2013 - 2014
ANNUAL REPORT ANNUAL REPORT 2013 / 2014
Contents
About NAMAL 01
Chairman's Review 03
Board of Directors 05
Management Team 09
NAMAL Funds 12
Investment Manager’s Report 16
NAMAL Acuity Value Fund 25
Unit Information 46
Corporate Information 48 About
1 ANNUAL REPORT 2013 / 2014
About NAMAL
National Asset Management Limited (NAMAL) is the pioneer Unit Trust management company in Sri Lanka established in 1991. Over 20 years of experience and a successful track record of investing in equity and xed income markets, NAMAL launched the rst Unit Trust to be licensed in Sri Lanka (National Equity Fund) and the rst listed Unit Trust (NAMAL Acuity Value Fund). We operate eight Unit Trusts and o er private portfolio management services as well. A subsidiary of Union Bank of Colombo PLC, our shareholders include DFCC Bank and Ennid Capital (Pvt) Limited. We have a highly experienced and professional management team with widespread experience in domestic and international capital markets.
Our Investment Philosophy
“Value Investing” is an in-grained investment philosophy at NAMAL. It is a rigorous and disciplined investment management process involving Fundamental Research and Valuations, Asset Allocation, Portfolio Implementation, Monitoring and Reallocation Strategies. The core investment team is guided by the Investment Committee which includes eminent independent investment professionals.
Our Unit Trusts
Unit Trusts enable individual investors to bene t from professional fund management, investment performance, portfolio diversi cation, additional investment alternatives and risk management for a low minimum investment. In addition, investors have the ability to redeem their investments on a daily basis in the event of an emergency. Investing in Unit Trusts allows you to plan and invest for your future nancial wealth, signi cant life milestones and your prosperous retirement while enjoying peace of mind.
All NAMAL Unit Trusts are licensed and regulated by the Securities and Exchange Commission of Sri Lanka.
2 Chairman’s Review
3 ANNUAL REPORT 2013 / 2014
“We remain committed to delivering long term capital appreciation and income to our investors by adopting conservative, fundamental based investment management”.
Dear Investors, It is my pleasure to send this Report and accounts of the Funds to our investors for the year ended 31st March 2014.
The Company achieved an impressive 155% growth in Assets under Management (AUM) to Rs. 13.1 Bn from Rs. 5.1Bn during the year under review. The Company passed the Rs. 10Bn AUM level for the rst time in its history. NAMAL was selected as the Best Investment Management Company in Sri Lanka by World Finance at the Investment Management Awards 2013 con rming our pre-eminent position in the country.
The agship, National Equity Fund, yet again ranked No 1 in the entire industry (46 Funds) with total returns of 17.1% in FY13. The NAMAL Growth Fund and NAMAL Acuity Value Fund also outperformed the All Share Price Index. Our xed income funds, NAMAL High Yield Fund and NAMAL Income Fund continue to provide attractive tax adjusted returns.
While foreseeing some near term challenges stemming from both global and domestic macro-economic issues, we are optimistic about the future growth trajectory of the Sri Lankan economy and the capital markets. We remain committed to delivering long term capital appreciation and income to our investors by adopting conservative, fundamental based investment management.
I wish to take this opportunity to thank our sta , Securities and Exchange Commission, the Trustees and our market counterparties for their contribution. Most importantly I wish to extend my sincere appreciation to our loyal investors, many of whom have remained with NAMAL since inception, for the trust they have placed in us. I am con dent NAMAL will repay your trust by continuing to deliver excellent performance in the future.
Alexis Lovell, MBE Chairman
4 Board of Directors
5 ANNUAL REPORT 2013 / 2014
Board of Directors
Alexis Lovell Ajith Wijeyesekera Anil Amarasuriya Chairman Deputy Chairman
Palitha Gamage Ms Khoo Siew Bee Avancka Herat
Not in picture: Jitendrakumar Warnakulasuriya Tyrone De Silva
6 ANNUAL REPORT 2013 / 2014
Pro les of the Board of Directors
Alexis Lovell, MBE - Chairman
Mr. Lovell is the Chairman of Union Bank of Colombo PLC. He counts over thirty years of experience in Finance and Investment Banking. Mr. Lovell is a Chartered Management Accountant, UK and holds a post graduate degree in Business Administration. He was awarded the MBE (Most Distinguished Order of the British Empire) by Her Majesty the Queen of England for services to Investment Banking.
Ajith Wijeyesekera - Deputy Chairman
Mr. Wijeyesekera is a renowned entrepreneur/ business leader with over 30 years experience in business management. An eminent personality in the Sri Lankan apparel industry, he is the Founder Chairman/Managing Director of Union Apparels (Pvt) Limited, a well established manufacturer of garments for export markets, consisting of ve manufacturing units with a turnover of Rs. 4 billion and a workforce of over 3500.
He is also the Founder Chairman/Managing Director of Union Resorts, the owning company of The Blue Water, Wadduwa, a luxury ve star resort hotel, NorthStar Holdings an investment company, Union Industrial Washing (Pvt) Limited and the elite fashion store, Dilly's Fashions (Pvt) Ltd.
Anil Amarasuriya
Mr. Amarasuriya is the Director / Chief Executive O cer of Union Bank of Colombo PLC (UBC). A veteran banker and former Managing Director / Chief Executive O cer of Sampath Bank. His association with UBC dates back to 2003 when he spearheaded its restructure, when Sampath Bank and a group of investors infused capital to the Bank. He has been instrumental in the Bank's business re-engineering process through a new strategic direction to reposition UBC as the preferred Bank for the SME and Retail Banking Sectors.
He is a Fellow of the Institute of Chartered Accountants, Sri Lanka and the Chartered Institute of Management Accountants, UK and an Honorary Fellow of the Institute of Bankers, Sri Lanka. He was a member of the Sri Lanka Accounting and Auditing Standards Monitoring Board. He is currently the vice chairman of the Sri Lanka Bank's Association and a Director of Financial Ombudsman Guarantee Ltd. Mr. Amarasuriya was also a former Chairman of the Sri Lanka Banks' Association and Financial Ombudsman Sri Lanka Guarantee Limited. He also served as a Director of Sampath Surakum Ltd, SC Securities Ltd, Sampath Trade Services (HK) Ltd and Lanka Bangla Finance Ltd.
Jit Warnakulasuriya
Mr. Warnakulasuriya is the Chairman of Just in Time Group and counts many years experience in management and over 25 years experience in the eld of IT. Mr. Warnakulasuriya is a Fellow member of the Institute of Certi ed Professional Managers, Chartered Institute of Marketing.
7 ANNUAL REPORT 2013 / 2014
Ms. Khoo Siew Bee
Ms. Siew Bee has extensive experience in all aspects of corporate nance work in Asia, the US and Europe. Her previous positions include Director & Country Manager of Schroders Taiwan, Director of Schroders Hong Kong, Director of Schroders Singapore and Mergers & Acquisitions Director (Asia Paci c) of Monsanto Singapore Pte. Ltd. Ms. Siew Bee is a Director of BP De Silva Holdings Pte Ltd., and a number of its subsidiary and associate companies.
Tyrone De Silva
Mr. De Silva is a Senior Vice President and Head of the Corporate Banking and Investment Banking Departments at DFCC Bank. He joined the Bank in 1989 and has been involved throughout in the Bank's Corporate Finance and Capital Markets business.
He serves as a member of Bank's Credit, Investment and Asset Liability Committees and as nominee Director on the Boards of some of the Bank's other subsidiary and associate companies.
Mr. De Silva holds a Master's Degree in Business Administration from the University of Warwick, UK. He is also a Graduate Member of the Institute of Mechanical Engineers, UK.
Palitha Gamage
Mr. Palitha Gamage is a career banker with over 25 years of experience at DFCC Bank. He has served in several senior managerial positions in Corporate Banking, SME Banking, Investment Banking and Planning within the bank. In addition, he also served as Head of Corporate Credit at DFCC Vardhana Bank. Presently, he holds the position Executive Vice President (Planning and Operations) at DFCC Bank; a post he has held since 2013. Prior to joining DFCC Bank, he worked as a Civil Engineer at State Engineering Corporation of Sri Lanka. He served as a member of the Governing Board of the National Institute of Business Management for three years from 2010. During his career, Mr. Gamage has attended a multitude of local and foreign training programs and workshops covering various aspects of banking.
Mr. Gamage holds a B. Sc (Engineering) Hons degree from the University of Moratuwa, Sri Lanka and a MBA from the Asian Institute of Technology, Thailand. He is an Associate of the Chartered Institute of Management Accounts (CIMA), UK and a Corporate Member of the Institute of Engineers, Sri Lanka.
Avancka Herat
Mr. Herat is the Executive Director of NAMAL. (Please refer management team pro le.)
8 Management Team
9 ANNUAL REPORT 2013 / 2014
Pro les of the Management Team
Avancka Herat, Executive Director/Chief Investment O cer
Mr. Herat has over 20 years experience in the nancial services sector in the areas of investments banking, investment management and corporate nance. He has extensive regional experience having worked for investments banks and MNC’s including Jardine Fleming, JP Morgan and Caltex. He has worked in Singapore, Hong Kong and Thailand specializing in key sectors such as Petroleum, Telecoms, Power and Energy, Cement, MNC’s and Small Caps. Prior to joining NAMAL, Mr. Herat was the Chief Investment O cer/Director of Aegis Fund Management (Pvt) Ltd, managing the funds of DCSL Group, including Sri Lanka Insurance Corporation Ltd.
