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FIRST INTERNATIONAL INVESTMENT BANK LIMITED

ANNUAL REPORT 2003

COMPANY INFORMATION

Board of Directors

Managing Director & Chief Executive

Syed Babar All,

Chairman

Nasim Beg

A. Saeed Siddiqui,

Nadeem Karamat

Kamal A. Chinoy

Khalid Yacob

Naveed Qazi

Imran Butt

Company Secretary

Naveed Qazi,

Chairman

Audit Committee

Kamal A. Chinoy

Khalid Yacob

Auditors

M/s Ford Rhodes Sidat Hyder & Co., Chartered Accountants

Legal Advisers

M/s Orr, Dignam & Co., Advocates

M/s Mohsin Tayebaly & Co., Advocates & Legal Consultants

Bankers

American Express Bank Ltd.

ABN-AMRO Bank N.V.

Bank AL Habib Limited

Citibank, N.A.

Metropolitan Bank Limited

Muslim Commercial Bank Limited

Soneri Bank Limited

Shares Registrar

Noble Computer Services (Private) Limited

14, BangloreTown Housing Society,

Main Shahrah-e-Faisal, Karachi.

Telephones: (021) 452-0121, 454-6978

Fax: (021)431-4962

E-mail: ncsl@hoh.net

Lahore

5 F.C.C., Ground Floor, Syed Maratib Ali Road,

Registered Office

Gulberg, Lahore.

Telephones: (042) 575-3414 (3 lines), 571-0597

Fax: (042)571-0598

E-mail: fiibl.lhr® interbank.com. pk

Karachi Office

7th Floor, Shaheen Commercial Complex,

Dr. Ziauddin Ahmed Road, Karachi.

Telephones: (021) 263-9042 (4 lines)

Fax: (021)263-0678

E-mail: fiibl.khi@interbank.com.pk

Islamabad Office

Mezzanine Floor, Razia Sharif Plaza,

90, Blue Area, G / 7, Islamabad.

Telephones: (051) 227-5256 (3 lines)

Fax: (051)227-3861

E-mail: f iibl.isl @ interbank.com. pk

Universal Access

Telephone: 111-234-234

Fax: 111-567-567

Website

www.interbank.com.pk

DIRECTORS' REPORT TO THE SHAREHOLDERS

The Board of Directors of First International Investment Bank Limited (Interbank) is pleased to present

the annual report and audited financial statements for the year ended June 30, 2003 to the thirteenth

Annual General Meeting of the shareholders.

BUSINESS OPERATIONS

After-tax profit of Interbank for the year under review is Rs. 44.9 million as against Rs. 43.1 million for

the previous year. Declining mark-up rates and excess liquidity in the market presented a challenge to

Interbank, but we were able to bring about corresponding reduction in our financial charges and also

took advantage of trading opportunities' in marketable securities, particularly government securities, to

generate trading income. Our income from lease finance also recorded substantial increase.

Consequently, pre-tax profit increased to Rs. 89.9 million from Rs. 62.5 million. However, this is not

fully reflected in after-tax profit because of a one-time adjustment of Rs. 18.7 million on account of

income tax and deferred tax pertaining to earlier years.

Earnings per share for the year are Rs. 1.95 per share as against Rs. 1.87 for the previous year.

Total assets and liabilities of Interbank increased to Rs. 3.344 billion from Rs. 2.960 billion last year.

Long-term local currency deposits have grown to Rs. 403.0 million from Rs. 223.6 million, in spite of

reduction in deposit rates offered by us in line with prevailing market conditions. Mobilisation of long-

term, low-cost funds will continue to be an important aspect of our business. Leasing portfolio has

grown to Rs. 869.9 million from Rs. 624.0 million, and this has been achieved in an environment which

is becoming increasingly competitive. However, term finance has declined to Rs. 367.5 million from

Rs. 484.7 million; it has not been feasible to grow this business due to very low mark-up rates being

offered by commercial banks. Short-term investments have grown to Rs. 1.292 billion from Rs. 1.051

billion, mainly on account of investment in government securities, while exposure to the stock market

has been kept within prudent limits.

