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Financial & Operational HighlightsCeylon Guardian Investment Trust PLC – Annual Report 2009-2010

Rs.13.6 bnTotal Portfolio

Rs.7.1 bnLong-Term Portfolio

Rs.747 mnTrading Portfolio

Rs.9.00Dividend per Share

Rs.501.50Market Price per Share

Rs.8.1 bnMarket Capitalisation

Financial Summary - Group

(All figures in Sri Lankan Rupees thousands unless otherwise stated)

For the year ended 31st March 2010 2009

Group revenue 1,960,283 2,350,153

Profit from operations 1,333,367 598,457

Share of associate companies' profits 386,732 75,700

Profit before taxation 1,714,685 660,632

Profit for the year 1,679,579 653,169

Profit attributable to equity holders of the parent 1,320,373 292,727

Shareholders' funds 7,637,249 4,551,906

Net assets 9,203,278 5,605,706

Total assets 9,550,381 5,675,108

Return on ordinary shareholders' funds (%) 21.99 14.35

Earnings per share (Rs.) 68.65 14.47

Dividend proposed* 9.00 11.50

Net assets per share - Book value (Rs.) 444.03 224.95

Net assets per share - Market value (Rs.) 620.33 252.77

Guardian Fund Value 13,583,583 6,138,056

Stock Market data as at 31st March

All Share Index 3,724.6 1,638.1

Market Capitalisation (Company) 8,072,844 1,974,298

Share price - Year end (Rs.) 501.50 104.25

- High (Rs.) 540.00 187.50

- Low (Rs.) 103.25 78.00

* Based on share capital as at 31st March 2010, and subject to approval at the

Annual General Meeting.

Year of spectacular performance Amidst a turnaround in the Colombo Stock Market …



SYNOPSIS OF OUR PERFORMANCE AND MARKETS

It is with a sense of optimism that I write this year’s Statement, with the

dawn of a new beginning for Sri Lankagiven the end to the three decade longconflict in the North and East. A new chapter in the history books of theisland has been written and we onceagain recognize the efforts and sacrificemade by all Sri Lankans towardsachieving what many thought was quitean impossible task. What the country and its people achieved is not second togaining independence, and today post

conflict Sri Lanka opens new vistas of opportunity to develop the nation as anewly emerging economy in Asia. Every citizen and corporate has a role to play in the upliftment of our country in thecoming years and Ceylon Guardian isproud to be a part of it.

The Sri Lankan economy turned around,recording a reasonable rate of GDPgrowth of 3.5% which has brought in a

sense of confidence back to the country.The economic and market turnaround was very much evident in the second half of the year with both economic activity and stock market indices gaining rapidground during this period. The economy bounced back to 6% growth in the lastquarter of 2009, a trend reflective of theexpectations in the coming years. Hencepositive domestic factors have overriddenthe negative sentiments that wereprevalent in most developed economies

which have been in recession in 2009.The global economy has shrunk by 0.5%- 1.0% in 2009. The major economies of the world are making progress towards a

slow recovery and the IMF has forecastedgrowth in the region of 4.0% for the world and 8.5% for developing Asia in2010. We are encouraged by the forecastGDP growth of 6.5% for 2010 indicatedin the Annual Report of the CentralBank, and would anticipate that greaterinvestment and fiscal consolidation would be a pre-requisite for achievingthis.

Although the All Share Price Index of the Colombo Stock Exchange started theyear in negative territory at thebeginning of the year, the period starting June 2009 proved to be one of consistent growth. The Colombo Bourseheaded to its highest ever index level of 3844 in the ensuing period and crossedthe Rs.1 trillion mark for the first time.Turnover levels over Rs.1bn wererecorded most days demonstrating that

activity levels were sustainable and notprompted just by euphoric feelings.Sri Lanka’s Stock Exchange was up127% for the financial year, its highestever recorded performance, and rankednumber 2 in the world for year 2009.Incidentally your Company was theColombo Stock Exchange’s third bestperformer in this historic year.

Ceylon Guardian booked record profitsin the backdrop of a buoyant year.

Ceylon Guardian Investment Trust andits subsidiaries achieved a consolidatedprofit after tax of Rs.1.68 bn as againstthe Rs.653.2 mn achieved in the

previous year, an increase of 157% thatbest reflects the turn of fortunes of themarket. The mainstream investmentbusiness of Ceylon Guardian, inparticular, showed an increase in profits with the dramatic turnaround of themarkets during the period of review. Theprofit from the investment business wasRs.1.33 bn mainly derived from realisedcapital gains, dividend income andinterest income.

Ceylon Guardian Investment Trust PLCdid a repurchase of its shares during thefinancial year at its then prevailing netasset value of Rs.368/- whereby 15% of the issued shares of the company wererepurchased at a total cost of Rs.1.1 bn.The share repurchase was prompted with the divestment of several strategicstakes by the Ceylon Guardian Group inthe last financial year. Since these were

one off transactions, the Company believed it best to pay back the cashgenerated to its shareholders, in keeping with the philosophy of passing on thebenefits of strategic divestments directly to the shareholders. These share re-purchase schemes of the Company andits listed subsidiary received the approvalof the respective shareholders at anextraordinary general meeting convenedfor the purpose.

2 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Chairman’s Statement

Dear Shareholders,

I look forward to welcoming you to the 58th Annual General Meeting of the Company andtake pleasure in presenting the Annual Report and Audited Accounts of the Company for

the year ended 31st March 2010, in what turned out to be a year of great hope for

Sri Lanka and strong performance for the Company. …



Activity at the Colombo Bourseincreased during this period with thedoubling of the daily average turnover,

with most investors looking positively atthe equity market. Low interest rates saw the shift of investor funds from interestbearing investments to higher risk equity investments. With risk premiums of themarket coming down, investorconfidence was on the rise. The CeylonGuardian Group portfolio appreciatedin value to Rs.13.78 bn, an appreciationof 215% when compared with the AllShare Index appreciation of 127%

during the financial year. Stock marketvolatility continued, giving investorsmuch trading opportunities.

However, it is a reason for concern thatstill there are insufficient avenues forinvestors to gain access to key sectors of the economy through the listed equity market, notable among them thegarment sector, value added exports,utilities, transportation andinfrastructure. We urge policy makers tocreate appropriate avenues for both stateowned and private sector players in thesekey industries to be represented in thelisted market so that high quality institutional investors, both foreign andlocal, would be more attracted to takelong term positions in Sri Lanka.

Reserving a part of its cash needs provedto add value as Ceylon Guardian wasable to move in fast and react to change

of sentiment in the market. This enabledthe portfolio to capture new exposuresto sectors likely to grow more rapidly inthe current environment, includingbanking, tourism and retail.

Shareholders would note that majoracquisitions amounting to Rs.2.9 bn were made during the year in sectorsexpected to be the key drivers of economic growth in the years ahead. As

discussed in last year’s Annual Report weactively vetted several unlisted equity investments this year, in keeping with

our search for private equity participation in good business modelsbacked by dynamic management and with the ability to realize returns overtime. We are now invested in ventures which satisfied the private equity benchmarks of Ceylon Guardian. Goingforward, we see more opportunities forGuardian to participate in funding pre-IPO ventures for superior returns. Inkeeping with our investment philosophy

of gaining exposures to growth sectorsthrough well managed companies, wehave revamped the Guardian portfolioto reflect the new opportunities that would arise in a rejuvenated Sri Lankaneconomy. These include stakes in listedcompanies, as well as unlistedcompanies.

The Board has recommended a first andfinal dividend of Rs. 9/- per equivalentordinary share, lower than theexceptional dividend of Rs.11.50 perequivalent ordinary share last year. Thelatter was made out of the proceeds fromsale of strategic shares that generatedsurplus cash for the company. This year’sdividend too reflects the significantgrowth in profits arising from theexceptional market conditions thatprevailed. Profits would be moderate infuture, in line with market fluctations.The total return to shareholders in the

year under review is 369% taking intoaccount the capital appreciation of theshare price and the return of capital by way of the share repurchase proceeds.

Your company has followed prudentinvestment policies by adopting marketvalue based accounting for both longterm and short term holdings, thusbringing our balance sheet up to date toreflect the true commercial value of the

underlying assets of the company. Thisresulted in a positive provisioning of Rs.145 mn being made in the profit and

loss account of the year under review forthe short term trading portfolio whilethe appreciation on the long termportfolio of Rs.2.84 bn is reflected in thebalance sheet reserves.

THE FUTURE …………ourcommitted path

For Ceylon Guardian, many opportunities await with the return of peace and stability. The choice of investments in the Sri Lankan equity markets are growing and the appetite forentrepreneurial equity capital will risefurther as corporates expand and comeinto the mainstream of the capitalmarkets for fund raising, given theconducive investment environment thatprevails now. It will be an opportunity forCeylon Guardian to partner in sharingthe risks and rewards of entrepreneurialcapital through the listed market and viaprivate equity investments. The Ceylon

Guardian asset base serves as the platformfor entry to these investments. We seeopportunities in many sectors as wideranging as infrastructure, tourism,financial services and retail, whereby wecould make inroads in exploringinvestments opportunities in future.

Our search for high quality investmentopportunities in the private equity space would gather momentum in time to

come since we see more potential in thissegment, both for diversification as wellas better returns. We will leverage our inhouse management expertise within theGroup to add value to our private equity projects, especially in instances where we would seek management participation.In addition, we would consider formingpartnerships with reputed local andinternational players to participate inprivate equity projects in Sri Lanka.

Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010



4

Furthermore, as indicated in theRoadmap 2010 published by the CentralBank of Sri Lanka, we look forward to

institutional investors obtainingclearance to invest a proportion of theirfunds in overseas markets to improve thediversity of returns.

Guardian Fund Management Ltd(GFM) the fund management arm of Carson Cumberbatch PLC manages theportfolios of the investment companiesof the group. It is registered with theSecurities and Exchange Commission of Sri Lanka as an Investment Manager while Ceylon Guardian Investment Trustand its subsidiary Ceylon InvestmentsPLC are registered as underwriters.GFM manages the largest listed equity fund in the country vested with theGuardian Group with a fund size of overRs.13 bn under management. Hencegiven the fund size and volume of business it does, it can command largerdeal flows in the market thusstrengthening its ability to commandgood prices. It has built an expert fundmanagement team centered on research,compliance and systems to handle thefund management operation in house.Ceylon Guardian’s investment policiesare set at the highest level involving theexpertise of the Board of Directors andthe Investment Committee that poolsdiverse expertise.

Going forward, we are looking to

diversify our fund management businessby extending the operation to managingthird party funds. This would furtherincrease the volume of funds undermanagement and extend our reach inthe market while adding value to ourclients through our home grownexpertise. Top priority has been given toactively raise funds for the Sri LankaFund, the dedicated country fundmanaged by us and we see this as an

opportune time to raise capital given thepositive sentiment internationally towards Sri Lanka’s successful end to

terrorism. We have signed up anagreement for the distribution of thefund overseas with a well acceptedmarket intermediary. Several moreavenues are being explored to take thisfund to the international level, thusmaking Ceylon Guardian a player withan outward market reach in its business.

I would like to thank the shareholdersfor their confidence in our managementand expertise during the bad times theequity market went through, and look forward to a brighter journey ahead.Many exciting and novel opportunitiesare likely to come our way as a key player in the local capital market and weinvite you to share in this journey infinancing the forward march of ourcountry. It will indeed be a challenge forus to continue to sustain ourperformance as market volatility increases in response to changes inforeign and domestic factors. It has beensaid that “resources are limited butcreativity is unlimited” and we will keepthat thought with us as we attempt toinject productivity to every rupee in ourportfolio.

Finally and most importantly, weacknowledge those who made ourprogress possible. To the regulators &our business associates, we extend our

appreciation for their continuedsupport. I like to thank the members of our staff for their valued contributionand place on record my appreciation tothe members of the Audit Committeefor their guidance and my colleagues onthe Board for their valuable inputs. I welcome Mrs. Rose Cooray to ourBoard, who brings with her many yearsof valuable experience gained during herillustrious career at the Central Bank of

Sri Lanka. I am sure her experience willadd diversity to our decision makingprocess. We look forward to all our stake

holders joining us in taking the CeylonGuardian Group to new heights in theemerging, new Sri Lanka.

(Sgd.)Israel PaulrajChairmanColombo

12th May 2010

Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Chairman’s Statement (Contd.)



Contributors to GDP growthThe turnaround in the economy wasvery much evident in the second half of the year with an expansion of 4.2% in Qtr 3, after a minimalgrowth of 1.6% in Qtr 1 and 2.1%

in Qtr 2 in year 2009. Thereby Sri Lanka’s economy is estimated tohave grown by 3.5% in the currentyear in comparison to an annualgrowth rate of 6.0% recorded in2008. The low GDP growth in thefirst half of 2009 was due to theheightened military offensive andthe global recession having its affecton the domestic economy. Despitethe slow down in GDP growth, the

country was able to maintain its percapita income at US$ 2,030 in year2009 the same level as in 2008.However the economy bounced back to 6.2% growth in GDP in the lastquarter of 2009, with forecastsexpecting 6%+ GDP growth overall

in 2010 followed by higher levels

thereafter.

The Economist Intelligence Unit of the UK has placed Sri Lanka amongstthe top ten fastest growing globaleconomies in 2010, alongside Chinaand India.

The economy has proved its resilience

amidst domestic and external turmoil.The major divisions of economicactivity, agriculture, industry andservices registered positive growthrates of 3.2%, 4.2% and 3.3%respectively. Impediments and barriers which affected the agriculture andfisheries industry in many districtsdue to security concerns, faded away swiftly with the end of terrorism.Some of the best performing subsectors recording growth were rubberproduction 7.9%, fisheries 6.9%,mining 8.2%, hotels & restaurants13.3% and transport &communication 6.6%. Thecontribution to total GDP from themain sectors remained unchangedfrom the previous year, being 12%from agriculture, 29% from industriesand 59% from services. The key toSri Lanka’s growth in the past hasbeen favourable weather conditions as

Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Managers’ Review

Synopsis Of The Macro Economic

Environment Sri Lankan economy sees a turn around …

GDP growth forecaste, 2010, %

Fastest ten

Source : Economist Intelligence Unit

0% 2% 4% 6% 8% 10% 12%

Qatar

Turkmenistan

Azerbaijan

China

Uzbekistan

Congo-Brazzaville

Angola

Ethiopia

India

Sri Lanka

24.5

Slowest ten

4% 3% 2% 1% 0%

Hungary

Jamaica

Barbados

Estonia

Belarus

Ireland

Latvia

Puerto Rico

Venezuela

Lithuania

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Quarterly Growth Rates

P e r c e

n t a g e

Agriculture Industry Ser vices GDP

1 s t Q t r 0 6

2 n d Q t r 0 6

3 r d Q t r 0 6

4 t h Q t r 0 6

1 s t Q t r 0 7

2 n d Q t r 0 7

3 r d Q t r 0 7

4 t h Q t r 0 7

1 s t Q t r 0 8

2 n d Q t r 0 8

3 r d Q t r 0 8

4 t h Q t r 0 8

1 s t Q t r 0 9

2 n d Q t r 0 9

3 r d Q t r 0 9

4 t h Q t r 0 9

7.9% 7.7% 7.7%

6.2% 6.1% 6.4%7.0% 7.6%

6.2%7.0%

4.3%

1.5%2.1%

4.2%6.2%

6.3%



the country’s economy is moreagrarian based. Thus a good cropresults in income re-distribution and

wealth among the people and this would continue its importance in themedium term as well.

Sri Lanka – macro economicfundamentals and how they fared

Balance of payments

For the year 2009, exports contractedby 12.7% amounting to US$ 7,085Million and imports contracted by 27.6% amounting to US$ 10,207Million which resulted in a reducedtrade deficit of US$ 3,122 Millioncompared to the trade deficit of US$ 5,981 (YE 2008). The overallbalance of payments which was a

deficit of US$ 1,385 Million in 2008recorded an unprecedented surplus of US$ 2,725 in 2009. Privateremittances from the large base of Sri Lankan expat workers in theMiddle East and elsewhere improvedin the current year with confidencegaining after the end to the war. This was remarkable, given the overallrecessionary conditions in the rest of the world.

Consequently the gross official reservesas at end December 2009 improved toUS$ 5,096 which was sufficient to

finance 6.1 months of imports, aremarkable improvement from thebeginning of the year where grossofficial reserves depleted to a point where it was only sufficient to finance1.5 months of imports. Confidence by the diaspora and their passion torebuild the war torn North East regionhas seen an influx of worker remittancesin the second half of the year and this islikely to improve in year 2010 too.

The Sri Lankan currency

The Sri Lankan Rupee closed atSLRs.114.38 against the US$ as atend December 2009 (end Dec 2008 –SLRs.113.14), amounting to adepreciation of 1.1% during the year. Against currencies such as the Eurothe Rupee depreciated 3.5% andagainst the Sterling the rupeedepreciated 11.3%. In addition toremittances, currency depreciation was also contained due to inflows of foreign investor funds to US dollardenominated and rupee sovereignbonds due to the liberlisation of thebond market and Treasury bill marketfor foreign investors. The reduction in

country risk and attractive ratesoffered, enticed investors togovernment bonds. During thecalendar year 2010 for the period January to March the Rupee hasmarginally appreciated by 0.30%against the US$, thus beingcategorized as a more stable currency.

The Government of Sri Lanka wasactive in the international bond

market by issuing Sri Lankadevelopment bonds at attractive yieldsoffering a reasonable alternative

investment to foreign investors. Thebond markets were partially liberalised with the opening up of the sovereignbond market along with short termTreasury bill markets, with foreigninvestors being able to take up 10% of these government securities now inissue at very attractive rates. In fact,one of the recent dollar bond issues inthe international market wasoversubscribed by foreign investors by

13 times. With these changes, interestrates stabilized in the short term andthe currency strengthened,supplemented by capital flows fordevelopment from bilateral sources.The IMF loan of US$2.6bn approvedfor Sri Lanka was a vote of confidencein the policy makers’ attempts at bettereconomic management. The thirdtranche which was delayed due to thenon achievement of budgetary targetsis expected to be reviewed shortly.

6 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010

-6

-3

0

3

6

9

12

15

GDP & sector growth rates

2007

%

2008 2009

G D P

A g r i c u l t u r e

M a n u f a c t u r i n g

E l e c t r i c i t y

C o n s t r u c t i o n

W h o l e S a l e & R e t a i l

H o t e l & R e s t a u r a n t s

T r a n s p o r t &

C o m m u n i c a t i o n

B a n k i n g ,

I n s u r a n c e Y &

R e a l E s t a t e

110

111

112

113

114

115

116

117

118

119

120

121

2 9

- M a r - 0

9

2 5

- A p r - 0

9

2 3

- M a y - 0

9

2 0

- J u n - 0

9

1 8

- J u l - 0 9

1 5

- A u g - 0

9

1 2

- S e p - 0

9

1 0

- O c t - 0

9

7 - N

o v - 0

9

5 - D

e c - 0 9

2 - J a n - 1

0

1 3

- F e b - 1

0

1 3

- M a r - 1

0

Exchange Rates

US$/Rs.

For calendar year 2010 (toMarch) the Rupeeappreciated 0.30%,to Rs.114.04 from Rs.114.38

Year 2009 the Rupeedepreciated marginally by 1.1%

Year 2004 2005 2006 2007 2008 2009

Remittances US$ (mn) 1,350 1,736 1,904 2,214 2,565 2,927

Growth in remittances 12% 28% 10% 16% 16% 14%

Managers’ Review (Contd.)




Inflation and interest rates

The Monetary Board set its policy direction by reducing statutory reserve

ratios in order to ease liquidity pressuresthat were prevalent in the money markets and to facilitate lending to kick start economic activity. Severalmeasures were taken to consciously lower domestic interest rates. TheCentral Bank of Sri Lanka reduced itskey policy rates by 300 basis points and225 basis points respectively on therepurchase rate and reverse repurchaserate during the calendar year 2009.

Currently repurchase rates are at 7.50% & Reverse Repurchase rate at 9.75%. Inter bank call money rates havebeen less volatile than in the pastranging from a low of 8% and a high of 13%. The 3 month T-Bill rate has cometo single digits of 7.73% (single digitslast seen in Nov 2005) which reduced960 basis points in the calendar year while the 12 month T-Bill rate reducedby 975 basis points to 9.33% as at endDec 09. As at 31st March 2010 the 3month T-Bill rate is at 8.45% and 12month T –Bill rate is at 9.47%. On thelong end of the yield curve thegovernment 2-3 year bonds arecurrently trading around 10.70% -11.00%.

Inflation as measured by the point-to-point change in the ColomboConsumers’ Price Index (CCPI)

reduced from 14.4% as at endDecember 2008 to a low of 0.70% inSept 09 but picked up to 4.8% by endDec 09 and 6.3% as at end March2010. Also the CCPI annual averagechange peaked at 22.6% as at endDecember 2008 and currently (March2010) is at 3.2%, indicating a drop infood prices & commodity prices. Thedecrease in world oil prices and sharpdrop in commodity prices in

international markets led to downwardrevisions in domestic prices of goods,thus contributing to lower importinflation. However, the signs of increasing oil prices and inching up of inflation in recent months are trends tobe carefully watched, as it could onceagain lead to import led inflation.

One would have expected credit tothe private sector to grow under thesecircumstances, but we are yet to see arecovery with most analysts expectingthis to materialize in the second half of 2010, as many companies hit fullcapacity utilization levels and feel theneed to upgrade their working capital.Furthermore, as a trade basedeconomy, the relaxation of importrestrictions done so far could besupplemented by tariff cuts in themore mass market consumer items tohelp stimulate demand and hopefully

raise more revenue.

The fiscal deficit of 9.8% reported for2009 is a cause for concern forbusiness, since it could once againlead to higher levels of inflation andthereafter higher interest rates if thegovernment resorts to borrowing inthe local market to bridge the deficit.It is essential that this deficit iscontained without causing significant

cuts in essential welfare expenditureon health and education services andinfrastructure development. The

budget deficit if left unchecked, would actually be a concern for thepoorest segments of society who would have to undergo hardship if further indirect taxes are imposed as arevenue generating measure, Foreignfinancing of the deficit would alsopose undue pressures by way of interest payments in future.

Thus while we do sense that there aremany challenges to be addressed inthe economic front, we are hopefulthat Sri Lanka now has the economicstrength to overcome these challengessuccessfully and place the economy ona more robust footing into the future.

Much commitment in the areas of economic reform and fiscal policy making would be required for thisprocess.

3 M o n t h s

6 M o n t h s

1 2 M o n t h s

2 Y e a r s

3 Y e a r s

4 Y e a r s

5 Y e a r s

Yield Curve

31st Mar 2010

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

31st Mar 2009

14.6%

16.2%

16.6%

18.1% 18.1% 18.0%

17.0%

8.5%

9.2%

9.5%

10.7%

11.0%

12.0% 12.1%

0

5

10

15

20

25

2 8 - M a r - 0 9

2 8 - A p r - 0 9

2 8 - M a y - 0 9

2 8 - J u n - 0 9

2 8 - J u l - 0 9

2 8 - A u g - 0 9

2 8 - S e p - 0 9

2 8 - O c t - 0 9

2 8 - N o v - 0 9

2 8 - D e c - 0 9

2 8 - J a n - 1 0

2 8 - F e b - 1 0

2 8 - M a r - 0 9

Economic Indicators

%

T.Bi ll - 12 months P ri me l endi ng rate

Inflation-annual avg. change

Economic indicators stabilising




review and this strength continuedmainly supported by local investors.By regional standards CSE valuationsstill appear to be modest whencompared with Price Earningsmultiples for an emerging market.Colombo in the past has seen averageP/E’s ranging between 13 -14multiples and the all time high hasbeen 18 times. Colombo’s market capto GDP ratio of 23% illustrates that ithas yet room to mature to reach thevalues commanded by more matureeconomies.

The bullish sectors of the Colombo

Stock Exchange

Construction & Engineering hasappreciated more than 300% for thefinancial year due to the bullishsentiment with the re-building of the war torn areas. Other sectors that haveperformed more than 200% for theperiod of review have been theDiversified, Hotels & Travels, OilPalms and Trading sectors. TheBanking & Finance sector whichaccounts for 18% of market cap hasgrown by 130%, above the marketperformance of 127%. Thetelecommunications sector the largest, which accounts for 21% of the marketcapitalization of the CSE failed todeliver returns given the intense pricecompetition in the industry following

high levels of penetration and lowerdisposable incomes.

Domestic investors dominate the CSEbut not for long

Local investors continued theirdominance at the Colombo bourse with local participation being in theregion of 60 - 80% during the yearvis-a-vis 50% on average in the past.

A net foreign outflow of Rs.784 mn was recorded for the calendar year2009 due to one off selling by theGalleon Fund in Sri Lanka (a key player in the past) to meetredemptions due to internal issuesrelated to that Fund. During the sameperiod of review foreign inflows wererecorded to the value of Rs.43,190

mn. A net inflow of Rs. 13,953 mn was recorded in 2008. However localinstitutions and foreign funds wereaggressively seen picking up liquidblue chip counters at low price levels.During the current year 2010 the netforeign outflow todate amounts toRs.13,075 mn.

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

CSE - Mkt Cap/PE

Rs. bn P/E

Market re-rates to all timehigh’s of 18 P/E multiplesafter the end to the 3 decadelong terrorist problemin the island

M a r - 0 8

A p r - 0 8

M a y - 0 8

J u n - 0 8

J u l - 0 8

A u g - 0 8

S e p - 0 8

O c t - 0 8

N o v - 0 8

D e c - 0 8

J a n - 0 9

F e b - 0 9

M a r - 0 9

A p r - 0 9

M a y - 0 9

J u n - 0 9

J u l - 0 9

A u g - 0 9

S e p - 0 9

O c t - 0 9

N o v - 0 9

D e c - 0 9

J a n - 1 0

F e b - 1 0

M a r - 1 0

Market Capitalisation Market PER

5.0

7.0

9.0

11.0

13.0

15.0

17.0

19.0

Daily Avg. T/O Vs Mkt. PE

Daily T/o Avg

T i m e s

R s . m n .

