CORPORATE INFORMATION

Transcription

1 An Open-end Income Fund primarily investing in portfolio of fixed income securities; NIT-IF offers a high degree of security to investors and is an ideal Fund for investors seeking competitive CORPORATE INFORMATION stream of returns with moderate level of risk. FUND NAME NIT - Income Fund NAME OF AUDITORS A.F. Ferguson & Co. Chartered Accountants LIST OF BANKERS Allied Bank Limited Bank Al Habib Limited NIB Bank Limited Standard Chartered Bank (Pakistan) Limited United Bank Limited Summit Bank Limited (Formerly Arif Habib Bank Limited) Soneri Bank Limited Bank Al Falah Limited

2 FUND MANAGER REPORT FUND MANAGER REPORT NIT Income Fund Objective The objective of NIT Income Fund (NIT IF) is to generate competitive stream of return with moderate level of risk for its unit holders, by investing primarily in fixed income securities/instruments. Profile of Investment Manager National Investment Trust Ltd. (NITL) is the first Asset Management Company of Pakistan, formed in NITL is the largest asset management company of Pakistan with approximately Rs. 81 billion assets under management. The family of Funds of NIT comprises of five funds including 3 equity Funds and 2 fixed income nature Funds. NIT s distribution network comprises of 24 NIT branches and various Authorized bank branches all over Pakistan. To cater the matters relating to investments in NIT and day to day inquiries / issues of NIT s unit holders, state of the art Investors Facilitation Centre is also in place. The Board of Directors of NITL consists of top executives from leading financial institutions, prominent industrialists and nominee of Govt. of Pakistan. The Company has been assigned an Asset Manager rating of AM2- by Pakistan Credit Rating Agency, which reflects the company s very strong capacity to manage the risks inherent in the asset management business and the asset manager meets very high investment management industry standards and benchmarks. All Investment decisions are taken by the Investment Committee of NITL. Fund s Performance at a Glance Beginning Net Assets (Rs. Million) 2,622 2,014 Beginning NAV Per Unit (Ex-Dividend) (Rs.) Ending Net Assets (Rs. Million) 3,680 2,622 Ending NAV Per Unit (Rs.) Net Income (Rs. Million) Final Distribution Per Unit (Rs.) Income Distribution (% of Net Income) 100% 90% Annualized Return (%) 9.56% 12.34% Benchmark Return (%) 9.92% 12.38% Weighted Average Time to Maturity (Year) Fund Information - NIT IF Fund Type Open-End Category Income Fund Launch Date February 19, 2010 Listing KSE, LSE & ISE Benchmark vs. Return The performance of scheme is compared against average of 6 months KIBOR Management Fee 1.25% Front End Load* 1.00% Back End Load Nil Par Value PKR Comparison of Fund s return against benchmark Fund Manager Khurram Aftab Ahmed Risk Profile Moderate Stability Rating A+ (f) (PACRA) AMC Rating AM2- (PACRA) The graph below depicts the comparison of the Fund s return against its benchmark. Trustee Central Depositary Co. (CDC) Auditors A.F Ferguson & Co. Registrar National Investment Trust Ltd. Pricing Mechanism Forward Pricing Min Subscription Rs. 5,000 *varies as per policy 13.00% 11.00% 9.00% 7.00% 5.00% Rating 3.00% The Pakistan Credit Rating Agency (PACRA) assigned stability rating of A+(f) (Single A Plus fund rating) to NIT Income Fund, an open-end income fund investing primarily in government securities in January The fund s rating denotes a strong capacity to manage relative stability in returns and very low exposure to risks. 01-Jul Jul Aug Sep Oct Nov-12 NIT-IF RETURN 16-Dec Jan Feb Mar Apr May-13 BENCHMARK RETURN 02-Jun Jun-13 Investment Strategy During FY13 NIT Income Fund yielded a return of 9.56% p.a. as compared to the benchmark return of 9.92% p.a. thereby, underperforming its benchmark by 36bps. The Fund s annualized return since inception is 12.71% while its benchmark return was 11.94% p.a. The Fund size as on June 30, 2013 was Rs billion growing by 40% period under review. The fund s major investments were in Treasury Bills as these are highly liquid instruments which offer competitive returns. At the end of the period the fund has investments in TFCs, with focus on instruments issued by the commercial banking sector and other high rated corporate entities.

