every meeting followed up the implementation status of the decisions that have been taken in the Executive Committee and Audit Committee Meetings.

The Audit Committee Reviewed the organogram and job description of Internal Control and Compliance Division. The Committee evaluated the performance of each official of Internal Control and Compliance Division and advised to improve their capacity and productivity. The Committee suggested Audit Format and Checklist for quick and effective Audit & Inspections.

Sl.No. Name

Status with thecommittee

Status withthe Bank

Educational qualification

1. Mr. Moin Iqbal Chairman Director BBA

2. Mr. Shah Md. Nahyan Haroon Member Director Bar-at -Law (running)

3. Mr. Kazi Abdul Mazid Member IndependentDirector

Bachelor of Commerce,Rajshahi University


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2.17 Taxation

Income tax expenses represent the sum of the tax currently payable and deferred tax.

2.17.1 Current tax

Provision for current income tax for the year has been made @ 42.50% as prescribed in the Finance Act 2011 on the accounting Profit made after considering some of the taxable add back income and disallowance of expenditure.

2.17.2 Deferred taxation

The Bank has adopted deferred tax accounting policy as per Bangladesh Accounting Standard (BAS) 12. Accordingly deferred tax liability/asset is accounted for all temporary timing differences arising between the tax base of the assets and liabilities and their carrying value for financial reporting purpose. Deferred tax is computed at the prevailing tax rate as per Finance Act 2011.


The Premier Bank LimitedNotes to financial statements for the year ended 31st December 2011

Amount in Taka20102011


Balance Sheet

3. Cash

3.1 Cash in hand

In local currency 611,008,348 465,765,410 In foreign currency 16,490,613 23,824,314 627,498,961 489,589,724

3.1(a) Consolidated Cash in hand In Bangladesh Premier Bank Limited (note 3.1) 627,498,961 489,589,724 Premier Bank Securites Limited 154,057 - 627,653,018 489,589,724

3.2 Balance with Bangladesh Bank and its agent bank(s)

Balance with Bangladesh Bank In local currency 3,860,503,010 2,933,850,222 In foreign currency 579,671,659 181,245,197 4,440,174,669 3,115,095,419

Sonali Bank (as an agent bank of Bangladesh Bank)-local currency 77,421,612 101,718,796 4,517,596,281 3,216,814,215 5,145,095,242 3,706,403,939

3(a) Consolidated Cash and Balance With Bangladesh Bank and its agent Bank(s)

In Bangladesh Premier Bank Limited 5,145,095,242 3,706,403,939 Premier Bank Securites Limited 154,057 - 5,145,249,299 3,706,403,939

3.3 Statutory deposits

3.3.1 Cash reserve requirement/ratio (CRR) and statutory liquidity ratio (SLR)

Cash reserve requirement/ratio and statutory reserve ratio have been calculated and maintained in accordance with section 33 of Bank Companies Act 1991 and subsequent Bangladesh Bank BCD circular no. 13 dated 24 May 1992, as amended by BRPD circular nos. 11 and 12 dated 25 August 2005,MPF Circular No. 04. dated 01.12.2010 and MPD Circular No.05 dated 01.12.2010

The statutory cash reserve ratio required on the Bank's time and demand liabilities at the rate of 6% has been calculated and maintained with Bangladesh Bank in current account (Taka) and 19% for conventional Banking & 11.50% for Islamic Banking statutory liquidity ratio, including CRR, on the same liabilities is also maintained in the form of treasury bills and bonds including balance with Bangladesh Bank. Both the reserves maintained by the Bank are in excess of the statutory requirements, as shown below :

For Conventional Banking

(a) Cash reserve requirement/ratio Required reserve 3,202,879,000 2,655,922,000 Actual reserve maintained 3,516,259,000 2,845,256,000 Surplus 313,380,000 189,334,000

(b) Statutory liquid reserve Required reserve 10,142,449,000 8,410,418,000 Actual reserve maintained 15,202,722,760 10,632,958,280 Surplus 5,060,273,760 2,222,540,280 Total required reserve 13,345,328,000 11,066,340,000 Total actual reserve held with Bangladesh Bank 18,718,981,760 13,478,214,280 Total surplus 5,373,653,760 2,411,874,280


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For Islamic Banking (a) Cash reserve requirement/ratio Required reserve 271,520,430 184,896,500 Actual reserve maintained 292,271,000 236,500,000 Surplus 20,750,570 51,603,500 (b) Statutory liquid reserve Required reserve 520,414,160 352,984,220 Actual reserve maintained 560,111,000 401,238,000 Surplus 39,696,840 48,253,780 Total required reserve 791,934,590 537,880,720 Total actual reserve held with Bangladesh Bank 852,382,000 637,738,000 Total surplus 60,447,410 99,857,280 4. Balance with other banks and financial institutions

In Bangladesh (note 4.2) 2,913,035,543 2,442,217,030 Outside Bangladesh (note 4.3) 972,644,332 916,685,644 3,885,679,875 3,358,902,674

