NNAAMMAALL HHIIGGHH YYIIEELLDD FFUUNNDD

IInntteerriimm RReeppoorrtt

For the Six months ended 30th September 2014

National Asset Management Limited Union Bank Building, 64, Galle Road , Colombo 2. Phone : 2445911 Fax : 2445903 Email : info@namal.lk

Table of Contents

Report of the Investment Manager 1

Statement of Comprehensive Income 2

Statement of Financial Position 3

Statement of Movement in Unit Holders Fund 4

Notes To the Acccounts 5 - 6

Corporate Information 7

Interim Report 2014NAMAL HIGH YIELD FUND

NAMAL HIGH YIELD FUND 1H15 INTERIM REPORT

16%

2%

10%

34%

6%

32%

Repos

TrustCertificatesTreasury Bill

FixedDepositCorporateDebtCommercialPaper

5.50%

6.00%

6.50%

7.00%

7.50%

Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14

3 Months 6 Months 12 Months

Dear Investor, We take pleasure in presenting the interim report of the NAMAL High Yield Fund (NHYF) for the six months ended 30th September 2014. Performance review The NHYF generated a return of 3.51% for the six month period under review, 8.60% over 12 months, and 24.45% over 24 months. Interest income increased 114.0% to Rs. 311.27m. The fund recorded a profit of Rs. 257.05m for the six months under review, an increase of 100.0%. Market Review Benchmark 12 month Treasury Bill auction yields declined by 116 basis points to 5.89% during the six month period under review. CBSL has limited access to the Standard Deposit Facility at 6.50% to a maximum of 3 times per month, with further deposits to be accepted at 5.00%. Inflationary pressures moderated with the CCPI (annual average) declining from 4.2% to 3.5% by September 2014. The Balance of Payment (BOP) improved marginally, with the trade deficit declining to USD 5.2b in the first eight months of the year, compared to a deficit of USD 5.6b the prior year. Worker’s remittances have grown 10% to USD 4.5b from USD 4.1b, helping to offset the trade deficit and reduce external financing requirements. Earnings from tourism grew 32.1% to USD 1.4m from USD 1.1m the prior year. Portfolio Composition The Portfolio is constructed to maximize returns by investing in high yielding corporate paper. CBSL’s accommodative policy stance, large external borrowings, and slower credit demand resulted in excess liquidity in commercial paper markets. This is exerting downward pressure on commercial paper yields and credit spreads. As at 30th September 2014, 74.75% of assets were invested in Commercial Debt with the remainder in Government Securities. Sincerely, The Fund Management Team 31st October 2014

Performance Comparison

6M* (%)

12M (%)

24M (%)

NHYF 3.51 8.60 24.45

Asset Allocation

Treasury Bill rates

Source: Central Bank of Sri Lankla

*Period ending 1st April 2014 - 30th September 2014

1

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

2014 2013Note Rs. Mn. Rs. Mn.

INVESTMENT INCOMEInterest income 10 311.27 145.33 Total Investment Income 311.27 145.33

EXPENSESManagement and registrar fees (18.97) (1.93) Trustee and custodian fees (6.38) (0.77) Audit fees (0.07) (0.40) Professional charges - - Other expenses (0.16) (0.16) Total operating expenses (25.58) (3.25)

NET OPERATING PROFIT/(LOSS) 285.69 142.09

FINANCE COSTDistribution to Unit Holders - - Interest expense (0.08) (0.01)

PROFIT AFTER DEDUCTIONS AND BEFORE TAX 285.61 142.08

Income tax expense (28.56) (13.86)

PROFIT AFTER TAX FOR THE PERIOD 257.05 128.22

COMPREHENSIVE INCOMEUNREALIZED GAIN/LOSS (0.91) -

INCREASE IN NET ASSETS ATTRIBUTABLE TO UNIT HOLDERS 256.14 128.22

NAMAL HIGH YIELD FUNDInterim Report 2014

2

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

2014 2013Rs. Mn. Rs.Mn.

