We have audited the accompanying Balance Sheet of Bangladesh Shilpa Bank as of 30 June, 2004 and the related Profit and Loss Account, Cash Flow Statement, Statement of Changes in Equity, Statement of Liquidity and notes to the financial statements for the year then ended. These financial statements are the responsibility of the management of the Bank. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Bangladesh Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion.

Our audit revealed the following:

i) BSB had made an investment of Tk. 10,000,000 in 100,000 Ordinary Shares @ Tk. 100 each of M/s. Sreepur Textile Mills Ltd. during the year 1993-94. But BSB did not receive any return on such investment till date. The market value of shares of the company has come down to Tk. 12.50 per share (on 28 October 2004). The bank has in turn lost Tk. 8,750,000 (100,000 x Tk. 100- Tk. 12.50) on this investment. But necessary provision has not been made in the accounts.

ii) In line with the requirement of Bangladesh Accounting Standard (BAS)-10; events after the Balance Sheet date necessary provision has not been made against classified loan account and classified equity investment held with M/s. Sreepur Textile Mills Ltd. As per Order of the Honourable 6th District Judge Court the said loanee was treated as unclassified till 30-06-04. But subsequently the order was suspended by the court on 27-09-04. As a result, the total loan of Tk. 29,776,738 should be provided for in the accounts for the period ended 30 June 2004.

iii) Specific provision amounting to Tk. 4,401,871 due to diminution of market value of Shares of various companies has not been made in the accounts.

iv) Provision has not been made against interest accrued on debenture amounting to Tk. 58,000,508 and these amounts appeared to us not realizable.

v) As per BSB book of accounts balance with Bangladesh Bank held by DCBO (Dhaka Commercial Branch Office) as on 30-06-04 amounted to Tk. 68,151,173. Bangladesh Bank confirmed a balance of Tk. 78,431,006. The difference of Tk. 10,279,833 remained unrecognized till the date of our audit.

vi) Other assets of the Bank include Inter Office Adjustment Account Tk. 104,233,782 as on 30-06-04. The said amount could not be reconciled by the bank till the date of our audit. As a result, we could not confirm inter office adjustment account.

vii) Fixed assets include a number of damaged items for which no accounting adjustment has been made regarding deletion of such item from the books of accounts.

viii) Requirement of Section 35 of the Bank Company Act 1991 in respect of transfer of unclaimed amount to inoperative accounts to Bangladesh Bank were not complied with.

In our opinion, if the adjustments relating to (i), (ii) and (iv) are reflected in the accompanying financial statements, the net profit shown in the profit and loss account will be reduced by Tk.100,919,117. Except for the above, the financial statements give a true and fair view of the financial position of the Bank as of 30 June, 2004 and of the results of its operations and its cash flows for the year then ended and comply with the Bank Companies Act 1991, the rules and regulations issued by Bangladesh Bank and the Security Exchange Rules 1987 and the other applicable laws and regulations.

We, except for the matters as mentioned above further report that:

(i) we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit and made due verification thereof;
(ii) in our opinion, proper books of accounts 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 purpose of our audit have been received from branches not visited by us;

(iii) the Bank’s Balance Sheet and Profit and Loss Account dealt with by the report are in agreement with the books of accounts and returns;

(iv) The financial statements have been drawn-up in conformity with the Bank Company Act, 1991 and in accordance with the applicable rules and regulations issued by the Bangladesh Bank;

(v) adequate provision has been made for advances which are, in our opinion, doubtful of recovery;

(vi) the records and statements submitted by the branches have been properly maintained and consolidated in the financial statements;

(vii) the financial statements conform to the prescribed standards set in the accounting regulations issued by the Bangladesh Bank;

(viii) the information and explanations required by us have been received and found satisfactory;

(ix) we were not aware of any other matters which are required to be brought to the notice of the shareholders.

Dated, Dhaka
November 22, 2004

Sd/-

ACNABIN & CO.
Chartered Accountants

Sd/=
Ahmad & Ahmad
Chartered Accountants