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NAMAL ACUITY VALUE FUNDFINANCIAL STATEMENTS For the 06 month period ended 30 September 2017

Corporate Information - National Asset Management Ltd 1

Investment Manager's Report 2

Statement of Financial Position 3

Statement of Comprehensive Income 4

Statement of Changes in Unit Holders Funds 5

Statement of Cash Flows 6

Notes to the Financial Statements 7 -10

Unit Information 11

CORPORATE INFORMATION

Trustee & Custodian Deutsche Bank AG86 Galle RoadColombo 03.

Auditors Ernst & YoungChartered Accountants201, De Saram Place,Colombo 10.

Bankers Deutsche Bank AG86 Galle RoadColombo 03.

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

National Asset Management Limited (NAMAL)7 ,Glen Aber Place , Colombo 03.

National Asset Management Limited Board of Directors (As of 30th September 2017)

Mr. Alexis Lovell ChairmanMr. 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 Director

NAMAL ACUITY VALUE FUND

Management Company &

1

NAMAL ACUITY VALUE FUND QUARTERLY REPORT 2QFY18

Dear Investor,

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

Performance Review The NAVF generated a return of -7.4% for the 3 month period ended September 2017, compared to the All Share Price Index (ASPI) return of -4.6% and the S&P Sri Lanka 20 Index (S&P SL20) return of -6.1%.

During 2QFY18, the Fund realized a gain of LKR 81.8 Mn. However, the unrealized loss for the period was LKR 213.1 Mn compared to LKR 179.2 Mn unrealized gain recognized in 2QFY17. This led to an investment loss of LKR 108.3 Mn for the period. The Fund reported a net loss for the period of LKR 116.3 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 declined 4.6% and the S&P SL20 declined 6.1%, affected by the uncertainty associated with the implementation of the new Inland Revenue Act. Foreign buying witnessed a slowdown in August ahead of the enactment of the new act. In September, the acquisition of a majority stake in Singer PLC by Hayleys for LKR 10.9 Bn resulted in CSE reporting a net foreign outflow of LKR 4.1 Bn for the quarter. The average daily turnover increased to LKR 887.8 Mn from LKR 779.3 Mn in 2QFY17. Foreign participation accounted for 44.8% 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

2

NAMAL Acuity Value FundSTATEMENT OF COMPREHENSIVE INCOMEFor the 06 month period ended 30 September 2017

Note3 month period

ended3 month period

ended6 month period

ended6 month period

ended30.09.2017 30.09.2016 30.09.2017 30.09.2016

Rs. Rs. Rs. Rs.INVESTMENT INCOMEDividend income 19,361,920 19,295,736 40,209,916 48,049,854 Interest income 11 3,595,584 3,840,945 5,311,863 9,157,073 Net realised gains on financial assets held for trading 7.3 81,800,448 - 81,584,766 10,295,524 Net change in unrealised gains/(losses) on financial assets held for trading 7.4 -213,143,551 179,235,942 -3,445,062 206,686,946 Total Investment Income (108,385,599) 202,372,623 123,661,483 274,189,397

EXPENSESManagement and registrar fees (3,903,981) (3,530,319) (7,688,417) (6,848,358) Trustee and custodian fees (949,524) (835,203) (1,871,346) (1,642,447) Audit fees (74,825) (39,388) (114,705) (99,980) Other expenses (504,973) (588,926) (511,818) (602,073) Brokerage Expenses (2,479,893) (776,356) (3,056,261) (3,035,175) Total operating expenses (7,913,196) (5,770,193) (13,242,547) (12,228,034)

NET OPERATING PROFIT/(LOSS) (116,298,795) 196,602,430 110,418,936 261,961,363

FINANCE COSTInterest expense - - (38,959) -

PROFIT AFTER DEDUCTIONS AND BEFORE TAX (116,298,795) 196,602,430 110,379,977 261,961,363

Income tax expense - - - -

PROFIT AFTER TAX FOR THE PERIOD (116,298,795) 196,602,430 110,379,977 261961363

INCREASE IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS (116,298,795) 196,602,430 110,379,977 261,961,363

The accounting policies and notes on pages 7-10 form an integral part of these Financial Statements.

