ANNUAL 2012/2013 REPORT - namalfunds.com · ANNUAL REPORT 2012 / 2013 4 Dear Investors, It is my pleasure to send this report and accounts of the Funds to the investors for the year

2012/2013ANNUAL REPORT

ANNUAL REPORT 2012 / 2013

Contents

About NAMAL

Chairman's Review

Board of Directors

Management Team

NAMAL Funds

Investment Manager’s Report

Fund Reports

National Equity Fund

NAMAL Growth Fund

NAMAL Income Fund

NAMAL Money Market Fund

NAMAL IPO Fund

NAMAL High Yield Fund

Corporate Information 153

137

116

95

72

49

25

24

17

13

10

06

03

01

1

About

2

About NAMAL

National Asset Management Limited (NAMAL) is the pioneer Unit Trust management company in Sri Lanka established in 1991. With 21

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.

3

Chairman’s Review


4

Dear Investors,

It is my pleasure to send this report and accounts of the Funds to the investors for the year ended 31st March 2013. During the year,

NAMAL funds delivered strong fund performance, incremental growth and earnings growth across all categories compared to previous

year.

Our �agship equity funds, National Equity Fund (NEF) and NAMAL Growth Fund (NGF) outperformed market indices and benchmark

competition for the 12 months ended 31 December 2012. The NEF launched in 1991, outperformed the CSE All Share Price Index (ASPI)

by 7.23% while NGF outperformed the ASPI by 5.43%. The NEF and NGF were the best performing funds in the Balanced and Growth

segments. The Fixed Income Funds continued to deliver attractive post tax returns to our investors.

Despite these attractive returns, we are fully cognisant of the current weak global economic conditions and volatility in the global markets.

As value investors we attempt to price macro–economic risks into individual investments. We remain fully aware of the importance of

making the right investment choices and committed to delivering long term capital appreciation and income to our investors by adopting

conservative, fundamental based investment management.

Chairman’s Review


5

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 MBEChairman

6

Board of Directors


7

Board of Directors

Anil AmarasuriyaAjith Wijeyesekera – Deputy Chairman

Ms Khoo Siew Bee

Alexis Lovell – Chairman

Not in picture: Jitendrakumar Warnakulasuriya Tyrone De Silva

Nihal Fonseka Avancka Herat


8

Alexis Lovell, Chairman

Mr. Lovell is the Chairman of Union Bank of Colombo Ltd. 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 Englandfor 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 spearheadedits 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 RetailBanking 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. Mr. Amarasuriya is 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 yearsexperience in the �eld of IT. Mr. Warnakulasuriya is a Fellow member of the Institute of Certi�ed Professional Mangers, CharteredInstitute of Marketing and is currently reading for an MBA at the University of Wales validated Centre in Sri Lanka.

Pro�les of the Board of Directors


9

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 positionsinclude Director & Country Manager of Schroders Taiwan, Director of Schroders Hong Kong, Director of Schroders Singapore andMergers & 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.

Nihal Fonseka

Mr. Fonseka is the Chief Executive O�cer of DFCC Bank since 2000. He is the Chairman of the Colombo Stock Exchange and a Vice Chairman of the Association of Development Financing Institutions in Asia and the Paci�c (ADFIAP). Mr. Fonseka is a member of the Governing Board of the National Institute of Business Management (NIBM) and serves as a member of the Advisory Committee on Finance and Banking of the Ceylon Chamber of Commerce, the Financial Sector and Tax Clusters of the National Council for Economic Development (NCED). He is also a member of the National Payments Council and Inter-RegulatoryInstitutions Council.

He is a Graduate of the University of Ceylon, Colombo, and a Fellow of the Chartered Institute of Bankers, UK.

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.

Avancka Herat

Mr. Herat is the Executive Director of NAMAL. (Please refer management team pro�le.)

10

Management Team


11

Avancka Herat, Executive Director/Chief Investment O�cer

Mr. Herat has over 15 years in 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 ten 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.

Tharaka Mudalige, Senior Sales Manager – Retail Sales

Mr. Mudalige has 6 years experience in Life Insurance and General Insurance specialising in Bancassurance. Prior to joining NAMAL, Mr. Mudalige was the Manager Sales of Bancassurance - for AVIVA NDB Insurance PLC.

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).

Pro�les of the Management Team


12

Mrs Pushpika Jeevaratne, Head of Compliance

Mrs. Jeevaratne has over 6 years 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)

Ms Menaka Fernando, Finance Manager

Ms. Fernando has more than six years experience in Accounting, Auditing and Advisory Services at Kreston MNS & Co.

Ms. Fernando is a member of the Institute of Chartered Accountants of Sri Lanka and the Association of Accounting Technicians of Sri Lanka.

Ms Hemanthi Bulathwatte, Registrar

Ms Bulathwatte is an Attorney-at-law and currently reading for a BSc in Business Administration at the University of Sri Jayewardenepura. She is a registered Company Secretary with the Registrar of Companies in Sri Lanka. She counts over six years experience in the �elds of company secretarial and litigation.

13

Funds


14

NAMAL Funds

Name of Fund National Equity Fund

Fund Type

Objective

Invest In

Time Frame ofInvestment

Risk-Return

Dividends

MinimumInvestment

Front-End Fee

Management Fee

Exit Fee

Registrar Fee

Trustee Fee

Advantages

NAMAL IPO FundNAMAL Growth Fund

Growth

Capital Grawth

Medium to Long Term

No Set Pattern

2.50%

1.25% (Additional 1.5% ifNet Return exceeds 15% p.ain a Quarter)

No

No

0.20%

*Invest in Professionally Selected IPO Securities

*Daily Liquidity

Rs. 10,000

High to ModerateRisk / Return

Listed Equity & Fixed IncomeSecurities

Rs.1,000

Balanced

Income and Long Term Growth

Listed Equity & FixedIncome Securities

Medium to Long Term

High to ModerateRisk / Return

Annual

5.00%

1.50%

No

0.25%

0.20%

*Provides current income and long term growth capital

*Flexibility to invest upto 80% in the stock market

*Minimum investment is low

Rs.5,000

5.00%

1.50%

No

0.25%

0.25%

*Invest in high quality handpicked stocks

*Flexibility to invest upto 90% in the stock market

*Ability to participate in a diversi�ed portfolio of listed shares

Growth

Long Term Capital Growth

Listed Equity

Medium to Long Term

High Risk - High Return

No set pattern


15

Name of Fund NAMAL Income Fund

Fund Type

Objective

Invest In

Time Frame ofInvestment

Risk-Return

Dividends

MinimumInvestment

Front-End Fee

Management Fee

Exit Fee

Registrar Fee

Trustee Fee

Advantages

NAMALHigh Yield Fund

NAMALMoney Market Fund

Rs.10,000

Income

Income

Fixed IncomeSecurities

Medium to Long Term

Medium to Long Term

Semi Annual

No

1.25%

1.00%(If withdrawn prior to 1 year)

0.25%

Rs.200,000 per annum

Lower level of riskthan Equity Funds

Invest in high qualityincome producinginstruments

Receive regulardividend income

Rs.1,000,000

Money Market

Cash Management

Fixed Income Securitiesof less than 12 months

Short Term

Low Risk / Return

Quaterly

No

0.25%

No

0.05%

0.15%

Provides currentincome at minimum risk

Dividends paidquarterly

Rs. 10,000

Fixed Income

Income

Short Term Commercial Papers,Trust Certi�cates & Corporate Debt

Short Term

Moderate toLow Risk - Returns

Regular

No

0.50%

No

No

0.15%

Obtains Signi�cantly HigherYields than Treasury Bills &Fixed Deposits

Daily Liquidity


16

Highlights of NAMAL Funds

National Equity Fund NAMAL Growth Fund NAMAL Acuity Fund NAMAL IPO Fund

Fund Performance YoYGrowth / (decline) 11.93% 11.46% 10.20% 7.02%

Fund Size Rs. 1.66 Bn 250.0 Mn 961.3 Mn 17.4 Mn

Dividend (Rs. Per share) 1.00No dividend paid in line

with fund objectives 1.00 -

Return per unit holder(since inception)

14.62%* Rs. 100,000 invested at

inception is worthRs. 1.8 Mn today

16.65%*Rs. 100,000 invested at

inception is worthRs. 1.1 Mn today

21.05%** (returns areannualized since 2009)

4.16%** (Since inception in2011)

* assuming re-investment of dividends since 1991 and returns are annualized** assuming re-investment of dividends since 1997 and returns are annualized

NAMAL Income Fund NAMAL High Yield FundNAMAL Money Market Fund

Fund Performance YoYGrowth / (decline) 9.67% 9.59%

Fund Size Rs. 360.6 Mn 450.1 Mn

Dividend (Rs. Per share) 0.75 0.88

Tax Equivalent Yield 13.43%* 13.32%*

14.45%

1.01 Bn

-

20.07%*

* for institutional investors who pay 28% corporate tax

17

Invesment Manager’sReport


18

Economic Growth Moderates

Sri Lanka’s GDP growth moderated to 6.4% in 2012, from above 8% in the preceding two years (Fig 1). The sluggish performance of the Services sector (constituting 58.5% of GDP) which saw growth of 4.6% in 2012 compared to 8.6% in 2011 was the main contributor to moderating GDP. The Services sector was severely impacted by by sharply slower growth in the wholesale and retail trade (23.0% of GDP) of 3.7% in 2012 compared to 10.3% in 2011 (Fig 2).

The Industrial sector maintained an unchanged growth rate of 10.3% assisted by a boom in the Construction sub-sector, which grew by 21.6% in 2012. Unfortunately, growth in the key manufacturing sub-sector slowed to 5.2% from 7.9%.

The Agriculture sector was a�ected by drought followed by heavy monsoonal rains and �oods. Notwithstanding the setbacks, the growth rate increased to 5.8% in 2012 compared to 1.4% in 2011.

The moderate GDP growth level is commendable, given the weak global economic environment and the structural problems a�ecting the domestic economy at the end of 2011 including highe interest rate environment, consumer price in�ation and currency depreciation. Despite these challenges, per capita GDP increased to US$ 2,923 from US$ 2,836 in 2011.

Investment Manager’s Report

Economic outlook

-8

-6

-4

-2

0

2

4

6

8

10

12

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

%

Agriculture Industry Services

Fig 02: GDP Growth By Secto

Source: CBSL

-2

0

2

4

6

8

10

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

%

Fig 01: GDP Growth Moderates

Source: CBSL


19

The expanding trade de�cit, US$ 9.7 billion in 2011, and consequently large Current Account de�cit was the largest structural problem confronting the economy at the start of 2012. Policy makers took aggressive measures, including depreciation of the currency, tighter monetary policing including 18% credit ceiling for banks and higher customs duties on selected imports to combat the trade de�cit. These measures contributed to the trade de�cit contracting to US$ 9.4 billion in 2012 (Fig 3) , accounting for 15.8% of GDP (16.4% in 2011). This improvement together with a signi�cant increase in inward remittances and higher earnings from tourism helped the Current Account de�cit to improve to 6.6% of GDP in 2012, compared to 7.8% of GDP in 2011).

Sri Lanka still faces some signi�cant external sector challenges due to the weakness of its two primary export markets, United States and European Union, which account for 61% of exports. This was underlined by the 7.4% decline in exports despite the signi�cant currency depreciation.

Trade Account Stabilizes in 2012

The Central Bank of Sri Lanka (CBSL) took a hawkish stand with its monetary policy in the �rst half of the year by increasing policy rates (Fig 4) and imposed a credit ceiling on banks to slowdown domestic consumption. Banking sector credit growth slowed to 20.8% in 2012 compared to 31.7% in 2011 (Fig5). Following the easing of external sector pressure, CBSL adopted a more accommodative stance by reducing policy rates in December 2012. The credit ceiling was withdrawn in 2013 and provided excess liquidity in the banking system.

Treasury Bill yields which increased during the tightening cycle in 2012 have declined in 2013 with monetary easing.

The Colombo Consumer Price Index (CCPI), particularly point to point continued to edge up during the course of the year which had a signi�cant impact on real interest rates (Fig 6). The increase in fuel and electricity prices in 2013 will have an impact on core in�ation, which will limit the ability for further policy easing in 2H of FY2013.

Tighter Monetary Policy Implemented

-1,100

-600

-100

400

900

1,400

1,900

2007 2008 2009 2010 2011 2012 2013

USD m

Exports Imports Trade Deficit

Fig 03: Trade De�cit Improves

Source: CBSL

Source: CBSL Annual Report & Website

7

8

9

10

11

12

13

1/1/2003 1/1/2005 1/1/2007 1/1/2009 1/1/2011 1/1/2013

Repurchase rate (%) Reverse Repurchase (%)

Fig 04: Policy Rates Raised

Source: CBSL


20

The Sri Lanka Rupee depreciated by over 20% to a low of Rs. 133 against US$ by June 2012 before recovering to Rs. 127 by the year end with the reduction in Trade and Current Account de�cits (Fig 7). The Rupee was helped to stabilise by the continuing �ow of FII investments into Treasury Bonds and Bills which accounted for approximately 45.6% of the gross o�cial reserves of US$ 6.9Bn as of end of FY12 (Fig8)

Rupee Depreciation

-10%

-5%

0%

5%

10%

15%

20%

0

20

40

60

80

100

120

140

160

1-Ja

n-07

1-M

ay-0

7

1-Se

p-07

1-Ja

n-08

1-M

ay-0

8

1-Se

p-08

1-Ja

n-09

1-M

ay-0

9

1-Se

p-09

1-Ja

n-10

1 -M

ay-1

0

1-Se

p-10

1-Ja

n-11

1-M

ay-1

1

1-Se

p-11

1-Ja

n-12

1-M

ay-1

2

1-Se

p-12

1-Ja

n-13

LKR / USD Depreciation (YTD)

Fig 07: Rupee Depreciation

Source: CBSL

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

-600

-500

-400

-300

-200

-100

0

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012Rs. bn

Loan-deposit gap Loan/deposits ratio

Fig 05: Banking Sector Credit Growth Slows

Source: CBSL

Fig 06: Real Rates Declined

Source: CBSL

0%2%4%6%8%

10%12%14%

Jan

Mar

May Ju

l

Sep

Nov Ja

n

Mar

May Ju

l

Sep

Nov Ja

n

Mar

May Ju

l

Sep

Nov Ja

n

Mar

2010 2011 2012 2013

1 year T bill rate Inflation Real rate


21

The Budget de�cit was contained to 6.4% of GDP in 2012 despite the constrained revenues resulting from the slowing economy (Fig 9). During the last three years stronger nominal GDP growth has resulted in the budget de�cit declining as a percentage of GDP. It is critical for long term economic growth prospects that the budget de�cit is reduced, the impact of the European sovereign debt crisis was most acute in countries with high debt to GDP ratios. Government debt increased to 79.1% of GDP in 2012 (78.5% in 2011).

Budget De�cit Declines

ASPI Recovers in 2H of FY12The ASPI declined by 7.1% YoY during the FY2012 impacted by the tightening policy cycle bottoming out at 4,738 in June 2012 before rallying 19% to 5,643 by end 2012 and continuing the upward momentum into 2013.

The ASPI is 244% higher than in 31 March 2009 and as a result Colombo Stock Exchange has outperformed regional indices in the past two years and remains one of the best performing markets with growth of 374% since 1st January 2005. The performance of key regional markets India (Sensex, up 290%), Singapore (Straits Times, up 153%), and Hong Kong (Hang Seng, up 159%) have been weaker (Fig 10). Average daily volumes of ASPI stood at Rs. 433Mn per day in CY2012 compared to Rs. 417Mn per day in CY2011.

Foreign Funds (FIIs) were large net buyers in 2012 after being net sellers in 2010 and 2011. This can be attributed to the attractive valuations in US$ terms. The market cap of ASPI which stood at US$ 19.5 Bn at end 2011 had declined by 13% to US$ 17.0 Bn by end of 2012. The net purchases by FIIs for CY 2012 stood at Rs. 38.7 Bn, the highest net in�ow in one calendar year during the last 20 years (Fig 11). Yield Ratio has improved with the correction in ASPI (Fig12) while the market PER levels have fallen to historically attractive levels (Fig 13).

Market Review

0.0

2.0

4.0

6.0

8.0

10.0

12.0

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Fig 09: Budget De�cit

Source: CBSL

0%

10%

20%

30%

40%

50%

60%

- 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

31-Ja

n-10

28-F

eb-1

031

-Mar

-10

30-A

pr-1

031

-May

-10

30-Ju

n-10

31-Ju

l-10

31-A

ug-1

030

-Sep

-10

31-O

ct-1

030

-Nov

-10

31-D

ec-1

031

-Jan-

1128

-Feb

-11

31-M

ar-1

130

-Apr

-11

31-M

ay-1

130

-Jun-

1131

-Jul-1

131

-Aug

-11

30-S

ep-1

131

-Oct

-11

30-N

ov-1

131

-Dec

-11

31-Ja

n-12

29-F

eb-1

231

-Mar

-12

30-A

pr-1

231

-May

-12

30-Ju

n-12

31-Ju

l-12

31-A

ug-1

230

-Sep

-12

31-O

ct-1

230

-Nov

-12

31-D

ec-1

231

-Jan-

1328

Feb

201

3

Foreign investments in treasury bills and bonds (USD Mn) Gross official reserve (USD m) FI as a % of gross official reserve

Fig 08: FII Investments in Treasury Bonds and Bills

Source: CBSL


22

(15,000.00)

(10,000.00)

(5,000.00)

-

5,000.00

10,000.00

15,000.00

20,000.00

Jan-

03

Jun-

03

Nov

-03

Apr-

04

Sep-

04

Feb-

05

Jul-0

5

Dec-

05

May

-06

Oct

-06

Mar

-07

Aug-

07

Jan-

08

Jun-

08

Nov

-08

Apr-

09

Sep-

09

Feb-

10

Jul-1

0

Dec-

10

May

-11

Oct

-11

Mar

-12

Aug-

12

Jan-

13

LKR m

Net foreign Purchases/(Sales)

Fig 11: Foreign Funds (FIIs) Large Net Buyers

-

100

200

300

400

500

600Ja

n-05

Jun-

05

Nov

-05

Apr-

06

Sep-

06

Feb-

07

Jul-0

7

Dec-

07

May

-08

Oct

-08

Mar

-09

Aug-

09

Jan-

10

Jun-

10

Nov

-10

Apr-

11

Sep-

11

Feb-

12

Jul-1

2

Dec-

12

Index

Hang Seng Sensex S & P 500 Straits Times ASPI

Fig10: ASPI Outperforms Regional Indices

Source : Bloomberg

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

%

Post Tax TB Yield

Post Tax Dividend Yield

Fig 12: Yield Ratio Improves

Source: CSE & NAMAL


23

Despite slower growth in 2012 Sri Lanka remained a bright spot in the global economic landscape. Sri Lanka does not have the excessive debt levels constraining some European countries and the �nancial sector remains fundamentally stable. The country is rebuilding following the end of its ethnic con�ict which will lead to higher growth rates than comparative benchmarks. The biggest medium term risk is in the external account, which is vulnerable to external trade and capital �ows.

As value investors we attempt to price macro–economic risks into individual investments. We continue to focus on identifying investments that are attractively valued which could outperform market returns in the long run. We look at opportunities to exit from counters that we consider expensive relative to their underlying value. We continue to be bullish on Retail, Health Care, Food and Beverage, Banking, Oil & Gas, and Infrastructure services.

