Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 1

Financial & Operational Highlights

Year of spectacular performance

Amidst a turnaround in the Colombo Stock Market …

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
Profit for the year
1,714,685
1,679,579
660,632
653,169 Rs.13.6 bn
Profit attributable to equity holders of the parent 1,320,373 292,727 Total Portfolio
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 Rs.7.1 bn
Earnings per share (Rs.) 68.65 14.47 Long-Term Portfolio
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
Rs.747 mn
Trading Portfolio
Stock Market data as at 31st March
All Share Index 3,724.6 1,638.1
Market Capitalisation (Company)
Share price - Year end (Rs.)
8,072,844
501.50
1,974,298
104.25
Rs.9.00
- High (Rs.) 540.00 187.50 Dividend per Share
- Low (Rs.) 103.25 78.00

* Based on share capital as at 31st March 2010, and subject to approval at the
Annual General Meeting. Rs.501.50
Market Price per Share

Rs.8.1 bn
Market Capitalisation
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 and
take 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. …

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 Lanka
given the end to the three decade long
conflict in the North and East. A new
chapter in the history books of the
island has been written and we once
again recognize the efforts and sacrifice
made by all Sri Lankans towards
achieving what many thought was quite
an impossible task. What the country
and its people achieved is not second to
gaining independence, and today post
conflict Sri Lanka opens new vistas of
opportunity to develop the nation as a
newly emerging economy in Asia. Every
citizen and corporate has a role to play
in the upliftment of our country in the
coming years and Ceylon Guardian is
proud to be a part of it.
The Sri Lankan economy turned around,
recording a reasonable rate of GDP
growth 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 rapid
ground during this period. The economy
bounced back to 6% growth in the last
quarter of 2009, a trend reflective of the
expectations in the coming years. Hence
positive domestic factors have overridden
the negative sentiments that were
prevalent 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 forecasted
growth in the region of 4.0% for the
world and 8.5% for developing Asia in
2010. We are encouraged by the forecast
GDP growth of 6.5% for 2010 indicated
in the Annual Report of the Central
Bank, and would anticipate that greater
investment and fiscal consolidation
would be a pre-requisite for achieving
this.
Although the All Share Price Index of
the Colombo Stock Exchange started the
year in negative territory at the
beginning of the year, the period starting
June 2009 proved to be one of
consistent growth. The Colombo Bourse
headed to its highest ever index level of
3844 in the ensuing period and crossed
the Rs.1 trillion mark for the first time.
Turnover levels over Rs.1bn were
recorded most days demonstrating that
activity levels were sustainable and not
prompted just by euphoric feelings.
Sri Lanka’s Stock Exchange was up
127% for the financial year, its highest
ever recorded performance, and ranked
number 2 in the world for year 2009.
Incidentally your Company was the
Colombo Stock Exchange’s third best
performer in this historic year.
Ceylon Guardian booked record profits
in the backdrop of a buoyant year.
Ceylon Guardian Investment Trust and
its subsidiaries achieved a consolidated
profit after tax of Rs.1.68 bn as against
the Rs.653.2 mn achieved in the
previous year, an increase of 157% that
best reflects the turn of fortunes of the
market. The mainstream investment
business of Ceylon Guardian, in
particular, showed an increase in profits
with the dramatic turnaround of the
markets during the period of review. The
profit from the investment business was
Rs.1.33 bn mainly derived from realised
capital gains, dividend income and
interest income.
Ceylon Guardian Investment Trust PLC
did a repurchase of its shares during the
financial year at its then prevailing net
asset value of Rs.368/- whereby 15% of
the issued shares of the company were
repurchased at a total cost of Rs.1.1 bn.
The share repurchase was prompted
with the divestment of several strategic
stakes by the Ceylon Guardian Group in
the last financial year. Since these were
one off transactions, the Company
believed it best to pay back the cash
generated to its shareholders, in keeping
with the philosophy of passing on the
benefits of strategic divestments directly
to the shareholders. These share re-
purchase schemes of the Company and
its listed subsidiary received the approval
of the respective shareholders at an
extraordinary general meeting convened
for the purpose.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Activity at the Colombo Bourse
increased during this period with the
doubling of the daily average turnover,
with most investors looking positively at
the equity market. Low interest rates saw
the shift of investor funds from interest
bearing investments to higher risk equity
investments. With risk premiums of the
market coming down, investor
confidence was on the rise. The Ceylon
Guardian Group portfolio appreciated
in value to Rs.13.78 bn, an appreciation
of 215% when compared with the All
Share Index appreciation of 127%
during the financial year. Stock market
volatility continued, giving investors
much trading opportunities.
However, it is a reason for concern that
still there are insufficient avenues for
investors to gain access to key sectors of
the economy through the listed equity
market, notable among them the
garment sector, value added exports,
utilities, transportation and
infrastructure. We urge policy makers to
create appropriate avenues for both state
owned and private sector players in these
key industries to be represented in the
listed market so that high quality
institutional investors, both foreign and
local, would be more attracted to take
long term positions in Sri Lanka.
Reserving a part of its cash needs proved
to add value as Ceylon Guardian was
able to move in fast and react to change
of sentiment in the market. This enabled
the portfolio to capture new exposures
to sectors likely to grow more rapidly in
the current environment, including
banking, tourism and retail.
Shareholders would note that major
acquisitions amounting to Rs.2.9 bn
were made during the year in sectors
expected to be the key drivers of
economic growth in the years ahead. As
discussed in last year’s Annual Report we
actively vetted several unlisted equity
investments this year, in keeping with
our search for private equity
participation in good business models
backed by dynamic management and
with the ability to realize returns over
time. We are now invested in ventures
which satisfied the private equity
benchmarks of Ceylon Guardian. Going
forward, we see more opportunities for
Guardian to participate in funding pre-
IPO ventures for superior returns. In
keeping with our investment philosophy
of gaining exposures to growth sectors
through well managed companies, we
have revamped the Guardian portfolio
to reflect the new opportunities that
would arise in a rejuvenated Sri Lankan
economy. These include stakes in listed
companies, as well as unlisted
companies.
The Board has recommended a first and
final dividend of Rs. 9/- per equivalent
ordinary share, lower than the
exceptional dividend of Rs.11.50 per
equivalent ordinary share last year. The
latter was made out of the proceeds from
sale of strategic shares that generated
surplus cash for the company. This year’s
dividend too reflects the significant
growth in profits arising from the
exceptional market conditions that
prevailed. Profits would be moderate in
future, in line with market fluctations.
The total return to shareholders in the
year under review is 369% taking into
account the capital appreciation of the
share price and the return of capital by
way of the share repurchase proceeds.
Your company has followed prudent
investment policies by adopting market
value based accounting for both long
term and short term holdings, thus
bringing our balance sheet up to date to
reflect the true commercial value of the
3
underlying assets of the company. This
resulted in a positive provisioning of
Rs.145 mn being made in the profit and
loss account of the year under review for
the short term trading portfolio while
the appreciation on the long term
portfolio of Rs.2.84 bn is reflected in the
balance sheet reserves.
THE FUTURE …………our
committed 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 for
entrepreneurial equity capital will rise
further as corporates expand and come
into the mainstream of the capital
markets for fund raising, given the
conducive investment environment that
prevails now. It will be an opportunity for
Ceylon Guardian to partner in sharing
the risks and rewards of entrepreneurial
capital through the listed market and via
private equity investments. The Ceylon
Guardian asset base serves as the platform
for entry to these investments. We see
opportunities in many sectors as wide
ranging as infrastructure, tourism,
financial services and retail, whereby we
could make inroads in exploring
investments opportunities in future.
Our search for high quality investment
opportunities in the private equity space
would gather momentum in time to
come since we see more potential in this
segment, both for diversification as well
as better returns. We will leverage our in
house management expertise within the
Group to add value to our private equity
projects, especially in instances where we
would seek management participation.
In addition, we would consider forming
partnerships with reputed local and
international players to participate in
private equity projects in Sri Lanka.
4 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Chairman’s Statement (Contd.)
Furthermore, as indicated in the
Roadmap 2010 published by the Central
Bank of Sri Lanka, we look forward to
institutional investors obtaining
clearance to invest a proportion of their
funds in overseas markets to improve the
diversity of returns.
Guardian Fund Management Ltd
(GFM) the fund management arm of
Carson Cumberbatch PLC manages the
portfolios of the investment companies
of the group. It is registered with the
Securities and Exchange Commission of
Sri Lanka as an Investment Manager
while Ceylon Guardian Investment Trust
and its subsidiary Ceylon Investments
PLC are registered as underwriters.
GFM manages the largest listed equity
fund in the country vested with the
Guardian Group with a fund size of over
Rs.13 bn under management. Hence
given the fund size and volume of
business it does, it can command larger
deal flows in the market thus
strengthening its ability to command
good prices. It has built an expert fund
management team centered on research,
compliance and systems to handle the
fund management operation in house.
Ceylon Guardian’s investment policies
are set at the highest level involving the
expertise of the Board of Directors and
the Investment Committee that pools
diverse expertise.
Going forward, we are looking to
diversify our fund management business
by extending the operation to managing
third party funds. This would further
increase the volume of funds under
management and extend our reach in
the market while adding value to our
clients through our home grown
expertise. Top priority has been given to
actively raise funds for the Sri Lanka
Fund, the dedicated country fund
managed by us and we see this as an
opportune time to raise capital given the Sri Lanka. I am sure her experience will
positive sentiment internationally add diversity to our decision making
towards Sri Lanka’s successful end to process. We look forward to all our stake
terrorism. We have signed up an holders joining us in taking the Ceylon
agreement for the distribution of the Guardian Group to new heights in the
fund overseas with a well accepted emerging, new Sri Lanka.
market intermediary. Several more
avenues are being explored to take this
fund to the international level, thus
making Ceylon Guardian a player with (Sgd.)
an outward market reach in its business. Israel Paulraj
Chairman
I would like to thank the shareholders Colombo
for their confidence in our management
and expertise during the bad times the 12th May 2010
equity market went through, and look
forward to a brighter journey ahead.
Many exciting and novel opportunities
are likely to come our way as a key
player in the local capital market and we
invite you to share in this journey in
financing the forward march of our
country. It will indeed be a challenge for
us to continue to sustain our
performance as market volatility
increases in response to changes in
foreign and domestic factors. It has been
said that “resources are limited but
creativity is unlimited” and we will keep
that thought with us as we attempt to
inject productivity to every rupee in our
portfolio.
Finally and most importantly, we
acknowledge those who made our
progress possible. To the regulators &
our business associates, we extend our
appreciation for their continued
support. I like to thank the members of
our staff for their valued contribution
and place on record my appreciation to
the members of the Audit Committee
for their guidance and my colleagues on
the Board for their valuable inputs. I
welcome Mrs. Rose Cooray to our
Board, who brings with her many years
of valuable experience gained during her
illustrious career at the Central Bank of
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 5
Managers’ Review

Synopsis Of The Macro Economic

Environment
Sri Lankan economy sees a turn around …

Quarterly Growth Rates

Contributors to GDP growth
The turnaround in the economy was
very much evident in the second half 14.0%
of the year with an expansion of 12.0%
4.2% in Qtr 3, after a minimal 10.0%
7.9% 7.7%
growth of 1.6% in Qtr 1 and 2.1% 8.0% 7.7% 7.0% 7.6%
6.1% 6.4% 7.0%
6.2% 6.2% 6.3%
Percentage

in Qtr 2 in year 2009. Thereby 6.0% 6.2%

4.3%
4.2%
Sri Lanka’s economy is estimated to 4.0%
2.1%
1.5%
have grown by 3.5% in the current 2.0%

year in comparison to an annual 0.0%

growth rate of 6.0% recorded in -2.0%

1st Qtr 06

2nd Qtr 06

3rd Qtr 06

4th Qtr 06

1st Qtr 07

2nd Qtr 07

3rd Qtr 07

4th Qtr 07

1st Qtr 08

2nd Qtr 08

3rd Qtr 08

4th Qtr 08

1st Qtr 09

2nd Qtr 09

3rd Qtr 09

2008. The low GDP growth in the
first half of 2009 was due to the
heightened military offensive and
the global recession having its affect
on the domestic economy. Despite
the slow down in GDP growth, the
country was able to maintain its per
capita income at US$ 2,030 in year
2009 the same level as in 2008.
However the economy bounced back
to 6.2% growth in GDP in the last
quarter of 2009, with forecasts
expecting 6%+ GDP growth overall
GDP growth forecaste, 2010, %
Fastest ten
Qatar
Turkmenistan
Azerbaijan
China
Uzbekistan
Congo-Brazzaville
Angola
Ethiopia
India
Sri Lanka
0% 2% 4% 6%
Source : Economist Intelligence Unit
4th Qtr 09
Agriculture Industry Services GDP
in 2010 followed by higher levels The economy has proved its resilience
thereafter. amidst domestic and external turmoil.
The major divisions of economic
The Economist Intelligence Unit of activity, agriculture, industry and
the UK has placed Sri Lanka amongst services registered positive growth
the top ten fastest growing global rates of 3.2%, 4.2% and 3.3%
economies in 2010, alongside China respectively. Impediments and barriers
and India. which affected the agriculture and
fisheries industry in many districts
due to security concerns, faded away
swiftly with the end of terrorism.
Some of the best performing sub
Slowest ten
sectors recording growth were rubber
24.5 Hungary
production 7.9%, fisheries 6.9%,
Jamaica
mining 8.2%, hotels & restaurants
Barbados
13.3% and transport &
Estonia
communication 6.6%. The
Belarus contribution to total GDP from the
Ireland main sectors remained unchanged
Latvia from the previous year, being 12%
Puerto Rico from agriculture, 29% from industries
Venezuela and 59% from services. The key to
Lithuania Sri Lanka’s growth in the past has
8% 10% 12% 4% 3% 2% 1% 0% been favourable weather conditions as
6 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Managers’ Review (Contd.)

the country’s economy is more Consequently the gross official reserves market by issuing Sri Lanka
agrarian based. Thus a good crop as at end December 2009 improved to development bonds at attractive yields
results in income re-distribution and US$ 5,096 which was sufficient to offering a reasonable alternative
wealth among the people and this finance 6.1 months of imports, a investment to foreign investors. The
would continue its importance in the remarkable improvement from the bond markets were partially liberalised
medium term as well. beginning of the year where gross with the opening up of the sovereign
official reserves depleted to a point bond market along with short term
where it was only sufficient to finance Treasury bill markets, with foreign
GDP & sector growth rates 1.5 months of imports. Confidence by investors being able to take up 10% of
2007 2008 2009 the diaspora and their passion to these government securities now in
%
15 rebuild the war torn North East region issue at very attractive rates. In fact,
12
has seen an influx of worker remittances one of the recent dollar bond issues in
in the second half of the year and this is the international market was
9
likely to improve in year 2010 too. oversubscribed by foreign investors by
6

