| Orix Leasing Pakistan Limited |
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| Annual
Report 1999 |
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| CONTENTS |
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| COMPANY
INFORMATION |
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| ORIX
CORPORATION, JAPAN |
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| ASSOCIATED
COMPANIES |
|
| NOTICE
OF MEETING |
|
| REPORT
OF THE DIRECTORS |
|
| AUDITORS'
REPORT |
|
| FINANCIAL
STATEMENTS OF THE COMPANY |
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| PATTERN
OF SHAREHOLDING |
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| ORIX
GROUP DIRECTORY |
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| COMPANY
INFORMATION |
|
|
| BOARD
OF DIRECTORS |
|
| Mr.
Yoshihiko Miyauchi |
(alternate Mr. Takafumi
Kanda) |
|
Chairman |
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|
| Mr.
Shakirullah Durrani |
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|
Vice Chairman |
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| Mr.
Takeshi Sato |
(alternate Mr. Yuki
Ohshima) |
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| Mr.
Genichi Fujinaga |
(alternate Mr. Nagaaki
Esaki) |
|
| Dr.
Najeeb Samie |
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| Mr.
Shaheen Amin |
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| Mr.
Mohammad Qamrul Haq |
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| Mr.
Humayun Murad |
|
Chief Executive |
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| COMPANY
SECRETARY |
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| Mr.
Ramon Alfrey - ACA |
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| BANKS
AND LENDING INSTITUTIONS |
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| Banks |
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| ABN-AMRO
Bank N.V. |
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| AI
Faysal Investment Bank Limited |
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| AI-Meezan
Investment Bank Limited |
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| ANZ
Grindlays Bank Limited |
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| Bank
of America NT & SA |
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| Citibank N.A. |
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| Faysal
Bank Limited |
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| First
International Investment Bank Limited |
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| Habib
Bank Limited |
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| Muslim
Commercial Bank Limited |
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| Oman
International Bank SAOG |
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| Standard
Chartered Bank |
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| The
Bank of Tokyo-Mitsubishi Limited |
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| United
Bank Limited |
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| DFIs
and Lending Institutions |
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| Asian
Development Bank |
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| F.
M. O., The Netherlands |
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| International
Bank for Reconstruction and Development |
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| International
Finance Corporation |
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| Pakistan
Kuwait Investment Company (Private) Limited |
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| Saudi
Pak Industrial & Agricultural Investment Company (Private) Limited |
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| AUDITORS |
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| Sidat
Hyder Qamar & Co., Chartered Accountants |
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| LEGAL
ADVISORS |
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| Mansoor
Ahmad Khan & Co. |
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| Walker
Martineau & Saleem |
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| REGISTRARS
AND SHARE TRANSFER OFFICE |
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| Noble
Computer Services (Private) Limited |
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| 2nd
Floor, AI-Manzoor Building |
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| Dr.
Ziauddin Ahmed Road, Karachi |
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| REGISTERED
OFFICE & HEAD OFFICE |
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| Overseas
Investors Chamber of Commerce Building |
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| Talpur
Road, Karachi - 74000 |
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| Tel:
2426020-9 Fax: 2425897 |
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| BRANCH
OFFICES |
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|
| Lahore |
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| State
Life Building, Sir Aga Khan III Road (Davis Road), Lahore- 54000. |
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| Tel:
6369946, 6301527, 6302620, 6304258, 6301866 |
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| and
6302897 Fax: 6305024 |
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| Faisalabad |
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| 2nd
Floor, Sitara Towers, Bilal Chowk, Civil Lines, Faisalabad. |
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| Tel:
633926 and 633811-3 Fax: 633927 |
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| Sialkot |
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| 1st
Floor, Goolam Kadir Arcade, Aziz Shaheed Road, Sialkot Cantt. |
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| Tel:
260767, 260616 and 260877 Fax: 269548 |
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| Peshawar |
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| 1st
Floor, State Life Building, The Mall, Peshawar. |
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| Tel:
279789 and 278647 Fax: 273389 |
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| Universal
Access Number (UAN): 111- 24 24 24 |
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| E-mail:
olp@orix-pak.com |
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| Website:
www.orix-pak.com |
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| ORIX
CORPORATION |
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| Japan's
Leading Diversified Financial Services Institution |
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| ORIX
Corporation is Japan's leading diversified financial services institution
with assets in |
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| excess
of US $ 45 billion. Founded as a leasing specialist in 1964, ORIX has
developed niche |
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| markets,
including those for installment loans, life insurance and real estate
services in Japan |
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| and