Market Outlook

1.4

1.7

2.0

2.3

2.6

2.9

3.2

3.5

3.8

4.1

4.4

Jan-8

5Jan

-86

Jan-8

7Jan

-88

Jan-8

9Jan

-90

Jan-9

1Jan

-92

Jan-9

3Jan

-94

Jan-9

5Jan

-96

Jan-9

7Jan

-98

Jan-9

9Jan

-00

Jan-0

1Jan

-02

Jan-0

3Jan

-04

Jan-0

5Jan

-06

Jan-0

7Jan

-08

Jan-0

9Jan

-10

Jan-1

1Jan

-12

Jan-1

3

Log scale

25x

10x

5x

2x

Fig 13: Market PER Multiples Down on Forward Earnings

Source: CSE & NAMAL

24

Fund Reports

NationalEquity Fund

25


26

Fund Performance Review

Investment Strategy

The National Equity Fund (NEF) is a balanced fund which aims to provide capital appreciation and current income for investors. The Fund allocates a maximum of 80% to equity with the balance invested in �xed income securities.

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 returns to investors in the long run rather than track the index.

Asset Allocation

The Fund invested 80% in equities, 9.3% in Commercial Paper, and 5.7% in Repos with the balance in Debentures & Fixed Deposits by end March 2013. The main sector allocations in equity are Healthcare (29.9%), Beverage, Food & Tobacco (29.1%), Banks, Finance & Insurance (15.5%) and Diversi�ed Holdings (9.5%).

Performance Review

The All Share Price Index increased by 5.82% while the 3 month Treasury Bill yields declined by 1.74% for the year ending 31st March 2013. The Fund outperformed the ASPI by 6.1% with the Fund’s NAV per unit increasing by 7.70% during the period under review.

The Fund value was Rs. 1.66 billion at 31 March 2013. Net assets attributable to unit holders increased by Rs. 129 million during the year, vs. a decrease of Rs. 478 million the prior year. The Fund also distributed Rs. 63 million to unit holders, leading to a total return of Rs. 192 million.

Return to Investors

The Fund has provided an annualized return of 14.96% to investors since inception in 1991 (Fig4). An investment of Rs. 100,000 at inception is worth Rs. 1.78 million today (assuming re-investment of dividends).The Fund paid a tax free dividend of Rs. 1.00 per unit for FY2013, bringing the cumulative dividends paid to Rs. 25.75 per unit.

Investment Management Team, National Asset Management Ltd


27

Fund Performance and Market Returns as at 31st March 2013

Fig 1: Fund Performance

12 months 24 months 36 months11.93%5.82%

-9.94%-20.6%

46.68%

6.80% -12.59% 48.89%

54.0%10.73% -19.44% 28.45%

National Equity FundASPI3 months T-BillBenchmark

*Note

1) Performance up to 31st March 2013 as published by the Unit Trust Association of Sri Lanka2) Benchmark consists of 80% return of ASPI and 20% return of 3M TB rate.3) All returns are adjusted for dividends4) Returns are not annualized5) Past performance should not be taken as a guide to future performance

Fig 2: Top Five Equity Holdings

30.0%

29.1%

15.5%

9.5%

6.0%

3.4%

2.8%

2.2%

0.8%

0.7%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00%

Healthcare

Beverage, Food and Tobacco

Banks, Finance and Insurance

Diversified Holdings

Manufacturing

Construction and Engineering

Investment Trust

Hotels and Travels

Plantations

Chemicals and Pharmaceuticals

SECT

OR

Fig 3: Sector Allocation

The Company No of Shares Value (RS.) % of NAV Asiri Hospital Holdings 22,750,781 259,358,903 15.7% Lion Brewery 601,825 200,407,725 12.1% Distilleries 936,843 155,984,360 9.5% CT Holdings 1,003,600 126,654,320 7.7% Central Finance 674,632 121,433,760 7.4%


28

Fig 4: Holding Period Return

-10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Rate of Return Value on Investments (Rs.)

Cumulative Value of Investment Compounded Annual Growth Rate

ADBT/CPEG/JJ

INDEPENDENT AUDITORS’ REPORTTO THE UNIT HOLDERS OF NATIONAL EQUITY FUND

Report on the Financial Statements

We have audited the accompanying �nancial statements of National Equity Fund which comprise the statement of �nancial position as at 31 March 2013 and statement of comprehensive income, statement of changes in unitholder’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, implementing and maintaining internal control relevant to the preparation and fair presentation of �nancial statements that are free from material misstate-ment, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting 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 2013 and the �nancial statements give a true and fair view of the Fund’s �nancial position as at 31 March 2013 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 and Unit Trust Deed.

11 June 2013Colombo


29


30

National Equity FundSTATEMENT OF FINANCIAL POSITIONAs at 31 March 2013

As at Notes 2013 2012 1 April 2011

ASSETS Rs. Rs. Rs.

Cash and cash equivalents 1,101,622 514,659 105,692,748 Financial assets - Held for trading 5 1,368,715,350 1,376,447,160 1,579,143,520 Financial assets - Loans and receivable 6 277,752,859 306,795,525 500,393,562 Accrued income and other receivables 8 57,775,761 44,718,841 4,517,800 Income tax recoverable 25,374,835 21,362,295 16,702,205 Total assets 1,730,720,427 1,749,838,480 2,206,449,835

UNIT HOLDERS' FUNDS & LIABILITIES

LIABILITIESAccrued expenses 9 71,842,315 90,310,410 11,401,053 Total Liabilities (Excluding net assets attributable to Unit Holders) 71,842,315 90,310,410 11,401,053

UNIT HOLDERS' FUNDSNet assets attributable to Unit Holders 1,658,878,112 1,659,528,070 2,195,048,782

1,730,720,427 1,749,838,480 2,206,449,835

These Financial Statements were approved by the Management Company, and adopted by the Trustees. - -

Colombo11 June 2013

……………………………..……………………………..

DirectorManagement Company


*The Accounting Policies and Notes on pages 34 to 48 form an integral part of these Financial Statements.


31

National Equity FundSTATEMENT OF COMPREHENSIVE INCOMEYear ended 31 March 2013


2013 2012Notes Rs. Rs.

INVESTMENT INCOMEDividend income 10.1 41,541,992 25,990,220 Interest income 10.2 59,921,901 39,720,713Net realised gains on �nancial assets held for trading 5.4 54,291,924 378,468,597Net change in unrealised gains/(losses) on �nancial assets held for trading 5.5 76,221,798 (810,538,265)Total investment income 231,977,615 (366,358,735)

EXPENSESManagement & Registrar fees (31,574,184) (34,675,046) Trustee fees (3,804,300) (4,489,492) Audit fee and expenses (284,557) (261,152) Bank charges (31,094) (9,941) Professional charges (31,248) (6,440) Other expenses (2,382,348) (4,071,546) Total operating expenses (38,107,731) (43,513,617)

Net operating pro�t/(loss) 193,869,884 (409,872,352)

FINANCE COSTInterest expense (48,778) (99,934) Distribution to unit holders 12 (63,015,519) (68,222,120)

PROFIT/(LOSS) AFTER DEDUCTIONS AND BEFORE TAX 130,805,587 (478,194,406)

Income tax expense 11 (1,787,255) 200,783

PROFIT/(LOSS) AFTER DISTRIBUTIONS AND TAX 129,018,332 (477,993,623)

INCREASE/(DECREASE) IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 129,018,332 (477,993,623)


32

National Equity FundSTATEMENT OF CHANGES IN UNITHOLDERS' FUNDSYear ended 31 March 2013


2013 2012Rs. Rs.

UNIT HOLDERS' FUNDS AT THE BEGINNING OF THE YEAR 1,659,528,070 2,195,048,782

Increase/ (decrease) in net assets attributable to Unit Holders 129,018,332 (477,993,623)

Received on unit creations 54,835,070 65,302,320

Payments on unit redemptions (184,503,360) (122,829,409)

UNIT HOLDERS' FUNDS AT THE END OF THE YEAR 1,658,878,112 1,659,528,070


33

National Equity FundSTATEMENT OF CASH FLOWSYear ended 31 March 2013


2013 2012Rs. Rs.

Cash Flows from Operating ActivitiesDividend received 27,596,802 29,758,020 Interest received 56,460,889 31,953,167 Proceeds from sale of investments 2,101,140,762 1,509,476,501 Payments on purchase of investments (1,945,310,382) (1,529,039,611) Taxation paid (3,514,412) (270,474) Operating expenses paid (39,118,072) (45,471,453) Net Cash Generated from/(used in) Operating Activities 197,255,587 (3,593,850)

Cash Flows from Financing ActivitiesIncome distribution (68,222,120) - Amount received on unit creation 55,723,340 21,333,479 Amount paid on unit redemption (184,121,066) (122,917,718) Interest paid on borrowings (48,778) - Proceeds from borrowings 100,100,000 - Repayment of borrowings (100,100,000) - Net Cash used in Financing Activities (196,668,624) (101,584,239)

Net increase in cash and cash equivalents 586,963 (105,178,089) Cash and cash equivalents at the beginning of the year 514,659 105,692,748 Cash and cash equivalents at the end of the year 1,101,622 514,659


34

1. GENERAL INFORMATION

National Equity Fund is an open ended unit trust fund approved by the Securities and Exchange Commission of Sri Lanka. The fund was launched on 8th December 1991.

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 primary objective of the fund is to achieve long term fund appreciation and provide investors with current income through prudent investment in a portfolio of listed shares and �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

This is funds’ �rst �nancial statements prepared in accordance with (SLFRSs) and SLFRS 1 – First time Adoption of Sri Lanka Financial Reporting Standards has been applied. Please refer Note 4 to the �nancial statements.

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.

National Equity FundNOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 2013


35

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 tradingFinancial 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 7.

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.



36

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 - 1.5% of Net Asset Value of the Fund

Trustee Fee - 0.2% of Net Asset Value of the Fund Registrar Fee - 0.25% of Net Asset Value of the Fund

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.



37

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 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 instrumentsManagement 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 STANDARDS ISSUED BUT NOT YET EFFECTIVE Standards issued but not yet e�ective up to the date of issuance of the fund’s �nancial statements are set out below. The fund 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.

(i) SLFRS 9 -Financial Instruments: Classi�cation and MeasurementSLFRS 9, as issued re�ects the �rst phase of work on replacement of LKAS 39 and applies to classi�cation and measurement of �nancial assets and liabilities. This standard will be e�ective for the �nancial periods beginning on or after 01 January 2015.

(ii) SLFRS 13 -Fair Value MeasurementSLFRS 13 establishes a single source of guidance under SLFRS for all fair value measurements. SLFRS 13 provides guidance on all fair value measurements under SLFRS.

This standard was originally e�ective for the �nancial period beginning on or after 01 January 2013 and early application was allowed. However e�ective date has been deferred subsequently.



38

3. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(a) Financial instruments

The fund’s principal �nancial assets comprise investments in trading securities, repurchase agreements, commercial papers, �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, �xed deposits and commercial papers 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, Groups’ 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.



39


(c) Credit risk

Credit risk is the risk that the counterparty to the �nancial statement 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 AgencyHayleys PLC AA - Ram RatingPeoples Leasing & Finance PLC AA- Fitch RatingSoftlogic Holdings PLC A- Fitch RatingAsia Capital PLC* Unrated -

*As per SEC Directive investments in companies that do not have a rating is limited to a maximum 10% of NAV

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:

2013 2012 Rs. 000 Rs. 000National Equity Fund - Investments Conservative 93,134 131,238Balanced 184,618 175,558Growth 1,368,715 1,376,447

(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.


40


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 5, with all other variables held constant:

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 due to trading securities 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.

31 March 2013

Increase/ (decrease)in pro�t before taxRs. 000

Increase/ (decrease)in net assetsattributable toUnit HoldersRs. 000

31 March 2012


Increase/ (decrease)in net assetsattributable toUnit HoldersRs. 000Change in price

of the fund’sinvestment intrading securities:

+10%-10%

132,957 132,957 112,251 112,251(132,957) (132,957) (112,251) (112,251)


41


Notes SLAS Reclassi�cation Remeasurements SLFRSRs. Rs. Rs. Rs.

ASSETS

Equity investments 1,579,143,520 (1,579,143,520) - - Fixed income investments - Trust certi�cates 2,624,863 (2,624,863) - Financial assets - Held for trading A - 1,579,143,520 - 1,579,143,520

Treasury bill repurchase agreements 467,584,063 (467,584,063) - - Fixed income investments - Trust certi�cates 30,000,000 (30,000,000) - - Financial assets - Loans and receivables A 500,391,655 1,907 500,393,562

CURRENT ASSETSAccrued income and other receivables A 4,700,529 (182,729) - 4,517,800 Income tax recoverable 16,702,205 - - 16,702,205 Cash and cash equivalents 105,692,748 - - 105,692,748

127,095,482 (182,729) - 126,912,753

2,206,447,928 - 1,907 2,206,449,835

UNIT HOLDERS' FUNDS AND LIABILITIESLiabilitiesAccrued expenses 11,401,053 - - 11,401,053

11,401,053 - - 11,401,053 Unit Holders' Funds BUnit capital 704,428,458 1,490,618,417 1,907 2,195,048,782 Net realised gains 557,217,494 (557,217,494) - - Net unrealised appreciation 849,057,375 (849,057,375) - - Income account 84,343,548 (84,343,548) - -

2,195,046,875 - 1,907 2,195,048,782

2,206,447,928 - 1,907 2,206,449,835

4. FIRST-TIME ADOPTION OF SLFRS's

These �nancial statements, for the year ended 31st March 2013, are the �rst �nancial statements the fund has prepared in accordance with SLFRS. For periods up to and including the year ended 31 March 2012, the fund prepared its �nancial statements in accordance with Sri Lanka Accounting Standards (SLAS).

Accordingly, the fund has prepared �nancial statements which comply with SLFRS applicable for periods ending on or after 31 March 2013, together with the comparative period data as at and for the year ended 31 March 2012, as described in the accounting policies. In preparing these �nancial statements, the fund’s opening statement of �nancial position was prepared as at 1 April 2011, the fund's date of transition to SLFRS. This note explains the principal adjustments made by the fund in restating its SLASs statement of �nancial position as at 1 April 2011 and its previously published SLASs �nancial statements as at and for the year ended 31 March 2012. 4.1 Reconciliation of equity as at 01 April 2011 (date of transition to SLFRS's)


42


4. FIRST-TIME ADOPTION OF SLFRS's (contd..)

4.2 Reconciliation of equity as at 31 March 2012Notes SLAS Reclassi�cation Remeasurements SLFRS

ASSETS Rs. Rs. Rs. Rs.

Equity investments 1,122,512,394 (1,122,512,394) - - Fixed income investments - Debentures 36,381,760 (36,381,760) - - Investments in treasury bonds 215,694,848 (215,694,848) - - Financial assets - Held for trading A - 1,376,447,160 - 1,376,447,160

Fixed income investments- Commercial Papers 174,035,274 (174,035,274) - - Treasury bill repurchase agreements 131,176,766 (131,176,766) - - Financial assets - Loans and Receivables A 306,795,525 - 306,795,525

CURRENT ASSETSAccrued income and other receivables A 48,160,484 (3,441,643) - 44,718,841 Income Tax Recoverable 21,362,295 - - 21,362,295 Cash and cash equivalents 514,659 - - 514,659

70,037,438 (3,441,643) - 66,595,795 1,749,838,480 - - 1,749,838,480

UNIT HOLDERS' FUNDS AND LIABILITIESLiabilitiesAccrued expenses 90,310,410 - - 90,310,410

90,310,410 - - 90,310,410 Unit Holders' Funds BUnit Capital 686,769,928 972,758,142 - 1,659,528,070 Net realised gains 921,789,136 (921,789,136) - - Net unrealised appreciation 14,579,615 (14,579,615) - - Income Account 36,389,391 (36,389,391) - -

1,659,528,070 - - 1,659,528,070 1,749,838,480 - - 1,749,838,480

4.3 Reconciliation of total comprehensive income for the year ended 31 March 2012


Gross income 65,710,933 - - 65,710,933 Net realised gains on �nancial assets held for trading C - 378,468,597 - 378,468,597

C/A - (810,536,358) (1,907) (810,538,265) Total investment income 65,710,933 (432,067,761) (1,907) (366,358,735)

Expenses (43,613,551) 99,934 - (43,513,617) Interest expenses - (99,934) - (99,934)

Distribution to Unit Holders - (68,222,120) - (68,222,120)

Pro�t after deductions before tax 22,097,382 (500,289,881) (1,907) (478,194,406)

Taxation 200,783 - - 200,783 Pro�t after tax 22,298,165 (500,289,881) (1,907) (477,993,623)

Net realised gain 378,468,597 (378,468,597) - -

(810,536,358) 810,536,358 - - Total earnings (409,769,596) (68,222,120) (1,907) (477,993,623)

EqualisationReceived on units created B 40,188,066 (40,188,066) - - Deducted on units redeemed B (80,056,627) 80,056,627 - - Net equalisation (39,868,561) 39,868,561 - -

Decrease in net assets attributable to Unit Holders (449,638,157) (28,353,559) (1,907) (477,993,623)

Net unrealised depreciation in valuation of investmentsat market value

Net changein unrealised losseson �nancial assets heldfor trading


43


4. FIRST-TIME ADOPTION OF SLFRS's (contd..) Notes to the reconciliation of equity of the fund as at 1 April 2011 and 31 March 2012 and total comprehensive income for the year ended 31 March 2012 A Financial Instruments In the previous �nancial year, Treasury bill repurchase agreements and �xed income investments (commercial papers) were accounted as investments and the accrued interest on such investments were accounted as accrued income and other receivables (2012 - Rs.1,583,485/-) (2011 - Rs.182,729/-). Under SLFRS, Loans and receivables which falls in the de�nition of LKAS 39 need to be disclosed separately at amortised cost using e�ective interest rate, accordingly have been reclassi�ed the interest receivable as Loans and receiva-bles.

As of 1 April 2011, investment in trust certi�cates (disclosed as �xed income investments) which were held for more than one year was recognised at the market value. Up on the adoption SLFRS trust certi�cate investments which falls in to the de�nition of Loans and receiva-bles, was recognised at amortised cost, hence a remeasurement adjustment of Rs. 1907/- was incorporated. In the previous �nancial year, accrued interest of Rs.1,166,795/- on quoted debentures were accounted and disclosed as accrued income and other receivables. Following the adoption of SLFRS, accrued interest on such was classi�ed and recorded as part of the �nancial asset to record at the fair value.

In the previous �nancial year, Treasury bonds was accounted as current assets and accrued interest on such investments were accounted as accrued income and other receivables. Under SLFRS, Treasury bonds are classi�ed as held for trading and is recorded at fair value, accrued interest receivable of Rs.691,363/- as at 31 March 2012 was classi�ed accordingly. As per SLFRS equity investments in quoted shares, Treasury bonds and quoted debentures, were classi�ed as held for trading.