Market PER

M

a y - 0 5

J

u n - 0

5

J u l - 0 5

A

u g - 0 5

S

e p - 0

5

O

c t - 0 5

N

o v - 0

5

D

e c - 0 5

J a n - 0

6

F

e b - 0

6

M

a r - 0 6

A

p r - 0 6

M

a y - 0 6

J

u n - 0

6

J u l - 0 6

A

u g - 0 6

S

e p - 0

6

O

c t - 0 6

N

o v - 0

6

D

e c - 0 6

J a n - 0

7

F

e b - 0

7

M

a r - 0 7

A

p r - 0 7

M

a y - 0 7

J

u n - 0

7

J u l - 0 7

A

u g - 0 7

S

e p - 0

7

O

c t - 0 7

N

o v - 0

7

D

e c - 0 7

J a n - 0

8

F

e b - 0

8

M

a r - 0 8

A

p r - 0 8

M

a y - 0 8

J

u n - 0

8

J u l - 0 8

A

u g - 0 8

S

e p - 0

8

O

c t - 0 8

N

o v - 0

8

D

e c - 0 8

J a n - 0

9

F

e b - 0

9

M

a r - 0 9

A

p r - 0 9

M

a y - 0 9

J

u n - 0

9

J u l - 0 9

A

u g - 0 9

S

e p - 0

9

O

c t - 0 9

N

o v - 0

9

D

e c - 0 9

J a n - 1

0

F

e b - 1

0

M

a r - 1 0

0

500

1,000

1,500

2,000

2,500

3,000

5

6

7

8

9

10

11

12

13

14

15

16

17

18

1920

Turnover -Domestic vs Foreign

% 0 20 40 60 80 100

0 20 40 60 80 100

T/ O -Domestic T/O-Foreign

Net Foreign inflow (Rs. Mn)

Mar 10

Feb 10

Jan 10

Dec 09

Nov 09

Oct 09

Sept 09

Aug 09

Jul 09

Jun 09

May 09

April 09

Mar 09

-8034

-2106

-2935

-520

-2355

+1340

+871

-176

+533

-97

-1917

-484

+2027

Sector Movementfor 2009/10

Banking & Finance +130%

Diversified +203%

Construction & Engineering +391%

Hotels & Travels +204%

Trading +573%

Oil Palms +208%

Investment Trusts +192%

ASI +127%



10

World markets – showed dramaticrecoveries in the second half of 2009 on world recession fears

easing

The global economy shrank in 2009

by 0.5% - 1.0% with most developed

economies facing recessions. However

many global equity markets have

slowly and steadily recovered in 2009

with the anticipated fallout being

milder than expected.

All equity markets internationally faced turbulent times during first half of the period of review due to themortgage crisis, credit crunch andrecession fears. Activity at theColombo Bourse too declined withmost investors shunning the equity market given the fear of the financialcrisis faced by the USA and Europespreading to Asian countries. Hencethe market P/E of the CSE wastrading at a significant discount,making Colombo one of the cheapest

markets in the South Asian region onP/E multiples. The war situation inthe first five months exacerbatedSri Lanka’s problems. Hence the re-rating of the market was long over duefrom an over sold position.

In the second half of the year equity markets forged ahead to positiveterritory in light of improvingeconomic fundamentals. Most

regional markets, China and India inparticular, recovered in 2009 forseveral reasons which are mostly related to internal developments inthose markets and the stimuluspackages which held up consumptionexpenditure. It is encouraging to notethat investor interest has returned toall key markets and it remains to beseen in which markets the recoveriesrecorded so far would remain

sustainable. The Colombo Stock Exchange was the second bestperforming market in the world in2009. The Dow Jones Indexappreciated 16.5% and FTSE by

18.2% for the year 2009 vis-a-vis Asian markets as represented by SSE74.2%, Hang Seng 57.5%, and BSESensex up 70.0%.

Inverse relationship between interest

rates and stock market performance

evident in Sri Lanka

High interest rates have been adampener in the past for equity markets. Further, the high risk

premium of the CSE deterredinvestors in equities, promptinginvestors to be in safe haven capital

guaranteed investments such as fixedincome in the early part of 2009. Theinverse relationship between fixedincome investments and equities ashighlighted below indicates that intime to come equities might continueto be attractive.

On a more macro level, the singlemost important factor in revivingeconomic activity is a low interest rateregime and presently rates have edgeddown with the easing of inflation tosingle digits and the absence of severeupward pressure from internationalcommodity prices. This is a positivefactor for both corporates and equity markets. Stock market activity through Initial Public Offers andRights issues revived with a Rs.5.8 bnbeing raised during the year, withmost issues being heavily oversubscribed. Dividend yield of themarket marginally came down to3.5% in 2010 from 5.6% recorded inyear 2009.

Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Managers’ Review (Contd.)

Index Performance for 2009

% 0 10 20 30 40 50 60 70 80 90 1 00 110 120 130

SSE Composite

Nikkei

FTSE

Dow Jones

ASPI

Karachi Index

Straits Times

BSE Sensex

Hang Seng 57.5%

70.0%

50.5%

51.2%

125.2%

16.5%

18.2%

16.2%

74.2%

Index Performance January to March 2010

% -6 -4 -2 0 2 4 6 8 10

SSE Composite

Nikkei

FTSE

Dow Jones

ASPI

Karachi Index

Straits Times

BSE Sensex

Hang Seng -2.9%

0.4%

-0.3%

7.8%

10.0%

4.1%

5.2%

4.9%

-5.1%

85

110

135

160

185

210

235

260

285

310

335

360

385410

435

460

485

510

535

560

Equity vs Fixed Income

T.Bill - 3 months

%ASI/Milanka

Composite

T.Bill - 12 months

ASI Comp Milanka Comp

M a r . 0

4

S e p . 0

4

M a r . 0

6

S e p . 0

6

M a r . 0

7

S e p . 0

7

M a r . 0

8

S e p . 0

8

M a r . 0

9

S e p . 0

9

J a n . 1

00

2

4

6

8

10

12

14

16

18

20

22 Inverse relationshipbetween interest rates andMarket performancehighlighted




Guardian Fund Performance

During the year under review, theCeylon Guardian Fund built positionsin identified companies in selectedsectors such as banking & finance,retail, food & beverage and diversifiedsectors which we have identified to bethe growth sectors in the future. We

aggressively increased our exposure tothe banking sector as we believe thatthis sector would first feel the turnaround in the economy in its primary role as a financial intermediary.Investments to the tourism sector,another obvious contender for highgrowth, were increased by way of buying directly into hotel stocks andthrough the diversified conglomerates.

The acquisitions are in keeping with ourstrategy of mapping our portfolio tobest represent economic trends andoverweighting on those sectors where weanticipate above average economicgrowth to be recorded. A bottom upapproach was applied when selectingstocks taking into account financials,industry presence, business model, goodmanagement and strong balance sheet. We opted for major stakes when

investing for the long term portfolio inkeeping with our investment philosophy of “investing selectively but takingmeaningful positions”. In reachingtowards the dual investment objectivesof the portfolio and adding dynamismto the year’s result, the trading portfolio was strengthened and structured toexpedite quicker gains in the short term.

The bulk of the Guardian Fund iscurrently invested in long term listed

equities which cover an investmenthorizon of 3-5 years. A bottom upapproach of stock selection is applied, where individual company fundamentals are given precedenceover asset and sector allocations of theportfolio. When a long terminvestment is selected, it is usually the

practice to acquire a position that would make Guardian a significantinvestor in that entity. Given below are our top investments and the stakes we hold in those companies.

Our investment choices are based ondetailed financial valuations andevaluation of key performanceindicators. Some of the characteristics we look for in our investments is thatthe business entity should be ingrowth sectors, with financial stability,

sound balance sheet and capitalstructure; and backed by dynamicmanagement.

On the other short end, the portfoliois managed on the basis of exploitingopportunities to capture quick valueby investing in relatively under-valuedstocks. Short term price movementsthat reflect changes in investorsentiment, company announcementsand demand / supply conditions are

exploited within a one year horizonfor active profit booking to enhanceannual shareholder returns. Oncetarget returns are achieved,investments are consciously divestedand profits booked.

Ceylon Guardian now stands at a

fresh phase of growth in its history, where having realized profits for itsshareholders and returned a part of their investment at a capital gain; theCompany has also re-invested for theeconomic turnaround given the peacedividend in the country. Sri Lankapresents a unique opportunity forinvestors who would benefit from theupside created by the dramaticturnaround in the country’s fortunes;

and the market is likely to poseopportunities for investors such as us with the dual objectives of enhancinggrowth in the long term and addingquick value in the short term.

The long term listed portfolio for thefirst time ventured into the bankingand financial services sector by acquiring 1.4% of Commercial bank,0.5% of DFCC, 1.3% of HNB and

5.1% of HNB Assurance. We optedfor stakes in the two largest retailbanking networks in the country, withaccess to all levels of clientele andability to lend at competitive ratesgiven their deposit mobilizationstrengths. We believe these two banks will be best positioned to quickly capture the growth opportunities inlending that would arise, given theirrelatively large capital base and ability to even compete with the giant state

Our Portfolio Review A case of being selective about where we invest …

Top 5 Holdings - excluding related companies

Market Value % StakeCompany Name Rs.mn held

1 John Keells Holdings 2,512 2.2%2 Aitken Spence 1,257 3.4%3 Commercial Bank 649 1.4%4 Cargills 496 3.1%5 Hatton National Bank 471 1.3%



12

banks. The smaller banks areattractively valued and as such thosepositions were built within the short

term portfolio. HNB’s insurancesubsidiary, though a relatively smallerplayer in the market, we believe wouldbe able to effectively use its strengthsand conservative management style tobuild a long term competitiveposition in the insurance industry.

Also during the year under review weincreased our stakes in the followingcompanies; Cargills to 3.1% a leadingsuper market and retail chain in thecountry with over 125 outlets, AitkenSpence to 3.4% a diversified sectorcompany with exposure to ports,power and leisure, Ceylon Hospitals to3.0% a leading hospital group and2.7% in Aitken Spence HotelHoldings, a leading hotel chainoperator and manager in the region, whose properties and managementcapability would have an edge incapturing the most lucrative niches inthe tourism industry in Sri Lanka andthe region. We continued to hold asubstantial share of our portfolio in John Keells Holdings amounting to a2.2% stake. We forecast growth in allthese industries and companies tocome at a pace that would exceedaverage economic growth and we arepositive on their business models,management strengths and cashgeneration ability.

Guardian was a net purchaser in themarket amounting to Rs.2.1 bn. Thepurchases were financed mainly by transforming from selling existingholdings in under performingequities. During the period, salesproceeds of Rs.1.7 bn was raised by selling substantial blocks of JKH atvarying prices and realising Rs.648mn, of which AHPL Rs.101 mn,

Distilleries Rs.380 mn and TokyoCement Rs.62 mn. Careful use of debt from time to time flexed

Guardian’s capacity for acquisitions.

Our Investment Performance –

Multiple goals achieved via varying

time frames

The total value of the GuardianGroup portfolio stood at Rs.13.89 bnas at 31st March 2010 from Rs.4.40bn as at 31st March 2009, anappreciation of 216% against the AllShare Index appreciation of 127% forthe same period. The portfolio of theGuardian Group has been segmentedinto long term and short term(trading) to achieve multipleinvestment objectives for theshareholders – that of long termsustainable growth and short termcash generation. Thus the long termcore stocks of the portfolio providethe foundation for sustained growth, whilst the trading portfolio addsmuch needed dynamism by exploitingmarket opportunities and generatingcash for dividend and returns. A combination of different portfoliomanagement styles are adopted whenmaking investment decisions on thelong term portfolio and short termtrading portfolio, the former being onfundamental valuations and latter ontemporary anomaly of price. The longterm portfolio when investing putsemphasis on factors such as quality of

management, industry leaderposition, business model and balancesheet strength. On the other hand thetrading portfolio takes into accountunexploited valuation gaps, marketinformation and prices the stock fortrue value in an annual timeframe.Thus price anomalies are exploitedand profits booked when a target rateof return is achieved.

Thus the investment horizons havebeen set to match the objectives. Accordingly the short term portfolio

comprises trading stocks with a shortinvestment horizon of less than oneyear, aimed at realizing capital gainsby riding market cycles. The longterm portfolio consists of shares witha maturity period of three to five yearsor even beyond.

In summary, the year end valuation of the different components of ourportfolio are as follows:

The long term portfolio performancerecovered superlatively with the marketrecovery and exceeded marketperformance by a wide margin. Ourphilosophy of investing for the long termand riding out temporary fluctuations of the market paid off with the portfolio weathering the roughest years in asustainable manner. The continuous


M a r 0 5

J u n e 0 5

S e p 0 5

D e c 0 5

M a r 0 6

J u n e 0 6

S e p 0 6

D e c 0 6

M a r 0 7

J u n e 0 7

S e p 0 7

D e c 0 7

M a r 0 8

J u n e 0 8

S e p 0 8

D e c 0 8

M a r 0 9

J u n e 0 9

S e p 0 9

D e c 1 0

M a r 1 0

Long Term Performance 2005 to 2010

ASI Comp

0

50

100

150

200

250

300

GG Comp

C o m p o s i t e

GG Comp ASI Comp

FY 08/09 - 43% -36%FY 09/10 +187% +127%

+136%

+113%

31.03.2009 31.03.2010

Rs.mn. Rs.mn.

Short term 344.48 747.39

Long term 2,280.89 6,536.67

Strategic 1,777.11 6,606.69

4,402.48 13,890.75




monitoring of investments and ourresearch process that analyses changingfundamentals and reviewing the impact

to bottomline on key performanceindicators was the key to the success of the long term portfolio. The turn aroundof the long term portfolio remained low given the long investment cycle pursued.The long term portfolio was up 187%against the ASPI of 127%

The short term portfolio too overperformed the benchmark All ShareIndex. Due to a dormant first quarter,the trading portfolio was very much incash to mitigate the downside given theuncertainties of the market. However inthe second half the year the tradingportfolio aggressively bought into stocksin the banking and tourism sectors. Thetimely shifting of funds enabled the

trading portfolio to perform steadily.The short term portfolio was up 117%against an increase in ASPI of 127% with almost 100% of the portfoliobeing traded in the year.

Private Equity Initiatives

Guardian explored many privateequity ventures at the pre IPO stage

during the period of review. Thecompany is seriously looking to builda portfolio exposure into suchinvestments as the conventionalquoted equity market does not offerexposure to certain sectors of theeconomy and these projects are likely to offer above market returns. Wehave evaluated many projects duringthe financial year and invested wherethe returns and risk profiles matched

our set internal benchmarks. We haveearmarked this in our future growthplan and will continue the process of evaluating such projects as we like tocapture opportunities for investmentat the infant stage, thus enabling tomaximize profits and add value tomanagement. Early entry to a projectprovides opportunities of exploringthe entrepreneurial spirit and qualitiesof high quality private equity venturesand builds commitment with ourinvestment team binding togetherourselves as investors and thepromoters at an early stage.

In the current year, the Fund made aninvestment into the retail sector by committing to invest Rs.200 Millionand taking a 4.3% stake in theunquoted Softlogic Holdings Ltd, anaggressive retail company having many international agencies such as Nokia,

Dell, Panasonic and Samsung undertheir wing, and a strategic stake in the Asiri Hospitals Group. We haveinvested in the company for its nextphase of growth with expansion plansunderway to roll out customer centersto market all its brands under theconcept of a one stop shop and to ridethe prospective retail boom in thecountry given the rise in per capitaincomes. The timely entry to the retail

75

100

125

150

175

200

225

250

Trading portfolio performance FY 2009/10

NAV Comp ASI Cop m

2009 2010

M a r

A p r i l

M a y

J u n e

J u l y

A u g

S e p

O c t

N o v

D e c J a

n F e b

M a r

127%

117%

0

10

20

30

40

50

60

70

80

90

100

Equity/cash exposure vs mkt movement

% %

2009 2010

M a r

A p r i l

M a y

J u n e

J u l y

A u g

S e p

O c t

N o v

D e c J a

n F e b

M a r

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Equity Cash ASI

T.bill rate - 3 mnth

Returns of comparative investment options2009/10

146.0%

144.43%

9.71%

9.47%

0 50 100 150 200 250

ASPI

MPI

CGITShareholder

wealth

Unit Trusts -growth funds avg

return

Bank fixeddeposits -

(AWFDR)

Treasury Bill- (1 year)

215.5%

127.4%

Equity Cash ASI T.bill

rate-3 m

2009 Mar 51% 49% 1638.06 14.62%

April 55% 45% 1838.45 13.38%

May 65% 35% 2215.96 12.04%

June 63% 37% 2432.15 11.41%

July 62% 38% 2525.7 11.63%

Aug 76% 24% 2607.65 11.30%

Sept 82% 18% 2938.64 9.75%

Oct 87% 13% 2976.93 8.50%

Nov 80% 20% 2913.39 7.25%

Dec 83% 17% 3385.55 7.73%

2010 Jan 80% 20% 3636.41 7.95%

Feb 67% 33% 3807.86 8.26%

Mar 88% 12% 3724.59 8.45%



14

sector was made as we believe that therise in per capita income in Sri Lanka would filter down to greater

consumption expenditure by the massmarket consumers. It is also Guardian’ssecond investment into unlistedequities, following our initial entry toDurdans Medical and Surgical HospitalLimited last financial year. We arehappy to note that the new hospitalcomplex is now ready for occupationand has commenced operations, backedby new technology, an unparalleledteam of physicians and nursing care.

Managing Outsourced Funds

Leveraging on our strengths in portfoliomanagement and our competencies, weare working towards extending ourbusiness model into managingoutsourced funds on behalf of thirdparty clients. This would be eitherthrough our country fund, the SriLanka Fund, an open ended country fund available to foreign investors orthrough the management of customized portfolios for institutionalor high net worth individual clients.

Sri Lanka Fund - a window to theinternational market At a time when Sri Lanka has beenattracting international attention formany good reasons, it is indeedappropriate that Guardian too makes its way towards testing its capabilities toraise funds for investment in the

international arena. We currently haveone product a country fund – The SriLanka Fund – through which we aimto widen our business model to managepublic funds. The Sri Lanka Fund is anopen ended mutual fund incorporatedoverseas and available to foreign andnon resident Sri Lankan investors who wish to secure exposures to the country through a dedicated country fund. A tieup with one of the largest mutual fund

operators has been recently made to

distribute The Sri Lanka Fund overseasvia its distribution network in theMiddle East and Asia. The fund will be

launched in June. Active fund raisingand marketing has commenced and wefeel that its an opportune time to raise

funds given the positive sentimenttowards Sri Lanka, plus we see a window of opportunity in raising funds

with the global economic recovery.


Our Top Holdings as at 31st March 2010

Group Holdings

Bukit Darah - An investment holding company with a 46%

stake in Carson Cumberbatch PLC and an exposure to oil

palm plantations in Central Kalimantan, Indonesia

Ceylon Brewery - Parent company of Lion Brewery Lion Brewery - Brewing company with a market share of over

80% in the business of brewing and bottling of high qualitity

beers under license for local and export markets

Group Holdings total value

Non Group Holdings

John Keells Holdings - A diversified company with interests in

ports & related activities, transportation, property development,

tourism, financial services and consumer products in Sri Lanka

and now moving into the South Asian region

Aitken Spence - A diversified company with interests in

tourism, power generation, port and related businesses. Has

aggressively set up operations overseas in niche-businessesCommercial Bank - One of the largest retail banks in Sri

Lanka with a wide branch network of over 150 branches

spread island wide

Cargills - Leading player in the retail super market trade,

commanding 50% of the market share. Also has

manufacturing operations in the food sector and operates the

KFC franchise in Sri Lanka

Hatton National Bank - One of the largest retail banks in

Sri Lanka with a wide branch network of over 150 branches

spread island wide

Aitken Spence Hotel Holdings - A pool of star class hotels

situated in Sri Lanka, Maldivies and Middle East, accounting

for over 1000 rooms.

Distilleries - Is an emerging conglomerate. Dominant player

in the local hard liquor market, telecom sector.

Durdans Medical & Surgical Hospital - Unquoted investment

and expansion project of the Ceylon Hospitals Group which

is one of the pioneers in private health care in Sri Lanka. Has

already commenced operations and will be fully operational in

the financial year 2010/11

Non Group Holdings total

Top Holdings

Other holdings

Total Portfolio

Value of Portfolio

the holding Weight %

Rs.mn

6,011 43.3%

314 2.3%

282 2.0%

6,607 47.6%

2,512 18.1%

1,257 9.0%

649 4.7%

496 3.6%

471 3.4%

492 3.5%

316 2.3%

263 1.9%

6,456 46.5%

13,063 94.0%

827 6.0%

13,890 100.0%



increased to Rs. 68.65 from Rs.14.47,a growth of 374% and the currentyear’s dividend represents a payout of

13%.

Borrowings increased to Rs.249 mn in2009/10 with total borrowings being inshort term borrowings to bridgecashflow mismatches between timing of purchases and sales. These borrowingsare not significant when compared withthe total net assets. Cash and cashequivalents amount to Rs. 48 mn as atbalance sheet date.

Cash used in operating activitiesamounted to Rs.321 mn. Dividendand repurchase proceeds paid toshareholders amounted to Rs.1,516mn. In the year under review, CeylonGuardian recorded a net decrease incash & cash equivalents of Rs.2,178mn compared with the previous yearsincrease of Rs.2,028 mn.

Prudent accounting policies are being

followed with the adoption of marketvalue accounting for both long termportfolio and short term portfolio alike.Hence year end appreciation in themarket value of the long term portfoliois provided in the reserve account of thebalance sheet at Rs.2.8 bn. Year endappreciation in the market value of thetrading portfolio is taken to the profitand loss account in addition to therealised gains represented. Thus the net

asset value of the balance sheet is now reflected at Rs.9.2 bn after consideringall long term investments at marketvalue.

Further gains on the long term portfoliothereafter in the subsequent financialyears will be taken to reserves and a longterm revaluation reserve built to reflectthe true worth of the balance sheet’sunderlying assets. The reserve, however,

being unrealized would not be

distributable until such time as aninvestment contained therein is sold andthe profits are realized and thereby

becomes distributable. As for the tradingportfolio, further gains would be takento the profit & loss account.

Shareholder Returns

The value per share of the company amounts to Rs.620, on a market pricebased net asset valuation. With theadoption of market value accountingfor all our portfolios, we have now brought the net worth of the balancesheet upto market value. Hence it isanticipated that the gap between theprice at which the Ceylon Guardianshare trades in the market and theactual net asset value per share wouldnot be significant and that the marketprice of the share would tend to movealong with the net asset value.

Shareholder wealth gained 369%during the year with a share priceappreciation and proposed dividend of

Rs. 9.00 per share. Last year’s dividendamounted Rs.11.50, an exceptionalamount on account of distributionsarising from the strategic sales made inthe last financial year.

Shareholder returns has averaged aCAGR of 30.4% during the ten yearperiod, inclusive of dividends, share

repurchase and after adjusting for rightsissues. A shareholder who investedRs.1,000 in 2005 would now commanda net worth of approximately Rs.4,135(a CAGR of 33% on financial yearbasis).

16Managers’ Review (Contd.)


NAV per share (Mkt value) vs Share price

NAV per share- Mkt Value

Rs.

Mkt value per share

2006 2007 2008 2009 2010

0

100

200

300

400

500

600

0

500

1,000

1,500

2,000

2,500

3,000

3,500

CGIT Mkt Cap performance vs ASI - 10 yrs

CGIT Mkt Cap Indexed

Composite

ASI Indexed

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

+3,228%

+652%

CAGR of CGIT Mkt Cap 42%CAGR of All Share Index 22.4%

3 1 . 3 . 2

0 0 5

3 1 . 3 . 2

0 0 6

3 1 . 3 . 2

0 0 7

3 1 . 3 . 2

0 0 8

3 1 . 3 . 2

0 0 9

3 1 . 3 . 2

0 1 0

Value of Rs. 1000/- Invested in CSE &Ceylon Guardian

CSE - ASPI

0

1,000

2,000

3,000

4,000

5,000

Ceylon Guardian

CAGR

16%

CAGR

33%




International markets

Volatility in international markets isexpected to continue in the comingyear as well with the major globaleconomies facing a slower recovery than anticipated. Some marketanalysts are of the view thatinternational equity markets have

been too quick to react and have re-rated to higher levels that cannot besupported by fundamentals. Webelieve that Asian markets are likely tosee domestic growth driving theireconomies vis-a vis export growth thathas been seen traditionally. Twocountries that are likely to stand aloneand weather the economic downturnof the West are India and China, where a ready captive consumer base

of over one billion people each willdrive growing incomes and ownconsumption growth.

Sri Lanka the future

Our domestic economy will benefit with the easing of recessionary conditions in the Western countries.The world economic climate is likely to pose a challenge, especially in theface of further escalations in oil prices

but is likely to be mitigated given thepositive turn of events in the domesticeconomy. We expect that export of garments will recover with orderbooks being filled by non GSP+dependent markets, while traditionalcommodity exports too are believed tobe on the rise with the increase in world market prices. Domestically, theopening up of the Northern andEastern markets will be the single

most positive factor for local

corporates due to the constructionboom in the cleared areas, opening upof new retail & consumer markets andagricultural & fishery resources.Infrastructure spending, by way of highways and ports will alsoexperience high growth due to theemphasis on laying a solid foundation

for economic development. The stock market is yet to see significantenhanced earnings from thosecorporates that have exposure to thekey growth sectors, which helps toimprove the earnings capacity of themarket and thereby offer attractivevaluations. It is however, understoodthat effective management of the fiscalposition and stability in economicfundamentals will drive sustainable

economic growth.

