Ceylon Guardian Investment Trust PLC, the major investment fund operating on the Colombo Stock Exchange (CSE), has said in an interim report covering the six months ended September 30,2008 that "we remain positive amidst the bearish sentiments as we see a `value buying’ opportunity for investors that have a long-term horizon.’’

Guardian, a member of the Carson Cumberbatch group, posted a hefty profit after-tax of Rs.778.3 million for the half year, up 532% from Rs.123.1 million posted a year earlier, mainly on account of what the company called "timely divestment" from its portfolio of longstanding investments in Hunters and Hayleys as well as disposal of SLT at the time of the mandatory offer.

Guardian said that the profit from the investment business was Rs.643 million after making provision of Rs.44 million on the short-term portfolio which declined due to the drop in market prices of the portfolio holdings.

"This provisioning can be reversed once market conditions improve," Carson’s Management Services (Pvt) Limited, managers of the Ceylon Guardian Investment Trust, said.

Noting that all equity markets internationally have faced turbulent times during the period reviewed due to the US sub prime mortgage crisis, credit crunch and recession fears, the managers said that activity on the Colombo bourse too declined with most investors shunning the equity market given the fear that the financial crisis will spread to Asian countries too.

During this period the All Share Price Index on the CSE declined 16% and this had impacted on Guardian’s long-term and shorts-term portfolios.

"Due to the prevailing bearish sentiment in the market and the scarcity of new issues and listings, the shorted-term portfolio had no adequate opportunities to trade and realize gains during this period," the statement said.

""Sri Lanka still remains one of the more resilient markets with most other Asian and Western markets having come down by 40%-50% from their peaks due to the financial crisis."

It said that market capitalization on the CSE stood at USD 6.5 billion at the end of September 2008 with the foreign inflow of Rs.14.5 billion recorded for the calendar year mostly on account of a significant number of strategic deals.

This pointed the varied opportunities available to investors in the Colombo market driven by both fundamental business values as well strategic and synergistic business acquisitions.

The Guardian portfolio was worth Rs.8.57 billion as at September 30, 2008, down from Rs.9.4 million at the beginning of April 2008 – a decline of 9.2%.

"The net profit before tax for the period under review on investment portfolio operations was Rs.643 million with net income mainly comprising realized gains attributed from the sale of long term stocks," the statement said.

The short-term portfolio had declined by 11.35% during this period against the ASPI moving down 16% during the same period.

The managers said that Guardian’s trading portfolio performance had been hampered due to its exposure to Distilleries with that share taking a heavy downturn pending the Supreme Court judgment on its investment in Sri Lanka Insurance.

"We exploited the downward trend in the equity market and acquired stakes taking a long term investment horizon in Distilleries, Aitken Spence and Durdans Medical & Surgical Hospital (unquoted share) during the period of review," the managers said.

This was possible due to the timely divestment of Hunters, Hayleys and SLT.

The managers said that listed companies will not experience the same levels of growth as they did the previous year due to prevailing inflation and high cost of capital. As such earnings growth of the market had been downgraded.

Guardian also said that the performance of international markets is likely to be volatile in the short-term and they believed that foreign portfolio investments in Asia are likely to be minimal.

"Thus it would take some time for emerging and frontier markets to bounce back since investor confidence is now at a low ebb," the statement said.

"However we believe that the current financial crisis poses an ideal opportunity for long term investors to pick good stocks and also pose a trading opportunity on a recovery for short term investors."

It also said that though the recent market downturn is mainly attributed to the international financial crisis and general weakening of the macro economic indicators in Sri Lanka, they did not see a fundamental weakening in the key companies in which they have invested.

"Hence we do not foresee any permanent concerns, particularly where our long term holdings are concerned," they said. This because their stock selection and investment thinking is based on long-term commitment to corporates displaying sound fundamentals, backed by strong growth in earnings, sustainable business models and expansion possibilities.

"As such, temporary fluctuations in market conditions pose no serious concerns for the investment model being pursued by Guardian."

Guardian has a stated capital of Rs.672.8 million, a capital reserve of Rs.1 billion and revenue reserves of Rs.2.9 billion.

Net assets per share at market value had grown to Rs.427.29 from Rs.405.78 and the Guardian share traded at a high of Rs.166 and a low of Rs.150 during the period under review. This compared to a trading range of Rs.173 to Rs.117.50 a year earlier.