TABLE OF CONTENTS S. No. Particulars Pages # 1. OFFERING DOCUMENT OF DAWOOD ISLAMIC FUND INTRODUCTION REGULATORY APPROVAL AND CONSENT.

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1 THE INVESTORS ARE ADVISED IN THEIR OWN INTEREST TO CAREFULLY READ THE CONTENTS OF THE OFFERING DOCUMENT IN PARTICULAR THE RISK FACTORS MENTIONED IN SECTION 3.8 AND WARNINGS IN SECTION 12 BEFORE MAKING ANY DECISION DIF Dawood Islamic Fund (DIF) Open-end Shariah Compliant Asset Allocation Fund Managed by Dawood Capital Management Limited Sponsored by Asian Development Bank & First Dawood Group

2 TABLE OF CONTENTS S. No. Particulars Pages # 1. OFFERING DOCUMENT OF DAWOOD ISLAMIC FUND INTRODUCTION REGULATORY APPROVAL AND CONSENT FILING OF THE OFFERING DOCUMENT PART II: CONSTITUTION OF THE SCHEME CONSTITUTION REGISTERED ADDRESS, PLACE AND DATE OF CREATION RESTRICTIONS TRUST DEED MODIFICATION OF TRUST DEED DURATION OPEN-END FUND UNITS INITIAL OFFER AND INITIAL OFFERING PERIOD TRANSACTIONS IN UNITS AFTER THE INITIAL PUBLIC OFFER OFFERING DOCUMENT PART III: INVESTMENT POLICY AND RESTRICTIONS INVESTMENT OBJECTIVE INVESTMENT POLICY INVESTMENTS OUTSIDE PAKISTAN INVESTMENT RESTRICTIONS EXCEPTION TO INVESTMENT RESTRICTIONS BORROWING AND BORROWING RESTRICTIONS RESTRICTION OF TRANSACTIONS WITH CONNECTED PERSONS RISKS PART IV: OPERATORS AND PRINCIPALS THE MANAGEMENT COMPANY: DAWOOD CAPITAL MANAGEMENT LIMITED (DCM) FUNDS MANAGED BY DCM BOARD OF DIRECTORS OF DCM FINANCIAL SUMMARY OF LAST 5 YEARS OF LISTED ASSOCIATED COMPANIES: PARTICULARS OF THE DIRECTORS KEY MANAGEMENT PROFILE ROLE OF THE MANAGEMENT COMPANY THE TRUSTEE TRUSTEE: DUTIES AND RESPONSIBILITIES THE CORE INVESTORS THE EXTERNAL AUDITOR SHARIAH-COMPLIANCE AUDITOR THE REGISTRAR THE LEGAL ADVISOR DISTRBUTORS AND INVESTMENT FACILITATORS THE SHARIAH ADVISORY COUNCIL BANKERS PART V: CHARACTERISTICS OF UNITS TYPE OF UNITS AND MINIMUM INVESTMENT CORE UNITS DETERMINATION OF NAV DETERMINATION OF OFFER PRICE PURCHASE PROCEDURE - ISSUE OF UNITS DETERMINATION OF REDEMPTION PRICE...38

3 5.7 REDEMPTION OF UNITS TRANSFER OF UNITS DEALING, SUSPENSION AND DEFERRAL OF DEALING ISSUANCE OF CERTIFICATES REPLACEMENT OF CERTIFICATES PLEDGE OF UNITS OFFER (PURCHASE) AND REDEMPTION (REPURCHASE) OF UNITS OUTSIDE PAKISTAN PART VI: DISTRIBUTION POLICY DISTRIBUTION POLICY AND DATE DISTRIBUTION OF INCOME PAYMENT OF DIVIDEND DISPATCH OF DIVIDEND WARRANTS/ADVICE CLOSURE OF REGISTER DISTRIBUTION OF LIQUIDATION PROCEEDS PART VII: FEES AND CHARGES FEES AND CHARGES PAYABLE BY AN INVESTOR FEES AND CHARGES PAYABLE BY DIF FORMATION COST OTHER FEES AND CHARGES PART VIII: TAXATION TAXATION ON INCOME OF DIF TAXATION OF UNIT HOLDERS AND LIABILITY OF ZAKAT PART IX: REPORTS AND ACCOUNTS FINANCIAL YEAR OF DIF FINANCIAL REPORTING PART X: SERVICE TO UNIT HOLDERS AVAILABILITY OF FORMS REGISTER OF UNIT HOLDERS INFORMATION IN THE REGISTER CLOSURE OF REGISTER ACCOUNT STATEMENT CERTIFICATES REPLACEMENT OF CERTIFICATES PART XI: FINANCIAL INFORMATION AUDITORS' CERTIFICATE ON CORE INVESTORS AND PRE-IPO INVESTOR'S INVESTMENT IN THE UNITS OF DIF (ATTACH CERTIFICATE) AUDITOR'S CERTIFICATE ON THE NET ASSET VALUE OF DIF (CERTIFICATE PLEASE) LIST OF PRE-IPO INVESTORS FORMATION COST PART XI: WARNING OFFERING DOCUMENT FLUCTUATION IN PRICE AND INCOME DISCLAIMER PART XIII: GENERAL INFORMATION INSPECTION OF CONSTITUTIVE DOCUMENTS STATEMENT OF RESPONSIBILITY PART XIV: TERMINATION OF THE SCHEME TERMINATION AND LIQUIDATION OF TRUST PART XV: DEFINITIONS...64 ANNEXURE A ANNEXURE B ANNEXURE C ANNEXURE D... 75