The Sri Lankan equity story

Looking ahead, the Central Bank of Sri Lanka forecasts GDP growth of 6%-8% in the next few years with theidentified sources of growth beingtourism, infrastructure, the openingup of new greenfield markets with theincorporation of the North & East

into the mainstream of economicactivity and the creation of a new affluent consumer class with greaterspending power. Foreign directinvestment to the country which hasbeen minimal in comparison to otheremerging Asian countries, will likely see greater inflows to themanufacturing and service sectors inthe future. These growth areas will besupported by service led export

businesses in the areas of ICT,

Future Outlook Fortune favours the brave …

PE Multiples of other Asian MarketsIndex Market Price/Earnings Current year 1 year Forward

Ratio Estimate Estimate

ASPI Colombo 18.22 22.4 11.6

Sensex Bombay 26.66 21.48 16.91

Dow Jones Industrials New York 16.29 13.84 11.94

FTSE 100 London 18.12 12.44 10.26

Hang Seng Hong Kong 16.15 14.25 12.06

JCI Composite Jakarta 24.59 14.8 12.14Nikkei 225 Tokyo Neg 39.77 21.82

SSE Composite Shanghai 29.04 18.31 15.36

ST Times Singapore 14.63 15 13.62

Bursa Malay Malaysia 19 16.07 14.09

DSE Bangladesh 31.44 26.2 22.36

Set Thailand 14.46 12.08 10.28

Karachi 100 Pakistan 11.74 8.68 7.31

IBOV Brazil 17.54 13.59 10.82

IPSA Chile 21.6 17.4 14.53

RTS I$ Russia 16.95 8.5 6.96(As at 1st April 2010)

Source: Bloomberg



18 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Managers’ Review (Contd.)

outsourcing and transit cargo &passenger movements.

Other market indicators also show theundervalued nature of the stock market. The market cap to GDP ratioof 23% is low in comparison toemerging markets and developedmarkets. The relatively low forwardP/E of the market at 12 also points tofurther upward movement, vis a visemerging and frontier markets. Theseare factors that would motivateforeign fund managers to focus moreon Sri Lanka and create a furtherdemand for good stocks.

The appetite for investing inSri Lanka has never been strongergiven the risk parameters beingminimized with the end to theterrorism problem and the reductionof country risk. Hence justifying alower risk premium is bound to re-rate the market to new highs in thecoming year. Historically the

benchmark index of the Colombostock market ASPI has traded at anaverage band of 14 -15 P/E levels andthe highest we have seen is 18 P/E in2005. We are approaching the all timehighs and are likely to see the markettesting new valuation levels in thefuture.

Sri Lanka is now widely assessed by analysts as a new economic force in

the South Asian region. The country’sGDP growth rates, which for theentirety of the civil conflict averaged4%-5%, is now expected to pick up to6% in 2010 and 8% thereafter. Percapita incomes are expected to rise toUSD 4000 in 2016 from the currentUSD 2400.

New investment opportunities inSri Lanka would initially be in the

areas of tourism, financial services,

infrastructure, consumer products,construction & property developmentand healthcare.

Guardian Fund – listed equity

strategy

The process of transforming theGuardian portfolio to best representthese sectors is almost complete, and we have been aggressive in investingvia the conventional equity marketand the unconventional unlistedprivate equity market which isexpected to offer a broader set of opportunities. As a key player in thecapital markets of the country CeylonGuardian is well positioned to capturegood private equity investmentopportunities into its portfolio at theGreenfield stage. The listed market isforecast to grow at over 20% p.a. overthe next 3 years, in line with GDPgrowth and a re-rating of market PEsthat reflects the positive country situation.

Guardian Fund - Private equity strategy

As the level of economic activity increases, it is inevitable that privateequity as a means of pre-entry to thelisted market would be an importantsource of capital for companies. Within its private equity portfolio,Guardian would opt to participate inmanagement and add value to itsshareholding stakes over a longer time

span of a maximum of five years. A suitable exit mechanism after realizingadequate value to shareholders wouldbe a pre-requisite when taking upprivate equity investments.

Managing Outsourced Funds

Our prime focus in managingoutsourced funds would be to actively market the Sri Lanka Fund to raisenew capital from foreign investors. We

believe this would form the bulk of our funds under management in theoutsourced category.

As a further extension of our businessscope into the future, Guardian wouldlook to expand its business scope tomanage mutual funds, high net worthportfolios and participate as afinancing partner in major deal flowsthat come to the Sri Lankan capitalmarket.



The Guardian Fund is one of theoldest investment companies listed onthe Colombo Stock Exchange and hasa long history in the investmentbusiness with a proven track recordover time. The Guardian group fundsare managed by Guardian FundManagement Ltd (GFM) which is a

fully owned subsidiary of the Group. At present GFM manages the largestlisted equity fund in Sri Lanka andhas built up its competencies in thefield of portfolio management.

To achieve this, a platform has beencreated with state of the arttechnology to support the fundmanagement activities and seek expertise where needed. Guardian

Fund Management has set in place aneffective process for vettinginvestments and our decision makingis supported by in house research. Asinvestors we have built a dialogue with the invested companies and builtclose rapport with the management.This enables a very proactive style of fund management where interaction with the investee company is regularly maintained. Guardian also plans as a

future activity to participate as amember / investor in financingconsortiums for any major deals thattake place in the market. These may include bids for major projects,mergers, acquisitions, underwritingconsortiums and private placementselevating Guardian to the status of anindispensable player in the localcapital market. We await regulatory reforms that would permit us to invest

a fraction of our resources in overseas

markets, bringing in more diversity and colour to our portfolio and ahigher quality return to ourshareholders

Guardian Fund Management is aninvestment manager registered withthe Securities and Exchange

Commission of Sri Lanka, GFM istherefore fully compliant with allregulatory requirements applicable tosuch registered market intermediaries.Compliance processes within GFMare covered by the internal auditfunction of the parent company as well as an independent complianceofficer. Furthermore all employees arerequired to sign a Code of Ethics andStandards of Professional Conduct

which govern their professionalconduct in the capital markets, thusensuring not only regulatory compliance by all staff but theprotection of investor interest in allthe funds we manage. Further detailsof our compliance process are coveredin the Risk Management Report which follows this review.

Research – the base for sound

decision making………Our research covers three areas whichare of relevance for investmentdecisions – macro economic trends,industry trends and company research. Macro economic trends aremonitored in order to understand theinfluence of underlying economicfundamentals on businessperformance, consumer demand andthe movement of inflation, interestand exchange rates that would impact

overall economic activity. Macroeconomic indicators are vital tounderstand investor sentiment onequity markets, which is seen as analternative to fixed incomeinvestments; and as a key factorinfluencing the future profitability of corporates.

Industry level studies are carried outin determining the competitivestructure of each industry as well asindustry growth potential in thecontext of the level of socio economicdevelopment in the country. Forinstance, industry penetration levels would help in understanding how demand would grow in parallel withincreasing per capita incomes, an

important factor driving profitability in immature industries which are inthe early part of their life cycle.Industry studies also help usunderstand the evolving competitivelandscape to determine the futureprofit prospects of the key players,and assessing the soundness of eachcompany’s business model.

Company related research is carried

out in order to monitor theperformance of key variables affectingthe business, and re-assessing the profitforecasts of each company to ensurethat our investments would meet therequired performance criteria.Company evaluations for long termand short term investments are basedon the criteria relevant to assess therespective priorities of each investmenttype. Our valuation models look atsensitivities to key variables affecting


Banking On Our StrengthMaking a difference in a skill based industry …



20

the business so that alternativescenarios can be built for each profitmodel. Buy and sell decisions are

determined based on a benchmark rateof return which ties up a sufficientpremium on the risk free rate, stock market performance and opportunity cost of capital. In stock selection atCeylon Guardian we place paramountimportance on the research process, which we believe will bring us a uniquecompetitive advantage. In the longterm we have been able to consistently over-perform the benchmark return

based on our research focus.

We live by this philosophy and it’s

shared amongst our investment team.It forms the basic value system for ourinvestment decision making process atGuardian.

Guardian Fund Management Limited

Investment Managers Colombo

12th May 2010


Investing for consistent above market

returns

We like companies that create value for all

stakeholders and take significant positions

in such companies to create above average

returns

Investing for shareholder value

We believe in giving steady long term

returns to our shareholders by re-investing

for growth as well as maintaining a

consistent distribution

Our investment philosophy

As managers of Ceylon Guardian we

would like to present to the shareholders

the investment approach adopted by us in

driving the Company growth in the past.

The guiding principles that have

influenced our decision making andapplied currently have been articulated

into our unique investment approach

given below.

Investing for growth

We invest into high growth industries and

companies that are competitively placed to

exploit that growth

Investing for innovation and

competitiveness

We seek out entrepreneurially managed companies with sustainable, competitive &

extendable business models

Investing in financial strength

We look for financially strong companies

with healthy cashflows, that are re-invested

for growth

Investing to effectively manage risk

We believe in diversifying our portfolio

exposures and avoid investments that are

subject to high risk and volatility



Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Profiles of the Directors

Israel PaulrajIsrael Paulraj is Chairman of CeylonInvestment PLC, Watapota

Investments PLC and RubberInvestment Trust Limited. He serves asa Director of Carson CumberbatchPLC and of several of the subsidiary companies within the Carsons Group.He is the Chairman of theIncorporated Trustees of the Church of Ceylon.

He served as Past Chairman of theFederation of Exporters Associations of Sri Lanka and The Coconut ProductsTraders Association. He was a memberof the Executive Committee of theCeylon Chamber of Commerce,National Chamber of Commerce of SriLanka and Shippers Council. Heserved on the Board of Arbitrators of the Ceylon Chamber of Commerce.He has served as Hony. GeneralSecretary of the Central Council of Social Services, Hony. Treasurer of TheChristian Conference in Asia,President, Church of Ceylon YouthMovement and Hony. TreasurerNational Christian Council of SriLanka.

He also served on the Presidential Task Force on Non-Traditional Export andImport Competitive Agriculture set upby President R.Premadasa. He alsoserved as Chairman of the EcumenicalLoan Fund of Sri Lanka and on itsInternational Board in Geneva. He wasa member of the Commercial Law Reform Commission and has served on

the Parliamentary ConsultativeCommittee on Internal andInternational Trade.

He holds a Bachelor of Law Degreeand an Executive Diploma in Business Administration.

Chandima Gunawardena Chandima Gunawardena is a Directorof Carson Cumberbatch PLC. He

serves as a Director in most of theCarsons Group companies in Sri Lankaand overseas. He is a member of theGroup’s Strategic Planning Forum. Healso serves as a member of the AuditCommittees of the Group, in Sri Lankaand overseas. Mr.Gunawardena hasover three decades of experience invaried fields of business andcommercial activities and has heldsenior positions in the corporate sector.He is a Fellow of the CharteredInstitute of Management Accountants,UK.

Asoka Gunasekera Asoka Gunasekera is a Director of Ceylon Investment PLC and serves asan alternate director to Mr. I. W.Senanayake, Chairman of IWSHoldings (Pvt) Ltd and in most GroupCompanies. Past Chairman of National Chamber of Commerce of SriLanka and Past President of the CeylonNational Chamber of Industries. He isa Past International Director and aBoard Appointee of Lions ClubsInternational and was also a member of the National Police Commission of SriLanka. He served as Legal Advisor andSecretary to the Ministry of Post andTelecommunications; Co-ordinatingSecretary to the Ministry of Power andEnergy and Ministry of Highways and was the Acting Secretary to theMinistry of Policy Plannning. Attorney-at-Law & Notary Public.

Manilal FernandoManilal Fernando is a Director of Ceylon Investment PLC and aDirector of Aitken Spence &Company PLC, Chairman of Holcim(Lanka) Limited, Shipping & CargoLogistics (Pvt) Ltd, Hyundai Lanka(Pvt) Ltd., Stallion Plantations (Pvt)Ltd. and Dynamic AV Technologies(Pvt) Ltd. Vice President of the AsianFootball Confederation (AFC).

Member of the FederationInternationale Football Association(FIFA), Player’s Status Committee and

FIFA Development Officer, Colombo.Past President of the FootballFederation of Sri Lanka and VicePresident of the National OlympicCommittee. Attorney – at- Law &Notary Public.

Rose Cooray Rose Cooray is a Director of CeylonInvestment PLC. She joined theCentral Bank of Sri Lanka in 1974 andserved the Central Bank in severalcapacities, covering a wide area of subjects, until she retired as a Deputy Governor in May 2009. During thisperiod, on release from the CentralBank, she also served the Ministry of Finance in the capacity of the DirectorGeneral of Fiscal Policy and Economic Affairs department from 1999 to 2004.

At the Ministry of Finance, sherepresented the Government on theBoards of Sri Lanka InstituteInformation Technology, De La Rue

Lanka Printing and Security (Pvt.) Ltd,the Ceylon Electricity Board,Sri Lanka Telecom, Sri Lanka ExportDevelopment Board and the DFCCBank. She also represented theMonetary Board on the Board of the West Coast Power (Pvt) Ltd. Sheserved as the representative of theMinistry of Finance on the Trade andTariff Council.

Mrs. Cooray has held the position of

the Secretary to the Monetary Boardand also the position of the vicechairperson of the Institute of Bankersof Sri Lanka. Presently she serves onthe Board of Directors of the HattonNational Bank PLC.

Mrs. Cooray holds a B.A. (Hons.) inEconomics from the University of Peradeniya and a Masters Degree fromthe University of Strathclyde, UK.



22

Ruvini FernandoDirector of Guardian FundManagement Limited, the Fund

Management Company of theCarsons Group and Director of TheSri Lanka Fund, a foreignincorporated country fund managedby investment sector. AssociateMember of the Chartered Institute of Management Accountants, UK and aFellow of the Association of CharteredCertified Accountants, UK. Has aMasters Degree in Business Administration from the Postgraduate

Institute of Management (PIM),University of Sri Jayewardenepura.Counts over 20 years work experiencein the fields of managementaccounting, finance, research analysis,strategic planning and investments, within the Hayleys Group and CarsonCumberbatch Group. Was a formervisiting faculty member of thePostgraduate Institute of Managementin the MBA programme. Member of the Regaining Sri Lanka TourismSteering Committee, a key policy making forum of the governmentfrom January 2002 to January 2004.

Niloo JayatilakeFund Manager, Guardian FundManagement Ltd, the fundmanagement company of the CarsonCumberbatch Group. Has over 15years experience in the investmentsfield. Prior to joining the Carsons

group worked as Fund Manager atThe Unit Trust ManagementCompany Limited managers of one of the largest unit trust in Sri Lanka. Isan Associate member of the CharteredInstitute of Management Accountants, UK and Associatemember of the Institute of CharteredSecretaries and Administrators, UK.

Krishna SelvanathanDirector of Carsons ManagementServices (Private) Limited. Also

Director of Carsons Real EstateManagement Services (Private)Limited, the property developmentarm of the Group. He is also amember of the Investment SectorManagement Team. He holds a BA Degree in Accounting & Finance andBusiness Administration from theUniversity of Kent, UK.

Vibath Wijesinghe

Financial Controller of the CarsonsManagement Services (Private)Limited, Management Company of the Carsons Group. Commencedcareer at M/s. KPMG Ford Rhodes,Thornton & Company and acquiredover five years experience. Joined theCarsons Group in 2004 as the sector Accountant for its Real Estate, Leisureand Investment sectors. An AssociateMember of the Institute of Chartered Accountants of Sri Lanka, CharteredInstitute of Management Accountants, UK and of the Society of Certified Management Accountantsof Sri Lanka. Also holds a B.Sc.(Special) Degree in Commerce fromthe University of Kelaniya, Sri Lanka.

Amila FernandoSenior Investment Analyst, GuardianFund Management Ltd, the fundmanagement company of the Carson

Cumberbatch Group. Has over fiveyears experience in finance andresearch. An Associate Member of theChartered Institute of Management Accountants UK and Institute of Certified Management Accountants of Sri Lanka. Also holds a BachelorsDegree in Accounting & Financefrom the University of Sri Jayewardenepura, Sri Lanka.

Ruvini Kiriwendala Joined Carsons Group in December2009 as Sector Accountant for Real

Estate, Leisure and Investmentsectors. Commenced career at M/sErnst & Young and acquired over 4years experience. An AssociateMember of the Institute of Chartered Accountants of Sri Lanka and holds aB Sc. (Special) Degree in Accountancy from the University of Sri Jayewardenapura, Sri Lanka.

Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Management Team Profiles



Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Risk Management

At Guardian, we recognise the

importance of risk management and

have built a comprehensive risk

management process & structure thatfocuses on continuous identification

and management of business risks. In

the last financial year Ceylon

Guardian for the first time presented a

coverage on risk management in its

annual review to shareholders. In the

light of the financial crisis faced by

many financial institutions both

locally and internationally, we at

Ceylon Guardian have re-assessed theimportance of this function to protect

the interests of stakeholders.

We believe that risk management is of

paramount importance in

safeguarding the interest of all

stakeholders and have undertaken a

comprehensive review to enhance the

risk mitigating processes already set in

place by the Guardian Fund

Management Limited, the fundmanagers of the Company. With this

review, we plan to bring our risk

management practices in line with the

benchmark best practices adopted

internationally in the industry.

We see risk management in portfolio

management not as an effort to

eliminate risk, but in identifying

which risks to bear with suitable

safeguards in place, and avoiding

unnecessary risks. What risks are

appropriate for a particular portfolio

will depend on the risk preferences of

the investor and the role that

particular portfolio plays in the

investor’s overall portfolio strategy.

Hence risk management is a balancing

act between managing risks & returns,

and having in place practices to

minimize the risks taken on by a

particular portfolio.

Thus, risk is an integral part of ourbusiness and we aim at delivering

shareholder value by achieving an

appropriate trade-off between risk and

returns. Our risk management

strategy is based on a clear

understanding of various risks a

portfolio is exposed to and disciplined

assessment, measurement and

continuous monitoring of such risks.

We have in place several measures to

strengthen our risk management

processes which are linked to our daily

investment decisions. These include

policies to mitigate business risks

along with the upgrading of the

support systems that enable easy

monitoring and management of risks.

The policies and procedures

established for this purpose are

continuously reviewed.

The risk management structure in

place

Guardian Fund Management (GFM)

has been set up as an independent

fund management company and the

management of the portfolios of the

Ceylon Guardian Group has been

delegated to this company. The Board

of Directors have formulated and

approved an investment framework

and control limits for GFM’s fund

management operation. GFM’s

management team is responsible for

the recommendation and execution of

the investment decisions, during the

course of which oversight and

management of the business, financial

and operational risks of the company

come into play. A comprehensive risk

identification and management

framework is in place which is

monitored consistently.

The Fund Manager (GFM) has beenregistered as an Investment Manager

with the Securities and Exchange

Commission of Sri Lanka since 2005

while Ceylon Guardian Investment

Trust PLC and its subsidiary Ceylon

Investment PLC have been registered

as underwriters since 2009. GFM as

well as the Company therefore, come

under the purview of the capital

market regulator and hence internal

monitoring is done on a quarterly

basis to ensure that the set regulations

are adhered to. Audits by the

Securities and Exchange Commission

may also be carried out as required.

Furthermore as a listed company the

Ceylon Guardian Investment Trust

PLC and its subsidiary Ceylon

Investment PLC conform to the

listing rules and guidelines of the

Colombo Stock Exchange.

The Board of Directors of the

Company has ultimate responsibility

for risk management. The Board is

supported by an organization

structure that covers the entire risk

management framework through an

independent Compliance Officer who

functions within GFM as well as the

internal audit function of the Carson

Cumberbatch Group to which the

Ceylon Guardian Group belongs. The

Audit Committee of the Company

has oversight over the financial

reporting function of the company,

the system of internal controls; as well

as the audit, compliance and risk

management processes. Further, an

Investment Committee drawn from

across the Carsons Group directorate



provide advice and insights to the

fund management team to further

sharpen and refine their decision

making process. This organizationstructure determines the objectives

and policies of our risk management

framework and promotes a culture of

risk awareness and balanced risk-

taking within the company.

Risk categories

Ceylon Guardian has identified and

categorized its risks into 4 categories,

namely macro environmental risks,

portfolio risks, regulatory risks and

operational risks and given below is its

approach in managing these key risk

areas.

Macro environmental risksCountry risks

Country risk is applicable if an

investment is made in a security

issued by an entity subject to foreign

laws or if transactions are entered intoin markets in other jurisdictions, the

sums invested and profits or returns

accruing maybe subject to exchange

control regulations, currency

fluctuations, transaction costs & taxes

and other actions that may be

imposed by the government or policy

making bodies of the said countries.

This risk is not currently applicable to

the Guardian Group as our exposure at

present is only to Sri Lankan

investments due to the local exchange

control regulations. Hence no risk

mitigating systems are required to be in

place.

Currency risk

Where investments are denominated

in currencies other than our primary

reference currency which is the

Sri Lanka Rupee, and where the

company is required to convert funds

from one currency to another upon

making investments, as well as inreceiving the returns from those

investments, the company is exposed

to the risk of the foreign exchange

parities moving against one’s

investment.

This risk is not currently applicable to

the Guardian Group as the current

exposure of the Guardian Group to

investments denominated in foreign

currencies is nil. Hence no risk

mitigating processes are required; but

looking ahead we need to prepare for

this if at any time the Sri Lankan

capital account were to be opened for

outward portfolio investment and

companies such as Ceylon Guardian get

an opportunity of investing overseas. A

detailed investment policy would be

developed in the year ahead in gaining

exposure to new markets, if suitable exchange control liberalization were to

take place.

The exposure however, indirectly exists

when managing the Sri Lanka Fund

and any customized portfolios of foreign

investors. Here we take care to ensure

that benchmark returns on such foreign

currency dependent portfolios are met

after currency conversions are executed.

Our economic research would give us an

understanding of the expectations on

future currency movements.

Market risk - domestic

The broad definition of market risk is

exposure to adverse movements in the

securities markets for both equity and

fixed income investments, which can

result in value loss as well as variations

in the anticipated returns from those

securities. All financial institutions

face market risks, created by changes

in the macro environment related to

political factors, national security,economic management and

globalization influences which have an

impact on systematic risk factors such

as interest rates, currency parity,

inflation, and availability of credit.

Therefore, understanding market risks

requires considering multiple

dimensions and complexity in the

macro environment.

Market risks are inherent in every

security and are thus collectively

considered at the portfolio level to take

into account the asset allocation

decisions of the portfolio. Thus market

risks affecting a particular class of

security are mitigated by switching to

asset classes that are assessed to be less

risky in a particular scenario.

This risk cannot be eliminated. All market participants such as Ceylon

Guardian should ideally develop its

business model taking into account

exposure limits and parameters to

sustain itself when faced with market

risks that can affect portfolio values

temporarily. The only mitigating process

is to develop a sound research base to

determine changing economic

fundamentals of the country and

determine its effect on equity vs fixed

income investments and the prompt

shifting of funds between asset classes.

This is of vital importance in trading

portfolio decisions where quick

encashment of equities is carried out if

macro indicators move adversely leading

to a slow down in stock market activity.

24 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Risk Management (Contd.)




Market risk – International and

external macro economic risks

These risks cannot be diversified or

mitigated by the company. We asinvestors in the equity market in

Sri Lanka have to live with the risk of

international happenings affecting our

market adversely. There is an indirect

impact of risks of other markets to our

domestic market as clearly seen in the

last year with the impacts of the global

financial crisis arising from the US sub

prime mortgage crisis spreading to

other Western countries and impacting Asian countries and in turn Sri Lanka.

In the global world of cross border

trade and cross border investment

flow, the impact of changing economic

indicators and policy will be high for

the domestic economy, especially in a

country such as ours which is import

dependent for vital commodities.

Hence in determining fund strategy we

monitor key economic indicators such as interest rates, exchange rates, inflation,

budget deficits of key economic super

powers, as well as global commodity

prices since Sri Lanka is a net importer

of essential commodities. This enables

the fund team to get a feel of changing

international market dynamics and in

turn relate that to local developments.

The entry and exit of foreign investor

interest on the local market is alsodetermined by the macro economic

trends prevailing in foreign markets.

We believe that building expertise in

foreign markets is of paramount

importance going forward with possible

further liberalisation on the cards.

In mitigating the risk we are looking to

tie up or collaborate with foreign entities

that have expertise in such markets at

such times when Guardian has the

ability to invest overseas.

Portfolio RisksGeneral Securities risk

Any trading in securities carries

inherent investment risks associated

with the entity issuing those securities.

In particular the price or value of any

security can and does fluctuate and

may even become valueless, resulting

in possible loss not only of returns

and profits, but even also of all or part

of the principal sums invested. These

risks arise as a result of the overall

risks faced by the issuing entity which

affects its ability to provide a return to

the investors holding the securities

issued by it. Particularly in the case of

equities, past performance of any

investment is not necessarily

indicative of future performance. At

Guardian our approach focuses on the

fact that there is no substitute forfundamental individual security

assessment. Our portfolio

management and investment selection

process is designed to maximize the

risk/return tradeoff to our

shareholders and we employ a bottom

up investment selection process.

Our risk mitigating methodology is

based on our internal research process

that has added value over time to our

choice of investments. Prospective

investments are selected from

fundamental analysis and contact with

corporate management of the issuing

company through company visits. Once

an investment is made a continuous

process of monitoring the performance of

that investment is adopted.

