FUND NAME NAME OF AUDITORS LIST OF BANKERS INFORMATION FUND NAME NIT - State Enterprise Fund NAME OF AUDITORS A.F. Ferguson & Co. Chartered Accountants LIST OF BANKERS Allied Bank

CORPORATE INFORMATION

FUND NAMENIT - State Enterprise Fund

NAME OF AUDITORSA.F. Ferguson & Co. Chartered Accountants

LIST OF BANKERSAllied Bank Limited

Bank Al Habib Limited

NIB Bank Limited

Standard Chartered Bank (Pakistan) Limited

Summit Bank Limited (Formerly Arif Habib Bank Limited)

United Bank Limited

LoyaltytoEnterprises

Launched to support the stock market, NIT-SEF has given

a staggering outperformance of 42.40% against the

KSE-100 Index benchmark since the year of inception till

June 30, 2012. NIT-SEF has proven the management’s

skill set and expertise in Fund Management during

depressed market conditions. With investments in only

eight blue chip state owned enterprises, NIT-SEF has re-

invented the concept of investments in Equity Market

amidst a volatile environment.

People are made to be loved and things are made to be used. The confusion in this world is that people are being used and things are being loved.

Annual Report 2012

NIT-SEF Objective

The objective is to take advantage of market conditions and acquire Eligible Stocks, and write Put Options in favor of Foreign and / or local investors as may be allowed by the Commission on the guarantee of Government, on such stocks thereby creating an opportunity for investors to achieve superior returns in the long run.

Profile of Investment Manager

National Investment Trust Ltd. (NITL) is the first Asset Management Company of Pakistan, formed in 1962. NITL is the largest asset management company of Pakistan with approximately Rs. 74 billion assets under management. The family of Funds of NIT comprises of five funds including 3 equity Funds and 2 fixed income nature Funds. NIT’s distribution network comprises of 22 NIT branches, various Authorized bank branches all over Pakistan and Arab Emirates Investment Bank (AEIB) in Dubai (UAE). 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 Pakistan Credit Rating Agency, which reflects the company’s very strong capacity to manage the risks inherent in the asset management business and the asset manager meets very high investment management industry standards and benchmarks. All Investment decisions are taken by the Investment Committee of NITL.

Fund Information - NIT-SEF

Fund Performance Analysis:

• Launch date 13th January 2009 • Minimum Investment: Rs. 5,000

• Type Open End Equity Fund • Management Fee: 1.50%

• Fund Manager Manzoor Ahmed • Front End Load: 0.00%

• Fund Size as on June 30, 2012 Rs. 20.830 Billion • Back End Load: 0.00%

• Par Value Rs. 50 • Auditors: A.F. Ferguson & Co. Chartered Accountants

• NAV/unit Rs. 89.32 • Trustee: Central Depository Company of Pakistan Ltd

• Pricing Mechanism Forward Pricing • Risk Profile Moderate / High

• Benchmark KSE 100 Index • Fund Rating (Ratings based on 31st Dec 2011)

2-Star (Short Term) Ranking (by PACRA)

2011-12 2010-11

Opening Net Assets (Rs. in billion) 26.37 24.79

Opening NAV /unit (Rs.) (Ex Div) 84.21 83.41

Ending Net Assets (Rs. in billion) 20.83 26.37

Ending NAV/unit (Rs.) 89.32 95.71

Cash Distribution / unit (Rs.) -

Bonus Distribution / unit (Rs.) Interim -

Bonus Distribution / unit (Rs.) Final 4.65 11.50

Dividend Yield (%) 5.52% 13.79%

Capital Growth (%) 0.55% 0.96%

Total Return (%) 6.07% 14.75%

Maximum Funds under management during the year (Rs. in billion) 26.80 29.50

NIT - STATE ENTERPRISE FUNDFUND MANAGER REPORT2011-2012

Asset Allocation

Keeping in view the market conditions the Fund has been slightly changing its asset allocation during the year. As on 30th June 2012, the Fund was invested in 85.99% in Equities whereas the remaining exposure was in Treasury Bills and cash. The asset allocation position of the Fund as on 30-06-2012 is depicted in the pie chart below:

Sector Wise Breakdown of Equity Portfolio

Sector-wise breakdown of Fund’s Equity portfolio as % of total assets is given below:

During the equity market crises of 2008, the Government of Pakistan decided to launch the State Enterprises Fund under the management of NIT for the specific purpose of buying stocks of companies in which GOP has substantial shareholding. The Fund was mandated to invest in eight state owned/controlled enterprises irrespective of sector specific allocation limits. Financing of Rs. 17.2 billion was availed by NITL from institutions for the purpose of investments in NIT SEF pursuant to establishment of NIT SEF.

During the year, the Fund continued to play its role in line with its given mandate. The Fund booked substantial capital gains by offloading some of its holdings at opportune moments. The Fund booked capital gains of Rs. 1.7 billion during the year and the generated liquidity was mostly utilized to repay the lenders of the Fund.

Repayment of Loan to Financier

The financing facilities were due for payment on January 1, 2012 as Government Guarantee expired on December 31, 2011. NITL re-paid Rs.5.0 billion to one of the lenders on March 26, 2012 from the internally generated cash, thereby reducing the Government Guarantee of


June 2012

Cash5.15%

T.Bills8.41%

Equities85.99%

Others0.46%

OIL & GAS

BANKS

GAS WATER AND MULTIUTILITIES

FIXED LINE TELECOMMUNICATION

ELECTRICITY

57%

15%

07%

04%

03%

99

98

Annual Report 2012

Relative Performance of NAV vs. KSE 100

The Net Asset Value of units of NIT-SEF increased by 6.1% YoY from Rs.84.21 as on June 30, 2011 (EX-Dividend) to Rs.89.32 as on June 30, 2012 compared to the benchmark KSE-100 index which increased by 10.45% during the period under review. However, since inception till 30th June 2012, NIT- SEF has shown a return of 171% as against the KSE-100 return of 128%, thus significantly outperforming the benchmark index by 43%. During the year the performance of the Fund remained constrained due to the fact that SEF repaid Rs.5.0 billion (approximately 28% of the total Fund size) to one of the lenders from the internally generated cash. During the year the Fund has been on selling side to generate the required liquidity at opportune times and liquidity generated was mostly utilized in repayment of loans.

WWF Disclosure:

As of 30th June 2012, the Scheme has maintained provisions against Workers’ Welfare Fund’s liability to the tune of Rs. 220.82 million, if the same were not made the NAV per unit/ year to date return of the Scheme would be higher by Rs. 0.95/1.13%.

Dividend declaration for the FY11-12:

Net income of the Fund (excluding impairment losses) stood at Rs.1,552 million as on 30th June 2012 against Rs.3,536 million during the last year. In FY 12, the Fund realized capital gains of Rs. 1,658 million as compared to Rs. 1,252 million last year showing a healthy growth of 32%, whereas, the dividend income earned by the Fund in FY12 stood at Rs. 1,259 million as against 1,342 million earned during the previous year. NITL declared final bonus @ 9.3% (which translates into Rs. 4.65 per unit) on the face value of Rs.50/- for unit holder of NIT-SEF for the year ended June 30, 2012.

principal facility from Rs.20 billion to Rs.12.2 billion. The Government has approved extension of the guarantee for the balance amount of Rs12.2 billion for a further period of two years.

Top Ten Holdings

Top ten holdings of the Fund’s portfolio as on June 30th 2012 are as follows:

(At present the sole investor of NIT SEF is NITL as this Fund has not been offered to the general public as yet.)

Stock Market & Fund Performance Review

The Pakistani bourse has posted a respectable gain of 10.4% in the outgoing fiscal year ended June 2012, with the benchmark KSE 100 Index closing at 13,801 points. The aggregate market capitalization increased to PKR 3.51tn from PKR 3.28tn, registering a surge of 7%. The average daily trading volumes also improved to reach 130mn shares compared to 95mn shares last year. If we analyse the KSE-100 index performance into two halves of the year we find that the market remained very volatile during 1HFY12 and posted negative return of 6% with low average daily volumes of 62mn shares. However, during 2HFY12, the market bounced back strongly and posted a 22% return with considerably higher daily average trading volume of 196mn shares.

The 1st half of the fiscal year started in a bearish mode due to persistent outflow of foreign portfolio investors, precarious law and order situation in parts of the country and spillover impact from a slump in global equity markets. Cut of 200 bps in discount rate by SBP, (50 bps in July and then 150 bps in October) led to an exuberant reaction of investors. However, concerns over the massive gas crisis severely affecting the fertilizer sector, strained US-Pakistan relations in the wake of Salala check post incident, continued uncertainty on the political front and the continuing foreign outflows did not allow the market to generate an expected bullish rally. During 1HFY12, foreign investors offloaded shares worth US$157.40 million as opposed to an inflow of US$249.99 million during the same period last year.

However, market sharply bounced back in the later half of the fiscal year. Overall, the KSE-100 index during 2HFY12 surged by 2,453 points or 21.27%. Average daily turnover registered a major upsurge with 196.40mn shares. The catalyst for the major recovery was the much awaited promulgation of ‘Capital Gains Tax Ordinance 2012’ which was signed by the President on 24th April 2012. The Ordinance froze CGT rates for a period of two years and amnesty scheme was also introduced by virtue of which no enquiry as to the nature and source of the amount invested shall be made for any investment made in the stock market, which was yet another pivotal factor behind the market’s improved liquidity. In another major development during the quarter, the joint sitting of the Parliament unanimously passed the “Stock Exchange (Corporatization, Demutualization and Integration) Bill, 2009 for the growth and strengthening of capital markets in Pakistan. The landmark legislative move would affect a balance among interest of different stakeholders in the corporate and governance structure of a stock exchange. The federal budget FY 2012-13 was another major event, where the budget document confirmed the earlier issued Presidential Ordinance regarding CGT by incorporating it into Finance bill 2012-13. The benchmark KSE-100 index finally settled at 13,801 points as of June 29, 2012 with a return of 10.4% for FY2011-12.

Oil & Gas Development Co. Ltd. Paksitan Telecommunication Co. Ltd.

Pakistan Petroleum Ltd. Sui Southern Gas Co. Ltd.

National Bank of Pakistan Kot Addu Power Company Ltd.

Pakistan State Oil Sui Northern Gas Pipelines Ltd.

Categorization of Unit Holders By Size - (JUNE 2012)

Category NIT-SEF Unit Holders % of Holding

Institutional Investors 1 100%

TOTAL 1 100.00%



15,000

13,000

11,000

9,000

7,000

5,000

29-J

ul-1

1

19-A

ug-1

1

09-S

ep-1

1

30-S

ep-1

1

21-O

ct-1

1

11-N

ov-1

1

02-D

ec-1

1

23-D

ec-1

1

13-J

an-1

2

03-F

eb-1

2

24-F

eb-1

2

16-M

ar-1

2

06-A

pr-1

2

27-A

pr-1

2

18-M

ay-1

2

08-J

un-1

2

29-J

un-1

2

01-J

ul-1

1

KSE-100 NAV OF SEF

101

100

FY 10 FY 11 FY 12 Return since inception(25th July 2008 to 30th June 2012)

NIT SEF (%) 43.40% 14.75% 6.07% 47.81%

KSE 100 (%) 35.74% 28.54% 10.45% 23.70%

Dividend Per Unit (Rs.) - - - -

Bonus Distribution on the face value of Rs. 50 38.24% 23.00% 9.30%

Annual Report 2012

TRUSTEE REPORT

TRUSTEE REPORT TO THE UNIT HOLDERS

Report of the Trustee pursuant to Regulation 41(h) and Clause 9 of Schedule V of the Non-Banking Finance Companies and Notified Entities Regulations, 2008

We, Central Depository Company of Pakistan Limited, being the Trustee of NIT-State Enterprise 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 year ended June 30, 2012 in accordance with the provisions of the

following:

(i) Limitations imposed on the investment powers of the Management Company under the constitutive documents of the Fund;

(ii) The pricing, issuance and redemption of units are carried out in accordance with the requirements of the constitutive documents of the Fund; and

(iii) The Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003, the Non-Banking Finance Companies and Notified Entities Regulations, 2008 and the constitutive documents of the Fund.

Sd/-

Muhammad Hanif JakhuraChief Executive OfficerCentral Depository Company of Pakistan Limited

Karachi, August 30, 2012

Economic Review:

The FY 2011-12 happened to be another challenging year for the Pakistan’s economy, affected by natural disasters and structural weaknesses including energy crisis, fiscal indiscipline, poor law and order situation, precipitous decline in saving & investment, decrease in coalition support funds. Budget deficit remained high, driven by substantial subsidies and losses of state-owned enterprises and low tax revenues. However the economy of Pakistan reflected some recovery this year as GDP growth rate increased from 3% in FY 2011 to 3.7% in FY 2011-12.

Encouragingly, the agriculture sector posted a healthy growth of 3.13% as compared to 2.4% in the last year mainly on the back of 4.04% growth in the livestock sector (highest contribution in the agricultural sector) and 3% growth in major crops.

The industrial sector grew by 3.6% compared to 3.1% in the previous year, showing some improvement during FY 2011-12. In particular the mining and construction sector reflected a healthy growth of 4.38% and 6.46%, respectively. Large Scale Manufacturing, which comprises of 11.9% of the GDP, clocked a 1.78% growth in FY 12, whereas small scale manufacturing once again showed the largest growth rate of 7.5% in FY 2011-12.

