Page 1 Corporate Governance PICG’S Recommendations CODE OF CORPORATE GOVERNANCE – WAY FORWARD Presentation by: EBRAHIM SIDAT COUNTRY MANAGING PARTNER / CEO Ernst & Young Ford Rhodes Sidat Hyder A member firm of Ernst & Young Global Limited September 22, 2010 Southern Regional Committee The Institute of Chartered Accountants of Pakistan

Page 2 Corporate Governance PICG’S Recommendations PRESENTATION AT A GLANCE ► BOARD COMPOSTION AND STRUCTURE ► INDEPENDENT DIRECTORS ► THOSE NOT TO BE DEEMED AS AN “INDEPENDENT DIRECTOR” ► GOVERNANCE STRUCTURE ► MAXIMUM NUMBER OF DIRECTORSHIPS ► INTERNAL AUDIT ► COMPOSITION OF AUDIT COMMITTEE ► ROLE OF AUDIT COMMITTEE ► MINUTES OF THE AUDIT COMMITTEE ► HR & REMUNERATION COMMITTEE ► BOARD DEVELOPMENT AND EFFECTIVENESS ► EXTERNAL AUDIT ► OTHER GOVERANCE REFORM RECOMMENDATIONS

Page 3 Corporate Governance PICG’S Recommendations BOARD COMPOSTION AND STRUCTURE Current provisions under the CCG 2002 Executive Directors (including the CEO) shall not be more than 75% of the elected directorsExecutive Directors (including the CEO) shall not be more than 75% of the elected directors Current provisions applicable to banks and DFIs Under SBP’s Prudential Regulations, maximum number of Executive Directors (including the CEO) shall not exceed twoUnder SBP’s Prudential Regulations, maximum number of Executive Directors (including the CEO) shall not exceed two Task Force Recommendations Executive Directors be not less than two and not more than 1/3 rd of the elected directors (including the CEO)Executive Directors be not less than two and not more than 1/3 rd of the elected directors (including the CEO) Compliance with the above shall become effective when the Board is next reconstituted on the expiry of its current termCompliance with the above shall become effective when the Board is next reconstituted on the expiry of its current term

Page 4 Corporate Governance PICG’S Recommendations Current provisions under the CCG 2002 There should be at least one Independent DirectorThere should be at least one Independent Director INDEPENDENT DIRECTORS Current provisions applicable to banks and DFIs Minimum of 25% members of the Board shall be Independent DirectorsMinimum of 25% members of the Board shall be Independent Directors Task Force Recommendations Board shall have a balance of Executive and Non-Executive Directors (and in particular, Independent Directors)Board shall have a balance of Executive and Non-Executive Directors (and in particular, Independent Directors) Board shall have not less than 1/3 rd or 3, whichever is higher, of its total members as Independent DirectorsBoard shall have not less than 1/3 rd or 3, whichever is higher, of its total members as Independent Directors Compliance with the above shall become effective when the Board is next reconstituted on the expiry of its current termCompliance with the above shall become effective when the Board is next reconstituted on the expiry of its current term

Page 5 Corporate Governance PICG’S Recommendations a) An employee of the company or group within the last two years; b) Has or had within the last three years, a material business relationship with the company either directly, or as a partner, shareholder, director or senior executive of a body that has such a relationship with the company; c) Received in the year preceding his appointment as a director or receives additional remuneration excluding retirement benefits apart from a director’s fee, participates in the company’s share option or a performance-related pay scheme; d) A close relative of the company’s directors or senior executives; e) Holds cross-directorships or has significant links with other directors through involvement in other companies or bodies; f) Is a shareholder holding 5% or more of the total voting shares of the company; g) Is an employee of an institutional investor including a banking company, DFI, NBFI, pension fund or insurance company or a person nominated by such institutional investor subject to restraint in the exercise of his independent judgment as directors; h) Has served on the Board for more than three consecutive terms from the date of his first election; eligible as “independent director” if re-elected after a lapse of one term. THOSE NOT TO BE DEEMED AS AN “INDEPENDENT DIRECTOR”

Page 6 Corporate Governance PICG’S Recommendations Current provisions under the CCG 2002 Chairman shall preferably be a Non-Executive DirectorChairman shall preferably be a Non-Executive Director GOVERNANCE STRUCTURE Current provisions applicable to banks and DFIs Under SBP’s Prudential Regulations, CEO and Chairman of the Board shall be two separate personsUnder SBP’s Prudential Regulations, CEO and Chairman of the Board shall be two separate persons Task Force Recommendations Chairman and CEO shall not be the same personChairman and CEO shall not be the same person Chairman shall be a Non-Executive DirectorChairman shall be a Non-Executive Director Role of Chairman and CEO to be determined by the BoardRole of Chairman and CEO to be determined by the Board Separation of the two offices aforesaid shall become effective when the Board is next reconstituted on the expiry of its current termSeparation of the two offices aforesaid shall become effective when the Board is next reconstituted on the expiry of its current term

