Dear Shareholders,
 
 The year 1995-96 is a significant year as your Company has
 completed ten years of operations. In retrospect, I have a
 great sense of satisfaction in the Company's achievements
 over the decade of operations, which witnessed growth in
 business volumes, funds base and profits. Dividends to the
 Shareholders have been stepped up continuously from Rs.
 14.85 lakhs (15%) in 1986-87 to Rs. 216.29 lakhs (30%) in
 1995-96. The diversification into Property Development has
 proved to be a timely step in imparting stability to the
 Company's growth and performance. Another achievement has
 been the merger of Kirloskar Leasing and Finance Ltd., Pune
 with the Company. The branch network now consists of 29
 branches spread over the states of Karnataka, Tamil Nadu,
 Maharashtra, Goa, Madhya Pradesh and Gujarat. The number of
 Shareholders and Depositors have substantially increased
 reflecting the growing confidence in the Performance of the
 Company.
 
 The Company has performed extremely well during the year
 1995-96, despite the Depressed Money and Stock Markets,
 Liquidity Crunch, High Interest Costs and Political
 instability.  The demand for fund based activities like
 Lease, Hire Purchase and Bill Discounting etc. continued to
 be steady. In line with the overall conditions prevailing
 in the Economy, during the later half of the year the Real
 Estate Market turned sluggish.  However, the projects of
 the Company at Mysore and Goa continued to sell well. A
 Dividend of 30% has been recommended despite tight money
 market conditions prevalent in the economy.
 
 The Union Budget for the year 1996-97 has been
 presented even as I am writing to you. Imposition of
 Minimum Alternate Tax, regulation of sale and lease back form
 of lease finance and depreciation eligibility in respect of joint
 ownership of assets are some of the proposals which will have
 a bearing on the Company's operations. Close on the heels of
 the Budget, the RBI has announced significant relaxations for
 registered Non-Banking Finance Companies which meet its
 requirements on Prudential Norms and Credit Rating. The
 removal of the cap on deposit rates, ceiling on deposit amounts
 and the reduction in the mandatory maintenance of liquid
 assets are the major concessions announced by the RBI. While
 the Budgetary proposals and the package announced by the
 RBI throw up certain issues requiring a closer look from the
 Company's point of view, I am certain that they also provide
 immense opportunities for growth and expansion of the
 Company in the years to come.
 
 The Company has made a comfortable start to the year
 1996-97. The Demand for Lease and Hire Purchase and other
 fund related business continue to be satisfactory. As far
 as the Property Development activity is concerned, the
 Company is planning to promote additional large size
 projects at Bangalore, Mysore and Goa apart from the maiden
 project at Pune in the next 3 months.
 
 In the backdrop of growth and achievements of the last
 decade of operations and the avenues being thrown open due
 to the overall economic growth and reforms, I am confident
 of continued growth and performance of the Company in the
 years to come.