B Unit Holders' Funds In the previous �nancial year, realised gains and unrealised appreciation/(depreciation) on quoted equity securities and debentures have been disclosed and accounted in separate accounts in the balance sheet in accordance with Recommended Accounting Practice for Open Ended Unit Trust issued by Institute of Chartered Accountants of Sri Lanka (ICASL). Since Recommended Accounting Practice for unit trusts issued would be withdrawn and ICASL has requested to adopt SLFRS for unit trust, the realised gains and unrealised appreciation/(depreciation) is shown in Unit Holders' Funds. In the previous �nancial year, income equalisation on creation and redemption of units comprising of income after the initial o�er price have been disclosed in the accounts and shown separately in the statement of total return and recorded to income account in accordance with Recommended Accounting Practice for Open Ended Unit Trust issued by ICASL. Since Recommended Accounting Practice for unit trusts issued would be withdrawn and ICASL has requested to adopt SLFRS for unit trust, the consideration paid and received on unit creation are recorded to Unit Holders' funds.

C Realised gain/(loss) and unrealised appreciation/(depreciation) on �nancial assets held for trading In the previous �nancial year, realised gain/(loss) and unrealised appreciation/(depreciation) on marketable securities were classi�ed separately in the statement of total return. Upon the adoption of SLFRS, such is classi�ed as part of the investment income, in the statement of comprehensive income as 'realised gain/(loss) on �nancial assets held for trading and net change in unrealised gain/(loss) on �nancial assets held for trading'.


44


As at 1 April5. FINANCIAL ASSETS - HELD FOR TRADING 2013 2012 2011

Rs. Rs. Rs.

Quoted equity securities (5.1) 1,329,572,057 1,122,512,394 1,579,143,520Debt securities - quoted debentures (5.2) 39,143,293 37,548,555 - Government treasury bonds - 216,386,211 -

1,368,715,350 1,376,447,160 1,579,143,5205.1 Quoted equity securities

Cost as at 31 March 1,185,132,487 1,052,687,063 702,398,164 (Depreciation) /appreciation of market value quoted equity securities 144,439,570 69,825,331 876,745,356 Market Value as at 31 March 1,329,572,057 1,122,512,394 1,579,143,520

2013 20125.1.1 Company Number of Market Holdings Number of Market Holdings Number of Market Holdings

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

Rs. Value Rs. Value Rs. ValueBanks, Finance and InsuranceCentral Finance Company PLC 674,632 121,433,760 7% 551,666 94,500,386 6% 100,000 127,370,000 5%Commercial Bank of Ceylon PLC - Non Voting 337,456 32,699,486 1% 1,095,752 87,660,160 5% 506,000 83,793,600 4%Commercial Bank of Ceylon PLC - Voting 50,000 5,650,000 0% - - - - - -Hatton National Bank PLC -Voting 274,060 45,850,238 4% 110,200 16,860,600 1% - - -Hatton National Bank PLC -Non Voting - - - 630,000 59,535,000 4% 400,000 85,320,000 4%National Development Bank PLC - - - 96,200 11,813,360 1% 48,100 16,373,240 1%Union Bank of Colombo PLC - - - 4,600 80,500 0% 4,600 164,680 0%

205,633,484 12% 270,450,006 17% 313,021,520 13%

Beverages, Food and TobaccoCeylon Tobacco Company PLC - - - - - - 379,500 135,861,000 8%Distilleries Company of Sri Lanka PLC 936,843 155,984,360 9% 820,000 118,900,000 7% 570,000 102,600,000 6%Lion Brewery Ceylon PLC 601,825 200,407,725 12% 600,000 119,700,000 7% - - - Renuka Agri Foods PLC 7,515,480 30,813,468 2% 5,368,200 32,209,200 2% - - -

387,205,553 23% 270,809,200 16% 238,461,000 14%

Chemicals and Pharmaceuticals CIC Holdings PLC 150,000 9,150,000 1% 150,000 14,340,000 1% 150,000 23,250,000 1%

9,150,000 1% 14,340,000 1% 23,250,000 1%

Construction and EngineeringAccess Engineering Limited 2,277,925 44,875,123 3% 1,000,000 26,700,000 2% - - -

44,875,123 3% 26,700,000 2% - -

Diversi�ed HoldingsCT Holdings PLC (Previously named as Ceylon Theaters PLC) 1,003,600 126,654,320 8% 1,107,100 166,175,710 10% 1,734,500 346,900,000 21%Aitken Spence PLC - - - - - - 1,450,000 235,335,000 14%

126,654,320 8% 166,175,710 10% 582,235,000 35%

Health Care Ceylon Hospitals PLC (Durdans) 1,028,900 102,890,000 6% 968,900 70,245,250 4% 968,900 96,890,000 5%Ceylon Hospitals PLC (Durdans) - Non Voting 481,000 36,123,100 2% 360,000 19,944,000 1% 360,000 28,836,000 2%Asiri Hospitals PLC 22,750,781 259,358,903 16% 11,000,000 83,600,000 5% - - -

398,372,003 24% 173,789,250 10% 125,726,000 7%

Hotels and TravelsAitken Spence Hotel Holdings PLC - - - - - - 1,050,000 102,900,000 6%Hotel Services (Ceylon) PLC 2,200,000 29,480,000 2% 2,200,000 38,280,000 2% 2,200,000 50,820,000 3%

29,480,000 2% 38,280,000 2% 153,720,000 9%

ManufacturingACL Cables PLC 845,000 55,347,500 3% 750,000 46,950,000 3% 750,000 70,500,000 4%Tokyo Cement PLC - Non voting 1,401,000 24,517,500 1% 1,401,000 37,827,000 2% - - 0%ACME Printing & Packaging PLC - - - - - - 2,000,000 42,600,000 3%Chevron Lubricants Lanka PLC - - - 100,000 18,190,000 1% - - 0%

79,865,000 4% 102,967,000 6% 113,100,000 7%

PlantationKegalle Plantations PLC 100,000 11,200,000 1% 100,000 10,300,000 1% 100,000 20,750,000 1%

11,200,000 1% 10,300,000 1% 20,750,000 1%Investment TrustsRenuka Holdings PLC 1,197,954 37,136,574 2% 1,197,954 46,121,228 3% - - -

37,136,574 2% 46,121,228 3% - -

Power and EnergyLaugfs Gas PLC - - - 100,000 2,580,000 0% 200,000 8,880,000 1%

- - 2,580,000 0% 8,880,000 1%

Total value of quoted equity securities(At Market Value) 1,329,572,057 80% 1,122,512,394 68% 1,579,143,520 88%

As at 1 April 2011


45


5. FINANCIAL ASSETS - HELD FOR TRADING (contd..)

5.2 Quoted debentures

Cost Market Holding as a Cost Market Holding as a Cost Market Holding as aValue % of Net Value % of Net Value % of Net

Rs. Rs. Asset Value Rs. Rs. Asset Value Rs. Rs. Asset Value

Lanka Orix Leasing Company PLC 40,000,000 39,143,293 2% 40,000,000 37,548,555 2% - - - 40,000,000 39,143,293 2% 40,000,000 37,548,555 2% - - -

As at 5.3 Treasury Bonds 2013 2012 1 April 2011

Rs. Rs. Rs.

Government treasury bonds - 216,386,211 - - 216,386,211 -

5.4 Net realised gains/(losses) on �nancial assets held for trading 2013 2012Rs. Rs.

Equity securitiesProceeds on Sale of Equity Shares 190,304,746 561,562,979 Average Cost of Equity Shares Sold (136,012,822) (183,094,382)

54,291,924 378,468,597

5.5 Net change in unrealised gains/(losses) on �nancial assets held for trading

Equity securities 74,614,238 (806,920,025) Debt securities - quoted debentures 1,607,560 (3,618,240)

76,221,798 (810,538,265)

6. FINANCIAL ASSETS - LOANS AND RECEIVABLES

Carrying Holding as a Carrying Holding as a Carrying Holding as aValue % of Net Value % of Net Value % of Net

6.1 Investments in commercial papers Rs. Asset Value Rs. Asset Value Rs. Asset Value

Asia Capital PLC 35,695,203 2% 20,117,913 1% - - Hayleys PLC 50,993,700 3% - - - - Peoples Leasing and Finance Company PLC 14,372,535 1% 55,607,240 3% - - Softlogic Holdings PLC 51,754,658 3% 84,319,819 5% - - LB Finance PLC - - 15,512,691 1% - -

152,816,096 9% 175,557,663 11% - - 6.2 Repurchase agreements

First Capital Treasuries Limited 79,993,020 5% - - - - National Savings Bank 13,141,390 1% - - - - Wealth Trust Securities - - 131,237,862 8% - - Natwealth Securities Limited - - - - 467,674,121 21%

93,134,410 6% 131,237,862 8% 467,674,121 21%6.3 Placements with other banks - �xed deposits

Union Bank of Colombo PLC 31,802,353 2% - - - - 31,802,353 2% - - - -

6.4 Trust Certi�cates

People's Leasing and Finance Company PLC - - - - 2,626,771 - Lanka Orix Finance Company PLC - - - - 30,092,670 1%

- - - 32,719,441 1%277,752,859 17% 306,795,525 19% 500,393,562 22%

2013 2012 As at 1 April 2011

2013 2012 As at 1 April 2011


46


As at 31 March 2013 Level 1 Level 2 Level 3 TotalRs. Rs. Rs. Rs.

Financial assets - Held for trading

Quoted equity securities 1,329,572,057 - - 1,329,572,057 Quoted debentures - 39,143,293 - 39,143,293

As at 31 March 2012


Quoted equity securities 1,122,512,394 - - 1,122,512,394 Quoted debentures - 37,548,555 - 37,548,555 Government treasury bonds 216,386,211 - - 216,386,211

As at8. ACCRUED INCOME AND OTHER RECEIVABLES 2013 2012 1 April 2011

Rs. Rs. Rs.

Dividend receivable 14,695,190 750,000 4,517,800 Receivable on unit creations 43,080,571 43,968,841 -

57,775,761 44,718,841 4,517,800

As at9. ACCRUED EXPENSES 2013 2012 1 April 2011

Rs. Rs. Rs.

Fund management & Registrar fee payable 7,293,636 8,229,178 9,270,324 Trustee fee payable 933,586 1,007,790 1,174,997 Audit fee 217,280 217,875 197,120 Unit Holder payable 382,294 - 88,308 Withholding tax payable on management fees - - 487,911 Debit tax payable - - 182,393 Dividend Payable 63,015,519 68,222,120 - CDS payable - 12,633,447 -

71,842,315 90,310,410 11,401,053

7. 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:


47


10. INVESTMENT INCOME 2013 2012Rs. Rs.

10.1 Dividend income on, 41,541,992 25,990,220

10.2 Interest incomeInterest on Treasury bill repurchase agreements (10.2.1) 21,957,949 25,655,532 Interest on �xed deposits 2,997,848 - Interest on treasury bonds (10.2.1) 895,877 1,125,632 Interest on commercial papers 29,337,712 7,955,476 Interest on debentures 4,680,000 3,087,184 Interest on savings 52,515 - Interest on trust certi�cates - 1,896,889

59,921,901 39,720,713

10.2.1

11. TAXATION 2013 2012Rs. Rs.

11.1 Tax expense for the year 1,787,255 - Over provision of tax with respect to previous year - (200,783)

1,787,255 (200,783)

11.2

Operating pro�t before tax 193,869,884 (409,872,352) Aggregate allowable expenses/ net gains (130,562,500) 431,969,734Allowable tax credits (41,541,992) (25,990,220) Total statutory income 21,765,392 (3,892,838)

Utilisation of previously unrecognised tax losses (3,892,838) - Taxable income 17,872,554 (3,892,838)

Income tax at the rate of 10% (2012 - 10%)Income tax expense reported in the Statement of Comprehensive Income 1,787,255 -

Carried forward unutilised tax losses 3,892,838 - Add: Incurred during the year - 3,892,838 Less: Tax losses claimed (3,892,838) - Brought forward unutilised tax losses - 3,892,838

12. DISTRIBUTION

Rs. Rs.1.0 63,015,519 63,015,519

A reconciliation between the tax expense and the product of taxable pro�t multiplied by the statutory tax rate isas follows:

Interest income on Treasury bill repurchase agreements and Treasury bills have been recognised gross of notional taxes.

Total dividend

27 March 2013

Date of declarationDividend per Unit No. of units in issue


48


13. CONTINGENCIES There are no material contingencies existing as at the reporting date that require adjustments to or disclosures in the Financial Statements.

14. POST BALANCE SHEET EVENTS There have been no material events occuring after the reporting date that require adjustments to or disclosure on the Financial Statements. 15. CAPITAL COMMITMENTS The Fund does not have signi�cant capital commitments at the reporting date. 16. UNITS IN ISSUE AND UNIT PRICE Units in issue and deemed to be issue as at 31 March 2013 is 64,672,992.6 (2012 - 70,064,531.9) and the creation and redemption price were Rs. 27.03 and Rs. 25.28 (2012 - Rs. 25.06 and Rs. 23.50) respectively. 17. RELATED PARTY TRANSACTIONS 17.1 The followng have been identi�ed as related parties of National Equity Fund as at 31 March 2013 in accordance with LKAS 24 - "Related Party Disclosures"

17. RELATED PARTY TRANSACTIONS (contd...) 17.2 Transactions between the National Equity Fund and the Directors of the Managing Company. "Mr. A N Fonseka, a Director of the Managing Company and Ms. R.D. Fonseka, spouse of Mr. A.N Fonseka hold Rs. 1,308,784/- and Rs. 872,513/- worth of units of National Equity Fund as at 31.03.2013 respectively. "

Mr T. De Silva, a Director of the Managing Company and Mrs.H.T.De Silva spouse of Mr.T.W.De Silva holds Rs. 174,447/-and Rs.436,147/- worth of units of National Equity Fund as at 31.03.2013 respectively.

National Asset Management Ltd.(Managing Company)

Deutsche Bank AG - Colombo Branch (Trustee)

DFCC Bank

Union Bank of Colombo PLC

Ennid Capital (Private) Limited

Fund has paid Rs. 32,509,726/- as management and registrar fees during the year. The fee payable as at 31 March 2013 is Rs. 7,293,636/-.

Fund has paid Rs. 3,878,504/- as trustee and custodial fees during the year. The fee payable as at 31 March 2013 is Rs. 933,585/-.

"DFCC holds 30% of equity of National Asset Management Limited. Value of the units held by DFCC Bank in National Equity Fund as at 31 March 2013 is Rs. 12,638,200/-. " "The value of Fixed deposit investments during the year with Union Bank of Colombo PLC is Rs.91,900,328/ .Interest received during the year is Rs. 2,145,659/-. Investments in �xed deposits as of 31 March 2013 is Rs. 30,95,164/-"

"Ennid Capital (Pvt) Limited holds 19% of equity of National Asset Management Limited."

Mr. Alexis Lovell

Mr. Anil AmarasuriyaMr. Jitendrakumar Warnakulasuriya(Consultant)

Mr. Avancka Herat

Nature of TransactionsNames of Directors / ManagersCompany / Fund

Mr. A. N. FonsekaMr. T. W. De Silva(Senior Vice President)

Growth Fund

49


50


Investment Strategy

NAMAL Growth Fund (NGF) is a growth fund which aims to provide long term capital appreciation by investing in equity. The Fund allocates a maximum of 90% to equity with the balance invested in �xed income securities.

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 allocated 91.1% in Equities, 4.1% in Commercial papers, 4.0% in Repos and the remainder in debentures by end March 2013. The main sector allocations in equity are Banks Finance &Insurance (27.4%), Beverage, Food & Tobacco (23.2%), Healthcare (17.6%) and Diversi�ed Holdings (17%).

Performance Review

The All Share Price Index increased by 5.82% whilst the 3 month Treasury bill yields declined by 1.74% for the year ending 31st March 2013. The Fund outperformed the ASPI by 5.64% with the Fund’s NAV increasing by 10.4%for the period under review.

The Fund value was Rs. 250.0 million as at 31 March 2013. Net assets attributable to unit holders increased by Rs. 27.1 million during the year, vs. a decrease of Rs. 70.0 million the prior year.

Return to Investors

The Fund has provided an annualized return of 16.65% to investors since inception in 1997. An investment of Rs. 100,000 at inception is worth Rs.1.1 million today (assuming re-investment of dividends).



51




-13.58%-20.60%

42.02%

6.31% -16.60% 51.45%

54.00%10.73% -19.44% 28.45%

Namal Growth FundASPI3 months T-BillBenchmark

*Note

1) Performance up to 31st March 2013 as published by the Unit Trust Association of Sri Lanka2) Benchmark returns consist of 90% return of ASPI and 10% return of 3M TB rate.2) All returns are adjusted for dividends3) Returns are not annualized4) Past performance should not be taken as a guide to future performance

27.44%

23.19%

17.61%

17.00%

4.21%

3.40%

2.75%

2.36%

2.02%

0.03%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00%


Beverage, Food and Tobacco

Healthcare

Diversified Holdings

Manufacturing

Plantations

Investment Trust

Hotels & Travels

Telecommunication

Chemicals and Pharmaceuticals

SECT

OR


Fig 2: Top Five Equity Holdings

The Company No of Shares Value (Rs) % of NAV Commercial Bank 332,500 37,572,500 15.1% Lion Brewery 100,000 33,300,000 13.4% Asiri Hospitals 2,200,000 25,080,000 10.1% CT Holdings 156,500 19,750,300 7.9% Central Finance 103,333 18,599,940 7.5%

Fig 4: Holding Period Return

-20.00% -15.00% -10.00% -5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Rate of Return Value of Investments (Rs.)

Cumulative Value of Investment Compounded Annual Growth Rate %

ADBT/CPEG/TW

INDEPENDENT AUDITORS’ REPORTTO THE UNIT HOLDERS OF NAMAL GROWTH FUND


We have audited the accompanying �nancial statements of NAMAL Growth Fund which comprise the statement of �nancial position as at 31 March 2013 and statement of comprehensive income, statement of changes in unitholder’s funds, statement of cash �ows, for the year then ended and a summary of signi�cant accounting policies and other explanatory notes.







Opinion




11 June 2013


52


53

NAMAL Growth FundSTATEMENT OF FINANCIAL POSITIONAs at 31 March 2013


ASSETS Rs. Rs. Rs.

Cash and cash equivalents 389,712 57,571 343,996 Financial assets - Held for trading 5 224,793,612 189,235,315 268,552,608 Financial assets - Loans and receivables 6 19,772,763 26,555,329 42,944,010 Accrued income and other receivables 8 1,565,218 504,533 7,323,154 Income tax recoverable 4,279,065 3,718,339 3,365,723 Total assets 250,800,370 220,071,087 322,529,491


LIABILITIESAccrued expenses 9 792,370 592,776 695,602 Total Liabilities (Excluding net assets attributable to Unit Holders) 792,370 592,776 695,602

UNIT HOLDERS' FUNDSNet assets attributable to Unit Holders 250,008,000 219,478,311 321,833,889

250,800,370 220,071,087 322,529,491

These Financial Statements were approved by the Management Company, and adopted by the Trustees.- -

11 June 2013Colombo

……………………………..……………………………..