The services sector grew by 4.02% in FY 2011-12 in comparison with 4.45% in FY 2010-11. Within the services sector, the wholesale and retail trade sector grew at 3.58%, while, Finance and insurance sector recorded healthy growth of 6.53% in FY 2011-12.

During FY 12, the current account deficit stood at $ 4.7 billion. Overall, exports remained almost stagnant at $ 24.6 billion during FY 2011-12 as compared to $ 25.3 billion last year. Compared to this, imports during the fiscal year increased by 12% compared to the same corresponding period, reaching $ 40.1 billion. It was largely a result of high oil prices and import of fertilizers. Pinpointing main factors behind the decline in exports, energy crisis was the major reason that resulted in negative impact. During FY 2011-12, worker’s remittances grew by 20.2% at $ 13.1 billion which helped in containing current account balance up to a great extent.

Inflation declined during the year from 13.8% in FY 2010-11 to 11% in the current year. As a result of of which SBP’s policy rate was cut by a cumulative 200 bps to 12.0% during the fiscal year.

A steep decline in Foreign Direct Investment was seen during the year, which tumbled from $ 1.6 billion during FY 2010-11 to only $ 0.8 billion in the current year owing to a multiple of factors. On the other hand, foreign portfolio investment also recorded a net outflow of US$ 71 million as compared to the inflow of US$ 365 million in the last year.

Another major concern on Pakistan’s external accounts is the commencement of repayment to the IMF for its latest Stand By Agreement (SBA). The declining reserves continue to be a source of concern for the economy as in FY 13 Pakistan is expected to repay USD 3.9bn to the IMF, having already paid back USD 1.2bn during FY 12.

Overall the economic prospects are challenging given a weak global economic environment, domestically widening fiscal deficit and declining foreign exchange reserves. The foreign exchange reserves position will retain paramount importance with investors to keep a close watch on US-Pakistan relations. Overall economy is expected to perform relatively better, however, improved prospects for Pakistan’s economy, will largely depend on the implementation of measures to address key problems such as inflation, the budget deficit, law and order situation and the Energy crisis

(Economic data source: Economic Survey of Pakistan & SBP Website)

Other Disclosures under NBFC Regulations 2008:

The Fund Manager hereby makes the following disclosures as required under the NBFC Regulations 2008;

a. The Management Company or any of its delegates did not receive any soft commission (goods & services) from any of its brokers / dealers by virtue of transactions conducted by the Fund.

b. There was no unit split undertaken during the year.


103

102

Annual Report 2012

Note 2012 2011-----------Rupees in '000-----------

ASSETS

Bank balances 4 1,087,449 1,422,430 Investments 5 19,934,795 24,844,876 Receivable against sale of investments - 50,263 Dividend and profit receivable 6 95,984 288,385 Unamortised formation costs 307 507

Total assets 21,118,535 26,606,461

LIABILITIES

Payable to National Investment Trust Limited - Management Company 7 29,656 16,444 Payable to Central Depository Company of Pakistan Limited - Trustee 8 534 683 Payable to Securities and Exchange Commission of Pakistan 9 22,477 25,427 Payable against purchase of investments 14,153 - Formation costs payable to management company 1,000 1,000 Accrued expenses and other liabilities 10 221,196 196,763

Total liabilities 289,016 240,317

NET ASSETS 20,829,519 26,366,144

Unit holders' fund (as per statement attached) 20,829,519 26,366,144

Contingencies and Commitments 11

Number of units in issue 233,199,153 275,478,665

Net asset value per unit 89.32 95.71

The annexed notes 1 to 28 form an integral part of these financial statements.

------------Number of units-----------

--------------Rupees-----------------

For National Investment Trust Limited(Management Company)

Sd/- Sd/- Sd/-

Managing Director Director Director

NIT - STATE ENTERPRISE FUNDSTATEMENT OF ASSETS AND LIABILITIESAS AT JUNE 30, 2012

AUDITORS’ REPORT

INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of NIT – STATE ENTERPRISE FUND (here in after referred to as “The Fund”), which comprise the statement of assets and liabilities as at June 30, 2012, the related income statement , statement of comprehensive income, distribution statement, statement of movement in unit holders’ fund and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management Company’s responsibility for the financial statements

The Management Company of the Fund is responsible for the preparation and fair presentation of these financial statements in accordance with approved accounting standards as applicable in Pakistan, and for such internal control as management determines is necessary to enable the preparation of financial Statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the International Standard on Auditing as applicable in Pakistan. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control . An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion the financial statements give a true and fair view of the financial position of the Fund as at June 30, 2012, and of its financial performance, cash flows and transactions for the year then ended in accordance with approved accounting standards as applicable in Pakistan.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In our opinion, the financial statements have been prepared in all material respects in accordance with the relevant provisions of the Non-Banking Finance Companies and Notified Entities Regulations, 2008.

Sd/-

A.F. Ferguson & Co.Chartered Accountants Engagement Partner: Rashid A. JaferDated: August 13, 2012Karachi

105

104

Annual Report 2012

Note 2012 2011

INCOME

Dividend income 1,258,761 1,341,797 Capital gains 1,658,007 1,252,181 Income from government securities 320,479 507,624 Profit on bank deposits 262,401 173,633

Total income 3,499,648 3,275,235

EXPENSESImpairment loss on equity securities classified as 'available for sale' 5.5 351,154 210,899 Remuneration of National Investment Trust Limited

- Management Company 7.1 245,422 201,017 Sindh Sales tax on Management Company's remuneration 7.2 39,268 - Remuneration of Central Depository Company of Pakistan

Limited - Trustee 8.1 7,420 8,341 Annual fee - Securities and Exchange Commission of Pakistan 9.1 22,477 25,427 Custodian charges of Central Depository Company of

Pakistan Limited 51 82 Settlement and bank charges 348 361 Amortisation of formation costs 200 200 Auditors' remuneration 12 566 558 Printing and stationery expenses 100 100 Other charges 150 152

Total expenses 667,156 447,137

Net income from operating activities 2,832,492 2,828,098

Element of income / (loss) and capital gains / (losses) included in prices of units issued less those in units redeemed - Net (1,607,154) 565,162

Provision for Workers' Welfare Fund 13 24,507 67,864

Net income for the year before taxation 1,200,831 3,325,396

Taxation 14 - -

Net income for the year after taxation 1,200,831 3,325,396

Earnings per unit 15

With impairment loss on equity securities classified as 'available for sale' 4.27 11.56

Without impairment loss on equity securities classified as 'available for sale' 5.51 12.29


--------Rupees in '000---------

--------Rupees---------

Note 2012 2011


Other comprehensive income for the year

Unrealised (diminution) / appreciation on re-measurement of investments classified as 'available for sale' 5.4 (1,455,479) 852,740

Total comprehensive income for the year (254,648) 4,178,136


----------------------------Rupees in '000----------------------------------


Sd/- Sd/- Sd/-



Sd/- Sd/- Sd/-


NIT - STATE ENTERPRISE FUNDINCOME STATEMENTFOR THE YEAR ENDED JUNE 30, 2012

NIT - STATE ENTERPRISE FUNDSTATEMENT OF COMPREHENSIVE INCOMEFOR THE YEAR ENDED JUNE 30, 2012

107

106

Annual Report 2012

Note 2012 2011

Undistributed income brought forward comprising:

Realised income 3,606,555 4,059,357

Unrealised income - - 3,606,555 4,059,357

Final distribution by issue of bonus units: - Rs 11.50 per unit on July 5, 2011 for the year ended June 30, 2011

(2011: Rs 15 per unit on July 5, 2010 for the year ended June 30, 2010) (3,168,005) (3,778,198)


Undistributed income carried forward 1,639,381 3,606,555

Undistributed income comprising:

Realised income 1,639,381 3,606,555

Unrealised income - -

1,639,381 3,606,555


----------------------------Rupees in '000----------------------------------2012 2011

Net assets at the beginning of the year 26,366,144 24,786,265

Issue of 28,383,234 units (2011: 34,634,187 units) 2,370,000 3,400,000 Redemption of 108,283,036 units (2011: 56,332,066 units) (9,259,131) (5,433,095)

(6,889,131) (2,033,095)

Issue of 37,620,290 bonus units (2011: 45,296,699) 3,168,005 3,778,198

22,645,018 26,531,368 Element of income / (loss) and capital gains / (losses) included in

prices of units issued less those in units redeemed - Net - transferred to income statement 1,607,154 (565,162)

Unrealised (diminution) / appreciation on re-measurement of investments classified as 'available for sale' - Note 5.4 (1,455,479) 852,740

Capital gains 1,658,007 1,252,181

Other net income / (loss) for the year (457,176) 2,073,215

Final distribution by issue of bonus units: - Rs 11.50 per unit on July 5, 2011 for the year ended June 30, 2011

(2011: Rs 15 per unit on July 5, 2010 for the year ended June 30, 2010) (3,168,005) (3,778,198)

(1,967,174) (452,802)

Net assets at the end of the year 20,829,519 26,366,144


----------------------------Rupees in '000----------------------------


Sd/- Sd/- Sd/-

Managing Director Director Director For National Investment Trust Limited(Management Company)

Sd/- Sd/- Sd/-


NIT - STATE ENTERPRISE FUNDDISTRIBUTION STATEMENTFOR THE YEAR ENDED JUNE 30, 2012

NIT - STATE ENTERPRISE FUNDSTATEMENT OF MOVEMENT IN UNIT HOLDERS’ FUNDFOR THE YEAR ENDED JUNE 30, 2012

109

108

Annual Report 2012

Note 2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES

Net Income for the year before taxation 1,200,831 3,325,396

Adjustments: Dividend income (1,258,761) (1,341,797) Profit on bank deposits (262,401) (173,633) Element of income / (loss) and capital gains / (losses) included in

prices of units issued less those in units redeemed - Net - transferred to income statement 1,607,154 (565,162)

Impairment loss on equity securities classified as 'available for sale' 351,154 210,899 Amortisation of formation cost 200 200 Remuneration of National Investment Trust Limited - Management Company 245,422 201,017 Sindh Sales tax on Management Company's remuneration 39,268 -

1,922,867 1,656,920 Decrease / (increase) in assets

Investments 3,103,448 (5,316,381) Receivable against sale of investments 50,263 (50,263)

3,153,711 (5,366,644) Increase / (decrease) in liabilities

Payable to Central Depository Company of Pakistan Limited - Trustee (149) 32 Payable to Securities and Exchange Commission of Pakistan (2,950) 4,823 Payable against purchase of investments 14,153 (58,734) Accrued expenses and other liabilities 24,433 67,726

35,487 13,847 Remuneration paid to National Investment Trust Limited - Management Company

inclusive of sales tax (271,478) (200,232) Profit received on bank deposits 260,333 224,698 Dividends received 1,453,230 1,240,008 Net cash generated from / (used in) operating activities 6,554,150 (2,431,403)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts / (payments) made against issue / redemption of units - Net (6,889,131) (2,883,308) Net cash used in financing activities (6,889,131) (2,883,308)

Net decrease in cash and cash equivalents during the year (334,981) (5,314,711)

Cash and cash equivalents at the beginning of the year 1,422,430 6,737,141

Cash and cash equivalents at the end of the year 4 1,087,449 1,422,430


----------------------------Rupees in '000----------------------------------1 LEGAL STATUS AND NATURE OF BUSINESS

1.1

1.2

1.3

1.4

1.5

--------

2 BASIS OF PREPARATION

2.1 Statement of compliance

2.2

a)

b)

The NIT - State Enterprise Fund (the Fund) was established under a Trust deed executed between NationalInvestment 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) onOctober 22, 2008 in accordance with the Non-Banking Finance Companies (Establishment and Regulation) Rules,2003 (NBFC Rules) and the trust deed was executed on October 24, 2008. The units of the Fund were initiallyissued at Rs 50 per unit.

The Management Company of the Fund has been classified as a Non-Banking Finance Company (NBFC) under theNBFC Rules, 2003 and has obtained the requisite license from the Securities and Exchange Commission ofPakistan (SECP) to undertake Asset Management Services. The registered office of the Management Company issituated at 6th floor, National Bank of Pakistan Building I. I. Chundrigar Road, Karachi.

The Fund is an open-ended mutual fund. Currently, all units of the Fund are owned by NITL.

The core objective of the Fund is to take advantage of market conditions, creating an opportunity for investors toachieve superior returns in the long run by acquiring a selection of equity securities of the Eligible Stocks and writePut Options in favour of foreign investors and / or local investors as may be allowed by the Securities and ExchangeCommission of Pakistan, on the guarantee of the Government of Pakistan. The Eligible Stocks comprise of thefollowing companies:

Pakistan Credit Rating Agency Limited (PACRA) has assigned a "2-star" rating to the Fund based on theperformance during the period ended December 31, 2011.

PACRA has assigned an asset manager rating of " AM2- " to the Management Company.