3 FUND MANAGER REPORT FUND MANAGER REPORT Asset Allocation during FY13 100% 80% 60% 40% 20% Pattern of Unit Holders Category NIT-IF (Units in million) Percentage of Holding Institutional Investors % Individuals % TOTAL % WWF Disclosure 0% 31-Jul 31-Aug 30-Sep 31-Oct 30-Nov 31-Dec 31-Jan Feb Mar Apr May Jun 2013 The Scheme has maintained provisions against Workers Welfare Fund s liability to the tune of Rs m, if the same were not made the NAV per unit/ to date return of the Scheme would be higher by Rs / 0.56%. Asset allocation of NIT Income Fund at the period ended June 30, 2013 had about 77% of its total assets in Government Securities (T-Bills and PIBs), 15% of total assets were invested in high quality corporate bonds mainly from the banking sector, an exposure of 5% was in Certificate of Investments and Letter of Placements whereas remaining 3% of total assets were in the form of cash and other receivables/assets. As of June 30, 2013 the weighted average time to maturity of the fund around 1.06 s. Credit quality of the portfolio reveals that the fund is invested around 77% of its total assets in Government Securities while around 19% is invested in AA- and above rated instruments and about 4% is invested in securities having rating of A+ to A-. This bifurcation reflects strong portfolio quality. The TFC holding as on 30 June, 2013 is also stated in the table below. AA+ 2.33% A+ 0.67% AA- 7.83% AA 8.51% A 1.44% A- 2.63% Govt Securities 76.60% Dividend Declaration by the Fund for FY13 Govt.Sec TFC CASH CP COI/LOP/TDR Others TFC Holding (As of Jun 30, 2013) % of Total Assets Bank Al-Habib Ltd. IV 3.04% Bank Al-Falah Ltd. IV 2.99% Summit Bank Ltd. 2.63% Askari Bank Ltd. III 2.15% Bank Al-Habib Ltd. III 1.45% Engro Fertilizer Ltd. IV 1.44% United Bank Ltd. IV 0.95% NIB Bank Ltd 0.67% Total 15.31% During FY13, the Fund earned a net income of Rs. 346 million as compared to Rs. 283 million FY12. This net income translates into a per unit earning of Rs as compared to Rs per unit last. For NIT IF, NIT declared a per unit distribution of Rs for the period ended 30th June Those who have opted for growth units with the option to receive bonus will be allocated units per 100 units at the ex-dividend NAV. Money Market Review The State Bank of Pakistan reduced its discount rate by 150 bps with the commencement of the fiscal and further cut rates by 50 bps in three different policy announcements to bring the rate to 9.00% p.a. towards the end of the fiscal. SBP s two main challenges over the has been managing the external account position and containing inflation. Inflation has been the primary driver behind monetary easing. CPI inflation touched a record low level of 5.1% in May 13 and the FY13 average inflation of 7.4% was around 200 bps lower than the targeted 9.5% set for the fiscal. Six month KIBOR reduced to average 9.92% as compared to last s average of 12.38% a decrease of 246 bps mainly due to reduction in discount rate. During FY13, SBP conducted a total of 26 T-bill auctions (two auctions per month and 3 auctions in Nov-12 and May-13). Total target amount was Rs 5,075bn set by SBP, while the accepted amount was Rs 5,500bn. The last cutoff yields from Jun-13 for the 3M, 6M and 12M tenors reduced to 8.93%, 8.92% and 8.96% from Jun-12 last cutoff yields of 11.92%, 11.94% and 11.95% respectively. The cut-off yield on the benchmark 10 PIB closed at 11.05%, decreasing by 233 bps over last closing of 13.38%. Economic Review During FY2013, Pakistan s economy faced myriad challenges on the external and internal front including large scale power shortages, internal security hazards, continuing depreciation of Pak Rupee against the US Dollar and massive losses incurred by the public sector enterprises resulting in unsustainably large fiscal deficits that were financed mainly through domestic debt. Due to the above factors coupled with the fact that this was an election with heightened uncertainty the GDP growth was restricted to 3.6%, compared to the target of 4.3 %. This growth is a 18% drop compared to the previous fiscal where the growth was recorded at 4.4% Agriculture Sector accounts for 21.4% of the GDP and engages 45% of the country s labor force. In FY -13. The agriculture sector grew by 3.3% as against 3.5% in the preceding. The -on- decline is attributed to adverse unfavorable conditions that resulted in lower production of our cash crops (cotton and rice). The industrial sector grew by 3.5% compared to 2.7 % in the previous, showing some improvement during FY12. In particular, the mining and construction sectors reflected a healthy growth of 7.6 % and 5.2 %, respectively, in comparison to growth rate of 4.6 % and 3.2 % during last. Manufacturing sector which comprises of 13.2 % of the GDP has shown some recovery by achieving a growth rate of 3.5% against 2.1 % last mainly on account of a tremendous growth of 8.2 % for small scale manufacturing. The growth in services sector remained to 3.7% in FY13 in comparison with 5.3 % in FY12. Growth in the services sector remained subdued due to decline in growth rates of transport, storage and communication.