………………………………..TrusteeDirector

Management Company



54

NAMAL Growth FundSTATEMENT OF COMPREHENSIVE INCOMEYear ended 31 March 2013



INVESTMENT INCOMEDividend income 10.1 5,732,365 4,948,239 Interest income 10.2 5,904,571 2,932,200Net realised (losses)/gains on �nancial assets held for trading 5.3 (3,819,169) 18,494,448Net change in unrealised gains/(losses) on �nancial assets held for trading 5.4 24,714,973 (90,081,011)Total investment income 32,532,740 (63,706,124)

EXPENSESManagement and Registrar fees (4,389,696) (4,936,037) Trustee fees (643,503) (754,844) Audit fee and expenses (233,288) (207,858) Professional charges (8,660) (6,440) Other expenses (66,940) (356,230) Total operating expenses (5,342,087) (6,261,409)

Net operating pro�t/(loss) 27,190,653 (69,967,533)

FINANCE COSTInterest expense (6,667) (25,388)

PROFIT/(LOSS) AFTER DEDUCTIONS AND BEFORE TAX 27,183,986 (69,992,921)

Income tax expense 11 (36,128) -

PROFIT/(LOSS) AFTER DISTRIBUTIONS AND TAX 27,147,858 (69,992,921)

INCREASE/(DECREASE) IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 27,147,858 (69,992,921)


55

NAMAL Growth FundSTATEMENT OF CHANGES IN UNITHOLDERS' FUNDSYear ended 31 March 2013


2013 2012Rs. Rs.

UNIT HOLDERS' FUNDS AT THE BEGINNING OF THE YEAR 219,478,311 321,833,889

Increase/ (decrease) in net assets attributable to Unit Holders 27,147,858 (69,992,921)



UNIT HOLDERS' FUNDS AT THE END OF THE YEAR 250,008,000 219,478,311


56

NAMAL Growth FundSTATEMENT OF CASH FLOWS Year ended 31 March 2013


2013 2012Rs. Rs.

Cash Flows from Operating ActivitiesDividend received 4,695,476 5,384,327 Interest received 5,904,988 2,401,666 Proceeds from sale of investments 248,713,814 159,324,724 Payments on purchase of investments (256,766,123) (128,690,753) Taxation paid (424,889) (86,639) Operating expenses paid (5,330,155) (6,364,235) Net Cash (used in)/ generated from Operating Activities (3,206,889) 31,969,090

Cash Flows from Financing ActivitiesAmount received on unit creations 10,284,888 6,814,012 Amount paid on unit redemptions (6,739,191) (39,044,139) Interest paid on borrowings (6,667) (25,388) Proceeds from borrowings 11,500,000 20,293,254 Repayment of borrowings (11,500,000) (20,293,254) Net Cash generated from/ (used in) Financing Activities 3,539,030 (32,255,515)

Net Increase in cash and cash equivalents 332,141 (286,425) Cash and cash equivalents at the beginning of the year 57,571 343,996 Cash and Cash Equivalents at the end of the year 389,712 57,571


57


NAMAL Growth Fund is an open ended unit trust fund approved by the Securities and Exchange Commission of Sri Lanka. The fund was launched on 19th August 2004.


The investment objective of the fund is to achieve medium to long term capital appreciation through prudently investing in a portfolio of quoted shares.








This is funds’ �rst �nancial statements prepared in accordance with (SLFRSs/LKASs) and SLFRS 1 – First time Adoption of Sri Lanka Financial Reporting Standards has been applied. Please refer Note 4 to the �nancial statements.







NAMAL Growth FundNOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 2013


58



After initial measurement, loans and receivables are subsequently measured at amortised cost using the e�ective interest rate, less allowance for impairment. The amortisation 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”.




• 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.










59



Interest income


Interest income from repurchase agreements is 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.




2.2.4 Income tax


2.2.5 Expenses



Trustee Fee - 0.25% of Net Asset Value of the Fund Registrar Fee - 0.25% of Net Asset Value of the Fund





60






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 reporting date that has signi�cant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next �nancial year.





(i) SLFRS 9 -Financial Instruments: Classi�cation and MeasurementSLFRS 9, as issued re�ects the �rst phase of work on replacement of LKAS 39 and applies to classi�cation and measurement of �nancial assets and liabilities. This standard will be e�ective for the �nancial periods beginning on or after 01 January 2015.





61



The fund’s principal �nancial assets comprise investments in trading securities, repurchase agreements, commercial papers, �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, �xed deposits and commercial papers 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 amortized cost.






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, Groups’ integrated risk management committee of the Manager, and ultimately the Trustees of the fund.




62

(c) Credit risk

Credit risk is the risk that the counterparty to the �nancial statement 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 AgencyMercantile Investments and Finance PLC BBB+ Ram RatingPeople’s Leasing and Finance PLC AA- Fitch RatingSoftlogic Finance PLC BBB- Ram RatingAsia Capital Plc* Unrated -


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: 2013 2012 Rs. 000 Rs. 000 NAMAL Growth Fund - Investments Conservative 9,758 1,536Balanced 10,015 25,019Growth 224,794 189,235

(d) Market risk



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 5, with all other variables held constant:



63


31 March 2013



31 March 2012




+10%-10%

22,284 22,284 18,736 18,736(22,284) (22,284) (18,736) (18,736)


Interest rate risk


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.




(e) Liquidity risk


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 approxi-mates fair value. The e�ect of discounting is not signi�cant as there is little di�erence between undiscounted and discounted cash �ows.


64



ASSETS

Equity investments 268,552,608 (268,552,608) - - Financial assets - Held for trading A - 268,552,608 - 268,552,608

Treasury bill repurchase agreements 42,935,893 (42,935,893) - - Financial assets - Loans and receivables A 42,944,010 - 42,944,010

CURRENT ASSETSAccrued income and other receivables A 7,331,271 (8,117) - 7,323,154 Income tax recoverable 3,365,723 - - 3,365,723 Cash and cash equivalents 343,996 - 343,996

11,040,990 (8,117) - 11,032,873

322,529,491 - - 322,529,491

UNIT HOLDERS' FUNDS AND LIABILITIESLiabilitiesAccrued expenses 695,602 - - 695,602

695,602 - - 695,602 Unit Holders' Funds BUnit capital 34,742,291 287,091,598 - 321,833,889 Net realised gains 194,880,620 (194,880,620) - - Net unrealised appreciation 67,175,554 (67,175,554) - - Income account 25,035,424 (25,035,424) - -

321,833,889 - - 321,833,889

322,529,491 - - 322,529,491


These �nancial statements, for the year ended 31 March 2013, are the �rst �nancial statements the fund has prepared in accordance with SLFRS. For periods up to and including the year ended 31 March 2012, the fund prepared its �nancial statements in accordance with Sri Lanka Accounting Standards (SLAS).

Accordingly, the fund has prepared �nancial statements which comply with SLFRS applicable for periods ending on or after 31 March 2013, together with the comparative period data as at and for the year ended 31 March 2012, as described in the accounting policies. In preparing these �nancial statements, the fund’s opening statement of �nancial position was prepared as at 1 April 2011, the fund's date of transition to SLFRS. This note explains the principal adjustments made by the fund in restating its SLASs statement of �nancial position as at 1 April 2011 and its previously published SLASs �nancial statements as at and for the year ended 31 March 2012.

4.1 Reconciliation of equity as at 01 April 2011 (date of transition to SLFRS's)


65


4. FIRST-TIME ADOPTION OF SLFRS's (Contd..)


Rs. Rs. Rs. Rs.ASSETSEquity investments 187,357,887 (187,357,887) - - Debenture - Quoted 1,819,088 (1,819,088) - - Financial assets - Held for trading A - 189,235,315 - 189,235,315

Fixed income investments- Commercial Papers 19,305,558 (19,305,558) Placements with Other Banks 5,500,000 (5,500,000) Treasury bill Repurchase Agreements 1,535,434 (1,535,434) - - Financial assets - Loans and receivables A 26,340,992 26,555,329 - 52,896,321

CURRENT ASSETSAccrued income and other receivables A 777,210 (272,677) - 504,533 Income Tax Recoverable 3,718,339 - - 3,718,339 Cash and cash equivalents 57,571 - - 57,571

4,553,120 (272,677) - 4,280,443

30,894,112 - - 246,412,079


592,776 - - 592,776 Unit Holders' Funds BUnit Capital 30,558,058 188,920,253 - 219,478,311 Net realised gains 188,264,251 (188,264,251) - - Net unrealised appreciation (22,794,027) 22,794,027 - - Income account 23,450,029 (23,450,029) - -

219,478,311 - - 219,478,311

220,071,087 - - 220,071,087



Gross income 7,880,439 - - 7,880,439 Net realised gains on �nancial assets held for trading C - 18,494,448 - 18,494,448Net change in unrealised losses on �nancial assets held for trading C - (90,081,011) - (90,081,011)Total investment income 7,880,439 (71,586,563) - (63,706,124)

Expenses (6,286,797) 25,388 - (6,261,409) Interest expense - (25,388) - (25,388)

Pro�t after deductions before tax 1,593,642 (71,586,563) - (69,992,921)

Taxation - - - - Pro�t after tax 1,593,642 (71,586,563) - (69,992,921)

Net realized gain 18,494,448 (18,494,448) - - Net unrealized depreciation in valuation of investments at market value (90,081,011) 90,081,011 - - Total earnings (69,992,921) - - (69,992,921)

EqualisationReceived on unit created B 5,891,605 (5,891,605) - - Deducted on unit redeemed B (34,070,031) 34,070,031 - - Net equalisation (28,178,426) 28,178,426 - -

Decrease in net assets attributable to Unit Holders (98,171,347) 28,178,426 - (69,992,921)


66


4. FIRST-TIME ADOPTION OF SLFRS's (Contd..)

Notes to the reconciliation of equity of the Fund as at 1 April 2011 and 31 March 2012 and total comprehensive income for the year ended 31 March 2012 A Financial Instruments

In the previous �nancial year, Treasury bill repurchase agreements, placements with other banks and �xed income investments (commercial papers) were accounted as investments and the accrued interest on such investments were accounted as accrued income and other receivables (2012 - Rs.214,337/-) (2011 - Rs.8,117/-). Under SLFRS, Loans and receivables which falls in the de�nition of LKAS 39 need to be disclosed separately at amortised cost using e�ective interest rate, accordingly have been reclassi�ed the interest receivable as Loans and receivables.

In the previous �nancial year, accrued interest of Rs.58,340/- on quoted debentures were accounted and disclosed as accrued income and other receivables. Following the adoption of SLFRS, accrued interest on such was classi�ed and recorded as part of the �nancial asset to record at the fair value. As per SLFRS equity investments in quoted shares and quoted debentures, were classi�ed as held for trading. B Unit Holders' Funds

In the previous �nancial year, realised gains and unrealised appreciation/(depreciation) on quoted equity securities and debentures have been disclosed and accounted in separate accounts in the balance sheet in accordance with Recommended Accounting Practice for Open Ended Unit Trust issued by Institute of Chartered Accountants of Sri Lanka (ICASL). Since Recommended Accounting Practice for unit trusts issued would be withdrawn and ICASL has requested to adopt SLFRS for unit trust, the realised gains and unrealised appreciation/(depreciation) is shown in Unit Holders' Funds.

In the previous �nancial year, income equalisation on creation and redemption of units comprising of income after the initial o�er price have been disclosed in the accounts and shown separately in the statement of total return and recorded to income account in accordance with Recommended Accounting Practice for Open Ended Unit Trust issued by ICASL. Since Recommended Accounting Practice for unit trusts issued would be withdrawn and ICASL has requested to adopt SLFRS for unit trust, the consideration paid and received on unit creation are recorded to Unit Holders' funds.

C Realised gain/(loss) and unrealised appreciation/(depreciation) on �nancial assets held for trading In the previous �nancial year, realised gain/(loss) and unrealised appreciation/(depreciation) on marketable securities were classi�ed separately in the statement of total return. Upon the adoption of SLFRS, such is classi�ed as part of the investment income, in the statement of comprehensive income as 'realised gain/(loss) on �nancial assets held for trading and net change in unrealised gain/(loss) on �nancial assets held for trading'.


67


As at 5. FINANCIAL ASSETS - HELD FOR TRADING 2013 2012 1 April 2011

Rs. Rs. Rs.Quoted equity securities (5.1) 222,836,447 187,357,887 268,552,608Debt securities - quoted debentures (5.2) 1,957,165 1,877,428 -

224,793,612 189,235,315 268,552,6085.1 Quoted equity securities

Cost as at 31 March 203,696,677 192,852,711 184,147,333 Appreciation/(depreciation) of market value quoted equity securities 19,139,770 (5,494,824) 84,405,275 Market Value as at 31 March 222,836,447 187,357,887 268,552,608

2013 2012 As at 1 April 20115.1.1 Company Number of Market Holdings Number of Market Holdings Number of Market Holdings

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

Rs. Value Rs. Value Rs. ValueBanks, Finance and InsuranceCentral Finance Company PLC 103,333 18,599,940 7% 103,333 17,700,943 8% 20,000 25,474,000 8%Commercial Bank of Ceylon PLC - Non Voting 29,920 2,899,248 1% 148,770 11,901,600 5% 68,700 11,376,720 4%Commercial Bank of Ceylon PLC -Voting 332,500 37,572,500 15% - - - - - - People's Leasing & Finance Company PLC (previously named as Peoples' Leasing Company PLC) 158,100 2,071,110 1% 158,100 1,833,960 1% - - -

Hatton National Bank PLC -Non voting - - - 143,700 13,579,650 6% 95,800 20,434,140 6%Sampath Bank PLC - - - 10,314 1,854,457 1% 10,082 2,906,640 1%Union Bank of Colombo PLC - - - 1,300 22,750 0% 1,300 46,540 0%

61,142,798 24% 46,893,360 21% 60,238,040 19%

Beverages, Food and TobaccoCeylon Tobacco Company PLC - - - - - - 67,700 24,236,600 7%Distilleries Company of Sri Lanka PLC 100,000 16,650,000 7% 100,000 14,500,000 7% 100,000 18,000,000 6%Lion Brewery Ceylon PLC 100,000 33,300,000 13% 100,000 19,950,000 9% - - - Renuka Agri Foods PLC 420,000 1,722,000 1% 300,000 1,800,000 1% - - -

51,672,000 21% 36,250,000 17% 42,236,600 12%

Chemicals and Pharmaceuticals CIC Holdings PLC 1,000 61,000 0% 1,000 95,600 0% 75,000 11,625,000 4%

61,000 0% 95,600 0% 11,625,000 4%

Diversi�ed HoldingsCT Holdings PLC (Previously named as Ceylon Theaters PLC) 156,500 19,750,300 8% 159,500 23,940,950 11% 184,500 36,900,000 11%Aitken Spence PLC - - - - - - 82,500 13,389,750 4%John Keells Holdings PLC - - - - - - 63,800 18,221,280 6%Hayleys PLC 60,700 18,131,090 7% 60,700 21,852,000 10% 40,700 15,551,470 5%

37,881,390 15% 45,792,950 21% 84,062,500 26%

Health Care Ceylon Hospitals PLC (Durdans) Voting 100,763 10,076,300 4% 100,763 7,305,318 3% 100,763 10,076,300 3%Ceylon Hospitals PLC (Durdans) - Non Voting 54,360 4,082,436 2% 54,360 3,011,544 1% 54,360 4,354,234 1%Asiri Hospitals PLC 2,200,000 25,080,000 10% 2,200,000 16,720,000 8% - - -

39,238,736 16% 27,036,862 12% 14,430,534 4%

Hotels and TravelsAitken Spence Hotel Holdings PLC - - - - - - 182,385 17,873,730 5%Hotel Services (Ceylon) PLC 392,700 5,262,180 2% 392,700 6,832,980 3% 392,700 9,071,370 3%Free Lanka Capital Holdings - - - 22,600 45,200 0% - - -

5,262,180 2% 6,878,180 3% 26,945,100 8%

ManufacturingACL Cables PLC 121,700 7,971,350 3% 121,700 7,618,420 3% 121,700 11,439,800 4%Tokyo Cement Company Lank PLC 80,000 1,400,000 1% 80,000 2,160,000 1% - - - ACME Printing & Packaging PLC - - - - - - 72 1,534 0%

9,371,350 4% 9,778,420 4% 11,441,334 4%

PlantationKegalle Plantations PLC 50,000 5,600,000 2% 50,000 5,150,000 2% 50,000 10,375,000 3%Horana Plantations PLC 75,000 1,987,500 1% 75,000 1,882,500 1% 75,000 5,422,500 2%

7,587,500 3% 7,032,500 3% 15,797,500 5%Investment TrustsRenuka Holdings PLC 197,403 6,119,493 2% 197,403 7,600,015 3% - - -

6,119,493 2% 7,600,015 3% - -

Power and EnergyLaugfs Gas PLC - - - - - - 40,000 1,776,000 1%

- - - - 1,776,000 1%

TelecommunicationDialog Axiata PLC 500,000 4,500,000 2% - - - - - -

4,500,000 2% - - - -

Total value of quoted equity securities in (At Market Value) 222,836,447 89% 187,357,887 85% 268,552,608 83%


68


5. FINANCIAL ASSETS - HELD FOR TRADING (contd..)

5.2 Quoted debentures

Cost Market Holding as a Cost Market Holding as a Cost Market Holding as aValue % of Net Value % of Net Value % of Net

Rs. Rs. Asset Value Rs. Rs. Asset Value Rs. Rs. Asset Value

Lanka Orix Leasing Company PLC 2,000,000 1,957,165 1% 2,000,000 1,877,428 1% - - - 2,000,000 1,957,165 1% 2,000,000 1,877,428 1% - - -

5.3 Net realised (losses)/gains on �nancial assets held for trading 2013 2012Rs. Rs.

Equity securitiesProceeds on sale of equity shares 25,640,281 83,420,722 Average cost of equity shares sold (29,459,450) (64,926,274)

(3,819,169) 18,494,448

5.4 Net change in unrealised gains/(losses) on �nancial assets held for trading

Equity securities 24,634,595 (89,900,099) Debt securities - quoted debentures 80,378 (180,912)

24,714,973 (90,081,011)


Carrying Holding as a Carrying Holding as a Carrying Holding as aValue % of Net Value % of Net Value % of Net

Rs. Asset Value Rs. Asset Value Rs. Asset Value 6.1 Investments in commercial papers

Asia Capital PLC 10,015,096 4% 3,034,804 1% - - Peoples Leasing and Finance Company PLC - - 10,919,240 5% - - Softlogic Finance PLC - - 3,498,262 2% - - Mercantile Investment and Finance PLC - - 2,021,346 1% - -

10,015,096 4% 19,473,652 9% - - 6.2 Repurchase agreements

First Capital Treasuries Limited 5,354,846 2% - - - - NSB Asset Management Limited 4,402,821 2% - - - - Wealth Trust Securities Limited - - 1,536,150 1% 42,944,010 13%

9,757,667 4% 1,536,150 1% 42,944,010 13%6.3 Placements with other banks - �xed deposits

Union Bank of Colombo PLC - - 3,025,048 1% - - DFCC Bank PLC - - 2,520,479 1% - -

- - 5,545,527 2% - -

19,772,763 8% 26,555,329 12% 42,944,010 13%

2013 2012 As at 1 April 2011

2013 2012 As at 1 April 2011


69



Financial assets - held for trading

Quoted equity investments 222,836,447 - - 222,836,447 Quoted debentures - 1,957,165 - 1,957,165

As at 31 March 2012

Financial assets - held for trading

Quoted equity investments 187,357,887 - - 187,357,887 Quoted debentures - 1,877,428 - 1,877,428


Rs. Rs. Rs.

