| ASIAN STOCKS FUND LIMITED |
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| ANNUAL
REPORT 2004 |
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| BOARD
OF DIRECTORS |
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| Mr.
Mahmood Ahmed
Chief Executive Officer |
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| Mr.
Farooq Lakhani |
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| Mr. Gul Nawaz |
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| Mr. Nasir Ayub |
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| Mr.
Shahid Latif Dar |
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| Mr. Tariq Aleem |
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| Mr.
Wasif Mustafa Khan |
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| COMPANY
SECRETARY |
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| Mr. Tariq Aleem |
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| CHIEF
FINANCIAL OFFICER |
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| Mr.
Moeen Arshad |
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| MANAGEMENT
COMPANY |
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| Asian
Capital Management Limited |
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| AUDIT
COMMITTEE |
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| Mr. Nasir Ayub |
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| Mr.
Wasif Mustafa Khan |
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| Mr. Tariq Aleem |
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| BANKERS |
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| National
Bank of Pakistan |
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| Union
Bank Limited |
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| CUSTODIAN |
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| Muslim
Commercial Bank Limited |
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| AUDITORS |
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| Syed
Husain & Co. |
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| Chartered
Accountants |
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| REGISTERED
OFFICE |
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| 4th
Floor, Crescent Standard Tower |
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| 10-B,
Block - E2 Gulberg-III, Lahore. |
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| UAN:
042-111-912-912 |
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| Fax:
042-587 5915-6 |
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| Directors' Report |
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| The
Board of Directors of Asian Stocks Fund Limited (the "Company") is
pleased to present the annual |
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| report
of the Company together with the audited accounts for the year ended June 30,
2004. |
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| Company's
Performance |
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| The
financial results of the Company are as follows: |
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| For
the year |
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|
Rupees |
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| Return
on investments |
6,405,801 |
24,999,577 |
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| Operating
expenses |
3,192,279 |
2,039,838 |
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| Net
profit after taxation |
3,155,389 |
23,298,446 |
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| Earning
per share
|
0.32 |
2.33 |
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| Net
asset value |
159,531,504 |
58,376,115 |
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| Net
asset value per share
|
8.06 |
5.83 |
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| Due
to levy of new taxes in the budget announced by the Federal Government in
June 2004, the Stock |
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| Market
was under immense pressure during the month of June 2004 and so. Thus the
Company incurred |
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| losses
(realized and unrealized), which offsetted the gains earned during the
previous periods. In the |
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| subsequent
period such losses has been recouped to some extent due to recovery in the
stock market |
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| index.
As the investments were made in the good rating securities, therefore,
management expect |
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| reasonable
returns thereon, in the near future. Keeping in view the post right issue
position, the |
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| management
has decided not to sell the investments with rising market prices. |
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| Appropriations |
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| Keeping
in view the accumulated losses of the Company, the Board of Directors has
decided not to |
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| announce
any dividend for the year under review. |
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| Right Issue |
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| During
the year the paid up share capital was raised by way of 800% Right Issue at
par value of share, |
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| the
issue was fully underwritten and as the closing dates were subsequent to the
year end, therefore, |
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| the
significant results of the right issue will be reflected in the subsequent
period. The management has |
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| planned
that the right issue proceeds will be utilized to expand business operations
of the Company |
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| and
to take advantage of the present attractive stock market conditions. It is
envisaged that the additional |
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| capital
will have a positive impact on the business operations and financial
performance of the Company |
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| in
the growing market and hence would result in improved return to the
shareholders in future. |
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| Stock
Market Behavior |
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| The
primary and secondary equity market remained highly liquid. The initiative by
the Government |
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| of
Pakistan to channelize the liquidity into productivity is clearly visible by
the privatization of government |
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| holdings
in the public sector. This has resulted in achieving a milestone of twenty
billion dollar mark |
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| in
terms of market capitalization. |
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| The
secondary market also witnessed a growth in the mutual fund sector with a
number of investment |
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| houses
structuring there portfolios. The investment services industry is expected to
grow and become |
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| more
competitive. The secondary market offers immense potential and opportunity
for the players who |
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| want
to be competitive in this asset class. |
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| Future Outlook |
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| The
future strategy of the Company will be to make investments in the listed
securities in form of well |
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| diversified
ratio in order to get benefit of fixed income, high dividend yield and high
capital gains. |
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| Although
stock market investors are presently cautious because of the economic and
political uncertainties |
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| in
the region. However, we expect that the stock market will continue to attract
more inflows. It is also |
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| anticipated
that the proposed privatization of Kot Adu Power Project and Pakistan State
Oil will positively |
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| contribute
towards the stock market performance. Keeping in view the constantly
improving regulatory |
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| environment
of the capital markets, new reforms by the government and other indicators
such as increase |
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| in
foreign exchange reserves and low interest rates scenarios, we look forward
that the stock market |
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| would
offer better returns to the investors. |
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| Changes
in Board of Directors |
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| Mrs.