During the year, we developed a website for our Intercar Financing Schemes, making it possible for

clients to apply directly to us via the Internet. We are also launching a website for our Intersafe Saving

Schemes, which will enable clients to know more about their investment options, calculate periodic

profit, and also download the application form.

A summary of key operating and financial data for the last six years appears at the beginning of this

annual report.

(Rupees in thousands)

For the year ended

June 30,

2002

2001

2000

1999

1998

200,000

180,000

204,382

161,263

165,322

157,122

150,215

404,382

361,263

345,322

337,122

330,215

29,414

2,632

—

484,738

686,246

891,711

1,009,755

1,571,525

623,972

458,957

338,719

250,776

74,740

1,108,710

1,145,203

1,230,430

1,260,531

1,646,265

862,924

515,139

1,216,368

534,970

474,969

246,403

188,628

109,439

26,849

9,284

-

3,333

6,666

9,999

26,047

23,718

6,097

39,901

70,287

1,135,374

727,485

1,335,237

608,386

564,539

358,281

405,361

579,565

837,235

554,981

1,131,609

1,585,143

1,796,046

2,385,643

2,715,019

355,433

243,861

325,179

325,440

-

62,500

71,940

32,053

10,907

28,499

43,119

45,940

26,200

6,907

20,999

-

15.00%

10.00%

-

7.50%

15.00%

-

11.11%

-

APPROPRIATIONS The Directors recommend the following appropriations:

Rupees

Profit for the year from ordinary activities after taxatioh

44,850,785

Unappropriated profit brought forward

58,182

Available for appropriation

44,908,967

Appropriations:

Transfer to special reserve

8,970,157

Transfer to general reserve

21,000,000

Transfer to reserve for issue of bonus shares

14,500,000

44,470,157

Unappropriated profit carried forward

438,810

SUMMARY OF KEY OPERATING AND FINANCIAL DATA

FOR THE LAST SIX YEARS

June 30,

2003

Share capital and reserves

Paid-up capital

230,000

Reserves

219,233

449,233

Surplus on revaluation of

investments - net

47,088

Finance provided

Term finance

367,469

Lease finance

869,942

1,237,411

Investments (Including repos

and excluding reverse repos)

Government securities

1,111,973

Term finance certificates (listed)

225,314

Term finance certificates (unlisted)

-

Listed shares, units and

modaraba certificates

24,348

1,361,635

Balances and placements with

banks/ financial institutions

(excluding balances with SBP

and reverse repos)

241,494

Certificates of deposit issued

1,114,415

Term finance certificates issued

274,106

Profit before taxation

89,936

Profit after taxation

45,851

Cash dividend

' -

Bonus shares issue

15.00%

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF

THE CODE OF CORPORATE GOVERNANCE

This statement is being presented to comply with the Code of Corporate Governance contained in

Regulation No. 37 (Chapter XI) and No. 43 (Chapter XIII) of listing regulations of the Karachi and

Lahore Stock Exchanges respectively for the purpose of establishing a framework of good

governance, whereby a listed company is managed in compliance with the best practices of corporate

governance.

The Company has applied the principles contained in the Code in the following manner:

1. The Company encourages representation of independent non-executive directors and directors

representing minority interests on its Board of Directors. At present the Board includes six non-

executive Directors, including two independent Directors, and there is no director representing

minority shareholders.

2. The Directors have confirmed that none of them is serving as a director in more than ten listed

companies, including this Company.

3. All the resident Directors of the Company are registered as taxpayers and none of them has

defaulted in payment of any loan to a banking company, a Development Finance Institution or a

Non-Banking Finance Company or, being a member of a stock exchange, has been declared as

a defaulter by that stock exchange.

4. A casual vacancy occurring in the Board on January 25, 2003 was filled up by the Directors on

the same day.

5. The Company has prepared a 'Statement of Ethics and Business Practices', which has been

signed by all the Directors and employees of the Company.

6. The Board has developed a statement of main purpose and guiding principles (vision/mission

statement), overall corporate strategy and significant policies of the Company. A complete

record of particulars of significant policies along with the dates on which they were approved or

amended has been maintained.