Dividend receivable 1,411,889 375,000 811,088 Receivable on unit creations 153,329 129,533 262,066 Share application - - 6,250,000

1,565,218 504,533 7,323,154


Rs. Rs. Rs.

Fund management and registrar fee payable 370,681 365,380 445,280 Trustee fee payable 59,307 52,197 66,959 Audit fee 174,720 175,199 158,704 Payable on unit redemptions 187,662 - - Other payable - - 24,659

792,370 592,776 695,602

7. 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:


70



10.1 Dividend income 5,732,365 4,948,239

10.2 Interest incomeInterest on Treasury bill repurchase agreements (10.2.1) 1,719,651 2,094,304 Interest on �xed deposits 41,622 45,527 Interest on commercial papers 3,877,990 638,506 Interest on debentures 234,019 153,863 Interest on savings account 31,289 -

5,904,571 2,932,200

10.2.1 Interest income on Treasury bill repurchase agreements has been recognised gross of notional taxes.


11.1 Tax expense for the year 36,128 - 36,128 -

11.2

Operating pro�t before tax 27,190,653 (69,967,533) Aggregate allowable expenses/ net gains (20,902,471) 71,561,175Allowable tax credits (5,732,365) (4,948,239) Total statutory income 555,817 (3,354,597)

Utilisation of previously unrecognised tax losses (194,536) - Taxable income 361,281 (3,354,597)

Income tax at the rate of 10% (2012 - 10%)Income tax expense reported in the Statement of Comprehensive Income 36,128 -

Carried forward unutilised tax losses 5,670,904 2,316,308 Add: Incurred during the year - 3,354,596 Less: Tax losses claimed (194,536) - Brought forward unutilised tax losses 5,476,368 5,670,904

A reconciliation between the tax expense and the product of taxable pro�t multiplied by the statutory tax rate is asfollows:


71


12. DISTRIBUTION The fund has not announced income distribution for the year ended 31 March 2013. 13. CONTINGENCIES There are no material contingencies existing as at the reporting date that require adjustments to or disclosures in the Financial Statements.

14. POST BALANCE SHEET EVENTS There have been no material events occuring after the reporting date that require adjustments to or disclosure on the Financial Statements.

15. CAPITAL COMMITMENTS The Fund does not have signi�cant capital commitments at the reporting date. 16. UNITS IN ISSUE AND UNIT PRICE Units in issue and deemed to be issue as at 31 March 2013 is 2,773,776.0 (2012 - 2,694,795.2) and the creation and redemption price were Rs. 96.28 and Rs. 89.87 (2012 - Rs. 86.34 and Rs. 80.67) respectively. 17. RELATED PARTY TRANSACTIONS 17.1 The followng have been identi�ed as related parties of NAMAL Growth Fund as at 31 March 2013 in accordance with LKAS 24 - "Related Party Disclosures"


Deutsche Bank(Trustee)

DFCC Bank



Fund has paid Rs. 4,384,395/- as management & registrar fees during the year. The fee payable as at 31 March 2013 is Rs. 370,681/-.

"Fund has paid Rs. 696,393/- as trustee fees during the year. The fee payable as at 31 March 2013 is Rs. 59,307/-."

"DFCC holds 30% of equity of National Asset Management Limited. Value of the units held by DFCC Bank in NAMAL Growth Fund as at 31 March 2013 is Rs. 26,510,854/-."

"Union Bank of Colombo PLC holds 51% of equity of National Asset Management Limited."

Ennid Capital (Private) Limited holds 19% of equity of National Asset Management Limited.


Mr. Alexis Lovell


Mr. Avancka Herat


Income Fund

72


73


Investment Strategy

NAMAL Income Fund (NIF) obtains higher yields by investing in short to medium term government securities, high grade corporate debt, asset back securities and bank deposits. Investments are subject to a detailed analysis to manage duration, ensure credit quality and investor protection. The Fund has a signi�cant tax advantage for corporate investors.

Asset Allocation

The Fund had 51% invested in Government Securities and 49% in Corporate Debt at end of March 2013. The majority of investments were less than three months to maturity.

Performance Review

The Fund generated a tax-free return of 9.67% for the year ended 31st March 2013 which corresponds to a tax equivalent yield of 13.43% for corporate investors, who are liable to pay tax rate of 28%.

The Fund paid dividends of Rs 0.75 per unit for FY2013 bringing the cumulative dividends paid to Rs 17.28 since inception.



74

Fund Performance as at 31st March 20132


12 months 24 months 36 months9.67% 16.61% 25.50%NAMAL Income Fund1

*Note

Fig 2: Asset Allocation Repo1%

Commercial Papers32%

Debentures2%

Treasury Bill50%

Fixed Deposits15%

Fig 3: Maturity Pro�le

More Than 1 Year4%9 Months To 1 Year

14%

3 - 6 Months12%

Less Than 3 Months70%

1) Performance up to 31st March 2013 as published by the Unit Trust Association of Sri Lanka. Fund returns are adjusted for dividends2) Returns are not annualized


75

ADBT/CPEG/DM

INDEPENDENT AUDITORS’ REPORTTO THE UNIT HOLDERS OF NAMAL INCOME FUND


We have audited the accompanying �nancial statements of NAMAL Income Fund which comprise the statement of �nancial position as at 31 March 2013 and statement of comprehensive income, statement of changes in unitholder’s funds, statement of cash �ows, for the year then ended and a summary of signi�cant accounting policies and other explanatory notes. The �nancial statements of the Fund as at 31 March 2012 and for the year then ended were audited by another auditor whose report dated 13 June 2012 expressed an unquali�ed opinion on such �nancial 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, implementing 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 accounting estimates that are reasonable in the circumstances.





Opinion




14 June 2013Colombo


76

NAMAL Income FundSTATEMENT OF FINANCIAL POSITIONYear ended 31 March 2013


ASSETS Rs. Rs. Rs.

Cash and cash equivalents 795,726 82,856 234,775 Financial assets - Held for trading 5 183,467,618 37,242,875 31,545,524 Financial assets - Loans and receivable 6 171,230,156 258,978,839 266,746,231 Accrued income and other receivables 8 7,453 7,399 69 Income tax recoverable 5,827,191 4,374,848 3,404,637 Total assets 361,328,144 300,686,817 301,931,236


LIABILITIESAccrued expenses 9 763,956 734,554 691,884 Total liabilities (Excluding net assets attributable to Unit Holders) 763,956 734,554 691,884

UNIT HOLDERS' FUNDSNet assets attributable to Unit Holders 360,564,188 299,952,263 301,239,352

361,328,144 300,686,817 301,931,236

- (0) - These Financial Statements were approved by the Management Company, and adopted by the Trustees. 0

-

14 June 2013Colombo


……………………………..……………………………..




77

NAMAL Income FundSTATEMENT OF COMPREHENSIVE INCOMEYear ended 31 March 2013



INVESTMENT INCOMEInterest income 10.1 44,226,454 34,174,988Net change in unrealised gains/(losses) on �nancial assests held for trading 5.4 294,643 (3,330,289)Total investment income 44,521,097 30,844,699

EXPENSESManagement and Registrar fees (5,585,866) (4,693,957) Trustee and Custodian fees (425,600) (419,145) Audit fee and expenses (294,999) (243,877) Other expenses (92,016) (472,003) Total operating expenses (6,398,481) (5,828,982)

Net operating pro�t 38,122,616 25,015,717

FINANCE COSTInterest expense (13,696) - Distribution to Unit Holders 12 (25,747,255) (19,337,700)

PROFIT AFTER DEDUCTIONS AND BEFORE TAX 12,361,665 5,678,017

Income tax expense 11 (3,781,421) (2,834,600)

PROFIT AFTER DISTRIBUTIONS AND TAX 8,580,244 2,843,417

INCREASE IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 8,580,244 2,843,417


78

NAMAL Income FundSTATEMENT OF CHANGES IN UNITHOLDERS' FUNDSYear ended 31 March 2013


2013 2012Rs. Rs.

UNIT HOLDERS' FUNDS AT THE BEGINNING OF THE YEAR 299,952,263 301,239,352

Increase in net assets attributable to unit holders 8,580,244 2,843,417



UNIT HOLDERS' FUNDS AT THE END OF THE YEAR 360,564,188 299,952,263


79

NAMAL Income FundSTATEMENT OF CASH FLOWSYear ended 31 March 2013


2013 2012Rs. Rs.

Cash Flows from Operating ActivitiesInterest received 38,587,293 31,822,521 Proceeds from sale of investments 1,374,138,750 228,868,998 Payments on purchase of investments (1,428,855,051) (227,800,259) Taxation paid (3,059,720) (3,781,262) Operating expenses paid (6,369,079) (5,786,312) Net Cash (used in)/ generated from Operating Activities (25,557,807) 23,323,687

Cash Flows from Financing ActivitiesIncome distribution (25,747,255) (19,337,700) Amount received on unit creations 110,220,835 5,161,013 Amount paid on unit redemptions (58,189,207) (9,298,919) Interest paid on borrowings (13,696) -

Proceeds from borrowings 35,800,000 - Repayment of borrowings (35,800,000) - Net Cash generated from/ (used in) Financing Activities 26,270,677 (23,475,606)

Net increase in cash and cash equivalents 712,870 (151,919) Cash and cash equivalents at the beginning of the year 82,856 234,775 Cash and cash equivalents at the end of the year 795,726 82,856


80


NAMAL Income Fund is an open ended unit trust fund approved by the Securities and Exchange Commission of Sri Lanka. The fund was launched in the month of December 1997.


The investment objective of the fund is to provide investors with a semi-annual income at low level of risk through prudently investing in �xed income securities.








This is funds’ �rst �nancial statements prepared in accordance with (SLFRSs/LKASs) and SLFRS 1 – First time Adoption of Sri Lanka Financial Reporting Standards has been applied. Please refer Note 4 to the �nancial statements.







NAMAL Income FundNOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 2013


81



After initial measurement, loans and receivables are subsequently measured at amortised cost using the e�ective interest rate, less allowance for impairment. The amortisation 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”.




• 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 is recorded in “investment income’ according to the terms of the contract. Included in this classi�cation are Treasury bills, Treasury bonds and quoted debentures.


The fair value for �nancial instruments traded in active markets at the reporting date is based on their quotedmarket price or dealer price quotations (bid price for long positions and ask price for short positions), withoutany deduction for transaction costs.








82



Interest income


Interest income from repurchase agreements, treasury bills and treasury bonds are recognised at gross of notional tax credit or withhold-ing tax.




2.2.4 Income tax


2.2.5 Expenses


Management Fee - 1.25% of Net Asset Value of the Fund Trustee Fee - A �at fee of Rs. 200,000 per annum Registrar Fee - 0.25% of Net Asset Value of the Fund








83



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 reporting date that has signi�cant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next �nancial year.





(i) SLFRS 9 -Financial Instruments: Classi�cation and Measurement

SLFRS 9, as issued re�ects the �rst phase of work on replacement of LKAS 39 and applies to classi�cation and measurement of �nancial assets and liabilities.

This standard will be e�ective for the �nancial periods beginning on or after 01 January 2015.

(ii) SLFRS 13 -Fair Value Measurement

SLFRS 13 establishes a single source of guidance under SLFRS for all fair value measurements. SLFRS 13 provides guidance on all fair value measurements under SLFRS.




The fund’s principal �nancial assets comprise investments in treasury bills, repurchase agreements commercial papers, treasury bonds, quoted debentures 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.



84

In accordance with LKAS 39 Financial Instruments: Recognition and Measurement, the fund’s bank balance, commercial papers, repurchase agreements, �xed deposits and trust certi�cates are classi�ed as ‘loans and receivables’ and are valued at amortised cost. The fund’s quoted debentures, treasury bills and treasury bonds are classi�ed as “held for trading” and valued at fair value.

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.



Financial instruments of the fund comprise investments in commercial papers, �xed deposits, quoted debentures, treasury bills and repurchase agreements 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 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.


(c) Credit risk


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 AgencyHayleys PLC AA - Ram RatingMercantile Investments and Finance PLC BBB+ Ram RatingPeople’s Leasing and Finance PLC AA- Fitch RatingSoftlogic Holdings PLC A- Fitch RatingLB Finance PLC A- Ram RatingAsia Capital PLC* Unrated -




85


The fund’s maximum exposure to credit risk can be analysed as follows: 2013 Rs. 000 NAMAL Income Fund - Investments Conservative - Treasury bills & Repurchase agreements 180,641Balanced - Commercial papers & �xed deposits 168,185Growth - Quoted debentures 5,872

(d) Market risk




Price risk

Price risk is the risk that the fair values of the fund’s investment in trading securities in �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.

NAMAL Income Fund is not authorized to invest in equities and is not subject to price risk.

Interest rate risk


The fund’s exposure to interest rate risk primarily arises from changes in interest rates applicable to quoted debentures, Treasury bills and Treasury bonds since they are valued at fair value and the balance held at the bank.

Foreign exchange riskForeign exchange risk is the risk that value of a �nancial instrument will �uctuate as a result of changes in foreign exchange rates.




86

(e) Liquidity risk






87



ASSETS

Fixed income investments 238,844,414 (238,844,414) - - Financial assets - Held for trading A - 31,545,525 - 31,545,525

Financial assets - Loans and Receivables - 267,346,758 (600,528) 266,746,230 A - 267,346,758 (600,528) 266,746,230

CURRENT ASSETSAccrued income A 4,626,356 (4,626,356) - - Other receivables 69 - - 69 Income tax recoverable 3,404,637 - - 3,404,637 Repurchase agreements A 55,421,513 (55,421,513) - Cash and cash equivalants 234,775 - - 234,775

63,687,350 (60,047,869) - 3,639,481

302,531,764 - (600,528) 301,931,236


691,884 - - 691,884 Unit Holders' Funds BUnit capital 277,896,185 23,943,695 - 301,839,880 Net realised gains 231,349 (231,349) - - Net unrealised appreciation 8,525,811 (8,525,811) (600,528) (600,528) Income account 15,186,535 (15,186,535) - -

301,839,880 - (600,528) 301,239,352

302,531,764 - (600,528) 301,931,236


These �nancial statements, for the year ended 31 March 2013, are the �rst �nancial statements the fund has prepared in accordance with SLFRS. For periods up to and including the year ended 31 March 2012, the fund prepared its �nancial statements in accordance with Sri Lanka Accounting Standards (SLAS).

Accordingly, the fund has prepared �nancial statements which comply with SLFRS applicable for periods ending on or after 31 March 2013, together with the comparative period data as at and for the year ended 31 March 2012, as described in the accounting policies. In preparing these �nancial statements, the fund’s opening statement of �nancial position was prepared as at 1 April 2011, the fund's date of transition to SLFRS. This note explains the principal adjustments made by the fund in restating its SLASs statement of �nancial position as at 1 April 2011 and its previously published SLASs �nancial statements as at and for the year ended 31 March 2012.



88




Rs. Rs. Rs. Rs.ASSETS

Fixed income investments 94,149,666 (94,149,666) - - Financial assets - Held for trading A - 37,242,875 - 37,242,875

Financial assets - Loans and receivables - 258,228,201 750,638 258,978,839 A - 258,228,201 750,638 258,978,839

CURRENT ASSETSAccrued income A 2,273,889 (2,273,889) - - Other receivable 7,399 - - 7,399 Income tax recoverable 4,374,848 - - 4,374,848 Repurchase agreements A 101,523,996 (101,523,996) - - Commercial papers A 67,923,525 (67,923,525) - - Fixed deposits A 29,600,000 (29,600,000) - - Cash and cash equivalents 82,856 - - 82,856

205,786,513 (201,321,410) - 4,465,103

299,936,179 - 750,638 300,686,817


734,554 - - 734,554 Unit Holders' Funds BUnit capital 274,194,812 25,006,813 - 299,201,625 Net realised gains 228,280 (228,280) - Net unrealised appreciation 3,792,893 (3,792,893) 750,638 750,638 Income account 20,985,640 (20,985,640) - -

299,201,625 - 750,638 299,952,263

299,936,179 - 750,638 300,686,817



Gross income 34,174,988 - - 34,174,988 Net change in unrealised losses on �nancial assets held for trading A/B/C - (4,681,455) 1,351,166 (3,330,289)Total investment income 34,174,988 (4,681,455) 1,351,166 30,844,699

Expenses (5,828,982) - - (5,828,982)Distribution to Unit Holders (19,337,700) - - (19,337,700)

Pro�t after deductions before tax 9,008,306 (4,681,455) 1,351,166 5,678,017

Taxation (2,834,600) - - (2,834,600) Pro�t after tax 6,173,706 (4,681,455) 1,351,166 2,843,417

Net unrealised depreciation on valuation of investments at market value B (4,732,918) 4,732,918 - - Net realised loss in creation and cancellation B (3,069) 3,069 - - Increase in net assets attributable to Unit Holders 1,437,719 54,532 1,351,166 2,843,417

EqualisationReceived on units created B 260,453 (260,453) - - Deducted on units redeemed B (635,053) 635,053 - - Net equalisation (374,600) 374,600 - -

Increase in net assets attributable to Unit Holders 1,063,119 429,132 1,351,166 2,843,417


89



Notes to the reconciliation of equity of the Fund as at 1 April 2011 and 31 March 2012 and total comprehensive income for the year ended 31 March 2012 A Financial instruments

In the previous �nancial year, Treasury bill repurchase agreements, commercial papers and �xed deposits were accounted as investments under current assets and the accrued interest on such investments were accounted as accrued income (2012 - Rs. 909,580/-) (2011 - Rs. 10,477/-). Under SLFRS, Loans and receivables which falls in the de�nition of LKAS 39 need to be disclosed separately at amortised cost using e�ective interest rate, accordingly have been reclassi�ed the interest receivable as Loans and receivables. In the previous �nancial year, accrued interest of Rs. 187,274 /- (2011 - Rs. 11,982/-) on quoted debentures were accounted and disclosed as accrued income. Following the adoption of SLFRS quoted debentures were classi�ed as held for trading and accrued interest on such was classi�ed and recorded as part of the �nancial asset to record at the fair value. As of 1 April 2011 and 31 March 2012, investment in trust certi�cates (disclosed as �xed income investments) which were held for more than one year was recognised at the market value. Up on the adoption SLFRS trust certi�cate investments which falls in to the de�nition of Loans and receivables, was recognised at amortised cost, hence a remeasurement adjustment of Rs. 600,528/- and Rs. 750,638/- was incorporated respectively. In the previous �nancial year, Treasury bonds were classi�ed as �xed income investments and recorded at market value. The accrued interest was recorded and accounted separately as accrued income. Upon the adoption of SLFRS Treasury bonds were classi�ed as held for trading and accrued interest (2012 - Rs. 946,210/- and 2011 - Rs. 940,580/-) on such was classi�ed and recorded as part of the �nancial asset to record at the fair value.

B Unit Holders' funds

In the previous �nancial year, unrealised appreciation/(depreciation) Treasury bonds and quoted debentures have been disclosed and accounted in separate accounts in the balance sheet in accordance with Recommended Accounting Practice for Open Ended Unit Trust issued by Institute of Chartered Accountants of Sri Lanka (ICASL). Since Recommended Accounting Practice for unit trusts issued would be withdrawn and ICASL has requested to adopt SLFRS for unit trust, unrealised appreciation/(depreciation) is shown in Unit Holders' funds.

