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ORIX LEASING PAKISTAN LIMITED

(Annual report for the year ended June 30, 1996)

CONTENTS

COMPANY INFORMATION

BOARD OF DIRECTORS

(alternate Mr. Takafumi Kanda)

Chairman

Mr. Yoshihiko Miyauchi

(alternate Mr. Hiromi Kobayashi)

Mr. Yoshiaki Ishida

Mr. Takeshi Sato

Mr. Shakirullah Durrani

Mr. Rauf Ahmed Shamsi

Mr. Khurshid Hadi

Mr. I. H. Shamsi

Mr. Humayun Murad

Managing Director & Chief Executive

COMPANY SECRETARY

Mr. S. Saeed Reza

BANKERS AND LENDING INSTITUTIONS

Bankers

ABN AMRO Bank

Al Faysal Investment Bank Limited

Allied Bank of Pakistan Limited

American Express Bank Ltd

ANZ Grindlays Bank plc

Banque Indosuez

Citicorp Investment Bank Limited

Deutsche Bank A.G.

Faysal Bank Limited

First International Investment Bank Limited

Oman International Bank, SAOG

Standard Chartered Bank

Societe Generale, The French and International Bank

The Bank of Tokyo-Mitsubishi Limited

Lending Institutions

Asian Development Bank

Asian Finance and Investment Corporation Limited

Bankers Equity Limited

F. M. O., The Netherlands

International Bank for Reconstruction and Development

International Finance Corporation

Pakistan Kuwait Investment Company (Private) Limited

Saudi Pak Industrial & Agricultural Investment Company (Private) Limited

AUDITORS

Sidat Hyder Qamar Maqbool & Co., Chartered Accountants

LEGAL ADVISORS

Mansoor Ahmad Khan & Co.

Walker Martineau & Saleem

REGISTRARS AND SHARE TRANSFER OFFICE

Noble Computer Services (Private) Limited

2nd Floor, Al-Manzoor Building,

Dr. Ziauddin Ahmed Road, Karachi.

REGISTERED OFFICE & HEAD OFFICE

Overseas Investors Chamber of Commerce Building,

Talpur Road, Karachi-74000

Tel: 2426020-9 Fax: 2425897 Telex 20104 ORIX PK

BRANCH OFFICES AT

Lahore

State Life Building, Sir Aga Khan III Road (Davis Road), Lahore-54000.

Tel: 6369946, 6301527, 6302620, 6304258 and 6302897

Fax: 6305024

Faisalabad

3rd Floor, Ahmed Plaza, Bilal Road, Faisalabad.

Tel: 633926 and 633927

Fax: 613936

Sialkot

1 st Floor, Goolam Kadir Arcade. Aziz Shaheed Road, Sialkot Cantt.

Tel: 560767 and 560616

Fax: 89548

Peshawar

1st Floor, State Life Building, The Mall, Peshawar.

Tel: 279789 and 278647

Fax: 273389

Universal Access Number: 111-242424

FINANCIAL HIGHLIGHTS OF THE COMPANY AS AT JUNE 30, 1996

(Rupees in thousands)

1996

1995

1994

1993

1992

Gross lease receivables

4,752,997

3,535,871

2,406,518

1,703,286

1,284,418

Total lease disbursements

1,957,318

1,559,699

1,051,872

728,136

659,418

Rents received

1,446,490

1,040,187

778,342

599,558

465,134

Gross income

656,982

466,777

320,943

230,394

174,129

Profit before tax

166,536

112,983

60,578

49,061

42,886

Shareholders' equity

685,872

570,505

197,412

158,815

129,773

Earning per share (in Rs.)

