YEAR END REPORT 1999

February 29, 2000

COMPANY DEVELOPMENTS

·         We are pleased to announce that Mr. Mike Maguid Abdelaaty has been appointed by the Board of Directors as President of American Finance House – LARIBA. Mr. Abdelaaty brings to your company a significant banking experience of over 20 years at increasing levels of management with Bank of America, Sanwa Bank and Saudi Investment Bank. Please welcome Mr. Abdelaaty by calling to meet him and/or visiting him at your company’s offices.

·         We are pleased to announce that your company’s Board of Directors has voted to grant the year 2000 LARIBA Award for Excellence in Islamic Banking, Finance and Economics, as follows: Academic Division - to Mr. Thomas Mullins, Harvard University. Mr. Mullins played a pivotal role in the start up and development of the Harvard Islamic Finance Information Program, (“HIFIP”). This has added a tremendous credibility and a large volume of research and development in Islamic Banking in the United States. The Board has also voted to grant the Practitioner’s Division award to Mr. Iqbal Khan, Managing Director, Islamic Banking Services, Hong Kong and Shanghai Banking Corp. – HSBC, London, UK. Mr. Khan played an important role in developing the Islamic Capital Market that resulted in the financing of major projects that started the process of joining Muslim countries economically and financially. Mr. Khan has also been an important factor in communicating the concepts and principles of Islamic Banking to leading Central Bankers in the United Kingdom and the United States. The Awards will be handed out during the Seventh Annual LARIBA Awards Symposium and Dinner to be held on Saturday April 29, 2000 at the Pasadena Convention Center starting at 12:00 noon. The registration fee including dinner  and a copy of LARIBA Bank Book is $50 per person. PLEASE MARK YOUR CALENDAR for APRIL 29, 2000 to join us. The symposium will feature Messrs. Thomas Mullins, Executive Director, Harvard Islamic Finance (Harvard University), Mahmoud Elgamal (Rice University), Bill Maurer (Univ. Calif. Irvine), Nejatullah Siddiqui (Aligarh University and King Abdul-Aziz University), Stephen Ross (MIT), Saleh Malaikah (CEO of Albaraka Investments), and Mohammad Fadil, Esq. (Attorney in Georgia).  Many other scholars with significant contributions in the field are also expected to attend. The Symposium & Awards Dinner will be attended by the Mayor of Pasadena, political leaders in the California State Assembly, newspaper and TV reporters, and community leaders.

·         We were invited to present a paper at the Third Annual Harvard University Forum on Islamic Finance held on October 1, 1999. We presented a paper entitled “The Challenges of Offering LARIBA Products and Services in an American Bank”.

·         We also participated in the organization and preparation of the Second Annual ISNA Conference on Islamic Banking and Finance held on October 2 & 3, 1999. We participated in the “Providers Forum” to introduce LARIBA’s products and services.

·         Your company is now registered to conduct business in 12 states including Arizona, California, Colorado, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, Texas and Virginia.

·         Your company has become a real LARIBA.com company. We receive up to ten requests for application, inquiries and LARIBA Bank book orders on our site daily from the United States and many parts of the world. Approximately 1800 visitors a month visit our site and the rate is growing.

·         Your company financed 31 projects totaling approximately $1.7 million from July 1999 until end of December 1999 consisting of single family homes, autos, equipment, trade finance and construction financing.

PROFIT DISTRIBUTION

The Board of Directors has approved the distribution to investors of approx. 6.5% for the third quarter and approx. 6.75% for the fourth quarter of 1999. This brings total distribution for the year 1999 to approx. 6.56%.

INTERNATIONAL ECONOMIC and FINANCIAL DEVELOPMENTS

  THE UNITED STATES:

·         Real Gross Domestic Production (GDP) is expected to have grown at approximately 4% in 1999 and is projected to grow at a slower rate ranging between 3% and 3.5% in the year 2000. Productivity of American labor increased by 2.9% in 1999, the highest rise in 7 years. Rising productivity means less pressure on wage increases.

·         The Federal Reserve Board has increased the Discount rate by 0.25 percent and is expected to follow up with another increase of 0.25 percent before May 2000 in an effort to curb inflation. The Fed has also been active in curbing money supply growth rate. Main sources of inflation are higher wages, due to historic declines in unemployment, and sharp increase in oil and gas prices. The other source of fear by the Fed has been the “wealth effect” prevailing in America due to record stock market rise in the last five years.

·         The US dollar has risen sharply against the Euro. This has reduced US exports and sharply increased US imports. The result has been record current account deficit and more export growth in Euroland. On the other hand, the dollar has declined sharply against the Japanese Yen. This situation, if continues, may hurt the hopeful recovery and growth of the Japanese economy.

