FIRST CAPITAL MUTUAL FUND LIMITED
ANNUAL REPORT 2004
Board of Directors
M. Jaffar Khan*			(Chief Executive Officer)
Lt. Gen. (R) Humayun Khan Bangash
Muhammad Ashraf Ali
Muhammad Shuaib Yousaf
Muhammad Naveed Tariq
Syed Kashan Kazmi
Salmaan Taseer			(Chairman)
Chief Financial Officer
Syed Kashan Kazmi
Audit Committee
Muhammad Shuaib Yousaf			(Chairman)
Lt. Gen. (R) Humayun Khan Bangash			(Member)
Muhammad Naveed Tariq			(Member)
Company Secretary
Ahmad Bilal
Investment Committee
Salmaan Taseer			(Chairman)
M. Jaffar Khan			(Member)
IqbalLatif			(Member)
Syed Kashan Kazmi			(Member)
Auditors
Ford Rhodes Sidat Hyder & Co.
Chartered Accountants
Legal Adviser
Rehman Saleem & Tarar
Advocates
Custodian
Crescent Commercial Bank Limited
(formerly MashreqBank Pakistan Ltd.)
Registered Office / Head Office
103-C/II, Gulberg-III
Lahore, Pakistan
(042) 5757591-4
Fax: (042) 5757590, 5877920
Investment Advisers
First Capital Investments Limited
103-C/II, Gulberg-III,
Lahore
Registrar and Shares Transfer Office
THK Associates (Pvt.) Limited
Ground Floor, Modem Motors House,
Beaumont Road
Karachi
(021)5689021
4. a)    Individual beneficial owners of CDC entitled to attend and vote at the meeting must bring his/her participant
ID and account/sub-account number along with original NIC or passport to authenticate his/her identity. In
case of Corporate entity, resolution of the Board of Directors/Power of attorney with specimen signatures of
nominees shall be produced (unless provided earlier) at the time of meeting.
b) For appointing of proxies, the individual beneficial owners of CDC shall submit the proxy form as per above
requirement along with participant ID and account/sub-account number together with attested copy of their
NIC or Passport. The proxy form shall be witnessed by two witnesses with their names, addresses and NIC
numbers. The proxy shall produce his/her original NIC or Passport at the time of meeting. In case of
Corporate entity, resolution of the Board of Director/Power of attorney along with specimen signatures shall
be submitted (unless submitted earlier) along with the proxy form.
5.        Members are requested to notify any change in their registered address immediately.
STATEMENT UNDER SECTION 160(l)(b) OF THE COMPANIES ORDINANCE, 1984
The statement sets out the material facts pertaining to the special business to be transacted at the Annual General Meeting
of the Company to be held on 30 October 2004.
PLACEMENT OF QUARTERLY ACCOUNTS OF THE COMPANY'S WEBSITE
Under section 245 of the Companies Ordinance, 1984 (read with various circulars and notifications issued from time to
time) the listed companies are required to prepare and either transmit their quarterly accounts by post to the shareholders
or publish the same in the leading daily newspapers.
The Securities and Exchange Commission of Pakistan ("SECP") vide its Circular No. 19 of 2004 issued vide letter No.
CLD/D-II/51/2003 dated 14 April 2004 has now decided that the requirements of section 245 of the Companies
Ordinance, 1984 would be treated as complied with (subject to the fulfilment of certain conditions including seeking the
consent of its shareholders in general meeting as mentioned in the above referred circular) if the quarterly accounts are
placed on the company's website.
In order to ensure timely availability of the information to the stakeholders and save the cost of printing and dispatching of
quarterly accounts, the Board of Directors has recommended (subject to the approval of SECP and relevant Stock
Exchanges) to place quarterly accounts on Company's website instead of circulating the same by post to the shareholders.
The Directors are not interested in this business except as shareholders of the Company.
INSPECTION OF DOCUMENTS
Copies of Memorandum and Articles of Association, Statement under section 160(l)(b) of the Companies Ordinance,
1984, SECP's Circular No. 19 of 2004 dated 14 April 2004, financial statements of all prior periods of the Company and
other related information of the Company may be inspected during the business hours on any working day at the
Registered Office of the Company from the date of publication of this notice till the conclusion of the Annual General
Meeting.eeting.
DIRECTORS' REPORT
The directors of First Capital Mutual Fund Limited ("the Company") are pleased to present the annual report of the
Company together with the audited accounts for the year ended 30 June 2004.