National Bank of Pakistan Kot Addu Power Company Limited Pakistan State Oil Company Limited Oil & Gas Development Company Limited

Standards, interpretations and amendments to published approved accounting standards that are effectivein the current year:

The following standards, amendments and interpretation to approved accounting standards have been publishedand are mandatory for the Fund's accounting period beginning on or after July 1, 2011:

Pakistan Petroleum Limited Sui Southern Gas Company Limited Sui Northern Gas Pipelines Limited Pakistan Telecommunication Company Limited

These financial statements have been prepared in accordance with approved accounting standards as applicable inPakistan. 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, therequirements of the Trust Deed, the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003(the NBFC Rules), the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFCRegulations) and directives issued by the Securities and Exchange Commission of Pakistan (SECP). Wherever therequirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or directives issued by SECP differ with therequirements of IFRS, the requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or the directivesissued by SECP prevail.

IFRS 7, 'Financial Instruments: Disclosures'. This amendment is effective from January 01, 2011. Theamendment emphasizes the interaction between quantitative and qualitative disclosures about the nature andextent of risks associated with financial instruments. The amendment does not have any significant impact onthe Fund's financial statements, other than certain additional disclosures.

IFRS 7, 'Financial instruments: Disclosures'. This amendment is effective from July 1, 2011. The amendmentaims to promote transparency in the reporting of transfer transactions and improve users' understanding of therisk exposures relating to transfers of financial assets and the effect of those risks on an entity's financialposition, particularly those involving securitisation of financial assets. The amendment does not have anyimpact on the Fund's financial statements during the current year.


Sd/- Sd/- Sd/-


NIT - STATE ENTERPRISE FUNDCASH FLOW STATEMENTFOR THE YEAR ENDED JUNE 30, 2012

NIT - STATE ENTERPRISE FUNDNOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTSFOR THE YEAR ENDED JUNE 30, 2012

111

110

Annual Report 2012

1 LEGAL STATUS AND NATURE OF BUSINESS

1.1

1.2

1.3

1.4

1.5

--------

2 BASIS OF PREPARATION

2.1 Statement of compliance

2.2

a)

b)

The NIT - State Enterprise Fund (the Fund) was established under a Trust deed executed between NationalInvestment 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) onOctober 22, 2008 in accordance with the Non-Banking Finance Companies (Establishment and Regulation) Rules,2003 (NBFC Rules) and the trust deed was executed on October 24, 2008. The units of the Fund were initiallyissued at Rs 50 per unit.

The Management Company of the Fund has been classified as a Non-Banking Finance Company (NBFC) under theNBFC Rules, 2003 and has obtained the requisite license from the Securities and Exchange Commission ofPakistan (SECP) to undertake Asset Management Services. The registered office of the Management Company issituated at 6th floor, National Bank of Pakistan Building I. I. Chundrigar Road, Karachi.

The Fund is an open-ended mutual fund. Currently, all units of the Fund are owned by NITL.

The core objective of the Fund is to take advantage of market conditions, creating an opportunity for investors toachieve superior returns in the long run by acquiring a selection of equity securities of the Eligible Stocks and writePut Options in favour of foreign investors and / or local investors as may be allowed by the Securities and ExchangeCommission of Pakistan, on the guarantee of the Government of Pakistan. The Eligible Stocks comprise of thefollowing companies:

Pakistan Credit Rating Agency Limited (PACRA) has assigned a "2-star" rating to the Fund based on theperformance during the period ended December 31, 2011.

PACRA has assigned an asset manager rating of " AM2- " to the Management Company.

National Bank of Pakistan Kot Addu Power Company Limited Pakistan State Oil Company Limited Oil & Gas Development Company Limited

Standards, interpretations and amendments to published approved accounting standards that are effectivein the current year:

The following standards, amendments and interpretation to approved accounting standards have been publishedand are mandatory for the Fund's accounting period beginning on or after July 1, 2011:

Pakistan Petroleum Limited Sui Southern Gas Company Limited Sui Northern Gas Pipelines Limited Pakistan Telecommunication Company Limited

These financial statements have been prepared in accordance with approved accounting standards as applicable inPakistan. 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, therequirements of the Trust Deed, the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003(the NBFC Rules), the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (the NBFCRegulations) and directives issued by the Securities and Exchange Commission of Pakistan (SECP). Wherever therequirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or directives issued by SECP differ with therequirements of IFRS, the requirements of the Trust Deed, the NBFC Rules, the NBFC Regulations or the directivesissued by SECP prevail.

IFRS 7, 'Financial Instruments: Disclosures'. This amendment is effective from January 01, 2011. Theamendment emphasizes the interaction between quantitative and qualitative disclosures about the nature andextent of risks associated with financial instruments. The amendment does not have any significant impact onthe Fund's financial statements, other than certain additional disclosures.


c)

d)

e)

- The circumstances likely to affect fair values of financial instruments and their classification; - Transfers of financial instruments between different levels of the fair value hierarchy; - Changes in classification of financial assets; and - Changes in contingent liabilities and assets.

2.3

a)

b)

c)

2.4 Critical accounting estimates and judgments

2.5 Accounting convention

The preparation of financial statements in conformity with approved accounting standards requires the use of certaincritical accounting estimates. It also requires the management to exercise its judgment in the process of applying theFund's accounting policies. Estimates and judgments are continually evaluated and are based on historicalexperience, including expectations of future events that are believed to be reasonable under the circumstances. Theareas where various assumptions and estimates are significant to the Fund's financial statements or where judgmentwas exercised in application of accounting policies principally relate to classification and valuation of investments(note 3.2 and note 5).

There are other new and amended standards and interpretations that are mandatory for accounting periodsbeginning on or after July 1, 2012 but are considered not to be relevant or do not have any significant effect on theFund's operations and are therefore not detailed in these financial statements.

There are other amendments to the standards and new interpretations that are mandatory for accounting periodsbeginning on or after July 1, 2011 but are considered not to be relevant or do not have any significant effect on theFund's operations and are therefore not detailed in these financial statements.


IAS 1, 'Presentation of financial statements' (effective January 1, 2011). The amendment clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. The amendment does not have any significant impact on the Fund's financial statements.

IAS 24 (revised), 'Related party disclosures', issued in November 2009. It superseded IAS 24, 'Related PartyDisclosures', issued in 2003. IAS 24 (revised) is mandatory for periods beginning on or after January 1, 2011.The revised standard clarifies and simplifies the definition of a related party and removes the requirement forgovernment-related entities to disclose details of all transactions with the government and other government-related entities. The revised standard does not have any impact on the Fund's financial statements.

IAS 34, 'Interim financial reporting' (effective January 1, 2011). The amendment provides guidance to illustratehow to apply disclosure principles in IAS 34 and adds disclosure requirements around:

IAS 32, 'Financial instruments: Presentation', (effective January 1, 2014). This amendment clarifies some of therequirements for offsetting financial assets and financial liabilities on the balance sheet. The management ofthe Fund is in the process of assessing the impact of this amendment on the Fund's financial statements.

Standards, interpretations and amendments to published approved accounting standards that are not yeteffective:

The following standards and amendments to standards have been published and are mandatory for accountingperiods beginning on or after July 1, 2012:

IAS 1, 'Financial statement presentation' (effective July 1, 2012). The main change resulting from theseamendments is a requirement for entities to group items presented in 'other comprehensive income' (OCI) onthe basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassificationadjustments). The amendments do not address which items are presented in OCI. The amendment will nothave any significant effect on the Fund's financial statements.

IFRS 7, 'Financial instruments: Disclosures' (effective January 1, 2013). This amendment reflects the joint IASBand FASB requirements to enhance current offsetting disclosures. These new disclosures are intended tofacilitate comparison between those entities that prepare IFRS financial statements and those that prepare USGAAP financial statements. The management of the Fund is in the process of assessing the impact of thisamendment on the Fund's financial statements.

c)

d)

e)

- The circumstances likely to affect fair values of financial instruments and their classification; - Transfers of financial instruments between different levels of the fair value hierarchy; - Changes in classification of financial assets; and - Changes in contingent liabilities and assets.

2.3

a)

b)

c)

2.4 Critical accounting estimates and judgments

2.5 Accounting convention

The preparation of financial statements in conformity with approved accounting standards requires the use of certaincritical accounting estimates. It also requires the management to exercise its judgment in the process of applying theFund's accounting policies. Estimates and judgments are continually evaluated and are based on historicalexperience, including expectations of future events that are believed to be reasonable under the circumstances. Theareas where various assumptions and estimates are significant to the Fund's financial statements or where judgmentwas exercised in application of accounting policies principally relate to classification and valuation of investments(note 3.2 and note 5).

There are other new and amended standards and interpretations that are mandatory for accounting periodsbeginning on or after July 1, 2012 but are considered not to be relevant or do not have any significant effect on theFund's operations and are therefore not detailed in these financial statements.

There are other amendments to the standards and new interpretations that are mandatory for accounting periodsbeginning on or after July 1, 2011 but are considered not to be relevant or do not have any significant effect on theFund's operations and are therefore not detailed in these financial statements.


IAS 1, 'Presentation of financial statements' (effective January 1, 2011). The amendment clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes to the financial statements. The amendment does not have any significant impact on the Fund's financial statements.

IAS 24 (revised), 'Related party disclosures', issued in November 2009. It superseded IAS 24, 'Related PartyDisclosures', issued in 2003. IAS 24 (revised) is mandatory for periods beginning on or after January 1, 2011.The revised standard clarifies and simplifies the definition of a related party and removes the requirement forgovernment-related entities to disclose details of all transactions with the government and other government-related entities. The revised standard does not have any impact on the Fund's financial statements.

IAS 34, 'Interim financial reporting' (effective January 1, 2011). The amendment provides guidance to illustratehow to apply disclosure principles in IAS 34 and adds disclosure requirements around:

IAS 32, 'Financial instruments: Presentation', (effective January 1, 2014). This amendment clarifies some of therequirements for offsetting financial assets and financial liabilities on the balance sheet. The management ofthe Fund is in the process of assessing the impact of this amendment on the Fund's financial statements.

Standards, interpretations and amendments to published approved accounting standards that are not yeteffective:

The following standards and amendments to standards have been published and are mandatory for accountingperiods beginning on or after July 1, 2012:

IAS 1, 'Financial statement presentation' (effective July 1, 2012). The main change resulting from theseamendments is a requirement for entities to group items presented in 'other comprehensive income' (OCI) onthe basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassificationadjustments). The amendments do not address which items are presented in OCI. The amendment will nothave any significant effect on the Fund's financial statements.

IFRS 7, 'Financial instruments: Disclosures' (effective January 1, 2013). This amendment reflects the joint IASBand FASB requirements to enhance current offsetting disclosures. These new disclosures are intended tofacilitate comparison between those entities that prepare IFRS financial statements and those that prepare USGAAP financial statements. The management of the Fund is in the process of assessing the impact of thisamendment on the Fund's financial statements.

2.6 Functional and presentation currency

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1

3.2 Financial assets

3.2.1 Classification

a) Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

b) Financial assets at fair value through profit or loss

c) Available for sale

3.2.2 Regular way contracts

3.2.3 Initial recognition and measurement

3.2.4 Subsequent measurement

a) Basis of valuation of equity securities

b) Basis of valuation of government securities

Financial assets that are acquired principally for the purpose of generating profit from short-term fluctuations inprices are classified as held for trading in the 'Financial assets at fair value through profit or loss' category.

Available for sale financial assets are those non-derivative financial assets that are designated as available for saleor are not classified as (a) loans and receivables or (b) financial assets at fair value through profit or loss. These areintended to be held for an indefinite period of time which may be sold in response to the needs for liquidity or changein price.

Regular purchases and sales of financial assets are recognised on the trade date - the date on which the Fundcommits to purchase or sell the asset.

Financial assets are initially recognised at fair value plus transaction costs except for financial assets carried at fairvalue through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fairvalue and transaction costs are expensed as incurred in the income statement.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits with banks and other short-term highly liquidinvestments with original maturities of three months or less and bank overdrafts which are subject to insignificantchanges in value.

The Fund classifies its financial assets in the following categories: loans and receivables, at fair value through profitor loss and available for sale. The classification depends on the purpose for which the financial assets wereacquired. Management determines the classification of its financial assets at initial recognition.

Subsequent to initial recognition, financial assets designated by the management as at fair value through profit orloss and available for sale are valued as follows:

The investment of the Fund in equity securities is valued on the basis of closing quoted market prices available atthe stock exchange.

The principal accounting policies applied in the preparation of these financial statements are set out below. Thesepolicies have been consistently applied unless otherwise stated.

These financial statements are prepared under the historical cost convention except that investments have beencarried at fair value.

These financial statements have been presented in Pak Rupees, which is the Fund's functional and presentationcurrency.



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Annual Report 2012

2.6 Functional and presentation currency

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1

3.2 Financial assets

3.2.1 Classification

a) Loans and receivables

These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

b) Financial assets at fair value through profit or loss

c) Available for sale

3.2.2 Regular way contracts

3.2.3 Initial recognition and measurement

3.2.4 Subsequent measurement

a) Basis of valuation of equity securities

b) Basis of valuation of government securities

Financial assets that are acquired principally for the purpose of generating profit from short-term fluctuations inprices are classified as held for trading in the 'Financial assets at fair value through profit or loss' category.

Available for sale financial assets are those non-derivative financial assets that are designated as available for saleor are not classified as (a) loans and receivables or (b) financial assets at fair value through profit or loss. These areintended to be held for an indefinite period of time which may be sold in response to the needs for liquidity or changein price.

Regular purchases and sales of financial assets are recognised on the trade date - the date on which the Fundcommits to purchase or sell the asset.