UNIT HOLDER' FUNDS AT THE BEGINNING OF THE PERIOD 7,376.86 -

Increase in net assets attributable to unit holders 256.14 43.61

Unit Creations 5,798.72 1,338.21

Payment on unit redemption (8,360.37) (692.85)

UNIT HOLDERS' FUNDS AT THE END OF THE PERIOD 5,071.35 688.96

Interim Report 2014

NAMAL HIGH YIELD FUND

4

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

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

the changes in presentation in the current period.

2 Income is recognised on an accrual basis.

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

income tax payable by the fund.

4 The profit and income of the fund is liable for income tax at the rate of 10% for the year of assessment 2013/2014 as

specified in part A of the second schedule to the Inland Revenue Act No. 10 of 2006.

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

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

NAMAL HIGH YIELD FUNDInterim Report 2014

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NOTES TO THE FINANCIAL STATEMENTSFor the 06 month period ended 30th September 7. FINANCIAL ASSETS - LOANS AND RECEIVABLES 2014 2013

Rs. Mn. Rs. Mn.7.1 Treasury Bills Repurchase Agreements

Capital Alliance Ltd 2.99 300.35 National Savings Bank - 19.07

DFCC 1,106.36 Wealth Trust Securities Ltd - 90.85 First capital Treasuries Ltd - 140.59

1,109.35 550.86

7.2 Investment in Commercial Papers

Merchant Bank of SL 541.74 74.95 Asia Capital PLC - 183.62 People's Leasing Co. PLC - 93.99 Siyapatha Finance Ltd - 180.27 Abans Fiance PLC 42.87 Abans Ltd 232.18 286.11 Hayleys PLC - - L B Finance PLC - - Mercantile Investment PLC 215.77 - DSI - - First Capital Holdings PLC 210.61 207.36 Softlogic Holdings PLC 235.32 403.65 Alliance Finance PLC 160.61 Lanka Orix Leasing Co. PLC - 317.61 Orient Financial Services - 321.87 Janashakthi 202.89

1,638.51 2,272.91 7.3 Placement with other Trust Certificates

Mercantile Investments PLC - - Commercial Leasing & Finace PLC - - Peoples Leasing 102.44

102.44 -

7.4 Investment in Treasury BillsCapital Alliance 485.22 -

485.22 -

7.5 Investment in Fixed DepositsOrient Finance 200.63 - Central Finance 521.13 - DFCC 1,017.18 -

1,738.93

5,074.45 2,823.77

8. OTHER RECEIVABLES 2013 2012Rs. Mn. Rs. Mn.

Unit Creation Receivable - 7.05 - 7.05

9. ACCRUED EXPENSES 2013 2012Rs. Mn. Rs. Mn.

Fund management fees payable 2.22 0.31 Trustee fee and Custodian fee payable 0.75 0.11 Audit fee payable 0.07 0.08 Redemption payable 3.18 -

6.22 0.50

10. INTEREST INCOME06 month period

ended06 month period

ended30.09.2014 30.09.2013

Rs. Mn. Rs. Mn.Interest on

Treasury bill repurchase agreements (Note 12.1) 103.67 7.44 Treasury Bills 10.95 Treasury bond - Commercial papers 118.43 131.27 Savings account 0.09 0.05 Fixed deposits 69.10 Trust Certificates 9.03 6.57

311.27 145.33

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

NAMAL HIGH YIELD FUNDInterim Report 2014

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CORPORATE INFORMATION

Trustee & Custodian Deutsche Bank AG86 ,Galle RoadColombo 03

Auditors Ernst & YoungChartered Accountants201, De Saram PlaceColombo 10

Bankers Deutsche Bank AG86, Galle RoadColombo 03

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

Managers & Registrars National Asset Management Limited (NAMAL)Union Bank Building64, Galle RoadColombo 03

National Asset Management LimitedBoard of Directors (30th September 2014) Mr. Alexis Lovell Chairman

Mr. Ajith Wijeyesekera Deputy ChairmanMr. Anil Amarasuriya DirectorMr. Palitha Gamage DirectorMr. Tyrone de Silva DirectorMr. Avancka Herat DirectorMs. Khoo Siew Bee Director

Interim Report 2014NAMAL HIGH YIELD FUND

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