Parveen A. Malik and Miss. Iffat Zehra Mankani, Directors of the Company
tendered their |
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| resignations
on February 28, 2004 and May 11, 2004 respectively and the Board appointed Mr. Shahid |
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| Latif
Dar and Mr. Gul Nawaz in their place subject to the approval of SECP. |
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| Code
of Corporate Governance (CCG) |
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| The
Company for the year ended June 30, 2004 has duly complied with the
provisions of the relevant |
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| code
for good corporate governance. The directors hereby confirm following as
required by Clause (XiX) |
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| of the Code: |
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| The
preparation of financial statements is the responsibility of the management
of the Company. The |
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| enclosed
financial statements fairly present its state of affairs, the result of
operations, cash flow and |
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| changes
in equity, statement of movement in reserves and distribution statement of
the Company. |
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| Proper
book of accounts have been maintained as required by the Companies Ordinance,
1984 and Non- |
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| Banking
Finance Companies (Establishment and Regulation) Rules 2003. The Company has
followed |
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| the
International Accounting Standards (IAS) as applicable in Pakistan. |
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| The
management has applied appropriate accounting policies during the year, which
are also consistent |
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| with
the last year, except those, which are changed due to adoption of new IAS by
the Securities & |
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| Exchange
Commission of Pakistan. |
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| The
accounting estimates are based on reasonable and prudent judgment and are in
accordance with |
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| the
criteria available in the respective IAS (as applicable in Pakistan). |
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| There
exist sound internal controls, which were effectively implemented and
monitored during the year |
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| under review. |
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| There
are no doubts upon the Company's ability to continue as a going concern. |
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| There
has been no material departure from the best practices of CCG. |
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| The
key financial data of nine years are summarized in note 17 to the accounts. |
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| There
are no outstanding statutory payments on account of taxes, duties, levies and
charges. |
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| The
statement as to the value of investments of provident fund, gratuity and
pension funds is not |
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| applicable
as the Investment Adviser is managing the Fund. |
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| The
detailed pattern of share holding is enclosed. |
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| During
the year under review four Board meetings were held. The attendance of each
director at the |
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| meetings
of the Board of Directors is as follows: |
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| Directors
Previous Board |
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Number of Board meetings
attended |
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| Mr.
Ramadan A. Haggiagi |
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1 |
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| Mr.
Muhammad Ali Yacoob |
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1 |
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| Mr.
Bashir Blkasm Omer |
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3 |
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| Syed
Ghazanfar Ali |
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3 |
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| Mr.
Muhammad Yasin |
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3 |
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| Mr.
Parveen A. Malik |
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1 |
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| Mr.
Ather Hussain Medina |
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1 |
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| Mr.
Shaukat Hussain |
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1 |
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| Grant
of leave was given by the Board to the Directors, who could not attend the
Board meeting. |
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| During
the year under review no trading in the Company's shares were carried out by
the directors, |
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| CEO,
CFO, Company Secretary and their spouses including minor children. |
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| Investment
Policy |
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| The
Investment policy of the company is the same as stated in its Articles of
Association duly approved |
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| by
the commission and respective stock exchanges, which inter alia aims at
providing superior results |
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| through
investment in quality growth stocks selected on the basis of their potential
capital appreciation |
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| possibilities
as well as dividend potential so as to benefit its investors / shareholders
with regular income |
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| as
well as long term growth
potential. According to this investment policy, the Company, based on |
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| market
conditions and available opportunities, either invests its funds entirely in
ordinary stocks of |
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| listed
equities or distribute its funds between these ordinary stocks and other
securities listed on three |
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| stock
exchanges of the Country such as fixed income securities, participation term
certificates, modaraba |
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| certificates
etc. While implementing the investment policy, the Company always strives to