Mr. Herat holds a BSc (Hon) Degree in Business Management from University of Swansea, Wales and MSc in Business Finance from University of London, Uxbridge.
Charana Jayasuriya, Head – Sales & Structuring
Mr. Jayasuriya has more than 12 years experience in the capital markets of Sri Lanka and United Kingdom in asset management, investment banking and nancial regulation. Prior to joining NAMAL, Mr. Jayasuriya was Fund Manager for Aegis Fund Management (Pvt) Ltd managing the funds of DCSL Group, including Sri Lanka Insurance Corporation Ltd specialising in xed income and foreign currency.
Mr. Jayasuriya holds a LLB (Hons) Law and LLM in Banking & Finance Law from University College, University of London.
Mrs. Pushpika Jeevaratne, Head of Compliance
Mrs. Jeevaratne has over 9 years of experience in the nancial services sector including investment banking. She has worked for Vanik and DP Capital Management prior to joining NAMAL.
Mrs. Jeevaratne holds a BSc. (Eng) from University of Moratuwa and is a member of the Chartered Institute of Management Accountants (UK)
Dinesh Fernando, Fund Manager
Mr. Fernando has 20 years experience in the nancial services sector in the areas of equity research, investment banking and portfolio management. He has worked for HSBC, KPMG, DFCC Bank, NDB Investment Bank and First Guardian Equities in Sri Lanka and overseas. Prior to joining NAMAL he was with Standard Chartered Bank.
Mr. Fernando is a CFA Charterholder and a member of the Association of Chartered Certi ed Accountants (UK) and Chartered Institute of Management Accountants (UK).
10 ANNUAL REPORT 2013 / 2014
Tharaka Mudalige, Senior Sales Manager – Retail Sales
Mr. Mudalige has over 8 years experience in Financial Services Sales including Life Insurance and General Insurance specialising in Bancassurance. Prior to joining NAMAL, Mr. Mudalige was the Manager Sales - Bancassurance for AVIVA NDB Insurance PLC.
Mr. Mudalige is an Associate Member of the Chartered Institute of Management Accountants (UK).
Mrs. Menaka Fernando, Finance Manager
Mrs. Fernando has more than six years experience in Accounting, Auditing and Advisory Services at Kreston MNS & Co.
Mrs. Fernando is a member of the Institute of Chartered Accountants of Sri Lanka and the Association of Accounting Technicians of Sri Lanka.
11 Funds
12 ANNUAL REPORT 2013 / 2014
NAMAL Funds
NAMAL NAMAL Name of Fund National Equity Fund NAMAL IPO Fund Growth Fund Sharia Fund
Fund Type Balanced Growth Growth Growth
Objective Income and Long Term Growth Long Term Capital Growth Capital Growth Capital Growth
Listed Equity & Fixed Listed Equity & Fixed Income Sharia Compliant Listed Equity Invest In Income Securities Securities Listed Equity & Income Securities Time Frame of Medium to Long Term Medium to Long Term Medium to Long Term Medium to Long Term Investment
High to Moderate High to Moderate High to Moderate Risk-Return High Risk - High Return Risk / Return Risk / Return Risk/Return
Dividends Annual No Set Pattern No Set Pattern -
Minimum Rs.1,000 Rs.5,000 Rs. 10,000 Rs.10,000 Investment
Front-End Fee 5.00% 5.00% 2.50% 3.50%
1.25% (Additional 1.5% if 1.75% (Additional 1.5% Management Fee 1.50% 1.50% Net Return exceeds 15% p.a if Net Return exceeds in a Quarter) 15% p.a in a Quarter)
Exit Fee No No No No
Registrar Fee 0.25% 0.25% No No
Trustee Fee 0.20% 0.25% 0.20% 0.20%
Provides current income Invest in high quality Invest in Professionally Access the Colombo Advantages and long term capital growth handpicked stocks Selected IPO Securities Stock Exchange in a Sharia Compliant Flexibility to invest upto 80% Flexibility to invest upto Daily Liquidity Manner in the stock market 90% in the stock market
Minimum investment is low Ability to participate in a diversi ed portfolio of listed shares
13 ANNUAL REPORT 2013 / 2014
NAMAL NAMAL Name of Fund NAMAL Income Fund High Yield Fund Money Market Fund
Fund Type Fixed Income Money Market Income
Objective Income Cash Management Income
Short Term Commercial Papers, Fixed Income Securities Fixed Income Invest In Trust Certi cates & Corporate Debt of less than 12 months Securities
Time Frame of Investment Short Term Short Term Medium to Long Term
Moderate to Risk-Return Low Risk - Returns Low Risk / Return Medium to Long Term
Dividends Regular Quarterly Semi Annual
Minimum Investment Rs. 10,000 Rs.1,000,000 Rs.10,000
Front-End Fee No No No
Management Fee 0.50% 0.25% 1.25%
Exit Fee No No 1.00% (If withdrawn prior to 1 year)
Registrar Fee No 0.05% 0.25%
Trustee Fee 0.15% 0.15% Rs.200,000 per annum
Obtains Signi cantly Higher Provides current Invest in high quality Advantages Yields than Treasury Bills & income at minimum risk income producing Fixed Deposits instruments
Daily Liquidity Dividends paid Receive regular quarterly dividend income
14 ANNUAL REPORT 2013 / 2014
Highlights of NAMAL Funds
National Equity Fund NAMAL Growth Fund NAMAL Acuity Value Fund NAMAL IPO Fund Fund Performance YoY 24.53% 19.46% 18.33% Growth / (decline) 13.03%
Fund Size Rs. 2.02 Bn 286.1 Mn 1.14 Bn 6.8 Mn No dividend paid in line Dividend (Rs. Per unit) 1.00 0.50 - with fund objectives
15.06%* 16.82%** Return per unit holder Rs. 100,000 invested at Rs. 100,000 invested at 20.25%** 17.74% (since inception) inception is worth inception is worth (returns are annualised (returns are annualised since Rs. 2.2 Mn today Rs. 1.3 Mn today since 2009) 2011) * assuming re-investment of dividends since 1991 and returns are annualised ** assuming re-investment of dividends since 1997 and returns are annualised
NAMAL Income Fund NAMAL Money Market Fund NAMAL High Yield Fund Fund Performance YoY 9.38% 7.92% 12.07% Growth / (decline)
Fund Size Rs. 321.0 Mn 488.0 Mn 7.38 Bn
Dividend (Rs. Per unit) 0.55 0.77 - Tax Equivalent Yield 13.03%* 11.00%* 16.77%* * for institutional investors who pay 28% corporate tax
15 Investment Manager’s Report
16 ANNUAL REPORT 2013 / 2014
Investment Manager’s Report
Economic outlook
Economic growth accelerates
Sri Lanka’s real GDP growth rebounded to 7.3% in 2013 from a moderate 6.3% in 2012, with growth accelerating across the four quarters of the year. Economic growth was broad based with strong growth in the Industry sector, continued expansion in Services sector. Agriculture sector showed dismal performance due to adverse weather conditions.
Expansion in the Services sector (constituting 58.1% of GDP) has been key with sector posting a better than expected growth rate with 6.4% (compared to 4.6% 2012). The wholesale and retail subsector (23% of GDP in 2013) showed impressive turnaround while visible improvements in transport and telecommunication services sectors also helped. Increased contribution from fast growing hotels & restaurants sector was also visible (CAGR of 24% during 2008-2013), though its contribution as the share of GDP was just 0.8% in 2013.
Continued expansion in construction activities and the manufacturing sector supported by strong external demand from advanced economies, enabled the industry sector (constituting 31.1% of GDP) to record a growth of 9.9%.
Adverse weather conditions a ected the growth in Agricultural sector (constituting 10.8% of GDP) with its annual growth rate slowing to 4.7% in CY13, compared to 5.4% in the previous year.
Sri Lanka continues to reap the bene ts from the end of con ict with average GDP growth of 7.5% in the past ve years compared to 4.7% GDP growth during the con ict period of 26 years.
Per Capita GDP (US$) at market prices increased to US$3,280 in 2013, growth of 10.3% (CAGR) for last 5 years.
Fig 01: GDP growth recovers to 7.3% in FY2013 % 10
8
6
4
2
0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3 -2 Source: CBSL Annual Report & Website
17 ANNUAL REPORT 2013 / 2014
Fig 02: Services sector expansion the primary cause of higher GDP growth in CY2013 % 12
10
8
6
4
2
0
-2 198 6 198 7 198 8 198 9 199 0 199 1 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3 -4
-6 Agriculture Industry Services -8
Source: CBSL Annual Report & Website
External sector improves
The external sector performed well in 2013 supported by the gradual recovery in advanced economies and improved performance in domestic environment. Signi cant growth in export earnings together with a sharp decline in import expenditure resulted in a dramatic improvement in the country’s external trade performance in 2013. Exports increased 6.4% YoY to US$ 10.3 Bn while imports declined 6.2% to US$ 18 Bn, resulting in a trade de cit of US$ 7.6 Bn (11.3% GDP) in CY13 compared to US$ 9.4 Bn in CY12 (15.8% of GDP).
