portfolio of Shariah Compliant listed equities.

Transcription

1 The objective of the Fund is to provide investors with long term capital growth from an actively managed portfolio of Shariah Compliant listed equities.

2 NIT ISLAMIC EQUITY FUND FUND MANAGER REPORT NIT Islamic Equity Fund (NIT IEF) Objective The objective of the Fund is to provide investors with long term capital growth from an actively managed portfolio of Shariah Compliant listed equities. Profile of Investment Manager CORPORATE INFORMATION FUND NAME NIT Islamic Equity Fund NAME OF AUDITORS KPMG Taseer Hadi & Co. Chartered Accountants LIST OF BANKERS Askari Bank Limited Bank Al Falah Limited Bank Al Habib Limited Bank Islami Pakistan Limited Habib Bank Limited MCB Bank Limited Meezan Bank Limited National Bank of Pakistan Sindh Bank Limited United Bank Limited National Investment Trust Ltd. (NITL) is the first and the largest Asset Management Company of Pakistan, formed in With the recent launch of 3 new Funds namely NIT Islamic Equity Fund, NIT Pension Fund & NIT Islamic Pension Fund the size of total Funds under management by NITL is approximately Rs. 95 billion as of June 30, The family of Funds of NIT comprises of 8 funds including 4 equity Funds, 2 fixed income nature Funds, 1 conventional Pension Fund and 1 Islamic Pension Fund. NIT s tally of nationwide branches is 23, no other Asset Management Company in Pakistan has such a vast network of nationwide branches. Further, to cater to the matters relating to investments in NIT and day to day inquiries/ issues of its unit holders, a state of the art Investors Facilitation Centre is also in place. The Board of Directors of NITL consists of representatives of leading financial institutions, prominent industrialists and nominee of Govt. of Pakistan. The Company has been assigned an Asset Manager rating of AM2 by PACRA, 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 Information NIT IEF Launch date 18th May 2015 Minimum Investment: Rs. 5,000 Type Shariah Compliant Open End Equity Management Fee: 3.00% Fund Fund Manager Wasim Akram Front End Load: 0.00%3.00% Fund Size as on June 30, 2015 Rs billion Back End Load: 0.00% Par Value Rs. 10 Auditors: KPMG Taseer Hadi & Co. NAV/unit (ExDiv) Rs Trustee: Central Depository Company of Pakistan Ltd. Pricing Mechanism Forward Pricing Risk Profile Moderate / High Benchmark KMI30 Index Fund Rating N/A Fund Performance Analysis (Since Inception): Opening Net Assets (Rs. in billion) 3.14 Opening NAV /unit (Rs.) (Ex Div) 10 Ending Net Assets (Rs. in billion) 4.36 Ending NAV/unit (Rs.) Total Return (%) 2.70% Maximum Funds under management during the year (Rs. in billion) 4.39

3 NIT ISLAMIC EQUITY FUND FUND MANAGER REPORT NIT ISLAMIC EQUITY FUND FUND MANAGER REPORT Asset Allocation As the fund was launched on May 18, 2015, it continued to gradually deploy liquidity in the stocks market keeping in view the market conditions. As on 30th June 2015, the Fund was invested to the extent of 69.93% in Equities whereas the remaining exposure was in cash and others. The asset allocation position of the Fund as on is depicted in the chart below: Top Ten Holdings Top ten holdings of the Fund s portfolio as % of total assets as on June 30th 2015 are as follows: Lucky Cement Engro Foods Engro Corporation Fauji Fertilizer Bin Qasim Fauji Fertilizer Co. Ltd. KotAddu Power Co Ltd. Pakistan State Oil Fauji Cement Co. Ltd Engro Fertilizer Hub Power Company Ltd. Categorization of Unit Holders By Size (JUNE 2015) Category NITIEF Unit Holders % of Holding Institutional Investors 83 68% Individual % TOTAL 3, % Sector Wise Breakdown of Equity Portfolio Sectorwise breakdown of Fund s Equity portfolio as % of total assets as on is given below: Fund Performance Review FERTILIZER CEMENT OIL & GAS EXPLORATION COMPANIES POWER GENERATION & DISTRIBUTION OIL & GAS MARKETING COMPANIES OTHERS During the period,nit IEF remained invested primarily in Fertilizer, Cement and the Oil & Gas exploration sectors. Since launch (May to 30 June 15), the KMI30 index increased by 6.56% whereas the NAV of your Fund increased by 2.70%, thus, showing an underperformance of 3.86%.The underperformance was mainly due to low exposure to the stock market due to gradual deployment of liquidity as mentioned earlier. WWF Disclosure As of 30th June 2015, the Scheme has maintained provisions against Workers Welfare Fund s liability to the tune of Rs million, If the same were not made, the NAV per unit/ year to date return of the Scheme would be higher by Rs per unit. For details, investors are advised to read the latest Financial Statement of the Scheme. Economic Review The revival of growth that started in accelerated further in The factors contributing to this momentum in growth include the reform initiatives, commitment to a calibrated fiscal and monetary management and an overall improvement in macroeconomic situation. The impact of these factors was strengthened by a steep decline in oil prices, rise in foreign exchange buffers, growth in remittances and proceeds from privatization. The GDP growth accelerated to 4.2 % in against a growth of 4.00 % recorded in the same period last year. The growth momentum is broad