ensure that |
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| exposure
limit in respect of 10% in respect of each security is strictly adhered to
and the composition |
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| of
stocks in different sectors has relatively low correlation among each other. |
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| Auditors |
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| Subsequent
to the year end but before the start of audit for the year ended June 30,
2004, we received |
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| a
letter from M/s Khalid Majid Rahman Sarfaraz Rahim Iqbal Rafiq (KMRSRIR)being
our appointed |
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| auditors,
which state that KMRSRIR has been demerged and have been bifurcated as a
result of |
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| restructuring
of the firm by its partners. A new firm has been formed i.e. M/s Khalid Majid
Rahman |
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| (KMR)
by some of partners of the old firm (KMRSRIR). The matter was informed to the
SECP as well |
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| as
discussed with the Partners of KMRSRIR and KMR. As a result the Board of
Directors appointed M/s |
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| Syed
Husain and Co. Chartered Accountants in order to fill the casual vacancy, to
conduct the annual |
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| audit
for the year ended June 30, 2004. |
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| The
retiring auditors M/s Syed Hussain and Company, Chartered Accountants being
eligible offer |
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| themselves
for re-appointment. As suggested by the audit committee, the Board of
Directors has |
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| recommended
their appointment as auditors of the Company for the year ending June 30,
2005. |
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| Acknowledgment |
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| The
directors wish to place on record their appreciation to employees at all
levels for their dedication |
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| and
commitment, thank all our shareholders and members stock exchanges for the
commitment and |
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| trust
reposed in us. Finally the directors acknowledge the valuable assistance,
support and guidance |
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| given
by the Securities and Exchange Commission of Pakistan. |
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| Statement
of Compliance with the |
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| Code
of Corporate Governance |
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| This
statement is being presented to comply with the Code of Corporate Governance
contained in listing |
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| regulations
(regulation # 37) of Karachi Stock Exchange (Guarantee) Limited and Lahore
Stock Exchange |
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| (Guarantee)
Limited for the purpose of establishing a framework of good governance,
whereby a listed |
|
| company
is managed in compliance with the best practices of corporate governance. |
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| The
Company has applied the principles contained in the Code in the following
manner: |
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| The
board of directors comprise of seven directors. The Company encourages
representation of |
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| independent
non-executive directors on its board. At present the board includes at least
3 independent |
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| non-executive
directors. |
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| The
directors have confirmed that none of them is serving as a director in more
than ten listed companies, |
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| including
this Company. |
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|
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| All
the resident directors of the Company are registered as taxpayers and none of
them has been convicted |
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| by
a Court of competent jurisdiction as a defaulter in payment of any loan to a
banking company, a DPI |
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| or
an NBFI. No one is a member of Stock Exchange. |
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|
|
| A
casual vacancy occurring in the board on February 28, 2004 and May 11, 2004
by resignation of Mrs. |
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| Parveen
A. Malik and Miss. Iffat Zehra Mankani respectively was filled up by the
directors within 30 |
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| days
thereof by appointing Mr. Shahid Latif Dar and Mr. Gul Nawaz subject to the
approval of Securities |
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| and
Exchange Commission of Pakistan ("SECP"). |
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|
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| The
Company has prepared a 'Statement of Ethics and Business Practices', which
has been signed by |
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| all
the directors and employees of the Company. |
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| The
board has developed a vision/mission statement, overall corporate strategy
and significant policies |
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| of
the Company. A complete record of particulars of significant policies along
with the dates on which |
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| they
were approved or amended has been maintained. |
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|
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| All
the powers of the board have been duly exercised and decisions on material
transactions, including |
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| appointment
and determination of remuneration and terms and conditions of employment of
the CEO |
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| and
other executive directors, have been taken by the board. |
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|
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| The
meetings of the board were presided over by the Chairman and, in his absence,
by a director elected |
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| by
the board for this purpose and the board met at least once in every quarter.
Written notices of the |
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| board
meetings, along with agenda and working papers, were circulated at least
seven days before the |
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| meetings.
