With the management of Asia Capital Ltd. now in the hands of its founders, a major shift in policy and direction had taken place with an aggressive program of investment and diversification launched, the company's new chairman, Mr. Nigel Austin has told shareholders.

Asia had turned round in the year ended March 31, 1998, posting a profit of Rs. 220 million against a loss of Rs. 110.9 million a year earlier. However, the company was carrying a retained loss of Rs. 297.2 million in its books as at March 31, 1998. During the first quarter of the current financial year the group had earned a net profit of Rs. 26.7 million, down from Rs. 63.9 million a year earlier.

Austin said that the company had identified opportunities to acquire substantial holdings in other businesses to form strategic alliances and enjoy mutually beneficial synergies. The object was to derive steady earnings and further enhance Asia's stability.

The first of these alliances was formed with Asia Capital acquiring a 40% stake in the commodity broking company, Asia Siyaka Commodities (Pvt.) Ltd. floated by a breakaway group of managers from Forbes and Walker. Austin said that in just six months then new company had become one of the country's leading commodity brokers, thanks to its able and experienced management.

A second strategic alliance was the acquisition of a 20% stake of old established Richard Pieris and Co. Ltd., a leading blue chip quoted on the Colombo bourse. The third such investment was the acquiring of 20% of Lanka Orix Leasing Co. Ltd. (LOLC), the pioneers of the leasing industry in Sri Lanka who is the lead player in this field.

"The strategic alliance with Richard Pieris, while helping to diversify our own income base, will enable both companies to take advantage of each other's strengths in their specialized areas of business,'' Austin said.

""The investment in Sri Lanka's leading leasing company adds diversity to Asia Capital's role as a lead player in the financial sector while harnessing to advantage the financial expertise of both organisations to take maximum advantage of the highly lucrative leasing market.''

Austin saw a lot of scope in the emerging fledgling debt market and said that Asia's focus in the coming year was to play an increasingly important role in this fast growing and potentially rewarding market.

Asia's chief executive officer, Dirk Flamer-Caldera said that their subsidiary, Asia Securities, remains one of the country's leading stockbrokers. It had returned to profitability from a small loss incurred the previous year.

"Asia Securities have performed creditably over the years and was rated No. 1 stockbroker in Sri Lanka by a recent poll of fund managers undertaken by Reuters. The new directors have taken several steps to improve the performance of the company even further and are confident that Asia Securities will continue to be the top ranking Sri Lankan broking house and contribute significantly towards the growth of your company in the future,'' Caldera said.

He also reported that the contentious issues arising with Asia and Vanik competing for Forbes Ceylon had been "satisfactorily concluded''. The sale of Asia- held Forbes shares consequent to a settlement with Vanik had "contributed significantly'' to Asia's profits during the year under review.

During the year, full provision of Rs. 15 million had to be made for an investment of Rs. 15 million in Norman Price Soft Toys (Pvt.) Ltd. due to that company going into liquidation. Rs. 15 million preferred shares in Asha Central Hospital were redeemed in full at a premium of 15% per annum.

The group had increased its listed share portfolio during the year with investments rising to Rs. 831 million from Rs. 500 million the previous year. The focus had mainly been on financial services and conglomerates. Other main investments were in the DFCC Bank and Asian Hotels. Investments underwriting The Ceylon Brewery and The Lion Brewery were divested at a substantial capital gain, Caldera said.

The group's after tax profit for the year was Rs. 220 million, up from a loss of Rs. 110.9 million the previous year. The group is now carrying forward retained losses of Rs. 297.2 million after providing for a proposed dividend absorbing Rs. 55 million.

The pre-tax returns on the group's investment in debt securities and deposits during the year was Rs. 48.1 million, down from the previous year's Rs. 94.3 million. The lower return was attributed to the company increasing its investment in equities and reducing its debt portfolio as well as lower interest rates that prevailed during the year under review.

Caldera said that a substantial portion of Asia's resources were tied in investments made by the previous management. They would take necessary steps at opportune moments to liquidate some of these and reinvest in accordance with their strategic objectives and in a manner that would optimise returns.

"The directors have now set the stage for your company to take maximum advantage of the opportunities that arise in the financial markets in the future,'' he said.

The directors of the company are Messrs. Nigel Austin (chairman), D.B. Flamer-Caldera (CEO), Rusi. S. Captain, Brian Brown, Ajit de Fonseka, Asanga Seneviratne, James Reinmuth, and Jean-Luc Eymery.