Management Report

General Review

During the fiscal year the economy of Pakistan continued to perform strongly and present a st eady progress towards stability with all the
macro economic indicators showing a positive trend. The GDP growth rate of 8.4% against a target of 6.6% has been the fastest in the
last two decades and has positioned Pakistan as the greatest growing economy. However, t he improvement in the infrastructure of the
country remained below expectations. T he communication sector reflected a positive trend. The two new mobile operators entered the
market aggressively in order to capture the market and in view of strong competition.

Financial Overview

The company’s record performance during the year under review is yet another addition to its success in all spheres of its activities that
validates corporate and management strategies of the Company. Following are some of the highlights of Company’s financial
performance:

New Orders of just under Rs. 18 billion have been received with an increase of 54% over the last year which is an all time record. The
major orders include high voltage grid stations to be constructed in Dubai which we have received against international competition
after establishing our competency in th e field of Power Transmission and Distribution. Some other major orders are in
Telecommunication sector where we are proudly serving three mobile operators at one time i.e. Mobilink, U fone and Telenor . In the
area of Industrial Solutions and Power Generation we received orders for building Power and Desalination Plant at DHA site and for
electrification work at Punjab Industrial State.

Sales increased by 85% as compared to the corresponding period to just over Rs. 13 billion – again a record performance. The major
increase is contributed by Power Transmission and Distribution and Communication Divisions.

Commission income has increased substantially by approximately 170% as compared to the corresponding period mainly due to
commission orders received and executed in the Telecommunication and Power Transmission and Distribution divisions.

Profit before tax increased by 62% compared with last year showing an all time high value of Rs. 1.2 billion. The major contributors are
higher sales volume and higher commission income.

Profit after tax increased by 89% as compared to the corresponding period of last year. T he increase is in line with increase in profit
before tax. Further, tax expense for the year has decreased due to lower incidence of tax on projects executed outside Pakistan.

Orders in hand at the end of the year depict a healthy outlook.

Capital investments of Rs.243 million (2004: Rs.189 million) were made mainly for replacement and modernization and include ERP
software SPIRIDON which has been developed especially for Siemens companies worldwide.

Contribution to Exchequer

The contribution to the Exchequer in the form of duties and taxes was amounted to Rs. 1,226 million during the year.

Siemens Compliance Programme

Siemens has a compliance system that encompasses all measures required for the effective prevention and detection of violations against
Business Conduct Guidelines of Siemens. For this purpose Siemens Pakistan has appointed Regional Compliance Officer who performs
his duties in close cooperation with the Chief Compliance Officer of Siemens AG (CCO) and reports to the Managing Director of
Siemens Pakistan.

Executive Management Committee

Executive Management Committee comprising the Chief Executive Officer, the Chief Financial Officer and the Executive Directors of
the Operating Divisions remained active during the year. The committee meets at least every quarter to review the result of operations, to
formulate strategic plans of marketing, production, investments, to finalize annual and seasonal budgets and to take corrective and
preventive measures for mitigation of risks and for seizing business opportunities. The Committee places before the Board of Directors
all such matters which are required to be approved by it under the law as well as other matters of significance.

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Active Interaction of Top Management

The management believes in active interaction with different levels of management and different categories of employees, in order to
involve them in the achievement of its overall goal and to get their valuable comments and recommendations for improvement in various
areas of the organization.

The Corporate Committee consists of heads of all corporate departments who meet with the Managing Director and Chief Financial
Office regularly each quarter. For major and important customers Key Account Managers exist to provide them one point access. The
Key Account Managers meet with the MD and CFO every quarter.

There is a yearly meeting with all the Divisional Directors, General Managers and Deputy General Managers of operational units. The
MD also has a yearly open session with all the engineers who have worked with Siemens for at least two years. There is also an open
session with trainees of the company.

Human Resource

Guided by the Fit4More - Profit & Growth – Program and People Excellence initiatives, our human resources continue to play a pivotal
role in company operations, through best practice sharing, identification of high potentials, talent development, competency
management, an d a relentless pursuit for superior quality.

