ASKARI BANK:

INTRODUCTION:

Askari commercial bank limited (“THE BANK”) was incorporated in Pakistan on

October 09,1991as a public limited company, and is listed on Karachi, Lahore and
Islamabad stock exchange .the registered office of the bank is situated at AWT plaza, the
Mall, Rawalpindi.

The bank obtained its business commencement certificate on February 26,1992 and
started its operation from April 01, 1992. Army welfare trust directly and indirectly holds
a significant potion of the bank’s equity .the bank has 36 branches (2000:29) in Pakistan
and Azad Jammu and Kashmir. The bank is scheduled commercial bank and is
principally engaged in the business banking as defined in the banking companies
ordinance, 1962.

Askari Commercial Bank Ltd. is one of the first Private Banks in Pakistan to offer innovative products and
services to its customers like 24 hour Telephone Banking. This enables our customers to Bank around the
clock from the comfort of their homes. We are proud to be able to provide such a facility to our valued
customers.

Askari Bank, being a leading bank of Pakistan has been quick to introduce ATM (Automated Teller
Machine) Services to our customers. Electronic cash dispensing facilities are now available at major centers
like Karachi, Lahore and Rawalpindi. All these ATMs are linked through a state-of-the-art Satellite based
Communications System offering real-time 24 hour service. In due course of time, we plan to install more
ATMs and extend this on-line facility to other operating centers of the Bank.

VISION OF ASKARI BANK

8 To Be the Bank of First Choice in th

Mission of ASKARI BANK

To be the
Leading private sector bank in Pakistan
With an international presence,
Delivering quality services
Through innovative technology
And effective human resource management
In a modern and progressive organization
Culture of meritocracy, maintaining
High ethical and professional standards,
While providing enhanced value to all our stake-holders,
And contributing to society.
Strategic goals:

COMMITMENT:
To deliver quality services through innovative technology and effective resource
management.
INTEGRITY:
To create relationship with the customers based on trust, and to be a reliable organization
for the customers.
FAIRNESS:
To be fair with the customers, to make fair dealings, and to create fair relation, and to be
fair the job.
TEAM WORK:
To work with the organization and to achieve the goal by mutual efforts.

SITUATIONAL ANALYSIS:
External analysis:
Industry analysis:
Banking and Financial services sector in Pakistan comprises the
commercial banks and the non-banking financial institutions,
including the development finance institutions (DFIs), leasing
companies, modarabas (Islamic Mutual Funds) and investment banks.
These are controlled and regulated by the State Bank of Pakistan
(SBP). Pakistan is in the process of adopting an Islamic
(Shariah) financial system, under which interest-based banking is
not allowed. However, this has not been made into a law as yet,
and exists only on paper, and most banks provide an anticipated
profit rate in advance.

Since 1990 the Government of Pakistan (GOP) has introduced

various reforms in the financial services sector enhancing the
level of autonomy enjoyed by the SBP. The number of banks
operating in Pakistan has increased, which in turn has resulted
in increased competition. The banking sector, in general, has
shown good progress during the last few years. During previous
five years, the combined total assets of domestic banks, showed
an average annual increase of 22 percent, while combined
deposits have recorded an increase of 27 percent per annum. A
total of forty six commercial banks, including twenty one foreign
banks, are operating in Pakistan. Additionally, sixteen
Investment Banks, twenty nine Leasing Companies and fifty three
Modaraba Companies provide a mix of financial services.

Three major nationalized commercial banks (NCBs) are still the

dominant players in the market, controlling about fifty-one
percent of the entire banking sector deposits and fifty percent
of advances. NCBs and some DFIs in the public sector are
experiencing difficulties because of over-staffing, inefficiency
and large non-performing loans. GOP is taking steps to recover
these loans, by offering incentives to defaulters. Bureaucratic
inertia and political clout, of some of the defaulters, is a
major impediment in this effort.

Opportunities for new American banks exist in consumer banking,

corporate bonds, investment banking, leasing and housing finance
sectors. Good reputation enjoyed by the existing American banks
will be helpful for new entrants. Some challanges, however, do
exist in the form of weak economic conditions in Pakistan and the
turnaround possibilities in NCBs through privatisation.

