Annual Report 2009 CSE WAS NAMED THE SECOND BEST PERFORMING STOCK EXCHANGE IN THE WORLD... AND THE BEST PERFORMING STOCK EXCHANGE IN ASIA 2009 was a historic year in many ways for the Colombo Stock Exchange. This was the year that saw us shattering virtually every record previously set, creating positive investor sentiment around the globe and bringing Sri Lanka and the Colombo Stock Exchange under the spotlight of international attention. 2009 was the year that saw us achieve an all-time high with the benchmark index, the All Share Price Index, closing the year at 3,385.6 points. The ASPI also recorded a growth rate of 125% which was again, the highest rate ever achieved. This report reveals these and several other fine achievements that we are proud to record in the year under review, as we continue to stay true to our vision of becoming the preferred choice in creating wealth and value. Yet we don't plan to rest on our laurels, strategising instead to build on these achievements so as to maintain a vibrant and growth oriented Exchange in the years to come. COLOMBO STOCK EXCHANGE Annual Report 2009 1 Daily Average Turnover Net Foreign Purchases Rs Mn Rs Mn 600 14,000 12,400 500 10,800 9,200 400 7,600 6,000 300 4,400 5,377 11,254 6,145 2,800 13,951 200 1,200 (789) (400) 100 Rs. Rs. 482 Rs. 436 Rs. 436 Rs. 464 Rs. 594 Rs. (2,000) Rs. Rs. Rs. Rs. 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Market Capitalisation Composition of % as a % of GDP Rs Bn Annual Turnover 30 100 99.0 90 89.9 CONTENTS 25 80 70 70.6 20 63.8 •Graphical Review 2 •Key Economic Indicators 60 59.6 2009 4 •Summarised Trading Statistics 5 50 50.7 15 43.4 41.1 •Chairman’s Message 6 •Chief Executive 40 34.4 10 30 Officer’s Review 10 •Events of 2009 17 24.6 24.6 % 29.8 % 22.9 % 11.1 % 22.6 % 20 •Human Resource Indicators 18 •Board 5 Committees 2009-10 19 •Board of Directors 20 10 2005 2006 2007 2008 2009 0 2005 2006 2007 2008 2009 0 •Management Team 22 •Members of the CSE Domestic 24 Foreign Financial Information •Annual Report of the Board of Directors on the Affairs of the Colombo Stock Exchange 28 •Audit Committee Report 31 •Directors’ Responsibility for Financial Reporting 32 •Independent Auditor’s Trading Turnover as a % CDS - New Accounts % No Report 33 •Balance Sheet 34 •Income of Market Capitalisation Opened 2005 - 2009 25 60,000 Statement 35 •Statement of Changes in Equity 50,000 36 •Consolidated Cash Flow Statement 37 20 •Notes to the Financial Statements 38 •Key 40,000 Financial Indicators 51 15 30,000 10 20,000 5 10,000 56,465 14,823 15,020 11,833 18,705 23.7 % 23.7 % 14.8 % 12.7 % % 16.9 18.0 2005 2006 2007 2008 2009 0 2005 2006 2007 2008 2009 0 2 “Based on the exceptional performance of the All Share Price index, the CSE was ranked the Best Performing Stock Exchange from amongst the 52 member exchanges of the World Federation of Exchanges (WFE) and the 2nd Best Performing Market in the world by Bloomberg News.” A Graphical Review A quick look at our performance 2009 2009 2009 Market Price/Earnings Ratio CDS - Deposits Value of Capital Raised (Equity) 16.6 Times 43,933 No 7.8 Rs Bn 2009 2009 2009 Value of Shares Traded Number of Transactions Number of Shares Traded 142.5 Rs Bn 1.27 Mn 4.7 Bn COLOMBO STOCK EXCHANGE Annual Report 2009 3 Key Economic Indicators 2009 2009* 2008 Demography Mid year population ('000 persons) 20,450 20,217 Growth of population (%) 1.1 1.0 Output GDP at current market prices (Rs. Billion) 4,825 4,411 GNP at current market prices (Rs. Billion) 4,769 4,306 Real Output (% change) GNP 4.8 4.6 GDP 3.5 6.0 Aggregate Demand and Savings (% of GDP) Consumption 82.0 86.1 Private 64.3 70.0 Government 17.6 16.2 Investment 24.5 27.6 Private 17.9 21.1 Government 6.6 6.5 Savings Domestic 18.0 13.9 National 23.9 17.8 Prices and Wages (% change) Colombo Consumers’ Price Index (2002=100) Annual Average 3.4 22.6 Colombo Consumers’ Price Index (2002=100) Point to Point-end period 4.8 14.4 Exchange Rates Annual Average Rs/US$ 114.9 108.3 Interest Rates (% per annum at end year) Treasury Bill yield rate 91 days 7.7 17.3 364 days 9.3 19.1 Deposit Rates Commercial Banks' Average