Economic overview and stock market conditions
During the period under review the stock markets of the country performed exceedingly well on account of
improving fundamentals of the economy. The GDP witnessed a growth of 6.4% during the year as the economy
benefited from low interest rates and growing consumer demand. Continuation of government policies of the last
few years also bore fruit in terms of improving business sentiment that encouraged private sector investment. This
improvement in economic conditions and expectations of further progress ahead propelled the stock market to new
highs. During the year the benchmark KSE-100 Index increased 53.8% and in the process created an all time high
of 5621 on April 19, 2004. Improving stock market conditions attracted both, the public and private sectors to the
IPO market with the Government taking the lead through listing of Oil and Gas Development Co. (OGDC) and
secondary offerings of NBP, SSGC and PIA. However, with SBP's restriction on banks with regards to their
exposure to the stock market, the retail public took the lead amongst the investing community. Asset management
companies also became more active through floatation of new funds. Consequently, the overall liquidity in the
market remained sufficient enough to sustain the bull run. Towards the close of the year, the imposition of capital
value tax (C VT) on investment in the stock market, announced in the latest budget, dampened the sentiment of the
market. Consequently, some of the gains were lost in the last few trading days of the year. The market ended the
year 2003-04 at the 5279 level as against 3433 level the previous year.
Operational performance
Your fund also benefited from the increasing trend in the stock market as the net asset value (NAV) of the fund
witnessed a growth of 21.7% to close the year at Rs 7.91 per share. However, the profitability of the fund witnessed
a decline from Rs 49.19 million in 2002-03 to Rs 21.14 million 2003-04 primarily due to lower capital gains
booked by the fund during 2003-04 as compared to the previous year.
Future outlook
Recently the announcement of a phased withdrawal of the Carry Over Transactions (COT) by June 2005 has
resulted in a dampening of investor sentiment especially at the retail level. However, given the continued
underlying strength in the Pakistani economy, strong corporate earnings, lack of investment alternatives and
expected launch of several new mutual funds, the Directors expect fresh inflows into the local bourses.
Furthermore, additional IPOs by the government of public sector entities will result in increased investment
opportunities. The Directors are of the view that Pakistani market continues to offer attractive prospects and the
Fund will more proactively probe the same to achieve better returns for the shareholders.
Payout for Shareholders
In order to strengthen the company's financial base, the directors do not recommend any payout this year.
Earnings pershare
Earnings per share for the year ended June 30,2004 was Rs. 1.41 compared to Rs. 3.28 of last year.
Changes in Board of Directors
Since the last report, there have been changes in the composition of the Board. During the period, Mr. Sardar Ali
Wattoo and Mr. Usman Haider have resigned from the Board of Directors of the Company. Mr. Muhammad
Naveed Tariq and Syed Kashan Kazmi have been appointed as Directors in place of Mr. Sardar Ali Wattoo and
Mr. Usman Haider respectively subject to the approval of Securities and Exchange Commission of Pakistan
("SECP"). The Company has already filed an application for seeking the approval from SECP. Subsequent to the
year-end Mr. Khurram Hanif has tendered his resignation from Directorship as well as from the office of Chief
Executive of the Company and Mr. M. Jaffar Khan has been appointed as Director/Chief Executive in his place
subject to the approval from SECP. Currently the Company has seven directors on its Board.
FINANCIAL HIGHLIGHTS
		2004	2003	2002	2001	2000	1999	1998	1997	1996	1995
Capital gain/(loss)		96,747	34,472	2,939	-4,964	15,135	-37,942	1,859	-12,157	-10,584	414
Dividend income		4,699	7,596	7,163	2,328	4,830	2,369	3,916	5,403	1,039	18
Gain/(loss) on remeasurement		11,925	11,241	-8,189	-273	288	-45,472	30,000	12,770	16,332	16,824
Operating expenses		5,019	4,166	3,564	2,423	4,006	4,519	5,284	5,125	5,875	656
Net gain/(loss) before taxation		21,377	49,186	-1,544	-4,614	16,230	6,263	-27,447	1,497	-29,447	-16,314
Taxation		234	-	430	169	182	132	196	270	52	3
Net gain/I loss) after taxation		21,142	49,185	-1,974	-4,783	16,048	6,131	-27,643	1,227	-29,499	-16,317
Dividend		-	37,500		-	7,500
Net assets		118,517	97,375	85,689	87,663	92,446	83,898	77,767	105,410	104,184	133,683
Net assets per share		7.91	6.49	5.71	5.85	6.16	5.59	5.18	7.03	6.95	8.84
Earning per share		1.41	3.28	-0.13	32	1.07	0.41	-1.84	0.08	-1.96	-1.08
Dividend distribution		Nil	25%	Nil	Nil	5%	Nil	Nil	Nil	Nil	Nil
KSE 100 Index		5279.18	3402.48	1770.12	1366.44	1520.74	1054.67	879.62	1565.73	1703.28	1912
The Directors who could not attend the Board Meeting were duly granted leave by the Board.