4 1. OFFERING DOCUMENT OF DAWOOD ISLAMIC FUND Managed by Dawood Capital Management Limited (An Asset Management Company Registered under the Non-Banking Finance Companies Establishment and Regulation Rules 2003) Date of Publication of July 5, 2007 Initial Offering Period: July 12-13, 2007 (Both days inclusive) 1.1 INTRODUCTION The Dawood Islamic Fund ("the Fund"/"the Scheme"/"the Trust"/"DIF") has been established through a Trust Deed under the Trusts Act 1882, entered into between Dawood Capital Management Limited (DCM), the Management Company and Central Depository Company of Pakistan Limited, the Trustee, and is authorized under Rule 67 of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (the NBFC Rules). This is governed by the provisions of the Trust Deed, Rules and the Shariah Code as specified hereafter. It sets forth information about the Fund that a prospective investor should know before investing in the Fund. Prospective investors should consult one or more from amongst their legal adviser, stockbroker, bank manager or other financial adviser. If you have any doubt about the contents of this offering document, you should consult one or more from amongst your investment advisors, legal advisers, bank managers, stockbrokers, or financial advisers. Investors must recognize that all Investments involve risk. The portfolio of the fund consists of market-based investments, listed as well as unlisted, that are subject to market fluctuations and risks inherent in all such investments. Investors are requested to read the Risk Disclosure contained in clause 3.8 and clause 12 of this. All Investments of the Fund shall be in adherence with the Islamic Shariah. It is possible that adherence to the Islamic Shariah will cause the Fund to perform differently from funds with similar objectives but that are not subject the Islamic Shariah. 1.2 REGULATORY APPROVAL AND CONSENT Approval of the Securities & Exchange Commission of Pakistan The Securities & Exchange Commission of Pakistan (the "SECP" or "Commission") has authorized the offer of Units of DIF under Rule 67 of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003 (the "NBFC Rules"). The SECP has also approved this, under Rule 70 of the NBFC Rules vide letter No. NBFC/MF-RS/AD-ZRK/DIF/467/2007 dated July 04,

5 It must be clearly understood that in giving this approval, the SECP does not take any responsibility for the financial soundness of the Fund, nor for the accuracy of any statement made or any opinion expressed in this. 1.3 FILING OF THE OFFERING DOCUMENT The Management Company has filed a copy of this signed by the Chief Executive along with the Trust Deed with the SECP. Certified copies of the following documents can be inspected at the registered office of the Management Company or the place of business of the Trustee: 1. The SECP's letter No. NBFC/MF-RS/DCML/AD-ZRK/340/2006 dated May 25, 2006 confirming DCM's renewal of license to undertake Asset Management Service; 2. Trust Deed (Deed) of DIF dated September 13, 2006 between Dawood Capital Management Limited (DCM) as the establisher and the Management Company and Central Depository Company of Pakistan Limited (CDC), as the Trustee; 3. SECP's letter No. NBFC/MF-RS-AD-ZRK/DCML-DIF/333/2007 dated May 11, 2007 authorizing Dawood Islamic Fund; 4. SECP's letter No. SEC/NBFC-JD-II/158/2006 dated March 17, 2006 approving the appointment of CDC as the Trustee of DIF; 5. SECP letter No. NBFC/MF/RS/ZRK-AD/DIF/597/2006 dated September 07, 2006 approving the appointment of Shariah Advisors of DIF; 6. Letter from M. Yousuf Adil Saleem & Co., Auditors of DIF, consenting to the issue of statements and reports; 7. Letter of Consent by the legal advisors, Bawaney and Partners, to act as the legal advisor of the DIF; 8 SECP's letter No NBFC/MF-RS/AD-ZRK/DIF/467/2007 dated July 04, 2007 approving this ; 9The Shariah Advisors of the Fund has confirmed that the provisions of the Trust Deed are in compliance with Shariah vide their letter dated June 15,

6 2. PART II: CONSTITUTION OF THE SCHEME 2.1 CONSTITUTION The Fund is an Open-End Shariah Compliant Asset Allocation Fund, established through a trust deed (the "Trust Deed"), dated September 13, 2006 under the Trusts Act, 1882, executed between: (1) Dawood Capital Management Limited (the "Management Company" or "DCM" or the "Offeror"), having its registered office at 1500A Saima Trade Towers, I.I. Chundrigar Road, Karachi, Pakistan, licensed to undertake asset management and investment advisory services under the NBFC Rules by the SECP as the establisher of the Fund and the Management Company; and (2) Central Depository Company of Pakistan Limited (the CDC or the Trustee ), a central depository company incorporated under the Companies Ordinance 1984, with its registered office at CDC House, 99-B, Block B, S.M.C.H.S., Main Shahra-e Faisal, Karachi , Pakistan as the Trustee. 2.2 REGISTERED ADDRESS, PLACE AND DATE OF CREATION The registered address of DCM is 1500A Saima Trade Towers, I.I. Chundrigar Road, Karachi, Pakistan. The Trust was created on September 12, The official website address is RESTRICTIONS This does not constitute an offer or solicitation to anyone in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it is unlawful to make such offer or solicitation. No person in any jurisdiction may treat this Offering Document as constituting an invitation to purchase Units unless it is lawful to make such an invitation to such person in the relevant jurisdiction and all registration and other legal requirements have been complied with in that jurisdiction. It is the responsibility of any person wishing to acquire Units to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental or other consents which may be required or the observance of other formalities which need to be observed or the payment of transfer or other taxes which may be required to be paid in such jurisdiction. The Management Company may redeem any Units sold in contravention of any of the prohibitions contained in this and the Rules. In addition, the Management Company may with the consent of the Trustee and under intimation to the Commission, compulsorily redeem the Units of any investor at any time if such redemption would be appropriate to protect the Fund from adverse consequences. 2.4 TRUST DEED The Deed is subject to and governed by the NBFC Rules 2003, the Commission and all other applicable laws and regulations. All investments of the Fund Property shall be in accordance with the Islamic Shariah as advised by the Shariah Advisors. The Fund shall also be subject to the rules and the regulations framed by the State Bank of Pakistan with regard to the foreign investments made by the Fund and investments made in the Fund from outside Pakistan in foreign currency. 3