Financial assets are initially recognised at fair value plus transaction costs except for financial assets carried at fairvalue through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fairvalue and transaction costs are expensed as incurred in the income statement.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, demand deposits with banks and other short-term highly liquidinvestments with original maturities of three months or less and bank overdrafts which are subject to insignificantchanges in value.

The Fund classifies its financial assets in the following categories: loans and receivables, at fair value through profitor loss and available for sale. The classification depends on the purpose for which the financial assets wereacquired. Management determines the classification of its financial assets at initial recognition.

Subsequent to initial recognition, financial assets designated by the management as at fair value through profit orloss and available for sale are valued as follows:

The investment of the Fund in equity securities is valued on the basis of closing quoted market prices available atthe stock exchange.

The principal accounting policies applied in the preparation of these financial statements are set out below. Thesepolicies have been consistently applied unless otherwise stated.

These financial statements are prepared under the historical cost convention except that investments have beencarried at fair value.

These financial statements have been presented in Pak Rupees, which is the Fund's functional and presentationcurrency.

3.2.5 Impairment

3.2.6 Derecognition

3.2.7 Offsetting of financial assets and liabilities

3.3 Derivatives

3.4 Financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expired.

3.5 Formation costs

3.6 Provisions

All financial liabilities are recognised at the time when the Fund becomes a party to the contractual provisions of theinstrument. They are initially recognised at fair value and subsequently stated at amortised cost.

Formation costs represent expenditure incurred prior to the commencement of operations of the Fund. These costsare being charged over a period of five years in accordance with the requirements set out in the Trust Deed of theFund and the Non-Banking Finance Companies and Notified Entities Regulations, 2008.

Provisions are recognised when the Fund has a present legal or constructive obligation as a result of past events, itis probable that an outflow of resources embodying economic benefits will be required to settle the obligation and areliable estimate of the amount of obligation can be made. Provisions are regularly reviewed and adjusted to reflectthe current best estimate.

The investment of the Fund in government securities is valued on the basis of rates announced by the FinancialMarkets Association of Pakistan.

Financial assets and financial liabilities are offset and the net amount is reported in the Statement of Assets andLiabilities when there is a legally enforceable right to set off the recognised amounts and there is an intention tosettle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Derivative instruments are initially recognised at fair value and subsequent to initial measurement each derivativeinstrument is remeasured to its fair value and the resultant gain or loss is recognised in 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 orloss previously recognised directly in the 'statement of comprehensive income' is transferred to the 'incomestatement'.

Subsequent to initial recognition financial assets classified as 'Loans and receivables' are carried at amortised costusing the effective interest method.

Gain or loss is also recognised in the 'income statement' when financial assets carried at amortised cost arederecognised or impaired, and through the amortisation process.

The Fund assesses at each reporting date whether there is objective evidence that the financial asset or a group offinancial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolongeddecline in the fair value of the security below its cost is considered, among other indicators, as an indicator that thesecurities are impaired. If any such evidence exists for available for sale financial assets, the cumulative lossmeasured as the difference between the acquisition cost and the current fair value, less any impairment loss on thatfinancial asset previously recognised in income statement is reclassified from unit holders' fund to the incomestatement. Impairment losses recognised on equity instruments are not reversed through the income statement.

For financial assets classified as 'loans and receivables' a provision for impairment is established when there isobjective evidence that the Fund will not be able to collect all amounts due according to the original terms. Theamount of the provision is determined based on the provisioning criteria specified by SECP.

Financial assets are derecognised when the rights to receive cash flows from the investments have expired or havebeen transferred and the Fund has transferred substantially all risks and rewards of ownership.

Net gains and losses arising from changes in the fair value of financial assets carried at fair value through profit orloss are taken to the 'income statement'.

3.2.5 Impairment

3.2.6 Derecognition


3.3 Derivatives



3.5 Formation costs

3.6 Provisions














3.7 Taxation

3.8 Proposed distributions

3.9 Issue and redemption of units

3.10

3.11 Net asset value per unit

Element of income / (loss) and capital gains / (losses) included in prices of units issued less those in unitsredeemed


The income of the Fund is exempt from income tax under clause 99 of Part I of the Second Schedule to the IncomeTax 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.

The Fund is also exempt from the provisions of section 113 (minimum tax) under clause 11A of Part IV of the SecondSchedule to the Income Tax Ordinance, 2001.

The Fund provides for deferred taxation using the balance sheet liability method on all major temporary differencesbetween the amounts used for financial reporting purposes and amounts used for taxation purposes. In addition, theFund also records deferred tax asset on unutilised tax losses to the extent that it is no longer probable that therelated tax benefit will be realised. However, the Fund has not recognised any amount in respect of deferred tax inthese financial statements as the Fund intends to continue availing the tax exemption in future years by distributingat least ninety percent of its accounting income for the year as reduced by capital gains, whether realised orunrealised, to its unit holders every year.

Distributions declared subsequent to the year end are considered as non-adjusting events and are recognised in thefinancial statements in the period in which such distributions are declared.

Units issued are recorded at the offer price, determined by the Management Company for the applications receivedby the distributors during business hours on that date. The offer price represents the Net Asset Value per unit as ofthe close of the business day plus the allowable sales load (if applicable), provision for transaction costs and anyprovision for duties and charges, if applicable.

Units redeemed are recorded at the redemption price, applicable to units for which the distributors receiveredemption applications during business hours of that day. The redemption price represents the Net Asset Value perunit as of the close of the business day less any back-end load (if applicable), any duties, taxes, charges onredemption and any provision for transaction costs, if applicable.

The net asset value (NAV) per unit, as disclosed on the Statement of Assets and Liabilities is calculated by dividingthe net assets of the Fund by the number of units in issue at the year end.

The 'net element of income / (loss) and capital gains / (losses) in prices of units issued less those in units redeemed'during the year is transferred to the income statement.

An equalisation account called the 'element of income / (loss) and capital gains / (losses) included in prices of unitsissued less those in units redeemed' is created, in order to prevent the dilution of per unit income and distribution ofincome already paid out on redemption.

The 'net element of income / (loss) and capital gains / (losses) in prices of units issued less those in units redeemed'account is credited with the amount representing net income / (loss) and capital gains / (losses) accounted for in thenet assets value and included in the sale proceeds of units. Upon redemption of units, the 'net element of income /(loss) and capital gains / (losses) in prices of units issued less those in units redeemed' account is debited with theamount representing net income / (loss) and capital gains / (losses) accounted for in the net asset value included inthe redemption price.

3.2.5 Impairment

3.2.6 Derecognition


3.3 Derivatives



3.5 Formation costs

3.6 Provisions














3.7 Taxation



3.10
















115

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Annual Report 2012

3.12 Revenue recognition

-

- Dividend income is recognised when the right to receive dividend is established.

- Income on government securities, bank deposits and placements is recognised on an accrual basis.

Note 2012 2011-----------Rupees in '000-----------

4 BANK BALANCES

In current accounts 16,270 3,254 In deposit accounts 4.1 1,071,179 1,419,176

1,087,449 1,422,430

4.1 These accounts carry return at rates ranging from 6% to 13% per annum (2011: 5% to 13%) per annum

Note 2012 20115 INVESTMENTS -----------Rupees in '000-----------

Available for sale

Listed equity securities 5.1 18,159,303 20,662,466 Government securities 5.2 1,775,492 4,182,410

19,934,795 24,844,876

5.1 Listed equity securities- available for sale

Shares of listed companies - Fully paid up ordinary shares of Rs 10 each unless otherwise stated

As at July 1, 2011

Purchases during the

year

Bonus shares issued

during the year

Sales during the year

As at June 30, 2012

Carrying value as at

June 30, 2012

Market value as at June 30, 2012

Unrealised gain as at June 30,

2012

Market value as a

percentage of net assets

Market value as a

percentage of

investments

Percentage of paid-up capital of

the investee company

held

BanksNational Bank of Pakistan Limited 66,980,052 3,916,995 6,617,145 5,376,042 72,138,150 2,528,179 3,140,895 612,716 15.08 15.76 3.90

66,980,052 3,916,995 6,617,145 5,376,042 72,138,150 2,528,179 3,140,895 612,716 15.08 15.76

Electricity Kot Addu Power Company Limited 13,418,997 316,072 - 743,285 12,991,784 480,727 584,630 103,903 2.81 2.93 1.48

13,418,997 316,072 - 743,285 12,991,784 480,727 584,630 103,903 2.81 2.93Gas, Water and Multiutilities Sui Northern Gas Pipelines Limited 20,609,143 1,729,400 1,066,064 - 23,404,607 370,896 395,304 24,408 1.90 1.98 4.06Sui Southern Gas Company Limited 53,072,409 2,639,831 2,764,460 - 58,476,700 719,527 1,140,296 420,769 5.47 5.72 6.64

73,681,552 4,369,231 3,830,524 - 81,881,307 1,090,423 1,535,600 445,177 7.37 7.70

Oil and GasOil & Gas Development Company Limited46,242,299 - - 10,359,358 35,882,941 1,772,623 5,757,059 3,984,436 27.64 28.88 0.83Pakistan Petroleum Limited 22,106,721 1,456,219 2,209,690 4,391,009 21,381,620 2,468,717 4,025,945 1,557,228 19.33 20.20 1.63Pakistan State Oil Company Limited 10,258,329 563,038 - 965,606 9,855,761 1,683,491 2,324,383 640,892 11.16 11.66 5.75

78,607,349 2,019,257 2,209,690 15,715,973 67,120,322 5,924,831 12,107,387 6,182,556 58.13 60.74

Fixed Line Telecommunication Pakistan Telecommunication

Company Limited 55,312,149 3,451,954 - 1,000,000 57,764,103 603,564 790,791 187,227 3.80 3.97 1.5355,312,149 3,451,954 - 1,000,000 57,764,103 603,564 790,791 187,227 3.80 3.97

288,000,099 14,073,509 12,657,359 22,835,300 291,895,666 10,627,724 18,159,303 7,531,579 87.19 91.10

Realised capital gains / (losses) arising on sale of investments are included in the income statement on the date at which thetransaction takes place.

Name of the investee company

------------------------Number of Shares------------------------ ---Rupees in '000---

3.7 Taxation



3.10














3.12 Revenue recognition

-

- Dividend income is recognised when the right to receive dividend is established.

- Income on government securities, bank deposits and placements is recognised on an accrual basis.

Note 2012 2011-----------Rupees in '000-----------

4 BANK BALANCES

In current accounts 16,270 3,254 In deposit accounts 4.1 1,071,179 1,419,176

1,087,449 1,422,430

4.1 These accounts carry return at rates ranging from 6% to 13% per annum (2011: 5% to 13%) per annum

Note 2012 20115 INVESTMENTS -----------Rupees in '000-----------

Available for sale

Listed equity securities 5.1 18,159,303 20,662,466 Government securities 5.2 1,775,492 4,182,410

19,934,795 24,844,876

5.1 Listed equity securities- available for sale

Shares of listed companies - Fully paid up ordinary shares of Rs 10 each unless otherwise stated

As at July 1, 2011


year

Bonus shares issued

during the year

Sales during the year

As at June 30, 2012

Carrying value as at

June 30, 2012

Market value as at June 30, 2012

Unrealised gain as at June 30,

2012

Market value as a percentage

of net assets

Market value as a

percentage of

investments

Percentage of paid-up capital of

the investee company

held

BanksNational Bank of Pakistan Limited 66,980,052 3,916,995 6,617,145 5,376,042 72,138,150 2,528,179 3,140,895 612,716 15.08 15.76 3.90

66,980,052 3,916,995 6,617,145 5,376,042 72,138,150 2,528,179 3,140,895 612,716 15.08 15.76

Electricity Kot Addu Power Company Limited 13,418,997 316,072 - 743,285 12,991,784 480,727 584,630 103,903 2.81 2.93 1.48

13,418,997 316,072 - 743,285 12,991,784 480,727 584,630 103,903 2.81 2.93Gas, Water and Multiutilities Sui Northern Gas Pipelines Limited 20,609,143 1,729,400 1,066,064 - 23,404,607 370,896 395,304 24,408 1.90 1.98 4.06Sui Southern Gas Company Limited 53,072,409 2,639,831 2,764,460 - 58,476,700 719,527 1,140,296 420,769 5.47 5.72 6.64

73,681,552 4,369,231 3,830,524 - 81,881,307 1,090,423 1,535,600 445,177 7.37 7.70

Oil and GasOil & Gas Development Company Limited46,242,299 - - 10,359,358 35,882,941 1,772,623 5,757,059 3,984,436 27.64 28.88 0.83Pakistan Petroleum Limited 22,106,721 1,456,219 2,209,690 4,391,009 21,381,620 2,468,717 4,025,945 1,557,228 19.33 20.20 1.63Pakistan State Oil Company Limited 10,258,329 563,038 - 965,606 9,855,761 1,683,491 2,324,383 640,892 11.16 11.66 5.75

78,607,349 2,019,257 2,209,690 15,715,973 67,120,322 5,924,831 12,107,387 6,182,556 58.13 60.74

Fixed Line Telecommunication Pakistan Telecommunication

Company Limited 55,312,149 3,451,954 - 1,000,000 57,764,103 603,564 790,791 187,227 3.80 3.97 1.5355,312,149 3,451,954 - 1,000,000 57,764,103 603,564 790,791 187,227 3.80 3.97

288,000,099 14,073,509 12,657,359 22,835,300 291,895,666 10,627,724 18,159,303 7,531,579 87.19 91.10

Realised capital gains / (losses) arising on sale of investments are included in the income statement on the date at which thetransaction takes place.