21 countries overseas. In addition to being a listed Company in Japan, in
September 1998 |
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| ORIX
listed its shares on the New York Stock Exchange, (NYSE), becoming the
twelfth |
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| Japanese
Company on the NYSE. |
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| Business
Operations- |
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| ORIX's
strength lies in its ability to anticipate change and create new business
based on fresh |
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| concepts
that go beyond existing frameworks. The Company is known for its flexibility
and |
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| provides
specialised, innovative support across a broad range of financial services
including |
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| lease
financing, rentals, loans (corporate finance, housing and card loans),
installment loans, |
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| securities
related services, venture capital, life insurance, trust and banking,
commodity funds |
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| and
management of real estate. |
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| ORIX
has approximately 241,000 vehicles under automobile leasing, the largest
number in the |
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| Japanese
automobile leasing industry. The Company owns and maintains 23 Airbus 320 |
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| aircraft
and one Boeing 737 aircraft which are given on operating lease to airlines
around the |
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| world.
As a pioneer of equipment rental business in Japan, ORIX has approximately
20,000 |
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| types
of equipment and more than 350,000 individual items under rental. ORIX Life
Insurance |
|
| Corporation
provides "ORIX Direct" insurance which is Japan's first range of
whole life, |
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| endowment
and term life insurance products offered through direct channels. |
|
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| International
Activities: |
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| Since
entering Hong Kong in 1971, ORIX has actively expanded its international
activities and |
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| has
built a network of 45 companies in 21 countries. ORIX's approach to
international |
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| expansion
has been to either establish wholly owned operations or set-up joint ventures
with |
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| strong
local partners. In Singapore, Malaysia, Hong Kong and Taiwan ORIX offers
automobile |
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| maintenance
leases in addition to direct financing leases. In the United States, ORIX has |
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| undertaken
a diverse range of financial and real estate related businesses, including
corporate |
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| finance
and real estate development and financing operations. |
|
|
| (For
full directory see pages 42 to 48) |
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| ORIX
GROUP, JAPAN |
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|
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| FINANCIAL
HIGHLIGHTS |
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|
(For the year ended March 31) |
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|
Translation
into |
|
|
|
|
|
Japanese Yen
(millions) |
US Dollars
(thousands) |
|
|
|
|
|
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|
1999 |
1998 |
1999 |
1998 |
|
|
| Total Revenues |
|
593,941 |
507,143 |
5,015,123 |
4,282,217 |
|
|
| Net
Profit after Tax |
25,621 |
23,731 |
216,339 |
200,380 |
|
|
| Shareholders'
Equity |
327,843 |
313,821 |
2,768,242 |
2,649,844 |
|
|
| Total Assets |
|
5,347,636 |
5,574,309 |
45,154,403 |
47,068,386 |
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|
|
| Note:
The dollar amounts above represent translations of Japanese yen at an
exchange rate of |
|
| ¥
11843 to US $1. |
|
|
| ORIX'S
PRINCIPAL ACTIVITIES |
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| DIRECT
FINANCE LEASES |
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| Aircraft
and Marine Vessels |
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| Automobiles |
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| Industrial
Equipment |
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| Information
related and office equipment |
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| OPERATING
LEASES |
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| Aircraft |
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| Marine Vessels |
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| Measuring
Analytical Equipment |
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| Information-related
Equipment |
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| Automobiles |
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| INSTALLMENT
LOANS |
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| Corporate
Finance |
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| Housing Loans |
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| Card Loans |
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| OTHER
OPERATIONS |
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| Life insurance |
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| Trust
and Banking |
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| Securities
Brokerage |
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| Securities
Investment |
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| Real
Estate and Development Brokering |
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| Venture
Capital Investment |
|
| Futures
and Options Trading |
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| Commodities
Funds |
|
| Computer
Software Development |
|
| Insurance
Agency Services |
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| Ship
Management |
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| Commercial
Mortgage Servicing |
|
|
| ASSOCIATED
COMPANIES |
|
|
| OVERSEAS
JOINT VENTURES |
|
|
| 1.Oman
ORIX Leasing Company SAOG (Oman ORIX) |
|
|
| Oman
ORIX in which ORIX Leasing Pakistan Limited holds 20.25% of equity and
provides |
|
| management
support, achieved strong growth in volume and profits in 1998. Net profit
after tax rose |
|
| by
64% to Rial Omani (RO) 542,403 (Pak Rs. 72.1 million) from RO 331,833 (Pak
Rs. 38.9 million) |
|
| enabling
the Company to declare a dividend of 11%. Purchase cost of new business
written during |
|
| the
year increased to RO 13.6 million (Pak Rs. 1.8 billion) compared to RO 10
million (Pak Rs. 1.2 |
|
| billion)
last year and gross lease receivables increased by 39% to RO 18 million (Pak
Rs. 2.39 |
|
| billion).