·         Policy-makers at the Group of Seven meeting fear that a “hard landing” in US  economy may be caused by increases of interest rates by the Fed.

·         Long-term RIBA interest rate on US Government bonds are expected to reach seven to 7.25% in the short-term. However, interest rates are expected to decline later to a range of 5.75 to 6% in the long run.

·         For the past decade, the United States has been experiencing the greatest and longest bull market in history. Surprisingly, in terms of individual stocks, the US market can be termed a bear market. If one looks at all stocks listed on the New York Stock Exchange through end of November 1999, we find that over 60% of these stocks have declined in 1999 and that includes over 50% of NASDAQ stocks. It is believed that with the economy growing, corporate earnings rising and more stocks down in 1999, there are many values remaining in the market. It is believed that investment in US value stocks, and small- and mid- capitalization stocks and in international markets may result in promising returns in 2000. Please consult with your financial advisor to restructure your portfolio.

EUROLAND

·         GDP is expected to have reached 2% in 1999 and is expected to rise to 3% this year.

·         The unified European currency, the Euro, weakened by 15% since its introduction in January 1999. The main reason was the easy money policy implemented by the European Central Bank, ECB. The lower Euro helped enhance exports from Euroland and hence the economic growth in these 11 one currency zone.

·         Short-term RIBA interest rates are expected to rise by 0.5percent to 1.0 percent this year in an effort by the ECB to combat inflation. The Bank of England raised rates to 6% for the second time this year.

·         Euroland is expected to experience a significant growth in the mergers and acquisition activity in order to streamline markets, reduce overhead expenses, and enhance efficiency along the same lines of what happened and is still happening in the United States. However, the potential of stock appreciation of many of these companies is very promising. Euroland may be a good place to look into for diversification of your investment portfolio. Please consult with your adviser.

·         European equity markets staged strong come back in the final two months of 1999.

JAPAN

·         GDP grew by 1% in 1999 due to a 3.9% annualized decline in 3^rd Q and perhaps 4% in 4^th Q and is expected to grow by 1.75% to 2.25% in 2000. This is mainly due to the huge monetary relaxation and pumping of money in the economy through direct spending coupons to the citizens and government financing of large public projects. Another reason has been the bank and financial institutions restructuring efforts by the Japanese government. The 60% rise in the share prices since1/99 suggests that investors agree with the changes. Financial deregulation is forcing firms to focus on return on capital. In some way, Japan looks like the US in the early 90’s when business engaged in painful changes, and workers’ real income fell.

·         Short-term RIBA interest rates are expected to hold steady at around zero percent to help the economy to grow further.

·         The Japanese stock market was one of the real bright spots in the world market. The market appreciated by 50% in U.S. dollar terms. Many portfolios investing in Japanese stocks realized around 65 to 80% growth. Please consult with your financial adviser about your portfolio diversification. It should be noted that due to the 10-year bear market in Japan, equity ownership is currently at 6%, which is a post war low. Japanese households are currently holding $11 trillion in financial assets, 53% of which is in cash or cash equivalents. Part of this money will soon come back to the market.

ASIA

·         Southeast Asian markets grew at a significant rate of over 50% in 1999 on average. This included the markets of South Korea, Thailand, Malaysia and Hong Kong. The Indonesian market is still suffering from the excesses of ill-advised policies and political instability. Malaysian independent economic policies were vindicated. Many companies and private high net worth individuals reduced debt, canceled many of their capital expenditure and purchases programs and increased operating efficiency.

·         Because of the restructuring of the weakened “tigers” of Asia, many foreign investors came back to take advantage of many of the operating areas that were closed to multinational corporations. Mega-banks, insurance & finance companies and investment banking firms came back with stronger presence in these markets.

 CRUDE OIL PRICES

·         Crude oil prices rose sharply due to the decline of export from Iraq, the adherence of OPEC producers to production quotas and increased demand due to economic recovery in Asia and the developed countries. Oil prices reached over $ 30 a barrel and are expected to stabilize in the range of $22-$24 a barrel by March/April 2000.

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PLEASE MARK YOUR CALENDAR

APRIL 29, 2000 at 12:00 Noon and Come to Pasadena

Pasadena Civic Center Auditorium, 300 E. Green Street, Pasadena, CA  

LARIBA 2000

Seventh Annual Symposium on Islamic Banking and

Achievement Awards Dinner

Honoring

Mr. Thomas Mullins, Harvard University, LARIBA 2000 Award – Academic Division

Founder of Harvard Islamic Finance Information Program

And

Mr. Iqbal Khan, LARIBA 2000 Award – Practitioners’ Division

Managing Director, Hong Kong and Shanghai Bank, London, UK

Registration for Symposium & Dinner, $50 per Guest

Call Us at 424-449-4401, or 1-888-LARIBA-1  &/or

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