based, as all major sectors like Commodities Producing Sector along with Services Sector performed better than last year amid gas shortages, power outages along with security related challenges and untoward environment behavior. Agriculture accounted for 20.9 % of the Gross Domestic Product (GDP) in and is a source of livelihood of 43.5 % of rural population. During fiscal year , the overall performance of agriculture sector recorded a growth of 2.9 % compared to the growth of 2.7 % during last year due to positive growth in all related agriculture sub sectors. Crops witnessed a growth of 1.0 %, Livestock 4.1 %, Forestry 3.2 % and Fishing 5.8 %. Manufacturing sector accounts for 13.3 % of GDP and 14.2 % of the total employed labor force. The Large Scale Manufacturing sector which has a share of 11 % in the industry and 80 % in manufacturing could not perform at the same pace as last year, registering a growth of 2.5 % in as compared to 4.6 % in the same period last year. The services sector registered a growth of 5% compared to last year s growth of 4.4 %. In the services sector, major growth emanated from finance and insurance which posted a growth of 6.2 % against a target of 5.8 % and growth of 4.2 % achieved last year. During FY , FDI inflows posted a growth of 10.2 % and reached $2,057.3 million against $1,866.3 million in the same period of FY1314. During FY1415, foreign private investment increased to $1,666.2 million against $1,050.3 million in the comparable period of FY14, thereby showing a sign of restoring investor s confidence. The communications, oil & gas exploration, financial business, power and chemicals sectors remained the main recipient of FDI during the year.

4 NIT ISLAMIC EQUITY FUND FUND MANAGER REPORT TRUSTEE REPORT Workers Remittances remained a key source of external resource flows for our economy. After India, Pakistan is the second largest recipient of remittances in the South Asian region. The available data suggest that inflow of Remittances for FY stood at $18.5 billion as compared to $15.8 billion during the corresponding period last year, a YoY growth of 17 %. Price stability remained a high priority of the government due to socioeconomic cost of inflation. Inflation rate measured through the Consumer Price Index (CPI) averaged at 4.5 % during as against 8.6 % in the same period last year. This is the lowest level of inflation since Pakistan s current account deficit declined to US$2.3 billion during from US$3.1 billion in A combination of factors helped this marked improvement including declining oil prices, larger inflows under the Coalition Support Fund (CSF), lower freight charges on imports and steady growth in workers remittances. The trade deficit posted an increase of around 2.4% during FY , primarily due to decline in exports. On the other hand, higher imports of metal, machinery, agriculture & other chemicals, and transport, nearly offset the gain in import bill from a sharp fall in international POL prices. Given the above macro stabilization achievements, it is expected that a better energy supply situation in the country going forward coupled with a historically low discount rate would encourage the private sector investors to expand their business and maximize capacity utilization. This will have a direct impact on the investment to GDP ratio. (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. TRUSTEE REPORT TO THE UNIT HOLDERS Report of the Trustee pursuant to Regulation 41(h) and Clause 9 of Schedule V of the NonBanking Finance Companies and Notified Entities Regulations, 2008 We, Central Depository Company of Pakistan Limited, being the Trustee of NIT Islamic Equity 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 during the period from April 27, 2015 to June 30, 2015 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 NonBanking Finance Companies (Establishment and Regulations) Rules, 2003, the NonBanking Finance Companies and Notified Entities Regulations, 2008 and the constitutive documents of the Fund. b. There was no unit split undertaken during the year. Sd/ Muhammad Hanif Jakhura Chief Executive Officer Central Depository Company of Pakistan Limited Karachi, October 19, 2015

5 REPORT OF THE SHARIAH ADVISOR AUDITORS REPORT I, the Shariah Advisor of the fund, am issuing this report in accordance with the rules and regulations. The scope of the report is to express an opinion on the Shariah Compliance of the Funds activities. In the capacity of Shariah Advisor, I have prescribed criteria and procedures to be followed in ensuring Shariah Compliance in each and every investment. It is the responsibility of the Management Company of the fund, to establish and maintain a system of internal controls to ensure compliance with the Shariah guidelines. My responsibility is to express an opinion, based on my review, to the extent where such compliance can be objectively verified. A review is limited primarily to inquiries of the Management Company s personnel and review of various documents prepared by the Management Company and investments to comply with the prescribed criteria. In light of the above, I hereby certify that: i. I have reviewed and approved the