4 FUND MANAGER REPORT TRUSTEE REPORT According to provisional data of FBS, a slight improvement in the trade sector has been witnessed as the trade deficit reduced to USD 19.9 billion during, FY13 as compared to USD 21.3 billion in the comparable period of FY12. During FY13, exports stood at USD 25 billion against 23.6 USD in FY12, while imports amounted to USD 44.9 billion, almost the same in the comparable period of FY12. Perhaps the consistently positive feature of the economy is a healthy increase in workers remittances since the past few s, which are estimated at USD 13.9 billion during FY13, reflecting nearly a 5.6% increase compared to the corresponding period. On a positive note, inflation fell significantly and the annualized inflation rate measured in terms of Consumer Price Index (CPI) for -13 averaged at 7.4% as against 11 % recorded in the same period of One of SBP s primary challenges was to manage inflation rates and the average inflation of 7.4% in FY13 was around 200 bps lower than the target of 9.5%. This was one of the main factors in SBP adopting a monetary easing stance through the. During FY13, Foreign direct investment (FDI) increased by 76% in contrast to a decline of 50% same period last. Portfolio investment witnessed a sharp rise during FY13 as according to NCCPL figures net inflow of $567 million was recorded against a net outflow of $169 million during same period last. The inflow of portfolio investment played a major role in driving the Pakistan stock market which witnessed a bullish trend during FY13. Pakistan s overall external account would remain under pressure due to sizeable repayments especially to that of IMF, with more than USD 3.0bn needs to be repaid during FY14. The Pakistan s economy is facing lot of difficulties and there is plenty of room to improve governance in law and order, education and energy. The government in its bid to diversify its energy mix must focus on providing incentives through policy frameworks with the collaboration of both local and foreign investors while offering them a level playing field. In a bid to attract foreign investors, the Board of Investment (BOI) recently launched a new investment policy to provide more investment friendly environment to investors. Pakistan economy still has to come up a long way but on a comparative basis still allows a lot of freedom. With some immediate and long-term fixtures, the economy can be revived. TRUSTEE REPORT TO THE UNIT HOLDERS Report of the Trustee pursuant to Regulation 41(h) and Clause 9 of Schedule V of the Non-Banking Finance Companies and Notified Entities Regulations, 2008 We, Central Depository Company of Pakistan Limited, being the Trustee of NIT Income Fund (the Fund) are of the opinion that National Investment Trust Limited being the Management Company of the Fund has in all material respects managed the Fund ended June 30, 2013 in accordance with the provisions of the following: (i) Limitations imposed on the investment powers of the Management Company under the constitutive documents of the Fund; (ii) The pricing, issuance and redemption of units are carried out in accordance with the requirements of the constitutive documents of the Fund; and (iii) The Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003, the Non-Banking Finance Companies and Notified Entities Regulations, 2008 and the constitutive documents of the Fund. (Economic data source: Economic Survey of Pakistan, FBS & SBP Website) Other Disclosures under NBFC Regulations 2008: The Fund Manager hereby makes the following disclosures as required under the NBFC Regulations 2008; a. The Management Company or any of its delegates did not receive any soft commission (goods & services) from any of its brokers / dealers by virtue of transactions conducted by the Fund. b. There was no unit split undertaken. Sd/- Muhammad Hanif Jakhura Chief Executive Officer Central Depository Company of Pakistan Limited Karachi, August 27, 2013

5 AUDITORS REPORT COMPLIANCE REPORT INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of NIT - Income Fund (here in after referred to as the Fund ), which comprise the statement of assets and liabilities as at June 30, 2013, and the related income statement, statement of comprehensive income, distribution statement, statement of movement in unit holders fund and cash flow statement for the then ended, and a summary of significant accounting policies and other explanatory notes. Management Company s responsibility for the financial statements The Management Company of the Fund is responsible for the preparation and fair presentation of these financial statements in accordance with approved accounting standards as applicable in Pakistan, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the International Standards on Auditing as applicable in Pakistan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Fund as at June 30, 2013, and of its financial performance, cash flows and transactions for the then ended in accordance with approved accounting standards as applicable in Pakistan. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In our opinion, the financial statements have been prepared in all material respects in accordance with the relevant provisions of the Non-Banking Finance Companies and Notified Entities Regulations, REVIEW REPORT ON THE STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE OF CORPORATE GOVERNANCE 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 National Investment Trust Limited, the Management Company of NIT Income Fund to comply with the Listing Regulation No. 35 (Chapter XI) of the Karachi, Lahore and Islamabad Stock Exchanges where the Fund is listed. The responsibility for compliance with the Code of Corporate Governance is that of the Board of Directors of the Management 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 Fund s compliance with the provisions of the Code of Corporate Governance and report if it does not. A review is limited primarily to inquiries of the Company s personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of the financial statements, we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We have not carried out any special review of the internal control system to enable us to express an opinion as to whether the Board s statement on internal control covers all controls and the effectiveness of such internal controls. Regulation 35 (X) of listing regulations notified by the Stock Exchanges where the fund is listed requires the company to place before the Board of Directors for their consideration and approval, related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arm s length transactions and transactions which are not executed at arm s length price recording proper justification for using such alternate pricing mechanism. Further, all such transactions are also required to be separately placed before the audit committee. We are only required and have ensured compliance of the above requirements to the extent of approval of related party transactions by the Board of Directors and placement of such transactions before the Audit Committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arm s length price or not. Based on our review, nothing has come to our attention, which causes us to believe that the Statement of Compliance does not appropriately reflect the Management Company s compliance for and on behalf of the Fund, in all material respects, with the best practices contained in the Code of Corporate Governance as applicable to the Fund for the ended June 30, Sd/- A.F. Ferguson & Co. Chartered Accountants Engagement Partner: Rashid A. Jafer Dated: August 06, 2013 Karachi Sd/- A.F. Ferguson & Co. Chartered Accountants Karachi Dated: August 06, 2013