9.22

6.61

7.33

6.16

5.91

Dividends:

Cash

45.00%

35.00%

20.00%

17.50%

15.00%

Bonus

—

10.00%

----------------

Total

45.00%

35.00%

30.00%

27.50%

25.00%

ORIX CORPORATION, JAPAN - GROUP PROFILE

With total assets of US $ 45 billion, ORIX Corporation is Japan's largest leasing

company and internationally a leading diversified financial services group. Since it's

establishment in 1964, ORIX has played a pioneering role, first in developing the

market for lease financing in Japan and subsequently in developing and introducing products

and services to meet defined customer needs for financing growth and managing assets, not

only in Japan but also in 25 countries overseas. As part of this pioneering role, ORIX has

worked to encourage deregulation and to provide a positive competitive stimulus for further

evolution in the financial services industry. In the development of its operations, ORIX has

emphasised innovation in products and services and geographical diversification into growth

markets in Japan and overseas.

Business Operations

In the early stages of its development, ORIX offered primarily full pay out finance leases for

machinery, office automation equipment and computers. Gradually, the Company broadened

the range of leased assets to include vessels, aircraft and automobiles. Thereafter, ORIX

expanded its activities to provide a wider range of financial services and today these services

include installment loans, rentals, securities brokerage, venture capital, futures and options

trading, commodities funds, life insurance and real estate related activities. As of March 31,

1996, ORIX had a domestic network of 429 offices. ORIX has diversified its service portfolio

primarily through the establishment of specialised subsidiaries that are fully integrated into the

operations of the ORIX group. Each of these subsidiaries has the principal responsibility of

responding quickly and flexibly to the market needs in its area of operations and is expected to

contribute to the consolidated profitability of the ORIX group. At the same time each of these

companies draws on ORIX's strong marketing capabilities developed through the leasing

business and its close relationship with a broad spectrum of customers. ORIX is the leading

automobile fleet leasing company in Japan with 170,000 vehicles under maintenance leases.

The Company owns a fleet of 26 commercial aircraft which it leases to airline companies

around the world.

International Activities

While building the strongest domestic market position among diversified financial services

companies in Japan, ORIX has worked to strengthen global synergies through the development

of an extensive network of overseas subsidiaries and affiliates. ORIX began setting up its

international network in 1971 and today its overseas presence is represented across 25

countries by 40 companies with 142 offices. To encourage close ties with host nations, ORIX

has emphasised the establishment of affiliates in co-operation with locally based financial

institutions and other leading companies. It has wholly owned subsidiaries in the USA, UK,

Ireland, Hong Kong, Singapore, Taiwan, Australia and New Zealand. Recent initiatives include

the establishment of an investment bank, ORIX Investment Bank Pakistan Limited; the opening

of a representative office in Vietnam in anticipation of future potential in that country; the

investment by ORIX Rentec Corporation, a subsidiary in Japan, in an equipment rental

company in South Korea; and the establishment of a leasing company in Poland.

Human Resources

ORIX believes in maintaining an environment that makes it possible for all employees to gnu

fulfillment in their work and contribute to society. ORIX is an equal opportunity employer and

today female employees have become a major factor supporting the Company's growth, filling

about 40% of the Company's career positions. In total ORIX employs 6,991 staff. ORIX policy

is to delegate control at local levels and increase autonomy of member companies. Of the

approximately 1,600 personnel working at ORIX's subsidiaries and affiliates outside Japan,

only 45 are seconded from Japan. ORIX encourages co-operation and sharing of know-how

among Group companies and regularly brings together participants from affiliates around the

world to observe firsthand the activities of ORIX group in Japan.

Financial Highlights

ORIX Group, Japan

(For the year ended March 31)

Translation into

Japanese Yen (millions)

U S. Dollars (thousands)

1996

1995

1996

1995

Total Revenues

317,594

310,837

2,996,170

2,932,425

Income before Income Taxes

35,027

33,629

330,444

317,255

Net Income

18,003

17,072

169,840

161,057

Shareholders' Investment

276,251

238,050

2,606,142

2,245,755

Total Assets

4,751,756

4,405,556

44,827,887

41,561,849

Notes: a) The Japanese yen and dollar amount are in million of yen and thousands of U.S. dollars,

respectively.

b) The dollar amounts above represent translations of Japanese yen at an exchange rate of

Yen 106 to US $1

Business Activities

ORIX Group, Japan:

