ANNUAL REPORT 2017/18 National Asset Management Ltd No. 07, Glen Aber Place, Colombo 03. T: 9411 2445911 | www.namalfunds.com National Asset Management Limited Contents Chairman’s Review | 2 Board of Directors | 3 Management Team | 7 Investment Manager’s Report | 8 Fund Reports National Equity Fund | 18 NAMAL Growth Fund | 44 NAMAL Income Fund | 68 NAMAL High Yield Fund | 90 Corporate Information | 109 Declaration By Trustees and Managing Company | 110 National Asset Management Limited | Annual Report 2017/18 1 About NAMAL National Asset Management Limited (NAMAL) is the pioneer Unit Trust management company in Sri Lanka established in 1991. With over 25 years of experience and a successful track record of investing in equity and fixed income markets, NAMAL launched the fiywwrst Unit Trust to be licensed in Sri Lanka (National Equity Fund) and the first listed Unit Trust (NAMAL Acuity Value Fund). We operate seven Unit Trusts and offer private portfolio management services as well. A subsidiary of Union Bank of Colombo PLC, our shareholders include DFCC Bank PLC 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 Our philosophy is to identify and invest in “compounders” – high quality companies with dominant business models, intangible assets, pricing power and low capital intensity. The investment philosophy is clearly reflected in our Investment Management process. Our primary objective is to provide enhanced long term growth while ensuring preservation of capital. Our Unit Trusts Unit Trusts enable individual investors to benefit from professional fund management, investment performance, portfolio diversification, 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 financial wealth, significant 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 Dear Investors, Growth fund with 21 years of existence during the period ahead with a strong focus reported a 14.6% annualised return, which to maintain sustainable long term returns It is my pleasure to send this report and is a benchmark set by NAMAL for the unit to the investors in our funds. accounts of the funds to our investors for trust industry. NAMAL fixed income funds the financial year ended 31st March 2018. too have provided attractive tax adjusted I take this opportunity to thank the Board returns, despite the challenging interest of Directors, the staff at the Securities and The company operated in a tough rate regime during the year. Exchange Commission of Sri Lanka, our environment during 2018 which impacted market counterparties and our Trustees for the business negatively in two ways. NAMAL as a leading Unit Trust the support extended during the year. Most Firstly, both equity and debt markets management company in Sri Lanka with importantly I wish to extend my sincere posted two years of lacklustre returns widespread experience in both domestic appreciation to our loyal investors, many due to global economic uncertainties and and international capital markets, also of whom have remained with NAMAL since local economic policy direction. Secondly, made strategic decision to shift its office inception, for the trust they continue to the situation was further aggravated by premises to No.7 Glen Aber Place, Colombo place in us. Last but not least, I thank the the 2017 budget proposals, where all 3. The new premises will further support staff of NAMAL for their dedicated and loyal the tax incentives given to corporates the growth of NAMAL, providing a more service. were withdrawn, making unit trusts less flexible and accessible business venue to attractive for institutional investors. As a accommodate its discerned clientele, thus result, the industry saw its assets under delivering an enhanced client experience. management declining by 1.9% YoY to Rs 71.9 Bn as at end March 2018. The slower global economic recovery and challenges stemming from domestic Alexis Lovell MBE Despite the challenges it is noteworthy that political and macro-economic challenges Chairman our flagship equity funds, namely, National will accentuate the challenges ahead. Equity Fund which has the longest track Nevertheless, we are optimistic about record in the industry has delivered 13.2% the long term growth prospects of the Sri compounded annualised return to investors Lankan economy and its capital markets in its 27 years of existence, while NAMAL and would be more vigilant and proactive National Asset Management Limited | Annual Report 2017/18 3 Board of Directors Alexis Lovell Indrajit Wickramasinghe Malinda Samaratunga Chairman Wijenanda Dambawinne Ms Khoo Siew Bee Suren Madanayake Tyrone De Silva Palitha Gamage Avancka Herat 4 Board of Directors Mr. Alexis Lovell, MBE Prior to his appointment as Director/ Mr. Dambawinne started his career with Mr. Alexis