7. 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 Chief Executive /executive Director, have been taken by the Board.

8. The meetings of the Board were presided over by the Chairman and the Board met at least once

in every quarter. Written notices of the Board meetings, along with agenda and working papers,

were circulated at least seven days before the meetings. The minutes of the meetings were

appropriately recorded and circulated.

9. The Board arranged an orientation course for its Directors during the year to apprise them of

their duties and responsibilities. Furthermore, the Chief Executive also attended a course on the

Code of Corporate Governance arranged by the Securities and Exchange Commission of

Pakistan.

10. The Board has approved appointment of Chief Financial Officer, Company Secretary and Head

of Internal Audit, including their remuneration and terms and conditions of employment, as

determined by the Chief Executive.

NOTES:

1 . The share transfer books of the Company will remain closed from October 14, 2003 to October

21 , 2003 (both days inclusive).

2. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a

proxy in writing to attend the meeting and to vote on a member's behalf. A proxy need not be a

member of the Company.

3. Duly completed form of proxy must be received at the Registered Office of the Company not

later than forty-eight hours before the time appointed for the Meeting.

4. Account holders and sub-account holders holding book entry securities of the Company in the

Central Depository Company of Pakistan Limited, who wish to attend the Annual General

Meeting, are requested to bring original National Identity Cards with copies thereof duly attested

by their bankers for identification purposes.

5. A statement under Section 160(1)(b) of the Companies Ordinance, 1984 pertaining to the

special business along with the special resolutions to be passed at the Annual General Meeting

is being sent to the members along with this Notice. The existing Memorandum and Articles of

Association of the Company and the special resolutions are available at the Registered Office

of the Company for perusal and inspection of the members during office hours.

6. The shareholders are requested to notify any change in their addresses.

NOTICE OF THE THIRTEENTH ANNUAL GENERAL MEETING

Notice is hereby given that the Thirteenth Annual General Meeting of First International Investment

Bank Limited will be held at Ground Floor, 5 F.C.C., Gulberg, Lahore, on Tuesday, October 21, 2003

at 4.00 p.m. to transact the following businesses:

ORDINARY BUSINESS:

1 . To receive and consider the Financial Statements of the Company for the financial year ended

June 30, 2003 together with the Directors' and Auditors' Reports thereon.

2. To declare issuance of bonus shares in the proportion of 3 shares for every 20 shares held.

3. To appoint auditors and to fix their remuneration. M/s Ford Rhodes Sidat Hyder & Co.,

Chartered Accountants, being eligible offer themselves for re-appointment.

4. To elect Directors in accordance with the provisions of section 1 78 of the Companies Ordinance,

1 984 for a term of three years commencing from the date of their appointment.

As decided by the Board of Directors, the number of Directors to be elected would be seven.

The names of the present Directors retiring at the Annual General Meeting are as follows:

1 . Syed Babar AN

2. Mr. Nasim Beg

3. Mr. A. Saeed Siddiqui

4. Mr. Nadeem Karamat

5. Mr. Kamal A. Chinoy

6. Mr. Khalid Yacob

7. Mr. Naveed Qazi

Any person who seeks to contest election of the office of Director shall file a notice of his

intention along with an affidavit as required under the State Bank of Pakistan's BPRD Circular

No. 12, dated June 2, 2000 at the Registered Office in terms of Section 178(3) of the Companies

Ordinance 1984, not later than fourteen days before the date of the Meeting.

In terms of the criteria prescribed by the State Bank of Pakistan, association of the following

persons as director is undesirable and against the public interest: (a) a person who is/has been

associated with any illegal activity, especially relating to banking business; and (b) a person who

in his individual capacity or a proprietary concern or any partnership firm or any private limited

company or any unlisted public company or any listed public company (of which he has been a

proprietor, partner, director or shareholder), has been in default of payment of dues owed to any

financial institution and/or in default of payment of any taxes. Furthermore, a person is not

permitted to be a director of more than one financial institution. The term "financial institution"

will include any bank, investment finance company, venture capital company, housing finance

company, leasing company or modaraba company.