The minutes of the meetings were appropriately recorded and circulated. |
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|
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| The
Board arranged orientation courses for its directors during the year to
apprise them of their duties |
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| and
responsibilities. |
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| The
Board has approved appointment of Company Secretary/ CFO/ Internal Auditor
alongwith the |
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| terms
and conditions of employment, as determined by the CEO. |
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|
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| The
directors' report for this year has been prepared in compliance with the
requirements of the Code |
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| and
fully describes the salient matters required to be disclosed. |
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|
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| The
financial statements of the Company were duly endorsed by CEO and CFO before
approval of the |
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| Board. |
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| The
directors, CEO and executives do not hold any interest in the shares of the
Company other than |
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| that
disclosed in the pattern of shareholding. |
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|
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| Review
Report to the Members on Statement of Compliance |
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| with
Best Practices of Code of Corporate Governance |
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| We
have reviewed the Statement of Compliance with the best practices contained
in the Code of Corporate |
|
| Governance
prepared by the Board of Directors of ASIAN STOCKS FUND LIMITED (the Company) |
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| to
comply with the Listing Regulation No. 37 of Karachi Stock Exchange, Chapter
XIII of Listing |
|
| Regulations
of the Lahore Stock Exchange and Chapter XI of the Listing Regulations of the
Islamabad |
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| Stock
Exchange where the Company is listed. |
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|
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| The
responsibility for compliance with the Code of Corporate Governance is that
of the Board of Directors |
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| of
the Company. Our responsibility is to review, to the extent where such
compliance can be objectively |
|
| verified,
whether the Statement of Compliance reflects the status of the Company's
compliance with |
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| the
provisions of the Code of Corporate Governance and report if it does not. A
review is limited |
|
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| primarily
to inquiries of the Company personnel and review of various documents
prepared by the |
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| Company
to comply with the Code of Corporate Governance. |
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|
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| As
part of our audit of financial statements we are required to obtain an
understanding of the accounting |
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| and
internal control systems sufficient to plan the audit and develop an
effective audit approach. We |
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| have
not carried out any special review of the internal control system to enable
us to express an opinion |
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| as
to whether the Board's statement on internal control covers all controls and
the effectiveness of such |
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| internal controls. |
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|
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| Based
on our review, nothing has come to our attention which causes us to believe
that the Statement |
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| of
Compliance does not appropriately reflect the Company's compliance, in all
material respects, with |
|
| the
best practices contained in the Code of Corporate Governance, as applicable
to the Company for the |
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| year
ended June 30, 2004. |
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| Auditors'
Report to the Members |
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|
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| We
have audited the annexed balance sheet of ASIAN STOCKS FUND LIMITED as at
June 30, 2004 |
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| and
the related profit and loss account, cash flow statement, distribution
statement, statement of |
|
| movement
in equity and reserves and statement of changes in equity together with the
notes forming |
|
| part
thereof, for the year then ended and we state that we have obtained all the
information and |
|
|
| explanations
which, to the best of our knowledge and belief, were necessary for the
purposes of our |
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| audit. |
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|
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| It
is the responsibility of the company's management to establish and maintain a
system of internal |
|
| control,
and prepare and present the financial statements in conformity with the
approved accounting |
|
| standards,
the requirements of the Companies Ordinance, 1984 and the Non-Banking Finance
Companies |
|
| (Establishment
