NAMAL ACUITY VALUE FUND

Interim Report

For the Six months ended 30th September 2017

National Asset Management Limited 07,Glen Aber Place Colombo 03. Phone : 2445911 Fax : 2445903 Email : info@namal.lk

Table of Contents

Report of the Investment Manager 1

Statement of Comprehensive Income 2

Statement of Financial Position 3

Statement of Movement in Unit Holders Fund 4

Notes To the Financial Statements 5-7

Corporate Information 8

NAMAL ACUITY VALUE FUNDInterim Report 2017

NAMAL ACUITY VALUE FUND INTERIM REPORT

1HFY18

Dear Investor,

We take pleasure in presenting the quarterly report of the Namal Acuity Value Fund (NAVF) for the 6 month period ended 30th September 2017.

Performance Review The NAVF generated a return of 8.1% for the 6 month period ended September 2017, compared to the All Share Price Index (ASPI) return of 6.2% and the S&P Sri Lanka 20 Index (S&P SL20) return of 7.4%.

During 1HFY18, the Fund realized a gain of LKR 81.6 Mn. However, the unrealized loss for the period was LKR 3.5 Mn compared to LKR 206.7 Mn unrealized gain recognized in 1HFY17. This led to an investment income of LKR 123.7 Mn for the period. The Fund reported a net profit for the period of LKR 110.4 Mn.

Net asset value of the Fund increased 1.7% YoY to LKR 1,492.1 Mn during the period.

Market Review During the period under review, the ASPI gained 6.2% and the S&P SL20 gained 7.4%, led by continued foreign buying over the period. However, in September, the acquisition of a majority stake in Singer PLC by Hayleys led to net outflow LKR 9.5 Bn. For the 6 month period the CSE reported a net inflow of LKR 12.3 Bn. The average daily turnover increased to LKR 1,014 Mn from LKR 743 Mn in 1HFY17. Foreign participation accounted for 45.2% of turnover during the period.

Benchmark 12 month Treasury bill yields continued to decline in primary market auctions in 2QFY18 and stood at 9.10% at the end of September. Removal of caps imposed on interest rates of credit products, effective from 3QCY2017, led to a slowdown in private sector credit growth during the quarter. Policy rates were held steady in 2QFY2018.

On the economic front, real GDP grew at 3.9% in 1HCY2017 compared to 3.7% growth in 1HCY2016. The growth was led by construction sector. External sector showed mixed performance in 1HFY2018. Exports gained momentum in Q2 and Q3 of CY2017. Nevertheless, trade deficit expanded by 12.1% to USD 6,184.0 Mn in the first 8 months, as a result of higher import expenditures. During the same period, tourism earnings grew 3.5% to USD 2,413.7 Mn, while worker remittances declined 6.3% to USD 4,503.3 Mn. The overall BoP position recorded a surplus of USD 2,174.9 Mn at the end of August compared to USD 211.5 Mn surplus reported in the comparative period of last year, mainly aided by foreign currency receipts on account of additional borrowings and grants.

Portfolio Composition The Fund has 94.2% allocation to equity and the remainder in Repos and Debentures.

NAVF’s highest equity concentrations are in Banking, Materials and Capital Goods sectors.

Sincerely, The Fund Management Team 31th October 2017

Performance Comparison

(Non-annualised returns)

6M* (%)

12M (%)

24M (%)

36M (%)

ASPI 6.21 -1.48 -8.69 -11.22

S&P SL 20 7.44 2.14 -3.43 -8.51

NAVF 8.12 0.77 6.08 9.41

* Six month period ending 30 September 2017

Asset Allocation

Top 5 Sector Allocations

94.2%

5.0% 0.7%

Equity

Repos

Debentures

26.26%

21.15%

15.12%

11.03%

9.14%

0.0% 10.0% 20.0% 30.0%

Banks

Materials

Capital Goods

Chemicals

Oil, Gas andConsumable Fuels

1

STATEMENT OF COMPREHENSIVE INCOMEFor the 06 month period ended 30th September

2017 2016Note Rs. Mn. Rs. Mn.

INVESTMENT INCOMEDividend income 40.21 48.05 Interest income 13 5.31 9.16 Net realised gains on financial assets held for trading 9.3 81.58 10.30 Net change in unrealised losses on financial assets held for trading 9.4 (3.45) 206.69 Total Investment Income 123.66 274.19

EXPENSESManagement and registrar fees (7.69) (6.85) Trustee and custodian fees (1.87) (1.64) Audit fees (0.11) (0.10) Other expenses (3.57) (3.64) Total operating expenses (13.24) (12.23)

NET OPERATING PROFIT/(LOSS) 110.42 261.96

FINANCE COSTInterest expense (0.04) -

PROFIT AFTER DEDUCTIONS AND BEFORE TAX 110.38 261.96

Income tax expense - -

PROFIT AFTER TAX FOR THE PERIOD 110.38 261.96

INCREASE IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 110.38 261.96

NAMAL ACUITY VALUE FUND

Interim Report 2017

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STATEMENT OF CHANGES IN UNIT HOLDERS' FUNDSFor the 06 month period ended 30th September

2017 2016Rs. Mn. Rs. Mn.

