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Golden Arrow Selected Stocks Fund Limited
Annual Report 1998
CONTENTS
Board of Directors and Company Information
Notice of Meeting
Directors' Report
Pattern of Shareholding
Auditors' Report
Balance Sheet
Profit and Loss Account
Statement of Changes in Financial Position
Notes to the Accounts
Investment Adviser's Statement of Income and
Expenditure in relation to Investment Company
BOARD OF DIRECTORS
Mr. Said Ahmed			Chairman
Mr. Mohammad Basheer Janmohammed			Director
Mr. Ahmed Abdul Sattar			Director
Mr. Muhammad Atiq			Director
Mr. Muhammad Hashim Khan			Nominee Director of ICP
Malik M. Parvez Akhtar			Director
Mr. Mohammed Ashraf Kothari			Director and Chief Executive
INVESTMENT ADVISER
Golden Arrow Investment & Research (Private) Limited
607, Uni Tower,
I.I. Chundrigar Road,
Karachi.
CUSTODIAN
National Bank of Pakistan,
I.I. Chundrigar Road, Karachi.
AUDITORS
Taseer Hadi Khalid & Co.,
Chartered Accountants,
First Floor, Sheikh Sultan Trust Bldg. No. 2,
Beaumont Road,
Karachi.
LEGAL ADVISER
Ali Daraz Siddiqui,
C/o. Noorallah A. Manji,
5th Floor, Jubilee Insurance House,
I.I. Chundrigar Road, Karachi.
REGISTERED OFFICE
607, Uni Tower,
I.I. Chundrigar Road, Karachi.
NOTICE OF MEETING
Notice is hereby given that the Fifteenth Annual General Meeting of Golden Arrow Selected Stocks Fund
Limited will be held on Tuesday, 29th December, 1998 at 10:30 a.m. at 703, Uni Tower, I.I. Chundrigar Road,
Karachi to transact the following business:-
To confirm the Minutes of the Extraordinary General Meeting held on 15th May, 1998.
To receive, consider and adopt the Audited Accounts together with the Directors' and Auditors' Report
for the year ended 30th June, 1998.
To appoint Auditors of the Company and to fix their remuneration. The present Auditors, Messrs. Taseer
Hadi Khalid & Co., Chartered Accountants, retire and being eligible, offer themselves for re-appointment.
To transact such other business as may be placed before the meeting with the permission of the Chair.
				By Order of the Board
Karachi: 7th December, 1998				Company Secretary
NOTES:
1. A member entitled to attend and vote at the meeting may appoint a proxy to attend and vote instead of
him/her at the meeting. Proxies must be deposited at the Company's Registered Office not less than 48
hours before the time for holding the meeting. A proxy must be a member.
2. The Share Transfer books of the Company will remain closed from 23rd December, 1998 to 29th
December, 1998 (both days inclusive).
3. The Shareholders are advised to notify the Company of any change in their addresses to ensure prompt
delivery of mails. Any shares for transfers etc. should also be lodged with the Company.
DIRECTORS' REPORT
The Directors of Golden Arrow Selected Stocks Fund Ltd. present this report, together with Accounts of
the Fund for the financial year ended 30th June, 1998.
MARKET BEHAVIOUR
There has been continuous downward trend prevailing in the Capital Market since June, 1997. The
Karachi Stock Exchange Index of share prices declined from 1566 points on 30th June, 1997 to 880 points on
30th June, 1998 resulting in net change of minus 686 points.
The first half of the year under review has really been depressing. The general investing public was in
complete disarray and unable to decide about the future course of the market. The continued downslide and
under performance of the market were mainly attributed to law and order situation, acute liquidity crunch,
sharp devaluation of Pak rupee and finally the Government-Judiciary crisis. In the second half the
performance of market remained sluggish most of the time though the government started to revamp the
economy. In May 1998 in response to India's nuclear blast our country had to respond in a befitting manner.