Year 2004 2005 2006 2007 2008 2009

3

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

Growth in remittances 12% 28% 10% 16% 16% 14%
-3
Agriculture

Manufacturing

Electricity

Construction

Whole Sale & Retail

Hotel & Restaurants

Transport &
Communication

Banking, Insurance Y &

Real Estate
GDP

-6
The Sri Lankan currency 13 times. With these changes, interest
The Sri Lankan Rupee closed at rates stabilized in the short term and
SLRs.114.38 against the US$ as at the currency strengthened,
end December 2009 (end Dec 2008 – supplemented by capital flows for
Sri Lanka – macro economic SLRs.113.14), amounting to a development from bilateral sources.
fundamentals and how they fared depreciation of 1.1% during the year. The IMF loan of US$2.6bn approved
Against currencies such as the Euro for Sri Lanka was a vote of confidence
Balance of payments
the Rupee depreciated 3.5% and in the policy makers’ attempts at better
For the year 2009, exports contracted
against the Sterling the rupee economic management. The third
by 12.7% amounting to US$ 7,085
depreciated 11.3%. In addition to tranche which was delayed due to the
Million and imports contracted by
remittances, currency depreciation non achievement of budgetary targets
27.6% amounting to US$ 10,207
was also contained due to inflows of is expected to be reviewed shortly.
Million which resulted in a reduced
foreign investor funds to US dollar
trade deficit of US$ 3,122 Million
denominated and rupee sovereign
compared to the trade deficit of
bonds due to the liberlisation of the Exchange Rates
US$ 5,981 (YE 2008). The overall
bond market and Treasury bill market US$/Rs.
balance of payments which was a 121
for foreign investors. The reduction in For calendar year 2010 (to
deficit of US$ 1,385 Million in 2008 120 March) the Rupee
country risk and attractive rates appreciated 0.30%,
recorded an unprecedented surplus of 119 to Rs.114.04 from Rs.114.38
offered, enticed investors to
US$ 2,725 in 2009. Private 118
government bonds. During the 117
remittances from the large base of
calendar year 2010 for the period 116
Sri Lankan expat workers in the
January to March the Rupee has 115
Middle East and elsewhere improved
marginally appreciated by 0.30% 114
in the current year with confidence
against the US$, thus being 113
gaining after the end to the war. This Year 2009 the Rupee
112 depreciated marginally by
categorized as a more stable currency. 1.1%
was remarkable, given the overall 111
recessionary conditions in the rest of 110
The Government of Sri Lanka was
29-Mar-09
25-Apr-09
23-May-09
20-Jun-09
18-Jul-09
15-Aug-09
12-Sep-09
10-Oct-09
7-Nov-09
5-Dec-09
2-Jan-10
13-Feb-10
13-Mar-10

the world.
active in the international bond
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 7

Inflation and interest rates
The Monetary Board set its policy
direction by reducing statutory reserve
ratios in order to ease liquidity pressures
that were prevalent in the money
markets and to facilitate lending to kick
start economic activity. Several
measures were taken to consciously
lower domestic interest rates. The
Central Bank of Sri Lanka reduced its
key policy rates by 300 basis points and
225 basis points respectively on the
repurchase rate and reverse repurchase
rate during the calendar year 2009.
Currently repurchase rates are at 7.50
% & Reverse Repurchase rate at 9.75
%. Inter bank call money rates have
been less volatile than in the past
ranging from a low of 8% and a high of
13%. The 3 month T-Bill rate has come
to single digits of 7.73% (single digits
last seen in Nov 2005) which reduced
960 basis points in the calendar year
while the 12 month T-Bill rate reduced
by 975 basis points to 9.33% as at end
Dec 09. As at 31st March 2010 the 3
month T-Bill rate is at 8.45% and 12
month T –Bill rate is at 9.47%. On the
long end of the yield curve the
government 2-3 year bonds are
currently trading around 10.70% -
11.00%.
Yield Curve
31st Mar 2009
20%
18.1%
18%
16.2%
16% 16.6%
14% 14.6%
12% 10.7%
10% 9.2%
9.5%
8% 8.5%
6%
4%
2%
0%
3 Months
Inflation as measured by the point-to-
point change in the Colombo
Consumers’ Price Index (CCPI)
reduced from 14.4% as at end
December 2008 to a low of 0.70% in
Sept 09 but picked up to 4.8% by end
Dec 09 and 6.3% as at end March
2010. Also the CCPI annual average
change peaked at 22.6% as at end
December 2008 and currently (March
2010) is at 3.2%, indicating a drop in
food prices & commodity prices. The
decrease in world oil prices and sharp
drop in commodity prices in
international markets led to downward
revisions in domestic prices of goods,
thus contributing to lower import
inflation. However, the signs of
increasing oil prices and inching up of
inflation in recent months are trends to
be carefully watched, as it could once
again lead to import led inflation.
One would have expected credit to
the private sector to grow under these
circumstances, but we are yet to see a
recovery with most analysts expecting
this to materialize in the second half
of 2010, as many companies hit full
capacity utilization levels and feel the
need to upgrade their working capital.
Furthermore, as a trade based
economy, the relaxation of import
restrictions done so far could be
supplemented by tariff cuts in the
31st Mar 2010 more mass market consumer items to
18.1% 18.0%
help stimulate demand and hopefully
raise more revenue.
17.0%
12.0% 12.1%
The fiscal deficit of 9.8% reported for
2009 is a cause for concern for
11.0%
business, since it could once again
lead to higher levels of inflation and
thereafter higher interest rates if the
government resorts to borrowing in
the local market to bridge the deficit.
It is essential that this deficit is
cuts in essential welfare expenditure
on health and education services and
infrastructure development. The
budget deficit if left unchecked,
would actually be a concern for the
poorest segments of society who
would have to undergo hardship if
further indirect taxes are imposed as a
revenue generating measure, Foreign
financing of the deficit would also
pose undue pressures by way of
interest payments in future.
Economic Indicators
T.Bill - 12 months Prime lending rate
Inflation-annual avg. change
%
25
20
Economic indicators stabilising
15
10
5
0
28-Mar-09
28-Apr-09
28-May-09
28-Jun-09
28-Jul-09
28-Aug-09
28-Sep-09
28-Oct-09
28-Nov-09
28-Dec-09
28-Jan-10
28-Feb-10
28-Mar-09
Thus while we do sense that there are
many challenges to be addressed in
the economic front, we are hopeful
that Sri Lanka now has the economic
strength to overcome these challenges
successfully and place the economy on
a more robust footing into the future.
Much commitment in the areas of
economic reform and fiscal policy
making would be required for this
process.

6 Months

12 Months

2 Years

3 Years

4 Years

5 Years

contained without causing significant

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

Colombo Stock Exchange Commentary

Second best performing market in the world …

Sri Lanka transformed in 2009 into Index was up 127% and Milanka higher risk investments. The All Share
one of the most attractive frontier Index was up 146%, both all time Price Index of the CSE ended at an all
markets attracting global investor highs ever seen at the Colombo time high of 3724 index levels. The
attention with its successful bourse. capital gains of the most active shares
conclusion to a three decade long in the Colombo Stock Exchange have
terrorist problem, a factor which upto Market capitalization which was surpassed 100% since June 2009
now deterred many investors from hovering around Rs.533 bn in March reflecting the peace dividend,
investing long term in the country. 2009 has improved tremendously to uniquely improved economic outlook,
The All Share Index appreciated Rs.1,210 bn crossing the Rs.1 trillion revival in key sectors such as tourism
125% and Milanka Index 136% for mark achieving another milestone at and the stable macro economic
the calendar year ended 31st the CSE. The daily market turnover conditions particularly reflected in
December 2009. The Index crossed too has averaged Rs.1,487 mn international reserves and interest
the all time high of 3016 which was compared to Rs.488 mn which was rates.
last recorded in February 2007 and is prevalent beginning of the year,
now reaching towards 4000 plus. For demonstrating sustained levels of The initial public offers in the last
the financial year 09/10 the All Share activity and investors’ appetite for few months have attracted a flurry
of interest among investors being
CSE Indicators
over subscribed in ever increasing
multiples. For the moment this
Daily avg. turnover Rs. mn. ASPI Milanka
shows an oversupply of risk capital
2,700 4,500 on the CSE and we anticipate that
2,550 4,250
2,400 it would not take too long for
4,000
2,250
2,100 3,750 corporates to start seeking this
1,950 3,500
1,800
capital in larger volumes for
3,250
1,650
1,500 3,000 financing business enterprises.
1,350 2,750
Rs. mn.

Indices

1,200
Much of the activity is still
2,500
1,050
2,250 observed to be on balance, arising
900
750 2,000 from local institutional and retail
600 1,750
450 investors while foreign investor
1,500
300
150 1,250 interest is yet to gather sufficient
0 1,000
momentum.
Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

The market P/E ratio, from 5.4 times,

31st 31st 30th 30th 31st 31st Movement improved to 18.4 times during the
Dec 08 Mar 09 Jun 09 Sept 09 Dec 09 Mar 10 for FY period of review. The re-rating of the
09/10 market was supported by regaining of
ASPI 1,503.0 1,638.1 2,432.1 2,938.6 3,385.6 3,724.6 127.4%
confidence with the anticipation of
MPI 1,631.3 1,736.2 2,721.6 3,297.4 3,849.4 4,270.7 145.9% improved earnings by corporates, the
Avg.T/O Rs.mn 71 488 736 963 1,198 1,487 1,587.3% elimination of a critical risk factor and
Mkt Cap Rs.bn 488.81 533.75 781.77 941.51 1,092.14 1,210.84 126.9% correcting from an over sold position.
Mkt P/E ratio 5.4 5.8 9.9 13.8 16.5 18.4 217.2% Turnover improved on average to Rs.1
bn per day during the period of
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 9

CSE - Mkt Cap/PE

The bullish sectors of the Colombo high levels of penetration and lower
Market Capitalisation Market PER
Stock Exchange disposable incomes.
Rs. bn P/E
1,400 19.0
Domestic investors dominate the CSE
Market re-rates to all time
Sector Movement
1,300 high’s of 18 P/E multiples
after the end to the 3 decade 17.0 for 2009/10 but not for long
1,200 long terrorist problem
in the island Local investors continued their
1,100 15.0 Banking & Finance +130%
Diversified +203%
dominance at the Colombo bourse
1,000
13.0 with local participation being in the
Construction & Engineering +391%
900
11.0 Hotels & Travels +204% region of 60 - 80% during the year
800
Trading +573% vis-a-vis 50% on average in the past.
700 9.0
Oil Palms +208%
600
7.0
Turnover -Domestic vs Foreign
Investment Trusts +192%
500
Net Foreign inflow
ASI +127%
400 5.0 (Rs. Mn)
T/O -Domestic T/O-Foreign
0 20 40 60 80 100
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10

Construction & Engineering has Mar 10 -8034

appreciated more than 300% for the Feb 10 -2106

review and this strength continued financial year due to the bullish Jan 10 -2935
Dec 09 -520
mainly supported by local investors. sentiment with the re-building of the
Nov 09 -2355
By regional standards CSE valuations war torn areas. Other sectors that have Oct 09 +1340
still appear to be modest when performed more than 200% for the Sept 09 +871
Aug 09 -176
compared with Price Earnings period of review have been the
Jul 09 +533
multiples for an emerging market. Diversified, Hotels & Travels, Oil Jun 09 -97
Colombo in the past has seen average Palms and Trading sectors. The May 09 -1917

P/E’s ranging between 13 -14 Banking & Finance sector which April 09 -484
Mar 09 +2027
multiples and the all time high has accounts for 18% of market cap has
% 0 20 40 60 80 100
been 18 times. Colombo’s market cap grown by 130%, above the market
to GDP ratio of 23% illustrates that it performance of 127%. The
has yet room to mature to reach the telecommunications sector the largest,
values commanded by more mature which accounts for 21% of the market A net foreign outflow of Rs.784 mn
economies. capitalization of the CSE failed to was recorded for the calendar year
deliver returns given the intense price 2009 due to one off selling by the
competition in the industry following Galleon Fund in Sri Lanka (a key
player in the past) to meet
redemptions due to internal issues
Daily Avg. T/O Vs Mkt. PE related to that Fund. During the same
Daily T/o Avg Market PER period of review foreign inflows were
recorded to the value of Rs.43,190
3,000 20
19
mn. A net inflow of Rs. 13,953 mn
18 was recorded in 2008. However local
2,500 17
16
institutions and foreign funds were
2,000 15 aggressively seen picking up liquid
14
13
blue chip counters at low price levels.
1,500
Rs. mn.

12
Times

During the current year 2010 the net

11
1,000 10
foreign outflow todate amounts to
9 Rs.13,075 mn.
8
500
7
6
0 5
Jun-07
Jul-07
Aug-07
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
May-05
Jun-05
Jul-05
Aug-05
Sep-05
Oct-05
Nov-05
Dec-05
Jan-06
Feb-06
Mar-06
Apr-06
May-06
Jun-06
Jul-06
Aug-06
Sep-06
Oct-06
Nov-06
Dec-06
Jan-07
Feb-07
Mar-07
Apr-07
May-07
10 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Managers’ Review (Contd.)