UNIT HOLDER' FUND AT THE BEGINNING OF THE PERIOD 1,362.60 1,204.46

Increase in net assets attributable to unit holders 110.38 261.96

UNIT HOLDERS' FUNDS AT THE END OF THE PERIOD 1,472.98 1,466.42

NAMAL ACUITY VALUE FUND

Interim Report 2017

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NOTES TO THE FINANCIAL STATEMENTSFor the 06 month period ended 30th September 2017

1 All figures are provisional and unaudited. Where necessary comparative figures have been adjusted to confirm with the changes in

presentation in the current period.

2 Income is recognised on an accrual basis.

3 Interest on repurchase agreements is shown together with the applicable notional tax credit which is set off against the income tax

payable by the fund.

4 The profit and income of the fund is liable for income tax at the rate of 10% for the year of assessment 2017/2018 as specified in part A

of the second schedule to the Inland Revenue Act No. 10 of 2006.

5 There are no material Contingent Liabilities or contingent Assets which require disclosure in the financial statements.

6 No circumstances have arisen since the Balance Sheet date, which would require adjustments or disclosure in the Financial Statements.

7. Share Price Movement

The market prices during the 6 months period ended 30 September 2017 2016

Highest Price ( Rs.) 107.50 90.00

Lowest Price (Rs.) 83.00 80.10

Last Traded Price ( Rs.) 105.00 85.20

2017 2016

8. Net Asset Value of a unit as at September 30 (Rs.) 136.17 135.63

(Applicable to 10,751,200 units)

9 FINANCIAL ASSETS-HELD FOR TRADING 2017 2016Rs. Mn. Rs. Mn.

Quoted equity securities (Note 9.1) 1,394.11 1,352.20 Debt Securities-quoted Debentures (Note 9.2) 10.95 17.19 Market Value 1,405.06 1,369.39

9.1 Quoted Equity Securities

Cost as at 30.09.2016 1,287.61 1,118.12Appreciation/(Depriciation) of market value quoted equity securities 106.49 234.09

1,394.11 1,352.20

CompanyNumber of Market Holdings Number of Market Holdings

Shares Value as a % of Shares Value as a % of Rs. Net Asset Rs. Net Asset

Banks, Finance and Insurance Mn. Value Mn. Value

Commercial Bank of Ceylon PLC-V - - - - - 0.00%Central Finance PLC 170,000 14.62 0.98% 386,303 44.42 3.05%Hatton National Bank LTD. 550,000 129.25 8.66%Nations Trust Bank 1,200,000 96.00 6.43% 1,200,000 100.68 6.90%Sampath Bank 233,713 72.10 4.83% - - 0.00%Seylan Bank-NV 1,189,875 68.77 4.61% 1,150,000 74.06 5.08%

380.75 25.51% 219.16 15.03%

30.09.2017 30.09.2016

Interim Report 2017NAMAL ACUITY VALUE FUND

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Beverages, Food and TobaccoRenuka Agri Foods 8,220,240 23.02 1.54% 8,220,240 24.66 1.69%

23.02 1.54% 24.66 1.69%

Construction & EngineeringAccess Engineering 3,644,821 94.04 6.30% 1,144,821 31.25 2.14%

94.04 6.30% 31.25 2.14%

Diversified HoldingsSoftlogic Holdings 3,396,497 41.10 2.75% 3,396,497 50.61 3.47%Hemas Holdings PLC - - - 1,310,000 136.37 9.35%Hayleys LTD 29,530 7.97 0.53%

49.07 3.28% 186.98 12.82%

Health CareCeylon Hospitals PLC (Durdans)-NV 800,000 56.00 3.75% 800,000 64.00 4.39%Ceylon Hospitals PLC (Durdans)-V - - - 54,541 5.45 0.37%Lanka Hospital Corporation LTD 800,000 50.40 3.38% - - -

106.40 7.13% 69.45 4.76%

ManufacturingACL Cables PLC 1,500,000 67.65 4.53% 1,500,000 97.05 6.66%Tokyo Cement 1,800,000 127.62 8.55% 1,500,000 90.00 6.17%Tokyo Cement - NV 2,782,635 167.24 11.21% 2,218,863 110.94 7.61%Chevron Lubricant Lanka PLC 1,260,000 153.72 10.30% 1,160,000 193.72 0.13 Textured Jersey Lanka LTD 2,250,000 87.75 5.88% 2,250,000 106.43 0.07