Export growth was driven by Industrial exports (primarily textiles and garments), and Agricultural exports (primarily from tea and spice exports) to advanced economies. The contraction in the import bill was aided by lower fuel bill, transport equipment, and textile and textile imports. Continued growth in worker remittances (6.6% YoY to US$ 6.4 Bn in CY13) together with increased earnings from tourism, transport and IT related services helped to narrow the current account de cit to US$ 2.6 Bn (3.8% of GDP) in CY13 from US$ 4 Bn (6.6% of GDP) from previous year.
These developments together with increased in ow to nancial account (both Portfolio and FDI) helped to improve the overall BOP surplus of US$ 1 Bn in CY13 compared to US$ 151 Mn in 2012. Gross o cial reserves rose to US$7.5 Bn by CY13, amounting ve months of imports.
Fig 03: Trade de cit improves in 2013
USD m
2,500
2,000
1,500
1,000
500
0 2007 2008 2009 2010 2011 2012 2013 2014 (500)
(1,000)
(1,500) Exports Imports Trade Deficit
Source: CBSL Annual Report & Website
18 ANNUAL REPORT 2013 / 2014
Stable Rupee during the year
The improvement in BOP together with higher international reserve positions resulted in a stable rupee during the year despite currency volatility in other emerging market economies.
The Sri Lanka Rupee depreciated by only 2.8% against US$ during the year to close the year at 130.7. The currency came under some pressure in the middle of the year due to expectation of unwinding of positions by foreign investors (FII’s) from the government securities market in anticipation of possible tapering of the US bond buying program. Such pressure was short lived as Sri Lanka showed resilience to tapering pressure and the currency recovered later in the year.
FII’s continued to be net buyers of rupee denominated government securities during the year, increasing their holdings from Rs. 476 Bn at the end of March 2013 to Rs. 491 Bn by March 2014.
Fig 04: : Currency stable in 2013 despite a mid-year wobble
LKR/USD Depreciation 160 20% 140 15% 120 10% 100 80 5% 60 0% 40 -5% 20 0 -10% 3 2 1 0 9 8 3 2 1 0 9 8 7 3 2 1 0 9 8 1 1 1 1 0 0 1 1 1 1 0 0 0 1 1 1 1 0 0 ------r r r r r r c c c c c c c g g g g g g p p p p p p e e e e e e e u u u u u u A A A A A A D D D D D D D A A A A A A 30 - 30 - 30 - 30 - 30 - 30 - 31 - 31 - 31 - 31 - 31 - 31 - 31 - 31 - 31 - 31 - 31 - 31 - 31 -
LKR/USD (LHS) Depreciation YTD (RHS)
Source: CBSL Annual Report & Website
Fig 05: FII Investments in Treasury Bills and Bonds
Foreign investments in treasury bills and bonds (USD Mn) USD m Gross official reserve (USD m) % FI as a % of gross official reserve 9,000 70% 8,000 60% 7,000 50% 6,000 5,000 40% 4,000 30% 3,000 20% 2,000 1,000 10% - 0%
Source: CBSL Annual Report & Website
19 ANNUAL REPORT 2013 / 2014
In ation
In ation remained at single digit levels for the fth consecutive year. Headline in ation was 4.7% YoY and 6.9% on annual average basis by year and supported by stable domestic supply conditions, due to favorable weather patterns and prudent demand management by policy makers. Core in ation stood at 2.1% YoY and 4.4% on annual average basis by December 2013.
Fig 06: In ation remains single digit
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0% 2010 2011 2012 2013 2014
CCPI (Point to Point) CCPI (Annual Average)
Source: CBSL Annual Report & Website
Monetary policy easing to continue
A stable economic environment coupled with benign in ation expectations allowed Central Bank to continue easing monetary policy during the year. Overall policy rates were reduced by further 100 points during 2013 with Repurchase and Reverse Repurchase rates coming down to 6.50% and 8.50% respectively in by October 2013. This was further supported by a 2% reduction in Statutory Reserve Requirement to improve the liquidity conditions in the market.
Monetary policy easing coupled with lower credit demand by private sector led to excess rupee liquidity averaging around Rs. 23 Bn in the money market during the year. This led to downward adjustment in market rates, with the benchmark one year Treasury bill yield declining 400 basis points YoY to 7.05% by March 2014. Both prime lending and borrowing rates followed same trend, albeit with a considerable time lag. Yields on government securities across all maturities declined throughout the year, re ecting the clear trend in lower policy rates, excess liquidity and moderating in ation expatiations.
The removal of credit growth ceilings in banks did not yield any positive impact on credit growth during the year.
Fig 07: Policy rates reduced further in 2013 14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00 2 3 8 0 1 2 1 0 9 2 0 3 9 1 1 0 1 1 1 1 1 0 1 1 1 0 ------l t - t - r r c v g y n p b u c c p a e a J o u a un - e e J J O O A S F D A N M M 17 - 17 - 17 - 17 - 17 - 17 - 17 - 17 - 17 - 17 - 17 - 17 - 17 -
Repurchase rate (%) Reverse Repurchase (%) SRR (%)
Source: CBSL Annual Report & Website
20 ANNUAL REPORT 2013 / 2014
Fig 08: Banking sector credit growth was below potential in 2013
Rs. bn 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3 0 0.9
-100 0.8 0.7 -200 0.6 -300 0.5 -400 0.4 -500 0.3 -600 0.2
-700 0.1 Loan-deposit gap Loan/deposits ratio -800 0
Source: CBSL Annual Report & Website
Fig 09: Real interest rates declines
14% 12% 10% 8% 6% 4% 2% 0% l l l l r r r r r v v v v n n n n n y y y y p p p p u u u u a a a a a o o o o J a a J a J a J a a a a a e e e e J J J J J S S S S N N N N M M M M M M M M M
2010 2011 2012 2013 2014
1 year T bill rate Inflation Real rate
Source: CBSL Annual Report & Website
Budget de cit declines further but need improvement in revenue collection
Steady progress on scal consolidation and reduction in public debt is key for macroeconomic stability in Sri Lanka. Fiscal de cit declined signi cantly to 5.9% of GDP in 2013 from 6.5% in 2012, the lowest since 1977. However further reforms are needed in government scal policy to meet the long term social and infrastructure development needs of the country.
Government revenue collection as percentage of GDP declined further to 13.1% in 2013 and continues to fall short of the budgetary targets. Low tax revenue mobilization remains an issue especially given the high debt service levels (80% of GDP) as well as shift from concessional borrowings to commercial borrowing. Further reforms are needed in extending VAT coverage (while reducing the thresholds) and automation of tax collection. Reducing the debt levels of State run corporations and better public nancial management will also help to improve countries lagging scal discipline.
21 ANNUAL REPORT 2013 / 2014
Fig 10: Budget de cit continues to decline
% of GDP 12.0
10.0
8.0
6.0
4.0
2.0
0.0 199 2 199 3 199 4 199 5 199 6 199 7 199 8 199 9 200 0 200 1 200 2 200 3 200 4 200 5 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3
Source: CBSL Annual Report
Equity Market Review
ASPI gathers momentum
The ASPI gained 4.8% YoY to close the year at 5,912 while more liquid S&P SL20 gained 5.8% YoY to close the year at 3,264 in CY13. Daily average turnover fell 6.2% YoY to Rs. 828.4 Mn per day in CY13 compared to Rs. 883.6 Mn per day in CY12. Foreign Funds (FII’s) were net buyers in CY13, continuing the momentum from CY12 although increased selling pressure was evident in the latter part of the year. Foreign participation improved to 36.1% in CY13 compared to 24.9% in the previous year but net FII fell by 40.9% YoY.
Market was trading at 15.9X historical earnings in CY13 as per market earnings reported by the CSE.
In terms of sector performance, Food & Beverages showed highest returns with 18.1%, followed by Power & energy (19.5%), Healthcare Sector (16.9%) and Land & property Sector (11.6%). Information Technology (-27.1%) and Trading (-21.4%) were worst sectors with negative returns.
Despite aggregate market returns being weak in 2012 and 2013, the ASPI has performed well compared to regional markets in the recent times. The out performance is likely to be attributable for the returns during CY09-10 but in relative terms, market continues hold its momentum, despite some lackluster performance in the region. India (Sensex up 8.9% YoY), Singapore (Straits Times up 0.01% YoY) and Hong Kong (Hang Seng up 2.9% YoY) have shown weaker performance during the year. US markets continued its strong rally, gaining 29.6% YoY (S&P 500) in CY13.
The removal of credit growth ceilings in banks did not yield any positive impact on credit growth during the year.
ASPI continue to trade attractively valued around 10X-12X forward earnings (with assumption of 12% growth in corporate earnings in CY14) while the yield ratio has further narrowed due to falling interest rates signaling further upside in equities.
