LOTUS CAPITAL HALAL INVESTMENT FUND Managed by LOTUS CAPITAL LIMITED FINANCIAL STATEMENTS for the year ended 31ST DECEMBER, 2016 Horwath Dafinone, Chartered Accountants, Ceddi Towers, 16 Wharf Road, Apapa, P. O. Box 2151, Marina, Lagos LOTUS CAPITAL HALAL INVESTMENT FUND MANAGED BY LOTUS CAPITAL LIMITED Contents Page(s) Corporate information 1 Report of the trustees 2 - 4 Report of the fund manager 5 - 7 Report of the Shari’ah Supervisory Board 8 - 9 Report of the independent auditors 10 - 11 Statement of financial position 12 Statement of comprehensive income 13 Statement of changes in equity 14 Statement of cash flows 15 Notes to the financial statements 1 General reporting 16 2 Basis of preparation 16 3 Significant accounting policies 17 3.1 Definition 17 3.2 Foreign currency transactions 17 3.3 Income from financing and advances 17 - 18 3.4 Net gain/loss from financial instruments at fair value through profit or loss 18 3.5 Dividend income 18 3.6 Fees, commission and other expenses 18 3.7 Taxation 18 3.8 Financial assets and liabilities 18 - 23 3.9 Cash and cash equivalents 23 3.10 Provisions 24 3.11 Contingencies 24 3.12 Redeemable units 25 3.13 New standards and interpretations not yet adopted 25 4 Financial risk management 26 – 32 5 Critical accounting estimates and judgements 33 – 34 6 Financial assets and liabilities 35 – 36 7 Income from financing and advances 36 8 Net impairment loss on financial assets 36 9 Net loss from financial assets at fair value through profit or loss 37 10 Other operating expenses 37 11 Withholding tax expense 37 12 Cash and cash equivalents 37 13 Financial assets at fair value through profit or loss 38 14 Financial assets available-for-sale 38 15 Financing and advances 38 – 40 16 Other receivables 40 17 Trade and other payables 40 18 Related parties and other key contracts 40 – 41 19 Contingent Liabilities- Litigation and claim 41 20 Statement on the calculation of Zakah 41 Information not required under International Financial Reporting Standards: Statement of value added 42 Five year financial summary 43 LOTUS CAPITAL HALAL INVESTMENT FUND MANAGED BY LOTUS CAPITAL LIMITED Corporate information Fund Manager Lotus Capital Limited 1b Udi Street Osborne Foreshore Estate Osborne Road Lagos Directors of the Fund Manager Mr. Fola Adeola Mrs. Hajara Adeola Mrs. Lateefah Okunnu Mrs. Amina Oyagbola Mr. Nuruddeen Lemu Registered office 1b Udi Street (Fund Manager) Osborne Foreshore Estate Osborne Road Lagos Trustees to the Fund FBN Trustees Limited 10, Keffi Street Off Awolowo Road, Ikoyi Lagos Independent auditors to the Fund Horwath Dafinone Chartered Accountants Custodian to the Fund Citibank Nigeria Limited Registrar to the Fund Unity Registrars Limited 25 Ogunlana drive Surulere Lagos 1 LOTUS CAPITAL HALAL INVESTMENT FUND MANAGED BY LOTUS CAPITAL LIMITED Report of the trustees The Trustees present their report on the affairs of the Lotus Capital Halal Investment Fund, together with the audited financial statements for the year ended 31st December, 2016. Principal activity: The principal activity of the Lotus Capital Halal Investment Fund is the pooling of funds from individual members of the public and companies and the investment of such funds in equities listed on the Nigerian Stock Exchange, Asset Backed Investments and other Sharia-compliant investments. During the year under review, the Fund was administered in accordance with the Trustees Investment Act, CAP T22 LFN, 2004, the Investments and Securities Act, 2007, the provisions of the Trust Deed and any supplemental thereto, together with the rules and regulations set out by the regulatory bodies established pursuant to the legislation referred to within this paragraph (“Applicable Regulations”), taking into cognisance prevailing market conditions as well as preserving of (and minimising possible losses to) unit holders’ funds. The Fund was also administered in accordance with Shari’ah Rules and Principles. Results: The results for the year are set out on Pages 14. Distribution: While the Trust Deed constituting the Fund empowers the Fund to distribute any part of its income to its members, such distribution has to be approved by the Trustee on the recommendation of the Fund Manager. Directors: The directors of the Fund Manager who served on the board of the Fund Manager during the period under review and up to the date of approving these financial statements were: Mr. Fola Adeola (Chairman) Mrs. Hajara Adeola (Managing Director/Chief Executive Officer) Mrs. Lateefah Okunnu Mrs. Amina Oyagbola Mr. Nuruddeen Lemu Directors' and related The Directors of Lotus Capital Limited who held direct and indirect parties interest in the beneficial interest in the units of the Fund as at 31st December, 2015 are: units of the Fund: Units held as at Units held as at 31st December, 2016 31st December, 2015 Mr. Fola Adeola 5,000,000 5,000,000 Mrs. Hajara Adeola 8,500,000 7,838,691 Mr. Nuruddeen Lemu 3,274,756 3,274,756 