7 The terms and conditions in the Deed and any supplemental deed(s) shall be binding on each Unit Holder. 2.5 MODIFICATION OF TRUST DEED The Trustee and the Management Company acting together shall be entitled by deed supplemental hereto to modify, alter or add to the provisions of this Deed in such manner and to such extent as they may consider expedient for any purpose, subject only to the approval of the SECP. Provided that, the Trustee and the Management Company shall certify in writing that, in their opinion such modification, alteration or addition is required pursuant to any amendment in the Rules or to ensure compliance with any fiscal or statutory requirement or to enable the provisions of this Deed to be more efficiently, conveniently or economically managed or to enable the Units to be dealt in or quoted on Stock Exchange or otherwise for the benefit of the Unit Holders and that it does not prejudice the interests of the Unit Holders or any of them or operate to release the Trustee or the Management Company from any responsibility to the Unit Holders Where this Deed has been altered or supplemented the Management Company shall notify the Unit Holders immediately through two widely circulated newspapers in Pakistan; one English and one Urdu If the SECP modifies or substitutes the Rules to allow any relaxations or exemptions, these will be deem to have been included in this Trust Deed without requiring any modification or alteration of this Trust Deed The Management Company may, from time to time, with the consent of the Trustee frame rules or regulations for conducting the business of the Trust or in respect of any other matter incidental thereto; provided such rules or regulations are not inconsistent with the provisions of this Deed or the s. 2.6 DURATION The duration of the Fund is perpetual. However, the SECP or the Management Company may on the occurrence of the certain events, wind it up as stated in Part 14 of this under the heading TERMINATION OF THE SCHEME. 2.7 OPEN-END FUND DIF is an open-end Shariah Compliant asset allocation fund. It shall offer Units on a continuous basis. There is no upper or lower limit set on the Units to be issued to a single Unit Holder or on the total number of Units to be issued to the public. However, the Management Company may impose, from time to time, certain amounts of minimum monetary investment limits to facilitate economical and efficient management of investors' accounts. Fractional Units will be issued to enhance economical and efficient handling. Units are also transferable. Units will be issued in registered, un-certificated form and will be confirmed to investors by means of an account statement issued by the Registrar. Certificates, being the definitive certificate acknowledging the number of Units registered in the name of the Holder, shall be issued at the request of the Unit Holder. 2.8 UNITS DIF is divided into Units having an Initial Offer Price of Rs. 100/- each. This price is applicable to such Units that are issued before any of the assets of the Fund are invested other than deposits, whether or not earning profit. Thereafter, the Units shall be issued on the basis of 4

8 their Net Asset Value (NAV), which shall form the base for determining the Offer and Repurchase Prices. All Units and fractions thereof represent an undivided share in the Fund and rank pari passu as to their rights in the Net Assets, earnings and the receipt of the dividends and distributions. Each Unit Holder has a beneficial interest in the Fund proportionate to the Units held by such Unit Holder. The Management Company may issue any of the following classes of Units: a) Class A is Core capital which cannot be redeemed within two years, however these Units are transferable with a written acceptance of this condition by the transferee thereof; b) Class B units to be offered and issued during the Pre-IPO and Initial Offering Period with no Sales Load, thereafter these units will be offered with a front-end load; c) Class C and D are DAWOOD SAVINGS FUNDS units will be issued at NAV with no Front-end Load but will subject to Back-end Load. 2.9 INITIAL OFFER AND INITIAL OFFERING PERIOD The Initial Offer is for Class B Units, with no Sales Load, which shall be issued at the Initial Offer Price of Rs. 100/- per Unit. The Offer and Issue of Units at Initial Offer Price shall commence from the start of the banking hours on July 12, 2007 and shall end at the close of the banking hours on July 13, During the Initial Offer, Units will be offered at par without any Sales Load. During the Initial Period of Offer, the Units will not be redeemed TRANSACTIONS IN UNITS AFTER THE INITIAL PUBLIC OFFER Subsequent to the Initial Offer, public sale of units at Initial Price shall be discontinued. The Units can be purchased at the Offer Price and redeemed at the Redemption Price. The Management Company will fix the Offer and Redemption Prices daily on the basis of the Net Asset Value (NAV) of the Units after the close of the Stock Exchange(s)/Financial Market(s) business day. The NAV based price per Unit shall be fixed after adjusting for the (Frontend/Back-end) Load as the case may be and any Transaction Costs that may be applicable, save under circumstances elaborated in Section 5.9 mentioned herein. Such prices shall be applicable to Purchase and Redemption requests with complete and correctly filled respective forms and have to be received within business hours as announced by the Management Company from time to time OFFERING DOCUMENT This is governed by the provisions of the Trust Deed and the Rules as amended or replaced from time to time and the Islamic Shariah as advised by the Shariah Advisors. Its sets forth the information about the DIF that a prospective investor should know before investing in any Unit. DCM accepts responsibility for the accuracy of the information herein contained as of the date of publication. 5