modes of investments of NITIEF in light of the Shariah guidelines. ii. All the provisions of the Scheme and investments made on account of NITIEF by National Investment Trust Ltd. (NITL) are Shariah compliant and in accordance with the criteria established and given from time to time. iii. On the basis of information provided by the management, all operations of NITIEF for the year ended 30 June 2015 have been in compliance with the Shariah principles. During the year, Rs. 177,964/ has been recognized as charity. May Allah give us strength to work in accordance with Quran and Sunnah and forgive our mistakes. And Allah Knows Best. Mufti Zeeshan Abdul Aziz Shariah Advisor INDEPENDENT AUDITORS REPORT TO THE UNIT HOLDERS REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of NIT Islamic Equity Fund ( the Fund ), which comprise the statement of assets and liabilities as at 30 June 2015 and the related income statement, statement of comprehensive income, distribution statement, cash flow statement, statement of movement in unit holders fund for the period from 24 February 2015 to 30 June 2015 and a summary of significant accounting policies and other explanatory notes. Management s responsibility for the financial statements The Management Company of the Fund is responsible for the preparation and fair presentation of the financial statements in accordance with approved accounting standards as applicable in Pakistan, and for such internal control as the management determines is necessary to enable the preparation of the 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 auditing standards 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 misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our 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, we consider internal control relevant to the Fund 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 Fund s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by 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 state of the Fund s affairs as at 30 June 2015 and of its financial performance, cash flows and transactions for the period from 24 February 2015 to 30 June 2015 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 accordance with the relevant provisions of the NonBanking Finance Companies (Establishment and Regulation Rules, 2003) and NonBanking Finance Companies and Notified Entities Regulations, Karachi: September 09, 2015 Sd/ Sd/ KPMG Taseer Hadi & Co. Chartered Accountants Muhammad Nadeem Dated: September 30, 2015 Karachi

6 NIT ISLAMIC EQUITY FUND STATEMENT OF ASSETS AND LIABILITIES AS AT 30 JUNE 2015 NIT ISLAMIC EQUITY FUND INCOME STATEMENT Note Note Assets Bank balances 5 1,340,436 Investments 6 3,163,993 Dividend and profit receivable 7 10,581 Preliminary expenses and floatation costs 8 4,879 Security deposits 9 2,600 Total assets 4,522,489 Liabilities Payable to National Investment Trust Limited Management Company 10 19,993 Payable to Central Depository Company of Pakistan Limited Trustee Payable to Securities and Exchange Commission of Pakistan Payable against purchase of investments 127,994 Payable against redemption of units 372 Accrued expenses and other liabilities 13 10,641 Total liabilities 159,997 Net Assets 4,362,492 Unit holders' fund (as per statement attached) 4,362,492 Contingencies and commitments 14 (Number of units) Number of units in issue ,871,324 (Rupees) Net assets value per unit The annexed notes from 1 to 29 form an integral part of these financial statements. Income Dividend income 2,619 Gain on sale of investments net 7,795 Markup / return on bank deposits 18,122 Total income 28,536 Expenses Remuneration of National Investment Trust Limited Management Company ,017 Sindh Sales Tax on remuneration of Management Company ,613 Federal Excise Duty on remuneration of Management Company ,403 Remuneration of Central Depository Company of Pakistan Limited Trustee Annual fee Securities and Exchange Commission of Pakistan Custodian charges of Central Depository Company of Pakistan Limited 90 Settlement and bank charges 343 Auditors' remuneration Amortization of preliminary expenses and floatation costs Printing charges 200 Annual listing fee 130 Mutual fund rating fee 200 Total expenses 22,616 Net income from operating activities 5,920 Element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed net 653 Provision for Workers' Welfare Fund 13.1 (131) Net income before taxation 6,442 Taxation 17 Net income for the period 6,442 (Rupees) Earnings per unit basic and diluted The annexed notes from 1 to 29 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

7 NIT ISLAMIC EQUITY FUND STATEMENT OF COMPREHENSIVE INCOME NIT ISLAMIC EQUITY FUND DISTRIBUTION STATEMENT Note Net income for the period 6,442 Other comprehensive income for the period Items to be reclassified to income statement in subsequent periods: Net unrealised appreciation on remeasurement of investments classified as 'available for sale' ,071 Total comprehensive income for the period 109,513 Element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed amount representing income / (loss) that form part of unit holders' fund net 4,206 Net income for the period 6,442 Undistributed income carried forward realised 10,648 The annexed notes from 1 to 29 form an integral part of these financial statements. The annexed notes from 1 to 29 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