Index Performance for 2009

World markets – showed dramatic premium of the CSE deterred
recoveries in the second half of investors in equities, prompting
2009 on world recession fears investors to be in safe haven capital
easing SSE Composite 74.2% guaranteed investments such as fixed
Nikkei 16.2% income in the early part of 2009. The
The global economy shrank in 2009 FTSE 18.2%
inverse relationship between fixed
by 0.5% - 1.0% with most developed income investments and equities as
Dow Jones 16.5%
economies facing recessions. However highlighted below indicates that in
ASPI 125.2%
many global equity markets have time to come equities might continue
Karachi Index 51.2%
slowly and steadily recovered in 2009 to be attractive.
with the anticipated fallout being Straits Times 50.5%

milder than expected. BSE Sensex 70.0% On a more macro level, the single
Hang Seng 57.5%
most important factor in reviving
All equity markets internationally %0 10 20 30 40 50 60 70 80 90 100 110 120 130 economic activity is a low interest rate
faced turbulent times during first half regime and presently rates have edged
of the period of review due to the down with the easing of inflation to
Index Performance January to March 2010
mortgage crisis, credit crunch and single digits and the absence of severe
recession fears. Activity at the upward pressure from international
Colombo Bourse too declined with commodity prices. This is a positive
most investors shunning the equity -5.1% SSE Composite
factor for both corporates and equity
market given the fear of the financial Nikkei 5.2% markets. Stock market activity
crisis faced by the USA and Europe FTSE 4.9% through Initial Public Offers and
spreading to Asian countries. Hence Dow Jones 4.1% Rights issues revived with a Rs.5.8 bn
the market P/E of the CSE was being raised during the year, with
ASPI 10.0%
trading at a significant discount, most issues being heavily
Karachi Index 7.8%
making Colombo one of the cheapest oversubscribed. Dividend yield of the
-0.3% Straits Times
markets in the South Asian region on market marginally came down to
P/E multiples. The war situation in 0.4% BSE Sensex 3.5% in 2010 from 5.6% recorded in
the first five months exacerbated -2.9% Hang Seng year 2009.
Sri Lanka’s problems. Hence the re- % -6 -4 -2 0 2 4 6 8 10

rating of the market was long over due

from an over sold position. Equity vs Fixed Income
T.Bill - 3 months T.Bill - 12 months
sustainable. The Colombo Stock ASI Comp Milanka Comp
In the second half of the year equity Exchange was the second best ASI/Milanka
% Composite
22 560
markets forged ahead to positive performing market in the world in Inverse relationship
between interest rates and 535
2009. The Dow Jones Index 20 Market performance 510
territory in light of improving
highlighted 485
18
economic fundamentals. Most appreciated 16.5% and FTSE by 460
16 435
regional markets, China and India in 18.2% for the year 2009 vis-a-vis 410
14 385
particular, recovered in 2009 for Asian markets as represented by SSE 360
12 335
74.2%, Hang Seng 57.5%, and BSE 310
several reasons which are mostly 10
285
related to internal developments in Sensex up 70.0%. 8 260
235
those markets and the stimulus 6 210
185
4
packages which held up consumption Inverse relationship between interest 160
2 135
expenditure. It is encouraging to note rates and stock market performance 110
0 85
that investor interest has returned to evident in Sri Lanka
Mar. 04

Sep. 04

Mar. 06

Sep. 06

Mar. 07

Sep. 07

Mar. 08

Sep. 08

Mar. 09

Sep. 09

Jan. 10

all key markets and it remains to be

seen in which markets the recoveries High interest rates have been a
recorded so far would remain dampener in the past for equity
markets. Further, the high risk
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Our Portfolio Review
A case of being selective about where we invest …
Guardian Fund Performance
During the year under review, the
Ceylon Guardian Fund built positions
in identified companies in selected
sectors such as banking & finance,
retail, food & beverage and diversified
sectors which we have identified to be
the growth sectors in the future. We
aggressively increased our exposure to
the banking sector as we believe that
this sector would first feel the turn
around in the economy in its primary
role as a financial intermediary.
Investments to the tourism sector,
another obvious contender for high
growth, were increased by way of
buying directly into hotel stocks and
through the diversified conglomerates.
The acquisitions are in keeping with our
strategy of mapping our portfolio to
best represent economic trends and
overweighting on those sectors where we
anticipate above average economic
growth to be recorded. A bottom up
approach was applied when selecting
stocks taking into account financials,
industry presence, business model, good
management and strong balance sheet.
We opted for major stakes when
investing for the long term portfolio in
keeping with our investment philosophy
of “investing selectively but taking
meaningful positions”. In reaching
towards the dual investment objectives
of the portfolio and adding dynamism
to the year’s result, the trading portfolio
was strengthened and structured to
expedite quicker gains in the short term.
The bulk of the Guardian Fund is
currently invested in long term listed
equities which cover an investment
horizon of 3-5 years. A bottom up
approach of stock selection is applied,
where individual company
fundamentals are given precedence
over asset and sector allocations of the
portfolio. When a long term
investment is selected, it is usually the
practice to acquire a position that
would make Guardian a significant
investor in that entity. Given below
are our top investments and the stakes
we hold in those companies.
Top 5 Holdings - excluding related companies
Market Value % Stake
Company 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%
Our investment choices are based on
detailed financial valuations and
evaluation of key performance
indicators. Some of the characteristics
we look for in our investments is that
the business entity should be in
growth sectors, with financial stability,
sound balance sheet and capital
structure; and backed by dynamic
management.
On the other short end, the portfolio
is managed on the basis of exploiting
opportunities to capture quick value
by investing in relatively under-valued
stocks. Short term price movements
that reflect changes in investor
sentiment, company announcements
and demand / supply conditions are
11
exploited within a one year horizon
for active profit booking to enhance
annual shareholder returns. Once
target returns are achieved,
investments are consciously divested
and profits booked.
Ceylon Guardian now stands at a
fresh phase of growth in its history,
where having realized profits for its
shareholders and returned a part of
their investment at a capital gain; the
Company has also re-invested for the
economic turnaround given the peace
dividend in the country. Sri Lanka
presents a unique opportunity for
investors who would benefit from the
upside created by the dramatic
turnaround in the country’s fortunes;
and the market is likely to pose
opportunities for investors such as us
with the dual objectives of enhancing
growth in the long term and adding
quick value in the short term.
The long term listed portfolio for the
first time ventured into the banking
and 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 opted
for stakes in the two largest retail
banking networks in the country, with
access to all levels of clientele and
ability to lend at competitive rates
given their deposit mobilization
strengths. We believe these two banks
will be best positioned to quickly
capture the growth opportunities in
lending that would arise, given their
relatively large capital base and ability
to even compete with the giant state
12
Managers’ Review (Contd.)
banks. The smaller banks are
attractively valued and as such those
positions were built within the short
term portfolio. HNB’s insurance
subsidiary, though a relatively smaller
player in the market, we believe would
be able to effectively use its strengths
and conservative management style to
build a long term competitive
position in the insurance industry.
Also during the year under review we
increased our stakes in the following
companies; Cargills to 3.1% a leading
super market and retail chain in the
country with over 125 outlets, Aitken
Spence to 3.4% a diversified sector
company with exposure to ports,
power and leisure, Ceylon Hospitals to
3.0% a leading hospital group and
2.7% in Aitken Spence Hotel
Holdings, a leading hotel chain
operator and manager in the region,
whose properties and management
capability would have an edge in
capturing the most lucrative niches in
the tourism industry in Sri Lanka and
the region. We continued to hold a
substantial share of our portfolio in
John Keells Holdings amounting to a
2.2% stake. We forecast growth in all
these industries and companies to
come at a pace that would exceed
average economic growth and we are
positive on their business models,
management strengths and cash
generation ability.
Guardian was a net purchaser in the
market amounting to Rs.2.1 bn. The
purchases were financed mainly by
transforming from selling existing
holdings in under performing
equities. During the period, sales
proceeds of Rs.1.7 bn was raised by
selling substantial blocks of JKH at
varying prices and realising Rs.648
mn, of which AHPL Rs.101 mn,
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Distilleries Rs.380 mn and Tokyo Thus the investment horizons have
Cement Rs.62 mn. Careful use of been set to match the objectives.
debt from time to time flexed Accordingly the short term portfolio
Guardian’s capacity for acquisitions. comprises trading stocks with a short
investment horizon of less than one
Our Investment Performance – year, aimed at realizing capital gains
Multiple goals achieved via varying by riding market cycles. The long
time frames term portfolio consists of shares with
The total value of the Guardian a maturity period of three to five years
Group portfolio stood at Rs.13.89 bn or even beyond.
as at 31st March 2010 from Rs.4.40
bn as at 31st March 2009, an In summary, the year end valuation of
appreciation of 216% against the All the different components of our
Share Index appreciation of 127% for portfolio are as follows:
the same period. The portfolio of the
Guardian Group has been segmented 31.03.2009 31.03.2010
into long term and short term Rs.mn. Rs.mn.
(trading) to achieve multiple
investment objectives for the Short term 344.48 747.39
Long term 2,280.89 6,536.67
shareholders – that of long term
Strategic 1,777.11 6,606.69
sustainable growth and short term
4,402.48 13,890.75
cash generation. Thus the long term
core stocks of the portfolio provide
the foundation for sustained growth, Long Term Performance 2005 to 2010
whilst the trading portfolio adds
GG Comp ASI Comp
much needed dynamism by exploiting 300
market opportunities and generating
cash for dividend and returns. A 250
+136%
combination of different portfolio +113%
200
management styles are adopted when
Composite
making investment decisions on the 150
long term portfolio and short term
trading portfolio, the former being on 100
fundamental valuations and latter on GG Comp ASI Comp
50
FY 08/09 - 43% -36%
temporary anomaly of price. The long FY 09/10 +187% +127%
term portfolio when investing puts 0
Mar 05
June 05
Sep 05
Dec 05
Mar 06
June 06
Sep 06
Dec 06
Mar 07
June 07
Sep 07
Dec 07
Mar 08
June 08
Sep 08
Dec 08
Mar 09
June 09
Sep 09
Dec 10
Mar 10
emphasis on factors such as quality of
management, industry leader
position, business model and balance
sheet strength. On the other hand the The long term portfolio performance
trading portfolio takes into account recovered superlatively with the market
unexploited valuation gaps, market recovery and exceeded market
information and prices the stock for performance by a wide margin. Our
true value in an annual timeframe. philosophy of investing for the long term
Thus price anomalies are exploited and riding out temporary fluctuations of
and profits booked when a target rate the market paid off with the portfolio
of return is achieved. weathering the roughest years in a
sustainable manner. The continuous
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 13

monitoring of investments and our Equity/cash exposure vs mkt movement Private Equity Initiatives
research process that analyses changing Equity Cash ASI Guardian explored many private
T.bill rate - 3 mnth
fundamentals and reviewing the impact % % equity ventures at the pre IPO stage
4,000 100
to bottomline on key performance during the period of review. The
90
3,500
indicators was the key to the success of company is seriously looking to build
80
the long term portfolio. The turn around 3,000 a portfolio exposure into such
70
of the long term portfolio remained low 2,500 investments as the conventional
60
given the long investment cycle pursued. quoted equity market does not offer
2,000 50
The long term portfolio was up 187% exposure to certain sectors of the
40
1,500
against the ASPI of 127% 30
economy and these projects are likely
1,000 to offer above market returns. We
20
500
Trading portfolio performance FY 2009/10 10
have evaluated many projects during
0 0
the financial year and invested where
NAV Comp ASI Copm
Mar
April
May
June
July
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
the returns and risk profiles matched
250
127% 2009 2010 our set internal benchmarks. We have
225
117% earmarked this in our future growth
Equity Cash ASI T.bill
200 rate-3 m plan and will continue the process of
evaluating such projects as we like to
175
2009 Mar 51% 49% 1638.06 14.62%
April 55% 45% 1838.45 13.38% capture opportunities for investment
150 May 65% 35% 2215.96 12.04% at the infant stage, thus enabling to
maximize profits and add value to
125
June 63% 37% 2432.15 11.41%
July 62% 38% 2525.7 11.63% management. Early entry to a project
100 Aug 76% 24% 2607.65 11.30% provides opportunities of exploring
75
Sept 82% 18% 2938.64 9.75% the entrepreneurial spirit and qualities
Mar
April
May
June
July
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar

Oct 87% 13% 2976.93 8.50% of high quality private equity ventures
2009 2010 Nov 80% 20% 2913.39 7.25% and builds commitment with our
Dec 83% 17% 3385.55 7.73% investment team binding together
The short term portfolio too over 2010 Jan 80% 20% 3636.41 7.95%
ourselves as investors and the
Feb 67% 33% 3807.86 8.26%
performed the benchmark All Share promoters at an early stage.
Mar 88% 12% 3724.59 8.45%
Index. Due to a dormant first quarter,
the trading portfolio was very much in In the current year, the Fund made an
Returns of comparative investment options
cash to mitigate the downside given the investment into the retail sector by
uncertainties of the market. However in 2009/10 committing to invest Rs.200 Million
the second half the year the trading and taking a 4.3% stake in the
portfolio aggressively bought into stocks ASPI 127.4%
unquoted Softlogic Holdings Ltd, an
in the banking and tourism sectors. The aggressive retail company having many
timely shifting of funds enabled the MPI 146.0% international agencies such as Nokia,
trading portfolio to perform steadily. CGIT
Dell, Panasonic and Samsung under
Shareholder 215.5%
The short term portfolio was up 117% wealth their wing, and a strategic stake in the
against an increase in ASPI of 127% Unit Trusts - Asiri Hospitals Group. We have
growth funds avg 144.43%
return
with almost 100% of the portfolio invested in the company for its next
Bank fixed
being traded in the year. deposits - 9.71% phase of growth with expansion plans
(AWFDR)
underway to roll out customer centers
Treasury Bill 9.47%
- (1 year) to market all its brands under the
0 50 100 150 200 250 concept of a one stop shop and to ride
the prospective retail boom in the
country given the rise in per capita
incomes. The timely entry to the retail
14 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Managers’ Review (Contd.)