6 COMPLIANCE STATEMENT COMPLIANCE STATEMENT STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE OF CORPORATE GOVERNANCE This Statement is being presented to comply with the requirements of the Code of Corporate Governance contained in the Listing Regulations of Karachi, Islamabad and Lahore Stock Exchanges 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. National Investment Trust Limited, the Management Company, is not listed and hence, the Code is not applicable to it. However, NIT-Income Fund (the Fund) being listed at the Karachi, Islamabad and Lahore Stock Exchanges comes under the ambit of the Code. The Fund, being a unit trust scheme, does not have its own Board. The Board of Directors of the Management Company manages the affairs of the Fund and has appointed the Managing Director (MD), Chief Financial Officer (CFO) and the Company Secretary of the Management Company and other necessary personnel to manage its affairs. The Management Company has applied the principles contained in the Code in the following manner: 1. The Company encourages representation of non-executive directors (the Board). Presently, the Board includes eight non-executive directors and one executive director. The names are listed in alphabetical order as under: (i) Mr. Abdul Razak Adamjee Non Executive (ii) Mr. Abdur Rauf Khan Non Executive (iii) Mr. Ali Sameer Farooqui Non Executive (iv) Dr. Asif A. Brohi Non Executive (v) Mr. Jamal Nasim Non Executive (vi) Mr. Manzoor Ahmed Executive (vii) Mian Tajammal Hussain Non Executive (viii) Mr. Muhtashim Ahmad Ashai Non Executive (ix) Mr. Rasul Bux Phulpoto Non Executive Currently, the Board doesn t have any independent director. The matter is in active consideration of the board and the said compliance to the regulation will be done in consultation with SECP through a legal consultant. 2. None of the directors are serving as a director in seven or more listed companies with the exception of Managing Director of NIT who is serving as a director of nine listed companies. However, the Management Company has obtained an approval from the Securities and Exchange Commission of Pakistan in this regard. 3. All the resident directors of the Management Company have confirmed that they are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a DFI or an NBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. 4. During the, following casual vacancies occurred on the Board of Directors which were duly filled within ninety days: (i) Mr. Mahmood Akhter was appointed in place of Ms. Nazrat Bashir w.e.f July 05,. (ii) Mr. Ali Sameer Farooqui was appointed in place of Mr. Bahauddin Khan w.e.f.august 13, (iii) Mr. Munawar Opel was appointed in place of Ms. Rukhsana Saleem w.e.f October 11,. (iv) Dr. Asif A. Brohi was appointed in place of Mr. Qamar Hussain w.e.f February 7, (v) Mr. Abdur Rauf Khan was appointed in place of Mr.Mahmood Akhter w.e.f February 7, (vi) Mr. Rasul Bux Phulpoto was appointed in place of Mr. Munawar Opel w.e.f. April 18, (vii) Mr. Manzoor Ahmed was appointed in place of Mr. Wazir Ali Khoja w.e.f. May 24, The Management Company has adopted a Corporate Social Responsibility (CSR) Document detailing organizational governance and business practices which has been acknowledged by all the directors and employees of the Management Company. 6. The Management Company has developed a vision / mission statement, overall corporate strategy and significant policies of the Management Company which have been approved by the Board. A complete record of particulars of significant policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the Chief Executive Officer, have been taken by the Board. 8. The meetings of the Board were presided over by the Chairman. The Board of Directors has met at least once every quarter and written notices of the meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. 9. The Board did not arrange any training program / workshop for its directors. Last arrangement was made with International Finance Corporation in 2010 and was attended by the Managing Director. However, three Directors on the Board are Certified Directors of PICG out of which one has completed the said course this. 10. The related party transactions have been placed before the audit committee and approved by the Board of Directors with necessary justification for non arm s length transactions, if any, and pricing methods for transactions that were made on terms equivalent to those that prevail in an arm s length transactions only if such terms can be substantiated. 11. There was no new appointment of Chief Financial Officer, Company Secretary or the Head of Internal Audit. Their remuneration and terms and conditions of employment had been approved by the Board. 12. The Directors Report for the ended June 30, 2013 has been prepared in compliance with the requirements of the Code and fully describes the salient matters required to be disclosed. 13. The financial statements of the Fund have been prepared in accordance with the approved accounting standards as applicable in Pakistan and were duly endorsed by the Chief Executive Officer and Chief Financial Officer before approval of the Board. 14. The directors, Chief Executive Officer and executives do not hold any interest in the shares of the Company other than those disclosed in the Directors Report. 15. The Management Company has complied with all the corporate and financial reporting requirements of the Code. 16. The Board has formed an Audit Committee which comprises of four members, all of whom are non-executive directors. 17. The meetings of the Audit Committee were held at least every quarter prior to approval of interim and final results of the Fund as required by the Code. The Board has approved terms of reference of the Audit Committee. 18. The Board has formed a Human Resource and Remuneration Committee which comprises of four members, all of whom are non-executive directors. 19. The Board has set-up an effective internal audit function headed by the Head of Internal Audit & Compliance who is considered suitably qualified and experienced for the purpose and is conversant with the policies and procedures of the company. 20. The statutory auditors of the Fund have confirmed that they have been given a satisfactory rating under the quality control review program of the Institute of Chartered Accountants of Pakistan (ICAP), that they or any of the partners of the firm, their spouses and minor children do not hold units of the Fund and that the firm and all its partners are in compliance with the International Federation of Accountants (IFAC) guidelines on Code of Ethics as adopted by the ICAP. 21. 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. 22. The closed period, prior to the announcement of final results, and business decisions, which may materially affect market price of the fund s unit was determined and intimated to the trustee, employees and stock exchange(s). 23. Material / price sensitive information has been disseminated among all market participants at once through stock exchange(s).