8 NIT ISLAMIC EQUITY FUND STATEMENT OF MOVEMENT IN UNIT HOLDERS FUND NIT ISLAMIC EQUITY FUND CASH FLOW STATEMENT Note Note Issue of 436,677,334 units 15 4,376,063 Redemption of 11,806,010 units 15 (122,431) 4,253,632 Element of (income) / loss and capital gains / losses included in prices of units issued less those in units redeemed net amount representing income transferred to income statement (653) amount representing income transferred to distribution statement (4,206) (4,859) Net unrealised appreciation on remeasurement of investments classified as 'available for sale' ,071 Gain on sale of investments net 7,795 Other net loss for the period (1,353) Total comprehensive income for the period 109,513 Element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed amount representing income / (loss) that form part of unit holders' fund net 4,206 Net assets at end of the period 4,362,492 [Rs per unit ] The annexed notes from 1 to 29 form an integral part of these financial statements. CASH FLOWS FROM OPERATING ACTIVITIES Net income before taxation 6,442 Adjustments Element of (income) / loss and capital (gains) / losses included in prices of units issued less those in units redeemed net (653) Amortization of preliminary expenses and floatation costs 121 5,910 Increase in assets Investments (3,060,922) Dividend and profit receivable (10,581) Preliminary expenses and floatation costs (5,000) Security deposits (2,600) (3,079,103) Decrease in liabilities Payable to National Investment Trust Limited Management Company 19,993 Payable to Central Depository Company of Pakistan Limited Trustee 522 Payable to Securities and Exchange Commission of Pakistan 475 Payable against purchase of investments 127,994 Payable against redemption of units 372 Accrued expenses and other liabilities 10, ,997 Net cash (used in) operating activities (2,913,196) CASH FLOW FROM FINANCING ACTIVITIES Amount received on issue of units 4,376,063 Payments against redemption of units (122,431) Net cash generated from financing activities 4,253,632 For National Investment Trust Limited (Management Company) Cash and cash equivalents at end of the period 1,340,436 The annexed notes from 1 to 29 form an integral part of these financial statements. Sd/ Sd/ Sd/ Managing Director Director Director For National Investment Trust Limited (Management Company) Sd/ Sd/ Sd/ Managing Director Director Director

9 NIT ISLAMIC EQUITY FUND 1 LEGAL STATUS AND NATURE OF BUSINESS 1.1 The NIT Islamic Equity 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) on 03 February 2015 in accordance with the Non Banking Finance Companies (Establishment and Regulation) Rules, 2003 (NBFC Rules) and the Trust Deed was executed on 24 February The Fund is categorized as an Equity Scheme as per the criteria for categorisation of open end collective investment scheme as specified by Securities and Exchange Commission of Pakistan (SECP) and other allied matters. NIT ISLAMIC EQUITY FUND and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. 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 related to classification and valuation of investments and impairment thereagainst, if any (note 4.1 and note 6) The Management Company of the Fund has been classified as a NonBanking Finance Company (NBFC) under the NBFC Rules, 2003 and has obtained the requisite license from the Securities and Exchange Commission of Pakistan (SECP) to undertake Asset Management Services. The registered office of the Management Company is situated at 6th floor, National Bank of Pakistan Building I.I.Chundrigar Road, Karachi. The Fund has received Rs. 1,848 million against PreIPO (initial public offer) of the units from various institutions and individuals during the period from 27 April 2015 to 8 May 2015 (both days inclusive) at the initial offer price of Rs. 10 each. In accordance with clause 1.6 and (d) of offering document of the Fund, the management has decided to allocate additional units against the income earned on the investment of the PreIPO investors upto the start of IPO i.e. 11 May 2015 to all the investors who participated in PreIPO. In addition, the Fund has received Rs. 2,087 million agianst IPO from various investors during the period from 11 May 2015 to 15 May 2015 (both days inclusive) at Rs. 10 each. The Fund commenced its business activities from 18 May Accordingly, all transactions from the start of IPO till the period ended 30 June 2015 have been reflected in the income statement. The Fund is an openended mutual fund. Units are offered for subscription on a continuous basis. The units are transferable and can be redeemed by surrendering them to the Fund. Subsequent to the period end, the Fund has been listed on Islamabad Stock Exchange. The objective of the Fund is to invest in the equity market when there is an opportunity to invest the funds in a gainful manner and such investment is for the benefit of the Fund based on long term perspective to provide the unit holder safe and Halal income on their investment. Under the Trust Deed all conducts and acts of the fund are based on Shariah. The management company has appointed Mufti Zeeshan Ali Aziz as Shariah Advisor to the NIT Islamic Equity Fund to ensure that the activities of the Fund are in compliance with the Principles of Shariah. 