Lovell, MBE, serves as the CEO of Union Bank he served as the Chief HSBC, Colombo from February 1984 to Chairman of National Asset Management Operating Officer of NDB Bank where he September 1987 and subsequently took an Limited. Mr. Lovell counts over thirty was responsible for all business areas appointment with Sampath Bank PLC from three years of experience in Finance including Retail Banking, Corporate October 1987. In his tenure at Sampath and Investment Banking. Mr. Lovell is Banking, SME Banking and Project Bank PLC until October 2015, he served a Chartered Management Accountant, Finance. Prior to that he held positions as as Deputy General Manager - Treasury UK. He holds a Post Graduate Degree in a Vice President looking after functions and Global Business and also served as a Business Administration. such as HR, Marketing and seven years as Director of the Board of Sampath Centre, Vice President heading Retail Banking. Mr. which is a fully owned subsidiary of He was awarded the MBE (Most Wickramasinghe was also a Non-Executive Sampath Bank PLC from January 2014 to Distinguished Order of the British Empire) Director of Eagle Insurance/Aviva NDB October 2015. by Her Majesty the Queen of England for Insurance, NDB Capital Holdings PLC, NDB services to Investment Banking. Securities (Pvt) Ltd, Development Holdings Ms. Khoo Siew Bee (Pvt) Ltd and the Credit Information Bureau Ms. Siew Bee has extensive experience Mr. Lovell is also the Chairman of UB of Sri Lanka. He currently serves as a in all aspects of corporate finance work Finance, which is a Group Company of Non-Executive Director of the National in Asia, the US and Europe. Her previous Union Bank. He is also the Chairman Asset Management Ltd and UB Finance positions include Director & Country of Think Cube Systems Pvt Ltd. He is Company Ltd. Manager of Schroders Taiwan, Director a member of the Board of Directors of of Schroders Hong Kong, Director of Associated Electrical Corporation Ltd, Mr. Malinda Samaratunga Schroders Singapore and Mergers & Real Investment Holdings Pte Ltd and is Mr. Malinda Samaratunga is an Associate Acquisitions Director (Asia Pacific) of the Principal of JI Capital Limited. He has Member of the Chartered Institute of Monsanto Singapore Pte Ltd. Ms. Siew also been appointed director of EAP Films Management Accountants, UK and a Fellow Bee is a Director of BP De Silva Holdings and Theaters (Pvt) Ltd and Swarnamahal Member of the Certified Management Pte Ltd., and a number of its subsidiary and Jewellers Pvt. Ltd. Accountants, Sri Lanka. He holds a associate companies. Master of Business Administration (MBA) Mr. Lovell is a well respected and recognised and a Bachelor of Science (B.Sc.) degree Mr. Suren Madanayake personality in the banking and financial both from the University of Colombo. Mr. Mr. Suren Madanayake had his education industry for his deep insight, dynamic Samaratunga counts over 17 years of at Royal College, Colombo and qualified as leadership, revolutionary concepts and his extensive experience in the Banking & a Mechanical Engineer from the University ability to re-engineer entities and create Financial services sectors. He currently of Texas at Austin, USA. He was appointed wealth. functions in the bank in the capacity of to the Board of ACL Cables PLC in June the Chief Financial Officer. He also serves 1991 and appointed as Managing Director Mr. Indrajit Wickramasinghe on the Boards of UB Finance Co. Ltd. and in September 2005. When Kelani Cables Indrajit Wickramasinghe was appointed as National Asset Management Limited as a PLC was acquired in October 1999, he was Director/Chief Executive Officer of Union Non Independent Non-Executive Director. appointed as Managing Director of Kelani Bank on the 15th of November 2014. He Cables PLC and Lanka Olex Cables (Private) counts for over 28 years of Management Mr. Wijenanda Dambawinne Ltd which is the holding Company of Kelani experience having worked in both the Mr. Dambawinne was appointed to the Cables PLC. In 2003 he was appointed as financial and consumer sectors in both Union Bank of Colombo PLC as Vice Deputy Chairman of Kelani Cables PLC. local and multinational companies. He President/Head of Treasury on the holds an MBA from the University of Sri 15th of October 2015 and possesses He also serves as the Chairman of Resus Jayewardenepura, a Fellow of the Chartered the ACI Dealing certificate from the ACI Energy PLC, Managing Director of ACL Institute of Marketing UK, a Member of the Financial Markets Association (which is Cables PLC and ACL Plastics PLC and Association of the Professional Bankers an international qualification for Foreign Director of ACL Electric (Pvt) Ltd., Ceylon and a member of the Oxford Business Exchange Dealers).