This action of both the Governments resulted in imposition of international economic sanctions. Due to these
sanctions, the already sluggish economy declined to such a level that country's foreign exchange reserves
declined steeply causing default to appear a distinct possibility. Capital Market of the country in line with the
economy, performed poorly. Against this back drop the performance of an investment portfolio, such as ours,
with largely depends on market conditions supported by economic development, particularly!:/ sectors like
textile, sugar and modarabas, could only be expected to suffer.
OPERATIONAL RESULTS
The Company's income amounted to Rs.8.50 million as at the year ended 30th June, 1998 as against
Rs.0.99 million for the preceding year showing a net increase of Rs. 7.51 million. After meeting administrative
expenses, custodian fee, auditor's remuneration, the fee of 1% of the net assets of the company to
Investment Advisor, and finally provision of Rs.21.2 million to be made for diminution in value of investments,
the loss before taxation comes to Rs.13.7 million. In these circumstances, the Directors have regretfully
passed over dividend payment for the year under report. There is no material change in overall position of
Company's portfolio since the balance sheet date.
FUTURE PROSPECTS
The present Government is disparately trying to improve worsening economic conditions by presenting
comprehensive reform packages of various industries and sectors. So far the pace of economic growth has
not responded to the desired level and as such budgeted revenue target could not be achieved. The shortfall
in revenue largely and the lack of investment growth are giving alarming signals to country's economic
conditions. Unless the financial condition of the country improves, Capital Market would remain dull and
directionless.
ACKNOWLEDGMENTS
The Directors would like to take this opportunity of thanking the Corporate Law Authority and Ministry of
Finance for their support to the Company.
The Board also appreciate the devoted work done by the staff and officers of the company.
While concluding we regret to inform that one of our Directors, Sheikh Ejaz Ahmed, expired in October,
1998. As a Director on our Board, the Late Sheikh Ejaz Ahmed, rendered valuable contribution to the Board's
deliberations. We pray that the departed soul may rest in peace in its heavenly abode. We also pray that the
members of the deceased family bear this irreparable loss with strength and fortitude.
				For and on behalf of the Board
				SAID AHMED
Karachi: 5th December, 1998				Chairman
PATTERN OF SHAREHOLDING AS AT 30TH JUNE 1998
No. of	Having Shares
Shareholders	From	To	Shares Held	Percentage
388	1	100	23,681	0.15
646	101	500	173,398	1.07
519	501	1,000	418,520	2.58
1,085	1,001	5,000	2,636,672	16.27
225	5,001	10,000	1,615,363	9.96
76	10,001	15,000	977,436	6.03
31	15,001	20,000	558,873	3.45
15	20,001	25,000	332,232	2.05
3	25,001	30,000	81,225	0.50
10	30,001	35,000	334,463	2.06
1	35,001	40,000	38,653	0.24
2	40,001	45,000	82,391	0.51
3	45,001	50,000	144,596	0.89
3	50,001	55,000	157,579	0.97
3	55,001	60,000	173,930	1.07
3	60,001	65,000	189,350	1.17
1	65,001	70,000	70,000	0.43
2	75,001	80,000	155,533	0.96
1	80,001	85,000	84,000	0.52
1	85,001	90,000	87,500	0.54
4	95,001	100,000	394,789	2.44
1	100,001	105,000	105,000	0.65
1	120,001	125,000	124,000	0.76
2	140,001	145,000	286,996	1.77
1	165,001	170,000	166,500	1.03
1	180,001	185,000	182,971	1.13
1	190,001	195,000	191,672	1.18
1	245,001	250,000	247,800	1.53
1	250,001	255,000	254,523	1.57
1	265,001	370,000	266,800	1.65
1	330,001	335,000	332,980	2.05
1	365.00	270,000	367,920	2.27
1	455,001	460,000	458,000	2.82
1	465,001	470,000	465,082	2.87
1	580,001	585,000	584,732	3.61
1	1,300,001	1,305,000	1,300,840	8.02
1	2,140,001	2,145,000	2,144,000	13.23
----------			----------	----------
3,039			16,210,000	100.00
==========			==========	==========