1.6 Title to the assets of the Fund are held in the name of Central Depository Company of Pakistan Limited as trustee of the Fund. 2 BASIS OF PREPARATION 2.1 Statement of compliance These financial statements have been prepared in accordance with 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 NonBanking Finance Companies (Establishment and Regulation) Rules, 2003 (the NBFC Rules), the NonBanking 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 NBFC Rules, the NBFC Regulations or directives issued by the SECP differ with the requirements of IFRS, the NBFC Rules, the NBFC Regulations or the directives issued by the SECP prevail. 2.2 Accounting convention 3 NEW OR AMENDMENTS / INTERPRETATION TO EXISTING STANDARD, INTERPRETATION AND FORTHCOMING REQUIREMENTS The following standards, amendments and interpretations of approved accounting standards and new interpretations to existing standards will be effective for accounting periods beginning on or after 01 July 2015: Amendments to IAS 38 Intangible Assets and IAS 16 Property, Plant and Equipment (effective for annual periods beginning on or after 1 January 2016) introduce severe restrictions on the use of revenuebased amortization for intangible assets and explicitly state that revenuebased methods of depreciation cannot be used for property, plant and equipment. The rebuttable presumption that the use of revenuebased amortisation methods for intangible assets is inappropriate can be overcome only when revenue and the consumption of the economic benefits of the intangible asset are highly correlated, or when the intangible asset is expressed as a measure of revenue. The amendments are not likely to have an impact on the Fund s financial statements. IFRS 10 Consolidated Financial Statements (effective for annual periods beginning on or after 1 January 2015) replaces the part of IAS 27 Consolidated and Separate Financial Statements. IFRS 10 introduces a new approach to determining which investees should be consolidated. The single model to be applied in the control analysis requires that an investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. IFRS 10 has made consequential changes to IAS 27 which is now called Separate Financial Statements and will deal with only separate financial statements. Certain further amendments have been made to IFRS 10, IFRS 12 and IAS 28 clarifying the requirements relating to accounting for investment entities and would be effective for annual periods beginning on or after 1 January The adoption of this standard is not likely to have an impact on the Fund's financial statements. IFRS 11 Joint Arrangements (effective for annual periods beginning on or after 1 January 2015) replaces IAS 31 Interests in Joint Ventures. Firstly, it carves out, from IAS 31 jointly controlled entities, those cases in which although there is a separate vehicle, that separation is ineffective in certain ways. These arrangements are treated similarly to jointly controlled assets/operations under IAS 31 and are now called joint operations. Secondly, the remainder of IAS 31 jointly controlled entities, now called joint ventures, are stripped of the free choice of using the equity method or proportionate consolidation; they must now always use the equity method. IFRS 11 has also made consequential changes in IAS 28 which has now been named Investment in Associates and Joint Ventures. The amendments requiring business combination accounting to be applied to acquisitions of interests in a joint operation that constitutes a business are effective for annual periods beginning on or after 1 January The adoption of this standard is not likely to have an impact on the Fund's financial statements. IFRS 12 Disclosure of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2015) combines the disclosure requirements for entities that have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities, into one place. The adoption of this standard is not likely to have an impact on the Fund's financial statements. These financial statements are prepared under the historical cost convention except for investments which are carried at fair value. 2.3 Functional and presentation currency These financial statements are presented in Pak Rupees, which is the Fund's functional and presentation currency. 