7 COMPLIANCE STATEMENT STATEMENT OF ASSETS AND LIABILITIES AS AT JUNE 30, We confirm that all other material principles contained in the Code have been complied with. The Management Company intends to file its Secretarial Compliance Certificate subsequent to the ended June 30, ASSETS Note Rupees in ' Sd/- Sd/- Sd/- Managing Director Director Director Sd/- Manzoor Ahmed Managing Director Dated: August 06, 2013 Place: Karachi Bank balances 4 86,598 91,737 Investments 5 3,612,740 2,534,290 Accrued income 6 12,148 19,720 Security deposits Preliminary expenses and floatation costs 8 1,420 2,282 Total assets 3,713,006 2,648,129 LIABILITIES Payable to National Investment Trust Limited - Management Company 9 9,407 7,839 Payable to Central Depository Company of Pakistan Limited - Trustee Payable to Securities and Exchange Commission of Pakistan 11 2,415 1,607 Payable against redemption of units Accrued expenses and other liabilities 12 19,960 15,326 Total liabilities 32,562 25,955 NET ASSETS 3,680,444 2,622,174 Unit holders fund (as per statement attached) 3,680,444 2,622,174 Contingencies and commitments Number of units Number of units in issue ,445, ,084, Rupees----- Net asset value per unit The annexed notes from 1 to 31 form an integral part of these financial statements. For National Investment Trust Limited (Management Company)

8 INCOME STATEMENT STATEMENT OF COMPREHENSIVE INCOME INCOME Note Rupees in ' Income from government securities 222, ,997 Profit on bank deposits 5,130 22,792 Income from term finance certificates 75,919 80,037 Income from sukuks 6,852 7,655 Income from term deposit receipts 1,248 7,558 Income from certificate of investments 28,000 6,476 Income from letter of placement 2,787 - Amortisation of discount on term finance certificates - net Capital gain on sale of investments 3,692 1,118 Other income - 1,333 Total income 346, ,966 Note Rupees in ' Net income after taxation 345, ,675 Other comprehensive income Net unrealised appreciation in the fair value of investments classified as 'available for sale' 5.7 3,485 12,624 Total comprehensive income 349, ,299 The annexed notes from 1 to 31 form an integral part of these financial statements. EXPENSES Remuneration of National Investment Trust Limited - Management Company ,250 26,788 Sindh sales tax on remuneration of Management Company 6,440 4,287 Remuneration of Central Depository Company of Pakistan Limited - Trustee ,587 2,674 Annual fee - Securities and Exchange Commission of Pakistan ,415 1,607 Custodian charges of Central Depository Company of Pakistan Limited 6 6 Amortisation of preliminary expenses and floatation costs Amortisation of premium on term finance certificates - net - 67 Settlement and bank charges Securities transaction costs Listing fee Rating fee Auditors' remuneration Printing charges Total expenses 55,026 37,673 For National Investment Trust Limited (Management Company) Sd/- Sd/- Sd/- Managing Director Director Director Net income from operating activities 291, ,293 Element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed - net 60,858 48,151 Provision for workers' welfare fund 16 (7,034) (5,769) Net income before taxation 345, ,675 Taxation Net income after taxation 345, , Rupees Earnings per unit - basic and diluted The annexed notes from 1 to 31 form an integral part of these financial statements. For National Investment Trust Limited (Management Company) Sd/- Sd/- Sd/- Managing Director Director Director

9 DISTRIBUTION STATEMENT STATEMENT OF MOVEMENT IN UNIT HOLDERS FUND Rupees in ' Note Rupees in ' Undistributed income brought forward Realised income 307, ,440 Unrealised income , ,440 Net income after taxation 345, ,675 Final distribution for the ended June 30, : Rs per unit (2011: Rs per unit) -Bonus Units (202,742) (97,386) -Cash Distribution (49,181) (89,153) -CIP Units (2,665) (3,654) Undistributed income carried forward 399, ,922 Undistributed income comprising of: Realised income 399, ,922 Unrealised income , ,922 The annexed notes from 1 to 31 form an integral part of these financial statements. Net assets at the beginning of the 2,622,174 2,013,727 Issue of 164,642,925 units (: 115,539,256 units) 1,785,299 1,281,857 Redemption of 88,242,620 units (: 75,164,902 units) (966,229) (831,405) 819, ,452 Issue of 19,702,603 bonus units (: 9,599,587 units) 202,742 97,386 Issue of 259,001 units under Cumulative Investment Plan (: 360,164 units) 2,665 3,654 3,646,651 2,565,219 Element of (income) / loss and capital (gains) / losses included in prices of units issued less those in units redeemed - net (60,858) (48,151) Net unrealised appreciation in the fair value of investments classified as 'available for sale' 5.7 3,485 12,624 Capital gain / (loss) on sale of investments 3,692 1,118 Other net income for the 342, ,557 Final Distribution for the ended June 30, : Rs per unit (2011: Rs per unit) - Bonus Units (202,742) (97,386) - Cash Distribution (49,181) (89,153) - Units under Cumulative Investment Plan (2,665) (3,654) 91,166 92,482 Net assets at the end of the 3,680,444 2,622,174 The annexed notes from 1 to 31 form an integral part of these financial statements. For National Investment Trust Limited (Management Company) Sd/- Sd/- Sd/- Managing Director Director Director For National Investment Trust Limited (Management Company) Sd/- Sd/- Sd/- Managing Director Director Director