Name of the investee company

------------------------Number of Shares------------------------ ---Rupees in '000---



117

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Annual Report 2012

5.2 Government Securities - Market Treasury Bills

As at July 1, 2011


year

Sales / matured during the year

As at June 30, 2012 Book value Market value

Market Treasury Bills

April 21, 2011 03 Months 1,937,000 - 1,937,000 - - - - - - May 5, 2011 03 Months - 385,000 385,000 - - - - - - May 19, 2011 03 Months 950,000 - 950,000 - - - - - - June 2, 2011 03 Months - 825,000 825,000 - - - - - - June 16, 2011 03 Months 825,000 - 825,000 - - - - - - June 30, 2011 03 Months 125,000 - 125,000 - - - - - - July 14, 2011 03 Months - 1,725,000 1,725,000 - - - - - - July 25, 2011 03 Months - 800,000 800,000 - - - - - -

August 11, 2011 03 Months - 625,000 625,000 - - - - - - August 25, 2011 03 Months - 425,000 425,000 - - - - - -

November 17, 2011 03 Months - 300,000 300,000 - - - - - - December 10, 2011 03 Months - 980,000 980,000 - - - - - -

May 3, 2012 03 Months - 600,000 - 600,000 595,250 594,944 (306) 2.86% 2.98%May 17, 2012 03 Months - 750,000 - 750,000 740,738 740,324 (414) 3.55% 3.71%

3,837,000 7,415,000 9,902,000 1,350,000 1,335,988 1,335,268 (720) 6.41% 6.69%

January 27, 2011 06 Months - 90,000 90,000 - - - - - - February 10, 2011 06 Months 400,000 100,000 500,000 - - - - - - February 24, 2011 06 Months - 100,000 100,000 - - - - - -

March 10, 2011 06 Months - 200,000 200,000 - - - - - - April 21, 2011 06 Months - 300,000 300,000 - - - - - - May 5, 2011 06 Months - 1,175,000 1,175,000 - - - - - - May 19, 2011 06 Months - 700,000 700,000 - - - - - - June 2, 2011 06 Months - 1,050,000 1,050,000 - - - - - -

November 3, 2011 06 Months - 630,000 630,000 - - - - - - 400,000 4,345,000 4,745,000 - - - - - -

February 24, 2011 12 Months - 70,000 70,000 - - - - - - May 19, 2011 12 Months - 470,000 470,000 - - - - - -

September 8, 2011 12 Months - 450,000 - 450,000 440,435 440,224 (211) 2.11% 2.21%- 990,000 540,000 450,000 440,435 440,224 (211) 2.11% 2.21%

4,237,000 12,750,000 15,187,000 1,800,000 1,776,423 1,775,492 (931) 8.52% 8.90%

5.3

5.4 Unrealised (diminution) / appreciation on re-measurement 2012 2011of investments classified as 'available for sale' - Net -----------Rupees in '000-----------

Market value of investments 24,844,876 Less: Carrying value of investments - Net of impairment 15,858,749

8,986,127 Less: Unrealised appreciation in fair value of investments

at the beginning of year - Net 8,133,387 852,740

5.5 Impairment against equity securities classified as 'available for sale'

2012 20116 DIVIDEND AND PROFIT RECEIVABLE

Dividend receivable 82,887 277,356 Profit receivable on bank deposits 13,097 11,029

95,984 288,385

Issue date Appreciation / (diminution)

During the current year, based on a scrip wise analysis of the deficit arising on revaluation of quoted shares classified as'available for sale', it has been determined that an amount of Rs 351.154 million (2011: 210.899 million) should be charged to theincome statement as impairment loss. This impairment loss has been fully recognised and the charge has been reflected in theincome statement of the Fund.

-----------Rupees in '000-----------

Investments include securities with market value aggregating to Rs 1,068.110 million (2011: Rs.1,108.21 million) which have beenpledged with National Clearing Company of Pakistan Limited for guaranteeing settlement of the Fund's trades in terms of CircularNo. 11 dated October 23, 2007 issued by the Securities and Exchange Commission of Pakistan.

Market value as a

percentage of total

investments

Tenor

Face valueMarket

value as a percentage

of net assets

Balance as at June 30, 2012

--------------------------------Rupees in '000------------------------------

19,934,795 12,404,147 7,530,648

8,986,127

(1,455,479)

5.2 Government Securities - Market Treasury Bills

As at July 1, 2011


year

Sales / matured during the year

As at June 30, 2012 Book value Market value

Market Treasury Bills

April 21, 2011 03 Months 1,937,000 - 1,937,000 - - - - - - May 5, 2011 03 Months - 385,000 385,000 - - - - - - May 19, 2011 03 Months 950,000 - 950,000 - - - - - - June 2, 2011 03 Months - 825,000 825,000 - - - - - - June 16, 2011 03 Months 825,000 - 825,000 - - - - - - June 30, 2011 03 Months 125,000 - 125,000 - - - - - - July 14, 2011 03 Months - 1,725,000 1,725,000 - - - - - - July 25, 2011 03 Months - 800,000 800,000 - - - - - -

August 11, 2011 03 Months - 625,000 625,000 - - - - - - August 25, 2011 03 Months - 425,000 425,000 - - - - - -

November 17, 2011 03 Months - 300,000 300,000 - - - - - - December 10, 2011 03 Months - 980,000 980,000 - - - - - -

May 3, 2012 03 Months - 600,000 - 600,000 595,250 594,944 (306) 2.86% 2.98%May 17, 2012 03 Months - 750,000 - 750,000 740,738 740,324 (414) 3.55% 3.71%

3,837,000 7,415,000 9,902,000 1,350,000 1,335,988 1,335,268 (720) 6.41% 6.69%

January 27, 2011 06 Months - 90,000 90,000 - - - - - - February 10, 2011 06 Months 400,000 100,000 500,000 - - - - - - February 24, 2011 06 Months - 100,000 100,000 - - - - - -

March 10, 2011 06 Months - 200,000 200,000 - - - - - - April 21, 2011 06 Months - 300,000 300,000 - - - - - - May 5, 2011 06 Months - 1,175,000 1,175,000 - - - - - - May 19, 2011 06 Months - 700,000 700,000 - - - - - - June 2, 2011 06 Months - 1,050,000 1,050,000 - - - - - -

November 3, 2011 06 Months - 630,000 630,000 - - - - - - 400,000 4,345,000 4,745,000 - - - - - -

February 24, 2011 12 Months - 70,000 70,000 - - - - - - May 19, 2011 12 Months - 470,000 470,000 - - - - - -

September 8, 2011 12 Months - 450,000 - 450,000 440,435 440,224 (211) 2.11% 2.21%- 990,000 540,000 450,000 440,435 440,224 (211) 2.11% 2.21%

4,237,000 12,750,000 15,187,000 1,800,000 1,776,423 1,775,492 (931) 8.52% 8.90%

5.3

5.4 Unrealised (diminution) / appreciation on re-measurement 2012 2011of investments classified as 'available for sale' - Net -----------Rupees in '000-----------

Market value of investments 24,844,876 Less: Carrying value of investments - Net of impairment 15,858,749

8,986,127 Less: Unrealised appreciation in fair value of investments

at the beginning of year - Net 8,133,387 852,740

5.5 Impairment against equity securities classified as 'available for sale'

2012 20116 DIVIDEND AND PROFIT RECEIVABLE

Dividend receivable 82,887 277,356 Profit receivable on bank deposits 13,097 11,029

95,984 288,385

Issue date Appreciation / (diminution)

During the current year, based on a scrip wise analysis of the deficit arising on revaluation of quoted shares classified as'available for sale', it has been determined that an amount of Rs 351.154 million (2011: 210.899 million) should be charged to theincome statement as impairment loss. This impairment loss has been fully recognised and the charge has been reflected in theincome statement of the Fund.

-----------Rupees in '000-----------

Investments include securities with market value aggregating to Rs 1,068.110 million (2011: Rs.1,108.21 million) which have beenpledged with National Clearing Company of Pakistan Limited for guaranteeing settlement of the Fund's trades in terms of CircularNo. 11 dated October 23, 2007 issued by the Securities and Exchange Commission of Pakistan.

Market value as a

percentage of total

investments

Tenor

Face valueMarket

value as a percentage

of net assets

Balance as at June 30, 2012

--------------------------------Rupees in '000------------------------------

19,934,795 12,404,147 7,530,648

8,986,127

(1,455,479)

Note 2012 20117 PAYABLE TO NATIONAL INVESTMENT TRUST LIMITED

- MANAGEMENT COMPANY

Management fee 7.1 & 7.2 29,656 16,444

7.1

7.2

Note 2012 20118 PAYABLE TO CENTRAL DEPOSITORY COMPANY OF PAKISTAN

LIMITED - TRUSTEE

Trustee fee 8.1 534 683

8.1

Based on the Trust Deed, the tariff structure applicable to the Fund as at June 30, 2012 is as follows:

Amount of funds under management (Average NAV) Tariff per annumUp to Rs 1,000 million Rs 0.7 million or 0.20% p.a. of NAV, whichever is higherOn an amount exceeding Rs 1,000 million Rs 2.0 million plus 0.10% p.a. of NAV exceeding Rs 1,000 million

Note 2012 20119 PAYABLE TO SECURITIES AND EXCHANGE COMMISSION OF

PAKISTAN

Annual Fee 9.1 22,477 25,427

9.1

2012 2011

10 ACCRUED EXPENSES AND OTHER LIABILITIES

Provision for Workers' Welfare Fund 220,820 196,314Auditors' remuneration 330 356Printing charges payable 25 - Others 21 93

221,196 196,763

11 CONTINGENCIES AND COMMITMENTS

There were no contingencies and commitments outstanding as at June 30, 2012 (2011: Nil)

2012 2011

12 AUDITORS' REMUNERATION

Under the provisions of the Non Banking Finance Companies and Notified Entities Regulations, 2008 a CollectiveInvestment Scheme categorised as equity scheme is required to pay as annual fee to the Securities and ExchangeCommission of Pakistan, an amount equal to 0.095 percent of the average annual net assets of the scheme. TheFund has been categorised as an equity scheme by the management company.

-----------Rupees in '000-----------

-----------Rupees in '000-----------

-----------Rupees in '000-----------

Under the provisions of the Non-Banking Finance Companies and Notified Entities Regulations, 2008, theManagement Company of the Fund is entitled to a remuneration during the first five years of the Fund, of an amountnot exceeding three percent of the average annual net assets of the Fund and thereafter of an amount equal to twopercent of such assets of the Fund. Management fee is currently being charged at the rate of 1.5 % (2011: 0.75%) ofthe average annual net assets of the Fund.

During the current year, the Sindh Revenue Board (SRB) has levied Sindh Sales Tax at the rate of 16% on theremuneration of the Management Company through Sindh Sales Tax on Services Act 2011 effective from July 1,2011.

The Trustee is entitled to a monthly remuneration for services rendered to the Fund under the provisions of the TrustDeed as per the Tariff specified therein, based on the daily net assets of the Fund.

-----------Rupees in '000-----------

The Trustee has agreed to receive remuneration at the rate of 30% of the applicable tariff.Accordingly the Management Company has charged and paid the Trustee remuneration on the samebasis. The remuneration is paid to the Trustee monthly in arrears.

-----------Rupees in '000-----------



119

118

Annual Report 2012

Note 2012 20117 PAYABLE TO NATIONAL INVESTMENT TRUST LIMITED

- MANAGEMENT COMPANY

Management fee 7.1 & 7.2 29,656 16,444

7.1

7.2

Note 2012 20118 PAYABLE TO CENTRAL DEPOSITORY COMPANY OF PAKISTAN

LIMITED - TRUSTEE

Trustee fee 8.1 534 683

8.1

Based on the Trust Deed, the tariff structure applicable to the Fund as at June 30, 2012 is as follows:

Amount of funds under management (Average NAV) Tariff per annumUp to Rs 1,000 million Rs 0.7 million or 0.20% p.a. of NAV, whichever is higherOn an amount exceeding Rs 1,000 million Rs 2.0 million plus 0.10% p.a. of NAV exceeding Rs 1,000 million

Note 2012 20119 PAYABLE TO SECURITIES AND EXCHANGE COMMISSION OF

PAKISTAN

Annual Fee 9.1 22,477 25,427

9.1

2012 2011

10 ACCRUED EXPENSES AND OTHER LIABILITIES

Provision for Workers' Welfare Fund 220,820 196,314Auditors' remuneration 330 356Printing charges payable 25 - Others 21 93

221,196 196,763

11 CONTINGENCIES AND COMMITMENTS

There were no contingencies and commitments outstanding as at June 30, 2012 (2011: Nil)

2012 2011

12 AUDITORS' REMUNERATION

Under the provisions of the Non Banking Finance Companies and Notified Entities Regulations, 2008 a CollectiveInvestment Scheme categorised as equity scheme is required to pay as annual fee to the Securities and ExchangeCommission of Pakistan, an amount equal to 0.095 percent of the average annual net assets of the scheme. TheFund has been categorised as an equity scheme by the management company.