sector was made as we believe that the distribute The Sri Lanka Fund overseas funds given the positive sentiment
rise in per capita income in Sri Lanka via its distribution network in the towards Sri Lanka, plus we see a
would filter down to greater Middle East and Asia. The fund will be window of opportunity in raising funds
consumption expenditure by the mass launched in June. Active fund raising with the global economic recovery.
market consumers. It is also Guardian’s and marketing has commenced and we
second investment into unlisted feel that its an opportune time to raise
equities, following our initial entry to
Durdans Medical and Surgical Hospital Our Top Holdings as at 31st March 2010 Value of Portfolio
Limited last financial year. We are the holding Weight %
happy to note that the new hospital Rs.mn
complex is now ready for occupation Group Holdings
and has commenced operations, backed Bukit Darah - An investment holding company with a 46%
by new technology, an unparalleled stake in Carson Cumberbatch PLC and an exposure to oil
team of physicians and nursing care. palm plantations in Central Kalimantan, Indonesia 6,011 43.3%
Ceylon Brewery - Parent company of Lion Brewery 314 2.3%
Managing Outsourced Funds Lion Brewery - Brewing company with a market share of over
Leveraging on our strengths in portfolio 80% in the business of brewing and bottling of high qualitity
management and our competencies, we beers under license for local and export markets 282 2.0%
are working towards extending our Group Holdings total value 6,607 47.6%
business model into managing Non Group Holdings
outsourced funds on behalf of third John Keells Holdings - A diversified company with interests in
ports & related activities, transportation, property development,
party clients. This would be either
tourism, financial services and consumer products in Sri Lanka
through our country fund, the Sri
and now moving into the South Asian region 2,512 18.1%
Lanka Fund, an open ended country
Aitken Spence - A diversified company with interests in
fund available to foreign investors or tourism, power generation, port and related businesses. Has
through the management of aggressively set up operations overseas in niche-businesses 1,257 9.0%
customized portfolios for institutional Commercial Bank - One of the largest retail banks in Sri
or high net worth individual clients. Lanka with a wide branch network of over 150 branches
spread island wide 649 4.7%
Sri Lanka Fund - a window to the Cargills - Leading player in the retail super market trade,
international market commanding 50% of the market share. Also has
At a time when Sri Lanka has been manufacturing operations in the food sector and operates the
attracting international attention for KFC franchise in Sri Lanka 496 3.6%
many good reasons, it is indeed Hatton National Bank - One of the largest retail banks in
appropriate that Guardian too makes its Sri Lanka with a wide branch network of over 150 branches
spread island wide 471 3.4%
way towards testing its capabilities to
Aitken Spence Hotel Holdings - A pool of star class hotels
raise funds for investment in the
situated in Sri Lanka, Maldivies and Middle East, accounting
international arena. We currently have for over 1000 rooms. 492 3.5%
one product a country fund – The Sri Distilleries - Is an emerging conglomerate. Dominant player
Lanka Fund – through which we aim in the local hard liquor market, telecom sector. 316 2.3%
to widen our business model to manage Durdans Medical & Surgical Hospital - Unquoted investment
public funds. The Sri Lanka Fund is an and expansion project of the Ceylon Hospitals Group which
open ended mutual fund incorporated is one of the pioneers in private health care in Sri Lanka. Has
overseas and available to foreign and already commenced operations and will be fully operational in
non resident Sri Lankan investors who the financial year 2010/11 263 1.9%
wish to secure exposures to the country Non Group Holdings total 6,456 46.5%
through a dedicated country fund. A tie Top Holdings 13,063 94.0%
Other holdings 827 6.0%
up with one of the largest mutual fund
Total Portfolio 13,890 100.0%
operators has been recently made to
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Financial Review And Shareholder Returns
Translating the philosophy to tangible value …
Turnover comprised dividend and
interest income and sales proceeds on
sale of shares during the year. Year on
year turnover declined 17% since last
year’s figures reflected one off proceeds
from disposals of strategic investments.
However proceeds from disposal of
non strategic investment increased
twofold. The Group achieved an
operating profit of Rs. 1.33 bn before
finance cost a growth of 123% from
Rs. 598 mn recorded in the previous
year. Finance cost reduced during the
year from Rs.13.52 mn to Rs.5.4 mn.
Purchases were financed from a
temporary over draft due to mismatch
in sales and purchases timing with
increased activity given a buoyant
market during the second half of the
year. However with lending rates
coming down, finance costs remained
at tolerable levels.
Consolidated profit after tax amounted
to Rs. 1,680 mn for the year under
review against Rs. 653 mn recorded last
year. The consolidated profit after tax
includes an unrealized appreciation of
Rs. 146 mn in the short term portfolio.
With the adoption of market value
accounting for the long term portfolio
the group balance sheet has now been
brought up to market value with net
asset values recording Rs. 7.6 bn, a
growth of 68% for the financial year
2009/10. Total unrealized gains taken
to reserves on account of the long term
portfolio value appreciation was Rs. 2.8
bn, representing potential profits that
could be booked in the form of cash as
at the date of reporting. It is indeed
encouraging that we have been
15
Profit to shareholders vs cashflows generated
successful in accumulating value at a
very early stage to the portfolio, when Profit attributable to Cashflow from
shareholders operating activities
most of our holdings are yet to reach Rs.’000
maturity. The total net asset value of the 1,500,000
Guardian Group portfolio stood at Rs. 1,200,000
9.2 bn as at 31st March 2010 up from
900,000
Rs. 5.6 bn as at 31st March 2009, an
appreciation of 64% while net assets at 600,000
market value grew 145% to Rs.620 per
300,000
share.
0
The Group did share repurchases
-300,000
during the year at a cost of Rs.1.5 bn,
using proceeds generated by the -600,000
2006 2007 2008 2009 2010
divestment of strategic stakes in the
last financial year.
Dividends/EPS - last 5 yrs
Share of associate companies profits
DPS EPS
increased from Rs.75.7 mn to Rs.
DPS EPS
386.7 mn during the year with the 12 100
Groups holding in Bukit Darah PLC.
10
80
At company level, Ceylon Guardian
8
recorded a turnover of Rs.1,661 mn 60
and a profit after tax of Rs.1,419 mn, 6
an increase in profits of 267% from 40
4
last year. The Company’s portfolio
20
was valued at Rs. 3.1 bn. The sales 2
proceeds generated to CGIT as a
0 0
result of share re-purchases by its
2006 2007 2008 2009 2010
subsidiaries CICL and RITL
amounted to Rs.863 mn which is
shown in the company profit and loss The Company proposes a final
account. These intercompany gains dividend of Rs.9 per share. A dividend
are all eliminated in the Group level of Rs.11.50 was paid in FY 2008/09.
accounts and consolidated profits The dividend yield has come down
clearly show the results pertaining to marginally, to 2% from 11% recorded
share trading activity and income last year, owing to changes in the
generation thereon excluding inter Company’s share price. The
company transactions arising out of Company’s share price improved from
the share repurchases. Rs.104.25 to Rs.501.50 as at 31st
March 2010. The Company’s EPS
16 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Managers’ Review (Contd.)

increased to Rs. 68.65 from Rs.14.47,
a growth of 374% and the current
year’s dividend represents a payout of
13%.
Borrowings increased to Rs.249 mn in
2009/10 with total borrowings being in
short term borrowings to bridge
cashflow mismatches between timing of
purchases and sales. These borrowings
are not significant when compared with
the total net assets. Cash and cash
equivalents amount to Rs. 48 mn as at
balance sheet date.
Cash used in operating activities
distributable until such time as an
investment contained therein is sold and
the profits are realized and thereby
becomes distributable. As for the trading
portfolio, further gains would be taken
to the profit & loss account.
Shareholder Returns
The value per share of the company
amounts to Rs.620, on a market price
based net asset valuation. With the
adoption of market value accounting
for all our portfolios, we have now
brought the net worth of the balance
sheet upto market value. Hence it is
anticipated that the gap between the
Shareholder returns has averaged a
CAGR of 30.4% during the ten year
period, inclusive of dividends, share
repurchase and after adjusting for rights
issues. A shareholder who invested
Rs.1,000 in 2005 would now command
a net worth of approximately Rs.4,135
(a CAGR of 33% on financial year
basis).
CGIT Mkt Cap performance vs ASI - 10 yrs
CGIT Mkt Cap Indexed ASI Indexed
Composite
3,500
+3,228%
3,000

amounted to Rs.321 mn. Dividend
and repurchase proceeds paid to
shareholders amounted to Rs.1,516
mn. In the year under review, Ceylon
price at which the Ceylon Guardian 2,500
share trades in the market and the
2,000
actual net asset value per share would CAGR of CGIT Mkt Cap 42%
CAGR of All Share Index 22.4%
not be significant and that the market 1,500

Guardian recorded a net decrease in price of the share would tend to move 1,000
cash & cash equivalents of Rs.2,178 +652%
along with the net asset value.
mn compared with the previous years 500

increase of Rs.2,028 mn. Shareholder wealth gained 369% 0

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
during the year with a share price
Prudent accounting policies are being appreciation and proposed dividend of
followed with the adoption of market Rs. 9.00 per share. Last year’s dividend
value accounting for both long term amounted Rs.11.50, an exceptional
portfolio and short term portfolio alike. amount on account of distributions
Hence year end appreciation in the arising from the strategic sales made in
market value of the long term portfolio the last financial year.
is provided in the reserve account of the
balance sheet at Rs.2.8 bn. Year end
appreciation in the market value of the
trading portfolio is taken to the profit NAV per share (Mkt value) vs Share price Value of Rs. 1000/- Invested in CSE &
and loss account in addition to the Ceylon Guardian
NAV per share- Mkt Value Mkt value per share
Ceylon Guardian CSE - ASPI
realised gains represented. Thus the net Rs.
5,000
asset value of the balance sheet is now 600
CAGR
reflected at Rs.9.2 bn after considering 33%
500 4,000
all long term investments at market
value. 400
3,000

CAGR
Further gains on the long term portfolio 300 16%
2,000
thereafter in the subsequent financial
200
years will be taken to reserves and a long
1,000
term revaluation reserve built to reflect 100
the true worth of the balance sheet’s
0
underlying assets. The reserve, however, 0
31.3.2005

31.3.2006

31.3.2007

31.3.2008

31.3.2009

31.3.2010

2006 2007 2008 2009 2010

being unrealized would not be
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 17

Future Outlook
Fortune favours the brave …

International markets corporates due to the construction The Sri Lankan equity story
Volatility in international markets is boom in the cleared areas, opening up Looking ahead, the Central Bank of
expected to continue in the coming of new retail & consumer markets and Sri Lanka forecasts GDP growth of
year as well with the major global agricultural & fishery resources. 6%-8% in the next few years with the
economies facing a slower recovery Infrastructure spending, by way of identified sources of growth being
than anticipated. Some market highways and ports will also tourism, infrastructure, the opening
analysts are of the view that experience high growth due to the up of new greenfield markets with the
international equity markets have emphasis on laying a solid foundation incorporation of the North & East
been too quick to react and have re- for economic development. The stock into the mainstream of economic
rated to higher levels that cannot be market is yet to see significant activity and the creation of a new
supported by fundamentals. We enhanced earnings from those affluent consumer class with greater
believe that Asian markets are likely to corporates that have exposure to the spending power. Foreign direct
see domestic growth driving their key growth sectors, which helps to investment to the country which has
economies vis-a vis export growth that improve the earnings capacity of the been minimal in comparison to other
has been seen traditionally. Two market and thereby offer attractive emerging Asian countries, will likely
countries that are likely to stand alone valuations. It is however, understood see greater inflows to the
and weather the economic downturn that effective management of the fiscal manufacturing and service sectors in
of the West are India and China, position and stability in economic the future. These growth areas will be
where a ready captive consumer base fundamentals will drive sustainable supported by service led export
of over one billion people each will economic growth. businesses in the areas of ICT,
drive growing incomes and own
consumption growth.
PE Multiples of other Asian Markets
Sri Lanka the future Index Market Price/Earnings Current year 1 year Forward
Our domestic economy will benefit Ratio Estimate Estimate
with the easing of recessionary
ASPI Colombo 18.22 22.4 11.61
conditions in the Western countries.
Sensex Bombay 26.66 21.48 16.91
The world economic climate is likely
Dow Jones Industrials New York 16.29 13.84 11.94
to pose a challenge, especially in the FTSE 100 London 18.12 12.44 10.26
face of further escalations in oil prices Hang Seng Hong Kong 16.15 14.25 12.06
but is likely to be mitigated given the JCI Composite Jakarta 24.59 14.8 12.14
positive turn of events in the domestic Nikkei 225 Tokyo Neg 39.77 21.82
economy. We expect that export of SSE Composite Shanghai 29.04 18.31 15.36
garments will recover with order ST Times Singapore 14.63 15 13.62
books being filled by non GSP+ Bursa Malay Malaysia 19 16.07 14.09
dependent markets, while traditional DSE Bangladesh 31.44 26.2 22.36
commodity exports too are believed to Set Thailand 14.46 12.08 10.28
be on the rise with the increase in Karachi 100 Pakistan 11.74 8.68 7.31
IBOV Brazil 17.54 13.59 10.82
world market prices. Domestically, the
IPSA Chile 21.6 17.4 14.53
opening up of the Northern and
RTS I$ Russia 16.95 8.5 6.96
Eastern markets will be the single (As at 1st April 2010)
most positive factor for local Source: Bloomberg
18
Managers’ Review (Contd.)
outsourcing and transit cargo &
passenger movements.
Other market indicators also show the
undervalued nature of the stock
market. The market cap to GDP ratio
of 23% is low in comparison to
emerging markets and developed
markets. The relatively low forward
P/E of the market at 12 also points to
further upward movement, vis a vis
emerging and frontier markets. These
are factors that would motivate
foreign fund managers to focus more
on Sri Lanka and create a further
demand for good stocks.
The appetite for investing in
Sri Lanka has never been stronger
given the risk parameters being
minimized with the end to the
terrorism problem and the reduction
of country risk. Hence justifying a
lower risk premium is bound to re-
rate the market to new highs in the
coming year. Historically the
benchmark index of the Colombo
stock market ASPI has traded at an
average band of 14 -15 P/E levels and
the highest we have seen is 18 P/E in
2005. We are approaching the all time
highs and are likely to see the market
testing new valuation levels in the
future.
Sri Lanka is now widely assessed by
analysts as a new economic force in
the South Asian region. The country’s
GDP growth rates, which for the
entirety of the civil conflict averaged
4%-5%, is now expected to pick up to
6% in 2010 and 8% thereafter. Per
capita incomes are expected to rise to
USD 4000 in 2016 from the current
USD 2400.
New investment opportunities in
Sri Lanka would initially be in the
areas of tourism, financial services,
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
infrastructure, consumer products, believe this would form the bulk of
construction & property development our funds under management in the
and healthcare. outsourced category.
Guardian Fund – listed equity As a further extension of our business
strategy scope into the future, Guardian would
The process of transforming the look to expand its business scope to
Guardian portfolio to best represent manage mutual funds, high net worth
these sectors is almost complete, and portfolios and participate as a
we have been aggressive in investing financing partner in major deal flows
via the conventional equity market that come to the Sri Lankan capital
and the unconventional unlisted market.
private equity market which is
expected to offer a broader set of
opportunities. As a key player in the
capital markets of the country Ceylon
Guardian is well positioned to capture
good private equity investment
opportunities into its portfolio at the
Greenfield stage. The listed market is
forecast to grow at over 20% p.a. over
the next 3 years, in line with GDP
growth and a re-rating of market PEs
that reflects the positive country
situation.
Guardian Fund - Private equity
strategy
As the level of economic activity
increases, it is inevitable that private
equity as a means of pre-entry to the
listed market would be an important
source of capital for companies.
Within its private equity portfolio,
Guardian would opt to participate in
management and add value to its
shareholding stakes over a longer time
span of a maximum of five years. A
suitable exit mechanism after realizing
adequate value to shareholders would
be a pre-requisite when taking up
private equity investments.
Managing Outsourced Funds
Our prime focus in managing
outsourced funds would be to actively
market the Sri Lanka Fund to raise
new capital from foreign investors. We
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Banking On Our Strength
Making a difference in a skill based industry …
The Guardian Fund is one of the
oldest investment companies listed on
the Colombo Stock Exchange and has
a long history in the investment
business with a proven track record
over time. The Guardian group funds
are managed by Guardian Fund
Management Ltd (GFM) which is a
fully owned subsidiary of the Group.
At present GFM manages the largest
listed equity fund in Sri Lanka and
has built up its competencies in the
field of portfolio management.
To achieve this, a platform has been
created with state of the art
technology to support the fund
management activities and seek
expertise where needed. Guardian
Fund Management has set in place an
effective process for vetting
investments and our decision making
is supported by in house research. As
investors we have built a dialogue
with the invested companies and built
close 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 a
member / investor in financing
consortiums for any major deals that
take place in the market. These may
include bids for major projects,
mergers, acquisitions, underwriting
consortiums and private placements
elevating Guardian to the status of an
indispensable player in the local
capital 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 a
higher quality return to our
shareholders
Guardian Fund Management is an
investment manager registered with
the Securities and Exchange
Commission of Sri Lanka, GFM is
therefore fully compliant with all
regulatory requirements applicable to
such registered market intermediaries.
Compliance processes within GFM
are covered by the internal audit
function of the parent company as
well as an independent compliance
officer. Furthermore all employees are
required to sign a Code of Ethics and
Standards of Professional Conduct
which govern their professional
conduct in the capital markets, thus
ensuring not only regulatory
compliance by all staff but the
protection of investor interest in all
the funds we manage. Further details
of our compliance process are covered
in the Risk Management Report
which follows this review.
Research – the base for sound
decision making………
Our research covers three areas which
are of relevance for investment
decisions – macro economic trends,
industry trends and company
research. Macro economic trends are
monitored in order to understand the
influence of underlying economic
fundamentals on business
performance, consumer demand and
the movement of inflation, interest
and exchange rates that would impact
19
overall economic activity. Macro
economic indicators are vital to
understand investor sentiment on
equity markets, which is seen as an
alternative to fixed income
investments; and as a key factor
influencing the future profitability of
corporates.
Industry level studies are carried out
in determining the competitive
structure of each industry as well as
industry growth potential in the
context of the level of socio economic
development in the country. For
instance, industry penetration levels
would help in understanding how
demand would grow in parallel with
increasing per capita incomes, an
important factor driving profitability
in immature industries which are in
the early part of their life cycle.
Industry studies also help us
understand the evolving competitive
landscape to determine the future
profit prospects of the key players,
and assessing the soundness of each
company’s business model.
Company related research is carried
out in order to monitor the
performance of key variables affecting
the business, and re-assessing the profit
forecasts of each company to ensure
that our investments would meet the
required performance criteria.
Company evaluations for long term
and short term investments are based
on the criteria relevant to assess the
respective priorities of each investment
type. Our valuation models look at
sensitivities to key variables affecting
20 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Managers’ Review (Contd.)

