Colombo Fort Investments : Annual Report - 2021/2022

Colombo Fort Investments PLC

Colombo Fort Investments PLC - Annual Report 2021/2022	1

Contents

Chairman's Review	02
Board of Directors	03
Corporate Governance	04
Risk Management Report	12
Management Discussion and Analysis	13
Financial Reporting
Annual Report of the Board of Directors	15
Audit Committee Report	19
Related Party Transactions Review Committee Report	21
Independent Auditors' Report	22
Statement of Profit or Loss and Other Comprehensive Income	26
Statement of Financial Position	27
Statement of Changes in Equity	28
Statement of Cash Flows	29
Notes to the Financial Statements	30
Financial Summary	62
Information to Shareholders and Investors	63
Notice of Meeting	65
Form of Proxy	67

2	Colombo Fort Investments PLC - Annual Report 2021/2022

Chairman's Review

On behalf of the Board, I am privileged in welcoming all the shareholders to the Thirty Eighth Annual General Meeting of your Company. It gives me great pleasure to present to you the Annual Report and Audited Financial Statements of the Company for the year ended 31st March, 2022.

During the past year, the Sri Lankan economy rebounded from the impact induced by the outbreak of COVID-19, on the economic activities. Gross Domestic Product growth was 3.7% for 2021 reversing the negative 3.6% experienced in the previous year. Headline inflation accelerated to 12.1% by end 2021, well above the targeted 4% - 6%. The escalating trend in inflation has continued so far in 2022. Core inflation accelerated sharply from mid- 2021. The low interest regime continued in most part of 2021 following the concessions given, owing to the COVID-19 pandemic. Market interest rates adjusted upwards thereafter and Central Bank increased the policy rate by 700 basis points in April 2022, being the highest single day adjustment in the recent past.

The Colombo Stock Market has been on an upward trend, gradually gaining momentum from April 2021 to January 2022. The All Share Price Index (ASPI) reached a high of 13,462.39 points in the month of January 2022. Thereafter, a downward trend was witnessed with a steep drop in March 2022, owing to the macroeconomic uncertainties'. ASPI ended the year at 8,903.87 (31.03.2021 - 7,121.28), increasing by 20% in comparison with the previous financial year end. During the month of April 2022 CSE witnessed trading halts and market closure for few days. The escalating interest rate and the overall economic instability faced by the Country at present has negatively impacted the Stock Market.

During the year under review, a revenue of Rs.41.23 Million was recorded by the Company. An increase of 139% was observed, in comparison to the preceding year's revenue of Rs. 17.22 Million. The increased dividend payout by Investee Companies and the realization of gains from the disposal of shares mainly contributed towards the current year's improvement. The profit prior to the fair value adjustment on Financial Assets was Rs. 36.58 Million compared to Rs. 10.64 Million achieved in the previous year.

At the end of the financial year, the Net Asset Value of your Company was Rs. 160.03 per share as against Rs. 189.25 per share in the comparative year. The fair value of quoted investments as at 31st March, 2022 and 31st March, 2021 were Rs. 1.13 Billion and Rs. 1.34 Billion respectively.

Based on the dividend income and the performance of the Company your Board recommends a First & Final Dividend of Rs. 1.20 per share in the form of a Scrip Dividend for the financial year ended 31st March, 2022.

I would like to thank all our shareholders for the confidence placed in the Company, and

my colleagues on the Board for their views and valuable advice.

1. Rajaratnam Chairman

01st July, 2022

Colombo Fort Investments PLC - Annual Report 2021/2022	3

Board of Directors

A.Rajaratnam - Chairman

FCA

Mr.A.Rajaratnam was appointed to the Board of Colombo Fort Investments PLC in 1995 and was appointed Chairman on 12th August, 2011.

S.D.R.Arudpragasam - Deputy Chairman

FCMA (UK)

Mr.S.D.R.Arudpragasam is a Fellow member of the Chartered Institute of Management Accountants (UK). He was appointed to the Board as Deputy Chairman in August, 2011. Having held the position of Deputy Chairman until end June, 2022 he was appointed Chairman of The Colombo Fort Land & Building PLC with effect from 1st July, 2022. He also holds the position of Chairman of Lankem Ceylon PLC and Chairman / Managing Director of E. B. Creasy

• Company PLC in addition to serving on the Boards of other companies within the CFLB
  Group.

S.Shanmugalingam - Director

Mr.S.Shanmugalingam was appointed to the Board in 2004. He has over 25 years experience in Share Trading and the Capital Market and has worked for many years as a Senior Stock broker. He currently functions as an Adviser. He holds a Higher Diploma in Information Technology.

A.M.de S.Jayaratne - Director

B.Sc. (Econ.), FCA

Mr.A.M.de S.Jayaratne was appointed to the Board in 2005. He has graduated in Economics and is a Chartered Accountant by profession. He was the former Chairman of Forbes & Walker Ltd., Colombo Stock Exchange, Ceylon Chamber of Commerce and The Finance Commission. He also served as Sri Lanka's High Commissioner in Singapore. He is a Director of several public listed companies.