9 3. PART III: INVESTMENT POLICY AND RESTRICTIONS 3.1 INVESTMENT OBJECTIVE DIF is an open-end Shariah Compliant asset allocation fund. The main objective of the fund is to provide an avenue to the Unit Holders to invest their savings in a diversified portfolio based on Shariah Compliant investments under supervision of its Shariah Advisor. In addition, the Management Company would aim to maximise the returns on investments while at all times observing prudent investment practices, reasonable safety of capital and provide liquidity to the investors to join or leave the Fund at their convenience. 3.2 INVESTMENT POLICY The Scheme is a purely Shariah based Unit Trust which shall make Investments only in Shariah Compliant Authorized Investments and shall thus offer Shariah Compliant returns to investors in the Units of the Scheme. Hence, no investments of the Fund Property or any portion thereof shall be made in any security or instrument, or deposited in any account, which in the opinion of the Shariah Advisors is inconsistent with Shariah During and prior to the commencement of the Initial Period the Trustee shall hold the Deposited Property in cash in a separate account with an Islamic Bank or Islamic Financial Institution approved by the Management Company. After the Initial Period, all cash, except in so far as such cash may in the opinion of the Management Company be required for transfer to the Distribution Account, shall be invested by the Trustee from time to time in such authorized investments as may (subject always to the provisions of this Deed and the rules) be directed by the Management Company Any investment may at any time be realized at the discretion of the Management Company either in order to invest the proceeds of sale in another authorized investment or to provide the cash required for the purpose of any provision of this Deed or in order to retain the proceeds of sale in cash or on deposit as aforesaid or partly one and partly another. Any Investment which ceases to be an authorized investment or Shariah Compliant one shall be realized and the net proceeds of realization shall be applied in accordance with this Clause; Provided that the Trust may postpone the realization of such Investment for such period as the Management Company and the Trustee may determine to be in the interest of the Unit Holders, with the consent of the Shariah Advisors and also with the approval of SECP The purchase or sale of any investment in listed securities for the account of the Trust shall be made on the Stock Exchange through a broker, who must be a member of the Stock Exchange, unless the Management Company is satisfied that it is possible, subject to applicable law, to make such purchase or sale more advantageously in some other manner. The broker will be appointed from time to time by the Management Company under intimation to the Trustee. The Management Company shall not employ, as a broker, directly or indirectly any of its directors or officers or employees or a person who beneficially owns, whether individually or in association with close relative(s), 10% (ten percent) or more of the equity or other securities with voting rights, if any, issued by the Management Company, without the prior approval of the SECP and under intimation to the Trustee. The term "close relative" shall have the same meaning as contemplated under the Rules. The Management Company shall not enter into transactions with any broker, which shall equal or exceed 10% or more of the transactions of the Scheme in any one Accounting Year. Provided further that the 10% limit may be exceeded with the prior permission of the SECP and accordingly under intimation to the Trustee. 6

10 3.3 INVESTMENTS OUTSIDE PAKISTAN Investments outside Pakistan will enable DIF to diversify risk as well as avail opportunities for higher returns in markets that are undervalued. Total Investment by the scheme in overseas products/instruments will be to the extent of 30% of Net Assets of the Fund subject to a cap of US$ 15 million. Overseas investments would be made according to the prescribed guidelines of SECP & SBP and if guidelines are not available, specific approval from SECP & SBP will be obtained. The Fund Property will be invested in the International Market including the following with the permission of SECP & SBP: In case, due to the relative movement of the value of foreign investment and/or change in the limit, the value of foreign investment exceeds the above limit, the Management Company will have three months to bring the Fund into compliance Fund Property can be invested in Shariah Compliant international investments with prior approval of Shariah Advisors including the following: a) international listed equities; b) international profit-bearing securities; c) international Shariah Compliant money market instruments; d) foreign currency Shariah Compliant bank deposits & certificates of investments; e) foreign currency Shariah Compliant bank accounts in Pakistan; f) Islamic mutual funds including real estate and property funds; g) Islamic index funds While investing in international equities, international profit-bearing securities and international money markets, the Management Company will invest through its foreign counterpart unless it has built in-house capacity to manage international Investments and provided evidence of the same to the Trustee. However, for jurisdiction where foreign counterpart does not have operations, the Management Company may invest through following agencies: a) Mutual funds; b) Index funds or securities that give exposure to international equity indices; c) Individually managed accounts with a reputable international fund manager; or d) After acquiring the services of a reputable international fund manager through a joint venture or a service agreement; The Management Company may build-up its capacity to manage Investments in a limited number of countries / markets and may start to manage Investments directly in those countries / markets after providing evidence of the capacity to the Trustee while using the above means to manage Investments in other countries / markets. The fee charged directly by an international fund manager(s) on investments outside Pakistan will be the responsibility of the Management Company and any fees paid out of Deposited Property will be netted-off from the fees paid to the Management Company While investing internationally, Deposited Property will not be placed in any Investment that has the effect of leveraging the Fund and if any such instrument / security is used, it must be supported by Investment in spot or money market Investment such that the effect of leverage is cancelled out. 7