-----------Rupees in '000-----------

-----------Rupees in '000-----------

-----------Rupees in '000-----------

Under the provisions of the Non-Banking Finance Companies and Notified Entities Regulations, 2008, theManagement Company of the Fund is entitled to a remuneration during the first five years of the Fund, of an amountnot exceeding three percent of the average annual net assets of the Fund and thereafter of an amount equal to twopercent of such assets of the Fund. Management fee is currently being charged at the rate of 1.5 % (2011: 0.75%) ofthe average annual net assets of the Fund.

During the current year, the Sindh Revenue Board (SRB) has levied Sindh Sales Tax at the rate of 16% on theremuneration of the Management Company through Sindh Sales Tax on Services Act 2011 effective from July 1,2011.

The Trustee is entitled to a monthly remuneration for services rendered to the Fund under the provisions of the TrustDeed as per the Tariff specified therein, based on the daily net assets of the Fund.

-----------Rupees in '000-----------

The Trustee has agreed to receive remuneration at the rate of 30% of the applicable tariff.Accordingly the Management Company has charged and paid the Trustee remuneration on the samebasis. The remuneration is paid to the Trustee monthly in arrears.

-----------Rupees in '000-----------

Statutory audit fee 330 330Half yearly review fee 165 165Tax services 51 50Out of pocket expenses 20 13

566 558

13 PROVISION FOR WORKERS' WELFARE FUND

14 TAXATION

2012 201115 EARNINGS PER UNIT

Net income for the year with impairment loss on equity securities classified as 'available for sale' 1,200,831 3,325,396

Net income for the year without impairment loss on equity securities classified as 'available for sale' 1,551,985 3,536,295

Weighted average number of units outstanding during the year 281,460 287,699

Earnings per unit (basic and diluted) 4.27 11.56

Earnings per unit without impairment loss on equity securitiesclassified as 'available for sale' 5.51 12.29

----------------------------------Rupees in '000----------------------------------

-----------Number of units in '000s-------------

-----------------Rupees----------------------

Subsequent to the year ended June 30, 2010, a clarification was issued by the Ministry of Labour and Manpower(the Ministry) which stated that mutual funds are not liable to contribute to WWF on the basis of their income.However, on December 14, 2010 the Ministry filed its response against the Constitutional petition requesting thecourt to dismiss the petition. According to the legal counsel who is handling the case, there is a contradictionbetween the aforementioned clarification issued by the Ministry and the response filed by the Ministry in Court.

The income of the Fund is exempt from income tax under clause 99 of Part I of the Second Schedule to the Income Tax Ordinance, 2001 subject to the condition that not less than ninety percent of its accounting income for the year, as reduced by capital gains, whether realised or unrealised, is distributed amongst the unit holders. The Fund has not recorded provision for taxation as the Board of Directors of the Management Company has distributed more than ninety percent of the Fund's accounting income for the year as reduced by capital gains, whether realised or unrealised, to its unit holders as further explained in note 25 to these financial statements.

Subsequent to the year ended June 30, 2011, the Honorable Lahore High Court (LHC) in a Constitutional Petitionrelating to the amendments brought in the WWF Ordinance, 1971 through the Finance Act, 2006, and the FinanceAct, 2008, has declared the said amendments as unlawful and unconstitutional and struck them down. TheManagement Company is hopeful that the decision of the LHC will lend further support to the Constitutional Petitionwhich is pending in the SHC. However, pending the decision of the said constitutional petition, the ManagementCompany, as a matter of abundant caution, has decided to retain the provision for WWF amounting to Rs 220.820million (including Rs 24.507 million for the current period) in these financial statements. Had the same not beenmade the net asset value per unit of the fund would have been higher by Rs 0.95 per unit.

The Finance Act 2008 introduced an amendment to the Workers' Welfare Fund Ordinance, 1971 (WWF Ordinance).As a result of this amendment it may be construed that all Collective Investment Schemes / mutual funds (CISs)whose income exceeds Rs. 0.5 million in a tax year, have been brought within the scope of the WWF Ordinance,thus rendering them liable to pay contribution to WWF at the rate of two percent of their accounting or taxableincome, whichever is higher. In this regard, a constitutional petition has been filed by certain CISs through theirtrustees in the Honourable High Court of Sindh, challenging the applicability of WWF to the CISs, which is pendingadjudication. However, without prejudice to the above, the Management Company made a provision for WWFcontribution in the annual financial statements for the year ended June 30, 2010.

Statutory audit fee 330 330Half yearly review fee 165 165Tax services 51 50Out of pocket expenses 20 13

566 558

13 PROVISION FOR WORKERS' WELFARE FUND

14 TAXATION

2012 201115 EARNINGS PER UNIT

Net income for the year with impairment loss on equity securities classified as 'available for sale' 1,200,831 3,325,396

Net income for the year without impairment loss on equity securities classified as 'available for sale' 1,551,985 3,536,295

Weighted average number of units outstanding during the year 281,460 287,699

Earnings per unit (basic and diluted) 4.27 11.56

Earnings per unit without impairment loss on equity securitiesclassified as 'available for sale' 5.51 12.29

----------------------------------Rupees in '000----------------------------------

-----------Number of units in '000s-------------

-----------------Rupees----------------------

Subsequent to the year ended June 30, 2010, a clarification was issued by the Ministry of Labour and Manpower(the Ministry) which stated that mutual funds are not liable to contribute to WWF on the basis of their income.However, on December 14, 2010 the Ministry filed its response against the Constitutional petition requesting thecourt to dismiss the petition. According to the legal counsel who is handling the case, there is a contradictionbetween the aforementioned clarification issued by the Ministry and the response filed by the Ministry in Court.

The income of the Fund is exempt from income tax under clause 99 of Part I of the Second Schedule to the Income Tax Ordinance, 2001 subject to the condition that not less than ninety percent of its accounting income for the year, as reduced by capital gains, whether realised or unrealised, is distributed amongst the unit holders. The Fund has not recorded provision for taxation as the Board of Directors of the Management Company has distributed more than ninety percent of the Fund's accounting income for the year as reduced by capital gains, whether realised or unrealised, to its unit holders as further explained in note 25 to these financial statements.

Subsequent to the year ended June 30, 2011, the Honorable Lahore High Court (LHC) in a Constitutional Petitionrelating to the amendments brought in the WWF Ordinance, 1971 through the Finance Act, 2006, and the FinanceAct, 2008, has declared the said amendments as unlawful and unconstitutional and struck them down. TheManagement Company is hopeful that the decision of the LHC will lend further support to the Constitutional Petitionwhich is pending in the SHC. However, pending the decision of the said constitutional petition, the ManagementCompany, as a matter of abundant caution, has decided to retain the provision for WWF amounting to Rs 220.820million (including Rs 24.507 million for the current period) in these financial statements. Had the same not beenmade the net asset value per unit of the fund would have been higher by Rs 0.95 per unit.

The Finance Act 2008 introduced an amendment to the Workers' Welfare Fund Ordinance, 1971 (WWF Ordinance).As a result of this amendment it may be construed that all Collective Investment Schemes / mutual funds (CISs)whose income exceeds Rs. 0.5 million in a tax year, have been brought within the scope of the WWF Ordinance,thus rendering them liable to pay contribution to WWF at the rate of two percent of their accounting or taxableincome, whichever is higher. In this regard, a constitutional petition has been filed by certain CISs through theirtrustees in the Honourable High Court of Sindh, challenging the applicability of WWF to the CISs, which is pendingadjudication. However, without prejudice to the above, the Management Company made a provision for WWFcontribution in the annual financial statements for the year ended June 30, 2010.

16 FINANCIAL INSTRUMENTS BY CATEGORY

Loans and receivables

Available for sale Total

Financial assetsBank balances 1,087,449 - 1,087,449 Investments - 19,934,795 19,934,795 Dividend and profit receivable 95,984 - 95,984

1,183,433 19,934,795 21,118,228

Liabilities at fair value

through profit or loss

Others Total

Financial liabilitiesPayable to National Investment Trust Limited - Management Company - 29,656 29,656 Payable to Central Depository Company of Pakistan Limited - Trustee - 534 534 Payable against purchase of investments - 14,153 14,153 Formation costs payable - 1,000 1,000 Accrued expenses and other liabilities - 376 376

- 45,719 45,719



Financial assetsBank balances 1,422,430 - 1,422,430 Investments - 24,844,876 24,844,876 Receivable against sale of investments 50,263 - 50,263 Dividend and profit receivable 288,385 - 288,385

1,761,078 24,844,876 26,605,954



Others Total

Financial liabilitiesPayable to National Investment Trust Limited - Management Company - 16,444 16,444 Payable to Central Depository Company of Pakistan Limited - Trustee - 683 683 Formation costs payable - 1,000 1,000 Accrued expenses and other liabilities - 449 449

- 18,576 18,576

17 TRANSACTIONS WITH CONNECTED PERSONS

17.1

17.2

17.3

17.4 Remuneration of the Trustee is determined in accordance with the provisions of the Trust Deed.

17.5

------------ Rupees in '000 ------------

------------ As at June 30, 2012 ------------

------------ Rupees in '000 ------------

------------ As at June 30, 2012 ------------

------------ Rupees in '000 ------------

------------ As at June 30, 2011 ------------

------------ Rupees in '000 ------------

------------ As at June 30, 2011 ------------

Connected persons include National Investment Trust Limited being the Management Company, Central DepositoryCompany of Pakistan being the Trustee of the Fund, National Bank of Pakistan, other collective investment schemesmanaged by the Management Company, directors and officers of the Management Company and the Trustees andentities having common directorship with the Management Company.

The transactions with connected persons are in the normal course of business, at contracted rates and termsdetermined in accordance with market rates.

Remuneration of the Management Company is determined in accordance with the provisions of the NBFCRegulations and the Trust Deed.

The details of the significant transactions carried out by the Fund with connected persons and balances with them at year end are as follows:



121

120

Annual Report 2012

16 FINANCIAL INSTRUMENTS BY CATEGORY



Financial assetsBank balances 1,087,449 - 1,087,449 Investments - 19,934,795 19,934,795 Dividend and profit receivable 95,984 - 95,984

1,183,433 19,934,795 21,118,228



Others Total

Financial liabilitiesPayable to National Investment Trust Limited - Management Company - 29,656 29,656 Payable to Central Depository Company of Pakistan Limited - Trustee - 534 534 Payable against purchase of investments - 14,153 14,153 Formation costs payable - 1,000 1,000 Accrued expenses and other liabilities - 376 376

- 45,719 45,719



Financial assetsBank balances 1,422,430 - 1,422,430 Investments - 24,844,876 24,844,876 Receivable against sale of investments 50,263 - 50,263 Dividend and profit receivable 288,385 - 288,385

1,761,078 24,844,876 26,605,954



Others Total

Financial liabilitiesPayable to National Investment Trust Limited - Management Company - 16,444 16,444 Payable to Central Depository Company of Pakistan Limited - Trustee - 683 683 Formation costs payable - 1,000 1,000 Accrued expenses and other liabilities - 449 449

- 18,576 18,576

17 TRANSACTIONS WITH CONNECTED PERSONS

17.1

17.2

17.3

17.4 Remuneration of the Trustee is determined in accordance with the provisions of the Trust Deed.

17.5

------------ Rupees in '000 ------------

------------ As at June 30, 2012 ------------

------------ Rupees in '000 ------------

------------ As at June 30, 2012 ------------

------------ Rupees in '000 ------------

------------ As at June 30, 2011 ------------

------------ Rupees in '000 ------------

------------ As at June 30, 2011 ------------

Connected persons include National Investment Trust Limited being the Management Company, Central DepositoryCompany of Pakistan being the Trustee of the Fund, National Bank of Pakistan, other collective investment schemesmanaged by the Management Company, directors and officers of the Management Company and the Trustees andentities having common directorship with the Management Company.

The transactions with connected persons are in the normal course of business, at contracted rates and termsdetermined in accordance with market rates.

Remuneration of the Management Company is determined in accordance with the provisions of the NBFCRegulations and the Trust Deed.


2012 2011Transactions during the year ---------- Rupees in '000 ---------

National Investment Trust Limited - Management Company

Issue of 28,383,234 units (2011: 34,634,187 units) 2,370,000 3,400,000 Issue of 37,620,290 bonus units (2011: 45,296,699 units) 3,168,005 3,778,198 Redemption of 108,283,036 units (2011: 56,332,066 units) 9,259,131 5,433,095 Management fee expense for the period 245,422 201,017 Sindh Sales Tax on Management Fee 39,268 -

Central Depository Company of Pakistan Limited - Trustee

Remuneration 7,420 8,341 Custodian charges 51 82

Amounts outstanding as at year end

National Investment Trust Limited - Management CompanyInvestment held by the Sponsor in the Fund 20,829,519 26,366,144 Units held 233,199,152 (2011: 275,478,665 units)Management fee payable 29,656 16,444 Formation cost payable 1,000 1,000

Central Depository Company of Pakistan Limited - Trustee Remuneration payable 534 683 Custodian charges payable 2 3

National Bank of Pakistan 3,140,895 3,377,134 Shares held 72,138,150 (2011: 66,980,052 shares)

18 FINANCIAL RISK MANAGEMENT

The Fund's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk.

18.1 Market risk

18.1.1 Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in foreign exchange rates. The Fund, at present is not exposed to currency risk as all transactions arecarried out in Pak Rupees.