10 CASH FLOW STATEMENT CASH FLOWS FROM OPERATING ACTIVITIES Note Rupees in ' Net income before taxation 345, ,675 Adjustments for non-cash items Remuneration of National Investment Trust Limited - Management Company 40,250 26,788 Sindh sales tax on Management Company's remuneration 6,440 4,287 Profit on bank deposits (5,130) (22,792) Capital gain on sale of investments (3,692) (1,118) Amortisation of preliminary expenses and floatation costs Element of (income) / loss and capital (gains) / losses included in prices of units issued less those in units redeemed - net (60,858) (48,151) 323, ,557 (Increase) / decrease in assets Investments (1,071,273) (689,499) Accrued income 7,355 (10,038) Receivable against sale of units - 125,000 (1,063,918) (574,537) Increase / (decrease) in liabilities Payable to National Investment Trust Limited - Management Company Payable to Central Depository Company of Pakistan Limited - Trustee Payable to Securities and Exchange Commission of Pakistan Payable against redemption of units (490) (134,698) Accrued expenses and other liabilities 4,634 8,664 5,104 (125,819) Remuneration paid to Management Company inclusive of Sindh Sales Tax (45,187) (30,231) Profit received on bank deposits 5,347 22,807 Net cash used in operating activities (775,028) (465,223) CASH FLOWS FROM FINANCING ACTIVITIES Receipts from issue of units 1,785,299 1,281,857 Payments on redemption of units (966,229) (831,405) Dividend paid (49,181) (89,153) Net cash generated from financing activities 769, ,299 1 LEGAL STATUS AND NATURE OF BUSINESS 2 BASIS OF PREPARATION 2.1 Statement of compliance 2.2 The NIT - Income Fund (the Fund) was established under a Trust Deed executed between National Investment Trust Limited (NITL) as Management Company and Central Depository Company of Pakistan Limited (CDC) as Trustee. The Fund was approved by the Securities and Exchange Commission of Pakistan (SECP) vide its letter no. NBFC-II/NITL/1026/2009 dated November 20, 2009 in accordance with the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules) and the Trust Deed was executed on September 17, The units of the Fund were initially issued at Rs 10 per unit. The Management Company of the Fund has been licensed to act as an Asset Management Company under the NBFC Rules through a certificate of registration issued by the SECP. The registered office of the Management Company is situated at 6th floor, National Bank of Pakistan Building, I. I. Chundrigar Road, Karachi. The Fund is an open-ended mutual fund. Units are offered for public subscription on a continuous basis. The units are transferable and can be redeemed by surrendering them to the Fund. The objective of the Fund is to generate competitive stream of return with moderate level of risk for its unit holders, by investing primarily in fixed income securities / instruments. Pakistan Credit Rating Agency Limited (PACRA) has assigned "A+(f)" rating to the Fund and has assigned an asset manager rating of "AM2-" to the Management Company. These financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, the requirements of the Trust Deed, the Non- Banking Finance Companies (Establishment and Regulation) Rules, 2003 (the NBFC Rules), the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFC Regulations) and directives issued by the Securities and Exchange Commission of Pakistan (SECP). Wherever the requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or directives issued by the SECP differ with the requirements of IFRS, the requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or the directives issued by the SECP prevail. Standards, interpretations and amendments to published approved accounting standards that are effective in the current : The following amendments to approved accounting standards have been published and are mandatory for the Fund's period beginning July 1, : Net decrease in cash and cash equivalents (5,139) (103,924) Cash and cash equivalents at the beginning of the 91, ,661 Cash and cash equivalents at the end of the 4 86,598 91,737 - IAS 1, 'Financial statement presentation'. The main change resulting from these amendments is a requirement for entities to group items presented in 'other comprehensive income' (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The amendments do not have any effect on the Fund's financial statements. The annexed notes from 1 to 31 form an integral part of these financial statements. There are other new and amended standards and interpretations that are mandatory for accounting periods beginning July 1, but are considered not to be relevant or do not have any significant effect on the Fund's operations and are therefore not detailed in these financial statements. 2.3 Standards, interpretations and amendments to published approved accounting standards that are not yet effective: For National Investment Trust Limited (Management Company) Sd/- Sd/- Sd/- Managing Director Director Director There are certain new and amended standards and interpretations that are mandatory for accounting periods beginning on or after July 1, 2013 but are considered not to be relevant or do not have any significant effect on the Fund's operations and are therefore not detailed in these financial statements. 2.4 Critical accounting estimates and judgments The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Fund's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are