11 3.3.4 Associated companies and companies in parent-subsidiary relationship shall be treated as group companies, even if registered / listed in different countries and any prescribed limit on group exposure shall apply to such companies Direct investments of the Fund in debt securities will only take place in investment grade securities and sovereign risk securities. Only up to 50% of the allowed limit of international investments shall be placed in sovereign risk securities of countries outside Pakistan and only up to 20% of the allowed limit of international investments in sovereign risk securities of any one country with the sovereign risk portion, if fully invested, divided among five different countries. The above limit will be applicable only to direct investments by the Fund Not more than 50% of allowable limit of international investment will be placed in any one country The Management Company may use derivatives only to hedge existing exposure of the Fund in foreign currencies, provided they are cleared by the Shariah Board. The derivatives used may also hedge the US Dollar, however, the Management Company will attempt to hedge, in all cases where hedging is desirable, to the Base Currency if cost-effective and practical. No other use of derivatives is permissible and only currency derivatives will be used and only up to the limit of the Fund's exposure to foreign currency Make any Investments that are not compliant with the Shariah as advised by the Shariah Advisors. 3.4 INVESTMENT RESTRICTIONS The Deposited Property shall be subject to such exposure limits as are provided in the NBFC Rules. Provided further that such exposure limits shall not be applicable in case, on application of the Management Company, SECP provides a relaxation of any or all of the exposure limits provided in the NBFC Rules. Provided further that it will not be necessary for the Trustee to sell any such Investment merely because owing to appreciation or depreciation of any investment or redemption of Units, such limit shall be exceeded subsequent to the acquisition of such investment. However, the Management Company shall not make further investment in such investments till such time the limits are in accordance with the NBFC Rules. The Management Company shall have three (3) months to comply with the exposure limits in case such limits are exceeded If and as long as the value of the holding in a particular company or sector shall exceed the limit imposed by the NBFC Rules, the Trustee shall not purchase any further investments in such company or sector. However this restriction on purchase shall not apply to any offer of right shares or any other share offering, if the Management Company is satisfied that accepting such offer is in the interest of the Trust The Deposited Property shall not be invested in any security of a company if any director or officer of the Management Company owns more than five percent of the total nominal amount of the securities issued or collectively the directors and officers of the Management Company own more than ten percent of those securities The Trust shall not purchase from or sell to the Management Company or the Trustee or to any director, officer or employee of the Management Company or Trustee or to any person who beneficially owns ten percent or more of the equity or other securities with voting rights, if any, issued by the Management Company or the Trustee, save in the case of such party acting as an intermediary. 8

12 3.4.5 The Trust will not at any time: a) Invest in any thing that is not Shariah Compliant or is Haram. b) Purchase or sell: i. bearer securities; ii. securities which result in assumption of unlimited or undetermined liability (actual or contingent); iii. commodities or commodity contracts (other than securities issued by listed companies dealing in securities); iv. real estate or interest in real estate (other than securities issued by real estate companies); v. participate in a joint account with others in any transaction; vi. make short sales of any security or maintain a short position. c) Merge with, acquire or take over any scheme, unless it has obtained the prior approval of the SECP in writing to the scheme of such merger, acquisition or take over. d) Pledge any of the securities held or beneficially owned by it, except for its own benefit. e) Make a loan or advance money to any person except in connection with the normal business of the Scheme, subject to the limits specified under the NBFC Rules. f) Make an Investment in a company which has the effect of vesting the management or control over the affairs of such company, in the Scheme. g) Employ as a broker, directly or indirectly, any director, officer or employee of the Fund or its Management Company or any Connected Person or member of the family of such person and enter into transactions with any Connected Broker, which shall equal or exceed 10% of the transactions of the Fund in any one Accounting Year of that Fund. Provided that the Commission may, in each case on merits, permit the 10% limit to be exceeded if the connected broker offers advantages to the Fund not available elsewhere. Explanation: For the purposes of this Section the term family includes spouse, lineal ascendants and descendants and brothers and sisters. h) Invest more than 25% of the Net Asset Value of the Fund in securities of any one business sector as per classification of the stock exchange in which such security is listed. i) Investment of the Scheme in any company shall not, at any time, exceed an amount equal to 10% of the total Net Assets Value of the Scheme at the time of investment or 10% of the issued capital of the investee company. j) Engage in leveraged transactions or borrow, except that the Fund may borrow as provided by the NBFC Rules to meet redemption requests, provided the borrowing complies with the Shariah. k) Any other activity declared unlawful by the Shariah Advisors at any point in time. 9

13 3.5 EXCEPTION TO INVESTMENT RESTRICTIONS The Fund may deposit securities, for facilitation or guaranteeing settlement of its own trades and transactions in favor of a Stock Exchange or clearing house or national clearing and settlement system, on acquiring associate membership of the concerned settlement system. The securities, however, shall not be pledged for any other reason with any other person or entity In the event the weightage of securities exceed the limits laid down in the or the NBFC Rules as a result of the relative movement in the market prices of the investments or through any disinvestments, the Management Company shall make its best endeavors to bring the exposure within the prescribed limits within three months of the event. But in any case the Management Company shall not invest further in such securities or sectors while the deviation exists. However, this restriction on further investment shall not apply to any offer of right shares or bonus shares on existing Investments. 3.6 BORROWING AND BORROWING RESTRICTIONS Subject to any statutory requirements for the time being in force and to the terms and conditions herein contained, the Trustee may at any time at the request of the Management Company concur with the Management Company in making and varying arrangements with Banks or financial institutions for borrowings on a Shariah Compliant basis by the Trustee for the account of the Scheme; provided that the borrowings shall not be resorted to, except for meeting the redemption requests The charges payable to any Bank or financial institution against borrowings on account of the Trust as permissible under Clause above, shall not be higher than the normal prevailing bank charges or normal Shariah based market rates Borrowings may be resorted to only for meeting redemption requests. The maximum borrowing for the account of the Trust shall not exceed fifteen per cent (15%) of the total Net Assets Value of the Scheme and shall be payable within a period of ninety (90) days or such other limits or period, as may be provided in the NBFC Rules. If subsequent to any borrowing, the Net Assets are reduced as a result of depreciation in the market value of the Deposited Property or redemption of Units, the Management Company shall not be under any obligation to reduce such borrowing Neither the Trustee, nor the Management Company shall be required to issue any guarantee or provide security over their own assets for securing such borrowings from Banks and financial institutions. The Trustee or the Management Company shall not in any manner be liable in their personal capacities for repayment of such loans, finances or advances For the purposes of securing any such borrowings, the Trustee may with the approval of the Management Company mortgage, charge or pledge in any manner all or any part of the Deposited Property provided that the aggregate amount secured by such mortgage, charge or pledge shall not exceed the limits provided under the NBFC Rules and/or any law for the time being in force Neither the Trustee nor the Management Company shall incur any liability by reason of any loss to the Trust or any loss that a Unit Holder may suffer by reason of any depletion in the Net Asset Value that may result from any borrowing arrangement made hereunder in good faith. 10