22 ANNUAL REPORT 2013 / 2014
Fig 11: ASPI outperforms Regional Indices
Index 600
500
400
300
200
100
0
Hang Seng Sensex S&P 500 Straits Times ASPI
Source: The Wall Street Journal
Fig 12: Foreign Funds (FIIs) remain Net Buyers LKR m 20,000
15,000
10,000
5,000
- 1 5 2 3 8 9 6 3 4 1 5 0 7 8 2 3 4 4 1 5 2 9 6 3 0 7 8 9 6 1 0 0 9 1 0 9 1 0 9 1 0 1 0 0 0 0 9 9 0 9 9 1 0 0 9 0 9 9 ------l l l l l l l t - t - t - t - t - t - t - r r r r r r r n n n n n n n n u u u u u u u c c c c c c
(5,000) c p p p p p p p a a a a a a a a J J J J J J J J J J J J J J J ------O O O O O O O A A A A A A A ------1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 (10,000) 1
(15,000)
Source: CSE
Fig 13: Yield Ratio improves
% 16
14 Post Tax TB 12 Yield
10
8
6
4
2 Post Tax Dividend Yield
0 199 8 199 9 199 2 199 3 200 0 200 1 200 2 200 3 199 4 199 5 199 6 199 7 200 6 200 7 200 8 200 9 201 0 201 1 201 2 201 3 201 4 200 4 200 5
Source: CBSL Website & CSE 23 ANNUAL REPORT 2013 / 2014
Fig 14: ASPI Data CY12-CY13
CY2013 CY2012 % Change
ASPI 5,913 5,643 4.8%
S&P SL20 3,264 3,085 5.8%
Average Daily Turnover 828,381,432 883,583,465 -6.2%
Net FII 22,878,501,584 38,681,213,541 -40.9%
Foreign participation 36.09% 24.93% 44.7%
Source: CSE
Future market outlook
Sri Lanka will continue to be amongst the most attractive frontier market due to economic growth. The investment in infrastructure and increased productivity will sustain higher growth rates relative to frontier market peers. Credit growth has been weak in the previous years but lower interest rates and a competitive currency will generate further growth momentum with the ongoing recovery in the global economic cycle. The biggest medium term risk is a slower than expected global recovery together with tightening of external liquidity which could a ect borrowing costs. Nevertheless we believe Sri Lanka is likely to maintain current economic momentum in the next 12-18 months with expectations of improved corporate earnings in the coming quarters.
As institutional investors, we attempt to price macroeconomic risks into individual investments while maintaining our distinct investment philosophy and style. We continue to focus on identifying investments that are attractively valued which could outperform both in relative basis and absolute basis while looking at opportunities to exit from counters that we consider expensive relative to their underlying value. We continue to be bullish on Health Care, Food and beverage, Banking, Oil & Gas, and infrastructure services where we see lot of growth potential in the medium to long term.
Fig 15: Market PER multiples attractive on forward earnings
Log scale 4.4 4.1 3.8 25x 3.5 10x 3.2
2.9 5x 2.6 2.3 2x 2.0 1.7 1.4 3 4 5 7 8 9 0 2 3 4 5 6 7 8 9 0 1 2 6 1 5 6 7 8 9 0 1 2 3 4 9 9 9 9 9 9 0 0 0 0 8 8 8 8 8 9 9 9 9 0 0 0 0 0 0 1 1 1 1 1 ------n n n n n n n n n n n n n n n n n n n n n n n n n n n n n n a a a a a a a a a a a a a a a a a a a a a a a a a a a a a a J J J J J J J J J J J J J J J J J J J J J J J J J J J J J J
Source: CSE & NAMAL Estimates
24 Acuity Value Fund
25 ANNUAL REPORT 2013 / 2014
Fund Performance Review
Investment Strategy NAMAL Acuity Value Fund (NAVF) is a growth fund listed on Colombo Stock Exchange which aims to provide long term capital apprecia- tion by investing in equity. The Fund can allocate a maximum of 100% to equity.
The investment strategy is market neutral and based on fundamental research to identify stocks trading below intrinsic value. The Fund has invested in fundamentally strong companies that are exposed to the key sectors of the economy. These investments will enable the Fund to perform strongly notwithstanding any short-term market volatility.
The Fund aims to deliver consistent capital appreciation to investors whilst ensuring preservation of capital.
Asset Allocation The Fund invested 88.3% in Equities, 7.1% in Debentures, 2.6% in Repos with the balance invested in Fixed Deposits as at 31st March 2014. The main sector allocations in equity are Banks, Finance & Insurance (46.6%), Healthcare (30.7%) and Manufacturing (12.4%).
Performance Review The All Share Price Index increased by 4.06% for the year ending 31st March 2014. The Fund outperformed the ASPI by 14.28% with the Fund’s NAV increasing by 18.1% during the period under review.
The Fund value was Rs. 1,135 million as at 31st March 2014. The Fund realized gains of Rs. 62.7 million during the year.
Return to Investors The Fund has provided an annualised return of 20.25% to investors since inception in 2009.
The Fund paid a dividend of Rs. 0.50 per unit for FY2014, bringing the cumulative dividends paid to Rs. 9.00 per unit since inception in 2009.
Investment Management Team, National Asset Management Ltd
26 ANNUAL REPORT 2013 / 2014
Fig 1: Fund Performance Fund Performance and Market Returns as at 31st March 2014 12 months 24 months 36 months NAMAL Acuity Value Fund 18.33% 30.18% 3.27% ASPI 4.06% 10.11% (17.41%) S & P SL20 (0.41%) 9.86% (15.75%)
*Note 1) Performance up to 31st March 2014 as published by the Unit Trust Association of Sri Lanka 2) All returns are adjusted for dividends 3) Returns are not annualised 4) Past performance should not be taken as a guide to future performance
Fig 2: Top Five Equity Holdings
The Company No of Shares Value (RS.) % of NAV Asiri Hospitals PLC 10,665,149 236,766,308 21% Commercial Bank of Ceylon PLC 1,260,000 154,980,000 14% Sampath Bank PLC 667,238 121,504,040 11% Nations Trust Bank PLC 1,200,000 77,880,000 7% Ceylon Hospitals PLC (Durdans) (Non-Voting) 800,000 61,600,000 5%
Fig 3: Sector Allocation
Constructions & Enginering 1.40%
Power And Energy 1.55%
Hotel And Travels 2.13%
Sector Trust & Investment 2.56%
Beverage Food And Tobacco 2.57%
Manufacturing 12.42%
Health Care 30.75%
Banks Finance And Insurance 46.62%
0% 10% 20% 30% 40% 50% as a % of Total Equity
27 ANNUAL REPORT 2013 / 2014
Ernst & Young Tel : +94 11 2463500 Chartered Accountants Fax Gen : +94 11 2697369 201 De Saram Place Tax : +94 11 5578180 P.O. Box 101 [email protected] Colombo 10 ey.com Sri Lanka
ADBT/CPEG/KWS/JJ
INDEPENDENT AUDITORS’ REPORT TO THE UNIT HOLDERS OF NAMAL ACUITY VALUE FUND
Report on the Financial Statements
We have audited the accompanying nancial statements of NAMAL Acuity Value Fund (the “Fund”) which comprise the statement of nancial position as at 31 March 2014 and statement of comprehensive income, statement of changes in unit holder’s funds, statement of cash ows, for the year then ended and a summary of signi cant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
National Asset Management Limited, the Managers of the Unit Trust are responsible for the preparation and fair presentation of these nancial statements in accordance with Sri Lanka Accounting Standards. This responsibility includes: designing, implement- ing and maintaining internal control relevant to the preparation and fair presentation of nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making account- ing estimates that are reasonable in the circumstances.
Scope of Audit and Basis of Opinion
Our responsibility is to express an opinion on these nancial statements based on our audit. We conducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the nancial statements are free from material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the nancial statements. An audit also includes assessing the accounting policies used and signi cant estimates made by management, as well as evaluating the overall nancial statement presentation.
We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. We therefore believe that our audit provides a reasonable basis for our opinion.
Opinion
In our opinion, so far as appears from our examination, the Fund maintained proper accounting records for the year ended 31 March 2014 and the nancial statements give a true and fair view of the Fund’s nancial position as at 31 March 2014 and its nancial performance and cash ows for the year then ended in accordance with Sri Lanka Accounting Standards.
Report on Other Legal and Regulatory Requirements
These nancial statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007 as required by Section 17 of the Unit Trust Deed between National Asset Management Limited and Deutsche Bank AG dated 3 September 2009.
06 June 2014 Colombo
Partners: A D B Talwatte FCA FCMA M P D Cooray FCA FCMA R N de Saram ACA FCMA Ms. N A De Silva ACA Ms. Y A de Silva ACA W R H Fernando FCA FCMA W K B S P Fernando FCA FCMA A P A Gunasekera FCA FCMA A Herath FCA D K Huhangamuwa FCA FCMA LLB (Lond) H M A Jayesinghe FCA FCMA Ms. A A Lodowyke FCA FCMA Ms. G G S Manatunga ACA N M Sulaiman ACA ACMA B E Wijesuriya ACA ACMA
28 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund STATEMENT OF FINANCIAL POSITION As at 31 March 2014
Notes 2014 2013 ASSETS Rs. Rs.