the business so that alternative

Investing for consistent above market
scenarios can be built for each profit
returns
model. Buy and sell decisions are
We like companies that create value for all
determined based on a benchmark rate
stakeholders and take significant positions
of return which ties up a sufficient
in such companies to create above average
premium on the risk free rate, stock
returns
market performance and opportunity
cost of capital. In stock selection at Investing for shareholder value
Ceylon Guardian we place paramount We believe in giving steady long term
importance on the research process, returns to our shareholders by re-investing
which we believe will bring us a unique for growth as well as maintaining a
competitive advantage. In the long consistent distribution
term we have been able to consistently
over-perform the benchmark return
We live by this philosophy and it’s
based on our research focus.
shared amongst our investment team.
It forms the basic value system for our
investment decision making process at
Our investment Guardian.
philosophy
Guardian Fund Management Limited
As managers of Ceylon Guardian we Investment Managers
would like to present to the shareholders Colombo
the investment approach adopted by us in
driving the Company growth in the past. 12th May 2010
The guiding principles that have
influenced our decision making and
applied 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

Profiles of the Directors
Israel Paulraj
Israel Paulraj is Chairman of Ceylon
Investment PLC, Watapota
Investments PLC and Rubber
Investment Trust Limited. He serves as
a Director of Carson Cumberbatch
PLC and of several of the subsidiary
companies within the Carsons Group.
He is the Chairman of the
Incorporated Trustees of the Church of
Ceylon.
He served as Past Chairman of the
Federation of Exporters Associations of
Sri Lanka and The Coconut Products
Traders Association. He was a member
of the Executive Committee of the
Ceylon Chamber of Commerce,
National Chamber of Commerce of Sri
Lanka and Shippers Council. He
served on the Board of Arbitrators of
the Ceylon Chamber of Commerce.
He has served as Hony. General
Secretary of the Central Council of
Social Services, Hony. Treasurer of The
Christian Conference in Asia,
President, Church of Ceylon Youth
Movement and Hony. Treasurer
National Christian Council of Sri
Lanka.
He also served on the Presidential Task
Force on Non-Traditional Export and
Import Competitive Agriculture set up
by President R.Premadasa. He also
served as Chairman of the Ecumenical
Loan Fund of Sri Lanka and on its
International Board in Geneva. He was
a member of the Commercial Law
Reform Commission and has served on
the Parliamentary Consultative
Committee on Internal and
International Trade.
He holds a Bachelor of Law Degree
and an Executive Diploma in Business
Administration.
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Chandima Gunawardena
Chandima Gunawardena is a Director
of Carson Cumberbatch PLC. He
serves as a Director in most of the
Carsons Group companies in Sri Lanka
and overseas. He is a member of the
Group’s Strategic Planning Forum. He
also serves as a member of the Audit
Committees of the Group, in Sri Lanka
and overseas. Mr.Gunawardena has
over three decades of experience in
varied fields of business and
commercial activities and has held
senior positions in the corporate sector.
He is a Fellow of the Chartered
Institute of Management Accountants,
UK.
Asoka Gunasekera
Asoka Gunasekera is a Director of
Ceylon Investment PLC and serves as
an alternate director to Mr. I. W.
Senanayake, Chairman of IWS
Holdings (Pvt) Ltd and in most Group
Companies. Past Chairman of
National Chamber of Commerce of Sri
Lanka and Past President of the Ceylon
National Chamber of Industries. He is
a Past International Director and a
Board Appointee of Lions Clubs
International and was also a member of
the National Police Commission of Sri
Lanka. He served as Legal Advisor and
Secretary to the Ministry of Post and
Telecommunications; Co-ordinating
Secretary to the Ministry of Power and
Energy and Ministry of Highways and
was the Acting Secretary to the
Ministry of Policy Plannning.
Attorney-at-Law & Notary Public.
Manilal Fernando
Manilal Fernando is a Director of
Ceylon Investment PLC and a
Director of Aitken Spence &
Company PLC, Chairman of Holcim
(Lanka) Limited, Shipping & Cargo
Logistics (Pvt) Ltd, Hyundai Lanka
(Pvt) Ltd., Stallion Plantations (Pvt)
Ltd. and Dynamic AV Technologies
(Pvt) Ltd. Vice President of the Asian
Football Confederation (AFC).
21
Member of the Federation
Internationale Football Association
(FIFA), Player’s Status Committee and
FIFA Development Officer, Colombo.
Past President of the Football
Federation of Sri Lanka and Vice
President of the National Olympic
Committee. Attorney – at- Law &
Notary Public.
Rose Cooray
Rose Cooray is a Director of Ceylon
Investment PLC. She joined the
Central Bank of Sri Lanka in 1974 and
served the Central Bank in several
capacities, covering a wide area of
subjects, until she retired as a Deputy
Governor in May 2009. During this
period, on release from the Central
Bank, she also served the Ministry of
Finance in the capacity of the Director
General of Fiscal Policy and Economic
Affairs department from 1999 to 2004.
At the Ministry of Finance, she
represented the Government on the
Boards of Sri Lanka Institute
Information Technology, De La Rue
Lanka Printing and Security (Pvt.) Ltd,
the Ceylon Electricity Board,
Sri Lanka Telecom, Sri Lanka Export
Development Board and the DFCC
Bank. She also represented the
Monetary Board on the Board of the
West Coast Power (Pvt) Ltd. She
served as the representative of the
Ministry of Finance on the Trade and
Tariff Council.
Mrs. Cooray has held the position of
the Secretary to the Monetary Board
and also the position of the vice
chairperson of the Institute of Bankers
of Sri Lanka. Presently she serves on
the Board of Directors of the Hatton
National Bank PLC.
Mrs. Cooray holds a B.A. (Hons.) in
Economics from the University of
Peradeniya and a Masters Degree from
the University of Strathclyde, UK.
22
Management Team Profiles
Ruvini Fernando
Director of Guardian Fund
Management Limited, the Fund
Management Company of the
Carsons Group and Director of The
Sri Lanka Fund, a foreign
incorporated country fund managed
by investment sector. Associate
Member of the Chartered Institute of
Management Accountants, UK and a
Fellow of the Association of Chartered
Certified Accountants, UK. Has a
Masters Degree in Business
Administration from the Postgraduate
Institute of Management (PIM),
University of Sri Jayewardenepura.
Counts over 20 years work experience
in the fields of management
accounting, finance, research analysis,
strategic planning and investments,
within the Hayleys Group and Carson
Cumberbatch Group. Was a former
visiting faculty member of the
Postgraduate Institute of Management
in the MBA programme. Member of
the Regaining Sri Lanka Tourism
Steering Committee, a key policy
making forum of the government
from January 2002 to January 2004.
Niloo Jayatilake
Fund Manager, Guardian Fund
Management Ltd, the fund
management company of the Carson
Cumberbatch Group. Has over 15
years experience in the investments
field. Prior to joining the Carsons
group worked as Fund Manager at
The Unit Trust Management
Company Limited managers of one of
the largest unit trust in Sri Lanka. Is
an Associate member of the Chartered
Institute of Management
Accountants, UK and Associate
member of the Institute of Chartered
Secretaries and Administrators, UK.
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Krishna Selvanathan Ruvini Kiriwendala
Director of Carsons Management Joined Carsons Group in December
Services (Private) Limited. Also 2009 as Sector Accountant for Real
Director of Carsons Real Estate Estate, Leisure and Investment
Management Services (Private) sectors. Commenced career at M/s
Limited, the property development Ernst & Young and acquired over 4
arm of the Group. He is also a years experience. An Associate
member of the Investment Sector Member of the Institute of Chartered
Management Team. He holds a BA Accountants of Sri Lanka and holds a
Degree in Accounting & Finance and B Sc. (Special) Degree in Accountancy
Business Administration from the from the University of Sri
University of Kent, UK. Jayewardenapura, Sri Lanka.
Vibath Wijesinghe
Financial Controller of the Carsons
Management Services (Private)
Limited, Management Company of
the Carsons Group. Commenced
career at M/s. KPMG Ford Rhodes,
Thornton & Company and acquired
over five years experience. Joined the
Carsons Group in 2004 as the sector
Accountant for its Real Estate, Leisure
and Investment sectors. An Associate
Member of the Institute of Chartered
Accountants of Sri Lanka, Chartered
Institute of Management
Accountants, UK and of the Society
of Certified Management Accountants
of Sri Lanka. Also holds a B.Sc.
(Special) Degree in Commerce from
the University of Kelaniya, Sri Lanka.
Amila Fernando
Senior Investment Analyst, Guardian
Fund Management Ltd, the fund
management company of the Carson
Cumberbatch Group. Has over five
years experience in finance and
research. An Associate Member of the
Chartered Institute of Management
Accountants UK and Institute of
Certified Management Accountants of
Sri Lanka. Also holds a Bachelors
Degree in Accounting & Finance
from the University of Sri
Jayewardenepura, Sri Lanka.

Risk Management
At Guardian, we recognise the
importance of risk management and
have built a comprehensive risk
management process & structure that
focuses 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 the
importance 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 fund
managers 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
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
minimize the risks taken on by a
particular portfolio.
Thus, risk is an integral part of our
business 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
23
framework is in place which is
monitored consistently.
The Fund Manager (GFM) has been
registered 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
24
Risk Management (Contd.)
provide advice and insights to the
fund management team to further
sharpen and refine their decision
making process. This organization
structure 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 risks
Country 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 into
in 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
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Sri Lanka Rupee, and where the
company is required to convert funds
from one currency to another upon
making investments, as well as in
receiving 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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 25

Market risk – International and that have expertise in such markets at Sector Exposure
external macro economic risks such times when Guardian has the Market Weight 31st Mar 09 31st Mar 10
These risks cannot be diversified or ability to invest overseas.
Bank, Finance &
Insurance
mitigated by the company. We as
Portfolio Risks Beverage, Food
investors in the equity market in & Tobacco

Sri Lanka have to live with the risk of General Securities risk Diversified Holdings

international happenings affecting our Any trading in securities carries

Health Care

market adversely. There is an indirect inherent investment risks associated

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
Hotels & Travels
with the entity issuing those securities.
Manufacturing
In particular the price or value of any
* Exposure built up into banking
Telecommunication
sector
* Overwieght to palm oil,
security can and does fluctuate and
diversified & health care sectors
may even become valueless, resulting Trading

prime mortgage crisis spreading to in possible loss not only of returns 0 10 20 30 40 50

and profits, but even also of all or part %
other Western countries and impacting
Asian countries and in turn Sri Lanka. of the principal sums invested. These
In the global world of cross border risks arise as a result of the overall
risks faced by the issuing entity which Single Company exposure - Top 5 holdings
trade and cross border investment
flow, the impact of changing economic affects its ability to provide a return to Value of Portfoloio
Company Name Rs.mn weight
indicators and policy will be high for the investors holding the securities
the domestic economy, especially in a issued by it. Particularly in the case of 1 Bukit Darah 6,011 43.3%
country such as ours which is import equities, past performance of any 2 John Keells Holding 2,512 18.1%
3 Aitken Spence 1,257 9.0%
dependent for vital commodities. investment is not necessarily
4 Commercial Bank 649 4.7%
indicative of future performance. At 5 Cargills 496 3.6%
Hence in determining fund strategy we Guardian our approach focuses on the
monitor key economic indicators such as fact that there is no substitute for
Portfolio exposure to private equity
interest rates, exchange rates, inflation, fundamental individual security
budget deficits of key economic super assessment. Our portfolio vs listed equity
powers, as well as global commodity management and investment selection Private equity
Listed equity Rs.417 mn
prices since Sri Lanka is a net importer process is designed to maximize the Rs.16,419 mn

of essential commodities. This enables risk/return tradeoff to our 3%

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 also
determined by the macro economic
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 97%

trends prevailing in foreign markets. choice of investments. Prospective

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
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.
26
Risk Management (Contd.)
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
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
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 to
enhance 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 will
outperform 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 - Ceylon Guardian
Beta of portfolio 0.99
Beta of share 2.64
Beta of market 1.00
* Beta calculation over a period of 5 years.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 27

Regulatory Risks Mandatory regulations

Legal compliance
The legal support services to
Guardian Fund Management comes
through the management services
company of the Carson Cumberbatch
Group, which ensures that the
Guardian Group complies with all
Securities Exchange Commission Act Compliant
Securities Exchange Commission Rules Compliant
Market Intermediary Rules Compliant
Financial Transactions Reporting Act Staff is being made aware of the requirements
under the Act and extensive guidelines are being
prepared on same.

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 our
investments. 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.
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
Key risk management initiatives in 2009/10
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.