We source and place the best available talent, thereby creating an environment that is conducive for healthy competition with unlimited
growth opportunities, in return for which we have rewards that commensurat e with performance.

Moreover, we foster a high performance culture, through Siemens Management Reviews, which leads to synergy of the knowledge,
experience and capabilities of our employees, with the company’s targets.

Our operations are a manifestatio n of the performance and commitment of our human resources, as we aspire to set new benchmarks of
excellence both locally and regionally.

Quality

Our consistent outstanding performance owes much to our commitment to Quality which in our company is not a cliché’ but an
imbedded part of Organizational Culture.

We have defined the Quality Performance indicators for all our processes – Management and Technical alike and encourage and demand
from our employees to take immediate corrective and preventive actions. This contributes to our successful completion of all third party
Audits without non-conformances. We have empowered our Quality Managers to proactively take cognizance to ensure that our
stakeholder’s interests in terms of Quality are never compromised and that non-conformance costs are caused to be held at a minimum
level and Siemens image as a bench mark of Quality at its peak. Management’ part icipation and commitment in its true letter and spirit
supports this endeavour.

We are also a part of Siemens global initiative to further enhance the role of Quality in every facet of our operations and in sustaining
profit and growth so that we remain Fit4More. Our activities in this financial year, therefore, continued with renewed vigor on
implementing Mandatory Elements of Siemens Quality Management system. The focus of these activities is to have Product and Service
Quality for greatest possible customer satisfaction - by Process Quality which provides efficient processes resulting in best cost position
– made possible by increasing Personnel Quality using best trained and motivated employees.

We have also rigorously started our activities to bring the whole company under the ambit of ISO certification – as a means but not as an
end to remain Quality leaders.

Business Processes Improvement Activities

Our business processes improvement activities are constantly undertaken by our top+ program. This is in addition to our continual
activities for improvement and redefinition of all our processes through the Quality Management System and Siemens specific quality
initiatives.

Environment, Health and Safety

We reiterate our commitment as enumerated in our Quality Policy to function in a manner that protects and preservers the environment
for our future generations, ensure the health and safety of our employees with a strong sense of responsibility to the society and
environment.

We have, therefore, reorganized the functions of Environmental Affairs, Technical and Workplace Safety and Occupational Health and
consolidated them in our Quality Management System. This ensures that all controls and monitoring in these affairs are fully regulated
by an integrated management system and a synergy in these activities is produced – thereby increasing efficiency and optimizing costs.

Product Safety

We continue to take complete cognizance of all Product Safety issues by including these requirements in our internal Quality audits and
ensure that all stakeholders’ interests in this regard are protected.

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Corporate Citizenship

Sustainable business success and good corporate citizenship are inextricably linked at Siemens. Fully aware of its responsibility towards
its employees, the company promotes diversity within its workforce and views the vocational training, continuing education,
development, safety and health of its employees as high priorities.

The company supports educational initiatives, promotes sports and cultural events and provides help to the needy. Our university liaison
program helps youth acquire the key qualifications so vital in today’s world. We provide scholarships to students in the field of
engineering, medicine and business administration besides internships to students in different sections of our Company. We award gold
medals to the best students in recognition of their academic achievements in the fields of electrical and electronic engineering.

We organize regular visits of students from engineering and technical institutions and employees of our large customers including
various branches of the armed forces of Pakistan to our manufacturing complex. Such visits are part of the curriculum of many of these
institutions.

Siemens has a well established apprentice training center where young men are exposed to latest technology and trained for the industry.
The three year course imparts knowledge in electrical and mechanical trades during which period the apprentices get stipend paid by the
company. The trained apprentices are much sought after not only by the local engineering industry but also by this sector in the region.
This year the company decided to induct an underprivileged child from SOS Children’s village to give him a head start on life.

Siemens has a policy of helping institutions which work for collective benefit to the society. During the year under review Siemens
helped many organizations with their fund raising efforts. We participated in a fund raising event for Aga Khan Hospit al and Medical
College Foundation and also contributed towards sponsorship of Health Sciences Education Symposium by Aga Khan University
Foundation. Other sponsorships included conference on Safe Blood, Gold Medal for student of Central Institute of Arts and Craft, Indus
Valley School fund raising efforts, Rotary Club of Karachi for their Charity Gala, Organization for the under privileged, Zindagi Trust,
Oncology Department CMH etc. In the field of sports a 200 KVA pad mounted transformer was donated for the floodlit system at
WAPDA sports complex Lahore.