603.98 40.47% 598.14 41.02%

Power & EnergyLaugfs Gas-V 1,139,563 34.43 2.31% 1,139,563 39.88 2.74%Lanka IOC 3,100,000 93.00 6.23% 3,100,000 111.91 7.67%

127.43 8.54% 151.79 10.41%

TelecommunicationDialog 779,770 9.44 0.63% 6,100,000 70.76 4.85%

9.44 0.63% 70.76 4.85%

Total value of Equity Investments in 1,394.11 93.40% 1,352.20 92.72%Quoted Shares (At Market Value)

9.2 Quoted Debentures As at As at

Cost Market ValueHolding as a

% of Net Asset value

Cost Market ValueHolding as a

% of Net Asset value

Rs. Mn. Rs. Mn. Rs. Mn. Rs. Mn.

Lanka Orix Leasing Co. PLC - - - - - - Hatton National bank PLC 3.17 3.20 0.21% 3.17 3.32 0.23%Central Finance PLC - - - - - 0.00%Lion Brewery PLC 4.00 4.51 0.30% 7.00 7.30 0.50%Softlogic Holdings - - - - - 0.00%Hayleys - - - - - 0.00%Richard Pieris - - - 3.11 3.25 0.22%Hemas Holdings 3.26 3.24 0.22% 3.26 3.31 0.23%

10.43 10.95 0.73% 16.54 17.19 1.18%

9.3 Net realised in gains on financial assets held for trading30.09.2017 30.09.2016

Equity securitiesProceeds on sale of equity shares 157.45 148.78 Average cost of equity share sold (75.87) (138.49)

81.58 10.30

9.4 Net change in unrealised gains on financial assets held for trading

Equity securities (3.71) 206.58 Debt securities-quoted debentures 0.26 0.11

(3.45) 206.69

30.09.2017 30.09.2016

6

NOTES TO THE FINANCIAL STATEMENTSFor the 06 month period ended 30th September 2017

10. FINANCIAL ASSETS - LOANS AND RECEIVABLES 2017 2016Rs. Mn. Rs. Mn.

10.1 Treasury Bills Repurchase Agreements

Wealth Trust Securities Ltd 74.08 - DFCC Vardhana Bank - 32.00

74.08 32.00

10.2 Investment in Commercial Papers

Softlogic Holdings PLC - 50.99 - 50.99

74.08 82.99

11. OTHER RECEIVABLES 2017 2016Rs. Mn. Rs. Mn.

Dividend Receivable 0.46 5.32 0.46 5.32

12. ACCRUED EXPENSES 2017 2016Rs. Mn. Rs. Mn.

Fund management fees payable 1.23 1.20 Trustee fee and Custodian fee payable 0.30 0.28 Audit fee payable 0.08 0.08 CDS Payable 17.60 -

19.22 1.56

13. INTEREST INCOME06 month period

ended06 month period

ended30.09.2017 30.09.2016

Rs. Mn. Rs. Mn.Interest on

Treasury bill repurchase agreements (Note 11.1) 3.21 1.27 Debentures 0.81 3.40 Savings account 0.09 0.06 Commercial Paper 1.21 4.43

5.31 9.16

13.1

14. DISTRIBUTIONThe fund announced a dividend of Rs.1.50 per unit on September 28,2017 for the period September 1,2016 to August 31,2017.

Interest on Treasury Bill Repurchase Agreements and Treasury bills have been accounted for gross of notionaltax.

NAMAL ACUITY VALUE FUNDInterim Report 2017

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CORPORATE INFORMATION

Trustee & Custodian Deutsche Bank AG86 ,Galle RoadColombo 03

Auditors Ernst & YoungChartered Accountants201, De Saram PlaceColombo 10

Bankers Deutsche Bank AG86, Galle RoadColombo 03

Lawyers F J & G De SaramAttorneys-at-Law & Notries Public216, De Saram PlaceColombo 10

Managers & Registrars National Asset Management Limited (NAMAL)7, Glen Aber PlaceColombo 03

National Asset Management LimitedBoard of Directors (30th September 2017) Mr. Alexis Lovell Chairman

Mr. Indrajit Wickramasinghe DirectorMr. Palitha Gamage DirectorMr. Tyronne de Silva DirectorMr. Malinda Samaratunga DirectorMr. Wijenanada Dambawinne DirectorMr. Suren Madhanayake DirectorMr. Avancka Herat DirectorMs. Khoo Siew Bee DirectorMr. Avancka Herat DirectorMs. Khoo Siew Bee Director

NAMAL ACUITY VALUE FUNDInterim Report 2017

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