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 when
admitting new investors to the fund by
following the proper identification
process for investors as required by anti
money laundering regulations.
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 fund
management 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.
28
Risk Management (Contd.)
Regulatory Compliance
The operations of the Guardian
Group come within the rules and
regulations applicable to all market
participants 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 Risks
Professionalism 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
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
dealing that is expected of staff.
Structures to avoid conflicts of interest
and compromising of best practices
are set up. Staff education covers these
areas 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 or
failed 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
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 29

agreement with the software vendor research team has been developed in the
which ensures on line support for system last one year to complement the fund
issues and queries. At the same time the management operation and raise the
financial transaction processing and standard of the investment decision
reporting system are based on an ERP making process.
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 enhance
portfolio 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
30
Annual Report of the Board of Directors
on the Affairs of the Company
The details set out herein provide the
pertinent information required by the
Companies Act No. 07 of 2007,
Listing Rules of the Colombo Stock
Exchange and recommended best
accounting practices. The Annual
Report was approved by the Directors
on 12th May 2010.
1. General
The Directors have pleasure in
presenting to the Shareholders
their report together with the
audited financial statements for
the year ended 31st March 2010
of Ceylon Guardian Investment
Trust PLC, a public limited
liability company incorporated in
Sri Lanka in 1951.
2. The Principal Activities of the
Group and Structure.
There were no significant changes
in the nature of the principal
activities of the company and its
subsidiaries during the financial
year under review where the
principle activity of the company
and its subsidiaries continues to
be managing and holding of an
investment portfolio.
For the year ended 31st March
Profit for the year
Profit brought forward from previous year 2,541,620
Repurchase of shares
Profit available for appropriation
From which the following appropriations/
distributions have been made:
Dividend paid
Transfers – market value Adjustment reserve
Associate Company negative goodwill
Retained profits carried forward
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Subsidiaries (effective holding) 5. Market Value Adjustment Reserve
Ceylon Investment PLC – 56.28% During the year amount of Rs.292
Rubber Investment mn and Rs.158 mn resulting from
Trust Limited – 78.16% the ‘Mark to Market Value
Guardian Fund Adjustment’ of investment
Management Limited – 78.16% portfolio has been transferred
from retained earnings to ‘Market
Associate Value Adjustment Reserve’ as at
Bukit Darah PLC – 15.66% 31st March 2010 of Group (2009
- Rs.45 mn) and Company (2009
3. Review of Operations and Future
- 27.05 mn) respectively as shown
Developments
in the Statement of Changes in
The review of the performance
Equity (Page No.42).
during the year, with comments on
financial results and future Any gains arising from the above
developments, is contained in the adjustment will be transferred
Chairman’s Statement (Pages 2-4) from retained earnings to ‘Market
and Manager’s review (pages 5-20). Value Adjustment Reserve’ at
These reports form an integral part Balance Sheet Date, and any
of the Annual Report. losses arising will be transferred
from ‘Market Value Adjustment
4. Financial Results
Reserve’ to the extent that loss
The company recorded a net
does not exceed the balance held
profit of Rs.1.6 bn at group level
in the said reserve as at that date.
for the year. An abridgement of
the performance is presented in 6. Independent Auditors’ Report
the table below. The Independent Auditors’ Report
on the Financial Statements is given
on page 39 of this Annual Report.
7. Significant Accounting Policies
The accounting policies adopted
Group Company in the preparation of the financial
2010 2009 2010 2009 statements are given on pages 44
Rs.’000 Rs.’000 Rs.’000 Rs.’000 to 47. There have been no
changes in the accounting policies
1,320,373 292,727 1,419,296 386,417 adopted by the company during
2,239,090 762,740 384,680 the year under review.
(1,116,991) - (1,116,991) -
8. Financial Statements
2,745,002 2,531,817 1,065,045 771,097 Financial Statements of the
company comprises the Balance
Sheet, Statements of Income,
(232,702) (35,411) (232,702) (35,411) Changes in Equity and Cash Flow
(291,980) 45,214 (158,561) 27,054 together with the Accounting
16,718 - - - Policies and Notes to the
2,237,038 2,541,620 673,782 762,740 Financial Statements for the year
ended 31st March 2010 are set
out in page 40 to page 65.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
9. Statement of Directors’
Responsibilities
The Statement of Director’s
Responsibilities for the Financial
Statements is given on page 37.
10. Interest Register
The Company maintains an
Interest Register conforming to
the provisions of the Companies
Act No. 07 of 2007.
The relevant details as required by
the Companies Act No. 7 of 2007
have been entered in the Interest
Register during the year under
review.
The Interest Register is available
for inspection as required under
the Companies Act.
10.1Remuneration of Directors
Directors’ remuneration, for the
financial year ended 31st March
2010 is given in Note 4 to the
Financial Statements on page 49.
10.2Directors’ Interests in
transactions and shares
All Directors have made
declarations as provided for in
Section 192(2) of the Companies
Act.
Directors’ interest in transactions of
the company are disclosed in Note
19 to these financial statements
and have been declared at meetings
of the directors. The Directors
have had no direct or indirect
interest in any other contracts or
proposed contracts in relation to
the business of the company, while
they had the following interests in
Ordinary shares of the Company.
Directors No. of No. of
Shares Shares
as at
31st March 1st April
2010
Mr. I. Paulraj 50
Mr. D.C.R. Gunawardena 50
Mr. A. De Z. Gunasekera 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 granted
during the year.
12. Directors
The names of the Directors who
served during the year are given
under Corporate information
provided in the back inner cover
of the Annual Report.
12.1Appointment
Mrs. Rose Cooray was appointed
as a Non executive/Independent
Director to the Company on 11th
March 2010.
12.2Directors to Retire by Rotation
In terms of Articles 89,90 and 91
of the Articles of Association of
the Company, Mr. A. De Z.
Gunasekera retires by rotation
and being eligible offers himself
for re-election.
12.3Retirement at the 1st AGM
following appointment as
Director
In terms of Article 95 of the
Articles of Association of the
Company, Mrs. Rose Cooray
retires from the Board and being
eligible offers herself for re-
election.
31
12.4Appointment of Director who is
over 70 years of age
as at
Mr. I. Paulraj who is over 70 years
2009 of age to be re-appointed as a
Director of the Company for a
50 further period of one year from
50 the conclusion of the Annual
50 General Meeting and that the age
limit stipulated in Section 210 of
the Companies Act No.7 of 2007
shall not be applicable.
13. Auditors
Company’s auditors during the
year under review were Messrs.
KPMG Ford Rhodes Thornton &
Company, Chartered
Accountants.
A sum of Rs.225,000/- was paid
to them by the Company as audit
fees for the year ended 31st
March 2010 (2009-Rs.208,000/).
In addition they were paid
Rs.749,000/- by the Company for
non-audit related services.
The retiring auditors have
expressed their willingness to
continue in office. A Resolution
to re-appoint them as Auditors of
the company and authorizing the
directors to fix their remuneration
will be proposed at the
forthcoming Annual General
Meeting.
The Audit Committee reviewed
the appointment of the Auditors,
its effectiveness and its
relationship with the group,
including the level of audit and
non-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
Annual Report of the Board of Directors
on the Affairs of the Company (Contd.)
made by the Independent
Auditors to the Board, the
auditors did not have any interest
with the Company and its
subsidiaries that would impair
their independence.
14. Corporate Governance
Compliance of Corporate
governance Rules as per the
Listing Rules of the Colombo
Stock Exchange (CSE).
14.1Board of Directors
The following Directors held
office as at the balance sheet date
and their brief profiles are given
on 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 that
Mr. I. Paulraj is an Independent,
non executive Director in spite of
being on the Board for more than
9 years and being a Director of
Ceylon Investment PLC, in
which majority of other Directors
of the Board are also Directors,
since he is not directly involved in
the management of the Company.
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
** The Board has determined that
Mr. A. De Z. Gunasekera is an
Independent, non executive
Director in spite of being on the
Board for more than 9 years and
being a Director of Ceylon
Investment PLC, in which
majority of other Directors of the
Board are also Directors, since he
is not directly involved in the
management of the Company.
*** The Board has determined that
Mr. V.M. Fernando is an
independent, non executive
Director in spite of being a
Director of Ceylon Investment
PLC, in which majority of other
Directors of the Board are also
Directors, since he is not directly
involved in the management of
the Company.
****The Board has determined that
Mrs. M.A.R.C. Cooray is an
independent, non executive
Director in spite of being a
Director of Ceylon Investment
PLC, in which majority of other
Directors of the Board are also
Directors, since she is not directly
involved in the management of
the Company.
The Management of the
Company is carried by Carsons
Management Services (Private)
Limited.
14.2Remuneration Committee
As per the Rule 7.10.5 of the
Listing Rules of the Colombo
Stock Exchange the
Remuneration Committee of
Carson Cumberbatch
PLC(CCPLC), the parent
Company, functions as the
Remuneration Committee of the
Company 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 remuneration
policy based on market and
industry factors and individual
performance for all group
companies. Aggregated
remuneration paid to the Non-
Executive Directors of the
Company are disclosed under
Note 4 on page 49 of this Annual
Report.
Executive Directors are not
compensated for their role on the
Board.
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
14.3Audit Committee
As per the Rule 7.10.6 of the
Listing Rules of the Colombo
Stock Exchange the Audit
Committee of Carson
Cumberbatch PLC(CCPLC), the
parent Company functions as the
Audit Committee of the
Company and comprises the
following 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 is
given on page 35 of this Annual
Report.
15. Directors’ Meeting Attendance
Four Board Meetings were
convened during the financial
year and the attendance of the
Directors were as follows :
Director Meetings attended
(out of 04)
Mr. I. Paulraj
Mr. D.C.R. Gunawardena
Mr. A. De Z. Gunasekera
Mr. V.M. Fernando
Mrs. M.A.R.C. Cooray
(Appointed w.e.f. 11.03.2010)
16. Dividends
Subject to the approval of the
shareholders at the Annual
General Meeting, 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 is
recommended by the Directors
for the year ended 31st March
2010. The dividend payable has
not been accounted for until it is
approved at the forthcoming
Annual General Meeting.
The details of the dividends paid
during the year are set out in
Note 8 to the Financial
Statements.
17. Solvency Test
Taking into account the said
distribution, the Directors are
satisfied that the Company would
meet the solvency test
requirement under Section 56(2)
of the Companies Act No.07 of
2007 immediately after the
distribution. The Company’s
Auditors, Messrs. KPMG Ford
Rhodes Thornton & Company
have issued a Certificate of
Solvency confirming the same.
18. Stated Capital
The Stated Capital of the
Company Rs.672 mn consisting
of 16,097,396 Ordinary Shares,
8,669 Fully paid Deferred Shares
and 2,593 partly paid Deferred
Shares (Rs.908/- paid) and
subsequent to the repurchase of
2 2,840,716 ordinary shares, 1,530
4 fully paid Deferred shares and
4 457 partly paid Deferred shares
2 by the Company as per Section
64 of the Companies Act No.7 of
- 2007. There was no change in the
Rupee Value of the Stated Capital
of the Company during the year.
19. Shareholders Funds
Total Group shareholders’ funds
stood at Rs.7,637 mn as at 31st
March, 2010 (2009 – Rs.4,551.9
33
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.2,877
mn). The movements are shown
in the Statement of Changes in
Equity.
20. Investments
The total investments made by
the Group during the year
amounted to Rs.2,932 mn (31st
March, 2009 - Rs.957 mn).
The short-term portfolio engaged
in active trading to realise the
benefits of the movements in the
stock market. The carrying value
of short-term portfolio of the
Group/Company as at 31st
March, 2010 was Rs.652
mn./Rs.32 mn (2009 – Rs.114
mn/Rs.55 mn) which includes a
market value appreciation of
Rs.263 mn./Rs.34 mn
respectively.
The market value of long-
term/other investment portfolio
of the Group/Company is
Rs.7,121 mn/Rs.3,047 mn (2009
– Rs.2,463 mn/ Rs.978 mn)
respectively.
The movements of the investment
portfolio during the year are set
out in Notes 10 and 11 to the
Financial Statements.
21. Statutory Payments
The Directors to the best of their
knowledge and belief are satisfied
that all statutory payments have
been paid up to date or have been
provided for in these financial
statements.
34 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Annual Report of the Board of Directors
on the Affairs of the Company (Contd.)

22. Going Concern 25. Twenty Major shareholders with

Having taken into account the Comparatives
financial position and future
prospects the Directors have a As at 31st March 2010 2009
reasonable expectation that the Name of shareholders No. of shares % No. of shares %
Company & its subsidiaries have
adequate resources to continue to Carson Cumberbatch PLC A/C No. 01 10,809,967 67.15 12,622,607 66.65
be in operational existance for the Thurston Investments Limited 1,077,199 6.69 1,249,462 6.60
forseeable future. For this reason Mr. M. Radhakrishnan 398,664 2.48 398,664 2.11
the Company and its subsidiaries Pershing LLC S/A Averbach Grauson & Co. 381,600 2.37 381,600 2.01
continue to adopt the going The Gilpin Fund Limited 308,424 1.92 297,624 1.57
concern basis in preparing the Mr. G.J.W. De Silva 186,000 1.16 186,033 0.98
financial statements. 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
23. Events Occurring After The Mr. K.C. Vignarajah 110,935 0.69 68,233 0.36
Balance Sheet Date Miss R.H. Abdulhussein 100,585 0.62 130,100 0.69
Subsequent to the Balance Sheet The Ceylon Desiccated Coconut &
date, no material circumstances Oil Company Limited 74,988 0.47 74,988 0.40
have arisen, which would require Waldock Mackenzie Ltd/
adjustments to or disclosure in Mr. H.M.S. Abdulhussein 72,367 0.45 141,041 0.74
these Financial Statements other Miss G.N.A. De Silva 70,685 0.44 89,656 0.47
than those disclosed in Note 17 Waldock Mackenzie Ltd/Mr. M.A.N. Yoosufali 61,764 0.38 35,093 0.19
to these Financial Statements. 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
24. Share Information Mr. G.N. Russel 45,568 0.28 45,568 0.24
Information relating to Earnings, J.B. Cocoshell (Pvt) Ltd 45,279 0.28 169,900 0.90
dividend, net assets and market Mrs. S. Vignarajah 42,236 0.26 19,088 0.10
price per share are given on page Mr. A.C. Rizan 37,200 0.23 37,200 0.20
74 to 75 of the Annual Report.