4

NAMAL Acuity Value FundSTATEMENT OF CHANGES IN UNIT HOLDERS' FUNDSFor the 06 month period ended 30 September 2017

6 month period ended

6 month period ended

30.09.2017 30.09.2016Rs. Rs.

UNIT HOLDER' FUND AT THE BEGINNING OF THE PERIOD 1,362,598,840 1,204,456,672

Increase in net assets attributable to unit holders 110,379,977 261,961,363

UNIT HOLDERS' FUNDS AT THE END OF THE PERIOD 1,472,978,817 1,466,418,035

The accounting policies and notes on pages 7-10 form an integral part of these Financial Statements.

5

NAMAL Acuity Value FundSTATEMENT OF CASH FLOWSFor the 06 month period ended 30 September 2017

3 month period ended

3 month period ended

6 month period ended

6 month period ended

30.09.2017 30.09.2016 30.09.2017 30.09.2016Rs. Rs. Rs. Rs.

Cash Flows from Operating ActivitiesDividend received 25,444,643 14,367,368 37,881,216 39,049,314 Interest received 3,367,075 4,718,248 5,786,611 7,596,451 Management fees and Trustee fees paid (4,847,277) (4,249,131) (9,353,671) (8,459,869) Other expenses paid (3,247,022) (589,452) (3,899,803) (602,598) Taxation paid (325,229) (3,309) (450,115) (5,873) Dividend paid - - - - Net Cash Flow generated from Operating Activities 20,392,190 14,243,724 29,964,238 37,577,425

Cash Flows from Investing ActivitiesCost of investments purchased (130,373,924) (70,046,497) (207,642,324) (296,039,946) Cost of fixed incomes securities purchased/sold (42,328,557) 47,781,723 15,715,178 67,082,274

Sale proceeds from Equity investment 152,449,014 - 157,454,100 192,450,087

Net Cash from Investing Activities (20,253,467) (22,264,774) (34,473,046) (36,507,585)

Cash Flows from Financing ActivitiesInterest paid on reverse repo borrowings - - (38,959) - Cash received on creation of units - - - - Cash paid on redemption of units - - - - Net Cash generated from Financing Activities - - (38,959) -

Net increase in cash and cash equivalents 138,723 (8,021,050) (4,547,767) 1,069,840 Cash and cash equivalents at the beginning of the period 3,456,351 10,064,429 8,142,841 973,539 Cash and cash equivalents at the end of the period 3,595,074 2,043,379 3,595,074 2,043,379

6

NAMAL ACUITY VALUE FUNDNOTES TO THE FINANCIAL STATEMENTSFOR THE 6 MONTH PERIOD ENDED September 30,2017

1

2

3

4

5

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

All figures are provisional and unaudited. Where necessary comparative figures have been adjustedto confirm with the changes in presentation in the current period.

Income is recognised on an accrual basis.

Interest on repurchase agreements is shown together with the applicable notional tax credit which isset off against the income tax payable by the fund.

The profit and income of the fund is liable for income tax at the rate of 10% for the year ofassessment 2017/2018 as specified in part A of the second schedule to the Inland Revenue Act No. 10of 2006.

There are no material Contingent Liabilities or contingent Assets which require disclosure in thefinancial statements.

7

NAMAL ACUITY VALUE FUNDNOTES TO THE FINANCIAL STATEMENTSFOR THE 6 MONTH PERIOD ENDED 30 September 2017

7 FINANCIAL ASSETS-HELD FOR TRADING 30.09.2017 30.09.2016Rs. Rs.

Quoted equity securities (Note 7.1) 1,394,107,353 1,352,204,939 Debt Securities-quoted Debentures (Note 7.2) 10,951,835 17,188,076 Market Value 1,405,059,187 1,369,393,014

7.1 Quoted Equity Securities

Cost as at 30.09.2017 1,287,613,955 1,118,119,256Appreciation/(Depriciation) of market value quoted equity securities 106,493,398 234,085,683