2.4 Critical accounting estimates and judgments The preparation of financial statements in conformity with approved accounting standards as applicable in Pakistan requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results IFRS 13 Fair Value Measurement (effective for annual periods beginning on or after 1 January 2015) defines fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. IFRS 13 explains how to measure fair value when it is required by other IFRSs. It does not introduce new fair value measurements, nor does it eliminate the practicability exceptions to fair value measurements that currently exist in certain standards. The adoption of this standard is not likely to have an impact on the Fund s financial statements. Amendments to IAS 27 Separate Financial Statements (effective for annual periods beginning on or after 1 January 2016). The amendments to IAS 27 will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. The adoption of the amended standard is not likely to have an impact on the Fund's financial statements. Agriculture: Bearer Plants [Amendments to IAS 16 and IAS 41] (effective for annual periods beginning on or after 1 January 2016). Bearer plants are now in the scope of IAS 16 Property, Plant and Equipment for measurement and disclosure purposes. Therefore, a company can elect to measure bearer plants at cost. However, the produce growing on bearer plants will continue to be

10 NIT ISLAMIC EQUITY FUND 4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of these financial statements are set out below. 4.1 Financial assets Classification Bearer plants are now in the scope of IAS 16 Property, Plant and Equipment for measurement and disclosure purposes. Therefore, a company can elect to measure bearer plants at cost. However, the produce growing on bearer plants will continue to be measured at fair value less costs to sell under IAS 41 Agriculture. A bearer plant is a plant that: is used in the supply of agricultural produce; is expected to bear produce for more than one period; and has a remote likelihood of being sold as agricultural produce. Before maturity, bearer plants are accounted for in the same way as selfconstructed items of property, plant and equipment during construction. The adoption of the amended standard is not likely to have an impact on the Fund's financial statements. Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) [effective for annual periods beginning on or after 1 January 2016]. The main consequence of the amendments is that a full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The adoption of these amendments is not likely to have an impact on the Fund s financial statements. Annual Improvements cycles (amendments are effective for annual period beginning on or after 1 January 2016). The new cycle of improvements contain amendments to the following standards: IFRS 5 Noncurrent Assets Held for Sale and Discontinued Operations. IFRS 5 is amended to clarify that if an entity changes the method of disposal of an asset (or disposal group) i.e. reclassifies an asset from held for distribution to owners to held for sale or vice versa without any time lag, then such change in classification is considered as continuation of the original plan of disposal and if an entity determines that an asset (or disposal group) no longer meets the criteria to be classified as held for distribution, then it ceases held for distribution accounting in the same way as it would cease held for sale accounting. IFRS 7 Financial Instruments Disclosures. IFRS 7 is amended to clarify when servicing arrangements are in the scope of its disclosure requirements on continuing involvement in transferred financial assets in cases when they are derecognized in their entirety. IFRS 7 is also amended to clarify that additional disclosures required by Disclosures: Offsetting Financial Assets and Financial Liabilities (Amendments to IFRS7) are not specifically required for inclusion in condensed interim financial statements for all interim periods. IAS 19 Employee Benefits. IAS 19 is amended to clarify that high quality corporate bonds or government bonds used in determining the discount rate should be issued in the same currency in which the benefits are to be paid. IAS 34 Interim Financial Reporting. IAS 34 is amended to clarify that certain disclosures, if they are not included in the notes to interim financial statements and disclosed elsewhere should be cross referred. The Fund classifies its financial assets in 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. The Management Company determines the classification of its financial assets at initial recognition. a) Loans and receivables These are nonderivative 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 profit from shortterm 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 nonderivative 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 NIT ISLAMIC EQUITY FUND 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 expensed as incurred 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 equity securities The investment of the Fund in equity securities is valued on the basis of closing quoted market prices available at the stock exchange. 