Oman ORIX has total assets of RO 18.4 million (Pak Rs. 2.4 billion) and a net
worth of RO |
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| 5.134
million (Pak Rs. 682.8 million). |
|
|
| Oman
ORIX wrote 1,469 contracts for all type of assets including motor cars,
construction, |
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| earthmoving
and transportation equipment, information technology equipment and plant and |
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| machinery.
The Company's lessees include individuals, small and medium size companies
and |
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| large
sub contractors in diverse economic sectors including services, trading and
contracting, |
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| construction
and manufacturing. |
|
|
| Oman
ORIX continues to focus on its core business of lease and hire purchase
financing and plans |
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| to
expand geographical reach of the business by opening branches in other main
cities of the |
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| Sultanate. |
|
|
| 2.ORIX
Leasing Egypt SAE (ORIX Egypt) |
|
|
| ORIX
Corporation, Japan and ORIX Leasing Pakistan each hold 23% of ORIX Egypt's
equity. The |
|
| Company
started operations in November 1997 and has established a good business base.
ORIX |
|
| Egypt's
first accounting period ended on December 31, 1998 representing fourteen
months |
|
| commercial
operations. |
|
|
| ORIX
Egypt earned a profit before tax of Egyptian Pounds (EP) 904,160 (Pak Rs.
13.1 million) in its |
|
| first
accounting period. Business volume was good with purchase cost of leases
written amounting |
|
| to
EP 24.4 million (Pak Rs. 355.5 million) and related gross lease receivables
of EP 30.5 million |
|
| (Pak
Rs. 444.4 million). The Egyptian economy is performing well and ORIX Egypt is
well placed to |
|
| avail
business opportunities which will increase as the concept of leasing which is
new in Egypt |
|
| becomes
familiar. The Company continues to focus on needs of small and medium sized
business |
|
| which
enables it to diversify risk and earn good spreads. |
|
|
| JOINT
VENTURE IN PAKISTAN |
|
|
| ORIX
Investment Bank Pakistan Limited (OIB) |
|
|
| ORIX
Corporation, Japan and ORIX Leasing Pakistan hold 20% and 15% respectively of
OIB's |
|
| equity.
OIB earned a profit of Rs. 32.2 million for the year to June 30, 1999. The
bank continues to |
|
| concentrate
on maintaining a high quality loan portfolio while seeking to improve fee
based income |
|
| from
advisory services. As experienced by other financial institutions in
Pakistan, OIB's business is |
|
| also
impacted by the slow economic conditions prevailing in the Country. The Bank
is primarily |
|
| engaged
in providing a range of investment banking products which include corporate
advisory |
|
| services,
project packaging, structuring and placement of capital market debt products,
issuance |
|
| and
discounting of bankers acceptance and treasury operations. At June 30, 1999
OIB had total |
|
| assets
in excess of Rs. 1.8 billion. |
|
|
| NOTICE
OF MEETING |
|
|
| Notice
is hereby given that the Thirteenth Annual General Meeting of the Company
will be held |
|
| at
Overseas Investors Chamber of Commerce Building, Talpur Road, Karachi on,
Tuesday, |
|
| November
2,1999 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'
Report for the year ended dune 30, 1999. |
|
|
| 2.