Single Company exposure - Top 5 holdings

Value of PortfoloioCompany Name Rs.mn weight

1 Bukit Darah 6,011 43.3%2 John Keells Holding 2,512 18.1%3 Aitken Spence 1,257 9.0%4 Commercial Bank 649 4.7%5 Cargills 496 3.6%

Sector Exposure

%

Diversified Holdings

Health Care

Hotels & Travels

Manufacturing

Telecommunication

Trading

Beverage, Food& Tobacco

Mark et We ight 3 1st Mar 09 3 1s t Mar 10

0 10 20 30 40 50

Bank, Finance &

Insurance

* Exposure built up into banking sector

* Overwieght to palm oil,diversified & health care sectors

Portfolio exposure to private equity

vs listed equity

Private equity

Rs.417 mnListed equity

Rs.16,419 mn

97%

3%



We manage the concentration risk

arising from over exposure to one

security by monitoring sector exposure

and single company exposure as mitigation strategies. Further, private

equity exposure limits at company and

group level are monitored as another

measure of managing risk. Loss limits

are set to monitor stocks performing

below their cost of acquisition to

determine whether temporary capital

erosion is a concern. This helps us

mitigate the downside risk of any

security in the portfolio.

In the case of private equity, Board

representation in proportion to the

investment is considered necessary in the

case of larger stake, while for smaller

stakes monitoring mechanisms to

facilitate constant evaluation of the

investment will be built into the

shareholder agreement.

Liquidity risk Under certain market conditions, an

investor may find it difficult or

impossible to liquidate a position.

This can occur when trading is

suspended by the exchange on which

a security is listed or when poor

market sentiment dries up investor

interest in an investment. In addition,

there may not be a ready market for

certain investments due to low levels

of publicly traded quantities. Some

investments will have to be held to

maturity. Proper information for

determining the value of certain

investments may also not be available

under such circumstances of low

liquidity. However the strategy of

holding big stakes might be a limiting

factor when selling, if the stock is

illiquid or in the case of a change in

fundamentals.

At Guardian we mitigate this risk by investing in companies with a

reasonable free float and where securities

are heavily traded. Also by limiting the

portfolio’s buy list to highly traded blue

chips, the risk of illiquidity can be

mitigated. Good research will enable the

fund team to identify changes in

fundamentals and be proactive in

investment decision making.

Temporary leverage as a measure toenhance liquidity when risk/return

trade off justifies it, has been adopted as

a policy in order not to miss out on

lucrative buy opportunities in the

market. Our overdraft facilities

currently cover approximately 4% of

portfolio value. However close

monitoring of interest rate movements

and liquidation of positions to cover

overdrafts after 3-6 months exposure would be the risk mitigation methods

used to ensure low exposure to interest

rate risks and maintenance of liquidity

within Guardian.

In the case of private equity, liquidity

risks are difficult to manage due to time

bound exit strategies. However, our

insistence on one or two fall back exit

options being built into the shareholder

agreement ensures that eventually

private equity projects will end up in an

encashable state with a minimum

return.

Performance volatility risks

The composition of portfolio

investments will determine the

portfolio’s ability to out perform the

market. If more volatile stocks that

respond more than proportionately to

market movements are selected, there

is a likelihood that the portfolio willoutperform the benchmark All Share

Price Index in a growing market,

while in a downturn it can under-

perform the market. It is once again

an attempt at balancing good

performance with a certain risk

tolerance in a volatile environment.

Measuring portfolio volatility through

calculation of a portfolio beta is one

method of keeping ourselves aware of the

sensitivities of the portfolio. In the case

of the long term portfolio, we would not

attempt to handle market volatility by

encashing stocks, but would rather

attempt to hold into fundamentally

strong stocks and ride out low

performing cycles. For this, we ensure

adequate cash generation by way of

dividend and other income flows to keep

our daily operations running smoothly while we ride out low market periods.

On the other hand, in the case of the

trading portfolio, it is necessary to keep

an even closer tab on market volatility,

since it needs to regularly encash its

profitable positions to remain a high

performing portfolio.

* Beta calculation over a period of 5 years.


Beta calculation - Ceylon Guardian

Beta of portfolio 0.99Beta of share 2.64Beta of market 1.00




Regulatory RisksLegal compliance

The legal support services to

Guardian Fund Management comesthrough the management services

company of the Carson Cumberbatch

Group, which ensures that the

Guardian Group complies with all

legal and regulatory provisions

applicable to it. The legal function

proactively identifies and advices

GFM to set up appropriate systems

and processes for legal and regulatory

compliance in respect of all ourinvestments. We also ensure legal and

regulatory compliance in any foreign

country that we operate in in respect

of the Sri Lanka Fund, and in such

instances through legal counsel

retained in those environments.

At Guardian proactive monitoring of

the compliance process is followed and

we see that our investments are made

and trades are executed in keeping to the Companies Act, SEC regulations, tax

regulations, exchange control regulations

and other applicable guidelines. In

addition since the Sri Lanka Fund is

incorporated in Cayman Islands and is

extending its marketing reach to all

parts of the world, we are mindful of the

need to comply with regulations in those

jurisdictions. In this respect we will take

the necessary precautions whenadmitting new investors to the fund by

following the proper identification

process for investors as required by anti

money laundering regulations.

Key risk management initiatives in 2009/10

1. Development of a broad based research unit to research companies, industry sectors and

monitoring of economic indicators

2. Implementation of Code of Ethics for all employees directly or indirectly related to the fundmanagement operation

3. Regular monitoring of fund management operational functions by the independent

Compliance Officer and Internal Audit Division of the parent company

4. Updating of staff knowledge on key issues such as insider trading and other trading rules,

money laundering, KYC issues and similar regulatory priorities

Key risk management initiatives planned for 2010/11

1. Short listing and formulating guidelines to manage the risks impacts to the fund

management company on the proposed re-launch of the Sri Lanka Fund given its

international reach and international investor base.

2. Short listing and formulating guidelines to manage the risk impacts to the fund management

company on the management of local and foreign individual or institutional client

portfolios.

Mandatory regulations

Securities Exchange Commission Act

Securities Exchange Commission Rules

Market Intermediary Rules

Financial Transactions Reporting Act

Mandatory Know your Customer &

customer due diligence : Rules for the

Securities Industry in terms of the provisions

of the Financial Transactions Reporting Act

Money Laundering Act

Exchange Control Act and Regulations

under the Gazette regulations made under

the Act

Compliant

Compliant

Compliant

Staff is being made aware of the requirements

under the Act and extensive guidelines are being

prepared on same.

The Sri Lanka Fund is yet to be launched and

thus profiling of investors have not yet

commenced. We have already prepared a

checklist of KYCs required.

Staff is being made aware of the requirements

under the Act and extensive guidelines are being

prepared on same.The Exchange Control Act mainly applies to the

entry of foreign clients if any, and we advice the

clients as required.




Regulatory Compliance

The operations of the Guardian

Group come within the rules and

regulations applicable to all marketparticipants operating in the equity

and debt markets of Sri Lanka, as well

as the regulatory provisions applicable

to companies listed on the CSE and

regulations applicable to securities

trading set by the Securities and

Exchange Commission of Sri Lanka.

Our systems and processes are structured

to satisfy the criteria set by these

regulations, and staff is constantly kept

aware of the compliance needs imposed

by these regulations. An independent

compliance officer undertakes

responsibility for maintaining a check

on the overall compliance process and he

is supported by the internal audit

function of the Carsons Group. GFM,

as an Investment Manager registered

with the SEC, the fund management

company, is also subject to further regulation by the capital markets

regulator.

Operational RisksProfessionalism in operational

dealings

Guardian emphasizes professionalism

in the manner in which the staff

interacts with clients as well as market

intermediaries, since it is vital for

maintaining the company’s standing

within the investment community.

Our staff has signed a Code of Ethics

at the time of recruitment by the

company, which lays down

professional standards of conduct and

dealing that is expected of staff.

Structures to avoid conflicts of interest

and compromising of best practices

are set up. Staff education covers theseareas of practice, and annual

declarations by the staff members on

compliance in personal equity trading

are mandatory.

Compliance with SEC trading rules on

insider trading, front running, market

manipulation etc are checked by

comparing trading statistics between

portfolios and pre-approved personal

transaction of employees, by the

Compliance Officer.

Compliance with the Company Code of

Ethics ensures that the conduct of fund

managers and other staff do not violate

the code of ethics that have been brought

in by the company and for which

employees are signatories. Some of the

areas that have been highlighted include

avoiding conflict of interest between portfolios through Chinese walls being

maintained.

Systems and process risks

We manage operational risks by

identifying areas of risk, formulating

plans for their management,

promoting best practices,

implementing internal controls and

systems, and monitoring compliance

with these internal guidelines for

managing operational risks.

Operational risks mainly cover the

areas of system failure, continuity of

decision making, dealing with

contingencies and ensuring efficiency

in operations and correct application

of recommended management

practices. Operational risk is the risk

of loss resulting from inadequate orfailed internal processes, people and

systems or from external events.

In order to deal with unexpected

contingencies, at Guardian Group we

have developed and implemented a

business continuity plan, which looks

after aspects such as staff deployment

and systems backup in case of an

unexpected disruption to the business.

This business continuity plan forms a

part of the Carsons Group’s business

continuity plan.

The internal audit function of the

Carsons Group, ensures the safeguarding

of company assets and recommends

process improvements in areas where

process control failures are noted.

Compliance with the investment

objectives of each portfolio involves checking whether fund managers have

adhered to the investment guidelines for

each portfolio operating within set limits

& not falling to prohibited investments;

as well as monitoring portfolio

performance against the benchmarks set.

Further compliance with the operating

process manual involves checking the

application of proper internal controls

such as segregation of duties, authority

limits, approvals and that cash

management processes are in order.

Systems support for the portfolio

management software is made available

through an annual maintenance




agreement with the software vendor

which ensures on line support for system

issues and queries. At the same time the

financial transaction processing and reporting system are based on an ERP

system in use at Carsons Group level

and as such back up support services for

this system are available through the

parent company’s management services

company.

Staff risks

A fund management operational unit

requires qualified professionals with

experience in the fund management

industry. Knowledge of the operating

mechanism of the market as well as its

norms and ethics is of importance.

We attempt to pass on this valuable

local knowledge to our staff at all

levels. Having diversity in the team,

developing a strong second level,

training and development

opportunities, are standard practices

of the industry, which we benchmark ourselves with. A performance related

incentive scheme for the staff is in

place. The networking ability of key

staff to source deals is important in

running a successful fund

management operation by being

shown both important buy side and

sell side deals by brokers. In addition,

the networking ability to source

private equity deals to enhanceportfolio returns is also important in

this industry.

The staff of GFM are all professionally

qualified with a track record of

experience in the industry. A strong

research team has been developed in the

last one year to complement the fund

management operation and raise the

standard of the investment decisionmaking process.



30 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Annual Report of the Board of Directorson the Affairs of the Company

The details set out herein provide thepertinent information required by theCompanies Act No. 07 of 2007,

Listing Rules of the Colombo Stock Exchange and recommended bestaccounting practices. The AnnualReport was approved by the Directorson 12th May 2010.

1. GeneralThe Directors have pleasure inpresenting to the Shareholderstheir report together with theaudited financial statements forthe year ended 31st March 2010of Ceylon Guardian InvestmentTrust PLC, a public limitedliability company incorporated inSri Lanka in 1951.

2. The Principal Activities of theGroup and Structure.

There were no significant changesin the nature of the principalactivities of the company and itssubsidiaries during the financialyear under review where the

principle activity of the company and its subsidiaries continues tobe managing and holding of aninvestment portfolio.

Subsidiaries (effective holding)

Ceylon Investment PLC – 56.28%

Rubber Investment

Trust Limited – 78.16%Guardian Fund

Management Limited – 78.16%

Associate

Bukit Darah PLC – 15.66%

3. Review of Operations and FutureDevelopments

The review of the performanceduring the year, with comments onfinancial results and future

developments, is contained in theChairman’s Statement (Pages 2-4)and Manager’s review (pages 5-20).These reports form an integral partof the Annual Report.

4. Financial Results

The company recorded a netprofit of Rs.1.6 bn at group levelfor the year. An abridgement of the performance is presented in

the table below.

5. Market Value Adjustment Reserve

During the year amount of Rs.292mn and Rs.158 mn resulting from

the ‘Mark to Market Value Adjustment’ of investmentportfolio has been transferredfrom retained earnings to ‘MarketValue Adjustment Reserve’ as at31st March 2010 of Group (2009- Rs.45 mn) and Company (2009- 27.05 mn) respectively as shownin the Statement of Changes inEquity (Page No.42).

Any gains arising from the aboveadjustment will be transferredfrom retained earnings to ‘MarketValue Adjustment Reserve’ atBalance Sheet Date, and any losses arising will be transferredfrom ‘Market Value AdjustmentReserve’ to the extent that lossdoes not exceed the balance heldin the said reserve as at that date.

6. Independent Auditors’ Report

The Independent Auditors’ Reporton the Financial Statements is givenon page 39 of this Annual Report.

7. Significant Accounting Policies

The accounting policies adoptedin the preparation of the financialstatements are given on pages 44to 47. There have been nochanges in the accounting policiesadopted by the company during

the year under review.

8. Financial Statements

Financial Statements of thecompany comprises the BalanceSheet, Statements of Income,Changes in Equity and Cash Flow together with the AccountingPolicies and Notes to theFinancial Statements for the yearended 31st March 2010 are setout in page 40 to page 65.

For the year ended 31st March Group Company

2010 2009 2010 2009

Rs.’000 Rs.’000 Rs.’000 Rs.’000

Profit for the year 1,320,373 292,727 1,419,296 386,417

Profit brought forward from previous year 2,541,620 2,239,090 762,740 384,680

Repurchase of shares (1,116,991) - (1,116,991) -

Profit available for appropriation 2,745,002 2,531,817 1,065,045 771,097

From which the following appropriations/

distributions have been made:

Dividend paid (232,702) (35,411) (232,702) (35,411)

Transfers – market value Adjustment reserve (291,980) 45,214 (158,561) 27,054

Associate Company negative goodwill 16,718 - - -

Retained profits carried forward 2,237,038 2,541,620 673,782 762,740




9. Statement of Directors’Responsibilities

The Statement of Director’s

Responsibilities for the FinancialStatements is given on page 37.

10. Interest Register

The Company maintains anInterest Register conforming tothe provisions of the Companies Act No. 07 of 2007.

The relevant details as required by the Companies Act No. 7 of 2007have been entered in the Interest

Register during the year underreview.

The Interest Register is availablefor inspection as required underthe Companies Act.

10.1Remuneration of Directors

Directors’ remuneration, for thefinancial year ended 31st March2010 is given in Note 4 to the

Financial Statements on page 49.

10.2Directors’ Interests intransactions and shares

All Directors have madedeclarations as provided for inSection 192(2) of the Companies Act.

Directors’ interest in transactions of the company are disclosed in Note19 to these financial statements

and have been declared at meetingsof the directors. The Directorshave had no direct or indirectinterest in any other contracts orproposed contracts in relation tothe business of the company, whilethey had the following interests inOrdinary shares of the Company.

Directors No. of No. of Shares Shares

as at as at 31st March 1st April

2010 2009

Mr. I. Paulraj 50 50

Mr. D.C.R. Gunawardena 50 50

Mr. A. De Z. Gunasekera 50 50

Mr. V.M. Fernando - -

Mrs. M.A.R.C. Cooray - -

(Appointed to the Board w.e.f.

11/03/2010)

11. Corporate Donations

There were no donations grantedduring the year.

12. Directors

The names of the Directors whoserved during the year are givenunder Corporate informationprovided in the back inner coverof the Annual Report.

12.1Appointment

Mrs. Rose Cooray was appointed

as a Non executive/IndependentDirector to the Company on 11thMarch 2010.

12.2Directors to Retire by Rotation

In terms of Articles 89,90 and 91of the Articles of Association of the Company, Mr. A. De Z.Gunasekera retires by rotationand being eligible offers himself for re-election.

12.3Retirement at the 1st AGMfollowing appointment asDirector

In terms of Article 95 of the Articles of Association of theCompany, Mrs. Rose Cooray retires from the Board and beingeligible offers herself for re-election.

12.4Appointment of Director who isover 70 years of age

Mr. I. Paulraj who is over 70 years

of age to be re-appointed as aDirector of the Company for afurther period of one year fromthe conclusion of the AnnualGeneral Meeting and that the agelimit stipulated in Section 210 of the Companies Act No.7 of 2007shall not be applicable.

13. Auditors

Company’s auditors during theyear under review were Messrs.KPMG Ford Rhodes Thornton &Company, Chartered Accountants.

A sum of Rs.225,000/- was paidto them by the Company as auditfees for the year ended 31stMarch 2010 (2009-Rs.208,000/).In addition they were paidRs.749,000/- by the Company fornon-audit related services.

The retiring auditors haveexpressed their willingness tocontinue in office. A Resolutionto re-appoint them as Auditors of the company and authorizing thedirectors to fix their remuneration will be proposed at theforthcoming Annual GeneralMeeting.

The Audit Committee reviewedthe appointment of the Auditors,its effectiveness and itsrelationship with the group,including the level of audit andnon-audit fees paid to the Auditor.

13.1Auditors’ relationship or any interest with the Company

The Directors are satisfied that,based on written representations



32 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Annual Report of the Board of Directorson the Affairs of the Company (Contd.)

made by the Independent Auditors to the Board, theauditors did not have any interest

with the Company and itssubsidiaries that would impairtheir independence.

14. Corporate Governance

Compliance of Corporategovernance Rules as per theListing Rules of the ColomboStock Exchange (CSE).

14.1Board of Directors

The following Directors held

office as at the balance sheet dateand their brief profiles are givenon page 21 of the Annual Report.

Name of the Director Executive/

Non-executive/

Independent

Mr. I. Paulraj Non-Executive

/Independent*

Mr. D.C.R. Gunawardena Executive

Mr. A. De Z. Gunasekera Non-Executive/Independent**

Mr. V.M. Fernando Non-Executive

/Independent***

Mrs. M.A.R.C. Cooray Non-Executive

(Appointed w.e.f. /Independent****

11/03/2010

* The Board has determined thatMr. I. Paulraj is an Independent,non executive Director in spite of being on the Board for more than9 years and being a Director of Ceylon Investment PLC, in which majority of other Directorsof the Board are also Directors,since he is not directly involved inthe management of the Company.

** The Board has determined thatMr. A. De Z. Gunasekera is anIndependent, non executive

Director in spite of being on theBoard for more than 9 years andbeing a Director of CeylonInvestment PLC, in whichmajority of other Directors of theBoard are also Directors, since heis not directly involved in themanagement of the Company.

*** The Board has determined thatMr. V.M. Fernando is anindependent, non executiveDirector in spite of being aDirector of Ceylon InvestmentPLC, in which majority of otherDirectors of the Board are alsoDirectors, since he is not directly involved in the management of the Company.

****The Board has determined thatMrs. M.A.R.C. Cooray is anindependent, non executive

Director in spite of being aDirector of Ceylon InvestmentPLC, in which majority of otherDirectors of the Board are alsoDirectors, since she is not directly involved in the management of the Company.

The Management of theCompany is carried by CarsonsManagement Services (Private)

Limited.

14.2Remuneration Committee

As per the Rule 7.10.5 of theListing Rules of the Colombo

Stock Exchange theRemuneration Committee of Carson CumberbatchPLC(CCPLC), the parentCompany, functions as theRemuneration Committee of theCompany with effect from 1st January 2010 and comprises of the following members -

Remuneration Executive/

Committee members Non-Executive/

Independent

Mr. I. Paulraj - Chairman Non Executive/

Independent

Director of CCPLC

Mr. M. Moonasinghe Non-Executive/

Independent

Director of CCPLC

Mr. H. Selvanathan Executive

Director of CCPLC

Mr. M. Selvanathan Executive

Director of CCPLC

Mr. D.C.R. Gunawardena Executive

Director of CCPLC

The Committee is currently formulating a remunerationpolicy based on market andindustry factors and individualperformance for all groupcompanies. Aggregatedremuneration paid to the Non-

Executive Directors of theCompany are disclosed underNote 4 on page 49 of this AnnualReport.

Executive Directors are notcompensated for their role on theBoard.




14.3Audit Committee

As per the Rule 7.10.6 of theListing Rules of the Colombo

Stock Exchange the AuditCommittee of CarsonCumberbatch PLC(CCPLC), theparent Company functions as the Audit Committee of theCompany and comprises thefollowing members.

Audit Committee Executive/

members Non-Executive

Mr. Vijaya Malalasekera Non-Executive,

Independent

Director of CCPLC

Mr. Chandima Gunawardena Executive

Director of CCPLC

Mr. Faiz Mohideen Non-Executive,

Independent

Director of CCPLC

The Audit Committee Report isgiven on page 35 of this AnnualReport.

15. Directors’ Meeting Attendance

Four Board Meetings wereconvened during the financialyear and the attendance of theDirectors were as follows :

Director Meetings attended

(out of 04)

Mr. I. Paulraj 2

Mr. D.C.R. Gunawardena 4

Mr. A. De Z. Gunasekera 4

Mr. V.M. Fernando 2

Mrs. M.A.R.C. Cooray

(Appointed w.e.f. 11.03.2010) -

16. Dividends

Subject to the approval of theshareholders at the AnnualGeneral Meeting, a first and finaldividend of Rs.9/- per ordinary share, Rs.900/- per fully paid

deferred share and Rs.817/20 perpartly paid deferred share isrecommended by the Directors

for the year ended 31st March2010. The dividend payable hasnot been accounted for until it isapproved at the forthcoming Annual General Meeting.

The details of the dividends paidduring the year are set out inNote 8 to the FinancialStatements.

17. Solvency Test

Taking into account the saiddistribution, the Directors aresatisfied that the Company wouldmeet the solvency testrequirement under Section 56(2)of the Companies Act No.07 of 2007 immediately after thedistribution. The Company’s Auditors, Messrs. KPMG FordRhodes Thornton & Company have issued a Certificate of

Solvency confirming the same.

18. Stated Capital

The Stated Capital of theCompany Rs.672 mn consistingof 16,097,396 Ordinary Shares,8,669 Fully paid Deferred Sharesand 2,593 partly paid DeferredShares (Rs.908/- paid) andsubsequent to the repurchase of 2,840,716 ordinary shares, 1,530

fully paid Deferred shares and457 partly paid Deferred sharesby the Company as per Section64 of the Companies Act No.7 of 2007. There was no change in theRupee Value of the Stated Capitalof the Company during the year.

19. Shareholders Funds

Total Group shareholders’ fundsstood at Rs.7,637 mn as at 31stMarch, 2010 (2009 – Rs.4,551.9

mn) comprising stated capital of Rs.673 mn, capital reserves of Rs.1,255 mn (2009 - Rs.1,002

mn) and revenue reserve of Rs.5,709 mn (2009 - Rs.2,877mn). The movements are shownin the Statement of Changes inEquity.

20. Investments

The total investments made by the Group during the yearamounted to Rs.2,932 mn (31stMarch, 2009 - Rs.957 mn).

The short-term portfolio engagedin active trading to realise thebenefits of the movements in thestock market. The carrying valueof short-term portfolio of theGroup/Company as at 31stMarch, 2010 was Rs.652mn./Rs.32 mn (2009 – Rs.114mn/Rs.55 mn) which includes amarket value appreciation of Rs.263 mn./Rs.34 mn

respectively.

The market value of long-term/other investment portfolioof the Group/Company isRs.7,121 mn/Rs.3,047 mn (2009– Rs.2,463 mn/ Rs.978 mn)respectively.

The movements of the investmentportfolio during the year are set

out in Notes 10 and 11 to theFinancial Statements.

21. Statutory Payments

The Directors to the best of theirknowledge and belief are satisfiedthat all statutory payments havebeen paid up to date or have beenprovided for in these financialstatements.



34 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Annual Report of the Board of Directorson the Affairs of the Company (Contd.)

22. Going Concern

Having taken into account thefinancial position and future

prospects the Directors have areasonable expectation that theCompany & its subsidiaries haveadequate resources to continue tobe in operational existance for theforseeable future. For this reasonthe Company and its subsidiariescontinue to adopt the goingconcern basis in preparing thefinancial statements.

23. Events Occurring After TheBalance Sheet Date

Subsequent to the Balance Sheetdate, no material circumstanceshave arisen, which would requireadjustments to or disclosure inthese Financial Statements otherthan those disclosed in Note 17to these Financial Statements.

24. Share Information

Information relating to Earnings,

dividend, net assets and marketprice per share are given on page74 to 75 of the Annual Report.

25. Twenty Major shareholders withComparatives

26. Annual Report

The Board of Directors approvedthe Company and theconsolidated financial statementstogether with the reviews whichforms a part of the AnnualReport, on 12th May 2010. The

appropriate number of copies of the Report would be submitted tothe Colombo Stock Exchange, SriLanka Accounting and AuditingStandard Monitoring Board andthe Registrar of Companies within the given time frames.

27. Annual General Meeting

58th Annual General Meeting of the Company will be held onTuesday, 15th day of June 2010 at

3.30 p.m. at the “SamudraHotel”, Sri Lanka Institute of Tourism & Hotel Management,Committee Room “C”, No. 78,Galle Road, Colombo 3.

The Notice of the Annual

General Meeting is on page 78 of the Annual Report.

Signed on behalf of the Board

(Sgd.) (Sgd.)I. Paulraj D. C. R. Gunawardena

Chairman Director

Colombo

12th May 2010

As at 31st March 2010 2009Name of shareholders No. of shares % No. of shares %

Carson Cumberbatch PLC A/C No. 01 10,809,967 67.15 12,622,607 66.65

Thurston Investments Limited 1,077,199 6.69 1,249,462 6.60

Mr. M. Radhakrishnan 398,664 2.48 398,664 2.11

Pershing LLC S/A Averbach Grauson & Co. 381,600 2.37 381,600 2.01

The Gilpin Fund Limited 308,424 1.92 297,624 1.57

Mr. G.J.W. De Silva 186,000 1.16 186,033 0.98

Miss G.I.A. De Silva 170,250 1.06 170,250 0.90

Mrs. M.L. De Silva 168,160 1.04 168,160 0.89

Mr. K.C. Vignarajah 110,935 0.69 68,233 0.36

Miss R.H. Abdulhussein 100,585 0.62 130,100 0.69

The Ceylon Desiccated Coconut &

Oil Company Limited 74,988 0.47 74,988 0.40

Waldock Mackenzie Ltd/

Mr. H.M.S. Abdulhussein 72,367 0.45 141,041 0.74

Miss G.N.A. De Silva 70,685 0.44 89,656 0.47

Waldock Mackenzie Ltd/Mr. M.A.N. Yoosufali 61,764 0.38 35,093 0.19

Mr. O.D. Liyanage 51,492 0.32 57,685 0.30

DFCC Bank A/C 1 48,318 0.30 36,844 0.19

Mr. G.N. Russel 45,568 0.28 45,568 0.24

J.B. Cocoshell (Pvt) Ltd 45,279 0.28 169,900 0.90

Mrs. S. Vignarajah 42,236 0.26 19,088 0.10

Mr. A.C. Rizan 37,200 0.23 37,200 0.20



Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Audit Committee Report

The Audit Committee of Carson

Cumberbatch PLC (CCPLC), the

Parent Company, is the Audit

Committee of the Company, asprovided for by the Colombo Stock

Exchange Listing Rules.