14 3.7 RESTRICTION OF TRANSACTIONS WITH CONNECTED PERSONS The Fund Property shall not be invested in any security of a company if any director or officer of the Management Company individually owns more than five per cent of the total nominal amount of the securities issued or collectively the directors and officers of the Management Company in their individual capacities own more than ten per cent of those securities DIF shall not purchase from or sell any security to management company or the Trustee or to any director, officer or employee of the Management Company or Trustee or to any person who beneficially owns ten percent (10%) or more of the equity of the Management Company or the Trustee or the major shareholders of the Trustee Company, save in the case of such party acting as an intermediary For the purpose of sub-paragraphs 3.7.1, and above the term director, officer and employee shall include spouse, lineal ascendants and descendants, brothers and sisters. Subject to the Rules, any transaction between the Trust and the Management Company or any of their respective connected persons as principal shall only be made with the prior written consent of the Trustee and the approval of the SECP All transactions carried out by or on behalf of the Scheme shall be made as provided in the constitutive documents, and shall be disclosed in the Scheme's annual report Cash forming part of the property of the Scheme may be placed as deposits with the Trustee or an institution licensed to accept deposits Money can be borrowed from connected Banks and financial institutions provided that the charges are not higher than normal bank charges RISKS It should be clearly understood that portfolio of DIF is subject to market fluctuations and risks inherent in all such Investments. The value of Units in DIF may appreciate as well as depreciate, and the Fund may or may not declare a dividend. Past performance does not necessarily indicate future performance. Investments will primarily be in equity securities. Such Investments carry a risk that is considered higher than that to which fixed income or debt securities are subject. The key risk emanates from various factors that include, but are not limited to: Credit Risk - Credit risk is comprised of default risk, credit spread risk and downgrade risk. Each can have a negative impact on the value of a fixed-income security including money market instruments. a. Default Risk is the risk that the issuer will not able to pay the obligation, either on time or at all. b. Credit Spread Risk is the risk that there will be an increase in the difference between the return/mark-up rate of an issuer's bond and the return/mark-up rate of a bond that is considered to have little associated risk (such as a government guaranteed bond or treasury bill). The difference between this return/mark-up rate is called credit spread. Credit spreads are based on macroeconomic events in the domestic or global financial markets. An increase in credit spread will decrease the value of fixed income securities including money market instruments. 11

15 c. Downgrade Risk is the risk that a SECP approved credit rating agency or any other reputed international credit rating agency will reduce the credit rating of any issuer's securities. Downgrades in credit rating will decrease the value of those fixed income securities including money market instruments Equity Risk - Companies issue equities or stocks to help finance their operations and future growth. The company's performance outlook, market activity and the larger economic picture influence the price of stock. When the economy is expanding, the outlook for many companies will be good and the value of their stocks would rise. The opposite is also true Shariah Compliance Risk - Due to the primary objective of Shariah Compliance, the Fund would have a relatively limited investments universe as compared to a conventional asset allocation fund. At the time of the purchase, the investment, may have seen Shariah Compliant but during the holding period it may breach the Shariah guidelines resulting in a component of Haram income. To mitigate distribution of Haram income to unit holders, the Management Company will dispose that part of income as per guidelines of Shariah Advisors Liquidity Risk - some companies have limited market float of their issue securities and hence are not actively traded in the stock market / financial markets. Securities issued by such companies may be difficult to buy or sell, which may cause the value of the Funds that buy these securities to rise and fall substantially because any buying or selling of such company securities may have a great impact on that company's security price Government Regulation Risk - Government policies or regulations are more prevalent in some sectors than in others. Funds that invest in these sectors may be affected due to change in these regulations or policies, which directly or indirectly affect the earnings and / or the cash flows and / or any governmental or court orders restraining payment of capital, principal or income of Investee Companies to such companies Mark-up Rate Risk - Some debt securities including money market instruments may a fixed rate of coupon / mark-up. The value of the fund, due to its holdings in such debt securities including money market instrument, will rise and fall as market interest rate change. For example, when interest rates fall, the value of the existing securities will rise because the fixed coupon rate on that securities is greater than prevailing return/mark-up rates and vice versa. DIF will invest in Shariah Compliant debt instruments on a profit/loss basis, and there is a possibility that the net result from such Investments may be a loss Derivative Risk - The risk with repo / reverse repo / money market placement transactions are that the other party may default under the agreement or go bankrupt. In a reverse repo transaction, the Fund may be left holding the security and may not be able to sell it at the same price it paid for it, plus return / mark-up, if the market value of the security has dropped Foreign Investment Risk - The Fund may also invest outside Pakistan and such investments outside Pakistan may be exposed to certain additional risk including political, economic and exchange rate risks that may reduce the value of the investments. However, studies show that diversifying internationally would tend to reduce the overall volatility of a portfolio and thus may reduce risks for investors. 12

16 Disclaimer: The Units of DIF are not bank deposits and are neither issued by, insured by, obligations of, nor otherwise supported by the SECP, any Government agency, the Trustee (except to the extent specifically stated in this document and the Trust Deed) or any of the shareholders of the Management Company or of the Trustee or of any of the Core Investors or any other bank or financial institution. 13