To approve the payment of cash dividend to the Shareholders at the rate of
Rs. 4/- per share |
|
| of
Rs. 10/- each for the year ended dune 30,1999. |
|
|
| 3.To
appoint Auditors and fix their remuneration. The present Auditors Messrs.
Sidat Hyder |
|
| Qamar
& Co., Chartered Accountants, retire and being eligible, offer themselves
for re- |
|
| appointment. |
|
|
| 4.
To elect 8 (eight) Directors of the Company as fixed by the Board of
Directors for a period of |
|
| three
years under Section 178 of the Companies Ordinance, 1984. |
|
|
| The
following are the retiring Directors who being eligible have notified their
intention to offer |
|
| themselves
for election. |
|
|
| 1.
Mr. Yoshihiko Miyauchi |
|
5. Dr. Najeeb Samie |
|
| 2.
Mr. Shakirullah Durrani |
|
6. Mr. Shaheen Amin |
|
| 3.
Mr. Takeshi Sato |
|
7. Mr. Mohammad Qamrul
Haq |
|
| 4.
Mr. Genichi Fujinaga |
|
8. Mr. Humayun Murad |
|
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| SPECIAL
BUSINESS: (STATEMENTS ATTACHED) |
|
|
| 5.
To approve investment in a joint venture leasing company in the Kingdom of
Saudi Arabia. |
|
| 6.
To approve the remuneration of Executive Directors including the Chief
Executive. |
|
| 7.
To transact any other business, with permission of the Chair. |
|
|
| Karachi:
September 22, 1999 |
|
BY ORDER OF THE BOARD |
|
|
|
|
|
|
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|
RAMON ALFREY - ACA |
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|
Company Secretary |
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|
|
|
|
| Notes: |
|
|
| i)
The Register of Members of the Company will be closed from October 4, 1999 to
October 11, |
|
| 1999
(both days inclusive). Transfers received at our registrars, Messrs. Noble
Computer |
|
| Services
(Private) Limited, 2nd Floor, AI-Manzoor Building, Dr. Ziauddin Ahmed Road, |
|
| Karachi
at the close of business on October 3, 1999, will be treated in time for the
purpose of |
|
| payment
of dividend, issuing of notices and annual reports to the transferees. |
|
|
| 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.
Shareholders are requested to notify any change of address immediately. |
|
|
| Statement
under section 160 of the Companies Ordinance, 1984, |
|
| in
respect of Special business and related draft resolutions |
|
|
| Material
facts concerning the special business to be transacted at the Annual General
Meeting |
|
| and
the proposed resolutions related thereto are given below. |
|
|
| Item
no. 5 of Agenda - Investment in Joint Venture Leasing Company in Kingdom of |
|
| Saudi Arabia |
|
|
| I.
The Directors recommend the Company's participation, as one of the sponsors,
in a |
|
| leasing
company being established in the Kingdom of Saudi Arabia. The proposed |
|
| company
will be named Saudi ORIX Leasing Company. The Government of Saudi Arabia |
|
| has
been actively following a policy to develop the non-oil sectors and is keen
to promote |
|
| the
development of small and medium sized industrial enterprises. Leasing is
expected to |
|
| contribute
towards this objective as it has demonstrated in many other countries. ORIX
will |
|
| be
a pioneer of leasing in Saudi Arabia, which offers attractive opportunities
for the |
|
| promotion
of leasing business. The investment will be financed from the Company's |
|
| internal
resources. This will be OLP's third investment overseas and together with |
|
| operations
in Oman and Egypt will form a sound base for foreign currency earnings in |
|
| future.