The members of the Audit

Committee are as follows :

Audit Committee Executive /

members Non-Executive

Mr.Vijaya Malalasekera Non-Executive,

Independent (CCPLC)Mr.Chandima Gunawardena Executive

(CCPLC)

Mr. Faiz Mohideen Non-Executive,

Independent (CCPLC)

Mr.Vijaya Malalasekera is a Non-

Executive, Independent Director of

Carson Cumberbatch PLC and a

Non-Executive Director of Ceylon

Tobacco Company PLC.

Mr.Chandima Gunawardena is a

Director of Carson Cumberbatch

PLC and in most of its’ Group

Companies.

Mr.Faiz Mohideen, a Non-Executive,

Independent Director of Carson

Cumberbatch PLC, was the former

Deputy Secretary to the Treasury anda former Director of Bank of Ceylon

and Securities and Exchange

Commission of Sri Lanka.

In addition, Mr.Tennyson Rodrigo is

the Expert Advisor to the Audit

Committee for the Investment Sector.

The audit aspects of Ceylon Guardian

Investment Trust PLC are conducted

within the Agenda of Carson

Cumberbatch PLC-Audit Committee

and the Committee is advised by

Mr.Tennyson Rodrigo as a member of the Panel of Expert Advisors to the

Audit Committee of Carson

Cumberbatch PLC, for the

Investment Sector, Property Sector

and the Leisure Sector of the Group.

Mr.Rodrigo is a Director of Good

Hope PLC and was the former

Managing Director and Chief

Executive of Capital Development

and Investment Company PLC and was the former Chairman of the Audit

Committee of Eagle Insurance

Company Limited.

Carson Cumberbatch PLC-Audit

Committee held 05 Meetings during

the financial year to discuss matters

relating to the Company and the

attendance of the Members of the

Audit Committee was as follows :

Meetings attended (out of five)

Mr. Vijaya Malalasekera 05

Mr. Chandima Gunawardena 05

Mr. Faiz Mohideen 05

Mr.Tennyson Rodrigo, the Expert

Advisor attended all 05 Audit

Committee Meetings.

In accordance with the audit plan

formulated and approved by the Audit

Committee for the financial year

2009/2010, the Group Internal Audit

(GIA) carried out 03 detailed audits

on the Investment Sector companies.

The findings and contents of the

Group Internal Audit reports have

been discussed with the management

and subsequently the audit reports

were circulated to the Audit

Committee and to the management.

The objectives of the GIA work was

to have an independent review of the

system of internal controls as

established by the management, its

adequacy and integrity vis-à-vis

objectives served and to determine the

extent of adherence to the controls by

staff responsible for the function and

to take corrective/preventive action

where necessary.

The interim financial statements of

Ceylon Guardian Investment Trust

PLC have been reviewed by the Audit

Committee Members at Audit

Committee Meetings. The draft

financial statements of Ceylon

Guardian Investment Trust PLC for

the year ended 31st March 2010 have

also been reviewed at a Meeting of the

Audit Committee, together with theExternal Auditors, Messrs. KPMG

Ford Rhodes Thornton & Company,

prior to release of same to the

Regulatory Authorities and to the

shareholders. The Audit Committee

was provided with confirmations and

declarations as required, by the

Managers, Carsons Management

Services (Private) Limited that the

said financial statements were

prepared in accordance with the

Sri Lanka Accounting Standards and

the information required by the

Companies Act No. 7 of 2007 therein

and presented a true and fair view of

the Company’s state of affairs as at

that date and the Company’s activities

during the year under review.



36

The Audit Committee has determined

that Messrs.KPMG Ford Rhodes

Thornton & Company, Auditors are

independent on the basis of the letterof independence submitted by them.

The Audit Committee has concurred

to recommend to the Board of

Directors the re-appointment of

Messrs. KPMG Ford Rhodes

Thornton & Company as Auditors

for the financial year ending 31st

March 2011, subject to the approval

of the shareholders of Ceylon

Guardian Investment Trust PLC at

the Annual General Meeting.

The purpose of the Audit Committee

of Carson Cumberbatch PLC, the

Audit Committee of Ceylon Guardian

Investment Trust PLC is as follows :

To assist the Board of Directors in

fulfilling its oversight responsibilities

for the financial reporting process, thesystem of internal control over

financial reporting, the audit process

and the process for monitoring

compliance with Company policies

and procedures, laws and regulations

and the code of conduct and the

identification of and management of

risks that would impact on the

Company/Group’s business objectives.

(Sgd.)

Vijaya Malalasekera

Chairman – Audit Committee

Carson Cumberbatch PLC

12th May 2010

Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Audit Committee Report (Contd.)



Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Statement of Directors’ Responsibilities

The responsibilities of the Directors,in relation to the Financial Statementsare detailed in the following

paragraphs while the responsibilitiesof the Auditors are set out in theReport of the Auditors.

According to the Companies Act No.07 of 2007 and the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995, Directors arerequired to prepare FinancialStatements for each financial year,giving a true and fair view of the stateof affairs of the Company as at theend of the financial year and of theprofit or loss for the said period.

In preparing these FinancialStatements the Directors are requiredto ensure that:

• appropriate accounting policieshave been selected and appliedconsistently while materialdepartures, if any, have beendisclosed and explained,

• all applicable AccountingStandards have been complied with and,

• reasonable and prudent judgements and estimates havebeen made.

The Directors are responsible forensuring that the Company maintainssufficient accounting records to

disclose with reasonable accuracy, thefinancial position of the Company inorder to ensure that the FinancialStatements of the Company meet with the requirements of theSri Lanka Accounting and AuditingStandards Act, No. 15 of 1995 andthe Companies Act, No. 07 of 2007.

They are also responsible for takingreasonable measures to safeguard theassets of the Company and in this

regard to give proper consideration tothe establishment of appropriatesystem of internal controls with a view to prevent, detect and rectify fraudsand other irregularities.

These Financial Statements have beenprepared on a going concern basis,after reviewing the financial positionand the cash flows, since the Directorsare of the view that the Company hasadequate resources to continue inoperation for the foreseeable future.

The Directors are also of the view thatthey have discharged theirresponsibilities as set out in thisstatement.

By Order of the Board

(Sgd.)D.C.R. Gunawardena Director

Carsons Management Services(Private) Limited.Secretaries

Colombo12th May 2010




Independent Auditors’ Report 39

Income Statement 40

Balance Sheet 41

Statement of Changes in Equity 42

Cash Flow Statement 43

Significant Accounting Policies 44

Notes to the Financial Statements 48

Five Year Summary 66

USD Group at a Glance 69

USD Income Statement 70

USD Balance Sheet 71

USD Five Year Summary 72

Information to Shareholders and Investors 74

Glossary of Financial Terms 76

Financial Reports

Financial Calendar

Financial Year End - 31st March 2010

Announcement of Results

First Quarter ended 30th June 2009 - 14th August 2009

Second Quarter ended 30th September 2009 - 9th November 2009

Third Quarter ended 31st December 2009 - 12th February 2010

Dividend Declaration

First & Final Dividend - 15th June 2010

58th Annual General Meeting - 15th June 2010



Independent Auditors’ ReportCeylon Guardian Investment Trust PLC – Annual Report 2009-2010

TO THE SHAREHOLDERS OF CEYLON

GUARDIAN INVESTMENT TRUST PLC

Report on the Financial Statements

We have audited the accompanying financial

statements of Ceylon Guardian Investment

Trust PLC, the consolidated financial

statements of the Company and its

subsidiaries as at March 31 2010 which

comprise the balance sheet as at that date, and

the income statement, statement of changes

in equity and cash flow statement for the year

then ended, and a summary of significant

accounting policies and other explanatory

notes.

Management’s Responsibility for the Financial

Statements

Management is responsible for the

preparation and fair presentation of these

financial 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 financial 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 thecircumstances.

Scope of Audit and Basis of Opinion

Our responsibility is to express an opinion on

these financial 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 financial statements are free from

material misstatement.

An audit includes examining, on a test basis,evidence supporting the amounts and

disclosures in the financial statements. An

audit also includes assessing the accounting

principles used and significant estimates made

by management, as well as evaluating the

overall financial 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 - Company

In our opinion, so far as appears from our

examination, the Company maintained

proper accounting records for the year ended

March 31, 2010 and the financial statements

give a true and fair view of the Company’s

state of affairs as at March 31, 2010 and its

profit and cash flows for the year then ended

in accordance with Sri Lanka Accounting

Standards.

Opinion - Group

In our opinion, the consolidated financial

statements give a true and fair view of the state

of affairs as at March 31, 2010 and the profit

and cash flows for the year then ended, in

accordance with Sri Lanka Accounting

Standards, of the Company and its

subsidiaries dealt with thereby, so far as

concerns the shareholders of the Company.

Report on Other Legal and Regulatory Requirements

These financial statements also comply with

the requirements of Sections 153(2) to 153(7)

as appropriate of the Companies Act No. 07

of 2007.

KPMG Ford, Rhodes, Thornton & CO

Chartered Accountants

12 May 2010



40 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Income Statement

Group Company

For the year ended 31st March 2010 2009 2010 2009

In Rs. '000s Note

Revenue 1 1,960,283 2,350,153 1,660,742 1,284,028

Carrying value of investments disposed (1,544,300) (1,790,017) (573,567) (989,934)

Net realized gain on sale of Investments 2 680,932 427,970 195,736 329,927

Mark to market value adjustment - unrealized 3 304,339 (356,284) 167,066 (215,609)

Profit on portfolio activities 1,401,254 631,822 1,449,977 408,412

Other income - 962 - 479

Administrative expenses (67,887) (34,327) (18,964) (9,837)

Profit from operations 4 1,333,367 598,457 1,431,013 399,054

Finance cost (5,414) (13,525) (5,309) (12,013)

Profit from operations after finance cost 1,327,953 584,932 1,425,704 387,041

Share of associate companies profit net of taxation 5 386,732 75,700 - -

Profit before taxation 1,714,685 660,632 1,425,704 387,041

Taxation 6 (35,106) (7,463) (6,408) (624)

Profit for the year 1,679,579 653,169 1,419,296 386,417

Attributable to:

Equity holders of the parent 1,320,373 292,727 1,419,296 386,417

Minority shareholders 359,206 360,442 - -

1,679,579 653,169 1,419,296 386,417

Earnings Per Share - Rs. 7 68.65 14.47 73.83 19.10

Dividend Per Share - Rs. 8 9.00 11.50 9.00 11.50

The Accounting Policies and Notes from pages 44 to 65 form an integral part of these Financial Statements.

Figures in brackets indicate deductions.

Dividend Per Share is based on the proposed/interim dividend.



Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Balance Sheet

Group Company

As at 31st March 2010 2009 2010 2009

In Rs. '000s Note

Assets

Non-Current Assets

Property, plant & equipment 9A 8,017 10,039 - -

Intangible assets 9B 7,099 9,152 - -

Investments in subsidiaries 10A - - 277,217 346,500

Investments in associates 10B 1,667,306 1,022,079 - -

Other Long-term investments 10C 7,121,063 2,463,564 3,047,976 978,160

Deferred tax asset 12 250 250 - -

8,803,735 3,505,084 3,325,193 1,324,660

Current Assets

Trade and other receivables 46,638 14,941 24,337 2,885

Income tax recoverable - 5,812 5,356 4,611

Short-term investments 11 651,826 114,044 31,734 54,619

Short-term deposits 9,287 1,974,584 - 46,806Cash at bank 38,895 60,643 19,799 280,209

746,646 2,170,024 81,226 389,130

Total assets 9,550,381 5,675,108 3,406,419 1,713,790

Equity and Liabilities

Stated Capital and Reserves

Stated capital 13 672,811 672,811 672,811 672,811

Capital reserves 14A 1,255,328 1,001,762 208,660 208,660

Revenue reserves 14B 5,709,110 2,877,333 2,242,896 828,334

Shareholders’ funds 7,637,249 4,551,906 3,124,367 1,709,805

Minority shareholders’ interest 1,566,029 1,053,800 - -

9,203,278 5,605,706 3,124,367 1,709,805

Non-Current LiabilitiesRetirement benefit obligation 15 561 361 - -

561 361 - -

Current Liabilities

Creditors and accruals 69,398 5,405 28,350 1,120

Income tax payable 15,533 - - -

Unclaimed dividend 12,873 5,895 5,970 2,520

Bank overdraft 248,738 57,741 247,732 345

346,542 69,041 282,052 3,985

Total Liabilities 347,103 69,402 282,052 3,985

Total equity and liabilities 9,550,381 5,675,108 3,406,419 1,713,790

Net assets per ordinary/deferred share - Book value - Rs. 444.03 224.95 181.65 84.50

Net assets per ordinary/deferred share - Market value - Rs. 620.33 252.77 576.18 185.53


I certify that these financial statements have been prepared in compliance with the requirement of the Companies Act No. 07 of 2007.

A. P. WeeratungeChief Financial Officer Carsons Management Services (Private) Limited

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.

Approved and signed on behalf of the Investment Managers, Approved and signed on behalf of the Board,

(Sgd.) (Sgd.) (Sgd.) W. Y .R. Fernando I. Paulraj D. C. R. Gunawardena Director Chairman Director Guardian Fund Management Limited

Colombo12th May 2010



42 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Statement of Changes in Equity

For the year ended 31st MarchTotal

Stated Shareholders Minority Total

Capital Capital Reserves Revenue Reserves Funds Interest Equity

Investment Other Associate Market Long-Term General RetainedReserve Capi tal Company’s Value Investments Reserve Profi ts

Reserves Capital Adjustment Revaluation

Reserve Reserve Reserve

In Rs. ’000s Short-term

Group

Balance a s a t 1st April 2008 672,811 7,805 316,741 611,137 57,573 2,078,293 32,668 2,239,090 6,016,118 1,210,710 7,226,828

Profit for the year * - - - - - - - 292,727 292,727 360,442 653,169

Loss on revaluation of long-term investments - - - - - (1,787,607) - - (1,787,607) (485,502) (2,273,109)

Movement in associate company's reserves - - - 66,079 - - - - 66,079 - 66,079

Transfers (Note 14.3) - - - - (45,214) - - 45,214 - - -

Dividend paid for 2008 - - - - - - - (35,411) (35,411) (31,850) (67,261)

Balance a s a t 31st March 2009 672,811 7,805 316,741 677,216 12,359 290,686 32,668 2 ,541,620 4,551,906 1,053,800 5,605,706

Balance as at 1st April 2009 672,811 7,805 316,741 677,216 12,359 290,686 32,668 2,541,620 4,551,906 1,053,800 5,605,706

Profit for the year * - - - - - - - 1,320,373 1,320,373 359,206 1,679,579

Re-purchase of shares - - - - - - - (1,116,991) (1,116,991) (399,083) (1,516,074)

Movement in associate company's reserves - - - 253,566 - - - - 253,566 - 253,566

Effect of change in Associate Company’s

Negative Goodwill 16,718 16,718 - 16,718

Gain on revaluation of long-term investments - - - - - 2,844,379 - - 2,844,379 666,666 3,511,045

Transfers (Note 14.3) - - - - 291,980 - - ( 291,980) - - -

Dividend paid for 2009 - - - - - - - (232,702) (232,702) (114,560) (347,262)

Balance as at 31st March 2010 672,811 7,805 316,741 930,782 304,339 3,135,065 32,668 2,237,038 7,637,249 1,566,029 9,203,278

Stated TotalCapital Capital Reserves Revenue Reserves Equity

Investment Other Market Revaluation General Retained

Reserve Capital Value Long-Term Reserve Profits

Reserve Adjustment Investments

Reserve Reserve

In Rs. ’000s Short-term

Company

Balance as at 1st April 2008 672,811 7,805 200,855 35,559 869,917 14,961 384,680 2,186,588

Profit for the year - - - - - - 386,417 386,417

Loss on Revaluation of long-term investments - - - - (827,789) - - (827,789)

Transfers (Note 14.3) - - - (27,054) - - 27,054 -

Dividend paid for 2008 - - - - - - (35,411) (35,411)

Balance as at 31st March 2009 672,811 7,805 200,855 8,505 42,128 14,961 762,740 1,709,805

Balance as at 1st April 2009 672,811 7,805 200,855 8,505 42,128 14,961 762,740 1,709,805

Profit for the year - - - - - - 1,419,296 1,419,296

Gain on Revaluation of long-terminvestments - - - 1,344,959 - - 1,344,959

Re-purchase of Shares - - - - - - (1,116,991) (1,116,991)

Transfers (Note 14.3) - - - 158,561 - - (158,561) -

Dividend paid for 2009 - - - - - - (232,702) (232,702)

Balance as at 31st March 2010 672,811 7,805 200,855 167,066 1,387,087 14,961 673,782 3,124,367

* Profit for the year includes share of profits of the associate company which cannot be distributed.





Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Cash Flow Statement

Group Company

For the year ended 31st March 2010 2009 2010 2009

In Rs. '000s

Cash Flows from Operating Activities


Adjustments for:

Share of associate company’s profit net of tax (386,732) (75,700) - -

Depreciation on property, plant & equipment 2,200 1,661 - -

Amortisation of intangible assets 2,166 1,615 - -

Provision for retiring gratuity 200 155 - -

Finance cost 5,414 13,525 5,309 12,013

Loss on disposal of associate companies - 237,970 - -

Dividend received from associate companies 11,789 19,868 - -

Mark to market value adjustment for long-term investments (158,654) 296,668 (142,609) 188,555

Mark to market value adjustment for short-term investments (145,685) 59,616 (24,457) 27,054Operating profit before working capital changes 1,045,383 1,216,010 1,263,947 614,663

(Increase)/Decrease in trade and other receivables (31,697) 21,962 (21,452) 1,814

Net (increase)/decrease in investments (1,379,896) 166,708 (465,623) (61,741)

Increase/(Decrease) in creditors and accruals 63,993 (1,145) 27,230 (84,586)

Cash generated from operations (302,217) 1,403,535 804,102 470,150

Finance cost (5,414) (13,525) (5,309) (12,013)

Taxation paid (13,762) (6,590) (7,153) (1,889)

Net cash generated from/(used in) operating activities (321,393) 1,383,420 791,640 456,248

Cash Flows from Investing Activities

Proceeds from sale of associate companies - 728,535 - -

Purchase of property, plant & equipment & intangible asssets (291) (20,627) - -

Net cash generated from/(used in) investing activities (291) 707,908 - -

Cash Flows from Financing Activities

Dividend paid (225,724) (31,201) (229,252) (35,465)

Re-purchase of shares (1,116,991) - (1,116,991) -

Re-purchase of shares held by minority shareholders (399,083) - - -

Dividend paid to minority shareholders (114,560) (31,850) - -

Net cash used in financing activities (1,856,358) (63,051) (1,346,243) (35,465)

Net increase/(decrease) in cash & cash equivalents (2,178,042) 2,028,277 (554,603) 420,783

Cash & cash equivalents at the beginning of the year 1,977,486 (50,791) 326,670 (94,113)

Cash & cash equivalents at the end of the year (200,556) 1,977,486 (227,933) 326,670

Cash & Cash Equivalents

Short-term deposits 9,287 1,974,584 - 46,806

Cash at bank 38,895 60,643 19,799 280,209

Bank overdrafts (248,738) (57,741) (247,732) (345)

(200,556) 1,977,486 (227,933) 326,670

The Accounting Policies and Notes from pages 44 to 65 form an integral part of these financial statements.





1. General

Ceylon Guardian Investment Trust PLC.

is a subsidiary of Carson Cumberbatch

PLC. and is a public quoted company with limited liability incorporated and

domiciled in Sri Lanka and listed on the

Colombo Stock Exchange. Principal

activity of the Company and the

subsidiaries are investment holding &

portfolio management services.

In the Annual Report, ‘the Company’

refers to Ceylon Guardian Investment

Trust PLC., as the holding company and

‘the Group’ refers to the companies whose

accounts have been consolidated therein.

All companies in the Group have a common

financial year which ends at 31st March.

The consolidated financial statements of

the Group for the year ended 31st March

2010 were authorised for issue by the

Directors on 12th May 2010.

2. General Policies

2.1 Statement of Compliance

The Balance Sheet, Statement of Income,Statement of Changes in Equity, Cash

Flow Statement, Accounting Policies and

Notes to the financial statements of the

Group as at 31st March 2010 and for the

year then ended comply with the

Sri Lanka Accounting Standards (SLAS)

laid down by the Institute of Chartered

Accountants of Sri Lanka (ICASL) and

also are in compliance with the

Companies Act No. 07 of 2007.

2.2 Basis of Preparation

The financial statements of the Company

have been prepared on a historical cost

convention except for market value

adjustment of investment portfolios as

stated in the respective Clause 7.1.2 below.

The accounting policies applied by the

Group are, consistent with those used in

previous year . Previous year figures and

phrases have been rearranged wherever

necessary to conform to the current year’s

presentation.

All values presented in the financial

statements are in Sri Lankan Rupees

thousand (Rs.'000) unless otherwise

indicated. Figures in brackets indicate

deduction/negative changes.

3. Consolidation Policy

3.1 Basis of Consolidation

Subsidiaries

Subsidiaries are all entities over which the

Company has the power to govern the

financial and operating policies generally

accompanying a shareholding of more

than one half of the voting rights. The

existence and effect of potential voting

rights that are currently exercisable orconvertible are also considered when

assessing whether the Company controls

another entity. Subsidiaries are

consolidated from the date of that

control commenced until the date that

control ceases. Acquisitions for

subsidiaries are accounted for using the

purchase method of accounting.

The consolidation of the financial

statements of the Company and its

subsidiaries are in accordance with theSri Lanka Accounting Standard 26

(Revised 2005) - ‘Consolidated and

Separate Financial Statements’. The cost

of an acquisition is measured as the fair

value of the assets given, equity

instruments issued and liabilities incurred

or assumed at the date of exchange, plus

costs directly attributable to the

acquisition. Identifiable assets acquired

and liabilities and contingent liabilities

assumed in a business combination are

measured initially at their fair values atthe acquisition date, irrespective of the

extent of any minority interest.

The total profits and losses for the period

of the Company and of its subsidiaries are

included in the consolidated income

statement and the allocation of profit and

loss for the period attributable to minority

interest and equity holders of the parent,

are disclosed separately.

All assets & liabilities of the Company

and of its subsidiaries are included in the

consolidated balance sheet. The

proportionate interest of minority

shareholders in the net assets employed by

the Group, is disclosed separately within

equity in the consolidated balance sheet as

‘Minority Shareholders Interest’.

The financial statements of the Group

represent the consolidation of financial

statements of the Company and of its

subsidiaries, Ceylon Investment PLC.,

Rubber Investment Trust Limited. and

Guardian Fund Management Limited.

3.2 Goodwill

The excess of the cost of acquisition over

the fair value of the Group’s share of the

identifiable net assets acquired is recorded

as goodwill, and is tested for impairment

annually. If the cost of acquisition is less

than the fair value of the net assets of the

subsidiary acquired, the resulting negative

goodwill is credited to the income

statement immediately.

3.3 Intra-Group Transactions

Intra-group balances, intra-group

transactions and resulting unrealized

profits are eliminated in full in the

consolidated financial statements.

Unrealised losses resulting from intra-

group transaction are eliminated unless

the cost cannot be recovered.

3.4 Transactions and Minority Interest

The Group applies a policy of treating

transactions with minority interests as

transactions with parties external to theGroup. Disposals to minority interest

result in gains and losses for the Group

that is recorded in the income statement.

Purchases from minority interests result in

goodwill, being the difference between

any consolidation paid and the relevant

share acquired of the carrying value of net

assets of subsidiary.

3.5 Finacial Year End

All Companies in the group have a common

financial year which ends on 31st March

Significant Accounting Policies




4. Associates

Associates are those entities where the

Company’s holding is more than 20%

and where the Company exercisesignificant influence over the financial

and operating decisions/policies. The

results of the Associate Companies of the

Group are accounted for on the equity

method of accounting, where the Group’s

share of profits or losses are incorporated

in the Consolidated Income Statement,

and the related investments presented in

the Consolidated Balance Sheet at values

adjusted to reflect the Group’s share of

retained assets. The carrying value of the

Group’s investments in such Associates, is

reduced to the extent of the dividend

received from these Associate Companies.

5. Other Investments

Investments in companies where the

Group’s holding is less than 20% and

where the Group does not exercise

significant influence and/or control over

the financial and operating

decisions/policies, are accounted on the

basis stated in 7.1 below. The income

from these investments is recognised only to the extent of dividend received.

6. Taxation

6.1 Current Income Tax

Provision for taxation is based on the

profit for the year adjusted for taxation

purposes in accordance with the

provisions of the Inland Revenue Act No.

10 of 2006 and amendments made

thereto, taking into consideration the

maximum relief available.

6.2 Deferred Taxation

Deferred tax is recognised using the

Balance Sheet method, providing for

temporary differences between the

carrying amounts of assets and liabilities

for financial reporting purposes and the

amounts used for taxation purposes.