26. Annual Report

3.30 p.m. at the “Samudra
The Board of Directors approved
Hotel”, Sri Lanka Institute of
the Company and the
Tourism & Hotel Management,
consolidated financial statements
Committee Room “C”, No. 78,
together with the reviews which
Galle Road, Colombo 3.
forms a part of the Annual
Report, on 12th May 2010. The The Notice of the Annual
appropriate number of copies of General Meeting is on page 78 of
the Report would be submitted to the Annual Report.
the Colombo Stock Exchange, Sri
Lanka Accounting and Auditing Signed on behalf of the Board
Standard Monitoring Board and
the Registrar of Companies
within the given time frames. (Sgd.) (Sgd.)
I. Paulraj D. C. R. Gunawardena
27. Annual General Meeting Chairman Director
58th Annual General Meeting of
the Company will be held on Colombo
Tuesday, 15th day of June 2010 at 12th May 2010

Audit Committee Report
The Audit Committee of Carson
Cumberbatch PLC (CCPLC), the
Parent Company, is the Audit
Committee of the Company, as
provided 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 and
a 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
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
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
35
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 the
External 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 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Audit Committee Report (Contd.)

The Audit Committee has determined

that Messrs.KPMG Ford Rhodes
Thornton & Company, Auditors are
independent on the basis of the letter
of 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, the
system 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 37
Statement of Directors’ Responsibilities

The responsibilities of the Directors,
in relation to the Financial Statements
are detailed in the following
paragraphs while the responsibilities
of the Auditors are set out in the
Report 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 are
required to prepare Financial
Statements for each financial year,
giving a true and fair view of the state
of affairs of the Company as at the
end of the financial year and of the
profit or loss for the said period.
In preparing these Financial
Statements the Directors are required
to ensure that:
They are also responsible for taking
reasonable measures to safeguard the
assets of the Company and in this
regard to give proper consideration to
the establishment of appropriate
system of internal controls with a view
to prevent, detect and rectify frauds
and other irregularities.
These Financial Statements have been
prepared on a going concern basis,
after reviewing the financial position
and the cash flows, since the Directors
are of the view that the Company has
adequate resources to continue in
operation for the foreseeable future.
The Directors are also of the view that
they have discharged their
responsibilities as set out in this
statement.

• appropriate accounting policies

have been selected and applied
consistently while material By Order of the Board
departures, if any, have been
disclosed and explained,

• all applicable Accounting

(Sgd.)
Standards have been complied D.C.R. Gunawardena
with and, Director
Carsons Management Services
• reasonable and prudent
(Private) Limited.
judgements and estimates have
Secretaries
been made.
Colombo
The Directors are responsible for 12th May 2010
ensuring that the Company maintains
sufficient accounting records to
disclose with reasonable accuracy, the
financial position of the Company in
order to ensure that the Financial
Statements of the Company meet
with the requirements of the
Sri Lanka Accounting and Auditing
Standards Act, No. 15 of 1995 and
the Companies Act, No. 07 of 2007.
38 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010

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

Financial Reports
Independent Auditors’ Report 39 Significant Accounting Policies 44 USD Balance Sheet 71
Income Statement 40 Notes to the Financial Statements 48 USD Five Year Summary 72
Balance Sheet 41 Five Year Summary 66 Information to Shareholders and Investors 74
Statement of Changes in Equity 42 USD Group at a Glance 69 Glossary of Financial Terms 76
Cash Flow Statement 43 USD Income Statement 70

Independent Auditors’ Report
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 the
circumstances.
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
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 39
Sri Lanka Auditing Standards. Those and cash flows for the year then ended, in
standards require that we plan and perform accordance with Sri Lanka Accounting
the audit to obtain reasonable assurance Standards, of the Company and its
whether the financial statements are free from subsidiaries dealt with thereby, so far as
material misstatement. concerns the shareholders of the Company.
An audit includes examining, on a test basis, Report on Other Legal and Regulatory
evidence supporting the amounts and Requirements
disclosures in the financial statements. An These financial statements also comply with
audit also includes assessing the accounting the requirements of Sections 153(2) to 153(7)
principles used and significant estimates made as appropriate of the Companies Act No. 07
by management, as well as evaluating the of 2007.
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 KPMG Ford, Rhodes, Thornton & CO
our opinion. Chartered Accountants
12 May 2010
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
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 41
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 - 46,806
Cash 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 Liabilities
Retirement 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

The Accounting Policies and Notes from pages 44 to 65 form an integral part of these Financial Statements.
I certify that these financial statements have been prepared in compliance with the requirement of the Companies Act No. 07 of 2007.

A. P. Weeratunge
Chief 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
Colombo
12th May 2010
42 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Statement of Changes in Equity

For the year ended 31st March

Total
Stated Shareholders Minority Total
Capital Capital Reserves Revenue Reserves Funds Interest Equity
Investment Other Associate Market Long-Term General Retained
Reserve Capital Company’s Value Investments Reserve Profits
Reserves Capital Adjustment Revaluation
Reserve Reserve Reserve
In Rs. ’000s Short-term
Group
Balance as at 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 as at 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 Total
Capital 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-term investments - - - 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.
The Accounting Policies and Notes from pages 44 to 65 form an integral part of these Financial Statements.
Figures in brackets indicate deductions.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 43
Cash Flow Statement

Group Company
For the year ended 31st March 2010 2009 2010 2009
In Rs. '000s

Cash Flows from Operating Activities

Profit before taxation 1,714,685 660,632 1,425,704 387,041
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) 27,054
Operating 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.
Figures in brackets indicate deductions.
44
Significant Accounting Policies
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.
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
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 or
convertible 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 the
Sri 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 at
the 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 the
Group. 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
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
4. Associates
Associates are those entities where the
Company’s holding is more than 20%
and where the Company exercise
significant 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 revalued
amounts 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
45
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.
46
Significant Accounting Policies
7.2 Property, Plant & Equipment and
Depreciation
7.2.1 Valuation
Property, plant & equipment are stated at
cost 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 which
to 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:
% cash and cash equivalents consist of cash
Furniture & fittings 5 in hand, short term deposits and deposits
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 the
assets 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
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
(Contd.)
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,
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 in
the 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 out
once 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 the
Statement 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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
- 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
47
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
31st March 31st March 31st March 31st March
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)
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 49

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

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
31st March 31st March 31st March 31st March
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
For the year ended 31st March 31st March 31st March 31st March
2010 2009 2010 2009
Rs '000 Rs '000 Rs '000 Rs '000

6.2 Reconciliation of Accounting Profit and Taxable Profits

Profit before taxation 1,714,685 660,632 1,425,704 387,041
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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 51

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
31st March 31st March 31st March 31st March
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
31st March 31st March 31st March 31st March
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 2009
Total 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
52 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Notes to the Financial Statements (Contd.)

9(B) Intangible Assets

Group 2010 2009
Computer Computer
Software 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 March
as at as at as at as at
31st March 31st March 31st March 31st March
Note 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 2,869,018 978,776 824,700
Unquoted 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.

 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 53

10.1 Movements in Investments - Group

Carrying 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 Value

as at Value as at
1st April Additions Disposals Adjustment 31st March
2008 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 - Group

Market Value/ Market Value/
No. of Cost Valuation No. of Cost Valuation
Shares as at as at Shares as at as at
31st March 31st March 31st March 31st March
2010 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 at
31st 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
54 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Notes to the Financial Statements (Contd.)

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
31st March 31st March 31st March 31st March
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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 55

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
31st March 31st March 31st March 31st March
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
31st March 31st March 31st March 31st March
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'
Shares as at Valuation as at Shares as at Valuation as at
31st March 31st March 31st March 31st March
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
56 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Notes to the Financial Statements (Contd.)

10.6 Movements in Investments - Company

Carying Market to Carying
Value Market 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 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 Carying

Value Market Value
as at Value as at
1st 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 Valuation
2010 as at 2009 as at
31st March 31st March
2010 2009
Rs. '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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 57

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

Beverage, Food & Tobacco

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

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

(b) Unquoted
No. of Cost Directors’ No. of Cost Directors’
Shares as at Valuation as at Shares as at Valuation as at
31st March 31st March 31st March 31st March
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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 59

11.1 (a) Short-Term Quoted Investments - Group

No. of Market Value No. of Market Value
Shares as at Shares as at
31st March 31st March
2010 2009
Rs '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 & Tobacco

Nestle 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
31st March 31st March
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.
60 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Notes to the Financial Statements (Contd.)

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
31st March 31st March
2010 2009
Rs '000 Rs '000

Beverage, Food & Tobacco

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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 61

Group Company
As at As at As at As at
31st March 31st March 31st March 31st March
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
As at As at As at As at
31st March 31st March 31st March 31st March
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.
62 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Notes to the Financial Statements (Contd.)

Group Company
As at As at As at As at
31st March 31st March 31st March 31st March
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
As at As at As at As at
31st March 31st March 31st March 31st March
2010 2009 2010 2009
Rs '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 Accounting
Standard 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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 63

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

19.1 Transactions with Related Companies

Name of the Related Company Nature of the Relationship Name of Common Directors Nature of Transaction

Ceylon Guardian Investment

Trust PLC
Carsons Management Affiliate D.C.R. Gunawardena The Company paid the following fees to CMSL
Services (Private) Limited. during the year under review:
(CMSL) 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/-)

Ceylon Investment PLC Subsidiary I. Paulraj
(CICL) D.C.R. Gunawardena
* A. de Z. Gunasekera
* V.M. Fernando
** M.A.R.C. Cooray
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.

Rubber Investment Trust Subsidiary I. Paulraj During the year Company received
Limited D.C.R. Gunawardena dividend amounting to Rs.95,057,150/-
(RITL) (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.

Carson Cumberbatch PLC Parent I. Paulraj The Company has given a short-term advance of
(CCPLC) D.C.R. Gunawardena 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

dividend amounting to Rs.160,074,215/-
(2009 - Rs.24,359,120/-) to CCPLC.
* 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
64
Notes to the Financial Statements
19 Related Party Transactions (Contd.)
Name of the Related Company Nature of the Relationship Name of Common Directors Nature of Transaction
Ceylon Investment PLC
Carsons Management Services
(Private) Limited. (CMSL)
Rubber Investment Trust
Limited
(RITL)
Carson Cumberbatch PLC
(CCPLC)
Rubber Investment Trust
Limited
Carsons Management Services
(Private) Limited. (CMSL)
Bukit Darah PLC
Carson Cumberbatch PLC
(CCPLC)
* The above management fees to CMSL includes fees paid on portfolio management services which were obtained from Guardian Fund Management Limited.
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
(Contd.)
Affiliate D.C.R. Gunawardena The Company paid the following fees to CMSL
A.P.Weeratunge during the year under review:
Management fees - Rs.6,045,416/-
(2009 - Rs.3,453,611/-)
Computer charges - Rs.420,000/-
(2009 - Rs.420,000/-)
Secretarial fees - Rs.60,000/-
(2009 - Rs.60,000/- )
Associate I. Paulraj During the year Company received
D.C.R. Gunawardena dividend amounting to Rs.92,459,989/-
A.P. Weeratunge (Appointed (2009 - Rs.30,193,995/-) from RITL.
as an alternate Director to Mr.
I. Paulraj w.e.f. 02.07.2009)
The Company received Rs.348,392,000/- (2009 -
Rs.Nil) as sales proceeds on repurchase of shares by
RITL.
Parent I. Paulraj The Company has given a short-term advance of
D.C.R. Gunawardena Rs.1,505mn to CCPLC treasury and earned an
interest income of Rs.39,725,709/-. The total advance
amount given was settled during the financial year.
During the year Company paid a
dividend amounting to Rs.12,050,703/-
(2009 - Rs.3,012,675/-) to CCPLC.
Affiliate D.C.R. Gunawardena The Company paid the following fees to CMSL
during the year under review:
Management fees - Rs.4,384,724/- *
(2009 - Rs.2,500,899)
Computer charges Rs.420,000/-
(2009 - Rs.420,000/-)
Secretarial fees - Rs.60,000/-
(2009 - Rs.60,000/-)
Associate I. Paulraj During the year Company received
D.C.R. Gunawardena dividend amounting to Rs.15,087,775/-
(2009 - Rs.9,327,820/-) from Bukt Darah PLC
Parent I. Paulraj The Company has given a short term advance of
D.C.R. Gunawardena Rs.1,605mn to CCPLC treasury and earned an
interest income of Rs.20,500,469/-. The total advance
amount given was settled during the financial year.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 65

19 Related Party Transactions (Contd.)

Name of the Related Company Nature of the Relationship Name of Common Directors Nature of Transaction

Guardian Fund Management

Limited
Carsons Management Services Affiliate D.C.R. Gunawardena The Company paid the following fees to CMSL
(Private) Limited. (CMSL) during the year under review:
Computer charges - Rs.30,000/-
(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/-)

Equity Two PLC Affiliate D.C.R. Gunawardena An amount of Rs.424,578./- (2009 - Rs.424,578/-)
was paid to Equity Two PLC as rental fee.

Sri Lanka Fund Affiliate D.C.R. Gunawardena The Company received Rs.483,839/- (2009 -
Rs.943,181/-) as management fees from Sri Lanka
Fund.

There are no material related party transactions other than those disclosed above and there are no any amounts receivable from/to payable to any related
party as at the Balance Sheet date.

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 for
planning 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.
66 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Five Year Summary

Financial Highlights - Group

Year ended 31st March 2010 2009 2008 2007 2006
Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Operating Results
Revenue
Dividend income 398,324 241,580 216,563 220,154 218,902
Proceeds from disposal of investments 2,876,175 2,151,351 321,052 840,397 301,579
Interest income 135,482 38,122 3,817 3,486 6,806
Management fee 13,981 10,807 13,648 12,401 8,179
3,423,962 2,441,860 555,080 1,076,438 535,466
Less: 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 1,714,685 660,632 370,470 769,983 316,647

Taxation (35,106) (7,463) (2,119) (56,989) (40,266)
Profit for the year 1,679,579 653,169 368,351 712,994 276,381
Minority interest (359,206) (360,442) (51,564) (152,597) (59,037)
Profit attributable to the
shareholders of the parent 1,320,373 292,727 316,787 560,397 217,344
Dividends 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 2,221,111
Shareholders' funds 7,637,249 4,551,906 6,016,118 3,593,565 2,894,407
Minority interest 1,566,029 1,053,800 1,210,710 603,989 475,355
Non-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 3,211,835
Current assets 746,646 2,170,024 304,860 394,278 274,363
9,550,381 5,675,108 7,370,630 4,403,487 3,486,198
Current liabilities (346,542) (69,041) (143,559) (205,767) (116,436)
Net assets 9,203,839 5,606,067 7,227,071 4,197,720 3,369,762

Cash Flow Statements

Net 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) 362,223
Net (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 67

Financial Highlights - Group (Contd.)

