Earnings attributed to equity shareholders after tax were K9.1 billion (2005: K6.1 billion), a rise of 49% and Return on Shareholders funds of 39%.

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1 MANAGING DIRECTOR S REVIEW OVERVIEW Zambia enjoyed a robust economic growth of 5.8% in 2006 (2005: 5.2%) mainly driven by positive growth in mining, construction and transport sectors. Other positive developments included reduction in inflation rate to a single digit and the reduction in the level of Government borrowing. The above developments saw a reduction in the average yield rates on Treasury Bills and Government Bonds to 9.8% and 12.6% respectively from 16.7% and 23.5% respectively. This led to a decline in commercial banks lending rates to 27.9% by end of 2006 from 33.9% in However, the foreign exchange market witnessed a depreciation of the Kwacha against the US dollar by 20% during the year. Overall, the banking sector continued to perform strongly during the year. FINANCIAL HIGHLIGHTS Despite operating in a challenging business environment characterised with increased competition, falling yield rates, reduced base lending rates and increases in operating costs, Investrust Bank Plc (the Bank) is proud to report yet another solid performance in The Bank recorded a profit before tax of K12 billion (2005: K9 billion) signifying a 33% increase. The increase in profitability arose from higher net interest income and net fee and commission income. Earnings attributed to equity shareholders after tax were K9.1 billion (2005: K6.1 billion), a rise of 49% and Return on Shareholders funds of 39%. Earnings per share grew from K2.07 to K3.08, representing a growth of 49%. The Balance sheet remained strong throughout the year with health capital ratios. Total assets grew by 46% to K287 billion. Of the largest contribution to the asset growth were the growth in loans and advances (72%), leases (138%) and balances with the Central Bank (66%). The Bank s deposit base grew by 49% to K243 billion. Below are growth trends of the Bank s selected assets and liabilities and profits over the last three years;

2 Balance sheet growth 300,000 K'millions 250, , ,000 Investments in GRZ securities Loans and advances Leases 100,000 50,000 Customer deposits Year ended 31 December Profit before tax Amounts in K'million 15,000 10,000 5, Year ended 31 December

3 Operating income Total income was recorded at K38.6 billion, being 40% higher than This reflects a steady growth in both net interest income and non-interest income. Net Interest income increased by 55% to K25.5 billion. Despite the growth in net interest income, the Bank reduced the base lending rates twice during This had a negative effect on the Bank s budgeted interest income. Net fee and commission income recorded a growth of 37% to K7.1 billion mainly reflecting increased use of the Bank s service related products. Income from dealings in foreign currencies recorded a reduction of 40%. This was as a result of the volatility of the exchange rates experienced during the year. Operating costs Operating expenses were 16% higher than in The increases in costs reflect normal business expenditure. The cost to income ratios have continued to improve. The increases in staff costs were due to annual pay awards and staff profit share. Staff numbers remained fairly stable. Despite the significant growth in business, the increase in operating costs was slightly lower compared to the income growth rate. Impairment charge on loans and advances The increase in the impairment charge on loans and advances is due to the growth in the loan portfolio. BUSINESS HIGHLIGHTS During the year, the customer deposit base and loan balances both grew strongly. The growth in customer deposits was spread fairly across the deposit types with deposit accounts recording the highest growth followed by the current accounts, REPOs and savings accounts. The growth has been particularly in those areas the Bank has developed focus: small to medium size enterprises, charities, the public sector and other private enterprises. The growth in loans and advances and leases is a testimony of the Bank s commitment to support economic growth by providing credit to companies in the productive sectors of the economy. The Bank, has over the last three years, reduced its investments in Government securities and channeled the funds to support the growing demand for its credit products. A sizeable portion of the Bank s loan book comprises credit to the personal loan market. The biggest challenge in this area continues to be effective management and monitoring of the asset quality and the Bank has systems and procedures in place to ensure that this is not compromised. During the year the Bank launched two credit products i.e. the Investlease and the Investdiscount. This move was aimed at capturing small to medium sized companies who had no access to leasing and invoice discounting facilities.

4 Our ATM debit card has continued to gain popularity and the Bank will continue to promote its use. Being part of the ZAMLINK ATM network has provided flexibility to customers to be able to withdraw cash from ATMs from any member bank on the network. 10 th anniversary celebrations The Bank celebrated its 10 th anniversary in September This was strengthened by the advertising campaigns on national TV and radio and this earned the Bank excellent publicity. People Our staff and their commitment have always been critical to the success of the Bank. They are vital to the quality of our customer service and so, as we make significant changes to our organization, investing in our employees remains key priority. During the year, the Bank launched the HIV/AIDS policy for its staff. OUTLOOK FOR 2007 In 2007, monitoring credit quality will remain a priority. Efficient management of capital and adequate loan provisions will be key focus areas. Looking forward, we see continued focus on preserving interest margins, developing non-interest income business and seeking to actively manage the cost base. These three areas will be key to developing growth in profitability and specific programs are in place to address each area. We have good growth prospects in the short, medium and longer term and our ability to generate strong cash flows allows funding growth internally and externally. Importantly, we shall not sacrifice profitability to achieve this growth. We have developed robust plans to ensure that our long-term strategy of satisfying our customers wider financial needs will be delivered. We continue to seek further innovative ways to improve our products, services and operations and we have a strong management team with a proven track record of investing depositors and shareholders money wisely. Attention will also focus on improving and expanding existing strategic areas of operations. Overall, the Bank is in great shape, and we will seek to build on the momentum we have generated in the last four years. I would like to express thanks to all our loyal customers who have trusted us with their business in the last year and I would also express my gratitude to the Central Bank for the clear and firm support given to the Bank s development strategy. Finally, I believe it is critical to recognize the importance of the contribution made by our employees in the past year. Despite the significant challenges presented by all the changes taking place, employees have once again demonstrated resilience and enthusiasm in delivering with

5 quality and reliability. We are now focusing on developing customer service and sales as key priorities. F.C. NDHLOVU CHIEF EXECUTIVE AND MANAGING DIRECTOR