Deferred tax is measured at the tax rates

that are expected to be applied to the

temporary differences when they reverse,

based on the laws that have been enacted

or substantively enacted by the reporting

date.

A deferred tax asset is recognised to the

extent that it is probable that future

taxable profits will be available against

which such asset can be utilised. Deferred

tax assets are reviewed at each reporting

date and are reduced to the extent that it

is no longer probable that the related tax

benefit will be realised.

7. Assets and Bases of their Valuation

Assets classified as current assets in the

Balance Sheet are cash and those which

are expected to be realised in cash during

the normal operating cycle of the

Company’s business or within one year

from the Balance Sheet date, whichever is

shorter.

Non-current assets are those which the

Company intends to hold beyond a

period of one year from the Balance Sheet

date, less impairment losses, if any.

7.1 Investments

7.1.1 Classification

Investments held for yield or capital

appreciation are classified as long-term

investments and investments that are

intended to be held for trading purposes

are classified as short-term investments.

7.1.2 Valuation

Quoted Investments

Long term quoted investments other than

investments in subsidiaries and associates

which are considered as strategic

investments are carried at revaluedamounts based on their market prices. All

investments classified as long term are

revalued quarterly and any gains are

recognized in the equity as revaluation

surplus. A subsequent decline will be

offset against a previous increase for the

same investment which is credited to the

revaluation surplus and not reversed

subsequently. In all other cases a decrease

in the carrying amount of an investment

is recognized as an expense. An increase

on revaluation that is related to a previous

decrease in carrying amount recognized as

an expense is credited to income to the

extent it offsets the previously recorded

decrease.

On disposal, the amount of gains

applicable to that investment previously

credited to the revaluation surplus is

transferred from revaluation surplus to

income statement.

Quoted investments that are held for

short term are carried in the Balance Sheet

at market value.

Unquoted Investments

All unquoted investments are carried at

lower of cost and Directors' valuation.

Provision is made for any permanent

diminution in value.

7.1.3 Cost

Cost of investments is the cost of

acquisition including brokerage,

commission and other fees.

7.1.4Market Value of the Investment Portfolio

The market values of the investment

portfolio are based on the following:

(a) Marketable equity securities are stated at

the values in the Official Valuation List of

the Colombo Stock Exchange published

as at the Balance Sheet date. Where the

official valuation is not available the

market value is stated at the last

transacted price.

(b) Units purchased from Unit Trusts are

valued at the managers’ buying price as at

the Balance Sheet date.

7.1.5Mark to Market Value Adjustment

This represents the difference between

‘carrying value and market value’ of the

investments as at the Balance Sheet date.




7.2 Property, Plant & Equipment and

Depreciation

7.2.1 Valuation

Property, plant & equipment are stated atcost or valuation less accumulated

depreciation, less impairment losses if any.

The cost of property, plant & equipment

is the cost of purchase or construction

together with any incidental expenses

incurred in bringing the assets to its

working condition for its intended use.

Expenditure incurred for the purpose of

acquiring, extending or improving assets

of a permanent nature by means of whichto carry on the business or to increase the

earning capacity of the business has been

treated as capital expenditure.

7.2.2 Depreciation

Depreciation is provided on a straight-line

method over periods appropriate to the

estimated useful lives of different types of

assets, by applying the following

percentages on their cost or revalued

amounts:

%Furniture & fittings 5

Office equipment 20

Computer equipment 33 1/3

Motor Vehicle 20

Depreciation of an asset begins when it is

available for use whereas depreciation of

an asset ceases at the earlier of the date

that the asset is classified as held for sale

and the date that the asset is derecognised.

The appropriateness of useful lives of theassets and the depreciation rates are

assessed annually.

An asset’s carrying amount is written

down immediately to its recoverable

amount if the asset’s carrying amount is

greater than its estimated recoverable

amount.

7.3 Intangible Assets

All computer software cost incurred and

licensed to the Company, which are not

integrally related to the associated

hardware, which can be clearly identified,

reliably measured and probably will lead

to future economic benefits are included

in the Balance Sheet as intangible assets

and carried at cost less accumulated

amortization on strast line basis and any

impairment losses. Intangible assets are

amortized over 05 years based on the

frequency of upgrade available as per the

agreement with vendor.

7.4 Debtors and Other Receivables

Debtors and other receivables are stated at

the amounts estimated to realize. Where

necessary, provision is made for bad and

doubtful debts.

7.5 Cash and Cash Equivalents

Cash and cash equivalents are defined as

cash in hand, demand deposits in Bank

and short-term highly liquid deposits,

readily convertible to known amounts of

cash and subject to insignificant risk of

change in value.

For the purpose of Cash Flow Statement,

cash and cash equivalents consist of cash

in hand, short term deposits and deposits

at Banks.

Interest paid and interest and dividend

received are classified as operating cash

flows while dividend paid are classified as

financing cash flows for the purpose of

presentation of Cash Flow Statement,

reported based on the indirect method.

8. Liabilities and Provisions

Liabilities classified as current liabilities inthe Balance Sheet are those obligations

payable on demand or within one year

from the Balance Sheet date. Items

classified as long-term liabilities are those

obligations which expire beyond a period

of one year from the Balance Sheet date.

All known liabilities have been accounted

for in preparing these Financial

Statements. Provisions and liabilities are

recognised when the Company has a legal

or constructive obligation as a result of

past events and it is probable that an

outflow of economic benefits will be

required to settle the obligation.

8.1 Retirement Benefit Obligations

(i) Defined Benefit Plan - Gratuity

The Company is liable to pay gratuity in

terms of the Payment of Gratuity Act No.

12 of 1983. Gratuity provision for

employees has been made as

recommended by the related Sri Lanka

Accounting Standard 16, 'Employee

Benefit', the 'Projected Unit Credit'

(PUC) method has been used in this

valuation. It is expected that such

actuarial valuations will be carried outonce in every two years.

(ii) Defined Contribution Plans - Employees’

Provident Fund and Employees’ Trust

Fund

All employees who are eligible for

Employees’ Provident Fund contributions

and Employees' Trust Fund contributions

are covered by relevant contribution funds

in line with the respective statutes.

Contributions to the defined contribution

plans are recognised as an expense in theStatement of Income when incurred.

9. Capital Commitments and Contingencies

Capital commitments and contingencies

which exist at the Balance Sheet date are

disclosed in the respective Notes to the

financial statements.

10. Income Statement

10.1 Revenue

The revenue mainly represents dividend

income, interest income and proceeds

from disposal of investments.

10.2 Revenue Recognition

Revenue is accrued and matched with the

related expenditure and is recognised in

accordance with the Sri Lanka Accounting

Standard No. 29 in the following manner:

- Dividend income - when the

shareholders’ right to receive dividend is

established.

Significant Accounting Policies (Contd.)




- Interest income - accrued on a time

proportion basis.

- Proceeds from sale of shares - on an

accrual basis.

- Management fee on accrual basis.

10.3 Expenditure Recognition

All expenditure, including the following,

incurred in operating the business are

charged against revenue in arriving at the

profit or loss from operations.

10.3.1 Providing for bad and doubtful debts

and all known liabilities.

10.3.2 All expenses incurred in the day-to-day

operations of the business.

10.3.3 All expenses incurred in respect of

business development.

10.4 For the purpose of presentation of the

Income Statement, the Directors are of

the view that Function of Expenses

Method fairly presents the elements of the

Company’s performance. Hence, such a

presentation method is adopted.

10.5 Borrowing Costs

Borrowing costs are recognized as

expenses in the period in which they are

incurred and charged to the income

statement

11. Related Party Transactions

Disclosures are made in respect of the

transactions in which one party has the

ability to control or exercise significant

influence over the financial and operating

decisions/policies of the other, irrespective

of whether a price is being charged.

12. Segment Reporting

A segment is a distinguishable component

of an enterprise that is engaged in either

providing products or services (Business

segment) or in providing products or

service within a particular economic

environment (Geographical segment)

which is subject to risk and rewards that

are different from those of the other

segment. However, there are no

distinguishable components to be

identified as segments for the Group.

13. Impairment

The Group assesses assets or groups of

assets for impairment at each reporting

date or whenever events or changes in

circumstances indicate that the carrying

value of assets may not be recoverable. If

any such indication of impairment exists,

the Group makes an estimate of its

recoverable amount individual assets are

grouped for impairment purposes at the

lowest level at which there are identifiable

cash flows that are largely independent of

the cash flows of other groups of assets.

Where the carrying amount of an asset

group exceeds its recoverable amount, the

asset group is considered impaired and is

written down to its recoverable amount.

A previously recognized impairment loss

is reversed only if there has been a change

in the estimates used to determine the

asset’s recoverable amount since the last

impairment loss was recognized. If that is

the case, the carrying amount of the asset

is increased to its recoverable amount.

Such increase is recognized to the extent

of the carrying amount net of

depreciation had no impairment losses

been recognized previously.

14. Critical Accounting Estimates and

Judgments

Estimates and judgments are continually

evaluated and are based on historical

experience and other factors, including

expectations of future events that are

believed to be reasonable under the

circumstances.



48 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Notes to the Financial Statements

Group Company

For the year ended 31st March 31st March 31st March 31st March

2010 2009 2010 2009

Rs '000 Rs '000 Rs '000 Rs '000

1 Revenue

Dividend income* 398,324 241,580 220,206 99,460

Interest income 135,482 38,122 27,833 5,667

Proceeds from disposal of investments-Strategic 697,413 996,607 862,650 268,071

Proceeds from disposal of investments-non Strategic 2,178,762 1,154,744 550,053 910,830

Management fees 13,981 10,807 - -

3,423,962 2,441,860 1,660,742 1,284,028

Intra-group transactions (1,463,679) (91,707) - -

1,960,283 2,350,153 1,660,742 1,284,028

* Dividend income includes Rs. 2,026,000 (2009 - NIL) at company level and Rs. 19,139,000 (2009-NIL) at group level, of dividend income

receivable at balance sheet date.

Group Group

Revenue Profit before Taxation

31st March 31st March 31st March 31st March

2010 2009 2010 2009

Rs '000 Rs '000 Rs '000 Rs '000

1.1 Revenue and Profit before Taxation

Ceylon Guardian Investment Trust PLC 1,660,742 1,284,028 1,425,704 387,041

Ceylon Investment PLC 1,509,468 988,889 1,086,192 446,588

Rubber Investment Trust Limited 239,498 158,135 213,202 770,971

Guardian Fund Management Limited 14,254 10,808 (2,693) (2,446)

Share of Associate Companies’ profit after taxation - - 386,732 75,700

3,423,962 2,441,860 3,109,137 1,677,854

Intra-group transactions/Consolidation adjustments (1,463,679) (91,707) (1,394,452) (1,017,222)

1,960,283 2,350,153 1,714,685 660,632

Group Company


2010 2009 2010 2009

Rs '000 Rs '000 Rs '000 Rs '000

2 Net Realized Gain on Sale of Investments

Realized gain on sale of investments 680,932 665,940 195,736 329,927

Loss on sale of associate companies - (237,970) - -

680,932 427,970 195,736 329,927

3 Mark to Market Value Adjustment - Unrealized

Mark to Market Value Adjustment

- On Long-term investments 158,654 (59,616) 142,609 (27,054)

- On Short-term investments 145,685 (296,668) 24,457 (188,555)

304,339 (356,284) 167,066 (215,609)




Group Company


2010 2009 2010 2009

Rs '000 Rs '000 Rs '000 Rs '000

4 Profit from Operations

Profit from operations is stated after

charging all expenses which include the following:

Directors’ fees 500 355 440 300

Directors’ emoluments 2,846 2,689 - -

Management fees 16,109 10,532 5,680 4,577

Audit Committee fees 200 200 200 200

Auditors' remuneration - audit fees 635 322 225 208

- non audit services 1,659 106 749 40

Depreciation 2,200 1,661 - -

Amortisation 2,166 1,615 - -

Personnel cost (Note 4.1) 8,053 6,954 - -

4.1 Personnel cost

Salaries, wages and other related expenses 7,125 6,104 - -

Defined benefit plan cost-gratuity 200 158 - -

Defined contribution plan cost - EPF and ETF 728 692 - -

8,053 6,954 - -

Revenue Profit after Tax Group's Share of Profit

after Tax

31st March 31st March 31st March 31st March 31st March 31st March

In Rs.’000s 2010 2009 2010 2009 2010 2009

Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000

5 Share of Associate Companies’

Profit after Taxation

Selinsing PLC - 184,660 - 69,074 - 15,369

Good Hope PLC - 168,685 - 77,429 - 18,753

Indo-Malay PLC - 82,268 - 24,870 - 4,628

Bukit Darah PLC 23,865,375 17,090,940 6,607,250 2,564,586 386,732 36,950

386,732 75,700

Group Company


2010 2009 2010 2009

Rs '000 Rs '000 Rs '000 Rs '000

6 Taxation

6.1 Current tax

Company (Note 6.2) 6,279 624 6,279 624

Subsidiaries (Note 6.2 & 6.3) 28,497 7,127 - -

Under provision for previous year 330 - 129 -

35,106 7,751 6,408 624

Deferred tax reversal - (288) - -

Tax expense for the year 35,106 7,463 6,408 624



50 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Notes to the Financial Statements (Contd.)

Group Company


2010 2009 2010 2009

Rs '000 Rs '000 Rs '000 Rs '000

6.2 Reconciliation of Accounting Profit and Taxable Profits


Less: Profit not Liable for Taxation

Exempt profits on sale of Quoted Public Shares (1,873,408) (1,026,604) (1,034,872) (518,894)

Dividend income (398,324) (241,580) (220,206) (99,460)

Allowable Claims (3,476) (5,311) - (479)

Add: Mark to market value adjustment (443,415) 356,284 (167,066) 215,609

Expenses attributable to excluded profits 33,900 20,867 13,406 9,722

Disallowable expenses 23,804 3,927 10,224 26

(946,234) (231,785) 27,190 (6,435)

Inter Company transactions 1,463,679 91,907 - -

Associate Company profits (386,732) (75,700) - -

Loss on diaposal of Associates - 237,970 - -

Adjustments on losses 650 8,473 - -

Utilisation of tax losses (33,472) (10,803) (9,516) -

Tax adjusted profit/(loss) 97,891 20,062 17,674 (6,435)

Tax liability for current year

(Company and subsidiaries)

Income Tax 34,262 7,022 6,186 -

Social Responsibility Levy 514 105 93 -

Economic Service Charge write-off - 624 - 624

34,776 7,751 6,279 624

Group tax expenses is based on the taxable profit of individual companies within the group. At present the tax laws of Sri Lanka does not provide

for group taxation.

Analysis of Tax Losses

Tax losses brought forward 96,578 98,908 58,720 52,285

Adjustment on finalisation of liability 282 - (33) -

Tax losses incurred during the year 650 8,473 (9,516) 6,435

Utilization of tax losses during the year (33,472) (10,803) - -

Tax losses carried forward 64,038 96,578 49,171 58,720

Utilization of current year and brought forward tax losses is restricted to 35% of Statutory Income. Unabsorbed tax losses can be carried forward

indefinitely.

6.3 Company & Subsidiaries

(a) Profits of the company, other than such referred to in note 6.3 (b) are liable to income tax at the standard rate of 35%. (2009 -35%).

(b) In terms of Section 13 (t) of Inland Revenue Act No. 10 of 2006 and amendments thereto, profits derived on the sale of shares on which Share

Transaction Levy has been paid is exempt from income tax.

(c) Economic Service Charge paid by companies is available as income tax credit. In instances where recoverability is not possible due to the tax status,

sums paid are written-off to the income statement.

(d) The Company and its Subsidiaries are liable to pay 1.5% of income tax as a Social Responsibility Levy (2009 - 1.5%). This has been included in

the Tax Charge.




7 Earnings Per Share (EPS)

The Group's earnings per share is calculated on the profit attributable to the shareholders of Ceylon Guardian Investment Trust PLC over the

weighted average number of ordinary/deferred shares in issue during the year.

The following reflect the income and share data used for the computation of Earnings Per Ordinary/Deferred Share:

Group Company


2010 2009 2010 2009

Amount used as the Numerator

Profit attributable to Group shareholders Rs.'000 1,320,373 292,727 1,419,296 386,417

Amount used as Denominator

* Weighted average number of ordinary shares and deferred shares

in issue applicable to basic earnings per share (in 000) 19,233 20,235 19,223 20,235

Basic earnings per share 68.65 14.47 73.83 19.10

* Each deferred share has been considered to be made up of equivalent number of ordinary shares (up to the paid up value) in arriving at the weighted average number of shares.

Group Company


2010 2009 2010 2009

Rs '000 Rs '000 Rs '000 Rs '000

8 Dividend

Dividend paid

On ordinary shares 217,788 33,142 217,788 33,142

On deferred shares (fully and partly paid) 14,914 2,269 14,914 2,269

232,702 35,411 232,702 35,411

Dividend Proposed *

On ordinary shares 144,876 217,788 144,876 217,788

On deferred shares (fully and partly paid) 9,921 14,914 9,921 14,914

154,797 232,702 154,797 232,702

* The proposed dividend is subject to approval by shareholders at the forthcoming Annual General Meeting and according to the Sri Lanka Accounting

Standard No. 12, the liability has not been provided for in these Financial Statements.

9(A) Property, Plant & Equipment Group Office Computer Furniture & Motor 31st March 31st March

Equipment Fittings Vehicle 2010 2009Total Total

Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000

Cost Balance as at the beginning of the year 187 390 1,843 9,675 12,095 2,234

Additions - 178 - - 178 9,861

Disposals - - - - - -

Balance at the end of the year 187 568 1,843 9,675 12,273 12,095

Depreciation

Balance as at the beginning of the year 112 217 276 1,451 2,056 395

Charge for the year 37 136 92 1,935 2,200 1,661

Balance at the end of the year 149 353 368 3,386 4,256 2,056

Net Book Value as at 31st March 2010 38 215 1,475 6,289 8,017

Net Book Value as at 31st March 2009 75 173 1,567 8,224 10,039




9(B) Intangible AssetsGroup 2010 2009

Computer ComputerSoftware Software

Rs. ’000 Rs. ’000

Cost

Balance as at the beginning of the year 10,767 9,285

Amount transferred from Prepayments - 1,482

Additions 113 -

Balance at the end of the year 10,880 10,767

Amortization

Balance as at the beginning of the year 1,615 -

Charge for the year 2,166 1,615

Balance at the end of the year 3,781 1,615

Net Book Value as at 31st March 2010 7,099

Net Book Value as at 31st March 2009 9,152

Amortization charge on intangible assets are included in the administrative expenses.

10 Investment Portfolio

Summary of Investment Portfolio

Group Company Carrying Market Cost Market Carrying Market Cost Market

Value/ Value/ as at Value as at Value/ Value/ as at Value as at

Cost Valuation 31st March 31st March Cost Valuation 31st March 31st Marchas at as at as at as at

31st March 31st March 31st March 31st MarchNote 2010 2010 2009 2009 Note 2010 2010 2009 2009

Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000 Rs '000

(A) Investments in Subsidiaries

Quoted - - - - 10.7 (a) 276,920 2,945,893 346,151 788,108

Unquoted - - - - 10.7 (b) 297 4,117,101 349 1,602,699

Total investments in subsidiaries - - - - 277,217 7,062,994 346,500 2,390,807

(B) Investments in Associate Companies

Quoted 10.2 1,667,305 6,011,250 1,022,078 1,582,962 - - - -

Unquoted 10.2 1 1 1 1 - - - -

Total investments in associates companies 1,667,306 6,011,251 1,022,079 1,582,963 - - - -

(C) Other long term investments

Investments in Equity Securities

Quoted 10.3 (a) 2,831,564 6,714,928 2,131,457 2,183,725 10.8 (a) 1,489,417 2,869,018 978,776 824,700Unquoted 10.3 (b) 406,130 406,130 279,834 279,834 10.8 (b) 178,957 178,957 153,460 153,459

Total investments in equity securities 3,237,694 7,121,058 2,411,291 2,463,559 1,668,374 3,047,975 1,132,236 978,159

Investments in Debentures

Unquoted 10.4 5 5 5 5 10.9 1 1 1 1

Total investments in debentures 5 5 5 5 1 1 1 1

Investments in Preference Shares

Unquoted 10.5 - - - - - - -

Total investments in preference shares - - - - - -

Total other long term investments 3,237,699 7,121,063 2,411,296 2,463,564 1,668,375 3,047,976 1,132,237 978,160

Total long-term investments 4,905,005 13,132,314 3,433,375 4,046,527 1,945,592 10,110,970 1,478,737 3,368,967

Note : Investment portfolio excludes cash and cash equivalents.




10.1 Movements in Investments - GroupCarrying Value Mark to Market Carrying Value

as at Value as at 1st April Additions Disposals Adjustment 31st March

2009 2010 Year 2009/10 Note Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000

Investments in equity securities 10.3 2,463,559 2,124,021 (1,011,417) 3,544,895 7,121,058

Investments in debentures 10.4 5 - - - 5

Investments in preference shares 10.5 - - - - -

2,463,564 2,124,021 (1,011,417) 3,544,895 7,121,063

Carrying Value Mark to Market Carrying Valueas at Value as at

1st April Additions Disposals Adjustment 31st March2008 2009

Year 2008/09 Rs. '000 Rs. '000 Rs. '000 Rs. '000 Rs. '000

Investments in equity securities 5,197,238 886,427 (1,716,256) (1,903,850) 2,463,559

Investments in debentures 19 - (14) - 5

Investments in preference shares - - - - -

5,197,257 886,427 ( 1,716,270) (1,903,850) 2,463,564

Mark to market value adjustment

The mark to market value adjustment includes the realized and unrealized gains/(losses) on market value adjustment as indicated in Note 2 and 3

to the financial statements and the movement in revaluation reserve is disclosed in the statement of changes in equity.

10.2 Investment in Associate Companies - GroupMarket Value/ Market Value/

No. of Cost Valuation No. of Cost ValuationShares as at as at Shares as at as at

31st March 31st March 31st March 31st March2010 2010 2009 2009

On Ordinary Shares

Bukit Darah PLC 2,003,750 1,927 6,011,250 2,003,750 1,927 1,582,962

On Preference Shares

Bukit Darah PLC 8% participating

cumulative preference shares 3,125 1 1 3,125 1 1

1,928 6,011,251 1,928 1,582,963

Directors’ Directors’% Cost Valuation % Cost Valuation

Holding as at as at Holding as at as at31st March 31st March 31st March 31st March

2010 2010 2009 2009

Investors’ Share of Net Assets

At the beginning of the year 15.66 1,070,151 15.66 2,002,710

Appreciation/(depreciation) of

associate company’s reserves 220,285 (1,038,391)

Dividend (11,790) (19,868)

Share of profit for the year (net of tax) 386,732 75,700

At the end of the year 1,665,378 6,011,250 1,020,151 1,582,962

Total Investment in Associate on Equity Basis 1,667,306 6,011,250 1,022,079 1,582,962




10.3 Other Long term Investments in Equity Securities - Group

(a) Quoted

No. of Cost Market Value No. of Cost Market Value

Shares as at as at Shares as at as at


2010 2010 2009 2009

Rs. '000 Rs. '000 Rs. '000 Rs. '000

Banks, Finance & Insurance

Commercial Bank of Ceylon PLC 3,214,400 462,045 648,505 328,800 25,979 26,057

Hatton National Bank PLC 2,500,000 415,244 470,625 - - -

HNB Assurance PLC 1,500,000 90,735 83,250 - - -

968,024 1,202,380 25,979 26,057

Beverage, Food & Tobacco

Distilleries Company of Sri Lanka PLC 2,680,300 184,461 316,275 4,894,300 315,794 318,130

Cargills (Ceylon) PLC 7,041,300 208,976 496,411 6,830,000 199,746 160,505

Nestle Lanka PLC 100,000 32,590 49,000 17,300 3,151 4,758

Ceylon Brewery PLC 1,742,900 69,270 313,722 1,742,900 69,270 88,888

Lion Brewery (Ceylon) PLC 3,256,872 124,654 281,720 1,913,857 70,934 105,262

619,951 1,457,128 658,895 677,543

Diversified

Aitken Spence PLC 891,800 393,392 1,225,110 891,800 393,392 280,917

John Keells Holdings PLC 12,817,159 547,443 2,358,357 16,762,675 770,847 1,051,858

940,835 3,583,467 1,164,239 1,332,775

Hotels & Travel

Asian Hotels & Properties PLC - - - 1,699,200 77,403 42,055

Aitken Spence Hotel Holding PLC 1,029,250 262,812 396,261 - - -

262,812 396,261 77,403 42,055

Manufacturing

Tokyo Cement Company (Lanka) PLC

- Voting - - - 249,596 8,045 31,199

- - 8,045 31,199

Telecommunications

Dialog Telekom PLC - - - 10,080,180 170,107 49,393

- - 170,107 49,393

HealthCare

Ceylon Hospitals PLC 630,763 39,942 75,692 466,100 29,003 24,703

39,942 75,692 29,003 24,703

Total Equity Investments in

Quoted Companies 2,831,564 6,714,928 2,133,671 2,183,725

Note :

(I) Group’s entitlement in the Rights issue of Aitken Spence Hotel Holding PLC of 255,850 shares amounting to Rs.66,521,000/- has been included

under investments on accrual basis and corresponding entry shown under creditors and accruals as at balance sheet date. Cash outflow on this

transaction took effect on 26th April 2010.

(II) Group’s subscription to the Initial Public offer of Vallibel Finance Ltd. amounting to Rs.22,000,000/- is shown under Trade and Other receivables as at

the balance sheet date and not included under investments. Group was alloted 98,000 shares amounting to Rs.2,165,000/- after the balance sheet date.