11 policies. Estimates and judgments are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. The areas where various assumptions and estimates are significant to the Fund's financial statements or where judgment was exercised in application of accounting policies principally relate to classification and valuation of investments (note 3.2 and note 5). 2.5 Accounting convention These financial statements have been prepared under the historical cost convention except that investments have been carried at fair value. 2.6 Functional and presentation currency These financial statements are presented in Pakistani Rupees, which is the Fund's functional and presentation currency. 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied unless otherwise stated. 3.1 Cash and cash equivalents Cash and cash equivalents include demand deposits with banks and other short term highly liquid investments with original maturities of three months or less and which are subject to insignificant changes in value. 3.2 Financial assets Classification The Fund classifies its financial assets into the following categories: loans and receivables, at fair value through profit or loss and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Derivative instruments held by a) Loans and receivables These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. b) Financial assets at fair value through profit or loss Financial assets that are acquired principally for the purpose of generating profits from short-term fluctuations in prices are classified as held for trading in the 'financial assets at fair value through profit or loss' category. c) Available for sale Available for sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as (a) loans and receivables or (b) financial assets at fair value through profit or loss. These are intended to be held for an indefinite period of time which may be sold in response to the needs for liquidity or change in price Regular way contracts Regular purchases and sales of financial assets are recognised on the trade date the date on which the Fund commits to purchase or sell the asset Initial recognition and measurement Financial assets are initially recognised at fair value plus transaction costs except for financial assets carried 'at fair value through profit or loss'. Financial assets carried 'at fair value through profit or loss' are initially recognised at fair value and transaction costs are recognised in the income statement Subsequent measurement Subsequent to initial recognition, financial assets designated by the management as 'at fair value through profit or loss' and 'available for sale' are valued as follows: a) Basis of valuation of debt securities The investment of the Fund in debt securities is valued on the basis of rates determined by the Mutual Fund Association of Pakistan (MUFAP) in accordance with the methodology prescribed by SECP for valuation of debt securities vide its circular no. 1 of 2009 dated January 6, In the determination of the rates MUFAP takes into account the holding pattern of these securities and categorises them as traded, thinly traded and non-traded securities. The circular also specifies the valuation process to be followed for each category as well as the criteria for the provisioning of non-performing debt securities. b) Basis of valuation of government securities The investment of the Fund in government securities is valued on the basis of rates announced by the Financial Markets Association of Pakistan. Net gains and losses arising from changes in the fair value of financial assets carried 'at fair value through profit or loss' are taken to the 'income statement'. Net gains and losses arising from changes in the fair value of available for sale financial assets are taken to the 'statement of comprehensive income' until these are derecognised or impaired. At this time, the cumulative gain or loss previously recognised directly in the 'statement of comprehensive income' is transferred to the 'income statement'. Subsequent to initial recognition financial assets classified as 'loans and receivables' are carried at amortised cost using the effective interest method. Gains or losses are also recognised in the 'income statement' when financial assets carried at amortised cost are derecognised or impaired, and through the amortisation process Impairment The Fund assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any such evidence exists for 'available for sale' financial assets, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the 'income statement' is reclassified from 'unit holders' fund' to the 'income statement'. a) Debt securities Provision for non-performing debt securities is made on the basis of time based criteria as prescribed under circular no. 1 of 2009 dated January 6, 2009 issued by SECP. Impairment losses recognised on debt securities can be reversed through the income statement. As allowed under circular no. 13 of 2009 dated May 4, 2009 issued by SECP the management may also make provision against debt securities over and above the minimum provision requirement prescribed in the aforesaid circular, in accordance with a provisioning policy approved by the Board of Directors and disseminated by the Management Company on its website. b) Loans and receivables For financial assets classified as 'loans and receivables', a provision for impairment is established when there is objective evidence that the Fund will not be able to collect all amounts due according to the original terms. The amount of the provision is determined based on the provisioning criteria specified by SECP Derecognition Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership.

