ASSOCIATED DISCOUNT HOUSE LIMITED 12TH ANNUAL GENERAL MEETING

CHAIRMAN’S STATEMENT

Distinguished Shareholders
Invited Guests
Ladies and Gentlemen

It is with great pleasure that I welcome you to the 11th Annual General Meeting of Associated Discount House Limited (ADH). Before I present the Annual Report and Accounts for the year ended July 31, 2004, it is important to undertake a review of the operating environment that prevailed during the financial year.

THE OPERATING ENVIRONMENT:
The financial year under review began shortly after the May 2003 General Elections. Though the successful conclusion of the elections indicated that the nation’s nascent democracy was on the path of gradual but steady growth, the attendant wave of violence and upheavals in the polity as a consequence of the elections underlined the fragility of the political process in Nigeria.

With the successful conduct of the elections, expectations were high that the distortions and uncertainty that characterized the first term of the fourth republic would be constructively addressed post re-election. However, with the exception of the vast improvement in the relationship between the executive and the legislative arms of government, these expectations have been largely unmet. The much-awaited quantum leap in foreign investment inflow remains elusive, while the prevailing business climate has become increasingly challenging for the Nigerian private sector. This has been due mainly to recurring crises in various regions of the country, particularly the Niger Delta, and incessant labour unrest with attendant effect on Foreign Investor-confidence and capital flight.

Also, though Nigeria’s economic outlook brightened significantly with the unexpected leap in oil prices from an assumed price of US$23 per barrel in the 2004 budget to a record high of $51 per barrel, the realization of the full impact of this windfall has been hampered by the volatility of the Niger-Delta and other monumental socio-economic issues.

In order to reform and enhance the growth and diversification of the economy, the government launched a four-year economic agenda christened “National Economic Empowerment and Development Strategy” (NEEDS) in March, 2004. The initiative focuses on reinforcement of fiscal discipline, downsizing of the public sector, stabilization of the foreign exchange rate and elimination of budget deficit financing with its attendant inflationary tendencies. NEEDS is supported by State governments with their own version called “State Economic Empowerment and Development Strategy” (SEEDS). With NEEDS, Government expects to drastically prune the workforce in the public sector and create about seven million jobs in the private sector. The NEEDS document is complemented by the continental quest for development through the economic integration of Africa as articulated through the African Union Initiative in the New Partnership for Africa’s Development (NEPAD).

Gross Domestic Product (GDP) stood at 3.5% as at the end of 2003 against the budgeted 5.0% while the inflation rate was 13.8%. Improvements are however expected in the course of the present financial year, with the robust growth in our oil export earnings and its envisaged impact on activities. This is already apparent in the area of the country’s external reserves which, from a relatively low US$7.5 billion at the end of December, 2003 has risen to US$11.4 billion by June, 2004. The trend of declining value of the Naira experienced in the fourth quarter of 2003 when the exchange rate was N137/US$1 recently was also reversed in the second quarter of 2004 when the exchange rate improved to N132.8 to the US Dollar.

THE FINANCIAL SECTOR
The highpoint of activities in the financial sector occurred towards the end of our last financial year, with the announcement by the Central Bank of Nigeria of a new capital base of N25 billion for all banks in the country. The intended objective of the policy was to deepen the industry and reduce the number of banks from 91 to about 12 mega-banks that could favorably compete with the established international banks. Though the deadline for compliance was December 31, 2005, the new policy expectedly threw the entire banking and finance industry into a flurry of activities.
The immediate impact of the policy on the banking public and banks, was unsettling. Among the banking public, anxiety over the state of their banks spurred a massive flight of deposits to perceptibly stronger banks and drew many banks to the brink of insolvency as a consequence. Banks entered into merger talks and rapidly made recapitalisation plans, resulting in a profusion of fresh banking stock offerings in the capital market. For Discount Houses, the implications of this new rule have been no less fundamental, particularly as it relates to the current shareholdings of banks in discount houses in the country.
Another landmark development was the introduction of a new settlement system on April 1, 2004 with the appointment of seven settlement banks each of which provided a N15 billion collateral deposit. The introduction of this system has led to significant improvement in the banking settlement mechanism. Clearing days were reduced from four to three and from nine to six days for local and upcountry clearing respectively. The CBN also introduced the daily Open Market Operations (OMO) to replace the weekly auction. This innovation now provides operators with constant access to investment outlets as and when required.

The main policy thrust of the Central Bank remained the control of inflation rate and management of liquidity in the banking system, though the country’s large informal sector and unbridled public sector spending made the intended results a huge challenge. The apex bank however recorded greater success with its Project Eagle, as it concluded the linking of all its branches on-line, real time.

In May 2004, Chief Joseph Sanusi retired as the Governor of Central Bank of Nigeria after serving a full and meritorious term of five years. On behalf of the board and entire staff of ADH, I express our sincere appreciation to Chief Sanusi for his contributions to the Industry and the nation at large. In the same vein, we welcome Professor Charles Soludo and wish him a successful tenure as the new Governor of the Central Bank of Nigeria.

THE DISCOUNT MARKET
The long-awaited review of the operating guidelines for Discount Houses became effective in April, 2004. Though the subsequent recapitalisation policy for banks, overshadowed this guidelines, its impact has been no less remarkable. The guidelines reconfirmed the importance of the complementary roles of discount houses in the Nigerian financial sector and contained some changes that reflected the yearnings of the operators in the sub-sector.