10.3 Other Long-term Investments in Equity Securities - Group (Contd.)

(b) Unquoted

No. of Cost Directors' No. of Cost Directors'

Shares as at Valuation as at Shares as at Valuation as at


2010 2010 2009 2009

Rs. '000 Rs. '000 Rs. '000 Rs. '000

Capital Reach Holdings Limited 100,000 - - 100,000 - -

DFCC Vardhana Bank Limited 128,925 1,600 1,600 128,925 1,600 1,600

Softlogic Holdings (Private) Limited 1,750,000 126,000 126,000 - - -

Kandy Private Hospital Limited 1,200 20 20 1,200 20 20

Lanka Communications Limited 1,428,496 15,714 15,714 1,428,496 15,714 15,714

Durdans Medical &

Surgical Hospital (Private) Limited 21,000,000 262,796 262,796 21,000,000 262,500 262,500

406,130 406,130 279,834 279,834

Total carrying value of Long-term

investments in Equity Securities 3,237,694 7,121,058 - 2,413,505 2,463,559

10.4 Investments in Debentures - Group

No. of Cost Directors' No. of Cost Market Value/

Debentures as at Valuation as at Debentures as at Valuation as at


2010 2010 2009 2009

Rs. '000 Rs. '000 Rs. '000 Rs. '000

Unquoted investments

Redeemable unsecured

Riverina Hotels Limited - Zero Coupon 56 1 1 56 1 1

Ocean View Limited - 6% 360 4 4 360 4 4

Total Investments in Debentures 5 5 5 5

10.5 Investments in Preference Shares - Group

No. of Cost Directors' No. of Cost Directors'



2010 2010 2009 2009

Rs. '000 Rs. '000 Rs. '000 Rs. '000

Ceylon Cold Stores PLC 7% 1,362 - - 1,362 - -

Richard Pieris & Co. PLC 8% cumulative 1,375 - - 1,375 - -

Rowlands Limited - 8% cumulative 1,125 - - 1,125 - -

Total Investments in Preference Shares - - - -

Total Other Long-term Investments 3,237,699 7,121,063 2,411,296 2,463,564




10.6 Movements in Investments - Company Carying Market to Carying

Value Market as at Value as at

1st April Additions Disposals Adjustment 31st March2009 2010

Year 2009/10 Note Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000 Rs. '000

Investments in Subsidiaries

Quoted 10.8 (a) 346,151 - (69,231) - 276,920

Unquoted 10.8 (b) 349 - (52) - 297

346,500 - (69,283) - 277,217

Other Long-term Investments

Investments in Equity Securities 10.9 (a & b) 1,132,236 1,271,346 (419,217) 1,217,686 3,047,975

Investments in Debentures 10.1 1 - - 1

1,132,237 1,271,346 (419,217) 1,217,686 3,047,976

Total investments 1,478,737 1,271,346 (488,500) 1,217,686 3,325,192

Carying Market to CaryingValue Market Value

as at Value as at1st April Additions Disposals Adjustment 31st March

2008 2009

Year 2008/09 Note Rs. ’000 Rs. ’000 Rs. ’000 Rs. '000 Rs. '000

Investments in Subsidiaries

Quoted 346,151 - - - 346,151

Unquoted 349 - - - 349

346,500 - - - 346,500

Other Long-term Investments

Investments in Equity Securities 1,925,734 693,668 (624,896) (1,010,346) 978,160

Investments in Debentures 8 - (7) - 1

1,925,742 693,668 (624,903) - 978,161

Total investments 2,272,242 693,668 (624,903) - 1,324,661

Long-term investments are last revalued on 31st March 2010.

10.7 Investments in Subsidiaries - Company No. of Cost Market Value/ No. of Cost Market Value/Shares as at Directors’ Shares as at Directors’

31st March Valuation 31st March Valuation2010 as at 2009 as at

31st March 31st March

2010 2009Rs. '000 Rs. '000 Rs. '000 Rs. '000

(a) Quoted Investments

Ceylon Investment PLC 10,870,453 276,920 2,945,893 13,588,066 346,151 788,108

(b) Unquoted Investments

Rubber Investment Trust Limited 3,955,579 297 4,117,101 4,653,622 349 1,602,699

277,217 7,062,994 346,500 2,390,807

Note: The Directors’ valuation of Rubber Investment Trust Ltd. (RITL) is based on the net asset value of the RITL which is arrived at based on

the market value of the investment portfolio of RITL.




10.8 Other Long-term Investments in Equity Securities - Company

(a) Quoted

No. of Cost Market Value No. of Cost Market Value

Shares as at as at Shares as at as at


2010 2010 2009 2009

Rs. ’000 Rs. ’000 Rs. '000 Rs. '000

Banks, Finance & Insurance

Commercial Bank of Ceylon PLC 1,770,300 278,043 357,158 23,800 1,891 1,886

Hatton National Bank PLC 1,000,000 170,027 188,250 - - -

HNB Assurance PLC 1,500,000 90,735 83,250 - - -

538,805 628,658 1,891 1,886


Distilleries Company of Sri Lanka PLC 2,549,800 178,076 300,876 3,649,800 254,899 237,237

Nestle Lanka PLC 15,400 3,890 7,546 8,700 1,585 2,392

Ceylon Brewery PLC 934,900 37,580 168,282 934,900 37,580 47,680

Cargills (Ceylon) PLC 7,041,300 208,976 496,412 6,830,000 199,746 160,505

Lion Brewery (Ceylon) PLC 2,341,672 90,065 202,554 1,341,857 50,073 73,802

518,587 1,175,670 543,883 521,616

Diversified

Aitken Spence PLC 626,700 295,926 860,929 626,700 295,926 197,410

John Keells Holdings PLC - - - 1,184,416 66,832 74,322

295,926 860,929 362,758 271,732

Hotels & Travels

Asian Hotels & Properties PLC - - - 560,800 20,821 13,880

Aitken Spence Hotel Holding PLC 529,250 136,099 203,761 - - -

136,099 203,761 20,821 13,880

Telecommunications

Dialog Telecom PLC - - - 3,180,870 49,423 15,586

- - 49,423 15,586

Total Equity Securities - Quoted 1,489,417 2,869,018 978,776 824,700

Note :

(I) Company’s entitlement in the Rights issue of Aitken Spence Hotel Holdings PLC of 105,850 shares amounting to Rs.27,521,000/- has been

included under investments on accrual basis and corresponding entry shown under creditors and accruals as at the balance sheet date. Cash outflow

on this transaction took effect on 26th April 2010.

(II) Company’s subscription to the Initial Public Offer of Vallibel Finance Ltd., amounting to Rs.22,000,000/- is shown under the trade and other

receivables as at the balance sheet date and not included under investments. Company was allotted 98,000 shares amounting to Rs.2,165,000/-

after the balance sheet date.




10.8 Other Investments in Equity Securities - Company (Contd.)

(b) Unquoted

No. of Cost Directors’ No. of Cost Directors’



2010 2010 2009 2009

Rs. ’000 Rs. ’000 Rs. '000 Rs. '000

DFCC Vardhana Bank 42,975 533 533 42,975 533 533

Softlogic Holdings (Private) limtied 350,000 25,200 25,200 - - -

Kandy Private Hospitals Limited 600 10 10 600 10 10

Capital Reach Holdings Limited 100,000 - - 100,000 - -

Lanka Communications Limited 1,428,496 15,714 15,714 1,428,496 15,714 15,713

Durdans Medical &

Surgical Hospital (Private) Limited 11,000,000 137,500 137,500 11,000,000 137,203 137,203

Total Equity Securities - Unquoted 178,957 178,957 153,460 153,459

Total Gross Carrying Value of

Equity Securities 1,668,374 3,047,975 1,132,236 978,159

10.9 Investments in Debentures - Company

No. of Cost Directors’ No. of Cost Directors’

Debentures/ as at Valuation as at Debentures/ as at Valuation as at

Units 31st March 31st March Units 31st March 31st March

2010 2010 2009 2009

Rs. '000 Rs. '000 Rs. '000 Rs. '000

Unquoted Investments

Redeemable Unsecured

Ocean View Limited - 6% 120 1 1 120 1 1

Total Investments in Debentures 1 1 1 1

Total Other Investments 1,668,375 3,047,976 1,132,237 978,160

11 Short-Term Investments - Group

Movements in Short-Term Investments

Carrying Value of Mark to Market Carrying Value

Investments Additions Disposals Value of Investments

at the beginning Adjustment at the

of the year end of the year

Rs '000 Rs '000 Rs '000 Rs '000 Rs '000

Year 2009/2010

Short-Term Investments

Quoted 114,044 807,909 (532,883) 262,756 651,826

114,044 807,909 (532,883) 262,756 651,826

Year 2008/2009

Short-Term Investments

Quoted 176,452 70,955 (73,747) (59,616) 114,044

176,452 70,955 (73,747) (59,616) 114,044

Mark to market value adjustment

This balance includes the realized gains/(losses) on market value adjustment on short-term investments as disclosed in Note 2 and 3 to the financial

statements.




11.1 (a) Short-Term Quoted Investments - Group

No. of Market Value No. of Market Value

Shares as at Shares as at


2010 2009Rs '000 Rs '000

Bank, Finance and Insurance

National Development Bank PLC 524,100 110,061 - -

Sampath Bank PLC 242,000 53,724 - -

DFCC 637,500 115,068 - -

Ceylinco Insurance Company PLC 60,000 13,860 - -

HNB Assuarnce PLC 421,600 23,398 - -

Commercial Bank of Ceylon PLC - - 6,600 523

316,111 523

Beverage, Food & TobaccoNestle Lanka PLC - - 14,000 3,850

Cargills (Ceylon) PLC - - 315,400 7,412

Distilleries Company of Sri Lanka PLC - - 1,256,600 81,679

- 92,941

Diversified

Aitken Spence PLC 23,100 31,733 57,000 17,955

John Keells Holdings PLC 838,800 154,302 - -

186,035 17,955

Hotels & Travel

Amaya Leisure PLC 100,000 7,300 - -

Browns Beach Hotel PLC 41,200 2,987 - -

Aitken Spence Hotel Holding PLC 250,000 96,250 - -

106,537 -

Manufacturing

Royal Ceramic Lanka PLC 381,800 43,143 - -

43,143 -

Power & Energy

Vallibel Power Erathna PLC - - 846,900 2,625

- 2,625

Total Short-Term Quoted Investments 651,826 114,044

11.1 (b) Short-Term Unquoted Investments - Group

No. of Directors' No. of Directors'

Shares Valuation as at Shares Valuation as at


2010 2009

Rs '000 Rs '000

International Grocers Alliance (Pvt) Ltd.

- Ordinary shares 5,100,000 - 5,100,000 -

Total Short-Term Investments 651,826 114,044

A full provision on permenant dimunition in value has been made in respect of IGA in the previous years.




11.2 Short-Term Investments - Company

Movements in Short-Term Investments

Carrying Value of Mark to Market Carrying Value

Investments at the Additions Disposals Value of Investments

beginning Adjustment at the

of the year end of the year

Rs '000 Rs '000 Rs '000 Rs '000 Rs '000

Year 2009/2010

Quoted 54,619 97,879 (154,349) 33,584 31,734

54,619 97,879 (154,349) 33,584 31,734

Year 2008/2009

Quoted 88,703 28,078 (35,108) (27,054) 54,619

88,703 28,078 (35,108) (27,054) 54,619

11.3 (a) Short-Term Quoted Investments

No. of Market Value No. of Market Value

Shares as at Shares as at


2010 2009

Rs '000 Rs '000


Distilleries Company of Sri Lanka PLC - - 595,000 38,675

Cargills (Ceylon) PLC - - 205,000 4,817

Nestle Lanka PLC - - 14,000 3,850

- 47,342

Diversified

Aitken Spence PLC 23,100 31,734 23,100 7,277

31,734 7,277

Total Short-Term Quoted Investments 31,734 54,619

11.3 (b) Short-Term Unquoted Investments

No. of Directors' No. of Directors'

Debentures/ Valuation as at Debentures/ Valuation as at

Units 31st March Units 31st March

2010 2009

Rs '000 Rs '000 Rs '000 Rs '000

International Grocers Alliance (Pvt) Ltd. - Ordinary shares 5,100,000 - 5,100,000 -

Total Short-Term Investments 31,734 54,619

The market value of the Company's marketable investments portfolio has been obtained from the official valuation list as at 31st March, 2010

published by the Colombo Stock Exchange. Provision have not been made for temporary fluctuations on market prices of long-term investments.




Group Company

As at As at As at As at


2010 2009 2010 2009

Rs '000 Rs '000 Rs '000 Rs '000

12 Deferred Tax Asset

Balance as at the beginning of the year 250 - - -

Amount recognised during the year - 250 - -

Balance as at the end of the year 250 250 - -

13 Stated Capital

Ordinary Shares

Issued and Fully Paid

Balance as at the beginning of the year 18,938,112 shares 617,220 617,220 617,220 617,220

Repurchase of shares (2,840,716 shares) - - - -

Balance as at the end of the year 16,097,396 shares 617,220 617,220 617,220 617,220

Deferred Shares

Balance as at the beginning of the year 10,199 fully paid shares 10,199 10,199 10,199 10,199

3,050 partly paid shares (Rs.908/- paid up) 45,392 45,392 45,392 45,392

55,591 55,591 55,591 55,591

Repurchase of fully paid shares (1,530 shares) - - - -

Repurchase of partly paid shares (457 shares) - - - -

Balance as at the end of the year 8,669 fully paid shares 10,199 10,199 10,199 10,199

Balance as at the end of the year 2,593 partly paid shares (Rs.908/- paid up) 45,392 45,392 45,392 45,392

Balance as at the end of the year 55,591 55,591 55,591 55,591

Total 672,811 672,811 672,811 672,811

The holders of ordinary shares and deferred shares are entitled to receive dividends as declared from time to time based on the paid up value of the

shares. All shares rank equally with regard to the Company's residual assets.

Group Company



2010 2009 2010 2009

Sub-note Rs '000 Rs '000 Rs '000 Rs '000

14 Reserves

A Capital Reserves

Investment reserve 14.1 7,805 7,805 7,805 7,805 Associate companies' capital reserve 14.2 930,782 677,216 - -

Other capital reserve 14.3 316,741 316,741 200,855 200,855

1,255,328 1,001,762 208,660 208,660

14.1 These amounts have been reserved for use in future development of the Company.

14.2 Share of associate companies' capital reserve recognises the investor's share of the capital reserves of the associate company after the date of

acquisition. It also recognises the investor's share arising due to changes that include revaluation of property, plant & equipment and Investments,

foreign exchange differences and other changes in the associate companies' equity that is not included in the Income Statement.




Group Company



2010 2009 2010 2009

Sub-note Rs '000 Rs '000 Rs '000 Rs '000

B Revenue Reserves

Market value adjustment reserve short term 14.3 304,339 12,359 167,066 8,505

Revaluation of Long Term Investments Reserve 14.4 3,135,065 290,686 1,387,087 42,128

General reserve 32,668 32,668 14,961 14,961

Retained earnings 2,237,038 2,541,620 673,782 762,740

5,709,110 2,877,333 2,242,896 828,334

14.3 Market Value Adjustment Revenue

Amount of Rs.292 mn (2009 unrealised loss of Rs.45.2 mn) and Rs.158mn (2009 unrealised loss of Rs.27.1 mn) respectively for Group and

Company resulting from the unrealised ‘Mark to Market Value Adjustment' of investment portfolio has been transferred to/from retained earnings

to ‘Market Value Adjustment Reserve' as at 31st March 2010 as shown in the Statement of Changes in Equity on page 42.

Any gains arising from the above adjustment will be transferred from retained earnings to ‘Market Value Adjustment Reserve' at Balance Sheet date

and any losses arising will be transferred from‘Market Value Adjustment Reserve' to retained earnings to the extent that loss does not exceed the

balance held in the said reserve as at the date.

14.4 Revaluation of Long Term Investments Reserve

This consists of unrealised surpluses on revaluation of long term investments.

Group Company



2010 2009 2010 2009Rs '000 Rs '000 Rs '000 Rs '000

15 Retirement Benefit Obligations

Balance as at the beginning of the year 361 206 - -

Interest Cost 60 22 - -

Current Service Cost 140 123 - -

Acturial gain / (loss) - 10 - -

Payments made during the year - - - -

Balance as at the end of the year 561 361 - -

The gratuity liability as at 31st March 2010 amounting to Rs.561,000/- (2009 - Rs.361,000/-) is based on an acturial valuation carried out by Mr.

Piyal S. Goonetilleke of Messrs. Piyal S. Goonetilleke & Associates as at 31st March 2010. As recommended by the related Sri Lanka AccountingStandard No. 16 (Revised 2006). “Employee Benefit” the “Projected Unit Credit” (CPU) method has been used in this valuation.

The principal assumptions made are given below.

Rate of discount 12% p.a.

Rate of pay increase 10% p.a.

Retirement age 55 years

The Company is a going concern.

The above liability has not been externally funded.

16 Comparative Figures

Previous year figures and phrases have been rearranged wherever necessary to conform to the current year's presentations.




19 Related Party Transactions

19.1 Transactions with Related Companies

Name of the Related Company

Ceylon Guardian Investment

Trust PLC

Carsons Management

Services (Private) Limited.

(CMSL)

Ceylon Investment PLC

(CICL)

Rubber Investment Trust

Limited

(RITL)


(CCPLC)

Nature of Transaction

The Company paid the following fees to CMSL

during the year under review:

Management fees - Rs.5,679,981/-

(2009 - Rs.4,577,171/-)

Computer charges - Rs.420,000/-

(2009 - Rs.420,000/-)

Secretarial fees - Rs.60,000/-

(2009 - Rs.60,000/-)Secretarial expenses - Rs.1,361,821/-

(2009 - Rs.35,235/-)

During the year Company received

dividend amounting to Rs.94,651,200/-

(2009 - Rs.23,779,290/-) from CICL.

The Company received Rs.513,628,857/- (2009 - Rs.

Nil) as sales proceeds on repurchase of shares by CICL.



(2009 - Rs.30,248,543/-) from RITL.

The Company received Rs.349,021,500/- (2009 - Rs.

Nil) as sales proceeds on repurchase of shares by RITL.

The Company has given a short-term advance of

Rs.300mn to CCPLC treasury and earned an

interest income of Rs.5,860,748/-. The total advance

amount given was settled during the financial year.

During the year Company paid a


(2009 - Rs.24,359,120/-) to CCPLC.

Name of Common Directors

D.C.R. Gunawardena

I. Paulraj

D.C.R. Gunawardena

* A. de Z. Gunasekera

* V.M. Fernando

** M.A.R.C. Cooray

I. Paulraj

D.C.R. Gunawardena

I. Paulraj

D.C.R. Gunawardena

Nature of the Relationship

Affiliate

Subsidiary

Subsidiary

Parent

* Appointed to the Board of Ceylon Investment PLC w.e.f. 18.03.2010.** Appointed to the Board of Ceylon Investment PLC & Ceylon Guardian Investment Trust PLC w.e.f. 11.03.2010

17 Events Occurring after the Balance Sheet date

After satisfying the Solvency Test in accordance with Section 57 of the Companies Act No. 7 of 2007, the Directors have recommended the

payment of a first and final dividend of Rs.9/- per ordinary share, Rs.900/- per fully paid deferred share and Rs.817/20 per partly paid deferred

share for the year ended 31st March 2010 amounting to Rs.154,797,664/-, which is to be approved at the forthcoming Annual General Meeting.

In accordance with Sri Lanka Accounting Standard No. 12 (Revised 2005) “events after the balance sheet date” this proposed first and final

dividend has not been recognised as a liability as at 31st March 2010.

Subsequent to be balance sheet date there are no other circumstances other than disclosed above.

18 Commitments and Contingencies

18.1 Capital Expenditure Commitments

The Company has entered into a shareholder agreement with Softlogic Holdings (Pvt) Ltd. to purchase additional shares amounting to Rs.100

mn. The payment was made on 6th April 2010.

18.2 Contingencies

There were no material contingent liabilities as at the Balance Sheet date.




19 Related Party Transactions (Contd.)

* The above management fees to CMSLincludes fees paid on portfolio management services which were obtained from Guardian Fund Management Limited.


Ceylon Investment PLC

Carsons Management Services

(Private) Limited. (CMSL)


Limited

(RITL)


(CCPLC)


Limited



Bukit Darah PLC


(CCPLC)




Management fees - Rs.6,045,416/-

(2009 - Rs.3,453,611/-)


(2009 - Rs.420,000/-)


(2009 - Rs.60,000/- )



(2009 - Rs.30,193,995/-) from RITL.

The Company received Rs.348,392,000/- (2009 -

Rs.Nil) as sales proceeds on repurchase of shares by

RITL.

The Company has given a short-term advance of

Rs.1,505mn to CCPLC treasury and earned an



During the year Company paid adividend amounting to Rs.12,050,703/-

(2009 - Rs.3,012,675/-) to CCPLC.



Management fees - Rs.4,384,724/- *

(2009 - Rs.2,500,899)

Computer charges Rs.420,000/-

(2009 - Rs.420,000/-)


(2009 - Rs.60,000/-)



(2009 - Rs.9,327,820/-) from Bukt Darah PLC

The Company has given a short term advance of

Rs.1,605mn to CCPLC treasury and earned an




D.C.R. Gunawardena

A.P.Weeratunge

I. Paulraj

D.C.R. Gunawardena

A.P. Weeratunge (Appointedas an alternate Director to Mr.

I. Paulraj w.e.f. 02.07.2009)

I. Paulraj

D.C.R. Gunawardena

D.C.R. Gunawardena

I. Paulraj

D.C.R. Gunawardena

I. Paulraj

D.C.R. Gunawardena


Affiliate

Associate

Parent

Affiliate

Associate

Parent




19.2 Transactions with Key Management Personnel (KMP)

According to Sri Lanka Accounting Standard 30 (Revised 2006) "Related Party Disclosures", KMP are those having authority and responsibility forplanning and controlling the activities of the entity. Accordingly, the Directors pf the Company aand its parent Company have been classified as

KMP of the Company.

The Compensation to KMP and other short term employment benefits has been disclosed in Note 4. No other payments such as post employment

benefits, termination benefits and share based payments have been paid to KMP during the year.

There are no material related party transactions other than those disclosed above and there are no any amounts receivable from/to payable to any relatedparty as at the Balance Sheet date.

19 Related Party Transactions (Contd.)


Guardian Fund Management

Limited



Equity Two PLC

Sri Lanka Fund





(2009 - Rs.30,000 /-)

Secretarial fees - Rs.36,000-

(2009 - Rs.36,000/-)

The Company received management fees

from CMSL for porfolio management services

at market rate amounting to Rs.13,496,381/-

(2009 - Rs.9,560,769/-)

An amount of Rs.424,578./- (2009 - Rs.424,578/-)

was paid to Equity Two PLC as rental fee.

The Company received Rs.483,839/- (2009 -

Rs.943,181/-) as management fees from Sri Lanka

Fund.


D.C.R. Gunawardena

D.C.R. Gunawardena

D.C.R. Gunawardena


Affiliate

Affiliate

Affiliate



66

Financial Highlights - GroupYear ended 31st March 2010 2009 2008 2007 2006

Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Operating ResultsRevenueDividend income 398,324 241,580 216,563 220,154 218,902Proceeds from disposal of investments 2,876,175 2,151,351 321,052 840,397 301,579Interest income 135,482 38,122 3,817 3,486 6,806Management fee 13,981 10,807 13,648 12,401 8,179

3,423,962 2,441,860 555,080 1,076,438 535,466Less: Inter-group transactions (1,463,679) (91,707) (38,801) (61,204) (93,612)

1,960,283 2,350,153 516,279 1,015,234 441,854

Profit before tax 1,714,685 660,632 370,470 769,983 316,647Taxation (35,106) (7,463) (2,119) (56,989) (40,266)Profit for the year 1,679,579 653,169 368,351 712,994 276,381Minority interest (359,206) (360,442) (51,564) (152,597) (59,037)Profit attributable to the

shareholders of the parent 1,320,373 292,727 316,787 560,397 217,344Dividends paid (232,702) (35,411) (30,352) (30,352) 17,037

Balance Sheet Capital Employed Stated Capital 672,811 672,811 672,811 672,811 673,296

Reserves 6,964,438 3,879,095 5,343,307 2,920,754 2,221,111Shareholders' funds 7,637,249 4,551,906 6,016,118 3,593,565 2,894,407Minority interest 1,566,029 1,053,800 1,210,710 603,989 475,355Non-current liabilities 561 361 243 166 -

9,203,839 5,606,067 7,227,071 4,197,720 3,369,762

Assets Employed Non-current assets 8,803,735 3,505,084 7,065,770 4,009,209 3,211,835Current assets 746,646 2,170,024 304,860 394,278 274,363

9,550,381 5,675,108 7,370,630 4,403,487 3,486,198Current liabilities (346,542) (69,041) (143,559) (205,767) (116,436)

Net assets9,203,839

5,606,067 7,227,071 4,197,720 3,369,762

Cash Flow StatementsNet cash generated from/(used in)

from operating activities (321,393) 1,383,420 180,299 (48,554) (397,163)Net cash generated from/(used in)

investing activities (291) 707,908 (4) - (2,230)Net cash generated from/(used in)

financing activities (1,856,358) (63,051) (46,719) (56,753) 362,223Net (decrease)/increase in

cash & cash equivalents (2,178,042) 2,028,277 133,576 (105,307) (37,170)

Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Five Year Summary



Financial Highlights - Group (Contd.)Year ended 31st March 2010 2009 2008 2007 2006

Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Ratios & StatisticsOperational RatioReturn on ordinary shareholders funds (%) 17.29 6.43 5.27 15.59 7.51Liquidity RatioCurrent ratio (Times) 2.15 31.43 2.12 1.92 2.36Investor RatioEarnings per share (Adjusted Rs.) 68.65 14.47 15.66 27.69 10.74Dividend per share proposed (Rs.) ** 9.00 11.50 1.75 1.50 1.50Dividend cover (Times) 763 1.26 8.95 18.46 7.16Dividend growth (%) (22) 557 17 - -

Dividend yield (%) 1.79 11.03 1.06 0.92 1.07Dividend payout ratio (%) 13.11 79.49 11.18 5.42 13.97Net assets per share - Book value (Rs.) 444.03 224.95 297.31 177.59 132.46

- Market value 687.27 252.77 457.47 492.76 373.31Market value per share (Rs.) * 501.50 104.25 165.00 162.50 140.00Price earning ratio (Times) 7.31 7.21 10.54 5.87 13.04Price to book value ratio (Times) 1.06 0.46 0.55 0.92 1.06Market capitalisation 8,072,844 1,974,287 3,124,770 3,077,425 2,646,601 Additions to investment portfolio (Rs.) 2,909,925 957,382 244,591 1,026,909 883,665(Ceylon Investment Company Ltd.)Market value of investments (Rs.) 13,784,140 6,135,154 9,815,594 10,155,461 8,403,885

Milanka Price Index (Points) 4,271 1,736 3,181 3,838 2,877 All Share Price Index (Points) 3,725 1,638 2,550 2,790 2,264

* As at 31st March.** Proposed dividends of Rs.9.00 on ordinary shares for the current year is not provided for in the Financial Statements.Deferred shares in issue are converted into equivalent ordinary shares up to the paid up amount for per share basedcomputations




68

US$ Financials

PREPARATION OF US DOLLARFINANCIAL STATEMENTS

The Financial Statements of the Company are

stated in US Dollars. The translation of

Sri Lankan Rupee amounts into US Dollar

amounts is included solely for the convenience of

Shareholders, Investors, Bankers and other users

of Financial Statements. US Dollar Financials do

not form part of the audited Financial

Statements of the Company.