Year ended 31st March 2010 2009 2008 2007 2006
Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Ratios & Statistics

Operational Ratio
Return on ordinary shareholders funds (%) 17.29 6.43 5.27 15.59 7.51
Liquidity Ratio
Current ratio (Times) 2.15 31.43 2.12 1.92 2.36
Investor Ratio
Earnings per share (Adjusted Rs.) 68.65 14.47 15.66 27.69 10.74
Dividend per share proposed (Rs.) ** 9.00 11.50 1.75 1.50 1.50
Dividend cover (Times) 763 1.26 8.95 18.46 7.16
Dividend growth (%) (22) 557 17 - -
Dividend yield (%) 1.79 11.03 1.06 0.92 1.07
Dividend payout ratio (%) 13.11 79.49 11.18 5.42 13.97
Net assets per share - Book value (Rs.) 444.03 224.95 297.31 177.59 132.46
- Market value 687.27 252.77 457.47 492.76 373.31
Market value per share (Rs.) * 501.50 104.25 165.00 162.50 140.00
Price earning ratio (Times) 7.31 7.21 10.54 5.87 13.04
Price to book value ratio (Times) 1.06 0.46 0.55 0.92 1.06
Market 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 based
computations
68 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010

US$ Financials
PREPARATION OF US DOLLAR
FINANCIAL 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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 69
Group at a Glance

(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%
70 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Income Statement

Group
US$ US$
For the year ended 31st March 2010 2009

Revenue 17,062,260 20,462,804

Carrying Value of investments disposed & other direct expenses (13,441,555) (15,585,694)
3,620,080 4,877,110
Realised Gain on Sale of Investments 5,926,817 3,726,339
Mark to Market Value Adjustment - Unrealized 2,648,960 (3,108,168)
Profit on Portfolion Acitivites 12,196,481 5,501,280
Other Income - 8,376
Administrative expenses (590,887) (298,886)
Profit from operations 11,605,594 5,210,771
Finance costs (47,125) (117,762)
Profit from operations after finance cost 11,558,469 5,093,008
Share of associate companies' profit before taxation 3,366,111 659,121
Profit before taxation 14,924,580 5,752,129
Taxation (305,558) (64,980)
Profit for the year 14,619,022 5,687,148

Attributable to:
Equity holders of the parent 11,492,500 2,548,777
Minority shareholders 3,126,522 3,138,371
14,619,022 5,687,148

Earnings per share (US$) 0.71 0.13

Dividend per share (proposed) (US$) 0.08 0.10

Figures in brackets indicate deductions.

 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 71
Balance Sheet

Group
US$ US$
As at 31st March 2010 2009

Assets
Non-Current Assets
Property, plant & equipment 70,274 86,767
Investment in associates 14,615,238 8,833,872
Intangible assets 62,229 79,101
Other investments 62,421,660 21,292,688
77,169,402 30,292,429

Current Assets
Debtors & other receivables 408,818 129,136
Income tax recoverable - 50,233
Deferred tax asset 2,191 2,161
Short-term investment 5,713,762 985,687
Short-term deposits 81,404 17,066,413
Cash at bank 340,945 524,140
6,547,121 18,757,770
Total assets 83,716,522 49,050,199

Equity & Liabilities

Stated Capital and Reserves
Stated capital 6,334,507 6,334,507
Capital reserves 11,003,927 8,658,271
Revenue reserve 50,044,793 24,868,911
Foreign currency equalisation reserve (436,797) (519,373)
Shareholders' funds 66,946,430 39,342,316
Minority interest 13,727,465 9,108,038
80,673,895 48,450,354

Non-Current Liabilities
Gratuity Provision 4,918 3,120
4,918 3,120

Current Liabilities
Creditors & accruals 608,327 46,716
Income tax payable 136,159 -
Dividend unclaimed 112,842 50,951
Bank 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 1.94

Net assets per ordinary/deferred Share-Market Value (US$) 5.44 2.18

1 Basis of Conversion
Income Statement - Average rate
Monetary assets and liabilities - Closing rate
Share Capital - Historical rate

2010 2009

Average rate 114.89 114.85

Closing rate 114.08 115.70
72 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Five Year Summary

Financial Highlights - Group

Year ended 31st March 2010 2009 2008 2007 2006
US$ US$ US$ US$ US$

Operating Results
Revenue
Dividend income 3,467,003 2,103,439 1,962,510 2,085,191 2,161,997
Proceeds from disposal of investments 25,034,163 18,731,833 2,909,397 7,959,811 2,978,557
Interest income 1,179,232 331,929 37,663 33,022 67,216
Management fee 121,682 94,097 - 117,447 80,779
29,802,080 21,261,297 4,909,570 10,195,471 5,288,549
Less: 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 2,729,685
Minority 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 6,558,869
Reserves 61,048,720 33,527,182 31,331,547 26,778,439 21,631,390
Foreign 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 28,188,610
Minority interest 13,727,465 9,108,038 5,988,150 5,546,271 4,629,478
Non-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 21,720
Investments 77,036,898 30,126,560 42,047,659 36,796,865 31,258,337
Current 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 33,952,077
Current 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 STATEMENTS

Net 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) 3,527,687
Net (decrease)/increase in
cash & cash equivalents (18,957,629) 17,660,226 1,238,535 (967,007) (361,998)
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 73

Financial Highlights - Group (Contd.)

Year ended 31st March 2010 2009 2008 2007 2006
US$ US$ US$ US$ US$

RATIOS & STATISTICS

Operating Ratio
Return on ordinary shareholders' funds (%) 21.84 14.46 8.57 16.08 8.22
Liquidity Ratio
Current ratio (Times) 2.16 31.43 2.12 1.91 2.36
Investor Ratios
Earnings per share (US$) 0.71 0.13 0.16 0.20 0.11
Net assets per ordinary/deferred share
- Historical cost (US$) 3.86 1.94 1.86 1.63 1.29
Net assets per ordinary/deferred share
- Market value 5.44 2.18 4.24 4.52 3.64
Market value per share (US$) 4.40 0.91 1.53 1.49 1.36
Market capitalisation (US$) 70,764,762 17,063,943 30,957,580 30,150,150 25,775,235
Market value of investments (US$) 120,828,717 53,026,396 87,573,064 93,254,927 77,193,975
74 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Information to Shareholders and Investors

1. Stock Exchange Listing

Ceylon Guardian Investment Trust PLC is a Public listed Company, the ordinary Shares of which are listed on the
main 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 to
12.44% 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 1.07

1001 - 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 16.20

Institutions 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.) 540.00 187.50

Lowest (Rs.) 103.25 78.00
Value of shares traded (Rs.) 383,227,800 136,475,550
No. of shares traded 1,282,800 895,300
Volume of transactions (Nos.) 1,990 932
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 75

5. Market Capitalisation
Market capitalization of the Company which is the number of ordinary shares in issue multiplied by the market value
of 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 Cumulative

Share Capital
Rs. '000

1951 - Initial Capital – 757,525 757,525

1990 - Bonus 01:01 757,525 1,515,050
1992 - Bonus 01:08 189,381 1,704,431
1999 - Bonus 01:04 426,108 2,130,539
2000 - Bonus 01:04 532,634 2,663,173
2002 - April Rights 01:07 380,453 3,043,626
- May Bonus 01:04 760,906 3,804,532
2003 - 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 7,989,516
2004 - September Bonus 01:03 2,663,172 10,652,688
2005 - March Rights 01:03 3,550,896 14,203,584
- June Bonus 01:03 4,734,528 18,938,112
2009 - 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 capital
as at 31st March 2010.

8. Public Holding
The Percentage of shares held by the public as at 31st March 2010 was 32.85%.
76
Glossary of Financial Terms
Accounting Policies
The specific principles, bases,
conventions, rules and practices adopted
by an entity in preparing and presenting
Financial Statements
Amortisation
The systematic allocation of the
depreciable amount of an intangible
asset over its useful life
Accrual Basis
Recognising the effects of transactions
and other events when they occur
without waiting for receipt or payment
of cash or its equivalent
Associate
An entity, including an unincorporated
entity such as a partnership, over which
the investor has significant influence and
that is neither a subsidiary nor an
interest in a joint venture.
Appropriations
Apportioning of earnings to capital
reserves, revenue reserves or as dividends
Beta
A measure of the volatility, or systematic
risk, of a security or a portfolio in
comparison to the market as a whole
Bonus Issue (Scrip Issue)
The issue of new shares to existing
shareholders in proportion to their
shareholdings. It is a process for
converting a company's reserves (in
whole or part) into issued capital and
hence does not involve an infusion of
cash.
Capital Reserves
Reserves identified for specific purposes
and considered not available for
distribution.
Capital Markets
A market for debt or equity, where
business enterprises can raise long-term
(longer than one year) funds.
Current Ratio
Current assets divided by current
liabilities.
Compounded Annual Growth Rate
(CAGR)
The rate at which it would have grown if
it grew at an even rate compounded
annually.
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Compliance officer
The officer primarily responsible for
overseeing and managing compliance
issues within an organization. Is in
charge of ensuring that a company is
complying with regulatory requirements,
and that the company and its employees
are complying with internal policies and
procedures
Contingencies
Conditions or situations at the Balance
Sheet date, the financial effects of which
are 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 is
initially recognized at cost. The investor
recognises income from the investment
only to the extent that the investor
receives distributions from accumulated
profits of the investee arising after the
date of acquisition. Distributions
received in excess of such profits are
regarded as a recovery of investment and
are recognised as a reduction of the cost
of the investment.
Corporate Governance
The process by which corporate entities
are governed. It is concerned with the
way in which power is exercised over the
management and direction of entity, the
supervision of executive actions and
accountability to owners and others.
Cash Equivalents
Short term highly liquid investments that
are readily convertible to known
amounts of cash and which are subject to
an insignificant risk of changes in value
Credit Risk
Credit risk or default risk is most simply
defined as the potential that a borrower
or counterparty will fail to meet its
obligations in accordance with agreed
terms and conditions.
Country Fund
An international mutual fund with a
portfolio that consists entirely of
securities, generally stocks, of companies
located exclusively in a given country.
Dividend per Share
Dividend paid divided by the number of
ordinary shares in issue which ranked for
those dividends.
Dividend Yield
Dividend per share as a percentage of
market price per share
Deferred Taxation
Sum set aside for tax in the Financial
Statements that may become
payable/receivable in a financial year
other than the current financial year.
Dividend Cover
Profit after tax divided by gross
dividends. This ratio measures the
number 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 takes
into consideration cost of total invested
equity.
Effective Tax Rate
Provision 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 at
cost and adjusted thereafter for the post-
acquisition changes in the investor's
share of net assets of the investee. The
profit or loss of the investor includes the
investor's share of the profit or loss of
the investee.
Events occurring after the Balance
Sheet date
Significant events that occur between
the Balance Sheet date and the date on
which the Financial Statements are
authorised for issue, which would
require adjustments to or disclosure in
the Financial Statements
Fair Value
The amount for which an asset could be
exchanged, or a liability settled, between
knowledgeable, willing parties in an
arm's length transaction.

Fundamental Investing
The strategy of selecting stocks which
trade for less than their intrinsic values,
after research on the company and its
industry. Intrinsic value is based on the
actual financial returns of the company
and the current and future plans of the
company.
Group
A group is a parent and all its
subsidiaries and associates.
Impairment
This occurs when the recoverable amount
of an asset is less than its carrying
amount.
Initial Public Offer (IPO)
The first sale of stock by a private
company to the public. IPOs are often
issued by smaller companies seeking the
capital to expand, but can also be done
by large privately owned companies
looking to become publicly traded.
Intangible Asset
An intangible asset is an identifiable
non-monetary asset without physical
substance.
Key Management Personnel
Key management personnel are those
persons having authority and
responsibility for planning, directing and
controlling the activities of the entity,
directly or indirectly, including any
Director (whether Executive or
otherwise) of that entity.
Mark to Market Value Adjustment
The accounting act of recording the
price or value of a security, portfolio or
account to reflect its current market
value rather than its book value.
Market Risk
This refers to the possibility of loss
arising from changes in the value of a
financial instrument as a result of
changes in market variables such as
interest rates, exchange rates, credit
spreads and other asset prices.
Materiality
The relative significance of a transaction
or an event, the omission or
misstatement of which could influence
the economic decisions of users of
Financial Statements.
Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Market Capitalisation
The market value of a company at a
given date obtained by multiplying the
share 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 in
securities such as stocks, bonds, money
market instruments and similar assets.
Net Assets Value per Ordinary Share
Shareholders' funds excluding preference
shares, if any, divided by the number of
ordinary shares in issue.
Net Current Assets
Capital required to finance the day-to-
day operations (current assets less
current liabilities).
Operational Risk
This refers to the risk of loss resulting
from inadequate or failed internal
processes, people and systems or from
external events
Parent Company
A Parent Company is an entity that has
one or more subsidiaries.
Private equity
Money invested in companies that are
not publicly traded on a stock exchange.
Prudence
Inclusion of a degree of caution in the
exercise of judgment needed in making
the estimates required under conditions
of uncertainty, such that assets or
income are not overstated and liabilities
or expenses are not understated.
Price Earnings Ratio (P/E)
Market price of a share divided by
earnings per share (EPS)
Related Parties
Parties where one party has the ability to
control the other party or exercise
significant influence over the other party
in making financial and operating
decisions, directly or indirectly.
Repurchase Of Shares
A program by which a company buys
back its own shares from the share
holders, reducing the number of
outstanding shares
77
Return on Average Assets (ROA)
Profit after tax divided by the average
assets.
Return on Average Equity (ROE)
Net profit for the year, less preference
share dividends, if any, expressed as a
percentage of average ordinary
shareholders' equity.
Return on Shareholders' Funds
Profit attributable to shareholders
divided by shareholders' funds
Revenue Reserves
Reserves considered as being available
for distribution and other appropriations
Rights Issue
Issue of shares to the existing
shareholders at an agreed price, generally
lower than market price
Share Split
A corporate action in which a company's
existing shares are divided into multiple
shares
Shareholders' Funds
Shareholders' funds consist of stated
capital plus capital and revenue reserves.
Stock market index
Index is a number that measures the
relative value of a group of stocks. As the
stocks in this group change value, the
index also changes value.
Subsidiary
An entity, including an unincorporated
entity such as a partnership, which is
controlled by another entity (known as
the 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 the
following purposes :

1. To receive and 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.
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 the
Company.
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 deemed
fit 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 be
applicable to Mr. I. Paulraj who is 73 years of age and that he be re-appointed a Director of the Company from the
conclusion 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 their
remuneration.

By Order of the Board

CARSONS MANAGEMENT SERVICES (PRIVATE) LIMITED
Secretaries

Colombo,
12th May 2010

Notes
1. 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.
 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010 79
Form of Proxy

*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 2010
as 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 and
to 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.
80 Ceylon Guardian Investment Trust PLC – Annual Report 2009-2010
Instructions as to Completion

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 details

Name : ………………………………………………………….

Address : ………………………………………………………….

………………………………………………………….

Jointly with

Share folio no. : ………………………………………………………….