In the previous �nancial year, income equalisation on creation and redemption of units comprising of income after the initial o�er price have been disclosed in the accounts and shown separately in the statement of total return and recorded to income account in accordance with Recommended Accounting Practice for Open Ended Unit Trust issued by ICASL. Since Recommended Accounting Practice for unit trusts issued would be withdrawn and ICASL has requested to adopt SLFRS for unit trust, the consideration paid and received on unit creation are recorded to Unit Holders' funds.

C Unrealised appreciation/(depreciation) on �nancial assets held for trading

In the previous �nancial year, unrealised appreciation/(depreciation) on marketable securities were classi�ed separately in the statement of total return. Upon the adoption of SLFRS, such is classi�ed as part of the investment income, in the statement of comprehensive income as 'net change in unrealised gain/(loss) on �nancial assets held for trading'.


90

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92




Quoted debentures - 5,871,661 - 5,871,661 Governement Treasury bills 177,595,957 - - 177,595,957

As at 31 March 2012


Quoted debentures - 6,351,568 - 6,351,568 Government Treasury bonds 30,891,307 - 30,891,307


Rs. Rs. Rs.

Receivable on unit creations 7,453 7,399 69 7,453 7,399 69


Rs. Rs. Rs.

Fund manager and Registrar fee payable 455,598 425,784 367,196 Trustee and Custodian fee payable 36,147 36,146 32,274 Audit fee 224,000 224,613 224,000 Withholding tax payable on management fees - - 19,326 Debit tax payable - - 1,077 Other payable 48,211 48,011 48,011

763,956 734,554 691,884

7. 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:






93



10.1 Interest income on,Interest on Treasury bill repurchase agreements (10.2.1) 10,121,868 8,575,955 Interest on Treasury bills (10.2.1) 11,398,618 - Interest on Treasury bonds (10.2.1) 219,954 6,943,729 Interest on �xed deposits 4,542,007 244,809 Interest on trust certi�cates 2,341,124 16,818,295 Interest on commercial papers 14,827,620 1,654,204 Interest on debentures 746,235 562,750 Interest on saving accounts 29,028 - Amortisation of Treasury bond - (624,754)

44,226,454 34,174,988

10.2.1


Tax expense for the year 3,781,421 2,834,600 3,781,421 2,834,600

12. DISTRIBUTION

Rs. Rs.

0.45 36,136,197.80 16,261,289

0.3 31,619,886.80 9,485,966

Interest income on Treasury bill repurchase agreements, Treasury bills and Treasury bonds have been recognised gross of notional taxes.

11 February 2013

Total dividendDividend per Unit

7 August 2012

Date of declaration No. of units in issue

13. CONTINGENCIES There are no material contingencies existing as at the reporting date that require adjustments to or disclosures in the Financial Statements. 14. POST BALANCE SHEET EVENTS There have been no material events occuring after the reporting date that require adjustments to or disclosure on the Financial Statements. 15. CAPITAL COMMITMENTS The fund does not have signi�cant capital commitments at the reporting date.


94


16. UNITS IN ISSUE AND UNIT PRICE Units in issue and deemed to be issue as at 31 March 2013 is 31,880,742.4 (2012 - 27,391,530.9). The creation price was Rs.11.23 (2012 - Rs. 10.92) per unit and cancellation price was Rs. 11.12 (2012 - Rs. 10.81) per unit after deducting an exit fee of Rs. 0.11 (2012 - Rs. 0.11) as at 31 March 2013.

17. RELATED PARTY TRANSACTIONS

17.1 The followng have been identi�ed as related parties of National Equity Fund as at 31 March 2013 in accordance with LKAS 24 - "Related Party Disclosures"



DFCC Bank



"Fund has paid Rs. 5,556,052/- as management & registrar fees during the year. The fee payable as at 31 March 2013 is Rs.455,598/-

"Fund has paid Rs. 425,599/- as trustee & custodian fees during the year. The fee payable as at 31 March 2013 is Rs.36,147/-

"DFCC holds 30% of equity of National Asset Management Limited. Value of the units held by DFCC Bank in NAMAL Income Fund as at 31 March 2013 is Rs. 187,655,487/-The fund invested in Fixed deposit with DFCC Bank amounting to Rs. 14,800,000/- during the year. Interest received during the year is Rs.289,390/-"

"Union Bank of Colombo PLC holds 51% of equity of National Asset Management Limited.The value of �xed deposit investments during the year with Union Bank of Colombo PLC is Rs. 96,066,885/-. Interest received during the is Rs.2,723,527/-. Investments in �xed deposits as at 31 March 2013 is Rs.52,266,885/-. Interest receivable as at that date is Rs. 1,439,129/-"

Ennid Capital (Private) Limited holds 19% of equity of National Asset Management Limited.

Mr. Alexis Lovell


Mr. Avancka Herat



Money Market Fund

95


96


Investment Strategy

NAMAL Money Market Fund (NMMF) invests exclusively in short term government securities. The Fund provides a highly liquid cash management solution for investors. The Fund has a signi�cant tax advantage for corporate investors.

Asset Allocation

The Fund had 73.5% invested in Treasury Bills and 26.5% in Repos at end March 2013. All investments were less than one year to maturity.

Performance Review

The Fund generated a tax-free return of 9.59% for the year ended 31st March 2013 which corresponds to a tax equivalent yield of 13.32% for corporate investors, who are liable to a tax rate of 28%.

The Fund paid dividends of Rs 0.88 per unit for FY2013 bringing the cumulative dividends paid to Rs 8.74 since inception.



97




9.50%9.51%

9.59%9.55%

NAMAL Money Market Fund1

Overnight Repo2

*Note

1) Performance up to 31st March 2013 as published by the Unit Trust Association of Sri Lanka. Fund returns are adjusted for dividends2) Overnight repo rates are based on transactions among commercial banks and primary dealers(Source: CBSL)3) All returns are annualized

Fig 2: Asset AllocationRepo27%

Treasury Bill73%

Fig 3: Maturity Pro�leLess Than 1 Month

35%

6 - 12 Months15%

3 - 6 Months22%

2 - 3 Months24%

1 - 2 Months4%

ADBT/CPEG/JJ

INDEPENDENT AUDITORS’ REPORTTO THE UNIT HOLDERS OF NAMAL MONEY MARKET FUND


We have audited the accompanying �nancial statements of NAMAL Money Market Fund which comprise the statement of �nancial position as at 31 March 2013 and statement of comprehensive income, statement of changes in unit holders’ funds, statement of cash �ows, for the year then ended and a summary of signi�cant accounting policies and other explanatory notes.


National Assets 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, implementing 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 accounting estimates that are reasonable in the circumstances.





Opinion

In our opinion, so far as appears from our examination, the Fund maintained proper accounting records for the year ended 31 March 2013 and the �nancial statements give a true and fair view of the Fund’s �nancial position as at 31 March 2013 and its performance and cash �ows for the year then ended in accordance with Sri Lanka Accounting Standards.


These �nancial statements also comply with the requirements of Section 151(2) of the Companies Act No. 07 of 2007, Unit Trust Deed and Unit Trust code of the Securities and Exchange Commission of Sri Lanka.

23 May 2013Colombo


98



99

NAMAL Money Market FundSTATEMENT OF FINANCIAL POSITIONAs at 31 March 2013

As at Note 2013 2012 1 April 2011

Rs. Rs. Rs.ASSETSCash and cash equivalents 485,833 203,326 173,175 Financial assets - Held for trading 5 327,381,352 463,685,345 - Financial assets - Loans and receivables 6 118,052,215 68,115,411 618,170,806 Income tax receivable 4,536,198 4,207,567 2,899,251

Total Assets 450,455,598 536,211,649 621,243,232

UNIT HOLDERS' FUNDS & LIABILITIES LIABILITIES

Accrued expenses 8 343,908 392,053 832,438 343,908 392,053 832,438

UNIT HOLDERS' FUNDS

Net assets attributable to Unit Holders 450,111,690 535,819,596 620,410,794 450,111,690 535,819,596 620,410,794

450,455,598 536,211,649 621,243,232 - -

These Financial Statements were approved by the Management Company, and adopted by the Trustee.

23 May 2013Colombo

……………………………..……………………………..




100

NAMAL Money Market FundSTATEMENT OF COMPREHENSIVE INCOMEYear ended 31 March 2013

Note 2013 2012Rs. Rs.

INVESTMENT INCOMEInterest income 9 58,052,221 56,362,982

EXPENSESManagement and registrar fees (1,637,984) (1,990,920)Trustee and custodian fees (1,107,569) (1,331,665)Audit fee and expenses (228,032) (250,590)Bank charges (17,629) (2,156)Other expenses (160,847) (524,849)Amortisation of Treasury bond premium - (420,385)Operating expenses (3,152,061) (4,520,565)

NET PROFIT 54,900,160 51,842,417

FINANCE COSTInterest expense (137,333) -Distribution to Unit Holders (43,420,556) (41,218,534)

PROFIT AFTER DEDUCTIONS AND BEFORE TAX 11,342,271 10,623,883

Income tax expense (5,476,283) (5,374,795)

PROFIT AFTER DISTRIBUTIONS AND TAX 5,865,988 5,249,088

INCREASE IN NET ASSET ATTRIBUTABLE TO UNIT HOLDERS 5,865,988 5,249,088



101

NAMAL Money Market FundSTATEMENT OF CHANGES IN UNITHOLDERS’ FUNDYear ended 31 March 2013

2013 2012Rs. Rs.

Unit Holders' funds at the beginning of the year 535,819,596 620,410,794

Increase in Net assets attributable to Unit Holders 5,865,988 5,249,088



Unit Holders' funds at the end of the year 450,111,690 535,819,596



102

NAMAL Money Market FundSTATEMENT OF CASH FLOWSYear ended 31 March 2013

2013 2012Rs. Rs.

Cash �ows from operating activitiesInterest received 47,742,022 59,442,442Proceeds from sale of investments 1,094,402,309 559,744,627Payments on purchase of investments (1,003,527,283) (480,859,749)Taxation paid (2,552) (2,697,785)Operating expenses paid (3,200,206) (4,540,564)Net cash generated from operating activities 135,414,290 131,088,971

Cash �ows from �nancing activitiesCash received on creation of units 262,676,729 335,915,160Cash paid on redemption of units (354,250,623) (425,755,446)Income distribution (43,420,556) (41,218,534)Interest paid on borrowings (137,333) -Proceeds from borrowings 200,100,000 -Repayment of borrowings (200,100,000) -Net cash generated from �nancing activities (135,131,783) (131,058,820)

Net increase in cash and cash equivalents 282,507 30,151Cash and cash equivalents at the beginning of the year 203,326 173,175Cash and cash equivalents at the end of the year 485,833 203,326



NAMAL Money Market Fund is an open ended unit trust fund approved by the Securities and Exchange Commission of Sri Lanka. The fund was launched on 10 September 2004.

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 provide investors with current income in the short term, consisting of interest income, by investing in money market instruments such as, Government securities, asset back securities, bank deposits, repurchase agreements and corporate debt having maturities within one year, while providing liquidity to the investors.


2.1 Basis of Preparation


The �nancial statements have been prepared on the historical cost basis. The �nancial statements are presented in Sri Lankan rupees. The statement of �nancial position is presented broadly in order of a liquidity basis.


These �nancial statements have been prepared in accordance with Sri Lanka Accounting Standards (SLFRSs and LKASs) which are e�ective from 01 January 2012.

2.1.2 Comparative Information

This is funds’ �rst �nancial statements prepared in accordance with (SLFRSs/LKASs) and SLFRS 1 – First time Adoption of International Financial Reporting Standards has been applied. Please refer Note 4 to the �nancial statements.






103

NAMAL Money Market FundNOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 2013


104




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. Loan and receivables in the statement of �nancial position comprise of repurchase agreements and trust certi�cates.

After initial measurement, loans and receivable 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”.


2.2.1.4 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 net change in �nancial assets at fair value through pro�t loss’ in the statement of comprehensive income. Interest income or expense is recorded in “Investment income’ according to the terms of the contract. Included in this classi�cation are government treasury bills and bonds.


The fair value for �nancial instruments traded in active markets at the reporting date is based on their quotedmarket price or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transac-tion costs.







105




Interest Income




Cash and cash equivalents in the statement of �nancial position and statement of cash �ows comprise cash at bank.

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 authorizes. The tax rates and tax laws used to compute the amount are those that are enacted to substantively enacted, at the reporting date. The fund is liable to pay income tax at the rate of 10% in accordance with the Inland Revenue Act No10 of 2006.

2.2.5 Expenses



Registrar Fee - 0.05% of Net Asset Value of the Fund

Trustee Fee - 0.15% of Net Asset Value of the Fund Custody Fee - Flat Fee of Rs. 240,000 per annum Management fees are detailed in the fund’s statement of comprehensive income. The Manager pays Trustee’s fees and custodian fees for services rendered on behalf of the fund to Trustees.




106



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 balance sheet 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.



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 �nancial position date, that have signi�cant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next �nancial year.


2.3.2 Impairment losses on �nancial assets – loans and receivables



(i) SLFRS 9 -Financial Instruments: Classi�cation and MeasurementSLFRS 9, as issued re�ects the �rst phase of work on replacement of LKAS 39 and applies to classi�cation and measurement of �nancial assets and liabilities.


SLFRS 9 will be e�ective for �nancial periods beginning on or after 01 January 2015 whilst SLFRS 13 will be e�ective for �nancial periods beginning on or after 01 January 2014.


107



(a) Financial Instruments

The fund’s principal �nancial assets comprise investments in treasury bills, repurchase agreements and treasury bonds 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 trust certi�cates are classi�ed as ‘loans and receivables’ and are valued at amortised cost .The fund’s treasury bills and treasury bonds are classi�ed as “held for trading” and valued at fair value.

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.



Financial instruments of the fund comprise investments in treasury bills and repurchase agreements, 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 Financial 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 manage-ment, Risk and Investment Committees, and ultimately the Trustees of the fund.


(c) Credit risk


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.


108


NAMAL Money Market Fund’s investments are only in Government securities.

Risk concentration of credit risk exposureConcentration 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:

2013 LKR000NAMAL Money Market Fund InvestmentsConservative 445,433Balanced -Growth -

(d) Market risk




Price risk

Price risk is the risk that the fair values of the fund’s investment in trading securities in �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.NAMAL Money Market Fund is not authorized to invest in equities and is not subject to price risk.

Interest rate risk


The Fund’s exposure to interest rate risk primarily arises from changes in interest rates applicable to treasury bills /treasury bonds since they are valued at fair value and the balance held at the bank.



The Fund is not exposed to foreign exchange risk due to trading securities denominated in Sri Lankan Rupees.


109


(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 approxi-mates fair value. The e�ect of discounting is not signi�cant as there is little di�erence between undiscounted and discounted cash �ows.


110

NAMAL Money Market FundNOTES TO THE FINANCIAL STATMENTSYear ended 31 March 2013



ASSETSFixed income investments A 347,274,990 9,404,829 - 356,679,819Treasury Bill repurchase agreements A 261,440,848 50,139 - 261,490,987Financial Assets - Loans and receivables 608,715,838 9,454,968 - 618,170,806

CURRENT ASSETSAccrued income and other receivables A 12,354,219 (12,354,219) - -Income tax recoverable - 2,899,251 - 2,899,251Cash at bank 173,175 - 173,175

12,527,394 (9,454,968) - 3,072,426621,243,232 - - 621,243,232

UNIT HOLDERS' FUNDS AND LIABILITIESLiabilities

Accrued expenses 832,438 - - 832,438832,438 - - 832,438

Unit Holders' FundsUnit capital B 607,407,827 13,002,967 - 620,410,794Income account B 13,002,967 (13,002,967) - -

620,410,794 - - 620,410,794621,243,232 - - 621,243,232


Rs. Rs. R s. Rs.ASSETS

Financial assets - Held for tradingTreasury bond A 462,085,194 1,600,151 - 463,685,345

Financial Assets - Loans and receivablesTreasury Bill repurchase agreements A 68,069,230 46,181 - 68,115,411

CURRENT ASSETSAccrued income and other receivables A 5,853,899 (5,853,899) - -Income tax recoverable - 4,207,567 - 4,207,567Cash at bank 203,326 - - 203,326

6,057,225 (1,646,332) - 4,410,893536,211,649 - - 536,211,649

4. FIRST-TIME ADOPTION OF SLFRS's These �nancial statements, for the year ended 31st March 2013, are the �rst the fund has prepared in accordance with SLFRS. For

periods up to and including the year ended 31 March 2012, the fund prepared its �nancial statements in accordance with Sri Lanka Accounting Standards (SLAS).

Accordingly, the fund has prepared �nancial statements which comply with SLFRS applicable for periods ending on or after 31 March

2013, together with the comparative period data as at and for the year ended 31 March 2012, as described in the accounting policies. In preparing these �nancial statements, the fund’s opening statement of �nancial position was prepared as at 1 April 2011, the fund's date of transition to SLFRS. This note explains the principal adjustments made by the fund in restating its SLASs statement of �nancial position as at 1 April 2011 and its previously published SLASs �nancial statements as at and for the year ended 31 March 2012.


111


UNIT HOLDERS' FUNDS AND LIABILITIESLiabilities

Accrued expenses 392,053 - - 392,053

Unit Holder's FundsUnit capital B 519,429,408 16,390,188 - 535,819,596Income account B 16,390,188 (16,390,188) - -

535,819,596 - - 535,819,596536,211,649 - - 536,211,649




Gross income 56,362,982 - - 56,362,982Expenses (4,520,565) - - (4,520,565)Net income before taxation 51,842,417 - - 51,842,417

Distribution to unit holders - (41,218,534) - (41,218,534)

Pro�t after deductions before tax 51,842,417 (41,218,534) - 10,623,883

Taxation (5,374,795) - - (5,374,795)Pro�t after tax 46,467,622 (41,218,534) - 5,249,088

Income equalisationReceived on units created B 8,421,580 (8,421,580) - -Deducted on units redeemed B (10,283,447) 10,283,447 - -Net equalisation (1,861,867) 1,861,867 - -

Increase in net assets attributable to Unit Holders 44,605,755 (39,356,667) - 5,249,088

A Financial instruments

In the previous �nancial year, Treasury bill repurchase agreements and �xed income investments (investment in trust certi�cates) were accounted as investments and the accrued interest on such investments were accounted as accrued income and other receivables (2012 - Rs. 1,600,151) (2011 - Rs.9,454,968/-). Under SLFRS, Loans and receivables which falls in the de�nition of LKAS 39 need to be disclosed separately at amortised cost using e�ective interest rate, accordingly have been reclassi�ed the interest receivable as Loans and receivables. As per preious SLAS, Treasury bonds was accounted as current assets and accrued interest on such investments were accounted as accrued income and other receivables. Under SLFRS, Treasury bonds are classi�ed as held for trading and is recorded at fair value.

B Unit Holders' funds

In the previous �nancial year, income equalisation on creation and redemption of units comprising of income after the initial o�er price have been disclosed in the accounts and shown separately in the statement of total return and recorded to Income Account in accordance with Recommended Accounting Practice for Open Ended Unit Trust issued by Institute of Chartered Accountants of Sri Lanka (ICASL) . Since Recommended Accounting Practice for unit trusts issued would be withdrawn and ICASL has requested to adopt SLFRS/LKAS for unit trust, the consideration paid and received on unit creation are recorded to unit holders' funds.