(All figures in US$ thousands unless otherwise stated)

For the year ended 31st March 2010 2009 % Change

Group revenue 17,062 20,463 -17%Profit from operations 11,606 5,211 123%

Profit before taxation 14,925 5,752 159%

Profit after taxation 14,619 5,687 157%

Profit attributable to shareholders 11,493 2,549 351%

Dividend 1,261 1,896 -34%

Shareholders' funds 66,946 39,342 70%

Net assets 80,674 48,450 67%

Total assets 83,717 49,050 71%

Return on ordinary shareholders' funds (%) 21.84 14.46 51%

Earnings per share (US$) 0.71 0.13 466%Net assets per share - Book value (US$) 3.86 1.94 98%

Net assets per share - Market value (US$) 5.44 2.18 149%

Market capitalisation (Company) 70,765 17,064 315%

Market value of invesment portfolio 120,829 53,026 128%

Group at a Glance




GroupUS$ US$

For the year ended 31st March 2010 2009

Revenue 17,062,260 20,462,804Carrying Value of investments disposed & other direct expenses (13,441,555) (15,585,694)

3,620,080 4,877,110Realised Gain on Sale of Investments 5,926,817 3,726,339Mark to Market Value Adjustment - Unrealized 2,648,960 (3,108,168)Profit on Portfolion Acitivites 12,196,481 5,501,280Other Income - 8,376 Administrative expenses (590,887) (298,886)Profit from operations 11,605,594 5,210,771Finance costs (47,125) (117,762)

Profit from operations after finance cost 11,558,469 5,093,008Share of associate companies' profit before taxation 3,366,111 659,121Profit before taxation 14,924,580 5,752,129Taxation (305,558) (64,980)Profit for the year 14,619,022 5,687,148

Attributable to:Equity holders of the parent 11,492,500 2,548,777Minority shareholders 3,126,522 3,138,371

14,619,022 5,687,148

Earnings per share (US$) 0.71 0.13Dividend per share (proposed) (US$) 0.08 0.10


Income Statement




GroupUS$ US$

As at 31st March 2010 2009

AssetsNon-Current AssetsProperty, plant & equipment 70,274 86,767Investment in associates 14,615,238 8,833,872Intangible assets 62,229 79,101Other investments 62,421,660 21,292,688

77,169,402 30,292,429

Current AssetsDebtors & other receivables 408,818 129,136Income tax recoverable - 50,233Deferred tax asset 2,191 2,161Short-term investment 5,713,762 985,687Short-term deposits 81,404 17,066,413Cash at bank 340,945 524,140

6,547,121 18,757,770Total assets 83,716,522 49,050,199

Equity & LiabilitiesStated Capital and ReservesStated capital 6,334,507 6,334,507Capital reserves 11,003,927 8,658,271Revenue reserve 50,044,793 24,868,911Foreign currency equalisation reserve (436,797) (519,373)Shareholders' funds 66,946,430 39,342,316

Minority interest 13,727,465 9,108,03880,673,895 48,450,354

Non-Current LiabilitiesGratuity Provision 4,918 3,120

4,918 3,120

Current LiabilitiesCreditors & accruals 608,327 46,716Income tax payable 136,159 -Dividend unclaimed 112,842 50,951Bank overdraft 2,180,382 499,058

3,037,710 596,724

Total equity & liabilities 83,716,522 49,050,199

Net assets per ordinary/deferred Share-Book Value (US$) 3.86 1.94Net assets per ordinary/deferred Share-Market Value (US$) 5.44 2.18

1 Basis of ConversionIncome Statement - Average rateMonetary assets and liabilities - Closing rateShare Capital - Historical rate

2010 2009

Average rate 114.89 114.85

Closing rate 114.08 115.70

Balance Sheet




Financial Highlights - GroupYear ended 31st March 2010 2009 2008 2007 2006

US$ US$ US$ US$ US$

Operating ResultsRevenueDividend income 3,467,003 2,103,439 1,962,510 2,085,191 2,161,997Proceeds from disposal of investments 25,034,163 18,731,833 2,909,397 7,959,811 2,978,557Interest income 1,179,232 331,929 37,663 33,022 67,216Management fee 121,682 94,097 - 117,447 80,779

29,802,080 21,261,297 4,909,570 10,195,471 5,288,549Less: Inter-group transactions (12,739,829) (798,494) (351,618) (579,689) (924,568)

17,062,251 20,462,804 4,557,952 9,615,782 4,363,981

Profit before tax 14,924,580 5,752,129 4,320,151 7,292,879 3,127,375

Taxation (305,558) (64,980) (1,102,075) (539,766) (397,690)

Profit from ordinary activities after tax 14,619,022 5,687,148 3,218,076 6,753,113 2,729,685Minority interest 3,126,522 3,138,372 (531,282) (1,445,322) (583,080)

Profit attributable to the shareholders of Ceylon Guardian Investment Trust 11,492,500 2,548,777 2,686,794 5,307,791 2,146,605

Dividends 1,261,002 1,896,285 281,427 278,714 165,920

Balance Sheet Capital Employed

Stated capital 6,334,507 6,334,507 6,334,507 6,334,507 6,558,869Reserves 61,048,720 33,527,182 31,331,547 26,778,439 21,631,390Foreign currency equalisation reserve (436,797) (519,373) (96,133) (114,206) (1,649)Shareholders' funds 66,946,430 39,342,316 37,569,921 32,998,740 28,188,610Minority interest 13,727,465 9,108,038 5,988,150 5,546,271 4,629,478Non-current liabilities 4,918 3,120 2,235 1,552 -

80,678,812 48,453,475 43,560,306 38,546,563 32,818,088

Assets Employed Proprety, plant & equipment 132,503 165,869 17,051 18,666 21,720Investments 77,036,898 30,126,560 42,047,659 36,796,865 31,258,337Current assets 6,547,121 18,757,770 2,826,713 3,625,934 2,672,020

83,716,522 49,050,199 44,891,423 40,441,465 33,952,077Current liabilities (3,037,710) (596,724) (1,331,117) (1,894,902) (1,133,989)Net assets 80,678,812 48,453,475 43,560,306 38,546,563 32,818,088

CASH FLOW STATEMENTSNet cash inflows/(outflows)

from operating activities (2,797,398) 12,045,451 1,689,086 (445,853) (3,867,968)Net cash used in investing activities (2,533) 6,163,761 (37) - (21,717)Net cash generated from/

(used in) financing activites (16,157,699) (548,986) (450,514) (521,154) 3,527,687Net (decrease)/increase in

cash & cash equivalents (18,957,629) 17,660,226 1,238,535 (967,007) (361,998)

Five Year Summary




Financial Highlights - Group (Contd.)Year ended 31st March 2010 2009 2008 2007 2006

US$ US$ US$ US$ US$

RATIOS & STATISTICSOperating RatioReturn on ordinary shareholders' funds (%) 21.84 14.46 8.57 16.08 8.22Liquidity RatioCurrent ratio (Times) 2.16 31.43 2.12 1.91 2.36Investor RatiosEarnings per share (US$) 0.71 0.13 0.16 0.20 0.11Net assets per ordinary/deferred share

- Historical cost (US$) 3.86 1.94 1.86 1.63 1.29Net assets per ordinary/deferred share

- Market value 5.44 2.18 4.24 4.52 3.64Market value per share (US$) 4.40 0.91 1.53 1.49 1.36Market capitalisation (US$) 70,764,762 17,063,943 30,957,580 30,150,150 25,775,235Market value of investments (US$) 120,828,717 53,026,396 87,573,064 93,254,927 77,193,975




1. Stock Exchange Listing

Ceylon Guardian Investment Trust PLC is a Public listed Company, the ordinary Shares of which are listed on themain board of the Colombo Stock Exchange.

2. Share Valuation

The market price of the Company’s shares as at 31st March, 2010 was Rs.501.50 per share (2009 – Rs.104.25).

3. Ordinary Shareholders

As at 31st March 2010 2009

Number of Shareholders 1,239 1,472

The number of Ordinary shares held by non-residents as at 31st March 2010 was 2,001,918 which amounts to12.44% of the total number of Ordinary shares.

Residents Non-Residents Total

Distribution No of No of % No of No of % No of No of %

of Shares Shareholders Shares Shareholders Shares Shareholders Shares

1 - 1,000 960 167,708 1.04 15 4,470 0.03 975 172,178 1.071001 - 10,000 169 538,078 3.34 26 110,005 0.68 195 648,083 4.02

10,001 - 100,000 55 1,445,131 8.98 4 120,220 0.74 59 1,565,351 9.72

100,001 - 1,000,000 6 1,134,594 7.05 2 690,024 4.29 8 1,824,618 11.33

Above 1,000,000 1 10,809,967 67.15 1 1,077,199 6.70 2 11,887,166 73.85

Total 1,191 14,095,478 87.56 48 2,001,918 12.44 1,239 16,097,396 100

Categories of Shareholders No. of Shareholders No. of Shares %

Individuals 1,114 2,607,323 16.20Institutions 125 13,490,073 83.80

Total 1,239 16,097,396 100.00

4. Market Performance – Ordinary Shares

2009/2010 2008/2009

Highest (Rs.) 540.00 187.50Lowest (Rs.) 103.25 78.00Value of shares traded (Rs.) 383,227,800 136,475,550No. of shares traded 1,282,800 895,300Volume of transactions (Nos.) 1,990 932

Information to Shareholders and Investors




5. Market Capitalisation

Market capitalization of the Company which is the number of ordinary shares in issue multiplied by the market valueof an ordinary share was Rs.8,072,844,094 as at 31st March, 2010 (2009 – Rs.1,974,298,176).

6. Record of Bonus, Rights issues and Repurchase of Shares

The undermentioned share issues/repurchase have been made by the Company to date, in relation to its ordinary shares.

Year ended Issue Basis No. of Shares Cumulati

Share CapitalRs. '000

1951 - Initial Capital – 757,525 757,5251990 - Bonus 01:01 757,525 1,515,0501992 - Bonus 01:08 189,381 1,704,4311999 - Bonus 01:04 426,108 2,130,5392000 - Bonus 01:04 532,634 2,663,1732002 - April Rights 01:07 380,453 3,043,626

- May Bonus 01:04 760,906 3,804,5322003 - July Rights 01:05 760,906 4,565,438

- August Bonus 01:06 760,906 5,326,344

2004 - July Rights 01:02 2,663,172 7,989,5162004 - September Bonus 01:03 2,663,172 10,652,6882005 - March Rights 01:03 3,550,896 14,203,584

- June Bonus 01:03 4,734,528 18,938,1122009 - October Repurchase 03.20 2,840,716 16,097,396

7. Dividend

A first & final Dividend of Rs.9/- per ordinary share, Rs.900/- per fully paid Deferred share and Rs.817/20 per partly paid Deferred share amounting to Rs.154,797,664/- is proposed (2008/2009 - Rs.232,701,948/-) on the share capitalas at 31st March 2010.

8. Public Holding The Percentage of shares held by the public as at 31st March 2010 was 32.85%.



76 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Glossary of Financial Terms

Accounting PoliciesThe specific principles, bases,conventions, rules and practices adoptedby an entity in preparing and presenting

Financial Statements

AmortisationThe systematic allocation of thedepreciable amount of an intangibleasset over its useful life

Accrual BasisRecognising the effects of transactionsand other events when they occur

without waiting for receipt or paymentof cash or its equivalent

Associate

An entity, including an unincorporatedentity such as a partnership, over whichthe investor has significant influence andthat is neither a subsidiary nor aninterest in a joint venture.

Appropriations Apportioning of earnings to capitalreserves, revenue reserves or as dividends

Beta A measure of the volatility, or systematicrisk, of a security or a portfolio incomparison to the market as a whole

Bonus Issue (Scrip Issue)The issue of new shares to existingshareholders in proportion to theirshareholdings. It is a process forconverting a company's reserves (in

whole or part) into issued capital andhence does not involve an infusion of cash.

Capital ReservesReserves identified for specific purposesand considered not available fordistribution.

Capital Markets A market for debt or equity, wherebusiness enterprises can raise long-term(longer than one year) funds.

Current RatioCurrent assets divided by currentliabilities.

Compounded Annual Growth Rate(CAGR)The rate at which it would have grown if it grew at an even rate compounded

annually.

Compliance officerThe officer primarily responsible foroverseeing and managing complianceissues within an organization. Is in

charge of ensuring that a company iscomplying with regulatory requirements,and that the company and its employeesare complying with internal policies andprocedures

ContingenciesConditions or situations at the BalanceSheet date, the financial effects of whichare to be determined by future events

which may or may not occur

Cost Method This is a method of accounting for an

investment whereby the investment isinitially recognized at cost. The investorrecognises income from the investmentonly to the extent that the investorreceives distributions from accumulatedprofits of the investee arising after thedate of acquisition. Distributionsreceived in excess of such profits areregarded as a recovery of investment andare recognised as a reduction of the costof the investment.

Corporate GovernanceThe process by which corporate entities

are governed. It is concerned with the way in which power is exercised over themanagement and direction of entity, thesupervision of executive actions andaccountability to owners and others.

Cash EquivalentsShort term highly liquid investments thatare readily convertible to knownamounts of cash and which are subject toan insignificant risk of changes in value

Credit Risk Credit risk or default risk is most simply defined as the potential that a borroweror counterparty will fail to meet itsobligations in accordance with agreedterms and conditions.

Country Fund An international mutual fund with aportfolio that consists entirely of securities, generally stocks, of companieslocated exclusively in a given country.

Dividend per ShareDividend paid divided by the number of ordinary shares in issue which ranked forthose dividends.

Dividend Yield Dividend per share as a percentage of market price per share

Deferred TaxationSum set aside for tax in the FinancialStatements that may becomepayable/receivable in a financial yearother than the current financial year.

Dividend CoverProfit after tax divided by grossdividends. This ratio measures thenumber of times dividend is covered by current year's distributable profits.

Dividend Payout The pecentage of earnings paid to

shareholders as dividend.

Earnings per Ordinary Share (EPS)Profit attributable to ordinary shareholders divided by the number of ordinary shares in issue

Economic Value Added (EVA) A measure of productivity which takesinto consideration cost of total investedequity.

Effective Tax RateProvision for taxation excluding deferred

tax divided by the profit before taxation

Equity Method This is a method of accounting whereby the investment is initially recognised atcost and adjusted thereafter for the post-acquisition changes in the investor'sshare of net assets of the investee. Theprofit or loss of the investor includes theinvestor's share of the profit or loss of the investee.

Events occurring after the BalanceSheet date

Significant events that occur betweenthe Balance Sheet date and the date on which the Financial Statements areauthorised for issue, which wouldrequire adjustments to or disclosure inthe Financial Statements

Fair ValueThe amount for which an asset could beexchanged, or a liability settled, betweenknowledgeable, willing parties in anarm's length transaction.




Fundamental Investing The strategy of selecting stocks whichtrade for less than their intrinsic values,after research on the company and its

industry. Intrinsic value is based on theactual financial returns of the company and the current and future plans of thecompany.

Group A group is a parent and all itssubsidiaries and associates.

Impairment This occurs when the recoverable amountof an asset is less than its carryingamount.

Initial Public Offer (IPO)The first sale of stock by a privatecompany to the public. IPOs are oftenissued by smaller companies seeking thecapital to expand, but can also be doneby large privately owned companieslooking to become publicly traded.

Intangible Asset An intangible asset is an identifiablenon-monetary asset without physicalsubstance.

Key Management Personnel

Key management personnel are thosepersons having authority andresponsibility for planning, directing andcontrolling the activities of the entity,directly or indirectly, including any Director (whether Executive orotherwise) of that entity.

Mark to Market Value Adjustment The accounting act of recording theprice or value of a security, portfolio oraccount to reflect its current marketvalue rather than its book value.

Market Risk This refers to the possibility of lossarising from changes in the value of afinancial instrument as a result of changes in market variables such asinterest rates, exchange rates, creditspreads and other asset prices.

Materiality The relative significance of a transactionor an event, the omission ormisstatement of which could influencethe economic decisions of users of Financial Statements.

Market CapitalisationThe market value of a company at agiven date obtained by multiplying theshare price by the number of shares in

issue

Mutual Fund An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing insecurities such as stocks, bonds, money market instruments and similar assets.

Net Assets Value per Ordinary ShareShareholders' funds excluding preferenceshares, if any, divided by the number of ordinary shares in issue.

Net Current AssetsCapital required to finance the day-to-day operations (current assets lesscurrent liabilities).

Operational Risk This refers to the risk of loss resultingfrom inadequate or failed internalprocesses, people and systems or fromexternal events

Parent Company A Parent Company is an entity that hasone or more subsidiaries.

Private equity Money invested in companies that arenot publicly traded on a stock exchange.

PrudenceInclusion of a degree of caution in theexercise of judgment needed in makingthe estimates required under conditionsof uncertainty, such that assets orincome are not overstated and liabilitiesor expenses are not understated.

Price Earnings Ratio (P/E)

Market price of a share divided by earnings per share (EPS)

Related PartiesParties where one party has the ability tocontrol the other party or exercisesignificant influence over the other party in making financial and operatingdecisions, directly or indirectly.

Repurchase Of Shares A program by which a company buysback its own shares from the shareholders, reducing the number of

outstanding shares

Return on Average Assets (ROA)Profit after tax divided by the averageassets.

Return on Average Equity (ROE)Net profit for the year, less preferenceshare dividends, if any, expressed as apercentage of average ordinary shareholders' equity.

Return on Shareholders' FundsProfit attributable to shareholdersdivided by shareholders' funds

Revenue ReservesReserves considered as being availablefor distribution and other appropriations

Rights IssueIssue of shares to the existingshareholders at an agreed price, generally lower than market price

Share Split A corporate action in which a company'sexisting shares are divided into multipleshares

Shareholders' FundsShareholders' funds consist of statedcapital plus capital and revenue reserves.

Stock market index Index is a number that measures therelative value of a group of stocks. As thestocks in this group change value, theindex also changes value.

Subsidiary An entity, including an unincorporatedentity such as a partnership, which iscontrolled by another entity (known asthe Parent)



78 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Notice of Meeting

NOTICE IS HEREBY GIVEN that the FIFTY EIGHTH Annual General Meeting of CEYLON GUARDIAN

INVESTMENT TRUST PLC will be held on Tuesday the 15th day of June 2010 at 3.30 p.m. at the “Samudra Hotel”,Sri Lanka Institute of Tourism & Hotel Management, Committee Room “C”, No. 78, Galle Road, Colombo 3 for thefollowing purposes :

1. To receive and adopt the Annual Report of the Board of Directors and the Financial Statements for the year ended 31stMarch 2010, together with the Report of the Auditors thereon.

2. To declare a dividend as recommended by the Directors.

3. To re-elect Mr. A. De Z. Gunasekera who retires in terms of Articles 89,90 and 91 of the Articles of Association of theCompany.

4. To re-elect Mrs. M.A.R.C. Cooray, who retires in terms of Article 95 of the Articles of Association of the Company.

5. To re-appoint Mr. I. Paulraj as a Director of the Company who is over Seventy years of age and to consider and if deemedfit to pass the following resolution :

“IT IS HEREBY RESOLVED that the age limit stipulated in Section 210 of the Companies Act No. of 2007 shall not beapplicable to Mr. I. Paulraj who is 73 years of age and that he be re-appointed a Director of the Company from theconclusion of the Annual General Meeting for a further period of one year.”

6. To re-appoint Messrs. KPMG Ford Rhodes Thornton & Company, Chartered Accountants as Auditors of the Company as set out in Section 154 (1) of the Companies Act No. 7 of 2007 and to authorize the Directors to determine theirremuneration.

By Order of the BoardCARSONS MANAGEMENT SERVICES (PRIVATE) LIMITEDSecretaries

Colombo,12th May 2010

Notes1. A member is entitled to appoint a proxy to attend and vote instead of him/her. A proxy need not be a member of the

Company. A Form of Proxy accompanies this notice.

2. The completed Form of Proxy must be deposited at the Registered Office, No.61, Janadhipathi Mawatha, Colombo 1, not

later than 3.30 p.m. on 13th June 2010.3. A person representing a Corporation is required to carry a certified copy of the resolution authorising him/her to act as the

representative of the Corporation. A representative need not be a member.

4. The transfer books of the Company will remain open.

5. Security Check We shall be obliged if the shareholders/proxies attending the Annual General Meeting, produce their National Identity Card to the security personnel stationed at the entrance lobby.



*I/ We .............................................................................................................................................................................................................................

of .....................................................................................................................................................................................................................................

being *a Member/Members of CEYLON GUARDIAN INVESTMENT TRUST PLC

hereby appoint..................................................................................................................................................................................................................

of .....................................................................................................................................................................................................................................

bearing NIC No./ Passport No ..................................................... or failing him/her

Israel Paulraj of Colombo, or failing him,

Don Chandima Rajakaruna Gunawardena of Colombo, or failing him,

Asoka De Z. Gunasekera of Colombo, or failing him,

Vernon Manilal Fernando of Colombo, or failing him,

Mirihana Arachchige Rose Chandralatha Cooray

as *my/our proxy to attend at the Annual General Meeting of the Company to be held on Tuesday, the 15th day of June 2010 at 3.30 p.m., at the

“Samudra Hotel”, Sri Lanka Institute of Tourism & Hotel Management, Committee Room “C”, No. 78, Galle Road, Colombo 3 and at any

adjournment thereof and at every poll which may be taken in consequence thereof.

For Against

(i) To adopt the Annual Report of the Board of Directors and the Financial Statements for the year

ended 31st March 2010, together with the Report of the Auditors thereon.

(ii) To declare Rs.9/- per ordinary share, Rs.900/- per fully paid Deferred share and Rs.817/20 per

partly paid Deferred share as First & Final dividend for the financial year ended 31st March 2010as recommended by the Directors.

(iii) To re-elect Mr. A. De Z. Gunasekera who retires in terms of Articles 89,90 and 91 of the Articles

of Association of the Company.

(iv) To re-elect Mrs. M.A.R.C. Cooray who retires in terms of Article 95 of the Articles of Association

of the Company.

(v) To re-appoint Mr. I. Paulraj who is over Seventy years of age as a Director of the Company.

(vi) To re-appoint Messrs. KPMG Ford, Rhodes, Thornton & Company, Chartered Accountants as

Auditors of the Company as set out in Section 154 (1) of the Companies Act. No. 07 of 2007 andto authorize the Directors to determine their remuneration.

Signed this........................................day of …. .……….. Two Thousand and Ten.

………………………………….

Signature /s

Note: (a) * Please delete the inappropriate words.

(b) A shareholder entitled to attend and vote at a General meeting of the company, is entitled to appoint a proxy to attend and vote instead of

him/her and the proxy need not be a shareholder of the Company. A proxy so appointed shall have the right to vote on a show of hands or

on a poll and to speak at the general meeting of the shareholders.

(c) A shareholder is not entitled to appoint more than one proxy to attend on the same occasion.

(d) Instructions are noted on the reverse hereof.

Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Form of Proxy



1. Kindly perfect the form of proxy after filling in legibly your full name and address, by signing in the space provided. Please fill in the date of

signature.

2. If you wish to appoint a person other than the Directors as your proxy, please insert the relevant details in the space provided overleaf.

3. In terms of Article 71 of the Articles of Association of the Company:

The instrument appointing a proxy shall be in writing and :

(i) in the case of an individual shall be signed by the appointor or by his attorney; and

(ii) in the case of a corporation shall be either under its common seal or signed by its attorney or by an officer on behalf of the corporation.

The Company may, but shall not be bound to, require evidence of the authority of any such attorney or officer.

A proxy need not be a member of the company.

4. In terms of Article 66 of the Articles of Association of the Company:

In the case of joint-holders of a share, the senior who tenders a vote, whether in person or by proxy or by attorney or by representative, shall be

accepted to the exclusion of the votes of the other joint-holders and for this purpose seniority shall be determined by the order in which the names

stands in the Register of members in respect of the joint holding.

5. To be valid the completed form of proxy should be deposited at the Registered Office of the Company situated at No. 61, Janadhipathi Mawatha,

Colombo 1 not later than 3.30 p.m. on 13th June 2010.

Please fill in the following detailsName : ………………………………………………………….

Address : ………………………………………………………….

………………………………………………………….

Jointly with

Share folio no. : ………………………………………………………….

80 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 Instructions as to Completion

ceylon guardian trust

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