Competitive analysis:
Consumer banking

Consumer banking in Pakistan is largely underdeveloped. There is

no tradition of lending to small individual consumers, and
purchases of automobiles, housing, and consumer goods are
generally made on a cash basis. Foreign banks generally have
sufficient lucrative business in the corporate sector to absorb
their limited credit reserves. High interest rates combined with
high start-up costs are major impediments in the development of
consumer banking.

Commercial banks face considerable competition in attracting

deposits from individuals or small investors. In contrast, the
GOP's national saving scheme offers attractive rates of return
(approx. 16 to 18 percent annually) on 10-15 year fixed accounts,
which banks find difficult to match.

Recently banks and other financial institutions have introduced

innovative schemes to attract deposits. These schemes offer
prizes on short and long term fixed deposits, through lucky
draws. These prize schemes have generated Rupees 16.3 billion of
new deposits from October to mid December 1998 alone.

- Wholesale/Corporate banking

The corporate bond market is still in its infancy in Pakistan.

Few companies such as Pakistan Telecommmunication Ltd. (PTCL) and
Water and Power Development Authority (WAPDA) introduced
corporate bonds for general public and received good response but
no similar initiative was taken by other companies. Market for
corporate bonds needs to be developed as it will offer greater
opportunities to the corporate and investment banks.

- Market position of American banks

American banks enjoy a good market position. Collectively U.S.

banks hold approximately 9 percent of all commercial banks'
assets. At present, three American banks are operating in
Pakistan: American Express Bank; Bank of America and Citibank.
Generally American banks are selective in their clientele and
target reputable and established companies and individuals,
resulting in a more focused offering and personalized service.

Citibank is the largest foreign bank operating in Pakistan with a

total equity investment exceeding USD 80 million. It employs
over 700 people and provides comprehensive range of innovative
financial services to over 100,000 customers. It is also one of
the largest tax payers in Pakistan's corporate sector.

Bank of America started its operations in Pakistan in 1961.

Presently it has branches in Karachi, Lahore and Islamabad and
employs over 300 people. Bank of America provides versatile
financial services such as depositry services, corporate banking,
investment banking, treasury services, trade financing and global
payment services. In December 1997 its assets exceeded Pak
Rupees 19.7 billion, deposits Pak Rupees 16 billion and advances
Pak Rupees 10 billion.

American Express Bank started its operation in Pakistan in 1984

and has branches in Lahore, Faisalabad and Islamabad in addition
to Karachi. In addition to banking services, American Express
also provides travel related services in Pakistan. In December
1997 its assets exceeded Pak Rupees 15.5 billion, deposits Pak
Rupees 12.63 billion and advances Pak Rupees 6.63 billion.

Market analysis:

All private sector banks were nationalized by GOP in 1974.

Subsequently, financial reforms were introduced in 1990 to
liberalize this sector. Plans were announced to privatize state-owned banks and DFIs,
and to allow the establishment of private
domestic banks. Since the latest liberalization, two banks and
three DFIs have been privatized, and 14 new private banks have
started their operations. Consequently, private banks play a
significant role in the banking industry. The State Bank of
Pakistan (SBP) holds complete autonomy in administrative matters,
and has introduced guidelines to enforce internationally accepted
standards on capital adequacy. However, implementation of these
guidelines is still far from completion.

In total forty-six commercial banks operate in Pakistan, out of

which twenty five are local and twenty one are foreign-owened.
The number of branches for Pakistani banks, stand at 8,597 and
for foreign banks at 87.

Though the economy of Pakistan is passing through a difficult

phase and the financial sector is operating in an environment of
increasing competition, both from local and foreign banks and
financial institutions. The financial services sector still
offers good opportunities in consumer banking, corporate bonds,
underwriting of equity issues for privatisation, refinancing of
U.S. exports to Pakistan under letters of credit and advisory
services for due diligence and project feasibilities.
Additionally joint venture and technical relationship in the
leasing sector is also possible.