Page 7 Corporate Governance PICG’S Recommendations Current provisions under the CCG 2002 Maximum directorship of 10 listed companiesMaximum directorship of 10 listed companies MAXIMUM NUMBER OF DIRETORSHIPS Task Force Recommendations Maximum directorship of 05 listed companiesMaximum directorship of 05 listed companies Directorship of listed subsidiary companies of a Group holding company not to be included in the above limitDirectorship of listed subsidiary companies of a Group holding company not to be included in the above limit Compliance with the above shall become effective when the Board is next reconstituted on the expiry of its current termCompliance with the above shall become effective when the Board is next reconstituted on the expiry of its current term

Page 8 Corporate Governance PICG’S Recommendations INTERNAL AUDIT Current provisions under the CCG 2002 The appointment, remuneration and terms and conditions of employment of the Chief Finance Officer (CFO), the Company Secretary and the Head of Internal Audit of listed companies shall be determined by the CEO with the approval of the Board of Directors.The appointment, remuneration and terms and conditions of employment of the Chief Finance Officer (CFO), the Company Secretary and the Head of Internal Audit of listed companies shall be determined by the CEO with the approval of the Board of Directors. The CFO or the Company Secretary of a listed company shall not be removed except by the CEO with the approval of the Board of Directors.The CFO or the Company Secretary of a listed company shall not be removed except by the CEO with the approval of the Board of Directors. Task Force Recommendations Appointment provisions remain unchanged.Appointment provisions remain unchanged. The Head of Internal Audit of listed company shall also not be removed except by the CEO with the approval of Board.The Head of Internal Audit of listed company shall also not be removed except by the CEO with the approval of Board.

Page 9 Corporate Governance PICG’S Recommendations Composition Current provisions under the CCG 2002 The Audit Committee shall comprise not less than three members including the Chairman. Majority of the members of the Committee shall be from among the Non- Executive Directors.The Audit Committee shall comprise not less than three members including the Chairman. Majority of the members of the Committee shall be from among the Non- Executive Directors. COMPOSITION OF AUDIT COMMITTEE Task Force Recommendations The Committee shall only comprise of non-executive directors majority of whom shall be Independent Directors.The Committee shall only comprise of non-executive directors majority of whom shall be Independent Directors. The Board should satisfy itself that at least one member of the Committee has relevant financial experience.The Board should satisfy itself that at least one member of the Committee has relevant financial experience. The Chairman of the Committee shall be an Independent Director.The Chairman of the Committee shall be an Independent Director. SECRETARY Current provisions under the CCG 2002 The Audit Committee shall appoint a secretary of the committee.The Audit Committee shall appoint a secretary of the committee. Task Force Recommendations The CFO of a company shall not be appointed as the Secretary so as to achieve desired independence from executive management.The CFO of a company shall not be appointed as the Secretary so as to achieve desired independence from executive management.

Page 10 Corporate Governance PICG’S Recommendations ROLE OF AUDIT COMMITTEE Current provisions under the CCG 2002 The Code contains a detailed terms of reference of the Committee. The role does include recommendation to the Board about the appointment, resignation or removal of External Auditors, audit fee and provision of any services in addition to audit of financial statements.The role does include recommendation to the Board about the appointment, resignation or removal of External Auditors, audit fee and provision of any services in addition to audit of financial statements. The Board is required to act in accordance with the recommendations of the Audit Committee unless strong grounds exist to proceed otherwise.The Board is required to act in accordance with the recommendations of the Audit Committee unless strong grounds exist to proceed otherwise. Task Force Recommendations Audit Committee to have comprehensive responsibility for the recommendation for appointment, removal determination of audit fee and provision of non-audit services by External Auditors. The Board is required to follow these recommendations and if it proceeds otherwise, then the Board shall record reasons for not acting on the recommendations of the Audit Committee.Audit Committee to have comprehensive responsibility for the recommendation for appointment, removal determination of audit fee and provision of non-audit services by External Auditors. The Board is required to follow these recommendations and if it proceeds otherwise, then the Board shall record reasons for not acting on the recommendations of the Audit Committee.

Page 11 Corporate Governance PICG’S Recommendations MINUTES OF THE AUDIT COMMITTEE Current provisions under the CCG 2002 The Secretary of the Audit Committee is required to circulate minutes of meeting of the Audit Committee to all members, directors and the CFO within a fortnight.The Secretary of the Audit Committee is required to circulate minutes of meeting of the Audit Committee to all members, directors and the CFO within a fortnight. Task Force Recommendations The circulation of the minutes is required prior to the next Board meeting and where it is not practical, the Chairman of the Audit Committee shall circulate a written synopsis of the proceedings to the Board and the minutes are to be circulated immediately after the meeting of the Board.The circulation of the minutes is required prior to the next Board meeting and where it is not practical, the Chairman of the Audit Committee shall circulate a written synopsis of the proceedings to the Board and the minutes are to be circulated immediately after the meeting of the Board.