1,394,107,353 1,352,204,939

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 Value Value

Central Finance PLC 170,000 14,620,000 0.98% 386,303 44,424,845 3.05%Nation Trust Bank 1,200,000 96,000,000 6.43% 1,200,000 100,680,000 6.90%Hatton National Bank LTD 550,000 129,250,000 8.66% - - - Seylan Bank-NV 1,189,875 68,774,775 4.61% 1,150,000 74,060,000 5.08%Sampath Bank 233,713 72,100,461 4.83% - - -

380,745,236 25.52% 219,164,845 15.03%

Beverages, Food and TobaccoRenuka Agri Foods 8,220,240 23,016,672 1.54% 8,220,240 24,660,720 1.69%

23,016,672 1.54% 24,660,720 1.69%

Construction & EngineeringAccess Engineering 3,644,821 94,036,382 6.30% 1,144,821 31,253,613 2%

94,036,382 6.30% 31,253,613 2%

Diversified HoldingsSoftlogic Holdings 3,396,497 41,097,614 2.75% 3,396,497 50,607,805 3.47%Hemas Holdings PLC - - - 1,310,000 136,371,000 9.35%Hayleys LTD 29,530 7,973,100 0.53% - - -

49,070,714 3.29% 186,978,805 12.82%

Health CareCeylon Hospitals PLC (Durdans)-NV 800,000 56,000,000 3.75% 800,000 64,000,000 4.39%Ceylon Hospitals PLC (Durdans)-V - - - 54,541 5,454,100 0.37%Lanka Hospitals Corporation LTD 800,000 50,400,000 3.38% - - -

106,400,000 7.13% 69,454,100 4.76%

30.09.2017 30.09.2016

8

ManufacturingACL Cables PLC 1,500,000 67,650,000 4.53% 1,500,000 97,050,000 6.66%Tokyo Cement -V 1,800,000 127,620,000 8.55% 1,500,000 90,000,000 6.17%Tokyo Cement - NV 2,782,635 167,236,364 11.21% 2,218,863 110,943,150 7.61%Textured Jersey Lanka Limited 2,250,000 87,750,000 5.88% 2,250,000 106,425,000 7.30%Chevron Lubricants Lanka 1,260,000 153,720,000 10.30% 1,160,000 193,720,000 13.28%

603,976,364 40.48% 598,138,150 41.02%

Power & EnergyLaugfs Gas-V 1,339,563 34,426,769 2.31% 1,139,563 39,884,705 2.74%Lanka IOC 3,100,000 93,000,000 6.23% 3,100,000 111,910,000 7.67%

127,426,769 8.54% 151,794,705 10.41%

TelecommunicationDialog Axiata 779,770 9,435,217 0.63% 6,100,000 70,760,000 4.85%

9,435,217 0.01 70,760,000 4.85%Total value of Equity Investments in Quoted Shares (At Market Value) 1,394,107,353 92.79% 1,352,204,938 92.58%

7.2 Quoted Debentures As at As at

Cost Market ValueHolding as a %

of Net Asset value

Cost Market ValueHolding as a %

of Net Asset value

Hatton National bank PLC 3,167,100 3,198,238 0.21% 3,167,100 3,322,012 0.23%Lion Brewery PLC 4,000,000 4,510,344 0.30% 7,000,000 7,303,691 0.50%Softlogic Holdings - - - - - -Hayleys - - - - - -Richard Pieris - - - 3,110,000 3,248,193 0.22%Hemas Holdings 3,260,000 3,243,252 0.22% 3,260,000 3,314,179 0.23%

10,427,100 10,951,834 0.73% 16,537,100 17,188,076 1.18%

7.3 Net realised in gains on financial assets held for trading 6 month period ended

6 month period ended

30.09.2017 30.09.2016Equity securitiesProceeds on sale of equity shares 157,454,100 148,784,458 Average cost of equity share sold (75,869,334) (138,488,934)

81,584,766 10,295,524

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

Equity securities (3,705,958) 206,581,672 Debt securities-quoted debentures 260,896 105,274

(3,445,062) 206,686,946

30.09.2017 30.09.2016

9

NAMAL Acuity Value FundNOTES TO THE FINANCIAL STATEMENTSFor the 06 month period ended 30 September 2017

