DIRECTOR'S REVIEW

The Directors are pleased to present the financial statements of the Bank reviewed by the auditors for the half year ended December 31, 2004.

Profit before tax for the half year is Rs. 39.7 million compared to Rs. 87.0 million for the corresponding period last year. The reason for this decline in profitability is a capital loss of Rs. 37.2 million against a capital gain of Rs. 26.1 million in the corresponding period last year. This capital loss which occurred mainly due to a well-considered decision of the management to reduce the interest-rate risk exposure by disposing of Government Securities held by the bank. Income from investments / fund placements however has increased. In line with the long term strategy of the Bank, the non fund-based income has sharply increased to Rs. 51.3 million from Rs. 32.3 million in the last year's corresponding period.

The long-term prospects of the Bank have improved with the commencement of equity brokerage operations now in full swing. This division is contributing towards the non-fund as well as the fund-based activities with growing potential.

The increase in administrative and operating expenses is almost entirely due to the expenses directly related to the equity brokerage division which is greatly contributing to the profitability of the Bank. In a rising interest rate scenario, borrowing cost has increased which is however offset by a corresponding increase in the total fund-based revenue.

The long and short term Credit Ratings of the Bank for FY 2004 have been maintained by PACRA at 'A' (Single A) and 'A1' (A One), respectively. The ratings denote a low expectation of credit risk and a strong capacity for timely payment of financial commitments.

In the fast changing economic scene, the Bank needs to grasp the opportunities that come its way by taking quick decisions and guard against the hazards through effective risk management. The management remains forward-looking and vigilant to add value to the investment of the shareholders and at the same time contribute to the growth of the capital markets.

Karachi                                                                                                                                                         On behalf of the board

February 23, 2005

                                                                                                                                                                                NAIM FAROOQUI

                                                                                                                                                                                   Chief Executive