Cash and cash equivalents 816,533 657,111 Financial assets - Held for trading 4 1,069,984,691 880,172,656 Financial assets - Loans and receivables 5 51,799,832 92,245,890 Accrued income and other receivables 7 7,739,647 6,932,575 Income tax recoverable 6,167,766 4,944,161 Total Assets 1,136,508,469 984,952,393
UNIT HOLDERS' FUNDS & LIABILITIES
LIABILITIES CDS payable - 22,569,691 Accrued expenses 8 1,289,734 1,123,955 Total Liabilities (Excluding net assets attributable to Unit Holders) 1,289,734 23,693,646
UNIT HOLDERS' FUNDS Net assets attributable to Unit Holders 1,135,218,735 961,258,747
1,136,508,469 984,952,393
These Financial Statements were approved by the Management Company, and adopted by the Trustees.
………………………… ………………………… ……………………………….. Director Director Trustee Management Company Management Company
06 June 2014 Colombo
*The Accounting Policies and Notes on pages 33 to 45 form an integral part of these Financial Statements. 29 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund STATEMENT OF COMPREHENSIVE INCOME Year ended 31 March 2014
2014 2013 Notes Rs. Rs.
INVESTMENT INCOME Dividend income 9.1 2 9,337,559 2 5,669,988 Interest income 9.2 17,354,358 34,021,483 Net realised gains on nancial assets held for trading 4.3 62,680,999 52,141,890 Net change in unrealised gains/(losses) on nancial assets held for trading 4.4 92,811,147 (4,938,685) Total investment income 202,184,063 106,894,676
EXPENSES Management fees (10,575,906) (9,835,724) Trustee fees (2,321,632) (2,024,123) Custodian fees (268,800) (268,800) Audit fee and expenses (143,326) (149,050) Professional charges (62,093) (6,160) Brokerage charges (8,970,877) - Other expenses (504,916) (740,875) Total operating expenses (22,847,550) (13,024,732)
Net operating pro t 1 79,336,513 9 3,869,944
FINANCE COST Interest expense (925) (62,826)
PROFIT AFTER DEDUCTIONS AND BEFORE TAX 1 79,335,588 9 3,807,118
Income tax expense 10 - (1,475,801)
PROFIT AFTER TAX 1 79,335,588 9 2,331,317
INCREASE IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 1 79,335,588 9 2,331,317
*The Accounting Policies and Notes on pages 33 to 45 form an integral part of these Financial Statements. 30 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund STATEMENT OF CHANGES IN UNITHOLDERS' FUNDS Year ended 31 March 2014
2014 2013 Rs. Rs.
UNIT HOLDERS' FUNDS AT THE BEGINNING OF THE YEAR 9 61,258,747 8 79,678,630
Increase in net assets attributable to Unit Holders 179,335,588 92,331,317
Income distribution to unit holders (5,375,600) ( 10,751,200)
UNIT HOLDERS' FUNDS AT THE END OF THE YEAR 1,135,218,735 961,258,747
*The Accounting Policies and Notes on pages 33 to 45 form an integral part of these Financial Statements. 31 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund STATEMENT OF CASH FLOWS Year ended 31 March 2014
2014 2013 Rs. Rs. Cash ows from operating activities Dividend received 28,530,487 19,487,413 Interest received 14,506,064 34,186,810 Proceeds from sale of investments 4,897,695,270 1,654,976,741 Payments on purchase of investments ( 4,889,167,905) ( 1,681,440,976) Taxation paid ( 776,508) ( 2,831,104) Operating expenses paid (45,251,462) ( 13,023,634) Net cash generated from operating activities 5,535,947 11,355,250
Cash ows from nancing activities Income distribution (5,375,600) (10,751,200) Interest paid on borrowings (925) (62,826) Proceeds from borrowings 5,000,925 212,363,759 Repayment of borrowings (5,000,925) (212,363,759) Net cash used in nancing activities (5,376,525) (10,814,026)
Net increase in cash and cash equivalents 159,422 541,224 Cash and cash equivalents at the beginning of the year 657,111 115,887 Cash and cash equivalents at the end of the year 816,533 657,111
*The Accounting Policies and Notes on pages 33 to 45 form an integral part of these Financial Statements. 32 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
1. GENERAL INFORMATION
NAMAL Acuity Value Fund is a closed ended unit trust fund approved by the Securities and Exchange Commission of Sri Lanka. The fund was launched on 29th September 2009.
The fund is managed by National Asset Management Limited, which is incorporated and domiciled in Sri Lanka. The registered o ce of the management company is located at 7th Floor, Union Bank Head O ce, No. 64, Galle Road, Colombo 03. The Trustee of the fund is Deutsche Bank AG having its place of business at No. 86, Galle Road, Colombo 03.
The investment objective of the fund is to achieve long term capital appreciation for the Unit Holders by adopting a dynamic asset allocation strategy for investments in listed and unlisted xed income securities.
2. ACCOUNTING POLICIES 2.1 BASIS OF PREPARATION
The nancial statements are prepared in accordance with and comply with the Sri Lanka Accounting Standards issued by the Institute of Chartered Accountants of Sri Lanka and adopted as directed by the Securities and Exchange Commission of Sri Lanka.
The nancial statements have been prepared on the historical cost basis except for the nancial assets at fair value through pro t or loss. The nancial statements are presented in Sri Lankan rupees. The statement of nancial position is presented broadly in order of a liquidity basis.
2.1.1 Statement of Compliance
These nancial statements have been prepared in accordance with Sri Lanka Accounting Standards comprising SLFRSs and LKASs (hereafter "SLFRS") which are e ective from 01 January 2012.
2.1.2 Comparative Information
The accounting policies have been consistently applied by the Fund with those of the previous nancial year in accordance with LKAS 01 Presentation of Financial Statements. Further, comparative information is reclassi ed wherever necessary to conform to the current presentation.
2.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.2.1 Financial instruments – initial recognition and subsequent measurements 2.2.1.1 Date of recognition
All nancial assets are initially recognized on the trade date, i.e the date that the fund becomes a party to the contractual provisions of the instrument. This includes purchases of nancial assets that require delivery of assets within the time frame generally established by regulation or convention in the market place.
2.2.1.2 Initial measurement of nancial instruments
The classi cation of nancial instruments at initial recognition depends on their purpose and characteristics and the management intention in acquiring them. All nancial assets are measured initially at the fair value plus transaction costs, except in the cases of nancial assets recorded at fair value through pro t or loss.
33 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
2.2.1.3 Financial assets - Loans and receivables
Loans and receivables are non derivative nancial assets with xed or determinable payments that are not quoted on an active market. Loans and receivables in the statement of nancial position comprise of repurchase agreements, commercial papers and placements with other banks.
After initial measurement, loans and receivables are subsequently measured at amortised cost using the e ective interest rate, less allowance for impairment. The amortization is included in the “interest income” in the statement of comprehensive income. The losses arising from impairment is recognised in the statement of comprehensive income in “credit loss expense”.
Interest income is recognized by applying the e ective interest rate, except for short term receivables when the recognition of interest would be immaterial.
2.2.1.4 Financial assets at fair value through pro t or loss
Financial assets are classi ed as fair value through pro t or loss (FVTPL) if they are held for trading or are designated at fair value though pro t or loss. Financial assets are classi ed as held-for-trading if they are acquired for the purpose of selling or repurchasing in the near term. Up on the initial recognition, transaction cost are directly attributable to the acquisition are recognized in pro t or loss as incurred.
• Financial assets held for trading
Financial assets, held for trading are recorded in the statement of nancial position at fair value. Changes in fair value are recognised in the ‘net change in nancial assets held for trading’ in the statement of comprehensive income. Interest income or expense and dividend income are recorded in “investment income’ according to the terms of the contract. Included in this classi cation are quoted equity securities and quoted debentures.
2.2.1.5 Determination of fair value
The fair value for nancial instruments traded in active markets at the reporting date is based on their quoted market price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.
For all other nancial instruments not traded in an active market, the fair value is determined by using appropriate valuation techniques. Valuation techniques include the discounted cash ow method, comparison with similar instruments for which market observable prices exist, options pricing models, credit models and other relevant valuation models.
An analysis of fair values of nancial instruments and further details as to how they are measured are provided in Note 6.
2.2.1.6 Derecognition of nancial assets
A nancial asset is derecognised when,
1) The rights to receive cash ows from the asset have expired. 2) The fund has transferred its rights to receive cash ows from the asset or has assumed an obligation to pay the received cash ows in full without material delay to a third party under a ‘pass–through’ arrangement; and either,
• The fund has transferred substantially all the risks and rewards of the asset or • The fund has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
34 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
2.2.2 Recognition of income
Revenue is recognised to the extent that it is probable that the economic bene ts will ow to the fund and the revenue can be reliably measured.
Interest income
For all nancial instruments measured at amortised cost, interest income is recorded using the e ective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the nancial instrument or a shorter period, where appropriate, to the net carrying amount of the nancial asset.
Interest income from repurchase agreements and government treasury bills are recognised at gross of notional tax credit or withholding tax.
Dividend income
Income is recognised when the right to receive the dividend is established, normally being the ex-dividend date. Dividend income is recognized net of withholding tax, if any.
2.2.3 Cash and cash equivalents
Cash and cash equivalents in the statement of nancial position comprise cash at bank.