12 Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount is reported in the 'Statement of Assets and Liabilities' when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously Element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed An equalisation account called the 'element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed' is created, in order to prevent the dilution of per unit income and distribution of income already paid out on redemption. 3.3 Derivatives Derivative instruments are initially recognised at fair value and subsequent to initial measurement each derivative instrument is remeasured to its fair value and the resultant gain or loss is recognised in the income statement. 3.4 Financial liabilities All financial liabilities are recognised at the time when the Fund becomes a party to the contractual provisions of the instrument. They are initially recognised at fair value and subsequently stated at amortised cost. A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired. 3.5 Preliminary expenses and floatation costs Preliminary expenses and floatation costs represent expenditure incurred prior to the commencement of operations of the Fund. These costs are being amortised over a period of five s in accordance with the requirements set out in the Trust Deed of the Fund and the Non- Banking Finance Companies and Notified Entities Regulations. 3.6 Provisions Provisions are recognised when the Fund has a present, legal or constructive, obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligation can be made. Provisions are regularly reviewed and adjusted to reflect the current best estimate. 3.7 Taxation The 'element of income / (loss) and capital gains / (losses) in prices of units issued less those in units redeemed' account is credited with the amount representing net income / (loss) and capital gains / (losses) accounted for in the net asset value and included in the sale proceeds of units. Upon redemption of units, the 'element of income / (loss) and capital gains / (losses) in prices of units issued less those in units redeemed' account is debited with the amount representing net income / (loss) and capital gains / (losses) accounted for in the net asset value and included in the redemption price. The 'element of income / (loss) and capital gains / (losses) in prices of units issued less those in units redeemed' is transferred to the 'income statement' Net Asset Value per unit The Net Asset Value (NAV) per unit as disclosed in the Statement of Assets and Liabilities is calculated by dividing the net assets of the Fund by the number of units in circulation at the end Revenue recognition - - Realised capital gains / (losses) arising on sale of investments are included in the income statement on the date at which the transaction takes place. Income from investments in term finance certificates is recognised on an accrual basis, except where recovery is doubtful in which case it is credited to suspense account. - Profit on bank deposits is recognised on an accrual basis. - Income from term deposit receipts is recognised on an accrual basis. The income of the Fund is exempt from income tax under clause 99 of Part I of the Second Schedule to the Income Tax Ordinance, 2001 subject to the condition that not less than ninety percent of its accounting income for the, as reduced by capital gains, whether realised or unrealised, is distributed among the unit holders. - - Income on issue and repurchase of units is recognised when the units are issued and redeemed at the transaction date. Income from government securities is accrued using the effective interest method. The Fund is also exempt from the provisions of section 113 (minimum tax) under clause 11A of Part IV of the Second Schedule to the Income Tax Ordinance, The Fund provides for deferred taxation using the balance sheet liability method on all major temporary differences between the amounts used for financial reporting purposes and amounts used for taxation purposes. In addition, the Fund also records deferred tax asset on unutilised tax losses to the extent that it is no longer probable that the related tax benefit will be realised. However, the Fund has not recognised any amount in respect of deferred tax in these financial statements as the Fund intends to continue availing the tax exemption in future s by distributing at least ninety percent of its accounting income for the as reduced by capital gains, whether realised or unrealised, to its unit holders every. 3.8 Proposed distributions Distributions declared subsequent to the end are considered as non-adjusting events and are recognised in the financial statements of the period in which such distributions are declared. 3.9 Issue and redemption of units Units issued are recorded at the offer price, determined by the Management Company for the applications received by the distributors during business hours on that day. The offer price represents the Net Asset Value per unit as of the close of the business day plus the allowable sales load, provision for transaction costs and any provision for duties and charges, if applicable. The sales load is payable to the investment facilitators, distributors and the Management Company. Transaction costs are recorded as income of the Fund. Units redeemed are recorded at the redemption price, applicable to units for which the distributors receive redemption applications during business hours on that day. The redemption price represents the Net Asset Value per unit as of the close of the business day less any back-end load, any duties, taxes, charges on redemption and any provision for transaction costs, if applicable. 4 BANK BALANCES Note Rupees in ' Savings accounts ,598 91, These carry profits at rates ranging from 6% to 12% per annum (: 6.00% to 13% per annum). 5 INVESTMENTS Note Rupees in ' Available for sale Government securities: 5.1 -Market Treasury Bills 2,818,378 1,497,617 -Pakistan Investment Bonds 25,961 96,311 Term finance certificates - listed 5.2 & , ,506 Term finance certificates - unlisted 5.3 & , ,856 Certificates of investment , ,000 Letter of Placement ,000-3,612,740 2,534,290