Notes to the reconciliation of equity of the Fund as at 1 April 2011 and 31 March 2012 and total comprehensive income for the year ended 31 March 2012


112


5. FINANCIAL ASSETS - HELD FOR TRADING

5.1 Investments in Treasury Bills As at2013 2012 1 April 2011Rs. Rs. Rs.

Government treasury bills 327,381,352 - -327,381,352 - -

As at5.2 Investments in Treasury Bonds 2013 2012 1 April 2011

Rs. Rs. Rs.

Government treasury bonds - 463,685,345 -- 463,685,345 -

327,381,352 463,685,345 -

6. FINANCIAL ASSETS - LOANS AND RECEIVABLES As at2013 2012 1 April 2011

6.1 Repurchase Agreements Rs. Rs. Rs.

Sampath Bank Plc - - 261,490,987First Capital Treasuries 118,052,215 33,204,432 -Wealth Trust Securities Limited - 34,910,979 -

118,052,215 68,115,411 261,490,987

6.2 Trust Certi�cates

Alliance Finance Company Plc (Trust 19) - - 10,935,022People's Leasing Company (Trust 67) - - 84,158,091Softlogic Finance Plc (Trust 13) - - 83,758,458Senkadagala Finance Co Limited (Trust 24) - - 26,396,374Vallibel Finance Plc (Trust 01) - - 40,966,616Softlogic Finance Plc (Capital Reach Leasing Plc ) (Trust 11) - - 27,453,349LB Finance (Trust 11) - - 2,986,151Commercial Leasing Company Limited (Trust 38) - - 67,758,068People's Leasing Company (Trust 65) - - 12,267,690

- - 356,679,819

118,052,215 68,115,411 618,170,806


113


7. FAIR VALUE OF FINANCIAL INSTRUMENTS

Determination of fair value and fair value hierarchy



Finanacial assets - held for trading

Government Treasury bills 327,381,352 - - 327,381,352

As at 31 March 2012Government Treasury bonds 463,685,345 - - 463,685,345

8. ACCRUED EXPENSES 2013 2012Rs. Rs.

Fund manager payable 113,922 150,576Trustee fee and Custodian fee payable 86,626 98,117Audit fee 143,360 143,360

343,908 392,053

SLFRS 7 Financial Instruments: Disclosures require fair value measurements to be disclosed by the source o� nputs, using athree 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 marketand 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 thatare 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 usingunobservable inputs at the reporting date.


114



Interest onDeposits 28,564 -Repurchase agreements (9.1) 26,795,815 34,616,459Treasury bills (9.1) 29,308,788 1,628,953Treasury bonds (9.1) 1,310,054 2,781,291Trust certi�cates - 16,509,779

Discount on Treasury bond (9.1) 609,000 826,50058,052,221 56,362,982

9.1 Interest on Treasury bills, repurchase agreements, Treasury bonds and discount on treasury bond has been accounted for gross of Notional Tax.

10. DISTRIBUTION The Fund announced and paid the following dividends during the year.

11. CONTINGENCIES There are no material contingencies existing as at the Balance Sheet date that require adjustments to, or disclosure in the Financial Statements.

12. POST BALANCE SHEET EVENTS

There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the Financial Statements.

13. CAPITAL COMMITMENTS The Fund does not have signi�cant Capital Commitments at the Balance Sheet date.

14. UNITS IN ISSUE AND UNIT PRICE

Units in issue and deemed to be in issue as at 31 March 2013 is 42,935,143.9. Unit price as at this date is Rs. 10.4514/-.

Dividend per Unit Number of Units in Issue Date

Rs. 0.20 51,738,730.50 26 April 2012Rs. 0.22 64,871,743.30 26 July 2012Rs. 0.22 42,757,926.40 25 October 2012Rs. 0.22 42,701,284.10 23 January 2013


115




DFCC Bank



Fund has paid Rs.1,674,638/- as management & registrar fees during the year. The fee payable as at 31.03.2013 is Rs. 113,923/-.

National Asset Management Limited holds Rs.704,650/- worth of units of NAMAL Money Market Fund as at 31.03.2013.

Fund has paid Rs.1,119,060/- as trustee and custodian fees during the year. The fee payable as at 31.03.2013 is Rs.86,626/-.

DFCC holds 30% of equity of National Asset Management Limited. Value of the units held by DFCC Bank in NAMAL Money Market Fund as at 31.03.2013 is Rs. 97,366,586/-.

Union Bank of Colombo PLC holds 51% of equity of National Asset Management Limited. Union Bank does not hold any investments in NAMAL Money Market Fund as at 31.03.2013.

Ennid Capital (Private) Limited holds 19% of equity of National Asset Management Limited.Value of units held by Ennid Capital in NAMAL Money Market Fund as at 31.03.2013 is Rs. 3,644,923/-.


Mr. Alexis Lovell


Mr. Avancka Herat


15. RELATED PARTY TRANSACTIONS The following institutions have been identi�ed as related parties to the Fund in accordance with Sri Lanka Accounting Standards LKAS 24 - "Related Party Disclosures".

IPO Fund

116


117


Investment Strategy

NAMAL IPO Fund (NIPO) is a growth fund which aims to achieve growth of capital by investing primarily in equity securities at the Initial Public O�er (IPO) stage and post IPO stage.

The Fund aims to deliver consistent returns to investors in the long run whilst ensuring preservation of capital.

Asset Allocation

The Fund allocated 18.7% in Equities, 43.8% in Commercial Paper, with the balance in Treasury bills and Repos by end March 2013.The main sector allocations in equity are in Construction & Engineering (75.6%) and Banks, Finance & Insurance (24.4%).

Performance Review

The All Share Price Index increased by 5.82% while the 3 Month Treasury Bill yields declined by 1.74% for the year ending 31st March 2013.The Fund outperformed the ASPI by 1.2%with the Fund’s NAV per unit increasing by 7.01% during the period under review.

The Fund value was Rs. 17.42 million at 31st March 2013. Net assets attributable to unit holders increased by Rs. 1.3 million during the year, vs. a decrease of Rs. 0.03 million the prior year.

Return to Investors

The Fund has provided a return of 4.16% to investors since inception in 2011.



118

*Note

12 months Since inceptionNAMAL IPO FundASPIS&P SL 20


7.02%5.82%

10.32%

4.16%-16.10%-5.67%

1) Performance up to 31st March 2013 as published by the Unit Trust Association of Sri Lanka2) Benchmark returns are ASPI return.3) Returns are not annualized4) Past performance should not be taken as a guide to the future


The Company No of Shares Value (Rs) % of NAV58,200 767,420 4.42%

120,000 2,364,000 13.70%People's Leasing Company PLC Access Engineering Limited

Fig 2: Top Equity Holdings

24.39%

75.61%

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00%


Construction and Engineering

SECT

OR


ADBT/CPEG/DM

INDEPENDENT AUDITORS’ REPORTTO THE UNIT HOLDERS OF NAMAL IPO FUND


We have audited the accompanying �nancial statements of NAMAL IPO Fund which comprise the statement of �nancial position as at 31 March 2013 and statement of comprehensive income, statement of changes in unitholder’s funds, statement of cash �ows, for the year then ended and a summary of signi�cant accounting policies and other explanatory notes.


National Assets 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, implementing 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 accounting estimates that are reasonable in the circumstances.





Opinion

In our opinion, so far as appears from our examination, the Fund maintained proper accounting records for the year ended 31 March 2013 and the �nancial statements give a true and fair view of the Fund’s �nancial position as at 31 March 2013 and its performance and cash �ows for the year then ended in accordance with Sri Lanka Accounting Standards.



22 May 2013Colombo


119


120

NAMAL IPO FundSTATEMENT OF FINANCIAL POSITIONYear ended 31 March 2013

ASSETS Notes 2013 2012Rs. Rs.

Cash and Cash Equivalents 736,210 54,840Financial Assets - Held for Trading 5 7,994,110 1,209,120Financial Assets - Loans and Receivables 6 8,689,222 16,662,850Income Tax Receivable 159,476 92,990Total Assets 17,579,018 18,019,800


LIABILITIESAccrued Expenses 8 156,446 159,878Total Liabilities (Excluding net assets attributable to Unit Holders) 156,446 159,878

UNIT HOLDERS' FUNDSNet Assets Attributable to Unit Holders 17,422,572 17,859,922

17,579,018 18,019,800

- -


22 May 2013Colombo


……………………………..……………………………..




121

NAMAL IPO FundSTATEMENT OF COMPREHENSIVE INCOMEYear ended 31 March 2013


Notes Year ended 8 month ended31.03.2013 31.03.2012

Rs. Rs.INVESTMENT INCOMEDividend Income 9 101,127 26,190Interest Income 9 2,186,376 1,136,575

5.2 (93,215) (338,480)2,194,288 824,285

EXPENSES

Management Fees (235,352) (140,738)Trustee Fees (38,678) (24,026)Custody Fees (268,800) (164,226)Audit Fees (124,375) (112,505)Other Expenses (41,849) (273,832)Bank Charges (11,000) (750)Total Operating Expenses (720,054) (716,077)

NET PROFIT 1,474,234 108,208

FINANCE COSTInterest Expense (4,636) (6,907)Treasury Bond Premium Amortisation - (105,096)

(4,636) (112,003)

PROFIT/ (LOSS) AFTER DEDUCTIONS AND BEFORE TAX 1,469,598 (3,795)Income Tax Expense (146,496) (30,850)

PROFIT/ (LOSS) AFTER DISTRIBUTIONS AND TAX 1,323,102 (34,645)

1,323,102 (34,645)INCREASE/(DECREASE) IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS

Net Change in Unrealised Losses on Financial Assets Held for Trading


122

NAMAL IPO FundSTATEMENT OF CHANGES IN UNITHOLDERS' FUNDSYear ended 31 March 2013


Year ended 8 month ended31.03.2013 31.03.2012

Rs. Rs.

UNIT HOLDERS' FUNDS AT THE BEGINNING OF THE YEAR/PERIOD 17,859,922 -

Increase/(Decrease) in Net Assets Attributable to Unit Holders' Funds 1,323,102 (34,645)

Received on Creation of Units - 17,914,067

Payments on Cancellation of Units (1,760,452) (19,500)

UNIT HOLDERS' FUNDS AT THE END OF THE YEAR/PERIOD 17,422,572 17,859,922


123

NAMAL IPO FundSTATEMENT OF CASH FLOWSYear ended 31 March 2013


Year ended 8 month ended31.03.2013 31.03.2012

Rs. Rs.Cash Flows from Operating ActivitiesDividend Received 101,127 26,190Interest Received 2,067,024 932,015Proceeds from Sale of Investments 99,086,099 28,868,338Payment on Purchase of Investments (97,941,002) (47,083,124)Taxation Paid (143,304) (20,041)Operating Expenses Paid (723,486) (563,106)Net Cash Generated from Operating Activities 2,446,458 (17,839,728)

Cash Flows from Financing ActivitiesCash Received on Creation of Units - 17,913,928Cash Paid on Redemption of Units (1,760,452) (19,360)Income Distribution - -Interest Paid on Borrowings (4,636) -Proceeds from Borrowings 9,100,000 -Repayment of Borrowings (9,100,000) -Net Cash Generated from Financing Activities (1,765,088) 17,894,568

Net Increase in Cash and Cash Equivalents 681,370 54,840Cash and Cash Equivalents at the Beginning of the Year/Period 54,840 -Cash and Cash Equivalents at the end of the Year/Period 736,210 54,840


124


NAMAL IPO Fund is an open ended unit trust fund approved by the Securities and Exchange Commission of Sri Lanka. The fund was launched on 22 August 2011.


The investment objective of the fund is to achieve growth of capital by investing primarily in equity securities at the initial o�ering stage and post IPO stage for a period of one year. To target preferential allocations, that may be mandated by the SEC, in IPO’s thus enabling retail investors to bene�t by being part of a large single application by the fund.





2.1.1 Statement of Compliance


2.1.2 Comparative Information

This is funds’ �rst �nancial statements prepared in accordance with (SLFRSs/LKASs) and SLFRS 1 – First time Adoption of International Financial Reporting Standards has been applied. Please refer Note 4 to the �nancial statements.


2.2.1 Financial Instruments – Initial Recognition and Subsequent Measurements

2.2.1.1 Date of Recognition


2.2.1.2 Initial Measurement of Financial Instruments


NAMAL IPO FundNOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 2013


125

2.2.1.3 Financial Assets - Loans and Receivables




2.2.1.4 Financial assets – Held for Trading

Financial assets, fair value through pro�t and loss 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, dividend income are recorded in ‘investment income’ according to the terms of the contract. Included in this classi�cation are government treasury bills and quoted equity securities.

2.2.1.5 Determination of Fair Value




2.2.1.6 Derecognition of Financial Assets





126

2.2.2 Recognition of Income


Interest IncomeFor 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.


Dividend IncomeIncome 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 and statement of cash �ows comprise cash at bank.

2.2.4 Income TaxCurrent 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 of 10% in accordance with the Inland Revenue Act No.10 of 2006.

2.2.5 Expenses



Trustee Fee - 0.2% of Net Asset Value of the Fund Custody Fee - Flat Fee of Rs. 240,000 per annum Management fees are detailed in the Fund’s Statement of Comprehensive Income. The Manager pays Trustee’s fees and Custodian fees for services rendered on behalf of the fund to Trustees.

2.2.6 Accrued Expenses


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 balance sheet date.




127


2.3.1 Fair Value of Financial 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 �nancial position date, that have signi�cant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next �nancial year.


2.3.2 Impairment Losses on Financial 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. If 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.


(i) SLFRS 9 -Financial Instruments: Classi�cation and MeasurementSLFRS 9, as issued re�ects the �rst phase of work on replacement of LKAS 39 and applies to classi�cation and measurement of �nancial assets and liabilities.





The fund’s principal �nancial assets comprise investments in trading securities, repurchase agreements, commercial papers 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, commercial papers and placements with other banks 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.



128

(b) Financial Risk Management Objectives, Policies and Processes





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, Risk and Investment Committees, and ultimately the Trustees of the fund.


(c) Credit risk


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 AgencyMercantile Investments and Finance PLC BBB+ Ram RatingPeoples Leasing and Finance PLC AA- Fitch RatingSoftlogic Holdings PLC A- Fitch RatingSoftlogic Finance PLC BBB- Ram RatingAlliance Finance Company PLC BBB Ram RatingLB Finance PLC A- Ram RatingAsia Capital PLC* Unrated -





129

The fund’s maximum exposure to credit risk can be analysed as follows: 2013 Rs. 000NAMAL IPO Fund Investments Conservative 4,867Balanced 7,289Growth 3,126

(d) Market risk




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 5, with all other variables held constant:


Interest rate risk


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 treasury bill portfolio.


31 March 2013



31 March 2012




+10%-10%

312.642 312.642 120.912 120.912(312.642) (312.642) (120.912) (120.912)


130




(e) Liquidity risk






131


4. FIRST-TIME ADOPTION OF SLFRS's These �nancial statements, for the year ended 31st March 2013, are the �rst �nancial statements the fund has prepared in accordance with SLFRS. For the 8 month period ended 31 March 2012, the fund prepared its �nancial statements in accordance with Sri Lanka Accounting Standards (SLAS). Accordingly, the fund has prepared �nancial statements which comply with SLFRS applicable for periods ending on or after 31 March 2013, together with the comparative period data as at and for the 8 month period ended 31 March 2012, as described in the accounting policies. This note explains the principal adjustments made by the fund in restating its previously published

4.1 Reconciliation of equity as at 31.03.2012 Notes SLAS Reclassi�cation Remeasurements SLFRSRs. Rs. Rs. Rs.

ASSETS

Equity Investments A 1,209,120 (1,209,120) - -Financial Assets - Held for Trading - 1,209,120 - 1,209,120

Treasury Bill - Repurchase Agreements A 4,662,175 2,171 - 4,664,346Placements with Other Banks A 1,700,000 13,926 - 1,713,926Fixed Income Investments A 10,199,912 84,666 - 10,284,578Financial Assets - Loans and Receivables 16,562,087 100,763 - 16,662,850

CURRENT ASSETS

Accrued Income and Other Receivables A 100,763 (100,763) - -Income Tax Recoverbale 92,990 - - 92,990Cash at Bank 54,840 - - 54,840

248,593 (100,763) - 147,830

18,019,800 1,209,120 - 18,019,800UNIT HOLDERS' FUNDS AND LIABILITIESLiabilitiesAccrued Expenses 159,878 - - 159,878

159,878 - - 159,878Unit Holders' FundsUnit Capital B 17,890,547 (30,625) - 17,859,922Net Unrealised Loss C (337,784) 337,784 - -Income Account B 307,159 (307,159) - -

17,859,922 - - 17,859,922

18,019,800 - - 18,019,800

4.2 Reconciliation of total comprehensive income for the 8 month period ended 31 March 2012


Gross Income C 1,162,765 (338,480) - 824,285Expenses (828,080) 112,003 - (716,077)Finance Cost - (112,003) - (112,003)

Net Income Before Taxation 334,685 (226,477) - (3,795)Taxation (30,850) - - (30,850)Net Income After Taxation 303,835 (226,477) - (34,645)

Income EqualisationReceived on Units Created B 3,880 (3,880) - -Deducted on Units Redeemed B 140 (140) -Net Equalisation 4,020 (4,020) - -

Decrease in Net Assets Attributable to Unit Holders 307,855 (230,497) - (34,645)


132


4. FIRST-TIME ADOPTION OF SLFRS's (Contd.)

Notes to the reconciliation of equity of the Fund as at 31 March 2012 and total comprehensive income for the 8 month period ended 31 March 2012

A Financial Instruments In the previous �nancial year, Treasury bill repurchase agreements, placements with other banks and �xed income investments (investment in commercial papers) were accounted as current investments and the accrued interest on such investments were accounted as accrued income and other receivables (Rs.100,763/-). Under SLFRS, Loans and receivables which falls in the de�nition of LKAS 39 need to be disclosed separately at amortised cost using e�ective interest rate, accordingly have been reclassi�ed the interest receivable as Loans and Receivables. As per previous SLAS, equity investments in quoted companies was classi�ed as investments and under SLFRS, investments in equity securities in quoted companies are classi�ed as �nancial assets held for trading and is recorded at fair value.

B Unit Holders' Funds

In the previous �nancial year, income equalisation on creation and redemption of units comprising of income after the initial o�er price have been disclosed in the accounts and shown separately in the Statement of Total Return and recorded to income account in accordance with Recommended Accounting Practice for Open Ended Unit Trust issued by Institute of Chartered Accountants of Sri Lanka (ICASL). Since Recommended Accounting Practice for unit trusts issued would be withdrawn and ICASL has requested to adopt SLFRS/LKAS for unit trust, the consideration paid and received on unit creation are recorded to Unit Holders' funds.

C Unrealised Loss on Financial Assets Held for Trading In the previous �nancial period, unrealised loss on quoted equity securities have been accounted separately in the net unrealised loss account in the balance sheet. Upon the adoption of SLFRS, net change in unrealised loss on quoted equity securities are recorded in the statement of comprehensive income and unrealised loss as at the balance sheet date is recorded in Unit Holders' Funds.