Mrs. Lateefah Okunnu 10,777,612 10,777,612 None of the directors of FBN Trustees Limited has any direct or indirect beneficial interest in the units of the Fund. 2 LOTUS CAPITAL HALAL INVESTMENT FUND MANAGED BY LOTUS CAPITAL LIMITED Report of the trustees (continued) Responsibilities of The Investments and Securities Act, 2007 requires the Fund Manager the Fund Manager: to keep proper books of account and prepare annual financial statements which give a true and fair view of the state of affairs of the unit trust scheme during the period covered by the financial statements. In our opinion, the Fund Manager has in preparing the financial statements: selected suitable accounting policies and applied them consistently; made judgments and estimates that were reasonable and prudent; ensured that the applicable accounting standards have been followed, and in the case of any material departure, that it was fully disclosed and explained in the financial statements; and prepared the financial statements on a going concern basis; since it was appropriate to assume that the Fund shall continue to exist. The Fund Manager was responsible for keeping proper accounting records, which disclose with reasonable accuracy, at any point in time, the financial position of the Fund, and enable the Fund Manager to ensure that the financial statements comply with the Applicable Regulations. The Fund Manager is also responsible for maintaining adequate financial resources to meet its commitments and to manage the risks to which the Fund is exposed. Responsibilities of The responsibilities of the Trustee as provided by the Trust Deed and the Trustee: other Supplemental thereto, the Securities and Exchange Commission’s Rules and Regulations made pursuant to the Investments and Securities Act, 2007 are as stated below: Monitoring of the activities of the Fund Manager and the custodian on behalf of and in the interest of the Unit Holders; Ensuring that the Custodian takes into custody all of the scheme’s assets and holds it in trust for the holders in accordance with the Trust Deed and the Custodial Agreement; Monitoring the register of unit holders or contributors; Ascertaining the Fund Manager’s compliance with the Applicable Regulations; Ascertaining that the monthly and other periodic returns/reports relating to the Fund are sent by the Fund Manager to the Commission; 3 LOTUS CAPITAL HALAL INVESTMENT FUND MANAGED BY LOTUS CAPITAL LIMITED Report of the trustees (continued) Responsibilities of the Trustee: (continued) Exercising any right of voting conferred on it as the registered holder of any investment and/or forward to the fund manager within a reasonable time all notices of meetings, reports, circulars, proxy solicitations and any other document of a like nature for necessary action; Ensuring that fees and expenses of the fund is within the prescribed limits; and Acting at all times in the interest and for the benefit of unit holders of the scheme. Administration of the During the year under review, the Fund was administered in accordance Fund: with the applicable regulations, taking into cognisance prevailing market conditions as well as preserving and minimising possible losses to unit holders’ funds. Charitable donations: The Fund did not make any charitable donations during the year. (2015: nil) Auditors: Messrs Horwath Dafinone, Chartered Accountants, having indicated their willingness to continue in office, shall do so in accordance with Section 169(1) of the Investments and Securities Act, 2007. By Order of the Trustees Adekunle Awojobi, FRC/ICAN/2013/00000002442 Managing Director FBN Trustees Limited Lagos, Nigeria , 2017 4 LOTUS CAPITAL HALAL INVESTMENT FUND MANAGED BY LOTUS CAPITAL LIMITED Report of the fund manager Dear Investor, This report provides an overview of the performance of the Lotus Capital Halal Investment Fund (Halal Fund) from 1st January, 2016 to 31st December, 2016. INVESTMENT OBJECTIVES The primary objective of the Fund is to optimize total returns of investors by seeking high quality investments whilst adhering to the strictest code of ethics in line with our Islamic finance investment philosophy. MACROECONOMIC REVIEW In 2016 we witnessed landmark events on both the political and economic fronts, which makes it fair to characterize the year as volatile and interesting. In the year under review, Britain’s electorate made the shocking decision to exit the European Union (otherwise known as Brexit); and their angst was largely driven by concerns over insecurity and unemployment following a wave of migration into Europe. Consequently, the European Central Bank took measures to forestall any adverse consequences of the Brexit and extended its bond buying program by nine months to December 2017. This boosted consumer spending and raised inflation in the Eurozone to its highest level in 2.5 years at 0.6%. In the US, Donald Trump emerged as the President after a heated general election.