For the purpose of the statement of cash ows, cash and cash equivalents consist of cash and cash equivalents as de ned above.
2.2.4 Income tax
Current tax assets and liabilities for the current and prior year are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. The fund is liable to pay income tax at the rate 10% in accordance with the Inland Revenue Act No. 10 of 2006.
2.2.5 Expenses
The management participation fees of the fund is as follows:
Management Fee - 1.0% of Net Asset Value of the Fund Trustee Fee - 0.2% of Net Asset Value of the Fund
Custody Fee - Flat Fee of Rs. 20,000 per month
2.2.6 Accrued expenses
Payables are initially recognised at fair value, which is the fair value of the consideration to be paid in the future for service received, whether or not billed to the fund, and subsequently at amortised cost.
35 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
2.2.7 Unit Holders’ funds and net assets attributable to Unit Holders
Unit Holders’ funds has been calculated as the di erence between the carrying amounts of the assets and the carrying amounts of the liabilities, other than those due to Unit Holders as at the reporting date.
Units can be issued and redeemed based on the fund’s net asset value per unit, calculated by dividing the net assets of the fund calculated in accordance with the valuation guidelines issued by the Unit Trust Association of Sri Lanka and approved by the Securities and Exchange Commission of Sri Lanka, by the number of units in issue. Income not distributed is included in net assets attributable to Unit Holders.
2. 3 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS 2.3.1 Fair value of nancial instruments
Management considers credit, liquidity and market risk and assesses the impact on valuation of investments when determining the fair value. Following are the key sources of estimation uncertainty at the statement of reporting date that have signi cant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next nancial year. a) Fair value of securities not quoted in an active market and over the-counter derivative instruments Management uses its judgment in determining the appropriate valuation technique for nancial instruments that are not quoted in an active market. Valuation techniques commonly used by market practitioners are applied. Other nancial instruments are valued using a discounted cash ow analysis based on the assumptions supported, where possible, by observable market prices or rates.
2.3.2 Impairment losses on nancial assets – Loans and receivables
The fund reviews its nancial investments classi ed as loans and receivables at each reporting date to assess whether they are impaired. In particular management judgment is required in the estimation of the amount and timing of future cash ows when determining the impairment loss. These estimates are based on assumptions about a number of factors and actual results may di er, resulting future changes to the allowance.
2.4 NEW ACCOUNTING STANDARDS ISSUED BUT NOT EFFECTIVE AS AT STATEMENT OF FINANCIAL POSITION DATE
Standards issued but not yet e ective up to the date of the Fund’s nancial statements are given below. The company will adopt these standards when they become e ective. Pending a detailed review the nancial impact is not reasonably estimable as at the date of publication of these nancial statements.
SLFRS 9 – Financial Instruments : Classi cation and Measurement SLFRS 10 – Consolidated Financial Statements SLFRS 11 – Joint Arrangements SLFRS 12 – Disclosure of Interests in Other Entities SLFRS 13 – Fair Value Measurements
The Manager believes that there would be no impact on the nancial statement of the Fund from SLFRS 10 and SLFRS 11 one such standard become e ective.
SLFRS 9 will be e ective for nancial periods beginning on or after 01 January 2015 whilst SLFRS 10, 11, 12 and 13 will be e ective for nancial periods beginning on or after 01 January 2014.
36 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
(a) Financial instruments
The fund’s principal nancial assets comprise investments in trading securities, repurchase agreements, xed deposits and cash at bank. The main purpose of these nancial instruments is to generate a return on the investment made by Unit Holders. The fund’s principal nancial liabilities comprise amounts attributable to Unit Holders, which are the amounts owed to Unit Holders of the fund. The fund also has other nancial instruments such as receivables and payables which arise directly from its operations.
In accordance with LKAS 39 Financial Instruments: Recognition and Measurement, the fund’s bank balance, repurchase agreements and xed deposits are classi ed as ‘loans and receivables’ and valued at amortised cost. Trading securities are classi ed as ‘held for trading’, meaning they are valued at fair value through pro t or loss. Amounts attributable to Unit Holders are classi ed as ‘other nancial liabilities’ and are carried at the redemption amount being net asset value. Payables are designated as ‘other nancial liabilities’ at amortised cost.
(b) Financial risk management objectives, policies and processes
Risks arising from holding nancial instruments are inherent in the fund’s activities, and are managed through a process of ongoing identi cation, measurement and monitoring. The fund is exposed to credit risk, market risk, and liquidity risk.
Financial instruments of the fund comprise investments in trading securities for the purpose of generating a return on the investment made by Unit Holders, in addition to cash at bank, and other nancial instruments such as receivables and payables, which arise directly from its operations.
The manager is responsible for identifying and controlling the risk that arise from these nancial instruments. The manager agrees policies for managing each of the risks identi ed below.
The risks are measured using a method that re ects the expected impact on the statement of comprehensive income and statement of nancial position of the fund from reasonably possible changes in the relevant risk variables. Information about these risk exposures at the reporting date, measured on this basis, is disclosed below.
The manager also monitors information about the total fair value of nancial instruments exposed to risk, as well as compliance with established investment mandate limits. These mandate limits re ect the investment strategy and market environment of the fund, as well as the level of risk that the fund is willing to accept, with additional emphasis on selected industries. This information is prepared and reported to relevant parties within the manager on a regular basis as deemed appropriate, including the Fund manager, other key management, Group’s integrated risk management committee of the manager and ultimately the Trustees of the fund.
Concentration of risk arises when a number of nancial instruments or contracts are entered in to with the same counterparty, or where a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly a ected by changes in economics, political or other conditions.
37 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
(c) Credit risk
Credit risk is the risk that the counterparty to the nancial instrument will fail to discharge an obligation and cause the fund to incur a nancial loss.
The fund’s exposure to credit risk from its nancial assets arises from default of the counterparty, with the current exposure equal to the fair value of these instruments as detailed below. It is the fund’s policy to enter into nancial instruments with reputable counterparties. The details are as follows:
Counter Party Credit Rating Rating Agency Softlogic Holdings PLC BBB+ Fitch Rating Union Bank of Colombo PLC BBB Ram Rating
Risk concentration of credit risk exposure:
Concentration of credit risk is managed by counterparty and by market sector. The fund is also subject to credit risk on its bank balance and receivables. The credit risk exposure on these instruments is not deemed to be signi cant.
The fund’s maximum exposure to credit risk can be analysed as follows:
2014 2013 Rs. 000 Rs. 000 NAMAL Acuity Value Fund - Investments Conservative 29,064 44,261 Balanced 22,735 47,984 Growth 1,069,985 880,173
(d) Market risk
Market risk represents the risk that the value of the fund’s investments portfolios will uctuate as a result of changes in market prices.
This risk is managed by ensuring that all investment activities are undertaken in accordance with established mandate limits and investments strategies. As such, Unit Holders can manage this risk through their choices of which investment portfolios to participate in.
The fund uses a range of di erent fund managers for investment assets. Where a Unit Holder is invested in more than one investment portfolio, this reduces the impact of a particular manager underperforming. Within the underlying investment portfolio, diversi cation is achieved at a number of levels. The diversi ed portfolios are invested across a range of investment sectors. Within each sector of the diversi ed portfolios, the fund managers invest in a variety of securities.
Price risk
Price risk is the risk that the fair value of the fund’s investment in trading securities will uctuate as a result of changes in the price of the fund’s investments in trading securities. Price risk exposure arises from the fund’s investment portfolios.
The table below shows the impact on the statement of comprehensive income and statement of nancial position due to a reasonably possible change in the price of the fund’s investment in trading securities in note 4, with all other variables held constant:
38 ANNUAL REPORT 2013 / 2014
31 March 2014 31 March 2013 Increase/ (decrease) Increase/ (decrease) Increase/ (decrease) Increase/ (decrease) in pro t before tax in net assets in pro t before tax in net assets Rs. 000 attributable to Rs. 000 attributable to Unit Holders Unit Holders Change in price Rs. 000 Rs. 000 of the fund’s investment in trading securities:
+10% 99,074 99,074 86,060 86,060 -10% (99,074) (99,074) (86,060) (86,060)
The above gures are calculated across the entire investment portfolio on an annual basis. There is a corresponding change to the fair value of trading securities within the statement of nancial position.
Interest rate risk
Interest rate risk is the risk that the value of a nancial instrument will uctuate as a result of changes in market interest rates.
The fund’s exposure to interest rate risk primarily arises from changes in interest rates applicable to the balance held at the bank and the listed debentures.
Foreign exchange risk
Foreign exchange risk is the risk that value of a nancial instrument will uctuate as a result of changes in foreign exchange rates.
The fund is not exposed to foreign exchange risk since the nancial instruments of the fund denominated in Sri Lankan Rupees.
(e) Liquidity risk
Liquidity risk is the risk that the fund will encounter di culty in raising funds to meet its obligation to pay Unit Holders.
Due to the nature of a unit trust, it is unlikely that a signi cant number of Unit Holders would exit at the same time. However, to control liquidity risk, the Fund investments in nancial instruments, which under normal market conditions are readily convertible to cash. In addition, the fund invests within established limits to ensure there is no concentration of risk.