General Industrial Equipment Leasing

Computer Leasing

Ship Leasing

Interior Furnishing Leasing

Automobile Maintenance Leasing

Ship Management

Electronic Measuring Equipment Rentals

Aircraft Finance Leasing

Office Automation Equipment Rentals

Automobile Rentals

Automobile Leasing to Individuals

Dormitory Leasing

Real Estate Rentals and Management

Real Estate Investment Trust

Aircraft Operating Leasing

Installment Sales

Industrial Finance

Housing Loans

Consumer Finance

Securities Investment

Mortgage - Backed Securities Loans

Venture Capital Investment

Securities Brokerage

Futures Funds

Investment Banking

Futures and Options Trading

Life Insurance

Leisure Facilities Management

Computer Software Development

Resort Development

Manufacture and Sale of Interior Furnishings

Hotel Management

Broadcasting Service via Comm. Satellite

Training Facilities Management

Professional Baseball Team

Consumer Credit Sales

Casualty Insurance Services

OMAN ORIX LEASING COMPANY SAOG (OOL)

In September 1994 OOL was established to promote leasing in the Sultanate of Oman. ORIX

Leasing Pakistan Limited is a founder shareholder and has the management of the Company.

Other sponsoring shareholders are IFC, member of the World Bank Group, Oman National

Insurance Company, the biggest insurance company in the country, Oman International Bank,

one of the largest Omani commercial banks and Oman Development Bank, a DFI whose

majority shares are owned by the Government. The founders' objective was to participate in the

economic development taking place in Oman and to provide businesses with an alternative

source of medium term finance through leasing.

The Company's main business is leasing of moveable assets such as vehicles, plants,

machinery, computers and office equipment. Lessees range from large industrial and

commercial companies to medium and small sized businesses. These businesses include

manufacturing, contracting and sub-contracting, trading, transport, consumer product and the

services sector.

OOL earned a profit of Rial Omani (R.O.) 53,627 (Rs. 5.1 million) in the first full year of its

operations which ended December 31, 1995. The Company wrote leases with a purchase cost

of R.O. 3.3 million (Rs. 313 million) and had gross lease receivables at the end of the year of

R.O. 3.6 million (Rs. 342 million). The Company's share of R.O. 1 each is quoted on the Muscat

Securities Market at a value of R.O. 1.80 per share (Rs. 171 per share). Shareholders equity

amounts to R.O. 2.0 million (Rs. 190.0 million).

The Company is pursuing a policy of growth by booking quality leases and diversifying its risks

over a wide range of business sectors and developing a balanced leased asset portfolio. The

emphasis is on providing lease finance facility for productive assets to ongoing projects and

businesses and at all times adhering to rigorous credit screening. Future prospects for leasing in

Oman are promising as the industry is expected to play an active role in development of the

economy. Oman is a member of the Gulf Cooperation Council (G.C.C.). The Company is also

exploring the possibility of tapping the business potential for leasing in other G.C.C. countries

(Saudi Arabia, U.A.E., Kuwait, Qatar and Bahrain).

NOTICE OF MEETING

Notice is hereby given that the tenth Annual General Meeting of the Company will be held at

Pearl Continental Hotel, Karachi on Saturday, September 21, 1996 at 11:30 am to transact the

following business:

Ordinary Business:

1. To receive, consider and adopt the audited accounts together with the Directors' and

Auditors' Reports for the year ended June 30, 1996.

2. To approve the payment of cash dividend to the Shareholders at the rate of Rs. 4.50 per

share of Rs. 10/- each for the year ended June 30,1996.

3. To appoint Auditors and fix their remuneration. The present Auditors Messrs. Sidat Hyder

Qamar Maqbool & Co.. Chartered Accountants, retire and being eligible, offer themselves

for re-appointment.

4. To elect 8 (eight) directors of the Company, including the Chief Executive, for a period of

three years under Section 178 (1) of the Companies Ordinance, 1984, as fixed by the

Board of Directors.