Page 12 Corporate Governance PICG’S Recommendations HR & REMUNERATION COMMITTEE Current provisions under the CCG 2002 NoneNone Task Force Recommendations There shall also be a Board’s Human Resources and Remuneration committee of not less than three members comprising Non-Executive Directors including at least one Independent Director. CEO(who shall be the only Executive Director) may also be included. The Chairman of the committee shall be a Non-Executive Director.There shall also be a Board’s Human Resources and Remuneration committee of not less than three members comprising Non-Executive Directors including at least one Independent Director. CEO(who shall be the only Executive Director) may also be included. The Chairman of the committee shall be a Non-Executive Director. The committee shall be responsible for recommending human resource management policies to the Board including succession planning.The committee shall be responsible for recommending human resource management policies to the Board including succession planning. The committee shall specifically be responsible for recommending to the Board the selection, evaluation, compensation (including retirement benefits) and succession planning of the CEO and his recommendations on such matters for key management positions who report directly to him.The committee shall specifically be responsible for recommending to the Board the selection, evaluation, compensation (including retirement benefits) and succession planning of the CEO and his recommendations on such matters for key management positions who report directly to him. The CEO shall not participate in the proceedings of the committee on maters that directly relate to his performance and compensation.The CEO shall not participate in the proceedings of the committee on maters that directly relate to his performance and compensation.

Page 13 Corporate Governance PICG’S Recommendations Task Force Recommendations A mechanism be put in place whereby the Board shall undertake an evaluation of its own performance and of its committees to enhance Board’s performance.A mechanism be put in place whereby the Board shall undertake an evaluation of its own performance and of its committees to enhance Board’s performance. Compliance with the aforesaid shall be done within two years of the provision becoming effective.Compliance with the aforesaid shall be done within two years of the provision becoming effective. Directors shall acquire certification of orientation of director’s education program from PICG or such other institution as may be accredited by the SECP.Directors shall acquire certification of orientation of director’s education program from PICG or such other institution as may be accredited by the SECP. By 30 June 2011, at least one director shall be required to obtain the above certification. Thereafter, every following year, minimum one director shall procure the said certification.By 30 June 2011, at least one director shall be required to obtain the above certification. Thereafter, every following year, minimum one director shall procure the said certification. BOARD DEVELOPMENT AND EFFECTIVENESS

Page 14 Corporate Governance PICG’S Recommendations Auditors shall furnish a Management Letter to the Board within 45 days (currently 30 days) from the date of the audit report.Auditors shall furnish a Management Letter to the Board within 45 days (currently 30 days) from the date of the audit report. Any matter deemed significant by the auditor shall be communicated in writing to the Board prior to the approval of accounts.Any matter deemed significant by the auditor shall be communicated in writing to the Board prior to the approval of accounts. Engagement Partner of the Firm shall attend the AGMEngagement Partner of the Firm shall attend the AGM Engagement Partner of the Firm shall not attend that part of the AGM when appointment or removal of auditors is discussed, so as to avoid perceived conflict of interest.Engagement Partner of the Firm shall not attend that part of the AGM when appointment or removal of auditors is discussed, so as to avoid perceived conflict of interest. EXTERNAL AUDIT

Page 15 Corporate Governance PICG’S Recommendations Appropriate arrangement be made for insurance cover in respect of Independent Directors.Appropriate arrangement be made for insurance cover in respect of Independent Directors. Board shall determine, subject to the Companies Ordinance, 1984 and the Company’s Articles of Association, reasonable remuneration for Non-Executive Directors at such levels which may not be perceived to comprise their independence.Board shall determine, subject to the Companies Ordinance, 1984 and the Company’s Articles of Association, reasonable remuneration for Non-Executive Directors at such levels which may not be perceived to comprise their independence. Casual vacancy in the Board shall be filled up latest within 90 days (currently, the time limit under the CCG 2002 is 30 days).Casual vacancy in the Board shall be filled up latest within 90 days (currently, the time limit under the CCG 2002 is 30 days). Adequate systems and controls should be in place for identification and redressel of grievances arising from unethical practices.Adequate systems and controls should be in place for identification and redressel of grievances arising from unethical practices. CFO shall be a person who is a member of a recognized Body of professional accountants or a post-graduate (under the current CCG, a graduate in any subject) in finance.CFO shall be a person who is a member of a recognized Body of professional accountants or a post-graduate (under the current CCG, a graduate in any subject) in finance. The term “executive” for purposes of financial reporting and certain disclosures redefined to mean an employee of a listed company (other than CEO and directors) who report directly to the CEO or whose salary, allowances and benefits exceed Rs.5 million in a financial year.The term “executive” for purposes of financial reporting and certain disclosures redefined to mean an employee of a listed company (other than CEO and directors) who report directly to the CEO or whose salary, allowances and benefits exceed Rs.5 million in a financial year. OTHER GOVERNANCE REFORMS RECOMMENDED

Page 16 Corporate Governance PICG’S Recommendations ► Thank you