MARKET PROFILE

Commercial Banks: Thirty-nine companies have been issued

licenses to operate as banks in Pakistan. Their major activities
include:

- retail banking
- short term financing
- trade financing
- discounting of bills
- financial advice
- project financing
- underwriting of equity and debt issues
- portfolio management
- custodial services.

There are no restrictions on new foreign banks coming in

Pakistan. However, permission to operate is considered on a
reciprocal basis. State Bank of Pakistan grants permission to
operate in Pakistan to only those foreign countries where the law
provides same facilities to the Pakistani banks as Pakistan
provides to foreign banks and American banks qualify this basic
criteria. U.S. Banks interested in operating in Pakistan, must
have branches in atleast two countries, other than the U.S.

The State Bank of Pakistan (SBP) is the central bank and has the
authority to grant permission to banks interested in setting up
operations in Pakistan. Applications should be submitted on a
prescribed form issued by SBP. The form, enclosing required
information such as annual reports for last five years, bio-data
of directors of bank, authorization from the Federal Reserve Bank
in the U.S. to establish branches outside U.S., should be
submitted to SBP. SBP may take 3-6 months in reviewing the
information provided with the application form, and may seek
clarifications or more information, before giving the approval.

Environment analysis:

Financial reforms, have reduced government's intervention in the

operations of financial organizations for economic reasons. The
autonomy granted to State Bank of Pakistan, in February 1994, was
further strengthened in January 1997, and it was given additional
authority to conduct the monetary policy of the country. In
addition to managing the monetary policy, SBP also oversees the
entire financial system and has institutionalized the procedure
for the appointment of Chief Executive Officers (CEO), and Board
members of the NCBs, and DFIs.

All banks/DFIs are facing stiff competition to attract new

customers. With the privatization program that began in Pakistan
in 1991, two of the five NCBs and three DFIs were privatized, and
eleven new private banks were set up. With a network of 8,597
domestic branches and 87 foreign branches, competition among
banks is getting tougher and profit margin lower.

Along with the growth in size, the banks are now incorporating
innovative approaches to their traditional commercial banking
operations, keeping in view the changing demand of time, and
emphasizing more on personalized service, electronic funds
transfer, sophisticated financial products such as electronic
banking, auto-teller machines and evening banking.

The backbone of Pakistan's domestic financial system, is still

provided by the five major domestic commercial banks, which are
Habib Bank Ltd., National Bank of Pakistan, Muslim Commercial
Bank, United Bank Ltd. and Allied Bank Ltd. Three NCBs, Habib
Bank, National Bank and United Bank, despite the severe financial
crunch, are still the market's dominant players, controlling
about 51 percent of the entire banking sector deposits and 50
percent of advances.

Domestic Banks: Before the liberalization of the financial

sector in the early 1990s, there were no local private banks in
Pakistan. In the industry, where earnings largely depended upon
already limited spread, service was, and still is, the single
most critical success factor.

At present there are 14 domestic private banks operating in

Pakistan. The domestic private banks, despite tough competition
from NCBs, denationalized commercial banks and foreign commercial
banks, have shown a phenomenal growth over the past five years.
The combined total assets of domestic banks have increased from
Rs. 771.3 billion in 1992 to 1,616.3 billion in 1997, showing an
average increase of 22 percent annually. Similarly, combined
annual deposits have recorded an increase of 27 percent, from Rs.
318.9 billion in 1992 to 1,066 billion in 1996. Advances recorded
an annual growth of 27 percent from Rs. 192.8 billion in 1992 to
Rs. 641 billion in 1997. Capital adequacy ratio is 8 percent for
domestic private banks compared to less than 5 percent for NCBs.

Private banks generally have an edge over the NCBs. Almost all
of these banks have been patronized by big industrial groups,
that deal exclusively with these banks. Additionally, they
provide better customer services, maintain lower overheads and
follow relatively more prudent lending policies than the
government-owned banks, and are thus more profitable.