S.Rajaratnam - Director

B.Sc., CA

Mr.S.Rajaratnam was appointed to the Board in 2008. He holds a Bachelor of Science Degree in Business Administration from Boston College, USA

and is a Member of the Institute of Chartered Accountants in Australia. He has been associated with overseas companies in the field of finance and currently holds the position of Joint Managing Director of E.B. Creasy & Company PLC amongst other Directorships.

Dr.J.M.Swaminathan - Director

Attorney-at-Law, LLB (Ceylon), LLM, M.Phil.

(Colombo), and LLD (Honoris Causa)

Dr.J.M.Swaminathan is an Attorney-at-Law having over 55 years in practice. He was the former Senior Partner of Messrs. Julius & Creasy. He is a Member of the Office for Reparations Sri Lanka. He has served as a Member of the Law Commission of Sri Lanka and Member of the Council of Legal Education and the Council of the University of Colombo. He is also a Member of the Company Law Advisory Commission and The Intellectual Property Law Advisory Commission. He is the Chairman of the Studies of the Council of Legal Education and also a Consultant at the Institute of Advanced Legal Studies of the Council of Legal Education. He is a Member of the Visiting Faculty of the LLM Course of the University of Colombo. He also serves on the Boards of several public and private companies.

Amrit Rajaratnam - Director

LLB (Notts.), Barrister-at-Law

Mr. Amrit Rajaratnam was appointed to the Board in March, 2022. He holds a Bachelor's Degree in Law from the University of Nottingham and is a Barrister at Law (Lincoln's Inn). He began his career at the Law Firm Julius & Creasy and later joined Lankem Ceylon PLC.

Anushman Rajaratnam

B.Sc. (Hons.), CPA, MBA

Mr. Anushman Rajaratnam was appointed to the Board of Directors of Colombo Fort Investments PLC on 9th June, 2022. He is at present the Group Managing Director of The Colombo Fort Land

• Building PLC (CFLB). In addition, he serves on the Board of several subsidiary companies of the CFLB Group. Prior to joining the CFLB
  Group, he worked overseas for a leading global Accountancy Firm.

4	Colombo Fort Investments PLC - Annual Report 2021/2022

Corporate Governance

Colombo Fort Investments PLC is committed to a policy of maintaining the highest standard of accountability in all its business and other activities.

The Company firmly believes that good governance adopted and implemented will strengthen the confidence and trust of all stakeholders.

Board Composition

Currently the Board of Colombo Fort Investments PLC comprises of Eight Non-Executive Directors, of whom two are Independent.

These Directors are named below and their profiles appear on page 3.

Mr.A.Rajaratnam	- Chairman
	Non-Executive
(Alternate
Mr.Anushman Rajaratnam)	- Non-Executive
Mr.S.D.R.Arudpragasam	- Deputy Chairman
	Non-Executive
Mr.S.Shanmugalingam	- Non-Executive
Mr.A.M.de S. Jayaratne	- Independent /
	Non-Executive
Mr.S.Rajaratnam	- Non-Executive
Dr.J.M.Swaminathan	- Independent /
	Non-Executive
Mr.Amrit Rajaratnam	- Non-Executive
Mr.Anushman Rajaratnam	- Non-Executive

These Directors have submitted declarations of their Independence or Non-Independence to the Board of Directors.

Mr.A.M.de S.Jayaratne and Dr.J.M.Swaminathan are on Boards of other listed companies, in which a majority of the Directors of the Company are Directors and also serve on the

Boards of other listed entities which have significant shareholdings in the Company. Mr.A.M.de S.Jayaratne and Dr. J.M.Swaminathan have served for over a period of nine years on the Board of the Company. However, the Directors having taken into consideration all other circumstances listed in the Colombo Stock Exchange Listing Rules pertaining to the "Criteria for Defining Independence" is, of the opinion that Mr. A.M.de S.Jayaratne and Dr.J.M.Swaminathan to be nevertheless Independent.

Decision Making of the Board

During the year the Board has met on three occasions. In addition to Board Meetings, matters are referred to the Board and decided by Resolutions in writing.

Appointment and Re-election of Directors

The Board as a whole decides on the appointment of Directors in accordance with the Articles of Association of the Company and in compliance with the Rules on Governance.

In terms of the Articles of Association a Director appointed by the Board holds office until the next Annual General Meeting, at which he seeks re-election by the shareholders. The Articles require that one of the Directors in office to retire at each Annual General Meeting. The Director to retire, is he who has been longest in office since his last election. A retiring Director is eligible for re-election.

Financial Acumen

The Directors are from varied business and professional backgrounds and have vast experience and proven ability in the field of investment, management and trading in securities. Their expertise enables them to