The following are the retiring directors who being eligible, have notified their intention to

offer themselves for election:

1. Mr. Yoshihiko Miyauchi

5. Mr. Rauf Ahmed Shamsi

2. Mr. Yoshiaki Ishida

6. Mr. Khursid Hadi

3. Mr. Takeshi Sato

7. Mr. Rauf B. Kadri

4. Mr. Shakirullah Durrani

8. Mr. Humayun Murad

Special Business:

5. To consider and if approved, pass the following resolution in respect of the Company's

investment:

" Resolved that the Company be and is hereby authorised to invest the equivalent of

Egyptian pounds 4.6 million representing 23% equity interest in proposed joint

venture leasing company in Egypt, subject to such permissions as may be required

in this behalf from the Governments of Pakistan and Egypt and departments acting

on their behalf.

Further resolved that the Managing Director be and is hereby authorised on behalf

of the Company to sign such documents and take such steps from time to time as

may be necessary to acquire the said equity interest in the said company."

6. To transact any other business with permission of the Chair.

Karachi: August 26, 1996

BY ORDER OF THE BOARD

S. SAEED REZA

Company Secretary

Statement under Section 160 (1) of the Companies Ordinance, 1984.

I. The Directors recommend the Company's participation, as one of the sponsors, in a

leasing company being established in Egypt which is proposed to be named ORIX

Leasing Egypt. In 1995 the Government of Egypt introduced a law enabling the

formation of leasing companies. ORIX will be a pioneer of leasing in Egypt which offers

attractive opportunities for the promotion of leasing business. The Government of Egypt

is pursuing a policy of liberalisation and deregulation and is encouraging

industrialisation and foreign investment. Egypt has a population of 60 million and in

1994 it registered a GDP growth of 10% and its foreign currency reserves are in excess

of US$ 18 billion. The investment will be financed from the Company's internal

resources. The sponsoring shareholders of ORIX Egypt are:

Share of Equity

Sponsor's Name

Egyptian

Pak

%age

Pounds

Rupees

( i n m i l l i on )

ORIX Corporation, Japan

4.60

47.70

23.00

International Finance Corporation, U.S.A.

3.00

31.11

15.00

National Bank of Egypt

4.80

49.78

24.00

Commercial International

Investment-Company, Egypt

3.00

31.11

15.00

ORIX Leasing Pakistan Limited

4.60

47.70

23.00

-------

Total sponsor's holding

20.00

207.40

100.00

=======

The proposal has been examined and is being recommended for the following reasons:

1) The viability of the project has been identified and a sound and profitable future is

forecast.

2) The strength of institutional sponsorship demonstrates confidence in the proposed

project.

3) The investment will add to the growing international business of ORIX Leasing

Pakistan Limited in the Middle East Region.

4) Shares in ORIX Egypt will be acquired at par value of shares by ORIX Leasing

Pakistan Limited from its own resources.

II. The Directors of ORIX Leasing Pakistan Limited have no interest in the above

investment

Notes:

The Register of Members of the Company will be closed from September 14,1996 to

September 21,1996 (both days inclusive). Dividend will be paid to those Shareholders

whose names appear on the Register of Members as at the close of business on

September 13,1996.

ii)

A Member entitled to attend and vote at the General Meeting of Members is entitled to

appoint a proxy to attend and vote on his behalf. A proxy need not be a Member of the

Company.

iii)

The instrument appointing a proxy and the power of attorney or other authority under

which it is signed or a notarially certified copy of the power of attorney must be deposited

at the registered office of the Company at least 48 hours before the meeting. A form of

proxy is enclosed.

iv)

Shareholders are requested to notify any change of address immediately.

REPORT OF THE DIRECTORS

The Directors are pleased to present the tenth Annual Report together with the audited

accounts of the Company for the year ended June 30, 1996.

Financial Results

Rupees

Net profit for the year after charging all expenses

and allowances for potential lease losses

166,536,155

Less: Taxation

18,000,000

----------

148,536,155

Unappropriated profit brought forward

9,008,809

----------

157,544,964

Appropriations:

- Transfer to general reserve

75,000,000

- Cash dividf3nd

72,499,289

----------

147,499,289

----------

Unappropriated profit carried forward

10,045,675

==========

Dividend

The directors recommend a cash dividend of 45%. This is a 28.57% increase over the 1995

cash dividend of 35%.