The highlights of the new guidelines were the increase in the paid up share capital of discount houses from N500 million to N1 billion and the removal of the restriction on Discount Houses from trading in medium term government securities with tenors of up to five years and in asset-backed securities. This, I believe, will enable the system benefit from the ability of the discount houses to be market makers especially in secondary market trading in other government securities and the bond market. The major implication of these guidelines is that Discount Houses can now deploy their capabilities and competences more efficiently.

SOCIAL RESPONSIBILITY
In the course of the past financial year, we reconfirmed our commitment to being a socially responsible organization by identifying strongly with key societal causes, especially for the less privileged in our society. I am glad to inform you that the landmark SOS Village Computer/Music block project sponsored by ADH was completed during the year. The block is furnished with state-of-the-art computers and musical equipment for the development of the pupils in the Village. We will continue to partner with organizations that are focused on giving hope to the less privileged in the society, with special emphasis on the youths and their educational development.

OPERATING RESULTS
Although the challenges presented by the operating environment were daunting, our company was able to record a significant improvement on our results for the previous year. Gross Earnings rose to N------billion from N5.11billion in 2003, which represents ----% growth. The Profit Before Tax rose to N---- million from N658 million. This represents a year-on-year growth of ----%. In view of this performance, the Board is pleased to propose a dividend of ---- per share, translating to N142.95 million and a bonus of ---- for every --- shares held by shareholders.

On behalf of the Board, I must commend the Managing Director & Chief Executive Officer of ADH, Mrs. Yetunde Ogunseye and her team for this commendable result.

BOARD CHANGES
Following the retirement of Mr. John C. Odogwu, our erstwhile Managing Director & Chief Executive Officer on 31 December 2003, Mrs. Yetunde O. A. Ogunseye, a pioneer staff of your company was appointed the Managing Director & Chief Executive Officer. On behalf of the Board, I wish to place on record Mr. Odogwu’s contributions to building ADH to its present frontline status and wish him unqualified success in his future undertakings. I am confident that Mrs. Ogunseye, with her wealth of experience and unparalleled knowledge of ADH culture, is a most worthy successor. Please join me in welcoming her to the Board.

Messrs Tunde Lemo and Francis Atoju also resigned from the Board following their disengagement from Wema Bank Plc and Triumph Bank Plc respectively. We thank them for their immense contributions to the growth of our company. We also congratulate Mr. Lemo on his appointment as a Deputy Governor of the Central of Bank Nigeria and wish him a highly successful tenure in his new position. They have both been replaced on the board by Alhaji Alade Adeleke and Mr. Wole Oluwatosin respectively. Gentlemen, on behalf of other members of the Board, I welcome you most sincerely. I am confident that the quality of the Board will be further enriched by your contributions.

THE FUTURE
As we commence our 12th year of operations as a discount house, with the new operational guidelines and current realities in the banking sector, our outlook on the future is very bullish.

Our confidence is derived from the robust shape of our core assets and the envisaged boost to our service franchise after the merger of our subsidiary, Gateway Bank, with our largest corporate shareholder – Intercontinental Bank. On September 16, 2004, a key step in this direction was taken with the Memorandum of Understanding signed by Intercontinental, Equity, Global and Gateway Banks to form a single banking entity that would rank among the top three in the country on the conclusion of the merger process by the second quarter of 2005. We believe that our strong affiliation with this group would help to significantly improve our bottom line beyond levels achieved for the 2003/4 financial year by way of additional business opportunities and enhanced income streams.

We also intend to leverage on our first class customer focused service delivery, to tap into opportunities arising from the present consolidation process in the banking industry and build ADH to the status of the undisputed premier Discount House in the country. We, therefore, anticipate that the performance of 2005 will be a significant improvement on the results we are celebrating today.

We equally intend to tap into the opportunities presented by the new guidelines by strengthening our human capital base with the best professionals, training our staff on best global practice on the financial markets and improving our staff motivation system to the status of the reference point for other operators in the industry. With all the assets at our disposal presently and our future plans, I can confidently say our best years are still ahead.

APPRECIATION
I wish to express our gratitude to the Almighty God for His blessings upon Associated Discount House Limited. To Him be all the glory.

All our stakeholders have been very wonderful and generous with their support. Our customers deserve special appreciation in this regard for remaining faithful through the years. Your words of encouragement, the demand on us for the highest level of service delivery and the belief in us for the safety of your investments have been responsible for our successes to date. To all our shareholders, I assure you that ours is a commitment to giving you the best returns on your investments.

To my colleagues on the Board, I commend you for your incisive analysis and contributions to this company. The unity of purpose and the strategic initiatives for the growth of the company is uncommon. I pray that the Almighty may preserve you in all your ways and reward your various institutions with superlative success. For the Executive Management and Staff of ADH, I give special commendation for this remarkable performance and the willingness to go the extra-mile in fulfilling our unique service commitment. I congratulate you and thank God for blessing the works of your hands.


Thank you and God bless you all.

DR. ERASTUS B. O. AKINGBOLA, MON

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Chairman's Statement at the 11th Annual General Meeting