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 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. Gain or loss is also recognised in the 'income statement' when financial assets carried at amortised cost are derecognised or impaired, and through the amortisation process Impairment of financial assets The carrying value of the Fund's assets are reviewed at each reporting date to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount of such asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment loss on investment other than 'available for sale' is recognised in the Income Statement whenever the carrying amount of investment exceeds its recoverable amount. If in a subsequent period, the amount of an impairment loss recognised decreases the impairment is reversed through the Income Statement. In case of equity securities classified as availableforsale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are 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 is reclassified from other comprehensive income to income statement. Impairment losses recognised on equity securities in the income statement are not reversed subsequently Derecognition Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and where the Fund has transferred substantially all risks and rewards of ownership Offsetting of financial assets and 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. 4.2 Cash and cash equivalents

11 NIT ISLAMIC EQUITY FUND NIT ISLAMIC EQUITY FUND 4.2 Cash and cash equivalents Cash and cash equivalents comprise of deposits and profit and loss sharing accounts maintained with banks. Cash equivalents are short term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short term cash commitments rather than for investments and other purposes. 4.9 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. 4.3 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. 4.4 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 or cancelled or expired. 4.5 Preliminary expenses and floatation costs Preliminary expenses and floatation costs (formation cost) represent expenditure incurred prior to the commencement of operations of the Fund and include underwriting commission, commission to the bankers to the issue, brokerage paid to the members of the stock exchanges and other expenses. These costs are being amortised over a period of five years starting from the end of the initial offering period as per the requirements set out in the Trust Deed of the Fund and NBFC regulations. 4.6 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. 4.7 Taxation The income of the Fund is exempt from income tax as per 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 year, as reduced by capital gains, whether realised or unrealised, is distributed among the unit holders, provided that for the purpose of determining distribution of not less than 90% of its accounting income for the year, the income distributed through bonus units shall not be taken into account. 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 avail the tax exemption in future years by distributing at least ninety percent of its accounting income for the year as reduced by capital gains, whether realised or unrealised, to its unit holders every year. 4.8 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 / Management Company during business hours on the date on which the funds are actually realized against application. The offer price represents the net assets 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. Units redeemed are recorded at the redemption price, applicable to units for which the distributors receive redemption applications during business hours of that day. The redemption price represents the net assets value per unit as of the close of the business day less any backend load, any duties, taxes, charges on redemption and any provision for transaction costs, if applicable. The An equalisation element of income account / (loss) calledand the capital 'element gains of income / (losses) / (loss) included andin capital the prices gains of / units (losses) issued included less those in prices in units of units redeemed issuedto less the extent those in that units is represented redeemed' isby created, income in earned orderduring to prevent the period the dilution is recognised of per in unit income statement and distribution and to the of extent income that already it is represented paid out by on unrealised redemption. appreciation / (diminution) arising during the period on available for sale securities is included in distribution statement Net assets value per unit The net assets value (NAV) per unit, as disclosed on 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 period end Revenue recognition Realised gains / (losses) arising on sale of investments are included in the income statement on the date at which the transaction takes place. Unrealised appreciation / (dimunition) arising on remeasurement of investments classified as available for sale are included in the statement of comprehensive income in the period in which they arise. Dividend income is recognised when the right to receive dividend is established i.e. on the date of book closure of the investee company / institution declaring the dividend. Markup / return on bank deposits is recognised using effective yield method Proposed distributions Dividend / distributions are recognised in the financial statements in the period in which such distributions are declared / approved. 5 BANK BALANCES These represent balances with banks in savings accounts carrying markup rates ranging from 3.14% to 6.85% per annum. 6 INVESTMENTS 2015 Available for sale Listed equity securities 6.1 3,163, Available for sale Listed equity securities Name of the investee Company Purchases during the period Sales during the period As at 30 June 2015 Cost as at 30 June 2015 Market value as at 30 June 2015 Market value as a percentage of net assets Market value as a percentage of investments (%) Percentage of paidup capital of the investee company held COMMERCIAL BANKS Meezan Bank Limited 686, ,500 28,385 28, , ,500 28,385 28, TEXTILE COMPOSITE Nishat Mills Limited 70,000 70,000 70,000 70,000 CEMENT D. G. Khan Cement Company Limited 823, ,000 Fauji Cement Company Limited 4,247,500 4,247, , , Lucky Cement Limited 805, , , , ,876, ,000 5,053, , ,