The sponsoring shareholders of Saudi ORIX Leasing Company are: |
|
|
| Sponsor's
Name |
|
Share of
Equity |
Shareholding |
|
|
|
Saudi Rial |
Pak Rupees* |
% |
|
|
(in
millions) |
|
|
| Saudi
Investment Bank |
|
18 |
270 |
30% |
|
| Saudi
Business Group |
|
18 |
270 |
30% |
|
| ORIX
Corporation, Japan |
|
12 |
180 |
20% |
|
| ORIX
Leasing Pakistan Limited |
|
6 |
90 |
10% |
|
| IFC
- Washington |
|
6 |
90 |
10% |
|
|
|
------------------ |
------------------ |
------------------ |
|
| Total
sponsor's holding |
|
60 |
900 |
100% |
|
|
========== |
========== |
========== |
|
|
|
|
| *Saudi
Rial 1 = approximately Rs. 15 |
|
|
| The
proposal has been examined and is being recommended for the following
reasons: |
|
|
| a)
The viability of the project has been identified and a sound and profitable
future is |
|
| forecast. |
|
|
| b)
The strength of institutional sponsorship demonstrates confidence in the
proposed |
|
| project. |
|
|
| c)
The investment will add to the growing international business of ORIX Leasing
Pakistan |
|
| Limited
in the Middle East Region. |
|
|
| d)
Shares in Saudi ORIX Leasing Company will be acquired at par value by ORIX
Leasing |
|
| Pakistan
Limited from its own resources. |
|
|
|
| II.
The Directors of ORIX Leasing Pakistan Limited have no interest in the above
investment. |
|
|
| It
is proposed to pass the following special resolution. |
|
|
| "Resolved that: |
|
|
| The
Company be and is hereby authorised to invest the rupee equivalent of Saudi
Rial (SR) |
|
| 6
million representing 10% equity interest in a proposed joint venture leasing
company in |
|
| the
Kingdom of Saudi Arabia, subject to such permissions as may be required in
this behalf |
|
| from
the Government of Pakistan and Saudi Arabia 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." |
|
|
| Item
no. 6 of Agenda - Remuneration of Chief Executive and Executive Directors |
|
|
| Shareholder's
approval is required for the holding of office of profit by any of the
Directors |
|
| as
well as of their remuneration. It is therefore proposed to pass the following
as an |
|
| Ordinary
Resolution. |
|
|
| "Resolved that: |
|
|
| Approval
is hereby given for the holding of office of profit with the Company by all
the |
|
| Executive
Directors including the Chief Executive, namely, Mr. Humayun Murad, Mr. |
|
| Shaheen
Amin and Mr. Mohammad Qamrul Haq, and for payment of remuneration to the |
|
| Executive
Directors amounting in aggregate to Rs. 5.6 million actual for the year
ending |
|
| June
30, 1999, and Rs. 7.1 million estimated for the year ending June 30, 2000,
together |
|
| with
other benefits in accordance with rules of the Company." |
|
|
| The
Executive Directors are interested to the extent of the remuneration payable
to them |
|
| individually. |
|
|
| REPORT
OF THE DIRECTORS |
|
|
| The
Directors are pleased to present the thirteenth Annual Report together with
the audited |
|
| accounts
of the Company for the year ended June 30, 1999. |
|
|
| FINANCIAL
RESULTS |
|
|
|
|
RUPEES |
|
|
| Net
profit for the year after charging all expenses |
|
150,463,752 |
|
| Less: Taxation |
|
|
20,000,000 |
|
|
|
|
------------------ |
|
|
|
|
130,463,752 |
|
| Unappropriated
profit brought forward |
|
6,037,576 |
|
|
|
|
------------------ |
|
|
|
|
136,501,328 |
|
| Appropriations: |
|
|
|
|
|
| Transfer
to Statutory reserve |
|
7,000,000 |
|
| Transfer
to Capital reserve for deferred tax |
|
48,700,000 |
|
| Cash dividend |
|
|
80,554,764 |
|
|
|
|
------------------ |
|
|
|
|
136,254,764 |
|
|
|
|
------------------ |
|
| Unappropriated
profit carried forward |
|
246,564 |
|
|
|
|
========== |
|
|
| DIVIDEND |
|
| The
Directors recommend a cash dividend of 40% for the year. Last year's
distribution was |
|
| 20%
cash and 25% bonus shares. |
|
|
| REVIEW
OF OPERATIONS |
|
| The
slowdown in economic activity and depressed conditions for investment posed
new |
|
| challenges
for our business. These were primarily on three fronts: |
|
|
| -
low investment in plant and machinery has a direct bearing on leasing
business which is |
|
| asset-based
financing thus necessitating new marketing strategies to develop sufficient |
|
| volume
of business; |
|
|
| -
foreign currency loans as a major source of funding dried completely due to
the inability to |
|
| hedge