17 4. PART IV: OPERATORS AND PRINCIPALS 4.1 THE MANAGEMENT COMPANY: DAWOOD CAPITAL MANAGEMENT LIMITED (DCM) DCM is a publicly limited company incorporated on 18th September 1990 and which has been listed on KSE since In 2003, it was licensed by the SECP to undertake investment advisory services and asset management services and was registered as an Investment Advisor and Asset Manager under the NBFC Rules and rated AM3 by PACRA. The paid-up capital of DCM is Rs 121 million with equity reserve of Rs million. The pattern of shareholding of the Company is as under: Name Number of Shares Held Amount in Rupees First Dawood Investment Bank Limited 3,630,000 36,600,000 Asian Development Bank 1,512,500 15,125,000 Guardian Modaraba 1,561,021 15,610,210 National Bank of Pakistan 1,089,000 10,890,000 Public Sector Companies & Corporation 492,107 4,921,070 Banks, DFIs, Insurance Cos., Modarabas & Mutual Funds 418,297 4,182,970 Others 3,397,075 33,970,750 TOTAL 12,100, ,000,000 Financial Highlights of DCM: Particulars June 30, June 30, June 30, June 30, June 30, Rupees in Millions Shareholders Equity Total Assets Book value per share Rs Rs Rs Rs Rs Earnings Per Share Dividend Per Share 10% 10% Nil 10% Nil 4.2 FUNDS MANAGED BY DCM Dawood Money Market Fund (DMMF) - Open-end DCM floated its first open-end income fund DMMF on May 20, 2003 with a record seed capital of Rs. 300 million. The Fund is highly conservative and risk-averse and has consistently been a market leader. Its stellar reputation and impressive performance has earned the Fund a rating of 5-Star on February 2007 by PACRA for the last two consecutive years. 14

18 Fact Sheet Structure Open-end Scheme Launched date May 20, 2003 Seed Capital 300 Million Par Value Rs. 100 per unit Nature Income Fund Net Assets (May 31, 2007) Rs. 2,671 Million NAV (May 31, 2007) Rs Dividend paid 2003: Rs per unit (April 18, June 30, 2003) : Rs per unit : Rs per unit : Rs per unit Credit Rating 5-Star by PACRA (February 2007) Listed Karachi Stock Exchange First Dawood Mutual Fund (FDMF) Close-end FDMF is a close-end asset allocation fund which is listed on the Karachi Stock Exchange (Guarantee) Ltd. (KSE) and was launched on March 22, The Trustee of the Fund is Central Depository Company of Pakistan (CDC). Fact Sheet Structure Closed-end Scheme Launched date March 22, 2005 Capital 500 Million Par Value Rs. 10 per certificate Nature Asset Allocation Fund Net Assets (May 31, 2007) Rs Million NAV (May 31, 2007) Rs Dividend paid : 1% Bonus : 15% Bonus Credit Rating 4-Star by PACRA February 2007 Listed Karachi Stock Exchange 15

19 4.3 BOARD OF DIRECTORS OF DCM Name, Occupation & Address Position Other Directorships Mr. Feroze Sayeed-Ud- Deane Business Plot No. 49, Sasi Boardview, Apartment No. 14, 14 th floor, Block-2, Clifton Miss Tara Uzra Dawood Business F-12 Dawood Colony, Stadium Road, Karachi Mr. Hasib Ahmed Senior Investment Officer OPF Building Sharah-e- Jamhoriyat, G-5/2, Islamabad Mr. Nazimuddin Feroze Service 94, Overseas Society, Ahmed Barrister Road, Off: Haider Ali Road, Karachi Mr. Anwar Sheikh Service A-275, Block N, North Nazimabad Karachi Mr. Gul Nawaz Service Apartment No. 4, 2 nd Floor, Plot No. 96, 10 th Commercial Street, Phase VI Commercial DHA Chairman (Nominee of Guardian Modaraba) Chief Executive Officer Director (Nominee of Asian Development Bank) Director Director Director (Nominee of NIT) Proprietor - Castle Overseas Company Managing Director: - Castle Textile Industries (Pvt.) Ltd. Partner: - Castle Export International Director - Pakistan Export Finance Guarantee Agency Pakistan Director: - Eforze Chemical Industries (Pvt.) Ltd. - Otsuka Pakistan Ltd. - Maple Pharmaceutical (Pvt.) Ltd. Partner: - S. Ejazuddin & Co. - NMS Medical Industries Chief Executive Officer: - Access Financial Services (Pvt.) Limited Director: - Integrated Resources Distribution (Pvt.) Ltd. Director: - Berger Paints Pakistan Ltd. - Javed Omer Vohra & Company Ltd. - Kohinoor Mills Ltd. - Mirpurkhas Sugar Mills Ltd. - Paramount Spinning Mills Ltd. - Pak Electron Ltd. - Punjab Oil Mills Ltd. - Shakarganj Mills Ltd. - Shams Textile Mills Ltd. AVM(R) Zulfiqar A. Shah Service 7-A/II, North Lane, Phase I, DHA, Karachi Director 16 Partner: - Dal Entriprises