Payables have no contractual maturities but are typically settled within ve market days. Receivables outstanding at balance date are due to be settled within seven market days of balance date. Due to the short term nature of these nancial instruments, carrying value approximates fair value. The e ect of discounting is not signi cant as there is little di erence between undiscounted and discounted cash ows.
39 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
4. FINANCIAL ASSETS - HELD FOR TRADING 2014 2013 Rs. Rs.
Quoted equity securities (4.1) 990,741,517 860,601,010 Debt securities - quoted debentures (4.2) 79,243,175 19,571,646 1,069,984,691 880,172,656 4.1 Quoted equity securities
Cost as at 31 March 910,364,581 868,309,056 Appreciation/(depreciation) of market value quoted equity securities 80,376,936 (7,708,046) Market value as at 31 March 990,741,517 860,601,010
2014 2013 4.1.1 Company Number of Market Holdings Number of Market Holdings Shares Value as a % of Shares Value as a % of Net Asset Net Asset Rs. Value Rs. Value Banks, Finance and Insurance Central Finance Company PLC 1 08,499 19,638,319 2% 5,166 929,880 0% Commercial Bank of Ceylon PLC - Non Voting 4 23,409 41,070,673 4% 385,188 37,324,717 4% Commercial Bank of Ceylon PLC - Voting 1 ,260,000 154,980,000 14% 675,000 76,275,000 8% Hatton National Bank PLC - Non Voting - - - 350,000 58,555,000 6% Hatton National Bank PLC - Voting 2 50,000 37,500,000 3% - - - Nations Trust Bank PLC 1 ,200,000 77,880,000 7% - - - Union Bank of Colombo PLC 4 95,259 9,261,343 1% 1,215,789 20,668,413 2% People's Leasing and Finance Company PLC - - - 1,198,600 15,701,660 2% Sampath Bank PLC 6 67,238 121,504,040 11% 100,000 22,490,000 2% 461,834,375 42% 231,944,670 24% Beverages, Food and Tobacco Distilleries Company of Sri Lanka PLC - - - 626,400 104,295,600 11% Lion Brewery Ceylon PLC - - - 200,000 66,600,000 7% Renuka Agri Foods PLC 8 ,220,240 25,482,744 2% 8,220,240 33,702,984 3% 25,482,744 2% 204,598,584 21%
Chemicals and Pharmaceuticals CIC Holdings PLC - - - 118,000 7,198,000 1% - - 7,198,000 1%
Construction and Engineering Access Engineering PLC 6 15,000 13,837,500 1% 615,000 12,115,500 1% 13,837,500 1% 12,115,500 1%
Diversi ed Holdings CT Holdings PLC - - - 482,000 60,828,400 6% Hayleys PLC - - - 118,100 35,276,470 4% - - 96,104,870 10%
Health Care Ceylon Hospitals PLC (Durdans) - Non Voting 8 00,000 61,600,000 5% 800,000 60,080,000 6% Ceylon Hospitals PLC (Durdans) - Voting 5 4,541 6,272,215 1% - - - Asiri Hospitals PLC 1 0,665,149 236,766,308 21% 10,665,149 121,582,699 13% 304,638,523 27% 181,662,699 19%
Hotels and Travels Kingsbury PLC 1 ,650,000 21,120,000 2% 1,650,000 22,110,000 2% 21,120,000 2% 22,110,000 2%
Manufacturing ACL Cables PLC 5 00,000 30,500,000 3% 500,000 32,750,000 3% Alumex PLC 3 57,100 5,070,820 0% - - - Tokyo Cement Company Lank PLC - Voting 1 ,011,737 36,624,879 3% - - - Tokyo Cement Company Lank PLC - Non Voting 1 ,754,450 50,879,050 4% 1,026,600 17,965,500 2% 123,074,749 10% 50,715,500 5% Plantation Kegalle Plantations PLC - - - 100,000 11,200,000 1% - - 11,200,000 1% Investment Trusts Renuka Holdings PLC 8 04,877 25,353,626 2% 804,877 24,951,187 3% 25,353,626 2% 24,951,187 3%
Telecommunication Dialog Axiata PLC - - - 2,000,000 18,000,000 2% - - 18,000,000 2%
Power & Energy Lanka IOC PLC 4 00,000 15,400,000 1% - - 15,400,000 1% - - Total value of quoted equity securities (At market value) 990,741,517 87% 860,601,010 89%
40 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
4. FINANCIAL ASSETS - HELD FOR TRADING (contd..)
4.2 Quoted debentures 2014 2013 Cost Market Holding as a Cost Market Holding as a Value % of Net Value % of Net Rs. Rs. Asset Value Rs. Rs. Asset Value
Lanka Orix Leasing Company PLC 20,000,000 20,800,246 2% 20,000,000 19,571,646 2% Hatton National Bank PLC 3,167,100 3,731,302 0% - - - Central Finance PLC 4,600,000 5,055,074 0% - - - Lion Brewery 10,000,000 11,025,529 1% - - - Softlogic Holdings PLC 25,000,000 27,627,559 2% - - - Hayleys PLC 10,000,000 11,003,464 1% - - - 72,767,100 79,243,175 6% 20,000,000 19,571,646 2%
4.3 Net realised in gains on nancial assets held for trading 2014 2013 Rs. Rs. Equity securities Proceeds on sale of equity shares 501,549,891 142,069,433 Average cost of equity shares sold (438,868,893) (89,927,543) 62,680,999 52,141,890
4.4 Net change in unrealised gains/(losses) on nancial assets held for trading
Equity securities 88,084,982 (5,742,465) Debt securities - quoted debentures 4,726,165 803 ,780 92,811,147 (4,938,685)
5. FINANCIAL ASSETS - LOANS AND RECEIVABLES 2014 2013 Carrying Holding as a Carrying Holding as a Value % of Net Value % of Net Rs. Asset Value Rs. Asset Value 5.1 Investments in commercial papers
Softlogic Holdings PLC - - 27,540,524 3% - - 27,540,524 3% 5.2 Repurchase agreements
First Capital Treasuries Limited 26,426,121 3% 14,087,002 1% Wealth Trust Securities Limited 2,638,217 1% 30,174,843 3% 29,064,338 4% 44,261,845 4% 5.3 Placements with other banks - xed deposits
Union Bank of Colombo PLC 22,735,494 2% 20,443,521 2% 22,735,494 2% 20,443,521 2%
51,799,832 6% 92,245,890 9%
41 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Determination of fair value and fair value hierarchy
SLFRS 7 Financial Instruments: Disclosures require fair value measurements to be disclosed by the source of inputs, using a three level hierarchy. The hierarchy for measuring fair value consists of Levels 1 to 3:
Level 1 – An investment in a fund is classi ed in Level 1 of the hierarchy when that investment is quoted in an active market and measured at the unadjusted quoted price at the reporting date.
Level 2 – An investment in a fund is classi ed in Level 2 of the hierarchy when that investment is measured using inputs that are directly observable at the reporting date.
Level 3 – An investment in a fund is classi ed in Level 3 of the hierarchy when the investment is measured using unobservable inputs at the reporting date.
The following table shows an analysis of nancial instruments recorded at fair value by level of the fair value hierarchy:
As at 31 March 2014 Level 1 Level 2 Level 3 Total Rs. Rs. Rs. Rs. Financial assets - held for trading
Quoted equity investments 990,741,517 - - 990,741,517 Quoted debentures - 79,243,175 - 79,243,175
As at 31 March 2013
Financial assets - held for trading
Quoted equity investments 860,601,010 - - 860,601,010 Quoted debentures - 19,571,646 - 19,571,646
7. ACCRUED INCOME AND OTHER RECEIVABLES 2014 2013 Rs. Rs.
Dividend receivable 7,739,647 6,932,575 7,739,647 6,932,575
8. ACCRUED EXPENSES 2014 2013 Rs. Rs.
Fund management fee payable 942,883 816,344 Trustee and Custodian fee payable 229,811 205,691 Audit fee 117,040 101,920 1,289,734 1,123,955
42 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
2014 2013 9. INVESTMENT INCOME Rs. Rs.
9.1 Dividend income 29,337,559 25,669,988
9.2 Interest income Interest on Treasury bill repurchase agreements (9.2.1) 4,470,978 4,460,818 Interest on Treasury bills (9.2.1) - 503,339 Interest on xed deposits 3,545,559 3,292,355 Interest on trust certi cates - - Interest on commercial papers 1,703,393 23,362,824 Interest on debentures 7,538,014 2,340,000 Interest on savings 96,414 62 ,147 17,354,358 34,021,483
9.2.1 Interest income on Treasury bill repurchase agreements and Treasury bills have been recognised gross of notional taxes.
10. INCOME TAX 2014 2013 Rs. Rs.
10.1 Tax expense for the year - 1,475,801 - 1,475,801
10.2 A reconciliation betweenthe tax expenseand the product of taxable pro t multiplied by the statutory tax rate is as follows:
Operating pro t before tax 179,335,588 93,869,944 Aggregate allowable expenses/ net gains (146,521,269) (47,266,031) Allowable tax credits (34 ,535,573) (25,669,988) Total statutory income (1 ,721,254) 20,933,925
Utilisation of previously unrecognised tax losses - (6,175,913) Taxable income - 14,758,012
Income tax at the rate of 10% (2013-10%) Income tax expense reported in the Statement of Comprehensive Income - 1,475,801
Carried forward unutilized tax losses - 6,175,913 Tax losses incurred during the year 1,721,254 - Less: Tax losses claimed - (6,175,913) Brought forward unutilized tax losses 1,721,254 -
11. DISTRIBUTION
The fund announced and paid the following dividends during the year.