and Regulation) Rules, 2003. Our responsibility is to express an opinion on
these |
|
| statements
based on our audit. |
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|
|
|
| We
conducted our audit in accordance with the International Standards on
Auditing as applicable in |
|
| Pakistan.
These standards require that we plan and perform the audit to obtain
reasonable assurance |
|
| about
whether the financial statements are free of any material misstatement. An
audit includes |
|
| examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. |
|
| An
audit also includes assessing the accounting policies and significant
estimates made by management, |
|
| as
well as, evaluating the overall presentation of the financial statements. We
believe that our audit |
|
| provides
a reasonable basis for our opinion and, after due verification, we report
that: |
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|
|
|
| a) in our opinion, proper books of
account have been kept by the company as required by the |
|
| Companies
Ordinance, 1984 and the Non-Banking
Finance Companies (Establishment and |
|
|
| Regulation)
Rules, 2003; |
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|
|
|
| b) in our opinion: |
|
|
|
|
| i)
the balance sheet and profit and loss account together with the notes thereon
have been |
|
|
| drawn
up in conformity with the Companies Ordinance, 1984 and in accordance with
the |
|
|
| provisions
of the Non-Banking Finance Companies (Establishment and Regulation) Rules, |
|
|
| 2003
and are in agreement with the books of account and are further in accordance with |
|
|
| accounting
policies consistently applied; |
|
|
|
|
| ii)
the expenditure incurred during the year was for the purpose of the company's
business; |
|
|
| and |
|
|
|
|
| iii)
the business conducted, investments made and the expenditure incurred during
the year |
|
|
| were
in accordance with the objects of the company; |
|
|
|
|
| c) in our opinion and to the best of our
information and according to the explanations given to us, |
|
| the
balance sheet, profit and loss account, cash flow statement, distribution
statement, statement |
|
| of
movement in equity and reserves and statement of changes in equity together
with the notes |
|
| forming
part thereof conform with approved accounting standards as applicable in
Pakistan, |
|
|
| and,
give the information required by the Companies Ordinance, 1984 and the
Non-Banking |
|
|
| Finance
Companies (Establishment and Regulation) Rules, 2003 in the manner so
required and |
|
| respectively
give a true and fair view of the state of the company's affairs as at June
30, 2004 and |
|
| of
the profit, its cash flows, its distributions, movement in equity and
reserves and changes in |
|
|
| equity
for the year then ended; and |
|
|
|
|
| d) in our opinion, no Zakat was
deductible at source under the Zakat and Ushr Ordinance, 1980. |
|
|
|
| The
financial statements of the company for the year ended June 30, 2003 were
audited by another firm |
|
| of
Chartered Accountants whose report dated September 25,2003 emphasized the
matter regarding the |
|
| pending
approval of Securities and Exchange Commission of Pakistan for the then
proposed change |
|
| in
management and major shareholding of the company. The approval has been
obtained during the |
|
| year. |
|
|
|
|
| Balance Sheet |
|
|
| As
at June 30, 2004 |
|
|
|
|
|
|
|
Note |
2004 |
2003 |
|
|
|
Rupees |
Rupees |
|
| CURRENT
ASSETS |
|
|
| Bank balances |
|
3 |
63,054,985 |
7,846,959 |
|
| Advances,
prepayments and other receivables |
4 |
1,096,612 |
207,309 |
|
| Accounts
receivable |
|
5 |
7,949,838 |
3,570,304 |
|
| Investments |
|
6 |
95,221,627 |
50,970,980 |
|
| CURRENT
LIABILITIES |
|
167,323,062 |
62,595,552 |
|
| Due
to investment advisor |
|
7 |
- |
945,674 |
|
| Accounts
payable and accrued expenses |
8 |
7,135,924 |
2,728,542 |
|
| Unclaimed
dividend |
|
172,098 |
172,548 |
|
| Provision
for taxation |
|
483,536 |
372,673 |
|
|
7,791,558 |
4,219,437 |
|
| NET ASSETS |
|
159,531,504 |
58,376,115 |
|
| REPRESENTED
BY: |
|
|
| Share
Capital and Reserves |
|
|
| Authorized
share capital |
|
|
| 100,000,000
(2003: 10,000,000) ordinary shares |
|
|
| of
Rupees 10 each |
|
1,000,000,000 |
100,000,000 |
|
| Issued,
subscribed and paid up share capital |
|
|
| 10,000,000
(2003: 10,000,000) ordinary shares |
|
|
| of
Rupees 10 each fully paid up in cash |
9 |
100,000,000 |
100,000,000 |
|
| Accumulated loss |
|
-38,468,496 |
-41,623,885 |
|
|
61,531,504 |
58,376,115 |
|
| Deposit
against right issue |
|
10 |
98,000,000 |
- |
|
| Contingencies
and commitments |
|
- |
- |
|
|
159,531,504 |
58,376,115 |
|
|
|
| Profit
and Loss Account |
|
|
| For
the Year Ended June 30, 2004 |
|
|
|
|
|
|
|
Note |
2004 |
2003 |
|
|
|
Rupees |
Rupees |
|
| INCOME |
|
|
| Return
on investments |
|
11 |
6,405,801 |
24,999,577 |
|
| Profit
on bank deposits |
|
199,652 |
255,226 |
|
|
6,605,453 |
25,254,803 |
|
| OPERATING
EXPENSES |
|
|
| Administrative
and general expenses |
|
12 |
3,192,279 |
1,094,164 |
|
| Remuneration
of investment advisor |
|
7 |
- |
945,674 |
|
|
3,192,279 |
2,039,838 |
|
| PROFIT
BEFORE TAXATION |
|
3,413,174 |
23,214,965 |
|
| PROVISION
FOR TAXATION |
|
|
| Current |
|
13 |
257,785 |
100,000 |
|
| Prior |
|
- |
-183,481 |
|
|
257,785 |
-83,481 |
|
| PROFIT
AFTER TAXATION |
|
3,155,389 |
23,298,446 |
|
| EARNINGS
PER SHARE - BASIC |
|
14 |
0.32 |
2.33 |
|
|
|
| Cash
Flow Statement |
|
|
| For
the Year Ended June 30, 2004 |
|
|
|
|
|
|
|
Note |
2004 |
2003 |
|
|
|
Rupees |
Rupees |
|
| CASH
FLOW FROM OPERATING ACTIVITIES |
|
|
| Profit
before taxation |
|
3,413,174 |
23,214,965 |
|
| Adjustments
of items not involving cash flows: |
|
|
| Gain
on remeasurement of investments held for trading |
|
-5,826,116 |
-186,065 |
|
| Cash
(outflow) /inflow from operating activities |
|
|
| before
working capital changes |
|
-2,412,942 |
23,028,900 |
|
| Adjustments
for working capital changes: |
|
|