Denationalized Banks: Two banks, Muslim Commercial Bank (MCB)

and Allied Bank Ltd. (ABL), were privatized during the banking
reforms and privatization process. MCB was taken over by a local
business consortium in 1990 and ABL by an employees' group in
1991. After privatization, MCB's net assets increased from 75
billion in 1993 to 135 billion in 1996, deposits from 63 billion
to 113 billion and advances from 31 billion to 58 billion,
accordingly. ABL also fared quite well during the same period.
Its net assets increased from 42 billion in 1993 to 58 billion in
1995, deposits from 31 billion to 51 billion and advances from 18
billion to 29 billion. The profitability of these banks is
better than that of nationalized banks, therefore, GOP is
planning to privatize other nationalized banks as well. Habib
Bank Ltd, the largest Pakistani bank, is currently being
restructured for eventual privatization.

Foreign banks: The twenty one foreign banks operating in

Pakistan are playing a significant role by incorporating new
technologies and providing better quality services. Policies of
privatization, foreign exchange reforms and structural
adjustments, have increased the inflow of foreign resources
through direct and portfolio investment. Most foreign banks in
Pakistan have branches only in big commercial/industrial centers,
unlike local banks which also operate in small towns.

In trade financing, the role of foreign banks is even more

significant, as approximately 30 percent of the total trade of
the country is transacted through them. Major portion of the
trade financing is for importers to establish letters of credit.

In 1991 when GOP allowed resident Pakistanis to open foreign

currency accounts, many banks directed their efforts towards the
previously untapped consumer and retail banking sector. New
products such as credit cards, housing finance and automobile
finance were introduced. Foreign banks also play an important
role in assisting local corporations to access international
capital markets. The total deposits of the foreign banks
increased from Rs. 74.4 billion in 1992 to Rs. 213.4 billion in
1997. Furthermore, their advances increased from Rs. 34.2
billion in 1992 to Rs. 100 billion in 1997 showing an annual
increase of 37 percent.

Development Finance Institutions (DFIs): DFIs face problems of

weak economic health and low profitability, due to low
productivity, high overhead expenditures, over-staffing and large
number of loss-making branches, resulting in high intermediation
costs which make their financing more expensive relative to other
financial institutions.

A serious problem facing DFIs is the liability of non-performing

loans, which has adversely affected the overall viability of the
entire banking system. The total amount of non-performing
advances of banks/DFIs of Rs. 1 million and above, increased from
Rs. 113.2 billion from June 1996 to Rs. 128 billion by the end of
June 1997 or 18.5 percent of the total loan portfolio. On June
30, 1997 the default to total loan portfolio ratio for the DFIs
was 23.3 percent, followed by domestic banks at 20.7 percent and
foreign banks at 4.2 percent. Among domestic banks, the default
ratio in the case of NCBs stands at 28.8 percent, for provincial
banks 6.6 percent and for private banks 5.2 percent.

To improve the recovery of non-performing loans, SBP has

introduced several initiatives, to assist the defaulting
companies and non-performing industries. However, the desired
results have not been achieved, due to political influences,
ineffective monitoring and slow/weak court procedures. To speed-up legal action against
the defaulting companies, SBP has now
amended banking court laws and has expanded the number of banking
courts from 10 to 45. By March 1998, over 43,000 cases involving
an outstanding amount of Rs. 66 billion were filed by the
banks/DFIs by March 1998. Cases involving Rs. 11.7 billion were
presented for execution and Rs. 1.15 billion was released.

Investment Banks (IBs): The first investment bank was listed on

the Karachi Stock Exchange in 1957, and 16 investment banks are
presently operating in Pakistan. Major activities of these
investment banks are corporate financing, trade financing,
treasury services, securities underwriting and merchant banking.
The performance of investment banks has generally been
satisfactory. Deposits of investment banks must be of one month
duration in local currency and minimum three month duration in
foreign currency. Investment banks are not allowed to deal in
foreign exchange.