No. of Total Dividend per Unit Date of declaration units in issue Dividend Rs. Rs. 0.50 03 October 2013 10,751,200 5,375,600
43 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
12. CONTINGENCIES
There are no material contingencies existing as at the reporting date that require adjustments to or disclosures in the nancial statements.
13. EVENTS AFTER THE REPORTING DATE
There have been no material events occurring after the reporting date that require adjustments to or disclosures in the nancial statements.
14. CAPITAL COMMITMENTS
The fund does not has signi cant capital commitments as at the reporting date.
15. UNITS IN ISSUE AND UNIT PRICE
Units in issue and deemed to be issue as at 31 March 2014 is 10,751,200.0 (2013 - 10,751,200.0 ) and the net asset value as at that date per unit was Rs. 105.01 (2013 - Rs. 89.16).
16. RELATED PARTY TRANSACTIONS
16.1 The following have been identi ed as related party transaction of NAMAL Acuity Value Fund for the year ended 31 March in accordance with LKAS 24 - "Related Party Disclosures".
Company / Fund Names of Directors / Managers Nature of Transactions
National Asset Management Ltd. Fund has paid Rs. 10,449,367/- (2013 - Rs. 9,859,070) as (Managing Company) management & registrar fees during the year. The fee payable as at 31 March 2014 is Rs. 942,883/- (2013 - Rs. 816,344/-).
Deutsche Bank Fund has paid Rs. 2,297,512/- (2013 - Rs. 2,277,999/-) as (Trustee) trustee and custodian fees during the year. The fee payable as at 31 March 2014 is Rs. 229,811/- (2013 - 205,690/-).
DFCC Bank Mr. I. J. P. Gamage DFCC holds 30% of equity of National Asset Management (Executive Vice President) Limited.Value of Units held by DFCC Bank in NAMAL Acuity Mr. T. W. De Silva Value Fund is Rs. 316,951,683 (2013 - Rs. 269,111,628/- ) (Senior Vice President) No of units held is 3,018,300 units, (2013 - 3,018,300 units)
44 ANNUAL REPORT 2013 / 2014
NAMAL Acuity Value Fund NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2014
16. RELATED PARTY TRANSACTIONS (Contd..)
Union Bank of Colombo PLC Mr. Alexis Lovell Union Bank of Colombo PLC holds 51% (2013 - 51%) of Mr. Anil Amarasuriya equity of National Asset Management Limited.
The value of xed deposit investments during the year with Union Bank of Colombo PLC is Rs. Rs. 15,000,000/-. Interest received during the year is Rs. 3,664,360/-.
Investment in xed deposit as at 31 March 2014 is Rs. 22,359,939/-.
Ennid Capital (Private) Limited Mr. Avancka Herat Ennid Capital (Pvt) Limited holds 19% (2013 - 19%) of equity of National Asset Management Limited.
16.2 Unit Holdings of the related parties of NAMAL Acuity Value Fund as at 31 March is as follows.
Name Relationship Value of Unit Holding As at 31.03.2014* As at 31.03.2013
Mrs. R.D. Fonseka Spouse of Mr. A.N Fonseka - Rs. 445,800/- (5,000 Units)
*Mr. A.N. Fonseka, resigned from the Board of National Asset Management Limited with e ect from October 31, 2013. As of this date related party unit holding of Mrs.R.D.Fonseka (Spouse of Mr.A.N. Fonseka) was Rs. 470,300 (5000 units).
45 ANNUAL REPORT 2013 / 2014
UNIT INFORMATION
Analysis of Unitholders according to the Number of Units as at 31st March 2014
Holding Units Range No. of No. of Unitholders Units %
1-200 256 26,298 0.24 201-1,000 205 136,893 1.27 1,001-2,000 59 100,914 0.94 2,001-4,000 43 129,405 1.20 4,001-6,000 29 155,088 1.44 6,001-8,000 9 62,530 0.58 8,001-10,000 12 120,000 1.12 10,001-20,000 19 268,647 2.50 20,001-40,000 15 369,645 3.44 40,001- & Above 11 9,381,780 87.26
658 10,751,200 100.00
No. of No. of Holding Categories of Unit Holders Unitholders Units % Individuals 610 1,152,100 10.72 Company 48 9,599,100 89.28 658 10,751,200 100.00
Share Price Movement The market prices during the year Rs.
Highest Price 73.50 Lowest Price 65.20 Last Traded Price 68.40
Net Asset Value of a unit as at 31st March, 2014 105.01
46 ANNUAL REPORT 2013 / 2014
List of 20 Major Unit Holders based on their unitholdings as at 31st March, 2014
Name No. of Holding Units %
DFCC Bank 3,018,300 28.07 Hatton National Bank PLC 3,000,000 27.90 Central Finance Company PLC A/C No 3 2,744,900 25.53 Life Insurance Corporation Lanka Ltd. 168,500 1.28 Bartleet Religare Securities (Pvt) Ltd. 100,000 0.93 HNB Assurance PLC A/C No 2 (Life Insurance Fund) 80,000 0.74 East West Properties PLC 73,200 0.68 Capital Alliance Finance PLC/A.H. Udeshi 53,964 0.50 Mr. S. Nagahawatte 50,000 0.47 Mr.W.K.G.N. Perera 50,000 0.47 Mrs. G. Muralidaran 43,916 0.40 HNB AssurancePLC A/C No 1 (General Insurance Fund) 34,400 0.32 Merchant Bank of Sri Lanka LTD. A/C No 1 30,900 0.29 Mr.K.S.M.De Silva 26,522 0.24 Mellon Bank N.A.-The Frontier Emerging Markets Fund 25,703 0.24 Mr. W. A. D. U. C. Perera 25,100 0.23 Mr. A. N. Dias 25,000 0.23 Perera and Sons Caterers (Pvt) Ltd 25,000 0.23 Perera and Sons Distributors (Pvt) Ltd 25,000 0.23 Senkadagala Finance Company Ltd 25,000 0.23
47 ANNUAL REPORT 2013 / 2014
Corporate Information
NATIONAL ASSET MANAGEMENT LIMITED
DIRECTORS
Mr. Alexis Lovell – Chairman
Mr. Ajith Wijesekera – Deputy Chairman
Mr. Anil Amarasuriya
Mr. Jitendrakumar Warnakulasuriya
Mr. I. J. P. Gamage
Mr. T. W. De Silva
Mr. Avancka Herat
Ms. Khoo Siew Bee
UNIT TRUST INFORMATION National Asset Management Ltd MANAGEMENT COMPANY 7th Floor, Union Bank Head O ce 64,Galle Road ,Colombo 3.
TRUSTEE & CUSTODIAN Deutsche Bank AG 86 Galle Road, Colombo 3.
AUDITORS Ernst and Young Chartered Accountants 201, De Saram Place Colombo 10.
BANKERS Union Bank Of Colombo PLC 64,Galle Road, Colombo 3
Deutsche Bank AG 86, Galle Road, Colombo 3.
LAWYERS F J & G de Saram Attorneys-at-Law & Notaries Public 216, De Saram Place, Colombo 10
48 ANNUAL REPORT 2013 / 2014
Declaration By Trustees And Managing Company
DECLARATION 1
Declaration by Trustee and Management Company as per SEC Circular No: 02/2009 on Guidelines for Trustees and Managing Companies of Unit Trusts Funds.
Deutsche Bank AG, the Trustee and National Asset Management Ltd, the Managers of the NAMAL Acuity Value Fund hereby declare that
1. the requirements of the Guidelines for Trustees and Managing Companies of Unit Trust Funds set by the Securities and Exchange Commission of Sri Lanka (SEC), the Trust Deed, the SEC Act, the Explanatory Memorandum, directives issued by the SEC from time to time have been complied with during the period.
2. the transactions were and will be carried out at an arm’s length basis and on terms which are best available for the fund, as well as act, at all times, in the best interest of the fund’s unit holders.
DECLARATION 2
As per the section 4.3 c (iv) of the Listing Rule of the Colombo Stock Exchange.
Deutsche Bank AG, the Trustee and National Asset Management Ltd, the Managers of the NAMAL Acuity Value Fund hereby declare that the requirements of the Trust Deed, the Securities and Exchange Commission of Sri Lanka Act No 36 of 1987, the Explanatory Memorandum, directives issued by the Securities and Exchange Commission from time to time have been complied with and is in compliance.
…………………………….. …………………………….. …………………………………………… Director Director Authorised Signatories Management Company Management Company Trustee NAMAL Acuity Value Fund
49 "The SEC in approving this Annual Report has taken reasonable care to ensure the accuracy of the information included herein. However, National Asset Management Limited is at all times responsible for the information included in this Annual Report" National Asset Management Ltd. | No.64 Galle Road, Colombo 03. | T: 9411 2445911 | www.namalfunds.com