Market risk is the risk that the fair value or the future cash flows of a financial instrument may fluctuate as a result ofchanges in market prices. Market risk comprises of three types of risk: currency risk, interest rate risk and other price risk.













18.1 Market risk





18.1.2 Interest rate risk

a) Sensitivity analysis for variable rate instruments

Presently, the Fund does not hold any variable rate instruments and is not exposed to cash flow interest rate risk.

b) Sensitivity analysis for fixed rate instruments

On-balance sheet financial instruments

Financial assets

Bank balances 6% - 13% 1,071,179 - - 16,270 1,087,449

Investments 12.42% - 12.77% 1,335,268 440,224 - 18,159,303 19,934,795Dividend and profit receivable - - - 95,984 95,984

2,406,447 440,224 - 18,271,557 21,118,228Financial liabilities

Payable to National Investment Trust Limited - Management Company - - - 29,656 29,656Payable to Central Depository Company of Pakistan Limited - Trustee - - - 534 534Payable against purchase of investments - - - 14,153 14,153Formation costs payable - - - 1,000 1,000Accrued expenses and other liabilities - - - 376 376

- - - 45,719 45,719On-balance sheet gap 2,406,447 440,224 - 18,225,838 21,072,509

Off-balance sheet financial instruments - - - - -

Off-balance sheet gap - - - - -

Total interest rate sensitivity gap 2,406,447 440,224 - 20,985,792 26,587,378

Cumulative interest rate sensitivity gap 2,406,447 2,846,671 2,846,671

More than three months and up-to one

year

More than one year

---------------------------------------------- Rupees in '000----------------------------------------------

Effective yield / interest rate

Exposed to yield / interest rate riskNot exposed

to interest rate / yield risk

Total Upto three months

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in market interest rates.

As at June 30, 2012, the Fund holds Treasury Bills which are classified as available for sale, exposing the Fund tofair value interest rate risk. In case of 100 basis points increase in rates announced by the Financial MarketAssociation on June 30, 2012, with all other variables held constant, the net assets would have been lower by Rs.2.021 million. In case of 100 basis points decrease in rates announced by the Financial Market Association on June30, 2012, with all other variables held constant, the net assets would have been higher by Rs. 2.026 million.

The composition of the Fund's investment portfolio and rates announced by the Financial Market Association ofPakistan is expected to change over time. Therefore, the sensitivity analysis prepared as of June 30, 2012 is notnecessarily indicative of the effect on the Fund's net assets due to future movements in interest rates.

Yield / interest rate sensitivity position for on balance sheet financial instruments is based on the earlier ofcontractual repricing or maturity date and for off balance sheet instruments is based on settlement date.

---------------------------------------------- As at June 30, 2012 ----------------------------------------------












18.1 Market risk







123

122

Annual Report 2012

18.1.2 Interest rate risk

a) Sensitivity analysis for variable rate instruments

Presently, the Fund does not hold any variable rate instruments and is not exposed to cash flow interest rate risk.

b) Sensitivity analysis for fixed rate instruments


Financial assets

Bank balances 6% - 13% 1,071,179 - - 16,270 1,087,449

Investments 12.42% - 12.77% 1,335,268 440,224 - 18,159,303 19,934,795Dividend and profit receivable - - - 95,984 95,984

2,406,447 440,224 - 18,271,557 21,118,228Financial liabilities

Payable to National Investment Trust Limited - Management Company - - - 29,656 29,656Payable to Central Depository Company of Pakistan Limited - Trustee - - - 534 534Payable against purchase of investments - - - 14,153 14,153Formation costs payable - - - 1,000 1,000Accrued expenses and other liabilities - - - 376 376

- - - 45,719 45,719On-balance sheet gap 2,406,447 440,224 - 18,225,838 21,072,509



Total interest rate sensitivity gap 2,406,447 440,224 - 20,985,792 26,587,378



year

More than one year

---------------------------------------------- Rupees in '000----------------------------------------------


Exposed to yield / interest rate riskNot exposed

to interest rate / yield risk

Total Upto three months

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in market interest rates.

As at June 30, 2012, the Fund holds Treasury Bills which are classified as available for sale, exposing the Fund tofair value interest rate risk. In case of 100 basis points increase in rates announced by the Financial MarketAssociation on June 30, 2012, with all other variables held constant, the net assets would have been lower by Rs.2.021 million. In case of 100 basis points decrease in rates announced by the Financial Market Association on June30, 2012, with all other variables held constant, the net assets would have been higher by Rs. 2.026 million.

The composition of the Fund's investment portfolio and rates announced by the Financial Market Association ofPakistan is expected to change over time. Therefore, the sensitivity analysis prepared as of June 30, 2012 is notnecessarily indicative of the effect on the Fund's net assets due to future movements in interest rates.

Yield / interest rate sensitivity position for on balance sheet financial instruments is based on the earlier ofcontractual repricing or maturity date and for off balance sheet instruments is based on settlement date.

---------------------------------------------- As at June 30, 2012 ----------------------------------------------


Financial assets

Bank balances 5% - 13% 1,419,176 - - 3,254 1,422,430

Investments 13.7% - 14.1% 4,182,410 - - 20,662,466 24,844,876Receivable against sale of investments - - - 50,263 50,263Dividend and profit receivable - - - 288,385 288,385

5,601,586 - - 21,004,368 26,605,954Financial liabilities

Payable to National Investment Trust Limited - Management Company - - - 16,444 16,444Payable to Central Depository Company of Pakistan Limited - Trustee - - - 683 683Formation costs payable - - - 1,000 1,000Accrued expenses and other liabilities - - - 449 449

- - - 18,576 18,576On-balance sheet gap 5,601,586 - - 20,985,792 26,587,378



Total interest rate sensitivity gap 5,601,586 - - 20,985,792 26,587,378


18.1.3 Price Risk

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changesin market prices (other than those arising from interest risk or currency risk) whether those changes are caused byfactors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instrumenttraded in the market.

The Fund is exposed to equity securities price risk because of investments held by the Fund and classified on theStatement of Assets and Liabilities as available for sale. To manage its price risk arising from investments in equitysecurities, the Fund diversifies its portfolio within the eligible stocks prescribed in the Trust Deed. The NBFCregulations also limit individual equity securities to no more than 10% of net assets, or issued capital of the investeecompany and sector exposure limit to 30% of the net assets or index weight of the securities whichever is higher,subject to a maximum of 35%. However, relaxation in this regard has been obtained from the regulators, tomaximise returns and achieve the objectives of the Fund.

In case of 5% increase in KSE 100 index on June 30, 2012, with all other variables held constant, net income forthe year would not be affected as the Fund does not have any security which is classified at fair value through profitor loss. Other components of equity and net assets of the Fund would increase / (decrease) by Rs 176.922 million(2011: Rs 674.675 million) as a result of gains / (losses) on equity securities classified as available for sale.

The analysis is based on the assumption that the equity index had increased / decreased by 5% with all othervariables held constant and all the Fund’s equity instruments moved according to the historical correlation with theindex. This represents management’s best estimate of a reasonable possible shift in the KSE 100 Index, havingregard to the historical volatility of the index. The composition of the Fund’s investment portfolio and the correlationthereof to the KSE 100 index, is expected to change over time. Accordingly, the sensitivity analysis prepared as ofJune 30, 2012 is not necessarily indicative of the effect on the Fund’s net assets of future movements in the level ofthe KSE 100 Index.

---------------------------------------------- As at June 30, 2011 ----------------------------------------------


Exposed to yield / interest rate risk

Not exposed to interest rate

/ yield riskTotal Upto three

months


year

More than one year

---------------------------------------------- Rupees in '000----------------------------------------------


Financial assets

Bank balances 5% - 13% 1,419,176 - - 3,254 1,422,430









18.1.3 Price Risk





---------------------------------------------- As at June 30, 2011 ----------------------------------------------





months


year

More than one year

---------------------------------------------- Rupees in '000----------------------------------------------


Financial assets

Bank balances 5% - 13% 1,419,176 - - 3,254 1,422,430









18.1.3 Price Risk





---------------------------------------------- As at June 30, 2011 ----------------------------------------------





months


year

More than one year

---------------------------------------------- Rupees in '000----------------------------------------------



125

124

Annual Report 2012

18.2 Credit risk

Bank balances by rating category 2012 2011 A1+,A-1+ 93.84% 0.56%

A-2 6.16% 99.44%

Concentration of credit risk

18.3 Liquidity risk

---------------- As at June 30, 2012 ----------------

Upto three months

Over three months and

upto one yearOver one year Total

Payable to National Investment Trust Limited - Management Company 29,656 - - 29,656 Payable to Central Depository Company of Pakistan Limited - Trustee 534 - - 534 Payable against purchase of investments 14,153 - - 14,153 Formation costs payable - - 1,000 1,000 Accrued expenses and other liabilities 376 - - 376

---------------------Rupees '000---------------------

The Fund has the ability to borrow in the short term to ensure settlement. The maximum amount available to theFund from the borrowing would be limited to fifteen percent of the net assets upto 90 days and would be secured bythe assets of the Fund. The facility would bear interest at commercial rates.

Credit risk represents the risk of a loss if the counter parties fail to perform as contracted. Credit risk arises fromdeposits with banks and financial institutions, credit exposure arising as a result of dividends receivable on equitysecurities, receivable against sale of investments and investment in debt securities. For banks and financialinstitutions, only reputed parties are accepted. Credit risk on dividend receivable is minimal due to statutoryprotection. All transactions in listed securities are settled / paid for upon delivery using the national clearing companysystem. The risk of default is considered minimal due to inherent systematic measures taken therein. Riskattributable to investment in Treasury Bills is limited as these are guaranteed by the Federal Government.

The Fund's policy is to enter into financial contracts in accordance with the internal risk management policies andinvestment guidelines approved by the Investment Committee. The Fund does not expect to incur material creditlosses on its financial assets.

In order to manage the Fund's overall liquidity, the Fund may also withhold daily redemption requests in excess often percent of the units in issue and such requests would be treated as redemption requests qualifying for beingprocessed on the next business day. Such procedure would continue until the outstanding redemption requestscome down to a level below ten percent of the units then in issue. The Fund did not withhold any redemptions duringthe year.

The table below analyses the Fund's financial liabilities into relevant maturity groupings based on the remainingperiod at the period end date to the contractual maturity date. The amounts in the table are the contractualundiscounted cash flows.

The analysis below summarises the credit quality of the Fund's financial assets as at June 30, 2012 and June 30th,2011

The maximum exposure to credit risk before any credit enhancement as at June 30, 2012 is the carrying amount ofthe financial assets. Investments in equity securities, however, are not exposed to credit risk.

Concentration of credit risk exists when changes in economic or industry factors similarly affect groups ofcounterparties whose aggregate credit exposure is significant in relation to the Fund's total credit exposure. TheFund's portfolio of financial instruments is mostly concentrated in government securities and deposits held with acommercial bank.

Liquidity risk is the risk that the Fund may not be able to generate sufficient cash resources to settle its obligation infull as they fall due or can only do so on terms that are materially disadvantageous.

The Fund is exposed to the daily settlement of equity securities and to daily cash redemptions, if any. The Fund'sapproach to managing liquidity is to ensure, as far as possible, that the Fund will always have sufficient liquidity tomeet its liabilities when due under both normal and stressed conditions, without incurring unacceptable losses orrisking damage to the Fund's reputation. Its policy is therefore to invest the majority of its assets in investments thatare traded in an active market and can be readily disposed of. The Fund’s listed securities are considered readilyrealisable, as they are listed on the Karachi Stock Exchange.

44,719 - 1,000 45,719

---------------- As at June 30, 2011 ----------------

Upto three months



Payable to National Investment Trust Limited - Management Company 16,444 - - 16,444 Payable to Central Depository Company of Pakistan Limited - Trustee 683 - - 683 Formation costs payable - - 1,000 1,000 Accrued expenses and other liabilities 449 - - 449

17,576 - 1,000 18,576

19 UNIT HOLDERS' FUND RISK MANAGEMENT

20

- quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)

-

-

Investments of the Fund carried at fair value are categorised as follows:

Assets Level 1 Level 2 Level 3 Total

Financial assets classified as available for sale

- Investment in shares 18,159,303 - - 18,159,303 - Investment in government securities - 1,775,492 - 1,775,492

---------------------Rupees '000---------------------

Fair value is the amount for which an asset could be exchanged, or liability settled, between knowledgeable willingparties in an arm's length transaction. Consequently, differences can arise between carrying values and the fairvalue estimates.

Underlying the definition of fair value is the presumption that the Fund is a going concern without any intention orrequirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms.

Financial assets which are tradable in an open market are revalued at the market prices prevailing at the close oftrading on the year end date. The estimated fair value of all other financial assets and liabilities is considered notsignificantly different from book values as the items are either short term in nature or periodically repriced.

IFRS 7 requires the Fund to classify fair value measurements using a fair value hierarchy that reflects thesignificance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

inputs other than quoted prices included within level 1 that are observable for the asset or liability, whetherdirectly (i.e. as prices) or indirectly (i.e. derived from prices) (level 2) ; and

inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3)

The unit holders' fund is represented by redeemable units. They are entitled to dividends and to payment of aproportionate share based on the Fund's net asset value per unit on the redemption date. The relevant movementsare shown on the Statement of Movement in Unit Holders' Funds.