8. FINANCIAL ASSETS - LOANS AND RECEIVABLES 30.09.2017 30.09.2016 31.03.2017 31.03.2016Rs. Rs. Rs. Rs.

8.1 Treasury Bills Repurchase AgreementsWealth Trust Securities Ltd 74,084,962 - - -First Capital Treasuries PLC 83679046.71Commercial Bank of Ceylon PLC - - - 28,564,628 DFCC Bank - 32,004,520

74,084,962 32,004,520 83,679,047 28,564,628

8.2 Investments In Commercial Paper

Central Finance Company PLC - - - 76,093,134 Softlogic Holdings PLC - 50,990,078 - -

- 50,990,078 - 76,093,134

74,084,962 82,994,598 83,679,047 104,657,762

9. OTHER RECEIVABLES 30.09.2017 30.09.2016 31.03.2017 31.03.2016Rs. Rs.

Dividend Receivable 457,438 5,318,867 457,438 195,298 CDS Receivable - 44,631,000

457,438 5,318,867 457,438 44,826,298

10. ACCRUED EXPENSES 30.09.2017 30.09.2016 31.03.2017 31.03.2016Rs. Rs. Rs. Rs.

Fund management fees payable 1,234,263 1,196,771 1,179,003 1,026,210 Trustee fee and Custodian fee payable 300,888 282,265 289,188 245,888 Audit fee payable 80,198 78,796 158,083 154,818 CDS Payable 17,600,745 - - -

19,216,093 1,557,832 1,626,275 1,426,916

11. INTEREST INCOME03 month period

ended03 month period

ended6 month period

ended6 month period

ended30.09.2017 30.09.2016 30.09.2017 30.09.2016

Rs. Rs. Rs. Rs.Interest on

Treasury bill repurchase agreements (Note 11.1) 1,992,452 415,824 3,205,219 1,267,159 Debentures 343,298 1,319,232 810,716 3,399,894 Savings account 51,023 33,092 87,117 58,731 Commercial Paper 1,208,811 2,072,797 1,208,811 4,431,290

3,595,584 3,840,945 5,311,863 9,157,073

11.1

12. 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 ofnotional tax.

10

NAMAL ACUITY VALUE FUNDUNIT INFORMATIONFor the 06 month period ended 30 September 2017

1

2 Unit Price MovementThe market prices during the quarter ended 30th September 2017 2016

Rs. Rs.

Highest Price 107.50 90.00Lowest Price 100.00 80.10Last Traded Price 101.20 85.20

3 Net Asset Value of a unit as at 30 th September 136.17 135.63

4 List of 20 Major Unit Holders based on their unitholdings as at 30 th September 2017

Name No. of Holding Units %

Hatton National Bank PLC A/C No 1 3,000,000 27.90Central Finance Company PLC A/C No 3 2,744,900 25.53DFCC Bank PLC A/C No 1 2,112,810 19.65Mr.A.S. Ratnayake 473,394 4.40Waldock MackenzieLimited/Mr.K.R.E.M.D.M.B.Jayasundara 300,334 2.79Hallsville Trading Group Inc. 200,000 1.86Mr.V.Sharda 142,750 1.33Mr.V.H.D.S.S.Siriwardena 130,000 1.21Bartleet Religare Securities (Pvt) Ltd. 100,000 0.93HNB AssurancePLC A/C No 2 (Life Insurance Fund) 80,000 0.74East West Properties PLC 73,200 0.68Mrs. G. Muralidaran 72,853 0.68Mr.R.Amarasinghe 55,000 0.51Mr.M.A.T.Raaymakers 54,960 0.51Mr.W.K.G.N. Perera 50,000 0.47HNB General Insurance Fund 34,400 0.32Miss. E.K.N. Selvadurai 31,302 0.29Mr.H.A.Van Starrex 30,490 0.28Mr.K.S.M.De Silva 29,472 0.27HSBC Intl Nom LTD-BP2S Jersey Laxey Partners Ltd 27,400 0.25

Mr. Suren Madhanayake a Director of the management company hold 2700 units of the fundas of September 30,2017.

11