CATEGORIES OF SHAREHOLDERS AS ON 30 JUNE 1998
Particulars			Shareholders	Shareholding	Percentage
Individuals			2,994	8,178,133	50.45
Insurance Companies			4	94,999	0.59
Joint Stock Companies			25	4,461,004	27.52
Financial Companies			8	2,803,655	17.29
Modaraba Companies			4	354,509	2.19
Leasing Companies			2	173,500	1.07
Non Resident			1	2,000	0.01
Others			1	142,200	0.88
			----------	----------	----------
			3,039	16,210,000	100.00
			==========	==========	==========
AUDITORS' REPORT TO THE MEMBERS
We have audited the annexed balance sheet of Golden Arrow Selected Stocks Fund Limited as at 30
June 1998 and the related Profit and Loss Account and Statement of Changes in Financial Position together
with the notes to the accounts for the year then ended. Our examination was made in accordance with the
generally accepted auditing standards and accordingly included such tests of the accounting records and
such other auditing procedures as were considered necessary in the circumstances 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 purpose of our audit and we report that:
(a) In our opinion, proper books of account have been kept by the Company as required by the Companies
Ordinance, 1984 and Rule 16 of the Investment Companies and Investment Adviser's Rules, 1971;
(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
Investment Companies and Investment Adviser's Rules, 1971 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;
(iii) the business conducted, investments made and expenditure incurred during the year were in
accordance with the investment policy of the company and Investment Companies and Investment
Adviser's Rules, 1971;
(iv) the company has not contravened the provisions of Rule 8 of the Investment Companies and
Investment Adviser's Rules, 1971;
(c) In our opinion and to the best of our information and according to the explanations given to us, the
Balance Sheet and the Profit and Loss Account and the Statement of Changes in Financial Position
together with the notes forming part thereof give the information required by the Companies Ordinance,
1984 and Investment Companies and Investment Adviser's Rules, 1971 in the manners so required and
respectively give a true and fair view of the state of the Company's affairs as at 30 June 1998 and of the
loss and the changes in financial position for the year ended on that date; and
(d) In our opinion, no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980.
				TASEER HADI KHALID & CO.
Karachi: 5th December, 1998				Chartered Accountants
BALANCE SHEET AS AT 30 JUNE 1998
				NOTE	1998	1997
					(Rupees '000)
CAPITAL AND RESERVES
SHARE CAPITAL
Authorised
60,000,000 ordinary shares of Rs. 5/- each					300,000	300,000
					==========	==========
Issued, Subscribed and Paid-up
16,210,000 ordinary Shares of Rs. 5 each				3	81,050	81,050
RESERVES
Share premium					6,700	6,700
General reserve					500	500
Accumulated loss					(35,505)	(21,303)
					----------	----------
					(28,305)	(14,103)
					----------	----------
					52,745	66,947
Deferred expenditure payable				4	62	124
CURRENT LIABILITIES
Due to shareholders on reduction of capital					45	45
Current maturity of deferred expenditure payable				4	62	116
Creditors and accrued expenses				5	839	48
Due to investment adviser - an associated company				6	539	694
Unclaimed dividend					322	322
Provision for taxation				7	440	150
					----------	----------
					2,247	1,375
					----------	----------
					55,054	68,446
					==========	==========
DEFERRED EXPENDITURE				8	136	272
CURRENT ASSETS
Marketable securities				9	49,404	65,169
Short Term Investments				10	2,500	-
Advances, prepayments and other receivables				11	1,144	733
Bank balances on current account					1,870	2,272
					54,918	68,174
					----------	----------
					55,054	68,446
					==========	==========
These accounts should be read in conjunction with the attached notes.