133


5. FINANCIAL ASSETS - HELD FOR TRADING 2013 2012Rs. Rs.

Equity Securities 3,126,420 1,209,120Debt Securities - Government Treasury Bills 4,867,690 -

7,994,110 1,209,120

5.1. Investments in Quoted Equity Securities (5.1.1)

Cost as at 31 March 3,570,000 1,547,600Provision for Depreciation of Quoted Equity Securities (443,580) (338,480)Market Value as at 31 March 3,126,420 1,209,120

5.1.1 Company Number of Market Holdings Number of Market HoldingsShares Value as a % of Shares Value as a % of

Net Asset Net AssetRs. Value Rs. Value

Banks, Finance and InsurancePeople's Leasing Company PLC 002,85 024,267 4% 58,200 675,120 4%

Construction and EngineeringAccess Engineering Limited 000,021 000,463,2 14% 20,000 534,000 3%

024,621,3 18% 1,209,120 7%

5.2 Net Change in Unrealised Losses on Financial Assets - Held for Trading Year ended8 Month ended

31.03.2013 31.03.2012Rs. Rs.

Equity Securities (105,100) (338,480)Debt Securities - Government Treasury Bills 11,885 -

(93,215) (338,480)

2013 2012


134



6.1. Repurchase Agreements 2013 2012Rs. Rs.

Wealth Trust Securities 1,399,494 4,664,346 1,399,494 4,664,346

6.2 Investment in Commercial Papers

Asia Capital PLC - 1,724,991Alliance Finance Company PLC 1,865,656 -People's Leasing and Finance Company PLC - 1,718,769Mercantile Investments and Finance PLC 1,715,690 1,718,144Softlogic Holdings PLC - 3,421,282Softlogic Finance PLC 1,935,378 -LB Finance PLC 1,773,004 1,701,392

7,289,728 10,284,578

6.3 Placements with Other Banks

DFCC Bank - 1,713,926 - 1,713,926

8,689,222 16,662,850

7. 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:





135


7. FAIR VALUE OF FINANCIAL INSTRUMENTS (Contd.)


Financial Assets - Held for Trading

Quoted Equity Securities 3,126,420 3,126,420Government Treasury Bills 4,867,690 - - 4,867,690

As at 31 March 2012Quoted Equity Securities 1,209,120 - - 1,209,120

8. ACCRUED EXPENSES 2013 2012Rs. Rs.

Fund Manager Payable 133,81 24,544Custodian Fee Payable 511,62 22,830Audit Fee 000,211 112,504

644,651 159,878

9. INVESTMENT INCOME Year ended 8 Month ended31.03.2013 31.03.2012

Rs. Rs.

Dividend Income 721,101 26,190

Interest onTreasury Bill Repurchase Agreements (9.1) 511,175 474,728Treasury Bills (9.1) 266,521 -Commercial Papers 683,844,1 397,085Deposits 800,32 13,926Savings 502,81 -Treasury Bonds (9.1) - 250,836

673,681,2 1,136,575


9.1 Interest on Treasury bill repurchase agreements, Treasury bills and Treasury bonds have been accounted for gross of notional tax.


136


10. CONTINGENCIES

There are no material contingencies existing as at the Balance Sheet date that require adjustments to or disclosures in the �nancial statements.

11. POST BALANCE SHEET EVENTS

There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosures in the �nancial statements.

12. CAPITAL COMMITMENTS

The fund does not have signi�cant Capital Commitments at the Balance Sheet date.

12. UNITS IN ISSUE AND UNIT PRICE

Units in issue and deemed to be issue as at 31 March 2013 is 1,656,917.30 (2012 - 1,834,927.90 ) and the creation and redemption price were Rs. 10.6981 and Rs. 10.3950 (2012 - Rs. 9.98 and Rs. 9.73) respectively.


13.1 The followng have been identi�ed as related parties of NAMAL IPO Fund as at 31 March 2013 in accordance with LKAS 24 - "Related Party Disclosures"

13.2 Unit Holdings of the related parties of NAMAL IPO Fund as at 31 March is as follows.



DFCC Bank



Fund has paid Rs. 238,179/- as management & registrar fees during the year. The fee payable as at 31.03.2013 is Rs. 18,330/-.

Fund has paid Rs. 307,587/- as trustee fees and custodian fees during the year. The fee payable as at 31.03.2013 is Rs. 26,114/-.

DFCC holds 30% of equity of National Asset Management Limited.

Union Bank of Colombo PLC holds 51% of equity of National Asset Management Limited.

Ennid Capital (Pvt) Limited holds 19% of equity of National Asset Management Limited


Mr. Alexis LovellMr. Anil AmarasuriyaMr. Jitendrakumar Warnakulasuriya(Consultant)

Mr. Avancka Herat


Rs. 24,325 (2,500 Units)

Name Relationship Value of Unit Holding

As at 31.03.2012

Mr.H.A.HeratExecutive Director of NationalAsset Management Limited

Rs. 25,987 (2,500 Units)

As at 31.03.2013

High Yield Fund

137


138


Investment Strategy

NAMAL High Yield Fund (NHYF) obtains higher yields by investing in short-term corporate debt securities. Investments are subjected to detailed analysis to ensure credit quality and investor protection. The Fund has a signi�cant tax advantage for corporate investors.

Asset Allocation

The Fund invested 86% in Corporate Debt and 14% in Government Securities at end March 2013. The majority of investments were in less than one month to maturity, with the balance maturing within 3 months.

Performance Review

The Fund generated tax-free return of 14.45% for the year ended 31st March 2013 which corresponds to a tax equivalent yield of 20.07% for corporate investors, who are liable to a tax rate of 28%.



139



3 months 6 months 12 months15.31% 15.12% 14.45%NAMAL High Yield Fund1

*Note

1) Performance up to 31st March 2013 as published by the Unit Trust Association of Sri Lanka2) All returns are annualized

Fig 2: Asset AllocationRepo14%

Commercial Paper86%

Fig 3: Maturity Pro�le

Less Than 1 Month86%

2 - 3 Months5%

1 - 2 Months9%

ADBT/CPEG/AD

INDEPENDENT AUDITORS’ REPORTTO THE UNIT HOLDERS OF NAMAL HIGH YIELD FUND


We have audited the accompanying �nancial statements of NAMAL High Yield Fund which comprise of the statement of �nancial position as at 31 March 2013, and the statement of comprehensive income, statement of changes in unitholder’s funds and statement of cash �ows for the 15 month period then ended, and a summary of signi�cant accounting policies and other explanatory notes.







Opinion

In our opinion, so far as appears from our examination, the Fund maintained proper accounting records for the 15 month period ended 31 March 2013 and the �nancial statements give a true and fair view of the Fund’s �nancial position as at 31 March 2013 and its performance and cash �ows for the period then ended in accordance with Sri Lanka Accounting Standards.



15 May 2013Colombo


140


141

NAMAL HIGH YIELD FundSTATEMENT OF FINANCIAL POSITIONFor the 15 month period ended 31 March 2013

Note 2013ASSETS Rs.

Cash and cash equivalents 2,244,777

Financial assets - Loans and receivables 3 1,004,508,971

Receivables 4 64,239Income tax recoverable 1,479,725

1,008,297,712

UNIT HOLDERS' FUNDS & LIABILITIES LIABILITIES

Accrued expenses 5 722,593

Total liabilities (Excluding net assets attributable to Unit Holders) 722,593

UNIT HOLDERS' FUNDSNet assets attributable to Unit Holders 1,007,575,119

1,008,297,712


15 May 2013Colombo

……………………………..……………………………..





142

NAMAL HIGH YIELD FundSTATEMENT OF COMPREHENSIVE INCOMEFor the 15 month period ended 31 March 2013


Note 15 month ended31.03.2013

Rs.INVESTMENT INCOMEInterest income 6 115,975,185

115,975,185EXPENSESManagement and registrar fees (3,972,322)Trustee and custodian fees (1,551,925)Audit fees (134,094)Professional charges (317,039)Other expenses (189,734)Total operating expenses (6,165,114)

NET OPERATING PROFIT 109,810,071

FINANCE COSTInterest expense (68,414)

PROFIT AFTER DEDUCTIONS AND BEFORE TAX 109,741,657

Income tax expense (10,974,163)

PROFIT AFTER TAX FOR THE PERIOD 98,767,494

INCREASE IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 98,767,494


143

NAMAL HIGH YIELD FundSTATEMENT OF CHANGES IN UNIT HOLDERS' FUNDSFor the 15 month period ended 31 March 2013


15 month ended31.03.2013

Rs.

UNIT HOLDERS' FUNDS AS AT 05 JANUARY 2012 -

Increase in net assets attributable to unit holders 98,767,494

Received on Creation of Units 1,634,874,165

Paid on Redemption of Units (726,066,540)

Net Increase due to Unit holders' Transactions 908,807,625

UNIT HOLDERS' FUNDS AS AT 31 MARCH 2013 1,007,575,119


144

NAMAL HIGH YIELD FundSTATEMENT OF CASH FLOWSFor the 15 month period ended 31 March 2013


15 month ended31.03.2013

Rs.Cash Flows from Operating ActivitiesInterest received 105,370,278Management fees and Trustee fees paid (4,936,236)Other expenses paid (506,773)Taxation paid (11,707,856)Net Cash Flow generated from Operating Activities 88,219,413

Cash Flows from Investing ActivitiesCost of investments purchasedTreasury bill repurchase agreements (10,950,028,269)Treasury bonds (8,489,840)Commercial papers (7,245,507,381)Fixed deposits (42,000,000)

Sale proceeds on investments disposedTreasury bill repurchase agreements 10,811,432,121Treasury bonds 8,489,840Commercial papers 6,389,453,921Fixed deposits 42,000,000

Net Cash used in Investing Activities (994,649,608)

Cash Flows from Financing ActivitiesInterest paid on reverse repo borrowings (68,414)Cash received on creation of units 1,634,809,926Cash paid on redemption of units (726,066,540)Net Cash generated from Financing Activities 908,674,972

Net increase in cash and cash equivalents 2,244,777Cash and cash equivalents at the beginning of the period -Cash and cash equivalents at the end of the period 2,244,777


145


NAMAL High Yield Fund is an open ended unit trust fund approved by the Securities and Exchange Commission of Sri Lanka. The fund was launched on 05 January 2012.


The investment objective of the fund is to obtained yield enhancement above the one year Treasury bills rate by investing in commercial papers, corporate debentures, trust certi�cates, asset back securities and other �xed income securities and government securities.





2.1.1 Statement of Compliance



2.2.1 Financial Instruments – initial recognition and subsequent measurements

2.2.1.1 Date of Recognition


2.2.1.2 Initial Measurement of Financial Instruments


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 commercial papers and Treasury bill repurchase agreements.

NAMAL HIGH YIELD FundNOTES TO THE FINANCIAL STATEMENTSFor the 15 month period ended 31 March 2013


146



2.2.1.4 Derecognition of Financial Assets



2.2.2 Recognition of Income


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 of treasury bills repurchase agreements and corporate debt securities are recognised at gross of notional tax credit or withholding tax.

2.3.3 Cash and Cash Equivalents



2.3.4 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 of 10% in accordance with the Inland Revenue Act No.10 of 2006.

2.3.4 Expenses

The management and registrar fees, trustee and custodian fees of the fund as per the trust deed is as follows,

Management fee - 0.5% per annum of the net asset value of the fund Trustee fee - 0.15% per annum of the net asset value of the fund Custodian fee - Flat Fee of Rs. 20,000/- per month



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Management fees are detailed in the Fund’s Statement of Comprehensive Income. The Manager pays Trustee’s fees and Custodian fees for services rendered on behalf of the fund to Trustees.

2.3.5 Accrued Expenses


2.3.6 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.


2.3.1 Impairment losses on �nancial investments – Loans and Receivables



(i) SLFRS 9 -Financial Instruments: Classi�cation and Measurement

SLFRS 9, as issued re�ects the �rst phase of work on replacement of LKAS 39 and applies to classi�cation and measurement of �nancial assets and liabilities.

(ii) SLFRS 13 -Fair Value Measurement

SLFRS 13 establishes a single source of guidance under SLFRS for all fair value measurements. SLFRS 13 provides guidance on all fair value measurements under SLFRS.




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2.5 FINANCIAL INSTRUMENTS AND RISK MANAGMENT


The Fund’s principal �nancial assets comprise investments in repurchase agreements, commercial papers 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 balances, repurchase agreements and commercial papers are classi�ed as ‘loans and receivables’ and valued at amortised cost. 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.


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 risks are measured using a method that re�ects the expected impact on the Statement of Comprehensive Income and Statement of Financial 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, Risk and Investment Committees, and ultimately the Trustees of the Fund.




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(c) Credit risk

Credit risk is the risk that the counterparty to the �nancial statement 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 counter parties. The details are as follows

Counter Party Credit Rating Rating AgencyHayleys PLC AA - Ram RatingMercantile Investments & Finance PLC BBB+ Ram RatingPeoples Leasing & Finance PLC AA- Fitch RatingSoftlogic Holdings PLC A- Fitch RatingSoftlogic Finance PLC BBB- Ram RatingOrient Finance PLC BBB- ICRA RatingAlliance Finance Company PLC BBB Ram RatingLB Finance PLC A- Ram RatingAsia Capital PLC* Unrated -


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:

2013 LKR000 NAMAL High Yield Fund Investments Conservative-Repurchase Agreements 138,725 Balanced- Commercial Papers 865,783 Growth -

(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.

Price risk

Price risk is the risk that the fair value of the Fund’s investment in trading securities in �uctuate as a result of changes in the price of the Trust’s investments in trading securities. Price risk exposure arises from the trust’s investment portfolios. NAMAL High Yield Fund is not authorized to investment in equities and is not subject to price risk.

Interest rate risk


The Fund’s exposure to interest rate risk primarily arises from changes in interest rates applicable to the balance held at the bank.



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The Fund is not exposed to foreign exchange risk due to trading securities 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 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.




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3. FINANCIAL ASSETS - LOANS AND RECEIVABLES 2013Rs.

Treasury bill repurchase agreements (Note 3.1) 138,725,073

Commercial papers (Note 3.2) 865,783,8981,004,508,971

3.1 Treasury Bills Repurchase Agreements

National Savings Bank 111,751,327First Capital Treasuries Ltd 1,347,004Wealth Trust Securities Ltd 25,626,742

138,725,073

3.2 Commercial Papers

Asia Capital PLC 97,437,403Alliance Finance Company PLC 121,232,032Softlogic Finance PLC 10,585,587Peoples Leasing and Finance PLC 99,329,900LB Finance PLC 63,975,171Orient Finance PLC 130,795,483Softlogic Holdings PLC 93,970,228Hayleys PLC 129,680,971Mercantile Investments and Finance PLC 118,777,123

865,783,8981,004,508,971

4. RECEIVABLES 2013Rs.

Receivable on unit creations 64,23964,239

5. ACCRUED EXPENSES 2013Rs.

Fund management fees payable 423,040Trustee fee and Custodian fee payable 164,971Audit fee payable 134,094WHT payable 488

722,593

6. INTEREST INCOME 15 month ended31.03.2013

Rs.Interest on

Treasury bill repurchase agreements (Note 6.1) 7,399,707Treasury bonds 55,733Commercial papers 107,770,201Savings account 58,455Fixed deposits 691,089

115,975,185

6.1 Interest on Treasury Bill Repurchase Agreements and Treasury bonds have been accounted for gross of notional tax.


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7. CONTINGENCIES There are no material contingencies existing as at the Balance Sheet date that require adjustments to, or disclosure in the Financial Statements.

8. POST BALANCE SHEET EVENTS There have been no material events occurring after the Balance Sheet date that require adjustments to or disclosure in the Financial Statements.

9. CAPITAL COMMITMENTS The Fund does not have signi�cant Capital Commitments at the Balance Sheet date.

10. UNITS IN ISSUE AND UNIT PRICE Units in issue and deemed to be in issue as at 31 March 2013 is 86,281,759.3. Unit price as at this date is Rs. 11.6705/-.


11.1 The following institutions have been identi�ed as related parties to the Fund in accordance with Sri Lanka Accounting Standards LKAS 24 - "Related Party Disclosures".



DFCC Bank



Fund has paid Rs. 3,693,434/- as management fees during the period. The fee payable as at 31.03.2013 is Rs.423,040/-.

Fund has paid Rs. 1,430,200/- as trustee and custodian fees during the period. The fee payable as at 31.03.2013 is Rs. 164,971/-.

National Asset Management Limited holds Rs. 99,100,149/- worth of units of NAMAL High Yield Fund as at 31.03.2013.

DFCC holds 30% of equity of National Asset Management Ltd. DFCC Bank does not hold any units in NAMAL high Yield Fund.

Union Bank of Colombo Ltd. holds 51% of equity of National Asset Management Ltd. Value of the units held by Union Bank in NAMAL high Yield Fund as at 31.03.2013 is Rs. 534,894,978/-.

Ennid Capital (Pvt) Ltd. holds 19% of equity of National Asset Management Ltd. Value of the units held by Ennid Capital (Pvt) Ltd. in NAMAL High Yield Fund as at 31.03.2013 is Rs. 582,941/-.


Mr. Alexis LovellMr. Anil AmarasuriyaMr. Jitendrakumar Warnakulasuriya(Consultant)

Mr. Avancka Herat


11.2 Unit Holdings of the related parties of NAMAL High Yield Fund as at 31 March is as follows. Name Relationship Value of Unit Holding As at 31.03.2013 Mr. H.A.Herat Executive Director of National Asset Management Limited Rs.9,546,399 (817,994 Units)


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NATIONAL ASSET MANAGEMENT LIMITED

DIRECTORS

Mr Alexis Lovell – Chairman

Mr. Ajith Wijesekera- Deputy Chairman

Mr. Anil Amarasuriya

Mr. Jitendrakumar Warnakulasuriya

Mr. A N Fonseka(Alternate: Ms. M. Gunawardhene)

Mr. T W De Silva

Mr. Avancka Herat

Ms. Khoo Siew Bee

Corporate Information

UNIT TRUST INFORMATIONMANAGEMENT COMPANY

TRUSTEE & CUSTODIAN

AUDITORS

BANKERS

LAWYERS

National Asset Management Ltd7th Floor, Union Bank Head O�ce64,Galle Road ,Colombo 3.

Deutsche Bank AG86 Galle Road, Colombo 3.

Ernst and YoungChartered Accountants201, De Saram PlaceColombo 10.

Union Bank Of Colombo PLC64,Galle Road, Colombo 3

Deutsche Bank AG86, Galle Road, Colombo 3.

F J & G de SaramAttorneys-at-Law & Notaries Public216, De Saram Place, Colombo 10


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Declaration By Trustees And Managing Company

Declaration by Trustees 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 National Equity Fund, NAMAL Growth Fund, NAMAL Income Fund, NAMAL Money Market Fund, NAMAL IPO Fund and NAMAL High Yield Fund 1 hereby declare that

the requirements and guidelines for Trustees and Managing Companies of Unit Trust Funds set by the Securities and Exchange Commission of Sri Lanka have been complied with during the year..

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.

1.

2.

……………………………..……………………………..



……………………………………………

Authorised SignatoriesTrustee

National Asset Management Ltd.No.64, Galle Road, Colombo 03,T: 011 2445911www.namalfunds.com

ANNUAL 2012/2013 REPORT - namalfunds.com · ANNUAL REPORT 2012 / 2013 4 Dear Investors, It is my pleasure to send this report and accounts of the Funds to the investors for the year

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