13.     During the year under review no trading in the Company's shares were carried out by the directors,
CEO, CFO, Company Secretary and their spouses including minor children.
Statement of Compliance with the best practices on Transfer Pricing
The Company has fully complied with the best practices on transfer pricing as contained in the listing
regulations of stock exchanges where the Company is listed.
Audit Committee
The Board of Directors in compliance with the Code of Corporate Governance has established an Audit
Committee consisting of following directors:
Muhammad Shuaib Yousaf				Chairman
Lt. Gen. (R) Humayun Khan Bangash				Member
Muhammad NaveedTariq				Member
Auditors
The present auditors M/s. Ford Rhodes Sidat Hyder & Co., Chartered Accountants, shall retire and being
eligible to offer themselves for reappointment.
Acknowledgment
The Directors wish to thank all the shareholders and members stock exchanges for the commitment and trust
reposed in them. Furthermore, the Directors place on record their appreciation for Securities and Exchange
Commission of Pakistan's valuable support and guidance.
Code of Corporate Governance (CCG)
The Company for the year ended June 30,2004 has duly complied with the provisions of the relevant code for good
corporate governance. The directors hereby confirm following as required by Clause (XiX) of the Code:
1.        The preparation of financial statements is the responsibility of the management of the Company. The
enclosed financial statements fairly present its state of affairs, the result of operations, cash flow and
changes in equity, statement of movement in reserves and distribution statement of the Company.
2.        Proper books of account have been maintained as required by the Companies Ordinance, 1984 and Non-
Banking Finance Companies (Establishment and Regulation) Rules 2003. The Company has followed the
International Accounting Standards (IAS) as applicable in Pakistan.
3.        The management has applied appropriate accounting policies during the year, which are also consistent with
the last year, except those, which are changed due to adoption of new IAS by the Securities & Exchange
Commission of Pakistan.
4.        The accounting estimates are based on reasonable and prudent judgement and are in accordance with the
criteria available in the respective IAS.
5.        There exist sound internal controls, which were effectively implemented and monitored during the year
under review.
6.        There are no doubts upon the Company's ability to continue as a going concern.
7.        There has been no material departure from the best practices of CCG.
8.        The key financial data of last ten years are summarized in note 19 to the accounts.
9.        There are no outstanding statutory payments on account of taxes, duties, levies and charges.
10.      The statement as to the value of investments of provident fund, gratuity and pension funds is not applicable
as the Investment Adviser is managing the Fund.
11.      The pattern of shareholding as required under section 236 of the Companies Ordinance, 1984 and listing
regulations are enclosed.
12.      During the year under review five Board meetings were held. The attendance of each director at the
meetings of the Board of Directors is as follows:
12)    The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board.
13)    The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed
in the pattern of shareholding
14)    The Company has complied with all the corporate and financial reporting requirements of the Code.
15)    The Board has formed an audit committee. At present the committee includes three non-executive directors
including the chairman of the committee.
16)    The meetings of the audit committee were held at least once every quarter prior to approval of interim and final
results of the Company and as required by the Code. The terms of reference of the committee have been formed and
advised to the committee for compliance.
17)    The Board has set-up an effective internal audit function having suitable qualified and experienced personnel who
are conversant with the policies and procedures of the Company.
18)    The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the
quality control review program of the Institute of Chartered Accountants of Pakistan, that they or any of the
partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its
partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as
adopted by Institute of Chartered Accountants of Pakistan.
19)    The statutory auditors or the persons associated with them have not been appointed to provide other services except
in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines
in this regard.
STATEMENT OF COMPLIANCE WITH THE CODE OF CORPORATE
GOVERNANCE FOR THE YEAR ENDED 30 JUNE 2004
This statement is being presented to comply with the Code of Corporate Governance contained in listing regulations of
Karachi Stock Exchange (Guarantee) Limited and Lahore Stock Exchange (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.