Earthquake Relief Efforts

Just after our financial year came to a close a major earthquake struck the northern areas of the country. We will provide details of our
efforts in our next annual report but at the moment we can say that the entire Siemens global family pitched in under the framework of
‘Caring Hands’ and at last count the total donations in cash and kind were in millions of rupees and efforts are being made for further
contributions.

Awards

We were awarded the following prestigious awards during last year

1. Siemens again qualified for the top 25 companies Award of the Karachi Stock Exchange.

2 Siemens received Export Trophy Awards from both FPCCI and KCCI in the following two categories

(a) Export of Engineering Goods ( Electrical)

(b) Export of Engineering Services ( Invisible earnings)

3 Siemens Pakistan was given the “Strategic Leadership Award” instituted jointly by Allama Iqbal Open University Islamabad
and Commonwealth of Learning Vancouver Canada.

4 Siemens Pakistan received the second award in the Engineering sector for its Annual Report. The award is given each year by
a joint committee of Institute of Chartered Accountants of Pakistan and the Institute of Cost and Management accountants of
Pakistan.

5 CQ (Corporate Quality) at Siemens Pakistan was selected as Best Practice Example of the communication phase of nine
mandatory elements in Siemens worldwide. The honor was shared with Siemens Medical Germany.

6 Siemens Pakistan was awarded the Environment Excellence Award 2005 by the National Forum for Environment and Health.

7 Siemens Pakistan was awarded a certificate recognizing it’s Corporate Excellence at the 22nd Excellence Award Ceremony of
Management Association of Pakistan

8 Siemens Pakistan Project “T –Mangoes “selected from amongst 15 projects submitted at Siemens advanced Management
learning program in Singapore.

9 The “Outstanding Value Added Reseller (VAR) Award 2004” was awarded to Siemens Pakistan by SAP Malaysia.

10 The EN Award instituted by Siemens AG was awarded to Siemens Pakistan in the category “Sales Performance Award-Direct
Channel”.
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 11 The AGPR (Auditor General of Pakistan Revenues) Lahore office presented a shield to Siemens Pakistan SAP team for their
valuable contribution in implementing SAP/3 in their office.

Acknowledgement

The Management would like to record its deep appreciat ion to the active role of the Board of Directors and the Audit Committee in
supporting and guiding the Management on matters of great importance leading to success in achieving the targets of the Company.

We would also like to thank the cooperation extended to us by our suppliers, contractors and financial institutions. We sincerely thank
our customers and recognize that all our efforts and suc cess are possible because of them and their confidence on our products and
services.

The management is thankful for all Executives, Officers and Workers for their dedicated efforts and smart work which leads the
Company’s performance to new heights.

We are also thankful for the support provided to us by our parent company and the trust reposed by the shareholders on the management
and board of directors. This support gives confidence and encouragement in achieving the targets and application of strategies.

Business Risks, Challenges and Future Outlook

While the economy is continuously growing and performing well, record high oil prices, rising prices of materials, rising inflation and
interest rates may have some adverse impact on the growth of market. Intense competition by expected new market entrants in the
different segments is yet another potential risk. However, on the other hand, expected infrastructure development, privatization and
opportunities in the telecommunication sector, are positive indicators. Our goal is not only to depend on local market but to capture
opportunities available in the regional markets particularly in the field of Transmission and Distribution. However, penetration in the
regional market is not easy in view of intense competition with the global players.

With our global strategy of Fit4More- Profit and Growth, we expect to maintain our goal to achieve further growth in profitability and to
increase our market share. The acquisition of Carrier Telephone Industry would also help us in achieving our targets and we would
benefit from synergies.

The company with its evolving portfolio, strategy and management system would continue to prosper coping with pressure on margins
and tough competition.

Sohail Wajahat H. Siddiqui

Managing Director &
Chief Executive Officer

Karachi; November 21, 2005