The Fund has no restrictions on the subscription and redemption of units. There is no specific capital requirementwhich is applicable to the Fund.

The Fund's objectives when managing unit holders' funds are to safeguard its ability to continue as a going concernso that it can continue to provide returns for unit holders and to maintain a strong base of assets under

In accordance with the risk management policies as stated in note 18, the Fund endeavours to invest thesubscriptions received in appropriate investments while maintaining sufficient liquidity which would be augmented byshort-term borrowings or disposal of investments where necessary.

FAIR VALUE OF FINANCIAL INSTRUMENTS

18.2 Credit risk

Bank balances by rating category 2012 2011 A1+,A-1+ 93.84% 0.56%

A-2 6.16% 99.44%

Concentration of credit risk

18.3 Liquidity risk

---------------- As at June 30, 2012 ----------------

Upto three months



Payable to National Investment Trust Limited - Management Company 29,656 - - 29,656 Payable to Central Depository Company of Pakistan Limited - Trustee 534 - - 534 Payable against purchase of investments 14,153 - - 14,153 Formation costs payable - - 1,000 1,000 Accrued expenses and other liabilities 376 - - 376

---------------------Rupees '000---------------------

The Fund has the ability to borrow in the short term to ensure settlement. The maximum amount available to theFund from the borrowing would be limited to fifteen percent of the net assets upto 90 days and would be secured bythe assets of the Fund. The facility would bear interest at commercial rates.

Credit risk represents the risk of a loss if the counter parties fail to perform as contracted. Credit risk arises fromdeposits with banks and financial institutions, credit exposure arising as a result of dividends receivable on equitysecurities, receivable against sale of investments and investment in debt securities. For banks and financialinstitutions, only reputed parties are accepted. Credit risk on dividend receivable is minimal due to statutoryprotection. All transactions in listed securities are settled / paid for upon delivery using the national clearing companysystem. The risk of default is considered minimal due to inherent systematic measures taken therein. Riskattributable to investment in Treasury Bills is limited as these are guaranteed by the Federal Government.

The Fund's policy is to enter into financial contracts in accordance with the internal risk management policies andinvestment guidelines approved by the Investment Committee. The Fund does not expect to incur material creditlosses on its financial assets.

In order to manage the Fund's overall liquidity, the Fund may also withhold daily redemption requests in excess often percent of the units in issue and such requests would be treated as redemption requests qualifying for beingprocessed on the next business day. Such procedure would continue until the outstanding redemption requestscome down to a level below ten percent of the units then in issue. The Fund did not withhold any redemptions duringthe year.

The table below analyses the Fund's financial liabilities into relevant maturity groupings based on the remainingperiod at the period end date to the contractual maturity date. The amounts in the table are the contractualundiscounted cash flows.

The analysis below summarises the credit quality of the Fund's financial assets as at June 30, 2012 and June 30th,2011

The maximum exposure to credit risk before any credit enhancement as at June 30, 2012 is the carrying amount ofthe financial assets. Investments in equity securities, however, are not exposed to credit risk.

Concentration of credit risk exists when changes in economic or industry factors similarly affect groups ofcounterparties whose aggregate credit exposure is significant in relation to the Fund's total credit exposure. TheFund's portfolio of financial instruments is mostly concentrated in government securities and deposits held with acommercial bank.

Liquidity risk is the risk that the Fund may not be able to generate sufficient cash resources to settle its obligation infull as they fall due or can only do so on terms that are materially disadvantageous.

The Fund is exposed to the daily settlement of equity securities and to daily cash redemptions, if any. The Fund'sapproach to managing liquidity is to ensure, as far as possible, that the Fund will always have sufficient liquidity tomeet its liabilities when due under both normal and stressed conditions, without incurring unacceptable losses orrisking damage to the Fund's reputation. Its policy is therefore to invest the majority of its assets in investments thatare traded in an active market and can be readily disposed of. The Fund’s listed securities are considered readilyrealisable, as they are listed on the Karachi Stock Exchange.



127

126

Annual Report 2012

21 TRANSACTIONS WITH TOP TEN BROKERS / DEALERS

List of top ten brokers by percentage of commission paid for the year ended June 30, 2012

(i) AKD Securities Limited(ii) Arif Habib Limited(iii) JS Global Capital Limited(iv) BMA Capital Management Limited(v) KASB Securites Limited(vi) Cassim Investment (Pvt) Limited(vii) Amin Tai Securities (Pvt) Limited(viii) Al-Habib Capital Markets (Pvt) Limited(ix) D.J.M Securities (Pvt) Limited(x) Lakhani Securites (Pvt) Limited

List of top ten brokers by percentage of commission paid for the period ended June 30, 2011

(i) AKD Securities Limited(ii) Arif Habib Limited(iii) JS Global Capital Limited(iv) Amin Tai Securities (Pvt) Limited(v) Cassim investment (Pvt) Limited(vi) KASB Securities Limited(vii) Foundation Securities (Pvt) Limited(viii) BMA Capital Management Limited(ix) D.J.M Securities (Pvt) Limited(x) Global Securities Pakistan Limited

22 PARTICULARS OF INVESTMENT COMMITTEE AND FUND MANAGER

Details of members of the investment committee of the Fund are as follow:

---------------------------------------------------2012---------------------------------------------------

S.NO Name Experience in years

1 Wazir Ali Khoja Chairman and Managing Director B.Com 412 Shahid Anwar MBA & DAIBP 35

3 Manzoor Ahmed Chief Operating Officer 23

4 S. Zubair Ahmed Controller of Branches 39

5 Aamir Amin Head of Finance 15

6 M. Imran Rafiq* 6

7 M. Atif Khan* 8

* M. Imran Rafiq and M. Atif Khan were appointed as members of the investment committee during the year.

22.1 Mr. Manzoor Ahmed is the Manager of the Fund. Other funds beings managed by the Fund Manager are as follows:

- National Investment (Unit) Trust - National Investment (Unit) Trust - LOC Holders' Fund (uptil its dissolution as of April 02, 2012)

23

Number of Unit Holders

Investment Amount

Percentage Investment

Management Company 1 20,829,519 100%


Investment Amount


Associated Companies / Directors Rupees '000

CA

MBA and CFA

ACMA and CIA

Head of Research

Manager Compliance and Risk Management

PATTERN OF UNIT HOLDINGAs at June 30, 2012


As at June 30, 2011

M.Phill, MBA, PGD-General Management & PGD-Development

Designation Qualification

Head of MD's Secretariat and Personnel

MBA, DAIBP & Candidate for CFA Level III








---------------------------------------------------2012---------------------------------------------------






6 M. Imran Rafiq* 6

7 M. Atif Khan* 8




23


Investment Amount




Investment Amount



CA

MBA and CFA

ACMA and CIA

Head of Research




As at June 30, 2011






---------------- As at June 30, 2011 ----------------

Upto three months



Payable to National Investment Trust Limited - Management Company 16,444 - - 16,444 Payable to Central Depository Company of Pakistan Limited - Trustee 683 - - 683 Formation costs payable - - 1,000 1,000 Accrued expenses and other liabilities 449 - - 449

17,576 - 1,000 18,576

19 UNIT HOLDERS' FUND RISK MANAGEMENT

20

- quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)

-

-

Investments of the Fund carried at fair value are categorised as follows:

Assets Level 1 Level 2 Level 3 Total

Financial assets classified as available for sale

- Investment in shares 18,159,303 - - 18,159,303 - Investment in government securities - 1,775,492 - 1,775,492

---------------------Rupees '000---------------------

Fair value is the amount for which an asset could be exchanged, or liability settled, between knowledgeable willingparties in an arm's length transaction. Consequently, differences can arise between carrying values and the fairvalue estimates.

Underlying the definition of fair value is the presumption that the Fund is a going concern without any intention orrequirement to curtail materially the scale of its operations or to undertake a transaction on adverse terms.

Financial assets which are tradable in an open market are revalued at the market prices prevailing at the close oftrading on the year end date. The estimated fair value of all other financial assets and liabilities is considered notsignificantly different from book values as the items are either short term in nature or periodically repriced.

IFRS 7 requires the Fund to classify fair value measurements using a fair value hierarchy that reflects thesignificance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

inputs other than quoted prices included within level 1 that are observable for the asset or liability, whetherdirectly (i.e. as prices) or indirectly (i.e. derived from prices) (level 2) ; and

inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3)

The unit holders' fund is represented by redeemable units. They are entitled to dividends and to payment of aproportionate share based on the Fund's net asset value per unit on the redemption date. The relevant movementsare shown on the Statement of Movement in Unit Holders' Funds.

The Fund has no restrictions on the subscription and redemption of units. There is no specific capital requirementwhich is applicable to the Fund.

The Fund's objectives when managing unit holders' funds are to safeguard its ability to continue as a going concernso that it can continue to provide returns for unit holders and to maintain a strong base of assets under

In accordance with the risk management policies as stated in note 18, the Fund endeavours to invest thesubscriptions received in appropriate investments while maintaining sufficient liquidity which would be augmented byshort-term borrowings or disposal of investments where necessary.

FAIR VALUE OF FINANCIAL INSTRUMENTS








---------------------------------------------------2012---------------------------------------------------






6 M. Imran Rafiq* 6

7 M. Atif Khan* 8




23


Investment Amount




Investment Amount



CA

MBA and CFA

ACMA and CIA

Head of Research




As at June 30, 2011







129

128

Annual Report 2012

24 ATTENDANCE AT MEETINGS OF BOARD OF DIRECTORS

Held Attended Leave granted

1 Mr. Wazir Ali Khoja 6 6 -2 Mian Tajammal Hussain 6 4 23 Mr. Qamar Hussain 6 6 -4 Ms. Rukhsana Saleem 6 6 -5 Mr. Jamal Nasim 6 6 -6 Mr. Bahauddin Khan 6 6 -7 Ms. Nazrat Bashir 6 6 -8 Mr. Abdul Razzak Adamjee 6 - 69 Mr. Muhtashim Ahmad Ashai 6 5 1

25 NON-ADJUSTING EVENT AFTER THE REPORTING PERIOD

26 CORRESPONDING FIGURES

27 DATE OF AUTHORISATION FOR ISSUE

28 GENERAL

Figures have been rounded off to the nearest thousand Rupees.

Corresponding figures have been re-classified, re-arranged or additionally incorporated in these financialstatements, wherever necessary to facilitate comparison and to conform with changes in presentation in the currentyear. No significant rearrangements or reclassifications were made in these financial statements.

These financial statements were authorised for issue on August 13, 2012 by the Board of Directors of theManagement Company.

The 288th, 289th, 290th, 291st, 292nd and 293rd Board meetings were held on July 05, 2011, August 22, 2011,October 13, 2011, November 23, 2011, February 6, 2012 and April 11, 2012 respectively. Information in respect ofattendance by the Directors in the meetings is given below:

Name of DirectorNumber of meetings

Meetings not attended

The Board of Directors of the Management Company in the meeting held on July 5, 2012 have approved adistribution by way of bonus issue of Rs 4.65 per unit for the year ended June 30, 2012 (2011: Rs 11.5 per unit ).The financial statements of the Fund for the year ended June 30, 2012 do not include the effect of the finaldistribution which will be accounted for in the financial statements of the Fund for the year ending June 30, 2013.

288th, 289th, 290th, 291th, 292nd, 293rd meeting

292nd, 293rd

291st


Sd/- Sd/- Sd/-



NIT - STATE ENTERPRISE FUNDPERFORMANCE TABLELAST 3 YEARS

JUNE 12 JUNE 11 JUNE 10

Total Net Asset Value Ex-Dividend (Rs. In 000’s) 19,475,143 23,198,139 21,008,067

Net Asset Value per Unit Ex-Dividend (Rs. / unit) 84.67 84.21 83.41

Last Issue/Repurchase Price per Unit* (Rs. / unit) 89.33 95.71 98.41

Highest Issue/Repurchase Price During the Year (Rs. / unit) 94.88 103.76 103.99

Lowest Issue/Repurchase Price During the Year (Rs. / unit) 73.66 81.05 75.24

Total Return of the Fund % 6.07 14.75 43.40

Capital Growth % 0.55 0.96 16.66

Income Distributions % 5.52 13.79 26.74

Distribution per Unit (Final) (Rs. / unit) - 11.50 19.12

Interim (Rs. / unit) - - 4.12

Final (Rs. / unit) 4.65 11.50 15.00

Distribution Date

Interim Not Applicable Not Applicable 13-Feb-10

Final 5-Jul-12 5-Jul-11 5-Jul-10

Average Annual Return

One Year % 6.07 14.75 43.40

Two Years % 10.41 29.08 50.28

Three Years % 21.41 38.44 -

Note: All investments in Mutual Funds and securities are subject to Market Risks. Our target return/dividend range can not be guaranteed. NIT’s unit price is neither guaranteed nor administered/managed. It is based on Net Asset Value (NAV) and the NAV of NIT units may go up or down depending upon the factors and forces affecting the stock market. Past performance is not indicative of future returns.

* These are cum-dividend prices of 30th June.

131

130

Documents

FUND NAME NAME OF AUDITORS LIST OF BANKERS INFORMATION FUND NAME NIT - State Enterprise Fund NAME OF AUDITORS A.F. Ferguson & Co. Chartered Accountants LIST OF BANKERS Allied Bank