Review of Operations

The Company achieved strong growth in volume and profits and results are attributable to the

broad business base developed over the last ten years. Net profit before tax rose 47% to Rs.

166.5 million from Rs. 113 million last year. Earnings per share, after tax, were higher by 40%

to Rs. 9.22 per share (1995: Rs. 6.61 per share). Volume of new business, based on the

purchase cost of leased assets, amounted to Rs. 1.96 billion, 26% higher than Rs. 1.56 billion

recorded in 1995. New rent receivables of Rs. 2.82 billion were added to the portfolio (1995:

Rs. 2.10 billion) and rent collections totalled Rs. 1.45 billion during the year providing strong

internal cash generation. Lease income rose 38% to Rs. 596 million and income from

installment loans. continues to a row at a satisfactory level.

New business written comprised 45% of plant and machinery, 46% of cars and commercial

vehicles and 9% computers and office equipment. The sectoral analysis of the lease portfolio

is well balanced with the highest exposure in any single sector being 16.4% of the total

portfolio. Lease finance facilities were extended to 1,066 business enterprises.

The main item of expenditure, financial expenses, rose by 41 % to Rs. 362.4 million. This is the

reflection of both a higher level of borrowings required to finance the Company's business and

the increasing cost of funds from domestic and international sources. Inflationary pressures

were evident in expenditure incurred on selling, general and administrative activities which

increased by 38% to Rs. 82.7 million. An amount of Rs. 32.5 million was charged as general

provision for potential lease losses bringing the aggregate to Rs. 124.6 million representing

3.29% of the net receivables. The Company maintained an excellent collection ratio and the

general provision is in accordance with our established policy since inception and a practice

followed by ORIX Group companies world wide.

The Company's funding ability is kept in line with its marketing objectives. Efforts to diversify

sources of funding have been successful and support of financial institutions and banks is

increasing in recognition of the Company's balance sheet strength and sustained growth. Loan

of US$ 15.8 million from IFC was fully drawndown and a loan agreement of US$ 20 million was

signed with the Asian Development Bank. The World Bank line of US$ 26 million for small

scale and micro enterprises continues to be utilised providing valuable support to this

important sector. Plans for issuing Term Finance Certificates (TFC's) are at an advanced stage

and the Company will tap this source at an appropriate time during 1996-97. In preparation for

the TFC issue, and in accordance with the directive of State Bank of Pakistan for all leasing

companies to be credit rated, The Pakistan Credit Rating Agency assigned credit ratings to

your Company of A1 + and A+ for short and long term debts respectively.

During the year IFC exercised its option to convert 10% of the loan of US $ 12.5 million into fully

paid up shares of the Company. Consequently, 905,609 shares were issued to IFC at a

conversion price of Rs. 43.43 per share (Rs. 39,330,599). IFC's presence as a shareholder will

strengthen the close working relationship which has developed between the Company and IFC.

Associated Companies

The Oman ORIX Leasing Company SAOG (OOL), in Muscat made a promising start and

reported a profit of Rs. 5.1 million in its first full year of operations which ended on December

31, 1995. OOL has total assets in excess of Rs. 570 million and its share of par value Rial

Omani (R.O.) 1/- each is quoted on the Muscat Securities Market at a value of R.O. 1.80

equivalent to Rs. 171 per share. ORIX Leasing Pakistan has a 20% shareholding in OOL and

this investment has a market value of Rs. 68.4 million against a cost of Rs. 33.9 million.

The Company's second joint venture project ORIX Investment Bank Pakistan Limited (OIB)

commenced operations in June, 1996. OlB's shares are listed on the Karachi Stock Exchange

and the offer of 5.5 million shares to the public was oversubscribed 9.96 times. ORIX Leasing

Pakistan has 15% equity in OIB and there are good prospects of business synergy developing

between the two companies

Your Directors are pleased to recommend the Company's participation, as one of the sponsors,

in a leasing company being established in Egypt which is proposed to be named ORIX Leasing

Egypt. In 1995 the Government of Egypt introduced a law enabling the formation of leasing