Leasing Companies (LCs): Leasing is now a popular mode of

financing in the country. There are 29 leasing companies
operating in Pakistan with market capitalization of over Pak.
Rupees 8,287 million which constituted 2.05 percent of total
market capitalization in December 1994. Leasing companies
provide a wide range of equipment, products and appliances such
as industrial equipment and machinery, motor vehicles, office
equipment and computer equipment. The recovery rate of leasing
companies stood at approximately 74 percent at end June 1998.

Modarabas: Conceptually and in practice Modaraba is the Islamic

version of a Mutual Fund, managed by Fund Managers, where owners
agree on a profit/loss sharing. Modaraba sector in general has
been facing liquidity problems and is operating in an environment
which has essentially restricted their resource mobilization
capability. Most of the modaraba companies which sprouted in
1992/93 are either facing liquidation, merger or are operating at
a loss.
 INTERNAL ANALYSIS
GROWTH OF ASKARI BANK:
"There is no sin punished more implacably by nature than the sin of resistance to
change"

We live in a moment of history where ever thing is changing so fast that we begin to
see the present only when it is already disappearing.
Our customer needs are changing and their expectations are growing. Technology is
fast proliferating the distribution channels and now banking services can be accessed
from multiple contact points. We believe that balanced growth is the key to survival
in today's global banking environment.
From a humble beginning with just 7 branches in 1992, today we enjoy a network of
36 outlets, spread across the country. These outlets are supported by a network of
selfservice ATMs.

Our total assets now exceed Rs.50.9 billion and we have over 17 products and services to
match our customers' individual needs. Bank's equity base stands at Rs. 2.58 billion with
20 growth over the last 5 years. The human resource capital of the bank today exceeds
1,200 employees. As part of our growth strategy we are now extending our banking
services to the remote and rural areas.
technological innovation
"Modern science is not an option, it is an obligation "

Technology is rapidly changing the way we think, act and do business.

It has played a pivotal role in enhancing customer expectations,
particularly with respect to speed and quality of service.

We enjoy a strategic competitive advantage over all domestic players

by virtue of our leadership in technological innovations. We have fully
automated transaction processing systems for back-office support. Our
branch network is connected on-line real-time and our customers have access to off-
site as well as on-site ATMs, all over Pakistan.

Our Phone Banking service and Internet Banking facility allows customers
to enjoy routine banking services from anywhere in the world, 365 days a
year, 24 hours a day. We have also pioneered ecommerce venture in
Pakistan through a major retail distributor.

Our qualified and experienced technology team is now focusing on data

warehousing to enhance the Customer Relationship Management (CRM)
program

Financial analysis:

Business Volumes
2001(Rupees in '000) 2000(Rupees in '000) 1999 (Rupees in '000)
ASSETS 50,980,392 37,249,355 31,026,845
LIABILITIES 48,401,674 35,094,800 28,980,424
NET ASSETS 2,578,718 2,154,555 2,046,421

Profitability
2001 (Rupees in '000) 2000 (Rupees in '000) 1999 (Rupees in '000)
Net Interest Income 1,348,410 921,925 864,335
Fee Based Income 796,282 644,667 538,733
Net Profit 1,008,498 315,588 282,446
Taxation 458,447 436,000 430,000
 Payout (Cash Dividend) 207,107 147,439 172,590
Earnings Retained 343,444 168,174 110,42

SWOT analysis:
Strength:
Askari Commercial Bank Limited has received an A1+ rating for the short term (which is the highest in the
category) and an AA for the long term, from the Pakistan Credit Rating Agency (Pvt) Ltd. (PACRA), an
affiliate of IBCA Ltd. UK. ACBL is the first Private Sector Pakistani Bank to voluntarily obtain a rating
from PACRA

Askari Commercial Bank is the only Private Sector bank that has been approved by the World Bank as a
Participating Financial Institution for the US$ 200 million Line of Credit sanctioned to the Government of
Pakistan for the Financial Sector Deepening and Intermediation Project.

Askari Bank is operating with 30 branches located throughout Pakistan. Most of the branches are
connected through our State of the Art, On-line Communications Network, which gives the bank a
competitive edge in providing instant services to its clientele. We also offer direct access to the latest
Foreign Exchange Rates through our Online Communications System.