	SAID AHMED			M. ASHRAF KOTHARI
	CHAIRMAN			DIRECTOR
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 JUNE 1998
				NOTE	1998	1997
					(Rupees '000)
Sales of marketable securities					10,487	21,676
Cost of sales of marketable securities				12	7,593	25,507
					----------	----------
Gain/(Loss) on sale of marketable securities					2,894	(3,831)
Other income				13	5,609	4,826
					----------	----------
					8,503	995
OPERATING EXPENSES
Administrative				14	384	408
Financial				15	13	25
Remuneration to the investment adviser				6.1	527	670
					----------	----------
					924	1,103
					----------	----------
					7,579	(108)
(Provision for)/Reversal of provision for diminution
in value of marketable securities					(21,253)	3,675
					----------	----------
(Loss)/Profit for the year before taxation					(13,674)	3,567
Taxation - Current Year				7	440	150
	- Prior Year				88	32
					----------	----------
					528	182
					----------	----------
(Loss)/Profit for the year after taxation					(14,202)	3,385
Accumulated loss brought forward					(21,303)	(24,688)
					----------	----------
Accumulated loss carried forward					(35,505)	(21,303)
					==========	==========
These accounts should be read in conjunction with the attached notes.
	SAID AHMED			M. ASHRAF KOTHARI
	CHAIRMAN			DIRECTOR
STATEMENT OF CHANGES IN FINANCIAL POSITION
FOR THE YEAR ENDED 30 JUNE 1998
					1998	1997
					(Rupees '000)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(Loss)before taxation					(13,674)	3,567
Adjustment for:
Amortisation of deferred expenditure					136	198
Provision for/(reversal) of diminution in value of					----------	----------
marketable securities					21,253	(3,675)
					7,715	90
Changes in Operating assets/liabilities:
(Increase)/decrease in current assets
Marketable securities					(5,489)	(8,547)
Short term investment					(2,500)	429
Prepayments & other receivable					(399)	(510)
(Decrease)/increase in current liabilities
Creditors and accrued expenses					791	(412)
Due to investment adviser					(155)	15
					----------	----------
					(7,752)	(9,025)
Income tax paid					(249)	(135)
					----------	----------
Net cash flow used in operating activities					(286)	(9,070)
CASH FLOWS FROM INVESTING ACTIVITIES
Deferred expenditure paid					(116)	(194)
					----------	----------
Net cash flow (used) in/from investing activities					(116)	(194)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid					-	(2)
					----------	----------
					-	(2)
Net (decrease)/increase in bank balances					(402)	(9,266)
Bank balance at the beginning of the year					2,272	11,538
					----------	----------
Bank balance at the end of the year					1,870	2,272
					==========	==========
NOTES TO THE ACCOUNTS
FOR THE YEAR ENDED 30 JUNE 1998
1. STATUS AND NATURE OF BUSINESS
The company was incorporated on 09 May 1983 as a public limited company under Companies Act,
1913 (now Companies Ordinance, 1984) and was registered as an Investment Company under the
Investment Companies and Investment Adviser's Rules, 1971 and is listed on Karachi and Lahore Stock
Exchanges. The Company has entered into an agreement with an associated company, Golden Arrow
Investment and Research (Private) Limited to act as its "Investment Adviser."
2. SIGNIFICANT ACCOUNTING POLICIES
2.1 Accounting Convention
These accounts have been prepared under the historical cost convention.
2.2 Marketable Securities
These are valued at lower of average cost and middle market price ruling on the balance sheet
date determined on an aggregate portfolio basis. Middle market value has been used for
calculating the market value which has been taken from the Karachi Stock Exchange closing rate
summary sheet and it means the average of the highest and the lowest quotations prevailing on
the balance sheet date.
2.3 Revenue Recognition
(i) Dividend Income is recorded at the time of the closure of share transfer books of the
company declaring the dividend and is shown net of zakat deducted.
(ii) Sales and purchases of securities are recognised on the date of contract. Capital gain on sale
of investments is taken to income of the period in which it arises.
(iii) In respect of term finance certificates, profit is recognised on a time proportion basis that
takes into account the effective yield on the asset.
2.4 Deferred Expenditure
The expenditure incurred on the issue of right shares has been deferred and are being amortized
over a period of five years commencing from the year in which these expenses were incurred.