Weighted Deposit Rate (AWDR) 8.0 11.6 Lending Rates Commercial Banks' Average Weighted Prime Lending Rate (AWPR) 10.9 18.5 * Provisional Data Source: Central Bank of Sri Lanka Annual Report 2009 4 Summarised Trading Statistics 2009 2008 2007 2006 Equity Market Annual Turnover (Rs Mn) 142,462.6 110,453.9 104,985.4 105,153.7 Domestic (Rs Mn) 99,010.8 50,796.9 63,815.7 70,675 Foreign (Rs Mn) 43,451.8 59,656.9 41,169.7 34,479 Foreign Contribution to total turnover (%) 30.5 54.0 39.2 32.8 Market Days (No) 240 238 241 241 Daily Average Turnover (Rs Mn) 593.6 464.1 435.6 436.3 Shares traded (No Mn) 4,762.7 3,154.9 2,887.3 3,912.3 Domestic (No Mn) 3,784.2 1,934.9 2,009.9 3,178.2 Foreign (No Mn) 978.4 1,220.0 877.3 734.2 Trades (No) 1,266,299 776,244 876,928 952,382 Domestic (No) 1,190,822 730,415 831,663 908,220 Foreign (No) 75,477 45,829 45,265 44,162 New Listing (No) 3 3 - 2 Delisting (No) 6 2 2 4 Companies Listed 231 235 235 237 Companies Traded 231 232 231 232 Market Capitalisation (Rs Bn) 1,092.1 488.8 820.7 834.8 Market PER year end (Times) 16.6 5.4 11.6 14.0 Turnover to Market Capitalisation (%) 18.0 16.9 12.7 14.8 Dividend Yield Year End (%) 3.0 5.6 2.5 2.2 Price to Book Value Year End (Times) 1.7 0.8 1.8 2.0 Market Cap. as a % of GDP 22.6 11.1 22.9 29.8 Price Indices All Share Price Index 3,385.6 1,503.0 2,541.0 2,722.4 y-o-y Change % 125.3 (40.9) (6.7) 41.6 Milanka Price Index 3,849.4 1,631.3 3,291.9 3,711.8 y-o-y Change % 136.0 (50.4) (11.3) 51.4 Foreign Trading Annual Turnover (Rs Mn) 43,451.8 59,656.9 41,169.7 34,478.6 Purchases (Rs Mn) 43,057.3 66,632.2 46,796.8 37,167.3 Sales (Rs Mn) 43,846.3 52,681.7 35,542.5 31,789.9 Net Foreign Flow (Rs Mn) (789.0) 13,950.5 11,254.3 5,377.3 Debt Market Corporate Debt Turnover (Rs 000) 136,765 102,639.3 98,903 405,211 No of Trades 42 27 144 321 No of Debentures Traded (000) 1,020 953.5 1,020 2,421 Government Debt Turnover (Rs 000) 98,977 195,157.4 709,333 207,080 No of Trades 42 69 208 379 No of Securities Traded (000) 102,778 208,182.6 742,736 213,242 Source: Colombo Stock Exchange COLOMBO STOCK EXCHANGE Annual Report 2009 5 “There is no doubt that much of the credit for the exceptional performance of the Colombo Stock Market in 2009 should go to the Government.” Nihal Fonseka Chairman 3rd May 2010 6 “The CSE believes that the time is ripe for placing the investment story for Sri Lanka on the world stage through high profile promotional activities.” How we did it Chairman’s statement As is customary, I am addressing this message to the broader group of stakeholders of the Colombo Stock Exchange (CSE) including our member stockbrokers, issuers of securities and investors. The euphoria associated with the performance of the CSE in 2009 is well deserved. As set out in detail in the Chief Executive's Review, the CSE performed exceptionally well in 2009 when compared with other markets as well as its own historical performance. The world's second best performing market in terms of the rise in indices to historically high levels, highest ever market capitalisation surpassing LKR 1 trillion for the first time and highest ever annual turnover are obvious factors that can be highlighted. Another noteworthy factor was that the achievements of the CSE were driven by domestic investors with foreign investors being net sellers (about USD 7 million) for the first time in 8 years mainly due to the global unwinding of investments by a foreign fund towards the end of 2009. However, to put this into perspective, at the end of 2009, foreign share ownership still represented 21% of market capitalisation, marginally lower than the share at the end of 2008, but well above the proportions at the end of the previous three years. There is no doubt that much of the credit for the exceptional performance of the market in 2009 should go to the Government on two counts. Firstly, the Government led by His Excellency Mahinda Rajapakse provided the required political leadership to the security forces to enable the writ of the elected government to be established in the entire land, sea and air space of this country for the first time in nearly three decades.