the exchange rate risk forcing all funding to be raised from domestic
sources; |
|
|
| -
weakness of the corporate and business sector required new measures to be
taken to |
|
| ensure
that the lease portfolio quality did not deteriorate. |
|
|
| I
am pleased to report that the Company managed its operations successfully,
and in particular, |
|
| was
able to overcome the challenges mentioned above by making the necessary
adjustments |
|
| in
our business strategy and day to day operations. |
|
|
| Machinery
and industrial equipment traditionally used to account for more than half of
our lease |
|
| disbursements
but this share has been declining in recent years. In the year under review
37% |
|
| of
disbursements were towards this segment. To make up for this fall, steps were
taken in the |
|
| previous
years to boost leasing of other assets. The results of these efforts bore
fruit in 1999 |
|
| with
total lease disbursements increasing by 44% over 1998 to Rs. 2.04 billion,
the highest |
|
| volume
ever achieved by the Company. Commercial vehicles and saloon cars accounted
for |
|
| 57%
of the volume and office equipment for 6%. Financial assistance was provided
to 1,289 |
|
| business
enterprises, majority of which were small and medium sized businesses. |
|
|
| Profit
before tax increased by 12% to Rs. 150.4 million (1998:Rs. 133.9 million)
thus reversing |
|
| the
trend of declining profits witnessed in the last two years. In the year under
review, |
|
| earnings
per share were recorded at Rs. 6.48 per share (1998: Rs. 5.16 per Share). New
rent |
|
| receivables
of Rs. 2.9 billion were added and total income from all operations increased
by |
|
| 7.8%
to Rs. 905.1 million. Although finance lease remains our main product,
increasing |
|
| contribution
was made by short-term rental of equipment under operating lease contracts
and |
|
| automobile
leases for individual customers. Consumer finance side maintained steady |
|
| progress
and has developed a firm market niche for its product. |
|
|
| Financial
charges represent 73% of the total expenses and show an increase of 2.6% over
the |
|
| previous
year. Since the average total borrowings of Rs. 3 billion during the year
were higher |
|
| than
the previous year by 5% the financial costs reflect an improvement in
borrowing rates. |
|
| Although
short-term rates have improved by 3-4%, the overall reduction in our
borrowing costs |
|
| will
not be so prominent as our business relies on medium to long-term loans for
which rates |
|
| have
decreased marginally. During the year Rs. 1.76 billion of new loans were
taken which |
|
| were
all from domestic sources. No foreign currency loan was utilised, and due to
the difficulty |
|
| in
arranging satisfactory hedge for exchange rate risk, an undrawn amount of US
$10.2 million |
|
| from
Asian Development Bank loan was recently cancelled. Our repayment obligations
to all |
|
| foreign
lenders are now current. |
|
|
| Tight
control was maintained on selling, general and administrative costs which
increased by |
|
| 6.2%
to Rs. 122.3 million. This is a modest increase considering the impact of
inflation and the |
|
| continuous
increase in expenditure for our expanding business. The charge for general
provision |
|
| for
potential bad leases was Rs. 31.8 million (1998 Rs. 28.1 million) and the
accumulated general |
|
| provision
now amounts to Rs. 135.2 million which is equal to 3.72% of the net exposure
on rent |
|
| receivables.
As mentioned earlier in the Report one of the challenges faced by management |
|
| was
to ensure that the lease portfolio did not impair in the current economic
scenario. I am |
|
| pleased
to report that due to rigorous monitoring and tight credit checks our
infected portfolio was |
|
| lower
than 1998 and our recovery rate continues to be excellent. |
|
|
| CREDIT
RATING |
|
|
| The
Pakistan Credit Rating Agency (PACRA) maintained the Company's credit rating
for the |
|
| fourth
consecutive year. Based on results for the year to June 30,1998, AI+ and A1
were |
|
| accredited
to the Company's short and long term debt respectively. The Company continues |
|
| to
enjoy the highest rating in the leasing sector for both categories of debt
awarded by PACRA. |
|
|
| ASSOCIATED
COMPANIES |
|
|
| Oman
ORIX Leasing Company SAOG (OOL) in which your Company holds 20.25% equity and |