20 4.4 FINANCIAL SUMMARY OF LAST 5 YEARS OF LISTED ASSOCIATED COMPANIES: First Dawood Investment Bank Limited Particulars June 30, June 30, June 30, June 30, June 30, Rupees in Millions Shareholders Equity 1, Total Assets 8, , , , , Earnings Per Share Dividend Per Share - - 5% 5% 5% Bonus Per Share 10% 10% 5% 5% - Guardian Modaraba: Particulars June 30, June 30, June 30, June 30, June 30, Rupees in Millions Certificate Holders Equity Total Assets 1, , Earnings Per Certificate After Taxation Dividend Per Certificate 12.50% 11.5% 10% 8.8% 5% B.R.R. International Modaraba: Particulars June 30, June 30, June 30, June 30, June 30, Rupees in Millions Certificate Holders Equity Total Assets 2, , , , Earnings Per Certificate Dividend Per Certificate 7.0% 11% 14% 16% 11% 4.5 PARTICULARS OF THE DIRECTORS Mr. Feroze Sayeed-Ud-Deane (Chairman) Mr. Deane is a Bachelor of Science from Dacca University. He has over 43 years of working experience. He is currently working with Castle Overseas Company, a company involved in the export of textile products to the US. Previously, he worked in National & Grindlays Bank Ltd., Habib Bank Ltd., and in various capacities at BCCI International Miss Tara Uzra Dawood Miss Tara Uzra Dawood has done her Doctorate of Juridical Science (J.D.) from Harvard Law School, USA, and Bachelor of Arts Honors (A.B.) from Cornell University, USA and Oxford University, United Kingdom. She has worked for law firms in New York, Toronto, Amsterdam and California and is a specialist in mergers and acquisitions and corporate law. She is Chief Executive Officer of Dawood Capital Management Ltd. 17

21 4.5.3 Mr. Hasib Ahmed (Director - Nominee of ADB) Mr. Ahmed is a senior banker with a proven track record of over 25 years with Citigroup. He has worked in multiple roles covering international markets, including the United States and Middle East. Strong Credit and analytical skills with in-depth experience in both, traditional credit risk analysis and risk management. He has been recognized for developing business in the United States with Multi-lateral Development Banks and SME portfolio of Not for Profit Organizations. Mr. Ahmed has an in-depth experience in Compliance, Capital Markets, Treasury, Trade Finance and Cash Management, underscored by a pro-active marketing approach. He has strong leadership skills and has in his career, managed large business units in the United States. His current assignment with the Asian Development Bank in Manila is as Head of Portfolio Administration in the Private Sector Operations department, covering Capital Market in ADB s member countries Mr. Nazimuddin Feroze He is a Graduate and a very experienced Industrialist. He has been working as a Director for Efroze Chemical Industries and Maple Pharmaceutical (Pvt.) Ltd. since inception and also working as a registered partners for other firms as well Mr. Anwar A. Sheikh Mr. Sheikh is a Masters in Business Administration from the Institute of Business Administration (IBA). Mr. Sheikh has over 14 years of strategic expertise in Financial Consulting/Restructuring, Mergers and Acquisitions, Privatization, Resource Mobilization and Structured Finance Mr. Gul Nawaz (Director - Nominee of NIT) Mr. Nawaz is M.Com and is a Senior Investment Analyst of Asset Management Department of National Investment Trust Limited (NIT). He is an asset manager with extensive experience of equity trading, equity research and as Non-Executive Director on the Board of Directors of leading listed public limited companies AVM (R) Zulfiqar A. Shah Mr. Shah has the honour of serving Pakistan Air Force (PAF) with over 34 years of Commissioned Service. He has extensive knowledge and experience of operation at PAF. He is a graduate of Air Command and Staff College of Air University, USAF and National Defence College. He has also managed a large public sector corporation when he was sent on deputation to the Civil Aviation Authority. 4.6 KEY MANAGEMENT PROFILE Mr. Tahir Mehmood - Company Secretary Mr. Mehmood is an Associate Member of the Institute of Carporate Secretaries of Pakistan and Associate Member of the Institute of Chartered Secretaries and Managers (Chartered Secretay Stream). Before Joning the First Dawood Group (FDG), he was working as Assistant Manager in Deloitte M. Yousuf Adil Saleem & Company, Chartered Accountants, for over six years. His areas of expertise include Corporate Affairs, Financial Advisory Services, merger & acquisitions. 18

22 4.6.2 Mr. Muhammad Shahid Usman (Chief Financial Officer) Mr. Shahid Usman completed his ICMA in December He has an experience of 12 Years of Financial Institutions. His core responsibilities include Financial Management and Reporting, Taxation, Finalization of Accounts and Budgeting Mr. Tauqir Shamshad (SeniorVice President & Fund Manager DMMF) Mr. Tauqir has over 16 years of work experience out of which 11 years in Treasury and over 4 years in Asset Management. During this tenor, he played an instrumental role in formation/floatation and management of Funds. He is a Masters of Business Administration and Masters of Commerce from the University of Karachi. He has also completed four years as audit trainee with M/s. Ford Rhodes Sidat Hyder and is registered with Institute of Chartered Accountants of Pakistan Mr. Muhammad Ahmed (Fund Manager - FDMF) Mr. Ahmed has over 15 years of experience with the financial markets portfolio management. He is responsible for managing the equity portfolio of the fund. His expertise includes hedging/arbitrage of shares, assessing and analyzing of the annual reports of companies etc Raja Jehangir Mehboob (Senior Vice President, Head of Sales) Mr. Mehboob has 20 years working experience including 17 in the United Kingdom, where he held various positions including Senior Dealer, FX & Bullion and Marketing Manager, Central & Eastern Europe. He has worked for organizations such as Shearson Lehman, Prudential Bache and Archer Daniels Midland. In Pakistan, he has been Regional Manager North for Askari Investment, and Sales South for JS ABAMCO Mr. Yousuf Ismail Turk (AVP - Capital and Debt Market) Mr. Yousuf has completed his Bachelors of Commerce from University of Karachi in He has over 12 years of experience managing the shares portfolio in various companies. His expertise also includes hedging/arbitrage of shares managing settlement and payment of shares on NCSS, T+3, T=1 and future counters, and assessing and analyzing of the annual reports of companies, etc. 19