4(a) Consolidated balance with other banks and financial institutions

In Bangladesh Premier Bank Limited (note 4.2) 2,913,035,543 2,442,217,030 Premier Bank Securites Limited 149,896,954 - 3,062,932,497 2,442,217,030 Outside Bangladesh Premier Bank Limited (note 4.3) 972,644,332 916,685,644 Premier Bank Securites Limited - - Premier Money Transfer Company Ltd. 4,100,600 - 976,744,932 916,685,644

4,039,677,429 3,358,902,674

4.1 Account type-wise Current account 57,710,440 37,175,152 STD account 5,325,103 5,041,878 Fixed deposit 2,850,000,000 2,400,000,000 2,913,035,543 2,442,217,030

4.2 In Bangladesh AB Bank Limited 1,400,000,000 1,400,000,000 Southeast Bank Limited 400,000,000 400,000,000 Bank Asia limited 200,000,000 200,000,000 Shahjalal Islami Bank Ltd. 200,000,000 - First Security Islamic Bank Ltd. 450,000,000 - Export Import Bank Limited - 200,000,000 Standard Bank Ltd. 400 - United Commercial Bank Limited 537,000 958,621 Sonali Bank Limited 11,982,184 10,235,550 Islami Bank Bangladesh Limited 35,817 35,817 Standard Chartered Bank 11,517,496 10,700,548 National Bank Limited 143,785 138,785 Mercantile Bank Limited 137 1,827 Islami Bank Bangladesh Limited - - National Bank Limited - - The City Bank Limited 150,595 150,595 Union Capital - 100,000,000 International Leasing & Financial Services Limited - 100,000,000 Prime Finance & Investment Ltd. 200,000,000 - Off-shore Banking Unit 38,668,129 19,995,287 2,913,035,543 2,442,217,030


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FIN

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LS -2

011

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4.4 Maturity grouping of balance with other banks Repayable on demand 1,030,354,772 933,865,509 Not more than 3 months 205,325,103 25,037,165 More than 3 months but not more than 1 year 2,650,000,000 2,400,000,000 More than 1 year but not more than 5 years - - More than 5 years - - 3,885,679,875 3,358,902,674

4.4(a) Maturity grouping of balance with other banks Repayable on demand 1,184,352,326 933,865,509 Not more than 3 months 205,325,103 25,037,165 More than 3 months but not more than 1 year 2,650,000,000 2,400,000,000 More than 1 year but not more than 5 years - - More than 5 years - - 4,039,677,429 3,358,902,674

5. Money at call on short notice Pubali Bank Limited - 350,000,000 Agrani Bank Limited - 350,000,000 Bank Asia Ltd - 300,000,000 Dhaka Bank Ltd - 250,000,000 Mutual Trust Bank Ltd - 200,000,000 National Bank of Pakistan - 200,000,000 AB Bank Limited - 200,000,000 BRAC Bank Ltd - 100,000,000 Eastern Bank Ltd - 100,000,000 Prime Bank Limited - 50,000,000 The City Bank Ltd - 40,000,000 - 2,140,000,000

6. Investments 11,638,596,315 10,195,000,425

6(a) Consolidated Investment Premier Bank Limited 11,638,596,315 10,195,000,425 Premier Bank Securites Limited 330,010,000 - 11,968,606,315 10,195,000,425 6.1 Government securities Treasury bills - - Bangladesh Bank bills - - Treasury bonds 9,239,121,555 7,288,384,604 Repo - - Prize bonds 678,900 812,400 9,239,800,455 7,289,197,004 6.2 Others In shares and bonds (quoted and unquoted) Quoted Islamic Investment Bond 250,000,000 160,000,000 Investment in Shares - Islami 277,305,000 336,910,000 Investment in shares - General 1,353,147,219 1,872,855,330 1,880,452,219 2,369,765,330 Unquoted Central Depository Bangladesh Limited 5,138,890 10,833,340 SWIFT Membership 1,214,751 1,214,751 Investment in PBL Securities 499,990,000 499,990,000 STS Holdings Limited (Preference Shares) 12,000,000 24,000,000 518,343,641 536,038,091 2,398,795,860 2,905,803,421 11,638,596,315 10,195,000,425


FIN

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6.2(a) Consolidated Unquoted Investment Premier Bank Limited (note 6.2) 2,398,795,860 2,905,803,421 Less:Investment in PBL Securities 499,990,000 - Premier Bank Securites Limited 830,000,000 - 2,728,805,860 2,905,803,421

6.3 Maturity grouping of Investment Repayable on demand 2,131,131,119 3,875,277,730 Not more than 3 months - - More than 3 months but not more than 1 year 749,990,000 619,990,000 More than 1 year but not more than 5 years 8,757,475,196 5,699,732,695 More than 5 ye

Documents

Auditors Report 2011