12 NIT ISLAMIC EQUITY FUND NIT ISLAMIC EQUITY FUND Name of the investee Company Purchases during the period Sales during the period As at 30 June 2015 Cost as at 30 June 2015 Market value as at 30 June 2015 Market value as a percentage of net assets Market value as a percentage of investments Percentage of paidup capital of the investee company held (%) POWER GENERATION & DISTRIBUTION Hub Power Company Limited 1,574,500 1,574, , , Kot Addu Power Company Limited 1,862,500 1,862, , , ,437,000 3,437, , , OIL & GAS MARKETING COMPANIES Pakistan State Oil Company Limited 684, , , , , , , , OIL & GAS EXPLORATION COMPANIES Oil & Gas Development Company Limited 406, ,800 75,984 72, Pakistan Oilfields Limited 249, ,800 97, , Pakistan Petrolenum Limited 822, , , , ,479,300 1,479, , , AUTOMOBILE ASSEMBLER Honda Atlas Car Limited 279, ,000 63,236 61, Indus Motor Copmany Limited 39,450 39,450 50,684 49, Millat Tractors Limited 16,750 16,750 11,541 11, Pak Suzuki Motor Company Limited 59,500 59,500 26,183 25, , , , , FERTILIZERS Dawood Herculus Corporation Limited 11,000 11,000 1,212 1, Engro Corporation Limited 1,317,400 1,317, , , Engro Fertilizers Limited 2,394,000 2,394, , , Fatima Fertilizer Company Limited 1,044,000 1,044,000 40,025 40, Fauji Fertilizer Bin Qasim Limited 2,951,000 2,951, , , Fauji Fertilizer Company Limited 2,489,600 2,489, , , ,207,000 10,207,000 1,137,034 1,180, PHARMACEUTICALS Abbot Laboatories (Pakistan) Limited 47,900 47,900 29,994 31, Ferozsons Laboratories Limited 47,650 47,650 28,073 30, Glaxosmithkline Pakistan Limited 205, ,900 40,438 40, Searle Pakistan Limited 95,500 95,500 24,449 30, , , , , PAPER AND BOARD Packages limited 43,600 43,600 26,197 25, ,600 43,600 26,197 25, LEATHER AND TENNERIES Bata Pakistan Limited ,325 2, Service Industries Limited 6,600 6,600 5,243 5, ,240 7,240 7,568 7, FOOD AND PERSONAL CARE PRODUCTS Engro Foods Limited 1,161,500 1,161, , , Mitchell's Fruit Farms Limited 37,650 37,650 16,008 16, Shezan International Limited ,199,700 1,199, , , Total 24,482, ,000 23,589,990 3,060,922 3,163, Investments include shares with market value of Rs million which have been pledged with National Clearing Company of Pakistan Limited for guaranteeing settlement of the Fund's trades in accordance with Circular no. 11 dated 23 October 2007 issued by the Securities and Exchange Commission of Pakistan. 6.2 Net unrealised appreciation on remeasurement of 2015 investments classified as 'available for sale' Market value of investments 6.1 3,163,993 Less: Cost of investments 6.1 (3,060,922) 103,071 7 DIVIDEND AND PROFIT RECEIVABLE 2015 Dividend receivable 2,797 Profit receivable on savings accounts 7,784 10,581 8 PRELIMINARY EXPENSES AND FLOATATION COSTS Incurred during the period 5,000 Less: amortisation during the period (121) Balance at end of the period 4,879 9 SECURITY DEPOSITS Central Depository Company of Pakistan Limited 100 National Clearing Company of Pakistan Limited 2,500 2, PAYABLE TO NATIONAL INVESTMENT TRUST LIMITED MANAGEMENT COMPANY 10.1 Preliminary expenses and floatation costs represent expenditure incurred prior to the commencement of operations of the Fund and have been restricted to Rs. 5 million as per the requirement of the Trust Deed. These expenses are being amortised over a period of five years commencing from 18 May 2015 in accordance with the requirement of clause of the Trust Deed of the Fund. Management remuneration ,518 Sindh Sales Tax ,830 Preliminary expenses and floatation costs 5,000 Others 2,645 19,993 Under the provisions of the NBFC Regulations, 2008, the Management Company of the Fund is entitled to a remuneration during the first five years of the Fund, of an amount not exceeding three percent of the average annual net assets of the Fund and thereafter of an amount equal to two percent of such assets of the Fund. The Management Company has charged its remuneration at the rate of 3 percent per annum of the average annual net assets of the Fund for the current period. The remuneration is paid on a monthly basis in arrears. The Sindh Government has levied Sindh Sales Tax at the rate of 15% on the remuneration of the Management Company through Sindh Sales Tax Act, 2011 effective from 01 July PAYABLE TO CENTRAL DEPOSITORY COMPANY OF PAKISTAN LIMITED TRUSTEE Trustee remuneration 432 Custodian charges All the shares are fully paid up ordinary shares of Rs. 10 each unless otherwise stated The Trustee is entitled to a monthly remuneration for services rendered to the Fund under the provisions of the Trust Deed as per the tariff specified therein, based on the daily net assets of the Fund.