Askari's emphasis on further broadening its core foreign trade business translated into handling a higher
volume of Export and Import business of Rs. 26 billion registering a growth of 34% over the pervious year.
This enhanced foreign trade business was secured due to excellent customer services and efficient
international settlement arrangements with our correspondent banks.
Current strategy:

Corporate culture:

Our Corporate Philosophy

The Challenge..... to bring a dream to life.

Inspiring relationships
From knowing our customers' requirements to understanding employee needs, from
utilizing modern technology to making responsible social contributions, from enhancing
stake-holders' value to practicing corporate ethics, we are continuously and consistently
striving to address newer challenges with a single motivation - the power to inspire and be
inspired.
 Corporate Information
Board of Directors
Lt. Gen. Jamshaid Gulzar Chairman
Lt. Gen. (R) Masood Parwaiz Chairman Executive Committee
Mr. Kalim-ur-Rahman President & Chief Executive
Brig (R) Muhammad Shiraz Baig Director
Brig (R) lkram ul Hasan Director
Brig (R) Asmat Ullah Khan Niazi Director
Brig (R) Muhammad Safdar All Director
Mr Javed Ahmed Noel Director
Mr Zafar Alam Khan Sumbal Director/Secretary
Mr Shahid Hafeez Azmi Director
Mr Muhammad Afzal Munif Director
Mr Tariq lqbal Khan Director (NIT Nominee)
Auditors
Taseer Hadi Khalid & Co Chartered Accountants
Legal Advisors
Afridi Angell & Khan
Registrar & Share Transfer Office
Askari Associates (Private) Limited,
6th Floor, AWT Plaza, The Mall,
P.O. Box 678, Rawalpindi.
Tel: (051) 9272442-44
Fax: (051) 9272447
E-Mail: askari@isb.compol.com
Registered Office/Head Office
AWT Plaza, The Mall,
P.O. Box No. 1084,
Rawalpindi - Pakistan.
Tel: (051) 9272150-53
Fax: (051) 9272455
Web Site: www.askaribank.com

Corporate citizenship
"The greatest of life's pleasures are shared"
 Our role as a responsible corporate citizen is as important to us as the
products and services we offer.
We have made useful contributions in the areas of sports, culture, poverty
alleviation, health & medical sciences, education and scientific research.
We are one of the co-sponsors of the 9th South Asian Federation Games,
now schedule to be held at Islamabad in the Year 2003. We have also
sponsored various sports tournaments at both amateur and professional
level.
Our contributions to the NGOs dedicated to the treatment and welfare of
the blind is a ray of hope in the darkness. We have made donations to the
drug-addiction control programs and our efforts to help support Aids
Awareness programs and contributions to the mental and social welfare of
women and children have won much acclaim.
We participated in IUCN Water conservation initiative and have helped in
creating better understanding about the country on the international
platform by cosponsoring the first interactive encyclopedia on Pakistan.

corporate achievement
"Winning isn't everything, it's the only thing.

Amidst tough competition, our efforts to go an extra mile in providing superior

services to our customers have been acknowledged at the national as well as
international levels. These acknowledgements serve as a great source of
encouragement and appreciation at one hand and inspire us to perform even better, on
the other.
We have been honored with the "The Best Bank in Pakistan" award by the Global
Finance Magazine. We won the Euromoney and Asiamoney awards as early as 1994,
1995 and 1996. We have Al+, the highest possible credit rating, for the short-term
obligations, and our long-term rating stands at AA. We won the prestigious "Best
Presented Annual Accounts" award from the Institute of Chartered Accountants in
Pakistan, and The Institute of Cost and Management Accountants, Pakistan, for the
services sector, for 2000. We have also received prizes during the last four years from
the South Asian Federation of Accountants (SAFA) for the "Best Presented Annual
Accounts" for the financial sector, in the SAARC region.

We were the first bank in Pakistan to offer Internet Banking services and b2b e-
commerce solutions for merchants looking to purchase on credit.

These achievements undoubtedly are the result of our consistent hard-work and
honest efforts to be the best in whatever we do.